DCIT, New Delhi V. M/s. L.T. Foods Ltd., New Delhi

ITA 4046/DEL/2013

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5951 (ITAT-DELHI)
• Duration Of Justice: 7 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 17-05-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 28-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Business expenditure; Income from undisclosed sources; Document seized; Earning of tax free income; Retrospective amendment; Non-deduction of tax; Revised return; Documents seized; Reassessment proceedings; TDS; Rule 8D
• Section: 40A(3); 143(3); 11A; 153A; 14A; 40(a)(ia); 80IB; 251; 139(1); 64; 43; 48; 13; 22; 69; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D NEW DELHI BEFORE SHRI G.S. PANNU, HONBLE VICE PRESIDENT & SHRI K.NARASIMHA CHARY, JUDICIAL MEMBER ITA NO. 4046/DEL/2013 (ASSESSMENT YEAR: 2007-08) DCIT CENTRAL CIRCLE-19, 3 RD FLOOR, ARA CENTRE, JHANDEWALAN EXTN. NEW DELHI. VS. L.T. FOODS LTD., UNIT NO. 134, FIRST FLOOR, RECTANGLE-I, SAKET DISTRICT CENTRE NEW DELHI. AND ITA NO. 4164/DEL/2013 (ASSESSMENT YEAR: 2007-08) L.T. FOODS LTD., UNIT NO. 134, FIRST FLOOR, RECTANGLE-I, SAKET DISTRICT CENTRE NEW DELHI. VS. ACIT CENTRAL CIRCLE-19, NEW DELHI PAN NO. AACCA3104G APPELLANTS RESPONDENTS ASSESSEE BY SHRI AJAY VOHRA, SR. ADVOCATE SHRI ROHIT JAIN, ADVOCATE SMT. DEEPASHREE RAO, CA SHRI VIBHU GUPTA, CA REVENUE BY SHRI J.K. MISHRA, CIT/DR DATE OF HEARING: 30.07.2020 PRONOUNCEMENT ON 30.09.2020 2 ORDER PER K. NARASIMHA CHARRY, JM CHALLENGING THE ORDER DATED 28/3/2013 IN APPEAL NUM BER 30/11- 12/715 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XXX III, NEW DELHI (LD. CIT(A)), IN THE CASE OF LT FO ODS LTD (PREVIOUSLY KNOWN AS M/S. LT OVERSEES LTD) (THE ASSESSEE), FOR THE ASSESSMENT YEAR 2007- 08 BOTH THE REVENUE AND ASSESSEE FILED THESE TWO AP PEALS. 2. BRIEF FACTS OF THE CASE, AS COULD BE CULLED OUT FRO M THE RECORD, ARE THAT THE ASSESSEE IS A COMPANY AND CLAIMS TO HAVE B EEN ENGAGED IN THE INTEGRATED BUSINESS OF HANDLING, STORAGE AND TRANS PORTATION OF FOOD GRAINS. FOR THE AY 2007-08, THEY HAVE FILED THE R ETURN OF INCOME ON 14/11/2007 DECLARING AN INCOME OF RS. 23, 52, 760/- UNDER THE NORMAL PROVISIONS OF THE INCOME TAX ACT, 1961 (THE ACT) AFTER AVAILING DEDUCTION OF RS. 1, 32, 500/- UNDER SECTION 80 G OF THE ACT A ND RS. 25, 66, 86, 795/- UNDER SECTION 80IB OF THE ACT, AND, HOWEVER, DECLAR ED BOOK PROFIT UNDER SECTION 115 JB OF THE ACT AT RS. 24, 84, 93, 930/-. 3. SUBSEQUENTLY, THERE WAS SEARCH & SURVEY AT DIFFEREN T BUSINESS/ RESIDENTIAL PREMISES OF THE ASSESSEE AND GROUP CASE S UNDER SECTION 132(4) OF THE ACT/133A OF THE ACT ON 10/02/2009, PURSUANT TO WHICH NOTICE UNDER SECTION 153A OF THE ACT WAS ISSUED TO THE ASSESSEE ON 7/10/2009 AND THE ASSESSEE, IN RESPONSE TO THE SAID NOTICE, FILED THE RETURN OF INCOME ON 22/01/2010, DECLARING A TOTAL INCOME OF RS. 39, 83, 900/- AFTER AVAILING DEDUCTION UNDER SECTION 80 G OF THE ACT AMOUNTING T O RS. 2, 65, 000/-AND RS. 25,66,86, 795/-UNDER SECTION 80IB OF THE ACT. AFTER SCRUTINY, BY ORDER DATED 19/08/2011, THE ASSESSMENT WAS COMPLETE UNDER SECTION 153A OF 3 THE ACT AT RS. 29, 98, 97, 528/- AFTER DENYING THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SECTION 80IB(11A) OF THE ACT AND MA KING THE FOLLOWING ADDITIONS: S.NO ADDITION AMOUNTIN RS. 1 ADDITION UNDER SECTION 40A(3) OF THE ACT 8,00,129 /- 2 ADDITION UNDER SECTION 40(A)(IA) OF THE ACT 1,84, 67,810/- 3 ADDITION ON ACCOUNT OF SHORTER DEDUCTION OF TDS 10,30,213/- 4 DISALLOWANCE ON ACCOUNT OF PERSONAL EXPENSES 7,70 ,096/- 5 ADDITION UNDER SECTION 69 OF THE ACT ON ACCOUNT O F UNEXPLAINED INVESTMENT 1,63,39,670/- 6 ADDITION UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES 18,18,915/ - TOTAL 29,98,97,528/- 3. AGGRIEVED BY SUCH ADDITIONS, ASSESSEE PREFERRED APP EAL BEFORE THE LD. CIT(A). BY WAY OF IMPUGNED ORDER, THE LD. CIT( A) DELETED THE DISALLOWANCE OF THE CLAIM OF THE ASSESSEE FOR DEDUC TION UNDER SECTION 80IB(11A) OF THE ACT AND THE ADDITION OF RS. 1, 63, 39, 67 0/- MADE BY THE ASSESSING OFFICER UNDER SECTION 69 OF THE ACT. LD. CIT(A), HOWEVER, SUSTAINED THE ADDITION IS MADE ON ACCOUNT OF SECTIO N 40A(3) OF THE ACT, 40(A)(IA) OF THE ACT, ALLEGED PERSONAL EXPENSES AND UNDER 14A OF THE ACT READ WITH RULE 8D OF THE RULES WITH CERTAIN PARTIAL RELIEFS. 4. REVENUE, THEREFORE, FILED ITA NO. 4046 /DEL/ 2013 C HALLENGING THE DELETION OF THE DISALLOWANCE UNDER SECTION 80IB(11A ) OF THE ACT AND 69 OF THE ACT; WHEREAS THE ASSESSEE FILED ITA 4164 /DEL/ 2013 CHALLENGING THE ADDITIONS THAT ARE SUSTAINED. NOW WE SHALL PROCEED TO DEAL WITH THESE TWO APPEALS AND DISPOSE THEM OF BY WAY OF THIS COMMON O RDER BECAUSE THE ORDER GIVING RISE TO THESE TWO APPEALS IS ONE AND T HE SAME AND IT WOULD BE CONVENIENT TO DO SO. 4 ITA NO 4046/DEL/2013 5. IN THIS APPEAL, REVENUE CHALLENGES THE DIRECTION OF THE LEARNED CIT(A) TO THE LEARNED ASSESSING OFFICER TO ALLOW DE DUCTION UNDER SECTION 80IB(11A) OF THE ACT, ON TWO COUNTS, NAMELY, STATIN G THAT THE ASSESSEE IS NOT ENGAGED IN THE INTEGRATED BUSINESS OF HANDLING, STORAGE AND TRANSPORTATION OF THE FOOD GRAINS UNDER SECTION 80I B(11A) OF THE ACT AND ALSO THAT THE ASSESSEE PUT TO USE AT BAHALGARH UNIT THE PLANT AND MACHINERY CONTAINING MORE THAN 20% OF THE OLD PLANT AND MACHINERY AND THEREBY VIOLATED THE CONDITIONS STIPULATED IN 80IB (2) OF THE ACT, VIDE GROUND NUMBER1 TO 3. REVENUE ALSO CHALLENGES THE D ELETION OF RS. 1, 63, 39, 670/- ADDED BY THE LEARNED ASSESSING OFFICER UN DER SECTION 69 OF THE ACT, VIDE GROUND NUMBER 4 WHEREAS GROUNDS NUMBER 5 AND 6 OF GENERAL IN NATURE AND DO NOT REQUIRE ANY SPECIFIC ADJUDICATION . FOR THE SAKE OF CONVENIENCE, WE SHALL DEAL WITH GROUNDS NUMBER1 TO 3 TOGETHER BECAUSE THEY TOUCH UPON THE ELIGIBILITY OF THE ASSESSEE TO CLAIM DEDUCTION UNDER SECTION 80IB(11A) OF THE ACT, THOUGH ON TWO COUNTS. 6. ACCORDING TO THE ASSESSEE, THE ASSESSEE COMMENCED T HE INTEGRATED BUSINESS OF PROCESSING, TRANSPORTING, STORAGE, HAND LING AND SALE OF FOOD GRAINS IN BAHALGARH, SONEPAT, HARYANA IN THE PREVIO US YEAR RELEVANT TO THE ASSESSMENT YEAR 2003-04 BY CREATING SIGNIFICANT INF RASTRUCTURE FOR STORAGE, HANDLING AND TRANSPORTATION OF PADDY/RICE AND HAD D EPLOYED THE MOST ADVANCED IMPORTED EQUIPMENT WITH A VIEW TO ENSURE L EAST POSSIBLE LOSSES IN POST-HARVEST PROCESSING OF FOOD GRAINS AND TO EN HANCE THE EFFICIENCY IN THE GRAIN MANAGEMENT SYSTEM. ASSESSEE CLAIMED DEDUC TION UNDER SECTION 80IB(11A) OF THE ACT, STATING THAT THE HANDLING, ST ORAGE AND TRANSPORTATION OF PADDY/RICE CONSTITUTE THE MAJOR COMPONENTS OF TH EIR INTEGRATED 5 BUSINESS, AND THAT ALL CONDITIONS SPECIFIED IN SUCH SECTION STOOD FULFILLED. 7. LD. ASSESSING OFFICER, HOWEVER, BASING ON THE FINDI NGS/OBSERVATIONS OF THE SPECIAL AUDITOR, REJECTED THE CLAIM OF THE A SSESSEE FOR DEDUCTION UNDER SECTION 80IB(11A) OF THE ACT AND HELD THAT T HE ASSESSEE WAS NOT ELIGIBLE TO CLAIM THE SAME ON THE GROUNDS THAT THE ASSESSEE WAS ENGAGED IN MANUFACTURE AND SALE-PURCHASE OF RICE AND NOT ST ORAGE, HANDLING & TRANSPORTATION OF FOOD GRAINS AS PROVIDED UNDER SEC TION 80IB(11A) OF THE ACT; AND FURTHER THAT PLANT AND MACHINERY PUT TO US E BY THE ASSESSEE PRIOR TO 01.04.2001 IN BAHALGARH UNIT CONSTITUTED MORE TH AN 20% OF THE TOTAL MACHINERY. 8. IN THE APPEAL ASSESSEE PREFERRED BY THE ASSESSEE AG AINST THE REJECTION OF THE CLAIM OF THE ASSESSEE FOR DEDUCTIO N UNDER SECTION 80IB(11A) OF THE ACT, LEARNED CIT(A), ON AN APPRAI SAL OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND POSITION IN LAW, AGRE ED WITH THE CONTENTIONS OF THE ASSESSEE AND DELETED THE DISALLOWANCE MADE B Y THE LD. ASSESSING OFFICER. LD. CIT(A) HELD THAT THE ASSESSEE WAS ENG AGED IN THE INTEGRATED BUSINESS OF TRANSPORTING, HANDLING AND STORAGE OF F OOD GRAINS AND FULFILLED CONDITION STIPULATED IN SECTION 80IB(11A) OF THE AC T AND, THEREFORE, THE ASSESSEE WAS ELIGIBLE TO CLAIM DEDUCTION UNDER THAT SECTION. LD. CIT(A) FURTHER AGREED WITH THE CONTENTION OF THE ASSESSEE THAT THE UNIT AT BAHALGARH WAS NOT FORMED BY WAY OF TRANSFER OF OLD PLANT AND MACHINERY AND IT COMMENCED COMMERCIAL OPERATIONS IN THE PREVI OUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2003-04. 9. AGGRIEVED BY SUCH FINDINGS OF THE LD. CIT(A), REVEN UE FILED APPEAL CHALLENGING THE FINDINGS OF THE LD. CIT(A) AND JUST IFYING THE ORDER OF THE LD. 6 ASSESSING OFFICER ON TWO COUNTS. FIRST CONTENTION R AISED ON BEHALF OF THE REVENUE IS THAT THE ASSESSEE WAS ENGAGED IN MANUFAC TURE AND SALE- PURCHASE OF RICE AND NOT STORAGE, HANDLING & TRANSP ORTATION OF FOOD GRAINS AS CONTEMPLATED UNDER SECTION 80IB(11A) OF THE ACT; AND SECONDLY, THAT PLANT AND MACHINERY PUT TO USE BY THE ASSESSEE PRIO R TO 01.04.2001 IN BAHALGARH UNIT CONSTITUTED MORE THAN 20% OF THE TOT AL MACHINERY. 10. ACCORDING TO THE REVENUE, THE ASSESSEE IS IN THE BU SINESS OF PROCUREMENT, STORAGE AND PROCESSING/HANDLING, PACKA GING AND MARKETING OF BRANDED AND NON-BRANDED BASMATI RICE; THAT THE A SSESSEE WAS BASICALLY ENGAGED IN THE BUSINESS OF MILLING OF PADDY IN EARL IER YEARS WHICH HAS CONTINUED AND ON THE SAME BUSINESS ASSESSEE IS NOW CLAIMING DEDUCTION U/S 80IB(11A); THAT THE ASSESSEE PROCURES PADDY FRO M MANDIS AND THEN AFTER MILLING, RICE IS MANUFACTURED, AND THEREFORE, THE ASSESSEE HAS NOT DERIVED ANY PROFIT FROM THE INTEGRATED BUSINESS OF HANDLING, STORAGE AND TRANSPORTATION, BUT ON THE OTHER HAND, THE INCOME O F THE ASSESSEE COMPANY IS FROM MANUFACTURING OF RICE FROM PADDY ON LY WHICH IS NOT ELIGIBLE BUSINESS IN TERMS OF 80IB(1) FOR CLAIMING DEDUCTION U/S 80IB(11A). 11. JUSTIFYING THE OBSERVATIONS OF THE LD. ASSESSING OF FICER AS TO THE MANUFACTURE ACTIVITY OF THE ASSESSEE, LD. DR ARGUED THAT THE ASSESSEE IS BASICALLY MANUFACTURING RICE FROM PADDY, OTHER ACTI VITIES LIKE PURCHASE, STORAGE, MILLING AND TRANSPORTATION BEING CONNECTED TO MILLING AND PRODUCTION OF RICE; THAT THE ASSESSEE HAS BEEN DOIN G THIS BUSINESS OF RICE MANUFACTURING OVER THE YEARS AND NOTHING HAS CHANGE D SUBSEQUENTLY; THAT IF THE PLEA OF THE ASSESSEE THAT IT IS ELIGIBLE FOR DEDUCTION U/S 80IB(11A) AGAINST MANUFACTURING OF RICE IS ACCEPTED IT WILL T ANTAMOUNT TO ACCEPTING THE CLAIM OF THE ASSESSEE THAT MANUFACTURING OF RIC E IS ELIGIBLE BUSINESS FOR 7 DEDUCTION U/S 80IB(11A) WHICH WAS NEVER THE INTENTI ON OF THE LEGISLATURE; THAT THERE IS A SEPARATE PROVISION OF DEDUCTION U/S 80IB FOR MANUFACTURING CONCERNS AND SECTION 80IB(11A) IS NOT THE PROVISION MEANT FOR SUCH MANUFACTURING ACTIVITY; THAT IN FACT, DEDUCTION U/S 80IB(11A) IS FOR CERTAIN SERVICE ACTIVITIES AND NOT FOR MANUFACTURING ACTIV ITY; THAT THE ASSESSEE IS CLAIMING DEDUCTION NOT AGAINST SERVICE ACTIVITIES, BUT AGAINST ITS MANUFACTURING ACTIVITIES , WHICH IS AGAINST THE MAN DATE OF THE STATUTE. ACCORDING TO HIM, DEHUSKING OF PADDY INTO RICE IS A MANUFACTURING ACTIVITY; THAT THE PURPOSE OF INCENTIVE OF DEDUCTION U/S 80IB (11A) IS NOT ADMISSIBLE ON MANUFACTURING ACTIVITY, ON INTEGRATED BUSINESS OF HANDLING, STORAGE AND TRANSPORTATION OF FOOD GRAINS; THAT MANUFACTU RING ACTIVITY CANNOT BE TREATED AS HANDLING BY ANY STRETCH OF IMAGINATIO N; THAT THE DEDUCTION UNDER SECTION 80IB(11A) IS NOT MEANT FOR AGRICULTUR AL ACTIVITY AS SUCH, BUT FOR INTEGRATED BUSINESS OF HANDLING, STORAGE AND T RANSPORTATION OF FOOD GRAINS, BY CREATING ENHANCED FACILITY OF BULK HAND LING, STORAGE AND TRANSPORTATION OF FOOD GRAINS; THAT SINCE THE PROVI SION IS RELATED TO FOOD GRAINS, IT DOES NOT ENTITLE ALL AGRICULTURAL ACTIVI TIES ELIGIBLE FOR DEDUCTION U/S 80IB(IA), INCLUDING THE DEHUSKING; AND THAT EVEN IF DEHUSKING OF RICE IS AN AGRICULTURAL ACTIVITY, THE SAID ACTIVITY DOES NOT P ARTAKE THE CHARACTER OF HANDLING TO MAKE IT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB(11A). 12. LD. DR FURTHER ARGUED THAT THE ASSESSEE HAS NOT DER IVED ANY PROFIT FROM THE INTEGRATED BUSINESS OF HANDLING, STORAGE A ND TRANSPORTATION; THAT THE INCOME OF THE ASSESSEE COMPANY IS FROM MANUFACT URING OF RICE FROM PADDY ONLY WHICH IS NOT ELIGIBLE BUSINESS IN TERMS OF 80IB(1) FOR CLAIMING DEDUCTION U/S 80IB(11A); THAT ALL OTHER ACTIVITIES OF THE ASSESSEE ARE LIKE STORAGE, TRANSPORTATION ETC. ARE ONLY ANCILLARY ACT IVITIES IN THE PROCESS OF 8 MANUFACTURING OF RICE; THAT MANUFACTURING OF RICE F ROM PADDY IS DIFFERENT FROM THE INTEGRATED BUSINESS OF HANDLING, STORAGE AND TRANSPORTATION; THAT THE NATURE OF BUSINESS OF THE ASSESSEE IS SHO WN AS RICE MANUFACTURING AND MERCHANT EXPORTS IN THE STATEMENT OF THE PARTIC ULARS REQUIRED TO BE FURNISHED UNDER SECTION 44 AB OF THE ACT, WHEREAS I N SCHEDULE 9 APPENDED TO THE P&L ACCOUNT RELATING TO SALES IS SILENT AS T O THE RECEIPT FROM INTEGRATED BUSINESS OF HANDLING, STORAGE AND TRANSP ORT. IN SUPPORT OF THIS CONTENTION, HE PLACED RELIANCE ON THE DECISIONS OF THE HONBLE APEX COURT IN THE CASES OF RAJA PROVISION STORES VS. APPELLATE TRIBUNAL (SALES TAX), TRIVANDRUM 1999 TAXMANN.COM 1941 (SC, AND STATE OF KARNATAKA VS. B. RAGHURAMA SHETTY 1981 TAXMANN.COM 413 (SC). 13. LD. DR SUBMITTED THAT THE DEDUCTION U/S 80IB (11A)I S ADMISSIBLE IN A CASE OF AN UNDERTAKING DERIVING PROFIT FROM THE INT EGRATED BUSINESS OF HANDLING, STORAGE AND TRANSPORTATION OF FOOD GRAINS ; THAT AS REGARDS STORAGE AND TRANSPORTATION ACTIVITY, THERE IS NO DI SPUTE; THAT THE MAIN ISSUE IN THE INSTANT CASE IS AS TO WHAT IS HANDLIN G IN TERMS OF SECTION 80IB(11A). ACCORDING TO HIM, PROCESSING/MANUFACTURI NG OF PADDY INTO RICE DOESNT COME UNDER HANDLING OF FOOD GRAINS, AND T HAT ON THIS SCORE THE BUSINESS OF THE ASSESSEE DOESNT FALL UNDER THE ELI GIBLE BUSINESS OF INTEGRATED BUSINESS OF HANDLING, STORAGE AND TRANS PORTATION OF FOOD GRAINS. 14. LD. DR REFERRED TO THE NATIONAL POLICY ON HANDL ING, STORAGE AND TRANSPORTATION OF FOOD GRAINS NOTIFIED IN THE GAZE TTE OF INDIA DATED 15TH JULY 2000 AND SUBMITTED THAT TO GIVE EFFECT TO THE COMMITMENT OF FISCAL INITIATIVE, PROVISIONS OF SECTION 80IB(11A) WERE IN TRODUCED BY THE FINANCE ACT, 2001 AND INITIALLY BENEFIT WAS GIVEN TO THE I NTEGRATED BUSINESS OF 9 HANDLING, STORAGE AND TRANSPORTATION OF FOOD GRAINS , WHICH LATER ON WAS EXTENDED TO THE BUSINESS OF PROCESSING, PRESERVATIO N AND PACKAGING OF FRUITS AND VEGETABLES BY FINANCE ACT, 2004 W.E.F. 1 .4.2005 AND THEREAFTER BY FINANCE ACT, 2009 W.E.F. 1.4.2010 THE BENEFIT WA S FURTHER EXTENDED TO THE MEAT PRODUCTS AND POULTRY OR MARINE OR DAIRY PR ODUCTS. HE, THEREFORE, CONTENDS THAT SEC 80IB(11A) WAS INSERTED IN THE INC OME-TAX ACT WITH THE LEGISLATIVE INTENTION OF DEVELOPMENT OF INFRASTRUCT URE FOR INTEGRATED BULK HANDLING, STORAGE AND TRANSPORTATION OF FOOD GRAINS KEEPING IN BACKGROUND THE STORAGE AND TRANSIT LOSS OF FOOD GRAINS, BUT NO T TO EXTEND THE BENEFIT OF DEDUCTION TO EXISTING OR NEW INDUSTRIAL UNDERTAKING ENGAGED IN MANUFACTURING OR PRODUCTION OF FOOD GRAINS AS THE S AME WAS ALREADY AVAILABLE UNDER SUB-SEC (3) TO (5) OF SECTION 80IB TO SUCH UNDERTAKING DEPENDING UPON THE PERIOD OF COMMENCEMENT OF BUSINE SS AND THE LOCATION OF INDUSTRIAL UNDERTAKING FOR THE PERIOD A S SPECIFIED THEREIN. FURTHER ACCORDING TO HIM, THE MEMORANDUM EXPLAINING THE PROVISIONS OF SECTION 80IB(11A) MAKES IT EXPLICITLY CLEAR THAT TH E SOLE EMPHASIS WAS TO ENCOURAGE BUILDING OF STORAGE CAPACITIES BY UNDERTA KING UPGRADATION AND MODERNIZATION OF INFRASTRUCTURE FOR BULK HANDLING, STORAGE AND TRANSPORTATION OF FOOD GRAINS. HE REFERRED TO THE SPEECH OF THE FINANCE MINISTER, WHILE INTRODUCING THIS PROVISION, LAYING STRESS ON THE STORAGE AND TRANSPORTATION OF FOOD GRAINS AS THE REASONS, AND A LSO TO THE CIRCULAR NO. 14/2001 WAS ALSO ISSUED BY CBDT ON 9.11.2001. 15. ACCORDING TO THE LD. DR, THE WORD 'HANDLING' IN ITS ORIGINAL SENSE AND IN THE CONTEXT OF FOOD GRAINS WOULD ENCOMPASS W ITHIN ITS AMBIT, PROCESSES AND ACTIVITIES RELATING TO CREATION OF FA CILITIES FOR CLEANING AND REMOVING OF FOREIGN MATERIAL FROM THE FOOD GRAIN SO AS TO PREVENT DAMAGE 10 FROM SUCH MATERIAL, FACILITIES FOR DRYING OF FOOD G RAINS TO PREVENT LOSS DURING STORAGE DUE TO EXCESSIVE MOISTURE, PRE STORA GE BULK GRAIN DUMPING AND DRYING FACILITIES, CREATION OF FACILITIES FOR M ECHANIZED SAMPLING, WEIGHING AND DETECTION OF LIVE INFECTANTS, MECHANIZ ED RECEIVING AND HANDLING BY STORING IN SILOS EQUIPPED WITH FACILITI ES OF AERATION AND FUMIGATION, LOADING AND UNLOADING FACILITIES AND TR AFFIC MANAGEMENT AND DUMPING PITS, CHAIN CONVEYORS, ELEVATORS AND FACULT IES FOR MECHANIZED SHIPMENT SO AS TO INTEGRATE STORAGE WITH QUICK TRAN SPORTATION. FURTHER, HE SUBMITTED THAT, THE SEQUENCE OF THREE ACTIVITIES CO VERED UNDER SECTION 80IB(11A) I.E., HANDLING, STORAGE AND TRANSPOR TATION OF FOOD GRAINS NEEDS TO BE CAREFULLY NOTED AND THE FIRST ACTIVITY LISTED IN THE SECTION IS OF HANDLING, WHICH SHALL ANSWER THE DESCRIPTION NARRA TED BY HIM ABOVE, AND SINCE THE ASSESSEE IN THIS CASE IS PROCESSING PADD Y INTO RICE ONLY AFTER STORAGE OF FOOD GRAINS IN SILOS, SUCH ACTIVITY OF P ROCESSING OF PADDY INTO RICE IS NOT ELIGIBLE ACTIVITY IN TERMS OF SECTION 80IB(1 1A). PLACING RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT IN CASE OF CGT V. NS GETTICHETTIAR , [1971] 82 ITR 599, SOLE TRUSTEE, LOKASHIKSHANA TRUST V. CIT , [1975] 101 ITR 234 (SC), AND SMT. TARULATASHYAM V. CIT , [1977] 108 ITR 345 (SC) HE SUBMITTED THAT THE DEFINITIONS IN OTHER ACTS OR TEC HNICAL MEANING OF A WORD OR EXPRESSION IN THE STATUTE MAY BE RELEVANT B UT NOT SACROSANCT, AND THE COURTS SHOULD NOT HESITATE TO DEPART THE MEANIN G IF THE TEXT AND SETTINGS IN WHICH THE WORD OR EXPRESSION IS USED DE MANDS SO. ON THIS PREMISE HE SUBMITS THAT WHEN SEC 80IB(11A) IS READ ALONG WITH MEMORANDUM OF EXPLAINING THE PROVISIONS IN THE BACK DROP OF NATIONAL POLICY ON HANDLING, STORAGE AND TRANSPORTATION OF F OOD GRAINS, IT WOULD EMERGE THAT THE WORD 'HANDLING' IN ITS ORDINARY SEN SE AND IN THE CONTEXT OF FOOD GRAINS WOULD COVER THE ABOVE ACTIVITIES DEF INED AS HANDLING BY 11 HIM. 16. KEEPING THE OVERALL INTENT OF THIS PARTICULAR PROVI SION IT IS CLEAR THAT THE WORD 'HANDLING' CAN NOT INCLUDE THE MANUFACTURE OR TRANSPORTATION OF FOOD GRAINS BY ANY STRETCH OF IMAGINATION. THE PROV ISIONS OF THE ACT HAVE TO BE INTERPRETED IN A WAY THAT ABSURDITY AND MISCH IEF IS AVOIDED. IN SUPPORT OF HIS SUBMISSION THAT A PARTICULAR WORD A ND EXPRESSION HAS TO BE GIVEN PURPOSIVE CONSTRUCTION, HE PLACED RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF KP VARGHESE V. ITO , [1981] 131 ITR 597/7 TAXMAN 13 AND R&B FALCON (A) (P.) LTD, V. CIT [2008] 301 ITR 309/169 TAXMAN 515. HE FURTHER CHALLENGED THE RELIA NCE OF THE CIT(A) ON THE DECISION OF CYNAMID INDIA (SUPRA) STATING THAT THE ISSUE THEREIN WAS NOT WAS HANDLING OF FOOD GRAINS, BUT ALLOWABILITY OF CLAIM U/S 35C, IN RESPECT OF RICE HUSK USED FOR MANUFACTURING ANIMAL FEED, IN WHICH CONTEXT THE HONBLE SC HELD THAT OPERATION OF DE-HUSKING PADDY IS AN AGRICULTURAL OPERATION AND BOTH RICE AND HUSK ARE AGRICULTURAL PRODUCTS . HE ALSO PLACED RELIANCE ON THE DECISIONS OF MADRAS HIGH COURT IN T HE CASE OF CIT V MUTHURAMALINGAM MODERN RICE MILL [2019] 105 TAXMAN N.COM 39 (MADRAS) AND CIT VS. S. MAHALAKSHMI [2020] 117 TAXM ANN.COM 621 (MADRAS) WHEREIN THE DECISIONS OF THE HONBLE SUPRE ME COURT IN THE CASES OF CYNAMID INDIA (SUPRA) AND GANESH TRADING CO. V. STATE OF HARYANA [1974] 3 SCC 620 WERE CONSIDERED. 17. THE OTHER GROUND URGED BY THE LD. DR IS THAT THE OL D MACHINERY PUT TO USE BY THE ASSESSEE PRIOR TO 01/04/2001 IN BAHAL GARH UNIT CONSTITUTES MORE THAN 20% AND, THEREFORE, THE CLAIM OF THE ASSE SSEE FOR A DEDUCTION UNDER SECTION 80IB(11A) OF THE ACT CANNOT BE ALLOWE D IN VIEW OF EXPLANATION (2) TO SECTION 80IB OF THE ACT WHICH S TIPULATES THAT WERE IN 12 THE CASE OF AN INDUSTRIAL UNDERTAKING, ANY MACHINER Y OR PLANT OR ANY PART THEREOF PREVIOUSLY USED FOR ANY PURPOSE IS TRANSFER RED TO A NEW BUSINESS AND THE TOTAL VALUE OF THE MACHINERY OR PLANT OR PA RT SO TRANSFERRED EXCEEDS 20% OF THE TOTAL VALUE OF THE MACHINERY OR PLANT USED IN THE BUSINESS, THEN DEDUCTION UNDER SECTION 80IB OF THE ACT WOULD NOT BE ALLOWED. 18. PER CONTRA, IT IS THE SUBMISSION OF THE LD. AR THAT THE IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2003- 04, ASSESSEE WAS CARRYING ON THE INTEGRATED BUSINESS OF HANDLING/PRO CESSING, STORAGE AND TRANSPORTATION OF FOOD GRAINS BY CREATING SIGNIFICA NT INFRASTRUCTURE FOR HANDLING, STORAGE AND TRANSPORTATION OF PADDY/RICE, IN ORDER TO ENSURE LEAST POSSIBLE LOSSES IN THE POST-HARVEST PROCESSIN G OF FOOD GRAINS AND TO ENHANCE THE EFFICIENCY IN THE GRAIN MANAGEMENT SYST EM, IN FURTHERANCE OF THE LARGER OBJECTIVE OF THE AGRO ECONOMY OF THE COU NTRY, BY OBTAINING BEST PRICES TO THE FARMERS FOR THEIR PRODUCE; TO MINIMIZ E THE LOSSES OF FOOD GRAINS IN THE COURSE OF HANDLING, STORAGE AND TRANS PORTATION; AND FOR CREATION OF MODERN INFRASTRUCTURE TO SUPPORT AGRO E CONOMY; AND THAT SINCE THE PROCESS OF HANDLING/PROCESSING, STORAGE A ND TRANSPORTATION OF PADDY/RICE IS PART AND PARCEL OF THE INTEGRATED BUS INESS OF THE ASSESSEE COMPANY, DEDUCTION UNDER SECTION 80IB(11A) OF THE A CT WAS CLAIMED BY THE ASSESSEE ON FULFILLMENT OF ALL CONDITIONS SPECI FIED THEREIN WHICH WAS, OF COURSE, DENIED ON TWO GROUNDS, FIRSTLY THAT THERE I S NO HANDLING ACTIVITY AS CONTEMPLATED IN THE INTEGRATED BUSINESS OF HANDLIN G, STORAGE AND TRANSPORTATION OF FOOD GRAINS, BUT ONLY MANUFACTUR E OF RICE FROM PADDY, THE OTHER GROUND BEING THAT THE MACHINERY USED BY T HE ASSESSEE CONSTITUTES MORE THAN 20% OF THE OLD MACHINERY. 13 19. ADVERTING TO THE MANUFACTURING ACTIVITY, CONTENDED BY THE LD. DR, IT IS SUBMITTED THAT WHEN PADDY IS DE-HUSKED/MILLED, T HERE IS NO MATERIAL DIFFERENCE, SO AS TO RENDER IT AS A COMMERCIALLY DI STINCT PRODUCT. HE ARGUED THAT ORDINARILY A MANUFACTURED ARTICLE TAKES A DIFF ERENT FORM AND SUB- SERVES DIFFERENT PURPOSES FROM THE ORIGINAL MATERIA L, THOUGH EVERY MANUFACTURE INVOLVES PROCESSES BUT EVERY PROCESS CA NNOT BE SAID TO BE A MANUFACTURE; THAT THERE IS A SHARP LINE OF DEMARCAT ION BETWEEN MERE PROCESSING SHORT OF MANUFACTURE AND MAKING FINISHED ARTICLES AFTER MANUFACTURING THEM; AND THAT THE EXTENT OF CHANGE W HICH HAS BEEN EFFECTED IN THE ORIGINAL MATERIAL IS USUALLY THE TE ST APPLIED IN DETERMINING WHETHER THE ARTICLE IS OR IS NOT OF MANUFACTURE. BA SING ON THIS SUBMISSION, HE CONTINUES THAT THE RICE IN ITS DE-HUSKED FORM DO ES NOT LOSE ITS IDENTITY, BUT REMAINS AS AN AGRICULTURAL PRODUCE/COMMODITY ON LY. HE PLEADED THAT PADDY OR THE RICE GRAIN CONSISTS OF THE HULL OR HUS K AND THE CARYOPSIS OR BROWN RICE, BROWN RICE CONSISTS OF AN OUTER LAYER CALLED BRAN, THE GERMEN OR EMBRYO AND THE EDIBLE PORTION, THE RICE MILLING OPERATION IS THE SEPARATION OF THE HUSK (DE-HUSKING) AND THE BRAN (P OLISHING) TO PRODUCE THE EDIBLE PORTION (ENDOSPERM) FOR CONSUMPTION, AND THEREFORE, THOUGH SOME PROCESS IS INVOLVED IN THIS ACTIVITY, IT DOES NOT AMOUNT TO MANUFACTURE. 20. HIS SUBMISSION IS THAT IT IS ONLY PADDY OR UNHUSKED RICE THAT CAN BE STORED FOR A LONG PERIOD (I.E., FOR A FEW MONTHS/YE ARS) IN ORDER TO ENHANCE THE NUTRITIVE VALUE AND EDIBLE ATTRIBUTES OF THE FO OD GRAIN, AND ONCE THE PADDY IS DE-HUSKED/MILLED, IT CANNOT BE STORED FOR A LONG PERIOD OF TIME, AS THE SAME DOES NOT POSSESS A LONG SHELF LIFE. IN SUP PORT OF HIS CONTENTION, HE PLACED RELIANCE ON THE DECISIONS OF THE HONBLE APEX COURT IN THE CASES 14 OF CIT VS. CYNAMID INDIA LTD.: 237 ITR 585, CST VS. D.S. BIST: 44 STC 392, STERLING FOODS VS. STATE OF KARNATAKA: 68 STC 239, AND CIT VS. RELISH FOODS: 237 ITR 59 (SC), SACS EAGLES CHICORY VS. CIT: 255 I TR 178 (SC) AND ALSO ON THE DECISIONS REPORTED INCIT VS. GITWAKOFARMA (I) ( P) LTD: 332 ITR 471 (DEL), RAGHBIR CHAND SOM CHAND V. EXCISE AND TAXATI ON OFFICER ([1960] 11 S.T.C. 149.) (P&H), CIT VS. KARJAN CO-OPERATIVE COT TON SALE GINNING & PRESSING SOCIETY LTD.: 129 ITR 821 (GUJ), D.D. SHAH & BROS VS. UOI: 283 ITR 486 (RAJ), B.G.CHITALE VS. DCIT: 305 ITR(AT) 81 (PU N SB), AND CESTAT, CHANDIGARH IN THE CASE OF DUNAR FOODS LTD. V. CCE: 2017 (346) ELT 612.WHILE REFERRING TO SECTION 80IB(11A) OF THE ACT , HE SUBMITTED THAT IT PROVIDES DEDUCTION IN RESPECT OF PROFITS DERIVED FR OM UNDERTAKINGS ENGAGED IN THE INTEGRATED BUSINESS OF HANDLING, STO RAGE AND TRANSPORTATION OF FOOD GRAINS. 21. IN THIS REGARD, IT IS ARGUED THAT SECTION 80IB(11A) OF THE ACT PROVIDES DEDUCTION IN RESPECT OF PROFITS DERIVED FROM UNDERT AKINGS ENGAGED IN THE INTEGRATED BUSINESS OF HANDLING, STORAGE AND TRANSP ORTATION OF FOOD GRAINS ON A CUMULATIVE BASIS AND THIS BENEFICIAL PROVISION S OF SECTION 80IB(11A) OF THE ACT WAS INTRODUCED IN ORDER TO ENCOURAGE TRANSP ORTATION, HANDLING AND STORAGE OF FOOD GRAINS, WITH THE PRIMARY INTENTION OF MINIMIZING LOSSES WHICH OCCUR DURING POST-HARVESTING OF FOOD GRAIN. R ELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF THE MUMBAI BENCH OF THE T RIBUNAL IN THE CASE OF ITO VS. SHANKAR K. BHANAGE: 25 TAXMANN.COM 310, WHE RE WHILE ADVERTING TO THE TERMS INTEGRATED BUSINESS OF HANDLING, STOR AGE AND TRANSPORTATION OF FOOD GRAINS USED IN SECTION 80IB(11A) OF THE AC T IT WAS HELD THAT THE MAIN PURPOSE OF BRINGING THIS PROVISION IS CONSTRUC TION OF GODOWNS SPECIFICALLY FOR STOCKING FOOD GRAINS FOR GREATER E FFICIENCY IN THE GRAIN 15 MANAGEMENT SYSTEM AND MINIMIZE POST HARVEST FOOD GR AIN LOSSES. 22. WHILE REFERRING TO THE SCHEME PROMOTED BY THE GOVER NMENT OF INDIA UNDER TFC 14/99-VOLUME III, DATED 4TH JULY, 2 000, WHICH RESULTED IN PROMULGATION OF THE NATIONAL POLICY ON HANDLING STO RAGE AND TRANSPORTATION OF FOOD GRAINS, SPEECH OF THE FINAN CE MINISTER WHILE INTRODUCING SECTION 80-IB(11A) ON THE STATUTE VIDE FINANCE BILL, 2001, MEMORANDUM EXPLAINING PROVISIONS OF THE FINANCE BIL L, 2001, AND THE CIRCULAR NO. 14/2001 DATED 09.11.2001 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES, EXPLAINING THE INTENT AND PURPOSE OF INTRODUCING PROVISIONS OF SECTION 80IB(11A) OF THE ACT LD. AR SUBMITTED TH AT BASIC CONCERN IN INTRODUCTION OF THE DEDUCTION UNDER SECTION 80IB(11 A) OF THE ACT WAS TO ADDRESS THE COUNTRY'S BASIC CONCERNS RELATING TO EN HANCED FOOD SECURITY AND AGRICULTURAL DEVELOPMENT, UPGRADATION AND MODER NIZATION OF INFRASTRUCTURE FOR STORAGE, HANDLING AND TRANSPORTA TION OF FOOD GRAINS IS A CENTRAL CONCERN IN WHICH INTRODUCTION OF MODERN TEC HNOLOGY WOULD BRING GREATER EFFICIENCY IN THE GRAIN MANAGEMENT SYSTEM A ND MINIMIZE POST HARVEST FOOD GRAIN LOSSES. HE SUBMITTED THAT SECTI ON80-IB(11A) OF THE ACT HAS BEEN INTRODUCED WITH THE INTENT OF SUPPORTING T HE AGRO-PROCESSING INDUSTRIES TO USE ADVANCED TECHNOLOGY/ INFRASTRUCTU RE, IN ORDER TO REDUCE POST-HARVEST LOSSES WHICH ARE INCURRED AT THE STAGE OF PROCESSING, STORAGE AND TRANSPORTATION OF ESSENTIAL CONSUMABLES. HE, TH EREFORE, SUBMITTED THAT THE REQUIREMENT OF HANDLING, STORAGE AND TRANS PORTATION OF FOOD GRAINS HAS TO BE LOOKED FROM THE ANGLE OF ACHIEVING GREATER EFFICIENCY IN THE GRAIN MANAGEMENT SYSTEM AND MINIMIZE POST-HARVE ST FOOD GRAIN LOSSES. ACCORDING TO HIM THE PHRASE HANDLING, STO RAGE AND TRANSPORTATION USED IN SECTION 80-IB(11A) OF THE ACT HAS A VERY WI DE CONNOTATION AND THE 16 WORD HANDLING ITSELF WOULD INCLUDE WITHIN ITS AMBIT PROCESSING AND MANUFACTURE AND EVEN FOR THE RESTRICTIVE ACTIVITY O F STORING FOOD GRAINS, THE ASSESSEE HAS NECESSARILY TO PROCESS THE FOOD GRAINS . IN THIS CONTEXT, HE SUBMITTED THAT SECTION 80IB(11A) OF THE ACT MANDATE S THAT THE UNDERTAKING OF THE ASSESSEE SHOULD BE ENGAGED IN AN INTEGRATED BUSINESS WHICH MEANS AN ACT OR PROCESS OF MAKING WHOLE OR EN TIRE, AND WHEN THE LEGISLATURE HAS INTENTIONALLY USED THE WORD INTEGR ATED BUSINESS IN SECTION 80IB(11A) OF THE ACT, IT WOULD ONLY IMPLY THAT ALL THE INTEGRATED ACTIVITIES/PROCESSES INVOLVED IN THE GRAIN MANAGEME NT SYSTEM FROM COLLECTING THE PADDY FROM THE FIELDS/MANDI TILL BRI NGING THE FOOD GRAIN TO ITS CONSUMABLE AND MARKETABLE FORM WHICH SHALL INCLUDE THE STEPS REQUIRED TO MINIMIZE POST HARVEST FOOD GRAIN LOSSE SHALL HAV E TO BE UNDERTAKEN BY THE ASSESSEE, WHICH ALSO INCLUDES THE PROCESS OF DE -HUSKING/MILLING OF PADDY/RICE/WHEAT TO BRING IT TO ITS CONSUMABLE FORM ALSO FALLS WITHIN THE AMBIT OF THE TERM INTEGRATED BUSINESS AS USED IN THE SAID SECTION. THEN THE LD. AR REFERRED TO THE VARIOUS STAGES INVOLVED IN THE GRAIN MANAGEMENT SYSTEM AND ALSO IN THE PREVENTION OF POS T-HARVEST LOSSES VIS- -VIS THE ACTIVITIES OF THE ASSESSEE AND SUBMITTED THAT ALL THE CONDITIONS STIPULATED IN THE SECTION I.E. ALL THE THREE ACTIVI TIES OF (I) HANDLING, (II) STORING AND (III) TRANSPORTATION HAVE BEEN UNDERTAK EN ON AN INTEGRATED BASIS, AND BY PICKING UP THE INTERMEDIARY ACTIVITY OF MILLING IN ISOLATION FROM THE INTEGRATED PROCESS, IT IS NOT OPEN FOR THE REVENUE TO SAY THAT IT IS ONLY A MANUFACTURE OF RICE FROM PADDY TO DISALLOW T HE DEDUCTION UNDER SECTION 80IB(11A) OF THE ACT. ACCORDING TO HIM SUC H ANACTIVITY OF THE ASSESSEE IS ONLY INTERMEDIARY IN THE ACTIVITIES IN THE NATURE OF PROCESSING OF THE FOOD GRAINS AND FALLS WITHIN THE AMBIT OF HA NDLING AND, THEREFORE, IT CANNOT BE THE SOLE BASIS FOR DENYING DEDUCTION UNDE R SECTION 80IB(11A) OF 17 THE ACT. 23. HE FURTHER SUBMITTED THAT THE CLAIM OF DEDUCTIO N AMOUNTING TO RS.2,75,27,680 UNDER SECTION 80IB(11A) OF THE ACT W AS MADE FOR THE FIRST TIME BY THE ASSESSEE IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2004-05, IN ITS REVISED RETURN OF INCOME, WHICH WAS ALLOWED BY THE ASSESSING OFFICER AFTER DUE EXAMINATION OF FACTS, H OWEVER, VIDE REASSESSMENT PROCEEDINGS INITIATED UNDER SECTION 14 8 OF THE ACT FOR THE SAID YEAR, THE CLAIM OF DEDUCTION MADE UNDER SECTIO N 80IB(11A) OF THE ACT WAS REDUCED TO RS.1,46,47,227 BY THE ASSESSING OFFI CER; AND THAT SUBSEQUENTLY, THE ASSESSING OFFICER PROCEEDED TO DE NY SUCH CLAIM IN THE SUBSEQUENT ASSESSMENTS FRAMED UNDER SECTION 153A R. W.S. 143(3) OF THE ACT FOR THE SAID YEAR. 24. FURTHER, IN THE ASSESSMENT YEAR(S) 2005-06 AND 2006-07 ALSO CLAIM OF DEDUCTION UNDER SECTION 80IB(11A) OF THE ACT WAS ACCEPTED BY THE LEARNED ASSESSING OFFICER IN THE ASSESSMENT CONCLUD ED UNDER SECTION 143(3) OF THE ACT, BUT IT WAS ALSO DENIED IN THE SU BSEQUENT ASSESSMENTS FRAMED UNDER SECTION 153A R.W.S. 143(3) OF THE ACT. SUCH RE-ASSESSMENT PROCEEDINGS INITIATED BY THE LEARNED ASSESSING OFFI CER TO INTER-ALIA DENY THE CLAIM OF DEDUCTION UNDER SECTION 80IB(11A) OF THE A CT FOR THE ASSESSMENT YEARS 2004-05 AND 2005-06 WERE, HOWEVER, QUASHED BY THE TRIBUNAL VIDE ORDER DATED 03.07.2019. 25. BY PLACING RELIANCE ON THE DECISIONS IN SAURASHTRA CEMENT & CHEMICAL INDUSTRIES V. CIT: 123 ITR 669 (GUJ), CIT V. PAUL BROTHERS: 216 ITR 548 (BOM.), CIT V GUJARAT STATE FERTILIZERS CO. LTD: 247 ITR 690 (GUJ.), CIT V FATEH GRANITE (P) LTD.: 314 ITR 32 (BOM.), CI T V. WESTERN OUTDOOR 18 INTERACTIVE PVT. LTD: 349 ITR 309, DIRECT INFORMATI ON PRIVATE LTD. VS. ITO: 15 TAXMANN.COM 63 AND THE FOLLOWING DECISIONS OF TH E DELHI HIGH COURT IN THE CASES OF CIT VS. ESCORTS LTD : 338 ITR 435, CIT VS . DELHI PRESS PATRA PRAKASHAN LTD. (NO.2) : 355 ITR 14, AND CIT VS. TATA COMMUNICATIONS INTERNET SERVICES LTD.: 251 CTR 290 HE SUBMITTED T HAT IT IS A WELL SETTLED PROPOSITION OF LAW THAT WHERE THE ACT PROVIDES FOR A DEDUCTION WHICH IS ALLOWABLE TO AN APPELLANT FOR A CERTAIN TERM/ PERIO D (SUCH AS A PERIOD OF CONSECUTIVE TEN YEARS IN PRESENT CASE), THE REVENUE IS REQUIRED TO EXAMINE THE ELIGIBILITY OF THE APPELLANT AND WHETHE R ALL STATUTORY PRECONDITIONS ARE SATISFIED IN THE FIRST YEAR IN WH ICH THE APPELLANT CLAIMS SUCH A TERM DEDUCTION. IN SUCH CASES, WITHOUT DISTU RBING THE ASSESSMENT FOR THE INITIAL YEAR, IT IS NOT OPEN TO THE REVENUE TO MAKE DISALLOWANCE OF SUCH DEDUCTION IN THE SUBSEQUENT YEAR(S), UNLESS TH ERE IS A MATERIAL CHANGE IN THE FUNDAMENTAL FACTS. 26. ON THE ASPECT OF ALLEGATION AS TO THE USE OF OLD MA CHINERY OR PLANT IN THE NEW BUSINESS IN EXCESS OF 20%, ARGUMENT OF T HE LEARNED AR IS TWOFOLD. FIRSTLY, HE ARGUES THAT THE LEARNED ASSES SING OFFICER FAILED TO DEMONSTRATE OR ESTABLISH ON FACTS AS TO HOW THE ASS ESSEE VIOLATED THE CONDITIONS OF THE PROVISIONS UNDER EXPLANATION-2 TO SECTION 80IB (2) OF THE ACT. ACCORDING TO THE ASSESSEE THERE WAS NO TR ANSFER OF ANY PREVIOUSLY USED MACHINERY TO THE NEW BUSINESS AND T HE ENTIRE MACHINERY AT BAHALGARH UNIT WAS USED FOR THE INTEGRATED ACTIV ITY OF HANDLING, STORAGE AND TRANSPORTATION OF FOOD GRAINS WITH EFFE CT FROM OCTOBER 2002, AND THEREFORE, THE ASSESSEE DOES NOT SUFFER ANY DIS QUALIFICATION MENTIONED IN EXPLANATION TWO OF SECTION 80IB (2) OF THE ACT. THE 2 ND ARGUMENT ADVANCED BY THE LEARNED DR IS THAT THE PRO VISIONS OF SECTION 19 80IB (2) OF THE ACT HAVE NO APPLICATION TO THE BUSI NESS OF THE ASSESSEE AT ALL, IN AS MUCH AS, THE PROVISIONS UNDER SECTION 80 IB (2) OF THE ACT ARE APPLICABLE ONLY TO INDUSTRIAL UNDERTAKINGS DIFFER ENT FROM THE UNDERTAKING MENTIONED IN 80IB(11A) OF THE ACT. O N THIS ASPECT. HE ARGUED AT LENGTH INVITING OUR ATTENTION TO THE PROV ISIONS OF SECTION 80 IA OF THE ACT PRIOR TO ITS AMENDMENT BY WAY OF FINANCE ACT, 1999 AND SUBSEQUENT AMENDMENTS MAKING IT UNWIELDY, LEADING T O THE RESTRUCTURING OF THE SAID SECTION INTO TWO PARTS, N AMELY, SECTION 80 IA OF THE ACT DEALING WITH THE TAX HOLIDAY TO INDUSTRIAL UNDERTAKINGS OR ENTERPRISES ENGAGED IN THE INFRASTRUCTURE DEVELOPME NT AND SECTION 80IB OF THE ACT DEALING WITH BUSINESS OTHER THAN INFRAST RUCTURE BUSINESS. HE SUBMITTED THAT IN CONTRAST TO THE UNAMENDED SECTION 80 IA OF THE ACT, WHICH WAS DEALING WITH THE DEDUCTION, AT SOME PERCE NTAGE OF THE PROFITS DERIVED FROM CERTAIN BUSINESSES IN SUBSECTION ONE T HEREOF ATTENUATING THE CONDITIONS STIPULATED FOR MAKING SUCH BUSINESS ELIGIBLE FOR SUCH DIRECTIONS IN SUBSECTIONS (2) TO (4 E) THEREOF, WHE REAS SUBSECTION 5 PRESCRIBING THE AMOUNT OF DEDUCTION OF PROFITS AVAI LABLE TO EACH BUSINESS, SECTION 80IB OF THE ACT IS ALSO STRUCTURE D THAT THE NATURE OF EVERY ELIGIBLE BUSINESS, THE CONDITIONS STIPULATED FOR ELIGIBILITY AND THE PERCENTAGE OF DEDUCTION ARE ALL GIVEN IN THE WATERT IGHT COMPARTMENTS OF THE SUBSECTIONS. HE SUBMITTED THAT EVERY SUBSECTIO N OF SECTION 80IB OF THE ACT IS A SELF-CONTAINED CODE AND DOES NOT ADMIT OF LOOKING INTO SOME OTHER SUBSECTION FOR THE PURPOSE OF IDENTIFYING THE ELIGIBLE BUSINESS, THE CONDITIONS STIPULATED FOR SEEKING ELIGIBILITY AND T HE PERCENTAGE OF DEDUCTION. WE HAD TAKEN TO VARIOUS SUBSECTIONS OF SECTION 80IB OF THE ACT TO DEMONSTRATE THAT FOR THE PURPOSES OF SUBSECT ION 11A OF SECTION 80IB OF THE ACT, ONE NEED NOT LOOK INTO ANY OTHER S UBSECTION OF SECTION 20 80IB OF THE ACT 27. WE HAVE GONE THROUGH THE RECORD IN THE LIGHT OF THE SUBMISSIONS MADE ON EITHER SIDE. ACCORDING TO THE ASSESSEE, THE ASSESSEE COMMENCED THE INTEGRATED BUSINESS OF PROCESSING, TRANSPORTING , STORAGE, HANDLING AND SALE OF FOOD GRAINS IN BAHALGARH, SONEPAT, HARYANA IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2003-04 BY CREATING SIGNIFICANT INFRASTRUCTURE FOR STORAGE, HANDLING AND TRANSPORTA TION OF PADDY/RICE AND HAD EMPLOYING THE MOST ADVANCED IMPORTED EQUIPMENT WITH A VIEW TO ENSURE LEAST POSSIBLE LOSSES IN POST-HARVEST PROCES SING OF FOOD GRAINS AND TO ENHANCE THE EFFICIENCY IN THE GRAIN MANAGEMENT S YSTEM, AND, THEREFORE, THE ASSESSEE CLAIMED DEDUCTION UNDER SEC TION 80IB(11A) OF THE ACT, STATING THAT THE HANDLING, STORAGE AND TRANSPO RTATION OF PADDY/RICE CONSTITUTE THE MAJOR COMPONENTS OF THEIR INTEGRATED BUSINESS, AND THAT ALL CONDITIONS SPECIFIED IN SUCH SECTION STOOD FULFILLE D; WHEREAS THE MAIN CONTENTION OF THE ASSESSING OFFICER IN DISALLOWING DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80IB(11A) OF THE ACT, IS THA T THE PROCESS OF MILLING OF PADDY FOR MANUFACTURING OF RICE AND SALE & PURCH ASE THEREOF, IS BEYOND THE SCOPE OF SECTION 80IB(11A) OF THE ACT MERELY BE CAUSE SOME PART OF THE ASSESSEES BUSINESS COINCIDES WITH A PART OF THE PR OVISIONS OF THE SAID SECTION, DEDUCTION CANNOT BE ALLOWED. 28. BEFORE ADVERTING TO THE SPECIFIC CONTENTIONS RAISED BY THE PARTIES IN RESPECT OF DEDUCTION CLAIMED UNDER SECTION 80IB(11A ) OF THE ACT, WE DEEM IT JUST AND NECESSARY TO REFER TO SECTION 80IB(11A) OF THE ACT AND TO LOOK INTO THE SCHEME PROMOTED BY THE GOVERNMENT OF INDIA UNDER TFC 14/99- VOLUME III, DATED 4TH JULY, 2000, WHICH RESULTED IN PROMULGATION OF THE NATIONAL POLICY ON HANDLING STORAGE AND TRANSPORTAT ION OF FOOD GRAINS, 21 SPEECH OF THE FINANCE MINISTER WHILE INTRODUCING SE CTION 80-IB(11A) ON THE STATUTE VIDE FINANCE BILL, 2001, MEMORANDUM EXPLAI NING PROVISIONS OF THE FINANCE BILL, 2001, AND THE CIRCULAR NO. 14/2001 DA TED 09.11.2001 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES, EXPLAINING TH E INTENT AND PURPOSE OF INTRODUCING PROVISIONS OF SECTION 80IB(11A) OF THE ACT. 29. THE PROVISIONS OF SECTION 80IB(11A) OF THE ACT READ AS UNDER: (11A) THE AMOUNT OF DEDUCTION IN A CASE OF AN UNDE RTAKING DERIVING PROFIT FROM THE BUSINESS OF PROCESSING, PRESERVATIO N AND PACKAGING OF FRUITS OR VEGETABLES OR MEAT AND MEAT PRODUCTS OR P OULTRY OR MARINE OR DAIRY PRODUCTS OR FROM THE INTEGRATED BUSINESS OF H ANDLING, STORAGE AND TRANSPORTATION OF FOOD GRAINS, SHALL BE HUNDRED PER CENT OF THE PROFITS AND GAINS DERIVED FROM SUCH UNDERTAKING FOR FIVE ASSESS MENT YEARS BEGINNING WITH THE INITIAL ASSESSMENT YEAR AND THEREAFTER, TW ENTY-FIVE PER CENT (OR THIRTY PER CENT WHERE THE ASSESSEE IS A COMPANY) OF THE PROFITS AND GAINS DERIVED FROM THE OPERATION OF SUCH BUSINESS IN A MA NNER THAT THE TOTAL PERIOD OF DEDUCTION DOES NOT EXCEED TEN CONSECUTIVE ASSESSMENT YEARS AND SUBJECT TO FULFILMENT OF THE CONDITION THAT IT BEGINS TO OPERATE SUCH BUSINESS ON OR AFTER THE 1ST DAY OF APRIL, 2001. PROVIDED THAT THE PROVISIONS OF THIS SECTION SHALL NOT APPLY TO AN UNDERTAKING ENGAGED IN THE BUSINESS OF PROCESSING, PRESERVATION AND PACKAGING OF MEAT OR MEAT PRODUCTS OR POULTRY OR MA RINE OR DAIRY PRODUCTS IF IT BEGINS TO OPERATE SUCH BUSINESS BEFO RE THE 1ST DAY OF APRIL, 2009. 30. RELEVANT PORTION OF THE SCHEME PROMOTED BY THE GOVE RNMENT OF INDIA UNDER TFC 14/99-VOLUME III, DATED 4TH JULY, 2 000, WHICH RESULTED IN PROMULGATION OF THE NATIONAL POLICY ON HANDLING STO RAGE AND TRANSPORTATION OF FOOD GRAINS (THE POLICY). IN ORDER TO REDUCE STORAGE AND TRANSIT LOSSES OF FO OD GRAINS AT FARM AND COMMERCIAL LEVEL, TO MODERNIZE THE SYSTEM OF HANDLI NG, STORAGE AND TRANSPORTATION OF THE FOOD GRAINS PROCURED BY THE F OOD CORPORATION OF INDIA (FCI) AND TO BRING IN ADDITIONALITY OF RESOURCES TH ROUGH PRIVATE SECTOR INVOLVEMENT, THE GOVERNMENT HAS APPROVED A NATIONAL POLICY ON HANDLING STORAGE AND TRANSPORTATION OF FOOD GRAINS, DETAILS OF WHICH ARE GIVEN BELOW: OBJECTIVES OF THE POLICY 22 THE MAIN OBJECTIVES OF THE POLICY ARE: (I) TO REDUCE STORAGE AND TRANSIT LOSSES AT FARM LE VEL WHERE ABOUT 70% OF THE TOTAL FOOD GRAIN PRODUCTION IS RETAINED AND CONSUM ED AND ALSO TO ENCOURAGE THE FARMERS TO ADOPT SCIENTIFIC STORAGE METHODS. (II) TO MODERNIZE THE SYSTEM OF HANDLING, STORAGE A ND TRANSPORTATION OF THE FOOD GRAINS PROCURED BY THE FOOD CORPORATION OF IND IA (FCI). (III) TO HARNESS EFFORTS AND RESOURCES OF PUBLIC AN D PRIVATE SECTORS, BOTH DOMESTIC AND FOREIGN TO BUILD AND OPERATE INFRASTRU CTURE FOR INTRODUCTION OF BULK HANDLING STORAGE AND TRANSPORTATION OF FOOD GR AINS IN THE COUNTRY. 31. IN HIS SPEECH THE FINANCE MINISTER, WHILE INTRODUCI NG SECTION 80- IB(11A) ON THE STATUTE VIDE FINANCE BILL, 2001, OBS ERVED THAT,- 'THE STORAGE OF FOOD GRAINS AND THEIR TRANSPORTATIO N ARE OUR MAJOR CONCERN. SIR, I PROPOSE TO PROVIDE A TAX HOLIDAY FOR FIVE YE ARS AND 30% DEDUCTION OF PROFITS FOR THE NEXT FIVE YEARS TO THE ENTERPRISES ENGAGED IN THE INTEGRATED BUSINESS OF HANDLING, TRANSPORTATION AND STORAGE OF FOOD GRAINS.' 32. FURTHER, THE MEMORANDUM EXPLAINING PROVISIONS OF TH E FINANCE BILL, 2001, HAS A BEARING ON GATHERING THE LEGISLATIVE IN TENT BEHIND INSERTION OF SECTION 80-IB(11A) OF THE ACT: TAX HOLIDAY FOR UNDERTAKING ENGAGED IN THE INTEGRA TED HANDLING, STORAGTE AND TRANSPORTTION OF FOOD GRAINS UNDER THE EXISTING PROVISIONS OF SECTION 80IB OF TH E INCOME -TAX ACT, 1961 A DEDUCTION IS ALLOWED, IN COMPUTING THE TAXABLE INCO ME, IN RESPECT OF PROFITS DERIVED FROM A NEW INDUSTRIAL UNDERTAKING OR A SHIP OR THE BUSINESS OF A HOTEL. TO ADDRESS THE COUNTRYS BASIC CONCERNS RELATING TO ENHANCED FOOD SECURITY AND AGRICULTURAL DEVELOPMENT, UPGRADATION AND MODER NIZATION OF INFRASTRUCTURE FOR STORAGE, HANDLING AND TRANSPORTA TION OF FOOD GRAINS IS A CENTRAL CONCERN IN WHICH INTRODUCTION OF MODERN TEC HNOLOGY WOULD BRING GREATER EFFICIENCY IN THE GRAIN MANAGEMENT SYSTEM A ND MINIMIZE POST HARVEST FOOD GRAIN LOSSES. (EMPHASIS SUPPLIED) 33. APART FROM THE ABOVE , CIRCULAR NO. 14/2001 DATED 09.11.2001 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES, IS ALSO HELPFUL TO BE REFERRED FOR EXPLANATION OF THE INTENT AND PURPOSE OF INTRODUCING PROVISIONS OF SECTION 80IB(11A) OF THE ACT, AND IT READS THUS: 23 TAX HOLIDAY FOR UNDERTAKINGS ENGAGED IN THE INTEGRA TED HANDLING, STORAGE AND TRANSPORTATION OF FOOD GRAINS 51.1 UNDER THE EXISTING PROVISIONS OF SECTION 80-IB OF THE INCOME-TAX ACT, A DEDUCTION IS ALLOWED, IN COMPUTING THE TAXABLE INCO ME, IN RESPECT OF PROFITS DERIVED FROM A NEW INDUSTRIAL UNDERTAKING, OR, A SH IP, OR THE BUSINESS OF A HOTEL. 51.2TO ADDRESS THE COUNTRYS BASIC CONCERNS RELATIN G TO ENHANCED FOOD SECURITY AND AGRICULTURAL DEVELOPMENT, UPGRADATION AND MODERNIZATION OF INFRASTRUCTURE FOR STORAGE, HANDLING AND TRANSPORTA TION OF FOOD GRAINS IS A CENTRAL CONCERN. THE INTRODUCTION OF MODERN TECHNOL OGY WOULD BRING GREATER EFFICIENCY IN THE GRAIN MANAGEMENT SYSTEM AND MINIM IZE POST HARVEST FOOD GRAIN LOSSES. 51.3 TO ENCOURAGE BUILDING OF STORAGE CAPACITIES, S ECTION 80-IB HAS BEEN AMENDED TO PROVIDE THAT ANY UNDERTAKING ENGAGED IN INTEGRATED BULK HANDLING, STORAGE AND TRANSPORTATION SHALL BE ALLOW ED HUNDRED PER CENT DEDUCTION FOR THE FIRST FIVE YEARS AND A DEDUCTION OF 25% OF PROFITS (30% IN CASE OF COMPANIES) FOR THE NEXT FIVE YEARS. 51.4 THE AMENDMENT WILL COME INTO EFFECT FROM 1ST A PRIL, 2002, AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YE AR 2002-03 AND SUBSEQUENT YEARS. (EMPHASIS SUPPLIED). 34. ON A CAREFUL UNDERSTANDING OF THE ABOVE, WE ALSO HA VE NO HESITATION TO HOLD THAT THE BENEFICIAL PROVISIONS O F SECTION 80IB(11A) OF THE ACT WAS INTRODUCED TO ENCOURAGE THE DEVELOPMENT OF INFRASTRUCTURE FACILITIES IN THE PRIVATE SECTOR IN THE DIRECTION O F INTEGRATED TRANSACTION OF TRANSPORTATION, HANDLING AND STORAGE AIMING AT THE ENHANCED FOOD SECURITY BY WAY OF ACQUIRING GREATER EFFICIENCY IN THE GRAIN MANAGEMENT SYSTEM AND MINIMIZING THE POST-HARVEST FOOD GRAIN LOSSES. THERE IS A PURPOSE OF PROVIDING INCENTIVE TO THE PRIVATE OPERATORS TO CRE ATE AND ENHANCE THE INFRASTRUCTURAL FACILITIES IN HANDLING, STORAGE AND TRANSPORTATION IN RESPECT OF FOOD GRAINS IS STRETCHING THE FINANCIAL FOOD SEC URITY THROUGH ACQUIRING GREATER EFFICIENCY IN THE GRAIN MANAGEMENT SYSTEM A ND MINIMIZE THE POST- HARVEST FOOD GRAIN LOSSES. 35. AS A MATTER OF FACT, AFTER REFERRING TO THE PROVISI ONS UNDER SECTION 24 80IB(11A) OF THE ACT, THE SPEECH OF THE FINANCE MIN ISTER, CBD TO CIRCULAR NUMBER 14 OF 2001 AND ALSO THE DISCUSSION MADE IN T HE SAMPAT IYENGARS LAW OF INCOME TAX 10 TH EDITION, LEARNED ASSESSING OFFICER OBSERVED THAT T HE PURPOSE BEHIND THE ENACTMENT OF SECTION 80IB(11A) O F THE ACT WAS ENHANCED FOOD SECURITY, BECAUSE A LARGE QUANTITY OF FOOD GRAINS WAS ROTTING IN THE COUNTRY EVERY YEAR BECAUSE OF INADEQ UATE STORAGE FACILITY,AND THAT TO ENHANCE FOOD SECURITY AND AGRI CULTURAL DEVELOPMENT, UPGRADATION AND MODERNISATION OF INFRASTRUCTURE FOR STORAGE, HANDLING AND TRANSPORTATION OF FOOD GRAINS IN ORDER TO MINIMISE THE POST-HARVEST FOOD GRAIN LOSSES BY CREATING INFRASTRUCTURE, THEREFOR. 36. IN THIS CONTEXT, IT IS NOT OUT OF PLACE TO NOTE THE OBSERVATIONS OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. SHANKAR K. BHANAGE: 25 TAXMANN.COM 310, TO THE EFFECT THAT THE LITERAL INTERPRETATION OF WORDS 'INTEGRATED BUSINESS OF HANDLING, STORAGE AND TRANS PORTATION OF FOOD GRAINS' WILL NOT LEAD TO ANY ABSURDITY OR PRODUCE A NY MANIFESTLY UNJUST RESULT; THAT THE LEGISLATIVE INTENT IS NOT TO ENCOU RAGE TRANSPORTATION OR HANDLING OF FOOD GRAINS BUT THE LEGISLATIVE INTENT IS TO ENCOURAGE CONSTRUCTION OF GODOWNS AND WAREHOUSES WITH A VIEW TO PROVIDING STORAGE OF FOOD GRAINS. IF WE CONSIDER THE ENTIRE COMBAT OF THE SCHEME RELATING TO THE TAX HOLIDAY PROVIDED BY THE LEGISLATURE, WE FIN D THAT THE DEDUCTIONS ARE AVAILABLE UNDER VARIOUS PROVISIONS WHEN THE ASS ESSEE HAS CONTRIBUTED SOMETHING TOWARDS THE INFRASTRUCTURE DEVELOPMENT OF THE COUNTRY, BUT THE MAIN PURPOSE OF BRINGING THIS PROVISION IS CONSTRUC TION OF GODOWNS SPECIFICALLY FOR STOCKING FOOD GRAINS FOR GREATER E FFICIENCY IN THE GRAIN MANAGEMENT SYSTEM AND MINIMIZE POST-HARVEST FOOD GR AIN LOSSES. 37. IN THIS BACK GROUND, FOR ALLOWING OR DENYING DEDUCT ION CLAIMED 25 UNDER SECTION 80IB(11A) OF THE ACT WE DEEM IT JUST AND NECESSARY TO REFER TO THE POST-HARVEST LOSSES THAT WOULD OCCUR BETWEE N HARVEST AND HUMAN CONSUMPTION, WHICH SHALL INCLUDE ON-FARM LOSSES, SU CH AS WHEN GRAIN IS THRESHED, WINNOWED AND DRIED, AS WELL AS LOSSES ALONG THE CHAIN DURING TRANSPORTATION, STORAGE AND PROCESSING. ACCORDING T O THE ASSESSEE, THE FLOWCHART BELOW DEMONSTRATES THE VARIOUS PROCESSES/ STAGES INVOLVED POST THE STAGE OF HARVEST OF PADDY/RICE: 38. FURTHER, THE MEASURES TO BE TAKEN IN PREVENTION OF POST-HARVEST LOSSES, ARE ELABORATED IN THE RECOMMENDATIONS OF TH E AGRICULTURAL MARKETING INFORMATION NETWORK, IN ORDER TO PREVENT POST-HARVEST LOSSES OF PADDY/RICE AND ARE,- TO MINIMISE POST-HARVEST LOSSES, THE FOLLOWING MEA SURES SHOULD BE FOLLOWED. - TIMELY HARVEST AT OPTIMUM MOISTURE PERCENTAGE (20 P ERCENT TO 22 PERCENT). STORAGE OF UNMILLED PADDY TO REDUCE MOISTURE CONTENT AND FOR AGEING PURPOSES GRADING AND PACKAGING TRANSPORTATION TO MARKETS DE - HUSKING OR MILLING OF PADDY TO MAKE IT CONSUMABLE AND MARKETABLE SEPARATION AND POLISHING OF DE-HUSKED PADDY TRANSPORTATION FROM FIELD AFTER THRESHING AND WINNOWING OF PADDY FROM FIELD CLEANING OF UNMILLED PADDY TO REMOVE DUST, SAND & UNHEALTHY PADDY POST - HARVEST 26 - USE OF PROPER METHOD OF HARVESTING. - AVOID EXCESSIVE DRYING, FAST DRYING AND REWETTING O F GRAINS, WHICH CAUSES MORE BROKEN RICE. - IMMEDIATE DRYING THE WET GRAIN AFTER HARVEST, PREFE RABLY WITHIN 24 HOURS TO AVOID HEAT ACCUMULATION. - ENSURE UNIFORM DRYING TO AVOID HOT AND WET SPOTS AN D MECHANICAL DAMAGE DUE TO HANDLING. - AVOID THE LOSSES IN THRESHING AND WINNOWING BY BETT ER MECHANICAL METHODS. - FOLLOW SANITATION DURING DRYING, MILLING AND AFTER MILLING TO AVOID CONTAMINATION OF GRAINS AND PROTECT FROM INSECTS, R ODENTS AND BIRDS. - USE PROPER TECHNIQUE OF PROCESSING I.E. CLEANING, P ARBOILING AND MILLING. - ADOPT THE GRADING PRACTICES TO GET MORE PROFIT AND TO AVOID THE ECONOMIC LOSSES. - USE EFFICIENT AND GOOD PACKAGING FOR STORAGE, AS WE LL AS IN TRANSPORTATION. - USE PROPER SCIENTIFIC TECHNIQUE IN STORAGE FOR MAIN TAINING OPTIMUM MOISTURE CONTENT I.E. 12 PERCENT FOR LONGER PERIOD AND 14 PERCENT FOR SHORTER STORAGE PERIOD. - USE PEST CONTROL MEASURES (FUMIGATION) BEFORE STORA GE. - PROVIDE AERATION TO STORED GRAIN AND STIR GRAIN BUL K OCCASIONALLY. - MOVE STOCKS IN SACKS TO DISCOURAGE PEST INCIDENCE A ND THEIR MULTIPLICATION. - PROPER HANDLING (LOADING AND UNLOADING) OF PADDY/RI CE WITH GOOD TRANSPORTATION FACILITATES HELPS IN REDUCTION IN LO SSES AT FARM AND MARKET LEVEL 39. IN THIS CONTEXT, IT IS NECESSARY TO LOOK AT THE ACT IVITIES CONDUCTED BY THE ASSESSEE IN THEIR INTEGRATED BUSINESS OF HANDLI NG, STORAGE AND TRANSPORTATION OF THE FOOD GRAINS IN FURTHERANCE OF THE ABOVE OBJECT OF ENHANCING THE FOOD SECURITY BY ACHIEVING THE GREATE R EFFICIENCY IN THE GRAIN MANAGEMENT SYSTEM AND MINIMIZING THE POST-HARVEST F OOD GRAIN LOSSES. IF THE UNIT OF THE ASSESSEE AT BAHALGARH STRIVES TO AC HIEVE THESE OBJECTIVES, IT WOULD CERTAINLY BE ENTITLED TO THE BENEFIT OF DEDUC TION UNDER SECTION 80IB(11A) OF THE ACT. WE ARE OF THE CONSIDERED OPI NION THAT FOR THIS 27 PURPOSE WE WILL HAVE TO KEEP IT IN MIND THAT THE IN CENTIVE IS PROVIDED FOR THE INTEGRATED BUSINESS OF HANDLING, STORAGE AND TR ANSPORTATION OF FOOD GRAINS WITH THIS PARTICULAR AVOWED OBJECT AND, THER EFORE, THERE SHALL NOT BE ANY COMPARTMENTALIZATION OF THESE ACTIVITIES FOR TH E PURPOSE OF ALLOWING THE DEDUCTION. 40. IT COULD BE SEEN FROM THE RECORD THAT THE ACTIVITIE S OF THE ASSESSEE INCLUDE PURCHASING AND TRANSPORTING PADDY, STORING PADDY, PROCESSING THE PADDY INTO RICE, HANDLING THE PADDY DURING THESE PR OCESSES AND THEREAFTER SELLING THE RICE IN THE DOMESTIC AND OVERSEAS MARKE TS; THAT THE ASSESSEE HAD SET UP AN UNDERTAKING FOR HANDLING AND STORAGE OF THE FOOD GRAINS AND THAT APART FROM DEHUSKING OF THE PADDY FOR THE PURP OSE OF RICE, SUCH PROCESSING/HANDLING/ STORAGE/ TRANSPORTATION INVOLV ES THE CLEANING, STEAMING, SOAKING, DRYING, POLISHING, GRINDING AND THEREAFTER PACKING AND MARKETING; THAT SUCH PROCESSES DONE BY THE ASSESSEE ON THE PADDY AND ENHANCE THE LIFE OF THE FOOD GRAIN , SIGNIFICANTLY REDUCES LOSS OF FOOD GRAIN AND SIGNIFICANTLY CONTRIBUTES TO AGRICULTURAL DEVEL OPMENT OF THIS PRODUCT; AND THAT ALL THESE ACTIVITIES ARE PART OF THE TREAT MENT OF PADDY WHICH IS IN ESSENCE DEHUSKING THE RICE AND TREATMENT CARRIED OU T BY THE ASSESSEE ARE PART OF THE AGRICULTURAL OPERATIONS AND BOTH THE RI CE AND ASK CONTINUE TO REMAIN FOOD GRAIN AND CONTINUE TO REMAIN AGRICULTU RAL PRODUCTS. 41. ORDERS OF THE AUTHORITIES BELOW MADE REFERENCE TO A ND EXTRACTED THE LEGAL OPINION GIVEN BY SHRI PORUSFERRACK KAKA. THE ACTIVITIES OF THE ASSESSEE WITH REFERENCE TO WHICH THE LEGAL OPINION WAS GIVEN CLEARLY ESTABLISHES /CORROBORATE THE SAID FACT ONLY.ACCORDI NG TO ASSESSEE, THEY ARE CONDUCTING ALL THE NECESSARY ACTIVITIES FROM COLLEC TION OF THE PADDY FROM THE FIELDS/MANDI TILL THEY ARE MADE READY FOR HUMAN CONSUMPTION BY 28 PLACING THEM IN THE MARKETS, AND MORE PARTICULARLY, AVOIDING THE LOSSES IN THRESHING AND WINNOWING BY BETTER MECHANICAL METHOD S, FOLLOWING SANITATION DURING DRYING, MILLING AND AFTER MILLING TO AVOID CONTAMINATION OF GRAINS AND PROTECT FROM INSECTS, RODENTS AND BIR DS, USING PROPER TECHNIQUE OF PROCESSING I.E. CLEANING, PARBOILING A ND MILLING, ADOPTING THE GRADING PRACTICES TO GET MORE PROFIT AND TO AVOID T HE ECONOMIC LOSSES, AND USING EFFICIENT AND GOOD PACKAGING FOR STORAGE, AS WELL AS IN TRANSPORTATION, BY INVESTING MORE THAN RS.30 CRORES FOR SETTING UP OF THE ELIGIBLE UNIT AND FOR THIS PURPOSE ADVANCED MACHINE RY WITH IMPROVED TECHNOLOGY WAS INSTALLED FOR EFFICIENTLY HANDLING F OOD GRAINS AND TO AVOID ANY POST-HARVEST LOSSES, DEVELOPED HUGE STORAGE CAP ACITY TO HANDLE PADDY STOCK OF MORE THAN 1,50,000 METRIC TON (MT) AND 70, 000 MT OF RICE IN ORDER TO BRING EFFICIENCY IN THE GRAIN MANAGEMENT S YSTEM AND INCURRING SIGNIFICANT EXPENDITURE TO FACILITATE TRANSPORTATIO N OF FOOD GRAINS BY WAY OF ACQUIRING TRUCKS, TRACTORS AND TROLLEYS AND HAS ALS O HIRED TRUCKS FOR THE PURPOSES OF CARRYING FOOD GRAINS FROM THE FARMERS A ND MANDIS TO ITS STORAGE BLOCKS AND THEREAFTER TO THE MARKETS, FOLLO WED BY UPGRADATION AND MODERNIZATION OF INFRASTRUCTURE FOR HANDLING OF FOO D GRAINS IN ORDER TO BRING GREATER EFFICIENCY IN THE STORAGE AND GRAIN M ANAGEMENT SYSTEM AND MINIMIZE POST-HARVEST FOOD GRAIN LOSSES. ASSESSEE ALSO BROUGHT IT TO THE NOTICE OF THE LEARNED ASSESSING OFFICER THAT THE SP ECIAL AUDITORS IN THE REPORT AT PAGES NUMBER IS 30 AND 31 PART II VOLUME 5 OBSERVED THAT THE CONDITION THAT THE ASSESSEE SHOULD BE ENGAGED IN TH E BUSINESS OF HANDLING, STORAGE AND TRANSPORTATION OF FOOD GRAINS WAS FULFI LLED. 42. REVENUE DOES NOT DISPUTE ANY OF THE ACTIVITIES CARR IED BY THE ASSESSEE OR INSTALLING THE MACHINERY PER TREATMENT AND PROCESSING OF THE 29 PADDY, SETTING UP OF STORAGE FACILITIES OR HIRING O F TRUCKS FOR TRANSPORTATION OF THE PADDY FROM THE FIELDS/MANDI TO THE STORAGE A ND TREATMENT FACILITY AND, RICE FROM THERE TO THE MARKETS. IN FACT, THE ASSESSING OFFICER MADE A REMARK IN THE ASSESSMENT ORDER THAT SIMPLY BECAUSE SOME PART OF THE ASSESSEES BUSINESS COINCIDES WITH THE PART OF THE PROVISION, HE CANNOT BE ALLOWED TO TAKE BENEFIT OF SOMETHING WHICH WAS NEVE R THE INTENTION OF THE LEGISLATURE. IT GOES WITHOUT SAYING THAT THE ACTIV ITIES LIKE COLLECTION OF THE PADDY FROM THE FIELDS/MANDI TILL THEY ARE MADE READ Y FOR HUMAN CONSUMPTION BY PLACING THEM IN THE MARKETS, AND MOR E PARTICULARLY, AVOIDING THE LOSSES IN THRESHING AND WINNOWING BY B ETTER MECHANICAL METHODS, FOLLOWING SANITATION DURING DRYING, MILLIN G AND AFTER MILLING TO AVOID CONTAMINATION OF GRAINS AND PROTECT FROM INSE CTS, RODENTS AND BIRDS, USING PROPER TECHNIQUE OF PROCESSING I.E. CLEANING, PARBOILING AND MILLING, ADOPTING THE GRADING PRACTICES TO GET MORE PROFIT A ND TO AVOID THE ECONOMIC LOSSES, AND USING EFFICIENT AND GOOD PACKA GING FOR STORAGE, AS WELL AS IN TRANSPORTATION, BY INVESTING MORE THAN R S.30 CRORES FOR SETTING UP OF THE ELIGIBLE UNIT AND FOR THIS PURPOSE ADVANC ED MACHINERY WITH IMPROVED TECHNOLOGY WOULD COINCIDE WITH THE PROVISI ON. 43. MAIN PLANK OF ARGUMENT OF THE LD. DR IS THAT THE AS SESSEE IS ENGAGED IN MANUFACTURE OF RICE AND IT CANNOT BE TER MED AS HANDLING. AS ARGUED BY THE LEARNED DR, ACCORDING TO THE LEARNED ASSESSING OFFICER, 'HANDLING' IN THE CONTEXT OF FOOD GRAINS IN THE CON TEXT OF SECTION 80IB(11A) OF THE ACT WOULD ENCOMPASS WITHIN ITS AMBIT, PROCES SES AND ACTIVITIES RELATING TO CREATION OF FACILITIES FOR CLEANING AND REMOVING OF FOREIGN MATERIAL FROM THE FOOD GRAIN SO AS TO PREVENT DAMAG E FROM SUCH MATERIAL, FACILITIES FOR DRYING OF FOOD GRAINS TO PREVENT LOS S DURING STORAGE DUE TO 30 EXCESSIVE MOISTURE, PRE STORAGE BULK GRAIN DUMPING AND DRYING FACILITIES, CREATION OF FACILITIES FOR MECHANIZED SAMPLING, WEI GHING AND DETECTION OF LIVE INFECTANTS, MECHANIZED RECEIVING AND HANDLING BY STORING IN SILOS EQUIPPED WITH FACILITIES OF AERATION AND FUMIGATION , LOADING AND UNLOADING FACILITIES AND TRAFFIC MANAGEMENT AND DUMPING PITS, CHAIN CONVEYORS, ELEVATORS AND FACULTIES FOR MECHANIZED SHIPMENT SO AS TO INTEGRATE STORAGE WITH QUICK TRANSPORTATION. 44. WHILE THERE IS NO PROBLEM IN UNDERSTANDING THE EXPR ESSIONS LIKE STORAGE AND TRANSPORT, THE EXPRESSION HANDLING HA S TO BE UNDERSTOOD IN THE CONTEXT OF THE INTEGRATED BUSINESS OF HANDLING, STORAGE AND TRANSPORTATION OF FOOD GRAINS. ACCORDING TO THE LD. DR HANDLING ANSWERS CERTAIN DESCRIPTION WERE ACCORDING TO THE ASSESSEE THEIR ACTIVITIES FITTING THE DESCRIPTION OF HANDLING. IN THE ABSENCE OF ANY LEGISLATIVE CLARIFICATION AS TO PRECISELY WHICH ACTIVITIES WOULD AMOUNT TO HA NDLING, AND WHEN THE MEANING OF HANDLING IS A LEFTY TO BE INTERPRETED CO NTEXT SURELY, IT IS NECESSARY TO MEET SOME CONCRETENESS ON THIS ASPECT AS AGAINST IMAGINATION. NO DOUBT THE ACTIVITIES ENUMERATED BY THE LD. DR TOO ANSWER THE DESCRIPTION OF HANDLING IN THE CONTEXT OF FOOD GRAINS UNDER SECTION 80IB(11A) OF THE ACT, IS NECESSARY THAT IN ORDER TO BE ELIGIBLE TO CLAIM THE BENEFITS UNDER SECTION 80IB(11A) OF THE ACT, WHETHE R THE ASSESSEE IS REQUIRED TO INSTALL ALL SUCH FACILITIES OR SUCH FAC ILITIES AT SUIT THE CONVENIENCE OF THE ASSESSEE WHILE MEETING THE AVOWE D OBJECT OF 80IB(11A) OF THE ACT WOULD ENTITLE THE ASSESSEE TO CLAIM SUCH BENEFIT IS THE MUTE QUESTION. 45. IN PLAIN ENGLISH HANDLING INCLUDES ANY PROCESS NOT AMOUNTING TO MANUFACTURE OF THE TREATMENT OF THE PRODUCT WITH A VIEW TO DEAL WITH THE 31 SAME TO ACHIEVE A DESIRED PURPOSE. IN A SENSE IT I NCLUDES ALL THE ACTIVITIES PREPARATORY AND AXILLARY IN NATURE. MERELY BECAUSE THE WORD PROCESSING IS OCCURRING IN 80IB(11A) OF THE ACT IN RESPECT OF THE FRUITS OR VEGETABLES, IT DOES NOT EXCLUDE ALL THE PROCESSES FROM MEANING OF HANDLING. AS STATED SUPRA, THERE ARE VARIOUS STEPS INVOLVED IN MINIMIZI NG THE POST-HARVEST LOSSES AS PER THE RECOMMENDATIONS OF THE AGRICULTUR AL MARKETING INFORMATION NETWORK. IF WE EXCLUDE THE SPECIFIC AC TIVITIES LIKE STORAGE AND TRANSPORT, ALL OTHER ACTIVITIES WHICH ARE PREPARATO RY, AXILLARY AND SUNDRY IN NATURE, BUT IN FURTHERANCE OF THE AVOWED OBJECT OF BETTER GRAIN MANAGEMENT AND MINIMIZING THE POST-HARVEST LOSSES T O ACHIEVE FOOD SECURITY WOULD NATURALLY FALL WITHIN THE CATEGORY O F HANDLING OTHERWISE, SUCH AN EXPRESSION WILL REMAIN REDUNDANT. IT CANNO T BE SAID THAT THE INTERMEDIARY PROCESSES UNDERTAKEN BY THE ASSESSEE I N CLEARING, STEAMING, SOAKING, DRYING, POLISHING AND GRINDING BESIDES DE- HUSKING THE PADDY WOULD SIGNIFICANTLY ENHANCE THE LIFE OF THE FOOD GR AIN , REDUCES THE LOSS OF FOOD GRAIN AND CONTRIBUTES TO THE PRESERVATION OF FOOD GRAINS. IF THOSE ACTIVITIES DO NOT ANSWER THE DESCRIPTION OF HANDLIN G, WE WONDER WHAT WOULD BE HANDLING. THE WORD HAS TO BE UNDERSTOOD I N ITS CONTEXTUAL SENSE AND MERELY BECAUSE THE LEARNED ASSESSING OFFICER DO ES NOT AGREE WITH THE ASSESSEE TO INCLUDE THE MILLING OF THE PADDY IS COV ERED BY HANDLING, IT DOES NOT TAKE AWAY THE OTHER ACTIVITIES FROM THE ME ANING OF HANDLING, SO LONG AS SUCH ACTIVITIES KEEP NEXUS WITH THE OBJECTI VE FOR WHICH THE BENEFIT IS INTENDED. WHETHER OR NOT THE DE-HUSKING OF PAD DY WOULD FORM PART OF THE HANDLING, WE SHALL DEAL WITH IT A LITTLE LATER. IN OUR OPINION, THE ACTIVITIES CARRIED OUT BY THE ASSESSEE CERTAINLY FO RM PART OF THE EXPRESSION HANDLING.. 32 46. AS STATED EARLIER, WHAT COULD BE GATHERED FROM THE IMPUGNED ASSESSMENT ORDER AND THE ARGUMENTS OF THE LEARNED D R IS THAT THE REVENUE DOESNOT DISPUTE THE NATURE OF THE ACTIVITIE S OF THE ASSESSEE, EXCEPT THE PROCESS OF DEHUSKING THE PADDY, AND THEI R MAIN DISPUTE IS THAT DEHUSKING IS A SEPARATE MANUFACTURING ACTIVITY AND DOES NOT FORM PART OF HANDLING, AND THEREFORE, SUCH ACTIVITY CANNOT BE MADE TO FIT IN THE EXPRESSION HANDLING. RELIANCE OF REVENUE ON THE CASE REPORTED IN LAKSHMI ENERGY & FOODS LTD. V. ACIT [2014] 44 TAXMANN.COM 248 (CHANDIGARH - TRIB.) POINTS OUT THE SAME. AS A MAT TER OF FACT, ON SIMILAR FACTS, ALL THEARGUMENTS IDENTICAL TO THE ONES RAISE D IN THIS CASE, WERE RAISED BY THE REVENUE IN THE CASE OF LAKSHMI ENERGY & FOODS LTD. (SUPRA). IN THAT CASE ALSO THE BUSINESS OF THE ASSESSEE COMP RISED OF THE PROCUREMENT OF PADDY FROM MARKET THEN TRANSPORT THE SAME TO THE GODOWN WHICH WERE SPECIFICALLY DESIGNED TO PROVIDE MAXIMUM SECURITY AND SAFETY FOR THE FOOD GRAINS FROM WITHERING, SPIL LAGE, LOSS BY PESTS AND OTHER NATURAL CALAMITIES. THEREAFTER THE HUSK ON TH E PADDY IS FIRST REMOVED TO PREVENT THE LOSS BY INBORN PESTS AND THEN THE PR ODUCT IS CONSIGNED TO STORES. FOOD GRAINS ARE KEPT IN HIGH CLASS STORES A ND IN CASE OF PADDY SAME IS KEPT FOR A PERIOD RANGING FROM ONE YEAR TO TWO Y EARS WHERE REGULAR FUMIGATION ACTIVITIES ARE CARRIED OUT. WHEN THE ASS ESSEE CLAIMED THE BENEFIT OF 80IB(11A) OF THE ACT, REVENUE DENIED THE SAME ON THE GROUND THAT THE ASSESSEE WAS BASICALLY ENGAGED IN THE BUSI NESS OF MILLING OF PADDY, IN FORM 3CD FOR ASSESSMENT YEAR 2005-06 THE ASSESSEE HAS SHOWN MAIN BUSINESS ACTIVITIES AS 'MANUFACTURING OF RICE, CATTLE FEED, CRUSHING OF OIL SEEDS, SOLVENT EXTRACTIONS' ETC., IN THE ANNUAL REPORT ALSO THE MAIN ACTIVITY SHOWN AS MANUFACTURING OF RICE AND EVEN TH E BANK LOANS WERE OBTAINED FOR THE PURPOSE OF MANUFACTURING OF RICE. AS AGAINST THE 33 ARGUMENT OF THE ASSESSEE THAT THE WORD HANDLING T AKES INTO ITS FOLD MANY ACTIVITIES AND PROCESSES IN FURTHERANCE OF THE AVOW ED OBJECT OF SECURING THE MINIMAL POST-HARVEST LOSSES WOVEN AROUND THE ST ORAGE AND TRANSPORTATION, WHICH INCLUDES THE MILLING OF THE P ADDY, REVENUE ARGUED IN IDENTICAL TERMS THAT 'HANDLING' IN THE CONTEXT OF F OOD GRAINS IN THE CONTEXT OF 80IB(11A) OF THE ACT WOULD ENCOMPASS WITHIN ITS AMBIT, PROCESSES AND ACTIVITIES RELATING TO CREATION OF FACILITIES FOR C LEANING AND REMOVING OF FOREIGN MATERIAL FROM THE FOOD GRAIN SO AS TO PREVE NT DAMAGE FROM SUCH MATERIAL, FACILITIES FOR DRYING OF FOOD GRAINS TO P REVENT LOSS DURING STORAGE DUE TO EXCESSIVE MOISTURE, PRE STORAGE BULK GRAIN D UMPING AND DRYING FACILITIES, CREATION OF FACILITIES FOR MECHANIZED S AMPLING, WEIGHING AND DETECTION OF LIVE INFECTANTS, MECHANIZED RECEIVING AND HANDLING BY STORING IN SILOS EQUIPPED WITH FACILITIES OF AERATION AND F UMIGATION, LOADING AND UNLOADING FACILITIES AND TRAFFIC MANAGEMENT AND DUM PING PITS, CHAIN CONVEYORS, ELEVATORS AND FACULTIES FOR MECHANIZED S HIPMENT SO AS TO INTEGRATE STORAGE WITH QUICK TRANSPORTATION. 47. IN THAT CASE ALSO, REFERENCE WAS MADE TO THE SCHEME PROMOTED BY THE GOVERNMENT OF INDIA UNDER TFC 14/99-VOLUME III, DATED 4TH JULY, 2000, WHICH RESULTED IN PROMULGATION OF THE NATIONAL POLI CY ON HANDLING STORAGE AND TRANSPORTATION OF FOOD GRAINS, SPEECH OF THE F INANCE MINISTER WHILE INTRODUCING SECTION 80-IB(11A) ON THE STATUTE VIDE FINANCE BILL, 2001, MEMORANDUM EXPLAINING PROVISIONS OF THE FINANCE BIL L, 2001, AND THE CIRCULAR NO. 14/2001 DATED 09.11.2001 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES, EXPLAINING THE INTENT AND PURPOSE OF INTRODUCING PROVISIONS OF SECTION 80IB(11A) OF THE ACT IN SUPPORT OF THE R IVAL CONTENTIONSOF THE PARTIES. HAVING CONSIDERED ALL THESE THINGS IN EXT ENSO, THE TRIBUNAL 34 REACHED A CONCLUSION THAT CARRYING OUT MILLING OF P ADDY TO RICE WILL NOT TAKE OUT THE CASE OF THE ASSESSEE FROM THE PURVIEW OF 80 IB(11A) OF THE ACT, AND ALL THE ACTIVITIES CARRIED OUT BY THE ASSESSEE BY C REATING INFRASTRUCTURE FOR HANDLING, STORAGE AND TRANSPORTATION WOULD ENTITLE THEM TO BE COVERED BY 80IB(11A) OF THE ACT. ON THE ASPECT OF PROCESSING T HE PADDY TO RICE VIS-- VIS THE STIPULATED ACTIVITY OF HANDLING, STORAGE A ND TRANSPORTATION OF FOOD GRAINS UNDER SECTION 80IB(11A) OF THE ACT, THE TRI BUNAL OBSERVED THAT,- 39. XXX XXX XXX TO FIND OUT THE INTENTION OF THE LEGISLATURE LET U S UNDERSTAND THE PROCESS OF HANDLING REQUIRED TO BE CARRIED ON IN RESPECT OF THE FOOD GRAINS. IN THIS REGARD IT WILL BE RELEVANT TO REFER TO THE PROCESS CARRIED OUT BY THE ASSESSEE WHICH HAS BEEN DESCRIBED THROUGH PICTORIAL CHART (IN THE PAPER BOOK FILED ON 30.9.2013 AT PAGE 58 TO 82), THE PROC ESS HAS BEEN DESCRIBED AS: 1. PADDY HARVESTED IN THE FARM - 2. PADDY IS LOADED IN THE TROLLEYS AUTOMATICALLY THROU GH A COMBINE - 3. TROLLYS COMES TO THE MANDI - 4. PADDY IS UNLOADED AND MOUNDS ARE CREATED - 5. PADDY IS PURCHASED IN TERMS OF MOUNDS THROUGH AUCTI ON - 6. PADDY IS CLEANED BY THE LABOUR AND FILLED IN THE GU NNY BAGS WHICH ARE STITCHED MANUALLY - 7. BAGS ARE LOADED IN COMPANY TRUCKS AND TRANSPORTED T O THE FACTORY 8. AT FACTORY THE WEIGHT IS RECORDED AT THE FACTORY GA TES - 9. THE BAGS ARE OPENED AND PADDY IS POURED IN THE OPEN GODOWNS WHERE DRIERS AND FANS ARE INSTALLED TO REDU CE THE MOISTURE FOR PROPER STORAGE - 10. AFTER DEMOISTURISATION IS COMPLETED PADDY IS REPACK ED AND LOADED INTO THE TRUCKS - 11. THESE LOADED TRUCKS OF THE COMPANY TRANSPORT THE PA DDY TO COVERED GODOWNS - 12. PADDY IS UNLOADED IN THE GODOWN AND PUT IN STACKS - 13. PADDY IS STORED IN SUCH GODOWN FOR A PERIOD OF ONE YEAR TO TWO 35 YEARS DEPENDING ON THE QUALITY AND TIME REQUIRED FO R MATURING THE SAME - 14. GODOWNS ARE FITTED WITH CLIMATIC CONTROL AND FUMIGA TION FACILITIES SO AS TO PRESERVE THE PADDY FROM WITHERI NG OUT - FROM INSETS AND OTHER NATURAL CALAMITIES - 15. PADDY IS ALSO KEPT AT A PARTICULAR MOISTURE LEVEL - 16. AFTER MATURING OF PADDY FROM ONE YEAR TO TWO YEARS THE SAME IS DE-HUSKED AND SENT TO MODERNIZED SILOS - 17. PADDY IS KEPT IN THE SILOS FROM 15 TO 60 DAYS DEPEN DING UPON THE CLIMATIC CONDITIONS AND MOISTURE LEVEL AND SENT FOR PROCESSING I.E. MILLING UNIT. 40. ACCORDING TO THE ASSESSEE THE ABOVE PROCESS IS DIRECTLY RELATED TO INTEGRATED BUSINESS OF HANDLING, STORAGE AND TRANSP ORTATION. IT HAS BEEN POINTED WITH REFERENCE TO SCHEDULE OF FIXED ASSTS T HAT THE ASSESSEE HAS PURCHASED MORE THAN 150 TRUCKS DURING THE IMPLEMENT ATION OF MEGA PROJECT. IT WAS ALSO POINTED OUT THAT NEW LAND WAS PURCHASED DURING FINANCIAL YEARS 2006-07, 2007-08 AND 2008-09 AND FR ESH ADDITION WERE ALSO MADE AND MAJORITY OF THE EXPANSION WAS CARRIED OUT IN BUILDING OF STORES. EVEN THE ADDITION TO MACHINERY WAS MAINLY O N ACCOUNT OF MACHINERY INSTALLED IN THE STORES FOR KEEPING THE C LIMATE UNDER CONTROL, CREATING OF DRYING FACILITIES AND FUMIGATION FACILI TIES ETC. EVEN THE LD. D.R. FOR THE REVENUE HAS CLEARLY STATED THAT THE WORD 'H ANDLING' IN ITS ORIGINAL SENSE AND IN THE CONTEXT OF FOOD GRAINS WOULD ENCOM PASS WITHIN ITS AMBIT, PROCESSES AND ACTIVITIES RELATING TO CREATION OF FA CILITIES FOR CLEANING AND REMOVING OF FOREIGN MATERIAL FROM THE FOOD GRAIN SO AS TO PREVENT DAMAGE FROM SUCH MATERIAL, FACILITIES FOR DRYING OF FOOD GRAINS TO PREVENT LOSS DURING STORAGE DUE TO EXCESSIVE MOISTURE, PRE STORAGE BULK GRAIN DUMPING AND DRYING FACILITIES, CREATION OF FACILITI ES FOR MECHANIZED SAMPLING, WEIGHING AND DETECTION OF LIVE INFECTANTS , MECHANIZED RECEIVING AND HANDLING BY STORING IN SILOS EQUIPPED WITH FACI LITIES OF AERATION AND FUMIGATION, LOADING AND UNLOADING FACILITIES AND TR AFFIC MANAGEMENT AND DUMPING PITS, CHAIN CONVEYORS, ELEVATORS AND FACULT IES FOR MECHANIZED SHIPMENT SO AS TO INTEGRATE STORAGE WITH QUICK TRAN SPORTATION. 41. IN OUR OPINION, WHEN THE ACTIVITIES SHOWN BY TH E ASSESSEE THROUGH PROCESS FLOW CHART ARE COMPARED WITH THE ACTIVITIES WHICH ADMITTEDLY CONSTITUTE 'HANDLING' AS PER THE REVENUE THEN IT EM ERGES THAT THE ASSESSEE HAS DEFINITELY CREATED CERTAIN FACILITIES WHICH CAN BE SAID TO BE RELATED TO HANDLING, STORAGE AND TRANSPORTATION OF FOOD GRAINS. THE ASSESSEE IS CARRYING THE PADDY FROM THE MARKET IN I TS OWN TRUCKS WHICH ARE WEIGHED AT THE GATE WHEREIN DRYING PROCESS AND INITIAL CLEANING TAKES PLACE. AFTER OPENING THE BAGS AND PUTTING THE PADDY THROUGH THESE 36 PROCESSES PARTICULARLY THE PROCESS OF DEFUSING SO A S TO REMOVE THE INBORN PESTS. AFTER THIS THE PROCESS IT IS AGAIN PACKED AN D CARRIED TO THE STORES WHERE THE SAME IS KEPT FOR MATURING FOR A PERIOD OF ONE YEAR TO TWO YEARS. ALL FACILITIES FOR SECURING MAXIMUM SECURITY TO THE FOOD GRAINS I.E; PADDY HAVE BEEN INSTALLED TO SAFEGUARD THE PADDY FR OM WITHERING, SPILLAGE AND OTHER NATURAL CALAMITIES. REGULAR FUMI GATION IS DONE TO PRESERVE THE FOOD GRAINS FROM NATURAL CALAMITIES AN D TO SAVE IT FROM VARIOUS PESTS. AFTER KEEPING THE PADDY FOR A PERIOD OF 12 TO 24 MONTHS THE SAME IS TRANSFERRED TO THE SILOS WHERE THE SAME IS AGAIN STORED FOR A PERIOD OF 15 TO 60 DAYS AND THEN SENT TO MILLING MA CHINE. THEREFORE IT IS CLEAR THAT BEFORE PROCESS OF MILLING OF PADDY BEGIN S IT HAS TO BE STORED IN A PROPER STORAGE SO AS TO PREVENT THE LOSSES OF SUCH FOOD GRAINS. THIS HAS BEEN DEFINITELY DONE BY THE ASSESSEE. THEREFORE IT IS CLEAR THAT THE ASSESSEE HAS DEFINITELY DONE HANDLING AND STORAGE O F FOOD GRAINS AS WELL AS THE TRANSPORTATION BECAUSE THE ASSESSEE HAS EMPL OYED ITS OWN TRUCKS. AT THIS STAGE WE POSED A QUESTION TO OURSELVES THAT IF THE FACILITIES CREATED BY THE ASSESSEE ARE NOT IN THE NATURE OF HANDLING A ND STORAGE THEN WHICH ACTIVITIES WOULD FALL IN THAT CATEGORY ? THE OBVIOU S ANSWER WHICH WE CAN THINK OF THAT THESE ACTIVITIES HAVE TO BE CLASSIFIE D AS HANDLING AND STORAGE ETC. BECAUSE IF THE MEANING WAS RESTRICTED ONLY TO CREATING OF STORES THEN LEGISLATURE WOULD HAVE MADE THE DEDUCTION AVAILABLE IN CASE OF WAREHOUSING FACILITIES THEN INSTEAD OF USING THE EX PRESSION 'THE INTEGRATED BUSINESS OF HANDLING, STORAGE AND TRANSPORTATION OF FOOD GRAINS' THE DEDUCTION WOULD HAVE BEEN PROVIDED 'FOR THE BUSINES S OF MODERN WAREHOUSES' WHICH HAS NOT BEEN DONE. THIS CLEARLY S HOWS THAT PERHAPS THE FACILITIES WHICH HAVE BEEN CREATED BY THE ASSES SEE WERE THE KIND OF FACILITIES WHICH WERE MADE ELIGIBLE FOR THE DEDUCTI ON UNDER SEC 80IB(11A). XXX XXX XXX XXX XXX XXX 44. .A QUESTION WOULD ARISE WHETHER THE ASSESSEE IS REQUIRED TO CARRY OUT ONLY ACTIVITY OF HANDLING, STORAGE AND TR ANSPORTATION OF FOOD GRAINS FOR CLAIMING DEDUCTION U/S 80IB(11A). IN OUR OPINION, THE ANSWER HAS TO BE 'NO' BECAUSE IN THE COMMERCIAL WORD AN EN TREPRENEUR WOULD ENGAGE IN ANY BUSINESS ONLY WHEN THE SAME IS COMMER CIALLY PROFITABLE. THEREFORE IN CASE OF INTEGRATED BUSINESS OF HANDLIN G, STORAGE AND TRANSPORTATION OF FOOD GRAINS MAY NOT ITSELF BE VER Y PROFITABLE AND IF THE SAME IS COMBINED WITH THE ACTIVITY OF PROCESSING OF PADDY INTO RICE BY SPENDING SMALLER AMOUNT OF MONEY FOR MILLING MILLS THEN SUCH ENTREPRENEUR WOULD DEFINITELY EXTEND THE ACTIVITY A ND GET INTO THE COMPOSITE BUSINESS OF HANDLING, STORAGE AND TRANSPO RTATION AND PROCESSING OF THE RICE. LET US IMAGINE THE SITUATIO N WHERE THE BUSINESSMAN IS ENGAGED IN THE BUSINESS OF PROCURING , HANDLING, STORAGE 37 AND TRANSPORTATION OF PADDY SEPARATELY AND THEN SEL LING THE SAME TO ANOTHER BUSINESSMAN WHO IS ENGAGED IN THE BUSINESS OF ONLY PROCESSING OF PADDY INTO RICE THEN SAME WOULD INVOLVE UNNECESS ARY FURTHER COST IN TERMS OF CARRYING THE PADDY FROM HANDLING AND STORA GE UNIT TO PROCESSING UNIT BECAUSE THE PADDY BAGS HAVE TO BE LOADED INTO THE TRUCKS CARRIED TO THE PROCESSING UNIT AND THEN AGAIN UNLOADED AND PUT IN TO THE MILLING MACHINES FOR PROCESSING OF THE PADDY. THIS WILL MAK E BOTH THE BUSINESSES UNVIABLE. EVEN THE LEGISLATURE INTENTION CANNOT BE THAT DEDUCTION IS ALLOWABLE ONLY IF THE ACTIVITY OF HANDLING, STORAGE AND TRANSPORTATION IS UNDERTAKEN SEPARATELY BECAUSE IN THAT CASE LEGISLAT URE WOULD HAVE PROVIDED FOR DEDUCTION IN CASE OF WAREHOUSES WHICH IS NOT THERE. IN THIS REGARD THE LD. D.R. FOR THE REVENUE HAD STRONGLY PL ACED RELIANCE ON THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN CASE OF ITO V. SHANKAR K. BHANAGE, [2012] 139 ITD 39/25 TAXMANN.COM 310. IN T HAT CASE THE ASSESSEE WAS A CONTRACTOR APPOINTED BY F.C.I. FOR H ANDLING THE FOOD GRAINS AT TURBHE/ KALYAN/ BHIVANDI SHED AND STORED FOOD GR AINS AT BHIWANDI DEPOT AND TRANSPORTED FOOD GRAINS FROM ABOVE GOODS SHEDS TO BHIWANDI DEPOT. FOR THESE ACTIVITIES THE ASSESSEE CLAIMED DE DUCTION U/S 80IB (11A) AND THE SAME WAS ALLOWED BY THE CIT(A). ON APPEAL T O THE TRIBUNAL THE DEDUCTION WAS DENIED BY OBSERVING THAT THE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION BECAUSE THE ASSESSEE HAS NOT CREATED ANY INFRASTRUCTURE FOR CARRYING OUT THESE ACTIVITIES. THUS IT IS CLEAR THA T IN THIS CASE THE ASSESSEE WAS MERELY CARRYING ON THE ACTIVITIES WITHOUT ANY I NFRASTRUCTURE WHEREAS IN CASE BEFORE US THE ASSESSEE HAS PURCHASED TRUCKS , CREATED FACILITIES FOR STORAGE AND INSTALLED VARIOUS MACHINES LIKE DRYERS, CLIMATIC CONTROL EQUIPMENT AND FUMIGATION FACILITIES. THUS THE ASSES SEE BEFORE US HAS NOT ONLY CARRIED OUT HANDLING AND STORAGE ACTIVITIES BU T HAS ALSO CREATED INFRASTRUCTURE FOR HANDLING, STORAGE AND TRANSPORTA TION OF THE FOOD GRAINS. 45. THE ASSESSING OFFICER ALSO DENIED THE DEDUCTION BY OBSERVING THAT THE MAIN BUSINESS OF THE ASSESSEE WAS MANUFACTURING OF THE RICE AND NOT OF HANDLING, STORAGE AND TRANSPORTATION AS OBSERVED EA RLIER NEITHER IT IS POSSIBLE COMMERCIALLY OR NOR IT IS INTENTION OF THE LEGISLATURE THAT FOR CLAIMING THIS DEDUCTION A BUSINESSMAN SHOULD HAVE I NDEPENDENTLY ENGAGED IN THE BUSINESS OF HANDLING, STORAGE AND TR ANSPORTATION OF THE FOOD GRAINS XXX XXX XXX XXX XXX XXX THUS IT IS CLEAR THAT IT IS NOT NECESSARY TO CARRY OUT A PARTICULAR ACTIVITY INDEPENDENTLY FOR WHICH THE DEDUCTION IS ELIGIBLE. EVEN IF SUCH ACTIVITY IS PART OF OVERALL ACTIVITY EVEN THEN THE DEDUCTION IS ALLOWABLE BUT OF COURSE SUCH DEDUCTION IS TO BE ALLOWED ON A PROPORTIONATE BASIS. SIMILAR VIEW 38 WAS TAKEN BY MUMBAI BENCH OF THE TRIBUNAL IN CASE O F SAMRAJ SEAFOODS (P.) LTD V. ITO ITA NO. 2875/MUM/2005. IN THE CASE BEFORE US THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HA S NOT RECEIVED ANY INDEPENDENT INCOME FROM HANDLING, STORAGE AND TRANS PORTATION OF THE FOOD GRAINS. WE HAVE ALREADY DISCUSSED THIS ASPECT EARLIER AND FURTHER IN VIEW OF THE DECISION IN CASE OF SANCHITA MARINE PRO DUCTS (P) LTD. (SUPRA) AND SAMRAJ SEAFOODS (P.) LTD.'S CASE (SUPRA). IT IS CLEAR THAT IT IS NOT NECESSARY FOR A BUSINESSMAN TO RECEIVE INCOME FROM EACH OF THE ACTIVITY SEPARATELY IN CASE OF A COMPOSITE BUSINESS. THIS CA N BE FURTHER UNDERSTOOD FROM A SIMPLE EXAMPLE OF A CAR MANUFACTU RER. LET US SAY FOR EXAMPLE A DEDUCTION IS AVAILABLE FOR MANUFACTURE AN D SALE OF ENGINE OF THE CAR. NOW A CAR MANUFACTURER COULD BE PRODUCING ITS OWN ENGINES AND USING THE SAME IN FINAL ASSEMBLY OF THE CAR THEN IT CANNOT BE SAID THAT THE ASSESSEE HAS NOT RECEIVED SEPARATE INCOME FROM SALE OF ENGINE, THEREFORE DEDUCTION IS NOT ALLOWABLE. 48. THE TRIBUNAL WONDERED THAT IF THE FACILITIES CREATE D BY THE ASSESSEE ARE NOT IN THE NATURE OF HANDLING AND STORAGE THEN WHICH ACTIVITIES WOULD FALL IN THAT CATEGORY AND ANSWERED THAT THESE ACTIV ITIES HAVE TO BE CLASSIFIED AS HANDLING AND STORAGE ETC. BECAUSE IF THE MEANING WAS RESTRICTED ONLY TO CREATING OF STORES THEN LEGISLAT URE WOULD HAVE MADE THE DEDUCTION AVAILABLE IN CASE OF WAREHOUSING FACILITI ES THEN INSTEAD OF USING THE EXPRESSION 'THE INTEGRATED BUSINESS OF HANDLING , STORAGE AND TRANSPORTATION OF FOOD GRAINS' THE DEDUCTION WOULD HAVE BEEN PROVIDED 'FOR THE BUSINESS OF MODERN WAREHOUSES' WHICH HAS N OT BEEN DONE. IN SUCH CIRCUMSTANCES, WHILE REACHING THE CONCLUSION THAT T HE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 80IB(11A) OF THE ACT, TH E TRIBUNAL MADE A REFERENCE TO THE CASE OF L.T. OVERSEAS (P.) LTD FOR THE ASSESSMENT YEAR 2004-05 AND 2005-06 IN WHICH CASE THE DEDUCTION UND ER SECTION 80IB(11A) OF THE ACT WAS ALLOWED TO THE ASSESSEE WHO WAS COND UCTING THE ACTIVITIES WHICH WERE IDENTICAL TO THE ACTIVITIES CONDUCTED BY THE ASSESSEE IN THE CASE OF LAXMI ENERGY (SUPRA) AND THE ASSESSEE BEFOR E US. 49. FOR THAT MATTER, LD. DR ADMITTED DURING THE COURSE OF ARGUMENTS 39 WHILE DEALING WITH THIS ALTERNATIVE PRAYER FOR REMA ND OF THE MATTER TO THE FILE OF LEARNED ASSESSING OFFICER THAT THE FACTS IN VOLVED IN LAXMI ENERGY (SUPRA) ARE IDENTICAL TO THE FACTS INVOLVED IN THE CASE ON HAND, IN RESPECT OF THE ACTIVITIES OF THE ASSESSEE. IT IS THEREFORE, CL EAR THAT THE ASSESSEES WHO WERE CONDUCTING THE BUSINESS SIMILAR TO THE ONE DON E BY THE ASSESSEE IN THIS CASE, WERE FOUND ENTITLED TO THE BENEFIT UNDER SECTION 80IB(11A) OF THE ACT AND SUCH A VIEW IS CONSISTENT SO FAR. WITHO UT MINCING MANY WORDS, WHILE FOLLOWING THE RATIO OF THOSE CASES, WE ARE OF THE CONSIDERED OPINION THAT THE ACTIVITIES INVOLVING THE CLEANING, STEAMIN G, SOAKING, DRYING, POLISHING, GRINDING ETC.ARE COVERED BY THE EXPRESSI ON HANDLING AND THE ASSESSEE IS CERTAINLY CONDUCTING SUCH ACTIVITIES WH ICH WOULD ENTITLE TO THE BENEFIT OF DEDUCTION UNDER SECTION 80IB(11A) OF THE ACT. 50. NEXT QUESTION THAT FALLS FOR OUR CONSIDERATION IS T HE ALTERNATIVE PRAYER OF THE LD. DR THAT THE ACTIVITY OF PROCESSIN G THE PADDY TO RICE AND SUBSEQUENT PACKING AND MARKETING IS A DISTINCT FROM THE INTEGRATED BUSINESS OF STORAGE, HANDLING AND TRANSPORTATION OF FOOD GRAINS AND THEREFORE, THE EXPENSES RELATABLE TO SUCH A DISTINC T AND SEPARATE ACTIVITY CANNOT BE ALLOWED UNDER SECTION 80IB(11A) OF THE AC T. HE, THEREFORE, SUBMITS THAT FOR THE PURPOSE OF WORKING OUT THE DED UCTION IN RESPECT OF THE SPECIFIC ACTIVITIES OF HANDLING, STORAGE AND T RANSPORTATION FROM THE TOTAL EXPENDITURE FOR THE BUSINESS WHICH INCLUDES T HE NON-SPECIFIC ACTIVITIES LIKE MILLING OF PADDY, PACKING AND MARKE TING, THE MATTER HAS TO GO BACK TO THE LEARNED ASSESSING OFFICER. 51. ON THIS ASPECT, ARGUMENT OF THE LEARNED AR IS THAT MILLING IS NOT A DISTINCT PROCESS FROM HANDLING OF FOOD GRAINS BECAU SE BY MILLING NOTHING MORE IS DONE THAN DE-HUSKING THE PADDY TO INCREASE THE LONGEVITY OF THE 40 GRAINS AND IT IS PART OF THE EFFICIENT GRAIN MANAGE MENT COVERED BY THE EXPRESSION HANDLING. HE PLACED RELIANCE ON THE D ECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS.CYNAMIDE INDIA LTD 273 ITR 585 ((SC) WHEREIN THE HONBLE APEX COURT CONSIDERED THE QUEST ION WHETHER DE- HUSKING RICE WAS A NEGLIGIBLE OPERATION AND THE CON SEQUENCES OF SUCH OPERATION ON THE RICE VIS-A-VIS THE DE-HUSKING RICE AND HELD THAT THE OPERATION OF DE-HUSKING PADDY IS NOT AN INDUSTRIAL OR MANUFACTURING OPERATION, AS IS COMMONLY UNDERSTOOD; IT IS ESSENTI ALLY AN AGRICULTURAL OPERATION AND SUCH CHANGES AS ARE BROUGHT ABOUT IN THE PRODUCT OR OUTCOME OF AGRICULTURAL OPERATIONS; THAT BOTH RICE AND HUSK REMAIN IN THE NATURAL FORM AS A RESULT OF DE-HUSKING AND ARE COVE RED BY THE TERM AGRICULTURAL PRODUCT. HONBLE APEX COURT FURTHER HELD THAT THE BENEFICIAL PROVISIONS SHOULD BE CONSTRUED LIBERALLY, SO AS TO INCLUDE NOT MERELY THE PRIMARY PRODUCT AS IT ACTUALLY GROWS, BUT ALSO A PR ODUCT WHICH UNDERGOES A SIMPLE OPERATION, SO AS TO MAKE IT MORE SALEABLE OR MORE USEFUL AND, THEREFORE, RICE AND HUSK, THOUGH SEPARATED, REMAINS AS THEY WERE PRODUCED AND HENCE CONTINUE TO REMAIN AGRICULTURAL PRODUCTS. 52. HE FURTHER SUBMITTED THAT MILLING IS DONE IN ORDER TO PREVENT POSTAL HARVEST LOSSES BECAUSE IN THE TRADITIONAL WAY IN TH E PROCESS OF SEPARATING THE HUSK AND BRAWN FROM RICE FOR HUMAN CONSUMPTION, THE TRADITIONAL PROCESS WAS POUNDING EITHER BY HUMAN BEINGS OR MACH INES IN WHICH PROCESS THERE USED TO BE HUGE, QUALITATIVE AND QUAN TITATIVE DETERIORATION OF THE FOOD GRAINS AND THE MECHANICAL PROCESS OF US ING HULLERS AND MILLS MINIMIZE SUCH LOSSES AND THEREFORE, THE MILLING PRO CESS CANNOT BE SEEN AS A SEPARATE ACTIVITY NECESSITATING TO TAKE IT AWAY F ROM THE EXPRESSION OF HANDLING OF FOOD GRAINS WITH THE OBJECT OF PREVENTI NG THE POST-HARVEST 41 LOSSES. HE PLACED RELIANCE ON SEVERAL DECISION TO SHOW THAT SO LONG AS THERE IS NO QUALITATIVE DIFFERENCE IN THE MATERIAL AFTER THE PROCESS, SUCH PROCESS CANNOT BE TERMED AS MANUFACTURE. 53. AS WE HAVE STATED ABOVE, WE WILL HAVE TO TEST THE E XPRESSION HANDLING, OCCURRING IN SECTION 80IB(11A) OF THE A CTON THE TOUCHSTONE OF THE OBJECT SOUGHT TO BE ACHIEVED THROUGH SUCH INCEN TIVE, NAMELY, ACHIEVING THE ENHANCED FOOD SECURITY BY WAY OF GREA TER EFFICIENCY IN THE GRAIN MANAGEMENT SYSTEM BY MINIMIZING THE POST-HARV EST FOOD GRAIN LOSSES. IT IS AN UNDENIABLE FACT THAT TRADITIONALL Y POUNDING WAS THE WAY IN WHICH THE PADDY WAS CONVERTED TO THE FORM OF RICE B Y SEPARATING THE HUSK AND BRAWN. IT IS ALSO COMMON KNOWLEDGE THAT THAT I N THAT PROCESS THERE USED TO BE QUANTITATIVE AND QUALITATIVE LOSSES, CAU SED BY THE BREAKING OF THE GRAINS ETC. BY DEHUSKING THE PADDY AND CONVERT ING IT INTO RICE, NO NEW ARTICLE IS BROUGHT INTO EXISTENCE WHICH IS QUALITAT IVELY DIFFERENT FROM THE INPUTS, BUT IS THE SIMPLE PROCESS OF DE-HUSKING THE PADDY TO OBTAIN THE RICE. THIS CONVERSION MEETS THE OBJECTIVE OF MINIM IZING THE POST-HARVEST LOSSES WHICH WOULD LEAD TO THE GREATER EFFICIENCY O F THE FOOD GRAIN MANAGEMENT SYSTEM AND CONSEQUENTLY TO THE ENHANCED FOOD SECURITY. IN COMMISSIONER OF CUSTOMS(IMPORT) VS. DILIP KUMAR AND COMPANY &OTHRS CA NO. 3327 OF 2007 (SC), THE HONBLE SUPREME COURT HELD THAT WHILE INTERPRETING THE TAXING STATUTES, THE APPLICABILITY OF THE SECTION HAS TO BE SEEN IN STRICT SENSE, AND ONCE THE SECTION IS FOUND TO BE APPLICABLE, THEN IT HAS TO BE CONSTRUCTED LIBERALLY. SINCE UNDOUBTEDLY THE PROVISIONS OF SECTION 80IB(11A) OF THE ACT ARE APPLICABLE TO THE ACTIVITIES OF THE ASSESSEE LIKE CLEARING, STEAMING, SOAKING, DRYING, POLISHING AND GRINDING IT CAN ALSO BE NOT DENIED THAT DE-HUSKING THE PADDY WOULD SIGNI FICANTLY ENHANCE THE 42 LIFE OF THE FOOD GRAIN, THEREBY REDUCES THE LOSS OF FOOD GRAIN AND CONTRIBUTES TO THE PRESERVATION OF FOOD GRAINS. IN SUCH AN EVENT , WE ARE UNABLE TO UNDERSTAND HOW THIS PARTICULAR PROCESS DO ES NOT FIT IN THE EXPRESSION HANDLING. FOR THESE REASONS, WE ARE O F THE CONSIDERED OPINION THAT THE DE-HUSKING OF THE PADDY TO CONVERT IT INTO RICE IS ALSO AN INTEGRAL PART OF REDUCING THE POST-HARVEST FOOD GRA IN LOSS. 54. IN RESPECT OF THE CONTENTION OF THE ALLEGATION OF T HE LEARNED ASSESSING OFFICER THAT PART OF THE OLD MACHINERY WA S USED IN THE BAHALGARHUNIT FOR THE PURPOSE OF CONDUCT OF THE INT EGRATED BUSINESS OF HANDLING, STORAGE AND TRANSPORTATION OF THE FOOD GR AINS, IT COULD BE SEEN FROM THE ORDERS OF THE AUTHORITIES BELOW THAT THE A SSESSEE HAD TAKEN A PLEA BEFORE THE LEARNED ASSESSING OFFICER THAT ENTI RELY NEW MACHINERY WAS USED IN THE BAHALGARH UNIT FOR THE PURPOSE OF CONDU CT OF THE INTEGRATED BUSINESS OF HANDLING. THE LEGAL OPINION TENDERED B Y POROUS KAKA ALSO REFER TO THIS CONTENTION. ASSESSEE CONTENDED BEF ORE THE LEARNED ASSESSING OFFICER THAT THE UNDERTAKING CARRYING INT EGRATED BUSINESS OF HANDLING, STORAGE AND TRANSPORTATION OF FOOD GRAINS COMMENCED IN OCTOBER, 2002 CAN BE SEEN FROM THE PURCHASES/STOCK RECORD OF PADDY, ACCORDING TO WHICH PURCHASE OF PADDY COMMENCED ONLY POST 1 ST APRIL, 2001 AND PRIOR TO THAT THE UNDERTAKING ONLY HAD SET UP POLISHING AND FINISHING PLANNED TO UNDERTAKE JOB WORK OF THE PROC ESSING DONE AT THE KAKROI UNIT AT SONIPAT, AND ALL THE REFERENCES TO T HE EVIDENCE IN THE SPECIAL AUDIT REPORT OF UNIT COMMENCING OPERATIONS PRIOR TO 1/4/2001 WERE REFERENCES TO SUCH POLISHING AND FINISHING CAPACITY SET UP AT BAHALGARH UNIT. IT WAS FURTHER CONTENDED BEFORE THE LEARNED ASSESSING OFFICER THAT A STATEMENT OF THE CAPACITY WAS GIVEN IN THE CLOSING FINANCIAL STATEMENT THAT 43 WAS ENCLOSED AND SUCH STATEMENT ALONG WITH OTHER CO RROBORATIVE DOCUMENTS/RECORDS WOULD CONCLUSIVELY ESTABLISH THAT THE COMPOSITE UNDERTAKING OF HANDLING, STORAGE AND TRANSPORTATION OF FOOD GRAINS WAS COMMENCED ONLY AFTER 1 ST APRIL, 2001 AND THE SCHEDULE FOR THE ASSETS FOR THE FY 2001-02 AND 2002-03 CLEARLY SHOWS THE MAJOR ADDITIONS IN BUILDING AND PLANT AND MACHINERY SUBSEQUENT TO 1 ST APRIL, 2001. 55. APART FROM THIS, ASSESSEE FURTHER CONTENDED THAT IT WAS WITHIN THE COMMAND OF THE SPECIAL AUDITOR TO SECURESUCH INFORM ATION, WHICH WAS VERY MUCH RELEVANT TO THE COMMENCEMENT OF THE BUSIN ESS OF THE ASSESSEE AT BAHALGARH,AND IT WAS IN THE FORM OF PROSPECTUSIS SUED AT THE TIME OF INITIAL PUBLIC OFFER BY THE ASSESSEE DURING THE FY 2006-07 ACCORDING TO WHICH AND OTHER MATERIAL THAT WAS PRODUCED BEFORE T HE SEBI AS WELL AS OTHER STATUTORY AUTHORITIES, THE INFORMATION FURNIS HED THEREUNDER WAS AUTHENTIC AND RELEVANT. IT IS ALSO BROUGHT TO OUR NOTICE THAT IN THE PROSPECTUS THE ASSESSEE STATED THAT PRIOR TO 1 ST APRIL, 2001 THE UNDERTAKING HAD ONLY SET UP POLISH OF SAND FINISHIN G PLANNED TO UNDERTAKE JOB WORK OF THE PROCESSING DONE AT KAKROI UNIT AT S ONIPAT, WHICH ACCORDING TO THE ASSESSEE WAS ONLY INTERMEDIARY PROCESS, AND SUCH FACT WAS ACKNOWLEDGED BY THE REVENUE AUDIT WHILE CARRYING OU T AUDIT IN THE CASE OF THE ASSESSEE FOR THE AY 2004-05 AND 2005-06 AND SUC H OBSERVATION WAS COMMUNICATED BY THE REVENUE AUDIT TO THE DEPARTMENT , VIDE AUDIT MEMO DATED 17 TH MARCH, 2009 WHEREIN ADDITIONAL FACT ABOUT THE COMM ENCEMENT OF BUSINESS AT BAHALGARH UNIT BY THE ASSESSEE WAS B ROUGHT TO LIGHT MENTIONING THAT THE DIRECTORS REPORT ALSO POINTED TO THE AUDITED BALANCE SHEET OF THE ASSESSEE FOR THE YEAR ENDED ON 31/3/20 01, REVEALING THAT THE PRODUCTION IN BAHALGARH UNIT FOR WHICH DIRECTION UN DER SECTION 80IB OF THE 44 ACT WAS CLAIMED, COMMENCING DECEMBER, 2000. 56. LEARNED ASSESSING OFFICER, HOWEVER, DID NOT REFER T O ANY OF THESE CONTENTIONS RAISED BY THE ASSESSEE IN HIS ORDER, BU T STRAIGHTAWAY PROCEEDED TO OBSERVE THAT THE MACHINERY PUT TO USE BY THE ASSESSEE PRIOR TO 1/4/2001 IN BAHALGARH UNIT CONSTITUTES MORE THAN 20%, WHICH ACCORDING TO HIM MEANS THAT MORE THAN 20% OF THE MACHINERY HA D BECOME OLD PRIOR TO 1/4/2001. AS A MATTER OF FACT, THE ASSESSING OF FICER COULD HAVE REFERRED TO THE SCHEDULE OF FIXED ASSETS OR THE STOCK REGIST ERS OR THE FINANCIALS OF THE ASSESSEE TO SAY THAT NONE OF THE MISSIONARY THA T WAS PUT TO USE AT BAHALGARH UNIT FOR THE PURPOSE OF THE INTEGRATED BU SINESS OF HANDLING, STORAGE AND TRANSPORTATION OF FOOD GRAINS WAS NEW A ND WAS TRANSFERRED FROM THE OLD UNIT. NO SUCH EXERCISE TO RETURN A FI NDING THE FACT WAS UNDERTAKEN BY THE LEARNED ASSESSING OFFICER BEFORE REACHING THE CONCLUSION THAT MORE THAN 20% OF THE MACHINERY AT B AHALGARH UNIT HAD BECOME OLD PRIOR TO 1/4/2001. 57. LD. CIT(A), HOWEVER, MADE A REFERENCE TO THE QUANTI TATIVE DETAILS AND CONSIDERED THE CONTENTION OF THE ASSESSEE THAT THE ENTIRE MACHINERY USED THE AS ELIGIBLE UNIT AT BAHALGARH WAS NEW ONE AND NOT OLD MACHINERY WAS USED AND OBSERVED THAT THE LEARNED ASSESSING OF FICER, WITHOUT MENTIONING THE INSTANCES OF OLD PLANT AND MACHINERY BEING USED BY BAHALGARH UNIT, PRESUMED THAT THE PLANT AND MACHINE RY FOR BAHALGARH UNIT USED PRIOR TO 1/4/2001 AND WAS TRANSFERRED SUCH OLD MACHINERY FOR THE NEW UNIT. LD. CIT(A) ALSO REFERRED TO THE SPECIAL AUDIT REPORT WHEREIN IT WAS OBSERVED THAT FOR THE PURPOSE OF EXAMINING THE QUESTION WHETHER THE UNIT AT BAHALGARH HAD STARTED WITH EFFECT FROM OCTO BER 2002, EXAMINATION OF THE STOCK REGISTERS, UNIT-WISE BOOKS OF ACCOUNTS AND SALES TAX 45 REGISTRATION CERTIFICATE IN RESPECT OF BAHALGARH UN IT TOOK PLACE, AND IT WAS ONLY AFTER EXAMINATION OF ALL THESE THINGS THE SPEC IAL AUDITORS CONCLUDED THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF HA NDLING, STORAGE AND TRANSPORTATION OF FOOD GRAINS AND SUCH BUSINESS WAS ELIGIBLE FOR A DEDUCTION UNDER SECTION 80IB(11A) OF THE ACT. 58. IT IS, THEREFORE, CLEAR THAT THERE IS NO MATERIAL W AS EITHER EXAMINED BY THE LEARNED ASSESSING OFFICER BEFORE REACHING TH E CONCLUSION AS TO THE USES OF OLD MACHINERY NOR THE SAME IS PRODUCED BEFO RE US, IN SUPPORT OF SUCH CONCLUSION.IN THE ABSENCE OF ANY REASONS TO SH OW THE CONTRARY, WE FIND IT DIFFICULT TO TAKE A DIFFERENT VIEW FROM THE VIEW TAKEN BY THE LD. CIT(A) THAT WITHOUT UNDERTAKING ANY EXERCISE TO ASC ERTAIN THE INSTANCES OF OLD PLANT AND MACHINERY BEING USED AT BAHALGARH, TH E LEARNED ASSESSING OFFICER PRESUMED THAT PLANT AND MACHINERY FOR BAHAL GARH UNIT WAS USED PRIOR TO 1/4/2001 AND WAS TRANSFERRED TO BAHALGARH UNIT SUBSEQUENTLY. SUCH UNFOUNDED OBSERVATIONS OF THE LEARNED ASSESSIN G OFFICER CANNOT BE ONE OF THE BASES TO DENY THE DEDUCTION UNDER SECTIO N 80IB(11A) OF THE ACT. 59. FURTHER, THE ALTERNATIVE PLEA TAKEN BY THE ASSESSEE ALSO MERITS CONSIDERATION. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 80IB OF THE ACT. SUBSECTION(1)OF SECTION 80IB OF T HE ACT SAYS THAT WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED FROM ANY BUSINESS REFERRED TO IN SUBSECTION IS 3 TO 11, 11A AND 11 B AND IF SUCH BUSINESS HAPPENS TO BE THE ELIGIBLE B USINESS, THERE SHALL BE ALLOWED A DEDUCTION FROM SUCH PROFITS AND GAINS AT SUCH PERCENTAGE AS A SPECIFIED IN THAT SUBSECTION. SUBSECTIONS (2), (3 ), (4), (5) AND (11) DEAL WITH THE CASES OF INDUSTRIAL UNDERTAKINGS; WHEREAS SUBSECTION (6)DEALS 46 WITH BUSINESS OF A SHIP, (7) DEALS WITH THE BUSINES S OF HOTEL, (7A) DEALS WITH THE BUSINESS OF ANY MULTIPLEX THEATRE, (8) AND (8A) DEAL WITH CARRYING ON SCIENTIFIC RESEARCH AND DEVELOPMENT, (9) WITH TH E UNDERTAKINGS LOCATED IN NORTH-EASTERN REGION ET CETERA, (10) DEALS WITH AN UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECT, (11A) DEAL S WITH THE UNDERTAKING IN THE BUSINESS OF PROCESSING, PRESERVATION AND PAC KAGING OF FRUITS OR VEGETABLES OR MEAT AND MEAT PRODUCTS OR POULTRY OR MARINE OR DAIRY PRODUCTS, OR FROM THE INTEGRATED BUSINESS OF HANDLI NG, STORAGE AND TRANSPORTATION OF FOOD GRAINS, (11B) AND (11C) DEAL ING WITH AN UNDERTAKING DERIVING PROFITS FROM THE BUSINESS OF OPERATING AND MAINTAINING A HOSPITAL IN RURAL AREAS ETC., (12A) DEALING WITH A COMPANY T RANSFERRED TO ANOTHER INDIAN COMPANY, ET CETERA. 60. IN THE SCHEME OF SECTION 80IB OF THE ACT, AS STATED ABOVE, INDUSTRIAL UNDERTAKINGS ARE DEALT WITH SEPARATELY FROM THE UND ERTAKINGS AND OTHER BUSINESSES. IN CONTRAST TO SUBSECTIONS(2) TO (5), IN SUBSECTION (11) WHEN A REFERENCE OF INDUSTRIAL UNDERTAKING HAS COME, THERE IS A SPECIFIC REFERENCE TO SUBSECTIONS 2(III) AND (3) TO (5), STATING THAT IN RESPECT OF THE INDUSTRIAL UNDERTAKING DERIVING PROFITS FROM THE BUSINESS OF S ETTING UP AND OPERATING A COLD CHAIN FACILITY FOR AGRICULTURAL PRODUCTS, NO TWITHSTANDING ANYTHING CONTAINED IN CLAUSE (III) OF SUBSECTION TWO AND SUB SECTIONS ()3, (4) AND (5), THE ASSESSEE WOULD BE ENTITLED TO DEDUCTION AT CERT AIN PERCENTAGE. THEREFORE, THE NEXUS BETWEEN THE INDUSTRIAL UNDERT AKING AND THE SPECIFIC CONDITIONS APPLICABLE TO IT IS CONSPICUOUS LY DECIPHERABLE AND WHEN IT COMES TO THE INDUSTRIAL UNDERTAKING SETTING UP A ND OPERATING A COLD CHAIN FACILITY FOR AGRICULTURAL PRODUCE, SUCH GENER AL CONDITIONS APPLY TO INDUSTRIAL UNDERTAKINGS IN SUBSECTIONS OF (2) TO (5 ) ARE EXPRESSLY RELAXED BY 47 MAKING A SPECIFIC REFERENCE TO THEM. IT MAKES THE THINGS VERY CLEAR THAT THE LEGISLATIVE INTENT OF THE CONDITION OF NOT TO U SE THE OLD MACHINERY MORE THAN 20% IN THE NEW BUSINESS, IS THE RULE FOR SUBSECTIONS (3) TO (5) AND IT IS RELAXED IN RESPECT OF THE INDUSTRIAL UNDE RTAKING SETTING UP FOR THE SPECIFIC PURPOSE OF OPERATING COLD CHAIN FACILITY F OR AGRICULTURAL PRODUCE. IT GOES WITHOUT SAYING THAT THE CONDITION STIPULATED I N CLAUSE (III) OF SUBSECTION(2) (III)IS A SPECIFIC ONE IN RESPECT OF SUBSECTIONS (3) TO (5) AND CANNOT BE MADE GENERALLY APPLICABLE TO ALL OTHER SU BSECTIONS WHERE A REFERENCE WAS MADE ONLY TO BUSINESS OR UNDERTAKI NG. THE ELIGIBLE CONDITIONS FOR THE BUSINESSES OR UNDERTAKINGS OTHER THAN SUBSECTIONS (3) TO (5) ARE GIVEN IN SUCH SUBSECTIONS ALONE, AND FOR SUCH PURPOSE THERE DOES NOT APPEAR TO BE ANY NEED TO LOOK INTO SUBSECTION ( 2), AND FOR THAT MATTER ANY OTHER SUBSECTION. 61. FURTHER, WHILE REFERRING TO DEFINITION OF INDUSTRI AL UNDERTAKING. UNDER VARIOUS STATUTES, HONBLE JURISDICTIONAL HIGH COURT, IN THE CASE OF ANSAL HOUSING & CONSTRUCTION LTD VS. CIT 320 ITR 42 0 (DELHI), OBSERVED THAT SUCH ESTABLISHMENTS OR UNDERTAKINGS AS ARE CAR RYING ON SOME MANUFACTURING ACTIVITY OR FACTORIES, ARE TREATED AS INDUSTRIAL UNDERTAKINGS, THEREBY MAKING A DISTINCTION BETWEEN AN UNDERTAKING AND INDUSTRIAL UNDERTAKING. CONTENTION OF THE AS SESSEE BASED ON THE CBDT CIRCULAR NUMBER 1/2009, DATED 27/3/2009, PROVI DING EXPLANATORY NOTES TO THE PROVISIONS OF FINANCE ACT, 2008 ALSO M ERITS CONSIDERATION IN THIS CONTEXT. IN THAT CIRCULAR, IT WAS STATED THAT , AFTER THE COMMENCEMENT OF BUSINESS, THE DEDUCTION WAS BEING ALLOWED UNDER SECTION 35D ONLY TO AN INDUSTRIAL UNDERTAKING OR UNIT, BUT IN ORDER TO PRO VIDE A LEVEL PLAYING FIELD TO THE SERVICE SECTOR, THE SECTION WAS AMENDED TO P ROVIDE THE BENEFIT OF 48 AMORTIZATION TO ALL THE ASSESSEE, IS AFTER THE COMM ENCEMENT OF HIS BUSINESS, IN CONNECTION WITH THE EXTENSION OF HIS U NDERTAKING OR IN CONNECTION WITH HIS SETTING UP A NEW UNIT. THE EXP LANATION OFFERED IN THIS CIRCULAR ALSO MAKES THE DISTINCTION BETWEEN UNDERT AKING AND INDUSTRIAL UNDERTAKING IN UNEQUIVOCAL TERMS. 62. FOR THE ABOVE REASONS, WE ARE OF THE CONSIDERED OPI NION THAT THE LEGISLATURE WOULD NOT HAVE USED DIFFERENT EXPRESSIO NS, NAMELY, THE EXPRESSION INDUSTRIAL UNDERTAKING IN SUBSECTIONS (3) TO (5), WHILE USING THE EXPRESSION UNDERTAKING IN SUBSECTIONS 9, 10, 11A, 11 B, AND 11 C AND YET BUSINESS IN SOME OTHER SUBSECTIONS OF SECTION 80IB OF THE ACT, WITHOUT ANY PURPOSE. REDUNDANCY CANNOT BE ATTRIBUT ED TO THE LEGISLATIVE INTENTIONS. IT IS MORE PARTICULARLY, WHILE REFERRI NG TO THE INDUSTRIAL UNDERTAKINGS SETTING UP AND OPERATING COLD CHAIN FA CILITIES FOR AGRICULTURAL PRODUCE IN SUBSECTION (11), A REFERENCE IS MADE TO SUBSECTIONS(2)TO (5), STATING THAT NOTWITHSTANDING ANYTHING CONTAINED IN CLAUSE (III) OF SUBSECTION TWO AND SUBSECTIONS 3 TO 5, SUCH ASSESSE E WILL GET THE BENEFIT OF DEDUCTION. OCCURRENCE OF THE EXPRESSION INDUST RIAL UNDERTAKING IN SUBSECTIONS(2)TO (5) IN JUXTAPOSITION TO THE SAME I N SUBSECTION (11) AND RELAXING THE CONDITIONS STIPULATED UNDER CLAUSE (II I) OF SUBSECTION(2)AND SUBSECTIONS 3 TO 5 MAKES IT AMPLY CLEAR THAT THE IN DUSTRIAL UNDERTAKINGS ARE TREATED SEPARATE FROM OTHER BUSINESSES OR UN DERTAKINGS. WE, THEREFORE, FIND THAT FOR THE PURPOSE OF TESTING THE ELIGIBILITY UNDER SECTION 80IB(11A) OF THE ACT THERE IS NO NEED TO LOOK INTO 80IB (2) OF THE ACT, AND NON-FULFILMENT OF CONDITION STIPULATED VIDE CLAUSE (III) THEREOF CANNOT BE A GROUND FOR DENYING THE DEDUCTION UNDER SECTION 80IB (11A) OF THE ACT. 63. WE, ACCORDINGLY FIND THAT THE ASSESSEE CANNOT BE DE NIED THE 49 DEDUCTION UNDER SECTION 80IB(11A) OF THE ACT EITHER IN RESPECT OF THE ACTIVITIES CONDUCTED BY THE ASSESSEE TO MEET THE DE MAND OF THE SECTION, NAMELY, DERIVING INCOME FROM THE INTEGRATED BUSINES S OF HANDLING, STORAGE AND TRANSPORTATION OF FOOD GRAINS OR FOR NON-COMPLI ANCE WITH THE CONDITIONS DEPLETED UNDER SECTION 80IB (2) OF THE A CT. WE DO NOT FIND ANYTHING ILLEGALITY ARE REGULARITY EITHER IN THE RE ASONING OR THE CONCLUSIONS REACHED BY THE LD. CIT(A) ON THIS ASPECT, AND WHILE CONFIRMING THE SAME FIND THE GROUNDS NUMBER1 TO 3 OF REVENUES APPEAL D EVOID OF MERITS AND RELIABLE TO BE DISMISSED. 64. GROUND NUMBER 4 OF THE REVENUES APPEAL DEALS W ITH THE ADDITION MADE BY THE LEARNED ASSESSING OFFICER UNDER SECTION 69 OF THE ACT. DURING THE COURSE OF ASSESSMENT, LEARNED ASSESSING OFFICER NOTICED THAT THE SPECIAL AUDITOR HAS POINTED OUT UNACCOUNTED RECEIPT S AND PAYMENTS TAXABLE IN THE HANDS OF THE ASSESSEE, AS UNACCOUNTE D INCOME ON THE BASIS OF SEIZED DOCUMENTS AND A SUM OF RS.1,63,39,670/- WAS WORKED AS TAXABLE IN THE HANDS OF THE ASSESSEE FOR THE PERIOD UNDER CONSIDERATION. THE WORKING OF THESE TRANSACTIONS WAS GIVEN IN THE SPECIAL AUDIT REPORT SHOWING THE BALANCING FIGURE OF CASH TRANSACTION DU RING THE YEAR PERTAINING TO THE ASSESSEE AS ARE REFLECTED, WHICH SHOWS THAT THE ASSESSEE WAS HAVING CASH RECEIVABLE OF RS. 1,63,39,670 /- AS ON 31.3.2007 WHICH WHERE NOT TO BE FOUND IN THE BOOKS OF THE ASSESSEE. 65. WHEN ASKED TO EXPLAIN THE TAXABILITY OF THE ABO VE CASH ENTRIES FOUND IN THE SEIZED DOCUMENTS AND NOT RECORDED IN T HE BOOK AS OF ACCOUNT, THE ASSESSEE, WHILE DRAWING THE ATTENTION OF THE LEARNED ASSESSING OFFICER TO LETTER DATED 28.12.2010 FILED IN THE CASE OF ASSESSMENT OF SHRI VIJAY ARORA OFFERING FOR TAXATIO N A SUM OF RS. 50 3,77,72,500/- SUBMITTED THAT INCOME ARISING FROM SE IZED MATERIAL FROM ALL PREMISES SEARCHED/SURVEYED AND ALL PERSONS SEARCHED IN THE GROUP AND ALLEGED TO BE NOT FOUND IN THE BOOKS OF ACCOUNT, WA S TAXED IN THE HANDS OF VIJAY ARORA, SURENDER ARORA, ASHOK ARORA AND ASHWAN I ARORA. IT WAS FURTHER SUBMITTED THAT THOUGH INCOMES RETURNED IN T HE RETURNS FILED AND EVERY SEIZED DOCUMENT, IN RELATION TO SHRI VIJAY AR ORA AND HIS FAMILY AND ALL PERSONS IN THE GROUP, WERE EXPLAINED IN ACCORDA NCE WITH REQUIREMENT OF THE ACT.SINCE THE LEARNED ASSESSING OFFICER, HOW EVER, WAS NOT SATISFIED WITH SUCH EXPLANATION, IN ORDER TO BUY PEACE AND AV OID FRUITLESS LITIGATION, SHRI VIJAY ARORA OFFERED AN ADDITIONAL INCOME OF RS . 3,77,72,500/- IN THE ASSESSMENT YEAR 2009-10 OVER AND ABOVE WHAT HAS BEE N RETURNED IN HIS RETURN U/S 153A AND 139(1) TO COVER ALL SEIZED DOCU MENTS, LOOSE SHEETS, TRANSACTIONS, INVESTMENTS, EXPENDITURES, CREDITS MO NEY, BULLION, JEWLLERY AND OTHER VALUABLE ARTICLES BELONGING TO HIM, AND O R IN THE NAME OF HIS WIFE RANJU ARORA, HIS SON ABHINAV ARORA AND ALL OTH ER PERSONS IN THE GROUP THEY BELONG TO. SIMILAR LETTERS WERE BY SURENDER ARORA, ASHOK ARORA AND ASHWANI ARORA ALSO. 66. LEARNED ASSESSING OFFICER, HOWEVER, DID NOT ACC EPT THE EXPLANATION GIVEN BY THE ASSESSEE STATING THAT IT IS NOT THE AS SESSEE BUT THE INDIVIDUALS OF THE GROUP WHO HAVE SURRENDERED THE AMOUNT DURING THE ASSESSMENT PROCEEDINGS IN THEIR HANDS ON 30.12.2010 VIDE LETTE R DATED 28.12.2010, WHEREAS THE SPECIAL AUDITOR HAS SPECIFICALLY IDENTI FIED THE UNACCOUNTED CASH TRANSACTIONS FOUND IN THE SEIZED DOCUMENTS IN RESPECT OF EACH ENTITY OF ASSESSEE GROUPS, AND THEREFORE, THE UNACCOUNTED CASH TRANSACTIONS RELATED TO GROUP COMPANIES SHOULD BE TAXED IN THE R ESPECTIVE HANDS OF INDIVIDUALS/CONCERNS. LEARNED ASSESSING OFFICER FU RTHER OBSERVED THAT. 51 LEARNED ASSESSING OFFICER FURTHER OBSERVED THAT THE SURRENDER MADE BY THE INDIVIDUALS IN THEIR HANDS MIGHT BE THEIR UNACC OUNTED INCOME WHICH HAS BEEN SURRENDERED BUT NO ONE CAN BE ALLOWED TO O WN UP THE UNACCOUNTED INCOME OF THE GROUP COMPANIES. ON THIS PREMISE. LEARNED ASSESSING OFFICER PROCEEDED TO ADD AN AMOUNT OF RS. 1, 63, 39, 6, 70/- UNDER SECTION 69 OF THE ACT. 67. BEFORE THE LD. CIT(A), ASSESSEE RAISED CERTAIN CONTENTIONS, STATING THAT SINCE THE IMPUGNED AMOUNTS HAVE ALREADY BEEN O FFERED TO TAX IN THE HANDS OF THE DIRECTORS OF THE ASSESSEE COMPANY, THE SAME RESULTED IN DOUBLE ADDITION. ASSESSEE ALSO PLACED RELIANCE ON THE OBSERVATIONS OF THE LEARNED DRP IN ASSESSEES OWN CASE FOR THE AY 2008- 09 AND 2009-10. LD. CIT(A) ON CONSIDERATION OF THE CONTENTIONS OF THE A SSESSEE AND ALSO THE OBSERVATIONS OF THE LEARNED DRP BEFORE THE ASSESSME NT YEAR 2008-09 AND 2009-10 HELD THAT THE ENTRIES ON THE BASIS OF WHICH THE ADDITION WAS MADE WERE TAKEN FROM THE SEIZED MATERIAL, PEAK OF S UCH CASH ENTRIES WAS OFFERED TO TAX AS UNDISCLOSED INCOME BY PROMOTERS O F THE COMPANY, NAMELY, SHRI VIJAY KUMAR ARORA, SHRI ASHVIN KUMAR A URORA, SHRI SURENDRA KUMAR AURORA AND SHRI ASHOK AURORA WERE ASSESSED BY THE ASSESSING OFFICER FOR SUCH UNDISCLOSED INCOME. LD. CIT(A) FU RTHER REFERRED TO AND FOLLOWED THE DIRECTIONS OF THE LEARNED DRP IN ASSES SEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09 AND 2009-10 BY ORDER DATED 4/9/2012 NOT TO MAKE ANY ADDITION ON SUCH ISSUE. 68. IT IS SUBMITTED ON BEHALF OF THE ASSESSEE THAT THE ENTRIES IN THE SEIZED PAPERS WHICH FORMED THE BASIS FOR THE LEARNE D ASSESSING OFFICER TO MAKE THE IMPUGNED ADDITION, WERE RELATING TO THE TR ADING BUSINESS OF THE ABOVE SAID FOUR PROMOTERS/DIRECTORS OF THE ASSESSEE COMPANY, SUCH 52 PERSONS HAVE ALREADY SURRENDERED AN AMOUNT OF RS. 3 , 72, 55, 6, 11/- IN THEIR RETURN OF INCOME FILED UNDER SECTION 153A OF THE ACT AND SUBSEQUENTLY, A FURTHER SUM OF RS. 5,21,50,000/- WA S SURRENDERED ON THE BASIS OF PEAK OF ALL TRANSACTIONS DURING THE COURSE OF THEIR RESPECTIVE ASSESSMENT PROCEEDINGS, THEREBY DECLARING/SURRENDER ING A TOTAL SUM OF RUPEES, 8,94,05, 611/- ON THE BASIS OF THE SEIZED P URPOSE. HE FURTHER SUBMITTED THAT A SIMILAR QUESTION HAD ARISEN FOR TH E ASSESSMENT YEARS 2008-09 AND 2009-10 AND WHEN THE ISSUE REACHED BEFO RE THE LEARNED DRP, LEARNED DRP CONSIDERED THE SAME VERY EXTENSIVE LY AND HELD THAT IN THE BACKGROUND OF THE PROMOTERS/DIRECTORS SURRENDER ING/DECLARING A SUM OF RUPEES, 8,94,05,611/- FOR THE ASSESSMENT YEAR 20 08-09 AND 2009-10 IN THE RETURNS FILED UNDER SECTION 153A OF THE ACT AND IN THE COURSE OF ASSESSMENT PROCEEDINGS AND IN MAKING THE DECLARATIO N/SURRENDER OF INCOME, ALL THE ENTRIES IN THE SEIZED DOCUMENTS WER E TAKEN TO CONSIDERATION, BOTH IN THE TRADING ACCOUNT AS WELL AS IN THE PEAK ARRIVED AT ON THE BASIS OF THESE ENTRIES, AND THE ASSESSING OF FICER HAD CATEGORICALLY ACCEPTED THE SURRENDER/DECLARATION OF THE INCOME ON THE BASIS OF THE SEIZED DOCUMENTS, IN THE INTEREST OF REVENUE, THERE IS NO JUSTIFICATION FOR MAKING AGAIN, ANOTHER ADDITION IN THE HANDS OF THE COMPANY. 69. LD. AR THEREFORE, SUBMITS THAT THE LD. CIT(A) RIGHT LY FOLLOWED THE DIRECTIONS OF THE LEARNED DRP,HAVING SATISFIED THAT THE AMOUNT COVERED BY THE ENTRIES OF THE SEIZED DOCUMENTS WAS OFFERED TO TAX BY THE PROMOTERS/DIRECTORS IN THEIR INDIVIDUAL CAPACITY AN D THEREFORE, TO AVOID DOUBLE TAXATION THE SAME ARE NOT BE PERMITTED TO BE TAXED IN THE HANDS OF THE ASSESSEE. 70. LEARNED DR HEAVILY RELIED ON THE ORDERS OF THE ASSE SSING OFFICER AND 53 SUBMITTED THAT VIEW OF THE OBSERVATIONS OF THE SPEC IAL AUDITOR THAT THE AMOUNT SURRENDERED BY THE INDIVIDUALS MAY BE THEIR UNACCOUNTED MONEY, WHICH IS NOTHING TO DO WITH THE ENTRIES IN THE SEIZ ED DOCUMENTS AND THEREFORE, IT IS A REASONABLE FOR THE LD. CIT(A) TO CONSIDER THE AMOUNTS SURRENDERED BY THE INDIVIDUALS AS AGAINST THE, TAX LIABILITY OF THE COMPANY IN RESPECT OF THE ENTRIES IN THE SEIZED DOCUMENTS. 71. THOUGH THE REVENUE DISPUTED THE FINDINGS OF THE LD. CIT(A), NO FACTS, RENDERING THE OBSERVATIONS OF THE LD. CIT(A) ILLEGAL OR IRREGULAR ARE BROUGHT TO OUR NOTICE. THERE IS NO DISPUTE THAT TH E TOTAL SURRENDERED AMOUNT OF RS. 8, 94, 05, 611/- WAS COVERED BY THE E NTRIES OF THE SEIZED DOCUMENTS. IT IS NOT IN DISPUTE THAT, EXCEPT THE S USPICION OF THE SPECIAL AUDITOR, AND FOR THAT MATTER THAT OF THE LEARNED AS SESSING OFFICER, THE AMOUNTS SURRENDERED BY THE INDIVIDUALS WERE COVERED BY THE ENTRIES OF THE SEIZED DOCUMENTS. WHEN ONCE THE AMOUNT COVERED BY THE ENTRIES OF THE SEIZED DOCUMENTS WAS SURRENDERED BY THE INDIVID UALS IN THEIR INDIVIDUAL RETURNS OF INCOME, BRINGING THE SAME AMO UNT TO TAX IN THE HANDS OF THE COMPANY DOES NOT ARISE AND IT AMOUNTS TO DOUBLE TAXATION. FURTHER, THIS ISSUE HAS BEEN CONSIDERED BY THE LEAR NED DRP FOR THE ASSESSMENT YEARS 2008-09 AND 2009-10 WHEREIN LEARNE D DRP IN UNEQUIVOCAL TERMS, OBSERVED THAT WHILE TAKING INTO CONSIDERATION THE TRADING ACCOUNTS AS WELL AS THE PEAK ARRIVED AT ON THE BASIS OF THE ENTRIES OF THE SEIZED DOCUMENTS, ASSESSING OFFICER ACCEPTED THE SURRENDER OF THE INCOME ON THE BASIS OF THE SEIZED DOCUMENTS IN THE HANDS OF THE INDIVIDUALS, IN THE INTEREST OF REVENUE, THERE IS N O JUSTIFICATION FOR MAKING AGAIN AS AN ADDITION IN THE HANDS OF THE COMPANY. 72. UNLESS AND UNTIL THE REVENUE DISPUTES THE CONTENTIO N, WITH 54 REFERENCE TO ANY DOCUMENTS, THAT THE AMOUNT DECLARE D BY THE INDIVIDUALS IS IN RESPECT OF THEIR SOME OTHER UNDISCLOSED INCOM E AND IT HAS NOTHING TO DO WITH THE AMOUNT COVERED BY THE SEIZED DOCUMENTS, MERE SUSPICION OF THE SPECIAL AUDITOR OR THE LEARNED ASSESSING OFFICE R DOES NOT TAKE THE PLACE OF LEGAL EVIDENCE OR PROOF, AND IT CANNOT BE A BASIS FOR BRINGING THE VERY SAME AMOUNT TO TAX IN THE HANDS OF THE COMPANY ALSO. IT IS ALWAYS OPEN FOR THE ASSESSING OFFICER TO SHOW THAT THE AMO UNT SURRENDERED BY THE INDIVIDUALS WAS IN RESPECT OF THEIR OWN UNDISCLOSED INCOME INDEPENDENT OF THE ENTRIES IN THE SEIZED DOCUMENTS, BASING ON WHIC H NOW THE LEARNED ASSESSING OFFICER WANTS TO TAX THE COMPANY. WITHOU T UNDERTAKING ANY SUCH EXERCISE, IT IS NOT PERMISSIBLE FOR THE LEARNE D ASSESSING OFFICER TO PROCEED TO TAX THE COMPANY FOR THE VERY SAME AMOUNT , BASING ON SUSPICIONS. 73. WE, THEREFORE, WE FIND SUBSTANCE IN THE CONTENTIONS RAISED ON BEHALF OF THE ASSESSEE AND HOLD THAT INASMUCH AS TH E AMOUNT COVERED BY THE ENTRIES IN THE SEIZED DOCUMENTS WAS ALREADY OFF ERED TO TAX BY THE PROMOTERS/DIRECTORS OF THE ASSESSEE COMPANY IN THEI R INDIVIDUAL RETURNS OF INCOME AND HAS ALREADY BEEN ACCEPTED BY THE LEARNED ASSESSING OFFICER TAKING INTO CONSIDERATION THE ENTRIES IN THE SEIZE D DOCUMENTS VIS-A-VIS THE TRADING ACCOUNTS AS WELL AS THE PEAK ARRIVED ON THE BASIS OF SUCH ENTRIES, IT IS NOT OPEN FOR THE LEARNED ASSESSING OFFICER TO TA X THE SAME AGAIN IN THE HANDS OF THE COMPANY. CONSEQUENTLY, WE FIND THAT T HE FINDINGS OF THE LD. CIT(A) NOT SUFFER ANY LEGALITY OR IRREGULARITY AND NO INTERFERENCE WITH THE SAME IS WARRANTED. WE, THEREFORE, WHILE CONFIRMING THE FINDINGS OF THE LD. CIT(A) DECLINE TO INTERFERE WITH THE SAME. ITA 4164 /DEL/ 2013 55 74. ASSESSEE PREFERRED THIS APPEAL ON AS MANY AS 22 GRO UNDS, BUT AT THE OUTSET, LD. AR SUBMITTED THAT THE ASSESSEE IS N OT PRESSING GROUNDS NUMBER1TO 9. RECORDING THE SAME, GROUNDS NUMBER ON E TO 9 OR DISMISSED AS NOT PRESSED. GROUNDS NUMBER 10 TO 13 RELATE TO THE DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT, GROUNDS NUMBER 14 TO 17 RELATE TO THE DISALLOWANCE OF EXPENSES ON ACCOUNT OF NON DEDUCTIO N AND SHORT DEDUCTION OF TDS, GROUND NUMBER 16 RELATE TO THE AD DITION ON ACCOUNT OF PERSONAL EXPENSES, GROUNDS NUMBER 17 RELATE TO THE ADDITION MADE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RUL ES WHEREAS GROUNDS NUMBER 18 TO 22 ARE EITHER CONSEQUENTIAL OR GENERAL IN NATURE WHICH DO NOT REQUIRE ANY SPECIFIC EDUCATION. WE SHALL DEAL WITH THESE ISSUES IN THE FOLLOWING PARAGRAPHS. 75. GROUNDS 10 TO 13 OF THE ASSESSEES APPEAL RELATE TO THE CASH PAYMENTS TO VARIOUS CONCERNS IN VIOLATION OF PROVIS IONS OF SECTION 40A(3) OF THE ACT. BASING ON THE COMMENTS MADE BY THE SPEC IAL AUDITOR IN THE SPECIAL AUDIT REPORT, AO FOUND THAT CASH PAYMENTS A GGREGATING TO RS.40,00,647/- WERE MADE IN CONTRAVENTION OF PROVIS IONS OF SECTION 40A(3) OF THE ACT AND CONSEQUENTLY, DISALLOWED EXPENDITURE AGGREGATING TO RS.8,00,129 BEING 20% OF RS.40,00,647. ON APPEAL, T HE CIT(A) DELETED DISALLOWANCE TO THE EXTENT OF RS.2,15,985 BEING 20% OF CASH PAYMENTS OF RS.10,79,924 MADE ON HOLIDAYS AND SUNDAYS. THE CIT( A), HOWEVER, CONFIRMED DISALLOWANCE TO THE EXTENT OF RS.5,84,144 UNDER SECTION 40A(3) OF THE ACT AND IT IS CHALLENGED IN THESE GROUNDS. 76. IN RESPECT OF FREIGHT PAYMENTS OF RS.23,86,883/ - MADE TO TRANSPORTERS AND TRUCK OPERATOR, CONTENTION OF THE ASSESSEE IS THAT SUCH AMOUNT WAS PAID TO TRANSPORTERS/TRUCK DRIVERS, AND EVEN OTHERWISE, 56 EXEMPTED UNDER SUB RULE (K) OF RULE 6DD, WHICH PROV IDES THAT NO DISALLOWANCE UNDER SUB SECTION (3) OF SECTION 40 OF THE ACT SHALL BE MADE WHERE A PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE DRAFT EXCEEDS TWENTY THOUSAND WHERE THE PAYM ENT IS MADE BY A PERSON TO HIS AGENT WHO IS REQUIRED TO MAKE PAYMENT IN CASH FOR GOODS OR SERVICES ON BEHALF OF SUCH PERSON.' 77. IT IS ARGUED BY THE LD. AR THAT THE LEGISLATIVE INT ENT BEHIND INTRODUCTION OF SECTION 40A(3) OF THE ACT REQUIRING PAYMENT OF ANY EXPENDITURE BY CROSSED CHEQUE OR CROSSED BANK DRAFT , IS TO PREVENT EVASION OF TAXES AND NOT TO DISALLOW DEDUCTION OF G ENUINE AND BONA-FIDE BUSINESS EXPENDITURE; THAT THE TRANSACTIONS WERE G ENUINE AND MADE TO PERSONS WHOSE IDENTITIES ARE FULLY ESTABLISHED BY T HE DOCUMENTS; LEARNED ASSESSING OFFICER DOES NOT DISPUTE THE GENUINENESS OF THE PAYMENTS OR MAKING SUCH PAYMENTS IN THE COURSE OF BUSINESS; AND THEREFORE, CONSIDERING THE LEGISLATIVE INTENT BEHIND INTRODUCT ION OF SECTION 40A(3) OF THE ACT, DISALLOWANCE UPHELD BY THE CIT(A) IN RELAT ION TO THE REMAINING PAYMENTS, THE GENUINENESS OF WHICH IS NOT AT ALL DI SPUTED BY THE REVENUE, HAS TO BE DELETED. LD. AR FURTHER SUBMITTED THAT IN A CONTRACT OF TRANSPORT OF GOODS, THERE ARE AT LEAST THREE PARTIES INVOLVED VIZ., (I) TRANSPORT COMPANY, (II) TRUCK OWNER/DRIVER; AND THE (III) APP ELLANT; THAT IN SUCH A TRANSACTION, NORMALLY THE ARRANGEMENT IS BETWEEN TH E APPELLANT AND THE TRANSPORT COMPANY AND THE TRUCK OWNER/TRUCK DRIVER IS THE INTERMEDIARY BETWEEN THE TWO; THAT WHEN THE TRUCK OWNER/DRIVER CARRIES THE GOODS BELONGING TO THE APPELLANT, HE MERELY ACTS AS AN AG ENT OF THE TRANSPORT COMPANY TO DELIVER THE GOODS AND COLLECTS THE FREIG HT CHARGES FROM THE 57 APPELLANT ON BEHALF OF THE TRANSPORT COMPANY; THAT IN SUCH AN EVENT, THE APPELLANT IS UNDER OBLIGATION TO MAKE PAYMENT TO TH E TRUCK DRIVER, AS PAYMENTS ARE MADE ONLY AFTER RECEIPT/DELIVERY OF GO ODS; THAT CONSIDERING THE TOTALITY OF THE CIRCUMSTANCES, THE CASE OF THE APPELLANT SQUARELY FALLS IN THE PURVIEW OF SUB RULE (K) OF RULE 6DD OF THE INCO ME TAX RULES, 1962 (THE RULES) AND ACCORDINGLY, NO DISALLOWANCE WAS CALLED FOR IN TERMS OF SECTION 40A(3) OF THE ACT. RELIANCE IS PLACED ON THE DECISI ON OF PUNE BENCH OF TRIBUNAL IN THE CASE OF ITO VS. DHANSHREEISPAT IN I TA NO. 794 OF 2013, AND A DECISION OF AMRITSAR BENCH OF THE TRIBUNAL IN ROY AL WOOD INDUSTRIES VS. JCIT: ITA NO.53 OF 2015 IN SUPPORT OF THE ARGUMENT THAT WHERE CASH PAYMENTS ARE MADE UNDER BONA FIDE CONDITIONS AND NO DOUBT IS RAISED OVER GENUINENESS OF THE PAYMENTS AND THE PAYEES ARE IDENTIFIABLE AND THE ASSESSEE HAS SUFFICIENTLY EXPLAINED THE CIRCUMSTANC ES UNDER WHICH THE PAYMENTS HAVE BEEN MADE TO THE TRUCK DRIVERS IN CAS H, BUT THE ASSESSING OFFICER MADE DISALLOWANCE BY TAKING A PEDANTIC VIEW OF THE CASH TRANSACTION, NO DISALLOWANCES U/S. 40A(3) IS WARRAN TED. 78. IN RESPECT OF THE DISALLOWANCE OF RS1,06,768/-, MADE ON ACCOUNT OF CASH PAYMENTS AGGREGATING TO RS.5,33,840/- MADE TOW ARDS REPAIRS, BUSINESS PROMOTION AND IMPREST ACCOUNT, LD. AR SUBM ITTED THAT THE PAYMENTS WERE MADE ON ACCOUNT OF BUSINESS EXPEDIENC Y; WHEREAS IN RESPECT OF CASH DEPOSIT OF RS.22,000/- MADE IN THE ACCOUNT OF DAAWAT FOODS LTD., IT WAS ARGUED THAT THE SAME DOES NOT TA NTAMOUNT TO CONTRAVENTION OF PROVISIONS OF SECTION 40A(3) OF TH E ACT IN SO FAR AS DEPOSIT OF CASH HAS BEEN MADE INTO THE BANK ACCOUNT OF DAAW AT FOODS LTD. DIRECTLY AND THE SAME CANNOT, IN ANY WAY, BE CONSTR UED AS CASH PAYMENT. 79. PER CONTRA, LEARNED DR SUBMITTED THAT THE AUTHORITI ES BELOW 58 FOLLOWED THE LAW AND RULES AND IT IS NOT POSSIBLE F OR THE REVENUE AUTHORITIES TO ADD ANY NEW ENTRIES TO RULE 6DD (K) OF THE RULES. HE SUBMITTED THAT IF THE CONTENTION OF THE ASSESSEE IS ACCEPTED, THE PROVISIONS OF SECTION 40A(3) OF THE ACT CAN EASILY BE CIRCUMVENTED WITH IMPUNITY BY TENDERING THE AMOUNT TO SOME PERSON ON BEHALF OF THE PAYER STATING THAT IT WAS PAID TO THE AGENT. FURTHER, WH EN THE ASSESSEE HAD A TRANSPORT CONTRACTOR, THE ASSESSEE IS NOT REALLY UN DER ANY OBLIGATION TO MAKE PAYMENTS TO THE TRUCK DRIVERS, AND IF THE ASSE SSEE DOES SO, THE ASSESSEE IS LIABLE TO THE LEGAL CONSEQUENCES. 80. WE HAVE GONE THROUGH THE RECORD IN THE LIGHT OF THE SUBMISSIONS MADE ON EITHER SIDE. ACCORDING TO THE LEARNED ASSES SING OFFICER THE FOLLOWING CASH PAYMENTS AGGREGATING TO RS.40,00,647 /- WERE MADE IN CONTRAVENTION OF PROVISIONS OF SECTION 40A(3) OF TH E ACT AND CONSEQUENTLY, DISALLOWED EXPENDITURE AGGREGATING TO RS.8,00,129 B EING 20% OF RS.40,00,647/-. SL. NO. NATURE OF PAYMENT AMOUNT 1. FREIGHT CHARGES PAID TO TRANSPORTERS/ TRUCK OPERATORS RS.30,47,456 2. REPAIR CHARGES RS.1,72,940 3. CLEARING & FORWARDING CHARGES RS.4,03,951 4. SALES AND BUSINESS PROMOTION EXPENSES RS.1,31,90 0 5. IMPREST ACCOUNT PAYMENTS RS.2,67,000 6. CASH DEPOSITED IN BANK ACCOUNT OF DAWAAT FOODS LTD. RS.22,000 TOTAL RS.40,00,647 81. AFTER CONSIDERING THE CONTENTIONS OF THE ASSESSEE, THE CIT(A), HOWEVER, DELETED DISALLOWANCE TO THE EXTENT OF RS.2 ,15,985/- BEING 20% OF CASH PAYMENTS OF RS.10,79,924/- MADE ON HOLIDAYS AN D SUNDAYS, AND THE 59 CIT(A), HOWEVER, CONFIRMED DISALLOWANCE TO THE EXTE NT OF RS.5,84,144 UNDER SECTION 40A(3) OF THE ACT, IN THE FOLLOWING M ANNER, AND NO FURTHER APPEAL HAS BEEN PREFERRED BY THE DEPARTMENT. SL. NO. NATURE OF PAYMENT AS PER AO EXCLUSION PAYMENTS CONSIDERED FOR DISALLOWANCE DISALLOWANCE CONFIRMED BY CIT(A) 1. FREIGHT CHARGES PAID TO TRANSPORTERS/ TRUCK OPERATORS RS.30,02,856 RS.6,15,973 RS.23,86,883 RS.4,77,376 2. REPAIR CHARGES RS.1,72,940 RS.30,000 RS.1,42,940 RS.28,588 3. CLEARING & FORWARDING CHARGES RS.4,03,951 RS.4,03,951 NIL NIL 4. SALES AND BUSINESS PROMOTION EXPENSES RS.1,31,900 - RS.1,31,900 RS.26,380 5. IMPREST ACCOUNT PAYMENT RS.2,67,000 RS.30,000 RS.2,37,000 RS.47,400 6. CASH DEPOSITED IN BANK ACCOUNT OF DAWAAT FOODS LTD. RS.22,000 - RS.22,000 RS.4,400 TOTAL RS.40,00,647 RS.10,79,924 RS.29,20,723 RS.5,84,144 82. AT THE OUTSET, WE WOULD LIKE TO STATE THAT INSOFAR AS THE DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT IS CON CERNED, IDENTIFY OF THE PAYEES OR THE GENUINENESS OF PAYMENT ARE IRRELEVANT CONSIDERATIONS, BECAUSE IT IS ONLY AFTER CROSSING THE THRESHOLD OF SUCH GENUINENESS OF THE EXPENDITURE, THE QUESTION OF PAYMENT IN TERMS OF SE CTION 40A(3) OF THE ACT WILL ARISE. ASSESSEE IS HARPING ON THE ESCAPE CLAUS E UNDER RULE 6DD(K) WHICH SAYS THAT WHERE A PAYMENT OR AGGREGATE OF PAY MENTS MADE BY A 60 PERSON TO HIS AGENT WHO IS REQUIRED TO MAKE PAYMENT IN CASH FOR GOODS OR SERVICES ON BEHALF OF SUCH PERSON IN A DAY, OTHERWI SE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT OR USE OF ELECTRONIC CLEARING SYSTEM THROUGH A BANK ACCOUNT O R THROUGH SUCH OTHER ELECTRONIC MODE AS PRESCRIBED UNDER RULE 6ABBA, NO DISALLOWANCE UNDER SUB-SECTION (3) OF SECTION 40A SHALL BE MADE AND NO PAYMENT SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF BUSINESS OR P ROFESSION UNDER SUB- SECTION (3A) OF SECTION 40A OF THE ACT. 83. ACCORDING TO THE ASSESSEE, THE TRUCK DRIVER ACTS AS AN AGENT OF THE ASSESSEE. BY NO STRETCH OF IMAGINATION CAN WE SAY THAT THE TRUCK DRIVER WHO OPERATES THE TRACK PURSUANT TO THE AGREEMENT BE TWEEN THE ASSESSEE AND THE TRANSPORT CONTRACTOR WOULD BE THE AGENT OF THE ASSESSEE. EVEN OTHERWISE ALSO, WE ARE NOT PREPARED TO ACCEPT SUCH AN ARGUGMENT BECAUSE SUCH ACCEPTANCE WOULD RENDER THE PROVISIONS UNDER S ECTION 40A(3) OF THE ACT NUGATORY AND EVERY PAYMENT COULD BE TAKEN OUT O F THE PURVIEW OF SECTION 40A(3) OF THE ACT BY DELIVERING THE CASH TO SOME INTERMEDIARY CALLING HIM AS AN AGENT. THERE IS NO PRIVITY OF CO NTRACT BETWEEN THE PERSON RECEIVING THE SUMS IN CASH AND THE ASSESSEE AND THE TRUCK DRIVER. SUCH PAYMENTS ARE NOT PROTECTED UNDER RULE 6 DD (K) OF T HE RULES. ON THIS PREMISE, WE REJECT CONTENTION OF THE ASSESSEE. 84. AN ALTERNATIVE PLEA IS TAKEN ON BEHALF OF THE ASSES SEE TO THE EFFECT THAT IN CERTAIN INSTANCES, THE ASSESSING OFFICER HA S PROCEEDED TO DISALLOW EXPENSES WITHOUT FIRST VERIFYING IF THE AGGREGATE P AYMENTS WERE MADE TO A SINGLE PERSON ON A SINGLE DAY AND IF THE PRE-REQUIS ITES OF SECTION 40A(3) OF THE ACT WERE FULFILLED. THIS PLEA DOES NOT SEEM TO HAVE BEEN TAKEN BEFORE THE LD. CIT(A) AND AT THIS STAGE IT IS DIFFICULT TO ACCEPT THE SAME BECAUSE 61 THE ASSESSEE DOES NOT PRODUCE ANY MATERIAL TO SHOW THAT ANY SUCH INSTANCES HAD TAKEN PLACE. IN THE ABSENCE OF ANY S UCH MATERIAL PRIMA FACIE TO SHOW THAT, AS A MATTER OF FACT, THE LEARNED ASSE SSING OFFICER HAD PROCEEDED TO DISALLOWED EXPENSES WITHOUT ANY VERIFI CATION OF THE AGGREGATE PAYMENTS TO A SINGLE PERSON ON A SINGLE D AY, WE CANNOT COUNTENANCE SUCH PLEA. WE, THEREFORE, FIND GROUND NUMBERS 10 TO 13 IS DEVOID OF MERITS AND ACCORDINGLY DISMISS THE SAME. 85. GROUNDS NUMBER 14 TO 17 RELATING TO THE ISSUE OF DI SALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT TO THE TUNE OF R S. 1, 84, 87, 810/- ON ACCOUNT OF NOT DEDUCTION OF TDS AND RS. 10, 30,213/ -ON ACCOUNT OF SHORTER DIRECTION OF TDS. OUT OF THE AMOUNT OF RS. 1, 84, 67, 810/-, A SUM OF RS. 1, 45, 27, 042/-RELATES TO THE FREIGHT CHARGES, NAMELY , RAIL, STEAMER AND TRUCK FRIEGHT, WHEREAS THE AMOUNT OF RS. 39, 40, 733/-REL ATES TO THE CLEARING AND FORWARDING CHARGES, LABOUR CHARGES, COMMISSION CHAR GES, PROFESSIONAL CHARGES, PURCHASE OF PADDY, MATERIAL ET CETERA. 86. ON THIS ASPECT, LD. CIT(A) MADE OBSERVATIONS TO THE EFFECT THAT NO DISALLOWANCE TO BE MADE UNDER SECTION 40(A)(IA) OF THE ACT IN CASE WHERE PAYMENT HAS BEEN MADE AS REIMBURSEMENT OF EXPENSES; THAT NO DISALLOWANCE TO BE MADE IN CASES WHERE PROVISIONS O F SECTION 172 OF THE ACT WAS APPLICABLE; THAT NO DISALLOWANCE IN CASE OF PAYMENT FOR RAILWAY FREIGHT; THAT IN CASE OF SHORT DEDUCTION OF TAX AT SOURCE, DISALLOWANCE TO BE MADE UNDER SECTION 40(A)(IA) OF THE ACT ONLY IN RES PECT OF PORTION OF PAYMENT ON WHICH TDS HAS NOT BEEN DEDUCTED; THAT IF PAYMENT TO ONE SPECIFIC PARTY (COVERED UNDER PROVISIONS OF SECTION 194C) IN THE GIVEN ASSESSMENT YEAR EXCEEDS RS.50,000 AND NO TAX HAS BE EN DEDUCTED THEN, DISALLOWANCE TO BE MADE UNDER SECTION 40(A)(IA) OF THE ACT; THAT IF 62 PAYMENT IS MADE TO NON-RESIDENT AND TDS PROVISIONS ARE NOT APPLICABLE, NO DISALLOWANCE TO BE MADE UNDER SECTION 40(A)(IA) OF THE ACT; AND THAT IF EXPENDITURE IS NOT CLAIMED IN PROFIT & LOSS ACCOUNT AND THE PAYMENT MADE DIRECTLY OR INDIRECTLY RELATES TO SUCH EXPENDITURE, NO DISALLOWANCE TO BE MADE UNDER SECTION 40(A)(IA) OF THE ACT. PURSUANT TO THESE OBSERVATIONS OF THE LD. CIT(A), ASSESSING OFFICER DELETED THE ADDIT ION TO THE EXTENT OF RS. 1, 53, 76, 284/-ON ACCOUNT OF NON-DEDUCTION OF TDS AND RS. 6, 54, 8, 62/- ON ACCOUNT OF SHORTER DEDUCTION OF TDS, AGAINST WHICH REVENUE DOES NOT PREFER ANY APPEAL. 87. THOUGH THE LD. AR SUBMITTED THAT NONE OF THE PA YMENTS REFERRED TO BY THE AUTHORITIES BELOW WARRANT THE INVOCATION OF SECTION 40(A)(IA) OF THE ACT, HE MAINLY SUBMITTED THAT, IF AT ALL SUCH PAYME NTS MUST BE SUBJECTED TO THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, THE DISALLOWANCE MUST BE CONFINED TO 30% OF THE IMPUGNED EXPENDITURE IN TERM S OF AMENDMENT OF SECTION 40(A)(IA) OF THE ACT BY WAY OF FINANCE ACT, 2014. READ WITH THE MEMORANDUM EXPLAINING THE PROVISIONS OF THE FINANCE BILL, 2014. HE FURTHER SUBMITTED THAT NO DOUBT THE AMENDMENTS BY W AY OF FINANCE ACT 2014 ARE EFFECTIVE ONLY FROM 1 ST APRIL, 2015, BUT SINCE THEY ARE CURATING THE NATURE, BEING INTRODUCED TO REDUCE THE UNDUE HARDSH IP CAUSED TO ASSESSEE ON DISALLOWANCE OF ENTIRE AMOUNT OF EXPENDITURE, SU CH AMENDED PROVISION HAS TO BE READ WITH RETROSPECTIVE EFFECT. RELIANCE IS PLACED ON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS.GOL D COIN HEALTH FOOD (P) LTD 304 ITR 308 TO THE EFFECT THAT THE PRESUMPTION AGAINST THE RETROSPECTIVE OPERATION IS NOT APPLICABLE TO THE DE CLARATORY STATUTES AND IN DETERMINING THE NATURE OF THE ACT, RECORD MUST BE H AD TO THE SUBSTANCE RATHER THAN THE FORM. LD. DR RELIED ON THE ORDERS O F THE AUTHORITIES BELOW 63 ON THIS ISSUE. 88. WE HAVE GONE THROUGH THE RECORD, IN THE LIGHT O F THE SUBMISSIONS MADE ON EITHER SIDE. AS A SPOKEN BY THE MEMORANDUM EXPLAINING THE PROVISIONS OF FINANCE BILL, 2014, THE AMENDMENT TO SECTION 40(A)(IA) OF THE ACT WAS INTRODUCED TO REDUCE THE HARDSHIP WHICH IS CAUSED BY THE DISALLOWANCE OF THE WHOLE OF THE AMOUNT OF EXPENDIT URE AND NOW IN CASE OF NON-DEDUCTION OR NON-PAYMENT OF TDS ON PAYMENTS MADE TO RESIDENTS AS SPECIFIED IN SECTION 40(A)(IA) OF THE ACT, THE D ISALLOWANCE SHALL BE RESTRICTED TO 30% OF THE AMOUNT OF EXPENDITURE CLAI MED. UNDOUBTEDLY, THE HARDSHIP RESULTED BY THE DISALLOWANCE OF THE WH OLE OF THE AMOUNT OF EXPENDITURE IS NOT SOMETHING THAT OCCURRED ONLY AFT ER THE AMENDMENT OF SECTION 40(A)(IA) OF THE ACT TO THE FINANCE ACT, 20 14, BUT HARDSHIP HAS ALWAYS BEEN THERE AND SUCH EXISTING HARDSHIP THAT W AS TRYING TO BE ALLEVIATED BY WAY OF THE AMENDMENT. THERE CANNOT B E TWO CATEGORIES OF HARDSHIPS THAT IS RESULTED BY THE DISALLOWANCE OF T HE WHOLE OF THE AMOUNT OF EXPENDITURE, NAMELY, THE HARDSHIP CAUSED PRIOR T O THE AMENDMENT AND THE HARDSHIP CAUSED TO SUBSEQUENT TO THE AMENDMENT. HARDSHIP IS ONE AND THE SAME WHICH IS TRIED TO BE REMOVED BY WAY OF AMENDMENT AND THEREFORE, WE FIND IT DIFFICULT TO UNDERSTAND THAT THE AMENDED PROVISIONS UNDER SECTION 40(A)(IA) OF THE ACT WOULD ADDRESS TH E HARDSHIPS THAT WOULD BE RESULTING SUBSEQUENT TO THE AMENDMENT, LEAVING A PART THE HARDSHIP THAT HAD CAUSED EARLIER, THERETO. WITH THIS VIEW O F THE MATTER. THE CONSIDERED OPINION THAT THE AMENDED PROVISION UNDER SECTION 40(A)(IA) OF THE ACT HAS TO BE UNDERSTOOD AS CREATIVE IN NATURE AND INTRODUCE YOU TO REDUCE THE NEW HARDSHIP CAUSED TO THE ASSESSEE ON T HE DISALLOWANCE OF THE ENTIRE AMOUNT OF EXPENDITURE BOTH PRIOR AND SUB SEQUENT TO SUCH 64 AMENDMENT. WHAT FOLLOWS NATURALLY IN VIEW OF THE D ECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS. GOLD COIN HEALTH FOOD (P) LTD, (SUPRA) THE PRESUMPTION GOES IN FAVOUR OF THE RETROSPECTIVE OPE RATION OF THIS CURATIVE OR DECLARATORY AMENDMENT. 89. INSOFAR AS THE DISALLOWANCE RELATING TO THE SHORTER DEDUCTION OF TAX AT SOURCE, IS CONCERNED, THE ISSUE IS A SQUARELY CO VERED BY THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS.SK TEKRIWAL 361 ITR 432 (CAL.HC) AND FOLLOWING THE SAME, WE HOLD THAT N O DISALLOWANCE IS PERMISSIBLE IN CASES WHERE THERE HAS BEEN A SHORTFA LL IN DEDUCTION OF TAX AS THE SAME IS NOT COVERED BY THE PROVISIONS OF SEC TION 40(A)(IA) OF THE ACT. 90. WE, THEREFORE, SET-ASIDE THE IMPUGNED FINDINGS OF T HE AUTHORITIES BELOW ON THE ASPECT OF DISALLOWANCE ARISING OUT OF THE NON-DEDUCTION OF TAX AT SOURCE AS DETAILED SUPRA, AND REMAND THE ISS UE TO THE FILE OF THE LEARNED ASSESSING OFFICER TO APPLY THE RESTRICTION ON THE DISALLOWANCE IN TERMS OF SECTION 40(A)(IA) OF THE ACT, AS AMENDED B Y THE FINANCE ACT, 2014. GROUNDS NUMBER 14 TO 17 OR, ACCORDINGLY, ALLOWED IN PART FOR 91. GROUND NUMBER 16 OF THE ASSESSEES APPEAL RELATED T O THE ADDITIONS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF THE ALL EGED PERSONAL EXPENSES. THOUGH WERE DISALLOWED BY THE ASSESSING OFFICER, ONE PAYMENT MADE TO M/S SYCORIAN MATRIMONIAL SERVICES LTD TO TH E TUNE OF RS. 1, 37, 944/-AND THE OTHER RELATING TO THE FOREIGN TRIP OF FAMILY MEMBERS OF DIRECTORS/PROMOTERS OF THE ASSESSEE COMPANY TO THE TUNE OF RS. 6, 32, 152/-, THE ASSESSEE HAS CHOSEN TO CHALLENGE ONLY TH E ADDITION MADE ON ACCOUNT OF THE FOREIGN TRIP OF FAMILY MEMBERS OF TH E DIRECTORS/PROMOTERS. 92. ON THIS ASPECT, IT IS SUBMITTED ON BEHALF OF THE AS SESSEE THAT THE 65 ISSUE OF ELIGIBILITY OF EXPENDITURE INCURRED ON FOR EIGN TRAVEL BY THE FAMILY MEMBERS OF THE DIRECTORS IS COVERED IN FAVOUR OF TH E ASSESSEE BY THE ORDER OF LD. DRP FOR THE ASSESSMENT YEAR 2008-09 AND 2009 -10, WHEREIN A SIMILAR DISALLOWANCE WAS MADE BY THE ASSESSING OFFI CER AND DELETED BY THE LD. DRP. LD. DR DOES NOT DISPUTE THIS POSITION. 93. WE HAVE GONE THROUGH THE OBSERVATIONS OF THE LE ARNED DRP FOR THE ASSESSMENT YEAR 2008-09 AND 2009-10 IN ASSESSEES O WN CASE WHEREIN THE LD. DRP FOUND THAT THE EXPENDITURE ON TRAVEL OF WIV ES AND THE DIRECTORS ABROAD WHEN THEY HAVE ACCOMPANIED THE DIRECTORS ON BUSINESS IS AN ALLOWABLE EXPENDITURE AND CONSEQUENTLY DIRECTED THE ASSESSING OFFICER TO ALLOW THE EXPENDITURE ON THE TRAVEL OF THE VOICE OF THE DIRECTORS WHEN THEY HAVE ACCOMPANIED THE DIRECTORS ON FOREIGN VISITS OF VERIFICATION. SINCE THERE IS NO CHANGE IN THIS POSITION, AND THERE IS N O REASON FOR US NOT TO ACCEPT THE FINDINGS OF THE LEARNED DRP IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEARS 2008-09 AND 2009-10. IN THE CIRCU MSTANCES, WE FIND MERIT IN THE CONTENTIONS OF THE ASSESSEE ON THIS AS PECT. ACCORDINGLY, WE ALLOW GROUND NUMBER 16 AND DIRECT THE LEARNED ASSES SING OFFICER TO DELETE THE ADDITION MADE ON ACCOUNT OF THE FOREIGN TRIP OF THE FAMILY MEMBERS OF THE DIRECTORS/PROMOTERS OF THE ASSESSEE COMPANY. G ROUND NUMBER 16 IS ALLOWED. ACCORDINGLY. 94. GROUND NUMBER 17 OF THE ASSESSEES APPEAL RELAT ED TO THE DISALLOWANCE TO THE TUNE OF RS. 18, 18, 915/-UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES 14A OF THE ACT READ WITH RULE 8D OF THE RULES, WHICH WAS RECEIVED TOWARDS THE SHARE OF PROF IT IN PARTNERSHIP FIRM, NAMELY, M/S RAGHUNATH AGRO INDUSTRIES, AMRITSAR AND ALSO THE DIVIDEND INCOME FROM MUTUAL FUNDS. CHALLENGE OF THIS ADDITI ON BY THE ASSESSEE IS 66 ON 3 COUNTS, NAMELY, THE ASSESSING OFFICER HAS NOT RECORDED THE SATISFACTION FOR DENYING THE CLAIM MADE BY THE ASSE SSEE AS TO THE EXPENDITURE INCURRED FOR EARNING THE EXEMPT INCOME; SHARE IN PROFIT FROM THE PARTNERSHIP FORM CANNOT BE CONSIDERED FOR THE P URPOSES OF DISALLOWANCE UNDER 14A OF THE ACT READ WITH RULE 8D OF THE RULES, AND LASTLY THAT SUCH INVESTMENT WAS MADE OUT OF THE OWN FUNDS OF THE ASSESSEE WITHOUT UTILIZING ANY BORROWED FUNDS AND T HEREFORE, THERE CANNOT BE IN INTEREST EXPENSE FOR EARNING THE EXEMPT INCOM E. LD. DR RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 95. WE HAVE GONE THROUGH THE RECORD, IN THE LIGHT O F THE SUBMISSIONS MADE ON EITHER SIDE. IT COULD BE SEEN FROM THE ASS ESSMENT ORDER, VIDE PARAGRAPH NUMBER 11, THERE WERE MADE THE REPORT OF THE SPECIAL AUDITOR AS THE BASIS FOR THE DISALLOWANCE, SPECIAL AUDITOR WORKED OUT THE TOTAL DISALLOWANCE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES AT RUPEES, 41, 80, 208/-, BUT IN VIEW OF THE PROVIS IONS OF SECTION 14A OF THE ACT, HE RESTRICTED THE DISALLOWANCE TO THE EXEMPT I NCOME AND DETERMINED THE SAME AT RS. 18, 18, 915/-. NOWHERE IN THE ORDE R, ASSESSING OFFICER HAD CONSIDERED THE ACCOUNTS OF THE ASSESSEE AS TO WHAT COULD HAVE BEEN THE EXPENDITURE, THAT HAS TO BE ALLOCATED FOR EARNING T HE EXEMPT INCOME. 96. EVEN OTHERWISE, WE FIND STRENGTH IN THE ORNAMEN T OF THE LD. AR THAT IN ORDER TO AVOID THE DOUBLE TAXATION ONCE IN THE H ANDS OF THE FORM AND SECONDLY IN THE HANDS OF THE PARTNER, THE SHARE IN THE PROFITS OF THE PARTNERSHIP FORM IS NOT TAXABLE IN THE HANDS OF THE PARTNER AS HAS BEEN HELD BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CAS E OF SUDHIR KAPADIA VS.ITO IN ITA NO. 7888 OF 2013, WHICH WAS FOLLOWED IN THE CASE OF HAMID A MOOCHHALA VS. ACIT IN ITA NO. 2218/MUM/2010. 67 97. FURTHER, THERE IS NO DENIAL OF THE FACT THAT AS ON 31/3/2006 AND 31/3/2007, THE CAPITAL AND FREE RESERVES OF THE ASS ESSEE WERE RS. 60, 92, 50, 784/- AND RS. 1, 19, 99, 27, 510/- RESPECTIVELY AS AGAINST THE INVESTMENT IN THE PARTNERSHIP FORM ON 31/3/2006 AND 31/3/2007 STOOD AT RS. 3, 49, 55, 937/-AND 3,67,57,562/- ONLY AND THER EFORE, IT CANNOT BE SAID THAT ANY BORROWED FUNDS COULD HAVE BEEN UTILISED TO MAKE SUCH INVESTMENT INCURRING ANY INTEREST EXPENDITURE. 98. VIEWING FROM ANY ANGLE, WE DID NOT FIND ANY GRO UND TO SUSTAIN ADDITION MADE UNDER 14A OF THE ACT READ WITH RULE 8 D OF THE RULES. SUCH AN ADDITION IS, THEREFORE, IS DIRECTED TO BE DELETE D. GROUND NUMBER 17 IS ACCORDINGLY ALLOWED. 99. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED AND THE APPEAL OF THE ASSESSEE IS ALLOWED IN PART AND FOR STATISTI CAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30/09/2 020. SD/- SD/- (G.S. PANNU) (K. NARSIMHA CHARRY) VICE PRESIDENT JUDICIAL MEMBER DATED: 30.09.2020