M/s. LUPIN LTD. (LUPIN LABORATORIES LTD.), MUMBAI V. JT. CIT SPL. RG. 6, MUMBAI

ITA 5088/MUM/2005

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8465 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 17-09-2012
• Assessment Year: 1994-1995
• Appeal Filed On: 21-07-2005
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P K SHUKLA
• Assessee Lawyers: VASANTI B PATEL
• Keywords: Reopening of assessment; Depreciation; Question of law; Difference of opinion; Change of opinion; Revenue expenditure
• Section: 143(3); 80HHC; 80G; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I , MUMBAI BEFORE SHRI P. M. JAGTAP, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO. : 5088/MUM/2005 ASSESSMENT YEAR : 1994-95 M/S. LUPIN LIMITED (FORMERLY KNOWN AS LUPIN LABORATORIES LIMITED) 159, CST ROAD, SANTACRUZ (E), KALINA, MUMBAI-400 098. PAN NO: AAACL 1121 E VS. JCIT, SPECIAL RANGE 6, MUMBAI (APPELLANT) (RESPONDENT) & ITA NO. : 4907/MUM/2005 ASSESSMENT YEAR : 1994-95 JCIT, SPECIAL RANGE 6, MUMBAI VS. M/S. LUPIN L ABORAT ORIES LTD. (SINCE MERGED WITH LUPIN CHEMICALS LTD, NOW KNOWN AS LUPIN LTD) 159, CST ROAD, SANTACRUZ (E), KALINA, MUMBAI-400 098. PAN NO: AAACL 1121 E (APPELLANT) (RESPONDENT) APPELLANT BY : MS. VASANTI B. PATEL RESPONDENT BY : SHRI P. K. SHUKLA DA TE OF HEARING : 11.10 .2012 DATE OF PRONOUNCEMENT : 02.11.2012 ORDER PER AMIT SHUKLA, J.M. : THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE AND THE DEPARTMENT AGAINST IMPUGNED ORDER DATED 09.05.2005 PASSED BY T HE LD. CIT-X, MUMBAI ITA NOS : 5088 & 4907/MUM/2005 2 FOR THE QUANTUM OF ASSESSMENT PASSED U/S.143(3) R.W .S 147 FOR THE ASSESSMENT YEAR 1994-95. ITA NO. : 5088/MUM/2005 ASSESSMENT YEAR : 1994-95 2. IN GROUND NO. 1, THE ASSESSEE HAS CHALLENGED THE VALIDITY OF REOPENING OF ASSESSMENT U/S.147. THE FACTS IN BRIEF ARE THAT THE ASSESSEE HAS FILED ITS RETURN OF INCOME AT NIL ON 08.08.1995. IN PURSUA NCE TO THAT SCRUTINY ASSESSMENT WAS COMPLETED U/S.143(3) VIDE ORDER DATE D 17.03.1997 AT AN INCOME OF `. 3,81,850/-. THIS ORDER WAS FURTHER MODIFIED U/S.15 4 VIDE ORDER DATED 09.07.1998 AND THE TOTAL INCOME WAS DETERMINE D AT `. 1,68,360/-. IN THE MEAN TIME, THE ASSESSMENTS SO COMPLETED U/S.143 (3) WAS SOUGHT TO BE REOPENED U/S.148, VIDE NOTICE DATED 24.07.1997 INTE RALIA ON THE FOLLOWING REASONS RECORDED BY THE A.O. :- ASSESSMENT YEAR 1994-95 A LETTER HAS BEEN RECEIVED FROM DEPUTY COMMISSIONER , SPECIAL RANGE 3, DATED 26/6/97 WHEREBY LETTER DATED 28/4/97 OF DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE I , JAIPUR, WAS FORWARDED ALONG WITH COPY OF ASSESSMENT ORDER FOR A SSESSMENT YEAR 1994-95 IN THE CASE OF MERU WOODLANDS CATERERS (P) LTD., KOTAWALA MARKET, TRIPOLIA BAZAR, JAIPUR PASSED UNDE R SEC. 143(3) ON 31/3/97. FROM THE PERUSAL OF THIS LETTER AND ASSESSMENT ORDER IT IS SEEN THAT SHARE CAPITAL RAIS ED BY THE ASSESSEE IS BOGUS AND NOT COMPLETELY VERIFICABLE, E .G., M/S. MERU WOODLAND CATERERS (P) LTD. HAS NOT BEEN ABLE TO EXP LAIN THE INVESTMENT IN THE SHARES OF LUPIN LABORATORIES LIMI TED THROUGH PUBLIC ISSUE. SHARE INVESTMENT REQUIRES VERIFICATION. HENCE IN V IEW OF DELHI HIGH COURT DECISION IN THE CASE OF SOPHIA FINANCE L TD., INCOME HAS ESCAPED ASSESSMENT, AS THE UNVERIFIABLE SHARE C APITAL WOULD NEED TO BE ADDED UNDER SEC. 68. ITA NOS : 5088 & 4907/MUM/2005 3 FURTHER LOAN GIVEN BY THE ASSESSEE TO KOTHAWALA EXP ORTS PVT. LTD., AT LOWER RATE OF INTEREST THAN THE RATE AT WH ICH IT HAS BORROWED IS ALSO NOT FOR BUSINESS PURPOSE AND HENCE DISALLOWANCE UNDER SEC. 37 IN VIEW OF H.R. SUGAR FA CTORY 187 ITR 363 (ALL). HENCE INCOME HAS ESCAPED ASSESSMENT . FURTHER FROM PERUSAL OF RECORD IT IS SEEN THAT DEDU CTION UNDER SEC. 80HHC HAS BEEN WRONGLY COMPUTED AS THE TOTAL BUSINE SS IS NOT THE BASIS BUT UNIT WISE PROFIT IS TAKEN. HENCE, DE DUCTION UNDER SEC. 80HHC IS EXCESS THAN ALLOWABLE. HENCE INCOME HAS ESCAPED ASSESSMENT UNDER SEC 147 EXPLANATION (C)(II I) & (IV). FURTHER DEDUCTION UNDER SEC. 80G SHOULD BE ALLOWED ONLY AFTER OTHER DEDUCTIONS, WHICH WAS NOT DONE. HENCE, INCOM E HAS ESCAPED ASSESSMENT UNDER SEC. 147 EXPLANATION (C)(I II) & (IV). 3. THE LEARNED COUNSEL APPEARING ON BEHALF OF THE A SSESSEE SUBMITTED THAT SO FAR AS THE FIRST PART OF THE REASONS RECOR DED, THE A.O. HAS NOT MADE ANY ADDITION FROM WHICH IT CAN BE INFERRED THAT HE HAS DROPPED THE PROCEEDINGS U/S.147 ON THIS ISSUE. WITH REGARD TO THE SECOND PART OF THE REASONS RECORDED, SHE SUBMITTED THAT THIS AMOUNTS TO CHANGE OF OPINION AS THE ASSESSEE HAS MADE THE FULL DISCLOSURE OF THE FACTS MADE IN THE COMPUTATION OF INCOME AND IN FORM NO.10CCAC FILED A LONG WITH THE RETURN OF INCOME. IT WAS BASED ON THESE MATERIAL AND FACT S ON RECORD AND ON EXPLANATION OFFERED DURING THE COURSE OF THE ASSESS MENT PROCEEDINGS, THE A.O. HAS ALLOWED THE DEDUCTION U/S.80HHC TO THE ASS ESSEE. WITHOUT THERE BEING ANY FRESH MATERIAL ON RECORD, SUCH A REOPENIN G ON THE CONCLUDED ISSUE AMOUNTS TO CHANGE OF OPINION WHICH IS NOT PERMISS IBLE IN LAW. IN SUPPORT OF HER CONTENTION SHE HAS RELIED UPON THE DECISION OF THE ITAT MUMBAI BENCH IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1993-94 IN ITA NO.4951 & 4906/MUM/2005 . FURTHER RELIANCE WAS ALSO PLACED ON THE ITA NOS : 5088 & 4907/MUM/2005 4 DECISION OF CIT VS. KELVINATOR OF INDIA REPORTED IN 256 ITR 1(FB) (DEL) , WHICH HAS BEEN APPROVED BY THE HON'BLE SUPREME COUR T IN 320 ITR 561 AND ON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF GENERAL INSURANCE CORPORATION OF INDIA VS. DCIT REPORTED IN 342 ITR 27 . BESIDES THIS, HOST OF OTHER DECISIONS WERE REFERRED TO, THE LIST OF WHICH WAS PROVIDED BEFORE US. BASED ON THESE DECISIONS, SHE SUBMITTED THAT THE A.O. CANNOT REOPEN THE CASE MERELY ON THE BASIS OF CHANGE OF O PINION. 4. PER CONTRA, THE LD. DR SUBMITTED THAT SO FAR AS THE FIRST PART OF THE REASONS RECORDED, THE SAME WAS BASED ON THE INFOR MATION RECEIVED FROM THE DEPARTMENT. THIS ITSELF IS A PRIMA FACIE REAS ONS TO ENTERTAIN A BELIEF THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSES SMENT. EVEN THOUGH THE A.O. HAS NOT MADE ANY ADDITION ON THIS SCOPE, T HIS DOES NOT PRECLUDE THE A.O. FOR ENTERTAINING THE REASON TO BELIEF BASE D ON SUCH INFORMATION. REGARDING THE SECOND PART OF THE REASONS RECORDED , HE SUBMITTED THAT APPARENTLY THE DEDUCTION COMPUTED U/S.80HHC WAS ERR ONEOUS AND WAS EXCESS OF WHAT WAS ADMISSIBLE IN LAW. THUS THE REA SONING GIVEN BY THE LD. CIT(A) IN HIS ORDER FOR SUSTAINING THE REASONS RE CORDED IS JUSTIFIED. HE STRONGLY RELIED UPON THE FINDINGS OF THE LD. CIT(A) . 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIO NS, PERUSED THE MATERIAL ON RECORD. FROM THE PERUSAL OF THE REASO NS RECORDED IT IS SEEN THAT AN INFORMATION WAS RECEIVED FROM THE DEPUTY CO MMISSIONER, CENTRAL ITA NOS : 5088 & 4907/MUM/2005 5 CIRCLE -1, JAIPUR ALONG WITH THE COPY OF THE ASSESS MENT ORDER IN THE CASE OF MERU WOODLANDS CATERERS (P) LTD. PASSED U/S.143(3), THAT SHARE CAPITAL RAISED BY THE ASSESSEE IS BOGUS AND NOT COMPLETELY VERIFIABLE. THIS INFORMATION ITSELF PRIMA-FACIE CAN LEAD TO THE REA SONS TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. E VEN THOUGH THE A.O. HAS NOT FINALLY MADE ANY ADDITION ON THIS SCORE IN THE ASSESSMENT ORDER, HOWEVER, AT THE TIME OF ENTERTAINING THE REASONS T O BELIEVE THE A.O. IS REQUIRED TO SEE WHETHER THERE WAS ANY INFORMATION O R CREDIBLE MATERIAL HAVING LIVE NEXUS WITH THE INCOME CHARGEABLE TO TAX WHICH CAN BE SAID TO HAVE ESCAPED ASSESSMENT. THIS REASON ITSELF IS S UFFICIENT TO CLOTHE THE A.O. TO ACQUIRE THE JURISDICTION TO REOPEN THE CASE U/S. 147. SO FAR AS THE SECOND PART OF THE REASONS RECORDED, PRIMA FACIE IT CAN BE SAID THAT THE SAID REASONS ARE BASED ON CHANGE OF OPINION, AS THE ASSESSEE HAS DISCLOSED ALL THE MATERIAL FACTS NECESSARY FOR THE COMPUTATION OF DEDUCTION U/S. 80HHC AND THE RESPONSIBILITY OF THE ASSESSEE IS LIMITED T O DISCLOSURE OF ALL THE PRIMARY FACTS NECESSARY FOR THE ASSESSMENT AND IT I S THE A.O. WHO HAS TO DRAW THE LEGAL INFERENCE BASED ON SUCH PRIMARY FACT S AND COMPUTE THE CORRECT INCOME AS PER LAW. THUS THE SECOND PART OF THE REASONS RECORDED DO NOT MEET THE REQUIREMENT OF THE LAW. HOWEVER, O NCE, ONE PART OF THE REASON RECORDED IS HELD TO BE SUFFICIENT TO ACQUI RE THE JURISDICTION FOR REOPENING THE CASE U/S.147, THEN THERE IS NO REQUIR EMENT TO GO INTO THE SECOND PART OF THE REASONS RECORDED WHICH EVEN TH OUGH IS NOT PRIMA FACIE TENABLE IN LAW. THUS ON THESE FACTS AND CIRCUMSTAN CES OF THE CASE, WE DO ITA NOS : 5088 & 4907/MUM/2005 6 NOT FIND ANY MERITS IN THE CONTENTION OF THE LEARNE D COUNSEL AND ACCORDINGLY WE UPHOLD THE VALIDITY OF REOPENING U/S.147 BASED O N THE REASONS RECORDED. THUS GROUND NO. 1 IS DECIDED AGAINST TH E ASSESSEE AND, THEREFORE, IS DISMISSED. 6. GROUND NOS. 2, 3, AND 4 WHICH ARE RELATING TO VA RIOUS OTHER OBJECTIONS TO THE VALIDITY OF THE ASSESSMENT, THE SAME HAS NOT BEEN PRESSED BY THE LEARNED COUNSEL AT THE TIME OF HEARING. ACCORDINGL Y THESE GROUNDS ARE BEING DISMISSED AS NOT PRESSED. 7. GROUND NOS. 5 AND 6 RELATES TO THE DISALLOWANCE OF AMORTISATION OF PAYMENT MADE FOR LEASEHOLD LAND OF `. 2,45,000/-. AT THE OUTSET, THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THIS ISSUE H AS COME UP FOR CONSIDERATION IN ASSESSEES OWN CASE IN THE A.Y. 20 00-01 IN ITA NO. 3314/3242/M/05 AND IN THE A.Y. 2002-03 IN ITA NO.648/411/M/2008 , WHEREIN THIS ISSUE HAS BEEN DECIDED AGAINST THE ASS ESSEE. HOWEVER, THE LEARNED COUNSEL SUBMITTED THAT THIS ISSUE NOW STAND S COVERED BY THE DECISION OF DCIT V SUN PHARMACEUTICALS LIMITED REPORTED IN 329 ITR 479 , WHEREIN IT HAS BEEN HELD THAT MAKING OF ADVANCE P AYMENT FOR ACQUIRING LAND ON LEASE FOR 19 YEARS WAS ALLOWABLE AS REVENUE EXPENDITURE. THEREFORE, THE DECISION OF THE EARLIER TRIBUNAL ORD ER MAY NOT BE FOLLOWED. 7.1 ON THE OTHER HAND, THE LEARNED DR RELIED UPON T HE FINDINGS GIVEN BY THE LD. CIT(A) AS WELL AS THE EARLIER ORDERS OF THE ITAT. ITA NOS : 5088 & 4907/MUM/2005 7 8. AFTER CAREFULLY CONSIDERING THE RIVAL SUBMISSION S, WE FIND THAT THE AMOUNT WHICH HAS BEEN AMORTIZED RELATES TO THE PAYM ENT FOR LEASE HOLD OF LAND AND BUILDING. THE LD. CIT(A) HAS DISMISSED TH E ASSESSEES GROUND ON THE REASON THAT THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE LD. CIT(A) IN THE EARLIER YEAR. THE TRIBUNAL ALSO IN T HE A.Y. 2000-01 IN ITA NO.3314/M/2005 HAS DISMISSED THE ASSESSEES APPEAL ON THE FOLLOWI NG REASONING:- 6. GROUND 2 RELATES TO CIT (A)S DECISION IN CONFI RMING THE DISALLOWANCE OF THE ASSESSEES CLAIM OF RS 2,97,015 /- U/S 35D. 7. DURING THE ASSESSMENT PROCEEDINGS BEFORE US, THE LD AR STATED THAT THE SAID EXPENDITURE WAS INCURRED IN CO NNECTION WITH THE ISSUE OF SHARES FOR INCREASE IN SHARE CAPITAL. AO MADE DISALLOWANCE BASING ON THE APEX COURT JUDGMENTS IN THE CASE OF M/S BROOKE BOND INDIA LTD (225 ITR 798)(SC) AND M/S PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD (225 I TR 792)(SC). THE CIT (A) CONFIRMED THE ACTION OF THE AO STATING THAT THE SAID EXPENDITURE SHOULD NOT BE ALLOWED AS REVENUE EXPEND ITURE. DURING THE PROCEEDINGS BEFORE US, LD AR FOR ASSESSE E RELIED ON VARIOUS JUDGMENTS INCLUDING THE JURISDICTIONAL HIGH COURT JUDGMENT IN THE CASE OF MAHARASHTRA UGINE AND STEEL CO LTD (250 ITR 84)(BOM). AFTER GOING THROUGH THE SAID JUDGM ENTS, WE FIND THAT THE SAID JURISDICTIONAL HIGH COURT JUDGMENT RE LATES TO ALLOWABILITY OF EXPENDITURE INCURRED ON PAYMENT OF STAMP DUTY FOR DEBENTURE ISSUE AND, THEREFORE, WE ARE OF THE C ONSIDERED OPINION THAT THE APEX COURT JUDGMENTS CITED ABOVE A RE RELEVANT AND EXPENSES ARE NOT ALLOWABLE AS REVENUE EXPENDITU RE AND THUS, THE ORDER OF THE CIT (A) DOES NOT CALL FOR AN Y INTERFERENCE. ACCORDINGLY, GROUND 2 IS DISMISSED . 9. FROM THE PERUSAL OF THE ABOVE DECISION, IT IS SE EN THAT THE TRIBUNAL HAD DECIDED THIS ISSUE BASED ON THE DECISION OF M/S BROOKE BOND INDIA LTD. (SUPRA) AND M/S PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD (SUPRA), WHEREIN THE MATTER RELATED TO THE ISSUE OF ALLOTMENT OF SHARES ITA NOS : 5088 & 4907/MUM/2005 8 AND INCREASE IN SHARE CAPITAL, WHEREAS IN THIS CASE , THE ISSUE IS ENTIRELY DIFFERENT AND RELATES TO THE PAYMENT ON ACCOUNT OF LEASE HOLD OF LAND AND BUILDING. THIS ISSUE AS RIGHTLY BEEN POINTED OUT B Y THE LEARNED COUNSEL IS COVERED BY THE DECISION OF THE HON'BLE HIGH COURT O F GUJARAT IN THE CASE OF DCIT VS. SUN PHARMACEUTICALS INDUSTRIES LTD. REPORTED IN 329 ITR 479, WHEREIN THE HON'BLE HIGH COURT HAS HELD THAT THE PA YMENT OF ADVANCE LEASE RENT FOR ACQUISITION OF LAND ON LEASE FOR A PERIOD OF 19 YEARS IS REVENUE EXPENDITURE. WHILE COMING TO THIS CONCLUSION THE H ON'BLE HIGH COURT HAS RELIED UPON THE PRINCIPLE AND RATIO LAID DOWN BY TH E HON'BLE SUPREME COURT IN THE CASE OF CIT VS. MADRAS AUTO SERVICES LTD. (1998), REPORTED IN 233 ITR 468 (SC) . THE POINT IN ISSUE IS ALSO COVERED BY THE DECISI ON OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. UCAL FUEL SYSTEMS LTD. REPORTED IN 296 ITR 702 , WHEREIN SIMILAR MATTER WAS INVOLVED AND WAS HELD THAT UPFRONT LEASE RENT CHARGES PAID FOR OBTAINING LEASE OF LAND AND BUILDING IS REVENUE EXPENDITURE. IN VIEW OF THE AFORESAID P REPOSITION LAID DOWN BY THE HON'BLE HIGH COURTS, WE ARE PERSUADED TO AGREE WITH THE LEARNED COUNSEL THAT THE EARLIER DECISION OF THE TRIBUNAL C ANNOT BE HELD AS A BINDING PRECEDENCE ON THE FACTS OF THE CASE. ACCORDINGLY, THE GROUND NOS. 5 AND 6 ARE ALLOWED IN FAVOUR OF THE ASSESSEE. 10. GROUND NOS. 7, 8, 9 AND 10 HAVE NOT BEEN PRESSE D BY THE LEARNED COUNSEL AT THE TIME OF HEARING, ACCORDINGLY THE SAM E IS BEING DISMISSED AS NOT PRESSED. ITA NOS : 5088 & 4907/MUM/2005 9 11. IN GROUND NO. 11 THE ASSESSEE HAS CHALLENGED TH E DISALLOWANCE OF DEDUCTION U/S.80HHC ON THE BASIS OF ENTITY, AS A WH OLE, AS AGAINST ON THE BASIS OF EACH BUSINESS UNIT SEPARATELY COMPUTED BY THE ASSESSEE. AT THE OUTSET THE LEARNED COUNSEL SUBMITTED THAT THIS ISSU E HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE A.Y. 2000-01 VIDE ORDER DATED 23.09.2008 PASSED IN ITA NO.3242 & 3314/M/05 . THE LEARNED DR FAIRLY CONCEDED THAT THIS ISSUE S TANDS COVERED BY THE SAID DECISION OF THE TRIBUNAL IN THE FAVOUR OF THE ASSESSEE. 12. AFTER CAREFULLY CONSIDERING THE ORDERS PASSED B Y THE AUTHORITIES BELOW AND THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE WE FIND THAT SIMILAR ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. THE LEARNED TRIBUNAL HAS DISCUSSED THIS ISSUE IN THE SA ID ORDER IN PARA 8 TO 11 WHICH FOR THE SAKE OF READY REFERENCE IS REPRODUCED HEREIN BELOW :- 8. GROUND 3 RELATES TO CIT (A)S DECISION OF CALCU LATING THE ALLOWABLE DEDUCTION U/S 80HHC NOT ON THE BASIS OF T HE COMPANY AS A WHOLE BUT ON THE BASIS OF EACH BUSINESS UNIT O F THE ASSESSEE SEPARATELY. IN THIS REGARD, LD AR FOR ASSESSEE REL IED ON THE SUBMISSIONS MADE BEFORE THE CIT (A) IN ADDITION TO VARIOUS JUDGMENTS. THE SAID SUBMISSIONS OF THE ASSESSEE AR E REPRODUCED FROM PARA 12.2 OF THE CIT (A) ORDER, WHI CH ARE AS UNDER:- (1) THE UNITS/FACTORIES ARE LOCATED AT DIFFERENT PL ACED AND THE VENTURES WERE UNDERTAKEN AT DIFFERENT TIMES AND THEY ARE INDEPENDENT OF ONE ANOTHER; (2) EACH ESTABLISHMENT HAS ITS OWN SUBSIDIARY ACCOU NT AND MANAGED LOCALLY ALTHOUGH OVERALL SOME CONTROL I S EXERCISED BY THE HEAD OFFICE; (3) THERE ARE SEPARATE STAFF AT EACH UNIT; ITA NOS : 5088 & 4907/MUM/2005 10 (4) THE CHARACTER OF THE BUSINESS ACTIVITIES / VENT URES IN DIFFERENT PLACES ARE DIFFERENT; (5) APART FROM THE EXISTENCE OF A CENTRALIZED MANAGEMENT IN ADMINISTRATIVE MATTERS AND HEAD OFFICE WHERE A SINGLE SET OF FINAL ACCOUNTS IS MAINTAINED, THE DIFFERENT ACTIVITIES ARE NOT INTER- LOCKED, INTER-CONNECTED AND INTER-DEPENDENT IN THE DAY TO DAY AFFAIRS; NOR IS THE FUNCTIONING OF EACH ACTIVITY DOVETAILED INTO ONE ANOTHER; AND (6) DIFFERENT KNOW-HOW, DIFFERENT PLANTS, DIFFERENT PROCESS METHOD AND TECHNOLOGY ARE USED FOR THE MANUFACTURE OF DIFFERENT PRODUCTS. (7) SEPARATE IDENTITY OF EXPORT BENEFIT WAS AVAILAB LE IN FORM NO.10CCAC I E, WHEN EXPORT PROFITS WERE EASILY IDENTIFIABLE, SUCH PROFITS ALONE SHOULD HAVE BEEN CONSIDERED FOR DEDUCTION. 9. AFTER CONSIDERING THE ABOVE SUBMISSIONS, THE CIT (A) DECIDED THE ISSUE AGAINST THE ASSESSEE AND THE RELE VANT PARA 12.3 IS AS UNDER:- 12.3 I HAVE GONE THROUGH THE RIVAL SUBMISSIONS, TH E DECISIONS QUOTED BY THE RIVAL PARTIES AND ALSO THE RELEVANT MATERIALS ON RECORD. THE CRUST OF THE PROBLEM IS T HAT WHETHER DEDUCTION UNDER SEC 80HHC IS QUA BUSINESS OR QUA ASSESSEE. IN THE APPELLANTS CASE SEPARATE B OOKS OF ACCOUNTS ARE MAINTAINED FOR BULK DRUGS, FORMULATION S, EXPORT DIVISION, ETC, WHICH AFTER AUDITING ARE MERG ED AT THE HEAD OFFICE FOR PREPARING A SINGLE PROFIT AND LOSS ACCOUNT. ON A SIMILAR ISSUE IN PARA 9.4, PG 21-22 OF THE APP EAL ORDER NO. CIT (A) X/IF/88/04-05, DATED 21/10/2004 FOR THE ASSESSMENT YEAR 2001-02, I HAVE DECIDED THIS ISSUE AGAINST THE APPELLANT AND IN FAVOUR OF THE DEPARTME NT. IN VIEW OF THIS, THE APPEALS OF THE APPELLANT COMPANY FAIL ON THESE GROUNDS OF APPEAL. 10. AGGRIEVED WITH THE ABOVE, THE ASSESSEE IS BEFOR E US. ASSESSEE, WHILE RELYING ON THE SUBMISSIONS MADE BEF ORE THE CIT (A), HAS RELIED ON THE RECENT JUDGMENT OF THE MADRA S HIGH COURT IN THE CASE OF M GANI & CO (301 ITR 381) (MAD) RELE VANT TO ASSESSMENT YEAR 2001-02 APART FROM THE COORDINATE B ENCH ORDER ITA NOS : 5088 & 4907/MUM/2005 11 IN THE CASE OF MIKU AGENCIES VIDE ITA 4205/MUM/1995 FOR AY 1991-92 TO SUPPORT HIS CASE THAT THE COMPUTATION U/ S 80HHC MUST BE CALCULATED QUO ASSESSEE AND NOT QUA BUSINES S. LD DR FOR REVENUE RELIED ON THE ORDERS OF THE LOWER AUTHO RITIES. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES ALONG WITH THE JUDG MENTS RELIED UPON BY THE PARTIES. FROM THE PERUSAL OF THE JUDGM ENT IN THE CASE OF M GANI & CO (SUPRA), WE FIND THAT THE ASSES SEE IS ENTITLED TO THE ALLOWABILITY OF DEDUCTION U/S 80HHC WITH THE TURNOVER OF QUA ASSESSEE AND NOT THE QUA BUSINESS, WHEN ASSESSE E HAVING MAINTAINED SEPARATE BOOKS OF ACCOUNTS FOR DIFFERENT BUSINESSES WHICH IS THE CASE IN THE INSTANT CASE ALSO. THEREF ORE, WE ARE OF THE CONSIDERED OPINION THAT THE CIT (A) ORDER IS SE T ASIDE ON THIS ISSUE AND AO IS DIRECTED TO RECOMPUTE ALLOWABILITY OF DEDUCTION U/S 80HHC QUA BUSINESS AND NOT QUA ASSESSEE AS SEPA RATE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE FOR BU LK DRUGS, FORMULAS, EXPORT DIVISIONS ETC. THE MERGER OF ACCO UNTS AT THE HEAD OF OFFICE FOR MAKING OF SINGLE PROFIT AND LOSS ACCOUNT WILL NOT COME IN THE WAY, AS SUCH MERGER IS ONLY FOR THE LI MITED PURPOSE OF MAKING OF THE FINANCIAL STATEMENTS AS BOOKS OF A CCOUNTS IS ALLOWABLE. ACCORDINGLY, GROUND 3 IS ALLOWED. THUS RESPECTFULLY FOLLOWING THE AFORESAID DECISION, THE SAID GROUND RAISED BY THE ASSESSEE STANDS ALLOWED. 13. GROUND NO. 12 AS ADMITTED BY BOTH THE PARTIES I S CONSEQUENTIAL IN NATURE AND, THEREFORE, THE SAME IS TREATED AS INFRU CTUOUS AND IS NOT ADJUDICATED UPON. 14. GROUND NOS. 13, 14, 15, 16, 17 AND 18 HAVE NOT HAVE PRESSED BY THE LEARNED COUNSEL AT THE TIME OF HEARING, THEREFORE, ALL THESE GROUNDS ARE BEING TREATED AS DISMISSED AS NOT PRESSED. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ITA NOS : 5088 & 4907/MUM/2005 12 ITA NO. : 4907/MUM/2005 ASSESSMENT YEAR : 1994-95 16. WE NOW TAKE UP DEPARTMENTS APPEAL. GROUND NO. 1 RELATES TO THE DEDUCTION U/S.80IA ON INTEREST RECEIVED FROM IDBI, INCOME FROM SERVICES AND INTEREST RECEIVED FROM BANK DEPOSIT. THE LEAR NED COUNSEL OF THE ASSESSEE FAIRLY ADMITTED THAT INTEREST ON BANK DEPO SITS THOUGH IS NOT DERIVED FROM INDUSTRIAL UNDERTAKING, HOWEVER ONLY NET INTER EST SHOULD BE EXCLUDED. 17. THE LEARNED DR SUBMITTED THAT INITIALLY IN THE MEMO OF APPEAL THIS GROUND WAS NOT TAKEN, HOWEVER, BY WAY OF ADDITIONAL GROUND THIS ISSUE HAS BEEN RAISED BEFORE THE TRIBUNAL CHALLENGING THE DIR ECTION OF CIT(A) FOR NETTING OF THE INTEREST. HE SUBMITTED THAT ONCE IT IS HELD THAT INTEREST IS NOT DERIVED FROM THE INDUSTRIAL UNDERTAKING, THEN THE S AME CANNOT BE NETTED AGAINST THE OTHER INTEREST EXPENSES. HE STRONGLY R ELIED UPON THE FINDINGS OF THE A.O. ON THE OTHER HAND, THE LEARNED COUNSEL F OR THE ASSESSEE SUBMITTED THAT THE ISSUE OF NETTING OF INTEREST HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN ASSESSEES OWN CASE IN THE A.Y. 2000-01 VIDE ORDER DATED 27.09.2008 IN ITA NO.3314 & 3342/M/05 . SHE FURTHER SUBMITTED THAT IN ASSESSEES OWN CASE, THE HON'BLE HIGH COURT HAS ALSO DECIDED THIS ISSUE IN THE FAVOUR OF THE ASSESSEE FO LLOWING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ACG ASSOCIATED CAPSULES PVT. LTD. VS. CIT REPORTED IN 343 ITR 89 . ITA NOS : 5088 & 4907/MUM/2005 13 18. AFTER CAREFULLY CONSIDERING THE RIVAL SUBMISSIO NS, THE ORDER PASSED BY THE AUTHORITIES BELOW AND THE DECISIONS RELIED UPON BY THE PARTIES, WE FIND THAT THIS ISSUE STANDS SQUARELY COVERED BY THE DECI SION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 2000-01 AND A.Y. 2 002-03 AND ALSO IN THE APPEAL FOR THE BLOCK PERIOD, DECIDED BY THE TRIBUNA L IN ITA NO. 311/M/03 . WE ALSO FIND THAT THE DEPARTMENT HAS CHALLENGED THI S ISSUE BEFORE THE HON'BLE HIGH COURT IN ITA NO.5718 OF 2010 , WHEREIN THE QUESTION OF LAW NO. IV WAS SPECIFICALLY RAISED, WHICH HAS BEEN DISM ISSED BY THE HON'BLE HIGH COURT FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ACG ASSOCIATED CAPSULES PVT. LTD. VS. CIT (SUPRA). IN VIEW OF THESE FACTS, WE DO NOT FOUND ANY MERITS IN THE ADDITIONAL GROUND RAISED BY THE DEPARTMENT AND, THEREFORE, THE SAME IS DISMISSED. 19. GROUND NO. 1 WHICH HAS BEEN RAISED BY THE DEPAR TMENTAL APPEAL IN MEMO OF THE APPEAL IS NOT ADJUDICATED UPON, AS FAIR LY ADMITTED BY THE LEARNED DR THAT THE SAID ISSUE IS COVERED BY ADDITI ONAL GROUND AS DISCUSSED ABOVE. 20. IN GROUND NO. 2, THE DEPARTMENT HAS CHALLENGED THE DEDUCTION U/S.80IA AND 80HHC ON INTEREST RECEIVED FROM CUSTOM ERS FOR DELAYED PAYMENTS AND EXCESS RECOVERY FROM DEBTORS. THE LEA RNED DR SUBMITTED THAT THIS INTEREST RECEIVED FROM THE CUSTOMERS IS N OT DERIVED FROM THE BUSINESS CARRIED ON BY THE INDUSTRIAL UNDERTAKING, THEREFORE, THE SAME CANNOT BE ALLOWED FOR THE PURPOSE OF DEDUCTION U/S. 80IA AND 80HHC. THE ITA NOS : 5088 & 4907/MUM/2005 14 LEARNED COUNSEL, ON THE OTHER HAND, SUBMITTED THAT THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE FOR THE A.Y. 2000- 01 IN ITA NO.3314 & 3242/M/05 . IT WAS ALSO SUBMITTED THAT THIS ISSUE HAS ALSO ATTAINED FINALITY FROM THE STAGE OF THE HO N'BLE HIGH COURT IN ASSESSEES OWN CASE. THIS ISSUE WAS RAISED BEFORE THE HON'BLE HIGH COURT BY THE DEPARTMENT VIDE QUESTION OF LAW NO. VI RAISE D IN ITA NO.5718 OF 2010 WHICH HAS BEEN ANSWERED IN FAVOUR OF THE ASSESSEE F OLLOWING THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GRIDWELL NORTON LTD. REPORTED IN (2009) 318 ITR 172 . 21. AFTER CAREFULLY CONSIDERING THE RIVAL SUBMISSIO NS AND THE JUDGEMENTS RELIED UPON THE LEARNED COUNSEL IN ASSESSEES OWN C ASE, WE FIND THAT THIS ISSUE STANDS SQUARELY COVERED IN FAVOUR OF THE ASSE SSEE BY THE ORDER OF TRIBUNAL IN A.Y. 2000-01 AND ALSO BY THE JUDGEMENT OF HON'BLE HIGH COURT OF BOMBAY IN ITA NO.5718 OF 2010 DECIDED VIDE ORDER DATED 24.09.2012, WHEREIN IN PARA 5 THEREOF THE HON'BLE HIGH COURT HA D CATEGORICALLY STATED THAT THIS ISSUE STANDS COVERED BY THE JUDGEMENT GIV EN IN THE CASE OF THE CIT VS. GRIDWELL NORTON LTD. (SUPRA). THUS RESPECTFULLY FOLLOWING THE SAID DECISION, THE GROUND NO. 2 RAISED BY THE DEPARTMENT STANDS DISMISSED. 22. IN GROUND NO.3, THE DEPARTMENT HAS CHALLENGED T HE ALLOWIBILITY OF DEDUCTION U/S.80-I BEFORE ALLOWING DEDUCTION U/S.80 HH. THE LD. CIT(A) HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE AFTER FOLLOWING THE VARIOUS DECISIONS AND AFTER OBSERVING AND HOLDING AS UNDER :- ITA NOS : 5088 & 4907/MUM/2005 15 7. IN GROUNDS NO. 12(D) OF ASSESSMENT YEAR 1993-94 AND GROUND NO. 14(D) OF ASSESSMENT YEAR 1994-95 THE APP ELLANT HAS OBJECTED THAT BENEFIT OF SEC. 80-I HAS TO BE GRANTE D ON THE GROSS TOTAL INCOME AND NOT ON THE INCOME REDUCED BY THE A MOUNT ALLOWED UNDER SEC. 80HH. I AM IN FULL AGREEMENT WI TH THE CONTENTIONS OF THE A/R THAT DEDUCTION UNDER SEC. 80 - I HAS TO BE ALLOWED ON THE GROSS TOTAL INCOME AND NOT ON THE IN COME REDUCED BY THE AMOUNT ALLOWED UNDER SEC. 80HH. IN VIEW OF THE DECISIONS IN THE CASE OF J.P. TOBACCO PRODUCTS PVT. LTD. V. CIT 229 ITR 123 (MP)[SLP DISMISSED 245 ITR (ST.) 71], CIT V . NIMA SPECIFIC FAMILY TRUST 248 ITR 29 (BOM), CIT V. CHOKSHI CONTR ACTS PVT. LTD. 251 ITR 587 (RAJ), CIT V. SIDPUR ISABGUL PROCESSING CO. LTD. 252 ITR 777 (GUJ), CIT V. AVON EMERY INDUSTRIES 117 TAX MAN 510 (RAJ), CIT V. M.P. STATE ELECTRONICS DEVELOPMENT CO RPN LTD. 267 ITR 405 (MP), CIT V. ANITA STAMPINGS 2000 TAX LR 10 09 (GUJ), CIT V. MITTAL APPLIANCES PVT. LTD. 270 ITR 176 (GUJ ), VAM ORGANIC CHEMICALS LTD. V. DCIT 138 TAXMAN 20 (DEL)(MAG) AND RAMNATH EXPORTS PVT. LTD. V. IAC 42 TTJ (DEL) 331. SECS 80 HH AND 80-I ARE INDEPENDENT; THEREFORE, DEDUCTION UNDER SEC 80- I SHALL BE ALLOWED ON THE PROFITS WITHOUT REDUCING THE DEDUCTI ON UNDER SEC. 80HH. IN OTHER WORDS, A NEW INDUSTRIAL UNDERTAKING CAN CLAIM DEDUCTION UNDER BOTH THESE SECTIONS. IT IS NOT NEC ESSARY THAT AFTER TAKING DEDUCTION UNDER SEC 80HH DEDUCTION UND ER SEC 80-I SHOULD BE TAKEN ON THE REDUCED BALANCE. THE APPELL ANT, THEREFORE, SUCCEEDS ON THESE GROUNDS OF APPEAL. 22.1 ON THIS ISSUE, THE LEARNED DR RELIED ON THE FI NDINGS OF THE A.O. ON THE OTHER HAND, THE LEARNED COUNSEL SUBMITTED THAT BESIDES THE DECISION CITED BY THE LD. CIT(A), THIS ISSUE NOW STANDS DECI DED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HON'BLE GUJARAT HIGH CO URT IN THE CASE OF CIT VS. VENUS ELECTRICALS REPORTED IN (2008) 304 ITR 347 . 23. AFTER CAREFULLY CONSIDERING THE RIVAL SUBMISSIO NS AND THE ORDER PASSED BY THE AUTHORITIES BELOW, WE FIND THAT THIS ISSUE H AS BEEN DECIDED BY THE HON'BLE SUPREME COURT IN THE CASE OF JCIT VS. MANDIDEEP ENGG. & ITA NOS : 5088 & 4907/MUM/2005 16 PACKAGING INDUSTRIES (P) LTD. (2007) REPORTED IN 292 ITR 1 (SC), WHEREIN THE HON'BLE SUPREME COURT HAS HELD THAT U/S.80HH AN D 80-I ARE INDEPENDENT OF EACH OTHER AND THEREFORE, THE DEDUCT IONS COULD BE CLAIMED BOTH UNDER SS. 80HH AND 80-IA ON THE GROSS TOTAL IN COME. THE HON'BLE GUJARAT HIGH COURT ALSO IN THE CASE CIT VS. VENUS ELECTRICALS (SUPRA) HAS ALSO HELD THAT THE ASSESSEE IS ENTITLED TO RELIEF U /S.80IA WITHOUT THE DEDUCTION U/S.80HH FROM THE PROFIT OF THE BUSINESS. THUS FOLLOWING THE JUDICIAL PRECEDENCE IN THE AFORESAID CASES AND ALSO THE JUDGMENT RELIED UPON BY THE LD. CIT(A), WE UPHOLD THE FINDINGS AND THE C ONCLUSION DRAWN BY THE LD. CIT(A) AND THUS GROUND NO. 3 AS RAISED BY THE D EPARTMENT STANDS DISMISSED. 24. GROUND NO. 4 RELATES TO THE EXCLUSION OF EXCISE DUTY AND SALES TAX FROM THE TOTAL TURNOVER FOR THE PURPOSE OF COMPUTIN G DEDUCTION U/S.80HHC. AT THE OUTSET BOTH THE PARTIES AGREED THAT THIS ISS UE NOW STANDS COVERED BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CA SE OF LAXMI MACHINE WORKS REPORTED IN 290 ITR 667 AND HOST OF OTHER DECISIONS. IT IS ALSO ADMITTED BY BOTH THE PARTIES THAT THIS ISSUE HAS BE EN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 2000-01 IN ITA NO.3314 & 3242/M/05. AFTER GOING THROUGH THE S AID DECISIONS WE FIND THAT THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE A SSESSEE BY THE TRIBUNAL FOLLOWING THE DECISION OF THE HON'BLE BOMBAY HIGH C OURT IN THE CASE OF CIT V. SUDERSHAN CHEMICALS INDUSTRIES LTD. (2000) REPORTED IN 245 ITR ITA NOS : 5088 & 4907/MUM/2005 17 769 (BOM) . HOWEVER, THIS ISSUE NOW STANDS CONCLUDED BY THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. LAXMI MACHINE WORKS (SUPRA), FOLLOWED BY ANOTHER DECISION OF HON'BLE SU PREME COURT IN THE CASE OF CIT V. CATAPHARMA (INDIA) (P.) LTD. [2007] REPORTED IN 292 ITR 641 . THUS IN VIEW OF THE LAW SETTLED DOWN BY THE HON'BLE SUPREME COURT, WE HOLD THAT WHILE CALCULATING THE DEDUCTION U/S.80HHC, AMO UNT OF EXCISE DUTY, SALES TAX ARE NOT TO BE INCLUDED IN THE TOTAL TURNO VER. IN THE RESULT, THE GROUND NO. 4 AS RAISED BY THE DEPARTMENT STANDS DIS MISSED. 25. IN GROUND NO. 5 THE DEPARTMENT HAS CHALLENGED T HE DIRECTION OF THE LD. CIT(A) TO REDUCE 90% OF THE NET AND NOT GROSS A MOUNT OF INTEREST FROM THE SERVICES AND INTEREST FROM BANKS WHILE CALCULAT ING DEDUCTION U/S.80HHC. AT THE OUTSET BOTH THE PARTIES AGREED T HAT THIS ISSUE NOW STANDS COVERED BY THE DECISION OF THE HON'BLE SUPRE ME COURT IN THE CASE OF ACG ASSOCIATED CAPSULES PVT. LTD. VS. CIT (SUPRA) . 26. THE LEARNED COUNSEL ALSO POINTED OUT THAT THIS ISSUE HAS CAME UP FOR CONSIDERATION BEFORE THE HON'BLE HIGH COURT IN ASSE SSEES OWN CASE IN ITA NO.5718 OF 2010, WHEREIN SPECIFIC THE QUESTION OF L AW NO. V WAS TAKEN WHICH HAS BEEN ANSWERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE FOLLOWING THE AFORESAID DECISION OF THE HON'BLE SUP REME COURT. THUS FOLLOWING THE BINDING PRECEDENCE, WE DO NOT FIND AN Y MERITS IN THE GROUNDS RAISED BY THE DEPARTMENT AND THE SAME IS DISMISSED. ITA NOS : 5088 & 4907/MUM/2005 18 27. IN GROUND NO. 6, THE DEPARTMENT HAS CHALLENGED THE DEDUCTION U/S.80HHC ON THE INTEREST INCOME RECEIVED FROM THE CUSTOMERS FOR DELAYED PAYMENT OF SALE CONSIDERATION AND RECOVERY FROM THE DEBTORS AFTER ALLOWING THE NETTING OF EXPENSES. BOTH THE PARTIES ADMITTED THAT THIS ISSUE STANDS COVERED AGAINST THE DEPARTMENT BY THE DECISION OF T HE TRIBUNAL IN ASSESSEES OWN CASE IN THE A.Y. 2000-01 IN ITA NO.3314 & 3242/M/05 , WHEREIN THIS ISSUE HAS BEEN DECIDED FOLLOWING ANOTHER DECISION O F THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.2739/M/1992 . IT HAS BEEN FURTHER POINTED OUT THAT THIS ISSUE HAS BEEN DECIDED BY THE HON'BLE HIGH COURT IN ASSESSEES OWN CASE IN ITA NO.5718 OF 2010 , WHEREIN THE QUESTION OF LAW NO. IV WAS RAISED BY THE DEPARTMENT WHICH HAS BEEN ANSWERED AG AINST THE DEPARTMENT. THUS, RESPECTFULLY FOLLOWING THE DECISION OF THE TR IBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 2000-01 IN ITA NOS. 3314 & 3242/M /05 AND THE ORDER OF THE HON'BLE HIGH COURT IN ASSESSEES OWN CASE, THIS ISSUE IS DECIDED AGAINST THE DEPARTMENT AND THE SAME IS TREATED AS DISMISSED . 28. GROUND NO. 7 RELATES TO THE DELETION IN RESPECT OF THE INSURANCE CLAIM U/S.41(1). THE LEARNED DR POINTED OUT THAT THE ASS ESSEE HAS CREDITED A SUM OF `. 8.93 LAKHS UNDER THE HEAD OTHER INCOME. THE AMOU NT SO CREDITED HAS NO DIRECT RELATIONSHIP WITH THE INDUSTRIAL ACTIVITY OF THE UNDERTAKING OF THE ASSESSEE AND, THEREFORE, IT IS NOT DERIVED FROM THE INDUSTRIAL UNDERTAKING. ON THE OTHER HAND, THE LEARNED COUNSEL POINTED OUT THAT THE RECEIPT FROM THE INSURANCE RECEIVED IS TO BE ASSESSED UNDER THE HEAD PROFIT AND GAINS FROM ITA NOS : 5088 & 4907/MUM/2005 19 BUSINESS AND PROFESSION, AS IT FORMED PART OF THE OPERATIONAL INCOME AND IT IS INTEGRALLY LINKED WITH THE MAIN BUSINESS OF THE ASSESSEE. SHE FURTHER SUBMITTED THAT THIS ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 2000-01 IN ITA NO.3314 AND 3242/M/05. 29. AFTER CAREFULLY CONSIDERING THE RIVAL SUBMISSIO NS, WE FIND THAT THIS HAS BEEN DECIDED IN THE FAVOUR OF THE ASSESSEE AND AGAI NST THE REVENUE BY THE TRIBUNAL IN THE EARLIER YEAR. THIS ISSUE HAS BEEN DISCUSSED IN PARAS 25 TO 29 OF THE SAID ORDER WHICH FOR THE SAKE OF READY RE FERENCE IS REPRODUCED HEREIN BELOW :- 6. GROUND 2 RELATES TO CIT (A)S DECISION IN CONFI RMING THE DISALLOWANCE OF THE ASSESSEES CLAIM OF RS 2,97,015 /- U/S 35D. 7. DURING THE ASSESSMENT PROCEEDINGS BEFORE US, THE LD AR STATED THAT THE SAID EXPENDITURE WAS INCURRED IN CO NNECTION WITH THE ISSUE OF SHARES FOR INCREASE IN SHARE CAPITAL. AO MADE DISALLOWANCE BASING ON THE APEX COURT JUDGMENTS IN THE CASE OF M/S BROOKE BOND INDIA LTD (225 ITR 798)(SC) AND M/S PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD (225 I TR 792)(SC). THE CIT (A) CONFIRMED THE ACTION OF THE AO STATING THAT THE SAID EXPENDITURE SHOULD NOT BE ALLOWED AS REVENUE EXPEND ITURE. DURING THE PROCEEDINGS BEFORE US, LD AR FOR ASSESSE E RELIED ON VARIOUS JUDGMENTS INCLUDING THE JURISDICTIONAL HIGH COURT JUDGMENT IN THE CASE OF MAHARASHTRA UGINE AND STEEL CO LTD (250 ITR 84)(BOM). AFTER GOING THROUGH THE SAID JUDGM ENTS, WE FIND THAT THE SAID JURISDICTIONAL HIGH COURT JUDGMENT RE LATES TO ALLOWABILITY OF EXPENDITURE INCURRED ON PAYMENT OF STAMP DUTY FOR DEBENTURE ISSUE AND, THEREFORE, WE ARE OF THE C ONSIDERED OPINION THAT THE APEX COURT JUDGMENTS CITED ABOVE A RE RELEVANT AND EXPENSES ARE NOT ALLOWABLE AS REVENUE EXPENDITU RE AND THUS, THE ORDER OF THE CIT (A) DOES NOT CALL FOR AN Y INTERFERENCE. ACCORDINGLY, GROUND 2 IS DISMISSED . ITA NOS : 5088 & 4907/MUM/2005 20 FURTHER THIS ISSUE ALSO STANDS COVERED BY THE DECIS ION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. PFIZER LTD. REPORTED IN (2011) 330 ITR 62 . THUS FOLLOWING THE AFORESAID JUDGMENT OF THE HON BLE JURISDICTIONAL HIGH COURT WE DO NOT FIND ANY MERIT IN THE GROUNDS RAISED BY THE DEPARTMENT AND THE SAME IS TREATED AS DISMISSED . 30. GROUND NO. 8 RELATES TO THE NON INCLUSION OF TH E PROCESSING CHARGES FROM THE PROFITS OF THE BUSINESS IN EXPLANATION (BA A) TO SECTION 80HHC. BOTH THE PARTIES FAIRLY AGREED THAT THIS ISSUE NOW STANDS DECIDED AGAINST THE ASSESSEE AND IN FAVOUR OF THE DEPARTMENT IN THE CAS E OF CIT VS. BRESSER INDIA PVT. LTD. REPORTED IN 323 ITR 429 . 31. AFTER GOING THROUGH THE SAID DECISION, WE FIND THAT THIS ISSUE NOW STANDS COVERED AGAINST THE ASSESSEE AS WHILE COMPUT ING THE DEDUCTION U/S.80HHC THESE CHARGES ARE TO BE EXCLUDED IN TERMS OF THE EXPLANATION (BAA) TO SECTION 80HHC. ACCORDINGLY THIS GROUND ST ANDS ALLOWED. 32. GROUND NO. 9 RELATES TO THE DELETION OF DISALLO WANCE IN RESPECT OF FOREIGN TRAVELLING EXPENSES AMOUNTING TO `. 2,04,877/-. THIS ISSUE HAS BEEN DELETED BY THE LD. CIT(A) IN THE FOLLOWING MANNER : - 13.1.2 IN PARA 6, PGS 16-20 OF THE CONSOLIDATED AP PEAL ORDER NO.CIT(A)-X/IT/20/25/28/95-96/96-97/97-98 DAT ED 10/5/2002 FOR ASSESSMENT YEARS 1992-93, 1993-94 AND 1994- 95, I HAVE DELETED DISALLOWANCE OF `. 4,27,382/- ( `. 1,99,338 + `. 2,28,044) AND `. 2,04,877/- FOR THE DETAILED REASONING CONTAINED IN PARA 6.5 OF THE CONSOLIDATED APPEAL OR DER. HOWEVER, I HAVE CONFIRMED THE DISALLOWANCE OF `. 2,40,767/- MADE IN THE ITA NOS : 5088 & 4907/MUM/2005 21 ASSESSMENT YEAR 1994-95 IN THE ABSENCE OF DETAILS. THEREFORE, DISALLOWANCES OF `. 4,27,534/- AND `. 2,04,877/- ON ACCOUNT OF FOREIGN TRAVELLING EXPENSES AND PROJECT EXPENSES MA DE IN ASSESSMENT YEARS 1993-94 AND 1994-95 ARE DELETED AN D DISALLOWANCE OF `. 2,40,767/- MADE IN ASSESSMENT YEAR 1994-95 ON ACCOUNT OF FOREIGN TRAVELLING EXPENDITURE IS CON FIRMED. 33. THE LEARNED DR RELIED UPON THE FINDINGS OF THE A.O., WHEREAS THE LEARNED COUNSEL SUBMITTED THAT THIS ISSUE STANDS DE CIDED IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE BY THE TRIBUNAL IN THE A.Y. 1994-95 IN ITA NO.4461/M/2002. 34. AFTER CAREFULLY CONSIDERING THE ORDER PASSED BY THE AUTHORITIES BELOW AND THE DECISION OF THE TRIBUNAL RELIED UPON BY THE ASSESSEE IN ASSESSEES OWN CASE, WE FIND THAT THIS ADDITION HAS BEEN DELE TED BY THE TRIBUNAL IN THE A.Y. 1994-95 IN THE FOLLOWING MANNER :- 13. THE NEXT ISSUE IS REGARDING THE DISALLOWANCE O F FOREIGN TRAVEL EXPENSES AND PROJECT EXPENSES. THE FIRST AP PELLATE AUTHORITY HAS FOUND THAT THESE EXPENSES WERE NOT IN CURRED FOR THE PURPOSE OF SETTING UP ANY NEW PROJECT BUT WERE INCURRED ONLY FOR THE PURPOSE OF BRINGING IMPROVEMENT TO THE EXIS TING MANUFACTURING PROCESS AND IN THE TECHNOLOGY OF THE PRODUCT ALREADY MANUFACTURED BY IT. WE DO NOT FIND ANY MER IT IN THE SUBMISSION OF THE LD. DEPARTMENTAL REPRESENTATIVE T HAT THE EXPENDITURE SHOULD BE DISALLOWED FOR THE REASON THA T THE ASSESSEE HAS NOT GIVEN DETAILS OF PER PERSON AND PE R TIRP. THE FIRST APPELLATE AUTHORITY HAS OBSERVED THAT THE DIS ALLOWANCES WERE MADE BY MAKING SOME GENERAL OBSERVATIONS AND W ITHOUT POINTING OUT ANY SPECIFIC DEFECT. HE HAS RECORDED A SPECIFIC FINDING THAT THESE EXPENSES WERE INCURRED BY THE AS SESSEE IN CONNECTION WITH RUNNING HIS BUSINESS AND THE FOREIG N TOURS WERE UNDERTAKEN BY SENIOR EXECUTIVES AND CONSULTANTS FOR BRINGING UP IMPROVEMENTS IN THE EXISTING MANUFACTURING OPERATIO NS SO AS TO FACILITATE THE CONDUCT OF THE ASSESSEES BUSINESS I N A MORE EFFICIENT AND PROFITABLE MANNER. WE FULLY AGREE WI TH HIS FINDING AND UPHOLD HIS ORDER ON THIS ISSUE. THUS, THIS GRO UND OF THE REVENUE FOR THE ASSESSMENT YEAR 1992-93, 1993-94 AN D 1994- 95 IS DISMISSED AS DEVOID OF MERITS. ITA NOS : 5088 & 4907/MUM/2005 22 THUS RESPECTFULLY FOLLOWING THE AFORESAID DECISION AND ALSO THE FACT THAT WE DO NOT FOUND ANY INFIRMITY IN THE ORDER OF THE LD.C IT(A), THE GROUNDS RAISED BY THE DEPARTMENT ON THIS SCORE STANDS DISMISSED. 35. GROUND NO. 10 RELATES TO THE DELETION OF DISALL OWANCE OF `. 10,42,290/- MADE BY THE A.O. U/S.43B IN RESPECT OF THE DELAYED PAYMENT OF PF CONTRIBUTION. BOTH THE PARTIES AGREED THAT THE PAY MENT HAS BEEN MADE WITHIN THE GRACE PERIOD AND IN ANY CASE BEFORE FILI NG THE RETURN. IN VIEW OF THIS ADMITTED FACTS AND ALSO THE JUDGMENT OF HONBL E SUPREME COURT IN THE CASE OF CIT VS. ALOM EXTRUSIONS LTD. [2009] REPORTED IN 319 ITR 306 (SC) THIS ISSUE IS DECIDED AGAINST THE DEPARTMENT AND TH E FINDING GIVEN BY THE LD.CIT(A) IS UPHELD. ACCORDINGLY THIS GROUND STAND S DISMISSED. 36. GROUND NO. 11 RELATES TO THE DELETION OF DISALL OWANCE OF `. 2,76,455/- IN RESPECT OF ENTERTAINMENT EXPENSES. THE LD. CIT (A) HAS DISCUSSED THIS ISSUE IN PARA 15 OF THE ORDER. HE HAS FOLLOWED HIS FINDINGS GIVEN IN THE EARLIER ASSESSMENT YEARS. BOTH THE PARTIES FAIRLY AGREED THAT THIS ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y.1994-95 IN ITA NO.4461/M/02. 37. AFTER GOING THROUGH THE FINDINGS OF THE LD. CIT (A) WE FIND THAT THE A.O. HAS DISALLOWED THE SUM OF `. 2,76,455/- OVER AND ABOVE THE SUM OF `. 5,76,000/- DISALLOWED BY THE ASSESSEE ITSELF IN THE RETURN OF INCOME. LOOKING TO THE FACT THAT THE ASSESSEE HAS ITSELF DI SALLOWED THE SAID EXPENSES, ITA NOS : 5088 & 4907/MUM/2005 23 THE LD. CIT(A) FOLLOWING THE EARLIER YEARS HAS DELE TED THE SAID ADDITION. MOREOVER THIS ISSUE HAS ALREADY BEEN DECIDED IN FAV OUR OF THE ASSESSEE IN ASSESSEES OWN CASE BY THE TRIBUNAL IN THE A.Y. 199 4-95. THUS WE DO NOT FIND ANY MERITS IN THE GROUND RAISED BY THE DEPARTM ENT AND THE SAME STANDS DISMISSED. 38. GROUND NO. 12 RELATES TO THE DELETION OF `. 11,87,960/- IN RESPECT OF INTEREST. BOTH THE PARTIES FAIRLY AGREED THAT THIS ISSUE HAS BEEN DECIDED AGAINST THE DEPARTMENT BY THE TRIBUNAL IN ASSESSEE S OWN CASE IN THE A.Y. 1994-95 IN ITA NO.4461/M/2002. AFTER GOING THROUGH THE SAID DECISION, WE FIND THAT THIS ISSUE HAS BEEN DECIDED IN THE FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT AFTER OBSERVING AND HOLDING AS UNDER :- 20. THE NEXT ISSUE FOR THE ASSESSMENT YEAR 1994-95 IS AN ADDITION OF `. 11,87,960/- BEING INTEREST ON AMOUNTS RECEIVABLE FROM PARTNERSHIP FIRMS. HERE ALSO THE FIRST APPELL ATE AUTHORITY FOUND THAT THERE WAS NO DIVERSION OF FUNDS FOR NON- BUSINESS PURPOSE. IT WAS ALSO FOUND BY HIM THAT INTEREST BE ARING FUNDS WERE NOT DIVERTED FOR INTEREST FREE LOANS AND THUS NO DISALLOWANCE OF INTEREST OUGHT TO BE MADE. THE LD. DEPARTMENTAL REPRESENTATIVE, THOUGH NOT LEVYING THIS GROUND, ULT IMATELY SUBMITTED THAT THE FINDING OF THE FIRST APPELLATE A UTHORITY NEED TO BE UPHELD. THUS, THIS GROUND OF THE REVENUE IS DIS MISSED. THUS RESPECTFULLY FOLLOWING THE AFORESAID DECISION, WE DO NOT FIND ANY MERITS IN THE GROUND RAISED BY THE DEPARTMENT AND THE SAME IS DISMISSED. ITA NOS : 5088 & 4907/MUM/2005 24 39. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E AS WELL AS BY THE DEPARTMENT ARE PARTLY ALLOWED ORDER PRONOUNCED ON THIS 02 ND DAY OF NOVEMBER, 2012. SD/- SD/- ( P. M. JAGTAP ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DT: 02.11.2012 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI