Glaxo Smith Kline Pharmaceuticals Ltd, V. AddlCIT Cir 6(3),

ITA 6483/MUM/2003

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3469 (ITAT-MUMBAI)
• Duration Of Justice: 9 year(s) 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 17-04-2013
• Assessment Year: misc
• Appeal Filed On: 03-10-2003
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GIRIJA DAYAL
• Assessee Lawyers: P J PARDIWALLA
• Keywords: Capital asset; Business income; Depreciation; Opportunity of being heard; Earning of tax free income; Retrospective amendment; Cost of acquisition; Capital receipt; Capital expenditure
• Section: 43B; 143(3); 80HHC; 14A; 54; 28; 154

Judgement Text

ITA NOS.6483 7252 OF 2003 AND CO NO.04 OF 2005 GLAX O SMITHKLINE MUMBAI PAGE 1 OF 34 IN THE INCOME TAX APPELLATE TRIBUNAL 'E' BENCH, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO.6483/MUM/2003 (ASSESSMENT YEAR: 2000-01) GLAXO SMITHKLINE PHARMACEUTICALS LTD (FORMERLY GLAXO INDIA LTD) 252 DR.ANNIE BESANT ROAD VS DY.CIT 6(3) 522, AAYAKAR BHAVAN MK ROAD MUMBAI 400020 WORLI, MUMBAI 400025 PAN NO: AAACG4414B (APPELLANT) (RESPONDENT) ITA NO.7252/MUM/2003 ( ASSESSMENT YEAR: 2000-01) DY. CIT 6(3) 522, AAYAKAR BHAVAN MK ROAD MUMBAI 400020 VS GLAXO SMITHKLINE PHARMACEUTICALS LTD (FORMERLY GLAXO INDIA LTD) DR.ANNIE BESANT ROAD WORLI, MUMBAI 400025 PAN NO: AAACG4414B (APPELLANT) (RESPONDENT) C.O. NO.04/MUM/2005 (ARISING OUT OF ITA NO. 7252/MUM/2003) GLAXO SMITHKLINE PHARMACEUTICALS LTD (FORMERLY GLAXO INDIA LTD) DR.ANNIE BESANT ROAD VS DY. CIT 6(3) 522, AAYAKAR BHAVAN MK ROAD MUMBAI 400020 WORLI, MUMBAI 400025 PAN NO: AAACG4414B (CROSS OBJECTOR) (RESPONDENT) ASSESSEE BY: SHRI P.J. PARDIWALLA & SHRI NIRAJ SHETH DEPARTMENT BY: SHRI GIRIJA DAYAL, CIT(DR) DATE OF HEARING: 17/04/2013 DATE OF PRONOUNCEMENT: 12/06/2013 ITA NOS.6483 7252 OF 2003 AND CO NO.04 OF 2005 GLAX O SMITHKLINE MUMBAI PAGE 2 OF 34 O R D E R PER BENCH. THESE ARE CROSS APPEALS BY ASSESSEE AND REVENUE AND CROSS OBJECTIONS BY ASSESSEE FOR ASSESSMENT YEAR 2000-01 ARISING OUT OF THE ORDER OF CIT (A)-XXVI MUMBAI DATED 31/07/2003 O N ORDER OF AO UNDER SECTION 143(3) OF THE INCOME-TAX ACT. 2. WE HAVE HEARD THE LEARNED COUNSEL AND THE LEARNED DEPARTMENTAL REPRESENTATIVE. LEARNED COUNSEL PLACED ON RECORD A PAPER BOOK AND A CHART INDICATING THE ISSUES WHICH ARE COVERED BY EARLIER ORDERS. THESE ARE CONSIDERED WHILE DISPOSIN G OF THESE APPEALS. ITA NO.6483/MUM/2003 ASSESSEE APPEAL. 3. GROUND NO.1 RAISED BY ASSESSEE IS AS UNDER: THE COMMISSIONER OF INCOME-TAX (APPEALS)-XXVI MUMBAI (HEREINAFTER REFERRED TO AS THE CIT (A), ERR ED IN UPHOLDING THE STAND OF THE ASSTT. COMMISSIONER OF INCOME-TAX CIRCLE 6(3) MUMBAI (HEREINAFTER REFERRED TO AS THE ACIT) ERRED IN NOT ALLOWING THE APPELLANTS CLAI M FOR DEPRECIATION ON ` .22,67,281 AND ` .16,42,617 BEING PART OF THE SHARE DILUTION EXPENSES INCURRED IN THE ASSESSMENT YEAR 1984-85 AND 1986-87 SUBMITTED AS RELATABLE TO PROGRAMMES OF CAPITAL EXPENDITURE IN T HE AYS 1984-85 AND 1986-87 RESPECTIVELY. 3.1 THIS ISSUE ARISED ORIGINALLY IN AY 1984-85 AND CONSEQUENT TO THE CAPITALIZATION OF THE AMOUNT IN THAT YEAR CONSE QUENTIAL DEPRECIATION BENEFITS ARE BEING CLAIMED BY ASSESSEE . 3.2 BEFORE US BOTH THE COUNSELS AGREED THAT THE ISS UE OF DISALLOWANCE OF DEPRECIATION OF SHARE VALUATION EXP ENSES IS COVERED IN FAVOUR OF ASSESSEE AND THE AGAINST THE REVENUE B Y THE COORDINATE BENCH DECISIONS RENDERED IN ASSESSEES O WN CASE FROM AY 1984-85 TO 1997-98. IT WAS FURTHER INFORMED THAT THE HON'BLE ITA NOS.6483 7252 OF 2003 AND CO NO.04 OF 2005 GLAX O SMITHKLINE MUMBAI PAGE 3 OF 34 JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE IN AY 1986-87, 1988-89 AND 1991-92 UPHELD ITAT ORDERS. CONSISTENT WITH THE VIEW TAKEN THEREIN, WE DIRECT AO TO ALLOW ON THE ABOVE A MOUNT CAPITALIZED IN AY 1984-85 ON WHICH THE DEPRECIATION CLAIM IS CONSEQUENTIAL. GROUND IS ALLOWED. 4. GROUND NO.2 IS AS UNDER: (A) THE CIT (A) ERRED IN UPHOLDING THE ACTION OF THE AC IT IN REDUCING THE ESTIMATED WRITTEN DOWN VALUES OF EACH OF THE BLOCK OF ASSETS OF THE FAMILY PRODUCTS UNDERTAKING TRANSFERRED AS A GOING CONCERN IN THE A Y 1995-96 FROM THE OPENING WRITTEN DOWN VALUES OF THE RESPECTIVE BLOCKS, FOR COMPUTATION OF DEPRECIATION ALLOWANCE. (B) THE CIT (A) ERRED IN UPHOLDING THE ACTION OF THE AC IT, IN DISALLOWING DEPRECIATION ON DEPRECIATION DISALLOWED IN EARLIER YEARS IN RESPECT OF ASSETS OF THE FAMILY PRODUCTS UNDERTAKING. (C) THE CIT (A) ERRED IN UPHOLDING THE ACTION OF THE AC IT IN DISALLOWING DEPRECIATION OF ` .44,000 FROM THE BLOCK FACTORY/OFFICE BUILDINGS IN RESPECT OF PART OF BUILDING 72 LEASED TO M/S HONGKONG & SHANGHAI BANKING CORPORATION LTD. DEPRECIATION FOR THE CURRENT AY ` ,40,000 DEPRECIATION ON DEPRECIATION DISALLOWED ` . 4,000 IN AY 1994-95, 1995-96, 1996-97 AND 1997-98 AND 1998-99 ` .44,000 4.1 GROUND NO.2A AND 2B PERTAINS TO THE ISSUE OF RE DUCTION OF ESTIMATED WDV BLOCK OF ASSETS OF FPU TRANSFERRED IN ASSESSMENT YEAR 1995-96 FROM THE RESPECTIVE BLOCKS AND COMPUTA TION OF DEPRECIATION DISALLOWED IN EARLIER YEARS. AS PER TH E RECORD, THE FAMILY PRODUCT UNDERTAKING WAS TRANSFERRED AS A GOI NG CONCERN AT SLUMP PRICE OF ` .180 CRORES IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1995-96. BOTH THE PARTIES SUBMITTED THAT THE ISSUE HAS BEEN SET ASIDE BY THE TRIBUNAL IN ITA NO. 1420/MUM/99 AND ITA NO.1594/MUM/99 VIDE ORDER DATED 16.6.2006 W HEREIN THE ITA NOS.6483 7252 OF 2003 AND CO NO.04 OF 2005 GLAX O SMITHKLINE MUMBAI PAGE 4 OF 34 TRIBUNAL HELD THAT THE TRANSACTION WAS NOT EXIGIBLE TO THE CAPITAL GAIN TAX. FURTHER, AO WAS DIRECTED TO DEDUCT FROM S UCH BLOCK THE WDV OF ASSETS TRANSFERRED TO M/S HEINZ BEFORE ALLOW ING DEPRECIATION TO ASSESSEE. THIS DIRECTION WAS GIVEN AS THE TRIBUNAL HELD AS OTHERWISE ASSESSEE WOULD CLAIM DEPRECIATION ON THE ASSETS WHICH WERE TRANSFERRED. ACCORDINGLY, WE RESTORE THE ISSUE BACK TO THE FILE OF AO TO DETERMINE CONSEQUENTIAL WDV IN TH IS ASSESSMENT YEAR AND ALLOW DEPRECIATION THERE ON. WE ORDER ACCO RDINGLY. 4.2 GROUND NO.2C PERTAINS TO DISALLOWANCE IN DEPREC IATION IN RESPECT OF PART OF BUILDING 72 LEASED TO M/S HONGKO NG & SHANGHAI BANKING CORPORATION LIMITED. 4.3 AO DISALLOWED DEPRECIATION ON THE ASSETS IN THE BLOCK WHICH WERE LEASED AND INCOME THERE ON WAS ASSESSED UNDER THE HEAD HOUSE PROPERTY. THE CIT (A) HELD THAT THE LEASED AS SETS ARE NOT PART OF ASSESSEES BUSINESS NOR USED FOR THE BUSINESS AN D HELD THAT AO RIGHTLY DISALLOWED THE CLAIM OF DEPRECIATION. IT WA S FAIRLY ADMITTED THAT THIS ISSUE WAS COVERED BY THE ORDERS OF THE IT AT IN ASSESSEES OWN CASE IN ASSESSMENT YEARS 1994-95, 1995-96 AND 1 996-97. KEEPING IN VIEW OF THE FINDINGS OF THE ITAT IN ASSE SSEES OWN CASES IN EARLIER YEARS, AS ASSESSEE HAD LEASED PART OF TH E BUILDING AND THE SAME WAS NOT USED FOR THE PURPOSE OF BUSINESS, NO D EPRECIATION CAN BE ALLOWED. THEREFORE, THE ORDER OF THE CIT (A) IS CONFIRMED AND THE GROUND IS ACCORDINGLY REJECTED. 5. GROUND NO.3 IS AS UNDER: 4. THE CIT (A) ERRED IN UPHOLDING THE STAND OF THE ACIT OF MAKING AN ADDITION OF ` .56,89,135 ON ACCOUNT OF CLOSING STOCK OF DIESEL AND COAL. 5.1 AO DISALLOWED THE CLAIM MADE BY ASSESSEE HOLDIN G THAT SINCE THE SAID ITEMS HAVE NOT BEEN CONSUMED IN THE YEAR, THE VALUE OF DIESEL OIL/COAL UNUTILIZED ARE TO BE CONSIDERED AS CLOSING STOCK AND ADDED TO THE INCOME OF THE CURRENT YEAR. THE CIT (A ) FOLLOWING HIS ITA NOS.6483 7252 OF 2003 AND CO NO.04 OF 2005 GLAX O SMITHKLINE MUMBAI PAGE 5 OF 34 EARLIER ORDERS IN ASSESSMENT YEARS 1994-95 TO 1996- 97 CONFIRMED THE SAME. 5.2 AFTER HEARING BOTH THE PARTIES AND ON PERUSAL O F THE RECORD AVAILABLE BEFORE US, WE FIND THAT THE ISSUE FOR OUR ADJUDICATION IS COVERED IN FAVOUR OF ASSESSEE BY THE DECISIONS OF T HE MUMBAI BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FROM ASSESSM ENT YEARS 1986- 87 TO 1996-97. SINCE THERE WAS A CHANGE OF METHOD O F ACCOUNTING IN ASSESSMENT YEAR 1986-87, WHICH WAS HELD TO BE A GEN UINE CHANGE OF METHOD OF ACCOUNTING, THE CONSUMABLE ITEMS LIKE COAL AND OIL WERE ALLOWED TO BE WRITTEN OFF IN THE YEAR OF PURCH ASE ITSELF. THEREFORE, CONSISTENT WITH THE VIEW TAKEN THEREIN, WE SET ASIDE THE IMPUGNED ORDER BY THE CIT (A) AND ALLOW THE GROUND RAISED BY ASSESSEE. 6. GROUND NO.4 IS GIVEN BELOW: THE CIT (A) ERRED IN UPHOLDING THE STAND OF THE AC IT THAT ALL INTEREST OTHER THAN INTEREST ON SECURITIES DEPO SIT IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCE S. THE APPELLANTS SUBMIT THAT FOLLOWING INTEREST INCOM E IS RELATED TO AND INCIDENTAL TO BUSINESS AND AS SUCH F ORMS A PART OF BUSINESS INCOME: ` .IN LAKHS A INTEREST ON DEPOSITS WITH BANKS AND LIMITED COMPANIES 46.04 B INTEREST ON BANK DEPOSITS 2.59 C INTEREST ON GOI SECURITIES 25.20 D INTEREST ON INCOME TAX REFUNDS 56.79 E INTEREST ON DEBENTURES/BONDS 145.52 F INTEREST ON IDBI BONDS (INVESTMENT OF LTCG UNDER SECTION 54EA) 125.00 401.14 6.1 GROUND NO.4 PERTAINS TO THE TREATMENT GIVEN TO INTEREST INCOME AS INCOME FROM OTHER SOURCES. BEFORE US, BOTH THE P ARTIES AGREED ITA NOS.6483 7252 OF 2003 AND CO NO.04 OF 2005 GLAX O SMITHKLINE MUMBAI PAGE 6 OF 34 THAT THIS ISSUE WAS EARLIER DECIDED BY THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEARS 1989-90 TO 1991- 92, 1992-93 TO 1993-94, 1994-95 AND 1995-96 RESPECTIVELY, WHEREIN THE TRIBUNAL RESTORED THE ISSUE TO THE FILE OF ASSESSING OFFICER FOR ADJUDICATION AFRESH BY OBSERVING AS FOLLOWS:- '57. LEARNED COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE LEARNED CIT (A). WE HAVE CONSIDERED TH E RIVAL SUBMISSIONS AS ALSO THE JUDICIAL PRONOUNCEMEN TS RELIED UPON BY THE LEARNED DR. IN THE CASE OF SHREE KRISHNA POLYESTER LTD. (SUPRA), THE BOMBAY HIGH COU RT HELD THAT INTEREST INCOME FROM INVESTMENT IN SHORT- TERM DEPOSIT OF SURPLUS FUNDS ACQUIRED IN PUBLIC ISSUE O F SHARES, IS ASSESSABLE AS 'INCOME FROM OTHER SOURCES '. IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZER S LTD. (SUPRA), THE SUPREME COURT HELD THAT INTEREST ON INVESTMENT OF BORROWED FUNDS PRIOR TO COMMENCEMENT OF BUSINESS IS TO BE ASSESSED UNDER THE HEAD 'INCOME F ROM OTHER SOURCES'. THE DECISION OF PUNJAB & HARYANA HI GH COURT IN THE CASE OF RANI PALIWAL IS NOT RELEVANT A S THE HIGH COURT WAS CONCERNED WITH ONLY APPLICABILITY OF CLAUSE (BAA) OF THE EXPLANATION UNDER SECTION 8OHHC . IN THE CASE OF PANDIAN CHEMICALS LTD. (SUPRA) THE MADR AS HIGH COURT HELD THAT INTEREST ON DEPOSITS WITH ELEC TRICITY BOARD MADE OUT OF STATUTORY COMPULSION WAS NOT PROF IT DERIVED FROM INDUSTRIAL UNDERTAKING. THIS JUDGMENT HAS SINCE BEEN CONFIRMED BY THE SUPREME COURT (262 ITR 278). IN THE CASE OF AUTOKAST LTD., THE ASSESSEE CO MPANY BORROWED MONEY FOR PURCHASE OF PLANT AND MACHINERY AND EARNED INTEREST INCOME BY PLACING IT IN SHORT- TERM DEPOSITS WITH BANKS TILL PAYMENT WAS MADE FOR PLANT AND MACHINERY. THESE DEPOSITS WERE USED IN BILL DISCOUNTING. THE SUPREME COURT HELD THAT THE INTERE ST INCOME EARNED WAS TAXABLE AS INCOME FROM OTHER SOURCES. IN OUR VIEW, THE PRESENT ISSUE HAS TO BE CONSIDERED N THE LIGHT OF THE AFORESAID JUDGMENTS. THE RELEVANT PART OF THE ORDER OF THE CIT (A) FOR THE ASSESSMENT YEAR 1989-90 HAS BEEN REPRODUCED (SUPRA) . FOR THE ASSESSMENT YEARS 1990-91 AND 1991-92 ALSO T HE FACTS ARE SIMILAR. WE FIND THAT THE EXACT NATURE OF THE INTEREST 10 GLAXO INDIA LIMITED ITA NO. 6027/MUM/1999, INCOME IS NOT CLEAR FROM THE ORDERS OF THE REVENUE AUTHORITIES. IN OUR VIEW THIS ISSUE REQ UIRES RECONSIDERATION BY THE ASSESSING OFFICER AFTER BRIN GING ON RECORD THE CORRECT FACTUAL POSITION WITH REGARD TO THE NATURE OF THE INTEREST INCOME, AFTER ALLOWING OPPOR TUNITY ITA NOS.6483 7252 OF 2003 AND CO NO.04 OF 2005 GLAX O SMITHKLINE MUMBAI PAGE 7 OF 34 TO THE ASSESSEE. ACCORDINGLY, WE RESTORE THIS ISSUE TO THE ASSESSING OFFICER FOR RE-ADJUDICATION.' 6.2 CONSISTENT WITH VIEW TAKEN, WE SET ASIDE THE OR DER OF AUTHORITIES AND RESTORE THE ISSUE TO THE FILE OF AO FOR ADJUDIC ATION AFRESH IN ACCORDANCE WITH LAW. THE LEARNED COUNSEL PLACED ON RECORD THE ORDERS GIVING EFFECT TO THE ORDERS OF THE ITAT IN A Y 1995-96 AND 1996-97 WHEREIN AO TREATED THE BUSINESS INCOME BY R EDUCING THE SAME FROM INCOME FROM OTHER SOURCES. THE ACTION OF AO IN THOSE YEARS MAY BE CORRECT ON FACTS BUT AO HAS TO EXAMINE HOW MUCH OF THE INCOME DO PERTAIN TO BE THE BUSINESS INCOME. IT WAS INFORMED THAT THE INTEREST INCLUDED INTEREST ON INTER CORPOR ATE DEPOSITS, TAX REFUNDS, GOI SECURITIES, DEBENTURES/BONDS. SINCE TH E NATURE OF INTEREST INCOMES ARE TO BE EXAMINED, THE ISSUE IS R ESTORED TO THE FILE OF AO. THIS GROUND IS THUS, ALLOWED FOR STATISTICAL PURPOSES. 7. GROUND NO.5 IS GIVEN BELOW: 5(I) THE CIT (A) ERRED IN UPHOLDING THE DECISION O F ACIT IN REDUCING 90% OF THE FOLLOWING ITEMS FORMING PART OF MISCELLANEOUS INCOME TREATING THE SAME AS COVERE D BY BROKERAGE, COMMISSION, INTEREST, RENT CHARGES OR A NY OTHER RECEIPT OF SIMILAR NATURE AS APPEARING IN EXPLANATION (BAA) TO SECTION 80HHC. ` .IN LAKHS ACCOMMODATION RECOVERY 5.02 MANUFACTURING CHARGES 93.54 MISCELLANEOUS INCOME 50.30 TOTAL 148.86 THE APPELLANTS SUBMIT THAT THE ABOVE LISTED ITEMS A RE NOT ENVISAGED BY THE SAID EXPLANATION AND ARE NOT TO BE CONSIDERED. (II) WITHOUT PREJUDICE TO THE ABOVE, THE REDUCTION SHOULD BE TAKEN ON A NET BASIS AND NOT ON A GROSS BASIS . 7.1 GROUND NO.5 PERTAINS TO DEDUCTION U/S 80HHC. W ITH REFERENCE TO THE EXCLUSION OF 90% OF THE MISCELLANEOUS INCOME IN COMPUTING THE PROFITS OF THE BUSINESS, VIDE PARA 16 OF AOS O RDER AO DISCUSSED ITA NOS.6483 7252 OF 2003 AND CO NO.04 OF 2005 GLAX O SMITHKLINE MUMBAI PAGE 8 OF 34 VARIOUS OTHER INCOMES RECEIVED BY ASSESSEE AND LI STED OUT AMOUNTS TO THE EXTENT OF ` .148.86 LAKHS AS OTHER INCOME WHICH IS TO BE EXCLUDED AT 90% UNDER EXPLANATION (BAA) TO SECTION 80HHC. ASSESSEE CONTESTED THE SAME BEFORE THE CIT (A). LD CIT(A) VIDE PARA 10 OF THE ORDER ALLOWED ONLY PART AMOUNT. IT WAS TH E CONTENTION THAT NONE OF THE RECEIPTS CAN BE EXCLUDED AS THEY ARE NO T ITEMS WHICH ARE ENVISAGED BY THE SAID EXPLANATION AND SHOULD NO T BE CONSIDERED FOR EXCLUSION AT 90% OF THE AMOUNT. APART FROM THE NATURE OF THE RECEIPTS, IT WAS FURTHER SUBMITTED THAT IF AMOUNTS ARE TO BE EXCLUDED, IT SHOULD BE ONLY ON THE BASIS OF THE NET AMOUNT FOLLOWING THE PRINCIPLES LAID DOWN BY THE HON'BLE SUPREME COU RT IN THE CASE OF ACG ASSOCIATED CAPSULES (P) LTD. VS. CIT 343 ITR 89. IT WAS THE CONTENTION OF THE LEARNED COUNSEL THAT THE AMOUNTS ARE CERTAINLY BUSINESS INCOME. 7.2 WE HAVE CONSIDERED THE ISSUE. PRIMA FACIE THE P ART OF AMOUNT REPRESENT THE RECOVERIES IN THE COURSE OF BUSINESS WHICH UNDER THE COMPANY LAW HAS BEEN SHOWN AS OTHER INCOME. BALANCE OF MANUFACTURING CHARGES AND MISC INCOME DETAILS ARE N OT PLACED ON RECORD TO VERIFY. AS THE NATURE OF AMOUNTS ARE NOT EXAMINED BY AO IN DETAIL BOTH ON FACTS AND ON LAW AND REQUIRES RE- EXAMINATION, ISSUE IS RESTORED TO THE FILE OF AO TO EXAMINE AFRE SH IN THE LIGHT OF THE PRINCIPLES LAID DOWN BY THE JURISDICTIONAL HIGH COURT RELIED UPON BY ASSESSEE AND ALSO OTHER DECISION OF THE JUR ISDICTIONAL HIGH COURT OR SUPREME COURT TO DECIDE EACH OF THE AMOUNT . IN CASE IT IS PART OF THE BUSINESS RECEIPTS, NOT COMING UNDER THE ITEMS UNDER EXPLANATION (BAA) THEY SHOULD NOT BE EXCLUDED AT 90 % FROM THE PROFITS OF THE BUSINESS. OTHERWISE, THE ALTERNATE C ONTENTION OF NET AMOUNT TO BE CONSIDERED IF NEXUS IS ESTABLISHED. WI TH THESE DIRECTIONS THE GROUND IS RESTORED TO THE FILE OF AO FOR EXAMINATION AND FRESH ADJUDICATION. ASSESSEE SHOULD BE GIVEN DU E OPPORTUNITY TO EXPLAIN THE NATURE OF THE RECEIPTS. ITA NOS.6483 7252 OF 2003 AND CO NO.04 OF 2005 GLAX O SMITHKLINE MUMBAI PAGE 9 OF 34 8. GROUND NO.6 IS AS UNDER: 7. THE LEARNED CIT (A) ERRED IN UPHOLDING THE STAN D OF THE ACIT OF NOT ALLOWING THE APPELLANTS CLAIM FOR DEDUCTION OF INTEREST ON DPEA LIABILITY FOR THE PER IOD 1 ST APRIL, 1999 TO 31 ST MARCH, 2000 ON THE GROUND THAT IT CONSTITUTES A CONTINGENT LIABILITY. 8.1 GROUND NO.6 PERTAINS TO INTEREST LIABILITY WITH RESPECT TO DPEA LIABILITY. IT WAS FAIRLY ADMITTED THAT THIS ISSUE I S TO BE HELD IN FAVOUR OF THE REVENUE AND AGAINST ASSESSEE IN VIEW OF THE ORDERS OF THE ITAT IN EARLIER YEARS. WE FIND FROM THE ORDER FROM ASSESSMENT YEAR 1996-97 THAT THE ITAT ORIGINALLY IN ASSESSMENT YEAR 1986-87 CONSIDERED THAT: A) DPEA LIABILITY WILL BE ALLOWABLE, IN THE YEAR IN WH ICH SUCH LIABILITY ACCRUES. THE ORDERS OF THE LD. CIT (A) WI TH REGARD TO GROUND NOS. 4, 5 AND 5 OF THE DEPARTMENT, RESPECTIV ELY FUR THE ASSESSMENT YEARS 1986.87, 1987-88 AND 1988-89 ARE C ONFIRMED. B) REGARDING APPLICABILITY OF SECTION 43B, WE AGREE WI TH THE FINDING OF THE LEARNED CIT (A) FOR THE ASSESSMENT YEAR 1988 -89 THAT THIS LIABILITY IS NOT A TAX, DUTY, CESS OR FEE UNDER ANY LAW LEVIABLE. THEREFORE, WE UPHOLD THE ORDER OF THE LEARNED CIT ( A) ON THIS ISSUE FOR THE ASSESSMENT YEAR 1988-89. C) ADDITIONAL CLAIM FOR DPEA WOULD BE ADMISSIBLE ON TH E SAME FOOTING ON ACCRUAL BASIS. D) REGARDING DETERMINATION OF PROFITS FOR THE PURPOSE OF SECTION 80- I, AS AND WHEN ANY ORDER OF HIGHER JUDICIAL FORUM C OMES, THE ASSESSING OFFICER SHALL GIVE EFFECT TO SUCH ORDER. E) ENHANCED DPEA LIABILITY, AS PER ADDITIONAL GROUND O F APPEAL RAISED BY ASSESSEE FOR THE ASSESSMENT YEAR 1986-87 AND THE ASSESSEE'S C.O. FOR THE ASSESSMENT YEAR 1987-88, WO ULD BE ALLOWABLE ON ACCRUAL BASIS. ITA NOS.6483 7252 OF 2003 AND CO NO.04 OF 2005 GLAX O SMITHKLINE MUMBAI PAGE 10 OF 34 F) INTEREST LIABILITY ACCRUES FROM YEAR TO YEAR AND, T HEREFORE, SUCH LIABILITY MAY BE ALLOWED ON THIS BASIS DURING EACH ASSESSMENT YEAR. G) THIS DISPOSES OF THE VARIOUS ISSUES MENTIONED ABOVE RAISED BY ASSESSEE AS ALSO BY THE DEPARTMENT WITH REGARD TO D PEA LIABILITY. 8.2 KEEPING IN VIEW OF THE ABOVE AFORESAID DECISION OF THE TRIBUNAL, WE SET ASIDE THE IMPUGNED ORDER OF THE CIT (A) AND RESTORE THE ISSUE BACK TO THE FILE OF AO FOR DE NOVO ADJUDICATION IN ACCORDANCE WITH THE LAW CONSISTENT WITH EARLIER YEARS ORDERS. THUS THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 9. GROUND 7 IS AS UNDER: (A) THE CIT (A) ERRED IN UPHOLDING THE STAND OF THE ACIT IN HOLDING THAT ` .7,65,29,026 BEING THE ADVANCE LICENCE BENEFIT ACCOUNTED FOR IN THE APPELLANTS BO OKS OF ACCOUNT HAD ACCRUED TO THE APPELLANTS AND WAS TAXABLE AS THEIR INCOME UNDER SECTION 28(IV) OF THE INCOME TAX ACT, 1961. (B) WITHOUT PREJUDICE TO (A) ABOVE, THE APPELLANTS SUBMIT THAT THE AMOUNT OF ADVANCE LICENCE BENEFIT ACTUALLY CREDITED IN THE PASS BOOK UPTO 31 ST MARCH, 2000 SHOULD ONLY BE INCLUDED IN COMPUTING INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS. 9.1 GROUND 7 PERTAINS TO COMPUTATION OF INCOME OF ADVANCE LICENCE BENEFIT AND RE-COMPUTATION OF DEDUCTION UND ER SECTION 80HHC AFTER EXCLUDING THE ADVANCE LICENCE BENEFIT F ROM BUSINESS PROFIT. 9.2 BRIEFLY STATED, THE ASSESSEE COMPANY OFFERED A SUM OF ` .4,66,77,440 ON ACCOUNT OF ADVANCE LICENCE IN THE C OMPUTATION OF INCOME ATTACHED TO THE RETURN OF INCOME. THE SAME AMOUNT WAS NOT OFFERED TO INCOME TAX IN THE PREVIOUS YEAR RELE VANT TO THE AY 1999- 00, THOUGH CREDITED IN THE PROFIT & LOSS A/C IN THAT YEAR. IN THIS YEAR THE AMOUNT OF ` .1133.55 LAKHS WHICH WAS AN ADVANCE ITA NOS.6483 7252 OF 2003 AND CO NO.04 OF 2005 GLAX O SMITHKLINE MUMBAI PAGE 11 OF 34 LICENCE ACCRUED DURING THE YEAR FOR EXPORTS MADE DU RING THE YEAR WAS CREDITED IN THE PROFIT & LOSS A/C AND A SUM OF ` .7,65,29,026 BEING CLOSING BALANCE OF ADVANCE LICENCE AS AT 31.0 3.1999 HAS BEEN EXCLUDED FROM THE TOTAL INCOME ON THE GROUND THAT T HE SAME HAS NOT BEEN ACCRUED TO ASSESSEE. THE NET RELIEF CLAIMED BY ASSESSEE IS THEREFORE, RS. 2,98,51,486. AO ANALYSED THE NATURE OF THE ADVANCE LICENCE AND AFTER DISCUSSION VIDE PAGE 15 OF THE AS SESSMENT ORDER ULTIMATELY CONCLUDED THAT THIS AMOUNT IS THE INCOME TAXABLE UNDER SECTION 28(IV) IS NOT DERIVED FROM THE EXPORTS AND THEREFORE, NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHC. THUS TH E PROFITS OF THE BUSINESS SHOWN BY ASSESSEE UNDER SECTION 80HHC HAS BEEN ADJUSTED. THIS MATTER WAS CONTESTED BEFORE THE CIT (A) WHO VIDE PARA 11.5 DECIDED AS UNDER: 11.5. SUB-GROUND NO.(E) IS AGAINST THE ACTION OF A O IN NOT EXCLUDING CLOSING BALANCE OF ADVANCE LICENCE BENEFI T AGGREGATING ` .1,65,29,026 WHILE COMPUTING BUSINESS PROFIT. 11.5A IN THIS REGARD IT IS SEEN THAT THIS SUB- GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE APPELLANT VIDE C IT (A) ORDER DATED 30.01.2002 AGAINST THE ORDER UNDER SECT ION 143(3) R.W.S. 147 FOR AY 1997-98. RESPECTFULLY FOLL OWING THE SAME, AO IS DIRECTED TO RE-COMPUTE DEDUCTION UNDER SECTION 80HHC AFTER EXCLUDING THE ADVANCE LICENCE BENEFIT AGGREGATING ` .1,65,29,026 FROM BUSINESS PROFIT. THIS SUB- GROUND OF APPEAL IS THEREFORE, ALLOWED. 9.3 ASSESSEE IS AGGRIEVED ON THE ABOVE DIRECTION. IT WAS SUBMITTED THAT IN THE CASE OF EXCEL INDUSTRIES, THE ITAT CONS ISTENTLY TAKEN A VIEW THAT ON THE ISSUE OF THE TAXABILITY OF THE ADV ANCE LICENCE BENEFITS, NO INCOME ACCRUES UNTIL IMPORTS ARE MADE AND ARE MATERIALIZED. THE LEARNED COUNSEL REFERRED TO THE S ERIES OF THE ORDERS ON THE ISSUE IN THE CASE OF EXCEL INDUSTRIES AND FOR AY 1998- 99 AND 1999-2000 IN ITA NO.3868/MUM/2003 DATED 4.5. 2012 AND SUBMITTED THAT THE WORKING AS PROVIDED BY ASSESSEE IS CORRECT. ITA NOS.6483 7252 OF 2003 AND CO NO.04 OF 2005 GLAX O SMITHKLINE MUMBAI PAGE 12 OF 34 9.4 WE HAVE CONSIDERED THE ISSUE. IN THE CASE OF D CIT VS. EXCEL INDUSTRIES (SUPRA) THIS ISSUE WAS DISCUSSED AT GROU ND NO.1 AND 2 AS UNDER: 3.1. GROUND NO.1& 2 : TAXABILITY OF ADVANCE LICENC E BENEFIT RECEIVABLE RS.52,84,674/- AND PASS BOOK BEN EFIT RECEIVABLE RS.2,98,03,293 (WRONGLY STATED AS RS.5,62,63,127/- IN GROUND OF APPEAL BUT RECTIFIED) IN THE TOTAL INCOME. 3.2. THERE IS A LONG DISCUSSION IN THE ASSESSMENT O RDER IN RESPECT OF THE GROUNDS TAKEN IN THE APPEAL. HOW EVER, BOTH THE GROUNDS ARE COVERED IN FAVOUR OF THE ASSES SEE BY THE EARLIER ORDERS OF THE TRIBUNAL IN THE ASSESSEE S OWN CASE. SO FAR AS GROUND NO.1 IS CONCERNED, WHICH RE LATES TO THE TAXABILITY OF ADVANCE LICENCE BENEFITS RECEI VABLE, THE TRIBUNAL HAS DECIDED THAT NO INCOME ACCRUES UNTIL T HE IMPORTS ARE MADE AND THE RAW MATERIALS ARE CONSUMED . IN THE YEAR BEFORE US, IT IS NOT IN DISPUTE THAT TH E IMPORTS WERE MADE AND THE RAW MATERIALS WERE CONSUMED IN TH E SUBSEQUENT YEAR. IN SUCH CIRCUMSTANCES THE EARLIER ORDERS OF THE TRIBUNAL IN THE ASSESSEES OWN CASE APPLY. THE FIRST OF SUCH ORDERS WAS PASSED ON 6 TH OCTOBER 2003 IN ITA NO: 4346/MUM/1997 FOR THE ASSESSMENT YEAR 1992-93. IN THIS ORDER THE TRIBUNAL APPLIED AND FOLLOWED THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN JAM SHRI RAJITSINGHJI SPG. & WVG. MILLS LTD. VS. IAC (1992) 41 ITD (BOM) 142, IN WHICH IT WAS HELD THAT UNTIL THE GOOD S ARE IMPORTED AND THE RAW MATERIALS ARE CONSUMED, NO INC OME BY WAY OF ADVANCE LICENCE BENEFIT ACCRUES TO THE AS SESSEE. THIS ORDER WAS FOLLOWED BY THE TRIBUNAL IN ITS ORDE R DATED 27 TH JANUARY 2004 FOR THE ASSESSMENT YEAR 1993-94 IN ITA NO.4145/MUM/1998. FOR THE ASSESSMENT YEAR 1995 - 96 THE ISSUE AGAIN CAME BEFORE THE TRIBUNAL IN ITA NO.2067/MUM/2000. THIS APPEAL WAS DISPOSED OF BY T HE TRIBUNAL ON 7 TH MARCH 2005. THIS ORDER TOOK THE SAME VIEW AS IN THE EARLIER YEARS. WHAT IS SIGNIFICANT IN THIS ORDER IS THAT THE DEPARTMENT RELIED ON THE DECISION OF THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF UNIT ED PHOSPHORUS LIMITED VS. JCIT (2002) 81 ITD 553 (AHD) , IN WHICH A VIEW WAS TAKEN THAT THE ADVANCE LICENCE BEN EFIT ITA NOS.6483 7252 OF 2003 AND CO NO.04 OF 2005 GLAX O SMITHKLINE MUMBAI PAGE 13 OF 34 WAS TAXABLE IN THE YEAR IN WHICH IT WAS RECEIVED, W ITHOUT WAITING FOR THE ACTUAL IMPORTS AND THE CONSUMPTION OF THE RAW MATERIAL. THIS ORDER OF THE AHMEDABAD BENCH OF THE TRIBUNAL WAS STRONGLY RELIED UPON BY THE REVENUE IN THE APPEAL FOR THE ASSESSMENT YEAR 1995-96. THE TRIBUN AL IN ITS ORDER FOR THE ASSESSMENT YEAR 1995-96 HAS DEALT WITH THE ARGUMENTS OF THE REVENUE BASED ON THE AHMEDABAD BENCH OF THE TRIBUNAL IN PARAGRAPHS 13 ONWARDS. IT WAS HELD BY THE TRIBUNAL THAT EVERY ASPECT HIGHLIGHTED IN THE ORDER OF THE AHMEDABAD BENCH HAS BEEN DULY EXPLAINE D ON BEHALF OF THE ASSESSEE. IN FACT THE TRIBUNAL TO OK THE VIEW THAT THERE WAS NO DISTINCTION BETWEEN THE FACT S OF THE ASSESSEES CASE AND THE FACTS OF THE CASE BEFORE TH E AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF UNIT ED PHOSPHORUS LIMITED (SUPRA) AND THAT IT WAS IN ORDER FOR THE AHMEDABAD BENCH TO HAVE REFERRED THE ISSUE TO A LAR GER BENCH FOR THE SAKE OF CONSISTENCY, HAVING REGARD TO THE ORDERS OF THE MUMBAI BENCHES OF THE TRIBUNAL IN JAM SHRI RAJITSINGHJI SPG. & WVG. MILLS LTD. (SUPRA). IN TH IS VIEW OF THE MATTER AND FINDING NO DIFFERENCE IN THE FACTS R ELATING TO THE ASSESSMENT YEAR 1995-96 AND THE FACTS FOR THE E ARLIER ASSESSMENT YEARS, THE TRIBUNAL HELD THAT THERE WAS NO REASON TO TAKE A DIFFERENT VIEW OF THE MATTER ON TH E BASIS OF THE ORDER IN THE CASE OF UNITED PHOSPHORUS LIMIT ED, AHMEDABAD BENCH. AFTER THIS ORDER OF THE TRIBUNAL, THE TRIBUNAL DISPOSED OF THE APPEALS RELATING TO THE AS SESSEE FOR THE ASSESSMENT YEARS 1996-97 AND 1997-98 BY ORD ER DATED 12 TH JANUARY 2009, IN WHICH THE TRIBUNAL FOLLOWED ITS OWN ORDER FOR THE ASSESSMENT YEAR 1995-96 PASSE D ON 7 TH MARCH 2005, TO HOLD THAT THE ADVANCE LICENCE BENEF IT WAS NOT TAXABLE UNLESS THE GOODS HAVE BEEN IMPORTED AND THE RAW MATERIALS ARE CONSUMED. A SIMILAR VIEW WAS TAKEN BY THE TRIBUNAL AGAIN FOR THE ASSESSMENT YEAR 2004-05 IN ITA NO:2251/MUM/2009, DATED 29 TH JULY 2010. 3.3. THUS, IN A SERIES OF ORDERS PASSED IN THE ASSESSEES OWN CASE, THE TRIBUNAL HAS TAKEN A CONSI STENT VIEW IN FAVOUR OF THE ASSESSEE EVEN AFTER CONSIDERI NG THE ORDER OF THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF UNITED PHOSPHORUS LIMITED (SUPRA). WE MAY ADD T HAT ITA NOS.6483 7252 OF 2003 AND CO NO.04 OF 2005 GLAX O SMITHKLINE MUMBAI PAGE 14 OF 34 THE ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 1 993-94 AND THE ORDER FOR THE ASSESSMENT YEARS 1996-97 AND 1997-98 WERE APPEALED AGAINST BY THE REVENUE BEFORE THE HONBLE BOMBAY HIGH COURT BUT SINCE NO STEPS HAD BE EN TAKEN BY THE REVENUE TO CHALLENGE THE FIRST ORDER O F THE TRIBUNAL, THE HONBLE HIGH COURT DID NOT CONSIDER I T FIT TO ADMIT THE APPEALS. COPIES OF ALL THE ORDERS OF THE TRIBUNAL AND THE JUDGMENTS OF THE HIGH COURT HAVE BEEN FILED BEFORE US. 3.4. IT WAS THE SUBMISSION OF THE LEARNED D.R. THAT IN VIEW OF THE SPECIAL BENCH DECISION OF MUMBAI IN THE CASE OF TOPMAN EXPORTS VS. ITO 124 ITD 1 (MUM.) (S.B.) PARTICULARLY IN PARAS 33 AND 34 OF THE ORDERS, IT W AS SUBMITTED THAT INCOME ON ADVANCED LICENCE WILL ACCR UE TO THE ASSESSEE WHEN THE EXPORTS WERE MADE AND ACCORDINGLY, FOLLOWING THE PRINCIPLES LAID DOWN BY THE SPECIAL BENCH WHICH WAS IN FACT UPHELD ULTIMATELY B Y THE HONBLE SUPREME COURT, THE ISSUE IS TO BE DECIDED A GAINST THE ASSESSEE HOLDING THAT INCOME ON ADVANCE LICENCE ARISES, THE MOMENT EXPORTS WERE DONE AND APPLICATIO N WAS MADE AND NOT AT THE TIME OF ACTUAL IMPORTS AS CONTENDED BY THE ASSESSEE. FURTHER, REFERRING TO TH E ORDERS IN ITA. NO. 6969/MUM/2008,IT WAS SPECIALLY SUBMITTED THAT THE ITAT REFERRED TO THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. KALPATARU COLOURS& CHEMICALS 328 ITR 451 (BOM.) TO DISMISS THE REVENUES CONTENTION IN VIEW OF THE THE N EXISTING BOMBAY HIGH COURT JUDGMENT REFERRED ABOVE, WHICH WAS REVERSED BY THE HONBLE SUPREME COURT IN THE CASE OF TOPMAN EXPORTS VS. CIT & OTHERS IN CIVIL AP PEAL NO.1699/2012. IN VIEW OF THE ABOVE, IT WAS SUBMITTE D THAT SPECIAL BENCH DECISION GOT APPROVED BY THE HONBLE SUPREME COURT. THEREFORE, THE ISSUE IS TO BE DECIDE D IN LINE WITH THE SPECIAL BENCH DECISION THAT INCOME AC CRUES IN THE YEAR IN WHICH EXPORTS WERE MADE AND ASSESSEE GOT ENTITLEMENT FOR ADVANCE LICENSING. 3.5. THE LEARNED COUNSEL, HOWEVER REFERRED TO THE PRINCIPLES LAID DOWN BY THE COORDINATE BENCHES IN ASSESSEES OWN CASE AND ALSO SUBMITTED THAT THE ISS UE IN ITA NOS.6483 7252 OF 2003 AND CO NO.04 OF 2005 GLAX O SMITHKLINE MUMBAI PAGE 15 OF 34 TOPMAN EXPORTS WAS WITH REFERENCE TO THE TAXABILITY AND BIFURCATION OF THE DEPB PROCEEDS WHILE COMPUTING DEDUCTION UNDER SECTION 80HHC AND NOWHERE CONCERNED WITH THE ISSUE BEFORE US WHICH ITSELF WAS UPHELD BY THE HONBLE BOMBAY HIGH COURT IN ASSESSEES OWN CASE. 3.6. WE HAVE CONSIDERED THE ISSUE AND PERUSED THE RECORD. AS ALREADY STATED ABOVE, THE ISSUES IN ASSE SSEES OWN APPEAL IS CONSISTENTLY HELD IN FAVOUR OF THE AS SESSEE FOLLOWING THE DECISION OF THE MUMBAI BENCH OF THE T RIBUNAL IN JAMSHRI RAJITSINGHJI SPG. &WVG. MILLS LTD. VS. I AC (1992) 41 ITD (BOM) 142. AS ALREADY STATED, THE ISS UE WAS CONFIRMED BY THE HONBLE JURISDICTIONAL HIGH COURT WHICH DISMISSED THE REVENUES APPEAL VIDE ORDERS ITA.1183/MUM/2011 DATED 25-11-2011. IN THAT, THE QUESTION REFERRED SPECIFICALLY IS AS UNDER : WHETHER THE ADVANCE LICENCE AND THE DEPB RECEIVABL E BY THE ASSESSEE ARE LIABLE TO BE ASSESSED TO TAX IN TH E YEAR IN WHICH THE LICENCE IS GRANTED TO THE LICENSEE OR LIA BLE TO BE TAXED IN THE YEAR IN WHICH THE BENEFITS ACTUALLY AC CRUE AFTER THE IMPORTS ARE EFFECTED, IS THE QUESTION RAI SED IN THIS APPEAL. 3.7. THE HONBLE HIGH COURT HELD AS UNDER : 2. THE INCOME TAX APPELLATE TRIBUNAL FOLLOWING IT S DECISION IN THE CASE OF JAMSHRIRAJITSINGHJISPG. &WV G. MILLS LTD. VS. IAC REPORTED IN 41 ITD 142 HELD THAT THE SAID AMOUNTS ARE LIABLE TO BE TAXED IN THE YEAR IN WHICH THE BENEFITS ACTUALLY ACCRUE TO THE ASSESSEE AND NOT IN THE YEAR IN WHICH THE LICENCE IS GRANTED. THIS COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. M/S. MAFATLAL INDUSTRIES LTD, BEING INCOME TAX APPEAL NO. 424 OF 2009 DECIDED ON 22 ND SEPTEMBER, 2009 HAS UPHELD THE DECISION OF THE INCOME TAX APPELLATE TRIBUNAL IN THE CASE OF JAMSHRI RAJITSINGHJI SPG. & WVG. MILLS LTD. (SUPRA) . 3. IN THIS VIEW OF THE MATTER, WE SEE NO MERIT TO E NTERTAIN THIS APPEAL. THE APPEAL IS ACCORDINGLY DISMISSED WI TH NO ORDER AS TO COSTS. ITA NOS.6483 7252 OF 2003 AND CO NO.04 OF 2005 GLAX O SMITHKLINE MUMBAI PAGE 16 OF 34 3.8. THEREFORE, THIS ISSUE IS NO LONGER SURVIVES FO R CONSIDERATION AS FAR AS THE INCOME TAX APPELLATE TR IBUNAL IS CONCERNED AS IT HAS CONSISTENTLY HELD THE ISSUE IN FAVOUR OF THE ASSESSEE AND WAS ALSO UPHELD BY THE HONBLE HIGH COURT. WE MAY ALSO NOTE THAT EVEN THOUGH THE ISSUE OF ACCRUAL OF INCOME ON DEPB WAS DISCUSSED BY THE SPEC IAL BENCH IN PARAS 33 AND 34, THE PRESENT ISSUE IS NOT WITH REFERENCE TO DEPB BUT ADVANCE LICENCES WHICH IS NOT TRANSFERABLE UNLIKE THE DEPB BENEFITS GRANTED UNDER THE SCHEME. THE HONBLE SUPREME COURT IN THE CASE OF TO PMAN EXPORTS VS. CIT, MUMBAI AND OTHERS HAD NOT DEALT WI TH ACCRUAL OF INCOME BUT DEALT WITH THE ISSUE OF BRING ING TO TAX THE SALE PROCEEDS OF THE DEPB, PROFIT ON SALE O F DEPB AND HOW THEY CAN BE CONSIDERED UNDER SECTION 28. TH E ISSUE WAS NOT ABOUT THE ACCRUAL OF INCOME BUT BIFUR CATION OF PROCEEDS OF DEPB/DFRC INTO FACE VALUE AND PROFIT AND YEAR OF TAXABILITY. IN VIEW OF THIS, TO THE EXTENT OF ACCRUAL OF INCOME IS CONCERNED, WE ARE OF THE OPINION THAT ISS UE WAS DECIDED IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE BY THE HONBLE HIGH COURT IN THE ORDERS REFERRED (S UPRA). RESPECTFULLY, FOLLOWING THE SAME, WE ALLOW THE GROU NDS RAISED BY THE ASSESSEE. ASSESSING OFFICER IS DIRECT ED TO DO THE NEEDFUL IN ACCORDANCE WITH THE ORDERS ON THE IS SUE AS IN THE EARLIER YEARS AND MAKE NECESSARY ADJUSTMENTS , IF ANY REQUIRED IN THE COMPUTATION. WITH THESE DIRECTI ONS, GROUNDS ARE CONSIDERED AS ALLOWED. 9.5 CONSISTENT WITH ABOVE OPINION, AO IS DIRECTED TO DO THE NEEDFUL IN ACCORDANCE WITH THE ORDERS ON THE ISSUE IN THE E ARLIER YEAR AND MAKE NECESSARY ADJUSTMENT, IF ANY REQUIRED IN THE C OMPUTATION OF INCOME UNDER THE HEAD BUSINESS AND ALSO U/S 80HHC. WITH THESE DIRECTIONS THE GROUNDS ARE CONSIDERED ALLOWED FOR S TATISTICAL PURPOSE. ADDITIONAL GROUNDS: 10. ASSESSEE HAS RAISED THE FOLLOWING ADDITIONAL GROUNDS, WHICH WERE ALLOWED: BETNELAN INTEREST DEMAND. THE APPELLANTS SUBMIT THAT IN VIEW OF THE DEMAND OF INTEREST RAISED BY THE DEPARTMENT OF CHEMICALS AND PETROCHEMICALS PURSUANT TO THE LETTER/ORDER DATED 1 0 TH JUNE, 1997 A SUM OF ` .18,06,887 WHICH REPRESENTS THE ITA NOS.6483 7252 OF 2003 AND CO NO.04 OF 2005 GLAX O SMITHKLINE MUMBAI PAGE 17 OF 34 INTEREST PAYABLE FOR THE PERIOD 1.4.1997 TO 31.3.19 98 BE ALLOWED AS A DEDUCTION. BETNELAN DEMAND. THE APPELLANTS SUBMIT WITHOUT PREJUDICE TO THEIR CONTENTIONS THAT THEY BE ALLOWED DEDUCTION FOR THE DEMAND IN EACH OF THE AYS TO WHICH THEY PERTAIN I.E . 1995-96 AND 1996-97, THE ENTIRE AMOUNT OF ` .1,20,42,318 BE ALLOWED IN AY 1998-99 AS THE DEMAND WAS RAISED VIDE LETTER/ORDER DATED 10.6.1997 OF THE DEPARTMENT OF CHEMICALS AND PETROCHEMICALS. 10.1 THESE ARE THE ADDITIONAL GROUNDS RAISED IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS VIDE LETTER DATED 9.8 .2007. THE FACTS LEADING TO THE PRESENT ISSUE ARE THAT DURING THE PR EVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 1998-99, ASSESSEE RECEI VED A DEMAND DATED 10 TH JUNE, 1997 FROM THE DEPARTMENT OF CHEMICALS & PETROCHEMICALS (DCP) AMOUNTING TO RS.1,90-,43,347/- TOWARDS OVERCHARGING OF PRICE IN RESPECT OF THE APPELLANTS PRODUCT BETNELAN TABS SOLD DURING THE PERIOD JANUARY 1995 TO JULY 19 95. THE DEMAND WAS REVISED TO RS. 1,20,42,312/-. INTEREST O F RS. 84,29,619/- UPTO 31.12.1999 WAS CHARGED ON THE DEMA ND AT THE RATE OF 15% PER ANNUM. AGGRIEVED BY THE DCPS ORDER , ASSESSEE FILED A WRIT PETITION BEARING NO. 1266 OF 1999 BEFORE THE DIVISION BENCH OF THE HONBLE HIGH COURT OF BOMBAY. THE DIVISION B ENCH, VIDE ORDER DATED 16.2.2004 UPHELD THE STAND OF THE DCP. THE DCP, SUBSEQUENTLY BY AN ORDER DATED 17/18.5.2004, REVISE D UPWARDS THE INTEREST DEMAND TO RS. 1,63,70,915/- (TOTAL DEMAND: RS.2,84, 13,228/-). ASSESSEE HAS FILED A SPECIAL LEAVE PETI TION (CIVIL) NO. 6518 OF 2004 IN THE SUPREME COURT WITH PRAYER FOR I NTERIM RELIEF CHALLENGING THE ORDER OF THE DIVISION BENCH OF THE BOMBAY HIGH COURT. THE SAME IS PENDING BEFORE THE HONBLE SUPRE ME COURT FOR DISPOSAL. 10.2 ASSESSEE IS OF THE VIEW THAT THE LIABILITY PER TAINING TO THE ABOVE DEMAND WAS ALLOWABLE IN EACH OF THE YEARS TO WHICH THE DEMAND ITA NOS.6483 7252 OF 2003 AND CO NO.04 OF 2005 GLAX O SMITHKLINE MUMBAI PAGE 18 OF 34 PERTAINS. THE YEAR-WISE BREAK-UP OF THE TOTAL DEMAN D OF RS.2,84,13,228/- (INCLUSIVE OF INTEREST) IS GIVEN B ELOW: ASSESSMENT YEAR DEMAND PRODUCT BETNELAN ( ` ) INTEREST DEMAND ( ` .) 1995-96 14,59,674 47,891 1996-97 1,05,82,638 18,06,887 1997-98 - 18,06,887 1998-99 - 18,06,887 1999-2000 18,06,887 2000-01 18,06,887 2001-02 18,06,887 2002-03 18,06,887 2003-04 18,06,887 2004-05 18,06,887 2005-06 65,901 TOTAL 1,20,42,312 1,63,70,915 ASSESSEE HAS NOT DEBITED THE AFORESAID DEMAND (INCL UDING INTEREST) TO THE PROFIT & LOSS ACCOUNT. ASSESSEE HAS ALSO NOT PAID THE DEMAND. 10.3 ON THIS ISSUE, IT WAS FAIRLY ADMITTED THAT THE ISSUE IS RESTORED TO THE FILE OF AO FOR FRESH ADJUDICATION IN VIEW OF THE DIRECTIONS GIVEN IN ASSESSMENT YEAR 1995-96 ORDER DATED 30.11.2011 W HEREIN THE TRIBUNAL VIDE PARA 3 & 4 RESTORED THE ISSUE TO THE FILE OF AO FOR DE NOVO ADJUDICATION IN ACCORDANCE WITH THE LAW. CONSISTEN T WITH THE VIEW TAKEN THEREIN, WE DIRECT AO TO ADJUDICATE THE ISSUE AND CONSIDER THE ALLOWANCE OF THE ABOVE AMOUNT IN ACCOR DANCE WITH THE LAW AND FACTS. THE GROUNDS ARE CONSIDERED ALLOWED F OR STATISTICAL PURPOSES. 10.4 IN THE RESULT, APPEAL IS PARTLY ALLOWED. ITA NO.7252/MUM/2003 REVENUE APPEAL THIS IS REVENUE APPEAL AND THERE ARE 18 GROUNDS FOR CONSIDERATION. 11. GROUND NO.1 IS AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWAN CE OF ITA NOS.6483 7252 OF 2003 AND CO NO.04 OF 2005 GLAX O SMITHKLINE MUMBAI PAGE 19 OF 34 ` .10,93,851(5% OF ` .2,18,77,028) BEING ESTIMATED EXPENSES INCURRED ON EARNING THE GROSS DIVIDEND OF ` .2,18,77,028 OBSERVING THAT THE ENTIRE AMOUNT OF DIVIDEND COMPRISES ONLY ONE DIVIDEND WARRANT RECEIV ED ON EARLIER INVESTMENTS WITHOUT APPRECIATING THAT TH E CALCUTTA HIGH COURT HAS, IN THE CASE OF UNITED INDI A FIRE & GENERAL INSURANCE CO. LTD (161 ITR 295) HELD THAT DIVIDEND INCOME EXEMPT UNDER SECTION 80M IS ONLY TH E NET INCOME AND THAT MANAGEMENT EXPENSES HAVE TO BE APPORTIONED FOR DISTRIBUTION OF THE SAID INCOME AND THEREFORE, AO RIGHTLY WORKED OUT EXPENSES OF ` .10,93,851 ON EARNING OF THE GROSS DIVIDEND OF ` .2,18,77,028. 11.1 THIS GROUND PERTAINS TO DISALLOWANCE AT 5% OF AN AMOUNT OF ` .10,93,851 BEING THE ESTIMATED EXPENSES INCURRED ON EARNING THE GROSS DIVIDEND OF ` .2,18,77,028. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE RECORDS AVAILABLE BEFORE US, WE F IND THAT THIS ISSUE IS COVERED BY THE JUDGMENT OF HON'BLE JURISDICTIONA L HIGH COURT IN CIT V/S GENERAL INSURANCE CORPORATION OF INDIA, (20 02) 254 ITR 204 (BOM.), AS WELL AS THE DECISION OF CHANDIGARH SPECI AL BENCH OF THE TRIBUNAL IN PUNJAB STATE INDUSTRIAL CORPORATION LTD ., (2006), 102 ITD 001 (CHANDI.). CONSISTENT WITH THE VIEW TAKEN B Y THE TRIBUNAL IN EARLIER ASSESSMENT YEARS, WE SET ASIDE THE IMPUG NED ORDER PASSED BY THE COMMISSIONER (APPEALS) AND RESTORE TH E ISSUE TO THE FILE OF ASSESSING OFFICER. THE ASSESSING OFFICER IS DIRECTED TO CONSIDER ASSESSEE'S CLAIM CONSISTENT WITH THE ORDER S IN EARLIER YEAR AS PER LAW AND PRINCIPLE LAID DOWN ON THE ISSUE. TH IS GROUND IS, THUS, ALLOWED FOR STATISTICAL PURPOSES. 12. GROUND NO.2 IS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF A SUM OF ` .4,30,000 BEING THE EXPENDITURE INCURRED ON GLAXO SPORTS CLUB ACTIVITIES UNDER SECTION 40A(9) R ELYING UPON THE CIT (A)S ORDER FOR THE AY 1998-99 & 1999- 2000 IN ASSESSEES OWN CASE WHICH HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND CONTESTED BY WAY OF FILING APPEA L TO THE ITAT. ITA NOS.6483 7252 OF 2003 AND CO NO.04 OF 2005 GLAX O SMITHKLINE MUMBAI PAGE 20 OF 34 12.1. GROUND NO.2 PERTAINS TO DISALLOWANCES UNDER S ECTION 40A(9) ON PAYMENT OF ` .4,30,000/-. BEFORE US, BOTH THE PARTIES AGREE THAT THIS ISSUE WAS EARLIER DECIDED BY THE TRIBUNAL IN A SSESSEE'S OWN CASE FOR ASSESSMENT YEARS 1989-90 TO 1991- 92, 1992 -93 TO 1993- 94, 1994-95, 1995-96 , 1996-97 1997-98 RESPECTIVELY , WHEREIN THE TRIBUNAL ALLOWED THE DEDUCTION IN RESPECT OF PAYMEN T MADE TO M/S. GLAXO SPORTS CLUB. CONSISTENT WITH THE VIEW TAKEN B Y THE TRIBUNAL, WE UPHOLD THE ORDER PASSED BY THE COMMISSIONER (APP EALS) AND DISMISS THE GROUND RAISED BY THE REVENUE. 13. GROUND NO.3 IS AS UNDER: 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWAN CE OF RS.39,26,000/- WRITTEN OFF BY THE ASSESSEE AS BAD D EBTS RELYING UPON THE CIT(A)S ORDERS FOR THE A YS. 1998-99 & 1999-2000 IN ASSESSEES OWN CASE WHICH HAVE NOT BEE N ACCEPTED BY THE DEPARTMENT AND CONTESTED BY WAY OF FILING APPEAL TO THE ITAT. 13.1 AS STATED IN THE ASSESSMENT ORDER, THE SAID AM OUNT HAS BEEN DISALLOWED BY AO PRIMARILY BECAUSE THE SAME WAS ACT UALLY WRITTEN OFF IN MAY,2000, WHEREAS THE YEAR UNDER CONSIDERATI ON CLOSED ON 31.3.2000. IT WAS THE CONTENTION OF AO THAT SINCE T HE ACCOUNT WAS WRITTEN OFF ONLY IN THE FINANCIAL YEAR 2000-01, THE SAME COULD BE CLAIMED AS DEDUCTION IN AY 2000-01, ALTHOUGH IT PER TAINS TO AN EARLIER AY. 13.2 THE CIT (A) HELD AS UNDER: 6.1A. IT IS SEEN FROM THE ASSESSMENT ORDER THAT THI S AMOUNT ` .39,26,000 HAS BEEN DISALLOWED BY AO AFTER PERUSAL OF FACTS WHICH SHOWS THAT THIS AMOUNT RELAT ES TO THE PERIOD 1 ST JANUARY 2000 TO 31 ST MARCH, 2000 AND WAS ACTUALLY WRITTEN OFF IN THE BOOKS OF ACCOUNT IN MAY, 2000. HE HAS, THEREFORE, HELD THAT THIS AMOUNT DOES NOT PERTAIN TO THE AY IN QUESTION. AS PER PROVISIONS OF 36(1)(VII) FOR AN AMOUNT TO BE DEDUCTIBLE AS A BAD DEBT, THE SAME HAS TO BE WRITTEN OFF AS IRRECOVERABLE IN THE ITA NOS.6483 7252 OF 2003 AND CO NO.04 OF 2005 GLAX O SMITHKLINE MUMBAI PAGE 21 OF 34 ACCOUNTS OF ASSESSEE FOR THE PREVIOUS YEAR. AO HAS NO WHERE CONTENDED THAT THIS AMOUNT DOES NOT PERTAIN T O THE YEAR UNDER CONSIDERATION AND FURTHER THE REQUIR EMENT OF THE SECTION IS THAT THE AMOUNT SHOULD BE WRITTEN OFF IN THE ACCOUNTS OF ASSESSEE IN PREVIOUS YEAR EVEN IF T HE WRITE OFF IS DONE ACTUALLY AFTER THE END OF THE PRE VIOUS YEAR, AT THE TIME OF CLOSING OF THE BOOKS. SINCE TH E ACCOUNTS FOR THE YEAR ENDED 31 ST MARCH, 200 WERE FINALIZED ON 26 TH JULY, 2000 AND THE WRITE OFF HAS BEEN DONE IN MAY, 2000 I HOLD THAT REQUIREMENT OF SECTIO N 36(1)(VII) HAS BEEN FULFILLED IN THAT THE AMOUNT CL AIMED AS IRRECOVERABLE HAS BEEN WRITTEN OFF IN THE ACCOUNTS OF ASSESSEE IN THE PREVIOUS YEAR UNDER CONSIDERATION. AN IDENTICAL ISSUE WAS ALSO CONSIDERED BY ME IN THE AY S 1998-99 AND 1999-2000 WHEREIN FOLLOWING THE DECISIO N OF THE CALCUTTA HIGH COURT IN THE CASE OF TURNER MO RRISON & CO. (114 TAXMAN 9) THE ISSUE WAS DECIDED IN FAVOU R OF THE APPELLANTS. I THEREFORE, HOLD THAT THIS ADDITIO N SHOULD BE DELETED. THIS SUB-GROUND OF THE APPEAL IS THEREF ORE, ALLOWED. 13.3 AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER AS THE LEARNED C IT (A) ORDER IS CONSISTENT WITH THE PRINCIPLES LAID DOWN ON THE ISS UE INCLUDING THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF TR F LTD VS. CIT, 323 ITR 397 (SC). IN EARLIER YEARS ALSO THE ISSUE W AS DECIDED AGAINST REVENUE. SINCE THE AMOUNTS WERE ALREADY WRITTEN OFF , REVENUE GROUND IS REJECTED. 14. GROUND NO.4 TO 6 ARE AS UNDER: 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN DIRECTING THE AO TO ALLOCATE ONLY 75% OF THE STAFF COST OF ` .963.73 LAKHS FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S.80-I & 80- IA, IN RESPECT OF NASIK UNIT, RELYING UPON THE CIT( A)'S ORDER FOR THE AY. 1998-99 & 1999-2000 WHICH HAVE NOT BEEN ACCEPTED BY THE DEPARTMENT AND CONTESTED BY WA Y OF FILING APPEAL TO THE ITAT . 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) ERRED IN DIRECTING THE AO TO ALL OCATE NET INTEREST FOR THE PURPOSE OF COMPUTATION OF DE DUCTION UNDER SECTION 80-I/80-IA RELYING UPON THE CIT (A)S ORDER ITA NOS.6483 7252 OF 2003 AND CO NO.04 OF 2005 GLAX O SMITHKLINE MUMBAI PAGE 22 OF 34 FOR THE AY 1998-99 AND 1999-2000 WHICH HAVE NOT BEE N ACCEPTED BY THE DEPARTMENT AND CONTESTED BY WAY OF FILING APPEAL TO THE ITAT. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) ERRED IN HOLDING THAT NO FINANCE COST IS ALLOCABLE TO UNIT NO.3 NAMELY THE STERILE DRY VIAL UNIT AS IT IS A SELF FINANCING UNIT, RELYING UPON THE CIT ( A)S ORDER FOR THE AY 1998-99 AND 1999-2000 WHICH HAVE NOT BEE N ACCEPTED BY THE DEPARTMENT AND CONTESTED BY WAY OF FILING APPEAL TO THE ITAT 14.1 GROUND NO.4 TO 6 PERTAINS TO THE DEDUCTION OF STAFF COST OF ` .963.76 LAKHS TO THE NASHIK UNIT WHICH CLAIMED 8 TH YEAR OF DEDUCTION. THE CIT (A) ALLOWED 75% OF STAFF COST AN D 100% OF THE OTHER COSTS. THE CIT (A) FURTHER DIRECTED NOT TO AD D ANY FINANCE COST TO STERILE DRY VIAL UNIT AS IT IS A SELF FINANCING UNIT. HENCE REVENUE IS AGGRIEVED. THESE GROUNDS ARE CONSIDERED IN FAVOU R OF ASSESSEE IN EARLIER YEARS. 14.2 THE ORDER OF THE ITAT IN AY 1997-98 IS AS UND ER: 10. GROUND NO.7 PERTAINS TO THE CLAIM OF DEDUCTION UNDER SECTION 80I AND 80IA. THE DISPUTE IS PERTAINING TO (A) ADJUSTMENT OF INTEREST COST AGAINST INTEREST INCOME , (B) ALLOCATION OF ADDITIONAL STAFF COST TO NASHIK UNITS AND (C) ALTERNATELY DISALLOWANCE IN THE SAME PROPORTION AS THE HEAD OFFICE EXPENSES ALLOCATION. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND WE FIND THAT THIS ISSUE IS COVERED BY THE DECISION OF THE ITAT I N ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 1989-90 AND 1991-92 IN ITA NOS.10002/BOM/92, 8341/BOM/93, AND 7742/BOM/94 VIDE PARA 31 TO 35 AND ITA NOS.4433 AND ITA NO.4434/BOM/96 FOR ASSESSMENT YEAR 1992-93 AND1993-94 IN REVENUE APPEALS VIDE PARA 24. SINCE T HE FACTS OF THE CASE UNDER CONSIDERATION ARE SAME TO T HAT OF THE AFORESAID DECISIONS, RESPECTFULLY FOLLOWING THE DECISIONS (SUPRA) WE DIRECT AO TO ALLOW DEDUCTION U NDER SECTION 80I AND 80IA AS CLAIMED BY ASSESSEE, FOLLOW ING THE DIRECTIONS IN EARLIER YEARS. IT WAS SUBMITTED T HAT SECTION 80IA CLAIM INVOLVES VARIOUS ASSESSMENT YEAR S SO, AO IS DIRECTED TO DETERMINE THE YEAR OF CLAIM WHILE ALLOWING THE DEDUCTION SO THAT NO DEDUCTION IS CLAI MED BEYOND THE ALLOWABLE PERIOD. GROUNDS ALLOWED. ITA NOS.6483 7252 OF 2003 AND CO NO.04 OF 2005 GLAX O SMITHKLINE MUMBAI PAGE 23 OF 34 14.3 CONSIDERING THE ABOVE, THERE IS NO MERIT IN RE VENUE GROUNDS AS THE CIT (A) FOLLOWED THE ORDER IN EARLIER YEAR. THE GROUNDS ARE REJECTED. 15. GROUND 7 IS AS UNDER: 7 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) ERRED IN DIRECTING THE AO TO ADD PROPORTIONATE DISALLOWANCES TO ELIGIBLE PROFITS FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER SECTION 8 0- I/80-IA RELYING UPON THE CIT (A)S ORDERS FOR THE A Y 1998-99 & 1999-2000 IN ASSESSEES OWN CASE WHICH HAVE NOT BEEN ACCEPTED BY THE DEPARTMENT AND CONTESTED BY WAY OF FILING APPEAL TO THE ITAT. 15.1 GROUND NO.7 PERTAINS TO THE CLAIM UNDER SECTIO N 80I AND 80IA ON THE DISALLOWANCES TO BE CONSIDERED AS PROFIT OF ELIGIBLE UNIT ON PROPORTIONATE BASIS. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE RECORDS AVAILABLE BEFORE US, WE FIND THAT TH IS ISSUE WAS NOT CONTESTED BY REVENUE IN AY 97-98 ON THE BASIS OF WH ICH THE CIT(A) GAVE RELIEF. EVEN OTHER WISE, WE DO NOT SEE ANY REA SON TO DIFFER AS THE EXPENDITURE CLAIMED WAS DISALLOWED THE SAME WOU LD INCREASE THE CORRESPONDING PROFITS. WE UPHOLD THE ORDER PASS ED BY THE COMMISSIONER (APPEALS) AND DISMISS THE GROUND RAISE D BY THE REVENUE. 16. GROUND NO.8 IS EXTRACTED AS UNDER: 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN DIRECTING THE A O. NOT TO TREAT THE SALE OF SCRAP AS A PART OF TOTAL TURNOVER FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80HHC RELYING ON THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE O F KANTILAL CHHOTALAL (246 ITR 439) WITHOUT APPRECIATI NG THAT THE DECISION OF THE BOMBAY HIGH COURT AS AFORE SAID HAS NOT DEALT WITH THE ISSUE OF SCRAP SALES IN RELA TION TO TOTAL TURNOVER FOR THE PURPOSE OF DEDUCTION UNDER S ECTION 80HHC. ITA NOS.6483 7252 OF 2003 AND CO NO.04 OF 2005 GLAX O SMITHKLINE MUMBAI PAGE 24 OF 34 16.1 AO INCLUDED THE INCOME RECEIVED ON SALE OF PRO DUCT SCRAP TO THE TOTAL TURNOVER. IT IS FAIRLY ADMITTED THAT THIS ISSUE IS HELD AGAINST ASSESSEE IN THE EARLIER YEARS CONSISTENTLY FROM ASS ESSMENT YEAR 1988-89 ONWARDS. CONSISTENT WITH THE VIEW TAKEN BY TRIBUNAL IN ASSESSEES OWN CASE, WHICH WAS FAIRLY ADMITTED BY T HE LEARNED COUNSEL, WE ALLOW THE GROUND RAISED BY REVENUE ON T HIS ISSUE. THE ORDER OF CIT(A) IS MODIFIED TO THAT EXTENT. 17 . GROUND NO 9 IS AS UNDER : 9 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DIRECTING THE A.O. TO E XCLUDE THE AMOUNT OF EXCISE DUTY AND SALES-TAX FROM THE TO TAL TURNOVER FOR THE PURPOSE OF COMPUTATION OF DEDUCTIO N U/S.80HHC RELYING UPON THE DECISION OF THE BOMBAY H IGH COURT IN THE CASE OF SUDARSHAN CHEMICAL INDUSTRIES LTD. (245 KTR 784) WHICH HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND CONTESTED BY WAY OF FILING SLP . 17.1 THE LEARNED CIT (A) FOLLOWING THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V. SUDARSHAN C HEMICALS INDUSTRIES LTD. [2000] 245 ITR 769 HELD THAT EXCISE DUTY AND SALES TAX ARE NOT INCLUDIBLE IN THE TURNOVER FOR THE PURP OSE OF COMPUTATION OF DEDUCTION UNDER SECTION 80HHC. THIS ISSUE IS NOW FAIRLY COVERED BY THE JUDGMENT OF THE HON'BLE SUPRE ME COURT IN THE CASE OF CIT VS. LAKSHMI MACHINE WORKS 290 ITR 667 ( SC) WHEREIN IT WAS HELD THAT EXCISE DUTY AND SALES TAX CANNOT FORM PART OF TOTAL TURNOVER UNDER SECTION 80HHC(3). RESPECTFULLY FOLLO WING THE AFORESAID JUDGMENT OF THE HON'BLE SUPREME COURT, WE REJECT THE GROUND OF THE REVENUE AND UPHOLD THE ORDER OF THE C IT (A) ON THIS ISSUE. 18. GROUND NO.10 AND 11 ARE AS UNDER 10 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE CIT (A) ERRED IN HOLDING THAT FOR THE PU RPOSE OF WORKING OUT INDIRECT COST IN THE CASE OF EXPORT OF TRADING GOODS, THE EXPORT DIVISION IS AN INDEPENDENT, SELF ITA NOS.6483 7252 OF 2003 AND CO NO.04 OF 2005 GLAX O SMITHKLINE MUMBAI PAGE 25 OF 34 CONTAINED DIVISION AND THEREFORE, THE HEAD OFFICE ADMINISTRATION EXPENSES INCLUDING INTEREST SHOULD N OT BE ALLOCATED TO THE SAID DIVISION FOR THE PURPOSE OF W ORKING OUT DEDUCTION UNDER SECTION 80HHC, RELYING UPON THE CIT (A)S ORDER FOR THE AY 1997-98 IN ASSESSEES OWN CA SE WHICH HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND CONTESTED BY WAY OF FILING APPEAL TO ITAT. 11 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) ERRED IN DIRECTING THE A.O. TO T AKE NET INTEREST CHARGES FOR ALLOCATION OF EXPENSES FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER SECTION 80HHC IN RESPECT OF PROFIT ON EXPORT OF TRADING GOODS, RELYI NG UPON THE CIT (A)S ORDER FOR THE AY 1998-99 AND 1999-200 0 IN ASSESSEES OWN CASE WHICH HAVE NOT BEEN ACCEPTED BY THE DEPARTMENT AND CONTESTED BY WAY OF FILING APPEA L TO THE ITAT. 18.1 AFTER HEARING BOTH THE PARTIES AND ON A PERUSA L OF THE RECORDS AVAILABLE BEFORE US, WE FIND THAT THE HEAD OFFICE A DMINISTRATIVE EXPENSES, ETC., HAVE BEEN ALLOCATED TO ARRIVE AT TH E INDIRECT COST IN THE CASE OF EXPORT OF TRADING GOODS. THESE ISSUES H AVE BEEN DECIDED BY THIS TRIBUNAL IN ASSESSEE'S OWN CASE IN ITAS NO. 3464 & 3465/MUM./1996, ETC., FOR ASSESSMENT YEARS 1992-93 AND 1993- 94, ETC., ORDER DATED 29TH MARCH 2007, WHEREIN THE TRIBUNAL, VIDE PARA-11, HELD AS FOLLOWS:- '11. AFTER HEARING BOTH THE PARTIES, WE FIND THAT T HIS ASPECT OF THE ISSUE WAS NEVER ADJUDICATED BY THE ASSESSING OFFICER. NO DOUBT, THE ASSESSEE HAD GIVEN A NOTE REGARDING DEDUCTION U/S 80HHC VIS--VIS INDIRE CT COST IN RESPECT OF TRADING GOODS FOR EXPORT BUT THE ASSESSING OFFICER DID NOT RECORD ANY FINDING IN THI S REGARD AS HE WAS OF THE VIEW THAT THE ASSESSEE WAS NOT ELI GIBLE FOR DEDUCTION U/S 80HHC AS THERE WAS HUGE LOSS IN TRADING GROUND WHICH WAS MUCH MORE THAN PROFITS OF EXPORT OF MANUFACTURED GOODS. ON APPEAL, THE LEARNE D CIT(A) HAS HELD THAT LOSS IN TRADING GOODS COULD NO T BE ADJUSTED AGAINST THE PROFITS IN RESPECT OF EXPORT O F MANUFACTURED GOODS. IN VIEW OF THIS FINDING, THE LE ARNED CIT(A) PROCEEDED TO DISPOSE OF THE ISSUE REGARDING INDIRECT COST. ON THESE FACTS, WE ARE OF THE VIEW T HAT THIS ISSUE REQUIRES FRESH ADJUDICATION. THE LEGISLATURE HAS AMENDED THE PROVISIONS OF SECTION 80HHC WITH ITA NOS.6483 7252 OF 2003 AND CO NO.04 OF 2005 GLAX O SMITHKLINE MUMBAI PAGE 26 OF 34 RETROSPECTIVE EFFECT. ACCORDING TO SUCH AMENDMENT, THE LOSS IN TRADING GOODS REQUIRES TO BE ADJUSTED AGAIN ST PROFITS FROM EXPORT OF MANUFACTURED GOODS. COMPUTAT ION OF INDIRECT COST IS NECESSARY INGREDIENT FOR COMPUT ING THE EXPORT PROFIT FROM TRADING GOODS AS WELL AS MANUFAC TURED GOODS. THE ASSESSING OFFICER HAS NOT MADE ANY OBSERVATION ON THIS ASPECT OF THE ISSUE. HOWEVER, S UCH EXERCISE MAY NOT BE REQUIRED TO BE MADE IF THE LOSS IN TRADED GOODS AS PER THE COMPUTATION OF ASSESSEE ITS ELF IS MORE THAN THE PROFITS FROM EXPORT OF MANUFACTURED G OODS IN AS MUCH AS IN SUCH SITUATION, THE ASSESSEE WOULD NOT BE ENTITLED TO DEDUCTION U/S 80HHC AS PER THE AMEND ED PROVISIONS. ON THE OTHER HAND, IF THE PROFITS FROM EXPORT OF MANUFACTURED GOODS, AS PER THE CALCULATION OF ASSES SEE, IS MORE THAN THE LOSS IN TRADED GOODS EXPORT, THEN THE ASSESSING OFFICER WOULD BE REQUIRED TO DETERMINE TH E INDIRECT COST. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LEARNED CIT(A) ON THIS ASPECT OF THE ISSUE AND REMI T THE MATTER TO THE FILE OF ASSESSING OFFICER FOR FRESH D EDUCTION FOR BOTH THE YEARS. THE ASSESSEE WOULD BE AT LIBERT Y TO FURNISH ALL THE DETAILS REGARDING THIS ASPECT OF TH E ISSUE.' 18.2 ALLOCATION OF OFFICE EXPENSES INCLUDING INTERE ST AND NETTING THEREOF TO EXPORT DIVISION FOR WORKING OUT COST REL ATING TO EXPORT OF TRADING GOODS HAS TO BE RE-DETERMINED AFTER EXAMINA TION. CONSISTENT WITH THE VIEW TAKEN BY THE CO-ORDINATE B ENCH OF THIS TRIBUNAL IN ASSESSEE'S OWN CASE FOR EARLIER ASSESSM ENT YEARS, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE COMMISSIONER (APPEALS) AND RESTORE THE ISSUE TO THE FILE OF ASSESSING OFFI CER FOR ADJUDICATION AFRESH IN ACCORDANCE WITH LAW AND AFTER PROVIDING A DEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THESE G ROUND ARE, THUS, ALLOWED FOR STATISTICAL PURPOSES. 19. GROUND NO.12 IS GIVEN BELOW: 12. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN DIRECTING THE A.O. TO RECOMPUTED DEDUCTION UNDER SECTION 80HHC WITHOUT REDUCING 90% OF VARIOUS ITEMS FORMING PART OF MISCELLANEOUS INCOME IN ACCORDANCE WITH EXPLANATION (BAA) TO SECTION 80HHC, HOLDING THAT THESE ITEMS HA VE NO DIRECT NEXUS WITH THE BUSINESS OF ASSESSEE COMPANY WITHOUT APPRECIATING THAT THE ITEMS OF MISCELLANEOU S ITA NOS.6483 7252 OF 2003 AND CO NO.04 OF 2005 GLAX O SMITHKLINE MUMBAI PAGE 27 OF 34 INCOME ARE NOT IN THE NATURE OF INCOME AS SPECIFIED IN CLAUSES (IIIA) (IIIB) & (IIIC) OF SECTION 28 OF THE ACT AND THEREFORE, AO RIGHTLY REDUCED 90% OF VARIOUS ITEMS OF MISCELLANEOUS INCOME FOR COMPUTATION OF DEDUCTION U NDER SECTION 80HHC. 19.1 CONSEQUENT TO THE ORDER OF THE CIT (A), BOTH A SSESSEE AND THE REVENUE ARE IN APPEAL. THIS ISSUE WAS CONSIDERED IN ASSESSEES APPEAL AGAINST GROUND NO. 5 ABOVE WHEREIN THE MATTE R WAS RESTORED TO THE FILE OF AO FOR FRESH EXAMINATION. ACCORDINGL Y, THIS GROUND IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 20. GROUND NO.13 & 14 ARE GIVEN BELOW: 13. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN DIRECTING THE A.O. TO I NCLUDE CLOSING BALANCE OF ADVANCE LICENCE BENEFIT AGGREGAT ING TO ` .7,65,29,026 (AS RECTIFIED IN ORDER UNDER SECTION 1 54 DATED 22.08.2003) IN THE PROFITS OF BUSINESS AND TO RECOMPUTED THE DEDUCTION UNDER SECTION 80HHC RELYIN G UPON THE ORDER OF THE CIT (A) FOR THE AY 1997-98 WH ICH HAS NOT BEEN ACCEPTED AND CONTESTED BY FILING APPEA L TO THE ITAT. 14. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN DIRECTING THE A.O. TO A LLOW BENEFIT OF ` .1133.55 LAKHS BEING ADVANCE LICENCE BENEFIT ACTUALLY UTILIZED BY ASSESSEE AS ENVISAGED IN PROVI SO TO SECTION 80HHC(3) RELYING UPON THE CIT (A)S ORDER D ATED 30.01.2002 FOR THE AY 1997-98 IN ASSESSEES OWN CAS E WHICH HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND CONTESTED BY WAY OF FILING APPEAL TO THE ITAT. 20.1 GROUND NOS. 13 & 14 ARE RELATED TO GROUND NO.7 IN ASSESSEES APPEAL. CONSISTENT WITH THE STAND TAKEN THEREIN, AS THE MATTER WAS RESTORED WITH DIRECTIONS, THESE GROUNDS ARE CONSIDE RED ALLOWED FOR STATISTICAL PURPOSES. 21. GROUND NO.15 IS EXTRACTED BELOW: 15. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE ADDITI ON MADE BY AO BY INVOKING THE PROVISIONS OF SECTION 43 B ON ITA NOS.6483 7252 OF 2003 AND CO NO.04 OF 2005 GLAX O SMITHKLINE MUMBAI PAGE 28 OF 34 UNPAID INTEREST LIABILITY, RELYING UPON THE CIT (A) S ORDER FOR THE AY 1997-98 IN ASSESSEES OWN CASE WHICH HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND CONTESTED B Y WAY OF FILING APPEAL TO THE ITAT. 21.1 GROUND NO.15 PERTAINS TO SECTION 43B ON UNPAID INTEREST LIABILITY WHICH CORRESPONDS TO GROUND NO.6 OF ASSES SEES APPEAL. CONSISTENT WITH THE STAND TAKEN THEREIN, AS THE ISS UE WAS RESTORED TO AO, THE GROUND IS CONSIDERED ALLOWED FOR STATIST ICAL PURPOSES 22. GROUND NO.16 & 17 ARE AS UNDER: 16. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN HOLDING THAT SALE PROCEEDS OF ` .5.00 CRORES IN RESPECT OF TRANSFER OF A SELF GENERATED BRAND MULTIVITE FM CONSTITUTES CAPITAL RECEIPTS NOT CHARGEABLE TO TAX, WITHOUT APPRECIATIN G THAT SELF GENERATED BRAND IS A GOODWILL WHICH IS TAXABLE UNDER SECTION 45 OF THE ACT AND THEREFORE, AO RIGHT LY APPLIED THE PROVISIONS OF SECTION 55(2)(A)(II) OF T HE ACT AND BROUGHT TO TAX THE SALE PROCEEDS AS LONG TERM CAPIT AL GAINS. 17. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN HOLDING THAT AO IS NOT JUSTIFIED IN APPLYING THE PROVISIONS OF SECTION 55( 2)(A)(II) TRADEMARKS AND BRANDS AS THIS PROVISION IS EFFECTIV E FROM 1.4.2002 I.E. FROM THE AY 2002-03 WITHOUT APPRECIATING THAT SELF GENERATED BRAND IS A GOODWIL L WHICH IS TAXABLE UNDER SECTION 45 OF THE ACT AND THEREFORE, AO RIGHTLY APPLIED THE PROVISIONS OF SEC TION 55(2)(A)(II) WHICH IS APPLICABLE ON TRANSFER OF A C APITAL ASSET BEING GOODWILL OF A BUSINESS W.E.F. 1.4.1995 I.E. AY 1995-96 AND BROUGHT TO TAX THE SALE PROCEEDS AS LONG TERM CAPITAL GAINS. 22.1 THESE GROUNDS PERTAIN TO THE ACTION OF AO IN H OLDING THAT THE SALE PROCEEDS OF ` .5.00 CRORES IN RESPECT OF TRANSFER OF SELF GENERAT ED BRAND MULTIVITE FM IS TAXABLE AS LONG TERM CAPITA L GAIN UNDER SECTION 45 OF THE I.T. ACT, 1961. AO IN PARA 21 OF THE ASSESSMENT ORDER HAS STATED THAT THE AFORESAID AMOUNT IS TAXAB LE UNDER SECTION 55(2)(A)(II) OF THE I.T. ACT. IT WAS ASSESSEES CON TENTION THAT THE SELF GENERATED ASSET FOR WHICH NO COST HAS BEEN INCURRED FOR ITS ITA NOS.6483 7252 OF 2003 AND CO NO.04 OF 2005 GLAX O SMITHKLINE MUMBAI PAGE 29 OF 34 ACQUISITION IS NOT TAXABLE UNDER THE PROVISIONS AS SECTION 55(2)(A)(II) ARE NOT APPLICABLE AT THE RELEVANT TIME. IT WAS THE CONTENTION THAT IT IS NOT A GOODWILL OR ANY RIGHTS, STAGE CARRIAGE PER MITS OR LOOM HOURS WHICH ARE TAXABLE AT THE RELEVANT POINT OF TIME. IT WAS ALSO FURTHER CONTENTION THAT THE TRADEMARKS AND BRANDS WERE BROU GHT INTO TAX W.E.F. 1.4.2002 I.E. FOR AY 2002-03. 22.2 AFTER CONSIDERING ASSESSEES SUBMISSIONS, THE CIT (A) FINDS CONSIDERABLE MERITS IN THE ARGUMENTS OF ASSESSEE. S INCE THE AMENDMENT BROUGHT TO TAX INCLUDING THE TRADEMARKS A ND BRANDS UNDER SECTION 55(2)(A)(II) WAS APPLICABLE ONLY FROM AY 2002-03, THE CIT (A) ALLOWED ASSESSEES CONTENTION AND DELETED T HE SAME. REVENUE IS AGGRIEVED. 22.3 AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE AG REE WITH THE FINDINGS OF THE CIT (A). SINCE SIMILAR ISSUE HAS BE EN CONSIDERED AND APPROVED BY THE HON'BLE JURISDICTIONAL HIGH COURT O F BOMBAY IN THE CASE OF CIT VS. M/S FERNHILL LABORATORIES AND INDUS TRIAL ESTABLISHMENT IN ITA NO.5615 OF 2010 DATED 12 TH JUNE, 2012, WE HAVE NO REASON TO DIFFER FROM THE FINDINGS OF THE C IT (A). ON SIMILAR FACTS WHEREIN M/S FERNHILL LABORATORIES AND INDUSTR IAL ESTABLISHMENT, OWNER OF THE TRADEMARK COLIN, SOLD T O M/S RECKITT & COLMAN LTD, AO BROUGHT THE SAME TO TAX. THE HON'BLE HIGH COURT HELD AS UNDER: 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. SECTI ON 45 OF THE ACT IS A CHARGING SECTION FOR THE PURPOSE OF LEVYING CAPITAL GAINS. HOWEVER TO IMPOSE THE CHARGE , PARLIAMENT HAS ENACTED PROVISION TO COMPUTE PROFITS OR GAINS UNDER THAT HEAD. SECTION 48 OF THE SAID ACT PROVIDES THE MANNER IN WHICH THE INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAINS IS TO BE COMPUTED I.E. BY DEDUCTING COSTS OF ACQUISITION OF THE CAPITAL ASSET FROM THE FULL CONSIDERATION RECEIVED ON THE TRANSFER OF THE CAPITAL ASSET. THE SUPREME COURT IN THE MATTER OF B . C. SRINIVASA SHETTY (SUPRA) WAS DEALING WITH THE ISSUE WHETHER THE TRANSFER OF THE GOODWILL BY PARTNERSHIP ITA NOS.6483 7252 OF 2003 AND CO NO.04 OF 2005 GLAX O SMITHKLINE MUMBAI PAGE 30 OF 34 FIRM CAN GIVE RISE TO A CAPITAL GAIN TAX UNDER SECT ION 45 OF THE SAID ACT. THE APEX COURT HELD THAT WHERE THE COST OF ACQUISITION OF THE CAPITAL ASSET IS NIL THE N THE COMPUTATION PROVISION FAILS AND THE TRANSFER OF GOO DWILL NOT GIVE RISE TO CAPITAL GAINS TAX. PRIOR TO THE AMENDMENT MADE TO SECTION 55(2) BY THE FINANCE ACT, 2001 EFFECTIVE FROM 1/4/2002 BY ADDING THE WORDS 'TRADE MARK OR BRAND NAME ASSOCIATED WITH THE BUSINESS' SELF GENERATED ASSETS SUCH AS TRADEMARK D ID NOT HAVE ANY COST OF ACQUISITION. THEREFORE FOR THE PERIOD UNDER CONSIDERATION THE COMPUTATION PROVISIO N UNDER SECTION 48 OF THE SAID ACT FAILS RESULTING IN SUCH TRANSFER OF TRADE MARKS NOT BEING CHARGEABLE TO CAP ITAL GAINS TAX. CONSEQUENT TO AMENDMENT MADE TO SECTION 55(2) WITH EFFECT FROM 1/4/2002 BY WHICH THE WORDS TRADE MARK OR BRAND NAME ASSOCIATED WITH THE BUSINESS WAS INTRODUCED INTO IT, THE COMPUTATION PROVISION BECOMES WORKABLE AND THE CONSIDERATION RECEIVED FOR THE SALE OF TRADE MARK WOULD BE SUBJEC T TO CAPITAL GAINS TAX. HOWEVER, FOR THE PERIOD PRIOR TO 1/4/2002 THE SALE OF SELF GENERATED TRADEMARK IS NO T LIABLE TO CAPITAL GAINS TAX. IN FACT, WHEN THE AMENDMENT WAS MADE TO SECTION 55 BY FINANCE ACT, 2001 THE CENTRAL BOARD OF EXCISE AND CUSTOMS HAD ISSUED A CIRCULAR BEARING NO.14/2001 EXPLAINING THE PROVISION OF THE FINANCE ACT, 2011 RELATING TO DIRE CT TAXES PROVIDED AS UNDER: '42- PROVIDING FOR COST OF ACQUISITION OF CERTAIN INTANGIBLE CAPITAL ASSERTS UNDER SECTION 55 42.1 UNDER THE EXISTING PROVISIONS OF SUB- SECTION (2) OF SECTION 55 OF THE INCOME TAX ACT, THE COST OF ACQUISITION OF AN INTANGIBLE CAPITAL ASSET, BEING GOODWILL OF A BUSINESS OR A RIGHT TO MANUFACTURE, PRODUCE OR PROCESS ANY ARTICLE OR THING, TENANCY RIGHTS, STAGE CARRIAGE PERMITS OR LOOM HOURS, IS THE PURCHASE PRICE IN CASE THE ASSET IS PURCHASED BY THE ASSESSEE FROM A PREVIOUS OWNER, AND NIL IN ANY OTHER CASE. IT WAS POINTED OUT THAT CERTAIN SIMILAR SELF GENERATED INTANGIBLE ASSETS LIKE BRAND NAME OR A TRADEMARK MAY NOT BE CONSIDERED TO FORM PART OF THE GOODWILL OF A BUSINESS AND CONSEQUENTLY IT MAY NOT BE ITA NOS.6483 7252 OF 2003 AND CO NO.04 OF 2005 GLAX O SMITHKLINE MUMBAI PAGE 31 OF 34 POSSIBLE TO COMPUTE CAPITAL GAINS ARISING FROM THE TRANSFER OF SUCH ASSETS. 42.2- THE ACT HAS THEREFORE AMENDED CLAUSE (A) OF SUB-SECTION (2) TO PROVIDE THAT THE COST OF ACQUISITION IN RELATION TO TRADEMARK OR BRAND NAME ASSOCIATED WITH A BUSINESS SHALL ALSO BE TAKEN TO BE THE PURCHASE PRICE IN CASE THE ASSET IS PURCHASED FROM A PREVIOUS OWNER AND NIL IN ANY OTHER CASE. 42.3- THIS AMENDMENT WILL TAKE EFFECT FROM 1ST APRIL, 2002, AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YEAR 2002-2003 AND SUBSEQUENT YEARS.' 9. FROM THE ABOVE CIRCULAR, IT WOULD BE CLEAR THAT THE AMENDMENT BRINGING SELF GENERATED INTANGIBLE ASSETS SUCH AS TRADEMARK TO CAPITAL GAINS TAX ONLY WITH EF FECT FROM ASSESSMENTS YEAR 2002-03 ONWARDS. IN THIS CASE , WE ARE CONCERNED WITH ASSESSMENT YEAR 1999-2000 AND THEREFORE, THE AMENDMENT WOULD NOT HAVE ANY EFFECT. FURTHER AS HELD BY THE SUPREME COURT IN THE MATTER OF DY. CIT V/S. CORE HEALTH CARE LTD. REPORT ED IN 298 ITR 194 THAT A PROVISION INTRODUCED WITH EFFECT FROM A PARTICULAR DATE WOULD NOT HAVE RETROSPECTIVE EFFECT UNLESS IT IS EXPRESSLY STATED TO BE SO. CONSEQUENTLY, THE SALE OF SELF GENERATED TRADE MARK S DURING THE ASSESSMENT YEAR 1999-2000 ARE NOT CHARGEABLE TO CAPITAL GAINS TAX. SO FAR AS THE SALE OF SELF GENERATED DESIGNS (I.E. NOT ACQUIRED) THE SAME IS ALSO NOT CHARGEABLE TO CAPITAL GAINS TAX NOT ONLY F OR THE REASONS APPLICABLE TO TRADE MARKS BUT FOR THE FACT THAT EVEN TILL THIS DATE, NO AMENDMENT HAS BEEN MADE TO SECTION 55(2) OF THE SAID ACT DEFINING COST OF ACQU ISITION OF DESIGN AS IN THE CASE OF TRADEMARK GOODWILL ETC. 10. IN THE CIRCUMSTANCES, THE AFORESAID RE-FRAMED QUESTION IS ANSWERED IN THE AFFIRMATIVE I.E. IN FAV OUR OF THE RESPONDENT/ASSESSEE AND AGAINST THE APPELLANT/REVENUE. 22.4 SINCE THE PROVISIONS ARE NOT APPLICABLE TO THE IMPUGNED YEAR, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDE R OF THE CIT (A) AND ACCORDINGLY THE GROUNDS ARE REJECTED. ITA NOS.6483 7252 OF 2003 AND CO NO.04 OF 2005 GLAX O SMITHKLINE MUMBAI PAGE 32 OF 34 23. GROUND NO. 18 IS GIVEN BELOW: 18. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN DIRECTING THE A.O. NOT TO ATTRIBUTE ANY EXPENSES TOWARDS EARNING OF INTEREST ON TAX FREE SECURITIES RELYING UPON THE CIT (A)S ORDE R FOR THE AY 1999-2000 IN ASSESSEES OWN CASE WHICH HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND CONTESTED BY WA Y OF FILING APPEAL TO THE ITAT. 23.1 WITH REGARD TO GROUND NO.18 AO INVOKED SECTION 14A TO DISALLOW 5% OF THE EXPENDITURE ON TAX FREE INCOMES. THE CIT (A) CONSIDERED THE SAME AS UNDER: 3.1 IT HAS BEEN STATED THAT THERE IS NO EXPENDITUR E DEBITED TO THE PROFIT & LOSS A/C FOR EARNING THE IN TEREST INCOME. AO IN FACT ON PAGE 28 HAS STATED THAT ASSES SEE HAS NOT MAINTAINED LIST OF ANY EXPENSES AND THEREFO RE, THE EXPENSES FOR EARNING THE INTEREST ARE ESTIMATED AT 5%. IT HAS ALSO BEEN STATED THAT DURING THE YEAR ONLY 3 INTEREST WARRANTS WERE RECEIVED WHICH WERE DEPOSIT5 ED INTO THE BANK ALONG WITH OTHER CHEQUES AND THEREFOR E, NO ADMINISTRATION COST HAS BEEN INCURRED IN EARNING TH E AFORESAID INTEREST. A NOTE WAS FURNISHED DURING THE ASSESSMENT PROCEEDINGS WHICH WAS ALSO PART OF THE PAPER BOOK AT PAGES 42 TO 44. 3.2 I HAVE GONE THROUGH THE RECORDS OF THE CASE AND THE DETAILS FILED AND I FIND THAT THE CONTENTION OF THE APPELLANTS IS CORRECT. CONSIDERING THE FACTS OF THE CASE I AM OF THE VIEW THAT THERE IS AN ERROR IN THE APPELL ATE ORDER WHICH NEEDS TO BE CORRECTED. I DIRECT AO NOT TO ATT RIBUTE ANY EXPENSES FORWARDS THE EARNING OF SUCH INTEREST AS ONLY 3 INTEREST WARRANTS WERE RECEIVED DURING THE Y EAR WHICH FACT HAS NOT BEEN DENIED BY AO. ACCORDINGLY T HIS GROUND OF APPEAL IS ALLOWED. 23.2 WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDERS OF THE CIT (A) AS ASSESSEE HAS OWN SURPLUS FUNDS FROM THE SALE OF FAMILY PRODUCTS UNDERTAKINGS AS A GOING CONCERN ON 1.10.19 94 AND THESE SECURITIES WERE PURCHASED OUT OF THE FUNDS AND THER E IS NOT INTEREST COST. MOREOVER SINCE ONLY THREE INTEREST WARRANTS W ERE RECEIVED, NO EXPENDITURE CAN BE ATTRIBUTED TO THE SAME. HOWEVER, THE 5% ESTIMATION ON DIVIDEND RECEIVED IS RESTORED IN GROU ND NO.1 OF THE ITA NOS.6483 7252 OF 2003 AND CO NO.04 OF 2005 GLAX O SMITHKLINE MUMBAI PAGE 33 OF 34 REVENUE WHICH WAS ON EXEMPT INCOME UNDER SECTION 10 (33). FOR THE SAME REASONS, THIS GROUND IS ALSO RESTORED TO AO FO R FRESH CONSIDERATION. 23.3 IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED. C.O. NO. 4/MUM/2005 24. ASSESSEE RAISED THE FOLLOWING GROUNDS IN THE CROSS OBJECTION: 1. THE RESPONDENTS SUBMIT THAT IN CASE AOS ACTION OF ALLOCATION OF H.O ADMINISTRATION EXPENSES WHILE WOR KING OUT THE INDIRECT COST IN THE CASE OF EXPORT OF TRAD ING GOODS FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80HHC IS UPHELD, THEN THE AMOUNT OF ` .12.86 LAKHS BEING ALLOCATION MADE FROM OTHER SERVICES WHICH HAS ALREADY BEEN INCLUDED IN THE EXPORT DIVISION EXPENDITURE, SHOULD BE EXCLUDED. 2. THE RESPONDENTS SUBMIT THAT IN CASE THE AOS ACT ION IN REDUCING 90% OF ITEMS FORMING PART OF MISCELLANEOU S INCOME TREATING THE SAME AS COVERED BY BROKERAGE, COMMISSION, INTEREST, RENT CHARGES OR ANY OTHER REC EIPT OF SIMILAR NATURE AS APPEARING IN EXPLANATION (BAA) TO SECTION 80HHC, IS UPHELD, THEN ONLY THE NET AMOUNT I.E. NET OF EXPENSES OUGHT TO BE CONSIDERED . 3. THE RESPONDENTS SUBMIT THAT IN CASE AOS ACTION OF NOT ALLOWING BENEFIT ON ADVANCE LICENCE BENEFIT OF ` .1133.55 LAKHS ACTUALLY UTILIZED IS UPHELD, THEN AO BE DIREC TED TO GRANT THE BENEFIT ON ` .835.03 LAKHS BEING ADVANCE LICENSE BENEFIT CREDITED TO THE PROFIT & LOSS A/C AND TAXED BY HIM IN THIS AY AS ENVISAGED IN THE PROVISO TO SECTION 80HHC(3). 24.1 THESE GROUNDS CORRESPOND TO GROUND NOS. 10, 12 , 13 AND 14 OF THE REVENUE APPEAL. SINCE THE ISSUES ARE RESTORE D TO THE FILE OF AO IN THE ABOVE GROUNDS, AO IS DIRECTED TO KEEP IN MIND THE ABOVE CONTENTIONS WHILE DECIDING THE ISSUES AND DECIDE AC CORDINGLY IN ACCORDANCE WITH FACTS AND LAW. THE GROUNDS ARE CONS IDERED ALLOWED FOR STATISTICAL PURPOSES. ITA NOS.6483 7252 OF 2003 AND CO NO.04 OF 2005 GLAX O SMITHKLINE MUMBAI PAGE 34 OF 34 25. TO SUM UP, APPEALS OF ASSESSEE AND REVENUE A RE PARTLY ALLOWED WHEREAS CO BY ASSESSEE IS ALLOWED FOR STATI STICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 12 TH JUNE, 2013. SD/- SD/- (AMIT SHUKLA) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 12 TH JUNE, 2013. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI