Bosch Limited, Bangalore V. DCIT, Bangalore

ITA 647/BANG/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5545 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 26-04-2011
• Assessment Year: 1994-1995
• Appeal Filed On: 11-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P J PARDIWALA SR
• Assessee Lawyers: G V GOPALA RAO CIT IDR
• Keywords: Business income; Revised return
• Section: 80HHC; 139(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO.637/BANG/2010 ASSESSMENT YEAR : 1994-95 THE DEPUTY COMMISSIONER OF INCOME TAX, LTU, BANGALORE. : APPELLANT VS. M/S. BOSCH LTD., (FORMERLY MOTOR INDUSTRIES CO. LTD.), P.B. NO.3000, HOSUR ROAD, ADUGODI, BANGALORE 560 030. : RESPONDENT ITA NO.645 TO 647/BANG/2010 ASSESSMENT YEARS : 1992-93 TO 1994-95 M/S. BOSCH LTD., (FORMERLY MOTOR INDUSTRIES CO. LTD.), P.B. NO.3000, HOSUR ROAD, ADUGODI, BANGALORE 560 030. : APPELLANT VS. THE DEPUTY COMMISSIONER OF INCOME TAX, LTU, BANGALORE. : RESPONDENT REVENUE BY : SHRI G.V. GOPALA RAO, CIT-I(DR) RESPONDENT BY : SHRI P.J. PARDIWALA, SR. COUNSEL ITA NOS.637 & 645 TO 647/BANG/10 PAGE 2 OF 17 O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER THESE FOUR APPEALS (I) THREE APPEALS INSTITUTED BY THE ASSESSEE COMPANY; AND (II) ANOTHER BY THE REVENUE ARE DIRECTED AGAINST THE APPELLATE ORDERS OF THE LD. CIT (A)-LTU, BANGALORE IN ITA NOS: 41, 42 & 41 (SIC) 43 /LTU/CIT(A)-II/08-09 DATED: 17.12.2009, 31.12.2009 & 31.12.2009 FOR THE ASSESSMENT YEARS 1992-93, 1993-94 AND 1994-95 RESPECTIVELY IN THE CASE OF M/S. BOSCH LIMITED , BANGALORE. I . ITA NOS: 645, 646 & 647/10 AY 1992-93, 93-94 & 94 -95 [BY THE ASSESSEE COMPANY ]: 2. FOR THESE THREE AYS, THE ASSESSEE COMPAN Y HAD RAISED FIVE IDENTICAL GROUNDS IN WHICH, GROUND NOS. 4 AND 5 BEING GENERAL AND NO SPECIFIC ISSUES INVOLVED, THEY HAVE BECOME INCONSEQ UENTIAL. IN THE REMAINING GROUNDS, THE ISSUES AGITATED ARE REFORMUL ATED, IN A CONCISE MANNER, AS UNDER: THAT THE LD. CIT (A)-LTU ERRED IN (I) HOLDING THAT THE CLAIMS MADE WAS BEYOND TIME LIMIT AND, HENCE, NOT MAINTAINABLE; (II) UPHOLDING THE STAND OF THE AO IN REDUCING THE ELIGI BLE PROFITS OF BUSINESS, 90% OF INTEREST RECEIVED WHILE COMPUTING DEDUCTIONS U/S 80HHC AND 80HHE OF THE ACT; (III) NOT DIRECTING THE AO TO REDUCE RS.2.97 CRORES, RS.4 .38 CRORES BEING DISCOUNTS AND RS.1.58 LAKHS (CASH INCENTIVE) FOR THE AYS 92.93, 93.94 AND 94.95 RESPECTIVELY FROM THE TOTAL TURNOVER WHILE COMPUTING DEDUCTION U/S 80HHC AND 80HHE OF THE ACT. ITA NOS.637 & 645 TO 647/BANG/10 PAGE 3 OF 17 II. ITA NO: 637/10 AY 1994-95 [BY THE REVENUE ]: 2.1. EVEN THOUGH THE REVENUE HAD RAISED SEVEN GROUNDS, THE SUBSTANCE OF ITS GRIEVANCE IS CONFINED TO A LONE IS SUE WHICH IS SPELT OUT AS UNDER: - THAT THE LD. CIT (A) HAS ERRED IN DIRECTING TO EXCL UDE THE COST OF SCRAPS FROM THE TOTAL TURNOVER FOR THE PURPOSE OF D EDUCTION U/S 80HHC AND 80HHE THOUGH THE ISSUE OF EXCLUSION OF CO ST OF SCRAP SOLD WAS NEVER IN DISPUTE IN THE AY UNDER CHALLENGE . 3. AS THE ISSUES CONFRONTED IN THESE APPEALS BEING IDENTICAL AND INTER- LINKED PERTAINING TO THE SAME ASSESSEE, FOR THE SAK E OF CLARITY AND CONVENIENCE, THEY WERE HEARD, CONSIDERED AND ADJUDI CATED IN THIS COMMON ORDER. WE SHALL NOW TAKE UP FOR CONSIDERATION THE ISSUES RAISED BY THE ASSESSEE COMPANY. I. ITA NOS: 645, 646 & 647/10 AY 1992-93, 93-94 & 94 .95 [BY THE ASSESSEE ]: 4. THE ASSESSEE COMPANY [THE ASSESSEE IN SHOR T] HAS BEEN IN THE BUSINESS OF MANUFACTURING SPARK PLUGS, FUEL INJECTI ON EQUIPMENTS FOR MOTOR VEHICLES. BRIEFLY, THE ASSESSMENT ORDERS FOR THE AY S UNDER DISPUTE WERE ORIGINALLY CHALLENGED BEFORE THE LD. CIT (A) AND DI SENCHANTMENT WITH SOME OF THE FINDINGS OF THE THEN LD. CIT (A), THE ASSESS EE HAD, SUBSEQUENTLY, APPROACHED THE HONBLE EARLIER BENCH FOR SUCCOR. WHILE DOING SO, THE ASSESSEE HAD ALSO RAISED A FEW OF THE FRESH GROUNDS WHICH WERE NOT ITA NOS.637 & 645 TO 647/BANG/10 PAGE 4 OF 17 AGITATED INITIALLY BEFORE THE LD. CIT (A) FOR ADJUD ICATION OR CLAIMED IN THE RETURNS OF INCOME. 4.1. CONSIDERING THE STATE OF AFFAIRS OF TH E ISSUES, THE HONBLE BENCH WAS PLEASED TO REMIT BACK SUCH ADDITIONAL GROUNDS R AISED BY THE ASSESSEE FOR THE FIRST TIME FOR ADJUDICATION TO THE FILES OF THE LD. CIT (A) VIDE ITS COMMON ORDER IN ITA NOS. 396 TO 399/B/1998 DATED: 31.5.2004 FOR THE REASONS RECORDED THEREIN. 4.2. CONSEQUENTLY, THE LD. CIT (A)-LTU, BANGAL ORE VIDE HIS IMPUGNED ORDERS CITED SUPRA THOUGH HELD THE CLAIM MADE IS BE YOND THE TIME LIMIT, DECIDED THE ISSUES ON MERITS PARTLY IN FAVOUR OF THE APPELLANT, THE DETAILS OF GROUNDS RAISED AND THE FINDINGS THEREON ARE, BR IEFLY, EXTRACTED AS UNDER: [ ITA NOS.41, 42 AND 43/LTU/CIT(A) DT: 17.12.09 & 31. 12.09 RESPECTIVELY] ADDITIONAL GROUNDS: A.Y.92-93: (I) THAT THE JOINT COMMISSIONER ERRED IN REDUCING FROM THE ELIGIBLE PROFITS OF BUSINESS 90% OF INTEREST RECEIVED (IGN ORING ALTOGETHER THE INTEREST EXPENDITURE INCURRED BY THE APPELLANT) BY INVOKING THE PROVISIONS OF EXPLANATION (BAA) TO S.80HHC AND EXPLN. (D) TO S. 80HHE WHILE CALCULATING DEDUCTION U/S 80HHC AND 80HHE. (II) THE HONBLE TRIBUNAL MAY BE PLEASED TO DIRECT THE JCIT (ASST) S.R. 3 TO REDUCE RS.2,97,44,080 FROM THE TOTAL TURNOVER BE ING DISCOUNT TO CUSTOMERS FOR PURPOSES OF GRANTING DEDUCTION U/S 80 HHC AND 80HHE. A.Y.93-94: (I) THE HONBLE TRIBUNAL MAY BE PLEASED TO DIRECT T HE JCIT (ASST) S.R. 3 TO REDUCE RS.4,38,70,940 FROM THE TOTAL TURNOVER BEING DISCOUNT TO CUSTOMERS FOR PURPOSES OF GRANTING DEDUCTION U/S 80HHC AND 80 HHE. (II) THAT THE JOINT COMMISSIONER ERRED IN REDUCING FROM THE ELIGIBLE PROFITS OF BUSINESS 90% OF INTEREST RECEIVED (IGN ORING ALTOGETHER THE ITA NOS.637 & 645 TO 647/BANG/10 PAGE 5 OF 17 INTEREST EXPENDITURE INCURRED BY THE APPELLANT) BY INVOKING THE PROVISIONS OF EXPLANATION (BAA) TO S.80HHC AND EXPLN. (D) TO S. 80HHE WHILE CALCULATING DEDUCTION U/S 80HHC AND 80HHE A.Y.94-95: (I) THAT THE JOINT COMMISSIONER ERRED IN REDUCING FROM THE ELIGIBLE PROFITS OF BUSINESS 90% OF INTEREST RECEIVED (IGN ORING ALTOGETHER THE INTEREST EXPENDITURE INCURRED BY THE APPELLANT) BY INVOKING THE PROVISIONS OF EXPLANATION (BAA) TO S.80HHC AND EXPLN. (D) TO S. 80HHE WHILE CALCULATING DEDUCTION U/S 80HHC AND 80HHE. (II) THAT THE JOINT COMMISSIONER ERRED IN INCLUDIN G CASH INCENTIVE AS PART OF TOTAL TURNOVER WHICH IS CONTRARY TO THE DEFINITI ON OF TERM TOTAL TURNOVER CONTAINED IN EXPLN. (BA) TO S.80HHC AND EXPLN. (E) TO S.80HHE. A.YS.92-93:, 93-94 & 94-95 : 4.3. AFTER TAKING INTO ACCOUNT THE FACTS OF THE ISSUES, ASSESSEES SUBMISSION, REMAND REPORT OF THE AO AND ALSO EXTENS IVELY QUOTING THE FINDING OF THE HONBLE ITAT IN 2746/BANG/2004 DT.4. 5.2007 FOR THE AY 1998- 99 [WHEREIN THE MATTER WAS RESTORED TO THE AO WITH A DIRECTION TO FOLLOW THE DECISION OF THE SPECIAL BENCH OF ITAT IN THE CASE O F LALSON ENTERPRISES 89 ITD 25], THE LD. CIT (A) TOOK A DIVERGENT VIEW FOR ALL THE AYS UNDER DISPUTE BY OBSERVING THUS ( I) IN RESPECT OF INTEREST : 3.11. IN THE INSTANT CASE, INTEREST ON BANK DEP OSITS AND OTHER ACCOUNT IS CREDITED IN THE PROFIT AND LOSS ACCOUNT FOR RS.2,27 ,49,608/- [RS.2.67 CRORES & RS.2.80 CRORES FOR THE AYS 93.94 & 94.95 RESPECTI VELY] FROM THE DETAILS FURNISHED, INTEREST TO THE EXTENT OF RS.90,37,990/- [RS.30.55 LAKHS & RS.48.17 LAKHS FOR THE AYS 93.94 & 94.95 RESPECTIVE LY] IS FROM BANKS AND INTEREST OF RS.1,37,11,618/- [RS.2.36 CRORES & RS.2 .32 CRORES FOR AYS 93-94 & 94-95] IS FROM OTHERS. AGAINST THE INTEREST EARN ED, THE APPELLANT CLAIMED TO HAVE PAID RS.5,17,41,487/-[RS.4.96 CRORES & RS.6 .01 CRORES FOR THE AYS. 93.94 & 94-95] BY WAY OF INTEREST IN BANK OVERDRAFT , CASH CREDITS, LETTER OF CREDITS, PACKING CREDITS ON EXPORT BILLS, INLAND BI LLS DISCOUNTED, IMPORT LOAN ITA NOS.637 & 645 TO 647/BANG/10 PAGE 6 OF 17 AND INTEREST PAYABLE TO M/S. BOSCH. THUS, IT CAN B E INFERRED THAT INTEREST WAS PAID ON OVERDRAFT AND OTHER FACILITIES WHICH WA S UTILIZED IN THE EXPORT BUSINESS. THE INTEREST PAID ON OVERDRAFT FACILITIES HAD NO DIRECT OR IMMEDIATE NEXUS WITH THE EARNING OF INTEREST INCOME AND, HENCE, NOT ALLOWABLE AGAINST THE INTEREST RECEIVED. IN THIS V IEW OF THE MATTER, THE APPELLANTS CLAIM IS NOT ACCEPTABLE ON THIS ISSUE. (II) WITH REGARD TO TRADE DISCOUNT : THE LD. CIT (A) OBSERVED, FOR ALL THE AYS UNDER DISPUTE, THUS - 3.13. A PLAIN READING OF THE DECISION OF THE HONBL E PUNJAB & HARYANA HIGH COURT [IN THE CASE OF CIT V. AVON CYCLES LTD. (2008) 303 ITR 345] SHOWS THAT SALES TAX AND EXCISE DUTY DO NOT FORM PA RT OF THE TOTAL TURNOVER. HOWEVER, AS REGARDS THE TRADE DISCOUNT, IT IS NOT E XPRESSLY MENTIONED IN THE SAID ORDER BUT IN PRINCIPLE ALLOWED IN FAVOUR OF TH E ASSESSEE. MOREOVER, IN THE CASE RELIED UPON, THE AO HAS NOT ACCEPTED THE C LAIM OF THE ASSESSEE AND THE TRADE DISCOUNT WAS CONSIDERED AS TOTAL TUR NOVER. IN THE INSTANT CASE, THE APPELLANT HAD EXCLUDED WHILE CLAIMING DED UCTION U/S 80HHC AND 80HHE AND THE AO DID NOT DISPUTE THE SAME. THUS, T HE FACTS OF THE CASE ARE DISTINGUISHABLE AND, THEREFORE, IT IS OF NO ASS ISTANCE TO THE APPELLANT. 5. AGGRIEVED, THE ASSESSEE HAS COME UP WITH THE PRESENT APPEALS. AFTER DUE CONSIDERATION OF THE RIVAL SUBMISSIONS, M ETICULOUS PERUSAL OF THE RELEVANT RECORDS AND ALSO THE DOCUMENTARY EVIDENCE ADVANCED BY THE LD. A R DURING THE COURSE OF HEARING IN THE SHAPE OF A PAPER BOOK, THE ISSUES RAISED BY THE ASSESSEE ARE ADJUDICATED IN A CHRONOL OGICAL ORDER AS UNDER: 5.1. THE FIRST COMMON GROUND RAISED IN ALL THE AYS UNDER CONSIDERATION IS THAT THE LD. CIT (A)-LTU ERRED IN HOLDING THAT THE CLAIMS MADE WAS BEYOND TIME LIMIT AND, HENCE, NOT M AINTAINABLE. 5.1.1. ON A PERUSAL OF THE IMPUGNED ORDERS OF THE LD. CIT (A), WE FIND THAT THE ISSUE HAS BEEN EXHAUSTIVELY DEALT WITH BY THE LD. CIT (A) FOR ALL THE AYS UNDER DISPUTE WITH REFERENCE TO THE DATE(S) OF FURNISHING OF RETURNS, ITA NOS.637 & 645 TO 647/BANG/10 PAGE 7 OF 17 TOTAL INCOME, TAX AUDITORS REPORTS, CLAIMS U/S 80H HC (4) OF THE ACT ETC. AS THE REASONS ADDUCED BY THE LD. CIT (A) WERE IDENTIC AL FOR ALL THE AYS AND FOR THE SAKE OF CONVENIENCE, THE REASONS RECORDED B Y THE LD. CIT (A) FOR THE AY 1992-93 ARE EXTRACTED AS UNDER: A.Y. 1992-93 : 3.5. I HAVE CONSIDERED THE FACTS OF THE CASE, T HE APPELLANTS SUBMISSIONS AND THE AOS REMAND REPORT. THE MATERIAL FACTS AVA ILABLE ON RECORD REVEAL THAT THE RETURN OF INCOME FOR THE ASSESSMENT YEAR U NDER CONSIDERATION WAS FILED ON 31.12.1992, DECLARING THE TOTAL INCOME AT RS.55,24,43,680/-. IT ALSO REVEALS THAT THE APPELLANT FURNISHED TAX AUDIT ORS REPORT IN FORM NO.3CD, FORM NO.10CCZAC, 10CCAF ALONG WITH THE RETU RN OF INCOME. THE AUDIT REPORT IN FORM NO.10CCAC FOR THE RELEVANT PREVIOUS YEAR IS REQUIRED FOR THE CLAIM U/S 80HHC (4) OF THE ACT. S IMILAR AUDIT REPORT IN FORM NO.10CCAF IS REQUIRED FOR THE CLAIM U/S 80HHE (4) OF THE ACT. THE RELEVANT PROVISION IS REPRODUCED AS UNDER: (4) THE DEDUCTION UNDER SUB-SECTION (1) SHALL NOT B E ADMISSIBLE UNLESS THE ASSESSEE FURNISHED IN THE PRESCRIBED FOR M, ALONG WITH THE RETURN OF INCOME, THE REPORT OF AN ACCOUNTANT AS DE FINED IN THE EXPLANATION BELOW SUB-SECTION (2) OF SECTION 288, C ERTIFYING THAT THE DEDUCTION HAS BEEN CORRECTLY CLAIMED IN ACCORDA NCE WITH THE PROVISIONS OF THIS SECTION. 3.6. A PERUSAL OF THE SAID AUDIT REPORT SHOWS THAT, IN ORDER TO CLAIM THE DEDUCTION U/S 80HHC, THE TOTAL TURNOVER, TOTAL EXPO RT TURNOVER AND PROFIT OF THE BUSINESS HAVE BEEN WORKED OUT AS UNDER: I) TOTAL TURNOVER RS. 396,13,58,198 II) TOTAL EXPORT TURNOVER RS. 42,88,82,450 III) TOTAL PROFIT OF THE BUSINESS RS. 58,62,21,615 (I) FURTHER, WHILE MAKING THE ADJUSTMENT REFERRED TO IN EXPLANATION (BAA) TO SECTION 80HHC, THE AUDITOR HAS GIVEN THE WORKING AS FOLLOWS: 90% OF EXPORT INCENTIVE (RS.97,10,6210) RS. 87,31,449 RENT INCLUDED UNDER BUSINESS INCOME(RS.187053) RS. 1,68,448 INTEREST INCLUDED UNDER BUSINESS INCOME RS.13711618 ) RS. 1,23,40,456 TOTAL RS. 2,12, 40,253 ITA NOS.637 & 645 TO 647/BANG/10 PAGE 8 OF 17 3.7. THE ORIGINAL ASSESSMENT ORDER WAS PASSED ON 2 4.3.1995 AND IT IS SEEN FROM THE COMPUTATION OF INCOME, THE AO HAS ACCEPTED THE APPELLANTS CLAIM IN TOTO IN RESPECT OF TOTAL TURNOVER AND EXPO RT TURNOVER. AS REGARDS THE BUSINESS PROFIT, THERE IS SOME VARIATION DUE TO ADDITIONS/DISALLOWANCES. HOWEVER, THE METHOD OF CALCULATION ADOPTED BY THE A O IS NOT DISPUTED BY THE APPELLANT. AS A MATTER OF FACT, THE APPELLANT ITSELF CLAIMED DEDUCTION ON THE GROSS INTEREST AS PER EXPLANATION (BAA) TO S ECTION 80HHC. SIMILARLY, THE AO HAS NOT DISPUTED THE TOTAL TURNOV ER AS COMPUTED BY THE APPELLANT. MOREOVER, THE CLAIM WAS MADE IN FORM NO .10CCAC AND 10CCAF AND CERTIFIED BY AN ACCOUNTANT AS REQUIRED B Y SUB-SECTION (4) OF S.80HHC WHICH IS MANDATORY. 3.8. IT IS OBSERVED THAT THIS ISSUE HAS BEEN RAISED BEFORE THE HONBLE ITAT AND NOT BEFORE THE AO AT THE TIME OF ASSESSMENT. I T IS RELEVANT TO EXTRACT THE SUB-SECTION (5) OF SECTION 139, WHICH READS AS UNDER: (5) IF ANY PERSONWHICHEVER IS EARLIER. 3.9. A PLAIN READING OF THE FOREGOING SECTION SHOWS THAT ANY OMISSION OR ANY WRONG STATEMENT THEREIN IS TO BE FURNISHED BY F ILING A REVISED RETURN BEFORE THE EXPIRY OF ONE YEAR FROM THE END OF THE R ELEVANT ASSESSMENT YEAR. AS SUCH, THE APPELLANT OUGHT TO HAVE FURNISHED ITS REVISED RETURN OF INCOME ON OR BEFORE 31.3.1994. HOWEVER, IT IS SEEN THAT T HE CLAIM WAS MADE ON 22/3/2001 I.E., AFTER EXPIRY OF ALMOST SEVEN YEARS. THEREFORE, IN MY CONSIDERED OPINION, THE CLAIM MADE IS BEYOND THE TI ME LIMIT AS DISCUSSED ABOVE. IN VIEW OF THE PROCEDURAL AND TECHNICAL LAP SES AS DISCUSSED IN THE PRECEDING PARAGRAPHS, THE APPELLANTS CLAIM IS NOT MAINTAINABLE. 5.1.2. AT THE SAME TIME, THE ASSESSEE HAD NOT COME UP WITH ANY PLAUSIBLE REASONING BEFORE US TO REBUT THE STAND OF THE LD. CIT (A) WITH REGARD TO THE MAINTAINABILITY OF THE ASSESSEES CLA IMS. 5.1.3. WE HAVE CAUTIOUSLY PERUSED THE PROVISI ONS OF S.80HHC (4), S.80HHE (4) AS WELL AS S. 139(5) OF THE ACT. AS JUD ICIOUSLY POINTED OUT BY THE LD. CIT (A), THE LD. AO HAD ACCEPTED THE ASSESS EES CLAIM IN TOTO IN RESPECT OF (I) TOTAL TURNOVER, (II) TOTAL EXPORT TU RNOVER (AY 92-93), (I) TOTAL TURNOVER; (II) EXCLUDING SALES TAX, EXCISE DUTY AND SALE OF SCRAPS (AYS 93- 94& 94-95). MOREOVER, THE METHOD OF CALCULATION AD OPTED BY THE AO WAS ITA NOS.637 & 645 TO 647/BANG/10 PAGE 9 OF 17 NOT DISPUTED BY THE ASSESSEE. AS A MATTER OF FACT [AS COULD BE SEEN FROM THE FINDINGS OF THE LD. CIT (A)] THE ASSESSEE ITSEL F CLAIMED DEDUCTION ON THE GROSS INTEREST AS PER EXPLANATION (BAA) TO S.80HHC. STRANGELY, THE ISSUES HAVE BEEN RAISED BEFORE THE EARLIER BENCH AFTER A L APSE OF A CONSIDERABLE TIME FRAME. 5.1.4. IN THIS CONNECTION, WE RECALL THE PROVI SIONS OF S. 139(5) OF THE ACT, ACCORDING TO WHICH, THE ASSESSEE FOR HAVING FURNISHED A RETURN, DISCOVE RED ANY OMISSION OR ANY WRONG STATEMENT THEREIN, IT OUG HT TO HAVE FURNISHED A REVISED RETURN AT ANY TIME BEFORE THE EXPIRY OF ONE YEAR FROM THE END OF THE RELEVANT ASSESSMENT YEAR OR BEFORE THE COMPLETION O F THE ASSESSMENT WHICHEVER WAS EARLIER . FOR RECORD, THE ASSESSEE HAD NOT PLACED ANY MATERIAL EITHER BEFORE THE FIRST APPELLATE AUTHORIT Y OR BEFORE THIS BENCH FOR SUCH A LAPSE ON THE PART OF THE ASSESSEE. 5.1.5. THE CIT (A) HAD, HOWEVER, TAKEN UP THE APPE LLANTS CLAIM FOR CONSIDERATION ON MERITS . THIS STAND OF THE LD. CIT (A) IN TAKING UP THE ASSESSEES CLAIM FOR CONSIDERATION ON MERITS IS MAI NLY ATTRIBUTABLE TO THE EARLIER BENCHS DIRECTIONS THAT - 30. THE ASSESSEE HAS PREFERRED ADDITIONAL GROU NDS. ADMITTEDLY, THESE GROUNDS WERE NOT RAISED BEFORE THE LEARNED CIT (A), SO THERE WAS NO OCCASION WITH THE FIRST APPELLATE AUTHORITY TO DEAL WITH THE ISSUE SINCE RAISED FOR THE FIRST TIME. AS THE ASSESSMENT YEAR BEFORE US IS 1994-95 AND THE AMENDMENT WAS MADE IN SECTION 80HHC W.E.F. 1.4. 92, THE FIRST APPELLATE AUTHORITY IS DIRECTED TO TAKE A VIEW IN T HE LIGHT OF THE SAID AMENDMENT. SO THESE GROUNDS ARE SENT TO THE FILE O F THE LEARNED FIRST APPELLATE AUTHORITY AND TO DECIDE IN VIEW OF THE AM ENDED PROVISIONS. ITA NOS.637 & 645 TO 647/BANG/10 PAGE 10 OF 17 5.1.6. DURING THE COURSE OF HEARING, THE LD. DR VEHEMENTLY ARGUED THAT SINCE THE CLAIM WAS NEVER MADE BY THE ASSESSEE WHIL E FILING THE RETURN OF INCOME AND IT WAS FOR THE FIRST TIME CLAIMED BEFORE THE TRIBUNAL AND SUCH CLAIM ON ISSUES NEVER RAISED BEFORE ANY AUTHORITY I S NOT MAINTAINABLE. LD. DR FURTHER STRESSED THAT THE PROVISIONS OF SECTION 139(5) OF THE ACT CANNOT BE OVERLOOKED WHICH IS STATUTORY. ON THIS ISSUE, WE DO RECOLLECT THE ORDER OF THE HONBLE APEX COURT IN THE CASE OF NATIONAL T HERMAL POWER COMPANY LTD. V. CIT (229 ITR 383) AND GOETZ INDIA LTD. V. C IT (284 ITR 323). HOWEVER, WE RESTRAIN FROM PASSING ANY COMMENTS ON T HIS ISSUE SINCE THE ISSUE WAS CONSIDERED BY THE EARLIER BENCH AND REMIT TED BACK THE ISSUES FOR ADJUDICATION ON MERITS. HOWEVER, THE REVENUE MAY EXERCISE ITS RIGHT TO RAISE THE MAINTAINABILITY OF THE APPEALS BY INVOKIN G THE PROVISIONS OF S.139(5) OF THE ACT BEFORE THE HIGHER JUDICIARY. 6. REVERTING BACK TO THE ISSUES WHICH HAVE SINCE BEEN DISPOSED OF BY THE LD. CIT (A) ON MERITS, WE SHALL TAKE UP THE SAM E FOR CONSIDERATION AS BELOW: 6.1. THE LD. CIT (A)-LTU, BANGALORE VIDE HI S IMPUGNED ORDERS CITED SUPRA HAD DECIDED THE ISSUES AGAINST THE ASSESSEE, THE DETAILS OF GROUNDS RAISED AND THE FINDINGS ARE, BRIEFLY, EXTRACTED A S UNDER: I. ADJUSTMENT AS PER EXPLANATION (BAA) TO S.80HHC AND EXPLN. (D) TO S. 80HHE, INTEREST RECEIVED BEING LOWER THAN INT EREST EXPENDITURE INCURRED 90% OF THE SAME SHOULD NOT HAVE BEEN REDUC ED FROM ELIGIBLE PROFIT OF BUSINESS WHILE GRANTING DEDUCTION U/S 80H HC AND 80HHE. 6.1.1. AFTER TAKING INTO ACCOUNT THE FACTS OF TH E ISSUE, ASSESSEES SUBMISSION, THE REMAND REPORT OF THE AO AND ALSO EX TENSIVELY QUOTING THE ITA NOS.637 & 645 TO 647/BANG/10 PAGE 11 OF 17 FINDING OF THE HONBLE HIGH COURT OF DELHI IN THE C ASE OF CIT V. DELHI BRASS AND METAL WORK LTD. (2009) 313 ITR 352 (DEL), THE L D. CIT (A) TOOK A DIVERGENT VIEW TO THAT OF THE ASSESSEE, THUS 3.11. IN THE INSTANT CASE, INTEREST ON BANK DEP OSITS AND OTHER ACCOUNT IS CREDITED IN THE PROFIT AND LOSS ACCOUNT FOR RS.2,27 ,49,608/- FROM THE DETAILS FURNISHED, INTEREST TO THE EXTENT OF RS.90,37,990/- IS FROM BANKS AND INTEREST OF RS.1,37,11,618/- IS FROM OTHERS. AGAIN ST THE INTEREST EARNED, THE APPELLANT CLAIMED TO HAVE PAID RS.5,17,41,487/- BY WAY OF INTEREST IN BANK OVERDRAFT, CASH CREDITS, LETTER OF CREDITS, PACKING CREDITS ON EXPORT BILLS, INLAND BILLS DISCOUNTED, IMPORT LOAN AND INTEREST P AYABLE TO M/S.BOSCH. THUS, IT CAN BE INFERRED THAT INTEREST WAS PAID ON OVERDRAFT AND OTHER FACILITIES WHICH WAS UTILIZED IN THE EXPORT BUSINES S. THE INTEREST PAID ON OVERDRAFT FACILITIES HAD NO DIRECT OR IMMEDIATE NEX US WITH THE EARNING OF INTEREST INCOME AND, HENCE, NOT ALLOWABLE AGAINST T HE INTEREST RECEIVED. IN THIS VIEW OF THE MATTER, THE APPELLANTS CLAIM IS N OT ACCEPTABLE ON THIS ISSUE. 6.1.2. INCIDENTALLY, AN IDENTICAL ISSUE THAT OF TH E PRESENT ONE HAD CROPPED UP BEFORE THE EARLIER BENCH IN THE CASE OF THE ASSESSEE FOR THE AYS 2002-03 AND 2003-04 AND AFTER DUE CONSIDERATION OF THE ISSUE, THE HONBLE BENCH IN ITS FINDING IN ITA NOS.706 & 707/B ANG/2010 DATED: 22/10/2010 HAD OBSERVED THUS (4) (D). WE HAVE DULY CONSIDERED THE RIVAL SUB MISSIONS AND ALSO DILIGENTLY PERUSED THE RULING OF VARIOUS HIGH COURT S ON WHICH THE REVENUE HAD PLACED ITS FAITH TO DRIVE HOME ITS POINT. WE H AVE ALSO PERUSED THE FINDINGS OF THE EARLIER BENCH ON A SIMILAR ISSUE IN THE ASSESSEES OWN CASE FOR THE AYS 98.99, 99-00, 2000-01 AND 01-02. THE H ONBLE BENCH IN ITS FINDING FOR THE AYS 2000-01 AND 01-02 IN ITA NOS.33 5 & 336/B/2005 DATED: 12.6.2008 HAD DELIBERATED THE ISSUE AT LENGT H. FOR THE APPRECIATION OF FACTS, WE VENTURE TO REPRODUCE THE RELEVANT PORT IONS OF ITS FINDING AS UNDER: 10. IN RESPECT OF GROUND OF APPEAL NO.6.2.[THAT TH E CIT(A) ERRED IN UPHOLDING THE ACTION OF THE AO IN EXCLUDING 90% OF GROSS INTEREST RECEIPTS], WE REPRODUCE PARA 30 OF THE ORDER OF TH IS TRIBUNAL DT: 4.5.2007: ITA NOS.637 & 645 TO 647/BANG/10 PAGE 12 OF 17 WE HAVE HEARD BOTH THE PARTIES. THE LD. DELHI HIG H COURT IN THE CASE OF SHRI RAM HONDA POWER EQUIP (SUPRA) HAS HELD THAT THE WORD INTEREST IN CLAUSE (BAA) OF EXPLANATION CONNOTES NET INTEREST AND NOT GROSS INTEREST. IF THE AO HAS TREATED THE INTEREST RECEIPTS AS BUSINESS INCOME, THEN DEDUCTION IN TERMS OF EXPLANATION (BAA ) SHOULD BE WITH REFERENCE TO NET INTEREST. THE LD. DELHI HIGH COUR T WAS REQUIRED TO CONSIDER THE FOLLOWING QUESTION: (C) IF THE EXPRESSION INTEREST IMPLIES NET INTER EST, THEN SHOULD NETTING NOT BE ALLOWED WHERE THE INTEREST INCOME IS COMPUTED TO BE BUSINESS INCOME? THE LD. DELHI HIGH COURT AT PAGE 507 ANSWERED THE A BOVE QUESTION AS UNDER: WE ACCORDINGLY HOLD THAT WHERE, AS A RESULT OF THE COMPUTATION OF PROFITS AND GAINS OF BUSINESS AND PROFESSION, THE A O TREATS THE INTEREST RECEIPT AS BUSINESS INCOME, THEN DEDUCTION SHOULD BE PERMISSIBLE, IN TERMS OF EXPLANATION (BAA) OF THE N ET INTEREST I.E., THE GROSS INTEREST LESS THE EXPENDITURE INCURRED FOR T HE PURPOSE OF EARNING SUCH INTEREST. FOLLOWING OUR ORDER IN THE CASE OF THE ASSESSEE FOR EARLIER, THE ASSESSING OFFICER IS DIRECTED TO DISALLOW 90% OF TH E NET INTEREST . (E) AS THE JURISDICTIONAL TRIBUNAL HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE FOR THE REASONS REPRODUCED SUPRA, WE ARE I NCLINED TO AGREE WITH THE FINDING OF THE LD. CIT (A). IT IS ORDERED ACCO RDINGLY. 6.1.3. IN CONFORMITY WITH THE FINDING OF THE EARLIER BENCH ON A SIMILAR ISSUE IN THE ASSESSEES OWN CASE, THE LD. AO IS DIR ECTED TO ADOPT THE FINDING OF THE EARLIER BENCH FOR THE ASSESSMENT YEA RS UNDER DISPUTE. IT IS ORDERED ACCORDINGLY. 6.2. THE OTHER COMMON GROUND RAISED BY THE A SSESSEE IS WITH REGARD TO THE STAND OF THE LD. CIT (A) IN NOT DIRECTING THE AO TO REDUCE RS.2.97 CRORES, RS.4.38 CRORES AND RS.1.58 LAKHS (CASH INCE NTIVE) FOR THE AYS 92.93, 93.94 & 94-95 RESPECTIVELY FROM THE TOTAL TU RNOVER BEING ITA NOS.637 & 645 TO 647/BANG/10 PAGE 13 OF 17 DISCOUNT TO CUSTOMERS WHILE COMPUTING DEDUCTION U/S 80HHC AND 80HHE OF THE ACT. 6.2.1. AFTER DUE CONSIDERATION OF THE ASSESSE ES SUBMISSION ON THE ISSUE, THE LD. CIT (A) VIEWED THAT A PLAIN READING OF THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT [IN THE CAS E OF CIT V. AVON CYCLES LTD. (2008) 303 ITR 345] SHOWS THAT SALES TA X AND EXCISE DUTY DO NOT FORM PART OF THE TOTAL TURNOVER. HOWEVER, AS REGARDS THE TRADE DISCOUNT, THOUGH IT IS NOT EXPRESSLY MENT IONED IN THE SAID ORDER, BUT, IN PRINCIPLE ALLOWED IN FAVOUR OF THE ASSESSEE. 6.2.2. WE DO FAITHFULLY SUBSCRIBE TO THE DECISION OF THE H ONBLE HIGH COURT. TRADE DISCOUNT IS AN INCENTIVE GIVEN T O CUSTOMERS LEADING TO DECREASE IN VALUE OF SALES. THEREFORE, IT IS OBVIOUS THAT THE TRADE DISCOUNT HAS TO BE REDUCED FROM THE TOTAL TURNOVER. THUS, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. WE SHALL NOW PROCEED TO DEAL WITH THE ISSUE RAISED BY THE REVENUE. ITA NO: 637/10 AY 1994-95 [BY THE REVENUE ]: 7. THE REVENUE IN ITS APPEAL HAD RA ISED A LONE GROUND TO THE EFFECT THAT THE LD. CIT (A) WAS NOT JUSTIFIED IN DIRECTING TO E XCLUDE THE COST OF SCRAPS FROM THE TOTAL TURNOVER FOR THE PURPOSE OF D EDUCTION U/S 80HHC AND 80HHE THOUGH THE ISSUE OF EXCLUSION OF COST OF SCRA P SOLD WAS NEVER IN DISPUTE IN THE AY UNDER CHALLENGE. ITA NOS.637 & 645 TO 647/BANG/10 PAGE 14 OF 17 7.1. IN THIS CONNECTION, WE RECALL THE FINDING OF THE HONBLE EARLIER BENCH, IN ITS CONSOLIDATED ORDER IN ITA NOS.396, 39 7, 398 & 399 /BANG/1998 DATED: 31.5.2004 WHEREIN FOR THE AY 1994-95, HAD OB SERVED THAT 30. THE ASSESSEE HAS PREFERRED ADDITIONAL GROUNDS IN THE FORM OF GROUND NOS.10, 11 AND 12. ADMITTEDLY, THESE GROUNDS WERE NOT RAISED BEFORE THE LEARNED CIT (A), SO THERE WAS NO OCCASION WITH THE FIRST APPELLATE AUTHORITY TO DEAL WITH THE ISSUE SINCE RAISED FOR THE FIRST T IME. AS THE ASSESSMENT YEAR BEFORE US IS 1994-95 AND THE AMENDMENT WAS MADE IN SECTION 80HHC W.E.F. 1.4.92, THE FIRST APPELLATE AUTHORITY IS DIR ECTED TO TAKE A VIEW IN THE LIGHT OF THE SAID AMENDMENT. SO THESE GROUNDS ARE SENT TO THE FILE OF THE LEARNED FIRST APPELLATE AUTHORITY AND TO DECIDE IN VIEW OF THE AMENDED PROVISION. 7.1.2. THEREFORE, THE LD. CIT (A) WAS WI THIN HIS DOMINION TO TAKE UP THE ISSUE FOR ADJUDICATION AND THE REVENUES VIEW T HAT (I ) THE ISSUE OF EXCLUSION OF THE COST OF SCRAP SOLD FROM THE TOTAL TURNOVER WAS NEVER IN DISPUTE IN THIS AY; (II) THE LD. CIT (A) HAD ALLOWE D AN ISSUE WHICH WAS NEVER IN EXISTENCE WAS BARELY ON MISCONCEPTION ON THE PART OF THE REVENUE. 7.1.3. TURNING OUR ATTENTION TO THE ISSUE ON HAND, WE FIND THAT THE LD. CIT (A) HAD TAKEN UP THE ADDITIONAL GROUND RAIS ED BY THE ASSESSEE FOR ADJUDICATION. THE ADDITIONAL GROUND OF THE ASSESSE E WAS THAT - 12. THAT THE JOINT COMMISSIONER ERRED IN INCLUDING WORKSHOP RECEIPTS I.E., SCRAP SALES AS PART OF TOTAL TURNOVE R. 7.1.4. AFTER CONSIDERING THE ISSUE, THE O BSERVATION OF THE FIRST APPELLATE AUTHORITY WAS THAT 4.3. AN IDENTICAL ISSUE CAME UP FOR CONSIDERATION FOR THE ASSESSMENT YEAR 1993-94 AND THE HONBLE ITAT, BANGALORE IN ITA NO.3 98/BANG/98 DATED 31/5/2004 FOR THE ASSESSMENT YEAR 1993-94 ALLOWED T HE ISSUE IN FAVOUR OF ITA NOS.637 & 645 TO 647/BANG/10 PAGE 15 OF 17 THE APPELLANT. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE ITAT, IT IS HELD THAT SCRAP SALES IS EXCLUDIBLE FROM THE TOT AL TURNOVER. HOWEVER, THE APPELLANT HAS NOT APPENDED THE BREAK-UP OF THE TURN OVER IN ORDER TO ENABLE THE AO TO ALLOW DEDUCTION U/S 80HHC AND 80HHE. THE AO IS, THEREFORE, DIRECTED TO VERIFY THE SAME AND RE-COMPUTE ACCORDIN GLY. 7.1.5. HOWEVER, ON A CRITICAL PERUSAL OF THE AFFIDAVIT FURNISHED BY THE ASSESSEE BEFORE THE EARLIER BENCH FOR THE AY 1994-95 WHEREIN IT HAS BEEN NOTICED THAT THE ASSESSEE HAD RAISED AN ADDITIONAL GROUND WITH REGARD TO WORKSHOP RECEIPTS, THE RELEVANT PORTION OF WHICH IS EXTRACTED AS UNDER: GROUND NO.12THAT THE LEARNED JOINT COMMISSIONER E RRED IN INCLUDING WORKSHOP RECEIPTS AS PART OF TOTAL TURNOVER. 7.1.6. ON A GLIMPSE OF THE COPY OF THE TR IBUNALS ORDER ( CONTAINED ONLY 7 PAGES WHICH HAS BEEN SERIALLY NUMBERED ) PRODUCED BY THE ASSESSEE DURING THE COURSE OF HEARING ON 26.4.2011, WE FIND THAT F OR THE AY 1993-94 THE HONBLE BENCH HAD OBSERVED THUS ITA NO.398/BANG/98 : 21. THE ASSESSEE HAS ALSO PREFERRED ADDITIONAL GRO UND (GROUND NO.11) PERTAINS TO REQUEST THE TRIBUNAL TO DIRECT THE REVE NUE TO REDUCE RS.4,38,70,940/- FROM THE TOTAL TURNOVER BEING DISC OUNT TO CUSTOMERS FOR PURPOSES OF GRANTING DEDUCTION U/S 80HHC AND 80HHE AND THE NEXT ADDITIONAL GROUND RAISED BY THE ASSESSEE IS THAT TH E JCIT ERRED IN REDUCING FROM THE ELIGIBLE PROFITS OF BUSINESS 90% OF INTERE ST RECEIVED BY INVOKING THE PROVISIONS OF EXPLANATION (BAA) TO SECTION 80HH C AND EXPLANATION (D) TO SECTION 80HHE WHILE CALCULATING DEDUCTION U/S 80 HHC AND 80HHE. SINCE THESE GROUNDS ARE RAISED BEFORE US FOR THE FI RST TIME AND WERE NOT RAISED BEFORE THE LEARNED FIRST APPELLATE AUTHORITY , WE ARE OF THE VIEW THAT THESE GROUNDS NEEDS TO BE SENT TO THE FILE OF THE F IRST APPELLATE AUTHORITY IN VIEW OF THE AMENDMENT MADE TO THE SAID SECTION, AS THE ASSESSMENT YEAR INVOLVED IS 1993-94 AND TO DECIDE AS PER LAW. 7.1.7. THUS, THE LD. CIT (A) HAD COMMITTED A M ISTAKE, PERHAPS BY OVERSIGHT, IN OBSERVING THAT THE EARLIER BENCH HAD ALLOWED THE ISSUE IN ITA NOS.637 & 645 TO 647/BANG/10 PAGE 16 OF 17 FAVOUR OF THE ASSESSEE. THE ISSUE RAISED BY THE AS SESSEE WAS, IN FACT, FOR THE AY 1994-95 AND NOT FOR THE AY 1993-94 WHICH HAS BEEN WRONGLY QUOTED AND ALSO DECIDED IN FAVOUR OF THE ASSESSEE B Y THE LD. CIT (A) IN HIS IMPUGNED ORDER UNDER CHALLENGE. 7.1.8. THE EARLIER BENCH, IN ITS FINDING FO R THE AY 1994-95 [IN ITA NO. 399 /BANG/98 DATED: 31.5.2004 IN THE ASSESSEES CASE HA D HOWEVER, OBSERVED THUS 30. THE ASSESSEE HAS PREFERRED ADDITIONAL GROU NDS. ADMITTEDLY, THESE GROUNDS WERE NOT RAISED BEFORE THE LEARNED CIT (A), SO THERE WAS NO OCCASION WITH THE FIRST APPELLATE AUTHORITY TO DEAL WITH THE ISSUE SINCE RAISED FOR THE FIRST TIME. AS THE ASSESSMENT YEAR BEFORE US IS 1994-95 AND THE AMENDMENT WAS MADE IN SECTION 80HHC W.E.F. 1.4. 92, THE FIRST APPELLATE AUTHORITY IS DIRECTED TO TAKE A VIEW IN T HE LIGHT OF THE SAID AMENDMENT. SO THESE GROUNDS ARE SENT TO THE FILE O F THE LEARNED FIRST APPELLATE AUTHORITY AND TO DECIDE IN VIEW OF THE AM ENDED PROVISIONS. 7.1.9. HOWEVER, TO PUT THE RECORD ON STRAIGHT, WE WOULD LIKE TO OBSERVE THAT INCIDENTALLY, AN IDENTICAL ISSUE HAD CROPPED U P IN THE ASSESSEES OWN CASE FOR THE AY 2002-03 WHEREIN THE LD. CIT (A), IN CONFORMITY WITH THE DECISIONS OF THE HONBLE TRIBUNAL IN ITA NOS.335 & 336/B/05 DATED 12.6.2008 FOR THE AYS 2001.01 AND 01.02 [IN THE ASS ESSEES OWN CASE], DIRECTED THE AO TO EXCLUDE THE SAME FROM THE TOTAL TURNOVER OF THE ASSESSEE. HOWEVER, THE FINDING OF THE LD. CIT (A) WAS HOTLY CONTESTED BY THE REVENUE BY TAKING A CUE FROM THE RULING OF THE HONBLE JUR ISDICTIONAL HIGH COURT IN THE ASSESSEES OWN CASE [(2010) 326 I TR 358 (KAR)] FOR THE ASSESSMENT YEAR 1993-94 WHEREIN THE ISSUE HAS BEEN DECIDED BY THE HONBLE COURT AGAINST THE ASSESSEE WITH THE FOLLO WING OBSERVATIONS: WHILE COMPUTING THE TOTAL TURNOVER FOR THE PURPOSE S OF S.80HHC, THE AMOUNTS RECEIVED BY SALE OF SCRAPS IN DOMESTIC MARK ET ARE INCLUDIBLE . ITA NOS.637 & 645 TO 647/BANG/10 PAGE 17 OF 17 7.1.10. IN CONFORMITY WITH THE RULING OF THE H ONBLE COURT, THE HONBLE EARLIER BENCH, IN ITS FINDINGS IN ITA NOS.706 & 707 /BANG/2010 FOR THE AYS 2002-03 & 2003-04 DATED: 22/10/2010, HAD DECIDED TH E ISSUE AGAINST THE ASSESSEE [ PARA 6(1) (E) ON PAGE 4 ]. THE FINDING OF THE EARLIER BENCH IN AN IDENTICAL ISSUE HOLDS GOOD FOR THE ISSUE ON HAND . IT IS ORDERED ACCORDINGLY. 8. IN THE RESULT: (I) THE ASSESSEES APPEALS FOR THE AYS. 1992-93 & 93-94 ARE PARTLY ALLOWED ; & (II) THE REVENUES APPEAL FOR THE AY 94-95 IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF JUNE, 2011. SD/- SD/- ( SMT. P. MADHAVI DEVI ) (A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 17 TH JUNE, 2011. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.