GALA PRECISION TECHNOLOGY P. LTD, MUMBAI V. ITO 6(3)(1), MUMBAI

ITA 5512/MUM/2011

• Counselvise Citation: 551219914 RSA 2011
• Duration Of Justice: 2 year(s) 11 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 22-07-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 26-07-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ADAGIRI
• Keywords: Retrospective amendment; Bad and doubtful debts; Revenue expenditure; Capital expenditure
• Section: 43B; 143(3); 115JB; 10B; 12; 10

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G , BENCH MUMBAI , BEFORE : SHRI R.C.SHARMA , A M & SHRI SANJAY GARG, J M ITA NO. 5512 / MUM/20 11 ( ASSESSMENT YEAR : 200 6 - 0 7 ) GALA PRECISION TECHNOLOGY PRIVATE LIMITED, 116, NARAYAN DHURU STREET, MUMBAI - 400 003 VS. ITO - 6(3)(1), MUMBAI PAN/GIR NO. : A A AC G 1777 F ( APPELLA NT ) .. ( RESPONDENT ) /ASSESSEE BY : SHRI ANUJ KISNADWALA /REVENUE BY : SHRI B. YADAGIRI DATE OF HEARING : 22 ND JULY , 201 4 DATE OF PRONOUNCEMENT : 25 TH JULY , 201 4 O R D E R PER R.C.SHARMA ( A .M.) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A ) DATED 29 - 1 - 2009 FOR AY 2006 - 07 , IN THE MATTER OF ORDER PASSED U/S. 143(3) OF THE ACT, WHEREIN FOLLOWING GROUNDS HAVE BEEN TAKEN : - TH E APPELLANT SUBMITS THE FOLLOWING GROUNDS, WHICH ARE WITHOUT PREJUDICE TO ONE ANOTHER: 1. DISALLOWANCE OF BAD DEBTS / WRITE OFF OF RS. 4,31,223/ - : 1.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) (HE REINA FTER REFERRED TO AS CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE OF AMOUNTS WRITTEN OFF AS BAD DEBT BY THE APPELLANT OF RS. 4,31,223/ - . 1.2 WITHOUT PREJUDICE TO THE ABOVE, THE AMOUNTS WRITTEN OFF SHOULD BE ALLOWED AS BUSINESS LOSS U/S37(1) AS CLAIMED BY THE APPELLANT. 2. DISALLOWANCE OF DEDUCTION U/ S 35D RS. 5,96,573/ - : ITA NO. 5512 / 11 2 2.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT (A) ERRED IN CONF IRM ING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING THE DEDUCTION U/S. 35D OF RS. 5,96,573/ - 2.2 WITHO UT PREJUDICE TO THE ABOVE, THE CL'I' (A) ERRED IN NOT APPRECIATING THAT THE APPELLANT HAD CLAIMED ONLY 1/5TH OF THE TOTAL EXPENDITURE INCURRED, BEING RS. 1,19,375/ - AND HENCE THE AMOUNT TO BE DISALLOWED OUGHT TO BE RESTRICTED TO RS. 1,19,375/ - . 3. ADDIT ION OF UN UTILIZED MODVAT CREDIT OF RS. 16,79,695/ - : 3.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING THE CONTENTION OF THE ASSESSING OFFICER BY ADDING CLOSING BALANCE OF MODV AT CREDIT OF RS. 16,79,695/ - TO THE CLOSING STOCK WITHOUT APPRECIATING THE FACT THAT THE PROVISIONS OF S. 145A ARE TAX NEUTRAL. 4. ADDITION OF PROVISION FOR DOUBTFUL DEBTS FOR DETERMINATION OF BOOK PROFITS U/ S 115JB RS. 38,84,717/ - 4.1 ON THE FACTS AND IN E CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN HOLDING THE CONTENTION OF THE ASSESSING OFFICER BY ADDING BACK THE PROVISION FOR BAD DEBTS TO THE BOOK PROFITS FOR COMPUTING BOOK PROFIT U/S. 115JB. 5. DISALLOWANCE OF DEDUCTION U/ S 10 B: 5.1 ON THE FACTS AND IN THE C IRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) ERRED IN UPHOLDING THE CONTENTION OF THE ASSESSING OFFICER IN NOT ALLOWING THE DEDUCTION U/ S 10 B ON THE GROUND THAT THE SAME WAS NOT CLAIMED BY THE APPELLANT . 2 . RIVAL CONTENTIONS HAVE BEEN HEARD AND RECOR D PERUSED . FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF PRECISION METAL COMPONENTS. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE AO DECLINED ASSESSEES CLAIM OF BAD DEBTS OF RS. 4,31,223/ - BY OBSERVING THAT, TO BE DE DUCTIBLE SHOULD BE ESTABLISHED TO HAVE BECOME A BAD DEBT IN THE PREVIOUS YEAR. BY THE IMPUGNED ORDER, THE CIT(A) CONFIRMED THE ACTION OF THE AO. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HON B LE SUPREME COURT IN THE CASE OF T.R.F. LIMITED VS. CIT, 323 ITR 397 , WHEREIN IT WAS HELD THAT IN ITA NO. 5512 / 11 3 RESPECT OF BAD DEBTS WRITTEN OFF IN THE BOOKS OF ACCOUNT AFTER 1 ST APRIL, 1989, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBTS, IN FACT, HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. IN THE INSTANT CASE, IT IS NOT THE CASE OF THE AO THAT BAD DEBTS HAVE NOT BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNT AS IRRECOVERABLE AND THE AO HAS DISALLOWED THE CLAIM ONLY BY OBSERVING THAT ASSESSEE HAS NOT ESTABLISHED THAT DEBT HAS BECOME BAD IN THE PREVIOUS YEAR. RESPECTFULLY FOLLOWING THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF T.R.F. LIMITED (SUPRA), WE REVERSE THE ORDER OF LOWER AUTHORITIES AND DIRECT THE AO TO ALLOW ASSESSEES CLAIM OF BAD DEBTS WRITTEN OFF IN THE BOOKS OF ACCOUNT. 3 . THE NEXT GRIEVANCE OF THE ASSESSEE RELATES TO DISALLOWANCE OF DEDUCTION U/S. 35D AMOUNTING TO RS. 5,96,573/ - . FROM THE RECORD WE FOUND THAT AS SESSEE HAS INCURRED EXPENDITURE OF RS. 5,96,573/ - FOR PAYMENT OF STAMP DUTY AND REGISTRATION FEES FOR INCREASE IN AUTHORIZED CAPITAL. IT HAD CLAIMED DEDUCTION OF 1/5 TH OF TOTAL EXPENDITURE U/S. 35D AND WORKS OUT IT TO BE RS.1,19,375/ - . HOWEVER, THE AO DISAL LOWED THE ENTIRE EXPENDITURE INCURRED IN THE PRECEDING ASSESSMENT YEAR I..E AY2005 - 06. WE HAVE CONSIDERED RIVAL CONTENTIONS. THE ISSUE WITH REGARD TO CLAIM OF DEDUCTION IN RESPECT OF EXPENDITURE INCURRED ON STAMP DUTY FOR INCREASE IN AUTHORIZED CAPITAL U/S . 35D AS WELL AS FEES FOR FILING FORM NO.5 FOR INCREASE IN AUTHORIZED SHARE CAPITAL IS SQUARELY COVERED AGAINST THE ASSESSEE BY THE ORDER OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF DRONAGIRI INFRASTRUCTURE PVT. LTD., ITA ITA NO. 5512 / 11 4 NO. 3369/MUM/2011, VIDE O RDER DATED 18 - 7 - 2012 , WHEREIN AFTER DISCUSSING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD. VS. CIT, 225 ITR 792 AND THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF HINDUSTAN INSECTIC IDES LTD., 250 ITR 338 , THE BENCH HELD THAT ASSESSEE IS NOT ENTITLED FOR ANY DEDUCTION ON SUCH EXPENDITURE. THE PRECISE OBSERVATION OF THE BENCH WAS AS UNDER : - 6 . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THERE IS N O DISPUTE ON THE FACT THAT THE EXPENDITURE IN QUESTION WAS INCURRED IN RELATION TO THE INCREASE IN AUTHORISED CAPITAL AND NOT IN RELATION TO INCORPORATION OF THE ASSESSEE COMPANY BY REGISTRATION WITH ROC. THE ASSESSEE HAS MAINLY RELIED UPON THE DECISION OF HONOURABLE RAJASTHAN HIGH COURT IN CASE OF MULTI - METAL LTD (SUPRA) AND ADVANCED THE ARGUMENT THAT THE LANGUAGE OF SECTION 35D(2)(C ) IS WIDE IN NATURE AND WOULD INCLUDE THE DEDUCTIBILITY OF FEE PAID BY THE ASSESSEE TO ROC FOR ENHANCEMENT OF AUTHORISED CAP ITAL. WE NOTE THAT THE ASSESSING OFFICER HAS DISTINGUISHED THE DECISION OF THE HONOURABLE RAJASTHAN HIGH COURT AND RELIED UPON THE DECISION OF HONOURABLE SUPREME COURT AS WELL AS HONOURABLE DELHI HIGH COURT. THE RELEVANT PART OF THE ASSESSMENT ORDER AT PAG E NO.4 IS REPRODUCED AS UNDER: THE SUBMISSIONS OF THE ASSESSEE IS CONSIDERED, BUT CANNOT BE ACCEPTED DUE TO THE REASONS THAT THE EXPENDITURE ALLOWED TO BE AMORTISED OF CERTAIN PRELIMINARY EXPENSES ARE MENTIONED IN THE PROVISIONS OF SECTION 35D OF I.T. A CT, 1961. ASSESSEES EXPENDITURE IS INCURRED ON NONE OF THE ITEMS MENTIONED IN PROVISIONS OF SECTION 35D (2) AND HENCE DOES NOT QUALIFY FOR ANY ALLOWANCE ON THIS ACCOUNT. THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND NOT A COMPANY IN WHICH THE PUBLIC IS SU BSTANTIALLY INTERESTED AND THE EXPENSES ARE NOT INCURRED FOR PUBLIC ISSUE. THE FACTS OF THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASES OF PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD VS. CIT 22 5 ITR 792 AND BROOK BOND INDIA LTD VS. CIT 225 ITR 798 (SC) WHEREIN IT WAS HELD THAT EXPENSES INCURRED ON INCREASING THE SHARE CAPITAL AND FEES PAID TO REGISTRAR OF COMPANIES FOR INCREASE IN AUTHORISED CAPITAL IS CAPITAL EXPENDITURE AND CANNOT BE ALLOWED A S REVENUE EXPENDITURE. IN THE CASE OF CIT VS. HINDUSTAN INSECTICIDES LTD 250 ITR 338, THE HON1E DELHI HIGH COURT HAS HELD THAT FEES PAID FOR INCREASE IN SHARE CAPITAL IS NOT FEES FOR REGISTRATION OF THE/ COMPANY AND HENCE IS NOT AMORTIZABLE UNDER SECTION 35D(2)(E)(III) OF THE I..T. ACT. ITA NO. 5512 / 11 5 REGARDING THE CONTENTION OF THE ASSESSEE THAT THIS ITEM IS COVERED BY PROVISIONS OF SECTION 35D (2)(D) OF THE I.T. ACT, IT IS SEEN THAT THE SAID CLAUSE PROVIDES THAT ANY OTHER ITEM AS MAY BE PRESCRIBED CAN BE CONSIDERED F OR AMORTIZATION. HOWEVER, NOTHING HAS BEEN PRESCRIBED, SO AS TO INCLUDE THE EXPENSES AS CLAIMED BY THE ASSESSEE. THEREFORE THE CLAIM OF THE ASSESSEE IS REJECTED. THE ASSESSEE HA RELIED ON THE CASE OF CIT VS. MULTI METALS LTD 188 ITR 151. THE FACTS OF THAT CASE ARE TOTALLY DIFFERENT. IN THAT CASE, THE EXPENSES WERE INCURRED FOR RAISING PUBLIC ISSUE OF SHARES AND THEREFORE WAS HELD TO BE COVERED BY SECTION 35D (2)(C)(IV). THE ASSESSEE IS NOT A PUBLIC COMPANY AND HAS NOT INCURRED ANY EXPENSES ON PUBLIC ISSUE A ND THEREFORE THE RATIO OF THIS DECISION IS NOT APPLICABLE. THE OTHER CASES RELIED BY THE ASSESSEE ARE ALSO DISTINGUISHABLE ON FACTS, HENCE THE CLAIM OF THE ASSESSEE ON ACCOUNT OF AMORTIZATION OF EXPENSES ARE DISALLOWED IN VIEW OF THE ABOVE DISCUSSION. 6 .1 THE ASSESSING OFFICER DISALLOWED THE CLAIM BY FOLLOWING THE DECISION OF HONOURABLE SUPREME COURT IN CASE OF PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION AND BROKE BROOKE BOND INDIA LTD (SUPRA). FURTHER THE HONOURABLE DELHI HIGH COURT IN CASE OF HINDU STAN INSECTICIDES LTD (SUPRA) HAS DECIDED AN IDENTICAL ISSUE AFTER CONSIDERING AND FOLLOWING THE AFORESAID DECISIONS OF HONOURABLE SUPREME COURT AND HELD IN PARA 3 AND 4 AS UNDER: WE HAVE HEARD LEARNED COUNSEL FOR THE REVENUE. THERE IS NO APPEARANCE ON B EHALF OF THE ASSESSEE IN SPITE OF NOTICE. SO FAR AS THE QUESTION REFERRED AT THE INSTANCE OF THE ASSESSEE IS CONCERNED, THE MATTER IS SQUARELY CONCLUDED BY TWO DECISIONS OF THE SUPREME COURT IN PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION LIMITED V. C IT [1997] 225 ITR 792 AND BROOKE BOND INDIA LIMITED V. CIT [1997] 225 ITR 798. IT WAS HELD IN BOTH THE CASES THAT EXPENDITURE INCURRED BY A COMPANY IN CONNECTION WITH ISSUE OF SHARES WITH A VIEW TO INCREASE ITS SHARE CAPITAL IS DIRECTLY RELATED TO THE EXPA NSION OF THE CAPITAL BASE OF THE COMPANY AND IS CAPITAL EXPENDITURE EVEN THOUGH IT MAY INCIDENTALLY HELP IN THE BUSINESS OF THE COMPANY AND IN THE PROFIT MAKING. THAT BEING THE POSITION, THE QUESTION IS ANSWERED IN THE AFFIRMATIVE, IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. COMING TO THE QUESTION REFERRED AT THE INSTANCE OF THE REVENUE IT WOULD BE NECESSARY TO QUOTE THE PROVISION AS IT STOOD AT THE RELEVANT POINT OF TIME: 35D. (1) . . . (2) THE EXPENDITURE REFERRED TO IN SUB - SECTION (1) SHALL BE THE EXPENDITURE SPECIFIED IN ANY ONE OR MORE OF THE FOLLOWING CLAUSES, NAMELY : - (A) & (B). (B) WHERE THE ASSESSEE IS A COMPANY, ALSO EXPENDITURE (I) AND (II).. (III) BY WAY OF FEES FOR REGISTERING THE COMPANY UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 (1 OF 1956) ; ITA NO. 5512 / 11 6 IT HAS TO BE NOTED THAT THE TRIBUNAL REFERRED TO SCHEDULE X TO THE COMPANIES ACT, 1956 (IN SHORT, THE COMPANIES ACT). THE SAID SCHEDULE REFERS TO THE TABLE OF FEES TO BE PAID TO THE REGISTRAR IN RESPECT OF A COMPANY HAVING A S HARE CAPITAL. ITEM 1 OF THE SCHEDULE INDICATES RS. 200 AS PRESCRIBED FEES PAYABLE FOR REGISTRATION OF A COMPANY WHOSE NOMINAL SHARE CAPITAL DOES NOT EXCEED RS. 20,000. ITEM 2 OF THE SCHEDULE INDICATES AN ADDITIONAL FEE FOR REGISTRATION OF A COMPANY WHOSE N OMINAL SHARE CAPITAL EXCEEDS RS. 20,000. THE TRIBUNAL WAS OF THE VIEW THAT ITEM 3 WAS THE RELEVANT ITEM. THE SAID ITEM READS AS FOLLOWS : (3) FOR FILING A NOTICE OF ANY INCREASE IN THE NOMINAL SHARE CAPITAL OF A COMPANY THE DIFFERENCE BETWEEN THE FEES PAYABLE ON THE DATE OF FILING THE NOTICE FOR THE REGISTRATION OF A COMPANY WITH A NOMINAL SHARE CAPITAL EQUAL TO THE INCREASED SHARE CAPITAL AND THE FEES PAYABLE, ON SUCH DATE, FOR THE REGISTRATION OF A COMPANY WITH A SHARE CAPITAL EQUAL TO THE NOMINAL SH ARE CAPITAL OF THE COMPANY FILING THE NOTICE IMMEDIATELY BEFORE THE INCREASE. WITH REFERENCE TO THE SAID ITEM, THE TRIBUNAL HELD THAT THE ADDITIONAL FEE IS A REGISTRATION FEE ON THE DIFFERENCE IN THE NOMINAL SHARE CAPITAL AND THE INCREASED SHARE CAPITAL OF THE COMPANY AND IS COVERED BY THE SAID ITEM. FOR COMING TO SAID CONCLUSION THE TRIBUNAL OBSERVED THAT IT HAS TO BE KEPT IN VIEW THAT THE WHOLE AMOUNT, WHICH BECOMES THE AUTHORISED SHARE CAPITAL, WOULD HAVE ATTRACTED PAYMENT OF FEE AT A PARTICULAR FIGUR E AT THE POINT OF TIME OF ORIGINAL REGISTRATION OF THE COMPANY. MERELY BECAUSE THE SHARE CAPITAL IS INCREASED SUBSEQUENTLY AS PERMISSIBLE UNDER SECTION 81 OF THE COMPANIES ACT, THE FEE PAID ON THE INCREASED CAPITAL DOES NOT CEASE TO BE REGISTRATION FEE. LE ARNED COUNSEL FOR THE REVENUE WITH REFERENCE TO THE VARIOUS PROVISIONS OF THE COMPANIES ACT SUBMITTED THAT ITEM 3 OF SCHEDULE X HAS NO APPLICATION TO THE FACTS OF THE CASE. THERE IS A CONCEPTUAL DIFFERENCE BETWEEN REGISTRATION OF THE COMPANY AND ACTION TA KEN FOR INCREASE OF THE SHARE CAPITAL. PART II OF THE COMPANIES ACT DEALS WITH INCORPORATION OF A COMPANY AND MATTERS INCIDENTAL THERETO. SECTION 12 DEALS WITH MODE OF FORMING AN INCORPORATED COMPANY. SECTIONS 33 AND 34 DEALS WITH REGISTRATION OF MEMORANDU M AND ARTICLES AND EFFECT OF REGISTRATION RESPECTIVELY. SECTION 97 DEALS WITH THE REQUIREMENT OF NOTICE OF INCREASE OF THE SHARE CAPITAL OR OF MEMBERS. SECTION 611 DEALS WITH THE FEES PAYABLE UNDER SCHEDULE X. SUB - SECTION (1) OF SECTION 34 TO WHICH WE HAVE MADE REFERENCE EARLIER STIPULATES THAT ON THE REGISTRATION OF THE MEMORANDUM OF A COMPANY, THE REGISTRAR SHALL CERTIFY UNDER HIS HAND THAT THE COMPANY IS INCORPORATED AND, IN THE CASE OF A LIMITED COMPANY, THAT THE COMPANY IS LIMITED. THEREFORE, ON THE RE GISTRATION OF THE MEMORANDUM OF A COMPANY THE COMPANY BECOMES INCORPORATED. A READING OF SCHEDULE X WOULD GO TO SHOW THAT ITEMS 1 AND 2 DEAL WITH REGISTRATION OF A COMPANY DEPENDING ON THE NOMINAL SHARE CAPITAL, IN RESPECT OF A COMPANY HAVING A ITA NO. 5512 / 11 7 SHARE CAPIT AL. ITEM 3, ON THE OTHER HAND, DEALS WITH FEES PAYABLE FOR FILING A NOTICE FOR INCREASE IN THE NOMINAL SHARE CAPITAL OF THE COMPANY. THE FIRST TWO ITEMS AND THE THIRD ITEM OPERATE IN CONCEPTUALLY AND CONTEXTUALLY DIFFERENT FIELDS. THIS IS ALSO CLEAR FROM A READING OF ITEM 4 WHICH PROVIDES THAT FOR REGISTRATION OF ANY EXISTING COMPANY, EXCEPT SUCH COMPANIES AS ARE BY THE COMPANIES ACT EXEMPTED FROM PAYMENT OF FEES IN RESPECT OF REGISTRATION UNDER THE COMPANIES ACT, THE SAME FEE AS IS CHARGED FOR REGISTERING A NEW COMPANY IS PAYABLE. SECTION 3 5 D(2)(C)(III) DEALS WITH EXPENDITURE INCURRED BY WAY OF FEES FOR REGISTRATION OF A COMPANY UNDER THE ACT. AS THE ANALYSIS OF THE POSITION ABOVE WOULD GO TO SHOW, FEES PAID UNDER ITEM 3 OF SCHEDULE X CANNOT BE STATED TO BE FEES PAI D FOR REGISTERING A COMPANY. THAT BEING THE POSITION SECTION 3 F D(2)(C)(III) HA S NO APPLICATION TO THE FACTS OF T HE CASE. THE QUESTION REFERRED AT THE INSTANCE OF THE REVENUE IS, THEREFORE, ANSWERED IN THE NEGATIVE, IN FAVOUR OF THE REVENUE AND AGA INST THE ASSESSEE.' 7. IT IS CLEAR FROM THE DECISIONS CITED ABOVE THAT THE ISSUE IS SETTLED AND COVERED AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE. ACCORDINGLY, RESPECTFULLY FOLLOWING THE DECISIONS OF HONOURABLE SUPREME COURT AS WELL AS HONOURABLE DELHI HIGH COURT, WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE ASSESSEE ON THIS ISSUE AND HENCE WE UPHOLD THE ORDERS OF THE AUTHORITIES BELOW ON THIS ISSUE. RESPECTFULLY, FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL, WE DO NOT FIND AN Y INFIRMITY IN THE ORDER OF LOWER AUTHORITIES FOR THE DISALLOWANCE. IT WAS SUBMITTED BY THE LEARNED AR THAT ASSESSEE CLAIMED DEDUCTION U/S. 35D TO THE EXTENT OF RS. 1,19,375/ - AND NOT RS. 5,96,573/ - . IN THE INTEREST OF JUSTICE, WE DIRECT THE AO TO VERIFY THE ACTUAL AMOUNT OF CLAIM AND TO RESTRICT THE DISALLOWANCE ONLY TO THE EXTENT OF DEDUCTION CLAIMED U/S. 35D. 5 . THE ASSESSEE IS ALSO AGGRIEVED FOR ADDITION OF UNUTILIZED MODVAT CREDIT OF RS. 16,79,6 95/ - . 5.1 IT WAS CONTENDED BY THE LEARNED AR THAT THE ASSES SING OFFICER H AS ADDED THE UNUTILIZED CENVA T CREDIT LYING IN THE SEPARATE LEDGER ACCOUNT AND REFLECTED IN THE BALANCE SHEET. IT WAS SUBMITTED THAT ITA NO. 5512 / 11 8 CENV AT CREDIT IS NOTHING BUT THE CREDIT EARNED ON PURCHASE OF GOODS. IT IS ELEMENTARY THAT THE CENV A T CREDI T CANNOT BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. WHAT CAN BE ADDED U/ S 145A OF THE ACT IS EXCISE DUTY RELATABLE TO CLOSING STOCK. HOWEVER, CENVAT CREDIT WHICH IS THE CREDIT BALANCE AVAILABLE TO ASSESSEE BEING BALANCE IN THE BOOKS OF EXCISE DEPARTMENT HAS GOT NO CORRELATION WITH AMOUNT OF CLOSIN G STOCK AVAILABLE WITH ASSESSEE. 5.2 AS AN ALTERNATIVE, IT WAS SU BMITTED THAT IF THE AMOUNT LYING IN THE CENVAT CREDIT ACCOUNT IS ADDED TO THE CLOSING STOCK, SUBSEQUENT PAYMENT OF EXCISE DUTY MADE BY ASSESSEE BE FORE DUE DATE OF FILING THE RETURN IS ELIGIBLE FOR DEDUCTION U/ S 43B OF THE ACT. A SIMIL AR ISSUE REGARDING DEDUCTION U/ S 43B OF THE ACT ON EXCISE DUTY PAID THROUGH CENV AT CREDIT ACCOUNT AROSE IN ASSESSEE'S OWN CASE FOR A.Y. 2001 - 02 AND 2003 - 04 (COPY ENCLOS ED AS ANNEXURE 1) WHEREIN THE HON'BLE TRIBUNAL HAS DEALT WITH THIS ISSUE ON PAGE 8 (PARA 5.5) AND PAGE 9 (PARA 5.6) OF THE ORDER. THE TRIBUNAL ON PAGE 9 HAS SENT THE ISSUE BACK TO THE ASSESSING OFFICER WITH A DIRECTION TO ALLOW DEDUCTION U/ S 43B OF THE ACT AFTER VERIFICATION OF FACTS. 5.3 RE LIANCE WAS PLACED ON THE DECISION OF THE MUMBAI TRIBUNAL IN THE CASE OF M/ S MIRC ELECTRONICS LTD V ACIT FOR A.YS. 2005 - 06 AND 2006 - 07 DATED 13.03.2013 WHEREIN THE TRIBUNAL HAS DEALT WITH THIS ISSUE FROM PAGES 3 TO 5 OF T HE ORDER. THE TRIBUNAL, IN PARA 8 OF THE SAID ORDER, HAS DIRECTED THE ASSESSIN G OFFICER TO ALLOW DEDUCTION U/ S 43B OF THE ACT ON THE COMPONENT OF EXCISE DUTY WHICH IS PAID BY ASSESSEE ITA NO. 5512 / 11 9 BEFORE DUE DATE OF FILING OF RETURN. IN VIEW OF THE ABOVE, IT IS SUBMITT ED BY THE LEARNED AR THAT T HE SAID ADDITION MADE BY THE ASSESSING OFFICER ON UNUTILIZED CENV AT CREDIT MAY KINDLY BE DELETED. AND W ITHOUT PREJUDICE, THE MATTER MAY BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER IN LINE WITH ASSESSEE'S OWN CASE OF EARLIER YEAR AND T HE ASSESSING OFFICER BE DIRECTED TO ALLOW DEDUCTION U/ S 43B OF THE ACT IN LINE WITH THE ORDER OF THE TRIBUNAL IN CASE OF M/ S MIRC ELECTRONICS LTD V ACIT FOR A.Y S. 2005 - 06 AND 2006 - 07 DATED 13.03.2013 . 5.4 THE CONTENTION OF THE ASSESSEE WAS THA T IT WAS FOLLOWING CONSISTENTLY EXCLUSIVE METHOD OF MODVAT ACCOUNT AND IT HAS ADDED UNUTILIZED MODVAT CREDIT TO THE CLOSING STOCK. HOWEVER, THE AO HAS ADDED UNUTILIZED MODVAT CREDIT TO CLOSING STOCK OF RAW MATERIAL. BY THE IMPUGNED ORDER, CIT(A) CONFIRMED THE ADDITION BY OBSERVING THAT MANDA T ORY PROVISION OF SECTION 145A IS APPLICABLE. WE FOUND THAT EXACTLY SIMILAR ISSUE HAS BEEN CONSIDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN THE IMMEDIATELY PRECEDING YEAR 2005 - 06, WHERE MATTER HAS BEEN RESTORED TO TH E FILE OF THE AO WITH THE FOLLOWING OBSERVATIONS : - 9. THE NEXT GRIEVANCE OF THE ASSESSEE RELATES TO ADDITION OF MODVAT OF RS.32,43,539/ - UNDER SECTION 145A. WE FOUND THAT EXACTLY SIMILAR ISSUE WAS DECIDED BY THE TRIBUNAL IN AFOREMENTIONED ORDER DATED 30 - 7 - 2010, WHEREIN THE MATTER WAS RESTORED TO THE FILE OF AO WITH THE FOLLOWING OBSERVATIONS : - 7. THE NEXT GROUND WAS WITH RESPECT TO ADDITION OF CLOSING BALANCE OF MODVAT CREDIT OF RS. 4,78,362/ - AS A PART OF THE CLOSING STOCK THE LD. CIT(A) UPHELD THE CO NTENTION OF THE AO BY ADDING CLOSING BALANCE OF MODVAT CREDIT OF RS. 4,78,362/ - TO THE CLOSING STOCK. ITA NO. 5512 / 11 10 8. WE FIND THAT THE ISSUE IS COVERED IN ASSESSEE'S OWN CASE IN ITA NO5760/M/2005 FOR THE A.Y. 2003 - 04 WHEREIN IT HAS BEEN HELD AS FOLLOWS : - 'SINCE TH E ISSUE UNDER CONSIDERATION IS IDENTICAL TO THAT OF HAWKINS COOKERS LTD. IN ITA NO. 505/M/04 VIDE ORDER DTD.11.8.2008, WE REMIT THE MATTER BACK TO THE FILE OF THE AD WITH A DIRECTION TO DECIDE THE ISSUE BY FOLLOWING THE GUIDELINES GIVEN IN HAWKINS COOKERS' LTD. THUS THIS GROUND OF THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES' RESPECTFULLY FOLLOWING THE EARLIER YEAR ORDER WE REMIT BACK THE ISSUE TO THE FILE OF THE AD AND REDO THE WORKING IN THE LIGHT OF THE DECISION OF HAWKINS COOKERS LTD .(SUPRA). WE HAVE CONSIDERED RIVAL CONTENTIONS. AS FACTS AND CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION ARE THE SAME AS DISCUSSED BY THE TRIBUNAL IN ITS ORDER DATED 30 - 7 - 2010, THEREFORE, WE RESTORE THIS GROUND WITH REGARD TO ADDITION ON ACCOUNT OF MODVAT TO THE FILE OF THE AO FOR DECIDING AFRESH IN TERMS OF DIRECTION GIVEN BY THE TRIBUNAL AS QUOTED ABOVE. 5.5 AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION ARE SAME, RESPECTFULLY FOLLOWING THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE, THE ISSUE IS RESTORED BACK TO THE FILE OF THE A O FOR DECIDING AFRESH AS PER THE DIRECTION GIVEN BY THE TRIBUNAL IN ITS ORDER DATED 30 - 7 - 2010 . WE DIRECT ACCORDINGLY. 6 . THE NEXT GRIEVANCE OF THE ASSESSEE RELATES TO THE ADDITION OF PROVISION FOR DOUB TFUL DEBTS FOR DETERMINATION OF BOOK PROFITS U/S. 115JB. LEARNED AR FAIRLY CONCEDED THAT DUE TO RETROSPECTIVE AMENDMENT, ISSUE IS COVERED AGAINST THE ASSESSEE AND THE SAME WAS NOT PRESSED. HENCE, WE DISMISS THIS GROUND OF THE ASSESSEE AS NOT PRESSED. 7 . TH E ASSESSEE IS ALSO AGGRIEVED FOR DISALLOWANCE OF DEDUCTION U/S. 10B . FROM THE RECORD WE FOUND THAT ASSESSEE HAS NOT CLAIMED DEDUCTION U/S. 10B IN ITS RETURN OF INCOME IN VIEW OF THE LOSS INCURRED AS PER BOOKS OF ACCOUNT. HOWEVER, DUE TO VARIOUS DISALLOWANCE MADE, ITA NO. 5512 / 11 11 LOSS OF THE ASSESSEE WAS CONVERTED INTO POSITIVE INCOME. WE ALSO FOUND THAT ASSESSEE HAD FILED FORM 56G BEFORE COMPLETION OF ASSESSMENT. HOWEVER, THE AO HAS DECLINED THE CLAIM ON THE PLEA THAT ASSESSEE HAS NOT CLAIMED ANY DEDUCTION U/S. 10B. CIRCULAR NO. 14 (XL35) DATED 11 - 4 - 1995 OF CBDT READS AS UNDER : - 'OFFICERS OF THE DEPARTMENT MUST NOT TAKE ADVANTAGE OF IGNORANCE OF AN A SSESSEE AS TO HIS RIGHTS. IT IS ONE OF THEIR DUTIES TO ASSIST A TAX PAYER IN EVERY REASONABLE WAY, PARTICULARLY IN THE MATTER OF CLAIMING AND SECURING RELIEFS AND IN THIS REGARD THE OFFICERS SHOULD TAKE THE INITIATIVE IN GUIDING A TAXPAYER WHERE PROCEEDINGS OR OTHER PARTICULARS BEFORE THEM INDICATE THAT SOME REFUND OR RELIEF IS DUE TO HIM. THIS ATTITUDE, IN THE LONG RUN, BENEFITS TH E DEPARTMENT FOR IT WOULD INSPIRE CONFIDENCE IN HIM THAT HE MAY BE SURE OF GETTING A SQUARE DEAL FROM THE DEPARTMENT. ALTHOUGH, THEREFORE, THE RESPONSIBILITY FOR CLAIMING REFUNDS AND RELIEFS RESTS WITH ASSESSEE ON WHOM IT IS IMPOSED BY LAW, OFFICERS SHOULD : - (A) DRAW THEIR ATTENTION TO ANY REFUNDS OR RELIEFS TO WHICH THEY APPEAR TO BE CLEARLY ENTITLED BUT WHICH THEY HAVE OMITTED TO CLAIM FOR SOME REASON OR OTHER; (B) FREELY ADVISE THEM WHEN APPROACHED BY THEM AS TO THEIR RIGHTS AND LIABILITIES AND AS TO THE PROCEDURE TO BE ADOPTED FOR CLAIMING REFUNDS AND RELIEF. SINCE THE ASSESSEE HAS FILED RETURN OF LOSS, THE AO HAS NO OCCASION TO EXAMINE ASSESSEES CLAIM OF ELIGIBILITY U/S. 10B. HOWEVER, DUE TO COMPUTATION OF PROFIT OF ELIGIBLE UNIT A T POSITIVE INCOM E, ASSESSEE HAS BECOME ENTITLED FOR CLAIM OF DEDUCTION ON SUCH POSITIVE INCOME. IN THE INTEREST OF JUSTICE AND FAIRLY, WE RESTORE THE MATTER BACK TO THE FILE OF THE AO FOR DECIDING AFRESH THE ASSESSEES CLAIM FOR DEDUCTION U/S. 10B IN RESPECT OF ENHANCED IN COME DUE TO THE TRADING ADDITION SO MADE BY THE AO. IF THE AO FINALLY FINDS THAT AFTER GIVING APPEAL EFFECT TO THE ORDER OF THE TRIBUNAL, ASSESSEE IS HAVING POSITIVE INCOME, WHICH IS ELIGIBLE FOR DEDUCTION U/S. 10B, THE SAME SHOULD BE CONSIDERED AS PER LAW . WE DIRECT ACCORDINGLY. ITA NO. 5512 / 11 12 9 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED IN PART FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25/07/ 201 4 . 2014 SD/ - SD/ - ( ) ( SANJAY GARG ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 25 / 0 7 /2014 /PKM , PS COPY OF THE ORDER F ORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) - X, MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//