M/s. CENTURY TEXTILES & INDUSTRIES LTD., MUMBAI V. DCIT Rg. - 6(2), MUMBAI

ITA 6365/MUM/2005

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8346 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 08-10-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 27-10-2005
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: Y P TRIVEDI
• Assessee Lawyers: S M BANDI
• Keywords: Depreciation; Business expenditure; Bad and doubtful debts; Revenue expenditure
• Section: 80HHC; 14A; 115JB; 37(1); 10B

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL I , BENCH MUMBAI BEFORE SHRI P.M.JAGTAP , A M & SHRI AMIT SHUKLA , J M ITA NO. 6365 / MUM/ 20 0 5 ( ASSESSMENT YEAR : 200 2 - 20 0 3 ) CENTURY TEXTILES AND INDUSTRIES LTD., CENTURY BHAVAN, DR. ANNIE BESANT ROAD, WORLI, MUMBAI - 30 . VS. DCIT, RANGE - 6(2), MUMBAI PAN/GIR NO. : AAACC 2659 Q ( APPELLANT ) .. ( RESPONDENT ) AND ITA NO. 6269 /MUM/20 0 5 ( ASSESSMENT YEAR :200 2 - 200 3 ) DCIT, RANGE - 6(2), MUMBAI VS. CENTURY TEXTILES AND INDUSTRIES LTD., CENTURY BHAVAN, DR. ANNIE BESANT ROAD, WORLI, MUMBAI - 30 . PAN/GIR NO. : AAACC 2659 Q ( APPELLANT ) .. ( RESPONDENT ) /RE VENUE BY : MR. Y.P.TRIVEDI /ASSESSEE BY : MR. S.M.BANDI DATE OF HEARING : 8 TH OCT ., 2012 DATE OF PRONOUNCEMENT : 31 ST OCT.,2012 O R D E R PER AMIT SHUKLA . J M. : THESE ARE THE CROSS APPEALS ARISING OUT OF IMPUGNED ORDER DATED 12 - 8 - 2005 , PASSED BY CIT(A ) - VI, MUMBAI FOR THE QUANTUM OF AS SESSMENT PASSED UNDER SECTION 143 (3) OF THE ACT , FOR THE ASSESSMENT YEAR 2002 - 03 . ITA NO S . 6365 & 6269 / 05 2 2. WE FIRST TAKE UP ITA NO. 6365 /0 5 FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2002 - 03 . LEARNED SENIOR COUNSEL APPEARING ON BEHALF OF THE ASSESSEE HAS FURNISHED A CHART S TATING, INTER ALIA , THAT MOST OF THE ISSUES ARE EITHER COVERED OR NOT PRESSED. IN GROUND NO. 1 , THE ASSESSEE HAS CHALLENGED THE FINDINGS OF THE LEARNED CIT(A) IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN HOLDING THAT FOLLOWING INCOMES WERE NOT DERIV ED FROM TWO UNITS WHICH WERE 100% EOU FOR THE PURPOSE OF CLAIMING EXEMPTION UNDER SECTION 10B OF THE INCOME TAX ACT : - (I) CENTURY YARN (A) RS.4,79,829/ - STORE BARDANA SALE (B) RS.24,693/ - BONUS RECEIVED AGAINST PURCHASE OF IMPORTED SPARES OF AUTOCORNE RS M/C. (C) RS.6,908/ - RECEIPT ON ACCOUNT OF SALE OF VEGETABLES, FRUITS, GRASS ETC. ----------------- RS.5,11,430/ - (II) CENTURY DENIM : (A) RS. 8,01,900 / - STORE S MISCELLANEOUS SALE (B) RS. 6,94,339/ - RECEIVED ON A/C OF COTTON WASTE EXPENSES (C) RS 1,50,972 / - BONUS ON SPARE PURCHASE FROM W.SCHLAFHORST A.G. & CO. , GERMANY FROM 1.11.99 TO 30.10.00. (D) RS.9,55,562/ - AMOUNT OF SETTLEMENT OF CANCELLATION OF SALE CONTRACT OF M/S SUDACOT TRADING S.A. FOR SUPPLY OF 200 MT GREEK CO TTON, CONTRACT NO.1010/GR -------------------- RS.26,02,773/ - 3 . BOTH THE PARTIES WERE HEARD AT LENGTH ON THIS ISSUE. AFTER CAREFULLY CONSIDERING THE RIVAL SUBMISSIONS AND ALSO PERUSING THE ORDERS OF THE AUTHORITIES BELOW, OUR FINDINGS ARE AS UNDER : - ITA NO S . 6365 & 6269 / 05 3 ( I) REGARDING STORES BARDANA SALE OF RS.4,79,829/ - IN CENTURY YARN , LEARNED COUNSEL HAS SUBMITTED THAT THIS GROUND IS NOT PRESSED AS IT HAS WRONGLY BEEN RAISED , BECAUSE THE CIT(A) HAS ALLOWED DEDUCTION UNDER SECTION 10B OF THE ACT. IN VIEW OF TH IS FACT , THI S ISSUE IS TREATED AS DISMISSED BEING NOT PRESSED. (II) REGARDING BONUS RECEIVED AGAINST PURCHASE OF IMPORTED SPARES OF AUTOCORNERS M/C. AMOUNTING TO RS. 24,693/ - , IT IS SEEN F ROM THE PERUSAL OF THE APPELLATE ORDER AS WELL AS THE ASSESSMENT ORDER, THAT THI S ISSUE HAS NOT BEEN PROPERLY EXAMINED BY EITHER OF THE AUTHORITIES BELOW, THEREFORE, ON THE FACTS AND CIRCUMSTANCES, THIS ISSUE IS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR CONSIDERING IT AFRESH AFTER GIVING OPPORTUNITY TO THE ASSESSEE. THUS, THIS ISSUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. (III) REGARDING RECEIPT ON ACCOUNT OF SALE OF VEGETABLES, FRUITS, GRASS ETC., FOR A SUM AMOUNTING TO RS. 6908 / - , AFTER GOING THROUGH THE RECORDS, IT IS SEEN THAT THESE ITEMS HAVE NO CONNECTION WITH THE INDUSTRIAL UNDERTAKING AND ARE NOT DERIVED FROM PROFITS AND GAINS OF THE UNDERTAKING, THEREFORE, THE FINDING GIVEN BY THE CIT(A) THAT IT IS TO BE EXCLUDED FROM THE COMPUTATION OF INCOME UNDER SECTION 10B OF THE ACT, IS CONFIRMED. THUS, THIS ISSUE I S DECIDED AGAINST THE ASSESSEE. (IV) REGARDING STORES MISCELLANEOUS SALE FOR SUM S AMOUNTING TO RS. 8,01,900/ - IN CENTURY DENIM UNIT, LEARNED CIT(A) HAS GIVEN A FINDING THAT THE STORE MISCELLANEOUS SALE IS IN RESPECT OF VARIOUS ITA NO S . 6365 & 6269 / 05 4 STORE PURCHASES DURING THE YEA R AND IS NOT IN RESPECT OF THE MANUFACTURING ACTIVITY OF THE ASSESSEE COMPANY AND, THEREFORE, THE SAME IS NOT REQUIRED TO BE CONSIDERED AS INCOME FROM INDUSTRIAL UNDERTAKING. LEARNED COUNSEL SUBMITTED THAT THIS ISSUE HAS NOT BEEN PROPERLY DISCUSSED BY THE ASSESSING OFFICER AS WELL AS C IT(A) . HE, THEREFORE, SUBMITTED THAT THE MATTER SHOULD BE RE - EXAMINED. ON THE MERITS, HE SUBMITTED THAT THE SALE OF MISCELLANEOUS STORE ITEMS PURCHASED DURING THE YEAR RELATES TO MANUFACTURING ACTIVITIES OF THE ASSESSEE. AFTER GOING THROUGH THE ORDER OF THE CIT(A) , WE FIND THAT THIS ISSUE HAS BEEN DECIDED BY THE CIT(A) AT PAGE 13 IN ITEM N O. VI. THE SALE OF MISCELLANEOUS STORES CANNOT BE HELD TO BE DERIVED FROM EXPORT ORIENTED UNDERTAKING AND IN ABSENCE OF ANY DETAIL TO CONTROVE RT THE SAME, THE FINDING OF THE CIT(A) IS ACCORDINGLY AFFIRMED. THE ASSESSEE COULD NOT EXPLAIN AS TO HOW THE SA LE OF MISCELLANEOUS STORE ITEM S IS DERIVED FROM THE ACTIVITIES CARRIED ON BY THE EOU UNDERTAKING . THUS, THIS ISSUE IS DECIDED AGAINST THE ASSESSE E. (V) REGARDING RECEI PTS ON ACCOUNT OF COTTON WASTE EXPENSES FOR SUM OF RS. 6,94,339/ - , LEARNED CIT(A) HAS NOTED THAT T HIS UNIT HAS BEEN COLLECTING R E . 1 PER KG. OF COTTON WASTE SOLD TO CUSTOMER IN A PARTICULAR PACKING. THE COST OF PACKING MATERIAL REQUIRED FOR SUCH PACKING IS DEBITED TO COTTON WASTE EXPENSES AND THE AMOUNT RECEIVED FROM THE CUSTOMER IS BEING CREDITED TO THIS ACCOUNT AND THE NET EXCESS IS SHOWN IN THE PROFIT AND LOSS ACCOUNT. HE FURTHER ITA NO S . 6365 & 6269 / 05 5 OBSERVED THAT THE AFORESAID NET INCOME IS NOT IN CONNEC TION WITH THE PRODUCTION OF ARTICLE OR THING, THE ABOVE COTTON WASTE EXPENSES WHICH IS THE NET INCOME HAS RIGHTLY BEEN EXCLUDED BY THE ASSESSING OFFICER. THE ASSESSEE IS ENGAGED IN MANUFACTURING OF DENIM CLOTH IN THE SAID EOU , WHICH RESULTS IN COTTON WAST E ALSO . AS NOTED BY THE CIT(A) , THE COST OF PACKING MATERIAL FOR SUCH PACKING OF COTTON WASTE IS DEBITED TO THE WASTE EXPENSES AND THE AMOUNT RECEIVED FROM THE CUSTOMERS IS CREDITED TO THIS ACCOUNT AND N ET EXCESS IS SHOWN IN THE PROFIT AND LOSS ACCOUNT. TH IS SALE IS DIRECTLY RELATED TO THE ACTIVITIES CARRIED OUT BY THE ASSESSEE AND, IS, THEREFORE, DERIVED FROM THE UNDERTAKING OF EOU. TH US , THIS INCOME IS DIRECTED TO BE INCLUDED IN THE COMPUTATION FOR EXEMPTION UNDER SECTION 10B OF THE ACT BEING DERIVED FROM THE SAID UNIT. ACCORDINGLY, THIS ISSUE IS ALLOWED IN FAVOUR OF THE ASSESSEE. (VI) REGARDING B ONUS ON SPARE PURCHASE FROM W.SCHLAFHORST A.G. & CO., GERMANY FROM 1.11.99 TO 30.10.0 0. RS1,50,972/ - . LEARNED CIT (A) HAS HELD THAT THIS HAS NO CONNECTION WITH TH E MANUFACTURING OF ANY ARTICLE AND THING AND IS, THEREFORE, UPHELD THE EXCLUSION MADE BY THE ASSESSING OFFICER. FROM THE PERUSAL OF THE ORDER OF THE ASSESSING OFFICER AS WELL AS CIT(A) , IT IS NOT CLEAR WHETHER THE PURCHASE FOR STORES WAS ON REVENUE ACCOUNT OR NOT. IF IT IS ON THE REVENUE ACCOUNT, THEN IT IS DERIVED FROM THE PROFIT ITA NO S . 6365 & 6269 / 05 6 AND GAIN FROM THE EOU. THEREFORE, IN THE INTEREST OF JUSTICE THIS ISSUE IS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER TO CONSIDER IT AFRESH AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE. THIS ISSUE IS ALLOWED FOR STATISTICAL PURPOSES. (VII) REGARDING AMOUNT OF SETTLEMENT OF CANCELLATION OF SALE CONTRACT OF M/S SUDACOT TRADING S.A. FOR SUPPLY OF 200 MT GREEK COTTON, CONTRACT NO.1010/GR FOR SUM AMOUNTING TO RS.9,55,562/ - . THE LEARNED COUNSEL AT THE TIME OF HEARING, DID NOT PRESS FOR THIS ISSUE . ACCORDINGLY, THE SAME IS TREATED AS DISMISSED BEING NOT PRESSED. I N THE RESULT, GROUND NO.1 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AS PER THE FINDING S GIVEN ON VARIOUS ISSUES AS ABO VE . 4 . IN GROUND NO. 2 , THE ASSESSEE HAS CHALLENGED THE FINDING OF THE CIT(A) IN AFFIRMING THE ACTION OF THE ASSESSING OFFICER BY TREATING THE FORFEITURE OF EMPLOYEE S SECURIT Y DEPOSIT OF RS. 51,327/ - AS INCOME OF THE ASSESSEE. 4.1 AT THE TIME OF HEARING , LEARNED COUNSEL, AT THE OUTSET, FAIRLY ADMITTED THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE BY THE ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO . 3926/M/2005 FOR THE ASSESSMENT YEAR 2001 - 02 VIDE ORDER DATED 16 - 5 - 2012. IN THIS CASE THE TRIBUN AL FOLLOWED ITS EARLIER DECISION. 4.2 AFTER GOING THROUGH THE ORDER OF THE PRECEDING YEAR, WE FIND THAT THIS ISSUE STANDS COVERED AGAINST THE ASSESSEE RIGHT FROM THE EARLIER ITA NO S . 6365 & 6269 / 05 7 YEARS WHICH HAS BEEN DISCUSSED BY THE TRIBUNAL IN THE FOLLOWING MANNER : - 18. G ROUND NO. 3 IS THAT THE C.I.T.(A) HAS ERRED IN CONFIRMING THE ACTION OF THE A.O. IN DISALLOWING THE FORFEITURE OF EMPLOYEES SECURITY DEPOSIT OF RS. 2,88,780/ - . 19. THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE IN THE ASSESSEES OWN CASE IN I.T.A. NOS. 3925 & 4170/MUM/2005 IN ASSESSMENT YEAR 2000 - 01, IN PARA 23, WHICH IS AS UNDER: 23. AFTER HEARING BOTH THE PARTIES, WE FIND THAT SIMILAR DISALLOWANCE AS MADE EVEN IN EARLIER YEAR AND THE MATTER TRAVELLED TO TRIBUNAL. AFTER CONSIDERING THE SUBMISSIONS, T HE TRIBUNAL DECIDED THE ISSUE AGAINST THE ASSESSEE, WHICH IS ALSO AN ADMITTED POSITION IN THE CHART. THEREFORE, FOLLOWING THE EARLIER YEAR ORDER, WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. WE DO NOT INTEND TO DISTURB THE FINDINGS OF THE CO - ORDINATE BENC H TAKEN ON THIS ISSUE, WE THEREFORE, DECIDE THE ISSUE AGAINST THE ASSESSEE. GROUND NO. 3 IS DISMISSED. 4. 3 THUS, FOLLOWING THE EARLIER ORDER PRECEDENCE , GROUND NO. 2 RAISED BY THE ASSESSEE IS DECIDED AGAINST THE ASSESSEE AND THE SAME IS DISMISSED. 5 . IN GROUND NO. 3 THE ASSESSEE HAS CHALLENGED THE FINDING OF THE LEARNED CIT(A) IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING THE PROJECT EXPENSES OF RS. 19,546/ - . 5.1 LEARNED COUNSEL SUBMITTED THAT THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF TH E ASSESSEE IN ASSESSEES OWN CASE IN ITA NO.3926/M/2005 FOR THE ASSESSMENT YEAR 2001 - 02 VIDE PARA 20 & 21 . HE FURTHER SUBMITTED THAT THIS ISSUE HAS ALSO TRAVELLED UPTO THE STAGE OF HON BLE HIGH COURT IN ASSESSEES OWN CASE IN EARLIER YEARS, WHEREIN THE DEP ARTMENTAL APPEAL ON THIS QUESTION HAS BEEN DISMISSED BY THE HONBLE HIGH COURT. ITA NO S . 6365 & 6269 / 05 8 5.2 LEARNED CIT DR, ON THE OTHER HAND, FAIRLY ADMITTED TO THIS CONTENTION. 5.3 AFTER CAREFULLY CONSIDERING THE ORDER OF THE CIT(A) AS WELL AS THE FINDINGS GIVEN BY THE HON B LE TRIBUNAL, WE FIND THAT THIS ISSUE HAS COME UP FOR CONSIDERATION IN THE EARLIER YEARS BEFORE THE TRIBUNAL. IN ASSESSMENT YEAR 2001 - 02, THE TRIBUNAL HAS DECIDED THIS ISSUE AFTER OBSERVING AND HOLDING AS UNDER : - 21. WE FIND THAT ASSESSEE HAD CLAIMED PROJ ECT EXPENSES IN RESPECT OF CENTURY CEMENT DIVISION AMOUNTING TO RS. 64,003/ - . THESE EXPENSES PERTAINED MAINLY TO SALARY, TRAVELLING AND OTHER MISCELLANEOUS EXPENDITURES, WHICH ARE OTHERWISE, REVENUE IN NATURE. THIS ISSUE HAS BEEN DECIDED BY THE ITAT IN ASS ESSEES OWN CASE IN I.T.A. NOS. 3925 & 4170/MUM/2005 IN ASSESSMENT YEAR 2000 - 01, IN PARAS 26, 27, 28 AND 29 AS UNDER: 26. BEFORE US, THE ID. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF TRIBUNAL IN EARLIER YEAR AND IN THIS REGARD HE SPECIFICALLY REFERRED TO PARA 19 OF THE ORDER OF TRIBUNAL IN ITA NO.9329/MUM/2004. 27. ON THE OTHER HAND, THE ID. D.R. SUBMITTED THAT THE HONBLE BOMBAY HIGH COURT IN THE OF CIT VS. J.K. CHEMICALS LTD. (SUPRA) AND OTHER DECISIONS RELIED ON BY THE CIT(A) HAS CLEARLY HELD THAT SUCH PROJECT EXPENSES ARE NOT ALLOWABLE. 28. IN THE REJOINDER, THE ID. COUNSEL OF THE ASSESSEE POINTED OUT THAT IN THE CASE OF J.K. CHEMICALS LTD. THE ISSUE WAS REGARDING EXPENDITURE INCURRED FOR PR OJECT REPORT FOR SETTING UP A NEW UNIT, WHEREAS IN THE CASE BEFORE US THE EXPENDITURE IS IN THE FORM OF SALARY, TRAVELLING AND MISC. EXPENDITURE, WHICH IS OF REVENUE NATURE. HE ALSO FURNISHED A COPY OF THE ORDER OF BOMBAY HIGH COURT IN ITA NO.4218 OF 2009 WHEREIN THE REVENUE HAD TAKEN THIS ISSUE BEFORE THE HONBLE BOMBAY HIGH COURT AND WHICH WAS ULTIMATELY DECIDED IN FAVOUR OF THE ASSESSEE. 29. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFULLY AND FIND THAT THE TRIBUNAL DECIDED THIS ISSUE IN ITA NO.9329/M UM/2004 VIDE PARA 19. FURTHER, THE HONBLE BOMBAY HIGH COURT ITA NO.4218 OF 2009, WHERE THE QUESTION WAS ASUNDER: (A) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE HONBLE TRIBUNAL WAS JUSTIFIED IN LAW IN TREATING THE PROJECT EXPENSES AM OUNTING TO RS.15,31,365/ - AS REVENUE EXPENDITURE EVEN THOUGH THE SAME WERE CONNECTED TO THE ITA NO S . 6365 & 6269 / 05 9 NEW PROJECTS UNDER COMPLETION AND THEREFORE CAPITAL IN NATURE? DECIDED THE ISSUE VIDE PARA 2, WHICH IS AS UNDER: 2, AS REGARDS THE FIRST TWO QUESTIONS ARE CONCERNE D, THE FINDING .OF FACT RECORDED BY THE TRIBUNAL IS THAT THE SAID EXPENDITURE WAS INCURRED BY THE ASSESSEE RELATED TO THE SAME LINE OF BUSINESS CARRIED ON BY THE ASSESSEE AND THEREFORE ALLOWABLE AS REVENUE EXPENDITURE. THE EXPENDITURE INCURRED RELATED TO S ALARY, CONVEYANCE, LEGAL AND PROFESSIONAL CHARGES, PRINTING AND STATIONERY, WHICH ARE REVENUE IN NATURE. IN THIS VIEW OF THE MATTER, NO FAULT CAN BE FOUND WITH THE DECISION OF THE TRIBUNAL IN ALLOWING THE EXPENSES AS REVENUE EXPENDITURE. FOLLOWING THE A BOVE, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE. IN THE CHART SUBMITTED BY THE SENIOR AR, HE REFERRED TO THE CASE OF CIT VS. COROMANDAL FERTILIZERS, REPORTED IN 105 TAXMAN 490 (AP), WHEREIN IT WAS HELD IT WAS ONLY AT THE STAGE OF STUDYING THE FEASI BILITY FOR EXPLORING THE AREA FOR INVESTING THE SURPLUS FUNDS. IT HAD NOT RESULTED IN A BENEFIT ON ENDURING NATURE. THEREFORE, THE EXPENDITURE INCURRED BY THE ASSESSEE WAS ON ACCOUNT OF REVENUE AND NOT OF CAPITAL NATURE. IN THE INSTANT CASE, THE EXPENSES INCURRED BY THE ASSESSEE WERE PRIMARILY IN THE NATURE OF SALARIES, WE FIND FORCE IN THE CASE CITED BY THE AR AND HOLD THAT THE EXPENSES WERE IN THE NATURE OF REVENUE. IN ANY CASE, WE DO NOT INTEND TO DISTURB THE FINDINGS OF THE CO - ORDINATE BENCH TAKEN ON T HIS ISSUE. WE, THEREFORE, DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. GROUND NO. 4 IS ALLOWED. 5.4 THIS ISSUE ALSO STANDS CONCLUDED BY THE JUDGMENT OF HONBLE HIGH COURT IN ITA NO. 4218/2009, ITA NO. 3723/2009 AND ITA NO. 3764/2009 , PASSED VIDE ORDER DATED 21 - 6 - 2011. THUS, RESPECTFULLY FOLLOWING THE ABOVE DECISION AND THAT THE MATTER HAS BEEN SETTLED BY THE HON BLE HIGH COURT , THIS GROUND IS DECIDED IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, GROUND NO. 3 IS ALLOWED . 6 . IN GROUND NO. 4 , THE ASSESSEE HAS CHALLEN GED THE DISALLOWANCE OF PENALTY /FINE OF RS. 1,03,700/ - CONSISTING OF MORE THAN 1 2 KINDS OF PENALTIES AND FINES AS GIVEN IN PAGE 17 & 18 OF THE APPELLATE ORDER. ITA NO S . 6365 & 6269 / 05 10 6.1 AT THE OUTSET, LEARNED COUNSEL SUBMITTED THAT THIS ISSUE STANDS COVERED AGAINST THE ASSESSEE IN ASSESSEES OWN CASE IN ITA NO. 3926/2005 FOR THE ASSESSMENT YEAR 2001 - 02 . 6.2 AFTER GOING THROUGH THE ORDER OF THE CIT(A) AS WELL AS THE ORDER OF THE TRIBUNAL, WE FIND THAT THIS ISSUE HAS COME UP FOR CONSIDERATION IN THE EARLIER YEARS ALSO BEFORE THE TRIBUNAL IN THE ASSESSMENT YEAR 2001 - 02. THE TRIBUNAL AFTER FOLLOWING ITS EARLIER DECISION HAS CONFIRMED THESE PENALTIES/FINES. SINCE THE NATURE OF PENALTIES AND FINES ARE SAME, HENCE, WE DO NOT FIND ANY REASON TO DEVIATE FROM THE PRECEDENCE OF THE EARLI ER ORDER S. ACCORDINGLY, WE UPHOLD THE DISALLOWANCE ON THE AMOUNT OF PENALTIES AND FINES AGGREGATING TO RS. 1,03,700/ - . THUS , THIS GROUND IS DECIDED AGAINST THE ASSESSEE. 7 . IN GROUND NO. 5 , THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF RS. 1,80,291/ - BEING A MOUNT PERTAINING TO WRITTEN OFF ON LEASEHOLD LAND IN VARIOUS DIVISION. 7.1 LEARNED COUNSEL SUBMITTED THAT THIS ISSUE HAS BEEN RESTORED TO THE FILE OF THE ASSESSING OFFICER IN ASSESSEES OWN CASE IN THE ASSESSMENT YEAR 2001 - 02 IN ITA NO. 3926/2005 . 7.2 LEA RNED DR DULY ADMITTED THIS FACT. 7.3 AFTER GOING THROUGH THE ORDER OF THE TRIBUNAL, WE FIND THAT THIS ISSUE HAS BEEN SET ASIDE TO THE FILE OF THE ASSESSING OFFICER FOLLOWING THE EARLIER YEARS ORDER AFTER OBSERVING AND HOLDING AS UNDER : - 24. THE ISSUE H AD BEEN SET ASIDE TO THE FILE OF THE AO IN THE PRECEDING YEAR IN I.T.A. NOS. 3925 & 4170/MUM/2005 IN ASSESSMENT YEAR 2000 - 01, FOR RE - EXAMINATION OF THE ISSUE IN THE ITA NO S . 6365 & 6269 / 05 11 LIGHT OF THE SPECIAL BENCH DECISION OF THE TRIBUNAL IN THE CASE OF MUKUND LTD. REPORTED IN 106 ITD 231 (MUM SB) FOR FINDING THE NATURE OF THE PREMIUM PART. RESPECTFULLY FOLLOWING THE ORDER, WE SET ASIDE THE ORDER OF CIT(A) AND RESTORE THE ISSUE TO THE FILE OF THE AO FOR PASSING FRESH ORDER ON THE IMPUGNED ISSUE AFTER ALLOWING PROPER OPPORTUNITY TO THE ASSESSEE. GROUND NO. 6 IS ALLOWED FOR STATISTICAL PURPOSES. 7.4 ACCORDINGLY, IN THIS YEAR ALSO, THIS ISSUE IS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER TO BE DECIDED IN VIEW OF THE DIRECTION GIVEN ABOVE. ACCORDINGLY, THIS GROUND IS TREATED A S ALLOWED FOR STATISTICAL PURPOSES . 8 . IN GROUND NO. 6 , THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF THE MINING LEASE EXPENSES OF RS. 81 , 180/ - . 8.1 LEARNED COUNSEL SUBMITTED THAT THIS ISSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN TH E EARLIER YEAR. LEARNED CIT DR FAIRLY ADMITTED TO THIS FACT. 8.2 AFTER GOING THROUGH THE FINDINGS OF THE TR IBUNAL, WE FIND THAT THIS ISSUE HAS COME UP FOR CONSIDERATION IN THE EARLIER YEARS IN THE CASE OF THE ASSESSEE BEFORE THE TRIBUNAL . IN THE ASSESSMEN T YEAR 2001 - 02 , THE TRIBUNAL HAS ALLOWED THIS GROUND FOLLOWING THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2000 - 01 . THE ASSESSING OFFICER HAS DISALLOWED THE LEASE EXPENSES OF RS. 16,23,610/ - AS AGAINST 1/10 TH CLAIMED AT RS.81,180/ - BY THE ASSESSEE. SINC E THIS ISSUE HAS BEEN DECIDED IN THE EARLIER YEAR ALLOWING HE ASSESSEES CLAIM , THEREFORE, IN THIS YEAR ALSO, WE DO NOT FIND ANY REASON TO DEVIATE FROM THE SAME . ACCORDINGLY, THIS GROUND IS ALLOWED IN FAVOUR OF THE ASSESSEE . ITA NO S . 6365 & 6269 / 05 12 9 . IN GROUND NO. 7 , THE ASSES SEE HAS CHALLENGED THE DISALLOWANCE OF COMPENSATION RECEIVED FROM EXPL OITATION OF COMMERCIAL PREMISES. 9 .1 AT THE OUTSET, L EARNED COUNSEL APPEARING FOR THE ASSESSEE POINTED OUT THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE IN ASSESSEES OWN CASE IN THE EARLIER ASSESSMENT YEAR . THE TRIBUNAL IN THE ASSESSMENT YEAR 2001 - 02 , HAS NOTED THAT THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE IN THE PRECEDING YEAR AND, THEREFORE, THERE IS NO REASON TO DISTURB SUCH FINDING. ACCORDINGLY, THE DISALLOWANCE WAS U PHE LD. 9.2 THUS, FOLLOWING THE EARLIER YEAR S PRECEDENCE , THIS ISSUE IS DECIDED AGAINST THE ASSESSEE. ACCORDINGLY, GROUND NO. 7 STANDS DISMISSED . 10. IN GROUND NO. 8 , THE ASSESSEE HAS CHALLENGED DISALLOWANCE OF INTEREST PAID ON INCOME TAX OF RS. 11,135/ - . AS FAIRLY ADMITTED BY LEARNED SENIOR COUNSEL APPE ARING ON BEHALF OF THE ASSESSEE THAT SUCH AN INTEREST PAID ON INCOME TAX CANNOT BE HELD TO BE DERIVED FROM ACTIVITIES CARRIED OUT BY THE EOU. OTHERWISE ALSO, THERE IS NO MERIT IN SUCH A CLAIM. ACCORDINGLY, THE SAME STANDS DISMISSED . 11 . IN GROUND NO. 9 , THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF INTEREST PAID TO SSI UNITS OF RS. 2,87,630/ - . LEARNED COUNSEL FAIRLY ADMITTED THAT THIS ISSUE STANDS COVERED AGAINST THE ASSESSEE IN ASSESSEES OWN CASE IN THE EARLI ER ASSESSMENT YEAR. AFTER GOING THROUGH THE ORDER PASSED BY THE TRIBUNAL IN ASSESSMENT YEAR 2001 - 02 , ITA NO S . 6365 & 6269 / 05 13 WE FIND THAT THE TRIBUNAL HAS RECORDED A FINDING THAT THIS ISSUE STANDS COVERED IN ASSESSEES OWN CASE RIGHT FROM THE ASSESSMENT YEARS 1990 - 91 TO 2001 - 02. IN VIEW OF THIS ADMITTED POSITION, THIS ISSUE IS DECIDED AGAINST THE ASSESSEE. ACCORDINGLY, GROUND NO. 9 STANDS DISMISSED . 12. IN GROUND NO.10 , THE ASSESSEE HAS CHALLENGED PROVISION IN RESPECT OF DIFFERENCE OF ELECTRICITY DUTY ON COLONY CONSUMPTION PAYABLE TO MPEB/CSEB ETC. RS. 81,06,514/ - . 12. 1 LEARNED COUNSEL POINTED OUT THAT THIS ISSUE HAS BEEN RESTORED BACK TO THE ASSESSING OFFICER WITH A DIRECTION IN THE APPEAL FOR THE ASSESSMENT YEAR 2001 - 02 , WHEREIN THE TRIBUNAL HAS DIRECTED THE ASSESSING OFFICER TO ALLOW THE EXPENDITURE ON PAYMENT BASIS. THE RELEVANT OBSERVATION AND FINDING OF THE TRIBUNAL IN THE ASSESSMENT YEAR 2001 - 02, READS AS UNDER : - 28. THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN PRECEDING YEARS WHEREIN THE AO WAS DIRECTED TO ALLOW THE EXPENDITURE ON PAYMENT BASIS CONSISTENTLY, WHATEVER SYSTEM OF ACCOUNTING IS ADOPTED BY THE ASSESSEE, IS TO BE FOLLOWED YEAR TO YEAR. AFTER CONSIDERING THAT THE ISSUE HAS NOT BEEN DECIDED BY THE AO IN THE PRECEDING YEAR AND THE SAME FI NDING IS TO BE ADOPTED HEREIN AS WELL, WE DEEM IT FIT TO RESTORE THE ISSUE TO THE FILE OF THE AO FOR ADJUDICATION. GROUND NO. 8 IS ALLOWED FOR STATISTICAL PURPOSES. 12.2 THUS, RESPECTFULLY FOLLOWING THE AFORESAID DECISION, THIS ISSUE IS RESTORED TO THE F ILE OF THE ASSESSING OFFICER WITH A SIMILAR DIRECTION AND TO ADJUDICATE THE SAME AFTER GETTING THE DETAILS FROM THE ASSESSEE. ACCORDINGLY, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES . ITA NO S . 6365 & 6269 / 05 14 1 3 . IN GROUND NO.1 1 , THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF PROVISION FOR DOUBTFUL DEBTS AND ADVANCES OF RS. 57,87,004/ - WHILE COMPUTING THE BOOK PROFITS UNDER SECTION 115JB . 1 3 . 1 AS ADMITTED BY BOTH THE PARTIES, THIS ISSUE NOW STANDS COVERED AGAINST THE ASSESSEE BY INSERTION OF CLAUSE 1 IN EXPLANATION 1 TO SECT ION 115JB , WHICH HAS BEEN INSERTED BY FINANCE (NO.2) ACT, 2009 W.R.E.F. 1 - 4 - 2001. THUS, IN VIEW OF THE AMENDMENT IN THE SAID PROVISION OF THE ACT, THE GROUND TAKEN BY THE ASSESSEE CANNOT BE ALLOWED. ACCORDINGLY, THE SAME IS TREATED AS DISMISSED . 14 . IN G ROUND NO. 12 , THE ASSESSEE HAS CHALLENGED DISALLOWANCE OF INTEREST UNDER SECTION 14A R.W.S. 36(1)(III) OF RS.10,70,617/ - ON THE NOTIONAL BASIS WITHOUT ESTABLISHING DIRECT NEXUS BETWEEN TAX FREE INCOME AND INTEREST EXPENSES. 14. 1 AS ADMITTED BY BOTH THE PART IES, THIS ISSUE HAS BEEN RESTORED BACK TO THE ASSESSING OFFICER AFTER FOLLOWING THE DECISION OF HON BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS. DCIT, [2010] 328 ITR 81 (BOM) IN THE EARLIER YEARS. AFTER GOING THROUGH THE ORDER OF T HE TRIBUNAL IN THE ASSESSMENT YEAR 2001 - 02 , WE FIND THAT THIS MATTER HAS BEEN RESTORED TO THE FILE OF THE ASSESSING OFFICER AFTER OBSERVING AND HOLDING AS UNDER : - 32. WE FIND THAT THE ITAT HAS RESTORED THE ISSUE BACK TO THE AO TO BE DECIDED ON THE BASIS OF THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS DCIT, REPORTED IN 328 ITR 81. THEREFORE, WE SET ASIDE THE ORDER OF THE CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF THE AO TO RECOMPUTE THE DISALLOWANCE U/S 14A IN THE LIGHT OF THE DECISION OF THE HON'BLE ITA NO S . 6365 & 6269 / 05 15 BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO.LTD. VS DCIT (SUPRA). GROUND NO. 10 IS ALLOWED FOR STATISTICAL PURPOSES. 14. 2 THUS, IN THIS Y EAR ALSO THIS MATTER IS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER TO WORK OUT SOME REASONABLE BASIS FOR DISALLOWANCE IN VIEW OF THE DECISION LAID DOWN BY THE HON BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD (SUPRA) . ACCORDINGLY, THIS GROUND IS TREATED AS ALLOWED FOR STATISTICAL PURPO SES . 15 . IN GROUND NO. 13 , THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF DEDUCTION UNDER SECTION 80HHC ON THE GROUND THAT THE INCOME AS PER NORMAL COMPUTATION IS NIL AND ACCORDINGLY NO DEDUCTION IS ALLOWED UNDER SECTION 80HHC WHILE COMPUTING BOOK PROFIT UNDER SECTION 115JB . 15.1 AFTER GOING THROUGH THE FINDING OF THE CIT(A) AS WELL AS THE ASSESSING OFFICER, WE FIND THAT THIS ISSUE NOW STANDS COVERED BY THE DECISION OF ITAT SPECIAL B ENCH, MUMBAI IN THE CASE OF DCIT VS. SYNCOME FORMULATI O NS (I) LTD. , [2007 ] 292 ITR (AT) 144 (MUMBAI) [SB] , WHEREIN IT HAS BEEN HELD THAT DEDUCTION UNDER SECTION 80HHC IN THE CASE OF MAT ASSESSMENT , IS TO BE WORKED OUT ON THE BASIS OF ADJUSTED BOOK PROFIT AND NOT ON THE BASIS OF PROFIT COMPUTED UNDER THE REGULAR PROVISIONS OF LA W APPLICABLE TO THE COMPUTATION OF PROFIT AND GAINS OF BUSINESS OR PROFESSION . THIS JUDGMENT OF THE SPECIAL BENCH HAS BEEN AFFIRMED BY THE HONBLE SUPREME COURT IN THE CASE OF AL - KABEER EXPORTS LIMITED VS. CIT, PASSED IN CIVIL APPEAL NO. 1546 OF ITA NO S . 6365 & 6269 / 05 16 2012, VID E ORDER DATED 3 RD FEBRUARY, 2012 AFTER OBSERVING AND HOLDING AS UNDER : - O R D E R LEAVE GRANTED. IN VIEW OF THIS COURTS ORDER IN THE CASE OF COMMISSIONER OF INCOME - TAX VS. BHARI INFORMATION TECHNOLOGY SYSTEMS (P) LTD. [S.L.P. (C) NO.33750 OF 2009], UPHO LDING THE JUDGMENT OF THE SPECIAL BENCH OF INCOME TAX APPELLATE TRIBUNAL IN THE CASE OF DEPUTY COMMISSIONER OF INCOME TAX VS. SYNCOME FORMULATIONS (I) LTD., REPORTED IN (2007) 106 ITD 193 , THE IMPUGNED JUDGMENT OF THE HIGH COURT IS SET ASIDE AND THE JUDGME NTS OF THE ITAT IN THESE CASES STAND AFFIRMED. THE CIVIL APPEALS FILED BY THE ASSESSEE ARE, ACCORDINGLY, ALLOWED WITH NO ORDER AS TO COSTS. 15.2 THUS, IN VIEW OF THE LAW SETTLED BY THE HON BLE SUPREME COURT, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSE E AND THE SAME IS ALLOWED . 1 6 . WE NOW TAKE UP ITA NO.6269/2005 , WHICH HAS BEEN FILED BY THE DEPARTMENT ON THE FOLLOWING GROUNDS : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO RE STRICT THE DISALLOWANCE TO 10,70,617/ - UNDER SEC.14A WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS A MIX OF BORROWED AND SELF OWNED FUNDS WHICH IT UTILIZES FOR BOTH BUSINESS AND NON - BUSINESS ACTIVITIES AND THE ASSESSEE HAD FAILED IN DISCHARGING THE ONUS OF PROVING THE NEXUS BETWEEN THE INVESTMENT AND THE SELF OWNED FUNDS BY WAY OF CASH FUND FLOW STATEMENT TO THE SATISFACTION OF THE ASSESSING OFFICER. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DIRECTING THE AO TO RESTRICT THE DISALLOWANCE TO RS.1,03,700/ - WITHOUT APPRECIATING THAT IN VIEW OF THE EXPLANATION TO SEC.37(1) ANY EXPENDITURE INCURRED BY AN ASSESSEE FOR ANY PURPOSE WHICH IS AN OFFENCE OF WHICH IS PROHIBITED BY LAW SHALL NOT BE DEEMED TO HAVE BEEN I NCURRED FOR THE PURPOSE OF BUSINESS OR PROFESSION AND NO DEDUCTION WILL BE ALLOWABLE IN RESPECT OF SUCH AN EXPENDITURE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE FORE IGN TRAVEL EXPENSES OF MRS.S.D.BIRLA, WIFE OF SHRI B.K.BIRLA, CHAIRMAN OF THE COMPANY WITHOUT APPRECIATING THE FACT THAT IT WAS NOT AN EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS OF THE ASSESSEE. ITA NO S . 6365 & 6269 / 05 17 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEPRECIATION ON ACCOUNT OF ADDITION TO PLANT & MACHINERY BEING PROVISION FOR CUSTOM DUTY ON AIRJET LOOMS AND AUTO CONER WITHOUT APPRECIATING THAT THE SAME ARE COVERED BY T HE PROVISIONS OF SEC.43B. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE TO RS.10,70,617/ - UNDER SEC.14A. AT THE SAME TIME HE HAS, IN PRINCIPLE, AGREED WITH THE DISALLOWANCE, THUS INCREAS ING THE BOOK PROFIT BY RS.84,77,211/ - WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS A MIX OF BORROWED AND SELF OWNED FUNDS WHICH IT UTILIZES FOR BOTH BUSINESS AND NON - BUSINESS ACTIVITIES AND THE ASSESSEE HAD FAILED IN DISCHARGING THE ONUS OF PROVING THE NEXUS BETWEEN THE INVESTMENT AND THE SELF OWNED FUNDS BY WAY OF CASH FUND FLOW STATEMENT TO THE SATISFACTION OF THE ASSESSING OFFICER. 16.1 BOTH THE PARTIES WERE HEARD AND ADMITTED THAT ALL THE ISSUES RAISED IN THE GROUNDS ARE COVERED BY THE EARLIER YEARS ORDER. 16. 2 GROUND NO.1 RELATES TO DISALLOWANCE UNDER SECTION 14A , WHEREBY THE LEARNED CIT(A) HAS DIRECTED THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE OF RS.10,70,617/ - UNDER SECTION 14A. THIS ISSUE HAS BEEN SET ASIDE TO THE FILE OF THE AS SESSING OFFICER WHILE DEALING WITH THE GROUND NO.2 OF THE ASSESSEES APPEAL IN ITA NO.6365/2005. WE HAVE RESTORED BACK THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR FOLLOWING THE DECISION OF EARLIER YEARS ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YE AR 2001 - 02. ACCORDINGLY, AS PER THE DIRECTION GIVEN THEREIN, THIS ISSUE IS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER AND THUS , THIS GROUND IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES . 16. 3 REGARDING GROUND NO.2 , LEARNED DR SUBMITTED THAT SIMILA R ISSUE WAS THERE IN THE EARLIER YEAR ALSO FOR THE ASSESSMENT YEAR 2001 - 02, WHEREIN THE TRIBUNAL SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING ITA NO S . 6365 & 6269 / 05 18 OFFICER TO RE - EXAMINE THE EXACT NATURE OF PAYMENTS WHETHER THESE ARE COMPENSATORY OR PENAL IN NATURE. THE REL EVANT PORTION WHILE DEALING WITH THIS ISSUE BY THE TRIBUNAL ARE REPRODUCED HEREINBELOW : - 40. GROUND NO. 1 OF APPEAL RAISED BY THE REVENUE IS THAT THE CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE TO RS. 1,06,837/ - WITHO UT APPRECIATING THAT IN VIEW OF THE EXPLANATION TO SECTION 37(1) ANY EXPENDITURE INCURRED BY AN ASSESSEE FOR ANY PURPOSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW SHALL NOT BE DEEMED TO HAVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS OR PROFESSION A ND NO DEDUCTION WILL BE ALLOWABLE IN RESPECT OF SUCH AN EXPENDITURE. 41. THIS ISSUE HAS BEEN DEALT WITH BY THE TRIBUNAL IN I.T.A. NOS. 3925 & 4170/MUM/2005 IN ASSESSMENT YEAR 2000 - 01, IN PARAS 69, 70 AND 71 WHICH READ AS UNDER: 69. BEFORE US, IT WAS SUB MITTED THAT THE AMOUNTS DL1LOWED BY THE CIT(A) ARE BASICALLY OF COMPENSATORY NATURE AND THEREFORE THE SAME SHOULD HAVE HEN ALLOWED. IN THIS REGARD , RELIANCE WAS PLACED ON THE DECISIONS OF HONBLE SUPREME COURT IN THE CASE OF PRAKASH COTTON MILLS PVT. VS. CIT (201 ITR 684) (SC) AND STANDARD BATTERIES LTD. VS.CIT (211 ITR 444) (SC). 70. ON THE OTHER HAND, THE ID. D.R RELIED ON THE ORDER OF CIT(A). 71. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIND THAT THE HONBLE SUPREME COURT IN THE CASES OF PRAKASH CO TTON MILLS PVT. LTD. (SUPRA) AND STANDARD BATTERIES LTD. VS. CIT (SUPRA) HAS OBSERVED THAT WHATEVER IS PAID TO THE GOVT. AUTHORITIES, THOUGH KNOWN AS PENALTY, BUT IF THE SAME IS OF COMPENSATORY NATURE, THEN THE SAME, STRICTLY SPEAKING, IS NOT PENALTY AND H AS TO BE ALLOWED AS BUSINESS EXPENDITURE. THE HONBLE COURT HAS GIVEN THE AMPLE OF PENALTY PAID FOR DELAYED PAYMENT OF SALES - TAX WHICH WAS HELD TO BE COMPENSATORY NATURE. SINCE NO DETAILS HAVE BEEN GIVEN FOR THE AMOUNT PAID, WHICH HAS BEEN DISALLOWED BY T HE AO, AND EVEN THE SR. COUNSEL OF THE ASSESSEE HAS NOT PLACED ANY DETAILS BEFORE US, THEREFORE, WE SET ASIDE THE ORDER OF ID. CIT(A AND REMIT THE MATTER BACK TO THE FILE OF AO FOR RE - EXAMINATION OF THE ISSUE AND IF VARIOUS PENALTIES PAID ARE FOUND TO BE O NLY COMPENSATORY IN NATURE IN VIEW OF THE DECISIONS OF THE HONBLE SUPREME COURT (SUPRA), THEN THE SAME MAY BE ALLOWED. RESPECTFULLY FOLLOWING THE DECISION TAKEN BY THE COORDINATE BENCH IN THE ASSESEES OWN CASE, WE IN THE CURRENT YEAR, SET ASIDE THE ORD ER OF THE CIT(A) AND RESTORE THE ISSUE TO THE FILE OF THE AO TO RE EXAMINE THE EXACT NATURE OF PAYMENTS, I.E., WHETHER THESE ARE COMPENSATORY OR THESE ARE PENAL IN NATURE. THE GROUND IS ALLOWED TO THAT EXTANT. GROUND NO. 1 IS ALLOWED FOR STATISTICAL PURP OSES. ITA NO S . 6365 & 6269 / 05 19 ACCORDINGLY FOLLOWING THE SAME, WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH THE SIMILAR DIRECTION. HENCE, THE GROUND NO.2 RAISED BY THE DEPARTMENT IN ITS APPEAL IS ALLOWED FOR STATISTICAL PURPOSES . 16. 4 REGARDING GROUND NO. 3 , L EARNED DR SUBMITTED THAT THIS ISSUE HAS ALSO BEEN RESTORED TO THE FILE OF THE ASSESSING OFFICER IN THE EARLIER YEAR FOR THE ASSESSMENT YEAR 2001 - 02, WHEREIN THE TRIBUNAL HAS FOLLOWED THE SIMILAR DIRECTIONS GIVEN IN THE EARLIER YEARS. THE RELEVANT OBSERVATI ONS AND FINDING AS GIVEN IN PARA 44 AND 45 OF THE SAID ORDER ARE REPRODUCED HEREIN BELOW : - 44. GROUND NO. 3 IS THAT THE CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE FOREIGN TRAVEL EXPENSES OF MRS. S.D. GINA, WIFE OF SHRI. B.K. BIRLA, CHAI RMAN OF THE COMPANY WITHOUT APPRECIATING THE FACT THAT IT WAS NOT AN EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS OF THE ASSESSEE. 45. IN THE PRECEDING YEAR, THE ITAT HAD RESTORED THE ISSUE TO THE FILE OF THE AO DIRECTING, THE AO TO EXAMIN E IN DETAIL THE NATURE OF EXPENSES ALONG WITH THE BOARDS RESOLUTION, IF AT ALL, THEREFORE, FOLLOWING THE FINDINGS OF THE ITAT IN THE PRECEDING YEAR AND IN THE INTERESTS OF JUSTICE, WE RESTORE THE ISSUE TO THE FILE OF THE AO TO TAKE A DECISION THEREON. THI S GROUND IS ALLOWED TO THAT EXTENT. GROUND NO. 3 IS PARTLY ALLOWED. THUS, FOLLOWING THE SAID PRECEDENCE, THIS GROUND IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES . 16. 5 REGARDING GROUND NO. 4 , LEARNED COUNSEL FOR THE ASSESSEE , AT THE OUT SET, POINTED OUT THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2001 - 02. THE RELEVANT OBSERVATION OF THE TRIBUNAL ARE AS UNDER : - 46. GROUND NO. 4 IS THAT THE CIT(A) ERRED IN DIRECTING THE ASSESSING ITA NO S . 6365 & 6269 / 05 20 OFFICER TO ALLOW DEPRECIATION OF RS. 57,756/ - ON ACCOUNT OF ADDITION TO PLANT & MACHINERY BEING PROVISION FOR CUSTOM DUTY ON AIRJET LOOMS AND AUTO CORNER WITHOUT APPRECIATING THAT THE SAME ARE COVERED BY THE PROVISIONS OF SECTION 43B. 47. IN ASSESSMENT YEAR 2000 - 01, IN ITA NO. 4170/MUM/2005 IN PARAS 77 AND 78 AND IN THE EARLIER YEARS, THE ITAT HAS BEEN DECIDING THE ISSUE AGAINST THE REVENUE AND IN FAVOR OF THE ASSESSEE, RESPECTFULLY FOLLOWING THE DECISIONS TAKEN BY THE ITAT IN THE PRECEDING YEARS, WE DECIDE THE I SSUE AGAINST THE DEPARTMENT. GROUND NO. 4 IS DISMISSED. THUS, FOLLOWING THE BINDING PRECEDENCE OF THE TRIBUNAL ORDER OF THE EARLIER YEARS, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND CONSEQUENTLY, GROUND NO.4 RAISED BY THE DEPARTMENT IS DISMIS SED . 16.6 GROUND NO. 5 RAISED BY THE DEPARTMENT IN ITS APPEAL IS SIMILAR TO GROUND NO.1 AS ABOVE AND, THEREFORE, IN VIEW OF THE FINDING GIVEN THEREIN, THIS ISSUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES . 1 7 . IN THE RESULT, APPEAL FILED BY THE ASSESS EE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THAT OF THE DEPARTMENT IS ALSO PARTLY ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST D AY OF OCT . , 2012. 31 ST OCT . , 2012 SD/ - SD/ - ( ) ( P.M.JAGTAP ) ( ) ( AMIT SHUKLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 31 ST OCT ./ 2012. /PKM , PS ITA NO S . 6365 & 6269 / 05 21 COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) - X, MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// / BY ORDER, ( DY./ASSTT. REGISTRAR) / ITAT, MUMBAI