Maruti Suzuki India Ltd., New Delhi V. Addl. CIT, New Delhi

ITA 4081/DEL/2010

• Counselvise Citation: [2024] 130 COUNSELVISE.COM (IT) 4511 (ITAT-DELHI)
• Duration Of Justice: 13 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 06-03-2024
• Assessment Year: 2003-2004
• Appeal Filed On: 02-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR
• Assessee Lawyers: AJAY VOHRA; VIRTUE OF ANY STATUTE. CUSTOMS DUTY IS AN; THIS TRIBUNAL
• Keywords: Set aside; Speculation loss; Opportunity of being heard; Transfer pricing; International transaction; Business expenditure; Question of law; Depreciation; Cost of acquisition; Capital receipt; Capital Gains; Principle of natural justice; Valuation report; Unabsorbed depreciation; Double taxation relief
• Section: 195; 32; 205; 43; 22; 13; 73; 145; 28; 14A; 43B; 40(a)(ia); 264; 260A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘I’ BENCH, NEW DELHI BEFORE SHRI SAKTIJIT DEY, VICE PRESIDENT, AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA No. 4081/DEL/2010 [A.Y. 2003-04] M/s Maruti Suzuki India Ltd Vs. The Addl. C.I.T. Plot No. 1, Nelson Mandela Road Range -1 Vasant Kunj, New Delhi New Delhi PAN – ITA No. 4174/DEL/2010 [A.Y. 2003-04] The Addl. C.I.T. Vs. M/s Maruti Suzuki India Ltd Circle - 6 (1) Plot No. 1, Nelson Mandela Road New Delhi Vasant Kunj, New Delhi PAN – (Applicant) (Respondent) Assessee By : Shri Ajay Vohra, Sr. Adv Shri Neeraj Jain, Adv Shri Ramit Katyal, AR Ms. Somya Jain, CA Department By : Shri Rajesh Kumar, CIT-DR Date of Hearing : 07.03.2024 Date of Pronouncement : 12.03.2024 2 ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER:- The above captioned cross appeals by the assessee and the Revenue are preferred against the order of the ld. CIT(A) - XX dated 08.07.2010 pertaining to A.Y. 2003-04. 2. Since both the appeals were heard together and involve common issues, they are disposed of by this common order for the sake of convenience and brevity. 3. At the very outset, the ld. counsel for the assessee submitted a detailed summary chart showing that all the issues raised in the cross appeals have been considered and decided by this Tribunal in earlier years in assessee’s own case. 4. The ld. DR fairly stated that wherever the Tribunal has restored the matter to the file of the Assessing Officer, the same should be followed. 3 5. On such concession, we have heard the rival submissions and have carefully perused the orders of the authorities below and considered the relevant documentary evidences brought on record in light of Rule 18(6) of the ITAT Rules. Judicial decisions relied upon duly considered. 6. We will first take up assessee’s appeal in ITA No. 4081/DEL/2010. 7. Ground No. 1 with its sub grounds relate to Transfer Pricing adjustment in respect of international transactions entered into during the year. 8. Briefly stated, the assessee is a subsidiary of Suzuki Motor Corporation, Japan with a 45.54% shareholding of the Government of India and is engaged in the manufacture and sale of passenger cars primarily for sale in Indian market. It also exports vehicles and spare part to various countries in Europe, South and Central America, Africa and Asia. It has only one manufacturing facility in India situated in Gurgaon. 4 9. During the year under consideration, the assessee has reported the following major international transactions with its AE in Form 3CEB: 10. TNMM has been selected as the most appropriate method as all the international transactions are inter-woven and inter-linked. They have been aggregated and examined as a whole by making companywide TNMM analysis. Operating Profit/Operating Revenues has been chosen as the appropriate Profit Level Indicator. 11. The assessee earned OP/Sales margin of 3.86%. The following comparables were selected having mean operating margin of 6.21% for the purpose of bench marking analysis: 5 12. The TPO recomputed the operating profit margin of the assessee at 3.71% as against 3.86% after excluding provision written back amounting to Rs. 19.10 million as non-operating income and, accordingly, computed TP adjustment of Rs. 188.59 crores. 13. Before the first appellate authority, objections were raised in respect of computation of margin of Hindustan Motors Limited and the ld. CIT(A) rectified the computational error made by the TPO and recomputed the margin of Hindustan Motors Ltd at 2.71% from 2.87%. Accordingly, mean operating margin of comparable companies mentioned hereinabove was taken at 6.19%. The ld. CIT(A) further restricted the adjustment to the value of international transaction as against adjustment made by the TPO with reference to entire turnover of the assessee. 6 14. We are of the considered view that the Hon'ble High Court and coordinate benches have taken a consistent view that TP adjustment cannot be made with reference to entire turnover of the assessee and ought to be restricted to the value of international transactions. We draw support from the decision of the Hon'ble Supreme Court in the case of Hindustan Unilever 259 Taxmann.com 218, the Hon'ble High Court of Delhi in the case of Keihin Panalfa Ltd 381 ITR 407, Hon'ble Bombay High Court in the case of Tara Jewel Exports [P] Ltd 129 DTR 410. 15. Respectfully following the ratio laid down by the Hon'ble Supreme Court and High Courts [supra], TP adjustment made by the TPO and sustained by the ld. CIT(A) cannot be sustained and is liable to be deleted on the following grounds: (i) Since the difference between operating profit margin of the assessee at 3.85% and that of comparable companies at 6.19% is 2.34%, no TP adjustment is warranted in terms of Proviso 92C(2) of the Act; and (ii) If we look at the list of comparables exhibited elsewhere, we find that except for Hindustan Motors Limited, all other companies selected by the TPO are engaged in manufacture and 7 sale of commercial vehicles and are therefore, functionally not comparable with the assessee, a company engaged in the manufacture and sale of passenger vehicles. 16. Considering the facts of the case from all possible angles, we do not find any merit in the TP adjustment made by the TPO. We accordingly, direct the Assessing Officer/TPO to delete the impugned adjustment. Ground No. 1 with all its sub-grounds is allowed and those of the Revenue’s appeal are dismissed. 17. Ground No. 2 with its sub-grounds relates to the claim of deduction of Rs. 1,99,79,84,644/- made u/s 43B of the Act. 18. This quarrel is coming out from A.Ys 1999-2000 onwards and the co-ordinate bench since A.Ys 1999-2000 to 2009-10 has been deciding this issue. 19. The co-ordinate bench in ITA No. 467/DEL/2014 for A.Y 2009-10 has considered this issue at Para 16 of its order. The relevant findings read as under: “16. As regards to Ground No. 3.5, relating to Customs Duty paid on import of components for export purposes for which exports has been made. The assessee has been consistently following 8 exclusive method of accounting in respect of custom duty paid on import of components for export purposes. Accordingly, duties paid on purchases are not included in the cost of purchases and the value of closing stock in the profit and loss account. Addition of the duty, both in the purchases as well as the closing stock as per the requirement of section 145A, is tax neutral inasmuch as the same amount is both debited as well as credited to the profit and loss account. However, to give effect to the provisions of section 43B, which mandates that duties paid by the assessee are allowable only on payment basis, custom duty paid by the assessee on import of components for export purposes, whether or not export against the same had actually taken place during the relevant year, is claimed as deduction in the return of income. The Assessing Officer, disallowed the same following the Assessment Order for the assessment year 2005-06, wherein it was held that since the assessee is entitled for duty drawback, which becomes immediately due on the date of export, the amount of custom duty on import is revenue neutral. Consequently, no deduction is allowable to the assessee in respect of the same. 17. The Ld. AR submitted that assessing officer failed to appreciate that Duty drawback does not accrue automatically on export of goods since the exporter is required to fulfill various conditions/ requirements in order to claim the same. Duty drawback accrues only when the claim of the exporter-assessee is sanctioned by the custom authorities; Duty drawback receivable is separately chargeable to tax as income of the assessee under section 28 of the Act. Receipt of duty drawback is 9 altogether different from allowability of deduction in respect of which duty paid by the assessee on payment basis under section 43B of the Act. The Ld. AR further submitted that without prejudice to the aforesaid, in case the assessing officer's contention were to be accepted, then duty drawback income amounting to Rs. 15,93,11,093/- declared by the assessee himself, being the amount of duty drawback received in the instant year but which allegedly accrued in the previous year, as per the principle adopted by the assessing officer is not taxable in the year under consideration. The Ld. AR submitted that there is no justification for adopting two different and inconsistent methods while computing the income of the present year. The aforesaid sum was duly declared as the income of the immediately succeeding year on receipt, a method consistently adopted by the assessee company and accepted by the AO since inception. The Tribunal has decided the aforesaid issue in favour of assessee in the assessment years 1999-00, 2000-01, 2001- 02, 2002-03, 2004-05, 2005-06, AY 2006-07, 2007-08 and 2008-09. The orders of the Delhi Tribunal have been affirmed by the Delhi High Court for assessment years 1999-00 (ITA No.250/2005), 2000- 01 (ITA No.976/2005), 2005-06 (ITA Nos. 171 and 172/2012) and 2006-07 (ITA No. 381/2016). Further, the issue stand covered in favour of the assessee in view of the decision of the Hon'ble Punjab and Haryana High Court in the case of CIT v. Sriyansh Knitters P. Ltd. 336 ITR 235 wherein the High Court, while affirming the finding of the Tribunal held that duty drawback accrues in the year in which rate is fixed by the competent authority after verification of claim of the assessee 10 and amount is quantified and not in the year of export. Similar view has been held in the case of CIT v. Manav Tools (India) P. Ltd: 336 ITR 237 (P&H). It has been held similarly by the Delhi High Court in assessee's own case for assessment years 1994-95, 1995-96, 1996-97, 1997-98, 1998-99, 1999-00, 2001-02 and 2004-05. 18. The Ld. DR relied upon the assessment orders. 19. We have heard both the parties and perused the records. It is pertinent to note that the Hon'ble Delhi High Court in Assessee's own case held as under: “6. Question (iii) concerns the disallowance of an addition of Rs. 20,60,14,392 representing the customs duty paid on imports claimed as a deduction under Section 43B of the Act. This was directly paid by the Assessee to the customs authorities and paid during the AY in question. Consequently, it was correctly allowed as a deduction by the ITAT. Question (iii) therefore, is answered in the affirmative i.e. in favour of the Assessee and against the Revenue." The facts of the present case and the decision of the Delhi High Court is on identical issue. Thus, this issue is covered by the decision of the Hon'ble Delhi High Court in favour of the assessee. 20. In result, Ground No. 3.5. is allowed.” 11 20. On finding parity of facts, this ground is allowed. 21. Ground Nos. 2.3 and 2.4 relate to disallowance of Rs. 1,26,13,69,894/- representing the amount of Excise Duty actually paid on purchase inputs and included in RG 23A Part II u/s 43B of the Act. 22. A similar issue was considered by this Tribunal in ITA No. 467/DEL/2014 at Para 21 of its order. The relevant findings read as under: “21. Ground No. 3.6 to 3.7 is regarding balance in RG 23A Part II the assessee had claimed deduction u/s 43B of the Act amounting to Rs. 10,15,93,048/- representing balance in RG23A as on 31.03.2009. The aforesaid amount represents excise duty paid on raw material and inputs purchased by the assessee for use in the manufacture of automobiles. Under the central excise law, the assessee is entitled to claim MODVAT Credit in respect of the amount of central excise duty so paid on raw material and inputs purchased for manufacture of excisable goods. The said amount of duty paid to the supplier of raw material and inputs is regarded as amount of central excise duty actually paid by the assessee under the Excise Laws. Since the aforesaid amount of excise duty was actually paid by the assessee as part of purchase price of raw material and inputs, the same has been claimed as deduction under section 43 B of the Act. The Assessing Officer, 12 however, disallowed the aforesaid amount following the assessment orders for the preceding years. 22. The Ld. AR submitted that the Special Bench of the Tribunal in the case of DCIT v Glaxo SmithKline Consumer Healthcare Ltd: 107 ITD 343/ 299 ITR (AT) 1 (Chd.) (SB), has held that, unutilized MODVAT credit is not an allowable deduction, since such credit does not amount to payment of duty. Therefore, the Ld. AR pointed out that, as a result of the order of the Tribunal, such deduction may be held as not allowable to the assessee in the instant year but would be allowable in the year when the same is adjusted against excise duty payable. The principle laid down is that deduction is allowable in the year when adjustment is made and not in the year of purchase of raw material/input. Following the order of the Special Bench in Glaxo (supra), the ITAT in assessee's own case for AY 2001-02 decided the issue against the assessee. However, the Supreme Court has held that deduction is allowable u/s 43B of the Act for the amount lying credited in the Modvat account at the end of the accounting year, dismissing the SLP (No. 23461/2012) filed by the department against the order of the High Court in the case of Shri Ram Honda Power Equipment Ltd: [2013] 258 CTR 329 / 352 ITR 481 (SC). Following the above judgment, the ITAT in AY 2006-07, AY 2007-08 and 2008-09 decided the aforesaid issue in favour of assessee. The Ld. AR pointed out that the aforesaid issue has been decided against the assessee by the Delhi High Court in assessment years 1999-00 (ITA No.31/2005 and 250/2005), 2000-01 (ITA No.442/2005) and 2004-05 (ITA No.397/2009). 13 The High Court has, however, decided the alternate claim in favour of the assessee and held that unutilized MODVAT credit of earlier year to the extent adjusted in the year under consideration shall be allowed as deduction in the relevant year ( para 45 of Delhi High Court order for AY 1999-00 in ITA No.31/2005). Thus the Ld. AR submitted that the assessee may be allowed the deduction representing the RG 23A balance at the end of Assessment Year 2008-09 amounting to Rs.18,47,40,688/- being the opening balance in the instant assessment year. The High Court has further allowed deduction for amount representing additional or countervailing duty which has been paid directly to the custom authorities. Thus, the Ld. AR requested that the Assessing Officer may be directed to allow deduction for amount forming part of RG 23A balance to the extent it has been directly paid to custom authorities. 23. The Ld. DR relied upon the order of the Assessing Officer. 24. We have heard both the parties and perused the records. It is pertinent to note that the Hon'ble Delhi High Court in Assessee's own case held as under: 32. An analysis of Section 43B of the Act reveals that for the deduction there under to be allowed, the following conditions are required to be satisfied. (a) there should be an actual payment of excise duty whether "by way of tax, duty, cess or fee, by whatever name"; 14 (b) such payment has to be "under any law for the time being in force" (c) the payment of such sum should have been made by the Assessee; d) irrespective of the method of accounting regularly employed by the Assessee, deduction shall be allowed while computing the income tax for the previous year "in which sum is actually paid" by the Assessee; e) the expression 'any such sum payable' refers to a sum for which the Assessee "incurred liability in the previous year even though such sum might not have been payable within that year under the relevant law. 33. There are two kinds of payment envisaged by Section 43B of the Act. Tax payable could be in the form of excise duty on the raw material/inputs purchased by the manufacturer. The second kind of payment could be of excise duty that is payable by manufacturer on the final product at the time of clearance of such final products from the factory. 34. In Eicher Motors (supra), a challenge was raised to the validity of Rule 57F (4A) of the CE Rules under which credit which was lying unutilised as of 16th March 1995 with the manufacturers stood lapsed in the manner set out therein. The Supreme Court upheld the challenge by the manufacturers to the aforementioned Rule 57F (4A) of the CE Rules on the ground that under the MODVAT scheme as it existed on the date of change, 15 i.e. 16th March 1995, MODVAT credit lying in the balance with the Assessee represented "a vested right accrued or acquired by the Assessee under the existing law". It was observed as under: "5............ when on the strength of the Rules available, certain acts have been done by the parties concerned, incidents following thereto must take place in accordance with the Scheme under which the duty had been paid on the manufactured products and if such a situation is sought to be altered, necessarily it follows that the right, which had accrued to a party such as the availability of a scheme, is affected and, in particular, it loses sight of the fact that the provision for facility of credit is as good as tax paid till tax is adjusted on future goods on the basis of the several commitments which would have been made by the Assessee concerned." 35. It was further explained that the MODVAT credit is "a right accrued to the assessee on the date when they paid the tax on the raw materials or the inputs and that right would continue until the facility available thereto gets worked out or until those goods existed." 36. In Dai Ichi Karkaria (supra), the question that arose for consideration was whether the cost of the raw material was the price paid by the manufacturer to its seller, as contended by the Revenue, or is it the price of raw material minus the excise duty thereon which has been paid by the seller and for which the manufacturer is entitled to credit under the MODVAT scheme to 16 be utilized against the payment of excise duty on products manufactured by him, including the intermediate product, as contended by the manufacturer. The Supreme Court analysed the entire MODVAT scheme, in particular Rules 57A to 571, and observed as under: "18. It is clear from these Rules, as we read them, that a manufacturer obtains credit for the excise duty paid on raw material to be used by him in the production of an excisable product immediately it makes the requisite declaration and obtains an acknowledgement thereof. It is entitled to use the credit at any time thereafter when making payment of excise duty on the excisable product. There is no provision in the Rules which provides for a reversal of the credit by the excise authorities except where it has been illegally or irregularly taken, in which event it stands cancelled or, if utilised, has to be paid for. We are here really concerned with credit that has been validly taken, and its benefit is available to the manufacturer without any limitation in time or otherwise unless the manufacturer itself chooses not to use the raw material in its excisable product. The credit is, therefore, indefeasible. It should also be noted that there is no corelation of the raw material and the final product; that is to say, it is not as if credit can be taken only on a final product that is manufactured out of the particular raw material to which the credit is related. The credit may be taken against the excise duty on a final product manufactured on the very day that it becomes available. 17 19. It is, therefore, that in the case of Eicher Motors Ltd. vs. Union of India (1999) 2 SCC 361 this Court said that a credit under the MODVAT scheme was as good as tax paid." 37. Now turning to the treatment of the said payment of excise duty which has any MODVAT credit in the books of accounts, a reference may be made first to the AS-2 issued by the ICAI, para 7 of which reads as under: "Costs of Purchase 7. The costs of purchase consist of the purchase price including duties and taxes (other than those subsequently recoverable by the enterprise from the taxing authorities), freight inwards and other expenditure directly attributable to the acquisition. Trade discounts, rebates, duty drawbacks and other similar items are deducted in determining the costs of purchase." 38. The ICAI has also issued a Guidance Note for treatment of MODVAT/CENVAT. Paras 16 and 18 of the Guidance Note reads thus: "16. Specified duty paid on inputs may be debited to a separate account, e.g. MODVAT/CENVAT Credit Receivable (inputs) Account. As and when MODVAT/CENVAT credit is actually utilized against payment of excise duty on final products, appropriate accounting entries will be required to adjust the excise duty paid out of MODVAT/CENVAT Credit Receivable (inputs) Account to the account maintained for 18 payment / provision for excise duty on final product. In this case, the purchase cost of the inputs would be net of the specified duty on inputs. Therefore, the inputs consumed and the inventory of inputs would be valued on the basis of purchase cost net of the specified duty on inputs. The debit balance in MODVAT/ CENVAT Credit Receivable (Inputs) should be shown on the assets side under the head 'advances', xxx 18. A question may arise as to when the 'MODVAT/CENVAT' credit should be taken if documents evidencing payment of specified duty on inputs are received later than the physical receipt of the goods.According to the accrual concept of accounting, one may account for such credit, provided one is reasonably certain of getting the said documents at a later date." 39. The above Guidance Note answers both issues raised by the Revenue. One is that it clarified that MODVAT Credit is treated as a separate account where appropriate accounting entries will be made to adjust the excise duty paid out of the said account. It is clear that the debit balance in MODVAT/CENVAT Credit Receivable (Inputs) has to be shown on the assets side, under the head 'advances'. According to the accrual concept of accounting (mercantile system), credit is taken even after the documents evidencing payment of specific duty on inputs are received later than the physical receipt of the goods. 19 40. Mr. Bhatia is right in pointing out that the Assessee has two options. One, to claim excise duty paid as explained, and the other, to claim it under MODVAT credit for utilization at a subsequent point in time. It is plain that the Assessee in the present case has not exercised the first option. 41.1. The Court now turns to the decision in Oswal Agro Mills (supra). The facts, in brief, in the above decision were that the Appellant therein was engaged in the manufacture and trade of products like de-oiled meals, industrial hard oil, edible oils etc. The Assessee entered into agreements with other entities for the purchase of imported palm stearin fatty acid ('imported material') from the said importers. In terms of the said agreement, the imported material was to be purchased by the Appellant at landed cost, i.e. CIF price, customs duty, clearing charges, etc. and 3% ofthe total cost. Under Clause 11 of the agreements, any liability arising after the sale of the imported material in respect of customs duty, excise duty, penalty, sales tax, etc. would be paid by the appellant and included in the landed cost of imported material. 41.2 At the time of actual import of material, the Customs Department demanded 100% of the applicable customs duty as additional customs duty on the CIF value of the imported material. The additional demand was challenged by the importers before the Supreme Court. As an interim measure, the Supreme Court allowed the clearance of imported material on payment of 15% of the disputed additional 20 customs duty. A stay was granted for the balance 85% subject to furnishing of bank guarantees by the importers in favour of the Customs Department. In terms of the agreement between the appellant and the importers, the appellant provided counter guarantees for the bank guarantees provided by the importers for the unpaid disputed amount of 85% of the additional customs duty. 41.3. As far as the Appellant therein was concerned, the unpaid additional customs duty pertaining to the previous year relevant to AY 1987- 88 was Rs. 1,64,87,375. The Appellant therein, following the mercantile system of accounting, claimed deduction on account of the said additional customs duty, in as much as the same was included in the landed cost of the imported material. The AO rejected the claim since the Appellant therein had failed to produce evidence by which it could be ascertained that the liability to pay the additional customs duty was crystallized during the period relevant to the ASSESSMENT YEAR .41.4. After the CIT (A) also dismissed the appeal of the Appellant holding that the liability would arise only when the Supreme Court gave a verdict in favour of the Customs Department, the Appellant went before the ITAT. Rejecting the Appellant's appeal, the ITAT held that there was no actual payment and the liability was covered only by the bank guarantee which had not yet been appropriated or encashed and the same is still in the ownership of the Appellant and therefore, the claim for deduction could not be allowed as 21 the bank guarantee cannot fulfill the requirements of expenditure so as to qualify for deduction from the total income. As far as Section 43B was concerned, it was held that even assuming it is a statutory liability, as the liability is eventually fastened upon the Appellant, the provision of bank guarantee in itself cannot be treated as payment as it has not been adjusted towards the customs duty. 41.5. This Court concurred with the ITAT and held that as long as the writ petitions were pending before the Supreme Court, the Appellant therein would have no obligation to pay any amount as the condition precedent for the Appellant to pay disputed amount would not be satisfied. The liability of the Appellant to pay the additional customs duty was contingent upon the importers being called upon to pay the same. Reference was made by this Court to the decision of the Supreme Court in Rotork Controls India P. Ltd. v. CIT [2009] 314 ITR 62 (SC) where three conditions were laid down while considering where a provision made for future claims against warrantees was allowable as a deduction. On the facts of the case, this Court held that subject liability was a contingent liability in respect thereof could not be allowed as a deduction for the AY in question. 41.6. Specific to Section 43B, the Court considered whether it was in fact an obligation of the Appellant therein to pay additional customs duty and whether such obligation could be considered to be a Court observed: 22 "Although the Assessee is obliged to pay the additional customs duty as and when the importers are called upon to pay the same, nonetheless, it cannot be considered as a statutory liability because the same is not imposed on the Assessee by virtue of any statute. Customs duty is an incident of import of goods and an importer is obliged to pay the same under the Customs Act . Therefore, the liability to pay the additional customs duty is a statutory liability of the importers. However, in the hands of the Assessee, the liability to pay the quantum of custom duty imposed on the importers, either directly to them or on their behalf, cannot be considered as a statutory liability as this obligation is not imposed by any statute but from the contracts entered into between the Assessee and the importers. The liability in question is thus, clearly a contractual liability insofar as the Assessee is concerned." (emphasis supplied) 41.7. The Court clarified that Section 43B of the Act would apply "only in cases of statutory liability" and held that: "This provision would have no application insofar as the assessee is concerned, as the liability to pay the amount of additional customs duty on behalf of the importers as and when they are called upon to discharge the same is, clearly, a contractual liability and not a statutory liability. Therefore, the question whether the said liability should be considered as deductible under Section 43B of the Income Tax Act does not arise." 23 42. In the considered view of the Court, the above decision should answer the question in the present case in favour of the Revenue and against the Assessee. The primary liability to pay excise duty is essentially on the manufacturers of the raw materials and inputs. As far as the Assessee is concerned, the liability to pay the said amount is only contractual. 43. It must be noted at this stage that after hearing the arguments on 21st September 2017, an affidavit dated 6th November 2017 has been filed by the Assessee pointing out that out of the total amount of unutilized MODVAT credit of Rs. 69,93,00,428, an amount of Rs. 15,73,38,110 pertains to goods already consumed and which were, therefore, not includable in the closing stock of raw materials and inputs as on 31st March 1999. It is pointed out that this was noted by the CIT (A) in para 9.16 of the appellate order and that this finding was not questioned by the Revenue. It is accordingly submitted that even if the Revenue's contention on the interpretation of Section 43B was accepted, the Assessee is unquestionably entitled to deduction of the aforementioned amount of Rs. 15,73,38,110. It is further pointed out that out of the aforementioned unutilized MODVAT credit claimed as a deduction by the Assessee for the AY 1999-00, a further amount of Rs. 14,96,79,029 represents additional or countervailing duty which has been paid by the Assessee directly to the Customs Department on the import of raw materials, components and the inputs. 24 This, according to the Assessee, is borne out by the RG-23 (Part-II) Register maintained by the Assessee and verified and audited from time to time by the excise authorities. It is asserted that the said amount "has actually been paid by the Appellant to the customs authorities (and not to the Appellant's suppliers)" and therefore, this amount should also be allowed under Section 43B of the Act. 44. The Court would only like to observe that it would be for the AO to give effect to the order pertaining to the aforementioned amounts paid by the Assessee to be made in respect of those goods already consumed as on 31st March 1999 and in respect of additional countervailing duty paid directly to the customs authorities. If indeed such payment has been made, the credit for the same would be allowable as a deduction under Section 43B of the Act. 45. However, it is also to be noted that in para 35 of the impugned order, the ITAT has accepted the alternate contention of the Assessee that unutilized MODVAT credit of an earlier year which has been adjusted in the year in question should be allowed as a deduction in as much as such adjustment would have to be treated as an actual payment of excise duty. In view of the Court agreeing with the ITAT on the non-allowability of unutilized MODVAT credit as a deduction under Section 43B of the Act for the AY in question, this Court also agrees with the ITAT's acceptance of the Assessee's alternate contention with regards to the unutilized MODVAT credit of the earlier year being allowable 25 as a deduction in the AY in question to the extent that it has been adjusted by treating as actual payment of the credit for the AY in question. As the ITAT has already pointed out, the Assessee would be entitled to such deduction "subject to verification provided the same was not allowed as deduction in the earlier year." 46. An attempt was made by Mr. Ganesh to contend that it should now be allowed to be treated as unutilized MODVAT credit as part of the closing stock. An attempt was then made by Mr. Ganesh to contend that the amount of excise duty paid by the Assessee should be treated as expenditure allowed under Section 37 of the Act as business expenditure. As rig pointed out by Mr. Bhatia, the Assessee appears to have followed exclusive method of valuation of stock as opposed to an inclusive stock valuation method. Such a plea was not taken at any stage of the present case; before the AO, CIT (A) or the ITAT. As rightly pointed out, if the amoun paid has to be allowed as a deduction under Section 37 of the Act then tbs inclusive method of valuation of stock has to be followed. The Assess- I must opt to either treat the same as expenditure or treat it as forming part of current assets. If the plea of deduction under Section 37 is to be allowed then the question of utilising the unutilized MODVAT credit for payment of excise duty would not arise at all. 47. It may be noted that after the insertion of Section 145A of the Act, v effect from 1st April 2010, an Assessee 26 must now necessarily follow n inclusive method of valuation of stock. It was explained by the Bombay High Court in Cartini India Limited v. Assistant Commissioner of Income Tax [2007] 291 ITR 355 (Bom) that "as per the new provision of Sec: 145 A of the Income-tax Act, 1961, the unutilized MODVAT credit ha: be included in the closing stock of raw material and work in progress, whereas the excise duty paid on unsold finished goods had to be include, m the inventory of finished goods." However, Section 145A of the Ac- 5 prospective and does not apply to the AY in question. 48. The Court is not inclined to permit the Assessee to raise the plea for more than one reason. In the first place, it is a plea taken for the first time in these proceedings. It appears to be an afterthought. Secondly, the ITAT has already accepted another alternate plea made before it by the Assessee by allowing deduction in respect of the unutilized MODVAT credit of the earlier AY, the Court is not inclined to disagree with the reasoning and conclusion of the ITAT. The assessee cannot be allowed to go back and forth on the above plea. There has to be consistency. Thirdly, balance sheet of the Assessee for AY 1999-00 shows that the turnover for the year was over Rs. 8,000 crores. The corresponding sum claimed as deduction representing the unutilized MODVAT credit is not very significant in comparison. 49. Consequently, Question (ii) is answered in the negative, i.e. in favour of the Revenue and against the Assessee." 27 In view of the finding of the Hon'ble High Court, this issue is remanded back to the file of the A.O to verify the claim as per the directions of the Hon'ble High Court and if found proper be allowed for deduction for amount forming part of RG 23A balance to the extent it has been directly paid to custom authorities. Needless to say the assessee be given opportunity of hearing by following principles of natural justice.” 23. This decision of the co-ordinate bench has to be read with the decision of the Hon'ble High Court of Delhi in assessee’s own case in ITA No. 31 of 2005 dated 07.12.2017. The relevant findings read as under: “43. It must be noted at this stage that after hearing the arguments on 21st September 2017, an affidavit dated 6th November 2017 has been filed by the Assessee pointing out that out of the total amount of unutilized 690 MODVAT credit of Rs. 69,93,00,428, an amount of Rs. 15,73,38,110 pertains to goods already consumed and which were, therefore, not includable in the closing stock of raw materials and inputs as on 31st March 1999. It is pointed out that this was noted by the CIT (A) in para 9.16 of the appellate order and that this finding was not questioned by the Revenue. It is accordingly submitted that even if the Revenue's contention on the interpretation of Section 43B was accepted, the Assessee is unquestionably entitled to deduction of 28 the aforementioned amount of Rs. 15,73,38,110. It is further pointed out that out of the aforementioned unutilized MODVAT credit claimed as a deduction by the Assessee for the AY 1999- 00, a further amount of Rs. 14,96,79,029 represents additional or countervailing duty which has been paid by the Assessee directly to the Customs Department on the import of raw materials, components and the inputs. This, according to the Assessee, is borne out by the RG-23 (Part-II) Register maintained by the Assessee and verified and audited from time to time by the excise authorities. It is asserted that the said amount "has actually been paid by the Appellant to the customs authorities (and not to the Appellant's suppliers)" and therefore, this amount should also be allowed under Section 43B of the Act. 44. The Court would only like to observe that it would be for the AO to give effect to the order pertaining to the aforementioned amounts paid by the Assessee to be made in respect of those goods already consumed as on 31st March 1999 and in respect of additional countervailing duty paid directly to the customs authorities. If indeed such payment has been made, the credit for the same would be allowable as a deduction under Section 43B of the Act. 45. However, it is also to be noted that in para 35 of the impugned order, the ITAT has accepted the alternate contention of the Assessee that unutilized MODVAT credit of an earlier year which has been adjusted in the year in question should be allowed as a deduction in as much as such adjustment would have to be treated as an actual payment of excise duty. In view of the Court 29 agreeing with the ITAT on the non-allowability of unutilized MODVAT credit as a deduction under Section 43B of the Act for the AY in question, this Court also agrees with the ITAT's acceptance of the Assessee's alternate contention with regards to the unutilized MODVAT credit of the earlier year being allowable as a deduction in the AY in question to the extent that it has been adjusted by treating as actual payment of the credit for the AY in question. As the ITAT has already pointed out, the Assessee would be entitled to such deduction "subject to verification provided the same was not allowed as deduction in the earlier year." 24. The Assessing Officer is directed to decide the issue as per the directions given in earlier A.Ys 2009-10 and 20101-11 mentioned hereinabove. Ground Nos. 2.3 and 2.4 are allowed for statistical purposes. 25. Ground No. 5 relates to the disallowance of Rs. 36,16,02,097/- being custom duty included in the closing inventory. 26. A similar issue was decided in A.Y 1999-2000 by this Tribunal. The Hon'ble High Court of Delhi in ITA No. 250/2005 has affirmed the order of the Tribunal. Similar was fate for A.Ys 2000-01, 2001-02, 2005-06 and 2006-07. 30 27. Respectfully following the previous history, Ground No. 2.5 is allowed. 28. Ground No. 2.6 relates to the disallowance of 15,87,10,947/- and Rs. 8,25,09,467/- representing customs duty and CVD paid in respect of goods in transit/under inspection. 29. Similar issue was considered by this Tribunal in A.Y 2009-10 in ITA No. 467/DEL/2014 at Para 31 of its order. The relevant findings read as under: “31. Ground No. 3.9 to 3.10 is regarding Customs Duty (CVD) paid which was to be adjusted against excise duty payable on finished products, Customs Duty on Goods in Transit/under inspection. This amount represents custom duty/CVD paid by the assessee during the relevant assessment year under consideration, on import of components/raw material, which were in transit as on the last date of financial year. Since the aforesaid amount represents actual custom duty/ CVD paid by the assessee during the year under consideration, the same was claimed as deduction under section 43B of the Act. The Assessing Officer disallowed the aforesaid following the Assessment Orders for the preceding Assessment Years. 32. The Ld. AR submitted that the aforesaid issue is covered in favour of the assessee by the decision of the Supreme Court in 31 Civil Appeal No. 6449/2012 dismissing the SLP filed by the department against the order of the Delhi High Court in the case of CIT vs. Samtel Color Ltd : 184 Taxman 120. The issue stands covered in favour of the assessee by the order of the Tribunal for the Assessment Years 1999-2000, 2000-01, 2002-03, 2004- 05, 2005-06, 2006-07, 2007-08 and 2008-09. 33. The Ld. DR relied upon the order of the Assessing Officer. 34. We have heard both the parties and perused the records. It is pertinent to note that in assessee's own case the Tribunal held this issue in favour of the assessee. The Tribunal held as under: "3.25 Insofar as the disallowance of deduction under Section 43B of the Act for a sum of Rs.13,51,93,089/- representing custom duty (CVD) paid to be adjusted against excise duty payable on finished products, and a sum of Rs.1,93,27,627/- representing custom duty in respect of the goods in transit/under inspection is concerned, the case of the assessee is that these amounts represent custom duty/CVD paid by the assessee during the financial year 2007-08, and since the aforesaid amount represents actual custom duty/CVD paid by the assessee during the year under consideration, the same was claimed as deduction under section 43B of the Act. But the assessing officer disallowed the aforesaid following assessment order for the assessment year 2005-06. Ld. AR submitted that this issue was also decided in favour of assessee by the Supreme Court in Civil Appeal No. 6449/2012 wherein the SLP filed by the 32 department against the order of the Delhi High Court in the case of CIT vs. Samtel Color Ltd.: 184 Taxman 120 was dismissed holding that Custom duty paid is allowable deduction u/s 43B of the Act. He further submits that apart from this, the issue stands covered in favour of the assessee by the order of a coordinate bench of this Tribunal for the Assessment years 1999-00, 2000-01, AY 2002-03, AY 2005-06, AY 2006- 07 and 2007-08 wherein it was held that since the duty is paid, deduction claimed u/s 43B of the Act has to be allowed. 3.26 Per Contra, on these Grounds 3.6 and 3.7, Ld. DR submitted that in respect of the amount of Rs.13,51,93,089/- being customs duty (CVD) paid to be adjusted against excise duty payable on finished products, a coordinate Bench of this Tribunal has also accepted that under the 'Inclusive method' it will be inclined in purchases, sales, and opening and closing stock of inventories, as a result of which the ultimate impact is revenue neutral and no deduction will be allowable to the assessee under this head. As regards the amount of Rs.1,93,27,627/- being customs duties on goods in transit/under inspection, he contends that it is be noted that the duty paid is not tax deductible as goods in transit are not expenditure of the year and are not routed through the P&L account. Further according to him, the liability to pay customs barrier and since the assessee has claimed deduction on this account, the onus of proving this fact was on the assessee. He points out that it is not on 33 record whether the assessee has discharged this responsibility, as such in view of the decision of Hon'ble Supreme Court in Indian Molasses Co. (P) Ltd. 37 ITR 66, this amount has to be treated as an advance payment, which is not an allowable deduction. Lastly he contended that these are continuous issues forming part of the assessment order for AY 2005-06, 2006-07 and 2007-08 also, and are at present pending adjudication before Hon'ble Delhi High Court. 3.27. Substantially this question had fallen for consideration before a coordinate Bench of this tribunal in assessee's own case for the AY 2006-07 and 2007-08 and by para Nos. 5.3 and 5.4 of its order for A.Y. 2006-07, a coordinate Bench of this Tribunal resolved the issue in the following manner, "5.3. Next item is customs duty (CVD) paid to be adjusted against excise duty payable on finished products amounting to Rs.15,59,44,258/-, which is the amount of customs duties on goods in transit/under inspection. The assessee claimed deduction for the above amounts u/s 43B of the Act, which the AO denied. 5.4 We have heard the rival submissions and perused the relevant material on record. The Ld. AR contended that this issue has been decided in earlier years in the assessee's favour by the Tribunal. He further referred to the judgment of the Hon'ble Delhi High Court in CIT vs. Samtel Colour Ltd. (2009) 184 Taxman 120 (Del) in which it has been held that advance customs duty paid in the year in question is an admissible deduction u/s 43B. In our considered opinion, 34 there can be no dispute on the otherwise availability of deduction of advance customs duty paid by the assessee, which has to be allowed in the year of payment. In this judgment also, the Hon'ble High Court has noticed vide para 3 that the provisions of section 145A were not applicable as the assessment year under consideration was 1995-96. In view of the detailed discussion supra with reference to the applicability of section 145A to the year in question, there can be no escape from valuation of purchase, sale and inventories under the inclusive method. We, therefore, direct the AO to recast Profit and loss account under 'Inclusive method' as per the mandate of section 145A, thereby, inter alia, increasing the purchase value with the above customs duty. Then the AO will allow separate deduction for the above referred sums to the extent not getting eventually deducted separately by way of increased purchase price, as has been discussed above. At the same time, we also direct the AO to make sure that such amount separately getting deducted in this year does not get deduction once again in the next year. In the like manner, the last year's similar deduction separately allowed should be taxed in the computation of income of the current year", and by following the same for AY 2007-08, vide para 14.1 the matter was set aside to the file of the Assessing Officer to decide the issue afresh as per the above direction of the ITAT in the appeal for the assessment year 2006-07 after affording opportunity of being heard to the assessee. In the absence of any 35 change of circumstances or law, we think it fit to follow the same line of reasoning and set aside to the file of the Assessing Officer to decide the issue afresh as per the above direction in the appeal for the assessment year 2006- 07 and 2007-08 after affording opportunity of being heard to the assessee. Ground Nos. 3.6 and 3.7 are, accordingly, allowed for statistical purposes." Thus, the issue in the present year as well as of the earlier Assessment Years is identical and hence we also deem it fit to follow the same reasoning and set aside the issue to the file of the Assessing Officer to decide the issue afresh as per the earlier assessment years. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. Ground No. 3.9 to 3.10 are partly allowed for statistical purpose. 34. Ground No. 3.9 to 3.10 are partly allowed for statistical purpose.” 30. Respectfully following the findings of the co-ordinate Bench [supra], we direct accordingly. Ground No. 2.6 is allowed for statistical purposes. 31. Ground No. 2.7 relates to disallowance of Rs. 2,23,69,355/- being Sales Tax paid in respect of components held in closing stock. 36 32. This issue has been decided against the assessee by this Tribunal in A.Ys 1999-2000, 2000-01, 2001-02 and 2002-03 wherein it has been held that deduction for Sales Tax paid on purchases/inputs is allowable in the year of adjustment i.e. year of sale of goods. 33. We, accordingly, direct the Assessing Officer to follow the decision of the co-ordinate bench given in earlier A.Ys and also consider the alternate claim for deduction in respect of Sales Tax paid during the preceding A.Y and adjusted during the year under consideration after affording reasonable and adequate opportunity of being heard to the assessee. We order accordingly. Ground No. 2.7 is allowed for statistical purposes. 34. Ground Nos. 3 to 5.3 relate to not allowing withdrawal of add back u/s 43B of the Act. 35. This issue has been considered in earlier A.Ys from 1999-2000 till 2010-11. The co-ordinate bench in A.Y 2009-10 in ITA No. 467/DEL/2014 has considered this issue at Para 41 of its order. The relevant findings read as under: 37 “41. Ground No. 4 to 4.2 is regarding non allowing withdrawal of add back u/s 43B. The assessee company had in the instant assessment year 2009-10 offered an amount of Rs.69,50,54,573/- in its return of income. This amount represents amounts received back/ adjusted in the profit and loss account during the financial year 2008-09 out of the amounts which have already been claimed as deduction on payment basis under section 43B of the Act in the preceding assessment years. This amount was offered to tax by the assessee during AY 2009- 10 on the presumption that deduction would be allowed in preceding years on payment basis. 42. The Ld. AR submitted that the aforesaid total amount has not been allowed to the assessee on payment basis in the preceding assessment years and thus the assessee has prayed that it should be allowed a withdrawal of add back of the aforesaid amount. Not allowing withdrawal of add back has resulted in the claim not being allowed in any year. To the extent the assessee's claim under Section 43B of the Act are allowed in the earlier assessment years out of the said amount of Rs.69,50,54,573/-, the same would certainly be liable to be added to the assessable income of the present year. Withdrawal of add back has also been allowed by ITAT in assessee case for AY 2000- 01, 2004-05, AY 2005-06, AY 2006-07 and AY 2008-09. Department Appeal in AY 2004-05 on this issue has not been admitted by Delhi High Court vide order dated 28- 01- 2010. 43. The Ld. DR relied upon the order of TPO/AO. 38 44. We have heard both the parties and perused the records. It is pertinent to note that the Tribunal in Assessee's own case held as under: "Grounds No. 4 to 4.2 Not allowing withdrawal of add back u/s 43B: 4. Adverting to Ground No 4 to 4.2, in the AY 2008-09 the assessee company offered an amount of Rs. 117,72,92,005/- in its return of income representing the amounts received back or adjusted in the Profit and Loss Account during FY 2007-08 out of the amounts which have already been claimed as deduction on payment basis u/s 43B of the Act in the preceding assessment years, and this amount was offered to tax by the assessee during AY 2008-09 on the presumption that deduction would be allowed in preceding years on payment basis. It is pleaded that the aforesaid total amount of Rs.117,72,92,005/- has not been allowed to the assessee on payment basis in the preceding assessment years and thus the assessee has prayed that it be allowed to withdraw the add back of the said amount and not allowing withdrawal of add back has resulted in the claim not being allowed in any year. Ld. AR brought to our notice that assessee's claim under Section 43B deduction was allowed in the earlier assessment years, as such, said amount of Rs. 117,72,92,005/- would certainly be liable to be added to the assessable income of the present year. It is submitted on behalf of the assessee that the withdrawal of write-back has been allowed by AO for AY2007-08, which has been confirmed by DRP. He submitted that identical claims have been allowed in the 39 assessee's own case by ITAT in AY 1999-2000, 2000-01 AY 2005-06 and AY 2006- 07 and by CIT(A) in AY 2001-02 and 2002-03. 4.1. As submitted by the Ld. AR, in the order dt 24.08.2015 for the AY 2006-07, this Tribunal in assessee's own case, vide paragraph No 6.3 and 6.4 dealt with this issue in the following manner: "6.3. Ground nos. 4 to 6.1 deal with a sum of Rs. 1,41,59,08,897, which has been stated to be a total of certain amounts claimed by the assessee as deductible in the preceding year u/s 43B as excise duty and customs duty and voluntarily offered for taxation in the current year's income. The ld. AR contended that since such deductions have been denied by the AO, the corresponding offering of the same to tax in the current year, be eliminated. 6.4. We agree with the ld. AR that one amount cannot be taxed twice. It is but natural that if an amount claimed as deduction by the assessee in the earlier year has not been allowed, then on the assessee's suo motu offering of it as an item of income for the current year on the strength of deduction claimed in the earlier year, which finally stands denied, should not be charged to tax. On being called upon to furnish the detail of such amount, it was stated that it, inter alia, includes a sum of Rs.71,63,89,449, which is subject matter of ground no. 3.5, that we have discussed immediately hereinbefore. We note that apart from the 40 sustenance of disallowance of Rs.71.63 crore in the preceding year, there is no other disallowance u/s 43B which has been upheld by the Tribunal. It is overt that all other disallowances made by the AO u/s 43B have been deleted by the tribunal. The ld. AR could not furnish any detail of the remaining amount of Rs.69.96 crore (Rs.141.59 crore minus Rs.71.63 crore), allegedly finally disallowed u/s 43B of the Act by the tribunal in the preceding year. It is simple and plain that if the tribunal has allowed deduction for the amounts disallowed by the AO in the preceding year, then the same are rightly chargeable to tax in the current year. This ground is, therefore, dismissed, subject to our decision on ground no. 3.5 in granting deduction of Rs.71,63,89,449, representing last year's unutilized Modvat credit which was claimed by the assessee as deductible u/s 43B but disallowed by the AO and also the tribunal." 4.2. For the AY 2007-08, though the AO refused to allow the deductions claimed by the assessee under section 43B of the Act, by order dated 20-05-2016 the Tribunal considered the case of the assessee and set aside the matter to the file of AO, and the relief on this aspect is dependent upon the findings of the AO while implementing the said order, as such we deem it just and proper to direct the AO to consider this aspect also in the light of implementing the order of this Tribunal for the AY 2007-08. These grounds are, therefore, allowed for statistical purpose. Thus, the issue is squarely covered by the decision of the Tribunal in Assessee's own case, therefore, we set side this issue 41 to the file of the Assessing Officer to decide it afresh as decided by the Tribunal in earlier Assessment Years. Needless to say, the assessee be given opportunity of hearing. Ground No. 4 to 4.2 are partly allowed for statistical purpose. 45. In result, Ground No. 4 to 4. 2 are partly allowed for statistical purpose.” 36. Respectfully following the findings of the co-ordinate Bench [supra], we direct the Assessing Officer to decide the issue afresh as decided by this Tribunal in earlier A.Ys. Thus, this ground is allowed in part for statistical purposes. 37. Ground No. 6 relates to the addition of Rs. 9.20 crores in respect of alleged excess consumption of raw materials and components. 38. Similar issue was considered by this Tribunal in assessee’s own case in A.Y 2000-01 till A.Y 2008-09. In A.Y 2008-09, this Tribunal in ITA No. 6021/DEL/2012 has considered a similar issue at para 5 of its order. The relevant findings read as under: “5. In respect of disallowance to a tune of Rs.1,70,45,000/- on account of alleged excess consumption of raw materials and components, it is the argument of the Ld. AR that in the 42 manufacturing process of automobiles, the assessee procures and utilizes more than 12000 items of raw material and components for manufacturing the range of automobiles, and during the previous year relevant to the assessment year 2008-09, the year under consideration, the turnover of the assessee (excluding excise duty) amounted to Rs.17,860 crores. He explained that the assessee followed the elaborate system of book keeping for receipt and issue of raw material and component as also manufacture of finished goods. The assessee followed “Just in Time” system for management and reorder of inventory, whereby the inventories are ordered just in time when the requirement for said inventory arises in respect of production shops, in that process the material so required is delivered straight to the shop floor in the relevant department and at a time there remain only a few hour inventories except for certain items, and on daily basis, a consolidated entry is passed for consumption of various materials on the basis of Bill of Material (`BOM’), which basically contains the standard quantity of material required for manufacture of a vehicle on the basis of the number of vehicles manufactured. However, in case of certain material, such as paint, consumption is recorded on actual basis as against consumption of other material being recorded on the basis of standard bills of material and at the year end, actual physical verification of the inventories is carried out by the assessee followed by preparation of stock reconciliation in respect of variation between physical stock and the stock as per computerized books of account. He submitted that for the purposes of financial accounting, the assessee debits to the profit 43 and loss account figure of consumption at the year end, which is derived on the basis of Opening stock (as per physical inventory) enhanced by purchases and reduced by closing stock (as per physical inventory). In this process, for the AY 2008-09, as per stock reconciliation, it was found that the value of items as per stock register was more than physical stock variation by Rs.1.7045 crores, which merely worked out as 0.013% of total consumption of Rs.13,034 crores. He submitted that in the assessment order, the assessing officer has accepted the system of accounting being followed by the assessee, as such, since there is no dispute as regards the figure of opening stock, purchases, closing stock and also the sales, in the absence of any allegation of any suppression of sales, excess consumption, if any, without anything more cannot lead to addition to income. He further submits that the alleged wastage is only 0.013% of the consumption of Rs.13,034 crores debited to profit and loss account, which is below the norm of 1% fixed by the Government of India as a tolerance level of production losses for allowing import against advance licenses, having regard to nature and skill of the operation and that similar issue raised by the Excise Authorities in the earlier year(s) has been decided in favour of the assessee by the CESAT in financial years 2000-01, 2001-02 and 2002-03. He placed reliance on a decision of the Hon’ble Apex Court in Commnr. Of Central Excise Vs. M/s Maruti Suzuki India Ltd in Civil Appeal No 7829/2004 decided on 3.4.2015 wherein the Hon’ble Apex Court held that when the shortage of inputes as corrected is only 0.24%, that would be immaterial and correction of the total input is in use. Besides placing reliance on 44 the decisions reported in Setia Plastic Industries: 316 ITR 133(Del.), R.B. 379 ITA No.-6021/Del/2012 36 Bansilal Abhirchand Spng & Wvng Mills v. CIT: 75 ITR 260 (Bom.), Surat District Co-operative Milk Producers Union Ltd: 99 TTJ 390 (Ahd.), Geetanjali Woollens Pvt.Ltd.v. ACIT: (1991) 121 CTR (Trib) (Ahd.), and ITO vs. Himalaya Drug Company : 17 TTJ 9 (Del.) Ld. AR submitted that the issue is squarely covered in favour of appellant by ITAT orders for assessment years 1999- 2000 to 2002-03, AY 2005-06, 2006-07 and 2007-08. 5.1. Per contra, it is the argument of the Ld. DR that though AO held that while the system of accounting employed by the assessee is not being challenged, at the same time, it is noted that the system has produced an error, which has also been accepted by the assessee, as such, there is no reason why revenue authorities should continue with the error and allow the assessee excess consumption. Further according to him even if the amount of variation is insignificant and arises out of a systematic problem, there is no reason for the same to be accepted, once it is noticed. He urges that one needs to understand the reasoning behind the disallowance made in the assessment. According to him, since the coordinate Bench of this Tribunal has not controverted the stand taken by the AO, it was an error to direct the AO to allow the excess consumption on the ground of its being insignificant. He further submitted that the decision of the ITAT for the immediately preceding AY is at present pending adjudication before the Hon’ble High Court. 45 5.2. There is no denial of the fact that the issue is squarely covered in favour of assessee by ITAT orders for assessment years 1999-2000 to 2002-03, AY 2005-06, 2006-07 and 2007- 08. This issue was covered by Grounds Nos. 7 to 7.4 of the assessee’s appeal for the AY 2006-07 and vide para 14.1 and 14.2 of its order a coordinate Bench of this Tribunal has held as under: “14.1. Ground nos. 7 to 7.4 are against the addition of Rs.4.48 crore made by the AO on account of excess consumption of raw material and components. The facts apropos these grounds are that the assessee is following ‘Just-in-time ’ system for management and reorder of inventory, in which inventories are ordered just in time when their requirement arises. The material so required is delivered straight to the shop floor in the relevant department. As a result of this, though the purchases are recorded as per actual bills upon the arrival of goods in the premises, the inventories are procured by considering the standard consumption of various raw materials for manufacture of vehicles. Due to this difference in the making of entry in the books of account and actual receipt of goods directly in the relevant department, which, in turn, is based on standard quantity of material required for manufacture of vehicles, sometimes there arises difference between the physical inventory taken and the inventory as per books of account at the end of the year. Some items of stock may be eventually under-consumed while others over consumed. The 46 net effect of under/over consumption is nothing, but, the deviation from the standard consumption. During the year in question, the variation between physical stock and stock register was Rs. 4.48 crore negative, which means items where stock as per stock register was more than physical stock and Rs.2.86 crore positive i.e., items where stock as per stock register was less than the physical stock, leaving the net difference of Rs.1.62 crore. The AO disallowed Rs.4.48 crore ignoring the excess amount of Rs.2.86 crore. The assessee is aggrieved against this addition. 14.2. It is manifest that the net difference of Rs.1.62 crore is nothing, but, excess consumption over the standard consumption. Such shortage of Rs.1.62 crore is only 0.018% of total consumption of material debited to the Profit & Loss Account. In view of the fact that this amount has actually been consumed in the manufacturing of goods, it cannot call for any disallowance. There may be production efficiencies or inefficiencies leading to under or over consumption of inputs visa-vis standard consumption. Such under or over consumption becomes a part of the cost of production. In our considered opinion, there can be no logic in disallowing such amount, which is nothing but excess consumption of inputs. Similar view has been taken by the Tribunal in the assessee ’s own case for earlier assessment years including the immediately preceding assessment year. This ground is allowed". 47 5.3. Following the above decision, this Tribunal for AY 2007-08, directed the Assessing Officer to delete the disallowance. Further the 381 ITA No.-6021/Del/2012 38 Ld. AR brought to our notice, a decision of the Hon’ble Apex Court in Commnr. Of Central Excise Vs. M/s Maruti Suzuki India Ltd in Civil Appeal No 7829/2004 decided on 3.4.2015 wherein the Hon’ble Apex Court held that when the shortage of in-putes as corrected is only 0.24%, that would be immaterial and correction of the total input is in use. It is, therefore, clear that for the successive AYs 2006-07 and 2007-08, the Assessing Officer was directed to delete the disallowance in respect of the excess consumption by a coordinate Bench of this Tribunal while placing reliance on two factors, namely, that the net difference of stock is negligible in tune with the observations of the Hon’ble Apex Court (supra), and that the Tribunal has taken similar view in the assessee’s own case in the earlier assessment years including the immediately preceding year. We, therefore, respectfully following the same direct the Assessing Officer to delete the addition Rs.1,70,45,000/- on account of alleged excess consumption of raw materials and components. Grounds No 5 to 5.4 are allowed accordingly.” 39. Respectfully following the findings of the co-ordinate Bench [supra], we direct the Assessing Officer to delete the impugned addition. This ground is allowed. 48 40. Ground No. 7 to 7.3 relates to disallowance u/s 14A of the Act. 41. Similar quarrel traveled upto the Hon'ble High Court of Delhi in A.Y 1999-2000 and 2000-01 in ITA No. 250/2005 and 976/2005 respectively wherein the Hon'ble High Court has held that the onus is on the Revenue to establish proximate nexus of expenses with earning of exempt income. The court further categorically held that the assessee had surplus funds and that no disallowance of interest was called for u/s 14A of the Act. 42. Respectfully following the findings of the co-ordinate Bench [supra], we direct the Assessing Officer to delete the impugned addition. This ground is allowed. 43. Ground Nos. 8 to 10 relate to the disallowance u/s 35DDA of the Act amounting to Rs. 14,72,09,512/-. 44. Similar issue has been considered by the Tribunal in A.Ys 2002- 03, 2004-05 to 2008-09. In A.Y 2008-09, this Tribunal in ITA No. 6021/DEL/2012 has considered this issue at Para 7 of its order. The relevant findings read as under: 49 “7. Now turning to the disallowance of Rs.23,91,54,836/- deduction claimed by the assessee u/s 35DDA of the Act, the assessee company had, during the assessment year 2008-09 claimed deduction of Rs.23,91,54,836/- u/s 35DDA of the Act, being 1/5th of the payment of Rs.119.58 crores made by the assessee company during AY 2004- 05 to its employees under VRS scheme, and the AO has held that payments under VRS made in earlier years, is violative of Section 35DDA of the Act and as such all claims made as a consequence of the original claim are also violative of that section. Ld. AR submitted that this issue of claim u/s 35DDA is covered in favour of assessee by the order of the ITAT for AY 2002-03, AY 2004-05, AY 2005-06, AY 2006- 07 and AY 2007-08. Further, reliance is placed on CIT vs. Sony India (P) Ltd : 210 Taxman 149 (Del) and State Bank of Mysore vs. CIT, 139 ITD 526 (Bang) where it has been held that compliance with the conditions of rule 2BA is mandatory only to avail the exemption under section 10(10C) by employees and not for the purposes of deduction under section 35DDA. 7.1. Per contra, it is the argument of the Ld. DR that this issue was also adjudicated upon by the coordinate Bench of this Tribunal in favour of the assessee based on the findings in the decision in the 392 ITA No.-6021/Del/2012 49 assessee’s own case for AY 2004-05, 2006-07 and AY 2007- O8 and the Department is in appeal against such orders. 7.2. In State Bank of Mysore vs. CIT, 139 ITD 526 (Bang) it was held as follows: 50 “It is clear from the proviso to s. 10(10C) that in order to claim an exemption under this section in respect of any payments received/receivable by an employee under any voluntary retirement scheme/schemes, such scheme/schemes must comply with the guidelines prescribed in this regard i.e. guidelines prescribed under Rule 2BA. In other words, the employee is entitled to exemption u/s. 10(10C) of the Act only if the voluntary retirement scheme fully complies with the conditions as prescribed in Rule 2BA. There are no such provisions in s. 35DDA of the Act similar to proviso to s. 10(10C), so as to include the conditionalities of Rule 2BA into s. 35DDA of the Act. A plain reading of provisions of s. 35DDA of the Act, it is clear that compliance with the conditions of Rule 2BA is mandatory only to avail exemption u/s. 10(10C) of the Act by the employees and thus the said rule is not relevant to deduction u/s. 35DDA of the Act. In the Finance Bill, 2001, the deduction u/s. 35DDA was linked to the provisions of Rule 2BA. In other words compliance with Rule 2BA would be mandatory in order to avail deduction u/s. 35DDA. However, when the bill was finally enacted, the link between s. 35DDA and Rule 2BA was deleted. Accordingly, the deletion of conditionalities originally incorporated in the Bill shows that legislative intendment was not to incorporate all the conditions of s. 10(10C) in s. 35DDA. Thus, the legislature has finally left the scheme of voluntary retirement open-ended and did not place any restriction on the scheme... 51 7.3. Further, on this issue, a coordinate Bench of this Tribunal while dealing with the same issue for the AY 2006-07 noticed that an identical issue has been decided by the ITAT in the earlier assessment years in the case of assessee itself and lastly in the appeal for the assessment year 2006-07 (supra), held that “...After making a thorough discussion on the issue, the Tribunal has held that Rule 2BA is relevant only for the purpose of availing exemption u/s 10 by employees and not for the purpose of allowing deduction to the employer u/s 35DDA of the Act. Resultantly, the disallowance made by the AO came to be knocked down by the tribunal. In the absence of any distinguishing factor having been pointed out by the ld. DR, respectfully following the precedent, we 393 ITA No.-6021/Del/2012 50 direct to allow deduction u/s 35DDA for a sum of Rs.38.63 crore.” 7.4. Following the same for the AY 2007-08 also, this Tribunal directed the Assessing Officer to allow the claimed deduction under sec. 35DDA of the Act at Rs.23,91,54,586. Since facts are similar in assessee’s own case, we follow the decisions above and direct the Assessing Officer to allow the deduction under section 35DDA of Rs.23,91,54,836/- (being 1 /5th of the total expenditure of Rs. 119.58 crores incurred by the appellant company, in respect of payment made to its employees under the voluntary retirement scheme 52 during the F.Y. 2003- 04). Ground Nos 7 to 7.3 are allowed accordingly.” 45. Respectfully following the findings of the co-ordinate Bench [supra], this ground is allowed. 46. Ground No. 11 to 11.2 relates to the disallowance of payments made outside India u/s 40(a)(ia) of the Act. 47. This issue has been decided by this Tribunal in A.Ys 2001-02 and 2002-03 and in A.Y 2001-02, the matter traveled upto the Hon'ble High Court of Delhi and the Hon'ble High Court of Delhi in ITA 519/2020 has dismissed this appeal of the Revenue. 48. The co-ordinate bench in A.Y 2001-02 in ITA No. 300/DEL/2006 has considered this issue at Para 29 of its order. The relevant findings read as under: “29. In regard to Ground No.14, which was against the deletion of disallowance of the payment made outside India by invoking the provisions of Section 40(a)(i) it was submitted that the assessee had incurred the expenditure on account of the commission paid to agents outside India for making sale of vehicles and re- 53 imbursement of advertisement expenses incurred outside India. It was the submission that the commission as paid did not constitute or give rise to any income chargeable in India both under the provisions of the Act or the provisions contained in DTAA and, therefore, no tax was deductible in respect thereof u/s 195 of the Act and consequently no disallowance could be made by invoking the provisions of Section 40(a)(i) of the Act. Ld. AR also relied upon the Circular No.786 dated 07.02.2000 and Circular No.23 dated 23.07.69 wherein it has been held that the commission paid to non-resident for services rendered outside India are not chargeable to tax in India. In reply, the Ld. DR submitted that the assessee was duty bound to make the necessary claim u/s 195 before the Assessing Officer and obtained the necessary certificate for nil deduction and this having not being done, the provisions of Section 40(a) (i) of the Act apply. 30. We have considered the rival submissions. A perusal of the provisions of Section 195 clearly shows that the deduction of tax is liable to be made by a person responsible for paying to the non-resident any sum chargeable under the provisions of this Act. The words “chargeable under the provisions of this Act” clearly shows that the payment which is made by the assessee to the non- resident is liable to be taxed in India in the hands of the non-resident. Here it is noticed that the commission has been paid to the agents for the sale of the vehicles and re- imbursement of advertisement expenses incurred outside India. Obviously, these expenditures incurred outside India does not 54 make them taxable in India under the Act and the non-resident itself is not taxable in India. In the circumstances, we are of the view that the provisions of Section 195 will not be attracted in the case of these payments and the CIT (A) was right in deleting the disallowances made. In the circumstances, ground No.14 of the Revenue’s appeal stands dismissed and the findings of the CIT (A) stands upheld.” 49. Respectfully following the findings of the co-ordinate Bench [supra], we direct the Assessing Officer to delete the impugned disallowance. This ground is allowed. 50. Ground Nos. 12 to 12.4 relates to claim of Sales Tax Subsidy as capital receipt. 51. The quarrel relating to the claim traveled upto the Hon'ble High Court of Delhi in A.Ys 2005-06 and 2006-07. The Hon'ble High Court of Delhi in ITA 171/2012 order dated 07.12.2017 was inter alia seized with the following question of law: “(4) Whether on the facts and circumstances of case, the ITAT was correct in law in deleting the addition on account of sales tax subsidy of Rs. 16,04,07,733 made by AO treating it to be revenue receipt?” 55 52. The Hon'ble High Court answered as under: “4. Question (4) pertains to sales tax subsidy being added to the income of the Assessee by treating it as revenue expenditure. With regard to the very same sales tax subsidy provided in the State of Haryana, pursuant to the Scheme in force in the said State during the AY in question, this Court, in Commissioner of Income Tax v. Johnson Matthey India (P) Limited (order dated 13th March 2015 in ITA No. 193 of 2015) answered the said issue in favour of the Assessee and against the Revenue. In that decision, this Court relied on the decisions of the Supreme Court in Sahney Steel and Press Works Limited v. CIT [1997] 228 ITR 253 (SC) and CIT v. Ponni Sugars and Chemicals Ltd (2008) 306 ITR 392 (SC). 5. The decision of this Court in CIT v. Johnson Matthey India (P) Ltd. (supra) was not appealed against by the Revenue. Further, it is pointed out by the Assessee that the decision of this Court in Commissioner of Income Tax v. Bhushan Steel Pvt. Ltd. [2017] 398 ITR 216 (Del), which has been relied upon by the Revenue, is in appeal before the Supreme Court in S.L.P.(C) No. 30728- 30732 of 2017 and has been stayed by that Court. 6. Since the sales tax subsidy under the same scheme that was the subject matter of CIT v. Johnson Matthey India (P) Ltd (supra) is also the subject matter of the present appeal, Question 56 (4) is answered in the affirmative, i.e. in favour of the Assessee and against the Revenue. “ 53. As the quarrel is settled in favour of the assessee and against the Revenue, respectfully following the decision of the Hon'ble High Court [supra], we direct the Assessing Officer to accept the subsidy as capital receipt. 54. Ground No. 13 relates to the not allowing set off of brought forward depreciation. 55. The root cause for this quarrel is the amendment brought in provisions of section 32(2) of the Act by the Finance Act, 2001 w.e.f 01.04.2002 wherein it has been provided that unabsorbed depreciation could be used to set off against any head of income except salary. 56. The claim was denied by the Assessing Officer placing reliance on pre-amended provision of section 32 of the Act. 57. We are of the considered view that the Assessing Officer should consider the set off as per the amended provisions of the Act. We order accordingly and direct the Assessing Officer to consider the same 57 as per relevant provisions of law. This ground is allowed for statistical purposes. 58. In the result, the appeal of the assessee is allowed in part for statistical purposes. ITA No. 4174/DEL/2010 [Revenue’s appeal] . 59. Ground Nos. 1 and 2 relate to the TP adjustment. 60. This issue has been discussed at length in assessee’s appeal [supra]. For our detailed discussion therein, Ground Nos. 1 and 2 are dismissed. 61. Ground No 3 relates to deletion of disallowance of Rs. 21,32,46,724/- made by the Assessing Officer on account of Customs Duty paid on import of components for export purposes for which exports have been made. 62. This dispute is coming since A.Y 1999-2000 and it has been decided by this Tribunal, which decision has been affirmed by the 58 Hon'ble High Court of Delhi in ITA Nos. 250/2005, 171/2012, 172/2012, 381/2016, 1999-2000, 2005-06 and 2006-07 respectively. 63. In A.Y 2009-10, this Tribunal has considered this issue at Para 16 of its order. The relevant findings read as under: “16. As regards to Ground No. 3.5, relating to Customs Duty paid on import of components for export purposes for which exports has been made. The assessee has been consistently following exclusive method of accounting in respect of custom duty paid on import of components for export purposes. Accordingly, duties paid on purchases are not included in the cost of purchases and the value of closing stock in the profit and loss account. Addition of the duty, both in the purchases as well as the closing stock as per the requirement of section 145A, is tax neutral inasmuch as the same amount is both debited as well as credited to the profit and loss account. However, to give effect to the provisions of section 43B, which mandates that duties paid by the assessee are allowable only on payment basis, custom duty paid by the assessee on import of components for export purposes, whether or not export against the same had actually taken place during the relevant year, is claimed as deduction in the return of income. The Assessing Officer, disallowed the same following the Assessment Order for the assessment year 2005-06, wherein it was held that since the assessee is entitled for duty drawback, which becomes immediately due on the date of export, the amount 59 of custom duty on import is revenue neutral. Consequently, no deduction is allowable to the assessee in respect of the same. 17. The Ld. AR submitted that assessing officer failed to appreciate that Duty drawback does not accrue automatically on export of goods since the exporter is required to fulfill various conditions/requirements in order to claim the same. Duty drawback accrues only when the claim of the exporter-assessee is sanctioned by the custom authorities; Duty drawback receivable is separately chargeable to tax as income of the assessee under section 28 of the Act. Receipt of duty drawback is altogether different from allowability of deduction in respect of which duty paid by the assessee on payment basis under section 43B of the Act. The Ld. AR further submitted that without prejudice to the aforesaid, in case the assessing officer’s contention were to be accepted, then duty drawback income amounting to Rs. 15,93,11,093/- declared by the assessee himself, being the amount of duty drawback received in the instant year but which allegedly accrued in the previous year, as per the principle adopted by the assessing officer is not taxable in the year under consideration. The Ld. AR submitted that there is no justification for adopting two different and inconsistent methods while computing the income of the present year. The aforesaid sum was duly declared as the income of the immediately succeeding year on receipt, a method consistently adopted by the assessee company and accepted by the AO since inception. The Tribunal has decided the aforesaid issue in favour of assessee in the assessment years 1999-00, 2000-01, 2001- 02, 2002-03, 2004-05, 2005-06, AY 60 2006-07, 2007-08 and 2008-09. The orders of the Delhi Tribunal have been affirmed by the Delhi High Court for assessment years 1999-00 (ITA No.250/2005), 2000-01 (ITA No.976/2005), 2005-06 (ITA Nos. 171 and 172/2012) and 2006-07 (ITA No. 381/2016). Further, the issue stand covered in favour of the assessee in view of the decision of the Hon’ble Punjab and Haryana High Court in the case of CIT v. Sriyansh Knitters P. Ltd. 336 ITR 235 wherein the High Court, while affirming the finding of the Tribunal held that duty drawback accrues in the year in which rate is fixed by the competent authority after verification of claim of the assessee and amount is quantified and not in the year of export. Similar view has been held in the case of CIT v. Manav Tools (India) P. Ltd: 336 ITR 237 (P&H). It has been held similarly by the Delhi High Court in assessee’s own case for assessment years 1994-95, 1995-96, 1996-97, 1997-98, 1998-99, 1999-00, 2001-02 and 2004-05. 18. The Ld. DR relied upon the assessment orders. 19. We have heard both the parties and perused the records. It is pertinent to note that the Hon’ble Delhi High Court in Assessee’s own case held as under: “6. Question (iii) concerns the disallowance of an addition of Rs. 20,60,14,392 representing the customs duty paid on imports claimed as a deduction under Section 43B of the Act. This was directly paid by the Assessee to the customs authorities and paid during the AY in question. Consequently, 61 it was correctly allowed as a deduction by the ITAT. Question (iii) therefore, is answered in the affirmative i.e. in favour of the Assessee and against the Revenue.” The facts of the present case and the decision of the Delhi High Court is on identical issue. Thus, this issue is covered by the decision of the Hon’ble Delhi High Court in favour of the assessee. 20. In result, Ground No. 3.5. is allowed.” 64. Respectfully following the same, this Ground is dismissed. 65. Ground No. 4 relates to the deletion of addition of Rs. 3 crores made by the Assessing Officer on account of Excise Duty paid under protest. 66. A similar issue came up for consideration before this Tribunal in A.Y 2009-10. The relevant findings read as under: “35. Ground No. 3.11 to 3.12 is in respect of Custom Duty and Excise Duty both paid under protest. Custom duty paid under protest represented the duties paid as per the additional demand raised by the statutory authorities, i.e. the Excise Department and the Customs Department. Though the assessee has disputed such additional demand and paid the amount under protest, in view of the demand being in the nature of a statutory liability, the same represented accrued/ crystallized liability. As per the 62 mandate of section 43B of the Act, the aforesaid additional excise duty and custom duty so actually paid under protest was claimed as deduction on payment basis which has been disallowed by the assessing officer. The Assessing Officer, following the orders for preceding assessment years, disallowed the said claim on the ground that since the assessee was contesting these liabilities and there was no finality regarding the liabilities and that the same were not debited to the P&L A/c. 36. The Ld. AR submitted that the Tribunal has held in assessee’s own case that, since the duty has been paid, deduction claimed under section 43B of the Act has to be allowed. The Ld. AR relied upon the decision of Delhi High Court in the case of CIT v. Dharampal Satyapal Sons (P.) Ltd. 50 DTR 287 wherein 528 49 ITA No. 467/Del/2014 the High Court has held that amount paid by the assessee against excise duty demand raised by excise authorities was allowable deduction as it was statutory liability which was allowable on payment basis under section 43B of the Act. Similarly, the Mumbai Bench of the Tribunal in the case of Euro RSCG Advertising (P) Ltd v. ACIT [2013] 154 TTJ 389 (Mum) held that service tax liability alongwith the interest paid on the basis of the show cause notice issued by the service tax authorities, is allowable deduction under section 43B of the Act in the year in which the payment was made irrespective of the fact that such demand was paid under protest and the matter was subjudice before the authorities. The issue stands covered in favour of the assessee by the order of the Tribunal in the assessee’s own case for A.Y’s 1999-00, 2000-01, 2001- 02, 63 2002-03 2005-06, 2006-07, 2007-08 and 2008-09. 37. The Ld. DR relied upon the order of the Assessing Officer. 38. We have heard both the parties and perused the records. It is pertinent to note that the Tribunal in Assessee’s own case held as under: “3.28. With regard to the disallowance of claim for deduction under section 43B of the Act for a sum of Rs. 92,431 /- being Customs Duty paid under protest, assessee submits that the Custom duty paid under protest represented the duties paid as per the additional demand raised by the statutory authorities, i.e. the Customs Department, and though they have disputed such additional demand and paid the amount under protest, in view of the demand being in the nature of a statutory liability, the same represented accrued/ crystallized liability. According to the assessee, as per the mandate of section 43B of the Act, the aforesaid additional custom duty so actually paid under protest was claimed as deduction on payment basis which has been disallowed by the assessing officer. However, the assessing officer disallowed the aforesaid following assessment order for the assessment year 2005-06. Ld. AR invited our attention to the decision of the Mumbai Bench of the Tribunal in the case of Euro RSCG Advertising (P) Ltd v. 529 50 ITA No. 467/Del/2014 ACIT : 154 TTJ 389 (Mum) wherein it was held that wherein the service tax liability alongwith the interest was paid on the basis of show cause notice issued by the service tax authorities, the same was allowable under section 43B in the year in which the payment 64 was made irrespective of the fact that such demand was paid under protest and the matter was subjudice before the authorities. He further submitted that in similar circumstances the Honhle Delhi High Court in the case of CIT v. Dharampal Satyapal Sons (P.) Ltd.: 50 DTR 287, held that the amount paid by the assessee against excise duty demand raised by excise authorities was allowable deduction as it was statutory liability which was allowable on payment basis under section 43B of the Act, and also submitted that in assessee’s own case for A.Y’s 1999-00, 2000-01, 2001-02, 2002-03, 2005-06, 2006-07 and 2007-08, coordinate Benches of this Tribunal have held that, since the duty is paid, deduction claimed u/s 43B of the Act has to be allowed. 3.29. This aspect of disallowance of claim for deduction under section 43B of the Act for the amount of Customs Duty paid under protest has been one of the subject of matters in assessee’s own case for the AY 2006-07 and 2007- 08 successively, and for the AY 2006-07 vide para 5.5 of the order dated 24.8.2015, the following finding was returned by the Tribunal, “ 5.5. Next item is Customs duty paid under protest amounting to Rs. 1,34,25,787. We have discussed similar issue supra while dealing with 'Excise duty paid under protest' by holding that first the Profit and loss account be recast as per 'Inclusive method' in terms of section 145A and then some adjustments as stated above be 65 separately made. Such directions are fully applicable pro tanto to the customs duty paid under protest. The AO is directed to follow the same.” 3.30. While following the same for AY 2007-08, Tribunal set aside the matter to the file of the Assessing Officer to decide it afresh as decided above by the ITAT after affording opportunity of being heard to the assessee. Ld. DR fairly concedes that the decision of the Tribunal on the issue of ‘Excise duty paid under protest’, in A.Y. 2006- 07 and 2007- O8 was acceptable to the Revenue, and accordingly, no further appeal was preferred on this issue. In these circumstances, while following the same, we set aside Ground No. 3.8 to the file of the Assessing Officer to decide it afresh as decided by the ITAT for the Assessment Years 2006-07 and 2007-08 after affording opportunity of being heard to the assessee.” Thus, the issue is squarely covered by the decision of the Tribunal in Assessee’s own case, therefore, we set side this issue to the file of the Assessing Officer to decide it afresh as decided by the Tribunal in earlier Assessment Years. Needless to say, the assessee be given opportunity of hearing. Ground No. 3.11 to 3.12 are partly allowed for statistical purpose. 39. In result, Ground No. 3.11 to 3.12 are partly allowed for statistical purpose.” 66 67. Respectfully following the same, this Ground is allowed for statistical purposes. 68. Ground No. 5 relates to the deletion of addition of Rs. 9,29,52,285/- made by the Assessing Officer on account of Excise Duty u/s 43B of the Act. 69. Similar issue was considered by this Tribunal in A.Y 2001-02 in ITA No. 300/DEL/2006, 204/DEL/2006 at para 22 of its order. The relevant findings read as under: “22. In regard to Ground No.9 which is against the action of the CIT (A) in deleting the disallowance of the Excise Duty paid by the assessee representing the reversal of the excise MODVAT availed in inputs on clearance of finished goods, it was fairly conceded by both the sides that this issue was squarely covered by the decision of the co-ordinate Bench in assessee’s own case for assessment year 2000-01 in ITA No.678/Del/2004. Respectfully following the decision of the Co-ordinate Bench of this Tribunal in assessee’s own case for assessment year 2000- 01, the findings of the CIT (A) on this issue stands confirmed.” 70. Respectfully following the findings of the co-ordinate bench [supra], this ground is dismissed. 67 71. Ground No. 6 relates to the deletion of addition of Rs. 1,08,18,31,688/- made by the Assessing Officer on disallowing liabilities on account of increased prices. 71. A similar issue came up for consideration before this Tribunal in ITA No. 467/DEL/2014A.Y 2009-10. The relevant findings read as under: “68. Ground No. 9 to 9.5 is regarding disallowance on account of Provisional Liability Expenditure on account of FPI-OE Components. The assessee had accounted for liability on account of foreseen price increase (FPI) based on scientific analysis of increase in input prices, on purchases already made by the company at provisional prices, and on which the final price is yet to be settled with the supplier. FPI of Rs.36,38,43,197/- was debited to consumption of raw material and components in the profit and loss account in accordance with mercantile system of accounting. The same was claimed as business deduction in the computation of income. Vendor-wise details of total provision of Rs.36,38,43,197/- made during the relevant year was submitted before the Assessing Officer. The said practice was in consonance with the provisions of the Companies Act and generally accepted accounting principles and practices of Institute of Chartered Accountants of India. The assessing officer however, disallowed the aforesaid claim of the assessee on the ground that assessee has quantified the liability without acknowledging the quantified 68 liability to the creditors. The Ld. AR submitted that liability for FPI was provided in the books of accounts on a scientific analysis of increase in price of components due to change in input cost. The liability of FPI was estimated by the purchase department with substantial degree of accuracy as they are in constant touch with suppliers and have knowledge of the claims of suppliers, trend of the cost of inputs, etc. The personnel in the purchase department updates the foreseen price of each component for each supplier and effective date, based on their input and available information. The accounting of FPI was justified on account of following reasons: (a) The liability was booked on account of materials already supplied by suppliers and not on an ad hoc or arbitrary basis. b) The amount was determined and computed with a substantial degree of accuracy at the time of determining and booking the amount as per information available till date of finalization of accounts c) The liability was required to be booked as per accrual system of accounting as the goods were already received. The Ld. AR submitted that FPI is an existing liability as per the understanding arrived at with the suppliers of the components, who are original manufacturers of the components. It is on the basis of analysis of the claims, price trend, and correspondences /discussions/negotiations with the suppliers during the year and past dealings that the assessee had computed the impact of 69 change in price of components. The change in price of the components takes place to give effect to the increase in the cost of the inputs required for manufacturing of the components. The same is as per the agreement with the suppliers to ensure uninterrupted supply of components, even when their cost has been increased. The Ld. AR also submitted that such practice is quite common in the motor vehicle industry which has also been duly recognized in the departmental clarification issued by the Central Excise Department. Thus, the Ld. AR submitted that it is not a case of provisional liability/contingent liability incurring of which is dependent on happening of an event. The liability, in our respectful submission, is in fact in respect of such purchases already made by the assessee and duly debited in the books of accounts. Thus, the amount of FPI is a liability which accrues simultaneously with each purchase made by assessee and is allowable as deduction in determining the income of the relevant assessment year. The aforesaid is further in accordance with practice prevalent in motor vehicles industry. Reference in this regard is invited to a notification dated 28.7.2003 issued by the Excise Authorities on the subject of charging of interest under section 11AB wherein the excise authorities recognized prevailing commercial practice of supplementary invoices being made in addition to the original invoices. The liability on account of FPI was an ascertained liability representing additional purchase price of the goods. Since the liability accrued during the relevant assessment year, even though was finally paid in the following assessment years, the same was allowable deduction. The Ld. AR relied upon the following decisions wherein it has been held that 70 liability which has arisen in the relevant accounting year is an allowable deduction even though its actual quantification and discharge is deferred to a future date: a) Calcutta Discount Co. Ltd.: 37 ITR 1 (SC) b) Metal Box (P) Limited (1969): 73 ITR 53 (SC) c) United Commercial Bank v. CIT 240 ITR 355 (SC) d) Bharat Earth Movers: 245 ITR 428 (SC) e) Kelvinator of India Ltd. reported in 256 ITR 1 confirmed by SC in 320 ITR 561 f) CIT v Vinitec Corpn. (P) Ltd.: 278 ITR 337 (Delhi) g) National Mineral Development Corporation Ltd. v. JCIT : 98 ITD 278 (Hyd. ITAT) The Hon’ble Supreme Court in the case of CIT v. Woodward Governor India (P) Ltd. 312 ITR 254 has held that:- g) “21. In conclusion, we may state that in order to find out if an expenditure is deductible the following have to be taken into account (i) whether the system of accounting followed by the assessee is mercantile system, which brings into debit the expenditure amount for which a legal liability has been incurred before it is actually disbursed and brings into credit what is due, immediately it becomes due and before it is actually received; (ii) whether the same system is followed by the assessee from the very beginning and if there was a change in the system, whether the change was bona fide; (iii) whether the assessee has given the same treatment to losses claimed to have accrued and to the 71 gains that may accrue to it; (iv) whether the assessee has been consistent and definite in making entries in the account books in respect of losses and gains; (v) whether the method adopted by the assessee for making entries in the books both in respect of losses and gains is as per nationally accepted accounting standards; (vi) whether the system adopted by the assessee is fair and reasonable or is adopted only with a view to reducing the incidence of taxation. ” The Ld. AR further relied upon the judgment of the Supreme Court in the case of Rotork Controls India (P) Ltd. vs CIT: 314 ITR 62 wherein it has been held that:- “17. At this stage, we once again reiterate that a liability is a present obligation arising from past events, the settlement of which is expected to result in an outflow of resources and in respect of which a reliable estimate is possible of the amount of obligation. ” The Ld. AR submitted that the invoices, raised by the suppliers, were provisional and each invoice was liable to be reviewed/ amended once the quantum is determined and that this quantum of increase would apply to recompute the prices payable by assessee on all supplies made by the suppliers during the year. The aforesaid method of accounting regularly and consistently followed does not lead to any loss of revenue, whatsoever. The liability estimated in a particular year finally settled in the subsequent year gets reflected in the profit & loss account. The income as 72 well as the charge on settlement in the subsequent year is brought to the income or expenses statement of the assessee company to the extent of variation from the actual FPI liability. It is well settled that mere timing difference should not be used to disturb the method of accounting and books of accounts of a tax payer consistently maintained and accepted year after year. The Ld. AR further submitted that the aforesaid method of accounting has been regularly followed by assessee and claims were accordingly made which has been duly accepted by Revenue in all the preceding years except in assessment year AY 2003-04 There has been no change in method of accounting or estimation. The Ld. AR submitted that it is a well settled position of law that while the principle of res judicata does not apply to the income- tax proceedings, the Courts have emphasized there must be consistency in the position that the Revenue takes on an issue in different assessment years. The Ld. AR relied upon the following decisions: • CIT vs. Excel Industries (P) Limited: 358 ITR 295 (SC) • Radhasoami Satsang v. CIT 193 ITR 321 (SC) • DIT (E) v. Apparel Export Promotion Council: 244 ITR 734 (Del) • CIT v. Neo Polypack (P) Ltd: 245 ITR 492 (Del.) • CIT v. Girish Mohan Ganeriwala: 260 ITR 417 (P&H) • CIT V. Dalmia Promoters Developers (P) Ltd: 200 CTR 426 (Del.) • Escorts Cardiac Diseases Hospital: 300 ITR 75 (Del) The Ld. AR further submitted that against the total accrued liability claimed during the year amounting to Rs.36.38 crores, the entire amount has either been paid or written-back and offered for tax as part of his chargeable income in assessment 73 year 2010-11. The amount of write-back could, in law, be taxed by the Assessing Officer in assessment year 2010-11 only if the same was an allowable deduction from the assessee’s assessable income in assessment year 2009-10. Further, the payment made in next year against the liability for foreseen price increase of previous year should be allowed as deduction in Assessment Year 2010-11. The issue now stands squarely covered in favour of the assessee by the order of the Tribunal in the assessee’s own case for the assessment years 2007-08 and 2008-09, wherein the Tribunal held that provision for foreseen price increase made by the assessee represented an accrued/crystallized liability, which is an allowable business deduction. 69. The Ld. DR relied upon the Assessment Order. 70. We have heard both the parties and perused all the relevant material available on record. We find, the Tribunal in assessee’s own case for A.Y. 2008- 09 has held as under: Ground No 12 to 12.5 Disallowance on account of Provisional Liability relating to Expenditure on account of FPI-OE Components 12. On the aspect of Disallowance of Rs.32,11,63,153 on account of Provisional Liability relating to Expenditure on account of FPI- OE Components, case of the assessee is that the assessee had accounted for liability on account foreseen price increase (FPI) on an estimate basis, this FPI of Rs.32,11,63,153 was debited to consumption of raw material and components in the profit and loss 74 account in accordance with mercantile system of accounting and the same was claimed as business deduction in the computation of income. Grievance of the assessee is that the assessing officer however, disallowed the aforesaid claim of the assessee on the ground that assessee has quantified the liability without acknowledging the quantified liability to the creditors. However, according to the assessee the change in price of the components takes place to give effect to the increase in the cost of the inputs required for manufacturing of the components. The same is, as per the agreement with the suppliers, to ensure uninterrupted supply of components, even when their cost has increased. According to the assessee FPI is an existing liability as per the understanding arrived at with the suppliers of the components, who are original manufacturers of the components. It is submitted on behalf of the assessee that the liability of FPI was estimated by the purchase department with substantial degree of accuracy as they are in constant touch with suppliers and have knowledge of the claims of suppliers, trend of the cost of inputs, etc. The personnel in the purchase department updates the foreseen price of each component for each supplier and effective date, based on their input and available information in computer system regarding quantity purchased and price paid. The liability in respect of each component was worked out considering the weight of each material, the quantity procured, the old rate and new rate worked by the assessee considering the price changes occurred during the period. It is on the basis of analysis of the claims, price trend, and correspondences/ discussions/negotiations with the suppliers during the year and 75 past dealings that the assessee had computed the impact of change in price of components, and, therefore, it is not a case of provisional liability/contingent liability, incurring of which is dependent on happening of an event, but in fact it is in respect of such purchases already made by the assessee and duly debited in the books of accounts resulting in that the amount of FPI is a liability which accrues simultaneously with each purchase made by assessee and is allowable as deduction in determining the income of the relevant assessment year. The accounting of FPI was justified by the assessee on account of the liability that was determined and computed with a substantial degree of accuracy on account of materials already supplied by suppliers, at the time of determining and booking the amount as per information available till date of finalization of accounts and such a liability was required to be booked as per accrual system of accounting as the goods were already received. According to the Ld. AR this practice of provision for FPI is in accordance with practice prevalent in motor vehicles industry. Reference in this regard is invited to a notification dated 28.7.2003 issued by the Excise Authorities on the 619 140 ITA No. 467/Del/2014 subject of charging of interest under section 11AB wherein the excise authorities recognized prevailing commercial practice of supplementary invoices being made in addition to the original invoices. 12.1. Placing reliance on the decision in assessee’s own case decided in favour by CIT (A) for AY 2003-04 and by ITAT for AY 2007- 08, and also the decisions reported in Calcutta Discount 76 Co. Ltd.: 37 ITR 1 (SC), Metal Box India (P) Limited (1969): 73 ITR 53 (SC) , United Commercial Bank v. CIT 240 ITR 355 (SC), Bharat Earth Movers: 245 ITR 428 (SC) , CIT v Vinitec Corpn. (P) Ltd.: 278 ITR 337 (Delhi), National Mineral Development Corporation Ltd. v JCIT: 98 ITD 278 (Hyd. ITAT), Ld. AR argued that that liability which has arisen in the relevant accounting year is an allowable deduction even though its actual quantification and discharge is deferred to a future date. In respect of the vendor-wise and item-wise details of total provision of Rs.32,11,63,153 made during the relevant year in the paper book, it is submitted that the said details contain name of the vendor, the amount of additional value in respect of the component, the invoices, raised by the suppliers, were provisional and each invoice was liable to be reviewed/ amended once the quantum is determined and that this quantum of increase would apply to re-compute the prices payable by assessee on all supplies made by the suppliers during the year, and the liability for FPI was provided in the books of accounts on a scientific analysis of increase in price of components due to change in input cost, representing additional purchase price of the goods. It is submitted that since the liability accrued during the relevant assessment year, even though was finally paid in the following assessment years, the same was allowable deduction. 12.2. Ld. AR placed reliance on the decision of the Hon’ble Supreme Court in the case of CIT vs Woodward Governor India (P) Ltd.: 312 ITR 254 wherein it is held that:- 77 “21. In conclusion, we may state that in order to find out if an expenditure is deductible the following have to be taken into account (i) whether the system of accounting followed by the assessee is mercantile system, which brings into debit the expenditure amount for which a legal liability has been incurred before it is actually disbursed and brings into credit what is due, immediately it becomes due and before it is actually received; (ii) whether the same system is followed by the assessee from the very beginning and if there was a change in the system, whether the change was bona fide; (iii) whether the assessee has given the same treatment to losses claimed to have accrued and to the gains that may accrue to it; (iv) whether the assessee has been consistent and definite in making entries in the account books in respect of losses and gains; (v) whether the method adopted by the assessee for making entries in the books both in respect of losses and gains is as per nationally accepted accounting standards; (vi) whether the system adopted by the assessee is fair and reasonable or is adopted only with a view to reducing the incidence of taxation.“ 12.3. Further reliance is also placed on the judgment of the apex Court in the case of Rotork Controls India (P) Ltd. vs CIT: 314 ITR 62 wherein it has been held that:- “17. At this stage, we once again reiterate that a liability is a present obligation arising from past events, the settlement of which is expected to result in an outflow of resources and 78 in respect of which a reliable estimate is possible of the amount of obligation.” 12.4. Ld. AR submitted that this practice is in consonance with the provisions of the Companies Act and generally accepted accounting principles and practices of Institute of Chartered Accountants of India and has been regularly followed by assessee and claims were accordingly made which has been duly accepted by Revenue in all the preceding years except in assessment year AY 2003-04 and AY 2007- 08. There has been no change in method of accounting or estimation. It is submitted that this method of accounting regularly and consistently followed does not lead to any loss of revenue, whatsoever and the liability estimated in a particular year finally settled in the subsequent year gets reflected in the profit & loss account, whereby the income as well as the charge on settlement in the subsequent year is brought to the income or expenses statement of the assessee company to the extent of variation from the actual FPI liability. Ld. AR argued that it is well settled that mere timing difference should not be used to disturb the method of accounting and books of accounts of a tax payer consistently maintained and accepted year after year. In support of his argument that while the principle of res judicata does not apply to the income-tax proceedings, the Courts have emphasized there must be consistency in the position that the Revenue takes on an issue in different assessment years, Ld. AR cited the decisions reported in CIT vs. Excel Industries (P) Limited: 358 ITR 295 (SC), Radhasoami Satsang v. CIT 193 ITR 321(SC), DIT (E) v. Apparel Export Promotion Council: 244 ITR 79 734 (Del), CIT v. Neo Polypack (P) Ltd: 245 ITR 492 (Del.), CIT v. Girish Mohan Ganeriwala: 260 ITR 417 (P&H), CIT V. Dalmia Promoters Developers (P) Ltd: 200 CTR 426 (Del.), Escorts Cardiac Diseases Hospital: 300 ITR 75 (Del). Since the issue now stands covered in favour of the assessee by the order of the Tribunal in the assessee own case for the assessment year 2007- 08, wherein the Tribunal held that provision for foreseen price increase made by the appellant represented an accrued/crystallized liability, which is an allowable business deduction, Ld. AR submits that the addition on this account may be deleted. 12.5. Per contra, Ld. DR submitted that the decision of ITAT for AY 2007-08 is not acceptable because the assessee’s methodology is unique and no case law applies to the modus operandi adopted by the assessee. Further according to him Assessee’s reliance on the case of Hon’ble Supreme Court in the case of Radha Saomi Satsang v. CIT reported in 193 ITR 321 and, Berger Paints v. CIT reported in 266 ITR 199, is also misplaced because in these cases Hon’ble Supreme Court was considering the situation where the liability was certain, but what was not certain was the quantum of such liability. In the case of the assessee, the assessee has quantified the liability without being sure of the liability and at the same time not acknowledging the quantified liability to the creditors and not leaving any note in the audit report. He placed reliance on the decisions reported in ITO vs. EMCO Transformers Ltd. (ITAT, Bom) 32 1TD 260, Srinivasa Computers Ltd. vs. ACIT (ITAT, Chennai) 107 1TD 357, and CIT 80 vs. Rotork Controls India Ltd. (Mad) 293 ITR 311. According to him, later on the Hon’ble Supreme Court has laid down General Principle on this issue, wherein it was stated that the value of contingent liability, like warranty expense, if properly ascertained and discounted on accrual basis can be an item of deduction under section 37, the principle of estimation is not the normal rule it would depend on the nature of business, nature of sale, nature of product and scientific method of accounting adopted by the assessee, and it would also depend upon the historical trend and number of articles produced. 12.6. On a perusal of the order of the Tribunal for the AY 2007-08 on this issue, we find that this issue covered by the ground Nos. 13 to 13.5 and by noticing that similar disallowance was deleted by the first appellate authority and revenue did not prefer any appeal thereon, and the Tribunal observed as follows: “26.5 Considering the above submissions, we find that similar disallowance was made in the assessment year 2003-04 and the first appellate order had deleted the disallowance while deciding the issue in favour of the assessee against which Revenue did not prefer any appeal before the ITAT. Thereafter, only during the year under consideration, such disallowance has been made. Of course, principles of res- judicata is not application in the incometax matters but rule of consistency is applicable as per which under the similar facts and circumstances, department ought to follow same approach on an issue in other assessment years. It is an 81 established proposition of law that a method of accounting regularly and consistently followed does not lead to any loss of Revenue, whatsoever. The liability estimated in a particular year finally settled in the subsequent year gets reflected in the profit and loss account. We thus set aside the matter to the file of the Assessing Officer with direction to decide the issue afresh after affording opportunity of being heard to the assessee as per the first appellate order on the issue in the assessment year 2003-04 against which no appeal was preferred by the Revenue before the ITAT.” 12.7. When a similar question was dealt with by the first appellate authority and the Revenue accepted the same without preferring any appeal thereon, it is not open for the Revenue now to contend that Assessee’s reliance on the case of Hon’ble Supreme Court in the case of Radha Saomi Satsang v. CIT reported in 193 ITR 321 and, Berger Paints v. CIT reported in 266 ITR 199, is also misplaced because in these cases Hon’ble Supreme Court was considering the situation where the liability was certain, but what was not certain was the quantum of such liability. There is no dispute that the same method of accounting is regularly and consistently followed by the assessee as such rule of consistency is applicable as per which under the similar facts and circumstances, department ought to follow same approach on an issue in other assessment years. We, therefore, respectfully following the reasoning adopted by the coordinate Bench of this Tribinal for the AY 2007-08, set aside the matter to the file of 82 the Assessing Officer with direction to decide the issue afresh after affording opportunity of being heard to the assessee as per the first appellate order on the issue in the assessment year 2003-04, as followed by this Tribunal for the AY 2007-08 also. Grounds 12 to 12.5 624 145 ITA No. 467/Del/2014 are disposed of accordingly.” Thus, the issue is identical in assessee’s own case for A.Y. 2008-09. Therefore, we are remanding back this issue to the file of the Assessing Officer with direction to decide the issue afresh after giving opportunity of hearing to the assessee. Hence Ground No. 9 to 9.5 are partly allowed for statistical purpose. 71. In result, Ground No. 9 to 9.5 are partly allowed for statistical purpose. “ 72. Respectfully following the findings of the co-ordinate [supra] we remand this issue to the file of the Assessing Officer to decide afresh as per directions given in earlier A.Y. This ground is allowed for statistical purposes. 73. Ground No. 7 relates to the deletion of addition of Rs. 8,74,54,456/- made by the Assessing Officer on account of under valuation of stock. 83 74. While scrutinizing the return of income, the Assessing Officer was of the opinion that there is an under valuation of stock amounting to Rs. 8,74,54,456/- as the assessee has not been able to produce any evidence that the impact of sales return of same amount on the closing stock has been correctly worked out. 75. Before the ld. CIT(A), the assessee submitted that all the sales return were recorded in the vehicle stock records and have been duly considered in the value of stock as on 31.03.2003. 76. After considering the facts and submissions and after examining the documents submitted by the assessee, the ld. CIT(A) was convinced that the assessee has maintained complete records, matching of returned vehicles with sales returned report, finished goods stock report and finished goods stock valuation report. The ld. CIT(A) gave a factual finding that the vehicles which have been returned during the year and have remained unsold have been included in the closing stock of finished goods and have been accounted in the books of account. 84 77. No factual error has been pointed out in the findings of the ld. CIT(A). We, therefore, do not find any reason to interfere with the findings of the ld. CIT(A). This ground is dismissed. 78. Ground No. 8 with its sub-grounds relates to the deletion of disallowance of long term capital loss as speculative loss. 79. The co-ordinate bench in A.Y 2001-02 in ITA No. 300/DEL/2006 has considered this issue at Paras 31 and 32 of its order. The relevant findings read as under: “31. In regard to Ground No.15, which was against the deletion of the disallowance of the long-term capital loss held as speculative loss within the meaning of Explanation to Section 73 of the Act, it was submitted that the issue was squarely covered by the decision of the jurisdictional High Court of Delhi in the case of Sahara India Financial Corporation reported in 206 ITR 258. It was the submission that the shares have been held as investment and the appellant has not purchased or sold shares of any company other than the trade investments. In reply, the Ld. DR vehemently supported the order of the Assessing Officer. 32. We have considered the rival submissions. It is noticed that the assessee has incurred the capital gains loss on account of the 85 redemption of the preference share of the ICICI and the loss is due to the effect of indexation on the cost of purchase as the redemption was at par. Obviously, the redemption of the preference shares cannot be treated as a sale of the shares. It is also noticed that during the year the assessee has not purchased or sold any shares of any company other than the trade investments. In the circumstances, in view of the decision of the Hon’ble Gujarat High Court in the case reported in 32 CTR 268, the redemption of the preference shares cannot be held to be the sale of the shares and as there is no sale of the shares, there is no question of this being treated a speculative loss on the sale. It is further noticed that the revenue has not raised any specific ground that such shares were not held as stock-intrade and it is noticed that the shares are held by the assessee as investment. In the circumstances, we are of the view that this loss on the redemption of the preference shares cannot be treated as speculative loss. Our view is also supported by the decision of the Hon’ble jurisdictional High Court of Delhi in the case of Sahara India Financial Corporation reported in 206 CTR 258. In the circumstances, Ground No.15 of the Revenue’s appeal stands dismissed.” 80. Respectfully following the same, this ground is dismissed. 81. Ground No. 9 relates to the deletion of addition of Rs. 80,248/- made by the Assessing Officer on account of expenses incurred on club membership. 86 82. Similar disallowance was considered by the Tribunal in assessee’s own case. In A.Y 2009-10, this Tribunal in ITA No. 467/DEL/2014 has considered this issue at Para 80 of its order. The relevant findings read as under: “80. Ground No. 12 is relating to disallowance of club expenditure amounting to Rs. 6,41,060. The Ld. AR submitted that the assessee company has debited Rs.6,41,060/- on account of club membership fees to profit & loss account. The said expenditure is incurred on subscription to clubs provided to various employees and directors. The Assessing Officer has, in the impugned assessment order disallowed the said expenditure of Rs.6,41,060/- by holding that the same cannot be considered as business expenditure. At the outset, the Ld. AR submitted that the aforesaid expenditure has been incurred for business purposes on the grounds of commercial expediency and there is no element of any personal benefit being granted either to the employee or director. The Tax Auditors have amply clarified this position vide clause 17(b) of the Tax Audit Report. The aforesaid expenditure is, thus, allowable as deduction. The aforesaid issue is covered by the decision of the Supreme Court in the case of Samtel Color Ltd (Civil appeal No 6449/2012) wherein the Court dismissed the SLP filed by Revenue against the order of Dr Delhi High Court (referred infra) allowing the claim for deduction representing 6 expenditure incurred on club membership. The Ld. AR relied upon the following judicial pronouncements: 87 • Nestle India Limited: 296 ITR 682 (Del.) • CIT v. Samtel Color Ltd.: 326 ITR 425 (Del.) - SLP filed by the Revenue dismissed in C.A No.6449/2012 • Otis Elevators Co. (India) Ltd v. CIT 195 ITR 682 (Bom) • CIT v. Citibank N.A.: 264 ITR 18 (Bom) • CIT v. Force Motors Ltd.: ITA No. 5296 of 2010 (Bom) • CIT v. Sundaram Industries Ltd 240 ITR 335 (Mad) • Gujarat State Export Corporation Ltd. v. CIT: 209 ITR 649 (Guj.) • CIT v. Infosys Technologies Ltd.: 205 Taxman 59 (Kar) • Assam Brook Ltd. v CIT: 267 ITR 121 (Cal) • DCIT v. Max India Ltd (2007) 112 TTJ (Asr.) 726 (Bom); • American Express International Banking Corporation v CIT 258 ITR 601. The Ld. AR further submitted that the aforesaid issue is also covered in favour of the assessee by the decisions of the Tribunal in the assessee’s own case for the assessment years 2001-02, 2002-03, 2004-O5, 2005-06, 2006-07, 2007-08 and 2008-09. 81. The Ld. DR relied upon the Assessment Order. 82. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that in assessee’s own case for A.Ys. 2001-02, 2002-03, 2004-O5, 88 2005-06, 2006-07, 2007-08 and 2008-09, the Tribunal decided this issue in favour of the assessee. The Tribunal held as under: “8. On the aspect of disallowance of Rs.10,06,470/- expenditure incurred on club membership, case of the assessee is that the assessee company has debited Rs.10,06,470/- to profit & loss account, the expenditure was incurred on subscription to clubs provided to various employees and directors on account of club membership fees and the assessing officer has, in the impugned assessment order disallowed the said expenditure of Rs.10,06,470/- by holding that the same cannot be considered as business expenditure. Ld. AR argued that this expenditure has been incurred for business purposes on the grounds of commercial expediency and there is no element of any personal benefit being granted either to the employee or director and the Tax Auditors have amply clarified this position vide clause 17(b) of the Tax Audit Report. Basing on the decision of the Supreme Court in the case of Samtel Color Ltd. (Civil appeal no. 6449/2012) by way of which the Hon’ble Apex Court dismissed the SLP filed by Revenue against the order of Delhi High Court in CIT v. Samtel Color Ltd.: 326 ITR 425 (Del.) allowing the claim for deduction representing expenditure incurred on club membership, he argued that this expenditure is allowable as deduction. He submitted that besides being covered by the decisions in Nestle India Limited: 296 ITR 682 (Del.), CIT v. Samtel Color Ltd.: 326 ITR 425 (Del.), Otis Elevators Co. (India) Ltd. v. CIT 195 89 ITR 682 (Bom); American Express International Banking Corporation v. CIT 258 ITR 601 (Bom.); CIT v. Citibank N.A.:264 ITR 18 (Bom), CIT v. Force Motors Ltd.:ITA No. 5296 of 2010 (Bom), CIT v. Sundharam Industries Ltd. 240 ITR 649 (Guj.), CIT v. Infosys Technologies Ltd.: 205 Taxman 59 (Kar), Assam Brook Ltd. v. CIT: 267 ITR 121 (Cal), DCIT v Max India Ltd. (2007) 112 TTJ (Asr.)726, this issue is also covered in favour of the assessee by the decisions of the Tribunal in the assessee’s own case for the assessment years 2001-02, 2002-03, 2004-05, 2005-06, 2006-07 and 2007- 08. 8.1 On this aspect, the Ld. DR submitted that in view of the decision of Hon’ble Supreme Court cited above, the decision of the ITAT was accepted and further appeal before the Hon’ble High Court u/s 260A was not preferred on this issue for AY 2006-07 and 2007-08. In view of this submission of Ld. DR this ground is allowed and the Assessing Officer is directed to allow a sum of Rs. 10,06,470/- being expenditure incurred on account of club membership fees.” Thus, this issue is squarely covered by the decision of the Tribunal in assessee’s own case. Hence Ground No. 12 is allowed. 83. In result, Ground No. 12 is allowed.” 83. Respectfully following the findings of the co-ordinate bench, this ground is dismissed. 90 84. Ground No. 10 with its sub grounds relates to levy of interest u/s 234B of the Act. 85. This levy of interest is mandatory and the Assessing Officer is directed to charge interest as per provisions of law. 86. As a result, the appeal of the Revenue is allowed in part for statistical purposes. 87. To sum up, in the result, the appeal of the assessee in ITA No. 4081/DEL/2010 as well as the revenue’s appeal in ITA No. 4174/DEL/2010 is allowed in part for statistical purposes. The order is pronounced in the open court on 12.03.2024. Sd/- Sd/- [SAKTIJIT DEY] [N.K. BILLAIYA] VICE PRESIDENT ACCOUNTANT MEMBER Dated: 12 th MARCH, 2024. VL/ 91 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi