M/s. TATA CHEMICAL LTD., MUMBAI V. JT. CIT Rg. 1, MUMBAI

ITA 5897/MUM/2004

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0681 (ITAT-MUMBAI)
• Duration Of Justice: 12 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2017
• Appeal Filed By: Assessee
• Bench Allotted: G
• Next Hearing Date: 23-02-2017
• Assessment Year: 1997-1998
• Appeal Filed On: 16-08-2004
• Court: TRIBUNAL
• Department Lawyers: MRS VIDISHA KALRA
• Assessee Lawyers: DINESH VYAS; ATUL T SURAIYA
• Keywords: Business income; Depreciation; Business expenditure; Opportunity of being heard; Bad and doubtful debts; Commercial expediency; Revenue expenditure
• Section: 37(1); 32; 37; 15

Judgement Text

' IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G , MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI A SHWANI TANEJA , ACCOUNTANT MEMBER ITA NO. 5897 /MUM/20 0 4 , (A.Y : 1997 - 98 ) M/S TATA CHEMICALS LTD. BOMBAY HOUSE, 24, HOMI MODY STREET, FORT MUMBAI 400 0 0 1 PAN : AA A C T 4 059M VS. D CIT RANGE 2(2) MUMBAI ITA NO. 7035 /MUM/20 0 4 , (A.Y : 1997 - 98 ) DCIT CIRCLE - 2(2) AAYAKAR BHAVAN ROOM NO.545, 5 TH FLOOR M.K.ROAD MUMBAI 400 020 VS. M/S TATA CHEMICALS LTD. BOMBAY HOUSE, 24, HOMI MODY STREET, FORT MUMBAI 400 001 PAN : AAACT4059M ( / APPELLANT) ( / RESPONDENT) / ASSESSEE BY : SHRI DINESH VYAS AND SHRI ATUL T SURAIYA / REVENUE BY : MRS VIDISHA KALRA / DATE OF HEARING : 23 . 2 . 2017 / DATE OF PRONOUNCEMENT : 17 . 5 . 2017 / O R D E R P ER C.N.PRASAD (JM) THESE APPEALS ARE FILED BY THE ASSESSEE AND REVENUE AGAINST THE O RDER OF THE LD. CIT (APPEALS) - II , MUMBAI DATED 28.07.2004 FOR THE ASSESSMENT YEAR 1997 - 98. 2 ITA NO S . 5897 AND 7035 /MUM/20 0 4 (A.Y. 1997 - 98 ) M/S TATA CHEMICALS LTD. 2. FIRST, WE TAKE UP ASSESSEES APPEAL. GROUND NO.1 IN THIS APPEAL OF THE ASSESSEE IS RELATING TO BANWA D PROSPECTING AND SURVEY EXPENSES. THE LD. COUNSEL, SHRI DINESH VYAS SUBMITTED THAT DEDUCTION WAS ALLOWED U/S 35E OF THE ACT ON THESE EXPENSES AND THEREFORE THIS GROUND BECOMES OTIOSE. THUS THIS GROUND IS DISMISSED AS INFRUCTUOUS. 3 . 1 G ROUND NO.2 IS RELATING TO ISSUE OF DISALL OWANCE OF ENTERTAINMENT EXPENSES. THE ASSESSEES CLAIM IS THAT A DEDUCTION OF 50% SHOULD BE ALLOWED FOR ACCOMPANYING STAFF MEMBERS. THE LD. CIT (APPEALS) HAS ALLOWED 25% FOR ACCOMPANYING STAFF MEMBERS. WE FIND THAT THE ITAT MUMBAI IN THE ASSESSEES OWN CASE IN ITA NO.5728/MUM/2004 DATED 17.8.2007 FOR THE ASSESSMENT YEAR 1996 - 97 HA D BEEN ALLOWING 25% OF THE ENTERTAIN MENT EXPENDITURE AS ALLOWABLE BUSINESS EXPENDITURE AS HAS BEEN INCURRED FOR ACCOMPANYING STAFF MEMBERS. RESPECTFULLY FOLLOWING THE EARLIER O RDERS OF THE TRIBUNAL, WE DISMISS THIS GROUND OF THE ASSESSEE. 3. 2 ON THE ISSUE OF ENTERTAIN MENT EXPENSES, BEING EXPENSES AT THE TIME OF COMPANYS AGM, WE FIND THAT THE ISSUE IS COVERED IN THE FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE IN THE ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 1996 - 97 IN ITA NO.5728/MUM/2004 DATED 17.8.2007, SPECIFICALLY AT PARA 4.1 ON PAGE 2. RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT THE EXPENSES INCURRED AT THE TIME OF COMPANYS AGM ARE ALLOWABLE EXPENSES. 3.3. ON T HE ISSUE OF SALES PROMOTION / ENTERTAINMENT EXPENSES, THE LD. COUNSEL SUBMIT TED THAT THE ASSESSEE SPONSORED DINNER AT ALL INDIA GLASS 3 ITA NO S . 5897 AND 7035 /MUM/20 0 4 (A.Y. 1997 - 98 ) M/S TATA CHEMICALS LTD. MANUFACTURERS CONFERENCE . T HE LD. COUNSEL SUBMITS THAT SODA ASH IS THE MAIN PRODUCT USED IN GLASS MANUFACTURING INDUSTRY AND THE GLASS MANUFACTURERS BUY SODA ASH FROM THE ASSESSEE. THIS SPONSORSHIP OF DINNER AT ALL INDIA GLASS MANUFACTURERS CONFERENCE IS ONLY TO THE EXTENT OF THE CONTRIBUTION EQUAL TO THE BILL OF THE DINNER AND THE ASSESSEE SPONSORED THIS DINNER KEEPING IN VIEW THE BUSINESS EXIGENCY AND IT IS NOT ENTERTAINMENT EXPENDITURE, BUT IT IS ONLY A SALES PROMOTION EXPENDITURE ALLOWABLE AS DEDUCTION. THE LD. COUNSEL SUBMITS THAT THE ASSESSING OFFICER DISALLOWED THE ENTIRE EXPENSES, HOWEVER, THE LD. CIT (APPEALS) ALLO WED 25% OF THE SAID EXPENSES FOR ACCOMPANYING STAFF AND BALANCE WAS DIRECTED TO BE TREATED AS ENTERTAINMENT EXPENSES. THE LD. COUNSEL REFERRING TO T H E SPECIAL BENCH OF THE TRIBUNAL, AHMEDABAD BENCH IN THE CASE OF LAK H ANPAL NATIONAL LTD. VS. ITO [239 ITR ( A T) 27] SUBMITS THAT CONFERENCE EXPENSES DO NOT CONSTITUTE ENTERTAINMENT EXPENDITURE. HE ALSO PLACES RELIANCE ON THE DECISION OF THE CALCUTTA HIGH COURT IN THE CASE OF SARADA PLYWOOD INDUSTRIES LTD. VS. CIT [238 ITR 354] AND SUBMITS THAT HONBLE HIGH COUR T HELD THAT EXPENDITURE ON HOLDING CONFERENCE OF DEALERS IS NOT ENTERTAINMENT EXPENDITURE. 3. 4. THE LD. DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 3. 5. WE HAVE HEARD BOTH THE SIDES, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE CASE LAWS RE LIED ON. THE SPECIAL BENCH IN THE CASE OF LAK H AN P AL NATIONAL LTD. (SUPRA) HELD THAT EXPENDITURE ON HOLDING CONFERENCE IS NOT AN ENTERTAINMENT EXPENDITURE. SIMILARLY, HONBLE CALCUTTA HIGH COURT IN THE CASE OF SARADA PLYWOOD INDUSTRIES LTD. (SUPRA) HELD T HAT EXPENDITURE ON HOLDING CONFERENCE OF DEALERS IS NOT ENTERTAINMENT EXPENDITURE. FOLLOWING THE SAID DECISIONS, WE HOLD THAT THE DINNER EXPENSES 4 ITA NO S . 5897 AND 7035 /MUM/20 0 4 (A.Y. 1997 - 98 ) M/S TATA CHEMICALS LTD. SPONSORED BY THE ASSESSEE IN THE ALL INDIA GLASS MANUFACTURERS ASSOCIATION IS NOT AN ENTERTAINMENT EXPENDITUR E, BUT IT IS CERTAINLY A SALES PROMOTION EXPENSES AS THESE EXPENSES WERE INCURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. THUS WE DIRECT THE ASSESSING OFFICER TO ALLOW THE SAID EXPENDITURE. THIS GROUND IS PARTLY ALLOWED. 4 . GROUND NO.3 RELATES TO D ISALLOWANCE OF EXPENSES ON MAINTENANCE OF GUEST HOUSE. THE FOOD EXPENSES OF RS.54,21,857/ - HAS BEEN CLAIMED BY THE ASSESSEE AS ALLOWABLE. IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 199 6 - 97 IN ITA NO.5728/MUM/2004 DATED 17.8.2007, THIS ISSUE HAS BEEN C ONSIDERED AND HELD IN FAVOUR OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE SAME, WE DIRECT THE ASSESSING OFFICER TO ALLOW THE EXPENDITURE INCURRED BY THE ASSESSEE FOR THE FOOD SERVED AT THE GUEST HOUSE. COMING TO OTHER EXPENSES INCURRED ON GUEST HOUSE I.E. SALARIES, REPAIRS, SOCIETY CHARGES AND MAINTENANCE EXPENSES, THE TRIBUNAL FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF BRITANNIA INDIA INDUSTRIES VS. CIT [278 ITR 546] DECIDED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. RESPECTFULLY FOLLOWING THE SAID DECISION, WE UPHOLD THESE DISALLOWANCES MADE BY THE ASSESSING OFFICER. THIS GROUND IS PARTLY ALLOWED. 5 . GROUND NO.4 RELATES TO DISALLOWANCE OF PAYMENT TO FORT MEDICAL SOCIETY. TH E ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNA L IN ITA NO.5728/MUM/2004 DATED 17.8.2007 FOR THE ASSESSMENT YEAR 199 6 - 9 7 IN ASSESSEES OWN CASE. RESPECTFULLY FOLLOWING THE SAME, WE ALLOW THIS GROUND OF THE ASSESSEE. 5 ITA NO S . 5897 AND 7035 /MUM/20 0 4 (A.Y. 1997 - 98 ) M/S TATA CHEMICALS LTD. 6 . GROUND NO. 5 RELATES TO DISALLOWANCE MADE U/S 40A(9) OF THE ACT REGARDING PAYMENT TO TATA SPORTS CLUB. THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THIS TRIBUNAL FOR THE ASSESSMENT YEAR 1996 - 97 AT PARA 6, PAGE 3, WHEREIN, THE SAID EXPENSES WERE ALLOWED BY THE TRIBUNAL. RESPECTFULLY FOLLOWING THE SAID DECISION OF THE COORDINATE BENCH IN THE ASSESSEES OWN CASE FOR THE A SSESSMENT YEAR 2006 - 07, WE ALLOW THE GROUND OF THE ASSESSEE. 7 . GROUND NO.6 RELATES TO DISALLOWANCE OF EXPENDITURE INCURRED ON SURVEY AND FEASIBILITY EXPENSES OF WIND MILLS. THIS GROUND IS CONNECTED TO THE ADDITIONAL GROUND RAISED BY THE ASSESSEE REGARDI NG EXPENSES ON WIND MILLS WHICH WERE LATER ABANDONED TO BE ALLOWED AS REVENUE EXPENDITURE OR NOT. WE SHALL DECIDE THIS GROUND ALONG WITH THE ADDITIONAL GROUND IN THE SUBSEQUENT PARAS ALONG WITH ADDITIONAL GROUNDS. 8 . GROUND NO.7 RELATES TO DISALLOWANCE O F PRIOR PERIOD EXPENSES. THE LD. COUNSEL SUBMITS THAT ON INSTRUCTIONS FROM THE ASSESSEE, THIS GROUND IS NOT PRESSED, HENCE, THIS GROUND IS DISMISSED AS NOT PRESSED. 9 . GROUND NO.8 RELATES TO EXPENDITURE ON INCREASE IN AUTHORIZED SHARE CAPITAL AND DEDUCTI ON U/S 35D OF THE ACT . THE LD. COUNSEL SUBMITS THAT EXPENDITURE INCURRED ON INCREASE IN AUTHORIZED SHARE CAPITAL WAS HELD TO BE CAPITAL IN NATURE I N VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF BROOKE BOND INDIA LTD VS. CIT [225 ITR 79 8] . H OWEVER, ALTERNATIVELY, THE LD. COUNSEL SUBMITS THAT THE CLAIM WAS MADE TO ALLOW DEDUCTION U/S 35D OF THE ACT AND AN IDENTICAL ISSUE CAME UP BEFORE THE TRIBUNAL FOR THE ASSESSMENT YEAR 1993 - 94 IN ITA NO.2803/MUM/2000 DATED 21.4.2004 AND 6 ITA NO S . 5897 AND 7035 /MUM/20 0 4 (A.Y. 1997 - 98 ) M/S TATA CHEMICALS LTD. THE TRIBUNAL HELD THAT THE CLAIM OF THE ASSESSEE MAY BE CONSIDERED U/S 35D OF THE ACT. FOLLOWING THE SAID ORDER, WE HOLD THAT THE SAID EXPENSES ARE CAPITAL IN NATURE. HOWEVER, THE ALTERNATIVE CLAIM OF THE ASSESSEE THAT DEDUCTION U/S 35D SHOULD BE ALLOWED ON SUCH EXPE NSES MAY BE CONSIDERED BY THE ASSESSING OFFICER. THUS, THE MATTER IS RESTORED TO THE ASSESSING OFFICER FOR EXAMINING THE ALTERNATIVE CLAIM. THIS GROUND IS PARTLY ALLOWED. 10 . GROUND NO.9 RELATES TO DISALLOWANCE OF WRITE OFF OF UN RECONCILED BALANCES OF C ONSIGNEE DISTRIBUTORS (BAD DEBTS WRITTEN OFF). THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE COORDINATE BENCH DECISION FOR THE ASSESSMENT YEAR 1996 - 97 IN ITA NO.5728/MUM/2004 DATED 17.8.2007 AND ALSO THE DECISION OF THE HONBLE SUPREME COURT IN T HE CASE OF TRF LTD. VS. CIT [323 ITR 397]. IT IS NOT IN DISPUTE THAT THESE AMOUNTS WERE DUE TO THE ASSESSEE COMPANY FROM ITS DISTRIBUTORS AND AGENTS AND THESE BALANCES WERE WRITTEN OFF IN THE BOOKS OF ACCOUNTS. THEREFORE, RESPECTFULLY FOLLOWING THE SAME D ECISION OF THE HONBLE SUPREME COURT IN THE CASE OF TRF LTD. VS. CIT (SUPRA), WE ALLOW THE CLAIM OF THE ASSESSEE. THIS GROUND IS ALLOWED. 1 1 . GROUND NO.10 RELATES TO THE DISALLOWANCE OF PAYMENT TO TATA CHEMICALS SOCIETY FOR R URAL D EVELOPMENT. THE LD. C OU NSEL SUBMITTED THAT THIS GROUND IS NOT PRESSED IN VIEW OF THE ASSESSING OFFICER PASSING 154 ORDER GRANTING RELIEF TO THE ASSESSEE. THUS, THIS GROUND IS DISMISSED AS NOT PRESSED. 1 2 . GROUND NO.11 RELATES TO THE DISALLOWANCE OF PAYMENT TO FOREIGN TECHNICIA NS. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER ALLOWED DEDUCTION U/S 35AB OF THE ACT AT 1/6 TH OF THE TOTAL EXPENSES DURING THIS ASSESSMENT YEAR. HE SUBMITS THAT THE ASSESSEE WOULD BE SATISFIED 7 ITA NO S . 5897 AND 7035 /MUM/20 0 4 (A.Y. 1997 - 98 ) M/S TATA CHEMICALS LTD. IF A DIRECTION IS GIVEN TO THE ASS ESSING OFFICER TO ALLOW SIMILAR DEDUCTION IN SUBSEQUENT YEARS. THE ASSESSING OFFICER HAVING ALLOWED DEDUCTION AT 1/6 TH OF THE TOTAL EXPENSES DURING THIS ASSESSMENT YEAR, WE SEE NO REASON FOR NOT ALLOWING THE SAID EXPENSES IN SUBSEQUENT ASSESSMENT YEARS AT 1/6 TH OF THE TOTAL EXPENSES. THUS, WE DIRECT THE ASSESSING OFFICER TO ALLOW THESE EXPENSES AT 1/6 TH IN SUBSEQUENT ASSESSMENT YEARS. THE ADDITIONAL GROUND IS ADMITTED AND ALLOWED. 1 3 . GROUND NO.12 RELATES TO DISALLOWANCE OF PAYMENT TO TATA COUNCIL FOR C OMMUNITY INITIATIVES. THE LD. COUNSEL SUBMITS THAT IN VIEW OF THE SMALLNESS OF THE AMOUNT, THIS GROUND IS NOT PRESSED. THUS, THIS GROUND IS DISMISSED AS NOT PRESSED. 1 4.1 . GROUND NO.13 RELATED TO DISALLOWANCE OF I. PROVISION FOR REPAIRS OF DAMAGED WIND MILLS II. PROVISION FOR REPROCESSING DETERGENT POWDER III. PROVISION FOR BAD AND DOUBTFUL DEBTS AND ADVANCES IV. DEDUCTION OF 100% DEPRECIATION ON WIND MILL. 14.2 COMING TO FIRST THREE ITEMS OF THIS GROUND, I.E. PROVISION FOR REPAIRS OF DAMAGED WIND MILLS, PROVISION FOR REPROCESSING DETERGENT POWDER AND PROVISION FOR BAD AND DOUBTFUL DEBTS AND ADVANCES, THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT ON INSTRUCTIONS THIS PART OF GROUND IS NOT PRESSED. 14.3. COMING TO 4 TH ITEM I.E. DEDUCTION OF 100% DEPRECIATION ON WIND MILL, THE LD. COUNSEL SUBMITS THAT THIS ASPECT OF THE MATTER NEED NOT BE GONE INTO AS THE ASSESSEE IN ITS ADDITIONAL GROUND IS CLAIMING THAT THE EXPENSES ON WIND 8 ITA NO S . 5897 AND 7035 /MUM/20 0 4 (A.Y. 1997 - 98 ) M/S TATA CHEMICALS LTD. MILL BE ALLOWED AS REVENUE EXPENDITUR E. THE LD. COUNSEL SUBMITS THAT IF THE ADDITIONAL GROUND IS DECIDED IN FAVOUR OF THE ASSESSEE, THE ISSUE OF DEDUCTION OF 100% DEPRECIATION ON WIND MILL DOES NOT ARISE. 15.1 NOW, WE TAKE UP THE ADDITIONAL GROUND AND GROUND NO.6 WHICH ARE RELATING TO EXP ENSES ON WIND MILLS WHETHER TO BE A LLOWED AS REVENUE EXPENDITURE OR NOT. T HE ADDITIONAL GROUND RAISED BY ASSESSEE IS AS UNDER : THE LD.CIT(APPEALS) ERRED IN NOT ALLOWING THE WRITE OFF OF THE COST OF WIND MILLS AS A REVENUE EXPENDITURE AT RS.9,85,81,057/ - WHICH WAS DECAPITALIZED DURING THE YEAR 15.2 THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO STATEMENT OF FACTS AT PAGE 8, PARA 7 FILED BEFORE THE LD.CIT(APPEALS), SUBMITTED THAT DURING THE YEAR UNDER REFERENCE, ASSESSEE COMPANY HAD INSTALLED FIVE WIND MILLS BEFORE SEPTEMBER 13, 1996 AND THESE WIND MILLS WERE INSTALLED IN SALT WORKS WHICH IS BASICALLY IN MARSHY LAND AND COMPANY HAD TO INCUR SUBSTANTIAL EXPENSES FOR FINDING OUT LOCATION WHERE THESE WIND MILLS CAN BE INSTALLED. THE LD. COUNSEL SUBMITTED THAT THE WIND MILLS ARE ENTITLED FOR 100% DEPRECIATION, THE EXPENSES ON PROSPECTING AND SURVEY FOR WIND MILLS SHOULD BE ALLOWED AS 100% DEDUCTION. HOWEVER, HE SUBMITTED THAT THE PROJECT OF INSTA LLATION OF WIND MILLS COULD NOT BE TAKEN UP DUE TO TECHNICAL REASONS THE COST OF THE SAID WIND MILLS WAS WRITTEN OFF. THE LD. COUNSEL REFERRING TO THE ADDITIONAL GROUND FILED NOW BEFORE US SUBMITS THAT THESE WIND MILLS WERE INSTALLED FOR INCREASING POWER S UPPLY TO EXISTING MANUFACTURING FACILITIES OF THE ASSESSEE AND IT IS NOT AN EXPANSION OF NEW BUSINESS AND THEREFORE THE EXPENSES SHOULD BE ALLOWED AS REVENUE EXPENDITURE. THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE WIND MILLS INSTALLED WERE FOR CAPT IVE POWER CONSUMPTION AND WAS LATER THE WIND MILLS WERE ABANDONED DUE TO TECHNICAL REASONS AND 9 ITA NO S . 5897 AND 7035 /MUM/20 0 4 (A.Y. 1997 - 98 ) M/S TATA CHEMICALS LTD. THEREFORE HE SUBMITS THAT SINCE THESE WINDMILLS WERE INTENDED TO INSTALL ONLY FOR CAPTIVE CONSUMPTION AND NOT FOR A NEW SOURCE OF INCOME AND SINCE THE PROJECT W AS ABANDONED THE EXPENSES ARE TO BE ALLOWED AS REVENUE EXPENSES. HE STRONGLY PLACED RELIANCE ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. IDEA CELLULAR LTD [76 TAXMAN.COM 77] FOR THE ABOVE PROPOSITION. 15.3 WE HAVE HEARD THE RI VAL SUBMISSION. THE ASSESSEE IS ENGAGED IN MANUFACTURING OF SALT IN MULTIPLE SALT PAWNS OF ABOUT 120. THE LD. COUNSEL SUBMITTED THAT INSTALLATION OF WIND MILLS PROJECT WAS ABANDONED BY THE ASSESSEE DUE TO VARIOUS REASONS AND THE COST OF THE PROJECT ABANDON ED SHOULD BE ALLOWED AS REVENUE EXPENDITURE IN VIEW OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. IDEA CELLULAR LTD. (SUPRA). THE LD. COUNSEL SUBMITS THAT IN THIS CASE, THE ASSESSEE, A CELLULAR COMPANY INCURRED EXPENDITURE FOR CO NSTRUCTION OF A CELLULAR TOWER, BUT PROJECT WAS ABANDONED DUE TO COMMERCIAL REASONS AND THE IMPUGNED EXPENSES WERE CLAIMED AS REVENUE BY THE ASSESSEE, THEY WERE DISALLOWED BY THE ASSESSING OFFICER ON THE GROUND THAT THE EXPENDITURE WAS INCURRED TO BRING IN TO EXISTENCE A NEW ASSET AND NEW SOURCE OF INCOME. THE TRIBUNAL FOUND THAT CELLULAR TOWERS WERE SET UP FOR THE PURPOSE OF ASSESSEES OWN BUSINESS AND NOT FOR LEASING OUT THE TOWERS AND ON THESE FACTS, THE HIGH COURT HELD THAT SINCE NO NEW BUSINESS ASSET WA S SET UP, IMPUGNED EXPENDITURE WOULD BE ALLOWED AS BUSINESS EXPENDITURE. HE STRONGLY PLACING RELIANCE ON THIS DECISION SUBMITTED THAT THE COST OF ABANDONED PROJECT OF THE ASSESSEE, THE WIND MILLS SHOULD BE ALLOWED AS REVENUE EXPENDITURE FOR THE REASON THA T THESE WIND MILLS WERE SET UP AS A CAPTIVE POWER PLANTS FOR THE EXISTING BUSINESS OF THE ASSESSEE AND NOT FOR A NEW SOURCE OF INCOME. 10 ITA NO S . 5897 AND 7035 /MUM/20 0 4 (A.Y. 1997 - 98 ) M/S TATA CHEMICALS LTD. 15.4 THE ADDITIONAL GROUND RAISED BY THE ASSESSEE FOR ALLOWING WRITE OFF OF COST OF WIND MILLS AS REVENUE EXPENDITURE WA S MADE FOR THE FIRST TIME BEFORE THIS TRIBUNAL. THIS GROUND WAS NOT MADE BEFORE THE LD.CIT(APPEALS) NOR IT IS THE CONTENTION OF THE ASSESSEE BEFORE THE ASSESSING OFFICER. THE ASSESSEE ALL ALONG WAS CLAIMING ONLY 100% DEPRECIATION ON THIS PROJECT. THE GR OUND RAISED BY THE ASSESSEE IS PURELY A LEGAL GROUND IN THE SENSE, THE EXPENDITURE IF NOT ALLOWABLE U/S 32 SHOULD BE ALLOWED U/S37. THIS CONTENTION OF THE ASSESSEE WAS NOT EXAMINED BY THE LOWER AUTHORITIES SINCE THE ADDITIONAL GROUND IS ONLY A LEGAL GROUN D, WE ADMIT THIS ADDITIONAL GROUND AND SINCE THIS WAS NOT EXAMINED BY THE ASSESSING OFFICER, WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER, WHO SHALL DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW KEEPING IN VIEW OF THE SUBMISSIONS OF THE ASSE SSEE AND ALSO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. IDEA CELLULAR LTD. 76 TAXMANN.COM77. THE ADDITIONAL GROUND IS ALLOWED FOR STATISTICAL PURPOSE. GROUND NO.6 RELATING TO EXPENSES ON SURVEY & FEASIBILITY REPORTS ON WIND MILL S IS ALSO RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION ALONG WITH ADDITIONAL GROUND. 1 6.1 . GROUND NO.14 RELATES TO NON ADMISSION OF ADDITIONAL GROUND IN RESPECT OF AMOUNT TRANSFERRED TO DEBENTURE REDEMPTION RESERVE WHILE COMPUTING BOOK PROFITS U/S 115JA. THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS GROUND OF APPEAL THOUGH RAISED BEFORE THE LD. CIT (APPEALS) AS ADDITIONAL GROUND, THE LD. CIT (APPEALS) HAS NOT ADJUDICATED THIS GROUND. HE SUBMITS THAT THIS IS PURELY A LEGAL GRO UND AND THEREFORE THE LD. CIT (APPEALS) SHOULD HAVE ADMITTED AND ADJUDICATED UPON. HE FURTHER SUBMITS THAT IN THE CASE OF ECHJAY FORGINGS [251 ITR 15], THE HONBLE BOMBAY HIGH COURT HELD THAT THE AMOUNT TRANSFERRED TO DEBENTURE REDEMPTION RESERVE IS AN A MOUNT SET ASIDE 11 ITA NO S . 5897 AND 7035 /MUM/20 0 4 (A.Y. 1997 - 98 ) M/S TATA CHEMICALS LTD. TO MEET A KNOWN LIABILITY AND AS SUCH THE DEBENTURE REDEMPTION RESERVE CANNOT BE CONSIDERED TO BE A RESERVE FOR THE PURPOSE OF COMPUTING BOOK PROFITS U/S 115JA OF THE ACT. 16.2 ON HEARING THE LD. COUNSEL, WE ARE OF THE VIEW THAT THIS I SSUE SHOULD BE ADDRESSED BY THE LD. CIT (APPEALS) BY ADMITTING THE ADDITIONAL GROUND, HENCE, THIS GROUND IS RESTORED TO THE FILE O F THE LD. CIT (APPEALS) WHO SHALL ADMIT THE ADDITIONAL GROUND AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW KEEPING IN VIEW THE DECISION OF THE JURISDICTIONAL HIGH COURT AS REFERRED TO ABOVE. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSE. 1 7 . NOW COMING TO THE REVENUES APPEAL, G ROUND NO.1 IS RELATING TO ENTERTAINMENT EXPENDITURE FOOD SUBSIDY COUPONS. WE FIND THAT SIMILAR ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1996 - 97 IN ITA NO.6496/MUM/2004 DATED 17.8.2007, WHEREIN THE COORDINATE BENCH DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE FOLLOWING THE ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 1995 - 96 IN ITA NO.3082/MUM/2002. RESPECTFULLY FOLLOWING THE SAME, WE DISMISS THE GROUND OF THE REVENUE. 1 8 . GROUND NO.2 RELATES TO DISALLOWANCE U/S 40A(9) OF THE ACT IN RESPECT OF PAYMENTS TO SCHOOLS. WE FIND THAT SIMILAR GROUND IS DECID ED IN FAVOUR OF THE ASSESSEE BY THE COORDINATE BENCH FOR THE ASSESSMENT YEAR 1996 - 97 IN ITA NO.6496/MUM/2004 DATED 17.8.2007. RESPECTFULLY FOLLOWING THE SAME, WE DISMISS THE GROUND OF THE REVENUE. 12 ITA NO S . 5897 AND 7035 /MUM/20 0 4 (A.Y. 1997 - 98 ) M/S TATA CHEMICALS LTD. 19.1 . GROUND NO.3 RELATES TO DISALLOWANCE OF PRIOR PERIOD EXPENSES. THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT SINCE THESE EXPENSES WERE CRYSTALIZED DURING THE YEAR UNDER CONSIDERATION, THEY HAVE TO BE ALLOWED IN THIS ASSESSMENT YEAR ONLY. HE SUPPORTS THE ORDERS OF THE LD. CIT (APPEALS) AND PLACES RELIANCE ON THE DECISION OF THE COORDINATE BENCH IN THE ASSESSEES CASE FOR THE ASSESSMENT YEAR 1986 - 87 IN ITA NO.4564/MUM/2003 DATED 13.7.2012 . 19.2 THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT DISALLOWED PRIOR PERIOD EXPENSES, HOLDING THAT PRIOR PERIO D EXPENSES IN GENERAL ARE NOT ALLOWABLE. HE OBSERVED THAT EACH ASSESSMENT IS A SELF - CONTAINED UNIT AND ONLY INCOME OR EXPENSES OF THAT YEAR CAN BE CONSIDERED IN FRAMING THE ASSESSMENT. HE RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. BRITISH PAINTS [188 ITR 44]. THE LD. CIT (APPEALS) PARTLY SUSTAINED THE DISALLOWANCE TO THE EXTENT OF RS.38,50,115/ - . THE LD. CIT(APPEALS) IN SO FAR AS THE PROVISION FOR REPROCESSING CHARGES OF CHEMICALS DIVISION WHICH WAS CLAIMED AS PRIOR PERIO D EXPENSES OF RS.74,09,210/ - IS CONCERNED , THIS AMOUNT WAS DELETED SINCE THE ASSESSING OFFICER HIMSELF HAS GIVEN RELIEF BY PASSING 154 ORDER. THE OTHER PRIOR PERIOD EXPENSES OF RS.1,78,08,396/ - AND RS.12,81,299/ - HE DIRECTED THE ASSESSING OFFICER TO ALLOW DEDUCTION IN RESPECT OF RS.1,78,08,396/ - BEING EXCESS SHARE OF PROFIT ON SALE OF CEMENT THROUGH ACC OFFERED IN EARLIER YEARS AND REVERSED IN THE CURRENT YEAR. AND REGARDING RS.12,81,299/ - BEING SHORT PROVISION FOR BOOK DEPRECIATION, ASSESSING OFFICER IS D IRECTED TO DELETE AFTER VERIFICATION OF THE FACTS. THE LD. CIT (APPEALS) IN HIS ORDER HAS GIVEN THE FOLLOWING REASONS FOR DELETION OF THE PRIOR PERIOD EXPENSES. 13 ITA NO S . 5897 AND 7035 /MUM/20 0 4 (A.Y. 1997 - 98 ) M/S TATA CHEMICALS LTD. 11.3.1 AS REGARDS AMOUNT OF RS. 1,78,08,396/ - BEING EXCESS SHARE OF PROFIT ON SALE OF CEMEN T THROUGH ACC OFFERED IN EARLIER YEARS AND REVERSED IN THE CURRENT YEAR, IT IS SEEN THAT THE A.O HAS NOT GIVEN ANY REASONS BEFORE MAKING THE DISALLOWANCE. THE ENTIRE EXPENSES OF RS. 2,45,23,501 DEBITED UNDER THE HEAD 'PRIOR PERIOD EXPENSES' HAVE BEEN DISAL LOWED WITHOUT EXAMINING THE NATURE OF EXPENSES. THE INCOME OF RS. 1,78,08,396/ - WAS OFFERED BY THE APPELLANT IN EARLIER YEARS. DURING THE YEAR, AFTER NEGOTIATION AND FINALISATION OF ACCOUNTS, THE SHARE OF PROFIT RECEIVABLE FROM ACC WAS REDUCED. THE REDUCTI ON IN THE AMOUNT RECEIVABLE FROM ACC IS ELIGIBLE FOR DEDUCTION AS WRITE OFF OF BAD DEBT. IT HAS BEEN HELD BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF BYRAMJEE J E EJEEBHOY P. LTD. 182 ITR 6 THAT THE INTEREST INCOME TAXED ON ACCRUAL BASIS AND WRITTEN OFF AS BAD SUBSEQUENTLY IS ALLOWABLE AS DEDUCTION U/S 36(1)(VII) OF I.T. ACT. ON THE SAME ANALOGY THE APPELLANT IS ENTITLED FOR DEDUCTION OF THE INCOME OFFERED IN EARLIER YEARS WHICH WAS NO LONGER RECEIVABLE IN VIEW OF SUBSEQUENT NEGOTIATION AND FINALISATION O F ACCOUNTS. THE A.O IS DIRECTED TO ALLOW DEDUCTION OF RS. 1,78,08,396/ - . 11.3.2 AS REGARDS SHORT PROVISION FOR BOOK DEPRECIATION OF RS. 12,81,2991' - , A PERUSAL OF THE STATEMENT OF INCOME FILED ALONG WITH THE RETURN OF INCOME SHOWS THAT ASSESSEE ON ITS OWN HAD ADDED THIS AMOUNT TO THE INCOME AS PER PROFIT AND LOSS ACCOUNT. THE A .O STARTED THE COMPUTATION OF INCOME WITH THE RETURNED INCOME AND MADE FURTHER ADDITION - .OF PRIOR PERIOD EXPENSES OF RS. 2,45,23,501 (WHICH INCLUDED THE AMOUNT OF RS. 12,8 1,299). THUS, THE A.O'S ACTION HAS RESULTED IN DOUBLE DISALLOWANCE. THE A.O IS DIREC TED TO DELETE THE DISALLOWANCE AFTER REVERIFICATION OF FACTS. 19.3. ON GOING THROUGH THE OBSERVATIONS OF THE LD.CIT(APPEALS), WE DO NOT SEE ANY GOOD REASONS TO DISTURB THE FINDINGS AND DECISION OF THE LD. CIT (APPEALS). THUS, WE SUSTAIN THE ORDER OF THE LD. CIT. THIS GROUND OF REVENUE IS REJECTED. 2 0 . GROUND NO.4 IS RELATING TO DISALLOWANCE OF SHARE ISSUE AND PRELIMINARY EXPENSES INCURRED ON ISSUE OF BONUS SHARES , WHETHER ALLOWABLE AS REVENUE EXPENDITU RE OR NOT AND IN THE ALTERNATIVE, DEDUCTION SHOULD BE ALLOWED U/S 35D OF THE ACT. WE FIND THAT IN THE ASSESSMENT YEAR 199 6 - 9 7 IT WAS 14 ITA NO S . 5897 AND 7035 /MUM/20 0 4 (A.Y. 1997 - 98 ) M/S TATA CHEMICALS LTD. CONSIDERED THAT THIS EXPENDITURE IS NOT ALLOWABLE AS REVENUE EXPENDITURE IN VIEW OF THE DECISION OF THE HONBLE SUPREME C OURT IN THE CASE OF BROOKE BOND INDIA LTD. [225 ITR 798] . H OWEVER, ON THE ALTERNATIVE CLAIM THAT A DEDUCTION SHOULD BE ALLOWED U/S 3 5D OF THE ACT, THE ISSUE WAS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO CONSIDER THE CLAIM OF THE A SSESSEE FOR DEDUCTION U/S 35D OF THE ACT. FOLLOWING THE SAID ORDER, WE HOLD THAT THE EXPENSES ARE CAPITAL IN NATURE. HOWEVER , WE SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE ALTERNATIVE CLAIM OF THE ASSESSEE THAT A DEDUCTION U /S 3 5D OF THE ACT BE ALLOWED. THE ASSESSING OFFICER AFTER DUE EXAMINATION IN ACCORDANCE WITH LAW MAY ALLOW THE CLAIM U/S 35D OF THE ACT . FOR THIS LIMITED PURPOSE OF EXAMINING THE ALTERNATIVE CLAIM, THIS ISSUE IS RESTORED TO THE FILE OF ASSESSING OFFICER. 2 1 . 1. GROUND NO.5 RELATES TO DISALLOWANCE OF EXPENSES TOWARDS COMMUNITY DEVELOPMENT. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT DISALLOWED RS.96.2 LAKHS SPENT BY THE ASSESSEE ON COMMUNITY DEVELOPMENT UNDER DROUGHT RELIEF ON THE GROUND THAT T HE SAID EXPENDITURE DOES NOT FULFIL THE REQUIREMENTS OF SECTION 37 OF THE ACT. THE LD. CIT(APPEALS) TAKING NOTE OF THE FACT THAT THE MONIES SPENT BY THE ASSESSEE ON COMMUNITY DEVELOPMENT PROGRAMMES SUCH AS RUNNING OF PRIMARY SCHOOLS, MEDICAL FACILITIES, T ECHNICAL/INDUSTRIAL TRAINING, DISTRIBUTION OF SEED, DISTRIBUTION OF FERTILIZER, DISTRIBUTION OF CATTLE FIELD, ADULT EDUCATION AND LITERACY PROGRAMMES, SUPPLY OF DRINKING WATER ETC., HELD THAT ALL THESE EXPENSES INCURRED CANNOT BE REGARDED AS BEING WHOLLY O UTSIDE THE SCOPE OF ASSESEES BUSINESS. THE LD.CIT (APPEALS) HELD THAT ALL THESE ACTIVITIES ARE DONE EITHER IN THE NAME OF TCL BY THE COMPANY ITSELF OR THROUGH TATA CHEMICALS SOCIETY FOR RURAL DEVELOPMENT. APPRECIATING THE SUBMISSIONS OF THE ASSESSEE THA T THIS 15 ITA NO S . 5897 AND 7035 /MUM/20 0 4 (A.Y. 1997 - 98 ) M/S TATA CHEMICALS LTD. EXPENDITURE HAS BEEN INCURRED IN ORDER TO WIN OVER THE GOOD WILL OF THE EMPLOYEES AND THE NEARBY VILLAGERS, LD. CIT (APPEALS) HELD THAT THE EXPENDITURE IS IN LARGER INTEREST OF THE SMOOTH FUNCTIONING OF THE COMPANY AND IS THEREFORE ALLOWABLE DEDUCTION. 21.2 IN THE CASE OF CIT VS. MADRAS REFINERIES LTD., IT WAS HELD THAT THE AMOUNT SPENT FOR BRINGING DRINKING WATER AS ALSO FOR ESTABLISHING OR IMPROVING THE SCHOOL MEANT FOR THE RESIDENTS OF THE LOCALITY IN WHICH THE BUSINESS WAS SITUATED COULD NOT BE REGARDED AS BEING WHOLL Y OUTSIDE THE AMBIT OF THE BUSINESS CONCERNS OF THE ASSESSEE ESPECIALLY WHERE THE UNDERTAKING OWNED BY THE A SSESSEE WAS ONE WHICH WAS TO SOME EXTENT A POLLUTING INDUSTRY. 21.3 THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF MYSORE KIRLOSKAR LTD. VS. CIT [166 ITR 836] HELD AS UNDER : HELD. (I) THAT THE WORDS - FOR THE PURPOSE OF THE BUSIN ES S' USED IN SECTION 3 7 ( 1)SHOULD NOT BE LIMITED TO THE MEANING OF 'EARNING PROFIT ALONE' BUSINESS EXPEDIENCY OR COMMERCIAL EXPEDIENCY MIGHT REQUIRE PROVIDING FACILITIES LIKE SCHOOLS, HOSPITALS, ETC., FOR THE EMPLOYEES OR THEIR CHILDREN OR FOR THE CHILDREN OF THE EX - EMPLOYEES. A NY EXPENDITURE LAID OUT OR EXPENDED FOR THEIR BENEFIT, IF IT SATISFIED THE OTHER REQUIREMENTS, MUST BE ALLOWED AS A DEDUCTION UNDER SECTION 37(L) OF THE ACT. THE FACT THAT SOMEBODY OTHER THAN THE ASSESSEE WAS ALSO BENEFITED OR INCIDENTALLY TOOK ADVANTAGE O F THE PROVISION MADE, SHOULD NOT COME IN THE WAY OF THE EXPENDITURE BEING ALLOWED AS A DEDUCTION UNDER SECTION 37(1) OF THE ACT. NEVERTHELESS, IT IS AN EXPENDITURE ALLOWABLE AS DEDUCTION UNDER THE ACT. 21.4 THEREFORE IN VIEW OF WHAT IS DISCUSSED ABOVE AN D RESPECTFULLY FOLLOWING THE SAID DECISION S , WE SUSTAIN THE ORDER OF THE LD. CIT (APPEALS) ON THIS ISSUE. THE GROUND RAISED BY REVENUE IS DISMISSED. 16 ITA NO S . 5897 AND 7035 /MUM/20 0 4 (A.Y. 1997 - 98 ) M/S TATA CHEMICALS LTD. 2 2 . GROUND NO.6 RELATES TO DEDUCTION OF ADVERTISEMENT EXPENDITURE (DEFERRED REVENUE). WE FIND THAT THIS I SSUE IS COVERED IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1996 - 97 IN ITA NO.6496 DATED 17.8.2007, WHEREIN, THE COORDINATE BENCH FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. BHOR INDUSTRIES LT D. [264 ITR 180] ALLOWED THE CLAIM OF THE ASSESSEE. ACCORDINGLY, WE UPHOLD THE FINDINGS OF THE LD.CIT(APPEALS) AND REJECT THE GROUND OF THE REVENUE. 2 3 . GROUND NO.7 RELATES TO ALLOCATION OF INTEREST EXPENSES ON THE BORROWINGS BETWEEN BUSINESS INCOME AND INTEREST INCOME FROM TAX FREE BONDS AND DIVIDEND INCOME FOR THE PURPOSE OF THE PROVISIONS OF SECTION 14A. WE FIND THAT AN IDENTICAL ISSUE AROSE FOR THE AS SESSMENT YEAR 2006 - 07 AND THE COORDINATE BENCH IN ITA NO.6496/2004 DATED 17.08.2007 UPHELD THE ORDER OF THE LD. CIT (APPEALS) IN HOLDING THAT ENTIRE BORROWINGS WAS UTILIZ ED FOR PUTTING UP NEW PLANT AT P APRALA AND NO PART OF THE BORROWINGS WAS UTILIZED FOR THE PURPOSE OF INVESTMENT. IN OTHER WORDS, IT WAS HELD THAT THERE IS NO NEXUS BETWEEN THE INCOME ON INVESTMENTS AND THE INTEREST PAID ON BORROWINGS. IT WAS ALSO OBSERVED BY THE COORDINATE BENCH THAT CONTENTIONS RAISED BY THE REVENUE HAVE BEEN DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE IN ASSESSEES OWN CASE FOR THE EARLIER ASSESSMENT YEARS I.E. 1992 - 93 TO 1995 - 96. THE LD. CIT (APPEALS) FOLLOWING THE COORDINATE BENCH DECISION OF THIS TRIBUNAL FOR THE ASSESSMENT YEAR 1994 - 95 DELETED THE DISA LLOWANCE MADE BY THE ASSESSING OFFICER. THEREFORE, WE SEE NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT (APPEALS) HENCE THIS GROUND IS DISMISSED. 2 4.1 . GROUND NO.8 RAISED BY THE REVENUE IS IN RESPECT OF THE COMPUTATION OF BOOK PROFITS U/S 115JA OF THE ACT. THE ASSESSING OFFICER WHILE COMPLETING 17 ITA NO S . 5897 AND 7035 /MUM/20 0 4 (A.Y. 1997 - 98 ) M/S TATA CHEMICALS LTD. THE ASSESSMENT ADDED BACK PROVISION FOR DOUBTFUL DEBTS AMOUNTING TO RS.15,55,640/ - TO THE BOOK PROFITS AND FURTHER DEDUCTION OF PROFITS U/S 80IA OF FERTILIZER DIVISION WAS NOT CONSIDERED WHILE COMPUTING THE BOOK PROFITS U/S 115JA OF THE ACT. THE LD. CIT (APPEALS) FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ECHJAY FORGINGS PVT. LTD. ALLOWED THE CLAIM OF THE ASSESSEE IN RESPECT OF THE PROVISION FOR DOUBTFUL DEBTS. FOLLOWING THE SAID DECISION, HE DIRECTED THE ASSESSING OFFICER NOT TO ADD PROVISION FOR DOUBTFUL DEBTS WHILE COMPUTING BOOK PROFITS. WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD. CIT (APPEALS) AS HE FOLLOWED THE DECISION OF THE JURISDICTIONAL HIGH COURT AL LOWING THE CLAIM OF THE ASSESSEE. 24.2 COMING TO THE DEDUCTION U/S 80IA WHILE COMPUTING BOOK PROFITS U/S115JA , WE FIND THAT THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT, DID NOT ALLOW THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80IA OF THE ACT. H E HAS NOT GIVEN ANY REASON FOR NOT ALLOWING THE DEDUCTION. THE LD. CIT (APPEALS) WHILE DEALING WITH THE ISSUE UNDER NORMAL PROVISIONS OF THE ACT AT PAGE 20, PARA 20.3, HELD THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80IA IN RESPECT OF PAP RALA PLANT SUBJECT TO SATISFACTION OF OTHER CONDITIONS. WE ALSO FIND THAT THE LD. CIT (APPEALS) WHILE DEALING WITH THE SAID DEDUCTION U/S 80IA WHILE COMPUTING BOOK PROFITS IN PARA 34.3 AT PAGE 33 DIRECTED THE ASSESSING OFFICER TO REDUCE THE BOOK PROFIT BY THE AMOUNT OF PROFITS AND GAIN ELIGIBLE FOR DEDUCTION U/S 80IA IN VIEW OF SPECIFIC PROVISION OF CLAUSE (V) OF EXPLANATION TO SECTION 115JA OF THE ACT. HERE WHAT WE SEE IS , THE ELIGIBILITY OF DEDUCTION U/S 80IA IS NOT THE QUESTION BUT IT IS ONLY THE QUANTIFICATION S INCE THE LD.CIT (APPEALS) ALLOWED THE DEDUCTION U/S 80IA TO THE ASSESSEE . THE REVENUE DID NOT CHALLENGE THE ORDER OF THE LD. CIT 18 ITA NO S . 5897 AND 7035 /MUM/20 0 4 (A.Y. 1997 - 98 ) M/S TATA CHEMICALS LTD. (APPEALS) IN HOLDING THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80IA OF THE ACT. T HE REVENUE IS CHALLENGING THE ORDER OF THE LD. CIT (APPEALS) IN DIRECTING THE ASSESSING OFFICER TO ALLOW PROFITS AND GAINS ELIGIBLE FOR DEDUCTION U/S 80IA WHILE COMPUTING THE BOOK PROFITS. THE PROVISIONS OF CLAUSE (V) O F EXPLANATION TO SECTION 115JA CLEARLY STIPULATES THAT AN INDUSTRIAL UNDER TAKING LOCATED IN AN INDUSTRIALLY BACKWARD STATE OR DISTRICT REFERRED TO IN CLAUSE REFERRED TO SUB SECTION ( 2 ) OF 80IA IS TO BE REDUCED WHILE COMPUTING THE BOOK PROFITS. THEREFORE, THE DIRECTION GIVEN BY THE LD. CIT (APPEALS) APPEARS TO BE IN ACCORDANCE W ITH LAW. HOWEVER, SINCE THE ASSESSING OFFICER HAS NOT GIVEN ANY EXPLANATION AS TO WHY DEDUCTION IS NOT ALLOWED, WE DIRECT THE ASSESSING OFFICER TO EXAMINE THIS ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD , I N VIEW OF THE DIRECTION GIVEN BY THE LD. CIT (APPEALS) THAT SUBJECT TO OTHER PROVISIONS, THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80IA OF THE ACT. THIS GROUND IS PARTLY ALLOWED. 25. IN THE RESULT, APPEAL OF THE ASSESSEE AND REVENUE ARE PARTLY ALLOWED FO R STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THE 17 TH DAY OF MAY 2017 . SD/ - SD/ - ( ASHWANI TANEJA ) ( C.N.PRASAD ) / / ACCOUNTANT MEMBER JUDICIAL MEMBER / MUMBAI; / DATED 17 .0 5 . 2017 LR, SPS 19 ITA NO S . 5897 AND 7035 /MUM/20 0 4 (A.Y. 1997 - 98 ) M/S TATA CHEMICALS LTD. / COPY OF THE ORDER FORWARDED TO : / BY ORDER, (ASSTT. REGISTRAR) , / ITAT, MUM 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. // TRUE COPY / /