The ACIT,(OSD) Circle-8, Ahmedabad V. Suzlon Energy Ltd., Ahmedabad

ITA 4358/AHD/2007

• Counselvise Citation: 435820514 RSA 2007
• Duration Of Justice: 4 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 23-08-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 07-12-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANKIT TALSANIA
• Assessee Lawyers: S K GUPTA
• Keywords: Business income; Income from undisclosed sources; Loose papers; Earning of tax free income; Tax effect
• Section: 43B; 80HHC; 133A; 14A; 80IB; 131; 37; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, AHMEDABAD BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER I.T.A. NO. 3911/AHD/2007 & 1367/ AHD/2008 (ASSESSMENT YEAR 2005-06 &2006-07) M/S. SUZLON ENERGY LIMITED, SUZLON HOUSE, 5, SHRIMALI SOCIETY, NAVRANGPURA, AHMEDABAD VS. DCIT, CIRCLE 8, AHMEDABAD PAN/GIR NO. : AADCS0472N I.T.A.NO. 4358/AHD/2007 & 1677/AHD/2008 (ASSESSMENT YEAR 2005-06 & 2006-07) DCIT, CIRCLE 8, VS. M/S. SUZLON ENERGY LIMITED, AHMEDABAD SUZLON HOUSE, 5, SHRIMALI SOCIETY, NAVRANGPURA, AHMEDABAD (APPELLANT) .. (RESPONDENT) APPELLANT BY: S/SHRI TUSHAR HEMANI & ANKIT TALSANIA, ADV. RESPONDENT BY: SHRI S K GUPTA, CIT DR DATE OF HEARING: 23.08.2012 DATE OF PRONOUNCEMENT: 21.09.2012 O R D E R PER SHRI A. K. GARODIA, AM:- THESE ARE CROSS APPEALS OF THE ASSESSEE AND REVENU E FOR TWO YEARS WHICH ARE DIRECTED AGAINST TWO SEPARATE ORDERS OF L D. CIT(A) XIV, AHMEDABAD DATED 27.09.2007 FOR THE ASSESSMENT YEAR 2005-06 AND DATED 17.03.2008 FOR THE ASSESSMENT YEAR 2006-07. ALL TH ESE APPEALS WERE I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 2 HEARD TOGETHER AND ARE BEING DISPOSED OFF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST, WE TAKE UP THE APPEALS OF THE ASSESSMENT YEAR 2005-06. GROUND NO.1 OF THE ASSESSEES APPEAL AND GROUND NO. 1 OF THE REVENUES APPEAL ARE INTERCONNECTED AS PER WHICH THE GRIEVANC E OF THE DEPARTMENT IS REGARDING DELETION OF DISALLOWANCE OF RS.9,34,95,20 0/- MADE BY THE A.O. ON ACCOUNT OF SALES COMMISSION PAID U/S 37 OF THE I NCOME TAX ACT, 1961 AND THE GRIEVANCE OF THE ASSESSEE IS REGARDING CONF IRMATION OF PART DISALLOWANCE ON THIS ACCOUNT TO THE EXTENT OF RS.42 ,81,600/-. 2.1 BRIEF FACTS OF THIS ISSUE TILL THE ASSESSMENT S TAGE ARE NOTED BY LD. CIT(A) IN PARA 2.1 OF HIS ORDER AND FOR THE SAKE OF READY REFERENCE, THE SAME IS REPRODUCED BELOW: THE FIRST GROUND IS WITH REGARD TO THE DISALLOWANC E OF SALES COMMISSION EXPENDITURE OF RS.9,77,76,800/-. THE AP PELLANT COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING WIND TURBINE GENERATORS (WTGS) AT DAMAN & PONDICHERRY. DURING T HE YEAR, UNDER CONSIDERATION, THE APPELLANT CLAIMED SALES CO MMISSION EXPENSE IN THE SUM OF RS.9,77,76,800/- ON TOTAL SAL ES OF RS.1917.50 CRORES. THE APPELLANT HAS PAID COMMISSION TO 27 PA RTIES ON 137 TRANSACTIONS OF SALES OUT OF TOTAL 451 WIND MILLS S ALES. THE A.O. CALLED SIX CUSTOMER FOR PERSONAL VERIFICATION BY IS SUING SUMMONS U/S 131 OF THE ACT, WHO WERE EXAMINED AND THEIR STA TEMENTS WERE RECODED. THE A.O. HAS DISCUSSED THESE FACTS IN DET AILS IN THE ASSESSMENT ORDER AND CONCLUDED THAT THERE IS NO EVI DENCE THAT THE ASSESSEE COMPANY RECEIVED INBOUND SERVICES AND ITS CLAIM OF PAYMENT OF COMMISSION IS NOT JUSTIFIED, AS NO SERVI CES WERE RENDERED BY THE AGENTS. HENCE, HE A.O. DISALLOWED THE ENTIRE SALES COMMISSION EXPENSES OF RS.9,77,76,800/- AND ADDED T HE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 2.2 BEING AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(A) WHO HAS DELETED THE PART DISALLOWANCE TO T HE EXTENT OF RS.9,54,95,200/- AND CONFIRMED THE BALANCE DISALLOW ANCE OF RS.42,81,600/- AND NOW, THE REVENUE IS IN APPEAL FO R THE AMOUNT OF I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 3 DISALLOWANCE DELETED BY LD. CIT(A) AND THE ASSESSEE IS IN APPEAL FOR THE PART DISALLOWANCE CONFIRMED BY LD. CIT(A). 2.3 LD. A.R. SUPPORTED THE ORDER OF LD. CIT(A) WITH REGARD TO GROUND RAISED BY THE REVENUE AND WITH REGARD TO THE PART D ISALLOWANCE CONFIRMED BY LD. CIT(A), IN RESPECT OF SIX PERSONS, IT WAS SU BMITTED THAT EVEN AFTER INITIAL INTRODUCTION, THE AGENT CARRIES OUT MANY FU NCTIONS AND, THEREFORE, EVEN IF THE SALES IS INITIATED BY THE CUSTOMERS AS ALLEGED BY THE REVENUE, REMISSIORS ALSO PROVIDED OTHER BUSINESS INFORMATION AS STATED IN THE AGREEMENT SO AS TO JUSTIFY THE ALLOWABILITY OF THE COMMISSION EXPENDITURE. IT WAS THE SUBMISSION THAT IT WAS A CONTRACTUAL ARR ANGEMENT WITH REMISSIORS AS STATED IN THE CONTRACT AND THE SERVIC ES WERE RENDERED TO THE ASSESSEE AND THERE WAS NO PROVISION FOR RENDERING A NY SERVICES TO THE CUSTOMERS. HE ALSO SUBMITTED THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80-IB TO THE EXTENT OF 100% AND, THEREFORE, EVE N AFTER DISALLOWANCE OF SALES COMMISSION, THERE IS NO IMPACT ON THE PROFIT OF THE ASSESSEE AND THE TAX EFFECT IS REVENUE NEUTRAL. HE ALSO SUBMITTED T HAT APART FROM THE INTRODUCING OF CUSTOMERS, THE COMMISSION AGENTS WER E RENDERING OTHER VALUABLE SERVICES SUCH AS PROVIDING WITH THE OTHER VALUABLE INFORMATION SUCH AS CREDIBILITY REPORT OF THE CUSTOMERS AND THE Y WERE ALSO HELPING IN MAKING COLLECTION FROM THE CUSTOMERS AND THEREFORE, COMMISSION PAID BY THE ASSESSEE IS ALLOWABLE IN FULL. RELIANCE WAS PL ACED ON THE FOLLOWING JUDGEMENTS: (A) PENNZPL INVESTMENT & TRADING CO.(P) LTD. VS CIT 49 ITD 534 (HYD.) (B) SWASTIC TEXTILE CO.(P) LTD. VS CIT 150 ITR 155 (GUJ.) (C) CIT VS HEWITT ROBINS (NEW YORK) 141 ITR 278 (CA L.) (D) CIT VS ISHWARPRAKASH & BROS. 159 ITR 843 (E) ITO VS SHAKTI CABLES 50 TAXMAN 329 (DEL.) (F) CIBA DYES LTD. VS CIT 25 ITR 103 (BOM.) (G) JCIT VS CONCEPT COMMUNICATION LTD. 9 SOT 75 (MU M.) I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 4 2.4 AS AGAINST THIS, IT WAS SUBMITTED BY THE LD. D. R. THAT ONLY CUSTOMERS HAD APPROACHED THE ASSESSEE AND NOT OTHER WISE THAT THE ASSESSEE HAS APPROACHED THE CUSTOMERS AND, THEREFOR E, IT DID NOT COME OUT FROM THE RECORD THAT THE CUSTOMERS WERE INTRODUCED TO THE ASSESSEE BY SOME OTHER PERSON. HE ALSO SUBMITTED THAT NO EVIDE NCE HAS BEEN PRODUCED REGARDING RENDERING OF ANY SERVICES BY THE SE PERSONS AND HENCE, COMMISSION WAS RIGHTLY DISALLOWED BY THE A.O. RELI ANCE WAS PLACED ON THE JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF LAXMI SUGAR MILLS & OIL MILLS VS CIT AS REPORTED IN 84 I TR 439 (S.C.). 2.5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT THIS ISSUE WAS DECIDED BY LD. CIT(A) AS PER PA RA 3.2 OF HIS ORDER WHICH IS REPRODUCED BELOW: 3.2 I HAVE CONSIDERED THE FACTS OF THE CASE AND TH E SUBMISSIONS AS ADVANCED BY THE APPELLANT ALONG WITH THE CASE LAWS AS RELIED UPON. THE FACTS EMERGED THAT AGREEMENTS HAVE BEEN ENTERED INTO FOR PAYMENT OF COMMISSION IN RESPECT OF WORK DONE BY TH E AGENTS AND FOR PROVIDING INFORMATION WHICH RESULTED IN MATURIT Y OF SALES. THE PAYMENTS WERE MADE AS PER THE AGREEMENT. AS PER THE AGREEMENT, THE SCOPE OF SERVICES DEPENDING ON TYPE OF CUSTOMER REQUIRED TO BE DONE BY THE AGENTS WERE AS UNDER.- A) THE REMISSIER BASED ON THEIR INTERNAL RESOURCES SHALL AMONGST ITS BUSINESS ASSOCIATES IDENTIFY THE BUYERS WHO PROPOSE TO/HAVE INTENTION TO BUY AND HAVE THE CAPACITY TO B UY THE WTGS. , B) THE REMISSIER ON IDENTIFYING THE BUYERS WOULD S UGGEST, INFORM, INDICATE, INTRODUCE, RECOMMEND AND/OR SOLIC IT THEM TO THE COMPANY SO AS TO FACILITATE THE COMPANY IN CARR YING OUT THE SALES OF WTG AS PER THE REQUIREMENTS OF THE BUYER. REMISSIER WOULD FUNCTION AS A SILENT PROFESSIONAL T O RENDER INBOUND SERVICES TO THE COMPANY AND DEPENDING UPON THE CIRCUMSTANCES, LOOKING AT HIS REPUTATION, STATUS, F INANCIAL STANDING, THE COMPANY WILL NOT REVEAL THE NAME OF R EMISSIER TO THE PARTY REFERRED BY HIM BUT ANY REFERRED SOURC E RESULTING INTO SUCCESSFUL COMMERCIAL TRANSACTION WOULD MAKE T HE I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 5 REMISSIER ENTITLED TO THE COMMISSION AT THE AGREED RATE REFERRED TO HEREINAFTER. D) IN MAJORITY OF CIRCUMSTANCES THE BUYER WOULD PRE FER NO INTERMEDIATE WITH A VIEW TO CONTROL HIS COST AND .H ENCE IT IS IN THE INTEREST OF BOTH THE PARTY THAT THE REMISSIER W OULD NOT COME OH FRONT LINE. IN THE CASE OF THE APPELLANT, IT IS SEEN THAT I) ALL THE PAYMENTS WERE MADE BY CHEQUES ARID PARTIES WERE GENUINE. THE PARTIES HAVE CONFIRMED THE RECEIPT OF PAYMENTS AND RENDERING SERVICES IN THE FORM OF GIVING INFORMATION ABOUT ITS CUSTOMERS. II) ALL THE AGENTS ARE TAX PAYERS 'AND THE C OMMISSION RECEIVED BY THE ASSESSEE COMPANY IS SHOWN IN THEIR INCOME TAX RETURNS AND THE TAX HAS BEEN PAID THEREON, III) FOR THE APPELLANT, THERE IS NO MOTIVE TO SAVE-TAXES AS UNITS OF APPELLANT ARE ELIGIBLE FOR DEDUCTION U/S. 80I&- IV) ALL THE RECIPIENTS OF THE COMMISSION ARE INDEPENDENT PERSONS AND THEY ARE NOT RELATED TO THE APPELLANT C OMPANY. V) THERE IS INCREASE IN THE SALES THIS YEAR, WHICH JUSTIFIES THE PAYMENT OF COMMISSION, VI) AS PER THE HON. SUPREME COURT'S DECISION RELIED ON BY THE APPELLANT, THE AO CANNOT SIT IN JUDGEMENT OVER COMMERCIAL WISDOM OF THE APPELLANT AND DETERMINE THE REASONABL ENESS OF THE EXPENDITURE, UNLESS THE PERSON IS RELATED PERSO N TO THE ASSESSEE U/S. 40A 2(B). AS THE APPELLANT HAS GIVEN THE EVIDENCE THAT THE RE CIPIENTS PROVIDED INFORMATION IN RESPECT OF THE SERVICES, WHICH HELPE D THE SALES TO BE MATURED AND REALISED, THE PAYMENT OF COMMISSION IS JUSTIFIED. HOWEVER, AT THE SAME TIME, IT IS ALSO OBSERVED THAT THE ENTIRE EXPENDITURE OF COMMISSION CANNOT BE ALLOWED, IN VIE W OF THE SPECIFIC FINDING BROUGHT ON RECORD BY THE AO AFTER ENQUIRY IN CERTAIN CASES, WHEREIN HE EXAMINED THE SIX CUSTOMER S AND BROUGHT ON RECORD THAT IN RESPECT OF THESE CUSTOMERS, THE A GENTS PLAYED NO ROLE IN ACHIEVING THE SALES AND THESE CUSTOMERS DIR ECTLY APPROACHED THE ASSESSEE FOR THE TRANSACTION:- I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 6 NAME OF PERSON CALLED U/S. 131 NAME OF PARTY TO WHOM SALES MADE. COMMISSION AGENT COMMISSION PAID SHRI SOMCHAND LALJIBHAI SAVIA. SAVIA TWISTERS PVT. LTD. INDIA WIND POWER LTD. 8,00,000 SHRI DHANJIBHAI ANANDBHAI MAKVANA MAKSON PHARMACEUTICALS LTD. VISHAL CORPORATION 8,00,000 SHRI AMRUTLAL JETHALAL KALARIA INTRICAST PVT.. LTD. T R IKAYA METALIC LTD. ' 2,00,000 SHRI NIRBHAYA KRISHNA AGRAWAL HARSHA ENGINEERS LTD. SHREE RADHIKA STEEL-CHEM -LTD. 8,81,600 SHRI PARESHKUMAR LABSANKAR VYAS ARNBUJA INTERMEDIATES LTD. PKM INDUSTRIES 8,00,000 SHRINARESHBHAI MANCHAND SHAH M/S. SAHASTRA PROPERTIES PVT. SONICA GRANITE PVT. LTD. 8,00,000 42,81,600 IN RESPECT OF THE ABOVE SIX TRANSACTIONS, THE COMPA NY HAS NOT INITIATED ANY DIALOGUE AND NOT APPROACHED THE CUSTO MERS ON THE BASIS OF ANY INFORMATION RECEIVED FROM THE AGENTS. THEREFORE, IT IS HELD THAT THE STATEMENTS RECORDED FROM THE SIX PERS ONS PROVE THAT THE INITIATION OF THE TRANSACTION WAS FROM THE SIDE OF THE CUSTOMERS AND IT NEGATES THE CLAIM OF THE APPELLANT COMPANY O F HAVING RECEIVED THE SO CALLED INBOUND SERVICES. IF THE APP ELLANT HAD RECEIVED ANY INBOUND SERVICES, THEN THE INITIATION FOR THE SALES WOULD HAVE BEEN MADE BY THE APPELLANT COMPANY AND N OT BY THE CUSTOMERS. FURTHER, THERE IS NO EVIDENCE IN SUPPORT OF THE CONTENTION THAT THE CUSTOMERS WERE INDUCED BY THE A GENTS TO APPROACH THE APPELLANT COMPANY. HENCE, IT IS HELD T HAT IN RESPECT OF THE SIX PARTIES, THE PAYMENT IS NOT MADE FOR RECEIV ING THE INFORMATION, WHICH RESULTED INTO MATURITY OF SALES. THEREFORE, I HOLD THAT THE PAYMENT IS NOT MADE IN ACCORDANCE WIT H THE TERMS OF CONTRACT ENTERED INTO IN THIS RESPECT AND THESE PAY MENTS ARE NOT MADE FOR THE BUSINESS PURPOSES. THE AO WAS JUSTIFI ED IN DISALLOWING THE PAYMENT OF COMMISSION IN RESPECT OF THESE TRANSACTIONS AND THE DISALLOWANCE OF RS. 42,81,600/ - IS CONFIRMED. HOWEVER, THE ENTIRE EXPENDITURE CANNOT BE DISALLOWE D MERELY BASED ON THE STATEMENTS OF SIX CUSTOMERS, WHO FORM, A VERY NEGLIGIBLE PERCENTAGE OF SALES AND THE COMMISSION E XPENDITURE. THEREFORE, THE APPELLANT IS ALLOWED RELIEF IN RESPE CT OF THE BALANCE AMOUNT OF COMMISSION PAID. I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 7 2.6 FROM THE ABOVE PARA OF THE ORDER OF LD. CIT(A), WE FIND THAT A CLEAR FINDING IS GIVEN BY LD. CIT(A) THAT THE ASSES SEE HAS GIVEN EVIDENCE THAT THE RECIPIENT PROVIDED INFORMATION IN RESPECT OF SERVICES WHICH HELPED THE SALES TO MATURE AND REALIZE AND, THEREFO RE, PAYMENT OF COMMISSION IS JUSTIFIED EXCEPT FOR 6 PARTIES. IN R ESPECT OF THESE 6 PARTIES, IT IS NOTED BY LD. CIT(A) THAT THE A.O. AFTER INQUI RY HAS BROUGHT ON RECORD IN RESPECT OF THESE 6 CUSTOMERS, THE AGENTS HAD NO ROLE IN ACHIEVING THE SALES AND THESE CUSTOMERS DIRECTLY APPROACHED T HE ASSESSEE FOR ALL TRANSACTIONS. THE INCOME OF ALL THE UNITS OF THE A SSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80-IB OF THE INCOME TAX ACT, 1961. WE ALSO FIND THAT IN THE ASSESSMENT ORDER, THE A.O. HAS ALLOWED ADDITION AL DEDUCTION U/S 80-IB IN RESPECT OF VARIOUS ADDITIONS MADE BY HIM IN THE ASSESSMENT AND HENCE, THIS CONTENTION OF THE ASSESSEE IS SUPPORTED BY FAC TS ON RECORD THAT THERE IS NO MOTIVE TO SAVE TAXES BY PAYING COMMISSION SINCE THE UNITS OF THE ASSESSEE ARE ELIGIBLE FOR DEDUCTION @ 100% U/S 80-I B. IN RESPECT OF 6 PARTIES WHICH WERE NOT INTRODUCED BY THE COMMISSION AGENT, IT WAS THE SUBMISSION OF THE LD. A.R. THAT THE AGENTS HAD FURN ISHED OTHER INFORMATION SUCH AS REPORT ABOUT REPUTATION, STATUS , FINANCIAL STANDINGS ETC. REGARDING THESE 6 PARTIES, HE ALSO SUBMITTED T HAT THEY HAVE ALSO HELPED IN REALIZATION. THE LD. A.R. WAS ASKED TO FILE LETTERS OF THESE AGENTS BUT THE SAME ARE NOT FILED BY THE LD. A.R. A ND HENCE, IN THE FACTS OF THE PRESENT CASE, WE FEEL THAT THE ORDER OF LD. CIT (A) ON THIS ISSUE DOES NOT CALL FOR ANY INTERFERENCE FROM OUR SIDE BECAUSE PART DISALLOWANCE CONFIRMED BY HIM IS ON THIS BASIS OF THESE 6 CUSTOM ERS WERE NOT INTRODUCED BY THESE AGENTS WHEREAS FOR THE BALANCE AMOUNT FOR WHICH DISALLOWANCE OF COMMISSION IS DELETED BY LD. CIT(A) , HE HAS GIVEN A CLEAR FINDING THAT THESE PARTIES WERE INTRODUCED BY THE COMMISSION AGENTS I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 8 AND EVIDENCE WERE FILED REGARDING RENDERING OF THE SERVICES BY THEM AND THESE FINDINGS OF LD. CIT(A) COULD NOT BE CONTROVER TED BY THE LD. D.R. REGARDING THE JUDGMENT OF HONBLE APEX COURT ON WHI CH RELIANCE HAS BEEN PLACED BY THE LD. D.R., WE FIND THAT THIS JUDG MENT IS NOT APPLICABLE IN THE PRESENT CASE BECAUSE THE FACTS ARE DIFFERENT . IN THAT CASE, THIS FINDING WAS RECORDED BY THE TRIBUNAL THAT SELLING A GENCY FIRM AND THE ASSESSEE HAS NO GENUINE EXISTENCE AND SUCH SELLING AGENCY WAS FOUND TO BE MAKE BELIEVE DOCUMENT. THE FACTS IN THE PRESENT CASE ARE NOT SO. IN THE PRESENT CASE, A CLEAR FINDING IS GIVEN BY LD. C IT(A) THAT SERVICES WERE RENDERED BY THE COMMISSION AGENTS AND THIS FINDING OF LD. CIT(A) COULD NOT BE CONTROVERTED BY THE LD. D.R. HENCE, THIS JU DGEMENT OF HONBLE APEX COURT DOES NOT RENDER ANY HELP TO THE REVENUE IN THE PRESENT CASE. IN VIEW OF OUR ABOVE DISCUSSION, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE. ACCORDINGLY , GROUND NO.1 OF THE REVENUE AS WELL AS GROUND NO.1 OF THE ASSESSEES AP PEALS IS REJECTED. 3. GROUND NO.2 & 3 OF THE REVENUES APPEAL AND GROU ND NO.2 OF THE ASSESSEES APPEAL ARE ALSO INTERCONNECTED WHICH ARE IN CONNECTION WITH THE DISALLOWANCE MADE BY THE A.O. U/S 14A OF THE IN COME TAX ACT, 1961. 3.1 BRIEF FACTS OF THIS ISSUE ARE NOTED BY LD. CIT( A) IN PARA 4.1 OF HIS ORDER WHICH IS REPRODUCED BELOW: THE 2 ND , 3 R4 & 4 TH GROUNDS OF APPEAL ARE AS UNDER. THE AO HAS ERRED IN LAW AND ON FACTS I) IN APPLYING THE. PROVISIONS OF SEC. 14A OF THE ACT IN DISALLOWING AN AMOUNT OF RS.3,06,48,988/- II) IN DISALLOWING RS. 3,06,48,988/-UNDER SEC. 14A WITHOUT APPRECIATING THAT THE TOTAL DIVIDEND INCOME CLAIMED AS EXEMPT U/S. 10(33) OF THE ACT WAS ONLY RS. 2,02,56,516/- AND III) ALTERNATIVELY AND WITHOUT PREJUDICE THE SAID D ISALLOWANCE IS HIGHLY EXAGGERATED AND EXCESSIVE. IN FILE FACTS AND CIRCUMSTANCES OF THE CASE, THE SAID DISALLOWANCE OUGHT TO HAVE BE EN ESTIMATED AT SOME REASONABLE TOKEN FIGURE. I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 9 THE AO HAS FOUND THAT THE ASSESSEE HAD MADE HUGE IN VESTMENTS IN ITS SUBSIDIARY COMPANIES IN THE FORM OF EQUITY AND PREFERENCE SHARES AMOUNTING TO RS.97,74,38,092/-. THE AO HAS ALSO FOUND THAT THE ASSESSES HAD TAKEN HUGE BORROWED FOR WHICH IT IS PAYING INTEREST AND, THEREFORE, BY APPLYING THE PROVISIONS OF SEC. 14A OF THE ACT, HE DISALLOWED THE INTEREST EXPENDITURE MAD E TO THE SISTER CONCERNS FOR AN AMOUNT OF RS. 2,56,29,212/-. THE AO -FURTHER OBSERVED THAT THE ASSESSEE HAD EARNED DIVIDEND INCO ME OF RS. 2,02,56,516/- AND AGAINST THIS EXEMPT INCOME, THE A PPELLANT HAS NOT SHOWN ANY EXPENDITURE INCURRED FOR EARNING THIS EXE MPT INCOME. THE AO HAS TAKEN THE FOLLOWING EXPENSES AS RELATED TO EARNING THE EXEMPT INCOME AND HELD THAT THESE ARE COMMON EXPENS ES INCURRED FOR EARNING DIVIDEND INCOME AS WELL AS TAXABLE INCO ME, AND HENCE, HE APPORTIONED ON THE RATIO OF .TURNOVER OF THE ASS ESSEE COMPANY AND ALLOCATED @ 5.2% OF THESE AMOUNTS AND CALCULATE D AN AMOUNT OF RS. 50,19,716/-AS INCURRED RELATING TO EARNING D IVIDEND INCOME AND DISALLOWED THE SAME. THUS, TOTAL DISALLOWANCE M ADE U/S. 14A WAS RS. 3,06,48,988/-. SR.NO. PARTICULARS AMOUNT RS. IN LAKHS 1 DIRECTOR'S REMUNERATION 163.1 2 DIRECTOR'S FEES AND TRAVELING 67.45 3 STAFF SALARY OF CORPORATE OFFICE 73.9. 4 AUDIT FEES . 122.0 5 BUILDING 50.12 6 RENT 278.76 7 COMMUNICATION 210.00 TOTAL . 965.33 3.2 OUT OF THIS DISALLOWANCE OF RS.3,06,48,988/- MA DE BY THE A.O. U/S 14A, LD. CIT(A) HAS CONFIRMED THE PART DISALLOWANCE FOR WHICH THE ASSESSEE IS IN APPEAL AND DELETED THE BALANCE DISAL LOWANCE FOR WHICH THE REVENUE IS IN APPEAL BEFORE US. 3.3 IT WAS SUBMITTED BY THE LD. A.R. BEFORE US THAT WHILE WORKING OUT THE DISALLOWANCE U/S14A, THE A.O. INCLUDED THE AMOU NT OF INVESTMENT IN FOREIGN SUBSIDIARIES ALSO BUT INCOME OF DIVIDEND FR OM INVESTMENT IN FOREIGN SUBSIDIARIES IS TAXABLE AND, THEREFORE, THI S INVESTMENT IN FOREIGN I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 10 SUBSIDIARIES OF RS.59,07,18,092/- OUT OF TOTAL INVE STMENT OF RS.97,74,38,092/- CANNOT BE CONSIDERED FOR MAKING D ISALLOWANCE U/S 14A. HE FURTHER SUBMITTED THAT OUT OF TOTAL DISALLOWANCE OF RS.3,06,48,988/-, DISALLOWANCE OF RS.2,56,29,272/- IS OUT OF INTEREST EXPENDITURE AND OUT OF THIS INTERESTS EXPENDITURE, THE INTEREST CONSIDERED BY THE A.O. IN RESPECT OF INVESTMENT IN FOREIGN SUBSIDIARIES IS TO THE EXTENT OF RS.1,63,36,353/- AND ONLY THE BALANCE AMOUNT OF INTEREST EXPENDITURE OF RS.92,92,919/- IS IN RESPECT OF INVESTMENT IN INDIAN SUBSIDIARIES. REGA RDING THIS DISALLOWANCE OF INTEREST IN RESPECT OF INVESTMENT IN INDIAN SUBS IDIARIES, IT WAS SUBMITTED THAT RULE 8D IS NOT APPLICABLE IN THE PRE SENT YEAR SINCE THE SAME IS APPLICABLE FROM ASSESSMENT YEAR 2008-09. H E ALSO SUBMITTED THAT OWN FUNDS OF THE ASSESSEE I.E. ASSESSEES CAPITAL A ND RESERVES AND SURPLUS WERE TO THE EXTENT OF RS.92957.20 LACS AS PER THE B ALANCE SHEET AS ON 31.03.2005 OUT OF WHICH ONLY AN AMOUNT OF RS.3800 L ACS APPROXIMATELY WAS INVESTED IN INDIAN SUBSIDIARIES AND THERE IS NO FINDING OF THE A.O. THAT THERE IS ANY NEXUS BETWEEN INTEREST BEARING BO RROWED FUNDS AND INVESTMENT IN INDIAN SUBSIDIARIES AND, THEREFORE, N O DISALLOWANCE IS JUSTIFIED OUT OF INTEREST EXPENDITURE U/S 14A. REL IANCE WAS PLACED ON THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF MUNJAL SALES AS REPORTED IN 298 ITR 298 AND ALSO ON THE JUDGEMENT O F HONBLE BOMBAY HIGH COURT RENDERED IN THE CASE OF RELIANCE UTILITI ES AS REPORTED IN 313 ITR 340. REGARDING THE BALANCE DISALLOWANCE OF RS. 50,19,716/- U/S 14A FOR ADMINISTRATIVE EXPENSES, IT WAS SUBMITTED THAT THE ASSESSEE HAD INCURRED THOSE EXPENSES FOR THE PURPOSE OF ITS BUSI NESS AND, THEREFORE, NO DISALLOWANCE IS JUSTIFIED. 3.4 LD. D.R. OF THE REVENUE SUPPORTED THE ASSESSMEN T ORDER. 3.5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. REGARDING I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 11 THE GROUNDS RAISED BY THE REVENUE IN RESPECT OF DIS ALLOWANCE OF INTEREST EXPENDITURE MADE BY THE A.O. U/S 14A AND DELETION M ADE BY LD. CIT(A), WE FIND THAT NO INTERFERENCE IS CALLED FOR IN THE O RDER OF LD. CIT(A). WE HOLD SO BECAUSE WE FIND THAT WITH REGARD TO THE INV ESTMENT OF RS.5907.18 LACS IN FOREIGN SUBSIDIARIES, NO DISALLOWANCE CAN B E MADE U/S14A BECAUSE DIVIDEND INCOME FROM FOREIGN SUBSIDIARIES IS TAXABL E IN INDIA. REGARDING BALANCE INVESTMENT OF RS.38 CRORES APPROXIMATELY IN INDIAN SUBSIDIARIES, WE FIND THAT INTEREST FREE OWN FUNDS OF THE ASSESSE E IS MANY TIMES MORE THAN THIS INVESTMENT BECAUSE INTEREST FREE FUNDS AV AILABLE WITH THE ASSESSEE AS ON 31.03.2005 AS PER THE BALANCE SHEET AS ON THAT DATE IS OF RS.929.57 CRORES. THERE IS NO FINDING GIVEN BY THE A.O. REGARDING ANY DIRECT NEXUS BETWEEN INTEREST BEARING BORROWED FUND S AND INVESTMENT IN INDIAN SUBSIDIARIES. HENCE, IN OUR CONSIDERED OPIN ION, NO DISALLOWANCE U/S 14A CAN BE MADE OUT OF INTEREST EXPENDITURE IN THE FACTS OF THE PRESENT CASE. ACCORDINGLY, GROUND NO.2 & 3 OF THE REVENUE S APPEAL ARE REJECTED. 3.6 REGARDING GROUND NO.2 OF THE ASSESSEES APPEAL AS PER WHICH, LD. CIT(A) HAS DIRECTED THE A.O. TO ALLOCATE DIRECTORS REMUNERATION FEE AND TRAVELING ALLOWANCE TOWARD EARNING DIVIDEND AND TO MAKE PROPORTIONATE DISALLOWANCE U/S 14A OF THE INCOME TAX ACT, 1961, W E ARE OF THE CONSIDERED OPINION THAT THE A.O. SHOULD MAKE PROPOR TIONATE DISALLOWANCE ONLY IN RESPECT OF DIVIDEND INCOME FROM INDIAN SUBS IDIARIES. WE DO NOT FIND ANY MERIT IN THE SUBMISSIONS OF THE ASSESSEE T HAT NO DISALLOWANCE IS CALLED FOR OUT OF ADMINISTRATIVE EXPENDITURE BECAUS E DIVIDEND INCOME IS EXEMPT AND HENCE, PROPORTIONATE DISALLOWANCE OUT OF ADMINISTRATIVE EXPENSES IS JUSTIFIED. ON THIS ASPECT, WE DO NOT F IND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A). ACCORDINGLY GROUND NO.2 OF THE ASSESSEES APPEAL IS ALSO REJECTED. I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 12 4. GROUND NO.3 & 4 OF THE ASSESSEES APPEAL ARE IN RESPECT OF DISALLOWANCE OF DEDUCTION U/S 80-IB IN RESPECT OF I NTEREST ON FDR AND ICD AMOUNTING TO RS.5,07,48,207/- AS PER GROUND NO. 3 AND AS PER GROUND NO.4 THE ALTERNATIVE CLAIM IS MADE THAT EVEN IF SOM E DISALLOWANCE IS TO BE MADE ON THIS ACCOUNT, ONLY NET INTEREST INCOME CAN BE REDUCED FORM THE BUSINESS PROFIT. 4.1 BRIEF FACTS OF THIS ISSUE TILL THE ASSESSMENT S TAGE ARE NOTED BY LD. CIT(A) IN PARA 5.1 OF HIS ORDER WHICH IS REPRODUCED BELOW: THE GROUNDS NO. 5 & 6 ARE AS UNDER:- THE LD. AO HAS ERRED IN LAW AND ON FACTS IN NOT GRA NTING DEDUCTION 'U/S. 80IB OF THE ACT ON INTEREST ON FDR AND ICD AM OUNTING TO RS. 5,07,48,207/-ALTERNATIVELY AND WITHOUT PREJUDICE, O NLY NET INTEREST AND NOT THE GROSS INTEREST AS HAS BEEN -DONE, CAN B E REDUCED FROM THE PROFITS OF THE BUSINESS. THE A.O. HAS NOT GRANTED DEDUCTION U/S. 80IB OF THE ACT ON INTEREST INCOME FROM FDRS AND ICDS OF RS.5,07,48,207/-. THE APPELLANT HAS SUBMITTED THAT 'THE HON. ITAT HAS DECIDED THE I SSUE IN FAVOUR OF THE APPELLANT IN A.Y. 1999-2000. FURTHER, IT WAS SUBMITTED THAT ON SIMILAR ISSUE, THE OT(A) HAS DECIDED IN FAVOUR O F THE APPELLANT IN A.TY. 2003-04 & 2004-05 AND HELD THAT ONLY NET I NTEREST INCOME SHOULD BE EXCLUDED FOR CALCULATION OF DEDUCT ION U/S. 80IB- OF THE ACT. 4.2 BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R IN APPEAL BEFORE LD. CIT(A) BUT WITHOUT SUCCESS AND NOW, THE ASSESSE E IS IN FURTHER APPEAL BEFORE US. 4.3 IT WAS SUBMITTED BY THE LD. A.R. THAT INTEREST EARNED ON BANK DEPOSITS BY OPENING L/C HAS DIRECT NEXUS WITH THE A CTIVITIES OF INDUSTRIAL UNDERTAKING AND HENCE, THE SAME QUALIFIES FOR THE C LAIM OF DEDUCTION U/S 80IB. REGARDING THE ALTERNATIVE CLAIM, IT WAS SUBM ITTED THAT ONLY NET INTEREST SHOULD BE EXCLUDED FROM PROFITS OF BUSINES S AND NOT THE GROSS INTEREST WHILE COMPUTING DEDUCTION U/S 80-IB OF THE INCOME TAX ACT, 1961. IN SUPPORT OF THIS CONTENTION, RELIANCE IS P LACED ON THE TRIBUNAL I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 13 DECISION IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2004-05 IN I.T.A.NO. 2009/AHD/2006 DATED 29.04.2009. HE SUBMI TTED A COPY OF THIS TRIBUNAL DECISION. RELIANCE WAS ALSO PLACED ON THE DECISION OF HONBLE APEX COURT RENDERED IN THE CASE OF ACG CAPSULES ASS OCIATED PVT. LTD. VS ACIT AS REPORTED IN 343 ITR 89 (S.C.) IN SUPPORT OF THIS CONTENTION THAT NETTING OF INTEREST SHOULD BE ALLOWED. 4.4 LD. D.R. SUPPORTED THE ORDER OF AUTHORITIES BEL OW. 4.5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE JUDGEMENT CITED BY LD. A.R. WE FIND THAT INTEREST INCOME CANNOT BE SAID TO BE AN INCOME DERIVED FROM AN INDUSTRIAL UNDERTAK ING AND, THEREFORE, SECTION 80-IB DEDUCTION IS NOT ALLOWABLE IN RESPECT OF INTEREST INCOME. REGARDING NETTING OF INTEREST INCOME, WE FIND THAT HIS ISSUE IS NOW COVERED BY THE JUDGMENT OF HONBLE APEX COURT RENDE RED IN THE CASE OF ACG ASSOCIATED CAPSULES PVT. LTD. (SUPRA). IN THAT CASE, IT WAS HELD BY THE HONBLE COURT THAT ONLY 90% OF NET INTEREST INC LUDED IN THE PROFITS OF BUSINESS OF THE ASSESSEE HAS TO BE EXCLUDED UNDER C LAUSE (1) OF EXPLANATION (BAA) TO SECTION 80HHC FOR DETERMINING THE PROFITS OF BUSINESS. ALTHOUGH THIS JUDGMENT IS IN RESPECT OF DEDUCTION U/S 80HHC BUT WE FIND NO REASON AS TO WHY THE SAME LOGIC SHOU LD NOT BE APPLIED IN RESPECT OF DEDUCTION U/S 80-IB OF THE INCOME TAX AC T, 1961. WE, THEREFORE, HOLD THAT NET INTEREST ONLY SHOULD BE CO NSIDERED FOR REDUCING FROM PROFITS OF BUSINESS FOR COMPUTING DEDUCTION U/ S 80-IB AND FOR THE PURPOSE OF COMPUTING NET INTEREST, ONLY THESE EXPEN DITURE, WHICH ARE INCURRED FOR EARNING INTEREST INCOME SHOULD BE CONS IDERED AND REDUCED FROM INTEREST INCOME. GROUND NO.3 OF THE ASSESSEE IS REJECTED WHEREAS GROUND NO.4 OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 14 5. GROUND NO.4 OF THE REVENUES APPEAL IS REGARDING GRANTING OF DEDUCTION U/S 80-IB OF THE INCOME TAX ACT, 1961 ON INTEREST OF LATE PAYMENT OF SALE PROCEEDS FROM DEBTORS AMOUNTING TO RS.1,95,79,481/-. 5.1 LD. D.R. SUPPORTED THE ASSESSMENT ORDER WHEREAS IT WAS SUBMITTED BY THE LD. A.R. THAT THIS ISSUE IS NOW COVERED IN F AVOUR OF THE ASSESSEE BY THE JUDGEMENT OF HONBLE GUJARAT HIGH COURT RENDERE D IN THE CASE OF NIRMA INDUSTRIES AS REPORTED IN 283 ITR 402 (GUJ.) AND IT WAS ALSO SUBMITTED THAT SLP PREFERRED BY THE DEPARTMENT AGAI NST THIS JUDGMENT WAS REJECTED BY THE HONBLE APEX COURT. 5.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND WE FIND THAT THIS ISSUE IS NOW SQUARELY COVERED IN FAVOUR OF THE ASSE SSEE BY THIS JUDGEMENT OF HONBLE GUJARAT HIGH COURT AND HENCE, WE DECLINE TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE. GROUND NO.4 OF THE REVENUE IS REJECTED. 5. GROUND NO.5 OF THE REVENUES APPEAL IS REGARDING GRANTING OF DEDUCTION U/S 80-IB OF THE INCOME TAX ACT, 1961 TO THE EXTENT OF 2,66,698/- IN RESPECT OF DUTY DRAWBACK. 5.1 BRIEF FACTS OF THIS ISSUE ARE NOTED BY LD. CIT( A) IN PARA 7 OF HIS ORDER WHICH IS REPRODUCED BELOW: 7. THE GROUNDS NO. 9 & 10 ARE AGAINST NOT GRANTIN G DEDUCTION U/S. 80IB ON DUTY DRAW BACK AMOUNTING TO RS. 2,66,698/- AND ALTERNATIVELY AND WITHOUT PREJUDICE, IF THE DUTY DR AW BACK IS TO BE EXCLUDED, CORE SPENDING PAYMENT OF THE DUTY MAY KIN DLY BE ALLOWED TO BE TAKEN OUT FROM THE CALCULATION OF THE PROFIT OF THE BUSINESS. SIMILAR ISSUE AROSE IN EARLIER YEARS, I.E . 2003-04 & 2004- 05, WHERE THE ISSUE WAS DECIDED-IN FAVOUR OF THE AP PELLANT, VIDE CIT(A)'S ORDER DT: 29-3-2006 & 19-06-2006 BY FOLLOW ING THE DECISION OF HON. GUJARAT HIGH COURT IN THE -CASE OF INDIA GELATINE & CHEMICALS LTD., 275 ITR 284. AS THE ISSUE IS SIMI LAR, IT IS DIVIDED IN FAVOUR OF THE APPELLANT FOR THIS YEAR AL SO AND THE APPELLANT IS GIVEN RELIEF ON THIS POINT. I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 15 5.2 BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R IN APPEAL BEFORE LD. CIT(A) WHO HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE ORDER OF HIS PREDECESSOR IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2003-04 AND 2004-05 IN WHICH THE JU DGMENT OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF INDIA GE LATINE & CHEMICALS LTD. AS REPORTED IN 275 ITR 285 WAS FOLLOWED. NOW, REVENUE IS IN APPEAL BEFORE US. 5.3 IT WAS SUBMITTED BY THE LD. D.R. THAT THIS ISSU E IS NOW COVERED AGAINST THE ASSESSEE BY THE JUDGEMENT OF HONBLE AP EX COURT RENDERED IN THE CASE OF LIBERTY INDIA LTD. AS REPORTED IN 317 I TR 218 (S.C.) 5.4 AS AGAINST THIS, LD. A.R. SUBMITTED BRIEF NOTE ON ELIGIBILITY OF DUTY DRAWBACK WHILE COMPUTING DEDUCTION U/S 80-IB OF THE INCOME TAX ACT, 1961. THE SAME IS REPRODUCED BELOW: A BRIEF NOTE ON ELIGIBILITY OF INCOME ON ACCOUNT O F DUTY DRAWBACK WHILE COMPUTING DEDUCTION U/S 80IB OF THE ACT. SCHEME OF DUTY DRAWBACK. THE GRANT OF DUTY DRAWBACK IS GOVERNED BY THE CUSTO MS AND CENTRAL EXCISE DUTY DRAWBACK RULES, 1995 (DRAWBACK RULES) (COPY AT EXHIBIT 1). THE DUTY DRAWBACK IS OF TWO KINDS: (1) ALL INDUSTRY RATES (AIR) (2) BRAND RATE THE AIR IS A GENERAL RATE NOTIFIED BY THE GOVERNMEN T THROUGH DUTY DRAWBACK SCHEME EVERY YEAR AFTER ASSESSMENT OF AVERAGE INCIDENCES OF CUSTOMS AND CENTRAL EXCISE SUFFERED B Y THE EXPORT PRODUCT AFTER EXTENSIVE DISCUSSION WITH THE ALL STA KE HOLDERS OF INDUSTRY AND DATA COLLECTED FROM CUSTOMS AND CENTRA L EXCISE DEPARTMENT. THE MANNER FOR DETERMINATION OF RATE IS GIVEN IN RULE 3(2) OF DRAWBACK RULES. A PLAIN READING OF THE SAID RULE 3(2), THE FOLLOWIN G FEATURES EMERGE: THE RATES ARE DETERMINED ON GENERAL ANALYSIS OF INDUSTRY DATA AND NOT SPECIFIC TO ANY INDIVIDUAL EXPORTER; I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 16 THE SCHEDULE ENTRY RATES ARE STANDARD GENERAL R ATES HAVING NO NEXUS WITH THE ACTUAL AMOUNT OF DUTY SUFFERED ON IN PUT AND RAW MATERIAL USED IN PRODUCT EXPORTED; THE CLAIM OF DRAWBACK IS TO BE MADE AS PER THE SCHEDULE ENTRY RATE WHICH HAS NO CORRELATION WITH ACTUAL AMOUNT OF THE DUTY PAID BY AN INDIVIDUAL EXPORTER IN RESPECT OF THE RAW MAT ERIAL USED IN THE PRODUCT EXPORTED; THE CLAIM IS AVAILABLE TO WHETHER OR NOT EXPORT ER HAS IN FACT PAID DUTY OR NOT. THUS WHEN CLAIM OF DUTY DRAWBACK IS MADE APPLYING A IR IT HAS NO CORRELATION WITH ACTUAL AMOUNT OF DUTY PAID BY AN I NDIVIDUAL EXPORTER AS WELL AS WILL NOT BE ARITHMETICALLY EQUA L TO THE CUSTOM DUTY OR CENTRAL EXCISE DUTY ACTUALLY PAID BY THE EX PORTER IN CONTRAST TO ABOVE BRAND RATE OF DUTY DRAW BACK A MANUFACTURE EXPORTER IS COMPENSATED BY PAYING THE AMOUNT OF CUS TOMS AND CENTRAL EXCISE DUTIES INCIDENCE ACTUALLY INCURRED B Y THE EXPORTER AND SUFFERED BY PRODUCT EXPORTED. FOR THIS PURPOSE CLAIMANT HAS TO PRODUCE DOCUMENTS / PROOF ABOUT THE ACTUAL QUANTITY OF INPUTS UTILIZED IN THE MANUFACTURE OF EXPORT PRODUCT ALONG WITH EVIDENCE OF PAYMENT OF DUTIES THEREON. THIS SCHEME CAN BE OP TED BY THE MANUFACTURER EXPORTER WHERE EXPORT PRODUCT IS NOT N OTIFIED UNDER AIR OR WHERE THE EXPORTER CONSIDERS THE AIR DUTY DR AWBACK INSUFFICIENT TO FULLY NEUTRALIZE THE DUTIES SUFFERE D BY HIS EXPORT PRODUCT. THE RULE 6 AND 7 OF DUTY DRAWBACK RULES PR OVIDE MANNER OF DETERMINATION AND CLAIM OF DUTY DRAWBACK UNDER THIS SCHEME. A PERUSAL OF THE SAID RULES REVEAL THE FOLL OWING DISTINCT FEATURES: THOUGH IT IS CALLED BRAND RATE BUT IN FACT IT I S A REFUND OF ACTUAL AMOUNT OF DUTY PAID ON THE INPUTS USED IN EXPORT OF PRODUCT. IT IS NOT GENERAL ONE BUT IS GIVEN SPECIFIC TO THE INDIVIDUAL EXPORTER HAVING DIRECT NEXUS WITH THE ACTUAL AMOUNT OF DUTY PAID BY HIM AND IS ARITHMETICALLY EQUAL TO ACTUAL AMOUNT OF DUTY INCURRED ON EXPORT PRODUCT THE CLAIM IS AVAILABLE ONLY IF THE INPUT HAS BE EN USED IN MANUFACTURE OF PRODUCT EXPORTED AND HAS ALSO SUFFER ED CUSTOM DUTY OR CENTRAL EXCISE DUTY. IT MAY BE NOTED THAT WE HAVE NOT OPTED FOR AIR DUTY DRAW BACK BUT HAVE CLAIMED REFUND OF ACTUALLY PAID DUTY ON IN PUT USED IN MANUFACTURE OF PRODUCT EXPORTED BY US BY MAKING DET AILED APPLICATION FOR EACH EXPORT SUBMITTING EVIDENCE / P ROOF OF INPUT CONSUMED IN PRODUCT EXPORTED AND AMOUNT OF CUSTOM D UTY AND CENTRAL EXCISE DUTY PAID BY US ON THE SAME. A COPY OF ONE SUCH I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 17 SAMPLE APPLICATION GIVING DETAILS OF THE DUTY PAID IS ATTACHED HEREWITH AS EXHIBIT 2. SCHEME OF DEPB IS DIFFERENT FROM SCHEME OF DUTY DRA WBACK: EVEN THE SCHEME OF DEPB I.E. DUTY ENTITLEMENT PASS BOOK SCHEME WHEREIN THE EXPORTER IS GIVEN PASS BOOK CONT AINING A CREDIT ON THE FOB VALUE AT RATES PRESCRIBED UNDER EXPORT I MPORT POLICY AND HANDBOOK IS ALSO DIFFERENT AND AS A MATTER OF F ACT HAS NO NEXUS WITH THE ACTUAL AMOUNT OF DUTY PAID. THE CREDIT CAN BE USED FOR PAYMENT OF IMPORT DUTIES WHILE IMPORTING THE GOODS. THE DEPB ITSELF IS TRANSFERABLE AND CAN BE SOLD IN OPEN MARK ET AND PURCHASER OF DEPB CAN ALSO USE SUCH CREDIT FOR IMPORT OF MATE RIAL. IN ALMOST ALL STATES SALE OF DEPB IS CONSIDERED AS SALE OF GO ODS LIABLE FOR VALUE ADDED TAX (VAT). THUS THE CASE OF DEPB IS QUI TE DIFFERENT FROM THE DUTY DRAW BACK. COPY OF SCHEME OF DEPB IS ANNEXED HERETO AND MARKED AS EXHIBIT 3. THUS EVEN ON THIS COUNT THE CASE OF THE APPELLANT I S QUITE DIFFERENT FROM THE FACTS OF CASE DELT BY HONOURABLE SUPREME C OURT IN THE CASE OF LIBERTY INDIA AS APPELLANT HAS RECEIVED EXA CTLY ARITHMETICALLY EQUAL AMOUNT OF DUTY PAID BY IT ON T HE MATERIAL ACTUALLY CONSUMED IN MANUFACTURE OF EXPORT PRODUCT AS REFUND. THUS THERE IS RECOVERY OF COST ONLY AND NO QUESTION OF ANY PROFIT ARISING FROM SUCH DUTY DRAWBACK. B PRINCIPAL OF GROSS RECEIPT VS INCOME IT IS SUBMITTED THAT THE DEDUCTION U/S 80IB OF THE ACT IS ON INCOME FROM INDUSTRIAL UNDERTAKING AND NOT ON GROSS RECEIP T. INCOME IS NOTHING BUT GROSS RECEIPTS LESS EXPENDITURE. THE PR OFIT AS PER THE PROFIT AND LOSS ACCOUNT, SUBJECT TO CERTAIN ADJUSTM ENTS, IS THE BEGINNING POINT IN SO FAR AS COMPUTATION OF ELIGIBL E INCOME IS CONCERNED. THEREFORE, WHILE EXCLUDING ANY PARTICULA R TYPE OF INCOME FROM THE ELIGIBLE INCOME, WHAT HAS TO BE EXC LUDED IS WHAT IS INCLUDED THEREIN. IN OTHER WORDS, WHAT IS INCLUD ED IS THE INCOME I.E. GROSS INCOME ON THE CREDIT SIDE AND GROSS EXPE NDITURE ON DEBIT SIDE OF P & L ACCOUNT AND THEREFORE IF ONLY GROSS R ECEIPTS ARE EXCLUDED, LEAVING EXPENDITURE IN THE P & L ACCOUNT, THE PROFITS AND /OR INCOME BECOMES DISTORTED. HENCE ONLY INCOME COMPONENT FROM THE GROSS RECEIPTS CAN BE EXCLUDED. RELIANCE C AN BE PLACED ON THE FOLLOWING DECISIONS WHEREIN THE PRINCIPAL OF DI FFERENCE BETWEEN GROSS RECEIPT AND INCOME HAS BEEN DULY EXPL AINED: (I) CIT V. GOVINDA CHOUDHURY AND SONS 203 ITR 881 ( SC) (II) PRESIDENT INDUSTRIES 258 ITR 654 (GUJ) (III) CIT V. BALCHAND AJIT KUMAR 263 ITR 610 (MP) (IV) CIT V. S. M. OMER 201 ITR 608 (CAL.) I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 18 IN THE FACTS OF THE PRESENT CASE, THEREFORE, WHILE EXCLUDING DUTY DRAWBACK FROM THE ELIGIBLE INCOME, ONLY INCOME COMP ONENT, IF ANY, CAN BE EXCLUDED. HOWEVER, AS STATED HEREINABOV E, THERE IS NO INCOME COMPONENT EMBEDDED IN THE DUTY DRAWBACK IN T HE FACTS OF THE PRESENT CASE AS ASSESSEE HAS OPTED FOR REFUND O F DUTY ACTUALLY PAID ON INPUT USED IN MANUFACTURE OF PRODUCT. C EFFECT OF DECISION IN THE CASE OF LIBERTY I NDIA (317 ITR 218) 1. THE DECISION IN THE CASE OF LIBERTY (SUPRA) IS N OT AT ALL APPLICABLE TO THE FACTS OF THE PRESENT CASE SINCE WHILE RENDER ING THE SAID DECISION, HON'BLE THE SUPREME COURT DENIED THE BENE FIT OF 80IB IN RESPECT OF DUTY DRAWBACK AS IT FOUND THAT DUTY DRAW BACK WAS CLAIMED UNDER AIR AND WAS NOT ARITHMETICALLY EQUAL TO THE ACTUAL AMOUNT OF DUTY PAID. THE RELEVANT PARA 17 OF THE JU DGMENT HON'BLE SUPREME COURT IS REPRODUCED HEREIN BELOW FOR IMMEDI ATE REFERENCE: 'THE NEXT QUESTION IS - WHAT IS DUTY DRAWBACK? SECT ION 75 OF THE CUSTOMS ACT, 1962 AND SECTION 37 OF THE CENTRAL EXC ISE ACT, 1944 EMPOWER GOVERNMENT OF INDIA TO PROVIDE FOR REPAYMEN T OF CUSTOMS AND EXCISE DUTY PAID BY AN ASSESSEE. THE RE FUND IS OF THE AVERAGE AMOUNT OF DUTY PAID ON MATERIALS OF ANY PAR TICULAR CLASS OR DESCRIPTION OF GOODS USED IN THE MANUFACTURE OF EXP ORT GOODS OF SPECIFIED CLASS. THE RULES DO NOT ENVISAGE A REFUND OF AN AMOUNT ARITHMETICALLY EQUAL TO CUSTOMS DUTY OR CENTRAL EXC ISE DUTY ACTUALLY PAID BY AN INDIVIDUAL IMPORTER-CUM-MANUFACTURER. SU B-SECTION (2) OF SECTION 75 OF THE CUSTOMS ACT REQUIRES THE AMOUN T OF DRAWBACK TO BE DETERMINED ON A CONSIDERATION OF ALL THE CIRC UMSTANCES PREVALENT I N A PARTICULAR TRADE AND ALSO BASED ON THE FACTS SITUATION RELEVANT IN RESPECT OF EACH OF VARIOUS CLASSES OF G OODS IMPORTED...' THUS IN SUBJECT CASE HON'BLE SUPREME COURT GAVE A F INDING TO ABOVE EFFECT AS THE DUTY DRAWBACK WAS CLAIMED AT GE NERAL AIR RATES WHICH ARE PRESCRIBED BY GOVERNMENT AND IS NOT ARITHMETICALLY EQUAL TO CUSTOM DUTY OR CENTRAL EXCISE DUTY ACTUALL Y PAID BY AN INDIVIDUAL EXPORTER. CONTRARY TO THE DECISION OF LI BERTY (SUPRA) THE CASE OF THE ASSESSEE IS QUITE DIFFERENT IN AS MUCH AS IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE HAS NOT CLAIMED DUTY DRAWBACK UNDER AIR BUT HAS CLAIMED THE SAME AS REFUND OF ACTUAL AM OUNT OF DUTY PAID, TO THE LAST RUPEE. IN THAT VIEW OF THE MATTER , WHEN ACTUAL AMOUNT OF DUTY WHICH WAS PAID EARLIER IS BEING REFU NDED BACK TO THE ASSESSEE, THE DECISION IN THE CASE OF LIBERTY ( SUPRA) CANNOT HAVE ANY APPLICATION WHATSOEVER. COPY OF S 75 OF TH E CUSTOMS ACT, 1962 IS ANNEXED HERETO AND MARKED AS EXHIBIT 4 . I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 19 2. IN FACT THIS VIEW IS ALSO SUPPORTED BY THE SUBS EQUENT DECISIONS OF HON'BLE SUPREME COURT WHILE DISMISSING THE SLP A GAINST THE DELHI HIGH COURT'S DECISION AND ITAT, DELHI BENCH W HEREIN IT WAS HELD THAT WHERE ELIGIBLE UNDERTAKINGS RECEIVED REFU ND OF THE DUTY ACTUALLY PAID THEN THERE IS NO INCOME ARISING OUT O F IT AND THEREFORE QUESTION OF EXCLUDING THE SAID REFUND WHILE WORKING OUT THE DEDUCTION U/S. 80IB DOES NOT ARISE AT ALL. RELIANCE IS PLACED ON THE FOLLOWING DECISIONS: SPECIAL LEAVE TO APPEAL (CIVIL) NO. 24055 OF 2009, DATED 22/02/2010 (COPY ENCLOSED AT EXHIBIT 5 HEREINAFTER HEARING BO TH THE PARTIES, HON'BLE THE SUPREME COURT DISMISSED THE. SLP ON MER ITS AND THEREBY CONFIRMED THE DECISION PF DELHI HIGH COURT IN THE CASE OF CIT VS. DHARAMPAL PREMCHAND (317 ITR 353) HEREIN I T WAS HELD THAT EXCISE DUTY REFUND WAS ELIGIBLE II/S 80-IB ON THE GROUND THAT (A) THERE WAS A DIRECT NEXUS BETWEEN THE REFUND PF EXCISE DUTY AND THE UNDERTAKING AND (B) IF THE PROPER ACCOUNTING ME THODOLOGY WAS FOLLOWED FOR THE PAYMENT AND REFUND OF EXCISE DUTY, THE NET EFFECT ON THE P&L A/C WAS NIL. J K ALUMINIUM CO V ITO ITA 3303 / DEL/ 2010 DATED 2 9-4-2011 (COPY ENCLOSED AT EXHIBIT 6). 3. IN ANY CASE, IN THE CASE OF LIBERTY (SUPRA), I T WAS NEVER ARGUED BEFORE THE HON'BLE THE SUPREME COURT THAT FOR EARNI NG DEPB OR DUTY DRAWBACK, THE ASSESSEE HAS TO INCUR EXPENDITUR E AND THEREFORE, WHILE EXCLUDING SUCH RECEIPT, ONLY THE I NCOME PORTION, IF ANY, EMBEDDED IN SUCH RECEIPTS CAN BE EXCLUDED AND NOT THE GROSS RECEIPTS. THIS ISSUE OF DEPB OR DUTY DRAWBACK HAVIN G COST AND THE SAME HAS TO BE REDUCED TO FIND OUT PROFIT OR IN COME FROM THE GROSS RECEIPTS HAS BEEN ACCEPTED AND EXPLAINED BY H ON'BLE THE SUPREME COURT IN LATER DECISIONS IN THE FOLLOWING C ASES: TOPMANN EXPORTS V GIT (2012) 342 ITR 49(SC). THE RE LEVANT EXTRACT IS REPRODUCED HEREINBELOW FOR READY REFEREN CE: XXX... 15. WE MAY NOW POINT OUT THE ERRORS IN THE IMPUGNED JUDGMENT OF THE HIGH COURT. THE FIRST REASON GIVEN BY THE HIGH COURT IS THAT CLAUSE (IIIA) OF SECTION 28 TREATS PROFITS ON THE S ALE OF AN IMPORT LICENSE AS INCOME CHARGEABLE TO TAX AND WHEN THE LI CENSE IS SOLD, THE ENTIRE AMOUNT IS TREATED AS PROFITS OF BUSINESS UNDER CLAUSE (IIIA) OF SECTION 28 AND THUS THERE IS NO JUSTIFICA TION TO TREAT THE AMOUNT WHICH IS RECEIVED BY AN EXPORTER ON THE TRAN SFER OF THE DEPB ANY DIFFERENTLY THAN THE PROFITS WHICH ARE MAD E ON THE SALE OF AN IMPORT LICENSE UNDER CLAUSE (IIIA) OF SECTION 28 OF THE ACT. IN I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 20 TAKING THE VIEW THAT WHEN THE IMPORT LICENSE IS SOL D THE ENTIRE AMOUNT IS TREATED AS PROFITS OF BUSINESS, THE HIGH COURT HAS VISUALIZED A SITUATION WHERE THE COST OF ACQUIRING THE IMPORT LICENSE IS NIL. THE COST OF ACQUIRING DEPB, ON THE OTHER HA ND, IS NOT NIL BECAUSE THE PERSON ACQUIRES IT BY PAYING CUSTOMS DU TY ON THE IMPORT CONTENT OF THE EXPORT PRODUCT AND THE DEPB W HICH ACCRUES TO A PERSON AGAINST EXPORTS HAS A COST ELEMENT IN I T. ACCORDINGLY, WHEN DEPB IS SOLD BY A PERSON, HIS PROFIT ON TRANSF ER OF DEPB WOULD BE THE SALE VALUE OF THE DEPB LESS THE FACE V ALUE OF DEPB WHICH REPRESENTS THE COST OF THE DEPB. THE SECOND R EASON GIVEN BY THE HIGH COURT IN THE IMPUGNED JUDGMENT IS THAT UNDER THE DEPB SCHEME, DEPB IS GIVEN AT A PERCENTAGE OF THE F OB VALUE OF THE EXPORTS SO AS TO NEUTRALIZE THE INCIDENCE OF CU STOMS DUTY ON THE IMPORT CONTENT OF THE EXPORT PRODUCTS, BUT THE EXPO RTER MAY NOT HIMSELF UTILIZE THE DEPB FOR PAYING CUSTOMS DUTY BU T MAY TRANSFER IT TO SOMEONE ELSE AND THEREFORE THE ENTIRE SUM REC EIVED ON TRANSFER OF DEPB WOULD BE COVERED UNDER CLAUSE (IIID) OF SEC TION 28. THE HIGH COURT HAS FAILED TO APPRECIATE THAT DEPB REPRE SENTS PART OF THE COST INCURRED BY A PERSON FOR MANUFACTURE OF TH E EXPORT PRODUCT AND HENCE EVEN WHERE THE DEPB IS NOT UTILIZED BY TH E EXPORTER BUT IS TRANSFERRED TO ANOTHER PERSON, THE DEPB CONTINUE S TO REMAIN AS A COST TO THE EXPORTER. WHEN, THEREFORE, DEPB IS TRAN SFERRED BY A PERSON, THE ENTIRE SUM RECEIVED BY HIM ON SUCH TRAN SFER DOES NOT BECOME HIS PROFITS. IT IS ONLY THE AMOUNT THAT HE R ECEIVES IN EXCESS OF THE DEPB WHICH REPRESENTS HIS PROFITS ON TRANSFE R OF THE DEPB. IN THE FACTS OF THE PRESENT CASE ALSO THE ASSESSEE GOT REFUND, IN FORM OF DUTY DRAW BACK, OF THE CUSTOM DUTY AND CVD PAID ON IMPORTED RAW MATERIAL USED IN THE MANUFACTURING OF GOODS. TH E ASSESSEE HAS GIVEN VOLUMINOUS CHARTS CO-RELATING AMOUNT OF DUTY PAID AND REFUND RECEIVED ON BACK TO BACK BASIS. THUS IN THE PRESENT CASE ALSO IF THE COST OF DUTY DRAWBACK IS REMOVED FROM T HE AMOUNT RECEIVED, THERE WOULD BE NIL SURPLUS AS THE ASSESSE E HAS RECEIVED EXACTLY THE SAME AMOUNT OF DUTY PAID BY IT. 4. IN FACT THIS PRINCIPAL OF EXCLUDING ONLY THE NE T INCOME, IF ANY, AND NOT THE GROSS RECEIPTS HAS BEEN DULY EXPLAINED RECENTLY BY HON'BLE THE SUPREME COURT IN THE CONTEXT OF PROVISI ONS OF S. 80HHC WHEREIN THE PROVISIONS OF EXPLANATION (BAA) L AYS DOWN EXCLUSION OF 'RECEIPTS'. DESPITE THAT, HON'BLE THE SUPREME COURT HELD THAT WHAT CAN BE EXCLUDED IS THE PROFIT OR INC OME AND NOT THE GROSS RECEIPT. RELEVANT EXTRACT OF THE SAID DECISIO N ARE REPRODUCED HEREINBELOW FOR READY REFERENCE: I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 21 ACG ASSOCIATED CAPSULES (P.) LTD, V. CIT [2O121 343 ITR 89 (SO XXX... 3. FOR APPRECIATING THE SECOND ISSUE, WE MAY REFER VERY BRIEFLY TO THE FACTS OF THE CASE. FOR THE ASSESSMENT YEAR 2003 -04, THE ASSESSEE FILED A RETURN OF INCOME CLAIMING A DEDUCTION OF RS . 34,44,24,827/- UNDER SECTION 80HHC OF THE ACT. THE ASSESSING OFFIC ER PASSED THE ASSESSMENT ORDER DEDUCTING NINETY PER CENT OF THE G ROSS INTEREST AND GROSS RENT RECEIVED FROM THE PROFITS OF BUSINESS WH ILE COMPUTING THE DEDUCTION UNDER SECTION 80HHC AND ACCORDINGLY R ESTRICTED THE DEDUCTION UNDER SECTION 80HHC TO RS. 2,36,25,053/-. THE ASSESSEE FILED AN APPEAL AGAINST THE ASSESSMENT ORDER BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS), WHO CONFIRMED THE ORDER OF THE ASSESSING OFFICER EXCLUDING NINETY PER CENT OF THE GROSS INTEREST AND GROSS RENT RECEIVED BY THE ASSESSEE WH ILE COMPUTING THE PROFITS OF THE BUSINESS FOR THE PURPOSES OF SEC TION 80HHC. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE INCOME TAX APPELLATE TRIBUNAL (FOR SHORT 'THE TRIBUNAL'). THE TRIBUNAL HELD, RELYING ON THE DECISION OF THE DELHI HIGH COURT IN CIT V. SHRI RAM HONDA POWER EQUIP [2007] 289 ITR 475 / 158 TAXMAN 4 74 , THAT NETTING OF THE INTEREST COULD BE ALLOWED IF THE ASS ESSEE IS ABLE TO PROVE THE NEXUS BETWEEN THE INTEREST EXPENDITURE AN D INTEREST INCOME AND REMANDED THE MATTER TO THE FILE OF THE A SSESSING OFFICER. THE TRIBUNAL ALSO REMANDED THE ISSUE OF NE TTING OF THE RENT TO THE ASSESSING OFFICER WITH THE DIRECTION TO FIND OUT WHETHER THE ASSESSEE HAS PAID THE RENT ON THE SAME FLATS AGAINS T WHICH RENT HAS BEEN RECEIVED FROM THE STAFF AND IF SUCH RENT WAS P AID THEN SUCH RENT IS TO BE REDUCED FROM THE RENTAL INCOME FOR TH E PURPOSE OF EXCLUSION OF BUSINESS INCOME FOR COMPUTING THE DEDU CTION UNDER SECTION 80HHC. AGAINST THE ORDER OF THE TRIBUNAL, T HE REVENUE FILED AN APPEAL BEFORE THE HIGH COURT AND THE HIGH COURT HAS DIRECTED THAT ON REMAND THE ASSESSING OFFICER WILL DECIDE THE ISSUE IN ACCORDANCE WITH THE JUDGMENT OF THE HIGH COURT I N CIT V. ASIAN STAR CO. LTD. [2010] 326 ITR 56 (BOM.) IN WHICH IT HAS BEEN HELD THAT WHILE DETERMINING THE PROFITS OF THE BUSINESS AS DEFINED IN EXPLANATION (BAA) TO SECTION 80HHC, NINETY PER CENT OF THE GROSS RECEIPTS TOWARDS INTEREST AND NOT NINETY PER CENT O F THE NET RECEIPTS TOWARDS INTEREST ON FIXED DEPOSITS IN BANKS RECEIVE D BY THE ASSESSEE WOULD BE EXCLUDED FOR THE PURPOSE OF WORKING OUT TH E DEDUCTION UNDER SECTION 80HHC OF THE ACT. XXX... I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 22 9. EXPLANATION (BAA) EXTRACTED ABOVE STATES THAT 'P ROFITS OF THE BUSINESS' MEANS THE PROFITS OF THE BUSINESS AS COMP UTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' AS REDUCED BY THE RECEIPTS OF THE NATURE MENTIONED IN CLAUSES (1) AND (2) OF THE EXPLANATION (BAA). THUS, PROFITS OF THE BUSINESS OF AN ASSESSEE WILL HAVE TO BE FIRST COMPUTED UNDER THE HEAD 'PROFITS A ND GAINS OF BUSINESS OR PROFESSION' IN ACCORDANCE WITH PROVISIO NS OF SECTION 28 TO 44D OF THE ACT. IN THE COMPUTATION OF SUCH PR OFITS OF BUSINESS, ALL RECEIPTS OF INCOME WHICH ARE CHARGEAB LE AS PROFITS AND GAINS OF BUSINESS UNDER SECTION 28 OF THE ACT WILL HAVE TO BE INCLUDED. SIMILARLY, IN COMPUTATION OF SUCH PROFITS OF BUSINESS, DIFFERENT EXPENSES WHICH ARE ALLOWABLE UNDER SECTIO NS 30 TO 44D HAVE TO BE ALLOWED AS EXPENSES. AFTER INCLUDING SUC H RECEIPTS OF INCOME AND AFTER DEDUCTING SUCH EXPENSES, THE TOTAL OF THE NET RECEIPTS ARE PROFITS OF THE BUSINESS OF THE ASSESSE E COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSI ON' FROM WHICH DEDUCTIONS ARE TO MADE UNDER CLAUSES (1) AND (2) OF EXPLANATION (BAA). 10. UNDER CLAUSE (1) OF EXPLANATION (BAA), NINETY P ER CENT OF ANY RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, CHARGES OR ANY OTHER RECEIPT OF A SIMILAR NATURE INCLUDED I N ANY SUCH PROFITS ARE TO BE DEDUCTED FROM THE PROFITS OF THE BUSINESS AS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PR OFESSION'. THE EXPRESSION 'INCLUDED ANY SUCH PROFITS' IN CLAUSE (1 ) OF THE EXPLANATION (BAA) WOULD MEAN ONLY SUCH RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, CHARGES OR A NY OTHER RECEIPT WHICH ARE INCLUDED IN THE PROFITS OF THE BUSINESS A S COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSI ON'. THEREFORE, IF ANY QUANTUM OF THE RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, CHARGES OR ANY OTHER RECEIPT OF A S IMILAR NATURE IS ALLOWED AS EXPENSES UNDER SECTIONS 30 TO 44D OF THE ACT AND IS NOT INCLUDED IN THE PROFITS OF BUSINESS AS COMPUTED UND ER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION', NINE TY PER CENT OF SUCH QUANTUM OF RECEIPTS CANNOT BE REDUCED UNDER CL AUSE (1) OF EXPLANATION (BAA) FROM THE PROFITS OF THE BUSINESS. IN OTHER WORDS, ONLY NINETY PER CENT OF THE NET AMOUNT OF ANY RECEI PT OF THE NATURE MENTIONED IN CLAUSE (1) WHICH IS ACTUALLY INCLUDED IN THE PROFITS OF THE ASSESSEE IS TO BE DEDUCTED FROM THE PROFITS OF THE ASSESSEE FOR DETERMINING 'PROFITS OF THE BUSINESS' OF THE ASSESS EE UNDER EXPLANATION (BAA) TO SECTION 80HHC. 11. FOR THIS INTERPRETATION OF EXPLANATION (BAA) TO SECTION 80HHC OF THE ACT, WE RELY ON THE JUDGMENT OF THE CONSTITU TION BENCH OF I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 23 THIS COURT IN DISTRIBUTORS (BARODA) (P.) LTD. (SUPR A). SECTION 80M OF THE ACT PROVIDED FOR DEDUCTION IN RESPECT OF CER TAIN INTER CORPORATE DIVIDENDS AND IT PROVIDED IN SUB-SECTION (1) OF SECTION 80M THAT 'WHERE THE GROSS TOTAL INCOME OF AN ASSESS EE BEING A COMPANY INCLUDES ANY INCOME BY WAY OF DIVIDENDS REC EIVED BY IT FROM A DOMESTIC COMPANY, THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOW ED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION FROM SUCH INCOME BY WAY OF DIVIDENDS AN AMOUNT EQUAL TO' A CERTAIN PERC ENTAGE OF THE INCOME MENTIONED IN THIS SECTION. THE CONSTITUTION BENCH HELD THAT THE COURT MUST CONSTRUE SECTION 80M ON ITS OWN LANGUAGE AND ARRIVE AT ITS TRUE INTERPRETATION ACCORDING TO THE PLAIN NATURAL MEANING OF THE WORDS USED BY THE LEGISLATURE AND SO CONSTRUED THE WORDS 'SUCH INCOME BY WAY OF DIVIDENDS' IN SUB-SECT ION (1) OF SECTION 80M MUST BE REFERABLE NOT ONLY TO THE CATEG ORY OF INCOME INCLUDED IN THE GROSS TOTAL INCOME BUT ALSO TO THE QUANTUM OF THE INCOME SO INCLUDED. SIMILARLY, EXPLANATION (BAA) HA S TO BE CONSTRUED ON ITS OWN LANGUAGE AND AS PER THE PLAIN NATURAL MEANING OF THE WORDS USED IN EXPLANATION (BAA), THE WORDS ' RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, CHARGES O R ANY OTHER RECEIPT OF A SIMILAR NATURE INCLUDED IN SUCH PROFIT S' WILL NOT ONLY REFER TO THE NATURE OF RECEIPTS BUT ALSO THE QUANTU M OF RECEIPTS INCLUDED IN THE PROFITS OF THE BUSINESS AS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' REFER RED TO IN THE FIRST PART OF THE EXPLANATION (BAA). ACCORDINGLY, I F ANY QUANTUM OF ANY RECEIPT OF THE NATURE MENTIONED IN CLAUSE (1) O F EXPLANATION (BAA) HAS NOT BEEN INCLUDED IN THE PROFITS OF BUSIN ESS OF AN ASSESSEE AS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BU SINESS OR PROFESSION', NINETY PER CENT OF SUCH QUANTUM OF THE RECEIPT CANNOT BE DEDUCTED UNDER EXPLANATION (BAA) TO SECTION 80HH C. 12. IF WE NOW APPLY EXPLANATION (BAA) AS INTERPRETE D BY US IN THIS JUDGMENT TO THE FACTS OF THE CASE BEFORE US, IF THE RENT OR INTEREST IS A RECEIPT CHARGEABLE AS PROFITS AND GAINS OF BUSINE SS AND CHARGEABLE TO TAX UNDER SECTION 28 OF THE ACT, AND IF ANY QUAN TUM OF THE RENT OR INTEREST OF THE ASSESSEE IS ALLOWABLE AS AN EXPE NSE IN ACCORDANCE WITH SECTIONS 30 TO 44D OF THE ACT AND IS NOT TO BE INCLUDED IN THE PROFITS OF THE BUSINESS OF THE ASSESSEE AS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION', NINE TY PER CENT OF SUCH QUANTUM OF THE RECEIPT OF RENT OR INTEREST WIL L NOT BE DEDUCTED UNDER CLAUSE (1) OF EXPLANATION (BAA) TO SECTION 80 HHC. IN OTHER WORDS, NINETY PER CENT OF NOT THE GROSS RENT OR GRO SS INTEREST BUT ONLY THE NET INTEREST OR NET RENT, WHICH HAS BEEN I NCLUDED IN THE I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 24 PROFITS OF BUSINESS OF THE ASSESSEE AS COMPUTED UND ER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION', IS T O BE DEDUCTED UNDER CLAUSE (1) OF EXPLANATION (BAA) TO SECTION 80 HHC FOR DETERMINING THE PROFITS OF THE BUSINESS. XXX... 5. LASTLY, IF AT ALL IT EMERGES THAT THE DECISION OF LIBERTY INDIA (SUPRA) AND DECISIONS IN THE CASE OF TOPMAN (SUPRA) AND ACG ASSOCIATED (SUPRA) HAVE CONFLICTING VIEWS, THE ASSE SSEE SUBMITS THAT: (I) THE DECISIONS OF TOPMAN AND ACG WERE REND ERED BY A BENCH HAVING HEADED BY 3 JUDGES WHEREAS THE DECISIO N OF LIBERTY WAS RENDERED BY A DIVISION BENCH, THEREFORE A LARGE R BENCH WOULD PREVAIL UPON A DIVISION BENCH; (II) THE DECISIONS OF TOPMAN AND ACG WERE REND ERED ON 08/02/2012 WHEREAS THE DECISION OF LIBERTY WAS REND ERED ON 31/08/2009, THEREFORE A LATER DECISION PREVAILS UPO N EARLIER ONE; (III) IF TWO VIEWS ARE POSSIBLE, VIEW IN FAVOUR OF THE ASSESSEE SHOULD BE ADOPTED. IN VIEW OF THE ABOVE DISCUSSION, THE ASSESSEE MOST RESPECTFULLY SUBMITS THAT EVEN OTHERWISE WHILE COMPUTING THE DED UCTION U/S 80IB OF THE ACT NOT ONLY RECEIPT OF DUTY DRAWBACK S HOULD BE EXCLUDED BUT ALSO THE AMOUNT OF ACTUAL DUTY PAID AN D DEBITED TO P & L ACCOUNT SHOULD ALSO BE EXCLUDED. IN THE FACTS O F THE PRESENT CASE, SINCE THE ASSESSEE HAS ONLY RECEIVED BACK TO BACK REIMBURSEMENT OF DUTY PAID BY IT AS DUTY DRAWBACK I T IS IN THE NATURE OF REFUND OF DUTY AND THEREFORE IT DOES NOT AFFECT THE PROFIT OF THE UNDERTAKING ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT IN ANY MANNER WHATSOEVER, AND HENCE NO PART OF THE SAID DU TY DRAWBACK CAN BE EXCLUDED. 5.5 IN REJOINDER, IT WAS SUBMITTED BY THE LD. D.R. THAT IN THE CASE OF LIBERTY INDIA LTD. (SUPRA), THE ISSUE WAS DECIDED N OT IN RESPECT OF DEPB ONLY BUT IN RESPECT OF DUTY DRAWBACK ALSO AND ON BO TH THE ACCOUNTS, THE ISSUE WAS DECIDED BY THE HONBLE APEX COURT AGAINST THE ASSESSEE AND IN FAVOUR OF REVENUE. 5.6 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE JUDGEMENT CITED BY BOTH THE SIDES. WHEN WE GO THRO UGH PARA 16, 17 & 18 I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 25 OF THE JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF LIBERTY INDIA LTD. (SUPRA) WE FIND THAT THIS DECISION IS ON THIS BASIS THAT THE RULES DO NOT ENVISAGE A REFUND OF THE AMOUNT ARITHMETICAL LY EQUAL TO CUSTOM DUTY OR CENTRAL EXCISE DUTY ACTUALLY PAID BY AN IND IVIDUAL IMPORTER CUM MANUFACTURER. IT IS ALSO STATED BY HONBLE APEX CO URT IN PARA 17 OF THIS JUDGEMENT THAT SUB-SECTION (2) OF SECTION 75 OF THE CUSTOMS ACT REQUIRES THE AMOUNT OF DRAWBACK TO BE DETERMINED ON A CONSID ERATION OF ALL THE CIRCUMSTANCES PREVALENT IN A PARTICULAR TRADE AND A LSO BASED ON THE FACTS SITUATION RELEVANT IN RESPECT OF EACH OF VARIOUS CL ASSES OF GOODS IMPORTED. WE, THEREFORE, FEEL THAT PARA 16, 17 AND 18 OF THIS JUDGEMENT OF HONBLE APEX COURT SHOULD BE REPRODUCED BELOW FOR READY RE FERENCE: 16. DEPB IS AN INCENTIVE. IT IS GIVEN UNDER THE D UTY EXEMPTION REMISSION SCHEME. ESSENTIALLY, IT IS AN EXPORT INC ENTIVE. NO DOUBT, THE OBJECT BEHIND DEPB IS TO NEUTRALIZE THE INCIDENCE OF CUSTOMS DUTY PAYMENT ON THE IMPORT CONTENT OF EXPOR T PRODUCT. THIS NEUTRALIZATION IS PROVIDED OF BY CREDIT TO CUS TOMS DUTY AGAINST EXPORT PRODUCT. UNDER DEPB, AN EXPORTER MAY APPLY FOR CREDIT AS A PERCENTAGE OF THE FOB VALUE OF EXPORTS MADE IN FR EELY CONVERTIBLE CURRENCY. CREDIT IS AVAILABLE ONLY AGA INST THE EXPORT PRODUCT AND AT RATES SPECIFIED BY THE DGFT FOR IMPO RT OF RAW MATERIALS, COMPONENTS, ETC., DEPB CREDIT UNDER THE SCHEME HAS TO BE CALCULATED BY TAKING INTO ACCOUNT THE DEEMED IMP ORT CONTENT OF THE EXPORT PRODUCT S PER BASIC CUSTOMS DUTY AND SPE CIAL ADDITIONAL DUTY PAYABLE ON SUCH DEEMED IMPORTS. THEREFORE, IN OUR VIEW, DEPB/DUTY DRAWBACK ARE INCENTIVES WHICH FLOW FROM T HE SCHEMES FRAMED BY CENTRAL GOVERNMENT OR FORM SECTION 75 OF THE CUSTOMS ACT, 1962, HENCE, INCENTIVES PROFITS ARE NOT PROFIT S DERIVED FORM THE ELIGIBLE BUSINESS UNDER SECTION 80-IB. THEY BELONG TO THE CATEGORY OF ANCILLARY PROFITS OF SUCH UNDERTAKINGS. 17. THE NEXT QUESTION IS- WHAT IS DUTY DRAWBACK? S ECTION 75 OF THE CUSTOMS ACT, 1962, AND SECTION 37 OF THE CENTRA L EXCISE ACT, 1944, EMPOWERS THE GOVERNMENT OF INDIA TO PROVIDE F OR REPAYMENT OF CUSTOMS DUTY AND EXCISE DUTY PAID BY AN ASSESSEE . THE REFUND IS OF THE AVERAGE AMOUNT OF DUTY PAID ON MATERIALS OF ANY PARTICULAR CLASS OR DESCRIPTION OF GOODS USED IN THE MANUFACTU RE OF EXPORT GOODS OF SPECIFIED CLASS. THE RULES DO NOT ENVISAG E A REFUND OF AN I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 26 AMOUNT ARITHMETICALLY EQUAL TO CUSTOMS DUTY OR CENT RAL EXCISE DUTY ACTUALLY PAID BY AN INDIVIDUAL IMPORTER-CUM-MANUFAC TURER. SUB- SECTION (2) OF SECTION 75 OF THE CUSTOMS ACT REQUIR ES THE AMOUNT OF DRAWBACK TO BE DETERMINED ON A CONSIDERATION OF AL THE CIRCUMSTANCES PREVALENT IN A PARTICULAR TRADE AND A LSO BASED ON THE FACTS SITUATION RELEVANT IN RESPECT OF EACH OF VARI OUS CLASSES OF GOODS IMPORTED. BASICALLY, THE SOURCE OF THE DUTY DRAWBACK RECEIPT LIES IN SECTION 75 OF THE CUSTOMS ACT AND SECTION 3 7 OF THE CENTRAL EXCISE ACT. 18. ANALYZING THE CONCEPT OF REMISSION OF DUTY DRAW BACK AND DEPB, WE ARE SATISFIED THAT THE REMISSION OF DUTY I S ON ACCOUNT OF THE STATUTORY/POLICY PROVISIONS IN THE CUSTOMS ACT/ SCHEME(S) FRAMED BY THE GOVERNMENT OF INDIA. IN THE CIRCUMST ANCES, WE HOLD THAT PROFITS DERIVED BY WAY OF SUCH INCENTIVES DO N OT FALL WITHIN THE EXPRESSION PROFITS DERIVED FORM INDUSTRIAL UNDERTA KING IN SECTION 80-IB. 5.7 SINCE IT IS HELD BY HONBLE APEX COURT THAT SEC TION 75 OF CUSTOMS ACT IS RELEVANT OF THE PURPOSE OF DUTY DRAWBACK, WE REPRODUCE CLAUSE (A) OF SUB-SECTION (2) OF SECTION 75 OF THE CUSTOMS ACT 1962, WHICH IS AS UNDER: (A) FOR THE PAYMENT OF DRAWBACK EQUAL TO THE AMOUN T OF DUTY ACTUALLY PAID ON THE IMPORTED MATERIALS USED IN THE MANUFACTURED OR PROCESSING OF THE GOODS OR CARRYING OUT ANY OPERATI ON ON THE GOODS OR AS IS SPECIFIED IN THE RULES AS THE AVERAGE AMOU NT OF DUTY PAID ON THE MATERIALS OF THAT CLASS OR DESCRIPTION USED IN THE MANUFACTURE OR PROCESSING OF EXPORT GOODS OR CARRYING OUT ANY OPER ATION ON EXPORT GOODS OF THAT CLASS OR DESCRIPTION EITHER BY MANUF ACTURERS GENERALLY OR BY PERSONS PROCESSING OF CARRYING ON A NY OPERATION GENERALLY OR BY ANY PARTICULAR MANUFACTURER OR PART ICULAR PERSON CARRYING ON ANY PROCESS OR OTHER OPERATION, AND INT EREST IF ANY PAYABLE THEREON. 5.8 WE ALSO REPRODUCE THE RELEVANT PORTION OF CUSTO MS AND CENTRAL EXCISE DUTIES AND SERVICE TAX DRAWBACK RULES, 1995 AS PER NOTIFICATION NO.37/95 DATED 26.05.1995. I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 27 5.9 IN THE BEGINNING TO THE NOTIFICATION, IT IS STA TED THAT ON EXERCISE OF POWERS CONFERRED BY SECTION 75 OF THE CUSTOMS ACT 1 962, SECTION 37 OF THE CENTRAL EXCISE ACT 1944 AND SECTION 93A READ WI TH SECTION 75 OF THE FINANCE ACT 1944 THESE RULES ARE MADE BY THE CENTRA L GOVERNMENT. RULE 6 IS RELEVANT AND THE SAME IS REPRODUCED BELOW: RULE 6. CASES WHERE AMOUNT OR RATE OF DRAWBACK HAS NOT BEEN DETERMINED.- (A) WHERE NO AMOUNT OR RATE OF DR AWBACK HAS BEEN DETERMINED IN RESPECT OF ANY GOODS, ANY MANUFA CTURERS OR EXPORTER OF SUCH GOODS MAY, WITHIN SIXTY DAYS FORM THE DATE RELEVANT FOR THE APPLICABILITY OF THE AMOUNT OR RAT E OF DRAWBACK IN TERMS OF SUB-RULE (3) OF RULE (5) APPLY IN WRITING TO THE COMMISSIONER OF CENTRAL EXCISE OR THE COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE, HAVING JURISDICTION OVER THE MA NUFACTURING UNIT, OF THE MANUFACTURER EXPORTER OR, OF THE SUPPO RTING MANUFACTURERS, AS THE CASE MAY BE, FOR DETERMINATIO N OF THE AMOUNT OR RATE OF DRAWBACK THEREOF STATING ALL THE RELEVAN T FACTS INCLUDING THE PROPORTION IN WHICH THE MATERIALS OR COMPONENTS OR INPUTS SERVICES ARE USED IN THE PRODUCTION OR MANUFACTURE OF GOOD AND THE DUTIES PAID ON SUCH MATERIALS OR COMPONENTS OR THE TAX PAID ON INPUT SERVICES, 5.10 WE HAVE GONE THROUGH THE CLAUSE (A) OF SUB SEC TION (2) OF SECTION 75 OF THE CUSTOMS ACT, 1962 AND WE FIND THAT THERE ARE TWO TYPES OF DUTY DRAWBACK WHICH CAN BE ALLOWED. THE FIRST CATEGORY IS THAT PAYMENT OF DUTY DRAWBACK IS EQUAL TO THE AMOUNT OF DUTY ACTUAL LY PAID ON AN IMPORTED MATERIAL USED IN A MANUFACTURING OR PROCES SING OF GOODS OR CARRYING OUT ANY OPERATION OF THE GOODS. THE SECON D CATEGORY IS THAT AS SPECIFIED IN THE RULE, AVERAGE AMOUNT OF DUTY PAID ON THE MATERIAL OF THAT CLASS OR DESCRIPTION USED IN A MANUFACTURING OR PRO CESSING OF EXPORT OF GOODS OR CARRYING OUT ANY OPERATION OF EXPORT GOODS OF THIS CASE ETC. IN THE FIRST CATEGORY, THE DUTY DRAWBACK IS ARITHMETIC ALLY EQUAL TO THE DUTY PAID BY THE ASSESSEE ON IMPORT OF MATERIAL USED IN THE MANUFACTURE OR PROCESSING OF THE GOODS. IN THE 2 ND CATEGORY, AVERAGE AMOUNT OF DUTY I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 28 DRAWBACK IS PAID WITHOUT ANY CORRELATION WITH THE A CTUAL DUTY PAID BY THE ASSESSEE ON IMPORT. AS PER RULE 6 OF CUSTOMS, CENT RAL EXCISE DUTY AND SERVICE TAX DUTY DRAWBACK RULES 1995, WHERE NO AMOU NT OR RATE OF DRAWBACK HAS BEEN DETERMINED IN RESPECT OF ANY GOOD S, ANY EXPORTER OF SUCH GOODS MAY WITHIN 60 DAYS FROM THE DATE OF RELE VANT OF THE APPLICABILITY OF AMOUNT APPLY IN WRITING TO THE COM MISSIONER OF CENTRAL EXCISE OR COMMISSIONER OF CUSTOMS AND CENTRAL EXCIS E HAVING JURISDICTION OVER THE MANUFACTURING UNIT OR MANUFAC TURER EXPORTER OR THE SUPPORTING MANUFACTURER ETC TO DETERMINE THE AMOUNT AND RATE OF DRAWBACK THEREOF STATING ALL THE RELEVANT FACTS ETC . IN THE PRESENT CASE, THE DUTY DRAWBACK IS AVAILABLE TO THE ASSESSEE AS PER T HE FIRST CATEGORY AND AS PER THE DETAILS GIVEN BY THE ASSESSEE, AN AMOUNT OF RS.2,72,395/- WAS PAID BY THE ASSESSEE AS CUSTOM DUTY, OUT OF WHICH RS.5,6 97/- WAS DEDUCTED BEING @ RS.3/KG. FOR 1899 KG. BEING RECOVERABLE WAS TAGE AND THE BALANCE AMOUNT WAS PAID AS DUTY DRAWBACK BEING RS.2 ,66,698/-. SIMILARLY, FOR ASSESSMENT YEAR 2006-07 ALSO, THE AS SESSEE HAS SUBMITTED COMPLETE DETAILS ABOUT DUTY DRAWBACK, AS PER WHICH, DUTY PAID BY THE ASSESSEE IS OF RS.15,71,42,086/- AND DUTY DRAWBACK RECEIVED IS RS.15,48,64,977/-. THIS GOES TO SHOW THAT IN BOTH THE YEARS, THERE IS DIRECT AND ARITHMETIC CORRELATION BETWEEN THE DUTY PAID BY THE ASSESSEE AND DUTY DRAWBACK RECEIVED BY THE ASSESSEE. THESE FACTS ALONG WITH RELEVANT PROVISIONS OF THE CUSTOMS ACT 1962 AND CUS TOM AND CENTRAL EXCISE DUTY AND SERVICE TAX DRAWBACK RULES 1995 OF WHICH RELEVANT PORTION IS REPRODUCED ABOVE, WE FIND THAT THE FACTS IN THE PRESENT CASE ARE DISTINGUISHABLE FROM THE FACTS IN THE CASE OF LIBER TY INDIA (SUPRA). IN THE CASE OF LIBERTY INDIA (SUPRA), THE ISSUE WAS DECIDE D BY THE HONBLE APEX COURT AGAINST THE ASSESSEE ON THIS BASIS THAT SINCE THE RULE DOES NOT ENVISAGE REFUND OF AN AMOUNT ARITHMETICALLY EQUAL T O CUSTOMS DUTY PAID I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 29 BY THE INDIVIDUAL EXPORTER/MANUFACTURER, THE DUTY D RAWBACK AND DEPB RECEIPT OF THE ASSESSEE IS ON ACCOUNT OF STATUTORY POLICY AND PROVISIONS IN THE CUSTOMS ACT BY THE GOVERNMENT OF INDIA AND HENC E, THIS PROFIT DERIVED BY WAY OF SOME INCENTIVE DOES NOT FALL WITH IN THE EXPRESSION PROFITS DERIVED FORM INDUSTRIAL UNDERTAKING IN SE CTION 80-IB. IN THE PRESENT CASE, DUTY DRAWBACK RECEIVED BY THE ASSESSE E HAS A DIRECT AND ARITHMETIC CORRELATION WITH THE CUSTOM DUTY PAID BY THE ASSESSEE AND, THEREFORE, THERE IS NO INCOME AS SUCH ON ACCOUNT OF DUTY DRAWBACK RECEIVED BY THE ASSESSEE BECAUSE WHATEVER CUSTOM DU TY PAID BY THE ASSESSEE HAS BEEN RECEIVED BACK BY THE ASSESSEE AND IT LEAVES NO INCOME WITH THE ASSESSEE. 5.11 THE ASSESSEE HAS ALSO PLACED RELIANCE ON THE T RIBUNAL DECISION RENDERED IN THE CASE OF JK ALUMINIUM CO. VS ITO IN I.T.A.NO. 3303/DEL/2010 DATED 29.04.2011. IN THAT CASE ALSO, THE ISSUE INVOLVED WAS WITH REGARD TO ALLOWABILITY OF DEDUCTION U/S 80 -IB IN RESPECT OF EXCISE DUTY REFUND OF RS.5,68,41,800/- RECEIVED BY THE ASS ESSEE. THE TRIBUNAL HAS DULY CONSIDERED THIS JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF LIBERTY INDIA (SUPRA) AND THE TRIBUNAL HAS ALSO CONSIDERED ANOTHER JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF CIT VS DHARAM PAL PREM CHAND LTD. AS REPORTED IN 317 ITR 3 53 AND THEREAFTER, IT WAS HELD BY THE TRIBUNAL THAT THE ASSESSEE IS EL IGIBLE FOR DEDUCTION U/S 80-IB IN RESPECT OF REFUND OF EXCISE DUTY BECAUSE T HE RULES CLEARLY ENVISAGE REFUND OF AMOUNT ARITHMETICALLY EQUAL TO E XCISE DUTY PAID. IT WAS HELD BY THE TRIBUNAL IN THAT CASE THAT THERE IS DISTINCTION OF FACTS AS COMPARED TO THE FACTS IN THE CASE OF LIBERTY INDIA (SUPRA) BECAUSE AS PER THE FACTS IN THE CASE OF LIBERTY INDIA (SUPRA), THE ISSUE WAS NOT CONCERNED WITH THE REFUND OF AMOUNT PAID. WE HAVE SEEN THAT IN THE PRESENT CASE, THE ASSESSEE IS GETTING REFUND OF CUSTOM DUTY PAID BY THE ASSESSEE IN THE I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 30 FORM OF DUTY DRAWBACK AND THE DUTY DRAWBACK RELIEF ARE OF TWO TYPES. THE FIRST CATEGORY OF DUTY DRAWBACK IS AS PER ALL I NDIA RATES WHERE THE DUTY DRAWBACK HAS NO CORRELATION WITH THE ACTUAL DU TY PAID BY THE ASSESSEE AND UNDER THESE FACTS, IT WAS HELD BY THE HONBLE APEX COURT IN THE CASE OF LIBERTY INDIA (SUPRA) THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S 80-IB WITH REGARD TO DUTY DRAWBACK. AS PER THE SAME, DUTY DRAWBACK HAS NO ARITHMETICAL CORRELATION WITH ACTUA L DUTY PAID BY THE ASSESSEE BUT IN THE PRESENT CASE ACTUAL DUTY PAID I S REFUNDED AS DUTY DRAWBACK AND HENCE, THE FACTS OF THE PRESENT CASE A RE DISTINCT THAN THE FACTS IN THE CASE OF LIBERTY INDIA (SUPRA) AND, THE REFORE, THIS JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF LIBERTY INDIA (SUPRA) CANNOT BE APPLIED IN THE PRESENT CASE BECAUSE WE HAVE SEEN THAT FACTUALLY, ALL DUTY DRAWBACK RECEIVED BY THE ASSESSEE IS ALMOST AR ITHMETICALLY EQUAL TO THE DUTY PAID BY THE ASSESSEE WHEREIN SOME AMOUNT F OR WHICH DRAWBACK WAS NOT ALLOWED IS ON THIS BASIS THAT THE SAME IS R ELATABLE TO RECOVERABLE WASTAGE. UNDER THESE FACTS, IT IS ESTABLISHED BY T HE ASSESSEE THAT THE DUTY DRAWBACK RECEIVED BY THE ASSESSEE IS ARITHMETICALLY EQUAL TO THE DUTY PAID BY THE ASSESSEE AND, THEREFORE, IN THE FACTS OF THE PRESENT CASE, WE ARE OF THE CONSIDERED OPINION THAT DUTY DRAWBACK IN THE PR ESENT CASE IS NOTHING BUT REFUND OF DUTY PAID BY THE ASSESSEE AND, THEREF ORE, RESPECTFULLY FOLLOWING THE TRIBUNAL DECISION RENDERED IN THE CAS E OF J K ALUMINIUM CO. (SUPRA), WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND HOLD THAT IN THE FACTS OF THE PRESENT CASE, DUTY DRAWBACK RECEIV ED BY THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80-IB. THIS GROUND OF T HE ASSESSEE IS ALLOWED. 6. THE NEXT ISSUE IS REGARDING ALLOWABILITY OF DEDU CTION IN RESPECT OF EMPLOYEES CONTRIBUTION TO PF & ESI. THIS ISSUE IS RAISED BY THE REVENUE AS PER GROUND NO.6 AND ALSO BY THE ASSESSEE AS PER GROUND NO.7. IT WAS SUBMITTED BY THE LD. A.R. THAT THIS ISSUE IS NOW CO VERED IN FAVOUR OF THE I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 31 ASSESSEE BY THE TRIBUNAL DECISION RENDERED IN THE C ASE OF SHRI OM SINGH VS ITO IN I.T.A.NO. 1908/A/AHD/2009 DATED 18.09.200 9. RESPECTFULLY FOLLOWING THIS TRIBUNAL DECISION, WE DECIDE THIS IS SUE IN FAVOUR OF THE ASSESSEE AND ACCORDINGLY GROUND NO.6 OF THE REVENUE S APPEAL IS REJECTED AND GROUND NO.7 OF THE ASSESSEE IS ALLOWED BECAUSE THE ENTIRE AMOUNT WAS PAID PRIOR TO THE DUE DATE OF FILING OF RETURN OF INCOME. 7. THE NEXT ISSUE IS RAISED BY THE ASSESSEE AS PER GROUND NO.5 & 6 REGARDING SET OFF OF LOSS OF RS.468.34 LACS OF DHUN ETA UNIT AGAINST PROFITS OF OTHER ELIGIBLE UNITS. THESE GROUNDS WERE NOT PR ESSED BY THE ASSESSEE AND ACCORDINGLY REJECTED AS NOT PRESSED. 8. THE REMAINING GROUNDS I.E. GROUND NO.7 & 8 OF TH E REVENUES APPEAL AND GROUNDS NO.8 -10 OF THE ASSESSEES APPEA L ARE GENERAL AND DO NOT CALL FOR ANY ADJUDICATION. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. 10. NOW, WE TAKE UP THE APPEALS FOR ASSESSMENT YEAR 2006-07. 11. GROUND NO.1 OF THE REVENUES APPEAL IS REGARDIN G DELETION OF DISALLOWANCE OF RS.23,24,72,100/- ON ACCOUNT OF SAL ES COMMISSION PAID U/S 37 OF THE INCOME TAX ACT, 1961. BOTH THE SIDES AGREED THAT THIS ISSUE IS IDENTICAL TO GROUND NO.1 OF THE REVENUES APPEAL IN ASSESSMENT YEAR 2005-06 AND THE SAME CAN BE DECIDED ON SIMILAR LINE S. IN ASSESSMENT YEAR 2005-06, THIS ISSUE WAS DECIDED BY US IN FAVOUR OF THE ASSESSEE AND ACCORDINGLY IN THE PRESENT YEAR ALSO, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. GROUND NO.1 OF THE REVENUES APPEAL IS R EJECTED. 12. THE NEXT ISSUE IS REGARDING DISALLOWANCE MADE B Y THE A.O. U/S 14A OUT OF WHICH LD. CIT(A) HAS DELETED DISALLOWANCE OF RS.1,23,21,379/- ON ACCOUNT OF INTEREST EXPENSES BUT CONFIRMED THE DISA LLOWANCE PARTLY IN RESPECT OF DIRECTORS REMUNERATION, DIRECTORS FEES AND TRAVELING I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 32 EXPENDITURE TOWARDS EARNING OF DIVIDEND INCOME. RE GARDING THIS ISSUE ALSO, BOTH THE SIDES AGREED THAT THIS ISSUE IS IDEN TICAL TO GROUNDS NO.2 &3 OF THE REVENUES APPEAL AND GROUND NO.2 OF THE ASSE SSEES APPEAL IN ASSESSMENT YEAR 2005-06. IN THAT YEAR ALSO, THE GR OUND OF REVENUE AS WELL AS GROUND OF THE ASSESSEE WERE REJECTED. ACCORDING LY, IN THIS YEAR ALSO, GROUND NO.2 OF THE REVENUE AS WELL AS GROUND N.1 OF THE ASSESSEES APPEAL ARE REJECTED. 13. THE NEXT ISSUE IS REGARDING ALLOWABILITY OF DED UCTION U/S 43B OF RS.7,12,618/- IN RESPECT OF EMPLOYEES CONTRIBUTION TO PF & ESI. BOTH THE SIDES AGREED THAT IN THIS YEAR ALSO, THE ENTIRE AMO UNT WAS PAID PRIOR TO THE DUE DATE OF FILING OF RETURN OF INCOME AND HENCE, T HIS ISSUE IS IDENTICAL TO GROUND NO.6 OF THE REVENUES APPEAL IN ASSESSMENT Y EAR 2005-06. IN THAT YEAR, THIS ISSUE WAS DECIDED BY US IN FAVOUR OF THE ASSESSEE. ACCORDINGLY IN THE PRESENT YEAR ALSO, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. GROUND NO.3 OF THE REVENUE IS ALSO REJECTED. 14. THE NEXT ISSUE IS REGARDING THE ACTION OF THE A .O. IN NOT REDUCING THE CONDITIONAL ADDITIONAL AMOUNT OF RS.20 CRORES A DDED IN COMPUTATION OF INCOME TO COVER ANY ERROR, OMISSION ETC. THE SA ME IS AS PER GROUND NO.2 AND 3 OF THE ASSESSEES APPEAL WHEREAS REVENUE HAS RAISED THIS ISSUE AS PER GROUND NO.4 BECAUSE LD. CIT(A) HAS DIRECTED THE A.O. TO ALLOW DEDUCTION U/S 80-IB OF THE INCOME TAX ACT, 1961 OF RS.19,16,20,416/- OUT OF ADDITIONAL UNDISCLOSED INCOME OF RS.20 CRORES DU RING THE SURVEY U/S 133A OF THE INCOME TAX ACT, 1961. 15. REGARDING ASSESSEES GROUND NO.2 & 3, IT WAS SU BMITTED BY THE LD. A.R. THAT THIS ISSUE IS DIRECTLY AND SQUARELY COVER ED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION IN GROUP CASE IN I.T.A.NO. 3761- 3762/AHD/2008, I.T.A.NO. 1368 AND 1629/AHD/2008 AND HE SUBMITTED COPIES OF BOTH THESE TRIBUNAL DECISIONS. THE RELEV ANT PARA 15 OF THIS I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 33 TRIBUNAL DECISION RENDERED IN THE CASE OF SUZLON IN FRA STRUCTURE VS ACIT IN IT 3761-3762/AHD/2008 IS REPRODUCED BELOW: 15. IN VIEW OF THE ABOVE FACTS AND CASE LAWS REFER RED BY BOTH THE SIDES AND DISCUSSED ABOVE, WE FIND THAT THE ASSESSE E- COMPANY WAS SUBJECTED TO SURVEY ACTION U/S 133A OF THE ACT ON 0 5.04.2006 AND DURING THE COURSE OF SURVEY ACTION, THE DEPARTMENT FOUND MANY DOCUMENTS, BOOKS OF ACCOUNT, RECORDS ON ELECTRONIC MEDIA AND OTHER MATERIALS, WHICH WERE IMPOUNDED. THERE WAS N OT A SINGLE PIECE OF INCRIMINATING PAPER OR DOCUMENT OR EVIDENC E OF ANY NATURE WERE FOUND, WHICH SUGGESTS THAT UNACCOUNTED/UNDISCL OSED INCOME REMAINS HIDDEN OR NOT LIKELY TO BE DISCLOSED TO THE DEPARTMENT. THE ASSESSEE DISCLOSED ADDITIONAL INCOME OF RS.7 CR ORES WITH THE CONDITION THAT THE ASSESSEE DONT WANT TO ENGAGE IN LONG DRAWN PROTECTED LITIGATION AND WANT TO BUY MENTAL PEACE A ND TO MAINTAIN CORDIAL RELATION WITH THE DEPARTMENT AND ALSO TO CO VER ANY LIKELY ERRORS, OMISSIONS, DISALLOWANCES, CLAIMS ETC. EVEN THE A.O. COULD NOT FIND OUT ANY DISCREPANCY IN THE IMPOUNDED BOOKS OF ACCOUNT, LOOSE PAPER, DOCUMENTS, REGISTERS, RECORDS ON ELECT RONIC MEDIA SUCH S CD, HARD DISK, FLOPPY DISK ETC. THE A.O. HAS ACC EPTED THE VOLUNTARY DISCLOSURE WITHOUT POINTING OUT ANY MISTA KE IN THE IMPOUNDED DOCUMENTS. SPECIFICALLY THERE IS NO INCO ME FOR WHICH THE ASSESSEE HAS MADE VOLUNTARY DISCLOSURE AND THE DEPARTMENT ALSO COULD NOT POINT OUT ANY DISCREPANCY IN THE BOOKS OF ACCOUNT AND THE IMPOUNDED MATERIALS. THE VOLUNTARY DISCLOSURE WAS MADE DURING THE COURSE OF POSTS SURVEY PROCEEDINGS, WHEN THE ASSESSEE COMPANY FILED LETTERS DATED 21.06.2006 AND 19.06.20 06, EVEN THOUGH THE ASSESSEE WAS NOT SUPPLIED THE COPIES OF IMPOUNDED MATERIALS TILL THE FINALIZATION OF ASSESSMENT. EVE N THE ASSESSEE VIDE LETTER DATED 12.12.2006 REQUIRED THE DEPARTMENT TO PROVIDE PHOTO COPIES OF IMPOUNDED MATERIALS BUT THE IMPOUNDED MAT ERIAL WAS NOT SUPPLIED AND DISCLOSURE WAS TAKEN FROM THE ASSESSEE COMPANY. FROM THE ASSESSMENT ORDER IT IS VERY CLEAR THAT THE VERY BASIS OF ACCEPTANCE OF DISCLOSURE WAS THAT THE ASSESSEE HAS MADE DISCLOSURE VIDE LETTER DATED 19 TH JUNE AND 21 ST JUNE, 2006 AND PAID TAXES ACCORDINGLY. THERE IS NO DISCUSSION IN THE ASSESSM ENT ORDER ABOUT THE INCRIMINATING MATERIALS FOUND AND IMPOUNDED DUR ING THE COURSE OF SURVEY WHICH INDICATE THAT THERE IS UNDISCLOSED OR UNACCOUNTED INCOME EMERGING OUT OF THE SAME. IN THE ABSENCE OF THE SAME, THE ASSESSEE HAS SPECIFICALLY RETRACTED THE VOLUNTARY D ISCLOSURE DURING THE COURSE OF ASSESSMENT PROCEEDINGS VIDE LETTER DA TED 29 TH FEBRUARY AND 17 TH MARCH, 2008. THE HONBLE APEX COURT IN THE I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 34 CASE OF SHELLY PRODUCTS (SUPRA) HAS VERY CATEGORICA LLY RECORDED A FINDING THAT SIMILARLY, IF HE HAS BY MISTAKE OR INA DVERTENCE OR ON ACCOUNT OF IGNORANCE, INCLUDED IN HIS INCOME ANY AM OUNT WHICH IS EXEMPTED FORM PAYMENT OF INCOME TAX, OR IS NOT INCO ME WITHIN THE CONTEMPLATION OF LAW, HE MAY LIKEWISE BRING THIS TO THE NOTICE OF THE ASSESSING AUTHORITY, WHICH IF SATISFIED, MAY GR ANT HIM RELIEF AND REFUND THE TAX PAID IN EXCESS, IF ANY. SUCH MATTER S CAN BE BROUGHT TO THE NOTICE OF THE CONCERNED AUTHORITY IN A CASE WHEN REFUND IS UNDER AND PAYABLE AND THE AUTHORITY CONCERNED ON BE ING SATISFIED, SHALL GRANT APPROPRIATE RELIEF. IN THE PRESENT CAS E ALSO, THE ASSESSEE HAS SPECIFICALLY REQUIRED THE A.O. AND THE CIT(A), DURING THE COURSE OF PROCEEDINGS BEFORE THE RESPECTIVE AUTHORI TIES, THAT THERE IS NO UNACCOUNTED OR UNDISCLOSED INCOME FOUND DURING T HE COURSE OF SURVEY OR FROM THE IMPOUNDED MATERIAL AND THE SURRE NDER WAS SUBJECT TO THE CONDITION THAT THE DISCLOSURE IS MAD E TO COVER ANY ERRORS, OMISSIONS, DISCREPANCY THAT MAY BE FOUND IN ANY MANNER BASED ON ANY ENTRIES, NOTES, SCRIBBLING, NOTINGS ET C. IN THE BOOKS OF ACCOUNT, OTHER DOCUMENTS, LOOSE PAPERS, TRANSACTION S ETC., FORMING PART OF IMPOUNDED MATERIALS OR IDENTIFIED FROM ANY OTHER SOURCE, RECORDS ETC., IN THE HANDS OF THE COMPANY OR ANY OT HER ASSOCIATED CONCERN/PERSON ETC. THE ASSESSEE HAS VERY CATEGORI CALLY MADE THESE DISCLOSURES VIDE LETTER DATED 19 TH JUNE, 2006 STATING THAT THE ABOVE DISCLOSURE MAY KINDLY BE CONSIDERED ON LOGICA L AND JUDICIAL INTERPRETATION OF THE DEFINITION OF INCOME UNDER TH E ACT AND AS PER THE NORMALLY ACCEPTED, INTERPRETED, IMPLEMENTED AND UNDERSTOOD PRINCIPALS OF INCOME IN COMMERCIAL PARLANCE AS ALSO BASED ON THE JUDICIAL PRONOUNCEMENTS OF VARIOUS AUTHORITIES ON T HE SUBJECT MATTER. IT MAY BE CLARIFIED THAT THE ABOVE REFERRE D DISCLOSURE IS MADE THAT THE ABOVE REFERRED DISCLOSURE IS MADE WIT H THE CONDITION THAT NO PENALTY PROCEEDINGS SHALL BE INITIATED. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, NOW IT IS TO BE DISCUSSED, WHETHER THE ADMISSION MADE BY THE ASSESSEE COMPANY IN THE GIVEN FACTS AND CIRCUMSTANCES, BINDS THE ASSESSEE OR NOT. WE FIND THAT THE HONBLE APEX COURT HAS OCCASIONED TO DEAL WITH THE ISSUE OF ADMISSION IN THE CASE OF CHIKKAM KOTESWARA RAO V. CHIKKAM SUBETA N AIR (1971) (S.C.) 1542, WHEREIN THE HONBLE APEX COURT HAS STATED THAT AN ADMISSION, HOWEVER, BIND THE PERSON MAKING IT ONLY IN SO FAR AS FACTS ARE CONCERNED BUT AN ADMISSION IS NOT THE CONCLUSIVE PROOF OF THE MATTER ADMITTED, THOUGH IT MAY, IN CER TAIN CIRCUMSTANCES, OPERATE AS ESTOPPEL. BUT IN SUCH CA SES, THERE SHOULD BE NO DOUBT OR AMBIGUITY ABOUT THE ALLEGED ADMISSIO N. HOWEVER, AN ADMISSION OR ACQUIESCENCE ON THE PART OF THE ASS ESSEE CANNOT BE I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 35 THE FOUNDATION OF ASSESSMENT WHERE THE INCOME IS RE TURNED UNDER AN ERRONEOUS IMPRESSION OR MISCONCEPTION OF LAW. I IS ALWAYS OPEN TO THE ASSESSEE TO DEMONSTRATE AND SATISFIED THE AU THORITY CONCERN THAT A PARTICULAR INCOME WAS NOT TAXABLE IN HIS HAN D AND THAT IT WAS RETURNED UNDER ERRONEOUS IMPRESSION IN THE PRESENT CASE BEFORE US, THE ASSESSEE HAS PROVED THAT THE DISCLOSURE MADE WA S NEITHER THE UNDISCLOSED/UNACCOUNTED INCOME OF THE ASSESSEE COMP ANY AND EVEN NOT A SINGLE PIECE OF INCRIMINATING PAPER OR D OCUMENT OR EVIDENCE OF ANY NATURE WERE FOUND FORM THE IMPOUNDE D MATERIALS. EVEN THE A.O. HAS MADE ADDITION JUST ON THE BASIS S TATEMENT RECORDED DURING THE POST SURVEY PROCEEDINGS U/S 133 A OF THE ACT. THERE IS NO IOTA OF EVIDENCE, WHICH SUGGEST THAT TH ERE IS UNACCOUNTED/UNDISCLOSED INCOME EMERGING TOUT OF THE INCRIMINATING DOCUMENTS IMPOUNDED DURING THE COURSE OF SURVEY. THERE IS NOTHING ON RECORD WHICH COULD CO-RELATE SU CH ADDITIONAL INCOME/DISCLOSURE OFFERED BY THE ASSESSEE COMPANY D URING THE COURSE OF SURVEY WITH ANY OTHER DISCREPANCY. ON THE SE FACTS AND CIRCUMSTANCES, WE ALLOW THE CLAIM OF THE ASSESSEE. 16. FROM THE DECISION IN THE CASE OF SUZLON INFRAST RUCTURE (SUPRA), WE FIND THAT IN THAT CASE ALSO, THE ISSUE WAS REGARDIN G THE REDUCING OF CONDITIONAL ADDITIONAL AMOUNT OF R.700 LACS ADDED I N THE COMPUTATION OF INCOME TO COVER ANY ERROR, OMISSION, DISCREPANCY ET C. MADE IN REFERENCE TO THE ALL INDIA SURVEY ACTION. HENCE, IT IS SEEN THAT THE FACTS IN THE PRESENT CASE ARE IDENTICAL AND, THEREFORE, BY RESPE CTFULLY FOLLOWING THIS TRIBUNAL DECISION, WE HOLD THAT IN THE PRESENT CASE ALSO, THE ADDITIONAL DECLARATION MADE BY THE ASSESSEE CANNOT BE ADDED TO THE TOTAL INCOME BECAUSE IN THE PRESENT CASE ALSO, THERE IS NO IOTA OF EVIDENCE WHICH SUGGESTS THAT THERE IS UNACCOUNTED OR UNDISCLOSED I NCOME EMERGING OUT OF INCRIMINATING DOCUMENTS IMPOUNDED DURING THE COURSE OF SURVEY AND THE ADDITION WAS MADE BY THE A.O. SOLELY ON THE BASIS O F THE STATEMENT IN THE COURSE OF SURVEY AS IN THAT CASE. ACCORDINGLY, GRO UNDS NO.2 & 3 OF THE ASSESSEES APPEAL ARE ALLOWED. I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 36 17. REGARDING THE NEXT GROUND NO.4 OF THE REVENUES APPEAL, WE FEEL THAT THIS HAS BECOME INFRUCTUOUS BECAUSE SINCE NO A DDITION IS MADE IN RESPECT OF ADDITIONAL AMOUNT OF RS.20 CRORES, ON AC COUNT OF CONDITIONAL DISCLOSURE, THERE IS NO GROUND TO ALLOW ANY ADDITIO NAL DEDUCTION U/S 80-IB OF THE INCOME TAX ACT, 1961. GROUND NO.4 OF THE RE VENUES APPEAL IS ALLOWED. 18. THE NEXT ISSUE IS REGARDING ALLOWABILITY OF DED UCTION U/S 80-IB IN RESPECT OF INTEREST ON FDR AND ICD. THIS ISSUE HAS BEEN RAISED BY THE ASSESSEE AS PER GROUND NO.4 AND ALTERNATIVE CLAIM I S RAISED AS GROUND NO.5 AS PER WHICH CLAIM IS THAT ONLY NET INTEREST CAN BE REDUCED FORM THE PROFITS OF BUSINESS. 19. BOTH THE SIDES AGREED THAT THESE GROUNDS ARE ID ENTICAL TO GROUNDS NO.3 & 4 OF THE ASSESSEES APPEAL IN ASSESSMENT YEA R 2005-06 AND THE SAME CAN BE DECIDED ON SIMILAR LINES. IN THAT YEAR , WE HAVE REJECTED THE GROUND NO.3 OF THE ASSESSEES APPEAL BY HOLDING THA T DEDUCTION U/S 80-IB IS NOT ALLOWABLE IN RESPECT OF INTEREST INCOME BUT ONLY NET INTEREST INCOME HAS TO BE REDUCED FORM BUSINESS PROFIT. ACCORDINGL Y, IN THE PRESENT YEAR ALSO, WE REJECT GROUND NO.4 OF THE ASSESSEE AND REG ARDING GROUND NO.5, WE HOLD THAT ONLY NET INTEREST INCOME HAS TO BE RED UCED FORM PROFITS OF BUSINESS FOR THE PURPOSE OF COMPUTATION OF DEDUCTIO N ALLOWABLE TO THE ASSESSEE U/S 80-IB OF THE INCOME TAX ACT, 1961. WE ALSO DIRECT THE A.O. THAT WHILE COMPUTING NET INTEREST INCOME, ONLY THOS E EXPENSES SHOULD BE CONSIDERED WHICH ARE INCURRED FOR EARNING INTEREST INCOME. GROUND NO.5 OF THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 20. GROUND NO.5 OF THE REVENUES APPEAL IS REGARDIN G ALLOWABILITY OF DEDUCTION U/S 80-IB IN RESPECT OF DUTY DRAWBACK REC EIVED BY THE ASSESSEE OF RS.15,48,64,977/-. BOTH THE SIDES AGREED THAT T HIS ISSUE IS IDENTICAL TO GROUND NO.5 OF THE REVENUES APPEAL IN ASSESSMENT Y EAR 2005-06 AND THE I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 37 SAME CAN BE DECIDED ON SIMILAR LINES. IN THAT YEAR, THIS ISSUE WAS DECIDED BY US IN FAVOUR OF THE ASSESSEE AND ACCORDINGLY IN THE PRESENT YEAR ALSO, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. G ROUND NO.5 OF THE REVENUES APPEAL IS REJECTED. 21. GROUND NO.6 OF THE REVENUES APPEAL IS REGARDIN G SET OFF OF LOSS OF RS.4,68,34,166/- OF DHUNETA UNIT AGAINST THE PROFIT S OF OTHER ELIGIBLE UNITS. IT IS SUBMITTED BY THE LD. A.R. THAT THIS IS SUE WAS RAISED BY THE ASSESSEE IN ASSESSMENT YEAR 2005-06 ALSO AS PER GRO UND NO.5 & 6 REGARDING SET OFF OF THE SAME LOSS. IT IS SUBMITTE D THAT IN THAT YEAR, THIS GROUND WAS NOT PRESSED BY THE ASSESSEE AND, THEREFO RE, THE LOSS WAS SET OFF IN THAT YEAR AND HENCE, THERE IS NO QUESTION OF ANY FURTHER SET OFF IN THE PRESENT YEAR. 22. LD. D.R. SUPPORTED THE ORDERS OF AUTHORITIES BE LOW. 23. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT THE AMOUNT OF LOSS FOR WHICH SET OFF IS IN DIS PUTE IS THE SAME IN ASSESSMENT YEAR 2005-06 AND ASSESSMENT YEAR 2006-07 . IN ASSESSMENT YEAR 2005-06, THIS GROUND WAS NOT PRESSED BY THE LD . A.R. AND ACCORDINGLY REJECTED AS NOT PRESSED. HENCE, THE LO SS OF DHUNETA UNIT STANDS SET OFF AGAINST PROFIT OF OTHER ELIGIBLE UNI TS IN THAT YEAR AND THEREFORE, THERE IS NO QUESTION OF FURTHER SET OFF IN THE PRESENT YEAR IF THE ENTIRE AMOUNT OF LOSS IS SET OFF IN THAT YEAR. THI S IS NOT COMING OUT FORM THE RECORD AS TO WHAT WAS THE ACTUAL AMOUNT OF LOSS OF DHUNETA UNIT AND HOW MUCH OUT OF THIS WAS SET OFF IN ASSESSMENT YEAR 2005-06. HENCE, WE SET ASIDE THE ORDER OF LD. CIT(A) ON THIS ISSUE AND RESTORE THE MATTER BACK TO THE FILE OF THE A.O. FOR A FRESH DECISION. THE A.O. SHOULD FIND OUT WHAT WAS THE ACTUAL AMOUNT OF BROUGHT FORWARD LOSS OF DH UNETA UNIT IN ASSESSMENT YEAR 2005-06 AND HOW MUCH LOSS OUT OF TH IS WAS SET OFF IN THAT I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 38 YEAR AND IF THERE IS ANY BROUGHT FORWARD LOSS REMAI NING THEREAFTER, ONLY SUCH LOSS CAN BE SET OFF IN THE PRESENT YEAR AGAINS T THE PROFITS OF OTHER ELIGIBLE UNITS BUT IF THE ENTIRE AMOUNT OF SUCH BRO UGHT FORWARD LOSS WAS SET OFF IN ASSESSMENT YEAR 2005-06 THEN NO FURTHER SET OFF OF LOSS CAN BE MADE IN THE PRESENT YEAR. THIS GROUND OF THE REVEN UES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 24. REMAINING GROUNDS NO.7 & 8 OF THE REVENUES APP EAL AND GROUNDS NO.6, 7 & 8 OF ASSESSEES APPEAL ARE GENERAL FOR WH ICH NO ADJUDICATION IS CALLED FOR. 25. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PROPOSES WHEREAS APPEAL OF THE ASSESSEE IS PARTLY A LLOWED. 26. IN THE COMBINED RESULT, APPEAL OF THE REVENUE I N ASSESSMENT YEAR 2005-06 IS DISMISSED AND FOR ASSESSMENT YEAR 2006-0 7 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND BOTH THE APPEALS OF TH E ASSESSEE ARE PARTLY ALLOWED. 27. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD./- SD./- (KUL BHARAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD 1. DATE OF DICTATION 19.09.12 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 20.09.12.OTHER MEMBER I.T.A.NO.3911,4358AHD/2007 I.T.A.NO.1367,1677 /AHD/208 39 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 21/09/2012 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.21/9 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 21/09/2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. .