DCIT CEN CIR 2, MUMBAI V. CIPLA LTD, MUMBAI

ITA 6299/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62693 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 26-12-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 23-08-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A C TEJPAL
• Assessee Lawyers: D P BAPAT
• Keywords: Bogus purchase; Rectification of order; Opportunity of being heard; Earning of tax free income; Capital expenditure
• Section: 14A; 80IB; 10B; 154

Judgement Text

IN THE INCO ME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO , JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ./I.T.A. NO. 6471/M/2010 ( ASSESSMENT YEAR : 2008 - 2 009 ) ./I.T.A. NO. 5813/M/2011 ( ASSESSMENT YEAR : 2009 - 2 010 ) M/S. CIPLA LIMITED, MUMBAI CENTRAL, MUMBAI - 400 008. VS DCIT CENTRAL CIRCLE - 2, CGO BLDG, 9 TH FLOOR, M.K. MARG, MUMBAI - 400020. ./ PAN : AAACC 1480 B ( / APPELLANT) .. ( / RESPONDENT ) ./I.T.A. NO. 6299/M/2010 ( ASSESSMENT YEAR : 2008 - 2 009 ) ./I.T.A. NO. 6558/M/2011 ( ASSESSMENT YEAR : 2009 - 2 010 ) DCIT CENTRAL CIRCLE - 2, CGO BLDG, 9 TH FLOOR, M.K. MARG, MUMBAI - 400020. VS M/S. CIPLA LIMITED, MUMBAI CENTRAL, MUMBAI - 400 008. ./ PAN : AAACC 1480 B ( / APPELLANT) .. ( / RESPONDENT ) / ASSESSEE BY : SHRI D.P. BAPAT / REVENUE BY : SHRI A.C. TEJPAL / DATE OF HEARING : 17.7.2014 / DATE OF PRONOUNCEMENT : 25 .7.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE FOUR APPEALS UNDER CONSIDERATION AND THEY ARE CROSS APPEALS INVOLVING TWO ASSESSMENT YEARS 2008 - 2009 AND 2009 - 2010. SINCE, THE GROUNDS RAISED IN ALL THESE APPEALS ARE CONNECTED AND THEREFORE, FOR THE SAKE OF CONVENIENCE, THEY ARE CLUBBED, HEARD COMBINEDLY AND BEING DISPOSED OF THIS CONSOLIDATED ORDER. APPEAL WISE AND GROUND WISE ADJUDICATION IS GIVEN IN THE FOLLOWING PARAGRAPHS. 2 CROSS APPEALS FOR THE AY 2008 - 2009 ITA NO.6471/M/2010 (BY ASSESSEE) 2. FIRSTLY, WE SHALL TAKE UP THE APPEAL ITA NO.6471/M/2010, WHICH IS FILED BY THE ASSESSEE ON 3.9.2010 AGAINST THE ORDER OF THE CIT (A) - 36, MUMBAI DATED 11.6.2010. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GOURDS WHICH READ AS UNDER: 1. THE CIT (A) ERRE D IN UPHOLDING DENIAL OF DEDUCTION FROM THE INCOME OF THE APPELLANT OF A SUM OF RS. 10,35,39,731/ - BEING THE AMOUNT OF CREDIT UNDER DEPB SCHEME WHICH WAS NOT ACTUALLY UTILIZED BEFORE THE CLOSE OF THE RELEVANT PREVIOUS YEAR FOR PAYMENT OF DUTY ON THE IMPORT ATION OF GOODS. 2. THE LD CIT (A) HAS FURTHER ERRED IN UPHOLDING DISALLOWANCE OF ALLEGED BOGUS PURCHASES IN THE AMOUNT OF RS. 38,80,657/ - . WITHOUT PREJUDICE TO THE GENERALITY, THE LD CIT (A) HAS ERRED IN ALLEGING UNCLARIFIED DISCREPANCIES . YOUR APPELLANT I S AGGRIEVED BY THE DENIAL OF OPPORTUNITY TO CLARIFY THE ALLEGE D DISCREPANCIES . YOUR APPELLANT SEEKS THE OPPORTUNITY TO CLARIFY TO THE HONBLE TRIBUNAL THAT THE ALLEGED DISCREPANCIES ARE AMENABLE TO APPROPRIATE EXPLANATION WITH REFERENCE TO THE MATERIAL ON RECORD AND SUCH SUPPLEMENTARY MATERIAL WHICH MAY BE REQUISITIONED IN THE COURSE OF THE PROCEEDINGS. 3. THE LD CIT (A) HAS FURTHER ERRED IN UPHOLDING DISALLOWANCE OF RS. 73,75,369/ - UNDER SECTION 14A OF THE ACT. 4. THE LD CIT (A) HAS ERRED IN UPHOLDING THE DENIAL OF WEIGHTED DEDUCTION UNDER SECTION 35(2AB) OF THE INCOME TAX ACT READ WITH THE EXPLANATION THERETO WITH REFERENCE T O THE EXPENDITURE OF RS. 37 .3 4 LAKHS INCURRED ON SCIENTIFIC RESEARCH , NOT BEING EXPENDITURE IN THE NATURE OF COST OF LAND OR BUILDIN G, ON IN - HOUSE RESEARCH AND DEVELOPMENT FACILITY AS APPROVED BY THE PRESCRIBED AUTHORITY. WITHOUT PREJUDICE TO THE GENERALITY, YOUR APPELLANT OBJECTS TO THE OBSERVATION OF THE LD CIT (A) ON PAGE 18 OF THE APPELLANT ORDER THAT THE APPELLANT DID NOT COMMENT UPON THE GUIDELINES OF THE PRESCRIBED AUTHORITY DISREGARDING THE SPECIFIC SUBMISSIONS MADE IN THIS BEHALF WHICH HAVE BEEN EXTRACTED ON PAGE 13 OF THE APPELLANT ORDER. 3. GROUND NO.1 RELATES TO DENIAL OF DEDUCTION IN RESPECT OF AMOUNT OF CREDIT UNDER DEP B SCHEME. AO DENIED THE SAME HOLDING THAT THE ASSESSEE HAS NOT ACTUALLY UTILIZED THE CREDIT BEFORE CLOSING OF THE RELEVANT PREVIOUS YEAR FOR PAYMENT OF DUTY ON THE IMPORT OF GOODS. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THIS ISSUE IS V ALIDLY DECIDED BY THE TRIBUNAL IN THE ASSESSEES OWN CASE. THERE ARE DIVERGENT VIEWS ON THE ISSUE. HOWEVER, LD COUNSEL EVENTUALLY MENTIONED THAT THE ISSUE IS NOW SETTLED BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. M/S. EXCEL INDUS TRIES LTD (258 ITR 294), WHICH IS RELEVANT FOR THE PROPOSITION THAT THE INCOME DOES NOT ACCRUE IN THE YEAR OF EXPORT BUT IN THE YEAR IN WHICH THE IMPORTS ARE MADE. THE CONTENTS OF PARA 21 OF THE SAID JUDGMENT OF THE HONBLE SUPREME COURT IS RELEVANT IN TH IS REGARD . 3 4. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE CITED JUDGMENT OF THE APEX COURT IN THE CASE OF M/S. EXCEL INDUSTRIES LTD (SUPRA). ON PERUSAL OF THE SAID ORDER OF THE SUPREME COURT, WE FIND PARA 21 OF THE SA ID JUDGMENT IS RELEVANT HERE AND THE SAME IS REPRODUCED HERE UNDER: 21. IN SO FAR AS THE PRESENT CASE IS CONCERNED, EVEN IF IT IS ASSUMED THAT THE ASSESSEE IS ENTITLED TO THE BENEFITS UNDER THE ADVANCE LICENCES AS WELL AS UNDER THE DUTY ENTITLEMENT PASS B OOK, THERE WAS NO CORRESPONDING LIABILITY ON THE CUSTOMS AUTHORITIES TO PASS ON THE BENEFIT OF DUTY FREE IMPORTS TO THE ASSESSEE UNTIL THE GOODS ARE ACTUALLY IMPORTED AND MADE AVAILABLE FOR CLEARANCE. THE BENEFITS REPRESENT, AT BEST, A HYPOTHETICAL INCOME WHICH MAY OR MAY NOT MATERIALIZE AD ITS MONEY VALUE IS THEREFORE NOT THE INCOME OF THE ASSESSEE. 6. CONSIDERING THE SETTLED NATURE OF THE ISSUE IN FAVOUR OF THE ASSESSEE, WE ARE OF THE OPINION THAT THE ASSESSEE IS ENTITLED TO RELIEF. ACCORDINGLY, GROUN D NO.1 RAISED BY THE ASSESSEE IS ALLOWED . 7. REFERRING TO GROUNDS NO.2 & 3 , LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE SAID GROUNDS REQUIRE REVISIT TO THE FILE OF THE AO CONSIDERING THE FACT THAT THE ASSESSEE WAS NOT GIVEN A PROPER OPPORTUNITY TO CLARI FY THE ALLEGATIONS AGAINST THE BOGUS PURCHASES ON ONE SIDE AND THE ASSESSING OFFICER FAILED TO RECORD HIS DISSATISFACTION WITH REGARD TO THE CLAIM OF THE ASSESSEE THAT NO EXPENDITURE WAS INCURRED FOR EARNING OF THE EXEMPT INCOME AND THIS IS RELEVANT FOR TH E ISSUE RAISED IN GROUND NO.3. CONSIDERING THE CONCURRENCE OF BOTH THE PARTIES FOR REMANDING THESE TWO ISSUES TO THE FILE OF THE AO, WE ACCORDINGLY ALLOW THE GROUNDS NO.2 AND 3 RAISED BY THE ASSESSEE FOR STATISTICAL PURPOSES . 8. GROUND NO.4 RELATES TO THE DENIAL OF WEIGHTED DEDUCTION UNDER SECTION 35(2AB) OF THE INCOME TAX ACT WITH REGARD TO THE EXPENDITURE OF RS. 37.34 LAKHS INCURRED ON SCIENTIFIC RESEARCH. IN THIS CONNECTION, LD COUNSEL BROUGHT OUR ATTENTION TO THE CONTENTS OF PARA 10 OF THE IMPUGNED OR DER AND MENTIONED THAT CERTAIN EXPENSES WERE DISALLOWED BY THE DSIR AND THE SAID EXPENSES INCLUDES CLINICAL TRIALS AMOUNTING TO RS. 2134.72 LAKHS; BUILDING REPAIRS OF RS. 109.5 LAKHS; FOREIGN CONSULTANCY EXPENSES OF RS. 798.95 LAKHS; RESEARCH AND DEVELOPME NT (R & D) EXHIBIT BATCHES OF RS. 453.35 LAKHS, SALARY OF CMD AND CHAIRMAN OF RS. 238.45 LAKHS TOTALING TO RS. 37.34 LAKHS. IN CONNECTION WITH THE SAID EXPENSES, LD COUNSEL MENTIONED THAT THE EXPENDITURE RELATING TO THE CLINICAL TRIAL EXPENSES IS REQUIRED TO 4 BE ALLOWED IN FAVOUR OF THE ASSESSEE IN VIEW OF THE GUJARAT HIGH COURT JUDGMENT IN THE CASE OF CIT VS. CADILA HEALTHCARE LTD [2013] 31 TAXMANN.COM 300 (GUJARAT) WHICH IS RELEVANT FOR THE PROPOSITION THAT THE EXPLANATION TO SECTION 35(2AB)(1) DOES NOT R EQUIRE THAT EXPENSES INCLUDED IN THE SAID EXPLANATION ARE ESSENTIALLY TO BE INCURRED INSIDE AN APPROVED IN - HOUSE RESEARCH FACILITY . THIS FINDING WAS GIVEN BY THE HIGH COURT IN CONNECTION WITH THE EXPENSES INCURRED ON CLINICAL TRIAL S FOR DEVELOPING ITS PH ARMACEUTICAL PRODUCTS OUTSIDE APPROVED LABORATORY FACILITY. IN CONNECTION WITH THE REST OF THE EXPENSES LISTED ABOVE, LD COUNSEL MENTIONED THAT THE LOWER AUTHORITIES HAVE NOT GIVEN ANY FINDING OF FACT ON THE ALLOWABILITY OF THE SAID EXPENSES AND THEY HAVE NOT PASSED SPEAKING ORDER OF EACH OF THE LISTED EXPENSES. CONSIDERING THE ABOVE, LD COUNSEL PRAYED FOR ALLOWING THE CLINICAL TRIAL EXPENSES IN FAVOUR OF THE ASSESSEE IN VIEW OF THE JUDGMENT IN THE CASE OF CADILA HEALTHCARE LTD ( SUPRA) AND REMAND THE REST OF THE ISSUES TO THE FILE OF THE AO FOR FRESH ADJUDICATION. 9. ON THE OTHER HAND, LD DR RELIED ON THE ORDER OF THE AO. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. WE HAVE ALSO GONE THROUGH THE CITED JUDGMENT OF THE HONBLE GUJARAT HIGH COURT (SUPRA). ON HEARING BOTH THE PARTIES AND ON PERUSAL OF THE SAID ORDER OF THE HIGH COURT, WE ARE OF THE OPINION THAT THE ISSUES RAISED IN GROUND NO.4 SHOULD BE SET ASIDE TO THE FIL E OF THE AO TO EXAMINE EACH OF THE EXPENSES IN DETAIL AND APPLY THE CITED JUDGMENT OF THE HONBLE GUJARAT HIGH COURT (SUPRA) IN CONNECTION WITH THE CLAIM OF EXPENSES RELATING TO THE CLINICAL TRIALS. ACCORDINGLY, WE REMAND THIS PART OF THE GROUND TO THE FI LE OF THE AO AND GROUND NO.4 IS PARTLY ALLOWED STATISTICAL PURPOSES . 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.6299/M/2010 (AY 20 0 8 - 2009) (BY REVENUE) 12. THIS APPEAL FILED BY THE REVENUE ON 23.8.2010 IS AGAINST THE ORDER OF THE CIT (A) - 36, MUMBAI DATED 11.6.2010. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN NOT CONFIRMING THE BASIS ADOPT ED BY AO FOR COMPUTING 80IB DEDUCTION ADMISSIBLE TO THE ELIGIBLE UNITS AND IN HOLDING THAT THE AO WAS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 80IB(13) R.W. PROVISO TO 5 SECTION 80IA (8) OF THE ACT , WHEN THE ASSESSEE WAS UNDER OBLIGATION OF LAW TO ADOPT THE MARKET VALUE FOR THE GOODS TRANSFERRED TO AND FROM THE 80IB UNDERTAKING. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR CLAIMING DEDUCTION U/S 80IB ON THE PROF ITS DERIVED FROM THE WORK / MANUFACTURING GOT DONE THROUGH LEASE AND LICENSE MANUFACTURING (LLMS). 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) WAS NOT JUSTIFIED IN HOLDING THAT DEPB CREDIT IS ELIGIBLE FOR COMPUTATION OF PROFITS FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 80IB WHEN ITAT HAS DECIDED THIS MATTER AGAINST ASSESSEE IN ITA NO.5606/MUM/2008 FOR AY 2006 - 2007 BY RELYING ON THE DECISION OF SUPREME COURT IN THE CASE OF LIBERTY INDIA VS. CIT (317 ITR 218). 4. ON THE FAC TS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) WAS NOT JUSTIFIED IN HOLDING THAT SALE OF SCRAP IS ELIGIBLE FOR COMPUTATION OF PROFITS FOR PURPOSE OF CLAIMING DEDUCTION U/S 80IB WHEN ITAT HAS DECIDED THIS MATTER AGAINST ASSESSEE IN ITA N O.4007/M/2006 AND 4008/M/2006 FOR AY 2004 - 05 & 2005 - 06 BY RELYING ON THE DECISION OF SUPREME COURT IN THE CASE OF LIBERTY INDIA VS. CIT (317 ITR 218) . 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) WAS NOT JUSTIFIED IN HOLD ING THAT MISCELLANEOUS SALES / PROCESSING CHARGES MISCELLANEOUS RECEIPTS AND TECHNOLOGY FEES ARE ELIGIBLE FOR COMPUTATION OF PROFITS FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 80IB . 13. DURING THE PROCEEDINGS BEFORE US, SHRI D.P. BAPAT, LD COUNSEL FOR THE ASSESSEE FILED A CHART SHOWING THE GROUND WISE REMARKS AND COVERED NATURE OF THE ISSUES. REFERRING TO GROUND NO.1, WHICH RELATES TO THE BASIS ADOPTED BY THE ASSESSING OFFICER FOR COMPUT ING DEDUCTION UNDER SECTION 80IB ADMISSIBLE TO THE ELIGIBLE UNITS, LD COUNSEL MENTIONED THAT SIMILAR ISSUE WAS RAISED BY THE REVENUE BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE VIDE ITA NO.7412/MUM/2005 (AY 2003 - 04); ITA NO.4320/M/2006 (AY 2004 - 05) AND ITA NO.4321/M/2006 (AY 2005 - 06), DATED 2.1.2009 WHEREIN THE TRIBUNAL HAS DISMISSED THE GROUND RAISED BY THE REVENUE. IN THIS REGARD HE READ OUT THE RELEVANT PARAS 2 AND 3 OF THE SAID ORDER OF THE TRIBUNAL. 14. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 15. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE CITED ORDERS OF THE TRIBUNAL (SUPRA). ON PERUSAL OF THE SAID ORDER OF THE TRIBUNAL (SUPRA) DATED 2.1.2009, WHEREIN ONE OF US (AM) IS THE PARTY TO THAT ORDER, WE FIND PARAS 2 AND 3 ARE RELEVANT IN THIS REGARD WHICH READ AS UNDER: 2. DURING THE COURSE OF HEARING, THE LD COUNSEL FOR THE ASSESSEE HAS FILED A CHART IDENTIFYING THE ISSUES INVOLVED IN THESE APPEALS. IN THE LIGHT OF THE CH ART FILED BEFORE US, WE ARE OF THE VIEW THAT THESE APPEALS SHOULD BE DISPOSED OFF ISSUE WISE INSTEAD OF DEALING THESE APPEALS ONE BY ONE. WE, THEREFORE, FIRST TAKE UP THE REVENUES APPEAL ITA NO S .7412/MUM/2005, 4320/MUM/2006 AND 4321/MUM/2006. 6 THE FIRST GROUND RAISED IN THIS APPEAL RELATE TO THE BASIS ADOPTED BY THE ASSESSING OFFICER FOR COMPUTING DEDUCTION UNDER SECTION 80IB ADMISSIBLE TO THE ELIGIBLE UNITS. THE LEARNED COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION THAT THE IDENTICAL GROUND WAS RAI SED IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2002 - 2003 AND THE TRIBUNAL HAS CONFIRMED THE ORDER OF THE CIT (A) AFTER HOLDING THAT THE CIT (A) HAS DECIDED THE ISSUE FOLLOWING THE ORDER FOR THE TRIBUNAL FOR THE AY 1995 - 96 TO 1997 - 98 AS DISCUSSED IN PARA 7 OF THE CIT (A)S ORDER. THE RELEVANT OBSERVATION OF THE TRIBUNAL IS EXTRACTED HERE UNDER: 6. REVENUE IS AGGRIEVED ON THE DECISION OF THE CIT (A) IN NOT UPHOLDING THE BASIS ADOPTED BY THE AO. WE FIND THAT THE C IT (A) HAS RELIED ON THE ORDER O F T HE ITAT FOR THE AY 1995 - 96 TO 1997 - 98 AS DISCUSSED IN PARA 7 OF THE TRIBUNAL ORDER OF THE CIT (A). PARA 40 TO 51 AND 55 OF THE ITAT ORDER VIDE ITA NO.4619, 4731, 3036, 3057 AND 2062 DATED 14.2.2005 DEALS WITH THIS ISSUE. THE TRIBUNAL, AFTER CONSIDERING T HE DEPARTMENTAL ARGUMENT THAT THE AO HAS CORRECTLY INVOK ED THE PROVISO TO SECTION 80IA(A) AS WELL AS IN APPLYING THE GLOBAL PROFIT PERCENTAGE METHOD , RELIED ON THE DECISION REPORTED IN 48 ITR 213 (SC), WHILE CONFIRMING THE ORDER OF THE CIT (A) AS DISCUSS ED IN PARA 55 OF THE SAID ORDER. WE FIND THAT THE FACTS FOR THIS YEAR IN QUESTION ARE NO DIFFERENT. THEREFORE , WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE CIT (A) FOR THIS YEAR. ACCORDINGLY, GROUND NO.1 IS DISMISSED . 3. WE , THEREFORE, FOLLOWING THE AFORESAID ORDER OF THE TRIBUNAL, CONFIRM THE ORDER OF THE CIT (A). 16. CONSIDERING THE ABOVE SETTLED NATURE OF THE ISSUE, WE ARE OF THE OPINION THAT THE DECISION TAKEN BY THE CIT (A) IS FAIR AND REASONABLE AND IT DOES NOT CALL F OR ANY INTERFERENCE. ACCORDINGLY, GROUND NO.1 RAISED BY THE REVENUE IS DISMISSED . 17. GROUND NO.2 RELATES TO THE ALLOWANCE OF DEDUCTION UNDER SECTION 80IB ON THE PROFITS DERIVED FOR MANUFACTURING DONE BY THE ASSESSEE FROM THE L EASE & LICENSE MANUFACTURERS (LLMS). IN THIS REGARD, LD COUNSEL BROUGHT OUR ATTENTION TO THE SAID ORDER OF THE TRIBUNAL (SUPRA), DATED 2.1.2009 AND MENTIONED THAT THE SIMILAR ISSUE WAS DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE VIDE PARA 8 OF THE SAID TRI BUNALS ORDER (SUPRA) AND READ OUT THE SAME. 18. ON THE OTHER HAND, LD DR RELIED ON THE ORDER OF THE AO. 19. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE CITED ORDERS OF THE TRIBUNAL (SUPRA), DATED 2.1.200 9. ON PERUSAL OF THE SAID ORDER OF THE TRIBUNAL, WE FIND PARA 8 IS RELEVANT TO THE ISSUE UNDER CONSIDERATION AND THE SAME READS AS UNDER: 8. THE NEXT GROUND RELATE S TO ALLOWANCE OF DEDUCTION UNDER SECTION 80IB ON THE PROFITS DERIVED FOR MANUFACTURING DON E BY THE ASSESSEE FROM THE LOAN LICENSE MANUFACTURES (LLMS). IN THIS REGARD, IT WAS FURTHER CONTENDED THAT THIS ISSUE IS ALSO COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES CASE FOR ASSESSMENT YEAR 2002 - 2003 IN WHICH THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE FOLLOWING ITS ORDER IN ITA NO.4142/MUM/2005. THE RELEVANT OBSERVATION S OF THE TRIBUNAL ARE EXTRACTED HEREUNDER: 16. THE AO DENIED THE DEDUCTION HOLDING THAT SUCH PROFIT ARE DERIVED FROM OUT - SOURCING ACTIVITIES AND NOT FOR THE MAN UFACTURING DONE BY THE 7 ASSESSEE ITSELF AND THEREFORE, SUCH PROFITS ARE NOT ENTITLED TO DEDUCTION. CIT (A) GAVE A RELIEF TO THE ASSESSEE RELYING ON HIS OWN ORDER FOR AY 2001 - 02. DURING THE ASSESSMENT PROCEEDINGS BEFORE US, THE COUNSEL MENTIONED THAT THE S AID ORDER FOR AY 2001 - 02 TRAVELLED UP TO THE ITAT, WHERE THE TRIBUNAL HELD THAT THE ASSESSEE IS ENTITLED TO RELIEF AS DISCUSSED IN PARA 5 AND 5.1 OF THE ORDER OF ITA NO. 4142/MUM/2005 WHICH IS PLACED AT PAGES 17 TO 20 OF THE PAPER BOOK. 17. WE HAVE PERUSED THE SAME AND RELEVANT PATS OF PARAS 5 AND 5.1 READS AS UNDER: GROUND NO.2 AND 3 ARE AGAINST DEDUCTION ALLOWED U/S 80IBON THE PROFIT DERIVED FROM MANUFACTURING DONE BY THE ASSESSEE FROM LOAN LICENSE MANUFACTURERS (LLM) ETC. THE LD CIT (A) ALLOWED THE ISSUE IN F A VOUR OF THE ASSESSEE FOLLOWING THE ORDER OF THE EARLIER YEAR. EARLIER ORDER OF THE LD CIT (A) IN GROUP CONCERN FOR AY 1998 - 99 AND 2001 - 02 HAVE BEEN CONFIRMED BY THE TRIBUNAL. THE ORDER OF THE EARLIER YEAR IN GROUP CONCERNS I.E., M/S. OKASA PVT LTD HAVE BEEN CONFIRMED BY THE TRIBUNAL IN ITA NO.4140 AND 4141/M/2005. COPY OF THE SAME IS PLACED ON RECORD AT PAGE 100 OF THE PAPER BOOK. SINCE THE FACTS ARE IDENTICAL IN THE PRESENT CASE ALSO, THEREFORE FOLLOWING THE ORDER OF THE TRIBUNAL IN CASE OF GROUP CONCERNS OF THE AS S ESSEE (SUPRA) WE CONFIRM THE ORDER OF THE LD CIT (A) HERE ALSO. THIS GROUND OF THE DEPARTMENT ALSO FAILS. 18. IN VIEW OF THE ABOVE, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE CIT (A). ACCORDINGLY, GROUND NO.4 & 5 OF THE REVENUE ARE DISMISSED. 9. WE, THEREFORE, FOLLOWING THE SAME, DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE. 20. CONSIDERING THE ABOVE SETTLED POSITION OF THE ISSUE, WE ARE OF THE OPINION THAT THE ISSUE MUST BE DECIDED IN FAVOUR OF THE ASSESSEE. ACCO RDINGLY, GROUND NO.2 RAISED BY THE REVENUE IS DISMISSED. 21. GROUND NO.3 RELATES TO THE ALLOWABILITY OF DEPB CREDIT FOR THE PURPOSE OF DEDUCTION U/S 80IB OF THE ACT IN VIEW OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA VS. CIT ( 317 ITR 218). AT THE OUTSET, LD REPRESENTATIVES OF BOTH THE PARTIES MENTIONED THAT THIS GROUND HAS BECOME INFRUCTUOUS NOW, IN VIEW OF THE RECTIFICATION ORDER PASSED BY THE CIT (A) U/S 154 OF THE ACT. ON EXAMINING THE CLAIMS OF THE PARTIES, WE FIND THAT T HIS GROUND NO.3 IS REQUIRED TO BE DISMISSED AS INFRUCTUOUS. ACCORDINGLY, GROUND NO.3 IS DISMISSED AS INFRUCTUOUS. 22. GROUND NO.4 RELATES TO THE ALLOWABILITY OF DEDUCTION U/S 80IB OF THE ACT IN RESPECT OF RECEIPTS IN SALE OF SCRAP. IN THIS CONNECTION, LD REPRESENTATIVES OF BOTH THE PARTIES MENTIONED THIS ISSUE IS REQUIRED TO REVISIT THE FILE OF THE AO IN VIEW OF THE FACT THAT THE S AID SCRAP NOT ONLY INCLUDES GENERATED DURING MANUFACTURING ACTIVITY BUT ALSO OTHER GENERAL SCRAP SUCH AS PACKING MATERIAL ETC. IT IS A SETTLED ISSUE THAT THE RECEIPTS RECEIVED ON SALE OF SCRAP DURING THE MANUFACTURING ACTIVITY IS ENTITLED FOR DEDUCTION U/ S 80IB AND OTHER SCRAP PROCEEDS ARE NOT ELIGIBLE IN VIEW OF THE PRINCIPLES LAID DOWN IN THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA (SUPRA). AO IS REQUIRED TO EXAMINE THE ABOVE ISSUE AFRESH AFTER 8 AFFORDING A REASONABLE OPPORTUNI TY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, GROUND NO.4 IS ALLOWED FOR STATISTICAL PURPOSES . 23. IN CONNECTION WITH GROUND NO.5, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT CIT (A) HAS NOT ALLOWED ANY RELIEF ON ACCOUNT TECHNOLOGY TRANSFER FEES , THEREFO RE, THE GROUND IS MISPLACED. ON THIS ISSUE, WE FIND MERIT IN THE ASSERTIONS OF THE LD COUNSEL AND THIS PART OF THE GROUND IS DISMISSED . IN CONNECTION WITH THE OTHER ISSUES RAISED IN THIS GROUND I.E., MISCELLANEOUS SALES / PROCESSING CHARGES, MISCELLANEOUS RECEIPTS, WHETHER THEY ARE ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT, WE FIND THAT THE SIMILAR ISSUES CAME UP FOR ADJUDICATION BEFORE THE TRIBUNAL IN THE EARLIER YEARS AND THE SIMILAR GROUNDS WERE DISMISSED BY THE TRIBUNAL VIDE PARA 6 & 7 OF THE SAID ORD ER OF THE TRIBUNAL 2.1.2009 (SUPRA). FOR THE SAKE OF COMPLETENESS OF THIS ORDER, THE SAID PARAS ARE REPRODUCED HERE UNDER: 6. THE NEXT GROUND RELATE TO THE FINDING OF THE CIT (A) THAT OTHER INCOME LIKE PROCESSING CHARGES AND MISCELLANEOUS RECEIPTS ETC HA D ARISEN TO THE ASSESSEE IN THE COURSE OF MANUFACTURING ACTIVITIES OF THE ASSESSEES INDUSTRIAL UNDERTAKING AND SUCH AS THEY HAVE DIRECT NEXUS WITH THE OPERATION OF MANUFACTURING ACTIVITIES OF THE ASSESSEE AND SHOULD NOT BE EXCLUDED FROM THE ELIGIBLE PROFI TS OF THE UNIT FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80IB OF THE ACT. IN THIS REGARD, IT WAS CONTENDED THAT IDENTICAL ISSUE WAS RAISED IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2002 - 2003 BEFORE THE TRIBUNAL AND THE TRIBUNAL HAS HELD THAT THE SAI D RECEIPTS / INCOME ARE DERIVED FROM THE INDUSTRIAL UNDERTAKING UNDER SECTION 80IB OF THE ACT. THE RELEVANT OBSERVATION OF THE TRIBUNAL IS EXTRACTED HEREUNDER: 13. WE HAVE NOTICED THAT THESE INCOMES ARE EARNED BY THE ASSESSEE BY USE OF THE INFRASTRUCTURE OF THE UNIT DIRECTLY FOR THE PURPOSE OF EARNING RECEIPTS BY WAY OF JOB WORKS EXTENDED BY THE ASSESSEE. IN THESE CIRCUMSTANCES, THE SAID CHARGES ARE HELD TO BE PROFITS DERIVED FROM THE INDUSTRIAL UNDERTAKING U/S 80IB. IT IS RELEVANT TO MENTION THAT FINDIN G OF THE CIT (A) IN PARA 12 OF THE IMPUGNED ORDER, THE SAME IS REPRODUCED AS UNDER: THE APPELLANTS SUBMISSION IN THIS REGARD APPEARS TO BE CORRECT AND I HOLD THAT THE INCOME TO THE APPELLANT ON ACCOUNT OF THE AFORESAID ITEMS HAS ARISEN TO THE APPELLANT D URING THE COURSE OF MANUFACTURING ACTIVITIES OF THE APPELLANT AND HAS A DIRECT NEXUS OF THE PROFITS AS DERIVED BY THE APPELLANT FROM THE ELIGIBLE INDUSTRIAL UNDERTAKING AND AS SUCH THE AO IS DIRECTED TO INCLUDE THE SAME IN THE ELIGIBLE PROFITS OF THE UNDER TAKING FOR THE PURPOSE OF DEDUCTION U/S 80IB. 14. IN VIEW OF THE ABOVE POSITION, THE ORDER OF THE CIT (A) DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUND NO.3 OF THE REVENUE IS DISMISSED. 7. WE, THEREFORE, FOLLOWING THE SAME, CONFIRM THE ORDER OF THE CIT(A). 24. CONSIDERING THE ABOVE SETTLED POSITION OF THE ISSUE, WE ARE OF THE OPINION THAT THIS PART OF THE GROUND RAISED BY THE REVENUE SHOULD BE DISMISSED. ACCORDINGLY, THIS PART OF THE GROUND IS DISMISSED AND GROUND NO.5 IS PARTLY ALLOWED . 25. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES . 9 CROSS APPEALS FOR THE AY 2009 - 2010 ITA NO.5813/M/2011 (AY 2009 - 2010) (BY ASSESSEE) 26. THIS APPEAL FILED BY THE ASSESSEE ON 17.8.2011 IS AGAINST THE ORDER OF THE CIT (A) - 36, MUMBAI DATED 23.5.2011. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. THE CIT (A) ERRED IN HOLDING THAT RECEIPTS BY WAY OF INSURANCE CLAIMS DO NOT QUALIFY TO BE INCLUDED IN THE PROFITS DERIVED FROM THE UNDERTAKING IN THE CONTEXT OF SECTION 80IB / 80IC / 80IE / 10B OF THE ACT AND THE SAME IS RESTRICTED TO THE COST OF THE GOODS. 2. THE LD CIT (A) HAS FURTHER ERRED IN UPHOLDING DISALLOWANCE OF ALLEGED BOGUS PURCHASES IN THE AMOUNT OF RS. 83,27,214/ - . WITHOUT PREJUDICE TO THE GENERALITY, THE LD CIT (A) HAS ERRED IN ALLEGING UNCLARIFIED DISCREPANCIES. YOUR APPELLANT IS AGGRIEVED BY THE DENIAL OF OPPORTUNITY TO CLARIFY THE ALLEGED DISCREPANCIES. YOUR APPELLANT SEEKS THE OPPORTUNITY TO CLARIFY TO THE HONBLE TRIBUNAL THAT THE ALLEGED DISCREPANCIES ARE AMENABLE TO APPROPRIATE EXPLANATION WITH REFERENCE TO THE MATERIAL ON RECORD AND SUCH SUPPLEMENTARY MATERIAL WHICH MAY BE REQUISITIONED IN THE COURSE OF THE PROCEEDINGS. 3. THE LD CIT (A) HAS ERRED IN NOT ALLOWING THE WEIGHT ED DEDUCTION UNDER SECTION 35(2AB) ON REVENUE AND CAPITAL EXPENDITURE ON APPROVED R & D CENTRE OF RS. 57,15,86,155/ - AND RS. 7,43,26,886/ - . 4. THE LD CIT (A) ERRED IN RESTORING BACK TO THE FILE OF THE AO THE DISALLOWANCE OF RS. 46,48,287/ - UNDER SECTION 14 A OF THE INCOME TAX ACT. 27. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE, BROUGHT OUR ATTENTION TO THE ABOVE GROUNDS AND MENTIONED THAT GROUND NO.1 IS NOT PRESSED. AFTER HEARING THE LD DR IN THIS REGARD, THE SAID GROUND NO.1 IS DISMISSED AS NOT PRESSED . 28. GROUND NO.2 AND 4 RELATE TO THE DISALLOWANCE OF ALLEGED BOGUS EXPENSES AND DISALLOWANCE U/S 14A RESPECTIVELY. THESE TWO GROUNDS ARE EXACTLY IDENTICAL TO THAT OF THE GROUNDS RAISED BY THE ASSESSEE IN ITS APPEAL FOR THE AY 2008 - 2009, WHICH IS ADJUDICAT ED BY US IN THE ABOVE MENTIONED PARAGRAPHS OF THIS ORDER. SINCE, THE GROUNDS NO.2 AND 4 OF THE PRESENT APPEAL ARE SIMILAR TO THAT OF THE GROUNDS RAISED BY THE ASSESSEE FOR THE AY 2008 - 09, THEREFORE, THE DECISION GIVEN BY US WHILE ADJUDICATING THE GROUND NO.2 AND 3 OF THE SAID ASSESSEES APPEAL FOR THE AY 2008 - 09 SQUARELY APPLIES TO THE INSTANT GROUNDS TOO. THEREFORE, GROUND NO.2 AND 4 OF THE PRESENT APPEAL ARE ALSO REMANDED TO THE FILE OF THE AO FOR A FRESH ADJUDICATION AFTER AFFORDING A REASONABLE OPPOR TUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, GROUND NO.2 AND 4 ARE ALLOWED FOR STATISTICAL PURPOSES . 29. GROUND NO.3 RELATES TO WEIGHTED DEDUCTION U/S 35(2AB) OF THE ACT. THIS GROUND IS IDENTICAL TO THAT OF THE GROUND NO.4 RAISED BY THE ASSESSEE FO R THE AY 10 2008 - 2009, WHICH IS ADJUDICATED BY US IN THE ABOVE PARAS OF THIS ORDER. SINCE, THE ISSUE RAISED IN THE INSTANT GROUND IN SIMILAR TO THAT OF THE GROUND NO.4 OF THE ASSESSEES APPEAL (SUPRA), THE DECISION GIVEN BY THEREIN APPLIES TO THE INSTANT GRO UND TOO. ACCORDINGLY, GROUND NO.3 IS REMANDED TO THE FILE OF THE AO FOR ADJUDICATING THE ISSUE AFRESH AFTER AFFORDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, GROUND NO.3 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURP OSES. 30 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES . ITA NO.6558/M/2011 (AY 2009 - 2010) (BY REVENUE) 31. THIS APPEAL FILED BY THE REVENUE ON 29.9.2011 IS AGAINST THE ORDER OF THE CIT (A) - 36, MUMBAI DATED 23.5.2011. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN NOT CONFIRMING THE BASIS ADOPTED BY AO FOR COMPUTING 80IB DEDUCTION ADMISSIBLE TO THE ELIGIBLE UNITS AND IN HOLDING THAT THE AO WAS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 80IB(13) R.W. PROVISO TO SECTION 80IA (8) OF THE ACT , WHEN THE ASSESSEE WAS UNDER OBLIGATION OF LAW TO ADOPT THE MARKET VALUE FOR THE GOODS TRANSFERRED TO AND FROM THE 80IB UNDERTAKING. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR CLAIMING DEDUCTION U/S 80IB ON THE PROFITS DERIVED FROM THE WORK / MANUFACTURING GOT DONE THROUGH LEASE AND LICENSE MANUFACTURING (LLMS). 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) WAS NOT JUSTIFIED IN HOLDING THAT DEPB CREDIT IS ELIGIBLE FOR COMPUTATION OF PROFITS FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 80IB WHEN ITAT HAS DECIDED THIS MATTER AGAINST ASSESSEE IN ITA NO.5606/MUM/2008 FOR AY 2006 - 2007 BY RELYING ON THE DECISION OF SUPREME COURT IN THE CASE OF LIBERTY INDIA VS. CIT (317 ITR 218). 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN DELETING THE DISALLOWANCE OF PROVISION OF LOSS OF RS. 1,04,96,93,011/ - REPRESENTING PROVISION FOR UNSETTLED FORWARD CONTRACT WITHOUT APPRECIATING THE FACT THAT THE AMOUNT CLAIMED BY THE ASSESSEE REPRESENTED THE DEDUCTION IN THE NOTIONAL VALUE OF OUTSTANDING FORWARD CONTRACT REVALUATION WHICH WAS YET TO BE SETTLED AND LOSS CLAIMED CANNOT BE ALLOWED BEING A NOTIONAL OR CONTINGENT WHICH VIEW IS SUPPORTED BY DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. INDIAN OVERSEAS BANK 151 I TR 446, HONBLE UTTARAKHAND HIGH COURT IN THE CASE OF CIT VS. ONGC AND HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. KAMANI METAL PRODUCTS. 32. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE ABOVE GROUNDS AND MENTIONED THAT GR OUND NO.1 AND 2 OF THE APPEAL ARE SIMILAR TO THAT OF THE GROUNDS NO.1 AND 2 RAISED BY THE REVENUE FOR THE AY 2008 - 09. CONSIDERING 11 THE SIMILAR NATURE OF THE GROUNDS, WE ARE OF THE OPINION THAT THE ADJUDICATION AND DECISION GIVEN BY US WITH REGARD TO GROUND S NO.1 AND 2 IN THE SAID APPEAL FOR THE AY 2008 - 2009 , WHICH IS DECIDED IN THE ABOVE PARAGRAPHS OF THIS ORDER, SQUARELY APPLIES TO THE GROUNDS NO.1 AND 2 OF THE PRESENT APPEAL TOO. ACCORDINGLY, GROUNDS NO.1 & 2 RAISED BY THE REVENUE ARE DISMISSED . 33. REFE RRING TO THE GROUND NO.3 , LD COUNSEL FOR THE ASSESSEE MENTIONED THIS GROUND IS ALSO SIMILAR TO THAT OF THE GROUND NO.3 RAISED BY THE REVENUE FOR THE AY 2008 - 2009. BUT, CONSIDERING THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA (SUP RA), THE FINDING GIVEN BY THE AO IS PROPER AND THEREFORE THE REVENUE IS BOUND TO SUCCEED ON THIS ISSUE. HE ALSO MENTIONED THAT UNLIKE IN THE EARLIER ASSESSMENT YEARS, THE CIT (A) DID NOT RECTIFY HIS ORDER U/S 154 OF THE ACT, DENYING THE BENEFIT OF DEDUCTI ON WITH REGARD TO THE DEPB. CONSIDERING THE ADMITTED POSITION, THE GROUND NO.3 RAISED BY THE REVENUE IS ALLOWED. 34. GROUND NO.4 RELATES TO THE DISALLOWANCE OF PROVISION OF LOSS OF RS.104,96,93,011/ - ON FORWARD CONTRACTS. BRIEFLY STATED RELEVANT FACTS IN THIS REGARD ARE THAT THE ASSESSEE ASSESSEE EARNS REVENUES IN FOREIGN CURRENCY FROM EXPORT OF GOODS; PROVISION OF TECHNICAL SERVICES AND INTEREST ON LOANS ADVANCES TO SUBSIDIARY COMPANIES. FOR THE PURPOSE OF SAFEGUARDING THE CURRENCY FLUCTUATIONS, ASSESSE E ENTERED INTO FORWARD CONTRACTS WITH ITS BANKERS. FOR ACCOUNTING THE CURRENCY FLUCTUATIONS, ASSESSEE CONSISTENTLY FOLLOWING THE AS11 BEING THE ACCOUNTING STANDARD NOTIFIED UNDER THE COMPANIES (ACCOUNTING STANDARDS) RULES, 2006 FRAMED PURSUANT TO SECTION 211(3C) OF THE COMPANIES ACT, 1956. PURSUANT TO THE ABOVE, ASSESSEE RECOGNIZED CURRENCY FLUCTUATION GAINS OF RS. 106.14 CRS IN RESPECT OF OUTSTANDING DUES ARISING FROM THE BUSINESS TRANSACTIONS AS ON 31 ST MARCH, 2009 AND CREDITED THE SAME TO THE PROFIT AND LOSS ACCOUNT. THE GAINS WERE OFFERED TO TAX IN THE RETURN OF INCOME CONSISTENT WITH THE ACCOUNTING POLICY EMPLOYED IN THE ACCOUNTS. AT THE SAME TIME, ASSESSEE RECOGNIZED THE LOSSES OF RS.104.97 CRS IN RESPECT OF THE OUTSTANDING FORWARD COVER CONTRACTS AS ON 31.3.2009 AND PROVIDED THE SAME IN THE P & L ACCOUNT. THE SAID LOSS WAS CLAIMED AS A DEDUCTIBLE BUSINESS LOSS IN THE RETURN. DURING THE ASSESSMENT, AO MADE DISALLOWANCE, ON THE GROSS BASIS, OF THE PROVISION FOR LOSS OF RS. 104.97 CRS AND BROUGHT TO TAX THE PROVISION MADE FOR GAINS OF RS. 106.14 CRS ARISING FROM THE OUTSTANDING DUES FROM THE 12 BUSINESS TRANSACTIONS. AGGRIEVED, ASSESSEE FILED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 35. DURING T HE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CIT (A) DELETED THE DISALLOWANCE MADE BY THE AO VIDE DECISION GIVEN IN PAGE 19 AND 20 OF HIS ORDER . AGGRIEVED WITH THE DECISION OF THE CIT (A), REVENU E IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUND NO.4 OF THE APPEAL. 36. DURING THE PROCEEDINGS BEFORE US, LD DR RELIED ON THE ORDER OF THE AO. 37. ON THE OTHER HAND, LD COUNSEL FOR THE ASSESSEE HEAVILY RELIED ON THE ORDER OF THE CI T (A) AND REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. 38. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. ON PERUSAL OF THE ORDER OF THE CIT (A) WE FIN D THE FOLLOWING PORTIONS OF HIS DECISION ARE RELEVANT IN THIS REGARD AND THE SAME READ AS UNDER: 10.. THE TESTS LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF WODWARD GOVERNOR (SUPRA) ARE SATISFIED IN THE APPELLANTS CASE ON THE BASIS THAT THE A PPELLANT IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, THE ACCOUNTING POLICY IN THIS BEHALF HAS BEEN CONSISTENTLY FOLLOWED BY THE APPELLANT AND THE CLAIM MADE BY THE APPELLANT IS BONA FIDE. THEREFORE, I HOLD THAT THE APPELLANT HAS MADE CORRECT CLAIM FOR DEDUCTIBILITY OF PROVISION FOR LOSS OF RS. 104.97 CRS BY MARKING TO MARKING THE OUTSTANDING FORWARD COVER CONTRACTS AND THE DISALLOWANCE BY THE AO IS NOT JUSTIFIED BOTH ON FACTS AND IN LAW. THE DISALLOWANCE OF RS. 104.97 CRS IS THEREFORE DIRECTED TO BE DE LETED. 39. FROM THE ABOVE, WE FIND THAT WHILE DELETING THE DISALLOWANCE MADE BY THE AO, CIT (A) HAS DISCUSSED THE ISSUE AT LENGTH AND REACHED THE ABOVE JUSTIFIABLE CONCLUSION AND THE SAME IS FAIR AND REASONABLE. THE LOSS QUANTIFIED ON REVALUATION OF THE FORWARD CONTRACT IS AN ALLOWABLE BUSINESS LOSS. IT IS A SETTLED LEGAL PROPOSITION AT THE LEVEL OF THE APEX COURT. THIS IS NOT THE CASE OF THE REVENUE THAT THE IMPUGNED LOSSES ARE EARNED ON ACCOUNT OF PREMATURE CANCELLATION OF FORWARD CONTRACTS. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT (A) AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUND NO.4 RAISED BY THE REVENUE IS DISMISSED. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COUR T ON 2 5 T H JULY, 2014. S D / - S D / - (VIJAY PAL RAO) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 2 5 .7.2014 . . ./ OKK , SR. PS 13 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBA I