National Organic Chemica Inds Ltd, V. ACIT Cir 7(1),

ITA 5296/MUM/2003

• Counselvise Citation: 529619914 RSA 2003
• Duration Of Justice: 7 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 30-03-2011
• Assessment Year: misc
• Appeal Filed On: 22-07-2003
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: KUSUM INGLE
• Keywords: Capital asset; Depreciation; Opportunity of being heard; Bad and doubtful debts; Notional interest; Revenue expenditure; Capital expenditure

Judgement Text

I.T.A NO.3495/ MUM/2003 I.T.A NO.3677/ MUM/2003 I.T.A NO.5296/ MUM/2003 I.T.A NO.5176/ MUM/2003 NATIONAL ORGANIC CHEMICAL INDUSTRIES LTD., 1 IN THE INCOME TAX APPELLATE TRIBUNAL, F BENCH, MUMBAI. BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER I.T.A NO.3495/ MUM/2003 ASSESSMENT YEAR: 1998-99 NATIONAL ORGANIC CHEMICAL INDUSTRIES LTD., . APPELLANT MAFATLAL HOUSE, 5 TH FLOOR, BACKBAY RECLAMATION, MUMBAI-20. VS ADDL. CIT, SPL. RANGE-20,. .. RESPONDENT AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. I.T.A NO.3677/ MUM/2003 ASSESSMENT YEAR: 1998-99 DY. CIT, 7(1) . APPELLANT AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. VS NATIONAL ORGANIC CHEMICAL INDUSTRIES LTD., RE SPONDENT MAFATLAL HOUSE, 5 TH FLOOR, BACKBAY RECLAMATION, MUMBAI-20. I.T.A NO.5296/ MUM/2003 ASSESSMENT YEAR: 1999-2000 NATIONAL ORGANIC CHEMICAL INDUSTRIES LTD., .. AP PELLANT MAFATLAL HOUSE, 5 TH FLOOR, BACKBAY RECLAMATION, MUMBAI-20. VS DY. CIT, 7(1) ,. RESPONDENT AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. I.T.A NO.3495/ MUM/2003 I.T.A NO.3677/ MUM/2003 I.T.A NO.5296/ MUM/2003 I.T.A NO.5176/ MUM/2003 NATIONAL ORGANIC CHEMICAL INDUSTRIES LTD., 2 I.T.A NO.5176/ MUM/2003 ASSESSMENT YEAR: 1999-2000 DY. CIT, 7(1) ,. APPELLANT AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. VS NATIONAL ORGANIC CHEMICAL INDUSTRIES LTD., .. RE SPONDENT MAFATLAL HOUSE, 5 TH FLOOR, BACKBAY RECLAMATION, MUMBAI-20. PAN NO.AAACN 4412 E APPEARANCES: DINESH VYAS, FOR THE ASSESSEE KUSUM INGLE, FOR THE REVENUE O R D E R PER PRAMOD KUMAR: 1. THESE CROSS APPEALS ARE DIRECTED AGAINST SEPARA TE ORDERS OF THE CIT(A) RELATING TO THE ASSESSMENT YEARS 1998-99 AND 1999-2 000, RESPECTIVELY. THE APPEALS ARISE OUT OF THE ASSESSMENTS MADE UNDER SECTION 143 (3) OF THE INCOME TAX ACT, 1961. AS THEY INVOLVE SOME COMMON ISSUES, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CO NVENIENCE. 2. THE ASSESSEE HAS FILED CHARTS IN RESPECT OF INDI VIDUAL APPEALS AS WELL AS PAPER BOOKS, WHICH HAVE BEEN TAKEN INTO CONSIDERATION WHI LE DISPOSING OF THE APPEALS. 3. FIRST WE WILL CONSIDER THE APPEAL FILED BY THE A SSESSEE FOR THE ASSESSMENT YEAR 1998-99 IN ITA NO.3495/M/2003. I.T.A NO.3495/ MUM/2003 I.T.A NO.3677/ MUM/2003 I.T.A NO.5296/ MUM/2003 I.T.A NO.5176/ MUM/2003 NATIONAL ORGANIC CHEMICAL INDUSTRIES LTD., 3 4. GROUND NO.1 RELATES TO THE DECISION OF THE CIT(A ) DISALLOWING THE DEDUCTION OF ` . 18,01,431 OF PRO-RATA PREMIUM ON LEASEHOLD LAND. 5. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THIS I SSUE STANDS COVERED AGAINST THE ASSESSEE ON IDENTICAL FACTS BY THE ORDERS OF TH E TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 1989-90 TO 1997-98. COPIE S OF THESE ORDERS HAVE BEEN PLACED ON RECORD. IN VIEW OF THIS AND RESPECTFULLY FOLLOWING THE ORDERS OF THE TRIBUNAL, WE UPHOLD THE ORDER OF THE CIT (A) IN DIS ALLOWING THE DEDUCTION OF ` .18,01,341 ON PRO-RATA PREMIUM ON LEASEHOLD LAND. 6. THIS GROUND IS THUS DISMISSED. 7. THE SECOND GROUND IS AN ALTERNATE GROUND TO THE ONE CONSIDERED ABOVE, WHEREIN, THE ARGUMENT OF THE ASSESSEE IS THAT THE E NTIRE PREMIUM NEEDS TO BE CONSIDERED AS COST OF BUILDING AND PLANT SO AS TO A LLOW DEPRECIATION THEREON. SINCE THE ISSUE IS CONSIDERED AGAINST THE ASSESSEE IN GRO UND NO.1, ACCORDINGLY, THIS GROUND IS ALSO DISMISSED. 8. GROUND NO.2 IS THUS DISMISSED. 9. GROUND NO.3 RELATES TO DISALLOWANCE OF LICENSE A ND PROCESS TECHNOLOGY FEES OF ` .7,92,00,396. THIS GROUND WAS NOT PRESSED, THEREFO RE, SAME IS DISMISSED AS NOT PRESSED. 10. IN GROUND NO.4, THE ASSESSEE IS AGGRIEVED BY TH E CIT (A)S ACTION IN NOT ALLOWING ` .1,00,83,271 CLAIMED BY THE ASSESSEE TOWARDS COST O F CATALYST ISSUES. 11. FACTS IN BRIEF ARE THAT DURING THE COURSE OF AS SESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLA IMED DEDUCTION OF ` .1,00,83,271 I.T.A NO.3495/ MUM/2003 I.T.A NO.3677/ MUM/2003 I.T.A NO.5296/ MUM/2003 I.T.A NO.5176/ MUM/2003 NATIONAL ORGANIC CHEMICAL INDUSTRIES LTD., 4 ON THE NEW METHOD WHICH WAS NOT ALLOWED BY THE ASSE SSING OFFICER IN FULL. THE VIEW TAKEN BY THE AO WAS UPHELD BY THE FIRST APPELLATE A UTHORITY. 12. BEFORE US, IT WAS ARGUED THAT ON SIMILAR ISSUE IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 1987-87 TO 1997-98, THE MATTER HAS BEEN RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER WITH DIRECTIONS TO RE-COMP UTE THE PROFITS IN ACCORDANCE WITH THE OLD METHOD FOLLOWED BY THE ASSESSEE. SINCE, TH ERE IS NO CHANGE IN THE FACTS IN THE CURRENT YEAR, RESPECTFULLY FOLLOWING THE ORDERS OF THE TRIBUNAL; WE ALSO RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH THE SAME DIRECTIONS AS WERE GIVEN BY THE TRIBUNAL IN THE YEARS CITED BEFORE US. 13. GROUND NO. 4 IS THUS ALLOWED FOR STATISTICAL PURPOSES. 14. GROUND NO.5 & 6 IS AGAINST CONFIRMATION OF DISA LLOWANCE OF ` .17,29,454 BEING PRIOR PERIOD EXPENDITURE. 15. WE FIND THAT SIMILAR ISSUE HAD COME UP FOR CONS IDERATION BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS, 19 91-92 , 1996-97 AND 1997-98, WHEREIN, THE SAME HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL. SINCE IN THE YEAR UNDER CONSIDERATION, THERE IS NO CHANGE OF FACTS, RESPECTFULLY FOLLOWING THE EARLIER ORDERS OF THE TRIBUNAL, WE DECIDE THE I SSUE IN FAVOUR OF THE ASSESSEE WITH THE DIRECTION TO THE ASSESSING OFFICER TO ENSURE TH AT NO DOUBLE DEDUCTION IS ALLOWED. SUBJECT TO THIS REMARK, GROUND NO.5 & 6 IS ALLOWED . 16. GROUND NO.7 IS AGAINST CIT (A)S CONFIRMING THE DISALLOWANCE OF OVER-RIDING COMMISSION OF ` ..35,07,321 PAID TO NEERAJ CONSULTANTS. 17. FACTS IN BRIEF ARE THAT DURING THE COURSE OF AS SESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD PAI D ` .35,07,321 TO NEERAJ CONSULTANTS LTD., TOWARDS OVERRIDING COMMISSION. IN THE COURSE OF ASSESSMENT I.T.A NO.3495/ MUM/2003 I.T.A NO.3677/ MUM/2003 I.T.A NO.5296/ MUM/2003 I.T.A NO.5176/ MUM/2003 NATIONAL ORGANIC CHEMICAL INDUSTRIES LTD., 5 PROCEEDINGS, THE ASSESSEE WAS UNABLE TO PRODUCE ANY EVIDENCE TO SHOW THAT NEERAJ CONSULTANTS LTD HAS RENDERED ANY SERVICE TO THE ASS ESSEE. IT WAS IN THIS BACKDROP, THE ASSESSING OFFICER DISALLOWED THE EXPENSES OF ` .35,07,321. THE ACTION OF THE ASSESSING OFFICER WAS ALSO UPHELD IN THE FIRST APPE AL. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 18. LEARNED REPRESENTATIVE FAIRLY AGREE THAT THIS I SSUE IS COVERED AGAINST THE ASSESSEE BY THE DECISION DATED 28 TH JANUARY, 2011 OF A CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1997-98, COPY OF WHICH IS PLACED ON RECORD. WE, THEREFORE, CONFIRM THE DISAL LOWANCE MADE BY THE AUTHORITIES BELOW. 19. GROUND NO.7 IS THUS DISMISSED. 20. GROUND NO.8 & 9 IS AGAINST CONFIRMATION OF DISA LLOWANCE OF EXPENDITURE OF ` .17,58,270 INCURRED ON PURCHASE OF PROPERTY TIME SH ARE IN A HOLIDAY RESORT. BOTH THE GROUNDS WERE NOT PRESSED, THEREFORE, DISMISSED AS NOT PRESSED. 21. GROUND NO.10& 11 IS AGAINST CIT(A)S CONFIRMI NG THE DISALLOWANCE FOR THE LOANS AND ADVANCES OF ` .2,50,000 GIVEN TO SAMARAT HOUSING AND LEASING WRIT TEN OFF DURING THE YEAR. 22. LEARNED COUNSEL FOR THE ASSESSEE FAIRLY AGREES THAT THE LD CIT (A ) HAS BEEN QUITE FAIR IN REDUCING THE QUANTUM OF DISALLOWANCE TO ` .2,50,000 OUT OF ` .50,18,059. HE, ACCORDINGLY, DID NOT PRESS THIS GROUND. IN VIE W OF THIS, GROUND NO.10& 11 IS DISMISSED AS NOT PRESSED. 23. GROUND NOS.12 TO 14 RELATE TO CONFIRMATION OF D ISALLOWANCE OF EXPENDITURE OF ` .87,14,824 WERE NOT PRESSED, THEREFORE, SAME ARE DI SMISSED AS NOT PRESSED. I.T.A NO.3495/ MUM/2003 I.T.A NO.3677/ MUM/2003 I.T.A NO.5296/ MUM/2003 I.T.A NO.5176/ MUM/2003 NATIONAL ORGANIC CHEMICAL INDUSTRIES LTD., 6 24. GROUND NO.15 RELATES TO THE DISALLOWANCE OF FEE S OF ` .3,65,51,614 PAID FOR RESTRUCTURING THE ASSESSEES BUSINESS. 25. HAVING CONSIDERED THE RIVAL CONTENTIONS AND HAV ING PERUSED THE MATERIAL ON RECORD, WE FIND THAT THE CIT (A) HAS MERELY FOLLOWE D THE DECISION FOR THE ASSESSMENT YEARS 1993-94 TO 1997-98. HOWEVER, THE TRIBUNAL HA S REVERSED THE ORDER OF THE CIT(A) AND ACCEPTED THE GRIEVANCE OF THE ASSESSEE F OR THE ABOVE YEARS. SINCE, THERE IS NO CHANGE IN FACTS IN THE YEAR UNDER CONSIDERATI ON, RESPECTFULLY FOLLOWING THE SAME, THIS GROUND IS ALLOWED. 26. GROUND NO.16 RELATES TO DISALLOWANCE OF CONSULT ANCY AND ADVISORY FEES OF ` .1,50,000 FOR MODERNIZATION PROJECT. 27. HAVING CONSIDERED THE RIVAL CONTENTIONS AND HAV ING PERUSED THE MATERIAL ON RECORD, WE FIND THAT THE CIT (A) HAS MERELY FOLLOWE D THE DECISION FOR THE ASSESSMENT YEARS 1993-94 TO 1997-98. HOWEVER, THE TRIBUNAL HA S REVERSED THE ORDER OF THE CIT(A) AND ACCEPTED THE GRIEVANCE OF THE ASSESSEE F OR THE ABOVE YEARS. SINCE, THERE IS NO CHANGE IN FACTS IN THE YEAR UNDER CONSIDERATI ON, RESPECTFULLY FOLLOWING THE SAME, THIS GROUND IS ALLOWED. 28. GROUND NOS.17 TO 23 ARE CONSEQUENTIAL IN NATURE AND DOES NOT CALL FOR SPECIFIC ADJUDICATION. 29. IN THE RESULT, APPEAL IS PARTLY ALLOWED. NOW WE TAKE UP REVENUES APPEAL FOR THE ASSESSMENT YEAR 1998-99 IN ITA NO.3677/M/03: 30. IN GROUND NO.1, THE ASSESSING OFFICER IS AGGRIE VED THE CIT (A)S DELETING THE DISALLOWANCE OF ` .1,86,52,315 BEING INTEREST ON ADVANCE MADE TO M/S. ORBIT FINANCE LTD & OTHER PARTIES. I.T.A NO.3495/ MUM/2003 I.T.A NO.3677/ MUM/2003 I.T.A NO.5296/ MUM/2003 I.T.A NO.5176/ MUM/2003 NATIONAL ORGANIC CHEMICAL INDUSTRIES LTD., 7 31. HAVING CONSIDERED THE RIVAL CONTENTIONS AND HAV ING PERUSED THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSING OFFICER HAS DISA LLOWED NOTIONAL INTEREST PAID ON ADVANCE TO ORBIT FINANCE BUT THE CIT (A) DELETED THE DISALLOWANCE FOLLOWING THE DECISION OF HIS PREDECESSOR FOR THE ASSESSMENT YEAR S 1993-94 TO 1997-98. THE ORDERS OF THE CIT (A), HAS SINCE BEEN UPHELD BY THE TRIBUNAL DELETING THE DISALLOWANCE. IN VIEW OF THIS, RESPECTFULLY FOLLOW ING THE DECISION OF THE TRIBUNAL (SUPRA), WE UPHOLD THE ORDER OF THE CIT (A) AND DEC LINE TO INTERFERE. 32. GROUND NO.1 IS THUS DISMISSED. 33. IN GROUND NO.2, THE REVENUE HAS TAKEN THE FOLLO WING GRIEVANCE: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) ERRED IN DELETING THE DISALLOWANCE OF ` .13,17,81,278 IN RESPECT OF INTEREST ON CAPITAL WORK IN PROGRESS, IGNORING THE FACT THAT THE FUNDS INVESTED (ASSETS) WERE NOT IMMEDIATELY USED FOR THE EXISTING BUSINESS OF THE ASSESSEE AND, THEREFORE, THE INTEREST ATTRIB UTABLE TO SUCH INVESTMENT COULD NOT BE ALLOWED AS REVENUE EXPENDIT URE OUT OF THE INCOME OF THE EXISTING BUSINESS OF THE ASSESSEE. 34. HAVING CONSIDERED THE RIVAL CONTENTIONS AND HAV ING PERUSED THE MATERIAL ON RECORD, WE FIND THAT THIS ISSUE IS COVERED AGAINST THE REVENUE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 1992-93 TO 1997-98. RESPECTFULLY FOLLOWING THE SAME, THIS GROUND IS DIS MISSED. 35. IN GROUND NO.3, THE ASSESSING OFFICER HAS TAKEN THE FOLLOWING GRIEVANCE: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) HAS ERRED IN DIRECTING THE AO TO EXCLUDE THE AMOUNT OF ` .31,10,688 ON ACCOUNT OF WRITE BACK OF COMMISSION PAYABLE TO M/S. GWALIOR TRANSMISSIONS SYSTEM LTD FROM THE TOTAL INCOME OF THE ASSESSEE. I.T.A NO.3495/ MUM/2003 I.T.A NO.3677/ MUM/2003 I.T.A NO.5296/ MUM/2003 I.T.A NO.5176/ MUM/2003 NATIONAL ORGANIC CHEMICAL INDUSTRIES LTD., 8 36. FACTS IN BRIEF ARE THAT THE ASSESSEE APPOINTED M/S. GWALIOR TRANSMISSION SYSTEMS LIMITED FOR A PERIOD OF ONE YEAR FROM 1.4.1 994 SUBJECT TO REVIEW EVERY YEAR TO PROMOTE SALE OF RUBBER CHEMICALS TO M/S. J.K. IN DUSTRIES LIMITED. THE AO NOTICED THAT THE AGREEMENT ENTERED WITH GWALIOR TRANSMISSIO N SYSTEMS LIMITED WAS NOT RENEWED BEYOND ONE YEAR. THE ASSESSEE COULD NOT PR ODUCE ANY EVIDENCE REGARDING THE SERVICES RENDERED. IT WAS IN BACKDROP THAT THE AO DISALLOWED ` .31,10,688 TOWARDS COMMISSION PAYABLE TO M/S. GWALIOR TRANSMIS SIONS SYSTEM LTD. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CI T(A). IT WAS SUBMITTED BEFORE THE CIT(A) THAT THIS AMOUNT WAS DISALLOWED IN A.Y. 1997 -98 AS EXPENDITURE CLAIMED BY THE ASSESSEE AND THE SAME IS WRITTEN BACK IN THE YE AR UNDER CONSIDERATION. AFTER CONSIDERING THE ASSESSEES SUBMISSIONS, THE CIT(A) FOUND THAT THE SAID AMOUNT WAS DISALLOWED IN THE YEAR 1997-98. THEREFORE, HE WAS OF THE VIEW THAT TAXING THIS AMOUNT IN THE YEAR UNDER CONSIDERATION WILL AMOUNT TO DOUBLE TAXATION. ACCORDINGLY, HE DIRECTED THE AO TO DELETE THE SAME. AGGRIEVED, THE ASSESSING OFFICER IS IN APPEAL BEFORE US. 37. HAVING CONSIDERED THE RIVAL CONTENTIONS AND HAV ING PERUSED THE MATERIAL RECORD, WE SEE NO REASONS TO INTERFERE IN THE MATTE R. SINCE THE EXPENDITURE ITSELF HAS BEEN DISALLOWED IN THE YEAR IN WHICH IT WAS INCURRE D, IT IS ONLY COROLLARY THERETO THAT WRITE BACK OF SUCH AN EXPENDITURE DISALLOWED CANNOT CONSTITUTE TAXABLE INCOME IN THE YEAR OF WRITE BACK. THE CIT (A) WAS THUS QUITE JUSTIFIED IN DELETING THE IMPUGNED AMOUNT. WE CONFIRM AND APPROVE HIS ORDER ON THIS IS SUE AS WELL. 38. GROUND NO. 3 IS THUS DISMISSED. 39. GROUND NO.4 RELATES TO THE DISALLOWANCE OF THE EXPENDITURE OF ` .25,12,528 INCURRED ON MAKING A NEW ROAD, WATER PIPE LINES AND OVERHEAD TRANSMISSION LINES OWNED BY MIDC AND MSEB. I.T.A NO.3495/ MUM/2003 I.T.A NO.3677/ MUM/2003 I.T.A NO.5296/ MUM/2003 I.T.A NO.5176/ MUM/2003 NATIONAL ORGANIC CHEMICAL INDUSTRIES LTD., 9 40. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING P ERUSED THE MATERIAL ON RECORD, WE FIND THAT SIMILAR ISSUE HAD COME UP FOR CONSIDERATION IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 1993-94 TO 1997-98, W HEREIN, THE ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE. LEARNED REPRESENTATIV ES FAIRLY AGREE THAT THIS ISSUE IS AS SUCH COVERED AGAINST THE ASSESSEE BY DECISIONS O F THE COORDINATE BENCH IN ASSESSEES OWN CASE. THEREFORE, RESPECTFULLY FOLLO WING THE ORDERS OF THE TRIBUNAL, WE REVERSE THE DECISION OF THE CIT (A) AND RESTORE THAT OF THE ASSESSING OFFICER. 41. GROUND NO.4 IS THUS ALLOWED. 42. GROUND NO.5 READS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) ERRED IN HOLDING THAT THE EXPENDITURE INCURRED OF ` .6,06,99,550 ON ACCOUNT OF STAMP DUTY ON AMALGAMATION WAS NECESSARY FOR THE SM OOTH AND EFFICIENT CONDUCT OF THE ASSESSEES BUSINESS AND THAT THE SAI D EXPENDITURE WAS LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSI NESS OF THE ASSESSEE. 43. THE SHORT REASON FOR WHICH THIS DISALLOWANCE, I N RESPECT OF STAMP DUTY EXPENSES ON AMALGAMATION OF POLYFINS INDUSTRIES LIM ITED WITH THE ASSESSEE COMPANY, WAS MADE BY THE ASSESSING OFFICER ON THE GROUND THAT IT HAS RESULTED IN AN ADVANTAGE OF ENDURING NATURE, AND, AS SUCH, IS CAPI TAL EXPENDITURE IN NATURE. IN APPEAL, HOWEVER, CIT(A) DELETED THE DISALLOWANCE BY RELYING UPON HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF CIT VS BOMBAY DYING & MANUFACTURING CO LTD (219 ITR 521). THE ASSESSING OFFICER IS NOT SATISFIED A ND IS IN APPEAL BEFORE US. 44. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING P ERUSED THE MATERIAL ON RECORD, AND HAVING NOTED THAT THE ASSESSING OFFICER HAS NOT DISPUTED THAT AMALGAMATION WAS NECESSARY FOR SMOOTH AND NECESSARY CONDUCT OF BUSINESS, WE FIND THAT THE ISSUE IN APPEAL IS SQUARELY COVERED B Y HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF BOMBAY DYING & MANUFACTURIN G CO LTD (SUPRA) WHEREIN THEIR LORDSHIPS HAVE, INTER ALIA, OBSERVED AS FOLLO WS : I.T.A NO.3495/ MUM/2003 I.T.A NO.3677/ MUM/2003 I.T.A NO.5296/ MUM/2003 I.T.A NO.5176/ MUM/2003 NATIONAL ORGANIC CHEMICAL INDUSTRIES LTD., 10 , THE TRIBUNAL UPHELD THE ASSESSEE'S CONTENTION . IT DISAGREED WITH THE REVENUE'S CONTENTION THAT INASMUCH AS THE SAID AMAL GAMATION RESULTED IN ACQUISITION OF THE OTHER COMPANY BY THE ASSESSEE, W HICH ACQUISITION WAS IN THE NATURE OF ACQUISITION OF A CAPITAL ASSET, THE L EGAL EXPENSES INCURRED IN THAT BEHALF PARTAKE THE NATURE OF CAPITAL EXPENDITURE. T HE TRIBUNAL WAS OF THE OPINION THAT 'AS BOTH THE COMPANIES WERE CARRYING O N COMPLIMENTARY BUSINESS AND THEIR AMALGAMATION WAS NECESSARY FOR T HE SMOOTH AND EFFICIENT CONDUCT OF THE BUSINESS', IT IS AN EXPENDITURE LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. IN VIEW OF THE SAID FINDING AND ALSO IN VIEW OF THE DECISION OF THIS COURT IN BOMBAY STEAM NAVIGATION CO. [1953] (P.) LTD. V. CIT [1965] 56 ITR 52 , WE ARE OF THE OPINION THAT THE TRIBUNAL WAS RIGHT IN ITS CONCLUSION. THE DECISION IN BOMBAY STEAM NAVIGATION CO. (1953) (P.) LTD.'S CASE ( SUPRA ) ALSO PERTAINS TO AMALGAMATION OF TWO SHIPPING COMPANIES . THE ASSESSEE-COMPANY TOOK OVER THE ASSETS OF THE OTHER COMPANY AND PART OF THE PRICE WAS TREATED AS A LOAN SECURED BY A PROMISSORY NOTE AND HYPOTHECATION OF ALL MOVABLE PR OPERTIES OF THE ASSESSEE-COMPANY. THE LOAN WAS TO CARRY SIMPLE INTE REST AT 6 PER CENT. THE QUESTION THAT AROSE IN THE SAID CASE WAS WHETHER TH E INTEREST PAID UPON THE SAID LOAN WAS DEDUCTIBLE AS REVENUE EXPENDITURE. IT WAS HELD BY THIS COURT THAT IT WAS AN EXPENDITURE DEDUCTIBLE UNDER SECTION 10(2)( XV ) OF THE INDIAN INCOME-TAX ACT, 1922. IT WAS HELD THAT TRANSACTION OF ACQUISITION OF THE ASSET WAS CLOSELY RELATED TO THE COMMENCEMENT AND CARRYIN G ON OF THE ASSESSEE'S BUSINESS AND, THEREFORE, INTEREST PAID ON THE UNPAI D BALANCE OF THE CONSIDERATION FOR THE ASSETS ACQUIRED HAD, IN T HE NORMAL COURSE, TO BE REGARDED AS EXPENDITURE FOR THE PURPOSE OF THE BUSI NESS WHICH WAS CARRIED ON IN THE ACCOUNTING PERIODS. IN THE COURSE OF THE JUDGMENT THIS COURT REFERRED TO THE EARLIER DECISION OF THIS COURT IN STATE OF MADRAS V. G.J. COELHO [1964] 53 ITR 186 WHEREIN IT WAS HELD THAT THE INTEREST ON THE AMOUN T BORROWED FOR ACQUIRING A CAPITAL ASSET IS DEDUCTIBL E AS REVENUE EXPENDITURE. IT IS TRUE, THAT IN THE SAID DECISION THIS COURT RE -AFFIRMED THE WELL ESTABLISHED PRINCIPLE THAT ANY EXPENDITURE LAID OUT FOR ACQUIRI NG AN ASSET OF A PERMANENT CHARACTER WOULD BE CAPITAL EXPENDITURE, HELD AT THE SAME TIME THAT INASMUCH AS THE ACQUISITION OF THE OTHER COMPANY WAS IN THE COURSE OF CARRYING ON OF THE ASSESSEE'S BUSINESS, THE INTEREST PAID THEREON WAS DEDUCTIBLE UNDER SECTION 10(2)( XV ). IN THIS CASE TOO, THE TRIBUNAL HAS RECORDED A FI NDING THAT THE ACQUISITION OF NAWROSJEE WADIA GINNING & PRESSI NG COMPANY WAS NECESSARY FOR THE SMOOTH AND EFFICIENT CONDUCT OF T HE ASSESSEE'S BUSINESS. FOLLOWING THE RATIO OF THE AFOREMENTIONED DECISIONS OF THE COURT, WE HOLD THAT THE EXPENDITURE INCURRED TOWARDS PROFESSIONAL CHARGES OF THE SOLICITORS' FIRM FOR THE SERVICES RENDERED IN CONNECTION WITH T HE SAID AMALGAMATION WAS IN THE COURSE OF CARRYING ON OF THE ASSESSEE'S BUSI NESS AND, THEREFORE, DEDUCTIBLE AS A REVENUE EXPENDITURE. I.T.A NO.3495/ MUM/2003 I.T.A NO.3677/ MUM/2003 I.T.A NO.5296/ MUM/2003 I.T.A NO.5176/ MUM/2003 NATIONAL ORGANIC CHEMICAL INDUSTRIES LTD., 11 45. IN THIS VIEW OF THE MATTER, WE CONFIRM THE ACTI ON OF THE CIT(A) ON THIS ISSUE AS WELL AND DECLINE TO INTERFERE IN THE MATTER. 46. GROUND NO. 5 IS THUS DISMISSED. 47. GROUND NO.6 READS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) HAS ERRED IN DELETING THE ADDITION OF ` .29,40,41,392 MADE BY THE AO, IGNORING THE FACTS THAT THE EXPENDITURE INCURRED UNDER THE V OLUNTARY RETIREMENT SCHEME OF THE ASSESSEE COMPANY FOR ITS EMPLOYEES BR OUGHT ENDURING BENEFIT TO THE ASSESSEE AND WAS THUS OF CAPITAL NATURE AND WAS NOT ALLOWABLE. 48. BRIEFLY STATED THE MATERIAL FACTS ARE LIKE THI S. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF ` ` . 29,40,41,392 ON ACCOUNT OF THE COMPENSATION PAID TO THE EMPLOYEES OF THE ASSESSEE COMPANY UNDER VOLUNTARY RETIREMENT SCHEME. THE ASSESSING OFFICER DISALLOW ED THE SAME, HOLDING THAT THE VOLUNTARY RETIREMENT SCHEME BRINGS ABOUT AN ENDURIN G BENEFIT TO THE ASSESSEE AND, THEREFORE, TO BE TREATED AS CAPITAL EXPENDITURE. A GGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE CIT (A) FO LLOWING THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. SI MPSON AND CO.OP.LTD, 230 ITR 703, DIRECTED THE AO TO DELETE THE DISALLOWANCE. A GGRIEVED, THE ASSESSING OFFICER IS IN APPEAL BEFORE US. 49. HAVING CONSIDERED THE RIVAL CONTENTIONS AND HAV ING PERUSED THE MATERIAL ON RECORD, WE DO NOT FIND ANY INFIRMITY IN THE ORDER O F THE LEARNED CIT (A). WE ALSO FIND THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASS ESSEE BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF BHOR INDUSTRI ES LTD., 264 ITR 180. RESPECTFULLY FOLLOWING THE SAME, THIS GROUND OF THE REVENUE IS ALSO DISMISSED. 50. GROUND NO. 6 IS ALSO DISMISSED. I.T.A NO.3495/ MUM/2003 I.T.A NO.3677/ MUM/2003 I.T.A NO.5296/ MUM/2003 I.T.A NO.5176/ MUM/2003 NATIONAL ORGANIC CHEMICAL INDUSTRIES LTD., 12 51. GROUND NO.7 RELATES TO DELETION OF DISALLOWANCE OF ` .47,68,059 ON ACCOUNT OF WRITE OFF OF LOANS AND ADVANCES. 52. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED WRITE OFF OF LOANS AN D ADVANCES AMOUNTING TO RS 50,18,059 BUT THESE ARE NOT BAD DEBTS AS THE SAME A RE NOT TRADE DEBTS AND SINCE THE ASSESSEE IS NOT IN THE BUSINESS OF MONEY LENDING. T HESE WRITE OFFS WERE IN THE NATURE OF PARTIAL WRITE OFF OF HOUSING LOAN TO EMPLOYEE , WRITE OFF OF SECURITY DEPOSITS INSURANCE CLAIMS LOANS RECOVERABLE FROM EX-EMPLOYEE S AND MISCELLANEOUS RECOVERABLE ETC. WHEN MATTER WAS CARRIED IN APPEAL, CIT(A) GAVE PARTIAL RELIEF IN RESPECT OF THIS CLAIM FOR DEDUCTION BY OBSERVING TH AT AS ADVANCES WERE GIVEN DURING THE COURSE OF NORMAL BUSINESS AND LOSS WAS INCIDENT AL TO THE BUSINESS, THE SAME IS ALLOWABLE UNDER SECTION 28. THE ASSESSING OFFICER I S NOT SATISFIED AND IS IN APPEAL BEFORE US. 53. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING P ERUSED THE MATERIAL ON RECORD, WE SEE NO REASONS TO INTERFERE IN THE CONCL USIONS ARRIVED AT BY THE CIT(A) ON THIS ISSUE EITHER. LEARNED DEPARTMENTAL REPRESENTAT IVE COULD NOT POINT OUT A SINGLE INSTANCE WHERE THE ADVANCES WRITTEN OFF WERE NOT MA DE DURING THE COURSE OF, AND AS INCIDENTAL TO THE BUSINESS OF THE ASSESSEE. AS LONG AS AMOUNTS WRITTEN OFF HAVE BEEN IN THE COURSE OF, AND AS INCIDENTAL TO ASSESS EES NORMAL BUSINESS ACTIVITIES, THE LOSS SO INCURRED IS ADMISSIBLE AS BUSINESS LOSS. TH E CIT(A) WAS, THEREFORE, QUITE JUSTIFIED IN HIS CONCLUSIONS AND THE SAME DO NOT CA LL FOR ANY INTERFERENCE FROM US. WE DECLINE TO INTERFERE IN THE MATTER. 54. GROUND NO. 7 IS THUS DISMISSED. 55. THE APPEAL OF THE ASSESSING OFFICER IS THUS PAR TLY ALLOWED IN THE TERMS INDICATED ABOVE. I.T.A NO.3495/ MUM/2003 I.T.A NO.3677/ MUM/2003 I.T.A NO.5296/ MUM/2003 I.T.A NO.5176/ MUM/2003 NATIONAL ORGANIC CHEMICAL INDUSTRIES LTD., 13 ITA NO.5296/M/03: A.Y. 1999-2000 56. WE NOW TAKE UP ITA NO. 5296/MUM/03 I.E. ASSESEE S APPEAL AGAINST CIT(A)S ORDER FOR THE ASSESSMENT YEAR 1999-2000. 57. GROUND NO.1 RELATES TO CIT (A)S DECISION DISAL LOWING THE DEDUCTION OF PRO- RATA PREMIUM ON LEASEHOLD LAND ` .17,92,470. IN LINE WITH OUR DECISION IN RESPECT O F GROUND NO.1 IN ASSESSEES OWN CASE FOR THE ASSESSME NT YEAR 1998-99, WE CONFIRM THE DISALLOWANCE AND DISMISS THIS GROUND. 58. GROUND NO.1 IS THUS DISMISSED. 59. THE SECOND GROUND HAS BEEN TAKEN WITHOUT PREJUD ICE TO FIRST GROUND. IT IS TO THE EFFECT OF THAT THE CIT(A) ERRED IN TREATING THE ENTIRE PREMIUM AS COST OF BUILDING AND PLANT AND ALLOWING DEPRECIATION THEREON. THIS GROUND IS ALSO DISMISSED IN LINE WITH OUR DECISION TO GROUND NO.2 OF ASSESSMENT YEAR 1998-99 ABOVE. 60. GROUND NOS.3 TO 6 RELATE TO CONFIRMATION OF ENH ANCEMENT IN THE VALUE OF CLOSING STOCK BY AN AMOUNT OF ` .3,47,35,561. 61. LEARNED REPRESENTATIVES AGREE THAT THIS ISSUE I S REQUIRED TO BE REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJU DICATION IN THE LIGHT OF , INTER ALIA, DECISION OF A COORDINATE BENCH OF THIS TRIBUNAL, IN THE CASE OF CYANAMID AGRO LTD VS ADDITIONAL CIT ( 121 TTJ 606), WHEREIN THE COORDINA TE BENCH HAS, INTER ALIA, OBSERVED AS FOLLOWS: 19. IN OUR CONSIDERED VIEW, THE GROSS METHOD HAS GOT TO BE FOLLOWED AS PER PROVISIONS OF SECTION 145A IN CONTRAST WITH THE NET METHOD AS MANDATED UNDER THE SAID SECTION, WHICH IN OUR VIEW, WILL PUT AN END TO THE UNNECESSARY LITIGATION. ACCORDING TO OUR LIMITED UNDERSTANDING, THERE MAY N OT BE ANY SUBSTANTIAL BENEFIT OR LOSS TO THE ASSESSEE BY FOLLOWING GROSS METHOD I N RESPECT OF THE INPUTS AND THE I.T.A NO.3495/ MUM/2003 I.T.A NO.3677/ MUM/2003 I.T.A NO.5296/ MUM/2003 I.T.A NO.5176/ MUM/2003 NATIONAL ORGANIC CHEMICAL INDUSTRIES LTD., 14 INVENTORIES ETC. AS MANDATED UNDER SECTION 145A. WE ACCORDINGLY CONSIDER IT APPROPRIATE TO DIRECT THE AO TO GO THROUGH THE EXER CISE AND WORK OUT THE ADDITION OR RELIEF, AS THE CASE MAY BE, BY MAKING THE FOLLOWI NG ADJUSTMENTS IN ACCORDANCE WITH SECTION 145A READ WITH THE DECISION OF THE DEL HI HIGH COURT IN THE CASE OF MAHAVIR ALUMINIUM LTD. (SUPRA), AFTER GIVING REASON ABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE : (A) VALUE THE OPENING STOCK INCLUSIVE OF-ELEMENT O F TAXES, EVEN IF THE MODVAT CREDIT IS AVAILABLE IN RESPECT OF THE SAME. (B) DEBIT THE PURCHASES INCLUSIVE OF TAXES, EVEN IF MODVAT CREDIT IS AVAILABLE IN RESPECT OF THE SAME. (C) CREDIT THE SALES AS PER THE BILLS AND ADD THE M ODVAT CREDIT THAT HAS ACCRUED TO THE ASSESSEE IN RESPECT OF THE CONSUMPTI ON OF THE INPUTS INCLUDING IN RESPECT OF THE OPENING STOCK. (D) VALUE THE CLOSING STOCK INCLUSIVE OF ELEMENT O F TAXES WITHOUT DEDUCTION OF MODVAT CREDIT AVAILABLE TO THE ASSESSEE IN RESPECT O F THE UNUTILIZED STOCKS. IF THE MODVAT CREDIT ACCRUED ON CONSUMPTION OF INPU TS IS NOT CREDITED, THE ASSESSEE WILL GET DOUBLE DEDUCTION FOR THE TAXES PAID ON INP UTS, FIRSTLY, ON OPENING STOCK AND SECONDLY, ON EXCLUSION OF MODVAT CREDIT ACCRUIN G ON THE SAME. WE DIRECT THE AO TO GO THROUGH THE EXERCISE INDICATED ABOVE AND WO RK OUT THE CONSEQUENCES, IF ANY. WE DIRECT ACCORDINGLY. 62. WE, ACCORDINGLY, REMIT THE MATTER TO THE FILE O F THE ASSESSING OFFICER FOR FRESH ADJUDICATION, INTER ALIA, IN THE LIGHT OF THE ABOVE DECISION OF THE COORDINATE BENCH. 63. GROUND NOS. 3 TO 6 ARE THUS ALLOWED FOR STATIST ICAL PURPOSES IN THE TERMS INDICATED ABOVE. 64. GROUND NOS.7 TO 10 RELATE TO DISALLOWANCE OF RO YALTY OF ` .66,49,146 PAID TO M/S. GOECHST AG, GERMANY ARE DISMISSED AS NOT PRESS ED. 65. GROUND NO.11 IS SIMILAR TO GROUND NO.4 FOR THE ASSESSMENT YEAR 1998-99 AND IT RELATES TO THE COST OF CATALYST ISSUES. AS WAS DONE IN THE ASSESSMENT YEAR1998-99, WE RESTORE THIS ISSUE TO THE FILE OF THE AO WITH TH E SAME DIRECTION. HENCE, THIS GROUND IS TREATED AS ALLOWED FOR STATISTICAL PURPOS ES. I.T.A NO.3495/ MUM/2003 I.T.A NO.3677/ MUM/2003 I.T.A NO.5296/ MUM/2003 I.T.A NO.5176/ MUM/2003 NATIONAL ORGANIC CHEMICAL INDUSTRIES LTD., 15 66. GROUND NO.12 RELATES TO THE DISALLOWANCE OF ` .69,87,908 BEING PRIOR YEAR EXPENDITURE NET OF PRIOR YEARS INCOME. THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE IN A.Y. 1998-99. IN LINE WITH OUR DECISIO N, WHILE WE UPHOLD THE GRIEVANCE OF THE ASSESSEE IN PRINCIPLE, WE MAY ALSO CLARIFY THAT WHILE ALLOWING THE ASSESSEES CLAIM, THE AO MAY VERIFY THAT THERE IS NO DOUBLE CL AIM MADE BY THE ASSESSEE. 67. GROUND NO.12 IS THUS ALLOWED. 68. GROUND NO.13 IS THAT THE CIT (A) ERRED IN HOLDI NG THAT EXPENDITURE OF ` .69,87,908 IS NOT CRYSTALISED DURING THE YEAR RELEV ANT TO ASSESSMENT YEAR 1999- 2000 AND GROUND NO.14 IS WITHOUT PREJUDICE TO GROUN D NOS.12 AND 13, THE CIT (A) ERRED IN NOT DIRECTING THE AO TO ALLOW DEDUCTION FO R THE AFORESAID EXPENDITURE IN THE YEAR TO WHICH IT RELATES. 69. IN LINE WITH OUR DECISION IN GROUND NO.12, GROU ND NOS.13 & 14 ARE RENDERED INFRUCTUOUS. 70. GROUND NO.15 RELATES TO CONFIRMATION OF OVERRID ING COMMISSION OF ` .15,92,258 PAID DURING THE PREVIOUS YEAR TO NEERAJ CONSULTANTS. 71. IN LINE WITH OUR DECISION IN THE ASSESSMENT YEA R 1998-99, THIS GROUND IS DISMISSED. 72. GROUND NOS.16 & 17 RELATE TO EXPENDITURE ON PUR CHASE PROPERTY TIME SHARE ARE DISMISSED AS NOT PRESSED. 73. GROUND NO.18 RELATES TO CONSULTANCY AND ADVISOR Y FEES OF ` .52,73,315 FOR MODERNIZATION PROJECT. IN LINE WITH OUR DECISION I N GROUND NO.16 FOR THE ASSESSMENT I.T.A NO.3495/ MUM/2003 I.T.A NO.3677/ MUM/2003 I.T.A NO.5296/ MUM/2003 I.T.A NO.5176/ MUM/2003 NATIONAL ORGANIC CHEMICAL INDUSTRIES LTD., 16 YEAR 1998-99, AND FOR THE REASONS SET OUT THEREIN EARLIER IN THIS CONSOLIDATED ORDER, THIS GROUND IS ALLOWED. 74. GROUND NO.19 RELATES TO CONFIRMATION OF DISALLO WANCE OF ` .39,95,995 BEING PROPORTIONATE EXPENDITURE ON SUBSTANTIAL EXPANSION. IN LINE WITH OUR DECISION IN GROUND NO.16 FOR THE ASSESSMENT YEAR 1998-99, AND FOR THE REASONS SET OUT THEREIN EARLIER IN THIS CONSOLIDATED ORDER, THIS GROUND IS ALLOWED. 75. GROUND NO.20 RELATES TO TDS CREDIT AT ` .1,66,56,956 IS DISMISSED AS NOT PRESSED. 76. GROUND NO.21 RELATES TO INTEREST UNDER SECTION 201(1A) IS DISMISSED AS NOT PRESSED. 77. GROUND NOS.22 TO 25 ARE GENERAL IN NATURE. THE REFORE, SAME ARE DISMISSED AS GENERAL IN NATURE. THE APPEAL IS THUS PARTLY ALLOWE D IN THE TERMS INDICATED ABOVE. ITA NO. 5176/M/03; ASSESSMENT YEAR 1999-2000 78. WE NOW TAKE UP ASSESSING OFFICERS CROSS APPEAL FOR THE ASSESSMENT YEAR 1999-2000. 79. IN GROUND NO.1, THE ASSESSING OFFICER IS AGGRIE VED THE CIT (A)S DELETING THE DISALLOWANCE OF ` .1,85,08,947 BEING INTEREST ON ADVANCE MADE TO M/S. ORBIT FINANCE LTD & OTHER PARTIES. 80. HAVING CONSIDERED THE RIVAL CONTENTIONS AND HAV ING PERUSED THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSING OFFICER HAS DISA LLOWED NOTIONAL INTEREST PAID ON ADVANCE TO ORBIT FINANCE BUT THE CIT (A) DELETE D THE DISALLOWANCE FOLLOWING THE DECISION OF HIS PREDECESSOR FOR THE ASSESSMENT YEAR S 1993-94 TO 1997-98. THE I.T.A NO.3495/ MUM/2003 I.T.A NO.3677/ MUM/2003 I.T.A NO.5296/ MUM/2003 I.T.A NO.5176/ MUM/2003 NATIONAL ORGANIC CHEMICAL INDUSTRIES LTD., 17 ORDERS OF THE CIT (A), HAS SINCE BEEN UPHELD BY THE TRIBUNAL DELETING THE DISALLOWANCE. IN VIEW OF THIS, RESPECTFULLY FOLLOW ING THE DECISION OF THE TRIBUNAL (SUPRA), WE UPHOLD THE ORDER OF THE CIT (A) AND DEC LINE TO INTERFERE. 81. GROUND NO.1 IS THUS DISMISSED. 82. IN GROUND NO.2, THE REVENUE HAS TAKEN THE FOLLO WING GRIEVANCE: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) ERRED IN DELETING THE DISALLOWANCE OF RS 13,53, 36,928 IN RESPECT OF INTEREST ON CAPITAL WORK IN PROGRESS 83. HAVING CONSIDERED THE RIVAL CONTENTIONS AND HAV ING PERUSED THE MATERIAL ON RECORD, WE FIND THAT THIS ISSUE IS COVERED AGAINST THE REVENUE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 1992-93 TO 1997-98. RESPECTFULLY FOLLOWING THE SAME, THIS GROUND IS DIS MISSED. 84. IN GROUND NO.3, THE ASSESSING OFFICER HAS TAKEN THE FOLLOWING GRIEVANCE: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS 2,4 8,20,708 BEING AMOUNT OF EXPENDITURE ON MAKING A NEW ROAD, WATER PIPE LINE A ND OVERHEAD TRANSMISSION LINES WHICH WERE TO BE PROPERTY OF MID C AND MSEB. 85. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING P ERUSED THE MATERIAL ON RECORD, WE FIND THAT SIMILAR ISSUE HAD COME UP FOR CONSIDERATION IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 1993-94 TO 1997-98, W HEREIN, THE ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE. LEARNED REPRESENTATIV ES FAIRLY AGREE THAT THIS ISSUE IS AS SUCH COVERED AGAINST THE ASSESSEE BY DECISIONS O F THE COORDINATE BENCH IN ASSESSEES OWN CASE. THEREFORE, RESPECTFULLY FOLLO WING THE ORDERS OF THE TRIBUNAL, WE REVERSE THE DECISION OF THE CIT (A) AND RESTORE THAT OF THE ASSESSING OFFICER. I.T.A NO.3495/ MUM/2003 I.T.A NO.3677/ MUM/2003 I.T.A NO.5296/ MUM/2003 I.T.A NO.5176/ MUM/2003 NATIONAL ORGANIC CHEMICAL INDUSTRIES LTD., 18 86. GROUND NO.4 IS THUS ALLOWED. 87. GROUND NO.5 READS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS 36,67,58, 988 MADE BY THE AO WHO HELD THAT EXPENDITURE INCURRED UNDER THE VOLUNTARY RETIREMENT SCHEME OF THE ASSESSEE COMPANY FOR ITS EMPLOYEES WAS OF CAPIT AL NATURE AND WAS NOT ALLOWABLE AS IT HAS RESULTED IN A BENEFIT OF ENDURI NG NATURE. 88. BRIEFLY STATED THE MATERIAL FACTS ARE LIKE THI S. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF RS 36,67 ,58,988 ON ACCOUNT OF THE COMPENSATION PAID TO THE EMPLOYEES OF THE ASSESSEE COMPANY UNDER VOLUNTARY RETIREMENT SCHEME. THE ASSESSING OFFICER DISALLOW ED THE SAME, HOLDING THAT THE VOLUNTARY RETIREMENT SCHEME BRINGS ABOUT AN ENDURIN G BENEFIT TO THE ASSESSEE AND, THEREFORE, TO BE TREATED AS CAPITAL EXPENDITURE. A GGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE CIT (A) FO LLOWING THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. SI MPSON AND CO.OP.LTD, 230 ITR 703, DIRECTED THE AO TO DELETE THE DISALLOWANCE. A GGRIEVED, THE ASSESSING OFFICER IS IN APPEAL BEFORE US. 89. HAVING CONSIDERED THE RIVAL CONTENTIONS AND HAV ING PERUSED THE MATERIAL ON RECORD, WE DO NOT FIND ANY INFIRMITY IN THE ORDER O F THE LEARNED CIT (A). WE ALSO FIND THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASS ESSEE BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF BHOR INDUSTRI ES LTD., 264 ITR 180. RESPECTFULLY FOLLOWING THE SAME, THIS GROUND OF THE REVENUE IS ALSO DISMISSED. 90. GROUND NO.5 IS ALSO DISMISSED. I.T.A NO.3495/ MUM/2003 I.T.A NO.3677/ MUM/2003 I.T.A NO.5296/ MUM/2003 I.T.A NO.5176/ MUM/2003 NATIONAL ORGANIC CHEMICAL INDUSTRIES LTD., 19 91. GROUND NO.6 RELATES TO DELETION OF DISALLOWANCE OF RS 9,42,506 ON ACCOUNT OF WRITE OFF OF LOANS AND ADVANCES. 92. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED WRITE OFF OF LOANS AN D ADVANCES AMOUNTING TO RS 9,50,506 BUT THESE ARE NOT BAD DEBTS AS THE SAME AR E NOT TRADE DEBTS AND SINCE THE ASSESSEE IS NOT IN THE BUSINESS OF MONEY LENDING. T HESE WRITE OFFS WERE IN THE NATURE OF PARTIAL WRITE OFF OF HOUSING LOAN TO EMPLOYEE , WRITE OFF OF SECURITY DEPOSITS INSURANCE CLAIMS LOANS RECOVERABLE FROM EX EMPLOYEE S AND MISCELLANEOUS RECOVERABLES ETC. WHEN MATTER WAS CARRIED IN APPEAL , CIT(A) GAVE PARTIAL RELIEF IN RESPECT OF THIS CLAIM FOR DEDUCTION BY OBSERVING TH AT AS ADVANCES WERE GIVEN DURING THE COURSE OF NORMAL BUSINESS AND LOSS WAS INCIDENT AL TO THE BUSINESS, THE SAME IS ALLOWABLE UNDER SECTION 28. THE ASSESSING OFFICER I S NOT SATISFIED AND IS IN APPEAL BEFORE US. 93. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING P ERUSED THE MATERIAL ON RECORD, WE SEE NO REASONS TO INTERFERE IN THE CONCL USIONS ARRIVED AT BY THE CIT(A) ON THIS ISSUE EITHER. LEARNED DEPARTMENTAL REPRESENTAT IVE COULD NOT POINT OUT A SINGLE INSTANCE WHERE THE ADVANCES WRITTEN OFF WERE NOT MA DE DURING THE COURSE OF , AND AS INCIDENTAL TO, BUSINESS OF THE ASSESSEE. AS LONG AS AMOUNTS WRITTEN OFF HAVE BEEN IN THE COURSE OF, AND AS INCIDENTAL TO, ASSESSEES BUS INESS ACTIVITIES, THE LOSS SO INCURRED IS ADMISSIBLE AS BUSINESS LOSS. THE CIT(A) WAS, THE REFORE, QUITE JUSTIFIED IN HIS CONCLUSIONS AND THE SAME DONOT CALL FOR ANY INTERFE RENCE FROM US. WE DECLINE TO INTERFERE IN THE MATTER. 94. GROUND NO. 6 IS THUS DISMISSED. 95. THE APPEAL OF THE ASSESSING OFFICER IS THUS PAR TLY ALLOWED IN THE TERMS INDICATED ABOVE. I.T.A NO.3495/ MUM/2003 I.T.A NO.3677/ MUM/2003 I.T.A NO.5296/ MUM/2003 I.T.A NO.5176/ MUM/2003 NATIONAL ORGANIC CHEMICAL INDUSTRIES LTD., 20 96. TO SUM UP, ALL THE APPEALS ARE PARTLY ALLOWED IN THE TERMS INDICATED IN THE RESPECTIVE ORDERS ABOVE. PRONOUNCED IN THE OPEN COURT ON 29 TH APRIL, 2011 SD/- (N.V.VASUDEVAN) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) MUMBAI, DATED 29 TH APRIL, 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),XXIV, MUMB AI 4. COMMISSIONER OF INCOME TAX, CITY-VII , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH F, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI