DCIT, CHENNAI V. Consolidated Construction Consortium Ltd., CHENNAI

ITA 875/CHNY/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8248 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 12-10-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 07-04-2014
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Assessee Lawyers: S SRIDHAR
• Keywords: Depreciation; Business expenditure; Maximum Marginal Rate; Additional depreciation; Earning of tax free income; Cost of acquisition; Revenue expenditure; Capital expenditure
• Section: 14A; 37(1); 145; 37; 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI , ! ' . #$ , & '( ) [ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ] ./ I.T.A.NOS. 1824/MDS/2011, 875, 701 & 702/MDS/2014 / ASSESSMENT YEARS : 2006-07, 2007-08 TO 2009-10 THE ASSTT./DY. COMMISSIONER OF INCOME-TAX COMPANY CIRCLE I(3) CHENNAI VS. M/S CONSOLIDATED CONSTRUCTION CONSORTIUM LTD NO.3, 2 ND LINK STREET, CIT COLONY MYLAPORE, CHENNAI 600 004 [PAN AAACC 4214 B ] ( *+ / APPELLANT) ( ,-*+ /RESPONDENT) ./ I.T.A.NOS. 592, 593 & 594/MDS/2014 / ASSESSMENT YEARS : 2007-08, 2008-09 & 2009-10 M/S CONSOLIDATED CONSTRUCTION CONSORTIUM LTD NO.3, 2 ND LINK STREET, CIT COLONY MYLAPORE, CHENNAI 600 004 VS. THE ASSTT. COMMISSIONER OF INCOME-TAX COMPANY CIRCLE I(3) CHENNAI ( *+ / APPELLANT) ( ,-*+ /RESPONDENT) ASSESSEE BY : SHRI S. SRIDHAR, ADVOCATE DEPARTMENT BY : SHRI A B KOLI, JCIT / DATE OF HEARING : 12 - 10 - 2015 / DATE OF PRONOUNCEMENT : 06 - 01 - 2016 . / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THESE APPEALS FILED BY THE ASSESSEE AND THE RE VENUE ARE DIRECTED AGAINST THE RESPECTIVE ORDERS OF THE COMMI SSIONER OF INCOME- ITA NO.1824 ETC :- 2 -: TAX (APPEALS), CHENNAI, FOR ASSESSMENT YEARS 2006-0 7, 2007-08, 2008- 09 AND 2009-10. SINCE CERTAIN ISSUES ARE COMMON IN NATURE, THESE APPEALS ARE CLUBBED TOGETHER, HEARD TOGETHER AND DI SPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. AT THE OUTSET, IT WAS NOTICED THAT ALL THE APPEALS FILED BY THE ASSESSEE ARE TIME BARRED BY 6 DAYS. THE ASSESSEE FILED CONDONATION PETITIONS STATING THAT IN FORM NO.36, AT COLUMN NO. 9, DATE OF COMMUNICATION OF THE ORDER APPEALED AGAINST WAS MEN TIONED AS 3.1.2014 INSTEAD OF 31.1.2014 AND THE APPEALS WERE ACTUALLY FILED WITHIN THE STIPULATED TIME. SINCE IT IS A TYPOGRAP HICAL MISTAKE, THE ASSESSEE PRAYED FOR ADMISSION OF THE APPEALS. AFTE R GOING THROUGH THE RECORDS, WE FIND THAT IT IS A TYPOGRAPHICAL MISTAKE COMMITTED BY THE ASSESSEES COUNSEL, AND THEREFORE, WE CONDONE THE D ELAY AND ADMIT THE APPEALS. I.T.A.NO.594/MDS/2014[ASSESSEES APPEAL] AND I.T.A. NO. 702/MDS/ 2014 [REVENUES APPEAL] A.Y 2009-10 3. IN ASSESSEES APPEAL I.T.A.NO. 594/MDS/2014, THE F IRST ISSUE IS WITH REGARD TO DISALLOWANCE U/S 14A R.W. RULE 8 D. 4. THE FACTS OF THIS ISSUE ARE THAT THE ASSESSEE ITSE LF HAS DISALLOWED THE EXPENDITURE U/S 14A OF THE ACT OF ` 31,25,933/-. THE ASSESSEE HAS SHOWN IN ITS ACCOUNTS DIVIDEND INCOME OF ` 3,92,79,128/- ITA NO.1824 ETC :- 3 -: AND INTEREST DEBITED WAS ` 11.23 CRORES. THE ASSESSEE HAS HUGE INVESTMENT PORTFOLIO TO THE EXTENT OF ` 80.74 CRORES. NOT SATISFIED WITH THE AMOUNT OF EXPENDITURE DISCLOSED U/S 14A AND NO T SATISFIED WITH THE EXPLANATION GIVEN DURING THE COURSE OF ASSESSME NT PROCEEDINGS, THE ASSESSING OFFICER PROCEEDED TO WORK OUT THE DI SALLOWANCE U/S 14A R.W. RULE 8D AND BY RELYING ON THE DECISIONS IN THE CASES OF CIT VS RELIANCE UTILITIES & POWERS LTD, 313 ITR 340 (BOM) AND GODREJ & BOYCE MFG CO. LTD 328 ITR 81. WHILE DOING SO, THE ASSESSING OFFICER HAS ANALYZED THE INVESTMENTS MADE BY THE ASSESSEE AS UNDER: PARTICULARS AVERAGE VALUE A) NON TRADE LONG TERM QUOTED 92,383 B) SHARES DEBENTURES, BONDS IN WHOLLY OWNED SUBSIDIARIES 13,57,68,153 C) INVESTMENTS IN OVERSEAS SUBSIDIARIES 4,85,370 D) INVESTMENTS IN IMMOVABLE PROPERTIE S 17,84,416 E) INVESTMENTS IN MUTUAL FUNDS 66,25,00,000 F) INVESTMENTS IN PARTNERSHIP FIRMS 21,28,70,457 ON EXAMINATION OF THE ACCOUNTS AND THE RETURN ON TH ESE INVESTMENTS, IT IS SEEN THAT THE ITEMS CLASSIFIED IN (A), (B), ( D) TO (F) DID NOT RESULT IN PROFITS OR GAINS WHICH ARE UNDER THE PURVIEW OF TAX ATION AND EVEN IF THEY DO, THE SAME REMAINS EXEMPT. HENCE THE CORRES PONDING INVESTMENTS ARE UNDER THE AMBIT OF COMPUTATION OF D ISALLOWANCE U/S 14A. FROM THE ABOVE, THE ASSESSING OFFICER OBSERVED THAT A PORTION OF THE INTEREST EXPENDITURE PERTAINS TO TAX FREE INVESTMEN T. HE FOUND FROM ITA NO.1824 ETC :- 4 -: THE NATURE OF TRANSACTION IN THE FORM OF INVESTMENT S, BEING DORMANT IN CATEGORY (A) TO (E), THE ASSESSEE WOULD NOT HAVE I NCURRED ANY EXPENDITURE TOWARDS MANAGERIAL AND ADMINISTRATIVE C OSTS, IN ITS MAINTENANCE. EVEN IN RESPECT OF THE ADDITIONS MADE IN NON-QUOTED SHARES OF SUBSIDIARY COMPANIES, THE EXERCISE DOES N OT INVOLVE ANY COST TOWARDS MANAGERIAL AND ADMINISTRATION, IN SHORT ITS MAINTENANCE. THEREFORE, THE DISALLOWANCE U/S 14A R.W. RULE 8D I S AFTER FAIR APPLICATION OF MIND, RESTRICTED TO THE COMPUTATION ENVISAGED IN THE SECOND LIMB OF RULE 8D ALONE IN RESPECT OF INTEREST COST COVERING ALL INVESTMENTS OTHER THAN IN OVERSEAS SUBSIDIARY AND T HAT OF THE THIRD LIMB ONLY TO THE INVESTMENTS IN MUTUAL FUNDS WHICH EXHIBITS VOLATILITY DURING THE YEAR. IN CASE OF MUTUAL FUNDS BY THE VE RY NATURE OF ITS OPERATIONS, IT IS CLEAR THAT A PORTION OF MANAGERIA L AND ADMINISTRATIVE COST OUGHT TO HAVE INDIRECTLY INCURRED BY THE ASSE SSEE IN ITS OPERATIONS AND MAINTENANCE. FOLLOWING THE JUDGMENT OF BOMBAY HIGH COURT IN THE CASE OF M/S GODREJ & BOYCE LTD, THE ASSESSING O FFICER DISALLOWED ` 1,05,93,937/- U/S 14A WHICH PERTAINS TO THE TAX FR EE TERRITORY. ON APPEAL, THE CIT(A) OBSERVED THAT SEC. 14A R.W. RULE 8D IS APPLICABLE IN VIEW OF THE DECISION OF SPECIAL BENCH DELHI IN THE CASE OF CHEMINVEST VS ITO, 121 ITD 318 AND GIVEN A PARTIAL RELIEF AGAI NST WHICH THE ASSESSEE IS IN APPEAL BEFORE US. ITA NO.1824 ETC :- 5 -: 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL AVAILABLE ON RECORD. IN OUR OPINION, THE DECISION OF THE SPECIAL BENCH DELHI IN THE CASE OF CHEMINVEST VS ITO (SUPRA) IS N O MORE GOOD LAW AS THIS DECISION IS REVERSED BY THE DELHI HIGH COURT I N THE CASE OF CHEMINVEST LTD VS CIT IN I.T.A.NO. 749/2014 DATED 2 .9.2015 WHEREIN HELD THAT NO DISALLOWANCE U/S 14A CAN BE MADE IN A YEAR IN WHICH NO EXEMPT INCOME HAS BEEN EARNED OR RECEIVED BY THE A SSESSEE. SEC. 14A ALSO DOES NOT APPLY TO SHARES BOUGHT FOR STRATE GIC PURPOSES. BEING SO, IN OUR OPINION, APPLICABILITY OF DECISION OF SPECIAL BENCH IS NOT PROPER. FURTHER, THE LD. AR RELIED ON THE JUDG MENT OF THE COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF M/S GEOJIT INV ESTMENT SERVICES LTD VS ACIT, I.T.A.NO.261/COCH/2014 DATED 28.8.2014 AND ALSO THE DECISION OF THE CHENNAI BENCH IN THE CASE OF ACIT V S M/S BEST & CROMPTON ENGINEERING LTD, I.T.A.NO.1603/MDS/2012, D ATED 16.7.2013, FOR THE PROPOSITION THAT THE ASSESSING OFFICER SHAL L SATISFY HIMSELF ABOUT THE APPLICABILITY OF 14A R.W. RULE 8D. IN OUR OPIN ION, THE GRIEVANCE OF THE ASSESSEE IS JUSTIFIED AND IT REQUIRES REEXAMIN ATION AT THE END OF THE ASSESSING OFFICER AND HE HAS TO SEE WHETHER ANY EXPENDITURE WAS INCURRED FOR EARNING THE EXEMPT INCOME OR NOT. THE ASSESSING OFFICER SHALL CONSIDER THE ABOVE DECISIONS AND ALSO THE DE CISION OF MUMBAI BENCH IN THE CASE OF M/S DAGA GLOBAL CHEMICALS PVT. LTD VS ACIT IN I.T.A.NO.5592/MUM/2012, DATED 1.1.2015 AND THE JUDG MENT OF THE ITA NO.1824 ETC :- 6 -: DELHI HIGH COURT IN THE CASE OF JOINT INVESTMENTS P VT. LTD VS CIT, 372 ITR 694 WHEREIN IT WAS OBSERVED AS UNDER: 6. HEARD BOTH THE PARTIES. ON A PERUSAL OF THE ORD ER OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF M/S. DA GA GLOBAL CHEMICALS PVT. LTD. (SUPRA), WE FIND THAT AN IDENTICAL ISSUE HAS BEEN DECIDED BY THE TRIBUNAL HOLDING THAT DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D CA NNOT EXCEED THE EXEMPT INCOME. WHILE HOLDING SO, THE TRI BUNAL OBSERVED AS UNDER:- 2. AT THE TIME OF HEARING, DR. K.SHIVARAM ALONG WI TH SHRI RAHUL HAKANI, LD. COUNSELS FOR THE ASSESSEE ADVANCE D THEIR ARGUMENTS WHICH ARE IDENTICAL TO THE GROUND R AISED BY SUBMITTING THAT NO EXPENDITURE DIRECTLY OR INDIR ECTLY WAS INCURRED BY THE ASSESSEE FOR EARNING EXEMPT INCOME AND FURTHER THE INVESTMENT IN SHARES WAS MAD E IN EARLIER YEARS OUT OF OWN FUNDS AND NOT OUT OF BO RROWED FUNDS, THEREFORE, NO DISALLOWANCE U/S 14A R.W. RULE 8D IS TO BE MADE. 2.1. ON THE OTHER HAND, SHRI AKHILENDRA YADAV STRONGLYDEFENDED THE CONCLUSION ARRIVED AT BY THE L D. COMMISSIONER OF INCOME TAX (APPEALS) BY CONTENDING THAT A WELL REASONED ORDER HAS BEEN PASSED BY THE L D. FIRST APPELLATE AUTHORITY AS APPORTIONMENT OF EXPENDITURE FOR EARNING THE DIVIDEND INCOME WAS DON E AS PER THE PROVISIONS OF THE ACT. IT WAS PLEADED TH AT SECTION 14A R.W. RULE 8D OF THE RULES IS CLEARLY APPLICABLE TO THE FACTS OF THE PRESENT APPEAL. 2.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE IS A LIMITED COMPANY, ENGAGED IN TRADING OF BULK AND FINE, CHEMICALS, SOL VENT AND PHARMACEUTICAL RAW MATERIALS DECLARED ITS INCOM E AT RS.74,40,000/- ON 26/09/2009. THE ASSESSEE CREDITED DIVIDEND INCOME OF RS.1,82,262/- IN ITS PROFIT AND LOSS ACCOUNT. THE ASSESSING OFFICER WHILE FRAMING THE ASSESSMENT INVOKE SECTION 14A R.W. RULE 8D BY CONTENDING THAT ASSESSEE CLAIMED VARIOUS EXPENSES WHICH ARE RELATED TO EXEMPT INCOME IN ITS PROFIT & LOSS ACCOUNT AND DISALLOWED RS.14,58,412/-. ON APPEAL, BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) BROADLY THE STAND TAKEN IN THE ASSESSMENT ORDER WAS AFFIRMED AGAINST WHICH THE ASSESSEE IS IN FURTHER A PPEAL BEFORE THIS TRIBUNAL. THE TOTALITY OF FACTS CLEARLY INDICATES, AS CLAIMED BY THE ASSESSEE THAT NO BORROWED FUNDS ITA NO.1824 ETC :- 7 -: WERE UTILIZED FOR EARNING THE EXEMPT INCOME BY THE ASSESSEE AND FURTHER THE DIVIDEND WERE DIRECTLY CRE DITED IN THE BANK ACCOUNT OF THE ASSESSEE AND NO EXPENDIT URE WAS CLAIMED. WHAT IT MAY BE, WE FIND THAT THE ASSES SEE ONLY RECEIVED RS.1,82,362/- AS DIVIDEND INCOME, THEREFORE, THERE IS NO QUESTION OF DISALLOWANCE OF RS.14,58.412/- BY INVOKING SECTION 14A R.W. RULE 8D UNDER THE FACTS AVAILABLE ON RECORD. IT WAS ALSO EX PLAINED BY THE LD. COUNSEL FOR THE ASSESSEE THAT ON IDENTIC AL FACT IN EARLIER YEARS, NO DISALLOWANCE WAS MADE. IN THE PRESENT ASSESSMENT YEAR ALSO, NO BORROWED FUNDS WER E INVESTED BY THE ASSESSEE FOR MAKING INVESTMENT IN SHARES OR FOR EARNING DIVIDEND INCOME . AT BEST, IF ANY DISALLOWANCE COULD BE MADE THAT CAN BE RESTRICTED T O RS. 1,485/- WHICH WERE CLAIMED AS DEMAT CHARGES. DISALLOWANCE U/S 14A R.W. RULE 8D CANNOT EXCEED THE EXEMPT INCOME. IN VIEW OF THIS FACT, WE FIND MERIT IN THE CLAIM OF THE ASSESSEE. THE APPEAL OF THE ASSESSEE I S THEREFORE, ALLOWED. 5.1 FOLLOWING THE ABOVE DECISION OF THE MUMBAI B ENCH OF THE TRIBUNAL, WE ARE OF THE OPINION THAT DISALLOWANCE U /S.14A R.W. RULE 8D SHOULD NOT EXCEED THE EXEMPT INCOME. THE MUMBAI BE NCH IN ITS ORDER SUSTAINED THE DISALLOWANCE ON APPLICABILITY OF PROV ISIONS OF SEC.14A R.W. RULE 8D. HOWEVER, THE ALTERNATIVE CLAIM OF THE ASS ESSEE WAS THAT DISALLOWANCE IF AT ALL SHOULD BE MADE, IT SHOULD BE RESTRICTED TO EXEMPT INCOME EARNED AND NOT BEYOND THAT. ACCORDINGLY, TH E AO IS DIRECTED TO LOOK AT THIS ISSUE ON THIS ANGLE AND DECIDE IT AFRE SH IN THE LIGHT OF THE ABOVE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL. 6. THE NEXT GROUND IN ASSESSEES APPEAL IS WITH REGA RD TO DISALLOWANCE OF PAYMENT OF ` 1,50,200/- MADE TO REGISTRAR OF COMPANIES. ITA NO.1824 ETC :- 8 -: 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL AVAILABLE ON RECORD. BY PLACING RELIANCE ON THE J UDGMENT OF SUPREME COURT IN THE CASE OF PUNJAB STATE INDUSTRIAL DEVELO PMENT CORPN LTD VS CIT, 225 ITR 792, WHEREIN HELD THAT THE FEES PAID T O THE REGISTRAR OF COMPANIES FOR EXPANSION OF THE CAPITAL BASE OF A CO MPANY IS DIRECTLY RELATED TO THE CAPITAL EXPENDITURE INCURRED BY THE COMPANY AND ALTHOUGH INCIDENTALLY THAT WOULD CERTAINLY HELP IN PROFIT MAKING, IT STILL RETAINS THE CHARACTER OF CAPITAL EXPENDITURE SINCE THE EXPENDITURE IS DIRECTLY RELATED TO THE EXPANSION OF THE CAPITAL BA SE OF THE COMPANY. FOLLOWING THE ABOVE JUDGMENT OF THE SUPREME COURT, WE DISMISS THE GROUND RAISED BY THE ASSESSEE. 8. THE NEXT GROUND IN ASSESSEES APPEAL IS WITH REGAR D TO RETENTION MONEY PAYABLE AT ` 13,28,86,446/-. 9. THE FACTS OF THE ISSUE ARE THAT THE ASSESSING OFFIC ER DISALLOWED THE RETENTION MONEY HELD BACK BY THE ASS ESSEE AND CLAIMED AS EXPENSES WHICH RELATED TO CONTRACT MONEY PAYABLE TO THE CONTRACTORS/SUB-CONTRACTORS/SPECIAL AGENCIES. THE ASSESSING OFFICER HAS DISALLOWED THIS RETENTION MONEY BY STATING THAT THE LIABILITY IS CONTINGENT IN NATURE AND UNASCERTAINED ONE. DEDUCT ION IS PERMISSIBLE ONLY FOR EXPENDITURE AND CONTINGENT LIABILITY IS NO T AN EXPENDITURE. THE ASSESSING OFFICER HAS ALSO RELIED ON SEVERAL CASE L AWS INCLUDING THE ITA NO.1824 ETC :- 9 -: JUDGMENT OF MADRAS HIGH COURT IN THE CASE OF CIT VS EAST COAST CONSTRUCTIONS AND IND. LTD, 283 ITR 297. THE ASSES SING OFFICER FURTHER OBSERVED THAT THE AMOUNT RETAINED BY THE A SSESSEES CONTRACTEE WHICH REMAINED RECEIVABLE IN THE HANDS O F THE ASSESSEE WAS EXCLUDED BY THE ASSESSEE SINCE THE SAME WAS NO T RECEIVED YET. THE ASSESSING OFFICER HAS PUT THIS SITUATION SUCCIN CTLY SAYING THAT WHAT IS APPLICABLE TO GOOSE SHOULD ALSO APPLY TO GANDER AND DISALLOWED THE CLAIM OF THE ASSESSEE. THE CIT(A) CONFIRMED THE S AME. 10. THE LD.AR OF THE ASSESSEE SUBMITTED THAT EXPENSES ARE METICULOUSLY ESTIMATED WHICH HAS TO BE INCURRED UPT O THE STAGE OF COMPLETION OF THE CONTRACT AND THIS WAS BASED ON CO NSISTENT ACCOUNTING POLICY AND THE SAME WAS CLAIMED AS EXPEN DITURE. ACCORDING TO HIM, AS PER ACCOUNTING STANDARD (AS)-7 ACCOUNTING OF CONSTRUCTION CONTRACTS, AS APPLICABLE AT THE RELEVA NT TIME, THE REVENUE IS RECOGNIZED ONLY WHEN THE PROJECT IS COMPLETE OR SUBSTANTIALLY COMPLETE. TILL THAT DATE, ALL COSTS INCURRED AND A CCUMULATED AS PART OF WORK-IN-PROGRESS AND ON ACCOUNT PAYMENTS RECEIVED A RE SHOWN AS CURRENT LIABILITIES. IN THE YEAR, WHEN THE PROJECT IS COMPLETE OR SUBSTANTIALLY COMPLETE (I) REVENUE ON THE PROJECT I S RECOGNIZED INCLUDED BALANCE BILLING LEFT (II) ALL COSTS TAKEN AS PART O F WORK-IN-PROGRESS ARE DEBITED TO THE PROFIT AND LOSS ACCOUNT, AND (III) A DDITIONALLY, ANTICIPATED COSTS TILL COMPLETION ARE ALSO DEBITED TO THE PROFI T & LOSS ACCOUNT, TO ITA NO.1824 ETC :- 10 -: DETERMINE THE PROFIT/LOSS ON THE PARTICULAR WORK. IT IS CLAIMED THAT THE AFORESAID METHOD OF ACCOUNTING IS CONSISTENTLY AND REGULARLY FOLLOWED BY THE ASSESSEE AND ACCEPTED BY THE DEPARTMENT. A CCORDING TO HIM, THOUGH THE ASSESSING OFFICER ACCEPTED THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE, HE DID NOT ALLOW THE AFO RESAID EXPENSES ON THE GROUND THAT THE ASSESSEE HAS NOT OFFERED THE R ETENTION MONEY RECEIVABLE FOR TAXATION AND ACCORDING TO THE ASSESS ING OFFICER, THIS LIABILITY IS ONLY A CONTINGENT LIABILITY. HE SUBMI TTED THAT WHEN THE ASSESSEE HAS BEEN CONSISTENTLY AND REGULARLY FOLLOW ING THE SAME METHOD OF ACCOUNTING FROM YEAR TO YEAR FOR THE PURP OSE OF RECOGNIZING THE INCOME AND ALSO ACCEPTED BY THE DEPARTMENT, IT CANNOT BE ALLOWED TO DISTURB THE METHOD OF ACCOUNTING IN THE MIDDLE O F THE COMPLETION OF WORKS CONTRACT. IT WAS ARGUED THAT FOR DETERMINING THE PROFITS AND GAINS OF THE BUSINESS, SEC. 145 OF THE ACT PROVIDED THE METHOD OF ACCOUNTING, AS PER WHICH SUCH PROFITS OR GAINS ARE COMPUTED IN CASH OR MERCANTILE SYSTEM OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE. IN THIS CASE, THE ASSESSEE FOLLOWED COMPLETED CONT RACT METHOD IN TERMS OF AS-7, ISSUED BY THE ICAI AND THE ASSESSING OFFICER WAS SATISFIED WITH THE CORRECTNESS AND COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE AND ALSO WITH REGARD TO THE METHOD OF ACCOUNTING REGULARLY EMPLOYED HAS BEEN SCIENTIFIC AND RATIONAL . IN SUCH CIRCUMSTANCES, IT IS NOT OPEN TO THE ASSESSING OFFI CER TO DEVIATE FROM ITA NO.1824 ETC :- 11 -: REGULARLY AND CONSISTENTLY FOLLOWING THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE AND ACCEPTED BY THE DEPARTMENT. HE ARGUED THAT CONSISTENT AND REGULAR METHOD OF ACCOUNTING IS SUPR EME UNLESS THE ASSESSING OFFICER FINDS THAT ACCOUNTS OF THE ASSES SEE ARE NOT CORRECT OR COMPLETE OR THAT THE METHOD OF ACCOUNTING IS NOT REGULARLY FOLLOWED OR NOT IN ACCORDANCE WITH THE NOTIFIED ACCOUNTING S TANDARDS. ACCORDING TO HIM, AS-1 PROVIDES THAT THE FUNDAMENTAL ACCOUNTI NG ASSUMPTIONS RELATING TO GOING CONCERN CONSISTENCY AND ACCRUAL M UST BE FOLLOWED IN PREPARATION OF THE FINANCIAL STATEMENTS. FURTHER, IT PROVIDES THAT THE SELECTION AND APPLICATION OF ACCOUNTING POLICY MUST BE GOVERNED, INTER ALIA, BY PRUDENCE, WHICH HAS BEEN EXPLAINED THAT THE PROVISION SHOULD BE MADE FOR ALL KNOWN LIABILITIES AND LOSSES EVEN T HOUGH THE AMOUNT CANNOT BE DETERMINED WITH CERTAINTY AND REPRESENTS ONLY A BEST ESTIMATE IN THE LIGHT OF AVAILABLE INFORMATION. HE ARGUED THAT AS PER SEC. 145(2) OF THE ACT, IT IS MANDATORY THAT THE A SSESSEE FOLLOWS THE ACCOUNTING STANDARDS THAT MAY BE NOTIFIED BY THE CE NTRAL GOVERNMENT. AS-1 IS MANDATORY WHICH HAS BEEN FOLLOWED BY THE A SSESSEE. 11. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTAT IVE SUBMITTED THAT WHAT IS APPLICABLE TO RETENTION MONE Y RECEIVABLE, THE SAME IS APPLICABLE TO WITHHOLDING OF PAYMENT. ACCO RDING TO THE LD. DR, THE EXPENSES WERE YET TO BE INCURRED, THE LIABILITY THEREOF COULD NOT BE SAID TO HAVE ACCRUED SO AS TO BE ALLOWED UNDER THE MERCANTILE SYSTEM ITA NO.1824 ETC :- 12 -: OF ACCOUNTING AS IT WAS NOT A LIABILITY IN PRAESENT I BUT THE ANTICIPATED EXPENSES WHICH CANNOT BE DETERMINED WITH CERTAINTY CANNOT BE ALLOWED. HE RELIED ON THE ORDERS OF THE LOWER AUT HORITIES. 12. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. GENERALLY, THE EXPENDITURE WHICH IS ACTU ALLY INCURRED OR IS INCURRED IN A RELEVANT YEAR WOULD BE ALLOWED AS DED UCTION WHILE COMPUTING THE INCOME FROM BUSINESS. SUCH A LIABILI TY HAS TO BE IN PRAESENTI. HOWEVER, AT THE SAME TIME, IT RELATES T O THE WORKS UNDERTAKEN BY THE ASSESSEE, COMPLETED CONTRACT MET HOD OF ACCOUNTING IS FOLLOWED WHICH IS CONSISTENT WITH THE ACCOUNTING STANDARDS AND THESE ACCOUNTING STANDARDS ALSO LAID DOWN THE NORMS INDICTING THE PARTICULAR POINT OF TIME WHEN THE PRO VISIONS FOR ALL KNOWN LIABILITIES AND LOSSES HAVE TO BE MADE. THE MAKING OF SUCH A PROVISION BY THE ASSESSEE APPEARS TO BE JUSTIFIED MORE SO WH EN THE ASSESSEE HAD RECOGNIZED GAIN AS WELL ON SUCH PROJECT DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. THIS APPEARS TO BE IN CON SONANCE WITH THE PRINCIPLE OF MATCHING COST AND REVENUE AS WELL. T HE REASON GIVEN BY THE DEPARTMENT IS THAT THE RETENTION MONEY WHICH IS RECEIVABLE WAS NOT RECOGNIZED AS INCOME AS SUCH, RETENTION PAYMENT ALSO CANNOT BE ALLOWED AS DEDUCTION WHILE COMPUTING THE INCOME OF THE ASSESSEE. AS RIGHTLY ARGUED BY THE ASSESSEE, BOTH THESE ARE GOV ERNED BY DIFFERENT ACCOUNTING STANDARDS. RETENTION PAYMENT IS GOVERNE D BY AS-7 ISSUED ITA NO.1824 ETC :- 13 -: BY ICAI, NEW DELHI. ON THE OTHER HAND, RETENTION M ONEY RECEIVABLE IS GOVERNED BY AS-9. WHAT IS APPLICABLE TO RETENTION MONEY RECEIVABLE CANNOT BE APPLIED TO RETENTION MONEY PAYABLE AS THE SE ARE GOVERNED BY DIFFERENT ACCOUNTING STANDARD. FURTHER IT IS UN DISPUTED THAT WHENEVER ASSESSEE INCURRED EXPENDITURE ON THE PROJE CT IT IS ADMISSIBLE FOR DEDUCTION. THE ONLY DISPUTE RAISED BY THE REVE NUE IS REGARDING THE YEAR OF LIABILITY OF EXPENDITURE. CONSIDERING THAT THE ASSESSEE- COMPANY IS ASSESSED AT UNIFORM RATE OF TAX, THE ENT IRE EXERCISE OF SEEKING TO DISTURB THE YEAR OF ALLOWABILITY OF EXPE NDITURE IS, IN ANY CASE, REVENUE NEUTRAL. WE ARE REMINDED OF THE CLAS SIC OBSERVATION MADE BY THE BOMBAY HIGH COURT IN THE CASE OF CIT VS NAGRI MILLS CO. LTD, 33 ITR 681 WHICH READS AS UNDER: WE HAVE OFTEN WONDERED WHY THE INCOME-TAX AUTHORI TIES, IN A MATTER SUCH AS THIS WHERE THE DEDUCTION IS OBV IOUSLY A PERMISSIBLE DEDUCTION UNDER THE INCOME-TAX ACT, RAIS E DISPUTES AS TO THE YEAR IN WHICH THE DEDUCTION SHOU LD BE ALLOWED. THE QUESTION AS TO THE YEAR IN WHICH A DED UCTION IS ALLOWABLE MAY BE MATERIAL WHEN THE RATE OF TAX CHARG EABLE ON THE ASSESSEE IN TWO DIFFERENT YEARS IS DIFFERENT ; BUT IN THE CASE OF INCOME OF A COMPANY, TAX IS ATTRACTED AT A UNIFORM RATE, AND WHETHER THE DEDUCTION IN RESPECT OF BONUS WAS GRANTED IN THE ASSESSMENT YEAR 1952-53 OR IN THE ASSESSMENT YEAR CORRESPONDING TO THE ACCOUNTING YEAR 1952, THAT IS IN THE ASSESSMENT YEAR 1953-54, SHOULD BE A MATTER OF NO CONSEQUENCE TO THE DEPARTMENT; AND ONE SHOULD HAVE THOUGHT THAT THE DEPARTMENT WOULD NOT F RITTER AWAY ITS ENERGIES IN FIGHTING MATTERS OF THIS KIND. BUT, OBVIOUSLY, JUDGING FROM THE REFERENCES THAT COME UP TO US EVERY NOW AND THEN, THE DEPARTMENT APPEARS TO DELIG HT IN RAISING POINTS OF THIS CHARACTER WHICH DO NOT AFFEC T THE ITA NO.1824 ETC :- 14 -: TAXABILITY OF THE ASSESSEE OR THE TAX THAT THE DEPART MENT IS LIKELY TO COLLECT FROM HIM WHETHER IN ONE YEAR O R THE OTHER.' 12.1 THE AFORESAID OBSERVATION OF THE BOMBAY HIGH COU RT WAS REITERATED BY THE DELHI HIGH COURT IN THE CASE OF C IT VS SHRI RAM PISTOS AND RINGS LTD, 220 CTR 404, AS UNDER: 'FINALLY, WE MAY ONLY MENTION WHAT HAS BEEN ARTICUL ATED BY THE BOMBAY HIGH COURT IN CIT V. NAGRI MILLS CO. LTD. [1958] 33 ITR 681 (BOM) AS FOLLOWS : . . . IN THE REFERENCE THAT IS BEFORE US THERE IS NO DOUBT THAT THE ASSESSEE HAD INCURRED AN EXPENDITURE. THE ONLY D ISPUTE IS REGARDING THE DATE ON WHICH THE LIABILITY HAD CR YSTALLIZED. IT APPEARS THAT THERE WAS NO CHANGE IN THE RATE OF TAX FOR THE ASSESSMENT YEAR 1983-84 WITH WHICH WE ARE CONCERNED . THE QUESTION, THEREFORE, IS ONLY WITH REGARD TO THE YEAR OF DEDUCTION AND IT IS A PITY THAT ALL OF US HAVE TO E XPAND SO MUCH TIME AND ENERGY ONLY TO DETERMINE THE YEAR OF TAXABILITY OF THE AMOUNT.' 12.2 FURTHER, IN OUR OPINION, THE PROVISION FOR ACC RUED LIABILITY WHICH HAS TO BE DISCHARGED AT A FUTURE DATE BY THE ASSESSEE IS AN ALLOWABLE EXPENDITURE. IN THE CASE OF CIT VS MICRO LAND LTD, 347 ITR 613[KARNATAKA HIGH COURT], THE ASSESSEE CLAIMED DE DUCTION U/S 37 OF THE ACT FOR PROVISION FOR FUTURE WARRANTY. THE AS SESSING OFFICER OPINED THAT PROVISION FOR FUTURE WARRANTY IS CONTIN GENT LIABILITY AND CANNOT BE ALLOWED. THE SUPREME COURT IN THE CASE O F ROTORK CONTROLS INDIA PVT. LTD VS CIT, 314 ITR 62, HELD THAT THE PR OVISION MADE BY THE ITA NO.1824 ETC :- 15 -: ASSESSEE FOR WARRANTY CLAIMS ON THE BASIS OF PAST E XPERIENCE IS ALLOWABLE DEDUCTION U/S 37 OF THE ACT. IN THE CAS E OF BHARAT EARTH MOVERS VS CIT, 245 ITR 428, THE SUPREME COURT HELD THAT WHERE THE ASSESSEE HAS INCURRED EXPENDITURE WHICH IS MORE THA N THE PROVISION FOR WARRANTY OBLIGATION MADE IN THE BOOKS OF ACCOUNT, I T CANNOT BE SAID THAT THE PROVISION MADE BY THE ASSESSEE IS NOT CAP ABLE OF BEING ESTIMATED WITH THE REASONABLE CERTAINTY THOUGH ACT UAL QUANTIFICATION WAS NOT POSSIBLE AND THEREFORE, THE TRIBUNAL WAS JU STIFIED IN ALLOWING THE DEDUCTION. THE DELHI HIGH COURT IN THE CASE OF CIT VS ERICSSION COMMUNICATIONS P. LTD, 318 ITR 340, HELD THAT PROVI SION FOR WARRANTY CLAIMS ON SCIENTIFIC BASIS WHICH IS CONSISTENTLY AP PLIED BY THE ASSESSEE FOR ITS BUSINESS WAS ALLOWABLE AS DEDUCTION. THE M ADRAS HIGH COURT IN THE CASE OF CIT VS LUK INDIA PVT. LTD, 239 CTR 440, HELD THAT PROVISION FOR WARRANTY CLAIMED BY APPLYING THE SETTLED PRINCI PLES OF HAVING REGARD TO THE FACT THAT CLAIM WAS BASED ON A SCIENT IFIC APPROACH AND IT WAS WORKED OUT ON THE AVERAGE OF PREVIOUS YEARS WA RRANTY SETTLEMENT IS ALLOWABLE EXPENDITURE. SAME VIEW WAS TAKEN BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF KONE ELEVATOR INDIA PVT. LTD VS ACIT, 340 ITR 46. FURTHER, THE SUPREME COURT IN THE CASE OF CALCUTTA CO. LTD VS CIT, 37 ITR 1, HELD THAT WHERE THE ASSESSEE WAS FO LLOWING THE MERCANTILE SYSTEM OF ACCOUNTING IS ENTITLED FOR DED UCTION OF THE EXPENDITURE WHICH IS INCIDENTAL TO THE BUSINESS ON ACCRUAL BASIS THOUGH ITA NO.1824 ETC :- 16 -: IT WAS NOT ACTUALLY INCURRED DURING THE RELEVANT AC COUNTING YEAR. THE KERALA HIGH COURT IN THE CASE OF CIT VS INDIAN TRAN SFORMERS LTD, 270 ITR 259, HELD THAT PROVISION CREATED BY THE ASSESS EE FOR AFTER SALES SERVICES BASED ON WARRANTY WAS TOWARDS A DEFINITE A ND ASCERTAINED LIABILITY. ON THE BASIS OF RELEVANT FACTS THE PROV ISION CANNOT BE TREATED AS A CONTINGENT LIABILITY AND THEREFORE, THE SAME W AS ALLOWABLE AS DEDUCTION. SAME VIEW WAS TAKEN BY THE DELHI HIGH C OURT IN THE CASE OF CIT VS WHIRLPOOL OF INDIA LTD, 242 CTR 245, WHER EIN HELD THAT THE ASSESSEE CONSISTENTLY MAKING PROVISION FOR WARRANTY ON THE BASIS OF ACTUARIAL VALUATION IN RESPECT OF MACHINES SOLD DU RING THE YEAR COULD NOT BE PRECLUDED FROM REVISING THIS PROVISION AFTER TAKING INTO CONSIDERATION THAT WARRANTY PERIOD OF THE GOODS SOL D UNDER WARRANTY WAS EXCEEDING AND PROVISION ALREADY PROVIDED IN A P ARTICULAR YEAR IS FALLING SHORT OF THE EXPECTED CLAIM THAT MAY BE REC EIVED. SUCH A PROVISION IS BASED ON SCIENTIFIC STUDY AND ACTUARIA L BASIS AND TO BE ALLOWED AS A BUSINESS EXPENDITURE. HENCE, IN OUR O PINION, THE PROVISION FOR PAYMENT MADE BY THE ASSESSEE TOWARDS SUB-CONTRACT IS ALLOWABLE EXPENDITURE AS THE ASSESSEE RECOGNIZED T HE REVENUE FROM THE SAID CONTRACT AS INCOME IN THE ASSESSMENT YEAR UNDER CONSIDERATION. FURTHER, WE MAKE IT CLEAR THAT THE ASSESSEE CANNOT CLAIM THE SAME EXPENDITURE ON ACTUAL PAYMENT BASIS, OTHERWISE IT AMOUNTS TO DOUBLE DEDUCTION ONE ON THE BASIS OF A CCRUAL AND ITA NO.1824 ETC :- 17 -: ANOTHER ON THE BASIS OF ACTUAL PAYMENT. HENCE, WE DIRECT THE ASSESSING OFFICER TO ALLOW THIS RETENTION MONEY PAY MENT ONLY ON ACCRUAL BASIS AND NOT ON ACTUAL PAYMENT BASIS. WIT H THESE OBSERVATIONS, WE REMIT THIS ISSUE TO THE FILE OF TH E ASSESSING OFFICER FOR QUANTIFICATION. THIS GROUND IS PARTLY ALLOWED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE I.T.A. NO. 594/MDS/2014 IS A PARTLY ALLOWED FOR STATISTICAL PU RPOSES. 14. NOW COMING TO REVENUES APPEAL I.T.A.NO.702/MDS/201 4 FOR ASSESSMENT YEAR 2009-10, THE FIRST ISSUE IS WITH RE GARD TO RESTRICTING THE DISALLOWANCE U/S 14A R.W RULE 8D TO ONLY 3 RD LIMB OF RULE 8D(2). 15. SINCE WE HAVE REMITTED THE ISSUE RELATING TO THE DISALLOWANCE U/S 14A OF THE ACT IN ASSESSEES APPEA L I.T.A.NO. 594/MDS/2014, THIS GROUND DOES NOT REQUIRE ADJUDICA TIONS. 16. THE SECOND ISSUE IN REVENUES APPEAL IS WITH REGARD TO DELETING THE DISALLOWANCE OF ` 2 CRORES U/S 37(1) OF THE ACT TOWARDS PAYMENT OF TRADE LICENCE FEE. 17. THE FACTS OF THE ISSUE ARE THAT DDURING THE YEAR, AN AMOUNT OF RS.2 CRORES HAD BEEN PAID TO M/S. SAMRUDDHI HOLDINGS, A CLOSELY RELATED PARTNERSHIP FIRM WHICH ACCORDING TO THE ASS ESSEE WAS PAID FOR USAGE OF NAME AND LOGO THAT BELONGED TO THAT FIRM. THE ASSESSING ITA NO.1824 ETC :- 18 -: OFFICER HAS OBSERVED THAT THE TRANSACTION INVOLVING THE PAYMENT OF RS.2 CRORES WOULD BE COVERED BY THE PROVISIONS OF S ECTION 40A(2)(B) OF THE ACT WHEREIN THE COST OF OBTAINING THE RIGHTS FO R USAGE OF BRAND NAME AND LOGO NAMELY, 'CCC', TRIPLE C' AND 'UGA' BY THE APPELLANT COMPANY FROM THEIR ASSOCIATE CONCERN M/S. SAMRUDDHI HOLDINGS WAS FOUND TO BE UNREASONABLY HIGH. IT WAS OBSERVED FURT HER THAT THE SAID LOGO HAD NOT ATTAINED ANY SIGNIFICANT OR APPRECIABL E BRAND IMAGE AS WELL AS THE BASIS FOR ARRIVING FOR QUANTUM USAGE FE E WAS ALSO UNSCIENTIFIC. FURTHER, THE ASSESSING OFFICER IN TR ACING THE HISTORY OF BOTH THE PARTNERSHIP FIRM AND THE ASSESSEE COMPANY, OBSERVED THAT THE PARTNERSHIP FIRM WAS FORMED ON 31.5.1997 A ND THE ASSESSEE COMPANY WAS INCORPORATED ON 11.7.1997 AND WITHIN TH E SPAN OF 41 DAYS M/S. SAMRUDDHI HOLDINGS COULD NOT HAVE CREATED A BRAND I MAGE. IT IS CCL WHICH PERFORMED IN THE MARKET TO EARN A BRAN D IMAGE FOR ITSELF AND NOT M/S. SAMRUDDHI HOLDINGS. THE ASSESSING OFFICER FURTHER H ELD THAT THIS TRANSACTION IS A DEVICE TO SHIFT THE PROF ITS OF THE COMPANY TO THE DIRECTORS INDIRECTLY, SINCE THE SHARE OF PROFIT S FROM THE FIRM IS EXEMPT U/S 10 (2A). THE ASSESSING OFFICER HAS ALSO PUT FORTH ANO THER REASONING TO SHOW THAT THE AMOUNT PAID IS EXCESSIVE AND ATTRACTS THE PROVISIONS OF SEC.40A(2)(B) STATING THAT THE ASSESS EE WOULD NOT HAVE PAID SO MUCH AMOUNT AS LICENCE FEE TO OUTSIDER FOR SUCH LOGO AND TRADEMARK. ACCORDINGLY, THE CLAIM OF DEDUCTION OF R S. 2 CRORES BEING ITA NO.1824 ETC :- 19 -: THE AMOUNT RELATABLE TO THE TRADE LICENCE FEE FOR U SE OF TRADE NAME AND LOGO AS PER THE AGREEMENT BETWEEN THE ASSESSEE COMPANY AND M/S. SAMRUDDHI HOLDINGS WAS DISALLOWED BY THE ASSESSING OFFICER WITHIN THE SCOPE OF SECTION 37(1) OF THE ACT IN THE COMPUTATION OF TAXABLE TOTAL INCOME HOLDING THAT IT IS A TAILOR-MA DE ARRANGEMENT. ACCORDINGLY, HE MADE THE DISALLOWANCE. ON APPEAL, THE LD. CIT(A) HAS OBSERVED AS UNDER: 6.2 I HAVE GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE AND SUBMISSIONS MADE BY THE ID. AR . FROM THE FACTS OF THE CASE, IT IS NOTICED THAT M/S.SAMRUDDHI HOLDINGS, A PARTNERSHIP FIRM FLOATED BY FOUR INDIVI DUALS ON 31.5.1997 HAS CREATED THE APPELLANT COMPANY ON 11.7 .1997. EVEN THOUGH THE TIME GAP IS ONLY 41 DAYS AND THE SAMRUDDHI HOLDINGS HAS NOT EARNED ANY IMAGE WHICH S HOULD EARN LICENCE FEE, BUT THE FACT REMAINS THAT THE LOG O AND THE BRAND NAME OF TRIPLE C IS THE BRAIN CHILD OF TH E PARTNERS OF THE SAMRUDDHI HOLDINGS. IT IS FULLY SUP PORTED BY LOU BETWEEN THE COMPANY AND THE PARTNERSHIP FIRM AND THE APPROVAL FROM COMPANY LAW BOARD VIDE ITS ORDER DATED 8.4.2008. FROM THE POINT OF VIEW OF THE COMPANY , I T IS CLEAR THAT IT IS OBLIGATORY ON ITS PART TO REMIT TH E AMOUNT TO SAMRUDDHI HOLDINGS AS PER THE TERMS AND CONDITIO NS AGREED UPON. WHEN THERE IS LEGAL SANCTITY IN THE FO RM OF ENTERING INTO AN UNDERSTANDING AND APPROVAL BY THE COMPANY LAW BOARD, THERE IS NO SCOPE TO SUSPECT THE PAYMENTS ATTRACTING PROVISIONS HOLDING THAT THE APP ELLANT COULD NOT HAVE PAID THAT MUCH AMOUNT TO AN OUT SIDER, THA T TOO WHEN THE WHOLE AMOUNT PAID BY THE COMPANY WAS SUBJECTED TO TDS. THE COMPANY HAS SUBJECTED THE AMO UNT TO TDS AND REMITTED THE SAME AS PER THE PROVISIONS OF THE ACT. ITA NO.1824 ETC :- 20 -: 6.2.1 FROM THE POINT OF VIEW OF SAMRUDDHI HOLDINGS, THE ID. AR HAS SUBMITTED THAT THE SAME HAVE BEEN SUBJEC TED TO TAXATION AT MAXIMUM MARGINAL RATE ON THE ENTIRE SUMS RECEIVED FROM THE COMPANY. THE AO EVEN THOUGH MADE AN EFFORT TO SEE THE RECEIPT SIDE IN THE HANDS OF SAMR UDDHI HOLDINGS TO AVOID DOUBLE TAXATION, HE HAS NOT MADE ANY COMMENT WHETHER THE SAME WAS OFFERED FOR TAXATION I N THE HANDS OF SAMRUDDHI HOLDINGS. THE SAME WERE EXAM INED BY ME IN THE COURSE OF APPELLATE PROCEEDINGS. IT IS NOTICED THAT THE AMOUNTS PAID BY THE COMPANY WERE NOT ACCOU NTED REGULARLY IN THE BOOKS OF SAMRUDDHI HOLDINGS, EVEN THOUGH IT IS MAINTAINING ITS ACCOUNT ON CASH BASIS. ONLY F ROM AY 2012-13, IT STARTED MAINTAINING ITS ACCOUNT ON MERC ANTILE BASIS. IT IS NOTICED THAT ALL THE AMOUNTS RECEIVED WERE OFFERED FOR TAXATION OVER A PERIOD OF TIME UPTO AND INCLUDING A.Y 2012-13. THEREFORE, THERE IS NO REVENUE LOSS FROM THE POINT OF VIEW OF RECIPIENT ALSO. THE OBSERVATIONS O F THE AO THAT THE INCOMES OF THE PARTNERS IN THE FIRM ARE EX EMPT U/S.10(2A) SHOULD NOT BECOME AN ISSUE, SINCE IT IS AN EXEMPTION AVAILABLE TO ANY PARTNERS OF THE FIRM. 6.2.2 IN VIEW OF THE ABOVE DISCUSSIONS THAT THERE IS AN OBLIGATION ON THE PART OF THE COMPANY TO MAKE THE PAYMENT AND IN VIEW OF THE FACT THAT THE AMOUNT PAID BY THE APPELLANT COMPANY AFTER TDS HAS BEEN ENTIRELY OFFERED TO TAXAT ION BY THE RECIPIENTS AT MAXIMUM MARGINAL RATE , WE CANNOT SIMPLY BRUSH IT ASIDE AS A TAILOR-MADE ARRANGEMENT. THE AD DITION MADE BY THE AO CANNOT SURVIVE FOR THE SIMPLE REASON THAT IT WILL ATTRACT THE WRATH OF DOUBLE TAXATION . THEREFOR E, THE AO IS DIRECTED TO DELETE THE ADDITION. THE GROUND IS A LLOWED. AGAINST THE ABOVE FINDING OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE US. 18. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL AVAILABLE ON RECORD. THIS ISSUE CAME UP FOR CONSI DERATION BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEA R 2006-07 IN ITA NO.1824 ETC :- 21 -: I.T.A.NO. 2146/MDS/2010 AND THE TRIBUNAL VIDE ORDER DATED 24.5.2011 DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBS ERVING THAT THE PAYMENT MADE TO M/S SAMRUDDHI HOLDINGS IS AN ALLOWA BLE EXPENDITURE U/S 37 OF THE ACT AND THEREBY ANNULLED THE REVISION AL ORDER OF THE CIT DATED 27.10.2010 PASSED U/S 263 OF THE ACT. BEING SO, IN OUR OPINION, THE EXPENDITURE INCURRED BY THE ASSESSEE IS A REVE NUE EXPENDITURE AND TO BE ALLOWED ACCORDINGLY. THIS GROUND IS DISM ISSED. 19. THE NEXT ISSUE IN REVENUES APPEAL IS WITH REGARD T O DELETING THE DISALLOWANCE OF ADDITIONAL DEPRECIATION MADE T O THE EXTENT OF ` 56,00,907/-. 20. THE FACTS OF THIS ISSUE ARE THAT THE ASSESSING OFFI CER MADE DISALLOWANCE OF ADDITIONAL DEPRECIATION ON PLANT AN D MACHINERY TO THE EXTENT OF ` 56,00,907/- AFTER ADJUSTING SUCH ADDITIONAL DEPRE CIATION CLAIMED FOR A.YS 07-08 AND 08-09 WHICH WILL HAVE A CASCADING EF FECT ON THE WRITTEN DOWN VALUE OF THE PRESENT ASSESSMENT YEAR (75,19,652 - 19,18,675) . THE ASSESSING OFFICER HA S OBSERVED THAT THE COMPANY IS COVERED UNDER PARA 3(II)(C) OF PART 11 TO SCHEDULE VI TO COMPANIES ACT, 1956 AND RECOGNIZED AS A 'SERVI CE INDUSTRY' AND NOT AS AN 'INDUSTRIAL UNDERTAKING'. THE ASESSEE COMPANY IS A LARGE SCALE CONSTRUCTION CONTRACTOR AND SINCE THE P ROJECTS EXECUTED DURING THE YEAR UNDER CONSIDERATION WERE OF MAMMOTH PROPOSITIONS ITA NO.1824 ETC :- 22 -: AND SINCE THE CONSUMPTION OF CONCRETE WAS SUBSTANTI ALLY HIGH, THE ASSESSEE IN ITS ECONOMICS HAD INSTALLED A SEPARATE READY-MIX CONCRETE PLANT AND HOLLOW BLOCK MACHINERY IN EACH O F THE SELECT SITES IN WHICH THE CONSTRUCTION IS UNDER PROGRESS. ACCORDING TO ASSESSING OFFICER, THE CONSTRUCTION ACTIVITY IN WHI CH THE NEW PLANT WAS INSTALLED WAS NOT TO BE CONSTRUED AS A MANUFACT URING OR PRODUCTION ACTIVITY. FURTHER, IT WAS HELD THAT THE INSTALLATION OF THE PLANTS WAS ADMITTEDLY IN THE PLACES OF CONTRACTEES AND ACCORDINGLY IT WAS FURTHER HELD THAT THE PLANTS UNDER CONSIDERA TION WERE NOT INSTALLED IN THE SITES OWNED BY THE ASSESSEE. THEREFORE, THE ASSESSEE IS NOT ELIGIBLE FOR ADDITIONAL DEPRECIATIO N U/S.32(IIA) AMOUNTING TO ` 56,00,907/- AND HENCE DISALLOWED. THE ASSESSING OFFICER HAS PLACED HIS RELIANCE ON THE DECISION OF THE SUPREME COURT IN THE FOLLOWING CASES: N.G.BUDHARAJA & CO. AND ANOTHER REPORTED IN 2041TR 412(SC), BUILDERS ASSOCIATION OF INDIA VS. UOI & OTHERS REPORTED IN 209 ITR 877 (SC), THE DELHI HIGH COURT IN ANSAL HOUSING AND CONSTRUCT IONS LLD IN (320 ITR 420) THE ALLAHABAD HIGH COURT IN THE CASE OF JAYAPRAKASH ASSOCIATES PVT. LLD AND UP RAJKIYA NIRMAN LTD (155 TAXMAN 392) AND (155 TAXMAN 630) RESPECTIVELY. THE MADYAPRADESH HIGH COURT IN MEWARA CONSTRUCTIONS (119 TAXMAN 255) . ITA NO.1824 ETC :- 23 -: THE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. AGRA CONSTRUCTION CORPORATION REPORTED IN (146 TAXMAN 31). ON APPEAL, THE CIT(A) ALLOWED THE CLAIM OF THE AS SESSEE AGAINST WHICH THE REVENUE IS IN APPEAL. 21. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF READY-MIX CONCRETE AND SHOWN THE INCOME FROM READY-MIX CONCRE TE SALES SEPARATELY AND CLAIMED THAT THE ASSESSEE IS ENGAGE D IN THE BUSINESS OF MANUFACTURE AND PRODUCTION OF NEW ARTICLE AND F OR THAT PURPOSE IT HAS ACQUIRED NEW MACHINERY AND PLANT. ACCORDINGLY, ADDITIONAL DEPRECIATION U/S 32(1)(II) OF THE ACT WAS CLAIMED. THE ASSESSING OFFICER WAS OF THE OPINION THAT THE ASSESSEE WAS I N THE ACTIVITY OF CIVIL CONSTRUCTION AND IT IS NOT IN THE FIELD OF MANUFACT URING. HOWEVER, THE CIT(A) CONSIDERING THE READY-MIX CONCRETE PLANT AS A SEPARATE UNDERTAKING WHICH IS ENGAGED IN THE MANUFACTURE OF ARTICLE OR THING, GRANTED ADDITIONAL DEPRECIATION U/S 32(1)(II) OF T HE ACT. IN OUR OPINION, THE FINDINGS OF THE CIT(A) IS JUSTIFIED AN D THE CONTENTION OF THE REVENUE IS NOT SUSTAINABLE IN VIEW OF THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS VTM LTD, 319 ITR 3 36, WHEREIN HELD THAT THE ASSESSEE WHICH WAS A MANUFACTURER OF TEXT ILE GOODS WHEN SET UP A WINDMILL WAS ENTITLED TO ADDITIONAL DEPRECIATI ON. SAME VIEW WAS TAKEN BY THE CO-ORDINATE BENCH IN THE CASE OF SHEEL A CLINIC IN I.T.A.NO. ITA NO.1824 ETC :- 24 -: 481/MDS/2011 DATED 30.5.2011, BY OBSERVING THAT GEN ERATION OF ELECTRICITY IS AN INDEPENDENT ACTIVITY THOUGH ORIGI NALLY THE ASSESSEE IS ENGAGED IN THE BUSINESS OF RUNNING A HOSPITAL. CON SIDERING THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE ARE OF TH E OPINION THAT THE CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESS EE. THIS GROUND OF THE REVENUE IS DISMISSED. 22. THE NEXT GROUND IN REVENUES APPEAL IS WITH REGARD TO DELETING THE DISALLOWANCE OF ` 1,25,23,010/- ON PURCHASE OF AUTO CAD. 23. THE ASSESSEE INCURRED AN EXPENDITURE ON PURCHASE OF AUTOCAD SOFTWARE AND MADE PAYMENT OF ` 1,25,23,010/- AND CLAIMED AS REVENUE EXPENDITURE. THE ASSESSING OFFICER WAS OF THE OPINION THAT PURCHASE COST OF THE SOFTWARE IS A CAPITAL EXPENDIT URE AND THE BENEFIT IS AVAILABLE FOR MORE THAN ONE YEAR. HOWEVER, THE CIT(A), PLACING RELIANCE ON THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CAE OF CIT VS SOUTHERN ROADWAYS LTD, 304 ITR 84, DECIDED T HE ISSUE IN FAVOUR OF THE ASSESSEE. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 24. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL ON RECORD. AS SEEN FROM THE ORDER OF THE CIT(A), THE AUTOCAD SOFTWARE IS AN APPLICATION SOFT WARE. IT HELPS IN SPEEDING UP THE PROCESS AND TO CONDUCT THE PART OF A BUSINESS IN A ITA NO.1824 ETC :- 25 -: MORE EFFICIENT AND BETTER MANNER. THE BENEFITS OF THIS SOFTWARE ARE ACCRUED ON DAY TO-DAY RUNNING OF THE BUSINESS BUT D O NOT IN ANY WAY GIVE AN ENDURING BENEFIT. THOUGH THE SOFTWARE COULD BE USED FOR MORE THAN ONE YEAR, THAT ITSELF CANNOT BE A REASON FOR T REATING THE EXPENDITURE INCURRED ON APPLICATION SOFTWARE AS CAP ITAL EXPENDITURE. IN OUR OPINION, THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF SOUTHERN ROADWAYS LTD. (SUPRA) IS SQUARELY APPLICABLE TO THE FACTS OF THIS CASE AND THE EXPENDITURE INCURRED ON APPLICATION SOFTWARE IS ONLY A REVENUE EXPENDITURE AND IT IS TO BE ALLOW ED. BEING SO, WE CONFIRM THE ORDER OF THE CIT(A). THIS GROUND OF R EVENUE IS DISMISSED. 25. IN THE RESULT, THE REVENUES APPEAL I.T.A.NO.702/MD S/2014 FOR ASSESSMENT YEAR 2009-10 IS DISMISSED. I.T.A.NO. 1824/MDS/2011 [REVENUES APPEAL] -A.Y 200 6-07 26. IN THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2006-0 7, THE ONLY ISSUE IS WITH REGARD TO EXPENDITURE OF ` 1.45 CRORES AS REVENUE EXPENDITURE AND ALLOWING 1/3 RD OF THAT EXPENDITURE FOR THE ASSESSMENT YEAR 2006-07 AND REMAINING AMOUNT EQUALLY IN NEXT T WO ASSESSMENT YEARS. 27. THE FACTS OF THIS ISSUE ARE THAT THE ASSESSEE INCU RRED AN EXPENDITURE OF ` 1.45 CRORES WHICH HAS CLAIMED AS REVENUE ITA NO.1824 ETC :- 26 -: EXPENDITURE. THE ASSESSING OFFICER OBSERVED THATS THIS EXPENDITURE IS CAPITAL EXPENDITURE AND PAID TO M/S SPARK CAPITAL A DVISORS (INDIA) PVT. LTD FOR RENDERING PROFESSIONAL SERVICES TO THE ASSE SSEE-COMPANY IN THE FIELD OF CORPORATE FINANCE, CONNECTED ADVISORY SERV ICES, INDUSTRY RESEARCH, AND PREPARING CORPORATE STRATEGY AND GROW TH FOR BRINGING OUT A BUSINESS PLAN. THE ASSESSING OFFICER ALSO OBSERV ED THAT ANOTHER AMOUNT OF ` 25 LAKHS WAS PAID TO M/S UNIT TRUST OF INDIA VENT URE FUNDS MANAGEMENT COMPANY PVT. LTD FOR RAISING OF SH ARE CAPITAL. HE APPLIED THE RATIO OF SUPREME COURT IN THE CASE OF B ROOKE BOND INDIA LTD, 225 ITR 798, WHEREIN IT WAS HELD THAT EXPENDIT URE INCURRED IN ISSUE OF SHARE CAPITAL IS CAPITAL EXPENDITURE. ON APPEAL BEFORE THE CIT(A), THE CIT(A) OBSERVED THAT THESE EXPENDITURE GIVE BENEFIT TO THE ASSESSEE FOR LONGER DURATION OF TIME. BEING SO, THE RATIO OF JUDGMENT OF SUPREME COURT IN THE CASE OF MADRAS INDUSTRIAL INVE STMENT CORPORATION LTD VS CIT, 225 ITR 802 HAS TO BE APPLI ED. OTHERWISE, ALLOWING THE EXPENDITURE IN ONE YEAR MIGHT GIVE A V ERY DISTORTED PICTURE OF THE PROFITS OF THE ASSESSEE-COMPANY FOR A PARTICULAR ASSESSMENT YEAR AND THE BENEFIT OF THE EXPENDITURE INCURRED BY THE ASSESSEE IS OVER A PERIOD OF THREE YEARS WHICH IS T O BE APPORTIONED. HE DIRECTED ACCORDINGLY AGAINST WHICH THE REVENUE I S IN APPEAL BEFORE US. ITA NO.1824 ETC :- 27 -: 28. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL AVAILABLE ON RECORD. IN OUR OPINION, THE RELIANCE PLACED BY THE CIT(A) IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT CORPORA TION LTD (SUPRA) IS MISPLACED. IN THAT CASE THE EXPENDITURE INCURRED B Y THE ASSESSEE IS WITH REGARD TO ISSUE OF DEBENTURES AND THE DEBENTUR ES WERE TO BE REDEEMED OVER A PARTICULAR TERM. BEING SO, THE EXP ENDITURE FOR ISSUE OF DEBENTURES IS SAID TO BE DEFERRED REVENUE EXPEND ITURE AND IT IS TO BE APPORTIONED OVER A PERIOD OF DEBENTURES FOR WHIC H IT WAS ISSUED. IN THE PRESENT CASE, THE ASSESSEE INCURRED EXPENDITUR E TOWARDS CORPORATE FINANCE, INDUSTRY RESEARCH, PREPARING COR PORATE STRATEGY AND GROWTH FOR BRINGING OUT A BUSINESS PLAN WHICH GIVES ENDURING BENEFIT TO THE ASSESSEE AND THEREFORE, THE EXPENDITURE IS NOT FOR A PARTICULAR ASSESSMENT YEAR AS SUCH IT CANNOT BE NEITHER A REVE NUE EXPENDITURE OR DEFERRED REVENUE EXPENDITURE. THE BENEFITS OF THE EXPENDITURE ARE ENDURING IN NATURE. IN OUR OPINION, THE JUDGMENT O F SUPREME COURT IN THE CASE OF BROOKE BOND INDIA LTD (SUPRA) IS DIRECT LY APPLICABLE TO THE FACTS OF THE CASE. ACCORDINGLY, WE HAVE NO HESITAT ION TO HOLD THAT THE ASSESSING OFFICER IS JUSTIFIED IN TREATING THE EXPE NDITURE AS CAPITAL EXPENDITURE. ACCORDINGLY, WE REVERSE THE ORDER OF THE CIT(A) AND RESTORE THAT OF THE ASSESSING OFFICER. 29. IN THE RESULT, THE REVENUES APPEAL I.T.A.NO.1824/M DS/2011 IS ALLOWED. ITA NO.1824 ETC :- 28 -: I.T.A.NO.592/MDS/2014 [ASSESSEES APPEAL] & I.T.A.N O. 875/MDS/2014 [REVENUES APPEAL] A.Y 2007-08 30. IN THE APPEAL OF THE ASSESSEE IN I.T.A.NO.592/MDS/ 2014 FOR ASSESSMENT YEAR 2007-08, THE FIRST ISSUE IS WITH RE GARD TO DISALLOWANCE OF EXPENSES RELATING TO THE EXEMPT INCOME ON THE AP PLICATION OF SEC. 14A OF THE ACT. 31. THE ASSESSEE INVESTED IN THE MUTUAL FUNDS AND RECE IVED DIVIDEND INCOME OF ` 23,33,013/- WHICH IS TAX FREE. THE ASSESSING OFFICER INVOKED THE PROVISIONS OF SEC. 14A AND DISA LLOWED 5% OF THIS INCOME AS EXPENDITURE TOWARDS EARNING THE EXEMPTED INCOME. ON APPEAL, THE CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AGAINST WHICH THE ASSESSEE IS IN APPEAL. 32. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL AVAILABLE ON RECORD. IN OUR OPINION, THE JUDGMEN T OF MADRAS HIGH COURT IN THE CASE OF M/S SIMPSON & CO LTD VS DCIT I N TCA NO.2621 OF 2006 DATED 15.10.2012 IS DIRECTLY APPLICABLE TO THE FACTS OF THIS CASE AS RULE 8D IS NOT APPLICABLE TO ASSESSMENT YEAR 2007-0 8. ACCORDINGLY, IN VIEW OF THE JUDGMENT OF THE MADRAS HIGH COURT IN M/ S SIMPSON & CO. LTD (SUPRA), WE DIRECT THE ASSESSING OFFICER TO DIS ALLOW 2% OF THE DIVIDEND INCOME AS EXPENDITURE FOR EARNING THE EXEM PTED INCOME BY THE ASSESSEE. THIS GROUND IS PARTLY ALLOWED. ITA NO.1824 ETC :- 29 -: 33. THE NEXT ISSUE IS WITH REGARD TO DISALLOWANCE OF ` 1,50,200/- U/S 35D(2)(C)(III) OF THE ACT. THIS GROUND WAS NOT PRESSED AT THE TIME OF HEARING HENCE, THE SAME IS DISMISSED AS NOT PRES SED. 34. THE NEXT ISSUE IS WITH REGARD TO DISALLOWANCE OF ` 6,48,33,901/- BEING RETENTION MONEY PAYABLE WHILE C OMPUTING THE INCOME OF THE ASSESSEE. 35. WE HAVE DISCUSSED SIMILAR ISSUE ELABORATELY IN ASS ESSEES APPEAL I.T.A.NO.594/MDS/2014 FOR ASSESSMENT YEAR 20 09-10. IN VIEW OF OUR FINDING IN THE FORMER PART OF THIS ORDER AND FOR THE REASONS STATED THEREIN, WE REMIT THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING THE SAME AS PER THE DIRECTION GIVEN IN THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2009-10. 36. IN THE RESULT, THE APPEAL OF THE ASSESSEE I.T.A.NO.592/MDS/2014 FOR ASSESSMENT YEAR 2007-08 I S PARTLY ALLOWED FOR STATISTICAL PURPOSES. 37. NOW COMING TO REVENUES APPEAL I.T.A.NO. 875/MDS/20 14 FOR ASSESSMENT YEAR 2007-08, THE FIRST GROUND IS WITH R EGARD TO DELETION OF ADDITION OF ` 2,47,79,060/- U/S 37(1) OF THE ACT TOWARDS PAYMEN T OF TRADE LICENCE FEE. ITA NO.1824 ETC :- 30 -: 38. SIMILAR ISSUE CAME UP FOR CONSIDERATION IN REVENUE S APPEAL I.T.A.NO.702/MDS/2011 FOR ASSESSMENT YEAR 2009-10 I N PARA 18 AND BY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEE S OWN CASE IN I.T.A.NO. 2146/MDS/2010 DATED 24.5.2011, WE HAVE DE CIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND DISMISSED THE GROUND RAISED BY THE REVENUE IN THE FORMER PART OF THIS ORDER. ACCORDIN GLY, THIS GROUND IS DISMISSED. 39. THE NEXT ISSUE IS WITH REGARD TO DELETING THE DISA LLOWANCE OF ADDITIONAL DEPRECIATION MADE TO THE EXTENT OF ` 76,13,190/-. 40. WE HAVE DISCUSSED SIMILAR ISSUE ELABORATELY IN ASSE SSMENT YEAR 2009-10 IN REVENUES APPEAL I.T.A.NO.702/MDS/2 014. IN VIEW OF OUR ORDER IN THE FORMER PART OF THIS ORDER FOR THE ASSESSMENT YEAR 2009-10 AND FOR THE REASONS STATED THEREIN, THIS GR OUND OF THE REVENUE IS DISMISSED. 41. IN THE RESULT, REVENUES APPEAL I.T.A.NO.875/MDS/20 14 IS DISMISSED. I.T.A.NO.593/MDS/2014 [ASSESSEES APPEAL] AND I.T.A .NO.701/MDS/ 2014 [REVENUES APPEAL] A.Y 2008-09 ITA NO.1824 ETC :- 31 -: 42. IN ASSESSEES APPEAL I.T.A.NO.593/MDS/2014 FOR ASSE SSMENT YEAR 2008-09, THE FIRST ISSUE IS WITH REGARD TO DIS ALLOWANCE OF EXPENSES U/S 14A OF THE ACT. 43. WE HAVE DECIDED SIMILAR ISSUE ELABORATELY IN ASSES SEES APPEAL IN I.T.A.NO.592/MDS/2014 FOR ASSESSMENT YEA R 2007-08. ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO D ISALLOW 2% OF THE DIVIDEND INCOME AS EXPENDITURE. THIS GROUND IS PAR TLY ALLOWED. 44. THE NEXT ISSUE IS WITH REGARD TO DISALLOWANCE OF RO C FEE. 45. IN VIEW OF OUR ORDER IN ASSESSEES APPEAL I.T.A.NO. 594/MDS/2014 AND BY PLACING RELIANCE ON THE DECISI ON OF SUPREME COURT IN THE CASE OF BROOKE BOND INDIA LTD(SUPRA), THIS GROUND IS DISMISSED. 46. THE NEXT ISSUE IS WITH REGARD TO DISALLOWANCE OF RE TENTION MONEY PAYABLE OF ` 15,02,34,929/-. 47. SIMILAR ISSUE HAS COME UP BEFORE THIS TRIBUNAL IN I T 594/MDS/2014 FOR ASSESSMENT YEAR 2009-10 AND IN VIE W OF OUR ORDER IN THE FORMER PART OF THIS ORDER, WE DIRECT THE ASS ESSING OFFICER TO QUANTIFY THE DISALLOWANCE AS DIRECTED IN ASSESSMENT YEAR 2009-10. 48. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN I.T.A.NO.875/MDS/2014 IS PARTLY ALLOWED FOR STATIST ICAL PURPOSES. ITA NO.1824 ETC :- 32 -: 49. NOW COMING TO REVENUES APPEAL I.T.A.NO.701/MDS/201 4 FOR ASSESSMENT YEAR 2008-09, THE FIRST ISSUE IS WITH RE GARD TO DELETING THE DISALLOWANCE OF ` 2 CRORE TOWARDS PAYMENT OF TRADE LICENCE FEE U/S 37(1) OF THE ACT. 50. WE HAVE DECIDED SIMILAR ISSUE IN REVENUES APPEAL I .T.A.NO. 702/MDS/2014 FOR ASSESSMENT YEARS 2009-10 AND 2007- 08 BY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN I.T.A.NO.2146/MDS/2010 DATED 24.5.2011, IN FAVOUR O F THE ASSESSEE. WE, THEREFORE, DISMISS THE GROUND RAISED BY THE REV ENUE. 51. THE NEXT ISSUE IS WITH REGARD TO RESTRICTING THE DI SALLOWANCE U/S 14A R.W RULE 8D TO ONLY 3 RD LIMB OF RULE 8D(2) OF THE ACT TO THE EXTENT OF ` 70,57,089/- 52. IN ASSESSEES APPEALS I.T.A.NO.594/MDS/2014 FOR ASSESSMENT YEAR 2009-10 AND I.T.A.NO.593/MDS/2014 FOR ASSESSMENT YEAR 2008-09, WE HAVE REMITTED THIS ISSUE TO THE FI LE OF THE ASSESSING OFFICER TO DECIDE AFRESH IN THE LIGHT OF THE DECISI ON OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF M/S DAGA GLOBA L CHEMICALS PVT. LTD IN I.T.A.NO.5592/MUM/2012 DATED 1.1.2015. THER EFORE, THIS GROUND DOES NOT REQUIRE SPECIFIC ADJUDICATION. ITA NO.1824 ETC :- 33 -: 53. THE NEXT ISSUE IS WITH REGARD TO DELETING ADDITIONA L DEPRECIATION OF ` 55,91,308/- U/S 32(1) OF THE ACT. 54. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL AVAILABLE ON RECORD. THIS ISSUE IS COVERED BY OUR O RDER IN REVENUES APPEAL I.T.A.NO.702/MDS/2014 FOR ASSESSMENT YEAR 20 09-10 GIVEN IN THE EARLIER PART OF THIS ORDER. ACCORDINGLY, THIS GROUND IS DISMISSED. 55. IN THE RESULT, REVENUES APPEAL I.T.A.NO.701/MDS/20 14 IS DISMISSED. 56. TO SUMMARIZE, REVENUES APPEALS I.T.A.NO.702, 875 A ND 701/MDS/2014 FOR ASSESSMENT YEAR 2009-10, 2007-08 AND 2008-09 ARE DISMISSED WHEREAS I.T.A.NO.1824/MDS/2011 FOR AS SESSMENT YEAR 2006-07 IS ALLOWED. ASSESSEES APPEALS I.T.A.NOS.5 92 & 593 AND 594/MDS/2014 FOR ASSESSMENT YEARS AND 2007-08 AND 2008-09 AND 2009-10 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE S. ORDER PRONOUNCED IN THE OPEN COURT ON 06 TH JANUARY, 2016, AT CHENNAI. SD/- SD/- ( ! ' . #$ ) ( DUVVURU RL REDDY ) & / JUDICIAL MEMBER ( ) ( CHANDRA POOJARI ) / ACCOUNTANT MEMBER / CHENNAI / DATED: 06 TH JANUARY, 2016 RD ITA NO.1824 ETC :- 34 -: ' #$ %$ / COPY TO: 1 . &' / APPELLANT 4. ( / CIT 2. ')&' / RESPONDENT 5. $*+ ' , / DR 3. ( () / CIT(A) 6. +/ 0 / GF