DCIT CIR - 3(1), MUMBAI V. M/s. GUJARAT AMBUJA CEMENTS LTD., MUMBAI

ITA 570/MUM/2007

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2501 (ITAT-MUMBAI)
• Duration Of Justice: 9 year(s) 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 03-10-2016
• Assessment Year: 1998-1999
• Appeal Filed On: 18-01-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Business expenditure; Rule of consistency; Question of law; Revenue expenditure
• Section: 43B; 244A; 80HHC; 14A; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL,MUMBAI BENCH G, MUMBAI BEFORE SHRI R.C SHARMA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.570/MUM/2007 FOR ASSESSMENT YEAR: 1998-1999 AND ITA NO.1415/MUM/2007 FOR ASSESSMENT YEAR: 1999-2000 DCIT RANGE 3(1), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. VS. GUJARAT AMBUJA CEMENTS LIMITED, 122, MAKER CHAMBERS, III, NARIMAN POINT, MUMBAI-400021. PAN: AAACG0569P . (APPELLANT) (RESPONDENT) ITA NO.3359/MUM/2005FOR ASSESSMENT YEAR: 2000-01 GUJARAT AMBUJA CEMENTS LIMITED, 122, MAKER CHAMBERS, III, NARIMAN POINT, MUMBAI-400021. PAN: AAACG0569P VS. DCIT RANGE 3(1), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. (APPELLANT) (RESPONDENT) ITA NO.4373/MUM/2005 FOR ASSESSMENT YEAR: 2000-01 DCIT RANGE 3(1), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 GUJARAT AMBUJA CEMENTS LIMITED, 122, MAKER CHAMBERS, III, NARIMAN POINT, MUMBAI-400021. PAN: AAACG0569P (APPELLANT) (RESPONDENT) REVENUE BY MISS VIDISHA KALRA CIT --DR ASSESSEE BY SH. SOUMEN ADAK & HARISH AGGARWAL DATE OF HEARING 03.10.2016 DATE OF PRONOUNCEMENT 21.10. 2016 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH JUDICIAL MEMBER 1. THESE FOUR APPEALS U/S 253 OF INCOME TAX ACT(ACT) A RE DIRECTED AGAINST THE ORDER OF CIT(A) XXVII FOR AYS 1998-99 TO 2000-01. AS ALL T HE APPEALS ARE CONNECTED THUS ITA NOS. 570 & 1415/M/2007& 3359 & 4373/M/05 GU JARAT AMBUJA CEMENTS LTD. 2 ALL WERE CLUBBED TOGETHER, HEARD AND ARE DECIDED BY COMMON ORDER. THE APPEAL ITA NO. 570/M/2007 FOR AY1998- 99 AND ITA NO. 1415/M/20 074 FOR AY 1999- 2000 ARE DIRECTED BY REVENUE AGAINST THE DELETING OF PEN ALTY, ITA NOS 3359&4373/ M/2005 ARE CROSS APPEALS FOR AY 2000-01. 2. FIRST, WE SHALL TAKE UP APPEAL OF REVENUE FOR ASSES SMENT YEAR 1998-1999, BEING ITA NO. 570/M/2005. THE REVENUE HAS RAISED AS MANY AS S IX EFFECTIVE GROUNDS OF APPEAL WHICH ARE SUMMARISED AS UNDER; (I) LEARNED CIT(A) ERRED IN DELETING THE PENALTY IN RES PECT OF DISALLOWANCE OF CONSULTANCY CHARGES OF RS. 8,40,000/- AND SERVICE C HARGES PAID OF RS. 151048/-. (II) LEARNED CIT(A) ERRED IN DELETING THE PENALTY IN RES PECT OF DISALLOWANCE OF PREMIUM PAID FOR LEASEHOLD LAND AMOUNTING TO RS. 21 ,07,945/- (III) LEARNED CIT(A) ERRED IN DELETING THE PENALTY IN RES PECT OF DISALLOWANCE OF NON- COMPETE FEES OF RS. 50 LAKHS. (IV) LEARNED CIT(A) ERRED IN DELETING THE PENALTY IN RES PECT OF NON-ALLOWANCE OF EXCLUSION OF EXPORT PROFIT UNDER SECTION 80 HHC COM PUTED BY APPLYING THE PERCENTAGE OF EXPORT TURNOVER WITH THE TOTAL TURNOV ER ON THE PROFIT AS PER P&L ACCOUNT. (V) LEARNED CIT(A) ERRED IN DELETING THE PENALTY ON NON -ALLOWANCE OF EXCLUSION OF CAPITAL, PROFIT IN COMPUTING BOOK PROFIT UNDER SECT ION 115 JA. (VI) LEARNED CIT(A) ERRED IN DELETING THE PENALTY ON DEN IAL OF EXCLUSION OF DEDUCTION UNDER SECTION 80 IA ON PROFIT DERIVED BY AN INDUSTR IAL UNDERTAKING LOCATED IN INDUSTRIAL BACKWARD STATE . 3. WE HAVE HEARD RIVAL CONTENTIONS OF THE LD REPRESENT ATIVE OF THE PARTIES AT LENGTH AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE L D AR FOR ASSESSEE WOULD ARGUE THAT GROUND NO.1,3,4 AND 6 ARE COVERED IN HIS FAVOU R AS THE ADDITIONS IN THE QUANTUM ASSESSMENT ON THE BASIS OF WHICH PENALTY WAS LEVIED HAS BEEN DELETED IN APPEAL BY THIS TRIBUNALIN ITA NO. 2524 /M/2005. THE LD AR OF THE ASSESSEE FILED STATEMENT OF CHART AND COPY OF THE ORDER OF THE TRIBUNAL DATED 0 5.08.2016 IN ITA NO. 2524 /M/2005. THE LD DR FOR REVENUE HAS ADMITTED THE CON TENTION OF THE LD AR FOR ASSESSEE. 4. WE HAVE SEEN THE ORDER OF THE TRIBUNAL IN ITA NO. 2 524/M/2005, WHEREIN THE ADDITION OF RS. 840,000/- AND RS.151,048/- ON ACCOU NT OF CONSULTANCY CHARGES WAS DISCUSSED IN GROUND NO 2(B)& 3(A)HOLDING AS UNDER:- GROUND NO.2 & 3(A) TO 3(E) 4. THESE GROUNDS RELATE TO DISALLOWANCE OF CONSULT ANCY CHARGES FOR SERVICESOF RS.1,51,048/-. 4.1 WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES ON THIS GROUND AND WE HAVEALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PAS SED BY THE REVENUE AUTHORITIES. LD. AR SUBMITTED THAT THE ASSESSEE HAS APPOINTED MR.S.K.SE KHSARIA FOR ADVICE IN CIVIL CONSTRUCTION PERTAINING TO FACTORY BUILDINGS AND HAS APPOINTED M R. L.M. HIRANI FOR ADVICE IN CONSTRUCTION ITA NOS. 570 & 1415/M/2007& 3359 & 4373/M/05 GU JARAT AMBUJA CEMENTS LTD. 3 AND REGULAR MAINTENANCE OF COLONY. TOWARDS THIS A SSESSEE HAS INCURRED CONSULTANCY AND SERVICE CHARGES. LD. AR SUBMITTED THAT THE AO WHILE FOLLOWING THE ORDER OF EARLIER YEARS HAD DISALLOWED THE EXPENDITURE BY TREATING THE SAME AS CAPITAL NATURE. IT WAS FURTHER ARGUED BY LD. AR THAT CIT(A) HAS SUSTAINED THE SAID DISALLOWANCE ERRONEOUSLY. ITWAS ALSO ARGUED BY LD. AR THAT SIMILAR GROUND WAS ALLOWED BY HONBLE ITAT IN ASSESSES OWN CASE FOR AY 1995-96, 1996- 97, 1997-98. IN THIS RESPECT OUR ATTENTION WAS DRAW N TO PAGE NO. 5 &7 AND PARA 8-11 IN SUPPLEMENTARY PAPER BOOK AT PAGE NO. 53-55. 8 . THE FOURTH GROUND RAISED BY THE ASSESSEE IS AS FO LLOWS: '4(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF CONSULTANCY CHARG ES AMOUNTING TO RS. 5,40, 000/ - BY HOLDING THAT THE SAID EXPENDITURE IS CAPITAL IN NAT URE. 4(B). THAT ON THE FACTS AND IN THE CIRCUMSTANCES IF THE CASE, THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT THE EXPENDITURE ON ACCOUN T OF CONSULTANCY CHARGES AMOUNTING TO RS,5,40,OOO/- IS OF REVENUE IN NATURE IN VIEW A/TH E DECISION OF ITAT IN THE APPELLANT'SOWN CASE ON AN IDENTICAL ISSUE. 4((C) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT BY INCURRING THE SAID EXPENDITURE, 110 NEW ASSETS OR ADVANTAGE OF ENDURING NATURE WAS BROUGHT INTO EXIST ENCE. THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE IN ASSESSEE'S OWN CASE IN ITA NO.2292/M/94 FOR A.Y. 1990-91 IN WHICH IT HAS BEEN HELD AS UNDER : 'AS REGARDS CONSULTANCY FEES, LD. COUNSEL DREW OUR ATTENTION TO THE FINDING BY THE AO THAT THE CONSTRUCTION OF BUILDING, STAFF QUARTERS ETC. H AD ALREADY BEEN COMPLETED. ON THE BASIS OF THAT FINDING, THE AO HAD ALLOWED DEPRECIATION. THE LD. COUNSEL POINTED OUT THAT SINCE CONSTRUCTION HAD ALREADY BEEN COMPLETED, THE IMPUGN ED CONSULTANCY FEES WERE FOR THE PROPER MAINTENANCE OF THE PROPERTY AND HENCE ADMISS IBLE AS REVENUE DEDUCTION. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN THE LI GHT OF THE FACTS AND FINDINGS AS STATED ABOVE, THE LEGAL PROVISIONS AND THE JUDICIAL PRONOU NCEMENTS ON THE SUBJECT, WE ARE INCLINED TO UPHOLD THE ORDER OF CIT(A) ON THIS GROUND. THE C IT(A) HAS RIGHTLY HELD THAT THE IMPUGNED EXPENDITURE IS NOT DIRECTLY RELATED TO CREATION OF NEW CAPITAL ASSETS AND IS IN THE NATURE OF REVENUE EXPENDITURE. IN THIS VIEW, OF THE MATTER, T HE DEPRECIATION ALLOWED BY AO ON RS.1,51,995/- IS REQUIRED TO BE WITHDRAWN. THE GROU ND OF APPEAL FAILS. RESPECTFULLY FOLLOWING THE ABOVE DECISION, THIS GRO UND OF THE APPEAL IS ALLOWED. 10. GROUND NO. 5 RAISED BY THE ASSESSEE READS AS FO LLOWS: 5(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF CHARGES FOR SERVI CE AMOUNTING TO RS.1,17,939/- BY HOLDING THAT THE SAID EXPENDITURE IS CAPITAL IN NATURE. 5(B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT THE EXPENDITURE ON ACCOUNT OF CHARGES FOR SERVICE AMOUNTING TO RS.1,17,939/- IS O FREVENUE IN NATURE IN VIEW OF TH E DECISION OF ITAT IN THE APPELLANTS OWN CASE ON AN IDENTICAL ISSUE. 5(C) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT BY INCURRING THE SAID EXPE NDITURE NO NEW ASSETS OR ADVANTAGE OF ENDURING NATURE WAS BROUGHT INTO EXISTENCE. ITA NOS. 570 & 1415/M/2007& 3359 & 4373/M/05 GU JARAT AMBUJA CEMENTS LTD. 4 11. THIS ISSUE IS COVERED BY THE DECISION IN ASSESS EES OWN CASE IN ITANO.4032/M/99 FOR THE A.Y. 1994-95 IN WHICH IT HAS BEEN HELD AS UNDER: GROUND NO.3 OF THE APPEAL READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND INLAW THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE PAYMENT OFRS.97,512/- MADE TO SHRI HIRANI AS REVENUE EXPENDITURES. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF TH E PARAGRAPHS 9 AND 10 OF THE ORDER PASSED IN ITA NO.4189/B/96 FOR THE A.Y. 1 992093, AS THE CIRCUMSTANCES AND NATURE OF THAT CASE ARE SIMILAR TO THAT OF PREV IOUS YEAR AND HENCE SERVICE CHARGES TO THE EXTENT OF RS.97,512/- IS IN THE NATU RE OF REVENUE EXPENDITURE AND HENCE THIS GROUND OF REVENUES APPEAL IS DISMISSED. 4 .2 IN VIEW OF THE AFORE MENTIONED DECISION OF HONB LE ITAT IN FAVOUR OF ASSESSEE, WHILE ADHERE TO THE PRINCIPLES OF JUDICIAL CONSISTE NCY AND WHILE RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCH WE ALLOW THE ISSU E IN FAVOUR OF ASSESSEE AND ADDITIONS MAD BY AO AND SUSTAIN BY CIT(A) ARE DELET ED. 5. THE DISALLOWANCE OF NON-COMPETE FEE WAS DISCUSSED I N ITA NO.2524/M/2005 VIDE GROUND NO 4(A) &(B), HOLDING AS UNDER: - GROUND NO.4(A) & 4(B): 5.THIS GROUND RELATES TO DISALLOWANCES OF EXPENSES ON ACCOUNT OF NON-COMPLETEFEES AS BUSINESS EXPENDITURE AMOUNTING TO RS.50,00,000/- 5.1. WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTI ES ON THIS GROUND AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS TH E ORDERS PASSED BY THE REVENUE AUTHORITIES. LD. AR REPRESENTING THE ASSESSEE SUBMI TTED THAT THE ASSESSEE HAS ENTERED INTO AN AGREEMENT WITH MR. D.K. MODI FOR (I) TRANSF ER OF CONTROL AND MANAGEMENT IN MODI CEMENTS LTD.(II) RESIGNING AS MANAGING DIRECTO R(III) GETTING HIS NOMINEES RESIGN FROM THE BOARD AND(IV) FOR NOT CARRYING ON T HE BUSINESS OF MANUFACTURING OR MARKETING OF CEMENT FOR 5 YEARS WITHIN RADIUS OF 25 0 KM OF THE EXISTING PLANT. 5.2. LD. AR ARGUED THAT THE AO HAS HELD THAT THE PA YMENT WAS NOT MADE TOWARD OF COMPETITION BUT TO ACQUIRE MANAGEMENT CONTROL. THE SAME RESULTS IN DERIVING ENDURING BENEFITS AND HENCE THE EXPENDITURE WAS CON SIDERED BY THE AO IS CAPITAL IN NATURE. LD. AR FURTHER ARGUED THAT THE CIT(A) HAS A LSO ERRONEOUSLY UPHELD THE ORDER OF AO. LD. DR REPRESENTING THE REVENUE RELIED UPON THE ORDERS PASSED BY LOWER AUTHORITIES. 6. AFTER CONSIDERING THE FACTS OF THE CASE WE NOTIC ED THAT CONTROVERSY IN QUESTION RELATES TO MAKING PAYMENT ON ACCOUNT OF NON-COMPETE FEES AND CONSIDERING THE SAME TO THE BUSINESS EXPENDITURE. UNDER THE SIMILAR FACT S THE HONBLE MADRAS HIGH COURT IN CASE OF CARBORANDUM VS. JCIT IN ITA NO.244 OF 20 06 AS HELD THAT THE PAYMENT OF NON COMPETE FEES FOR FRUITFUL EXERCISE OF BUSINESS IS A COMMERCIAL DECISION AND HENCE SHOULD BE TREATED AS A REVENUE EXPENDITURE. FURTHE R IN THE CASE OF CIT VS. EICHER LTD. (2008) 302 ITR 249 (DEL)IT HAS BEEN HELD PAYM ENT OF NON COMPETE FEES HAS NOT RESULTED IN ACQUISITION OF CAPITAL ASSET. BUT MEREL Y ELIMINATED COMPETITION FOR A WHILE ITA NOS. 570 & 1415/M/2007& 3359 & 4373/M/05 GU JARAT AMBUJA CEMENTS LTD. 5 AND RESTRICTIVE COVENANT WAS NEITHER PERMANENT NOR EPHEMERAL. HENCE, THE ADVANTAGE WAS NOT OF AN ENDURING NATURE. 6.1 IN ADDITION TO THE ABOVE WE ALSO FOUND THAT SIM ILAR GROUNDS WERE ALSO CONSIDERED IN THE FOLLOWING CASE JCIT VS. SYNERGY CREDIT CORP ORATION LTD.(2006) 9 SOT 75 (MUM) AND IN THE CASE OF ACIT VS. CLARIANT CHEMICA LS (I)LTD.(ITA NO.7428/MUM/2011). AFTER CONSIDERING AFORE MENTIONE D JUDGMENTS WE FOUND THAT THE SIMILAR POINTS HAVE ALREADY BEEN CONSIDERED BY HON BLE HIGH COURT AS WELL AS CO- ORDINATE BENCH OF ITAT. 6.2 IN VIEW OF THE AFORE MENTIONED DECISION OF HON BLE ITAT IN FAVOUR OF ASSESSEE, WHILE ADHERE TO THE PRINCIPLES OF JUDICIAL CONSISTE NCY AND WHILE RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCH WE ALLOW THE ISSU E IN FAVOUR OF ASSESSEE AND ADDITIONS MAD BY AO AND SUSTAIN BY CIT(A) ARE DELET ED. WE ALLOW THIS GROUND. 6. THE NON-ALLOWANCE OF EXCLUSION OF PROFIT OF HIMACHA L UNIT WAS DISCUSSED IN GROUND NO 9(A)(B) AND DISALLOWANCE OF EXCLUSION OF DEDUCTI ON U/S 80HHC WAS DISCUSSED VIDE GROUND NO.10(A)(B) IN ITA NO. 2524/M/2005 AND DELETION OF PENALTY FOR AND ALL THE DISALLOWANCES/ ADDITIONS OF DELETED HOLDING AS UNDER:- 11. THIS GROUND RELATES TO NON-ALLOWANCE OF EXCLUS ION OF THE PROFITS OF HIMACHALUNIT AS PER THE BOOKS IN COMPUTING THE BOOK PROFIT U/S 1 15JA AMOUNTING TORS.58,57,93,526/- 11.1 WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIE S ON THIS GROUND AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS TH E ORDERS PASSED BY THE REVENUE AUTHORITIES. LD. AR REPRESENTING THE ASSESSEE HAS C LAIMED EXCLUSION OF PROFIT COMPUTED AS PER BOOKS OF HIMACHAL PRADESH UNIT LOCATED IN BA CKWARD AREA IN COMPUTING BOOK PROFIT U/S 115JA IN TERMS OF CLAUSE (V) OF THE EXPL ANATION TOSEC.115JA BUT THE AO HELD THAT ASSESSEE CAN CLAIM EXCLUSION ONLY OF THE PROFI T COMPUTED U/S 80IA FOR COMPUTING TOTAL INCOME UNDER THE NORMAL PROVISIONS. LD. AR SU BMITTED THAT CIT(A) HAS ERRONEOUSLY UPHELD THE ORDER OF AO WHEREAS THE SIMI LAR GROUND HAS ALREADY BEEN DECIDED BY ITAT IN ASSESSEES OWN CASE FOR A.Y. 199 7-98 IN ITA NO.1859/MUM/2004 IN THIS RESPECT OUR ATTENTION WAS DRAWN TO PAGE NO. 7- 8 AT PARA 2.6 TO 2.6.1 OF PAGE NO.24- 25 OF SUPPLEMENTARY PAPER BOOK. 2.6 THE SEVENTH DISPUTE IS REGARDING NOT ALLOWING THE EXCLUSION OF PROFIT FROM THE HIMACHAL UNIT COMPUTED AS PER BOOKS WHILE COMPUTING THE BOOK PROFIT AS PER CLAUSE (V) TO EXPLANATION TO SECTION 115JA(2). THE INCOME FROM HIMACHAL UNIT WAS EXEMPT UNDER SECTION 80IA. THE AO HELD THAT INC OME AS COMPUTED UNDER THE PROVISIONS OF THE ACT AND AS REDUCED BY BROUGHT FOR WARD LOSSES WAS ONLY TO BE DEDUCTED. CIT(A) UPHELD THE VIEW OF THE AO THAT THE INCOME COMPUTED UNDER THE PROVISIONS OF ACT HAS TO BE DEDUCTED BUT HE DIRECTE D NOT TO DEDUCT THE BROUGHT FORWARD LOSSES. 2.6.1 AFTER HEARING BOTH THE PARTIES WE FIND THAT T HIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN CASE OF TUSHAKO PUMP LTD. (2SOT 556) IN WHICH IT HAS BEEN HELD THAT FOR THE PURPOSE OF C OMPUTING BOOK PROFIT UNDER SECTION 115JA, THE PROFIT OF INDUSTRIAL UNDERTAKING ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA MUST BE COMPUTED AS PER THE BOOKS OF A CCOUNTS AND NOT AS PER THE ITA NOS. 570 & 1415/M/2007& 3359 & 4373/M/05 GU JARAT AMBUJA CEMENTS LTD. 6 PROVISION OF THE ACT. RESPECTFULLY FOLLOWING THE SA ID DECISION WE HELD THAT THE PROFIT OF THE HIMACHAL UNIT COMPUTED AS PER THE BOO KS AND AFTER MAKING ADJUSTMENTS AS PERMISSIBLE UNDER SECTION 115JA WILL ONLY BE EXCLUDED WHILE COMPUTING THE BOOK PROFIT. GROUND NO.10(A)&10(B) 12. THIS GROUND RELATES TO NON-ALLOWANCE OF EXCLUSI ON OF DEDUCTION U/S 80HHCCOMPUTED ON PROFIT OF THE BUSINESS AS PER THE ACCOUNTS PREPARED UNDER THE COS. ACT IN COMPUTING BOOK PROFIT U/S 115JA AMOUNTI NG TO RS.11,11,94,842/-. 12.1 WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIE S ON THIS GROUND AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY THE REVENUE AUTHORITIES. LD. AR REPRESENTING THE ASSESS EE SUBMITTED THAT IN COMPUTING BOOK PROFIT U/S 115JA, THE ASSESSEE HAS CLAIMED EXC LUSION OF DEDUCTION U/S 80HHCBY CONSIDERING THE PROFIT AS PER BOOKS OF ACCO UNTS BUT THE LD. AO WHILE FOLLOWING THE DECISION OF ROYAL CUSHION VINYL PRODU CTS LTD. VS. DCIT (1993) 47 ITD 111(BOM). LD. AR FURTHER ARGUED THAT CIT(A) HAS ALSO ERRONEOUSLY UPHELD THE ORDER PASSED BY AO. LD. AR ARGUED THAT THE HON BLE ITAT MUMBAI BENCH IN ASSESSES OWN CASE FOR A.Y. 1997-98 IN ITA NO.1859/M UM/04 IN THIS RESPECT OUR ATTENTION WAS DRAWN TO PAGE NO. 7-8 AT PARA 2.6 TO 2.6.1 OF SUPPLEMENTARY PAPER BOOK PAGE NO. 24-25. THEREFORE, CONSIDERING AFORE MENTIONED FACTS, THIS GROUND RAISED BY ASSESSEE IS ALLOWED. 7. CONSIDERING THE FACTS AND THE LEGAL POSITION THAT T HE ADDITIONS / DISALLOWANCE ON THE BASIS OF WHICH THE PENALTY IS BASED, WAS DELETED BY THE COORDINATE BENCH IN QUANTUM APPEAL VIDE ITA NO.2524/M/2005, THUS THE GROUND NO. 1,3,4 AND 6 RAISED BY REVENUE ARE DISMISSED. 8. GROUND NO.2 RELATES WITH THE DELETION OF PENALTY BY LD CIT(A) IN RESPECT OF DISALLOWANCE OF PREMIUM PAID FOR LEASE HOLD LAND AM OUNTING TO RS.21,07,945/-. THE LD AR FOR THE ASSESSEE ARGUED THAT PENALTY WAS LEVI ED BY AO AS THE DISALLOWANCE WAS UPHELD BY CIT(A) IN QUANTUM ASSESSMENT. THE PENALTY WAS DELETED BY LD CIT(A) BY FOLLOWING THE DECISION OF HIS PREDECESSOR IN AY 199 6-97. IT WAS FURTHER ARGUED THAT AT THE TIME OF FILING OF RETURN THE ISSUE WAS SQUAR ELY COVERED BY THE DECISION OF KERALA HIGH COURT IN CASE OF CIT VS H.M.T. (1993)20 3ITR 0820 (KAR). THE SIMILAR CLAIM WAS ALLOWED IN AY 1997-98. THE LD AR FOR THE ASSESSEE WOULD ARGUE THAT THIS ISSUE IS HIGHLY DEBATABLE AND DIVERGENT VIEWS ARE A VAILABLE THUS PENALTY ORDER WAS RIGHTLY DELETED BY LD CIT(A). THE LD AR FOR THE ASS ESSEE FURTHER RELIED UPON THE DECISION OF CIT VS RELIANCE PETROPRODUCTS 322 ITR 158 (SC) AND DECISION OF DELHI HIGH COURT IN CIT VS NALWA SONS INVESTMENTS LTD 327 ITR 543(DEL). ON THE OTHER ITA NOS. 570 & 1415/M/2007& 3359 & 4373/M/05 GU JARAT AMBUJA CEMENTS LTD. 7 THE LD DR FOR THE REVENUE SUPPORTED THE ORDER OF AO AND WOULD ARGUE THAT THE ORDER OF LD CIT(A) BE REVERSED AND THE ORDER OF AO MAY BE RESTORED. 9. WE HAVE CONSIDERED THE RIVAL CONTENTIONS OF THE LD REPRESENTATIVES OF THE PARTIES AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. A T THE TIME OF FILING OF RETURN THE ASSESSEE CLAIMED DEDUCTION ON ACCOUNT OF PREMIUM PA ID ON LEASE-HOLD LAND, THE SAME WAS DENIED BY AO. IN APPEAL THE DISALLOWANCE WAS CO NFIRMED AND THEREAFTER PENALTY WAS LEVIED. THE ASSESSEE CLAIMED THAT AT THE TIME O F FILING OF RETURN OF INCOME THE ISSUE WAS COVERED IN FAVOUR OF ASSESSEE BY THE DECI SION OF KERLA HIGH COURT IN CIT VS. HMT (1993) 203 ITR 820. THE SIMILAR CLAIM WAS A LLOWED IN AY 1997-98 (PAGE 76 TO 79 OF PB). IT IS SETTLED LAW THAT WHERE TWO L EGALLY SUSTAINABLE VIEWS ARE AVAILABLE ON THE POINT AND THE ASSESSEE ADOPT ONE O F THE POSSIBLE VIEW IN PREFERENCE TO THE OTHER, THAN IT CANNOT BE CONSIDERED A CASE O F CONCEALMENT OF INCOME. THE SIMILAR VIEW WAS HELD IN UNIFLEX CABLES LTD. VS. DC IT (2012) 136 ITD 374 (MUM). MOREOVER, MERE DISALLOWANCE OF CLAIM WOULD NOT AUTO MATICALLY LEAD TO DRAW A CONCLUSION FOR CONCEALMENT OF INCOME. THUS, KEEPING IN VIEW THE PECULIARITY OF THE CASE, WE DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN DELETING THE PENALTY LEVIED BY AO IN RESPECT OF DISALLOWANCE OF PREMIUM PAID FOR LEAS E-HOLD. THUS, THIS GROUND OF APPEAL RAISED BY REVENUE HAS NO FORCE AND THE SAME IS DISMISSED. 10. GROUND NO.5 IS RELATED WITH DELETION OF PENALTY FOR NON-EXCLUSION OF PROFIT ON SALE OF INVESTMENT IN COMPUTING BOOK PROFIT. LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF AO AND PRAYED THAT THE PENALTY WAS DELETED BY LD. C IT(A) WITHOUT ANY BASIS. LD. AR OF THE ASSESSEE ARGUED THAT THE ASSESSEE MADE A CLA IM IN THE RETURN OF INCOME ON THE BASIS OF DECISION OF VARIOUS TRIBUNAL VIZ. SUTLEJ C OTTON MILLS LTD. VS. ACIT (1993) 45 ITD 22 (CAL), GKW LTD. VS. JCIT (2000) 74 ITD 61 (CAL) & ACIT VS. NORTH INDIA THEATERS P. LTD. (1996) 133 CTR 326 (DEL. TM). LD. AR OF THE ASSESSEE FURTHER ARGUED THAT AND SLP HAS BEEN ADMITTED IN THE SUPREM E COURT IN GWK LTD. VS. CIT IN SLP NO. 29862/2011 ON 03.07.2012. IT WAS FURTHER ARGUED THAT WHEN A SUBSTANTIAL QUESTION OF LAW IS ADMITTED, IT IS CERTAINLY A DEBA TABLE ISSUE AND IN SUCH CIRCUMSTANCES PENALTY CANNOT BE LEVIED. 11. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE AO LEVIED PENALTY ON ADDITIO N MADE IN THE NORMAL ITA NOS. 570 & 1415/M/2007& 3359 & 4373/M/05 GU JARAT AMBUJA CEMENTS LTD. 8 COMPUTATION AS WELL AS IN COMPUTATION OF BOOK PROFI T U/S. 115JA. THE LD. CIT(A) WHILE CONSIDERING THIS GROUND CONCLUDED THAT ASSESS EE LODGED CLAIM ON THE BASIS OF VARIOUS DECISIONS OF THE TRIBUNAL AND THE ASSESSEE S CLAIM FOR DEDUCTION BASED ON CERTAIN LEGAL CONTENTION COULD NOT BE TREATED AS A CASE OF CONCEALMENT OF INCOME WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT AND DELETED THE PENALTY. IT IS SETTLED LEGAL POSITION THAT WHERE TWO LEGALLY SUSTA INABLE VIEWS ARE POSSIBLE AND THE ASSESSEE HAS FOLLOWED ONE OF SUCH VIEW IN PREFERENC E OF THE OTHER THE SAME CANNOT BE CONSIDERED AS A CASE OF CONCEALMENT OF INCOME. MORE OVER, THE ISSUE IS DEBATABLE ONE AND AS PER OUR CONSIDERED OPINION, THE FINDINGS OF LD. CIT(A) DOES NOT REQUIRE ANY FURTHER INTERFERENCE. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMI SSED. ITA NO. 1415/MUM/2007 12. THE REVENUE HAS RAISED AS MANY AS SEVEN EFFECTIVE G ROUNDS OF APPEAL WHICH ARE SUMMARIZED AS UNDER: (I) LD. CIT(A) ERRED IN DELETING THE PENALTY IN RESPECT OF DISALLOWANCE OF CONSULTANCY AND SERVICE CHARGES AMOUNTING TO RS. 12 ,76,160/-. (II) LD. CIT(A) ERRED IN DELETING THE PENALTY IN RESPECT OF DISALLOWANCE OF PREMIUM PAID FOR LEASE-HOLD AMOUNTING TO RS. 20,92,371/-. (III) LD. CIT(A) ERRED IN DELETING THE PENALTY IN RESPECT OF EXCLUSION OF INTEREST U/S. 244A AGGREGATING TO RS. 2,41,45,436/-. (IV) LD. CIT(A) ERRED IN DELETING THE PENALTY ON ADDITIO N ON ACCOUNT OF UNUTILIZED MODVAT CREDIT OF RS. 16,49,695/-. (V) LD. CIT(A) ERRED IN DELETING THE PENALTY IN RESPECT OF NON-ALLOWANCE OF EXCLUSION OF EXPORT PROFIT U/S. 80HHC AMOUNTING TO RS. 5,68,28,102/-. (VI) LD. CIT(A) ERRED IN DELETING THE PENALTY IN RESPECT OF NON-ALLOWANCE OF EXCLUSION OF CAPITAL PROFIT IN COMPUTING BOOK PROF IT U/S. 115JA AMOUNTING TO RS. 3,70,27,738/-. (VII) LD. CIT(A) ERRED IN DELETING THE PENALTY ON DENIAL OF EXCLUSION OF DEDUCTION U/S 80IA ON PROFIT DERIVED BY UNDERTAKING IN BACKWARD STATE IN COMPUTING BOOK PROFIT FOR THE PURPOSE OF SECTION 115JA OF RS. 19,5 1,38,035/-. 13. WE HAVE HEARD LD. DR FOR THE REVENUE AND LD. AR OF THE ASSESSEE. LD. DR FOR REVENUE SUPPORTED THE ORDER OF AO AND PRAYED THAT O RDER OF CIT(A) MAY BE SET- ASIDE AND THAT ORDER OF AO MAY BE RESTORED. ON THE OTHER HAND, LD. AR FOR ASSESSEE ARGUED THAT GROUND NOS.1, 3, 4, 5 & 7 ARE COVERED I N HIS FAVOUR AS THE ADDITION/DISALLOWANCE ON THE BASIS OF WHICH THE PEN ALTY WAS LEVIED, WERE DELETED BY THIS TRIBUNAL IN ASSESSEES APPEAL IN ITA NO. 2486/ MUM/2005 FOR AY 1999-2000. LD. AR OF THE ASSESSEE FURTHER PLACED ON RECORD COP Y OF DECISION OF THE TRIBUNAL. IT ITA NOS. 570 & 1415/M/2007& 3359 & 4373/M/05 GU JARAT AMBUJA CEMENTS LTD. 9 WAS FURTHER ARGUED BY LD. AR THAT GROUND NOS. 2 & 6 ARE ALSO COVERED BY VARIOUS DECISIONS OF SUPERIOR COURTS AND NO PENALTY ORDER L IES AGAINST THE ASSESSEE. 14. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND SEEN THE ORDER OF THE TRIBUNAL WHEREIN THE ADDITIONS ON THE BASIS THE BA SIS OF PENALTY WAS LEVIED VIDE GROUND NO. 1, 3, 4,5 & 7 WERE DELETED IN ITA NO. 2 486/MUM/2005, WHICH ARE REFERRED BELOW. 15. GROUND NO. 1, RAISED IN THE PRESENT APPEAL IS RELA TED WITH THE PENALTY IN RESPECT OF DISALLOWANCE OF CONSULTANCY AND SERVICE CHARGES AMO UNTING TO RS. 12,76,160/- . THE COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES APP EAL IN QUANTUM ASSESSMENT DELETED THE AFORESAID ADDITION IN ITA NO. 2486/MUM/2005, ON THE BASIS OF WHICH THE PENALTY WAS LEVIED. THE RELEVANT FINDING OF THE TRIBUNAL AR E REPRODUCED BELOW: 6. GROUND NO.2 AND 3 , FOR OUR CONSIDERATION ARE DISALLOWANCE OF CONSULT ANCY CHARGES OF RS. 11,10,000/- AND SERVICE CHARGES OF R S. 1,66,160/-,. THE LD AR OF THE ASSESSEE ARGUED THAT SIMILAR DISALLOWANCE IN RESPEC T OF CONSULTANCY FEE WAS MADE AGAINST THE ASSESSEE IN AY-1990-91. AND DISALLOWANC ES OF SERVICE CHARGES WERE MADE IN AY 1992-93. HOWEVER, ON APPEAL THE FAA/CIT( A) ALLOWED THE SAME IN FAVOUR OF ASSESSEE , THE REVENUE FILED APPEAL BEFOR E ITAT AND BOTH THE GROUNDS WERE ALLOWED IN FAVOUR OF ASSESSEE. WE HAVE SEEN THAT IN AY-1990-91,THE REVENUE FILED APPEAL BEFORE ITAT, MUMBAI VIDE ITA NO. 2291/M/199 4, AND WHILE DEALING WITH THE SIMILAR GROUND RELATED WITH CONSULTANCY FEE THE COORDINATE BENCH PASSED THE FOLLOWING ORDER: 14.6 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS IN TH E LIGHT OF THE FACTS AND FINDINGS AS STATED ABOVE, THE LEGAL PROVISIONS AND THE JUDICIAL PRONOUNCEMENTS ON THE SUBJECT, WE ARE INCLINED TO UPHOLD THE ORDER OF THE CIT(A) ON THIS GROUND. THE CIT(A) HAS RIGHTLY HELD THAT THE IMPUGNED EXPENSES IS NOT DIRECTLY RELATED TO THE CREATION OF NEW CAPITAL ASSETS AND IN THE NATURE OF REVENUE EXPENDITURE. IN THIS VIEW OF THE MATTER, THE DEPRECIATION ALLOWED BY AO ON RS. 1,51,995/- IS REQUIRED TO BE W ITHDRAWN. THIS GROUND OF APPEAL IS FAILS . FURTHER, WE HAVE SEEN THAT IN AY-1992-93, THE REVEN UE FILED APPEAL BEFORE ITAT, MUMBAI VIDE ITA NO. 4189/M/1996, AND WHILE DEALING WITH THE SIMILAR GROUND RELATED WITH SERVICE CHARGES THE COORDINATE BENCH P ASSED THE FOLLOWING ORDER: 10. T HE LD COUNSEL FOR THE ASSESSEE CONTENDED AND THE LD . DR AGREED, THAT THE POINT AT ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNALS ORDER DATED 04 TH AUGUST 2003 PASSED IN THE CASE OF THE ASSESSEE ITS ELF IN ITA NO.2419-MUM-94 FOR A.Y. 1990-91. IT IS CLARIFIED TH AT CONSULTANCY FEES AS MENTIONED IN A.Y. 1990-91 AND SERVICE CHARGES AS ME NTIONED IN THE YEAR UNDER APPEAL ARE ONE AND THE SAME. WE FIND THAT THE CONTENTION OF THE LD. COUNSEL OF THE ASSESSEE IS CORRECT. RESPECTFULLY FO LLOWING THE AFORESAID TRIBUNALS ORDER AND FOR THE REASONS GIVEN THEREIN, WE HOLD THAT THE IMPUGNED EXPENDITURE IS NOT DIRECTLY RELATED TO THE CREATION OF NEW CAPITAL ASSET AND IS IN THE NATURE OF REVENUE EXPENDITURE. NO INTERFERENCE IS, THEREFORE, CALLED FOR IN THE ORDER OF THE CIT(A) ON THIS ISSUE. THE LD. COUNSEL ITA NOS. 570 & 1415/M/2007& 3359 & 4373/M/05 GU JARAT AMBUJA CEMENTS LTD. 10 OF THE ASSESSEE STATED AT THE BAR THAT NO DEPRECIAT ION WAS ALLOWED BY THE AO WHEN THE IMPUGNED EXPENDITURE WAS TREATED AS CAPITA L EXPENDITURE. IN VIEW OF THIS FACT, NO ORDER WITH REGARD TO WITHDRAWAL OF DEPRECIATION IS REQUIRED TO BE PASSED. THE APPEAL OF THE REVENUE FAILS ON THIS ISSUE. HENCE KEEPING IN VIEW THE ABOVE OBSERVATION OF CO-O RDINATE BENCH, WHEREIN THE ADDITIONS/ DISALLOWANCE HAS BEEN DELETED IN THE APPEAL IN QUAN TUM ASSESSMENT THUS NO PENALTY ORDER WOULD SURVIVE, HENCE THE GROUND NO. 1 OF THE APPEAL IS DISMISSED. 16. GROUND NO.2 RAISED IN THE PRESENT APPEAL IS RELATES TO DELETING THE PENALTY IN RESPECT OF DISALLOWANCE OF PREMIUM PAID FOR LEASE-HOLD AMOUNTI NG TO RS. 20,92,371/-.THIS GROUND OF APPEAL IS IDENTICAL TO GROUND NO. 2 OF ITA NO. 570/ MUM/2007 WHICH WE HAVE ALREADY DISMISSED. THUS, THIS GROUND OF APPEAL IS ALSO DISM ISSED ON IDENTICAL GROUNDS. 17. GROUND NO.3 RAISED IN THE PRESENT APPEAL IS RELATED TO DELETING THE PENALTY IN RESPECT OF EXCLUSION OF INTEREST U/S. 244A AGGREGATING TO RS. 2,41,45,436/-. 18. THE LD. DR FOR THE REVENUE ARGUED THAT THE LD. CIT( A) DELETED THE PENALTY WITHOUT ANY BASIS. THE LD. DR FOR THE REVENUE FURTHER ARGUED TH AT ORDER OF AO MAY BE RESTORED AND THAT LD. CIT(A) MAY BE REVERSED. THE LD. AR OF THE ASSES SEE ARGUED THAT AT THE TIME OF FILING THE RETURN OF INCOME CLAIM WAS MADE ON THE BASIS OF DEC ISION IN CASE OF CIT VS. HINDUSTAN HOUSING AND LAND DEVELOPMENT TRUST LTD. 161 ITR 524 (SC). IT WAS FURTHER ARGUED THAT WHERE THERE ARE TWO LEGALLY SUSTAINABLE VIEWS AND T HE ASSESSEE HAS ADOPTED ONE OF SUCH VIEW NO PENALTY LIES. 19. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND THE ORDER OF AUTHORITIES BELOW. THE LD. CIT(A) WHILE CONSIDERING THE APPEAL OF THE ASSESSEE CONCLUDED THAT WHILE MAKING A CLAIM FOR EXCLUSION OF INTEREST U/S 144A ASSESSEE H AD NOT CONCEALED ANY PARTICULAR OF INCOME OR HAD FURNISHED INACCURATE PARTICULAR OF INCOME. T HERE WAS NO MENS REA IN THE CLAIM LODGED BY ASSESSEE. IT IS CARDINAL PRINCIPLE OF LAW THAT MENS REA IS THE CRUCIAL INGREDIENT FOR INITIATION OF ANY QUASI-CRIMINAL PROCEEDING AND THE SAID INGREDIENT IS NON-EXISTENTIN CASE OF ASSESSEE. IT IS SETTLED LAW THAT MERE DISALLOWANCE OF CLAIM WOULD NOT ATTRACT PENALTY. THE AO HAS NOT SPECIFIED THAT ASSESSEE HAS CONCEALED ANY P ARTICULAR OF INCOME OR FURNISHED INACCURATE PARTICULAR WITH MENS REA . THE LD. DR COULD NOT CONVINCE US AS TO WHY THE DECISION OF LD. CIT(A) IN DELETING PENALTY IS NOT S USTAINABLE, THUS THIS GROUND OF APPEAL IS DISMISSED. 20. GROUND NO.4 RAISED IN THE PRESENT APPEAL IS RELATED TO DELETING THE PENALTY ON ADDITION ON ACCOUNT OF UNUTILIZED MODVAT CREDIT OF RS. 16,49,69 5/-. THE LD. DR FOR THE ASSESSEE ITA NOS. 570 & 1415/M/2007& 3359 & 4373/M/05 GU JARAT AMBUJA CEMENTS LTD. 11 SUPPORTED THE ORDER OF AO AND PRAYED THAT PENALTY O RDER PASSED BY AO BE RESTORED BY SETTING ASIDE THE ORDER OF LD. CIT(A). THE LD. AR O F THE ASSESSEE ARGUED THAT THE ADDITION/DISALLOWANCE ON THE BASIS OF WHICH THE PEN ALTY WAS LEVIED HAS BEEN DELETED BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ITA NO. 2486/ M/2005. WE HAVE CONSIDERED THE CONTENTION OF THE PARTIES AND PERUSED THE ORDER OF TRIBUNAL IN THE APPEAL OF THE ASSESSEE ON QUANTUM ASSESSMENT, WHEREIN THE FOLLOWING ORDER WAS PASSED: GROUND NO. 7 FOR OUR CONSIDERATION IS DISALLOWANCE OF UNUTILIZE D MODVAT CREDIT AS ON LAST DATE OF ACCOUNTING YEAR AS ADJUSTMENT U/S. 145 A OF THE ACT OF RS. 1,69,49,695/-. AR OF THE ASSESSEE HAS ARGUED THAT ASSESSEE IN THE REVISE D RETURN OF INCOME HAD ADJUSTED THE NET PROFIT FOR THE YEAR TO THE PROVISION OF SECTION 145 A WHICH HAS BEEN INSERTED W.E.F. 01.04.1999. RS. 42,42,649/- BEING THE DIFFERENCE BE TWEEN EXCISE DUTY OF RS. 1,75,01,154/- PAYABLE ON OPENING STOCK OF FINISHED GOODS AND RS. 1,32,58,505/- PAYABLE ON CLOSING STOCK OF FINISHED GOODS LYING IN THE FACTORY HAS BEEN ADJ USTED. THE ASSESSEE HAS ALSO CLAIMED DEDUCTION U/S. 43B OF EXCISE DUTY PAYABLE ON STOCK OF FINISHED GOODS AS ON 31.03.1999 OF RS. 1,32,58,505/-, DETAILS OF WHICH ARE AVAILABLE ON PA GE NO. 37 & 45 OF PAPER BOOK, THE AO WHILE MAKING THE ASSESSMENT CONCLUDED THAT IN CASE OF MELMOULD CORPORATION VS. CIT (1993) 202 ITR 789 (MUM) HELD THAT UNUTILIZED MODVA T CREDIT BALANCE SHALL BE ADDED TO THE CLOSING STOCK. THE CIT(A) WHILE DEALING WITH TH IS GROUND CONCLUDED THE UNUTILIZED MODVAT CREDIT AT THE END OF YEAR SHOULD BE ADDED TO THE INCOME OF ASSESSEE. HOWEVER, CORRESPONDING ADJUSTMENT IN THE OPENING STOCK SHOUL D ALSO BE MADE. AR OF THE ASSESSEE ARGUED THAT UNUTILIZED BALANCE OF MODVAT CREDIT IS NOTHING BUT EXCISE DUTY PAID ON INPUTS TO BE UTILIZED ON FUTURE DISPATCH OF FINISHED GOODS . THE SAID CREDIT IS NOT RELATED TO THE CLOSING STOCK OF RAW-MATERIAL AND SHOULD NOT BE ADD ED TO THE CLOSING STOCK AND RELIED UPON 14 DTR 206 MUM, HAWKINS COOKERS LTD. VS. ITO, CIT V S. GODREJ & BOYCE MFG. CO. LTD. (2008) 2 DTR 36(BOM) , DCIT VS. VENUS WIRE INDUSTRI ES LTD. (2006) 99 TTJ 561 (MUM) & DCIT VS. M/S AXIS ELECTRICAL COMPONENTS (I) (P) LTD . (2011-TIOL-351-ITAT, MUM) AND ARGUED THAT THE DECISION OF MELMOULD CORPORATION VS . CIT 202 ITR 789 (BOM) IS NOT APPLICABLE AS SOON AS IN THE SAID CASE THE HONBLE HIGH COURT HAS DECIDED ON THE ISSUE OF CHANGE IN METHOD OF VALUING THE STOCK AND NOWHERE I T HAS BEEN UNUTILIZED MODVAT CREDIT SHOULD BE ADDED IS THE VALUE OF CLOSING STOCK OF FI NISHED GOODS. IN HAWKINS COOKERS LTD. VS. ITO, IT WAS HELD BY THE CO-ORDINATE BENCH THAT ADDI TION ON ENTIRE BALANCE IN MODVAT ACCOUNT IS NOT PROPER BECAUSE THE NATURE OF THIS AC COUNT IS PERSONAL ACCOUNT, AND ITEM OF ASSET SIDE OF BALANCE SHEET ALWAYS HAVING A DEBIT B ALANCE. FURTHER, EXCISE DUTY ADJUSTED THE CLOSING STOCK IS AN ELIGIBLE DEDUCTION U/S. 34B ON PAYMENT BASIS. FURTHER, CIT VS. GODREJ & BOYCE MFG. CO. LTD., IT WAS HELD BY JURISDICTIONAL HIGH COURT THAT MODVAT CREDIT OF EXCISE DUTY IS NOT INCLUDABLE IN THE VALUE OF CLOSING STOC K. IN DCIT VS. VENUS WIRE INDUSTRIES LTD., IT WAS HELD THAT WHEREIN ASSESSEE HAVING ACCOUNT FO R BOTH THE PURCHASE AND CLOSING STOCK, NET OF MODVAT CREDIT SUCH CREDIT SHOULD NOT BE ADDE D TO THE CLOSING STOCK IN DCIT VS. M/S AXIS ELECTRICAL COMPONENTS (I) (P) LTD. IT WAS HELD THAT THERE IS NO IMPACT ON PROFIT ACCOUNT OF ADJUSTMENT OF MODVAT CREDIT ON AN APPLICATION OF SECTION 145A. FROM THE ABOVE OBSERVATION, THE MODVAT CREDIT OF EXCISE DUTY IS NO T INCLUDABLE AS UNUTILIZED MODVAT CREDIT ON THE LAST DATE OF ACCOUNTING YEAR, HENCE, THIS GROUND IS ALSO ALLOWED IN FAVOUR OF ASSESSEE. 21. AS THE ADDITION/DISALLOWANCE HAS BEEN DELETED IN TH E APPEAL OF THE QUANTUM ASSESSMENT OF THE ASSESSEE, THUS, NO PENALTY ORDER SUSTAINED AGAI NST THE ASSESSEE. THUS, THIS GROUND OF APPEAL RAISED BY REVENUE IS DISMISSED. ITA NOS. 570 & 1415/M/2007& 3359 & 4373/M/05 GU JARAT AMBUJA CEMENTS LTD. 12 22. GROUND NO.5 IS RELATES WITH DELETING THE PENALTY I N RESPECT OF NON-ALLOWANCE OF EXCLUSION OF EXPORT PROFIT U/S. 80HHC AMOUNTING TO RS. 5,68,2 8,102/-. THE LD. DR FOR THE ASSESSEE SUPPORTED THE ORDER OF AO AND PRAYED THAT PENALTY O RDER PASSED BY AO BE RESTORED BY SETTING ASIDE THE ORDER OF LD. CIT(A). THE LD. AR O F THE ASSESSEE ARGUED THAT THE ADDITION/DISALLOWANCE ON THE BASIS OF WHICH THE PEN ALTY WAS LEVIED HAS BEEN DELETED BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ITA NO. 2486/ M/2005. WE HAVE CONSIDERED THE CONTENTION OF THE PARTIES AND PERUSED THE ORDER OF TRIBUNAL IN THE APPEAL OF THE ASSESSEE ON QUANTUM ASSESSMENT, WHEREIN THE FOLLOWING ORDER WAS PASSED: 12 .GROUND NO. 9 FOR OUR CONSIDERATION IS NON-ALLOWANCE OF EXCLUSIO N OF DEDUCTION U/S. 80HHC COMPUTED ON PROFIT OF THE BUSINESS AS PER ACC OUNT PREPARED UNDER COMPANIES ACT, IN COMPUTING BOOK PROFIT U/S. 115JA OF THE ACT. THE ASSESSEE CLAIMED EXCLUSION OF DEDUCTION U/S. 80HHE IN COMPUTING BOOK PROFIT U/S. 115JA. THE AO WHILE MAKING ASSESSMENT FOLLOWED THE ORDER OF EARLIER YEARS AND DENIED THE CLAIM TO THE ASSESSEE. CIT(A) CONFIRMED THE ORDER OF AO ON SIMILAR LINES. AR OF THE ASSESSEE ARGUED T HAT FOR THE YEAR 1997-98 SIMILAR CLAIM WAS DENIED BY THE REVENUE AUTHORITIES BUT IN THE AP PEAL BEFORE THE ITAT FOR AY 1997-98 IN ITA NO. 1859/MUM/2004. THE RELIEF WAS GRANTED TO TH E ASSESSEE. THE DEPARTMENT PREFERRED AN APPEAL BUT THE SAME HAS NOT BEEN ADMITTED IN THE HONBLE HIGH COURT AND THUS THE ISSUE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE, THE ASSE SSEE ALSO RELIED UPON THE JUDGMENT OF HONBLE SUPREME COURT IN CIT VS. BHARI INFORMATION TECHNOLOGIES SYSTEM (P) LTD. (2011) 62 DTR 337(SC) WHEREIN IT WAS HELD THAT DEDUCTION U /S. 80HHE IS TO BE WORKED OUT ON THE BASIS OF ADJUSTED BOOK PROFIT U/S. 115JA AND NOT ON THE BASIS OF PROFIT COMPUTED UNDER THE REGULAR PROVISION OF LAW IS APPLICABLE THE COMPUTAT ION OF PROFIT AND GAIN OF BUSINESS. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PARTIES AND NOTED THAT IN ITAT NO. 1859/MUM/2004: THE SEVENTH DISPUTE IS REGARDING NOT ALLOWING THE EXCLUSION OF PROFIT FROM THE HIMACHAL UNIT COMPUTED AS PER BOOKS WHILE COMPUTING THE BOOK PROFIT AS PER CLAUSE (V) TO EXPLANATION TO SECTION 115JA(2). THE INCOME FROM HIMACHAL UNIT WAS EXEMPT UNDER SECTION 80IA. THE AO HELD THAT INCOME AS COMPUTED UNDER THE PROVISIONS OF THE ACT AND AS REDUCED BY BROUGHT FOR WARD LOSSES WAS ONLY TO BE DEDUCTED. CIT(A) UPHELD THE VIEW OF THE AO THAT THE INCOME COMPUTED UNDER THE PROVISIONS OF ACT HAS TO BE DEDUCTED BUT HE DIRECTE D NOT TO DEDUCT THE BROUGHT FORWARD LOSSES. AFTER HEARING BOTH THE PARTIES WE FIND THAT THIS IS SUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN CASE OF TUSHAKO PUMP LTD. (2 SOT 556) IN WHICH IT HAS BEEN HELD THAT FOR THE PURPOSE OF C OMPUTING BOOK PROFIT UNDER SECTION 115JA, THE PROFIT OF INDUSTRIAL UNDERTAKING ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA MUST BE COMPUTED AS PER THE BOOKS OF A CCOUNTS AND NOT AS PER THE PROVISIONS OF THE ACT. RESPECTFULLY FOLLOWING THE S AID DECISION WE HOLD THAT THE PROFIT OF THE HIMACHAL UNIT COMPUTED AS PER THE BOO KS AND AFTER MAKING ADJUSTMENTS AS PERMISSIBLE UNDER SECTION 115JA WILL ONLY BE EXCLUDED WHILE COMPUTING THE BOOK PROFIT. WE HAVE CAREFULLY CONSIDERED THE CONTENTION OF THE AR OF ASSESSEE AND FOUND THAT THIS GROUND IS SQUARELY COVERED BY THE ORDER IN ITA NO. 1859/MUM/2004 IN ASSESSEES OWN CASE. KEEPING IN VIEW, THE PRINCIPLE OF CONSISTENCY THIS GROUND IS ALSO ALLOWED IN FAVOUR OF ASSESSEE. 23. AS THE ADDITION/DISALLOWANCE HAS BEEN DELETED IN TH E APPEAL OF THE QUANTUM ASSESSMENT OF THE ASSESSEE, THUS, NO PENALTY ORDER SUSTAINED AGAI NST THE ASSESSEE. THUS, THE GROUND NO.5 OF APPEAL RAISED BY REVENUE IS DISMISSED. ITA NOS. 570 & 1415/M/2007& 3359 & 4373/M/05 GU JARAT AMBUJA CEMENTS LTD. 13 24. GROUND NO.6 IS RELATES WITH DELETING THE PENALTY I N RESPECT OF NON-ALLOWANCE OF EXCLUSION OF CAPITAL PROFIT IN COMPUTING BOOK PROFIT U/S. 11 5JA AMOUNTING TO RS. 3,70,27,738/-.LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF AO. ON TH E OTHER HAND, LD. AR OF THE ASSESSEE ARGUED THAT ASSESSEE LODGED ITS CLAIM RELYING UPON THE DECISION OF SUTLEJ COTTON LTD. VS. ACIT 45 ITD 22 (CAL) AND GKW LTD. VS. JCIT 74 ITD 1 61(CAL). 25. WE HAVE CONSIDERED THE CONTENTION OF THE PARTIES AN D GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE CLAIM OF ASSESSEE FOR EXCLUSION OF PROFI T ON SALE OF INVESTMENT IN COMPUTING PROFIT U/S 115JA WAS DISALLOWED WHICH WAS SUSTAINED IN THE APPEAL. THE AO LEVIED PENALTY FOLLOWING THE DECISION OF CIT(A) IN AY 1998-99. WE HAVE ALREADY DISMISSED THE GROUND OF APPEAL IN ASSESSEES OWN CASE IN THE APPEAL OF REVE NUE FOR AY 1998-99 VIDE ITA NO.570/MUM/2007, THUS, THIS GROUND OF APPEAL IS DIS MISSED WITH SIMILAR OBSERVATION. 26. GROUND NO. 7 IS RELATES WITH DELETING THE PENALTY O N DENIAL OF EXCLUSION OF DEDUCTION U/S 80IA ON PROFIT DERIVED BY UNDERTAKING IN BACKWARD STATE IN COMPUTING BOOK PROFIT FOR THE PURPOSE OF SECTION 115JA OF RS. 19,51,38,035/-.THE LD. DR FOR THE ASSESSEE SUPPORTED THE ORDER OF AO AND PRAYED THAT PENALTY ORDER PASSED BY AO BE RESTORED BY SETTING ASIDE THE ORDER OF LD. CIT(A). THE LD. AR OF THE ASSESSEE ARG UED THAT THE ADDITION/DISALLOWANCE ON THE BASIS OF WHICH THE PENALTY WAS LEVIED HAS BEEN DELE TED BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ITA NO. 2486/M/2005. WE HAVE CONSIDERED THE CONTENTION OF THE PARTIES AND PERUSED THE ORDER OF TRIBUNAL IN THE APPEAL OF THE ASSESSEE ON QUANTUM ASSESSMENT, WHEREIN THE FOLLOWING ORDER WAS PASSED: 11. GROUND NO. 8 FOR OUR CONSIDERATION IS NOT ALLOWING THE DEDUCTIO N OF PROFIT OF HIMACHAL UNIT AS PER BOOKS OF ACCOUNT IN COMPUTING THE BOOK PROFIT U/S. 115JA OF THE ACT. THE ASSESSEE HAS CLAIMED EXCLUSION OF PROFIT COMPUTED A S PER BOOKS OF ACCOUNT OF THE HIMACHAL UNIT LOCATED IN BACKWARD AREA IN COMPUTING THE BOOK PROFIT UNDER CLAUSE 5 OF SECTION 115JA. THE AO WHILE MAKING ASSESSMENT CONCLUDED THA T ASSESSEE CAN CLAIM EXCLUSION ONLY OF THE PROFIT COMPUTED U/S. 80IA FOR COMPUTING TOTA L INCOME UNDER THE NORMAL PROVISION. CIT WHILE DEALING WITH THIS GROUND FOLLOWED THE DEC ISION OF CIT(A) IN EARLIER YEARS AND UPHELD THE ORDER OF AO. AR OF THE ASSESSEE ARGUED T HAT THIS GROUND IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF CO-ORDINATE BENCH OF T HIS TRIBUNAL IN ASSESSEES OWN CASE FOR AY 1997-98 IN ITA NO. 1859/MUM/2004. IN ITA NO. 185 9/MUM/2004 THE CO-ORDINATE BENCH OF THIS TRIBUNAL WHILE DEALING WITH THE SIMILAR GRO UND HELD AS UNDER: THE SEVENTH DISPUTE IS REGARDING NOT ALLOWING THE EXCLUSION OF PROFIT FROM THE HIMACHAL UNIT COMPUTED AS PER BOOKS WHILE COMPUTING THE BOOK PROFIT AS PER CLAUSE (V) TO EXPLANATION TO SECTION 115JA(2). THE INCOME FROM HIMACHAL UNIT WAS EXEMPT UNDER SECTION 80IA. THE AO HELD THAT INC OME AS COMPUTED UNDER THE PROVISIONS OF THE ACT AND AS REDUCED BY BROUGHT FORWARD LOSSES WAS ONLY TO BE DEDUCTED. CIT(A) UPHELD THE VIEW OF THE AO THAT THE INCOME COMPUTED UNDER THE PROVISIONS OF ACT HAS TO BE DEDUCTED BUT HE DIR ECTED NOT TO DEDUCT THE BROUGHT FORWARD LOSSES. AFTER HEARING BOTH THE PARTIES WE FIND THAT THIS IS SUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN CASE OF TUSHAKO PUMP LTD. (2 SOT ITA NOS. 570 & 1415/M/2007& 3359 & 4373/M/05 GU JARAT AMBUJA CEMENTS LTD. 14 556) IN WHICH IT HAS BEEN HELD THAT FOR THE PURPOSE OF COMPUTING BOOK PROFIT UNDER SECTION 115JA, THE PROFIT OF INDUSTRIAL UNDER TAKING ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA MUST BE COMPUTED AS PER THE BOOK S OF ACCOUNTS AND NOT AS PER THE PROVISIONS OF THE ACT. RESPECTFULLY FOLLOWI NG THE SAID DECISION WE HOLD THAT THE PROFIT OF THE HIMACHAL UNIT COMPUTED AS PE R THE BOOKS AND AFTER MAKING ADJUSTMENTS AS PERMISSIBLE UNDER SECTION 115JA WILL ONLY BE EXCLUDED WHILE COMPUTING THE BOOK PROFIT. AR OF THE ASSESSEE HAD ALSO ARGUED THAT DEPARTMENT PREFERRED AN APPEAL AGAINST THE ORDER OF ITAT FOR AY-1997-98 BUT THE SAME HAS NOT B EEN ADMITTED IN THE HONBLE HIGH COURT. WE HAVE CAREFULLY CONSIDERED THE CONTENTION OF THE AR OF ASSESSEE AND FOUND THAT THIS GROUND IS SQUARELY COVERED BY THE ORDER IN ITA NO. 1859/MUM/2004 IN ASSESSEES OWN CASE. KEEPING IN VIEW, THE PRINCIPLE OF CONSISTENCY THIS GROUND IS ALLOWED IN FAVOUR OF ASSESSEE. 27. AS THE ADDITION/DISALLOWANCE HAS BEEN DELETED IN TH E APPEAL OF THE QUANTUM ASSESSMENT OF THE ASSESSEE, THUS, NO PENALTY ORDER SUSTAINED AGAI NST THE ASSESSEE. THUS, THE GROUND NO.7 OF APPEAL RAISED BY REVENUE IS DISMISSED. IN THE RESUL T, APPEAL OF THE REVENUE IS DISMISSED. ITA NO. 3359/MUM/2005 FOR AY 2000-01 28. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL : 1. DISALLOWANCE OF PUJA/FUNCTIONS EXPENSES OF RS. 19,2 7,525/-. 2. DISALLOWANCE OF CONSULTANCY CHARGES OF RS. 12,00,00 0/- 3. DISALLOWANCE OF SERVICE CHARGES OF RS. 18,100/-. 4. DISALLOWANCE OF CLAIM OF ESOP EXPENSES OF RS. 2,44, 57,408/-. 5. DISALLOWANCE U/S. 14A OF RS. 1,30,000/- 6. (A TO C) ASSESSING INTEREST INCOME AND TRUCK HIRE C HARGES UNDER THE HEAD INCOME FROM OTHER SOURCES. NON-EXCLUSION OF ACTUAL EXPEND ITURE INCURRED TO EARN AFORESAID INCOME. WITHOUT PREJUDICE TO THE GROUND NO.8(A) DEP RECIATION ON TRUCKS. 7. DISCLAIMER OF DEPRECIATION. 8. DISALLOWANCE OF PROPORTIONATE AMOUNT OF PREMIUM ON LEASE HOLD LAND OF RS. 2201300/-. 9. DISALLOWANCE OF UNUTILIZED MODVAT CREDIT AS ON LAST DATE OF ACCOUNTING YEAR AS ADJUSTMENT U/S. 145A. 10. NON ALLOWANCE OF EXCLUSION OF PROFIT OF HIMACHAL UN IT AS PER BOOKS IN COMPUTING BOOK PROFIT U/S.115JA. 11. NON ALLOWANCE OF EXCLUSION OF DEDUCTION U/S. 80HHC COMPUTED ON PROFIT OF BUSINESS AS PER ACCOUNTS PREPARED UNDER THE COMPANIES ACT IN COMPUTING BOOK PROFIT U/S. 115JA. 12. NON EXCLUSION O FPROFIT ON SALE OF INVESTMENT IN CO MPUTING BOOK PROFIT U/S. 115JA. 29. THE LD. AR OF THE ASSESSEE ARGUED THAT GROUND NO.1 TO 3, 6, 10& 11 ARE COVERED IN FAVOUR OF ASSESSEE BY VARIOUS DECISION OF TRIBUNAL IN ASSESSEES OWN CASE. GROUND NO.4 IS COVERED IN FAVOUR OF ASSESSEE BY THE DECIS ION OF BANGALORE TRIBUNAL IN BIOCON LTD. VS. DCIT (2013) 25 ITR 602(BANG). (ITAT ) (SB). THE ASSESSEE IS NOT PRESSING GROUND NO.5 & 7.THE GROUND NO.8 & 12ARE C OVERED AGAINST THE ASSESSEE BY THE DECISION OF SPECIAL BENCH, MUMBAI ITAT IN CI T VS. MUKUND LTD. (2007) 106 ITD 231 (MUM)(SB). ITA NOS. 570 & 1415/M/2007& 3359 & 4373/M/05 GU JARAT AMBUJA CEMENTS LTD. 15 30. WE HAVE SEEN THE COPY OF DECISION IN ASSESSEES OWN CASE IN ITA NO. 2486/MUM/2005 FOR AY-1999-2000 WHEREIN GROUND NO.1 TO 3, 6, 9, 10 & 11 ARE COVERED IN FAVOUR OF ASSESSEE. THE LD. DR OF THE AS SESSEE HAS NOT DISPUTED THE FACTUAL POSITION, THUS, GROUND NO. 1 TO 3, 6, 9, 10 & 11 OF THE PRESENT APPEAL ARE ALLOWED AS THE SAME ARE COVERED IN FAVOUR OF ASSESS EE BY THE DECISION OF TRIBUNAL IN ITA NO2486/M/2005. 31. THE GROUND NO.4 IS RELATED WITH THE DISALLOWANCE OF ESOP EXPENSES OF RS. 2,44,57,408/-. WE HAVE SEEN THAT THIS GROUND OF APP EAL IS SQUARELY COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF BIOCON LTD. V S. DCIT(SUPRA). THE LD. DR FOR THE REVENUE HAS FAIRLY CONCEDED THAT THE FACTUAL AS WELL AS LEGAL POSITION. HENCE, THIS GROUND OF APPEAL IS ALLOWED IN FAVOUR OF ASSES SEE. 32. GROUND NO. 5 AND 7 WERE NOT PRESSED; HENCE BOTH THE SE GROUNDS OF APPEAL ARE DISMISSED. 33. THE GROUND NO.8 IS RELATES TO THE DISALLOWANCE OF P ROPORTIONATE AMOUNT OF PREMIUM ON LEASEHOLD LAND. THE LD. AR OF THE ASSESSEE FAIRL Y CONCEDED THAT THIS GROUND OF APPEAL IS COVERED AGAINST THE ASSESSEE BY THE DECIS ION OF SPECIAL BENCH OF ITAT MUMBAI IN JCIT VS. MUKUND LTD.(SUPRA). THUS, KEEPIN G IN VIEW THE SUBMISSION OF LD. AR OF THE ASSESSEE, THIS GROUND OF APPEAL IS DI SMISSED. 34. THE GROUND NO.12 IS RELATED WITH NON-EXCLUSION OF P ROFIT ON SALE ON INVESTMENT IN COMPUTING BOOK PROFIT U/S. 115JA. THE LD. AR OF THE ASSESSEE FAIRLY CONCEDED AND ARGUED THAT THIS GROUND OF APPEAL IS COVERED AGAINS T THE ASSESSEE BY THE DECISION OF SPECIAL BENCH OF ITAT, HYDERABAD IN CASE OF RAIN CO MMODITIES LTD. VS. DCIT (1010) 131 TTJ 514 (HYD.) (SB). KEEPING IN VIEW THE SUBMISSION OF LD. AR OF THE ASSESSEE, THIS GROUND OF APPEAL IS DISMISSED. 35. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO.4373/MUM/2005 36. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. DELETION OF DISALLOWANCE OF COMMUNITY WELFARE EXPEN SES OF RS. 64,41,428/- 2. DELETION OF DISALLOWANCE OF TEMPLE EXPENSES & PUJA EXPENSES RS. 6,63,382/- AD RS. 19,27,525/-. 3. DELETION OF DISALLOWANCE OF MINES PROSPECTING EXPEN SES OF RS. 20,93,707/-. 4. DELETION OF DISALLOWANCE OF FOREIGN EXCHANGE LOSS O F RS. 2,65,95,502/-. ITA NOS. 570 & 1415/M/2007& 3359 & 4373/M/05 GU JARAT AMBUJA CEMENTS LTD. 16 5. RESTRICTING THE DISALLOWANCE U/S. 14A TO RS. 50,000 /- AGAINST THE 2% OF THE DIVIDEND INCOME. 6. NON-INCLUSION OF SALES TAX AND EXCISE DUTY IN TOTAL TURNOVER FOR THE PURPOSE OF SECTION 80HHC. 7. ERRED IN DIRECTING THE AO TO MADE CORRESPONDING ADJ USTMENT OF MODVAT IN THE OPENING STOCK U/S. 145A. 37. THE LD. AR OF THE ASSESSEE ARGUED THAT GROUND NO. 1 TO 4 ARE COVERED IN FAVOUR OF ASSESSEE IN ASSESSEES OWN CASE IN VARIOUS DECISION OF MUMBAI TRIBUNAL FROM AY 1995-96 TO 1999-2000. AND GROUND NO.7 IS COVERED BY THE DECISION IN ASSESSEES OWN CASE FOR AY-1999-2000 IN ITA NO. 2653/MUM/2005. LD. CIT-DR NOT DISPUTED THE CONTENTION OF LD. AR OF THE ASSESSEE. WE HAVE SEEN THE COPY OF ORDER OF ITAT, MUMBAI IN ITA NO. 2653/M/2005 DATED 30.05. 2016 WHEREIN APPEAL OF THE REVENUE ON DELETING THE SIMILAR DISALLOWANCE WAS DI SMISSED. THUS, KEEPING IN VIEW THE SUBMISSION OF LD. AR OF THE PARTIES AND THE DEC ISION OF CO-ORDINATE BENCH IN ASSESSEES OWN CASE, THE GROUND NO. 1 TO 4 & 7 OF T HE APPEAL ARE DISMISSED. 38. THE GROUND NO.5 IS RELATED WITH RESTRICTING THE DIS ALLOWANCE U/S. 14A TO RS. 50,000/- AS AGAINST 2% OF DIVIDEND INCOME DISALLOWED BY AO. LD. AR OF THE ASSESSEE ARGUED THAT HE IS NOT OPPOSING THIS GROUND OF APPEAL RAISE D BY REVENUE. LD. DR FOR REVENUE ARGUED THAT IN CASE OF NON-OPPOSITION OF TH IS GROUND ON THE PART OF ASSESSEE, THIS GROUND OF APPEAL MAY BE ALLOWED. KEE PING IN VIEW THE SUBMISSIONS OF THE PARTIES, THIS GROUND OF APPEAL IS ALLOWED IN FAVOUR OF REVENUE. 39. THE GROUND NO.6 IS RELATED WITH NON-INCLUSION OF SA LES TAX AND EXCISE DUTY IN THE TOTAL TURNOVER FOR THE PURPOSE OF SECTION 80HHC. LD . DR FOR THE REVENUE SUPPORTED THE ORDER OF AO AND PRAYED FOR SETTING ASIDE THE OR DER OF LD. CIT(A). ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE ARGUED THAT THIS G ROUND OF APPEAL IS COVERED IN HIS FAVOUR BY THE DECISION OF HONBLE APEX COURT IN CIT VS. LAKSHMI MACHINE WORKS (2007) 290 ITR 667. THE HONBLE APEX COURT HELD THA T SALES TAX AND EXCISE DUTY DO NOT HAVE ANY ELEMENT OF TURNOVER. EXCISE DUTY AND SALES TAX ARE INDIRECT TAXES. THEY ARE RECOVERED BY ASSESSEE ON BEHALF OF GOVERNM ENT. THEREFORE, IF THEY ARE RELATABLE TO EXPORTS, THE FORMULA U/S. 80HHC WOULD BECOME UNWORKABLE. HENCE, EXCISE DUTY AND SALES TAX CANNOT FORM PART OF TURN OVER FOR THE PURPOSE OF COMPUTING DEDUCTION U/S. 80HHC. THUS, FOLLOWING THE DECISION OF HONBLE APEX COURT, THIS GROUND OF APPEAL RAISED BY THE REVENUE IS DISMISSED. ITA NOS. 570 & 1415/M/2007& 3359 & 4373/M/05 GU JARAT AMBUJA CEMENTS LTD. 17 40. IN THE RESULT, ITA NO. 4373/MUM/2005 IS PARTLY ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST OCTOBER, 2016 SD/- SD/- (R. C. SHARMA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI; DATED 21/10/2016 S.K.PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, (ASSTT.REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/