GREAVES COTTON LTD, MUMBAI V. ASST CIT CIR 6(3), MUMBAI

ITA 7424/MUM/2010

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1710 (ITAT-MUMBAI)
• Duration Of Justice: 8 year(s) 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2006-2007
• Appeal Filed On: 29-10-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ABBI RAMA KARTHIKEY
• Keywords: Transfer pricing; Business expenditure; International transaction; Rule of consistency; Earning of tax free income; Proportionate interest; Question of law; Wholly owned subsidiary; Notional interest; Revised return; TDS; Rule 8D
• Section: 143(3); 234B; 14A; 115JB; 40(a)(ia); 139(5); 143(1); 250; 139

Judgement Text

1 IN THE INCOME-TAX APPELLATE TRIBUNAL G BENCH MUMB AI BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 7424/MUM/2010 (ASSESSMENT YEAR 2006-07 ) GREAVES COTTON LTD. INDUSTRY MANOR, APPASAHEB MARATHE MARG, PRABHADEVI, MUMBAI-400025 . PAN: AAACG2062M VS. ACIT CIRCLE-6(3), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. APPELLANT RESPONDE NT ITA NO. 8533/MUM/2011 (ASSESSMENT YEAR 2007-08 ) GREAVES COTTON LTD. INDUSTRY MANOR, APPASAHEB MARATHE MARG, PRABHADEVI, MUMBAI-400025 . PAN: AAACG2062M VS. ACIT CIRCLE- 6(3), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. APPELLANT RESPONDE NT APPELLANT BY : SMT. ARATI VISSANJI (ADVOCATE) RESPONDENT BY : SHRI ABBI RAMA KARTHIKEY (DR) DATE OF HEARING : 04.06.2019 DATE OF PRONOUNCEMEN T : 07.06.2019 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THESE TWO APPEALS BY ASSESSEE UNDER SECTION 253 OF THE INCOME-TAX ACT (THE ACT) ARE DIRECTED AGAINST THE ASSESSMENT ORDER PAS SED UNDER SECTION 143(3) R.W.S. 144C PASSED IN PURSUANCE OF DIRECTION OF LD. DISPUTE RESOLUTION PANEL- 1 (LD. DRP), MUMBAI FOR ASSESSMENT YEAR 2006-07 & 2 007-08. IN BOTH THE APPEALS, THE ASSESSEE HAS RAISED CERTAIN IDENTICAL GROUNDS OF APPEAL, THEREFORE, BOTH THE APPEALS WERE CLUBBED, HEARD AND ARE DECIDE D BY COMMON ORDER FOR ITA NO. 7424 MUM 2010 & 8533 MUM 2011-GREAVES COTTON LTD. 2 THE SAKE OF BREVITY AND CONVENIENCE. WITH THE CONSE NT OF PARTIES, APPEAL FOR ASSESSMENT YEAR 2006-07 IN ITA NO. 7424/MUM/2010 WA S TREATED AS LEAD CASE. IN ITA NO. 7424/MUM/2010, THE ASSESSEE HAS RA ISED THE FOLLOWING GROUNDS OF APPEAL: GROUND A: DISALLOWANCE U/S 36(1)(III) - RS.10,11,216/-. 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ASSESSING OFFICER, IN THE ORDER PASSED IN PURSUANCE OF DIRECTIONS OF THE DISPUTE RE SOLUTION PANEL (DRP) ERRED IN DISALLOWING PROPORTIONATE INTEREST OF RS.10,1L,2 16/- ON BUSINESS ADVANCES OF RS. 2,13,55,159/- GIVEN TO M/S DEE GREAVES LIMITED, A ULTIMATE SUBSIDIARY OF THE APPELLANT WITHOUT APPRECIATING THE FACT THAT TH E APPELLANT IS SOLE SALE CONCESSIONAIRES OF THE SUBSIDIARY COMPANY, WHICH IS FINANCIALLY WEAK AND THE ADVANCES GIVEN TO THE SUBSIDIARY WERE FOR COMMERCIA L CONSIDERATION TO MEET THEIR WORKING CAPITAL REQUIREMENT, AND THE ADVANCES WERE UTILIZED BY THEM FOR THE SAID PURPOSE AND ALSO THE FACT THAT THE SUBSIDIARY COMPANY IS UNDER CONSTANT MANAGERIAL, FI NANCIAL AND ADMINISTRATIVE CONTROL OF THE APPELLANT COMPANY SINCE ITS INCORPOR ATION IN THE YEAR AUGUST, 1960. 2. THE ASSESSING OFFICER ERRED IN DECIDING THAT SIN CE THERE WAS NO BUSINESS WITH THE SUBSIDIARY COMPANY IN THE YEAR UNDER CONSIDERAT ION, THE ADVANCES GIVEN IN EARLIER YEARS ARE NOT IN CONNECTION WITH BUSINESS. GROUND B DISALLOWANCE U/S 14A R.W.R. 8D - RS. 1,19,20,701/- 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ASSESSING OFFICER, IN THE ORDER PASSED IN PURSUANCE OF DIRECTIONS OF THE DRP, ERRED IN APPLYING RETROSPECTIVELY THE METHODOLOGY PRESCRIBED IN RULE 8D, WHICH WAS IN SERTED BY THE I.T. (FIFTH AMDT.) RULES, 2008 W.E.F. 24.3.2008 AND DISALLOWED A SUM OF RS. 1,19,20,701/-, BEING EXPENDITURE FOR EARNING DIVIDEND AND INCOME F ROM MUTUAL FUNDS OF RS.61,68,033/- FOR THE ASSESSMENT YEAR 2006-2007. 4. SINCE RULE 8D INSERTED BY THE INSERTED BY THE LT . (FIFTH ARNDT.) RULES, 2008 W.E.F. 24.3.2008 IS NOT RETROSPECTIVE IN NATURE, FO R THE ASSESSMENT YEAR 2006- 2007 THE ASSESSING OFFICER SHOULD HAVE APPLIED THE REASONABLE DISALLOWANCE OF 0.4% OF GROSS EXEMPT INCOME, AS EXPENDITURE RELATAB LE TO INCOME WHICH DOES ITA NO. 7424 MUM 2010 & 8533 MUM 2011-GREAVES COTTON LTD. 3 NOT FORM PART OF THE TOTAL INCOME, AS DECIDED BY TH E HON. INCOME TAX APPELLATE TRIBUNAL, MUMBAI, IN APPELLANT'S OWN CASE FOR EARLI ER YEARS. 5. THE ASSESSING OFFICER SHOULD NOT HAVE CONSIDERED EXPENDITURE WORKED OUT AS PER THE METHODOLOGY PRESCRIBED UNDER RULE 8D, FOR T HE PURPOSES OF WORKING OUT BOOK-PROFIT U/S 115JB SINCE THERE IS NO MENTION OF MENTION OF SUCH METHODOLOGY IN EXPLANATION 1 TO SECTION 115JB OF TH E INCOME TAX ACT, 1961 AND ALSO THE SAID RULE CANNOT BE APPLIED FOR ASSESSMENT YEAR 2006-2007. GROUND C POOJA EXPENSES - RS. 7,05,806/- 6. THE ASSESSING OFFICER, IN THE ORDER PASSED IN PU RSUANCE OF DIRECTIONS OF THE DRP, ERRED IN DISALLOWING POOJA EXPENSES OF RS. 7,0 5,806/- BEING NON BUSINESS EXPENSES WITHOUT APPRECIATING THE FACT THAT EXPENDI TURE INCURRED ON POOJAS PERFORMED DURING DIWALI AND DASSERA FESTIVALS HELPS THE APPELLANT COMPANY TO FOSTER AMITY AND GOOD RELATION AMONGST THE EMPLOYEE S AND WORKERS. GROUND D CLUB EXPENSE - RS.79,170/- 7. THE ASSESSING OFFICER, IN THE ORDER PASSED IN PU RSUANCE OF DIRECTIONS OF THE DRP, ERRED IN NOT ALLOWING BUSINESS EXPENDITURE INC URRED BY SENIOR MARKETING EXECUTIVES OF THE APPELLANT BUSINESS MEETINGS HELD IN PRESTIGIOUS CLUBS, WHICH IS COMMON MEETING PLACE OF BUSINESS COMMUNITY AND A T CLUBS TOP EXECUTIVES OF LEADING COMPANIES GIVE SCOPE FOR CANVASSING AND PRO MOTING BUSINESS CONTACTS. GROUND E DISALLOWANCE U/S 40A(9) - RS. 94,470/- 8. THE ASSESSING OFFICER, IN THE ORDER PASSED IN PU RSUANCE OF DIRECTIONS OF THE DRP, SHOULD HAVE ALLOWED CONTRIBUTIONS MADE BY THE APPELLANT TOWARDS VARIOUS EMPLOYEE'S WELFARE FUNDS IN COMPLIANCE WITH THE AGR EEMENT ENTERED INTO BY THE APPELLANT WITH THE EMPLOYEE'S UNION WHICH ARE COVER ED UNDER THE INDUSTRIAL DISPUTE ACT, 1947 AND HENCE ALLOWABLE UNDER PROVISO TO SECTION 40A(9) OF THE ACT. 9. WITHOUT PREJUDICE TO ABOVE , THE ASSESSING OFFICER SHOULD NOT HAVE ADDED THE DISALLOWANCE OF RS. 94,470/- IN THE ASSESSED TOTAL INCOME SINCE THE APPELLANT HAD THEMSELF ADDED IT IN RETURNED INCOME AND HENCE FURTHER ADDITION RESULTS IN DOUBLE TAXATION. GROUND F ITA NO. 7424 MUM 2010 & 8533 MUM 2011-GREAVES COTTON LTD. 4 UNUTILISED CENVAT CREDIT - RS. 2,91,87,584/- 10. THE ASSESSING OFFICER, IN THE ORDER PASSED IN P URSUANCE OF DIRECTIONS OF THE DRP, ERRED IN ADDING THE UNUTILIZED CENVAT CREDIT O F RS.2,91,87,584/- TO THE TOTAL INCOME OF THE APPELLANT AS THE APPELLANT VALUED THE INVENTORY AS PER METHOD OF ACCOUNTS REGULARLY EMPLOYED AND THE AUDITORS HAVE A LSO CERTIFIED THAT DEVIATION FROM VALUATION METHOD PRESCRIBED UNDER SEC. 145A HA S NO IMPACT ON THE PROFIT OF THE APPELLANT. MOREOVER, ADDITION OF AMOUNT OF U NUTILIZED CENVAT CREDIT WILL DISTORT THE REAL PROFIT SINCE CONSISTENCY IN VALUAT ION OF INVENTORY IS DISTURBED. GROUND G DISALLOWANCE V/S 40(A) (IA) - RS. 2,58,19,665/-. 11. THE ASSESSING OFFICER; IN THE ORDER PASSED IN P URSUANCE OF DIRECTIONS OF THE DRP, ERRED IN NOT ALLOWING THE CLAIM OF THE APPELLA NT TO ALLOW DEDUCTION OF AMOUNT OF ADDITION MADE U/S 40(A) (IA) IN ASSESSMEN T YEAR 2005-06 SINCE THE APPELLANT REVERSED THOSE EXCESS EXPENSES' PROVISION AND CREDITED THE SAME IN RESPECTIVE EXPENDITURE ACCOUNTS IN THE ASSESSMENT Y EAR 2006-07. 12. THE ASSESSING OFFICER ALSO FAILED TO APPRECIATE THAT THE ORDER U/S 143 (3) MAKING DISALLOWANCE U/ S 40 (A) (IA) WAS PASSED ON 26/12/2008 AFTER THE TIME LIMIT PRESCRIBED U/S 139(5) I.E. ON 31.3.2008 AND H ENCE THE APPELLANT COULD NOT MAKE THEIR CLAIM IN REVISED RETURN. 13. THE ASSESSING OFFICER FAILED TO APPRECIATE THA T NON ALLOWANCE OF DEDUCTION OF REVERSAL OF EXPENDITURE WOULD RESULT IN DOUBLE T AXATION, FIRSTLY AT THE TIME OF DISALLOWANCE U/S 40(A) (IA) IN A.Y. 2005-06 AND SEC ONDLY INCLUDING IT AS TAXABLE INCOME IN THE ASST. YEAR 2006-07. 14. THE ASSESSING OFFICER ALSO FAILED TO APPRECIATE THAT THE ORDER U/S 143(3) MAKING DISALLOWANCE U/S 40(A) (IA) WAS PASSED ON 26 /12/2008 AFTER THE TIME LIMIT PRESCRIBED U/S 139(5) I.E. ON 31.3.2008 AND H ENCE THE APPELLANT COULD NOT MAKE THEIR CLAIM IN REVISED RETURN. GROUND H INTEREST U/S 234C - RS.L,13,850/- 15. AS DECIDED BY THE BOMBAY HIGH COURT IN THE CASE OF SNOCEM INDIA LTD., VS. DY. CIT (2009) 313 ITR 170, THE ASSESSING OFFICER S HOULD NOT HAVE LEVIED INTEREST U/S 234C IN RESPECT OF SHALL FALL OF ADVAN CE TAX PAYABLE AS PER WORKING U/S 115JB OF THE INCOME TAX ACT, 1961. GROUND I ITA NO. 7424 MUM 2010 & 8533 MUM 2011-GREAVES COTTON LTD. 5 GENERAL 16. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCL E 6(3), MUMBAI'S ORDER, IN PURSUANCE OF DIRECTIONS OF THE DRP, BEING CONTRARY TO LAW, EVIDENCE AND FACTS OF THE CASE SHOULD BE AMENDED OR MODIFIED IN LIGHT OF THE GROUNDS DEDUCED ABOVE. 2. IN ITA NO. 8533/MUM/2011, THE ASSESSEE HAS RAISED T HE FOLLOWING GROUNDS OF APPEAL: GROUND: A: DISALLOWANCE U/S 36(1)(III) - RS. 5,55,4 51/- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ASSESSING OFFICER AND THE DISPUTE RESOLUTION PANEL (DRP) SHOULD NOT HAVE DISALLOWED INTEREST OF RS.5,55,451/- ON INTEREST FREE LOANS AND ADVANCES G IVEN TO SUBSIDIARY COMPANIES. GROUND: B: DISALLOWANCE U/S 14A - RS. 70,43,316/- (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE ASSESSING OFFICER AND THE DRP SHOULD NOT HAVE DISALLOWED RS.70,43,316 /- U/S 14A OF THE INCOME TAX ACT, 1961 SINCE NO EXPENDITURE WAS INCUR RED BY THE APPELLANT FOR EARNING DIVIDEND (EXEMPT INCOME) OF RS. 1,80,38 ,016/-. (II) WITHOUT PREJUDICE TO ABOVE, ON THE FACTS AND I N THE CIRCUMSTANCES OF THE CASE, THE ASSESSING OFFICER AND THE DRP SHOULD NOT HAVE DISALLOWED A SUM OF RS. 70,43,316/- AS BEING REASONABLE EXPENDITURE RELATABLE TO DIVIDEND RECEIVED OF RS. 1,80,38,016/- , BY DIRECTLY OR INDI RECTLY FOLLOWING RULE 8D OF THE INCOME TAX RULES, 1962 FOR THE ASSESSMENT YE AR 2007-08 AND IGNORING THE DECISION OF THE BOMBAY HIGH COURT FOR THE ASST. YEAR 2001-02 AND THE REASONABLE EXPENSES DETERMINED IN EARLIER A SSESSMENT YEARS IN APPELLANT'S OWN CASE. GROUND: C: POOJA EXPENSES - RS. 11,84,378/- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ASSESSING OFFICER AND THE DISPUTE RESOLUTION PANEL SHOULD NOT HAVE DISALL OWED POOJA EXPENSES OF RS.11,84,378/- TREATING IT AS NON-BUSINESS EXPENDIT URE. GROUND: D: DISALLOWANCE U/S 40A(9) - RS. 49,649/- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ASSESSING OFFICER AND THE DRP SHOULD NOT HAVE DISALLOWED CONTRIBUTIONS TO VARIOUS EMPLOYEES' WELFARE FUNDS BEING STATUTORY PAYMENTS THAT ARE NOT COVERED UNDER SECTION 40A(9) OF THE INCOME TAX ACT, 1961. ITA NO. 7424 MUM 2010 & 8533 MUM 2011-GREAVES COTTON LTD. 6 GROUND: E: UNUTILISED CENVAT CREDIT - (RS. 2,95,78, 424/- (-) RS.L,49,82,050) RS.L,45,96,374/- (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE ASSESSING OFFICER AND THE DRP SHOULD NOT HAVE ADDED UNUTILIZED CENVAT CREDIT TO THE TOTAL INCOME OF THE APPELLANT. (II) WITHOUT PREJUDICE TO ABOVE, ON THE FACTS AND I N THE CIRCUMSTANCE OF THE CASE, THE ASSESSING OFFICER AND THE DRP SHOULD NOT HAVE REDUCED THE INCORRECT AMOUNT OF UNUTILIZED CENVAT CREDIT AS ON 31/3/2006 OF RS. 1,49,82,050/- INSTEAD OF REDUCING THE CORRECT AMOUN T OF RS.2,91,87,584/- AND THEREBY ENHANCING THE NET ADDITION OF UNUTILIZE D CENVAT CREDIT FOR THE ASSESSMENT YEAR 2007-08 FROM RS. 3,90,840/- (AS ASS ESSED BY THE ASSESSING OFFICER IN DRAFT ASSESSMENT ORDER U/S 144C} TO NET ADDITION OF RS.1,45,96,374/-. GROUND: F: BOOK-PROFIT - RS. 70,43,316/- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE ASSESSING OFFICER AND THE DRP SHOULD NOT HAVE ADDED RS. 70,43,316/- UNDER SEC TION 14A R.W.R. 8D OF THE INCOME TAX RULES, 1962 BEING EXPENDITURE RELATA BLE TO DIVIDEND RECEIVED. GROUND: G : MAT CREDIT U/S 115JAA ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE ASSESSING OFFICER SHOULD HAVE ALLOWED MAT CREDIT BEFORE DEDUCTING TDS AND AD VANCE TAX AS PER THE PROVISIONS OF SECTION 115JAA OF THE INCOME TAX ACT FOR THE ASSESSMENT YEAR 2007-08 AND ALLOWED INTEREST U/S 244(1A) OF THE INC OME TAX ACT, 1961. GROUND: H : INTEREST U/S 234B - RS. 2,05,99,228/- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE ASSESSING OFFICER SHOULD NOT HAVE CHARGED INTEREST UNDER SECTION 234B OF THE ACT, SINCE THE NET TAX PAYABLE BY THE APPELLANT WOULD RESULT INTO REFUND A FTER GIVING CREDIT FOR TAXES U/S 115JAA. GROUND: I: INTERSET U/S 234C - RS. 14,97,216/- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE ASSESSING OFFICER SHOULD NOT HAVE CHARGED INTEREST UNDER SECTION 234C OF THE ACT, SINCE THE NET TAX PAYABLE BY THE APPELLANT WOULD RESULT INTO REFUND A FTER GIVING CREDIT FOR TAXES U/S 115JAA. J. GROUND: J: GENERAL ITA NO. 7424 MUM 2010 & 8533 MUM 2011-GREAVES COTTON LTD. 7 1. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 6(3), MUMBAI'S AND THE DISPUTE RESOLUTION PANEL'S ORDER BEING CONTRARY TO LAW, EVIDENCE AND FACTS OF THE CASE SHOULD BE AMENDED OR MODIFIED IN LIGHT OF THE GROUNDS DEDUCED ABOVE. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPA NY IS IN THE BUSINESS OF MANUFACTURING OF MARINE AND INDUSTRIAL GEAR BOXES, DIESEL ENGINES, GENERATING SETS ETC. FOR THE ASSESSMENT YEAR UNDER CONSIDERATI ON THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING NILL INCOME. IN THE RETU RN THE ASSESSEE CLAIMED INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTE RPRISES, THEREFORE, THE ASSESSING OFFICER MADE A REFERENCE TO TRANSFER PRIC ING OFFICER (TPO) FOR COMPUTATION OF ARMS LENGTH PRICE. THE TPO PASSED IT S ORDER UNDER SECTION 92CA(3) ON 15.05.2009. AFTER RECEIPT OF ORDER OF TP O, THE ASSESSING OFFICER PASSED DRAFT ASSESSMENT ORDER UNDER SECTION 143(3) READ WIT SECTION 144C (1) DATED 3.11.2009. THE ASSESSEE WAS SERVED WITH THE C OPY OF THE DRAFT ASSESSMENT. IN THE DRAFT ASSESSMENT ORDER, THE ASSE SSING OFFICER MADE ADDITION/DISALLOWANCES CONSISTING OF DISALLOWANCE U NDER SECTION 36(1)(II), DISALLOWANCE UNDER SECTION 14A R.W.R 8D, DISALLOWAN CE OF POOJA EXPENSES, CLUB EXPENSES, DISALLOWANCE UNDER SECTION 40A(9) , ADDITION ON ACCOUNT OF CENVAT CREDIT, DISALLOWANCE UNDER SECTION 40(A)(IA) . THE ASSESSEE EXERCISED ITS OPTION FOR FILING OBJECTION BEFORE THE LD. DRP. THE DRP AFTER HEARING THE ASSESSEE GRANTED PARTIAL RELIEF ON DISALLOWANCE UND ER SECTION 36(1)(III) AND ON ADDITION OF CENVAT CREDIT IN ITS DIRECTION DATED 15 .07.2010, HOWEVER, THE OTHER REMAINING ADDITIONS / DISALLOWANCES WERE SUSTAINED. ON RECEIPT OF DIRECTION ITA NO. 7424 MUM 2010 & 8533 MUM 2011-GREAVES COTTON LTD. 8 FROM LD. DRP, THE ASSESSING OFFICER PASSED THE FINA L ASSESSMENT ORDER UNDER SECTION 143(3) R.W.S 144C(13) DATED 24.09.2010. AGG RIEVED BY THE VARIOUS ADDITIONS/ DISALLOWANCES MADE IN PURSUANCE OF DIRE CTION OF LD. DRP, THE ASSESSEE HAS FILED PRESENT APPEAL BEFORE THIS TRIBU NAL. 4. WE HAVE HEARD THE SUBMISSION OF LD. AR OF THE ASSES SEE AND LD. DR FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECOR D. GROUND NO.1 RELATES TO DISALLOWANCE UNDER SECTION 36(1)(III). THE LD. AR O F THE ASSESSEE SUBMITS THAT DURING THE ASSESSMENT, THE ASSESSING OFFICER ISSUED SHOW CAUSE FOR DISALLOWANCE OF PROPORTIONATE INTEREST IN RESPECT O F INTEREST FREE ADVANCES GIVEN BY ASSESSEE TO ITS SUBSIDIARY. THE ASSESSEE F ILED ITS REPLY. IN THE REPLY, THE ASSESSEE STATED THAT THEY HAVE ADVANCED MONEY T O THEIR 100% SUBSIDIARY I.E. DEE GREAVES LTD. & GREAVES LEASING FINANCE LTD . IN ASSESSMENT YEAR 1998-99. THE ASSESSEE HAD SUFFICIENT INTEREST FREE FUNDS AND THAT ADVANCE WAS NOT GIVEN FROM ANY BORROWED MONEY. THE ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS AVAILABLE WITH THEM. THE ASSESSEE ALSO RELIED ON THE DECISIONS OF HONBLE SUPREME COURT IN S.A. BUILDERS VS. CIT [158 TAXMAN 74 (SC)] AND MUNJAL SALES CORPORATION VS. CIT, ON THE RATIO THAT NOTIONAL INTEREST ON ADVANCES TO SUBSIDIARY SHOULD NOT BE DISALLOWED. TH E ASSESSEE ALSO BROUGHT ON RECORD THAT THE INTEREST FREE FUNDS AVAILABLE WI TH THE ASSESSEE WAS MUCH MORE THAN THE INTEREST FREE ADVANCES GIVEN BY ASSES SEE. THE LD. AR FURTHER RELIED UPON THE DECISION OF JURISDICTIONAL HIGH COU RT IN RELIANCE UTILITY & POWER LTD. [313 ITR 340]. THE LD. AR OF THE ASSESSE E FURTHER SUBMITS THAT THE ITA NO. 7424 MUM 2010 & 8533 MUM 2011-GREAVES COTTON LTD. 9 ASSESSEE ADVANCED TO ITS SUBSIDIARY IN 1998-99 AND THE REVENUE NEVER MADE ADDITION UNDER SECTION 36(1)(III) PRIOR TO THE ASSE SSMENT YEAR UNDER CONSIDERATION. 5. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTAT IVE (DR) FOR THE REVENUE SUPPORTED THE ORDER OF ASSESSING OFFICER. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. DURING THE ASSESSMENT, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS CLAIMED INTERES T EXPENSES OF RS. 6.57 CRORE. THE ASSESSEE WAS ASKED TO JUSTIFY FOR INTERE ST PAID ON BORROWED CAPITAL AND TO PROVE THE NEXUS BETWEEN THE OWN FUNDS AND TH E INTEREST FREE ADVANCE MADE TO SISTER CONCERN OF RS. 4.73 CRORE. THE ASSES SEE FILED ITS REPLY AND STATED THAT THE INTEREST DEBITED IN PROFIT & LOSS W AS PAID IN RESPECT OF CAPITAL BORROWED FOR THE PURPOSE OF BUSINESS. THE ADVANCE P AID TO SUBSIDIARY WAS ON ACCOUNT OF BUSINESS EXPEDIENCIES. THE CONTENTION OF ASSESSEE WAS NOT ACCEPTED BY ASSESSING OFFICER. THE ASSESSING OFFICE R WORKED OUT THE DISALLOWANCE OF RS. 22,42,759/- UNDER SECTION 36(1) (III). THE LD. DRP GRANTED THE PARTIAL RELIEF TO THE ASSESSEE ON THE LOAN AND ADVANCES GIVEN TO GREAVES LEASING COMPANY HOLDING THAT THE ADVANCES WERE GIVE N TO SUPPLY OF EQUIPMENT, THEREFORE, IT WAS IN NORMAL BUSINESS OPE RATION AND THE ASSESSING OFFICER WAS DIRECTED TO MODIFY THE ASSESSMENT ORDER ACCORDINGLY. WE HAVE NOTED THAT THE ASSESSEES OWN FUND CONSISTING OF SH ARE CAPITAL AND RESERVE AND SURPLUS WAS RS. 175.11 CRORE. THE ASSESSEE HAS GIVE N LOANS AND ADVANCE TO IS ITA NO. 7424 MUM 2010 & 8533 MUM 2011-GREAVES COTTON LTD. 10 SUBSIDIARIES I.E. DEE GREAVES OF RS. 2,13,55,159/- ONLY. THE HONBLE BOMBAY HIGH COURT IN RELIANCE UTILITY & POWER LTD. (SUPRA) HELD THAT IF THE ASSESSEE HAVE FUNDS AVAILABLE BOTH, INTEREST-FREE AND OVERDR AFT AND/OR LOANS ARE TAKEN, THEN A PRESUMPTION WOULD ARISE THAT INVESTMENTS WOU LD BE OUT OF THE INTEREST- FREE FUND GENERATED OR AVAILABLE WITH THE COMPANY, IF THE INTEREST-FREE FUNDS ARE SUFFICIENT TO MEET THE INVESTMENTS. THEREFORE, IN VIEW OF THE DECISION OF JURISDICTION HIGH COURT AS REFERRED ABOVE, WE ARE O F THE VIEW THAT THE ASSESSEE HAS SUFFICIENT INTEREST FREE FUND AVAILABLE WITH TH E ASSESSEE AND THEREFORE, NO INTEREST DISALLOWANCE UNDER SECTION 36(1)(III) WAS JUSTIFIED. HENCE, THE GROUND A (1&2) OF APPEAL RAISED BY ASSESSEE IS ALLOWED. . 7. GROUND NO. B (3) TO (4) RELATES TO DISALLOWANCE UND ER SECTION 14A R.W. RULE 8D. THE LD. AR OF THE ASSESSEE SUBMITS THAT DURING THE RELEVANT PERIOD UNDER CONSIDERATION, THE ASSESSEE EARNED EXEMPT INCOME OF RS. 61,68,033/-. THE ASSESSING OFFICER MADE DISALLOWANCE UNDER SECTION 1 4A OF RS. 1,19,20,701/- BY INVOKING THE PROVISION OF RULE 8D. THE LD. AR OF THE ASSESSEE SUBMITS THAT IT IS NOW SETTLED LAW THAT THE PROVISIONS OF R ULE 8D WERE NOT APPLICABLE FOR THE YEAR UNDER CONSIDERATION PRIOR TO AY 2008-0 9. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT THIS GROUND OF APPEAL IS COVERED IN FAVOUR OF ASSESSEE IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2005-06 IN ITA NO. 2482/MUM/2015 DATED 15.03.2019 WHEREIN THE DISALLOW ANCE UNDER SECTION 14A WAS RESTRICTED TO 2% OF THE DIVIDEND INCOME EAR NED BY ASSESSEE FOR RELEVANT PERIOD. ITA NO. 7424 MUM 2010 & 8533 MUM 2011-GREAVES COTTON LTD. 11 8. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF LOWER AUTHORITIES. 9. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE NO TED THAT DURING THE PERIOD UNDER CONSIDERATION, THE ASSESSEE HAS SHOWN THE EXE MPT INCOME OF RS. 61,43,033/-. THE ASSESSING OFFICER INVOKED THE PROV ISIONS OF RULE 8D AND DISALLOWED RS. 1,19,20,701/-. WE HAVE FURTHER NOTED THAT SIMILAR DISALLOWANCE WAS MADE BY REVENUE IN ASSESSMENT YEAR 2005-06 AND ON APPEAL BEFORE THE TRIBUNAL; THE DISALLOWANCE WAS RE STRICTED TO 2% OF THE DIVIDEND INCOME. CONSIDERING THE FACTS OF THE YEAR UNDER CONSIDERATION AND RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCH IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2005-06, THE DISALLOWANCE FOR THE ASSESSMENT YEAR IN THE PRESENT APPEAL IS RESTRICTED TO 2% OF THE DI VIDEND INCOME. THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY. 10. IN THE RESULT, GROUND NO. B (3 &4) ARE PARTLY ALLO WED. 11. GROUND NO. B (5) RELATES TO ADJUSTMENT OF BOOK PROF IT UNDER SECTION 115JB OF DISALLOWANCE OF RULE 14A. THE LD. AR OF THE ASSESSE E SUBMITS THAT THIS GROUND OF APPEAL IS ALSO COVERED BY THE DECISION OF SPECIAL BENCH OF DELHI TRIBUNAL IN ACIT VS VIREET INVESTMENT (P) LTD, (82 TAXMANN.COM 415) (DELHI-TRB SB), WHEREIN IT WAS HELD BY SPECIAL BENC H THAT COMPUTATION UNDER CLAUSE (F) OF EXPLANATION 1 TO SECTION 115JB(2), IS TO BE MADE WITHOUT ITA NO. 7424 MUM 2010 & 8533 MUM 2011-GREAVES COTTON LTD. 12 RESORTING TO COMPUTATION AS CONTEMPLATED UNDER SECT ION 14A READ WITH RULE 8D. 12. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF LOWER AUTHORITIES. 13. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE NO TED THAT THIS GROUND OF APPEAL IS COVERED IN FAVOUR OF ASSESSEE BY THE DECI SION OF SPECIAL BENCH IN VIREET INVESTMENT (P) LTD. (SUPRA), WHEREIN SPECIAL BENCH OF DELHI TRIBUNAL THAT THE COMPUTATION UNDER CLAUSE (F) OF EXPLANATIO N 1 TO SECTION 115JB (2), IS TO BE MADE WITHOUT RESORTING TO COMPUTATION AS CONT EMPLATED UNDER SECTION 14A READ WITH RULE 8D. THEREFORE, RESPECTFULLY FOLL OWING THE DECISION OF SPECIAL BENCH, WE DIRECT THE ASSESSING OFFICER TO F OLLOW THE DECISION OF VIREET INVESTMENT LTD. (SUPRA) AND PASS THE ORDER F OR ADJUSTMENT UNDER SECTION 115JB OF THE ACT ACCORDINGLY. 14. IN THE RESULT, THIS GROUND OF APPEAL IS ALSO ALLOWE D FOR STATISTICAL PURPOSE. 15. GROUND NO. C-(6) RELATES TO POOJA EXPENSES. THE LD . AR OF THE ASSESSEE SUBMITS THAT THIS GROUND OF APPEAL IS COVERED IN FA VOUR OF ASSESSEE BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1998-99 WHEREIN THE ASSESSEE WAS AL LOWED RELIEF BY TRIBUNAL AND ON APPEAL BEFORE THE HONBLE HIGH COUR T, THE DEPARTMENT FILED APPEAL, FURTHER, THE SAME WAS WITHDRAWN WITH THE PE RMISSION OF THE HONBLE HIGH COURT. THE LD. AR OF THE ASSESSEE SUBMITS THAT THE TRIBUNAL HAS ALLOWED ITA NO. 7424 MUM 2010 & 8533 MUM 2011-GREAVES COTTON LTD. 13 THE SIMILAR RELIEF IN DIAYTON GREAVES LTD. IN ITA N O. 5889/MUM/1992 DATED 15.03.2001. 16. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE RELIE D ON THE ORDER OF ASSESSING OFFICER. 17. WE HAVE CONSIDERED THE SUBMISSION OF THE PARTIES AN D HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE NOTED THAT THE ASSESSEE HAS CLAIMED POOJA EXPENSES OF RS. 7,05,806/-. THE ASSESSING OFF ICER DISALLOWED THE EXPENSES BY FOLLOWING THE DECISION OF EARLIER YEARS . THE LD. DRP CONFIRMED THE ACTION OF ASSESSING OFFICER HOLDING THAT THE AS SESSEE HAS NOT ESTABLISHED THAT EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. WE HAVE NOTED THAT THE ASSESSING OFFICE DISALLOWED POOJA EXPENSES OF RS. 8,41,279/- IN AY 1998-99, ON APPEAL BEFORE L D CIT(A) THE DELETED THE SAID DISALLOWANCES ALLOWED VIDE ORDER DATED 31.03.2 003. THE TRIBUNAL CONFORMED THE ORDER OF LD CIT(A) VIDE ITA NO. 7123/ M/2003 VIDE ORDER DATED 15.04.2008. THE REVENUE FILED APPEAL BEFORE H ONBLE BOMBAY HIGH COURT FOR CHALLENGING THE ORDER OF THE TRIBUNAL IN ITA NO. 50 OF 2010. HOWEVER, THE REVENUE HAS WITHDRAWN THE SAID APPEAL VIDE ORDER DATED 29 TH NOVEMBER 2010. THE COPY OF THE HONBLE HIGH COURT O RDER IS AVAILABLE ON RECORD. THEREFORE, WE ARE OF THE VIEW THAT THIS GRO UND OF APPEAL IS COVERED IN FAVOR OF THE ASSESSEE. HENCE, THE AO IS DIRECTED TO DELETE THE POOJA EXPENSES. IN THE RESULT THIS GROUND OF APPEAL IS ALSO ALLOWED . ITA NO. 7424 MUM 2010 & 8533 MUM 2011-GREAVES COTTON LTD. 14 18. GROUND D/ (7) RELATES TO CLUB EXPENSES. THE LD. AR FOR THE ASSESSEE SUBMITS THAT THIS GROUND OF APPEAL IS ALSO COVERED IN FAVOU R OF THE ASSESSEE BY THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR AY 1982-83 & 1990-91. THE LD AR FOR THE ASSESSEE ALSO RELIED ON THE DECISION OF BOMBAY HIGH COURT IN OTIS ELEVATOR COMPANY (INDIA) LTD VS CIT (ITA NO. 4 79 OF 1991. 19. ON THE OTHER HAND THE LD AR FOR THE ASSESSEE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 20. WE HAVE CONSIDERED THE SUBMISSION OF THE PARTIES AN D HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE NOTED THAT THE ASSESSEE HAS CLAIMED CLUB EXPENSES OF RS. 79,170/-. THE ASSESSEE CLAIMED CLUB EXPENSES OF RS. 7,07,477/-. THE ASSESSING OFFICER DISALLOWED THE EX PENSES BY FOLLOWING THE DECISION OF EARLIER YEARS. THE LD. DRP DIRECTED THE ASSESSING OFFICER TO ALLOW THE CLUB MEMBERSHIP FEES ONLY. THE CLUB MEMBERSHIP FEES WAS ONLY RS. 6,04,00/-, ACCORDINGLY, THE ASSESSING OFFICER DISAL LOWED THE BALANCE AMOUNT (RS. 7,07,477 6,04,000). WE HAVE NOTED THAT IN AS SESSEES OWN CASE FOR A.Y. 1982-83 SIMILAR DISALLOWANCES WAS ALLOWED VIDE ORDER DATED 21 ST JANUARY 1992 IN R.A NO. 2569(BOM.)/1991 IN ITA NO. 6154/BOM/1987. SIMILAR RELIEF WAS GRANTED TO THE ASSESSEE IN APPEA L FOR A.Y. 1990-91 IN ITA NO. 7619/BOM/1993 DATED 13.02.2002. WE HAVE FURTHER NOTED THAT AFTER THE DECISION OF HONBLE BOMBAY HIGH COURT IN OTIS ELEVA TOR CO. LTD. (SUPRA), THIS ISSUE IS NO MORE RES-INTEGRA WHEREIN THE HONBLE HIGH COURT WHILE CONSIDERING THE QUESTION OF LAW ABOUT THE ALLOWANCE OF CLUB FEES ITA NO. 7424 MUM 2010 & 8533 MUM 2011-GREAVES COTTON LTD. 15 INCURRED/PAID TO EMPLOYEES, ALLOWED THE QUESTION IN FAVOUR OF ASSESSEE. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF H ONBLE BOMBAY HIGH COURT IN OTIS ELEVATOR CO. LTD. (SUPRA) AND DECISIO N OF TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 1982-83 AND 1990-91, THIS GROUND OF APPEAL IS ALSO ALLOWED IN FAVOUR OF ASSESSEE. 21. GROUND NO. E (8 & 9) RELATES TO DISALLOWANCE UNDER SECTION 40A(9) OF RS. 94,740/-. THE LD. AR OF THE ASSESSEE FAIRLY CONCEDE D THAT THESE GROUNDS OF APPEAL ARE AGAINST THE ASSESSEE BY THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2004-05 IN ITA NO. 7356/MUM/2011 DATE D 13.10.2015. THE LD. AR SUBMITS THAT THIS GROUND OF APPEAL MAY BE DISMIS SED BY FOLLOWING THE DECISION OF TRIBUNAL DATED 13.10.2015. THE LD. DR F OR THE REVENUE STATED THAT THESE GROUNDS OF APPEAL MAY BE DISMISSED. 22. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES. THE ASSESSING OFFICER MADE DISALLOWANCE UNDER SECTION 40A(9) BY F OLLOWING THE EARLIER YEARS. THE LD. DRP ALSO UPHELD THE ACTION OF ASSESS ING OFFICER BY FOLLOWING THEIR ORDER FOR EARLIER YEARS. CONSIDERING THE SUBM ISSION OF LD. AR OF THE ASSESSEE THAT THESE GROUNDS OF APPEAL ARE AGAINST T HE ASSESSEE BY THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2004-05 IN ITA NO. 7356/MUM/2011 DATED 13.10.2015. THEREFORE, CONSIDER ING HER SUBMISSION, THESE GROUNDS OF APPEAL ARE DISMISSED. 23. GROUND NO. F (10) RELATES TO ADDITION OF UNUTILIZED CENVAT CREDIT OF RS. 2.91 CRORE. THE LD. AR OF THE ASSESSEE SUBMITS THAT THE ASSESSEE HAS BEEN ITA NO. 7424 MUM 2010 & 8533 MUM 2011-GREAVES COTTON LTD. 16 FOLLOWING EXCLUSIVE METHOD FOR ACCOUNTING FOR ACCOU NTING CENVAT CREDIT. THE LD. AR FURTHER THAT THERE WILL BE NO IMPACT ON PROF IT, EVEN IF INCLUSIVE METHOD IS FOLLOWED, I.E. EVEN IF CENVAT AMOUNT IS INCLUDED IN THE OPENING STOCK, PURCHASE, SALES AND CLOSING STOCK AS PER THE PROVIS ION OF SECTION 145A, THERE WOULD BE NO IMPACT ON THE PROFIT. THE LD. AR PRAYED FOR DELETING THE IMPUGNED ADDITION. THE LD. AR SUBMITS THAT THE AUDI TOR CERTIFIED THAT DEVIATION FROM VALUATION FROM METHOD PRESCRIBED UND ER SECTION 144A HAS NO IMPACT ON THE PROFIT OF THE ASSESSEE. THE LD. AR SU BMITS THAT CERTIFICATE OF AUDITOR IS FILED AT PAGE NO. 250 TO 252 OF PAPER B OOK. 24. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE RELIE D UPON THE ORDER OF LOWER AUTHORITY. 25. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER MADE ADDITION BY FOLLOWING THE ORDER OF EARLIER ASSESSMENT YEARS AND MADE ADDITION OF RS. 2.91 CRORE. THE LD. DRP ALSO FOLLOWED THEIR ORDER F OR EARLIER YEARS. WE HAVE NOTED THAT THE CO-ORDINATE BENCH OF TRIBUNAL IN ASS ESSEES APPEAL FOR A.Y. 2005-06 IN ITS ORDER DATED 15.03.2019 IN ITA NO. 24 82/MUM/2015 SET-ASIDE THE ORDER TO THE FILE OF ASSESSING OFFICER FOR EXAM INATION OF FIGURES FURNISHED BY ASSESSEE FOR RECONCILIATION OF STATEMENTS. THERE FORE, CONSIDERING THE ORDER OF TRIBUNAL FOR A.Y. 2005-06, THE GROUND OF APPEAL IS ALSO RESTORED TO THE FILE OF ASSESSING OFFICER TO EXAMINE THE ISSUE AFRESH AN D PASS THE ORDER BY ITA NO. 7424 MUM 2010 & 8533 MUM 2011-GREAVES COTTON LTD. 17 FOLLOWING THE ORDER OF TRIBUNAL DATED 15.03.2019. I N THE RESULT, THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 26. GROUND NO. G (11 TO 14) RELATES TO DISALLOWANCE UND ER SECTION 40(A)(IA) OF RS. 2,58,19,665/-. THE LD. AR OF THE ASSESSEE SUBMI TS THAT AND AMOUNT OF RS. 2,58,19,665/- WAS DISALLOWED UNDER SECTION 40(A)(IA ). DURING THE COURSE OF HEARING, THE ASSESSEE FURNISHED CERTIFICATE OF C.A. THAT DISALLOWANCE FOR A.Y. 2005-06 WAS NIL. THE ASSESSING OFFICER MADE THE DIS ALLOWANCE OF RS. 2,58,19,665/- IN A.Y. 2005-06. THE SAID PROVISION W AS REVERSED IN A.Y. 2006-07. THE LD. AR SUBMITS THAT THE ASSESSEE HAS A CCEPTED THE DISALLOWANCE IN A.Y. 2005-06 AND NO FURTHER APPEAL WAS FILED, TH EREFORE, THE SIMILAR DISALLOWANCE WOULD BE A DOUBLE DISALLOWANCE. THE LD . AR PRAYED FOR DELETING THE ENTIRE ADDITION. 27. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUBMI TS THAT THESE FACTS CAN BE VERIFIED BY THE ASSESSING OFFICER. 28. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE NOTED THAT DU RING THE ASSESSMENT THE ASSESSEE MADE SIMILAR SUBMISSIONS TO THE ASSESSING OFFICER THAT AMOUNT OF RS. 2,58,19,665/- WAS DISALLOWED UNDER SECTION 40(A)(IA ) IN AY 2005-06. DURING THE COURSE OF HEARING, THE ASSESSEE ALSO FURNISHED CERTIFICATE OF C.A. THAT DISALLOWANCE FOR A.Y. 2005-06 WAS NIL. THE ASSESSIN G OFFICER MADE THE DISALLOWANCE OF RS. 2,58,19,665/- IN A.Y. 2005-06. THE ASSESSEE ALSO RAISED ADDITIONAL CLAIM FOR ALLOWANCE OF SUCH AMOUNT WHICH WAS ALREADY DISALLOWED ITA NO. 7424 MUM 2010 & 8533 MUM 2011-GREAVES COTTON LTD. 18 IN EARLIER YEAR. HOWEVER, THE CLAIM OF ASSESSEE WAS NOT ALLOWED BY ASSESSING OFFICER ON THE GROUND THAT ASSESSEE HAS NOT FILED R EVISED RETURN OF INCOME. THE LD. DRP ALSO NOTED ACCEPTED THE OBJECTION OF AS SESSEE HOLDING THAT THE ASSESSEE HAS MERELY REVERSED THE ENTRY AND NOT PAID TDS THEREON, THE DISALLOWANCE MADE IN A.Y. 2005-06 CANNOT BE CORRECT ED IN THE YEAR UNDER CONSIDERATION. 29. WE HAVE NOTED THAT THERE IS NO DISPUTE THAT THE SIM ILAR DISALLOWANCE WAS MADE BY ASSESSING OFFICER IN A.Y. 2005-06, FROM THE ORDER OF TRIBUNAL FOR A.Y. 2005-06 WE HAVE NOTED THAT NO SUCH ADDITION WA S CHALLENGED BY ASSESSEE. CONSIDERING THE FACT THAT MAKING ADDITION OF THE SAME AMOUNT IN THE YEAR UNDER CONSIDERATION IS DOUBLE DISALLOWANCE OF THE SAME AMOUNT. THEREFORE, CONSIDERING THE FACT AND CIRCUMSTANCES O F THE CASE, WE ARE IN AGREEMENT WITH THE SUBMISSION OF LD. AR OF THE ASSE SSEE THAT THERE CANNOT BE A DOUBLE DISALLOWANCE OF THE SAME AMOUNT. THEREFORE , WE DIRECT THE ASSESSING OFFICER TO VERIFY THE FACT AND DELETE THE ADDITION OF RS. 2,58,19,665/-. IN THE RESULT, THIS GROUND OF APPEAL IS ALLOWED. 30. GROUND NO. H (15) RELATES TO INTEREST UNDER SECTION 234C OF THE ACT. CHARGING OF INTEREST UNDER SECTION 234C IS CONSEQUE NTIAL. THEREFORE, THE ASSESSING OFFICER IS DIRECTED TO WORK OUT THE INTER EST ACCORDINGLY. 31. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 8533/MUM/2011 FOR A.Y. 2007-08 ITA NO. 7424 MUM 2010 & 8533 MUM 2011-GREAVES COTTON LTD. 19 32. GROUND NO. A RELATES TO DISALLOWANCE UNDER SECTION 36(1)(III). WE HAVE NOTED THAT THIS GROUND OF APPEAL IS IDENTICAL TO THE GROU ND NO. A OF APPEAL FOR A.Y. 2006-07, WHICH WE HAVE ALLOWED. NO VARIATIONS OF FA CTS ARE BROUGHT TO OUR NOTICE, THEREFORE, FOLLOWING THE PRINCIPLE OF CONSI STENCY, THIS GROUND OF APPEAL IS ALLOWED WITH SIMILAR OBSERVATION. IN THE RESULT, THIS GROUND OF APPEAL IS ALLOWED. 33. GROUND NO. B RELATES TO DISALLOWANCE UNDER SECTION 14A. WE HAVE NOTED THAT THIS GROUND OF APPEAL IS IDENTICAL TO THE GROUND NO . B OF APPEAL FOR A.Y. 2006-07, WHICH WE HAVE ALLOWED. THERE IS NO MUCH VA RIATION ON FACTS FOR THE YEAR UNDER CONSIDERATION. THEREFORE, FOLLOWING THE PRINCIPLE OF CONSISTENCY, THIS GROUND OF APPEAL IS ALLOWED WITH SIMILAR DIREC TION. THE ASSESSING OFFICER IS DIRECTED TO RESTRICT THE DISALLOWANCE UNDER SECT ION 14A TO THE EXTENT OF 2% OF EXEMPT INCOME EARNED BY ASSESSEE DURING THE RELE VANT PERIOD UNDER CONSIDERATION. IN THE RESULT, THIS GROUND OF APPEAL IS PARTLY ALLOWED. 34. GROUND NO. C RELATES TO POOJA EXPENSES. WE HAVE NOT ED THAT THIS GROUND OF APPEAL IS IDENTICAL TO THE GROUND NO. C OF APPEAL F OR A.Y. 2006-07, WHICH WE HAVE ALLOWED. THEREFORE, FOLLOWING THE PRINCIPLE OF CONSISTENCY, THIS GROUND OF APPEAL IS ALLOWED WITH SIMILAR OBSERVATION. IN T HE RESULT, THIS GROUND OF APPEAL IS ALLOWED. 35. GROUND NO. D RELATES TO DISALLOWANCE UNDER SECTION 40A(9). WE HAVE NOTED THAT THIS GROUND OF APPEAL IS IDENTICAL TO THE GROU ND NO. G OF APPEAL FOR A.Y. 2006-07, WHICH WE HAVE DISMISSED BY FOLLOWING THE O RDER FOR A.Y. 2004-05, ITA NO. 7424 MUM 2010 & 8533 MUM 2011-GREAVES COTTON LTD. 20 THEREFORE, FOLLOWING THE PRINCIPLE OF CONSISTENCY, THIS GROUND OF APPEAL IS DISMISSED WITH SIMILAR OBSERVATION. IN THE RESULT, THIS GROUND OF APPEAL IS DISMISSED. 36. GROUND NO. E RELATES TO UNUTILIZED CENVAT CREDIT. WE HAVE NOTED THAT THIS GROUND OF APPEAL IS IDENTICAL TO THE GROUND NO. F O F APPEAL FOR A.Y. 2006-07, WHICH WE HAVE RESTORED TO THE FILE OF ASSESSING OFF ICER, THEREFORE, FOLLOWING THE PRINCIPLE OF CONSISTENCY, THIS GROUND OF APPEAL IS ALSO RESTORED TO THE FILE OF ASSESSING OFFICER WITH SIMILAR DIRECTION. IN THE RESULT, THIS GROUND OF APPEAL IS ALLOWED. 37. GROUND NO. F RELATES TO BOOK PROFIT UNDER SECTION 1 4A. WE HAVE NOTED THAT THIS GROUND OF APPEAL IS IDENTICAL TO THE GROUND NO . B (IV)/(5) OF APPEAL FOR A.Y. 2006-07, WHICH WE HAVE RESTORED TO THE FILE OF ASSESSING OFFICER TO FOLLOW THE DECISION OF SPECIAL BENCH IN VIREET INVE STMENT LTD. (SUPRA) AND PASS THE ORDER FOR ADJUSTMENT UNDER SECTION 115JB O F THE ACT ACCORDINGLY, THEREFORE, THIS GROUND OF APPEAL IS ALSO RESTORED T O THE FILE OF ASSESSING OFFICER WITH SIMILAR DIRECTION. IN THE RESULT, THIS GROUND OF APPEAL IS ALLOWED. 38. GROUND NO. G RELATES TO MAT CREDIT UNDER SECTION 11 5JAA. THE LD. AR OF THE ASSESSEE SUBMITS THAT THIS GROUND OF APPEAL IS COVE RED BY THE DECISION OF HONBLE APEX COURT IN CIT VS. TULSYAN NEC LTD. IN C .A. NO. 10677-79 OF 2010 DATED 16.12.2010. 39. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF LOWER AUTHORITIES. ITA NO. 7424 MUM 2010 & 8533 MUM 2011-GREAVES COTTON LTD. 21 40. WE HAVE CONSIDERED THE SUBMISSION OF THE PARTIES AN D GONE THROUGH THE ORDER OF LOWER AUTHORITIES. THE HONBLE APEX COURT IN CIT VS. TULSYAN NEC LTD. (SUPRA) WHILE CONSIDERING THE QUESTION OF COMPUTATI ON UNDER SECTION 115JAA HELD AS UNDER: THE ENTIRE SCHEME OF SECTIONS 115JA(1) AND 115JAA S HOWS THAT IF AN ASSESSEE IS ENTITLED TO A TAX CREDIT AS A CONSEQUENCE OF THE ASSESSEE MAKING PAYMENT OF TAX UNDER SECTION 115JA(1) IN THE YEAR ONE, THEN TH E SET OFF OF SUCH TAX CREDIT FOLLOWS AS A MATTER OF COURSE ONCE THE CONDITIONS M ENTIONED IN SECTION 115JAA ARE FULFILLED AND THE GRANT OF SUCH CREDIT IS NOT D EPENDENT UPON DETERMINATION BY THE ASSESSING OFFICER SAVE AND EXCEPT THAT THE U LTIMATE AMOUNT OF TAX CREDIT TO BE ALLOWED WILL BE DEPENDENT UPON THE FINAL DETE RMINATION OF THE TOTAL INCOME FOR THE FIRST ASSESSMENT YEAR. THERE IS NO P ROVISION UNDER SECTION 115JAA WHICH POSTPONES THE RIGHT OF THE ASSESSEE TO CLAIM SET OFF TO THE DETERMINATION OF THE TOTAL INCOME BY THE ASSESSING OFFICER IN THE FIRST ASSESSMENT YEAR. ENTITLEMENT/RIGHT TO CLAIM SET OFF IS DIFFERENT FROM THE QUANTUM/QUANTIFICATION OF THAT RIGHT. ENTITLEMENT O F MAT CREDIT IS NOT DEPENDENT UPON ANY ACTION TAKEN BY THE DEPARTMENT. HOWEVER, QUANTUM OF TAX CREDIT WILL DEPEND UPON THE ASSESSMENT FRAMED BY TH E ASSESSING OFFICER. THUS, THE RIGHT TO SET OFF ARISES AS A RESULT OF THE PAYM ENT OF TAX UNDER SECTION 115JA(1) ALTHOUGH QUANTIFICATION OF THAT RIGHT DEPE NDS UPON THE ULTIMATE DETERMINATION OF TOTAL INCOME FOR THE FIRST ASSESSM ENT YEAR. FURTHER, AN ASSESSEE HAS A RIGHT TO TAKE INTO ACCOUNT THE SET OFF EVEN W HILE ESTIMATING ITS LIABILITY TO PAY ADVANCE TAX ON THE CURRENT INCOME IN ACCORDAN CE WITH THE PROVISIONS OF CHAPTER XVII-C. ALTHOUGH SECTION 209(1)(D) DOES NOT MAKE ANY SPECIFIC PROVISION EITHER BEFORE OR AFTER THE AMENDMENTS CAR RIED OUT BY THE FINANCE ACT, 2006 TO THE EFFECT THAT AN ASSESSEE IS ENTITLED TO SET OFF THE TAX CREDIT THAT WOULD BE AVAILABLE IN TERMS OF SECTION 115JAA(1) WHILE CO MPUTING THE QUANTUM OF ADVANCE TAX THAT IS TO BE PAID, IT MUST FOLLOW THAT AN ASSESSEE WOULD BE ENTITLED TO DO SO; OTHERWISE IT WOULD RESULT IN ABSURDITY, V IZ., THAT AN ASSESSEE PAYS ADVANCE TAX ON THE FOOTING THAT IT IS NOT ENTITLED (WHEN IN FACT IT IS SO ENTITLED) TO THE CREDIT AND THEREAFTER CLAIMS A REFUND OF SUCH A DVANCE TAX PAID AS A CONSEQUENCE OF THE SET OFF. MOREOVER, WHEN AN ASSES SING OFFICER MAKES AN INTIMATION UNDER SECTION 143(1), HE ACCEPTS THE RET URN FILED BY THE ASSESSEE TO WHICH THE ASSESSING OFFICER MAY MAKE AN ADJUSTMENT AND, CONSEQUENTLY, MAKES A DEMAND OR REFUND. SECTION 143(1) PROVIDES T HAT WHERE A RETURN IS MADE UNDER SECTION 139 AND ANY TAX OR INTEREST IS FOUND DUE ON THE BASIS OF SUCH RETURN AFTER ADJUSTMENT OF ANY TDS, ANY ADVANCE TAX , ANY TAX PAID ON SELF ASSESSMENT AND ANY AMOUNT PAID OTHERWISE BY WAY OF TAX OR INTEREST, THEN, WITHOUT PREJUDICE TO PROVISIONS OF SUB-SECTION (2), AN INTIMATION WILL BE SENT TO THE ASSESSEE SPECIFYING THE AMOUNT SO PAYABLE AND S UCH INTIMATION SHALL BE ITA NO. 7424 MUM 2010 & 8533 MUM 2011-GREAVES COTTON LTD. 22 DEEMED TO BE A NOTICE OF DEMAND UNDER SECTION 156 A ND ALL THE PROVISIONS OF THE ACT SHALL APPLY THERETO. THIS SECTION ITSELF MA KES IT CLEAR THAT WHILST THE ASSESSING OFFICER DETERMINES THE TAX PAYABLE, HE HA S TO GIVE CREDIT FOR ALL TAXES PAID EITHER BY WAY OF DEDUCTION AT SOURCE, ADVANCE TAX, SELF ASSESSMENT TAX OR TAX PAID OTHERWISE WHICH WOULD INCLUDE OR WHICH CAN NOT EXCLUDE TAX CREDIT UNDER SECTION 115JAA(1). HOWEVER, THE QUESTION IS O F PRIORITY OF ADJUSTMENT FOR THE MAT CREDIT. IN THIS CONNECTION, IT IS IMPOR TANT TO BEAR IN MIND THAT THE CREDIT ALLOWED IS THE EXCESS OF THE NORMAL TAX LIAB ILITY OVER MAT LIABILITY IN THE SUBSEQUENT YEARS. 41. CONSIDERING THE DECISION OF HONBLE APEX COURT IN C IT VS. TULSYAN NEC LTD (SUPRA) THE AO IS DIRECTED TO RE-COMPUTE THE WORKIN G OF SECTION 115JAA AFRESH BY FOLLOWING THE AFORESAID DECISION. IN THE RESULT THIS GROUND OF APPEAL IS ALLOWED. 42. GROUND NO. H RELATES TO CHARGING OF INTEREST UNDER SECTION 234B AND GROUND NO. I RELATES TO CHARGING OF INTEREST UNDER SECTION 234C. WE HAVE NOTED THAT THESE GROUNDS OF APPEAL ARE CONSEQUENTIAL; THEREFOR E, THE ASSESSING OFFICER IS DIRECTED TO RE-COMPUTE THE INTEREST UNDER SECTION 2 34B AND 234C IN ACCORDANCE WITH LAW. 43. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 07/06/2019. SD/- SD/- PRADIP KUMAR KEDIA, PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 07.06.2019 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR G BENCH, ITAT, MUMBAI 6. GUARD FILE ITA NO. 7424 MUM 2010 & 8533 MUM 2011-GREAVES COTTON LTD. 23 BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI