Punjab State Warehousing Corporation, Chandigarh V. ACIT, Chandigarh

ITA 771/CHANDI/2009

• Counselvise Citation: 77121514 RSA 2009
• Duration Of Justice: 3 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 18-12-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 20-07-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MANJEET SINGH
• Assessee Lawyers: T N SINGLA
• Keywords: Earning of tax free income; Additional evidence
• Section: 10; 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO.771/CHD/2009 ( ASSESSMENT YEARS : 2002-03) PUNJAB STATE WAREHOUSING CORPORATION, VS. THE A .C.I.T., SCO 74-75, SECTOR 17-B, CIRCLE 2(1), CHANDIGARH. CHANDIGARH. PAN: AABCP7825J AND ITA NO.891/CHD/2009 ( ASSESSMENT YEARS : 2002-03) THE A.C.I.T., VS. PUNJAB STATE WAREHOUSING CORPO RATION, CIRCLE 2(1), SCO 74-75, SECTOR 17-B, CHANDIGARH. CHANDIGARH. PAN: AAACV5824C (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI T.N.SINGLA DEPARTMENT BY : SHRI MANJEET SINGH, DR DATE OF HEARING : 18.12.2012 DATE OF PRONOUNCEMENT :27.12.2012 O R D E R PER SUSHMA CHOWLA, J.M. : THE CROSS APPEALS FILED BY THE ASSESSEE AND THE REV ENUE ARE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEAL S), CHANDIGARH DATED 12..06.2009 RELATING TO ASSESSMENT YEAR 2002- 03 AGAINST THE ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961. 2. THE CROSS APPEALS FILED BY THE ASSESSEE AND REVE NUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLI DATED ORDER FOR THE SAKE OF CONVENIENCE. 2 3. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THAT THE LEARNED C.I.T. (APPEALS) IS BAD AGAIN ST THE FACTS & LAW. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) HAS WRONGLY TREATED STORAGE CHARGES RECEIVED SEPARATELY FROM FCI AS INCOME FROM PROCUREMENT ACTIVITIES. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) HAS WRONGLY ALLOWED DEDUCTION OF TOTAL INTEREST CLAIMED IN THE PROFIT & LOSS ACCOUNT AMOUNTING TO RS.488.25 LACS FROM TH E EXEMPT INCOME WITHOUT FOLLOWING RULE 8-D READ WITH SECTION 14-A OF THE INCOME TAX ACT, 1961. 4. THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROUND O F APPEAL WHICH READS AS UNDER : 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX ( APPEALS) HAS WRONGLY MADE ADDITION ON ACCOUNT OF SALARY PAID TO CHOWKIDARS/HELPERS FOR THE PURPOSE OF GODOWNS AMOUN TING TO RS.465.17 LACS AS DIRECT EXPENSES AGAINST WAREHOUSI NG INCOME WITHOUT ALLOCATING BALANCE SALARY OF RS.1949.81 LAC S AS DIRECT EXPENSES FOR PROCUREMENT ACTIVITY OR OTHERWISE THES E SHOULD BE ALLOCATED PROPORTIONATELY LIKE OTHER COMMON EXPENSE S. 5. THE REVENUE HAS RAISED THE FOLLOWING GROUND OF A PPEAL : 1. THAT THE LD. CIT(AI HAS ERRED IN ACCEPTING THE DET AILS FILED BY THE ASSESSEE AND DIRECTING TO VERIFY THE COMPUTATIO N GIVEN BY THE ASSESSEE FOR WORKING THE INDIRECT EXPENSES BY ADMIT TING ADDITIONAL EVIDENCE DURING APPEAL IN CONTRAVENTION TO RULE 46A(3) OF THE INCOME-TAX RULES WHEN NO SUCH DETAILS WERE FILED DURING THE ASSESSMENT PROCEEDINGS. 2. IT NEEDS TO BE DETERMINED WHETHER RULE 8D CAN BE APPLIED RETROSPECTIVELY. 5. THE LEARNED A.R. FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT GROUND NO.1 RAISED BY THE ASSESSEE IS GENERAL IN NA TURE. FURTHER THE GROUND NO.3 AND ADDITIONAL GROUND OF APPEAL RAISED BY THE ASSESSEE ARE NOT PRESSED, HENCE GROUND NOS.1, 3 AND ADDITIONAL G ROUND OF APPEAL ARE DISMISSED. 6. IN RELATION TO GROUND NO.2 RAISED BY THE ASSESSE E, THE LEARNED D.R. FOR THE REVENUE POINTED OUT THAT THE ISSUE STANDS C OVERED AGAINST THE 3 ASSESSEE BY THE RATIO LAID DOWN BY THE HON'BLE PUNJ AB & HARYANA HIGH COURT IN CIT VS. M/S HARYANA WAREHOUSING CORPORATIO N IN ITA NO.590 OF 2010 DATE OF DECISION 9.2.2011 AND ALSO PUNJAB STATE COOPERATION SUPPLY & MARKETING FEDERATION LTD. VS. UNION OF IND IA [196 TAXMAN 401 (P&H)]. 7. THE ISSUE RAISED VIDE GROUND NO.2 RAISED BY THE ASSESSEE IS IN RELATION TO THE TREATMENT OF STORAGE CHARGES RECEIV ED FROM FCI. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS CA RRYING ON TWO SEPARATE ACTIVITIES I.E. ONE OF LETTING OF GODOWN AS WAREHOU SES TO GOVERNMENT OF INDIA AND THE SECOND ACTIVITY OF PROCUREMENT. THE ASSESSEE HAD REFLECTED THE INCOME FROM WAREHOUSING ACTIVITIES CARRIED ON B Y IT ON ACCOUNT OF THE GOODS OF GOVERNMENT OF INDIA KEPT IN ITS GODOWN . FURTHER THE ASSESSEE HAD SHOWN NOTIONAL INCOME FROM LETTING OUT ITS GODOWN TO FCI BIFURCATING THE CHARGES FOR WAREHOUSING INCLUDED IN THE TOTAL SALE PRICE MONEY DUE FROM FCI, ON ACCOUNT OF STORAGE CHARGES P AYABLE FOR KEEPING THE FOOD GRAINS IN ITS GODOWN. THE SAID FOOD GRAIN S WERE KEPT AS PART OF SALE TRANSACTION WITH FCI IN THE GODOWN OF THE ASSE SSEE. BOTH THE WAREHOUSING CHARGES AND THE ANNUAL LEASE RENTALS RE CEIVED BY THE ASSESSEE WERE CLAIMED TO BE EXEMPT UNDER SECTION 10 (29) OF THE ACT. THE ASSESSING OFFICER, HOWEVER, TREATED THE SAID ST ORAGE CHARGES RECEIVED FROM FCI BY THE ASSESSEE AS PART OF TRADIN G RECEIPTS AS THE SALE PRICE PAID BY FCI TO THE ASSESSEE WAS COMPOSITE TRA DING RECEIPT. THE GOVERNMENT OF INDIA HAD FIXED THE SALE RATES AT WHI CH FCI PURCHASED FOOD GRAINS FROM THE ASSESSEE, AFTER TAKING INTO AC COUNT VARIOUS FACTORS I.E. PURCHASE PRICE OF THE PRODUCE, PROCUREMENT EXP ENSES, INTEREST FACTOR AND ALSO STORAGE CHARGES PRICE FACTOR. THE SALE P RICE PAID BY FCI TO THE ASSESSEE WAS THUS A COMPOSITE TRADING RECEIPT. THE ASSESSEE HAD BIFURCATED THE SAID RECEIPT BEING ON ACCOUNT OF PRO CUREMENT 4 ACTIVITIES AND ALSO STORAGE CHARGES. THE ASSESSEE HAD DECLARED RS.2995.20 LACS AS STORAGE CHARGES. THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE AND TREATED THE SAME AS TRADI NG RECEIPT WHICH WAS CONFIRMED BY THE CIT (APPEALS). 8. WE FIND THAT THE ISSUE STANDS COVERED BY THE RAT IO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS. M/S HARYANA WAREHOUSING CORPORATION (SUPRA) WHEREIN IDENTICAL I SSUE WAS RAISED IN RESPECT OF TAXABILITY OF INCOME UNDER THE HEAD SU RPLUS FROM PROCUREMENT OF WHEAT ACCOUNT BY NOTIONALLY DEBITIN G THE SUM OF RS.1090.82 LACS AS STORAGE CHARGES AND CREDITING TH E SAME TO WAREHOUSING CHARGES. THE HON'BLE PUNJAB & HARYANA HIGH COURT DECIDED THE ISSUE AGAINST THE ASSESSEE BY FOLLOWING ITS EARLIER ORDER DATED 8.9.2010 IN ITA NO.157 OF 2005 IN CIT (APPEAL S), PANCHKULA VS. M/S HARYANA STATE COOPERATIVE SUPPLY & MARKETING FE DERATION LTD., PANCHKULA. THE ASSESSEE BEFORE US IS CARRYING ON S IMILAR ACTIVITIES AS CARRIED ON BY M/S HARYANA STATE COOPERATIVE SUPPLY & MARKETING FEDERATION LTD. AND FOLLOWING THE RATIO LAID DOWN B Y THE HON'BLE PUNJAB & HARYANA HIGH COURT, WE HOLD THAT THE NOTIONAL EXC LUSION OF STORAGE CHARGES OUT OF THE TOTAL RECEIPTS FROM FCI IS UNWAR RANTED AND THE TOTAL RECEIPTS OF FCI ARE TO BE TREATED AS INCOME FROM PR OCUREMENT ACTIVITIES CARRIED ON BY THE ASSESSEE, WHICH ARE TAXABLE IN TH E HANDS OF THE ASSESSEE. THUS GROUND NO.2 RAISED BY THE ASSESSEE IS DISMISSED. 9. THE REVENUE IS AGGRIEVED BY THE DIRECTIONS OF CI T (APPEALS) IN COMPUTING THE TAXABLE INCOME FROM PROCUREMENT ACTIV ITIES CARRIED ON BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. AS MENTIONED IN THE PARAS HEREINABOVE THE ASSESSEE HAD DECLARED TWO TYPES OF INCOME I.E. ON ACCOUNT OF WAREHOUSING AND PROCUREMENT ACTIVITIES. THE INCOME FROM WAREHOUSING WAS EXEMPT IN THE HANDS OF THE ASSESSEE UNDER SECTION 5 10(29) OF THE ACT. THE INCOME FROM PROCUREMENT ACT IVITIES WAS TAXABLE IN THE HANDS OF THE ASSESSEE. THE DISPUTE ARISING BEFORE THE LOWER AUTHORITIES WAS IN RELATION TO THE COMPUTATION OF I NCOME FROM PROCUREMENT ACTIVITIES I.E. THE EXPENSES INCURRED B Y THE ASSESSEE BEING RELATABLE TO BOTH THE ACTIVITIES CARRIED ON BY THE ASSESSEE, ONE OF WHICH IS EXEMPT AND THE SECOND ONE IS TAXABLE. ADMITTEDL Y THE DIRECT EXPENSES RELATABLE TO EACH OF THE ACTIVITIES IS TO BE ALLOWE D AS A DEDUCTION IN THE FIRST INSTANCE AND THE DISPUTE IS IN RESPECT OF BIF URCATION OF INDIRECT COMMON EXPENSES INCURRED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. IT IS AN ADMITTED POSITION THAT THE SAID INDIRECT EXPENSES ARE RELATABLE TO BOTH THE EXEMPT INCOME OF WAREHOUS ING AND TAXABLE INCOME OF PROCUREMENT ACTIVITIES. THE DISPUTE IS O NLY VIS--VIS THE RATIO TO BE APPLIED FOR BIFURCATING THE INDIRECT EXPENSES AGAINST THE TAXABLE INCOME AND THE EXEMPT INCOME. FROM THE PERUSAL OF THE ORDER OF THE CIT (APPEALS) IT IS APPARENT THAT THIS IS THE THIRD ROU ND OF PROCEEDINGS BEFORE THE TRIBUNAL. THE ASSESSING OFFICER IN THE FIRST R OUND HAD MADE CERTAIN CALCULATION WHICH WAS SET ASIDE BY THE TRIBUNAL VID E ORDER DATED 4.10.2005 WITH THE DIRECTIONS TO REDETERMINE THE TA XABLE INCOME IN ACCORDANCE WITH LAW. THE ASSESSMENT THEREAFTER WAS COMPLETED UNDER SECTION 143(3) OF THE ACT BY THE ASSESSING OFFICER AT AN ASSESSED INCOME OF RS.1607.01 LACS. THE CIT (APPEALS) IN THE SECON D ROUND OF APPELLATE PROCEEDINGS HELD THE ASSESSING OFFICER TO HAVE WRON GLY TREATED THE STORAGE CHARGES RECEIVED FROM FCI AS INCOME FROM PR OCUREMENT ACTIVITIES AND ALSO DIRECTED THE ASSESSING OFFICER TO APPORTIO N THE INDIRECT COMMON EXPENSES IN THE RATIO OF GROSS TURNOVER FOR BOTH TH E ACTIVITIES. 10. THE REVENUE FILED THE APPEAL BEFORE THE TRIBUNA L. THE TRIBUNAL VIDE ORDER DATED 26.2.2008 SET ASIDE THE ORDER OF C IT (APPEALS) AND RESTORED THE MATTER ON BOTH THE ISSUES TO THE ASSES SING OFFICER FOR FRESH 6 ADJUDICATION IN ACCORDANCE WITH LAW AND ALSO THE DI RECTIONS GIVEN IN THE EARLIER ORDERS. THE ASSESSING OFFICER IN THE PRESE NT ROUND OF PROCEEDINGS ASKED THE ASSESSEE TO FURNISH DETAILS A S REQUIRED UNDER RULE 8D TO WORK OUT THE EXPENDITURE IN RELATION TO NON T AXABLE INCOME. IN THE ABSENCE OF ANY DETAILS PROVIDED BY THE ASSESSEE THE ASSESSING OFFICER ADOPTED THE METHOD ADOPTED BY HIS PREDECESSOR FOR D ETERMINING THE AMOUNT OF EXPENDITURE IN RELATION TO INCOME NOT INC LUDED IN THE TOTAL INCOME . THE CIT (APPEALS) REJECTING THE PLEA OF THE ASSES SEE THAT THE PROVISIONS OF RULE 8D WERE NOT APPLICABLE, HELD THA T WITH REGARD TO APPORTIONMENT OF INTEREST EXPENDITURE THE ARGUMENT OF THE ASSESSEE THAT IT RELATES TO THE EXEMPT INCOME, WAS NOT RAISED IN ANY OF THE PROCEEDINGS AND SUCH ARGUMENT WAS THUS NOT ENTERTAINED BY THE C IT (APPEALS). HOWEVER, THE SALARY PAID TO CHOWKIDAR/HELPER AMOUNT ING TO RS.465.17 LACS WAS HELD TO BE DIRECT EXPENDITURE FOR EARNING EXEMPT INCOME AND IT WAS HELD THAT SUCH EXPENDITURE WAS REQUIRED TO BE E XCLUDED. IN RESPECT OF THE BALANCE EXPENDITURE THE COMPUTATION AS PER R ULE 8D(2)(III) OF INCOME TAX RULES WAS HELD TO BE METHOD FOR COMPUTIN G THE TAXABLE INCOME IN THE HANDS OF THE ASSESSEE. THE ASSESSING OFFICER WAS THUS DIRECTED TO COMPUTE THE TAXABLE INCOME. 11. THE REVENUE IS IN APPEAL AGAINST THE ABOVE SAID FINDINGS OF THE CIT (APPEALS). IT HAS BEEN FAIRLY ADMITTED BY THE LEARNED D.R. FOR THE REVENUE THAT THE ASSESSMENT IN QUESTION BEING ASSES SMENT YEAR 2002-03, PROVISIONS OF RULE 8D OF INCOME TAX RULES WERE NOT APPLICABLE. HOWEVER, IN RESPECT OF THE APPORTIONMENT OF INDIREC T EXPENSES INCLUDING INTEREST THE LEARNED D.R. FOR THE REVENUE PLACED RE LIANCE ON THE ORDER OF THE ASSESSING OFFICER. 12. THE LEARNED A.R. FOR THE ASSESSEE ADMITTED THAT THOUGH THE PROVISIONS OF RULE 8D WERE NOT APPLICABLE BUT A FOR MULA HAD TO BE 7 ADOPTED FOR APPORTIONMENT OF COMMON INDIRECT EXPENS ES TO BE ATTRIBUTED TO THE TAXABLE AND EXEMPT INCOME. THE LEARNED A.R. FOR THE ASSESSEE PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HON'B LE SUPREME COURT IN CONSOLIDATED COFFEE LTD. VS. STATE OF KARNATAKA [24 8 ITR 432(SC)] WHEREIN THE ASSESSEE WAS DERIVING INCOME FROM AGRIC ULTURAL AS WELL AS NON AGRICULTURAL ACTIVITIES AND IN THE ABSENCE OF R ELEVANT PARTICULARS, THE APPORTIONMENT OF HEAD OFFICE EXPENSES ON THE BASIS OF GROSS RECEIPTS FROM AGRICULTURE AND NON AGRICULTURE ACTIVITIES WAS HELD TO BE JUSTIFIED. 13. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE HAS SHOWN INCOME FROM TWO SOURCES, ONE OF WHICH WAS EXEMPT FROM TAX AND THE OTHER SOURCE OF INCOME WAS TAXABLE IN THE HANDS OF THE ASSESSEE. THE DIRECT EXPENSES INCURRED BY THE ASSE SSEE FOR EARNING BOTH THE TAXABLE AND NON TAXABLE INCOME HAVE BEEN BIFURC ATED BY THE ASSESSEE AND HAD BEEN SO ACCEPTED BY THE AUTHORITIES BELOW. THE ONLY DISPUTE IS IN RESPECT OF THE INDIRECT COMMON EXPENSES INCURRED BY THE ASSESSEE INCLUDING THE BANK INTEREST PAID BY THE ASSESSEE ON VARIOUS LOANS RAISED BY IT. THE SAID BIFURCATION OF INDIRECT COMMON EXP ENSES IS THE NEED OF THE HOUR IN ORDER TO COMPUTE THE TAXABLE INCOME IN THE HANDS OF THE ASSESSEE. THE PROVISIONS OF RULE 8D OF INCOME TAX RULE CANNOT BE APPLIED TO THE CAPTIONED ASSESSMENT YEAR BEING ASSE SSMENT YEAR 2002-03 AS THE SAID PROVISIONS OF RULE 8D ARE NOT RETROSPEC TIVE IN NATURE, AS HELD BY THE HON'BLE BOMBAY HIGH COURT IN M/S GODREJ & BO YCEE VS. CIT [234 CTR 1 (BOM)]. SO IN THIS REGARD WE FIND NO ME RIT IN THE ORDER OF CIT (APPEALS) IN DIRECTING THE ASSESSING OFFICER TO ADOPT PROVISIONS OF RULE 8D(III) OF THE INCOME TAX RULES IN ORDER TO DE TERMINE THE TAXABLE INCOME IN THE HANDS OF THE ASSESSEE. WE REVERSE TH E SAID DIRECTIONS OF THE CIT (APPEALS). HOWEVER, THE ISSUE REMAINS IS C OMPUTATION OF TAXABLE INCOME FROM PROCUREMENT ACTIVITIES IN THE H ANDS OF THE ASSESSEE. 8 THE CLAIM OF THE ASSESSEE IS THAT THE GROSS RECEIPT S FROM WAREHOUSING AS COMPUTED BY THE ASSESSING OFFICER AT PAGES 3 AND 4 OF THE ASSESSMENT ORDER I.E. RS.10385.79 LACS WERE CORRECT, AGAINST W HICH DIRECT EXPENSES OF RS.2626.83 HAS BEEN WORKED OUT BY THE ASSESSING OFFICER. WHILE COMPUTING THE SAID DIRECT EXPENSES INTEREST ON LOAN S OF RS.488.25 LACS HAS BEEN CONSIDERED AS RELATABLE TO WAREHOUSING INC OME, AND THE BALANCE PROFIT FROM WAREHOUSING ACTIVITIES WAS RS.7758.96 L ACS. THE CIT (APPEALS) HAD ASKED THE ASSESSEE TO COMPUTE THE SAL ARY PAID TO CHOWKIDAR, WHICH WAS RELATABLE TO THE WAREHOUSING A CTIVITIES. THE ASSESSEE HAD COMPUTED THE SAME AT RS.465 LACS AND W E ARE IN CONFORMITY WITH THE ORDER OF THE CIT (APPEALS) IN INCLUDING TH E SAID AS DIRECT EXPENSES OF WAREHOUSING I.E. TOTALING TO RS.3092 LA CS (RS.2627 LACS PLUS RS.465 LACS). THE TOTAL INDIRECT EXPENSES INCURRED BY THE ASSESSEE FOR BOTH THE ACTIVITIES IS TABULATED BY THE ASSESSING O FFICER AT PAGE 4 OF THE ASSESSMENT ORDER AND THE SAME TOTALS TO RS.5391.53 LACS OUT OF WHICH SUM OF RS.465 LACS IS TO BE EXCLUDED AND THE BALANC E EXPENDITURE WOULD BE RS.4926 LACS. THE GROSS PROFIT FROM WAREHOUSING ACTIVITIES AFTER THE DIRECT EXPENDITURE HAS BEEN COMPUTED BY THE ASSESSI NG OFFICER AT RS.7759 LACS LESS RS.465 LACS ON ACCOUNT OF SALARY PAID TO CHOWKIDAR, COMES TO RS.7293 LACS. THE GROSS PROFIT FROM PROCU REMENT I.E. GROSS RECEIPTS OF RS.172435 LACS LESS DIRECT EXPENSES OF RS.169824 LACS IS RS.2611 LACS. THE ISSUE IS NOW RESTRICTED TO APPOR TIONMENT OF INDIRECT EXPENSES TOTALING RS.4926 LACS (RS.5391 MINUS RS.46 5 LACS) TO THE GROSS PROFIT FROM WAREHOUSING ACTIVITIES AT RS.7293 LACS AND GROSS PROFIT FROM PROCUREMENT I.E. TAXABLE INCOME AT RS.2611 LACS. T HE ASSESSING OFFICER ON THE BASIS OF GROSS PROFIT HAD WORKED OUT THE PRO PORTIONATE INDIRECT EXPENSES CHARGEABLE TO THE WAREHOUSING INCOME AT RS .3627.35 LACS. HOWEVER, THE ASSESSEE ON THE BASIS OF TURNOVER OF E ACH OF THE ACTIVITIES HAS COMPUTED THE PROPORTIONATE INDIRECT EXPENSES CH ARGEABLE TO 9 WAREHOUSING INCOME AT RS.279.81 LACS. THE TOTAL IN DIRECT EXPENSES AS POINTED OUT BY US IN THE ABOVE PARAS WERE RS.4926 L ACS AND IF OUT OF THE SAME RS.279.81 LACS WAS ATTRIBUTED TO THE WAREHOUSI NG INCOME, THE NET PROFIT FROM PROCUREMENT WOULD BE IN LOSSES. 14. WE FIND THAT SIMILAR ISSUE OF COMPUTATION OF IN COME FROM PROCUREMENT ACTIVITIES TAXABLE IN THE HANDS OF THE ASSESSEE AROSE BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NOS410 T O 412 & 414/CHANDI/2006 RELATING TO ASSESSMENT YEARS 1994-9 5 TO 1996-97 & 1998-99 ALONGWITH THE APPEAL FILED BY THE REVENUE I N ITA NOS.457 TO 459 & 461/CHANDI/2006 RELATING TO ASSESSMENT YEARS 1994-95 TO 1996-97 & 1998-99. COPY OF THE ORDER OF THE TRIBUNAL IS PA LCED AT PAGES 66 TO 79 OF THE PAPER BOOK FILED BY THE ASSESSEE. SIMILAR I SSUE OF MANNER COMPUTATION OF TAXABLE INCOME IN THE HANDS OF THE A SSESSEE AROSE BEFORE THE TRIBUNAL. THE TRIBUNAL AT PAGES 4 TO 6 OF THE ORDER HAS TABULATED YEAR-WISE INCOME FROM PROCUREMENT ACTIVITIES I.E. A FTER DEBITING THE EXPENDITURE ON THE BASIS OF GROSS PROFIT AND ON THE BASIS OF TURNOVER/RECEIPTS AS COMPUTED BY THE CIT (APPEALS), THERE WERE LOSSES. THE TRIBUNAL OBSERVED THAT THE FORMULA ADOPTED BY T HE ASSESSING OFFICER I.E. GROSS PROFIT FOR THE PURPOSE OF DETERMINING TH E PROPORTIONATE COMMON EXPENSES ATTRIBUTABLE TO TAXABLE INCOME, MAY NOT BE A FLAWLESS FORMULA. IT WAS FURTHER OBSERVED BY THE TRIBUNAL T HAT HOWEVER, WE FIND THAT THE CIT (APPEALS) AFTER HAVING ACCEPTED THE FO RMULA CANVASSED ON BEHALF OF THE ASSESSEE ON WORKING OUT THE PROPORTIO NATE COMMON EXPENSES ATTRIBUTABLE TO TAXABLE INCOME ON THE BASI S OF TURNOVER IN RESPECT OF TAXABLE AND NON TAXABLE ACTIVITIES HAS O VERLOOKED THE FACT. BY THIS METHOD THE ASSESSEE WAS SUPPOSED TO HAVE IN CURRED HEAVY LOSSES IN THE ACTIVITIES OF THE BUSINESS GENERATING TAXABL E INCOME. CONSEQUENTLY, THE TRIBUNAL REJECTED THE METHOD ADOP TED BY THE CIT 10 (APPEALS). FURTHER IT WAS ALSO OBSERVED BY THE TRI BUNAL IN CONNECTION WITH CARRY FORWARD OF SUCH LOSSES, THAT THE SAME HA S BEEN REJECTED BY THE CIT (APPEALS) ON THE PLEADING OF THE ASSESSEE THAT IT WAS CARRYING ON THE ACTIVITIES OF PROCUREMENT OF FOOD GRAINS ON NO PROF IT NO LOSS BASIS. THE TRIBUNAL VIDE PARA 7 HELD AS UNDER: 7. THEREFORE, WE FIND THAT BOTH THE METHODS ONE ADOPTED BY THE A.O. AND ANOTHER BY THE CIT(A) ARE NOT CAPABLE OF GIVING A REASONABLE BASIS FOR DETERMINATION OF THE TAXABLE INCOME. IN BOTH THE METHODS WE HAVE FOUND POSSIBILITY OF DISTORTION IN CERTAIN CIRCUMSTANCES. THEREFORE A SINGLE METHOD MAY NOT BE APPLICABLE IN ALL THE CASES FOR DETERMINATION OF PROPORTIONATE EXPENDITURE FOR THE PURPOSE OF APPORTIONMENT. WE HARDLY NEED TO MENTION THAT THERE CANNOT BE A SCIENTIFIC METHOD FOR EVOLVING A FORMULA FOR SUCH DETERMINATION. 15. THEREAFTER THE TRIBUNAL REFERRED TO THE PROVISI ONS OF SECTION 14A OF THE ACT AND WHILE ADJUDICATING THE GROUND OF APPEAL RAISED BY THE ASSESSEE REGARDING THE PROHIBITION FOR INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT THE TRIBUNAL HELD THAT ALL THE ABOVE WHERE APPEALS AGAINST ORIGINAL ASSESSMENTS WERE FILED BEFORE 11.5.2001, I N VIEW OF THE PROVISIONS OF SECTION 14A OF THE ACT, THE ASSESSING OFFICER WAS NOT EMPOWERED TO INVOKE PROVISIONS OF SECTION 14A OF TH E ACT. IN VIEW THEREOF, THE CONCLUSION OF THE TRIBUNAL VIDE PARA 1 5 WAS AS UNDER: 15. IN THE LIGHT OF OUR ABOVE DECISION, THERE WOUL D BE NEITHER ANY PROFIT NOR ANY LOSS ASSESSABLE TO TAX BY INVOKING OF SECTION 14A. THEREFORE, THE GROUND OF APPEAL RAISED BY THE ASSESSEE AGAINST THE DIRECTIONS OF THE COMMISSIONER OF INCOME-TAX (A) FOR IGNORING THE DEFICIT HAS BECOME INFRUCTUOUS AS OF NOW. 16. THE ISSUE RAISED IN THE PRESENT APPEAL IS IDENT ICAL TO THE ISSUE RAISED BEFORE THE TRIBUNAL IN THE EARLIER YEARS IN ASSESSEES OWN CASE FOR THE IMPUGNED ASSESSMENT YEARS AS MENTIONED ABOVE AN D THE PROVISIONS OF SECTION 14A OF THE ACT ARE NOT TO BE APPLIED IN ORD ER TO COMPUTE THE 11 EXPENSES NOT ALLOWABLE WHICH ARE ATTRIBUTABLE TO TH E EARNING OF NON TAXABLE INCOME. HOWEVER, IN ORDER TO DETERMINE THE TAXABLE INCOME IN THE HANDS OF THE ASSESSEE, THE COMMON EXPENSES ARE TO BE APPORTIONED BETWEEN TAXABLE AND NON TAXABLE INCOME. IN CASE FO RMULA CANVASSED BY THE ASSESSEE IS ACCEPTED I.E. THE TOTAL EXPENDITURE SHOULD BE ATTRIBUTED TO EACH OF THE ACTIVITIES ON THE BASIS OF THE TURNOVER , THERE WOULD BE LOSSES IN THE PROCUREMENT ACTIVITIES. AS HELD BY THE TRIB UNAL (SUPRA) IN THE CASE OF THE ASSESSEE ITSELF, SUCH LOSSES CANNOT BE ADJUSTED AND CARRY FORWARDED IN THE HANDS OF THE ASSESSEE. FOLLOWING T HE SAME WE DIRECT THE ASSESSING OFFICER TO ADOPT THE INCOME OF THE ASSESS EE AT NIL IN THE CAPTIONED ASSESSMENT YEARS AND NO LOSSES ARE TO BE ADJUSTED OR CARRIED FORWARD. THE GROUND OF APPEAL RAISED BY THE REVENU E IS THUS PARTLY ALLOWED. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED AND THAT OF THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH DAY OF DECEMBER, 2012. SD/- SD/- (MEHAR SINGH) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 27 TH DECEMBER, 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 12