A.C.I.T., Circle-4(1), Agra V. M/s Bhole Baba Milk Food Ltd., Agra

ITA 58/AGR/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60187 (ITAT-AGRA)
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 17-07-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 15-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Earning of tax free income
• Section: 14A; 80IB; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO.42/AGR/2012 ASSESSMENT YEAR: 2008-09 BHOLE BABA MILK FOOD INDUSTRIES LTD., VS. DY. COMMISSIONER OF INCOME TAX 7/52D, NAGLA JAWAHAR, 4(1), AGRA. BYE PASS ROAD, AGRA. (PAN: AACCB 3948 F) ITA NO.58/AGR/2012 ASSESSMENT YEAR: 2008-09 ASSTT. COMMISSIONER OF INCOME TAX, VS. M/S. BHOL E BABA MILK FOOD CIRCLE 4(1), AGRA. INDUSTRIES LTD., 7/52D, NAGLA JAWAHAR, BYE PASS ROAD, AGRA. (PAN: AACCB 3948 F) (APPELLANTS) (RESPONDENTS) ASSESSEE BY : SHRI RAJENDRA SHARMA & SHRI R.M. SINGHAL, ADVOCATES REVENUE BY : SHRI WASEEM ARSHAD, SR. D.R. DATE OF HEARING : 17.07.2012 DATE OF PRONOUNCEMENT OF ORDER : 20.07.2012 ORDER PER A.L. GEHLOT, ACCOUNTANT MEMBER: ITA NOS.42 & 58/AGR/2012 A.Y. 2008-09 . 2 THESE ARE APPEALS FILED BY THE ASSESSEE AND REVENUE AGAINST THE ORDER DATED 29.11.2011 PASSED BY THE LD. CIT(A)-II, AGRA FOR TH E ASSESSMENT YEAR 2008-09. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. THAT CIT (APPEALS) HAS ERRED ON FACTS AND IN LA W WHILE SUSTAINING THE ADDITION FOR RS.7414230/- BY INVOKIN G OF THE PROVISION OF SECTION 14 A OF LT. ACT. TREATING THE EXPENDITUR E UNDER THE HEAD INTEREST, ALLEGED TO BE INCURRED IN RELATION TO THE INCOME NOT INCLUDIBLE IN THE TOTAL INCOME WITHOUT APPRECIATING THE FACTS AND THE SUBMISSIONS MADE BY THE APPELLANT PARTICULARLY IN ABSENCE OF TH E BASIS FOR MAKING OF SUCH ADDITION NOT BROUGHT ON RECORD, THE ADDITIO N MADE BY THE AO AND SUSTAINED BY THE CIT(APPEALS) IS NOT CALLED FOR , SAME IS LIABLE TO BE DELETED. 2. THAT WHILE DETERMINE AND DISALLOWING THE EXPENDI TURE AT RS.7414230/- U/S 14A OF I.T. ACT, THE AUTHORITIES B ELOW HAVE NOT APPRECIATED, THAT THE APPELLANT HAS NOT INCURRED AN Y AMOUNT OF EXPENDITURE IN RELATION TO THE INCOME WHICH DOES NO T FORM THE PART OF THE TOTAL INCOME UNDER THE I.T. ACT., ALL THE INVES TMENT ALLEGED TO BE MADE WITH SHARE HOLDINGS WERE NOT MADE IN THE YEAR UNDER CONSIDERATION AND IS FULLY EXPLAINED BEING INVESTED OUT OF THE ACCUMULATED PROFIT AND ALSO OUT OF THE INTEREST FRE E DEPOSITS WITH THE CO., THE PROVISION OF SECTION 14A OF I.T. ACT IS NO T APPLICABLE IN THE CASE OF APPELLANT, ADDITION SUSTAINED ON THIS SCORE IS LIABLE TO BE DELETED. 3. THAT AUTHORITIES BELOW HAVE COMPLETELY IGNORED T HAT NO EXPENDITURE HAS BEEN INCURRED IN RELATION TO THE IN COME WHICH DOES NOT FORM THE PART OF TOTAL INCOME, THE AO HAS WRONG LY DETERMINE AND WORKED OUT THE AMOUNT OF EXPENDITURE AT RS.7414230/ - IN RELATION TO THE INCOME WHICH DOES NOT FORM THE PART OF THE TOTA L INCOME WHICH IS INCORRECT AND IS AGAINST THE LAW. PROVISIONS OF SE CTION 14A OF INCOME TAX IS NOT APPLICABLE IN THE CASE OF APPELLANT. ITA NOS.42 & 58/AGR/2012 A.Y. 2008-09 . 3 4. THAT THE AUTHORITIES BELOW HAVE ERRED ON FACTS A S WELL AS IN LAW WHILE ALLOWING OF THE DEPRECATION AT RS.1364644 ON THE TRUCKS @ 15% AS AGAINST 30% CLAIMED BY THE ASSESSEE, DEPRECIATIO N AS CLAIMED AT RS.2729289/- IS LIABLE TO BE ALLOWED AND ADDITION S USTAINED BY CIT(APPEALS) ON THIS SCORE IS LIABLE TO BE DELETED. 5. THAT THE CIT(APPEALS) HAS ERRED ON FACTS AND IN LAW WHILE EXCLUDING THE AMOUNT OF INCOME AT RS.1412108/- FROM THE GROSS TOTAL INCOME FOR ALLOWING OF THE DEDUCTION U/S 80 IB OF I .T. ACT, DEDUCTION AS CLAIMED U/S 80 IB AT RS.6901086/- IS LIABLE TO B E ALLOWED BEING CLAIMED AS PER LAW. 6. THAT THE CIT (APPEALS) HAS ERRED ON FACTS AS WEL L AS IN LAW WHILE SUSTAINING THE ADDITION FOR RS.1.00 LAKH ON A CCOUNT OF INTEREST ATTRIBUTED TO THE PAYMENT OF INCOME TAX, WHILE MAKI NG THE ABOVE ADDITION, THE AUTHORITIES BELOW HAVE COMPLETELY IGN ORED THE FACTS THAT THE ASSESSEE'S CO. HAS ITS RETURNED INCOME FOR THE YEAR UNDER CONSIDERATION WAS AT RS.37495132 AND ALSO HAVE HUGE AMOUNT, REPRESENT THE INTEREST FREE DEPOSIT WITH CO. OUT OF WHICH THE PAYMENT OF I. TAX WERE MADE, NO BORROWED FUNDS ARE UTILIZED FOR THE PAYMENT OF I. TAX, NO ADDITION IS LIABLE TO BE MADE, ADDITI ON MADE AND SUSTAINED BY CIT (APPEALS) IS LIABLE TO BE DELETED. 7. THAT CIT (APPEALS) HAS BEEN ERRED ON FACTS AND I N LAW WHILE SUSTAINING THE ADDITION FOR RS.1.00 LAKH BY ESTIMAT E DISALLOWING INTEREST AND INDIRECT EXPENSES ATTRIBUTABLE TO THE ASSET, CAPITAL WORK IN PROGRESS, THE ADDITION SO SUSTAINED IS ILLEGAL AND NOT CALLED FOR AND IS LIABLE TO BE DELETED. 8. THAT CIT (APPEALS) HAS BEEN ARBITRARY AND UNJUST WHILE SUSTAINING THE ADDITION FOR RS.50,000/- MADE BY DIS ALLOWING THE SAME OUT OF DEDUCTION U/S 80 IB OF I.T. ACT, NO DISALLOW ANCE IS CALLED FOR, ADDITION MADE ON THIS SCORE IS LIABLE TO BE DELETED . 9. THAT WHILE SUSTAINING THE ADDITIONS BY CIT (APPE ALS) AS MADE BY THE AO, THE CIT (APPEALS) HAS NOT GIVEN ANY REAS ONING OR BASIS FOR NOT ACCEPTING THE SUBMISSIONS OF THE ASSESSEE AND A LSO FOR SUSTAINING OF THE SAME, THE ORDER OF THE CIT (APPEALS) IS BAD IN LAW, LIABLE TO BE SET ASIDE AND ASSESSEES APPEAL IS LIABLE TO BE ALL OWED. ADDITIONS MADE BY THE AO AND SUSTAINED BY CIT (APPEALS) IS LI ABLE TO BE DELETED. ITA NOS.42 & 58/AGR/2012 A.Y. 2008-09 . 4 3. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND IN FACTS IN ALLOWING DEDUCTION U/S 80IB AMOUNTING TO RS.64,77,454/- AGAI NST RS.51,74,202/- ALLOWED BY THE AO WITHOUT PROPERLY A PPRECIATING THE FACTS OF THE CASE, ESPECIALLY THAT THE COMMON FUNDS ARE UTILIZED AND THERE IS NO SCIENTIFIC METHOD TO APPORTION THE OTHE R INCOME UNIT WISE EXCEPT MAKING RELIANCE IN THE PROPORTIONS OF SALES BETWEEN TWO UNITS. 2. THE ORDER OF THE LD. CIT(A) BEING ERRONEOUS IN L AW AND ON FACTS DESERVE TO BE QUASHED AND THAT THE ORDER OF AO TO B E RESTORED. 3. THE APPELLANT CRAVES LEAVE TO ADD OR ALTER ANY O R MORE GROUND OR GROUNDS OF APPEAL AS MAY BE DEEMED FIT AT THE TI ME OF HEARING OF APPEAL. 4. FIRST WE WILL DEAL WITH ITA NO.42/AGR/2012 FILED BY THE ASSESSEE. THE FIRST, SECOND AND THIRD GROUNDS OF ASSESSEES APPEAL ARE P ERTAINING TO DISALLOWANCE OF INTEREST EXPENDITURE OF RS.74,14,230/- BY INVOKING THE PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER). 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF GHEE AND MILK PRODUCTS. DURING TH E ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (A.O.) NOTICED THAT THE ASSESSEE HAS INVESTED RS.13,00,00,000/- IN SHARES TO EARN THE EXEMPT INCOME. AFTER CONSIDE RING THE ASSESSEES SUBMISSION, THE A.O. WAS OF THE VIEW THAT SECTION 14A OF THE AC T READ WITH RULE 8D IS APPLICABLE TO THE CASE OF THE ASSESSEE. THE A.O. A CCORDINGLY ESTIMATED THE AMOUNT ITA NOS.42 & 58/AGR/2012 A.Y. 2008-09 . 5 OF DISALLOWANCE BY APPLYING RULE 8D(2)(II) AT RS.74 ,14,230/-. THE A.O. MADE THE ADDITION OF THE SAID AMOUNT. 6. THE CIT(A) UPHELD THE ORDER OF THE A.O. AS UNDER :- (PARAGRAPH NO.3.3) I HAVE CONSIDERED THE RIVAL CONTENTIONS AND FIND T HAT THE DISALLOWANCE HAS BEEN RIGHTLY MADE BY THE AO. WHET HER ANY INCOME IS EARNED OR NOT IS IMMATERIAL FROM THE INVESTMENT MADE TO EARN EXEMPT INCOME AS HELD IN THE CASE OF M/S. CHEMINVES T LTD. VS. CIT (SUPRA). IAN THE CASE OF GODREJ & BOYCE VS. DCIT 3 28 ITR 81, THE HONBLE BOMBAY HIGH COURT HAS HELD THAT RULE 8D IS APPLICABLE FROM A.Y. 2008-09. THE AO HAS ALSO RIGHTLY HELD THAT TH E FUNDS AVAILABLE WITH THE ASSESSEE ARE IN A COMMON KITTY AND IN THE ABSENCE OF ANY DEMONSTRATION BY THE ASSESSEE WITH THE CASH FLOW ST ATEMENT THAT NO INTEREST BEARING FUNDS HAVE BEEN DIVERTED FOR INVES TMENT TO EARN EXEMPT INCOME, THE ACTION OF THE AO CANNOT BE FAULT ED. THEREFORE, THE DISALLOWANCE MADE BY THE AO IS UPHELD. 7. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE I.T.A.T ., AGRA BENCH IN ASSESSEES OWN CASE FOR THE A.Y. 2007-08 IN ITA NO.142/AGR/2011 OR DER DATED 22.06.2012. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT ON IDE NTICAL SET OF FACTS, THE ASSESSEE WAS HAVING OWN SHARE CAPITAL OF RS.96,52,30,001/-. THEREFORE, THE ASSESSEE WAS HAVING SUFFICIENT OWN FUNDS FOR MAKING THE INVESTME NT OF RS.13 CRORES TOWARDS PURCHASE OF SHARES. THE LD. AUTHORISED REPRESENTAT IVE FURTHER SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE D ID NOT MAKE ANY INVESTMENT IN PURCHASE OF SHARES. RS.13 CRORES WAS INVESTED IN T HE F.Y. RELEVANT TO 2007-08. ITA NOS.42 & 58/AGR/2012 A.Y. 2008-09 . 6 8. THE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHE R HAND, RELIED UPON THE ORDER OF THE REVENUE AUTHORITIES AND SUBMITTED THAT THE ASSESSEE HAS FAILED TO POINT OUT THAT IT WAS HAVING SUFFICIENT OWN FUNDS AT THE TIME OF MAKING INVESTMENT IN SHARES. THE LD. DEPARTMENTAL REPRESENTATIVE FURTHE R SUBMITTED THAT THE A.O. AND CIT(A) HAVE RELIED UPON VARIOUS JUDGEMENTS IN THEIR ORDERS ON WHICH THE LD. DEPARTMENTAL REPRESENTATIVE HAS ALSO RELIED UPON. 9. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PAR TIES AND RECORDS PERUSED. THE ADMITTED FACTS OF THE CASE ARE THAT THE ASSESSE E WAS HAVING CAPITAL OF RS.96,52,30,001/- WHICH IS SUFFICIENT TO COVER THE INVESTMENT OF RS.13 CRORES MADE TOWARDS PURCHASE OF SHARES. WE FIND THAT THE ISSUE IS SQUARELY COVERED BY THE ORDER OF I.T.A.T., AGRA BENCH IN FAVOUR OF THE ASSESSEE I N ASSESSEES OWN CASE FOR A.Y. 2007-08 IN ITA NO.142/AGR/2011. THE RELEVANT FINDI NG FROM THE ORDER OF I.T.A.T. (SUPRA) IS REPRODUCED AS UNDER :- 6. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PAR TIES AND RECORDS PERUSED. WE FIND THAT THE ASSESSEE WAS HAV ING OWN CAPITAL RESERVES AND SURPLUS OF RS.64,24,17,895/-. THE CLA IM OF THE LD. AUTHORISED REPRESENTATIVE WAS THAT THE DEFERRED TAX LIABILITY OF RS.2,80,56,200/- IS ALSO ASSESSEES OWN CAPITAL OR INTEREST FREE FUND IS NOT ACCEPTABLE AS THIS LIABILITY PERTAINS TO THE BU SINESS. THE NET AVAILABLE OWN CAPITAL AVAILABLE WITH THE ASSESSEE A S ON 31.03.2007 WAS RS.64,24,17,895/- AGAINST INVESTMENT IN SHARES OF RS.13 CRORES. THE I.T.A.T., AGRA BENCH IN THE CASE OF M/S LALA RA M FINANCE & INVESTMENT CO. PVT. LTD. VS. DCIT IN ITA NO.260 & 2 61/AGR/2011 ORDER DATED 08.06.2012 HAS HELD AS UNDER :- ITA NOS.42 & 58/AGR/2012 A.Y. 2008-09 . 7 8. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PARTIES AND RECORDS PERUSED. WE FIND THAT THE CASE OF ASSESSING OFFICER IS DISALLOWANCE OF INTEREST. THE INTEREST EXPENSES IS ALLOWABLE UNDER SECTION 36(1)( III) OF THE ACT. SUCH DISALLOWANCE CANNOT BE MADE IN CASE WHERE THE ASSESSEE IS HAVING SUFFICIENT INTEREST FR EE FUNDS AS HELD BY THE I.T.A.T., AGRA BENCH IN THE CASE CIT ED ABOVE. THIS VIEW IS ALSO FORTIFIED BY THE JUDGEMEN T OF HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. RELIANCE UTILITY AND POER LIMITED, 313 ITR 340 (BOM BAY). IN THE CASE UNDER CONSIDERATION IT IS ADMITTED FACT THAT THE ASSESSEE WAS HAVING SUFFICIENT INTEREST FREE FU NDS TO COVER THE INVESTMENT MADE IN SHARES OF WHICH INCOME IS EXEMPT UNDER SECTION 10 OF THE ACT. IN CASE OF CIT VS. HERO CYCLES LIMITED, 323 ITR 518 (P&H) WHEREIN IT H AS BEEN HELD THAT DISALLOWANCE UNDER SECTION 14A IS NO T PERMISSIBLE WHERE NO NEXUS BETWEEN THE EXPENDITURE INCURRED AND INCOME GENERATED HAS BEEN ESTABLISHED. HONBLE HIGH COURT OF BOMBAY IN THE CASE OF INCOME TAX APPEAL NO.1260 OF 2009 IN CASE OF CIT VS. K. RA HEJA CORPORATION P. LTD. JUDGEMENT DATED 08.08.2011 WHIL E CONFIRMING THE ORDER OF I.T.A.T. HELD THAT IF THE INVESTMENT IS MADE OUT OF THE ASSESSEES OWN INTERE ST FREE FUNDS, NO DISALLOWANCE CAN BE MADE UNDER SECTION 14 A OF THE ACT. SECTION 14A IS NOT A CHARGING SECTION BUT ONLY DISALLOWANCE OF EXPENDITURE FOR A FAIR ASCERTAINING OF ALLOWING COMMON EXPENSES BETWEEN TAXABLE AND NON- TAXABLE INCOME. RULE 8D CAN BE APPLICABLE ONLY WHE RE DISALLOWANCE OF INTEREST ON BORROWED CAPITAL WARRAN T FOR EXPENSES OUT OF SUCH BORROWED CAPITAL WITH THE AMOU NT RELATING TO INVESTMENT IN SHARES AND SEARCH AND NOT ASCERTAINABLE. IN THE LIGHT OF THE ABOVE JUDGEMENT OF BOMBAY HIGH COURT AND OTHERS (SUPRA), THE DISALLOWA NCE OF INTEREST IS NOT WARRANTED UNDER THE CIRCUMSTANCE S. THEREFORE, THERE IS NO QUESTION OF INVOKING RULE 8D OF THE RULES. IN THE LIGHT OF THE ABOVE DISCUSSIONS AND AF TER CONSIDERING THE ADMITTED FACT THAT THE ASSESSEE WAS HAVING SUFFICIENT OWN INTEREST FREE FUND TO COVER T HE INVESTMENT MADE IN SHARES, WE, THEREFORE, ARE OF TH E VIEW THAT NO DISALLOWANCE CAN BE MADE UNDER SECTION 14A OF THE ACT. WE, THEREFORE, DELETE THE ADDITIONS OF ITA NOS.42 & 58/AGR/2012 A.Y. 2008-09 . 8 RS.15,00,000/- MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE CIT(A) FOR EACH ASSESSMENT YEAR I. E. 2007-08 & 2006-07. 7. WE FOLLOW THE ORDER OF I.T.A.T. WHEREIN THE CONT ENTION OF THE LD. DEPARTMENTAL REPRESENTATIVE THAT THE OWN CAPITA L HAS BEEN ALREADY INVESTED IN THE BUSINESS IS NOT ACCEPTABLE AS PER DETAILED DISCUSSIONS MADE BY THE I.T.A.T., MUMBAI BENCH IN I TS ORDER IN THE CASE OF H.P. SHAH & CO. ITA NO.3694/MUM/2006 ORDER DATED 15.01.2009. SINCE IN THE CASE UNDER CONSIDERATION, THE ASSESSEE WAS HAVING SUFFICIENT OWN FUNDS TO MAKE INVESTMENT IN S HARES, UNDER THE CIRCUMSTANCES, THE DISALLOWANCE IS NOT WARRANTED. WE ACCORDINGLY DELETE THE ADDITION OF RS.21,94,877/-. 10. AS REGARDS THE JUDGEMENT OF BOMBAY HIGH COURT I N THE CASE OF GODREJ & BOYCE VS. DCIT, 328 ITR 81 ON WHICH THE CIT(A) HAS RELIED UPON, WE NOTICE THAT THERE IS NO DISPUTE THAT RULE 8D IS APPLICABLE FROM A.Y. 2008-09 BUT THE ISSUE UNDER CONSIDERATION IS NOT WHETHER RULE 8D IS APPLI CABLE FROM A.Y. 2008-09 OR NOT. THE ISSUE UNDER CONSIDERATION IS TO DECIDE TH E ISSUE CONSIDERING THE FACTS OF THE CASE WHICH HAS BEEN DECIDED AS ABOVE. 11. AS REGARDS VARIOUS DECISIONS CITED BY THE A.O. & CIT(A), THE RATIO OF DECISIONS HAVE BEEN CONSIDERED BY THE I.T.A.T. IN I TS ORDER FOR A.Y. 2007-08 IN ASSESSEES OWN CASE (SUPRA). THEREFORE, THOSE DECI SIONS DO NOT HELP THE REVENUE. FURTHER OBJECTION OF THE LD. DEPARTMENTAL REPRESENT ATIVE THAT AT THE TIME OF INVESTMENT IN SHARES THE ASSESSEE HAS FAILED TO FUR NISH NECESSARY EVIDENCE OF NEXUS THAT THE INVESTMENT WAS MADE OUT OF OWN CAPITAL OR INTEREST FREE FUND AVAILABLE WITH ITA NOS.42 & 58/AGR/2012 A.Y. 2008-09 . 9 THE ASSESSEE, THIS ISSUE HAS ALSO BEEN CONSIDERED B Y THE I.T.A.T. IN ITS ORDER DATED 22.06.2012 IN ASSESSEES OWN CASE FOR A.Y. 2007-08 (SUPRA). RELIANCE WAS ALSO PLACED UPON THE DECISION OF I.T.A.T., MUMBAI BENCH C IN THE CASE OF ACIT VS. M/S. H.P. SHAH & CO. IN ITA NO.3694/MUM/2006 ORDER DATED 15.01.2009. IN THE LIGHT OF THE SAID ORDER OF I.T.A.T. THE CONTENTION OF THE LD. DEPARTMENTAL REPRESENTATIVE IS NOT SUSTAINABLE. THEREFORE, THE SAME IS REJECTED. SINCE THE FACTS OF THE CASE UNDER CONSIDERATION ARE IDENTICAL TO TH E FACTS OF ASSESSEES OWN CASE FOR A.Y. 2007-08, BY RESPECTFULLY FOLLOWING THE ORDER O F I.T.A.T. THE ADDITION OF RS.74,14,230/- MADE BY INVOKING SECTION 14A OF THE ACT READ WITH RULE 8D BY THE A.O. AND SUSTAINED BY THE CIT(A) IS DELETED. 12. GROUND NO.4 OF ASSESSEES APPEAL IS IN RESPECT OF DEPRECIATION CLAIM OF THE ASSESSEE WHETHER TRUCKS USED FOR THE BUSINESS OF TH E ASSESSEE IS ENTITLED FOR HIGHER DEPRECIATION OR NORMAL DEPRECIATION. 13. THE BRIEF FACTS OF THE GROUND ARE THAT THE ASSE SSEE COMPANY HAS USED TRUCKS FOR ITS OWN BUSINESS AND WAS NOT RUNNING ON HIRE. THE CONTENTION OF THE ASSESSEE IS THAT THE ASSESSEE COMPANY USED TRUCKS FOR ITS OWN B USINESS FOR TRANSPORTATION OF MILK FROM COLLECTION CENTRE TO THE PROCESSING PLANT S OF THE ASSESSEE COMPANY. THE A.O. REJECTED THE ASSESSEES CONTENTION AND ALLOWED ONLY NORMAL DEPRECIATION OF 15% ON TRUCKS AGAINST THE ASSESSEES CLAIM OF 30%. THE A.O. CALCULATED THE EXCESS ITA NOS.42 & 58/AGR/2012 A.Y. 2008-09 . 10 DEPRECIATION AMOUNT OF RS.13,64,644/- AND THE SAME WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THE CIT(A) CONFIRMED THE ORDER OF A.O. 14. AFTER HEARING THE LD. REPRESENTATIVES OF THE PA RTIES, WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE REVENUE BY THE JU DGMENT OF HONBLE M.P. HIGH COURT IN THE CASE OF CIT VS. ANUPCHAND & CO., 239 I TR 466 (M.P.) WHEREIN IT HAS BEEN HELD AS UNDER :- THE ASSESSEE WAS A REGISTERED FIRM DERIVING INCOME FROM CONTRACT WORK. THE ASSESSEE CLAIMED DEPRECIATION A LLOWANCE AT THE RATE OF 40 PER CENT. ON TRUCKS USED FOR ITS BUSINES S PURPOSE. THE INCOME TAX OFFICER ALLOWED ONLY 30 PER CENT. ALLOWA NCE ON THE GROUND THAT THE VEHICLES WERE USED FOR THE ASSESSEE S OWN BUSINESS OF TRANSPORTING GOODS. ON A REFERENCE : HELD, THAT THE BENEFIT OF 40 PER CENT. DEPRECIATION ALLOWANCE WAS ADMISSIBLE ONLY FOR VEHICLES USED FOR BUSINESS OF H IRE IN VIEW OF THE PROVISIONS OF ENTRY NO.III(II)E(1-A) OF PART I OF A PPENDIX I TO THE INCOME-TAX RULES, 1962, AND SINCE THE ASSESSEE USED THE VEHICLES FOR ITS OWN BUSINESS OF TRANSPORTING ITS GOODS ONLY 30 PER CENT. DEPRECIATION WAS ALLOWABLE. 15. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE H ONBLE HIGH COURT OF M.P., THE ORDER OF THE CIT(A) IS CONFIRMED. 16. GROUND NO.5 OF THE ASSESSEES APPEAL IS IN RESP ECT OF DISALLOWANCE OF DEDUCTION UNDER SECTION 80-IB OF THE ACT. THIS IS A COMMON GROUND RAISED VIDE GROUND NO.1 OF REVENUES APPEAL AND GROUND NO.5 OF ASSESSEES APPEAL WHICH IS ITA NOS.42 & 58/AGR/2012 A.Y. 2008-09 . 11 PERTAINING TO DEDUCTION UNDER SECTION 80-IB OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT CERTAIN ITEMS OF OTHER INCOME ON WHICH THE ASSESSEE IS NOT ENTITLED TO DEDUCTION UNDER SECTION 80-IB OF THE ACT. THE A.O. NOTICED THAT THE ASSESSEE IS NOT ENTITLED FOR DEDUC TION UNDER SECTION 80-IB OF THE ACT ON DUTY DRAW BACK TO AN AMOUNT OF RS.95,48,466/ - WHICH IS AGAINST THE SALE MADE FROM DHOLPUR UNIT. THE A.O. FURTHER NOTICED T HAT THE ASSESSEE WAS HAVING TWO UNITS I.E. DHOLPUR UNIT AND KOSI UNIT. THE ASS ESSEE UTILIZED COMMON FUNDS TO EARN INCOME. THE A.O. NOTICED THAT THERE IS NO SCI ENTIFIC METHOD TO APPORTION THE OTHER INCOME UNIT-WISE EXCEPT MAKING RELIANCE ON TH E PROPORTIONS OF SALES BETWEEN TWO UNITS. THE A.O. ACCORDINGLY CALCULATED OTHER I NCOME OF RS.57,56,282/-. THE A.O. PROPOSED TO DISALLOW DEDUCTION UNDER SECTION 8 0-IB OF THE ACT ON DUTY DRAW BACK OF RS.95,45,466/- AND OTHER INCOME OF RS.57,56 ,282/-, THE A.O. DISALLOWED RS.45,41,924/- AS UNDER :- (PAGE NOS.10 & 11) A. FROM CAREFUL PERUSAL OF TRADING & PROFIT & LOSS ACCOUNT OF KOSI AND DHOLPUR UNIT, IT IS LEARNT THAT ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S.80IB ON DUTY DRAW BACK TO AN AMOUNT O F RS.95,48,466/- WHICH IS AGAINST THE SALE MADE FROM DHOLPUR UNIT. AS REGARDS THE APPORTIONMENT OF OTHER INCOMES BETWEEN KOSI AND DHO LPUR UNIT ARE CONCERNED, THE COMMON FUNDS WERE USED TO EARN THE I NCOME. THE COMMON FUNDS ARE UTILIZED AND THERE IS NO SCIENTIFI C METHOD TO APPORTION THE OTHER INCOME UNIT-WISE EXCEPT MAKING RELIANCE ON THE PROPORTIONS OF SALES BETWEEN TWO UNITS. AMONG THE TOTAL SALE OF RS.379,92,58,542/-, TOTAL SALES MADE FROM KOSI UNIT WAS RS.134,21,71,193/- AND THE TOTAL SALES FROM EXEMPTE D UNIT, DHOLPUR IS RS.245,70,87,348/-. THEREFORE, 64.67% SALES WERE M ADE FROM DHOLPUR UNIT, HENCE, OTHER INCOME EXCLUDING DUTY DR AWBACK FROM BOTH THE UNITS IS 64.7% OF RS.89,01,009/- I.E. RS.57,56, 282/- ATTRIBUTABLE TO DHOLPUR UNIT. HENCE, DEDUCTION IS COMPUTED AS UNDE R:- ITA NOS.42 & 58/AGR/2012 A.Y. 2008-09 . 12 GROSS INCOME RS.3,25,52,088 LESS: OTHER INCOME (DUTY DRAWBACK) RS.95,48,466 LESS: OTHER INCOME (AS CALCULATED ABOVE) RS.57,56, 282 RS.172,47,340 ADMISSIBLE DEDUCTION U/S. 80IB I.E. RS.51,74,20 2 30% OF THE ABOVE HOWEVER, THE ASSESSEE HAS CLAIMED DEDUCTION OF RS.9 7,65,626/- U/S. 80IB OF THE ACT. THEREFORE, DEDUCTION OF RS.45,91, 424/- IS NOT ADMISSIBLE TO THE ASSESSEE, HENCE ADDED BACK TO THE INCOME OF THE ASSESSEE. (ADDITION OF RS.45,41,924/-) 17. THE CIT(A) HELD THAT THE ADJUSTMENT OF DUTY DRA W BACK HAS BEEN GIVEN BY THE ASSESSEE HIMSELF BY DEDUCTING RS.95,48,466/-. THEREFORE, NO FURTHER DISALLOWANCE IS WARRANTED. HOWEVER, THE CIT(A) CON FIRMED THE DISALLOWANCE IN RESPECT OF OTHER INCOME TOTALING TO RS.14,12,108.67 AND ACCORDINGLY DIRECTED THE A.O. TO RECALCULATE THE DEDUCTION UNDER SECTION 80- IB OF THE ACT. THE RELEVANT FINDING OF CIT(A) IS REPRODUCED AS UNDER :- (PARAGR APH NO.5.3) I HAVE CONSIDERED THE RIVAL CONTENTIONS. IT IS NO TED THAT THE ASSESSEE ORIGINALLY HAD CLAIMED DEDUCTION OF RS.94, 53,191/- U/S 80IB OF THE ACT IN THE CASE OF DHOLPUR UNIT. HOWEVER, D URING THE COURSE OF ASSESSMENT PROCEEDINGS, THIS CLAIM WAS BROUGHT DOWN TO RS.69,01,085/-. BUT THE AO HAS ALLOWED THE CLAIM O F THE ASSESSEE AT RS.51,74,202/-. THE DISALLOWANCE OF DUTY DRAW BACK AMOUNTING TO RS.95,48,466/- WHILE DETERMINING THE DEDUCTION U/S. 80IB BY THE AO, IS NOT IN DISPUTE. HOWEVER, WHAT IS IN DISPUTE, IS THE ACTION OF THE AO WHEREIN HE HAS APPORTIONED THE TOTAL OF OTHER INCO ME OF THE GROUP ITA NOS.42 & 58/AGR/2012 A.Y. 2008-09 . 13 ON THE TURNOVER BASIS. THE TOTAL OTHER INCOME OF T HE GROUP IS RS.2,68,62,430/-. OUT OF THIS OTHER INCOME OF DHOL PUR UNIT, ON WHICH THE ASSESSEE IS CLAIMING DEDUCTION U/S. 80IB IS RS. 1,09,60,574/-. THE ASSESSEE HAS HIMSELF DEDUCTED THE SUM OF RS.95,48,4 66/- RECEIVED ON ACCOUNT OF DUTY DRAW BACK WHILE CALCULATING THE DED UCTION U/S 80IB. I INTEND TO AGREE WITH THE ASSESSEE THAT ONCE THE ASS ESSEE IS MAINTAINING SEPARATE PROFIT AND LOSS ACCOUNT FOR THE UNIT ON WH ICH 80IB IS AVAILABLE UNLESS AND UNTIL A CASE IS MADE OUT BY TH E AO THAT THE OTHER INCOME APPERTAINING TO DHOLPUR UNIT ON WHICH DEDUCT ION U/S. 80IB IS AVAILABLE HAS BEEN DIVERTED TO THE OTHER UNIT, THE CLAIM MADE BY THE ASSESSEE CANNOT BE DISPUTED. HOWEVER, IT IS SEEN T HAT WHILE CALCULATING THE DEDUCTION UNDER 80IB, THE ASSESSEE HAS NOT TAKEN INTO ACCOUNT THE FOLLOWING AMOUNT OUT OF THE OTHER INCOM E AS SHOWN BY IT:- INSURANCE CLAIM RS.494948.00 OTHER CHARGES RS.14903.17 INTEREST RECEIVED RS.754053.00 MISC. RECEIPTS RS.48204.50 SCRAP SAL4S RS.100000.00 RAS.14,12,108.67 THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S.80IB ON THESE AMOUNTS AS MENTIONED ABOVE, AS THESE ITEMS OF INCOME CANNOT BE SAID TO BE DERIVED FROM MANUFACTURING ACTIVITY. THEREFORE, TH E AO IS DIRECTED TO REDUCE ONLY THESE AMOUNTS WHILE CALCULATING THE DED UCTION U/S 80IB AND NOT RS.57,56,282/- AS DONE BY THE AO. THE GROU ND OF APPEAL IS PARTLY ALLOWED. 18. THE REVENUE IS IN APPEAL AGAINST ALLOWING DEDUC TION UNDER SECTION 80-IB OF THE ACT AMOUNTING TO RS.64,77,454/- AGAINST RS.51,7 4,202/- ALLOWED BY THE AO. THE GRIEVANCE OF THE REVENUE IS THAT THE CIT(A) DID NOT ACCEPT THE A.O.S FORMULA IN RESPECT OF APPORTIONMENT OF OTHER INCOME UNIT-WI SE. THE ASSESSEE IS IN APPEAL ITA NOS.42 & 58/AGR/2012 A.Y. 2008-09 . 14 AGAINST THE ITEM OF INCOME ON WHICH THE CIT(A) DID NOT ALLOW DEDUCTION UNDER SECTION 80-IB OF THE ACT. 19. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PA RTIES AND RECORDS PERUSED. WE FIND THAT THE CIT(A) HAS REJECTED THE AOS FORMU LA OF APPORTION METHOD OF OTHER INCOME ON THE BASIS OF SALE BETWEEN TWO UNITS . THE CIT(A) HELD THAT ONCE THE ASSESSEE IS MAINTAINING SEPARATE PROFIT & LOSS ACCOUNT FOR THE UNIT ON WHICH SECTION 80-IB IS AVAILABLE, DEDUCTION UNDER SECTION 80-IB IS TO BE CALCULATED ACCORDINGLY. THE CIT(A) HAS ALSO HELD THAT THE A.O . DID NOT POINT OUT THAT INCOME PERTAINING TO DHOLPUR UNIT ON WHICH DEDUCTION UNDER SECTION 80-IB IS AVAILABLE HAS BEEN DIVERTED TO OTHER UNIT. THE FINDING OF CIT(A) IS BASED ON MATERIAL ON RECORD AND THE REVENUE HAS NOT POINTED OUT ANY CONTRARY MA TERIAL TO THE FINDING OF CIT(A), NEITHER THE SAME IS AVAILABLE ON RECORD. I N THE LIGHT OF THE FACTS, WE UPHOLD THE ORDER OF THE CIT(A) IN REJECTING THE A.O.S FOR MULA IN RESPECT OF APPORTIONMENT OF OTHER INCOME UNIT-WISE ON THE BASIS OF SALE BETW EEN TWO UNITS. THUS, THE GROUND OF REVENUES APPEAL IS DISMISSED. INSURANCE CLAIM - RS.4,63,716/- 20. AS REGARDS THE ASSESSEES GROUND OF APPEAL WHIC H IS IN RESPECT OF DISALLOWANCE OF DEDUCTION UNDER SECTION 80-IB OF TH E ACT IN RESPECT OF INSURANCE ITA NOS.42 & 58/AGR/2012 A.Y. 2008-09 . 15 CLAIM, OTHER CHARGES, INTEREST RECEIVED, MISCELLANE OUS RECEIPTS AND SCRAP SALES OF WHICH DETAILS HAVE BEEN REPRODUCED ABOVE. THE DETA ILS OF INSURANCE CLAIM IS GIVEN AT PAGE NO.47 OF THE ASSESSEES PAPER BOOK. ON PER USAL OF SUCH DETAILS, WE NOTICE THAT THE INSURANCE CLAIM OF RS.31,232/- IS IN RESPE CT OF CLAIM RECEIVED AGAINST INSURANCE CLAIM OF CAR AND OTHER ITEMS OF INSURANCE CLAIM IS IN RESPECT OF GOODS DAMAGED IN TRANSIT. WE NOTICE THAT INSURANCE CLAIM IN RESPECT OF RECEIPT/INCOME ON GOODS DAMAGED IN TRANSIT IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IB AS HELD BY HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SPO RTKING INDIA LIMITED, 183 TAXMAN 312 (DELHI), 324 ITR 283 (DELHI). WE, THERE FORE, FOLLOWING THE ABOVE JUDGEMENT OF DELHI HIGH COURT, ALLOW THE CLAIM OF T HE ASSESSEE IN RESPECT OF INSURANCE OF DAMAGED GOODS IN TRANSIT. HOWEVER, IN SURANCE CLAIM OF CAR OF RS.31,232/- IS RIGHTLY DISALLOWED. THE A.O. IS DIR ECTED TO ALLOW DEDUCTION UNDER SECTION 80-IB OF THE ACT OF RS.4,63,716/- IN RESPEC T OF INSURANCE CLAIM OF GOODS DAMAGED IN TRANSIT. OTHER CHARGES - RS.14,903.17 21. THE ASSESSEE FURNISHED THE DETAILS OF OTHER CHA RGES WHICH IS APPEARING IN ASSESSEES PAPER BOOK FROM PAGE NOS.48 ONWARDS. ON PERUSAL OF DETAILS, WE NOTICE THAT THESE ARE PETTY AMOUNTS ON ACCOUNT OF DIFFEREN CE IN SALE BILLS WHICH IS PERTAINING TO THE ASSESSEES BUSINESS AND SUCH PETT Y RECEIPTS ARE INCOME DERIVED ITA NOS.42 & 58/AGR/2012 A.Y. 2008-09 . 16 FROM INDUSTRIAL UNDERTAKING. THEREFORE, DEDUCTION UNDER SECTION 80-IB IS ALLOWED. THE A.O. IS ACCORDINGLY DIRECTED TO ALLOW THE CLAIM OF THE ASSESSEE UNDER SECTION 80-IB OF THE ACT ON OTHER CHARGES OF RS.14,903.17 INTEREST RECEIVED - RS.7,54,053/- 22. THE CONTENTION OF THE ASSESSEE IS THAT THE SAID INCOME IS IN RESPECT OF FDRS. AND OTHER SECURITY DEPOSITS WHICH ARE IN CONNECTION WITH THE BUSINESS OF THE ASSESSEE. 23. WE FIND THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE BY THE JUDGEMENT OF JURISDICTIONAL HIGH COURT OF ALLAHABAD IN THE CASE OF CIT VS. KOTHARI PRODUCTS LIMITED, 295 ITR 223 (ALL) WHEREIN IT HAS BEEN HELD THAT THE INTEREST INCOME ACCRUED TO THE ASSESSEE, INCOME FROM INDUSTRIAL UND ERTAKING FROM INVESTMENT IN BANK COULD NOT BE TREATED AS INCOME DERIVED FROM IN DUSTRIAL UNDERTAKING AND WOULD NOT BE ENTITLED TO SECTION 80-IB OF THE ACT M ERELY BECAUSE THE ORIGINAL NUCLEUS FUNDS WHICH HAD YIELDED THE INTEREST CAME F ROM AN INDUSTRIAL UNDERTAKING. FOLLOWING THE ABOVE JUDGEMENT OF THE JURISDICTIONAL HIGH COURT, WE CONFIRM THE ORDER OF CIT(A) ON THE ISSUE. MISCELLANEOUS RECEIPTS - RS.48,204.50 ITA NOS.42 & 58/AGR/2012 A.Y. 2008-09 . 17 24. THE DETAILS OF MISCELLANEOUS RECEIPTS ARE GIVEN AT PAGE NO. 94 OF THE ASSESSEES PAPER BOOK. ON A PERUSAL OF SUCH DETAIL S, WE NOTICED THAT RS.45,000/- IS ON ACCOUNT OF CANCELLATION CHARGES AGAINST SUPPLY O RDER OF SMP AND RS.3,204/- BEING AMOUNT OF INCOME TRANSFER FROM H.O. WE FIND THAT THE CANCELLATION CHARGES AGAINST SUPPLY ORDER IS INCOME DERIVED FROM INDUSTR IAL UNDERTAKING. THEREFORE, THE SAME IS ALLOWABLE. OTHER PETTY AMOUNT OF RS.3,204/ - IS TREATED TO BE SAME NATURE. IN THE LIGHT OF THE FACTS, WE ARE OF THE VIEW THAT THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 80-IB FOR RS.48,204.50. THE A.O. IS DIRECTED ACCORDINGLY. SCRAP SALES - RS.1,00,000/- 25. THE SCRAP SALE IS INCOME DERIVED FROM INDUSTRIA L UNDERTAKING AS HELD BY VARIOUS COURTS INCLUDING JUDGEMENT OF THE HONBLE H IGH COURT OF GUJARAT IN THE CASE OF DCIT VS. HARJIVANDAS JUTHABHAI ZAVERI & ANO THER, 258 ITR 785 (GUJ). IN THE LIGHT OF THE SAID POSITION, THE SCRAP SALE IS I NCOME DERIVED FROM INDUSTRIAL UNDERTAKING. THE A.O. IS DIRECTED TO ALLOW THE CLA IM OF THE ASSESSEE ON SCRAP SALES OF RS.1,00,000/-. THIS GROUND NO.5 OF THE ASSESSEES APPEAL IS PARTLY ALLOWED. ITA NOS.42 & 58/AGR/2012 A.Y. 2008-09 . 18 26. GROUND NO.6 IS IN RESPECT OF ADDITION OF RS.1,0 0,000/- ON ACCOUNT OF INTEREST ATTRIBUTABLE TO THE PAYMENT OF INCOME TAX. THE A.O . NOTICED THAT THE ASSESSEE PAID RS.2,21,31,192/- ON ACCOUNT OF INCOME TAX. THE A.O . FURTHER NOTICED THAT THE LOAN AMOUNT HAS INCREASED FROM RS.38.11 CRORE TO RS.67.9 4 CRORE. THEREFORE, INTEREST BURDEN HAS BEEN INCREASED FROM RS.3.49 CRORES TO RS .6.86 CRORES. THE A.O. DREW PRESUMPTION THAT THE ASSESSEE HAS USED THE BORROWED FUND FOR THE PURPOSE OF PAYMENT OF INCOME TAX WHICH IS NOT ALLOWABLE. IN A BSENCE OF CASH FLOW, THE A.O. MADE LUMP SUM ADDITION OF RS.1,00,000/- BY DISALLOW ING INTEREST EXPENDITURE AND ADDED TO THE TOTAL INCOME ON ACCOUNT OF INTEREST AT TRIBUTABLE TO THE PAYMENT OF INCOME TAX. THE CIT(A) CONFIRMED THE ACTION OF A.O . 27. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PA RTIES AND RECORDS PERUSED. IN THE LIGHT OF DETAILED DISCUSSIONS MADE WHILE DECIDI NG THE GROUND NOS.1 TO 3, WE FIND THAT THE ASSESSEE WAS HAVING SUFFICIENT OWN FU NDS, THEREFORE, SUCH LUMP SUM DISALLOWANCE ON PRESUMPTION BASIS IS NOT WARRANTED. THEREFORE, THE SAME IS DELETED. 28. GROUND NO.7 IS IN RESPECT OF ADDITION OF RS.1,0 0,000/- TOWARDS CAPITAL WORK- IN-PROGRESS. DURING THE ASSESSMENT PROCEEDINGS, TH E A.O. NOTICED THAT THERE IS WORK-IN-PROGRESS AND THE ASSESSEE HAS ALSO USED BOR ROWED FUNDS IN THE CAPITAL WORK-IN-PROGRESS. THEREFORE, AN ESTIMATE AMOUNT OF RS.1,00,000/- IS REQUIRED TO BE ITA NOS.42 & 58/AGR/2012 A.Y. 2008-09 . 19 CAPITALIZED. THE A.O. HAS DISALLOWED THE INTEREST CLAIM OF ASSESSEE UNDER SECTION 36(1)(III) OF THE ACT AND MADE THE ADDITION OF RS.1 ,00,000/- HOLDING THAT THE BORROWED FUND HAS BEEN USED IN THE CAPITAL WORK-IN- PROGRESS. 29. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PA RTIES AND RECORDS PERUSED. THE ADMITTED FACTS OF THE CASE ARE THAT CAPITAL WOR K IN PROGRESS IS IN RESPECT OF EXISTING UNIT OF THE ASSESSEE. THE A.O. SIMPLY DIS ALLOWED A LUMP SUM AMOUNT OF RS.1,00,000/- ON PRESUMPTION BASIS THAT THE BORROWE D FUND HAS BEEN USED FOR THE PURPOSE OF CAPITAL WORK-IN-PROGRESS. WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGEMENT OF THE APEX COURT IN THE CASE OF DCIT VS. CORE HEALTH CARE LIMITED, 298 ITR 194 (SC). IN THE LIGHT OF LAW LAID DOWN BY THE APEX COURT IN THE ABOVE JUDGEMENT IN THE CASE OF DC IT VS. CORE HEALTH CARE LIMITED, WE DELETE THE ADDITION OF RS.1,00,000/-. 30. GROUND NO.8 IS IN RESPECT OF DISALLOWANCE OF RS .50,000/- OUT OF DEDUCTION UNDER SECTION 80-IB OF THE ACT. THE A.O. DISALLOWE D DEDUCTION UNDER SECTION 80- IB OF THE ACT ON THE GROUND THAT THE ASSESSEE MADE PURCHASE OF FINISHED GOODS AND SOLD THE SAME. THE A.O. WAS OF THE VIEW THAT THE A SSESSEE DID NOT MANUFACTURE THE GOODS, THEREFORE, THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION UNDER SECTION 80-IB OF THE ACT. THE A.O. DISALLOWED THE LUMP SUM AMOUNT O F RS.50,000/- ON ESTIMATION BASIS. ITA NOS.42 & 58/AGR/2012 A.Y. 2008-09 . 20 31. AFTER HEARING THE LD. REPRESENTATIVES OF THE PA RTIES, WE NOTICE THAT THE A.O. HAD DISALLOWED THE CLAIM OF THE ASSESSEE UNDER SECT ION 80-IB OF THE ACT ON PRESUMPTION BASIS WITHOUT DETERMINING THE EXACT AMO UNT OF DISALLOWANCE. IT IS NOT THE CASE OF THE A.O. THAT THE SAID AMOUNT IS NOT FR OM THE INDUSTRIAL UNDERTAKING. SUCH DISALLOWANCE OF DEDUCTION UNDER SECTION 80IB O F THE ACT IS NOT SUSTAINABLE IN LAW. THE A.O. HIMSELF MADE THE DISALLOWANCE ON T HE AMOUNT OF GOODS AND NOT ON THE PROFIT AMOUNT OR INCOME. SINCE THE A.O. HIMSEL F IS UNABLE TO CALCULATE THE INCOME PART, THEREFORE, WE ARE OF THE CONSIDERED VI EW THAT SUCH DISALLOWANCE ON PRESUMPTION BASIS CANNOT BE UPHELD. THE A.O. IS DI RECTED TO ALLOW THE CLAIM OF THE ASSESSEE RS.50,000/- UNDER SECTION 80-IB OF THE ACT . 32. GROUND NO.9 IS GENERAL IN NATURE REQUIRES NO IN DEPENDENT FINDING. 33. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND APPEAL OF THE REVENUE IS DISMISSED, AS INDICATED ABOVE. (ORDER PRONOUNCED IN THE OPEN COURT) SD/- SD/- (BHAVNESH SAINI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER PBN/* ITA NOS.42 & 58/AGR/2012 A.Y. 2008-09 . 21 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, AGRA BENCH, AGRA 6. GUARD FILE. BY ORDER SR. PRIVATE SECRETARY INCOME-TAX APPELLATE TRIBUNAL, AGRA TRUE COPY