GRASIM INDUSTRIES LTD, V. DY CIT CIR 6(3),

ITA 4083/MUM/2003

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84044 (ITAT-MUMBAI)
• Duration Of Justice: 11 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 27-08-2014
• Assessment Year: 1993-1994
• Appeal Filed On: 26-05-2003
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S D SRIVASTAVA
• Assessee Lawyers: J D MISTRI
• Keywords: Capital asset; Depreciation; Business expenditure; Opportunity of being heard; Earning of tax free income; Bad and doubtful debts; Notional interest; Capital receipt; Benefit of exemption; Unabsorbed depreciation; Revenue expenditure; Capital expenditure
• Section: 43B; 143(3); 244A; 80HHC; 14A; 10

Judgement Text

J IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER & SHRI SANJAY GARG, J.M. { ./ I.T.A. NO.4083 /MUM/2003 ( / ASSESSMENT YEAR : 2001-2002 GRASIM INDUSTRIES LIMITED, CORPORATE FINANCE DIVISION, ADITYA BIRLA CENTRE, A WING, 2 ND FLOOR, S.K. AHIRE MARG, WORLI, MUMBAI 400 025. / VS. DY. COMMISSIONER OF INCOME TAX CIRCLE 6(3), 5 TH FLOOR, ROOM NO. 522, AAYAKAR BHAVAN, MUMBAI 400 020. ./ PAN : AAACG4464B ( / APPELLANT ) .. ( / RESPONDENT ) ./ I.T.A. NO.7027 /MUM/2003 ( / ASSESSMENT YEAR : 2001-2002 DY. COMMISSIONER OF INCOME TAX CIRCLE 6(3), 5 TH FLOOR, ROOM NO. 522, AAYAKAR BHAVAN, MUMBAI 400 020. / VS. GRASIM INDUSTRIES LIMITED, CORPORATE FINANCE DIVISION, ADITYA BIRLA CENTRE, A WING, 2 ND FLOOR, S.K. AHIRE MARG, WORLI, MUMBAI 400 025. ./ PAN : AAACG4464B ( / APPELLANT ) .. ( / RESPONDENT ) /C.O. NO. 286/MUM/2004 ARISING OUT OF ITA NO. 7027/MUM/2003 GRASIM INDUSTRIES LIMITED, CORPORATE FINANCE DIVISION, ADITYA BIRLA CENTRE, A WING, 2 ND FLOOR, S.K. AHIRE MARG, WORLI, MUMBAI 400 025. / VS. DY. COMMISSIONER OF INCOME TAX CIRCLE 6(3), 5 TH FLOOR, ROOM NO. 522, AAYAKAR BHAVAN, MUMBAI 400 020. CROSS OBJECTOR .. ( / RESPONDENT ) ITA 4083/M/03,7027/M/03, & CO 286/M/04 2 ASSESSEE BY SHRI J.D. MISTRI & SHRI MADUR AGARWAL DEPARTMENT BY SHRI S.D. SRIVASTAVA / 012 3 45 / DATE OF HEARING : 27-08-2014 6789 3 45 / DATE OF PRONOUNCEMENT : 22-10-2014 [ :; / O R D E R PER R.C. SHARMA, A.M . : THESE ARE THE CROSS APPEALS BY THE ASSESSEE AND REV ENUE ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A) - XXVI, MUMBAI DATE D 16-04-2003 FOR THE A.Y. 2001-02 AND THE C.O. FILED BY THE ASSESSEE IN THE M ATTER OF ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. DISALLOWANCE UNDER SECTION 43B: 1.1 THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE AO IN NOT ALLOWING AMOUNTS PAID OR WRITTEN BACK DURING THE PREVIOUS YE AR AMOUNTING TO RS.4,55,53,707/- WHICH HAD ALREADY BEEN DISALLOWED IN PAST UNDER CLAUSE (C),(D) AND(E) OF SECTION 43B, CONSISTENT WITH THE DEPARTMENTS STAND. 1.2 THE CIT(A) OUGHT TO HAVE HELD THAT IN THE EVENT THE DEPARTMENT STAND IS ACCEPTED BY THE ITAT IN EARLIER YEARS, THEN DEDUCTI ON OF AMOUNTS PAID OR WRITTEN BACK AMOUNTING TO RS.4,55,53,707/- SHOULD B E ALLOWED IN THE PREVIOUS YEAR. 2. EXCHANGE FLUCTUATION LOSS: 2.1 THE CIT(A) FAILED TO DECIDE GROUND NO.9.4 THAT THE LEARNED AO ERRED IN NOT ALLOWING DEDUCTION IN RESPECT OF EXCHANGE FLUCT UATION LOSS OF RS.1,99,71,608/- ACTUALLY INCURRED DURING THE YEAR, WHICH HAD BEEN DISALLOWED IN EARLIER YEARS, CONSISTENT WITH THE DE PARTMENTS STAND. 2.2 THE CIT(A) OUGHT TO HAVE HELD HAT IN THE EVENT THE DEPARTMENTS STAND IS ACCEPTED BY THE ITAT IN EARLIER YEARS, THEN DEDU CTION OF AMOUNTS ACTUALLY PAID IN THE PREVIOUS YEAR AMOUNTING TO RS.1,99,71,6 08/- SHOULD BE ALLOWED. ITA 4083/M/03,7027/M/03, & CO 286/M/04 3 3. NOTIONAL INTEREST ACCRUED BUT NOT DUE ON SECURITIES 3.1 THE LEARNED CIT(A) ERRED IN UPHOLDING THE ACTIO N OF THE AO IN TAXING INTEREST NATIONALLY COMPUTED ON SECURITIES AMOUNTIN G TO RS.66,575/-. 3.2 THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT INTE REST NOTIONALLY COMPUTED ON A PER DAY BASIS ON SECURITIES AMOUNTING TO RS.66 ,575/- CANNOT BE TAXED, AS THE SAID INTEREST HAD NOT ACCRUED I.E. INTEREST WAS NOT DUE FOR PAYMENT ON 31.3.2001 AND NOT RIGHT TO RECEIVE INTEREST VESTED IN THE APPELLANT AS ON THAT DATE. 4. INTEREST RECEIVED FROM INCOME TAX DEPARTMENT: 4.1 THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE AO IN TAXING INTEREST OF RS.13,64,09,609/- ALLOWED UNDER SECTION 144A/244 BY THE DEPARTMENT. 4.2 THE CIT(A) FAILED TO APPRECIATE THAT NO INCOME CAN BE TAXED UNTIL THE PERSON BECOMES ENTITLED TO IT ABSOLUTELY OR IRRETRI EVABLY. THE CIT(A) OUGHT TO HAVE HELD THAT INTEREST ALLOWED BY THE DEPARTMENT I S NOT TO BE TAXED, TILL THE MATTER/APPEALS ARE FINALLY DECIDED AND THE APPELLAN T BECOME ABSOLUTELY ENTITLED TO SUCH INTEREST. 5. TECHNICAL ASSISTANCE FEES: 5.1 THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE AO IN DISALLOWING AMOUNT OF RS.2,34,17,500/- PAID TOWARDS TECHNICAL A SSISTANCE FEES FOR THE EXISTING BUSINESS. 5.2 CIT(A) OUGHT TO HAVE DELETED DISALLOWANCE MADE BY THE AO TOWARDS TECHNICAL ASSISTANCE FEE. 6. DEDUCTION UNDER SECTION 80HHC 6.1 THE CIT(A) ERRED IN NOT DIRECTING THE AO TO ALL OWED DEDUCTION UNDER SECTION 80HHC AS CLAIMED BY THE APPELLANT. 6.2 THE CIT(A) ERRED IN UPHOLDING THE AOS VIEW THA T DEDUCTION UNDER SECTION 80HHC OF THE ACT IS TO BE COMPUTED FOR THE COMPANY AS WHOLE AND REJECTING THE CONTENTION OF THE APPELLANT THAT THE DEDUCTION UNDER SECTION 80 HHC IS TO BE COMPUTED SEPARATELY IN RESPECT OF EACH INDIVIDUAL UNIT CARRYING ON THE ACTIVITY OF EXPORT. ITA 4083/M/03,7027/M/03, & CO 286/M/04 4 6.3 THE CIT(A) FAILED TO APPRECIATE THAT INTEREST P AID DURING THE PREVIOUS YEAR WAS HIGHER THAN THE AMOUNT OF INTEREST RECEIVE D RESULTING IN NET INTEREST PAID AND THEREFORE AMOUNT OF INTEREST RECEIVED DURI NG THE PREVIOUS YEAR CANNOT BE REDUCED FROM THE PROFIT OF THE BUSINESS. 6.4 THE CIT(A) OUGHT TO HELD THAT NET AMOUNT OF INT EREST RECEIVED IS TO BE REDUCED FROM PROFITS OF THE BUSINESS FOR THE PURPOS E OF CALCULATING DEDUCTION UNDER SECTION 80 HHC. 6.5 THE CIT(A) OUGHT TO HAVE HELD THAT RENT RS.1,21 ,85,015/- AND COMMISSION RS.1,02,76,604/- SHOULD NOT BE REDUCED F ROM THE PROFIT OF THE BUSINESS WHILE CALCULATING ALLOWABLE DEDUCTION UNDE R SECTION 80 HHC. 6.6 THE CIT(A) ERRED IN HOLDING THAT INTERDIVISIONA L TRANSFERS SHOULD NOT BE REDUCED FROM THE TOTAL TURNOVER FOR THE PURPOSE OF CALCULATING THE DEDUCTION ALLOWABLE UNDER SECTION 80 HHC. 6.7 THE CIT(A) OUGHT TO HAVE HELD THAT INTERDIVISIO NAL TRANSFERS SHOULD NOT BE INCLUDED IN THE TOTAL TURNOVER FOR COMPUTING THE DEDUCTION UNDER SECTION 80 HHC. CIT(A) FAILED TO APPRECIATE THAT TRANSFER O F GOODS FROM ON DIVISION TO ANOTHER DIVISION OF THE APPELLANT COMPANY IS NOT TU RNOVER. 6.8 THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE AO IN ADJUSTING LOSS ON EXPORT OF TRADED GOODS AGAINST PROFIT ON EXPORT OF MANUFACTURED GOODS, WHILE CALCULATING EXPORT OF TRADED GOODS IS TO BE IGNORED OR SHOULD NOT BE ADJUSTED AGAINST THE PROFITS ON EXPORT OF MANUFACTURED GOODS . 7. INTEREST UNDER SECTION 244A 7.1 THE CIT(A) ERRED IN UPHOLDING ACTION OF THE AO IN NOT ALLOWING INTEREST UNDER SECTION 144A ON REFUND OF RS.12 CRORES PAID B Y THE APPELLANT ON 30.04.2001. 7.2 THE CIT(A) OUGHT TO HAVE DIRECTED THE AO TO ALL OW INTEREST ON REFUND OF RS.12 CRORES UNDER SECTION 244A OF THE INCOME TAX A CT FROM DATE OF PAYMENT TO DATE OF REFUND. 8. THE APPELLANT PRAYS FOR THE COST OF THIS APPEAL IN VIES OF SECTION 154(2B) OF THE I.T. ACT. ITA 4083/M/03,7027/M/03, & CO 286/M/04 5 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND PERUSED T HE RECORD. THE ASSESSEE IS ENGAGED IN MANUFACTURING AND SALE VARIO US PRODUCTS. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE A.O. DISALLOWED ASSESSEES CLAIM OF DEDUCTION U/S 43-B OF THE ACT IN RESPECT OF LIABILI TIES DISALLOWED IN EARLIER YEARS WHICH ARE PAID/WRITTEN BACK IN THE CURRENT YE AR. THE A.O. FOUND THAT IN THE COMPUTATION OF INCOME AN AMOUNT OF RS. 10.85 CR ORES HAS BEEN CONSIDERED AS DISALLOWANCE U/S 43-B (A) OF THE ACT BY THE ASSESSEE ITSELF. HOWEVER, AN AMOUNT OF RS. 1.31 CRORES WAS NOT CONSI DERED AS DISALLOWANCE U/S 43-B OF THE ACT FALLING UNDER CLAUSE (B) TO (D) . THE CONTENTION OF THE ASSESSEE WAS THAT THE AMOUNT OF RS. 1.31 CRORES WHI CH FALLS UNDER CLAUSES (B) TO (D) OF SECTION 43-B OF THE ACT WHICH ARE NOT PAY ABLE AS ON 31-3-2001CANNOT BE COVERED BY THE PROVISIONS OF SECTION 43-B OF THE ACT. HOWEVER, THE A.O. DID NOT AGREE WITH THIS EXPLANATION AND MADE THE DISALL OWANCE. THE LD. CIT(A) BY HIS IMPUGNED ORDER, CONFIRMED THE ORDER OF THE A.O. AND THE ASSESSEE IS IN APPEAL BEFORE US. 3. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT THE ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL IN EARLI ER YEARS I.E ASSESSMENT YEARS 1993-94 TO 1998-99 AND 2000-01 IN ASSESSEES OWN CA SE, COPY OF WHICH WAS PLACED ON RECORD. WE FIND THAT SIMILAR ISSUE WAS CO NSIDERED BY THE TRIBUNAL IN A.Y. 2000-01 VIDE ORDER DATED 9-10-2013 WHEREIN THE GROUND TAKEN BY THE ASSESSEE WAS DISMISSED AS THE SAME HAS BECOME INFRU CTUOUS. IT WAS FOUND BY TRIBUNAL THAT IT IS AN ALTERNATIVE PLEA WHICH RE LATES TO A.Y. 1993-94 DECIDED BY THE TRIBUNAL IN ASSESSEES FAVOUR. THE A PPEAL FILED BY THE DEPARTMENT HAS BEEN DISMISSED BY THE TRIBUNAL VIDE ORDER DATED 20-12-2001. AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDE R CONSIDERATION ARE PARA MATERIA WHEREIN APPEAL OF DEPARTMENT IN EARLIER YEA R WAS DISMISSED BY THE TRIBUNAL, THEREFORE, GROUND TAKEN BY ASSESSEE FOR D ISALLOWANCE DURING THE YEAR HAS BECOME INFRUCTUOUS. THE VIEW TAKEN BY THE TRIBUNAL IN A.Y. 2000-01 ITA 4083/M/03,7027/M/03, & CO 286/M/04 6 IS RESPECTFULLY FOLLOWED, GROUND OF THE ASSESSEE BE COMES OTIOSE AND IS ACCORDINGLY DISMISSED. 4. THE NEXT GRIEVANCE OF THE ASSESSEE RELATES TO AL LOWING DEDUCTION IN RESPECT OF EXCHANGE FLUCTUATION LOSS OF RS. 1,99,71 ,608/- WHICH WAS DISALLOWED IN EARLIER YEAR. WE FIND THAT THE TRIBUN AL HAS ALREADY REJECTED THE DEPARTMENTS APPEAL FOR 1996-97 TO 2000-01. ACCORD INGLY THIS GROUND TAKEN BY THE ASSESSEE BECOMES ACADEMIC AND ACCORDINGLY RE JECTED. 5. THE NEXT GRIEVANCE OF THE ASSESSEE RELATES TO AD DITION OF NOTIONAL INTEREST ACCRUED BUT NOT DUE ON SECURITIES. 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FOU ND THAT THE ISSUE REGARDING THE TAXABILITY OF INTEREST HAVE BEEN DECI DED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ITS FAVOUR IN A.Y. 1998-99 A ND ALSO BY THE HONBLE BOMBAY HIGH COURT IN ASSESSEES OWN CASE FOR ASSESS MENT YEARS 1994-95, 1995-96 WHEREIN IT WAS HELD THAT SUCH INTEREST ARE TAXABLE IN SUBSEQUENT YEAR WHEN SECURITIES ARE SOLD. RESPECTFULLY FOLLOWI NG THE DECISION OF THE TRIBUNAL AS WELL AS HONBLE BOMBAY HIGH COURT IN AS SESSEES OWN CASE AS REFERRED, WE DO NOT FIND ANY MERIT FOR TAXING THE I NTEREST ACCRUED BUT NOT DUE ON SECURITIES DURING THE YEAR UNDER CONSIDERATION. 7. THE ASSESSEE IS ALSO AGGRIEVED FOR TAXING OF INT EREST RECEIVED FROM INCOME TAX DEPARTMENT AMOUNTING TO RS. 13,64,09,609 /-. WE FIND THAT SIMILAR ISSUE HAS BEEN DEALT WITH BY THE TRIBUNAL I N A.Y. 1993-94 IN ITA NO. 1523/MUM/1997 VIDE PARA 62 AS UNDER;- WE HAVE HEARD THE PARTIES AND CONSIDERED THE RIVAL SUBMISSIONS. THESE REFUNDS HAVE BEEN GRANTED TO THE ASSESSEE IN THE YEAR UNDER CONSIDERATION AND THEREFORE THEY WOULD PARTAKE THE CHARACTER OF INCOME OF THE ASSESSEE. IF HOWEVER, ANY REFUND HAS BEEN F OUND TO BE NOT REFUNDABLE TO THE ASSESSEE AND CONSEQUENTLY THE INT EREST GRANTED IS WITHDRAWN THE SAME WOULD NOT PARTAKE THE CHARACTER OF INCOME. WE ACCORDINGLY DIRECT THE ASSESSING OFFICER TO REDUCE FROM THE TAXABILITY OF ITA 4083/M/03,7027/M/03, & CO 286/M/04 7 THE AFORESAID INTEREST GRANTED TO THE ASSESSEE, THE AMOUNT WHICH HAS BEEN WITHDRAWN SUBSEQUENTLY. WE DIRECT ACCORDINGLY. 8. IT WAS ARGUED BY THE LD. A.R. THAT BENEFIT OF IN TEREST SO ALLOWED BY THE DEPARTMENT WAS SUBSEQUENTLY WITHDRAWN AS A RESULT O F THE APPELLATE ORDERS SHOULD BE GIVEN TO THE ASSESSEE AND THE INTEREST SU BSEQUENTLY WITHDRAWN SHOULD NOT BE TAXED AND FOR THIS, RELIANCE WAS PLAC ED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF AVADA TRADING CO. (P.) LTD. VS. ACIT (2006) 100 ITD 131. 9. WE HAVE CONSIDERED THE RIVAL CONTENTIONS. AS FA R AS THE TAXABILITY OF INTEREST AMOUNTING TO RS. 13,64,09,609/- IS CONCERN ED, THE SAME IS ASSESSABLE IN THE YEAR IN WHICH THE REFUND HAS BEEN GRANTED ALONGWITH INTEREST. HOWEVER, IF IN THE SUBSEQUENT YEAR REFUN D OF INTEREST IS WITHDRAWN, THEN THE SAME SHOULD BE REDUCED FROM THE TOTAL INCO ME OF THE ASSESSEE. ACCORDINGLY WE DIRECT THE A.O. TO TAX INTEREST INCO ME IN TERMS OF THE ORDER OF THE TRIBUNAL FOR A.Y. 1993-94 AS REPRODUCED ABOVE, KEEPING IN VIEW OUR ABOVE OBSERVATION. 10. THE NEXT GRIEVANCE OF THE ASSESSEE RELATES TO A LLOWING TECHNICAL ASSISTANCE FEES AS REVENUE EXPENDITURE. 11. HOWEVER, THE A.O. DID NOT ALLOW THE EXPENDITURE BUT ALLOWED DEPRECIATION AFTER CRYSTALISATION OF SUCH EXPENDITU RE. WE FIND THAT THE ISSUE IS COVERED BY THE DECISION OF HONBLE BOMBAY HIGH C OURT IN THE CASE OF TATA ENGINEERING AND LOCOMOTIVE CO. PVT. LTD., 123 ITR 5 38 (BOM), SERVICE STATION EQUIPMENT PVT. LTD., 132 ITR 130 (BOM), PREMIER AUT OMOBILES LTD., 150 ITR 28 (BOM), MAHINDRA UGINE AND STEEL CO. LTD., 250ITR 84 (BOM). THE HONBLE BOMBAY HIGH COURT IN THE CASE OF TATA ENGINEERING & LOCOMOTIVE CO. PVT. LTD. (SUPRA) HELD THAT EXPENDITURE INCURRED FOR ACQ UIRING TECHNICAL KNOW-HOW ON TRAINING OF PERSONNEL IS REVENUE EXPENDITURE. R ESPECTFULLY FOLLOWING THE PROPOSITION OF LAW LAID DOWN BY THE HONBLE BOMBAY HIGH COURT TO THE FACTS OF ITA 4083/M/03,7027/M/03, & CO 286/M/04 8 THE INSTANT CASE, WE DO NOT FIND ANY MERIT FOR DISA LLOWING THE TECHNICAL FEES EXPENDITURE INCURRED BY THE ASSESSEE AS REVENUE IN NATURE. 12. THE NEXT GRIEVANCE OF THE ASSESSEE RELATES TO T HE CLAIM OF DEDUCTION U/S 80HHC OF THE ACT WHETHER TO BE ALLOWED ON THE PROFI T OF THE COMPANY AS A WHOLE OR SEPARATELY FOR EACH UNIT. 13. THE LD. COUNSEL FOR THE ASSESSEE FAIRLY CONCEDE D THAT THE ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL IN THE A.Y. 1996-97 & 1997-98. AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDE R CONSIDERATION ARE SAME, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITIES FOR ALLOWING THE CLAIM OF DEDUCTION U/S 80HHC OF THE AC T TO BE COMPUTED ON THE PROFIT OF THE COMPANY AS A WHOLE, RATHER THAN UNIT- WISE. 14. THE NEXT GRIEVANCE OF THE ASSESSEE RELATES TO A LLOWING DEDUCTION U/S 80HHC OF THE ACT WITH RESPECT TO INTEREST INCOME. T HE ISSUE UNDER CONSIDERATION IS SQUARELY COVERED BY THE DECISION O F HONBLE SUPREME COURT IN THE CASE OF ACG ASSOCIATED CAPSULES PVT. LTD., 343 ITR 89(SC) WHEREIN IT WAS HELD THAT NET INTEREST INCOME IS TO BE EXCLUDED FRO M THE ELIGIBLE PROFIT FOR COMPUTING DEDUCTION U/S 80HHC RATHER THAN GROSS INT EREST. 15. AN IDENTICAL ISSUE RAISED AS ADDITIONAL GROUNDS FOR THE ASSESSMENT YEAR 1996-97 AND 97-98 WAS CONSIDERED AND DECIDED BY THI S TRIBUNAL IN ASSESSEE'S OWN CASE IN PARAS 30 & 30.1 AS UNDER: 30 AS REGARDS THE ADDITIONAL GROUND NO.1 PERTAININ G TO DEDUCTION U/S 80HH ON GROSS INTEREST THE SR LD COUNSEL FOR THE AS SESSEE HAS SUBMITTED THAT THIS ISSUE HAS BEEN DECIDED BY THE H ONBLE SUPREME COURT IN THE CASE OF ACG ASSOCIATED CAPSULES VS CIT VIDE DECISION DATED 8.2.2012; THEREFORE, THE DEDUCTION U/S 80HH S HOULD BE ALLOWED ON THE GROSS INTEREST RECEIVED. 30.1 SINCE THIS GROUND HAS BEEN RAISED BY THE ASSES SEE FIRST TIME IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT; THEREFORE, IT REQUIRES VERIFICATION AND EXAMINATION AT THE LEVEL OF THE AO . ACCORDINGLY, WE REMIT THIS ISSUE TO THE RECORD OF THE AO TO CONSIDE R AND DECIDE THE SAME ITA 4083/M/03,7027/M/03, & CO 286/M/04 9 AS PER LAW AFTER CONSIDERING THE CONTENTION OF THE ASSESSEE AND AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 16. IN VIEW OF THE DECISION OF HONOURABLE SUPREME C OURT IN CASE OF ACG ASSOCIATED CAPSULES REPORTED IN 67 DTR (SC) 205, TH E EXPLANATION TO SECTION 80 HHC TO BE APPLIED ON NET INTEREST AND NOT ON GRO SS INTEREST. ACCORDINGLY, WE DIRECT THE AO TO APPLY CLAUSE (BAA) IN RESPECT O F INTEREST RECEIPT BY FOLLOWING THE DECISION OF HONOURABLE SUPREME COURT (SUPRA). WE ACCORDINGLY DIRECT THE A.O. TO EXCLUDE THE EXCESS OF INTEREST I NCOME OVER INTEREST EXPENDITURE FROM THE ELIGIBLE PROFIT OF THE COMPANY WHILE COMPUTING DEDUCTION U/S 80HHC OF THE ACT. 17. ON THE SAME PROPOSITION, THE NET RENT EXPENDITU RE AND NET COMMISSION EXPENDITURE IS REQUIRED TO BE REDUCED FROM ELIGIBLE PROFIT RATHER THAN THE GROSS RENT AND GROSS COMMISSION FOR THE COMPUTATION OF DE DUCTION U/S 80HHC OF THE ACT. WE DIRECT ACCORDINGLY. 18. THE NEXT GRIEVANCE OF THE ASSESSEE RELATES THE DEDUCTION OF INTERDIVISIONAL TRANSFER FROM THE TOTAL TURNOVER. 19. THIS ISSUE HAS BEEN SETTLED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.YS. 1986-87 TO 1989-90, 1994-95, 1995-96, 199 6-97 & 1998-99 WHEREIN IT WAS HELD THAT INTERDIVISIONAL TRANSFER I S TO BE REDUCED FROM THE TOTAL TURNOVER FOR COMPUTING DEDUCTION U/.S 80HHC O F THE ACT. ALTER HEARING BOTH THE SIDES, WE FIND SIMILAR ISSUE HAD COME UP B EFORE THE TRIBUNAL IN ASSESSEES OWN CASE AND THE TRIBUNAL IN ITS CONSOLI DATED ORDER FOR A.YS. 1986- 87 TO 1989-90 ORDER DATED 22 MARCH, 2007 AT PARA 1 54 OF THE ORDER HAS HELD AS UNDER: WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIALS ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BEL OW. WE FIND THAT THERE ARE TWO ASPECTS INVOLVED EXCLUSION OF INTER DIVISION TR ANSFER FROM TOTAL TURNOVER WHILE COMPUTING DEDUCTION U/S. 8OHHC. SECOND ASPECT IS REGARDING EXCLUSION OF EXCISE DUTY FROM TOTAL TURNOVER FOR THE SAME PUR POSE. ITA 4083/M/03,7027/M/03, & CO 286/M/04 10 SECOND ASPECT OF THE MATTER REGARDING EXCLUSION OF EXCISE DUTY FROM TOTAL TURNOVER FOR COMPUTING DEDUCTION U/S. 8OHHC IS COVE RED IN FAVOUR OF THE ASSESSEE BY THE JUDGEMENT OF HONBLE JURISDICTIONAL HIGH COURT RENDERED IN THE CASE OF SUDARSHAN CHEMICALS INDUSTRIES LTD. (SU PRA). RESPECTFULLY FOLLOWING THE SAME, THIS ASPECT OF THE MATTER IS DE CIDED IN FAVOUR OF THE ASSESSEE. REGARDING THE FIRST ASPECT OF THE MATTER IE. REGARD ING EXCLUSION OF INTER- DIVISION TRANSFER FROM TOTAL TURNOVER, WE FIND THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE TRIBU NAL RENDERED IN ASSESSEES OWN CASE FOR A.Y. 1990-91 TO 1992-93. IN PARA NO. 152 OF THE JUDGMENT, THIS HAS BEEN HELD BY THE TRIBUNAL THAT INTER-DIVISION T RANSFER HAS TO BE EXCLUDED AS THAT WOULD AMOUNT TO DOUBLE ADDITION IN THE FIGU RE OF TOTAL TURNOVER. RESPECTFULLY FOLLOWING THIS JUDGMENT, THIS ASPECT O F THE MATTER IS ALSO DECIDED IN FAVOUR OF THE ASSESSEE. THIS GROUND NO. 26(II) STANDS ALLOWED. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO EXCLUDE THE INTER-DIVISION TRANSFER FROM THE TOTAL TURNOVER. RESPECTFULLY FOLLOWING THE DECISIONS OF THE TRIBUNA L, THE CLAIM OF THE ASSESSEE IS DIRECTED TO BE ACCEPTED. 20. THE NEXT ISSUE RELATES TO IGNORING LOSS ON EXPO RT OF TRADED GOODS AND FOR NOT ADJUSTING THE SAME AGAINST PROFIT ON EXPORT OF MANUFACTURED GOODS FOR COMPUTING DEDUCTION U/S 80HHC OF THE ACT. 21. THE LD. SR. COUNSEL FOR THE ASSESSEE FAIRLY CON CEDED THAT THIS ISSUE IS NOW SETTLED BY THE HONBLE SUPREME COURT AGAINST TH E ASSESSEE IN THE CASE OF IPCA LABORATORIES, 266 ITR 521 (SC). RESPECTFULLY FOLLOWING THE PROPOSITION LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF IPCA LABORATORIES (SUPRA), WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITIES ADJUSTING THE LOSS ON EXPORT OF TRADED GOODS AGAINS T PROFIT ON EXPORT OF MANUFACTURED GOODS FOR COMPUTING DEDUCTION U/S 80HH C OF THE ACT. 22. THE NEXT GRIEVANCE OF THE ASSESSEE RELATES TO A LLOWING INTEREST U/S 244A OF THE ACT ON THE REFUND OF RS. 12 CRORES PAID ON 3 0-04-2001. ITA 4083/M/03,7027/M/03, & CO 286/M/04 11 23. THE LD. SENIOR COUNSEL FOR THE ASSESSEE HAS REL IED UPON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN CASE OF VIJAYA BANK REPORTED IN 338 ITR 489 AS WELL AS DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. SUTLEJ INDUSTRIES LTD. REPORTED IN 3 25 ITR 331. HE HAS ALSO REFERRED TO VARIOUS DECISIONS OF THIS TRIBUNAL IN S UPPORT OF HIS CONTENTION. 24. THE TRIBUNAL IN ASSESSEES OWN CASE FOR 1998-99 VIDE ORDER DATED 10 TH AUGUST, 2012 HAS RESTORED SIMILAR MATTER TO THE FIL E OF THE A.O. FOR CONSIDERING THE ASSESSEES CLAIM OF INTEREST AFTER TAKING INTO ACCOUNT THE JUDICIAL PRONOUNCEMENTS AS REFERRED ABOVE. RESPECTFULLY FOL LOWING THE DECISION OF THE TRIBUNAL, WE RESTORE THE COMPUTATION PART OF INTERE ST U/S 244A OF THE ACT TO THE FILE OF THE A.O. FOR DECIDING AS PER THE DIRECT ION GIVEN BY THE TRIBUNAL IN ITS ORDER DATED 10 TH AUGUST, 2012. 25. THE ASSESSEE HAS TAKEN ADDITIONAL GROUND WITH R EGARD TO APPROPRIATION OF HO EXPENSES IN COMPUTING DEDUCTION U/S 80-O OF T HE ACT AMOUNTING TO RS. 3,18,000/-. 26. THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASS ESSEE BY THE TRIBUNAL FOR THE ASSESSMENT YEARS 1996-97, 1997-98, 1994-95 & 19 95-96. IT WAS FURTHER BROUGHT TO OUR NOTICE THAT NO APPEAL HAS BEEN FILED BY THE DEPARTMENT AGAINST THE DECISION OF THE TRIBUNAL FOR ALLOWING APPROPRIA TION OF HO EXPENSES IN COMPUTING DEDUCTION U/S 80-O OF THE ACT. 27. FOR THE ASSESSMENT YEAR 1996-97 AND 1997-98, TH IS TRIBUNAL HAS CONSIDERED AND DECIDED AN IDENTICAL ISSUE IN PARA 1 5.2 TO 15.4 AS UNDER: 15.2 WE HAVE HEARD THE SR LD COUNSEL FOR THE ASSES SEE AS WELL AS THE LD DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. A SIMILAR ISSUE HAS BEEN CONSIDERED AND DECIDED BY THE TRIBUNAL IN ASSE SSEES OWN CASE FOR THE AY 1995-96 IN PARAS 29.1 & 29.2 AS UNDER: 29.1 ON A SIMILAR ISSUE THE TRIBUNAL IN ASSESSEES OWN CASE IN AY 1994-95(SUPRA) IN PARAGRAPHS 25 TO 25.2 HAS HELD AS FOLLOWS:-, ITA 4083/M/03,7027/M/03, & CO 286/M/04 12 25. IN GROUNDS OF APPEAL NO. 32 TO 35, THE ASSESSE E HAS CHALLENGED THE ORDER OF THE CIT(A) IN ALLOCATING HEAD OFFICE EXPEN SES AND THEREBY REDUCING THE QUANTUM OF DEDUCTION AVAILABLE TO THE ASSESSEE UNDER THE FOLLOWING PROVISIONS: SECTION RS. 8OHH 14,20,000 801 5,54,600 80M 7,50,000 80-0 3,50,000 30,74,600 25.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO E STIMATED THE EXPENSES AND ALLOCATED HEAD OFFICE EXPENSE TO THE VARIOUS UN ITS WHICH HAD CLAIMED BENEFITS U/S. 8OHH,801, 80M AND 80-0 OF THE ACT. SINCE THE NEXUS BETWEEN THE HEAD OFFICE AND THE INDIVIDUAL UN ITS CANNOT BE DENIED AND SINCE THE ASSESSEE DID NOT GIVE DETAILS SO AS TO GIVE BETTER ALLOCATION OF THESE EXPENSES TO VARIOUS UNITS, THE CIT(A) UPHELD THE ACTION OF THE AO. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 25.2 AFTER HEARING BOTH THE SIDES, WE FIND THE AO H AS ONLY ALLOCATED THE EXPENSES BUT NO INCOME WAS ALLOCATED. WE FIND THE C O-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. PROCTER & GAMBL E INDIA LTD. VS. DCIT, VIDE ITA NO. 5466/MUM/99 ORDER DATED 27TH NOV EMBER, 2006 FOR THE A.Y. 1990-91 HAS HELD THAT HEAD OFFICE EXPE NSE ALLOCATED TO THE UNITS ARE NOT TO BE TAKEN INTO CONSIDERATION FOR CO MPUTING THE INCOME OF THE ASSESSEE ELIGIBLE FOR DEDUCTION U/S. 801 AND ALSO U/S 8OHH. SIMILARLY WE FIND THE BANGALORE BENCH OF THE ITAT I N THE CASE OF WIPRO GE MEDICAL SYSTEMS LTD. VS. DCIT REPORTED IN 81 TTJ 455 HAS HELD THAT THERE IS NO NEED FOR ALLOCATION OF ANY EXPENSE S WHEN THE EXPENSES ARE DIRECTLY CONNECTED WITH PERIODS. FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL AND THE DECISION O F THE BANGALORE BENCH OF THE TRIBUNAL, WE ARE OF THE CONSIDERED OPI NION THAT THERE IS NO NECESSITY FOR ALLOCATING THE HEAD OFFICE EXPENSES T O THE UNITS CLAIMING DEDUCTION U/S. 8OHH, 801, 80M AND 80-0. THE ORDER O F THE CIT(A) ON THIS ISSUE IS ACCORDINGLY SET ASIDE AND THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 29.2 RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THE TRIBUNAL, THESE GROUNDS, NAMELY 27 TO 30 A, ARE ALLOWED. RESPECTFULLY FOLLOWING THE EARLIER ORDER OF THE TRI BUNAL, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE. ITA 4083/M/03,7027/M/03, & CO 286/M/04 13 28. IN THE ADDITIONAL GROUND, THE ASSESSEE HAS ALSO TAKEN GROUND REGARDING SALES TAX EXEMPTION BENEFIT BEING CAPITAL RECEIPT N OT CHARGEABLE TO TAX. WE FIND THAT A SIMILAR ISSUE HAS BEEN RESTORED BACK BY THE TRIBUNAL IN A.Y. 2000-01 IN ASSESSEES OWN CASE TO THE FILE OF THE A.O. TO DECIDE AFTER CONSIDERING THE DECISION OF SPECIAL BE NCH IN THE CASE OF DCIT VS. RELIANCE INDUSTRIES LTD., 88 ITD 273 (MUM). RESPEC TFULLY FOLLOWING THE SAID DECISION OF THE TRIBUNAL, WE RESTORE THIS ISSUE BAC K TO THE FILE OF THE A.O. FOR DECIDING THE SAME IN THE LIGHT OF THE FINDINGS OF T HE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 1999-2000 IN ITA NO. 5631/BOM/2002, W HEREIN THE TRIBUNAL AT PARA NO. 26.1 ON PAGE 11 HAS RESTORED THE ISSUE BAC K TO THE FILE OF THE A.O.TO DECIDE THE ISSUE AFRESH AFTER CONSIDERING THE DECIS ION IN THE CASE OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF RELIANCE INDU STRIES LTD. (SUPRA). RESPECTFULLY FOLLOWING THE SAME, THE ISSUE IS RESTO RED BACK TO THE FILE OF THE A.O. FOR DECIDING THE SAME AFRESH. 29. THE NEXT GRIEVANCE RELATES TO THE DISALLOWANCE OF ROYALTY AND INTEREST ON ROYALTY U/S 43B OF THE ACT TREATING IT AS TAX. THE ISSUE IS NOW SETTLED BY VARIOUS ORDERS OF THE TRIBUNAL IN ASSESSEES OWN CA SE FOR ASSESSMENT YEARS 1995-96 TO 2000-01. A SIMILAR ISSUE WAS CONSIDERED BY THE TRIBUNAL IN THE ASSESSEES OWN CASE IN A.Y. 1999-2000 IN ITA NO. 56 31/M/2002, WHEREIN WE FIND THAT THE TRIBUNAL HAS FOLLOWED ITS EARLIER ORD ER IN THE ASSESSEES OWN CASE IN ITA NO. 5630/MUM/02 FOR A.Y. 1998-99. IN THE AB SENCE OF ANY CONTRADICTORY FACTS BROUGHT ON RECORD BY THE REVENU E, FOLLOWING THE AFOREMENTIONED DECISION, WE DECIDE THIS ISSUE IN FA VOUR OF THE ASSESSEE. ADDITIONAL GROUND NO. 2 IS ACCORDINGLY ALLOWED. 30. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.L,31,61,93 5/ MADE UNDER CLAUSES (B), (C) AND (6) OF SECTION 43B OF THE INCOME TAX ACT, IGNOR ING THE PROVISIONS OF SECTION 43B OF THE ACT AS A WHOLE AND WITHOUT TAKING INTO C ONSIDERATION A HARMONIOUS ITA 4083/M/03,7027/M/03, & CO 286/M/04 14 CONSTRUCTION OF VARIOUS PROVISIONS OF THE SAID SECT ION. FURTHER, THE MEANING OF THE WORD PAYABLE, AS APPLICABLE TO THE PROVISIONS O F SECTION 43B(B)(C) & (D), WAS ALSO IGNORED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 5,11 ,756 / TOWARDS CONTRIBUTION TO LOCAL ORGANISATIONS, RELYING UPON THE C1T(A)S ORDER IN TH E ASSESSEES OWN CASE FOR THE A.Y. 1999200O WHICH HAS NOT BEEN ACCEPTED BY THE DE PARTMENT AND CONTESTED IN FURTHER APPEAL BEFORE THE ITAT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN DELETING THE ADDITION OF RS.2,63,29,807/, BEING PROFITS OF THE USA AND UK BRANCH OF THE ASSESSEES SOFTWARE DIVISION, RELYI NG UPON THE CIT(A)S ORDER IN THE ASSESSEES OWN CASE FOR THE A. Y. 1996-97 WH ICH HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND CONTESTED IN FURTHER APPEAL B EFORE THE ITAT. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEBENTURE ISSUE EXPENSES AS REVENUE DEDUCTION, RELYING UPON THE CIT(A)S ORDER IN THE ASSESSEES OWN CASE FOR THE A.Y. 2000-01 WHICH HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND CONTESTED IN FURTHER APPEAL BEFORE THE ITAT. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF EXPENDITURE O F RS.36,88,792/ MADE BY THE ASSESSING OFFICER ON ESTIMATE BASIS, BEING EXPENDIT URE INCURRED FOR EARNING EXEMPTED INCOME OF DIVIDEND, RELYING UPON THE ORDER OF THE CIT(A) IN THE ASSESSEES OWN CASE FOR THE A.Y. 2000-01 WHICH HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND CONTESTED IN FURTHER APPEAL BEFORE T HE ITAT. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.66, 08,937/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF RURAL. DEVELOPMENT EXPENSES, RELYING UPON THE ORDER OF THE CIT(A) IN THE ASSESSEES OWN CASE FOR THE A.Y. 2000 -01 WHICH HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND CONTESTED M FURTHER APPEAL BEFORE THE ITAT. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.2,00,03,44 3/- MADE ON ACCOUNT OF EXCHANGE RATE FLUCTUATION LOSS, RELYING UPON THE OR DER OF THE CIT(A) IN THE ASSESSEES OWN CASE FOR THE A.Y. 1998-99 WHICH HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND CONTESTED IN FURTHER APPEAL BEFORE T HE ITAT. 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF INTEREST OF R S. L,45,77,507/- PERTAINING TO THE CONSTRUCTION PERIOD, RELYING UPON THE ORDER OF THE CIT(A) IN THE ASSESSEES ITA 4083/M/03,7027/M/03, & CO 286/M/04 15 OWN CASE FOR THE A.Y. 20000L WHICH HAS NOT BEEN ACC EPTED BY THE DEPARTMENT AND CONTESTED IN FURTHER APPEAL BEFORE THE ITAT. 9. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 17,79,22, 078/- BEING REVISED ELECTRICITY CHARGES LIABILITY FOR THE PERIOD FROM 1994 TO 1997 IGNORING, INTER ALIA, THE FOLLOWING :- (I) THE DECISION OF THE HONBLE SUPREME COURT IN TH E CASE OF RAYMONDS LIMITED CANNOT FORM THE BASIS OF CRYSTALLIZATION OF THE LIABILITY IN THE ASSESSEES CASE WHEN, AS PER RECORD, THE ASSESSEES OWN WRIT P ETITION IN THE M.P. HIGH COURT WAS STILL PENDING. (II) THE ORDER OF M.P.E.B. CHAIRMAN DTD. 12.04.200 1 RAISING THE DEMAND ON THE ASSESSEE WAS NEVER PRODUCED BEFORE THE ASSESSIN G OFFICER AND ACCEPTANCE OF THE SAME TO ALLOW RELIEF TO THE ASSESSEE WITHOUT AF FORDING OPPORTUNITY TO THE A.O. WAS VIOLATIVE OF RULE 46A OF THE I.T. RULES AN D EVEN ADMITTING THAT SUCH AN ORDER EXISTED, THE LIABILITY CRYSTALISED ONLY IN THE FOLLOWING ACCOUNTING PERIOD AND NOT IN THE PERIOD RELEVANT TO A.Y. 2001-02. 10. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE CIT(A) ERRED IN ALLOWING THE DEDUCTION FOR BAD DEBTS OF RS .7,38,368/ WHICH WAS ADJUSTMENT AGAINST THE PROVISION FOR DOUBTFULL DEBT S HOLDING THAT THE PROVISION MADE BY THE ASSESSEE FOR DOUBTFUL DEBTS IN THE EARL IER ASSESSMENT YEARS WAS DISALLOWED WITHOUT APPRECIATING THAT THE ASSESSEE H AS CONTESTED THIS ISSUE BEFORE THE ITAT IN EARLIER ASSESSMENT YEARS. 11. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.L5,57,153/ - BEING 25% OF THE EXPENSES OF RS.62,30,153/- INCURRED IN CONNECTION WITH THE A SSESSMENT OF THE LOSS AND INSURANCE CLAIM ON DESTRUCTION OF DG. SETS, RELYING UPON THE CLARIFICATION OF THE INSURANCE COMPANY THAT THE PRIMARY RESPONSIBILITY T O ASSESS AND ESTABLISH THE LOSS IS ON THE INSURED WITHOUT APPRECIATING THAT IT IS NOT THE JOB OF THE ASSESSEE COMPANY TO GET THE LOSS DETERMINED WHICH IS MOST UN LIKELY TO BE ACCEPTED BY THE INSURANCE COMPANY FOR SETTLING THE CLAIM. 12. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO EXCLUDE THE AMOUNT OF RS.66,575/, BEING ACCRUED INTEREST ON SECURITIES FROM SALE CONS IDERATION WHILE COMPUTING CAPITAL GAINS, RELYING UPON THE ORDERS OF THE CIT(A ) IN THE ASSESSEES OWN CASE FOR THE A.YS. 1998-99 & 1999-2000 WHICH HAVE NOT BE EN ACCEPTED BY THE DEPARTMENT AND CONTESTED IN FURTHER APPEAL BEFORE T HE ITAT. 13. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.68,26,833/ - BEING EXPENSES INCURRED FOR ITA 4083/M/03,7027/M/03, & CO 286/M/04 16 MAKING ADVERTISEMENT FILM, WITHOUT APPRECIATING THE TRUE IMPORT OF THE BOMBAY HIGH COURT DECISION IN THE CASE OF PATEL INTERNATIO NAL FILMS LTD. (102 ITR 209), WHICH HAS HELD THAT EXPENDITURE INCURRED ON PURCHAS E/PRODUCTION OF AD-FILMS IS AN EXPENDITURE OF CAPITAL NATURE AND, THEREFORE, TH E ASSESSING OFFICER RIGHTLY DISALLOWED THIS EXPENDITURE. 14. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO COMPUTE THE DEDUCTION U/S. 80HHC BEFORE SETTING OFF OF THE UNABSORBED BUSINESS LOSSE S AND UNABSORBED DEPRECIATION OF THE EARLIER YEARS AGAINST THE CURRE NT YEARS INCOME, RELYING UPON THE JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE O F SHIRKE CONSTRUCTION EQUIPMENTS LTD. (246 ITR 429) WITHOUT APPRECIATING THAT THE DECISION OF THE BOMBAY HIGH COURT, AS AFORESAID, HAS NOT BEEN ACCEP TED BY THE DEPARTMENT AND CONTESTED BY WAY OF FILING SLP. 15. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO REDUCE THE NET INTEREST, ARRIVED AT AFTER REDUCING THE AMOUNT OF INTEREST PAID FROM THE INTER EST RECEIVED IN CASE THE INTEREST RECEIVED IS FOUND TO BE LINKED WITH THE BU SINESS OF THE ASSESSEE, FROM THE PROFITS OF THE BUSINESS FOR THE PURPOSE OF COMPUTAT ION OF DEDUCTION U/S. 8OHHC, WITHOUT APPRECIATING THAT THERE IS NO PROVISION FOR REDUCTION OF NET INTEREST FROM THE PROFITS OF THE BUSINESS AS PER EXPLANATION TO S UB-SECTION (4B) OF SECTION 80HHC . 16. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO EXCLUDE THE AMOUNT OF EXCISE DUTY AND SALES TAX FROM THE TOTAL TURNOVER FOR THE PURPO SE OF COMPUTATION OF DEDUCTION U/S.80HHC, RELYING UPON THE ORDER OF THE CIT(A) IN THE ASSESSEES OWN CASE FOR THE A.Y. 1998-99, WHICH HAS NOT BEEN A CCEPTED BY THE DEPARTMENT AND CONTESTED IN FURTHER APPEAL BEFORE THE ITAT. 17. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO INCREAS E PROFITS OF THE BUSINESS BY THE LOSS OF FOREIGN BRANCH AND THE LOSS ON EXPORT OF TR ADING GOODS FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 80HHC, RELYING UPON TH E ORDER OF THE CIT(A) IN THE ASSESSEES OWN CASE FOR THE A.Y. I 996-97, WHIC H HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND CONTESTED IN FURTHER APPEAL BEFO RE THE ITAT. 18. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN HOLDING THAT NO AMOUNT OF HEAD OFFICE EXPE NSES CAN BE APPORTIONED TO THE UNITS ELIGIBLE FOR DEDUCTION U/S. 80-IA, RELYIN G UPON THE ORDER OF THE CIT(A) IN THE ASSESSEES OWN CASE FOR THE A.Y. 1996-97, WH ICH HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND CONTESTED IN FURTHER APPEAL B EFORE THE ITAT. ITA 4083/M/03,7027/M/03, & CO 286/M/04 17 19. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW D EDUCTION U/S.80-IA IN RESPECT OF VIKRAM POWER UNIT, RELYING UPON THE ORDER OF THE CIT(A) IN THE ASSESSEES OWN CASE FOR THE A.Y. 1998-99, WHICH HAS NOT BEEN A CCEPTED BY THE DEPARTMENT AND CONTESTED IN FURTHER APPEAL BEFORE THE ITAT. 20. ON THE FACTS AND M THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO REDUCE THE GROSS AMOUNT OF EXEMPT DIVIDEND INCOME FROM THE PROFIT AS PER PROFIT & LOS S A/C. FOR THE PURPOSE OF COMPUTATION OF BOOK PROFIT U/S.115JB WITHOUT APPREC IATING THAT THE EXPENDITURE INCURRED ON EARNING EXEMPT DIVIDEND INCOME IS NOT A LLOWABLE IN VIEW OF THE PROVISIONS OF SECTION 14A AND, THEREFORE, THE ASSES SING OFFICER RIGHTLY REDUCED THE NET DIVIDEND INCOME ARRIVED AT AFTER REDUCING T HE EXPENDITURE INCURRED ON EARNING OF THE SAME. 31. GROUND NO. 1 IN REVENUES APPEAL RELATES TO THE DIS ALLOWANCE U/S 43B OF THE ACT WHICH HAS BEEN DEALT WITH BY THE A.O. AT PARA NO. 9-9.5 OF HIS ORDER. THE LD. CIT(A) DEALT WITH THIS ISSUE AT PAG E NO. 2, PARA 5 OF HIS ORDER AND DELETED THE DISALLOWANCE BY FOLLOWING THE ORDER OF THE TRIBUNAL IN EARLIER YEARS. FROM THE RECORD, WE FOUND THAT THE TRIBUNAL HAS BEEN CONSISTENTLY ALLOWED THE ISSUE IN FAVOUR OF THE ASSESSEE IN ASSE SSMENT YEARS 1990-91, 1993-94, 1994-95, 1996-97, 1997-98 & 1998-99. WE FU RTHER FOUND THAT AGAINST THE ORDER OF THE TRIBUNAL, THE DEPARTMENT H AS NOT FILED ANY APPEAL BEFORE THE HONBLE HIGH COURT IN ASSESSMENT YEARS 1 996-97, 1997-98, 1995- 96 & 1994-95. AS THE MATTER HAS BEEN SETTLED AND T HE LD. CIT(A) DELETED THE DISALLOWANCE BY FOLLOWING THE ORDER OF THE TRIBUNAL , WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) DELET ING THE DISALLOWANCE MADE BY THE A.O. U/S 43-B OF THE ACT. 32. WITH REGARD TO THE CONTRIBUTION TO THE LOCAL OR GANIZATION, THE ISSUE HAS BEEN DEALT WITH BY THE A.O. AT PAGE 6 -7, PARA 10 O F HIS ORDER. THE LD. CIT(A) DELETED THE ADDITION/DISALLOWANCE BY DEALING THE IS SUE AT PAGE 3, PARA 7 OF HIS ORDER WHEREIN HE HAS FOLLOWED THE ORDER OF THE TRIB UNAL IN EARLIER YEARS. ITA 4083/M/03,7027/M/03, & CO 286/M/04 18 33. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND WE FOUND THAT THE ISSUE HAS BEEN DECIDED BY THE TRIBUNAL CONSISTENTLY IN FA VOUR OF THE ASSESSEE IN THE ASSESSMENT YEARS 1986-87 TO 1989-90, 1994-95 & 1995 -96 TO 1997-98. IN AN APPEAL FURTHER FILED BY THE REVENUE BEFORE THE HON BLE HIGH COURT IN ASSESSMENT YEARS 1988-89, 1994-95, 1995-96, THE SAM E HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. THE ORDER OF THE TRIBUNAL F OR 2000-01 WAS NOT CHALLENGED BY THE DEPARTMENT BEFORE THE HONBLE HIG H COURT ON THIS ISSUE. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL AN D HONBLE HIGH COURT IN ASSESSEES OWN CASE, WE DO NOT FIND ANY REASON TO I NTERFERE WITH THE ORDER OF THE LD. CIT(A). 34. WITH RESPECT TO GROUND NO. 3 ON ACCOUNT OF PROF ITS OF THE USA & UK BRANCH, THE A.O. HAS BEEN DEALT WITH THIS ISSUE AT PAGE 8, PARA 13 OF HIS ORDER. THE LD. CIT(A) DELETED THE ADDITION BY OBSER VING AT PARA 8 OF HIS APPELLATE ORDER WHEREIN IT WAS HELD THAT THE ACTION OF THE A.O. IN NOT EXCLUDING PROFIT OF FOREIGN BRANCH AMOUNTING TO RS. 2,63,29,807/- FROM THE TAXABLE PROFIT WAS NOT JUSTIFIED. FROM THE RECORD W E FOUND THAT THE ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ITS FAVOUR IN ASSESSMENT YEARS 1996-97 TO 2000-01. WE ALSO FOUND THAT THE DEPARTMENT IS NOT IN APPEAL ON THIS GROUND IN THE HONBLE HIGH CO URT AGAINST THE ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEARS 1996-97, 1997 -98 AND 1998-99. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL, W E DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) DIRECTIN G THE A.O. TO EXCLUDE THE PROFIT OF FOREIGN BRANCH FROM THE TAXABLE PROFIT. 35. GROUND NO. 4 OF REVENUES APPEAL RELATES TO THE DEBENTURE ISSUE EXPENSES BY THE ASSESSEE. THE ISSUE HAS BEEN DEALT WITH BY THE A.O. AT PAGE 10-11, PARA 18 OF HIS ORDER AND THE LD. CIT(A) HAS DEALT WITH THIS ISSUE AT PAGE 3-4, PARA 9 OF HIS ORDER AND DELETED THE DISALLOWAN CE MADE IN RESPECT OF DEBENTURE ISSUE EXPENSES. WE FOUND THAT THE ISSUE H AS BEEN CONSISTENTLY ITA 4083/M/03,7027/M/03, & CO 286/M/04 19 DECIDED IN FAVOUR OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEARS 1986-87 TO 1989-90, 1998-99, 1999-00 & 2000-01. RES PECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) DELETING THE DEBENTURE ISSUE EXPENSES. 36. GROUND NO. 5 OF REVENUES APPEAL PERTAINS TO DI SALLOWANCE OF INTEREST ON ESTIMATED BASIS TO EARN TAX FREE INCOME. 37. WE FOUND THAT SIMILAR ISSUE HAS BEEN DEALT WITH BY THE TRIBUNAL IN A.Y. 2000-01 WHEREIN THE DISALLOWANCE WAS RESTRICTED TO 1.5% OF THE EXEMPT INCOME. AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION ARE SAME, WE DIRECT THE A.O. TO RESTRICT THE DISALL OWANCE TO 1.5% OF THE EXEMPT INCOME. 38. GROUND NO. 6 OF REVENUES APPEAL RELATES TO THE DISALLOWANCE OF RURAL DEVELOPMENT EXPENSES. THE A.O. HAS DEALT WITH THIS ISSUE AT PAGE 9, PARA 15 AND THE LD. CIT(A) HAS DEALT WITH THIS ISSUE AT PAG E 4-5, PARA 11 OF HIS ORDER. WE FOUND THAT THE ISSUE HAS BEEN DECIDED BY THE TRI BUNAL IN ASSESSEES OWN CASE IN ITS FAVOUR IN ASSESSMENT YEARS 1998-99, 199 9-00 & 2000-01. WE FURTHER FOUND THAT THE DEPARTMENT ON THIS GROUND IS NOT IN APPEAL BEFORE THE HONBLE HIGH COURT IN THESE YEARS. RESPECTFULLY FOL LOWING THE ORDER OF THE TRIBUNAL, WE DO NOT FIND ANY REASON TO INTERFERE WI TH THE ORDER OF THE LD. CIT(A) FOR DELETING THE RURAL DEVELOPMENT EXPENSES AMOUNTING TO RS. 66,08,937/-. 39. GROUND NO. 7 PERTAINS TO EXCHANGE RATE FLUCTUAT ION LOSS ON CONVERSION OF TRADING ASSETS AND LIABILITIES AMOUNTING TO RS. 2,00,03,443/-. THE A.O. HAS DEALT WITH THIS ISSUE AT PAGE 9-10, PARA 16-16.6AND THE LD. CIT(A) HAS DEALT WITH THIS ISSUE AT PAGE 5, PARA 12 OF HIS ORDER. T HE LD. CIT(A) HAS ALLOWED THE ASSESSEES CLAIM AFTER HAVING OBSERVED AT PARA 12. WE FOUND THAT THE ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ITS FAVOUR IN ITA 4083/M/03,7027/M/03, & CO 286/M/04 20 ASSESSMENT YEARS 1998-99 TO 2000-01. FURTHERMORE, THE DEPARTMENT IS NOT IN APPEAL ON THIS GROUND BEFORE THE HONBLE HIGH CO URT AGAINST THE TRIBUNAL ORDER. THE HONBLE SUPREME COURT IN THE CASE OF WOO DWARD GOVERNOR INDIA PVT. LTD., 312 ITR 254 (SC) HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) DELETING THE DISALLOWANCE MADE ON ACCOUNT OF EXCHANGE FLUCTUATION LOSS ON CONVERSION OF TRADING ASSETS AND LIABILITIES ON BALANCE SHEET DATE. 40. GROUND NO. 8 PERTAINS TO DELETING OF INTEREST U /S 36(1)(III) OF THE ACT. THE ISSUE HAS BEEN DEALT WITH BY THE A.O. AT PAGE 1 0-11, PARA 18 OF HIS ORDER AND THE LD. CIT(A) DELETED THE SAME AFTER HAVING OB SERVED AT PAGE 5, PARA 13 OF HIS ORDER. FROM THE RECORD WE FOUND THAT THE ISS UE HAS BEEN DECIDED BY THE TRIBUNAL CONSISTENTLY IN FAVOUR OF THE ASSESSEE IN ASSESSMENT YEARS 1993-94, 1994-95, 1996-97 TO 1998-99 & 2000-01. WE FOUND THA T ON THIS GROUND THE DEPARTMENT IS NOT IN APPEAL BEFORE THE HONBLE HIGH COURT ON THIS GROUND IN ASSESSMENT YEARS 1996-97 TO 1998-99. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL, WE DO NOT FIND ANY REASON TO INTERFERE WI TH THE ORDER OF THE LD. CIT(A) DELETING THE DISALLOWANCE OF RS. 1,45,77,507 /- U/S 36(1)(III) OF THE ACT. 41. GROUND NO. 9 OF REVENUES APPEAL PERTAINS TO TH E DISALLOWANCE OF ELECTRICITY CHARGES WHICH HAS BEEN DEALT WITH BY TH E A.O. AT PAGE 11-12, PARA 20 OF HIS ORDER. THE LD. CIT(A) DELETED THE SAME A FTER HAVING HIS OBSERVATION AT PAGE 6-8, PARA 14 OF HIS ORDER. FOLLOWING ARE T HE PRECISE CONCLUSION OF LD. CIT(A) AT PARA 14.7: (A) THE SAID LIABILITY RELATES TO EARLIER YEARS, B UT WAS RAISED AGAINST THE APPELLANT DURING THE YEAR UNDER CONSIDERATION, BY WAY OF FORM B ISSUED BY MPEB ON 26.04.2000. (B) THE SAME WAS NOT PROVIDED FOR IN THE BOOKS FOR ACCOUNT AS THE SAME WAS DISPUTED AT THE TIME OF FINALISATION OF ACCOUNT S. (C) MATTERS REACHED A FINALITY IN PRINCIPLE IN THAT THE ISSUE WAS DECIDED BY THE HON'BLE SUPREME COURT IN THE CASE OF M/S RAYMON D LIMITED ON IDENTICAL ITA 4083/M/03,7027/M/03, & CO 286/M/04 21 FACTS. (D) IN PURSUANCE OF THE SAME MPEB CHAIRMAN PASSED A N ORDER ON 12.04.200 1 RAISING THE SAID DEMAND ON THE APPELLAN T, WHICH WOULD CRYSTALLISE THE LIABILITY. (E) ALTHOUGH THE SAID CRYSTALLISATION HAS TAKEN PLA CE AFTER THE CLOSE OF THE FINANCIAL YEAR, SINCE IT HAS TAKEN PLACE BEF ORE FINALISING OF ACCOUNTS, AS PER ACCOUNTING STANDARD NO. 4, THE APP ELLANT IS WELL WITHIN ITS RIGHTS TO CLAIM THE DEDUCTION IN THE YEAR UNDER CONSIDERATION. BASED ON THE ABOVE, SINCE THE LIABILITY HAS CRYSTAL LIZED DURING THE YEAR UNDER CONSIDERATION, THE SAME IS ALLOWED. THE GROUND OF APPEAL IS ALLOWED. 42. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FOUND THAT AFTER CONSIDERING THE DECISION OF HONBLE SUPREME COURT I N THE CASE OF CIT VS. SWADESHI COTTON FLOUR MILLS PVT. LTD. (1964) 53 ITR 134 ON THIS ISSUE, THE LD. CIT(A) REACHED THE CONCLUSION THAT LIABILITY HAS BE EN CRYSTALISED UNDER CONSIDERATION, THE SAME IS THEREFORE ALLOWABLE. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) AS THE S AME IS BASED ON THE DECISION OF HONBLE SUPREME COURT DATED 16/11/2000. 43. GROUND NO. 10 PERTAINS TO ALLOWING THE DEDUCTIO N AGAINST BAD DEBTS. THE A.O. HAS DEALT WITH THIS ISSUE AT PAGE 12, PARA 21 OF HIS ORDER. THE LD. CIT(A) HAS DELETED THE DISALLOWANCE AFTER HAVING OB SERVED AT PARA 15 OF HIS ORDER. THE LD. COUNSEL FOR THE ASESSEE FAIRLY CONCE DED THAT THE A.O. HAS ALLOWED THE CLAIM IN HIS ORDER GIVING EFFECT FROM A .Y. 1996-97. ACTUAL WRITE OFF WAS IN A.Y. 2000-01 AND THE SAME WAS AGAIN ALLOWED BY THE LD. CIT(A). SINCE THE CLAIM WAS PERTAINING TO THE A.Y. 1996-97 WHICH HAVE ALREADY BEEN ALLOWED BY THE A.O. WHEN THE MATTER WAS REMANDED BACK BY TH E TRIBUNAL, ALLOWING OF THE CLAIM BY THE LD. CIT(A) DURING THE YEAR UNDER C ONSIDERATION AMOUNTS TO DOUBLE DEDUCTION OF THE SAME AMOUNT. ACCORDINGLY W E SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS GROUND AND ALLOW THIS GROUND IN FAVOUR OF THE REVENUE. 44. GROUND NO. 11 PERTAINS TO THE EXPENSES INCURRED IN CONNECTION WITH THE ITA 4083/M/03,7027/M/03, & CO 286/M/04 22 ASSESSMENT OF THE LOSS AND INSURANCE CLAIM REDUCED FROM INSURANCE CLAIM RECEIVED. (NET INSURANCE AMOUNT RECEIVED IS REDUCED FROM BLOCK OF ASSETS BY THE ASSESSEE). 45. WE FOUND THAT THE A.O. HAS MADE THIS ADDITION T OWARDS EXPENSES INCURRED IN CONNECTION WITH ASSESSMENT OF LOSS AND INSURANCE CLAIM REDUCED FROM INSURANCE. ACCORDINGLY, ADDITION OF RS. 15,57, 538/- WAS MADE BY THE A.O. HOLDING THAT GROSS AMOUNT OF INSURANCE CLAIM R ECEIVED ON DESTRUCTION OF CAPITAL ASSET IS TO BE REDUCED FROM BLOCK OF ASSET. THE LD. CIT(A) HELD THAT THE A.O. SHOULD HAVE REDUCED FROM THE BLOCK OF ASSETS T HE NET AMOUNT I.E. THE AMOUNT RECEIVED FROM THE INSURANCE COMPANY, NET OF THE EXPENSES INCURRED OF RS. 62.30 LACS AND ALLOW DEPRECIATION THEREON. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) IN DIRECTING THE A.O. T O RECOMPUTE THE DEPRECIATION ON THE ABOVE LINES. 46. GROUND NO. 12 OF REVENUES APPEAL HAS ALREADY B EEN DEALT BY US WHILE DECIDING THE C.O. OF THE ASSESSEE IN GROUND NO. 3. 47. THE ISSUE IN GROUND NO. 13 WITH REGARD TO DELET ING THE DISALLOWANCE OF EXPENSES INCURRED FOR MAKING ADVERTISEMENT FILMS HA S BEEN DEALT WITH BY THE A.O. AT PAGE 15-16, PARA 26. THE LD. CIT(A) DELETE D THE SAME AFTER HAVING OBSERVED AT PAGE 12-13, PARA 21 OF HIS ORDER. WE F OUND THAT THE ISSUE HAS ALREADY BEEN SETTLED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN A.Y. 1976-77 AND NO GROUND WAS TAKEN BY THE DEPARTMENT BEFORE TH E HONBLE HIGH COURT. SIMILAR ISSUE HAS BEEN DECIDED BY THE HONBLE SUPRE ME COURT IN THE CASE OF EMPIRE JUTE CO. LTD., 124 ITR 1 (SC). ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) DELETING T HE DISALLOWANCE BY OBSERVING THAT ADVERTISEMENT FILM WAS MADE ONLY FOR ADVERTISE MENT AND ITS USEFUL LIFE IS VERY SHORT AND SUCH FILMS DO NOT ADD TO THE CAPITAL STRUCTURE OF THE COMPANY. 48. GROUND NO. 14 PERTAINS TO COMPUTATION OF DEDUCT ION U/S 80HHC OF THE ITA 4083/M/03,7027/M/03, & CO 286/M/04 23 ACT BEFORE SETTING OFF OF THE UNABSORBED DEPRECIATI ON AND BUSINESS LOSSES OF EARLIER YEARS 49. THIS ISSUE HAS ALREADY BEEN DECIDED BY THE HON BLE SUPREME COURT IN THE CASE OF CIT VS. SHIRKE CONSTRUCTION, 291 ITR 38 0 (SC) IN REVENUES FAVOUR. RESPECTFULLY FOLLOWING THE SAME, WE DO NOT FIND ANY MERIT IN THE ORDER OF THE LD. CIT(A) FOR DIRECTING THE A.O. TO COMPUTE DEDUCTION U/S 80HHC OF THE ACT BEFORE SETTING OFF OF THE UNABSORBED BUSINESS L OSSES AND UNABSORBED DEPRECIATION OF THE EARLIER YEARS AGAINST THE CURRE NT YEARS INCOME. ACCORDINGLY THIS GROUND OF THE REVENUE IS ALLOWED. 50. GROUND NO. 15 OF REVENUES APPEAL HAS ALREADY B EEN DEALT WITH BY US WHILE DECIDING ASSESSEES APPEAL WITH REGARD TO DED UCTION OF INTEREST EXPENSES OUT OF ALLOWABLE PROFIT OF ASSEESSEE. ON THE SAME R EASONING, WE DIRECT THE A.O. TO REDUCE THE NET AMOUNT OF INTEREST EXPENDITURE OU T OF ALLOWABLE INCOME OF THE ASSESSEE FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 80HHC OF THE ACT. WE DIRECT ACCORDINGLY. 51. GROUND NO. 16 PERTAINS TO THE LD. CIT(A)S ACTI ON FOR EXCLUDING THE AMOUNT OF EXCISE DUTY AND SALES TAX FROM THE TOTAL TURNOVER FOR COMPUTING DEDUCTION U/S 80HHC OF THE ACT. 52. THIS ISSUE HAS BEEN SETTLED BY THE HONBLE SUPR EME COURT IN THE CASE OF LAKSHMI MACHINE WORKS, 290 ITR 667 (SC). SIMILAR I SSUE HAS BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES FAVOUR IN ASSESSMENT YEARS 1986-87 TO 1989-90, 1990-91, 1994-95 TO 1998-99. FURTHER WE FOUND THAT REVENUE IS NOT IN APPEAL AGAINST THIS ISSUE BEFORE THE HONBLE HIGH C OURT IN ASSESSMENT YEARS 1994-95, 1995-96, 1996-97 AND 1997-98 & 1998-99. I N VIEW OF ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT( A) IN DIRECTING THE A.O. TO EXCLUDE THE AMOUNT OF EXCISE DUTY AND SALES TAX FRO M THE TOTAL TURNOVER OF THE ASSESSEE WHILE COMPUTING DEDUCTION U/S 80HHC OF THE ACT. ITA 4083/M/03,7027/M/03, & CO 286/M/04 24 53. GROUND NO. 17 PERTAINS TO THE LD. CIT(A)S DIRE CTION TO THE A.O. TO INCREASE PROFITS OF THE BUSINESS BY THE LOSS OF FOR EIGN BRANCH AND THE LOSS ON EXPORT OF TRADING GOODS FOR THE PURPOSE OF COMPUTAT ION OF DEDUCTION U/S 80HHC OF THE ACT. WE FOUND THAT THIS ISSUE IS COVE RED AGAINST THE ASSESSEE AND IN FAVOUR OF REVENUE BY THE DECISION OF HONBLE SUPR4EME COURT IN THE CASE OF IPCA LABORATORIES, 266 ITR 521 (SC). RESPE CTFULLY FOLLOWING THE SAID DECISION OF HONBLE SUPREME COURT IN THE CASE OF IP CA LABORATORIES (SUPRA), WE DO NOT FIND ANY MERIT IN THE ORDER OF LD. CIT(A) FOR ALLOWING THE ASSESSEES CLAIM. 54. THE ISSUE IN GROUND NO. 18 PERTAINS TO THE APPO RTIONMENT OF HEAD OFFICE EXPENSES WHILE COMPUTING DEDUCTION U/S 80IA OF THE ACT. 55. THIS ISSUE HAS BEEN DEALT WITH BY THE LD. CIT(A ) VIDE HIS ORDER IN PAGE 15-16, PARA 23.5 & 23.6. WE FOUND THAT THE ISSUE H AS BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ITS FAVOUR IN AS SESSMENT YEARS 1994-95 TO 1998-99 AND THE DEPARTMENT IS NOT IN APPEAL AGAINST THE ORDER OF THE TRIBUNAL. RESPECTFULLY FOLLOWING THE ORDER OF THE T RIBUNAL, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) ON THIS ISSUE. 56. GROUND NO. 19 OF REVENUES APPEAL PERTAINS TO D EDUCTION U/S 80-IA OF THE ACT IN RESPECT OF VIKRAM POWER UNIT AMOUNTING T O RS. 3,58,74,158/-. 57. THE LD. CIT(A) HAS DEALT WITH THIS ISSUE AT PAG E 16-17, PARA 24 OF HIS ORDER. WE FOUND THAT THE ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ITS FAVOUR IN ASSESSMENT YEARS 1998-99 TO 2000-01. FURTHERMORE, THE DEPARTMENT IS NOT IN APPEAL AGAINS T THE TRIBUNAL ORDER ON THIS ISSUE BEFORE THE HONBLE HIGH COURT FOR A.Y. 1 998-99. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) FOR ALLOWING DEDUCTION U/S 80IA OF T HE ACT IN RESPECT OF VIKRAM UNIT AMOUNTING TO RS. 3,58,74,158/-. ITA 4083/M/03,7027/M/03, & CO 286/M/04 25 58. GROUND NO. 20 PERTAINS TO THE DIRECTION OF THE LD. CIT(A) TO THE A.O. TO RECOMPUTE THE AMOUNT OF DEDUCTION TOWARDS EXPORT PR OFIT FOR THE LIMITED PURPOSE OF COMPUTING BOOK PROFIT IN ACCORDANCE WITH THE CIRCULAR NO. 680 DATED 21-02-1994 ISSUED BY THE CBDT. WE DO NOT FIND ANY INFIRMITY IN THIS DIRECTION OF THE LD. CIT(A) TO THE A.O., HENCE ALLO WED THIS GROUND OF THE ASSESSEE. 59. IN ITS C.O., THE ASSESSEE HAS RAISED THE FOLLOW ING GROUNDS:- 1. THE LD. CIT(A) ERRED IN REJECTING THE ALTERNATE GROUND RAISED BY THE RESPONDENT THAT THE AO ERRED IN NOT ALLOWING DE DUCTION FOR TAX PAID IN FOREIGN COUNTRIES AMOUNTING TO RS. 23,36,958/- F ROM TAX PAYABLE IN INDIA ON PROFIT OF THE FOREIGN BRANCHES. 2. THE LD. CIT(A) ERRED IN REJECTING THE ALTERNATE/ WITHOUT PREJUDICE SUBMISSION OF THE RESPONDENT THAT THE DEDUCTION OF RS. 17,79,22,078/- BE ALLOWED IN THE PREVIOUS YEAR IN WHICH THE RESPON DENT ACCOUNTS FOR THE SAID LIABILITY TOWARDS ELECTRICITY CHARGES. 3. THE LD. CIT(A) ERRED IN NOT DECIDING THE ALTERNA TE GROUND RAISED BY THE RESPONDENT THAT THE EXPENSES INCURRED IN CON NECTION WITH ASSESSMENT OF LOSS AND INSURANCE CLAIM OF RS. 62.30 LACS IN THE PREVIOUS YEAR, BE ALLOWED AS BUSINESS EXPENDITURE. 4. THE LD. CIT(A) ERRED IN NOT DECIDING THE ALTERNA TE GROUND RAISED BY THE RESPONDENT THAT THE AO FAILED TO APPRECIATE AND DECIDE ALTERNATE/WITHOUT PREJUDICE SUBMISSION OF THE RESPO NDENT TO ALLOW DEPRECIATION ON THE EXPENSES INCURRED FOR PRODUCTIO N OF ADVERTISEMENT FILM AMOUNTING TO RS. 68,26,833/- IN CASE THE SAME IS TREATED AS CAPITAL IN NATURE. 5. THE LD. CIT(A) ERRED IN NOT DECIDING THE ALTERNA TE GROUND RAISED BY THE RESPONDENT IN RESPECT OF THE BASIS OF ESTIMA TION OF ALLOCATING HEAD OFFICE EXPENSES TO UNDERTAKING IN RESPECT OF W HICH DEDUCTION U/S 80IA WAS CLAIMED. 60. THE LD. COUNSEL FOR THE ASSESSEE FAIRLY CONCEDE D THAT THE GROUNDS TAKEN IN THE C.O. HAS BECOME INFRUCTUOUS, THE SAME ARE TH EREFORE DISMISSED INLIMINE. ITA 4083/M/03,7027/M/03, & CO 286/M/04 26 63. IN THE RESULT, APPEALS OF THE ASSESSE AND REVEN UE ARE ALLOWED IN PART. THE GROUNDS TAKEN IN THE C.O. ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND OCTOBER, 2014. :; 3 6789 / < => ?:0 @ 22-10-2014 7 3 A2 B -SD/- SD/- (SANJAY GARG) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER = / J2 MUMBAI ; ?:0 DATED 22-10-2014 [ 1.K0../ RK , SR. PS ! '#$% &%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / L4 () / THE CIT(A) CONCERNED, MUMBAI 4. / L4 / CIT CONCERNED,, MUMBAI 5. O1PA K4K0QR , 5 QR9 , = / J2 / DR, ITAT, MUMBAI J BENCH 6. ATU V2 / GUARD FILE. ' / BY ORDER, O4 K4 //TRUE COPY// (/') * ( DY./ASSTT. REGISTRAR) , = / J2 / ITAT, MUMBAI