ROHAN UMESH GANDHI, MUMBAI V. ITO 20(2)(4), MUMBAI

ITA 626/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56325 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 23-11-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 25-01-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C G K NAIR
• Assessee Lawyers: RAJNIKANT CHANIYARI
• Keywords: Capital asset; Business income; Depreciation; Business expenditure
• Section: 80IB

Judgement Text

1 ITA NO. 626/MUM/2010 ROHAN UMESH GANDHI IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI D BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI R.K. PANDA, A.M. AND SHRI VIJAY PAL RA O, J.M. ITA NO. 626/MUM/2010 (ASST YEAR 2004-05) ROHAN UMESH GANDHI, 601, REMI BIZCOURT, VIRA DESAI ROAD, ANDHERI (WEST), MUMBAI 400 058. VS INCOME TAX OFFICER 20(2)(4), PIRAMAL CHAMBERS, LALBAUG, MUMBAI. 400 012. (APPELLANT) (RESPONDENT) PAN NO. AFYPG 8633A APPELLANT BY S HRI RAJNIKANT CHANIYARI RESPONDENT BY SHRI C.G.K. NAIR DATE OF HEARING 01.12.2011 DATE OF PRONOUNCEMENT 30.12.2011 ORDER PER R K PANDA, AM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 30.10.2009 OF THE COMMISSIONER OF INCOME TAX (A)- 3 1, MUMBAI RELATING TO ASSESSMENT YEAR 2004-05. 2. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE , ROHAN GANDHI WAS CARRYING ON BUSINESS IN THE NAME OF 4 PROPRIETARY C ONCERNS NAMELY M/S STAR PLASTIC, M/S NICE PLASTICS, M/S STAR POLYMERS & M/S STAR INDUSTRIES AND WAS ENGAGED IN MANUFACTURING OF HMHDPE FILM, BA GS, LINERS AND BLOW MOULDED BOTTLES & CAPS. DURING THE YEAR UNDER CONS IDERATION, THE AO NOTED THAT THE ASSESSEE HAS DECLARED NET LOSS FROM M/S ST AR PLASTIC, M/S STAR INDUSTRIES, M/S NICE PLASTICS AND NET PROFIT FROM S TAR POLYMERS. ASSESSEE WAS HAVING INCOME FROM OTHER SOURCES BEING INTEREST INCOME AND DIVIDEND ON SHARES. DURING THE COURSE OF ASSESSMENT PROCEED INGS THE A.O. NOTED THAT ASSESSEE HAS CLAIMED DEDUCTION U/S 80IB @ 25% ON THE PROFITS OF RS. 1,80,394/- DERIVED FROM M/S STAR POLYMERS AND RESTR ICTED THE SAME TO THE EXTENT OF GROSS TOTAL INCOME EXCLUDING DEDUCTION U/ S 80-L AT RS. 12,000/-. 2 ITA NO. 626/MUM/2010 ROHAN UMESH GANDHI THE GROSS TOTAL INCOME INCLUDES INCOME FROM OTHER S OURCES OF RS. 10,20,890/- BEING INTEREST ON FIXED DEPOSITS OF RS. 10,11,665/- AND DIVIDEND ON SHARES OF RS. 9,225/-. ACCORDING TO THE A.O., T HE INCOME FROM OTHER SOURCES SUCH AS INTEREST ON FIXED DEPOSITS AND DIVI DEND INCOME IS NOT ELIGIBLE FOR DEDUCTION U/S 80IB AS THE SAME DID NOT HAVE ANY DIRECT LINK OR NEXUS WITH THE MANUFACTURING ACTIVITY. REJECTING T HE EXPLANATION GIVEN BY THE ASSESSEE, THE A.O. DISALLOWED THE CLAIM OF DEDU CTION U/S 80IB ON SUCH INTEREST INCOME. 2.1 THE A.O. FURTHER NOTED THAT THE ASSESSEE HAS DE BITED INTEREST ON LOAN TO THE P&L ACCOUNT AMOUNTING TO RS. 7,95,021/- IN T HE CASE OF M/S STAR PLASTICS. ON VERIFICATION OF THE BALANCE SHEET OF THE ASSESSEE, HE OBSERVED THAT THE ASSESSEES CAPITAL ACCOUNT IS DEBITED BY R S. 69,22,234/-. THEREFORE, THERE IS A NEGATIVE CAPITAL BALANCE OF RS. 72,57,61 2/-. HE NOTED THAT THE INTEREST PAID IS ON ACCOUNT OF THESE BORROWING OF R S.72,57,612/- WHICH HAS BEEN USED BY THE ASSESSEE AND DUE TO THE SAME THE C APITAL ACCOUNT SHOWS NEGATIVE BALANCE. FURTHER, THERE WAS NO BUSINESS C ONDUCTED IN THE FIRM M/S STAR PLASTIC. HE, THEREFORE, DISALLOWED THE INT EREST OF RS. 7,95,021/-. SINCE THERE WAS NO BUSINESS CARRIED OUT BY THE ASSE SSEE ON M/S STAR PLASTICS, THE A.O. DISALLOWED DEPRECIATION OF RS. 5 3,358/- IN THE CASE OF M/S STAR PLASTICS. SINCE THERE WAS NO ACTIVITY IN THE CASE OF M/S NICE PLASTICS, THE A.O. DISALLOWED THE SALES AND ADMINISTRATION EX PENSES OF RS. 33,763/- AND DEPRECIATION OF RS. 7860/-. ACCORDINGLY, THE A .O. DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS. 16,05,320/- AS AGAINS T THE LOSS OF RS. 1,92,394/-. 2.2 IN APPEAL, THE ASSESSEE FURNISHED THE DETAILS O F BREAK-UP OF VARIOUS EXPENSES DEBITED UNDER SALES AND ADMINISTRATIVE EXP ENSES IN THE CASE OF M/S STAR PLASTICS AND NICE PLASTICS. IT WAS ARGUED THAT THESE EXPENSES ARE REQUIRED IRRESPECTIVE OF THE FACT WHETHER THERE WAS MANUFACTURING ACTIVITY OR NOT. IT WAS ALSO ARGUED THAT THE ASSESSEE BEING TH E PROPRIETOR OF ALL THE FOUR UNITS, ALL THE EXPENSES SHOULD BE CLUBBED TOGETHER. CONSIDERING THE SAME TO BE A COMPOSITE BUSINESS IT WAS SUBMITTED THAT THE V ARIOUS EXPENSES CLAIMED 3 ITA NO. 626/MUM/2010 ROHAN UMESH GANDHI WERE NECESSARY FOR MAINTAINING HIS ESTABLISHMENT AN D EXPENSES FOR LEGAL AND PROFESSIONAL CHARGES IRRESPECTIVE OF THE FACT WHETH ER THE BUSINESS OR MANUFACTURING WAS CARRIED ON OR NOT. VARIOUS DECISI ONS WERE ALSO CITED BEFORE THE LD. CIT(A). 2.3 HOWEVER, THE LD. CIT(A) WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND UPHELD THE ACTION OF THE A.O. HE O BSERVED THAT BOTH THESE PROPRIETARY UNITS ARE CLOSED PERMANENTLY AND THE AS SESSEE HAS ALREADY SHIFTED HIS BUSINESS TO HIS OTHER PROPRIETARY CONCE RNS LOCATED AT DAMAN AND SILVASSA. SINCE THE BUSINESS IS CLOSED, THE IMMOVA BLE PROPERTIES OF THE ASSESSEE BECOME HIS PERSONAL CAPITAL ASSETS. NO INC OME ON EXPLOITATION OR USE THEREOF IS REALISED AND THEREFORE THE EXPENDITU RE CLAIMED NOT BEING BUSINESS EXPENDITURE CANNOT BE ALLOWED AS BUSINESS EXPENDITURE. 2.4 SO FAR AS DEPRECIATION IS CONCERNED, HE NOTED T HAT THE ASSESSEE IS MAINTAINING SEPARATE SETS OF ACCOUNT IN RESPECT TO HIS DIFFERENT PROPRIETARY CONCERNS, INCOME IS DETERMINED SEPARATELY AND FINAL ACCOUNTS INCLUDING ITS SCHEDULES SUCH AS DEPRECIATION CHART ETC. ARE PREPA RED SEPARATELY IN EACH UNIT. SINCE THE ENTIRE BLOCK OF ASSET IS NOT PUT TO USE HAS BEEN DULY ADMITTED BY THE COUNSEL OF THE ASSESSEE APPEARING BEFORE HIM , HE HELD THAT THE A.O. WAS FULLY JUSTIFIED IN REJECTING THE SAID CLAIM OF THE ASSESSEE. FURTHER, THE ASSESSEE HAS PERMANENTLY CLOSED HIS BUSINESS IN THE SE UNITS SINCE LONG WITHOUT ANY INTENTION TO RESTART THE SAME IN THE SA ID LOCATIONS, THE REMAINING CAPITAL ASSET BEING ONLY FACTORY PREMISES HAS NOT BEEN COMMERCIALLY USED FOR THE RELEVANT ASSESSMENT YEAR. HE NOTED THAT IT IS NOT THE CASE OF THE A.O. OR THAT OF THE ASSESSEE THAT O UT OF THE TOTAL BLOCK OF ASSETS, THE ASSESSEE IS ELIGIBLE FOR DEPRECIATION O N CERTAIN ASSETS AND INELIGIBLE FOR OTHER ASSETS. DISTINGUISHING THE VA RIOUS CASE LAWS CITED BEFORE HIM, THE LD. CIT(A) UPHELD THE ACTION OF THE A.O. A ND DENIED ALLOWABILITY OF DEPRECIATION. 2.5 AS REGARDS THE CLAIM OF THE ASSESEE THAT THE A. O. HAS ERRED IN NOT ALLOWING DEDUCTION U/S 80IB TO THE EXTENT ELIGIBLE ON THE REVISED TOTAL 4 ITA NO. 626/MUM/2010 ROHAN UMESH GANDHI INCOME, HE DIRECTED THE A.O. TO RECOMPUTE THE DEDUC TION U/S 80IB IN CASE OF STAR POLYMERS, WHICH IS THE ONLY INDUSTRIAL UNDERTA KING ELIGIBLE FOR DEDUCTION U/S 80IB AS PER ASSESSED BUSINESS INCOME. 2.6 SO FAR AS THE ADDITIONAL GROUND RELATING TO DIS ALLOWANCE OF INTEREST EXPENSES OF RS.7,93,021/- MADE BY THE AO WHICH WAS CLAIMED BY THE ASSESSEE IN THE CASE OF M/S. STAR PLASTIC IS CONCER NED, THE LD. CIT(A) REJECTED THE CLAIM OF THE ASSESSEE. THE SUBMISSION OF THE ASSESSEE THAT THE LOAN WAS ORIGINALLY BORROWED BY LATE SHRI UMESH GAN DHI, FATHER OF THE ASSESSEE IN THE YEAR 1991-92 FROM HIS WIFE SMT. SUH ASINI GANDHI AND HIS DAUGTHER SHWETA GANDHI, FOR PURCHASE OF PLANT AND M ACHINERY FOR THE PURPOSE OF EXPANSION OF BUSINESS OF ASSESSEES LATE FATHER WAS REJECTED BY THE LD. CIT(A) IN ABSENCE OF ANY EVIDENCE TO ESTABL ISH THAT THE BORROWED FUNDS WERE UTILISED FOR THE PURPOSE OF BUSINESS. HE FURTHER NOTED THAT NOTHING WAS BROUGHT ON RECORD TO SUBSTANTIATE THAT THE CAPITAL WITHDRAWN BY THE ASSESSEE AS DISCUSSED BY THE AO IS UTILISED FOR HIS BUSINESS PURPOSE. THE ASSESSEE DOES NOT FULFIL THE CONDITIONS REQUIRE D U/S.36(1)(III) OF THE ACT. HE ACCORDINGLY, UPHELD THE ACTION OF THE AO IN DELE TING THE INTEREST OF RS.9,95,021/-. 3. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED ASSESSING OFFICER (HEREINAFTER REF ERRED TO AS AO) HAS ERRED IN DISALLOWING SALES AND DISTRIBUTION EXP ENSES OF `. 82,971/- AND `. 33,763/- CLAIMED IN THE CASE OF M/S. STAR PLASTIC AND M/S. NICE PLASTIC RESPECTIVELY. THE LEA RNED COMMISSIONER OF INCOME-TAX (APPEALS) [HEREINAFTER R EFERRED TO AS CIT (A)] HAS ERRED IN CONFIRMING THE ACTION OF THE AO. THE LEARNED CIT(A) AO BE DIRECTED TO ALLOW EXPENSES OF `. 82,971/- AND `. 33,763/- AND INCREASE THE LOSS ACCORDINGLY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED AO HAS ERRED IN DISALLOWING DEPREC IATION OF `. 53,358/- AND `. 7,860/- CLAIMED IN THE CASE OF M/S. STAR PLASTICS AND M/S. NICE PLASTICS RESPECTIVELY. THE L EARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF AO. THE LEARN ED AO BE 5 ITA NO. 626/MUM/2010 ROHAN UMESH GANDHI DIRECTED TO ALLOW DEPRECIATION OF `. 53,358/- AND `. 7,860/- IN CASE OF M/S. STAR PLASTICS AND M/S. NICE PLASTIC RESPECT IVELY AND INCREASE THE LOSS ACCORDINGLY. 3. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE A ND IN THE LAW, THE LEARNED AO HAS ERRED IN NOT ALLOWING DEDUC TION U/S.80IB @ 25% ON ENHANCED INCOME AND THE LEARNED CIT(A) HAS ERRED IN RESTRICTING THE SAME THE EXTENT OF 25% ON PROFITS D ERIVED TO ALLOW THE SAME TO THE EXTENT GROSS TOTAL INCOME AND REDUC E THE TOTAL INCOME ACCORDINGLY. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED AO HAS ERRED IN DISALLOWING INTERE ST EXPENSES OF `. 7,95,021/- CLAIMED IN THE CASE OF M/S. STAR PLASTIC . THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF AO. TH E LEARNED CIT(A) AO BE DIRECTED TO ALLOW THE INTEREST EXPENSE S OF `. 7,95,021/- IN CASE OF M/S. STAR PLASTIC AS DEDUCTIO N AND INCREASE THE LOSS ACCORDINGLY. 4. THE LD. COUNSEL FOR THE ASSESSEE WHILE ARGUING A LL THE GROUNDS SUBMITTED THAT THE SALES AND DISTRIBUTION EXPENDITU RE OF `. 82,971/- AND 33,763/- CLAIMED IN CASE OF M/S. STAR PLASTICS AND M/S. NICE PLASTICS RESPECTIVELY ARE NOTHING BUT AMOUNTS WRITTEN OFF, B MC CHARGES, BANK CHARGES, LEGAL AND PROFESSIONAL EXPENSES, SALES TAX DUE, TELEPHONE CHARGES AND PROPERTY MAINTENANCE CHARGES ETC. HE SUBMITTED THAT ALTHOUGH THE ASSESSEE HAS CLOSED THESE TWO UNITS, BUT STILL THE ASSESSEE BEING THE PROPRIETOR AND IS IN THE SAME LINE OF BUSINESS, THE REFORE, THE EXPENSE SHOULD BE CONSIDERED AS A WHOLE AND NET EFFECT SHOULD BE G IVEN. SO FAR AS THE DISALLOWANCE OF DEPRECIATION IS CONCERNED, HE SUBMI TTED THAT ONCE THE ITEMS ENTER INTO THE BLOCK OF ASSETS, THE REVENUE AUTHORI TIES CANNOT DENY DEPRECIATION ALLOWABLE TO THE ASSESSEE. 5. SO FAR AS THE GROUND OF APPEAL NO. 3 IS CONCERNE D, HE SUBMITTED THAT A DIRECTION MAY BE GIVEN TO THE AO TO ALLOW DEDUCTION U/S.80IB @ 25% ON THE ASSESSED INCOME. AS REGARDS THE DISALLOWANCE OF INT EREST OF RS.7,95,021/- IS CONCERNED, HE SUBMITTED THAT THE MONEY WAS BORROWED BY THE FATHER OF THE ASSESSEE FROM HIS MOTHER AND SISTER IN THE YEAR 199 1-92 FOR THE PURCHASE OF PLANT AND MACHINERY FOR EXPANSION OF THE BUSINESS. THE LOAN WAS TAKEN OVER BY THE ASSESSEE AFTER THE DEATH OF HIS FATHER AND H E WAS PAYING INTEREST @ 6 ITA NO. 626/MUM/2010 ROHAN UMESH GANDHI 18% P.A. TO HIS MOTHER AND SISTER. THEREFORE, THE D ISALLOWANCE OF INTEREST BY THE AO AND UPHELD BY THE LD. CIT(A) WAS UNCALLED FO R. 6. THE LD. DR ON THE OTHER HAND, WHILE SUPPORTING T HE ORDER OF THE LD. CIT(A) SUBMITTED THAT THE ASSESSEE HAS CLOSED THE T WO UNITS NAMELY M/S. STAR PLASTICS AND M/S. NICE PLASTICS AND THERE WAS NO INTENTION OF STARTING THE SAME. IT WAS NOT A TEMPORARY CLOSURE OF BUSINES S. SINCE THE ASSESSEE WAS MAINTAINING SEPARATE BOOKS OF ACCOUNTS, PREPARI NG SEPARATE MANUFACTURING AND TRADING ACCOUNT, THEREFORE, DUE T O CLOSER OF THE BUSINESS NO EXPENSES OR DEPRECIATION SHOULD BE ALLOWED. 7. SO FAR AS DEDUCTION U/S.80IB @ 25% ON ENHANCED I NCOME IS CONCERNED, HE SUBMITTED THAT THE LD. CIT(A) HAS ALR EADY GIVEN A DIRECTION TO THE AO TO ALLOW HIGHER DEDUCTION. THEREFORE, THIS G ROUND BY THE ASSESSEE IS INFRUSTUOUS. AS REGARDS THE DISALLOWANCE OF INTERES T EXPENDITURE OF `. 7,95,021/- IN CASE OF M/S. STAR PLASTICS IS CONCERN ED, HE SUBMITTED THAT THE ASSESSEE HAS NOT DISCHARGED THE ONUS CAST ON IT BY FILING ANY DOCUMENTARY EVIDENCE TO SUBSTANTIATE THAT THE MONEY BORROWED HAS BEEN UTILISED FOR THE PURPOSE OF BUSINESS AND THE FULFIL MENT OF CONDITION LAID DOWN U/S. 36(1)(III) OF THE I.T. ACT. THEREFORE, THE LD. CIT(A) WAS JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE. 8. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE LD. CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE WAS PROPRIETOR OF 4 UNITS NAMELY M/S STAR PLASTIC AND M /S NICE PLASTICS WHICH ARE LOCATED AT ANDHERI, MUMBAI, M/S STAR POLYMERS S ITUATED AT SILVASA AND & M/S STAR INDUSTRIES SITUATED AT DAMAN. THERE IS A LSO NO DISPUTE TO THE FACT THAT THE TWO PROPRIETORY CONCERNS NAMELY M/S S TAR PLASTIC AND M/S NICE PLASTICS ARE CLOSED DOWN AND THERE WAS NO BUSINESS ACTIVITY DURING THE IMPUGNED YEAR. THERE IS ALSO NO DISPUTE TO THE FACT THAT THE ASSESSEE HAS CLAIMED SALES AND DISTRIBUTION EXPENDITURE OF `. 82,971/- AND `. 33,763/- IN CASE OF M/S STAR PLASTIC AND M/S NICE PLASTICS RESP ECTIVELY. SIMILARLY, THE 7 ITA NO. 626/MUM/2010 ROHAN UMESH GANDHI ASSESSEE HAS ALSO CLAIMED DEPRECIATION OF `. 53,358/- AND `. 7,860/- IN CASE OF M/S STAR PLASTIC AND M/S NICE PLASTICS RESPECTIV ELY. WE FIND THE AO DISALLOWED THE EXPENDITURE AND DEPRECIATION IN CASE OF THE ABOVE TWO UNITS ON THE GROUND THAT THERE WAS NO BUSINESS ACTIVITY. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT ALTHOUGH THER E WAS NO BUSINESS ACTIVITY, STILL TO MAINTAIN THE PROPERTIES AT BOTH THE PLACES THE ASSESSEE HAS INCURRED EXPENSES WHICH ARE ROUTINE IN NATURE AND, THEREFORE, THE SAME HAS TO BE ALLOWED. SIMILARLY, SINCE THE ASSETS HAVE ENT ERED INTO THE BLOCK OF ASSETS, THEREFORE, DEPRECIATION CANNOT BE DENIED. I T IS ALSO THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT SINCE THE ASS ESSEE IS THE PROPRIETOR OF ALL THE 4 UNITS, THEREFORE, EVERYTHING SHOULD BE CL UBBED TOGETHER AS ONE UNIT AND ALL THE EXPENSES AND DEPRECIATION SHOULD BE ALL OWED. HOWEVER, WE DO NOT FIND ANY FORCE IN THE ABOVE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE. THE ASSESSEE IN THE INSTANT CASE WAS MAIN TAINING SEPARATE BOOKS OF ACCOUNTS AND PREPARING SEPARATE MANUFACTURING AN D TRADING ACCOUNTS FOR EACH UNIT. THEREFORE, WHEN THE ASSESSEE HAS COMPLET ELY CLOSED DOWN THE BUSINESS IN CASE OF M/S STAR PLASTIC AND M/S NICE P LASTICS AND SINCE THERE WAS NO INTENTION OF STARTING THE BUSINESS IN CASE O F THE ABOVE TWO UNITS, THEREFORE, IT CANNOT BE SAID THAT IT IS A TEMPORARY CLOSURE OF BUSINESS. THEREFORE, THE EXPENDITURE AND DEPRECIATION, IN OUR OPINION, CANNOT BE ALLOWED. SINCE THE BUSINESSES IN BOTH THE UNITS ARE CLOSED, THE IMMOVABLE PROPERTY OF THE ASSESSEE, IN OUR OPINION, BECOMES H IS PERSONAL CAPITAL ASSETS. SINCE NO INCOME ON EXPLOITATION OR USE THER E OF HAS BEEN REALISED, THEREFORE, THE EXPENDITURE CLAIMED BY THE ASSESSEE, IN OUR OPINION, CANNOT BE TREATED AS BUSINESS EXPENDITURE AND HAS TO BE CO NSIDERED AS THE PERSONAL EXPENDITURE OF THE ASSESSEE. IN THIS VIE W OF THE MATTER, WE UPHOLD THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND THE G ROUNDS OF APPEAL NOS. 1 AND 2 BY THE ASSESSEE ARE DISMISSED. 9. SO FAR AS THE DISALLOWANCE OF INTEREST OF `. 7,95,021/- IS CONCERNED, WE FIND NOTHING WAS PRODUCED BEFORE THE AO OR BEFORE T HE LD. CIT(A) OR EVEN BEFORE US TO SUBSTANTIATE THAT THE BORROWED MONEY H AS BEEN UTILISED FOR THE PURPOSE OF BUSINESS AND THE CONDITIONS LAID DOWN U/ S.36(1)(III) ARE FULFILLED. 8 ITA NO. 626/MUM/2010 ROHAN UMESH GANDHI IN THE ABSENCE OF ANY EVIDENCE, WE FIND NO INFIRMIT Y IN THE ORDER OF THE LD. CIT(A) IN REJECTING THE CLAIM OF THE ASSESSEE. THE GROUND OF APPEAL NO.4 IS ACCORDINGLY DISMISSED. 10. SO FAR AS DEDUCTION U/S.80IB @ 25% ON ENHANCED INCOME IS CONCERNED, WE FIND THE LD. CIT(A) HAS ALREADY GIVEN A DIRECTION TO THE AO TO ALLOW THE DEDUCTION ON THE ASSESSED BUSINESS INCOME . IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT DESPITE SU CH A DIRECTION BY THE LD. CIT(A), THE AO HAS NOT GIVEN EFFECT TO SUCH DIRECTI ON. WE, THEREFORE, DIRECT THE AO TO ALLOW THE DEDUCTION @ 25% U/S.80IB OF THE ACT ON THE ASSESSED BUSINESS INCOME AS PER LAW AFTER GIVING DUE OPPORTU NITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THE G ROUND OF APPEAL NO.3 IS ACCORDINGLY, ALLOWED FOR STATISTICAL PURPOSES. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT 30/12/2011 SD/- ( VIJAY PAL RAO ) JUDICIAL MEMBER SD/- ( R K PANDA ) ACCOUNTANT MEMBER PLACE: MUMBAI : DATED: 30/12/2011 RK COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT, 4, MUMBAI 4 CIT(A) - IV, MUMBAI 5 DR BENCH D 6 MASTER FILE /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI