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

ITA 391/AHD/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50579 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 25-08-2011
• Assessment Year: 1997-1998
• Appeal Filed On: 06-02-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: JAIMIN GANDHIARS; S N SOPARKAR
• Keywords: Capital asset; Depreciation; Capital expenditure
• Section: 80HHC; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI G.D.AGARWAL, VICE-PRESIDENT (AZ) AND SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER APPEAL(S) BY APPELLANT VS. RESPONDENT SL. NO(S). ITA NO(S) ASSESSMENT YEAR(S) APPELLANT (S) RESPONDENT(S) 1. 331/AHD/2009 1997-98 ALEMBIC LTD. 5 TH FLOOR, ADMIN BLDG ALEMBIC ROAD, BARODA AABCA 7950 P ASST.CIT CIRCLE-1(1) BARODA 2. 332/AHD/2009 1998-99 ASSESSEE REVENUE 3. 333/AHD/2009 1999-2000 ASSESSEE REVENUE 4. 334/AHD/2009 2000-01 ASSESSEE REVENUE 5. 335/AHD/2009 2001-02 ASSESSEE REVENUE 6. 391/AHD/2009 1997-98 REVENUE ASSESSEE 7. 392/AHD/2009 1998-99 REVENUE ASSESSEE 8. 393/AHD/2009 1999-2000 REVENUE ASSESSEE 9. 394/AHD/2009 2000-01 REVENUE ASSESSEE 10. 395/AHD/2009 2001-02 REVENUE ASSESSEE ASSESSEE BY : S/SHRI S.N. SOPARKAR & JAIMIN GANDHI, A.RS. REVENUE BY : SHRI B.L. YADAV, SR. D.R. DATE OF HEARING : 25/0 8/2011 DATE OF PRONOUNCEMENT : 30/08/201 1 O R D E R PER BENCH :- THESE TEN CROSS APPEALS HAVE BEEN FILED BY BOTH T HE SIDES ARISING FROM A CONSOLIDATED ORDER OF FIVE ASSESSMEN T YEARS PASSED BY CIT(A)-I BARODA DATED 30/10/2008. SINCE THE BASI C FACTS ARE IT A NOS.331 TO 335/AHD/2009 (BY ASSESSEE) & ITA NOS.391 TO 395/AHD/2009 (BY REVENUE) M/S.ALEMBIC LTD., BARODA VS. ACIT ASST.YEARS 1997-98 TO 2001-02 - 2 - COMMON, THEREFORE, THESE APPEALS ARE CONSOLIDATED A ND HEREBY DECIDED BY THIS SINGLE ORDER. (A) ASSESSEES APPEALS : 2. GROUND NO.1 FOR A.Y. 1997-98, 1998-99 & 1999- 2000 READS AS FOLLOWS:- 1. RE: NON CONSIDERATION OF FOREIGN EXCHANGE FLUCTUATION LOSS AS CAPITAL LOSS RS.1,01,97,968/- (FOR A.Y. 1998-99 RS.63,85,902/-). 1.1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED CIT(A) GROSSLY ERRED IN UPHOLDING THE CONTENTION OF THE ASSESSING OFFICER IN NOT ALLOWING THE CAPITAL LOSS ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUA TION IN THE YEAR UNDER APPEAL ALLOWABLE DESPITE THE SPEC IFIC DIRECTIONS GIVEN BY THE HONOURABLE AHMEDABAD ITAT VIDE ORDER DT 27 TH SEPTEMBER, 2005. 2.1. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDI NG ORDERS, BOTH DATED 29/12/2006, FOR A.Y. 1997-98 AND 1998-99 ORD ER GIVING EFFECT TO THE ORDER OF ITAT AHMEDABAD WERE THAT THE ITAT SET ASIDE THE ISSUE TO THE FILE OF THE AO TO DETERMINE THE CORRECT NATURE OF LOSS VIDE AN ORDER DATED 27/09/2005 BEARING ITA NO.1706/AHD/2003 FOR A.Y. 1998-99 WHEREIN THE OBSER VATION WAS AS FOLLOWS:- 68. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE MATERIAL AVAILABLE ON RECORD. WE ARE OF THE V IEW THAT APPLICABILITY OF SECTION 43A TOWARDS NON-EXIST ENCE IT A NOS.331 TO 335/AHD/2009 (BY ASSESSEE) & ITA NOS.391 TO 395/AHD/2009 (BY REVENUE) M/S.ALEMBIC LTD., BARODA VS. ACIT ASST.YEARS 1997-98 TO 2001-02 - 3 - OF ASSETS HAS NOT BEEN EXAMINED PROPERLY. THE CASE LAW RELIED ON BY THE AO PERTAINS TO INSTALLATION OF TUB E-WELL, WHICH WERE HELD TO BE USELESS. IN CONTRA-DISTINCTI ON THE ASSESSEE NEVER COMMISSIONED THE CAPITAL ASSETS, THEREFORE, WE ARE OF THE VIEW THAT THIS JUDGMENT IS DISTINGUISHABLE FROM ASSESSEES FACTS. CONSIDERI NG ALL THE ASPECTS, WE SET ASIDE THE MATTER BACK TO THE FILE OF AO TO DECIDE CORRECT NATURE OF LOSS. IF IT IS HELD TO BE CAPITAL LOSS, THEN A SUITABLE SET OFF SHOULD BE GIV EN AGAINST PROFITS TAXED IN RESPECT OF THIS TRANSFER I N A.Y. 1997-98. IN CASE IT IS HELD AS REVENUE LOSS THE SA ME SHOULD BE ALLOWED IN THIS YEAR. THIS GROUND OF ASS ESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 2.2. ON READING THESE DIRECTIONS OF THE TRIBUNAL IT IS EVIDENT THAT IN THE GROUND OF APPEAL IT WAS WRONGLY STATED THAT THE TRIBUNAL HAD GIVEN SOME SPECIFIC DIRECTION ABOUT THE TREATMENT OF THE LOSS INA PARTICULAR MANNER, RATHER THE DIRECTION WAS TO DETE RMINE THE CORRECT NATURE OF THE IMPUGNED LOSS. THE ASSESSEE HAS SUBMI TTED THAT A FOREIGN CURRENCY LOAN WAS TAKEN FROM ICICI FOR PURCHASE OF WIND TURBINE GENERATOR. IT HAS ALSO BEEN INFORMED THAT THE SAID PROJECT COULD NOT BE IMPLEMENTED. THE SAME WAS S OLD TO JMP ECOTECNIA LTD. IT HAS ALSO BEEN INFORMED THAT THE EQUIPMENT PURCHASED WAS NOT CAPITALIZED IN THE BOOKS OF ACCOU NTS AND REFLECTED AS AN ENGINEERING STORE AS AN ITEM OF CURRENT ASSET S. IT HAS ALSO BEEN INFORMED THAT THE LOSS HAD INCURRED DUE TO EXCHANGE FLUCTUATION AND THE SAME WAS CLAIMED AS AN EXPENDITURE U/S.43A OF THE I.T. ACT. THE AO WAS OF THE VIEW THAT THE SAID ASSET WAS SOLD IN THE F.Y. 1996-97 AND THE ASSESSEE HAS CLAI MED THE IMPUGNED IT A NOS.331 TO 335/AHD/2009 (BY ASSESSEE) & ITA NOS.391 TO 395/AHD/2009 (BY REVENUE) M/S.ALEMBIC LTD., BARODA VS. ACIT ASST.YEARS 1997-98 TO 2001-02 - 4 - LOSS OF RS.63,85,902/- WHICH WAS A FOREIGN EXCHANGE FLUCTUATION LOSS AGAINST A LOAN LIABILITY FOR THE ACQUISITION OF CAP ITAL ASSET. THE AO HAS FURNISHED A CHART GIVING THE DATE OF PAYMENT, C URRENCY RATE AND THE CORRESPONDING AMOUNT. THE AO HAS HELD THAT I T WAS NOTHING BUT A NOTIONAL AS WELL AS A CONTINGENT LIABILITY, THEREFORE, NOT ALLOWABLE. FOR THIS PROPOSITION, RELIANCE WAS PLAC ED ON INDIAN OVERSEAS BANK LTD. 151 ITR 446. IT HAS ALSO BEEN HELD BY THE AO THAT THE LOAN WAS RELATED TO THE ACQUISITION OF AN ASSET, HENCE, THE EXPENDITURE WAS CAPITAL IN NATURE. THE AO HAS HELD THAT THE LEGAL POSITION IS SETTLED THAT EVEN IN A CASE OF AN ABUNDANT PROJECT THE EXPENDITURE IS IN THE NATURE OF CAPITAL EXPENDITURE AND FOR THIS LEGAL PROPOSITION RELIANCE WAS PLACED ON AMBICA MILLS LTD. 236 ITR 921, DIGVIJAY CEMENT CO. 159 ITR 253, VAZEER SULTAN TOBACCO 175 ITR 55 AND CEBA INDIA LTD. 202 ITR PG-1 (BOM). FOLLOWING THESE DECISIONS, THE AO HAS GIVEN TWO FI NDINGS, FIRST THAT THE LIABILITY WAS CONTINGENT IN NATURE AND SECOND T HAT THE LIABILITY WAS CAPITAL IN NATURE, HENCE, NOT TO BE ALLOWED TO SET OFF AGAINST INCOME OF THE YEAR. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY. 3. THE LD.CIT(A) HAS FURNISHED A CHART TO DEMONSTRA TE THE DETAILS OF INSTALLMENTS AND THE FLUCTUATION IN THE RATE OF FOREIGN CURRENCY; AS FOLLOWS:- IT A NOS.331 TO 335/AHD/2009 (BY ASSESSEE) & ITA NOS.391 TO 395/AHD/2009 (BY REVENUE) M/S.ALEMBIC LTD., BARODA VS. ACIT ASST.YEARS 1997-98 TO 2001-02 - 5 - DATE OF PAYMENT CURRENCY RATE AT TIME OF AVAILING THE LOAN FOREIGN CURRENCY RATE AT THE TIME OF PAYMENT AMOUNT US $ AMOUNT IN INDIA RUPEE 15.04.98 35.39 39.55 149,893 59,28,268 29.06.98 35.39 42.55 149,893 63,77,947 08.12.98 35.39 42.58 1,182,008 5,03,29,901 1,481,794 6,26,36,116 3.1. AS PER LD.CIT(A), TOTAL AMOUNT TO BE REPAID WA S RS.6,26,36,116/-. THE LOAN IN US $ WAS 14,81,794 /- AND APPLYING THE EXCHANGE RATE AT THE TIME OF PURCHASE WAS 35.39 THEREFORE THE AMOUNT OF LOAN WAS IN INDIAN RS.5,24,43,690/-. THE DIFFERENCE BETWEEN THE TWO WAS THE FOREIGN EXCHANGE LOSS OF RS.1,01,92,426/- . THE SAID LOSS WAS BOOKED FOR A.YS. 1997-98 & 1998-99. THE LD.CIT(A) HAS ALSO NOTICED THAT THE ASSESSEE HAS DISCLOSED A PROFIT IN A.Y. 1997-98 OF RS.75,41,589/ -. TO THE SAID EXTENT THE SET OFF OF LOSS WAS ALLOWED AND REST OF THE AMOUNT WAS DISALLOWED BEING A CAPITAL LOSS IN NATURE. THE LD .CIT(A) HAS DISCUSSED A DECISION OF HONBLE APEX COURT OF SUTLEJ COTTON MILLS VS. CIT, 116 ITR 1 FOR THE LEGAL PROPOSITION THAT A PROFIT OR A LOSS IS OF CAPITAL NATURE IF THE FOREIGN CURRENCY I S HELD AS A CAPITAL ASSET OR A FIXED CAPITAL. THE LD.CIT(A) HAS ALSO DISCUSSED TATA LOCOMOTIVE & ENGINEERING CO.LTD. 60 ITR 405 (SC) FOR THE PROPOSITION THAT THE REAL TEST TO BE APPLIED IN SUC H CASES IS WHETHER IT A NOS.331 TO 335/AHD/2009 (BY ASSESSEE) & ITA NOS.391 TO 395/AHD/2009 (BY REVENUE) M/S.ALEMBIC LTD., BARODA VS. ACIT ASST.YEARS 1997-98 TO 2001-02 - 6 - THE DEPRECIATION VALUE HAS TAKEN PLACE IN A CAPITAL OR IN A TRADING ASSET OR IN OTHER WORDS, IN FIXED CAPITAL OR IN A C IRCULATING CAPITAL. THE HONBLE COURT HAS ALSO OPINED THAT WHAT IS RELE VANT IS THE NATURE OF THE ASSET AT THE TIME OF DEVALUATION. LD.CIT(A) HAS ALSO DISCUSSED AN ORDER OF THE BOMBAY HIGH COURT AND THE REAFTER CONCLUDED AS FOLLOWS:- 8.8. HAVING REGARD TO THE LANDMARK JUDICIAL DECIS IONS AS ABOVE, IT IS CLEAR THAT THE NATURE OF THE LOSS MUST BE DETERMINED WITH REFERENCE TO THE NATURE OF THE UNDE RLYING ASSET. IN THE INSTANT CASE, THE ASSET WAS A WIND OPERATED ELECTRIC GENERATOR. THIS IS A CLEARLY A CAPITAL ASSET, SINCE THE ASSESSEE WAS NOT IN THE BUSINESS OF DEALING IN SUCH TYPES OF EQUIPMENT. THE ASSET WAS PART OF THE FIXED CAPITAL AND NOT THE CIRCULATING CAPITAL. HENCE IT IS HELD THAT THE LOS S SUFFERED ON ACCOUNT OF DEVALUATION OF THE CURRENCY REPRESENTED A CAPITAL LOSS. THE ONLY ISSUE THEN REMAINING TO BE DETERMIN ED IS WHETHER THE AO WAS CORRECT IN RESTRICING THE LOSS T O THE EXTENT OF RS.75,41,589/-. THIS FIGURE OF RS.75,41,589/- R EPRESENTS THE SURPLUS CALCULATED BY THE ASSESSEE AT THE TIME WHEN THE ASSET WAS SOLD ON THE ASSUMPTION THAT THE EXCHANGE RATE W OULD REMAIN AT RS.35.39. HOWEVER, AS SEEN ABOVE, THE AS SESSEE REPAID THE LOAN TAKEN FOR PURCHASE OF THE ASSET IN THREE TRANCHES. THE EXCHANGE RATE WAS RS.39.55, RS.42.55 AND RS.42.58 RESPECTIVELY. AS A RESULT OF SUCH DEVALU ATION, THE LOSS ON ACCOUNT OF EXCHANGE RATE FLUCTUATION WAS RS.1,01,97,968/-. THIS FIGURE HAS NOT BEEN DISPUTE D BY THE AO BUT HAS BEEN ALLOWED AS CAPITAL LOSS BUT ONLY TO TH E EXTENT OF RS.75,41,589/-. ONCE THE LOSS HAS BEEN DETERMINED AS A CAPITAL LOSS, THERE IS NO JUSTIFICATION FOR RESTRIC TING THE SAME. THE ENTIRE LOSS IS ALLOWABLE AS PER LAW AS WELL AS ACCORDING TO THE DIRECTION OF ITAT. ACCORDINGLY, THE AO IS DIRE CTED TO ALLOW THE BALANCE LOSS OF RS.26,56,379/- (RS.1,01, 97,968 RS 75,41,589) ALSO AS CAPITAL LOSS IN AY 1999-2000. IT A NOS.331 TO 335/AHD/2009 (BY ASSESSEE) & ITA NOS.391 TO 395/AHD/2009 (BY REVENUE) M/S.ALEMBIC LTD., BARODA VS. ACIT ASST.YEARS 1997-98 TO 2001-02 - 7 - 4. WITH THIS BRIEF FACTUAL BACKGROUND, WE HAVE HEAR D BOTH THE SIDES. AS FAR AS THE QUANTUM INVOLVED IS CONCERNED , THERE WAS NO DISPUTE. THE NET FOREIGN EXCHANGE LOSS WAS RS.1,0 1,95,426/- . THIS WAS CALCULATED ON THE BASIS OF THE DATE WHEN T HE LOAN TAKEN AND TILL THE DATE OF ITS FINAL PAYMENT. WHILE GIVIN G EFFECT FOR A.Y. 1999-2000, THE AO VIDE ORDER DATED 29/12/2006 HAS D ETERMINED THE FIGURES AS FOLLOWS: INA THIS CASE THE TOTAL FOREIGN EXCHANGE FLUCTUATI ON LOSS OF RS.10197968/- WAS INCURRED BY THE ASSESSEE ON ACTUA L PAYMENT BASIS AS PER COMPUTATION SUBMITTED BY THE A SSESSEE. AS PER FURTHER SUBMISSION OF THE ASSESSEE, IT HAS O FFERED PROFIT OF RS.7541589/- FOR TAXATION IN THE A.Y. 1997-98. THE HON. HAD SET ASIDE THIS MATTER BACK TO THE FILE OF THE A O TO DECIDE CORRECT NATURE OF LOSS. IN THE ORDER GIVING EFFECT TO THE ORDER OF HON. ITAT FOR A.Y. 98-99 THE FINDING HAS BEEN GI VEN ABOUT THE NATURE OF LOSS WHERE IT HAS BEEN HELD AS CAPITA L LOSS. IT HAS ALSO BEEN HELD IN THE ORDER GIVING EFFECT TO ITATS ORDER FOR A.Y. 1997-98 THAT IT IS NOT AT ALL AN ALLOWABLE LOS S IN VIEW OF THE DISCUSSION HELD THEREIN BEING A CAPITAL LOSS DIRECTLY PERTAINING TO AN ABANDONED PROJECT OF THE ASSESSEE. HOWEVER, AS PER DIRECTION OF THE HON. ITAT THIS CAP ITAL LOSS IS BEING ALLOWED AGAINST THE PROFIT OFFERED IN THIS RE SPECT. SINCE, DURING THE A.Y. 98-99 IT WAS ONLY A NOTIONAL LOSS AS DISCUSSED IN THE ORDER IT WAS NOT ALLOWED TO THE ASSESSEE. D URING THE AY 99-2000 ACCORDINGLY THE ASSESSEE HAS INCURRED TOTAL CAPITAL LOSS ON ACTUAL PAYMENT BASIS AS DISCUSSED IN THIS P ARA. THE HON. ITAT HAD FURTHER GIVEN DIRECTION THAT IF IT HE LD TO BE CAPITAL LOSS, THEN A SUITABLE SET OFF SHOULD GIVEN AGAINST THE IT A NOS.331 TO 335/AHD/2009 (BY ASSESSEE) & ITA NOS.391 TO 395/AHD/2009 (BY REVENUE) M/S.ALEMBIC LTD., BARODA VS. ACIT ASST.YEARS 1997-98 TO 2001-02 - 8 - PROFITS TAXED IN RESPECT OF THIS TRANSFER IN A.Y. 1 997-98. IT MEANS THAT AS PER DIRECTION OF THE ITAT THE SET OFF IS TO BE GIVEN TO THE EXTENT OF THE PROFITS TAXED IN THIS RE SPECT. THE ASSESSEE HAS ALREADY CLAIMED RS.3862066/- ON ACCOUN T OF FOREIGN EXCHANGE FLUCTUATION LOSS, THE BALANCE AMOU NT OF RS.3679523/- (RS.7541589 (-) RS.3862066/-) IS ALLOW ED VIDE THIS ORDER TO THE ASSESSEE AS PER DIRECTION OF THE HON.ITAT WHO HAS DIRECTED TO SET OFF THE CAPITAL LOSS AGAINS T THE PROFIT TAXED IN THIS RESPECT. 4.1. IN THE LIGHT OF THE ABOVE DISCUSSION, WE HAVE EXAMINED THE RELEVANT PROVISIONS OF IT ACT AS IT WAS APPLICABLE FOR THE YEARS UNDER CONSIDERATION. A SPECIAL PROVISION IS INTRODUCED VIDE SECTION 43A OF THE ACT AND THE SALIENT FEATURES WERE THAT WHERE AN ASSESSEE HAS ACQUIRED ANY ASSET FROM A COUNTRY OUTSIDE INDIA FOR THE PURPOSE OF HIS BUSINESS AND IN CONSEQUENCE OF A CHANGE IN THE RATE OF EXCHANGE DUE TO WHICH THERE IS EITHER AN INCREASE OR A DEDUC TION IN THE LIABILITY IN INDIAN CURRENCY FOR MAKING PAYMENT TOWARDS THE C OST OF THE ASSET OR TOWARDS REPAYMENT OF MONEY BORROWED DIRECTLY OR INDIRECTLY IN FOREIGN CURRENCY FOR THE PURPOSE OF ACQUIRING THE S AID ASSET; THE AMOUNT BY WHICH THE LIABILITY INCREASED OR REDUCED DURING THE PREVIOUS YEAR SHALL BE EITHER ADDED OR AS THE CASE MAY BE DEDUCTED FROM THE ACTUAL COST OF THE ASSET. FURTHER, EXPLANATION-3 PRESCRIBES THAT WHERE THE ASSESSEE HAS ENTERED IN TO A CONTRACT WITH AN AUTHORISED DEALER AS DEFINED IN SE CTION 2 OF THE FOREIGN EXCHANGE REGULATION ACT, 1947 FOR PROVIDING FOREIGN CURRENCY AFTER A STIPULATED FUTURE DATE AT THE RAT E OF EXCHANGE IT A NOS.331 TO 335/AHD/2009 (BY ASSESSEE) & ITA NOS.391 TO 395/AHD/2009 (BY REVENUE) M/S.ALEMBIC LTD., BARODA VS. ACIT ASST.YEARS 1997-98 TO 2001-02 - 9 - SPECIFIED IN THE CONTRACT TO ENABLE HIM TO MEET TH E LIABILITY THEN THE AMOUNT TO BE EITHER ADDED OR DEDUCTED FROM THE ACTU AL COST OF THE ASSET. 4.2. FROM THE FACTS OF THE CASE, IT IS NOT IN DISPU TE THAT A LOAN WAS SANCTIONED BY ICICI LTD. FOR INSTALLING A WIND TUR BINE GENERATOR. THEREFORE, IT WAS AN ACCEPTED FACTUAL POSITION THAT THE SAID ARRANGEMENT OF FOREIGN CURRENCY WAS UNDISPUTEDLY IN RESPECT OF AN ACQUISITION OF A CAPITAL ASSET. FACTS OF THE CASE HAVE ALSO REVEALED THAT THE SAID CAPITAL ASSET WAS SOLD IN TH E F.Y. 1996-97. AN IMPORTANT FACT HAS ALSO BEEN BROUGHT TO OUR NOTI CE THAT WHILE COMPUTING THE INCOME FOR A.Y. 1997-98, I.E. THE YEA R IN WHICH THE SAID ASSET WAS SOLD, THE PROFIT WAS DISCLOSED OF RS .75,41,589/- AND THAT PROFIT WAS SET OFF BY THE ASSESSEE TO THAT EXT ENT OUT OF THE TOTAL LOSS SUFFERED ON ACCOUNT OF FOREIGN CURRENCY FLUCTU ATION. THE SAID FINDING OF LD.CIT(A) HAS NOT BEEN DISPUTED THAT WHI LE COMPUTING THE INCOME FOR A.Y. 1997-98, THE SAID SET OFF WAS ALLOW ED TO THE EXTENT OF THE DISCLOSED PROFIT. FROM THESE FACTS, THERE FORE, IT IS EVIDENT FIRSTLY THAT THE CONTRACT WITH THE AUTHORISED DEALER WAS ONLY IN RESPECT OF AN ACQUISITION OF A CAPITAL ASSET . TH E SECOND IMPORTANT ASPECT HAS ALSO EMERGED FROM THE CONDUCT OF THE ASS ESSEE THAT FOR A.Y. 1997-98, THE FOREIGN EXCHANGE LOSS WAS CONSIDERED AS A CAPITAL LOSS AND THAT IS WHY IT WAS ADJUSTED AGAINST THE PROFIT OF RS.75,41,589/- EARNED ON SALE OF THE IMPUGNED CAPI TAL ASSET. ONCE IT A NOS.331 TO 335/AHD/2009 (BY ASSESSEE) & ITA NOS.391 TO 395/AHD/2009 (BY REVENUE) M/S.ALEMBIC LTD., BARODA VS. ACIT ASST.YEARS 1997-98 TO 2001-02 - 10 - AT THE TIME OF ENTERING INTO THE HEDGING CONTRACT T HE NATURE OF THE IMPUGNED ARRANGEMENT OF FOREIGN CURRENCY WAS FOR AC QUISITION OF CAPITAL ASSET, THEREFORE, MERELY BY SALE OF THE SAI D ASSET DID NOT CHANGE THE NATURE OR THE CHARACTER OF THE ICICI LOA N. THE LOSS WHICH WAS INCURRED SUBSEQUENTLY WAS ALSO OF THE SAM E NATURE AND THERE WAS NO EFFECT WHATSOEVER AS FAR AS THE CHARAC TER OR THE NATURE OF THE LOAN WAS DETERMINED. SALE OF A CAPITAL ASSET DO NOT CHANGE THE NATURE OR DISPOSITION OR CHARACTER OF LOAN TAKEN AN D THAT IS THE REASON THAT THE STATUTE RECOGNIZES LONG TERM CAPITAL GA IN/LOSS WHICH IS BEING ASSESSED ON SALE OF A CAPITAL ASSET AND IF SO ME PORTION REMAINS TO BE ADJUSTED THEN CARRIED FORWARD WITHOUT ANY CHA NGE IN ITS CHARACTER. WE HAVE FOUND THAT IN A LAND-MARK DECI SION THE HONBLE SUPREME COURT IN THE CASE OF OIL AND NATURAL GAS CORPORATION LTD. REPORTED AT [2010] 322 ITR 180 (SC) VS. CIT (ORDER DATED 15 TH MARCH-2010) HAS ALSO OPINED AS FOLLOWS:- OPINING THAT THE AMENDMENT OF S. 43A OF THE ACT BY THE FINANCE ACT, 2002 W.E.F. 1ST APRIL, 2003 IS A MENDATORY AND NOT CLARIFICATORY AND WOULD THUS, APPLY PROSPECTIVELY, THE COURT EXPLAINED THAT UNDER THE UNAMENDED S. 43A, ADJUSTME NT TO THE ACTUAL COST TAKES PLACE ON THE HAPPENING OF CHANGE IN THE RATE OF EXCHANGE, WHEREAS UNDER THE AMENDED S. 43A, THE ADJ USTMENT IN THE ACTUAL COST IS MADE ON CASH BASIS. IN OTHER WOR DS, UNDER THE UNAMENDED S. 43A, 'ACTUAL PAYMENT' WAS NOT A CONDIT ION PRECEDENT FOR MAKING NECESSARY ADJUSTMENT IN THE CA RRYING COST OF THE FIXED ASSET ACQUIRED IN FOREIGN CURRENCY BUT UN DER THE AMENDED S. 43A, W.E.F. 1ST APRIL, 2003, SUCH PAYMENT OF THE DECREASED/ENHANCED LIABILITY ON ACCOUNT OF FLUCTUAT ION IN FOREIGN IT A NOS.331 TO 335/AHD/2009 (BY ASSESSEE) & ITA NOS.391 TO 395/AHD/2009 (BY REVENUE) M/S.ALEMBIC LTD., BARODA VS. ACIT ASST.YEARS 1997-98 TO 2001-02 - 11 - EXCHANGE RATE HAS BEEN MADE A CONDITION PRECEDENT F OR MAKING ADJUSTMENT IN THE CARRYING AMOUNT OF THE FIXED ASSE T. WE ARE OF THE OPINION THAT THE DECISION OF THIS CO URT IN WOODWARD'S CASE (2009) 312 ITR 254 SETTLES THE SEC OND ISSUE AS WELL. WE RESPECTFULLY CONCUR WITH THE SAME AND HOLD THAT ALL THE ASSESSMENT YEARS IN QUESTION BEING PRIOR TO THE AME NDMENT IN S. 43A OF THE ACT W.E.F. 1ST APRIL, 2003 THE ASSESSEE WOULD BE ENTITLED TO ADJUST THE ACTUAL COST OF THE IMPORTED CAPITAL A SSETS, ACQUIRED IN FOREIGN CURRENCY, ON ACCOUNT OF FLUCTUATION IN THE RATE OF EXCHANGE AT EACH OF THE RELEVANT BALANCE SHEET DATES PENDING ACTUAL PAYMENT OF THE VARIED LIABILITY. 4.3. WE HEREBY ALSO PLACE RELIANCE ON AN ANOTHER D ECISION OF THE HONBLE SUPREME COURT CITED AS ACIT VS. ELECON ENGG. CO. LTD. 322 ITR 20 (SC) (ORDER DATED 26 TH FEBRUARY-2010) WHEREIN IT WAS OPINED THAT THE PURPOSE OF THE LOAN TAKEN BY TH E ASSESSEE WAS TO FINANCE THE PURCHASE OF PLANT AND MACHINERY. THERE FORE, THE CAPITALIZATION OF FOREIGN EXCHANGE DIFFERENCE IN RE SPECT OF ACQUISITION OF FIXED ASSETS FROM ABROAD AND ROLL OV ER CHARGES RELATING THERETO HAD TO BE EITHER DEBITED OR CREDITED TO THE ASSETS IN RESPECT OF WHICH LIABILITY WAS INCURRED. IT WAS SPECIFICALL Y HELD THAT ROLL OVER PREMIUM CHARGES WERE NOT ALLOWABLE AS REVENUE EXPEN DITURE U/S.36 (1)(III). IT WAS ALSO HELD THAT ON THOSE CHARGES T HE PROVISIONS OF EXPLANATION-3 TO SECTION 43A SHOULD APPLY AS IT ST OOD PRIOR TO ITS AMENDMENT IN 2002. 4.4. RESPECTFULLY FOLLOWING THE AFORESAID DECISIONS , WE FIND NO FORCE IN THIS GROUND OF THE ASSESSEE, HENCE HEREBY DISMISSED. IT A NOS.331 TO 335/AHD/2009 (BY ASSESSEE) & ITA NOS.391 TO 395/AHD/2009 (BY REVENUE) M/S.ALEMBIC LTD., BARODA VS. ACIT ASST.YEARS 1997-98 TO 2001-02 - 12 - 5. GROUND NO.2 FOR A.YS. 1997-98, 1998-99, 1999-2000 A ND GROUND NO.3 FOR AY 2000-01 ARE IDENTICALLY WORDED AND REPRODUCED AS UNDER:- 2. RE: DEDUCTION U/S.80IA (IV) IN RESPECT OF PROFITS OF THE UNDERTAKING GENERATING AND DISTRIBUTING THE POWER WHILE COMPUTING BOOK PROFIT U/S.115JA. 2.1. THE ASSESSING OFFICER AND THE LEARNED CIT(A) O UGHT TO HAVE ALLOWED THE DEDUCTION U/S.80IA (IV) READ WITH EXPLANATION (IV) TO SECTION 115JA(2) IN RESPECT OF UNDERTAKING GENERATING AND DISTRIBUTING POWER FOR CAPTIVE PURPOSES WHILE COMPUTING BOOK PROFIT U/S.115JA. 5.1. IN RESPECT OF THIS GROUND, IT IS INFORMED AT T HE OUTSET THAT THIS IS A NEW ISSUE RAISED FOR THE FIRST TIME NOW BEFORE US. LD.AR MR.S.N.SOPARKAR & MR.JAININ GANDHI HAS CLARIFIED AT THE OUTSET THAT THIS ISSUE WAS NEVER RAISED IN ANY OF THE PROC EEDINGS IN THE FIRST ROUND EITHER BEFORE THE AO OR BEFORE CIT(A) AND EVE N BEFORE RESPECTED ITAT. LIKE-WISE, WHEN THE MATTER WAS RE STORED BACK TO AO, EVEN THEN THE IMPUGNED CLAIM WAS NEITHER MADE BEFORE THE AO NOR EVEN BEFORE LD.CIT(A). HOWEVER, HE HAS PL EADED THE ISSUE BEING A LEGAL ISSUE, THEREFORE, THIS ADDITIONAL GRO UND SHOULD BE ENTERTAINED AS HELD IN THE CASE OF NTPC LTD. 229 IT R 383 (SC). ON MERITS, HE HAS CITED A DECISION OF CIT VS. DCM S HREE RAM CONSOLIDATED PVT.LTD. 221 CTR 519 (DELHI). IT A NOS.331 TO 335/AHD/2009 (BY ASSESSEE) & ITA NOS.391 TO 395/AHD/2009 (BY REVENUE) M/S.ALEMBIC LTD., BARODA VS. ACIT ASST.YEARS 1997-98 TO 2001-02 - 13 - 5.2. FROM THE SIDE OF THE REVENUE MR.B.L. YADAV A PPEARED AND HAS VEHEMENTLY OBJECTED THE RAISING OF ADDITIONAL GROUN D WHICH WAS NEVER RAISED IN THE PAST. HE HAS ALSO ARGUED THAT THE PROCEEDINGS IN THE SECOND ROUND WERE CONDUCTED AS P ER THE DIRECTIONS OF THE TRIBUNAL, THEREFORE, SUCH AN ADD ITIONAL GROUND IS OUT OF THE AMBITS OF ANY OF THE SUBSEQUENT AUTHORIT Y THEREFORE BEYOND CONSIDERATION , HENCE SHOULD NOT BE ENTERTAI NED. 6. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES, WE ARE OF THE VIEW THAT THE QUESTION OF RAISING AN ADDITIONAL GRO UND IN THE SECOND ROUND OF PROCEEDINGS, WHICH WERE NOT THE SUBJECT MA TTER BEFORE THE TRIBUNAL OR THE TRIBUNAL HAD NOT GIVEN ANY SUCH DIR ECTION WHEN THE CASE WAS RESTORED WITH CERTAIN DIRECTIONS TO AO, HA S BEEN SETTLED BY THE RESPECTED ITAT B BENCH IN THE CASE OF DCIT VS . JINDAL WORLDWIDE LTD. BEARING ITA NO.4238/AHD/2007 FOR A. Y. 1995-96 ORDER DATED 17/09/2010, WHEREIN CASES REFERRED WE RE, (1) PULIPATI SUBBARAO AND CO. V. ACIT 35 ITR 673 (A.P.), (2) KAT IHAR JUTE MILLS (P) LTD. VS. CIT 120 ITR 861 (CAL.), (3) S. P.KOCHHAR VS. ITO 145 ITR 255 (ALLA.), (4) SRI VINDHYA BASINI PRASAD GUPTA VS. CIT 186 ITR 253 (ALLA.) & (5) CIT VS. HOPE TEXTILES LTD . 225 ITR 993 (M.P.), AND THEREAFTER HELD THAT THE POWER OF THE ITO IS CONFINED TO THE SUBJECT MATTER OF APPEAL BEFORE THE TRIBUNAL AN D THE AO CANNOT TAKE UP THE QUESTION WHICH IS NOT REFERRED BY THE T RIBUNAL. IN THE PRECEDENT CITED, IT WAS HELD THAT THE ITO COULD NOT CONSIDER ANY OTHER QUESTION AND EVEN CANNOT ENLARGE THE SCOPE OF THE PROCEEDINGS IT A NOS.331 TO 335/AHD/2009 (BY ASSESSEE) & ITA NOS.391 TO 395/AHD/2009 (BY REVENUE) M/S.ALEMBIC LTD., BARODA VS. ACIT ASST.YEARS 1997-98 TO 2001-02 - 14 - WHICH WERE SET ASIDE WITH CERTAIN DIRECTIONS FOR AF RESH CONSIDERATION. IT IS A WELL SETTLED POSITION OF LAW THAT AN APPELL ATE AUTHORITY WHILE REMANDING THE CASE CAN GIVE DIRECTIONS AND LAID DOW N LIMITS FOR THE ENQUIRY TO BE MADE BY THE LOWER COURT. WHEN SUCH A DIRECTION IS MADE AND LIMITS ARE LAID DOWN THE POWER AND JURISDI CTION OF THE LOWER COURT TO DEAL WITH THE CASE, AFTER REMAND, DE PEND ON THE SPECIFICATIONS OF THE REMAND ORDER. THE LOWER COUR T HAS NO JURISDICTION TO ENTER INTO ANY QUESTION WHICH FALLS OUTSIDE THE SAID LIMIT. THIS IS NOT THE CASE THAT THE TRIBUNAL HA S DIRECTED THE AO TO MAKE AN ASSESSMENT AFRESH WITH THE DIRECTION TO TAK E UP ANY OTHER MATTER FOR THE PURPOSE OF ASSESSMENT AS PER LAW. THEREFORE, IT WAS NOT OPEN FOR THE AO TO TAKE UP ANY OTHER ISSUE EXCE PT THE ISSUES WHICH WERE DIRECTED TO BE DECIDED BY THE AO. IT M IGHT BE POSSIBLE THAT THE LEGAL ISSUE NOW RAISED COULD HAS BEEN GIVE N A SANCTION BY A HIGH COURT BUT THE PRELIMINARY QUESTION IS THAT IN THE SECOND ROUND OF APPEAL WHETHER WE HAVE THE JURISDICTION TO ADJUD ICATE AN ISSUE WHICH WAS NOT THE SUBJECT MATTER OF REMAND BY THE T RIBUNAL IN THE FIRST ROUND OF APPEAL. FOLLOWING THE PRECEDENTS CI TED HEREINABOVE, WE THEREFORE HOLD THAT WE LACK JURISDICTION TO ADMI T AN ADDITIONAL GROUND AT THIS SECOND ROUND OF PROCEEDINGS. WE THE REFORE REJECT THE ADMISSION OF THE ADDITIONAL GROUND, HENCE, THE ISSU E RAISED THROUGH THIS ADDITIONAL GROUND IS HEREBY DISMISSED. IT A NOS.331 TO 335/AHD/2009 (BY ASSESSEE) & ITA NOS.391 TO 395/AHD/2009 (BY REVENUE) M/S.ALEMBIC LTD., BARODA VS. ACIT ASST.YEARS 1997-98 TO 2001-02 - 15 - 7. FOR A.YS. 2000-01 AND 2001-02, REPECTIVELY, GROU ND NO.1 AND GROUND NO.2 READ AS FOLLOWS:- 1. RE: CONSIDERATION OF COMPUTER CHARGES FOR COMPUTING PROFITS OF THE BUSINESS UNDER S.80HHC: 1.1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED CIT(A) GROSSLY ERRED UPHOLDING THE EXCLUSION OF COMPUTER CHARGES RECEIVED FRO COMPUTIN G PROFITS OF THE BUSINESS UNDER EXPLANATION (BAA) TO S. 80HHC WITHOUT APPRECIATING THAT COMPUTER CHARGES RECEIVED ARE THE RECOUPMENT OF COSTS AND ARE NOT IN COME AND HENCE SHOULD NOT BE EXCLUDED IN THE COMPUTING T HE PROFITS OF THE BUSINESS. 2. RE: CONSIDERATION OF MISCELLANEOUS INCOME FOR COMPUTING PROFITS OF THE BUSINESS UNDER S.80HHC. 2.1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) GROSSLY ERRED IN UPHOLDING THE REDUCTION OF MISCELLANEOUS INCOME UNDER EXPLANATION (BAA) TO S. 80HHC WITHOUT LOOKING INTO THE INDIVIDU AL CHARACTER OR NATURE OF THE RECEIPTS. 7.1. WHILE GIVING THE EFFECT FOR A.Y. 2000-01 AND 2 001-02 VIDE RESPECTIVE ORDERS BOTH DATED 29/12/2006 IT WAS OBSE RVED BY THE AO THAT THE CLAIM OF THE ASSESSEE WAS THAT THE COMPUTE R CHARGES WERE IN THE NATURE OF REIMBURSEMENT FROM GROUP COMPANIES. IT WAS ARGUED THAT THERE WAS NO ELEMENT OF INCOME IN RECEIVING TH E COMPUTER CHARGES. THE AO WAS OF THE VIEW THAT AS PER EXPLA NATION (BAA) TO SECTION 80HHC PROFITS OF THE BUSINESS INCLUDE SUCH TYPE OF INCOME. IT A NOS.331 TO 335/AHD/2009 (BY ASSESSEE) & ITA NOS.391 TO 395/AHD/2009 (BY REVENUE) M/S.ALEMBIC LTD., BARODA VS. ACIT ASST.YEARS 1997-98 TO 2001-02 - 16 - IT WAS NOT THE INTENTION TO EXCLUDE REIMBURSEMENT F ROM THE PROFITS OF THE BUSINESS. AS PER AO, IT WAS A PASSIVE INCOME HENCE SHOULD BE RESTRICTED AS PRESCRIBED TO BE EXCLUDED FROM THE P ROFITS OF THE BUSINESS. 7.2. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST A PPELLATE AUTHORITY, THE LD.CIT(A) HAS CITED SHREE RAM HONDA POWER EQUIPMENTS 289 ITR 475 AND HELD THAT WHILE APPLYIN G THE PROVISIONS OF EXPLANATION (BAA), THEN 90% OF THE NE T AMOUNT IS TO BE REDUCED AND NOT TO THE GROSS AMOUNT. FOR THE PURPO SE OF NETTING OF THE SAME, IT WAS OBSERVED THAT THERE SHOULD BE A DI RECT CORRELATION BETWEEN THE AMOUNT RECEIVED AND PAID. HE HAS ALS O SAID THAT KEEPING IN VIEW THE DIRECT NEXUS ONLY THE NET QUANT UM SHOULD SUFFER EXCLUSION TO THE EXTENT OF 90%. 8. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES, WE ARE OF THE VIEW THAT THE COMPUTER CHARGES BEING ADMITTEDLY RE IMBURSEMENT OF EXPENSES, THEREFORE, NEED NOT TO BE DISTURBED. THER E IS NO FALLACY IN THE VIEW TAKEN BY LD. CIT(A) HENCE WE CONCUR WITH T HE SAID FINDING. AS FAR AS THE MISCELLANEOUS INCOME IS CON CERNED, APPLYING THE RATIO OF SHREE RAM HONDA POWER EQUIPMENTS 289 I TR 475 (DELHI) AND WILLIAM GOOD CARE AND SONS 305 ITR 36 5 (KER.) ONLY THE NET INCOME SHOULD BE TAKEN FOR THE PURPOSE OF C OMPUTATION OF IT A NOS.331 TO 335/AHD/2009 (BY ASSESSEE) & ITA NOS.391 TO 395/AHD/2009 (BY REVENUE) M/S.ALEMBIC LTD., BARODA VS. ACIT ASST.YEARS 1997-98 TO 2001-02 - 17 - DEDUCTION U/S.80HHC OF THE ACT. ACCORDINGLY, THIS GROUND IS PARTLY ALLOWED. 9. IN THE RESULT, FOR A.YS. 1997-98, 1998-99 & 1999 -2000 APPEALS OF THE ASSESSEE ARE DISMISSED AND FOR A.YS 2000-01 & 2001-02 IT IS PARTLY ALLOWED. (B) REVENUES APPEALS: GROUND NO 1: ( FOR ALL THE FIVE YEARS ); 1. ON THE FACTS AND IN THE CIRCUMSTANCE3S OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN NEGATING THE ADJUSTMENT OF WEAL TH TAX LIABILITY OF RS.2 LACS (FOR 1998-99 & 1999-2000 - RS.3 LACS, AND A.YS 2000-01 & 2001-02 - RS.5 LACS) UNDER CLAUSE (C) OF THE EXPLANATION BELOW SECTION 115JB(2), WITHOUT APPRECIATING THAT THIS LI ABILITY WAS NOT BASED ON ANY WORKING OF NET WEALTH AND WAS PURELY U NASCERTAINED. 10.1. IN ASSESSEES OWN CASE FOR AY 2006-07, ITAT D BENCH BEARING ITA NO.3530/AHD/2008 VIDE AN ORDER DATED 1 5/02/2011 HAS HELD AS UNDER:- 29. WE ALSO FIND THAT THE PROVISIONS OF SECTION 11 5JA AND 115JB ARE PARA MATERIAL. THEREFORE RESPECTFULLY FO LLOWING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF USHA MARTIN INDUSTRIES LTD (SUPRA) AND THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAS 2000-01 AND 2001-02 DATED 16-7-2008 IN ITA NOS.1750 AND 1751/AHD/2004 WE CONFIRM THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING TH E ADDITION OF RS.7 LACS ON ACCOUNT OF WEALTH TAX PROV ISION IN COMPUTING THE BOOK PROFITS OF THE ASSESSEE. THUS, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. IT A NOS.331 TO 335/AHD/2009 (BY ASSESSEE) & ITA NOS.391 TO 395/AHD/2009 (BY REVENUE) M/S.ALEMBIC LTD., BARODA VS. ACIT ASST.YEARS 1997-98 TO 2001-02 - 18 - 10.1. LIKEWISE, WHILE DECIDING THE REVENUES APPEAL IN ASSESSEES CASE BY ITAT C BENCH AHMEDABAD IN A CONSOLIDATED ORDER FOR A.YS. 2000-01 & 2001-02 BEARING ITA NO.1750 & 1751/ AHD/2004 VIDE AN ORDER DATED 16/07/2008 HAS HELD AS UNDER:- 30. WE HAVE HEARD BOTH THE PARTIES AND CONSIDERE D RIVAL SUBMISSIONS. SECTION 115JB(2), EXPLANATION 1(A), T HE WORD INCOME TAX WHAT IS TO BE ADDED IS INCOME TAX WH ICH IS FURTHER AMPLIFIED BY EXPLANATION 2. HOWEVER, THIS DOES NOT INCLUDE WEALTH TAX. IN VIEW THEREOF, WE SEE NO INF IRMITY IN THE ORDER OR LD. CIT(A) IN ALLOWING THE PROVISIONS OF W EALTH TAX LIABILITY WHICH IS ASCERTAINED LIABILITY WHILE COMP UTING BOOK PROFIT U/S.115JB. THE RELIANCE PLACED BY THE LD. C OUNSEL FOR THE ASSESSEE CITED SUPRA IS WELL PLACED. ACCORDING LY, THE ORDER OF LD. CIT(A) IS UPHELD. THIS GROUND IS DISMISSED. 11. RESPECTFULLY FOLLOWING THESE DECISIONS PRONOUNC ED IN ASSESSEES OWN CASE, WE HEREBY DISMISS THIS GROUND OF THE REVENUE . 12. GROUND NO.2 IS IDENTICALLY WORDED FOR ALL THE FIVE YEARS, I.E.AYS 1997-98 TO 2001-02 AS RAISED BY THE REVENUE ; REPRODUCED BELOW:- 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING REDUCING OF RS.16, 54,735/- BEING WITHDRAWAL FROM REVALUATION RESERVE WITH THE OBSERV ATION THAT THE ISSUE WAS DECIDED BY HIM IN THE A.Y. 2002-03 WHEREA S NO SUCH ISSUE AROSE IN THAT ASSESSMENT YEAR AND, MOREOVER, SUCH REDUCTION IT A NOS.331 TO 335/AHD/2009 (BY ASSESSEE) & ITA NOS.391 TO 395/AHD/2009 (BY REVENUE) M/S.ALEMBIC LTD., BARODA VS. ACIT ASST.YEARS 1997-98 TO 2001-02 - 19 - WAS NOT PERMITTED IN VIEW OF THE PROVISO TO CLAUSE( I) OF THE EXPLANATION BELOW SECTION 115JB(2). 12.1. NOW THIS ISSUE STOOD COVERED BY THE DECISION OF ITAT D BENCH IN ASSESSEES OWN CASE FOR A.Y.2006-07 IN ITA NO.3530/AHD/2008 VIDE ORDER DATED 15 TH FEBRUARY-2011, WHEREIN FOLLOWED ITAT D BENCH DECISION IN ASSESSEES OWN CASE FOR A.Y. 1998-99 BEARING ITA NO.1706/AHD/2003 ORDER DATED 27 /09/2005, THE ORDER ALREADY REFERRED SUPRA, AND HELD THAT IN VIEW OF THE HONBLE SUPREME COURT JUDGEMENT IN THE CASE OF APOLLO TYRES 255 ITR 273 THE ASSESSEE HAS TO BE ALLOWED DEDUCTION OF THE DEPRECIATION IN RESPECT OF REVALUATION OF FIXED ASS ETS FOR THE PURPOSE OF DETERMINING THE PROFIT U/S.115J AND THEREFORE TH E BOOK PROFIT SHOULD BE WORKED OUT ACCORDINGLY. SINCE THE RESPEC TED COORDINATE BENCHES ARE CONSISTENTLY TAKING THE VIEW IN THE PAS T IN FAVOUR OF THE ASSESSEE, THEREFORE, FOLLOWING ALL THOSE DECISIONS WE FIND NO FORCE IN THIS GROUND OF THE REVENUE HENCE HEREBY DISMISSED. 13. GROUND NO.3 FOR AY 1997-98, 1998-99 ARE IN RESPECT OF LOSS ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION. WE H AVE ALREADY TAKEN A DECISION IN FAVOUR OF THE REVENUE AND THAT DECISION SHALL COVER THE REVENUES GROUND HENCE THESE GROUNDS OF T HE REVENUE MAY BE TREATED AS ALLOWED ACCORDINGLY. IT A NOS.331 TO 335/AHD/2009 (BY ASSESSEE) & ITA NOS.391 TO 395/AHD/2009 (BY REVENUE) M/S.ALEMBIC LTD., BARODA VS. ACIT ASST.YEARS 1997-98 TO 2001-02 - 20 - 14. GROUND NO.4 FOR A.YS. 1997-98, 1998-99, A.YS. 2 000-01 & 2001-02 AND GROUND NO.3 FOR A.Y. 1999-2000 ARE IN RESPECT OF ALLOWING THE DEDUCTION U/S.80HHC AS PER BOOK-PROFI T WHILE COMPUTING BOOK PROFIT U/S.115JA. WHILE DECIDING TH E APPEAL FOR A.YS. 2003-04 & 2002-03 ITAT C BENCH AHMEDABAD I N ITA NOS.3594 & 3810/AHD/2007 (2003-04) VIDE ORDER DATED 6/6/2008 HELD AS UNDER:- 49. RESPECTFULLY FOLLOWING THE SPECIAL BENCH DECI SION OF THE TRIBUNAL, MUMBAI BENCH, IN THE CASE OF SYNCOME FORMULATIONS INDIA LTD. (SUPRA), WE HOLD THAT THE D EDUCTION U/S.80HHC IN THE CASE OF MAT ASSESSMENT IS TO BE WO RKED OUT ON THE BASIS OF ADJUSTED BOOK PROFIT AND NOT ON THE BASIS OR PROFIT AS COMPUTED BY REGULAR PROVISIONS. FURTHER, IN VIEW OF THE BASIS OR PROFIT AS COMPUTED BY REGULAR PROVISIO NS. FURTHER, IN VIEW OF THE MUMBAI BENCH DECISION IN TH E CASE OF AJANTA PHARMA LTD. (SUPRA) DEDUCTION IS NOT TO BE R EDUCED OR SCALED DOWN AS PER SECTION 80HHC(1B). IN VIEW THER EOF, ASSESSEES GROUND IS ALLOWED AND CORRESPONDING REVE NUES GROUND NO.5 IS DISMISSED. 14.1. IN THIS REGARD, A DECISION OF THE HONBLE SU PREME COURT PRONOUNCED IN THE CASE OF AJANTA PHARMA LTD. VS. CIT 327 ITR 305 HAS ALSO BEEN CITED. 15. RESPECTFULLY FOLLOWING THESE DECISIONS, WE ARE OF THE VIEW THAT THE ISSUE AS RAISED BY THE REVENUE STOOD COVERED IN FAVOUR OF THE ASSESSEE, HENCE THIS GROUND IS HEREBY DISMISSED. IT A NOS.331 TO 335/AHD/2009 (BY ASSESSEE) & ITA NOS.391 TO 395/AHD/2009 (BY REVENUE) M/S.ALEMBIC LTD., BARODA VS. ACIT ASST.YEARS 1997-98 TO 2001-02 - 21 - 16. FOR A.YS. 2000-01 & 2001-02 VIDE GROUND NO.3 REVENUE HAS CHALLENGED THAT LD.CIT(A) HAS ERRED IN RELYING UPON THE DECISION OF ITAT BENCH IN THE CASE OF GUJARAT ALKALIES AND C HEMICALS LTD. IN RESPECT OF DEDUCTION OF THE INSURANCE CLAIMS AND THE SUNDRY BALANCE WRITTEN BACK RECEIVED. IT WAS ALSO CHALLEN GED BY THE REVENUE THAT THE BENEFIT OF NETTING SHOULD NOT BE A LLOWED. 17. WE HAVE HEARD BOTH THE SIDES. AT THE OUTSET IT HAS BEEN INFORMED THAT WHILE DECIDING THE APPEAL VIDE ITA NO.1322/AHD/2004 FOR A.Y. 2000-01 ORDER DATED 29/7/ 2005 AND APPEAL FOR A.Y. 2001-02 BEARING ITA NO.1323/AHD/200 4 VIDE SAID ORDER, AN EARLIER DECISION OF ASSESSEES OWN CASE F OR A.Y. 1994-95 WAS FOLLOWED AND DIRECTED THAT FOR THE PURPOSE OF A LLOWING BENEFIT OF NETTING THE MATTER WAS SENT BACK TO THE OF THE AO FOR THE SAID LIMITED PURPOSE. ONCE A DIRECTION HAS BEEN GIVEN FOR THESE TWO YEARS BY THE TRIBUNAL IN THE SAID CONSOLIDATED ORDE R, THEREFORE THE AO WAS EXPECTED TO PASS THE ORDER ACCORDINGLY. EVE N LD.CIT(A) HAS PROCEEDED ON THE SAME LINES AND FOLLOWING THE DECIS ION OF GUJARAT ALKALIES AND CHEMICALS LTD. 77 TTJ 224 ALLOWED THE REQUISITE CLAIM. BEFORE US, A LATEST DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF CIT VS. KAR MOBILES LTD. 333 ITR 478 HAS BEEN CITED, WHEREIN A VIEW WAS THAT IF THE INSURANCE RECEIPTS ARE ON AC COUNT OF LOSS OF GOODS THEN REQUIRED TO BE CONSIDERED AS PART OF BUS INESS PROFITS FOR THE PURPOSE OF DEDUCTION U/S.80HHC OF THE ACT. FOLL OWING THESE IT A NOS.331 TO 335/AHD/2009 (BY ASSESSEE) & ITA NOS.391 TO 395/AHD/2009 (BY REVENUE) M/S.ALEMBIC LTD., BARODA VS. ACIT ASST.YEARS 1997-98 TO 2001-02 - 22 - DECISIONS, WE FIND NO FORCE IN THIS GROUND OF REVEN UE, HENCE, DISMISSED. 18. THE REVENUE HAS RAISED AN ADDITIONAL GROUND AS FOLLOWS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN SCALING DOWN TH E DEDUCTION U/S.80HHC AS PER PROVISIONS OF SECTION 80HHC(1B) WHILE COMPUTING PROFIT U/S.115JA, IN VIEW OF THE LATEST DECISION IN THE CASE OF CIT VS. AJANTA P HARMA LTD., IN ITA NO.1005/2008 DATED 07.05.2009 OF ITAT, MUMBAI WHEREIN THE HONBLE ITAT HELD THAT SCAILING DOWN THE DEDUCTION U/S.80HHC IS NOT PERMISSIBLE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ADDITIONAL GROUND OF APPEAL IS TAKEN IN VI EW OF THE DECISION OF THE APEX COURT IN CIT VS AJANTA PHARMA LTD. IN ITA NO.1005/2008 DATED 07.05.2009. 18.1. WE ARE NOT INCLINED TO ACCEPT THIS ADDITIONAL GROUND AT THIS SECOND ROUND OF APPELLATE PROCEEDINGS. WE HAVE ALR EADY DISCUSSED HEREINABOVE, WHILE DECIDING ONE OF THE GROUND OF LI KE NATURE OF THE ASSESSEE, THAT THE ISSUES WHICH WERE DIRECTED TO BE DECIDED SHOULD BE WITHIN THE PURVIEW OF THE LOWER AUTHORITIES. THE T RIBUNAL HAS RESTORED THE MATTER WITH CERTAIN DIRECTIONS AND THE ASSESSING OFFICER AS ALSO OTHER AUTHORITIES ARE EXPECTED TO CONFINE T HEMSELVES TO THOSE DIRECTIONS ONLY. AFTER A DETAILED DISCUSSION, WE HAVE NOT ENTERTAINED AN ADDITIONAL ISSUE WHICH WAS RAISED BY THE ASSESSEE. IN IDENTICAL MANNER, WE ARE NOT ENTERTAINING THIS ADDI TIONAL GROUND OF IT A NOS.331 TO 335/AHD/2009 (BY ASSESSEE) & ITA NOS.391 TO 395/AHD/2009 (BY REVENUE) M/S.ALEMBIC LTD., BARODA VS. ACIT ASST.YEARS 1997-98 TO 2001-02 - 23 - THE REVENUE. MOREOVER, IT HAS ALSO BEEN BROUGHT TO OUR NOTICE THAT IN A LATEST DECISION OF THE HONBLE SUPREME COURT I N THE CASE OF AJANTA PHARMA LTD. VS. CIT, 327 ITR 305 (SC) , IT WAS HELD THAT THE PROVISIONS OF SECTION 115JB OF THE ACT ARE A SE LF-CONTAINED CODE AND 100% OF EXPORT PROFITS ERRED BY THE ASSESSEE AS COMPUTED U/S.80HHC(3) OF THE ACT IS ELIGIBLE FOR DEDUCTION U NDER CLAUSE(IV) OF THE EXPLANATION TO SECTION 115JB. THE DECISION OF THE HONBLE HIGH COURT IN THE CASE OF CIT VS. AJANTA PHARAMA LT D., 318 ITR 252 WAS REVERSED. THEREFORE, ON BOTH THE COUNTS THIS G ROUND OF THE REVENUE DO NOT SURVIVE, HENCE, DISMISSED. 19. IN THE RESULT, FOR A.YS. 1997-98 & 1998-99 REVENUE S APPEAL ARE PARTLY ALLOWED AND FOR A.YS.1999-2000, 2 000-01 & 2001-02 REVENUES APPEALS ARE DISMISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 30/ 08 /2011. SD/- SD/- ( G.D. AGARWAL ) ( MUKUL KR. SHRAWAT ) VICE PRESIDENT (AZ) JUDICIAL ME MBER AHMEDABAD; DATED 30/ 8 /2011 T.C. NAIR, SR. PS IT A NOS.331 TO 335/AHD/2009 (BY ASSESSEE) & ITA NOS.391 TO 395/AHD/2009 (BY REVENUE) M/S.ALEMBIC LTD., BARODA VS. ACIT ASST.YEARS 1997-98 TO 2001-02 - 24 - COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-I, BARODA 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD 1. DATE OF DICTATION..29.8.2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 29.8.2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S30/08/11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 30/08/11 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER