M/s Maral Overseas Ltd., V. The DCIT, 5(1),

ITA 869/IND/2003

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2561 (ITAT-INDORE)
• Duration Of Justice: 6 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 15-12-2009
• Assessment Year: 2000-2001
• Appeal Filed On: 06-10-2003
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K K SINGH
• Keywords: Business expenditure
• Section: 143(3); 80HHC; 37(1); 10B; 251; 208; 263; 10

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JM, AND SHRI V.K. GUPTA , AM ITA NO.312/IND/2002 A.Y. 1998-99 ITA NO.965/IND/2003 A.Y. 2000-01 DCIT-5(1), INDORE .....APPELLANT V/S. MARAL OVERSEAS LTD., VIL. KHAL BUJURG, KASRAWAD, DISTT. KHARGONE (PAN AACCM 0230 B) ....RESPONDENT AND ITA NO.288/IND/2002 A.Y. 1998-99 ITA NO.869/IND/2003 A.Y. 2000-01 MARAL OVERSEAS LTD. (PAN AACCM 0230 B) C/O ARORA BANTHIA & TULSIYAN, CAS 6 TH FLOOR, SILVER ARC PLAZA, 20/1, NEW PALASIA, INDORE .....APPELLANT V/S. DCIT-5(1), INDORE ....RESPONDENT DEPARTMENT BY : SHRI K.K. SINGH, CIT, DR ASSESSEE BY : SHRI AJAY TULSIYAN, CA 2 ORDER PER JOGINDER SINGH, JM THE REVENUE AS WELL AS THE ASSESSEE HAS FILED CROS S APPEALS FOR ASSESSMENT YEARS 1998-99 & 2000-01 RESP ECTIVELY AGAINST THE DIFFERENT ORDERS OF THE LD. CIT(A) DATE D 28.2.2002 & 28.8.2003. DURING THE HEARING OF THESE APPEALS, W E HAVE HEARD SHRI K.K. SINGH, LD. CIT, DR AND SHRI AJAY TU LSIYAN, LD. COUNSEL FOR THE ASSESSEE. 2. AT THE OUTSET, IT WAS POINTED OUT THAT THESE APP EALS ARE IDENTICAL TO THE FACTS OF APPEALS IN ITA NOS.415 & 451/IND/2000 AND ITA NOS.206 & 340/IND/2003. BOTH T HE REPRESENTATIVES SUBMITTED THAT THE ARGUMENTS ADVANC ED IN AFORESAID APPEALS MAY BE CONSIDERED FOR THE IMPUGNE D APPEALS ALSO. THE LEARNED CIT DR SUPPORTED THE ASSE SSMENT ORDER WHEREAS THE LEARNED COUNSEL FOR THE ASSESSEE DEFENDED THE IMPUGNED ORDER. 3. FIRST, WE SHALL TAKE UP APPEALS OF THE REVENUE F OR ASSESSMENT YEAR 1998-99 & 2000-01 (ITA NO.312/IND/2 002 & ITA NO.965/IND/2003), WHEREIN, THE FIRST COMMON GRO UND RAISED IS THAT ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEA LS) ERRED 3 IN DELETING THE ADDITIONS OF RS.1 LAC EACH MADE BY THE ASSESSING OFFICER BY DISALLOWING THE ESTIMATED BUSI NESS PROMOTION EXPENSES CLAIMED BY THE ASSESSEE FOR EXEM PTION. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND WIT HOUT DELIBERATING FURTHER FOUND THAT THIS ISSUE IS COVER ED BY THE DECISION OF THE TRIBUNAL IN ITA NO. 340/IND/03 WHER EIN VIDE PARA 54 ONWARDS IT WAS HELD AS UNDER :- 54. IN GROUND NO.(I), THE REVENUE IS AGGRIEVED BY THE DECISION OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS. 1 LAKH MADE BY THE ASSESSING OFFICER OUT OF BUSINESS PROMOTION EXPENSES. 55. THE FACTS, IN BRIEF, ARE THAT THE A.O. DISALLOWED A SUM OF RS. 1 LAKH OUT OF BUSINESS PROMOTION EXPENSES OF RS. 10,66,999/- CLAIMED BY THE ASSESSEE TO HAVE BEE N INCURRED ON THE VISITS OF FOREIGN BUYERS AND OF BAN K OFFICIALS. THE A.O. DISALLOWED THIS SUM AS HE WAS O F THE OPINION THAT ALL THESE EXPENSES COULD NOT BE CONSIDERED AS INCURRED WHOLLY AND EXCLUSIVELY FOR T HE PURPOSE OF THE BUSINESS OF THE ASSESSEE. IN APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED THAT IT WAS A 100% E.O.U. AND, THEREFORE, THE EXPENSES INCURRED ON THE VISITS OF THE FOREIGN BUYERS WERE I N THE COURSE OF FOREIGN BUSINESS. AS REGARDS TO VISITS OF BANK OFFICIALS, THE ASSESSEE STATED THAT THESE EXPENSES WERE INCURRED AS PER TERMS AND CONDITIONS OF AGREEMENT WITH THE BANK, HENCE, INCURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. THE LD. CIT(A) DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. AGGRIEVED BY THIS, THE REVENUE IS IN APPEA L BEFORE US. 56. THE LD. DR NARRATED THE FACTS AND PLACED RELIANCE O N THE ORDER OF THE AO. THE LD. COUNSEL FOR THE ASSESS EE, ON THE OTHER HAND, PLACED STRONG RELIANCE ON THE ORDER OF THE LD. CIT(A). 4 57. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIES BELOW. 58. IT IS NOTED THAT THE ASSESSEE IS 100 % EXPORT ORIEN TED UNITS AND HAS ALSO BORROWED FUNDS FROM BANK AND IS ENJOYING OTHER BANKING FACILITIES. HENCE, EXPENDITU RE INCURRED ON THE VISIT OF FOREIGN CUSTOMERS AND BANK OFFICIALS IS A BUSINESS EXPENDITURE. ACCORDINGLY, W E DISMISS THIS GROUND OF THE REVENUE. SINCE THE FACTS AND THE ISSUE WERE ARGUED TO BE IDE NTICAL BY THE LEARNED RESPECTIVE COUNSELS, THEREFORE, RESP ECTFULLY FOLLOWING THE FINDINGS GIVEN BY THE TRIBUNAL IN THE AFORESAID ORDER (SUPRA), THIS GROUND OF THE REVENUE IN BOTH T HE APPEALS IS HAVING NO MERIT THEREFORE DISMISSED. 5. THE SECOND GROUND RAISED IN ITA NO.965/IND/2003 FOR ASSESSMENT YEAR 2000-02 OF REVENUE AND GROUND NO. ( III)IN ITA NO.312/IND/2002 FOR ASSESSMENT YEAR 1998-99 OF REVENUE ARE AS UNDER: (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN DIRECTING TO ALLOW EXEMPTION U/S 10B AT RS.14,69,972/- ON DUTY DRAWBACK AND IN RESTRICTING THE DISALLOWANCE TO RS.58,908/- (III) DIRECTING THE AO TO TREAT THE INCOME FROM SAL ES OF QUOTA AT RS.5,11,555/-; DUTY DRAWBACK RECEIPT RS.13,17,917/- AND PREMIUM ON SPECIAL IMPORT LICENCE AMOUNTING TO RS.1,08,93,605/- AS INCOME OF THE EOU ELIGIBLE FOR EXEMPTION U/S 10B, ADDITION MADE BY THE AO BY DISALLOWING CLAIM OF THE ASSESSEE FOR EXEMPTION U/S 10B ON ACCOUNT OF 5 INCOME FROM SALE OF QUOTA, DUTY DRAWBACK AND PREMIUM OF SPECIAL IMPORT LICENCE. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND WIT HOUT DELIBERATING FURTHER FOUND THAT THE ABOVE GROUNDS A RE COVERED BY THE DECISION OF THE TRIBUNAL IN ITA NO. 451/IND/ 2000 WHEREIN VIDE PARA 34 ONWARDS IT WAS HELD AS UNDER: 34. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS 100 % EXPORT ORIENTED UNIT. THE A.O., IN THE COURSE OF ASSESSMEN T PROCEEDINGS NOTED THAT THE ASSESSEE HAD INCLUDED FOLLOWING INCOMES IN THE PROFIT OF THE EXPORT ORIEN TED UNDERTAKING WHILE CLAIMING EXEMPTIONS U/S 10B OF TH E ACT :- (I) PREMIUM ON SALE OF SPECIAL IMPORT LICENCE RS. 1,19,05,617/- (II) DUTY DRAW BACK RS. 6,03,977/- (III) SALE OF QUOTA RS. 9,66,650/- 35. THE A.O. HELD THAT SUCH INCOMES COULD NOT BE CO NSIDERED AS DERIVED FROM EXPORT ORIENTED UNDERTAKING. HENCE, HE RELYING ON THE DECISION OF SC IN THE CASE OF CIT VS . STERLING FOODS AS REPORTED IN 237 ITR 579 EXCLUDED THE SAME, WHILE COMPUTING EXEMPTION U/S 10-B OF THE ACT. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATTER INTO APPEAL BEFORE THE LD. CIT(A), WHEREIN IT WAS CONTEN DED THAT THE ASSESSEE COMPANY WAS CLAIMING EXEMPTION U/ S 10-B SINCE ASSESSMENT YEAR 1992-93. HOWEVER, IN THE YEAR UNDER CONSIDERATION ONLY THE ASSESSEES CLAIM OF SUCH EXEMPTION WAS DENIED. THE ASSESSEE ALSO RELIED ON THE LANGUAGE OF THE PROVISIONS OF SECTION 10B. THE LD. CIT(A) HELD THAT THERE WAS A CLOSE AND DIRECT PROXI MITY BETWEEN 100 % E.O.U. AND RECEIPT OF DUTY DRAW BACK . HENCE, THE ASSESSEE WAS ELIGIBLE FOR EXEMPTION THER EON U/S 10B OF THE ACT. THE LD. CIT(A) ALSO HELD THAT I MPORT LICENCES ISSUED BY THE DESIGNATED AUTHORITY OF GOVERNMENT OF INDIA AS PER THE EXPORT IMPORT POLICY AND 6 WHEN SUCH IMPORT LICENSES WERE SOLD, IT WAS A CASE OF SELLING SCRAP/WASTE AND, THEREFORE, IT WAS ALSO AN INTEGRAL PART OF E.O.U. OPERATIONS. AS REGARDS THE PROFIT OF SPECIAL IMPORT LICNECES, THE LD. CIT(A) HELD THA T SPECIAL IMPORT LICNECES WERE LIKE IMPORT ENTITLEMENTS AVAIL ABLE TO THE ASSESSEE AS A RESULT OF EXPORT ACTIVITIES CA RRIED OUT BY THE ASSESSEE. THE LD. CIT(A) FURTHER HELD THAT T HERE WAS A QUOTA SYSTEM FOR MAKING EXPORTS AND IF AN ASSESSEE WAS HAVING AN ORDER, BUT NO QUOTA FOR THAT COUNTRY THEN HE COULD MAKE EXPORT TO THAT COUNTRY B Y PURCHASING QUOTA FROM ANOTHER EXPORTER AND ,SIMILAR LY, THE ASSESSEE COULD SELL ITS QUOTA TO NEEDY EXPORTER AND, THEREFORE, PROFIT ON SALE OF QUOTA EARNED BY THE UNDERTAKING ON EXPORTS, WAS ALSO ELIGIBLE FOR EXEMP TION U/S 10B OF THE ACT. IN DOING SO, THE LD. CIT(A) ALS O HELD THAT THE A.O. WRONGLY APPLIED THE RATIO OF THE DECI SION OF STERLING FOODS (SUPRA) AS THE PROVISIONS OF SECTION 10B STOOD ON DIFFERENT FOOTINGS AS COMPARED TO THE PROVISIONS OF SECTION 80HHC. THE LD. CIT(A), IN DOI NG SO, ALSO RELIED ON THE DECISION OF THE ALLAHBAD BENCH O F THE TRIBUNAL IN THE CASE OF ACIT VS. PRATIBHA SYNTEX LI MITED, AS REORTED IN 108 TAXMAN (MAGAZINE) PAGES 32 & 34. AGGRIEVED BY THIS, THE REVENUE IS IN APPEAL BEFORE US. 36.THE LD. DEPARTMENTAL REPRESENTATIVE NARRATED THE FACTS, PLACED RELIANCE ON THE ORDER OF THE A.O. AND ALSO O N THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF LI BERTY INDIA AS REPORTED IN 317 ITR 208 ( S.C.). 37.THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTH ER HAND, FIRSTLY REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A), THEREAFTER, HE CONTENDED THAT THE ASSESSEE HAD NO OTHER SOURCE OF INCOME DURING THE YEAR UNDER CONSID ERATION, HENCE, WHATEVER INCOME WAS EARNED OR RECEIVED HAD T O BE TREATED AS DERIVED FROM THE SUCH EXPORT ORIENTED UNDERTAKING. HE FURTHER CONTENDED THAT UP TO ASSESS MENT YEAR 2000-01, EVEN PROFITS EARNED IN RESPECT OF DOM ESTIC SALES WERE ELIGIBLE FOR EXEMPTION U/S 10B UP TO ASS ESSMENT YEAR 2000-01. HENCE, LEGISLATIVE INTENT OF COMPLETE TAX HOLIDAY IN CASE OF ENTIRE INCOME OF 100 % E.O.U. WA S CLEARLY MANIFEST. HE FURTHER CONTENDED THAT ASSESSMENT FOR THE ASSESSMENT YEAR 1995-96 WAS COMPLETED U/S 143(3) 7 WHEREIN SUCH INCOMES WERE GRANTED EXEMPTIONS U/S 10 B OF THE ACT. SUBSEQUENTLY, WHEN THE LD CIT PASSED ORDER U/S 263 WITHDRAWING SUCH EXEMPTIONS, THE TRIBUNAL VIDE ITS ORDER DATED 28.12.2001 IN I.T.A.NO. 249/IND/2000 QUASHED SUCH ORDER AND AFTER CONSIDERING THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF STERLING FOODS ( SUPRA ) HELD THAT THE ASSESSEE WAS ELIGIBLE FOR EXEMPTION U/S 10B ON ALL SUCH RECEIPTS AND, THEREFORE, THE MATTER WAS COVERED IN FAVOUR OF THE ASSESSEE. HE FURTHER CONTENDED THAT SECTION 10B FELL UNDER CHAPTER III AND, THEREFORE, PROVISIONS OF SEC TION 10B HAD TO BE GIVEN A WIDER AND A LIBERAL INTERPRETATIO N AS COMPARED TO INCENTIVE PROVISIONS FALLING UNDER CHAP TER VIA OF THE ACT. THE LEARNED COUNSEL ALSO CONTENDED THAT THE LEGISLATIVE INTENT BEHIND SECTION 80HH/80I WAS TO P ROMOTE INDUSTRIES. HOWEVER, SECTION 10A & 10B HAD BEEN INCORPORATED TO PROMOTE EXPORTS AND, HENCE, ALL INC OMES DERIVED AS A RESULT OF EXPORT ACTIVITIES WERE ELIGI BLE FOR EXEMPTION, THOUGH THESE MIGHT NOT EMANATE FROM THE INDUSTRIAL ACTIVITIES, BECAUSE THEIR SOURCE WAS EXP ORT ULTIMATELY. IN THIS REGARD, HE FURTHER CONTENDED TH AT UNLESS EXPORTS WERE MADE, THESE INCOME WOULD NOT HAVE ACCR UED AND, THEREFORE, THESE INCOMES WERE INEXTRICABLY DER IVED FROM THE EXPORT ACTIVITIES, HENCE, ELIGIBLE FOR EXE MPTION U/S 10B. IN THIS REGARD, HE FURTHER PLACE RELIANCE ON T HE DECISION OF THE TRIBUNAL IN THE CASE OF WIPRO LIMITED VS. DY . CIT, AS REPORTED IN (2005) 96 TTJ ( BANG ) 211, WHEREIN THE TRIBUNAL HAD HELD THAT THE PREMIUM ON SALE OF SPECIAL IMPORT LICENSE WAS TO BE CONSIDERED AS EXEMPT U/S 10A. HE FURTHER CONTENDED THAT THE PROVISIONS OF SECTION 10A WERE P ARI- MATERIA WITH THE PROVISIONS OF SECTION 10B. HE FURT HER PLACED RELIANCE ON THE DECISION OF THE HON'BLE SUPR EME COURT IN THE ASSESSEE OF B. DESHRAJ VS. CIT, AS REP ORTED IN 301 ITR 439, WHEREIN THE HON'BLE SUPREME COURT HAD HELD THAT DUTY DRAW BACK AND CASH COMPENSATORY WERE TO B E INCLUDED IN THE BUSINESS PROVISIONS FOR COMPUTING T HE DEDUCTION U/S 80HHC. 38. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIES BELOW. 8 39. IT IS NOTED THAT THE ASSESSEE IS 100 % EXPORT ORIEN TED UNDERTAKING. IT IS MANUFACTURING AND EXPORTING THE PRODUCTS, WHICH ARE ELIGIBLE FOR EXEMPTION U/S 10B OF THE ACT. AT THE RELEVANT POINT OF TIME AS PER THE PROVI SIONS OF SECTION 10-B(1), AN ASSESSEE WAS ENTITLED FOR EXEMP TION U/S 10-B ANY PROFITS AND GAINS DERIVED BY AN ASSESSEE FROM A 100 % E.O.U.. SUBSEQUENTLY, THE PROVISIONS OF SECT ION 10B AS APPLICABLE WITH EFFECT FROM 1.4.2001 PROVIDED FO R A DEDUCTION OF SUCH PROFIT AND GAINS AS ARE DERIVED B Y A 100 % EXPORT ORIENTED UNDERTAKING. THUS, IN LIEU OF WOR D ANY, THE WORD SUCH WAS SUBSTITUTED, WHICH MEANS THAT SCOPE OF EARLIER PROVISIONS WAS WIDE AS THE TERM A NY HAS BEEN INTERPRETED IN A NUMBER OF JUDICIAL DECISION T O MEAN ALL. THUS, WHAT IS REQUIRED IS THAT THERE MUST BE SOME IMMEDIATE/DIRECT NEXUS BETWEEN SUCH PROFITS/GAINS AND THE EXPORT ORIENTED UNDERTAKING. IF IN THIS LEGAL BACKG ROUND, THE FACTS OF IMPUGNED ITEMS ARE ANALYZED, THEN, IT IS E VIDENT THAT ALL THE ITEMS HAVE ACCRUED TO SUCH UNDERTAKING DUE TO EXPORT ACTIVITY BEING UNDERTAKEN BY SUCH UNDERTAKIN G. HENCE, IN OUR OPINION, THE LD. CIT(A) HAS RIGHTLY H ELD THAT THE ASSESSEE IS ENTITLED TO EXEMPTION U/S 10B ON THESE ITEMS. WE ALSO FIND THAT THE DECISION OF THE TRIBUNAL IN T HE CASE OF WIPRO LIMITED (SUPRA ) ALSO SUPPORTS THE CLAIM OF T HE ASSESSEE. BEFORE PARTING, WE MAY ALSO ADD THAT THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA IS IN THE CONTEXT OF DIFFERENT PROVISIONS, HENCE, IN O UR HUMBLE OPINION NOT APPLICABLE. WE FURTHER FIND THAT THE DE CISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1995-96, WHEREIN THE ORDER PASSED U/S 263 WAS QUASH ED ALSO SUPPORTS THE CLAIM OF THE ASSESSEE. THUS, THIS GROUND OF THE REVENUES APPEAL IS ALSO DISMISSED. SINCE THE FACTS AND THE ISSUE WERE ARGUED TO BE IDE NTICAL BY THE LEARNED RESPECTIVE COUNSELS, THEREFORE, RESP ECTFULLY FOLLOWING THE FINDINGS GIVEN BY THE TRIBUNAL IN THE AFORESAID ORDER (SUPRA), THESE GROUNDS OF THE REVENUE ARE HAV ING NO MERIT THEREFORE DISMISSED. 9 7. THE FOURTH GROUND RAISED IN ITA NO.965/IND/2003 OF REVENUE IS THAT ON THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEA LS) ERRED IN DIRECTING THE AO TO CONSIDER 90% OF NET INTEREST INCOME TO BE ALLOWED TO BE EXCLUDED FOR CALCULATION OF DEDUCT ION U/S 80HHC. 8. THE ASSESSEE RECEIVED INTEREST INCOME OF RS.3,78 ,478/- IN ITS EOU AND OF RS.2,53,836/- IN ITS JAMMU UNIT. INTEREST OF EOU WAS DENIED EXEMPTION U/S 10B BY THE AO AND THE SAME WAS INCLUDED IN THE PROFITS AND GAINS OF BUSINESS. THE INTEREST RECEIPT OF RS.2,53,836/- OF JAMMU UNIT WAS ALSO INC LUDED IN THE PROFITS AND GAINS OF BUSINESS. THE ITO IN VIEW OF EXPLANATION (BAA) TO SEC. 80HHC EXCLUDED THESE RECE IPTS FROM PROFITS OF BUSINESS FOR THE PURPOSE OF CALCULATION OF DEDUCTION ALLOWABLE TO THE ASSESSEE. ON APPEAL, LD. CIT(A) CO NFIRMED THE ACTION OF THE AO. AN ALTERNATE PLEA WAS TAKEN B Y THE ASSESSEE BEFORE THE LD. CIT(A) THAT ONLY 90% OF NET INTEREST INCOME SHOULD BE ALLOWED TO BE EXCLUDED FOR CALCULA TION DEDUCTION U/S 80HHC. THE LD. CIT(A) ACCEPTED THE PL EA OF THE ASSESSEE AND DIRECTED THE AO TO EXCLUDE 90% OF NET INTEREST INCOME. 10 9. BEFORE US, THE LD. DR SUPPORTED THE ORDER OF THE AO WHEREAS THE LD. COUNSEL FOR THE ASSESSEE SUPPORTED THE IMPUGNED ORDER. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON THE FILE, THEREFORE, KEEPING IN VIEW T HE FACTS NARRATED BY US IN PARA 8 (PAGE 9) (SUPRA), WE DO N OT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). THE SAME IS, THEREFORE, CONFIRMED. 11. THE GROUND (II) RAISED IN ITA NO.312/IND/2002 F OR ASSESSMENT YEAR 1998-99 IS THAT THE LEARNED CIT(A) ERRED IN DELETIN G THE ADDITION OF RS. 39,452/- MADE ON ACCOUNT OF SUNDRY BALANCES WRITTE N OFF. 12. THE AO DISALLOWED AN AMOUNT OF RS.39,452/- DEBI TED TO SUNDRY BALANCES WRITTEN OFF. IT WAS PLEADED BEFORE THE AO THAT THE SAME AMOUNT WAS EXCESS PROVIDED FOR THE PERIOD 16.8.96 TO 31.8.96 W HEREAS THE INTEREST WAS ACTUALLY RECEIVABLE FOR TWO DAYS ONLY. THE AO HELD THAT THE ACCOUNT OF THE ASSESSEE IN THE BOOKS OF BHILWARA PROCESSORS LTD. D ID NOT ESTABLISH THE STAND OF THE ASSESSEE THAT THE AMOUNT WAS WITH THE ASSESS EE FOR TWO DAYS ONLY. HE, THEREFORE, DISALLOWED THE SAME. ON APPEAL, AFTER CO NSIDERING THE SUBMISSION OF THE ASSESSEE, THE LD. CIT(A) DELETED THE ADDITIO N. 13. THE LEARNED CIT DR DEFENDED THE ASSESSMENT ORDE R WHEREAS THE LEARNED COUNSEL FOR THE ASSESSEE SUPPORTED THE IMPU GNED ORDER. 11 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECORD AND FIND THAT IT IS A DEDUCTION FOR BUSINESS EXPENSES AS THE SAME IS INCI DENTAL TO CARRYING ON THE BUSINESS. THE AO DID NOT BRING ANY MATERIAL ON RECO RD TO CONTROVERT THE STAND OF THE ASSESSEE AND WITHOUT ANY MATERIAL ON RECORD, HE DISALLOWED THE CLAIM OF THE ASSESSEE, WHICH CANNOT STAND. OUR VIEW FURTH ER FINDS SUPPORT FROM THE DECISION IN THE CASE OF RAMCHANDAR SHIVNARAYAN VS. CIT, 111 ITR 263 (SC), WHEREIN, IT WAS HELD THAT IF THERE IS A DIRECT AND PROXIMATE NEXUS BETWEEN THE OPERATIONS AND THE LOSS OR IT IS INCIDENTAL TO IT, THEN THE LOSS IS DEDUCTIBLE AS WITHOUT THE BUSINESS OPERATIONS NO PROFIT CAN BE EA RNED. THEREFORE, THE ORDER OF THE LD. CIT(A) IS UPHELD. CONSEQUENTLY, THIS GRO UND OF THE REVENUE IS HAVING NO MERIT THEREFORE DISMISSED. 15. THE GROUND NO.(IV) OF ITA NO.312/IND/2002 FOR T HE ASSESSMENT YEAR 1998-99 IS THAT THE LD. CIT(A) ERRED IN DELETING TH E ADDITION OF RS.2,37,641/- MADE BY THE AO ON ACCOUNT OF PROVISIONS NO LONGER R EQUIRED WRITTEN BACK. 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES. 17. THE ASSESSEE WROTE OFF AN AMOUNT OF RS.12,79,27 1/- AS PROVISIONS NO LONGER REQUIRED. THE ASSESSEE FILED DETAILS OF THE SAME BEFORE THE AO WHEREFROM THE AO FOUND THAT THE SAME HAS BEEN ARRIV ED AT AFTER DEDUCTING THE SHORT PROVISIONS OF RS. 9,42,520/- FROM THE GRO SS PROVISIONS WRITTEN BACK 12 RS. 22,21,791/-. THE AO OBSERVED THAT THE LIABILI TY ON ACCOUNT OF COMMISSION AND CLAIMS HAS BEEN DETERMINED IN TERMS OF US DOLLA RS AT THE END OF EARLIER YEAR ONLY. THE SHORT PROVISION DEBITED THIS YEAR W AS ONLY ON ACCOUNT OF FLUCTUATION IN FOREIGN EXCHANGE RATE OVER WHICH THE ASSESSEE DID NOT HAVE ANY CONTROL. THE AO FOUND THAT THE ASSESSEE WAS JUSTIF IED IN DEBITING SUCH EXCESS PAYMENTS DURING THE YEAR. SO FAR AS SHORT PROVISION ON ACCOUNT OF OCEAN FREIGHT OF EARLIER YEARS BEING RS. 2,37,641/- IS CO NCERNED, THE ASSESSEE SUBMITTED BEFORE THE AO VIDE LETTER DATED 16.12.200 0 THAT THE LIABILITIES IN THIS REGARD HAD BEEN PROVIDED ON ESTIMATION BASIS WHEREA S THE ACTUAL PAYMENTS HAD TO BE MADE SUBSEQUENTLY FOR A HIGHER AMOUNT. T HE ASSESSEE ALSO SUBMITTED THAT ONLY ANTICIPATED LIABILITIES COULD B E PROVIDED AT THE TIME OF CONSIGNMENT LEAVING THE FACTORY AND BEST OF ESTIMAT ION ALSO MAY NOT WORK AT ALL TIMES. THE ASSESSEE, THEREFORE, SUBMITTED BEFOR E THE AO THAT SUCH LIABILITY HAS CRYSTALISED IN THE YEAR AND WAS, THEREFORE, ALL OWABLE. THE AO, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVE D THAT SUCH LIABILITIES WERE PROVIDED FOR IN THE EARLIER YEAR ON AN ESTIMATED BA SIS. THE ASSESSEE COULD NOT CITE ANY REASON FOR SO MUCH VARIATION IN ITS ESTIMA TE . THE AO FURTHER OBSERVED THAT SINCE IT HAS REMAINED TO BE ESTABLISH ED THAT THE LIABILITY IN THIS REGARD HAD CRYSTALISED DURING THE YEAR, THE ASSESSE E IS NOT CONSIDERED AS CORRECT IN THE EXPENSES OF PAST YEARS A CHARGE AGA INST THE PROFIT OF THIS YEAR. HE, THEREFORE, DISALLOWED THE SAME AND ADDED IT TO THE TOTAL INCOME OF THE 13 ASSESSEE. ON APPEAL, THE LEARNED CIT(A) AFTER CONSI DERING THE SUBMISSIONS OF THE ASSESSEE AND THE FACTS, DELETED THE ADDITION. 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECORD AND FIND THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF T HIS BENCH OF THE TRIBUNAL IN ITA NO. 415/IND/2000. THE RELEVANT PORTION OF THE SAME IS REPRODUCED HEREUNDER :- 23. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE CREDITED A SUM OF RS. 4,35,466/- IN THE PROFIT AND LOSS ACCOUNT ON ACCOUNT OF PROVISIONS WRITTEN BACK, WHICH WERE NOT REQUIRED. IN DOING SO, THE ASSESSEE HAD REDUCED A SUM OF RS. 3,35,199/- FROM THE GROSS VALUE OF PROVISIONS NO LONGER REQUIRED. HOWEVER, HE MADE AN ADDITION OF RS. 3,35,199/- FOR THE REASON THAT IT WAS RELATED TO EARLIER YEARS . AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATTER INTO APPEAL BEFORE THE LD. CIT(A), WHEREIN THE ASSESSEE CONTENDED THAT SUCH SHORT PROVISIONS CRYSTALLIZED IN THE YEAR UNDER CONSIDERATION, HENCE ALLOWABLE IN THIS YEAR. THE ASSESSEE ALSO SUBMITTED THAT IN SOME CASES, A PROVISION WAS MADE ANTICIPATING THE RATE OF FLUCTUATION IN THE FOREIGN CURRENCY. HOWEVER, DUE TO MORE FLUCTUATION IN THE RATE OF CURRENCY ADDITIONAL PROVISION HAD TO BE MADE AND, THEREFORE, THE SAME WAS ALSO ALLOWABLE IN THE YEAR UNDER CONSIDERATION. THE LD. CIT(A) AGREEING WITH THIS CONTENTION DIRECTED THE A.O. TO MAKE THE ADJUSTMENT OF THE IMPUGNED SUM AGAINST THE AMOUNT OF RS. 7,69,664/- WRITTEN BACK AND CREDITED TO THE PROFIT AND LOSS ACCOUNT. AGGRIEVED BY THIS, THE REVENUE IS IN APPEAL BEFORE US. 14 24. THE LD. DR NARRATED THE FACTS AND PLACED RELIANCE ON THE ORDER OF THE AO. 25. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, PLACED STRONG RELIANCE ON THE ORDER OF THE LD . CIT(A) AND ALSO SUBMITTED THAT THE ASSESSEE COMPANYS TURNOVER WAS AROUND RS. 144 CRORES AND EXPENSES CLAIMED IN THE YEAR UNDER CONSIDERATION WERE TO THE TUNE OF RS. 125 CRORES AND DUE TO SUCH LEVEL OF BUSINESS OPERATIONS AND HAVING REGARD TO EXPORT TRANSACTIONS AS WELL, THESE SORTS OF ADJUSTMENTS WERE NORMAL. 26. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIES BELOW. 27. IT IS NOTED THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. IT HAS MADE PROVISIONS OF EXPENSES/ LIABILITIES BASED UPON THE FACTUAL SITUATION AS ON THE DATE OF THE CLOSING OF THE YEAR. HOWEVER, SUCH PROVISION, IN SOME CASES, IS SHORT OR, IN SOME CASES IT IS IN EXCESS OF ACTUA L AMOUNT PAYABLE. SOME PROVISIONS, MADE EARLIER, ARE NO MORE REQUIRED. THUS, HAVING REGARD TO THESE FACTS, WE HOLD THAT THE LD. CIT(A) HAS RIGHTL Y DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. HENCE, THIS GROUND OF THE REVENUE IS DISMISSED. 19. SINCE THE FACTS AND THE ISSUE WERE ARGUED TO BE IDENTICAL BY THE LEARNED RESPECTIVE COUNSELS, THEREFORE, RESPECTFULLY FOLLOW ING THE FINDINGS GIVEN BY THE TRIBUNAL IN THE AFORESAID ORDER (SUPRA), THESE GROU NDS OF THE REVENUE ARE HAVING NO MERIT THEREFORE DISMISSED. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. 15 20. NOW, WE TAKE UP THE APPEALS OF THE ASSESSEE IN ITA NO.288/IND/2002 FOR THE ASSESSMENT YEAR 19998-99 AND ITA NO.869/IND /2003 FOR THE ASSESSMENT YEAR 2000-01. 21. IN ITA NO.288/IND/2002, GROUND NOS.3 TO 6 OF TH E GROUNDS OF APPEAL WERE NOT PRESSED, THEREFORE, SAME ARE DISMISSED. GR OUND NO.7 IS GENERAL IN NATURE, THEREFORE, DOES NOT REQUIRE ANY DELIBERATIO N FROM OUR SIDE. IN ITA NO.869/IND/2003, GROUND NOS.4 TO 6 WERE ALSO NOT PR ESSED, THEREFORE, SAME ARE ALSO DISMISSED. GROUND NO.7 IS ALSO GENERAL IN NATURE, THEREFORE, DOES NOT REQUIRE ANY DELIBERATION FROM OUR SIDE. 22. GROUND NO.1 IN BOTH THE APPEALS RELATES TO MAIN TENANCE OF DISALLOWANCE OF RS.10 LACS EACH BEING THE AMOUNT PAID BY THE ASS ESSEE TO A SCHOOL AND CLAIMED AS DEDUCTION UNDER THE HEAD STAFF WELFARE EXPENSES. 23. DURING HEARING OF THIS GROUND, THE LD. REPRESEN TATIVES SUBMITTED THAT THE ARGUMENTS ADVANCED IN ITA NO.415/IND/2000 MAY B E CONSIDERED FOR THE PRESENT ISSUE ALSO. WE HAVE CONSIDERED THE RIVAL SU BMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON RECORD AND FIND THAT THIS ISSUE IS COVERED IN FAVOUR OF TH E ASSESSEE BY THE ORDER OF THIS BENCH OF THE TRIBUNAL IN ITA NO.415/IND/2000. THE RELEVANT PARAS 4 & 5 OF THE SAME ARE REPRODUCED HEREUNDER: - 4. THE LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE WAS COVERED IN FAVOUR OF THE ASSESSEE BY ORDER OF THE TRIBUNAL IN ASSESSEE OWN CASE FOR 16 ASSESSMENT YEAR 95-96 AND 96-97 IN ITA NO. 251 & 252/IND/2001 ORDER DATED 26.11. 2009 AND DREW OUR ATTENTION ON PARA 9 OF THE SAID ORDER. THE LD DR AL SO AGREED. ACCORDINGLY, WE DECIDE THIS GROUND IN FAVOU R OF THE ASSESSEE AND FOR THE SAKE OF READY REFERENCE , WE REPRODUCE THE RELEVANT FINDINGS OF THE SAID ORDE R OF THE TRIBUNAL AS UNDER :- WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIES BELOW. IT IS NOTED THAT THE ASSESSEES FACTORY IS SITUATED 90 KMS. AWAY FROM INDORE IN A VILLAGE IN DISTRICT KHARGONE. IT IS ALSO NOTED THAT THE SOCIETY HAS BEEN FORMED TO RUN A SCHOOL WITH THE HELP OF TWO OTHER CORPORATE ENTITIES, HAVING FACTORY AT THE SAME LOCATION. IT IS ALSO NOTED THAT THE FACT THAT CHILDREN OF THE ASSESSEES EMPLOYEES ARE STUDYING IN THIS SCHOOL IS NOT IN DOUBT. IT IS FURTHER NOTED THAT THE GENUINENESS OF INCURRENCE OF THIS EXPENDITURE IS ALSO NOT IN DISPUTE. IT IS ALSO NOTED THAT C.M.D. OF THIS COMPANY AND OTHER TWO STAFF OFFICIALS ARE HOLDING PROMINENT POSITION IN THE GOVERNING BODY OF THE SAID SCHOOL. IN THIS FACTUAL BACKGROUND, WE FIND THAT THE IMPUGNED SUM HAS NOT BEEN ALLOWED AS EXPENDITURE FIRSTLY FOR THE REASON THAT NO EXCLUSIVITY IS ATTACHED WITH THE ASSESSEE EITHER IN GOVERNING THE SCHOOL OR IN ADMISSION OF CHILDREN OF ITS EMPLOYEES I.E. THE CHILDREN OF OTHER PERSONS CAN ALSO STUDY. THE OTHER REASON IS THAT SCHOOL IS NOT SITUATED IN THE FACTORY CAMPUS OF THE ASSESSEE. IN OUR VIEW, BOTH THESE REASONS ARE DEVOID OF ANY MERITS FOR DISALLOWING SUCH EXPENDITURE AS IF THE SCHOOL WOULD HAVE BEEN SITUATED IN THE FACTORY PREMISES AND THE CHILDREN OF OTHER PERSONS WERE NOT STUDYING THEREIN, HOW THIS FACT WOULD HAVE ENTITLED THE ASSESSEE TO CLAIM THE DEDUCTION. FURTHER, IF THE ENTRY OF THE OTHER PERSONS WOULD HAVE BEEN RESTRICTED, THEN THE 17 EXPENDITURE OF BURDEN ON THE ASSESSEE WOULD HAVE BEEN MUCH MORE AND IF THAT BE SO, THE ASSESSEE WOULD HAVE CLAIMED MORE EXPENDITURE AS BUSINESS EXPENDITURE. IT IS ALSO A SETTLED JUDICIAL PRINCIPLE THAT THE TERM WHOLLY AND EXCLUSIVELY USED IN SECTION 37(1) CANNOT BE INTERPRETED IN A MANNER SO AS TO DISALLOW A GENUINE BUSINESS EXPENDITURE, IF THIRD PARTIES ARE ALSO BENEFITED THEREBY SO LONG SUCH EXPENDITURE HAS BEEN INCURRED IN THE COURSE OF CARRYING OF THE BUSINESS OF THE ASSESSEE. HAVING STATED SO, WE ALSO FIND THAT THE DECISIONS RELIED ON BY THE CIT(A) ARE TOTALLY OUT OF CONTEXT, HENCE, NOT RELEVANT. WE ARE FURTHER OF THE VIEW THAT IF A PAYMENT IS ELIGIBLE FOR DEDUCTION U/S 80-G, THE SAME CANNOT BE DISALLOWED U/S 37(1) MERELY FOR THIS REASON IF SUCH EXPENDITURE SATISFIES THE OTHER CONDITIONS ATTACHED TO ALLOWABILITY OF A GENUINE BUSINESS EXPENDITURE, AS THESE PROVISIONS OPERATE IN DIFFERENT FIELDS. HOWEVER, AN ASSESSEE WOULD NOT BE ENTITLED TO CLAIM BENEFIT UNDER BOTH THESE SECTIONS SIMULTANEOUSLY ON THE SAME PAYMENT I.E. IF AN ASSESSEE HAS INCURRED AN EXPENDITURE OF CHARITABLE NATURE AND GETS DEDUCTION OF 50% IN COMPUTING GROSS TOTAL INCOME U/S 80G, THEN, HE CANNOT CLAIM THE BALANCE 50% AS BUSINESS EXPENDITURE, AS ACTION OF THE ASSESSEE OF CLAIMING A DEDUCTION U/S 80-G RAISES A PRESUMPTION THAT SUCH EXPENDITURE HAS BEEN INCURRED AS A MATTER OF CHARITY AND NOT AS A BUSINESS EXPENDITURE. EQUALLY, THE REVENUE AUTHORITIES CANNOT DISALLOW A GENUINE BUSINESS EXPENDITURE, AS STATED EARLIER, MERELY FOR THE REASON THAT THE ASSESSEE COULD HAVE AVAILED DEDUCTION U/S 80-G, WHICH IT COULD NOT AVAIL, BECAUSE OF ABSENCE OF POSITIVE PROFITS (I.E. GROSS TOTAL INCOME) . WE ARE FURTHER OF THE VIEW THAT WHEN THE CHILDREN OF ASSESSEES EMPLOYEES STUDY IN THIS SCHOOL, THE EMPLOYEES ARE FREE 18 FROM THE BURDEN OF MAKING ARRANGEMENTS FOR THE EDUCATION OF THEIR CHILDREN, WHICH RESULTS INTO HIGHER EFFICIENCY AND MOTIVATION, HAVING A POSITIVE EFFECT ON THE BUSINESS ACTIVITIES CARRYING ON BY AN ASSESSEE AND, THEREFORE, SUCH ACT OF AN ASSESSEE HAS TO BE CONSIDERED AS UNDERTAKEN IN THE COURSE OF ITS BUSINESS ACTIVITIES AND FOR THE PURPOSE OF ITS BUSINESS. ACCORDINGLY, WE ACCEPT THIS CLAIM OF THE ASSESSEE AND DIRECT THE A.O. TO ALLOW THIS EXPENDITURE AS BUSINESS EXPENDITURE. WE ARE FURTHER OF THE VIEW THAT JUDICIAL DECISIONS CITED BY THE ASSESSEE ALSO STRONGLY SUPPORT THE CLAIM OF THE ASSESSEE. THUS, THIS GROUND OF THE ASSESSEE STANDS ALLOWED. 59. RESPECTFULLY FOLLOWING THE ABOVE DECISION IN THE CASE OF THE ASSESSEE , WE ALLOW THIS GROUND OF THE ASSESSEE. 24. KEEPING IN VIEW THE ASSERTION/SUBMISSION FROM T HE LD. REPRESENTATIVES FROM BOTH THE SIDES, THE FACTS AND THE ISSUE BEFORE US, WE, R ESPECTFULLY FOLLOWING THE ABOVE DECISION IN THE CASE OF THE ASS ESSEE, ALLOW THIS COMMON GROUND OF THE APPEALS OF THE ASSESSEE. 25. THE SECOND COMMON ISSUE RAISED BY THE ASSESSEE IN BOTH THE APPEALS IS THAT THE LD. CIT(A) ERRED IN HOLDING THAT THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 35D OF RS.19,01,458/- (ASSESSMENT YEAR 1998-99) AND RS.12.11.957/- (ASSESSMENT YEAR 2000-01) WAS RIGHTLY RESTRICTED BY THE LD. AO TO RS.10,43,309/- (ASSESSMENT YEAR 1998-99) AND RS.10, 43,309/- (ASSESSMENT YEAR 2000-01). THE GROUND RAISED IN ITA NO.869/IND/ 2003 FOR ASSESSMENT YEAR 2000-01 IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF 19 RS.6,89,501/- MADE BY THE AO IN RESPECT OF ADDITION AL EXPENSES INCURRED IN THE ASSESSMENT YEAR 1995-96 AND CLAIMED U/S 35D. THE LD . COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAID CLAIM, BEING LEGAL AND PROPER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE SAME MAY NOW BE ALLOWED. ON THE OTHER HAND, THE LD. CIT, DR DEFENDED THE IMPUGNED O RDER. 26. DURING HEARING OF THIS GROUND, THE LD. REPRESEN TATIVES SUBMITTED THAT THE ARGUMENTS ADVANCED IN ITA NO.415/IND/2000 MAY B E CONSIDERED FOR THE PRESENT ISSUES ALSO. WE HAVE CONSIDERED THE RIVAL S UBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON RECORD AND FIND THAT THE ISSUES ARE COVERED IN FAVOUR OF T HE ASSESSEE BY THE ORDER OF THIS BENCH OF THE TRIBUNAL IN ITA NO.415/IND/2000. THE RELEVANT PARAS 7 TO 10 OF THE SAME ARE REPRODUCED HEREUNDER: - 7. THE LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT TWO ISSUES WERE INVOLVED IN THIS GROUND I.E FIRSTLY CALCULATION OF QUANTUM OF PRELIMINARY EXPENSES COMPRISING OF SHARE ISSUE EXPENSES IN RESP ECT OF SHARE CAPITAL RAISED IN A.Y 92-93 & 95-96, SECONDLY, THE ELIGIBILITY OF ASSESSEE FOR WRITE OFF OF PRELIMINARY EXPENSES RELATING TO S HARE CAPITAL RAISED IN 95-96. HE FURTHER CONTENDED THAT BOTH THESE ISSUES WERE COVERED BY THE SAID DECISION OF THE TRIBUNAL AND REFERRED TO P ARA 16 & 17 OF THE SAID ORDER. THE LD DR, HOWEVER, PREFERRED TO RELY O N THE ORDER OF LD. CIT. 8. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH TH E SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 9. WE FIND THAT BOTH THE ISSUE INVOLVED IN THIS GROUND ARE COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEE OWN CASE C ITED SUPRA. HENCE, WE REPRODUCE THE RELEVANT FINDINGS OF THIS ORDER AS UNDER :- WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH TH E SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. AT THE VERY OUT-SET, IT IS NOTED THAT THE A.O. HAS REJECTED THE CLAIM OF ASSESSEE U/S 35-D FOR ADDITIONAL AMOUNT OF RS. 6,89 ,501/- ON THE GROUND THAT THE TOTAL SHARE ISSUE EXPENSES HAD ALRE ADY BEEN 20 QUANTIFIED IN ASSESSMENT YEAR 1992-93 FOR THE REASO N THAT THE PROVISIONS OF SECTION 35-D ITSELF PROVIDE THAT IF A N ASSESSEE INCURS PRELIMINARY EXPENSES OF THE NATURE SPECIFIED THEREI N, IN CONNECTION WITH EXTENSION OR DIVERSIFICATION OF ASSESSEES BUS INESS, THEN, AS PER THE PROVISIONS OF SECTION 35-D(1)(II), THE ASSESSEE SHALL BE ENTITLED FOR WRITE OFF OF SUCH EXPENSES PROVIDED OTHER CONDITION S SPECIFIED IN THAT SECTION ARE SATISFIED. AS REGARDS TO THE SATISFACTI ON OF THIS CONDITION, IT IS NOTED THAT IN THE DIRECTORS REPORT AT THE BACK OF PAGE 92 OF THE PAPER BOOK, IT IS MENTIONED THAT THE COMPANY PRIVAT ELY PLACED SHARES OF RS. 10/- EACH AT THE PREMIUM OF RS. 60/-. THE FA CT OF EXPANSION/BIFURCATION BY THE ASSESSEE COMPANY IS AL SO MENTIONED THEREIN. THUS, CONDITIONS OF SECTION 35-D(1) ARE SA TISFIED. WE HOLD THAT THE ASSESSEE IS ENTITLED FOR WRITE OFF OF PRELIMINA RY EXPENSES INCURRED BY IT IN THIS YEAR. THE SECOND ISSUE IS REGARDING C OMPUTATION OF CAPITAL EMPLOYED TO WORK OUT ELIGIBLE AMOUNT, WHICH COULD B E WRITTEN OFF U/S 35-D OF THE ACT. IN THIS REGARD, IT IS NOTED THAT I N THE ASSESSMENT YEAR 1992-93, WHEN THIS ISSUE WAS DECIDED BY THE TRIBUNA L AGAINST THE ASSESSEE, THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF DY. CIT VS. CORE HEALTH CARE LIMITED AS REPORTED IN 308 ITR 263, HAD NOT BEEN PRONOUNCED, THOUGH THE MATTER HAD BEEN UND ER CONSIDERATION OF THE HON'BLE GUJARAT HIGH COURT. NO W, THIS DECISION HAS BEEN PRONOUNCED AND THE RELEVANT FINDINGS ARE A S UNDER :- UNDER THE EXPLANATION, CLAUSE (A) DEFINES COST OF PROJECT, CLAUSE (B) DEFINES CAPITAL EMPLOYED IN THE BUSINESS OF THE COM PANY, AND CLAUSE (C) DEFINES LONG-TERM BORROWINGS. IN CASE OF THE AS SESSEE THE FACTOR OF COST OF PROJECT IS NOT RELEVANT AND ONLY CAPITAL EM PLOYED IN THE BUSINESS OF THE COMPANY IS REQUIRED TO BE CONSIDERE D, THAT ALSO AS DEFINED IN SUB-CLAUSE(II) OF CLAUSE (B) OF THE EXPL ANATION WHICH TALKS OF AGGREGATE OF ISSUED SHARE CAPITAL, DEBENTURES AND L ONG-TERM BORROWINGS AS ON THE LAST DAY OF THE PREVIOUS YEAR. LONG-TERM BORROWINGS MEANS UNDER SUB-CLAUSE (I) OF CLAUSE (C ) OF THE EXPLANATION ANY MONEY BORROWED BY THE COMPANY FROM GOVERNMENT, OR THE INDUSTRIAL FINANCE CORPORATION OF INDIA OR T HE INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA OR ANY OTHER FI NANCIAL INSTITUTION, WHICH IS FOR THE TIME BEING APPROVED BY THE CENTRA L GOVERNMENT OR ANY BANKING INSTITUTION. THEREFORE, ON A PLAIN READ ING IT BECOMES APPARENT THAT THE BORROWING HAS TO BE FROM ANY OF T HE FOUR ENTITIES MENTIONED IN SUB-CLAUSE (I) OF CLAUSE (C) OF THE EX PLANATION. NO TIME LIMIT FOR THE PURPOSE OF BORROWING IS LAID DOWN IN THE PROVISION. THIS ASSUMES SIGNIFICANCE WHEN ONE COMPARES THE SAME WIT H SUB-CLAUSE (II) OF CLAUSE (C) OF THE EXPLANATION WHEREIN IT IS SPECIFIED THAT IT SHOULD BE A PERIOD OF NOT LESS THAN SEVEN YEARS. THUS, ONC E IT IS ESTABLISHED THAT THE BORROWING IS FROM ANY ONE OF THE FOUR ENT ITIES AS SPECIFIED, THE SAME WOULD BE TREATED AS LONG-TERM BORROWINGS F OR THE PURPOSE OF WORKING OUT THE AGGREGATE OF CAPITAL EMPLOYED IN THE BUSINESS OF THE COMPANY. IN THE PRESENT CASE, AS FOUND BY THE COMMISSIONER 21 (APPEALS) AND THE TRIBUNAL HAVE RIGHTLY COME TO, TH E CONCLUSION THAT THE AMOUNT IN QUESTION WAS REQUIRED TO BE INCLUDED FOR THE PURPOSE OF CAPITAL EMPLOYED IN THE BUSINESS AND THE DIRECTION TO RECOMPUTED THE DEDUCTION U/S 35-D OF THE ACT WAS PERFECTLY JUSTIFI ED. WE ARE FURTHER OF THE VIEW THAT IN THE PRESENT CAS E, IT IS NOT IN DISPUTE THAT WORKING CAPITAL HAS BEEN TAKEN FROM THE BANKIN G INSTITUTION AND THOUGH THE NOMENCLATURE AND ACTUAL NATURE IS OF WOR KING CAPITAL, BUT IN REAL BUSINESS SITUATION, SUCH WORKING CAPITAL FA CILITIES ARE CONTINUOUSLY ENJOYED BY THE ASSESSEE AND IN THE PRE SENT CASE ALSO, IT IS NOT IN DISPUTE THAT, AT ANY POINT OF TIME, SUCH FAC ILITIES WERE REVOKED BY THE BANKING INSTITUTION. THUS, FOR ALL PRACTICAL PURPOSES, THESE ARE OF THE NATURE OF LONG TERM FINANCE AVAILABLE TO A BUSI NESS CONCERN DEPENDING UPON THE LEVEL OF ITS OPERATION AND EXPEN DITURE OF PRIMARY/COLLATERAL SECURITIES PROVIDED TO THE BANKI NG INSTITUTION. ACCORDINGLY, THIS ASPECT OF THE ISSUE IS ALSO DECID ED IN FAVOUR OF THE ASSESSEE. HAVING STATED SO, WE ARE OF THE VIEW THAT SINCE COMPOSITION OF EXPENDITURE AND ELIGIBILITY THEREOF IN TERMS OF PROVISIONS OF SECTION 35D(2) AND IN PARTICULAR OF SECTION 35D(2)(C)(IV), AS IT APPEARS TO BE A CASE OF PRIVATE PLACEMENT OF SHARES AND NOT OF PUB LIC SUBSCRIPTION OF SHARES, HAVE NOT BEEN EXAMINED. HENCE, WE RESTORE T HIS ISSUE TO THE FILE OF A.O. FOR EXAMINATION OF THESE ASPECTS AND D ECISION THEREON AS PER LAW. IT IS NEEDLESS TO MENTION THAT THE A.O. SH ALL GRANT AN ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE IN DOING SO. THUS, GROUND NO. 2 OF THE ASSESSEES APPEAL IS PARTLY ALL OWED IN TERMS INDICATED ABOVE. 10. ACCORDINGLY, WE HOLD THAT WORKING CAPITAL BORROWIN GS SHOULD BE CONSIDERED AS PART OF CAPITAL EMPLOYED. THE OTHER I SSUE REGARDING ALLOWABILITY OF SHARE ISSUE EXPENSES INCURRED IN AS SESSMENT YEAR 1995- 96 INVOLVED IN THIS GROUND IS RESTORED TO THE FILE OF AO TO BE DISPOSED OFF ON THE SIMILAR LINES. THUS, THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED IN TERMS INDICATED ABOVE. 27. BOTH THE PARTIES AGREED THAT THE ISSUES RAISED IN THESE GROUNDS ARE IDENTICAL TO ISSUE RAISED IN GROUND NO.2 OF I.T.A.N O. 415/IND/2000. FOLLOWING THE SAME REASONS, COMMON GROUND NO.2 OF THE APPEALS OF THE ASSESSEE IS ALLOWED AND THE ISSUE RAISED IN GROUND NO. 3 OF TH E APPEAL OF THE ASSESSEE IS RESTORED TO THE FILE OF A.O. TO BE DISPOSED OF ON S IMILAR LINES AS CONTAINED IN 22 PARA 10 OF THE ORDER REPRODUCED ABOVE . THUS, GROUN D NO.2 IS ALLOWED AND GROUND NO.3 STANDS ALLOWED FOR STATISTICAL PURPOSES . 28. IN THE RESULT, ITA NO.288/IND/2002 IS PARTLY AL LOWED AND ITA NO.869/IND/2003 IS PARTLY ALLOWED FOR STATISTICAL P URPOSES. FINALLY, THE APPEALS OF THE REVENUE ARE DISMISSED AND THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 29.12.2009. SD SD (V.K. GUPTA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 29.12.2009 {VYAS} COPY TO: APPELLANTS/RESPONDENTS/CIT/ CIT(A)/DR