VIJAY INDUSTRIES, Alwar V. ACIT, Alwar

ITA 825/JPR/2011

• Counselvise Citation: 82523114 RSA 2011
• Duration Of Justice: 3 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 26-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Earning of tax free income; Wrong claim; Unabsorbed depreciation
• Section: 14A; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH : JAIPUR BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.787/JP/2011 (ASSESSMENT YEAR :2007-08) ITA NO.825/JP/2011 (ASSESSMENT YEAR :2008-09) M/S. VIJAY INDUSTRIES, VS. ACIT, CIRCLE 1, NASIRABAD ROAD, KHAIRTHAL, ALWAR. ALWAR (RAJASTHAN). (PAN : AAAFV7282R) ITA NO.828/JP/2011 (ASSESSMENT YEAR :2007-08) ITA NO.935/JP/2011 (ASSESSMENT YEAR :2008-09) ACIT, CIRCLE 1, VS. M/S. VIJAY INDUSTRIES, ALWAR. CINEMA ROAD, KHAIRTHAL, ALWAR (RAJASTHAN). (PAN : AAAFV7282R) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI P.C. PARWAL, CA REVENUE BY : SHRI RAJESH OJHA, ADDL.CIT DATE OF HEARING : 25.11.2014 DATE OF PRONOUNACEMENT : 04.12.2014 2 ITA NO.787 & 825/JP/2011 ITA NO.828 & 935/JP/2011 O R D E R PER B.C. MEENA, ACCOUNTANT MEMBER : THE APPEALS, BEING ITA NO.787/JP/2011 FILED BY THE ASSESSEE AND ITA NO.828/JP/2011 FILED BY THE REVENUE, ARE CROSS APPE ALS AND EMANATE FROM THE ORDER OF THE CIT (APPEALS), ALWAR DATED 11.07.2011 FOR THE ASSESSMENT YEAR 2007-08. THE CROSS APPEALS IN THE ASSESSMENT YEAR 2008-09 ARE ITA NO.825/JP/2011 FILED BY THE ASSESSEE AND ITA NO.935 /JP/2011 FILED BY THE REVENUE AND EMANATE FROM THE ORDER OF THE CIT (APPE ALS), ALWAR DATED 26.08.2011. SINCE THE COMMON GROUNDS OF APPEAL ARE INVOLVED IN BOTH THE ASSESSMENT YEARS, THEREFORE, ALL THESE APPEALS ARE BEING DISPOSED OFF BY THIS COMMON ORDER. ITA NO.828/JP/2011 & 787/JP/2011 (ASSESSMENT YEAR 2 007-08) 2. IN THE GROUND NO.1 OF THE REVENUES APPEAL (ITA NO.828/JP/2011), THE ISSUE IS WITH REGARD TO THE DELETION OF THE TRADING ADDITION OF RS.15,00,000/- AFTER RESORTING THE PROVISION OF SECTION 145(3) OF THE AC T. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING & MANUFACTURING OF MUSTARD OIL AND OIL CAKE . FOR THE YEAR UNDER CONSIDERATION, THE GROSS PROFIT DECLARED BY THE ASS ESSEE WAS RS.285.15 LACS ON A TURNOVER OF RS.3542.55 LACS AND THE GROSS PROFIT RA TE WAS 8.05%. IT WAS CLAIMED BEFORE US THAT IN THE IMMEDIATELY PRECEDING ASSESSM ENT YEAR, GROSS PROFIT RATE 3 ITA NO.787 & 825/JP/2011 ITA NO.828 & 935/JP/2011 WAS 6.85%. THE DISALLOWANCE WAS MADE ON THE BASIS OF REASONS RECORDED IN THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2006-07 AND AL SO FOR THE REASONS RECORDED IN ITAT ORDER FOR THE ASSESSMENT YEAR 2003-04 REGAR DING NON-APPLICABILITY OF PROVISIONS OF SECTION 145(3) OF THE INCOME-TAX ACT, 1961 WAS BASED ON FALSE CLAIM OF ASSESSEE THAT IT HAS MAINTAINED LABORATORY TEST REPORTS FOR EACH LOT OF SEEDS PURCHASED. THE CIT (A) DELETED THE ADDITION BY HOLDING AS UNDER :- AFTER DUE CONSIDERATION & HEARING THE ASSESSEE AT GREAT LENGTH, IT IS SEEN, THAT THE G.P. RATE FOR THE ASSESSMENT Y EAR UNDER CONSIDERATION IS MUCH HIGHER & BETTER THAN A.Y. 06- 07. IN A.Y. 06-07, G.P. RATE WAS 6.85% WHEREAS THE CORRESPONDIN G G.P. RATE FOR A.Y. 07-08 IS 8.05%. THE AO WHILE MAKING T HE TRADING ADDITION OF RS. 15 LACS HAS RELIED UPON THE ASSESSM ENT ORDER FOR A.Y. 06-07. DURING THE APPELLATE PROCEEDINGS, MY AT TENTION WAS DRAWN TO THE ITAT BENCH JAIPUR APPELLATE ORDER FOR A.Y. 05-06 VIDE ITA NO. 70/JP/2010 DT. 30.07.2010 WHEREIN IT W AS OBSERVED AS UNDER:- AFTER CONSIDERING THE RIVAL CONTENTIONS OF BOTH TH E PARTIES & THE DECISION OF JURISDICTIONAL HIGH COURT IN CASE O F CIT VS. GOTAN LIME KHANIJ UDYOG 256 ITR 243 PLACED BY LD. A R, WE ARE OF THE VIEW THAT AO HAS FAILED TO MAKE OUT THE CASE FOR ADDITION OF RS. 7.50 LACS & LD. HONBLE CIT(A), ALW AR HAS WITHOUT GIVING THE CONCRETE FINDINGS RESTRICTED THE SAME TO RS. 1.50 LACS. THEREFORE, THE ADDITION RESTRICTED BY LD . HONBLE CIT(A) TO RS. 1.50 LACS IS HEREBY DELETED. THUS, TH E SOLITARY GROUND OF THE REVENUE IS DISMISSED & THAT OF THE AS SESSEE IS ALLOWED. HONBLE ITAT HAS ADDRESSED ITSELF TO THE ISSUE OF L AB REPORT IN A.Y. 05-06 IN PARA NO. 3.4, 3.5 & 3.6 IN ITA NO. 95 4/JP/10 DT. 08.04.2011 IN CASE OF SAURABH AGROTECH (P.) LTD. & AFTER CONSIDERING THE RIVAL CONTENTIONS OF BOTH THE PARTI ES HAVE DELETED THE ENTIRE TRADING ADDITION. 4 ITA NO.787 & 825/JP/2011 ITA NO.828 & 935/JP/2011 THUS, RESPECTFULLY FOLLOWING THE ABOVE ORDERS OF IT AT JAIPUR BENCH, JAIPUR FOR A.Y. 05-06 IN ASSESSEES CASE AS WELL AS IN CASE OF SAURABH AGROTECH (P.) LTD., ALWAR, WHICH AR E FOUND FULLY APPLICABLE IN CURRENT A.Y. ALSO IN AS MUCH AS THE FACTS OF THE CASE ARE SIMILAR, I HAVE NO HESITATION TO HOLD THAT AO WAS NOT JUSTIFIED IN INVOKING PROVISIONS OF SECTION 145 (3) OF THE I.T. ACT, 1961 & ALSO NOT JUSTIFIED IN MAKING THE TRADIN G ADDITION OF RS. 15 LACS. THE SAME IS, THEREFORE, DELETED. 4. LD. DR RELIED ON THE ORDER OF THE ASSESSING OFFI CER. 5. LD. AR SUBMITTED THAT THE ADDITION WAS MADE ON THE BASIS OF FINDINGS RECORDED IN ASSESSMENT ORDER FOR AY 2006-07 FOR INV OKING THE PROVISIONS OF WHICH SECTION 145(3) AND SUCH ADDITION HAS BEEN DEL ETED BY ITAT IN ITA NOS.902 & 952/JP/2010 IN ITS ORDER DATED 23.09.2011 . THE RELEVANT PARA IS 3.5 WHICH IS RECORDED AS UNDER :- 3.5 WE HAVE HEARD BOTH THE PARTIES. IN THE IMMEDI ATELY PRECEDING YEAR, THE AO MADE THE TRADING ADDITION OF RS.7.50 LACS WHICH WAS RESTRICTED TO RS.1.50 LACS BY THE LD . CIT(A). THE TRIBUNAL VIDE ORDER DATED 30.07.2010 DELETED TH E TRADING ADDITION AFTER OBSERVING AS UNDER :- 6. AFTER CONSIDERING THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND THE DECISION OF JURISDICTIONAL HIGH COU RT IN THE CASE OF CIT VS. GOTAN LIME KHANIJ UDYOG, 2567 ITR 243, PLACED BY THE LD. AR, WE ARE OF THE VIEW T HAT THE AO HAS FAILED TO MAKE OUT THE CASE FOR ADDITION OF RS.7.50 LACS AND THE LD. CIT (A) HAS WITHOUT GIVING THE CONCRETE FINDINGS RESTRICTED THE SAME TO RS.150 LAC S. THEREFORE, THE ADDITION RESTRICTED BY LD. CIT (A) T O RS.1.50 LACS IS HEREBY DELETED. THUS THE SOLITARY GROUND OF REVENUE IS DISMISSED AND THAT OF THE ASSESSEE IS ALLOWED. 5 ITA NO.787 & 825/JP/2011 ITA NO.828 & 935/JP/2011 SINCE THE FACTS ARE SIMILAR TO THE FACTS OF THE PRE CEDING YEAR AND, THEREFORE, FOLLOWING THE ORDER OF THE TRIBUNAL IN T HE CASE OF THE ASSESSEE, WE HOLD THAT IT WAS NOT A CASE OF MAKING ANY TRADING ADDITION. IT IS NOTICED THAT THE TRADING RESULTS D ECLARED DURING THE YEAR ARE BETTER. THUS, THE TRADING ADDITION AS CONFIRMED BY THE LD. CIT (A) IS DELETED. THE GROUND NO.3 OF THE ASSESSEE IS ALLOWED AND GROUND NO.1 OF THE REVENUE IS DISMISSED . LD. AR SUBMITTED THAT THE BOOKS OF ACCOUNTS HAVE BE EN ACCEPTED IN ASSESSMENT YEAR 2006-07. IT WAS ALSO PLEADED THAT IN THE ASSE SSMENT YEAR 2003-04, THERE IS NO FINDING OF ITAT THAT ASSESSEE HAS MAINTAINED LAB ORATORY TEST REPORTS FOR EACH LOT OF SEED PURCHASED ON THE BASIS OF WHICH PAYMENT S WERE MADE TO THE SUPPLIER. IT WAS ONLY MENTIONED THAT EVERY LOT OF SEED PURCHA SED CONTAINS DIFFERENT QUANTITY OF OIL AND AFTER MAKING LABORATORY TEST RE PORT, THE PAYMENT WAS MADE TO THE SUPPLIER. HE SUBMITTED THAT THIS ENTIRE TRADING ADDITION REQUIRES TO BE DELETED. IT WAS ALSO SUBMITTED THAT GROSS PROFIT RATE WAS BE TTER THAN THE IMMEDIATELY PRECEDING YEAR AS IT WAS 8.05% IN THE YEAR UNDER CO NSIDERATION AND 6.85% IN THE IMMEDIATELY PRECEDING YEAR. HE PLEADED THAT THE CI T (A) HAS RIGHTLY DELETED THE ADDITION AND PLEADED TO UPHOLD THE ORDER OF THE CIT (A). 6. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. WE HAVE ALSO GONE THROUGH THE VARIOUS CASE LAWS RELIED UPON. IN ASSESSEES O WN CASE FOR ASSESSMENT YEAR 2006-07, WHILE DECIDING ITA NO.902 & 952/JP/2010 DA TED 23.09.2011, ITAT UPHELD THE ORDER OF THE CIT (A) FOR DELETING THE AD DITION. RESPECTFULLY 6 ITA NO.787 & 825/JP/2011 ITA NO.828 & 935/JP/2011 FOLLOWING THE AFORESAID DECISION OF THE ITAT, WE FI ND NO MERITS IN THIS GROUND OF REVENUES APPEAL AND THIS GROUND IS DISMISSED. 7. GROUND NO.2 IN REVENUES APPEAL (ITA NO.828/JP/2 011) IS WITH REGARD TO THE DELETION OF ADDITION OF RS.11,26,190/- MADE ON ACCOUNT OF INTEREST AND OTHER EXPENSES. GROUND NO.1 AND SUB-GROUNDS NO.1.1 TO 1. 5 OF ASSESSEES APPEAL (ITA NO.787/JP/2011) ARE ALSO RELATED TO THIS ADDIT ION. THEREFORE, BOTH THE GROUNDS ARE DISPOSED OFF TOGETHER. 8. THE ASSESSEE HAS SHOWN INVESTMENTS IN THE BALANC E SHEET FOR THE YEAR UNDER CONSIDERATION AS BUILDING PURCHASED AT HANUMA N NAGAR, JAIPUR AT RS.64,65,000/- AND SHARES IN INDIAN COMPANIES I.E. GROUP COMPANIES RS.18,77,160/-. THE AO ON THE BASIS OF FACTS DISCU SSED IN ASSESSMENT ORDER FOR AY 2006-07 DISALLOWED 13.5% OF THE FUNDS DIVERTED B Y INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT. THE AO OBSERVED THAT AS SESSEE DO NOT HAVE INTEREST FREE FUNDS AND THAT EXPENSES WHICH ARE ATTRIBUTABLE TO THE CURRENT YEARS TAXABLE INCOME ARE ONLY ALLOWABLE AND THUS INTEREST AS WELL AS OTHER ESTABLISHMENT COST UP TO THE PROPORTIONATE EXTENT TO THE FUNDS DIVERTE D IS REQUIRED TO BE DISALLOWED. THE CIT (A) HELD THAT AO WAS NOT JUSTIFIED IN INVOK ING THE PROVISIONS OF SECTION 14A FOR THE INVESTMENT OF RS.64,65,000/- IN THE HOU SE PROPERTY AT HANUMAN NAGAR, JAIPUR. HOWEVER, THE CIT (A) DIRECTED TO RE STRICT THE DISALLOWANCE WITH REGARD TO INVESTMENT IN SHARES OF RS.18,77,160/- FO R THE REASONS THAT THE 7 ITA NO.787 & 825/JP/2011 ITA NO.828 & 935/JP/2011 DISALLOWANCE FOR INVESTMENT IN SHARES SHOULD HAVE B EEN MADE IN ACCORDANCE WITH THE PROVISION OF RULE 8D OF THE I.T. RULES WHI CH THE AO HAD NOT MADE. THEREFORE, IT IS DIRECTED THAT THE DISALLOWANCE FOR INVESTMENT IN SHARES BE MADE U/S 14A OF THE ACT AFTER WORKING OUT THE AMOUNT OF DISALLOWANCE BY INVOKING PROVISION OF RULE 8D OF I.T. RULES, 1962. 9. ON THIS ISSUE, LD. DR RELIED ON THE ORDER OF THE AO. HOWEVER, LD. AR SUBMITTED THAT ON THE INVESTMENT MADE IN THE BUILDI NG AT HANUMAN NAGAR, JAIPUR, THE ASSESSEE HAS DECLARED RENTAL INCOME OF RS.2,16,000/- WHICH HAS BEEN OFFERED FOR TAX. THUS, THIS INVESTMENT WAS YIELDING TAXABLE INCOME. THEREFORE, SECTION 14A OF THE ACT CANNOT BE INVOKED IN RESPECT OF THIS INVESTMENT. IT WAS ALSO PLEADED THAT ASSESSEE HAS RECEIVED INTEREST FR EE ADVANCE OF RS.50 LACS FROM M/S VIJAY SOLVEX LTD. IT WAS ALSO PLEADED THAT IN THE ASSESSMENT YEAR 2006-07 ALSO, ITAT HAS HELD THAT AO WAS NOT JUSTIFIED IN IN VOKING PROVISIONS OF SECTION 14A OF THE ACT IN HOUSE PROPERTY AT HANUMAN NAGAR, JAIPUR IN DELETING THE DISALLOWANCE. WITH REGARD TO INVESTMENT IN SHARES, LD. AR SUBMITTED THAT RULE 8D IS NOT APPLICABLE TO THE ASSESSMENT YEAR 2007-08 AS HELD BY HONBLE BOMBAY HIGH COURT IN GODREJ & BOYCE MANUFACTURING C O. LTD VS. DCIT REPORTED IN 328 ITR 81 AND THE HONBLE HIGH COURT H AS HELD THAT RULE 8D IS HELD TO BE APPLICABLE FROM ASSESSMENT YEAR 2008-09 ONLY. HE PLEADED THAT IN THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F CIT VS. WALFORT SHARE & 8 ITA NO.787 & 825/JP/2011 ITA NO.828 & 935/JP/2011 STOCK BROKERS PVT. LTD. REPORTED IN 326 ITR 1, THE HONBLE SUPREME COURT OBSERVED THAT FOR ATTRACTION OF SECTION 14A, THERE HAS TO BE A PROXIMATE CAUSE FOR DISALLOWANCE, WHICH IS ITS RELATIONSHIP WITH THE TA X EXEMPT INCOME. IT WAS ALSO PLEADED THAT WHILE DECIDING THE APPEAL OF THE ASSES SEE FOR THE ASSESSMENT YEAR 2006-07, ITAT, AFTER CONSIDERING THE DECISION OF HO NBLE PUNJAB & HARYANA HIGH COURT, HAS DIRECTED THAT AO SHOULD ESTABLISH T HE NEXUS BETWEEN THE BORROWED FUNDS AND INVESTMENT IN SHARES AND WILL AC CORDINGLY DISALLOW THE INTEREST. IT WAS PLEADED THAT FOR THE YEAR UNDER C ONSIDERATION, THERE WAS NO NEXUS BETWEEN THE BORROWED FUNDS & INVESTMENT IN SH ARES. HE RELIED ON THE VARIOUS CASE LAWS WHICH ARE AS UNDER :- (I) MINDA INVESTMENT LTD. VS. DCIT 52 DTR 001 (DEL.) (T RIB.) DT. 13.10.2010 A.Y. 06-07 (II) DCIT VS. MAHARASHTRA SEAMLESS LTD. 52 DTR 005 (DEL. )(TRIB.) DT. 16.12.2010 A.Y. 03-04 (III) CIT VS. METALMAN AUTO (P.) LTD. 199 TAXMAN149 (PUNJ &HAR.) (MAG.) DT. 11.02.2011 A.Y. 04-05 (IV) CIT VS. GUJARAT POWER CORPORATION LTD. ORDER DT. 28 .03.2011 (V) G.D. METSTEEL (P.) (LTD.) VS. ACIT 64 DTR 161 (MUM. ) (TRIB.) DT. 08.04.2011 A.Y. 05-06 (VI) BUNGE AGRIBUSINESS (INDIA) (P.) LTD. VS. DCIT 132 I TD 549 (MUM.) (TRIB.) DT. 22.06.2011 A.Y. 04-05 (VII) VISEN INDUSTRIES LTD. VS. ACIT 136 ITD 309 (MUM.)(T M) DT. 15.09.2011 A.Y. 07-08 9 ITA NO.787 & 825/JP/2011 ITA NO.828 & 935/JP/2011 (VIII) BNP PARIBAS SA VS. DDIT (INTERNATIONAL TAXATION) 13 7 ITD 322 (MUM.)(TRIB.) DT. 20.06.2012 A.Y. 02-03 10. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. AFT ER HEARING BOTH THE SIDES, WE FIND THAT CIT (A) HAS RIGHTLY DELETED THE ADDITI ON FOR WRONGLY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT IN RESPECT OF THE INVESTMENT MADE IN THE PROPERTY AT HANUMAN NAGAR, JAIPUR. THE ASSESSEE HA S OFFERED THE RENTAL INCOME OF RS.2,16,000/- FROM THE SAID PROPERTY, THEREFORE, THE INVESTMENT IN THE SAID PROPERTY CANNOT COME UNDER THE PROVISIONS OF SECTIO N 14A OF THE ACT. 10.1 HOWEVER, WITH RESPECT TO THE INVESTMENT IN SHA RES OF INDIAN COMPANIES (GROUP COMPANIES) OF RS.18,77,160/-. WE FIND THAT T HE ITAT HAS GIVEN A DIRECTION TO THE AO TO INVOKE THE PROVISIONS OF SEC TION 14A ONLY IF THE RELATION OF EXPENSES OF EXEMPT INCOME IS ESTABLISHED. AFTER CONSIDERING PLEADINGS OF BOTH THE SIDES AND CASE LAWS, WE RESTORE THIS ISSUE TO THE FILE OF THE AO TO DECIDE AFRESH AS PER LAW. 10.2 GROUND NO.2 OF THE REVENUES APPEAL IS DISMISS ED AND THE GROUND NO.1 AND SUB-GROUNDS NO.1.1 TO 1.5 OF THE ASSESSEES APP EAL ARE ALLOWED FOR STATISTICAL PURPOSES . 11. GROUND NO.3 OF REVENUES APPEAL (ITA NO.828/JP/ 2011) IS AGAINST REFERRING THE MATTER BACK TO AO TO DECIDE AFRESH WI TH RESPECT TO THE RENTAL INCOME. THE ASSESSEE HAS ALSO CHALLENGED THIS ISSU E VIDE GROUND NO.2 IN ITS APPEAL (ITA NO.787/JP/2011) IN RESPECT OF DIRECTING THE AO TO DECIDE AFRESH 10 ITA NO.787 & 825/JP/2011 ITA NO.828 & 935/JP/2011 AFTER OBTAINING OF THE RENT FOR THE SIMILARLY PLACE D PROPERTY IN THE SIMILARLY PLACED CIRCUMSTANCES AND APPLY THE SAME. 12. FOR THE YEAR UNDER CONSIDERATION, ASSESSEE RECE IVED RENT OF RS.1,80,000/- AND RS. 36,000/- FROM VIJAY SOLVEX LTD. AND DATA IN FOSYS LTD. RESPECTIVELY FOR ITS PROPERTY D-47, HANUMAN NAGAR, JAIPUR WHICH LET OUT TO THEM. THE AO TOOK A VIEW THAT ASSESSEE WHILE DECIDING THE RENT TO BE CHARGED HAS TAKEN INTO CONSIDERATION THE RATE OF INTEREST CHARGED BY THE B ANK. FOR THIS, LD. AR SUBMITTED THAT THE ANNUAL VALUE OF HOUSE PROPERTY I S TO BE DETERMINED AS PER THE PROVISIONS OF SECTION 23 OF THE ACT. IT WAS ALSO S UBMITTED THAT THE AO HAS TAKEN SIMILAR VIEW IN ASSESSMENT YEAR 2006-07. THE CIT ( A) DIRECTED THE AO TO OBTAIN THE RENT OF THE SIMILARLY PLACED PROPERTY IN SIMILARLY PLACED CIRCUMSTANCES AND THEN APPLY THE SAME TO THE INSTANT CASE FOR ASS ESSING THE INCOME. 13. WHILE PLEADING ON BEHALF OF THE ASSESSEE, LD. A R SUBMITTED THAT SECTION 23 OF THE ACT READ AS UNDER :- (1) FOR THE PURPOSE OF SECTION 22, THE ANNUAL VALUE OF ANY PROPERTY SHALL BE DEEMED TO BE (A) THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR; OR (B) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS L ET AND THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS IN EXCESS OF THE SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RECEIVED O R RECEIVABLE; OR .. 11 ITA NO.787 & 825/JP/2011 ITA NO.828 & 935/JP/2011 LD. AR SUBMITTED THAT IT IS A FACT THAT ASSESSEE HA S ACQUIRED THE PROPERTY AT RS.64.65 LACS. THE ASSESSEE HAS ALSO RECEIVED THE INTEREST FREE LOAN OF RS.50 LACS FROM ONE OF THE TENANT M/S. VIJAY SOLVEX LTD. IN T HESE CIRCUMSTANCES, THE ASSESSEE INVESTMENT OF ASSESSEES OWN FUNDS IS ONLY OF RS.14.65 LACS AND ON THAT, ANNUAL RETURN OF RENT OF RS.2,16,000/- WORKE D OUT AT15% P.A. THEREFORE, THE SUM RECEIVED IS ANNUAL VALUE OF THE PROPERTY OW NED BY THE ASSESSEE. LD. AR ALSO SUBMITTED THAT WITHOUT PREJUDICE TO THESE PLEA DINGS, IF THE ASSESSEE HAD NOT RECEIVED THE INTEREST FREE LOANS FROM M/S. VIJAY SO LVEX LTD. THEN ASSESSEE HAS ARRANGED SOME FUNDS FROM SOMEWHERE ELSE ON INTEREST AND SUCH INTEREST WOULD HAVE BEEN ALLOWED AS DEDUCTION U/S 24 (2) ON ACCOUN T OF INTEREST PAYMENT ON BORROWED CAPITAL. IN THAT CIRCUMSTANCES, ANNUAL RE NTAL VALUE FROM THIS HOUSE PROPERTY WOULD HAVE BEEN NIL. HE SUBMITTED THAT ASS ESSEE HAS RIGHTLY OFFERED THE ANNUAL VALUE FOR TAXATION AND THE DIRECTION OF THE CIT (A) TO REWORK OUT THE ANNUAL VALUE IS UNDESIRABLE. IT WAS ALSO SUBMITTED THAT ITAT, WHILE DECIDING ITA NOS.902 & 952/JP/2010 DATED 23.09.2011 FOR ASSE SSMENT YEAR 2006-07, DIRECTED THE AO TO FOLLOW THE PRINCIPLE GIVEN BY TH E HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. MONI KUMAR SUBBA 333 ITR 38 (FB) IN DETERMINING THE ALV WHERE IT WAS HELD THAT ALV CANNOT EXCEED THE ST ANDARD RENT AS PER THE RENT CONTROL LEGISLATION APPLICABLE TO THE PROPERTY . 12 ITA NO.787 & 825/JP/2011 ITA NO.828 & 935/JP/2011 14. AFTER CONSIDERING THE ARGUMENTS OF BOTH THE SID ES, GOING THROUGH THE RECORD AVAILABLE ON RECORD AND CASE LAWS RELIED UPO N, WE FIND THAT THIS ISSUE HAS ALREADY BEEN DECIDED BY THE ITAT WHILE DECIDING THE ASSESSEES APPEAL IN ITA NO.902/JP/2010 & 952/JP/2010 IN ITS ORDER DATED 23. 09.2011. THE RELEVANT PORTION OF THE ORDER OF ITAT DECISION IS REPRODUCED AS UNDER :- 5.1 THE 5TH GROUND OF APPEAL OF THE ASSESSEE IS TH AT THE LD. CIT(A) HAS ERRED IN DIRECTING THE AO TO OBTAIN RENT FROM THE S IMILARLY PLACED PROPERTY. 5.2 DURING THE YEAR UNDER CONSIDERATION THE ASSESSE E RECEIVED RENT FROM THE PROPERTY SITUATED AT D-47, HANUMAN NAGAR, JAIPUR, OF RS. 2,16,000/- FROM TWO CONCERNS DETAILS OF WHICH ARE A S UNDER : - VIJAY SOLVEX LTD. 1,80,000/- DATA INFOSYS LTD. 36,000/- THE A O HELD THAT THE ASSESSEE WHILE DECIDING THE R ENT TO BE CHARGED HAS TAKEN INTO CONSIDERATION THE RATE OF INTEREST CHARG ED BY THE BANK INSTEAD OF 10 TAKING INTO CONSIDERATION THE PROVISIONS OF SECT ION 23 OF THE INCOME TAX ACT WHICH DEALS WITH THE MATTER REGARDING HOW A NNUAL VALUE OF HOUSE PROPERTY IS TO BE DETERMINED. ACCORDINGLY HE ESTIMA TED THE ANNUAL VALUE OF THE SAID PROPERTY AT RS. 4,32,000/-. 5.3 THE LD CIT (A) DIRECTED THE A O TO OBTAIN THE R ENT OF SIMILARLY PLACED PROPERTY IN SIMILARLY PLACED CIRCUMSTANCES A ND APPLY THE SAME TO THE INSTANT CASE FOR ASSESSING THE INCOME. 5.4 DURING THE COURSE OF HEARING, THE LD. AR SUBMIT TED THROUGH ITS WRITTEN SUBMISSION AS UNDER :- 1. SECTION 23 ANNUAL VALUE HOW DETERMINED (RELE VANT EXTRACT) BE READ AS UNDER: (1) FOR THE PURPOSE OF SECTION 22, THE ANNUAL VALUE OF ANY PROPERTY SHALL BE DEEMED TO BE (A) THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR; OR (B) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS 13 ITA NO.787 & 825/JP/2011 ITA NO.828 & 935/JP/2011 IN EXCESS OF THE SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RECEIVED OR RECEIVABLE; OR ------------- ------------- THERE IS NO DISPUTE THAT IN THE PRESENT CASE THE A SSESSEE HAS ACQUIRED THE BUILDING FOR A SUM OF RS. 64.65 LACS F OR WHICH INTEREST FREE LOAN OF RS. 50 LACS IS GIVEN BY ONE O F THE TENANT M/S. VIJAY SOLVEX LTD (PB 17). HENCE INVESTMENT OF ASSES SEES OWN FUNDS IS ONLY TO THE EXTENT OF RS. 14.65 LACS. ON T HIS AMOUNT RENT OF RS. 2,16,000/- GIVES A RETURN OF 15% P.A. CONSID ERING THE PREVAILING MARKET RATE OF RETURN ON INVESTMENT, REN T RECEIVED @ 15% IS IN EXCESS OF THE SUM FOR WHICH THE PROPERTY MIGHT 11 REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR. HE NCE THE SUM RECEIVED IS THE ANNUAL VALUE OF THE PROPERTY OWNED BY THE ASSESSEE. 2. WITHOUT PREJUDICE TO ABOVE, HAD THE ASSESSEE NOT RECEIVED INTEREST FREE LOAN FROM M/S. VIJAY SOLVEX LTD, HE W OULD HAVE TO ARRANGE FUNDS FROM SOMEWHERE ELSE ON INTEREST WHICH WOULD HAVE BEEN ALLOWED DEDUCTION U/S 24(2) ON ACCOUNT OF INTE REST PAYMENT ON BORROWED CAPITAL FOR PURCHASE OF THE BUILDING. R ESULTANTLY THE INCOME FROM HOUSE PROPERTY WOULD HAVE BEEN NIL COMP UTED AS FOLLOWS : ANNUAL VALUE AS COMPUTED BY THE AO RS.4,32,000/ - LESS:INTEREST PAYMENT ON LOAN OF RS.50LAC@ 13.5% R S.6,75,000/- (RATE AS TAKEN BY THE A O FOR DISALLOWANCE OF INTER EST) INCOME FROM HOUSE PROPERTY AFTER CONSIDERING THE DE DUCTION TO THE EXTENT OF ANNUAL VALUE NIL IN VIEW OF ABOVE, THE RENTAL INCOME RECEIVED BY TH E ASSESSEE IS THE ANNUAL VALUE WHICH HAS BEEN RIGHTLY OFFERED BY THE ASSESSEE. HENCE THE DIRECTION OF CIT (A) TO REWORK OUT THE ANNUAL VALUE CONSIDERING THE COMPARABLE INSTANCES IS UNDES IRABLE AND THE AO BE DIRECTED TO ACCEPT THE RENT DECLARED BY THE A SSESSEE. 5.5 WE HAVE HEARD BOTH THE PARTIES. THE HON'BLE DEL HI HIGH COURT IN ITS FULL BENCH DECISION IN THE CASE OF CIT VS. MONI KUMAR SUBBA, 333 ITR 38 HAS LAID DOWN THE FOLLOWING PRINCIPLES TO DE TERMINE THE ANNUAL LETTING VALUE. : (I) ALV WOULD BE THE SUM AT WHICH THE PROPERTY MAY BE REASONABLY LET OUT BY A WILLING LESSOR TO A WILLING LESSEE UNINFLUENCED BY ANY EXTRANEOUS CIRCUMSTANCES. (II) AN INFLATED OR DEFLATED RENT BASED ON EXTRANEO US CONSIDERATION MAY TAKE IT OUT OF THE BOUNDS OF REAS ONABLENESS. 14 ITA NO.787 & 825/JP/2011 ITA NO.828 & 935/JP/2011 (III) ACTUAL RENT RECEIVED, IN NORMAL CIRCUMSTANCES , WOULD BE A RELIABLE EVIDENCE UNLESS THE RENT IS INFLATED/DEFLA TED BY REASON OF EXTRANEOUS CONSIDERATION. (IV) SUCH ALV, HOWEVER, CANNOT EXCEED THE STANDARD RENT AS PER THE RENT CONTROL LEGISLATION APPLICABLE TO THE PROP ERTY. (V) IF STANDARD RENT HAS NOT BEEN FIXED BY THE RENT CONTROLLER, THEN IT IS THE DUTY OF THE ASSESSING OFFICER TO DET ERMINE THE STANDARD RENT AS PER THE PROVISIONS OF RENT CONTROL ENACTMEN T. (VI) THE STANDARD RENT IS THE UPPER LIMIT, IF THE F AIR RENT IS LESS THAN THE STANDARD RENT, THEN IT IS THE FAIR RENT WH ICH SHALL BE TAKEN AS ALV AND NOT THE STANDARD RENT. THE HON'BLE DELHI HIGH COURT ALSO HELD THAT NOTIONA L INTEREST ON INTEREST FREE SECURITY DEPOSIT CANNOT BE ADDED FOR ARRIVING AT THE ANNUAL LETTING VALUE (ALV). WE THEREFORE, UPHOLD THE FINDINGS IN R ESTORING THE ISSUE. HOWEVER, THE AO WILL FOLLOW THE PRINCIPLES GIVEN BY HON'BLE DELHI HIGH COURT IN DETERMINING THE ALV. HENCE, THIS ISSUE IS RESTORED BACK ON THE FILE OF THE AO. SINCE THE ISSUE INVOLVED IN THE APPEALS UNDER CONSI DERATION IS SAME AND THE FACTS ARE ALSO SIMILAR TO THE AFORESAID ORDER, WE DECIDE THE ISSUE ON THE SAME TERMS AS AFORESAID. ACCORDINGLY, THIS ISSUE IS RESTORED TO THE FILE OF THE AO TO BE DECIDED ON THE SAME TERMS OF THE EARLIER ORDER OF THE ITAT AS AFORESAID. ACCORDINGLY, THIS GROUND IN BOTH THE APPEALS IS ALLOWED FOR STAT ISTICAL PURPOSES. 15. IN THE GROUND NO.4 OF THE REVENUES APPEAL (ITA NO.828/JP/2011), THE ISSUE INVOLVED IS AGAINST DELETING THE DISALLOWANCE OF RS.23,13,472/- U/S 80IA ON WIND MILLS. 15 ITA NO.787 & 825/JP/2011 ITA NO.828 & 935/JP/2011 16. THE ASSESSEE INSTALLED WINDMILLS AND STARTED PR ODUCING ELECTRICITY IN THE ASSESSMENT YEAR 2003-04. THE DEPRECIATION AND BUSI NESS LOSSES OF THE WINDMILLS UP TO ASSESSMENT YEAR 2006-07 WERE ADJUST ED AGAINST OTHER BUSINESS INCOME OF THE ASSESSEE. ASSESSMENT YEAR 2007-08, T HE YEAR UNDER CONSIDERATION, IS THE INITIAL YEAR IN WHICH THE ASSESSEE HAS CLAIM ED DEDUCTION U/S 80IA (4)(IV)(A) OF THE ACT @ 100% OF THE PROFIT AND GAIN S OF ELIGIBLE BUSINESS I.E. WINDMILL. 17. THE CIT (A) HAS ALLOWED THE DEDUCTION AND THE R ELEVANT FINDINGS OF THE CIT (A), AS REPRODUCED IN THE WRITTEN SUBMISSIONS F ILED BY THE LD. AR, ARE REPRODUCED AS UNDER :- - THE DECISION OF GOLDMINES CASE AS RELIED UPON B Y THE ASSESSING OFFICER, IS NO MORE A GOOD SOURCE OF LAW, IN AS MUCH AS IN A SUBSEQUENT DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LIMIT ED VS. ACIT 231 CTR 368/340 ITR 477, AS RIGHTLY RELIED UPO N BY THE COUNSEL, THE ISSUE IS DECIDED IN FAVOUR OF THE ASSE SSEE AFTER CONSIDERING THE DECISION OF GOLDMINES CASE. - THE MAIN ISSUE IS AS TO WHEN THE PROVISION OF SEC TION 80IA WILL BECOME APPLICABLE UPON THE APPELLANT. THE APPELLANT HAS OPTED TO CLAIM THE DEDUCTION U/S 80IA W.E.F. AS SESSMENT YEAR 2007-08, THOUGH THE PRODUCTION COMMENCED FROM THE ASSESSMENT YEAR 2003-04, THEREFORE PROVISION IS MAD E APPLICABLE FROM THE ASSESSMENT YEAR 2007-08. THE OP TION TO CLAIM THE DEDUCTION U/S 80IA RESTS WITH THE APPELLA NT TO CLAIM IT IN 10 YEARS OUT OF 15 YEARS. THE INITIAL ASSESSMENT YEAR FOR THE APPELLANT IS ASSESSMENT YEAR 2007-08 AND FROM SUCH ASSESSMENT YEAR, THE ELIGIBLE INDUSTRIAL UNDERTAKING WILL BE C ONSIDERED AS INDEPENDENT SOURCE OF INCOME OF THE APPELLANT AND N OT PRIOR TO THAT. 16 ITA NO.787 & 825/JP/2011 ITA NO.828 & 935/JP/2011 - THE ASSESSING OFFICER HAS MADE APPLICABLE THE PROVISIONS OF SECTION 80IA FROM THE ASSESSMENT YEAR 2003-04, WHEN THE APPELLANT HAS NOT EVEN CLAIMED THE DEDUCTI ON UNDER THE SAID PROVISION. THE ASSESSING OFFICER HAS MISUN DERSTOOD THE FIRST YEAR OF COMMENCEMENT OF PRODUCTION AND IN ITIAL ASSESSMENT YEAR AS SYNONYMOUS. THE YEAR OF COMMENCE MENT OF PRODUCTION AND INITIAL ASSESSMENT YEAR BEARS THE DI FFERENT CONNOTATION. FOR THIS PROPOSITION, STRENGTH IS DRAW N FROM THE STATUTORY AUDIT REPORT FORMAT IN FORM NUMBER 10CCB AS RELIED UPON BY LEARNED COUNSEL. I HAVE NO HESITATION IN GI VING A FINDING THAT THE INITIAL ASSESSMENT YEAR FOR THE AP PELLANT IS ASSESSMENT YEAR 2007-08 AND FROM SUCH ASSESSMENT YE AR, IT WILL BE CONSIDERED AS INDEPENDENT SOURCE OF INCOME. - WHILE GIVING THIS FINDING I ALSO DRAW STRENGTH FR OM TAXMANNS READY RACKNOR BY DR. VINOD K. SINGHANIA 3 3RD EDITION FROM PAGE NUMBER A-241 TO A-244. FURTHER, H ONBLE RAJASTHAN HIGH COURT IN CASE OF MEWAR SUGAR MILLS 2 71 ITR 311 HAVE DECIDED THAT IT IS NOT AT ALL REQUIRED THA T LOSSES OR OTHER DEDUCTION WHICH HAVE ALREADY BEEN SET OFF AGAINST T HE INCOME OF THE PREVIOUS YEAR SHOULD BE REOPENED AGAIN FOR THE PURPOSE OF COMPUTING ADMISSIBLE DEDUCTION U/S 80IA OF THE INCO ME TAX ACT, 1961. - THERE IS NO PROVISION UNDER THE INCOME TAX ACT, 1 961 OR ANY IOTA OF REFERENCE SUPPORTING THE STAND OF THE A SSESSING OFFICER FOR REVIVING THE EARLIER YEARS ALREADY ADJ USTED BUSINESS LOSSES AND UNABSORBED DEPRECIATION IN THE SUBSEQUEN T YEARS. - DECISION OF VELAYUDHASWAMY SPINNING MILLS (P) LIMITED (SUPRA), IS LATEST ON THE SUBJECT, WHEREIN THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN CASE OF MEWAR SUGAR MILLS HAVE ALSO BEEN FOLLOWED. THEREFORE, CONSIDERING ALL THESE ISSUES, IT IS HELD THAT THE ACTION OF AO IS NOT JUS TIFIED IN DENYING DEDUCTION OF RS. 23,13,472/- WITHIN THE MEANING OF SECTION 80IA OF THE I.T. ACT, 1961. THEREFORE, IT IS DIRECT ED THAT THE APPELLANT IS ENTITLED FOR DEDUCTION OF RS. 23,13,47 2/- WITHIN THE MEANING OF SECTION 80IA OF THE I.T. ACT, 1961.' 18. LD. DR RELIED ON THE ORDER OF THE ASSESSING OFF ICER. 17 ITA NO.787 & 825/JP/2011 ITA NO.828 & 935/JP/2011 19. LD. AR RELIED ON THE ORDER OF THE CIT (A) AND A LSO RELIED ON THE FOLLOWING CASE LAWS :- (I) VELAYUDHASWAMY SPINNING MILLS (P) LTD. VS. ACIT 340 ITR 477 (MAD.) (HC) AS PER SUB-S (5) OF S. 80IA, PROFITS ARE TO BE COMP UTED AS IF SUCH ELIGIBLE BUSINESS IS THE ONLY SOURCE OF INCOME OF THE ASSESSEE. WHEN THE ASSESSEE EXERCISES THE OPTION, O NLY THE LOSSES OF INITIAL ASSESSMENT YEAR ARE TO BE BROUGHT FORWARD AND NOT THE LOSSES OF EARLIER YEARS WHICH HAVE BEEN ALR EADY SET OFF AGAINST THE INCOME OF THE ASSESSEE. REVENUE CANNOT NOTIONALLY BRING FORWARD ANY LOSS OF EARLIER YEARS WHICH HAS A LREADY BEEN SET OFF AGAINST OTHER INCOME OF THE ASSESSEE AND SE T OFF THE SAME AGAINST THE CURRENT INCOME OF THE ELIGIBLE BUSINESS . FICTION CREATED BY SUB-S. (5) OF S. 80IA DOES NOT CONTEMPLA TE SUCH NOTIONAL SET OFF. IN THE INSTANT CASE, ADMITTEDLY, LOSSES INCURRED BY THE ASSESSEE HAVE ALREADY BEEN SET OFF AND ADJUS TED AGAINST THE PROFITS OF THE EARLIER YEARS. THERE IS A POSITI VE PROFIT DURING THE RELEVANT YEAR. THEREFORE, LOSS OR DEPRECIATION IN THE YEAR EARLIER TO INITIAL ASSESSMENT YEAR ALREADY ABSORBED AGAINST THE PROFIT OF OTHER BUSINESS CANNOT BE NOTIONALLY BROUG HT FORWARD AND SET OFF AGAINST THE PROFITS OF THE ELIGIBLE BUS INESS. ALL THE AUTHORITIES BELOW HAVE GIVEN A CATEGORICAL FINDING THAT THE FIRST YEAR OF ASSESSEES CLAIM FOR DEDUCTION UNDER S. 80I A IS 2004-05 AND THE SAME HAS REACHED FINALITY. THERE IS NO ERRO R OR ILLEGALITY IN THE ORDER OF THE TRIBUNAL WARRANTING INTERFERENC E. (II) RANGAMMA STEELS & MALLEABLES VS. ACIT 43 DTR 137 (CHENNAI)(TRIB.) IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, DERI VED FROM PROFITS AND GAINS FROM AN ELIGIBLE BUSINESS, WHICH ARE DETAILED IN SUB-S. (4), 100 PER CENT DEDUCTION IS ALLOWED FO R TEN CONSECUTIVE ASSESSMENT YEARS. SUB-S. (2) OF S. 80-I A GIVES OPTION TO THE ASSESSEE TO CHOOSE THE 10 CONSECUTIVE ASSESSMENT YEARS OUT OF 15 YEARS BEGINNING FROM THE YEAR IN WH ICH THE UNDERTAKING OR THE ENTERPRISE DEVELOPS AND BEGINS T O OPERATE ANY INFRASTRUCTURE FACILITY OR STARTS PROVIDING TEL ECOMMUNICATION 18 ITA NO.787 & 825/JP/2011 ITA NO.828 & 935/JP/2011 SERVICE OR DEVELOPS AND INDUSTRIAL PARKS ETC. SUB-S . (5) OF S. 80- IA QUALIFIES DEDUCTION OF SUB-S. (1) OF S. 80-IA WI TH A NON OBSTANTE CLAUSE AND OVERRIDES EVERY OTHER PROVISION IN THIS ACT PROVIDING MECHANISM BY WAY OF ASSUMPTION THAT FOR DETERMINING THE QUANTUM OF DEDUCTION FOR THE ASSESS MENT YEAR IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR OR ANY SUBSEQUENT ASSESSMENT YEAR, IT WOULD BE DEEMED AS I F SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL AS SESSMENT YEAR AND TO EVERY ASSESSMENT YEAR UPTO AND INCLUDING THE ASSESSMENT YEAR FOR WHICH THE DETERMINATION IS TO BE MADE. THE ABOVE PROVISIONS ARE VERY CLEAR, PLAIN AND DIRECT IN MEAN ING. BUT ONLY DIFFICULTY IS CAST BY THE TERM INITIAL YEAR WHICH HAS NOWHERE BEEN DEFINED IN THE ACT, YET BY SUB-S. (2) IT IS OB VIOUS THAT IT IS REFERRING TO THE OPTION VESTED IN THE ASSESSEE TO C HOOSE ANY 10 YEARS OUT OF 15 OR 20 YEARS PERIOD PROVIDED, AS THE CASE MAY BE. THE YEAR FROM WHICH OPTION HAS BEEN EXERCISED IS TO BE TREATED AS THE INITIAL ASSESSMENT YEAR BUT AFTER THAT THE 1 0 YEARS HAVE IN CONTINUITY. SUB-S. (5) OF S. 80-IA WOULD COME INTO OPERATION ONLY FROM THE YEAR IN WHICH THE APPELLANT STARTED C LAIMING DEDUCTION UNDER S. 80-IA I.E., FROM THE INITIAL YEA R, AND THE DEPRECIATION RELATING TO THE YEARS PRIOR TO THE INI TIAL ASSESSMENT YEAR CANNOT BE BROUGHT BACK NOTIONALLY TO BE ADJUST ED AGAINST THE INCOME OF THE INITIAL OR SUBSEQUENT ASSESSMENT YEARS (III) COMMISSIONER OF INCOME TAX VS. MEWAR OIL AND GENERAL MILLS LTD. 271 ITR 311 (RAJ.)(HC) THE QUESTION OF RECTIFICATION WOULD HAVE BEEN GERMA NE ONLY IF THERE HAD BEEN CARRY FORWARD OF UNABSORBED DEPRECIA TION AND UNABSORBED DEVELOPMENT REBATE OR ANY OTHER UNABSORB ED LOSSES OF THE PREVIOUS YEAR ARISING OUT OF THE PRIORITY IN DUSTRY AND WHETHER IT WAS REQUIRED TO BE SET OFF AGAINST THE I NCOME OF THE CURRENT YEAR. IN VIEW OF THE FINDING THAT THERE WAS NO CARRY FORWARD OF ALLOWABLE DEDUCTION UNDER THE HEAD DEPRE CIATION OR DEVELOPMENT REBATE WHICH NEEDED TO BE ABSORBED AGAI NST THE INCOME OF THE CURRENT ASSESSMENT YEAR 1984-85, RECO MPUTATION OF INCOME FOR THE PURPOSE OF COMPUTING PERMISSIBLE DEDUCTION UNDER SECTION 80I FOR THE NEW INDUSTRIAL UNDERTAKIN G WAS NOT 19 ITA NO.787 & 825/JP/2011 ITA NO.828 & 935/JP/2011 REQUIRED. THERE WAS NO ERROR APPARENT ON THE FACE O F THE RECORD WHICH COULD BE RECTIFIED. IT MAY BE NOTED THAT THERE IS NO CONTRARY JUDGMENT OF ANY OTHER HIGH COURT. HONBLE ITAT CHENNAI BENCH IN A THIRD MEMBER DECISION IN CASE OF SANGHVI & DOSHI ENTERPRISE VS. ITO 60 DTR 306/131 ITD 151 HELD THAT IF THERE IS NO DECISI ON OF JURISDICTIONAL HIGH COURT ON THE RELEVANT ISSUE, TR IBUNAL IS BOUND BY THE JUDGMENT OF ANY OTHER HIGH COURT WHICH IS AVAILABLE DIRECTLY ON THE SUBJECT. THEREFORE, THE A BOVE DECISION OF MADRAS HIGH COURT HAS RIGHTLY BEEN FOLLOWED BY C IT(A). 20. AFTER HEARING BOTH THE SIDES AND CONSIDERING TH E CASE LAWS, WE FIND NO FAULT IN THE ORDER OF THE CIT (A) AND DISMISS THIS GROUND OF REVENUES APPEAL. 21. GROUND NO.5 IN REVENUES APPEAL (ITA NO.828/JP/ 2011) AND GROUND NO.3 IN ASSESSEES APPEAL (ITA NO.787/JP/2011) IS GENERA L IN NATURE AND DO NOT REQUIRE ANY ADJUDICATION. 22. IN THE RESULT, THE APPEAL OF THE REVENUE BEING ITA NO.828/JP/2011 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND ASSESSE ES APPEAL BEING ITA NO.787/JP/2011IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.935/JP/2011 & 825/JP/2011 (ASSESSMENT YEAR 2008-09) 23. GROUND NO.1 OF THE REVENUES APPEAL IN ITA NO.9 35/JP/2011 IS WITH REGARD TO THE DELETION OF THE TRADING ADDITION OF R S.5,00,000/- AFTER INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT. WHILE DIS CUSSING THE SIMILAR ISSUE IN REVENUES APPEAL IN ITA NO.828/JP/2011 FOR ASSESSME NT YEAR 2007-08 IN PARA 20 ITA NO.787 & 825/JP/2011 ITA NO.828 & 935/JP/2011 NOS.2 TO 6 OF THIS ORDER ABOVE, WE HAVE ALREADY DIS MISSED THE SIMILAR GROUND OF THE REVENUE. FOLLOWING OUR OBSERVATIONS MADE AS ABO VE, WE DISMISS THIS GROUND OF REVENUES APPEAL. 24. IN THE GROUND NO.2 OF THE REVENUES APPEAL IN I TA NO.935/JP/2011 IS AGAINST DELETING THE DISALLOWANCE OF RS.2,98,510/- ON ACCOUNT OF EXCESS REMUNERATION. 25. ASSESSEE HAS CLAIMED ALLOWABLE REMUNERATION TO PARTNERS AT RS.62,31,585/- U/S 40B(V)(2) ON THE BOOK PROFIT OF RS.11,58,26,940/-. AO OBSERVED THAT THE NET INSURANCE INCOME OF RS.11,25, 503/- INCLUDED IN THE PROFIT & LOSS ACCOUNT CANNOT BE TREATED AS INCOME FROM BUS INESS ACTIVITY AND THEREFORE THE SAME CANNOT FORM PART OF BOOK PROFIT. RELYING O N THE ORDER OF THE ITAT IN THE CASE OF SH. KRISHNA MURARI AGARWAL PROPRIETOR M /S SH. SHAKUN OIL PRODUCTS, ALWAR DATED 22.02.2008 WHERE INSURANCE IN COME WAS HELD AS NOT DERIVED FROM BUSINESS, AO COMPUTED THE BOOK PROFIT AT RS.1,47,01,437/- AND ON THIS AMOUNT, HE ALLOWED THE REMUNERATION TO PARTNER S U/S 40(B) AT RS.59,33,075/- AS AGAINST RS.62,31,585/- CLAIMED BY ASSESSEE, WHIC H RESULTED INTO DISALLOWANCE OF RS.2,98,510/-. 26. LD. CIT (A) DELETED THE DISALLOWANCE BY OBSERV ING AS UNDER :- AFTER DUE CONSIDERATION OF THE SUBMISSION OF LD. AR & PURSUING THE ASSESSMENT ORDER, IT IS SEEN THAT THE AO HAS WRONGLY APPLIED THE RATIO OF SH. KRISHNA MURARI AGA RWAL PROPRIETOR M/S SH. SHAKUN OIL PRODUCTS, ALWAR. THE DECISION OF 21 ITA NO.787 & 825/JP/2011 ITA NO.828 & 935/JP/2011 SH. KRISHNA MURARI AGARWAL PROPRIETOR M/S SH. SHAKU N OIL PRODUCTS WAS ON THE ISSUE WHETHER THE INSURANCE INC OME IS PROFIT DERIVED FROM INDUSTRIAL UNDERTAKING/ACTIVITY OR NOT WHEREAS THIS IS NOT THE ISSUE IN THE CASE IN HAND. HERE, THE ISSUE OF BOOK PROFIT IS INVOLVED. BOOK PROFIT HAS BEEN DE FINED IN EXPLANATION 3 TO SECTION 40B OF I.T. ACT, 1961. IT PROVIDES, BOOK-PROFIT MEANS THE NET PROFIT, AS SHOWN IN THE PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR, COMPUT ED IN THE MANNER LAID DOWN IN CHAPTER IV-D AS INCREASED BY TH E AGGREGATE AMOUNT OF THE REMUNERATION PAID OR PAYABL E TO ALL THE PARTNERS OF THE FIRM IF SUCH AMOUNT HAS BEEN DEDUCT ED WHILE COMPUTING THE NET PROFIT. THE INSURANCE RECEIPTS AR E PART OF CHAPTER IV-D OF I.T. ACT, 1961. THEREFORE, THE SAME HAS TO BE TAKEN INTO ACCOUNT FOR THE PURPOSE OF COMPUTING THE BOOK PROFIT. MY PREDECESSOR HAS ALSO TAKEN A SIMILAR VIEW IN CAS E OF VIKAS OIL MILL, KHAIRTHAL IN APPEAL ORDER NO. 415/2006-07 DT. 26.03.2009. THEREFORE, THE ACTION OF AO IS NOT JUST IFIED IN DENYING THE REMUNERATION ON AMOUNT OF INSURANCE. TH US, THE DISALLOWANCE OF REMUNERATION OF RS. 2,98,510/- IS H EREBY DELETED. 27. LD. DR RELIED ON THE ORDER OF THE AO. WHILE LD . AR SUBMITTED THAT AO HAS INCORRECTLY RELIED ON THE DECISION OF ITAT IN C ASE OF SHRI KRISHNA MURARI AGARWAL IN PARTLY DISALLOWING THE CLAIM OF REMUNERA TION TO THE PARTNERS. HE SUBMITTED THAT FOR THE PURPOSE OF CLAIM OF DEDUCTIO N U/S 80IB, IT WAS HELD THAT INCOME FROM INSURANCE CLAIM CANNOT BE CONSIDERED AS DERIVED FROM THE MANUFACTURING ACTIVITY OF THE INDUSTRIAL UNDERTAKIN G AND IT IS NOT HELD THAT SUCH INCOME FROM INSURANCE CLAIM IS NOT ASSESSABLE AS BU SINESS INCOME BUT ASSESSABLE AS INCOME FROM OTHER SOURCES. LD. AR SU BMITTED THAT THE NATURE OF THE ACTIVITY OF ASSESSEE IS SUCH THAT IT COLLECTS I NSURANCE AMOUNT FROM THE 22 ITA NO.787 & 825/JP/2011 ITA NO.828 & 935/JP/2011 CUSTOMERS ON SALE OF MUSTARD OIL AND MAKES PAYMENT OF INSURANCE CHARGES TO THE INSURANCE COMPANY. HE SUBMITTED THAT IT INSURANCE R ECEIPTS ARE INTERDEPENDENT AND INTERLINKED WITH THE SALE OF MUSTARD OIL AND TH ESE ARE NOT ISOLATED TRANSACTIONS SO AS TO BRING ONE TO TAX AS INCOME FR OM OTHER SOURCES. HE SUBMITTED THAT THE TRANSACTIONS ARE DIRECTLY LINKED WITH THE BUSINESS OF THE ASSESSEE AND THUS CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM BUSINESS. HE SUBMITTED THAT THEREFORE, CIT(A) HAS RIGHTLY DISTIN GUISHED THE CASE RELIED BY THE AO AND DELETED THE ADDITION. 27.1 HE FURTHER SUBMITTED THAT WITHOUT PREJUDICE TO ABOVE, EVEN IF INCOME FROM INSURANCE CLAIM IS HELD AS ASSESSABLE AS INCOME FRO M OTHER SOURCES, THE SAME HAS TO BE CONSIDERED AS PART OF BOOK PROFIT FOR ALL OWING THE REMUNERATION TO THE PARTNERS U/S 40(B). FOR THIS PURPOSE, HE PLACED RE LIANCE ON THE DECISION OF ITAT, JAIPUR BENCH, JAIPUR IN THE CASE OF S.P. EQUIPMENT & SERVICES VS. ACIT 33 DTR 265, WHERE IT WAS HELD THAT FOR THE PURPOSE OF COMPUTING ALLOWABLE DEDUCTION UNDER SECTION 40(B), BOOK PROFIT HAS BEEN DEFINED UNDER EXPLANATION 3 THERETO TO MEAN THE NET PROFIT AS SHOWN IN THE P& L ACCOUNT OF THE RELEVANT PREVIOUS YEAR COMPUTED IN THE MANNER LAID DOWN IN C HAPTER IV-D SUBJECT TO SPECIFIED ADJUSTMENTS. SELECTION OF ANY HEAD OF INC OME, MORE PARTICULARLY 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' IS NO WHERE REQUIRED OR ENVISAGED BY THE LEGISLATURE. THERE IS NO SUBSTANCE IN THE CO NTENTION OF THE REVENUE THAT 23 ITA NO.787 & 825/JP/2011 ITA NO.828 & 935/JP/2011 THE RECEIPTS CREDITED TO PROFIT & LOSS ACCOUNT SHOU LD BE ASSESSED UNDER DIFFERENT HEADS OF INCOME AS CLASSIFIED UNDER SECTION 14. LEG ISLATURE HAS NOT AUTHORIZED EXCLUSION OF SOME RECEIPTS FROM P&L A/C EVEN THOUGH THEY ARE NON-BUSINESS RECEIPTS. EXPLANATION 3 NOWHERE EMPOWERS THE AO TO GO BEHIND THE NET PROFIT SHOWN IN THE P&L A/C EXCEPT TO THE EXTENT OF ADJUST MENTS PROVIDED THEREIN. SINCE THE BOOK PROFIT HAS BEEN DEFINED TO BE THE NE T PROFIT SHOWN IN THE P&L A/C OF THE FIRM, IT IS THE PROFIT WHICH THE PARTNERS HA VE AGREED TO SHARE AND, THEREFORE SUCH NET PROFIT HAS TO BE CONSIDERED AS BUSINESS IN COME AT LEAST FOR THE PURPOSE OF SECTION 40(B). PROVISIONS OF SECTION 28(V) ALSO SUPPORT THIS VIEW. IF THE NATURE OF THE INCOME HAS BEEN DEEMED BY THE LEGISLATURE TO BE THE BUSINESS INCOME BY THE RECIPIENT, THE SOURCE ALSO SHOULD BEAR THE SAME CHARACTER I.E. BUSINESS INCOME. THEREFORE, INTEREST INCOME IS NOT TO BE EXC LUDED FROM THE NET PROFIT DECLARED BY THE ASSESSEE FIRM FOR COMPUTING BOOK PR OFIT FOR THE PURPOSE OF DETERMINING THE ALLOWABLE DEDUCTION OF REMUNERATION PAYABLE TO THE PARTNERS UNDER SECTION 40(B). HE FURTHER POINTED OUT THAT T O THE EXTENT REMUNERATION IS NOT ALLOWED IN ASSESSMENT OF THE FIRM, THE SAME CAN NOT BE TAXED IN THE HANDS OF THE INDIVIDUAL PARTNERS. SECTION 28(V) OF THE ACT S PECIFICALLY DEALS WITH THIS PROPOSITION WHICH READS AS UNDER:- (V) ANY INTEREST, SALARY, BONUS, COMMISSION OR REM UNERATION, BY WHATEVER NAME CALLED, DUE TO, OR RECEIVED BY, A PARTNER OF A FIRM FROM SUCH FIRM: 24 ITA NO.787 & 825/JP/2011 ITA NO.828 & 935/JP/2011 PROVIDED THAT WHERE ANY INTEREST, SALARY, BONUS, CO MMISSION OR REMUNERATION, BY WHATEVER NAME CALLED, OR ANY PART THEREOF HAS NOT BEEN ALLOWED TO BE DEDUCTED UNDER CLAUSE (B) OF SECTION 40, THE INCOME UNDER THIS CLAUSE SHALL BE ADJUSTED TO T HE EXTENT OF THE AMOUNT NOT SO ALLOWED TO BE DEDUCTED. HE SUBMITTED THAT IN THE ASSESSEES CASE, REMUNERAT ION TO PARTNERS CLAIMED U/S 40(B) IN COMPUTATION OF THE INCOME OF THE FIRM HAS BEEN ASSESSED BY THE DEPARTMENT IN THE HANDS OF INDIVIDUAL PARTNERS. THE AO EVEN AFTER MAKING THE DISALLOWANCE OF REMUNERATION IN THE ASSESSMENT OF T HE FIRM HAS NOT EXCLUDED THE CORRESPONDING REMUNERATION FROM THE INCOME IN THE H ANDS OF THE PARTNERS. THUS, WHEN SUCH REMUNERATION IS TAXED BY THE DEPARTMENT I N THE HANDS OF THE PARTNERS, THE SAME CANNOT BE DISALLOWED IN THE ASSESSMENT OF THE ASSESSEE FIRM. HE PLEADED THAT THE CIT(A) HAS RIGHTLY DELETED THE DIS ALLOWANCE OF RS.2,98,510/- AND PLEADED TO UPHOLD THE SAME ON THIS ISSUE. 28. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE. WE HAVE ALSO GONE THROUGH THE MATERIAL AVAILABLE ON RECORD, ORDER OF THE AUTH ORITIES BELOW AND ALSO GONE THROUGH THE ORDER OF THE ITAT, JAIPUR BENCH, JAIPUR IN THE CASE OF S.P. EQUIPMENT, CITED SUPRA. WE FIND THAT THIS ISSUE IS COVERED AGAINST THE REVENUE BY THE DECISION OF ITAT, JAIPUR BENCH, JAIPUR. THE ITAT IN THE AFORESAID ORDER HELD AS UNDER :- AS PER S. 40(B)(V)(2), THE ALLOWABLE DEDUCTION IS TO BE COMPUTED AS PER GIVEN PERCENTAGE WITH REFERENCE TO THE AMOUNT O F 'BOOK PROFIT'. BOOK PROFIT HAS BEEN DEFINED UNDER EXPLN. 3 TO MEAN THE NET PROFIT 25 ITA NO.787 & 825/JP/2011 ITA NO.828 & 935/JP/2011 AS SHOWN IN THE P&L A/C FOR THE RELEVANT PREVIOUS Y EAR, COMPUTED IN THE MANNER LAID DOWN IN THE CHAPTER IV-D AS INCREAS ED BY THE AGGREGATE AMOUNT OF REMUNERATION.......... A BARE R EADING OF THE EXPLN. 3 MAKES IT EVIDENT THAT SELECTION OF ANY HEA D OF INCOME, MORE PARTICULARLY OF THE HEAD 'PROFITS AND GAINS OF BUSI NESS OR PROFESSION', IS NOWHERE REQUIRED OR ENVISAGED BY THE LEGISLATURE . IN OTHER WORDS, THERE IS NO WARRANT TO SELECT THE HEAD OF INCOME SO FAR AS THE COMPUTATION OF THE PERMISSIBLE AMOUNT OF DEDUCTION OF THE REMUNERATION UNDER S.40(B) IS CONCERNED. IT IS NOT BASICALLY THE DISPUTE BETWEEN THE PARTIES TO TAX THE RECEIPTS UND ER A PARTICULAR HEAD. THE LEGISLATURE IN ITS WISDOM, HAVING GIVEN A SPECIFIC DEFINITION OF BOOK PROFIT IN EXPLN. 3, THERE IS NO WARRANT TO GO BEYOND THE DEFINITION. IN OTHER WORDS, THE NET PROF IT AS SHOWN HAS BEEN SUBJECTED TO TWO ADJUSTMENTS I.E., ONE, TO BE COMPUTED IN THE MANNER LAID IN THE CHAPTER IV-D VIZ. THE DISALLOWAB LE EXPENDITURE TO BE ADDED AND SECOND, SUCH NET PROFIT TO BE INCREASE D BY THE AMOUNT OF REMUNERATION, IF ALREADY DEBITED IN THE P&L A/C. THERE IS NO SUBSTANCE IN THE CONTENTION OF THE DEPARTMENTAL REP RESENTATIVE THAT SIMPLY BECAUSE THE PROFIT HAS TO BE COMPUTED IN THE MANNER LAID DOWN IN THE CHAPTER IV-D, A PART OF THE RECEIPT CRE DITED TO THE P&L A/C SHOULD BE ASSESSED UNDER A PARTICULAR HEAD OF I NCOME AS CLASSIFIED UNDER S. 14. ON THE CONTRARY, THE EXPLA NATION DOES NOT AT ALL REQUIRE THE SELECTION OF A HEAD OF INCOME UNDER S. 14 FOR THIS PURPOSE. THEREFORE, ONCE THE ASSESSEE HAS SHOWN NET PROFIT IN ITS P&L A/C, WHAT IS REQUIRED IS ONLY A FEW ADJUSTMENTS THERETO AS REQUIRED/PERMITTED BY LAW. THIS SHOULD NOT BE CONFU SED WITH THE SELECTION OF THE HEAD/S OF INCOME. THE QUALIFYING W ORDS USED IN THE SAID EXPLN. 3 'COMPUTED IN THE MANNER LAID DOWN IN THE CHAPTER IV- D' HAS BEEN PURPORTEDLY USED BY THE LEGISLATURE SO AS TO ENSURE THAT ALL THE INADMISSIBLE EXPENDITURE THOUGH DEBITED TO THE P&L A/C SHOULD BE ADDED BACK SO THAT THE REAL OPERATIONAL P ROFITS EARNED BY THE ASSESSEE FIRM BY THE COLLECTIVE EFFORTS OF THE PARTNERS BE MADE A BASIS TO COMPUTE THE ALLOWABLE REMUNERATION WITH RE FERENCE THERETO ONLY. IT IS UNDER THIS BACKGROUND, THE LEGISLATURE HAS NOT AUTHORIZED EXCLUSION OF SUCH RECEIPTS FROM THE P&L A/C EVEN TH OUGH MAY BE NON-BUSINESS RECEIPTS. THIS THEORY ALSO FITS IN THE UNDERLYING PURPOSE OF FORMING A PARTNERSHIP FIRM AND THE RELATIONS DEF INED UNDER S. 4 OF THE PARTNERSHIP ACT. EXPLANATION 3 NOWHERE EMPOWERS THE AO OR THE AO DOES NOT GET THE JURISDICTION TO GO BEHIND THE N ET PROFIT SHOWN IN THE P&L A/C EXCEPT TO THE EXTENT OF THE ADJUSTMENTS PROVIDED IN THE EXPLN. 3, NOR HE IS EMPOWERED TO DECIDE UNDER WHICH HEAD THE INCOME IS TO BE TAXED. THE NET PROFIT AS SHOWN, IS NOT TO BE ALLOCATED INTO DIFFERENT COMPONENTS. THE DISPUTE RELATING TO THE ALLOWABILITY OF 26 ITA NO.787 & 825/JP/2011 ITA NO.828 & 935/JP/2011 DEDUCTION OF REMUNERATION UNDER S. 40(B) FALLS WITH IN THE GROUP OF SS. 28 TO 44DB, FALLING UNDER CHAPTER IV-D TITLED AS 'P ROFITS AND GAINS INCOME OF BUSINESS OR PROFESSION'. MOREOVER, S. 40( B) STARTS WITH THE WORDS, 'NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SS. 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTIN G THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUS INESS OR PROFESSION'.' THEREFORE, IT IS PRE-SUPPOSED THAT TH E AO WAS ALREADY WORKING UNDER THE HEAD PROFITS AND GAINS/INCOME FRO M BUSINESS AND PROFESSION ONLY AND NOT UNDER A DIFFERENT HEAD. THU S, IT IS NOT THE STAGE OF THE SELECTION OF A PROPER HEAD UNDER S. 14 . ABOVE VIEW ALSO FINDS SUPPORT FROM THE DEFINITION OF PARTNERSHIP PR OVIDED UNDER S. 4 OF THE INDIAN PARTNERSHIP ACT, 1932, WHICH READS TH AT 'PARTNERSHIP IS THE RELATION BETWEEN THE PERSONS WHO HAVE AGREED TO SHARE THE PROFIT OF A BUSINESS CARRIED ON BY ALL OR ANY OF THEM ACTI NG FOR ALL'. THE COMPUTATION OF THE REMUNERATION TO THE PARTNERS CON CERNS THE RELATIONSHIP OF THE PARTNERS. THE NET PROFIT DECLAR ED IN THE P&L A/C BY THE PARTNERS IS THE RESULT OF THE PROFIT OF A BU SINESS CARRIED ON BY ALL OR ANY OF THEM ACTING FOR ALL. SINCE THE BOOK P ROFIT HAS BEEN DEFINED TO BE THE NET PROFIT SHOWN BY THE PARTNERS IN THE P&L A/C OF THE FIRM, IT IS THE PROFITS WHICH THE PARTNERS HAVE AGREED TO SHARE AND THEREFORE, ALSO SUCH NET PROFIT HAS TO BE CONSIDERE D AS BUSINESS INCOME AND IN ANY CASE AT LEAST FOR THE PURPOSE OF S. 40(B). THE PROVISIONS CONTAINED UNDER S. 28(V) ALSO SUPPORT TH IS VIEW. ANY INTEREST, SALARY, BONUS, COMMISSION OR REMUNERATION , BY WHATEVER NAME CALLED, DUE TO, OR RECEIVED BY, A PARTNER OF A FIRM, DESPITE THEIR NAME AND NATURE, SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. NEED LESS TO SAY, WHAT A PARTNER SHARES IS ONLY SHARE OUT OF THE VERY NET PR OFIT AS SHOWN BY THE FIRM IN THE P&L A/C. LF THE NATURE OF THE INCOME HA S BEEN DEEMED BY THE LEGISLATURE TO BE THE BUSINESS INCOME BY THE RE CIPIENT, THE SOURCE ALSO SHOULD BEAR THE SAME CHARACTER I.E., BUSINESS INCOME. A GOLDEN RULE OF INTERPRETATION IS THE CONTEXTUAL INTERPRETA TION. A WORD HAS ALWAYS TO BE INTERPRETED ONLY WITH THE CONTEXT WITH WHICH ONE IS SEIZED. INTERPRETATION OF THE PROVISIONS OTHERWISE OR THE WAY THE AO HAS DONE, IF ACCEPTED, HAS THE EFFECT OF RENDERING THE VERY EXPLN. 3 TOTALLY NUGATORY OR PURPOSELESS. NEEDLESS TO SAY, T HAT EVERY WORD USED BY THE LEGISLATURE IS SIGNIFICANT AND CANNOT B E LOST SIGHT OF. THE AO WAS REQUIRED TO HAVE COMPUTED THE BOOK PROFIT AS PER THE SPECIFIC DEFINITION GIVEN UNDER EXPLN. 3 BELOW S. 4 0(B). CONSEQUENTLY, THE INTEREST INCOME BE NOT EXCLUDED A ND THE NET PROFIT AS DECLARED BY THE APPELLANT BE CONSIDERED. IN OTHE R WORDS, THE IMPUGNED DISALLOWANCE MADE BECAUSE OF A DIFFERENT A PPROACH ADOPTED BY THE AO AND CONFIRMED BY THE CIT(A), IS H EREBY DELETED. 27 ITA NO.787 & 825/JP/2011 ITA NO.828 & 935/JP/2011 RESPECTFULLY FOLLOWING THE AFORESAID ORDER OF THE I TAT, JAIPUR BENCH, JAIPUR, WE DISMISS THIS GROUND OF REVENUES APPEAL. 29. IN THE GROUND NO.3 OF THE REVENUES APPEAL IN I TA NO.935/JP/2011, THE ISSUE IS DELETING THE DISALLOWANCE U/S 80IA ON WIND MILLS. THIS ISSUE HAS BEEN DISCUSSED BY US ABOVE IN PARA NOS.15 TO 20 IN ITA N O.828/JP/2011 FOR ASSESSMENT YEAR 2007-08 OF THIS ORDER AND THE GROUN D IS DISMISSED. FOLLOWING OUR OBSERVATIONS MADE AS ABOVE, WE DELETE THIS GROU ND OF REVENUES APPEAL. 30. GROUND NO.4 IS GENERAL IN NATURE AND DOES NOT R EQUIRE ANY ADJUDICATION. 31. IN THE RESULT, THE REVENUES APPEAL BEING ITA N O.935/JP/2011 IS DISMISSED. 32. GROUND NO.1 AND SUB-GROUNDS NO.1.1 TO 1.5 OF AS SESSEES APPEAL ARE DELETING THE DISALLOWANCE MADE ON ACCOUNT OF INTERE ST AND OTHER EXPENSES. THIS ISSUE HAS ALREADY BEEN DISCUSSED BY US ABOVE V IDE PARAS 7 TO 10 OF THIS ORDER AND THE GROUND IS ALLOWED FOR STATISTICAL PUR POSES. FOLLOWING OUR AFORESAID ORDER, WE ALLOW THIS GROUND OF ASSESSEES APPEAL FOR STATISTICAL PURPOSES. 33. GROUND NO.2 OF ASSESSEES APPEAL IN ITA NO.825/ JP/2011 IS AGAINST REFERRING THE MATTER BACK TO AO TO DECIDE AFRESH AF TER OBTAINING OF THE RENT FOR THE SIMILARLY PLACED PROPERTY IN THE SIMILARLY PLAC ED CIRCUMSTANCES AND APPLY THE 28 ITA NO.787 & 825/JP/2011 ITA NO.828 & 935/JP/2011 SAME. THIS ISSUE HAS BEEN DECIDED BY US VIDE PARAS 11 TO 14 IN THE APPEALS FOR ASSESSMENT YEAR 2007-08 AND THE SAME IS ALLOWED FOR STATISTICAL PURPOSES. RESPECTFULLY FOLLOWING THE SAME, WE ALLOW THIS GROU ND FOR STATISTICAL PURPOSES ON THE SAME TERMS AND CONDITIONS. 34. GROUND NO.3 IS GENERAL IN NATURE AND DOES NOT R EQUIRE ANY ADJUDICATION. 35. IN THE RESULT, THE ASSESSEES APPEAL BEING ITA NO.825/JP/2011 IS ALLOWED FOR STATISTICAL PURPOSES. 36. TO SUM UP : IN THE RESULT, THE APPEAL OF THE RE VENUE BEING ITA NO.828/JP/2011 IS PARTLY ALLOWED FOR STATISTICAL PU RPOSES; ASSESSEES APPEALS BEING ITA NO.787/JP/2011 AND ITA NO.825/JP/2011 ARE ALLOWED FOR STATISTICAL PURPOSES AND THE REVENUES APPEAL BEING ITA NO.935/ JP/2011 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 4 TH DAY OF DECEMBER, 2014. SD/- SD/- (SHAILENDRA KUMAR YADAV) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED : THE 4 TH DAY OF DECEMBER, 2014/TS. 29 ITA NO.787 & 825/JP/2011 ITA NO.828 & 935/JP/2011 COPY FORWARDED TO: 1. ACIT, CIRCLE 2, ALWAR. 2. M/S. VIJAY INDUSTRIES, 3.CIT 4.CIT(A) 5.DR, ITAT GUARD FILE (ITA NOS.787, 828, 935 &825/JP/2011) AR, ITAT NEW DELHI.