DCIT, C-1, Ludhiana V. M/s Vardhman Textiles Limited, Ludhiana

ITA 611/CHANDI/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 1045 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2020
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 02-03-2020
• Assessment Year: 2008-2009
• Appeal Filed On: 03-05-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C CHANDERKANTA
• Assessee Lawyers: SUBHASH AGGARWAL; RISHIT DHINGRA
• Keywords: Capital asset; Business income; Earning of tax free income; Capital receipt; Revenue expenditure; Capital expenditure; Rule 8D
• Section: 14A; 80IB; 10B; 80IA; 201; 80IC; 80IC; 43; 48; 13; 22

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH B , CHANDIGARH , !' # $ % &' , '( BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NO.484 /CHD/2019 / ASSESSMENT YEAR : 2008-09 VARDHMAN TEXTILES LIMITED, CHANDIGARH ROAD, LUDHIANA. THE A.C.I.T., CIRCLE-1, LUDHIANA. ./PAN NO: AABCM4692E /APPELLANT /RESPONDENT & ./ ITA NO.611 /CHD/2019 / ASSESSMENT YEAR : 2008-09 THE D.C.I.T., CIRCLE-1, LUDHIANA. VARDHMAN TEXTILES LIMITED, CHANDIGARH ROAD, LUDHIANA. ./PAN NO: AABCM4692E /APPELLANT /RESPONDENT ./ ITA NO.485/CHD/2019 / ASSESSMENT YEAR : 2009-10 VARDHMAN TEXTILES LIMITED, CHANDIGARH ROAD, LUDHIANA. THE J.C.I.T., CIRCLE-1, LUDHIANA. ./PAN NO: AABCM4692E /APPELLANT /RESPONDENT & ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 2 ./ ITA NO.612 /CHD/2019 / ASSESSMENT YEAR : 2009-10 THE D.C.I.T., CIRCLE-1, LUDHIANA. VARDHMAN TEXTILES LIMITED, CHANDIGARH ROAD, LUDHIANA. ./PAN NO: AABCM4692E /APPELLANT /RESPONDENT ./ ITA NO.486 /CHD/2019 / ASSESSMENT YEAR : 2013-14 VARDHMAN TEXTILES LIMITED, CHANDIGARH ROAD, LUDHIANA. THE A.C.I.T., CIRCLE-1, LUDHIANA. ./PAN NO: AABCM4692E /APPELLANT /RESPONDENT & ./ ITA NO.613 /CHD/2019 / ASSESSMENT YEAR : 2013-14 THE D.C.I.T., CIRCLE-1, LUDHIANA. VARDHMAN TEXTILES LIMITED, CHANDIGARH ROAD, LUDHIANA. ./PAN NO: AABCM4692E /APPELLANT /RESPONDENT /ASSESSEE BY: S/SHRI SUBHASH AGGARWAL, ADV. & RISHIT DHINGRA, CA. ! / REVENUE BY: SMT.C.CHANDERKANTA, CIT DR ' # $ /DATE OF HEARING : 02.03.2020 %&'( $ /DATE OF PRONOUNCEMENT:. 28.05.2020 ') /ORDER ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 3 PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER : ALL THE ABOVE CROSS APPEALS RELATE TO SAME ASSESSEE AND HAVE BEEN PREFERRED AGAINST SEPARATE ORDERS OF THE COMMISSIONER OF INCOME TAX(APPEALS-I, LUDHIANA [(IN SHORT REFERRED TO AS CIT(A)] DATED 8.2.2019, 11.2.2019 AND 1.2.2019 RELATING TO ASSESSMENT YEARS 2008-09, 2009 -10 AND 2013-14 RESPECTIVELY, PASSED U/S 250(6)) OF THE INC OME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT. 2. BOTH THE PARTIES CONCEDED THAT THERE WERE COMMON ISSUES INVOLVED IN ALL THE APPEALS ARISING FROM IDE NTICAL SET OF FACTS. ALL THE CROSS APPEALS WERE, THEREFORE, TA KEN UP TOGETHER FOR HEARING. WE SHALL FIRST TAKE UP THE CROSS APPEAL PERTAINING TO ASSESSMENT YEAR 2008-09 I.E. IN ITA NO.484/CHD/2019 & ITA NO.611/CHD/2019 AND FIRST DEAL WITH THE APPEAL OF T HE ASSESSEE IN ITA NO.484/CHD/2019 . ITA NO.484/CHD/2019(A.Y.2008-09-ASSESSEES APPEAL): 3. THE EFFECTIVE GROUNDS OF APPEAL RAISED BY THE AS SESSEE READ AS UNDER: 2. THAT THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN UPHOLDING THE APPLICABILITY OF SECTION 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D AND MAKING DISALLOWANCE THEREUNDER IGNORING THE CONTENTIONS/SUBMISSIONS OF THE ASSESSEE. ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 4 3. THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ACTION OF AO FOR TREATING INTEREST RE CEIVED AMOUNTING TO RS.9,89,04,000/- AS 'INCOME FROM OTHER SOURCES' INSTEAD OF 'INCOME FROM BUSINESS AND PROFE SSION'. 5. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS I N CONFIRMING THE ACTION OF THE AO IN REDUCING RENTAL INCOME OF RS. 45,75,267/-, INTEREST FROM OTHER OF RS.42,40 ,928/- AND MISCELLANEOUS RECEIPTS OF RS.32,18,153/- FROM T HE PROFITS OF THE UNITS ELIGIBLE FOR DEDUCTION U/S 80 IC/80IB OF THE INCOME TAX ACT, 1961. 6. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS I N UPHOLDING THE ACTION OF THE AO IN ALLOCATING HEAD O FFICE EXPENSES TO UNITS CLAIMING DEDUCTION U/S 80IB/80IC OF THE ACT. 7. THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ACTION OF AO FOR TREATING LINE/BAY CH ARGES AMOUNTING TO RS. 4,00,72,000/- AS CAPITAL EXPENDITU RE INSTEAD OF REVENUE EXPENDITURE. 4. GROUND NO.2 RELATES TO THE ISSUE OF DISALLOWANCE OF EXPENSES MADE PERTAINING TO THOSE INCURRED FOR THE PURPOSE OF EARNING EXEMPT INCOME, AS PER THE PROVISIONS OF SECTION 14A OF THE ACT R.W.R. 8D OF THE INCOME TAX RULES. 5. BRIEF FACTS RELATING TO THE ISSUE ARE THAT DURIN G THE IMPUGNED YEAR THE ASSESSEE HAD EARNED SUBSTANTIAL E XEMPT INCOME AMOUNTING TO RS.1,39,15,734/- FROM HOLDING O F INVESTMENTS, FOR WHICH VOLUNTARY AND SUO MOTO DISAL LOWANCE OF RS.1 LAC WAS MADE IN THE COMPUTATION OF INCOME F ILED ALONGWITH RETURN OF INCOME. NOT SATISFIED WITH THE SAME THE ASSESSING OFFICER (AO) INVOKED THE PROVISIONS OF SE CTION CONTAINED IN RULE 8D FOR MAKING DISALLOWANCE U/S 14 A OF THE ACT. ACCORDINGLY, THE AO COMPUTED THE DISALLOWA NCE ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 5 UNDER RULE 8D(2)(II)&(III) AT RS.1,64,14,855/- AND RS.45,94,325/- RESPECTIVELY. 6. THE LD.CIT(A), FOLLOWING THE DECISION OF THE FIR ST APPELLATE AUTHORITY IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2013-14, DIRECTED THE AO TO RECOMPU TE THE DISALLOWANCE AFTER EXCLUDING INTEREST EXPENDITURE O F SPECIFIC PURPOSE BORROWINGS, NETTING THE INTEREST INCOME OUT OF INTEREST EXPENDITURE BEFORE COMPUTING THE DISALLOWA NCE AND CONSIDERING ONLY THOSE INVESTMENTS WHICH HAD YIELDE D EXEMPT INCOME FOR THE PURPOSE OF COMPUTING THE INTE REST INCOME. HE FURTHER DIRECTED THAT THE DISALLOWANCE I N ANY CASE SHOULD NOT EXCEED THE EXEMPT INCOME. 7. BEFORE US THE CONTENTION RAISED BY THE LD.COUNSE L FOR THE ASSESSEE WAS THAT IDENTICAL ISSUE HAD BEEN DEAL T WITH BY THE ITAT IN PRECEDING YEARS I.E. ASSESSMENT YEARS 2 006-07 AND 2007-08 AND IN SUCCEEDING YEARS I.E. ASSESSMENT YEAR 2011-12 AND 2012-13 WHEREIN THE DISALLOWANCE HAD BE EN RESTRICTED TO RS.2 LACS TO RS.6 LACS. OUR ATTENTIO N WAS DRAWN TO THE DISALLOWANCE UPHELD BY THE ITAT IN THE SAID YEARS AS UNDER: ASST. YEAR EXEMPT INCOME DISALLOWANCE 2006-07 RS.1.59 CRORES RS.2 LACS 2007-08 RS.2.19 CRORES RS.2.50 LACS ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 6 2011-12 RS.12.59 CRORES RS.5 LACS 2012-13 RS.14.87 CRORES RS.6 LACS 8. REFERRING TO THE ABOVE THE LD.COUNSEL FOR THE AS SESSEE PLEADED THAT CONSIDERING THE SAME SINCE THE EXEMPT INCOME EARNED IN THE IMPUGNED YEAR AMOUNTED TO RS.1.39 CRO RES, DRAWING PARITY FROM THE ORDERS OF THE ITAT AS ABOV E, THE DISALLOWANCE IN THE PRESENT CASE BE RESTRICTED TO R S.2 LACS. THE LD.COUNSEL FOR THE ASSESSEE FURTHER POINTED OUT THAT THERE WERE NO CHANGE IN FACTS AND CIRCUMSTANCES FRO M THE PRECEDING YEAR I.E. ASSESSMENT YEAR 2007-08 WHEN TH E DISALLOWANCE HAD BEEN RESTRICTED BY THE ITAT TO RS. 2.5 LACS SINCE AS IN THAT YEAR, IN THE IMPUGNED YEAR ALSO TH E ASSESSEE HAD SUFFICIENT OWN FUNDS FOR THE PURPOSE OF MAKING THE IMPUGNED INVESTMENT. OUR ATTENTION WAS DRAWN TO THE TOTAL INVESTMENT MADE BY THE ASSESSEE IN THE SAID TWO YEA RS AS REPRODUCED IN ITS SYNOPSIS AS UNDER: INVESTMENTS 31.3.08 31.3.07 SUBSIDIARIES/ASSOCIATES = 95.16 CRS 84.63 CRS INVESTMENTS GENERATING = 0.25 CRS 0.25 CRS TAXABLE INCOME IN SECTION 25 COMPANIES = 0.85 CRS 0.85 CRS INVESTMENTS WHICH = 0.89 CRS 0.89 CRS YIELD DIVIDEND TOTAL INVESTMENTS = 97.15 CRS 86.62 CRS AND TO THE POSSESSION OF AVAILABLE SURPLUS AS UNDER : ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 7 OWN FUNDS 31.3.08 31.3.07 SHARE CAPITAL = 57.77 CR. 57.77 CR. RESERVES = 1114.37 CR. 1034.26 CR. DEP.RESERVES = 1074.27 CR. 930.75 CR. 2246.41 CR. 2022.78 CR. 9. THE LD.COUNSEL FOR THE ASSESSEE THEREAFTER DREW OUR ATTENTION TO THE FACT THAT THE EXEMPT DIVIDEND INCO ME HAD BEEN EARNED ON THE FOLLOWING INVESTMENTS: VMT SPINNING COMPANY = RS.1,36,62,054/- IDBI LIMITED = RS. 2,53,680/- TOTAL: = RS.1,39,15,734/- 10. THE LD.COUNSEL FOR THE ASSESSEE CONTENDED THAT ALMOST THE ENTIRE DIVIDEND INCOME HAD BEEN EARNED FROM VMT SPINNING COMPANY LIMITED WHICH WAS SUBSIDIARY/ASSOC IATE CONCERN OF THE ASSESSEE AND INVESTMENT IN WHICH HAD BEEN MADE IN PRECEDING YEARS ONLY. HE, THEREFORE, CONTEN DED THAT THE ASSESSEE COMPANY WAS NOT REQUIRED TO MAKE ANY EXPENDITURE FOR THE PURPOSE OF EARNING THE EXEMPT I NCOME SINCE IT WAS INVESTMENT IN A SUBSIDIARY COMPANY ONL Y FOR WHICH NO ADMINISTRATIVE EFFORTS WAS REQUIRED FOR MO NETARY EITHER FOR MAKING THE INVESTMENT OR EARNING THE DIV IDEND INCOME. HE, THEREFORE, PLEADED THAT THE DISALLOWANC E BE RESTRICTED TO RS.2 LACS. 11. THE LD. DR, ON THE OTHER HAND, CONTENDED THAT T HE LD.CIT(A) WAS JUST AND FAIR HAVING GIVEN ALL POSSIB LE RELIEF TO THE ASSESSEE AS ALLOWABLE UNDER LAW BY EXCLUDING IN TEREST ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 8 PAID ON LINES TAKEN FOR SPECIFIC PURPOSES, ALLOWING THE NETTING OF INTEREST AND FURTHER DIRECTING THAT ONLY THOSE INVESTMENTS WHICH HAVE EARNED EXEMPT INCOME BE CONSIDERED FOR THE PURPOSE OF DISALLOWANCE. THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE LD.CIT(A). 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE AL SO GONE THROUGH THE ORDER OF THE ITAT IN THE CASE OF THE AS SESSEE FOR ASSESSMENT YEARS 2006-07, 2007-08, 2011-12 AND 2012 -13 TO WHICH OUR ATTENTION WAS DRAWN. ON GOING THROUGH THE ORDER FOR ASSESSMENT YEARS 2006-07 AND 2007-08 WE F IND THAT THE ITAT HAD DIRECTED THE DISALLOWANCE OF RS.2 LACS AND RS.2.5 LACS RESPECTIVELY IN THE SAID YEARS FOR THE PURPOSE OF CALCULATING THE DISALLOWANCE U/S 14A AND ON FURTHER NOTING THAT THE HON'BLE HIGH COURT IN THE CASE OF THE ASSE SSEE ITSELF FOR ASSESSMENT YEAR 2000-01 HAD CONFIRMED THE DISAL LOWANCE OF RS.1 LAC AGAINST DIVIDEND INCOME EARNED BY THE A SSESSEE FOR RS.2.16 CRORES. CONSIDERING THE OVERALL FACTS A ND CIRCUMSTANCES OF THE CASE THE ITAT HAD CONFIRMED TH E DISALLOWANCE OF RS.2 LACS AND RS.2.5 LACS IN ASSESS MENT YEARS 2006-07 AND 2007-08 RESPECTIVELY. IN ASSESSME NT YEARS 2011-12 AND 2012-13, ON GOING THROUGH THE ORD ER OF THE ITAT, WE FIND THAT THE ITAT IN THE SAID YEARS H AD TAKEN NOTE OF THE FACT THAT THE ASSESSEE HAD SUFFICIENT O WN FUNDS FOR THE PURPOSE OF MAKING THE INVESTMENTS AND ACCOR DINGLY ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 9 FOLLOWING THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF CIT LTU VS. RELIANCE INDUSTRIES LTD. (2010) 410 ITR 466 HELD THAT NO DISALLOWANCE OF INTEREST IS WARRANTED U/S 14A OF THE ACT. ACCORDINGLY, THE DISALLOWANCE CALCULATE D AS PER RULE 8D(2)(II) WAS DELETED BY THE ITAT. AS FOR THE DISALLOWANCE OF ADMINISTRATIVE EXPENSES THE ITAT NO TED THAT THE SUBSTANTIAL AMOUNT OF INTEREST HAD BEEN EARNED BY THE ASSESSEE FROM ITS SUBSIDIARY COMPANIES WHERE NOT MU CH OF ADMINISTRATIVE RESOURCES WERE USED. ACCORDINGLY, TH E ITAT HELD THAT THE DISALLOWANCE OF ADMINISTRATIVE EXPENS ES COULD NOT BE DONE SOLELY IN THE RATIO OF QUANTUM OF INVES TMENTS SHOWN. THE ITAT, THEREFORE, CONSIDERING THE PAST HI STORY OF THE ASSESSEE AND OVERALL FACTS AND CIRCUMSTANCES OF THE CASE UPHELD THE DISALLOWANCE OF RS.5 LACS AS JUSTIFIABLE . THE RELEVANT FINDING OF THE ITAT IN ASSESSMENT YEAR 201 1-12 IN ITA NO.787/CHD/2015 DATED 14.3.2019 AT PARAS 8 TO 1 0 OF THE ORDER IS AS UNDER: 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE ISSUE RELATING TO THE PRESUMPTION THEORY IN THE LIGHT OF THE DECISION OF THE HON'BLE SUPREME COURT IN MAXOPP INVESTMENT LTD VS. CIT., 402 ITR 640 (SC) (SUPRA) HAS BEEN DISCUSSED BY THE TRIBUNAL IN THE LATEST DECISION OF THE TRIBUNAL IN THE CASE OF ACIT VS. JANAK GLOBAL RESOURCES PVT LTD (SUPRA), WHEREIN, THE TRIBUNAL AFTER CONSIDERING THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF HERO CYCLES PVT. LTD. VS. CIT, 379 ITR 347(SC), AND OTHER DECISIONS AS WELL AS IN THE CASE OF AVON CYCLES LTD. VS. CIT OF THE HON'BLE HIGH COURT (SUPRA) HAS DECIDED THE ISSUE IN FAVOUR ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 10 OF THE ASSESSEE. AT THIS STAGE, LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT NOW THE ISSUE IS SQUARELY COVERED BY THE LATEST DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF IN THE CASE OF CIT (LTU) VS. RELIANCE INDUSTRIES LTD. [2010] 410 ITR 466 (SC), WHEREIN, THE HON'BLE SUPREME COURT HAS REITERATED THE PROPOSITION THAT IF THERE ARE INTEREST FUNDS AVAILABLE WITH THE ASSESSEE, WHICH ARE SUFFICIENT TO MEET THE INVESTMENT, IT CA N BE PRESUMED THAT THE INVESTMENTS ARE MADE FROM THE INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE. IN VIEW OF THIS, THIS QUESTION IS NOW SETTLED BY THE DECISION OF THE HON'BLE SUPREME COURT AND THE ISSUE ACCORDINGLY IS DECIDED IN FAVOUR OF THE ASSESSEE SO FAR AS THE ISSUE OF DISALLOWANCE OF INTEREST EXPENDITURE IS CONCERNED. 9. HOWEVER, SO FAR AS THE ISSUE OF DISALLOWANCE OF ADMINISTRATIVE EXPENDITURE IS CONCERNED, THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE EARLIER ORDER OF THE TRIBUNAL TO STATE THAT IN THE APPEAL FOR THE ASSESSMENT YEAR 2006-07, THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS. 1.59 CRORES AND THE TRIBUNAL RESTRICTED THE DISALLOWANCE OF ADMINISTRATIVE EXPENDITURE TO RS. 2 LACS AND FURTHER IN THE ASSESSMENT YEAR 2007- 08, THE ASSESSEE HAD EARNED DIVIDEND INCOME OF RS. 219 CRORES AND THE TRIBUNAL RESTRICTED THE DISALLOWANCE TO RS. 2.5 LACS. IN THE YEAR UNDER CONSIDERATION, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT OUT OF THE TOTAL DIVIDED OF RS. 12.59 CRORES, THE ASSESSEE HAS EARNED A DIVIDED OF RS. 7.91 CORES FROM ITS SUBSIDIARIES. HE, IN TH IS RESPECT HAS SUBMITTED THAT FOR MAKING INVESTMENTS IN OWN SUBSIDIARIES, NOT MUCH OF ADMINISTRATIVE RESOURCES ARE USED, HENCE, THE DISALLOWANCE ON ADMINISTRATIVE EXPENDITURE CANNOT BE DISALLOWED SOLELY IN THE RATIO OF THE QUANTUM OF THE INVESTMENTS SHOWN. HE, HOWEVER, HAS FAIRLY ADMITTED THAT THE ASSESSEE HAS ALSO RECEIVED DIVIDEND OF RS. 4.6 CORES FROM THE INVESTMENT IN OTHER COMPANIES. THE LD. COUNSEL HAS FURTHER SUBMITTED THAT THE ASSESSEE HAS SUO MOTTO DISALLOWED A SUM OF RS. 2 LACS FOR THE YEAR UNDER CONSIDERATION ON ACCOUNT OF ADMINISTRATIVE EXPENSES U/S 14A OF THE I.T.ACT. ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 11 10. CONSIDERING THE OVER ALL FACTS AND CIRCUMSTANCES OF THE CASE AND SUBMISSIONS OF BOTH THE PARTIES AND ALSO CONSIDERING THE QUANTUM OF INVESTMENT MADE, THE AMOUNT OF DIVIDED EARNED BY THE ASSESSEE FROM ITS OWN SUBSIDIARY AS WELL FROM OUTSIDE / OTHER COMPANIES, IN OUR VIEW, A TOTAL DISALLOWANCE OF RS. 5 LACS WILL BE JUSTIFIED IN TH IS CASE ON ACCOUNT OF ADMINISTRATIVE EXPENSES. HOWEVER, SINCE THE ASSESSEE ITSELF HAS SUO MOTU MADE DISALLOWANCE OF RS. 2 LACS, THE ASSESSEE WILL BE GIVEN THE BENEFIT OF THE SAME. 13. CONSIDERING THE ABOVE AND FURTHER NOTING THE FA CT THAT IN THE IMPUGNED YEAR ALSO THE ASSESSEE HAS DEMONSTR ATED THE AVAILABILITY OF SUFFICIENT OWN FUNDS FOR THE PU RPOSE OF MAKING INVESTMENT AS BEING RS.2246.41 CRORES OF OWN FUNDS AVAILABLE AS AGAINST TOTAL INVESTMENT OF RS.97.51 C RORES, WE HOLD THAT THE SAID FACTS AND CIRCUMSTANCES OF THE A SSESSEE WARRANT NO DISALLOWANCE OF INTEREST IN THE PRESENT CASE, FOLLOWING THE DECISION OF THE ITAT IN THE CASE OF T HE ASSESSEE FOR ASSESSMENT YEAR 2011-12 AS REPRODUCED ABOVE. SI MILARLY IN THE CASE OF ADMINISTRATIVE EXPENSES WE HAVE NOTE D THAT ALMOST ENTIRE AMOUNT OF DIVIDEND INCOME HAS BEEN EA RNED FROM SUBSIDIARY COMPANY OF THE ASSESSEE IN WHICH INVESTMENT WAS MADE IN THE PRECEDING YEARS ONLY. AS NOTED BY THE ITAT IN THE CASE OF THE ASSESSEE FOR ASSESSM ENT YEAR 2011-12 SINCE THE INVESTMENT IN SUBSIDIARIES DO NOT REQUIRE MUCH ADMINISTRATIVE INDULGENCE, THE DISALLOWANCE CA NNOT BE CALCULATED AS PRESCRIBED BY RULE 8D IN THE RATIO OF INVESTMENTS MADE AND CONSIDERING THE PAST HISTORY O F THE ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 12 ASSESSEE WHEREIN AGAINST EXEMPT INCOME EARNED OF RS .1.59 CRORES AND RS.2.19 CRORES IN ASSESSMENT YEARS 2006- 07 AND 2007-08, DISALLOWANCE OF RS.2 LACS AND RS.2 LACS RESPECTIVELY HAS BEEN UPHELD BY THE ITAT. WE DIRECT THE DISALLOWANCE OF RS.2.25 LACS IN THE PRESENT CASE WH EREIN THE FACTS INDICATE THAT THE ASSESSEE HAS EARNED DIVIDEN D INCOME OF RS.1.39 CRORES. WE, THEREFORE, DIRECT THE AO TO RESTRICT THE DISALLOWANCE IN ALL U/S 14A IN THE PRESENT CASE TO RS.2.25 LACS. THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS, THEREFORE, ALLOWED IN ABOVE TERMS. 14. GROUND NO.3 RAISED BY THE ASSESSEE RELATES TO T HE ISSUE OF TREATMENT OF INTEREST EARNED BY THE ASSESSEE AMO UNTING TO RS.9,89,04,000/- AS INCOME FROM OTHER SOURCES INSTE AD OF INCOME FROM BUSINESS AND PROFESSION. THE LD.COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE INTEREST EARNED B Y THE ASSESSEE FROM BANK AND OTHERS AMOUNTED IN ALL OF RS.9,89,04,000/- WAS TREATED BY THE AO AS TAXABLE U NDER THE HEAD INCOME FROM OTHER SOURCES AS AGAINST THE CLAIM OF THE ASSESSEE OF THE SAID INTEREST AS INCOME FROM B USINESS AND PROFESSION. NO NETTING OF INTEREST EXPENSES WA S ALSO ALLOWED AGAINST THE SAME. 15. BEFORE US AT THE OUTSET ITSELF THE LD. DR POINT ED OUT THAT IDENTICAL ISSUE STOOD ADJUDICATED IN THE CASE OF THE ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 13 ASSESSEE BY THE ITAT IN ASSESSMENT YEAR 2006-07 IN ITA NO.1429/CHD/2010 AND IN ASSESSMENT YEAR 2007-08 IN ITA NO.270/CHD/2011 VIDE ORDER DATED 18.12.2018 WHEREIN THE ITAT HAD DISMISSED ASSESSEES PLEA OF TREATING IT A S INCOME FROM BUSINESS AND PROFESSION BUT CONSIDERING THE PL EA OF THE ASSESSEE THAT THE NETTING OF INTEREST EXPENDITURE B E ALLOWED, HAD DIRECTED THE AO TO ALLOW THE SAME WHERE A DIREC T NEXUS BETWEEN THE INTEREST INCOME EARNED AND INTEREST EXP ENDITURE INCURRED WAS THERE. OUR ATTENTION WAS DRAWN TO PARA S 4 TO 6 OF THE ORDER DEALING WITH THE SAID ISSUE IN ASSESSM ENT YEAR 2006-07 AS UNDER: 4. GROUND NO.1: VIDE GROUND NO.1, THE ASSESSEE HAS AGITATED THE ACTION OF THE CIT(A) IN TREATING T HE INTEREST INCOME AMOUNTING TO RS. 1,65,17,422/-AS INCOME FROM OTHER SOURCES INSTEAD OF INCOME FROM BUSINESS OR PROFESSION AS WAS CLAIMED BY THE ASSESSEE. 5. THE FACTS RELATING TO THE ABOVE ISSUE ARE THAT THE ASSESSING OFFICER HAD TREATED INTEREST FROM CUSTOMERS AND SUPPLIERS AMOUNTING TO RS. 355.28LACS AND FURTHER INTEREST FROM BANK &OTHERS AMOUNTING TO RS. 165.17 LACS AS INCOME FROM OTHER SOURCES AS AGAINST THE CLAIM OF THE BUSINESS INCOME. THE LD. CIT(A) HELD THAT SINCE INCOME ON TH E DELAYED PAYMENT FROM CUSTOMERS AND SUPPLIERS WAS INTRINSICALLY LINKED WITH THE BUSINESS ACTIVITY OF THE ASSESSEE, HENCE, THE SAME WAS TO BE TREATED AS BUSINESS INCOME OF THE ASSESSEE, WHEREAS, THEINTEREST RECEIVED FROM BANK &OTHERS WAS DIRECTED TOBE TREATED AS INCOME FROM OTHER SOURCES. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS ON THIS ISSUE. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 14 THE CIT(A) SO FAR AS THE TREATMENT OF THE INTEREST FROM CUSTOMERS AND SUPPLIERS AS BUSINESS INCOME AND INTEREST FROM BANK AND OTHER SOURCES AS INCOME FROM OTHER SOURCES IS CONCERNED. HOWEVER, A CONTENTION HAS BEENRAISED BY THE LD. COUNSEL FOR TH E ASSESSEE THAT WHERE THERE IS A DIRECT NEXUSBETWEEN THE INTEREST INCOME EARNED AND THE INTEREST EXPENDITURE INCURRED IN THIS RESPECT, THE ASSESSEE SHOULD BE ALLOWED NETTING OF THE SAME BEFORE COMPUTING THE SAME UNDER THE HEAD INCOME FROM OTHER SOURCES. WE FIND MERIT IN THE ABOVE CONTENTI ON OF THE ASSESSEE AND WE ORDER ACCORDINGLY. 16. IN VIEW OF THE ABOVE, SINCE THE ISSUE OF INTERE ST INCOME TO BE TAXABLE UNDER THE HEAD OTHER SOURCES STANDS ADJUDICATED BY THE ITAT AGAINST THE ASSESSEE THE SA ID DECISION WILL SQUARELY APPLY IN THE PRESENT CASE AL SO AND FOLLOWING THE DIRECTIONS OF THE ITAT IN THE SAID YE AR, WE UPHOLD THE PLEA OF THE ASSESSEE TO NETTING OF INTER EST EXPENDITURE AGAINST THE SAID INCOME DIRECTING THE A O TO ALLOW NETTING OF SUBJECT TO THERE BEING DIRECT NEXU S BETWEEN THE INTEREST INCOME EARNED AS DIRECTED BY THE ITAT IN THE CASE OF THE ASSESSEE IN ASSESSMENT YEARS 2006-07 AN D 2007- 08 ABOVE. GROUND NO.3 RAISED BY THE ASSESSEE IS ALL OWED IN ABOVE TERMS. 17. GROUND NO.5(WHICH CORRECTLY SHOULD HAVE BEEN MENTIONED AS GROUND NO.4 IN CHRONOLOGICAL ORDER) RE LATES TO THE ISSUE OF DISALLOWANCE OF DEDUCTION U/S 80IC/80I B OF THE ACT ON THE FOLLOWING INCOMES EARNED BY THE ASSESSEE : RENTAL INCOME = RS.45,75,267/- ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 15 INTEREST FROM OTHER = RS.42,40,928/- MISCELLANEOUS RECEIPT = RS.32,18,153/- THE SAID DISALLOWANCE WAS MADE FOR THE REASON THAT THE IMPUGNED INCOMES WERE FOUND TO BE NOT DERIVED FROM INDUSTRIAL UNDERTAKINGS, WHICH IS A NECESSARY PRERE QUISITE FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 80IB/80IC OF THE ACT. 18. WITH RESPECT TO RENT RECEIPT, THE CONTENTION OF THE LD.COUNSEL FOR THE ASSESSEE WAS THAT IT HAD RECEIVE D RENTAL INCOME FROM ACCOMMODATION RENTED TO ITS EMPLOYEES. THE PLEADINGS OF THE LD.COUNSEL FOR THE ASSESSEE IN THI S REGARD WAS THAT WHILE THE REVENUE AUTHORITIES HAD EXCLUDED THE ENTIRE RENT RECEIPTS, THE EXPENSES INCURRED FOR MAI NTAINING THOSE ACCOMMODATIONS FOR THE EMPLOYEES SHOULD HAVE BEEN REDUCED THEREFROM AND ONLY THE BALANCE RENTAL INCOM E OUGHT TO HAVE BEEN DISALLOWED. 19. AS FOR THE MISCELLANEOUS RECEIPTS IT WAS POINTE D OUT THAT THE SAME RELATED TO THE FOLLOWING: A) DAMAGES AGAINST CANCELLATION = RS.31,10,744/- OF ORDERS FROM CUSTOMERS B) COMMISSION FROM SHIPPING = RS. 7,075/- COMPANIES C) OTHER RECEIPTS = RS. 1,00,356/- ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 16 20. THE LD.COUNSEL FOR THE ASSESSEE CONTENDED THAT THERE CANNOT BE DISPUTE ABOUT THE FACT THAT THE DAMAGES R ECEIVED AGAINST CANCELLATION OF ORDERS FROM CUSTOMERS HAD D IRECT NEXUS WITH THE INDUSTRIAL UNDERTAKING OF THE ASSESS EE AND DEDUCTION U/S 80IC/80IB OF THE ACT WAS ALLOWABLE IN THIS REGARD. HE RELIED UPON THE DECISION OF THE ITAT IN THE CASE OF PR.CIT, DELHI VS. BHARAT SANCHAR NIGAM LTD. IN I TA NO.476/2016 DATED 1.8.2016 WHEREIN THE LD.COUNSEL F OR THE ASSESSEE POINTED OUT THAT DEDUCTION U/S 80IA WAS AL LOWED ON LIQUIDATED DAMAGES. AS FOR THE COMMISSION FROM SHIPPING COMPANIES, THE LD.COUNSEL FOR THE ASSESSEE CONTENDED THAT THE ITAT IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEARS 2006-07 AND 2007-08 HAD ALLOWED DEDUCTION U/S 80IB/80IC OF THE ACT ON COMMISSION EA RNED FROM OCEAN FREIGHT. OUR ATTENTION WAS DRAWN TO PARA S 7 TO 10 OF THE ORDER DEALING WITH IDENTICAL ISSUE AS UND ER: 7. GROUND NO.2 : VIDE GROUND NO.2, THE ASSESSEE HAS AGITATED THE ACTION OF THE CIT(A) INDIRECTING T HE ASSESSING OFFICER TO REDUCE THE ELIGIBLE PROFITS OF THEUNDERTAKING FOR THE PURPOSE OF DEDUCTION U/S 10B, 80IB AND 80IC OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') IN RESPECT OF OTHER INCOME RECEIVE D. 8. THE LD. COUNSEL FOR THE ASSESSEE HAS GIVEN DETAILS OF OTHER INCOME WHICH IS MENTIONED IN THE GROUND NO.2 ITSELF. A PERUSAL OF THE AFORESAID DETA ILS WILL REVEAL THAT THE ASSESSEE CLAIMED RENT, MISC. RECEIPTS, DEPB, COMMISSION AND INTEREST INCOME AS OTHER INCOME AND HAS CLAIMED DEDUCTIONS IN RESPEC T OF THE SAME U/S 10B, 80IB AND 80IC ETC., AS APPLICABLE IN RESPECT OF THE RESPECTIVE UNIT. THE L D. ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 17 COUNSEL FOR THE ASSESSEE HAS FAIRLY AGREED THAT EXCEPT THE BROKERAGE FROM OCEAN FREIGHT, THE OTHER ITEMS DO NOT CONSTITUTE INCOME DERIVED FROM UNDERTAKING. SO FAR AS THE BROKERAGE OF OCEAN FREIG HT IS CONCERNED, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE SAME IS NOTHING BUT REFUND / REBATE OUT OF THE FREIGHT EXPENDITURE INCURRED BY T HE ASSESSEE WHICH HAS RESULTED IN INCREASE IN INCOME O F THE ASSESSEE. 9. THE LD. DR ALSO COULD NOT REBUT THE AFORESAID ARGUMENTS OF THE ASSESSEE 10. IN VIEW OF THIS, OUT OF THE ITEMS MENTIONED IN GROUND NO.2, THE ASSESSING OFFICER IS DIRECTED TO CONSIDER THE REBATE ON OCEAN FREIGHT AS INCOME OF T HE UNDERTAKING OF THE ASSESSEE. HOWEVER, THE FINDINGS OF THE LOWER AUTHORITIES IN RESPECT OF THE REMAININ G ITEMS IS AFFIRMED. 21. IT WAS, THEREFORE, PLEADED THAT THE ISSUE STOOD COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE ITAT IN ASSESSMENT YEAR 2006-07 AS ABOVE. AS FOR THE DISALLOWANCE OF DEDUCTION U/S 80IB/80IC OF THE ACT ON INTEREST FROM OTHERS AMOUNTING TO RS.42,40,9 28/-, THE LD.COUNSEL FOR THE ASSESSEE CONTENDED THAT MAJO R AMOUNT OF INTEREST INCLUDED IN THE ABOVE, AMOUNTING TO RS.26,84,428/- ,HAD BEEN RECEIVED FROM ELECTRICITY BOARD ON SECURITY DEPOSIT AND BEING PURELY OF BUSINESS NATUR E, THE SAME WAS ELIGIBLE FOR DEDUCTION U/S 80IB/80IC OF TH E ACT. 22. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE AUTHORITIES BELOW CONTENDING THAT IN THE ABSENC E OF NEXUS WITH THE INDUSTRIAL UNDERTAKING, THE DISALLOW ANCE OF ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 18 DEDUCTION U/S 80IB/80IC OF THE ACT OF THE ACT ON TH E ABOVE INCOMES HAD BEEN RIGHTY UPHELD BY THE LD.CIT(A). 23. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTI ES. IT IS SETTLED LAW THAT THE DEDUCTION U/S 80IB/80IC OF THE ACT IS ELIGIBLE ON THE INCOMES WHICH HAVE FIRST DEGREE NEX US WITH THE INDUSTRIAL UNDERTAKINGS OF THE ASSESSEE. THERE IS NO DISPUTE ABOUT THIS PROPOSITION AT ALL. IN THIS BACK DROP, CONSIDERING THAT THE RENTAL INCOME HAD BEEN RECEIVE D BY THE ASSESSEE FROM LETTING OUT ACCOMMODATION TO ITS EMP LOYEES, THERE IS CLEARLY NO NEXUS OF THE SAID INCOME WITH T HE INDUSTRIAL UNDERTAKING OF THE ASSESSEE AND THE CLAI M OF DEDUCTION U/S 80IB/80IC OF THE ACT, THEREFORE, WE H OLD HAS BEEN RIGHTLY DISALLOWED BY THE LD.CIT(A). BUT AT TH E SAME TIME, WE ARE IN AGREEMENT WITH THE CONTENTION OF TH E LD.COUNSEL FOR THE ASSESSEE THAT IT IS NOT THE ENTI RE GROSS RENTAL RECEIPTS WHICH ARE TO BE DISALLOWED OUT OF T HE TOTAL PROFITS CLAIMED BY THE ASSESSEE AS DEDUCTABLE U/S 8 0IB/80IC OF THE ACT, BUT ON THE PROFIT ELEMENT IN THE SAID I NCOME WHICH IS EMBEDDED IN THE PROFITS EARNED BY THE ASSE SSEE MEANING THEREBY THAT THE EXPENSES, IF ANY, INCURRED BY THE ASSESSEE FOR EARNING THE RENTAL INCOME OUGHT TO BE REDUCED FROM THE RENTAL INCOME AND IT IS ONLY THE BALANCE W HICH SHOULD BE DENIED DEDUCTION U/S 80IB/80IC OF THE ACT . ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 19 ACCORDINGLY, WE DIRECT THE AO TO REDUCE EXPENSES, I F ANY, INCURRED BY THE ASSESSEE FOR THE PURPOSE OF EARNING RENTAL INCOME AND DISALLOW ONLY THE BALANCE RENTAL INCOME DEDUCTION U/S 80IB/80IC OF THE ACT. AS FOR THE MISCELLANEOUS RECEIPTS, THE DAMAGES AGAINST CANCELL ATION OF ORDERS FROM CUSTOMERS RECEIVED BY THE ASSESSEE, WE AGREE WITH THE LD.COUNSEL FOR THE ASSESSEE, AS DIRECT NEX US WITH THE INDUSTRIAL UNDERTAKINGS OF THE ASSESSEE AND WE HOLD, IS ELIGIBLE FOR DEDUCTION U/S 80IB/80IC OF THE ACT. SI MILARLY, THE COMMISSION FROM SHIPPING COMPANIES, WE HAVE NOT ED, HAS BEEN HELD BY THE ITAT IN THE CASE OF THE ASSESS EE ITSELF IN THE PRECEDING YEAR I.E. ASSESSMENT YEAR 2006-07 AS ELIGIBLE FOR DEDUCTION U/S 80IB/80IC OF THE ACT. AC CORDINGLY, FOLLOWING THE SAID DECISION WE HOLD THE COMMISSION FROM SHIPPING COMPANIES TO BE ELIGIBLE FOR DEDUCTION U/S 80IB/80IC OF THE ACT. FOR OTHER RECEIPTS NO ARGUMEN TS HAVE BEEN FORWARDED BY THE ASSESSEE AND, THEREFORE, THE DISALLOWANCE OF DEDUCTION U/S 80IB/80IC OF THE ACT OF THE ACT ON THE SAME AMOUNTING TO RS.1,00,356/- IS UPHEL D. AS FOR THE INTEREST RECEIVED FROM BANK AND OTHER, WE D O NOT FIND ANY MERIT IN THE CLAIM OF THE ASSESSEE THAT HAVING BEEN EARNED ON SECURITY DEPOSITS MADE WITH ELECTRICITY B OARD THEY WERE PURELY IN THE NATURE OF BUSINESS INCOME AND HE NCE ELIGIBLE FOR DEDUCTION U/S80IB/80IC OF THE ACT. THE SAID ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 20 INCOME AS DESCRIBED BY THE LD.COUNSEL FOR THE ASSES SEE DOES NOT HAVE ANY FIRST DEGREE NEXUS WITH THE INDUSTRIAL UNDERTAKINGS OF THE ASSESSEE AND, THEREFORE, WE HOL D THAT THE SAME IS NOT ELIGIBLE FOR DEDUCTION U/S 80IB/80I C OF THE ACT. 24. IN VIEW OF THE ABOVE, WE HOLD THAT THE ASSESSEE IS ELIGIBLE TO DEDUCTION U/S 80IB/80IC OF THE ACT ON T HE DAMAGES AGAINST CANCELLATION, COMMISSION FROM SHIPP ING WHILE IT IS HELD NOT ELIGIBLE FOR DEDUCTION ON THE OTHER RECEIPTS, INTEREST RECEIPTS FROM BANK AND OTHERS AN D RENTAL INCOME, WHICH WE DIRECT THE AO TO RESTRICT THE DISA LLOWANCE TO THE NET RENTAL INCOME EXCLUDING THE EXPENSES INC URRED FOR EARNING THE SAME. GROUND OF APPEAL NO.5 RAISED BY T HE ASSESSEE IS PARTLY IN ABOVE TERMS. 25. GROUND OF APPEAL NO.6 RAISED BY THE ASSESSEE RE LATES TO THE ISSUE OF ALLOCATION OF HEAD OFFICE EXPENSES TO UNITS CLAIMING DEDUCTION U/S 80IB/80IC OF THE ACT. 26. BRIEFLY STATED THE AO HAD ALLOCATED HEAD OFFICE EXPENSES ON THE BASIS OF TURN OVER FOR THE PURPOSE OF CALCULATING THE PROFITS OF THE UNITS ELIGIBLE FOR D EDUCTION U/S 80IB/80IC OF THE ACT. THE LD.CIT(A) DIRECTED THE AO TO ALLOCATE HEAD OFFICE EXPENSES NET OF HEAD OFFICE IN COME FOR THE SAID PURPOSE FOLLOWING THE DECISION OF THE ITAT IN ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 21 ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2006-07 AN D 2007-08 IN ITA NO.1429/CHD/2010 AND ITA NO.270/CHD/2011. 27. BEFORE US THE LD.COUNSEL FOR THE ASSESSEE WAS U NABLE TO GIVE ANY REASON FOR NOT FOLLOWING THE DECISION O F THE ITAT IN THE PRECEDING YEAR AS DONE BY THE CIT(A). HE WAS UNABLE TO POINT OUT ANY DISTINGUISHING FACTS IN THE PRESEN T CASE. IN VIEW OF THE SAME, SINCE THE LD.CIT(A) HAS FOLLOWED THE ORDER OF THE ITAT IN THE CASE OF THE ASSESSEE FOR ASSESSM ENT YEARS 2006-07 AND 2007-08 ON IDENTICAL ISSUE AND NO DISTINGUISHING FACTS HAVE BEEN BROUGHT TO OUR NOTIC E BY THE LD.COUNSEL FOR THE ASSESSEE, WE SEE NO REASON TO IN TERFERE IN THE ORDER OF THE LD.CIT(A). GROUND OF APPEAL NO.6 R AISED BY THE ASSESSEE IS DISMISSED. 28. GROUND OF APPEAL NO.7 RAISED BY THE ASSESSEE RE LATES TO THE TREATMENT OF LINE/BAY CHARGES AMOUNTING TO RS.4,00,72,000/- AS CAPITAL EXPENDITURE; 29. BRIEFLY STATED, THE FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE HAD PAID LINE/BAY CHARGES IN ITS UNIT ANANT SPINNING MILLS AND VARDHMAN YARNS, BOTH LOCATED IN MADHYA PRADESH ELECTRICITY BOARD AMOUNTING TO RS.4,00,72,0 00/-. THE ASSESSEE HAD CLAIMED THE SAID EXPENDITURE AS RE VENUE ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 22 CONTENDING BEFORE THE AO THAT THE SAID EXPENDITURE HAD BEEN INCURRED FOR AUGMENTING THE BUSINESS ACTIVITIES OF THE ASSESSEE COMPANY AND THE OWNERSHIP OF THE ASSETS SO CREATED VESTED WITH THE STATE ELECTRICITY BOARD AND THE AMOUNT WAS NOT REFUNDABLE AT ANY STAGE. THE EXPLANA TION OF THE ASSESSEE DID NOT FIND FAVOUR WITH THE AO WHO TR EATED THE SAME AS CAPITAL EXPENDITURE AND ALLOWED DEPARTMENT ON THE SAME. 30. THE LD.CIT(A) UPHELD THE ORDER OF THE AO. 31. BEFORE US THE LD.COUNSEL FOR THE ASSESSEE POINT ED OUT THAT THIS ISSUE STOOD ADJUDICATED IN FAVOUR OF THE ASSESSEE IN ITS OWN CASE BY THE ITAT IN ASSESSMENT YEARS 201 1-12 AND 2012-13 IN ITA NO.787/CHD/2015 AND ITA NO.483/CHD/2016 DATED 14.3.2019. OUR ATTENTION WAS DRAWN TO THE RELEVANT FINDINGS OF THE ITAT IN PARAS 33 AND 34 OF THE ORDER AS UNDER: 33. GROUND NO.14 : VIDE GROUND NO.14, THE ASSESSEE HAS AGITATED THE ACTION THE CIT(A) IN TREATING THE LINE/BAY CHARGES AS CAPITAL RECEIPT INSTEAD OF REVENUE RECEIPT. 34. THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE DECISION OF THE TRIBUNAL IN TH E OWN CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2007-08 IN ITA NO. 1430/CHD/2010 ORDER DATED 31.3.2010 , WHEREIN, THE TRIBUNAL AFTER DISCUSSING THE DETAILS UPHELD THE ORDER OF THE CIT(A) IN THAT YEAR TREATING THE AFORESAID EXPENDITURE AS ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 23 REVENUE EXPENDITURE. NO CONTRARY DECISION HAS BEEN CITED BEFORE US. IN VIEW OF THIS, THE ISSUE IS ACCORDINGLY DECIDED IN FAVOUR OF THE ASSESSEE AND THE ASSESSING OFFICER IS DIRECT TO TREAT THE AFORESAID EXPENDITURE AS REVENUE EXPENDITURE. THE LD.COUNSEL FOR THE ASSESSEE, THEREFORE, CONTEND ED THAT THE ISSUE STOOD COVERED IN FAVOUR OF THE ASSES SEE 32. THE LD. DR THOUGH FAIRLY CONCEDED TO THE ABOVE, HOWEVER, RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 33. IN VIEW OF THE ABOVE SINCE IDENTICAL ISSUE ALRE ADY STANDS DECIDED IN FAVOUR OF THE ASSESSEE BY THE ITA T IN ASSESSMENT YEAR 2011-12 AND 2012-13 AND NO DISTINGUISHING FACTS HAVE BEEN BROUGHT TO OUR NOTIC E BY THE LD. DR, THE SAID DECISION WILL APPLY IN THE PRESENT CASE ASSESSING OFFICER, FOLLOWING WHICH WE HOLD THAT THE LINE/BAY CHARGES TO BE REVENUE IN NATURE. GROUND OF APPEAL N O.7 RAISED BY THE ASSESSEE IS ACCORDINGLY, ALLOWED. 34. IN EFFECT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED . WE NOW SHALL TAKE UP THE DEPARTMENTAL APPEAL IN ITA NO.611/CHD/2019 . ITA NO.611/CHD/2019(A.Y.2008-09-REVENUES APPEAL): 35. GROUND NO.1 RAISED BY THE REVENUE READS AS UNDE R: ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 24 Q.I. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN ALLOWING INTER EST FROM CUSTOMERS & SUPPLIERS AMOUNTING TO RS.3,19,43,971/- TO BE TREATED AS BUSINESS INCOME AS AGAINST A.O. TREATING THE SAME AS INCOME FROM OTHER SOURCES?' 36. THE ISSUE RAISED IN THE ABOVE GROUND RELATES TO THE TREATMENT OF INTEREST RECEIVED FROM CUSTOMERS AND S UPPLIERS AND BUSINESS INCOME OF THE ASSESSEE. 37. AT THE OUTSET ITSELF, IT WAS POINTED OUT THAT T HE AO HAD TREATED THE SAID INCOME AS INCOME FROM OTHER SOURC ES, WHILE THE LD.CIT(A) ALLOWED THE ASSESSEES CLAIM OF TREATING THE SAID INCOME AS BUSINESS INCOME FOR THE REASON THAT THE INCOME ON DELAYED PAYMENT FROM CUSTOMERS AND SUPPLI ERS WAS INTRINSICALLY LINKED WITH THE BUSINESS OF THE ASSESSEE. BEFORE US AT THE OUTSET ITSELF IT WAS POINTED OUT B Y THE LD.COUNSEL FOR THE ASSESSEE THAT THE ISSUES STOOD C OVERED BY THE ORDER OF THE ITAT IN THE OWN CASE OF THE ASSESS EE FOR ASSESSMENT YEARS 2006-07 AND 2007-08 IN ITA NO.1429/CHD/2010 AND ITA NO.270/CHD/2011 DATED 18.12.2018 WHEREIN THE ITAT HAD FOUND NO INFIRMITY IN THE ORDER OF THE CIT(A) TREATING THE INTEREST RECEIVED ON ACCOUNT OF DELAYED PAYMENTS FROM CUSTOMERS AND SUPPLIERS AS BUSINESS INCOME. NO DISTINGUISHING FACTS HAVE BEEN BROUGHT TO OUR NOTICE BY THE LD. DR. ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 25 IN VIEW OF THE SAME THE ISSUE STANDS COVERED BY THE ORDER OF THE ITAT IN THE PRECEDING YEARS IN FAVOUR OF THE AS SESSEE AND THE ORDER OF THE LD.CIT(A) ON THIS ISSUE IS, TH EREFORE, UPHELD. GROUND OF APPEAL NO.1 RAISED BY THE REVENUE IS ACCORDINGLY DISMISSED. 38. GROUND OF APPEAL NO.2 RAISED BY THE REVENUE REA DS AS UNDER: Q.2. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN ALLOWING DEDUC TION U/S 80IB AND 80IC ON INTEREST FROM CUSTOMERS & EMPLOYEE , MISC. RECEIPTS COMPRISING BROKERAGE FROM OCEAN FREIGHTS, FOREX GAINS, INSURANCE CLAIM & REBATE DISCOUNT ?' 39. THE REVENUE IN THE ABOVE GROUND HAS AGITATED TH E ACTION OF THE LD.CIT(A) IN ALLOWING DEDUCTION U/S 8 0IB AND 80IC ON THE INTEREST FROM CUSTOMERS AND EMPLOYEES, MISCELLANEOUS RECEIPTS COMPRISING BROKERAGE FROM OC EAN FREIGHT, FOREIGN EXCHANGE GAINS, INSURANCE CLAIM AN D REBATE DISCOUNT. AT THE OUTSET ITSELF, THE LD.COUNSEL FOR THE ASSESS EE DREW OUR ATTENTION TO THE DETAILS OF INSURANCE CLAIM REC EIVED AT PAPER BOOK PAGE NO.1 AS UNDER: ARISHT SPINNING MILLS DETAIL OF INSURANCE CLAIM RECEIVED DATE DESCRIPTION OF CLAIM LOSS SUFFERED CLAIM RECEIVED 7/25/2007 LOSS DUE TO FIRE IN CARDING 134,107 49,265 10/16/2007 LOSS DUE TO FIRE IN H. PLANT 586,706 285,612 10/16/2007 CLAIM FOR MOBILE SET 1,800 1,800 12/27/2007 MARINE CLAIM DUE TO LOSS OF YARN 105,920 105,920 828,533 442,597 ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 26 AURO TEXTILES DATE DESCRIPTION OF CLAIM LOSS SUFFERED CLAIM RECEIVED 9/25/2007 CLAIM FOR MOBILE SET 3,200 900 3,200 900 AURO SPINNING MILLS DATE DESCRIPTION OF CLAIM LOSS SUFFERED CLAIM RECEIVED 8/27/2007 FIRE CLAIM OF BLOW ROOM MPM 8 IN HALL 5 1 63,715 136,281 8/27/2007 FIRE CLAIM OF BLOW ROOM (UNIMIX) IN HALL 4 372,770 362,432 10/26/2007 LOSS OF MOBILE BILL NOKIA 5,600 5,572 11/14/2007 TRANSIT CLAIM OF RIETER CARD COVER SHEET 8,192 7,447 3/31/2008 TRANSIT CLAIM OF AMSLER ATTACHMENTS (CSY) 4,966,956 4,966,956 5,517,233 5,478,688 40. REFERRING TO THE SAME HE POINTED OUT THAT THE E NTIRE CLAIM RELATED TO THE LOSS IN ITS BUSINESS UNITS/ BU SINESS ACTIVITIES AND, THEREFORE, THE ENTIRE CLAIM WAS ELI GIBLE FOR DEDUCTION U/S 80IB/IC OF THE ACT. HE FURTHER POINTE D OUT THAT THE ISSUE OF ALLOWANCE OF INSURANCE CLAIM ALSO HAD BEEN DEALT WITH BY THE ITAT IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2011/12 AN D 2012-13 IN ITA NOS.787 & 894/CHD/2015 AND ITA NOS.4 83 & 518/CHD/2016 DATED 14.3.2019. AS FOR THE CLAIM OF DEDUCTION U/S 80IB/80IC ON INTE REST FROM CUSTOMERS AND MISC.RECEIPTS COMPRISING OF BROKERAGE,OCEAN FREIGHT ,FOREX GAIN,LD.COUNSEL FOR THE ASSESSEE POINTED OUT THAT THESE ISSUES ALSO STOOD E CIDED BY THE ITAT IN FAVOUR OF THE ASSESSEE IN ASSESSES OWN CASE FOR A.Y 2006-07 & 2007-08 IN ITA NO.35/2011 & 286/2011 DATED 18-12-18. ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 27 41. WE HAVE GONE THROUGH THE ORDERS OF THE ITAT TO WHICH OUR ATTENTION WAS DRAWN AND HAVE NOTED THAT THE ITA T HAD ALLOWED THE ASSESSEES CLAIM OF DEDUCTION U/S 80IB/ 80IC IN CASE OF FOREIGN EXCHANGE GAIN, COMMISSION BROKERAGE FROM OCEAN FREIGHT AND INTEREST RECEIVED FROM CUSTOMERS AND SUPPLIERS AND THAT RELATING TO INSURANCE CLAIM IN P RECEDING YEARS HOLDING AT PARA 27 OF THE ORDER IN ITA NO. 3 5/2011 AS UNDER: 27. GROUND NO.2 : GROUND NO.2 RAISED BY THE REVENUE IS IN THREE PARTS. THE REVENUE IN THE IST PART HAS AGITATED THE ACTION OF THE CIT(A) IN DIRECTING THE ASSESSING OFFICER TO TREAT THE INTEREST RECEIVE D FROM THE CUSTOMERS AND SUPPLIERS TO BE INCOME DERIVED FROM INDUSTRIAL UNDE RTAKING AND ELIGIBLE FOR EXEMPTION U/S 10B AND DEDUCTION U/S 80IB AND 80IC O F THE ACT. SINCE WE HAVE ALREADY HELD THAT THE INTEREST INCOME RECEIVED ON DELAYED PAYMENT IS IN FACT PART OF THE SALE CONSIDERATION / RECEIVABLE FROM THE CUSTOMERS AND WE HAVE ALSO HELD THAT THE SAME TO BE TREATED AS BUSINESS INCOME AND SINCE THE AFORESAID RECEIPTS ARE RELATIN G TO THE SALE RECEIPTS OF THE ASSESSEE OF THE PRODUCED MANUFACTURED, HENCE , WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN THIS RE SPECT. IN THE SECOND PART OF GROUND NO.2, THE REVENUE HAS AGITATED THE ACTION OF THE CIT(A) IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEDUCTION U/S 80IB AND 80IC AND EXEMPTION U/S 10B ON PROFIT AFTER EXCL UDING LOSES DEBITED IN THE ACCOUNTS IN RESPECT OF WHICH INSURANCE CLAIMS W ERE RECEIVED. THE LD. COUNSEL FOR THE ASSESSEE IN THIS RESPECT HAS INVITE D OUR ATTENTION TO THE PAPER BOOK PAGE 2 WHEREIN THE DETAILS OF THE ITEMS HAS BEEN GIVEN ON WHICH INSURANCE CLAIM WAS RECEIVED. HOWEVER, AFTER PERUSAL OF THE SAME, IT IS NOT CLEAR AS TO WHICH OF THE ITEMS CONSTITUTE D CAPITAL ASSETS AND WHICH OF THE ITEMS CONSTITUTED TRADING ASSET OF THE ASSES SEE. WE THEREFORE, RESTORE THIS ISSUE TO THE FILE OF THE ASSESSEE TO B IFURCATE THE ITEMS BETWEEN CAPITAL ASSETS AND TRADING ASSETS AND TO ALLOW THE CLAIM IN RESPECT OF INSURANCE CLAIM RECEIVED ON TRADING ASSETS ONLY. 28. THE THIRD PART OF GROUND NO.2 IS AGAINST THE AC TION OF THE CIT(A) IN DIRECTING THE ASSESSING OFFICER NOT TO REDUCE FOREI GN EXCHANGE FLUCTUATION GAIN FROM ELIGIBLE PROFITS OF UNITS ELIGIBLE FOR DE DUCTION U/S 80IB AND 80IC AND EXEMPTION U/S 10B OF THE ACT. 29. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE FOREIGN EXCHANGE FLUCTUATION GAIN IS IN RESPECT OF EXPORT R ECEIPTS / RECEIVABLE OF THE ASSESSEE AND ANY GAIN IN RESPECT OF RECEIVABLE ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION IN FACT CONTRIBUTES TO THE PRO FITS OF THE ASSESSEE FROM THE SALE/ EXPORT OF THE PRODUCTS. WE FIND FORCE IN THE AFORESAID ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 28 CONTENTION. WE DO NOT FIND ANY INFIRMITY IN THE ORD ER OF THE CIT(A) IN THIS RESPECT ALSO. WE HAVE ALSO GONE THROUGH THE ORDER OF THE ITAT IN ITA NO.787/2015 AT PARA 23 AS UNDER: 23. GROUND NO.9 . VIDE THIS GROUND THE ASSESSEE HAS AGITATED THE ACTION OF THE LOWER AUTHORITIES IN TRE ATING THE INCOME FROM THE PROFITS OF THE UNITS ELIGIBLE F OR DEDUCTION U/S 80IB / 80IC OF THE ACT. SO FAR AS THE CLAIM OF DEDUCTION IN RESPECT OF THE INSURANCE CLAIM, WHICH ADMITTEDLY WAS ON ACCOUNT OF LOSS OF TRADING ASSETS IS CONCERNED, IT HAS BEEN HE LD TIME AND AGAIN THAT IF THE LOSS THEREIN IS INDEMNIF IED BY WAY OF COMPENSATION RECEIVED FROM INSURANCE COMPANY THAT CAN BE SAID TO BE NOT A SEPARATE INCOM E, RATHER, THE SAME WILL HAVE EFFECT FOR REDUCING LOSS / EXPENDITURE. HENCE, IF THE ASSESSEE HAS BOOKED THE AFORESAID LOSS, IN RELATION TO WHICH INSURANCE CLAI M HAS BEEN RECEIVED, AS EXPENDITURE, THEN THE AMOUNT RECEIVED BY THE ASSESSEE FROM INSURANCE COMPANY WIL L BE ELIGIBLE FOR DEDUCTION U/S 80IB/80IC OF THE ACT. THIS ISSUE IS ACCORDINGLY RESTORED TO THE FILE OF T HE ASSESSING OFFICER FOR VERIFICATION OF THE FACTS. SO FAR AS THE ISSUE RELATING TO THE GAINS ON THE FOREIGN EXCHANGE RATE FLUCTUATION IS CONCERNED, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT GAIN ON FOREIGN EXCHANGE RATE FLUCTUATION HAS BEEN RECEIVED ON ACCOUNT OF PROCEEDS OF EXPORTS RECEIVABLE AND THAT THE SAME WAS A PART OF THE SALE CONSIDERATION. THE LD. COUNSEL HAS FURTHER SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE IN THE O WN CASE OF THE ASSESSEE FOR ASSESSMENT YEARS 2006-07 AND 2007-08 VIDE COMMON ORDER OF THE TRIBUNAL DATED 18.12.2018 (SUPRA). CONSIDERING THE ABOVE WE AGREE WITH THE LD.COUNSEL FOR THE ASSESSEE THAT THE ISSUE OF CLAIM OF DEDUCTION U/S 8 0IB/80IC OF THE ACT ON INTEREST INCOME RECEIVED FROM CUSTOME RS AND MISC. RECEIPTS IN THE NATURE OF OCEAN FREIGHT,FOREX GAIN ALREADY STAND DECIDED IN FAVOUR OF THE ASSESSEE BY THE ITAT ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 29 IN PRECEDING YEARS IN THE CASE OF THE ASSESSEE ITSE LF. WE THEREFORE SEE NO REASON TO INTERFERE IN THE ORDER O F THE LD.CIT(A) WITH RESPECT TO ALLOWANCE OF THE AFORESAI D CLAIMS. AS FOR CLAIM OF DEDUCTION U/S 80IB/80IC OF THE ACT ON INSURANCE CLAIM RECEIVED , THE ISSUE IS RESTORED BA CK TO THE AO WITH THE DIRECTION TO ADJUDICATE IT IN ACCORDANC E WITH THE DIRECTION OF THE ITAT IN THE CASE OF THE ASSESSEE O N THE IDENTICAL ISSUE IN A.Y 2011-12 DEALT WITH IN ITA NO.787/CHD/2015. THIS GROUND OF APPEAL IS PARTLY ALLOWED FOR STATIST ICAL PURPOSES. 42. GROUND NO.3 RAISED BY THE REVENUE READS AS UNDE R: 3. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN TREATING THE REIMBURSEMENT OF INTEREST UNDER TUF SCHEME OF THE MINISTRY OF TEXTILES, GO VERNMENT OF INDIA, AS CAPITAL RECEIPT INSTEAD OF REVENUE RECEIP T WITHOUT GIVING AN OPPORTUNITY TO ASSESSING OFFICER TO EXAMINE THE CLAIM OF ASSESSEE?' 43. THE ISSUE RAISED IN THE ABOVE GROUND RELATES TO THE TREATMENT OF THE REIMBURSEMENT OF INTEREST RECEIVED BY THE ASSESSEE UNDER THE TUF SCHEME OF THE MINISTRY OF TE XTILELS, GOVERNMENT OF INDIA, WHICH THE ASSESSEE HAD CLAIMED TO BE CAPITAL IN NATURE AS OPPOSED TO THE AO TREATING THE SAME AS REVENUE IN NATURE AND SUBJECTING IT TO TAX AND WHIC H CLAIM OF THE ASSESSEE WAS UPHELD BY THE LD.CIT(A). ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 30 OUR ATTENTION WAS DRAWN TO THE FINDINGS OF THE LD. CIT(A) AT PARAS 23 TO 25 OF THE ORDER POINTING OUT THEREFROM THAT THE LD.CIT(A) AFTER EXAMINING THE OBJECTS OF THE TUF SC HEME FROM THE RESOLUTION OF THE MINISTRY OF TEXTILES (NO.28/1/99CIT DATED 31.3.1999) HAD FOUND THAT THE PURPOSE OF THIS SUBSIDY WAS UPGRADATION OF PLANT AN D MACHINERY AND THUS THE CAPITAL APPARATUS OF THE ASS ESSEE COMPANY. THEREAFTER REFERRING TO THE DECISION OF TH E HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SH AM LAL BANSAL WHEREIN IDENTICAL ISSUE OF TREATMENT OF SUBS IDY WAS EXAMINED BY THE HON'BLE HIGH COURT AND FOUND TO BE CAPITAL IN NATURE AND FURTHER RELYING ON THE DECISION OF TH E HON'BLE HIGH COURT OF CALCUTTA IN THE CASE OF CIT VS. GLOST ER JUTE MILLS LTD. (2018) 96 TAXMANN.COM 303 WHEREIN ALSO T HE SUBSIDY WAS TREATED TO BE A CAPITAL RECEIPT, THE LD .CIT(A), IT WAS POINTED OUT, HELD THAT THE INTEREST RECEIVED UN DER TUF SCHEME WAS A CAPITAL RECEIPT. THE LD.COUNSEL FOR TH E ASSESSEE FUTHER POINTED OUT THAT THIS ISSUE HAD BEE N SETTLED BY THE ITAT ALSO IN FAVOUR OF THE ASSESSEE IN ITS O WN CASE FOR ASSESSMENT YEARS 2002-03 TO 2005-06 IN ITA NOS.1479 TO 1482/CHD/2018 DATED 29.5.2019 TREATING THE INTEREST RECEIVED AS CAPITAL IN NATURE. OUR ATTENTION WAS DR AWN TO PARAS 10 TO 13 OF THE ORDER CONTAINING THE FINDINGS OF THE ITAT IN THIS REGARD AS UNDER: ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 31 10. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO GONE THROUGH THE ORDER OF THE LD.CIT(A). THE ISSUE BEFORE US RELATES TO THE NATURE OF INTEREST SUBSIDY RECEIVED UNDER THE TUF SCHEME OF THE GOVERNMENT OF INDIA. THE FACTUAL FINDINGS OF THE CIT(A) THAT T HE PURPOSE OF THE INTEREST SUBSIDY WAS UPGRADATION OF PLANT & MACHINERY AND THUS THE CAPITAL APPARATUS OF THE ASSESSEE COMPANY, HAS NOT BEEN CONTROVERTED BY THE REVENUE. THE LD.CIT(A), WE FIND, HAS RELIED UPON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SHAM LAL BANSAL, ITA NO.472/2010 (P&H) AND THE DECISION OF THE HON'BLE HIGH COURT OF CALCUTTA IN THE CASE OF CIT VS. GLOSTER JUTE MILLS LTD.(2018) 9 6 TAXMAN.COM 303 FOR HOLDING THE INTEREST SUBSIDY TO BE CAPITAL IN NATURE.WE HAVE GONE THROUGH THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SHAM LAL BANSAL(SUPRA),COPY OF WHICH ORDER WAS PLACED BEFORE US, AND WE AGREE WITH THE LD.CIT(A) THAT IN THE SAID CASE ALSO, THE ISSUE RELATED TO NATURE OF SUBSIDY RECEIVED UNDER TUF SCHEME OF THE MINISTRY OF TEXTILES. THE HON'BLE HIGH COURT , HELD THAT FOR THE PURPOSE OF DETERMINING THE NATURE OF THE SUBSIDY ,THE PURPOSE FOR WHICH THE SUBSIDY WAS GIVEN WAS TO BE DETERMINED AND RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SAHNI STEEL & PRESS WORKS LTD. VS. CIT (1997) 94 TAXMAN 368 AND CIT VS. PONNI SUGARS & CHEMICALS LTD. (2008) 174 TAXMAN 87 FOR THE AFORESAID PROPOSITION. THEREAFTER THE HONBLE HIGH COURT NOTED THAT THE PURPOSE OF THE TUF SCHEME WAS TO INDUCE THE ENTREPRENEUR TO UNDERTAKE INVESTMENT IN MODERNIZING THE PLANT AND MACHINERY AND WAS DEFINITELY NOT FOR THE PURPOSE OF DAY TO DAY BUSINESS OF THE ASSESSEE. ACCORDINGLY THE HONBLE HIGH COURT HELD THAT THE NATURE OF THE SUBSIDY WAS CAPITAL. 11. IN THE CASE OF GLOSTER JUTE MILLS(SUPRA),COPY OF ORDER OF WHICH WAS ALSO PLACED BEFORE US, THE HON'BLE HIGH COURT EXAMINED THE FEATURES OF THE TUF SCHEME AND FOUND THE PURPOSE WAS TO INDUCE THE ENTREPRENEUR TO UNDERTAKE INVESTMENT IN MODERNIZING THE PLANT AND MACHINERY AND ASSETS AND, THEREFORE WAS CLEARLY A CAPITAL RECEIPT. ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 32 12. THE AFORESAID TWO DECISIONS RELIED UPON BY THE CIT(A), WE FIND THEREFORE, HAVE ALREADY DEALT WITH THE NATURE OF THE SUBSIDY RECEIVED UNDER TUFS SCHEME AND AFTER ANALYZING THE TERMS OF THE SCHEME AND FINDING THAT THE PURPOSE OF THE SCHEME WAS TO INDUC E MODERNIZATION OF PLANT AND MACHNIERY USED IN TEXTIL E INDUSTRY ,HELD THE SAME TO BE CAPITAL IN NATURE FOLLOWING THE PROPOSITION LAID DOWN BY THE APEX COU RT FOR DETERMINING THE NATURE OF SUBSIDY IN THE CASE O F SAWHNEY STEELS(SUPRA) AND PONNI SUGARS(SUPRA). THE LD. DR HAS BEEN UNABLE TO BRING TO OUR NOTICE ANY CONTRARY DECISION EITHER OF THE HON'BLE JURISDICTIO NAL HIGH COURT OR THE HON'BLE APEX COURT ON THIS ISSUE NOR WAS THE DECISIONS RELIED UPON BY THE LD.CIT(A) DISTINGUISHED BEFORE US. 13. IN VIEW OF THE SAME, WE HAVE NO HESITATION IN UPHOLDING THE ORDER OF THE CIT(A) THAT CONSIDERING THE OBJECTIVE OF THE TUF SCHEME AND JUDICIAL DECISIONS OF THE HON'BLE JURISDICTIONAL HIGH COURT AND HON'BLE H IGH COURT OF CALCUTTA , THE INTEREST RECEIVED UNDER TUF SCHEME IS CAPITAL IN NATURE. GROUNDS OF APPEAL RAIS ED BY THE REVENUE ARE, THEREFORE, DISMISSED. 44. THE LD. DR FAIRLY CONCEDED THAT THE ISSUE STOOD DECIDED IN EARLIER YEARS IN FAVOUR OF THE ASSESSEE AS POINTED OUT BY THE LD.COUNSEL FOR THE ASSESSEE THOU GH HE VEHEMENTLY RELIED UPON THE ORDER OF THE AO. 45. WE HAVE HEARD THE RIVAL CONTENTIONS. SINCE ADMITTEDLY THE ISSUE OF TREATMENT OF INTEREST RECEI VED UNDER TUF SCHEME HAS ALREADY BEEN ADJUDICATED BY THE ITAT IN ASSESSEES OWN CASE IN THE PRECEDING Y EARS RIGHT FROM ASSESSMENT YEARS 2002-03 TO 2005-06 IN I TA NOS.1479 TO 1482/CHD/2018 (SUPRA) TREATING THE SAME AS CAPITAL RECEIPT AND NO DISTINGUISHING FACTS HAVE BEEN BROUGHT TO OUR NOTICE, WE HAVE NO HESITATION I N ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 33 UPHOLDING THE ORDER OF THE CIT(A) TREATING THE INTE REST SUBSIDY AS CAPITAL IN NATURE. GROUND OF APPEAL NO.3 RAISED BY THE REVENUE IS, THEREFORE, DISMISSED. 46. GROUND OF APPEAL NO.4 RAISED BY THE REVENUE REA DS AS UNDER: 4. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN TREATIN G THE SALE TAX SUBSIDY OF RS. 9,60,79,071/- AS CAPITAL RECEIPTS WITHOUT COMPARING THE SCHEME OF GUJRAT GOVERNMENT WITH THAT OF PUNJAB GOVERNMENT SCHEME MADE BY HON'BLE PUNJAB 85 HARYANA HIGH COURT IN THE CASE OF M/S ABHISHEK INDUSTRIES LTD., 286 ITR1?' 47. THE ISSUE RAISED IN THE ABOVE GROUND RELATES TO THE TREATMENT OF SALES TAX SUBSIDY RECEIVED BY THE ASSE SSEE MOUNTING TO RS.9,60,79,071/- WHICH THE DEPARTMENT C LAIMS TO BE REVENUE IN NATURE, WHILE THE LD.CIT(A) HAS ON THE OTHER HAND, UPHELD THE CLAIM OF THE ASSESSEE TREATI NG IT AS CAPITAL IN NATURE. AT THE OUTSET ITSELF, THE LD.COUNSEL FOR THE ASSES SEE POINTED OUT THAT IDENTICAL ISSUE HAD ARISEN IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEARS 2011-12 AND 2012-13 W HEREIN THE MATTER HAD TRAVELLED UP TO THE ITAT, WHICH HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE TREATING THE SA LES TAX SUBSIDY AS CAPITAL RECEIPT IN THEIR ORDER PASSED IN ITA NOS.787 & 894/CHD/2015 FOR ASSESSMENT YEAR 2011-12 AND IN ITA NOS.483 & 518/CHD/2016 FOR ASSESSMENT YEAR 2 012- ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 34 13 BOTH DATED 14.3.2019. COPY OF THE ORDER WAS PLAC ED BEFORE US. OUR ATTENTION WAS DRAWN TO THE RELEVANT FINDINGS OF THE ITAT AT PARA 32 OF THE ORDER AND AT PARAS 35 AND 36 OF THE ORDER AS UNDER: 32. GROUND NOS.12 & 13 : VIDE GROUND NOS.12 & 13, THE ASSESSEE HAS AGITATED THE ACTION OF THE CIT(A) IN TREATING THE SALES TAX SUBSIDY AS REVENUE RECEIPT INSTEAD OF CAPITAL RECEIPT AS CLAIMED BY THE ASSESSEE. THIS ISSUE IS NOW WELL SETTLED BY THE DECISION OF THE HON'BLE SUPREME COURT IN CIT-I VS. M/S CHAPHALKAR BROTHERS, PUNE AND OTHERS IN CIVIL APPEAL NOS. 6513-6514 OF 2012 ORDER DATED 7.12.2017, WHEREIN, IT HAS BEEN HELD THAT THE SALES TAX SUBSIDY IS A GOVERNMENT INCENTIVE TO SET UP NEW INDUSTRIAL UNITS IN SPECIFIED AREAS AND TO BE IS TREATED AS CAPITAL RECEIPT. FURTHER, THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO INVITED OUR ATTENTION TO THE DECISION OF THE TRIBUNAL DATED 18.12.2018, (SUPRA) WHEREIN AFTER CONSIDERING THE RELEVANT DECISIONS IT HAS BEEN SO HELD THAT THE SALES TAX SUBSIDY IS A CAPITAL RECEIPT. THIS ISSUE IS ACCORDINGLY DECIDED IN FAVOUR OF THE ASSESSEE. 35. THE ASSESSEE APART FROM ABOVE GROUND HAS ALSO RAISED ADDITIONAL GROUND WHICH READS AS UNDER:- THAT THE AUTHORITIES BELOW HAVE ERRED IN TREATING SALES TAX SUBSIDY OF RS. 1,67,984/- UNDER MADHYA PRADESH INDUSTRIAL PROMOTIONAL ASSISTANCE SCHEME 2004 AS REVENUE RECEIPT INSTEAD OF CAPITAL RECEIPT. 36. THIS ISSUE IS RELATING TO SALES TAX SUBSIDY RECEIVED FROM M.P. GOVERNMENT. THIS ISSUE IS IDENTICAL TO THAT HAS BEEN TAKEN IN GROUND NO.12 OF THE APPEAL. ACCORDINGLY, THE SALES TAX SUBSIDY IN RESPECT OF M.P. UNIT IS ALSO ORDERED TO BE TREATED AS CAPITAL RECEIPT. ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 35 48. THE LD.COUNSEL FOR THE ASSESSEE POINTED OUT THA T THE ITAT HAD HELD THE SALES TAX SUBSIDY IN RESPECT OF T HE SCHEME OF THE MADHYA PRADESH GOVERNMENT AS BEING CAPITAL I N NATURE FOLLOWING THE DECISION OF THE HON'BLE APEX C OURT IN THE CASE OF CIT VS. M/S CHAPHALKER BROTHERS PUNE & OTHERS IN CIVIL APPEAL NOS.6513 & 6514 OF 2012 DATED 7.12. 2017 WHEREIN IT HAD BEEN HELD THAT THE SALES TAX SUBSIDY IS A GOVERNMENT INCENTIVE TO SET UP NEW INDUSTRIAL UNIT IN SPECIFIED AREA AND IT IS TO BE TREATED AS CAPITAL R ECEIPT. THE LD. DR FAIRLY CONCEDED TO THE ABOVE THOUGH HE CONTENDED THAT THE LD.CIT(A) OUGHT TO HAVE EXAMINED THE SCHEME OF THE GUJARAT GOVERNMENT UNDER WHICH SUBSID Y HAVE BEEN RECEIVED IN THE PRESENT CASE AND THEREAFT ER ADJUDICATED THE ISSUE. 49. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTI ES. WE HAVE ALSO GONE THROUGH THE ORDERS OF THE ITAT IN TH E CASE OF THE ASSESSEE IN ASSESSMENT YEARS 2011-12 AND 2012-1 3 TO WHICH OUR ATTENTION WAS DRAWN AND WE HAVE NOTED THA T THE ITAT IN THE SAID YEARS HAS TREATED SALES TAX SUBSI DY TO BE CAPITAL IN NATURE TAKING NOTE OF THE RATIO LAID DOW N BY THE HON'BLE APEX COURT IN THE CASE OF IN THE CASE OF M/ S CHAPHALKER BROTHERS PUNE & OTHERS (SUPRA) WHEREIN A NY SUBSIDY RECEIVED AS AN INCENTIVE FOR SETTING UP AN INDUSTRIAL ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 36 UNIT WAS TREATED TO BE A CAPITAL RECEIPT . THE ITAT HELD THAT THE SALES TAX SUBSIDY WAS ALSO AN IDENTICAL INCENTI VE FOR SETTING UP INDUSTRIAL UNITS AND, THEREFORE, WAS CAP ITAL IN NATURE. SINCE THIS ISSUE HAS ALREADY BEEN ADJUDICAT ED AS ABOVE AND IN THE CASE OF THE ASSESSEE ITSELF IN THE SUCCEEDING ASSESSMENT YEARS AND LD. DR HAS NOT BROU GHT TO OUR NOTICE ANY DISTINGUISHING FACTS, THE ISSUE STAN DS COVERED BY THE DECISION OF THE ITAT AS ABOVE IN FAVOUR OF T HE ASSESSEE. GROUND OF APPEAL NO.4 RAISED BY THE REVEN UE IS ALSO DISMISSED. 50. GROUND OF APPEAL NO.5 RAISED BY THE REVENUE REA DS AS UNDER: 5. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN ALLOWING RE LIEF TO THE ASSESSEE BY HOLDING THAT MAT CREDIT TO BE CARRI ED FORWARD TO SUBSEQUENT YEARS SHOULD BE CALCULATED AF TER INCLUDING OF SURCHARGE AND CESS?' 51. THE ISSUE RAISED IN THE ABOVE GROUND RELATES TO THE INCLUSION OF SURCHARGE AND CESS FOR THE PURPOSE OF DETERMINING THE QUANTUM OF MAT CREDIT TO BE CARRIED FORWARD FOR SET OFF IN SUBSEQUENT YEARS. THE AO HAD EXCLUDED SURCHARGE AND CESS FROM THE QUANTUM OF MAT CREDIT TO BE CARRIED FORWARD FOR SET OFF IN SUBSEQUENT YEA RS WHICH THE LD.CIT(A) HELD WAS INCORRECT SINCE HE NOTED THA T THE ITAT HAD HELD IN THE CASE OF VMT SPINNING COMPANY L TD. FOR ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 37 ASSESSMENT YEAR 2007-08 IN ITA NO.1147/CHD/2014 DAT ED 8.12.2016 THAT THE SURCHARGE AND CESS WERE TO BE IN CLUDED IN MAT CREDIT. HE ACCORDINGLY DIRECTED THE AO TO CA LCULATE AND CARRY FORWARD MAT CREDIT IN TERMS OF THE AFORES AID ORDER OF THE ITAT. 52. BEFORE US THE LD. DR WAS UNABLE TO BRING TO OUR NOTICE ANY CONTRARY JUDGMENT OF EITHER THE HON'BLE HIGH CO URT OR THE HON'BLE APEX COURT IN THIS REGARD. IN VIEW OF T HE ABOVE, SINCE THE ISSUE ALREADY STANDS DECIDED BY THE ITAT IN THE CASE OF VMT SPINNING COMPANY LTD. (SUPRA) HOLDING T HAT THE MAT CREDIT SHALL INCLUDE SURCHARGE AND CESS, THE IS SUE IN THE PRESENT GROUND STANDS COVERED BY THE DECISION O F THE ITAT, WHICH WE HOLD THAT THE LD.CIT(A) HAS RIGHTLY FOLLOWED AND ALLOWED THE ASSESSEES CLAIM. GROUND OF APPEAL NO.5 RAISED BY THE REVENUE IS, THEREFORE, DISMISSED. 53. IN EFFECT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. WE NOW SHALL TAKE UP THE CROSS APPEALS ASSESSEES APPEAL IN ITA NO.485/CHD/2019 & ITA NO.612/CHD/2019 RELATING TO ASSESSMENT YEAR 2009-10 . ITA NO.485/CHD/2019(A.Y.2009-10-ASSESSEES APPEAL): ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 38 54. GROUND NO. 2 RAISED BY THE ASSESSEE IN ITA NO.485/2019 READS AS UNDER: 2. THAT THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN UPHOLDING THE APPLICABILITY OF SECTION 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D AND MAKING DISALLOWANCE THEREUNDER IGNORING THE CONTENTIONS/SUBMISSIONS OF THE ASSESSEE. 55. IT WAS COMMON GROUND BETWEEN THE PARTIES THAT T HE ABOVE GROUND WAS IDENTICAL TO GROUND NO.2 RAISED BY THE ASSESSEE IN ITS APPEAL FOR A.Y 2008-09 IN ITA NO.484/CHD/2019 ,DEALT WITH US ABOVE.OUR DECISION RENDERED THEREIN AT PARA 12-13 ABOVE WILL APPLY MUT ATIS MUTANDIS TO THIS GROUND NO.2 RAISED BY THE ASSESSEE . ACCORDINGLY DISALLOWANCE OF INTEREST MADE AS PER RU LE 8D(2)(II) OF THE INCOME TAX RULES ,1962,IS DIRECTED TO BE DELETED. FURTHER THE DISALLOWANCE OF ADMINISTRATIVE EXPENSES AS PER RULE 8D(2)(III) OF THE RULES, IS DIRECTED TO BE RESTRICTED TO RS. 5LACS IN ALL CONSIDERING THE PAST HISTORY OF THE IDENTICAL DISALLOWANCE UPHELD BY THE ITAT AN D APPLYING IT TO THE FACTS OF THE PRESENT CASE WHEREI N THE ASSESSEE HAS EARNED EXEMPT INCOME TO THE TUNE OF RS .11.18 CRS. GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE I S ALLOWED IN THE ABOVE TERMS. 56. GROUND NO. 3 RAISED BY THE ASSESSEE IN ITA NO.485/2019 READS AS UNDER: ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 39 3. THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACT S IN UPHOLDING THE ACTION OF AO FOR TREATING INTEREST RECEIVED AMOUNTING TO RS.21,26,96,516/- AS 'INCO ME FROM OTHER SOURCES' INSTEAD OF 'INCOME FROM BUSINE SS AND PROFESSION'. 57. IT WAS COMMON ISSUE BETWEEN THE PARTIES THAT TH E ABOVE GROUND IS IDENTICAL TO GROUND NO.3 RAISED BY THE ASSESSEE IN ITS APPEAL FOR A.Y 2008-09 IN ITA NO.484/CHD/2019 ,DEALT WITH BY US ABOVE.OUR DECISIO N RENDERED THEREIN AT PARA 16 OF OUR ORDER ABOVE WILL APPLY MUTATIS MUTANDIS TO THIS GROUND NO.3 RAISED BY THE ASSESSEE. ACCORDINGLY THE PLEA OF THE ASSESSEE OF TREATING THE IMPUGNED INTEREST INCOME AS ASSESSABLE UNDER T HE HEAD BUSINESS INCOME IS REJECTED BUT AT THE SAME TIME IT S PLEA OF NETTING THE SAID INCOME IS ACCEPTED AND THE AO IS D IRECTED TO ALLOW NETTING SUBJECT TO THERE BEING DIRECT NEXUS B ETWEEN THE INTEREST INCOME AND EXPENDITURE INCURRED .GROUN D OF APPEAL NO.3 RAISED BY THE ASSESSEE IS ALLOWED IN TH E ABOVE TERMS. 58. GROUND NO. 5 RAISED BY THE ASSESSEE IN ITA NO.484/2019 READS AS UNDER: 5. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS IN CONFIRMING THE ACTION OF THE AO IN REDUCING RENTAL INCOME OF RS.58,87,394/-, INTEREST FROM OTHERS OF RS.11929 62/- AND MISCELLANEOUS RECEIPTS OF RS.1,26,569/- FROM THE PROFITS OF THE UNITS ELIGIBLE FOR DEDUCTION U/S 80IC OF THE INCOME TAX ACT, 1961. ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 40 59. IT WAS COMMON GROUND BETWEEN THE PARTIES THAT T HE ISSUE RAISED IN THE ABOVE GROUND IS IDENTICAL TO GR OUND NO.5 RAISED BY THE ASSESSEE IN ITS APPEAL FOR A.Y 2008-0 9 IN ITA NO.484/CHD/2019,DEALT WITH US ABOVE.OUR DECISION RENDERED THEREIN AT PARA 23-24 OF OUR ORDER ABOVE W ILL APPLY MUTATIS MUTANDIS TO GROUND NO.5 RAISED BY THE ASSES SEE. GROUND OF APPEAL NO.5 RAISED BY THE ASSESSEE IS PA RTLY ALLOWED IN THE ABOVE TERMS. 60. GROUND NO. 6 RAISED BY THE ASSESSEE IN ITA NO.484/2019 READS AS UNDER: 6. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS IN UPHOLDING THE ACTION OF THE AO IN ALLOCATING HEAD O FFICE EXPENSES TO UNITS CLAIMING DEDUCTION U/S 80IB/80IC OF THE ACT. 61. IT WAS COMMON GROUND BETWEEN THE PARTIES THAT T HE ISSUE RAISED IN THE ABOVE GROUND IS IDENTICAL TO GR OUND NO.6 RAISED BY THE ASSESSEE IN ITS APPEAL FOR A.Y 2008-0 9 IN ITA NO.484/CHD/2019,DEALT WITH US ABOVE.OUR DECISION RENDERED THEREIN AT PARA 27 WILL APPLY MUTATIS MUTA NDIS TO GROUND NO.6 RAISED BY THE ASSESSEE IN ITA NO.485/CHD/2019. GROUND OF APPEAL NO.6 RAISED BY TH E ASSESSEE IS ACCORDINGLY DISMISSED 62. GROUND NO.7 RAISED BY THE ASSESSEE IN ITA NO.484/2019 READS AS UNDER: ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 41 7. THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACT S IN UPHOLDING THE ACTION OF AO FOR TREATING LINE/BAY CH ARGES AMOUNTING TO RS. 66,61,050/- AS CAPITAL EXPENDITURE INSTEAD OF REVENUE EXPENDITURE. 63. IT WAS COMMON GROUND BETWEEN THE PARTIES THAT THE ABOVE GROUND IS IDENTICAL TO GROUND NO.7 RAISED BY THE ASSESSEE IN ITS APPEAL FOR A.Y 2008-09 IN ITA NO.484/CHD/2019,DEALT WITH US ABOVE.OUR DECISION RENDERED THEREIN AT PARA 33 WILL APPLY MUTATIS MUTA NDIS TO GROUND NO.6 RAISED BY THE ASSESSEE IN ITA NO.485/CHD/2019. GROUND OF APPEAL NO.7 RAISED BY TH E ASSESSEE IS ALLOWED IN THE ABOVE TERMS. 64. IN EFFECT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO.612/CHD/2019(A.Y.2009-10-REVENUES APPEAL): 65. GROUND NO.1 RAISED BY THE REVENUE IN ITA NO.612 /2019 READS AS UNDER: 1. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN ALLOWING INTEREST FROM CUSTOMERS & SUPPLIERS AMOUNTING TO RS.4,00,63,000/- TO BE TREATED AS BUSINESS INCOME AS AGAINST A.O. TREATING THE SAME AS INCOME FROM OTHER SOURCES?' 66. IT WAS COMMON GROUND BETWEEN THE PARTIES THAT T HE ISSUE RAISED IN THE ABOVE GROUND IS IDENTICAL TO GR OUND NO.1 RAISED BY THE REVENUE IN ITS APPEAL FOR A.Y 2008-09 IN ITA NO.611/CHD/2019 ,DEALT WITH BY US ABOVE.OUR DECISIO N ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 42 RENDERED THEREIN AT PARA 37 WILL APPLY MUTATIS MUTA NDIS TO GROUND NO.1 RAISED BY THE REVENUE IN ITA NO.612/CHD/2019. GROUND OF APPEAL NO.1 RAISED BY TH E REVENUE IS ACCORDINGLY DISMISSED. 67. GROUND NO. 2 RAISED BY THE REVENUE IN ITA NO.612/2019 READS AS UNDER: 2. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN ALLOWING DEDUCTION U/S 80IB AND 80IC ON INTEREST FROM CUSTOMERS & EMPLOYEE, MISC. RECEIPTS COMPRISING BROKERAGE FROM OCEAN FREIGHTS AND INSURANCE CLAIM?' 68. IT WAS COMMON GROUND BETWEEN THE PARTIES THAT T HE ABOVE GROUND IS IDENTICAL TO GROUND NO.2 RAISED BY THE REVENUE IN ITA NO.611/CHD/2019,DEALT WITH BY US ABOVE.OUR DECISION RENDERED THEREIN AT PARA 41 WILL APPLY MUTATIS MUTANDIS TO GROUND NO.2 RAISED BY THE REVEN UE IN ITA NO.612/CHD/2019. GROUND OF APPEAL NO.2 RAISED B Y THE REVENUE IS ACCORDINGLY PARTLY ALLOWED FOR STATISTIC AL PURPOSES. 69. GROUND NO.3 RAISED BY THE REVENUE IN ITA NO.612 /2019 READS AS UNDER: 3. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN TREATING THE REIMBURSEMENT OF INTEREST UNDER TUF SCHEME OF THE MINISTRY OF TEXTILES, GOVERNMENT OF INDIA, AS CAPITAL RECEIPT INSTEAD ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 43 OF REVENUE RECEIPT WITHOUT GIVING AN OPPORTUNITY TO ASSESSING OFFICER TO EXAMINE THE CLAIM OF ASSESSEE?' 70. IT WAS COMMON GROUND BETWEEN THE PARTIES THAT T HE ISSUE RAISED IN THE ABOVE GROUND IS IDENTICAL TO GR OUND NO.3 RAISED BY THE REVENUE IN ITA NO.611/CHD/2019,DEALT WITH BY US ABOVE.OUR DECISION RENDERED THEREIN AT PARA 4 5 WILL APPLY MUTATIS MUTANDIS TO GROUND NO.3 RAISED BY THE REVENUE IN ITA NO.612/CHD/2019. GROUND OF APPEAL NO .3 RAISED BY THE REVENUE IS ACCORDINGLY DISMISSED. 71. GROUND NO.4 RAISED BY THE REVENUE IN ITA NO.612 /2019 READS AS UNDER: 4. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN TREATING THE SALE TAX SUBSIDY OF RS.11,58,16,9337- AS CAPITAL RECEIPTS WITHOUT COMPARING THE SCHEMEOF GUJRAT GOVERNMENT WITH THAT OF PUNJAB GOVERNMENT SCHEME MADE BY HON'BLE PUNJAB 85 HARYANA HIGH COURT IN THE CASE OF M/S ABHISHEK INDUSTRIES LTD., 286 ITR1?' 72. IT WAS COMMON GROUND BETWEEN THE PARTIES THAT T HE ISSUE RAISED IN THE ABOVE GROUND IS IDENTICAL TO GR OUND NO.4 RAISED BY THE REVENUE IN ITA NO.611/CHD/2019,DEALT WITH BY US ABOVE.OUR DECISION RENDERED THEREIN AT PARA 4 9 WILL APPLY MUTATIS MUTANDIS TO GROUND NO.4 RAISED BY THE REVENUE IN ITA NO.612/CHD/2019. GROUND OF APPEAL NO .4 RAISED BY THE REVENUE IS ACCORDINGLYDISMISSED. ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 44 73. GROUND NO.5 RAISED BY THE REVENUE IN ITA NO.612 /2019 READS AS UNDER: 5. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN ALLOWING RELIEF TO THE ASSESSEE BY HOLDING THAT MAT CREDIT TO BE CARRIED FORWARD TO SUBSEQUENT YEARS SHOULD BE CALCULATED AFTER INCLUDING OF SURCHARGE AND CESS?' 74. IT WAS COMMON GROUND BETWEEN THE PARTIES THAT T HE ISSUE RAISED IN THE ABOVE GROUND IS IDENTICAL TO GR OUND NO.5 RAISED BY THE REVENUE IN ITA NO.611/CHD/2019,DEALT WITH BY US ABOVE.OUR DECISION RENDERED THEREIN AT PARA 5 2 WILL APPLY MUTATIS MUTANDIS TO GROUND NO.5 RAISED BY THE REVENUE IN ITA NO.612/CHD/2019. GROUND OF APPEAL NO .5 RAISED BY THE REVENUE IS DISMISSED. 75. THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FO R STATISTICAL PURPOSES. ITA NO.486/CHD/2019(A.Y.2013-14-ASSESSEES APPEAL): 76. GROUND NO.2 RAISED BY THE ASSESSEE IN ITA NO.486/2019 READS AS UNDER: 2. THAT THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN UPHOLDING THE APPLICABILITY OF SECTION 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D AND MAKING DISALLOWANCE THERE UNDER IGNORING THE CONTENTIONS/SUBMISSIONS OF THE ASSESSEE. 77. IT WAS COMMON GROUND BETWEEN THE PARTIES THAT T HE ABOVE GROUND WAS IDENTICAL TO GROUND NO.2 RAISED BY THE ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 45 ASSESSEE IN ITS APPEAL FOR A.Y 2008-09 IN ITA NO.484/CHD/2019 ,DEALT WITH US ABOVE. OUR DECISION RENDERED THEREIN AT PARA 12-13 ABOVE W ILL APPLY MUTATIS MUTANDIS TO THIS GROUND NO.2 RAISED BY THE ASSESSEE. ACCORDINGLY DISALLOWANCE OF INTEREST MADE AS PER RULE 8D(2)(II) OF THE INCOME TAX RULES ,1962,IS DIR ECTED TO BE DELETED. FURTHER THE DISALLOWANCE OF ADMINISTRAT IVE EXPENSES AS PER RULE 8D(2)(III) OF THE RULES, IS DI RECTED TO BE RESTRICTED TO RS. 5 .50 LACS IN ALL CONSIDERING THE PAST HISTORY OF THE IDENTICAL DISALLOWANCE UPHELD BY T HE ITAT AND APPLYING IT TO THE FACTS OF THE PRESENT CASE WHEREIN THE ASSESSEE HAS EARNED EXEMPT INCOME TO THE TUNE OF RS .13.15 CRS. GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE I S ALLOWED IN THE ABOVE TERMS. 78. GROUND NO. 3 RAISED BY THE ASSESSEE IN ITA NO.486/2019 READS AS UNDER: 3. THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACT S IN UPHOLDING THE ACTION OF AO FOR TREATING INTEREST RECEIVED AMOUNTING TO RS. 19,40,80,702/- AS 'INCOME FROM OTHER SOURCES' INSTEAD OF 'INCOME FRO M BUSINESS AND PROFESSION'. 79. IT WAS COMMON ISSUE BETWEEN THE PARTIES THAT TH E ABOVE GROUND IS IDENTICAL TO GROUND NO.3 RAISED BY THE ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 46 ASSESSEE IN ITS APPEAL FOR A.Y 2008-09 IN ITA NO.484/CHD/2019 ,DEALT WITH BY US ABOVE.OUR DECISIO N RENDERED THEREIN AT PARA 16 OF OUR ORDER ABOVE WILL APPLY MUTATIS MUTANDIS TO THIS GROUND NO.3 RAISED BY THE ASSESSEE. ACCORDINGLY THE PLEA OF THE ASSESSEE OF TREATING THE IMPUGNED INTEREST INCOME AS ASSESSABLE UNDER T HE HEAD BUSINESS INCOME IS REJECTED BUT AT THE SAME TIME IT S PLEA OF NETTING THE SAID INCOME IS ACCEPTED AND THE AO IS D IRECTED TO ALLOW NETTING SUBJECT TO THERE BEING DIRECT NEXUS B ETWEEN THE INTEREST INCOME AND EXPENDITURE INCURRED .GROUN D OF APPEAL NO.3 RAISED BY THE ASSESSEE IS ALLOWED IN TH E ABOVE TERMS. 80. GROUND NO.4 RAISED BY THE ASSESSEE IN ITA NO.486/2019 READS AS UNDER: 4. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS IN CONFIRMING THE ACTION OF THE AO IN REDUCING RENTAL INCOME OF RS.1,56,47,787/- AND MISCELLANEOUS RECEIPTS OF RS.61,52,573/- FROM THE PROFITS OF THE UNITS ELIGIBLE FOR DEDUCTION U/S 80IC/80IA OF THE INCOME TAX ACT, 1961. 81. IT WAS COMMON GROUND BETWEEN THE PARTIES THAT T HE ISSUE RAISED IN THE ABOVE GROUND IS IDENTICAL TO GR OUND NO.5 RAISED BY THE ASSESSEE IN ITS APPEAL FOR A.Y 2008-0 9 IN ITA NO.484/CHD/2019,DEALT WITH US ABOVE.OUR DECISION RENDERED THEREIN AT PARA 23-24 OF OUR ORDER ABOVE W ILL APPLY MUTATIS MUTANDIS TO GROUND NO.4 RAISED BY THE ASSES SEE. ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 47 GROUND OF APPEAL NO.4 RAISED BY THE ASSESSEE IS PAR TLY ALLOWED ACCORDINGLY. 82. GROUND NO.5 RAISED BY THE ASSESSEE IN ITA NO.486/2019 READS AS UNDER: 5. THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACT S IN UPHOLDING THE ACTION OF AO FOR TREATING LINE/BAY CHARGES AMOUNTING TO RS.2,89,25,454/- AS CAPITAL EXPENDITURE INSTEAD OF REVENUE EXPENDITURE. 83. IT WAS COMMON GROUND BETWEEN THE PARTIES THAT THE ABOVE GROUND IS IDENTICAL TO GROUND NO.7 RAISED BY THE ASSESSEE IN ITS APPEAL FOR A.Y 2008-09 IN ITA NO.484/CHD/2019,DEALT WITH US ABOVE.OUR DECISION RENDERED THEREIN AT PARA 33 WILL APPLY MUTATIS MUTA NDIS TO GROUND NO.5 RAISED BY THE ASSESSEE. GROUND OF APPEA L NO.5 RAISED BY THE ASSESSEE IS ALLOWED IN THE ABOVE TERM S. 84.GROUND NOS.6 RAISED BY THE ASSESSEE IN ITA NO.486/2019 READ AS UNDER: 6. THAT THE AUTHORITIES BELOW HERE ERRED IN TREATI NG INTEREST REIMBURSEMENT OF RS.1,76,12,549/- RELATED TO TUFS UNDER MADHYA PRADESH SCHEME - 2012 AS REVENUE RECEIPT INSTEAD OF CAPITAL RECEIPT. 85. AT THE OUTSET IT WAS POINTED OUT BY THE LD.DR T HAT THERE IS NO GRIEVANCE OF THE ASSESSEE ON THE IMPUGNED ISS UE SINCE THE LD.CIT(A) HAS TREATED THE INTEREST RECEIVED UND ER TUFS SCHEME AS CAPITAL RECEIPT AT PARA 38-43 OF HIS ORDE R. ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 48 THE LD.COUNSEL FOR THE ASSESSEE WAS UNABLE TO CONTR OVERT THE ABOVE. IN VIEW OF THE SAME THE GROUND OF APPEAL NO.6 IS DI SMISSED AS INFRUCTUOUS. GROUND OF APPEAL NO.7 READS AS UNDER: 7. THAT THE AUTHORITIES BELOW HERE ERRED IN TREATIN G SALES TAX SUBSIDY OF RS.2,82,71,552/- UNDER MADHYA PRADESH INDUSTRIAL PROMOTION ASSISTANCE SCHEME - 2004 AS REVENUE RECEIPT INSTEAD OF CAPITAL RECEIPT. IT WAS COMMON GROUND BETWEEN THE PARTIES THAT THE A BOVE GROUND WAS COVERED BY THE DECISION IN THE DEPARTMEN TAL APPEAL IN ITA NO.611/CHD/2019 BEING IDENTICAL TO G ROUND NOS 4 RAISED BY THE REVENUE IN ITA NO.611/CHD/2019, DEALT WITH BY US ABOVE.OUR DECISION RENDERED THEREIN AT P ARA 49 OF OUR ORDER ABOVE, WILL APPLY MUTATIS MUTANDIS TO ADDITIONAL GROUND NOS. 7 RAISED BY THE ASSESSEE IN ITA NO.486/CHD/2019. GROUND OF APPEAL NOS. 7 RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 86. THE APPEAL OF THE ASSESSEE IS ACCORDINGLY PA RTLY ALLOWED AS ABOVE. ITA NO.613/CHD/2019(A.Y.2013-14-REVENUES APPEAL): ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 49 87. GROUND NO.1 RAISED BY THE REVENUE IN ITA NO.613 /2019 READS AS UNDER: 1. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN ALLOWING INTEREST FROM CUSTOMERS & SUPPLIERS AMOUNTING TO RS.5,23,34,571/- AND INTEREST EARNED FROM EMPLOYEE AGAINST HOUSING LOAN GRANTED TO THEM TO BE TREATED AS BUSINESS INCOME AS AGAINST A.O. TREATING THE SAME AS INCOME FROM OTHER SOURCES?' 88. IT WAS COMMON GROUND BETWEEN THE PARTIES THAT T HE ISSUE RAISED IN THE ABOVE GROUND IS IDENTICAL TO GR OUND NO.1 RAISED BY THE REVENUE IN ITS APPEAL FOR A.Y 2008-09 IN ITA NO.611/CHD/2019 ,DEALT WITH BY US ABOVE.OUR DECISIO N RENDERED THEREIN AT PARA 37 WILL APPLY MUTATIS MUTA NDIS TO GROUND NO.1 RAISED BY THE REVENUE IN ITA NO.612/CHD/2019. GROUND OF APPEAL NO.1 RAISED BY TH E REVENUE IS ACCORDINGLY DISMISSED. 89. GROUND NO.2 RAISED BY THE REVENUE IN ITA NO.613 /2019 READS AS UNDER: 2. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN ALLOWING DEDUCTION U/S 80IA AND 80IC ON INTEREST FROM CUSTOMERS & EMPLOYEE, MISC. RECEIPTS COMPRISING BROKERAGE FROM OCEAN FREIGHTS, FOREX GAI NS AND INSURANCE CLAIM?' 90. IT WAS COMMON GROUND BETWEEN THE PARTIES THAT T HE ABOVE GROUND IS IDENTICAL TO GROUND NO.2 RAISED BY THE REVENUE IN ITA NO.611/CHD/2019,DEALT WITH BY US ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 50 ABOVE.OUR DECISION RENDERED THEREIN AT PARA- 41 WIL L APPLY MUTATIS MUTANDIS TO GROUND NO.2 RAISED BY THE REVEN UE IN ITA NO.612/CHD/2019. GROUND OF APPEAL NO.2 RAISED B Y THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 91. GROUND NO.3 RAISED BY THE REVENUE IN ITA NO.613 /2019 READS AS UNDER: 3. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN TREATING THE REIMBURSEMENT OF INTEREST UNDER TUF SCHEME OF THE MINISTRY OF TEXTILES, GOVERNMENT OF INDIA, AS CAPITAL RECEIPT INSTEAD OF REVENUE RECEIP T WITHOUT GIVING AN OPPORTUNITY TO ASSESSING OFFICER TO EXAMINE THE CLAIM OF ASSESSEE?' 92. IT WAS COMMON GROUND BETWEEN THE PARTIES THAT T HE ISSUE RAISED IN THE ABOVE GROUND IS IDENTICAL TO GR OUND NO.3 RAISED BY THE REVENUE IN ITA NO.611/CHD/2019,DEALT WITH BY US ABOVE.OUR DECISION RENDERED THEREIN AT PARA 4 5 WILL APPLY MUTATIS MUTANDIS TO GROUND NO.3 RAISED BY THE REVENUE IN ITA NO.612/CHD/2019. GROUND OF APPEAL NO .3 RAISED BY THE REVENUE IS ACCORDINGLY DISMISSED. IN EFFECT THE APPEAL OF THE REVENUE IS PARTLY ALLOW ED FOR STATISTICAL PUROSES. 93. IN EFFECT, THE APPEALS OF THE ASSESSEE IN ITA N O.484 TO 486/CHD/2019 ARE PARTLY ALLOWED AND THE APPEALS OF THE ITA NOS.484 TO 486/CHD/2019 & ITA NOS.611 T O 613/CHD/2019 A.YS. 2008-09, 2 009-10 & 2013-14 51 REVENUE IN ITA NOS.611 TO 613 ARE PARTLY ALLOWED FO R STATISTICAL PURPOSES. ORDER PRONOUNCED ON 28 TH MAY 2020. SD/- SD/- # $ % &' (SANJAY GARG) (ANNAPURNA GUPTA) /JUDICIAL MEMBER '( /ACCOUNTANT MEMBER *# /DATED: 28 TH MAY, 2020 * ' * &) *+ ,+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ' - / CIT 4. ' - ( )/ THE CIT(A) 5. +./ 0 , $ 0 , 123/4 / DR, ITAT, CHANDIGARH 6. /3 5# / GUARD FILE &) ' / BY ORDER, 6 ! / ASSISTANT REGISTRAR