The DCIT--4, Ahmedabad V. GMM Pfaulder Ltd., Ahmedabad

ITA 613/AHD/2011

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9636 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 25-03-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 28-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Transfer pricing; Proportionate interest; Bad and doubtful debts; Commercial expediency
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD .. , , BEFORE SHRI BEFORE SHRI G.D. AGARWAL,VICE PRESIDEN T (AZ) AND SHRI KUL BHARAT, JUDICIAL MEMBER SL. NO(S) ITA NO(S) NOS. ASSESSMENT YEAR(S) APPEAL(S) BY APPELLANT VS. RESPONDENT APPELLANT RESPONDENT 1. 318/AHD/2011 2006-07 GMM PFAUDLER LTD. 3 RD FLOOR, B-JADAV CHAMBERS ASHRAM ROAD AHMEDABAD PAN:AABC G0563A THE ASST.CIT CIRCLE-4 AHMEDABAD 2. 613/AHD/2011 2006-07 REVENUE ASSESSEE 3. 319/AHD/2011 2007-08 ASSESSEE REVENUE 4. 614 /AHD/201 1 2007 - 08 REVENUE ASSESSEE 5. 2279 /AHD/201 1 200 8 - 0 9 ASSESSEE REVENUE 6. 2296/AHD/2011 2008-09 REVENUE ASSESSEE ASSESSEE BY : SHRI SHRI S.N.SOPARKAR, A.R. REVENUE BY : SHRI DINESH SINGH, SR.DR !' / DATE OF HEARING 25/03/2015 #$%& !' / DATE OF PRONOUNCEMENT 17/04/2015 / O R D E R PER BENCH : THESE CROSS-APPEALS BY THE ASSESSEE AND THE REVENUE ARE DIRECTED AGAINST THE SEPARATE ORDERS OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-VIII, AHMEDABAD (CIT(A) IN SHORT) PERTAINING TO ITA NOS.318,613, 319,614, 2279 & 2296 /AHD/2011 GMM PFAUDLER LTD. VS. DY.CIT(CROSS-APPEALS) ASST.YEARS 2006-07,2007-08 & 2008- 09 - 2 - ASSESSMENT YEARS (AYS) 2006-07, 2007-08 & 2008-09 D ATED 06/12/2010, 06/12/2010, & 07/07/2010 RESPECTIVELY. SINCE COMMON ISSUES AND FACTS ARE INVOLVED IN THESE APPEALS, THE SE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS C ONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST, WE TAKE UP THE CROSS-APPEALS OF ASSESSEE AND REVENUE, I.E. ITA NO.318/AHD/2011 & ITA NO.613/AHD/2011 RESPECTIV ELY FOR AY 2006-07. THE FOLLOWING GROUNDS OF APPEAL HAVE BEEN RAISED BY THE RESPECTIVE PARTIES:- (A) ASSESSEES APPEAL IN ITA NO.318/AHD/2011- FO R AY 2006-07. 1. THE LEARNED COMMISSIONER (APPEAL) FAILED TO UNDE RSTAND THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED COMMISSIONER (APPEAL) ERRED IN CONFI RMING THE DISALLOWANCE OF RS.2,69,966/- BEING ADMINISTRAT IVE EXPENSES U/S.14A OF THE ACT, CONSIDERING THEM INCUR RED IN RELATION TO EXEMPTED DIVIDEND INCOME. 3. THE APPELLANT PRAYS FOR APPROPRIATE RELIEF ON TH E ABOVE GROUNDS OF APPEALS. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, SUBSTITUTE, OR WITHDRAW ANY OF THE ABOVE GROUNDS OF APPEAL AS CIRCUMSTANCES MAY JUSTIFY. (B) REVENUES APPEAL IN ITA NO.613/AHD/2011- FOR AY 2006-07. 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE DISALLOWANCE OF RS.4,09,899/- BEING LIQUIDATED DAMA GES MADE BY THE ITA NOS.318,613, 319,614, 2279 & 2296 /AHD/2011 GMM PFAUDLER LTD. VS. DY.CIT(CROSS-APPEALS) ASST.YEARS 2006-07,2007-08 & 2008- 09 - 3 - A.O., WITHOUT APPRECIATING THE FACTS AND MATERIALS BROUGHT ON RECORD BY THE ASSESSING OFFICER. 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE DISALLOWANCE OF RS.34,39,000/- BEING BAD DEBTS, MAD E BY THE A.O., WITHOUT APPRECIATING THE FACTS AND MATERIALS BROUGH T ON RECORD BY THE ASSESSING OFFICER. 3. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE DISALLOWANCE OF RS.1,12,14,000/- BEING PROVISION FO R WARRANTY EXPENSES, MADE BY THE A.O., WITHOUT APPRECIATING TH E FACTS AND MATERIALS BROUGHT ON RECORD BY THE ASSESSING OFFICE R. 4. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE DISALLOWANCE OF RS.23,43,716/- BEING INTEREST EXPEN SES, MADE BY THE A.O. U/S.14A OF THE ACT, WITHOUT APPRECIATING THE F ACTS AND MATERIALS BROUGHT ON RECORD BY THE ASSESSING OFFICE R. 5. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE DISALLOWANCE OF RS.1,86,650/- BEING PROPORTIONATE I NTEREST EXPENSES MADE BY THE A.O. U/S.36(I)(III) OF THE ACT, WITHOUT APPRECIATING THE FACTS AND MATERIALS BROUGHT ON RECORD BY THE ASSESS ING OFFICER. 6. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE DISALLOWANCE OF RS.49,60,500/- BEING ROYALTY EXPENS ES MADE BY THE A.O., WITHOUT APSPRECIATING THE FACTS AND MATERIALS BROUGHT ON RECORD BY THE ASSESSING OFFICER. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) OUGHT TO HAVE UPHELD THE DECISION OF THE ASSESSING OFFICER. 8. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LEAR NED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EXTENT. 2. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE AS SESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 30/12/2008. THE AO WHILE FRAMING THE ASSESSMENT, MADE VARIOUS DISALLOWANCES/ADDITIONS ON ACCOUNT OF ACCRUED INTER EST TO APSEB OF ITA NOS.318,613, 319,614, 2279 & 2296 /AHD/2011 GMM PFAUDLER LTD. VS. DY.CIT(CROSS-APPEALS) ASST.YEARS 2006-07,2007-08 & 2008- 09 - 4 - RS.8,33,185/-, PROVISIONS FOR LIQUIDATED DAMAGES OF RS.4,09,899/-, BAD DEBTS WRITTEN OFF OF RS.34,39,000/- PROVISIONS FOR WARRANTY EXPENSES OF RS.1,12,14,000/-, DISALLOWANCE U/S.14A OF THE ACT O F RS.26,13,682/-, DISALLOWANCE OF PROPORTIONATE INTEREST U/S.36(1)(II I) OF RS.1,86,650/-, CLAIM OF ROYALTY OF RS.49,60,500/- AND ARMS LENGTH PRICE OF RS.2,28,082/-. AGAINST THIS, THE ASSESSEE PREFERRE D AN APPEAL BEFORE THE LD.CIT(A) IN RESPECT OF DISALLOWANCE OF PROVISIONS FOR LIQUIDATED DAMAGES AMOUNTING TO RS.4,09,899/-, DISALLOWANCE OF BAD-DEBTS AMOUNTING TO RS.34,39,000/-, DISALLOWANCE OF PROVIS IONS FOR WARRANTY EXPENSES AMOUNTING TO RS.1,12,14,000/-, DISALLOWANC E MADE BY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT AMOUNTING TO RS.26,13,682/-, DISALLOWANCE OF PROPORTIONATE INTEREST U/S.36(1)(II I) AMOUNTING TO RS.1,86,650/-, DISALLOWANCE OF CLAIM OF ROYALTY AMO UNTING TO RS.49,60,500/- AND ADDITION OF ARMS LENGTH PRICE IN RESPECT OF SALE MATERIAL TO ASSOCIATED-CONCERN AMOUNTING TO RS.2,28 ,082/-. THE LD.CIT(A) DELETED THE DISALLOWANCE OF RS.4,09,899/- MADE ON ACCOUNT OF LIQUIDATED DAMAGES. THE LD.CIT(A) ALSO DELETED THE ADDITION MADE ON ACCOUNT OF BAD-DEBTS WRITTEN OFF OF RS.34,49,000/- BY FOLLOWING THE ORDER OF HIS PREDECESSOR IN AY 2005-06. IN RESPECT OF DI SALLOWANCE OF PROVISIONS FOR WARRANTY EXPENSES OF RS.1,12,14,000/ -, THE LD.CIT(A) DELETED THE SAME BY FOLLOWING HIS PREDECESSORS ORD ER PASSED IN AY 2005-06. HOWEVER, IN RESPECT OF DISALLOWANCE OF RS .26,13,682/- MADE U/S.14A OF THE ACT, THE LD.CIT(A) PARTLY ALLOWED TH E APPEAL, WHEREBY THE ITA NOS.318,613, 319,614, 2279 & 2296 /AHD/2011 GMM PFAUDLER LTD. VS. DY.CIT(CROSS-APPEALS) ASST.YEARS 2006-07,2007-08 & 2008- 09 - 5 - LD.CIT(A) DELETED THE ADDITION MADE ON ACCOUNT OF T HE INTEREST EXPENSES AND SUSTAINED THE ADDITION MADE ON ACCOUNT OF ADMIN ISTRATIVE EXPENSES OF RS.2,69,966/-. IN RESPECT OF DISALLOWANCE MADE U/S .36(1)(III) OF RS.1,86,650/-, THE LD.CIT(A) FOLLOWING HIS PREDECES SORS ORDER PASSED IN AY 2005-06 DELETED THE ADDITION. IN RESPECT OF THE ADDITION MADE ON ACCOUNT OF ROYALTY OF RS.49,60,500/-, THE LD.CIT(A) FOLLOWING HIS PREDECESSORS ORDER PASSED IN AY 2005-06, DELETED T HE ADDITION. THE GROUND RAISED IN RESPECT OF DISALLOWANCE MADE ON AC COUNT OF ALP WAS WITHDRAWN BEFORE THE LD.CIT(A) AND, THEREFORE, THIS ADDITION WAS CONFIRMED BY THE LD.CIT(A). BOTH THE ASSESSEE AN D REVENUE HAVE PREFERRED APPEALS AGAINST THE ORDER OF LD.CIT(A). 3. FIRST, WE TAKE UP THE ASSESSEES APPEAL IN AY 20 06-07. THE ONLY EFFECTIVE GROUND IN ASSESSEES APPEAL, I.E. IN ITA NO.318/AHD/2011 FOR AY 2006-07, IS AGAINST THE CONFIRMATION OF ADDITIO N OF RS.2,69,966/- BEING ADMINISTRATIVE EXPENSES U/S.14A OF THE ACT. THE LD.SR.COUNSEL FOR THE ASSESSEE SHRI S.N.SOPARKAR SUBMITTED THAT THE I DENTICAL ISSUE WAS BEFORE THE ITAT FOR AY 2005-06. HE SUBMITTED THAT THE LD.CIT(A) HAS FOLLOWED THE DECISION OF HIS PREDECESSOR PASSED IN AY 2005-06. HE SUBMITTED THAT THE ISSUE TRAVELLED UPTO THE TRIBUNA L (ITAT A BENCH) BY WAY OF ITA NO.2627/AHD/2008-ASSESSEES CROSS-APPEAL AND ITA NO.2923/AHD/2008-REVENUES APPEAL AND THE HONBLE T RIBUNAL VIDE ORDER DATED 28/01/2014 WAS PLEASED TO DECIDE THIS I SSUE IN FAVOUR OF ITA NOS.318,613, 319,614, 2279 & 2296 /AHD/2011 GMM PFAUDLER LTD. VS. DY.CIT(CROSS-APPEALS) ASST.YEARS 2006-07,2007-08 & 2008- 09 - 6 - ASSESSEE. HE DREW OUR ATTENTION TOWARDS PARAS-6 & 7 IN ITA NO.2627/AHD/2008(SUPRA), WHEREIN THE COORDINATE BEN CH HAD DELETED THE ADDITION MADE ON ADMINISTRATIVE EXPENSES FOLLOW ING THE DECISION OF HONBLE KERALA HIGH COURT RENDERED IN THE CASE OF C IT VS. CATHOLIC SYRIAN BANK LTD. REPORTED AT (2012) 207 TAXMAN 2. THE RELEVANT PARAS-6 AND 7 OF THE TRIBUNALS ORDER DATED 28/01/2014 ARE REPRODUCED HEREUNDER:- 6. GROUND NO.3 IS AGAINST THE CONFIRMATION OF DISA LLOWANCE OF RS.3,62,160/- BEING ADMINISTRATIVE EXPENSES U/S.14A OF THE ACT. 6.1. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS DECIDED IN FAVOUR OF ASSESSEE BY THE HONBLE COORDI NATE BENCH IN ITA NO.1476/AHD/2006 PERTAINING TO AY 2002-03. 6.2. ON THE CONTRARY, LD.SR.DR SUPPORTED THE ORDER OF THE LD.CIT(A). THE LD.SR.DR HAS RELIED ON THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF DHANUKA & SONS VS. CIT REPORTED AT ( 2011) 12 TAXMANN.COM 227 (CAL.). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE HONBLE COORDINATE BENCH IN ITA NO.1476/AHD/2006(SUPRA) VIDE PARA-16, IT HAS BEEN H ELD THAT SINCE THE ASSESSEE HAD SUFFICIENT PROFITS GENERATED THIS YEAR AND IT HAD MIXED FUNDS AND NO NEXUS IS ESTABLISHED BY THE AO AS TO W HETHER INVESTMENT WAS MADE OUT OF INTEREST BEARING FUNDS, DISALLOWANC E OF INTEREST CANNOT BE MADE. SIMILARLY NO DISALLOWANCE OUT OF ADMINIST RATIVE EXPENDITURE CAN BE MADE AS THERE IS NO DIRECT NEXUS. AS A RESU LT, THIS GROUNDS IS ALLOWED. IN THIS YEAR ALSO, THE AO HAS NOT ESTABLI SHED THE NEXUS. MOREOVER, THE LD.COUNSEL FOR THE ASSESSEE HAS RELIE D ON THE DECISION OF THE HONBLE KERALA HIGH COURT IN THE CASE OF CIT VS . CATHOLIC SYRIAN ITA NOS.318,613, 319,614, 2279 & 2296 /AHD/2011 GMM PFAUDLER LTD. VS. DY.CIT(CROSS-APPEALS) ASST.YEARS 2006-07,2007-08 & 2008- 09 - 7 - BANK LTD. REPORTED AT (2012) 207 TAXMAN 2 :: (2011) 9 TAXMANN.COM 148 (KER.)(MAG), WHEREIN THE HONBLE HIGH COURT HAS HELD THAT SO FAR AS DISALLOWANCE OF ADMINISTRATIVE EXPENSE IS CONCER NED, THERE IS NO PRECIOUS FORMULA OR PROPORTIONATE DISALLOWANCE, HEN CE NO DISALLOWANCE CAN BE CALLED FOR UNDER THE IDENTICAL FACTS. ON TH E OTHER HAND, THE LD.DR HAS RELIED ON THE DECISION OF HONBLE CALCUT TA HIGH COURT IN THE CASE OF DHANUKA & SONS(SUPRA). SINCE DIFFERENT VIE WS HAVE BEEN EXPRESSED BY THE HONBLE CALCUTTA HIGH COURT AND HO NBLE KERALA HIGH COURT, VIEW WHICH IS IN FAVOUR OF ASSESSEE IS TO BE ADOPTED AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. VEGETABLE PRODUCTS LTD. REPORTED AT 88 ITR 192 (SC). THEREFO RE, RESPECTFULLY FOLLOWING THE DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF CATHOLIC SYRIAN BANK LTD.(SUPRA), THIS GROUND OF AS SESSEES APPEAL IS ALLOWED. 3.1. THE LD.SR.DR SHRI DINESH SINGH SUPPORTED THE O RDERS OF THE AUTHORITIES BELOW. HE SUBMITTED THAT SOME AMOUNT O F THE ADMINISTRATIVE EXPENSES CAN BE ATTRIBUTED TO THE EARNING OF THE EX EMPT INCOME. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE COORDINATE BENCH IN ITA NO.1476/A HD/2006 PERTAINING TO AY 2002-03 HAD DECIDED THE SIMILAR ISSUE IN FAVO UR OF THE ASSESSEE. WE ALSO FIND THAT THE FACTS ARE IDENTICAL TO THE FA CTS AS WERE RAISED IN AY 2005-06, THEREFORE FOLLOWING THE EARLIER ORDER OF T HIS COORDINATE BENCH PASSED IN ITA NO.2627/AHD/2008(ASSESSEES OWN CASE) , DATED 28/01/2014, WE DIRECT THE AO TO DELETE THE ADDITION FOR THIS YEAR AS WELL. THUS, THIS GROUND OF ASSESSEES APPEAL IS ALLOWED. ITA NOS.318,613, 319,614, 2279 & 2296 /AHD/2011 GMM PFAUDLER LTD. VS. DY.CIT(CROSS-APPEALS) ASST.YEARS 2006-07,2007-08 & 2008- 09 - 8 - 4.1. THE OTHER GROUNDS RAISED IN THIS APPEAL ARE GE NERAL IN NATURE NEED NO SEPARATE ADJUDICATION. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR AY 2006-07 IS ALLOWED. 6. NOW, WE TAKE UP THE REVENUES APPEAL (ITA NO.613 /AHD/2011 FOR AY 2006-07). 6.1. FIRST GROUND OF REVENUES APPEAL IS AGAINST DE LETION OF DISALLOWANCE OF RS.4,09,899/- IN RESPECT OF LIQUIDA TED DAMAGES MADE BY THE AO. 6.2. AT THE OUTSET, LD.SR.DR SUBMITTED THAT THE IDE NTICAL ISSUE WAS RAISED IN ITA NO.2923/AHD/2008 FOR AY 2005-06(SUPRA ) BY THE REVENUE. THE TRIBUNAL VIDE ITS ORDER DATED 28/01/ 2014 WAS PLEASED TO RESTORE THIS ISSUE TO THE AO FOR DECISION AFRESH. 6.3. ON THE CONTRARY, LD.SR.COUNSEL FOR THE ASSESSE E SHRI S.N.SOPARKAR SUPPORTED THE ORDER OF THE LD.CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE COORDINATE BENCH OF THIS TRIBUNAL IN ITA NOI.2923/AHD/2008-REVENUES APPEAL, THE ISSUE HAD R ESTORED TO THE FILE ITA NOS.318,613, 319,614, 2279 & 2296 /AHD/2011 GMM PFAUDLER LTD. VS. DY.CIT(CROSS-APPEALS) ASST.YEARS 2006-07,2007-08 & 2008- 09 - 9 - OF AO FOR DECISION AFRESH. THE RELEVANT FINDINGS O F THE TRIBUNAL ARE REPRODUCED HEREUNDER:- 11.1. THE FIRST GROUND IS AGAINST DELETION OF DISA LLOWANCE OF PROVISION FOR LIQUIDATED DAMAGES OF RS.8,67,740/-. THE LD.SR .DR SUBMITTED THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN DELETING THE DIS ALLOWANCE OF PROVISION FOR LIQUIDATED DAMAGES. ON THE CONTRARY, LD.COUNSE L FOR THE ASSESSEE FAIRLY SUBMITTED THAT UNDER THE IDENTICAL FACTS, TH E HONBLE COORDINATE BENCH IN ITA NO.2002/AHD/2007 FOR AY 2003-04 (ASSES SEES CROSS- APPEAL), DATED 11/02/2011, THE ISSUE AHS BEEN RESTO RED BACK TO THE FILE OF AO. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE HONBLE COORDINATE BENCH I N ITA NO.2002/AHD/2007 FOR AY 2003-04 VIDE PARA-56 HAS RE STORED THIS ISSUED BACK TO THE FILE OF AO. THE HONBLE TRIBUNA L IN PARA-56 HAS GIVEN THE FOLLOWING DIRECTION:- 56. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSE D THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THE ISSUE REGARD ING LIQUIDATED DAMAGES REQUIRES A FRESH LOOK BY THE AO. HE WOULD ALLOW THE CLAIM ON ACTUAL BASIS. WHEREVER THE OTHER PARTY HAS CLAI MED LIQUIDATED DAMAGES AGAINST THE ASSESSEE IN THE CURRENT YEAR AS ST.YEAR IT SHOULD BE ALLOWED. THE ASSESSEE WOULD SUBMIT INDIVIDUAL A CCOUNT AND THE AO WILL EXAMINE SUCH ACCOUNTS AND TAKE A DECISION AS P ER LAW. THIS GROUND IS ALLOWED BUT FOR STATISTICAL PURPOSES. 12.1. AFTER CONSIDERING THE TOTALITY OF THE FACTS, WE FEEL THAT A SIMILAR DIRECTION MAY ALSO BE ISSUED IN THIS CASE AS WELL. ACCORDINGLY, THE AO IS DIRECTED TO DECIDE THIS ISSUE AFRESH IN THE LIGH T OF THE DIRECTION ISSUED IN ITA NO.2002/AHD/2007 (SUPRA). THUS, THIS GROUND OF THE REVENUE IS ALLOWED BUT FOR STATISTICAL PURPOSES. ITA NOS.318,613, 319,614, 2279 & 2296 /AHD/2011 GMM PFAUDLER LTD. VS. DY.CIT(CROSS-APPEALS) ASST.YEARS 2006-07,2007-08 & 2008- 09 - 10 - 7.1. THEREFORE, IN THIS YEAR ALSO, THIS GROUND OF R EVENUES APPEAL IS RESTORED BACK TO THE FILE AO FOR DECISION AFRESH. T HE AO IS HEREBY DIRECTED TO DECIDE THIS ISSUE IN THE LIGHT OF THE D IRECTION GIVEN BY THE TRIBUNAL IN ITA NO.2923/AHD/2008(SUPRA). THUS, THIS GROUND OF REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSE S. 8. GROUND NO.2 IS AGAINST THE DELETION OF DISALLOWA NCE OF RS.34,39,000/- BEING BAD-DEBTS MADE BY THE AO. 8.1. THE LD.SR.DR SUPPORTED THE ORDER OF THE AO. O N THE CONTRARY, LD.SR.COUNSEL FOR THE ASSESSEE SHRI S.N.SOPARKAR SU BMITTED THAT IN AY 2005-06, THE TRIBUNAL IN ITA NO.2923/AHD/2008/AHD/2 008 HAD DECIDED THE ISSUE IN FAVOUR OF ASSESSEE. HE DREW OUR ATTEN TION TOWARDS PARAS-13 AND 14 OF THE TRIBUNALS ORDER DATED 28/01/2014 PAS SED IN ITA NO.2923/AHD/2008. 9. AFTER HEARING THE RIVAL SUBMISSIONS, WE FIND THA T THE IDENTICAL ISSUE WAS BEFORE THIS TRIBUNAL IN ITA NO.2923/AHD/2008, W HEREIN THE TRIBUNAL IN PARAS-13 TO 14.1 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER:- 13. GROUND NO.2 IS AGAINST THE DELETION OF THE DIS ALLOWANCE OF RS.26,08,000/-, BEING BAD DEBTS WRITTEN OFF. THE LD.SR.DR SUPPORTED THE ORDER OF THE AO, WHEREAS LD.COUNSEL FOR THE ASS ESSEE SUPPORTED THE ORDER OF THE LD.CIT(A) AND SUBMITTED THAT AN IDENTI CAL ISSUE HAS BEEN ITA NOS.318,613, 319,614, 2279 & 2296 /AHD/2011 GMM PFAUDLER LTD. VS. DY.CIT(CROSS-APPEALS) ASST.YEARS 2006-07,2007-08 & 2008- 09 - 11 - DECIDED BY THE TRIBUNAL IN ITA NO.1241/AHD/06 FOR A Y 2002-03 (REVENUES CROSS-APPEAL), ORDER DATED 11/02/2011. 14. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE HONBLE COORDINATE BENCH VI DE PARA-43 OF ITS ORDER HAS DECIDED THIS ISSUE IN FAVOUR OF ASSESSEE BY OBSERVING AS UNDER:- 43. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSE D THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THERE IS NO CASE FOR INTERFERENCE IN THE ORDER OF LD.CIT(A). IT IS ADMITTED POSITION THA T ASSESSEE HAS ACTUALLY WRITTEN OFF THE AMOUNTS. ONCE IT IS SO TH EN MATTER IS SQUARELY COVERED BY THE DECISION OF HON.SUPREME COURT IN THE CASE OF TRF LTD. VS. CIT (2010) 323 ITR 397 (SC() WHEREIN IT IS HELD THAT W.E.F. 1.4.1989 IN ORDER TO OBTAIN A DEDUCTION IN RELATION TO BAD DEBTS IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT TH E DEBT IN FACT HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AND THE BAD DEBT IS IRRECOVERABLE IN THE ACCOUNT OF ASS ESSEE. FOLLOWING THE ABOVE DECISION OF HON.SUPREME COURT, WE CONFIRM THE ORDER OF LD.CIT(A) AND DISMISS THIS GROUND OF REVENUE. 14.1. SINCE THE FACTS ARE IDENTICAL IN THIS CASE AL SO AND THE REVENUE HAS NOT POINTED OUT ANY CHANGE IN THE FACTS AND CIR CUMSTANCES OF THE CASE, THEREFORE WE UPHOLD THE ORDER OF THE LD.CIT(A ) AND DISMISS THIS GROUND OF THE REVENUES APPEAL. 9.1. SINCE THE FACTS ARE IDENTICAL TO THE FACTS AS WERE RAISED IN ITA NO.2923/AHD/2008 FOR AY 2005-06 AND THE REVENUE HAS NOT POINTED OUT ANY CHANGE INTO THE FACTS AND CIRCUMSTANCES OF THE CASE, THEREFORE FOLLOWING THE DECISION OF COORDINATE BENCH PASSED I N ITA NO.2923/AHD/2008, THE ISSUE IS DECIDED IN FAVOUR OF ASSESSEE IN THIS YEAR AS WELL. HENCE, THE FINDING OF THE LD.CIT(A) IS SU STAINED AND THIS GROUND OF REVENUES APPEAL IS REJECTED. ITA NOS.318,613, 319,614, 2279 & 2296 /AHD/2011 GMM PFAUDLER LTD. VS. DY.CIT(CROSS-APPEALS) ASST.YEARS 2006-07,2007-08 & 2008- 09 - 12 - 10. GROUND NO.3 IS AGAINST THE DELETION OF DISALLOW ANCE OF RS.1,12,14,000/- BEING PROVISION FOR WARRANTY EXPEN SES MADE BY THE AO. 10.1. THE LD.SR.DR SUBMITTED THAT THE TRIBUNAL IN E ARLIER ASSESSMENT YEAR, I.E. AY 2005-06 WAS PLEASED TO RESTORE THIS I SSUE TO THE FILE OF AO. HE DREW OUR ATTENTION TOWARDS PARA-15 OF THE TRIBUN ALS ORDER PASSED IN ITA NOA.2923/AHD/2008(SUPRA). 10.2. THE LD.SR.COUNSEL FOR THE ASSESSEE FAIRLY CON CEDED THE FACT THAT THIS ISSUE HAS BEEN RESTORED TO THE FILE OF THE AO. 11. AFTER HEARING BOTH THE PARTIES, WE FIND THAT TH E COORDINATE BENCH OF THIS TRIBUNAL HAD RESTORED THIS ISSUE WHILE PASS ING THE ORDER IN ITA NO.2923/AHD/2008(SUPRA) AND THE RELEVANT FINDINGS C ONTAINED IN PARA-15 ARE REPRODUCED HEREUNDER:- 15. GROUND NO.3 IS AGAINST THE DELETION OF DISALLO WANCE OF RS.68,61,000/- IN RESPECT OF PROVISION FOR WARRANT Y EXPENSES. THE SR.DR SUPPORTED THE ORDER OF THE AO, WHEREAS THE LD .COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE LD.CIT(A). LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT THIS ISSUE HAS BEEN SET ASIDE TO THE FILE OF AO BY THE HONBLE COORDINATE BENCH IN ITA NO.12/AHD/20 08 FOR AY 2004- 05. 15.1. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES ITA NOS.318,613, 319,614, 2279 & 2296 /AHD/2011 GMM PFAUDLER LTD. VS. DY.CIT(CROSS-APPEALS) ASST.YEARS 2006-07,2007-08 & 2008- 09 - 13 - BELOW. WE FIND THAT THE HONBLE TRIBUNAL IN ITA NO .12/AHD/2008 FOR AY 2004-05 (REVENUES APPEAL IN ASSESSEES OWN CASE ) VIDE ORDER DATED 11/12/2011 HAS RESTORED THE MATTER BACK TO THE FIL E OF AO BY OBSERVING AS UNDER:- 76. GROUND NO.2 RELATES TO DELETION OF A SUM OF RS .6,43,000/- IS PROVISIONS FOR WARRANTY EXPENSES. THE ASSESSEE DEB ITED A SUM OF RS.25,70,000/- IN THE P&L A/C. THE AO DISALLOWED W ARRANTY EXPENSES FOR THREE MONTHS ON PROPORTIONATE BASIS AS PERTAINI NG TO THE SUBSEQUENT YEAR. THE LD.CIT(A) ALLOWED THE ENTIRE CLAIM FOLLOWING THE DECISION OF ITAT, BANGALORE IN THE CASE OF WIPRO GE MEDICAL SYSTEM LTD. VS. DCIT 81 TTJ 455. 79. WE HAVE HEARD THE PARTIES. THE ASSESSEE HAS T O SUBMIT PRESENT VALUE OF WARRANTY EXPENSES. IT HAS TO BE PROPERLY ASCERTAINED AND DISCOUNTED ON ACCRUAL BASIS. A PROPER CALCULATION ON THIS ISSUE WILL BE SUBMITTED TO THE AO WHO WILL EXAMINE THE SAME AND A LLOW THE CLAIM AS PER DECISION OF HON.SUPREME COURT IN ROTORK CONTROL S INDIA (P) LTD. (SUPRA) AS ABOVE. THIS GROUND OF REVENUE IS ALLOWE D BUT FOR STATISTICAL PURPOSES. 15.2. SINCE THE FACTS ARE IDENTICAL IN THIS CASE AL SO AND THE REVENUE HAS NOT POINTED OUT ANY CHANGE IN THE FACTS AND CIR CUMSTANCES OF THE CASE, THEREFORE TAKING A CONSISTENT VIEW, WE ACCORD INGLY SET ASIDE THE ORDER OF THE LD.CIT(A) AND RESTORE THIS ISSUE BACK TO THE FILE AO FOR FRESH ADJUDICATION. THUS, THIS GROUND OF REVENUES APPEA L IS ALLOWED BUT FOR STATISTICAL PURPOSES. 11.1. SINCE THERE IS NO CHANGE INTO THE FACTS AND C IRCUMSTANCES OF THE CASE AND FOLLOWING THE DECISION OF THE COORDINATE B ENCH PASSED IN ITA NO.2923/AHD/2008, IN THIS YEAR ALSO, THIS ISSUE IS RESTORED BACK TO THE FILE OF AO FOR DECISION AFRESH. THUS, THIS GROUND OF RE VENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ITA NOS.318,613, 319,614, 2279 & 2296 /AHD/2011 GMM PFAUDLER LTD. VS. DY.CIT(CROSS-APPEALS) ASST.YEARS 2006-07,2007-08 & 2008- 09 - 14 - 12. GROUND NO.4 IS AGAINST THE DELETION OF DISALLOW ANCE OF INTEREST EXPENSES OF RS.23,43,716/- BEING INTEREST EXPENSES MADE BY THE AO U/S.14A OF THE ACT. 12.1. AT THE OUTSET, LD.SR.COUNSEL FOR THE ASSESSE E POINTED OUT THAT THE IDENTICAL ISSUE CAME BEFORE THE HONBLE TRIBUNAL BY WAY OF ITA NO.2923/AHD/2008-REVENUES APPEAL, WHEREIN THE HON BLE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE. 12.2. THE LD.SR.DR HAS FAIRLY CONCEDED THE FACT THA T THE TRIBUNAL HAS DECIDED THIS ISSUE IN FAVOUR OF ASSESSEE FOR AY 200 5-06. HOWEVER, HE SUPPORTED THE ORDER OF THE AO. 13. WE HAVE HEARD THE PARTIES. WE FIND THAT THE LD .CIT(A), WHILE DECIDING THE ISSUE, HAS FOLLOWED HIS PREDECESSORS ORDER PASSED IN AY 2005-06 AND THE ISSUE TRAVELLED UPTO THE STAGE OF T RIBUNAL BY WAY OF ITA NO.2923/AHD/2008 AND THE TRIBUNAL HAS DECIDED THE I SSUE IN FAVOUR OF ASSESSEE BY HOLDING AS UNDER:- 16. GROUND NO.4 IS AGAINST THE DELETION OF DISALLO WANCE OF INTEREST EXPENSES OF RS.13,44,876/- U/S.14A OF THE ACT. THE LD.SR.DR SUPPORTED THE ORDER OF THE AO AND PLACED RELIANCE ON THE DECI SION OF HONBLE CALCUTTA HIGH COURT RENDERED IN THE CASE OF DHANUKA & SONS VS. CIT (SUPRA) AND DECISION OF ITAT MUMBAI BENCH RENDERED IN THE CASE OF KALPATARU CONSTRUCTION OVERSEAS (P.) LTD. VS. DCIT REPORTED AT (2007) 13 SOT 194 (MUM.). ON THE CONTRARY, LD.COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE LD.CIT(A) AND SUBMITTED THAT THE ISSUE HAS ITA NOS.318,613, 319,614, 2279 & 2296 /AHD/2011 GMM PFAUDLER LTD. VS. DY.CIT(CROSS-APPEALS) ASST.YEARS 2006-07,2007-08 & 2008- 09 - 15 - BEEN DECIDED BY THE HONBLE COORDINATE BENCH IN ITA NO.1476/AHD/2006 FOR AY 2002-03. 17. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED T HE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE HONBLE ITAT IN ITA NO.147 6/AHD/2006(SUPRA) VIDE PARA NOS.14 TO 16 HAS HELD AS UNDER:- 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW, THE MA TTER WOULD GO TO THE FILE OF AO AS PER THE DECISION OF HON.BOMBAY HI GH COURT IN THE CASE OF GODREJ BOYCE MFG. CO.LTD. (SUPRA) ONLY WHEN IT IS HELD THAT SOME AMOUNT IS REQUIRED TO DISALLOWED AS THERE IS A NEXUS BETWEEN THE EXEMPTED INCOME AND INVESTMENT, I.E. IF REVENUE IS ABLE TO SHOW THAT INTEREST BEARING CAPITAL HAS BEEN INVESTED IN SHARE S BUT WHERE NO SUCH NEXUS IS ESTABLISHED THE QUESTION OF DETERMINING AN Y DISALLOWANCE DOES NOT ARISE AND, THEREFORE, MATTER NEED NOT BE S ENT TO THE FILE OF AO AS NO DETERMINATION OF ANY DISALLOWANCE WOULD BE NE CESSARY. IN THE PRESENT CASE WE NOTICE THAT LOAN FUNDS HAVE DECREAS ED THIS YEAR AS COMPARED TO EARLIER YEARS. EVEN THOUGH INVESTMENTS HAVE INCREASED FROM RS.940.32 LACS TO RS.1008.51 LACS BUT SUCH INC REASE IN INVESTMENT CANNOT BE LINKED TO ANY BORROWED FUNDS THIS YEAR AS ASSESSEE HAS IN FACT NOT BORROWED ANY ADDITIONAL FUND THIS YEAR. P RIOR TO THE DECISION OF HON.SUPREME COURT IN THE CASE OF HONBLE SUPREME COURT IN S.A.BUILDERS VS. CIT 288 ITR 1 (SC) ONUS WAS CONSID ERED ON THE ASSESSEE TO SHOW THE NEXUS BETWEEN THE INTEREST FRE E FUNDS AND INVESTMENT ON WHICH NO INCOME IS EARNED. AFTER S.A .BUILDERS CASE (SUPRA) ONUS IS CONSIDERED SHIFTED TO THE REVENUE A ND AO HAS TO SHOW THAT INTEREST BEARING CAPITAL ALONE WERE INVESTED I N INVESTMENT ON WHICH NO INCOME WAS EARNED. HON.SUPREME COURT IN T HE CASE OF MUNJAL SALES CORPORATION VS. CIT (2008) 298 ITR 298 (SC) HELD WHERE ASSESSEE HAD SUFFICIENT PROFITS IN THE CURREN T YEAR THEN INTEREST FREE ADVANCES CAN BE CONSIDERED TO BE FLOWING FROM SUCH PROFITS. HONBLE BOMBAY HIGH COURT IN CIT VS. RELIANCE UTILI TIES & POWER LTD. (2009) 313 ITR 340 (BOM) HELD THAT IF THERE AR E FUND AVAILABLE BOTH INTEREST FREE AND INTEREST BEARING, THEN A PRE SUMPTION ARISE THAT INVESTMENT WERE OUT OF INTEREST FREE FUNDS GENERATE D OR AVAILABLE WITH THE ASSESSEE. IF THE INTEREST FREE FUNDS WERE SUFF ICIENT TO MEET THE INVESTMENT NO DISALLOWANCE OF INTEREST PAID ON BORR OWED FUNDS WOULD ITA NOS.318,613, 319,614, 2279 & 2296 /AHD/2011 GMM PFAUDLER LTD. VS. DY.CIT(CROSS-APPEALS) ASST.YEARS 2006-07,2007-08 & 2008- 09 - 16 - BE NECESSARY. ONCE SUCH PRESUMPTION IS ESTABLISHED CLAIM OF INTEREST WAS ALLOWABLE. 15. THERE IS ANOTHER ASPECT OF THE MATTER. IF THE ASSESSEE HAS MADE INVESTMENT IN SUBSIDIARIES OUT OF MIXED FUNDS AND F OR COMMERCIAL EXPEDIENCY THEN NO INTEREST OUT OF PAYMENT MADE ON BORROWED FUNDS CAN BE DISALLOWED AS HELD IN S.A.BUILDERS LTD. VS. CIT (2007) 288 ITR 1 (SC). HONBLE PUNJAB & HARYANA HIGH COURT IN C IT VS. HERO CYCLES LTD. (2010) 323 ITR 518 (P& H) HELD THAT NO DISALLOWANCE OUT OF INTEREST PAYMENT IS PERMISSIBLE IF AO DOES NOT E STABLISH NEXUS BETWEEN THE EXPENDITURE INCURRED AND INCOME GENERAT ED. 16. SINCE ASSESSEE HAD SUFFICIENT PROFITS GENERATED THIS YEAR AND IT HAD MIXED FUNDS AND NO NEXUS IS ESTABLISHED BY THE AO AS TO WHETHER INVESTMENT WAS MADE OUT OF INTEREST BEARING FUNDS, DISALLOWANCE OF INTEREST CANNOT BE MADE. SIMILARLY NO DISALLOWANCE OUT OF ADMINISTRATIVE EXPENDITURE CAN BE MADE AS THERE IS NO DIRECT NEXUS. AS A RESULT, THIS GROUND IS ALLOWED. 17.1. THE HONBLE COORDINATE BENCH HAS EXAMINED THE VARIOUS CASE LAWS AND CAME TO THE CONCLUSION THAT THE ASSESSEE H AD SUFFICIENT PROFITS GENERATED THIS YEAR AND IT HAD MIXED FUNDS AND NO N EXUS IS ESTABLISHED BY THE AO AS TO WHETHER INVESTMENT WAS MADE OUT OF INTEREST-BEARING FUNDS, DISALLOWANCE OF INTEREST CANNOT BE MADE. IN THE PRESENT CASE ALSO, THE FACTS ARE IDENTICAL, THEREFORE WE DO NOT FIND ANY REASON TO TAKE A CONTRARY VIEW THAN TAKEN BY THE HONBLE COORDINAT E BENCH. THUS, THIS GROUND OF THE REVENUES APPEAL IS REJECTED. 13.1. SINCE THE FACTS ARE IDENTICAL TO THE FACTS A S WERE RAISED IN ITA NO.2923/AHD/2008 FOR AY 2005-06 AND THE REVENUE HA S NOT POINTED OUT ANY CHANGE INTO THE FACTS AND CIRCUMSTANCES OF THE CASE, THEREFORE FOLLOWING THE DECISION OF COORDINATE BENCH PASSED I N ITA NO.2923/AHD/2008, THE ISSUE IS DECIDED IN FAVOUR OF ASSESSEE IN THIS YEAR ITA NOS.318,613, 319,614, 2279 & 2296 /AHD/2011 GMM PFAUDLER LTD. VS. DY.CIT(CROSS-APPEALS) ASST.YEARS 2006-07,2007-08 & 2008- 09 - 17 - AS WELL. HENCE, THE FINDING OF THE LD.CIT(A) IS SU STAINED AND THIS GROUND OF REVENUES APPEAL IS REJECTED. 14. GROUND NO.5 IS AGAINST THE DELETION OF DISALLOW ANCE OF RS.1,86,650/- BEING PROPORTIONATE INTEREST EXPENSES MADE BY THE AO U/S.36(1)(III) OF THE ACT. 14.1. AT THE OUTSET, THE LD.SR.COUNSEL FOR THE ASS ESSEE POINTED OUT THAT THE IDENTICAL ISSUE CAME BEFORE THE HONBLE TRIBUNAL BY WAY OF ITA NO.2923/AHD/2008-REVENUES APPEAL, WHEREIN THE HON BLE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE. 14.2. THE LD.SR.DR HAS FAIRLY CONCEDED THE FACT THA T THE TRIBUNAL HAS DECIDED THIS ISSUE IN FAVOUR OF ASSESSEE FOR AY 200 5-06. HOWEVER, HE SUPPORTED THE ORDER OF THE AO. 15. WE HAVE HEARD THE PARTIES. WE FIND THAT THE IS SUE TRAVELLED UPTO THE STAGE OF TRIBUNAL BY WAY OF ITA NO.2923/AHD/200 8 AND THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE BY HOLD ING AS UNDER:- 18. GROUND NO.5 IS AGAINST THE DELETION OF DISALLO WANCE OF RS.1,29,034/- U/S.36(1)(III) OF THE ACT. THE LD.SR .DR HAS SUPPORTED THE ORDER OF THE AO, WHEREAS LD.COUNSEL FOR THE ASSESSE E SUPPORTED THE ORDER OF THE LD.CIT(A) AND SUBMITTED THAT UNDER THE IDENTICAL FACTS, THE HONBLE TRIBUNAL IN ITA NO.1476/AHD/2006(SUPRA) THE ISSUE HAS BEEN ITA NOS.318,613, 319,614, 2279 & 2296 /AHD/2011 GMM PFAUDLER LTD. VS. DY.CIT(CROSS-APPEALS) ASST.YEARS 2006-07,2007-08 & 2008- 09 - 18 - DECIDED IN FAVOUR OF ASSESSEE VIDE PARA NOS.9 & 16 BY OBSERVING AS UNDER:- 9. GROUND NO.4(A) RELATES TO DISALLOWANCE OF PROP ORTIONATE INTEREST OF RS.10,70,7000/-. THE AO DISALLOWED PROPORTIONA TE INTEREST OUT OF INTEREST PAID ON BORROWED FUNDS ON THE ASSUMPTION T HAT BORROWED MONEY HAS BEEN USED FOR ACQUISITION OF INVESTMENT A S ON BALANCE SHEET DATE. AS PER AO THE COMPANY HAD MADE TOTAL INVESTM ENT TO THE EXTENT OF RS.1008.51 LACS IN THE EQUITY SHARES AND MUTUAL FUNDS. DURING THE YEAR THE INVESTMENT IN SHARES AND MUTUAL FUNDS WERE INCREASED FROM 940.32 LACS TO RS.1008.51 LACS. OUT OF THIS INVEST MENT, TO THE TUNE OF RS.61 LACS, IS MADE IN SUBSIDIARY COMPANIES NAMELY KARAMSAD INVESTMENT LTD. & KARAMSAD HOLDING LTD. SINCE THE ASSESSEE HAD PURCHASED SHARES IN THOSE COMPANIES BEING SISTER CO NCERNS, THE NATURE OF INVESTMENT IS THE SAME AS IN SHARES AND MUTUAL F UND OF OTHER COMPANIES. THE ASSESSEE COMPANY HAD EARNED DIVIDEN D INCOME OF RS.94.47 LACS DURING THE YEAR AND HAS CLAIMED AS EX EMPT UNDER SECTION 10(33). INVOKING SECTION 14A AO HELD THA T EXPENDITURE FOR EARNING EXEMPTED INCOME CANNOT BE ALLOWED AS DEDUCT ION. SIMILARLY, THE AO IDENTIFIED THAT ADMINISTRATIVE EXPENDITURE W HICH COULD HAVE BEEN INCURRED FOR HANDLING THE INVESTMENT IN SHARES AND MUTUAL FUND. A PART OF SUCH EXPENDITURE WAS CONSIDERED ATTRIBUTA BLE TO INVESTMENT MADE IN SISTER CONCERNS, THE INCOME THEREFROM WAS E XEMPT UNDER SECTION 10(33). THE ASSESSEE SUBMITTED THAT IT HAS ENOUGH WORKING CAPITAL AND IT HAS NOT INCREASED ITS BORROWINGS THI S YEAR. THEREFORE, IT CANNOT BE SAID THAT INVESTMENT IN SUBSIDIARY WAS DO NE DURING THIS YEAR OUT OF ANY BORROWED CAPITAL MADE THIS YEAR. REGARD ING ADMINISTRATIVE EXPENDITURE SOUGHT TO BE DISALLOWED ASSESSEE SUBMIT TED BEFORE THE AO THAT THERE IS NO RELATIONSHIP OF SUCH EXPENDITURE W ITH THE INVESTMENT ACTIVITIES. NO SPECIFIC STAFF HAS BEEN APPOINTED F OR THIS PURPOSE. THE AO, HOWEVER, DID NOT AGREE AND DISALLOWED PROPORTIO NATE INTEREST BY HOLDING THAT ASSESSEE DID NOT PRODUCE ANY EVIDENCE TO SHOW THAT INTEREST FREE FUNDS WERE ALONE USED FOR MAKING SUCH INVESTMENT IN SISTER CONCERNS. THE ASSESSEE HAS NOT MAINTAINED S EPARATE ACCOUNT FOR MAKING INVESTMENT ARE OUT OF MIXED FUNDS. THERE IS NO NEXUS BETWEEN THE INVESTMENT AND INTEREST FREE FUNDS. ONUS IS ON THE ASSESSEE DURING THE YEAR AND ALSO IN EARLIER YEARS THAT INVESTMENT FOR EARNING CAPITAL GAINS AND DIVIDEND ARE MADE OUT OF INTEREST FREE CA PITAL. AFTER LONG AND DETAILED DISCUSSION THE AO DISALLOWED PRO-RATA INTEREST WORKED ITA NOS.318,613, 319,614, 2279 & 2296 /AHD/2011 GMM PFAUDLER LTD. VS. DY.CIT(CROSS-APPEALS) ASST.YEARS 2006-07,2007-08 & 2008- 09 - 19 - OUT AT RS.10.70 LACS. IN ADDITION, HE ALSO DISALLO WED, BY ESTIMATE ADMINISTRATIVE, EXPENDITURE OF RS.1,20,000/-. 16. SINCE ASSESSEE HAD SUFFICIENT PROFITS GENERATED THIS YEAR AND IT HAD MIXED FUNDS AND NO NEXUS IS ESTABLISHED BY THE AO AS TO WHETHER INVESTMENT WAS MADE OUT OF INTEREST BEARING FUNDS, DISALLOWANCE OF INTEREST CANNOT BE MADE. SIMILARLY NO DISALLOWANCE OUT OF ADMINISTRATIVE EXPENDITURE CAN BE MADE AS THERE IS NO DIRECT NEXUS. AS A RESULT, THIS GROUND IS ALLOWED. 18.1. IN THE PRESENT CASE ALSO, THE FACTS ARE IDE NTICAL AS THE LD.CIT(A) HAD GIVEN A FINDING ON FACT THAT THERE ASSESSEE HAD SUFFICIENT INTEREST FREE FUND AND IT HAD NOT DIVERTED THE INTEREST BEAR ING FUND SAME REMAINED UNREBUTTED. THEREFORE, WE DO NOT FIND ANY REASON TO TAKE A CONTRARY VIEW THAN TAKEN BY THE HONBLE COORDINATE BENCH. THUS, THIS GROUND OF THE REVENUES APPEAL IS REJECTED. 15.1. SINCE THE FACTS ARE IDENTICAL TO THE FACTS A S WERE RAISED IN ITA NO.2923/AHD/2008 FOR AY 2005-06 AND THE REVENUE HA S NOT POINTED OUT ANY CHANGE INTO THE FACTS AND CIRCUMSTANCES OF THE CASE, THEREFORE FOLLOWING THE DECISION OF COORDINATE BENCH PASSED I N ITA NO.2923/AHD/2008, THE ISSUE IS DECIDED IN FAVOUR OF ASSESSEE IN THIS YEAR AS WELL. HENCE, THE FINDING OF THE LD.CIT(A) IS SU STAINED AND THIS GROUND OF REVENUES APPEAL IS REJECTED. 16. GROUND NO.6 OF REVENUES APPEAL IS AGAINST THE DELETION OF DISALLOWANCE OF RS.49,60,500/- BEING ROYALTY EXPENS ES MADE BY THE AO. 16.1. AT THE OUTSET, LD.SR.COUNSEL FOR THE ASSES SEE POINTED OUT THAT THE IDENTICAL ISSUE CAME BEFORE THE HONBLE TRIBUNAL BY WAY OF ITA ITA NOS.318,613, 319,614, 2279 & 2296 /AHD/2011 GMM PFAUDLER LTD. VS. DY.CIT(CROSS-APPEALS) ASST.YEARS 2006-07,2007-08 & 2008- 09 - 20 - NO.2923/AHD/2008-REVENUES APPEAL, WHEREIN THE HON BLE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE. 16.2. THE LD.SR.DR HAS FAIRLY CONCEDED THE FACT TH AT THE TRIBUNAL HAS DECIDED THIS ISSUE IN FAVOUR OF ASSESSEE FOR AY 200 5-06. HOWEVER, HE SUPPORTED THE ORDER OF THE AO. 17. WE HAVE HEARD THE PARTIES. WE FIND THAT THE IS SUE TRAVELLED UPTO THE STAGE OF TRIBUNAL BY WAY OF ITA NO.2923/AHD/200 8 AND THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE BY HOLD ING AS UNDER:- 20. GROUND NO.7 IS AGAINST THE DELETION OF DISALLO WANCE OF ROYALTY OF RS.41,06,250/-. THE LD.SR.DR SUPPORTED THE ORDER O F THE AO, WHEREAS LD.COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE LD.CIT(A) AND SUBMITTED THAT THE ASSESSEE-COMPANY IS PAYING ROYAL TY TO PFAUDLER INC, USA FOR THE USAGE OF TRADEMARKS. IT IS SUBMITTED T HAT AS PER USER AGREEMENT THE ASSESSEE-COMPANY HAS GOT THE RIGHT OF USER ONLY AND NOT OF OWNERSHIP. THE PAYMENT OF ROYALTY IS RELATED TO SALES MADE BY USER OF TECHNOLOGY SUPPLIED BY THEM. IF THE ASSESSEE DO ES NOT USE THE TECHNOLOGY THEN NO ROYALTY PAYMENT IS REQUIRED. US ER OF THE TRADEMARK DID NOT CREATE ANY ASSET OR CONFERRED ANY PERMANENT RIGHT IN FAVOUR OF THE ASSESSEE. THE AGREEMENT IS ONLY FOR 11 YEARS A ND TERMINABLE BY SHORT NOTICE. ROYALTY IS PAID IN COURSE OF PROFIT EARNING PROCESS. 20.1. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT ON THE BASIS OF THE SUBMISSION S OF THE ASSESSEE, LD.CIT(A) HAS GIVEN A FINDING ON FACT THAT THE ASSE SSEE HAS NOT ACQUIRED ANY OWNERSHIP RIGHTS. IT HAS GOT THE RIGHT OF USER ONLY. SINCE, AY 1989- 90, THE USER CHARGES CLAIMED AS ROYALTY HAVE BEEN A LLOWED IN THE ITA NOS.318,613, 319,614, 2279 & 2296 /AHD/2011 GMM PFAUDLER LTD. VS. DY.CIT(CROSS-APPEALS) ASST.YEARS 2006-07,2007-08 & 2008- 09 - 21 - ASSESSMENTS, THE RATE OF USER CHARGES IS 1% OF THE SALES DURING THE YEAR UNDER CONSIDERATION. TDS HAS BEEN MADE IN RESPECT OF ROYALTY PAYMENTS. AS IT IS A RECURRING EXPENDITURE PAYABLE ON THE BASIS OF SALES AND THE APPELLANT HAS NOT ACQUIRED ANY CAPITAL ASSE T OR PERMANENT RIGHT, THE PAYMENT OF ROYALTY IS ALLOWABLE AS BUSIN ESS EXPENDITURE. THE REVENUE HAS NOT CONTROVERTED THIS FACT BY PLACING A NY MATERIAL ON RECORD, THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A), THE SAME IS HEREBY UPHELD. THUS, THI S GROUND OF REVENUES APPEAL IS REJECTED. 17.1. SINCE THERE IS NO CHANGE INTO THE FACTS AND C IRCUMSTANCES OF THE CASE, THEREFORE TAKING A CONSISTENT VIEW, THE ISSU E IS DECIDED IN FAVOUR OF ASSESSEE. THUS, THIS GROUND OF REVENUES APPEAL IS REJECTED. 18. GROUND NOS.7 & 8 ARE GENERAL IN NATURE REQUIRE NO INDEPENDENT ADJUDICATION. 19. IN THE COMBINED RESULT, ASSESSEES APPEAL IN IT A NO.318/AHD/11 FOR AY 2006-07 IS ALLOWED AND REVENUES APPEAL IN I TA NO.613/AHD/2011 FOR AY 2006-07 IS PARTLY ALLOWED FO R STATISTICAL PURPOSES. 20. NOW, WE TAKE UP THE CROSS-APPEALS OF ASSESSEE A ND REVENUE FOR AYS 2007-08 & 2008-09, WHEREIN FOLLOWING GROUNDS HA VE BEEN RAISED BY THE RESPECTIVE PARTIES:- (C) ASSESSEES APPEAL FOR AY 2007-08 (ITA NO.319/AH D/2011) ITA NOS.318,613, 319,614, 2279 & 2296 /AHD/2011 GMM PFAUDLER LTD. VS. DY.CIT(CROSS-APPEALS) ASST.YEARS 2006-07,2007-08 & 2008- 09 - 22 - 1. THE LEARNED COMMISSIONER (APPEAL) FAILED TO UNDE RSTAND THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED COMMISSIONER (APPEAL) ERRED IN CONFI RMING THE DISALLOWANCE OF RS.9,14,475/- BEING ADMINISTRAT IVE EXPENSES U/S.14A OF THE ACT, CONSIDERING THEM INCUR RED IN RELATION TO EXEMPTED DIVIDEND INCOME. 3. THE APPELLANT PRAYS FOR APPROPRIATE RELIEF ON TH E ABOVE GROUNDS OF APPEALS. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, SUBSTITUTE, OR WITHDRAW ANY OF THE ABOVE GROUNDS OF APPEAL AS CIRCUMSTANCES MAY JUSTIFY. (D) REVENUES APPEAL FOR AY 2007-08 (ITA NO.614/AHD /2011) 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE DISALLOWANCE OF RS.33,909,742/- BEING BAD DEBTS, MA DE BY THE A.O., WITHOUT APPRECIATING THE FACTS AND MATERIALS BROUGH T ON RECORD BY THE ASSESSING OFFICER. 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE DISALLOWANCE OF RS.1,53,55,536/- BEING PROVISION FO R WARRANTY EXPENSES, MADE BY THE A.O., WITHOUT APPRECIATING TH E FACTS AND MATERIALS BROUGHT ON RECORD BY THE ASSESSING OFFICE R. 3. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE DISALLOWANCE OF INTEREST EXPENSES RS.25,28,987/- AN D ADMN.EXOEBSES OF RS.9,14,475/- MADE BY THE AO U/S. 14A OF THE ACT, WITHOUT APPRECIATING THE FACTS AND MATERIALS B ROUGHT ON RECORD BY THE ASSESSING OFFICER. 4. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE DISALLOWANCE OF RS.1,98,428/- BEING PROPORTIONATE I NTEREST EXPENSES MADE BY THE A.O. U/S.36(I)(III) OF THE ACT, WITHOUT APPRECIATING THE FACTS AND MATERIALS BROUGHT ON RECORD BY THE ASSESS ING OFFICER. 5. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE DISALLOWANCE OF RS.56,09,987/- BEING ROYALTY EXPENS ES MADE BY THE A.O., WITHOUT APPRECIATING THE FACTS AND MATERIALS BROUGHT ON RECORD BY THE ASSESSING OFFICER. ITA NOS.318,613, 319,614, 2279 & 2296 /AHD/2011 GMM PFAUDLER LTD. VS. DY.CIT(CROSS-APPEALS) ASST.YEARS 2006-07,2007-08 & 2008- 09 - 23 - 6. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE DISALLOWANCE OF RS.17,21,313/- BEING PROVISION FOR BAD ADVANCES WRITTEN OFF, MADE BY THE A.O., WITHOUT APPRECIATING THE FACTS AND MATERIALS BROUGHT ON RECORD BY THE ASSESSING OFFICE R. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) OUGHT TO HAVE UPHELD THE DECISION OF THE ASSESSING OFFICER. 8. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LEAR NED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EXTENT. (E) ASSESSEES APPEAL FOR AY 2008-09 (ITA NO.2279/A HD/2011) 1. THE LEARNED COMMISSIONER (APPEAL) FAILED TO UNDE RSTAND THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED COMMISSIONER (APPEAL) ERRED IN CONFI RMING THE DISALLOWANCE OF RS.14,25,893/- BEINGINTEREST EX PENSE U/S.14A OF THE ACT R.W.R 8D, ON INVALID GROUND THAT INTEREST EXPENSES ARE INCURRED FOR MAKING INVESTMEN T IN SHARES AND MUTUAL FUNDS THOUGH THE ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS AVAILABLE FOR MAKING INVESTMENTS. 3. ALTERNATIVELY, WITHOUT PREJUDICE TO ABOVE GROUND OF APPEAL, THE COMMISSIONER (APPEAL) ERRED IN INCLUDIN G RS.5,22,75,000/- BEING INVESTMENT IN FOREIGN SUBSID IARY FROM WHICH INCOME NOT FORMING PART OF TOTAL INCOME IS EARNED, IN THE AVERAGE VALUE OF INVESTMENT FOR WORK ING OUT INTEREST DISALLOWABLE U/S.14A OF THE ACT R.W.R.8D. 4. THE LEARNED COMMISSIONER(APPEAL) ERRED IN CONFIR MING THE ADDITION OF RS.1,82,085/- ON ACCOUNT OF PROVISI ON FOR ADVANCES WITH DIRECTION NOT TO TAX IN ASSESSMENT YE AR 2011-12 BEING THE YEAR OF RECOVERY. 5. THE APPELLANT PRAYS FOR APPROPRIATE RELIEF ON TH E ABOVE GROUNDS OF APPEALS. 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, SUBSTITUTE, OR WITHDRAW ANY OF THE ABOVE GROUNDS OF APPEAL AS CIRCUMSTANCES MAY JUSTIFY. ITA NOS.318,613, 319,614, 2279 & 2296 /AHD/2011 GMM PFAUDLER LTD. VS. DY.CIT(CROSS-APPEALS) ASST.YEARS 2006-07,2007-08 & 2008- 09 - 24 - (F) REVENUES APPEAL FOR AY 2008-09 (ITA NO.2296/AH D/2011) 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE DISALLOWANCE OF RS.1,47,77,100/- MADE ON ACCOUNT OF PROVISION FOR WARRANTY EXPENSES WITHOUT APPRECIATIN G FACTS THAT PROVISION FOR WARRANTY WAS IN THE NATURE OF CO NTINGENT, UNASCERTAINED AND NON-CRYSTALLIZED LIABILITY. 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE DISALLOWANCE OF RS.27,96,724/- MADE ON ACCOUNT OF I NTEREST EXPENSES U/S.36(1)(III) WITHOUT APPRECIATING THE FA CT THAT ONCE THE FUNDS ARE PUT INTO THE BUSINESS, THEY LOSE IDEN TITY. 3. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE DISALLOWANCE OF RS.62,84,947/- MADE ON ACCOUNT OF R OYALTY PAYMENT WITHOUT APPRECIATING THE FACT THAT THE SAID PAYMENT WAS MADE FOR THE USE OF TRADE MARK. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASS ESSING OFFICER. 5. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD.C IT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EXTENT. 21. NOW, WE TAKE UP THE ASSESSEES APPEAL, ITA NO.3 19/AHD/2011 FOR AY 2007-08. THE ONLY EFFECTIVE GROUND IS AGAINST CO NFIRMING DISALLOWANCE OF RS.9,14,475/-. THE FACTS ARE IDENT ICAL AS WERE IN THE YEAR 2006-07. IN THIS YEAR ALSO, THE AO AND THE LD.CIT( A) FOLLOWED THEIR ORDER PASSED IN AY 2005-06. THE MATTER TRAVELLED U PTO THE STAGE OF THE TRIBUNAL AND THE TRIBUNAL WAS PLEASED TO DECIDE THI S ISSUE IN FAVOUR OF ASSESSEE IN ITA NO.2627/AHD/2008 FOR AY 2005-06. THERE IS NO ITA NOS.318,613, 319,614, 2279 & 2296 /AHD/2011 GMM PFAUDLER LTD. VS. DY.CIT(CROSS-APPEALS) ASST.YEARS 2006-07,2007-08 & 2008- 09 - 25 - CHANGE INTO THE FACTS AND CIRCUMSTANCES IN THE PRES ENT YEAR. THE REVENUE HAS NOT POINTED OUT ANY CHANGE INTO THE FACTS AND C IRCUMSTANCES, THEREFORE TAKING A CONSISTENT VIEW. THIS GROUND OF ASSESSEES APPEAL IS ALLOWED. 21.1. GROUND NOS.1, 3 & 4 ARE GENERAL IN NATURE NE ED NO SEPARATE ADJUDICATION. AS A RESULT, ASSESSEES APPEAL IN IT A NO.319/AHD/2011 FOR AY 2007-08 IS ALLOWED. 22. REVENUES APPEAL, ITA NO.614/AHD/2011 FOR AY 20 07-08. THE REPRESENTATIVES OF BOTH THE PARTIES HAVE ADOPTED TH EIR ARGUMENTS AS WERE MADE IN THE AY 2006-07. THE FACTS AND CIRCUMSTANCE S ARE IDENTICAL AS WERE IN THE AY 2006-07. 22.1. GROUND NO.1 IS IN THIS APPEAL IS AGAINST THE DELETION OF ADDITION OF BAD DEBTS BY THE LD.CIT(A). IT IS CONTENDED BY THE LD.SR.COUNSEL FOR THE ASSESSEE THAT THE LD.CIT(A) FOLLOWED ITS ORDER PASS ED IN THE AY 2005-06 AND THE ISSUE TRAVELLED UPTO THE STAGE OF TRIBUNAL IN ITA NO.2923/AHD/2008 AND THE TRIBUNAL HAS DECIDED THE I SSUE IN FAVOUR OF ASSESSEE. THE LD.SR.DR HAS FAIRLY CONCEDED THE FAC TS. THEREFORE, TAKING A CONSISTENT VIEW, THIS GROUND OF REVENUES APPEAL IS REJECTED. 23. GROUND NO.2 IS AGAINST THE DELETION OF DISALLOW ANCE OF EXPENSES MADE FOR THE PROVISION FOR WARRANTY AMOUNTING TO RS .1,53,55,536/-. THE ITA NOS.318,613, 319,614, 2279 & 2296 /AHD/2011 GMM PFAUDLER LTD. VS. DY.CIT(CROSS-APPEALS) ASST.YEARS 2006-07,2007-08 & 2008- 09 - 26 - LD.SR.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE L D.CIT(A) FOLLOWED ITS ORDER PASSED IN AY 2005-06. THE ISSUE TRAVELLED UP TO THE STAGE OF THE TRIBUNAL AND THE TRIBUNAL WAS PLEASED TO DECIDE THI S ISSUE IN FAVOUR OF ASSESSEE IN ITA NO.2627/AHD/2008 FOR AY 2005-06. THE LD.SR.DR HAS NOT CONTROVERTED THE SUBMISSIONS MADE BY THE LD.SR. COUNSEL FOR THE ASSESSEE. 23.1. WE HAVE HEARD BOTH THE SIDES, PERUSED THE MA TERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. WE FIND THAT THIS TRIBUNAL IN ITA NO.2923/AHD/2008 IN PARAS-15, 15.1 & 15.2(REPRODUCED AT PARA-11 OF THIS ORDER) HAS RESTO RED THIS ISSUE BY FOLLOWING THE ORDER OF THE COORDINATE BENCH PASSED IN ITA NO.12/AHD/2008 FOR AY 2004-05. SINCE THERE IS NO CHANGE INTO THE FACTS AND CIRCUMSTANCES OF THE CASE, THEREFORE TAK ING A CONSISTENT VIEW, THE ISSUE IS RESTORED TO THE FILE OF AO FOR DECISIO N AFRESH IN THE LIGHT OF THE DIRECTION GIVEN BY THE TRIBUNAL IN ITA NO.12/AH D/2008 FOR AY 2004-05. THUS, THIS GROUND OF REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 24. GROUND NO.3 IS AGAINST THE DELETION OF DISALLOW ANCE OF INTEREST EXPENSES OF RS.25,28,987/- AND ADMINISTRATIVE EXPEN SES OF RS.9,14,475/-. THE DISALLOWANCES WERE MADE BY INVO KING THE PROVISIONS OF SECTION 14A OF THE ACT. THE LD.SR.COUNSEL FOR T HE ASSESSEE HAS POINTED ITA NOS.318,613, 319,614, 2279 & 2296 /AHD/2011 GMM PFAUDLER LTD. VS. DY.CIT(CROSS-APPEALS) ASST.YEARS 2006-07,2007-08 & 2008- 09 - 27 - OUT THAT THE LD.CIT(A) HAS FOLLOWED THE ORDER PASSE D IN AY 2005-06 AND THE ISSUE TRAVELLED UPTO THE STAGE OF THE TRIBUNAL AND THE TRIBUNAL IN ITA NO.2923/AHD/2008 HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE, IN PARAS- 16 & 17 OF ITS ORDER. THE LD.SR.DR HAS FAIRLY CONC EDED THE FACT THAT THE LD.CIT(A) HAS FOLLOWED THE ORDER PASSED IN AY 2005- 06. 25. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE FACTS ARE IDENTICAL AS WERE IN THE AY 2005-06. THIS TRIBUNAL IN ITA NO.2923/AHD/2008 FOR AY 2005-06, ORDER DATED 28 /01/014, HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE IN PARAS-16 & 17 (REPRODUCED IN PARAS-13 & 13.1 OF THIS ORDER). SINCE THERE IS NO CHANGE INTO THE FACTS AND CIRCUMSTANCES OF THE CASE, THEREFORE TAKING A CONSISTENT VIEW, THE ISSUE IS DECIDED IN FAVOUR OF ASSESSEE. THUS, T HIS GROUND OF REVENUES APPEAL IS REJECTED. 26. GROUND NO.4 IS AGAINST THE DELETION OF DISALLOW ANCE OF RS.1,98,428/- BEING PROPORTIONATE INTEREST EXPENSES MADE BY THE AO U/S.36(1)(III) OF THE ACT. THE LD.SR.COUNSEL FOR T HE ASSESSEE HAS POINTED OUT THAT THE LD.CIT(A) HAS FOLLOWED THE ORDER PASSE D IN AY 2005-06 AND THE ISSUE TRAVELLED UPTO THE STAGE OF THE TRIBUNAL AND THE TRIBUNAL IN ITA NO.2923/AHD/2008 HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE, IN PARA- ITA NOS.318,613, 319,614, 2279 & 2296 /AHD/2011 GMM PFAUDLER LTD. VS. DY.CIT(CROSS-APPEALS) ASST.YEARS 2006-07,2007-08 & 2008- 09 - 28 - 18 OF ITS ORDER. THE LD.SR.DR HAS FAIRLY CONCEDED THE FACT THAT THE LD.CIT(A) HAS FOLLOWED THE ORDER PASSED IN AY 2005- 06. 27. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED T HE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE FACTS ARE IDENTICAL AS WERE IN THE AY 2005-06. THIS TR IBUNAL IN ITA NO.2923/AHD/2008 FOR AY 2005-06, ORDER DATED 28/01/ 014, HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE IN PARA-18 (REPRODU CED IN PARAS-15 & 15.1 OF THIS ORDER). SINCE THERE IS NO CHANGE INTO THE FACTS AND CIRCUMSTANCES OF THE CASE, THEREFORE TAKING A CONSISTENT VIEW, T HE ISSUE IS DECIDED IN FAVOUR OF ASSESSEE. THUS, THIS GROUND OF REVENUE S APPEAL IS REJECTED. 28. GROUND NO.5 IS AGAINST THE DELETING OF DISALLO WANCE OF RS.56,09,987/- BEING ROYALTY EXPENSE. THE LD.SR.C OUNSEL FOR THE ASSESSEE HAS POINTED OUT THAT THE LD.CIT(A) HAS FOLLOWED THE ORDER PASSED IN AY 2005-06 AND THE ISSUE TRAVELLED UPTO THE STAGE OF T HE TRIBUNAL AND THE TRIBUNAL IN ITA NO.2923/AHD/2008 HAS DECIDED THE IS SUE IN FAVOUR OF ASSESSEE, IN PARA-20 OF ITS ORDER. THE LD.SR.DR HA S SUPPORTED THE ORDER OF THE AO AND FAIRLY CONCEDED THE FACT THAT THE LD.CIT (A) HAS FOLLOWED THE ORDER PASSED IN AY 2005-06. 29. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE FACTS ITA NOS.318,613, 319,614, 2279 & 2296 /AHD/2011 GMM PFAUDLER LTD. VS. DY.CIT(CROSS-APPEALS) ASST.YEARS 2006-07,2007-08 & 2008- 09 - 29 - ARE IDENTICAL AS WERE IN THE AY 2005-06. THIS TR IBUNAL IN ITA NO.2923/AHD/2008 FOR AY 2005-06, ORDER DATED 28/01/ 014, HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE IN PARA-20 (REPRODU CED IN PARAS-17 & 17.1 OF THIS ORDER). SINCE THERE IS NO CHANGE INTO THE FACTS AND CIRCUMSTANCES OF THE CASE, THEREFORE TAKING A CONSISTENT VIEW, T HE ISSUE IS DECIDED IN FAVOUR OF ASSESSEE. THUS, THIS GROUND OF REVENUE S APPEAL IS REJECTED. 30. GROUND NO.6 IS AGAINST THE DELETION OF DISALLOW ANCE OF RS.17,21,313/- IN RESPECT OF PROVISION FOR BAD ADVA NCES WRITTEN OFF. THE LD.SR.COUNSEL FOR THE ASSESSEE HAS POINTED OUT THAT THE LD.CIT(A) HAS FOLLOWED THE ORDER PASSED IN AY 2005-06 AND THE ISS UE UNDER APPEAL TRAVELLED UPTO THE STAGE OF THE TRIBUNAL AND THE TR IBUNAL IN ITA NO.2923/AHD/2008 WAS PLEASED TO SET ASIDE THE ISSUE TO THE FILE OF AO IN PARA-11.1 & 12.1 OF ITS ORDER. THE LD.SR.DR SUPPOR TED THE ORDER OF THE AO AND FAIRLY CONCEDED THAT THE ISSUE HAS BEEN SET ASIDE TO THE FILE OF AO. 31. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD.CIT(A) HAS FOLLOWED THE ORDER P ASSED IN AY 2005-06. THE FACTS ARE IDENTICAL AS WERE IN THE AY 2005-06. THIS TRIBUNAL IN ITA NO.2923/AHD/2008 FOR AY 2005-06, ORDER DATED 28 /01/014, HAS SET ASIDE THE ISSUE TO THE FILE OF AO IN PARAS-11.1 TO 12.1 (REPRODUCED IN ITA NOS.318,613, 319,614, 2279 & 2296 /AHD/2011 GMM PFAUDLER LTD. VS. DY.CIT(CROSS-APPEALS) ASST.YEARS 2006-07,2007-08 & 2008- 09 - 30 - PARAS-7 & 7.1 OF THIS ORDER). SINCE THERE IS NO C HANGE INTO THE FACTS AND CIRCUMSTANCES OF THE CASE, THEREFORE TAKING A CONS ISTENT VIEW, THE ISSUE IS RESTORED TO THE FILE OF AO TO DECIDE THE SAME AFRES H IN THE LIGHT OF THE DIRECTION GIVEN IN ITA NO.2002/AHD/2007 FOR AY 2003 -04, DATED 11/02/2011. THUS, THIS GROUND OF REVENUES APPEA L IS ALLOWED FOR STATISTICAL PURPOSES. 32. GROUND NOS.7 & 8 ARE GENERAL IN NATURE NEED NO INDEPENDENT ADJUDICATION. 33. IN THE RESULT, THE APPEAL OF THE REVENUE FOR AY 2007-08 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 34. NOW, WE TAKE UP THE CROSS-APPEALS OF THE ASSESS EE AND REVENUE FOR AY 22008-09. 34.1. ASSESSEES APPEAL (ITA NO.2279/AHD/2011) :- GROUND NO.4 OF ASSESSEES APPEAL HAS NOT BEEN PRESSED BY THE LD.CO UNSEL FOR THE ASSESSEE AND, THEREFORE, THE SAME IS DISMISSED AS SUCH. 34.2. GROUND NOS.1, 5 & 6 ARE GENERAL IN NATURE REQ UIRE NO INDEPENDENT ADJUDICATION. ITA NOS.318,613, 319,614, 2279 & 2296 /AHD/2011 GMM PFAUDLER LTD. VS. DY.CIT(CROSS-APPEALS) ASST.YEARS 2006-07,2007-08 & 2008- 09 - 31 - 34.3. GROUND NOS.2 & 3 ARE INTER-CONNECTED AND THE SAME ARE AGAINST CONFIRMING THE DISALLOWANCE OF RS.14,25,893/- OUT O F INTEREST EXPENSES U/S.14A R.W.RULE 8D OF THE ACT AND ALTERNATIVELY, E RRED IN INCLUDING RS.5,22,75,000/- BEING INVESTMENT IN FOREIGN SUBSID IARY WHICH CALCULATING AVERAGE VALUE OF INVESTMENT FOR WORKING OUT INTEREST DISALLOWABLE. 34.4. THE LD.SR.COUNSEL FOR THE ASSESSEE HAS POIN TED OUT THAT THE LD.CIT(A) HAS FOLLOWED THE ORDER PASSED IN AY 2005- 06 AND THE ISSUE TRAVELLED UPTO THE STAGE OF THE TRIBUNAL AND THE TR IBUNAL IN ITA NO.2923/AHD/2008 HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE, IN PARAS- 16 & 17 OF ITS ORDER. THE LD.SR.DR HAS SUPPORTED T HE ORDER OF THE AO AND FAIRLY CONCEDED THE FACT THAT THE LD.CIT(A) HAS FOLLOWED THE ORDER PASSED IN AY 2005-06. 34.5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE FACTS ARE IDENTICAL AS WERE IN THE AY 2005-06. THIS TRIBUNAL IN ITA NO.2923/AHD/2008 FOR AY 2005-06, ORDER DATED 28 /01/014, HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE IN PARAS-16 & 17 (REPRODUCED IN PARAS-13 & 13.1 OF THIS ORDER). SINCE THERE IS NO CHANGE INTO THE FACTS AND CIRCUMSTANCES OF THE CASE, THEREFORE TAKING A CONSISTENT VIEW, THE ITA NOS.318,613, 319,614, 2279 & 2296 /AHD/2011 GMM PFAUDLER LTD. VS. DY.CIT(CROSS-APPEALS) ASST.YEARS 2006-07,2007-08 & 2008- 09 - 32 - ISSUE IS DECIDED IN FAVOUR OF ASSESSEE. THUS, T HESE GROUNDS OF ASSESSEES APPEAL ARE ALLOWED. 35. IN THE RESULT, ASSESSEES APPEAL FOR AY 2008-09 IS PARTLY ALLOWED. 36. REVENUES APPEAL (ITA NO.2296/AHD/2011) :- GROUND NO.1 IS AGAINST DELETION OF DISALLOWANCE OF RS.1,47,77,100/ - MADE ON ACCOUNT OF PROVISION FOR WARRANTY EXPENSES. THE LD.SR.COUNSE L FOR THE ASSESSEE HAS POINTED OUT THAT THE LD.CIT(A) HAS FOLLOWED THE ORD ER PASSED IN AY 2005- 06 AND THE ISSUE UNDER APPEAL TRAVELLED UPTO THE S TAGE OF THE TRIBUNAL AND THE TRIBUNAL IN ITA NO.2923/AHD/2008 WAS PLEASE D TO SET ASIDE THE ISSUE TO THE FILE OF AO IN PARA-15 OF ITS ORDER. T HE LD.SR.DR SUPPORTED THE ORDER OF THE AO AND FAIRLY CONCEDED THAT THE IS SUE HAS BEEN SET ASIDE TO THE FILE OF AO. 36.1. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD.CIT(A) HAS FOLLOWED THE ORDER P ASSED IN AY 2005-06. THE FACTS ARE IDENTICAL AS WERE IN THE AY 2005-06. THIS TRIBUNAL IN ITA NO.2923/AHD/2008 FOR AY 2005-06, ORDER DATED 28 /01/014, HAS SET ASIDE THE ISSUE TO THE FILE OF AO IN PARA-15 (REPR ODUCED IN PARAS-11 & 11.1 OF THIS ORDER). SINCE THERE IS NO CHANGE INT O THE FACTS AND CIRCUMSTANCES OF THE CASE, THEREFORE TAKING A CONS ISTENT VIEW, THE ISSUE IS ITA NOS.318,613, 319,614, 2279 & 2296 /AHD/2011 GMM PFAUDLER LTD. VS. DY.CIT(CROSS-APPEALS) ASST.YEARS 2006-07,2007-08 & 2008- 09 - 33 - RESTORED TO THE FILE OF AO TO DECIDE THE SAME AFRES H IN THE LIGHT OF THE DIRECTION GIVEN IN ITA NO.2002/AHD/2007 FOR AY 2003 -04, DATED 11/02/2011. THUS, THIS GROUND OF REVENUES APPEA L IS ALLOWED FOR STATISTICAL PURPOSES. 37. GROUND NO.2 OF REVENUES APPEAL IS AGAINST THE DELETION OF DISALLOWANCE OF RS.27,96,724/- OUT OF INTEREST EXPE NSES U/S.36(1)(III) OF THE ACT. THE LD.SR.COUNSEL FOR THE ASSESSEE HAS PO INTED OUT THAT THE LD.CIT(A) HAS FOLLOWED THE ORDER PASSED IN AY 2005- 06 AND THE ISSUE TRAVELLED UPTO THE STAGE OF THE TRIBUNAL AND THE TR IBUNAL IN ITA NO.2923/AHD/2008 HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE, IN PARA- 18 OF ITS ORDER. THE LD.SR.DR HAS FAIRLY CONCEDED THE FACT THAT THE LD.CIT(A) HAS FOLLOWED THE ORDER PASSED IN AY 2005- 06. 37.1. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE FACTS ARE IDENTICAL AS WERE IN THE AY 2005-06. THIS TRIBUNAL IN ITA NO.2923/AHD/2008 FOR AY 2005-06, ORDER DATED 28 /01/014, HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE IN PARA-18 (REPRODUCED IN PARAS-15 & 15.1 OF THIS ORDER). SINCE THERE IS NO CHANGE I NTO THE FACTS AND CIRCUMSTANCES OF THE CASE, THEREFORE TAKING A CONS ISTENT VIEW, THE ISSUE IS DECIDED IN FAVOUR OF ASSESSEE. THUS, THIS GROUND OF REVENUES APPEAL IS REJECTED. ITA NOS.318,613, 319,614, 2279 & 2296 /AHD/2011 GMM PFAUDLER LTD. VS. DY.CIT(CROSS-APPEALS) ASST.YEARS 2006-07,2007-08 & 2008- 09 - 34 - 38. GROUND NO.3 IS AGAINST THE DELETION OF DISALLOW ANCE OF ROYALTY PAYMENT OF RS.62,84,947/-. THE LD.SR.COUNSEL FOR T HE ASSESSEE HAS POINTED OUT THAT THE LD.CIT(A) HAS FOLLOWED THE ORD ER PASSED IN AY 2005- 06 AND THE ISSUE TRAVELLED UPTO THE STAGE OF THE TR IBUNAL AND THE TRIBUNAL IN ITA NO.2923/AHD/2008 HAS DECIDED THE ISSUE IN FA VOUR OF ASSESSEE, IN PARA-20 OF ITS ORDER. THE LD.SR.DR HAS FAIRLY CONC EDED THE FACT THAT THE LD.CIT(A) HAS FOLLOWED THE ORDER PASSED IN AY 2005- 06. 39. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED T HE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE FACTS ARE IDENTICAL AS WERE IN THE AY 2005-06. THIS TR IBUNAL IN ITA NO.2923/AHD/2008 FOR AY 2005-06, ORDER DATED 28/01/ 014, HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE IN PARA-20 (REPRODU CED IN PARAS-17 & 17.1 OF THIS ORDER). SINCE THERE IS NO CHANGE INTO THE FACTS AND CIRCUMSTANCES OF THE CASE, THEREFORE TAKING A CONSISTENT VIEW, T HE ISSUE IS DECIDED IN FAVOUR OF ASSESSEE. THUS, THIS GROUND OF REVENUE S APPEAL IS REJECTED. 40. GROUND NO.4 & 5 ARE GENERAL IN NATURE REQUIRE N O INDEPENDENT ADJUDICATION. IN THE RESULT, REVENUES APPEAL FO R AY 2008-09 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NOS.318,613, 319,614, 2279 & 2296 /AHD/2011 GMM PFAUDLER LTD. VS. DY.CIT(CROSS-APPEALS) ASST.YEARS 2006-07,2007-08 & 2008- 09 - 35 - 41. IN THE COMBINED RESULT, THE ASSESSEES CROSS-AP PEALS IN A.YS. 2006-07, 2007-08 BOTH ARE ALLOWED AND ASSESSEES AP PEAL IN AY 2008- 09 IS PARTLY ALLOWED. THE REVENUES CROSS-APPEALS F OR ALL THE THREE YEARS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE 17 TH DAY OF APRIL, 2015 AT AHMEDABAD. SD/- SD/- ( .. ) ( ) ( G.D. AGARWAL ) ( KUL BHARAT ) VICE PRESIDENT (AZ) JUDICIAL MEMBER AHMEDABAD; DATED 17/ 04 /2015 -!.. , .../ T.C. NAIR, SR. PS !'#'$ / COPY OF THE ORDER FORWARDED TO : 1. ./ / THE APPELLANT 2. 01./ / THE RESPONDENT. 3. 23245 6 / CONCERNED CIT 4. 6 ( ) / THE CIT(A)-VIII, AHMEDABAD 5. 7 8045 , !45& , 3 / DR, ITAT, AHMEDABAD 6. 8 :; / GUARD FILE. / BY ORDER, 1 70 //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 30.3.15/8.4.15 (DICTATION-PAD 18+15 PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER ..01.4.2015/9.4.15 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.17.4.15 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 17.4.15 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER