Sara Services & Engineers Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 408/DEL/2010

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7351 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 19-10-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 29-01-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Business income; Depreciation; Business expenditure; Opportunity of being heard; Rule of consistency; Additional evidence; Assessment record
• Section: 143(3); 80HHC; 147; 54; 139; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI `G BENCH , NEW DELHI BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER , AND SHRI L.P. SAHU, ACCOUNTANT MEMBER I.T.A.NO S . 54 5 TO 547 /DEL/201 0 ASSESSMENT YEAR : 2004 - 05 TO 200 6 - 0 7 THE D . C . I . T, VS. M/S SARA SERVICES & ENGINEERS PVT. LTD CIRCLE - 7(1) , [NOW KNOW N AS NOV SARA INDIA PVT. LTD] NEW DELHI. GL 3, ASHOKA ESTATE 24, BARAKHAMBA ROAD, C.P. NEW DELHI. (PAN: AAACS 6857 L ) I.T.A.NO. 408 TO 410 /DEL/201 0 ASSESSMENT YEAR : 2004 - 05 TO 200 6 - 0 7 M/S SARA SERVICES & ENGINEERS PVT. LTD VS. DCIT, [NOW KNOW AS NOV SARA INDIA PVT. LTD] CIRCLE 7(1) GL 3, ASHOKA ESTATE NEW DELHI 24, BARAKHAMBA ROAD, C.P. NEW DELHI. (PAN: AAACS 6857 L ) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI O.P. SAPRA, ADV SHRI SANDEEP SAPRA, ADV SHRI HEMANT ARORA, CA SHRI JEETAN NAGPAL, CA DEPARTMENT BY : SHRI SUJIT KUMAR, SR - DR SMT. SUNITA KEJRIWAL, CIT - DR DATE OF HEARING : 21.10. 2015 DATE OF PRONOUNCEMENT : 18 01 .201 6 - 2 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD O R D E R PER CHANDRA MOHAN GARG, J.M. THE ABOVE CAPTIONED CROSS APPEALS BY THE REVENUE AS WELL AS THE ASSESSEE HAVE BEEN DIRECT ED AGAINST THE ORDER OF CIT(A) - X , NEW DELHI DATED 2 7 . 1 1.20 09 IN APPEAL NO S . 137 TO 139 / 08 - 09 FOR A.Y S . 2004 - 05 TO 200 6 - 0 7 RESPECTIVELY . 2. GROUNDS RAISED BY THE REVENUE IN ITA NO. 545/DEL/2010 FOR A.Y 2004 - 05 READ AS UNDER: 1. THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IN DELETING THE ADDITION TO RS. 25,97,310/ - MADE BY THE AO ON ACCOUNT OF COMMISSION ON SALE. 2. THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IN DIRECTING THE AO TO ALLOW DEDUCTION U/S 80IC OF THE ACT. 3. THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IN DIRECTING TH E AO TO EXCLUDE THE AMOUNT OF REVALUATION OF PLANT AND MACHINERY FOR THE PURPOSE OF COMPUTING BOOK VALUE. - 3 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD 3 . GROUNDS RAISED BY THE REVENUE IN ITA NO. 54 6 /DEL/2010 FOR A.Y 2005 - 06 READ AS UNDER: 1. THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IN DELETING THE ADDITION TO RS. 39 , 1 7, 774 / - MADE BY THE AO ON ACCOUNT OF COMMISSION ON SALE. 2. THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IN DIRE CTING THE AO TO ALLOW DEDUCTION U/S 80IC OF THE ACT. 3. THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IN DIRECTING THE AO TO EXCLUDE THE AMOUNT OF REVALUATION OF PLANT AND MACHINERY FOR THE PURPOSE OF COMPUTING BOOK VALUE. 4. GROUNDS RAISED BY THE REVENUE IN ITA NO. 54 7 /DEL/2010 FOR A.Y 2006 - 07 READ AS UNDER: 1. THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IN DELETING THE ADDITION TO RS. 2 8 , 46 , 268 / - MADE BY THE AO ON ACCOUNT OF COMMISSION ON SALE. 2. THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IN RESTRICTING THE ADDITION TO RS. 13,07,188/ - AS AGAINST RS. 35,45,027/ - MADE BY THE AO ON ACCOUNT OF COMMISSION PAID TO FOREIGN AGENTS. - 4 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD 3. THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IN DELETING THE ADDITION TO RS. 2, 10 , 098 / - MADE BY THE AO ON ACCOUNT OF COMMISSION PAID TO DIRECTORS . 4. THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IN D IRECT ING T HE AO TO AL LOW DEDUCTION U/S 80IC OF THE ACT. 5. THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IN DIRECTING THE AO TO EXCLUDE THE AMOUNT OF REVALUATION OF PLANT AND MACHINERY FOR THE PURPOSE OF COMPUTING BOOK VALUE. GROUND NO. 1 IN REVENUE S APPEAL FOR A.Y 2004 - 05 & 2005 - 06 5 . WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND CAREFULLY PERUSED THE RELEVANT MATERIAL PLACED ON RECORD BEFORE US. THE LD. DR, SUPPORTING THE ACTION OF THE AO, SUBMITTED THAT WHEN THE ASSESSEE HAS FAILED T O ESTABLISH WITH ANY RELIABLE EVIDENCE THAT THE PARTIES TO WHOM ALLEGED COMMISSION WAS PAID HAD RENDERED ANY SUCH SERVICES SO AS TO RECEIVE THE COMMISSION, AND IN THE ABSENCE OF EVIDENCE TO SUPPORT THE ASSESSEE S CLAIM OF COMMISSION PAYMENT, THE ENTIRE AMO UNT WAS RIGHTLY DELETED BY THE AO. THE LD. DR SUBMITTED THAT THE LD. CIT(A) GRANTED - 5 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD RELIEF WITHOUT ANY BASIS. THEREFORE, THE SAME BE SET ASIDE BY RESTORING THAT OF THE AO. 6 . REPLYING TO THE ABOVE, THE LD, COUNSEL FOR THE ASSESSEE VEHEMENTLY CONTENDED T HAT THE AO MADE DISALLOWANCE WITHOUT ANALY SIS AND IGNORING THE CONTENTION OF THE ASSESSEE THAT THE ASSESSEE COMPANY HAD NOT MADE ANY PAYMENTS TOWARDS AFTER SALES SERVICE CHARGES ON EXPORTS TO IRAQ. HE STRONGLY SUPPORTED THE ORDER OF THE LD. CIT(A) AND SU BMITTED THAT THE LD. CIT(A), FOLLOWING HIS OWN ORDER FOR A.Y 2003 - 04, GRANTED RELIEF TO THE ASSESSEE. THE RELEVANT PART OF THE FIRST APPELLATE ORDER FOR A.Y 200 4 - 0 5 IS BEING REPRODUCED FOR THE SAKE OF COMPLETENESS IN OUR FINDINGS: THIS ISSUE OF DISALLOWANCE OF COMMISSION HAS BEEN EXAMINED IN THE APPELLATE ORDERS FOR AY 2002 - 03 AND 2003 - 04 ALSO. THE FACTS OF THE CASE ARE NO DIFFERENT FROM THE FACTS IN THE PRECEDING YEAR I.E. 2003 - 04. T H E APPELLANT HAS FILED A COPY OF THE AFFIDAVIT FI LED DURING THE ASSESSMENT PROCEEDINGS BY SH. V.K. DHAWAN, THE MANAGING DIRECTOR AS PER WHICH DURING THE RELEVANT FINANCIAL YEAR I. E. YEAR ENDED 31 - 03 - 2004, THE COMPANY HAS NOT MADE ANY PAYMENT TOWARDS AFTER SALES SERVICE CHARGES ON EXPORTS TO IRAQ. SUCH AF FIDAVIT HAS BEEN FILED FOR THE PRECEDING ASSESSMENT YEAR I.E. AY 2003 - 04 ALSO. - 6 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD FOLLOWING THE APPELLATE ORDER FOR AY 2003 - 04, FOR THE REASONS DISCUSSED THEREIN IT IS H E LD THAT THE COMMISSION PAYMENTS MADE BY THE APPELLANT TO PARTIES / INDIVIDUALS NOT CONNEC TED WITH THE SALES MADE TO IRAQ ARE ALLOWABLE EXPENSES AS THEY HAVE BEEN MADE IN THE NORMAL COURSE OF BUSINESS OVER THE YEARS. THE A O I S DIREC TED TO DELETE THE ADDITION OF RS.25,97,310/ - ON ACCOUNT OF COMMISSIO N. 7 . ON A CAREFUL PERUSAL OF THE ABOVE SUBMISSIONS, WE NOTE THAT SHRI V.K. DHAWAN, THE MANAGING DIRECTOR OF THE COMPANY SUBMITTED AN AFFIDAVIT DURING THE ASSESSMENT PROCEEDINGS STATING THAT DURING THE RELEVANT F.Y. ENDED ON 31.3.2004 AND 31.4.2004, THE COMPANY HAS NOT MADE ANY PAYMENT TOWARDS A FTER SALES SERVICE CHARGES ON EXPORT TO IRAQ. SIMILAR AFFIDAVIT WAS ALSO FILED FOR THE PRECEDING A.Y 2003 - 04 AND FOLLOWING THE APPELLATE ORDER FOR A.Y 2003 - 04, COMMISSION PAYMENT MADE BY THE ASSESSEE TO THE PARTIES AND INDIVIDUALS NOT CONNECTED WITH SALES MADE TO IRAQ WAS HELD TO BE ALLOWABLE EXPENDITURE BY OBSERVING THAT THE PAYMENT ON COMMISSION HAS BEEN MADE IN THE NORMAL COURSE OF BUSINESS OVER THE YEARS. FROM THE OPERATIVE PART OF THE FIRST APPELLATE ORDER FOR A.Y 2003 - 04 IT IS APPARENT THAT THE PAYM ENTS HAVE BEEN MADE THROUGH BANKING CHANNEL WH ICH WERE NOT RELATED TO THE ASSESSEE OR ANY OF ITS DIRECTORS AND FURTHERMORE, SUCH COMMISSION - 7 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD PAYMENTS HAVE BEEN MADE IN THE EARLIER YEARS ALSO IN THE REGULAR COURSE OF BUSINESS. SIMILAR AMOUNT OF COMMISSION W AS ALLOWED IN A.Y 2001 - 02 AND IN THE SUBSEQUENT A.Y FROM 2007 - 08 TO A.Y 2011 - 12 AND THIS FACT HAS NOT BEEN CONTROVERTED OR DISPUTED BY THE LD. DR DURING THE COURSE OF ARGUMENTS. IN THIS SITUATION, IT IS APPARENT THAT THE AO WAS CONFUSED WITH THE FACT THAT THE COMMISSION PAYMENT CLAIMED BY THE ASSESSEE WAS PERTAINING TO PAYMENT TOWARDS AFTER SALES SERVICE CHARGES ON EXPORTS TO IRAQ AND THIS FACT WAS REFUTED AND C ONTROVERTED BY THE ASSESSEE BY WAY OF FILING AN AFFIDAVIT OF THE MANAGING DIRECTOR OF THE ASSESS EE COMPANY, BUT THE SAME WAS IGNORED BY THE AO. DURING THE APPELLATE PROCEEDINGS, AFTER ANALYSING THE ENTIRE RELEVANT FACTS INCLUDING THE SAID AFFIDAVIT OF THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY, THE LD. CIT(A) CATEGORICALLY HELD THAT THE ASSESSEE COMPANY HAS NOT MADE ANY PAYMENT TOWARDS AFTER SALES SERVICE CHARGES ON EXPORTS TO IRAQ AND CLAIMED COMMISSION PAYMENT WAS NOT CONNECTED WITH THE SALES MADE TO IRAQ. THEREFORE, THE COMMISSION PAYMENTS MADE BY THE ASSESSEE WERE HELD AS ALLOWABLE EXPENSES A S THE SAME WERE INCURRED DURING THE NORMAL COURSE OF BUSINESS OVER THE YEARS. AT THE COST OF REPETITION, WE MAY POINT OUT THAT THE DEPARTMENT WAS ALLOWING SIMILAR KIND OF COMMISSION PAYMENT IN THE EARLIER A.Y 2001 - 02 AND CONSEQUENT SUBSEQUENT FIVE YEARS 2 007 - 08 TO 2011 - 12. - 8 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD ACCORDINGLY, WE OF THE CONSIDERED OPINION THAT THE LD. CIT(A) WA S RIGHT IN GRANTING RELIEF TO THE ASSESSEE. WE ARE UNABLE TO SEE ANY VALID REASON TO INTERFERE WITH THE SAME AND WE UPHOLD THE SAME. ACCORDINGLY , GROUND NO. 1 OF THE REVE NUE IN A.YS 2004 - 05 AND 2005 - 06 ARE DISMISSED BEING DEVOID OF MERITS. GROUND NOS. 2 & 3 IN REVENUE S APPEAL FOR A.Y 2004 - 05 & 2005 - 06 AND GROUND NO. 4 & 5 IN A.Y 2006 - 07 8 . WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND CAREFULLY PERUSED THE RELEVANT M ATERIAL PLACED ON RECORD BEFORE US. THE LD. DR VEHEMENTLY SUPPORTED THE ACTION OF THE AO AND SUBMITTED THAT IN THE FIRST ROUND OF PROCEEDINGS, THE ITAT, VIDE COMBINED ORDER DATED 19.09.2008 IN ITA NO. 64/DEL/2008 [ASSESSEE S APPEAL] AND CROSS APPEAL OF THE REVENUE ALLOWED THE APPEAL OF THE ASSESSEE FOR STATISTICAL PURPOSES AND RESTORED THE ISSUE OF DISALLOWANCE OF DEDUCTION U/ 80IC OF THE ACT BACK TO THE FILE OF THE AO AFTER CONSIDERING THE CLAIM OF THE ASSESSEE IN THE LIGHT OF THE RELEVANT PROVISIONS AND FORM 10 CCB FILED BEFORE THE LD. CIT (A). THE LD. D R HAS FURTHER DRAWN OUR ATTENTION TOWARDS OPERATIVE PART OF THE ASSESSMENT ORDER AND SUBMITTED THAT THE DEDUCTION U/S 80IC OF THE ACT CANNOT BE ALLOWED ON THESE TERMS OF INCOME AND SINCE THE ASSESSEE COMPANY HAS NOT FULFILLED - 9 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD THE BASIC CON DITION OF SUBSTANTIAL EXPANSION IN THE PLANT AND MACHINERY DURING THE RELEVANT F.Y. THEREFORE, THE ASSESSEE WAS RIGHTLY HELD AS NOT ENTITLED FOR DEDUCTION U/S 80IC OF THE ACT. THE LD. DR VEHEMENTLY CONTENDED THAT THE LD. CIT(A) CONSIDERED THE RELEVANT FAC TS AND WRONGLY HELD THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IC OF THE ACT SUBJECT TO FULFILLING OTHER CONDITIONS AS PER LAW. THEREFORE, THE CLAIM OF THE ASSESSEE U/S 80IC OF THE ACT MAY KINDLY BE DISALLOWED, UPHOLDING THE ORDER OF THE AO. 9 . R EPLYING TO THE ABOVE , THE LD. AR HAS DRAWN OUR ATTENTION TOWARDS THE WRITTEN SYNOPSIS OF ARGUMENTS FILED ON 26.08.2015 AND SUBMITTED THAT THE AO IN THE IMPUGNED ORDER DISALLOWED THE ASSESSEE S CLAIM UNDER WRONG APPRECIATION OF FACTS AND INCORRECTLY HOLDIN G THAT THE ASSESSEE HAS NOT TAKEN SUBSTANTIAL EXPANSION OF ITS MANUFACTURING UNIT. THE LD, COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE SUBMITTED DETAILS SUBMISSIONS ON THIS ISSUE WHICH HAVE BEEN REPRODUCED IN THE FIRST APPELLATE ORDER FROM PAGES 24 TO 32 AND ON A PERUSAL OF THE SAID SUBMISSIONS AND COMPUTATION FURNISHED BY THE ASSESSEE, IT IS AMPLY CLEAR THAT THE ASSESSEE HAS SUCCESSFULLY PROVED TO HAVE UNDERTAKEN SUBSTANTIAL EXPANSION OF ITS MANUFACTURING FACILITIES - 10 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD AND THE ALLEGATIONS RAISED BY THE AO IS MERELY A MISINTERPRETATION OF FACTS AND LAW ON THIS ISSUE. THE LD. COUNSEL FOR THE ASSESSEE ALSO POINTED OUT THAT THE ONLY ISSUE IS WITH RESPECT TO DEDUCTIBILITY U/S 80IC OF THE ACT WITH REGARD TO WHETHER THE ASSESSEE HAS UNDERTAKEN SUBSTANTIAL EXPANSION AS REQUIRED BY THE PROVISIONS OF SECTION 80IC OF THE ACT. THE LD. AR FURTHER TOOK US THROUGH PARA 6.5 OF THE FIRST APPELLATE ORDER FOR A.Y 2004 - 05 AT PAGES 38 TO 47 OF THE APPELLATE ORDER AND SUBMITTED THAT SUBSTANTIAL EXPANSION MEANS INCREASE IN THE PLANT AND MACHINERY BY AT LEAST 50% OF THE BOOK VALUE [BEFORE TAKING DEPRECIATION IN ANY YEAR], AS ON THE FIRST DAY OF THE PREVIOUS YEAR IN WHICH SUBSTANTIAL EXPANSION IS UNDERTAKEN. THE LD COUNSEL REITERATED ITS DETAILS SUBMISSIONS BEFORE THE LD. CI T(A) AND POINTED OUT THAT THE BOOK VALUE OF PLANT AND MACHINERY AS ON 1.4.2003 HAS BEEN MISTAKENLY TAKEN TO BE VALUE OF LAND, BUILDING FIXTURES AND FURNITURE AND SUCH OTHER ASSETS WHICH SHALL NOT FALL WITHIN THE AMBIT OF THE TERM PLANT AND MACHINERY AND THE AO WRONGLY TOOK THE BOOK VALUE TO INCLUDE THE PROFITS ON ACCOUNT OF REVALUATION IN ASSETS. THE LD. COUNSEL FOR THE ASSESSEE IN THE WRITTEN SYNOPSIS SUBMITTED THE BROAD PROPOSITIONS OF SUBMISSIONS AS UNDER: - 11 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD 1 ) SECTION 80IC STIPULATES INCREASE IN THE VA LUE OF PLANT AND MACHINERY AND NOT THE TOTAL FIXED ASSETS OF THE INDUSTRIAL UNDERTAKING. 2 ) REVALUATION PROFITS, BEING HYPOTHETICAL IN NATURE, CANNOT BE CONSIDERED WHILE COMPUTING THE THRESHOLD LIMIT OF 50% INCREASE IN INVESTMENT. HAD THIS BEEN THE INTENTION OF THE LEGISLATURE, THEN THE CONVERSE WOULD HAVE ALSO HELD EQUALLY GOOD, IN WHICH CASE, IN THE SITUATION WHERE THE ASSESSEE HAD DEVALUED ITS ASSETS IN ANY PREVIOUS YEAR, THE BOOK VALUE WOULD HAVE MEANT TO BE SUCH DEVALUED FIGURES AND THE FURTHER INVESTMEN T REQUIRED TO BE MADE IN NEW PLANT AND MACHINERY WOULD HAVE BEEN 50% OF THE SAID NOTIONALLY REDUCED BOOK VALUE. THIS OBVIOUSLY COULD NOT HAVE BEEN THE INTENTION OF THE LEGISLATURE. 3 ) THE TERM BOOK VALUE SINCE NOT DEFINED IN THE ACT, MUST BE CONSTRUED AS COMMONLY UNDERSTOOD IN THE CONTEXT OF THE PURPOSE OF THE SECTION. HENCE IT IS INAPPROPRIATE TO BORROW ITS MEANING FROM THE ACCOUNTING STANDARDS WHICH MAY PERMIT INCLUSION EVEN OF THE REVALUATION SURPLUS OR DEFICIT. THE PURPOSE OF SECTION 80IC HAS BEEN EXPLAINED IN CIRCULAR NO. 7/2003, DATED 05.09.2003. COPY PLACED AT PGS. 185 - 186 OF THE DPB. OBVIOUSLY, THE ECONOMIC DEVELOPMENT REQUIRES REAL OUTLAY OF MONEY IN PLANT AND MACHINERY. THE ASSESSEE S SUBMISSION I S FURTHER STRENGTHENED BY THE EXPRESSION INCREASE IN THE INVESTMENT . INVESTMENT MEANS ACTUAL OUTLAY OF MONEY. - 12 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD 4 ) THE ACT REQUIRES INVESTMENT IN REAL TERMS. SINCE HYPOTHETICAL INCREMENT IN THE VALUE OF ASSETS COULD NOT BE CONSIDERED AS INVESTMENT, THE BOOK VALUE OF SUCH ASSETS CAN ALSO NOT BE CONSTRUED TO INCLUDE THE FIGURE OF HYPOTHETICAL VALUE ADDITIONS. THE REAL O UTLAY IN ASSETS, DURING THE YEAR, MUST ONLY BE CALCULATED AS A PERCENTAGE OF THE ACTUAL INVESTMENTS DONE BY THE ASSESSEE IN THE EARLIER YEARS. 5 ) REVALUAT I ON OF ASSETS CANNOT BE TERMED AS TANGIBLE INVESTMENTS, NEITHER IN THE YEAR OF SUBSTANTIAL EXPANSION NOR IN RESPECT OF ANY OF THE PREVIOUS ACCOUNTING YEARS. 1 0 . ON CAREFUL CONSIDERATION OF BOTH THE RIVAL SUBMISSIONS FROM THE APPELLATE ORDER FOR A.Y 2004 - 05, WE NOTE THAT THE LD. CIT(A) GRANTED RELIEF TO THE ASSESSEE WITH THE FOLLOWING CONCLUSION AND OBSERVATI ONS: THE SUBMISSIONS AND DETAILS FILED BY THE APPELLANT HAVE BEEN CONSIDERED IT IS SEEN THAT THE APPELLANT HAS MADE SUBSTANTIAL EXPANSION OF ASSETS ONLY IN TWO DIVISIONS I.E. IN BOP UNIT AND UTENSIL UNIT AND NOT IN THE COMPANY AS A WHOLE. HENCE, THE CONTE NTION OF THE APPELLANT THAT THE FIXED ASSETS SCHEDULE OF THESE TWO UNITS HAVE TO BE TAKEN INTO ACCOUNT APPEARS TO BE CORRECT. THIS IS SO BECAUSE THESE TWO SCHEDULES OF FIXED ASSETS HA VE BEEN SEPARATELY DRAWN UP BY THE APPELLANT AND ALSO BOTH HAVE BEEN DULY ADDED AND ARE BASED ON SEPARATE BOOKS OF ACCOUNTS MAINTAINED FOR THE TWO DIVISIONS. AND IN ANY CASE, THE - 13 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD SUBSTANTIAL INVESTMENT HAS BEEN MADE IN THESE TWO UNITS ONLY BY THE APPELLANT. UNDER THESE CIRCUMSTANCES, THE CONTENTION OF THE APPELLANT APPEARS TO B E CORRECT AND IS ACCEPTED. IT IS SEEN THAT THE SECOND ISSUE IS WHETHER THE REVALUATION OF PLANT AND MACHINERY AMOUNTING TO THE FIGURE OF RS.87,79,776/ - SHOULD HAVE BEEN REDUCED FROM THE FIGURE OF OPENING BOOK VALUE AS ON 01 - 04 - 2003 OR NOT. THE APPELLANT HA S CONTENDED THAT REVALUATION OF FIXED ASSETS IS A NOTIONAL INCREASE IN THE BOOK VALUE OF THE ASSETS SO AS TO DEPICT AN APPROXIMATE CURRENT MARKET VALUATION THEREOF AND THAT IT DOES NOT REPRESENT ANY ACTUAL FINANCIAL INVESTMENT IN THE FIXED ASSETS. IT HAS A LSO BEEN CONTENDED THAT REVALUATION COULD MEAN APPRECIATION OR DEPRECIATION AS THE CASE MAY BE. THE AR HAS ARGUED THAT IN THE OPPOSITE SITUATION WHERE AN ASSESSEE DEVALUES ITS ASSETS AND REDUCES THE BOOK VALUE OF ITS PLANT AND MACHINERY, WOULD THE REVENUE ACCEPT 51% OF SUCH REDUCED NOTIONAL VALUE AS 'SUBSTANTIAL ADDITION' FOR THE PURPOSE OF CLAIM UNDER THIS SECTION? FURTHER, THE AR HAS ARGUED THAT THE ASSESSEE HAS NEITHER CLAIMED NOR HAS BEEN ALLOWED DEPRECIATION U/S 32 OF THE I.T. ACT, 1961 ON THE REVALUED FIGURE OF FIXED ASSETS IN THE PRECEDING YEARS SUBSEQUENT TO REVALUATION. THE AR HAS ALSO ARGUED THAT THE INTENTION OF THE LEGISLATURE - IS THAT NO ADJUSTMENT ON ACCOUNT OF DEPRECIATION ETC CAN BE ALLOWED TO BE MADE IN THE BOOK VALUE OF THE PLANT A ND MACHINERY FOR CALCULATING SUBSTANTIAL EXPANSION. TAKING IT A STEP FURTHER, THE AR HAS SUBMITTED THAT IF THAT BE SO THEN NO ADJUSTMENTS ON ACCOUNT OF NOTIONAL INCREASE OR DECREASE IN BOOK VALUE CAN BE - 14 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD PERMITTED TO BE MADE. HENCE, IT IS ARGUED THAT THE NO TIONAL INCREASE OR DECREASE IN THE BOOK VALUE CANNOT BE THE BASIS FOR DETERMINING THE QUAN T UM OF 'SUBSTANTIAL EXPANSION'. THE AR HAS TAKEN RECOURSE TO AN EXAMPLE AS BELOW: IN A CASE WHERE THE ACTUAL INVESTMENT OF RS.100/ - IN PLANT AND MACHINERY HAS BEEN R EPLACED BY SAY RS.110/ - AFTER REVALUATION AND THE DEPARTMENT'S CONTENTION IS THAT RS.55/ - SHOULD HAVE BEEN THE ADDITIONAL INVESTMENT TO CONSTITUTE SUBSTANTIAL EXPANSION. IF THE OPPOSITE CASE WAS TO BE TAKEN AND THE BOOK VALUE WAS TO BE DEVALUED TO RS.90/ - , THEN IN THAT CASE WOULD AN INVESTMENT OF RS.45 BE ACCEPTABLE TO THE DEPARTMENT FOR CONSTITUTING SUBSTANTIAL EXPANSION? THE AR HAS ANSWERED THE QUESTION IN A CATEGORICAL NO . THE AB O VE ARGUMENTS OF THE AR HAVE BEEN EXAMINED AND IT IS FELT THAT THEY ARE NOT WITHOUT THEIR MERIT. THE REVALUATION OF ASSETS OR FOR THAT MATTER DEVALUATION IS A NOTIONAL ADJUSTMENT OF FIGURES ONLY. THE ACTUAL INVESTMENT MADE BY AN UNDERTAKING REMAINS THE SAME BEFORE AND AFTER THE REVALUATION. M ERE ADOPTION OF A REVISED HIGHER FI GURE WOULD NOT IN REALITY AMOUNT TO AN ACTUAL INCREASE IN INVESTMENT. THE HISTORICAL COST OF THE INVESTMENT BY THE UNDERTAKING IN THE PLANT AND MACHINERY WILL CONTINUE TO REMAIN THE SAME. KEEPING IN VIEW THE FIGURES OF INVESTMENT IN PLANT AND MACHINERY IN THE YEAR IN WHICH REVALUATION WAS MADE BY THE - 15 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD APPELLANT AND ALSO KEEPING IN VIEW THE QUANTUM OF INVESTMENT MADE BY THE APPELLANT D URING THE YEAR, WHICH HAS BEEN SHOWN TO BE ABOVE 50%, THE ARGUMENT OF THE APPELLANT THAT THE SUBSTANTIAL EXPANSION MADE BY THE APPELLANT WAS ABOVE 50% AND, THEREFORE, ELIGIBLE FOR THE CLAIM OF DEDUCTION U/S 80IC, APPEARS TO BE BASED ON CORRECT REASONING. FURTHERMORE, THE ARGUMENT OF THE APPELLANT THAT NO DEPRECIATION HAS BEEN CLAIMED BY OR ALLOWED TO THE APPELLANT ON THE INCREASED / REVALUED FIGURE OF INVESTMENT IN OF PLANT AND MACHINERY HAS ALSO BEEN CONSIDERED. THE EXAMPLE GIVEN BY THE APPELLANT THAT IN A CASE OF DEVALUATION TO A REDUCED FIGURE, THE DECREASED NOTIONAL VALUE AS PER REVALUATION WOULD NOT BE ACCEPTABLE TO T HE DEPARTMENT ALSO APPEARS TO BE LOGICAL AND WELL - REASONED. AFTER CONSIDERING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED ABOVE, IT IS FELT THAT THE AO WAS NOT CORRECT IN NOT ADOPTING THE ACTUAL/HISTORICAL COST OF ASSETS AS THE BOOK VALUE INST EAD OF ADOPTING THE REVALUED NOTIONAL FIGURE OF INVESTMENT IN PLANT AND MACHINERY AFTER REVALUATION AS THE BOOK VALUE. FOR THE PURPOSE OF THIS SECTION, THE ACTUAL COST OF PLANT AND MACHINERY RATHER THAN A NOTIONAL FIGURE WOULD BE THE CORRECT AND APPROPRIAT E BASIS FOR DETERMINING SUBSTANTIAL EXPANSION. THEREFORE, IT IS HELD THAT THE AO WAS NOT CORRECT IN EXCLUDING THE AMOUNT OF REVALUATION AMOUNT FOR THE PURPOSE OF COMPUTING BOOK VALUE OF THE APP ELLANT'S PLANT AND MACHINERY AS ON 01 - 04 - 2003. ACCORDINGLY, THE ISSU E OF ALLOWABILITY OF DEDUCTION U/ 80IC - 16 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD CLAIMED BY THE APPELLANT AS PER GROUND NO.5 IS DECIDED IN FAVOUR OF THE APPELLANT, SUBJECT TO THE APPELLANT'S FULFILLING OTHER CONDITIONS, IF ANY, AS PER LAW. 1 1 . IN VIEW OF THE ABOVE, ON CAREFUL CONSIDERATION OF THE RIVAL SUBMISSIONS OF BOTH THE SIDES, WE NOTE THAT THE AO WAS NOT CORRECT IN INCLUDING THE VALUE OF LAND AND BUILDING FIXTURES, FURNITURE AND OTHER ASSETS WITHIN THE AMBIT OF PLANT AND MACHINERY AND THE AO WAS ALSO NOT CORRECT IN CONSIDERING THE BOOK VALUE OF THE ASSETS AFTER REVALUATION. FROM A BARE READING OF THE RELEVANT SECTION 80IC OF THE ACT, IT IS APPARENT THAT THE REQUIREMENT OF THE PROVISIONS IS THAT THERE MUST BE INCREASE IN THE VALUE OF PLANT AND MACHINERY AND NOT THE VALUE OF FIXED AS S ETS OF THE INDUSTRIAL UNDERTAKING. IT IS A WELL - KNOWN PROPOSITION THAT THE REVALUATION OF PROFITS, BEING HYPOTHETICAL IN NATURE , CANNOT BE CONSIDERE D WHILE COMPUTING THE THRESHOLD LIMIT OF 50% INCREASE IN INVESTMENT. OBVIOUSLY, IT WAS NOT THE INTENTION OF THE LEGISLATURE TO CONSIDER THE BOOK VALUE AFTER REVALUATION AND INVESTMENT REQUIRED TO BE MADE IN THE VALUE OF PLANT AND MACHINER Y WOULD BE 50% OF THE BOOK VALUE BEFORE REVALUATION OF AS S ETS. THERE IS N O DEFINITION OF BOOK VALUE IN THE PREVIOUS ACT BUT I N THE ABSENCE OF ANY DEFINITION, THE LOGICAL MEANING MUST BE GIVEN AND CONSTRUED AS - 17 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD COMMONLY UNDERSTOOD IN THE LIGHT OF THE CONTEXT AND PURPOSE OF BENEFICIARY PROVIS I ONS. WE ARE IN AGREEMENT WITH THE CONCLUSION OF THE LD. CIT(A) THAT FOR THE PURPOSE OF CA LCULATION OF SUBSTANTIAL INCREASE OF 50% IN PLANT AND MACHINERY THE ACTUAL COST OF PLANT AND MACHINERY HAS TO BE CONSIDERED INSTEAD OF NOTIONAL FIGURE CALCULATED AFTER REVALUATION IN ASSETS. THUS, THE AO WAS NOT CORRECT IN EXCLUDING THE AMOUNT OF REVALUAT ION FOR THE PURPOSE OF COMPUTING THE BOOK VALUE OF THE ASSESSEE S PLANT AND MACHINERY AS ON 1.4.2003. IN VIEW OF OUR ABOVE NOTED FINDINGS AND FOREGOING DISCUSSION, WE HAVE NO HESITATION IN HOLDING THAT THE LD. CIT(A) WAS RIGHT IN DETERMINING THE VALUE OF SUBSTANTIAL EXPANSION DURING THE RELEVANT F.Y. BY TAKING THE ACTUAL COST OF PLANT AND MACHINERY AT THE BEGINNING OF THE YEAR AND IF THE ASSETS HAVE BEEN REVALUED DURING THE F.Y., THEN THE AMOUNT ENHANCED BY REVALUATION OF ASSETS HAS TO BE EXCLUDED FOR THE PURPOSE OF COM M UTING THE BOOK VALUE OF THE ASSESSEE S EXISTING PLANT AND MACHINERY AS ON THE FIRST DAY OF THE F.Y. THEREFORE, WE ARE INCLINED TO HOLD THAT THE APPROACH ADOPTED BY THE AO WAS NOT CORRECT AND AS PER THE PROVISIONS OF THE ACT. ON THE OTHER HAND, THE LD. CIT(A) RIGHTLY CONSIDERED THE RELEVANT PROVIS I ON OF THE ACT AND ADOPTED PERMISSIBLE AND PLAUSIBLE VIEW AND WE ARE UNABLE TO SEE ANY VALID REASON TO INTERFERE WITH THE CONCLUSION OF THE LD. CIT(A) ON THIS ISSUE AND THUS WE UPHOLD THE SAME. - 18 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD GROUND NO . 1 OF REVENUE S APPEAL FOR A.Y 2006 - 07 12. APROPOS TH IS GROUND, WE HAVE HEARD THE ARGUMENTS OF THE RIVAL SUBMISSIONS AND HAVE CAREFULLY PERUSED THE RELEVANT MATERIAL ON RECORD. THE LD. DR, SUPPORTING THE ACTION OF THE AO, SUBMITTED THAT THE AO M ADE DISALLOWANCE ON ACCOUNT OF COMMISSION PAID TO DIRECTORS AGAINST THE SALES. THE LD. DR TOOK US THROUGH THE RELEVANT PART OF THE ASSESSMENT ORDER AT PAGE 2 AND SUBMITTED THAT IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE, THE COMMISSION PAID ON SALES WAS RI GHTLY DISALLOWED AS IN RESPONSE TO QUERY RAISED BY THE AO, THE ASSESSEE COMPANY HAS FILED ONLY NAME AND ADDRESS OF THE PERSON TO WHOM THE COMMISSION ON SALES WAS GIVEN. THEREFORE, THE AO WAS QUITE JUSTIFIED IN MAKING THE SAID DISALLOWANCE. THE LD. DR VEH EMENTLY CONTENDED THAT THE LD. CIT(A) GRANTED RELIEF TO THE ASSESSEE ON THIS ISSUE WITHOUT ANY REASONING. THEREFORE, THE IMPUGNED ORDER MAY BE SET ASIDE BY RESTORING THAT OF THE AO. 13. REPLYING TO THE ABOVE, THE LD. AR STRONGLY SUPPORTED THE ORDER OF TH E LD. CIT(A) AND REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW BY WAY OF WRITTEN SUBMISSIONS. - 19 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD 14. ON CAREFUL CONSIDERATION OF THE RIVAL SUBMISSIONS AND FROM THE OPERATIVE PART OF THE FIRST APP EL L A TE ORDER, WE FIND THAT THE LD. CIT(A) DELETE D THE ENTIRE AMOUNT OF DISALLOWANCE ON ACCOUNT OF COMMISSION ON SALES WITH THE FOLLOWING OBSERVATIONS: THE ASSESSMENT ORDER HAS BEEN PERUSED AND IT IS SEEN THAT THE AO HAS DISALLOWED THE COMMISSION ON SALE OBSERVING THAT THE APPELLANT FILED ONLY THE NAMES AND ADDRESSES OF THE PERSONS TO WHOM COMMISSION ON SALES WAS PAID BY THE APPELLANT DURING THE YEAR. IT HAS BEEN OBSERVED BY THE AO THAT THE ASSESSEE DID NOT FILE ANY AGREEMENT BETWEEN THE PARTIES AND DID NOT FURNISH THE DETAIL OF THE RATE AT WHICH COMMISS ION WAS PAID. IN ABSENCE OF THE ABOVE DOCUMENTARY EVIDENCE, THE ENTIRE AMOUNT OF COMMISSION HAS BEEN DISALLOWED BY THE AO APPARENTLY IN A SUMMARY MANNER WITHOUT DISCUSSING MUCH IN DETAIL. DURING THE COURSE OF THE PRESENT APPELLATE PROCEEDINGS, IT HAS BEEN CLARIFIED BY THE APPELLANT THAT THIS COMMISSION ON SALES AMOUNTING TO RS.28,46,268/ - HAS BEEN PAID TO DIRECTORS OF THE COMPANY ON THE BASIS OF SALES MADE DURING THE YEAR. HENCE, THERE WAS NO AGREEMENT BETWEEN ANY TWO PARTIES WHICH COULD BE PRODUCED BEFORE THE AO AS SUCH. IT HAS BEEN SUBMITTED THAT SUCH COMMISSION HAS BEEN PAID AS PER BOARD RESOLUTION DT. 30 TH SEPTEMBER, 1998 A COPY OF WHICH IS STATED TO BE ALREADY ON RECORD. IT HAS ALSO BEEN STATED TO HAVE BEEN PAID AS PER RATES OF 1%, 0.25% AND 0.10% TO RE SPECTIVE DIRECTORS AS PER THE BOARD RESOLUTION DATED 30 - 09 - 1998 AND 25 - 04 - 2006. SUCH PAYMENTS - 20 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD HAVE BEEN MADE IN PRECEDING YEARS WERE INCLUDED IN THE FIGURE OF SALARY TO DIRECTORS. COPIES OF THE RESOLUTIONS HAVE BEEN FILED. FURTHER, IT HAS BEEN CLARIFIED TH AT SUCH COMMISSION HAS BEEN PAID IN EARLIER YEARS ALSO AND HAS BEEN SHOWN AS PART OF SALARY ON WHICH TDS HAS BEEN ALREADY DEDUCTED. KEEPING IN VIEW THE ABOVE SUBMISSIONS, IT IS SEEN THAT THIS COMMISSION IS NOT TO ANY AGENTS AS OBSERVED BY THE AO BUT TO DIR ECTORS AND HAS BEEN PAID AS PER BOARD RESOLUTIONS AND HAS BEEN IN CLUDED IN SALARY ON WHICH TDS HAS BEEN ALREADY DEDUCTED. THEREFORE, IT WAS UNJUSTIFIED IN MAKING THE ADDITION. HENCE, THE AMO UNT OF RS.28,46,267/ - IS DELETED. 15. IN VIEW OF THE ABOVE, THE L D. CIT(A) NOTED THAT THE IMPUGNED COMMISSION HAS BEEN PAID ON SALES TO THE DIRECTORS OF THE COMPANY AS PER BOARD RESOLUTION DATED 30.09.1998 @ 1%, .25% AND 10% TO THE RESPECTIVE DIRECTORS AS PER THE SAID BOARD RESOLUTION DATED 30.09.1998 AND 25.04.2006 AND SOME PAYMENTS ON COMMISSION ON SALE HAVE BEEN MADE IN THE PRECEDING YEARS WHICH WERE INCLUDED IN THE FIGURE OF THE REMUNERATION/SALARY TO THE DIRECTORS. THE LD. CIT(A) ALSO NOTED THAT THE COMMISSION ON SALES HAS BEEN MADE IN THE EARLIER YEARS AND WAS SHO WN AS PART OF SALARY ON WHICH TDS HAS ALREADY BEEN DEDUCTED. THE FIRST APPELLATE AUTHORITY ALSO CLARIFIED THE FACTUAL CONFUSION CREPT IN THE MIND OF THE AO BY OBSERVING THAT THE COMMISSION IN QUESTION AS - 21 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD SALES WAS NOT PAID TO ANY AGENT BUT WAS PAID TO THE DIRECTORS AS PER THE BOARD S RESOLUTION AND THE TDS WAS ALSO DEDUCTED THEREON. WITH THESE FACTUAL FINDINGS, THE LD. CIT(A) GRANTED RELIEF TO THE ASSESSEE AND WE ARE UNABLE TO SEE ANY AMBIGUITY, PERVERSITY OR ANY OTHER VALID REASON TO INTERFERE WITH THE OR DER OF THE LD. CIT(A) AND WE UPHOLD THE SAME. ACCORDINGLY, GROUND NO. 1 OF THE REVENUE FOR A.Y 2006 - 07 IS DISMISSED. GROUND NO. 2 OF THE REVENUE FOR A.Y 2006 - 07 16. THE LD. DR HAS CONTENDED THAT THE LD. CIT(A) UPHELD PART DISALLOWANCE OF RS. 13,07,188/ - BUT DELET E D THE PART ADDITION WITHOUT ANY BASIS AND SOUND REASONING. HENCE THE ORDER OF THE LD. CIT(A) MAY BE SET ASIDE BY RESTORING THAT OF THE AO. REPLYING TO THE ABOVE, THE LD. AR VEHEMENTLY CONTENDED THAT THE FACTS AND CIRCUMSTANCES FOR A.Y 2006 - 07 ARE SIMILAR TO A.Y 2004 - 05 AND 2005 - 06 EXCEPT THAT THE LD. CIT(A) UPHELD AND CONFIRMED PART DISALLOWANCE PERTAINING TO PROVISION OF COMMISSION AGAINST WHICH THE ASSESSEE HAS NOT PREFERRED ANY GROUND OF APPEAL BEFORE THE TRIBUNAL. - 22 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD 17. ON CAREFUL CONSIDERA TION OF THE ABOVE, AT THE OUTSET, WE NOTE THAT THE LD. CIT(A) WAS QUITE JUSTIFIED IN UPHOLDING THE PART DISALLOWANCE AS THE PROVISION OF COMMISSION CANNOT BE ALLOWED AS BUSINESS EXPENDITURE ACTUALLY INCURRED FOR THE PURPOSE OF BUSINESS. HOWEVER, THE FACTS AND CIRCUMSTANCES OF THE CASE ON THIS ISSUE FOR A.Y 2004 - 05 AND 2005 - 06 ARE QUITE SIMILAR. HENCE, OUR CONCLUSION REGARDING GROUND NO. 1 OF THE REVENUE FOR A.Y 2004 - 05 WILL APPLY MUTATIS MUTANDIS TO GROUND NO. 2 OF THE REVENUE. ACCORDINGLY, GROUND NO. 2 OF THE REVENUE FOR A.Y 2006 - 07 IS DISMISSED. GROUND NO. 3 FOR A.Y 2006 - 07 . 18. APROPOS GROUND NO 3 OF THE REVENUE, WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND HAVE CAREFULLY PERUSED THE RELEVANT MATERIAL PLACED ON RECORD BEFORE US. THE LD. DR SUPPORTING THE ACTION AND STAND OF THE AO CONTENDED THAT THE ASSESSEE HAS NOT FILED ANY SUBM ISSIONS ON THIS ISSUE AND THE AO NOTED THAT THE DIRECTORS ARE ALREADY GETTING REMUNERATION FOR THE SERVICES BEING RENDERED BY THEM AND PAYMENTS TO THE DIRECTORS WHO ARE ALSO SHARE HOLDERS ARE THEREFORE, NOT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. TH E LD. DR VEHEMENTLY CONTENDED THAT THE IMPUGNED PAYMENT IS CLEARLY HIT AND - 23 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD PROHIBITED BY SECTION 36(1)(II) OF THE ACT AS THE COMMISSION SHOULD NOT BE PAID TO THE EMPLOYEE SHARE HOLDERS WHO SHOULD OTHERWISE BE PAID THE DIVIDEND. THE LD. DR PARTED WITH THE ARGUMENTS ON THIS ISSUE BY SUBMITTING THAT THE IMPUGNED ORDER MAY BE SET ASIDE BY RESTORING THAT OF THE AO. 19. REPLYING TO THE ABOVE, THE LD. COUNSEL OF THE ASSESSEE SUPPORTING THE LD. CIT(A) S ORDER SUBMITTED THAT THE ASSESSEE HAS BEEN MAKING SAME PAYME NT OF COMMISSION TO ITS DIRECTORS FOR THE PAST MANY YEARS WHICH HAVE BEEN REGULARLY ALLOWED IN THE PAST FROM 1998 - 99 ONWARDS, THEREFORE, THE LD. CIT(A) FOLLOWING THE RULE OF CONSISTENCY RIGHTLY ALLOWED THE SAME. THE LD. COUNSEL POINTED OUT THAT THE ASSESS EE CLAIMED SIMILAR COMMISSION EXPENDITURE IN EARLIER AND SUBSEQUENT YEARS WHICH WAS REGULARLY ACCEPTED BY THE REVENUE AND IN VIEW OF CONSISTENCY IN THE STAND THE FIRST APPELLATE AUTHORITY RIGHTLY DELETED THE UNJUSTIFIED DISALLOWANCE. 20. ON CAREFUL CONSIDERATION OF THE ABOVE RIVAL SUBMISSIONS OF BOTH THE SIDES AND ON CAREFUL PERUSAL OF THE RELEVANT PART OF THE IMPUGNED ORDER, WE NOTE THAT THE LD. CIT(A) GRANTED RELIEF TO THE ASSESSEE WITH THE FOLLOWING CONCLUSION : - 24 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE AO HAS DISALLOWED THE COMMISSION BY OBSERVING THAT THE DIRECTORS ARE ALSO SHAREHOLDERS IS NOT CORRECT AS PER LAW. IT IS ALSO OBSERVED BY THE AO THAT INSTEAD OF DISTRIBUTING ITS PROFIT AS DIVIDEND, THE ASSESSEE HAS PAID COMMISSION TO ITS DIRE CTORS AND, THEREFORE, AVOIDED THE PAYMENT OF DIVIDEND DISTRIBUTION TAX. THE SUBMISSIONS OF THE APPELLANT HAVE BEEN EXAMINED WHEREIN IT HAS BEEN STATED THAT PAYMENT OF COMMISSION IS A NORMAL BUSINESS PRACTICE FOLLOWED BY THE APPELLANT STE A D I LY FOR THE PAST MANY YEARS, AND SHOULD BE TREATED AS A PART OF SALARY ONLY. THE APPELLANT HAS RELIED ON THE CASE OF CIT VS. T. ABDUL WAHID & CO. WHEREIN IT WAS HELD THAT COMMISSION SHOULD ALSO BE TREATED AS SALARY FOR THE PURPOSE OF TAX DEDUCTION AT SOURCE. IT HAS BEEN ST ATED THAT IN THE APPELLANT'S CASE, THE COMMISSION TO DIRECTORS IS CALCULATED AS A PERCENTAGE OF THE TURNOVER AND IS SUBJECTED TO TDS. HENCE, IT IS CLAIMED THAT DUE TAXES HAVE BEEN PAID ON THE SAME. KEEPING IN VIEW THE ENTIRE FACTS AND CIRCUMSTANCES, IT IS SEEN THAT THE APPELLANT HAS MADE THE PAYMENT OF COMMISSION TO ITS DIRECTORS FOR THE PAST MANY YEARS WHICH HAVE BEEN STATED TO HAVE BEEN ALLOWED IN THE PAST FROM 1998 - 99 ONWARDS. IT IS ALSO STATED THAT DUE TAXES THEREON HAVE BEEN PAID. HENCE, THE DISALLOWA NCE OF RS.2,10,098/ - IS DELETE D. 21. ON A LOGICAL ANALYSIS OF THE FIRST APPELLATE ORDER, WE NOTE THAT THE AO HAS NOT CONTROVERTED THIS FACT THAT THE COMMISSION TO DIRECTORS IS CALCULATED AS A PERCENTAGE OF THE TURNOVER AND SUBJECT TO TDS AND - 25 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD DUE TAXES HA S BEEN PAID BY THE DIRECTORS ON THE SAME AS A PART OF SALARY. THE LD. CIT(A) ALSO NOTED THAT THE ASSESSEE HAS BEEN MAKING SIMILAR PAYMENTS TO ITS DIRECTORS FOR THE PAST MANY YEARS WHICH HAVE BEEN STATED TO HAVE BEEN ALLOWED IN THE PAST FROM A.Y 1998 - 99 ON WARDS. IN OUR CONSIDERED VIEW, THE PROVISION OF SECTION 36(1)(II) OF THE ACT DOES NOT CREATE ANY BAR OR PROHIBITION ON SUCH PAYMENTS OF COMMISSION TO THE DIRECTORS OF THE ASSESSEE COMPANY TOWARDS SERVICES RENDERED BY THEM AS SAID PROVISION MANDATES ABOUT THE DEDUCTIONS PROVIDED TO BE ALLOWED IN RESPECT OF THE MATTERS DEALT WITH THEREIN, IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 OF THE ACT. THUS, FOLLOWING THE RULE OF CONSISTENCY, THE LD. CIT(A) RIGHTLY GRANTED RELIEF TO THE ASSESSEE SPECIALLY IN A SITUATION WHEN THE AO COULD NOT POINT OUT ANY OTHER DEFECT OR DEFICIENCY IN THE SAID PAYMENT ALLEGING THAT IT WAS NOT FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE OR ITS WAS NOT LINKED WITH THE SERVICES RENDERED BY THE RECIPIENT DIRECTORS OF THE COMPAN Y. THIS CONTENTION ALSO GETS STRENGTH FROM THE ORDER OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF AMD MET PLAST P. LTD VS. DCIT 341 ITR 563 [DEL.] . IN THAT VIEW OF THE MATTER, WE ARE UNABLE TO SEE ANY PERVERSITY, AMBIGUITY OR ANY OTHER VALID REASON TO INTERFERE WITH THE IMPUGNED ORDER. THUS WE UPHOLD THE SAME. ACCORDINGLY, GROUND NO. 3 OF THE REVENUE BEING DEVOID OF MERITS IS DISMISSED. - 26 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD GROUNDS RAISED BY THE ASSESSEE IN ITA NO. 408 /DEL/2010 READ AS UNDER: 1. THAT THE ID. CIT(A) ERRED IN L AW AND IN FACTS IN HOLDING THAT THE RE - OPENING WAS VALID, ALTHOUGH THE APPELLANT HAD DEMONSTRATED BEFORE HIM THAT THERE WAS NO ESCAPEMENT OF INCOME WITHIN MEANING OF SECTION 147 R.W.S 148 OF THE INCOME TAX ACT,1961. 2. THAT THE ID. CIT (A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE ENTIRE SUM OF RS 1,14,84,222/ - ON ACCOUNT OF COMMISSION ON SALES, FOREIGN COMMIS SION RECEIVE D ,LOCAL COMMISSION RE CEIVED, DISCOUNT AND REBATES, EXC ESS PROVISIO NS WRITTEN BACK, E XCHANGE FLU C T UATION INSURANCE CLAIM RECEIVED, SERVICE CHARGES, INTERES T ON FIXED DEPOSIT RECEIPTS, INTEREST ON REFUND OF TAX, DIVIDEND INCOME, MISCELLANEOUS INCOME, PROFIT ON SALE OF ASSETS, INTEREST FROM OTHERS SERVICING CHARGES, AND UNCLAIMED BALANCES WRITTEN OFF INCLUDED IN OTHER INCOME HAS TO BE REDUCED FOR THE PURPOSE OF ARRIVING AT ADJUSTED PROFITS WHILE COMPUTING THE PROFITS FOR THE PURPOSE OF SECTION 80HHC. 3. THAT THE ID. CIT (A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE INCOME AGGREGATING TO RS. 2,01,16,210 / - REPRESENTING COMMISSIONS , INCENTIVES, SERVICE CHARGE ETC. ARE NOT IN THE NATURE OF INCOME DERIVED FROM AN INDUSTRIAL UNDERTAKING AND THEREFORE NOT ELIGIBLE FOR DEDUCTION U/S 80 - IC. DETAILED SUBMISSIONS FILED IN THIS REGARD HAVE EITHER NOT BEEN APPRECIATED OR COMPLETELY IGNORED . - 27 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD GROUNDS RAISED BY THE ASSESSEE I N ITA NO. 409 /DEL/2010 READ AS UNDER: 1. THAT THE ID. CIT(A) ERRED IN LAW AND IN FACTS IN HOLDING THAT THE RE - OPENING WAS VALID, ALTHOUGH THE APPELLANT HAD DEMONSTRATED BEFORE HIM THAT THERE WAS NO ESCAPEMENT OF INCOME WITHIN MEANING OF SECTION 147 R.W.S 148 OF THE INCOME TAX ACT,1961. 2. THAT THE ID. CIT (A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE INCOME AGGREGATING TO RS. 2,0 3 , 41 ,2 52 / - REPRESENTING COMMISSIONS, INCENTIVES, SERVICE CHARGE ETC. ARE NOT IN THE NATURE OF INCOME DERIVED FROM AN INDUSTRIAL UNDERTAKING AND THEREFORE NOT ELIGIBLE FOR DEDUCTION U/S 80 - IC. DETAILED SUBMISSIONS FILED IN THIS REGARD HAVE EITHER NOT BEEN APPRECIATED OR COMPLETELY IGNORED . GROUNDS RAISED BY THE ASSESSEE I N ITA NO. 410 /DEL/2010 READ AS UNDER: 1. THAT THE ID. CIT (A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE INCOME AGGREGATING TO RS. 3 ,0 0 , 49 , 178/ - REPRESENTING COMMISSIONS, INCENTIVES, SERVICE CHARGE ETC. ARE NOT IN THE NATURE OF INCOME DERIVED FROM AN INDUSTRIAL UNDERTAKING AND THEREFORE NOT ELIGIBLE FOR DEDUCTION U/S 80 - IC. DETAILED SUBMISSIONS FILED IN THIS REGARD HAVE EITHER NOT BEEN APPRECIATED OR COMPLETELY IGNORED . - 28 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD 22 . AT T HE VERY OUTSET, THE LD. COUNSEL APPEARING FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE COMPANY DOES NOT WANT TO PRESS GROUND NO. 1 IN ITA NOS. 408 & 409/DEL/2010 PERTAINING TO CHALLENGING TO THE VALIDITY OF REOPENING OF ASSESSMENT U/S 147/148 OF THE INCOME - TAX ACT, 1961 ['THE ACT' FOR SHORT] . THUS, GROUND NO1 IN BOTH THESE APPEALS ARE DISMISSED AS NOT PRESSED. HOWEVER, IT IS PERTINENT TO MENTION THAT IN A.Y 2006 - 07, THE ISSUE OF REOPENING IS NOT INVOLVED AND CROSS APPE ALS HAVE BEEN FILED CHALLENGING THE FIRST APPELLATE ORDER PASSED AGAINST THE ASSESSMENT ORDER FRAMED U/S 143(3) OF THE ACT. 23 . BRIEFLY STATED, THE FACTS GIVING RISE TO THIS APPEAL ARE THAT ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT U/S 143(3) OF THE ACT VIDE ORDER DATED 22.12.2006 AT A TOTAL INCOME OF RS. 3,29,75,960 BY MAKING FOLLOWING DISALLOWANCE/ADDITIONS: A) DISALLOWANCE OF DEDUCTIONS CLAIMED ON ACCOUNT OF: (I) INTEREST ON LOANS TAKEN FROM ASSOCIATED/SISTER CONCERNS RS. 22,97,929/ - (II) LOSS ON FOREIGN EXCHANGE FLUCTUATION RS. 16,20,398/ - B) ALLOWING DEDUCTION UNDER SECTION 80HHC AT RS. 33,85,151/ - (AS AGAINST RS. 52,63,066 CLAIMED BY THE ASSESSEE) C) DISALLOWING ASSESSEE S CLAIM FOR DEDUCTION U/S 80IC RS. 2,25,42,013/ - - 29 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD 24 . ON APPEAL, THE LD. CIT(A), VIDE HIS APPELLATE ORDER DATED 26.10.20017 ALLOWED THE ASSESSEE S CLAIM ON ACCOUNT OF INTEREST PAID ON LOANS TAKEN FROM SISTER CONCERNS AND RECOMPUTATION OF DEDUCTION U/.S 80HHC TO THE EXTENT THAT UNCLAIMED BALANCES WRITTEN OFF W ERE PART OF ASSESSEE S BUSINESS PROFITS. THE OTHER ISSUES WERE DECIDED BY THE LD. CIT(A) AGAINST THE ASSESSEE. THE ASSESSEE PREFERRED APPEAL AGAINST THE SAID ORDER BEFORE THE ITAT AND IN THE FIRST ROUND OF LITIGATION, THE ITAT VIDE ORDER DATED 19.9.2008, RESTORED BOTH THE ISSUES TO THE FILE OF THE AO AND ALLOWED THE ASSESSEE S APPEAL FOR STATISTICAL PURPOSES. MEANWHILE, THE REOPENING OF ASSESSMENT U/S 147/148 OF THE ACT WAS INITIATED BY WAY OF ISSUANCE OF NOTICE U/S 148 OF THE ACT ON 23.7.2007 AND REASSES SMENT ORDER WAS PASSED U/S 254/147/143(3) OF THE ACT BY WAY OF DISALLOWING COMMISSION PAID BY THE ASSESSEE ON THE SALES A ND ALLOWING PART DEDUCTION U/S 80HHC OF THE ACT AND DISALLOWING ASSESSEE S CLAIM FOR DEDUCTION U/S 80IC OF THE ACT. 25 . AGAINST HE SAI D REASSESSMENT ORDER, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) WHEREIN THE LD. CIT(A) UPHELD THE VALIDITY OF REOPENING OF ASSESSMENT AND ALLOWED THE ENTIRE AMOUNT OF COMMISSION AND ALSO ACCEPTED THE ASSESSEE S CLAIM WITH RESPECT OF - 30 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD COMPUTATION O F DEDUCTION U/S 80HHC WITH A RESERVATION THAT 90% OF RECEIPTS ON ACCOUNT OF INSURANCE CLAIM, SERVICE, CHARGES, DIVIDEND INCOME, INTEREST INCOME ETC SHOULD BE REDUCED FROM BUSINESS PROFITS WITHIN THE MEANING OF CLAUSE (BAA) OF EXPLANATION TO SECTION 80HHC O F THE ACT. NOW THE ASSESSEE IS BEFORE THIS TRIBUNAL IN THE SECOND APPEAL WITH THE GROUNDS AS REPRODUCED HEREINABOVE. GROUND N O . 1 OF THE ASSESSEE IN ITA NO. 408/DEL/2010 FOR A.Y 2004 - 05 2 6 . THE LD COUNSEL FOR THE ASSESSEE REITERATED ITS WRITTEN SUBMISSI ONS DATED 26.8.2015 ON THE ISSUE AND SUBMITTED THAT SINCE EACH OF THE ITEM NAMELY COMMISSION ON SALES, FOREIGN COMMIS SION RECEIVE D ,LOCAL COMMISSION RE CEIVED, DISCOUNT AND REBATES, EXC ESS PROVISIO NS WRITTEN BACK, E XCHANGE FLUCTUATION INSURANCE CLAIM RECEIVED, SERVICE CHARGES, INTEREST ON FIXED DEPOSIT RECEIPTS, INTEREST ON REFUND OF TAX, DIVIDEND INCOME, MISCELLANEOUS INCOME, PROFIT ON SALE OF ASSETS, INTEREST FROM OTHERS SERVICING CHARGES, AND UNCLAIMED BALANCES WRITTEN O FF HAD DIRECT NEXUS WITH EXPORT BUSINESS OF THE ASSESSEE AND THE SAME DESERVE TO BE REDUCED TO BE INCLUDED IN THE BUSINESS PROFITS FOR COMPUTING DEDUCTION U/S 80HHC OF THE ACT. THE LD. AR FURTHER CONTENDED THAT - 31 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD WITHOUT PREJUDICE TO THE SAID SUBMISSION, EVE N IF IT WAS TO BE ACCEPTED, THOUGH NOT ADMITTED THAT THE INCOME ON ACCOUNT OF ABOVE MENTIONED ITEMS DID NOT FORM PART OF BUSINESS INCOME WITHIN THE MEANING OF CLAUSE (BAA) OF EXPLANATION TO SECTION 80HHC OF THE ACT. YET, 90% OF THE GROSS RECEIPTS ON THESE ACCOUNTS SHOULD NOT BE REDUCED FROM THE BUSINESS PROFITS OF THE ASSESSEE. THE LD. COUNSEL STRONGLY CONTENDED THAT THE L EGISLATURE, BY MEANS OF CLAUSE (BAA) OF EXPLANATION TO SECTION 80HHC OF THE ACT ONLY INTENDED TO REDUCE 90% OF THE PROFITS ON ACCOUNT OF OTHER INCOME FROM BUSINESS PROFITS AND NOT THE GROSS RECEIPTS. THEREFORE, EVEN IF T H E SAID INCOMES WERE TO BE TREATED AS NON ALLOWABLE FOR SECTION 80HHC DEDUCTION, THE SAME DESERVED TO BE NETTED OFF AGAINST THE EXPENDITURE INCURRED BY THE ASSESSEE IN EAR NING THESE INCOMES. IT IS ONLY THE NET RECEIPTS ON WHICH THE PRESCRIBED PERCENTAGE OF 90% COULD BE APPLIED. OUR ATTENTION WAS INVITED TO THE JUDGMENT OF THE HON'BLE HIGH COURT IN THE CASE OF ACG ASSOCIATED CAPSULES [P] LTD VS. CIT [2012] REPORTED AT 247 CTR 372 [SC] AND PRAYED THAT OTHER INCOME WITHIN THE M EA NING OF CLAUSE (BAA) OF SECTION 80HHC SHOULD BE FIRST REDUCED BY THE EXPENDITURE INCURRED BY THE ASSESSEE IN EARNING SUCH INCOME AND 90% OF THE RESIDUAL ALONE SHOULD BE REDUCED FROM BUSINESS PROFITS. THE LD. AR, LASTLY, SUBMITTED THAT THE ASSESSEE SHOULD BE HELD AS ELIGIBLE FOR COMPUTING ALLOWABLE - 32 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD DEDUCTION U/S 80HHC OF THE ACT AND THE ISSUE MAY KINDLY BE RESTORED TO THE FILE OF THE AO FOR LIMITED PURPOSE OF COMPUTING THE DEDUCTION IN ACCORDANCE WITH THE PROPOSITION LAID DOWN BY THE HON'BLE SUPREME COURT. 2 7 . PER CONTRA, THE LD. DR, IN HER RIVAL SUBMISSIONS, ALTHOUGH SUPPORTED THE ORDERS OF THE LD. CIT(A), BUT COULD NOT CONTROVERT THIS CONTENTION OF THE LD. AR THAT THE ISSUE OF COMPUTATION OF DEDUCTION U/S 80HHC OF THE ACT HAS NOW BEEN SETTLED BY THE JUDGMENT O F THE HON'BLE SUPREME COURT IN THE CASE OF ACG ASSOCIATED CAPSULES [P] LTD [SUPRA]. 2 8 . ON A CAREFUL CONSIDERATION OF THE RIVAL SUBMISSIONS AND FROM THE OPERATIVE PART OF THE FIRST APPELLATE ORDER, WE FIND THAT THE LD. CIT(A), IN THE PRESENT CASE, REOPENED THE ASSESSMENT ALREADY COMPLETED U/S 143(3) OF THE ACT. ONLY FOR THE REASON THAT AFTER COMPLETION OF ORIGINAL ASSESSMENT, INFORMATION WAS RECEIVED FROM THE CBDT VIDE LETTER DATED 1.6.2007 THAT THE ASSESSEE HAD ENG AGED IN FOREIGN EXCHANGE TRANSACTIONS AND ASSESSMENT RECORD FOR A.Y 2004 - 05 DOES NOT REVEAL ANY SUCH TRANSACTIONS IN ITS ACCOUNT. HOWEVER, THE ASSESSEE HAS NOT PRESSED THE VALIDITY OF REOPENING U/S 147/148 OF THE ACT BUT IT IS - 33 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD PERTINENT TO KEEP IN MIND TH E ISSUE OF LIABILITY OF DEDUCTION U/S 80HHC OF THE ACT OR ANY OTHER ISSUE W A S NOT MENTIONED IN THE REASONS RECORDED BY THE AO FOR REOPENING OF ASSESSMENT. 29 . A S WE HAVE ALREADY OBSERVED THAT THE ISSUE OF LIABILITY OF DEDUCTION U/S 80HHC OF THE A C T WAS ALSO AGITATED BY THE ASSESSEE BEFORE THE TRIBUNA L IN THE FIRST ROUND OF PROCEEDINGS AND THE TRIBUNAL BY PAS S ING ORDER DATED 19.9.2008 IN ITA NO. 64/DEL/2008 FOR A.Y 2004 - 05 RESTORED THE ISSUE TO THE FILE OF THE AO WITH THE OBSERVATION THAT THE ASSESSEE IS NOT A SUPPORTING MANUFACTURER AND THEREFORE, THE PROVISIONS OF SECTION 80HHC(1A) ARE NOT APPLICABLE TO THE FACTS OF THE CASE . THE TRIBUNAL FURTHER HELD THAT THE QUESTION WHETHER SERVICE CHARGES RECEIVED FROM THE BUYERS FOR THE PROFITS OF THE BUSINESS OR I NDEPENDENT INCOME IN TERMS OF THE DECISION IN THE CASE OF K. RAVINDRANATHAN NAIR HAS NOT BEEN DECIDED BY THE LOWER AUTHORITIES. THE LD. DR HAD NO OBJECTION TO SUCH DETERMINATION ON MERITS. IN VIEW THEREOF, THE TRIBUNAL FINALLY ADMITTED THE ADDITIONAL EVI DENCE IN THE INTEREST OF JUSTICE AND RESTORED THE ISSUE TO THE FILE OF THE AO FOR CONSIDERING ALL THE ASPECTS, BOTH FACTUAL AND LEGAL AND DECIDE DE NOVO AS TO WHETHER THE ASSESSEE IS ENTITLED TO DEDUCTION ON THE AFORESAID - 34 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD INCOME U/S 80HHC OF THE ACT. THE RELEVANT OPERATIVE PART OF THE TRIBUNAL ORDER [SUPRA] IS BEING REPRODUCED BELOW FOR THE S AKE OF CLARITY IN OUR FINDINGS: 4. GROUND NO. 1 UNDER ISSUE A IS THAT THE CIT(APPEALS) WAS NOT CORRECT IN HOLDING THAT THE SERVICE CHARGED AMOUNTING TO RS. 16,01,74 0/ - , RECEIVED IN RESPECT OF POST - EXPORT MAINTENANCE SERVICES, WERE PART AND PARCEL OF THE BUSINESS ACTIVITY OF THE ASSESSEE OF THE EXPORT OF GOODS AND, THEREFORE, CONSTITUTED EXPORT PROCEEDINGS FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 80HHC OF THE ACT. THE FINDING OF THE LD. CIT(A) IN THIS MATTER WAS THAT TIE SERVICE CHARGES WERE NOT DIRECTLY RELATED TO THE EXPORT OF GOODS. THE SERVICE CHARGES WERE RECEIVED AFTER THE EXPORT OF THE GOODS HAD BEEN COMPLETED. THEREFORE, THE AO WAS JUSTIFIED THAT SUCH RECEI PTS ARE IN THE NATURE OF COMMISSION OR CHARGES WITH THE RESULT THAT 90% THEREOF WAS RIGHTLY EXCLUDED FROM THE PROFITS OF THE BUSINESS. 4.1 THE CASE OF THE LEARNED COUNSEL BEFORE US WAS THAT THE ASSESSEE WAS NOT GIVEN A PROPER OPPORTUNITY TO EXPLAIN ITS CASE BEFORE THE AO AND THIS MATTER WAS POINTED TO THE LEARNED CIT(APPEALS). HOWEVER, HE DID NOT EXAMINE THIS MATTER AND NO OBSERVATION WAS MADE IN THIS BEHALF IN THE APPELLATE ORDER. THE ASSESSEE ALSO FILED ADDITIONAL EVIDENCE BEING TERMS AND CONDITION S OF SALE BETWEEN THE ASSESSEE AND ITS CUSTOMERS. IT WAS HIS - CASE THAT IN VIEW OF THE DECISION OF HO NBLE SUPREME COURT IN THE CASE OF CIT VS. K. - 35 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD RAVINDRANATHAN NAIR (2 00 7) TIOL 202 (SC) - IT, THE NATURE OF EVERY RECEIPT HAS TO BE ASCERTAINED TO FIND OUT WHE THER IT FORMED PART AND PARCEL OF THE EXPORT TURNOVER OR IT WAS INDEPENDENT INCOME. THIS WAS NOT DONE BY THE LOWER AUTHORITIES AND COULD NOT HAVE DONE WITHOUT REFERRING TO THE TERMS AND CONDITIONS OF AGREEMENT . THEREFORE, IT WAS REQUESTED THAT SUCH EVIDENC E MAY BE TAKEN OH RECORD IN THE INTEREST OF JUSTICE AND THE MATTER MAY BE DECIDED ACCORDINGLY. RELIANCE WAS ALSO PLACED ON THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF CIT VS. BABY MARINE EXPORTS (2007) TIOL - 46 (SC) - IT, IN WHICH IT WAS POINTED OUT THAT THE SUPPORTING MANUFACTURERS WILL BE ENTITLED TO DEDUCTION U/S 80HHC( 1 A) NOT ONLY IN RESPECT OF EXPORT PROCEEDS BUT ALSO PREMIUM BECAUSE IT IS AN INTEGRAL PART OF BUSINESS OPERATIONS OF THE ASSESSEE WHICH WAS SALE OF GOODS BY IT TO THE EXPORT HOUSE. 4.2 IN REPLY, THE LEARNED DR FAIRLY CONCEDED THAT THE MATTER MAYBE RESTORED TO THE AO AFTER ADMITTING THE ADDITIONAL EVIDENCE SO THAT HE MAY VERIFY THE AGREEMENT AND THE BILLS WITH A MEW TO ARRIVE AT THE CORRECT AMOUNT OF DEDUCTION ADMISSIBLE TO THE ASSESS EE UNDER THE AFORESAID PROVISION. 4.3 WE HAVE CONSIDERED THE FACTS OF THE CASE AND RIVAL SUBMISSIONS. THE ASSESSEE IS NOT A SUPPORTING MANUFACTURER AND, THEREFORE, THE PROVISIONS OF SECTION 80HHC(1A) ARE NOT - 36 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD APPLICABLE TO THE FACTS OF THIS CASE. HOWEVER, THE QUESTION WHETHER SERVICE CHARGES RECEIVED FROM THE - THE DECISION I N THE CASE OF K. RAVINDRANATHAN NAIR (SUPRA) HAS NOT BEEN DECIDED BY THE LOWER AUTHORITIES. THE LEARNED DR HAS NO OBJECTION TO SUCH DETERMINATION ON MERITS. IN VIEW THEREOF, IT IS HELD T HAT THE ADDITIONAL EVIDENCE IS ADMITTED IN THE INTEREST OF JUSTICE AND THE MATTER I S RESTORED TO THE FILE OF THE AO FOR CONSIDERING ALL ASPECTS, BOTH FACTUAL AND LEGAL, AND DECIDE DE - NOVO AS TO WHETHER THE ASSESSEE IS ENTITLED TO DEDUCTION ON THE AFORESAID INCOME U/S 80 - HHC. 30 . IN VIEW OF THE ABOVE, IT IS PERTINENT TO MENTION THAT AFTER THE ORDER OF THE TRIBUNAL [SUPRA], THE ISSUE HAS BEEN SETTLED BY THE HON'BLE SUPREME COURT BY ITS JUDGMENT IN THE CASE OF ACG ASSOCIATED CAPSULES [P] LTD [SUPRA] AND THE RATIO OF THE DECISION OF H ON'BLE SUPREME COURT IN THE CASE OF CIT VS. AVNI EXPORTS IN SLP CIVIL NO. 9273/13 ORDER DATED 1.4.2015 , COPY OF WHICH IS PLACED ON RECORD BY THE LD. AR, WHEREIN IT HAS BEEN HELD AS FOLLOWS: HAVING SEEN THE TWIN CONDITIONS AND SINCE BENEFIT IS NOT AVAILABL E AFTER 1.4.2005, WE ARE SATISFIED THAT THE CASES OF EXPORTERS HAVING A TURNOVER BELOW AND THOSE ABOVE RS. 10 CRORE SHOULD BE TREATED SIMILARLY. THIS ORDER IS IN SUBSTITUTION OF JUDGMENT IN APPEAL . - 37 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD 31. SINCE, AT THE TIME OF PASSING OF ORDER BY THE TRIBU NAL ON19.9.2008 [SUPRA] TH E S E JUDGMENT S OF HON'BLE SUPREME COURT IN THE CASE OF ACG ASSOCIATED CAPSULES PVT. LTD [SUPRA] & AVNI EXPORTS [SUPRA] WAS NOT IN EXISTENCE AND THE SAME WERE REQUIRED TO BE CONSIDERED AT THE TIME OF PROPER ADJUDICATION OF THE ISSUE . ON SPECIFIC QUERY FROM THE BENCH, THE LD. DR COULD NOT ASSIST THE BENCH AS TO WHETHER ANY ORDER FOR A.Y 2004 - 05 HAS BEEN PASSED BY THE AO IN PURSUANCE TO THE ORDER OF THE TRIBUNAL [SUPRA]. HENCE TO BE IN CONSISTENT WITH THE EARLIER ORDER OF THE TRIBUN A L [SUPRA], WE DEEM IT APPROPRIATE T O RESTORE THIS ISSUE TO THE FILE OF THE AO FOR A FRESH ADJUDICATION IN ACCORDANCE WITH THE PROVISIONS OF THE AT AS WELL AS THE PROPOSITION/RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE JUDGMENTS AS RESPECTFULLY REFER RED HEREINABOVE , AFTER PROVIDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND BENEFICIAL NATURE OF THE CLAIM OF THE ASSESSEE. IT IS ORDERED ACCORDINGLY AND FINALL Y GROUND NO. 2 OF THE ASSESSEE FOR A.Y 2004 - 05 IS ALLOWED FOR STATISTICAL PURPOSES. - 38 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD ASSESSEE S GROUND NO. 3 IN A.Y 2004 - 05 , GROUND NO. 2 IN A.Y 2005 - 06 & GROUND NO. 1 IN A.Y 2006 - 07 32 . SINCE THE ISSUE RAISED IN ALL THE AFOREMENTIONED GROUNDS IS SIMILAR, THEREFORE, WE ARE ADJUDICATING THE SAID GROUNDS FOR ALL THE THREE A.YS TOGETHER FOR THE SAKE OF CONVENIENCE AND BREVITY. 33 . WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND CAREFULLY PERUSED THE RELEVANT MATERIAL PLACED ON RECORD BEFORE US. TH E LD. AR REITERATED THE CONTENTIONS AS MADE BY HIM IN THE WRITTEN SUBMISSIONS AND FURTHER CONTENDED THAT THE ID. CIT (A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE INCOME REPRESENTING COMMISSIONS, INCENTIVES, SERVICE CHARGE ETC. ARE NOT IN THE NATURE OF INCOME DERIVED FROM AN INDUSTRIAL UNDERTAKING AND THEREFORE NOT ELIGIBLE FOR DEDUCTION U/S 80 - IC. THE LD. AR FURTHER SUBMITTED THAT DETAILED SUBMISSIONS FILED IN THIS REGARD HAVE EITHER NOT BEEN APPRECIATED OR COMPLETELY IGNORED . HE FURTHER SUBMITTED THAT ON A PERUSAL OF SECTION 80IC OF THE ACT, IT IS APPARENT THAT UNLIKE SECTIONS 80HH/80IA/80IB OF THE ACT DEALT BY THE HON'BLE SUPREME COURT IN THE JUDGMENTS OF CAMBAY ELECTRICAL SUPPLY INDUSTRIAL CO. VS. CIT [1978] [113 ITR 84][SC], PANDIAN CHEMICALS LT D VS. CIT [2003] [262 ITR 278][SC] AND CIT VS. STERLING FOODS [1999] [237 - 39 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD ITR 579], INCOMES ON ACCOUNT ON COMMISSION, SERVICE CHARGES, ETC. ARE NOT IN THE NATURE OF INCOME WHICH CAN BE SAID TO BE DERIVED FROM THE INDUSTRIAL UNDERTAKING. BUT SECTION 80IC O F THE ACT PROVIDES DEDUCTION FROM GROSS TOTAL INCOME OF THE ASSESSEE, OF AN AMOUNT EQUAL TO THE PROFITS/GAINS DERIVED BY THE ELIGIBLE UNDERTAKING FROM ELIGIBLE BUSINESS. THE LD. AR FURTHER CONTENDED THAT THE PERTINENT DIFFERENCE BETWEEN THE PROVISIONS CON TAINED IN SECTION 80IA/80IB AND 80IC OF THE ACT, LIES IN THE CONTEXT I N WHICH THE WORD DERIVED HAS BEEN USED. THE LD. COUNSEL SUBMITTED THAT THE INCOME ON ACCOUNT OF DISCOUNT & REBATES, EXPORT INCENTIVES, EXCESS PROVISION WRITTEN BACK, SERVICE CHARGES & UNCLAIMED BALANCE WRITTEN OFF, ETC. HAVING BEEN EARNED BY THE ELIGIBLE UNDERTAKING FROM THE ELIGIBLE BUSINESS ACTIVITIES, THE SAME DESERVE TO BE ALLOWED AS DEDUCTION U/S 80IC OF THE ACT. THE LD. AR PLACED RELIANCE ON THE DECISION OF THE HON'BLE SUPREME CO URT IN THE CASE OF ACG ASSOCIATED CAPSULES [SUPRA] AND SUBMITTED THAT EVEN THOUGH IT IS ASSUMED THAT TH E SAID INCOME DID NOT QUALIFY FOR EXEMPTION U/S 80IC OF THE ACT, THE SAME SHOULD BE EXCLUDED FROM THE ELIGIBLE BUSINESS PRO F IT ONLY TO THE EXTENT THESE H AVE BEEN INCLUDED IN THE SAID PROFITS ONLY AFTER NETTING OFF EXPENDITURE. THE LD. AR FURTHER CONTENDED THAT EXCLUSIONS ON ACCOUNT OF OTHER INCOME, IF ANY, TO BE MADE, SHOULD BE DONE AFTER REDUCING THE SAID INCOMES TO THE EXTENT OF COSTS - 40 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD ATTRIBUTABLE TO EA RNING OF SUCH INCOMES. THE LD. AR FAIRLY SUBMITTED THAT THE JUDGMENT IN THE CASE OF ACG ASSOCIATES CAPSULES [SUPRA] WAS IN THE CONTEXT OF PROVISIONS OF SECTION 80HHC OF THE ACT AND THE RATIO OF THE JUDGMENT WOULD SQUARELY APPLY TO THE FACTS OF THE PRESENT CASE. 34 . THE LD. DR, ON THE OTHER HAND, ALTHOUGH SUPPORTED THE ORDER OF THE LD. CIT(A), BUT FAIRLY CONCEDED THAT IN THE FIRST ROUND OF PROCEEDINGS, THE TRIBUNAL VIDE ORDER DATED 19.9.2008 [SUPRA] , HAS RESTORED THE ISSUE TO THE FILE OF THE AO FOR A FRESH ADJUDICATION FOR CONSIDERING THE CLAIM OF THE ASSESSEE IN THE L I G H T OF THE PROVIS I ONS CONT A INED IN SECTION 80IC OF THE A C T AND THE MATERIAL AVAILABLE IN FORM NO. 10CCB FILED BEFORE THE FIRST APPELLATE AUTHORITY. 35 . ON A CAREFUL CONSIDERATION OF THE ABO VE SUBMISSIONS OF BOTH THE SIDES, AT THE VERY OUTSET, IT IS PERTINENT TO NOTE THAT THE TRIBUNAL IN THE FIRST ROUND, VIDE ORDER DATED 19.9.2008, RESTORED THE ISSUE TO THE FILE OF THE AO WITH THE FOLLOWING OBSERVATIONS: 6. GROUND NOS. 3 TO 9 UNDER ISSUE C PERTAIN TO DEDUCTION U/S 80IC OF THE ACT. THE REAL GRIEVANCE OF THE ASSESSEE IS THAT THE LEARNED CIT(APPEA L S) ERRED IN - 41 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD CONFIRMING THE DISALLOWANCE OF THE CLAIM AMOUNTING TO RS. 2,25,42,013/ - . IT IS MENTIONED THAT THE LEARNED CIT(A PPEALS) ERRED IN NOT APPR ECIATING THE PLEA OF THE ASSESSEE THAT IT WAS UNDER BONA FIDE BELIEF THAT THERE WAS NO LEGAL DUTY CAST ON IT TO FILE FORM 10CCB ALONG WITH RETURN OF INCOME FOR THE REASON THAT AT THE RELEVANT POINT OF TIME THE CORRESPONDING RULE HAD NOT BEEN PRESCRIBED. THE OBLIGATION WAS CAST BY INCOME - TAX (THIRD AMENDMENT) RULES, 21005 W.E.F 4.2.2005 AND THE ASSESSEE HAD FILED RETURN OF INCOME BY THAT TIME. THE RETURN WAS FILED ON 1,11.2004;' IT IS FURTHER MENTIONED THAT HE ERRED IN NOT TREATING THE AUDIT CERTIFICATE FIL ED BEFORE HIM AS SUFFICIENT COMPLIANCE IN THE MATTER. IT IS ALSO MENTIONED THAT HE WAS NOT RIGHT IN HOLDING THAT DURING THE PREVIOUS YEAR THE ASSESSEE HAD NOT MADE ANY SUBSTANTIAL EXPANSION IN THE PLANT AND MACHINERY AS DEFINED IN SECTION 80IC(8)(IX). IT I S ALSO MENTIONED THAT THE WORDS BOOK VALUE USED IN THE SAID SECTION WERE WRONGLY CONSTRUED WITH REFERENCE TO GROSS BOOK VALUE . IT IS ALSO MENTIONED THAT HE ERRED IN NOT EXCLUDING RE - VALUATION RESERVE FOR THIS PURPOSE. IT WAS ALSO MENTIONED THAT THE INC OME WAS DERIVED BY DIE UNDERTAKING AND HENCE DEDUCTION U/S 80IC WAS ADMITTEDLY IN RESPECT OF THE PROFITS OF THE UNDERTAKING. - 42 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD 6.1 THE FINDING OF THE LEARNED CIT(A) IN THE MATTER WAS THAT THE ASSESSEE WAS NOT ENTITLED TO THE DEDUCTION IN VIEW OF THE FACT THAT EVEN IF THE PROVISION IS TAKEN TO BE DIRECTOR Y AND NOT MANDATOR Y , YET, THE ASSESSEE WAS OBLIGED TO FILE THE AUDIT REPORT BEFORE THE COMPLETION OF ASSESSMENT BY THE AO ON 22.12.2006. 6.2 BEFORE US, THE ASSESSEE REITERATED VARIOUS POINTS TAKEN IN THE GROUNDS AND MENTIONED THAT THE ASSESSEE WAS UNDER BONA FIDE BELIEF THAT IT WAS NOT REQUIRED TO FILE THE REPORT WITH THE RETURN OF INCOME, F I LED ON 1.11.2004, WHEN THE RULES HAD NOT BEEN INCORPORATED IN THE INCOME - TAX RULES, 1962. ON THE OTHER HAND, THE CAS E OF THE LEARNED DR AS THAT EVEN IF THE PROVISION IS CONSTRUE D TO BE DIRECTORY IN NATURE, THE ASSESSEE WAS OBLIGED TO FILE THE FORM BEFORE COMPLETION OF ASSESSMENT AS BY THAT TIME THE RULES HAD BEEN INCORPORATED IN THE INCOME TAX RULES, 1962. IN THIS CONNE CTION, RELIANCE WAS PLACED ON THE DECISION OF HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SHIVA NAND ELECTRONICS (1994) 209 ITR 63 , A CASE DEALING WITH SIMILAR PROVISION U/S 80J. THE HON BLE COURT CAME TO THE CONCLUSION THAT THE REQUIREMENT OF F ILING THE AUDIT REPORT ALONG WITH THE RETURN WAS DIRECTORY IN NATURE AND THE ASSESSEE WOULD BE ENTITLED TO THE DEDUCTION PROVIDED HE FILES THE REPORT BEFORE COMPLETION OF ASSESSMENT AND OFFERS SATISFACTORY EXPLANATION FOR FAILURE TO SUBMIT THE REPORT IN TIME. O N - 43 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD THE OTHER HAND, THERE WAS NO DUTY CAST ON THE ITO TO INFORM THE ASSESSEE ABOUT HIS FAILURE TO FILE THE REPORT BEFORE REJECTING THE CLAIM. 6 .3 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. IT IS ADMITTED BY BOTH THE PARTIES THAT WHEN THE RETURN OF INCOME WAS FILED ON 1.11.2004, THE RULE HAD NOT BEEN INCORPORATED IN ME INCOME - TAX RULES, 1962. IT CAME INTO EFFECT FROM 4.2 .2005. THE ASSESSEE DID NOT FILE THE FORM EVEN AFTER INCORPORATION OF THE RULE AND THE SAME WAS NOT FILED TILL THE COMPLETION OF ASSESSMENT ON 22.12.2006. THE FORM WAS FILED BEFORE THE LEARNED CIT(APPEALS) IN THE APPELLATE PROCEEDINGS, WHO REFUSED TO TAKE IT ON RECORD. ONE OF THE GROUNDS FOR NOT ENTERTAINING THIS CLAIM WAS THAT THE FORM WAS NOT FILED EVEN BEFORE THE COMPLETION OF THE ASSESSMENT HAVING REGARD TO THE FACTS OF THE CASE, IT IS CLEAR THAT ON THE DATE OF FILING OF THE RETURN, THERE WAS NO OBLIGA TION ON THE ASSESSEE TO FILE THE AUDIT REPORT. IN THESE CIRCUMSTANCES, DIE ASSESSEE COULD BE UNDER BONA FIDE BELIEF THAT SUCH FORM WAS NOT REQUIRED TO BE FILED BY IT FOR THIS ASSESSMENT YEAR ALTHOUGH A PROCEDURAL PROVISION COMES INTO FORCE FROM THE DATE IT IS INSERTED IN THE RULES. IN SUCH CIRCUMSTANCES, THE LEARNED LD. CIT(A) OUGHT TO HAVE ENTERTAINED THE FORM FILED BY THE ASSESSEE, WHEN IT WAS REALIZED BY IT ON THE BASIS OF ASSESSMENT ORDER THAT SUCH A FORM OUGHT TO HAVE BEEN FILED. THEREFORE, WE ARE OF T HE VIEW THAT THE FORM SHOULD HAVE - 44 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD BEEN TAKEN IN ACCOUNT BY THE LD. CIT(A) FOR DECIDING THE CLAIM OF THE ASSESSEE ON MERITS. SINCE IT HAS NOT BEEN DONE SO, IT WILL BE IN THE INTEREST OF JUSTICE TO RESTORE THE MATTER TO THE FILE OF THE AO FOR CONSIDERING TH E CLAIM OF THE A SSESSEE IN THE LIGHT OF THE PROVISIONS CONTAINED IN SECTION S01C AND THE MATERIAL AVAILABLE IN FORM 10CCB FILED BEFORE THE CTT(APPEALS) AFTER HEARING THE ASSESSEE. IN VIEW OF THIS FINDING, WE DO NOT THINK IT FIT TO DEAL WITH OTHER ISSUES ON MERITS AS THOSE WERE NOT CONSIDERED BY THE AO. THUS, THESE GROUNDS ARE ALSO TREATED AS ALLOWED . 36 . IN VIEW OF THE ABOVE, WE FURTHER OBSERVE THAT THE LD. DR COULD NOT ASSIST THE BENCH AS TO WHETHER ANY ORDER FOR A.Y 2004 - 05 HA S BEEN PASSED BY THE AO IN PURSUANCE T O THE ORD E R OF THE TRIBUNAL. UPTO THIS STAGE, MUCH WATER HAS FLOWN AND EVEN IN THE FIRST ROUND OF PROCEEDINGS, THE MATERIAL PLACED BY THE ASSESSEE IN FORM NO. 10CCB WAS TO BE CONSIDERED BY THE AO AS PER THE DIR E CTIONS OF THE TRIBUNAL . WE, THEREFORE , ARE OF THE CONSIDERED OPINION THAT THE ISSUE OF ALLOWABILI TY A ND COMPUTA TION OF DED U CT I ON U/S 80IC OF THE ACT REQUIRES PROPER EXAMINATION AND ADJUDICATION AT THE END OF THE AO AFTER CONSIDERING THE RELEVANT PROVIS I ONS OF THE A C T AND MATER I AL PLACED BY THE ASSESSEE ALONGWITH FORM 10CCB AND IN THE LIGHT OF THE RATIO OF THE RELEVANT DECISIONS/JUDGMENTS OF THE HON'BLE SUPREME COURT , AS CITED - 45 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD ABOVE, ON THE IS S UE. THUS, WE ARE OF THE CONSIDERED OPINION THAT IN THE INTER E ST OF J USTICE AND TAKING A CONSISTENT VIEW WITH THE EARLIER ORDER OF THE TRIBUNAL [SUPRA] , THE ISSUE DESERVES TO BE SET ASIDE TO THE FILE O F THE AO FOR PROPER ADJUDICATION AFTER ALLOWING DUE AND REASONABLE OPPORTU NI TY OF HEA R ING TO THE ASSESSEE. WITH THESE DIREC TIONS, WE SET ASIDE THE ISSUE TO THE FILE OF THE AO FOR FRESH A D JUDICAT I ON. ACCORDINGLY, ASSESSEE S GROUND NO. 3 FOR A.Y 2004 - 05, GROUND NO 2 FOR A.Y 2005 - 06 AND SOLE GROUND FOR A.Y 2006 - 07 ARE ALLOWED FOR STATISTICAL PURPOSES IN THE MANNER AS INDICATED A BOVE. 37 . I N THE RESULT, THE APPEAL S OF THE REVENUE ARE DISMISSED AND TH OSE OF THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES IN THE MANNER AS INDICATED ABOVE . THE DECISION IS PRONOUNCED IN THE OPEN COURT ON 18 .01. 2016 . SD/ - SD/ - ( L.P. SAHU ) (C.M. GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 18 TH JANUARY, 2015 VL/ - 46 - ITA NOS. 408 TO 410 & 545 TO 547 M/S SARA S ERVICES & ENGINEERS P. LTD COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR ASST. REGISTRAR, ITAT, NEW DELHI