PERSTORP CHEMICALS INDIA P.LTD, NAVI MUMBAI V. ITO 10(2)(2), MUMBAI

ITA 4364/MUM/2012

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1026 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Next Hearing Date: 06-04-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 26-06-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V JENARDHANAN
• Keywords: Depreciation; Transfer pricing; International transaction; Question of law; Fair market value; Unabsorbed depreciation; Revenue expenditure; Capital expenditure
• Section: 80HHC; 115JB; 10B; 10; 92

Judgement Text

, , , , INCOME-TAX APPELLATE TRIBUNAL KBENCH M UMBAI , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBE R & RAVISH SOOD, JUDICIAL MEMBER ./I.T.A./4364/MUM/2012, /ASSESSMENT YEAR: 2007-08 ./I.T.A./2195/MUM/2015, /ASSESSMENT YEAR: 2008-09 ./I.T.A./2196/MUM/2015, /ASSESSMENT YEAR: 2009-10 PERSTORP CHEMICALS INDIA PVT.LTD. 501, 5 TH FLOOR, KESAR SOLITAIRE PLOT NO.5, SECTOR-19, SANPADA NAVI MUMBAI-400 705. PAN:AAACP 9450 G VS. INCOME TAX OFFICER-10(2)(2) 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: S/SHRI V. JENARDHANAN -DR ASSESSEE BY: SHRI MAYUR KISNADWALA / DATE OF HEARING: 11/10/2017 / DATE OF PRONOUNCEMENT: 03/01/2018 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) , / PER RAJENDRA,AM - CHALLENGING THE ORDER OF THE CIT(A)-15,CIT(A)-57 MU MBAI THE ASSESSEE HAS FILED THE APPEAL FOR THE ABOVE MENTIONED ASSESSMENT YEARS. (A.Y.S).A SSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF SPECIALITY CHEMICALS USED IN VARIO US PRODUCTS,INCLUDING THE PAINTS INDUSTRY. THE DETAILS OF FILING OF INCOME,ASSESSED INCOME,DAT E OF CIT(A) ORDER ETC. ARE TABULATED BELOW:- A.Y. ROI FILED ON RETURNED INCOME ASST. DT. ASSESSE D INCOME CIT(A)ORDER DT. 07-08 15/11/07 NIL 24/02/2011 NIL 12/03/2012 08-09 27/09/09 NIL 27/01/2015 RS.24,70,100/- 28/01/ 2015 09-10 30/9/09 (-) RS.24.20CRORE 03/05/2013 (-)23.91 CRORES 29/01/2015 DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESSEE HAD ENTERED INTO INTER - NATIONAL TRANSACTIONS(IT.S)WITH ITS ASSOCIATED ENTE RPRISES(AE).HE MADE A REFERENCE TO THE TRANSFER PRICING OFFICER(TPO)TO DETERMINE THE ARMS -LENGTH-PRICE(ALP)OF THE IT.S.AFTER RECEIVING THE ORDER OF THE TPO,HE MADE AN ADJUSTMEN T OF RS.56,26,647/- TO THE INCOME OF THE ASSESSEE. ITA/4364/MUM/2012,AY.2007-08: 2. FIRST GROUND OF APPEAL IS ABOUT CONFIRMING AN UPWAR D ADJUSTMENT OF RS.56.26 LAKHS U/S. 92 CA(3)OF THE ACT.DURING THE TP PROCEEDINGS THE TPO F OUND THAT THE ASSESSEE HAD BENCH - MARKED THE IT.S BY USING CUP METHOD FOR IMPORT,THA T IT HAD PURCHASED PENTA (RS.21.10 CRORES),SODIUM FORMATE(RS.1.55 CRORES)AND POLYOL AC ID(RS.49.88 LAKHS).AS THE ASSESSEE DID NOT FILE DETAILS OF CUP RELATING TO PURCHASE OF POL YOL-ACID,SO HE DIRECTED IT TO FURNISH 4364/M/12;2195/M/15 &2196/M/15 PERSTORP CHEMICALS INDIA PVT.LTD. 2 NECESSARY DETAILS.AS PER THE TPO TILL THE PASSING O F ORDER THE ASSESSEE DID NOT FILE REQUISITE INFORMATION.SO,HE PROPOSED DOWNWARD ADJUSTMENT @25% AS UNDER :- (AMOUNT IN RS.) COST OF RAW MATERIAL 49,88,296 25% DOWNWARD ADJUSTMENT 12,47,074 ALP COST OF RAW MATERIAL 37,41,222 105% COST OF RAW MATERIAL 39,28,283 HE FURTHER FOUND THAT THE ASSESSEE HAD PURCHASED TRADING GOODS WORTH RS.23.61 CRORES FORM ITS AE,THAT IT HAD USED CUP METHOD FOR BENCHMARKING THE IT.S NAMELY,NEO (RS.6.23 CRORES), TMP(RS.1.53 CRORES),ETHYLE(RS.13.36 LAKHS),NEXCOAT( RS.21.22 LAKHS) AND POLYOL PX (RS.43. 16 LAKHS).AS PER THE TPO,THE ASSESSEE DID NOT FILE DETAILS OF CUP RELATING TO THE LAST ITEM I.E. POLYOL PX. HE PROPOSED A 25% DOWNWARD ADJUSTMENT OF RS.10.79 LAKHS AS UNDER :- (AMOUNT IN RS.) COST OF RAW MATERIAL 43,16,828 25% DOWNWARD ADJUSTMENT 10,79,207 ALP COST OF RAW MATERIAL 32,37,621 105% COST OF RAW MATERIAL 33,99,502 THE TPO FURTHER OBSERVED THAT THE ASSESSEE HAD NOT FURNISHED CUP RELATED INFORMATION ABOUT CREOSOTE-RS.6.34 LAKHS.HE SUGGESTED A 25% DOWNWARD ADJUSTMENT(RS.1.58LAKHS)OF CREOSOTE ALSO. HE ALSO NOTICED THAT THE ASSESSEE HAD SOLD DI PENTA OF RS.74.03 LAKHS. FOR FAILURE OF FURNISHING OF CUP DETAILS ABOUT THE ITEM THE TPO SU GGESTED AN UPWARD ADJUSTMENT OF RS.18.50 LAKHS.HE ALSO OBSERVED THAT ASSESSEE HAD C LAIMED RESEARCH AND DEVELOPMENT INCOME OF RS.1.29 CRORES,THAT IT HAD CHARGED A MARKUP OF 1 0% ON COST AND HAD ADOPTED THE COST PLUS METHOD FOR DETERMINING THE ALP OF THE IT. IT WAS SU BMITTED BEFORE HIM THAT ARMS-LENGTH RESULT WERE 9.62%,THAT THE TRANSACTION REPRESENTED FAIR MARKET VALUE.HOWEVER THE TPO DID NOT AGREE WITH THE SUBMISSIONS MADE WITH THE ASSESS EE.HE ADOPTED THE FOLLOWING COMPARABLES UNDER THE HEAD RESEARCH & DEVELOPMENT SEGMENT:- SN. NAME OF THE COMPANY DATA SOURCE RETURN ON TOTA L COSTS 1. ALPHAGEO(INDIA) LIMITED P 30.31% 2. CHOKSI LABORATORIES LIMITED P 32.00% 3. DOLPHIN MEDICAL SERVICES LIMITED P 13.89% 4. MEDINOVA DIAGNOSTIC SERVICES LIMITED P 3.87% 5. N.G. INDUSTRIES LIMITED P 31.01% 6. PFIZER LIMITED-SERVICES SEGMENT SEG-P 3.00% 7. TRANSGENE BIOTEK LIMITED-DIAGNOSTIC SEG-P -0.03% 8. IDC (INDIA) LTD. P 15.89% 9. MINDTREE LTD. SEG-P 14.90% 10. VIMTA LABS LTD. C 27.44% 11. CELESTIAL LABS LTD. P/C 58.35% MEAN 20.97% 4364/M/12;2195/M/15 &2196/M/15 PERSTORP CHEMICALS INDIA PVT.LTD. 3 AS A RESULT,HE RECOMMENDED AN ADJUSTMENT OF RS.12.9 0 LAKHS.IN SHORT,ADJUSTMENT OF RS.56.26 LAKHS WAS MADE UNDER FOUR HEADS NAMELY RAW MATERIA L PURCHASES(RS.12.47 LAKHS),TRADING MATERIAL PURCHASE(RS.12.37 LAKHS),TRADING MATERIAL SALE(RS.18.50 LAKHS AND R&D INCOME- (RS.12.90 LAKHS).AFTER RECEIVING THE ORDER OF THE T PO,THE AO MADE THE AN ADDITION OF RS.56, 26,647/- TO THE INCOME OF THE ASSESSEE . 2.1. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FAA AND MADE DETAILED SUBMISSIONS.IT WAS STATED THAT COMPAR ABLES SELECTED BY THE TPO WERE NOT IN THE FIELD OF R&D.AFTER CONSIDERING THE SUBMISSION OF TP O AND FAA IT WAS HELD AS UNDER:- 5.6 IN VIEW OF THE FACTS OF THE CASE DISCUSSION HE REIN ABOVE, THE CONTENTIONS OF THE APPELLANT ARE NOT FOUND TO BE ACCEPTABLE AND ACCORDINGLY BENC HMARKIG DONE BY THE TPO BY ADOPTING A SET OF COMPARABLES WHICH ARE INTO R&D ACTIVITIES TO BENCHMARK THE APPELLANTS INTERNATIONAL TRANSACTION RELATING TO PROVISIONING OF R&D SERVICE S IS FOUND TO BE JUSTIFIABLE AND ACCORDINGLY THE GROUND OF APPEAL SO RAISED BY THE A PPELLANT IS DISMISSED. 2.2. DURING THE COURSE OF HEARING BEFORE US,THE AR STAT ED THAT THE ASSESSEE WAS NOT IN A POSITION TO CHALLENGE THE ADJUSTMENTS MADE BY TPO U NDER FIRST THREE HEADS,THAT IT HAD PICKED UP 9 COMPARABLES FOR R&D COMPONENT,THAT THE TPO HAD REJECTED ONE COMPARABLE, THAT HE ADDED FOUR NEW COMPARABLES -SL.NO.8-11 OF THE TABLE ,THAT THE CIT(A) HAD NOT CONSIDERED ANY OF THE SUBMISSIONS MADE BY THE ASSESSEE, THAT HE HA D PASSED A NON-SPEAKING AND CRYPTIC ORDER. THE DR STATED THAT MATTER COULD BE DECIDED O N MERITS. 2.3 .WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MA TERIAL BEFORE US.WE FIND THAT THE ASSESSEE HAD NOT QUESTIONED THE VALIDITY OF DOWNWA RD ADJUSTMENT MADE BY TPO UNDER THREE HEADS,THAT IT HAD OBJECTED TO UPWARD ADJUSTMENT MAD E ON ACCOUNT OF R&D, THAT THE FAA HAS NOT MENTIONED THE FACTS MADE BY THE ASSESSEE BEFORE HIM,THAT HE HAS NOT DEALT WITH ANY OF THE ARGUMENTS OF THE ASSESSEE,THAT HE HAS NOT GIVEN ANY FINDING AS TO WHY THE COMPARABLES SELECTED BY TPO SHOULD BE ACCEPTED.IN OUR OPINION, THE FAA SHOULD PASS A SPEAKING ORDER WHILE DISMISSING OR ACCEPTING THE APPEAL OF AN ASSE SSEE.AN ORDER,WITHOUT REASONS,IN OUR OPINION,IS NO ORDER.THE FAA SHOULD HAVE AT LEAST DI SCUSSED THE VALIDITY OF COMPARABLE REJECTED BY THE TPO OR INTRODUCED BY THE TPO.IT IS A FIT CASE FOR FURTHER VERIFICATION AND INVES -TIGATION.THEREFORE, IN THE INTEREST OF JUSTICE,WE RESTORE BACK THE ISSUE TO THE FILE OF THE FAA TO DETERMINE THE ALP OF R&D SEGMENT. HE IS DIRECTED TO PASS A SPEAKING AND REASONED ORD ER AFTER GIVING FULL OPPORTUNITY TO THE ASSESSEE WIT H REFERENCE TO ALL THE QUERIES OBJECT TO BY THE ASSESSEE.WE DECIDE THE ISSUE IN FAVOUR OF THE ASSES SEE,IN PART. 3. NEXT GROUND OF APPEAL IS ABOUT ADDITION MADE BY THE AO U/S. 145A OF THE ACT.DURING THE ASSESSMENT PROCEEDINGS THE AO MENTIONED THAT FOLLOW ING THE PROVISIONS OF SEC. 145A VARIOUS 4364/M/12;2195/M/15 &2196/M/15 PERSTORP CHEMICALS INDIA PVT.LTD. 4 DECISIONS AND THE CBDT CIRCULARS,AN ADDITION OF 24. 77 LAKHS HAD TO BE MADE TO THE TOTAL INCOME OF THE ASSESSEE AS THE ASSESSEE HAD NOT RECO NCILED THE MODVAT. 3.1. BEFORE THE FAA,THE ASSESSEE MADE DETAILED SUBMISSIO NS AND RELIED UPON CERTAIN CASE LAWS.HOWEVER,THE FAA CONFIRMED THE ORDER OF THE AO HOLDING THAT UNUTILIZED MODVAT CREDIT/EXCISE DUTY WAS REQUIRED TO BE INCLUDED IN T HE VALUE OF THE CLOSING STOCK. 3.2. DURING THE COURSE OF HEARING,BEFORE US,THE AR CONTE NDED THAT THE ASSESSEE WAS FOLLOWING EXCLUSIVE METHOD MODVAT PURPOSES,THAT IN THE AUDIT REPORT IT WAS SPECIFICALLY MENTIONED.HE REFERRED TO THE ORDER OF THE TRIBUNAL IN ITS OWN CA SE(ITA/6078/MUM/2011)AND STATED THAT THE ORDER OF THE FAA FOR THE YEAR UNDER CONSIDERATION W AS VERY CRYPTIC AND NON SPEAKING.THE DR STATED THAT THE MATTER COULD BE DECIDED ON MERITS. 3.3. WE FIND THAT,WHILE DECIDING THE APPEAL FOR THE AY.2 004-05,IN ASSESSEES OWN CASE,THE TRIBUNAL HAD DEALT WITH THE ISSUE AS UNDER: 13. THE FIRST ISSUE RELATES TO THE ADDITION MADE B Y THE AO U/S 145A OF THE ACT. THE ASSESSEE HAS FOLLOWED EXCLUSIVE METHOD OF ACCOUNTING FOR EXC ISE DUTY AND HENCE THE CLOSING STOCK VALUE DECLARED IN THE PROFIT AND LOSS ACCOUNT DID N OT INCLUDE THE VALUE OF EXCISE DUTY. HENCE THE AO ENHANCED THE VALUE OF CLOSING STOCK BY THE A MOUNT OF DUTY RELATED TO IT. THE LD CIT(A) ALSO CONFIRMED THE SAME, BUT GAVE A PARTIAL RELIEF WITH REGARD TO SOME COMPUTATIONAL ERROR. 14. WE HEARD THE PARTIES ON THIS ISSUE. ACCORDING T O THE ASSESSEE, IT HAS FOLLOWED EXCLUSIVE METHOD FOR ACCOUNTING THE EXCISE DUTY, WHICH MEANS THAT THE EXCISE DUTY ACCOUNT SHALL BE MAINTAINED AS A BALANCE SHEET ITEM, WHEREIN THE COL LECTION AND REMITTANCE SHALL BE ACCOUNTED FOR AND THE REMAINING BALANCE SHALL BE TAKEN TO THE BALANCE SHEET AS AN ITEM OF PAYABLE/RECEIVABLE. UNDER INCLUSIVE METHOD, THE EXC ISE DUTY SHALL BE INCLUDED IN THE VALUE OF PURCHASES, SALES AND INVENTORY AND HENCE THE SAME I S ACCOUNTED FOR THROUGH THE PROFIT AND LOSS ACCOUNT. AS PER THE ACCOUNTING PRINCIPLES, BOT H THE METHODS FOR ACCOUNTING FOR THE EXCISE DUTY COLLECTION AND REMITTANCE ARE ACCEPTED, SINCE BOTH THE METHODS SHALL NOT HAVE ANY IMPACT ON THE NET PROFIT. IT IS ONLY TWO DIFFERENT FORMS O F PREPARING THE FINANCIAL STATEMENTS. 15. HOWEVER, THE PROVISIONS OF SEC. 145A MANDATES T HAT THE VALUE OF PURCHASE AND SALE OF GOODS AND INVENTORY SHALL BE ADJUSTED TO INCLUDE TH E AMOUNT OF TAX, DUTY, CESS OR FEE ACTUALLY PAID OR INCURRED BY THE ASSESSEE TO BRING THE GOODS TO THE PLACE OF ITS LOCATION AND CONDITION AS ON THE DATE OF VALUATION. HENCE, FOR THE PURPOSE S OF INCOME TAX, AN ASSESSEE IS REQUIRED TO FOLLOW ONLY INCLUSIVE METHOD OF ACCOUNTING THE TAX, DUTY ETC. IN THE INSTANT CASE, WE NOTICE THAT THE AO HAS ADJUSTED THE VALUE OF CLOSING STOCK ONLY , TO INCLUDE THE AMOUNT OF TAX, DUTY ETC., WHERE AS THE PROVISIONS OF SEC. 145A REQUIRES THAT THE VALUE OF PURCHASES AND SALES SHOULD ALSO BE ADJUSTED TO INCLUDE THE AMOUNT OF TAX, DUTY ETC. THUS, THE ACTION OF THE AO, WHICH WAS APPROVED BY LD CIT(A), WAS NOT IN ACCORDANCE WITH T HE MANDATE OF THE PROVISIONS OF SEC. 145A OF THE ACT. COMPLIANCE OF PROVISIONS OF SEC. 1 45A IN PART ONLY, WOULD GIVE MISLEADING RESULT. ACCORDINGLY, WE ARE NOT ABLE TO APPROVE THE ORDER OF LD CIT(A) ON THIS ISSUE. 16. SINCE THE PROVISIONS OF SEC. 145A OF THE ACT HA VE NOT BEEN APPLIED IN ENTIRETY, WE ARE OF THE VIEW THAT THIS ISSUE REQUIRES FRESH EXAMINATION AT THE END OF THE AO. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND REST ORE THE SAME TO THE FILE OF THE AO WITH THE DIRECTION TO APPLY THE PROVISIONS OF SEC. 145A OF T HE ACT TO PURCHASES, SALES AND INVENTORY AND MAKE ADDITION, IF ANY, IS FOUND TO BE MADE. THE ASS ESSEE IS ALSO DIRECTED TO PROVE TO THE SATISFACTION OF THE AO THAT BOTH THE INCLUSIVE METH OD AND EXCLUSIVE METHOD GIVE SAME FINANCIAL RESULT. 4364/M/12;2195/M/15 &2196/M/15 PERSTORP CHEMICALS INDIA PVT.LTD. 5 RESPECTFULLY FOLLOWING THE ABOVE,WE RESTORE BACK TH E MATTE TO THE FILE OF THE FAA FOR FRESH ADJUDICATION,WHO WOULD PASS A REASONED ORDER AFTER AFFORDING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE.GROUND NO.2 IS PARTLY ALLOW ED. 4. NEXT TWO GROUNDS DEAL WITH DEDUCTION U/S.10B OF THE ACT.FIRST GROUND IS ABOUT NOT ALLOWING THE DEDUCTION WHEREAS THE SECOND ONE PERTAINS TO AD JUSTING THE BROUGHT FORWARD LOSSES AND DEPRECIATION BEFORE CONSIDERING DEDUCTION UNDER THE SAID SECTION.DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESSEE HAD CLAI MED DEDUCTION U/S.10B OF THE ACT,THAT AGAINST THE BALANCE TAXABLE INCOME IT HAD CLAIMED SET OFF OF CARRIED FORWARD LOSSES.HE HELD THAT THE STAND TAKEN BY THE ASSESSEE WAS NOT AS PER THE PROVISIONS OF LAW,THAT SET OFF OF CARRIED-FORWARD LOSSES FOR EARLIER YEAR HAD TO BE C ONSIDERED AGAINST THE TOTAL INCOME OF THE ASSESSEE AT THE FIRST INSTANCE,THAT DEDUCTION U/S. 10B COULD BE ALLOWED OUT OF THE BALANCE INCOME ONLY,THAT THE PROVISIONS OF SECTION 10B WERE SIMILAR TO PROVISIONS OF SECTION 80HHC OF THE ACT WHICH RESTRICTED THE ALLOWABILITY OF DED UCTION TO A PARTICULAR EXTENT OF DEDUCTION, THAT DEDUCTION U/S.10B WAS ALLOWABLE ONLY TO THE EX TENT OF ELIGIBLE BUSINESS PROFIT AND BEFORE CLAIMING ANY EXEMPTION/DEDUCTION,THAT BROUGHT FORWA RD LOSSES AND DEPRECIATION WAS REQUIRED TO BE REDUCED FROM GROSS BUSINESS PROFIT,THAT ONLY NET PROFIT SO ARRIVED COULD BE CONSIDERED FOR COMPUTING DEDUCTION UNDER THE RELEVANT PROVISIO NS.ACCORDINGLY,HE DID NOT GRANT DEDUC - TION U/S.10B OF THE ACT TO THE TUNE OF RS.1.96 CROR ES. HE ALSO HELD THAT BROUGHT FORWARD LOSSES AND DEPRECIATION WERE TO BE CONSIDERED BEFORE ALLOW ING DEDUCTION U/S. 10B. 4.1. BEFORE THE FAA,DURING APPELLATE PROCEEDINGS,THE ASS ESSEE MADE SUBMISSIONS AND RELIED UPON CERTAIN CASE LAWS.AFTER CONSIDERING AVAILABLE MATERIAL,HE REFERRED TO THE PROVISIONS OF SECTION 10B AND HELD THAT PRIOR TO THE AMENDMENT W. E.F. 1/4/2001 SECTION 10B WAS ABOUT EXEMPTION,THAT THE AMENDED SECTION TALKED ABOUT DED UCTION AND NOT ABOUT EXEMPTION.HE FURTHER HELD THAT THE CASES RELIED UPON BY THE ASSE SSEE WERE NOT OF ANY HELP TO IT.HE FINALLY HELD THAT THE INTENTION OF THE LEGISLATION WAS NOT TO GRANT DOUBLE BENEFIT UNDER THE SAME SECTION/SCHEME,THAT THE AO WAS JUSTIFIED IN RESTRIC TING THE DEDUCTION AND ADJUSTING THE BROUGHT FORWARD LOSSES AND DEPRECIATION BEFORE ALLO WING DEDUCTION. 4.2. BEFORE US,THE AR STATED THAT THE ASSESSEE SET UP TH E 10B UNIT DURING THE YEAR UNDER APPEAL,THAT IT WAS MAINTAINING SEPARATE ACCOUNT FOR THE UNIT,THAT THERE WAS NO JUSTIFICATION IN ADJUSTING THE BROUGHT FORWARD LOSSES AND DEPRECIATI ON BEFORE ALLOWING THE DEDUCTION.HE RELIED UPON THE CASE OF YOKAGAWA INDIA LTD.(77TAXMANN.C OM.41).THE DR SUPPORTED THE ORDERS OF 4364/M/12;2195/M/15 &2196/M/15 PERSTORP CHEMICALS INDIA PVT.LTD. 6 THE AO AND THE AND STATED THAT DEDUCTION U/S.10 SHO ULD BE RESTRICTED TO PROFIT DERIVED FROM THE UNIT AND NOT TO THE INCREASED INCOME I.E. THE INCOM E DETERMINED AS PER TP ADDITIONS. 4.3. WE FIND THAT IN THE CASE OF CASE OF YOKAGAWA INDI A LTD.(SUPRA)THE HONBLE COURT HAS HELD AS UNDER: SECTION 10A OF THE INCOME-TAX ACT, 1961AS ORIGINAL LY INTRODUCED, PROVIDED THAT ANY PROFITS AND GAINS DERIVED BY AN ASSESSEE FROM AN INDUSTRIAL UNDERTAKING TO WHICH THE SECTION APPLIED SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE AS SESSEE. THE AMENDMENT OF THE SECTION BY THE FINANCE ACT, 2000 WITH EFFECT FROM APRIL 1, 2001, S PECIFICALLY USES THE WORDS DEDUCTION OF PROFITS AND GAINS DERIVED BY AN ELIGIBLE UNIT . . . FROM THE TOTAL INCOME OF THE ASSESSEE. THE RETENTION OF SECTION 10A IN CHAPTER III OF THE ACT AFTER THE AMENDMENT MADE BY THE FINANCE ACT, 2000 WOULD BE MERELY SUGGESTIVE AND NOT DETERM INATIVE OF WHAT IS PROVIDED BY THE SECTION AS AMENDED, IN CONTRAST TO WHAT WAS PROVIDE D BY THE UNAMENDED SECTION. THE TRUE AND CORRECT PURPORT AND EFFECT OF THE AMENDED SECTION W ILL HAVE TO BE CONSTRUED FROM THE LANGUAGE USED AND NOT MERELY FROM THE FACT THAT IT HAS BEEN RETAINED IN CHAPTER III. THE INTRODUCTION OF THE WORD DEDUCTION IN SECTION 10A BY THE AMENDMEN T, IN THE ABSENCE OF ANY CONTRARY MATERIAL, AND IN VIEW OF THE SCOPE OF THE DEDUCTION S CONTEMPLATED BY SECTION 10A HAS TO BE UNDERSTOOD AS EMBODYING A CLEAR ENUNCIATION OF THE LEGISLATIVE DECISION TO ALTER THE NATURE OF THE SECTION FROM ONE PROVIDING FOR EXEMPTION TO ONE PROVIDING FOR DEDUCTIONS. THOUGH THE DIFFERENCE BETWEEN THE TWO EXPRESSIONS EXEMPTION AND DEDUCTION, BROADLY MAY APPEAR TO BE THE SAME, I.E., IMMUNITY FROM TAXA TION, THE PRACTICAL EFFECT OF IT IN THE LIGHT OF THE SPECIFIC PROVISIONS CONTAINED IN DIFFERENT P ARTS OF THE ACT WOULD BE WHOLLY DIFFERENT. THE ABOVE IMPLICATIONS WOULD BE OBVIOUS WHERE LOSS MAKI NG ELIGIBLE UNITS OR NON-ELIGIBLE ASSESSEES SEEK THE BENEFIT OF ADJUSTMENT OF LOSSES AGAINST PROFITS MADE BY ELIGIBLE UNITS. SUB-SECTION (4) OF SECTION 10A WHICH PROVIDES FOR P RO RATA EXEMPTION, NECESSARILY INVOLVING DEDUCTION OF THE PROFITS ARISING OUT OF DOMESTIC SA LES, IS ONE INSTANCE OF DEDUCTION PROVIDED BY THE AMENDMENT. PROFITS OF AN ELIGIBLE UNIT PERTAINI NG TO DOMESTIC SALES WOULD HAVE TO ENTER INTO THE COMPUTATION UNDER THE HEAD PROFITS AND GA INS FROM BUSINESS IN CHAPTER IV AND BE DENIED THE BENEFIT OF DEDUCTION. THE PROVISIONS OF SUB-SECTION (6) OF SECTION 10A , AS AMENDED BY THE FINANCE ACT, 2003, GRANTING THE BENEFIT OF A DJUSTMENT OF LOSSES AND UNABSORBED DEPRECIATION, ETC., COMMENCING FROM THE YEAR 2001-0 2 ON COMPLETION OF THE PERIOD OF TAX HOLIDAY ALSO VIRTUALLY WORK AS A DEDUCTION WHICH HA S TO BE WORKED OUT AT A FUTURE POINT OF TIME, NAMELY, AFTER THE EXPIRY OF THE PERIOD OF TAX HOLIDAY. THE ABSENCE OF ANY REFERENCE IN CHAPTER VI OF THE ACT TO DEDUCTION UNDER SECTION 10 A CAN BE UNDERSTOOD BY ACKNOWLEDGING THAT ANY SUCH REFERENCE OR MENTION WOULD HAVE BEEN A REPETITION OF WHAT HAS ALREADY BEEN PROVIDED IN SECTION 10A . THE PROVISIONS OF SECTION S 80HHC AND 80HHE OF THE ACT PROVIDING FOR SOMEWHAT SIMILAR DEDUCTIONS WOULD BE WHOLLY IRR ELEVANT AND REDUNDANT IF DEDUCTIONS UNDER SECTION 10A WERE TO BE MADE AT THE STAGE OF O PERATION OF CHAPTER VI OF THE ACT. THE RETENTION OF THE PROVISIONS OF THE ACT, I.E., SECTI ONS 80HHC AND 80HHE , DESPITE THE AMENDMENT OF SECTION 10A INDICATES THAT SOME ADDITI ONAL BENEFIT TO ELIGIBLE SECTION 10A UNITS, NOT CONTEMPLATED BY SECTIONS 80HHC AND 80HHE , WAS INTENDED BY THE LEGISLATURE. SUCH A BENEFIT CAN ONLY BE UNDERSTOOD BY A LEGISLATIVE MAN DATE TO UNDERSTAND THAT THE STAGES FOR WORKING OUT THE DEDUCTIONS UNDER SECTIONS 10A AND 8 0HHC AND 80HHE ARE SUBSTANTIALLY DIFFERENT. FROM A READING OF THE RELEVANT PROVISIONS OF SECTIO N 10A , IT IS MORE THAN CLEAR THAT THE DEDUCTION CONTEMPLATED THEREIN IS QUA THE ELIGIBLE UNDERTAKING OF AN ASSESSEE STANDING ON ITS OWN AND WITHOUT REFERENCE TO THE OTHER ELIGIBLE OR NON-ELIGIBLE UNITS OR UNDERTAKINGS OF THE ASSESSEE. THE BENEFIT OF DEDUCTION IS GIVEN BY THE ACT TO THE INDIVIDUAL UNDERTAKING AND RESULTANTLY FLOWS TO THE ASSESSEE. CIRCULAR NO. 794 , DATED AUGUST 9, 2000 STATES IN PARAGRAPH 15.6 THAT THE EXPORT TURNOVER AND THE TOTAL TURNOVE R FOR THE PURPOSES OF SECTIONS 10A AND 10B SHALL BE OF THE UNDERTAKING LOCATED IN SPECIFIED ZO NES OR 100 PER CENT EXPORT ORIENTED 4364/M/12;2195/M/15 &2196/M/15 PERSTORP CHEMICALS INDIA PVT.LTD. 7 UNDERTAKINGS, AS THE CASE MAY BE, AND THIS SHALL NO T HAVE ANY MATERIAL RELATIONSHIP WITH THE OTHER BUSINESS OF THE ASSESSEE OUTSIDE THESE ZONES OR UNITS FOR THE PURPOSES OF THIS PROVISION. IF THE SPECIFIC PROVISIONS OF THE ACT (THE FIRST PROVI SO TO SUB-SECTION (1) OF SECTION 10A AND SUB- SECTIONS (1A) AND (4) OF SECTION 10A ) PROVIDE THAT THE UNIT THAT IS CONTEMPLATED FOR GRANT OF BENEFIT OF DEDUCTION IS THE ELIGIBLE UNDERTAKING AN D THAT IS ALSO HOW THE CONTEMPORANEOUS CIRCULAR OF THE DEPARTMENT UNDERSTOOD THE SITUATION , IT IS LOGICAL AND NATURAL THAT THE DEDUCTION OF THE PROFITS AND GAINS OF THE BUSINESS OF AN ELIGIBLE UNDERTAKING HAS TO BE MADE INDEPENDENTLY AND, THEREFORE, IMMEDIATELY AFTER THE STAGE OF DETERMINATION OF ITS PROFITS AND GAINS. AT THAT STAGE THE AGGREGATE OF THE INCOMES U NDER OTHER HEADS AND THE PROVISIONS FOR SET OFF AND CARRY FORWARD CONTAINED IN SECTIONS 70 , 72 AND 74 OF THE ACT WOULD BE PREMATURE FOR APPLICATION. THE DEDUCTION UNDER SECTION 10A THEREF ORE WOULD BE PRIOR TO THE COMMENCEMENT OF THE EXERCISE TO BE UNDERTAKEN UNDER CHAPTER VI O F THE ACT FOR ARRIVING AT THE TOTAL INCOME OF THE ASSESSEE FROM THE GROSS TOTAL INCOME. THE SO MEWHAT DISCORDANT USE OF THE EXPRESSION TOTAL INCOME OF THE ASSESSEE IN SECTION 10A CAN B E RECONCILED BY UNDERSTANDING THE EXPRESSION TOTAL INCOME OF THE ASSESSEE IN SECTIO N 10A AS TOTAL INCOME OF THE UNDERTAKING. THEREFORE, THOUGH SECTION 10A , AS AMENDED, IS A PR OVISION FOR DEDUCTION, THE STAGE OF DEDUCTION WOULD BE WHILE COMPUTING THE GROSS TOTAL INCOME OF THE ELIGIBLE UNDERTAKING UNDER CHAPTER IV OF THE ACT AND NOT AT THE STAGE OF COMPU TATION OF THE TOTAL INCOME UNDER CHAPTER VI. FOLLOWING THE SAME,WE ALLOW THE GROUNDS NO.3 AND 4 IN FAVOUR OF THE ASSESSEE. 5. LAST GROUND OF APPEAL IS ABOUT COMPUTATION OF BOOK PROFIT AS PER THE PROVISIONS OF SECTION 115JB OF THE ACT.WHILE COMPUTING THE BOOK PROFIT,TH E AO DID NOT ALLOW THE DEDUCTION FOR TRANSFER TO LOAN REPAYMENT RESERVE OF RS.4.94 CROR ES U/S.115JB. 5.1. BEFORE THE FAA THE ASSESSEE MADE WRITTEN SUBMISSIO NS AND RELIED UPON THE CASES OF AMLINE TEXTILES (P.) LTD. (27SOT152) AND IOL LTD. ( 81TTJ525). HE HELD THAT THE PERUSAL OF THE P&L ACCOUNT OF THE ASSESSEE PROVED THAT THE AMO UNT OF RS.4.94 CRORES WAS APPROPRIATION OF PROFIT BY TRANSFER TO LOAN REPAYMENT RESERVE,THA T THE ASSESSEE HAD NOT CHARGED THE SUM TRANSFERRED TO LOAN REPAYMENT RESERVE IN ITS P&L AC COUNT, THAT THE NATURE OF SUCH RESERVE COULD ONLY BE CONSIDERED TO BE CAPITAL IN NATURE AN D NOT CHARGEABLE TO THE P&L ACCOUNT, THAT THE TRANSFER/APPROPRIATION WAS HIT BY CL.(B) OF THE EXPLANATION TO SECTION 115J OF THE ACT. FINALLY,HE UPHELD THE ORDER OF THE AO. 5.2. BEFORE US,THE AR REFERRED TO PG.44 OF THE PB AND ST ATED THAT LOAN REPAYMEN RESERVE (LRR)SHOULD BE ALLOWED FOR ADJUSTMENT UNDER MAT PRO VISIONS.HE REFERRED TO THE CASE OF RAYMOND LTD.(21TAXMANN.COM.60) OF THE HONBLE BOMBA Y HIGH COURT.HE FAIRLY CONCEDED THAT OUT OF THE DISPUTED AMOUNT OF RS.13.75 CRORES AN AMOUNT OF RS.13.07 CRORES WAS ALLOWABLE AND THAT RS.67.97 LAKHS WAS TO BE DISALLO WED.THE DR SUPPORTED THE ORDER OF THE FAA. IN HIS REJOINDER,THE AR STATED THAT NO TP ADJUSTMEN TS WERE MADE IN THE EARLIER YEARS,AS FAR AS THE INCOME OF 10B UNIT WAS CONCERNED.ABOUT THE MAT CALCULATION HE REFERRED TO THE CASE OF 4364/M/12;2195/M/15 &2196/M/15 PERSTORP CHEMICALS INDIA PVT.LTD. 8 GENUS ELECTROTECH LTD.(71TAXMANN.COM101)(ITA.S.2826 &2840/AHD/2012AY.2006-07DTD. 11 .05.2016). 5.3. WE FIND THAT THE ISSUE STANDS DIRECTLY COVERED BY T HE ORDER OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF RAYMOND LTD.(SUPRA).FIRST WE A RE REPRODUCING THE QUESTIONS FRAMED BY THE HONBLE COURT AND SAME READ AS UNDER: (A) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ITAT WAS RIGHT IN DELETING THE ADJUSTMENT MADE BY THE AO RELATING TO REDEMPTION OF DEBENTURES RESERVE AMOUNTING TO RS.18.80 CRORES; (B) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES A ND IN LAW. THE ITAT WAS RIGHT IN DELETING THE DISALLOWANCE IN RESPECT OF CAPITAL EXPENDITURE INCU RRED IN RESPECT OF STEEL DIVISION AT NASHIK AS REVENUE EXPENDITURE? THE HONORABLE COURT HELD AS FOLLOW: RE QUESTION (A): SECTION 115JA OF THE INCOME TAX AC T, 1961 PROVIDES IN SUBSECTION (2) THAT EVERY ASSESSEE BEING A COMPANY SHALL FOR THE PURPOSE OF THE SECTION PREPARE ITS PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR IN ACCORDANCE WITH THE P ROVISIONS OF PARTS II AND III OF SCHEDULE VI TO THE COMPANIES ACT, 1956. THE EXPLANATION TO THE SECTION PROVIDES THAT FOR THE PURPOSE OF THE SECTION, 'BOOK PROFIT' MEANS THE NET PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS Y EAR PREPARED UNDER SUBSECTION (2) AS INCREASED INTER AL IA BY '(B) THE AMOUNTS CARRIED TO ANY RESERVES BY WHATEVER NAME CALLED'. PART III OF SCHEDULE VI TO T HE COMPANIES ACT, 1956 PROVIDES INTER ALIA IN CLAUSE 7(L)(B) THAT, 'THE EXPRESSION 'RESERVE' SHAL L NOT INCLUDE ANY AMOUNT WRITTEN OFF OR RETAINED BY WAY OF PROVIDING FOR DEPRECIATION, RENEWALS OR DIMI NUTION IN VALUE OF ASSETS OR RETAINED BY WAY OF PROVIDING FOR ANY KNOWN LIABILITY'. 3. THE NATURE OF A DEBENTURE REDEMPTION RESERVE (DR R) HAS BEEN CONSIDERED BY THE JUDGMENT OF THE SUPREME COURT IN NATIONAL RAYON CORPN. LTD, V. CIT [1997] 227 ITR 7647 93 TAXMAN 754 . THE SUPREME COURT AFTER ADVERTING TO THE PROVISIONS OF CLAUSE 7 OF PART III TO SCHEDULE VI OF THE COMPANIES ACT, 1956 HELD THAT 'THE BASIC PRINCIPLE IS THAT AN AMOUNT SET APART TO MEET A KNOWN LIABILITY CANNOT BE REGARDED AS RESERVE'. WHERE A C OMPANY ISSUES DEBENTURES, THE LIABILITY TO REPAY ARISES THE MOMENT THE MONEY IS BORROWED. BY ISSUING DEBENTURES A COMPANY TAKES A LOAN AGAINST THE SECURITY OF ITS ASSETS. THOUGH THE LOAN MAY NOT BE REPAYABLE IN THE YEAR OF ACCOUNT, THE OBLIGATION TO REPAY IS A PRESENT 'OBLIGATION. HENCE ANY MONEY SET APART IN THE ACCOUNTS OF THE COMPANY TO REDEEM THE DEBENTURE HAS TO BE TREATED AS MONIES SET APART TO MEET A KNOWN LIABILITY. CONSEQUENTLY, DEBENTURES HAVE TO BE SHOWN IN THE BALANCE SHEET OF A COMPANY AS A LIABILITY. BEING MONIES SET APART TO MEET A KNOWN LIABILITY, A DEBENTURE REDEMPTION RESERVE CAN NOT BE REGARDED AS A RESERVE FOR THE PURPOSE OF SCHEDULE VI TO THE COMPANIES ACT, 1956. IN NATIONAL RAYON CORPN. LTD. (SUPRA) THE SUPREME COURT FOLLOWED ITS EARLIER DECISION IN VAZIR SULTAN TOBAC CO CO. LTD. V. CIT [1981] 132 ITR 559 II TAXMAN 28, IN HOLDING THAT SINCE THE CONCEPT OF RESERVE AN D OF A PROVISION IS WELL KNOWN IN COMMERCIAL ACCOUNTANCY AND IS USED IN THE COMPANIES ACT, 1956, WHILE DEALING WITH THE PREPARATION OF BALANCE SHEETS AND PROFIT AND LOSS ACCOUNTS THE MEANING OF THAT CONCEPT WOULD HAVE TO BE GATHERED FROM THE MEANING ATTACHED IN THE COMPANIES ACT ITSELF. THE F OLLOWING OBSERVATIONS OF THE SUPREME COURT ARE OF SIGNIFICANCE: 'THE DEBENTURES WERE NOTHING BUT SECURED LOANS. MER ELY BECAUSE THE DEBENTURES WERE NOT REDEEMABLE DURING THE ACCOUNTING PERIOD, THE LIABIL ITY TO REDEEM THE DEBENTURES DID NOT CEASE TO EXIST . IT WAS REDEEMABLE OR REPAYABLE AT A FUTURE DATE. BU T IT WAS A KNOWN LIABILITY. IN THE FORM OF BALANCE- SHEET PRESCRIBED BY THE ACT IN SCHEDULE VI, THE SEC URED LOANS HAVE TO BE SHOWN UNDER THE HEADING LIABILITIES. SECOND LOANS INCLUDE (1) DEBENTURES, (2) LOANS AND ADVANCES FROM BANKS, (3) LOANS AND ADVANCES FROM SUBSIDIARIES, AND (4) OTHER LOANS AND ADVANCES. THE SECURED LOANS MIGHT NOT BE IMMEDIATELY REPAYABLE, BUT THE LIABILITY TO REPAY T HESE LOANS IS AN EXISTING LIABILITY AND HAS TO BE SHOWN IN THE COMPANY'S BALANCE-SHEET FOR THE RELEVA NT YEAR OF ACCOUNT AS A LIABILITY. AMOUNTS SET APART TO PAY THESE LOANS CANNOT BE 'RESERVE'. THE I NTERPRETATION CLAUSE OF THE BALANCE-SHEET IN SCHEDULE VI OF THE COMPANIES ACT SPECIFICALLY LAYS DOWN THAT RESERVES SHALL NOT INCLUDE ANY AMOUNT WRITTEN OFF OR RETAINED BY WAY OF PROVIDING FOR A K NOWN LIABILITY.' 4. THE MERE FACT THAT A DEBENTURE REDEMPTION RESERV E IS LABELED AS A RESERVE WILL NOT RENDER IT AS A RESERVE IN THE TRUE SENSE OR MEANING OF THAT CONCEP T. AN AMOUNT WHICH IS RETAINED BY WAY OF PROVIDING FOR A KNOWN LIABILITY IS NOT A RESERVE. CONSEQUENTL Y THE TRIBUNAL WAS CORRECT IN HOLDING THAT THE AMOU NT WHICH WAS SET APART AS A DEBENTURE REDEMPTION RESER VE IS NOT A RESERVE WITHIN THE MEANING OF 4364/M/12;2195/M/15 &2196/M/15 PERSTORP CHEMICALS INDIA PVT.LTD. 9 EXPLANATION (B) TO SECTION 115JA OF THE INCOME TAX ACT, 1961. NO SUBSTANTIAL QUESTION OF LAW WOULD, THEREFORE, ARISE. 5. RE QUESTION (B): AS REGARDS QUESTION (B) THE TRI BUNAL HAS RELIED UPON ITS ORDER IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 1996-97 WHICH IN TURN RELIES UPON AN ORDER FOR AY 1990-91. THAT ORDER IN TURN RELIED UPON THE ORDER OF THE TRIBUNAL FOR ASSE SSMENT YEAR 1985-86 WHICH HAD BEEN CONFIRMED BY THIS COURT, TREATING PRE-OPERATIVE EXPENSES AS REVE NUE EXPENDITURE. THE ORDER PASSED BY THE ASSESSING OFFICER NOTES IN PARAGRAPH 9.1 THAT THE PRE-OPERATI VE EXPENSES RELATED TO THE FOLLOWING ITEMS VIZ. SAL ARY AND WAGES, STAFF WELFARE EXPENSES, POWER, TRAVELLIN G, LEGAL AND PROFESSIONAL FEES AND MISCELLANEOUS EXPENSES. EVIDENTLY THESE ARE OF A REVENUE NATURE. FOR ALL THESE REASONS QUESTION (B) WILL NOT GIVE RI SE TO ANY SUBSTANTIAL QUESTION OF LAW. THE APPEAL IS A CCORDINGLY DISMISSED. THERE SHALL BE NO ORDER AS TO COSTS. FROM THE ABOVE,IT IS CLEAR THAT THE STAND TAKEN BY THE ASSESSEE IS AS PER THE PROVISONS OF LAW. AS FAR AS COMPUTATION PART IS CONCERNED,WE WOULD LI KE THE AO TO DETERMINE THE AMOUNT IN LIGHT OF THE STATEMENT MADE BEFORE US ON BEHALF OF THE ASSESSEE.WE DECIDE THE LAST GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE,IN PART. ITA/2195/MUM/2015-AY.2008-09: 6. FIRST GROUND OF APPEAL IS ABOUT UPWARD ADJUSTMENT O F RS.22.60 LAKHS (RS.60,257/- ON ACCOUNT OF ADJUSTMENT TO RAW MATERIAL PURCHASES,+RS .1.02 LAKHS, ADJUSTMENT ABOUT PACKING MATERIAL + RS.2.63 LAKHS ADJUSTMENT OF TRADING MATE RIAL SALE + RS.18.34 LAKHS ADJUSTMENT TO RESEARCH AND DEVELOPMENT INCOME). 6.1. WE FIND THAT THE ORDER OF THE FAA FOR THE YEAR UNDE R CONSIDERATION IS ALSO NOT SPEAKING OR A REASONED ORDER.HE HAS JUST REPRODUCED THE ORDER O F THE TPO AND SUBMISSIONS OF THE ASSESSEE.THEREFORE,IN THE INTEREST OF JUSTICE WE AR E REMITTING BACK THE MATTER TO THE FILE OF THE FAA FOR FRESH ADJUDICATION,WHO WOULD DECIDE THE ISS UE OF TP ADJUSTMENT AFTER AFFORDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE.H E IS DIRECTED PASS A SPEAKING ORDER.GROUND NO.1 IS PARTLY ALLOWED IN FAVOUR OF THE ASSESSEE. 7. GOA-2 DEALS WITH SETTING OFF OF BROUGHT FORWARD LOS SES.DURING THE ASSESSMENT PROCEEDINGS, THE AO DID NOT ALLOW SET OFF OF THE BROUGHT FORWARD LOSSES OF THE ASSESSEE.IN THE APPELLATE PROCEEDINGS,THE FAA HELD THAT THE AO HAD NOT DISCUS SED THE ISSUE ABOUT SETTING OFF OF THE ISSUE,THAT HE COULD NOT ADJUDICATE THE ISSUE AS THE AO HAD NOT DECIDED THE SAME. 7.1. BEFORE US,THE AR STATED THAT ALL THE MATERIAL ABOUT SETTING OFF OF BROUGHT FORWARD LOSSES WAS AVAILABLE ON RECORD,THAT THE ASSESSEE COULD NO T COMPEL THE AO TO WRITE THE ORDER, THAT THE ASSESSEE HAD RAISED A GROUND IN THAT REGARD,THAT TH E FAA SHOULD HAVE DECIDED OR SHOULD HAVE CALLED FOR THE REMAND REPORT FROM THE AO.THE DR LEF T THE ISSUE TO THE DISCRETION OF THE BENCH. 7.2. WE FIND THAT THE ASSESSEE HAD RAISED A SPECIFIC GRO UND BEFORE THE FAA.THEREFORE, IT WAS HIS DUTY TO DECIDE THE ISSUE EITHER BY CALLING A RE MAND REPORT FROM AO OR BY MAKING FURTHER ENQUIRY AT HIS OWN LEVEL.THEREFORE,WE DIRECT THE F AA TO DECIDE THE ISSUE AFTER AFFORDING 4364/M/12;2195/M/15 &2196/M/15 PERSTORP CHEMICALS INDIA PVT.LTD. 10 REASONABLE OPPORTUNITY TO THE ASSESSEE.SECOND GROUN D OF APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE,IN PART. ITA/ 2196/MUM/2015-A.Y.09-10: 8. FIRST GROUND OF APPEAL IS ABOUT CONFIRMING THE UPWA RD ADJUSTMENT OF RS.17.25 LAKHS UNDER THE HEADS TRADING MATERIAL PURCHASED RS.3.25 LAKHS AND SALE OF GOODS RS.14.LAKHS.WE FIND THAT WHILE DISMISSING THE APPEAL FILED BY THE ASSES SEE THE FAA HAS REFERRED TO TWO CASES OF AZTEC SOFTWARE AND TECHNOLOGY SERVICES LIMITED (107 ITD 141)AND SHATRUNJAY DIAMONDS (261 ITR 258).HE HAS NOT DEALT WITH ARGUMENT RAISED BEFORE HIM BY THE ASSESSEE .THEREFORE, WE ARE RESTORING THE ISSUE BACK TO FILE OF FAA FOR FRESH ADJUDICATION. HE IS DIRECTED TO DECIDE THE ISSUE AFTER HEARING THE ASSESSEE.EFFECTIVE GROU ND OF APPEAL IS PARTLY ALLOWED. 9. LAST GROUND OF APPEAL IN ALL THE APPEALS IS ABOUT I NITIATION OF PENALTY U/S.271(1)(C)OF THE ACT.AS THE ISSUE IS PREMATURE AT THIS STAGE,SO,WE D ISMISS THE GROUNDS,RAISED BY THE ASSESSEE FOR ALL THE THREE YEARS. AS A RESULT, APPEAL FILED BY THE ASSESSEE FOR ALL T HE THREE AY.S STAND PARTLY ALLOWED. ORDER PRONOUNCED I N THE OPEN COURT ON 3 RD JANUARY, 2018. 03 ,2018 SD/- SD/- ( (( ( /RAVISH SOOD) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 03.01.2018. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR K BENCH, ITAT, MUMBAI / , , . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.