M/s. CENTURY TEXTILES & INDUSTRIES LTD., MUMBAI V. DCIT Rg. 6(2), MUMBAI

ITA 3925/MUM/2005

• Counselvise Citation: 392519914 RSA 2005
• Duration Of Justice: 6 year(s) 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 20-12-2011
• Assessment Year: 2000-2001
• Appeal Filed On: 24-05-2005
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANJIV DUTT
• Assessee Lawyers: S M BANDI; Y P TRIVEDI
• Keywords: Capital asset; Depreciation; Bad and doubtful debts; Assessment record; Reason to believe; Reassessment proceedings; Capital expenditure
• Section: 143(3); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH I,MUMBAI BEFORE SHRI T.R. SOOD (AM) & SHRI VIJAY PAL RAO (JM) I.T.A. NO.3925/MUM/2005 (A.Y. 2000-01) CENTURY TEXTILES & INDUSTRIES LTD., CENTURY BHAVAN, DR.ANNIE BESANT ROAD, WORLI, MUMBAI-400 030. PAN: AAACC2659Q VS. DY. COMMR. OF INCOME-TAX, RANGE-6(2), 5 TH FLOOR, AAYKAR BHAVAN, M.K. ROAD, MUMBAI-400 020. APPELLANT RESPONDENT I.T.A. NO.4170/MUM/2005 (A.Y. 2000-01) DY. COMMR. OF INCOME-TAX, RANGE-6(2), 5 TH FLOOR, AAYKAR BHAVAN, M.K. ROAD, MUMBAI-400 020. VS. CENTURY TEXTILES & INDUSTRIES LTD., CENTURY BHAVAN, DR.ANNIE BESANT ROAD, WORLI, MUMBAI-400 030. PAN: AAACC2659Q APPELLANT RESPONDENT ASSESSEE BY S/SHRI Y.P. TRIVEDI & S.M. BANDI. DEPARTMENT BY SHRI SANJIV DUTT. DATE OF HEARING 20-12-2011 DATE OF PRONOUNCEMENT 30-12-2011 O R D E R PER T.R. SOOD, AM : ITA NO.3925/MUM/2005 (BY ASSESSEE): ITA NOS.3924 & 4170/MUM/2005 CENTURY TEXTILES & INDUSTRIES LTD. 2 IN THIS APPEAL, VARIOUS GROUNDS HAVE BEEN FILED BU T, AT THE TIME OF HEARING, THE LD. SR. ADVOCATE FOR THE ASSESSEE SUBMITTED THAT SINCE MANY ISSUES ARE INVOLVED AND SOME OF THEM ARE COVERED BY EARLIER ORDERS OF TRIBUNAL, THEREFORE, A CHART HAS BEEN PREPARED WHICH WAS FURNISHED BEFORE US. HE SUBMITTED THAT ISSUES MENTIONED IN T HE CHART MAY BE ADJUDICATED INSTEAD OF THE GROUNDS. WE ARE ADJUDICATING THE ISSUES RAISED IN T HE CHART. 2. ISSUE NO. 1 READS AS UNDER : SR.NO. GROUNDS OF APPEAL AMOUNTS RS. AMOUNTS RS 1 THE LD. C.I.T.(A) HAS ERRED IN CONFIRMING THE ACTION OF THE A.O. BY UPHOLDING THE VALIDITY OF NOTICE ISSUED U/S.148 R.W.S. 147 OF THE I.T. ACT, 1961. THE INITIATION AND CONTINUATION OF PROCEEDINGS AND THE SAID NOTICE 148(1) IS ILLEGAL, BAD-IN-LAW AND VOID AND HENCE IS LIABLE TO BE QUASHED/SET ASIDE AND ACCORDINGLY, BE QUASHED AND SET ASIDE. 3. AFTER HEARING BOTH THE PARTIES, WE FIND THAT ORI GINALLY THE RETURN WAS PROCESSED U/S.143(1) AND LATER ON A NOTICE U/S.148 WAS SERVED ON THE ASSESSEE. OBJECTIONS WERE RAISED BEFORE THE AO REGARDING RE-OPENING OF THE ASSESSMEN T. THE AO UPHELD THE RE-OPENING ON THE BASIS THAT INCOME HAS ESCAPED ASSESSMENT, PARTICULA RLY IN RESPECT OF ISSUES LIKE LOSS ON ACCOUNT OF EXCHANGE FLUCTUATION, INCOME OF UNITS U/S.10B, INTE REST ON LOANS TAKEN FOR NEW PROJECTS CAPITALIZED IN THE BOOKS BUT CLAIMED AS REVENUE, CO MMISSION PAYMENT, PROVISION FOR DEBTS ETC. ARE NOT ALLOWABLE. 4. BEFORE THE LD. CIT(A), IT WAS MAINLY SUBMITTED T HAT SUFFICIENT TIME WAS NOT GIVEN TO FILE THE RETURN AS PROVIDED U/S. 148(1). THE RE-OPENING WAS WITHOUT JURISDICTION BECAUSE THE CONDITIONS LAID DOWN IN SEC. 147 WERE NOT SATISFIED BECAUSE TH E AO HAD NO MATERIAL AT ALL TO FORM A REASONABLE BELIEF. THE LD. CIT(A) ADJUDICATED THIS ISSUE VIDE PARA 3.2 OF HIS ORDER, WHICH IS AS UNDER : ITA NOS.3924 & 4170/MUM/2005 CENTURY TEXTILES & INDUSTRIES LTD. 3 3.2 FINDING: THE APPELLANT HAD MADE SIMILAR SUBMISSION DURING ASSESSMENT PROCEEDINGS. THE ASSESSING OFFICER HAS C ONSIDERED AND REJECTED THE SAME FOR THE FOLLOWING REASONS : I DO NOT AGREE WITH THE ASSESSEES CONTENTION THAT INCOME HAS NOT ESCAPED ASSESSMENT. IT IS SEEN THAT LOSS O N ACCOUNT OF EXCHANGE RATE FLUCTUATION, INCOME OF UNITS U/S.1 0B, INTEREST ON LOANS TAKEN FOR NEW PROJECT CAPITALIZED IN BOOKS BUT CLAIMED AS REVENUE, COMMISSION PAYMENT, PROVISION FOR DOUBTFUL DEBTS ETC. ARE NOT ALLOWABLE . HOWEVER, THE ASSESSEE COMPANY HAS CLAIMED THE SAME. HENCE, THE ASSESSING OFFICER HAD REASON TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT. I HAVE CAREFULLY CONSIDERED THE APPELLANTS SUBMISS ION, ASSESSING OFFICERS REASON AND FACTS AS PER RECORD. IN THE NO TICE ISSUED U/S.148, TIME OF 30 DAYS FROM THE DATE OF RECEIPT OF NOTICE WAS ALLOWED TO THE APPELLANT TO FILE THE RETURN OF INCOME. THE TIME AL LOWED WAS NOT INADEQUATE. THE RETURN OF INCOME WAS ACCEPTED U/S. 143(1) AND NO REGULAR ASSESSMENT WAS MADE U/S. 143(3). THE ASSESS MENT HAS BEEN REOPENED WITHIN A PERIOD OF 4 YEARS. IN VIEW OF THE SE FACTS THE PROVISO TO SECTION 147 IS NOT APPLICABLE. IN THE PAST YEARS ASSESSMENT THE CLAIMS AS MENTIONED IN THE REASONS RECORDED WERE DI SALLOWED. THEREFORE, AS PER EXPLANATION 2 OF SECTION 147 THE APPELLANTS CASE IS DEEMED TO BE A CASE WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. ON PERUSAL OF ASSESSMENT RECORD IT IS N OTICED THAT THE REASONS FOR REOPENING THE ASSESSMENT HAVE BEEN RECO RDED. IN VIEW OF THESE FACTS AND CIRCUMSTANCES OF THE CASE, I UPHOLD THE VALIDITY OF THE ISSUANCE OF NOTICE U/S.148. CONSEQUENTLY THE REASSE SSMENT PROCEEDINGS HAVE BEEN LEGALLY INITIATED AND THE IMPUGNED ORDER HAS BEEN COMPLETED IN ACCORDANCE WITH THE PROVISIONS OF THE INCOME TAX ACT. THE FIRST GROUND OF APPEAL IS THUS DISMISSED. ` 5. BEFORE US, THE LD. SR. ADVOCATE REITERATED THE S UBMISSIONS MADE BEFORE THE CIT(A). 6. ON THE OTHER HAND, THE LD. D.R. POINTED OUT THAT ORIGINALLY THE RETURN WAS ONLY PROCESSED U/S. 143(1) AND LATER ON IT WAS FOUND THAT SO MANY EXPENSES HAVE BEEN CLAIMED AS REVENUE WHICH ARE BASICALLY OF CAPITAL NATURE. REASONS WERE RECORDED ACCORDINGLY. HE ALSO STRONGLY RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CAS E OF ACIT VS. RAJESH JHAVERI STOCK BROKERS PVT. LTD. (2007) 291 ITR 500 (SC). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY AND FIND THAT ORIGINALLY THE RETURN WAS PROCESSED U/S. 143(1). LATER ON, THE AO HAS REC ORDED THE REASONS WHICH CLEARLY SHOW THAT ITA NOS.3924 & 4170/MUM/2005 CENTURY TEXTILES & INDUSTRIES LTD. 4 INCOME HAS ESCAPED ASSESSMENT AND THE CASE IS CLEAR LY COVERED BY EXPLANATION 2(C) OF SEC. 147. FURTHER, THE HONBLE SUPREME COURT HAS HELD IN THE CASE OF RAJESH JHAVERI STOCK BROKERS PVT. LTD. (SUPRA) THAT IF A RETURN HAS BEEN ONLY PROCESSED U/ S. 143(1), THEN RE-OPENING IS JUSTIFIED. IN FACT, THE HELD COLUMN OF THE SAID DECISION READS AS UNDER : TAXING INCOME ESCAPING ASSESSMENT IN THE CASE OF A N INTIMATION UNDER SECTION 143(1) IS COVERED BY THE MAIN PROVISION OF SECTION 147 AS SUBSTITUTED WITH EFFECT FROM APRIL 1, 1989, AND INI TIATING REASSESSMENT PROCEEDINGS IN THE CASE OF INTIMATION WOULD BE COV ERED BY THE MAIN PROVISION OF SECTION 147 AND NOT THE PROVISO THERET O. ONLY ONE CONDITION HAS TO BE SATISFIED. FAILURE TO TAKE STEP S UNDER SECTION 143(3) WILL NOT RENDER THE ASSESSING OFFICER POWERLESS TO INITIATE REASSESSMENT PROCEEDINGS WHEN INTIMATION UNDER SECTION 143(1) HA S BEEN ISSUED. IN VIEW OF THE ABOVE POSITION, WE ARE OF THE OPINIO N THAT ASSESSMENT HAS BEEN VALIDLY RE-OPENED. 8. ISSUE NO. 2 READS AS UNDER : SR.NO. GROUNDS OF APPEAL AMOUNTS RS. AMOUNTS RS 2 THE LD. C.I.T.(A) HAS ERRED IN CONFIRMING THE ACTION OF THE A.O. IN DISALLOWING THE LOSS DUE TO EXCHANGE RATE FLUCTUATION OF RS.47,01,720/- TO THE EXTENT OF LOAN WHICH WAS NOT PAID DURING THE YEAR. 47,01,720/- 9. AFTER HEARING BOTH THE PARTIES, WE FIND THAT DUR ING ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE HAD CLAIMED FOREIGN EXCHA NGE RATE FLUCTUATION LOSS AMOUNTING TO RS.4.3 CRORE. THE DETAILS OF THE LOSS WERE FILED. IT WAS M AINLY SUBMITTED THAT THE LOSS WAS MAINLY SUFFERED IN RESPECT OF FOREIGN CURRENCY LOANS TAKEN FOR IMPORT OF SPARES & RAW MATERIALS IN PULP & PAPER DIVISION AND WORKING CAPITAL REQUIREMENTS IN TEXTILE DIVISION. THE AO DISCUSSED THE ISSUE IN DETAILS AND REFERRED TO THE DECISION OF HO NBLE SUPREME COURT IN THE CASE OF SUTLEJ COTTON MILLS VS. CIT (116 ITR 1) AND SOME OTHER CASE LAWS. ULTIMATELY, HE HELD THAT THE LOSS INCURRED ON ACCOUNT OF BORROWINGS FOR WORKING CAPITAL REQUIREME NTS IS ADMISSIBLE. HOWEVER, HE DISALLOWED A ITA NOS.3924 & 4170/MUM/2005 CENTURY TEXTILES & INDUSTRIES LTD. 5 SUM OF RS.47,01,720/-. ON APPEAL, THE LD. CIT(A) DE CIDED THE ISSUE VIDE PARA 4.5 OF HIS ORDER WHICH IS AS UNDER : 4.5 APPELLANT WAS THEREFORE, REQUESTED TO FILE ALL THE RELEVANT DETAILS IN RESPECT OF EXCHANGE RATE FLUCTUATION FOR EXAMINING THE PURPOSE OF LOANS BORROWED. APPELLANT HAS SUBMITTED THE DETAILS AND ALSO FURNISHED SANCTION LETTERS IN RESPECT OF THE L OANS OBTAINED. A COPY OF SANCTION LETTER DATED 26 TH SEPTEMBER, 1966 OF GOVERNMENT OF INDIA, MINISTRY OF FINANCE (DEPARTMENT OF ECONOMIC AFFAIRS ) IN RESPECT OF FOREIGN CURRENCY LOAN OF US DOLLAR 3 MILLION FROM S TATE BANK OF INDIA, CHICAGO FOR WORKING CAPITAL REQUIREMENTS OF TEXTILE DIVISION AND OTHER DETAILS PERTAINING TO LOSS ON EXCHANGE RATE FLUCTUA TION HAVE BEEN EXAMINED. A PERUSAL OF THE DETAILS, DEPRECIATION CH ART AND RECONCILIATION STATEMENT FILED BEFORE ME REVEALS TH AT IN A.Y. 2000-2001 EXCHANGE RATE FLUCTUATION LOSS WAS RS.12.45 CRORE, OUT OF WHICH RS.8.22 WAS ON ACCOUNT OF CAPITAL EXPENDITURE AND RS.4.23 C RORE WAS REVENUE IN NATURE AND ACCORDINGLYRS.4.23 CRORE WAS DEBITED TO PROFIT AND LOSS ACCOUNT. FROM THE DETAILS FURNISHED IT IS CLEAR THA T THE FOREIGN EXCHANGE FLUCTUATION LOSS OF RS.4.23 CRORE WAS INCU RRED ON THE LOANS OBTAINED BY THE COMPANY IN RESPECT OF DAY TO DAY WO RKING CAPITAL REQUIREMENTS. ONLY A LOSS OF RS.3,75,63,754 RELATIN G TO ACTUAL REPAYMENT OF LOAN CRYSTALLIZED DURING THE YEAR. THE BALANCE AMOUNT OF LOSS CRYSTALLIZED IN SUBSEQUENT YEARS ON ACTUAL REP AYMENTS OF THE LOANS. IT HAS ALSO BEEN NOTICED THAT IN ASSESSMENT YEAR 20 01-02 THE LOSS HAS BEEN ALLOWED ONLY ON THE BASIS OF ACTUAL REPAYMENT OF THE LOAN. THE AMOUNT OF EXCHANGE RATE FLUCTUATION LOSS RELATING T O THE AMOUNT OF LOAN WHICH WAS NOT PAID DURING THE YEAR UNDER CONSI DERATION WAS A NOTIONAL LOSS, HENCE IT IS NOT ALLOWABLE AS DEDUCTI ON. RELIANCE IS PLACED ON THE DECISION OF RAJASTHAN HIGH COURT IN DHADDA & CO. VS. CIT (2003) 22 SITC 366. HOWEVER, IN VIEW OF THE SUPREME COURT DECISION IN THE CASE OF SUTLEJ COTTON MILLS LTD. VS. CIT (116 ITR 1 ) THE ACTUAL LOSS OF RS.3,75,63,754 ONLY INCURRED DURING THE YEAR ON REP AYMENT OF LOAN OBTAINED FOR WORKING CAPITAL REQUIREMENT OF THE COM PANY IS ALLOWABLE DEDUCTION U/S. 37(1) OF THE ACT, WHICH THE ASSESSIN G OFFICER HAS ALREADY ALLOWED IN ASSESSMENT ORDER FOR ASSESSMENT YEAR 200 0-2001. THEREFORE, THE ASSESSING OFFICER HAS ALLOWED THE DE DUCTION CORRECTLY AND NO INTERFERENCE IS CALLED FOR. CONSEQUENTLY, GROUND NO.2 IS DISMISSED. 10. BEFORE US, THE LD. SR. ADVOCATE OF THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE S UPREME COURT IN THE CASE OF CIT VS. WOODWARD GOVERNER (I) PVT. LTD. (312 ITR 254) (SC) AND SPEC IAL BENCH OF THE TRIBUNAL IN THE CASE OF ONGC LTD. VS. CIT (83 ITD 151) AND ALSO BY THE ORDER OF TRIBUNAL IN ITA NO.3507/MUM/2005 FOR ASSESSMENT YEAR 1999-2000 VIDE PARAS 17 & 18. 11. ON THE OTHER HAND, THE LD. D.R. STRONGLY RELIED ON THE ORDERS OF AO AND CIT(A). ITA NOS.3924 & 4170/MUM/2005 CENTURY TEXTILES & INDUSTRIES LTD. 6 12. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIN D THAT PARA 4.5 OF THE APPELLATE ORDER, WHICH HAS BEEN EXTRACTED BY US ABOVE, CLEARLY SHOWS THAT TOTAL LOSS WAS RS.12.45 CRORE OUT OF WHICH LOSS OF RS.8.22 CRORE WAS OF CAPITAL EXPENDIT URE AND RS.4.23 CRORE WAS ON REVENUE SIDE. PART OF THIS HAS BEEN DISALLOWED MAINLY ON THE BASI S THAT THE PAYMENT HAS NOT BEEN MADE AND IT WAS ONLY A NOTIONAL LOSS. THE HONBLE SUPREME COURT HAS CLEARLY HELD IN THE CASE OF CIT VS. WOODWARD GOVERNER (I) PVT. LTD. THAT LOSS INCURRED ON REVENUE SIDE ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION IS ALLOWABLE. SINCE THE DISALL OWANCE OF LOSS AMOUNTING TO RS.47,01,720/- IS ADMITTEDLY ON REVENUE SIDE, THEREFORE, WE SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO ALLOW THIS LOSS. 13. ISSUE NO. 3 READS AS UNDER : 3 I) II) III) IV) V) VI) VII) VIII) THE LD. C.I.T.(A) HAS ERRED IN CONFIRMING THE ACTION OF THE A.O. IN HOLDING THAT THE FOLLOWING INCOME/RECEIPTS, WERE NOT DERIVED FROM INDUSTRIAL U/T OF CENTURY YARN AND CENTURY DENIM A 100% E.O.U.S FOR THE PURPOSE OF CLAIMING EXEMPTION U/S.10B OF CENTURY YARN RS.33,45,296/- AND CENTURY DENIM RS.53,39,740/- AS NOT DERIVED FROM INDUSTRIAL U/T CLAIMING EXEMPTION U/S.10B. PREMIUM ON TRANSFER OF IMPORT LICENCES C.S.T. REMBURSEMENT CLAIM RECEIVED INSURANCE CLAIM RECEIVED SUNDRY CREDIT BALANCE WRITTEN BACK STAFF AGREEMENT DEPOSIT FORFEITED RECEIVED FROM THE NEW INDIA ASSURANCE CO.LTD.,MUMBAI, AGAINST CLAIM OF FIRE IN BLOW ROOM. COMPENSATION RECEIVED FROM M/S.MILESTONE SWITCHGEARS LTD. FOR NON-WORKING OF COMPUTERS SUPPLIED BY THEM. SURPLUS ON SALE OF ASSETS CENTURY YARN (RS.) 905,376 2,227,850 176,719 7 35,344 - - - CENTURY DENIM (RS.) 203,795 3,480,311 1,487,484 2 51,880 90,828 24,990 450 TOTAL 3,345,296 5,339,740 ITA NOS.3924 & 4170/MUM/2005 CENTURY TEXTILES & INDUSTRIES LTD. 7 14. AFTER HEARING BOTH THE PARTIES, WE FIND THAT AS FAR AS THE ISSUE REGARDING PREMIUM ON TRANSFER OF IMPORT LICENCES, INSURANCE CLAIM, SUNDR Y CREDIT BALANCE WRITTEN BACK AND STAFF AGREEMENT DEPOSIT FORFEITURE IS CONCERNED, THE SAME HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE ORDER OF TRIBUNAL FOR EARLIER YEAR, PARTICULARL Y IN ASSTT. YEAR 1998-99 IN ITA NO.9329/MUM/2004 VIDE PARAS 9 TO 11. THIS POSITION IS ADMITTED IN THE CHART ALSO AND ACCORDINGLY WE DECIDE THIS ISSUE AGAINST THE ASSESS EE. 14.1 SIMILARLY, COMPENSATION FOR AMOUNT RECEIVED ON SURPLUS OF ASSETS CAN ALSO BE NOT RELATED TO THE BUSINESS OF EXPORT AND, THEREFORE, THE SAME IS ALSO DECIDED AGAINST THE ASSESSEE. 14.2 AS FAR AS THE ISSUE REGARDING CST REIMBURSEMEN T IS CONCERNED, THE LD. COUNSEL OF THE ASSESSEE POINTED OUT THAT SIMILAR ISSUE HAS BEEN DE CIDED IN FAVOUR OF THE ASSESSEE VIDE PARA 11.1 IN ITA NO.9329/MUM/2004. 15. ON THE OTHER HAND, THE LD. D.R. SUBMITTED THAT THIS ISSUE HAS BEEN DECIDED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. DRESSER RA ND INDIA PVT. LTD. (2010) 323 ITR 429 (BOM). 16. IN THE REJOINDER, THE LD. COUNSEL OF THE ASSESS EE SUBMITTED THAT THE ISSUE INVOLVED IN THE PRESENT APPEAL IS LITTLE DIFFERENT. IT IS NOT A CAS E OF SALES-TAX REFUND WHICH WAS BEFORE THE HONBLE BOMBAY HIGH COURT IN THE CASE OF DRESSER RAND INDIA P.LTD. WHERE THE ASSESSEE PAYS SALES-TAX WHICH IS REFUNDED LATER ON IF THE GOODS MANUFACTURE D ARE EXPORTED AND THAT IS WHY THE DECISION OF HONBLE BOMBAY HIGH COURT IS NOT APPLICABLE. 17. AFTER CONSIDERING THE SUBMISSIONS, WE AGREE WIT H THE CONTENTION OF THE LD. SR. ADVOCATE, SHRI Y.P. TRIVEDI, THAT WHEN SALES-TAX IS INITIALLY PAID, THAT WILL GO ON TO INCREASE THE PURCHASES WHICH MEANS PROFIT IS REDUCED AND WHEN SALES-TAX IS REFUNDED THE PROFIT WOULD INCREASE AND THEREFORE PAYMENT AND REIMBURSEMENT WOULD NULLIFY E ACH OTHER. THEREFORE, WE HOLD THAT REFUND OF SALES-TAX CANNOT BE REDUCED FROM PROFITS. 18. ISSUE NO. 4 READS AS UNDER : ITA NOS.3924 & 4170/MUM/2005 CENTURY TEXTILES & INDUSTRIES LTD. 8 4 THE LD. C.I.T.(A) HAS ERRED IN CONFIRMING THE ACTION OF THE A.O. IN DISALLOWING THE INTEREST U/S.36(I)(III) OF RS.30,20,699/- BEING THE AMOUNT CAPITALIZED IN THE BOOKS. 30,20,699/- 19. AFTER HEARING BOTH THE PARTIES, WE FIND THAT A SUM OF RS.30,20,699/- ON ACCOUNT OF INTEREST HAS BEEN DISALLOWED BECAUSE THE SAME HAS B EEN INCURRED FOR PURCHASING CAPITAL ASSET FOR RAYON DIVISION OF THE ASSESSEE. THE DISALLOWANCE HA S BEEN CONFIRMED BY THE LD. CIT(A). WE FIND THAT THIS ISSUE IS NOW SETTLED BY THE DECISION OF H ONBLE SUPREME COURT IN THE CASE OF DCIT VS. CORE HEALTH CARE LTD. (2008) 298 ITR 194 (SC). IN T HIS CASE, IT WAS HELD : HELD ACCORDINGLY, THAT THE ASSESSEE WAS ENTITLED T O DEDUCTION UNDER SECTION 36(1)(III) PRIOR TO ITS AMENDMENT BY THE FI NANCE ACT, 2003, IN RELATION TO MONEY BORROWED FOR PURCHASE OF MACHINER Y EVEN THOUGH THE ASSESSEE HAD NOT USED THE MACHINERY IN THE YEAR OF BORROWING. SIMILAR VIEW HAS BEEN TAKEN IN THE EARLIER YEAR BY THE TRIBUNAL. FOLLOWING THE ABOVE ORDER, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE. 20. ISSUE NO. 5 READS AS UNDER : 5 THE LD. C.I.T. (A) HAS ERRED IN CONFIRMING THE ACTION OF THE A.O. IN DISALLOWING COMMISION OF RS.1,50,000/- PAID TO M/S. L.K. CORPORATION BY RELYING ON ORDER FOR THE EARLIER ASSESSMENT YEARS. 1,50,000/- 21. AFTER HEARING BOTH THE PARTIES, WE FIND THAT EV EN IN EARLIER YEAR A SUM OF RS.1,50,000/- PAID TO M/S. L.K. CORPORATION AS COMMISSION WAS DIS ALLOWED AND THE TRIBUNAL HAS IN EARLIER YEAR RESTORED THIS MATTER TO THE FILE OF AO FOR RECONSID ERATION. REFERENCE MAY BE MADE TO PARA 16 IN ITA NO.9329/MUM/2004. CONSISTENT WITH THE EARLIER O RDER, WE RESTORE THIS ISSUE TO THE FILE OF AO WITH A DIRECTION TO RECONSIDER THE SAME AND THE DEC IDE THE SAME AS PER DECISION OF EARLIER YEAR. ITA NOS.3924 & 4170/MUM/2005 CENTURY TEXTILES & INDUSTRIES LTD. 9 22. ISSUE NO. 6 READS AS UNDER : 6 THE LD. C.I.T.(A) HAS ERRED IN CONFIRMING THE ACTION OF THE A.O. IN DISALLOWING THE FORFEITURE OF EMPLOYEES SECURITY DEPOSIT OF RS.187,167/-. 1,87,167/- 23. AFTER HEARING BOTH THE PARTIES, WE FIND THAT SI MILAR DISALLOWANCE WAS MADE EVEN IN EARLIER YEAR AND THE MATTER TRAVELLED TO TRIBUNAL. AFTER CONSIDERING THE SUBMISSIONS, THE TRIBUNAL DECIDED THE ISSUE AGAINST THE ASSESSEE, WHICH IS AL SO AN ADMITTED POSITION IN THE CHART. THEREFORE, FOLLOWING THE EARLIER YEAR ORDER, WE DECIDE THIS IS SUE AGAINST THE ASSESSEE. 24. ISSUE NO. 7 READS AS UNDER : 7 THE LD. C.I.T.(A) HAS ERRED IN CONFIRMING THE ACTION OF THE A.O. IN DISALLOWING THE PROJECT EXPENSES RS.57,477/- OF CENTURY CEMENT DIVISION AND RS.1,47,000/- OF CENTURY PULP DIVISION. TOTAL RS.2,04,477/-. 2,04,477/- 25. AFTER HEARING BOTH THE PARTIES, WE FIND THAT TH E ASSESSEE HAD CLAIMED PROJECT EXPENSES IN RESPECT OF CENTURY CEMENT DIVISION AND CENTURY PULP & PAPER DIVISION AMOUNTING TO RS.2,04,477/-, WHICH WAS DISALLOWED BY THE AO. THE DISALLOWANCE WAS CONFIRMED BY THE LD. CIT(A) ON THE BASIS THAT THE EXPENSES HAVE BEEN INC URRED FOR SETTING UP OF THE NEW PROJECTS WHICH WERE UNDER CONSTRUCTION STAGE AT THE MATERIAL TIME. IN THIS REGARD, HE FOLLOWED THE DECISION OF CIT VS. J.K. CHEMICALS LTD. (207 ITR 98 5) (BOM), CIBA OF INDIA LTD. VS. CIT ( 202 ITR 1) (BOM) AND CIT VS. TATA MILLS LTD. (118 ITR 496) ( BOM). 26. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBM ITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF TRIBUNAL IN EARLIER YE AR AND IN THIS REGARD HE SPECIFICALLY REFERRED TO PARA 19 OF THE ORDER OF TRIBUNBAL IN ITA NO.9329/MU M/2004.