WELSPUN SYNTEX LTD, MUMBAI V. ITO WD 4(3)(2), MUMBAI

ITA 8689/MUM/2011

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3869 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2016
• Appeal Filed By: Assessee
• Bench Allotted: F
• Next Hearing Date: 20-11-2014
• Assessment Year: 1999-2000
• Appeal Filed On: 23-12-2011
• Court: TRIBUNAL
• Assessee Lawyers: F V IRANI
• Keywords: Unexplained cash credit; Depreciation; Business expenditure; Capital receipt
• Section: 43B; 32; 68; 37

Judgement Text

, , F , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI , , , BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.8688/MUM/2011 ASSESSMENT YEAR: 1998-99 WELSPUN SYNTEX LTD. TRADE WORLD, B. WING, 9TH FLOOR, KAMALA MILS COUMPOUND, SENAPATI BAPAT MARG, LOWER PAREL, MUMBAI-400013 / VS. ACIT CEN. CIR - 22 R.NO.403, AAYAKAR BHAVAN, MUMBAI-400020 (ASSESSEE ) (REVENUE) P.A. NO. AAACW0489L ITA NO.8689/MUM/2011 ASSESSMENT YEAR: 1999-2000 WELSPUN SYNTEX LTD. TRADE WORLD, B. WING, 9TH FLOOR, KAMALA MILS COUMPOUND, SENAPATI BAPAT MARG, LOWER PAREL, MUMBAI-400013 / VS. ITO, W D 4(3)(2) ADDL. CIT 1(1) R.NO.403, AAYAKAR BHAVAN, MUMBAI-400020 (ASSESSEE ) (REVENUE) P.A. NO. AAACW0489L ITA NO.6284/MUM/2005 ASSESSMENT YEAR: 2000-01 WELSPUN SYNTEX LTD. 2 WELSPUN SYNTEX LTD. TRADE WORLD, B. WING, 9TH FLOOR, KAMALA MILS COUMPOUND, SENAPATI BAPAT MARG, LOWER PAREL, MUMBAI-400013 / VS. ITO, WD 4(3)(2) ADDL. CIT 1(1) R.NO.403, AAYAKAR BHAVAN, MUMBAI-400020 (ASSESSEE ) (REVENUE) P.A. NO. AAACW0489L ITA NO.6653/MUM/2005 ASSESSMENT YEAR: 2000-01 ITO, WD 4(3)(2) ADDL. CIT 1(1) R.NO.403, AAYAKAR BHAVAN, MUMBAI-400020 / VS. WELSPUN SYNTEX LTD. TRADE WORLD, B. WING, 9TH FLOOR, KAMALA MILS COUMPOUND, SENAPATI BAPAT MARG, LOWER PAREL, MUMBAI-400013 (REVENUE) (REVENUE ) P.A. NO. AAACW0489L APPELLANT BY SHRI F.V. IRANI (A R) RESPONDENT BY SHRI RAJESH OJHA (D R) / DATE OF HEARING: 21/07/2016 / DATE OF ORDER: 11/08/2016 / O R D E R PER ASHWANI TANEJA (ACCOUNTANT MEMBER): THESE APPEALS PERTAINS TO THE SAME ASSESSEE INVOLVI NG IDENTICAL ISSUES AND THEREFORE THESE WERE HEARD TOG ETHER AND BEING DISPOSED BY THIS COMMON ORDER. 2. DURING THE COURSE OF HEARING, ARGUMENTS WERE MADE B Y SHRI F.V. IRANI, (AR) ON BEHALF OF THE ASSESSEE AND BY SHRI WELSPUN SYNTEX LTD. 3 RAJESH OJHA, DEPARTMENTAL REPRESENTATIVE (LD. DR) O N BEHALF OF THE REVENUE. FIRST WE SHALL TAKE UP APPEAL FILED BY THE ASSESSEE IN ITA NO.6284/MUM/2005 FOR A.Y. 2000-01: THE ASSESSEE HAS FILED FOLLOWING GROUNDS OF APPEAL: 1.A) THE HON. CIT (A) HAS ERRED IN LAW AND FACTS IN CONFIRMING THE DISALLOWANCE OF DEPRECIATION OF RS. 35,09,559/- OF FOREIGN EXCHANGE DIFFERENCE CAPITALI SED ON REALIGNMENT OF FOREIGN CURRENCY LOAN DIRECTLY & FULLY UTILIZED FOR FIXED ASSETS. THE REASONS GIVEN BY HIM ARE WRONG AND CONTRARY TO THE PROVISIONS OF LAW. THE HON. CIT (A) FAILED TO APPRECIATE THAT INCREASE OF LOAN LIABILITY DUE TO FLUCTUATION IN EXCHANGE RATE IS DI RECTLY RELATED TO ACQUISITION OF FIXED ASSETS. HE OUGHT TO HAVE ALLOWED DEPRECIATION OF RS. 35,09,559/- ON SUCH FOR EIGN EXCHANGE LOSS. 2.A) THE HON. CIT (A) ERRED IN LAW AND FACTS IN DIS ALLOWING ALTERNATIVE CLAIM FOR ALLOWANCE OF RS. 59,82,332/-, BEING DIFFERENCE OIL OF FOREIGN CURRENCY LOAN (OIL DAY OF THE YEAR) UTILIZED FOR ASSETS ALREADY PUT TO USE, U/S 37 OF THE ACT BEING EXPENSE INCURRED FOR THE BU SINESS OF THE APPELLANT. THE HON. CIT (A) ERRED IN LAW AND FACTS IN HOLDING THAT EXCHANGE DIFFERENCE OIL OF FOREIGN EXCHANGE LO AN IS ON CAPITAL ACCOUNT. HE FAILED APPRECIATE THAT IT IS BUSINESS LOSS ALLOWABLE DEDUCTION U/S 37 OF THE ACT . THE HON. CIT (A) FAILED TO APPRECIATE THAT RS. 59,82,332/- BEING DIFFERENCE OIL OF FOREIGN CURRENC Y LOAN USED FOR ASSETS PUT TO USE HENCE HE TREATED AS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS AND ALLOWABLE U/S 37 OF THE I.T. ACT, 1961 . 2. A) THE HON. CIT (A) HAS ERRED IN LAW AND FACTS I N CONFIRMING THE ADDITION OF RS.4.00 CRORES U/S 68 OF THE ACT AS UNEXPLAINED CREDIT ON ACCOUNT OF FORFEITURE OF PREFERENCE SHARES. THE REASONS GIVEN BY A.O. AND CONFIRMED BY HON. CIT (A) IS WRONG AND CONTRARY TO THE PROVISIONS OF LAW AND FACTS OF THE CASE. WELSPUN SYNTEX LTD. 4 B) THE ADDITION OF RS. 4 CRORE TO INCOME AS UNEXPLA INED CREDIT CONFIRMED BY THE HON. CIT (A) IS FACTUALLY A ND LEGALLY CONTRARY TO THE PROVISIONS OF LAW- (I) AS THE AMOUNT OF RS. 4 CRORES WERE RECEIVED AND CREDITED DURING THE EARLIER ASST. YEAR (PARA 4.4 OF CIT (A)'S ORDER) HENCE IF AT ALL ADDITION TO BE MADE IT SHOULD HAVE BEEN MADE IN THE ASST. YEAR 1999-00. (II) THE CREDIT TO SHARE CAPITAL ON ISSUE OF SHARES IS O NCE ACCEPTED BY HIM AS EXPLAINED AND FORFEITURE OF THOS E VERY SHARES CANNOT BE HELD AS UNEXPLAINED. C) THE HON. CIT (A) FAILED TO APPRECIATE THAT THE AMOUNT ON FORFEITURE OF PREFERENCE SHARES IS ON CAP ITAL ACCOUNT AND NOT TAXABLE. IT IS A CAPITAL RECEIPT HE NCE ADDITION IS WRONG AND CONTRARY TO THE PROVISIONS OF LAW. THE LD. CIT (A) HAS CONFIRMED THE ADDITION WITHOUT GIVING ANY REASONS FOR DOING SO. 3.A)THE HON. CIT (A) HAS ERRED IN LAW AND FACTS IN CONFIRMING THE DISALLOWANCE OF CLAIM OF RS. 16,70,2 26/- BEING PROVISIONS FOR EARNED LEAVE. THE REASONS OF ACTUARIAL CERTIFICATE, GIVEN BY HIM IS WRONG AND AG AINST LAW. (B) THE HON. CIT (A) FAILED TO APPRECIATE THAT PROV ISIONS FOR EARNED LEAVE LIABILITY IS ALLOWABLE DEDUCTION A S HELD IN THE CASE OF BHARAT EARTH MOVERS AND NOT COVERED U/S 43B OF THE ACT. THIS IS INCLUDED U/S 43B BY FINANCE ACT 2001 W.E.F. 01.04.2002 (A.Y. 2002-03)]. 3. GROUND NO. 1(A): IN THIS GROUND THE ASSESSEE HAS CHALLENGED THE ACTION OF LD. CIT(A) IN CONFIRMING T HE DISALLOWANCE OF DEPRECIATION OF RS.35,09,559/- ON T HE FOREIGN EXCHANGE DIFFERENCE CAPITALIZED ON REALIGNMENT OF F OREIGN CURRENCY LOAN CLAIMED TO BE UTILIZED, DIRECTLY & FU LLY, FOR ACQUIRING FIXED ASSETS. 3.1. THE BRIEF FACTS ARE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF MANUFACTURING AND PROCESSING YARNS VIZ TEXTURISING, TWISTING, DYEING, POLYSTER YARN AT PAL GHAR AND WELSPUN SYNTEX LTD. 5 RAKHOLI. THE ASSESSEE FILED ITS RETURN OF INCOME ON 30.11.2000 SHOWING LOSS OF RS. 41,47,38,061/-. THE ASSESSEE HAD PURCHASED CERTAIN MACHINERIES UTILIZING FOREIGN CURRENCY LOAN TAKEN BY IT. AS PER ITS ACCOUNTING PO LICY, IT REALIGNED ITS FIXED LOAN LIABILITY AT THE YEAR END AND DIFFERENCE WAS DEBITED TO COST OF FIXED ASSETS PURC HASED OUT OF THAT LOAN AND CLAIMED DEPRECIATION THEREON. THE ASS ESSEE CLAIMED DEPRECIATION OF RS. 35,09,559/- ON EXCHANGE DIFFERENCE CAPITALISED WITHIN PLANT & MACHINERIES, IN RESPECT OF LOAN OF RS. 10.00 CRORES TAKEN FOR PURCH ASE OF MACHINERIES. THE ASSESSEE ALTERNATIVELY CLAIMED DED UCTION OF RS.59,82,332/- AS REVENUE EXPENSES BEING EXCHANGE DIFFERENCE OIL OF LOAN DURING THE YEAR, WHICH IS US ED FOR MACHINERIES ALREADY PUT TO USE FOR THE PURPOSE OF B USINESS. THE LD A.O. DISALLOWED THE DEPRECIATION OF RS. 35,0 9,559/- ON THE GROUND THAT THE EXCHANGE DIFFERENCE CANNOT BE CAPITALISED U/S 43A AS THE LOAN IS NOT USED FOR IMP ORTED MACHINERIES HENCE NOT ELIGIBLE FOR DEPRECIATION AND ALSO REJECTED ALTERNATIVE CLAIM FOR DEDUCTION OF RS.59,8 2,332/- AS REVENUE EXPENSES / BUSINESS LOSS. LD. CIT (A) UPHEL D THE DISALLOWANCE. 3.2. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFO RE THE TRIBUNAL. 3.3. DURING THE COURSE OF HEARING LD. COUNSEL SUBMITTED THAT FAIRLY SPEAKING SECTION 43A DOES NOT APPLY ON THE F ACTS OF THIS CASE SINCE THE ASSESSEE DID NOT PURCHASE PLAN AND M ACHINERY FROM OUTSIDE INDIA AND THEREFORE ASSESSEE CANNOT TA KE BENEFIT OF DEPRECIATION TAKING SHELTER OF SECTION 43A, BUT, THE ASSESSEE WELSPUN SYNTEX LTD. 6 IS ENTITLED FOR DEPRECIATION ON ADDITIONAL LIABILIT Y ARISING ON ACCOUNT OF FLUCTUATION IN FOREIGN EXCHANGE UNDER GE NERAL PRINCIPLES. IN SUPPORT OF HIS ARGUMENTS, HE RELIED UPON JUDGMENTS OF HONBLE SUPREME COURT IN THE CASE OF C IT V. ARVIND MILLS LTD. 193 ITR 255 FOR THIS PROPOSITION AND ARGUED THAT THIS ISSUE IS COVERED WITH THE SAID JUDGMENT O F HONBLE SUPREME COURT. 3.4. PER CONTRA, LD. DR SUBMITTED THAT SECTION 43A IS C LEAR IN ITS EXPRESSION AND DOES NOT PROVIDE BENEFIT WHERE T HE MACHINE IS PURCHASED WITHIN INDIA. HE FURTHER SUBMITTED THA T UNDER THE GENERAL PRINCIPLES ALSO ASSESSEE CANNOT BE GIVE N BENEFIT OF DEPRECIATION ON ACCOUNT OF FLUCTUATION IN FOREIGN E XCHANGE. HE DREW OUR ATTENTION ON PAGE NO.4 OF ORDER PASSED BY LD. CIT(A) WHEREIN THIS ISSUE HAS BEEN DISCUSSED. 3.5. WE HAVE GONE THROUGH THE ORDERS OF LOWER AUTHORITI ES AND CONSIDERED SUBMISSIONS MADE BY BOTH THE SIDES AS WE LL AS THE JUDGMENTS RELIED UPON BEFORE US. ADMITTEDLY, IN THI S CASE, THE MACHINE HAS NOT BEEN PURCHASED FROM OUTSIDE INDIA A ND THEREFORE, ASSESSEE IS CLEARLY NOT ELIGIBLE TO CLAI M THE BENEFIT OF DEPRECIATION U/S 43A OF THE ACT. THE NEXT ISSUE THA T ARISES FOR OUR CONSIDERATION IS WHETHER THE ASSESSEE WOULD BE ENTITLED FOR THE DEPRECIATION ON THE ADDITIONAL AMOUNT OF LIABIL ITY OF THE LOAN ARISING ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUA TIONS. IN THIS REGARD, IT WAS SHOWN TO US THAT THIS ISSUE HAS ALREADY BEEN DECIDED BY HONBLE SUPREME COURT IN THE CASE O F ARVIND MILLS LTD. (SUPRA). IT IS NOTED FROM THE PERUSAL OF JUDGMENT OF HONBLE SUPREME COURT THAT ONE OF THE QUESTIONS CON SIDERED BY HONBLE SUPREME COURT WAS THAT WHETHER THE ASSESSEE CAN WELSPUN SYNTEX LTD. 7 CLAIM ALLOWANCES LIKE DEPRECIATION ETC. UNDER THE A CT ON THE ADDITIONAL LIABILITY ARISING TO THE ASSESSEE CONSEQ UENT TO THE DEVALUATION OF RUPEE VIZ-A-VIZ FOREIGN EXCHANGE. HO NBLE SUPREME COURT CONSIDERED ENTIRE GAMUT OF LAW AVAILA BLE AND ALSO CONSIDERED THE STATEMENT ISSUED BY THE INSTITU TE OF CHARTERED ACCOUNTANT OF INDIA WHEREIN IT WAS ADVISE D THAT FIXED ASSETS WHICH ARE PURCHASED PRIOR TO DEVALUATI ON BUT PAID FOR SUBSEQUENTLY SHOULD BE RECORDED AT THE ENHANCED COST OF CONVERSION AT THE NEW RATES OF EXCHANGE AND DEPRECI ATION MUST BE PROVIDED ON THE ADDITIONAL COST ACCORDING T O THE METHOD OF DEPRECIATION NORMALLY EMPLOYED BY THE COM PANY. THEIR LORDSHIPS OBSERVED AS UNDER: WE MAY NOW TURN TO THE SECOND QUESTION POSED EARL IER AND CONSIDER THE POSITION ON GENERAL PRINCIPLES. SO FAR AS DEPRECIATION ALLOWANCE IS CONCERNED, THE POSITION I S PERHAPS A LITTLE SIMPLER BECAUSE IT IS A RECURRENT CLAIM. UNDER THE DEFINITIONS CONTAINED IN SECTION 32 READ WITH SECTION 43(1) AND (6) OF THE INCOME-TAX ACT, T HE DEPRECIATION IS TO BE ALLOWED ON THE ACTUAL COST OF THE ASSET LESS ALL DEPRECIATION ACTUALLY ALLOWED IN RESPECT T HEREOF IN EARLIER YEARS. THUS WHERE THE COST OF THE ASSET SUBSEQUENTLY GOES UP BECAUSE OF DEVALUATION, WHATEVER MIGHT HAVE BEEN THE POSITION IN THE EARLIE R YEAR, IT IS ALWAYS OPEN TO THE ASSESSEE TO INSIST, AND FOR THE INCOME-TAX OFFICER TO AGREE, THAT THE WRITT EN DOWN VALUE IN THE YEAR IN WHICH THE INCREASED LIABILITY HAS ARISEN SHOULD BE TAKEN ON THE BASIS O F THE INCREASED COST MINUS DEPRECIATION EARLIER ALLOWED ON THE BASIS OF THE OLD COST . THUS IN THE ILLUSTRATION GIVEN EARLIER, IF THE ASSET IS ONE THA T EARNS DEPRECIATION AT 10%, THE ASSESSEE WOULD HAVE GOT A DEPRECIATION ALLOWANCE OF RS. 10,000 FOR ASSESSMENT YEAR 1966-67 AND THAT WILL STAND. BUT, FOR THE ASSESSMEN T YEAR 1967-68 THE DEPRECIATION ALLOWANCE WILL BE CALCULAT ED ON AN ACTUAL COST OF RS. 1,20,000 MINUS THE DEPRECIATI ON, EARLIER ALLOWED, OF RS. 10,000 I.E. ON RS. 1,10,000 . THE WELSPUN SYNTEX LTD. 8 WRITTEN DOWN VALUE AND ALLOWANCES FOR SUBSEQUENT YE ARS WILL BE CALCULATED ON THIS FOOTINGS. IN OTHER WORDS, THOUGH THE DEPRECIATION GRANTED EARLIER WILL NOT BE DISTURBED, THE ASSESSEE WILL BE ABLE TO GET A HIGHE R AMOUNT OF DEPRECIATION IN SUBSEQUENT YEARS ON THE BASIS OF THE REVISED COST AND THERE WILL BE NO PROBLEM. 3.6. THUS, PERUSAL OF THE JUDGMENT OF HONBLE SUPREME C OURT REVEALS THAT IF AN ASSESSEE INCURS AN ADDITIONAL LI ABILITY ON ACCOUNT OF FLUCTUATION IN FOREIGN EXCHANGE FOR THE LOAN WHICH WAS TAKEN FOR ACQUIRING A FIXED ASSETS, THEN ON GEN ERAL PRINCIPLES ALSO IT SHALL BE ADJUSTED TO THE COST OF THE ASSETS AND ASSESSEE WOULD BE ELIGIBLE TO CLAIM BENEFIT OF DEPR ECIATION ON THE ADJUSTED COST. THE FACTS IN THIS REGARD ARE UNDISPUTED; IT I S AN ADMITTED FACT THAT LOAN WAS TAKEN FOR ACQUIRING FIXED ASSETS. LD. COUNSEL PLACED BEFORE US AT PAGE 62 A W ORK SHEET SHOWING THE EFFECT OF INCREASE IN LIABILITY ON ACCO UNT OF DEVALUATION OF INR VIZ-A-VIZ US$ AND CONSEQUENT ADJ USTMENT TO THE COST OF THE ASSETS AND ENTITLEMENT OF THE AS SESSEE WITH RESPECT TO DEPRECIATION ON THE ADDITIONAL LIABILITI ES ADJUSTED TO THE COST OF THE ASSETS. THUS, RESPECTFULLY FOLLOWIN G THE JUDGMENT OF HONBLE SUPREME COURT, WE DIRECT THE AO TO VERIFY THE FACTS AS HAVE BEEN BROUGHT BEFORE US VIDE PAPER BOOK PAGE NO. 62 AND AFTER VERIFYING REQUISITE DETAILS AND DO CUMENTARY DETAILS IN THIS REGARD, THE AO SHOULD ALLOW THIS DE PRECIATION ON THE ADJUSTED COST OF ASSETS IN RELATION TO INCREASE IN THE LIABILITY ARISING ON ACCOUNT OF FLUCTUATION IN FORE IGN EXCHANGE. THE ASSESSEE IS FREE TO RAISE ALL LEGAL AND FACTUAL ISSUES IN THIS REGARD FOR WHICH THE AO SHALL GRANT ADEQUATE OPPORT UNITY OF HEARING. THIS GROUND MAY BE TREATED AS ALLOWED. WELSPUN SYNTEX LTD. 9 4. GROUND NO.1(B): IN THIS GROUND, THE ASSESSEE HAD MADE ALTERNATIVE CLAIM OF ALLOWING THE AMOUNT OF RS.59,8 2,332/- BEING DIFFERENCE ON REALIGNMENT OF FOREIGN CURRENCY LOAN U/S 37 OF THE ACT, AS PART OF BUSINESS EXPENSES. 4.1. SINCE, WE HAVE PRINCIPALLY ALLOWED PRIMARY CLAIM O F THE ASSESSEE WITH RESPECT TO CAPITALIZING THE ADDITIONA L LIABILITY AND ALLOWING DEPRECIATION ON THE SAME, THEREFORE, WE FI ND THAT GROUND NO. 1(B) HAS BECOME INFRUCTUOUS AND SAME IS DISMISSED AS SUCH. 5. GROUND NO. 2(A): IN THIS GROUND, THE ASSESSEE HAS CHALLENGED THE ACTION OF LD. CIT(A) IN CONFIRMING T HE ADDITION OF RS.4.00 CRORES U/S 68 OF THE ACT AS UNEXPLAINED CREDIT ON ACCOUNT OF FORFEITURE OF PREFERENCE SHARES. 5.1. THE BRIEF FACTS IN THIS REGARD ARE THAT THE ASSESS EE RECEIVED RS. 4.00 CRORES ON 05.03.1999 BY WAY OF A LOAN FROM M/S CHURUWALA INVESTMENT & FINANCE PVT. LTD, A COMP ANY ASSESSED TO TAX, AND SUBSEQUENTLY CONVERTED THE SAI D LOAN INTO SHARE APPLICATION MONEY FOR 80,00,000 PREFEREN CE SHARES OF RS. 10/- EACH ( FOR AGGREGATE FACE VALUE OF RS 8 CRORES ) AND ALLOTMENT WAS MADE ON 30.04.99 AND THE SHAREHOLDER WAS ASKED TO MAKE PAYMENT OF BALANCE AMOUNT OF RS. 4.00 CRORE. HOWEVER, THE COMPANY FAILED TO MAKE THE PAYM ENT OF BALANCE CALL MONEY OF RS. 4.00 CRORE INSPITE OF FORFEITURE NOTICE ISSUED FROM TIME TO TIME BY THE ASSESSEE COM PANY. EVENTUALLY, THE ASSESSEE COMPANY FORFEITED THE AFOR ESAID AMOUNT AND CREDITED IT TO CAPITAL RESERVE A/C DURIN G THE YEAR. THE AO DID NOT ACCEPT IT AND MADE ADDITION OF RS. 4.00 CRORES ON THIS ACCOUNT AS UNEXPLAINED CREDIT. WELSPUN SYNTEX LTD. 10 LD. CIT(A)CONFIRMED THE ADDITION, AND THEREFORE APP EAL HAS BEEN FILED BEFORE US. 5.2. DURING THE COURSE OF HEARING BEFORE US, IT WAS SUB MITTED THAT THE IMPUGNED AMOUNT WAS RECEIVED BY THE ASSESS EE IN THE PRECEDING YEAR AND THEREFORE, NO ADDITION COULD HAV E BEEN MADE U/S 68. IT WAS FURTHER SUBMITTED THAT REQUISIT E EVIDENCES WERE SUBMITTED TO SHOW THAT THERE WAS FORFEITURE OF SHARES DUE TO NON-PAYMENT OF PENDING AMOUNT BY THE SHAREHOLDER . IT WAS ALSO SUBMITTED THAT THERE ARISES NO PROFIT ON ACCOU NT OF FORFEITURE OF SHARE AND SECONDLY THE SHARES THOUGH PREFERENCE IN NATURE FORMS PART OF THE CAPITAL OF THE COMPANY AND THEREFORE, ANY FORFEITURE ON ACCOUNT OF THIS AMOUNT S TO BE CAPITAL RECEIPTS AND THUS THE FORFEITURE OF SHARE I S AN ACT OF A COMPANY IN RESPECT OF ITS CAPITAL STRUCTURE. UNDER THESE CIRCUMSTANCES, NO ADDITION COULD HAVE BEEN MADE IN THE YEAR UNDER CONCERN MUCH LESS U/S 68. OUR ATTENTION WAS D RAWN UPON VARIOUS EVIDENCES FILED IN THIS REGARD. 5.3. PER CONTRA, LD. DR SUBMITTED THAT SINCE THERE WERE CONTRADICTIONS IN THE EVIDENCES SUBMITTED BY THE AS SESSEE AND EVIDENCES COLLECTED BY THE AO DIRECTLY FROM THE SAI D PARTY, THEREFORE, ADDITION WAS RIGHTLY MADE BY THE AO. 5.4. WE HAVE GONE THROUGH THE ORDERS OF THE LOWER AUTHO RITIES AND CONSIDERED SUBMISSIONS MADE BY BOTH THE SIDES B EFORE US. IT IS NOTED BY US FROM THE PERUSAL OF THE ASSESSMEN T ORDER THAT AT PARA 5.5, THE AO HAS CLEARLY MENTIONED THAT THE CHEQUE WAS DEPOSITED AND GOT CLEARED IN THE BANK ACCOUNT OF TH E ASSESSEE ON 09.03.1999. THUS, THE IMPUGNED FUNDS SAW LIGHT O F THE DAY FOR THE FIRST TIME IN FINANCIAL YEAR 1998-99 (CORRE SPONDING TO WELSPUN SYNTEX LTD. 11 A.Y. 1999-00). UNDER THESE CIRCUMSTANCES, WE FIND T HAT AS PER SECTION 68 ADDITION, IF AT ALL IT WAS POSSIBLE, C OULD HAVE BEEN MADE IN A.Y. 1999-00 ONLY. SECTION 68 DOES NOT PERM IT FOR MAKING OF ADDITION FOR AN AMOUNT WHICH HAS NOT BEEN RECEIVED DURING THE YEAR UNDER CONCERN. UNDER THESE CIRCUMST ANCES, WE FIND THAT IMPUGNED ADDITION COULD NOT HAVE MADE AT ALL IN A.Y. 2000-01 I.E. THE YEAR UNDER CONSIDERATION. THU S, ON THIS GROUND ITSELF THIS ADDITION IS LIABLE TO BE DELETED . IT IS FURTHER NOTED BY US THAT THIS AMOUNT HAS BEEN DULY CONFIRME D BY THE SAID COMPANY AND WAS ALSO SHOWN IN ITS BALANCE SHEE T AS ADVANCE SHARE APPLICATION MONEY AS ON 31.03.1999. I N FINANCIAL YEAR 19990-00, THE SAID COMPANY HAS WRITT EN OFF THIS AMOUNT IN ITS BALANCE SHEET AND DEBITED IT IN ITS P ROFIT AND LOSS ACCOUNT AS LOSS ON ACCOUNT OF FORFEITURE. IT IS FUR THER NOTED THAT IN ITS COMPUTATION SHEET, THIS LOSS HAS BEEN A DDED BACK AS A PART OF ITEMS DISALLOWED. THE ASSESSING OFFICE R OF THE SAID COMPANY HAS ACCEPTED THE SAME AND NEITHER ANY ADDIT ION NOR DISALLOWANCE WAS MADE NOR ANY ADVERSE OBSERVATION W AS GIVEN IN THIS REGARD. THUS, WE FIND THAT, VIEWED FROM ANY ANGLE, THE ADDITION MADE BY THE AO IS CONTRARY TO LAW AND FACT S AND THE SAME IS HEREBY DELETED. 6. GROUND NO. 3: IN THIS GROUND, THE ASSESSEE HAS CHALLENGED THE ACTION OF LD. CIT(A) IN CONFIRMING THE DISALLOW ANCE OF CLAIM OF RS.16,70,226/-BEING THE AMOUNT OF PROVISIONS MAD E FOR EARNED LEAVE, ON THE GROUND THAT PROPER CERTIFICATE WAS NOT GIVEN BY THE ASSESSEE. 6.1. THE BRIEF FACTS IN THIS REGARD ARE THAT THE ASSESS EE CLAIMED DEDUCTION FOR RS. 16,70,226/- BEING PROVISION FOR L EAVE WELSPUN SYNTEX LTD. 12 ENCASHMENT, IN VIEW OF SUPREME COURT'S DECISION IN THE CASE OF BHARAT EARTH MOVERS VS. CIT (112 TAXMAN 61). THE AO DISALLOWED THE SAME ON THE GROUND THAT REPORT OF AC TUARIAL VALUATION WAS NOT SUBMITTED. LD. CIT (A) CONFIRMED THE DISALLOWANCE ON THE GROUND THAT IT IS NOT PAID BEFO RE THE DUE DATE OF SUBMISSION OF RETURN OF INCOME BY THE ASSESSEE. 6.2. DURING THE COURSE OF HEARING BEFORE US, LD. COUNSE L OF THE ASSESSEE SUBMITTED THAT PROPER DETAILS WERE SUBMITT ED WHEREIN NOTHING WRONG HAS BEEN FOUND BY THE AO AND STILL DISALLOWANCE HAS BEEN MADE AND WRONGLY CONFIRMED BY THE LD. CIT(A). 6.3. WE HAVE GONE THROUGH THE DETAILS SUBMITTED BY THE ASSESSEE IN THIS REGARD AND FIND THAT THE ASSESSEE HAS SUBMITTED PROPER EMPLOYEE WISE AND DATE WISE DETAIL S WITH RESPECT TO EMPLOYEES. THESE DETAILS ARE QUITE EXHAU STIVE. NOTHING WRONG HAS BEEN POINTED OUT BY THE AO WITH R EGARD TO THESE DETAILS. THE ONLY REQUIREMENT OF LAW IS THAT THE CALCULATION SHOULD BE DONE ON SCIENTIFIC BASIC. THE RE IS NO SUCH REQUIREMENT THAT A CERTIFICATE FROM THE ACTUAR IAL IS MANDATORY. THUS, WE SEND THIS ISSUE BACK TO THE FIL E OF THE AO WITH THE DIRECTION TO VERIFY THESE EXHAUSTIVELY PRE PARED DETAILS SUBMITTED BY THE ASSESSEE BEFORE US. THE ASSESSEE M AY ALSO FURNISH FURTHER DETAILS AND EVIDENCES IN SUPPORT OF ITS CLAIM AS MAY BE CONSIDERED APPROPRIATE AS PER LAW. THE AO SH ALL CONSIDER THESE DETAILS AND EVIDENCES ON OBJECTIVE B ASIS AND UNLESS ANYTHING WRONG IS FOUND IN DETAILS OR DOCUME NTARY EVIDENCES, THE CLAIM OF THE ASSESSEE SHOULD BE ALLO WED IN VIEW OF JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF BHARAT WELSPUN SYNTEX LTD. 13 EARTH MOVERS VS CIT 245 ITR 428. THUS, THIS GROUND MAY BE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 6.3. AS A RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLO WED. NOW, WE SHALL TAKE UP REVENUES APPEAL IN ITA NO.6653/MUM/2005 FOR A.Y. 2000-01. 7 . IT WAS BOUGHT TO OUR NOTICE THAT IN THIS APPEAL T AX EFFECT IS LESS THAN 10,00,000/- AND THEREFORE, APPEAL OF THE REVENUE IS NOT MAINTAINABLE IN VIEW OF CIRCULAR OF CBDT. KEEPI NG IN VIEW, THESE SUBMISSIONS AND FACTS OF THIS CASE, APPEAL OF REVENUE IS DISMISSED. OUR ORDER SHALL HAVE NO BEARING ON THE M ERITS OF THIS CASE. 7.1. AS A RESULT, APPEAL OF THE REVENUE IS DISMISSED. NOW, WE SHALL TAKE UP APPEAL FILED BY THE ASSESSEE IN ITA NO.8688/MUM/2011 FOR A.Y.1998-99: 8. GROUND NOS. 1, 2 & 3: THESE GROUNDS ARE IDENTICAL TO THE GROUND NO. 1(A) FOR A.Y. 2000-01 AND THEREFORE, THE SE ARE ALLOWED IN TERMS FOR OUR DIRECTION AS GIVEN IN A.Y. 2000-01. 9. GROUND NO.4: THIS GROUND IS IDENTICAL TO GROUND NO. 1(B) FOR A.Y. 2000-01 AND THEREFORE IT IS DISMISSED AS INFRU CTUOUS. NOW WE SHALL TAKE UP ASSESSEES APPEAL FOR A.Y. 199 9-00 IN ITA NO.8689/MUM/2011: 10 . GROUND NOS. 1(A)(B) & (C) ARE IDENTICAL TO GROUND NO.1(A) OF A.Y.2000-01 AND THEREFORE, THESE ARE ALLOWED IN TER MS OF OUR WELSPUN SYNTEX LTD. 14 DIRECTIONS AS GIVEN IN A.Y. 2000-01. THE AO IS DIRE CTED TO FOLLOW OUR DIRECTIONS AS GIVEN FOR A.Y. 2000-01. 11. GROUND NO. 1(D). THIS GROUND IS IDENTICAL TO GROUND NO. 1(B) FOR A.Y. 2000-01 AND THEREFORE, DISMISSED AS I NFRUCTUOUS. 12. GROUND NO. 2 IS NOT PRESSED AND THEREFORE, DISMISS ED. 13. GROUND NO.3 IS GENERAL AND DOES NOT NEED ANY SPECI FIC ADJUDICATION. 14. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISM ISSED AND APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH AUGUST, 2016. SD/- (AMIT SHUKLA ) SD/- (ASHWANI TANEJA) ! / JUDICIAL MEMBER ' ! / ACCOUNTANT MEMBER MUMBAI; # DATED : 11/08/2016 CTX? P.S/. .. #$%&'(')% / COPY OF THE ORDER FORWARDED TO : 1. % &' / THE APPELLANT 2. ()&' / THE RESPONDENT. 3. * * ( % ) / THE CIT, MUMBAI. 4. * * / CIT(A)- , MUMBAI 5. -. / (01 , * % 012 , / DR, ITAT, MUMBAI 6. / 34 5 / GUARD FILE. / BY ORDER, ) -% ( //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI