M/S. STAR INDIA PVT. LTD, MUMBAI V. THE ACIT RG 11(1), MUMBAI

ITA 7476/MUM/2007

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55907 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 14-11-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 14-12-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: KUSUM INGLE
• Keywords: Recovery proceedings; Bad and doubtful debts; Assessment record; Capital receipt; Reassessment proceedings
• Section: 143(3); 263; 63

Judgement Text

ITA NO. 7476 /MUM/20 07 AND ITA NOS. 3201 AND 3315/MUM/10 ASSESSMENT YEAR: 2003-04 PAGE 1 OF 20 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI J BENCH, MUMBAI BEFORE SHRI PRAMOD KUMAR (ACCOUNTANT MEMBER) AND SHRI VIJAY PAL RAO (JUDICIAL MEMBER) ITA NO. 7476/MUM/07 AND 3201/MUM/10 ASSESSMENT YEAR: 2003-04 STAR INDIA LIMITED ...APPELLANT STAR HOUSE, OFF DR E MOSES ROAD MAHALAXMI, MUMBAI 400 011 [PAN : AAACN1335Q] VS. ADDITIONAL COMMISSIONER OF INCOME TAX RANGE 11(1), MUMBAI RESPONDENT ITA NO. 3315/MUM/2010 ASSESSMENT YEAR 2003-04 ADDITIONAL COMMISSIONER OF INCOME TAX RANGE 11(1), MUMBAI ...APPELLANT VS. STAR INDIA LIMITED RESPONDENT STAR HOUSE, OFF DR E MOSES ROAD MAHALAXMI, MUMBAI 400 011 [PAN : AAACN1335Q] APPEARANCES: PORUS F KAKA, ALONG WITH DIVESH CHAWLA, FOR THE ASSESSEE KUSUM INGLE, FOR THE ASSESSING OFFICER DATE OF HEARING : NOVEMBER 14, 2011 DATE OF PRONOUNCEMENT : NOVEMBER 30, 2011 ITA NO. 7476 /MUM/20 07 AND ITA NOS. 3201 AND 3315/MUM/10 ASSESSMENT YEAR: 2003-04 PAGE 2 OF 20 O R D E R PER PRAMOD KUMAR: 1. THESE THREE PERTAIN TO THE SAME ASSESSEE. WHILE IN ONE APPEAL, THE ASSESSEE HAS CHALLENGED CORRECTNESS OF THE REVISION ORDER DATED 19 TH OCTOBER 2007, PASSED BY THE LEARNED CIT UNDER SECTI ON 263 R.W.S. 143(3) OF THE INCOME TAX ACT, 1961 FOR THE ASSESSME NT YEAR 2003-04, THE REMAINING TWO APPEALS ARE CROSS APPEALS AGAINST CIT(A)S APPELLATE ORDER IN THE MATTER OF ASSESSMENT FRAMED TO GIVE EF FECT TO LEARNED CITS REVISION ORDER. AS THESE APPEALS INVOLVE SOMEWHAT I NTERCONNECTED ISSUES ARISING OUT OF COMMON SET OF FACTS AND AS TH ESE THREE APPEALS WERE HEARD TOGETHER, ALL THE THREE APPEALS ARE BEIN G DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER. 2. WE WILL FIRST TAKE UP ASSESSEES APPEAL AGAINST THE REVISION ORDER I.E. ITA NO 7476/MUM/07. 3. WHILE THE ASSESSEE HAS RAISED AS MANY AS ELEVEN GROUNDS OF APPEAL, THE MAIN GRIEVANCES PRESSED BEFORE US PERTAIN TO C IT(A)S INITIATING THE REVISION PROCEEDINGS (I) IN RESPECT OF SET OFF OF LOSS FROM ELIGIBLE PROFITS OF BUSINESS FOR THE PURPOSE OF COMPUTING DE DUCTION UNDER SECTION 80 HHF OF THE ACT, AND THUS DENYING DEDUCTI ON UNDER SECTION 80 HHF AMOUNTING TO RS 9,51,70,949 ; (II) IN RESPECT O F DEDUCTIBILITY OF EXPENSES INCURRED IN FOREIGN CURRENCY FROM EXPORT T URNOVER AND TOTAL TURNOVER, FOR THE PURPOSE OF COMPUTING DEDUCTION UN DER SECTION 80 HHF OF THE ACT; AND (III) IN RESPECT OF ALLOWABILITY OF BAD DEBTS AS A DEDUCTION. 3. TO ADJUDICATE ON THIS APPEAL, ONLY A FEW MATERIA L FACTS NEED TO BE ITA NO. 7476 /MUM/20 07 AND ITA NOS. 3201 AND 3315/MUM/10 ASSESSMENT YEAR: 2003-04 PAGE 3 OF 20 TAKEN NOTE OF. THE ASSESSEE IS MAINLY ENGAGED IN T HE BUSINESS OF PRODUCING AND PROCURING TELEVISION PROGRAMS AND FIL MS/ FILM RIGHTS FOR SUPPLYING THE SAME TO STAR GROUP LIMITED AND OTHER OVERSEAS MEDIA COMPANIES. THE ASSESSEE ALSO CARRIES ON CHANNEL SUB SCRIPTION BUSINESS AND ACTS AS MARKETING AGENTS FOR, AND RENDERS SERVI CES TO, STAR GROUP LIMITED AND OTHER OVERSEAS MEDIA COMPANIES. ITS AS SESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 WAS FINA LIZED BY THE ASSESSING OFFICER ON 24 TH MARCH 2006. HOWEVER, ON SUBSEQUENTLY PERUSING THE ASSESSMENT RECORDS, THE COMMISSIONER W AS OF THE VIEW THAT THE ASSESSMENT SO FRAMED WAS ERRONEOUS, INSOFA R AS IT WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE, INTER ALIA IN RESPECT OF ALLOWING DEDUCTION UNDER SECTION 80 HHF BEFORE ALLO WING SET OFF OF LOSSES CARRIED FORWARD FROM EARLIER YEARS. THE VIEW OF THE COMMISSIONER WAS THAT, IN VIEW OF HONBLE SUPREME C OURTS DECISION IN THE CASE OF IPCA LABORATORIES LTD VS. DCIT (266 ITR 521), WHICH WAS AVAILABLE TO THE ASSESSING OFFICER AT THE POINT OF TIME WHEN ASSESSMENT WAS FINALIZED, AS IT WAS DELIVERED BEFORE THE DATE THE ASSESSMENT WAS FINALIZED. WHILE COMPUTING THE DEDUCTION UNDER SEC TION 80 HHF, THE ASSESSING OFFICER HAD NOT TAKEN INTO ACCOUNT THE BR OUGHT FORWARD BUSINESS LOSS. THE VIEW OF THE COMMISSIONER WAS THA T THIS ACTION WAS INCORRECT AND CONTRARY TO THE LAW LAID DOWN BY HON BLE SUPREME COURT IN IPCAS CASE (SUPRA), AND THAT THE ASSESSING OFFI CER OUGHT TO HAVE REDUCED THE BROUGHT FORWARD BUSINESS LOSSES BEFORE COMPUTING THE DEDUCTION UNDER SECTION 80 HHF. IN THE COURSE OF TH E PROCEEDINGS BEFORE THE COMMISSIONER, IT WAS EXPLAINED BY THE AS SESSEE THAT IPCA DECISION IS NOT APPLICABLE ON THE FACTS OF THIS CAS E INASMUCH AS THE LOSS IS NOT INCURRED IN THE BUSINESS IN THE SAME YEAR IN SOME OTHER ACTIVITY, AND IS A BROUGHT FORWARD BUSINESS LOSS. IT WAS EXPL AINED THAT IN RESPECT OF BROUGHT FORWARD BUSINESS LOSSES, IN VIEW OF HONBLE BOMBAY HIGH COURTS JUDGMENT IN THE CASE OF CIT VS SHIRKE CONSTRUCTION EQUIPMENT LTD (246 ITR 429) HELD FIELD AT THE RELEV ANT POINT OF TIME, ITA NO. 7476 /MUM/20 07 AND ITA NOS. 3201 AND 3315/MUM/10 ASSESSMENT YEAR: 2003-04 PAGE 4 OF 20 AND, FOR THIS REASON, ACTION OF THE ASSESSING OFFIC ER COULD NOT BE SAID TO BE ERRONEOUS. IT WAS ALSO POINTED OUT THAT AN ASSE SSMENT FRAMED ON THE BASIS OF LEGALLY BINDING DECISION OF HONBLE J URISDICTIONAL HIGH COURT COULD NOT BE SAID TO BE ERRONEOUS. NONE OF TH ESE SUBMISSIONS, HOWEVER, IMPRESSED THE COMMISSIONER. HE NOTED THAT HONBLE SUPREME COURT HAD REVERSED THE SHRIKE EQUIPMENT DECISION (SUPRA) IN THE CASE REPORTED AS CIT VS SHRIKE CONSTRUCTION EQUIPMENT LT D (291 ITR 380) AND HELD THAT DEDUCTION UNDER SECTION 80 HHC HAS TO BE ALLOWED ONLY AFTER SET OFF OF EARLIER YEAR LOSSES. LEARNED COMMI SSIONER OBSERVED THAT .. THE DECISION OF IPCA LABORATORIES, WHICH A GAIN IS A SUPREME COURT DECISION, WHEN THE AO PASSED THE ORIGINAL ASS ESSMENT ORDER, AND, THEREFORE, THE ORDER PASSED BY THE AO IS BOTH ERRON EOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE ON THE ISSUE OF BROU GHT FORWARD LOSS/ SET OFF OF LOSS BEFORE ALLOWING THE DEDUCTION UNDER SEC TION 80 HHC. LEARNED COMMISSIONER FURTHER NOTED THAT IN IPCAS C ASE SUPREME COURT HAS HELD THAT DEDUCTION UNDER SECTION 80 HHC IS TO BE ALLOWED AFTER SET OFF OF BROUGHT FORWARD LOSS OF EARLIER YE ARS, AND ALSO REFERRED TO HONBLE MP HIGH COURTS DECISION IN THE CASE OF VIPPY SOLVEX PRODUCTS LTD VS CIT (273 ITR 107). WITH THESE OBS ERVATIONS, LEARNED COMMISSIONER REJECTED SUBMISSIONS OF THE ASSESSEE O N THIS ISSUE. 4. THE NEXT POINT WHICH LEARNED COMMISSIONER PICKED UP FOR REVISION PROCEEDINGS, AND WHICH IS BEING CHALLENGED BEFORE U S NOW, WAS RAISED BY THE COMMISSIONER DURING THE COURSE OF THE REVISI ON PROCEEDINGS. VIDE LETTER DATED 24 TH SEPTEMBER, 2007, LEARNED COMMISSIONER ISSUED THE SHOW CAUSE NOTICE REQUIRING THE ASSESSEE TO SHO W CAUSE AS TO WHY THE ASSESSMENT NOT BE SUBJECTED TO REVISION UNDER S ECTION 263 ON THIS POINT AS WELL, AND STATED AS FOLLOWS: IN ADDITION TO THE POINTS COVERED BY THIS OFFICE LE TTER OF EVEN NO. DATED 18.7.2006, THE ASSESSMENT ORDER IS CONSID ERED ITA NO. 7476 /MUM/20 07 AND ITA NOS. 3201 AND 3315/MUM/10 ASSESSMENT YEAR: 2003-04 PAGE 5 OF 20 ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTER EST OF THE REVENUE ON THE FOLLOWING POINT ALSO: PERUSAL OF THE RECORDS INDICATE THAT WHILE ALLOWIN G DEDUCTION UNDER SECTION 80 HHF OF THE INCOME TAX AC T, THE EXPENSES INCURRED IN FOREIGN CURRENCY FOR PROVIDING TECHNICAL SERVICES OUTSIDE INDIA HAVE NOT BEEN REDU CED FROM EXPORT TURNOVER AND TOTAL TURNOVER. THE ASSESS EE HAS CLAIMED EXPENSES INCURRED IN FOREIGN CURRENCY IN RE SPECT OF ADVERTISEMENT/ LICENCE FEES, TRAVEL ETC IN FOREI GN CURRENCY. IN VIEW OF THE SPECIFIC DEFINITION OF TOT AL TURNOVER AND EXPORT TURNOVER GIVEN IN EXPLANATION B ELOW SECTION 80 HHF(6) EXPLANATIONS (C) AND (J). THE A MOUNT OF EXPENDITURE INCURRED IN FOREIGN CURRENCY ON THIS ACCOUNT IS RS 18,01,10,000. SINCE THE ASSESSING OFFICER HAS ALLOWED DEDUCTION U NDER SECTION 80 HHF IN EXCESS BY RS 22,04,96,097 DUE TO IGNORING SUCH EXPENSES IN FOREIGN CURRENCY, THE ORDER PASSED BY THE AO ON THIS ISSUE IS ALSO CONSIDERED ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 5. IN RESPONSE TO THIS SHOW CAUSE NOTICE, IT WAS INTER ALIA SUBMITTED BY THE ASSESSEE THAT NO INCOME HAS BEEN EARNED BY P ROVIDING TECHNICAL SERVICES SUCH AS DUBBING, POST PRODUCTION, TECHNICA L CONSULTANCY SERVICES ETC, AND THAT IT HAS NOT INCURRED ANY EXPE NDITURE IN FOREIGN CURRENCY FOR PROVIDING TECHNICAL SERVICES OUTSIDE I NDIA. IT WAS ALSO SUBMITTED THAT NONE OF THE EXPENDITURE INCURRED IN FOREIGN CURRENCY ARE EXPENDITURE IN PROVIDING TECHNICAL SERVICES OUT SIDE INDIA. IT WAS ALSO POINTED OUT THAT OUT OF TOTAL EXPENDITURE IN FOREIGN CURRENCY OF RS 1,800,110,000 AS STATED IN YOUR NOTICE, MAJORITY OF THE EXPENDITURE INCURRED IS IN RELATION TO LICENCE FEES PAID BY SIP L (I.E. THE ASSESSEE) AMOUNTING TO RS 1,762,898,000, WHICH IS RELATION TO DISTRIBUTION BUSINESS AND NOT EXPORT BUSINESS. LEARNED COMMISSI ONERS ATTENTION WAS ALSO INVITED TO NOTE 19(D) OF THE FINANCIAL STA TEMENTS TO SUPPORT THE SUBMISSION OF THE ASSESSEE. WHILE LEARNED COMM ISSIONER DID NOT REJECT THESE SUBMISSIONS, HE DID NOT DEAL WITH THE SUBMISSIONS EITHER. ITA NO. 7476 /MUM/20 07 AND ITA NOS. 3201 AND 3315/MUM/10 ASSESSMENT YEAR: 2003-04 PAGE 6 OF 20 HE SIMPLY PROCEEDED TO EXERCISE REVISION POWERS IN RESPECT OF THIS ISSUE EITHER AND HELD AS FOLLOWS: ON THE LAST ISSUE OF EXPENDITURE IN THE FOREIGN CUR RENCY AMOUNTING TO RS 18,01,10,000 ALSO, THE AO WILL EXAM INE THE APPLICABILITY OF PROVISIONS OF EXPLANATION C AND J BELOW SECTION 80 HHF(6) OF THE INCOME TAX ACT. THE EXPORT TURNOVE R AND TOTAL TURNOVER WILL BE WORKED OUT AFTER MAKING ADJU STMENTS AS PROVIDED IN EXPLANATIONS C AND J REFERRED TO ABOVE. DEDUCTION UNDER SECTION 80 HHF WILL BE WORKED OUT ACCORDINGLY AFTER ALLOWING THE OPPORTUNITY TO THE ASSESSEE. 6. THE THIRD ISSUE ON WHICH THE ASSESSMENT ORDER WA S SUBJECTED TO REVISION AND WHICH IS CHALLENGED IN THIS APPEAL IS IN RESPECT OF BAD DEBTS. THE SHORT REASON FOR WHICH THE ASSESSMENT WA S SUBJECTED TO REVISION PROCEEDINGS IN RESPECT OF THE ASSESSING OF FICER HAVING ALLOWED THE BAD DEBTS WAS THAT THE ASSESSEES CLAIM OF BAD DEBT OF RS 13.82 CRORES WAS ALLOWED WITHOUT MAKING ANY ENQUIRY INTO THE CIRCUMSTANCES LEADING TO THE WRITE OFF AND THAT THE BAD DEBT IN RESPECT OF FOREIGN EXCHANGE TO BE RECEIVED WAS ALLOWED WITHOUT PROPER INQUIRIES. HOWEVER, LEARNED REPRESENTATIVES FAIRLY AGREE THAT IN VIEW OF HONBLE SUPREME COURT IN THE CASE OF TRF LTD VS CIT (323 IT R 397), IT IS NO LONGER NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT HAS ACTUALLY BECOME UNRECOVERABLE AND AS LONG AS THE ASSESSEE HA S ACTUALLY WRITTEN OFF THE DEBT IN THE BOOKS OF ACCOUNTS, AND UPON FUL FILLMENT OF OTHER NECESSARY PRECONDITIONS WHICH ARE NOT SUBJECT MAT TER OF DISPUTE BEFORE US ANYWAY, THE ASSESSEE IS ENTITLED TO DEDUC TION IN RESPECT OF THE SAME. IN THIS VIEW OF THE MATTER, AND FOR THE REASO NS WE WILL SET OUT IN A SHORT WHILE, IT IS NOT REALLY NECESSARY TO GO ANY DEEPER INTO THE DETAILS SO FAR AS THIS ISSUE IS CONCERNED. THERE WERE AS WE LL CERTAIN OTHER ISSUES IN THE IMPUGNED REVISION ORDER, BUT LEARNED COUNSEL FOR THE ASSESSEE HAS NOT DISPUTED THE SAME SO FAR AS CHALLE NGE TO REVISION PROCEEDINGS IS CONCERNED. WE, THEREFORE, NEED NOT D EAL WITH THE SAME. ITA NO. 7476 /MUM/20 07 AND ITA NOS. 3201 AND 3315/MUM/10 ASSESSMENT YEAR: 2003-04 PAGE 7 OF 20 AGGRIEVED, INTER ALIA, BY THE REVISION PROCEEDINGS IN RESPECT OF THE ABOVE ISSUES, THE ASSESSEE IS IN APPEAL BEFORE US. 7. AS FAR AS ISSUE IN APPEAL, I.E. (I) IN RESPECT O F SET OFF OF LOSS FROM ELIGIBLE PROFITS OF BUSINESS FOR THE PURPOSE OF COM PUTING DEDUCTION UNDER SECTION 80 HHF OF THE ACT, IS CONCERNED, THE MAIN PLANK OF LEARNED COUNSELS ARGUMENT IS THAT WHAT IS TO BE CO NSIDERED, IN THE CONTEXT OF EXAMINING LEGALITY OF REVISION PROCEEDI NGS, IS THE LAW PREVAILING AS ON THE TIME OF PASSING THE REVISION O RDER, AND THAT, THE LAW IN VIEW OF THE LEGAL POSITION AS IT STOOD AT TH AT POINT OF TIME, IT WAS A POSSIBLE VIEW OF THE MATTER THAT THE DEDUCTION OF SECTION 80 HHF IS TO BE COMPUTED BEFORE ALLOWING THE SET OFF OF BROUGHT FORWARD LOSSES. LEARNED COUNSEL POINTS OUT THAT THE JUDGMENT DATED 24 TH JULY 2000 PASSED BY HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS SHRIKE CONSTRUCTION EQUIPMENT LTD (246 ITR 429) HELD FIELD TILL 17 TH MAY 2007 WHEN IT WAS REVERSED BY HONBLE SUPREME COURT BY JU DGMENT OF THE SAID DATE IN THE CASE OF CIT VS SHIRKE CONSTRUCTION EQUIPMENT LTD (291 ITR 380). LEARNED COUNSEL THE POINTS OUT THAT WHILE HONBLE SUPREME COURTS DECISION IN THE CASE OF IPCA LABORATORIES L TD VS. DCIT (266 ITR 521), WAS INDEED DELIVERED ON A DATE EARLIER THAN THE DATE ON WHICH ASSESSMENT UNDER SECTION 143(3) WAS FINALIZED ON 24 TH MARCH 2006, I.E. ON 11 TH MARCH 2004, BUT THEN THERE ARE DECISIONS OF THE CO ORDINATE BENCHES OF THIS TRIBUNAL TO THE EFFECT THAT EVEN AF TER THE IPCA DECISION (SUPRA), SHRIKE EQUIPMENT DECISION (SUPRA) BY HONB LE BOMBAY HIGH COURT HELD THE FIELD. OUR ATTENTION IS INVITED TO T HIS TRIBUNALS DECISION IN THE CASE OF JCIT VS INFOCON INTERNATIONAL LTD ( 2 SOT 444). IN OTHER WORDS, EVEN AFTER IPCA DECISION, THE VIEW TAKEN BY THE ASSESSING OFFICER, ON THIS ISSUE, COULD NOT BE SAID TO NOT A POSSIBLE VIEW OF THE MATTER. NOT ONLY THIS WAS A POSSIBLE VIEW OF THE MA TTER, IT WAS A VIEW HELD BY THIS TRIBUNAL. IT IS SUBMITTED THAT THE ASS ESSING OFFICER CANNOT BE SAID TO BE IN ERROR IN TAKING THE SAME VIEW AS W AS TAKEN BY A COORDINATE BENCH OF THIS TRIBUNAL, AND THE VIEW TAK EN BY THE ITA NO. 7476 /MUM/20 07 AND ITA NOS. 3201 AND 3315/MUM/10 ASSESSMENT YEAR: 2003-04 PAGE 8 OF 20 COORDINATE BENCH OF THIS TRIBUNAL WAS THAT EVEN POS T IPCA DECISION BY SUPREME COURT, SHIRKE EQUIPMENT DECISION OF HONBLE BOMBAY HIGH COURT HELD GOOD IN LAW. LEARNED COUNSEL THEN FAIRL Y ACCEPTS THAT SHRIKE EQUIPMENT DECISION BY HONBLE BOMBAY HIGH COURT HAS SINCE BEEN DISAPPROVED BY HONBLE SUPREME COURT ON 17 TH MAY 2007, BUT THEN THIS EVENT TOOK PLACE MUCH AFTER THE ASSESSMENT ORDER WA S FRAMED. HE, HOWEVER, HASTENS TO ADD THAT WHAT IS TO BE SEEN FOR THE PURPOSE OF EXERCISE OF POWERS UNDER SECTION 263 IS THE LAW AS IT STOOD AT THE POINT OF TIME WHEN ASSESSMENT WAS FRAMED. IN SUPPORT OF T HIS LEGAL PLEA, LEARNED COUNSEL RELIES UPON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CIT VS G M STAINLESS STEEL PVT LTD (263 ITR 255) WHEREIN IT IS HELD THAT ..GIVEN THE FACT THAT THE DECISION O F THE JURISDICTIONAL HIGH COURT WAS OPERATIVE AT THE MATERIAL TIME, THE AO COULD NOT BE SAID TO HAVE ERRED IN LAW AND THAT THE FACT THAT THIS COURT HAD SUBSEQUENTLY REVERSED THE DECISION OF THE HIGH COUR T WOULD NOT JUSTIFY THE CIT IN TREATING THE AOS DECISION AS ERRONEOUS. THE POWER OF THE CIT UNDER S. 263 OF THE IT ACT MUST BE EXERCISED ON THE BASIS OF THE MATERIAL THAT WAS AVAILABLE TO HIM WHEN HE EXERCISE D THE POWER. LEARNED COUNSEL ALSO TOOK US THROUGH RELATED JUDGME NTS AND TRIED TO CANVASS THE VIEW THAT THE ISSUE BEFORE HONBLE BOMB AY HIGH COURT IN SHIRKES CASE WAS ALTOGETHER DIFFERENT AND IPCA DEC ISION DID NOT TOUCH UPON THE SAME. IN SUPPORT OF THIS DISTINCTION, HE H EAVILY RELIED UPON THE OBSERVATIONS MADE BY A COORDINATE BENCH IN INF OCONS CASE (SUPRA), AND MADE ELABORATE ARGUMENTS ON THE ACTUAL ISSUES WHICH CAME UP FOR CONSIDERATION IN THESE CASES AND HOW TH EY WERE MATERIALLY DIFFERENT. HE, HOWEVER, FAIRLY ACCEPTED THAT THIS A SPECT OF THE MATTER IS SOMEWHAT ACADEMIC BECAUSE THE JUDGMENT OF HONBLE S UPREME COURT IS BINDING ANYWAY. LEARNED COUNSEL THEN REFERRED TO HO NBLE SUPREME COURTS JUDGMENT IN THE CASE OF CIT VS MAX INDIA LT D (295 ITR 282) IN SUPPORT OF THE PROPOSITION THAT WHEN TWO VIEWS ON A LEGAL ISSUE ARE POSSIBLE, AND THE ASSESSING OFFICER ONE OF THESE VI EWS, COMMISSIONER ITA NO. 7476 /MUM/20 07 AND ITA NOS. 3201 AND 3315/MUM/10 ASSESSMENT YEAR: 2003-04 PAGE 9 OF 20 CANNOT SUBSTITUTE SUCH VIEWS OF THE AO BY HIS VIEWS . LEARNED COUNSEL THEN CONTENDS THAT IN ANY CASE THE ASSESSING OFFICE R WAS UNDER AN OBLIGATION TO FOLLOW THE LAW LAID DOWN BY HONBLE J URISDICTIONAL HIGH COURT, AND HE CANNOT, THEREFORE, SAID TO BE IN ERRO R WHEN HE DOES SO. HE, HOWEVER, DID NOT ELABORATE THIS POINT FURTHER B ECAUSE HE FELT DESERVES TO SUCCEED ON OTHER GROUNDS ONLY. LEARNED COUNSEL SUBMITS THAT WITHOUT GOING INTO THE CORRECTNESS OF VIEWS, A S LONG AS THE VIEW HELD BY THE ASSESSING OFFICER CAN BE SAID TO BE A P OSSIBLE VIEW OF THE MATTER, AND IT SHOULD BE HELD TO BE A POSSIBLE VIEW OF THE MATTER FOR THE SHORT REASON THAT TRIBUNAL TOO HELD THIS VIEW IN IN FOCONS CASE (SUPRA), REVISION POWERS CANNOT BE EXERCISED IN RESPECT OF T HE SAME. LEARNED COUNSEL THEN POINTS OUT THAT IN THE PRESENT CASE, T HE ASSESSEE WAS ALL ALONG A PROFIT MAKING COMPANY AND THE LOSSES BROUGH T FORWARD ARE NOT ASSESSEES LOSSES BUT THAT OF ANOTHER COMPANY AS A RESULT OF DEMERGER EXERCISE. THESE LOSSES, ACCORDING TO THE LEARNED CO UNSEL, CAN NEVER FORM PART OF THE COMPUTATION OF INCOME, BUT HAVE BEEN TA KEN INTO ACCOUNT IN VIEW OF THE PROVISIONS OF SECTION 72. A REFERENCE IS ONCE AGAIN MADE TO INFCON DECISION IN SUPPORT OF THE CONTENTION THAT N OT ALL TYPES OF BROUGHT FORWARD LOSSES ARE TO BE CONSIDERED FOR THE PURPOSE OF GRANTING DEDUCTION. ON THE STRENGTH OF THESE ARGUME NTS, LEARNED COUNSEL URGES TO QUASH THE IMPUGNED ORDER ON THIS P OINT. LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUB MITS THAT IPCA DECISION WAS ADMITTEDLY AVAILABLE TO THE ASSESSING OFFICER, AND AS A PLAIN READING OF THE IPCA DECISION WOULD SHOW, POST THE STAND SO TAKEN BY HONBLE SUPREME COURT, SHRIKE EQUIPMENT DECISION BY HONBLE BOMBAY HIGH COURT DID NOT HOLD GOOD LAW. IT IS ALSO SUBMITTED THAN THAT ALL THAT SHIRKE SUPREME COURT DECISION DOES IS TO H OLD THAT IN VIEW OF IPCA DECISION BY HONBLE SUPREME COURT, SHRIKE EQUI PMENT DECISION BY HONBLE BOMBAY HIGH COURT IS NO LONGER GOOD LAW. IN SUCH A SITUATION, ACCORDING TO THE LEARNED DEPARTMENTAL REPRESENTATIV E, IT COULD NOT BE SAID THAT BOMBAY HIGH COURTS JUDGMENT IN SHIRKES CASE CONTINUED TO ITA NO. 7476 /MUM/20 07 AND ITA NOS. 3201 AND 3315/MUM/10 ASSESSMENT YEAR: 2003-04 PAGE 10 OF 20 BE GOOD LAW POST IPCA DECISION. LEARNED COUNSEL TH EN SUBMITTED THAT THE PRESENT REVISION ORDER WAS NOT A FRIVOLOUS REVI SION ORDER AS EVIDENT FROM THE FACT THAT THE ASSESSEE HIMSELF HAS CONCEDE D ON SOME OF THE POINTS. ONCE IT IS FOUND THAT THE REVISION ORDER IS SUSTAINABLE IN LAW AT LEAST ON SOME GROUNDS, WE SHOULD NOT QUASH THE SAME IN RESPECT OF OTHER PARTS ALSO. IT IS A CASE IN WHICH REVISION WA S VALIDLY DONE, AND WE NEED NOT RESTRICT THE SCOPE OF THE REVISION ORDER. IT IS FURTHERSUBMITTED THAT IN ANY EVENT ALL THAT THE COMMISSIONER HAS SAI D THAT THE ASSESSING OFFICER SHOULD EXAMINE THE MATTER IN ACCORDANCE WIT H THE LAW, AND THERE CANNOT BE ANY INFIRMITY IN DIRECTIONS TO FOLL OW THE LAW OF THE LAND. LEARNED DEPARTMENTAL REPRESENTATIVE THEN TOOK US TH ROUGH THE REVISION ORDER PASSED BY THE COMMISSIONER AND VEHEM ENTLY RELIED UPON THE SAME. IN HIS BRIEF REJOINDER, LEARNED COUN SEL REITERATED HIS CONTENTIONS. HE ALSO SUBMITTED THAT, UNLIKE IN THE CASE OF REASSESSMENT PROCEEDINGS UNDER SECTION 147, IN WHICH ONCE ASSESS MENT IS HELD TO BE VALIDLY REOPENED ON ANY GROUND, THE ASSESSING OFFIC ER CAN PICK UP ANY OF THE ISSUES EVEN THOUGH THE REASSESSMENT MAY NOT HAVE BEEN REOPENED ON THAT POINT, THE REVISION PROCEEDINGS AR E ISSUE SPECIFIC. 8. IN OUR CONSIDERED VIEW, FOR THE PURPOSE OF EXA MINING VALIDITY OF REVISION PROCEEDINGS, WHAT WE REALLY NEED TO EXAMIN E IS THE LEGAL POSITION PREVAILING AS ON THE TIME WHEN REVISION PO WERS ARE EXERCISED BY THE COMMISSIONER. IN THE CASE OF MAX INDIA LTD ( SUPRA), HONBLE SUPREME COURT HAS SAID THAT, WE HAVE TO TAKE INTO ACCOUNT THE POSITION OF LAW AS IT STOOD AT THE POINT OF TIME WH EN CIT PASSED THE ORDER DATED 5 TH MARCH 1997 IN PURPORTED EXERCISE OF HIS POWERS UNDER SECTION 263 OF THE ACT. . IN THE CASE OF GM STAINLESS STEEL, ON WHICH SO MUCH OF RELIANCE IS PLACED, THE LEGAL P OSITION AS AT THE POINT OF TIME WHEN ASSESSMENT ORDER WAS FINALIZED A ND AS AT THE POINT OF TIME WHEN REVISION ORDER WAS PASSED WAS MATERIAL LY THE SAME, AND THE LEGAL DEVELOPMENTS TOOK PLACE IN BETWEEN THE TI ME WHEN REVISION ITA NO. 7476 /MUM/20 07 AND ITA NOS. 3201 AND 3315/MUM/10 ASSESSMENT YEAR: 2003-04 PAGE 11 OF 20 ORDER WAS PASSED AND MATTER TRAVELLED IN APPEAL BEF ORE THEIR LORDSHIPS. HOWEVER, SO FAR AS THE CRUCIAL POINT OF TIME ON WHICH LEGAL POSITION WAS TO BE EXAMINED, IT IS CLEAR THAT THE R ELEVANT POINT OF TIME IS WHEN THE COMMISSIONER EXERCISED THE POWER AND NO T WHEN THE ASSESSING OFFICER PASSED THE ORDER, AS THEIR LORDSH IPS HAVE OBSERVED THAT . THE POWER OF THE CIT UNDER S. 263 OF THE IT ACT MUS T BE EXERCISED ON THE BASIS OF THE MATERIAL THAT WAS AVA ILABLE TO HIM WHEN HE EXERCISED THE POWER. AT THAT TIME, THERE WA S NO DISPUTE THAT THE ISSUE WHETHER THE POWER SUBSIDY SHOULD BE TREATED AS CAPITAL RECEIPT HAD BEEN CONCLUDED AGAINST THE REVE NUE. THE SATISFACTION OF THE CIT, THEREFORE, WAS BASED ON NO MATERIAL EITHER LEGAL OR FACTUAL WHICH WOULD HAVE GIVEN HIM THE JUR ISDICTION TO TAKE ACTION UNDER S. 263 OF THE IT ACT.. IT IS ALSO SPECIFICALLY PROVIDED IN THE STATUTE ITSELF THAT THE EXPRESSION RECORDS , FOR THE PURPOSE OF SECTION 263, IS DEEMED TO INCLUDE ALL R ECORDS UNDER ANY PROCEEDINGS UNDER THIS ACT AVAILABLE AT THE TIME OF EXAMINATION BY THE COMMISSIONER. IT IS, THEREFORE, FUTILE TO SUGGEST THAT LEGAL DECISIONS AVAILABLE AT THE POINT OF TIME WHEN COMMISSIONER IS EXAMINING THE MATTER FOR EXERCISE OF POWERS UNDER SECTION 163 CAN BE IGNORED. AS REGARDS LEARNED COUNSELS RELIANCE ON THIS TRIBUNAL S ORDER IN THE CASE OF GAJENDRA KUMAR T AGARWAL VS INCOME TAX OFFICER (11 ITR TRIB 640), THAT ONCE AGAIN WAS A SITUATION IN WHICH THERE WAS NO MATERIAL DIFFERENCE IN THE LEGAL POSITION BETWEEN THE POINTS OF TIME WHEN ASSESSMENT WAS FINALIZED AND THE REVISION ORDER WAS PASSED. AS A MATTER OF FACT, THE ISSUE WAS DECIDED, ON MERITS, I N FAVOUR OF THE ASSESSEE, AND THEN IT WAS HELD THAT, NOTWITHSTANDIN G THE DECISION ON MERITS IN FAVOUR OF THE ASSESSEE, IT COULD NOT HAVE BEEN A FIT CASE FOR REVISION PROCEEDINGS FOR THE REASON THAT THE VIEW A DOPTED BY THE ASSESSING OFFICER WAS AT LEAST A POSSIBLE VIEW OF T HE MATTER. THE SENTENCE RELIED UPON BY THE LEARNED COUNSEL, ON THE SE FACTS, WAS ON ALTOGETHER DIFFERENT FACTS, AND, IN ANY EVENT, IT W AS NO MORE THAN AN ITA NO. 7476 /MUM/20 07 AND ITA NOS. 3201 AND 3315/MUM/10 ASSESSMENT YEAR: 2003-04 PAGE 12 OF 20 OBITER WHICH HAS AT BEST A PERSUASIVE VALUE . HOWEVER, THE WORDINGS OF HONBLE SUPREME COURT ARE CLEAR AND ADMIT NO AMBIGU ITY, AND THE LAW SO LAID DOWN BY HONBLE SUPREME COURT BINDS US UNDE R ARTICLE 141 OF THE CONSTITUTION OF INDIA. WHAT IS TO BE SEEN IS TH E LEGAL POSITION PREVAILING AS ON THE POINT OF TIME WHEN REVISION OR DER IS PASSED. IT IS, THEREFORE, WHOLLY IMMATERIAL AS TO WHAT WAS THE LEG AL POSITION AS AT THE POINT OF TIME WHEN THE ASSESSMENT WAS FRAMED PART ICULARLY WHEN THERE IS SIGNIFICANT DIFFERENCE IN THE LEGAL POSITI ON BETWEEN THE POINT OF TIME WHEN ASSESSMENT IS FRAMED AND WHEN IT IS REVIS ED . A LOT OF EMPHASIS HAS THEN BEEN PLACED ON THE SUGGESTION THA T THE VIEW ADOPTED BY THE ASSESSING OFFICER WAS A POSSIBLE VIEW OF TH E MATTER, AS THE SAME VIEW WAS TAKEN BY A COORDINATE BENCH OF THIS TRIBUN AL IN INFOCONS CASE (SUPRA), AND, AS AN ANALYSIS OF THE RELATED DECISIO NS, WOULD UNAMBIGUOUSLY SHOW. WE SEE NO MERITS IN THIS PLEA E ITHER. IN THE CASE OF MAX INDIA (SUPRA), HONBLE SUPREME COURT HAS OBS ERVED AS FOLLOWS: AT THIS STAGE, WE MAY CLARIFY THAT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. (SUPRA) THIS COURT HAS TAKEN THE VIEW THAT THE PHRASE 'PREJUDICIAL TO THE INTEREST OF THE REVENUE' UNDER S. 263 HAS TO BE READ IN CONJUNCTION WITH THE EXPRESSION 'ERRONEO US' ORDER PASSED BY THE AO. EVERY LOSS OF REVENUE AS A CONSEQ UENCE OF AN ORDER OF THE AO CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. FOR EXAMPLE, WHEN THE ITO ADOPTED O NE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN L OSS OF REVENUE; OR WHERE TWO VIEWS ARE POSSIBLE AND THE IT O HAS TAKEN ONE VIEW WITH WHICH THE CIT DOES NOT AGREE, I T CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE IN TEREST OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE ITO IS UNSUST AINABLE IN LAW (EMPHASIS BY UNDERLINING SUPPLIED BY US) 9. THE VIEW TAKEN BY THE ASSESSING OFFICER, THEREFO RE, NEED NOT ONLY BE A POSSIBLE VIEW OF THE MATTER BUT ALSO A VIEW WH ICH IS NOT UNSUSTAINABLE IN LAW. A VIEW WHICH IS CLEARLY UNS USTAINABLE IN LAW, IN OUR HUMBLE UNDERSTANDING, WILL INCLUDE A VIEW WHICH IS CONTRARY TO THE ITA NO. 7476 /MUM/20 07 AND ITA NOS. 3201 AND 3315/MUM/10 ASSESSMENT YEAR: 2003-04 PAGE 13 OF 20 LAW LAID DOWN BY HONBLE SUPREME COURT. THEREFORE, THE VIEW TAKEN BY THE ASSESSING OFFICER, EVEN THOUGH IT MAY BE A POSS IBLE VIEW OF THE MATTER AT THE POINT OF TIME WHEN THE ASSESSMENT ORD ER WAS PASSED, CANNOT BE SAID TO BE A VIEW WHICH COMMISSIONER CANN OT DISTURB IN THE REVISION PROCEEDINGS. 10. AS REGARDS LEARNED COUNSELS RATHER PLEA THAT T HE ASSESSING OFFICER WAS BOUND TO FOLLOW HONBLE JURISDICTIONAL HIGH COU RT JUDGMENT AS LONG AS THE SAID JUDGMENT IS NOT SPECIFICALLY OVERRULED, WE FIND NO MERITS IN THIS PLEA EITHER. LEARNED COUNSEL DID NOT ELABORATE UPON HIS ARGUMENTS AND WE DONOT, THEREFORE, HAVE THE BENEFIT OF HIS AN ALYSIS OF LEGAL POSITION. AS WE UNDERSTAND, AN ASSESSING OFFICER IS PART OF REVENUE MACHINERY, EVEN THOUGH HIS JOB INVOLVES EXERCISE OF CERTAIN QUASI- JUDICIAL POWERS, AND DECISIONS OF THE APPELLATE FOR UMS, IN GENERAL, DO NOT PREVENT HIM FROM RAISING DEMANDS ON THOSE ISSUE S, UNLESS THESE DECISIONS ARE ACCEPTED BY THE REVENUE. NO DOUBT, TH E ASSESSING OFFICER SHOULD FOLLOW THE JUDICIAL DECISIONS AS LONG AS HE CAN DO SO WITHOUT SACRIFICING THE LEGITIMATE INTERESTS OF THE REVENUE , BUT WE CANNOT VISUALIZE A SITUATION IN WHICH HIS NOT RAISING DEMA NDS ON THOSE ISSUES WILL NOT AFFECT THE INTERESTS OF REVENUE. IN CASE THE ASSESSING OFFICER DOES NOT RAISE THE DEMANDS ON THE ISSUES WHICH HAVE BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY JURISDICTIONAL HIGH COURT , EVEN THOUGH THE INCOME TAX DEPARTMENT IS IN APPEAL AGAINST THE SAME , INTERESTS OF THE REVENUE WILL BE CLEARLY PREJUDICED AND REMAIN UNPRO TECTED. THE ORDERS OF THE HIGHER JUDICIAL AUTHORITIES BIND THE ASSESSING OFFICER TO THE EXTENT THAT HE IS REQUIRED TO LOYALLY EXECUTE T HE DIRECTIONS CONTAINED IN THESE ORDERS, BUT THEN THESE ORDERS DO NOT PREVENT HIM FROM TAKING THE SAME STAND, AS HE TOOK IN THOSE ASS ESSMENTS, IN OTHER CASES; QUITE TO THE CONTRARY, HIS ABANDONING THAT S TAND IN OTHER CASES COULD PREJUDICE HIS STAND IN THE MATTERS WHICH ARE IN APPEAL BEFORE THE HIGHER APPELLATE AUTHORITIES. THE ONLY DIFFERENCE T HESE JUDICIAL ITA NO. 7476 /MUM/20 07 AND ITA NOS. 3201 AND 3315/MUM/10 ASSESSMENT YEAR: 2003-04 PAGE 14 OF 20 DECISIONS, WHICH ARE DECIDED IN FAVOUR OF THE ASSES SEE AND ARE IN CHALLENGE BEFORE HIGHER AUTHORITIES, MAKE TO THE OT HER CASES IS THAT, IN TERMS OF THE GUIDELINES ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES, THE ASSESSING OFFICER MAY NOT COLLECT DEMANDS ON TH OSE ISSUES TILL THESE DEMANDS ARE EXAMINED BY THE APPELLANT AUTHORITIES, WHICH ARE, BEING PART OF THE JUDICIAL MACHINERY, ANYWAY BOUND BY THO SE DECISIONS. IN TERMS OF THE CBDT GUIDELINES, STAY IS NORMALLY GRAN TED BY THE ASSESSING OFFICER (A) IF THE DEMAND IN DISPUTE RELATES TO IS SUES THAT HAVE BEEN DECIDED IN ASSESSEES FAVOUR BY AN APPELLATE AUTHOR ITY OR COURT EARLIER; OR (B) IF THE DEMAND IN DISPUTE HAS ARISEN BECAUSE THE ASSESSING OFFICER HAD ADOPTED AN INTERPRETATION OF LAW IN RES PECT OF WHICH THERE EXIST CONFLICTING DECISIONS OF ONE OR MORE HIGH COU RTS (NOT OF THE HIGH COURT UNDER WHOSE JURISDICTION THE ASSESSING OFFICE R IS WORKING); OR (C) IF THE HIGH COURT HAVING JURISDICTION HAS ADOPT ED A CONTRARY INTERPRETATION BUT THE DEPARTMENT HAS NOT ACCEPTED THAT JUDGMENT. IT WILL, HOWEVER, BE STRETCHING THE THINGS TOO FAR TO SUGGEST THAT THE ASSESSING OFFICER SHOULD NOT RAISE DEMANDS ON THOSE ISSUES AT ALL, BECAUSE IT WILL RESULT IN A SITUATION THAT IN THE A SSESSMENTS SO FRAMED, TAX REVENUES IN RESPECT OF AN ISSUE ON WHICH REVENU E IS VIGOROUSLY JUSTIFYING ITS EARLIER STAND BEFORE THE HIGHER JUDI CIAL AUTHORITIES, WILL BE LOST FOREVER. THE POSITION OF THE ASSESSING OFF ICER IS VERY DIFFERENT FROM A JUDICIAL OR EVEN QUASI-JUDICIAL AUTHORITY; H E IS NOT ONLY AN ADJUDICATOR BUT ALSO AN INVESTIGATOR AND IT IS ALSO HIS DUTY TO DEFEND LEGITIMATE INTERESTS OF THE REVENUE. MERELY BECAUS E ANOTHER DEMAND RAISED ON THE SAME ISSUE HAS NOT BEEN APPROVED BY A JUDICIAL BODY, AS LONG AS THE DECISION OF THAT JUDICIAL BODY IS IN CH ALLENGE BEFORE THE HIGHER JUDICIAL AUTHORITY, DOES NOT PREVENT THE ASS ESSING OFFICER FROM RAISING DEMANDS ON THOSE ISSUES IN THE CASES OF OTH ER TAXPAYERS, EVEN THOUGH, AS WE HAVE SEEN EARLIER, HE MAY NOT BE IN A POSITION TO ENFORCE RECOVERY OF TAX DEMANDS IN SUCH CASES. WE, THEREFOR E, SEE NO MERITS IN THIS PLEA OF THE ASSESSEE EITHER. ITA NO. 7476 /MUM/20 07 AND ITA NOS. 3201 AND 3315/MUM/10 ASSESSMENT YEAR: 2003-04 PAGE 15 OF 20 11. IN VIEW OF THE REASONS SET OUT ABOVE, WE UPHOLD THE ACTION OF THE COMMISSIONER IN INVOKING HIS REVISION POWERS IN RES PECT OF IN RESPECT OF SET OFF OF LOSS FROM ELIGIBLE PROFITS OF BUSINES S FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 80 HHF OF THE ACT . 12. AS REGARDS THE SECOND ISSUE, I.E. IN RESPECT OF DEDUCTIBILITY OF EXPENSES INCURRED IN FOREIGN CURRENCY FROM EXPORT T URNOVER AND TOTAL TURNOVER, FOR THE PURPOSE OF COMPUTING DEDUCTION UN DER SECTION 80 HHF OF THE ACT, WE FIND THAT IT HAS BEEN A CATEGORICAL STAND OF THE ASSESSEE BEFORE THE CIT THAT NO INCOME HAS BEEN EARNED BY PR OVIDING TECHNICAL SERVICES SUCH AS DUBBING, POST PRODUCTION, TECHNICA L CONSULTANCY SERVICES ETC, AND THAT THE ASSESSEE HAS NOT INCURR ED ANY EXPENDITURE IN FOREIGN CURRENCY FOR PROVIDING TECHNICAL SERVICES O UTSIDE INDIA. THERE ARE NO FINDINGS BY THE CIT TO THE EFFECT THAT ANY O F THESE CONTENTIONS ARE INCORRECT. WE HAVE ALSO NOTED THAT WHILE IT WAS POINTED OUT TO THE CIT THAT OUT OF TOTAL EXPENDITURE IN FOREIGN CURRE NCY OF RS 1,800,110,000 AS STATED IN YOUR NOTICE, MAJORITY OF THE EXPENDITURE INCURRED IS IN RELATION TO LICENCE FEES PAID BY SIP L (I.E. THE ASSESSEE) AMOUNTING TO RS 1,762,898,000, WHICH IS RELATION TO DISTRIBUTION BUSINESS AND NOT EXPORT BUSINESS, LEARNED COMMISSI ONER HAS NOT DISPUTED THIS ASPECT OF THE MATTER EITHER. HOWEVER, HE PROCEEDS TO SIMPLY BRUSH ASIDE ALL THESE CONTENTIONS AND PROCEE DS TO DIRECT THE ASSESSING OFFICER TO EXAMINE THE APPLICABILITY OF PROVISIONS OF EXPLANATION C AND J BELOW SECTION 80 HHF(6) OF THE INCOME TAX ACT. WHILE REVISION PROCEEDINGS WERE INITIATED ON THE GR OUND THAT THESE EXPENSES WERE INADMISSIBLE, THE REVISION ORDE R HAS BEEN PASSED WITH A DIRECTION TO THE ASSESSING OFFICER THAT HE S HOULD LOOK INTO THE APPLICABILITY OF EXPLANATION C AND J BELOW SECTION 80 HHF, WITHOUT THERE BEING ANY FINDING THAT THESE PROVISIONS CAN B E INVOKED AT ALL. LEARNED COMMISSIONER HAS NOT REJECTED THE SUBMISSIO NS OF THE ITA NO. 7476 /MUM/20 07 AND ITA NOS. 3201 AND 3315/MUM/10 ASSESSMENT YEAR: 2003-04 PAGE 16 OF 20 ASSESSEE ON MERITS AND YET ALLOWED THE ASSESSING OF FICER TO REEXAMINE THE MATTER. THE SHOW CAUSE NOTICE IS ISSUED ON THE GROUND THAT THE COMPUTATION IS INCORRECT BUT THE REVISION IS EXERCI SED ON THE GROUND THAT THE MATTER WAS NOT EXAMINED ON MERITS. AS TO W HETHER SUCH AN ACTION CAN BE UPHELD, WE FIND GUIDANCE FROM A DECIS ION OF A COORDINATE BENCH IN THE CASE OF SYNERGY ENTERPRENUER SOLUTIONS PVT LTD VS DCIT (ITA NO 3076/MUM/10; ORDER DATED 31.3.2011). THE RE ASON WHICH CAN BE INFERRED FROM THE REVISION ORDER UNDER SECTION 2 63 (THAT THE AO HAS NOT VERIFIED THE ISSUE) IS DIFFERENT FROM THE REASO N SET OUT IN THE SHOW- CAUSE NOTICE (THAT SUCH EXPENSES CANNOT BE ALLOWED) . IF A GROUND OF REVISION IS NOT MENTIONED IN THE SHOW-CAUSE NOTICE, IT CANNOT BE MADE THE BASIS OF THE ORDER FOR THE REASON THAT THE ASSE SSEE WOULD HAVE HAD NO OPPORTUNITY TO MEET THE POINT. WE ALSO FIND GUID ANCE FROM A COORDINATE BENCH DECISION IN THE CASE OF MAXPACK IN VESTMENTS 13 SOT 67 (DEL), BY HONBLE AP HIGH COURT DECISION IN THE CASE OF CIT VS G.K. KABRA 211 ITR 336 AND OF HONBLE P & H HIGH COURT DECISION IN THE CASE OF CIT VS JAGADHRI ELECTRIC SUPPLY (140 ITR 4 90). FOR THIS SHORT REASON, THEREFORE, THE REVISION PROCEEDINGS ARE NOT LEGALLY SUSTAINABLE ON THIS ISSUE , I.E. THE NOTICE IS ISSUED ON THE GR OUND OF INADMISSIBILITY OF DEDUCTION, AND THE REVISION IS DONE ON THE GROUN D THAT THE MATTER NEEDS TO EXAMINED EVEN AS THERE ARE NO FINDINGS ABO UT SHORTCOMINGS IN THE PROCEEDINGS BEFORE THE ASSESSING OFFICER. IN AN Y CASE, THE CIT HAS NOT GIVEN ANY FINDINGS AGAINST THE ASSESSEE AT ALL AND YET HE HAS PROCEEDED TO DIRECT THE ASSESSING OFFICER TO EXAMIN E THE ISSUE AGAIN. UNLESS THE CIT POINTS OUT ANY DEFECT IN THE STAND O F THE ASSESSING OFFICER, IT CANNOT BE OPEN TO HIM TO EXERCISE THE R EVISION POWERS. SUCH DEFECTS CANNOT BE ASSUMED OR INFERRED. AS HELD BY H ONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS GABRIEL INDIA LTD (203 ITR 108), UNLESS COMMISSIONER POINTS OUT SPECIFIC DEFECTS IN THE ORD ER OF THE ASSESSING OFFICER, HE CAN NOT SIMPLY PROCEED TO DIRECT THE AS SESSING OFFICER TO RE- EXAMINE THE MATTER. NO SUCH DEFECTS HAVE BEEN POINT ED OUT IN THE ITA NO. 7476 /MUM/20 07 AND ITA NOS. 3201 AND 3315/MUM/10 ASSESSMENT YEAR: 2003-04 PAGE 17 OF 20 IMPUGNED ORDER. IN THIS VIEW OF THE MATTER, WE SEE MERITS IN THE PLEA OF THE ASSESSEE ON THIS ISSUE AND HOLD THAT REVISION O F ORDER, ON THIS ISSUE , WAS NOT JUSTIFIED. 13. WE, THEREFORE, QUASH THE REASSESSMENT PROCEEDIN GS ON THE SECOND ISSUE, I.E. IN RESPECT OF DEDUCTIBILITY OF EXPENSES INCURRED IN FOREIGN CURRENCY FROM EXPORT TURNOVER AND TOTAL TURNOVER, F OR THE PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 80 HHF OF THE ACT . TO THIS EXTENT, THE APPELLANT INDEED DESERVES TO SUCCEED. 14. AS REGARDS THIRD ISSUE WHICH IS AGITATED IN APP EAL BEFORE US, I.E. IN RESPECT OF ALLOWABILITY OF BAD DEBTS AS A DEDUCTION , LEARNED REPRESENTATIVES HAVE FAIRLY AGREED THAT THE ISSUE I S COVERED IN FAVOUR OF THE ASSESSEE BY HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF TRF LTD (SUPRA). IN THIS VIEW OF THE MATTER, WE VACATE THE REVISION ORDER IN RESPECT OF THIS ISSUE AS WELL. 15. IN THE RESULT, ITA NO. 7476/MUM/09, I.E. APPEAL AGAINST THE REVISION ORDER, IS PARTLY ALLOWED IN THE TERMS INDI CATED ABOVE. 16. WE NOW TAKE UP ITA NO. 3201/MUM/2010, I.E. ASS ESSEES APPEAL AGAINST CIT(A)S ORDER DATED 12 TH FEBRUARY 2010, IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) R.W.S. 263, FOR THE ASSESSMENT YEAR 2003-04. 17. THE ONLY GRIEVANCE RAISED IN THIS APPEAL IS AGA INST CIT(A)S DENYING THE DEDUCTION UNDER SECTION 80 HHF ON THE G ROUND THAT BROUGHT FORWARD LOSS OF EARLIER YEARS IS REQUIRED T O BE SET OFF FROM THE ELIGIBLE PROFITS OF THE BUSINESS. 18. LEARNED COUNSEL FOR THE ASSESSEE FAIRLY ADMITS THAT THE ISSUE IS ITA NO. 7476 /MUM/20 07 AND ITA NOS. 3201 AND 3315/MUM/10 ASSESSMENT YEAR: 2003-04 PAGE 18 OF 20 COVERED AGAINST HIM, ON MERITS, BY HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF SHRIKE CONSTRUCTION EQUIPMENT (SUPRA ). HIS DEFENCE, HOWEVER, IS THAT SINCE THE CIT COULD NOT HAVE SUBJE CTED THIS DEDUCTION TO THE REVISIONS PROCEEDINGS, WHICH ARE SEPARATELY CHALLENGED IN ANOTHER APPEAL, THE DEDUCTION CANNOT BE DISTURBED I N THE IMPUGNED PROCEEDINGS. AS WE HAVE DISMISSED THIS CHALLENGE TO THE REVISION PROCEEDINGS EARLIER IN THIS ORDER, THAT DEFENCE IS NOT SUSTAINABLE IN LAW EITHER. LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUBMITS THAT THE ISSUE BEING COVERED AGAINST THE AS SESSEE BY HONBLE SUPREME COURT JUDGMENT IN SHIRKES CASE (SUPRA), TH E GRIEVANCE HAS NO LEGALLY SUSTAINABLE IN MERITS. 19. IN VIEW OF THE ABOVE DISCUSSIONS, WE SEE NO MER ITS IN ASSESSEES GRIEVANCE. THE CHALLENGE TO REVISION PROCEEDINGS ON THIS ISSUE HAS ALREADY BEEN REJECTED, AND, ON MERITS, THE ISSUE IS COVERED AGAINST THE ASSESSEE BY HONBLE SUPREME COURT JUDGMENT IN SHIRK ES CASE (SUPRA). WE, THEREFORE, APPROVE THE CONCLUSION ARRIVED AT BY THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. 20. IN THE RESULT, ITA NO. 3201/MUM/10 IS DISMISSED . 21. WE NOW TAKE UP ITA NO. 3315/MUM/2010. 22. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THE F IRST FOUR GROUNDS OF APPEAL, WHICH DEAL WITH DIFFERENT FACETS OF BAD DEB TS DISALLOWANCE OF RS 13.82 CRORES, ARE NOW COVERED IN FAVOUR OF THE ASS ESSEE BY HONBLE SUPREME COURTS DECISION IN THE CASE OF TRF LTD (SU PRA). IN OUR ORDER ON ASSESSEES CHALLENGE TO REVISION PROCEEDINGS ON THIS ISSUE, WE HAVE ALREADY UPHELD ASSESSEES CONTENTIONS ON THE ISSUE OF VALIDITY OF REVISION PROCEEDINGS AND THUS QUASHED THE REVISION ORDER TO THAT EXTENT. THE QUANTUM ADDITIONS IN RESPECT OF THE SAI D ISSUE CANNOT, ITA NO. 7476 /MUM/20 07 AND ITA NOS. 3201 AND 3315/MUM/10 ASSESSMENT YEAR: 2003-04 PAGE 19 OF 20 THEREFORE, SURVIVE. THE CIT(A) WAS, EVEN ON MERITS, JUSTIFIED IN DELETING THE IMPUGNED ADDITION. 23. GROUND NOS. 1 TO 4 ARE THUS DISMISSED. 24. IN THE FOURTH GROUND OF APPEAL, THE ASSESSING OFFICER IS AGGRIEVED THAT THE CIT(A) ERRED IN DELETING THE ADD ITION OF RS 8,87,400 . 25. THE SUBJECT ADDITION WAS MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THERE WAS NOTHING ON RECORD TO SUGGEST THAT THE SAID INCOME WAS ALREADY TAXED IN AN EARLIER ASSESSMENT Y EAR. IN THE PROCEEDINGS BEFORE THE CIT(A), HOWEVER, THIS ASPEC T HAS BEEN EXAMINED AND IT IS FOUND THAT THIS INCOME HAS ALREA DY BEEN OFFERED TO TAX IN THIS ASSESSMENT YEAR ITSELF. THE ADDITION IS DELETED ON THE SHORT GROUND THAT IF THIS TAXABILITY IS UPHELD, IT WILL A MOUNT TO THE SAME INCOME BEING TAXED TWICE. THE ASSESSING OFFICER IS AGGRIEVED AND IS IN APPEAL BEFORE US. 26. LEARNED DEPARTMENTAL REPRESENTATIVE RATHER DUT IFULLY RELIES ON THE ORDER OF THE ASSESSING OFFICER AND DOES NOT REALLY DISPUTE THAT THE SAID INCOME HAS ALREADY BEEN OFFERED TO TAX IN THIS VERY ASSESSMENT YEAR ITSELF. THERE IS THUS NO QUESTION OF EVIDENCE OF ITS HAVING BEEN TAXED IN AN EARLIER YEAR. WHEN RELEVANT ENTRIES WER E EXPLAINED BY THE LEARNED COUNSEL, LEARNED DR DID NOT HAVE MUCH TO SA Y EXCEPT TO PLACE RELIANCE ON THE ORDER OF THE ASSESSING OFFICER. 27. IN VIEW OF THE ABOVE DISCUSSIONS, AS ALSO BEAR ING IN MIND THE FACT THAT THE SAID INCOME HAS ALREADY BEEN OFFERED TO, AND BROUGHT TO, TAX IN THIS ASSESSMENT YEAR SEPARATELY, WE SEE NO M ERITS IN GRIEVANCE OF THE ASSESSING OFFICER. WE APPROVE THE ACTION OF TH E CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. ITA NO. 7476 /MUM/20 07 AND ITA NOS. 3201 AND 3315/MUM/10 ASSESSMENT YEAR: 2003-04 PAGE 20 OF 20 28. IN THE RESULT, ITA NO. 3315/MUM/2010 IS DISMISS ED. 29. TO SUM UP, WHILE ITA NO. 7476/MUM/2007 IS PARTL Y ALLOWED, THE ITA NOS. 3201/MUM/2010 AND ITA NO. 3315/MUM/2010 AR E DISMISSED. PRONOUNCED IN THE OPEN COURT TODAY ON 30 TH DAY OF NOVEMBER, 2011. SD/- SD/- (VIJAY PAL RAO ) (PRAMOD KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; 30 TH DAY OF NOVEMBER, 2011 . COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER , MUMBAI 4. DEPARTMENTAL REPRESENTATIVE, BENCH, MUMBAI 5. GUARD FILE TRUE COPY BY ORDER ETC. ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, MUMBAI