Paswara Electronics (P) Ltd., New Delhi V. ITO, New Delhi

ITA 71/DEL/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90947 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 17-02-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 06-01-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY SENIOR
• Keywords: Revenue expenditure; Capital expenditure
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F: NEW DELHI BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER AND SHRI C.M. GARG, JUDICIAL MEMBER ITA NO.71/DEL/2011 (ASSESSMENT YEAR : 2007-08) M/S. PASWARA ELECTRONICS (P) LTD., VS. ITO, WARD 1 4 (2), 15, 2 ND FLOOR, NATIONAL PARK, NEW DELHI. LAJPAT NAGAR IV, NEW DELHI. (PAN : AADCP5906G) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VED JAIN, ADVOCATE REVENUE BY : SHRI VIKRAM SAHAY, SENIOR DR DATE OF HEARING : 17.02.2015 DATE OF PRONOUNCEMENT : .04.2015 O R D E R PER C.M. GARG, JUDICIAL MEMBER : THIS APPEAL HAS BEEN DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-XVII, NEW DELHI DATED 29.10.20 10 IN APPEAL NO.192/09- 10 FOR ASSESSMENT YEAR 2007-08. 2. THE GROUNDS NO.1 AND 5 OF THE ASSESSEE ARE GENER AL IN NATURE WHICH NEED NO ADJUDICATION. THE REMAINING GROUNDS FOR ADJUDIC ATION READ AS UNDER :- 2(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, L D. CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE AC TION OF THE ASSESSING OFFICER IN RESTRICTING THE DEDUCTION UNDE R SECTION 80IC 2 ITA NO.71/DEL/2011 OF THE ACT TO RS.83,71,889/- AS AGAINST RS.5,75,33, 565/- CLAIMED BY THE ASSESSEE AND ALLOWABLE UNDER THE PROVISION O F THE ACT. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD . CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE AC TION OF THE ASSESSING OFFICER BY HOLDING THAT PROFIT ON SALE OF UNDERTAKING IS NOT INCOME DERIVED BY AN UNDERTAKING FROM ANY BUSIN ESS AND AS SUCH NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IC OF THE ACT. (III) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE AC TION OF THE ASSESSING OFFICER BY HOLDING THAT INTEREST INCOME F ROM FDR OF RS.1,02,347/- IS NOT INCOME THEREBY NOT ALLOWING D EDUCTION UNDER SECTION 80IC ON ACCOUNT OF INTEREST OF RS.1,0 2,347/-. (IV) N THE FACTS AND CIRCUMSTANCES OF THE CASE, LD . CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE AC TION OF THE ASSESSING OFFICER IN IGNORING THE PROVISIONS OF THE SECTION 80IC WHICH IS QUITE DISTINCT, DESPITE THE ASSESSEE BRING ING TO HIS NOTICE THE JUDGEMENT OF GAUHATI HIGH COURT IN THE CASE OF PANCHARATNA CEMENT (P) LTD VS UNION OF INDIA (2009) 317 ITR 259 . 3(I). ON THE FACTS AND CIRCUMSTANCES OF THE CASE, L D. CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE AC TION OF THE ASSESSING OFFICER IN COMPUTING SHORT-TERM CAPITAL G AIN AT RS.5,14,80,518/- AGAINST RS.4,90,59,320/- COMPUTED AS SLUMP SALE BY THE ASSESSEE. (II) THAT THE ABOVE-SAID ADDITION HAS BEEN MADE RE JECTING THE EXPLANATION OF THE ASSESSEE THAT THE SALE WAS A SLU MP SALE. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT (A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE DI SALLOWANCE OF AN AMOUNT OF RS.6,47,197/- ON ACCOUNT OF EXPENSES I NCURRED BY THE ASSESSEE. 3. BRIEFLY STATED THE FACTS GIVING RISE TO THIS APP EAL ARE THAT THE CASE WAS SELECTED FOR SCRUTINY AND A NOTICE U/S 143(2) OF TH E INCOME-TAX ACT, 1961 (FOR SHORT, THE ACT) WAS ISSUED TO THE ASSESSEE. THE AO NOTED THAT FROM THE DETAILS 3 ITA NO.71/DEL/2011 FILED IN RESPECT OF OTHER INCOME, IT WAS REVEALED T HAT THE SAME CONSISTED OF PROFIT ON THE SALE OF ASSET AND BANK INTEREST. ON SPECIFI C QUERY FROM THE AO, THE ASSESSEE VIDE LETTER DATED 27.11.2009 FILED A REVIS ED COMPUTATION OF INCOME WHEREIN SHORT TERM CAPITAL GAIN OF RS.4,90,59,329.0 4 HAS BEEN DECLARED AND CLAIM OF DEDUCTION U/S 80IC OF THE ACT HAS BEEN REV ISED TO RS.84,74,263.87. AGAIN ON 07.12.2009, THE LD. AR OF THE ASSESSEE COM PANY FILED ANOTHER REVISED COMPUTATION OF TOTAL INCOME WHEREIN THE SAID SHORT TERM CAPITAL GAIN ON SALE OF ASSETS WAS SHOWN AT RS.4,90,59,320.54 AND INCOME FR OM OTHER SOURCES WAS SHOWN AT RS.1,02,347/- AND THE CLAIM OF DEDUCTION U /S 80IC OF THE ACT WAS REVISED AT RS.83,71,889.87. THE ASSESSEE ALSO EXPL AINED THAT ASSESSEE SOLD ITS BUSINESS AS SLUMP SALE AND ADJUSTED THE TOTAL CONSI DERATION AGAINST THE EXISTING ASSETS. THE AO REJECTED THE EXPLANATION OFFERED BY THE ASSESSEE AND HELD THAT THE SEPARATE BILLS WERE RAISED FOR EACH AND EVERY A SSETS WHICH CLEARLY PROVED THAT IT WAS NOT A SLUMP SALE AND THE AO CALCULATED THE SHORT TERM CAPITAL GAIN AT RS.5,14,80,518/-. THE AO ALSO MADE CERTAIN DISALLO WANCES WITH REGARD TO INTEREST FROM FDR AND DISALLOWANCES ON ACCOUNT OF E XPENSES INCURRED BY THE ASSESSEE AND FINALISED, THE ASSESSMENT AT RS.5,22,3 0,062/-. 4. BEING AGGRIEVED BY THE ABOVE ASSESSMENT ORDER, T HE ASSESSEE PREFERRED AN APPEAL BEFORE CIT (A) WHICH WAS ALSO DISMISSED ON A LL THE GROUNDS. NOW, THE EMPTY HANDED ASSESSEE IS BEFORE THIS TRIBUNAL WITH THE GROUNDS AS REPRODUCED HEREIN ABOVE. 4 ITA NO.71/DEL/2011 GROUND NO.2(I), (II) & (IV) 5. APROPOS THESE GROUNDS, THE LD. COUNSEL OF THE AS SESSEE PLACING RELIANCE ON THE DECISION OF HONBLE GAUHATI HIGH COURT IN TH E CASE OF PANCHARATNA CEMENT P. LTD. VS. UOI - 317 ITR 259 (GAU.) SUBMITT ED THAT THE INCOME FROM PROFIT ON SALE OF ASSETS AND INCOME FROM INTEREST O N FIXED DEPOSIT ARE PROFITS DERIVED FROM THE BUSINESS IN WHICH THE INDUSTRIAL U NDERTAKING IS ENGAGED AND, THEREFORE, SUCH PROFITS AND GAINS NEED NOT ESSENTIA LLY BE DERIVED FROM INDUSTRIAL UNDERTAKING. THE LD. COUNSEL ALSO CONTENDED THAT T HEY ARE ELIGIBLE FOR DEDUCTION U/S 80IC OF THE ACT. REPLYING TO THE ABOVE, THE LD . DEPARTMENTAL REPRESENTATIVE (DR) CONTENDED THAT WHEN THE ASSESSEE ITSELF IS SHO WING THE INCOME FROM SALE OF BUSINESS AS SHORT TERM CAPITAL GAIN IN THE REVISED COMPUTATION OF INCOME FILED ON 27.11.2009 AND 07.12.2009 THEN THE SAME CANNOT BE H ELD ENTITLED FOR DEDUCTION U/S 80IC OF THE ACT. THE LD. DR POINTED OUT THAT A SSESSEE ITSELF HAS REVISED ITS CLAIM OF DEDUCTION U/S 80IC OF THE ACT AT RS.83,71, 889.87 THEN ASSESSEE CANNOT CLAIM THE INCOME FROM SALE OF BUSINESS AND EARNED O N INTEREST FROM FIXED DEPOSITS AS ELIGIBLE U/S 80IC OF THE ACT. 5.1 THE LD. DR ALSO CONTENDED THAT SEPARATE BILLS W ERE RAISED FOR EACH AND EVERY ASSET WHICH CLEARLY PROVES THAT THE SALE OF B USINESS BY THE ASSESSEE WAS NOT A SLUMP SALE AS DEFINED IN SECTION 2(42C) OF TH E ACT, HENCE, THE PROFIT SO DERIVED AS SHORT TERM CAPITAL GAIN IS NOT ELIGIBLE FOR DEDUCTION U/S 80IC OF THE ACT. 5 ITA NO.71/DEL/2011 6. ON CAREFUL CONSIDERATION OF THE ABOVE SUBMISSION S, AT THE VERY OUTSET, WE FIND IT APPROPRIATE TO CONSIDER THE RATIO OF THE DE CISION OF HONBLE GAUHATI HIGH COURT IN THE CASE OF PANCHARATNA CEMENT P. LTD., SU PRA , WHEREIN IT HAS BEEN HELD THAT THE WORDS DERIVED BY AN UNDERTAKING OR AN ENT ERPRISE FROM ANY BUSINESS IN SECTION 80IC HAVING REGARD TO THE PLENITUDE OF E XPENSE WOULD TAKE IN THEIR FOLD PROFITS AND GAINS MADE BY ANY ACTIVITY ASSOCIA BLE WITH THE BUSINESS IT UNDERTAKES AND WHICH FORMS THE SUBJECT MATTER OF AS SESSMENT UNDER THE ACT TO DETERMINE ITS TAX LIABILITY THEREUNDER. THAT WAS T HE CASE OF REASSESSMENT U/S 147 OF THE ACT ON THE GROUND THAT TRANSPORT AND INSURAN CE SUBSIDIES RECEIVED FROM GOVERNMENT ARE NOT PROFITS AND GAINS DERIVED FROM I NDUSTRIAL UNDERTAKING BUT INCIDENTAL. THE FACTS OF THE PRESENT CASE ARE CLEA RLY DISTINGUISHABLE AS IN THE PRESENT CASE IN HAND, THE ASSESSEE COMPANY DERIVED SHORT TERM CAPITAL GAIN FROM SALE OF ITS BUSINESS ASSETS, THEREFORE, WE RESPECTF ULLY HOLD THAT THE BENEFIT OF THE RATIO OF THIS DECISION OF HONBLE GAUHATI HIGH COUR T IS NOT AVAILABLE FOR THE ASSESSEE. AS WE HAVE ALREADY POINTED OUT THAT THE ASSESSEE, DURING THE ASSESSMENT PROCEEDINGS, REVISED ITS COMPUTATION OF INCOME TWICE AND FINALLY, CLAIMED DEDUCTION U/S 80IC OF THE ACT AT RS.83,71,8 89.87 EXCLUDING THE SHORT TERM CAPITAL GAIN EARNED FROM SALE OF BUSINESS ASSE TS. THE LD. COUNSEL OF THE ASSESSEE COULD NOT DEMONSTRATE US THAT THE BUSINESS OF THE ASSESSEE WAS SOLD AS SLUMP SALE AND HENCE, WE ARE INCLINED TO ACCE PT CONCLUSION OF THE REVENUE AUTHORITIES THAT SEPARATE BILLS WERE RAISED FOR EVERY ASSET, 6 ITA NO.71/DEL/2011 THEREFORE, THE SALE OF BUSINESS IN PIECEMEAL CANNOT BE HELD AS SLUMP SALE BY THE ASSESSEE AS DEFINED IN SECTION 2(42C) OF THE ACT. 6.1 DERIVING TO THE ACTION OF THE AO WHEREIN THE IN TEREST INCOME FROM FDR OF RS.1,02,347/- WAS ALSO TREATED AS INCOME FROM OT HER SOURCES AND DEDUCTION U/S 80IC OF THE ACT WAS ALSO DISALLOWED THEREON, TH E LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE SUM RECEIVED BY THE ASSESSEE COM PANY FROM INTEREST ON FDR WAS ACCRUED TO THE ASSESSEE AS THE ASSESSEE COMPANY DEPLOYED THE FUNDS RECEIVED FROM THE SALE PROCEEDS INTO SHORT TERM FDR S AND THE INTEREST THEREON WAS ALSO CREDITED TO THE PROFIT AND LOSS ACCOUNT. THE LD. COUNSEL FURTHER POINTED OUT THAT IN BOTH THE INSTANCES, THE INCOME FROM SAL E OF ASSETS AND INCOME FROM FIXED DEPOSITS ARE PROFITS DERIVED FROM THE BUSINES S IN WHICH THE INDUSTRIAL UNDERTAKING IS ENGAGED AND, THEREFORE, SUCH PROFITS AND GAINS NEED NOT ESSENTIALLY, WILL DERIVE FROM THE INDUSTRIAL UNDERT AKING. REPLYING TO THE ABOVE, THE LD. DR SUBMITTED THAT THE PROFIT FROM SALE OF B USINESS ASSETS AND INCOME EARNED FROM FDR BY DEPLOYING FUNDS RECEIVED FROM SA LE OF BUSINESS CANNOT BE HELD ELIGIBLE FOR DEDUCTION U/S 80IC OF THE ACT AS SUCH PROFITS AND GAINS ARE NOT DERIVED FROM BUSINESS OF INDUSTRIAL UNDERTAKING AS REQUIRED FROM ELIGIBILITY U/S 80IC OF THE ACT. THE LD. DR FURTHER POINTED OUT TH AT THE ASSESSEE COMPANY ITSELF HAS EXCLUDED THESE AMOUNTS IN THE REVISED COMPUTATI ON OF TOTAL INCOME FILED BEFORE AO ON 07.12.2009, THEREFORE, THE SAME CANNOT BE CLAIMED AS DEDUCTION U/S 80IC OF THE ACT. 7 ITA NO.71/DEL/2011 6.2 ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS, WE NOTE THAT THE CIT (A) HAS DECIDED THE ISSUE WITH FOLLOWING OBSERVATIONS A ND CONCLUSION :- 2.2. I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE LD. AR AND PERUSED THE ASSESSMENT ORDER PASSED BY THE AO. THE LD. AR TRIED TO DRAW A DISTINCTION IN THE LANGUAGE USED IN SECTION 80LA AND SECTION 80IC .I DO NOT AGREE WITH THE SUBMISSIONS O F LD. AR REGARDING THE INTERPRETATION OF SECTION 80 IC. SECT ION 80 IC IS A SPECIAL PROVISION IN RESPECT OF CERTAIN UNDERTAKING S OR ENTERPRISE IN CERTAIN SPECIAL CATEGORY STATES. THIS SECTION WAS I NSERTED BY THE FINANCE ACT, 2003 W.E.F. 01.04.2004 WITH AN OBJECTI VE TO PROMOTE INDUSTRIALIZATION OF ECONOMICALLY BACKWARD AREAS. T HE MAIN PURPOSE WAS TO PROMOTE INVESTMENT AND EMPLOYMENT IN SUCH AREAS. SUB-SECTION (1) OF SECTION 80 IC PROVIDES FOR THE D EDUCTION IN RESPECT OF GROSS TOTAL INCOME OF AN ASSESSEE FROM A NY BUSINESS REFER TO IN SUB-SECTION (2). SUB-SECTION (2) PROVID ES THAT THE SECTION APPLIES TO ANY UNDERTAKING OR ENTERPRISE WHICH HAS BEGUN OR BEGINS TO MANUFACTURE OR PRODUCE ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE 13 TH SCHEDULE, OR WHICH MANUFACTURES OR PRODUCES ANY ARTICLE OR THING NOT B EING ANY ARTICLE OR THING SPECIFIED IN THE 13 TH SCHEDULE AND UNDERTAKES SUBSTANTIAL EXPANSION DURING THE PERIOD BEGINNING 23 RD DECEMBER, 2002 AND OTHER DATES. SUB-SECTION (4) PROVIDES THE CONDITION S REQUIRED TO BE FULFILLED BY THE UNDERTAKING. IT IS AN ADMITTED FACT THAT THE APPELLANT COMPANY H AS SOLD ITS ENTIRE MANUFACTURING UNIT TO ANOTHER COMPANY. THE P ROFIT EARNED ON ACCOUNT OF SALE OF UNIT CANNOT BE SAID TO BE DER IVED FROM MANUFACTURING OR PRODUCTION OF AN ARTICLE OR THING. THE CASE LAWS RELIED UPON BY THE LD. AR ARE NOT OF MUCH HELP TO T HE APPELLANT AS THEY WERE DECIDED ON DIFFERENT FACTS. THEREFORE, TH EY ARE DISTINGUISHABLE ON FACTS. THE LD. AR HAS PLACED REL IANCE ON THE JUDGEMENT OF HON'BLE GAUHATI HIGH COURT IN THE CASE OF PANCHARATNA CEMENT (P) LTD. VS. UNION OF INDIA (200 9) 317 ITR 259 (GAU). IN THAT CASE, THE APPELLANT COMPANY HAD RECEIVED TRANSPORT SUBSIDY AND INSURANCE SUBSIDY AND SAID AM OUNTS WERE DULY ACCOUNTED FOR AND CREDIT IN THE P&L ACCOUNT. T HE ISSUE IN THAT CASE WAS WHETHER DEDUCTION U/S 80 IC WAS ALLOW ABLE ON THE TRANSPORT SUBSIDY AND INSURANCE SUBSIDY WHICH HAVE BEEN RECEIVED IN THE COURSE OF THE BUSINESS AND CREDITED TO THE P &L ACCOUNT. 8 ITA NO.71/DEL/2011 IN THE CASE UNDER CONSIDERATION, THE ISSUE IS TOTAL LY DIFFERENT BECAUSE THE APPELLANT COMPANY HAS SOLD ITS ENTIRE M ANUFACTURING UNIT. THE VALUATION WAS DONE ITEM WISE. THE INCOME RECEIVED FROM THE SALE OF ITS UNIT CANNOT BE SAID BY ANY STRETCH OF IMAGINATION TO BE RECEIVED FROM MANUFACTURING OR PRODUCE OF AN ART ICLE OR THING. THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. VE NKATESHWARA HATCHERIES (P) LTD. (SC) 237 ITR 174 HAS HELD THAT WORDS TAKE COLOUR FROM CONTEXT IN WHICH THEY ARE USED. THE JUR ISDICTIONAL HIGH COURT IN THE CASE OF AMERICAN HOTEL AND LODGIN G ASSOCIATION EDUCATIONAL INSTITUTE VS. CBDT (DEL) 28 9 ITR 46 HAS HELD THAT THE INTERPRETATION OF THE STATUTE SHOULD BE IN CONFORMITY WITH OBJECT OF PROVISION. THE HON'BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA VS. CIT (2009) 317 ITR 218 HAS HEL D THAT THE CONNOTATION OF THE WORDS 'DERIVED FROM' IS NARROWER AS COMPARED TO WORDS 'ATTRIBUTABLE TO'. BY USING THE EXPRESSION 'DERIVED FROM', PARLIAMENT INTENDED TO COVER SOURCES NOT BEYOND THE FIRST DEGREE. THE HON'BLE APEX COURT IN THE CASE OF NOVOPAN INDIA LTD. VS. COMMISSIONER OF CENTRAL EXCISE 1994 (73) E. L.T. 76 9 HAS HELD THAT WHILE INTERPRETING PROVISION GRANTING EXEMPTIO N, STRICT CONSTRUCTION OF THE STATUTE SHOULD BE ADOPTED. IN T HE INSTANT CASE, THE APPELLANT IS CLAIMING DEDUCTION U/S 80 IC ON TH E SALE OF ITS MANUFACTURING UNIT. THE PROFIT FROM SALE OF A UNIT CANNOT BE TERMED AS DERIVED FROM THE BUSINESS OF MANUFACTURIN G OR PRODUCTION OR AN ARTICLE OR THING. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE IN ITS TOTALITY AND VARIO US JUDICIAL PRONOUNCEMENTS ON THE ISSUE, I HOLD THAT THE AO WAS FULLY JUSTIFIED IN REJECTING THE CLAIM OF THE 'APPELLANT COMPANY. I THEREFORE, CONFIRM THE ADDITION MADE BY THE AO. THI S GROUND OF APPEAL IS REJECTED. 6.3 IN VIEW OF THE ABOVE, FIRSTLY, WE NOTE THAT THE ASSESSEE COMPANY ITSELF HAS SUBMITTED REVISED COMPUTATION OF ITS INCOME BEFORE THE AO TWICE, FIRSTLY ON 27.11.2009 AND SECONDLY ON 07.12.2009, WHEREIN THE SHORT TERM CAPITAL GAIN ON SALE OF ASSETS AND INCOME FROM FDR INTEREST WAS RED UCED FROM THE CLAIM OF DEDUCTION U/S 80IC OF THE ACT. AT THIS JUNCTURE, W E RESPECTFULLY TAKE GUIDANCE FROM THE DECISION OF HONBLE SUPREME COURT IN THE C ASE OF LIBERTY INDIA LTD. (SUPRA) WHEREIN IT WAS HELD THAT THE CONNOTATION OF THE WORDS DERIVED FROM IS 9 ITA NO.71/DEL/2011 NARROWER AS COMPARED TO WORDS ATTRIBUTABLE TO. S PEAKING FOR HONBLE SUPREME COURT, THEIR LORDSHIPS FURTHER OBSERVED THA T BY USING THE EXPRESSION DERIVED FROM, THE PARLIAMENT INTENDED TO COVER SO URCES NOT BEYOND THE FIRST DEGREE BUSINESS ACTIVITIES. FROM THE FACTS EMERGED BEFORE US, IT IS VIVID THAT THE ASSESSEE COMPANY SOLD ITS BUSINESS ASSETS AND RECEI VED SALE CONSIDERATION OF LAND AND BUILDING OF RS.5,75,00,000/-. THE ASSESSE E COMPANY ALSO EARNED INTEREST FROM FDRS BY DEPLOYING SAID AMOUNT OF CONS IDERATION WITH THE BANK IN SHORT TERM FIXED DEPOSIT ACCOUNT. THEREFORE, WE AR E INCLINED TO HOLD THAT SUCH PROFITS AND GAINS FROM SALE OF ASSETS AND INTEREST CANNOT BE HELD AS INCOME DERIVED FROM THE ACTIVITIES OF THE INDUSTRIAL UNDER TAKING ELIGIBLE FOR DEDUCTION U/S 80IC OF THE ACT AND THE WORD DERIVED FROM COV ERS THE SOURCE OF INCOME NOT BEYOND THE FIRST DEGREE ACTIVITIES OF THE BUSIN ESS. HENCE, WE REACH TO A LOGICAL CONCLUSION THAT THE AO AS WELL AS CIT (A) W AS RIGHT IN DISALLOWING CLAIM OF DEDUCTION U/S 80IC OF THE ACT ON THE INCOME FROM SALE OF BUSINESS ASSETS AND INCOME FROM INTEREST ON SHORT TERM FIXED DEPOSITS W ITH THE BANKS. ACCORDINGLY, GROUNDS NO.2(II) & (IV) BEING DE VOID OF MERITS ARE DISMISSED. GROUNDS NO.3(I) & (II) 7. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT T HE CIT (A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN COMPUTING SHORT TERM CAPITAL GAIN AT RS.5,14,80,518/- AGAINST RS.4,90,59 ,320/- COMPUTED AS SLUMP SALE OF THE ASSESSEE. THE LD. COUNSEL VEHEMENTLY C ONTENDED THAT THE ABOVE SAID 10 ITA NO.71/DEL/2011 ADDITION HAS BEEN MADE REJECTING THE EXPLANATION OF THE ASSESSEE THAT THE SALE WAS A SLUMP SALE. REPLYING TO THE ABOVE, THE LD. D R TOOK US THROUGH DEFINITION OF SLUMP SALE AS MENTIONED IN SECTION 2(42C) OF THE ACT AND SUBMITTED THAT WHEN ASSESSEE HAS RAISED SEPARATE BILLS FOR EACH AN D EVERY ASSET THEN IT CANNOT BE HELD THAT ASSESSEE TRANSFERRED ITS BUSINESS ASSETS AS A RESULT OF SALE OF A LUMP SUM CONSIDERATION WITHOUT VALUES BEING ASSIGNED TO THE INDIVIDUAL CONCERN AND LIABILITIES IN SUCH SALE. THE LD. DR ALSO POINTED OUT THAT IN THE LETTER DATED 19.02.2009, THE ASSESSEE EXPLAINED THAT THE ASSESSE E COMPANY SOLD ITS LAND AND BUILDING ALONG WITH ALL FURNITURE, FIXTURES AND FIT TINGS FOR A LUMP SUM CONSIDERATION WITHOUT ASSIGNING VALUE OF INDIVIDUAL ASSETS, THEREFORE, BENEFIT OF SECTION 50B OF THE ACT IS AVAILABLE TO THE ASSESSEE COMPANY BUT THIS EXPLANATION COULD NOT BE SUBSTANTIATED BY THE ASSESSEE. THE LD . DR SUPPORTING THE ASSESSMENT ORDER SUBMITTED THAT THE ASSESSEE COMPAN Y RAISED SEPARATE BILLS FOR EACH AND EVERY ASSET STATING THEREIN VALUE OF SALE SEPARATELY ASSIGNED TO EVERY ASSET, THEREFORE, THE SALE OF ASSETS BY THE ASSESSE E COMPANY CANNOT BE HELD AS SLUMP SALE. 8. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS, W E ARE INCLUDED TO ACCEPT CONCLUSION OF THE AUTHORITIES BELOW THAT SALE OF AS SETS BY THE ASSESSEE COMPANY WAS NOT A SLUMP SALE IN THE LIGHT OF DEFINITION GIV EN BY THE STATUTE TO THE SLUMP SALE IN SECTION 2(42C) OF THE ACT. THEREFORE, WE U PHOLD THE SAME AND GROUNDS NO.3(I) AND (II) OF THE ASSESSEE BEING DE VOID OF M ERITS ARE ALSO DISMISSED. 11 ITA NO.71/DEL/2011 GROUND NO.4 9. APROPOS GROUND NO.4, THE LD. COUNSEL OF THE ASSE SSEE REITERATING ITS WRITTEN SUBMISSIONS SUBMITTED THAT AS PER DECISION OF HONB LE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF CIT VS. HUGHES ESCORT COMMU NICATION LTD. 311 ITR 253, THE EXPENSES INCURRED IN THE PREVIOUS YEAR, PR IOR TO THE DATE OF COMMENCEMENT OF THE BUSINESS BUT AFTER THE SETTING UP OF ITS BUSINESS, WHICH TWO DATES NEED NOT BE THE SAME, WOULD BE DEDUCTIBLE AS REVENUE EXPENDITURE. THE LD. COUNSEL ALSO PLACED RELIANCE ON THE DECISIO N OF HONBLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. WHIRLPOOL OF INDIA LTD . AND SUBMITTED THAT THE PREREQUISITE FOR ALLOWABILITY OF EXPENDITURE IN THE CASE OF NEWLY SET UP BUSINESS IS NOT THE COMMENCEMENT OF COMMERCIAL PRODUCTION BU T SETTING UP OF THE BUSINESS AND, THEREFORE, AN AMOUNT OF RS.6,47,197/- ON ACCOUNT OF EXPENSES INCURRED BY THE ASSESSEE DURING THE RELEVANT PERIOD SHOULD HAVE BEEN ALLOWED AS REVENUE EXPENDITURE. 10. REPLYING TO THE ABOVE, THE LD. DR POINTED OUT T HAT THE ASSESSEE HAS DEBITED IMPUGNED SUM TOWARDS INDIRECT EXPENSES PERT AINING TO DECEMBER 2006 TO MARCH 2007 WHICH WERE NOT ALLOWABLE AS EXPENSES AS THE COMPANY SOLD ALMOST ENTIRE ALL ITS ASSETS AND PURCHASED NEW ONES IN THE PROCESS OF ESTABLISHING AN ENTIRELY NEW ESTABLISHMENT. THEREFORE, INDIRECT EXPENSES FOR THE MONTH OF DECEMBER 2006 TO MARCH 2007 CANNOT BE ALLOWED AS RE VENUE EXPENDITURE AGAINST THE INCOME EARNED. 12 ITA NO.71/DEL/2011 11. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS, WE NOTE THAT THE CIT (A) DECLINED TO ALLOW GROUND OF ASSESSEE ON THIS ISSUE WITH FOLLOWING OBSERVATIONS AND CONCLUSIONS :- 3.2. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F THE LD. AR AND FINDINGS OF THE AO AS GIVEN IN THE ASSESSMENT O RDER. THE AO HAS GIVEN A CATEGORICAL FINDING THAT THE APPELLANT COMPANY HAS SOLD ITS INDUSTRIAL LAND AT KHASRA NO. 158 ADMEASURING 8 .6179 HECTARES SITUATED AT VILLAGE RAIPUR, BHAGWANPUR, TEHSIL ROOR KI, DISTRICT HARIDWAR TOGETHER WITH THE STRUCTURE ON THE SAID PL OT OF LAND FOR RS.5,75,00,000/-. THE PERUSAL OF MOU DATED 16.11.2 006 MADE BETWEEN THE APPELLANT COMPANY AND MIRC ELECTRONICS LTD. REVEALS THAT THE APPELLANT WAS REQUIRED TO HANDOVER THE PLO T WITH OTHER STRUCTURE AS A VACANT PLOT. PARA 10 OF THE MOU REV EALS THAT THE MIRC ELECTRONICS LTD. WAS INTENDING TO SETUP A NEW INDUSTRIAL UNDERTAKING AT THE SAID PLOT OF LAND. THEREFORE, IT CANNOT BE SAID THAT THE APPELLANT HAS SOLD ITS UNDERTAKING AS A SL UMP SALE. SECTION 2(42C} OF THE I.T. ACT, 1961 DEFINES THE SLUMP SALE /TO MEAN THE TRANSFER OF ONE OR MORE UNDERTAKINGS AS A RESULT OF THE SALE FOR A LUMP SUM CONSIDERATION WITHOUT VALUES BEING ASSIGNE D TO THE INDIVIDUAL ASSETS AND LIABILITIES IN THE SUCH SALES . IT IS NOTED THAT THE APPELLANT HAS SOLD PLOT OF LAND AND STRUCTURE FOR R S.5,75,00,000/- BY A SEPARATE AGREEMENT WHICH DOES NOT INCLUDE PLAN T & MACHINERY AND OTHER ASSETS. IN ADDITION TO THE PLOT OF LAND AND STRUCTURE, THE APPELLANT ALSO SOLD THE OTHER ASSETS SUCH AS' PLANT AND MACHINERY FOR RS.23,65,000, COMPUTER FOR RS.80,000/ - FURNITURE & FIXTURE FOR RS.45,000/- AND OFFICE EQUIPMENT FOR RS .10,000/-. IS FURTHER NOTED THAT SEPARATE BILLS' WERE RAISED FOR EACH AND EVERY ASSET, WHICH CLEARLY PROVES THAT IT IS NOT A SLUMP SALE. IT IS FURTHER NOTED THAT IN THE SCHEDULE OF ASSETS THE APPELLANT COMPANY HAS CLAIMED LOSS ON SALE OF PLANT AND MACHINERY AT RS.5 ,99,829/-, ELECTRIC INSTALLATION AT RS.3,50,845/- FURNITURE & FIXTURE AT RS.60,25,246/-, COMPUTERS AT RS.1,50,980/-, GENERAT OR AT RS.4,07,000/-, TRANSFORMS AT RS.1,50,581/-, MOBILE AT RS.6,072/- AND OFFICE EQUIPMENT AT RS.23,202/-. DURING THE HEA RING OF APPEAL THE LD. AR HAS NOT SUBMITTED ANY ARGUMENT AND EVIDE NCE TO REBUT THE FINDINGS OF THE AO TO THE EFFECT THAT IT WAS NO T A SLUMP SALE. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE , I HOLD THAT THE AO WAS JUSTIFIED IN REJECTING THE ALTERNATE CLAIM O F THE APPELLANT REGARDING SHORT TERM CAPITAL GAIN. THEREFORE, I DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE AO. REGARDING THE CLA IM OF 13 ITA NO.71/DEL/2011 RS.6,47,197/- TO BE REVENUE EXPENDITURE, THE APPELL ANT HAS NOT BEEN ABLE TO SUBSTANTIATE ITS CLAIM THAT THESE EXPE NSES WERE REVENUE EXPENSES. IT HAS BEEN ADMITTED BY THE APPEL LANT THAT THESE EXPENSES WERE INCURRED TOWARDS SETTING UP OF A NEW UNIT. THEREFORE, THE SAME WERE RIGHTLY TREATED BY THE AO AS CAPITAL EXPENDITURE. IN VIEW OF THE ABOVE DISCUSSION, THE A CTION OF THE AO IS CONFIRMED. THIS GROUND OF APPEAL IS REJECTED. 12. IN VIEW OF ABOVE, SINCE THE ASSESSEE ITSELF ADM ITTED BEFORE THE CIT (A) THAT THE IMPUGNED EXPENDITURE WAS INCURRED TOWARDS SETTING UP OF A NEW UNIT AND THEREFORE, THE SAME WERE RIGHTLY TREATED BY THE AO AS CAPITAL EXPENDITURE. WE FURTHER OBSERVE THAT THE ASSESSEE COULD NOT SUBS TANTIATED ITS CLAIM THAT THE ASSESSEE INCURRED SAID EXPENDITURE, WHICH WAS INCUR RED FROM DECEMBER 2006 TO MARCH 2007, WAS ACTUALLY MADE AS REVENUE EXPENDITUR E AGAINST THE INCOME EARNED DURING THE YEAR CONSIDERATION. THUS, WE ARE OF THE CONSIDERED VIEW THAT WHEN THE ASSESSEE ITSELF ADMITTED THAT THE EXPENDIT URE IN QUESTION WAS INCURRED TOWARDS SETTING UP OF A NEW UNIT THEN THE SAME CANN OT BE ALLOWED AS EXPENDITURE TOWARDS THE BUSINESS WHICH WAS CLOSED AND ASSETS WE RE SOLD ON 16.11.2006. THEN, THE EXPENDITURE INCURRED SUBSEQUENTLY FROM DE CEMBER 2006 TO MARCH 2007 CANNOT BE TREATED AS REVENUE EXPENDITURE THAT TOO WHEN THE ASSESSEE ITSELF ADMIT THAT THE IMPUGNED EXPENDITURE WAS INCURRED TO WARDS SETTING UP OF A NEW UNIT AND THUS, WE ALSO UPHOLD THE ACTION OF THE REV ENUE AUTHORITIES, TREATING THE SAME AS CAPITAL EXPENDITURE. ACCORDINGLY, WE ARE U NABLE TO SEE ANY AMBIGUITY, 14 ITA NO.71/DEL/2011 PERVERSITY OR ANY OTHER VALID REASON TO INTERFERE W ITH THE IMPUGNED ORDER OF THE CIT (A). HENCE, GROUND NO.4 OF THE ASSESSEE IS ALS O DISALLOWED. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN OPEN COURT ON THIS 17 TH DAY OF APRIL, 2015. SD/- SD/- (B.C. MEENA) (C.M. GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 17 TH DAY OF APRIL, 2015 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A), MEERUT. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.