Addl.CIT, Special Range-3, New Delhi V. Dawat Foods Ltd., Gurgaon

ITA 5345/DEL/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 2885 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 10-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ROHIT JAIN
• Keywords: Business expenditure; Earning of tax free income; Rule 8D
• Section: 14A; 80IB; 37(1); 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SH. AMIT SHUKLA, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCING) ITA NO. 5345/DEL/2018 : ASSTT. YEAR : 2011-12 ITA NO. 5346/DEL/2018 : ASSTT. YEAR : 2012-13 ITA NO. 5347/DEL/2018 : ASSTT. YEAR : 2013-14 ITA NO. 5348/DEL/2018 : ASSTT. YEAR : 2014-15 ADDL. CIT, SPECIAL RANGE-3, NEW DELHI-110002 VS DAWAT FOODS LTD., UNIT NO. 134, 1 ST FLOOR, RECTANGLE-1, SAKET DISTRICT CENTRE, NEW DELHI-110017 (APPELLANT) (RESPONDENT) PAN NO. AA CCD3698N ASSESSEE BY : SH. ROHIT JAIN, ADV. REVENUE BY : SH. MAHESH THAKUR, SR. DR DATE OF HEAR ING: 05 . 08 .20 2 1 DATE OF PRONOUNCEMENT: 22 .10 .20 2 1 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEALS HAVE BEEN FILED BY THE REVENUE AGAINST THE ORDERS OF LD. CIT(A)-3, DELHI DATED 18. 05.2018 AND 21.05.2018. 2. SINCE, THE ISSUES INVOLVED IN ALL THESE APPEALS ARE IDENTICAL, THEY WERE HEARD TOGETHER AND BEING ADJUD ICATED BY A COMMON ORDER. ITA NOS. 5345 TO 5348/DEL/2018 DAWAT FOODS LTD. 2 DEDUCTION U/S 80IB(11A): 3. THE ASSESSEE IS A DOMESTIC COMPANY ENGAGED IN TH E INTEGRATED BUSINESS OF HANDLING, PROCESSING, STORAG E AND TRANSPORTATION OF FOOD GRAINS I.E. PADDY AND RICE A ND THEREAFTER SELLING THE SAME IN THE DOMESTIC AND OVERSEAS MARKE T. THE ASSESSEE COMPANY CLAIMED DEDUCTION U/S 80IB(11A) OF THE INCOME TAX ACT, 1961 AMOUNTING TO RS.XXXX DURING THE RELEVANT ASSESSMENT YEAR. 4. THE COMPANY HAD SET UP THE UNDERTAKING IN THE A. Y. 2008- 09 AT INDUSTRIAL AREA, MANDIDEEP, MADHYA PRADESH. T HE MAIN CONTENTION OF THE ASSESSING OFFICER IN DISALLOWING THE DEDUCTION CLAIMED U/S 80IB(11A) IS THAT THE PREDOMINANT ACTI VITY OF THE ASSESSEE IS MILLING/DE-HUSKING OF PADDY, WHICH DOES NOT CONSTITUTES A MANUFACTURING ACTIVITY, AND IS BEYO ND THE SCOPE OF SECTION 80IB(11A) AND THAT THE ACTIVITY OF STORA GE AND TRANSPORTATION UNDERTAKEN BY THE ASSESSEE ARE ONLY INCIDENTAL TO THE MAIN MANUFACTURING ACTIVITY OFF THE ASSESSEE. I T IS ALSO A MATTER OF RECORD THAT THE SIMILAR ADDITION HAS BEEN DELETED BY THE LD. CIT(A) FOR THE A.YS. 2009-10 AND 2010-11. 5. AT THE OUTSET, IT WAS SUBMITTED THAT THE AFORESA ID ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE O RDER OF THE CO-ORDINATE BENCH OF TRIBUNAL IN ASSESSES OWN CASE FOR THE A.Y. 2009-10 IN ITA NO. 4042/DEL/2013 WHEREIN THE TRIBUN AL, FOLLOWING THE ORDER OF THE CO-ORDINATE BENCH IN THE CASE OF A GROUP COMPANY, LT FOODS LTD. FOR THE A.Y. 2007-08 I N ITA NO. 4046/DEL/2013, ALLOWED DEDUCTION CLAIMED U/S 80IB(1 1A) OF THE ACT AND DISMISSED THE APPEAL OF THE REVENUE. ITA NOS. 5345 TO 5348/DEL/2018 DAWAT FOODS LTD. 3 THE RELEVANT FINDINGS OF THE TRIBUNAL, IS EXTRACTED HEREUNDER: 24. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS PERTINENT TO NO TE THAT THE SECTION 80IB (11A) OF THE ACT MANDATES THAT THE UNDERTAKING OF THE ASSESSEE SHOULD BE ENGAGED IN AN INTEGRATED BUSINESS AND T HE ASSESSEE HAS DEMONSTRATED BEFORE US THAT THE COMBINING OR COORDI NATING OF THE THREE ELEMENTS I.E. HANDLING, STORAGE AND TRANSPORT ATION OF FOOD GRAINS IS HARMONIOUS INTERRELATED AS WHOLE ACTIVITY AND THUS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB(11A) OF THE ACT. T HE DECISION IN CASE OF DILIP KUMAR (SUPRA) HELD THAT EXEMPTION NOT IFICATION SHOULD BE INTERPRETED STRICTLY; THE BURDEN OF PROVING APPL ICABILITY WOULD BE ON THE ASSESSEE TO SHOW THAT HIS CASE COMES WITHIN THE PARAMETERS OF THE EXEMPTION CLAUSE OR EXEMPTION NOTIFICATION. WHEN THERE IS AMBIGUITY IN EXEMPTION NOTIFICATION WHICH IS SUBJEC T TO STRICT INTERPRETATION, THE BENEFIT OF SUCH AMBIGUITY CANNO T BE CLAIMED BY THE SUBJECT/ASSESSEE AND IT MUST BE INTERPRETED IN FAVOUR OF THE REVENUE. IN THE PRESENT ASSESSEES CASE, THE ASSESS EE HAS DEMONSTRATED THAT THE ASSESSEE FULFILLED THE PARAME TERS OF THE EXEMPTIONS. BESIDES THIS, IN CASE OF GROUP COMPANY OF ASSESSEE I.E. L T FOODS LTD. FOR A.Y. 2007-08 IN ITA NO. 4046/DEL /2013, THE TRIBUNAL ON IDENTICAL FACTS ALLOWED DEDUCTION CLAIM ED UNDER SECTION 80IB (11A) OF THE ACT. THE TRIBUNAL HELD AS UNDER: 53. AS WE HAVE STATED ABOVE, WE WILL HAVE TO TEST THE EXPRESSION HANDLING , OCCURRING IN SECTION 80IB(1 1A) OF THE ACT ON THE TOUCHSTONE OF THE OBJECT SOUGHT TO BE AC HIEVED THROUGH SUCH INCENTIVE, NAMELY, ACHIEVING THE ENHAN CED FOOD SECURITY BY WAY OF GREATER EFFICIENCY IN THE GRAIN MANAGEMENT SYSTEM BY MINIMIZING THE POST-HARVEST FOOD GRAIN LO SSES. IT IS AN UNDENIABLE FACT THAT TRADITIONALLY POUNDING WAS THE WAY IN WHICH THE PADDY WAS CONVERTED TO THE FORM OF RICE B Y SEPARATING THE HUSK AND BRAWN. IT IS ALSO COMMON KN OWLEDGE ITA NOS. 5345 TO 5348/DEL/2018 DAWAT FOODS LTD. 4 THAT IN THAT PROCESS THERE USED TO BE QUANTITATIVE AND QUALITATIVE LOSSES, CAUSED BY THE BREAKING OF THE GRAINS ETC. BY DE-HUSKING THE PADDY AND CONVERTING IT INTO RICE , NO NEW ARTICLE IS BROUGHT INTO EXISTENCE WHICH IS QUALITAT IVELY DIFFERENT FROM THE INPUTS, BUT IS THE SIMPLE PROCESS OF DE-HU SKING THE PADDY TO OBTAIN THE RICE. THIS CONVERSION MEETS THE OBJECTIVE OF MINIMIZING THE POST-HARVEST LOSSES WHICH WOULD L EAD TO THE GREATER EFFICIENCY OF THE FOOD GRAIN MANAGEMENT SYS TEM AND CONSEQUENTLY TO THE ENHANCED FOOD SECURITY. IN COMM ISSIONER OF CUSTOMS (IMPORT) VS. DILIP KUMAR AND COMPANY & O RS. CA NO. 3327 OF 2007 (SC), THE HONBLE SUPREME COURT HE LD THAT WHILE INTERPRETING THE TAXING STATUTES, THE APPLICA BILITY OF THE SECTION HAS TO BE SEEN IN STRICT SENSE, AND ONCE TH E SECTION IS FOUND TO BE APPLICABLE, THEN IT HAS TO BE CONSTRUCT ED LIBERALLY. SINCE UNDOUBTEDLY THE PROVISIONS OF SECTION 80IB(11 A) OF THE ACT ARE APPLICABLE TO THE ACTIVITIES OF THE ASSESSE E LIKE CLEARING, STEAMING, SOAKING, DRYING, POLISHING AND GRINDING IT CAN ALSO BE NOT DENIED THAT DE-HUSKING THE PADDY WO ULD SIGNIFICANTLY ENHANCE THE LIFE OF THE FOOD GRAIN, T HEREBY REDUCES THE LOSS OF FOOD GRAIN AND CONTRIBUTES TO T HE PRESERVATION OF FOOD GRAINS. IN SUCH AN EVENT, WE A RE UNABLE TO UNDERSTAND HOW THIS PARTICULAR PROCESS DOES NOT FIT IN THE EXPRESSION HANDLING. FOR THESE REASONS, WE ARE OF THE CONSIDERED OPINION THAT THE DE-HUSKING OF THE PADDY TO CONVERT IT INTO RICE IS ALSO AN INTEGRAL PART OF RE DUCING THE POST-HARVEST FOOD GRAIN LOSS. 63. WE, ACCORDINGLY FIND THAT THE ASSESSEE CANNOT BE DENIED THE DEDUCTION UNDER SECTION 80IB(11A) OF THE ACT EI THER IN RESPECT OF THE ACTIVITIES CONDUCTED BY THE ASSESSEE TO MEET THE DEMAND OF THE SECTION, NAMELY, DERIVING INCOME FROM THE INTEGRATED BUSINESS OF HANDLING, STORAGE AND TRANSP ORTATION OF FOOD GRAINS OR FOR NON-COMPLIANCE WITH THE CONDITIO NS DEPLETED ITA NOS. 5345 TO 5348/DEL/2018 DAWAT FOODS LTD. 5 UNDER SECTION 80IB(2) OF THE ACT. WE DO NOT FIND AN YTHING ILLEGALITY ARE REGULARITY EITHER IN THE REASONING O R THE CONCLUSIONS REACHED BY THE LD. CIT(A) ON THIS ASPEC T, AND WHILE CONFIRMING THE SAME FIND THE GROUNDS NUMBER 1 TO 3 OF REVENUES APPEAL DEVOID OF MERITS AND RELIABLE TO B E DISMISSED. THUS, THE CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF D EDUCTION UNDER SECTION 80IB(11A) OF THE ACT. IT IS PERTINENT TO NO TE THAT ALL THE CONDITIONS WHICH HAVE BEEN STIPULATED IN THE STATUT E HAVE BEEN FULFILLED I.E. ALL THE THREE ACTIVITIES OF HANDLING , STORING AND TRANSPORTATION HAVE BEEN UNDERTAKEN ON AN INTEGRATE D BASIS BY THE ASSESSEE. THUS, GROUND NO. 3 TO 5 OF REVENUES APPE AL ARE DISMISSED. 25. IN RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND THE APPEAL FOR THE REVENUE IS DISMISSED. 6. FOR THE SAKE OF COMPLETENESS, THE DETAILED FINDI NGS OF THE TRIBUNAL RENDERED IN THE CASE OF LT FOODS LTD. FOR THE A.Y. 2007-08 IN ITA NO. 4046/DEL/2013 [REFER PAGES 20 TO 54 OF THE PB] IS EXTRACTED HEREUNDER: IN PARA 28 TO 36, THE TRIBUNAL DISCUSSED THE INTENT FOR INTRODUCTION OF DEDUCTION UNDER SECTION 80IB(11A) O F THE ACT AND HELD AS UNDER: 34. ON A CAREFUL UNDERSTANDING OF THE ABOVE, WE AL SO HAVE NO HESITATION TO HOLD THAT THE BENEFICIAL PROVISIONS O F SECTION 80IB(11A) OF THE ACT WAS INTRODUCED TO ENCOURAGE TH E DEVELOPMENT OF INFRASTRUCTURE FACILITIES IN THE PRI VATE SECTOR IN THE DIRECTION OF INTEGRATED TRANSACTION OF TRANSPOR TATION, HANDLING AND STORAGE AIMING AT THE ENHANCED FOOD SE CURITY BY ITA NOS. 5345 TO 5348/DEL/2018 DAWAT FOODS LTD. 6 WAY OF ACQUIRING GREATER EFFICIENCY IN THE GRAIN MA NAGEMENT SYSTEM AND MINIMIZING THE POST-HARVEST FOOD GRAIN L OSSES. THERE IS A PURPOSE OF PROVIDING INCENTIVE TO THE PR IVATE OPERATORS TO CREATE AND ENHANCE THE INFRASTRUCTURAL FACILITIES IN HANDLING, STORAGE AND TRANSPORTATION IN RESPECT OF FOOD GRAINS IS STRETCHING THE FINANCIAL FOOD SECURITY THROUGH ACQU IRING GREATER EFFICIENCY IN THE GRAIN MANAGEMENT SYSTEM AND MINIM IZE THE POSTHARVEST FOOD GRAIN LOSSES. 35. AS A MATTER OF FACT, AFTER REFERRING TO THE PR OVISIONS UNDER SECTION 80IB(11A) OF THE ACT, THE SPEECH OF THE FIN ANCE MINISTER, CBD TO CIRCULAR NUMBER 14 OF 2001 AND ALS O THE DISCUSSION MADE IN THE SAMPAT IYENGARS LAW OF INCO ME TAX 10TH EDITION, LEARNED ASSESSING OFFICER OBSERVED THAT TH E PURPOSE BEHIND THE ENACTMENT OF SECTION 80IB(11A) OF THE AC T WAS ENHANCED FOOD SECURITY, BECAUSE A LARGE QUANTITY OF FOOD GRAINS WAS ROTTING IN THE COUNTRY EVERY YEAR BECAUSE OF IN ADEQUATE STORAGE FACILITY, AND THAT TO ENHANCE FOOD SECURITY AND AGRICULTURAL DEVELOPMENT, UPGRADATION AND MODERNIZA TION OF INFRASTRUCTURE FOR STORAGE, HANDLING AND TRANSPORTA TION OF FOOD GRAINS IN ORDER TO MINIMIZE THE POST-HARVEST FOOD G RAIN LOSSES BY CREATING INFRASTRUCTURE, THEREFOR. 36. IN THIS CONTEXT, IT IS NOT OUT OF PLACE TO NOT E THE OBSERVATIONS OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. SHANKAR K. BHANAGE 25 TAXMANN.COM 310, TO T HE EFFECT THAT THE LITERAL INTERPRETATION OF WORDS 'INTEGRATE D BUSINESS OF HANDLING, STORAGE AND TRANSPORTATION OF FOOD GRAINS ' WILL NOT LEAD TO ANY ABSURDITY OR PRODUCE ANY MANIFESTLY UNJ UST RESULT; THAT THE LEGISLATIVE INTENT IS NOT TO ENCOURAGE TRA NSPORTATION OR ITA NOS. 5345 TO 5348/DEL/2018 DAWAT FOODS LTD. 7 HANDLING OF FOOD GRAINS BUT THE LEGISLATIVE INTENT IS TO ENCOURAGE CONSTRUCTION OF GODOWNS AND WAREHOUSES WI TH A VIEW TO PROVIDING STORAGE OF FOOD GRAINS. IF WE CONSIDER THE ENTIRE COMBAT OF THE SCHEME RELATING TO THE TAX HOLIDAY PR OVIDED BY THE LEGISLATURE, WE FIND THAT THE DEDUCTIONS ARE AV AILABLE UNDER VARIOUS PROVISIONS WHEN THE ASSESSEE HAS CONTRIBUTE D SOMETHING TOWARDS THE INFRASTRUCTURE DEVELOPMENT OF THE COUNT RY, BUT THE MAIN PURPOSE OF BRINGING THIS PROVISION IS CONSTRUC TION OF GODOWNS SPECIFICALLY FOR STOCKING FOOD GRAINS FOR G REATER EFFICIENCY IN THE GRAIN MANAGEMENT SYSTEM AND MINIM IZE POST- HARVEST FOOD GRAIN LOSSES. THEREAFTER, IN PARA 39 TO 43, THE TRIBUNAL EXAMINED THE ACTIVITIES UNDERTAKEN BY LT FOODS LTD. IN THE INTEG RATED BUSINESS OF HANDLING, STORAGE AND TRANSPORTATION OF FOOD GRAINS AND OBSERVED AS UNDER: 39. IN THIS CONTEXT, IT IS NECESSARY TO LOOK AT TH E ACTIVITIES CONDUCTED BY THE ASSESSEE IN THEIR INTEGRATED BUSIN ESS OF HANDLING, STORAGE AND TRANSPORTATION OF THE FOOD GR AINS IN FURTHERANCE OF THE ABOVE OBJECT OF ENHANCING THE FO OD SECURITY BY ACHIEVING THE GREATER EFFICIENCY IN THE GRAIN MA NAGEMENT SYSTEM AND MINIMIZING THE POST-HARVEST FOOD GRAIN L OSSES. IF THE UNIT OF THE ASSESSEE AT BAHALGARH STRIVES TO AC HIEVE THESE OBJECTIVES, IT WOULD CERTAINLY BE ENTITLED TO THE B ENEFIT OF DEDUCTION UNDER SECTION 80IB(11A) OF THE ACT. WE AR E OF THE CONSIDERED OPINION THAT FOR THIS PURPOSE WE WILL HA VE TO KEEP IT IN MIND THAT THE INCENTIVE IS PROVIDED FOR THE INTE GRATED BUSINESS OF HANDLING, STORAGE AND TRANSPORTATION OF FOOD GRAINS WITH THIS PARTICULAR AVOWED OBJECT AND, THEREFORE, THERE SHALL ITA NOS. 5345 TO 5348/DEL/2018 DAWAT FOODS LTD. 8 NOT BE ANY COMPARTMENTALIZATION OF THESE ACTIVITIES FOR THE PURPOSE OF ALLOWING THE DEDUCTION. 40. IT COULD BE SEEN FROM THE RECORD THAT THE ACTIV ITIES OF THE ASSESSEE INCLUDE PURCHASING AND TRANSPORTING PADDY, STORING PADDY, PROCESSING THE PADDY INTO RICE, HANDLING THE PADDY DURING THESE PROCESSES AND THEREAFTER SELLING THE R ICE IN THE DOMESTIC AND OVERSEAS MARKETS; THAT THE ASSESSEE HA D SET UP AN UNDERTAKING FOR HANDLING AND STORAGE OF THE FOOD GRAINS AND THAT APART FROM DE-HUSKING OF THE PADDY FOR THE PUR POSE OF RICE, SUCH PROCESSING/HANDLING/ STORAGE/ TRANSPORTATION I NVOLVES THE CLEANING, STEAMING, SOAKING, DRYING, POLISHING, GRI NDING AND THEREAFTER PACKING AND MARKETING; THAT SUCH PROCESS ES DONE BY THE ASSESSEE ON THE PADDY AND ENHANCE THE LIFE OF T HE FOOD GRAIN , SIGNIFICANTLY REDUCES LOSS OF FOOD GRAIN AN D SIGNIFICANTLY CONTRIBUTES TO AGRICULTURAL DEVELOPMENT OF THIS PRO DUCT; AND THAT ALL THESE ACTIVITIES ARE PART OF THE TREATMENT OF PADDY WHICH IS IN ESSENCE DE-HUSKING THE RICE AND TREATMENT CAR RIED OUT BY THE ASSESSEE ARE PART OF THE AGRICULTURAL OPERATION S AND BOTH THE RICE AND ASK CONTINUE TO REMAIN FOOD GRAIN AND CONTINUE TO REMAIN AGRICULTURAL PRODUCTS. 41. ORDERS OF THE AUTHORITIES BELOW MADE REFERENCE TO AND EXTRACTED THE LEGAL OPINION GIVEN BY SHRI PORUSFERR ACK KAKA. THE ACTIVITIES OF THE ASSESSEE WITH REFERENCE TO WH ICH THE LEGAL OPINION WAS GIVEN CLEARLY ESTABLISHES /CORROBORATE THE SAID FACT ONLY. ACCORDING TO ASSESSEE, THEY ARE CONDUCTING AL L THE NECESSARY ACTIVITIES FROM COLLECTION OF THE PADDY F ROM THE FIELDS/MANDI TILL THEY ARE MADE READY FOR HUMAN CON SUMPTION BY PLACING THEM IN THE MARKETS, AND MORE PARTICULARLY, AVOIDING ITA NOS. 5345 TO 5348/DEL/2018 DAWAT FOODS LTD. 9 THE LOSSES IN THRESHING AND WINNOWING BY BETTER MEC HANICAL METHODS, FOLLOWING SANITATION DURING DRYING, MILLIN G AND AFTER MILLING TO AVOID CONTAMINATION OF GRAINS AND PROTEC T FROM INSECTS, RODENTS AND BIRDS, USING PROPER TECHNIQUE OF PROCESSING I.E. CLEANING, PARBOILING AND MILLING, ADOPTING THE GRADING PRACTICES TO GET MORE PROFIT AND TO AVOID THE ECONO MIC LOSSES, AND USING EFFICIENT AND GOOD PACKAGING FOR STORAGE, AS WELL AS IN TRANSPORTATION, BY INVESTING MORE THAN RS.30 CRORES FOR SETTING UP OF THE ELIGIBLE UNIT AND FOR THIS PURPOSE ADVANC ED MACHINERY WITH IMPROVED TECHNOLOGY WAS INSTALLED FOR EFFICIEN TLY HANDLING FOOD GRAINS AND TO AVOID ANY POST-HARVEST LOSSES, D EVELOPED HUGE STORAGE CAPACITY TO HANDLE PADDY STOCK OF MORE THAN 1,50,000 METRIC TON (MT) AND 70,000 MT OF RICE IN O RDER TO BRING EFFICIENCY IN THE GRAIN MANAGEMENT SYSTEM AND INCURRING SIGNIFICANT EXPENDITURE TO FACILITATE TRANSPORTATIO N OF FOOD GRAINS BY WAY OF ACQUIRING TRUCKS, TRACTORS AND TROLLEYS A ND HAS ALSO HIRED TRUCKS FOR THE PURPOSES OF CARRYING FOOD GRAI NS FROM THE FARMERS AND MANDIS TO ITS STORAGE BLOCKS AND THEREA FTER TO THE MARKETS, FOLLOWED BY UPGRADATION AND MODERNIZATION OF INFRASTRUCTURE FOR HANDLING OF FOOD GRAINS IN ORDER TO BRING GREATER EFFICIENCY IN THE STORAGE AND GRAIN MANAGEM ENT SYSTEM AND MINIMIZE POST-HARVEST FOOD GRAIN LOSSES. ASSESS EE ALSO BROUGHT IT TO THE NOTICE OF THE LEARNED ASSESSING O FFICER THAT THE SPECIAL AUDITORS IN THE REPORT AT PAGES NUMBER IS 3 0 AND 31 PART II VOLUME 5 OBSERVED THAT THE CONDITION THAT THE AS SESSEE SHOULD BE ENGAGED IN THE BUSINESS OF HANDLING, STOR AGE AND TRANSPORTATION OF FOOD GRAINS WAS FULFILLED. 42. REVENUE DOES NOT DISPUTE ANY OF THE ACTIVITIES CARRIED BY THE ASSESSEE OR INSTALLING THE MACHINERY PER TREATM ENT AND ITA NOS. 5345 TO 5348/DEL/2018 DAWAT FOODS LTD. 10 PROCESSING OF THE PADDY, SETTING UP OF STORAGE FACI LITIES OR HIRING OF TRUCKS FOR TRANSPORTATION OF THE PADDY FROM THE FIELDS/MANDI TO THE STORAGE AND TREATMENT FACILITY AND, RICE FRO M THERE TO THE MARKETS. IN FACT, THE ASSESSING OFFICER MADE A REMA RK IN THE ASSESSMENT ORDER THAT SIMPLY BECAUSE SOME PART OF T HE ASSESSEES BUSINESS COINCIDES WITH THE PART OF THE PROVISION, HE CANNOT BE ALLOWED TO TAKE BENEFIT OF SOMETHING WHIC H WAS NEVER THE INTENTION OF THE LEGISLATURE. IT GOES WITHOUT S AYING THAT THE ACTIVITIES LIKE COLLECTION OF THE PADDY FROM THE FI ELDS/MANDI TILL THEY ARE MADE READY FOR HUMAN CONSUMPTION BY PLACIN G THEM IN THE MARKETS, AND MORE PARTICULARLY, AVOIDING THE LO SSES IN THRESHING AND WINNOWING BY BETTER MECHANICAL METHOD S, FOLLOWING SANITATION DURING DRYING, MILLING AND AFT ER MILLING TO AVOID CONTAMINATION OF GRAINS AND PROTECT FROM INSE CTS, RODENTS AND BIRDS, USING PROPER TECHNIQUE OF PROCESSING I.E . CLEANING, PARBOILING AND MILLING, ADOPTING THE GRADING PRACTI CES TO GET MORE PROFIT AND THAN RS.30 CRORES FOR SETTING UP OF THE ELIGIBLE UNIT AND FOR THIS PURPOSE ADVANCED MACHINERY WITH I MPROVED TECHNOLOGY WOULD COINCIDE WITH THE PROVISION. IN PARA 44 TO 49, THE TRIBUNAL DEALT WITH THE MEANI NG OF EXPRESSION HANDLING AND HELD THAT THE ACTIVITIES INVOLVING CLEANING, STEAMING, SOAKING, DRYING, POLISHING, GRI NDING ETC. CLEARLY FALL WITHIN THE EXPRESSION HANDLING AS CO NTEMPLATED UNDER SECTION 80IB(11A) OF THE ACT BY OBSERVING AS UNDER: 44. WHILE THERE IS NO PROBLEM IN UNDERSTANDING THE EXPRESSIONS LIKE STORAGE AND TRANSPORT, THE EXPRESSION HANDLIN G HAS TO BE UNDERSTOOD IN THE CONTEXT OF THE INTEGRATED BUSINES S OF HANDLING, STORAGE AND TRANSPORTATION OF FOOD GRAINS . ACCORDING ITA NOS. 5345 TO 5348/DEL/2018 DAWAT FOODS LTD. 11 TO THE LD. DR HANDLING ANSWERS CERTAIN DESCRIPTION WERE ACCORDING TO THE ASSESSEE THEIR ACTIVITIES FITTING THE DESCRIPTION OF HANDLING. IN THE ABSENCE OF ANY LEGISLATIVE CLAR IFICATION AS TO PRECISELY WHICH ACTIVITIES WOULD AMOUNT TO HANDLING , AND WHEN THE MEANING OF HANDLING IS A LEFTY TO BE INTERPRETE D CONTEXT SURELY, IT IS NECESSARY TO MEET SOME CONCRETENESS O N THIS ASPECT AS AGAINST IMAGINATION. NO DOUBT THE ACTIVITIES ENU MERATED BY THE LD. DR TOO ANSWER THE DESCRIPTION OF HANDLING I N THE CONTEXT OF FOOD GRAINS UNDER SECTION 80IB(11A) OF THE ACT, IS NECESSARY THAT IN ORDER TO BE ELIGIBLE TO CLAIM THE BENEFITS UNDER SECTION 80IB(11A) OF THE ACT, WHETHER THE ASSESSEE IS REQUI RED TO INSTALL ALL SUCH FACILITIES OR SUCH FACILITIES AT SUIT THE CONVENIENCE OF THE ASSESSEE WHILE MEETING THE AVOWED OBJECT OF 80IB(11 A) OF THE ACT WOULD ENTITLE THE ASSESSEE TO CLAIM SUCH BENEFI T IS THE MUTE QUESTION. 45. IN PLAIN ENGLISH HANDLING INCLUDES ANY PROCESS NOT AMOUNTING TO MANUFACTURE OF THE TREATMENT OF THE PR ODUCT WITH A VIEW TO DEAL WITH THE SAME TO ACHIEVE A DESIRED P URPOSE. IN A SENSE IT INCLUDES ALL THE ACTIVITIES PREPARATORY AN D AXILLARY IN NATURE. MERELY BECAUSE THE WORD PROCESSING IS OCCUR RING IN 80IB(11A) OF THE ACT IN RESPECT OF THE FRUITS OR VE GETABLES, IT DOES NOT EXCLUDE ALL THE PROCESSES FROM MEANING OF HANDLING. AS STATED SUPRA, THERE ARE VARIOUS STEPS INVOLVED I N MINIMIZING THE POST-HARVEST LOSSES AS PER THE RECOMMENDATIONS OF THE AGRICULTURAL MARKETING INFORMATION NETWORK. IF WE E XCLUDE THE SPECIFIC ACTIVITIES LIKE STORAGE AND TRANSPORT, ALL OTHER ACTIVITIES WHICH ARE PREPARATORY, AXILLARY AND SUNDRY IN NATUR E, BUT IN FURTHERANCE OF THE AVOWED OBJECT OF BETTER GRAIN MA NAGEMENT AND MINIMIZING THE POST-HARVEST LOSSES TO ACHIEVE F OOD SECURITY ITA NOS. 5345 TO 5348/DEL/2018 DAWAT FOODS LTD. 12 WOULD NATURALLY FALL WITHIN THE CATEGORY OF HANDLIN G OTHERWISE, SUCH AN EXPRESSION WILL REMAIN REDUNDANT. IT CANNOT BE SAID THAT THE INTERMEDIARY PROCESSES UNDERTAKEN BY THE ASSESS EE IN CLEARING, STEAMING, SOAKING, DRYING, POLISHING AND GRINDING BESIDES DE-HUSKING THE PADDY WOULD SIGNIFICANTLY EN HANCE THE LIFE OF THE FOOD GRAIN , REDUCES THE LOSS OF FOOD G RAIN AND CONTRIBUTES TO THE PRESERVATION OF FOOD GRAINS. IF THOSE ACTIVITIES DO NOT ANSWER THE DESCRIPTION OF HANDLING, WE WONDE R WHAT WOULD BE HANDLING. THE WORD HAS TO BE UNDERSTOOD IN ITS CONTEXTUAL SENSE AND MERELY BECAUSE THE LEARNED ASS ESSING OFFICER DOES NOT AGREE WITH THE ASSESSEE TO INCLUDE THE MILLING OF THE PADDY IS COVERED BY HANDLING, IT DOES NOT TAKE AWAY THE OTHER ACTIVITIES FROM THE MEANING OF HANDLING, SO L ONG AS SUCH ACTIVITIES KEEP NEXUS WITH THE OBJECTIVE FOR WHICH THE BENEFIT IS INTENDED. WHETHER OR NOT THE DE-HUSKING OF PADDY WO ULD FORM PART OF THE HANDLING, WE SHALL DEAL WITH IT A LITTL E LATER. IN OUR OPINION, THE ACTIVITIES CARRIED OUT BY THE ASSESSEE CERTAINLY FORM PART OF THE EXPRESSION HANDLING. 48. THE TRIBUNAL WONDERED THAT IF THE FACILITIES CR EATED BY THE ASSESSEE ARE NOT IN THE NATURE OF HANDLING AND STOR AGE THEN WHICH ACTIVITIES WOULD FALL IN THAT CATEGORY AND AN SWERED THAT THESE ACTIVITIES HAVE TO BE CLASSIFIED AS HANDLING AND STORAGE ETC. BECAUSE IF THE MEANING WAS RESTRICTED ONLY TO CREATING OF STORES THEN LEGISLATURE WOULD HAVE MADE THE DEDUCTI ON AVAILABLE IN CASE OF WAREHOUSING FACILITIES THEN INSTEAD OF U SING THE EXPRESSION 'THE INTEGRATED BUSINESS OF HANDLING, ST ORAGE AND TRANSPORTATION OF FOOD GRAINS' THE DEDUCTION WOULD HAVE BEEN PROVIDED 'FOR THE BUSINESS OF MODERN WAREHOUSES' WH ICH HAS NOT BEEN DONE. IN SUCH CIRCUMSTANCES, WHILE REACHING TH E ITA NOS. 5345 TO 5348/DEL/2018 DAWAT FOODS LTD. 13 CONCLUSION THAT THE ASSESSEE IS ENTITLED TO DEDUCTI ON UNDER SECTION 80IB(11A) OF THE ACT, THE TRIBUNAL MADE A R EFERENCE TO THE CASE OF L.T. OVERSEAS (P.) LTD FOR THE ASSESSME NT YEAR 2004-05 AND 2005-06 IN WHICH CASE THE DEDUCTION UND ER SECTION 80IB(11A) OF THE ACT WAS ALLOWED TO THE ASSESSEE WH O WAS CONDUCTING THE ACTIVITIES WHICH WERE IDENTICAL TO T HE ACTIVITIES CONDUCTED BY THE ASSESSEE IN THE CASE OF LAXMI ENER GY (SUPRA) AND THE ASSESSEE BEFORE US. 49. FOR THAT MATTER, LD. DR ADMITTED DURING THE COU RSE OF ARGUMENTS WHILE DEALING WITH THIS ALTERNATIVE PRAYE R FOR REMAND OF THE MATTER TO THE FILE OF LEARNED ASSESSING OFFI CER THAT THE FACTS INVOLVED IN LAXMI ENERGY (SUPRA) ARE IDENTICA L TO THE FACTS INVOLVED IN THE CASE ON HAND, IN RESPECT OF THE ACT IVITIES OF THE ASSESSEE. IT IS THEREFORE, CLEAR THAT THE ASSESSEES WHO WERE CONDUCTING THE BUSINESS SIMILAR TO THE ONE DONE BY THE ASSESSEE IN THIS CASE, WERE FOUND ENTITLED TO THE BENEFIT UN DER SECTION 80IB(11A) OF THE ACT AND SUCH A VIEW IS CONSISTENT SO FAR. WITHOUT MINCING MANY WORDS, WHILE FOLLOWING THE RAT IO OF THOSE CASES, WE ARE OF THE CONSIDERED OPINION THAT THE AC TIVITIES INVOLVING THE CLEANING, STEAMING, SOAKING, DRYING, POLISHING, GRINDING ETC. ARE COVERED BY THE EXPRESSION HANDLI NG AND THE ASSESSEE IS CERTAINLY CONDUCTING SUCH ACTIVITIES WH ICH WOULD ENTITLE TO THE BENEFIT OF DEDUCTION UNDER SECTION 8 0IB(11A) OF THE ACT. IN THE SUBSEQUENT PARAS 50 TO 53, THE TRIBUNAL HELD THAT DE- HUSKING OF THE PADDY TO CONVERT IT INTO RICE IS AN INTEGRAL PART OF REDUCING THE POST-HARVEST FOOD GRAIN LOSS AS IT ENH ANCES LIFE OF FOOD GRAIN AND REDUCES THE LOSS OF FOOD GRAIN AND C ONTRIBUTES TO ITA NOS. 5345 TO 5348/DEL/2018 DAWAT FOODS LTD. 14 THE PRESERVATION OF FOOD GRAINS. THE RELEVANT OBSER VATIONS OF THE TRIBUNAL ARE REPRODUCED AS UNDER: 53. AS WE HAVE STATED ABOVE, WE WILL HAVE TO TEST THE EXPRESSION HANDLING, OCCURRING IN SECTION 80IB(11 A) OF THE ACT ON THE TOUCHSTONE OF THE OBJECT SOUGHT TO BE ACHIEV ED THROUGH SUCH INCENTIVE, NAMELY, ACHIEVING THE ENHANCED FOOD SECURITY BY WAY OF GREATER EFFICIENCY IN THE GRAIN MANAGEMENT S YSTEM BY MINIMIZING THE POST-HARVEST FOOD GRAIN LOSSES. IT I S AN UNDENIABLE FACT THAT TRADITIONALLY POUNDING WAS THE WAY IN WHICH THE PADDY WAS CONVERTED TO THE FORM OF RICE BY SEPA RATING THE HUSK AND BRAWN. IT IS ALSO COMMON KNOWLEDGE THAT TH AT IN THAT PROCESS THERE USED TO BE QUANTITATIVE AND QUALITATI VE LOSSES, CAUSED BY THE BREAKING OF THE GRAINS ETC. BY DE-HUS KING THE PADDY AND CONVERTING IT INTO RICE, NO NEW ARTICLE I S BROUGHT INTO EXISTENCE WHICH IS QUALITATIVELY DIFFERENT FROM THE INPUTS, BUT IS THE SIMPLE PROCESS OF DE-HUSKING THE PADDY TO OBTAI N THE RICE. THIS CONVERSION MEETS THE OBJECTIVE OF MINIMIZING T HE POST- HARVEST LOSSES WHICH WOULD LEAD TO THE GREATER EFFI CIENCY OF THE FOOD GRAIN MANAGEMENT SYSTEM AND CONSEQUENTLY TO TH E ENHANCED FOOD SECURITY. IN COMMISSIONER OF CUSTOMS( IMPORT) VS. DILIP KUMAR AND COMPANY & OTHRS CA NO. 3327 OF 2007 (SC), THE HONBLE SUPREME COURT HELD THAT WHILE INT ERPRETING THE TAXING STATUTES, THE APPLICABILITY OF THE SECTI ON HAS TO BE SEEN IN STRICT SENSE, AND ONCE THE SECTION IS FOUND TO BE APPLICABLE, THEN IT HAS TO BE CONSTRUCTED LIBERALLY . SINCE UNDOUBTEDLY THE PROVISIONS OF SECTION 80IB(11A) OF THE ACT ARE APPLICABLE TO THE ACTIVITIES OF THE ASSESSEE LIKE C LEARING, STEAMING, SOAKING, DRYING, POLISHING AND GRINDING I T CAN ALSO BE NOT DENIED THAT DE-HUSKING THE PADDY WOULD SIGNIFIC ANTLY ITA NOS. 5345 TO 5348/DEL/2018 DAWAT FOODS LTD. 15 ENHANCE THE LIFE OF THE FOOD GRAIN, THEREBY REDUCES THE LOSS OF FOOD GRAIN AND CONTRIBUTES TO THE PRESERVATION OF F OOD GRAINS. IN SUCH AN EVENT, WE ARE UNABLE TO UNDERSTAND HOW THIS PARTICULAR PROCESS DOES NOT FIT IN THE EXPRESSION HANDLING. FOR THESE REASONS, WE ARE OF THE CONSIDERED OPINION THAT THE DE-HUSKING OF THE PADDY TO CONVERT IT INTO RICE IS ALSO AN INT EGRAL PART OF REDUCING THE POST-HARVEST FOOD GRAIN LOSS.' 7. ON THE BASIS OF THE AFORESAID FINDINGS AND REASO NING, THE TRIBUNAL ALLOWED THE CLAIM OF DEDUCTION UNDER SECTI ON 80IB(11) OF THE ACT BY HOLDING AS UNDER: 63. WE, ACCORDINGLY FIND THAT THE ASSESSEE CANNOT BE DENIED THE DEDUCTION UNDER SECTION 80IB(11A) OF THE ACT EI THER IN RESPECT OF THE ACTIVITIES CONDUCTED BY THE ASSESSEE TO MEET THE DEMAND OF THE SECTION, NAMELY, DERIVING INCOME FROM THE INTEGRATED BUSINESS OF HANDLING, STORAGE AND TRANSP ORTATION OF FOOD GRAINS OR FOR NON-COMPLIANCE WITH THE CONDITIO NS DEPLETED UNDER SECTION 80IB (2) OF THE ACT. WE DO NOT FIND A NYTHING ILLEGALITY ARE REGULARITY EITHER IN THE REASONING O R THE CONCLUSIONS REACHED BY THE LD. CIT(A) ON THIS ASPEC T, AND WHILE CONFIRMING THE SAME FIND THE GROUNDS NUMBER 1 TO 3 OF REVENUES APPEAL DEVOID OF MERITS AND RELIABLE TO B E DISMISSED.' 8. IN VIEW OF THE AFORESAID, IT WAS RESPECTFULLY SU BMITTED THAT THE CIT(A) HAS RIGHTY ALLOWED THE CLAIM OF DEDUCTIO N UNDER SECTION 80IB(11A) OF THE ACT AND WE DECLINE TO INTE RFERE WITH THE ORDER OF THE LD. CIT(A). ITA NOS. 5345 TO 5348/DEL/2018 DAWAT FOODS LTD. 16 DISALLOWANCE U/S 14A: 9. THE ASSESSEE, DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, RECEIVED INCOM E AMOUNTING TO RS.2,03,13,535/- AS SHARE OF ITS PROFI T IN PARTNERSHIP FIRM NAMELY M/S. RAGUNATH AGRO INDUSTRI ES, AMRITSAR. THE SAID INCOME WAS CLAIMED AS EXEMPT UND ER SECTION 10 OF THE ACT IN THE RETURN OF INCOME. 10. IN THE IMPUGNED ASSESSMENT ORDER, THE ASSESSING OFFICER MADE DISALLOWANCE OF RS.36,87,907/- U/S 14A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULE,1962 (THE RULE S) AS UNDER: - DISALLOWANCE OF DIRECT EXPENDITURE - NIL - DISALLOWANCE OF INTEREST EXPENDITURE - RS.31,73,824 - DISALLOWANCE OF ADMINISTRATIVE EXPENSE (BY CONSIDER ING TOTAL INVESTMENTS) - RS.5,14,083/- FINDINGS OF CIT( A) 11. IT WAS SUBMITTED THAT SIMILAR DISALLOWANCE MADE U/S 14A OF THE ACT IN THE CASE OF M/S LT FOODS LTD, A GROUP CO MPANY, IN RESPECT OF SHARE OF PROFIT RECEIVED FROM A PARTNERS HIP FIRM WAS DELETED IN TOTO BY THE TRIBUNAL IN ITA NO. 4164/DEL/2013 VIDE ORDER DATED 30.09.2020 BY HOLDING AS UNDER: 95. WE HAVE GONE THROUGH THE RECORD, IN THE LIGHT OF THE SUBMISSIONS MADE ON EITHER SIDE. IT COULD BE SEEN F ROM THE ASSESSMENT ORDER, VIDE PARAGRAPH NUMBER 11, THERE W ERE MADE THE REPORT OF THE SPECIAL AUDITOR AS THE BASIS FOR THE DISALLOWANCE, SPECIAL AUDITOR WORKED OUT THE TOTAL DISALLOWANCE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF T HE RULES AT RUPEES, 41, 80, 208/-, BUT IN VIEW OF THE PROVISION S OF SECTION ITA NOS. 5345 TO 5348/DEL/2018 DAWAT FOODS LTD. 17 14A OF THE ACT, HE RESTRICTED THE DISALLOWANCE TO T HE EXEMPT INCOME AND DETERMINED THE SAME AT RS.18,18,915/-. N OWHERE IN THE ORDER, THE ASSESSING OFFICER HAD CONSIDERED THE ACCOUNTS OF THE ASSESSEE AS TO WHAT COULD HAVE BEEN THE EXPENDI TURE, THAT HAS TO BE ALLOCATED FOR EARNING THE EXEMPT INCOME. 96. EVEN OTHERWISE, WE FIND STRENGTH IN THE ORNAME NT OF THE LD. AR THAT IN ORDER TO AVOID THE DOUBLE TAXATION O NCE IN THE HANDS OF THE FIRM AND SECONDLY IN THE HANDS OF THE PARTNER, THE SHARE IN THE PROFITS OF THE PARTNERSHIP FORM IS NOT TAXABLE IN THE HANDS OF THE PARTNER AS HAS BEEN HELD BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF SUDHIR KAPADIA VS. ITO IN ITA NO. 7888 OF 2013, WHICH WAS FOLLOWED IN THE CASE OF HAM ID A MOOCHHALA VS. ACIT IN ITA NO. 2218/MUM/2010. 97. FURTHER, THERE IS NO DENIAL OF THE FACT THAT A S ON 31/3/2006 AND 31/3/2007, THE CAPITAL AND FREE RESER VES OF THE ASSESSEE WERE RS. 60, 92, 50, 784/- AND RS.1,19,99, 27,510/- RESPECTIVELY AS AGAINST THE INVESTMENT IN THE PARTN ERSHIP FORM ON 31/3/2006 AND 31/3/2007 STOOD AT RS.3,49,55,937/ -AND 3,67,57,562/- ONLY AND THEREFORE, IT CANNOT BE SAID THAT ANY BORROWED FUNDS COULD HAVE BEEN UTILISED TO MAKE SUC H INVESTMENT INCURRING ANY INTEREST EXPENDITURE. 98. VIEWING FROM ANY ANGLE, WE DID NOT FIND ANY GR OUND TO SUSTAIN ADDITION MADE UNDER 14A OF THE ACT READ WIT H RULE 8D OF THE RULES. SUCH AN ADDITION IS, THEREFORE, IS DIREC TED TO BE DELETED. GROUND NUMBER 17 IS ACCORDINGLY ALLOWED. ITA NOS. 5345 TO 5348/DEL/2018 DAWAT FOODS LTD. 18 12. IN VIEW OF THE AFORESAID, IT WAS SUBMITTED THAT THERE WAS NO WARRANT TO MAKE DISALLOWANCE U/S 14A OF THE ACT IN THE CASE OF THE ASSESSEE. 13. IT WAS ALSO SUBMITTED THAT THE CO-ORDINATE BENC H OF TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009- 10 IN ITA NO. 4042/DEL/2013 RESTRICTED THE DISALLOW ANCE U/S 14A BY DIRECTING THE ASSESSING OFFICER TO CONSIDER ONLY THOSE INVESTMENTS FROM WHICH EXEMPT INCOME WAS EARNED DUR ING THE YEAR AS AGAINST TOTAL INVESTMENTS APPEARING IN THE BALANCE SHEET. IT MAY HOWEVER BE PERTINENT TO NOTE THAT THE AFORESAID DECISION RENDERED BY THE CO-ORDINATE BENCH IN THE C ASE OF LT FOODS WAS NOT AT ALL CONSIDERED BY THE TRIBUNAL. TH E RELEVANT FINDING OF THE TRIBUNAL IS EXTRACTED HEREUNDER: 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. IN THE PRESE NT CASE, THE SATISFACTION IS RECORDED WHILE INVOKING RULE 8D OF THE INCOME TAX RULES, 1962. BUT THE ASSESSING OFFICER CONSIDER ED EXEMPT INCOME EARNED AS SHARE IN PROFIT FROM PARTNERSHIP F IRM FOR THE PURPOSE OF DISALLOWANCE UNDER SECTION 14A OF THE AC T. THE INVESTMENTS WAS MADE OUT OF OWN FUNDS AND NOT BORRO WED FUNDS AND THEREFORE, THE ASSESSEE HAS NOT MADE ANY DISALL OWANCE OUT OF INTEREST EXPENDITURE. THE LD. ARS CONTENTIONS T HAT UNDER RULE 8D (2)(III), WHAT IS DISALLOWABLE IS AN AMOUNT EQUAL TO V2 PERCENTAGE OF THE AVERAGE VALU E OF INVESTMENT, THE INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE T OTAL INCOME, IS RIGHT. THEREFORE, AS PER THE CHART GIVEN BY THE LD. AR, AT THE TIME OF HEARING, WE DIRECT THE ASSESSING OFFICER TO VERIFY THE SAME AND THEREAFTER RESTRICT THE DISALLOWANCE TO RS . 23,264/- ITA NOS. 5345 TO 5348/DEL/2018 DAWAT FOODS LTD. 19 ONLY IF THE CONTENTIONS OF THE ASSESSEE ARE FOUND C ORRECT, OTHERWISE PROCEED ACCORDING TO THE PROVISIONS OF IN COME TAX ACT AND RULES. NEEDLESS TO SAY, THE ASSESSEE BE GIV EN OPPORTUNITY OF HEARING BY FOLLOWING PRINCIPLES OF N ATURAL JUSTICE. GROUND NO. 8 AND 9 ARE PARTLY ALLOWED FOR STATISTIC AL PURPOSE. 14. ON GOING THROUGH THE RECORD, WE HOLD THAT THE A SSESSEE IS NOT LIABLE FOR ANY DISALLOWANCE ON INTEREST AS NO I NTEREST BEARING FUNDS HAVE BEEN UTILIZED FOR THE PURPOSE OF MAKING INVESTMENT. SINCE, THE SHARE OF PROFIT FROM THE PARTNERSHIP IS MERE DISTRIBUTION OF INCOME WHICH IS ALREADY BEEN TAXED, HENCE THE PROVISIONS U/S 14A ARE NOT ATTRACTED IN SUCH CASE. FURTHER, WE ALSO AFFIRM THE PRINCIPLE OF NO DISALLOWANCE IS CAL LED FOR WHERE THERE IS NO EXEMPT INCOME EARNED. THE AO IS DIRECTE D TO RE- COMPUTE THE DISALLOWANCE, KEEPING IN VIEW THE GUIDE LINES MENTIONED ABOVE. PRIOR PERIOD EXPENSES (A.Y. 2012-13) 15. THE ASSESSEE HAD DEBITED A SUM OF RS.8,79,356/- ON ACCOUNT OF PRIOR PERIOD EXPENSE TO THE PROFIT AND L OSS ACCOUNT WHICH WAS CLAIMED AS DEDUCTION WHILE COMPUTING THE TAXABLE INCOME FOR THE RELEVANT ASSESSMENT YEAR. 16. THE AFORESAID AMOUNT COMPRISED OF EXCESS INPUT TAX RECEIVABLE OF RS.8,16,068/- AND BANK PROCESSING CHA RGES OF RS.63,288/-. THE ASSESSING OFFICER DISALLOWED PRIOR PERIOD EXPENSES AGGREGATING TO RS.8,79,356/- ON THE GROUND S THAT THEY DO NOT RELATE TO THE RELEVANT PREVIOUS YEAR. ON APP EAL, THE CIT(A) DELETED THE DISALLOWANCE MADE BY THE ASSESSI NG OFFICER. ITA NOS. 5345 TO 5348/DEL/2018 DAWAT FOODS LTD. 20 17. THE RELEVANT FACTS ARE THAT THE AFORESAID EXPEN DITURE WAS DULY CLAIMED AS DEDUCTION IN THE COMPUTATION OF INC OME AS THE SAME WERE BUSINESS EXPENDITURE INCURRED IN THE ORDI NARY COURSE OF RUNNING THE BUSINESS AND ALLOWABLE REVENUE DEDUC TION U/S 37(1) OF THE ACT. FURTHER, IN SO FAR AS BANK PROCES SING CHARGES OF RS.63,288/- IS CONCERNED, THE PROCESSING CHARGES WAS ACCOUNTED AND CHARGED BY THE BANK DURING THE RELEVA NT ASSESSMENT YEAR ONLY, BUT THE ASSESSEE INADVERTENTL Y DEBITED THE SAME INTO PRIOR PERIOD EXPENSES. 18. IN VIEW OF THE ABOVE, THE DISALLOWANCE OF PRIOR PERIOD EXPENSES IS BEING DELETED IN TOTO . 19. IN THE RESULT, ALL THE APPEALS OF THE REVENUE A RE HEREBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22/10/2021. SD/- SD/- (AMIT SHUKLA) (DR. B. R. R. KUMAR) JUDICIAL MEMBER ACC OUNTANT MEMBER DATED: 22/10/2021 *SUBODH KUMAR, SR. PS* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR