U.P.State Industrial Development Corporation Ltd., Kanpur V. Asstt. Commissioner of Income Tax-6, Kanpur

ITA 446/LKW/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78623 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 25-06-2014
• Assessment Year: 2001-2002
• Appeal Filed On: 06-08-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business expenditure; Opportunity of being heard; Principle of natural justice; Capital receipt; Revised return; Reason to believe; Reassessment proceedings
• Section: 43B; 40A(3); 143(3); 142(1); 80HHC; 14A; 37(1); 12A; 12AA; 147; 148; 37

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A , LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.446/LKW/ 2012 ASSESSMENT YEAR:2001 - 02 & I.T.A. NO.382/LKW/2011 ASSESSMENT YEAR :2003 - 04 U.P. STATE INDUSTRIAL DEVELOPMENT CORPORATION LIMITED, (UPSIDC) A - 1/4, LAKHANPUR, KANPUR PAN:AAACU1759K VS. A.C.I.T. - 6, KANPUR (APPELLANT) (RESPONDENT) I.T.A. NO.396/LKW/2011 ASSESSMENT YEAR :2003 - 04 DY.C.I.T. - 6, KANPUR. VS. U.P. STATE INDUSTRIAL DEVELOPMENT CORPORATION LIMITED, (UPSIDC) A - 1/4, LAKHANPUR, KANPUR PAN:AAACU1759K (APPELLANT) (RESPONDENT) I.T.A. NO.383/LKW/2011 ASSESSMENT YEAR :2004 - 05 U.P. STATE INDUSTRIAL DEVELOPMENT CORPORATION LIMITED, (UPSIDC) A - 1/4, LAKHANPUR, KANPUR PAN:AAACU1759K VS. DY.C.I.T. - 6, KANPUR. (APPELLANT) (RESPONDENT) I.T.A. NO.397 & 560/LKW/2011 ASSESSMENT YEAR :2004 - 05 & 2005 - 06 DY.C.I.T. - 6, KANPUR. VS. U.P. STATE INDUSTRIAL DEVELOPMENT CORPORATION LIMITED, (UPSIDC) A - 1/4, LAKHANPUR, KANPUR PAN:AAACU1759K 2 I.T.A. NO.540/LKW/2011 ASSESSMENT YEAR :2005 - 06 U.P. STATE INDUSTRIAL DEVELOPMENT CORPORATION LIMITED, (UPSIDC) A - 1/4, LAKHANPUR, KANPUR PAN:AAACU1759K VS. DY.C.I.T. - 6, KANPUR. (APPELLANT) (RESPONDENT) I.T.A. NO.398/LKW/2011 ASSESSMENT YEAR :2006 - 07 DY.C.I.T. - 6, KANPUR. VS. U.P. STATE INDUSTRIAL DEVELOPMENT CORPORATION LIMITED, (UPSIDC) A - 1/4, LAKHANPUR, KANPUR PAN:AAACU1759K (APPELLANT) (RESPONDENT) I.T.A. NO.384/LKW/2011 ASSESSMENT YEAR :2006 - 07 U.P. STATE INDUSTRIAL DEVELOPMENT CORPORATION LIMITED, (UPSIDC) A - 1/4, LAKHANPUR, KANPUR PAN:AAACU1759K VS. DY.C.I.T. - 6, KANPUR. (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI P. K. KAPOOR, C.A. SHRI ASHISH BANSAL, ADVOCATE REVENUE BY SHRI MANOJ KUMAR GUPTA, CIT, D.R. DATE OF HEARING 25/06/2014 DATE OF PRONOUNCEMENT 2 4 /07/2014 O R D E R PER BENCH: I.T.A. NO.446/LKW/2012 ALL THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 3 2. FIRST WE TAKE UP THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2001 - 2002 I.E. I.T.A. NO.446/LKW/2012. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. BECAUSE THE 'CIT(A)' HAS ERRED IN LAW AND ON FACTS IN DISMISSING THE RE - INSTITUTED APPEAL NO. CIT (A) - I/345/DCIT - VI/2011 - 12/283 ON THE GROUNDS THAT ( A ) IN VIEW OF THE DECISION OF HON'BLE APEX COURT IN THE CASE OF GOETZE (INDIA) LTD. VS. CIT REPORTED IN (2006) 284 ITR 323, THE PLEA FOR ADMISSIBILITY OF SUMS AGGREGATING RS.3,78,67,703/ - TAKEN FOR THE FIRST TIME AT THE STAGE OF FIRST APPELLATE AUTHORITY, WAS NOT MAINTAINABLE; AND ( B ) THE SAID APPEAL [BEING APPEAL NO. CIT(A) - I/345/DCIT - VI/2011 - 12] 'NOT ARISING OUT OF THE IMPUGNED ASSESSMENT'. 2. BECAUSE RELIANCE ON THE DECISION OF HON'BLE APEX COURT IN THE CASE OF GOETZ (INDIA) LTD. CIT REPORTED (2006) 284 ITR 323, FOR DISMISSAL THE ISSUE OF ADMISSIBILITY OF DEDUCTION OF RS.3,78,67,703/ - , IS WHOLLY MISCONCEIVED AS THE SAID DECISION ITSELF SUPPORTS THE MAINTAINABILITY OF THE 'APPELLANT'S' CLAIM FOR DEDUCTION AT THE APPELLATE STAGE. 3. BECAUSE THE 'CIT(A)' CAME TO BE SEIZED WITH THE MATTER IN PURSUANCE OF THE DIRECTION GIVEN BY THE ITAT VIDE PARA 5.1 OF ITS ORDER DATED 05.02.2010 IN ITA NO. 116 /LUC/07 READING AS UNDER: - '5.1 AS REGARDS TO THE ADDITIONAL GROUND BOTH THE PARTIES AGREED THA T THIS ISSUE MAY BE SENT TO THE LEARNED CIT(A) FOR ADJUDICATION SINCE HE HAD NOT ADJUDICATED THE SAME IN SPITE OF THE FACT THAT THE ASSESSEE SPECIFICALLY RAISED THIS GROUND IN THE FIRST APPEAL. WE, THEREFORE, ACCEPTING THE CONTENTION OF BOTH THE PARTIES, D IRECT THE LEARNED CIT(A) TO DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER PROVIDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO BOTH THE PARTIES.' 4 AND BEING A SUBORDINATE APPELLATE AUTHORITY, THE 'CIT(A)' WAS UNDER A STATUTORY OBLIGATION TO DEAL WITH AND DECIDE THE 'ISSUE' ON MERITS THEREOF. 4. BECAUSE IN VIEW THAT THE 'APPEAL NOT BEING NOT ARISING OUT OF THE IMPUGNED ASSESSMENT', REFLECTS UPON THE PROPRIETARY OF THE 'CIT(A)' IN COMPLYING WITH THE DIRECTION GIVEN BY THE HON'BLE ITAT VIDE ORDER DATED 0 5.02.2010 PASSED IN ITA NO. 11 6/LUC/07 IN THE CASE OF U.P. STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD VS. ASSTT. COMMISSIONER OF INCOME TAX - VI, KANPUR. 5. BECAUSE THE SUMS AGGREGATING RS.3,78,67,703/ - REPRESENTED 'WAIVER OF INTEREST' AS GRANTED BY THE BOARD OF DIRECTORS OF THE 'APPELLANT' IN EXERCISE OF ITS POWER TO DO SO AND SUCH WAIVER HAVING BEEN APPROVED DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2001 - 02, THE SUM IN QUESTION REPRESENTED THE LEGITIMATE 'OUTGOING' OF THE BUSINESS OF THE 'APPELLANT' WAS LIABLE TO BE EXCLUDED FROM THE INCOME OF THE 'APPELLANT' IN THE YEAR UNDER APPEAL. 6. BECAUSE KEEPING IN VIEW THE FINDING GIVEN BY THE ASSESSING OFFICER HIMSELF, WHILE COMPLETING THE ASSESSMENT FOR THE ASSESSMENT YEAR 2002 - 03 VIDE ORDER DA TED 22.03.2005, THE 'CIT(A)' SHOULD HAVE HELD THAT THE CLAIM FOR DEDUCTION OF SUMS AGGREGATING RS.3,78,67,703 / - WAS NOT ONLY MAINTAINABLE BUT ALLOWABLE ALSO IN THE ASSESSMENT YEAR 2001 - 02, YEAR UNDER APPEAL. 7. BECAUSE LOOKING TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, THE 'APPELLANT' IS ENTITLED TO 'COST 'BEING AWARDED TO IT. 8. BECAUSE THE ORDER APPEALED AGAINST IS CONTRARY TO THE FACTS, LAW AND PRINCIPLES OF NATURAL JUSTICE. 9. BECAUSE IN SUPPORT OF MAINTAINABILITY OF THE APPEAL AND ADMISSIBILITY OF CLAIM FOR DEDUCTION OF RS.3,78,67,703/ - ON MERITS THEREOF, THE 'APPELLANT' BEGS TO REFER AND RELY UPON THE FACTS OF THE CASE AS HAVE BEEN GIVEN IN BRIEF IN ANNEXURE - 1 TO THE GROUNDS OF APPEAL AS AFORESAID. 3. ALTHOUGH THE ASSESSEE HAS RAISED SO MANY GR OUNDS BUT THE ONLY GRIEVANCE OF THE ASS ESSEE IS REGARDING DISALLOWING OF DEDUCTION IN RESPECT OF CLAIM BY THE ASSESSEE FOR RS.3,78,67,703/ - ON ACCOUNT OF WAIVER OF 5 INTEREST SAID TO BE GRANTED BY BOARD OF DIRECTORS OF THE ASSESSEE COMPANY. VARIOUS SUBMISSIONS WERE MADE BY THE LEARNED A.R. OF THE ASSESSEE IN SUPPORT OF THE ISSUE RAISED BY THE ASSESSEE IN APPEAL BUT AT THIS JUNCTURE , A QUERY WAS RAISED BY THE BENCH AS TO HOW THE ASSESSEE CAN BE ELIGIBLE FOR EXTRA DEDUCTION IN THE PRESENT YEAR WHEN THE ASSESSMENT IS BEING FRAMED BY THE ASSESSING OFFICER U/S 143(3)/148 AS PER THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME - TAX VS SUN ENGINEERING WORKS P. LTD. AS REPORTED IN [1992] 198 ITR 297 (SC) WHEREIN IT WAS HELD THAT IN THE REASSESSMENT PROCEEDINGS , IT IS NOT OPEN TO AN ASSESSEE TO SEEK A REVIEW OF THE CONCLUDED ITEM, UNCONNECTED WITH ESCAPEMENT OF INCOME. IN REPLY, IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THIS JUDGMENT OF HON'BLE APEX COURT IS NOT APPLICABLE IN THE PRESENT CASE BECAUSE THE DEDUCTION IN QUESTION HAS BEEN CLAIMED BY THE ASSESSEE IN ASSESSMENT YEAR 2002 - 03 AND WHILE DISALLOWING THIS CLAIM FOR ASSESSMENT YEAR 2002 - 2003, IT WAS HELD BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER F OR THAT YEAR THAT IT IS EVIDENT THAT THE LIABILITY IN RESPECT OF THIS AMOUNT WRITTEN OFF HAS CRYSTALLIZED IN THE ACCOUNTING PERIOD RELEVANT TO ASSESSMENT YEAR 2001 - 02 AND THEREFORE, THE SAME IS NOT ALLOWABLE IN THE PRESENT YEAR. HE SUBMITTED THAT SINCE A CLEAR FINDING IS GIVEN BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2002 - 03 THAT THE LIABILITY HAS CRYSTALLIZED DURING THE ASSESSMENT YEAR 2001 - 2002, DEDUCTION IS ALLOWABLE IN THE PRESENT YEAR. RELIANCE WAS PLACED BY HIM ON THE JUD GMENT OF HON'BLE DELHI HIGH COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME - TAX VS JAI PARABOLIC SPRINGS LTD. AS REPORTED IN [2008] 306 ITR 42 (DEL) WHEREIN IT WAS HELD THAT THERE WAS NO PROHIBITION ON THE POWERS OF THE TRIBUNAL TO ENTERTAIN ADDITIONA L GROUND WHICH, ACCORDING TO THE TRIBUNAL, AROSE IN THE MATTER AND FOR THE JUST DECISION OF THE CASE . HE SUBMITTED THAT IN VIEW OF THIS JUDGMENT, THE CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT IN VIEW OF THIS JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE C ASE OF GOETZE (INDIA) LTD. VS COMMISSIONER OF INCOME - TAX 6 [2006] 284 ITR 323 (SC) , THE ASSESSEE CANNOT RAISE THIS ISSUE WITHOUT FILING REVISED RETURN OF INCOME. 4. AS AGAINST THIS, LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDER OF LEARNED CIT(A). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRST OF ALL, WE REPRODUCE THE RELEVANT PARA OF THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IN ASSESSMENT YEAR 2002 - 03 BECAUSE IT IS THE CLAIM OF THE LEARNED A.R. OF THE ASSESSEE THAT AS PER THE ASSESSME NT ORDER FOR ASSESSMENT YEAR 2002 - 2003, IT WAS HELD BY THE ASSESSING OFFICER THAT DEDUCTION IS ALLOWABLE FOR ASSESSMENT YEAR 2001 - 2002. THE RELEVANT PARA APPEARING ON PAGE NO. 9 OF THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2002 - 03 IS AS UNDER: FROM THE A BOVE JOURNAL VOUCHER IT IS EVIDENT THAT THE LIABILITY IN RESPECT OF THE AMOUNT WRITTEN OFF WAS CRYSTALLIZED IN THE ACCOUNTING PERIOD RELEVANT TO ASSESSMENT YEAR 2001 - 02. THEREFORE, THE SAME WAS APPARENTLY NOT ALLOWABLE IN THE RELEVANT ACCOUNTING PERIOD. THE OTHER EXPENSES CLAIMED UNDER THIS HEAD WERE ALSO FOUND TO BE OF IDENTICAL NATURE. THE AFORESAID FACTS WERE DISCUSSED WITH THE A.R. OF THE ASSESSEE CORPORATION DURING THE COURSE OF HEARING ON 11/03/2005. AS THE EXPENSES CLAIMED UNDER THIS HEAD WERE FO UND TO BE APPARENTLY NOT RELATABLE TO THE RELEVANT ACCOUNTING PERIOD THE WILL BE DISALLOWED. 5.1 FROM THE ABOVE PARA OF THE ASSESSMENT ORDER, IT IS SEEN THAT IT IS STATED BY THE ASSESSING OFFICER IN THIS ASSESSMENT ORDER THAT THE DEDUCTION IS NOT ALLOWABLE FOR ASSESSMENT YEAR 2002 - 03 BECAUSE THE LIABILITY HAS CRYSTALLIZED IN ASSESSMENT YEAR 2001 - 2002 AND THERE IS NO SUC H DIRECTION GIVEN BY THE ASSESSING OFFICER THAT THIS CLAIM HAS TO BE ALLOWED IN ASSESSMENT YEAR 2001 - 2002. CRYSTALISATION OF LIABILITY IN THE PRESENT YEAR IS NOT THE ONLY CRITERIA TO DECIDE ALLOWABILITY OF THIS DEDUCTION. THERE ARE VARIOUS OTHER ASPECTS AL SO ON WHICH THE ALLOWABILITY OF A DEDUCTION IS DEPENDENT. IT IS ADMITTED POSITION THAT THIS DEDUCTION WAS NOT CLAIMED IN 7 THE PRESENT YEAR IN COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS AND THIS IS ALSO A FACT THAT THIS IS NOT CONNECTED WITH THE ALLEGED ESCAP ED INCOME. 6. NOW WE FIND THAT IN THE PRESENT YEAR, THIS APPEAL IS ARISING OUT OF THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) READ WITH SECTION 147 OF THE ACT ON 27/07/2005. FROM THIS ASSESSMENT ORDER, WE FIND THAT REOPENING WAS MADE ONLY FOR THE ALLEGED ESCAPEMENT OF INCOME ON ACCOUNT OF INCOME ACCRUED ON THE ADVANCE MADE TO THE EXTENT OF RS.3,06,24,528/ - BECAUSE THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND THIS INCOME ON ADVANCE WAS NOT OFFERED FOR TAX. HENCE, NOW WE HAVE TO SEE AS TO WHETHER THE DEDUCTION NOW BEING CLAIMED BY THE ASSESSEE IN APPELLATE PROCEEDINGS IS CONNECTED WITH THIS ESCAPED INCOME OR NOT. THE DEDUCTION NOW BEING CLAIMED BY THE ASSESSEE IS IN RESPECT OF WRITE OFF OF ADVANCE PREMIUM OF TRONICA HO USING AS HAS BEEN NOTED BY THE ASSESSING OFFICER ON PAGE NO. 9 OF THE ASSESSMENT ORDER. HENCE, IT IS SEEN THAT THERE IS NO CO - RELATION BETWEEN THE ESCAPED INCOME AND THIS EXTRA CLAIM BEING MADE BY THE ASSESSEE IN COURSE OF REASSESSMENT PROCEEDINGS. IN TH E LIGHT OF THESE FACTS, WE EXAMINE THE APPLICABILITY OF THIS JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME - TAX VS SUN ENGINEERING WORKS P. LTD. (SUPRA). IN THE CASE OF COMMISSIONER OF INCOME - TAX VS SUN ENGINEERING WORKS P. LTD. (SUPRA) , IT WAS HELD BY HON'BLE APEX COURT THAT THE MATTER NOT AGITATED IN THE CONCLUDED ORIGINAL ASSESSMENT PROCEEDINGS, CANNOT BE PERMITTED TO BE AGITATED IN THE REASSESSMENT PROCEEDINGS UNLESS RELATABLE TO THE ITEM SOUGHT TO BE TAXED AS ESCAPED INC OME. IN THE PRESENT CASE, WE HAVE NOTICED THAT THE DEDUCTION NOW BEING CLAIMED BY THE ASSESSEE IS NOT IN RELATION TO THE ESCAPED INCOME SOUGHT TO BE TAXED BY THE ASSESSING OFFICER IN REASSESSMENT PROCEEDINGS AND THEREFORE, THE ASSESSEE CANNOT BE ALLOWED T O CLAIM DEDUCTION OF THIS AMOUNT IN REASSESSMENT PROCEEDINGS. RESPECTFULLY FOLLOWING THIS JUDGMENT OF HON'BLE APEX COURT, WE DECLINE TO 8 INTERFERE IN THE ORDER OF LEARNED CIT(A) ON THIS ISSUE. UNDER THESE FACTS, ALL OTHER ARGUMENTS OF LEARNED AR OF THE ASS ESSEE ARE NOT RELEVANT. 7. REGARDING THE RELIANCE PLACED BY THE ASSESSEE ON THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX VS JAI PARABOLIC SPRINGS LTD. (SUPRA), WE WOULD LIKE TO OBSERVE THAT THERE IS NO QUARREL ON THIS ASPECT AND EVEN AS PER THE JUDGMENT OF HON'BLE APEX COURT, THIS JUDGMENT DOES NOT IMPINGE UPON THE POWERS OF APPELLATE AUTHORITIES I.E. CIT(A) AND THE TRIBUNAL AND IT IS ONLY IN RESPECT OF POWERS OF THE ASSESSING OFFICER BUT IN THE PRESENT CASE, THE CLAIM IS NOT ALLOWABLE BECAUSE OF THE JUDGMENT OF HON'BLE APEX COURT IN THE CASE OF SUN ENGINEERING (SUPRA). HENCE, THIS JUDGMENT OF HON'BLE DELHI HIGH COURT IS NOT RENDERING ANY HELP TO THE ASSESSEE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS DISMIS SED. 9. NOW WE TAKE UP THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2003 - 04 I.E. I.T.A. NO.382/LKW/2011. THE GROUNDS AS PER MODIFIED/CONCISE GROUNDS ARE AS UNDER: 1. BECAUSE THE PROCEEDINGS UNDER SECTION 147 HAVE NEITHER BEEN VALIDLY INITIATED NOR CONCLUDED IN ACCORDANCE WITH THE PROVISIONS OF LAW, AS A) THE 'REASONS RECORDED' (COPY APPEAR AT PAGE 4 OF THE PAPER BOOK) DO NOT MEET THE REQUIREMENT OF LAW; AND B) AFTER THE ASSESSEE HAD FILED THE 'RETURN' IN COMPLIANCE WITH NOTICE UNDER SECTION 148 (A S REFERRED TO IN THE OPENING PARA OF THE ASSESSMENT ORDER ITSELF, NO NOTICE UNDER SECTION 143(2) WAS ISSUED BY THE ASSESSING OFFICER AND SERVED ON THE 'APPELLANT' AND ACCORDINGLY THE ASSESSMENT ORDER DATED 31.12.2008 CAPTIONED AS ORDER UNDER SECTION '143( 3)/148 OF THE I.T. ACT' DESERVES TO BE HELD AS VOID AB - INITIO. 9 WITHOUT PREJUDICE TO THE AFORESAID 2. BECAUSE THE 'CIT(A)' HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE DISALLOWANCE OF RS.4,71,49,011/ - REPRESENTING THE CONTRIBUTION MADE TO LIFE INSURANCE CORPORATION OF INDIA UNDER 'GROUP GRATUITY INSURANCE SCHEME' AS HAD BEEN FRAMED BY IT (LIC), ON THE GROUNDS THAT THE SCHEME OF GROUP GRATUITY SCHEME HAS NOT BEEN APPROVED BY THE COMMISSIONER OF INCOME - TAX. 3. BECAUSE THERE WAS NO 'ACCRUAL' OR 'RECEIPT' OF ANY INCOME CHARGEABLE TO TAX, ON PREMIA RECEIVED/RECEIVABLE FROM THE ENTREPRENEURS ON ALLOTMENT OF INDUSTRIAL SITES AND SHEDS TO THEM AND THE ' / CIT(A)' / HAS ERRED IN LAW AND ON FACTS IN UPHOLDING AN ADDITION OF RS.4,37,72,326/ - , AS HAD BEEN WORKED OUT B Y THE ASSESSING OFFICER BY APPLYING A 'MEASURE' OF 5% TO THE AGGREGATE OF 'PREMIA' RECEIVED DURING THE YEAR . 4. BECAUSE THE 'CIT(A)' AFTER HAVING ACCEPTED, THAT THE PROVISIONS OF SECTION 14A READ WITH RULE 8D WERE NOT APPLICABLE IN THE YEAR UNDER APPEAL, HAS GROSSLY ERRED IN UPHOLDING AN AD HOC DISALLOWANCE OF RS.1,00,000/ - , OUT OF EXPENDITURE CLAIMED BY THE 'APPELLANT'. 5. BECAUSE WHILE ACCEPTING THE 'APPELLANT'S' CLAIM UNDER SECTION 80IA, ON RECEIPTS UNDER THE HEAD 'OTHER INCOME', THE 'CIT(A)' SHOUL D HAVE EXTENDED THE RELIEF TO SUCH 'OTHER INCOME' IN RELATION TO THE 'TRONICA CITY' PROJECT ALSO. 6. BECAUSE IN THE MATTER OF 'APPELLANT'S' CLAIM FOR DEDUCTION UNDER SECTION 80 IA(4), THE 'CIT(A)' HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT RECEIPTS UNDE R THE HEAD 'INTEREST' DID NOT FORM PART OF 'ELIGIBLE PROFIT' AND IN GIVING DIRECTION TO THE ASSESSING OFFICER TO RE - CALCULATE THE ELIGIBLE PROFIT (AFTER EXCLUDING THE SAID RECEIPTS). 7. BECAUSE LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, PARTICULA RLY THAT : A) THE APPELLANT IS A 'FINANCIAL CORPORATION' DULY APPROVED BY THE CENTRAL GOVERNMENT VIDE NOTIFICATION DATED 30.05.1975 EFFECTIVE FROM 1973 - 74; AND B) NATURE OF ACTIVITIES CARRIED ON BY IT, RECEIPTS UNDER THE HEAD INTEREST IS AN INSEPARABLE AND INTEGRAL PART OF THE RECEIPT UNDER THE HEAD 'INTEREST' CONSTITUTED AN 10 INSEPARABLE PART OF THE 'PROFITS AND GAINS' DERIVED FROM THE UNDERTAKING/ENTERPRISE OF THE APPELLANT THE SAME COULD NOT HAVE BEEN EXCLUDED FROM THE COMPUTATION OF 'ELIGIBLE PROFIT', FOR THE PURPOSES OF COMPUTING DEDUCTION UNDER SECTION 80 IA OF THE ACT. 10. REGARDING GROUND NO. 1, IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT NO NOTICE U/S 143(2) OF THE ACT WAS ISSUED BY THE ASSESSING OFFICER AS IS EVIDENT FROM THE ASSESSME NT ORDER ITSELF AND THEREFORE, THIS ASSESSMENT ORDER FRAMED BY THE ASSESSING OFFICER U/S 143(3)/148 SHOULD BE HELD AS VOID AB INITIO. AT THIS JUNCTURE, IT WAS POINTED OUT BY THE BENCH THAT AS PER THE DECISION OF PATNA BENCH OF THE TRIBUNAL RENDERED IN THE CASE OF SHYAM BIHARI AGARWAL VS. ACIT IN IT(SS)A NO.05/PAT/2010, IT WAS HELD BY THE TRIBUNAL THAT IF THE RETURN OF INCOME WAS NOT FILED WITHIN THE STATUTORY TIME LIMITED LAID DOWN IN SECTION 158BC, THE RETURN FILED BY THE ASSESSEE AFTER THE EXPIRY OF SAID TIME LIMIT WOULD NOT ONLY BE NOT IN CONFORMITY WITH LAW BUT ALSO NON EST. IT WAS HELD BY THE TRIBUNAL THAT IN THIS VIEW OF THE MATTER, THE ASSESSING OFFICER WAS NOT REQUIRED TO ISSUE NOTICE U/S 143(2) OF THE ACT. THE BENCH RAISED A QUERY THAT IN THE PR ESENT CASE , WHAT WAS THE DATE ON WHICH THE ASSESSEE WAS REQUIRED TO FILE THE RETURN OF INCOME IN COMPLIANCE OF THE NOTICE ISSUED BY THE ASSESSING OFFICER U/S 148 AND WHAT IS DATE ON WHICH RETURN WAS FILED BY THE ASSESSEE. IN REPLY, IT WAS SUBMITTED BY LEA RNED A.R. OF THE ASSESSEE THAT NOTICE U/S 148 WAS ISSUED BY THE ASSESSING OFFICER ON 25/05/2007 BUT HE COULD NOT SUBMIT THE DATE ON WHICH THE RETURN OF INCOME WAS FILED BY THE ASSESSEE IN COMPLIANCE OF THIS NOTICE U/S 148 ISSUED BY THE ASSESSING OFFICER ON 25/05/2007. AS PER THE ASSESSMENT ORDER, WE FIND THAT IT IS NOTED BY THE ASSESSING OFFICER THAT IN COMPLIANCE TO THIS NOTICE DATED 25/05/2007, THE ASSESSEE SUBMITTED THAT THE RETURN ALREADY FILED ON 02/05/2005 SHOULD BE ACCEPTED AS RETURN FILED IN COMPLI ANCE TO THE NOTICE U/S 148. HENCE, THE DATE OF FILING OF RETURN OF INCOME OR THE DATE OF FILING THIS LETTER BEFORE THE 11 ASSESSING OFFICER REQUESTING THE ASSESSING OFFICER TO CONSIDER THE RETURN ALREADY FILED ON 02/05/2005 AS RETURN FILED IN COMPLIANCE TO T HIS NOTICE U/S 148 IS NOT AVAILABLE ON RECORD. A CERTIFIED COPY OF THE ORDER SHEET ENTRY IS AVAILABLE ON PAGE NO. 4 TO 11 OF THE PAPER BOOK AND FROM THE SAME, WE FIND THAT THE NOTICE U/S 148 WAS ISSUED BY THE ASSESSING OFFICER ON 25/05/2007 AND THEREAFTER NOTICE U/S 142(1) WAS ISSUED ON 04/11/2008 FIXING THE DATE OF HEARING ON 14/11/2008 AND THERE WAS NO COMPLIANCE ON THIS DATE. AGAIN A NOTICE U/S 142(1) WAS ISSUED ON 04/12/2008 AND IN COMPLIANCE , SHRI RAJESH KANODIA APPEARED ON 11/12/2008. IN THE ABSENC E OF COPY OF LETTER SUBMITTED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER REQUESTING THE ASSESSING OFFICER TO CONSIDER THE RETURN ALREADY FILED BY THE ASSESSEE ON 02/05/2005 AS THE RETURN FILED IN COMPLIANCE TO THIS NOTICE, WE PRESUME IN THE FACTS OF THE PRESENT CASE THAT SUCH LETTER WAS FILED BEFORE THE ASSESSING OFFICER ON THE DATE WHEN LEARNED A.R. OF THE ASSESSEE APPEARED BEFORE THE ASSESSING OFFICER FOR THE FIRST TIME I.E. ON 11/12/2008. WE ALSO FIND THAT THE ASSESSEE HAS SUBMITTED CHRONOLOGY OF REL EVANT DATES AND EVENTS ON PAGE NO. 2 & 3 OF THE PAPER BOOK AND FROM THE SAME, WE FIND THAT IT IS NOTED THEREIN THAT THE ORIGINAL RETURN OF INCOME WAS FILED ON 02/05/2005 BUT THE SAME WAS TREATED AS NON EST. HENCE, IN THE PRESENT CASE, EVEN THE ORIGINAL RE TURN FILED BY THE ASSESSEE ON 02/05/2005 WAS TREATED AS NON EST AND HENCE SUCH NON EST RETURN CANNOT BE CONSIDERED AS A VALID RETURN AT ANY POINT OF TIME. A S PER THIS TRIBUNAL DECISION RENDERED IN THE CASE OF SHYAM BIHARI AGARWAL VS. ACIT (SUPRA), THIS RET URN OF INCOME FILED BY THE ASSESSEE IN COMPLIANCE TO NOTICE ISSUED BY THE ASSESSING OFFICER U/S 148 HAS TO BE TREATED AS NOT IN CONFORMITY WITH LAW AND NON EST AND THEREFORE, THE ASSESSING OFFICER WAS NOT REQUIRED TO ISSUE NOTICE U/S 143(2) OF THE ACT. AC CORDINGLY, GROUND NO. 1 OF THE ASSESSEE IS REJECTED. 11. REGARDING GROUND NO. 2 , IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT IT IS ADMITTED POSITION THAT THE TRUST CREATED U NDER GROUP 12 GRATUITY SCHEME DOES NOT HAVE THE APPROVAL OF CIT, KANPUR. HE FURTHER SUBMITTED THAT THE STATUS AS ON TODAY IS THIS THAT THE ASSESSEES APPLICATION FOR SUCH APPROVAL STANDS REJECTED BY THE CIT - II EX - PARTE VIDE ORDER DATED 25/06/2012. HE FURTHER SUBMITTED THAT A PETITION FOR REVIEW OF THE SAID ORDER IS FILED BEF ORE THE CIT AND THE SAME IS PENDING SINCE AUGUST, 2012. HE FURTHER SUBMITTED THAT SINCE NO ORDER FOR REJECTING THE ORDER FOR REVIEW HAS BEEN PASSED EVEN AFTER EXPIRY OF A LONG PERIOD, THERE IS A DEEMED APPROVAL OF THE CIT. R ELIANCE WAS PLACED BY HIM ON T HE JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT RENDERED IN THE CASE OF SOCIETY FOR THE PROMOTION OF EDUCATION ADVENTURE SPORT & CONSERVATION OF ENVIRONMENT VS. CIT & ORS AS REPORTED IN [2008] 216 CTR 167, WHICH WAS RENDERED IN THE CONTEXT OF APPROVAL U/S 12AA OF THE ACT. RELIANCE WAS ALSO PLACED ON THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF CIT VS. TEXTOOL CO. LTD. AS REPORTED IN [2013] 216 TAXMAN 327 WHEREIN IT WAS HELD THAT FOR THE REASON THAT AFTER MAKING PAYMENT TO LIC OF INDIA, THE ASSESS EE HAS LOST CONTROL OVER THE FUND , THE ASSESSEE COULD NOT BE DENIED DEDUCTION OF PAYMENT MADE TO LIC OF INDIA BY WAY OF ANNUAL PREMIUM. 12. A N ALTERNATIVE CONTENTION WAS ALSO RAISED BY THE ASSESSEE THAT EVEN IF THE PAYMENT TO LIC OF INDIA IS NOT TREATED A S PAYMENT TOWARDS GRATUITY, THE SAME SHOULD BE ALLOWED AS EXPENDITURE INCURRED BY THE ASSESSEE DURING THE COURSE OF CARRYING ON OF THE BUSINESS AND IN SUPPORT OF THIS CONTENTION, RELIANCE WAS PLACED ON THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CAS E OF SASSOON J. DAVID AND CO. (P.) LTD. VS COMMISSIONER OF INCOME - TAX [1979] 118 ITR 261 (SC) . 13. AS AGAINST THIS, LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDER OF LEARNED CIT(A). 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IT IS ADMITTED POSITION OF FACT THAT APPROVAL IS NOT GRANTED TO THE TRUST CREATED 13 BY THE ASSESSEE AND IN FACT THE REQUEST FOR APPROVAL IS REJECTED BY CIT AS PER HIS ORDER DATED 25/06/2012. NOW THE CL AIM OF THE ASSESSEE IS THAT SINCE THE ASSESSEE HAS FILED A REVIEW APPLICATION IN AUGUST, 2012 BEFORE CIT AND THE SAME IS PENDING, IT SHOULD BE CONSIDERED AS DEEMED APPROVAL. WE DO NOT FIND ANY MERIT IN THIS CONTENTION OF THE LEARNED A.R. OF THE ASSESSEE. IN THIS REGARD, R ELIANCE WAS PLACED BY LEARNED A.R. OF THE ASSESSEE ON THE JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT RENDERED IN THE CASE OF SOCIETY FOR THE PROMOTION OF EDUCATION ADVENTURE SPORT & CONSERVATION OF ENVIRONMENT VS. CIT & ORS (SUPRA). IN THA T CASE , IT WAS HELD BY HON'BLE ALLAHABAD HIGH COURT THAT IF THE REGISTRATION IS NOT GRANTED BY THE CIT U/S 12AA WITHIN THE PRESCRIBED TIME LIMIT OF SIX MONTHS AS PROVIDED IN SUB SECTION 2 OF SECTION 12AA OF THE ACT, IT SHOULD BE CONSIDERED AS DEEMED REGIST RATION. IN THIS REGARD, WE FIND THAT THERE IS SPECIFIC PROVISION FOR DEEMED APPROVAL IN SUB SECTION 2 TO SECTION 12AA THAT THE ORDER IN RESPECT OF THE APPLICATION FOR REGISTRATION U/S 12AA SHOULD BE PASSED BEFORE THE EXPIRY OF SIX MONTHS FROM THE END OF T HE MONTH IN WHICH THE APPLICATION WAS RECEIVED U/S 12A ( 1) OF THE ACT. LEARNED A.R. OF THE ASSESSEE COULD NOT POINT OUT ANY SUCH DEEMING PROVISION IN THE ACT AS PER WHICH THE APPLICATION OF THE ASSESSEE FOR REVIEW IS TO BE DISPOSED OF BY THE CIT WITHIN A FIXED TIME AND IF IT IS NOT SO DISPOSED OF, IT WILL AMOUNT TO DEEMED APPROVAL OF GRATUITY FUND AND THEREFORE, IN THE FACTS OF THE PRESENT CASE, THIS JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT IS NOT RENDERING ANY HELP TO THE ASSESSEE. RELIANCE HAS BEEN PLAC ED BY LEARNED A.R. OF THE ASSESSEE ON ONE MORE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF CIT VS. TEXTOOL CO. LTD. (SUPRA) IN SUPPORT OF T HIS CONTENTION THAT EVEN IN THE ABSENCE OF REGISTRATION IN THE RELEVANT YEAR, DEDUCTION IS TO BE ALLOWED I N RESPECT OF PAYMENT TO LIC OF INDIA BECAUSE AFTER MAKING THE PAYMENT TO LIC OF INDIA, THE ASSESSEE HAS LOST CONTROL OVER THE FUND AND THEREFORE, THE ASSESSEE COULD NOT BE DENIED DEDUCTION OF PAYMENT MADE TO LIC BY WAY OF ANNUAL PREMIUM. IN THIS REGARD, W E FIND THAT AS PER FACTS NOTED BY HON'BLE 14 APEX COURT IN THIS CASE, THE ASSESSEE COMPANY S GRATUITY FUND I.E. TEXTOOL EMPLOYEES GROUP GRATUITY FUND WAS APPROVED BY CIT, COIMBATORE WITH EFFECT FROM 25/02/83. IN FACT , THE ASSESSING OFFICER HAS ALSO ALLOWED D EDUCTION OF RS.36,22,224/ - U/S 40A( 7 ) OF THE ACT BUT DEDUCTION FOR THE BALANCE AMOUNT WAS DISALLOWED ON THE GROUND THAT THE PAYMENT TOWARDS GRATUITY FUND WAS MADE DIRECTLY TO THE LIC AND NOT TO THE APPROVED FUND AND THEREFORE, DEDUCTION IS NOT ALLOWABLE. HENCE, IT IS SEEN THAT THE FACTS OF THAT CASE ARE DIFFERENT. IN THAT CASE, THE GRATUITY FUND WAS DULY APPROVED BY CIT WITH EFFECT FROM 25/02/1983 AND THE ASSESSMENT YEAR WAS 83 - 84 AND THEREFORE, FROM THE FIRST DATE OF THE RELEVANT ASSESSMENT YEAR I.E. ON 01/04/83, THE GRATUITY FUND WAS DULY APPROVED BY CIT AND THE DISALLOWANCE OF PART AMOUNT WAS MADE ONLY ON THE BASIS OF CERTAIN IRREGULARITY IN RESPECT OF PAYMENT WHEREAS IN THE PRESENT CASE, THE FUND ITSELF IS NOT APPROVED EVEN TILL DATE AND THEREFORE, THI S JUDGMENT IS NOT APPLICABLE IN THE FACTS OF THE PRESENT CASE. 15. REGARDING THE ALTERNATIVE CONTENTION OF LEARNED A.R. OF THE ASSESSEE THAT EVEN IF THIS DEDUCTION IS NOT ALLOWABLE AS PAYMENT TOWARDS GRATUITY THEN THE SAME SHOULD BE ALLOWED AS BUSINESS E XPENDITURE U/S 37 OF THE ACT AND IN SUPPORT OF THIS CONTENTION RELIANCE WAS PLACED BY LEARNED A.R. OF THE ASSESSEE ON THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF SASSOON J. DAVID AND CO. (P.) LTD. VS COMMISSIONER OF INCOME - TAX (SUPRA). IN O UR CONSIDERED OPINION, THIS JUDGMENT OF HON'BLE APEX COURT IS NOT AT ALL APPLICABLE BECAUSE THE RATIO OF THE JUDGMENT IS THAT EXPRESSION WHOLLY AND EXCLUSIVELY USED IN SECTION 10(2)(XV) OF THE ACT DOES NOT MEAN NECESSARILY. IN VIEW OF THIS, IT WAS HELD BY HON'BLE APEX COURT THAT EVEN IF THERE WAS NO COMPELLING NECESSITY TO INCUR SUCH EXPENDITURE, DEDUCTION IS ALLOWABLE IF AN EXPENDITURE HAS BEEN INCURRED FOR PROMOTING THE BUSINESS AND TO EARN PROFIT. IN THE PRESENT CASE, T HIS IS NOT IN DISPUTE AS TO WHETHER THE EXPENDITURE IS NECESSARY OR NOT. THE DISPUTE IS THAT THE PAYMENT IS NOT 15 TO AN APPROVED GRATUITY FUND. MOREOVER, THE PROVISION OF SECTION 37(1) IS IN RESPECT OF THOSE EXPENDITURE, WHICH ARE NOT COVERED BY SECTION 30 TO 36 OF THE ACT. THE PAYMENT IN RESPECT OF GRATUITY IS DULY COVERED BY SECTION 36(1)(V) OF THE ACT AND THEREFORE, THE SAME CANNOT BE COVERED U/S 37(1) OF THE ACT. 16. AS PER ABOVE DISCUSSIO0N, WE HAVE SEEN THAT NONE OF THE CONTENTIONS RAISED BY THE LE ARNED A.R. OF THE ASSESSEE IS ACCEPTABLE IN THE FACTS OF THE PRESENT CASE AND THEREFORE, ON THIS ISSUE ALSO, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A). ACCORDINGLY, GROUND NO. 2 IS ALSO REJECTED. 17. REGARDING GROUND NO. 3, IT WAS SUB MITTED BY LEARNED A.R. OF THE ASSESSEE THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION IN ASSESSEES OWN CASE IN EARLIER YEARS. IN THIS REGARD , IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THE TRIBUNAL DECISION IS AV AILABLE ON PAGE NO. 449 TO 453 OF THE PAPER BOOK. 18. LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDER OF LEARNED CIT(A). 19. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT ON PAGE NO. 449 TO 453 OF THE PAPER BOOK, THERE IS NO TRIBUNAL DECISION A ND IN FACT IT IS PART OF WRITTEN SUBMISSIONS OF LEARNED A.R. OF THE ASSESSEE BEFORE US. IN THE WRITTEN SUBMISSIONS , IT HAS BEEN SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT SIMILAR ADDITION HAS BEEN MADE IN EARLIER YEAR ALSO AND THE SAME STANDS UPHELD F ROM THE STAGE OF THE TRIBUNAL IN ALL THE YEARS. HE ALSO SUBMITTED THAT THE MATTER IS NOT SUB JU D ICE BEFORE HON'BLE ALLAHABAD HIGH COURT BUT THE ASSESSEE BEGS TO PLEAD THAT THE MATTER REQUIRED RECONSIDERATION IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE C ASE. WE DO NOT FIND ANY MERIT IN THIS SUBMISSION OF LEARNED A.R. OF THE ASSESSEE BECAUSE WHEN THE MATTER IS SQUARELY COVERED AGAINST THE ASSESSEE BY THE TRIBUNAL DECISION IN ASSESSEES OWN CASE IN EARLIER YEARS, WE DO NOT FIND ANY REASON TO TAKE A CONTRA RY VIEW IN THE PRESENT YEAR. ACCORDINGLY, THIS 16 GROUND IS ALSO REJECTED BY RESPECTFULLY FOLLOWING THE TRIBUNAL DECISION IN EARLIER YEAR. 20. REGARDING GROUND NO. 4, IT IS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THE AVERAGE AMOUNT OF INVESTMENT WA S TO THE EXTENT OF RS.1259.25 LAC AS HAS BEEN NOTED BY ASSESSING OFFICER ON PAGE NO. 8 OF THE ASSESSMENT ORDER. HE ALSO SUBMITTED THAT AS CAN BE SEEN ON PAGE NO. 16 OF THE PAPER BOOK, THE OWN FUNDS WERE TO THE EXTENT OF RS.7800.75 LAC AT THE END OF THE YE AR AND RS.7014.75 LAC AT THE BEGINNING OF THE YEAR. HE SUBMITTED THAT UNDER THESE FACTS, NO DISALLOWANCE IS JUSTIFIED IN RESPECT OF INTEREST EXPENDITURE. REGARDING THE DISALLOWANCE IN RESPECT OF ADMINISTRATIVE EXPENSES, HE SUBMITTED THAT THE SAME SHOULD BE REASONABLE. LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDER OF LEARNED CIT ( A). 21. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND FORCE IN THIS CONTENTION OF LEARNED A.R. OF THE ASSESSEE THAT SINCE OWN INTEREST FREE FUNDS WERE MORE THAN THE INVEST MENT , NO DISALLOWANCE IS JUSTIFIED OUT OF INTEREST EXPENDITURE BUT STILL SOME DISALLOWANCE IS JUSTIFIED OUT OF ADMINISTRATIVE EXPENSES. OUT OF ADMINISTRATIVE EXPENSES, THE DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER OF RS.6,29,626/ - AS PER RULE 8D BUT CIT(A) HAS CONFIRMED THE DISALLOWANCE OF RS.1 LAC AND THE SAME IS IN RESPECT OF ADMINISTRATIVE EXPENDITURE IN RESPECT OF MANAGING THE INCOME ACCRUED FROM THESE SHARED HELD AS INVESTMENT. IN OUR CONSIDERED OPINION, THE DISALLOWANCE OF RS1 LAC IS NOT EXCESS IVE AND THEREFORE, WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE ALSO. ACCORDINGLY, GROUND NO. 4 IS ALSO REJECTED. 22. REGARDING GROUND NO. 5, IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT SIMILAR RECEIPTS IN RESPECT OF TWO PROJECTS I.E. TRONICA CITY, INDUSTRIAL MODEL TOWN, LONI AND GREATER NOIDA EXPORT PROMOTION INDUSTRIAL PARK WERE EXCLUDED BY THE ASSESSING OFFIC ER FROM THE BUSINESS PROFIT FOR 17 THE PURPOSE OF COMPUTING DEDUCTION ALLOWABLE TO THE ASSESSEE U/S 80IA OF THE ACT. HE FURTHER SUBMITTED THAT THIS ISSUE HAS BEEN DECIDED BY THE CIT(A) AS PER PARA 10.3.7 AND 10.3.8 OF HIS ORDER BUT WHILE DECIDING THIS ISSUE, THE CIT(A) HAS NOTED DOWN THE RECEIPTS IN RESPECT OF ONE PROJECT ONLY I.E. GREATER NOIDA EXPORT PROMOTION INDUSTRIAL PARK AND HE HAS NOT NOTED DOWN THE RECEIPTS IN RESPECT OF TRONICA CITY, WHICH ARE OF THE SAME NATURE AND THEREFORE, THE TRIBUNAL SHOULD DI RECT THE ASSESSING OFFICER THAT SIMILAR BENEFIT SHOULD BE ALLOWED IN RESPECT OF THESE RECEIPTS OF TRONICA CITY ALSO TOTALING TO RS.97,64,807/ - . 23. LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDER OF CIT(A). 24. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IT WAS HELD BY THE ASSESSING OFFICER THAT THE AMOUNT OF RS.1,05,11,689/ - IS IN THE NATURE OF INCOME FROM OTHER SOURCES AND THE SAME IS NOT ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT . AS APPEARING ON PAGE NO. 3 OF THE ASSESSMENT ORDER, IT IS S EEN THAT IT INCLUDES VARIOUS RECEIPTS OF SAME NATURE, SUCH AS PROCESSING FEE, MISC. RECEIPTS, EARNEST MONEY USED AND QUOTATION CHARGES IN RESPECT OF TWO PROJECTS I.E. TRONICA CITY, INDUSTRIAL MODEL TOWN, LONI AND GREATER NOIDA EXPORT PROMOTION INDUSTRIAL PARK. AS PER PARA 10.3.7 AND 10.3.8 OF HIS ORDER, THE CIT(A) HAS HELD THAT THESE RECEIPTS HAVE DIRECT NEXUS WITH THE ASSESSEES BUSINESS AND THEREFORE, HE DIRECTED THE ASSESSING OFFICER TO RECOMPUTE THE DEDUCTION U/S 80IA WITHOUT EXCLUDING THE SE RECEIPTS. BUT IN PARA 10.3.7, THE CIT(A) HAS NOTED DOWN THE AMOUNT OF RECEIPTS IN RESPECT OF ONLY ONE PROJECT I.E. GREATER NOIDA EXPORT PROMOTION INDUSTRIAL PARK AND HE HAS NOT NOTED THE RECEIPTS OF SIMILAR NATURE IN RESPECT OF OTHER PROJECT I.E. TRONICA CITY, IND USTRIAL MODEL TOWN, LONI. SINCE THE RECEIPTS OF BOTH THE PROJECTS ARE OF SIMILAR NATURE, WE FAIL TO UNDERSTAND AS TO HOW THE RECEIPTS OF ONE PROJECT IS ALLOWABLE FOR DEDUCTION AND SIMILAR RECEIPTS OF OTHER PROJECTS IS NOT ALLOWABLE. HENCE, WE DIRECT THE ASSESSING OFFICER TO EXCLUDE THE RECEIPTS OF BOTH THESE PROJECTS IN 18 THE BUSINESS PROFIT FOR THE PURPOSE OF COMPUTING DEDUCTION ALLOWABLE TO THE ASSESSEE U/S 80IA OF THE ACT. ACCORDINGLY, GROUND NO. 5 STANDS ALLOWED. 25. IT IS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE REGARDING GROUND NO. 6 & 7 THAT CIT(A) WAS NOT JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO EXCLUDE INTEREST RECEIVED FROM THE ALLOTTEES FROM PROFIT OF THE ELIGIBLE BUSINESS FOR THE PURPOSE OF COMPUTING DEDUCTION ALLOWABLE TO THE ASSESSEE U/S 80IA OF THE ACT. HE FURTHER SUBMITTED THAT AS PER THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF LIBERTY INDIA VS COMMISSIONER OF INCOME - TAX [2009] 317 ITR 218 (SC) , IT WAS HELD BY HON'BLE APEX COURT THAT SOURCE OF FIRST DEGREE IS ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. HE SUBMITTED THAT THE CIT(A) WAS NOT JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO EXCLUDE INTEREST INCOME FROM THE BUSINESS PROFIT FOR THE PU RPOSE OF COMPUTING DEDUCTION ALLOWABLE TO THE ASSESSEE U/S 80IA OF THE ACT. HE PLACED RELIANCE ON THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF TOPMAN EXPORTS VS COMMISSIONER OF INCOME - TAX [2012] 342 ITR 49 (SC) IN RESPECT OF DEDUCTION ALLOWA BLE U/S 80HHC OF THE ACT AND SUBMITTED THAT THEREIN IT WAS HELD THAT THE EXPORT INCENTIVE BEING VALUE OF DEPB INCENTIVE IS INCOME DERIVED FROM EXPORT BUSINESS AND THEREFORE, ELIGIBLE FOR DEDUCTION U/S 80HHC OF THE ACT. HE FURTHER SUBMITTED THAT THE INTERE ST REALIZED BY THE ASSESSEE ON UNPAID AMOUNT OF PREMIUM FORMS PART OF PROFIT AND GAINS DERIVED FROM THE UNDERTAKING/BUSINESS ENTERPRISE AND THEREFORE, THE SAME IS ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. 26. LEARNED D.R. OF THE REVENUE SUPPORTED THE OR DERS OF THE AUTHORITIES BELOW. 27. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THE DISPUTE IS IN RESPECT OF INTEREST INCOME EARNED BY THE ASSESSEE IN RESPECT OF INSTALLMENT OF PREMIUMS. THIS ISSUE HAS BEEN DECIDED BY CIT(A) AGAINST 19 THE ASSESSEE AS PER PARA NO. 10.3 TO 10.3.5 OF HIS ORDER AND FOR THE SAKE OF READY REFERENCE, THESE PARAS ARE REPRODUCED HEREIN BELOW: 10.3 DECISION IT CAN BE SEEN FROM THE LD. A.R'S SUBMISSION THAT THE IMPUGNED INTEREST INCOME HAS BEEN EARNED BY THE ASSESSEE ON ACCOUNT OF INSTALLMENTS GRANTED BY THE ASSESSEE (TO THE RESPECTIVE ENTREPRENEURS) IN RESPECT OF THE PREMIUM PAYABLE ON LEASE OF THE INDUSTRIAL LAND. IT IS ALSO AN ADMITTED FACT (PLEASE SEE THE EXTRACT OF THE LETTER OF THE LD. A.R REPRODUCED ABOVE) THAT IN CASE WHERE THE PREMIUM IS PAID IN ONE LUMP - SUM AT THE TIME OF ALLOTMENT, THERE IS NO CHAR G E OF INTEREST BY THE ASSESSEE. IN THIS FACT OF THE M ATTER, SUCH INTEREST INCOME EARNED BY THE APPELLANT CANNOT BE SAID TO BE 'DERIVED FROM' THE ELIGIBLE BUSINESS. AN INCOME COULD BE SAID TO BE 'DERIVED FROM' ONLY WHEN THE NEXUS BETWEEN THE SOURCE OF THE INCOME AND THE INCOME IS OF THE 1 ST DEGREE. IN THE INS TANT CASE, WHEN APPELLANT LEASES OUT THE INDUSTRIAL PLOTS TO THE PROSPECTIVE ENTREPRENEURS, THE APPELLANT IS ENTITLED TO 'PREMIUM', WHICH HAS BEEN CONSIDERED BY THE APPELLANT AS CAPITAL RECEIPTS. THE RECEIPTS WHICH HAVE BEEN SHOWN BY THE ASSESSEE COMPANY A S 'INCOME' FROM SUCH LEASING OUT OF THE PLOTS IS ACTUALLY THE INTEREST INCOME EARNED ON INSTALLMENT GRANTED (AS DISCUSSED ABOVE). EARNING OF INTEREST ON INSTALLMENTS GRANTED MAY BE SAID TO HAVE SOME LINK WITH THE BUSINESS, BUT SUCH RECEIPTS CANNOT BE SAID TO INCOME 'DERIVED FROM' SUCH ELIGIBLE BUSINESS SINCE IT HAS NO 1 ST DEGREE NEXUS WITH THE ELIGIBLE BUSINESS. IN THIS REGARD, REFERENCE IS INVITED TO THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT V/S. RAJA BAHADUR KAMAKHAYA NARAYAN SINGH (16 ITR 325). IN THIS CASE, THE QUESTION WAS WHETHER INTEREST RECEIVED ON ARREARS OF RENT PAYABLE IN RESPECT OF LAND USED FOR AGRICULTURAL PURPOSE WAS INCOME 'DERIVED FROM' LAND? IT WAS ANSWERED BY THE HON'BLE SUPREME COURT THAT - 'THE INTEREST CLEARLY IS NOT RENT. RENT IS O TECHNICAL CONCEPTION, ITS LEADING CHARACTERISTIC BE ING THAT IT IS PAYMENT IN MONEY OR IN KIND BY ONE PERSON TO ANOTHER IN RESPECT OF THE GRANT OF A RIGHT TO USE LAND. INTEREST PAYABLE BY STATUTE ON RENT IN ARREAR IS NOT SUCH A PAYMENT. IT IS NOT PART OF THE RENT NOR IS IT AN ACCRETION TO IT THOUGH IT IS RE CEIVED IN RESPECT OF IT. 20 'EQUALLY CLEARLY THE INTEREST ON RENT IS REVENUE, BUT IN THEIR LORDSHIPS' OPINION IT IS NOT REVENUE DERIVED FROM LAND. IT IS NO DOUBT TRUE THAT WITHOUT THE OBLIGATION TO PAY RENT AND RENT IS OBVIOUSLY DERIVED FROM LAND THERE COULD BE NO ARREARS OF RENT AND WITHOUT ARREARS OF RENT THERE WOULD BE NO INTEREST BUT THE AFFIRMATIVE PROPOSITION THAT INTEREST IS DERIVED FROM LAND DOES NOT EMERGE FROM THIS SERIES OF FACTS. ALL THAT EMERGES IS THAT AS REGARDS THE INTEREST LAND RENT AND NONPA YMENT OF RENT STAND TOGETHER AS CAUSAE SINE QUIBUS NON. THE SOURCE FROM WHICH THE INTEREST IS DERIVED HAS NOT THEREBY BEEN ASCERTAINED. THE WORD 'DERIVED' IS NOT A TERM OF ART. ITS USE IN THE DEFINITION INDEED DEMANDS AN ENQUIRY INTO THE GENEALOGY OF THE PRODUCT. BUT THE ENQUIRY SHOULD STOP AS SOON AS THE EFFECTIVE SOURCE IS DISCOVERED. IN THE GENEALOGICAL TREE OF THE INTEREST LAND INDEED APPEARS IN THE SECOND DEGREE, BUT THE IMMEDIATE AND EFFECTIVE SOURCE IS RENT, WHICH HAS SUFFERED THE ACCIDENT OF NONPAY MENT . AND RENT IS NOT LAND WITHIN THE MEANING OF THE DEFINITION. THERE IS NO COMMERCIAL CONNECTION BETWEEN THE INTEREST AND THE RENTED LAND AND EFFECTIVE SOURCE NOT LAND HAS BECOME APPARENT. THESE CONSIDERATIONS SUPPLY A NEGATIVE ANSWER TO THE QUESTION POSED, SUBJECT TO AN ENTIRELY DIFFERENT POINT TAKEN BY THE RESPONDENTS.' 10.3.1 THIS DECISION WAS APPROVED AND REITERATED IN 1955 BY A CONSTITUTIONAL BENCH OF THE HON'BLE SUPREME COURT IN THE CASE OF MRS. BACHA F. GUZDARA V/S CIT [27 ITR 1]. FURTHER, IN THE DECISION OF PANDIAN CHEMICALS LTD. [ 262 ITR 278], THE HON'BLE SUPREME COURT ONCE AGAIN EXPLAINED THE SIGNIFICANCE OF THE EXPRESSION 'DERIVED FROM' AS: 'IT IS CLEAR, THEREFORE, THAT THE WORD 'DERIVED FROM' IN SECTION 80HH OF THE INCOME TAX ACT, 1961, MUST BE UNDERSTOOD AS SOMETHING WHICH HAS DIRECT OR IMMEDIATE NEXUS WITH THE APPELLANT'S INDUSTRIAL UNDERTAKING. ALTHOUGH ELECTRICITY MAY BE REQUIRED FOR THE PURPOSES OF THE INDUSTRIAL UNDERTAKING, 'THE DEPOSIT REQUIRED FOR ITS SUPPLY IS A STEP REMOVED FRO M THE BUSINESS OF THE 21 INDUSTRIAL UNDERTAKING. THE DERIVATION OF PROFITS ON THE DEPOSIT MADE WITH ELECTRICITY BOARD CANNOT BE SAID TO FLOW DIRECTLY FROM THE INDUSTRIAL UNDERTAKING ITSELF.' 10.3.2 SIMILARLY, IN THE CASE OF ORISSA STATE WAREHOUSING CORPORA TION V/S CIT [237 ITR 589 (SC)], THE HON'BLE SUPREME COURT HAS OBSERVED THAT INCOME RECEIVED BY STATE WAREHOUSING CORPORATION FROM INTEREST ON FIXED DEPOSITS, INCOME FROM PROCUREMENT OF GRAINS FROM FCI/STATE GOVT. AND MISC. INCOME ARE NOT ENTITLED TO EXEMP TION SINCE SUCH INCOMES ARE NOT DERIVED FROM THE 10.3.3 IN MAHARAJ KUMAR GOPAL SARAN NARAIN SINGH V/S. CIT [3 ITR 237 (PC)] WHICH WAS A CASE WHEREIN THE ASSESSEE HAD CONVEYED THE GREATER PORTION OF HIS ESTATE. THE CONSIDERATION FOR SUCH TRANSFER WAS, INTE R - ALIA, AN ANNUAL PAYMENT OF RS.2.4 LAKH TO THE ASSESSEE FOR LIFE. THE HON'BLE PRIVY COUNCIL HELD THAT THIS ANNUAL PAYMENT WAS NOT AGRICULTURAL INCOME AS IT WAS NOT RENT OR REVENUE DERIVED FROM LAND, BUT MONEY PAYABLE UNDER A CONSTRAINT IMPOSING A PERSONAL LIABILITY. 10.3.4 SIMILAR IS THE DECISION OF THE HON'BLE SUPREME COURT IN THE FOLLOWING CASES: I. CAMBAY ELECTRIC SUPPLY V/S. CIT [113 ITR 84] II. LIBERTY INDIA V/S CIT [317 ITR 444] III. CIT V/S STERLING FOODS [237 ITR 579] IV. CIT V/S KIRAN ENTERPRISES [189 TAXMAN 457 (HP)] 10.3.5 IN VIEW OF. THE OVERWHELMING NUMBER OF DECISIONS OF THE HON'BLE SUPREME COURT ON THIS ISSUE, THE LAW IN THIS REGARD IS NO MORE 'RES - INTEGRA'. THUS, IT HAS TO BE HELD THAT INTEREST EARNED BY THE APPELLANT ON INSTALLMENTS GRANTED IN RESPECT OF PREMIUM PAYABLE, OTHER INTEREST INCOME, OTHER MISC. RECEIPTS MAY HAVE SOME LINK WITH THE BUSINESS OF THE APPELLANT, YET SUCH RECEIPTS CAN NEVER BE SAID TO HAVE BEEN 'DERIVED FROM' SUCH ELIGIBLE BUSINESS SINCE SUCH INCOME HAVE NO DIRECT NEXUS WITH THE ELIGIBLE BUSINESS. THUS, THE A.O SHOULD ALSO HAVE NOT ALLOWED THE DEDUCTION U/S.80IA ON THE INTEREST EARNED BY THE APPELLANT (ON THE INSTALLMENTS GRANTED), WHICH NOW I ORDER THE A.O TO WITHDRAW THE SAME. 27.1 FROM THE ABOVE PARAS OF CIT(A), WE FIND THAT A CLEAR FINDING IS GIVEN BY CIT(A) THAT EARNING OF INTEREST ON INSTALLMENTS GRANTED MAY BE SAID TO 22 HAVE SOME LINK WITH BUSINESS BUT SUCH RECEIPTS CANNOT BE SAID TO BE INCOME DERIVED FROM SUCH ELIGIBLE BUSINESS SINCE IT HAS NO FIRST DEGREE NEXUS WITH THE ELIGIBLE BUSINESS. THIS FINDING OF CIT(A) COULD NOT BE CONTROVERTED BY LEARNED A.R. OF THE ASSESSEE BECAUSE EARNING OF INTEREST INCOME IS NOT THE ELIGIBLE BUSINESS OF THE ASSESSEE COMPANY. THE ELIGIBLE BUSINESS OF THE ASSESSEE IS INFRASTRUCTURE DEVELOPMENT BY WAY OF DEVELOPMENT OF INDUSTRIAL AREA OR PLOT FOR PROVIDING THE SAME TO ENTREPRENEURS FOR SETTING UP OF INDUSTRIAL UNIT FOR THE INDUSTRIAL DEVELOPMENT OF THE CITY. HENCE, EARNING OF INTEREST INCOME IS NOT AN ELIGIBLE BUSI NESS OF THE ASSESSEE COMPANY. EARNING OF INTEREST INCOME BY WAY OF ALLOWING INSTALLMENT OF LEASE RENT CAN BE SAID TO BE RELATED WITH THIS ELIGIBLE ACTIVITY OF THE ASSESSEE COMPANY BUT DEFINITELY THIS INTEREST CANNOT BE SAID TO BE AN INCOME DERIVED FROM TH IS ELIGIBLE ACTIVITY OF THE ASSESSEE. THIS HAS TO BE NOTED THAT THE ASSESSEE COMPANY IS ALSO WORKING AS FINANCIAL CORPORATION AND IF THE ASSESSEE COMPANY IS MIXING ITS BOTH ACTIVIT IES I.E. DEVELOPMENT OF INFRASTRUCTURE FACILITY AND GRANTING OF FINANCE BY WAY OF GRANTING INSTALLMENTS, IT CANNOT BE SAID THAT INCOME FROM BOTH THE ACTIVITIES IS ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. IN THE PRESENT CASE, THE ASSESSEE COMPANY HAS MIXED ITS BOTH THE ACTIVITIES BY WAY OF GRANTING INSTALLMENTS IN RESPECT OF PREMIUM AND HENCE, IN OUR CONSIDERED OPINION, SUCH INTEREST INCOME CANNOT BE CONSIDERED AS INCOME OF ELIGIBLE BUSINESS FOR THE PURPOSE OF COMPUTING DEDUCTION ALLOWABLE TO THE ASSESSEE U /S 80IA OF THE ACT. HENCE, IN OUR CONSIDERED OPINION, NONE OF THE JUDGMENTS CITED BY LEARNED A.R. OF THE ASSESSEE IS RENDERING ANY HELP TO THE ASSESSEE BECAUSE THE FACT REMAINS THAT INTEREST INCOME IS NOT AN INCOME DERIVED FROM THE ELIGIBLE BUSINESS AND T HE PROVISIONS OF SUB SECTION 1 OF SECTION 80IA ITSELF SPECIFY THAT FOR ANY PROFIT AND GAINS DERIVED BY AN UNDERTAKING OR ENTERPRISES FROM ANY BUSINESS REFERRED TO IN SUB SECTION 4 I.E. ELIGIBLE BUSINESS, DEDUCTION IS ALLOWABLE. THE BUSINESS OF THE ASSESSE E COMPANY IS COVERED BY SUB CLAUSE (III) OF CLAUSE C OF SUB SECTION 4 OF SECTION 80IA OF THE ACT. AS PER THIS SUB CLAUSE 23 (III), IT IS SEEN THAT ANY UNDERTAKING WHICH DEVELOPS, MAINTAINS, OPERATES AN INDUSTRIAL PAR K OR SPECIAL ECONOMIC ZONE NOTIFIED BY T HE CENTRAL GOVERNMENT IN ACCORDANCE TO THE SCHEME FRAMED AND NOTIFIED BY THAT GOVERNMENT FOR THE PERIOD BEGINNING ON THE FIRST DAY OF 1987 AND ENDING ON 31 ST MARCH, 2006. HENCE, ONLY PROFIT DERIVED FROM DEVELOPING AND OPERATING AND MAINTAINING INDUSTRIAL PARK IS ELIGIBLE FOR DEDUCTION AND INTEREST INCOME CANNOT BE SAID TO BE AN INCOME ON ACCOUNT OF DEVELOPMENT OR OPERATION OR MAINTENANCE OF INDUSTRIAL PARK/ SPECIAL ECONOMIC ZONE. INTEREST INCOME IS IN RESPECT OF MAKING AVAILABLE THE FINANCE AND PARTICULAR LY IN THE PRESENT CASE , THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF FINANCING ALSO AND THE ASSESSEE HAS MIXED ITS BOTH THE ACTIVITIES AND THEREBY CLAIMING DEDUCTION U/S 80IA IN RESPECT OF INTEREST INCOME OF FINANCING ACTIVITY WHICH IS NOT ELIGIBLE FOR SUCH DEDUCTION. HENCE, WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE ALSO. ACCORDINGLY, GROUND NO. 6 & 7 ARE REJECTED. 28. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS PARTLY ALLOWED. 29. NOW WE TAKE UP THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2003 - 04 I.E. I.T.A. NO.396/LKW/2011. 30. GROUND NO. 1 OF THE APPEAL IS AS UNDER: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.47,33,032/ - MADE ON ACCOUNT OF CONTRIBUTION MADE TO UDYOG BANDHU WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO SUBMIT ANY DETAILS WITH REGARD TO THE PRECISE NATURE OF THE CLAIM INCLUDING ITS BUSINESS NEXUS AND ALSO, ITS ALLOWABILITY UNDER ANY SPECIFIC PROVISION OF THE ACT. 31. LEARNED D.R. OF THE REVENUE SUPPORTE D THE ASSESSMENT ORDER WHEREAS LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF CIT(A). HE ALSO SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2002 - 03 IN 24 I.T.A. NO.192/L KW/2007 DATED 17/09/2008, COPY OF WHICH IS AVAILABLE ON PAGES 147 TO 148 OF THE PAPER BOOK. HE ALSO SUBMITTED THAT THIS ISSUE IS ALSO COVERED BY THE JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT RENDERED IN ASSESSEES OWN CASE IN INCOME TAX APPEAL NO. 103 OF 2 009 DATED 03/09/2012, COPY OF WHICH IS AVAILABLE ON PAGE NO. 388 AND 389 OF THE PAPER BOOK. 32. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION AND ALSO BY THE JUDGM ENT OF HON'BLE ALLAHABAD HIGH COURT IN ASSESSEES OWN CASE. IN THE JUDGMENT, IT WAS HELD BY HON'BLE ALLAHABAD HIGH COURT THAT CONTRIBUTION MADE BY THE ASSESSEE TO UDYOG BANDHU WAS RIGHTLY ALLOWED AS BUSINESS EXPENSES AND IT WAS INCIDENTAL TO THE BUSINESS U/S 37 OF THE ACT. HENCE, RESPECTFULLY FOLLOWING THIS JUDGMENT, WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE. ACCORDINGLY, GROUND NO. 1 OF THE REVENUE IS REJECTED. 33. GROUND NO. 2 OF THE APPEAL IS AS UNDER: 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE ON ACCOUNT OF INCOME FROM ACCRUED INTEREST WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD NOT DISCLOSED INTEREST INCOME AMOUNTING TO RS.3,63,72,915/ - DEEMED TO HAVE ACCRUED DURI NG THE CURRENT YEAR. 34. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF CIT(A). HE ALSO SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECIS ION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2001 - 02 IN I.T.A. NO.116/LKW/07 DATED 05/02/2010, COPY OF WHICH IS AVAILABLE ON PAGE NO. 149 TO 167 OF THE PAPER BOOK AND THE RELEVANT PORTION IS AVAILABLE ON PAGE 164 TO 167 OF THE PAPER BOOK. 25 35. WE HAVE CO NSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THE ISSUE INVOLVED IN THE PRESENT CASE AS PER THIS GROUND IS IN RESPECT OF INTEREST ACCRUED IN RESPECT OF THOSE PLOTS WHICH ARE UNDER LITIGATION AND IT IS THE CLAIM OF THE ASSESSEE THAT CHANCES OF RECOVERY OF S UCH INTEREST IS NIL AND THE INTEREST HAS NOT BEEN ACCOUNTED FOR IN PROFIT & LOSS ACCOUNT AND HAS NOT BEEN DECLARED IN ITS INCOME. IN ASSESSMENT YEAR 2002 - 03 ALSO , IT IS NOTED BY THE TRIBUNAL IN PARA 13 THAT THE DISPUTE REGARDING INTEREST AMOUNTING TO RS.3 06.24 LAC WAS RELATED TO THE NON PERFORMING ASSETS. IN THAT YEAR ALSO, THE SAID INTEREST WAS NOT RECEIVED AND IT WAS POINTED OUT BY WAY OF NOTES ON ACCOUNTS OF THE AUDIT REPORT THAT THE CHANCES OF RECOVERY ARE ALSO VERY WE A K. THE TRIBUNAL HAS CONSIDERED THE PROVISIONS OF SECTION 43D OF THE ACT AND THEREAFTER DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 36. LEARNED D.R. OF THE REVENUE COULD NOT POINT OUT ANY DIFFERENCE IN FACTS AND HENCE, WE DO NOT FIND ANY REASON TO TAKE A CONTRARY VIEW IN THE PRESENT YE AR. THEREFORE, RESPECTFULLY FOLLOWING THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR EARLIER YEAR, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE ALSO. ACCORDINGLY, GROUND NO. 2 IS ALSO REJECTED. 37. GROUND NO. 3 OF THE APPEAL IS AS UNDER: 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.16,35,528/ - MADE U/S 14A WITHOUT APPRECIATING THE FACT THAT THE SUBSTANTIVE LAW U/S 14A WAS ALREADY IN EXISTENCE RETROSPECTIVELY AND ITS PROVISIONS (2) & ( 3) AND RULE 8D ARE CLARIFICATORY IN NATURE AND WERE MERELY INTRODUCED TO CLARIFY THE MODE OF CALCULATION OF EXPENSES INCURRED IN RELATION TO EXEMPTED INCOME. 38. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER. HE ALSO SUBMITTED THAT NOW THI S IS THE SETTLED POSITION OF LAW THAT RULE 8D IS APPLICABLE FROM ASSESSMENT YEAR 2008 - 09 ONWARDS AND THEREFORE, THE SAID 26 RULE IS NOT APPLICABLE IN THE PRESENT YEAR AS HAS BEEN HELD BY HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS . DY. CIT AS REPORTED IN [2010] 234 CTR (BOM) 1. HE SUBMITTED THAT IN THE LIGHT OF THIS JUDGMENT OF HON'BLE BOMBAY HIGH COURT, THE ISSUE MAY BE RESTORED TO THE FILE OF ASSESSING OFFICER FOR FRESH DECISION. 39. AS AGAINST THIS, LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). 40. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT CIT(A) HAS DECIDED THE ISSUE ON THE BASIS THAT NO PART OF INTEREST PAYMENT CAN BE ATTRIBUTED TO INVESTMENT MADE IN SHARE S AND HE RESTRICTED THE DISALLOWANCE TO THE ESTIMATED EXPENDITURE AT RS.1 LAC AS ADMINISTRATIVE COST FOR THESE SHARES HELD AS INVESTMENT. THIS IS ALSO HELD BY CIT(A) THAT THE ASSESSEE IS HAVING SMALL BORROWING AND WHATEVER BORROWING HAS BEEN MADE BY THE ASSESSEE, IT IS IN RESPECT OF SPECIFICALLY EARMARKED PROJECTS AND IN ADDITION TO THAT , THE ASSESSEE HAS BEEN EARNING HUGE INCOME OVER THE YEAR IN ADDITION TO OWN FUNDS. ON THIS BASIS, IT WAS HELD BY CIT(A) THAT NO DISALLOWANCE IS JUSTIFIED OUT OF INTEREST EXPENDITURE. CONSIDERING THE FACTS OF THE PRESENT CASE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE. ACCORDINGLY, THIS GROUND IS ALSO REJECTED. 41. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. 42. NOW WE TAKE UP THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2004 - 05 I.E. I.T.A. NO.297/LKW/2011. 43. GROUND NO. 1 IS AS UNDER: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.38,38,745/ - MADE ON ACCOUNT OF CONTRIBUTION MADE TO UDYOG BANDHU WITHOUT APPRECIA TING THE FACT THAT THE ASSESSEE FAILED TO SUBMIT ANY DETAILS WITH REGARD TO THE PRECISE NATURE OF THE 27 CLAIM INCLUDING ITS BUSINESS NEXUS AND ALSO ITS ALLOWABILITY UNDER ANY SPECIFIC PROVISION OF THE ACT. 44. IT WAS AGREED BY BOTH THE SIDES THAT THIS ISSUE IS IDENTICAL TO GROUND NO. 1 RAISED BY THE REVENUE IN ASSESSMENT YEAR 2003 - 2004 AND THE SAME MAY BE DECIDED ON SIMILAR LINES. IN ASSESSMENT YEAR 2003 - 04, THIS ISSUE HAS BEEN DECIDED BY US IN FAVOUR OF THE ASSESSEE AS PER PARA 32 OF THIS ORDER AND ACCORDI NGLY IN THE PRESENT YEAR ALSO, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, GROUND NO. 1 IS REJECTED. 45. GROUND NO. 2 IS AS UNDER: 2. THE LEARNED. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE ON ACCOUNT OF INCOME FROM ACCRUED INTEREST WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD NOT DISCLOSED INTEREST INCOME AMOUNTING TO RS.1,34,53,232/ - DEEMED TO HAVE ACCRUED DURING THE CURRENT YEAR. 46. IT WAS AGREED BY BOTH THE SIDES THAT THIS ISSUE IS IDENTICAL TO GROUND NO. 2 RAISED BY THE REVENUE IN ASSESSMENT YEAR 2003 - 2004 AND THE SAME MAY BE DECIDED ON SIMILAR LINES. IN ASSESSMENT YEAR 2003 - 04, THIS ISSUE HAS BEEN DECIDED BY US IN FAVOUR OF THE ASSESSEE AS PER PARA 36 OF THIS ORDER AND ACCORDINGLY IN THE PRESENT YEA R ALSO, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, GROUND NO. 2 IS REJECTED. 47. GROUND NO. 3 IS AS UNDER: 3. THE LEARNED. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.14,25,744/ - MADE U/S 14A WITHOUT APPRECIATI NG THE FACT THAT THE SUBSTANTIVE LAW U/S 14A WAS ALREADY IN EXISTENCE RETROSPECTIVELY AND ITS PROVISIONS (2) & (3) AND RULE 8D ARE CLARIFICATORY IN NATURE AND WERE MERELY INTRODUCED TO CLARIFY THE MODE OF CALCULATION OF EXPENSES INCURRED IN RELATION TO EXE MPTED INCOME. 48. IT WAS AGREED BY BOTH THE SIDES THAT THIS ISSUE IS IDENTICAL TO GROUND NO. 3 RAISED BY THE REVENUE IN ASSESSMENT YEAR 2003 - 2004 AND THE SAME 28 MAY BE DECIDED ON SIMILAR LINES. IN ASSESSMENT YEAR 2003 - 04, THIS ISSUE HAS BEEN DECIDED BY US IN FAVOUR OF THE ASSESSEE AS PER PARA 40 OF THIS ORDER. SINCE NO DIFFERENCE IN FACTS C OULD BE POINTED OUT BY THE REVENUE, WE DO NOT FIND ANY REASON TO TAKE A CONTRARY VIEW IN THE PRESENT YEAR AND HENCE, IN THE PRESENT YEAR ALSO, THIS ISSUE IS DECIDED IN F AVOUR OF THE ASSESSEE. ACCORDINGLY, GROUND NO. 3 IS REJECTED. 49. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. 50. NOW WE WILL TAKE UP THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2004 - 05 I.E. I.T.A. NO. 383/LKW/2011. IN THIS APPEAL THE ASSES SEE HAS RAISED THE FOLLOWING GROUNDS: 1 . BECAUSE THE PROCEEDINGS UNDER SECTION 147 HAVE NEITHER BEEN VALIDLY INITIATED NOR CONCLUDED AND THE REASSESSMENT ORDER DATED 31.12.2008 CAPTIONED AS '143(3)/148 OF THE I.T. ACT' PURPORTED TO HAVE BEEN MADE IN PURSUANCE OF SUCH PROCEEDINGS, IS BAD IN LAW. 2 . BECAUSE THE 'CIT(A)' HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE NARRATION READING AS 'SINCE THE RETURN WAS FILED QUITE LATE, PROCEEDINGS U/S 147 WERE INITIATED AND A NOTICE U/S 148 WAS ISSUED ON 25.05.2007' (QUOTE FROM THE ASSESSMENT ORDER) CONSTITUTED 'THE REASONS RECORDED' AND THE SAME ARE 'ADEQUATE AND SELF EXPLANATORY AND THERE IS NO INFIRMITY AS SUCH IN RECORDING OF THE REASONS' AND IN UPHOLDING VALIDITY OF ACTION TAKEN BY THE ASSESSING OFFICER. 3. BECA USE SCOPE OF REASSESSMENT PROCEEDINGS WAS STRICTLY CIRCUMSCRIBED BY THE 'REASONS RECORDED' AND ACCORDINGLY THE DISALLOWANCES/ADDITIONS AS PER PARTICULARS GIVEN BELOW: - (I) DISALLOWANCE OUT OF GROUP GRATUITY SCHEME 61,97,718 (II) INCOME UNDER THE HEAD BUSINESS AND PROFESSION @5% OF ACCUMULATION OF PREMIUM DURING THE YEAR, AS WORKED OUT AT RS.87,54,46,528 4,38,98,192 (III) DISALLOWANCES OUT OF EXPENDITURE, ON 29 ADHOC BASIS 1,00,000 (IX) DISALLOWANCES OUT OF PRIOR PERIOD EXPENSES 36,53,718 TO THE INCOME ALREADY ASSESSED UNDER SECTION 143(1) ARE BEYOND THE LETTER AND LAW, AS AMENDED FROM TIME TO TIME. WITHOUT PREJUDICE TO THE AFORESAID 4. BECAUSE THE 'CIT(A)' HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE DISALLOWANCE OF RS.61,97,718/ - REPRESENTING THE CONTRIBUTION ACTUALLY MADE TO LIFE INSURANCE CORPORATION OF INDIA UNDER 'GROUP GRATUITY INSURANCE SCHEME' AS HAD BEEN FRAMED BY IT (LIC), ON THE GROUNDS THAT THE SCHEME OF GROUP GRATUITY SCHEME HAS NOT BE EN APPROVED BY THE COMMISSIONER OF INCOME - TAX. 5. BECAUSE GROUP GRATUITY INSURANCE SCHEME AS FORMULATED BY LIFE INSURANCE CORPORATION OF INDIA WITH GENERAL APPROVAL OF THE GOVERNMENT OF INDIA CONSTITUTED AN APPROVED FUND AND NO FURTHER/SEPARATE APPROVAL B Y THE CIT WAS NOT NEEDED, FOR THE PURPOSES OF ADMISSIBILITY OF THE SAME AS DEDUCTION UNDER SECTION 40A(7) OF THE 'ACT'. 6. BECAUSE THERE WAS NO 'ACCRUAL' OR 'RECEIPT' OF ANY INCOME CHARGEABLE TO TAX, OUT OF PREMIA RECEIVED / RECEIVABLE FROM THE ENTREPRENE URS AT THE TIME OF ALLOTMENT OF INDUSTRIAL SITES AND SHEDS TO THEM AND THE 'CIT(A)' HAS ERRED IN LAW AND ON FACTS IN UPHOLDING AN ADDITION OF RS.4,38,98,192/ - AS HAD BEEN WORKED OUT BY THE ASSESSING OFFICER BY APPLYING A 'MEASURE' OF 5% TO THE AGGREGATE OF SUCH PREMIA. 7. BECAUSE THE 'CIT(A),' AFTER HAVING ACCEPTED, THAT THE PROVISIONS OF SECTION 14A READ WITH RULE 8D WERE NOT APPLICABLE IN THE YEAR UNDER APPEAL, HAS GROSSLY ERRED IN UPHOLDING AN ADHOC DISALLOWANCE OF RS.1,00,000 / - , OUT OF EXPENDITURE CLAIMED BY THE 'APPELLANT'. 8. BECAUSE THE 'CIT(A)' HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT IN SUPPORT OF CLAIM AGGREGATING RS.36,53,718/ - UNDER THE HEAD 'PRIOR PERIOD EXPENSE', NECESSARY EVIDENCES HAS NOT BEEN BROUGHT ON RECORD AND ON THAT BASIS IN REJECTING THE 'APPELLANT'S' CLAIM FOR DEDUCTION OF THE SAME. 9. BECAUSE THE EXPENDITURE IN QUESTION, ALTHOUGH CLASSIFIED UNDER THE HEAD 'PRIOR PERIOD EXPENSES' ACCRUED AS A 30 LIABILITY IN THE YEAR UNDER APPEAL AND THE SAME STOOD FULLY SUPPORTED BY RELEVANT BILLS AND VOUCHERS AND DIRECTIONS AS AFORESAID ARE WHOLLY VITIATED. 10. BECAUSE TO ENTERTAIN 'REASON TO BELIEVE' THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FALLS WITHIN THE EXCLUSIVE JURISDICTION OF THE ASSESSING OFFICER AND THE 'CIT(A)' HA S ERRED IN SUBSTITUTING AND/OR SUPPLEMENTING THE 'REASON TO BELIEVE', ( AS HAD BEEN ENTERTAINED BY THE ASSESSING OFFICER AT THE TIME OF INITIATION OF PROCEEDINGS UNDER SECTION 147) BY HIS 'OPINION' AND IN DIRECTING THE ASSESSING OFFICER TO EXCLUDE INTEREST EARNED BY THE 'APPELLANT' FROM THE ENTREPRENEURS, FROM THE COMPUTATION OF ELIGIBLE PROFITS. 11. BECAUSE SUCH A DIRECTION RESULTED INTO REDUCTION IN THE QUANTUM OF EXEMPTION/RELIEF UNDER SECTION 80 - 1A WHICH WAS BEYOND THE SCOPE OF INITIATION OF PROCEEDINGS UNDER SECTION 147. 12. BECAUSE IN ANY CASE, THE 'APPELLANT'S' CLAIM FOR RELIEF UNDER SECTION 80IA, AS PER THE COMPUTATION GIVEN BY IT, CANNOT BE SAID TO BE DEFEATED EVEN BY THE DECISION OF HON'BLE APEX COURT IN THE CASE OF CIT VS. RAJA BAHADUR KAMAKHAYA NARAYAN SINGH REPORTED IN 16 ITR 325 AS ALSO BY VARIOUS OTHER DECISIONS, AS HAVE BEEN REFERRED TO AND RELIED UPON BY THE 'CIT(A)' AS THE SAME HAD BEEN DELIVERED IN AN ALTOGETHER DIFFERENT CONTEXT AND ON THE FACTS DISSIMILAR TO THAT OF THE 'APPELLANT'. 13. BECAUSE THE ORDER APPEALED AGAINST IS CONTRARY TO THE FACTS, LAW AND PRINCIPLES OF NATURAL JUSTICE. 51. REGARDING GROUND NO. 1,2 & 3 IN RESPECT OF VALIDITY OF REASSESSMENT PROCEEDINGS, IT WAS SUBMITTED THAT THIS ISSUE IS IDENTICAL TO GROUND NO. 1 OF MODIFIED/CONCISE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN ASSESSMENT YEAR 200 3 - 0 4 AND HENCE, THE SAME MAY BE DECIDED ON SIMILAR LINES. IN ASSESSMENT YEAR 200 3 - 0 4 THIS ISSUE HAS BEEN DECIDED BY US AGAINST THE ASSESSEE AS PER PARA 10 OF THIS ORDER AND AC CORDINGLY IN THE PRESENT YEAR ALSO, THIS ISSUE IS DECIDED AGAINST THE ASSESSEE AND ACCORDINGLY GROUND NO.1,2 & 3 ARE REJECTED. 31 52. REGARDING GROUND NO. 4 & 5 ALSO, IT WAS SUBMITTED THAT THIS ISSUE IS IDENTICAL TO GROUND NO. 2 OF MODIFIED/CONCISE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN ASSESSMENT YEAR 2003 - 04 AND HENCE, THE SAME MAY BE DECIDED ON SIMILAR LINES. IN ASSESSMENT YEAR 2003 - 04 THIS ISSUE HAS B EEN DECIDED BY US AGAINST THE ASSESSEE AS PER PARA 14 TO 16 OF THIS ORDER AND ACCORDINGLY IN THE PRESENT YEAR ALSO, THIS ISSUE IS DECIDED AGAINST THE ASSESSEE AND GROUND NO. 4 & 5 ARE REJECTED. 53. REGARDING GROUND NO. 6 ALSO, IT WAS SUBMITTED THAT THIS I SSUE IS IDENTICAL TO GROUND NO. 3 OF MODIFIED/CONCISE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN ASSESSMENT YEAR 2003 - 04 AND HENCE, THE SAME MAY BE DECIDED ON SIMILAR LINES. IN ASSESSMENT YEAR 2003 - 04 THIS ISSUE HAS BEEN DECIDED BY US AGAINST THE ASSESSE E AS PER PARA 19 OF THIS ORDER AND ACCORDINGLY IN THE PRESENT YEAR ALSO, THIS ISSUE IS DECIDED AGAINST THE ASSESSEE AND GROUND NO. 6 IS REJECTED. 54. REGARDING GROUND NO. 7, IT WAS SUBMITTED THAT THIS ISSUE IS IDENTICAL TO GROUND NO. 4 OF MODIFIED/CONCISE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN ASSESSMENT YEAR 2003 - 04 AND HENCE, THE SAME MAY BE DECIDED ON SIMILAR LINES. IN ASSESSMENT YEAR 2003 - 04 THIS ISSUE HAS BEEN DECIDED BY US AGAINST THE ASSESSEE AS PER PARA 21 OF THIS ORDER AND ACCORDINGLY IN THE PRESENT YEAR ALSO, THIS ISSUE IS DECIDED AGAINST THE ASSESSEE AND GROUND NO. 7 IS REJECTED. 55. REGARDING GROUND NO. 8 TO 12, IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THESE EXPENSES HAVE C RYSTALLIZED IN THE PRESENT YEAR AND THEREFORE, THE SAME ARE ALLOWABLE IN THE PRESENT YEAR. 56. LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDER OF LEARNED CIT(A). 32 57. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THIS ISSUE HAS BEEN DECIDED BY CIT(A) AS PER PARA 12.2 OF HIS ORDER, WHICH IS REPR ODUCED BELOW FOR THE SAKE OF READY REFERENCE: 12.2 DISCUSSION & DECISION: ON PERUSAL OF THE DETAILS (APPEARING ON PAGE 28 OF THE COMPILATION), I FIND THAT OUT OF TOTAL EXPENDITURE CLAIMED (RS.36,53,718/ - ) A SUM OF RS.25,76,358/ - IS ON ACCOUNT OF INTEREST ACCRUED BUT WRITTEN BACK. IT WAS EXPLAINED THAT THIS INTEREST HAD BEEN OFFERED TO TAX AND SUBSEQUENTLY, SAME WAS WRITTEN OFF. THUS, IT WAS IN THE NATURE OF BAD - DEBT. AS REGARDS, THE OTHER EXPENDITURE, THE LD. A.R HAS NOT LEAD ANY EVIDENCE VIZ - A - VIZ ALLOWAB ILITY OF THESE EXPENDITURE IN THE YEAR UNDER CONSIDERATION. THUS THE CASE TAWS RELIED UPON BY THE LD. A.R CAN BE OF ASSISTANCE ONLY WHEN THERE IS EVIDENCE THAT THE LIABILITY TO PAY SUCH EXPENSES HAD INCURRED DURING THE YEAR. SINCE EVIDENCE IN THIS REGARD I S LACKING, NO BENEFIT OF THE CASE LAWS CAN BE GIVEN. ACCORDINGLY, THE A.O IS DIRECTED TO CALL FOR DETAILS OF THE INTEREST AMOUNT WRITTEN OFF AND IF HE IS SATISFIED THAT THE CONDITIONS OF SECTION 36(2) OF THE ACT HAVE BEEN MET BY THE APPELLANT COMPANY IN TH IS REGARD, HE WOULD ALLOW THE INTEREST WRITTEN OFF WHILE OTHER ITEMS OF PRIOR PERIOD EXPENDITURE WOULD STAND DISALLOWED WHILE INCOME RECOGNIZED BY THE APPELLANT WOULD REMAIN INCOME OF THE YEAR UNDER REFERENCE. 57.1 FROM THE ABOVE PARA OF CIT(A), WE FIND THAT IN RESPECT OF BALANCE AMOUNT AFTER EXCLUDING RS.25,76,358/ - FROM THE TOTAL CLAIM , A CLEAR FINDING IS GIVEN BY CIT(A) THAT LEARNED A.R. OF THE ASSESSEE COULD NOT LEAD ANY EVIDENCE REGARDING ALLOWABILITY OF THESE EXPENSES IN THE YEAR UNDER CONSIDERATION. BEFORE US ALSO, NO EVIDENCE HAS BEEN BROUGHT ON RECORD TO SHOW THAT THESE EXPENSES HAVE CRYSTALLIZED DURING THIS YEAR. HENCE, ON THIS ASPECT, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A). IN RESPECT OF RS. 25,76,358 / - , WHICH IS IN RESPECT OF INTEREST ACCRUED BUT WRITTEN BACK, IT IS NOTED BY CIT(A) THAT THE ASSESSING OFFICER IS D IRECTED TO CALL FOR DETAILS OF THE INTEREST AMOUNT WRITTEN OFF AND IF HE IS SATISFIED THAT THE CONDITIONS OF SECTION 36(2) OF THE ACT HAVE BE EN MET BY THE ASSESSEE 33 COMPANY IN THIS REGARD, HE SHOULD ALLOW THE INTEREST WRITTEN OFF WHILE OTHER ITEMS OF PRIOR PERIOD EXPENDITURE WOULD STAND DISALLOWED . CONSIDERING ALL THESE FACTS, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) ON THI S ISSUE ALSO. ACCORDINGLY, GROUND NO. 8 TO 12 ARE REJECTED. 58. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS DISMISSED. 59. NOW WE TAKE UP THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2005 - 06 I.E. I.T.A. NO.560/LKW/2011. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. THE LEARNED. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.41,08,000 / - MADE ON ACCOUNT OF CONTRIBUTION MADE TO UDYOG BANDHU WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO SUBMIT ANY DETAILS WITH REGARD TO THE PRECISE NATURE OF THE CLAIM INCLUDING ITS BUSINESS NEXUS AND ALSO ITS ALLOWABILITY UNDER ANY SPECIFIC PROVISION OF THE ACT. 2. THAT THE ORDER OF THE LD. CIT(A) - II , KANPUR BEING ERRONEOUS IN LAW AND ON FACTS DESERVES TO BE VACATED AND THE ORDER OF THE AO BE RESTORED. 3. THE APPELLANT CRAVES LEAVE TO MODIFY ANY OF THE GROUNDS OF APPEAL OR TAKE ADDITIONAL GROUND DURING THE PENDENCY OF THIS APPEAL. 60. IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT IN THIS APPEAL ONLY ONE ISSUE HAS BEEN RAISED BY THE REVENUE AND THIS ISSUE IS IDENTICAL TO THE ISSUE RAISED BY THE REVENUE AS PER GROUND NO. 1 IN ASSESSMENT YEAR 2004 - 05 AND THE SAME CAN BE DECIDED ON SIMILAR LINES. IN ASSESSMENT YEAR 2004 - 05, THIS ISSUE HAS BEEN DECID ED BY US IN FAVOUR OF THE ASSESSEE AS PER PARA 44 OF THIS ORDER AND ACCORDINGLY, THIS GROUND OF THE REVENUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND THIS GROUND IS REJECTED. 61. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. 34 62. NOW WE TAKE UP THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2005 - 06 I.E. I.T.A. NO.540/LKW/2011. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. BECAUSE ON A DUE CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW APPLICABLE THERETO, P ARTICULARLY THAT (I) THE 'RETURN' FILED BY THE 'APPELLANT' UNDER SECTION 139(1) ON 30.10.2005 CANNOT BE SAID TO HAVE BEEN VALIDLY PICKED UP AND SELECTED FOR SCRUTINY ASSESSMENT, OWING TO LACK OF OPINION BEING EXPRESSED BY THE ASSESSING OFFICER AS PER CLAU SE (II) OF SUB - SECTION (2) OF SECTION 143 OF THE ACT.; AND (II) IN ANY CASE THE NOTICE UNDER SECTION 143(2) COULD NOT BE SAID TO HAVE BEEN VALIDITY ISSUED AND SERVED IN ACCORDANCE WITH THE LAW, AS PER INFORMATION AVAILABLE ON RECORD, THE 'CIT(A)' SHOULD HAVE DELETED THE ENTIRE VARIATIO N BETWEEN THE 'RETURNED INCOME' AND THE 'ASSESSED INCOME', AS HAD BEEN CONTESTED IN APPEAL BEFORE HIM. WITHOUT PREJUDICE TO THE AFORESAID 2. BECAUSE THERE WAS NO 'ACCRUAL' OR 'RECEIPT' OF ANY INCOME CHARGEABLE TO TAX OUT OF PREMIA RECEIVED/RECEIVABLE FROM THE ENTREPRENEURS AT THE TIME OF ALLOTMENT OF INDUSTRIAL SITES AND SHEDS TO THEM AND THE 'CIT(A)' HAS ERRED IN LAW AND ON FACTS IN UPHOLDING AN ADDITION OF RS.5,16,27,653/ - AS HAD BEEN WORKED OUT BY THE ASSESSING OFFICER, BY APPLYING A 'MEASURE' OF 5% TO THE AGGREGATE OF SUCH PREMIA. 3. BECAUSE THE 'CIT(A)' HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE DISALLOWANCE OF RS.39,57,629/ - REPRESENTING THE CONTRIBUTION MADE TO LIFE INSURANCE CORPORATION OF INDIA UNDER 'GROUP GRATUITY INSURANCE SCHEME' AS HA D BEEN FRAMED BY IT (LIC), ON THE GROUNDS THAT THE SCHEME OF GROUP GRATUITY SCHEME HAS NOT BEEN APPROVED BY THE COMMISSIONER OF INCOME - TAX. 35 4. BECAUSE GROUP GRATUITY INSURANCE SCHEME AS FORMULATED BY LIFE INSURANCE CORPORATION OF INDIA WITH GENERAL APPRO VAL OF THE GOVERNMENT OF INDIA CONSTITUTED AN 'APPROVED FUND' AND NO FURTHER/SEPARATE APPROVAL BY THE CIT WAS NEEDED, FOR THE PURPOSE OF ADMISSIBILITY OF THE SAME AS DEDUCTION UNDER SECTION 40A(7) OF THE 'ACT'. 5. BECAUSE IN ANY CASE, THE SUM IN QUESTION REPRESENTED ACTUAL PAYMENT MADE BY THE APPELLANT BY WAY OF 'GRATUITY' AND SAME WAS ALLOWABLE AS DEDUCTION UNDER SECTION 40A(3) READ WITH SECTION 43B OF THE ACT. 6. BECAUSE THE AUTHORITIES BELOW HAVE ERRED IN LAW AND ON FACTS IN DISALLOWING/ UPHOLDING THE DISALLOWANCE OF SUMS AGGREGATING RS.L,54,Q9,286/ - OUT OF THE 'APPELLANT'S' CLAIM FOR EXEMPTION UNDER SECTION 80IA IN RESPECT OF (A) TRONICA CITY INDUSTRIAL MODEL 1,35,46,885 (B) GREATER NOIDA EXPORT PROMOTION INDUSTRIAL PARK 18,62,401 ON THE GROUND THAT THE SAID AGGREGATE OF SUMS CANNOT BE SAID TO BE 'INCOME DERIVED' FROM THE 'ELIGIBLE BUSINESS'. 7. BECAUSE THE 'RECEIPTS' REFERRED TO IN THE ORDERS PASSED BY THE AUTHORITIES BELOW FORM AN INSEPARABLE PART OF THE INCOME DERIVED BY THE SAID PROJE CTS AND THE SAME COULD NOT HAVE BEEN VALIDLY EXCLUDED FROM THE COMPUTATION OF RELIEF AS CLAIMED UNDER SECTION 80IA OF THE ACT ON THE GROUND THAT THE SAME DID NOT PROVIDE '1ST DEGREE NEXUS' WITH THE 'ELIGIBLE BUSINESS' AND IN MAKING/UPHOLDING THE DISALLOWAN CE IN QUESTION. 8. BECAUSE THE VIEW TAKEN BY THE AUTHORITIES BELOW IN THE MATTER OF RESTRICTING THE 'APPELLANT'S' CLAIM FOR DEDUCTION UNDER SECTION 80 IA , FROM RS.6,09,25,317/ - TO RS.4,55,16,031/ - IS BASED ON ERRONEOUS ASSUMPTION OF FACTS AND NON - APPRECIAT ION OF LAW APPLICABLE THERETO, AND SUCH DISALLOWANCE IS NOT AT ALL SUSTAINABLE. 9. BECAUSE THE 'APPELLANT'S' CLAIM FOR RELIEF UNDER SECTION 80IA, AS PER THE COMPUTATION GIVEN BY IT, CANNOT BE SAID TO BE DEFEATED EVEN BY THE DECISION OF HON'BLE APEX COURT IN THE CASE OF CIT VS. RAJA BAHADUR KAMAKHAYA NARAYAN SINGH REPORTED IN 16 ITR 325 AS ALSO BY VARIOUS OTHER JUDICIAL 36 PRONOUNCEMENTS, AS HAVE BEEN REFERRED TO AND RELIED UPON BY THE 'CIT(A)'. 10. BECAUSE THE ORDER APPEALED AGAINST IS CONTRARY TO THE FACTS/ LAW AND PRINCIPLES OF NATURAL JUSTICE. 63. IT WAS AGREED BY BOTH THE SIDES THAT GROUND NO. 1 OF THE ASSESSEES APPEAL IS IDENTICAL TO GROUND NO. 1 & 2 OF THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2004 - 05 AND HENCE, THE SAME CAN BE DECIDED ON SIMILAR LINES IN THE PRESENT YEAR ALSO. IN ASSESSMENT YEAR 2004 - 05, THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE AS PER PARA 51 OF THIS ORDER AND ACCORDINGLY IN THE PRESENT YEAR ALSO , THIS ISSUE IS DECIDED AGAINST THE ASSESSEE. ACCORDINGLY, THIS GROUND OF THE ASSESSEE IS REJECTED. 64. IT WAS ALSO AGREED BY BOTH THE SIDES THAT GROUND NO. 2 OF THE ASSESSEES APPEAL IS IDENTICAL TO GROUND NO. 6 OF THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2004 - 05 AND HENCE, THE SAME CAN BE DECIDED ON SIMILAR LINES IN THE PRESENT YEAR ALSO. IN ASSESSMENT YEAR 2004 - 05, THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE AS PER PARA 53 OF THIS ORDER AND ACCORDINGLY IN THE PRESENT YEAR ALSO THIS ISSUE IS DECIDED AGAINST THE ASSESSEE. ACCORDINGLY, THIS GROUND OF THE ASSESSEE IS REJECTED. 65. IT WAS AGREED BY BOTH THE SIDES THAT GROUND NO. 3 & 4 OF THE ASSESSEES APPEAL ARE IDENTICAL TO GROUND NO. 4 & 5 OF THE ASSESSEES APPEAL FOR ASSES SMENT YEAR 2004 - 05 AND HENCE, THE SAME CAN BE DECIDED ON SIMILAR LINES IN THE PRESENT YEAR ALSO. IN ASSESSMENT YEAR 2004 - 05, THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE AS PER PARA 52 OF THIS ORDER AND ACCORDINGLY IN THE PRESENT YEAR ALSO , THIS ISSUE IS DECIDED AGAINST THE ASSESSEE. ACCORDINGLY, THESE GROUNDS OF THE ASSESSEE ARE REJECTED. 66. REGARDING GROUND NO. 5, IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT EVEN IF GROUND NO. 3 & 4 ARE DECIDED AGAINST THE ASSESSEE 37 THEN ALSO , DEDUCTION SH OULD BE ALLOWED TO THE EXTENT OF ACTUAL PAYMENT MADE BY THE ASSESSEE BY WAY OF GRATUITY. 67. AS AGAINST THIS LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). 68. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN THIS REGARD WE FIND THAT THIS ISSUE HAS BEEN DECIDED BY CIT(A) AS PER PARA 5 & 5.1 OF HIS ORDER AND FOR THE SAKE OF READY REFERENCE, THE SAME IS REPRODUCED BELOW: 5. APPEAL GROUND NO. 3 IS IN RESPECT OF DISALL OWANCE ADDITION OF RS.39,57,629/ - OUT OF LIABILITY COVERED UNDER GROUND GRATUITY INSURANCE SCHEME OF LIC. 5.1 DISCUSSION & DECISION SINCE THE SCHEME HAS NOT BEEN APPROVED BY THE CONCERNED CIT, SUCH CONTRIBUTION HAD BEEN CORRECTLY DISALLOWED BY THE ASSESSI NG OFFICER U/S 40A(7) OF THE ACT. THE IMPUGNED ADDITION IS, THEREFORE, CONFIRMED. 68.1 FROM THE ABOVE PARAS FROM THE ORDER OF CIT(A), WE FIND THAT THIS ASPECT WAS NEVER RAISED BY THE ASSESSEE BEFORE THE CIT(A) AND THEREFORE, THIS GROUND DOES NOT ARISE OU T OF THE ORDER OF CIT(A). EVEN THE ASSESSEE HAS NOT RAISED THIS ISSUE BEFORE US BY WAY OF ADDITIONAL GROUND AND THEREFORE, IN NORMAL CIRCUMSTANCES , NO DE CISION IS CALLED FOR ON THIS ISSUE FROM OUR SIDE. MOREOVER, AS PER GROUND NO. 5 RAISED BY THE ASSESSE E BEFORE US, THE ASSESSEE HAS REQUESTED THAT THE AMOUNT IS ALLOWABLE AS DEDUCTION U/S 40A(3) READ WITH SECTION 43B OF THE ACT. SECTION 40A(3) IS IN RESPECT OF DISALLOWANCE IN THOSE CASES WHERE THE PAYMENT IS MADE FOR A SUM EXCEEDING RS.20,000/ - OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON BANK. WE FAIL TO UNDERSTAND THAT HOW SECTION 40A(3) IS RELEVANT FOR THE PURPOSE OF DECIDING THIS ISSUE. HENCE, THIS GROUND OF THE ASSESSEE IS REJECTED IN VIEW OF THE ABOVE DISCUSSION. 38 69. REGARDING GROUND NO. 6 TO 9, IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT IN ASSESSMENT YEAR 2003 - 04, IT WAS HELD BY CIT(A) THAT THE RECEIPTS ON ACCOUNT OF PROCESSING FEE, RENT RECEIVED FROM FACTORY, CORPORATION HOUSE RENT AND SALE OF PUBLICATION ETC. ARE HAVING DIRECT NE XUS WITH THE RUNNING OF THE ELIGIBLE BUSINESS AND, THEREFORE, THESE RECEIPTS ARE TO BE INCLUDED IN THE PROFIT OF THE BUSINESS FOR THE PURPOSE OF COMPUTING THE DEDUCTION ALLOWABLE TO THE ASSESSEE. HE ALSO SUBMITTED THAT IN THAT YEAR THIS ISSUE HAS BEEN RAI SED BY THE ASSESSEE AS PER GROUND NO. 5 BECAUSE WHILE DECIDING THIS ISSUE BY CIT(A) AS PER PARA 10.3.7 AND 10.3.8 THE CIT(A) HAS NOTED SUCH RECEIPTS IN RESPECT OF ONE PROJECT AND THEREFORE, THIS ISSUE WAS RAISED BY THE ASSESSEE BY WAY OF GROUND NO. 5 IN AS SESSMENT YEAR 2003 - 04 THAT SIMILAR TREATMENT SHOULD BE GIVEN IN RESPECT OF THE SIMILAR RECEIPT OF OTHER PROJECT. HE ALSO SUBMITTED THAT IN ASSESSMENT YEAR 2003 - 04, THERE IS APPEAL OF THE REVENUE ALSO IN I.T.A. NO.396/LKW/2011 BUT NO GROUND HAS BEEN RAISED BY THE REVENUE IN THAT YEAR AGAINST THIS DECISION OF CIT(A) THAT THESE RECEIPTS ARE ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. HE SUBMITTED THAT UNDER THESE FACTS, THIS ISSUE SHOULD BE DECIDED IN FAVOUR OF THE ASSESSEE. 70. LEA RNED D.R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW BUT HE COULD NOT CONTROVERT THESE SUBMISSIONS OF LEARNED A.R. OF THE ASSESSEE THAT IN ASSESSMENT YEAR 2003 - 04 , SIMILAR ISSUE WAS DECIDED BY CIT(A) IN FAVOUR OF THE ASSESSEE AND NO GROUN D HAS BEEN RAISED BY THE REVENUE IN APPEAL BEFORE THE TRIBUNAL IN THAT YEAR. UNDER THESE FACTS, WE ARE OF THE CONSIDERED OPINION THAT IN THE PRESENT YEAR ALSO , THE ASSESSEE DESERVES TO SUCCEED BECAUSE THE REVENUE CANNOT TAKE A DIFFERENT VIEW IN ASSESSMENT YEAR 2003 - 04 AND THAN A CONTRARY VIEW IN ASSESSMENT YEAR 2005 - 06. HENCE, FOR THE SAKE OF CONSISTENCY, IN LINE WITH THE DECISION OF CIT(A) IN ASSESSMENT YEAR 2003 - 04 ON THIS ISSUE WHICH HAS ATTAINED FINALITY IN ABSENCE OF ANY GROUND RAISED BY THE REVENUE IN ASSESSMENT YEAR 2003 - 39 04 BEFORE THE TRIBUNAL, WE HOLD THAT IN THE PRESENT YEAR ALSO , THESE RECEIPTS IN RESPECT OF BOTH THE PROJECTS I.E. TRONICA CITY, INDUSTRIAL MODEL TOWN, LONI AND GREATER NOIDA EXPORT PROMOTION INDUSTRIAL PARK SHOULD BE INCLUDED IN TH E BUSINESS PROFIT FOR THE PURPOSE OF COMPUTING DEDUCTION ALLOWABLE TO THE ASSESSEE U/S 80IA OF THE ACT. ACCORDINGLY, THIS GROUND IS ALLOWED. 71. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS PARTLY ALLOWED. 72. NOW WE TAKE UP THE APPEAL OF THE REVENUE FOR THE ASSESSMENT YEAR 2006 - 07 I.E. I.T.A. NO.398/LKW/2011. 73. GROUND NO. 1 IS AS UNDER: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.39,76,000/ - MADE ON ACCOUNT OF CONTRIBUTION MADE TO UDYOG BANDHU WITHOUT APPRECIATIN G THE FACT THAT THE ASSESSEE FAILED TO SUBMIT ANY DETAILS WITH REGARD TO THE PRECISE NATURE OF THE CLAIM INCLUDING ITS BUSINESS NEXUS AND ALSO ITS ALLOWABILITY UNDER ANY SPECIFIC PROVISION OF THE ACT. 74. BOTH THE SIDES AGREED THAT THIS ISSUE IS IDENTICAL TO THE ONLY GROUND RAISED BY THE REVENUE IN ASSESSMENT YEAR 2005 - 06 THE SAME CAN BE DECIDED ON SIMILAR LINES IN THE PRESENT YEAR ALSO. IN ASSESSMENT YEAR 2005 - 06, THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE AS PER PARA 60 OF THIS ORDER AND ACCORDINGLY IN THE PRESENT YEAR ALSO , THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND THIS GROUND OF THE REVENUE IS REJECTED. 75. GROUND NO. 2 IS AS UNDER: 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE ON ACCOUNT OF INCOME FROM ACCRUED INTEREST WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD NOT DISCLOSED INTEREST INCOME AMOUNTING TO RS.2,87,11,618/ - DEEMED TO HAVE ACCRUED DURING THE CURRENT YEAR. 40 76. BOTH THE SI DES AGREED THAT THIS ISSUE IS IDENTICAL TO GROUND NO. 2 RAISED BY THE REVENUE IN ASSESSMENT YEAR 2004 - 05 AND THE SAME CAN BE DECIDED ON SIMILAR LINES IN THE PRESENT YEAR ALSO. IN ASSESSMENT YEAR 2004 - 05, THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESS EE AS PER PARA 53 OF THIS ORDER AND ACCORDINGLY IN THE PRESENT YEAR ALSO THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, THIS GROUND OF THE REVENUE IS REJECTED. 77. GROUND NO. 3 IS AS UNDER: 3. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.25,38,497/ - MADE U/S 14A WITHOUT APPRECIATING THE FACT THAT THE SUBSTANTIVE LAW U/S 14A WAS ALREADY IN EXISTENCE RETROSPECTIVELY AND ITS PROVISIONS (2) & (3) AND RULE 8D ARE CLARIFICATORY IN NATURE AND WERE MERELY INTRO DUCED TO CLARIFY THE MODE OF CALCULATION OF EXPENSES INCURRED IN RELATION TO EXEMPTED INCOME. 78. BOTH THE SIDES AGREED THAT THIS ISSUE IS IDENTICAL TO GROUND NO. 3 RAISED BY THE REVENUE IN ASSESSMENT YEAR 2004 - 05 AND THE SAME CAN BE DECIDED ON SIMILAR LI NES IN THE PRESENT YEAR ALSO. IN ASSESSMENT YEAR 2004 - 05, THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE AS PER PARA 48 OF THIS ORDER AND ACCORDINGLY IN THE PRESENT YEAR ALSO THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE BECAUSE NO DIFFERENCE IN FACTS CAN BE POINTED OUT BY THE LEARNED D.R. OF THE REVENUE . ACCORDINGLY, THIS GROUND OF THE REVENUE IS REJECTED. 79. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. 80. NOW WE TAKE UP THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2006 - 07 I.E . I.T.A. NO.384/LKW/2011. 81. BOTH THE SIDES AGREED THAT GROUND NO. 1,2, & 3 ARE IDENTICAL TO GROUND NO. 1 RAISED BY THE ASSESSEE IN ASSESSMENT YEAR 2005 - 06 AND THE SAME CAN BE DECIDED ON SIMILAR LINES IN THE PRESENT YEAR ALSO. IN 41 ASSESSMENT YEAR 2005 - 06, THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE AS PER PARA 63 OF THIS ORDER AND ACCORDINGLY IN THE PRESENT YEAR ALSO THIS ISSUE IS DECIDED AGAINST THE ASSESSEE. ACCORDINGLY, GROUND NO. 1,2 & 3 OF THE ASSESSEE ARE REJECTED. 82. B OTH THE SIDES AGREED THAT GROUND NO. 4 IS IDENTICAL TO GROUND NO. 2 RAISED BY THE ASSESSEE IN ASSESSMENT YEAR 2005 - 06 AND THE SAME CAN BE DECIDED ON SIMILAR LINES IN THE PRESENT YEAR ALSO. IN ASSESSMENT YEAR 2005 - 06, THIS ISSUE HAS BEEN DECIDED AGAINST TH E ASSESSEE AS PER PARA 51 OF THIS ORDER AND ACCORDINGLY IN THE PRESENT YEAR ALSO THIS ISSUE IS DECIDED AGAINST THE ASSESSEE. ACCORDINGLY, GROUND NO. 4 OF THE ASSESSEE IS REJECTED. 83. BOTH THE SIDES AGREED THAT GROUND NO. 5 & 6 ARE IDENTICAL TO GROUND NO. 3 & 4 RAISED BY THE ASSESSEE IN ASSESSMENT YEAR 2005 - 06 AND THE SAME CAN BE DECIDED ON SIMILAR LINES IN THE PRESENT YEAR ALSO. IN ASSESSMENT YEAR 2005 - 06, THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE AS PER PARA 64 OF THIS ORDER AND ACCORDINGLY IN TH E PRESENT YEAR ALSO THIS ISSUE IS DECIDED AGAINST THE ASSESSEE. ACCORDINGLY, GROUND NO. 5 & 6 OF THE ASSESSEE ARE REJECTED. 84. BOTH THE SIDES AGREED THAT GROUND NO. 7 IS IDENTICAL TO GROUND NO. 7 RAISED BY THE ASSESSEE IN ASSESSMENT YEAR 2004 - 05 AND THE SAME CAN BE DECIDED ON SIMILAR LINES IN THE PRESENT YEAR ALSO. IN ASSESSMENT YEAR 2004 - 05, THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE AS PER PARA 54 OF THIS ORDER AND ACCORDINGLY IN THE PRESENT YEAR ALSO , THIS ISSUE IS DECIDED AGAINST THE ASSESSEE. ACCORDINGLY, GROUND NO. 7 OF THE ASSESSEE IS REJECTED. 85. REGARDING GROUND NO. 8, IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THE FDRS WERE PURCHASED IN COURSE OF ELIGIBLE BUSINESS AND, THEREFORE, INTEREST INCOME SHOULD BE ALLOWED AS DEDUCTION U/S 80IA OF THE ACT. 42 86. LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDER OF LEARNED CIT(A). 87. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THE DEDUCTION U/S 80IA IS ALLOWED TO THE ASSESSEE IN RESPECT OF DEVELOPMENT OF INDUSTRIAL PARK/SEZ AND H ENCE INTEREST INCOME ON FDRS OF RS.7,79,373/ - CANNOT BE SAID TO BE AN INCOME DERIVED FROM SUCH ELIGIBLE BUSINESS AND, THEREFORE, IN OUR CONSIDERED OPINION, THIS INTEREST INCOME IS NOT ELIGIBLE FOR THIS DEDUCTION AND ON THIS ISSUE , WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A). THIS GROUND IS REJECTED. 88. REGARDING GROUND NO. 9, 10 & 11, IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THESE EXPENSES HAVE CRYSTALLIZED IN THE PRESENT YEAR AND, THEREFORE, DEDUCTION IS ALLOWABLE IN THE PR ESENT YEAR. 89. LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDER OF LEARNED CIT(A). 90. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IT IS NOTED BY CIT(A) IN HIS ORDER THAT PART OF THE AMOUNT CLAIMED BY THE ASSESSEE IS IN RESPECT OF INTEREST ACCRUED BUT WRITTEN BACK. REGARDING THIS AMOUNT, IT IS HELD BY CIT(A) THAT THE ASSESSING O FFICER IS DIRECTED TO CALL FOR THE DETAILS OF INTEREST AMOUNT WRITTEN OFF AND IF HE IS SATISFIED THAT THE CONDITIONS OF SECTION 36 (2) ARE FULFILLED BY THE ASSESSEE, HE SHOULD ALLOW THE DEDUCTION IN RESPECT OF INTEREST WRITTEN OFF. REGARDING THE BALANCE A MOUNT, IT WAS HELD BY CIT(A) THAT IN THE PRESENT CASE, EVIDENCE IS LACKING IN THIS REGARD THAT THE LIABILITY TO PAY THIS EXPENDITURE HAS CRYSTALLIZED IN THE PRESENT YEAR. BEFORE US ALSO, NO EVIDENCE HAS BEEN BROUGHT ON RECORD TO SHOW THAT THE LIABILITY HA S CRYSTALLIZED IN THE PRESENT YEAR AND HENCE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE. ACCORDINGLY, THESE GROUNDS ARE REJECTED. 91. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS DISMISSED. 43 91. IN THE COMBINED RESULT, THE APPEAL OF THE ASSESSEE IN I.T.A. NO.446 FOR ASSESSMENT YEAR 2001 - 02 IS DISMISSED, APPEAL OF THE ASSESSEE IN I.T.A. NO.382 FOR ASSESSMENT YEAR 2003 - 04 IS PARTLY ALLOWED, APPEAL OF THE REVENUE IN I.T.A. NO. 396 FOR ASSESSMENT YEAR 2003 - 04 IS DISMISSED, APPEAL OF THE REVENUE IN I.T.A. NO.297 FOR ASSESSMENT YEAR 2004 - 05 IS DISMISSED, APPEAL OF THE ASSESSEE IN I.T.A. NO. 383 FOR ASSESSMENT YEAR 2004 - 05 IS DISMISSED, APPEAL OF THE REVENUE IN I.T.A. NO. 560 FOR ASSESSMENT YEAR 2005 - 06 I S DISMISSED, APPEAL OF THE ASSESSEE IN I.T.A. NO. 540 FOR ASSESSMENT YEAR 2005 - 06 IS PARTLY ALLOWED, APPEAL OF THE REVENUE IN I.T.A. NO. 398 FOR ASSESSMENT YEAR 2006 - 07 IS DISMISSED AND APPEAL OF THE ASSESSEE IN I.T.A. NO. 384 FOR ASSESSMENT YEAR 2006 - 07 I S DISMISSED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 4 /07/2014. *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR