The ACIT, Circle-1(1), Baroda V. GE Plastics India Ltd.,(Amalgamated with GE India Ind.Pvt.Ltd.), Baroda

ITA 483/AHD/2007

• Counselvise Citation: 48320514 RSA 2007
• Duration Of Justice: 5 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 25-01-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 02-02-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVINDRA KUMAR
• Assessee Lawyers: URVASHI SHODHAN ARS; S N SOPARKAR
• Keywords: Capital asset; Depreciation; Opportunity of being heard; Retrospective amendment; Bad and doubtful debts; Unabsorbed depreciation; Revenue expenditure
• Section: 80HHC; 115JB; 32; 37

Judgement Text

-1- IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'D' BEFORE SHRI BHAVNESH SAINI - JM AND SHRI A K GARODIA, AM ITA NO.483/AHD/2007 (ASSESSMENT YEAR:-2003-04) THE ASSISTANT COMMISSIONER OF INCOME- TAX, CIRCLE-1(1), BARODA V/S GE PLASTICS INDIA LTD., [AMALGAMATED WITH GE INDIA INDUSTRIAL PVT. LTD.] PLASTIC AVENUE, PO JAWAHARNAGAR, BARODA PAN: [APPELLANT] [RESPONDENT] ITA NO.573/AHD/2007 (ASSESSMENT YEAR:-2003-04) GE PLASTICS INDIA LTD., [AMALGAMATED WITH GE INDIA INDUSTRIAL PVT. LTD.] PLASTIC AVENUE, PO JAWAHARNAGAR, BARODA V/S THE ASSISTANT COMMISSIONER OF INCOME- TAX, CIRCLE-1(1), BARODA [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI S N SOPARKAR AND MS. URVASHI SHODHAN, ARS REVENUE BY:- SHRI RAVINDRA KUMAR, CIT DR DATE OF HEARING:- 25-01-2012 DATE OF PRONOUNCEMENT:- 23-03-2012 O R D E R 2 2 PER A K GARODIA (AM) :- THESE ARE CROSS APPEALS FILED BY THE REVENUE AND THE ASSESSEE WHICH ARE DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-I, BARODA DATED 24-11-2006 FOR A SSESSMENT YEAR 2003-04. THESE APPEALS WERE HEARD TOGETHER AN D ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2 FIRST WE TAKE UP THE REVENUES APPEAL I.E. ITA NO.483/AHD/2007. GROUND NO.1 READS AS UNDER:- [1] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN ALLOWING DEPRECIATION ON NON-COMPET E FEE OF RS.4,55,40,000/-, BY TREATING THE SAME AS INTANGIBL E ASSET U/S 32(1)(II), WHICH DOES NOT CONSTITUTE A BUSINESS OR COMMERCIAL RIGHT HAVING CONNOTATION OF A POSITIVE RIGHT BUT A FEE PAID FOR A NEGATIVE ACT OF NOT CARRYING ON THE SAME BUSINESS. 3 THE LEARNED DR OF THE REVENUE SUPPORTED THE ASSES SMENT ORDER AND PLACED RELIANCE ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS:- (I) R KESHVANI VS. ACIT (2009) 116 ITD 133 (MUMBAI) (II) SRIVATSAN SURVEYORS (P) LTD. VS. ITO (2009) 125 TTJ 286 (CHENNAI) (III) CIT VS. HOOGLY MILLS CO. LTD. (2006) 157 TAXMAN 347 (SC) (IV) BHARATBHAI J VYAS VS. ITO (2006) 97 ITD 248 (AHD) 4 AS AGAINST THIS, THE LEARNED AR ON BEHALF OF THE ASSESSEE SUPPORTED THE ORDER OF THE LEARNED CIT(A) IN RESPEC T OF REVENUES APPEAL AND PLACED RELIANCE ON THE FOLLOWI NG JUDICIAL PRONOUNCEMENTS:- 3 3 (I) ACIT VS. REAL IMAGE TECH. (P) LTD. (2009) 177 TAXMAN 80 (CHENNAI) (MAG) (II) ITO VS. MEDICORP TECHNOLOGIES INDIA LTD. (2009) 30 SOT 506 (CHENNAI) (III) 118 TTJ 334 (MUMBAI) (IV) 116 ITD 348 5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES AND THE JUDGMENTS CITED BY BOTH THE SID ES. WE FIND THAT THIS ISSUE HAS BEEN DECIDED BY THE LEARNED CIT (A) AS PER PARA-9 OF HIS ORDER WHICH IS REPRODUCED BELOW:- 9. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE CASE LAW. IT IS OBSERVED THAT THE ASSESSING OFF ICER HAS HELD THE EXPENDITURE INCURRED FOR OBTAINING NON COMPETITION FROM JISL AS NOT AN INTANGIBLE ASSET U/S. 32(1)(II) FOR TWO REASONS: (A) IS NOT COVERED UNDER THE PHRASE 'ANY OTHER BUSINESS OR RIGHTS OF S IMILAR NATURE' AND, (B) THAT IT IS NOT CAPABLE OF AND TRANSFER LIKE OTH ER INTANGIBLE ASSETS OF KNOW HOW, WITH REGARD TO THE OBJECTION AT (B) ABOVE, IT IS OB SERVED THAT EARNING OF THE RIGHT OF ABSENCE OF COMPETITION FROM M/S. JISL IN BUSINESS OF EXTRUSION AND FOR THE LICENCE MANUFACTURE POLY CARB ONATE SHEETS IN THE ENTIRE ASIA PACIFIC REGION FOR A PERIOD OF 10 YEARS IS A RIGHT IN THE NATURE OF AN INTANGIBLE CAPITAL ASSET. THIS RIGHT O F ABSENCE OF COMPETITION OR THE 'NON-COMPETE RIGHT' IS AN ASSET WHICH IS CABLE OF BEING TRANSFERRED. THE BIGGEST EVIDENCE IN THIS SUP PORT IS AVAILABLE FROM THE FACT THAT THIS RIGHT HAS BEEN FURTHER TRAN SFERRED BY THE APPELLANT COMPANY TO M/S. G.E. LIGHTING INDIA PVT. LTD. AT THE TIME OF AMALGAMATION. IT IS ALSO OBSERVED IN THIS BEHALF TH AT THE SAID DEVELOPMENT CONFIRMS THAT THE NON-COMPETE RIGHT IS A CAPITAL ASSET THAT CAN BE OWNED AND CAN ALSO BE TRANSFERRED. TO T HAT EXTENT THE VIEWS OF THE ASSESSING OFFICER ARE DIFFERED FROM. IT IS, THEREFORE, HELD THAT THE NON-COMPETE RIGHT IS A CAPITAL ASSET. IT FOLLOWS FROM ABOVE, THAT THE EXPENDITURE INCURRE D FOR THE ACQUISITION OF NON-COMPETE RIGHT IS NOT A REVENUE EXPENDITURE S INCE THE SAME HAS BEEN INCURRED FOR THE ACQUISITION OF A CAPITAL ASSE T. IT IS PERTINENT TO 4 4 POINT OUT IN THIS REGARD THAT THE APPELLANT HAS ACQ UIRED THE RIGHT OF NO COMPETITION IN EXTRUSION BUSINESS AND TO MANUFACTUR E POLY CARBONATE SHEETS AND TO OPERATE IN THE ENTIRE ASIA PACIFIC RE GION FOR A PERIOD OF 10 YEARS. IT HAS RESULTED IN THE ACQUISITION OF AN UNRIVALED AND NON- COMPETED BUSINESS DOMAIN / TERRITORY FOR THE APPELL ANT FOR A SUFFICIENTLY TONG PERIOD OF 10 YEARS. THE ACQUISITI ON OF SUCH A BUSINESS DOMAIN / TERRITORY WITH NO COMPETITION HAS BROUGHT ADVANTAGES IN THE CAPITAL FIELD. THE TRANSACTION RESULTING IN THE ACQ UISITION OF THE RIGHT TO CONDUCT EXTRUSION BUSINESS AND TO OPERATE IN THE AS IA PACIFIC REGION WITHOUT ANY COMPETITION IS FINAL AND IRREVERSIBLE. THIS RIGHT HAS BECOME THE OWNERSHIP RIGHT OF THE APPELLANT. IT IS THIS EXPENDITURE WHICH HAS BOUGHT THIS OWNERSHIP RIGHT TO THE APPELLANT. UNDER THE CIRCUMSTANCES, IT IS HELD TO BE AN EXPE NDITURE ON CAPITAL ACCOUNT INCURRED FOR THE ACQUISITION OF THE NON-COM PETE RIGHT, A CAPITAL ASSET. AS REGARDS THE OBJECTION OF THE ASSESSING OFFICER A T (A) ABOVE, IT IS APPOSITE TO EXTRACT THE RELEVANT PROVISIONS 'SECTION-32. DEPRECIATION. (1) IN RESPECT OF DEPRECIATION OF (I) BUILDINGS, MACHINERY........ BEING TANGIBLE ASS ETS; (II) KNOW-HOW, PATENTS, COPYRIGHTS, TRADE MARKS, LI CENCES, FRANCHISES, OR ANY OTHER BUSINESS OR COMMERCIAL RIG HTS OF SIMILAR NATURE BEING INTANGIBLE ASSETS ACQUIRED ON OR AFTER THE 1ST DAY OF APRIL, 1998, OWNED, WHOLLY OR PARTLY, BY THE ASSESSEE AND USED F OR THE PURPOSES OF THE BUSINESS OR PROFESSION, THE FOLLOWI NG DEDUCTIONS SHALL BE ALLOWED.' THE BASIC OBJECTION-OF THE ASSESSING OFFICER HAS BE EN 'THAT THE BUSINESS OR COMMERCIAL RIGHTS TO QUALIFY AS AN INTA NGIBLE ASSETS HAS TO BE OF 'SIMILAR' NATURE AS KNOW HOW, PATENTS, COPYRI GHTS, TRADE MARKS ETC. AND THE NON-COMPETE RIGHT IS NOT OF THE 'SIMIL AR NATURE' AS KNOW HOW, PATENT ETC. HE HAS DRAWN THIS DISTINCTION BY S AYING THAT THE INTANGIBLE ASSETS LIKE KNOW HOW, PATENTS ETC. ARE C APABLE OF BEING OWNED AND BEING TRANSFERRED WHICH CHARACTERISTICS A RE MISSING FROM THE NON-COMPETE RIGHT. IN THIS REGARD IT IS OBSERVE D THAT IT HAS ALREADY BEEN HELD ABOVE THAT THE NON-COMPETE RIGHT IS AN AS SET CAPABLE OF BEING OWNED AND TRANSFERRED IN THE HANDS OF THE APP ELLANT AND THIS VIEW HAS BEEN SUPPORTED BY THE FACT THAT THE SAID N ON-COMPETE RIGHT 5 5 HAS ACTUALLY BEEN SUBSEQUENTLY TRANSFERRED BY THE A PPELLANT TO M/S. G.E. LIGHTING INDIA PVT. LTD. IT IS FURTHER OBSERVE D THAT THE NON- COMPETE RIGHT IS CLEARLY IN THE NATURE OF A BUSINES S OR COMMERCIAL RIGHT AND SINCE IT IS CAPABLE OF BEING OWNED AND TR ANSFERRED, IT IS 'OF SIMILAR NATURE' AS KNOW HOW, PATENTS, COPYRIGHTS ET C. AS CONTAINED IN CLAUSE (II) OF SUB SECTION (1) OF SEC. 32 OF THE AC T. UNDER THE CIRCUMSTANCES, IT IS HELD THAT THE NON-COMPETE RIGH T IS AN INTANGIBLE CAPITAL ASSET FOR THE PURPOSES OF SECTION 32(L)(II) OF THE ACT AND IS ELIGIBLE FOR DEPRECIATION AT THE ADMISSIBLE RATES. THE ASSESSING OFFICER IS DIRECTED TO TREAT THE SAME AS INTANGIBLE CAPITAL ASSET AND ALLOW DEPRECIATION AS PER RULES. THE ALTERNATE PLEA OF TH E APPELLANT THAT THE SAME BE ALLOWED AS REVENUE EXPENDITURE HAS ALREADY BEEN DISMISSED HEREINBEFORE. 6. NOW, WE FIRST CONSIDER THE APPLICABILITY OF VARI OUS JUDGMENTS CITED BY THE LEARNED DR ON BEHALF OF THE REVENUE. WE FIND THAT EXCEPT ONE JUDGMENT OF THE TRIBUNAL RENDE RED IN THE CASE OF SRIVATSAN SURVEYORS (P) LTD. VS. ITO (2009) 125 TTJ 286 (CHENNAI), OTHER JUDGMENTS CITED BY THE LEARNED DR ARE NOT REGARDING THE ALLOWABILITY OF DEPRECIATION ON NON-C OMPETE FEES. IN THOSE CASES, THE ISSUE INVOLVED IS REGARDING ALL OWABILITY OF DEPRECIATION ON GOODWILL AND GRATUITY AND HENCE, TH ESE JUDGMENTS ARE NOT APPLICABLE IN THE FACTS OF THE PRESENT CASE . REGARDING THE TRIBUNAL DECISION RENDERED IN THE CASE SRIVATSAN S URVEYORS (P) LTD. (SUPRA), WE FIND THAT IN THIS CASE, THE ISSUE WAS DECIDED AGAINST THE ASSESSEE ON THE BASIS THAT THE DEPRECIA TION ON RESTRICTIVE COVENANT IS A RIGHT IN PERSONA AND NO T A RIGHT IN REM AND HENCE, DEPRECIATION ON IT IS NOT ALLOWABLE AS PER THE PROVISIONS OF SECTION 32(1)(II). IN THAT CASE, RS.1 CRORE WAS PAID TO ONE OF THE DIRECTORS ON THE BASIS OF NON-COMPETE COVENANT ENTERED INTO BETWEEN THE ASSESSEE COMPANY AND ITS D IRECTOR SHRI R SRIVATSAN, AS PER WHICH THE SAID DIRECTOR AGREED NOT TO CARRY ON HIS INDIVIDUAL BUSINESS OF GENERAL INSURANCE SURVEY , LOSS 6 6 ASSESSMENT, VALUATION OF ASSETS, ETC. FOR A PERIOD OF SEVEN YEARS. IN THE PRESENT CASE ALSO, NON-COMPETE FEE WAS PAID FOR THE ACQUISITION OF NON-COMPETE RIGHTS FROM JISL FOR AGR EEING FOR NOT ENTERING INTO OR PARTICIPATE IN ANY BUSINESS WH ICH DIRECTLY COMPETE WITH THE BUSINESS OF THE ASSESSEE COMPANY. IT SHOWS THAT THE FACTS ARE SIMILAR AND THEREFORE, THIS TRIBUNAL DECISION CITED BY THE LEARNED DR OF THE REVENUE IS APPLICABLE IN THE PRESENT CASE BUT AT THE SAME TIME, WE FIND THAT THE SUBSEQUENT D ECISION OF THE TRIBUNAL RENDERED IN THE CASE OF ITO VS. MEDICORP T ECHNOLOGIES INDIA LTD. (SUPRA) IS ALSO REGARDING THE ALLOWABILI TY OF DEPRECIATION ON NON-COMPETE FEES PAID BY THE ASSESS EE OF RS.2 CRORES AND IN THAT CASE, THE ISSUE WAS DECIDED BY T HE TRIBUNAL IN FAVOUR OF THE ASSESSEE. IT IS NOW SETTLED POSITION OF LAW THAT WHEN THERE ARE TWO VIEWS POSSIBLE, THE VIEW FAVOURABLE T O THE ASSESSEE SHOULD BE FOLLOWED AS WAS HELD BY THE HONBLE APEX COURT IN THE CASE OF CIT VS. VEGETABLE PRODUCTS LTD. (1073) 88 I TR 192 (SC). HENCE, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESS EE BY FOLLOWING THE TRIBUNAL DECISION RENDERED IN THE CAS E OF ITO VS. MEDICORP TECHNOLOGIES INDIA LTD. (SUPRA). GROUND NO .1 RAISED BY THE REVENUE IS DISMISSED. 7 GROUND NO.2 IN THE REVENUES APPEAL READS AS UNDE R:- [2(A)]ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DIRECTING TO EXCLUDE SALES TAX OF RS.6,25,45,754/- FROM THE TOTAL TURNOVER FOR THE PU RPOSE OF COMPUTING DEDUCTION U/S.80HHC BY IGNORING THE RATIO LAID DOWN BY THE SUPREME COURT IN THE CASE OF CHOWRINGHE E SALES BUREAU P. LTD VS. CIT 87 ITR 542 (SC) AND SINCLAIR MURRAY & CO P. LTD. VS. CIT 97 ITR 615 (SC), HOLDING THAT TH E COLLECTION OF SALES TAX FORMS PART OF TRADING RECEIPTS AND HEN CE TOTAL TURNOVER. 7 7 [2(B)]THE CIT(A) ALSO FAILED TO TAKE NOTE OF THE DE FINITION OF TOTAL TURNOVER IN CLAUSE (BA) OF THE EXPLANATION BELOW SE CTION 80HHC, EXCLUDING ONLY FREIGHT & INSURANCE UP TO THE CUSTOMS STATION, LEAVING THE CONCEPT OF TOTAL TURNOVER TO B E UNDERSTOOD AS IN COMMON COMMERCIAL PARLANCE. [2(C)]THE CIT(A) FAILED TO TAKE NOTE OF THE MANDATE OF SECTION 145A(B), INSERTED W.E.F. 1.4.1999, GOVERNING THE CO MPUTATION OF PROFITS HAVING INESCAPABLE BEARING ON THE COMPUTATI ON OF DEDUCTION U/S.80HHC, WHICH IS MADE BY APPORTIONING THE SAME PROFITS IN THE RATIO OF EXPORT TURNOVER TO TOTAL TU RNOVER. 8 THE LEARNED DR ON BEHALF OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS THE LEARNED AR ON BEHALF O F THE ASSESSEE SUPPORTED THE ORDER OF THE LEARNED CIT(A). IT WAS ALSO SUBMITTED BY HIM THAT THIS ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE HON'BLE SUPREME COU RT RENDERED IN THE CASE OF CIT VS. LAKSHMI MACHINE WORKS (2007) 290 ITR 667 (SC). BY RESPECTFULLY FOLLOWING THIS JUDGMENT O F THE HONBLE APEX COURT, WE DECLINE TO INTERFERE IN THE ORDER OF THE LEARNED CIT(A) ON THIS ISSUE. THIS GROUND IS ALSO REJECTED. THE APPEAL OF THE REVENUE IS DISMISSED. 9 NOW, WE TAKE UP THE ASSESSEES APPEAL I.E. ITA NO.573/AHD/2007. GROUND NO.1 READS AS UNDER:- 1 THE ID. CIT (A) ERRED IN LAW AND ON FACTS IN CON FIRMING DISALLOWANCE MADE BY AO OF RS.24, 54,480/- EXPENSES PAID TO THE CONSULTANTS AND LAWYERS ON ACCOUNT OF DUE DILIG ENCE AND OTHER COMPLIANCE CHECKS TO BE CAPITAL IN NATURE. LD . CIT (A) OUGHT TO HAVE ALLOWED THE EXPENSES AS CLAIMED BY TH E ASSESSEE HOLDING THE SAME TO BE REVENUE IN NATURE. 8 8 10 THE LEARNED AR ON BEHALF OF THE ASSESSEE SUBMITT ED THAT THE EXPENDITURE IS ALLOWABLE AS REVENUE EXPENDITURE AND IN SUPPORT OF HIS CONTENTION, RELIANCE WAS PLACED ON THE JUDGMENT OF THE HONBLE ANDHRA PRADESH HIGH COURT RENDERED IN THE C ASE OF CIT VS. COROMONDAL FERTILIZERS (2001) 247 ITR 417 (AP). IT WAS HIS ALTERNATIVE SUBMISSION THAT IN CASE, IT IS HELD THA T THE EXPENDITURE IS NOT ALLOWABLE AS REVENUE EXPENDITURE, DEPRECIATI ON SHOULD BE ALLOWED. THE LEARNED DR SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 11 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND THE JUDGMENT CITED BY THE LEA RNED AR OF THE ASSESSEE. WE FIND THAT A CLEAR FINDING IS GIVEN BY THE LEARNED CIT(A) THAT THE EXPENDITURE OF RS.24,54,480/- INCUR RED ON ACCOUNT OF DUE DILIGENCE AND OTHER COMPLIANCE CHECK S TO CONSULTANTS AND LAWYERS IS TOWARDS THE ACQUISITION OF EXTRUSION BUSINESS AND HENCE, IT IS OF CAPITAL NATURE. UNDER THESE FACTS, THE JUDGMENT OF THE HONBLE ANDHRA PRADESH HIGH COURT C ITED BY THE LEARNED AR OF THE ASSESSEE IS NOT OF HELP TO THE AS SESSEE. SO FAR THE ALTERNATIVE CONTENTION IS CONCERNED FOR ALLOWIN G DEPRECIATION, WE FEEL THAT DEPRECIATION IS ALLOWABLE WHEN THE ASS ET IN QUESTION IS PUT TO USE. IT IS NOT ON RECORD AS TO WHETHER NE WLY ACQUIRED EXTRUSION BUSINESS HAD COMMENCED THE BUSINESS IN TH E PRESENT YEAR OR NOT AND HENCE, FOR THIS PURPOSE, WE SET ASI DE THE ORDER OF THE LEARNED CIT(A) AND RESTORE THIS ASPECT OF THE M ATTER BACK TO THE FILE OF THE LEARNED CIT(A) TO DECIDE AS TO WHET HER NEWLY ACQUIRED EXTRUSION BUSINESS HAD COMMENCED BUSINESS IN THE 9 9 PRESENT YEAR OR NOT AND WHETHER DEPRECIATION IS ALL OWABLE IN THE PRESENT YEAR OR NOT ON THIS AMOUNT OF RS.24,54,480/ -. THE LEARNED CIT(A) SHOULD PASS NECESSARY ORDER AS PER LAW AS PE R ABOVE DISCUSSION AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO BOTH THE SIDES. THIS GROUND IS ALLOWED FOR STATISTI CAL PURPOSE. 12 GROUND NO.2 IN THE ASSESSEES APPEAL AND ADDITIO NAL GROUND RAISED BY THE ASSESSEE ARE AS UNDER:- [2] THE ID. CIT (A) ERRED IN NOT APPRECIATING THE C LAIM OF THE APPELLANT THAT NON COMPETE FEES PAID TO JAIN IRRIGA TION SYSTEMS LTD. OF RS.4,63,58,160/-OUGHT TO BE ALLOWED AS DEDU CTION U/S 37 OF THE ACT AS REVENUE EXPENDITURE. ADDITIONAL GROUND :- [1] THE SUM OF RS.4,63,58,160 PAID TO JAIN IRRIGATI ON SYSTEMS LTD. ON ACCOUNT OF NON COMPETE FEES OUGHT TO HAVE BEEN C ONSIDERED AND ALLOWED BY THE LOWER AUTHORITIES AS ALLOWABLE R EVENUE EXPENDITURE UNDER SECTION 37 OF THE INCOME-TAX ACT, 1961. 13 IT WAS FAIRLY AGREED BY THE LEARNED AR OF THE AS SESSEE THAT THIS ISSUE IS NOW COVERED AGAINST THE ASSESSEE BY T HE DECISION OF THE SPECIAL BENCH OF ITAT RENDERED IN THE CASE OF T ECUMSEH INDIA (P) LTD. VS. ADDL. CIT (2010) 127 ITD 1 (DELH I)(SB). BY RESPECTFULLY FOLLOWING THIS DECISION OF THE SPECIAL BENCH OF THE ITAT, THIS GROUND OF THE ASSESSEE IS REJECTED. GROU ND NO.2 AND THE ADDITIONAL GROUND RAISED BY THE ASSESSEE ARE RE JECTED. 14 GROUND NO.3 OF THE ASSESSEES APPEAL READS AS UN DER:- [3] THE ID. CIT (A) ERRED IN LAW AND ON FACTS IN CO NFIRMING THE ACTION OF AO IN COMPUTING DEDUCTION U/S 80HHC OF TH E ACT AFTER SETTING OFF OF UNABSORBED DEPRECIATION OF RS. 21,35,96,830/- OF EARLIER YEARS AGAINST THE TOTAL INCOME. LD. CIT (A) OUGHT TO 10 10 HAVE QUASHED THIS ACTION OF AO AND ALLOWED DEDUCTIO N U/S 80HHC OF THE ACT AS CLAIMED BY THE APPELLANT. 15 IT WAS FAIRLY AGREED BY THE LEARNED AR OF THE AS SESSEE THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE BY THE D ECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. SHIRKE CONSTRUCTION EQUIPMENT LTD. (2007) 291 ITR 380 (SC) . BY RESPECTFULLY FOLLOWING THIS DECISION OF THE HONBLE APEX COURT, THIS ISSUE IS DECIDED AGAINST THE ASSESSEE. THE GRO UND RAISED BY THE ASSESSEE IS REJECTED. 16 GROUND NO.4 IN THE ASSESSEES APPEAL READS AS UN DER: [4] THE ID. CIT (A) ERRED IN LAW AND ON FACTS IN CO NFIRMING THE ACTION OF AO IN COMPUTING DEDUCTION U/S 80HHC OF TH E ACT AFTER SETTING OFF OF UNABSORBED DEPRECIATION OF RS. 21,35,96,830/- OF EARLIER YEARS AGAINST INCOME COMPUTED UNDER MAT PROVISIONS. LD. CIT (A) OUGHT TO HAVE QUASHED THIS ACTION OF AO AND ALLOWED DEDUCTION U/S 80HHC OF THE ACT AS CL AIMED BY THE APPELLANT. 17 IT WAS SUBMITTED BY THE LEARNED AR OF THE ASSESS EE THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE F OLLOWING JUDGMENTS:- (I) CIT VS. PACKWORTH UDYOG LTD. (2011) 331 ITR 416 (KERALA) (FB) (II) DCIT VS. SYNCOME FORMULATIONS (I) LTD. (2007) 106 ITD 193 (MUM)(SB) THE LEARNED DR SUPPORTED THE ORDERS OF THE AUTHORIT IES BELOW. 18 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND THE JUDGMENTS CITED BY THE LE ARNED AR OF 11 11 THE ASSESSEE. WE FIND THAT THIS ISSUE IS NOW COVERE D IN FAVOUR OF THE ASSESSEE BY THE JUDGMENTS CITED BY THE LEARNED AR OF THE ASSESSEE. BY RESPECTFULLY FOLLOWING THE SAID DECISI ONS, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. GROUND NO.4 I S ALLOWED. 19 GROUND NO.5 IN THE APPEAL READS AS UNDER:- [5] THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN CON FIRMING THE ACTION OF THE AO IN COMPUTING DEDUCTION U/S 80HHC O F THE ACT AFTER SETTING OFF OF UNABSORBED DEPRECIATION OF RS. 21,35,96,830/- OF EARLIER YEARS AGAINST INCOME COMPUTED UNDER MAT PROVISIONS. LD. CIT(A) OUGHT TO HAVE QUASHED THIS A CTION OF AO AND ALLOWED DEDUCTION U/S 80HHC WITHOUT SETTING OFF OF UNABSORBED DEPRECIATION WHILE COMPUTING INCOME U/S 115JB OF THE ACT. IT WAS SUBMITTED BY THE LEARNED AR OF THE ASSESSEE THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMEN T OF THE HONBLE APEX COURT IN THE CASE OF AJANTA PHARMA LTD . VS. CIT (2010) 327 ITR 305 (SC). THE LEARNED DR SUPPORTED T HE ORDER OF THE AUTHORITIES BELOW. BUT WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE BY RESPECTFULLY FOLLOWING THE DECISION CIT ED BY THE LD. AR OF THE ASSESSEE. 20 GROUND NO.6 IN THE APPEAL READS AS UNDER:- [6] THE ID. CIT (A) ERRED IN LAW AND ON FACTS IN CO NFIRMING THE ADDITION OF PROVISION FOR DOUBTFUL DEBTS OF RS.13,5 2,896/- MADE BY AO TO THE BOOK PROFITS U/S 115JB OF THE ACT. LD. CIT (A) FAILED TO APPRECIATE THAT THE APPELLANT HAS BEEN CL AIMING BAD DEBTS BY ADOPTING PROVISIONS FOR BAD AND DOUBTFUL D EBTS HENCE WHEN PROVISION IS NOT ALLOWED AS DEDUCTION THEN ACT UAL AMOUNT OF BAD DEBTS CLAIMED DURING THIS YEAR SHOULD BE ALL OWED AS DEDUCTION WHILE COMPUTING BOOK PROFITS U/S 115JB OF THE ACT. 12 12 21 THE LEARNED AR OF THE ASSESSEE FAIRLY CONCEDED T HAT THIS ISSUE IS TO BE DECIDED AGAINST THE ASSESSEE IN VIEW OF THE RETROSPECTIVE AMENDMENT IN SECTION 115JB BY THE FIN ANCE (NO.2) ACT, 2009 WITH EFFECT FROM 01-04-2001 AS PER WHICH CLAUSE (I) WAS INSERTED IN EXPLANATION 1 TO SECTION 115JB. ACC ORDINGLY, THIS GROUND OF THE ASSESSEE IS ALSO REJECTED. 22 IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED AND THE REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT TODAY ON 23-03-2012 SD/- SD/- (BHAVNESH SAINI) JUDICIAL MEMBER (A K GARODIA) ACCOUNTANT MEMBER DATE : 23-03-2012 COPY OF THE ORDER FORWARDED TO: 1. GE PLASTICS INDIA LTD., [AMALGAMATED WITH GE IND IA INDUSTRIAL PVT. LTD.] PLASTIC AVENUE, PO JAWAHARNAG AR, BARODA 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE -1(1), BARODA 3. CIT CONCERNED 4. CIT(A)-I, BARODA 5. DR, ITAT, AHMEDABAD BENCH-, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD