THOMSON PRESS (INDIA) LTD., NEW DELHI V. ADDL. CIT, SPL. RANGE- 9, NEW DELHI

ITA 4306/DEL/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 2698 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 30-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAKASH DUBEY
• Keywords: Business income; Residential status; Double taxation relief; Earning of tax free income; Proportionate interest; Bad and doubtful debts; TDS; Rule 8D
• Section: 43B; 143(3); 10AA; 14A; 10B; 2(A); 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI G BENCH: NEW DELHI (THROUGH VIDEO CONFERENCING ) BEFORE SHRI R.K.PANDA, ACCOUNTANT MEMBER & SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NOS.4306 TO 4308/DEL/2017 ASSESSMENT YEARS : 2010-11 TO 2012-13 THOMSON PRESS (INDIA) LTD. K-9, CONNAUGHT CIRCUS, NEW DELHI VS ADDL. CIT, SPL. RAGNE-9, NEW DELHI PAN-AAACT4827F APPELLANT RESPONDENT APPELLANT BY SH. SALIL AGARWAL & SH. SHAILESH GUPTA, ADV. RESPONDENT BY SH. PRAKASH DUBEY, SR. DR DATE OF HEARING 21.09.2021 DATE OF PRONOUNCEMENT 14.10.2021 ORDER PER VIJAY PAL RAO, JM : THESE THREE APPEAL BY THE ASSESSEE ARE DIRECTED AGA INST THREE SEPARATE ORDERS OF THE LD. CIT(A) DATED 27.03 .2017, 28.03.2017 AND 29.03.2017 FOR THE ASSESSMENT YEARS 2010- 11 TO 2012-13 RESPECTIVELY. 2. FOR THE ASSESSMENT YEAR 2010-11, THE ASSESSEE H AS RAISED THE FOLLOWING GROUNDS:- GROUND OF ASSESSMENT YEAR 2010-11 ITA NOS. 4306 TO 4308/DEL/2017 2 | PA GE 1 THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO LAW AND THE FACTS OF T HE CASE AND IS REQUIRED TO BE QUASHED; 2(A) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN DISALLOWING EXPENSES FOR EARNING DIVIDEND INCOME TO THE EXTENT OF RS. 7,21,646/- 2(B) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN DISALLOWING EXPENSES FOR EARNING DIVIDEND INCOME TO THE EXTENT OF RS. 7,21,646/- BY CONSIDERING THOSE INVESTMENTS ON WHICH NO DIVIDEND HAS BEEN RECEIVED BY THE ASSESSEE COMPANY DURING THE YEAR; 2(C) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN DISALLOWING EXPENSES FOR EARNING DIVIDEND INCOME TO THE EXTENT OF RS. 7,21,646/- BY CONSIDERING TERM LOAN INTEREST & WORKING CAPITAL LOAN INTEREST AS THE CHA RT FILED BY THE ASSESSEE COMPANY DEPICTING THAT THE INVESTMENTS HAVE BEEN MADE OUT OF INTERNAL REVENUE GENERATION / PROFIT EARNED DURING THE YEAR AND NOT OUT OF BORROWED FUNDS HAS NOT BEEN CONSIDERED; 2(D) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN DISALLOWING EXPENSES FOR EARNING DIVIDEND INCOME TO THE EXTENT OF RS. 7,21,646/- BY CONSIDERING THOSE INVESTMENT ON WHICH NO EXEMPT INCOME IS RECEIVABLE EITHER IN THE FORM OF DIVIDEND OR IN THE FORM OF CAPITAL GAIN; 2(E) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN DISALLOWING EXPENSES FOR EARNING DIVIDEND INCOME TO THE EXTENT OF RS.7,21,646/- BY CONSIDERING INTEREST PAID ON LOAN TAKEN ONLY FOR BUSINESS PURPOSES; 3(A) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN DISALLOWING A SUM OF RS. 18,56,215/- TOWARDS EXEMPTION U/S 10B, FURTHER THIS AMOUNT HAS BEEN COMPUTED INCORRECTLY ITA NOS. 4306 TO 4308/DEL/2017 3 | PA GE IN FACT AS WELL AS IN LAW; 3(B) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN DISALLOWING A SUM OF RS. 18,56,215/- TOWARDS EXEMPTION U/S 10B BY CALCULATING THE PROFITS DERIVED FROM EXPORT OF ARTI CLE OR THINGS AFTER REDUCING OTHER INCOMES; 3(C) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN DISALLOWING A SUM OF RS.18,56,215/- TOWARDS EXEMPTION U/S 10AA BY NOT TREATING THE OTHER INCOMES EARNED FROM EXPORT ACTIVITIES AS EXPORT TURNOVER BUT TREATING T HE SAME AS TOTAL TURNOVER; 4(A) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER GONE WRONG IN DISALLOWING A SUM OF RS.62,71,964/- [OUT OF RS.11564807/- TOWARDS PAYMENT MADE IN FOREIGN CURRENCY; (B) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER GONE WRONG IN DISALLOWING A SUM OF RS. 62,71,964/- BY PRESUMING THAT THE PROVISIONS OF TDS AS REQUIRED U/S 195(2) READ WITH SECTION 40(A)(I) HAS NOT BEEN COMPLIED WITH BY THE ASSESSEE COMPANY. 5.(A) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN DISALLOWING A SUM OF RS.67,00134/- TOWARDS PROPORTIONATE INTEREST ON CAPITAL WORK IN PROGRESS; 6. THAT THE APPELLANT RESERVES THE RIGHT TO ADD, ALTER, AMEND, DELETE, ANY/ALL GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF THE HEARING OF THE APPEAL. 3. GROUND NO. 1 IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. ITA NOS. 4306 TO 4308/DEL/2017 4 | PA GE 4. GROUND NO. 2 IS DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S 14A OF THE INCOME TAX ACT, 19 61(IN SHORT THE ACT) ON ACCOUNT OF INTEREST EXPENDITURE WHICH WAS CONFIRMED BY THE LD. CIT(A) WITH SOME DIRECTIONS TO THE ASSESSING OFFICER. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS MADE INVESTMENT IN SHARES WHICH MAY YIELD TAX FREE INCOM E IN THE FORM OF DIVIDEND, CAPITAL GAIN, ETC. WHICH DID NOT FORM PART OF THE INCOME OF THE ASSESSEE. THE ASSESSING OFFICER O BSERVED THAT THE EXPENDITURE IS REQUIRED TO BE DISALLOWED U NDER THE PROVISIONS OF SECTIONS 14A OF THE ACT AND ACCORDING LY ASKED THE ASSESSEE TO PROVIDE THE DETAILS OF EXEMPT INCOM E. IN RESPONSE, THE ASSESSEE SUBMITTED THAT DURING THE YE AR UNDER CONSIDERATION, THE ASSESSEE HAS EARNED EXEMPT INCOM E IN THE SHAPE OF DIVIDEND OF RS.14,87,335/-, WHICH IS SHOWN IN THE BALANCE SHEET UNDER SCHEDULE-14. THE ASSESSEE FURT HER CLAIMED THAT IT HAS NOT INCURRED ANY DIRECT OR INDI RECT EXPENDITURE FOR EARNING EXEMPT INCOME. THE ASSESSEE HAS ALSO EXPLAINED THAT IT HAS MADE SUO-MOTO DISALLOWANCE OF RS.49,886/- IN RESPECT OF EXPENDITURE ATTRIBUTABLE TO EXEMPT ITA NOS. 4306 TO 4308/DEL/2017 5 | PA GE INCOME IN THE COMPUTATION OF INCOME AS PER RULE 8D OF INCOME TAX RULES. THE ASSESSING OFFICER WAS NOT SA TISFIED WITH THE REPLY OF THE ASSESSEE AS WELL AS THE SUO-MOTO DISALLOWANCE MADE BY THE ASSESSEE AND PROCEEDED TO MAKE THE DISALLOWANCE ON ACCOUNT OF INTEREST EXPENDITURE PROPORTIONATE TO THE TOTAL ASSET/AVERAGE ASSET TO T HE AVERAGE INVESTMENT IN SHARES. ACCORDINGLY, THE ASSESSING OF FICER HAS MADE THE DISALLOWANCE U/S 14A ON ACCOUNT OF INTERES T EXPENDITURE OF RS.7,11,740/- AND ON ACCOUNT OF ADMINISTRATIVE EXPENSES CALCULATED @ 0.5% OF THE AV ERAGE INVESTMENT AMOUNTING TO RS.59,792/- AS AGAINST SUO-MOTO DISALLOWANCE OF RS.49,866/-. CONSEQUENTLY, THE ASS ESSING OFFICER HAS MADE NET ADDITION OF RS.7,21,646/-. 6. THE ASSESSEE CHALLENGED THE ACTION OF THE ASSES SING OFFICER BEFORE THE LD. CIT(A) AND CONTENDED THAT TH E ASSESSEE HAS MADE SUO-MOTO DISALLOWANCE BY TAKING THE AVERAG E INVESTMENT YIELDING EXEMPT INCOME, WHEREAS THE ASSE SSING OFFICER HAS TAKEN THE AVERAGE INVESTMENT WHICH COMP RISES OF DIVIDEND YIELDING INVESTMENT AS WELL AS NON-DIVIDEN D YIELDING INVESTMENT. THE ASSESSEE RELIED UPON THE DECISION O F THE HONBLE JURISDICTIONAL HIGH COURT IN ACB INDIA LTD. VS ACIT ITA NOS. 4306 TO 4308/DEL/2017 6 | PA GE (2015) 374 ITR 108 (DEL.). THE LEARNED CIT(A) ACCE PTED THIS CONTENTION OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO CONSIDER THE INVESTMENT WHICH HAVE YIELDED THE EXEM PT INCOME WHILE COMPUTING THE AVERAGE INVESTMENT FOR T HE PURPOSE OF DISALLOWANCE UNDER RULE-8D. FURTHER, TH E ASSESSING OFFICER HAS ALSO BEEN DIRECTED TO VERIFY THE QUANTUM OF FINANCIAL COST BY EXCLUDING EXPENSES LIKE BANK C HARGES, DD CHARGES ETC. WHICH DO NOT HAVE ANY COMPONENT OF IN TEREST WHILE MAKING THE DISALLOWANCE ON ACCOUNT OF INTERES T EXPENDITURE U/S 14A OF THE ACT. 7. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A), T HE ASSESSEE HAS FILED THE PRESENT APPEAL. 8. BEFORE THE TRIBUNAL, THE LEARNED SR. COUNSEL HA S CONTENDED THAT THE ASSESSEE IS HAVING ITS OWN NON-I NTEREST BEARING FUND IN THE SHAPE OF RESERVE AND SURPLUS OF MORE THAN RS.160 CRORES AS ON 31.03.2010. HE HAS FURTHER SUB MITTED THAT THE BORROWED FUND WAS UTILIZED FOR THE SPECIFI C PURPOSE AND THEREFORE, THE ASSESSEE HAS NOT UTILIZED ANY PA RT OF BORROWED FUNDS FOR THE PURPOSE MAKING INVESTMENT IN SHARES. HE HAS FURTHER CONTENDED THAT THE DURING THE YEAR U NDER THE CONSIDERATION, THE ASSESSEE HAS NOT MADE ANY FRESH ITA NOS. 4306 TO 4308/DEL/2017 7 | PA GE INVESTMENT EXCEPT AS SUM OF RS.19.60 LAKHS THAT TOO IN THE SUBSIDIARY COMPANY NOT YIELDING ANY DIVIDEND INCOME . THEREFORE, WHEN THE ASSESSEE HAS ITS OWN NON-INTER EST BEARING FUND MORE THAN SUFFICIENT TO MAKE THE INVES TMENT THEN THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INTEREST EXPENDITURE IS NOT JUSTIFIED AN D THE SAME IS LIABLE TO BE DELETED. IN SUPPORT OF HIS CONTENT ION, HE HAS RELIED UPON THE DECISION OF THE HONBLE SUPREME COU RT IN THE CASE OF SOUTH INDIAN BANK VS CIT 130 TAXMANN.COM 17 8, WHEREIN, THE HONBLE SUPREME COURT HAS HELD THAT IN ABSENCE OF SEPARATE ACCOUNT FOR INVESTMENT, THE TAX FREE I NCOME INVESTMENT MADE IN SHARES SHOULD BE CONSIDERED TO H AVE BEEN MADE OUT OF INTEREST FREE FUNDS WHICH WERE SUBSTANT IALLY MORE THAN THE INVESTMENT MADE AND THEREFORE, THE INTERES T PAID BY THE ASSESSEE ON ITS BORROWED MONEY SHOULD NOT BE CO NSIDERED TO BE EXPENDITURE INCURRED IN RELATION TO TAX FREE INCOME AND CONSEQUENTLY THERE SHOULD BE NO DISALLOWANCE U/S 14 A OF THE ACT. THUS, THE LD. SR. COUNSEL HAS SUBMITTED THAT I N CASE OF MIX FUND MADE UP PARTLY OF INTEREST FREE FUND AND P ARTLY OF INTEREST BEARING FUND THE INVESTMENT MUST BE CONSID ERED TO HAVE BEEN MADE OUT OF THE INTEREST FREE FUND. HENCE , HE HAS CONTENDED THAT IN VIEW OF THE INTEREST FREE FUND OF THE ASSESSEE ITA NOS. 4306 TO 4308/DEL/2017 8 | PA GE MORE THAN SUFFICIENT OF THE AMOUNT OF TOTAL INVESTM ENT IN SHARES, NO DISALLOWANCE IS CALLED FOR ON ACCOUNT OF INTEREST EXPENDITURE. 9. ON THE OTHER HAND, LEARNED DR HAS RELIED UPON T HE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT WHEN THE ASSESSEE IS HAVING SECURED AS WELL AS UNSECURED LOA N TO THE TUNE OF RS.197 CRORES THEN IN ABSENCE OF ANY DETAIL S OF UTILIZATION OF THE UNSECURED LOAN THE INTEREST PAID ON LOAN WOULD BE APPORTIONED BY TREATING THE SAME INCURRED FOR THE PURPOSE OF EARNING THE EXEMPT INCOME AS PER FORMULA PROVIDED UNDER RULE-8D OF THE I.T. RULES, 1962 (HER EINAFTER THE RULES). 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WE LL A MATERIAL AVAILABLE ON RECORD. THOUGH THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE SUSTAINED BY THE LD. CI T(A) U/S 14A OF THE ACT TO THE EXTENT OF RS.7,21,646/-, HOWE VER, AS IT IS CLEAR FROM THE DETAILS OF THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INTEREST EXPENDITUR E THAT THE CORRECT AMOUNT OF DISALLOWANCE IS RS.7,11,740/-PLUS SOME DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER ON A CCOUNT OF ADMINISTRATIVE EXPENSES WHICH WERE DELETED BY THE L D. CIT(A) ITA NOS. 4306 TO 4308/DEL/2017 9 | PA GE WHILE ACCEPTING THE PLEA OF THE ASSESSEE THAT THE A VERAGE INVESTMENT IN TAX FREE SECURITIES/SHARES BE CONSIDE RED ONLY BY TAKING EXEMPT INCOME YIELDING INVESTMENT. THEREFORE , THE DISPUTE BEFORE THE TRIBUNAL IS ONLY IN RESPECT OF D ISALLOWANCE U/S 14A ON ACCOUNT OF INTEREST EXPENDITURE OF RS.7, 11,740/-. ON PERUSAL OF THE BALANCE SHEET OF THE ASSESSEE, IT IS EVIDENT THAT THE ASSESSEE WAS HAVING MORE THAN RS.160 CRORE S OF RESERVE AND SURPLUS AS ON 31.03.2010, WHICH IS MANY TIMES MORE THAN THE TOTAL INVESTMENT MADE BY THE ASSESSEE IN THE SHARES. THE HONBLE SUPREME COURT IN THE LATEST JU DGMENT IN THE CASE OF SOUTH INDIAN BANK VS CIT (SUPRA) HAS R EITERATED THE PROPOSITION THAT IF THE ASSESSEE IS HAVING MIXE D FUND COMPRISING OF INTEREST BEARING AND INTEREST FREE FU NDS THEN THE INVESTMENT IN THE SHARES AND SECURITIES YIELDING TA X FREE INCOME WILL BE CONSIDERED OUT OF INTEREST FREE FUND S IF THE SAME ARE SUFFICIENT FOR MAKING SUCH INVESTMENT. EV EN OTHERWISE, THE ASSESSEE HAS GIVEN THE DETAILS OF TH E SECURED AND UNSECURED LOAN WHICH WERE TAKEN FOR THE SPECIFI C PURPOSE AND ACQUIRING ASSETS AS WELL AS BUSINESS PURPOSES O F THE ASSESSEE AND THEREFORE, THE EXPENDITURE ON ACCOUNT OF INTEREST CANNOT BE HELD TO BE ATTRIBUTABLE FOR EARNING THE D IVIDEND INCOME. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE ITA NOS. 4306 TO 4308/DEL/2017 10 | PA GE CASE WHEN THE ASSESSEE IS HAVING SUFFICIENT INTERES T FREE OWN FUNDS IN THE SHAPE OF RESERVE AND SURPLUS THEN NO DISALLOWANCE U/S 14A IS CALLED FOR ON ACCOUNT OF IN TEREST EXPENDITURE PARTICULARLY WHEN THE ASSESSEE HAS NOT MADE ANY NEW INVESTMENT EXCEPT MEAGER AMOUNT OF RS.19,60,000 /- DURING THE YEAR UNDER CONSIDERATION THAT TOO IN THE SUBSIDIARY COMPANY WHICH HAS NOT YIELDED ANY DIVIDEND INCOME. HENCE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OF RS.7,11,740/- ON ACCOUNT OF INTEREST EXPENDITURE U/ S 14A IS DELETED. 11. GROUND NO.3 IS REGARDING THE DISALLOWANCE OF DEDUCTION U/S 10B OF THE ACT TO THE EXTENT OF RS.13 ,48,416/- WHICH IS WRONGLY MENTIONED IN THE GROUND AS RS.18,5 6,215/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER NOTED THAT THE ASSESSEE HAS CLAIMED DEDUCTION/EXEMPTION U/S 10B OF THE ACT IN RESPECT O F TWO UNITS SITUATED AT FARIDABAD AND NOIDA RESPECTIVELY. THE ASSESSING OFFICER HAS RESTRICTED THE CLAIM OF DEDUC TION IN RESPECT OF NOIDA UNIT BY REDUCING A SUM OF RS.9,62, 364/- BEING NOT RECEIVED IN FOREIGN EXCHANGE WITHIN THE P RESCRIBED TIME LIMIT. CONSEQUENTLY, THE ASSESSING OFFICER CO MPUTED THE ITA NOS. 4306 TO 4308/DEL/2017 11 | PA GE DEDUCTION BY REDUCING THE EXPORT TURNOVER. THE ASSE SSING OFFICER HAS ALSO EXCLUDED OTHER INCOME FROM THE PRO FITS OF THE UNIT FOR COMPUTING THE DEDUCTION U/S 10B OF THE ACT AS THE ASSESSEE CREDITED MISCELLANEOUS INCOME OF RS.6,22,4 00/- ON ACCOUNT OF SCRAP SALE AND COMPENSATION INCOME OF RS.3,75,594/-. SIMILARLY, THE MISCELLANEOUS INCOME ON ACCOUNT OF SCRAP SALE WERE ALSO CREDITED IN RESPECT OF FARIDABAD UNIT, THE ASSESSING OFFICER RESTRICTED TH E CLAIM OF DEDUCTION BY EXCLUDING ALL THESE AMOUNTS FROM THE E LIGIBLE BUSINESS PROFITS. 12. THE ASSESSEE CHALLENGED THE ACTION OF THE ASSE SSING OFFICER BEFORE THE LEARNED CIT(A) BUT COULD NOT SUC CEED. 13. BEFORE THE TRIBUNAL, THE LD. SR. COUNSEL FOR T HE ASSESSEE HAS SUBMITTED THAT THESE AMOUNTS HAS EXCLU DED BY THE ASSESSING OFFICER ARE VERY MUCH FORM PART OF TH E BUSINESS PROFIT OF THE ELIGIBLE UNITS AND THEREFORE CANNOT B E EXCLUDED FROM THE PROFIT WHILE COMPUTING THE DEDUCTION. HE H AS FURTHER SUBMITTED THAT FOR THE ASSESSMENT YEAR 2007-08, AN IDENTICAL ISSUE WAS CONSIDERED BY THIS TRIBUNAL AND THE MATTE R WAS REMANDED TO THE RECORD OF THE ASSESSING OFFICER FOR VERIFYING THE FACTS AND THEN DECIDING THE ISSUE. AS REGARDS T HE ITA NOS. 4306 TO 4308/DEL/2017 12 | PA GE REDUCTION OF THE EXPORT TURNOVER ON ACCOUNT OF THE AMOUNT NOT RECEIVED IN FOREIGN CURRENCY, THE LD. SR. COUNSEL H AS CONTENDED THAT THE SAID AMOUNT SHALL ALSO BE REDUCE D FROM THE TOTAL TURNOVER WHILE COMPUTING THE DEDUCTION U/ S10B OF THE ACT. HE RELIED UPON THE DECISION IN THE CASE OF CIT VS GENPACT INDIA 203 TAXMANN 632 (DELHI) 14. ON THE OTHER HAND, LD. DR SUBMITTED THAT THE ASSESSING OFFICER HAS RESTRICTED THE CLAIM OF DEDUC TION U/S 10B BY GIVING THE FINDING OF FACTS THAT PART OF THE SALES TURNOVER WAS NOT RECEIVED BY THE ASSESSEE IN FOREIG N CURRENCY AND THEREFORE, THE SAME IS LIABLE TO EXCLUDED FROM THE EXPORT TURNOVER WHILE COMPUTING THE DEDUCTION. SIMILARLY, CERTAIN MISCELLANEOUS INCOMES WERE CREDITED BY THE ASSESSEE WHICH WERE NOT FORMING PART OF THE PROFITS OF THE ELIGIBL E UNIT AND PARTICULARLY FROM EXPORT OF GOODS. HE HAS RELIED U PON THE ORDERS OF THE AUTHORITIES BELOW. 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WE LL A MATERIAL AVAILABLE ON RECORD. AT THE OUTSET, WE NO TED THAT THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE AY 2007-08 IN ITA NO.5793/DEL/2010 VIDE ORDER DATED 20.11.2018 HAS CONSIDERED AN IDENTICAL ISSUE IN PARAS 3 TO 6 AS UN DER:- ITA NOS. 4306 TO 4308/DEL/2017 13 | PA GE 3.0 AT THE OUTSET, THE LD. AUTHORISED REPRESENTATI VE SUBMITTED THAT WHILE THE MATTER WAS BEING DECIDED BY THE ITAT IN THE FIRST ROUND I.E. VIDE ORDER DATE D 15.01.2016, THE ASSESSEE HAD SPECIFICALLY REFERRED TO THE DETAILS OF THE MISCELLANEOUS INCOME FOR BOTH TH E UNDERTAKINGS, DETAILS OF THE COMPENSATION INCOME AND HAD ALSO FILED A CHART SHOWING HISTORY OF DEDUCTION CLAIMED UNDER SECTION 10B IN RESPECT OF MISCELLANEOUS INCOME AND COMPENSATION INCOME AND TREATMENT ACCORDED BY THE REVENUE AND HAD ALSO SUBMITTED THAT IN NONE OF THE PRECEDING ASSESSMENT YEARS, DISALLOWANCE HAS EVER BEEN MADE. HE ALSO REFERRED TO THE ORDER OF ASSESSMENT PASSED U/S 143(3) OF THE ACT FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR 2006-07, WHEREIN THE AO HAD HIMSELF ACCEPTED THAT MISCELLANEOUS INCOME AND COMPENSATION INCOME WAS PROFIT DERIVED FROM THE UNDERTAKING AS NO DISALLOWANCE WAS MADE. IT WAS ALSO SUBMITTED THAT MISCELLANEOUS INCOME AND COMPENSATION INCOME HAVE BEEN TREATED AS BUSINESS INCOME AND, AS SUCH, IN ACCORDANCE WITH SUBSECTION (4) OF SECTION 10B OF THE ACT, BOTH THE AFORESAID I TEMS OF INCOME SHOULD BE PROFITS DERIVED FROM THE EXPORT , AS THE ASSESSEE HAD NOT MADE ANY DOMESTIC SALES AND ALL THE SALES OF THE ASSESSEE WAS EXPORT SALES. IN RESPECT OF COMPENSATION INCOME, IT WAS SUBMITTED THAT SAME HAD DIRECT NEXUS WITH THE PROFITS OF THE ASSESSEE AS COMPENSATION INCOME WAS UNCLAIMED SALARY/LEAVE WITH WAGES, WHICH WAS ORIGINALLY DEBITED WHILE COMPUTING THE INCOME OF THE UNDERTAKING, BUT WHEN THE SAME WAS NOT CLAIMED, THE SAME WAS CREDITED AND, AS SUCH, THE SAME ALSO HAD DIRECT NEXUS. IN SUPPORT, THE LD. AR ALSO FILED THE LEDGER ACCOUNT AS WELL AS THE CHART INDICATING THAT IN THE PRECEDING ASSESSMENT YEAR 2006-07, COMPENSATION INCOME RECEIVED BY THE ASSESSEE HAD BEEN TREATED AS PROFITS DERIVED FROM THE UNDERTAKIN G. RELIANCE WAS PLACED ON THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF CIT VS. EXCEL INDUSTRIES LTD REPORTED IN 358 ITR 285 WHEREIN IT WAS HELD THAT IT IS INAPPROPRIATE TO ALLOW THE RECONSIDERATION OF AN IS SUE FOR A SUBSEQUENT ASSESSMENT YEAR IF THE SAME 'FUNDAMENTAL ASPECT' PERMEATES IN DIFFERENT ITA NOS. 4306 TO 4308/DEL/2017 14 | PA GE ASSESSMENT YEARS AND THE REVENUE CANNOT BE ALLOWED TO FLIP-FLOP ON THE ISSUE AND IT OUGHT TO L ET THE MATTER REST. IT WAS SUBMITTED THAT ONCE THE REVENUE HAS ACCEPTED THAT MISCELLANEOUS INCOME AND COMPENSATION IS PROFIT DERIVED FROM THE UNDERTAKING IN THE EARLIER ASSESSMENT YEARS, THERE WAS NO JUSTIFICATION TO DENY SUCH CLAIM IN THE INSTANT YEA R WHERE IT IS NOT IN DISPUTE THAT NATURE OF INCOME WA S SAME AS WAS IN THE PRECEDING YEARS. 4.0 IN RESPONSE, THE LD. SR. DR PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW, BUT COULD NOT REBU T THE FACT THAT THE DEPARTMENT HAD ACCEPTED THAT MISCELLANEOUS INCOME AND COMPENSATION WAS PART OF INCOME FOR THE PURPOSE OF COMPUTATION OF ELIGIBLE PROFIT U/S 10B OF THE ACT. 5.0 ON A QUERY FROM THE BENCH, BOTH THE PARTIES HAD NO OBJECTION IF THE ISSUE WAS RESTORED TO THE FILE OF THE AO FOR ALLOWING THE CLAIM OF THE ASSESSEE AFTER DUE VERIFICATION. 6.0 HAVING HEARD BOTH THE PARTIES AND IN VIEW OF TH E UNDISPUTED FACT THAT THE REVENUE HAD ACCEPTED MISCELLANEOUS INCOME AND COMPENSATION AS PART OF THE ELIGIBLE PROFITS FOR THE PURPOSE OF COMPUTATION OF CLAIM U/S 10B OF THE ACT COUPLED WITH THE CONCURRENCE OF BOTH THE PARTIES FOR THE ISSUE BEING RESTORED TO THE FILE OF THE AO FOR VERIFICATION, WE RESTORE THE ISSUE TO THE FILE OF THE AO WITH A DIRE CTION TO ALLOW THE CLAIM OF THE ASSESSEE AFTER DUE VERIFICATION AND ALSO AFTER DULY APPRECIATING THE F ACT THAT SIMILAR INCOME/S HAD BEEN HELD TO BE INCLUDIBL E IN ELIGIBLE PROFITS IN THE PRECEDING ASSESSMENT YEA RS. 16. THUS, THE TRIBUNAL HAS NOTED THAT THE REVENUE HAS ACCEPTED THE MISCELLANEOUS INCOME OF COMPENSATION A S PART OF ELIGIBLE PROFIT FOR THE PURPOSE OF COMPUTING THE DE DUCTION U/S10B OF THE ACT. HOWEVER, THE MATTER WAS SET-ASID E TO THE RECORD OF THE ASSESSING OFFICER FOR VERIFICATION OF THE NATURE OF ITA NOS. 4306 TO 4308/DEL/2017 15 | PA GE INCOME AND THEN ALLOW THE CLAIM. TO MAINTAIN THE R ULE OF CONSISTENCY, WE FOLLOW THE EARLIER ORDER OF THE TRI BUNAL AND SET-ASIDE THE ISSUE TO THE RECORD OF THE ASSESSING OFFICER FOR COMPUTING THE DEDUCTION U/S 10B OF THE ACT IN TERMS OF DIRECTIONS AS GIVEN BY THE TRIBUNAL FOR AY 2007-08. 17. AS REGARDS THE REDUCTION OF THE EXPORT TURNOVE R ON ACCOUNT OF THE AMOUNT HAVE NOT RECEIVED IN FOREIGN CURRENCY WE FIND THAT IF ANY SUM IS REDUCED FROM EXPORT TURN OVER THEN THE SAME IS ALSO REQUIRED TO BE REDUCED FROM TOTAL TURNOVER BECAUSE THE TOTAL TURNOVER COMPRISES OF EXPORT TURN OVER AND NON-EXPORT TURNOVER. THEREFORE, FOLLOWING THE DECIS ION IN THE CASE OF CIT VS GENPACT INDIA (SUPRA) WE DIRECT THE A.O. TO RECOMPUTED THE DEDUCTION U/S 10B OF THE ACT BY REDU CING THE SAID AMOUNT FROM TOTAL TURNOVER ALSO. 18. GROUND NO.4 IS REGARDING THE DISALLOWANCE MADE U/S 40(A)(I) TOWARDS PAYMENT MADE IN FOREIGN CURREN CY. 19. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE ASSESSING OFFICER NOTED THAT THE EXPENDITURE INCURR ED IN FOREIGN CURRENCY INCLUDES A SUM OF RS.1,15,64,807/- UNDER THE HEAD OTHER EXPENSES. THE ASSESSING OFFICER FURT HER NOTED ITA NOS. 4306 TO 4308/DEL/2017 16 | PA GE THAT THE ASSESSEE HAS NOT CLARIFIED WHAT CONSTITUTE S THE OTHER EXPENDITURE, EVEN THE DETAILS OF TAX DEDUCTED AT SO URCE AND PAID WERE NOT SUBMITTED. ACCORDINGLY, THE ASSESSI NG OFFICER DISALLOWED THE SAID AMOUNT OF RS.1,15,64,807/- U/S 40(A)(I) OF THE ACT AS THE SAID PAYMENT ARE LIABLE TO TDS U/S 1 95(2) OF THE ACT. 20. THE ASSESSEE HAS CHALLENGED THE ACTION OF THE ASSESSING OFFICER BEFORE THE LD. CIT(A) AND SUBMITT ED THAT AS PER THE AUDIT REPORT, THE AUDITORS HAS MENTIONED AN AMOUNT OF RS.24,55,271/- AS DISALLOWABLE U/S 40(A)(I) OF T HE ACT, WHICH HAS ALREADY BEEN ADDED TO THE TOTAL INCOME BY THE ASSESSEE AND NO FURTHER DISALLOWANCE SHOULD BE MAD E. THE ASSESSEE FURTHER SUBMITTED THAT THE AMOUNT WHICH WA S DISALLOWED BY THE ASSESSING OFFICER CONSISTS OF AMO UNTS SPENT IN FOREIGN CURRENCY ON ACCOUNT OF PARTICIPATION FEE IN VARIOUS BOOK FARES AND EXHIBITION, BANK CHARGES, INTEREST, IMPORT OF MATERIAL, SALARY AND WAGES PAID OUTSIDE INDIA AND G ENERAL CHARGES. THUS, THE ASSESSEE CLAIMED ALL THESE EXPEN SES ARE NOT SUBJECTED TO TDS AS THE INCOME IN THE HAND OF T HE RECIPIENT IS NOT TAXABLE IN INDIA. THE LD. CIT(A) H AS GRANTED PART RELIEF TO THE ASSESSEE BY EXCLUDING THE BANK C HARGES, ITA NOS. 4306 TO 4308/DEL/2017 17 | PA GE IMPORT OF SPARE PARTS AND GENERAL CHARGES TOTAL AMO UNTING TO RS.52,93,114/- AND BALANCE DISALLOWANCE WAS CONFIRM ED. 21. BEFORE THE TRIBUNAL, THE LD. SR. COUNSEL FOR T HE ASSESSEE HAS SUBMITTED THAT THE LD. CIT(A) HAS CONF IRMED THE PART DISALLOWANCE WITHOUT DECIDING THE ISSUE WHETHE R THE AMOUNT IN THE HAND OF RECIPIENT IS CHARGEABLE TO T AX IN INDIA OR NOT. HE HAS REFERRED TO THE DETAILS OF THE EXPE NDITURE AND SUBMITTED THAT THESE EXPENDITURES WERE INCURRED IN RESPECT OF EXHIBITION OF BOOK FARE AND SALARY PAID OUTSIDE IND IA WHICH WILL NOT CONSTITUTE AN INCOME IN INDIA OF THE RECIP IENT TO BE TAXED IN INDIA. HE HAS FURTHER SUBMITTED THAT THE A SSESSING OFFICER HAS NOT GIVEN PROPER OPPORTUNITY TO THE ASS ESSEE BEING HEARD AND TO EXPLAIN THE NATURE OF PAYMENT. THE PAY MENT IS IN THE NATURE OF FEE FOR PARTICIPATION IN VARIOUS BOOKS FARES AND EXHIBITION HELD OUTSIDE INDIA WOULD NOT BE LIAB LE FOR TDS U/S 195(2) OF THE ACT BEING NO SERVICE RECEIVED BY THE ASSESSEE COMPANY AND THE SAME IS COVERED UNDER ARTICLE-7 OF DTAA BETWEEN INDIA- UK AND INDIA USA. 22. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED TH AT THE ASSESSING OFFICER HAS RECORDED IN THE ASSESSMEN T ORDER THAT THE ASSESSEE HAS NOT EVEN FURNISHED THE DETAIL S REGARDING ITA NOS. 4306 TO 4308/DEL/2017 18 | PA GE THE NATURE OF PAYMENT AND TDS LIABILITY. HE HAS RE LIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED T HAT THE LD. CIT(A) HAS ALREADY GRANTED SUBSTANTIAL RELIEF WHERE THE AMOUNT PAID BY THE ASSESSEE IN FOREIGN CURRENCY FOR PURCHASE OF SPARES, GENERAL CHARGES AND BANK CHARGES ARE EXC LUDED FROM THE DISALLOWANCE. 23. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS W ELL A MATERIAL AVAILABLE ON RECORD. AT THE OUTSET, WE NO TE THAT THE ASSESSING OFFICER HAS MADE THE DISALLOWANCE OF RS.1,15,64,807/- U/S 40(A)(I) OF THE ACT FOR WANT O F TDS AS WELL AS THE EXPLANATION OF THE ASSESSEE. THE LD. C IT(A) HAS GRANTED PART RELIEF TO THE ASSESSEE IN RESPECT OF E XPENDITURE INCURRED FOR BANK CHARGES, SPARES PARTS AND GENERAL CHARGES. THE REST OF THE DISALLOWANCE TO THE EXTENT OF RS.62 ,71,694/- WAS CONFIRMED BY THE LD. CIT(A) ON THE GROUND THAT THE ASSESSEE HAS NOT ABLE TO SUBSTANTIATE ITS CLAIM OF NON- TAXABILITY OF THESE AMOUNTS IN THE HANDS OF THE REC IPIENT BY PRODUCING SUPPORTING RELEVANT DETAILS AS TO THE RES IDENTIAL STATUS OF THE PAYEE AND THE RELEVANT PROVISIONS OF DTAA. WE FIND EVEN BEFORE THE TRIBUNAL, THE ASSESSEE HAS NOT PRODUCED THE RELEVANT DETAILS OF THE RESIDENTIAL STATUS AS W ELL AS THE ITA NOS. 4306 TO 4308/DEL/2017 19 | PA GE RESPECTIVE DTAA BETWEEN INDIA-UK AND INDIA-USA. TH OUGH, IT IS CONTENDED BY THE ASSESSE THAT IN VIEW OF THE ART ICLE-7 OF THE DTAA, THE INCOME IS NOT TAXABLE IN INDIA IN THE HAN DS OF THE RECIPIENT HOWEVER, NOTHING HAS BEEN BROUGHT ON RECO RD TO POINT OUT HOW THE INCOME IN THE HAND OF THE RECIPIE NT IS NOT TAXABLE IN INDIA. ACCORDINGLY, IN THE FACTS AND C IRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE IMPUGNED ORDER OF THE LD. CIT(A) QUA THIS ISSUE AND THE SAME IS UPHELD. 24. GROUND NO.5 IS REGARDING THE DISALLOWANCE TOWA RDS PROPORTIONATE INTEREST ON CAPITAL WORKING IN PROGRE SS. 25. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS SHOWN CAPITAL WORK IN PROGRESS AND THE INTEREST COST ATTRIBUTABLE TO THE EXPENDITURE INCURRED FOR CAPITAL WORK IN PROGRESS H AS TO BE CAPITALISED TO THE CAPITAL WORK IN PROGRESS INSTEAD OF CHARGING THE ENTIRE INTEREST TO PROFIT & LOSS ACCOUNT. ACCO RDINGLY, THE ASSESSING OFFICER HAS MADE A PROPORTIONATE DISALLOW ANCE BY TAKING THE AVERAGE COST OF WORK IN PROGRESS AMOUNTI NG TO RS.60,70,134/-. ITA NOS. 4306 TO 4308/DEL/2017 20 | PA GE 26. THE ASSESSEE CHALLENGED THE ACTION OF THE ASSE SSING OFFICER BEFORE THE LD. CIT(A) BUT COULD NOT SUCCEED . 27. BEFORE THE TRIBUNAL, THE LD. SR. COUNSEL HAS SUBMITTED THAT THE FINANCIAL COST WHICH IS APPORTIO NED BY THE ASSESSING OFFICER TOWARDS THE COST OF CAPITAL WORK IN PROGRESS IS SPECIFIC TO THE PURPOSE FOR WHICH THE LOANS WERE TAKEN BY THE ASSESSEE. HE HAS SUBMITTED THAT THE LOANS WER E TAKEN AND UTILIZED FOR SPECIFIED ASSETS AND THEREFORE, NO APPORTIONMENT IS PERMITTED ON PRESUMPTION BASIS WHE N THE ACTUAL EXPENDITURE IS INCURRED IN THE SHAPE OF INTE REST AND BANK CHARGES FOR SPECIFIC ASSETS. THE LD. SR. COUN SEL HAS SUBMITTED THAT THE DISALLOWANCE MADE BY THE ASSESSI NG OFFICER AND THE CONFIRMED BY THE LD. CIT(A) IS UNJU STIFIED AND THE SAME IS LIABLE BE DELETED. 28. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED TH AT THE ASSESSEE HAS FAILED TO SUBSTANTIATE ITS CLAIM B Y PRODUCING ANY EVIDENCE BEFORE THE AUTHORITIES BELOW. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 29. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WE LL AS MATERIAL AVAILABLE ON RECORD. SO FAR AS THE INT EREST ITA NOS. 4306 TO 4308/DEL/2017 21 | PA GE EXPENDITURE INCURRED ON THE SECURED LOANS IS CONCER NED, IT IS MATTER OF RECORD THAT THE LOAN IS TAKEN FOR SPECIFI C PURPOSE AND UTILIZED FOR SPECIFIED THE ASSETS. THEREFORE, THE EXPENDITURE INCURRED ON SECURED LOANS WHICH IS NOT UTILIZED FOR CAPITAL WORKING IN PROGRESS CANNOT BE ATTRIBUTE D TOWARDS THE CAPITAL WORK IN PROGRESS. HOWEVER, IT IS A MAT TER OF FACT TO BE VERIFIED WHETHER ANY UNSECURED LOAN IS TAKEN BY THE ASSESSEE FOR SPECIFIC PURPOSE BEING PART OF THE CAP ITAL WORKING IN PROGRESS. AS REGARDS THE UNSECURED LOANS, IT IS PRIMARY ONUS OF THE ASSESSEE TO PROVE THAT THE UNSECURED LO AN IS NOT UTILIZED FOR THE EXPENDITURE INCURRED TOWARDS CAPIT AL WORK IN PROGRESS. IN THE ABSENCE OF THESE SPECIFIC DETAILS, THIS ISSUE CANNOT BE DECIDED CONCLUSIVELY. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE SET-ASIDE THE ISSUE T O THE RECORD OF THE ASSESSING OFFICER FOR VERIFICATION OF THE FA CTS REGARDING PURPOSE OF TAKING SECURED AND UNSECURED LOANS AND A LSO TO VERIFY THE DETAILS WHETHER ANY PART OF THE LOANS WA S UTILIZED BY THE ASSESSEE IN RESPECT OF THE EXPENDITURE FORMING PART OF THE CAPITAL WORK IN PROGRESS. THE ASSESSING OFFICER THE N DECIDE THE ISSUE AFTER GIVING AN OPPORTUNITY OF HEARING TO THE ASSESSEE. ITA NOS. 4306 TO 4308/DEL/2017 22 | PA GE 30. FOR THE AY 2011-12 AND 2012-13, THE ASSESSEE H AS RAISED THE FOLLOWING GROUNDS. GROUND OF ASSESSMENT YEAR 2011-12 1 THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO LAW AND THE FACTS OF THE CASE AND IS REQUIRED TO BE QUASHED; 2(A) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN DISALLOWING EXPENSES FOR EARNING DIVIDEND INCOME TO THE EXTENT OF RS.7,18,256/-; 2(B) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN DISALLOWING EXPENSES FOR EARNING DIVIDEND INCOME TO THE EXTENT OF RS.7,18,256/-BY CONSIDERING THOSE INVESTMENTS ON WHICH NO DIVIDEND HAS BEEN RECEIVED BY THE ASSESSEE COMPANY DURING THE YEAR; 2(C) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN DISALLOWING EXPENSES FOR EARNING DIVIDEND INCOME TO THE EXTENT OF RS.7,18,256/- BY CONSIDERING TERM LOAN INTEREST & WORKING CAPITAL LOAN INTEREST AS THE CHA RT FILED BY THE ASSESSEE COMPANY DEPICTING THAT THE INVESTMENTS HAVE BEEN MADE OUT OF INTERNAL REVENUE GENERATION / PROFIT EARNED DURING THE YEAR AND NOT OUT OF BORROWED FUNDS HAS NOT BEEN CONSIDERED; 2(D) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN DISALLOWING EXPENSES FOR EARNING DIVIDEND INCOME TO THE EXTENT OF RS.7,18,256/- BY CONSIDERING THOSE INVESTMENT ON WHICH NO EXEMPT INCOME IS RECEIVABLE EITHER IN THE FORM OF DIVIDEND OR IN THE FORM OF CAPITAL GAIN; 2(E) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN DISALLOWING EXPENSES FOR EARNING DIVIDEND INCOME TO THE EXTENT ITA NOS. 4306 TO 4308/DEL/2017 23 | PA GE OF RS.7,21,646/- BY CONSIDERING INTEREST PAID ON LOAN TAKEN ONLY FOR BUSINESS PURPOSES; 3(A) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN DISALLOWING A SUM OF RS. 4,30,687/- TOWARDS EXEMPTION U/S 10AA, FURTHER THIS AMOUNT HAS BEEN COMPUTED INCORRECTLY IN FACT AS WELL AS IN LAW; 3(B) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN DISALLOWING A SUM OF RS. 4,30,687/- TOWARDS EXEMPTION U/S 10AA BY CALCULATING THE PROFITS DERIVED FROM EXPORT OF ARTI CLE OR THINGS AFTER REDUCING OTHER INCOMES; 3(C) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN DISALLOWING A SUM OF RS. 4,30,687/- TOWARDS EXEMPTION U/S 10AA BY NOT TREATING THE OTHER INCOMES EARNED FROM EXPOR T ACTIVITIES AS EXPORT TURNOVER BUT TREATING THE SAME AS TOTAL TURNOVER; 4(A) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER GONE WRONG IN DISALLOWING A SUM OF RS. 26,62,862/- [OUT OF RS. 47,09,848/- TOWARDS PAYMENT MADE IN FOREIGN CURRENCY; (B) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER GONE WRONG IN DISALLOWING A SUM OF RS. 26,62,862/- BY PRESUMING THAT THE PROVISIONS OF TDS AS REQUIRED U/S 195(2) READ WITH SECTION 40(A)(I) HAS NOT BEEN COMPLIED WITH BY THE ASSESSEE COMPANY. 5. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN DISALLOWING A SUM OF RS. 14,41,183/- TOWARDS PROPORTIONATE INTEREST ON CAPITAL WORK IN PROGRESS; 6. THAT THE APPELLANT RESERVES THE RIGHT TO ADD, ALTER, AMEND, DELETE, ANY/ALL GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF THE HEARING OF THE APPEAL. GROUND OF ASSESSMENT YEAR 2012-13 ITA NOS. 4306 TO 4308/DEL/2017 24 | PA GE 1 THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO LAW AND THE FACTS OF T HE CASE AND IS REQUIRED TO BE QUASHED; 2(A) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN DISALLOWING EXPENSES AMOUNTING TO RS. 8,36,181/- FOR EARNING DIVIDEND INCOME; 2(B) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN DISALLOWING EXPENSES AMOUNTING TO RS. 8,36,181/- FOR EARNING DIVIDEND INCOME BY CONSIDERING THOSE INVESTMENTS ON WHICH NO DIVIDEND HAS BEEN RECEIVED BY THE ASSESSEE COMPANY DURING THE YEAR; 2(C) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN DISALLOWING EXPENSES AMOUNTING TO RS. 8,36,181/- FOR EARNING DIVIDEND INCOME BY CONSIDERING TERM LOAN INTEREST & WORKING CAPITAL LOAN INTEREST BY IGNORING THE CHART FILED B Y THE ASSESSEE COMPANY DEPICTING THAT THE INVESTMENTS HAVE BEEN MADE OUT OF INTERNAL REVENUE GENERATION / PROFIT EARNED DURING THE YEAR AND NOT OUT OF BORROWED FUNDS; 2(D) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN DISALLOWING EXPENSES AMOUNTING TO RS. 8,36,181/- FOR EARNING DIVIDEND INCOME BY CONSIDERING INTEREST PAID ON LOAN TAKEN ONLY FOR BUSINESS PURPOSES; 3(A) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN DISALLOWING A SUM OF RS. 59,30,771/- TOWARDS EXEMPTION U/S 10AA; 3(B) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN DISALLOWING A SUM OF RS.3,14,636/- TOWARDS EXEMPTION U/S 10AA BY CALCULATING THE PROFITS DERIVED FROM EXPORT OF ARTI CLE OR THINGS AFTER REDUCING OTHER INCOMES [MISC INCOME , COMPENSATION,]; 3(C) THAT THE LD. COMMISSIONER OF INCOME TAX ITA NOS. 4306 TO 4308/DEL/2017 25 | PA GE (APPEALS) HAS GONE WRONG IN DISALLOWING A SUM OF RS.3,14,636/- TOWARDS EXEMPTION U/S 10AA BY NOT TREATING THE OTHER INCOMES [MISC INCOME, COMPENSATION] EARNED FROM EXPORT ACTIVITIES AS EXPORT TURNOVER BUT TREATING THE SAME AS TOTAL TURNOVER; 3(D) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN DISALLOWING A SUM OF RS.56,16,135/- TOWARDS PROVISION FOR DOUBTFUL DEBTS DEBITED TO EXEMPT UNIT [A - 129, SEZ NOIDA] BY IGNORING THE FACT THAT THE ASSESSEE COMPANY AHS COMPUTED TOTAL INCOME ON THE PROFITS OF ALL THE TAXABLE INCOME. 3(E) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN DISALLOWING A SUM OF RS.56,16,135/- TOWARDS PROVISION FOR DOUBTFUL DEBTS [SECTION 10AA] ON ACCOUNT OF RATE OF NET PROFIT TO SALE; 4(A) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN DISALLOWANCE A SUM OF RS.1,03,71,827/- TOWARDS LEAVE ENCASHMENT IN LIGHT OF SECTION 43B (F) OF THE IT ACT 1961; 4(B) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN IGNORING THE FACT THAT THERE ARE MANY CASES WHERE IN IT HAS BEEN HELD THAT THAT LEAVE ENCASHMENT WOULD BE ALLOWED ON ACCRUAL BASIS; THAT THE APPELLANT RESERVES THE RIGHT TO ADD, ALTER , AMEND, DELETE, ANY/ALL GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF THE HEARING OF THE APPEAL. 31. THE MAJORITY OF THESE GROUNDS ARE COMMON TO TH E GROUNDS FOR AY 2010-11. WE WILL DISCUSS IN BRIEF E ACH OF THE GROUND FOR THESE TWO ASSESSMENT YEARS. ITA NOS. 4306 TO 4308/DEL/2017 26 | PA GE 32. GROUND NO.1 IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 33. GROUND NO.2 IS REGARDING THE DISALLOWANCE MADE U/S 14A, WHICH IS COMMON FOR BOTH THE ASSESSMENT YE ARS AND IDENTICAL TO THE AY 2010-11. ACCORDINGLY, IN VIEW OF OUR FINDING ON THIS ISSUE FOR THE A Y 2010-11 THE GROUN D NO.2 STANDS DISPOSED OF IN THE SAME TERMS. 34. GROUND NO.3 IS REGARDING THE DISALLOWANCE OF DEDUCTION U/S 10B/10AA. THIS COMMON GROUND IS ALSO IDENTICAL TO THE GROUND NO.3 FOR AY 2010-11. IN VI EW OF OUR ABOVE FINDING ON THIS ISSUE FOR A Y 2010-11, THIS G ROUND STANDS PARTLY ALLOWED. 35. GROUND NO.4 FOR AY 2011-12 REGARDING DISALLOWANCE MADE U/S 40(A)(I) OF THE ACT. THIS GRO UND IS IDENTICAL TO THE GROUND NO.4 OF THE AY 2010-11. IN VIEW OF THE OUR FINDINGS ON THIS ISSUE FOR THE AY 2010-11, THIS GROUND STANDS DISMISSED. 36. GROUND NO.5 FOR THE AY 2011-12 IS IDENTICAL TO THE GROUND NO.5 OF AY 2010-11 THEREFORE, IN VIEW OF OUR FINDING ON ITA NOS. 4306 TO 4308/DEL/2017 27 | PA GE THIS ISSUE, THIS ISSUE ALSO STAND SET-ASIDE TO THE RECORD OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION. 37. GROUND NO.4 FOR THE AY 2012-13 IS REGARDING DISALLOWANCE OF LEAVE ENCASHMENT. 38. THE LD. SR. COUNSEL FOR THE ASSESSEE HAS FAREL Y SUBMITTED THAT IN VIEW OF THE JUDGMENT OF THE HONB LE SUPREME COURT IN THE CASE OF UOI VS. EXIDE INDUSTRIES 273 TAXMANN 189 , THE CLAIM OF THE LEAVE ENCASHMENT IS NOT ALLOWABLE FOR THE YEAR UNDER CONSIDERATION. THUS, H E HAS PLEADED THAT THE ASSESSING OFFICER MAY BE DIRECTED TO CONSIDER THE ISSUE IN THE SUBSEQUENT YEAR BY FOLLOWING THE J UDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF UOI VS M/S EXIDE INDUSTRIES LTD. 39. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED TH AT SINCE THIS CLAIM IS NOT ALLOWABLE FOR THE YEAR UNDE R CONSIDERATION THEREFORE, NO DIRECTION IS REQUIRED T O BE GIVEN TO THE ASSESSING OFFICER FOR THE SUBSEQUENT YEARS. 40. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WE LL A MATERIAL AVAILABLE ON RECORD. THERE IS NO DISPUTE THAT THIS EXPENDITURE ON ACCOUNT OF LEAVE ENCASHMENT HAS NOT BEEN ITA NOS. 4306 TO 4308/DEL/2017 28 | PA GE ACTUALLY PAID BY THE ASSESSE TO THE EMPLOYEES DURIN G THE YEAR UNDER CONSIDERATION THEREFORE, IN VIEW OF THE JUDGM ENT OF THE HONBLE SUPREME COURT IN THE CASE OF UOI VS EXIDE I NDUSTRIES LTD. (SUPRA), THE SAME IS ALLOWABLE AS DEDUCTION IN THE YEAR OF ACTUALLY PAYMENT AND NOT IN THE YEAR WHEN THE PROVI SIONS IS MADE. THEREFORE, THIS GROUND OF THE ASSESSEES APPE AL STAND DISMISSED. HOWEVER, THE ASSESSING OFFICER IS DIRECT ED TO CONSIDER THE CLAIM OF THE ASSESSEE IN THE YEAR WHEN ACTUAL PAYMENT IS MADE TOWARDS THE LEAVE ENCASHMENT. 41. IN THE RESULT, APPEALS OF THE ASSESSEE ARE PAR TLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH OCT. 2021. SD/- SD/- (R.K.PANDA) (VIJAY PAL RA O) ACCOUNTANT MEMBER JUDICIAL MEMBER DELHI/DATE 14.10.2021 F{X~{T F{X~{T F{X~{T F{X~{T COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI