M/S. ADITYA BIRLA NUVO LTD ( FORMERLY INDIAN RAYON AND INDUSTRIES LTD), MUMBAI V. THE ADDL CIT RG 3(2), MUMBAI

ITA 660/MUM/2009

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83465 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 24-07-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 02-02-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: J D MISTRI
• Keywords: Business income; Depreciation; Retrospective amendment; Benefit of exemption; Commercial expediency; Unabsorbed depreciation; Revenue expenditure
• Section: 43B; 80HHC; 14A; 115JB; 80IB; 10B; 145; 28

Judgement Text

, INCOME TAX APPELLATE TRIBUNALMUMBAI BENCH ES I MUMBAI , ! , ' BEFORE S.SH.VIJAY PAL RAO,JUDICIAL MEMBER AND RAJEN DRA,ACCOUNTANT MEMBER ./ ITA/660,661&662/MUM 2009/ # # # # $ $ $ $ / AY.S.2003-04,2004-05&2006-06 ./ ITA/616,617& 618/MUM 2009/ # # # # $ $ $ $ / AY.S.2003-04,2004-05&2006-06 %&' ./ CO/117,118 &119/MUM 2009/ # # # # $ $ $ $ / AY.S.2003-04,2004-05&2006-06 ( '( / APPELLANT) ( %&'( / RESPONDENT) # # # #)* )* )* )* + + + + / ASSESSEE BY :SH.J.D.MISTRI , + / REVENUE BY :SH.SANTOSH KUMAR # # # # , ,, , *- *- *- *- / DATE OF HEARING : 24/07/2014 ./$ , *- / DATE OF PRONOUNCEMENT : 01/08/2014 PER BENCH # # # # : CHALLENGING THE ORDERS OF THE CIT(A)-III,MUMBAI,ASS ESSEE-COMPANY AS WELL AS THE ASSESSING OFFICER(AO)HAS FILED CROSS APPEAL FOR THE YEARS UND ER CONSIDERATION.ASSESSEE HAS ALSO FILED CROSS OBJECTIONS. GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UND ER: - ITA/660/MUM/2009-AY.2003-2004: 1.THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LEARNED ADDITIONAL COMMISSIONER OF INCOME TAX (HEREIN AFTER REFERRED T O AS AO) HAS ERRED IN MAKING DISALLOWANCE OF RS.7,42,992/- BEING RURAL DEVELOPMENT EXPENDITURE I NCURRED BY THE APPELLANT AND LEARNED COMMISSIONER OF INCOME TAX (APPEALS) (HEREIN AFTER REFERRED TO AS CIT (A)) HAS ERRED IN CONFIRMING THE ORDER OF THE LEARNED AO. THE LEARNED AO BE DIRECTED TO ALLOW THE CLAIM OF RS.7,42,992/- AND TO REDUCE THE TOTAL INCOME ACCORD INGLY. 2. WITHOUT PREJUDICE TO THE CLAIM OF APPELLANT THAT NO ADDITION OF MODV A T (CENV A T) TO BE MADE IN CLOSING STOCK IN A Y 2002-03 AS HELD BY CIT (A). HOWEVER IF IT IS HELD THAT CLOSING STOCK FOR ADITYA BIRLA NUVO LTD., A4, ADITYA BIRLA CENTRE, S.K.AHIRE MARG, WORLI, MUMBAI-400 030 PAN:AAACI1747H V/S. ACIT, RANGE 3(2), AAYAKAR BHAVAN, MUMBAI-400 020 ACIT, RANGE 3(2), AAYAKAR BHAVAN, MUMBAI-400 020 V/S. ADITYA BIRLA NUVO LTD., A4, ADITYA BIRLA CENTRE, S.K.AHIRE MARG, WORLI, MUMBAI-400 030 PAN:AAACI1747H ADITYA BIRLA NUVO L TD., A4, ADITYA BIRLA CENTRE, S.K.AHIRE MARG, WORLI, MUMBAI-400 030 V/S. ACIT, RANGE 3(2), AAYAKAR BHAVAN, MUMBAI-400 020 ITA/660-62,616-18& CO-AYS.03-04-05-06,ADITA BIRLA N OVA LTD. 2 AY 2002-03 TO BE INCREASED BY CENVAT OF RS. 5,87,21 ,072 AS HELD BY AO, THEN OPENING STOCK IN AY 2003-04 SHALL ALSO BE INCREASE BY CENVAT OF RS. 5,87,21,072. THE AO MAY BE DIRECTED ACCORDINGLY. 3. WITHOUT PREJUDICE TO THE CLAIM OF THE APPELLANT THAT THE DEDUCTION CLAIMED ULS.36(1)(III) FOR INTEREST ON LOANS TAKEN FOR NEW PROJECTS/EXPANSION/ MODERNIZATION DURING ASSESSMENT YEARS 1994- 95 TO 1999-2000 IS REVENUE EXPENDITURE, HOWEVER, IF IT IS HELD IN THOSE YEARS THAT THE SAID EXPENDITURE IS NOT REVENUE EXPENDITURE, THE APPELLA NT CLAIMS THAT THE SAID EXPENDITURE BE CAPITALIZED TO THE ACTUAL COST OF FIXED ASSETS AND DEPRECIATION BE ALLOWED ON THE SAME AND TO REDUCE THE TOTAL INCOME ACCORDINGLY. 4. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LEARNED AO HAS ERRED IN DISALLOWING RS.2,48,12,593/- U/S 43B(F) BEING PROVI SION MADE FOR LEAVE SALARY AND LEARNED CIT (A)) HAS ERRED IN CONFIRMING THE ORDER OF THE LEARN ED AO. THE LEARNED AO BE DIRECTED TO ALLOW THE DEDUCTION OF RS.2,48,12,593/- AND TO REDUCE THE TOT AL INCOME ACCORDINGLY. 5. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LEARNED AO HAS ERRED IN DISALLOWING DEPRECIATION OF RS. 2,50,40,039 CLAIMED BY THE APPELLANT ON GOODWILL OF RS.20.35 CRORES ACQUIRED ON ACQUISITION OF 'MADURA GARMENTS' DIVISION FROM MADURA COASTS LTD. ON A GOING CONCERN BASIS AND LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF THE LEARNED AO. THE LEARNED AO BE DIRECTED TO ALLOW THE DEPRECIATION ON GOODWILL AND TO REDUCE THE TOTAL INCOME ACCORDINGLY. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS ES AND IN LAW, THE LEARNED AO HAS ERRED IN REDUCING THE EXEMPTION U/S 10B BY RS.1,42,544/- ON ACCOUNT OF INTEREST, ALLOCATION OF HEAD OFFICE EXPENSES AND EXPENSES OF ANOTHER DIVISION NAMELY, G LOBAL EXPORT & MARKETING TO 100% EXPORT ORIENTED UNIT AND THE CIT(A) HAS ERRED IN CONFIRMIN G THE ABOVE DISALLOWANCE. THE LEARNED AO BE DIRECTED TO INCREASE THE EXEMPTION U/S 10B AND REDU CE THE TOTAL INCOME-AS PER NORMAL PROVISION OF THE ACT AND REDUCE THE BOOK PROFIT U/S 115JB ACC ORDINGLY. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS ES AND IN LAW, THE LEARNED CIT(A) HAS ALSO ERRED IN MAKING ENHANCEMENT AND WITHDRAW THE EXEMPTION U/ S 10B ON THE GROUND THAT UNDERTAKING IS NOT APPROVED BY THE BOARD PARTICULARLY APPOINTED U/ S 14 OF THE INDUSTRIAL (DEVELOPMENT AND REGULATION) ACT. THE LEARNED AO BE DIRECTED TO ALLO W THE EXEMPTION U/S 10B AND REDUCE THE TOTAL INCOME AS PER NORMAL PROVISION OF THE ACT AND REDUC E THE BOOK PROFIT U/S 115JB ACCORDINGLY. 8. WITHOUT PREJUDICE TO THE CLAIM OF THE APPELLANT THAT THE EXEMPTION CLAIMED U/S 10B IS ALLOWABLE TO THE APPELLANT, ON THE FACTS AND IN THE CIRCUMSTA NCES OF THE CASES AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN NOT ALLOWING THE EXEMPTION U/S 10A. TH E LEARNED AO BE DIRECTED TO ALLOW THE EXEMPTION EITHER U/S 10A OR U/S 10B AND REDUCE THE TOTAL INCOME AS PER NORMAL PROVISION OF THE ACT AND REDUCE THE BOOK PROFIT U/S 1151B ACCORDINGL Y. 9. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED AO HAS ERRED IN REDUCING THE CLAIM OF DEDUCTION U/S 80IA & 80LB BY RS.36,05,953 ON ACCOUNT OF ALLOCATION OF HEAD OFFICE EXPENSES TO UNDERTAKINGS ELIGIBLE TO CL AIM DEDUCTION U/S 80IA & 80IB.THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF THE LEA RNED AO. THE LEARNED AO BE DIRECTED TO DELETE THE DISALLOWANCE OF RS.36,05,953, INCREASE THE DEDU CTION U/S 80LA & 80LB BY RS.36,05,953 AND TO REDUCE THE TOTAL INCOME COMPUTED UNDER NORMAL PROVI SIONS OF THE ACT. 10. A) ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LEARNED AO HAS ERRED IN ADJUSTING UNABSORBED DEPRECIATION OF RS.28,17,40,86 7 FROM THE CURRENT YEAR'S INCOME FROM BUSINESS OR PROFESSION FOR THE PURPOSE OF CALCULATI NG DEDUCTION U/S 80HHC AND THEREBY REDUCED DEDUCTION U/S 80HHC CLAIMED BY THE APPELLANT. THE L EARNED CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF THE LEARNED AO. THE LEARNED AO BE DIRECTED TO ALLOW DEDUCTION U/S 80HHC AS CLAIMED BY THE APPELLANT AND REDUCE THE TOTAL INCOME COMPUT ED UNDER THE NORMAL PROVISIONS OF INCOME TAX ACT AS WELL AS U/S 1151B ACCORDINGLY. B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED AO HAS ERRED IN HOLDING THAT EXPORT INCENTIVES IN THE FORM OF SALE PROCEEDS OF DEPB OF RS.5,81 ,80,230 ARE NOT ELIGIBLE FOR DEDUCTION U/S 80HHC OF THE ACT. FURTHE R, THE LEARNED AO HAS ERRED IN REJECTING THE CLAIM OF THE APPELLANT THAT ONLY 90% OF PROFITS ON TRANSFER OF DEPB I.E. RS.79,46,399 BE REDUCED FROM EXPORT INCENTIVES FOR THE PURPOSE OF CALCULATI NG DEDUCTION U/S 80HHC INSTEAD OF ENTIRE SALE PROCEEDS OF RS.5,81,80,230. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF THE LEARNED AO. THE LEARNED AO BE DIRECTED TO ALLOW DEDUCTION O F RS.5,81,80,230 U/S 80HHC AS CLAIMED BY ITA/660-62,616-18& CO-AYS.03-04-05-06,ADITA BIRLA N OVA LTD. 3 THE APPELLANT AND REDUCE THE TOTAL INCOME UNDER NOR MAL PROVISIONS OF INCOME TAX ACT AS WELL AS U/S 1151B ACCORDINGLY. C) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED AO HAS ERRED IN REDUCING THE DEDUCTION U/S 10B BY RS.10,76,525 IN R ESPECT OF ITS GLOBAL EXPORTS DIVISION, CALCUTTA FROM BUSINESS INCOME FOR THE PURPOSE OF CALCULATING THE DEDUCTION ALLOWABLE U/S 80HHC. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF THE LEARNED AO. THE LEARNED AO BE DIRECTED TO ALLOW DEDUCTION U/S 80HHC ON PROFITS FROM BUSINE SS OR PROFESSION BEFORE ALLOWING DEDUCTION OF RS.10,76,525 CLAIMED BY THE APPELLANT AND REDUCE TH E TOTAL INCOME UNDER THE NORMAL PROVISIONS OF INCOME TAX ACT AS WELL AS U/S 115JB ACCORDINGLY. 11. WITHOUT PREJUDICE TO THE CLAIM OF -APPELLANT CO MPANY THAT RS.19,64,93,193 INCURRED ON MARKETING AND TECHNICAL KNOW-HOW EXPENSES ON ACQUIS ITION OF MADURA GARMENTS DURING THE AY 2001-02 IS ALLOWABLE FULLY IN A Y 2000-01 ITSELF. H OWEVER IF IT IS HELD IN A Y 2000-01 THAT THE SAME EXPENDITURE IS ALLOWABLE IN FIVE INSTALLMENTS AS HE LD BY AO IN THE ASSESSMENT ORDER. THE LEARNED AO BE DIRECTED TO ALLOW THE DEDUCTION OF RS.3,92,98 ,638/- AND TO REDUCE THE TOTAL INCOME ACCORDINGLY. 12. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED AO HAS ERRED IN A DING BACK THE PROVISION FOR DEFERRED TAX OF RS.25,2 2,00,000 TO THE BOOK PROFITS COMPUTED 115JB & LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF THE LEARNED AO THE LEARNED AO BE DIRECTED TO DELETE THE ADDITION OF PROVISION FOR DEFERRED TAX O F RS.25,22,00,000 AND REDUCE THE BOOK PROFIT COMPUTED U/S 115JB ACCORDINGLY. 13. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SES AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN NOT ENTERTAINING THE ADDITIONAL GROUND TO DIRECT TH E AO TO ALLOW CLAIM U/S 80HHC OF RS.31,71,99,694/- ON ADJUSTED BOOK PROFIT CALCULATE D AS PER PROVISIONS OF SECTION 115JB THE LEARNED CIT(A) BE DIRECTED TO ACCEPT THE GROUND OF APPEAL AND THE LEARNED AO BE DIRECTED TO ALLOW THE DEDUCTION U/S 80HHC OFRS.31,71,99,694/-. 14. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SES AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN NOT ENTERTAINING THE ADDITIONAL GROUND TO DIRECT TH E AO TO EXCLUDE FROM TAXABLE PROFIT, THE SALES TAX EXEMPTION BENEFIT OF RS.5,17,28,688/-, THE LEARNED CIT(A) BE DIRECTED TO ACCEPT THE GROUND OF APPEAL AND THE LEARNED AO BE DIRECTED TO EXCLUDE TH E SALES TAX EXEMPTION AMOUNT OF RS.5,17,28,688/- FROM THE TAXABLE INCOME. 15. WITHOUT PREJUDICE TO THE CLAIM OF THE APPELLANT COMPANY THAT NO TDS WAS APPLICABLE U/S 195 ON FEES PAID TO LEAD MANAGERS TO THE ISSUES DURING AY 1994-95 AS ALSO HELD BY HON'BLE ITAT AND IF IN DEPARTMENT APPEAL AT HIGHER LEVEL, IT IS HELD TH AT WITHHOLDING TAX ON FEE PAID TO LEAD MANAGER IS REQUIRED TO BE DEDUCTED - THEN THE DEDUCTION U/S 35 D SHOULD BE ALLOWED TO THE APPELLANT. 16. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED AO HAS ERRED IN INITIATING PENALTY PROCEEDINGS U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 AND CIT (A) DISMISSED THE GROUND AS PREMATURE IN NATURE. THE LEARNED AO BE DI RECTED TO DROP THE PENALTY PROCEEDINGS INITIATED U/S 271 (1)(C). 17. THE APPELLANT RESERVES THE RIGHT TO ADD, ALTER, AMEND AND DELETE THE ABOVE GROUND/S AT OR BEFORE TIME OF HEARING. ITA/661/MUM/2009-AY.2004-2005: 1.WITHOUT PREJUDICE TO THE CLAIM OF APPELLANT THAT NO ADDITION OF MODV AT (CENV AT) TO BE MADE IN CLOSING STOCK IN A Y 2003-04 AS HELD BY CIT(A). HOWEVER IF IT IS HELD THAT CLOSING STOCK FOR A Y 2003-04 TO BE INCREASED BY CENV AT OF RS.5,04,24,06 6 AS HELD BY AO, THEN OPENING STOCK IN A Y 2004-05 SHALL ALSO BE INCREASE BY CENVAT OF RS.5,04 ,24,066. THE AO MAY BE DIRECTED ACCORDINGLY. 2. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LEARNED AO HAS ERRED IN DISALLOWING RS.1,76,74,126/- U/S 43B(F) BEING PROVI SION MADE FOR LEAVE SALARY AND LEARNED CIT (A)) HAS ERRED IN CONFIRMING THE ORDER OF THE LEARN ED AO. THE LEARNED AO BE DIRECTED TO ALLOW THE DEDUCTION OF RS.1,76,74,126/- AND TO REDUCE THE TOT AL INCOME ACCORDINGLY. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS ES AND IN LAW, THE LEARNED AO HAS ERRED IN REDUCING THE EXEMPTION U/S 10B BY RS.1,10,488/- ON ACCOUNT OF ALLOCATION OF HEAD OFFICE EXPENSES TO 100% EXPORT ORIENTED UNIT AND THE CIT(A) HAS ERR ED IN CONFIRMING THE ABOVE DISALLOWANCE. THE LEARNED AO BE DIRECTED TO INCREASE THE EXEMPTION U/ S 10B AND REDUCE THE TOTAL INCOME AND REDUCE THE BOOK PROFIT U/S 115JB ACCORDINGLY. ITA/660-62,616-18& CO-AYS.03-04-05-06,ADITA BIRLA N OVA LTD. 4 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS ES AND IN LAW, THE LEARNED CIT(A) HAS ALSO ERRED IN MAKING ENHANCEMENT AND WITHDRAW THE EXEMPTION U/ S 10B ON THE GROUND THAT UNDERTAKING IS NOT APPROVED BY THE BOARD PARTICULARLY APPOINTED U/S 14 OF THE INDUSTRIAL (DEVELOPMENT AND REGULATION) ACT. THE LEARNED AO BE DIRECTED TO ALLO W THE EXEMPTION U/S 10B AND REDUCE THE TOTAL INCOME AND BOOK PROFIT U/S 115JB ACCORDINGLY. 5. WITHOUT PREJUDICE TO THE CLAIM OF THE APPELLANT THAT THE EXEMPTION CLAIMED U/S 10B IS ALLOWABLE TO THE APPELLANT, ON THE FACTS AND IN THE CIRCUMSTA NCES OF THE CASES AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN NOT ALLOWING THE EXEMPTION U/S 10A. TH E LEARNED AO BE DIRECTED TO ALLOW THE EXEMPTION EITHER U/S 10A OR U/S 10B AND REDUCE THE TOTAL INCOME AND BOOK PROFIT U/S 115JB ACCORDINGLY. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED AO HAS ERRED IN REDUCING THE CLAIM OF DEDUCTION U/S 80IA & 80IB BY RS.38,57,757/- ON ACCOUNT OF ALLOCATION OF HEAD OFFICE EXPENSES TO UNDERTAKINGS ELIGIBLE TO CL AIM DEDUCTION U/S 80IA & 80IB.THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF THE LEA RNED AO. THE LEARNED BE DIRECTED TO DELETE THE DISALLOWANCE OF RS. 38,57,757/- INCREASE THE DEDUCT ION U/S 80IA & 80IB BY RS.38,57,757/- AND TO REDUCE THE TOTAL INCOME COMPUTED UNDER NORMAL PROVI SIONS OF THE ACT. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, FOR THE PURPOSE OF CALCULATING DEDUCTION U/S 80HHC OF THE ACT THE LEARNED AO HAS E RRED IN REDUCING ENTIRE SALE PROCEEDS OF DEPB LICENSES I.E RS.40,91 ,641, REJECTING THE CLAI M OF THE APPELLANT THAT ONLY 90% OF PROFIT ON TRANSFER OF DEPB BE REDUCED FROM EXPORT INCENTIVES. THE LEARNED AO BE DIRECTED TO ALLOW DEDUCTION U/S 80HHC WITHOUT REDUCING SALE PROCEEDS OF DEPB (AS APPELLANT HAS SUFFERED LOSS OF RS. 1358 ON SALE OF DEPB) AND REDUCE THE TOTAL INCO ME ACCORDINGLY. 8. WITHOUT PREJUDICE TO THE CLAIM OF THE APPELLANT THAT THE DEDUCTION CLAIMED U/S.36(1 )(III) OR INTEREST ON LOANS TAKEN FOR NEW PROJECTS/ EXPANSION /MODERNIZATION DURING ASSESSMENT YEARS 1995- 96 TO 1999-2000 IS REVENUE EXPENDITURE, HOWEVER, IF IT IS HELD IN THOSE YEARS THAT THE SAID EXPENDITURE IS NOT REVENUE EXPENDITURE, THE APPELLA NT CLAIMS THAT THE SAID EXPENDITURE BE CAPITALIZED TO THE ACTUAL COST OF FIXED ASSETS AND DEPRECIATION BE ALLOWED ON THE SAME AND TO REDUCE THE TOTAL INCOME ACCORDINGLY. 9. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LEARNED AO HAS ERRED IN DISALLOWING DEPRECIATION OF RS.1,87,80,029 CLAIMED BY THE APPELLANT ON GOODWILL OF RS.20.35 CRORES ACQUIRED ON ACQUISITION OF 'MADURA GARMENTS' DIVISION FROM MADURA COASTS LTD. ON A GOING CONCERN BASIS AND LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF THE LEARNED AO. THE LEARNED AO BE DIRECTED TO ALLOW THE DEPRECIATION ON GOODWILL AND TO REDUCE THE TOTAL INCOME ACCORDINGLY. 10. THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED AO ERRED IN REDUCING THE MAT CREDIT AVAILABLE TO RS 6,20,17,944 AGAINST THE MAT CREDIT AVAILABLE TO THE APPELLANT OF RS 14,76,34,018 AND THE LEARNED CIT(A) ERRED IN NOT CONSIDERING THE GROUND OF APPEAL. THE LEARNED AO BE DIRECTED TO ALLOW CORRECT AVAILABLE MAT CREDIT AND INCREASE THE REFUND AMOUNT ACCORDINGLY 11. WITHOUT PREJUDICE TO THE CLAIM OF THE APPELLANT COMPANY THAT NO TDS WAS APPLICABLE U/S195 ON FEES PAID TO LEAD MANAGERS TO THE ISSUES DURING A Y 1994-95 AS ALSO HELD BY HON'BLE IT AT AND IF IN DEPARTMENT APPEAL AT HIGHER LEVEL, IT IS HELD TH AT WITHHOLDING TAX ON FEE PAID TO LEAD MANAGER IS REQUIRED TO BE DEDUCTED THEN THE DEDUCTION U/S 35D SHOULD BE ALLOWED TO THE APPELLANT. 12.WITHOUT PREJUDICE TO THE CLAIM OF APPELLANT COMP ANY THAT RS. 19,64,93,193 INCURRED ON MARKETING AND TECHNICAL KNOW-HOW EXPENSES ON ACQUIS ITION OF MADURA GARMENTS DURING THE A Y 2000-01 IS ALLOWABLE FULLY IN A Y 2000-01 ITSELF. H OWEVER IF IT IS HELD IN A Y 2000- 01 THAT THE SAME EXPENDITURE IS ALLOWABLE IN FIVE INSTALLMENTS AS HE LD BY AO IN THE ASSESSMENT ORDER. THE LEARNED AO BE DIRECTED TO ALLOW THE DEDUCTION OF RS.3,92,98 ,638/- AND TO REDUCE THE TOTAL INCOME ACCORDINGLY. 13. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED AO HAS ERRED IN INITIATING PENALTY PROCEEDINGS U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 AND CIT (A) DISMISSED THE GROUND AS PREMATURE IN NATURE. THE LEARNED AO BE DI RECTED TO DROP THE PENALTY PROCEEDINGS INITIATED U/S 271(1)(C). 14. THE APPELLANT RESERVES THE RIGHT TO ADD, ALTER, AMEND AND DELETE THE ABOVE GROUND/S AT OUR BEFORE THE TIME OF HEARING. ITA/660-62,616-18& CO-AYS.03-04-05-06,ADITA BIRLA N OVA LTD. 5 ITA/662/MUM/2009-AY.2005-2006: 1.WITHOUT PREJUDICE TO THE CLAIM OF APPELLANT THAT NO ADDITION OF MODV A T (CENV A T) TO BE MADE IN CLOSING STOCK IN A Y 2004-05 AS HELD BY CIT (A). HOWEVER IF IT IS HELD THAT CLOSING STOCK FOR AY 2004-05 TO BE INCREASED BY CENVAT OF RS. 7,15,73 ,598 AS HELD BY AO, THEN OPENING STOCK IN A Y 2005-06 SHALL ALSO BE INCREASE BY CENV A T OF RS. 7,15,73,598. THE AO MAY BE DIRECTED ACCORDINGLY. 2. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LEARNED AO HAS ERRED IN DISALLOWING RS.2,16,16,918/- U/S 43B(F) BEING PROVI SION MADE FOR LEAVE SALARY AND LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF THE LEARNED AO . THE LEARNED AO BE DIRECTED TO ALLOW THE DEDUCTION OF RS.2,16,16,9181- AND TO REDUCE THE TOT AL INCOME ACCORDINGLY. 3. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LEARNED AO HAS ERRED IN DISALLOWING DEPRECIATION OF RS.1,40,85,022 CLAIMED BY THE APPELLANT ON GOODWILL OF RS.20.35 CRORES ACQUIRED ON ACQUISITION OF 'MADURA GARMENTS' DIVISION FROM MADURA COASTS LTD. ON A GOING CONCERN BASIS AND LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF THE LEARNED AO. THE LEARNED AO BE DIRECTED TO ALLOW THE DEPRECIATION ON GOODWILL AND TO REDUCE THE TOTAL INCOME ACCORDINGLY 4.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO HAS ERRED IN REDUCING THE CLAIM OF DEDUCTION U/S 80IA & 80IB BY RS.36,23,838/- ON ACCOUNT OF ALLOCATION OF HEAD OFFICE EXPENSES TO UNDERTAKINGS ELIGIBLE TO CL AIM DEDUCTION U/S 80IA & 80IB.THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF THE LEA RNED AO. THE LEARNED BE DIRECTED TO DELETE THE DISALLOWANCE OF RS. 36,23,838/-, INCREASE THE DEDUC TION U/S 80IA & 80IB BY RS. 36,23,838/- AND TO REDUCE THE TOTAL INCOME COMPUTED UNDER NORMAL PROVI SIONS OF THE ACT. 5.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO HAS ERRED IN DISALLOWING THE CLAIM OF DEDUCTION U/S 80GGB/37 OF RS.2,40,00,0001- ON ACCOUNT OF CONTRIBUTION TO GENERAL ELECTROAL TRUST. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF THE LEARNED AO .THE LEARNED AO BE DIRECTED TO ALLOW THE CLAIM F OR DEDUCTION OF RS. 2,40,00,0001- AND INCREASE THE DEDUCTION U/S 80GGB/37 BY RS. 2,40,00, 0001- AND TO REDUCE THE TOTAL INCOME ACCORDINGLY. 6.WITHOUT PREJUDICE TO THE CLAIM OF THE APPELLANT T HAT THE DEDUCTION CLAIMED ULS.36(1)(III) OR INTEREST ON LOANS TAKEN FOR NEW PROJECTS/EXPANSION /MODERNIZATION DURING ASSESSMENT YEARS 1995- 96 TO 1999-2000 IS REVENUE EXPENDITURE, HOWEVER, IF IT IS HELD IN THOSE YEARS THAT THE SAID EXPENDITURE IS NOT REVENUE EXPENDITURE, THE APPELLA NT CLAIMS THAT THE SAID EXPENDITURE BE CAPITALIZED TO THE ACTUAL COST OF FIXED ASSETS AND DEPRECIATION BE ALLOWED ON THE SAME AND TO REDUCE THE TOTAL INCOME ACCORDINGLY. 7.WITHOUT PREJUDICE TO THE CLAIM OF THE APPELLANT C OMPANY THAT NO TDS WAS APPLICABLE U/S 195 ON FEES PAID TO LEAD MANAGERS TO THE ISSUES DURING A Y 1994-95 AS ALSO HELD Y HON'BLE ITAT AND IF IN DEPARTMENT APPEAL AT HIGHER LEVEL, IT IS HELD THAT WITHHOLDING TAX ON FEE PAID TO LEAD MANAGER IS REQUIRED TO BE DEDUCTED THEN THE DEDUCTION U/S 35D SHOULD BE ALLOWED TO THE APPELLANT. 8.WITHOUT PREJUDICE TO THE CLAIM OF APPELLANT COMPA NY THAT RS. 19,64,93,19.) IN ERRED ON MARKETING AND TECHNICAL KNOW-HOW EXPENSES ON ACQUISITION OF M ADURA GARMENTS DURING THE AY 2000-01 IS ALLOWABLE FULLY IN A Y 2000-01 ITSELF. HOWEVER IF I T IS HELD IN A Y 2000-01 THAT THE SAME EXPENDITURE IS ALLOWABLE IN FIVE INSTALLMENTS AS HE LD BY AO IN THE ASSESSMENT ORDER. THE LEARNED AO BE DIRECTED TO ALLOW THE DEDUCTION OF RS.2,95,27 ,719/ AND TO REDUCE THE TOTAL INCOME ACCORDINGLY. 9.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO HAS ERRED IN INITIATING PENALTY PROCEEDINGS U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 AND CIT (A) DISMISSED THE GROUND AS PREMATURE IN NATURE. THE LEARNED AO BE DI RECTED TO DROP THE PENALTY PROCEEDINGS INITIATED U/S 271(1)(C) 10.THE APPELLANT RESERVES THE RIGHT TO ADD, ALTER, AMEND AND DELETE THE ABOVE GROUND/S AT OR BEFORE THE TIME OF HEARING. AO HAS FILED FOLLOWING GROUNDS OF APPEAL: ITA/616/MUM/2009-AY.2003-2004: 1. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A) ERRED IN DELETING ADDITION OF RS. 2,80,263/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF EXPENSES INCURRED IN LIVE STOCK ITA/660-62,616-18& CO-AYS.03-04-05-06,ADITA BIRLA N OVA LTD. 6 WITHOUT APPRECIATING THAT THE ISSUE OF BUSINESS EXP EDIENCY IS NOT PROVED BEFORE THE ASSESSING OFFICER.' 2. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A) ERRED IN DELETING THE AMOUNT OF RS. 5,04,24,066/- BEING THE MODVAT CREDIT AVAILABLE TO THE ASSESSEE WITHOUT APPRECIATING THE PROVISIONS OF SECTION 145A OF THE I.T.ACT.' 3. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A) ERRED IN DELETING AMOUNT OF RS 5,43,4601- RELATING TO DEDUCTION U/S 80M OF T HE I. T. ACT, WITHOUT APPRECIATING THAT THE DIVIDEND INCOME WAS CLAIMED EXEMPT BY THE APPELLANT .' 4. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A) ERRED IN HOLDING THAT THE DEDUCTION U/S 80HHC CANNOT BE REDUCED IN ACCORDANCE WITH PROVISIONS OF SECTION 80HHC (18) FOR THE PURPOSE OF COMPUTING PROFIT U/S 115JB.' 5. 'THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED.' 6. 'THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER AN Y GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY.' ITA/617/MUM/2009-AY.2004-2005: 1.'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD CIT(A) ERRED IN DELETING THE AMOUNT OF RS. 7,15,73,958/- BEING THE MODVAT CREDIT AVAILABLE TO THE ASSESSEE WITHOUT APPRECIATING THE PROVISIONS OF SECTION 145A OF THE I.T.ACT.' 2. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A) ERRED IN DELETING AMOUNT OF RS. 20,03,282/- BEING PAYMENT MADE TO IND. RAYON SCHOOL VERAVAL WITHOUT APPRECIATING THAT THE SAME IS NOT COVERED U/S 40A(9) OF THE I. T. ACT '. 3.'THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED.' 4.'THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY.' ITA/618/MUM/2009-AY.2005-2006: 1.'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD CIT(A) ERRED IN DELETING THE AMOUNT OF RS. 7,03,57,036/- BEING THE MODVAT CREDIT AVAILABLE TO THE ASSESSEE WITHOUT APPRECIATING THE PROVISIONS OF SECTION 145A OF THE I. T.ACT.' 2. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A) ERRED IN DELETING AMOUNT OF RS.24,19,517/- BEING PAYMENT MADE TO IND. RAYON SCHOOL VERAVAL WITHOUT APPRECIATING THAT THE SAME IS NOT COVERED U/S 40A(9) OF THE I.T.ACT ' 3. 'ON FACTS AND IN THE CIRCUMSTANCE OF THE CASE AN D IN LAW THE LD CIT(A) ERRED IN DELETING AMOUNT OF RS.1,69,6201- BEING ADDITION MADE BY THE A.O. U/ S 14A OF THE I.T.ACT WITHOUT APPLYING THE DECISION IN THE CASE OF M/S.DAGA CAPITAL MANAGEMENT P LTD. (ITA NO.8057/MUM/2003).' 4. 'THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED.' 5. 'THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER AN Y GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY.' FOLLOWING ARE THE GROUNDS FOR CROSS OBJECTIONS. CO/117/MUM/2009-AY.2003-2004: 1.THAT,ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED ASSISTANT COMMISSIONER OF INCOME TAX (HEREINAFTER REFERRED TO AS 'AO') HAS ERRED IN NOT INCREASING OPENING STOCK BY AN AMOUNT OF RS. 5,87,21,092 ON ACCOUNT OF ADDITION MA DE TO CLOSING STOCK ON ACCOUNT OF MODVAT CREDIT DURING THE PREVIOUS YEAR RELEVANT TO ASSESSM ENT YEAR 2002-03 AND THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CENTRAL-II HAS ERRED IN CONFIRMING THE ACTION OF THE LEARNED AO. THE LEARNED AO BE DIRECTED TO ALLOW THE CLAIM OF DEDUCTION OF MODVA T CREDIT OF RS 5,87,21,092 AND TO REDUCE THE TOTAL INCOME OF THE A PPELLANT ACCORDINGLY. 2. THE APPELLANT RESERVES THE RIGHT TO ADD, ALTER, AMEND AND DELETE THE ABOVE GROUND/S AT OR BEFORE THE TIME OF HEARING. CO/118/MUM/2009-AY.2005-2006: 1.THAT,ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED ASSISTANT COMMISSIONER OF INCOME TAX (HEREINAFTER REFERRED TO AS 'AO' HAS ERRED IN NOT INCREASING OPENING STOCK BY AN ITA/660-62,616-18& CO-AYS.03-04-05-06,ADITA BIRLA N OVA LTD. 7 AMOUNT OF RS. 7,15,73,958 ON ACCOUNT OF ADDITION MA DE TO CLOSING STOCK ON ACCOUNT OF MODVAT CREDIT DURING THE PREVIOUS YEAR RELEVANT TO ASSESSM ENT YEAR 2004-05 AND THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN C ONFIRMING THE ACTION OF THE LEARNED 'AO'. THE LEARNED AO BE DIRECTED TO ALLOW THE CLAIM OF DE DUCTION OF MOO VAT CREDIT OF RS. 7,15,73,958 AND TO REDUCE THE TOTAL INCOME OF THE APPELLANT ACC ORDINGLY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A)HAS ERRED IN:- A. NOT ALLOWING THE CLAIM OF THE APPELLANT THAT ONL Y DIRECT EXPENSES SHOULD BE DISALLOWED U/S 14A. B. APPLYING THE MECHANICALLY TO THE FORMULA PRESCRI BED IN RULE 8D IN RESPECT OF EXPENSES. C. APPLYING THE RULE 80 R.W.S. 14A RETROSPECTIVELY. 3. THE APPELLANT RESERVES THE RIGHT TO ADD, ALTER, AMEND AND DELETE THE ABOVE GROUND/S AT OR BEFORE THE TIME OF HEARING CO/119/MUM/2009-AY.2004-2005: 1.THAT,ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED ASSISTANT COMMISSIONER OF INCOME TAX (HEREINAFTER REFERRED TO AS 'AO') HAS ERRED IN NOT INCREASING OPENING STOCK BY AN AMOUNT OF RS. 5,04,24,066 ON ACCOUNT OF ADDITION MA DE TO CLOSING STOCK ON ACCOUNT OF MODVAT CREDIT DURING THE PREVIOUS YEAR RELEVANT TO ASSESSM ENT YEAR 2003-04 AND THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CENTRAL-II HAS ERRED IN CONFIRMING THE ACTION OF THE LEARNED AO. THE LEARNED AO BE DIRECTED TO ALLOW THE CLAIM OF DEDUCTION OF MODVA T CREDIT OF RS 5,04,24,066 AND TO REDUCE THE TOTAL INCOME OF THE A PPELLANT ACCORDINGLY. 2.THE APPELLANT RESERVES THE RIGHT TO ADD, ALTER, A MEND AND DELETE THE ABOVE GROUND/S AT OR BEFORE THE TIME OF HEARING. DURING THE COURSE OF HEARING BEFORE US,AUTHORISED R EPRESENTATIVE (AR) INFORMED THAT GROUNDS OF APPEAL NO.1,3,8,11,15,GROUNDS NO.1,5,8,11,12 AND GR OUNDS NO.1,6,7,8 FOR THE AY.S.2003-04 TO2005-06 RESPECTIVELY,WERE INFRUCTUOUS.HENCE,WE DI SMISS THE SAME.HE FURTHER INFORMED THAT GROUND NO.16,13, 9 FOR THE SAME AY.S.WERE PREMATURE IN NATURE,AS SAME DEALT WITH IMPOSITION OF PENALTY U/S..271(1)(C)OF THE ACT.WE DISMISS THE ABO VE GROUNDS FOR THE RESPECTIVE YEARS.HE DID NOT PRESS GROUND NO.5 FOR THE AY.2005-2006.SO,THE SAID GROUND IS REJECTED AS NOT PRESSED. 2. THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING OF RAYON,CARBON BLACK,INSULATORS, READYMADE GARMENTS ETC.DETAILS OF DATES OF FILING OF RETURNS, INCOMES RETURNED,DATES OF ASSESSMENT,ASSESSED INCOMES, DATES OF ORDERS OF THE CIT(A)CAN BE SUMMAR ISED AS UNDER : AY. RETURN FILED ON RETURNED INCOME ASSESSMENT DATE ASSESSED INCOME DT.OF CIT(A) ORDER 2003-04 01.12.2003 35,93,01,389/- 31.01.2006 9,11,83,630/- 26.11.2008 2004-05 28.10.2004 104,84,05,543/- 24.11.2006 34,42,94,490/- 26.11.200 8 2005-06 24.10.2005 110,22,79,994/- 05.03.2007 1,20,04,69,950/- 26.11.2008 ITA/660-62,616-18& CO-AYS.03-04-05-06,ADITA BIRLA N OVA LTD. 8 AS MOST OF THE GROUNDS OF APPEAL ARE COMMON OR ALMO ST IDENTICAL, SO FOR THE SAKE CONVENIENCE, WE ARE ADJUDICATING ALL THE APPEALS BY A SINGLE COMMON ORDER.WE WOULD LIKE PREPARE A CHART OF COMMON GOUNDS. ISSUE GROUND OF AP PEAL (G.) NO. & AY. DEPRECIATION OF GOODWILL OF ONGOING CONCERN G.5-2003-04,G.9-2004-05,G.3-2005-06 PROVISIONS MADE FOR THE LEAVE SALARY U/S.. 43F G.4- 2003-04,G.2-2004-05,G.2-2005-06 DEDUCTION U/S. 80IA AND 80IB G. 9 - 2003 - 04,G. 6 - 2004 - 05,G. 4 - 2005 - 06 DISALLOWANCE OF ELIGIBLE CLAIM U/S.10IA/10IB G.6-2003-04,G.3-2004-05 ENHANCEMENT/ WITHDRAWAL OF 10B EXEMPTION G.8-2003-0 4,G.4-2004-05 ELIGIBILITY OF DEPB - 80HHC G. 10(B) - 2003 - 04,G. 7 - 2004 - 05 COMMON GROUNDS RAISED BY THE AO DELETION OF UNUTILISED MODVAT CREDIT G.2-2003-04,G .1-2004-05,G.1-2005-06 RURAL DEVELOPMENT G.2 - 2004 - 05,G.2 - 2005 - 06 FIRST WE WILL TAKE THE ISSUES WHICH ARE COMMON MORE THAN ONE YEARS. REMAINING GROUNDS WOULD BE DEALT YEAR-WISE AFTER DECIDING THE COMMON GROUND S. 3. FIRST COMMON GROUND OF APPEAL IS ABOUT DISALLOWANCE OF DEPRECIATION OF GOODWILL OF RS. 20.35 CRORES ACQUIRED ON ACQUISITION OF MADURA GARMENTS O NGOING CONCERN BASIS AND THE AMOUNT INVOLVED IS RS. 3.33 CRORES,RS.2.50 CRORES AND RS.1 .87 CRORES FOR THE AY.S.2003-04, 2004-05 AND 2005-06 RESPECTIVELY. BEFORE US,AR AND THE DEPARTMENTAL REPRESENTATIVE (D R) AGREED THAT IDENTICAL ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBU NAL DELIVERED FOR THE AY 2002-03 (ITA / 615/ MUM/2009,DATED 30.06.2014). 3.1. WE FIND THAT SUM OF RS. 3.33 CRORES,RS.2.50 CRORES AND RS.1.87 CRORES WAS FOUND TO BE INCURRED BY THE ASSESSEE FOR THE AY.S.2003-04.2004- 05 AND 2005-06 RESPECTIVELY ON ACCOUNT OF MARKETING AND KNOWHOW INCURRED ON ACQUISITION OF MADURA GARMENTS DIVISION.WE FIND THAT ITA/660-62,616-18& CO-AYS.03-04-05-06,ADITA BIRLA N OVA LTD. 9 THE IDENTICAL ISSUE WAS DELIBERATED UPON BY THE TRI BUNAL WHILE DECIDING THE APPEAL FOR EARLIER AY. WE ARE REDPRODUCING THE RELEVANT PARAGRAPH OF THAT ORDER AND SAME READS AS UNDER: 18.GROUND NO. 8 READS AS UNDER: THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO HAS ERRED IN DISALLOWING DEPRECIATION OF RS. 3,33,86,719 CLAIMED BY THE APPELLANT ON GOODWILL OF RS.20.35 CRORES ACQUIRED ON ACQUISITION OF MADURA GARM ENTS DIVISION FROM MADURA COASTS LTD. ON A GOING CONCERN BASIS AND LEARNED CIT (A) HAS ERRE D IN CONFIRMING THE ORDER OF THE LEARNED AO. THE LEARNED AO BE DIRECTED TO ALLOW THE DEPRECIATI ON ON GOODWILL AND TO REDUCE THE TOTAL INCOME ACCORDINGLY. 18.1.WE FIND THAT THIS ISSUE HAS ALREADY BEEN ALLOW ED IN ASSESSEES OWN CASE IN ITA NO.5421/ M/05 FOR A.Y.2000-01.RESPECTFULLY FOLLOWING THE DECISION OF THE CO ORDINATE BENCH, WE DIRECT THE AO TO ALLOW THE CLAIM OF DEPRECIATI ON ON GOODWILL. GROUND NO. 8 IS ACCORDINGLY ALLOWED. FOLLOWING THE ABOVE ORDER OF THE TRIBUNAL FOR EARLI ER YEARS,GROUND NO.5,9,AND 3 FOR THE AY.2003 - 04,2004-05,2005-06 ARE DECIDED IN FAVOUR OF THE ASS ESSEE. 4. SECOND COMMON GROUND IS ABOUT DISALLOWANCE OF PROVI SIONS MADE FOR THE LEAVE SALARY U/S.. 43F OF THE ACT AND THE AMOUNT INVOLVED ARE RS. 2.48 CRO RES, 1.76 CRORES AND 2.6 CRORES.DURING THE COURSE OF HEARING BEFORE US,REPRESENTATIVES OF BOTH THE SIDES CONCEDED THAT ISSUE WAS DECIDED BY THE TRIBUNAL IN THE YEAR 2002-03 (SUPRA). 4.1. WE FIND THAT TRIBUNAL IN ITS ORDER HAS DECIDED THE ISUSE AS UNDER: '15.7.WE HAVE CAREFULLY PERUSED THE ORDERS OF THE L OWER AUTHORITIES AND THE CLAIM OF THE ASSESSEE VIS--VIS SEC.43B(F).A PERUSAL OF SEC. 43B(F) SHOWS THAT THE EXPLANATION TO SEC. 43B REFERRING TO THE AMENDMENT OF THE WORD ANY SUM PAYABLE IS A PPLICABLE ONLY FOR CLAUSE (A) OF SEC.43B WHICH MEANS THAT IT IS NOT APPLICABLE FOR C LAUSE (F).HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF SRIKAKOLLU SHUBBARAO & CO.173 ITR 708 H AS HELD THAT IN ORDER TO APPLY THE PROVISIONS OF SEC. 43B NOT ONLY SHOULD BE THE LIABILITY TO PAY THE TAX OR DUTY BE INCURRED IN THE ACCOUNTING YEAR BUT ALSO SHOULD BE STATUTORILY PAYABLE IN THE ACCOUNTING YEAR. IN OUR CONSIDERED OPINION, THE PROVISION FOR LEAVE SALARY IS NOT A STATUTOR Y LIABILITY BUT ONLY A CONTRACTUAL LIABILITY WHICH IS PAYABLE ONLY IF THE EMPLOYEES RESIGNS OR R ETIRED FROM THE SERVICES.WE ALSO FIND THAT TH E HONBLE CALCUTTA HIGH COURT IN THE CASE OF EXCIDE I NDUSTRIES LTD. (SUPRA) HAS STRUCK DOWN SEC. 43B(F) BEING ARBITRARY, UNCONSCIONABLE AND DEHORS T HE APEX COURT DECISION IN THE CASE OF BHARAT EARTHMOVERS 245 ITR 428. IT IS RELEVANT TO STATE T HAT THE TRIBUNAL IN THE CASE OF CIT VS UNIVERSAL MEDICARE IN ITA NO. 6191/M/08, HAS FOLLOWED THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF BHARAT EARTH MOVERS AND DIRECTED THE A O TO ALLOW THE AMOUNTS SO CLAIMED. RESPECTFULLY FOLLOWING THE AFORE DISCUSSED DECIS IONS, WE DIRECT THE AO TO ALLOW THE CLAIM O F PROVISIONS FOR LEAVE SALARY. GROUND NO. 6 IS ACCORD INGLY ALLOWED. RESPECTFULLY FOLLOWING THE ABOVE,GROUNDS NO.4,2 AND 2 FOR THE AY.S.UNDER APPEAL ARE DECIDED IN FAVOUR OF THE ASSESSEE-COMPANY. 5. NEXT GROUND FOR ALL THE THREE YEARS IS ABOUT DISALL OWANCE OF RS. 36.05 LAKHS, 38.57 LAKHS AND 36.23 LAKHS AND IS RELATED TO CLAIM OF DEDUCTION U/ S. 80IA AND 80IB OF THE ACT.BEFORE US,AR AND ITA/660-62,616-18& CO-AYS.03-04-05-06,ADITA BIRLA N OVA LTD. 10 DR STATED THAT WHILE DECIDING THE ISSUE FOR THE AY 2002-03, THE TRIBUNAL HAD DELETED ALLOCATION OF HEAD OFFICE EXPENSES IN COMPUTING 10B DEDUCTION.A R EFERENCE WAS MADE TO PAGE 14 PARAS NO.19- 20 OF THE ORDER FOR THE AY 2002-03(SUPRA). 5.1. WE WOULD LIKE TO REPRODUCE THE PARAGRAPHS NO.19 AN D 20 OF ORDER OF THE TRIBUNAL FOR THE AY 2002-03 (SUPRA) AND SAME READ AS UNDER: '19.GROUND NO. 9 READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASES AND IN LAW, THE LEARNED AO HAS ERRED IN REDUCING THE EXEMPTION U/S.10B I) BY RS.75,083/- O N ACCOUNT OF ALLOCATION OF HEAD OFFICE EXPENSES TO 100% EXPORT ORIENTED UNIT AND; II) BY RS.32,289/- ON ACCOUNT OF ALLOCATION OF EXPENSES OF ANOTHER DIVISION NAMELY, GLOBAL EXPORT & MARKETI NG TO 100% EXPORT ORIENTED UNIT AND III) BY RS.25,943/- ON ACCOUNT OF INTEREST INCOME EARNED BY 100% EXPORT ORIENTED UNIT; AND THE CIT(A) HAS ERRED IN CONFIRMING THE ABOVE DISALLOWANCE .THE LEARNED AO BE DIRECTED TO INCREASE THE EXEMPTION U/S. 10B AND REDUCE THE TOTAL INCOME AND REDUCE THE BOOK PROFIT U/S. 115JB ACCORDINGLY. 20.WE FIND THAT AN IDENTICAL ISSUE HAS BEEN CONSIDE RED BY THE TRIBUNAL IN THE CASE OF GRASIM INDUSTRIES IN ITA NOS.5630/M/02 & 1865/M/03.THE TRI BUNAL IN THE CASE OF PROCTER & GAMBLE HYGIENE & HEALTH CARE LTD. IN ITA NOS.1499/M/05 AND 1500/M/05 HAVE AGAIN CONSIDERED A SIMILAR ISSUE AT PARA-54 OF ITS ORDER DIRECT ED THE AO NOT TO REDUCE THE CLAIM OF DEDUCT ION U/S.80IB OF THE ACT BY ALLOCATING HEAD OFFIC E EXPENSES TO PROFITS DERIVED FROM ELIGIBLE UNITS. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL MENTIONED HEREINABOVE, WE DIRECT THE AO NOT TO REDUCE THE CLAIM OF DEDUCTION BY ALLOCATING HEAD OFFICE EXPENSES, EXPENSES OF RAYON DIVISION AND INTEREST INCOME. GROUND NO. 9 IS ALLOWED. RESPECTFULLY FOLLOWING THE ABOVE ORDER,WE DECIDE GR OUNDS NO.9,6 AND 4 IN FAVOUR OF THE ASSESSEE FOR THE AY.S.2003-04TO2005-06. 6. ISSUE OF DEDUCTION IN EXEMPTION U/S. 10B TOWARDS AL LOCATION OF HEAD OFFICE EXPENSES/EXPENSE OF OTHER DIVISION AND INTEREST INCOME EARNED BY 100% E .O.U. UNDER NORMAL INCOME AND MAT PROVISIONS.THE ISSUE IS SUBJECT MATTER OF APPEAL FO R THE AY 2003-04 AND 2004-05 AND THE AMOUNTS INVOLVED ARE RS.1,42,544/- AND 1,10,488/-. AR BROUG HT TO OUR NOTICE THAT TRIBUNAL HAD IN THE ORDER FOR THE AY 2002-03 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE-COMPANY WHILE DECIDING GROUND NO.9 FOR THAT YEAR. 6.1. WHILE DECIDING THE EARLIER COMMON GROUNDS OF APPEAL NO.3,AT PARAGRAPH NO.5.1.WE HAVE REPRODUCED THE ORDER OF THE TRIBUNAL FOR THE EARLIE R YEAR WHERE THE ISSUE OF INTEREST INCOME EARNED BY THE 100%EOU AND ALLOCATION OF HEAD OFFICE EXPENS ES OF OTHER DIVISION HAVE BEEN DECIDED IN FAVOUR OF THE ASSESSEE-COMPANY.CONSIDERING THE ABOV E GROUND NO.6 AND GROUND NO.3 FOR THE AY.S.2003-04 AND 2004-05 ARE DECIDED IN FAVOUR OF T HE ASSESSEE. ITA/660-62,616-18& CO-AYS.03-04-05-06,ADITA BIRLA N OVA LTD. 11 7. ENHANCEMENT AND WITHDRAWAL OF EXEMPTION U/S.10B OF THE ACT ON THE GROUND THAT UNDERTAKING IS NOT APPROVED BY THE BOARD U/S.14 OF THE INDUSTRIAL DEVELOPMENT AND REGULATION ACT IS THE COMMON ISSUE FOR AY 2003-04 AND 2004-05. THE AMOUNT S IN DISPUTE ARE RS. 12.19 LAKHS AND 4.10 LAKHS.REPRESENTATIVE OF BOTH THE SIDES AGREED THAT ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL,WHILE PASSING THE ORDER FOR AY 2002-03 . WE FIND THAT PARAGRAPHS NO. 21 AND 21.1 OF PAGE 15 OF THE ORDER OF THE TRIBUNAL,DEALING WITH THE ISSUE READS AS UNDER: '21.GROUND NO. 10 READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE S AND IN LAW, THE LEARNED CIT(A) HAS ALSO ERRED IN MAKING ENHANCEMENT AND WITHDRAWING THE EX EMPTION U/S.10B ON THE GROUND THAT UNDERTAKING IS NOT APPROVED BY THE BOARD PARTICUL ARLY APPOINTED U/S. 14OF THE INDUSTRIAL (DEV - ELOPMENT AND REGULATION)ACT.THE LEARNED AO BE DIR ECTED TO ALLOW THE EXEMPTION U/S. 10B AND REDUCE THE TOTAL INCOME AND REDUCE THE BOOK PROFIT U/S. 11 5JB ACCORDINGLY. 21.1.AT THE VERY OUTSET, WE HAVE TO STATE THAT THIS IS NOT THE FIRST YEAR OF CLAIM OF EXEMPTION U/S.10B OF THE ACT.THE HONBLE BOMBAY HIGH CO URT IN THE CASE OF CIT VS PAUL BROTHERS 79 TAXMAN 378 AND IN THE CASE OF WESTERN OUTDOOR INTE R ACTIVE PVT. LTD. 25 TAXMANN.COM 340 HAS LAID DOWN THAT IF THE CLAIM OF DEDUCTION/EXEMPTION IS ALLOWED IN EARLIER YEARS, THE SAME CANNOT BE WITHDRAWN IN SUBSEQUENT YEARS UNLESS DEDUCT IONS ALLOWED IN THE INITIAL YEAR IS WITHDRAWN. WE FIND THAT THERE IS NO CHANGE IN THE FACTS WHICH WERE IN EXISTENCE DURING THE YEAR VIS--VIS THE CLAIM OF EXEMPTION U/S10B OF THE ACT. WE ALSO FIND THAT THIS IS NOT THE FIRST YEAR OF CLAIM THEREFORE THE DEPARTMENT CANNOT DENY THE BENEFIT OF SEC.10B W ITHOUT WITHDRAWING THE CLAIM ALLOWED IN THE INITIAL ASSESSMENT YEAR.THAT BEING NOT THE CASE GRO UND NO. 10 IS ALLOWED. RESPECTFULLY,FOLLOWING THE ABOVE GROUNDS NO.8 AND 4 TAKEN BY THE ASSESSEE FOR BOTH THE YEARS STAND ALLOWED. 8. LAST COMMON GROUND OF APPEAL PERTAINS TO EXPORT INC ENTIVES WITH REGARD TO 80HHC OF ACT.IN THE YEAR 2003-04,IT WAS HELD BY THE AO AND THE FAA THAT DEPB WAS NOT ELIGIBLE FOR DEDUCTION U/S.80HHC AND CONSEQUENTIALLY AO EXCLUDED RS. 5.81 CRORES WHILE MAKING THE COMPUTATION U/S. 80HHC OF THE ACT AND THE FAA CONFIRMED IT.BEFORE US , AR ARGUED THAT HON'BLE SUPREME COURT HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE WHI LE DELETING THE JUDGMENT IN THE CASE OF TOPMAN EXPORTS(342 ITR 49).WE FIND THAT WHILE DECIDING THE APPEAL IN THE CASE OF TOPMAN EXPORTS (SUPRA) THE HON'BLE APEX COURT HAS DEALT WITH THE I SSUE AS UNDER:- THE OBJECTIVE OF THE DUTY ENTITLEMENT PASSBOOK SCH EME (DEPB) IS TO NEUTRALIZE THE INCIDENCE OF CUSTOMS DUTY ON THE IMPORT CONTENT OF THE EXPORT PR ODUCTS. HENCE, IT HAS DIRECT NEXUS WITH THE COST OF THE IMPORTS MADE BY AN EXPORTER FOR MANUFACTURIN G THE EXPORT PRODUCTS. THE NEUTRALIZATION OF THE COST OF CUSTOMS DUTY UNDER THE DEPB CREDIT SCHE ME, HOWEVER, IS BY GRANTING A DUTY CREDIT AGAINST THE EXPORT PRODUCT AND THIS CREDIT CAN BE U TILIZED FOR PAYING CUSTOMS DUTY ON ANY ITEM ITA/660-62,616-18& CO-AYS.03-04-05-06,ADITA BIRLA N OVA LTD. 12 WHICH IS FREELY IMPORTABLE. THE DEPB CREDIT IS ISSU ED AGAINST THE EXPORTS TO THE EXPORTER AND IS TRANSFERABLE BY THE EXPORTER. THE DEPB CREDIT IS 'CASH ASSISTANCE' RECEIVABLE BY A PERSON AGAINST EXPORTS UNDER THE SCHEME OF THE GOVERNMENT OF INDIA AND FALLS UNDER CLAUSE (III B) OF SECTION 28 OF THE INCOME-TAX ACT, 1961, AND IS CHARGEABLE TO INCOME-TAX UNDER THE HEAD 'PRO FITS AND GAINS OF BUSINESS OR PROFESSION' EVEN BEFORE IT IS TRANSFERRED BY THE ASSESSEE. UNDER CLA USE (IIID) OF SECTION 28, ANY PROFIT ON TRANSFER OF THE DEPB CREDIT IS CHARGEABLE TO INCOME-TAX UNDER T HE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' AS AN ITEM SEPARATE FROM CASH ASSISTANC E UNDER CLAUSE (IIIB). THE WORD 'PROFIT' MEANS THE GROSS PROCEEDS OF A BUS INESS TRANSACTION LESS THE COSTS OF THE TRANSACTION. PROFITS IMPLY A COMPARISON OF THE VALU E OF AN ASSET WHEN THE ASSET IS ACQUIRED WITH THE VALUE OF THE ASSET WHEN THE ASSET IS TRANSFERRED AN D THE DIFFERENCE BETWEEN THE TWO VALUES IS THE AMOUNT OF PROFIT OR GAIN MADE BY A PERSON. AS THE DEPB CREDIT HAS DIRECT NEXUS WITH THE COST O F IMPORTS FOR MANUFACTURING AN EXPORT PRODUCT, ANY AMOUNT REALISED BY THE ASSESSEE OVER AND ABOVE THE DEPB CREDIT ON TRANSFER OF THE DEPB CREDIT WOULD REPRESENT PROFIT ON THE TRANSFER OF TH E DEPB CREDIT. THUS, WHILE THE FACE VALUE OF THE DEPB CREDIT WILL FALL UNDER CLAUSE (IIIB) OF SECTIO N 28 OF THE ACT, THE DIFFERENCE BETWEEN THE SALE VALUE AND THE FACE VALUE OF THE DEPB CREDIT WILL FA LL UNDER CLAUSE (IIID) OF SECTION 28 OF THE ACT. THE COST OF ACQUIRING THE DEPB CREDIT IS NOT NIL BE CAUSE THE PERSON ACQUIRES IT BY PAYING CUSTOMS DUTY ON THE IMPORT CONTENT OF THE EXPORT PRODUCT AN D THE DEPB CREDIT WHICH ACCRUES TO A PERSON AGAINST EXPORTS HAS A COST ELEMENT IN IT. THE DEPB CREDIT REPRESENTS PART OF THE COST INCURRED BY A PERSON FOR MANUFACTURE OF THE EXPORT PRODUCT AND HE NCE EVEN WHERE THE DEPB CREDIT IS NOT UTILISED BY THE EXPORTER BUT IS TRANSFERRED TO ANOTHER PERSO N, THE CREDIT CONTINUES TO REMAIN AS A COST TO THE EXPORTER. WHEN, THEREFORE, THE DEPB CREDIT IS TRANS FERRED BY A PERSON, THE ENTIRE SUM RECEIVED BY HIM ON SUCH TRANSFER DOES NOT BECOME HIS PROFITS. I T IS ONLY THE AMOUNT THAT HE RECEIVES IN EXCESS OF THE DEPB CREDIT WHICH REPRESENTS HIS PROFITS ON TRA NSFER OF THE DEPB CREDIT. UNDER SECTION 28 OF THE ACT 'CASH ASSISTANCE' RECEI VED OR RECEIVABLE BY ANY PERSON AGAINST EXPORTS SUCH AS THE DEPB CREDIT AND 'PROFIT ON TRANSFER OF THE DEPB CREDIT' ARE TREATED AS TWO SEPARATE ITEMS OF INCOME UNDER CLAUSES (IIIB) AND (IIID). AS A RESULT, THE DEPB CREDIT WILL BE CHARGEABLE AS INCOME UNDER CLAUSE (IIIB) OF SECTION 28 IN THE YEA R IN WHICH THE PERSON APPLIES FOR THE DEPB CREDIT AGAINST THE EXPORTS AND THE PROFIT ON TRANSF ER OF THE DEPB CREDIT BY THAT PERSON WILL BE CHARGEABLE AS INCOME UNDER CLAUSE (IIID) OF SECTION 28 IN HIS HANDS IN THE YEAR IN WHICH HE MAKES THE TRANSFER. THERE IS NO DOUBLE TAXATION OF THE SA ME INCOME. SUB-SECTION (3)(A) OF SECTION 80HHC PROVIDES THAT W HERE THE EXPORT OUT OF INDIA IS OF GOODS OR MERCHANDISE MANUFACTURED OR PROCESSED BY THE ASSESS EE, THE PROFITS DERIVED FROM SUCH EXPORTS SHALL BE THE AMOUNT WHICH BEARS TO THE PROFITS OF T HE BUSINESS, THE SAME PROPORTION AS THE EXPORT TURNOVER IN RESPECT OF SUCH GOODS BEARS TO THE TOTA L TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSEE. EXPLANATION (BAA) UNDER SECTION 80HHC STA TES THAT 'PROFITS OF THE BUSINESS' MEANS THE PROFITS OF THE BUSINESS AS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' AS REDUCED, INTER ALIA, BY NINETY PER CENT. OF ANY SUM REFERRED TO IN CLAUSES (IIIA), (IIIB), (IIIC), (II ID) AND (IIIE) OF SECTION 28. THUS, NINETY PER CENT. OF THE DEPB CREDIT WHICH IS 'CASH ASSISTANCE' AGAINST EXPORTS AND IS COVERED UNDER CLAUSE (IIIB) OF SECTION 28 WILL GET EXCLUDED FROM THE 'PROFITS OF THE BUSINESS' OF THE ASSESSEE IF SUCH THE DEPB C REDIT HAS ACCRUED TO THE ASSESSEE DURING THE PREVIOUS YEAR. SIMILARLY, IF DURING THE SAME PREVIO US YEAR, THE ASSESSEE HAS TRANSFERRED THE DEPB CREDIT AND THE SALE VALUE OF SUCH THE DEPB CREDIT I S MORE THAN THE FACE VALUE OF THE DEPB CREDIT, THE DIFFERENCE BETWEEN THE SALE VALUE OF THE DEPB C REDIT AND THE FACE VALUE OF THE DEPB CREDIT WILL REPRESENT THE PROFIT ON TRANSFER OF THE DEPB C REDIT COVERED UNDER CLAUSE (IIID) OF SECTION 28 AND NINETY PER CENT. OF SUCH PROFIT ON TRANSFER OF THE DEPB CREDIT CERTIFICATE WILL GET EXCLUDED FROM 'PROFITS OF THE BUSINESS'. BUT, WHERE THE DEPB CRED IT ACCRUES TO THE ASSESSEE IN THE FIRST PREVIOUS YEAR AND THE ASSESSEE TRANSFERS THE DEPB CREDIT CER TIFICATE IN THE SECOND PREVIOUS YEAR, ONLY NINETY PER CENT. OF THE PROFITS ON TRANSFER OF THE DEPB CREDIT COVERED UNDER CLAUSE (IIID) AND NOT NINETY PER CENT OF THE ENTIRE SALE VALUE INCLUDING THE FACE VALUE OF THE DEPB CREDIT WILL GET EXCLUDED FROM THE 'PROFITS OF THE BUSINESS'. THUS, WHERE THE NINETY PER CENT. OF THE FACE VALUE OF THE DEPB CREDIT DOES NOT GET EXCLUDED FROM 'PROFITS OF THE BUSINESS' UNDER EXPLANATION (BAA) AND ONLY NINETY PER CENT. OF THE DIFFERENCE BETWEEN THE FACE VALUE OF THE DEPB CREDIT AND THE SALE VALUE OF THE DEPB CREDIT GETS EXCLUDED FROM 'PROFITS OF T HE BUSINESS', THE ASSESSEE GETS A BIGGER FIGURE ITA/660-62,616-18& CO-AYS.03-04-05-06,ADITA BIRLA N OVA LTD. 13 OF 'PROFITS OF THE BUSINESS' AND THIS IS POSSIBLE W HEN THE DEPB CREDIT ACCRUES TO THE ASSESSEE IN ONE PREVIOUS YEAR AND TRANSFER OF THE DEPB CREDIT T AKES PLACE IN THE SUBSEQUENT PREVIOUS YEAR. THE RESULT IN SUCH CASE IS THAT A HIGHER FIGURE OF 'PROFITS OF THE BUSINESS'' BECOMES THE MULTIPLIER I N THE FORMULA UNDER SUB-SECTION (3)(A) OF SECTION 80H HC FOR ARRIVING AT THE FIGURE OF PROFITS DERIVED FROM EXPORTS. TO THE FIGURE OF PROFITS DERIVED FROM EXPORTS WORKE D OUT ACCORDING TO THE FORMULA UNDER SUB- SECTION (3)(A) OF SECTION 80HHC, THE ADDITIONS AS M ENTIONED IN THE FIRST, SECOND, THIRD AND FOURTH PROVISO UNDER SUB-SECTION (3) ARE MADE TO THE PROFI TS DERIVED FROM EXPORT. UNDER THE FIRST PROVISO, NINETY PER CENT. OF THE SUM REFERRED TO IN CLAUSES (IIIA), (IIIB) AND (IIIC) OF SECTION 28 ARE ADDED I N THE SAME PROPORTION AS THE EXPORT TURNOVER BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSEE. IN THIS FIRST PROVISO, THERE IS NO ADDITION OF ANY SUM REFERRED TO IN CLAUSE (IIID) O R CLAUSE (IIIE). HENCE, PROFIT ON TRANSFER OF THE DEP B CREDIT OR DFRC ARE NOT TO BE ADDED UNDER THE FIRST PROVISO. WHERE THEREFORE IN THE PREVIOUS YEAR NO DEPB CREDIT OR DFRC ACCRUES TO THE ASSESSEE, HE WOULD NOT BE ENTITLED TO THE BENEFIT O F THE FIRST PROVISO TO SUB-SECTION (3) OF SECTION 80HHC BECAUSE HE WOULD NOT HAVE ANY SUM REFERRED TO IN CLAUSE (IIIB) OF SECTION 28 OF THE ACT. THE SECOND PROVISO TO SUB-SECTION (3) OF SECTION 80 HHC STATES THAT IN THE CASE OF AN ASSESSEE HAVING EXPORT TURNOVER NOT EXCEEDING RS. 10 CRORES DURING THE PREVIOUS YEAR, AFTER GIVING EFFECT TO THE FIRST PROVISO, THE EXPORT PROFITS ARE TO BE INC REASED FURTHER BY THE AMOUNT WHICH BEARS TO NINETY PER CENT. OF ANY SUM REFERRED TO IN CLAUSES (IIID) AND (IIIE) OF SECTION 28, THE SAME PROPORTION AS TH E EXPORT TURNOVER BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSEE. THE THIRD PROVISO TO SUB-SECTION (3) STATES THAT IN THE CASE OF AN ASSESSEE HAVING EXPORT TURNOVER EXCEEDING RS. 10 CRORES, SIMILAR ADDITION OF NINETY PER CENT. OF THE SUMS REFERRED TO IN CLAUSE (IIID) OF SECTIO N 28 CAN BE MADE ONLY IF THE ASSESSEE HAS THE NECESSA RY AND SUFFICIENT EVIDENCE TO PROVE THAT (A) HE HAD AN OPTION TO CHOOSE EITHER THE DUTY DRAWBACK OR THE DUTY ENTITLEMENT PASS BOOK SCHEME, BEING THE DUTY REMISSION SCHEME ; AND (B) THE RATE OF DRA WBACK CREDIT ATTRIBUTABLE TO THE CUSTOMS DUTY WAS HIGHER THAN THE RATE OF CREDIT ALLOWABLE UNDER THE DUTY ENTITLEMENT PASS BOOK SCHEME, BEING THE DUTY REMISSION SCHEME. THEREFORE, IF THE ASSESS EE HAVING EXPORT TURNOVER OF MORE THAN RS. 10 CRORES DOES NOT SATISFY THESE TWO CONDITIONS, HE WI LL NOT BE ENTITLED TO THE ADDITION OF PROFIT ON TRANSFER OF THE DEPB CREDIT UNDER THE THIRD PROVISO TO SUB-SECTION (3) OF SECTION 80HHC. THEREFORE, WHERE AN ASSESSEE HAS AN EXPORT TURNOVER EXCEEDING RS. 10 CRORES AND HAS MADE PROFITS ON TRANSFER OF THE DEPB CREDIT UNDER CLAUSE (IIID) OF SECTION 28, HE WOULD NOT GET THE BENEFIT OF ADDITION TO EXPORT PROFITS UNDER THE THIRD OR FOURT H PROVISO TO SUB-SECTION (3) OF SECTION 80HHC, BUT HE WOULD GET THE BENEFIT OF EXCLUSION OF A SMAL LER FIGURE FROM 'PROFITS OF THE BUSINESS' UNDER EXPLANATION (BAA) TO SECTION 80HHC OF THE ACT. THER E IS NOTHING IN EXPLANATION (BAA) TO SECTION 80HHC TO SHOW THAT THIS BENEFIT OF EXCLUSION OF A S MALLER FIGURE FROM 'PROFITS OF THE BUSINESS' WILL NOT BE AVAILABLE TO AN ASSESSEE HAVING AN EXPORT TU RNOVER EXCEEDING RS. 10 CRORES. IT IS A WELL-SETTLED PRINCIPLE OF STATUTORY INTERPR ETATION OF A TAXING STATUTE THAT A SUBJECT WILL BE LIABLE TO TAX AND WILL BE ENTITLED TO EXEMPTION FRO M TAX ACCORDING TO THE STRICT LANGUAGE OF THE TAXING STATUTE AND IF AS PER THE WORDS USED IN EXPL ANATION (BAA) TO SECTION 80HHC READ WITH THE WORDS USED IN CLAUSES (IIID) AND (IIIE) OF SECTION 28, THE ASSESSEE WAS ENTITLED TO A DEDUCTION UNDER SECTION 80HHC ON EXPORT PROFITS, THE BENEFIT OF SUC H DEDUCTION CANNOT BE DENIED TO THE ASSESSEE. RESPECTFULLY FOLLOWING THE SAME,WE DECIDE GROUND 10 (B) FOR THE YEAR 2003-04 IN FAVOUR OF THE ASSESSEE.AS THE FACTS FOR THE GROUND NO.7 FOR THE Y EAR 2004-05 ARE IDENTICAL THAT OF THE GROUND NO.10(B)OF THE PREVIOUS YEAR,THEREFORE,FOLLOWING IT GROUND OF APPEAL NO.7 FOR AY.2004-05 IS ALSO DECIDED IN FAVOUR OF THE ASSESSEE. NOW WE WOULD DISCUSS THE ISSUE RAISED IN INDIVIDUAL AYS. ITA NO. 660/MUM/2009 ITA/660-62,616-18& CO-AYS.03-04-05-06,ADITA BIRLA N OVA LTD. 14 9. THE FIRST GROUND OF APPEAL IS ABOUT DISALLOWANCE OF RURAL DEVELOPMENT EXPENDITURE OF RS. 7,42,992/-.AR AND THE DR CONCEDED THAT THE TRIBUNAL WHILE DECIDING THE APPEAL FOR THE AY 2002- 03(SUPRA),HAD DECIDED THE ISSUE IN FAVOUR OF THE AS SESSEE. 9.1. WE WOULD LIKE TO REPRODUCE PARAGRAPH 7 OF PAGE 4 OF THE ORDER FOR THE AY 2002-03 (SUPRA). 7.WE HAVE CAREFULLY PERUSED THE EARLIER YEARS ORDE RS OF THE TRIBUNAL. WE FIND THAT THE TRIBUNAL IN A.Y. 2000-01 AND 2001-02 IN ITA NO. 5421 & 5422/M/ 2005 HAS FOLLOWED THE DECISION OF THE TRIBUNAL FOR A.YRS.1998-99 AND 1999-2000 IN I TA NO. 6668 & 6669/M/03.AS NO DISTINGUISHING FACTS HAVE BEEN BROUGHT ON RECORD, R ESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE AS MENTIONED H EREINABOVE, WE DIRECT THE AO TO ALLOW THE EXPENDITURE OF RS. 6,37,883/- INCURRED ON RURAL DEV ELOPMENT. GROUND NO. 1 IS ACCORDINGLY ALLOWED. CONSIDERING THE ORDERS FOR THE EARLIER YEARS OF THE TRIBUNAL,WE DECIDED GROUND NO.1 IN FAVOUR OF THE ASSESSEE-COMPANY. 10. GROUND NO.10(A), AND 10(C) DEAL WITH DEDUCTION MADE U/S. 80HHC OF THE ACT.10(A) IS ABOUT ADJUSTMENT OF BROUGHT FORWARD UNABSORBED DEPRECIATI ON OF RS. 28.17 LAKHS.BEFORE US,AR FAIRLY CONCEDED THAT ISSUE WAS DECIDED AGAINST THE ASSESSE E BY THE JUDGMENT OF THE HON'BLE SUPREME COURT DELIVERED IN THE CASE OF IPCA LABORATORIES LT D.(266ITR521).RESPECTFULLY,FOLLOWING THE ORDER OF THE HON'BLE APEX COURT,GROUND NO.10(A) IS DECIDED AGAINST THE ASSESSEE. 10.A. LAST GROUND(10C)RELATED WITH COMPUTATION OF 80HHC I S ABOUT DEDUCTION U/S. 10B VIS--VIS DEDUCTION U/S. 80HHC AND THE AMOUNT INVOLVED IS 10. 76 LAKHS.BEFORE US,AR STATED THAT ISSUE STANDS COVERED BY THE ORDER OF THE HON'BLE JURISDIC TIONAL HIGH COURT IN THE CASE OF ASSOCIATES CAPSULE (197TAXMAN 84).WE FIND THAT HON'BLE BOMBAY HIGH COURT HAS DECIDED THE ISSUE BEFORE US,IN THE CASE OF ASSOCIATES CAPSULES PVT.LTD.,AS UNDER: SECTION 80-IA(9) OF THE INCOME-TAX ACT, 1961, PROV IDES THAT THE DEDUCTION TO THE EXTENT OF PROFITS ALLOWED UNDER SECTION 80-IA(1) WOULD NOT BE ALLOWED UNDER ANY OTHER PROVISIONS. IT MEANS THAT THE DEDUCTIONS ALLOWABLE UNDER OTHER PROVISIONS UNDER H EADING C OF CHAPTER VI-A WOULD BE ALLOWED TO THE EXTENT OF PROFITS AS REDUCED BY THE PROFITS ALLOWED UNDER SECTION 80-IA(1). THE SECOND PART OF SECTION 80-IA(9) DOES NOT REFER TO THE METHOD OF CO MPUTING DEDUCTION UNDER OTHER PROVISIONS UNDER HEADING C OF CHAPTER VI-A. THUS, SECTION 80-IA(9) S EEKS TO CURTAIL THE ALLOWANCE OF DEDUCTION AND NOT THE COMPUTATION OF DEDUCTION UNDER ANY OTHER PR OVISIONS UNDER HEADING C OF CHAPTER VI-A OF THE ACT. THE LEGISLATURE HAS USED SPECIFIC WORDS WH ENEVER IT INTENDS TO AFFECT THE COMPUTATION OF DEDUCTION. AS THE WORDS USED IN SECTION 80-IA(9) RE LATE TO ALLOWANCE AND NOT COMPUTATION OF DEDUCTION, IT CANNOT BE INFERRED THAT SECTION 80-IA (9) WAS INSERTED WITH A VIEW TO AFFECT COMPUTATION OF DEDUCTION UNDER ANY OTHER PROVISIONS UNDER HEADING C OF CHAPTER VI-A. SINCE SECTION 80-IA(9) USES THE WORDS 'SHALL NOT BE ALLOW ED', THE SECTION SEEKS TO RESTRICT THE ALLOWANCE OF DEDUCTION AND NOT THE COMPUTATION OF DEDUCTION U NDER ANY OTHER SECTIONS UNDER HEADING C OF ITA/660-62,616-18& CO-AYS.03-04-05-06,ADITA BIRLA N OVA LTD. 15 CHAPTER VI-A OF THE ACT. THEREFORE THE REASONABLE C ONSTRUCTION OF SECTION 80-IA(9) WOULD BE THAT WHERE THE DEDUCTION IS ALLOWED UNDER SECTION 80-IA( 1), THEN THE DEDUCTION COMPUTED UNDER OTHER PROVISIONS UNDER HEADING C OF CHAPTER VI-A HAVE TO BE RESTRICTED TO THE PROFITS OF THE BUSINESS THAT REMAIN AFTER EXCLUDING THE PROFITS ALLOWED AS DEDUC TION UNDER SECTION 80-IA, SO THAT THE TOTAL DEDUCTION ALLOWED UNDER THE HEADING C OF CHAPTER VI -A DOES NOT EXCEED THE PROFITS OF THE BUSINESS. GROUND NO. 10(C) STANDS ALLOWED. 11. NEXT GROUND OF APPEAL(GOA12)PERTAINS TO ADDING BACK OF PROVISIONS FOR DEFERRED TAX OF RS. 25.22 CRORES TO THE BOOK PROFITS COMPUTED U/S.115JB OF THE ACT. DURING THE COURSE OF HEARING BEFORE US,AR FAIRLY CO NCEDED THAT MATER HAS TO BE DECIDED AGAINST THE ASSESSEE BECAUSE OF THE RETROSPECTIVE AMENDMENT IN SECTION 115JB OF THE ACT.IN VIEW OF THE STATEMENT MADE BY THE AR OF THE ASSESSEE AND CONSID ERING RETROSPECTIVE AMENDMENT,GROUND NO. 12 IS DECIDED AGAINST THE ASSESSEE. 12. NEXT GROUND IS ABOUT DEDUCTION U/S 115JB OF THE ACT OF RS. 31.71 CRORES,BEING DEDUCTION U/S. 80HHC.REPRESENTATIVE OF BOTH THE SIDES AGREED THAT IN THE EARLIER YEARS,INCLUDING AY.2002-03, THE MATTER WAS RESTORED BACK TO THE FILE OF THE AO TO RECOMPUTE THE DEDUCTION AS PER THE DECISION OF BHARAT INFORMATION TECHNOLOGY SYSTEM PVT. LTD. ( 340ITR593) DELIVERED BY THE HON'BLE SUPREME COURT. WE FIND THAT IN PARAGRAPH 25 OF THE ORDER FOR THE AY 2002-03 THE TRIBUNAL HAS DEALT WITH THE ISSUE AS UNDER: '25.THIS ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN A.Y. 2000-01 IN ITA NO.5422/M/05. WE FIND THAT THE TRIBUNAL HAS CONSIDE RED AN IDENTICAL ISSUE AT PARA-66 OF ITS ORDER AND AT PARA-70, THE TRIBUNAL HAS SET ASIDE THIS ISSUE AND DIRECTED THE AO TO RECOMPUTE THE DEDUCTION U/S. 80HHC UNDER MAT PROVISIONS AS PER LA W AND KEEPING IN VIEW THE DECISION IN THE CASE OF BHARATI INFORMATION TECH. PVT. LTD. 340 ITR 593. AS NO DISTINGUISHING FACTS HAVE BEEN BROUGHT BEFORE US, RESPECTFULLY FOLLOWING THE DECISION OF THE CO ORDINATE BENCH AS MENTIONED HEREINABOVE, WE DIRECT THE AO TO RECOMPUT E THE DEDUCTION AS PER PROVISIONS OF THE LAW AND IN LINE WITH THE DECISION IN THE C ASE OF BHARATI INFORMATION TECH. PVT. LTD (SUPRA). GROUND NO. 12 IS ALLOWED FOR STATISTICAL PURPOSE. RESPECTFULLY FOLLOWING THE SAME,MATTER IS RESTORED BACK TO THE FILE OF THE AO FOR FRESH ADJUDICA - TION WITH A DIRECTION TO AFFORD A REASONABLE OPPORT UNITY OF HEARING TO THE ASSESSEE. 13. GROUND OF APPEAL NO.14 IS ABOUT NON GRANT OF EXCLU SION OF SALES TAX EXEMPTION BENEFIT OF RS. 5,17,26,688/-.BEFORE US,REPRESENTATIVES OF BOTH THE SIDES AGREED THAT SIMILAR ISSUE WAS RESTORED BACK TO THE FILE OF THE AO BY THE TRIBUNAL,WHILE PA SSING THE ORDER FOR THE EARLIER YEARS,INCLUDING ITA/660-62,616-18& CO-AYS.03-04-05-06,ADITA BIRLA N OVA LTD. 16 AY.2002-03.REFERENCE WAS MADE TO THE PARAGRAPHS NO . 25-26 OF THE ORDER OF THE AY 2002-03.WE REPRODUCE THE SAID PARAGRAPHS WHICH READ AS UNDER: '25. GROUND NO. 14 READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE S AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN NOT ENTERTAINING THE ADDITIONAL GROUND TO DIR ECT THE AU TO EXCLUDE FROM TAXABLE PROFIT, THE SALES TAX EXEMPTION BENEFIT OF RS. 5,89,11, 855/-, THE LEARNED CIT(A) BE DIRECTED TO ACCEPT THE GROUND OF APPEAL AND THE LEARNED AO BE DIRECTED TO EXCLUDE THE SALES TAX EXEMPTION AMOUNT OF RS. 5,89,11,855 FROM THE TAXABLE INCOME. 26.WE FIND THAT AN IDENTICAL ISSUE WAS CONSIDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 5421/M/2005 FOR A.Y.2000-01 AT PARA-28 OF ITS O RDER AND AT PARA-31, THE TRIBUNAL DIRECTED THE AO TO ADJUDICATE ON THIS ISSUE AS PER LAW AND RELYI NG ON THE DECISION IN THE CASE OF RELIANCE INDUSTRIES LTD. 82 TTJ 765 FOLLOWING THE DECISION O F THE TRIBUNAL IN ITA NOS. 6668 & 6669/M/03. FACTS AND ISSUES BEING SIMILAR, RESPECTFULLY F OLLOWING THE DECISION OF THE CO-ORDINATE BENC H AS MENTIONED HEREINABOVE, WE DIRECT THE AO ACCORDI NGLY. GROUND NO. 14 IS ALLOWED FOR STATISTICAL PURPOSE. RESPECTFULLY,FOLLOWING THE SAME GROUND 14 IS REMITT ED BACK TO THE FILE OF THE AO,WHO WILL DECIDE THE ISSUE AFRESH AFTER AFFORDING A REASONABLE OPPOR TUNITY OF HEARING TO THE ASSESSEE. ITA NO. 662/MUM/2009: 15. NOW WE WOULD LIKE TO ADJUDICATE THE GROUND NO.10 FO R THE YEAR 2004-05,THAT HAS REMAINED UNDECIDED BY OUR ABOVE ORDER.IT IS ABOUT REDUCING T HE MAT CREDIT AVAILABLE TO RS 6,20,17,944/- AGAINST THE MAT CREDIT AVAILABLE TO THE APPELLANT O F RS.14,76,34,018/-. BEFORE US,AR STATED THAT THE FAA HAD NOT CONSIDERED THE GROUND RAISED BY THE ASSESSEE IN THIS REGARD,THAT ISSUE WAS CONSEQUENTIAL IN NATURE,THAT THE AMOUNT OF MAT CREDIT AVAILABLE WOULD DEPEND ON ORDER GIVING EFFECT OF THE TRIBUNAL ORDER S OF EARLIER YEARS.CONSIDERING THE FACTS,AO IS DIRECTED TO PASS NECESSARY ORDERS,IF HE HAS NOT PAS SED THE TILL DATE.GROUND NO.10 IS ALLOWED FOR STATISTICAL PURPOSES. 16. IN THE APPEALS FILED BY THE AO,THERE ARE TWO GROUND S OF APPEAL,THAT ARE COMMON.FIRST WE WOULD LIKE TO ADJUDICATE THEM.GROUNDS NO.2,1 AND 1 FOR TH E AY.S.2003-04,2004-05 AND 2005-06 DEAL WITH DELETION OF UNUTILISED MODVAT CREDIT IN CLOSIN G STOCK AND AMOUNTS INVOLVED ARE RS.5. 04 CRORES,RS.7.15 CRORES AND RS.7.03CRORES RESPECTIVEL Y FOR THE AY.S.CONCERNED. 16.1. BEFORE US,DR AND AR AGREED THAT THE ISSUE HAS BEEN ALREADY DECIDED IN FAVOUR OF THE ASSESSEE BY EARLIER YEARS ORDER INCLUDING THE ORDE R FOR THE AY.2002-03.WE FIND THAT WHILE DECIDING THE IDENTICAL ISSUE FOR THE IMMEDIATE PREV IOUS ASSESSMENT YEAR,THETRIBUNAL HAD DISMISSED ITA/660-62,616-18& CO-AYS.03-04-05-06,ADITA BIRLA N OVA LTD. 17 THE APPEAL OF THE AO.BESIDES,THE ISSUE OF MODVAT CR EDIT HAS BEEN FINALLY SETTLED BY THE CASE OF INDO NIPPON CHEMICALS CO.LTD.(261ITR275)BY THE HON BLE APEX COURT.HERE IS THE DECISION OF THE HONBLE COURT: IT IS NOT OPEN TO THE ASSESSING OFFICER TO TREAT O UTGOINGS AS INCOME UNDER SECTION 145 OF THE INCOME-TAX ACT, 1961.WHATEVER METHOD THE ASSESSING OFFICER ADOPTS AFTER INVOKING SECTION 145, IT HAS TO BE CONSISTENT WITH ACCEPTED PRINCIPLES OF AC COUNTANCY. THE ASSESSEES,WHICH WERE MANUFACTURING UNITS, WERE LIABLE TO EXCISE DUTY ON THE GOODS MANUFACTURED BY THEM. UNDER THE MODVAT SCHEME THE A SSESSEES GOT CREDIT FOR THE EXCISE DUTY ALREADY PAID ON THE RAW MATERIALS PURCHASED BY THEM AND UTILISED IN THE MANUFACTURE OF EXCISABLE GOODS. WHEN THEY MANUFACTURED THE GOODS AND SOLD TH EM THE PROPORTIONATE PART OF THE MODVAT CREDIT WAS SET OFF AGAINST THEIR EXCISE DUTY LIABIL ITY. THE ASSESSEE HAD, IN VALUING THEIR STOCK, UNIFORMLY ADOPTED THE NET METHOD, VIZ., VALUING T HE RAW MATERIALS AT THE PURCHASE PRICE MINUS THE MODVAT CREDIT. THIS METHOD WAS ALSO ADOPTED WHI LE VALUING THE UNCONSUMED RAW MATERIALS AND THE WORK IN PROGRESS AT THE END OF THE YEAR. THE AS SESSING OFFICER TOOK THE VIEW THAT THE MODVAT CREDIT SHOULD BE TREATED AS AN INCOME OR ADVANTAGE IN THE NATURE OF INCOME AND ADDED BACK THE MODVAT CREDIT. THE APPELLATE TRIBUNAL HELD THAT THE MODVAT CREDIT COULD NOT BE ADDED BACK TO THE INCOME OF THE ASSESSEE. THAT MERELY BECAUSE THE MODVAT CREDIT WAS AN IRREVERSIBLE CREDIT AVAILABLE TO MANUFACTURERS UPON PURCHASE OF DUTY-PA ID RAW MATERIAL, THAT WOULD NOT AMOUNT TO INCOME WHICH WAS LIABLE TO BE TAXED UNDER THE ACT : INCOME WAS NOT GENERATED TO THE EXTENT OF THE MODVAT CREDIT ON UNCONSUMED RAW MATERIAL ;(II) THAT IT WAS NOT PERMISSIBLE FOR THE ASSESSING OFFICER TO ADOPT THE GROSS METHOD FOR VALUATION O F RAW MATERIALS AT THE TIME OF PURCHASE AND THE NET METHOD FOR VALUATION OF STOCK ON HAND. RESPECTFULLY FOLLOWING THE ABOVE DECISION GROUNDS N O.2,1 AND 1 FOR THE AY.S.2003-04, 2004-05 AND 2005-06 ARE DECIDED AGAINST THE AO. 17. NEXT COMMON GROUND IS ABOUT RURAL DEVELOPMENT FOR T HE AYS 2004-05 AND 2005-06 OF RS. 20.03 LAKHS AND RS. 24.19 LAKHS.BEFORE US,THE DR AN D THE AR AGREED THAT SIMILAR ISSUE HAD ARISEN BEFORE THE TRIBUNAL WHILE DECIDING THE APPEAL FOR T HE AY 2002-03, THAT FAA HAD DECIDED THE ISSUE AGAINST THE ASSESSEE IN THAT YEAR,THAT THE TRIBUNAL HAD ALLOWED THE CLAIM MADE BY THE ASSESSEE,THAT IN THE SUBSEQUENT TWO YEARS FAA HAD ALLOWED THE CLA IM. 17.1. WHILE DECIDING THE APPEAL FILED BY THE ASSESSEE FOR THE AY.2003-04 FOR THE IDENTICAL ISSUE,AT PARAGRAPH NO.9.1.OF OUR PRESENT ORDER,WE HAVE ALLOW ED ITS APPEAL.FOLLOWING THE SAME,WE DECIDE THE ISSUE OF RURAL DEVELOPMENT AGAINST THE AO FOR T HE BOTH THE AY.S. NOW,WE WILL DISCUSS THE INDIVIDUA L GROUNDS TAKEN BY THE AO FOR PARTICULAR AY.S. ITA/616/MUM/2009-AY.2003-04: 18. GROUND NO.1 FOR THE YEAR IS ABOUT DELETION OF EXPEN DITURE INCURRED ON LIVE STOCK OF RS. 2.80 LAKHS.BEFORE US,DR SUPPORTED THE ORDER OF THE AO. A R STATED THAT CLAIM MADE BY THE ASSESSEE HAD ITA/660-62,616-18& CO-AYS.03-04-05-06,ADITA BIRLA N OVA LTD. 18 BEEN ALLOWED BY THE FAA FROM ASSESSMENT YEAR 1998-9 9 ONWARDS AND DEPARTMENT HAD ACCEPTED THE SAME.HE REFERRED TO THE ORDER OF BIRLA NGK INSU LATORS PVT. LTD.(ITA NO.3239/ MUM/2006- AY.2003-04,DATED 29.02.2012). 18.1. WE FIND THAT IN THE CASE OF BIRLA NGK INSULATORS PV T. LTD. (SUPRA) HAS BEEN DISCUSSED AS UNDER: '43.GROUND NO.2, IN REVENUES APPEAL IS ON T HE ISSUE OF DISALLOWANCE OF MAINTENANCE OF LIVESTOCK. 44.THE ASSESSING OFFICER DISALLOWED THE EXPEND ITURE ON THE GROUND THAT THE EXPENDITURE ON THE GROUND THAT MAINTENANCE OF LIVESTOCK AND SALE O F MILK IS NOT THE BUSINESS OF THE ASSESSEE. 45.ON APPEAL, THE COMMISSIONER (APPEALS) ALLOW ED THE ALLOWED THE EXPENDITURE HOLDING AS FOLLOWS:- 57. THE SUBMISSION MADE BY THE APPELLANTS REPRESENTATIVE HAS BEEN CONSIDERED. CLEARLY THE APPELLANT HAS IN THE INSTANT CASE INCURRED ADDITION AL EXPENDITURE AS A STAFF WELFARE MEASURE AT ONE OF THE UNITS BIRLA NGK INSULATORS P. LTD. OW NED BY IT WHERE THE MANUFACTURING HAS BEEN CARRIED OUT. THE ADDITIONAL EXPENDITURE INCURRED THAT WAS CLAIMED AS DEDUCTION WHICH WAS OVER AND ABOVE THE AMOUNT RECOVERED IS, THER EFORE, TO BE ACCEPTED AS HAVING BEEN INCURRED OUT OF COMMERCIAL EXPEDIENCY MAKING THE AMOUNT ELIGIBLE FOR DEDUCTION. THEREFORE, IN LINE WITH THE DECISIONS TAKEN I N THE PRECEDING ASSESSMENT YEARS IN APPEAL, IN THIS ASSESSMENT YEAR AS WELL, THE EXPENDITURE OF ` 2,80,263, HAS TO BE HELD AS ALLOWABLE. CONSEQUENTLY,THE DISALLOWANCE MADE BY THE ASSE SSING OFFICER IS DELETED. APPEAL IN RESPECT OF GROUND NO.4, IS DISPOSED OFF AS ALLOWED. 46. AFTER HEARING THE RIVAL CONTENTIONS, WE FI ND THAT THE ASSESSEE WAS PROVIDING MILK TO T HE EMPLOYEES AND WORKERS AT SUBSIDISED RATES.THE MILK WAS ALSO USED FOR PREPARING TEA/COFFEE FOR THE STAFF/VISITORS.THE ASSESSEE HAD MAINTAIN ED CERTAIN COWS TO ENSURE GOOD QUALITY OF MILK AND HAD INCURRED CERTAIN EXPENDITURE ON MAINTENANCE THEREOF. THE MILK WAS SOLD AT SUBSIDISED RATES TO THE EMPLOYEES. THERE WAS A NET DEFICIT AND THIS WAS CHARGED TO THE PROFIT & LOSS ACCOUNT. ON THESE FACTS, WE UPHOLD THE FINDI NGS OF THE COMMISSIONER (APPEALS) THAT THE EXPENDITURE INCURRED IN QUESTION IS INCURRED OUT OF COMMERCIAL EXPEDIENCY AND, HENCE, HAS TO BE ALLOWED AS A DEDUCTION . RESPECTFULLY FOLLOWING THE SAME,GROUND NO.1 IS DECI DED AGAINST THE AO. 19. NEXT GROUND(GOA-3) OF APPEAL IS ABOUT DEDUCTION U/S 80 M OF THE ACT AND THE AMOUNT INVOLVED IS RS.5.43 LAKHS.BEFORE US,DR SUPPORTED TH E ORDER OF THE AO. AR CONCEDED THAT MATTER WAS TO BE DECIDED AGAINST THE ASSESSEE-COMPANY,HENC E THE GROUND IS DECIDED IN FAVOUR OF THE AO. 20. GROUND NO.4 DEALS WITH DEDUCTION U/S 80HHC AMOUNT I NVOLVED IS RS. 12.16 CRORES.DURING THE ASSESSMENT PROCEEDINGS,THE AO REDUCED DEDUCTION U/S .80IB FOR CALCULATING DEDUCTION U/S.80 HHC.AS A CONSEQUENCE,IT AFFECTED THE CALCULATION OF BOOK PROFIT U/S.115JA OF THE ACT.THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA.HE DIRE CTED THE AO NOT TO ADJUST DEDUCTION U/S. 80IB FOR CALCULATING BOOK PROFIT U/S.115JB FOLLOWING THE DECISION OF JASHAN TEXTILE MILLS PVT. LTD.(ITA/790/MUM/2006). ITA/660-62,616-18& CO-AYS.03-04-05-06,ADITA BIRLA N OVA LTD. 19 20.1. BEFORE US,THE DR SUPPORTED THE ORDER OF THE AO.THE AR RELIED UPON THE CASE OF AJANTA PHRAMA LTD.(291ITR380).WE FIND THAT IN THE MATTER O F AJANTA PHARMA LTD.(SUPRA)HONBLE APEX COURT HAS DISCUSSED THE ISSUE AS UNDER: SECTION 80AB OF THE INCOME-TAX ACT, 1961, SPECIFYI NG THAT PROFITS ARE THOSE AS DETERMINED FOR THE PURPOSE OF THE ACT, WILL APPLY FOR DETERMINING PROF ITS FROM EXPORT BUSINESS FOR THE PURPOSES OF THE DEDUCTION UNDER SECTION 80HHC. FOLLOWING THE ABOVE DECISION,WE CONFIRM THE ORDER O F THE FAA AND DECIDE GROUND NO.4 AGAINST THE AO. ITA/618/MUM/2009-AY. 2005-06 21. GROUND NO.3 IS ABOUT DISALLOWANCE U/S 14A OF THE AC T,AMOUNTING TO RS. 1.69 LAKHS. BEFORE US,BOTH THE REPRESENTATIVES ADMITTED THAT TRIBUNAL HAD DISMISSED THE APPEAL FILED BY THE AO ON THE IDENTICAL ISSUE,WHILE DECIDING THE APPEAL FOR THE A Y 2002-03. 21.1. WE FIND THAT AT PAGE 19-20 OF THE ORDER FOR THE AY 2002-03 (SUPRA) ISSUE OF DISALLOWANCE U/S 14A WAS DISCUSSED AS UNDER: '32.GROUND NO. 2 RELATES TO THE RESTRICTION O F THE DISALLOWANCE MADE U/S.14A OF THE ACT. 32.1.DURING THE COURSE OF THE ASSESSMENT PROCEEDING S, THE AO NOTICED THAT THE ASSESSEE HAS CLAIMED THE ENTIRE DIVIDEND INCOME HAS BEEN CLAIMED AS EXEMPT. INVOKING THE PROVISIONS OF SEC.14A, THE AO ASKED THE ASSESSEE TO JUSTIFY WHY THE INTEREST EXPENSES INCURRED SHOULD N OT BE APPORTIONED TOWARDS EARNING OF TAX FREE IN COME. IT WAS EXPLAINED THAT DURING THE YEAR, THE ASSESSEE HAS RECEIVED DIVIDENDOF RS. 5.04 CRORE S OUT OF 14.80 CRORES HAS BEEN RECEIVED FROM THE GROUP COMPANIES FOR WHICH THE ASSESSEE HAS NOT INCURRED ANY COST. IT WAS FURTHER EXPLAINED THAT THE INVESTMENTS HAVE BEEN MADE OUT OF IN TERNAL ACCRUALS OF THE COMPANY. THE STATEMENT OF THE ASSESSEE DID NOT FIND FAVOUR FROM THE AO WHO WENT ON TO COMPUTE THE DISALLOWANCE U/S.14A AT RS. 18,43,425/-. 32.2.IT WAS EXPLAINED BEFORE THE LD. CIT(A) T HAT TOTAL AMOUNT OF INVESTMENT IN GROUP COMPANY IS RS.54.30 CRORES. IT WAS FURTHER EXP LAINED THAT IN RESPECT OF INVESTMENT IN GROUP COMPANIES, THE ASSESSEE DOES NOT HAVE TO INCUR ANY EXPENDITURE AT ALL.THE LD. CIT (A) WAS CONVINCED WITH THIS EXPLANATION OF THE ASSESSEE. HO WEVER, IN RESPECT OF BALANCE INVESTMENT, THE LD.CIT(A) WAS OF THE OPINION THAT DISALLOWANCE U/S. . 14A NEED TO BE MADE. THE LD.CIT(A) COMPUTED SUCH DISALLOWANCE AS % OF THE AVERAGE INV ESTMENT AND RESTRICT THE DISALLOWANCE U/S.. 14A TO RS. 1,87,954/-. 32.3. BEFORE US, THE LD. DR COULD NOT BRING ANY DIS TINGUISHING FACTS OR DECISION IN FAVOUR OF THE REVENUE. THE LD. DR RELIED UPON THE FINDINGS OF THE AO. 32.4.THE LD. SR. COUNSEL FOR THE ASSESSEE FAIRLY CO NCEDED TO THE FINDINGS OF THE LD. CIT(A). 32.5.WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AU THORITIES BELOW. WE FIND THAT THE MAJOR INVESTMENT OF THE ASSESSEE IS IN ITS GROUP COMPANIE S. AFTER CONSIDERING THIS FACTS, THE LD. CIT(A ) HAS RESTRICTED THE DISALLOWANCE TO RS. 1.87 LAKHS . WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). GROUND NO. 2 IS ACCORDINGLY DISMISSED. RESPECTFULLY, FOLLOWING THE ORDER FOR THE YEAR 200 2-03,GROUND NO.3 IS DECIDED AGAINST THE AO. C.O. NO.117,118,119 OF 2009. ITA/660-62,616-18& CO-AYS.03-04-05-06,ADITA BIRLA N OVA LTD. 20 BEFORE US,AR AGREED THAT GROUNDS OF APPEAL OF CROSS OBJECTIONS FOR ALL THE THREE YEARS WERE INFRUCTUOUS.THEREFORE,WE DISMISS THE SAME. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE AND THE AO ARE PARTLY ALLOWED AND THE CO.S. FILED BY THE ASSESSEE ARE DISMISSED. 0*1 #)* *' #)* - 2 3 , 4 5 6*1 7 , * 89 : #)* %&' #7 ; * 89. ORDER PRONOUNCED IN THE OPEN COURT ON 1ST AUGUST, 2 014 . 6 , ./$ 5 ;# 1 VXLR , 201 4 / , 4 = SD/- SD/- ( / VIJAY PAL RAO ) ( ! / RAJENDRA ) /JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, ;# / DATE: 01.08.2014 S.K. 6 6 6 6 , ,, , %* %* %* %* > $* > $* > $* > $* / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / '( 2. RESPONDENT / %&'( 3. THE CONCERNED CIT(A)/ ? @ , 4. THE CONCERNED CIT / ? @ 5. DR I BENCH, ITAT, MUMBAI / A4 %*# , . . . 6. GUARD FILE/ 4 0 &* &* &* &* %* %*%* %* //TRUE COPY// 6# / BY ORDER, B / 8 DY./ASST. REGISTRAR , /ITAT, MUMBAI