M/s. Quadrant EPP Surlon Uttranchal (P) Ltd, New Delhi V. ITO, New Delhi

ITA 4835/DEL/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58561 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 31-01-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 23-12-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B R R KUMARDR
• Assessee Lawyers: SATENDRA KUMAR DIRECTOR
• Keywords: Capital asset; Business income; Depreciation; Commercial expediency; Revenue expenditure; Capital expenditure
• Section: 115JB; 80IB; 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI F BENC H BEFORE SMT. DIVA SINGH, JM & SHRI A.N. PAHUJA, AM ITA NO. 4835/DEL/2009 ASSESSMENT YEAR: 2005-06 QUADANT EPP SURLON UTTRANCHAL (P) LTD.,H.NO. 4, POCKET-1, JASOLA VIHAR, NEW DELHI. V/S . ITO WARD 14(4), NEW DELHI [PAN : A AAACQ0944J] (APPELLANT) (RESPONDENT) ASSESSEE BY SH. SATENDRA KUMAR, DIRECTOR REVENUE BY SHRI B.R.R. KUMAR,DR DATE OF HEARING 31-01-2012 DATE OF PRONOUNCEMENT 08-02-2012 O R D E R A.N.PAHUJA : THIS APPEAL FILED ON 23.12.2009 BY THE ASSESSEE A GAINST AN ORDER DATED 9 TH OCTOBER, 2009 OF THE LD. CIT(A)-XVII, NEW DELHI RA ISES THE FOLLOWING GROUNDS: 1. THAT THE LD. AUTHORITIES BELOW HAVE E RRED IN LAW AND ON FACTS IN TREATING THE EXPENDITURE OF ` 11,49,690/- INCURRED ON REPAIR OF THE EXISTING BUILDING AS CAPITAL EXPENDITURE, WHEREAS T HE SAME WAS IN THE NATURE OF REVENUE EXPENDITURE IN VIEW OF PROVIS IONS OF SECTION 30(A)(II) OF I.T. ACT, 1961, AS NO NEW ASSET HAD CO ME INTO EXISTENCE. FURTHER RELIANCE IS PLACED ON THE FOLLOWING JUDICIA L DECISIONS: - I) 215 ITR 536 (MAD.) IN CIT VS. BINNY LTD. II) 239 ITR 908 (KER) IN CIT VS. COOPERATIVE SUGAR S LTD. III)234 ITR 167 (ALL) IN CIT VS. HIMALAYA DRUG CO. PVT. LTD. THUS, THE ACTION OF THE AUTHORITIES BELOW IS AGAINS T PROVISIONS OF LAW AND THE ADDITION MADE ON THIS ACCOUNT AT ` 1129201/- (AFTER ALLOWING DEPRECIATION ON ` 1149690/-) DESERVES TO BE DELETED. 2*.THAT THE AUTHORITIES BELOW HAVE ERRED IN LAW AND ON FACTS IN NOT ALLOWING DEDUCTION U/S 80IC WITH REFERENCE TO THE A MOUNT OF ` ` 290949/- (270266+13123+7560). THESE AMOUNTS WERE R ECEIVED IN THE COURSE OF RUNNING AN INDUSTRIAL UNDERTAKING AND WERE INCIDENTAL TO THE SAME, HENCE THE AMOUNTS ARE TO BE CONSIDERED AS DERIVED FROM AN INDUSTRIAL UNDERTAKING AND THEREFOR E DEDUCTION IS ALLOWABLE U/S80IC. 3*. THAT THE LD. CIT(APPEALS) HAS ERRED IN LAW A ND ON FACTS IN REJECTING THE ALTERNATE PLEA REGARDING INCOME U/S 1 15JB. THE LD. ITA NO. 4835/D/2009 2 CIT(APPEALS) HAS DISCUSSED, THIS POINT IN PARA 3(3) AND 4 OF THE APPELLATE ORDER. 4*. THAT THE OBSERVATIONS MADE PAGE NO. 9 OF THE APPELLANT ORDER ARE IMAGINARY INCORRECT AND THE APPELLANT HAD NEVER ACCEPTED THAT THE ACCOUNTS WERE NOT PROPER AND NOT IN ACCORDANCE WITH THE PRESCRIBED ACCOUNTING STANDARD. *INCORRECTLY NUMBERED 1,2 &3 2. ADVERTING FIRST TO GROUND NO. 1 IN THE APPEAL, F ACTS, IN BRIEF, AS PER THE RELEVANT ORDERS ARE THAT THE RETURN DECLARING NIL INCOME FIL ED ON 29.10.2005 UNDER THE NORMAL PROVISIONS AND BOOK PROFITS IN TERMS OF PROVISIONS OF SEC. 115JB OF THE I.T. ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT] WAS SELECTED FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE ACT ISSUED ON 26.10.2006. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (AO IN SHORT) NO TICED THAT THE ASSESSEE INCURRED AN EXPENDITURE OF ` 11,99,690/- TOWARDS REPAIR OF THE BUILDING .TO A Q UERY BY THE AO AS TO WHY THE SAID EXPENDITURE BE NOT TREATED AS CAPITAL IN NATURE, THE ASSESSEE REPLIED THAT THEY HAD PURCHASED OLD FACTORY LAND AND BUILDING FR OM UP STATE DEVELOPMENT CORPORATION LTD. SINCE THE FACTORY WAS LYING CLOSE D FOR THE PRECEDING SEVERAL YEARS, THE ASSESSEE INCURRED THE AFORESAID EXPENDITURE FOR REP AIR OF BUILDING, FLOOR PLASTERING ETC. IN ORDER TO MAKE THE BUILDING IN WORKING CONDITION. THEREBEING NO NEW ADVANTAGE DERIVED FROM THE REPAIR OF THE BUILDING NOR ANY MAT ERIAL ALTERATION OR IMPROVEMENT HAVING BEEN EFFECTED, THE EXPENDITURE WAS REVENUE IN NATUR E, THE ASSESSEE CONTENDED. HOWEVER, THE AO DID NOT ACCEPT THE CONTENTIONS OF T HE ASSESSEE AND TREATED THE AMOUNT AS CAPITAL IN NATURE ON THE GROUND THAT AMO UNT WAS NOT INCURRED TOWARDS CURRENT REPAIRS AND A NEW ASSET/BUILDING HAD COME I NTO EXISTENCE WHICH PROVIDED ENDURING BENEFIT TO THE ASSESSEE. 3. ON APPEAL, THE LD. CIT(A) UPHELD THE F INDINGS OF THE AO IN THE FOLLOWING TERMS: - 2.1 I HAVE CONSIDERED THE SUBMISSIONS OF LD. AR AN D PERUSED ASSESSMENT ORDER OF AO. IT IS ADMITTED BY THE APPELLANT BEFORE THE AO THAT THEY HAD PURCHASED OLD FACTORY LAND AND BUILDI NG FROM UP STATE DEVELOPMENT CORPORATION LTD. THE FACTORY WAS LYING CLOSED FOR SEVERAL YEARS AND TO MAKE IT IN WORKING CONDITION AMOUNT WA S SPENT ON REPAIRS OF THE BUILDING AND THE FLOOR PLASTERING ETC. THUS IT CANNOT BE SAID THAT THE REPAIR WAS A ROUTINE REPAIR OR WAS DONE IN ROUTINE WAY TO MAINTAIN THE ONGOING BUSINESS. IT HAS BEEN ADMITTED THAT THE REPAIR WAS DONE ON THE BUILDING WHICH WAS LYING UNUSED FOR SEVERAL YEARS. WITHOUT THIS R EPAIR, THE BUILDING COULD ITA NO. 4835/D/2009 3 HAVE NOT BEEN IN THE WORKING CONDITION. THUS, BY R EPAIRING THE BUILDING WAS BROUGHT TO WORKABLE CONDITION. THEREFORE, THE BENE FITS DERIVED WERE OF ENDURING NATURE. THE JUDGMENT RELIED UPON BY THE A PPELLANT IS NOT APPLICABLE TO THE FACTS OF THE CASE UNDER CONSIDERATION AS THA T JUDGMENT WAS GIVEN ON DIFFERENT FACTS. THE HONBLE SC IN THE CASE OF ASS AM BENGAL CEMENT CO. LTD. 27 ITR 34 (SC) HAD HELD THAT WHETHER EXPENDITURE IS CAPITAL OR REVENUE IN NATURE HAS ALL ALONG BEEN CONSIDERED TO BE QUESTION OF FACT TO BE DETERMINED BY THE IT AUTHORITIES ON AN APPLICATION OF THE BROA D PRINCIPLES LAID DOWN AND THE COURTS OF LAW WOULD NOT ORDINARILY INTERFERE WI TH SUCH FINDINGS OF FACTS IF THEY HAVE BEEN ARRIVED AT ON A PROPER APPLICATION O F THOSE PRINCIPLES. RELIANCE IS ALSO PLACED ON THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. GOYAL MG GASES (P) LTD. 173 TAXMAN 34 DELHI. CONSIDERING THE FACTS OF THE CASE AND LEGAL POSITION ON THE ISS UE, I UPHOLD THE DISALLOWANCE MADE BY THE AO. AS FAR ALTERNATE GROUND THAT IF AB OVE AMOUNT IS TO BE DISALLOWED IT CANNOT BE CHARGED TO INCOME TAX AT FU LL RATE SINCE THIS EXPENDITURE WAS INCURRED FROM THE INCOME DERIVED FR OM THE COMPANY EXEMPTED U/S 80IC. THE AO IS DIRECTED TO VERIFY TH E CLAIM OF THE APPELLANT AND IF IT IS FOUND THAT THE APPELLANT AHS NO OTHER SOURCE OF INCOME EXCEPT THAT FROM THE BUSINESS MANUFACTURING IN SPECIFIED AREAS U/S 80IC, THE SAME MAY BE ALLOWED IF OTHERWISE ADMISSIBLE UNDER THE PROVIS IONS OF I.T. ACT, 1961. 4. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF LD. CIT(A). THE LD. AR ON BEHALF OF ASSESSEE WHILE CA RRYING US THROUGH THE IMPUGNED ORDER CONTENDED THAT EXPENDITURE WAS REVENUE IN NAT URE AND NO NEW ASSET HAD COME INTO EXISTENCE. IN THIS CONNECTION LD. AR RELIED UP ON THE DECISIONS IN BALLIMAL NAVAL KISHORE AND ANOTHER.VS. CIT,224 ITR 414 (SC.), CIT VS.,KALYANJI MAVJI AND CO., 122 ITR 49 (SC), & CIT V. SARAVANA SPINNING MILLS (P.) LTD. ,293 ITR 201 (SC). ON THE OTHER HAND, LD. DR SUPPORTED THE FINDINGS OF THE L D. CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE DECISIONS RELIED UPON THE LD. AR ON BEHALF OF T HE ASSESSEE. THE ISSUE BEFORE US IS AS TO WHETHER THE EXPENDITURE ON REPAIR OF THE FLOO R, ROOF AND BOUNDARY WALLS OF A FACTORY BUILDING PURCHASED BY THE ASSESSEE FROM UP STATE DE VELOPMENT CORPORATION LTD. IS REVENUE EXPENDITURE OR CAPITAL IN NATURE. INDISPUTA BLY, THE ASSESSEE PURCHASED LAND & FACTORY BUILDING FROM UP STATE DEVELOPMENT CORPORA TION LTD. AND THERE IS NOTHING TO SUGGEST THAT THE ASSESSEE CARRIED ON ANY BUSINESS I N THAT BUILDING BEFORE INCURRING THE AFORESAID EXPENDITURE. IT APPEARS, THE BUILDING WAS IN A DILAPIDATED CONDITION AND ASSESSEE INCURRED EXPENDITURE OF ` 11,99,690/-ON FLOOR, ROOF AND BOUNDARY WALLS SO AS TO ENABLE IT TO COMMENCE ITS BUSINESS IN THE SAID BUI LDING. THERE IS A SPECIFIC PROVISION, I.E., SECTION 30 OF THE ACT THAT RELATES TO DEDUCTION OF EXPENDITURE ON REPAIRS. THE SAID PROVISION CREATES A DISTINCTION AS TO THE CAPACITY IN WHICH AN ASSESSEE INCURS THE ITA NO. 4835/D/2009 4 EXPENDITURE - WHETHER AS A TENANT OR OTHERWISE THAN AS A TENANT. IF EXPENDITURE IS INCURRED BY A TENANT, THE ENTIRE EXPENDITURE INCURR ED BY THE ASSESSEE ON 'REPAIRS' IS ALLOWABLE DEDUCTION U/S 30( A )( I ) OF THE ACT. BUT IF THE EXPENDITURE IS INCURRED OT HERWISE THAN AS A TENANT, THE PROVISIONS OF SECTION 30( A )( II ) OF THE ACT STIPULATE DEDUCTION OF THE EXPENDITURE INCURRED BY AN ASSESSEE ON ACCOUNT OF ' CURRENT REPAIRS' TO THE PREMISES. THE EXPRESSION EMPLOYED IN SECTION 30( A )( I ) IS 'REPAIRS' AS AGAINST THE EXPRESSION CURRENT REPAIRS,' IN SECTION 30( A )( II ). ANY CAPITAL EXPENDITURE IS EXCLUDED BOTH UNDER SEC. 30 AND SEC. 37(1) OF THE ACT . THE ASSESSEE BEFORE US PURCHASED A FACTORY BUILDING FROM UP STATE DEVELOPMENT CORPORATION LTD. AND INCURRED THE AFORESAID EXPENDITURE. WE ARE, THEREFORE, CONCERNED WITH THE PROVISIONS OF SECTION 30( A )( II ) OF THE ACT AND THE GENERAL PROVISIONS OF SECTION 37(1). IN THIS CONNECTION THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF NEW SHORRO CK SPG. & MFG. CO. LTD. V. CIT [1956] 30 ITR 338 IS THE LEADING CASE , WHICH WAS APPROVED BY THE H ONBLE SUPREME COURT IN THE CASE OF BALLIMAL NAVAL KISHORE V. CIT [1997] 224 ITR 414 . THE HONBLE BOMBAY HIGH COURT EXPLAINED THE EXPRESSION 'REPAIRS ' IN THE FOLLOWING WORDS : 'THE EXPRESSION REPAIRS MUST BE UNDERSTOOD IN CON TRADISTINCTION TO RENEWAL OR RESTORATION. A BUILDING, MACHINERY, PLAN T OR FURNITURE MAY BE RENEWED OR RESTORED EITHER WHOLLY OR IN PART, IN WHICH CASE THE AMOUNT EXPENDED WOULD NOT BE IN RESPECT OF REPAIRS, BUT WHEN RENEWING OR RESTORING A BUILDING, MACHINERY, PLANT OR FURNITURE A NEED MAY ARISE TO SET RIGHT CERTAIN DEFECTS OR FLAWS AND AN AMOUNT MAY BE SPENT FOR THIS PURPOSE AND THE RESULT MAY BE THAT A LTHOUGH THE ORIGINAL ASSET HAS BEEN PRESERVED AND MAINTAINED, NO NEW ASS ET HAS COME INTO EXISTENCE AND NO ADDITIONAL ADVANTAGE HAS ACCR UED TO THE ASSESSEE.' 5.1 THEREAFTER ,THE HONBLE HIGH COURT HAVE EXPLA INED THE EXPRESSION 'CURRENT REPAIRS' IN THE FOLLOWING WORDS : 'THE DEFINITION OF REPAIR REALLY DOES NOT CREATE MUCH DIFFICULTY, BUT THE DIFFICULTY IS CREATED BY THE ADJECTIVE WHICH QUALIF IES THE EXPRESSION REPAIRS AND THAT ADJECTIVE IS CURRENT, AND AS A LREADY POINTED OUT THE LEGISLATURE DID NOT INTEND THAT THE ASSESSEE SHOULD BE PERMITTED ALL REPAIRS, EVEN THOUGH THE EXPENDITURE MAY BE A REVEN UE EXPENDITURE, AS A PERMISSIBLE DEDUCTION UNDER SECTION 10(2)(V). WHAT WE HAVE TO CONSIDER IS IN WHAT WAY HAS THE LEG ISLATURE CIRCUMSCRIBED THE EXPRESSION REPAIRS AND TO WHAT EXTENT HAS THE LEGISLATURE LIMITED THE RIGHT OF THE ASSESSEE TO CL AIM DEDUCTION IN RESPECT OF REPAIRS. ONE OR TWO VIEWS ARE POSSIBLE O F THE EXPRESSION CURRENT. IT MAY BE SAID THAT CURRENT IS USED IN CONTRADISTINCTION TO HEAVY AND THAT SMALL PETTY REPAIRS ARE THE ONLY REP AIRS WHICH CAN FALL WITHIN THE AMBIT OF SECTION 10(2)(V). ITA NO. 4835/D/2009 5 THE OTHER VIEW IS A VIEW MORE IN FITTING WITH THE E TYMOLOGICAL MEANING OF THE EXPRESSION CURRENT, AND IT IS THAT THEY AR E SUCH REPAIRS WHICH ARE ATTENDED TO WHEN THE NEED FOR THEM ARISES AND A RE NOT ALLOWED TO FALL INTO ARREARS OR TO BE ACCUMULATED. IF A BUILDI NG, MACHINERY, PLANT OR FURNITURE NEEDS SOME REPAIRS AND THOSE REPAIRS A RE ATTENDED TO AS AND WHEN THE NEED ARISES THEN THE REPAIRS ARE CURRE NT REPAIRS. BUT IF THE ASSESSEE, ALTHOUGH THE NEED HAS ARISEN, DOES NOT ATTEND TO THAT NEED AND ALLOWS THE REPAIRS TO GET ACCUMULATED , THEN IT COULD NOT BE SAID THAT WHEN HE IS EXPENDING MONEY ON THESE RE PAIRS HE IS EXPENDING THEM ON CURRENT REPAIRS. AGAIN, IT SEEMS TO HAVE BEEN THE INTENTION OF THE LEGISLATURE THAT IF THE ASSESSEE C OULD CARRY ON WITH HIS BUILDING, MACHINERY, PLANT OR FURNITURE WITHOUT ATT ENDING TO ITS REPAIRS AND SPENDS AN AMOUNT AT A LATER DATE WHEN THE ARREA RS ARE ACCUMULATED, SUCH EXPENDITURE PARTAKES MORE OF THE NATURE OF CAPITAL EXPENDITURE THAN OF REVENUE EXPENDITURE. IN OUR OPINION, THE LATTER VIEW AS TO THE EXPRESSIO N CURRENT REPAIRS IS THE BETTER VIEW AND MORE CONSISTENT WITH THE LANGUA GE USED BY THE LEGISLATURE. IT MAY ALSO BE POINTED OUT THAT SINCE 1953 WHEN SECTION 10(2)(XV) WAS AMENDED, NO DEDUCTION IS PERMISSIBLE UNDER SECTION 10(2)(XV) WHICH IS AN ALLOWANCE OF THE NATURE DESCR IBED IN ANY OF THE CLAUSES (I) TO (XIV).' 5.2. IN THE CASE OF HUMAYUN PROPERTIES LTD. V. CIT [1962] 44 ITR 73 (CAL.), THE ASSESSEE WAS THE OWNER OF TWO CINEMA HOUSES IN CALC UTTA KNOWN AS LIGHT HOUSE AND NEW EMPIRE. IN THE YEAR ENDING SEPTEMBER 30, 1949, THE ASSESSEE INCURRED RENOVATION EXPENSES ON BUILDINGS, FURNITURE AND FITTINGS IN RE SPECT OF THE SAID TWO CINEMA HALLS. THE ASSESSEE CLAIMED THAT DURING THE WAR YEARS THEY WER E UNABLE TO EXECUTE THE NECESSARY REPAIRS TO THE MACHINERY, BUILDINGS AND FURNITURE O F THE SAID CINEMA HOUSES AND SO AFTER SEVERAL YEARS THE ASSESSEE RENOVATED THE FURNITURE OF THE BUILDINGS AND INCURRED HEAVY EXPENDITURE THAT WAS CLAIMED AS ALLOWABLE DEDUCTION . THE AO ALLOWED ONLY 10% OF THE CLAIM AS CURRENT REPAIRS. THE AAC UPHELD THE FINDIN G OF THE AO. ON ASSESSEES APPEAL, THE APPELLATE TRIBUNAL FOUND THAT EXPENSES UNDER TH E HEAD 'RENOVATION' COULD NOT BE REGARDED AS CURRENT REPAIRS AND, THEREFORE, THE SUM OF ` 2,17,182 HAD BEEN RIGHTLY DISALLOWED. ON A REFERENCE TO THE HONBLE CALCUTTA HIGH COURT, THE REFERENCE WAS ANSWERED IN FAVOUR OF THE REVENUE AND AGAINST THE A SSESSEE. 5.3 . THE HONBLE DELHI HIGH COURT IN MODI SPG. & WVG. MILLS CO. LTD. V. CIT [1993] 200 ITR 544 STATED THE LEGAL POSITION IN THE CONTEXT OF PROVISIONS OF SEC. 30A(II) OF THE ACT IN THE FOLLOWING WORDS : ITA NO. 4835/D/2009 6 'ONE OF THE INGREDIENTS OF THE AMOUNT BEING ALLOWED AS A DEDUCTION UNDER SECTION 30(A)(II) IS THAT THE AMOUNT MUST BE SPENT FOR PURPOSES OF CARRYING OUT CURRENT REPAIRS. THE FACTS AS FOUND BY THE TRIBUNAL ARE THAT THE ADMINISTRATIVE BLOCK HAD BEEN BUILT IN 1948 AND REQUIRED REPAIRS AND IMPROVEMENT IN THE RELEVANT ASSESSMENT YEAR IN QUES TION. AS THE AMOUNT WAS SPENT FOR CARRYING OUT REPAIRS WHICH WERE LONG OVERDUE, IT IS EVIDENT THAT THE AMOUNT WAS NOT SPENT ON CURRENT REPAIRS. S ECTION 30(A)(II) IS NOT CONCERNED WITH THE QUESTION AS TO WHETHER THE NATUR E OF THE EXPENSES TOWARDS CURRENT REPAIRS IS CAPITAL OR REVENUE. AS L ONG AS THE REPAIRS WHICH ARE CARRIED OUT FALL UNDER THE CATEGORY OF CU RRENT REPAIRS, THEN, IRRESPECTIVE OF THE FACT THAT THE REPAIRS HAVE BEEN CARRIED OUT TO A CAPITAL ASSET, AND MAY OTHERWISE HAVE BEEN REGARDED AS A CA PITAL EXPENDITURE, THE SAID PROVISION SPECIFICALLY ALLOWS DEDUCTION. C URRENT REPAIRS MUST NECESSARILY MEAN REPAIRS WHICH ARE REQUIRED TO BE C ARRIED OUT FROM TIME TO TIME AS AND WHEN A DEFECT ARISES. IF THERE HAS B EEN WEAR AND TEAR ON AN ITEM, LIKE THE FLOORS IN THE PRESENT CASE, OVER A NUMBER OF YEARS AND ULTIMATELY THEY ARE REPLACED, THEN SUCH REPLACEMENT CANNOT BE REGARDED AS CURRENT REPAIRS. THE REPLACEMENT MAY AMOUNT TO R ENOVATION OR REPAIRS WHICH MAY OR MAY NOT BE ENTITLED TO DEDUCTION UNDER SECTION 37 OF THE ACT BUT SUCH AN EXPENSE HAS BEEN RIGHTLY HELD BY TH E TRIBUNAL AS NOT BEING ALLOWABLE AS DEDUCTION UNDER THE SAID HEAD C URRENT REPAIRS.' 5.31 AS TO THE APPLICABILITY OF PROVISIONS OF S ECTION 37(1), THE HONBLE DELHI HIGH COURT HELD AS UNDER : 'WE MIGHT, HOWEVER, OBSERVE THAT, WHILE DISALLOWING THE EXPENDITURE UNDER SECTION 30(A)(II), THE INCOME-TAX APPELLATE T RIBUNAL HAS GIVEN DIRECTION THAT THE ASSESSEE BE ALLOWED DEPRECIATION ON THE ABOVE EXPENDITURE, IF OTHERWISE ADMISSIBLE. THE IMPLICATI ON OF THIS DIRECTION SEEMS TO BE CLEAR, NAMELY, THAT THE EXPENDITURE WAS CAPITAL IN NATURE AND, THEREFORE, IN ANY EVENT, WOULD NOT HAVE BEEN E NTITLED TO DEDUCTION UNDER SECTION 37 OF THE ACT. QUESTION NO. 3, THEREF ORE, IS ALSO ANSWERED IN THE AFFIRMATIVE AND IN FAVOUR OF THE REVENUE.' 5.4 APPARENTLY, THE PROVISIONS OF SECTION 30( A )( II ) OF THE ACT ENVISAGE DEDUCTION OF ONLY SUCH REPAIRS AS ARE ATTENDED TO WHEN THE NEED AROSE . IN NEW SHORROCK SPG. & MFG. CO. LTD. (SUPRA),HONBLE BOMBAY HIGH COURT HAVE CLEARLY PR ONOUNCED THAT THE PROVISION OF SECTION 10(2)( V ) BEING A SPECIFIC PROVISION WHAT CANNOT BE ALLOWED UNDER THAT PROVISION CANNOT BE CLAIMED AS DEDUCTION UNDER THE GENERAL PROVISIONS OF SECTION 10(2)( XV ). THE AFORESAID JUDGMENT OF HONBLE BOMBAY HIGH CO URT HAS BEEN APPROVED BY HONBLE SUPREME COURT IN THE CASE OF BALLIMAL NAVAL KISHORE (SUPRA).HOWEVER, IN THE CASE OF KALYANJI MAVJI & CO. ( SUPRA ), HONBLE SUPREME COURT HAVE HELD THAT EXPENDITURE ON REPAIRS OTHER THAN CURRENT REPAIRS CAN BE ALLOWE D AS DEDUCTION UNDER THE GENERAL ITA NO. 4835/D/2009 7 PROVISION OF THE ACT BUT IN THAT CASE HONBLE SUPRE ME COURT HAVE EMPHASIZED THAT THERE IS EMBARGO AGAINST ALLOWANCE OF A CAPITAL EXPENDITU RE. THUS, EVEN IF ACCUMULATED REPAIRS OR REPAIRS ARISING FROM OTHER REASONS, NOT BEING IN THE NATURE OF CURRENT REPAIRS, CAN BE ALLOWED AS DEDUCTION UNDER SECTION 37(1) THE EXPENDITURE SHOULD IN NO CASE TRANSGRESS THE BOUNDARIES OF BEING REVENUE EXPENDIT URE. REPAIRS, CAPITAL IN NATURE, CANNOT BE ALLOWED AS DEDUCTION UNDER THE PROVISIONS OF SECTION 37(1) OF THE ACT. AS A MATTER OF FACT SUCH EXPENDITURE CAN HARDLY BE CONST RUED AS EXPENDITURE ON 'REPAIRS'. IN THE CASE OF CIT V. MAHALAKSHMI TEXTILE MILLS LTD. [1965] 56 ITR 256 (MAD), THE HONBLE MADRAS HIGH COURT HELD THAT THE EXPENDITURE WHICH I NVOLVED THE RECONSTRUCTION OF THE BUILDING ITSELF COULD NOT BE REGARDED AS EXPENDITUR E INCURRED FOR THE MAINTENANCE OF THE CAPITAL ASSET. IN THE CASE OF RATLAM BONE MILLS V. CIT [1984] 147 ITR 148, THE HONBLE MADHYA PRADESH HIGH COURT HELD THAT WHERE AS A RESU LT OF THE EXPENDITURE ON RENOVATION OF THE FACTORY BUILDING TO THE EXTENT OF ` 34,245 THERE WAS SUBSTANTIAL IMPROVEMENT OF THE PROPERTY, THE TRIBUNAL WAS JUSTI FIED IN HOLDING THAT THE SAID EXPENDITURE WAS CAPITAL IN NATURE. 5.5 IN THE CASE OF BALLIMAL NAVAL KISHORE V. CIT [1997] 224 ITR 414 . (SC), THE ASSESSEE CARRIED ON THE BUSINESS OF EXHIBITING FILM S IN A THEATRE CALLED NAVAL TALKIES AT PANIPAT. THE ASSESSEE HAD BEEN EXHIBITING FILMS IN THE THEATRE FROM 1945 TO 1960. DURING THE PERIOD 1960 TO MARCH, 1961 THE ASSESSEE EXTENSIVELY REPAIRED THE THEATRE. THE AMOUNTS SPENT BY HIM WERE ON MACHINERY RS. 16,0 02, NEW FURNITURE RS. 27,889, SANITARY FITTINGS ` 5,225 AND REPLACEMENT OF ELECTRICAL WIRING RS. 13, 604. IN ADDITION THERETO, A TOTAL AMOUNT OF ` 62,977 WAS SPENT ON EXTENSIVE REPAIRS TO WALLS, TO THE HALL, TO THE FLOORING AND ROOFING, TO DOORS AND WINDOWS A ND THE STAGE SIDES ETC. IN ASSESSMENT PROCEEDINGS THE ASSESSEE CLAIMED THAT TH E EXPENDITURE THUS INCURRED WAS IN THE NATURE OF REVENUE EXPENDITURE AS HAVING BEEN INCURRED ON REPAIRS. THE LEARNED ASSESSING OFFICER AND THE LEARNED AAC HELD THE EXPE NDITURE TO BE OF CAPITAL NATURE. HOWEVER, THE TRIBUNAL UPHELD THE ASSESSEES CASE. O N REFERENCE AT THE INSTANCE OF THE REVENUE, HONBLE BOMBAY HIGH COURT, FOLLOWING THE E ARLIER DECISION IN THE CASE OF NEW SHORROCK SPG. & MFG. CO. LTD. ( SUPRA ) ANSWERED THE QUESTION IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. ON ASSESSEES APPEAL THE HONBLE SUPREME COURT HAVE DECIDED THE MATTER IN THE FOLLOWING WORDS: 'THE EXPRESSION USED IN SECTION 10(2)(V) IS CURREN T REPAIRS AND NOT MERE REPAIRS. THE SAME EXPRESSION OCCURS IN SECTI ON 30(A)(II) AND IN SECTION 31(I) OF THE INCOME-TAX ACT, 1961. THE QUES TION IS WHAT IS THE ITA NO. 4835/D/2009 8 MEANING OF THE EXPRESSION IN THE CONTEXT OF SECTION 10(2). IN NEW SHORROCK SPG. & MFG. CO. LTD. [1956] 30 ITR 338 (BOM.), CHAGLA, CJ., SPEAKING FOR THE DIVISION BENCH, OBSERVED THAT THE EXPRESSION CURRENT REPAIRS MEANS EXPENDITURE ON BUILDINGS, M ACHINERY, PLANT OR FURNITURE WHICH IS NOT FOR THE PURPOSE OF RENEWAL O R RESTORATION BUT WHICH IS ONLY FOR THE PURPOSE OF PRESERVING OR MAIN TAINING AN ALREADY EXISTING ASSET AND WHICH DOES NOT BRING A NEW ASSET INTO EXISTENCE OR DOES NOT GIVE TO THE ASSESSEE A NEW OR DIFFERENT AD VANTAGE. THE LEARNED CHIEF JUSTICE OBSERVED THAT THEY ARE SUCH R EPAIRS AS ARE ATTENDED TO AS AND WHEN NEED ARISES AND THAT THE QU ESTION WHEN A BUILDING, MACHINERY, ETC., REQUIRES REPAIRS AND WHE N THE NEED ARISES MUST BE DECIDED NOT BY ANY ACADEMIC OR THEORETICAL TEST BUT BY THE TEST OF COMMERCIAL EXPEDIENCY. THE LEARNED CHIEF JU STICE OBSERVED : THE SIMPLE TEST THAT MUST BE CONSTANTLY BORNE IN M IND IS THAT AS A RESULT OF THE EXPENDITURE WHICH IS CLAIMED AS AN EX PENDITURE FOR REPAIRS WHAT IS REALLY BEING DONE IS TO PRESERVE AN D MAINTAIN AN ALREADY EXISTING ASSET. THE OBJECT OF THE EXPENDITU RE IS NOT TO BRING A NEW ASSET INTO EXISTENCE, NOR IS ITS OBJECT THE OBT AINING OF A NEW OR FRESH ADVANTAGE. THIS CAN BE THE ONLY DEFINITION OF REPAIRS BECAUSE IT IS ONLY BY REASON OF THIS DEFINITION OF REPAIRS THA T THE EXPENDITURE IS A REVENUE EXPENDITURE. IF THE AMOUNT SPENT WAS FOR THE PURPOSE OF BRINGING INTO EXISTENCE A NEW ASSET OR OBTAINING A NEW ADVANTAGE, THEN OBVIOU SLY SUCH AN EXPENDITURE WOULD NOT BE AN EXPENDITURE OF A REVENU E NATURE BUT IT WOULD BE A CAPITAL EXPENDITURE, AND IT IS CLEAR THA T THE DEDUCTION WHICH THE LEGISLATURE HAS PERMITTED UNDER SECTION 1 0(2)(V) IS A DEDUCTION WHERE THE EXPENDITURE IS A REVENUE EXPEND ITURE AND NOT A CAPITAL EXPENDITURE. IN TAKING THE ABOVE VIEW, THE BOMBAY HIGH COURT DIS SENTED FROM THE VIEW TAKEN BY THE ALLAHABAD HIGH COURT IN RAMKISHAN SUNDERLAL V. CIT [1951] 19 ITR 324 , WHERE IT WAS HELD THAT THE EXPRESSION CURRENT REPAIRS IN SECTION 10(2)(V) WAS RESTRICTED TO PETT Y REPAIRS ONLY WHICH ARE CARRIED OUT PERIODICALLY. THE LEARNED JUDGE AGR EED WITH THE VIEW TAKEN BY THE PATNA HIGH COURT IN CIT V. DARBHANGA S UGAR CO. LTD. [1956] 29 ITR 21 AND BY THE MADRAS HIGH COURT IN CIT V. SRI RAMA SUGAR MILLS LTD. [1952] 21 ITR 191 . IN LIBERTY CINEMA V. CIT [1964] 52 ITR 153 (CAL.), P.B. MUKHARJI, J., SPEAKING FOR A DIVISION BENCH OF THE CALCUTTA HIGH COURT, HELD THAT AN EXPENDITURE INCURRED WITH A VIEW TO BRING INTO EXIS TENCE A NEW ASSET OR AN ADVANTAGE OF ENDURING NATURE CANNOT QUALIFY F OR DEDUCTION UNDER SECTION 10(2)(V). IN OUR OPINION THE TEST INVOLVED BY CHAGLA, CJ., IN NEW SHORROCK SPG. & MFG. CO. LTD. [1956] 30 ITR 338 (BOM.) IS THE MOST APPROPRIATE ONE HAVING REGARD TO THE CONTEXT IN WHICH THE SAID EXPR ESSION OCCURS. IT HAS ALSO BEEN FOLLOWED BY A MAJORITY OF THE HIGH CO URTS IN INDIA. WE RESPECTFULLY ACCEPT AND ADOPT THE TEST. ITA NO. 4835/D/2009 9 APPLYING THE AFORESAID TEST, IF WE LOOK AT THE FACT S OF THIS CASE, IT WILL BE EVIDENT THAT WHAT THE ASSESSEE DID WAS NOT MERE REPAIRS BUT A TOTAL RENOVATION OF THE THEATRE. NEW MACHINERY, NEW FURNITURE, NEW SANITARY FITTINGS AND NEW ELECTRICAL WIRING WERE IN STALLED BESIDES EXTENSIVELY REPAIRING THE STRUCTURE OF THE BUILDING . BY NO STRETCH OF IMAGINATION, CAN IT BE SAID THAT THE SAID REPAIRS Q UALIFY AS CURRENT REPAIRS WITHIN THE MEANING OF SECTION 10(2)(V). IT WAS A CASE OF TOTAL RENOVATION AND HAS RIGHTLY BEEN HELD BY THE HIGH CO URT TO BE CAPITAL IN NATURE. INDEED, THE FINDING OF THE HIGH COURT IS TH AT AS AGAINST THE SUM OF RS. 17,000 FOR WHICH THE ASSESSEE HAD PURCHA SED THE FACTORY IN 1937, THE EXPENDITURE INCURRED IN THE RELEVANT A CCOUNTING YEAR WAS IN THE REGION OF RS. 1,20,000. THE APPEAL ACCORDINGLY FAILS AND IS DISMISSED. NO C OSTS.' 5.6 . IN CIT V. SARAVANA SPINNING MILLS (P.) LTD. [2007] 293 ITR 201(SC),THE HONBLE APEX COURT EXPLAINED WHAT CURRENT REPAIRS OF PLANTS AND MACHINERY UNDER SECTION 31( I ) OF THE ACT WOULD MEAN, IN THE FOLLOWING MANNER: 11. AN ALLOWANCE IS GRANTED BY CLAUSE (I) OF SECTI ON 31 IN RESPECT OF AMOUNT EXPENDED ON CURRENT REPAIRS TO MACHINERY, PL ANT OR FURNITURE USED FOR THE PURPOSES OF BUSINESS, IRRESPECTIVE OF WHETHER THE ASSESSEE IS THE OWNER OF THE ASSETS OR HAS ONLY USE D THEM. THE EXPRESSION CURRENT REPAIRS DENOTES REPAIRS WHICH ARE ATTENDED TO WHEN THE NEED FOR THEM ARISES FROM THE VIEWPOINT OF A BUSINESSMAN. THE WORD REPAIR INVOLVES RENEWAL. HOWEVER, THE WO RDS USED IN SECTION 31(I) ARE CURRENT REPAIRS. THE OBJECT BEH IND SECTION 31(I) IS TO PRESERVE AND MAINTAIN THE ASSET AND NOT TO BRING IN A NEW ASSET. IN OUR VIEW, SECTION 31(I) LIMITS THE SCOPE OF ALLOWAB ILITY OF EXPENDITURE AS DEDUCTION IN RESPECT OF REPAIRS MADE TO MACHINER Y, PLANT OR FURNITURE BY RESTRICTING IT TO THE CONCEPT OF CURR ENT REPAIRS. ALL REPAIRS ARE NOT CURRENT REPAIRS. SECTION 37(1) ALLOWS CLAIM S FOR EXPENDITURE WHICH ARE NOT OF CAPITAL NATURE. HOWEVER, EVEN SECT ION 37(1) EXCLUDES THOSE ITEMS OF EXPENDITURE WHICH EXPRESSLY FALLS IN SECTIONS 30 TO 36. THE EFFECT IS TO DELIMIT THE SCOPE OF ALLOWABILITY OF DEDUCTIONS FOR REPAIRS TO THE EXTENT PROVIDED FOR IN SECTIONS 30 T O 36. TO DECIDE THE APPLICABILITY OF SECTION 31(I) THE TEST IS NOT WHET HER THE EXPENDITURE IS REVENUE OR CAPITAL IN NATURE, WHICH TEST HAS BEEN W RONGLY APPLIED BY THE HIGH COURT, BUT WHETHER THE EXPENDITURE IS CUR RENT REPAIRS. THE BASIC TEST TO FIND OUT AS TO WHAT WOULD CONSTITUTE CURRENT REPAIRS IS THAT THE EXPENDITURE MUST HAVE BEEN INCURRED TO PRESERV E AND MAINTAIN AN ALREADY EXISTING ASSET, AND THE OBJECT OF THE EX PENDITURE MUST NOT BE TO BRING A NEW ASSET INTO EXISTENCE OR TO OBTAIN A NEW ADVANTAGE. IN FACT, IN THE PRESENT CASE, IN THE BALANCE SHEET THE ASSESSEE, VIZ., M/S. SARAVANA SPINNING MILLS HAS INDICATED THE ABOV E EXPENSE AS AN ITEM INCURRED FOR PURCHASE OF A NEW ASSET. IN OUR V IEW, THE HIGH ITA NO. 4835/D/2009 10 COURT, HAD ERRED IN PLACING RELIANCE ON THE REPORT OF SITRA IN COMING TO THE CONCLUSION THAT THE TEXTILE MILL IS A PLANT UNDER SECTION 31(I). AS STATED ABOVE, EACH MACHINE IN A SEGMENT HAS AN INDE PENDENT ROLE TO PLAY IN THE MILL AND THE OUTPUT OF EACH DIVISION IS DIFFERENT FROM THE OTHER REPAIR IMPLIES THE EXISTENCE OF A PART OF T HE MACHINE WHICH HAS MALFUNCTION. IF THE ARGUMENT OF THE ASSESSEE HE REIN BEFORE US IS TO BE ACCEPTED IT WOULD RESULT IN ABSURDITY AND IT WOULD MAKE THE PROVISIONS OF SECTION 31(I) COMPLETELY REDUNDANT. A CCORDING TO SHRI R. VENKATARAMAN, LEARNED SENIOR COUNSEL FOR THE ASSESS EE, THE TEXTILE PLANT CONSISTS OF ABOUT 25 MACHINES. ONE OF SUCH MA CHINES IS THE RING FRAME. IF THE ARGUMENT OF THE ASSESSEE IS TO B E ACCEPTED, IT WOULD MEAN THAT PERIODICALLY ONE MACHINE OUT OF 25 WOULD BE REPLACED, AND ON THAT BASIS, FROM TIME TO TIME, EAC H OF THESE 25 MACHINES IN THE TEXTILE PLANT WOULD BE ENTITLED TO CLAIM ALLOWANCE UNDER SECTION 31(I). IN OUR VIEW, THE ASSESSING OFF ICER WAS RIGHT IN HOLDING THAT EACH MACHINE INCLUDING THE RING FRAME WAS AN INDEPENDENT AND SEPARATE MACHINE CAPABLE OF INDEPEN DENT AND SPECIFIC FUNCTION AND, THEREFORE, THE EXPENDITURE I NCURRED FOR REPLACEMENT OF THE NEW MACHINE WOULD NOT COME WITHI N THE MEANING OF THE WORDS CURRENT REPAIRS. IN THE PRESENT CASE , IT IS NOT THE CASE OF THE ASSESSEE THAT A PART OF THE MACHINE (OUT OF 25 MACHINES) NEEDED REPAIRS. THE ENTIRE MACHINE HAD BEEN REPLACED. THER EFORE, THE EXPENDITURE INCURRED BY THE ASSESSEE DID NOT FALL W ITHIN THE MEANING OF CURRENT REPAIRS IN SECTION 31(I). 5.7 AS REGARDS DECISION IN BINNY LTD.(SUPRA) RELI ED UPON BY THE ASSESSEE IN THE GROUNDS OF APPEAL, IN THAT DECISION THE ROOF WITH G. I. SHEETS PLACED ON THE WOODEN FRAMES WAS REPLACED BY ASBESTOS SHEETS PLACED ON ST EEL FRAMES. THE ENTIRE STRUCTURE OF THE SPINNING DEPARTMENT WAS NOT ALTERED. ACCORDINGL Y, THE HONBLE HIGH COURT CONCLUDED THAT THE EXPENDITURE INCURRED FOR THE PUR POSE OF REPLACING THE ROOF CANNOT BE CONSIDERED TO BE FOR THE PURPOSE OF OBTAINING AN EN DURING BENEFIT IN THE BUSINESS ALREADY CARRIED ON BY THE ASSESSEE. SIMILARLY IN HI MALYA DRUG CO. PVT. LTD.(SUPRA), HONBLE HIGH COURT UPHELD THE FINDINGS OF THE ITAT THAT EXPENDITURE OF RS. 60,000 SPENT ON RESURFACING THE ROAD WITHIN THE FACTORY PREMISES WAS REVENUE EXPENDITURE IN THE BUSINESS ALREADY CARRIED ON BY THE ASSESSEE. IN CO-OPERATIVE SUGARS LTD.(SUPRA) HONBLE HIGH COURT UPHELD THE FINDINGS OF THE ITAT ,HOLDING THAT EXPENDITURE INCURRED ON REPLACEMENT OF MACHINERY WAS REVENUE IN NATURE. IN ANOTHER DECISION IN GIRDHARI DASS AND SONS. (SUPRA) RELIED UPON BY THE LD. AR, HONBL E HIGH COURT HELD THAT WHEN AN OWNER SPENDS ON ADDITIONS OR ALTERATIONS IN A BUILD ING WHICH ENHANCES ITS VALUE, THEN THE EXPENDITURE IS OF CAPITAL NATURE BUT IF A TENAN T INCURS SUCH AN EXPENDITURE, HE DOES NOT ACQUIRE ANY CAPITAL ASSET, BECAUSE THE BUILDING DOES NOT BELONG TO HIM, AND ITA NO. 4835/D/2009 11 THEREFORE, SUCH AN EXPENDITURE NORMALLY SHOULD BE O F REVENUE NATURE. AFTER PERUSING THESE DECISIONS, WE ARE OF THE OPINION THAT FACTS A ND CIRCUMSTANCES IN ALL THESE DECISIONS ARE ALTOGETHER DIFFERENT FROM THE FACTS A ND CIRCUMSTANCES IN THE INSTANT CASE BEFORE US. THE LD. AR DID NOT EVEN ATTEMPT TO DEMON STRATE BEFORE US AS TO HOW THESE DECISIONS HELP THE ASSESSEE IN PECULIAR FACTS BEFOR E US. THUS, RELIANCE ON THESE DECISIONS IS TOTALLY MISPLACED. 6. IN THE INSTANT CASE, INDISPUTABLY, THE ASSES SEE PURCHASED LAND & FACTORY BUILDING FROM UP STATE DEVELOPMENT CORPORATION LTD. . IT AP PEARS, THE BUILDING WAS IN A DILAPIDATED CONDITION AND ASSESSEE INCURRED EXPENDI TURE OF ` 11,99,690/-ON FLOOR, ROOF AND BOUNDARY WALLS SO AS TO ENABLE IT TO COMMENCE ITS BUSINESS IN THE SAID BUILDING. THERE IS NOTHING TO SUGGEST THAT THE ASSESSEE CARRI ED ON ANY BUSINESS IN THAT BUILDING BEFORE INCURRING THE AFORESAID EXPENDITURE ON REPAI RS. WHERE AN ASSESSEE EXPENDS MONEYS UPON BUILDING IN ADVANCE OF THE COMMENCEMEN T OF THE BUSINESS, SUCH EXPENDITURE MUST NECESSARILY BE OF A CAPITAL NATURE . BOTH THE RELEVANT PROVISIONS OF SECTION 30A(II) AND SEC. 37 RELATE TO EXPENDITURE I NCURRED BY AN ASSESSEE, THE ONE BY WAY OF CURRENT REPAIRS CLEARLY INDICATING THAT THE EXPENDITURE IS REQUIRED IN THE RUNNING OF THE BUSINESS AND HAS BEEN NECESSITATED BY THE RUNNI NG OF THE BUSINESS AND THE OTHER EXPENDITURE LAID OUT OR EXPENDED WHOLLY AND EXCLUSI VELY FOR THE PURPOSE OF SUCH BUSINESS, OBVIOUSLY A BUSINESS WHICH WAS ALREADY IN EXISTENCE AND NOT ONE THAT IS TO COME INTO EXISTENCE IN THE FUTURE. AS OBSERVED BY T HE HONBLE APEX COURT IN ,SARAVANA SPINNING MILLS (P.) LTD., SECTION 37(1) EXCLUDES TH OSE ITEMS OF EXPENDITURE WHICH EXPRESSLY FALLS IN SECTIONS 30 TO 36 OF THE ACT. VI EWED IN THIS LIGHT, WE ARE OF THE OPINION THAT WHERE REPAIRS ARE EFFECTED TO BUILDINGS, SUCH REPAIRS, BEING FOUND NECESSARY AT THE TIME OF THE PURCHASE FOR THE PURPOSE OF COMMENCING A BUSINESS THEREIN, THOSE EXPENSES CANNOT BUT BE REGARDED AS EXPENDITURE ON C APITAL ACCOUNT . IN VIEW THEREOF, WE HAVE NO HESITATION IN UPHOLDING THE CONCLUSION O F THE LD. CIT(A).CONSEQUENTLY, GROUND NO.1 IN THE APPEAL IS DISMISSED. 7. GROUND NO. 2 RELATES TO DEDUCTION U/S 80IC OF TH E ACT IN RELATION TO COMMISSION, INTEREST AND RECEIPT FROM SURAJ ROADWAYS, AMOUNTIN G IN ALL TO ` 290949/-. SINCE THE INCOME ON ACCOUNT OF COMMISSION AMOUNTING TO ` 270266/-, INTEREST ` 13,123/- AND RECEIPT FROM SURAJ ROADWAYS ` . 7,560/- WERE NOT DERIVED FROM THE ACTIVITY OF THE INDUSTRIAL UNDERTAKING, RELYING UPON DECISIONS IN C AMBAY ELECTRIC SUPPLY INDUSTRIAL CO. ITA NO. 4835/D/2009 12 LTD. VS. CIT 113 ITR 84(SC), CIT VS. STERLING FOODS 237 ITR 579(SC), CIT VS. PANDIAN CHEMICALS LTD. 262 ITR 278(SC), CIT VS. RITESH INDU STRIES 274 ITR 324(DEL.), CIT VS. JAMEEL LEATHER AND UPPERS 246 ITR 97 (MAD.), AND CI T VS. VISHVANATH & CO. 261 ITR 737 (MAD.), THE AO REJECTED THE CLAIM FOR DEDUCTION U/S 80IC ON THE AFORESAID THREE RECEIPTS. 8. ON APPEAL THE LD. CIT(A) UPHELD THE FINDINGS OF AO IN THE FOLLOWING TERMS: - 3.1 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF APPELLANT AND PERUSED THE ASSESSMENT ORDER. IT WILL BE QUITE APP ROPRIATE TO REPRODUCE SEC. 80IC OF THE ACT WHICH IS IN FOLLOWING TERMS: 80IC. SPECIAL PROVISIONS IN RESPECT OF CERTAIN UNDERTAKIN GS OR ENTERPRISES IN CERTAIN SPECIAL CATEGORY STATES. (1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUBSECTION (2), THERE SHALL, IN ACCO RDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED, IN COMPUTIN G THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION FROM SUCH PROFITS AND GAINS, AS SPECIFI ED IN SUB-SECTION (3). (2) THIS SECTION APPLIES TO ANY UNDERTAKING OR ENT ERPRISE,- (A) WHICH HAS BEGUN OR BEGINS TO MANUFACTURE OR PRO DUCE ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE THIRTEE NTH SCHEDULE, OR WHICH MANUFACTURES OR PRODUCES ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE THIRTEENTH SCHEDULE AND UNDERTAKES SUBSTANTI AL EXPANSION DURING THE PERIOD BEGINNING (I) ON THE 23 RD DAY OF DECEMBER, 2002.IN THE STATE OF SIKKIM; OR (II) ON THE 7 TH DAY OF JANUARY, 2003, AND ENDING BEFORE THE1ST DAY OF APRIL, 2012, IN ANY EXPORT PROCESSING ZONE OR INTEGRATED INFRASTRUC TURE DEVELOPMENT CENTRE OR INDUSTRIAL GROWTH CENTRE OR INDUSTRIAL ESTATE OR IN DUSTRIAL PARK OR SOFTWARE TECHNOLOGY PARK OR INDUSTRIAL AREA OR THEME PARK, A S NOTIFIED BY THE BOARD IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY T HE CENTRAL GOVERNMENT IN THIS REGARD, IN THE STATE OF HIMACHAL PRADESH OR THE STA TE OF UTTARANCHAL; OR (III) ON THE 24 TH DAY OF DECEMBER, 1997IN ANY OF THE NORTH EASTERN STATES; (B) WHICH HAS BEGUN OR BEGINS TO MANUFACTURE OR PR ODUCE ANY ARTICLE OR THING, SPECIFIED IN THE 14 TH SCHEDULE OR COMMENCES ANY OPERATION SPECIFIED IN T HAT SCHEDULE, OR WHICH MANUFACTURES OR PRODUCES ANY ARTICLE OR TH ING, SPECIFIED IN THE FOURTEENTH SCHEDULE OR COMMENCES ANY OPERATION SPECIFIED IN TH AT SCHEDULE AND UNDERTAKEN SUBSTANTIAL EXPANSION DURING THE PERIOD BEGINNING-. .. (II) ON THE 7 TH DAY OF JANUARY, 2003, AND ENDING BEFORE THE 1 ST DAY OF APRIL, 2012, IN THE STATE OF HIMACHAL PRADESH OR THE STATE OF UTTARANCH AL; OR (3) THE DEDUCTION REFERRED TO IN SUB-SECTION (1) SH ALL BE- (I) IN THE CASE OF ANY UNDERTAKING OR ENTERPRISE RE FERRED TO IN SUB-CLAUSES (I) AND (III) OF CLAUSE (A) OR SUB-CLAUSES (I) AND (III) OF CLAUSE ( B), OF SUB-SECTION (2), ONE HUNDRED PER CENT OF SUCH PROFITS AND GAINS FOR TEN ASSESSMENT Y EARS COMMENCING WITH THE INITIAL ASSESSMENT YEAR; (II) IN THE CASE OF ANY UNDERTAKING OR ENTERPRISE R EFERRED TO IN SUB-CLAUSE (II) OF CLAUSE (A) OR SUB-CLAUSE (II) OF CLAUSE (B), OF SUB-SECTIO N (2), ONE HUNDRED PER CENT OF SUCH PROFITS AND GAINS FOR FIVE ASSESSMENT YEARS COMMENC ING WITH THE INITIAL ASSESSMENT ITA NO. 4835/D/2009 13 YEAR AND THEREAFTER, TWENTY-FIVE PER CENT. (OR THIR TY PER CENT WHERE THE ASSESSEE IS A COMPANY) OF THE PROFITS AND GAINS. (4) THIS SECTION APPLIES TO ANY UNDERTAKING OR ENTE RPRISE WHICH FULFILS ALL THE FOLLOWING CONDITIONS, NAMELY: - (I) IT IS NOT FORMED BY SPLITTING UP, OR THE RECONS TRUCTION, OF A BUSINESS ALREADY IN EXISTENCE: PROVIDED THAT THIS CONDITION SHALL NOT APPLY IN RES PECT OF AN UNDERTAKING WHICH IS FORMED AS A RESULT OF THE RE-ESTABLISHMENT, RECONST RUCTION OR REVIVAL BY THE ASSESSEE OF THE BUSINESS OF ANY SUCH UNDERTAKING AS IS REFERRED TO IN SECTION 33B, IN THE CIRCUMSTANCES AND WITHIN THE PERIOD SPECIFIED IN TH AT SECTION; (II) IT IS NOT FORMED BY THE TRANSFER TO A NEW BUSI NESS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. EXPLANATION THE PROVISIONS OF EXPLANATIONS 1 & 2 TO SUB-SECTION (3) OF SECTION 80-IA SHALL APPLY FOR THE PURPOSES OF CLAUSE (II) OF THIS SUB-SECTION AS THEY APPLY FOR THE PURPOSES OF CLAUSE (II) OF THAT SUB-SECTION (8) FOR THE PURPOSES OF THIS SECTION,- (I) INDUSTRIAL AREA MEANS SUCH AREAS, WHICH THE B OARD, MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, SPECIFY IN ACCORDANCE WITH THE SC HEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMENT; EXPLAINING THE SCOPE AND EFFECT OF THE ABOVE NEW PR OVISIONS, THE CENTRAL BOARD OF DIRECT TAXES, ISSUED A CIRCULAR BEARING NO. 7/20 03, DATED SEPTEMBER 5, 2003 (REF. [2004] 263 ITR (ST.) 62, 95) WHICH STANDS IN THE FOLLOWING TERMS: NEW PROVISIONS ALLOWING A TEN-YEAR HOLIDAY IN RESP ECT OF CERTAIN UNDERTAKINGS IN THE STATES OF HIMACHAL PRADESH, SIKKIM, UTTARANCHAL AND NORTH-EASTERN STATES- THE UNION CABINET HAS ANNOUNCED A PACKAGE OF FISCAL AND NON-FISCAL CONCESSIONS FOR THE SPECIAL CATEGORY STATES OF HIMACHAL PRADESH, UT TARANCHAL, SIKKIM AND NORTH- EASTERN STATES, IN ORDER TO GIVE BOOST TO THE ECONO MY IN THESE STATES. WITH A VIEW TO GIVE EFFECT OF THESE NEW PACKAGES A NEW SECTION 80- IC HAS BEEN INSERTED TO ALLOW A DEDUCTION FOR TEN YEARS FROM THE PROFITS OF NEW UND ERTAKINGS OR ENTERPRISES OR EXISTING UNDERTAKINGS OR ENTERPRISES ON THEIR SUBST ANTIAL EXPANSION, IN THE STATES OF HIMACHAL PRADESH, UTTARANCHAL, SIKKIM AND NORTH-EAS TERN STATES. FOR THIS PURPOSE, SUBSTANTIAL EXPANSION IS DEFINED AS INCREASE IN THE INVESTMENT IN THE PLANT AND MACHINERY BY AT LEAST 50% OF THE BOOK VALUE OF THE PLANT AND MACHINERY (BEFORE TAKING DEPRECIATION IN ANY YEAR), AS ON THE FIRST D AY OF THE PREVIOUS YEAR IN WHICH THE SUBSTANTIAL EXPANSION IS UNDERTAKEN. THE SECTION PROVIDES THAT THE DEDUCTION SHALL BE AV AILABLE TO SUCH UNDERTAKINGS OR ENTERPRISES WHICH MANUFACTURE OR PRODUCE ANY ARTICL E OR THING, NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE THIRTEENTH SCHEDULE AND W HICH COMMENCE OPERATION IN ANY EXPORT PROCESSING ZONE, OR INTEGRATED INFRASTRUCTUR E DEVELOPMENT CENTRE OR INDUSTRIAL GROWTH CENTRE OR INDUSTRIAL ESTATE, OR I NDUSTRIAL PARK OR SOFTWARE TECHNOLOGY PARK OR INDUSTRIAL AREA OR THEME PARK, A S NOTIFIED BY THE BOARD IN ACCORDANCE WITH RULES PRESCRIBED IN THIS REGARD. F OURTEENTH SCHEDULE. THE AMOUNT OF DEDUCTION IN THE CASE OF UNDERTAKINGS OR ENTERPRISES IN THE STATE OF SIKKIM, AND THE NORTH-EASTERN STATES SHALL BE ONE H UNDRED PER CENT OF THE PROFITS OF THE UNDERTAKING FOR TEN ASSESSMENT YEARS. THE AMOU NT OF DEDUCTION IN CASE OF UNDERTAKINGS OR ENTERPRISES IN THE STATES OF UTTARA NCHAL, HIMACHAL PRADESH SHALL BE ONE HUNDRED PER CENT OF THE PROFITS OF THE UNDERTAK ING FOR FIVE ASSESSMENT YEARS, AND THEREAFTER TWENTY FIVE PER CENT (THIRTY PER CENT FO R COMPANIES) FOR THE NEXT FIVE ASSESSMENT YEARS. ITA NO. 4835/D/2009 14 THE SECTION ALSO PROVIDES THAT NO DEDUCTION SHALL B E ALLOWED TO ANY UNDERTAKING OR ENTERPRISE UNDER THIS SECTION, WHERE THE TOTAL PERI OD OF DEDUCTION INCLUSIVE OF THE PERIOD OF DEDUCTION UNDER THIS SECTION OR UNDER SEC TION 80-IBOR UNDER SECTION 10C, AS THE CASE MAY BE, EXCEEDS TEN ASSESSMENT YEARS. FUR THER, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, NO DEDUCTION SHALL BE ALLOW ED UNDER ANY OTHER SECTION CONTAINED IN CHAPTER VI-A OR IN SECTION 10A OR 10B, IN RELATION TO THE PROFITS AND GAINS OF THE UNDERTAKING OR ENTERPRISE. A NEW THIRTEENTH SCHEDULE HAS BEEN INSERTED IN THE INCOME TAX ACT TO SPECIFY THE LIST OF ARTICLES AND THINGS, WHICH ARE INELIGIBLE FOR TH E PURPOSE OF DEDUCTION U/S 80-IC. FURTHER, A NEW FOURTEENTH SCHEDULE HAS ALSO BEEN IN SERTED, WHICH SPECIFIES THE LIST OF ARTICLES AND THINGS, BEING THRUST SECTOR INDUSTRIES , WHICH ARE ELIGIBLE FOR THE PURPOSES OF AVAILING OF DEDUCTION UNDER THIS SECTION. CONSE QUENT TO THESE AMENDMENTS, THE PROVISIONS OF SECTION 10C AND SUB-SECTION (4) OF SE C. 80IB HAVE BEEN MADE INOPERATIVE IN RESPECT OF UNDERTAKINGS OR ENTERPRISES IN THE ST ATE OF HIMACHAL PRADESH OR IN THE NORTH-EASTERN REGION INCLUDING SIKKIM, WITH EFFECT FROM THE APRIL 1, 2004. FROM THE ABOVE DISCUSSION, THE CARDINAL POINT WHICH EMERGES IS THAT IN ORDER TO CLAIM RELIEF U/S 80IC OF THE ACT, THERE MUST BE (I) AN UNDERTAKING OR AN ENTERPRISE, (II) THE SAID UNDERTAKING/ENTERPRISE MU ST MANUFACTURE OR PRODUCE ANY ARTICLE OR THING, AND (III) THE INCOME MUST BE DERIVED FROM THE SAID MANUFACTURING OR PRODUCTION OF ANY ARTICLE OR THING . 3.2 IN OTHER WORDS THAT IN ORDER TO CLAIM DEDUCTION U/S 80IC THE ASSESSEE MUST MANUFACTURE OR PRODUCE ANY ARTICLE OR THING SP ECIFIED THEREIN AND SUCH INCOME MUST BE DERIVED FROM THE BUSINESS OF MANUFAC TURING. ADMITTEDLY, THE AMOUNT OF RS. 2,90,949/- WAS NOT DERIVED FROM THE B USINESS OF MANUFACTURING OR PRODUCTION OF ANY ARTICLE OR THING BY THE APPELL ANT. IT WAS PURELY INCOME FROM TRADING. HONBLE ITAT DELHI IN THE CASE OF SUDISHA FARM NURSERY VS. ITO (2004) 88 ITD 638 HAS HELD THAT WHERE THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF GROWING THE NURSERY PLANTS AND SELLING IT, WAS HELD AS THE INCOME AGRICULTURE INCOME BUT WHEN THE ASSESSEE PURCHASED SOME PLANTS FROM OUTSIDE, BROUGHT IT TO THE NURSERY KEPT IT FOR SOME TIME IN THE NURSERY AND SOLD IT, THE INCOME WAS HELD TO BE BUSINESS INCOME FROM TRAD ING. THE HONBEL PUNJAB & HARYANA IN THE CASE OF LIBERTY SHOES LTD. VS. CIT (P&H) 293 ITR 478 HAS HELD THAT PROFIT DERIVED FROM BUSINESS OF TRADING O F PRODUCTS OF OTHER CONCERNS WAS NOT ENTITLED FOR RETENTION U/S 80IA SINCE SUCH PROFIT WAS NOT DERIVED FROM INDUSTRIAL UNDERTAKING. THE AP HAS RIGHTLY PLACED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. STERLI NG FOODS, 237 ITR 579 (SC). IN VIEW OF THE ABOVE DISCUSSION, I AM OF THE VIEW THAT THE AO WAS FULLY JUSTIFIED IN DISALLOWING DEDUCTION U/S 80IC IN RESP ECT OF INCOME OF RS. 2,90,949/- AS DISCUSSED ABOVE. I, THEREFORE, UPHOLD ORDER OF THE AO. THIS GROUND OF APPEAL IS REJECTED. 9. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF LD. CIT(A). AT THE OUTSET, THE LD. AR ON BEHALF OF THE ASSESSEE ADMITTED THAT COMMISSION, INCOME HAVING BEEN DERIVED FROM THE TRADING ACTIVIT IES WAS NOT ELIGIBLE FOR DEDUCTION U/S 80IC OF THE ACT .AS REGARDS INTEREST, THE LD. AR R ELIED UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. ADVANCE DETERG ENTS LTD.,339 ITR 81 (DEL.) AND ITA NO. 4835/D/2009 15 CONTENDED THAT INTEREST ON OVER DUES AND EXCESS CHE QUE ISSUED TO SURAJ ROADWAYS HAVING BEEN DERIVED FROM THE ACTIVITIES OF THE INDU STRIAL UNDERTAKING, ARE ELIGIBLE FOR DEDUCTION U/S 80IC OF THE ACT. ON THE OTHER HAND, LD. DR RELIED UPON THE DECISION IN LIBERTY SHOES LTD. VS. CIT,293 ITR 478(P&H) IN RELA TION TO CLAIM OF DEDUCTION U/S 80IC OF THE ACT WHILE SUPPORTING THE FINDINGS OF THE LD. CIT(A). 10. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE DECISIONS RELIED UPON BY BOTH THE SIDES. INDISP UTABLY, THE COMMISSION INCOME AMOUNTING TO ` 270266/- HAVING BEEN DERIVED FROM TRADING ACTIVITI ES ALONE ,THUS, NOT DERIVED FROM THE ACTIVITIES OF THE INDUSTRIAL UNDER TAKING FALLING WITHIN THE MEANING OF PROVISIONS OF SEC. 80IC OF THE ACT. CONSEQUENTLY, T HE SAID COMMISSION INCOME, AS ADMITTED BY THE LD. AR ON BEHALF OF THE ASSESSEE, IS NOT ELIGIBLE FOR DEDUCTION U/S 80IC OF THE ACT. REGARDING INTEREST INCOME OF ` 13,123/- , THE LD. AR SUBMITTED THAT THIS RELATED TO OVERDUES WHILE RECEIPT OF ` 7,560/-FROM M/S SURAJ ROADWAYS IS ON ACCOUNT OF EXCESS CHEQUE ISSUED TO THEM. HOWEVER, NEITHER THE AO NOR THE LD. CIT(A) RECORDED ANY FINDINGS ON THE NATURE OF SUCH RECEIPTS NOR TH ERE IS ANY MATERIAL BEFORE US, SUGGESTING THAT THE PLEA NOW BEING TAKEN BEFORE US ,WAS RAISED BEFORE THE LOWER AUTHORITIES. IN THE ABSENCE OF ANY FINDINGS IN THE IMPUGNED ORDER IN RELATION TO NATURE OF RECEIPTS ON ACCOUNT OF INTEREST AND AMOUNT RECEIVED FROM M/S SURAJ ROADWAYS NOR THE LD. DR HAVING CONTROVERTED THE SUBMISSIONS OF THE LD. AR, WE CONSIDER IT FAIR AND APPROPRIATE TO VACATE THE FINDINGS OF THE LD. CIT(A ) AND RESTORE THE ISSUE OF CLAIM FOR DEDUCTION U/S 80IC OF THE ACT IN RELATION TO INTERE ST AND RECEIPT FROM SURAJ ROADWAYS, TO HIS FILE WITH THE DIRECTIONS TO READJUDICATE THE I SSUE IN ACCORDANCE WITH LAW IN THE LIGHT OF VARIOUS JUDICIAL PRONOUNCEMENTS INCLUDING THOSE REFERRED TO ABOVE AND OF COURSE, AFTER ALLOWING SUFFICIENT OPPORTUNITY TO BOTH THE P ARTIES. THE LD. CIT(A) IS DIRECTED TO PASS A SPEAKING ORDER, BRINGING OUT CLEARLY THE NAT URE OF THESE TWO RECEIPTS AND AS TO WHETHER OR NOT THESE RECEIPTS WERE DERIVED FROM THE BUSINESS OF THE INDUSTRIAL UNDERTAKING FALLING WITHIN THE MEANING OF PROVISION S OF SEC. 80IC OF THE ACT.. WITH THESE DIRECTIONS, GROUND NO. 2 IN THE APPEAL IS DISPOSED OF, AS INDICATED HEREINBEFORE. 11. GROUND NOS. 3 & 4 (WRONGLY NUMBERED 2 & 3) REL ATE TO REJECTION OF ALTERNATE PLEA REGARDING INCOME U/S 115JB OF THE ACT. THERE IS NO DISCUSSION IN THE ASSESSMENT ORDER ON THIS ASPECT NOR A COPY OF ORDER ,DETERMINING BOO K PROFITS U/S 115JB OF THE ACT ,HAS ITA NO. 4835/D/2009 16 BEEN PLACED BEFORE US, DESPITE SPECIFIC REQUEST. T HE LD. CIT(A) ON THIS ALTERNATE PLEA CONCLUDED AS UNDER: - 4. I HAVE CONSIDERED THE ARGUMENTS OF THE APPELLAN T. THE DECISION CITED BY THE APPELLANT IS NOT APPLICABLE TO THE FACTS OF THE CASE AS THAT DECISION WAS GIVEN ON DIFFERENT FACTS. THE SUPREME COURT IN THE CASE OF MALAYALA MANORAMA HAD HELD THAT THE AO DOES NOT HAVE JURISDICTION U/S 115J OF THE I.T. ACT, 1961, TO REWORK THE NET PROFIT BY SUBSTITUTING DEPRECIATION AT THE RATES PRESCRIBED IN SCHEDULE XIV TO THE COMPANIES ACT, 1956. AS DISCUS SED IN PARA 2 OF THIS ORDER, THE APPELLANT HAS ACCEPTED CERTAIN ADDITIONS MADE B Y THE AO AND HAS NOT CHALLENGED THEM IN APPEAL. THUS, THE APPELLANT AHS ADMITTED THAT ITS ACCOUNTS WERE NOT PROPER AND NOT IN ACCORDANCE WITH THE PRES CRIBED ACCOUNTING STANDARDS. SEC. 115JB IS A SPECIAL PROVISION FOR P AYMENT OF TAX. SEC. 115JB IS APPLICABLE TO THE CASE WHERE THE INCOME TAX PAYABLE ON THE TOTAL INCOME OF THE COMPANY IS LESS THAN 10% OF ITS BOOK PROFIT, SUCH B OOK PROFIT SHALL BE DEEMED TO BE THE TOTAL INCOMEO OF THE ASSESSEE AND THE TAX PAYABLE BY THE ASSESSEE ON SUCH TOTAL INCOME SHALL BE THE AMOUNT OF INCOME TAX @ 10%. THUS, THIS SECTION IS NOT APPLICABLE WHERE TAX PAYABLE IS MORE THAN 10% OF ITS BOOK PROFIT. IT IS CLEAR FROM THE FACTS OF THE CASE THAT THE APP ELLANT HAD NOT COMPUTED ITS INCOME IN ACCORDANCE WITH THE PRESCRIBED ACCOUNTING STANDARDS. I AM THEREFORE UNABLE TO ACCEPT THE CONTENTIONS OF THE APPELLANT. THE FACTS OF THE CASE MAKE IT CLEAR THAT THE AO WAS FULLY JUSTIFIED IN MAKING THE ADDITION. THIS GROUND OF APPEAL IS, THEREFORE, REJECTED. 12. AS ALREADY OBSERVED, THE LD. AR APPEARING BEFOR E US DID NOT SUBMIT COMPUTATION OF BOOK PROFITS U/S 115JB OF THE ACT NOR A COPY OF ANY SUCH ORDER OF THE AO, DETERMINING BOOK PROFITS HAS BEEN PLACED BEFORE US. THE LD. CIT (A) WHILE ADJUDICATING THE ALTERNATE PLEA RAISED ON BEHALF OF THE ASSESSEE CONCLUDED THA T PROVISIONS OF THIS SECTION WERE NOT APPLICABLE, WHERE TAX PAYABLE WAS MORE THAN 10% OF ITS BOOK PROFIT. IN THIS SITUATION, ESPECIALLY WHEN THE LD. AR DID NOT PLACE ANY MATE RIAL BEFORE US SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER, WE ARE NOT INC LINED TO INTERFERE. THEREFORE, GROUND NOS. 3 & 4(WRONGLY NUMBERED AS 2 & 3) ARE DISMISSE D. 13. NO OTHER PLEA OR ARGUMENT WAS MADE BEFORE US. 14. IN THE RESULT, APPEAL IS PARTLY ALLOWED BUT FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT SD/- SD/- (DIVA SINGH) (A.N. PAHUJA) JUDICIAL MEMBER ACCOUNTANT MEMBER ITA NO. 4835/D/2009 17 *KAVITA COPY FORWARDED TO: - 1. QUADANT EPP SURLON UTTRANCHAL (P) LTD. ,H.NO. 4, POCKET-1, JASOLA VIHAR, NEW DELHI 2. ITO WARD 14(4), NEW DELHI 3. CIT CONCERNED 4. CIT(A)-XVII, NEW DELHI 5. DR, ITAT,F BENCH,NEW DELHI 6. GUARD FILE TRUE COPY BY ORDER, DEPUTY REGISTRAR