DCIT Cir 6(3), V. M/s Glaxo India Ltd,

ITA 7125/MUM/2003

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3476 (ITAT-MUMBAI)
• Duration Of Justice: 9 year(s) 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 17-04-2013
• Assessment Year: misc
• Appeal Filed On: 03-11-2003
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GIRIJA DAYAL
• Assessee Lawyers: P J PARDIWALLA
• Keywords: Business income; Depreciation; Opportunity of being heard; Retrospective amendment; Bad and doubtful debts; Capital expenditure
• Section: 43B; 143(3); 80HHC; 37(1); 28

Judgement Text

ITA NOS.6158 AND 7125 OF 2003 AND CO NO.396 OF 2004 GLAXO SMITHKLINE MUMBAI PAGE 1 OF 33 IN THE INCOME TAX APPELLATE TRIBUNAL 'E' BENCH, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO.6158/MUM/2003 (ASSESSMENT YEAR: 1998-99) GLAXO SMITHKLINE PHARMACEUTICALS LTD (FORMERLY GLAXO INDIA LTD) 252 DR.ANNIE BESANT ROAD VS DY.CIT 6(3) 522, AAYAKAR BHAVAN MK ROAD MUMBAI 400020 WORLI, MUMBAI 400025 PAN NO: AAACG4414B (APPELLANT) (RESPONDENT) ITA NO.7125 & 7206/MUM/2003 ( ASSESSMENT YEAR: 1998-99) DY. CIT 6(3) 522, AAYAKAR BHAVAN MK ROAD MUMBAI 400020 VS GLAXO SMITHKLINE PHARMACEUTICALS LTD (FORMERLY GLAXO INDIA LTD) DR.ANNIE BESANT ROAD WORLI, MUMBAI 400025 PAN NO: AAACG4414B (APPELLANT) (RESPONDENT) C.O. NO.396/MUM/2004 (ARISING OUT OF ITA NO. 7125/MUM/2003) GLAXO SMITHKLINE PHARMACEUTICALS LTD (FORMERLY GLAXO INDIA LTD) DR.ANNIE BESANT ROAD VS DY. CIT 6(3) 522, AAYAKAR BHAVAN MK ROAD MUMBAI 400020 WORLI, MUMBAI 400025 PAN NO: AAACG4414B (CROSS OBJECTOR) (RESPONDENT) ASSESSEE BY: SHRI P.J. PARDIWALLA & SHRI NIRAJ SHETH DEPARTMENT BY: SHRI GIRIJA DAYAL, CIT(DR) DATE OF HEARING: 17/04/2013 DATE OF PRONOUNCEMENT: 12/06/2013 ITA NOS.6158 AND 7125 OF 2003 AND CO NO.396 OF 2004 GLAXO SMITHKLINE MUMBAI PAGE 2 OF 33 O R D E R PER BENCH. THESE ARE CROSS APPEALS BY ASSESSEE AND REVENUE AND CROSS OBJECTIONS BY ASSESSEE FOR ASSESSMENT YEAR 1998-99 ARISING OUT OF THE ORDER OF CIT (A)-XXVI MUMBAI DATED 25/03/2003 O N ORDER OF AO UNDER SECTION 143(3) OF THE INCOME-TAX ACT. 2. WE HAVE HEARD THE LEARNED COUNSEL AND THE LEARNED DEPARTMENTAL REPRESENTATIVE. LEARNED COUNSEL PLACED ON RECORD A PAPER BOOK AND A CHART INDICATING THE ISSUES WHICH ARE COVERED BY EARLIER ORDERS. THESE ARE CONSIDERED WHILE DISPOSIN G OF THESE APPEALS. ITA NO.6158/MUM/2003 3. GROUND NO.1 RAISED BY ASSESSEE IS AS UNDER: THE COMMISSIONER OF INCOME-TAX (APPEALS)-XXVI MUMBAI (HEREINAFTER REFERRED TO AS THE CIT (A), ERR ED IN UPHOLDING THE STAND OF THE JT. COMMISSIONER OF INCO ME- TAX SPECIAL RANGE 53 MUMBAI (HEREINAFTER REFERRED T O AS THE JCIT) IN NOT ALLOWING THE APPELLANTS CLAIM FOR DEPRECIATION ON ` .22,67,281 AND ` .16,42,617 BEING PART OF THE SHARE DILUTION EXPENSES INCURRED IN THE ASSESSMENT YEAR 1984-85 AND 1986-87 SUBMITTED AS RELATABLE TO PROGRAMMES OF CAPITAL EXPENDITURE IN T HE AYS 1984-85 AND 1986-87 RESPECTIVELY BUT ALLOWED. 3.1 THIS ISSUE ARISES ORIGINALLY IN AY 1984-85 AND CONSEQUENT TO THE CAPITALIZATION OF THE AMOUNT IN THAT YEAR CONSE QUENTIAL DEPRECIATION BENEFITS ARE BEING CLAIMED BY ASSESSEE . 3.2 BEFORE US BOTH THE COUNSELS AGREED THAT THE ISS UE OF DISALLOWANCE OF DEPRECIATION OF SHARE VALUATION EXP ENSES IS COVERED IN FAVOUR OF ASSESSEE AND THE AGAINST THE REVENUE B Y THE COORDINATE BENCH DECISIONS RENDERED IN ASSESSEES O WN CASE FROM AY 1984-85 TO 1997-98. IT WAS FURTHER INFORMED THAT THE HON'BLE ITA NOS.6158 AND 7125 OF 2003 AND CO NO.396 OF 2004 GLAXO SMITHKLINE MUMBAI PAGE 3 OF 33 JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE IN AY 1986-87, 1988-89 AND 1991-92 UPHELD ITAT ORDERS. CONSISTENT WITH THE VIEW TAKEN THEREIN, WE DIRECT AO TO ALLOW ON THE ABOVE A MOUNT CAPITALIZED IN AY 1984-85 ON WHICH THE DEPRECIATION CLAIM IS CONSEQUENTIAL. GROUND IS ALLOWED. 4. GROUND NO.2 IS AS UNDER: 2. THE CIT (A) ERRED IN UPHOLDING THE STAND OF THE JCIT IN NOT ALLOWING TENDER DEPOSITS WRITTEN OFF OF ` .38,020 4.1 ASSESSEE IS AGGRIEVED ON THE DECISION OF AO AND THE CIT (A) IN REJECTING THE WRITE OFF OF TENDER DEPOSITS AMOUNTIN G TO ` .38,020. THE FACTS IN BRIEF ARE THAT ASSESSEE CLAIMED WRITE OFF OF VARIOUS SMALL TENDER DEPOSITS IN THE YEAR UNDER CONSIDERATION AND CLAIMED DEDUCTION THEREOF. AO HOWEVER, HELD THAT THE CONDIT IONS OF SECTION 36(2) OF THE ACT WERE NOT SPECIFIED AND THEREFORE, HE REJECTED THE CLAIM OF ASSESSEE. AO ALSO REJECTED THE CLAIM OF AL LOWANCE OF THE SAME UNDER SECTION 28/37(1) OF THE ACT. AGGRIEVED B Y THIS, ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT (A) WHO A LSO CONFIRMED THE ACTION OF AO BY HOLDING THAT SUCH DEPOSITS COULD NO T BE CONSIDERED AS DEBTS OR LOSS INCURRED IN RESPECT OF BUSINESS. A GGRIEVED BY THIS ASSESSEE IS IN APPEAL BEFORE US. 4.2 WE CONSIDERED THE RIVAL SUBMISSIONS AND THE MAT ERIAL ON RECORD. ADMITTEDLY SUCH WRITE OFF IS RELATED TO VAR IOUS SMALL AMOUNT DEPOSITS AS EMD. THE SUBMISSION OF TENDERS FLOATED BY THE PROSPECTIVE BUYERS OF ASSESSEE PRODUCTS AND SUCH DE POSIT IS THE PRE CONDITION TO GET THE BUSINESS, HENCE SUCH DEPOSITS CANNOT BE TREATED IN ISOLATION OF BUSINESS. THE GENUINENESS O F SUCH DEPOSITS IS NOT IN DISPUTE, NOR ITS WRITE OFF. SIMILAR ISSUE WA S CONSIDERED BY THE COORDINATE BENCH IN THE CASE OF M/S BURROUGHS WELLC OME (I) LTD IN ITA NO.5335/MUM/2002 DATED 27.03.2008 WHEREIN ON SI MILAR FACTS IT WAS HELD THAT THE LOSS WAS INCIDENTAL TO BUSINES S AND WAS ITA NOS.6158 AND 7125 OF 2003 AND CO NO.396 OF 2004 GLAXO SMITHKLINE MUMBAI PAGE 4 OF 33 ALLOWABLE UNDER SECTION 28 R.W.S. 37(1) OF THE ACT. RESPECTFULLY FOLLOWING THE PRINCIPLES LAID DOWN THEREIN, WE DIRE CT AO TO ALLOW THE AMOUNT. GROUND IS ALLOWED. 5. GROUND NO.3 IS AS UNDER: (A) THE CIT (A) ERRED IN UPHOLDING THE ACTION OF THE JC IT IN REDUCING THE ESTIMATED WRITTEN DOWN VALUES OF EACH OF THE BLOCK OF ASSETS OF THE FAMILY PRODUCTS UNDERTAKING TRANSFERRED AS A GOING CONCERN IN THE A Y 1995-96 FROM THE OPENING WRITTEN DOWN VALUES OF THE RESPECTIVE BLOCKS, FOR COMPUTATION OF DEPRECIATION ALLOWANCE. (B) THE CIT (A) ERRED IN UPHOLDING THE ACTION OF THE JC IT, IN DISALLOWING DEPRECIATION ON DEPRECIATION DISALLOWED IN EARLIER YEARS IN RESPECT OF ASSETS OF THE FAMILY PRODUCTS UNDERTAKING. (C) THE CIT (A) ERRED IN UPHOLDING THE ACTION OF THE HC IT IN DISALLOWING DEPRECIATION OF ` .31,233 FROM THE BLOCK FACTORY/OFFICE BUILDINGS IN RESPECT OF PART OF BUILDING 2 LEASED TO M/S HONGKONG & SHANGHAI BANKING CORPORATION LTD. DEPRECIATION FOR THE CURRENT AY ` ,28,400 DEPRECIATION ON DEPRECIATION DISALLOWED ` . 2,833 IN AY 1994-95, 1995-96, 1996-97 AND 19987-98. ` .31,233 5.1 GROUND NO.3A AND 3B PERTAINS TO THE ISSUE OF RE DUCTION OF ESTIMATED WDV BLOCK OF ASSETS OF FPU TRANSFERRED IN ASSESSMENT YEAR 1995-96 FROM THE RESPECTIVE BLOCKS AND COMPUTA TION OF DEPRECIATION DISALLOWED IN EARLIER YEARS. AS PER TH E RECORD, THE FAMILY PRODUCT UNDERTAKING WAS TRANSFERRED AS A GOI NG CONCERN AT SLUMP PRICE OF ` .180 CRORES IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1995-96. BOTH THE PARTIES SUBMITTED THAT THE ISSUE HAS BEEN SET ASIDE BY THE TRIBUNAL IN ITA NO. 1420/MUM/99 AND ITA NO.1594/MUM/99 VIDE ORDER DATED 16.6.2006 W HEREIN THE TRIBUNAL HELD THAT THE TRANSACTION WAS NOT EXIGIBLE TO THE CAPITAL GAIN TAX. FURTHER, AO WAS DIRECTED TO DEDUCT FROM S UCH BLOCK THE ITA NOS.6158 AND 7125 OF 2003 AND CO NO.396 OF 2004 GLAXO SMITHKLINE MUMBAI PAGE 5 OF 33 WDV OF ASSETS TRANSFERRED TO M/S HEINZ BEFORE ALLOW ING DEPRECIATION TO ASSESSEE. THIS DIRECTION WAS GIVEN AS THE TRIBUNAL HELD AS OTHERWISE ASSESSEE WOULD CLAIM DEPRECIATION ON THE ASSETS WHICH WERE TRANSFERRED. ACCORDINGLY, WE RESTORE THE ISSUE BACK TO THE FILE OF AO TO DETERMINE CONSEQUENTIAL WDV IN TH IS ASSESSMENT YEAR AND ALLOW DEPRECIATION. WE ORDER ACCORDINGLY. 5.2 GROUND NO.3C PERTAINS TO DISALLOWANCE IN DEPREC IATION IN RESPECT OF PART OF BUILDING 72 LEASED TO M/S HONGKO NG & SHANGHAI BANKING CORPORATION LIMITED. 5.3 THE CIT (A) HELD THAT THE RENT ON SAID BUILDING HAS BEEN TAXED UNDER HEAD INCOME FROM HOUSE PROPERTY AND THEREFORE , DOES NOT FORM PART OF BLOCK ASSETS UNDER THE HEAD BUILDING IN BLOCK OF ASSETS OF ASSESSEE. SINCE THE LEASED ASSETS ARE NOT PART OF ASSESSEES BUSINESS, CIT(A) HELD THAT AO RIGHTLY DI SALLOWED THE CLAIM OF DEPRECIATION. IT WAS FAIRLY ADMITTED THAT THIS ISSUE WAS COVERED BY THE ORDERS OF THE ITAT IN ASSESSEES OWN CASE IN ASSESSMENT YEARS 1994-95, 1995-96 AND 1996-97. FOLL OWING THE ORDERS OF EARLIER YEARS, KEEPING IN VIEW OF THE ABO VE FINDINGS OF THE ITAT IN ASSESSEES OWN CASES IN EARLIER YEARS, ON T HE REASON THAT ASSESSEE HAD LEASED PART OF THE BUILDING AND THE SA ME WAS NOT USED FOR THE PURPOSE OF BUSINESS, NO DEPRECIATION CAN BE ALLOWED. THEREFORE, THE ORDER OF THE CIT (A) IS CONFIRMED AN D THE GROUND IS ACCORDINGLY REJECTED. 6. GROUND NO.4 IS AS UNDER: 4. THE CIT (A) ERRED IN UPHOLDING THE STAND OF THE JCIT OF MAKING AN ADDITION OF ` .43,33,328 ON ACCOUNT OF CLOSING STOCK OF DIESEL AND COAL. 6.1 AO DISALLOWED THE CLAIM MADE BY ASSESSEE HOLDIN G THAT SINCE THE SAID ITEMS HAVE NOT BEEN CONSUMED IN THE YEAR, THE VALUE OF DIESEL OIL/COAL UNUTILIZED ARE TO BE CONSIDERED AS CLOSING STOCK AND ADDED TO THE INCOME OF THE CURRENT YEAR. THE CIT (A ) FOLLOWING HIS ITA NOS.6158 AND 7125 OF 2003 AND CO NO.396 OF 2004 GLAXO SMITHKLINE MUMBAI PAGE 6 OF 33 EARLIER ORDERS IN ASSESSMENT YEARS 1994-95 TO 1996- 97 CONFIRMED THE SAME. 6.2 AFTER HEARING BOTH THE PARTIES AND ON PERUSAL O F THE RECORD AVAILABLE BEFORE US, WE FIND THAT THE ISSUE FOR OUR ADJUDICATION IS COVERED IN FAVOUR OF ASSESSEE BY THE DECISIONS OF T HE MUMBAI BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FROM ASSESSM ENT YEARS 1986- 87 TO 1996-97. SINCE THERE WAS A CHANGE OF METHOD O F ACCOUNTING IN ASSESSMENT YEAR 1986-87, WHICH WAS HELD TO BE A GEN UINE CHANGE OF METHOD OF ACCOUNTING, THE CONSUMABLE ITEMS LIKE COAL AND OIL WERE ALLOWED TO BE WRITTEN OFF IN THE YEAR OF PURCH ASE ITSELF. THEREFORE, CONSISTENT WITH THE VIEW TAKEN THEREIN, WE SET ASIDE THE IMPUGNED ORDER BY THE CIT (A) AND ALLOW THE GROUND RAISED BY ASSESSEE. 7. GROUND NO.5 IS GIVEN BELOW: THE CIT (A) ERRED IN UPHOLDING THE STAND OF THE JC IT THAT ALL INTEREST OTHER THAN INTEREST ON SECURITIES DEPO SIT IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCE S. THE APPELLANTS SUBMIT THAT FOLLOWING INTEREST INCOM E IS RELATED TO AND INCIDENTAL TO BUSINESS AND AS SUCH F ORMS A PART OF BUSINESS INCOME: ` .IN LAKHS A INTEREST ON BANK/INTER CORPORATE DEPOSIT 99.26 B INTEREST ON TAX REFUNDS 46.75 C INTEREST ON GOI SECURITIES 73.65 D INTEREST ON DEBENTURES/BONDS 413.29 632.95 7.1 GROUND NO.5 PERTAINS TO THE TREATMENT GIVEN TO INTEREST INCOME AS INCOME FROM OTHER SOURCES. BEFORE US, BOTH THE P ARTIES AGREED THAT THIS ISSUE WAS EARLIER DECIDED BY THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEARS 1989-90 TO 1991- 92, 1992-93 TO 1993-94, 1994-95 AND 1995-96 RESPECTIVELY, WHEREIN THE TRIBUNAL ITA NOS.6158 AND 7125 OF 2003 AND CO NO.396 OF 2004 GLAXO SMITHKLINE MUMBAI PAGE 7 OF 33 RESTORED THE ISSUE TO THE FILE OF ASSESSING OFFICER FOR ADJUDICATION AFRESH BY OBSERVING AS FOLLOWS:- '57. LEARNED COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE LEARNED CIT (A). WE HAVE CONSIDERED TH E RIVAL SUBMISSIONS AS ALSO THE JUDICIAL PRONOUNCEMEN TS RELIED UPON BY THE LEARNED DR. IN THE CASE OF SHREE KRISHNA POLYESTER LTD. (SUPRA), THE BOMBAY HIGH COU RT HELD THAT INTEREST INCOME FROM INVESTMENT IN SHORT- TERM DEPOSIT OF SURPLUS FUNDS ACQUIRED IN PUBLIC ISSUE O F SHARES, IS ASSESSABLE AS 'INCOME FROM OTHER SOURCES '. IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZER S LTD. (SUPRA), THE SUPREME COURT HELD THAT INTEREST ON INVESTMENT OF BORROWED FUNDS PRIOR TO COMMENCEMENT OF BUSINESS IS TO BE ASSESSED UNDER THE HEAD 'INCOME F ROM OTHER SOURCES'. THE DECISION OF PUNJAB & HARYANA HI GH COURT IN THE CASE OF RANI PALIWAL IS NOT RELEVANT A S THE HIGH COURT WAS CONCERNED WITH ONLY APPLICABILITY OF CLAUSE (BAA) OF THE EXPLANATION UNDER SECTION 8OHHC . IN THE CASE OF PANDIAN CHEMICALS LTD. (SUPRA) THE MADR AS HIGH COURT HELD THAT INTEREST ON DEPOSITS WITH ELEC TRICITY BOARD MADE OUT OF STATUTORY COMPULSION WAS NOT PROF IT DERIVED FROM INDUSTRIAL UNDERTAKING. THIS JUDGMENT HAS SINCE BEEN CONFIRMED BY THE SUPREME COURT (262 ITR 278). IN THE CASE OF AUTOKAST LTD., THE ASSESSEE CO MPANY BORROWED MONEY FOR PURCHASE OF PLANT AND MACHINERY AND EARNED INTEREST INCOME BY PLACING IT IN SHORT- TERM DEPOSITS WITH BANKS TILL PAYMENT WAS MADE FOR PLANT AND MACHINERY. THESE DEPOSITS WERE USED IN BILL DISCOUNTING. THE SUPREME COURT HELD THAT THE INTERE ST INCOME EARNED WAS TAXABLE AS INCOME FROM OTHER SOURCES. IN OUR VIEW, THE PRESENT ISSUE HAS TO BE CONSIDERED N THE LIGHT OF THE AFORESAID JUDGMENTS. THE RELEVANT PART OF THE ORDER OF THE CIT (A) FOR THE ASSESSMENT YEAR 1989-90 HAS BEEN REPRODUCED (SUPRA) . FOR THE ASSESSMENT YEARS 1990-91 AND 1991-92 ALSO T HE FACTS ARE SIMILAR. WE FIND THAT THE EXACT NATURE OF THE INTEREST 10 GLAXO INDIA LIMITED ITA NO. 6027/MUM./1999, INCOME IS NOT CLEAR FROM THE ORDERS OF THE REVENUE AUTHORITIES. IN OUR VIEW THIS ISSUE REQ UIRES RECONSIDERATION BY THE ASSESSING OFFICER AFTER BRIN GING ON RECORD THE CORRECT FACTUAL POSITION WITH REGARD TO THE NATURE OF THE INTEREST INCOME, AFTER ALLOWING OPPOR TUNITY TO THE ASSESSEE. ACCORDINGLY, WE RESTORE THIS ISSUE TO THE ASSESSING OFFICER FOR RE-ADJUDICATION.' ITA NOS.6158 AND 7125 OF 2003 AND CO NO.396 OF 2004 GLAXO SMITHKLINE MUMBAI PAGE 8 OF 33 CONSISTENT WITH VIEW TAKEN, WE SET ASIDE THE ORDER OF AUTHORITIES AND RESTORE THE ISSUE TO THE FILE OF AO FOR ADJUDIC ATION AFRESH IN ACCORDANCE WITH LAW. THE LEARNED COUNSEL PLACED ON RECORD THE ORDERS GIVING EFFECT TO THE ORDERS OF THE ITAT IN A Y 1995-96 AND 1996-97 WHEREIN AO TREATED THE BUSINESS INCOME BY R EDUCING THE SAME FROM INCOME FROM OTHER SOURCES. THE ACTION OF AO IN THOSE YEARS MAY BE CORRECT ON FACTS BUT AO HAS TO EXAMINE HOW MUCH OF THE INCOME DO PERTAIN TO BE BUSINESS INCOME. IT WAS INFORMED THAT THE INTEREST INCLUDED INTEREST ON INTER CORPORATE D EPOSITS, TAX REFUNDS, GOI SECURITIES, DEBENTURES/BONDS. SINCE TH E NATURE OF INTEREST INCOMES ARE TO BE EXAMINED, THE ISSUE IS R ESTORED TO THE FILE OF AO. THIS GROUND IS THUS, ALLOWED FOR STATISTICAL PURPOSES. 8. GROUND NO.6 AND GROUND NO.8 ARE GIVEN BELOW: 6(A) THE CIT (A) ERRED IN UPHOLDING THE STAND OF J CIT OF INCLUDING THE SALE OF SCRAP IN TOTAL TURNOVER FOR A RRIVING AT THE RATIO OF EXPORT TURNOVER TO TOTAL TURN OVER FOR THE PURPOSE OF COMPUTING THE DEDUCTION UNDER SECTION 80HHC. (B)(I) FOR THE PURPOSE OF REDUCING 90% OF ITEMS FOR MING OF MISCELLANEOUS INCOME THE CIT (A) HAVING HELD THAT THE FOLLOWING ITEMS ARE NOT TO BE REDUCED BY 90% IN ACCORDANCE WITH EXPLANATION (BAA) TO SECTION 80HHC ERRED IN STATING THAT NONE OF THE RECEIPTS COULD BE TREATED AS HAVING A DIRECT NEXUS WITH THE BUSINESS ACTIVITI ES OF THE APPELLANT. THE APPELLANTS SUBMIT THAT THE BELOW LISTED ITEMS ARE NOT ENVISAGED BY THE SAID EXPLANATION AND SHOULD NOT BE CONSIDERED FOR REDUCTION BY 90% UNDER EXPLANATION (BAA) TO SECTION 80HHC. ` .IN LAKHS CLAIM RECOVERIES 123.84 ACCOMMODATION RECOVERY 1.30 RECOVERY OF MANUFACTURING CHARGES AND FOR STAFF BUSES 5.50 SALES TAX/PURCHASE TAX SET OFF 19 5.40 RECOVERY OF EXPENSES BWIL/BSG 307.02 MANUFACTURING CHARGES 8.85 MISCELLANEOUS INCOME 8.86 TOTAL 650.77 ITA NOS.6158 AND 7125 OF 2003 AND CO NO.396 OF 2004 GLAXO SMITHKLINE MUMBAI PAGE 9 OF 33 (II) WITHOUT PREJUDICE TO THE ABOVE, THE REDUCTION SHOULD BE TAKEN ON A NET BASIS AND NOT ON A GROSS BASIS . (III) FURTHER THE CIT (A) ERRED IN NOT ADJUDICATING ON THE JCITS ACTION OF HAVING CONSIDERED INSURANCE CLAIMS RECOVERIES AS PART OF TOTAL TURNOVER AND IN REDUCIN G 90% THEREOF FROM BUSINESS PROFITS. (C) HAVING DECIDED THE GROUND OF APPEAL REGARDING THE ACTION OF THE JCIT IN EXCLUDING THE CLOSING BALANCE OF ADVANCE LICENCE BENEFIT WHILE COMPUTING THE BUSINES S PROFIT FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80HHC IN FAVOUR OF THE APPELLANTS, THE CIT (A) ERRE D IN DIRECTING THE JCIT TO RECOMPUTED THE DEDUCTION UNDE R SECTION 80HHC AFTER EXCLUDING THE ADVANCE LICENCE BENEFIT FROM BUSINESS PROFIT. 8(A) THE CIT (A) ERRED IN UPHOLDING THE STAND OF TH E JCIT IN HOLDING THAT ` .3,78,07,645 BEING THE ADVANCE LICENCE BENEFIT ACCOUNTED FOR IN THE APPELLANTS BOOKS OF A CCOUNT HAD ACCRUED TO THE APPELLANTS AND WAS TAXABLE AS TH EIR INCOME UNDER SECTION 28(IV) OF THE INCOME TAX ACT, 1961. (B) WITHOUT PREJUDICE TO (A) ABOVE, THE APPELLANTS SUBMIT THAT THE AMOUNT OF ADVANCE LICENCE BENEFIT ACTUALLY CREDITED IN THE PASS BOOK UPTO 31 ST MARCH, 1998 SHOULD ONLY BE INCLUDED IN COMPUTING INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS. 8.1 GROUND NO.6(A) PERTAINS TO DEDUCTION U/S 80HHC. THERE ARE THREE CONTENTIONS IN THIS GROUND, FIRST ONE (A) TO EXCLUDE SALE OF SCRAP FROM THE TOTAL TURNOVER. AO INCLUDED THE INCO ME RECEIVED ON SALE OF PRODUCT SCRAP TO THE TOTAL TURNOVER. IT IS FAIRLY ADMITTED THAT THIS ISSUE IS HELD AGAINST ASSESSEE IN THE EARLIER YEARS CONSISTENTLY FROM ASSESSMENT YEAR 1988-89 ONWARDS. CONSISTENT WI TH THE VIEW TAKEN BY TRIBUNAL IN ASSESSEES OWN CASE, WHICH WAS FAIRLY ADMITTED BY THE LEARNED COUNSEL, WE DISMISS THE GROUND RAISE D BY ASSESSEE ON THIS ISSUE. 8.2 GROUND NO.6(B) IS WITH REFERENCE TO THE EXECUTI ON OF 90% OF THE MISCELLANEOUS INCOME IN COMPUTING THE PROFITS OF TH E BUSINESS. VIDE PARA 17 OF AOS ORDER AO DISCUSSED VARIOUS OTH ER INCOMES RECEIVED BY ASSESSEE AND LISTED OUT AMOUNTS TO THE EXTENT OF ITA NOS.6158 AND 7125 OF 2003 AND CO NO.396 OF 2004 GLAXO SMITHKLINE MUMBAI PAGE 10 OF 33 ` .650.77 LAKHS AS OTHER INCOME WHICH IS TO BE EXCLUD ED AT 90% UNDER EXPLANATION (BAA) TO SECTION 80HHC. ASSESSEE CONTESTED THE SAME BEFORE THE CIT (A). THE LEARNED CIT (A) AFTER EXTRACTING THE AMOUNTS IN PARA 13.5D MENTIONING THE DECISION OF TH E ITAT THEREIN HAS DECIDED AS UNDER: 13.5D IF THIS TEST IS APPLIED TO EACH OF THE ITEMS LISTED ABOVE, IT WOULD BE SEEN THAT NONE OF THE RECEIPTS C OULD BE TREATED AS HAVING A DIRECT NEXUS WITH THE BUSINE SS ACTIVITIES OF THE APPELLANT COMPANY. AO IS THEREFOR E, DIRECTED TO RECOMPUTED DEDUCTION UNDER SECTION 80HH C WITHOUT REDUCING 90% OF THESE ITEMS IN ACCORDANCE W ITH EXPLANATION (BAA) TO SECTION 80HHC. THIS SUB GROUND OF APPEAL IS THEREFORE, ALLOWED. 8.3 AS THERE IS INCONSISTENCY IN THE ORDER OF THE C IT(A), BOTH ASSESSEE IS CONTESTING THE SAME AND THE REVENUE IS IN APPEAL CORRESPONDING TO GROUND NO.9 IN THEIR APPEAL. IT WA S THE CONTENTION THAT NONE OF THE RECEIPTS CAN BE EXCLUDED AS THEY A RE NOT ITEMS WHICH ARE ENVISAGED BY THE SAID EXPLANATION AND SHO ULD NOT BE CONSIDERED FOR EXCLUSION AT 90% OF THE AMOUNT. APAR T FROM THE NATURE OF THE RECEIPTS, IT WAS FURTHER SUBMITTED TH AT IF INCOMES OF AMOUNTS ARE TO BE EXCLUDED, IT SHOULD BE ONLY ON TH E BASIS OF THE NET AMOUNT FOLLOWING THE PRINCIPLES LAID DOWN BY TH E HON'BLE SUPREME COURT IN THE CASE OF ACG ASSOCIATED CAPSULE S (P) LTD. VS. CIT 343 ITR 89. WHILE CONCEDING THAT NATURE OF INCO ME TO AN EXTENT OF ` .8.86 LAKHS COULD NOT BE EXPLAINED, AS NO DETAILS C OULD BE FILED EITHER BEFORE AO OR BEFORE THE CIT (A), IT WAS THE CONTENTION OF THE LEARNED COUNSEL THAT THE OTHER AMOUNTS ARE CERTAINL Y BUSINESS INCOME. WITH REFERENCE TO THE CLAIM RECOVERIES, THE LEARNED COUNSEL ALSO RELIED ON THE JURISDICTIONAL HIGH COURT IN THE CASE OF PFIZER LTD, 330 ITR 62. 8.4 WE HAVE CONSIDERED THE ISSUE. PRIMA FACIE THE A BOVE AMOUNTS REPRESENT THE RECOVERIES IN THE COURSE OF BUSINESS WHICH UNDER THE COMPANY LAW HAS BEEN SHOWN AS OTHER INCOME. HOWEVER , THE NATURE OF AMOUNTS ARE NOT EXAMINED BY AO IN DETAIL AND REQ UIRES RE- ITA NOS.6158 AND 7125 OF 2003 AND CO NO.396 OF 2004 GLAXO SMITHKLINE MUMBAI PAGE 11 OF 33 EXAMINATION. THEREFORE, EXCEPT THE AMOUNT OF ` .8.86 LAKHS FOR WHICH THE DETAILS WERE NOT FURNISHED, THE REST OF T HE AMOUNT IS RESTORED TO THE FILE OF AO TO EXAMINE AFRESH IN THE LIGHT OF THE PRINCIPLES LAID DOWN BY THE JURISDICTIONAL HIGH COU RT RELIED UPON BY ASSESSEE AND ALSO OTHER DECISION OF THE JURISDICTIO NAL HIGH COURT OR SUPREME COURT TO DECIDE EACH OF THE AMOUNT. IN CASE IT IS PART OF THE BUSINESS RECEIPTS, NOT COMING UNDER THE ITEMS U NDER EXPLANATION (BAA) THEY SHOULD NOT BE EXCLUDED AT 90 % FROM THE PROFITS OF THE BUSINESS. OTHERWISE, THE ALTERNATE C ONTENTION OF NET AMOUNT TO BE CONSIDERED IF NEXUS IS ESTABLISHED. WI TH THESE DIRECTIONS THE GROUND IS RESTORED TO THE FILE OF AO FOR EXAMINATION AND FRESH ADJUDICATION. ASSESSEE SHOULD BE GIVEN DU E OPPORTUNITY TO EXPLAIN THE NATURE OF THE RECEIPTS. 8.5 GROUND NO.6(C) AND GROUND 8 PERTAINS TO RE-COMP UTATION OF DEDUCTION UNDER SECTION 80HHC AFTER EXCLUDING THE A DVANCE LICENCE BENEFIT FROM BUSINESS PROFIT. THESE ARE CONNECTED ISSUES OF CONSIDERING AS BUSINESS INCOME AND QUANTIFICATION F OR THE PURPOSE OF DEDUCTION UNDER 80HHC. 8.6 BRIEFLY STATED, THE ASSESSEE COMPANY OFFERED A SUM OF ` .5,26,09,487 ON ACCOUNT OF ADVANCE LICENCE IN THE C OMPUTATION OF INCOME ATTACHED TO THE RETURN OF INCOME. THE SAME AMOUNT WAS NOT OFFERED TO INCOME TAX IN THE PREVIOUS YEAR RELE VANT TO THE AY 1997-98, THOUGH CREDITED IN THE PROFIT & LOSS A/C I N THAT YEAR. IN THIS YEAR THE AMOUNT OF ` .432.02 LAKHS WHICH WAS AN ADVANCE LICENCE ACCRUED DURING THE YEAR FOR EXPORTS MADE DU RING THE YEAR WAS CREDITED IN THE PROFIT & LOSS A/C AND A SUM OF ` .3,78,07,645 BEING CLOSING BALANCE OF ADVANCE LICENCE AS AT 31.0 3.1998 HAS BEEN EXCLUDED FROM THE TOTAL INCOME ON THE GROUND THAT T HE SAME HAS NOT BEEN ACCRUED TO ASSESSEE. THE NET ADDITION EFFE CTED BY ASSESSEE IS THEREFORE, 1,48,01,842. CONSISTING WITH THE ORDE RS IN AY 1997-98, AO CONSIDERED THAT AMOUNT OF ` .5,26,09,487 WAS TO BE TAXED IN THAT ITA NOS.6158 AND 7125 OF 2003 AND CO NO.396 OF 2004 GLAXO SMITHKLINE MUMBAI PAGE 12 OF 33 YEAR AND THEREFORE, THE NET AMOUNT OFFERED WAS ACCE PTED AS INCOME ON PROTECTIVE BASIS. HOWEVER, AO ANALYSED THE NATUR E OF THE ADVANCE LICENCE AND AFTER DISCUSSION VIDE PARA 22 O F THE ASSESSMENT ORDER ULTIMATELY CONCLUDED THAT THIS AMOUNT OF ` .5,26,09,487 WHICH IS THE INCOME TAXABLE UNDER SECTION 28(IV) IS NOT D ERIVED FROM THE EXPORTS AND THEREFORE, NOT ELIGIBLE FOR DEDUCTION U NDER SECTION 80HHC. THUS THE PROFITS OF THE BUSINESS SHOWN BY AS SESSEE UNDER SECTION 80HHC HAVE BEEN REDUCED BY ` .5,26,09,487. THIS MATTER WAS CONTESTED BEFORE THE CIT (A) WHO VIDE PARA 13.6 E DECIDED AS UNDER: 13.6E. SUB-GROUND NO.(E) IS AGAINST THE ACTION OF AO IN NOT EXCLUDING CLOSING BALANCE OF ADVANCE LICENCE BE NEFIT AGGREGATING ` .526.09 LAKHS WHILE COMPUTING BUSINESS PROFIT. 13.7E. IN THIS REGARD IT IS SEEN THAT THIS SUB-GROU ND OF APPEAL IS DECIDED IN FAVOUR OF THE APPELLANT VIDE C IT (A) ORDER DATED 30.01.202 AGAINST THE ORDER UNDER SECTI ON 143(3) R.W.S. 147 FOR AY 1997-98. RESPECTFULLY FOLL OWING THE SAME, AO IS DIRECTED TO RE-COMPUTE DEDUCTION UN DER SECTION 80HHC AFTER EXCLUDING THE ADVANCE LICENCE BENEFIT AGGREGATING ` .526.09 LAKHS FROM BUSINESS PROFIT. THIS SUB-GROUND OF APPEAL IS THEREFORE, ALLOWED. 8.7 ASSESSEE IS AGGRIEVED ON THE ABOVE DIRECTION. I T WAS SUBMITTED THAT IN THE CASE OF EXCEL INDUSTRIES, THE ITAT CONS ISTENTLY TAKEN A VIEW THAT ON THE ISSUE OF THE TAXABILITY OF THE ADV ANCE LICENCE BENEFITS, NO INCOME ACCRUES UNTIL IMPORTS ARE MADE AND ARE MATERIALIZED. THE LEARNED COUNSEL REFERRED TO THE S ERIES OF THE ORDERS ON THE ISSUE IN THE CASE OF EXCEL INDUSTRIES AND FOR AY 1998- 99 AND 1999-2000 IN ITA NO.3868/MUM/2003 DATED 4.5. 2012 AND SUBMITTED THAT THE WORKING AS PROVIDED BY ASSESSEE IS CORRECT. 8.8 WE HAVE CONSIDERED THE ISSUE. IN THE CASE OF DC IT VS. EXCEL INDUSTRIES (SUPRA) THIS ISSUE WAS DISCUSSED AT GROU ND NO.1 AND 2 AS UNDER: 3.1. GROUND NO.1& 2 : TAXABILITY OF ADVANCE LICENC E BENEFIT RECEIVABLE RS.52,84,674/- AND PASS BOOK BEN EFIT ITA NOS.6158 AND 7125 OF 2003 AND CO NO.396 OF 2004 GLAXO SMITHKLINE MUMBAI PAGE 13 OF 33 RECEIVABLE RS.2,98,03,293 (WRONGLY STATED AS RS.5,62,63,127/- IN GROUND OF APPEAL BUT RECTIFIED) IN THE TOTAL INCOME. 3.2. THERE IS A LONG DISCUSSION IN THE ASSESSMENT O RDER IN RESPECT OF THE GROUNDS TAKEN IN THE APPEAL. HOW EVER, BOTH THE GROUNDS ARE COVERED IN FAVOUR OF THE ASSES SEE BY THE EARLIER ORDERS OF THE TRIBUNAL IN THE ASSESS EES OWN CASE. SO FAR AS GROUND NO.1 IS CONCERNED, WHIC H RELATES TO THE TAXABILITY OF ADVANCE LICENCE BENEFI TS RECEIVABLE, THE TRIBUNAL HAS DECIDED THAT NO INCOME ACCRUES UNTIL THE IMPORTS ARE MADE AND THE RAW MATERIALS ARE CONSUMED. IN THE YEAR BEFORE US, IT IS NOT IN DISPUTE THAT THE IMPORTS WERE MADE AND THE RAW MATERIALS WERE CONSUMED IN THE SUBSEQUENT YEAR. IN SUCH CIRCUMSTANCES THE EARLIER ORDERS OF THE TRIBUN AL IN THE ASSESSEES OWN CASE APPLY. THE FIRST OF SUCH O RDERS WAS PASSED ON 6 TH OCTOBER 2003 IN ITA NO: 4346/MUM/1997 FOR THE ASSESSMENT YEAR 1992-93. IN THIS ORDER THE TRIBUNAL APPLIED AND FOLLOWED THE DE CISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN JAMSHRI RAJITSINGHJI SPG. & WVG. MILLS LTD. VS. IAC (1992) 41 ITD (BOM) 142, IN WHICH IT WAS HELD THAT UNTIL THE GOOD S ARE IMPORTED AND THE RAW MATERIALS ARE CONSUMED, NO INCOME BY WAY OF ADVANCE LICENCE BENEFIT ACCRUES TO THE ASSESSEE. THIS ORDER WAS FOLLOWED BY THE TRIBUNAL IN ITS ORDER DATED 27 TH JANUARY 2004 FOR THE ASSESSMENT YEAR 1993-94 IN ITA NO.4145/MUM/1998. FOR THE ASSESSMENT YEAR 1995-96 THE ISSUE AGAIN CAME BEFORE THE TRIBUNAL IN ITA NO.2067/MUM/2000. THIS APPEAL WAS DISPOSED OF BY THE TRIBUNAL ON 7 TH MARCH 2005. THIS ORDER TOOK THE SAME VIEW AS IN THE EARLIER YEA RS. WHAT IS SIGNIFICANT IN THIS ORDER IS THAT THE DEPAR TMENT RELIED ON THE DECISION OF THE AHMEDABAD BENCH OF TH E TRIBUNAL IN THE CASE OF UNITED PHOSPHORUS LIMITED V S. JCIT (2002) 81 ITD 553 (AHD), IN WHICH A VIEW WAS TAKEN THAT THE ADVANCE LICENCE BENEFIT WAS TAXABLE IN THE YEAR IN WHICH IT WAS RECEIVED, WITHOUT WAITING FOR THE ACTUAL IMPORTS AND THE CONSUMPTION OF THE RAW MATER IAL. THIS ORDER OF THE AHMEDABAD BENCH OF THE TRIBUNAL W AS STRONGLY RELIED UPON BY THE REVENUE IN THE APPEAL F OR THE ASSESSMENT YEAR 1995-96. THE TRIBUNAL IN ITS ORDER FOR ITA NOS.6158 AND 7125 OF 2003 AND CO NO.396 OF 2004 GLAXO SMITHKLINE MUMBAI PAGE 14 OF 33 THE ASSESSMENT YEAR 1995-96 HAS DEALT WITH THE ARGUMENTS OF THE REVENUE BASED ON THE AHMEDABAD BENCH OF THE TRIBUNAL IN PARAGRAPHS 13 ONWARDS. IT WAS HELD BY THE TRIBUNAL THAT EVERY ASPECT HIGHLIGHTED IN THE ORDER OF THE AHMEDABAD BENCH HAS BEEN DULY EXPLAINE D ON BEHALF OF THE ASSESSEE. IN FACT THE TRIBUNAL TO OK THE VIEW THAT THERE WAS NO DISTINCTION BETWEEN THE FACT S OF THE ASSESSEES CASE AND THE FACTS OF THE CASE BEFOR E THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF UNIT ED PHOSPHORUS LIMITED (SUPRA) AND THAT IT WAS IN ORDER FOR THE AHMEDABAD BENCH TO HAVE REFERRED THE ISSUE TO A LARGER BENCH FOR THE SAKE OF CONSISTENCY, HAVING RE GARD TO THE ORDERS OF THE MUMBAI BENCHES OF THE TRIBUNAL IN JAMSHRI RAJITSINGHJI SPG. & WVG. MILLS LTD. (SUPRA) . IN THIS VIEW OF THE MATTER AND FINDING NO DIFFERENCE I N THE FACTS RELATING TO THE ASSESSMENT YEAR 1995-96 AND T HE FACTS FOR THE EARLIER ASSESSMENT YEARS, THE TRIBUNA L HELD THAT THERE WAS NO REASON TO TAKE A DIFFERENT VIEW O F THE MATTER ON THE BASIS OF THE ORDER IN THE CASE OF UNI TED PHOSPHORUS LIMITED, AHMEDABAD BENCH. AFTER THIS OR DER OF THE TRIBUNAL, THE TRIBUNAL DISPOSED OF THE APPEA LS RELATING TO THE ASSESSEE FOR THE ASSESSMENT YEARS 1 996- 97 AND 1997-98 BY ORDER DATED 12 TH JANUARY 2009, IN WHICH THE TRIBUNAL FOLLOWED ITS OWN ORDER FOR THE ASSESSMENT YEAR 1995-96 PASSED ON 7 TH MARCH 2005, TO HOLD THAT THE ADVANCE LICENCE BENEFIT WAS NOT TAXAB LE UNLESS THE GOODS HAVE BEEN IMPORTED AND THE RAW MATERIALS ARE CONSUMED. A SIMILAR VIEW WAS TAKEN B Y THE TRIBUNAL AGAIN FOR THE ASSESSMENT YEAR 2004-05 IN ITA NO:2251/MUM/2009, DATED 29 TH JULY 2010. 3.3. THUS, IN A SERIES OF ORDERS PASSED IN THE ASSESSEES OWN CASE, THE TRIBUNAL HAS TAKEN A CONSISTENT VIEW IN FAVOUR OF THE ASSESSEE EVEN AFTE R CONSIDERING THE ORDER OF THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF UNITED PHOSPHORUS LIMITED (SUPRA). WE MAY ADD THAT THE ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 1993-94 AND THE ORDER FOR THE ASSESSMENT YEARS 1996-97 AND 1997-98 WERE APPEALED AGAINST BY THE REVENUE BEFORE THE HONBLE BOMBAY HI GH COURT BUT SINCE NO STEPS HAD BEEN TAKEN BY THE REVE NUE TO CHALLENGE THE FIRST ORDER OF THE TRIBUNAL, THE H ONBLE ITA NOS.6158 AND 7125 OF 2003 AND CO NO.396 OF 2004 GLAXO SMITHKLINE MUMBAI PAGE 15 OF 33 HIGH COURT DID NOT CONSIDER IT FIT TO ADMIT THE APP EALS. COPIES OF ALL THE ORDERS OF THE TRIBUNAL AND THE JUDGMENTS OF THE HIGH COURT HAVE BEEN FILED BEFORE US. 3.4. IT WAS THE SUBMISSION OF THE LEARNED D.R. THAT IN VIEW OF THE SPECIAL BENCH DECISION OF MUMBAI IN THE CASE OF TOPMAN EXPORTS VS. ITO 124 ITD 1 (MUM.) (S. B.) PARTICULARLY IN PARAS 33 AND 34 OF THE ORDERS, IT W AS SUBMITTED THAT INCOME ON ADVANCED LICENCE WILL ACCR UE TO THE ASSESSEE WHEN THE EXPORTS WERE MADE AND ACCORDINGLY, FOLLOWING THE PRINCIPLES LAID DOWN BY THE SPECIAL BENCH WHICH WAS IN FACT UPHELD ULTIMATELY B Y THE HONBLE SUPREME COURT, THE ISSUE IS TO BE DECID ED AGAINST THE ASSESSEE HOLDING THAT INCOME ON ADVANCE LICENCE ARISES, THE MOMENT EXPORTS WERE DONE AND APPLICATION WAS MADE AND NOT AT THE TIME OF ACTUAL IMPORTS AS CONTENDED BY THE ASSESSEE. FURTHER, REFE RRING TO THE ORDERS IN ITA. NO. 6969/MUM/2008,IT WAS SPECIALLY SUBMITTED THAT THE ITAT REFERRED TO THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS. KALPATARU COLOURS& CHEMICALS 328 ITR 451 (BOM.) TO DISMISS THE REVENUES CONTENTION IN VIEW OF THE THEN EXISTING BOMBAY HIGH COURT JUDGMENT REFERRED ABOVE, WHICH WAS REVERSED BY THE HONBLE SUPREME COURT IN THE CASE OF TOPMAN EXPORTS VS. CIT & OTHER S IN CIVIL APPEAL NO.1699/2012. IN VIEW OF THE ABOVE, IT WAS SUBMITTED THAT SPECIAL BENCH DECISION GOT APPROVED BY THE HONBLE SUPREME COURT. THEREFORE, THE ISSUE IS TO BE DECIDED IN LINE WITH THE SPECIAL BENCH DECISION THA T INCOME ACCRUES IN THE YEAR IN WHICH EXPORTS WERE MA DE AND ASSESSEE GOT ENTITLEMENT FOR ADVANCE LICENSING. 3.5. THE LEARNED COUNSEL, HOWEVER REFERRED TO THE PRINCIPLES LAID DOWN BY THE COORDINATE BENCHES IN ASSESSEES OWN CASE AND ALSO SUBMITTED THAT THE ISS UE IN TOPMAN EXPORTS WAS WITH REFERENCE TO THE TAXABIL ITY AND BIFURCATION OF THE DEPB PROCEEDS WHILE COMPUTIN G DEDUCTION UNDER SECTION 80HHC AND NOWHERE CONCERNED WITH THE ISSUE BEFORE US WHICH ITSELF WAS UPHELD BY THE HONBLE BOMBAY HIGH COURT IN ASSESSEES OWN CASE. ITA NOS.6158 AND 7125 OF 2003 AND CO NO.396 OF 2004 GLAXO SMITHKLINE MUMBAI PAGE 16 OF 33 3.6. WE HAVE CONSIDERED THE ISSUE AND PERUSED THE RECORD. AS ALREADY STATED ABOVE, THE ISSUES IN ASSESSEES OWN APPEAL IS CONSISTENTLY HELD IN FAVOU R OF THE ASSESSEE FOLLOWING THE DECISION OF THE MUMBAI B ENCH OF THE TRIBUNAL IN JAMSHRI RAJITSINGHJI SPG. &WVG. MILLS LTD. VS. IAC (1992) 41 ITD (BOM) 142. AS ALREADY ST ATED, THE ISSUE WAS CONFIRMED BY THE HONBLE JURISDICTION AL HIGH COURT WHICH DISMISSED THE REVENUES APPEAL VID E ORDERS ITA.1183/MUM/2011 DATED 25-11-2011. IN THAT, THE QUESTION REFERRED SPECIFICALLY IS AS UNDER : WHETHER THE ADVANCE LICENCE AND THE DEPB RECEIVABL E BY THE ASSESSEE ARE LIABLE TO BE ASSESSED TO TAX IN THE YEAR IN WHICH THE LICENCE IS GRANTED TO THE LICENCE E OR LIABLE TO BE TAXED IN THE YEAR IN WHICH THE BENEFIT S ACTUALLY ACCRUE AFTER THE IMPORTS ARE EFFECTED, IS THE QUESTION RAISED IN THIS APPEAL. 3.7. THE HONBLE HIGH COURT HELD AS UNDER : 2. THE INCOME TAX APPELLATE TRIBUNAL FOLLOWING IT S DECISION IN THE CASE OF JAMSHRIRAJITSINGHJISPG. &WV G. MILLS LTD. VS. IAC REPORTED IN 41 ITD 142 HELD THAT THE SAID AMOUNTS ARE LIABLE TO BE TAXED IN THE YEAR IN WHICH THE BENEFITS ACTUALLY ACCRUE TO THE ASSESSEE AND NO T IN THE YEAR IN WHICH THE LICENCE IS GRANTED. THIS COUR T IN THE CASE OF COMMISSIONER OF INCOME TAX VS. M/S. MAFATLA L INDUSTRIES LTD, BEING INCOME TAX APPEAL NO. 424 OF 2009 DECIDED ON 22 ND SEPTEMBER, 2009 HAS UPHELD THE DECISION OF THE INCOME TAX APPELLATE TRIBUNAL IN TH E CASE OF JAMSHRI RAJITSINGHJI SPG. & WVG. MILLS LTD. (SUP RA). 3. IN THIS VIEW OF THE MATTER, WE SEE NO MERIT TO E NTERTAIN THIS APPEAL. THE APPEAL IS ACCORDINGLY DISMISSED WI TH NO ORDER AS TO COSTS. 3.8. THEREFORE, THIS ISSUE IS NO LONGER SURVIVES FO R CONSIDERATION AS FAR AS THE INCOME TAX APPELLATE TRIBUNAL IS CONCERNED AS IT HAS CONSISTENTLY HELD T HE ISSUE IN FAVOUR OF THE ASSESSEE AND WAS ALSO UPHELD BY THE HONBLE HIGH COURT. WE MAY ALSO NOTE THAT EVEN THOUGH THE ISSUE OF ACCRUAL OF INCOME ON DEPB WAS ITA NOS.6158 AND 7125 OF 2003 AND CO NO.396 OF 2004 GLAXO SMITHKLINE MUMBAI PAGE 17 OF 33 DISCUSSED BY THE SPECIAL BENCH IN PARAS 33 AND 34, THE PRESENT ISSUE IS NOT WITH REFERENCE TO DEPB BUT ADV ANCE LICENCES WHICH IS NOT TRANSFERABLE UNLIKE THE DEPB BENEFITS GRANTED UNDER THE SCHEME. THE HONBLE SUPREME COURT IN THE CASE OF TOPMAN EXPORTS VS. CIT , MUMBAI AND OTHERS HAD NOT DEALT WITH ACCRUAL OF INC OME BUT DEALT WITH THE ISSUE OF BRINGING TO TAX THE SAL E PROCEEDS OF THE DEPB, PROFIT ON SALE OF DEPB AND HO W THEY CAN BE CONSIDERED UNDER SECTION 28. THE ISSUE WAS NOT ABOUT THE ACCRUAL OF INCOME BUT BIFURCATION OF PROCEEDS OF DEPB/DFRC INTO FACE VALUE AND PROFIT AN D YEAR OF TAXABILITY. IN VIEW OF THIS, TO THE EXTENT OF ACCRUAL OF INCOME IS CONCERNED, WE ARE OF THE OPINION THAT ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE BY THE HONBLE HIGH COURT IN THE ORDERS REFERRED (SUPRA). RESPECTFULLY, FOLLOWING THE SAME, WE ALLOW THE GROUNDS RAISED BY THE ASSESSEE. ASSESSING OFFICER IS DIRECTED TO DO THE NEEDFUL IN ACCORDANCE WITH THE ORDERS ON THE ISSUE AS IN THE EARLIER YEARS AND MAKE NECESSARY ADJUSTMENTS, IF ANY REQUIRED IN THE COMPUTATION. WITH THESE DIRECTIONS, GROUNDS ARE CONSIDERED AS ALLOWED. 8.9 CONSISTENT WITH ABOVE OPINION, AO IS DIRECTED T O DO THE NEEDFUL IN ACCORDANCE WITH THE ORDERS ON THE ISSUE IN THE E ARLIER YEAR AND MAKE NECESSARY ADJUSTMENT, IF ANY REQUIRED IN THE C OMPUTATION OF INCOME UNDER THE HEAD BUSINESS AND ALSO U/S 80HHC. WITH THESE DIRECTIONS THE GROUNDS ARE CONSIDERED ALLOWED FOR S TATISTICAL PURPOSE. 9. GROUND NO.7 IS AS UNDER: 7. THE LEARNED CIT (A) ERRED IN UPHOLDING THE STAN D OF THE JCIT OF NOT ALLOWING THE APPELLANTS CLAIM FOR DEDUCTION OF INTEREST ON DPEA LIABILITY FOR THE PER IOD 1 ST APRIL, 1997 TO 31 ST MARCH, 1998 ON THE GROUND THAT IT CONSTITUTES A CONTINGENT LIABILITY. 9.1 GROUND NO.7 PERTAINS TO INTEREST LIABILITY WITH RESPECT TO DPEA LIABILITY. IT WAS FAIRLY ADMITTED THAT THIS ISSUE I S TO BE HELD IN FAVOUR OF THE REVENUE AND AGAINST ASSESSEE IN VIEW OF THE ORDERS OF THE ITAT IN EARLIER YEARS. WE FIND FROM THE ORDER FROM ASSESSMENT YEAR 1996-97 THAT THE ITAT ORIGINALLY IN ASSESSMENT YEAR 1986-87 CONSIDERED THAT: ITA NOS.6158 AND 7125 OF 2003 AND CO NO.396 OF 2004 GLAXO SMITHKLINE MUMBAI PAGE 18 OF 33 A) DPEA LIABILITY WILL BE ALLOWABLE, IN THE YEAR IN WH ICH SUCH LIABILITY ACCRUES. THE ORDERS OF THE LD. CIT (A) WI TH REGARD TO GROUND NOS. 4, 5 AND 5 OF THE DEPARTMENT, RESPECTIV ELY FUR THE ASSESSMENT YEARS 1986.87, 1987-88 AND 1988-89 ARE C ONFIRMED. B) REGARDING APPLICABILITY OF SECTION 43B, WE AGREE WI TH THE FINDING OF THE LEARNED CIT (A) FOR THE ASSESSMENT YEAR 1988 -89 THAT THIS LIABILITY IS NOT A TAX, DUTY, CESS OR FEE UNDER ANY LAW LEVIABLE. THEREFORE, WE UPHOLD THE ORDER OF THE LEARNED CIT ( A) ON THIS ISSUE FOR THE ASSESSMENT YEAR 1988-89. C) ADDITIONAL CLAIM FOR DPEA WOULD BE ADMISSIBLE ON TH E SAME FOOTING ON ACCRUAL BASIS. D) REGARDING DETERMINATION OF PROFITS FOR THE PURPOSE OF SECTION 80- I, AS AND WHEN ANY ORDER OF HIGHER JUDICIAL FORUM C OMES, THE ASSESSING OFFICER SHALL GIVE EFFECT TO SUCH ORDER. E) ENHANCED DPEA LIABILITY, AS PER ADDITIONAL GROUND O F APPEAL RAISED BY ASSESSEE FOR THE ASSESSMENT YEAR 1986-87 AND THE ASSESSEE'S C.O. FOR THE ASSESSMENT YEAR 1987-88, WO ULD BE ALLOWABLE ON ACCRUAL BASIS. F) INTEREST LIABILITY ACCRUES FROM YEAR TO YEAR AND, T HEREFORE, SUCH LIABILITY MAY BE ALLOWED ON THIS BASIS DURING EACH ASSESSMENT YEAR. G) THIS DISPOSES OF THE VARIOUS ISSUES MENTIONED ABOVE RAISED BY ASSESSEE AS ALSO BY THE DEPARTMENT WITH REGARD TO D PEA LIABILITY. 9.2 KEEPING IN VIEW OF THE ABOVE AFORESAID DECISION OF THE TRIBUNAL, WE SET ASIDE THE IMPUGNED ORDER OF THE CIT (A) AND RESTORE THE ISSUE BACK TO THE FILE OF AO FOR DE NOVO ADJUDICATION IN ACCORDANCE WITH THE LAW CONSISTENT WITH EARLIER YEARS ORDERS. THUS THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. ITA NOS.6158 AND 7125 OF 2003 AND CO NO.396 OF 2004 GLAXO SMITHKLINE MUMBAI PAGE 19 OF 33 ADDITIONAL GROUNDS: 10. ASSESSEE HAS RAISED THE FOLLOWING ADDITIONAL GROUND S WHICH ARE NUMBERED AS 9 AND 10, WHICH ARE ALLOWED: GROUND NO.9 BETNELAN INTEREST DEMAND. THE APPELLANTS SUBMIT THAT IN VIEW OF THE DEMAND OF INTEREST RAISED BY THE DEPARTMENT OF CHEMICALS AND PETROCHEMICALS PURSUANT TO THE LETTER/ORDER DATED 1 0 TH JUNE, 1997 A SUM OF ` .18,06,887 WHICH REPRESENTS THE INTEREST PAYABLE FOR THE PERIOD 1.4.1997 TO 31.3.19 98 BE ALLOWED AS A DEDUCTION. GROUND NO.10. BETNELAN DEMAND. THE APPELLANTS SUBMIT WITHOUT PREJUDICE TO THEIR CONTENTIONS THAT THEY BE ALLOWED DEDUCTION FOR THE DEMAND IN EACH OF THE AYS TO WHICH THEY PERTAIN I.E . 1995-96 AND 1996-97, THE ENTIRE AMOUNT OF ` .1,20,42,318 BE ALLOWED IN AY 1998-99 AS THE DEMAND WAS RAISED VIDE LETTER/ORDER DATED 10.6.1997 OF THE DEPARTMENT OF CHEMICALS AND PETROCHEMICALS. 10.1 GROUND NO.9 & 10 ARE THE ADDITIONAL GROUNDS RA ISED IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS VIDE LETTER DATED 9.8.2007. THE FACTS LEADING TO THE PRESENT ISSUE ARE THAT DUR ING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 1998-99, ASSESSEE RECEIVED A DEMAND DATED 10 TH JUNE, 1997 FROM THE DEPARTMENT OF CHEMICALS & PETROCHEMICALS (DCP) AMOUNTING TO RS.1,90-,43,347 /- TOWARDS OVERCHARGING OF PRICE IN RESPECT OF THE APPELLANTS PRODUCT BETNELAN TABS SOLD DURING THE PERIOD JANUARY 1995 TO JULY 19 95. THE DEMAND WAS REVISED TO RS. 1,20,42,312/-. INTEREST O F RS. 84,29,619/- UPTO 31.12.1999 WAS CHARGED ON THE DEMA ND AT THE RATE OF 15% PER ANNUM. AGGRIEVED BY THE DCPS ORDER , ASSESSEE FILED A WRIT PETITION BEARING NO. 1266 OF 1999 BEFORE THE DIVISION BENCH OF THE HONBLE HIGH COURT OF BOMBAY. THE DIVISION B ENCH, VIDE ORDER DATED 16.2.2004 UPHELD THE STAND OF THE DCP. THE DCP, SUBSEQUENTLY BY AN ORDER DATED 17/18.5.2004, REVISE D UPWARDS THE INTEREST DEMAND TO RS. 1,63,70,915/- (TOTAL DEMAND: RS.2,84, 13,228/-). ASSESSEE HAS FILED A SPECIAL LEAVE PETI TION (CIVIL) NO. ITA NOS.6158 AND 7125 OF 2003 AND CO NO.396 OF 2004 GLAXO SMITHKLINE MUMBAI PAGE 20 OF 33 6518 OF 2004 IN THE SUPREME COURT WITH PRAYER FOR I NTERIM RELIEF CHALLENGING THE ORDER OF THE DIVISION BENCH OF THE BOMBAY HIGH COURT. THE SAME IS PENDING BEFORE THE HONBLE SUPRE ME COURT FOR DISPOSAL. 10.2 ASSESSEE IS OF THE VIEW THAT THE LIABILITY PER TAINING TO THE ABOVE DEMAND WAS ALLOWABLE IN EACH OF THE YEARS TO WHICH THE DEMAND PERTAINS. THE YEAR-WISE BREAK-UP OF THE TOTAL DEMAN D OF RS.2,84,13,228/- (INCLUSIVE OF INTEREST) IS GIVEN B ELOW: ASSESSMENT YEAR DEMAND PRODUCT BETNELAN ( ` ) INTEREST DEMAND ( ` .) 1995-96 14,59,674 47,891 1996-97 1,05,82,638 18,06,887 1997-98 - 18,06,887 1998-99 - 18,06,887 1999-2000 18,06,887 2000-01 18,06,887 2001-02 18,06,887 2002-03 18,06,887 2003-04 18,06,887 2004-05 18,06,887 2005-06 65,901 TOTAL 1,20,42,312 1,63,70,915 ASSESSEE HAS NOT DEBITED THE AFORESAID DEMAND (INCL UDING INTEREST) TO THE PROFIT & LOSS ACCOUNT. ASSESSEE HAS ALSO NOT PAID THE DEMAND. 10.3 ON THIS ISSUE, IT WAS FAIRLY ADMITTED THAT THE ISSUE IS RESTORED TO THE FILE OF AO FOR FRESH ADJUDICATION IN VIEW OF THE DIRECTIONS GIVEN IN ASSESSMENT YEAR 1995-96 ORDER DATED 30.11.2011 W HEREIN THE TRIBUNAL VIDE PARA 3 & 4 RESTORED THE ISSUE TO THE FILE OF AO FOR DE NOVO ADJUDICATION IN ACCORDANCE WITH THE LAW. CONSISTEN T WITH THE VIEW TAKEN THEREIN, WE DIRECT AO TO ADJUDICATE THE ISSUE AND CONSIDER THE ALLOWANCE OF THE ABOVE AMOUNT IN ACCOR DANCE WITH THE LAW AND FACTS. THE GROUNDS ARE CONSIDERED ALLOWED F OR STATISTICAL PURPOSES. 10.4 IN THE RESULT, APPEAL IS PARTLY ALLOWED. ITA NOS.6158 AND 7125 OF 2003 AND CO NO.396 OF 2004 GLAXO SMITHKLINE MUMBAI PAGE 21 OF 33 ITA NO.7125/MUM/2003 THIS IS A REVENUE APPEAL AND THERE ARE 13 GROUNDS F OR CONSIDERATION. 11. GROUND NO.1 IS AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN DELETING THE ADDITION M ADE ON ACCOUNT OF DISALLOWANCE OF PENALTIES OF RS.I0,000- PAID TO THE CENTRAL EXCISE AUTHORITIES, HOLDING THAT THE PE NALTIES HAVE BEEN LEVIED NOT FOR INFRACTION OF LAW BUT ON A CCOUNT OF TECHNICAL LAPSE WITHOUT APPRECIATING THAT THE PENAL TIES HAVE BEEN PAID IN RESPECT OF OVER UTILISATION OF MO DVAT WHICH IS IN THE NATURE OF INFRACTION OF LAW AND, THEREFORE, THE AO RIGHTLY DISALLOWED THE PENALTIES OF ` 10,000 PAID TO THE CENTRAL EXCISE AUTHORITIES. 11.1 THIS GROUND PERTAINS TO DELETION OF AN AMOUNT OF ` .10,000 PAID AS PENALTY TO THE CENTRAL EXCISE AUTHORITIES ON ACC OUNT OF TECHNICAL LAPSE. AO WAS OF THE VIEW THAT IT IS A PENALTY FOR INFRACTION OF LAW AND DISALLOWED THE SAME. THE LEARNED CIT (A) HELD A S UNDER WHILE ALLOWING THE AMOUNT: 3.1 IT IS SEEN FROM THE FACTS OF THE CASE, THAT B OTH THESE AMOUNTS HAVE BEEN PAID TO THE CENTRAL EXCISE AUTHORITIES IN RESPECT OF OVER UTILISATION OF MOD V AT. FURTHER, IT IS ALSO SEEN FROM THE COPY OF THE ORDER IMPOSING THE SAID PENALTY THAT THE AMOUNT HAS BEEN PAID FOR A TECHNICAL LAPSE AND NOT FOR INFRACTION O F LAW. IN THE CIRCUMSTANCES, IT IS SEEN THAT THE SAID PENALTI ES HAVE BEEN LEVIED IN THE NORMAL COURSE OF BUSINESS AND TH E EXCESS AVAILABLE OF MODVAT HAS OCCURRED BECAUSE THE SALE WAS CLAIMED ON REJECTED GLASS BOTTLES/VI ALES AS A RESULT OF HUMAN ERROR AND LAPSE OF TIME. IT CAN BE SEEN THEREFORE THAT SAID PENALTIES HAVE BEEN LEVIED NOT FOR INFRACTION OF LAW BUT ON ACCOUNT OF TECHNICAL LAPSE AND SAME IS THEREFORE ALLOWED AND ADDITION IS DELETED . 11.2 AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER AS THIS IS IN CO NSISTENT WITH THE FACTS AND ALSO THE PRINCIPLES LAID DOWN BY THE HON' BLE HIGH COURT IN THE CASE OF CIT VS. INTERNATIONAL FISHERIES (220 TA XATION 11)(BOM ITA NOS.6158 AND 7125 OF 2003 AND CO NO.396 OF 2004 GLAXO SMITHKLINE MUMBAI PAGE 22 OF 33 HC) AND KAIRA CARN CO (127 TTJ 514) (MUM ITAT). GRO UND IS ACCORDINGLY DISMISSED. 12. GROUND NO.2 IS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.L,90,343/- (5% OF RS.38,06,871) BEING ESTIMATED EXPENSES INCURRED ON EARNING THE GROSS DIVIDEND OF RS.38,06,871 WHICH WAS CLAIMED AS EXEMPT UNDER SECTION 10(33) OF THE ACT, RELYING UPON THE CIT(A)' S ORDER IN THE ASSESSEE'S OWN CASE FOR THE AY 1999-2000 WHICH HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND CONTEST ED BY WAY OF FILING APPEAL TO THE ITAT. 12.1. GROUND NO.2 PERTAINS TO THE ISSUE OF DISALLOW ANCE AT 5% MADE BY AO ON THE DIVIDEND INCOME OF ` . 38,06,871 /-. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE RECORDS AVAILABLE BEFORE US, WE FIND THAT THIS ISSUE IS COVERED BY THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN CIT V/S GENERAL INSURA NCE CORPORATION OF INDIA, (2002) 254 ITR 204 (BOM.), AS WELL AS THE DECISION OF CHANDIGARH SPECIAL BENCH OF THE TRIBUNAL IN PUNJAB STATE INDUSTRIAL CORPORATION LTD., (2006), 102 ITD 001 (C HANDI.). CONSISTENT WITH THE VIEW TAKEN BY THE TRIBUNAL IN E ARLIER ASSESSMENT YEARS, WE SET ASIDE THE IMPUGNED ORDER P ASSED BY THE COMMISSIONER (APPEALS) AND RESTORE THE ISSUE TO THE FILE OF ASSESSING OFFICER. THE ASSESSING OFFICER IS DIRECTE D TO CONSIDER ASSESSEE'S CLAIM CONSISTENT WITH THE ORDERS IN EARL IER YEAR AS PER LAW AND PRINCIPLE LAID DOWN ON THE ISSUE. THIS GROU ND IS, THUS, ALLOWED FOR STATISTICAL PURPOSES. 13. GROUND NO.3 IS AS UNDER: 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWAN CE OF A SUM OF RS.2,30,000 BEING EXPENDITURE INCURRED ON GL AXO SPORTS CLUB ACTIVITIES U/S.40A(9), RELYING UPON THE CIT(A)'S ORDER FOR THE AY. 1997-98 IN THE ASSESSEE'S OWN CASE WHICH HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND ITA NOS.6158 AND 7125 OF 2003 AND CO NO.396 OF 2004 GLAXO SMITHKLINE MUMBAI PAGE 23 OF 33 CONTESTED BY WAY OF FILING APPEAL TO THE ITAT. 13.1 GROUND NO.3 PERTAINS TO DISALLOWANCES UNDER SE CTION 40A(9) ON PAYMENT OF ` .2,30,000/-. BEFORE US, BOTH THE PARTIES AGREE THAT THIS ISSUE WAS EARLIER DECIDED BY THE TRIBUNAL IN A SSESSEE'S OWN CASE FOR ASSESSMENT YEARS 1989-90 TO 1991- 92, 1992 -93 TO 1993- 94, 1994-95, 1995-96 , 1996-97 1997-98 RESPECTIVELY , WHEREIN THE TRIBUNAL ALLOWED THE DEDUCTION IN RESPECT OF PAYMEN T MADE TO M/S. GLAXO SPORTS CLUB. CONSISTENT WITH THE VIEW TAKEN B Y THE TRIBUNAL, WE UPHOLD THE ORDER PASSED BY THE COMMISSIONER (APP EALS) AND DISMISS THE GROUND RAISED BY THE REVENUE. 14. GROUND NO.4 IS AS UNDER: 4.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWAN CE OF RS.4,43,709/- WRITTEN OFF BY THE ASSESSEE AS BAD DE BTS HOLDING THAT THE A. O. HAS NOT BROUGHT ANY FACTS TO SHOW THAT THIS AMOUNT DOES NOT RELATE TO THE A Y. 1998-99 WITHOUT APPRECIATING THAT THE AMOUNT WAS ACTUALLY WRITTEN OFF IN JUNE, 1998 PERTAINING TO TH E A. Y. 1999-2000 AND, THEREFORE, THE AO RIGHTLY DISALLOWED THE CLAIM OF THE DEBTS DURING THE YEAR. 14.1 AS STATED IN THE ASSESSMENT ORDER THE SAID AMO UNT HAS BEEN DISALLOWED BY AO PRIMARILY BECAUSE THE SAME WAS ACT UALLY WRITTEN OFF IN JUNE, 1998 WHEREAS THE YEAR UNDER CONSIDERAT ION CLOSED ON 31.3.1998. IT WAS THE CONTENTION OF AO THAT SINCE T HE ACCOUNT WAS WRITTEN OFF ONLY IN THE FINANCIAL YEAR 1998-99, THE SAME COULD BE CLAIMED AS DEDUCTION IN AY 1999-2000, ALTHOUGH IT P ERTAINS TO AN EARLIER AY. 14.2 THE CIT (A) HELD AS UNDER: 8.2A. IN THIS REGARD THE APPELLANT HAS RELIED ON T HE DECISION OF THE CALCUTTA HIGH COURT IN THE CASE OF TURNER MORRISION & CO. (114 TAXMAN 9) WHEREIN THE HON'BLE HIGH COURT HAS HELD THAT IT IS IMMATERIAL WHETHER B AD DEBTS IS SHOWN AFTER THE CLOSE OF THE ACCOUNTING YE AR OR DURING THE ACCOUNT YEAR. EVEN A CLAIM LEAVING OF SE CTION ITA NOS.6158 AND 7125 OF 2003 AND CO NO.396 OF 2004 GLAXO SMITHKLINE MUMBAI PAGE 24 OF 33 36(1)(II) R.W.S. 36(2)(I) CLEARLY SUGGESTS THE BAD DEBTS CAN BE ALLOWED AS DEDUCTION IN COMPUTING THE INCOME OF ASSESSEE, EVEN IF THE BAD DEBTS IS ACTUALLY WRITTEN OFF AFTER THE CLOSING. SINCE AO HAS NOWHERE BROUGHT ON ACCOUNT ANY FACTS TO SHOW THAT THIS AMOUNT DO NOT RELATE TO THE AY UNDER CONSIDERATION, MERELY BECAUS E THE SAME WAS WRITTEN OFF AFTER THE CLOSE OF ACCOUNT ING YEAR, THE SAME CANNOT BE DISALLOWED. THIS ADDITION IS THEREFORE, DELETED. THIS SUB-GROUND IS ALLOWED. 14.3 AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER AS THE LEARNED C IT (A) ORDER IS CONSISTENT WITH THE PRINCIPLES LAID DOWN ON THE ISS UE INCLUDING THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF TR F LTD VS. CIT, 323 ITR 397 (SC). SINCE THE AMOUNTS WERE ALREADY WR ITTEN OFF, REVENUE GROUND IS REJECTED. 15. GROUND NO.5 IS AS UNDER: 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) ERRED IN DIRECTING THE AO TO ADD PROPORTIONATE DISALLOWANCES TO ELIGIBLE PROFITS FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S.80-I & 80-I A, RELYING UPON THE CIT(A)'S ORDER FOR THE AY. 1997-98 IN THE ASSESSEE'S OWN CASE WHICH HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND CONTESTED BY WAY OF FILING APPEAL TO THE ITAT . 15.1 GROUND NO.5 PERTAINS TO THE CLAIM UNDER SECTIO N 80I AND 80IA ON THE DISALLOWANCES IN THE SAME PROPORTION AS HEAD OFFICE EXPENSES ALLOCATION. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE RECORDS AVAILABLE BEFORE US, WE FIND THAT AN IDENTICAL ISSUE HAS BEEN DECIDED BY THIS TRIBUNAL IN ASSESSEE'S OWN CASE IN AN APPEAL FILED BY THE REVENUE IN ITA NO.8341/BOM./199 3, FOR ASSESSMENT YEAR 1990-91, ORDER DATED 31ST JANUARY 2 007, WHEREIN THE TRIBUNAL DIRECTED THE ASSESSING OFFICER TO ALLO W THE CLAIM MADE BY THE ASSESSEE. ITA NOS.6158 AND 7125 OF 2003 AND CO NO.396 OF 2004 GLAXO SMITHKLINE MUMBAI PAGE 25 OF 33 15.2 KEEPING IN VIEW THE AFORESAID CO-ORDINATE BENC H DECISION OF THIS TRIBUNAL, WE UPHOLD THE ORDER PASSED BY THE CO MMISSIONER (APPEALS) AND DISMISS THE GROUND RAISED BY THE REVE NUE. 16. GROUND NO.6 IS GIVEN BELOW: 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN DIRECTING THE A.O. TO E XCLUDE THE AMOUNT OF EXCISE DUTY AND SALES-TAX FROM THE TO TAL TURNOVER FOR THE PURPOSE OF COMPUTATION OF DEDUCTIO N U/S.80HHC RELYING UPON THE DECISION OF THE BOMBAY H IGH COURT IN THE CASE OF SUDARSHAN CHEMICAL INDUSTRIES LTD. (245 KTR 784) WHICH HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND CONTESTED BY WAY OF FILING SLP . 16.1 GROUND NO.6 PERTAINS TO EXCISE DUTY FORMING TH E PART FOR DEDUCTION UNDER SECTION 80HHC. THE LEARNED CIT (A) FOLLOWING THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CA SE OF CIT V. SUDARSHAN CHEMICALS INDUSTRIES LTD. [2000] 245 ITR 769 HELD THAT EXCISE DUTY AND SALES TAX ARE NOT INCLUDIBLE IN THE TURNOVER FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER SECTION 8 0HHC. THIS ISSUE IS NOW FAIRLY COVERED BY THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. LAKSHMI MACHINE WORKS 290 ITR 667 (SC) WHEREIN IT WAS HELD THAT EXCISE DUTY AND SALES TAX CANNOT FORM PART OF TOTAL TURNOVER UNDER SECTION 80HHC(3). RESP ECTFULLY FOLLOWING THE AFORESAID JUDGMENT OF THE HON'BLE SUP REME COURT, WE REJECT THE GROUND OF THE REVENUE AND UPHOLD THE ORD ER OF THE CIT (A) ON THIS ISSUE. 17. GROUND NOS.7 & 8 ARE AS UNDER: 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN HOLDING THAT FOR TH E PURPOSE OF WORKING OUT INDIRECT COST IN THE CASE OF EXPORT OF TRADING GOODS, THE EXPORT DIVISION IS AN INDEPEN DENT, SELF-CONTAINED DIVISION AND, THEREFORE, THE HEAD-OF FICE ADMINISTRATION EXPENSES INCLUDING INTEREST SHOULD N OT BE ALLOCATED TO THE SAID DIVISION FOR THE PURPOSE OF W ORKING OUT DEDUCTION U/S.80HHC, RELYING UPON THE CIT(A)'S ITA NOS.6158 AND 7125 OF 2003 AND CO NO.396 OF 2004 GLAXO SMITHKLINE MUMBAI PAGE 26 OF 33 ORDER FOR THE A. Y. 1997-98 IN THE ASSESSEE'S OWN C ASE WHICH HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND CONTESTED BY WAY OF FILING APPEAL TO IT AT. 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) ERRED IN DIRECTING THE A O. TO TAKE 'NET' INTEREST CHARGES FOR ALLOCATION OF EXPENSES FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER SECTION 80HHC ON PROFIT ON EXPORT OF TRADING GODS, RELYING UPON THE CIT (A)S ORDER FOR THE AY 1997-98 IN ASSESSEE S OWN CASE WHICH HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND CONTESTED BY WAY OF FILING APPEAL TO THE ITAT. 17.1 GROUND NO.7 AND 8 PERTAINS TO ISSUE OF ALLOCAT ION AND NETTING OF INTEREST ON THE ISSUE OF INDIRECT COST DEDUCTION UNDER SECTION 80HHC. AFTER HEARING BOTH THE PARTIES AND ON A PER USAL OF THE RECORDS AVAILABLE BEFORE US, WE FIND THAT THE HEAD OFFICE ADMINISTRATIVE EXPENSES, ETC., HAVE BEEN ALLOCATED TO ARRIVE AT THE INDIRECT COST IN THE CASE OF EXPORT OF TRADING GOOD S. THESE ISSUES HAVE BEEN DECIDED BY THIS TRIBUNAL IN ASSESSEE'S OW N CASE IN ITAS NO.3464 & 3465/MUM./1996, ETC., FOR ASSESSMENT YEAR S 1992-93 AND 1993-94, ETC., ORDER DATED 29TH MARCH 2007, WHE REIN THE TRIBUNAL, VIDE PARA-11, HELD AS FOLLOWS:- '11. AFTER HEARING BOTH THE PARTIES, WE FIND THAT T HIS ASPECT OF THE ISSUE WAS NEVER ADJUDICATED BY THE ASSESSING OFFICER. NO DOUBT, THE ASSESSEE HAD GIVEN A NOTE REGARDING DEDUCTION U/S 80HHC VIS--VIS INDIRE CT COST IN RESPECT OF TRADING GOODS FOR EXPORT BUT THE ASSESSING OFFICER DID NOT RECORD ANY FINDING IN THI S REGARD AS HE WAS OF THE VIEW THAT THE ASSESSEE WAS NOT ELI GIBLE FOR DEDUCTION U/S 80HHC AS THERE WAS HUGE LOSS IN TRADING GROUND WHICH WAS MUCH MORE THAN PROFITS OF EXPORT OF MANUFACTURED GOODS. ON APPEAL, THE LEARNE D CIT(A) HAS HELD THAT LOSS IN TRADING GOODS COULD NO T BE ADJUSTED AGAINST THE PROFITS IN RESPECT OF EXPORT O F MANUFACTURED GOODS. IN VIEW OF THIS FINDING, THE LE ARNED CIT(A) PROCEEDED TO DISPOSE OF THE ISSUE REGARDING INDIRECT COST. ON THESE FACTS, WE ARE OF THE VIEW T HAT THIS ISSUE REQUIRES FRESH ADJUDICATION. THE LEGISLATURE HAS AMENDED THE PROVISIONS OF SECTION 80HHC WITH ITA NOS.6158 AND 7125 OF 2003 AND CO NO.396 OF 2004 GLAXO SMITHKLINE MUMBAI PAGE 27 OF 33 RETROSPECTIVE EFFECT. ACCORDING TO SUCH AMENDMENT, THE LOSS IN TRADING GOODS REQUIRES TO BE ADJUSTED AGAIN ST PROFITS FROM EXPORT OF MANUFACTURED GOODS. COMPUTAT ION OF INDIRECT COST IS NECESSARY INGREDIENT FOR COMPUT ING THE EXPORT PROFIT FROM TRADING GOODS AS WELL AS MANUFAC TURED GOODS. THE ASSESSING OFFICER HAS NOT MADE ANY OBSERVATION ON THIS ASPECT OF THE ISSUE. HOWEVER, S UCH EXERCISE MAY NOT BE REQUIRED TO BE MADE IF THE LOSS IN TRADED GOODS AS PER THE COMPUTATION OF ASSESSEE ITS ELF IS MORE THAN THE PROFITS FROM EXPORT OF MANUFACTURED G OODS IN AS MUCH AS IN SUCH SITUATION, THE ASSESSEE WOULD NOT BE ENTITLED TO DEDUCTION U/S 80HHC AS PER THE AMEND ED PROVISIONS. ON THE OTHER HAND, IF THE PROFITS FROM EXPORT OF MANUFACTURED GOODS, AS PER THE CALCULATION OF ASSES SEE, IS MORE THAN THE LOSS IN TRADED GOODS EXPORT, THEN THE ASSESSING OFFICER WOULD BE REQUIRED TO DETERMINE TH E INDIRECT COST. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LEARNED CIT(A) ON THIS ASPECT OF THE ISSUE AND REMI T THE MATTER TO THE FILE OF ASSESSING OFFICER FOR FRESH D EDUCTION FOR BOTH THE YEARS. THE ASSESSEE WOULD BE AT LIBERT Y TO FURNISH ALL THE DETAILS REGARDING THIS ASPECT OF TH E ISSUE.' 17.2 ALLOCATION OF OFFICE EXPENSES INCLUDING INTERE ST AND NETTING THEREOF TO EXPORT DIVISION FOR WORKING OUT COST REL ATING TO EXPORT OF TRADING GOODS HAS TO BE RE-DETERMINED AFTER EXAMINA TION. CONSISTENT WITH THE VIEW TAKEN BY THE CO-ORDINATE B ENCH OF THIS TRIBUNAL IN ASSESSEE'S OWN CASE FOR EARLIER ASSESSM ENT YEARS, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE COMMISSIONER (APPEALS) AND RESTORE THE ISSUE TO THE FILE OF ASSESSING OFFI CER FOR ADJUDICATION AFRESH IN ACCORDANCE WITH LAW AND AFTER PROVIDING A DEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ISS UE IN GROUND NO 7 & 8 IS RESTORED TO AO IN ASSESSEE APPEAL FOR RE D ETERMINATION. THESE GROUNDS ARE, THUS, ALLOWED FOR STATISTICAL PU RPOSES. 18. GROUND NO.9 IS AS UNDER: 9. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DIRECTING THE A O. TO RECOMPUTED DEDUCTION UNDER SECTION 80HHC WITHOUT REDUCING 90% OF VARIOUS ITEMS FORMING PART OF MISCELLANEOUS INCOME IN ACCORDANCE WITH EXPLANATION (BAA) TO SECTION 80HHC HOLDING THAT THESE ITEMS HAV E NO ITA NOS.6158 AND 7125 OF 2003 AND CO NO.396 OF 2004 GLAXO SMITHKLINE MUMBAI PAGE 28 OF 33 DIRECT NEXUS WITH THE BUSINESS OF THE ASSESSEE COMP ANY WITHOUT APPRECIATING THAT THE ITEMS OF MISCELLANEOU S INCOME ARE NOT IN THE NATURE OF INCOME AS SPECIFIED IN CLAUSES (IIIA) (IIIB) & (IIIC) OF SECTION 28 OF THE ACT AND THEREFORE, AO RIGHTLY REDUCED 90% OF VARIOUS ITEMS OF MISCELLANEOUS INCOME FOR COMPUTATION OF DEDUCTION UNDER SECTION 80HHC. 18.1 CONSEQUENT TO THE CONFLICTING ORDER OF THE CIT (A), BOTH ASSESSEE AND THE REVENUE ARE IN APPEAL. THIS ISSUE WAS CONSIDERED IN ASSESSEES APPEAL AGAINST GROUND NO. 6(B)(I) ABO VE WHEREIN THE MATTER WAS RESTORED TO THE FILE OF AO FOR FRESH EXA MINATION. ACCORDINGLY, THIS GROUND IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 19. GROUND NOS. 10 & 11 ARE GIVEN BELOW: 10. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE CIT(A) ERRED IN DIRECTING THE A.O. TO INCLUDE CLOSING BALANCE OF ADVANCE LICE NCE BENEFIT AGGREGATING TO ` 526.09 LAKHS IN THE PROFITS OF BUSINESS FOR THE PURPOSE OF COMPUTATION OF DEDUCTIO N U/S.80HHC, RELYING UPON THE CIT(A)'S ORDER FOR' THE A.Y. 1997-98 IN THE ASSESSEE'S OWN CASE WHICH HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND CONTESTED BY WAY OF FILING APPEAL TO THE ITAT. 11.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) ERRED IN DIRECTING THE A O. TO ALLOW BENEFIT BEING ADVANCE LICENCE BEN EFIT ACTUALLY UTILIZED BY THE ASSESSEE AS ENVISAGED IN PROVISO TO SECTION 80HHC(3) OF THE ACT, RELYING UPO N THE CIT(A)'S ORDER FOR THE A Y. 1997-98 IN THE ASSESSEE'S OWN CASE WHICH HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND CONTESTED BY WAY OF FILING APPEA L TO THE IT AT. 19.1 GROUND NOS. 10 AND 11 ARE RELATED TO GROUND NO .6 (C) AND 8 IN ASSESSEES APPEAL. CONSISTENT WITH THE STAND TAK EN THEREIN, AS THE MATTER WAS RESTORED WITH DIRECTIONS, THESE GROU NDS ARE CONSIDERED ALLOWED FOR STATISTICAL PURPOSES. 20. GROUND NO.12 IS AS UNDER: ITA NOS.6158 AND 7125 OF 2003 AND CO NO.396 OF 2004 GLAXO SMITHKLINE MUMBAI PAGE 29 OF 33 12. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE AO. BY INVOKING THE PROVISIONS OF SECTION 43B ON UNPAID INTEREST LIABILITY, RELYING UPON THE CIT( A)'S ORDE R FOR THE A Y. 1997-98 IN THE ASSESSEE'S OWN CASE WHICH HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND CONTESTED BY WAY OF FILING APPEAL TO THE ITAT 20.1 GROUND NO.12 PERTAINS TO SECTION 43B ON UNPAID INTEREST LIABILITY WHICH CORRESPONDS TO GROUND NO.7 OF ASSES SEES APPEAL. CONSISTENT WITH THE STAND TAKEN THEREIN, AS THE ISS UE WAS RESTORED TO AO, THE GROUND IS CONSIDERED ALLOWED FOR STATIST ICAL PURPOSES. 21. GROUND NO.13 IS GIVEN BELOW: 13. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWAN CE OF RS.20,95,51,000/- FOR PAYMENTS MADE UNDER APPROVED VOLUNTARY RETIREMENT SCHEME OF THE COMPANY, HOLDING THE EXPENDITURE AS REVENUE IN NATURE WITHOUT APPRECIATI NG THAT THIS EXPENDITURE WILL GIVE THE ASSESSEE BENEFI T OF ENDURING NATURE AND, THEREFORE, THE A. O. RIGHTLY T REATED THE EXPENDITURE AS A CAPITAL ONE AND DISALLOWED THE SAME 21.1 ASSESSEE CLAIMED AN AMOUNT OF ` 3091.95 LAKHS AS PAYMENTS MADE UNDER VOLUNTARY RETIREMENT SCHEME WHI CH WAS REFLECTED IN PROFIT AND LOSS ACCOUNT AS EXCEPTIONAL ITEM. THE A.O DISALLOWED THE SAME BY HOLDING THAT THIS AMOUNT HAS RESULTING AN ENDURING BENEFIT TO ASSESSEE AND THEREFORE CONSTITU TES CAPITAL EXPENDITURE. 21.2 DURING APPELLATE PROCEEDINGS ASSESSEE PLACED A COPY OF SCHEME DATED 19.3.97 AS APPROVED BY THE OFFICE OF T HE CHIEF COMMISSIONER OF INCOME-TAX AS WELL AS RELIED ON THE FOLLOWING JUDGMENT: INDIAN CABLE CO.LTD. VS. THEIR WORKMEN (SC) 1972 AI R 2195 K. RAVINDRANATHAN NAIR VS.CIT(SC) 247 ITR 178 ITA NOS.6158 AND 7125 OF 2003 AND CO NO.396 OF 2004 GLAXO SMITHKLINE MUMBAI PAGE 30 OF 33 EMPIRE JUTE CO. LTD. VS. CIT (SC) 124 ITR 1 CIT(CENTRAL II )VS. ASSAM OIL CO. LTD.(CAL HC) 154 ITR 647 CIT VS. GEORGE OAKES LTD. (MAD HC) 197 ITR 288 SASOON DAVID AND CO. P. LTD. (SC)1L8 ITR 261 CIT KERALA VS. MALAYALAM PLANATATIONS (SC) 53 ITR 21.3 ASSESSEE RELIED ON THE DECISION OF ITAT, MUMBAI BENCH IN THE CASE OF BHOR INDUSTRIES LTD. A. Y. 1996-97 WHEREIN THE ITAT DECIDED THE EXPENDITURE INCURRED O N ACCOUNT OF PAYMENTS MADE UNDER VRS ARE REVENUE IN NATURE AND H ENCE DEDUCTIBLE. 21.4 AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE DO NOT SEE ANY REASONS TO DIFFER FROM THE ORDER OF THE CIT (A) AS IT IS CONSISTENT WITH THE HON'BLE BOMBAY HIGH COURT ORDER IN THE CASE OF BHOR INDUSTRIES 264 ITR 180 AND ALSO OTHER JUDGMENTS WHICH ARE AS U NDER: A) METAL BOX COMPANY OF INDIA (SC) 73 ITR 53 B) ROTORX CONTROLS INDIA P.LTD (SC) 314 ITR 62 C) BHARAT EARTH MOVERS VS. CIT (SC) 112 TAXMAN 61 D) INDIA CABLES CO. LTD VS. WORKMEN (SC), 1972 AIR 219 5 E) GODREJ GE APPLICATION (BOM. HC), 161 OF 2007 F) BHOR INDUSTRIES, 264 ITR 180 (BOM. HC) ACCORDINGLY GROUND IS DISMISSED. 22. IN THE RESULT, REVENUE APPEAL IS PARTLY ALLOWED . C.O. NO. 396/MUM/2004 23. ASSESSEE RAISED THE FOLLOWING GROUNDS IN THE C ROSS OBJECTION: 1. THE RESPONDENTS SUBMIT THAT IN CASE AOS ACTION OF ALLOCATION OF H.O ADMINISTRATION EXPENSES WHILE WOR KING OUT THE INDIRECT COST IN THE CASE OF EXPORT OF TRAD ING GOODS FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80HHC IS UPHELD, THEN THE AMOUNT OF ` .6.95 LAKHS BEING ALLOCATION MADE FROM OTHER SERVICES WHICH HAS ALREADY BEEN INCLUDED IN THE EXPORT DIVISION EXPENDITURE, SHOULD BE EXCLUDED. ITA NOS.6158 AND 7125 OF 2003 AND CO NO.396 OF 2004 GLAXO SMITHKLINE MUMBAI PAGE 31 OF 33 2. THE RESPONDENTS SUBMIT THAT IN CASE OF AOS ACTI ON OF NOT ALLOWING BENEFIT ON THE AMOUNT OF THE ADVANCE L ICENCE BENEFIT ACTUALLY UTILIZED BY THE APPELLANT AS ENVIS AGED IN THE PROVISO TO SECTION 80HHC (3) IS UPHELD, THEN AO BE DIRECTED TO GRANT THE BENEFIT ON THE AMOUNT OF THE ADVANCE LICENCE BENEFIT CREDITED TO THE PROFIT & LO SS A/C AND TAXED BY HIM IN THIS AY IRRESPECTIVE OF THE UTI LIZATION OF THE BENEFIT AS ENVISAGED IN THE PROVISO TO SECTI ON 80HHC(3) . 23.1 THESE GROUNDS CORRESPOND TO GROUND NOS. 7 AND 11 OF THE REVENUE APPEAL. SINCE THE ISSUES ARE RESTORED TO TH E FILE OF AO, AO IS DIRECTED TO KEEP IN MIND THE ABOVE CONTENTIONS W HILE DECIDING THE ISSUES AND DECIDE ACCORDINGLY IN ACCORDANCE WITH FA CTS AND LAW. THE GROUNDS ARE CONSIDERED ALLOWED FOR STATISTICAL PURP OSES. 24 IN THE RESULT, REVENUE APPEAL IS PARTLY ALLOWED. ITA NO.7206/MUM/2003 REVENUE APPEAL 25. THESE GROUNDS ARE RAISED BY THE REVENUE AGAIN ST THE ORDER OF THE CIT (A) PASSED UNDER SECTION 154 TO THE APPELLA TE ORDER DATED 25.03.2003 AS SOME OF THE GROUNDS WERE LEFT UNDECID ED. THE CIT (A) PASSED THE ORDER ALLOWING THE ISSUES IN FAVOUR OF A SSESSEE FOLLOWING THE ORDERS OF THE PREDECESSOR ON THE SAME ISSUES. T HESE ISSUES ARE COVERED BY EARLIER ORDERS AND CHARTS ARE PLACED ON RECORD BY THE COUNSEL. THERE ARE THREE GROUNDS FOR CONSIDERATION, WHICH ARE AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN DIRECTING AO TO ALLOCAT E ONLY 75% OF THE STAFF COST OF ` .687.91 LAKHS FOR THE PURPOSE OF COMPUTATION OF THE ELIGIBLE PROFITS UNDER SECTION 8 0-I/80IA IN RESPECT OF NASIK UNIT, RELYING UPON THE CIT (A) S ORDER FOR THE AY 1993-94 WHICH HAS NOT BEEN ACCEPTED BY T HE DEPARTMENT AND CONTESTED BY WAY OF FILING APPEAL TO THE ITAT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) ERRED IN DIRECTING AO TO ALLOCAT E NET INTEREST FOR THE PURPOSE OF COMPUTATION OF DEDUCTIO N UNDER SECTION 80-I/80-IA RELYING UPON THE CIT (A)S ORDER FOR THE AY 1993-94 WHICH HAS NOT BEEN ACCEPTED BY THE ITA NOS.6158 AND 7125 OF 2003 AND CO NO.396 OF 2004 GLAXO SMITHKLINE MUMBAI PAGE 32 OF 33 DEPARTMENT AND CONTESTED BY WAY OF FILING APPEAL TO THE ITAT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) ERRED IN HOLDING THAT NO FINANCE COST IS ALLOCABLE TO UNIT NI.3 NAMELY THE STERILE DRY VIAL UNIT AS IT IS A SELF FINANCING UNIT, RELYING UPON THE CIT (A) S ORDER FOR AY 1993-94 WHICH HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND CONTESTED BY WAY OF FILING APPEAL TO THE ITAT. 25.1 GROUND NO.1 TO 3 PERTAINS TO THE DEDUCTION O F STAFF COST OF ` .687.91 LAKHS TO THE NASHIK UNIT WHICH CLAIMED 8 TH YEAR OF DEDUCTION. THE CIT (A) ALLOWED 75% OF STAFF COST AN D 100% OF THE OTHER COSTS. THE CIT (A) FURTHER DIRECTED THAT NO FINANCE COST TO BE ADDED TO STERILE DRY VIAL UNIT AS IT WAS A SELF FIN ANCING UNIT. HENCE REVENUE IS AGGRIEVED. THESE GROUNDS WERE CONSIDERED IN FAVOUR OF ASSESSEE IN EARLIER YEARS. 25.2 THE ORDER OF THE ITAT IN AY 1997-98 IS AS UNDE R: 10. GROUND NO.7 PERTAINS TO THE CLAIM OF DEDUCTION UNDER SECTION 80I AND 80IA. THE DISPUTE IS PERTAINING TO (A) ADJUSTMENT OF INTEREST COST AGAINST INTEREST INCOME , (B) ALLOCATION OF ADDITIONAL STAFF COST TO NASHIK UNITS AND (C) ALTERNATELY DISALLOWANCE IN THE SAME PROPORTION AS THE HEAD OFFICE EXPENSES ALLOCATION. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND WE FIND THAT THIS ISSUE IS COVERED BY THE DECISION OF THE ITAT I N ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 1989-90 AND 1991-92 IN ITA NOS.10002/BOM/92, 8341/BOM/93, AND 7742/BOM/94 VIDE PARA 31 TO 35 AND ITA NOS.4433 AND ITA NO.4434/BOM/96 FOR ASSESSMENT YEAR 1992-93 AND1993-94 IN REVENUE APPEALS VIDE PARA 24. SINCE T HE FACTS OF THE CASE UNDER CONSIDERATION ARE SAME TO T HAT OF THE AFORESAID DECISIONS, RESPECTFULLY FOLLOWING THE DECISIONS (SUPRA) WE DIRECT AO TO ALLOW DEDUCTION U NDER SECTION 80I AND 80IA AS CLAIMED BY ASSESSEE, FOLLOW ING THE DIRECTIONS IN EARLIER YEARS. IT WAS SUBMITTED T HAT SECTION 80IA CLAIM INVOLVES VARIOUS ASSESSMENT YEAR S SO, AO IS DIRECTED TO DETERMINE THE YEAR OF CLAIM WHILE ALLOWING THE DEDUCTION SO THAT NO DEDUCTION IS CLAI MED BEYOND THE ALLOWABLE PERIOD. GROUNDS ALLOWED. ITA NOS.6158 AND 7125 OF 2003 AND CO NO.396 OF 2004 GLAXO SMITHKLINE MUMBAI PAGE 33 OF 33 25.3 CONSIDERING THE ABOVE, THERE IS NO MERIT IN RE VENUE GROUNDS AS THE CIT (A) FOLLOWED THE ORDER IN EARLIER YEAR. THE GROUNDS ARE REJECTED. 25.4 IN THE RESULT, THE REVENUE APPEAL IS DISMISSED. 26. TO SUM UP, ASSESSEES AND REVENUES APPEALS IN ITA NO.6158/MUM/2003 AND ITA NO.7125/MUM/2003 ARE PARTL Y ALLOWED, WHILE REVENUE APPEAL IN ITA NO. 7206/MUM/2 003 IS DISMISSED, WHEREAS CO BY ASSESSEE IS ALLOWED FOR ST ATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 12 TH JUNE, 2013. SD/- SD/- (AMIT SHUKLA) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 12 TH JUNE, 2013. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, E BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI