The DCIT, Circle-1(1), Baroda V. M/s. Jewel Consumer Care Pvt.Ltd., Baroda

ITA 884/AHD/2009

• Counselvise Citation: 88420514 RSA 2009
• Duration Of Justice: 2 year(s) 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 08-12-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 20-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K VOHRA
• Assessee Lawyers: MRS URVASHI SHODHAN; S N SOPARKAR
• Keywords: Depreciation; Business expenditure; Proportionate interest; Commercial expediency; Revised return; Revenue expenditure; Capital expenditure
• Section: 143(3); 14A; 80IB; 37

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE S/SHRI D.K.TYAGI, JM AND B.P. JAIN, AM. DY. CIT, CIRCLE-1(1), BARODA. VS. JEWEL CONSUMER CARE (P) LTD. UNIT AMIGO BRUSHES LTD. PLOT NO.212, LUNA PADRA, BARODA. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI R. K. VOHRA, DR RESPONDENT BY:- SHRI S.N. SOPARKAR, SR.ADVOCATE & MRS. URVASHI SHODHAN, ADVOCATE. DATE OF HEARING :8/12/2011 DATE OF PRONOUNCEMENT : 21.12.11. O R D E R PER D. K. TYAGI, JUDICIAL MEMBER . THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A) DATED 22.12.2008. THE REVENUE HAS RAISED FOL LOWING GROUNDS IN THIS APPEAL :- (1)(A) ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE AMOUNT OF RS.3,81, 00,000/- WAS PARKED WITH THE ASSOCIATED CONCERN, M/S DENTA BRUSH (P) LTD. FOR PURCHASE OF BLISTER MACHINE, THEREBY ASSUMING COMME RCIAL EXPEDIENCY OF THE TRANSACTION AND DELETING THE DISA LLOWANCE OF ITA NO.884/AHD/2009 ASST. YEAR :2005-06 ITA NO.884/AHD/2009 ASST. YEAR 2005-06 2 INTEREST MADE ON ACCOUNT OF DIVERSION OF THIS FUND, WHEN THE ASSESSEE HAD FAILED TO ADDUCE ANY EVIDENCE WHATSOEV ER IN REGARD TO PURCHASE OF BLISTER MACHINE DURING THE YEAR OR EVEN SUBSEQUENTLY, EITHER FROM OR THROUGH THE SAID ASSOCIATE CONCERN. (B) THE LD. CIT(A) FAILED TO APPRECIATE THAT, BEFOR E THE AO, THE ASSESSEE HAD TAKEN A VAGUE PLEA TO THE EFFECT THAT THE AMOUNT WAS GIVEN AS A FINANCIAL SUPPORT TO ENABLE M/S DENTA BR USH (P) LTD. TO PRODUCE SPECIALIZED MACHINE REQUIRED BY THE ASSESSE E, WHEN NOTHING PREVENTED THE ASSESSEE FROM ACQUIRING SUCH MACHINE DIRECTLY FROM THE SUPPORT AND THE TRANSACTION OF GR ANTING INTEREST- FREE FUNDS FOR SUCH ALONG PERIOD NOT TO THE SUPPLIE R OF THE MACHINERY BUT TO A THIRD PERIOD PURPORTEDLY AS FINA NCIAL SUPPORT TO ENABLE HIM TO PROCURE THE MACHINERY IS CONTRARY TO NORMAL BUSINESS PRACTICE. (C) THE LD. CIT(A) FAILED TO APPRECIATE THAT THE FA CTS BEING IN THE SPECIAL KNOWLEDGE OF THE ASSESSEE, THE ONUS U/S 36( 1)(III) BY VIRTUE OF SECTION 106 BY THE INDIAN EVIDENCE ACT, WAS ON T HE ASSESSEE TO PROVE THAT ALL THE BORROWINGS WERE USED FOR THE PUR POSE OF THE BUSINESS AND THAT THE PARKING OF INTEREST-FREE FUND S WITH THE ASSOCIATE CONCERN WAS FOR BUSINESS PURPOSE, AS SETT LED IN THE CASE OF CIT VS. ABHISHEK INDUSTRIES LTD. 286 ITR 01 (P & H) . (2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT AMOUNT OF RS.2,10,561/ - AS REVENUE EXPENDITURE, WITHOUT APPRECIATING THE DECISION OF C IT VS. SARAVANA SPINNING MILLS (P) LTD. 293 ITR 201 (SC). (3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE DEDUCTION U/S 80IB, EV EN THOUGH THE ASSESSEE DID NOT MAKE ITS CLAIM OF DEDUCTION IN THE ORIGINAL RETURN OF INCOME. 2. THE FIRST GROUND RELATES TO DISALLOWANCE OF INTE REST MADE ON ACCOUNT OF DIVERSION OF RS.3,81,00,000/-. BRIEF FAC TS OF THE CASE ARE THAT THE ASSESSEE COMPANY MADE ADVANCES TO ITS SISTER CO NCERNS, THE OUTSTANDING AMOUNTS OF WHICH AS ON 31/03/2005 WERE AS UNDER :- ITA NO.884/AHD/2009 ASST. YEAR 2005-06 3 AMIGO SECURITIES (P) LTD. (ASPL) RS.1,34,91,942/- DENTABRUSH (P) LTD. (DPL) RS.3,81,00,000/- THE AO NOTED THAT NO INTEREST WAS RECOVERED BY THE ASSESSEE COMPANY ON SUCH ADVANCES. THE AO FURTHER NOTED THAT THE ASSESS EE COMPANY HAD INVESTED FUNDS IN EQUITY SHARES OF RS.44,21,910/- W HICH COULD ALSO NOT BE CONSIDERED TO BE FOR BUSINESS PURPOSES. THE AO HENC E ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY PROPORTIONATE INTEREST ON I NTEREST-FREE ADVANCES GIVEN AND INVESTMENT IN EQUITY SHARES SHOULD NOT BE DISALLOWED U/S 36(1)(III), HOLDING THAT THE SAID INTEREST-FREE ADV ANCES AND INVESTMENTS HAD BEEN MADE OUT OF INTEREST-BEARING FUNDS. THE AS SESSEE IN REPLY SUBMITTED THAT THE ADVANCES WERE MADE BY THE COMPAN Y PURSUANT TO A MEMORANDUM OF UNDERSTANDING EXECUTED BY THE COMPANY WITH ASPL FOR DEVELOPMENT AND UTILIZATION OF OFFICE PREMISES ALON G WITH RELATED FACILITIES ON A PRE-DETERMINED RENT. THE ASSESSEE F URTHER SUBMITTED THAT VIDE THE SAID MOU IT HAD ALSO SECURED A RIGHT TO CO NVERT THE SAID ADVANCE INTO PURCHASE CONSIDERATION AND SECURE OWNERSHIP RI GHTS AT A FUTURE DATE AT ITS OWN OPTION. IN LIEU OF THE SAID RIGHTS, THE COM PANY HAD AGREED TO PROVIDE INTEREST FREE DEPOSITS TO ASPL TO FINANCE T HE CONSTRUCTION OF THE OFFICE BUILDING. THE AO NOTED THAT AS PER THE SAID MOU THE COMPANY WAS REQUIRED TO PROVIDE INTEREST-FREE ADVANCES OF RS.1. 00 CRORE TO ASPL. HE FURTHER NOTED THAT THE ASSESSEE HAD NOT SATISFACTOR ILY EXPLAINED THE REMAINING INTEREST-FREE DEPOSITS OF RS.34.91 LACS. ACCORDINGLY, THE AO ITA NO.884/AHD/2009 ASST. YEAR 2005-06 4 HELD THAT INTEREST FREE DEPOSITS OF RS.34.91 LACS W ERE GIVEN BY THE ASSESSEE FOR NON-BUSINESS PURPOSES. FURTHER, THE ASSESSEES CONTENTION THAT INTEREST FREE ADVANCES TO ITS SISTER CONCERN (DPL) WERE FOR BUSINESS PURPOSE WAS ALSO REJECTED. THE ALTERNATE CONTENTION OF THE ASSE SSEE COMPANY THAT IT HAD SUFFICIENT INTEREST FREE FUNDS AGAINST THE ABOVE IN TEREST FREE ADVANCES AND INVESTMENTS WAS ALSO REJECTED ON THE GROUNDS THAT T HE COMPANYS INVESTMENTS IN FIXED ASSETS ALONE WERE IN EXCESS OF THE SAID INTEREST FREE FUNDS. ACCORDINGLY, THE AO HELD THAT INTEREST FREE ADVANCE TO ASPL TO THE EXTENT OF RS.34.91 LACS AND ENTIRE INTEREST FREE AD VANCE OF RS.381 LACS TO DPL WAS FOR NON-BUSINESS PURPOSE. INTEREST EXPENDIT URE OF RS.39,95,709/- OUT OF TOTAL INTEREST EXPENDITURE OF RS.43,00,926/- WAS DISALLOWED ON THE GROUND THAT THERE WAS DIVERSION O F INTEREST-BEARING FUNDS TO INTEREST-FREE ADVANCES AND INVESTMENTS. 3. THE ASSESSEE WENT IN APPEAL BEFORE LD. CIT(A) WH EREIN THE LD. AR SUBMITTED THAT THE COMPANY WAS IN THE BUSINESS OF M ANUFACTURING TOOTHBRUSHES. IT WAS EARLIER OPERATING FROM THE FAC TORY SITUATED IN PADRA AND ALSO FROM SMALL OFFICE PREMISES ON OLD PADRA RO AD. SINCE ITS BUSINESS WAS EXPANDING, IT REQUIRED LARGER OFFICE P REMISES. ASPL AND THE ASSESSEE COMPANY ENTERED INTO AN AGREEMENT WHEREBY ASPL UNDERTOOD TO CONSTRUCT A COMMERCIAL BUILDING AT OLD PADRA ROAD, BARODA IN WHICH THE ASSESSEE COMPANY WOULD GET USAGE RIGHT OF 7000 SQ.F T. FULLY FURNISHED ITA NO.884/AHD/2009 ASST. YEAR 2005-06 5 SPACE. THE PREMISES WERE TO BE LET OUT ON LEASE BY ASPL TO THE ASSESSEE ON PRE-DETERMINED RATE OF RS.24 PER SQ.FT. INCLUSI VE OF SERVICES AND MAINTENANCE CHARGES. NO OTHER RENT WAS TO BE PAID. SINCE THE MARKET RENT IN OLD PADRA ROAD WAS MUCH HIGHER, THIS WAS AN ATTR ACTIVE PROPOSITION FOR THE ASSESSEE COMPANY. UNDER THE TERMS OF THE AGREEM ENT, THE ASSESSEE WAS REQUIRED TO MAKE INTEREST-FREE ADVANCE OF THE I MPUGNED AMOUNT OF RS.1.00 CRORES PLUS A FLOATING ADVANCE NOT EXCEEDIN G RS.1.50 CRORES. THE ASSESSEE ALSO RECEIVED THE RIGHT TO CONVERT THE LEA SE INTO OUTRIGHT PURCHASE AT ITS SOLE OPTION. THUS THE ADVANCE WAS MADE TO AS PL IN FURTHERANCE OF COMMERCIAL EXPEDIENCY OF THE ASSESSEE. THE ASSESSEE HENCE CONTENDED THAT THE ENTIRE ADVANCE MADE TO ASPL WAS IN ACCORD ANCE WITH THE PROVISIONS OF THE MOU. 3.1 IN RESPECT OF THE INTEREST-FREE ADVANCE TO DPL IT WAS SUBMITTED THAT THE SAME WAS MADE TO A SISTER CONCERN IN ORDER TO E NABLE IT TO SET UP ITS BUSINESS BY PURCHASING SUITABLE FIXED ASSETS IN THE FORM OF MACHINERY AND ALSO FACTORY BUILDING TO DEVELOP DPL AS AN ANCILLAR Y INDUSTRY TO THE COMPANYS MANUFACTURING ACTIVITIES. M/S DPL HAD ACQ UIRED A BRISLING MACHINE, WHICH DPL WOULD HAVE USED TO DO BRISTLING FOR TOOTHBRUSHES WHETHER FOR THE COMPANY ITSELF OR FOR ITS GROUP COM PANY. IN SUPPORT OF HIS PLEA THE LD. AR ALSO SUBMITTED THE BALANCE SHEET OF M/S DENTABRUSH LTD. FOR ALL YEARS SINCE THE ADVANCE WAS FIRST GIVEN BY THE ASSESSEE COMPANY, SHOWING DEPLOYMENT OF FUNDS IN ITS FIXED ASSETS. AC CORDINGLY, THE LD. AR ITA NO.884/AHD/2009 ASST. YEAR 2005-06 6 ARGUED THAT THE SAID ADVANCE WAS MADE ON GROUNDS OF COMMERCIAL EXPEDIENCY. 3.2 THE LD. CIT(A) DECIDED THE ISSUE BY OBSERVING A S UNDER :- 3.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. A R AND THE FACTS OF THE CASE. THE ISSUE REGARDING DISALLOWANCE ON ACCOUNT O F DIVERSION OF INTEREST-BEARING FUNDS FOR MAKING INTEREST-FREE ADV ANCES HAS BEEN CONSIDERED BY THE SUPREME COURT IN THE CASE OF S.A. BUILDERS LTD. VS. CIT 288 ITR 1. THE APEX COURT LAID DOWN THE FOLLOWING R ATIO WHILE DECIDING THE APPEAL : TO DECIDE WHETHER INTEREST ON FUNDS BORROWED BY TH E ASSESSEE TO GIVE AN INTEREST FREE LOAN TO A SISTER CONCERN (E.G. A SUBSIDIARY OF THE ASSESSEE) SHOULD BE ALLOWED AS A DEDUCTION UNDER SECTION 36(1)(III) OF THE INCOME-TA X ACT, 1961, ONE HAS TO ENQUIRE WHETHER THE LOAN WAS GIVEN BY THE ASSESSEE AS A MEA SURE OF COMMERCIAL EXPEDIENCY. THE EXPRESSION COMMERCIAL EXPEDIENCY IS ONE OF WI DE IMPORT AND INCLUDES SUCH EXPENDITURE AS A PRUDENT BUSINESSMAN INCURS FOR THE PURPOSE OF BUSINESS. THE EXPENDITURE MAY NOT HAVE BEEN INCURRED UNDER ANY LE GAL OBLIGATION BUT YET IT IS ALLOWABLE AS BUSINESS EXPENDITURE IF IT WAS INCURRE D ON GROUND OF COMMERCIAL EXPEDIENCY. DECISIONS RELATING TO SECTION 37 WILL ALSO BE APPLI CABLE TO SECTION 36(1)(III) BECAUSE IN SECTION 37 ALSO THE EXPRESSION USED IS FOR THE PUR POSE OF THE BUSINESS. FOR THE PURPOSE OF BUSINESS INCLUDES EXPENDITURE VOLUNTARI LY INCURRED FOR COMMERCIAL EXPEDIENCY, AND IT IS IMMATERIAL IF A THIRD PARTY A LSO BENEFITS THEREBY. THE EXPRESSION FOR THE PURPOSE OF BUSINESS IS WID ER IN SCOPE THAN THE EXPRESSION FOR THE PURPOSE OF EARNING PROFITS. IN ORDER TO CONSIDER WHETHER ONE SHOULD ALLOW DEDUC TION UNDER SECTION 36(1)(III) OF INTEREST PAID BY THE ASSESSEE ON AMOUNTS BORROWED B Y IF FOR ADVANCING TO A SISTER CONCERN, THE AUTHORITIES AND THE COURTS SHOULD EXAM INE THE PURPOSE FOR WHICH THE ASSESSEE ADVANCED THE MONEY AND WHAT THE SISTER CON CERN DID WITH THE MONEY. THAT THE BORROWED AMOUNT IS NOT UTILIZED BY THE ASSESSEE IN ITS OWN BUSINESS BUT HAD BEEN ADVANCED AS INTEREST FREE LOAN TO ITS SISTER CONCER N IS NOT RELEVANT. WHAT IS RELEVANT IS WHETHER THE AMOUNT WAS ADVANCED AS A MEASURE OF COM MERCIAL EXPEDIENCY AND NOT FROM THE POINT OF VIEW WHETHER THE AMOUNT INTEREST FREE LOAN TO ITS SISTER CONCERN IS NOT RELEVANT. ONCE IT IS ESTABLISHED THAT THERE WAS NEX US BETWEEN THE EXPENDITURE AND PURPOSE OF THE BUSINESS (WHICH NEED NOT NECESSARILY BE THE BUSINESS OF THE ASSESSEE ITSELF) THE REVENUE CANNOT JUSTIFIABLY CLAIM TO PUT ITSELF IN THE ARM-CHAIR OF THE BUSINESSMAN OR IN THE POSITION OF THE BOARD OF DIRE CTORS AND ASSUME THE ROLE TO DECIDE HOW MUCH IS REASONABLE EXPENDITURE HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE. NO BUSINESSMAN CAN BE COMPELLED TO MAXIMIZE HIS PRO FITS. ITA NO.884/AHD/2009 ASST. YEAR 2005-06 7 3.3.1 IT IS, THEREFORE TO BE SEEN WHETHER THE COMME RCIAL INTEREST OF THE ASSESSEE WAS FURTHERED BY ADVANCING THE LOAN AS AFO RESAID. IN THE CASE OF ASPL THE ASSESSEE APPEARS TO HAVE DERIVED CONSIDERA BLE BENEFIT UNDER THE TERMS OF AGREEMENT IN AS MUCH AS IT COULD OBTAI N OFFICE SPACE IN A PRESTIGIOUS LOCALITY AT LOW RATES INCLUSIVE OF MAIN TENANCE AND SERVICE CHARGES. THE USAGE OF THE PREMISES WAS, THEREFORE, VIRTUALLY RENT FREE. INSTEAD OF PAYING RENT MONTHLY, THE ASSESSEE HAS AL LOWED USE OF ITS FUNDS FOR EARNING INTEREST BY ASPL IN LIEU OF USAGE OF OF FICE SPACE. FURTHER, THE ASSESSEE RETAINED THE OPTION OF CONVERTING THE LEAS E INTO PURCHASE OF THE OFFICE PREMISES. IT THUS HAD THE RIGHT OF FIRST REF USAL ON SALE OF THE IMPUGNED PROPERTY. THESE ARE CONSIDERABLE COMMERCIA L ADVANTAGES. IT MAY BE DISPUTED WHETHER THE COMMERCIAL ADVANTAGE DE RIVED WAS COMMENSURATE TO THE LOSS ON ACCOUNT OF FOREGOING US AGE OF THE FUNDS IN QUESTION. IF HOWEVER, SOME NEXUS OF BUSINESS EXPEDI ENCY COULD BE SHOWN THEN THE BUSINESSMAN SHOULD BE ALLOWED TO BE THE BE ST JUDGE OF HIS OWN INTEREST THE AO HAVING HELD THAT THE INTEREST FREE ADVANCES GIVEN BY THE COMPANY TO ASPL WERE COMMERCIALLY EXPEDIENT, OUGHT NOT TO HAVE DISPUTED AS TO WHAT INTEREST FREE ADVANCES THE ASSE SSEE SHOULD HAVE JUSTIFIABLY ADVANCED AS THAT IS A JUDGMENT WHICH TH E BUSINESSMAN SHOULD BE ALLOWED TO TAKE IN HIS OWN INTEREST. FOLLOWING T HE RATIO OF THE SUPREME COURTS DECISION IN S.A. BUILDERS LTD. I AM OF THE OPINION THAT THE ENTIRE ADVANCE MADE BY THE ASSESSEE TO ASPL WAS FOR BUSINE SS PURPOSES. 3.3.2 SO FAR AS THE INTEREST-FREE ADVANCE TO DPL IS CONCERNED, IT IS OBSERVED THAT THE APPELLANT COMPANY IS IN THE BUSIN ESS OF MANUFACTURE OF TOOTHBRUSHES. THE ADVANCE TO DPL WAS FOR PURCHASE O F FIXED ASSETS I.E. BRISTLING MACHINE. DPL WAS BEING DEVELOPED AS AN AN CILLARY INDUSTRY TO THE GROUP COMPANIES. THE NYLON BRISTLES PRODUCED BY DPL WERE TO BE USED FOR MANUFACTURING OF TOOTHBRUSHES BY THE APPEL LANT COMPANY. THIS EVIDENTLY SUB-SERVES THE MAIN BUSINESS OF THE APPEL LANT AND THE COMMERCIAL INTEREST IS ALSO FURTHERED. THE SUCCESSI VE ANNUAL ACCOUNTS OF M/S DENTABRUSH LTD. CLEARLY INDICATED THAT THE FUND S ADVANCED BY THE ASSESSEE COMPANY WERE DEPLOYED FOR ACQUISITION OF F IXED ASSETS. THE ELEMENT OF COMMERCIAL EXPEDIENCY IS HENCE PRESENT I N THE TRANSACTION. FOLLOWING THE RATIO OF THE DECISION OF HONBLE SUPR EME COURT IN THE CASE OF S.A. BUILDERS LTD. I AM OF THE OPINION THAT THE ENTIRE ADVANCE MADE BY THE ASSESSEE TO ASPL WAS FOR BUSINESS PURPOSES. 3.4 IN RESPECT OF THE INVESTMENT IN EQUITY SHARES, THE LD. AR HAS SUBMITTED THAT EQUITY SHARES BEING INCOME GENERATIN G ASSETS, INVESTMENTS IN SUCH EQUITY SHARES CANNOT BE HELD TO BE DIVERSIO N OF FUNDS FOR NON- ITA NO.884/AHD/2009 ASST. YEAR 2005-06 8 BUSINESS PURPOSE. IT WAS SUBMITTED THAT AT THE EXTR EME, THE AO OUGHT TO HAVE EXAMINED WHETHER A DISALLOWANCE WAS JUSTIFIED UNDER SECTION 14A. IT WAS FURTHER SUBMITTED THAT EVEN A DISALLOWANCE UNDE R SECTION 14A WOULD NOT HAVE BEEN JUSTIFIED AS DURING THE YEAR UNDER CO NSIDERATION, THE COMPANY HAD NOT EARNED ANY DIVIDEND INCOME. IT WAS FURTHER SUBMITTED THAT THE COMPANY HAD INTEREST FREE FUNDS IN THE FOR M OF SHARE CAPITAL, RESERVES AND SURPLUS OF RS.3,06,86,721/- AGAINST WH ICH ITS INVESTMENT IN EQUITY SHARES WAS ONLY RS.44.21 LACS. HENCE, IT WAS SUBMITTED THAT NO DISALLOWANCE OF INTEREST WAS JUSTIFIED SINCE INTERE ST-FREE FUNDS WERE SUFFICIENT TO COVER THE INVESTMENTS. 3.4.1 I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. AR AND THE FACTS OF THE CASE. EQUITY SHARES BEING INCOME GENERATING ASSETS, INVESTMENT THEREON CANNOT BY ANY STRETCH OF IMAGINATION BE CALLED DIVE RSION OF FUNDS FOR NON- BUSINESS PURPOSE. THE ISSUE COULD HENCE BE WHETHER A DISALLOWANCE UNDER SECTION 14A WOULD BE JUSTIFIED. THE ITAT DELH I BENCH IN THE CASE OF MARUTI UDYOG LTD. VS. DCIT 92 ITD 119 HAS LAID D OWN THE PRINCIPLE THAT WHERE SUFFICIENT OWN FUNDS OF THE ASSESSEE WER E AVAILABLE FOR MAKING INVESTMENT, IT CANNOT BE ASSUMED THAT ANY PART OF T HE INVESTMENT PRODUCING THE TAX FREE INCOME MUST HAVE BEEN MADE F ROM BORROWED FUNDS UNLESS THERE WAS EVIDENCE TO SHOW THAT ANY SPECIFIC INVESTMENT HAS BEEN MADE FROM BORROWED FUNDS. SIMILAR VIEW HAS ALSO BEE N TAKEN IN ACIT VS. EICHER LTD. 101 TTJ 369 (DELHI ITAT), WHEREIN IT WA S HELD THAT NO DISALLOWANCE U/S 14A SHALL BE MADE WITHOUT PINPOINT ING ANY EXPENDITURE ON THE BASIS OF MATERIAL AVAILABLE ON RECORD TO SHO W THAT SUCH EXPENDITURE WAS DIRECTLY RELATABLE TO OR INCURRED I N EARNING THE TAX FREE INCOME AND NOTHING COULD BE DISALLOWED U/S 14A ON A N ESTIMATED BASIS. SIMILARLY, THE MUMBAI TRIBUNAL IN THE CASE OF FAZE THREE EXPORTS LTD. VS. ADDL. CIT (ITA NOS.7701 AND 4677 MUM 2004 AND 2005) AFTER HAVING CONSIDERED THE DECISION OF THE SUPREME COURT IN MUN JAL SALES CORPN. VS. CIT 298 ITR 298 (SC) HAS HELD WHERE THE ASSESSEE IS ABLE TO SHOW EARNINGS MORE THAN THE AMOUNT OF INVESTMENT MADE, T HE AO HAS NOT JUSTIFIED IN HAVING DISALLOWED INTEREST U/S 14A. IN THE INSTANT CASE THE APPELLANT HAD SUFFICIENT NON-INTEREST BEARING FUNDS OF ITS OWN. IT IS HELD THAT THE AO WAS NOT JUSTIFIED IN MAKING DISALLOWANC E OF INTEREST ON ACCOUNT OF INVESTMENT IN EQUITY SHARES. IN ANY CASE , THE DISALLOWANCE OF EXPENSES U/S 14A WHERE INCOME NOT SUBJECT TO TAX IS NIL WOULD BE PATENTLY UNJUSTIFIABLE. ACCORDINGLY, THE DISALLOWANCE OF RS. 39,95,709/- IS DIRECTED TO BE DELETED. AGGRIEVED BY THIS ORDER OF THE LD. CIT(A) THE REVEN UE IS IN APPEAL BEFORE THE TRIBUNAL. ITA NO.884/AHD/2009 ASST. YEAR 2005-06 9 4. THE LD. DR SUPPORTED THE ORDER OF AO AND SUBMITT ED THAT THE ASSESSEE HAD FAILED TO ADDUCE ANY EVIDENCE WHATSOEV ER IN REGARD TO PURCHASE OF BLISTER MACHINE DURING THE YEAR OR EVEN SUBSEQUENTLY, EITHER FROM OR THROUGH THE SAID ASSOCIATE CONCERN. BEFORE THE AO THE ASSESSEE HAD TAKEN A VAGUE PLEA TO THE EFFECT THAT THE AMOUN T WAS GIVEN AS A FINANCIAL SUPPORT TO ENABLE M/S DENTA BRUSH (P) LTD . TO PRODUCE SPECIALIZED MACHINE REQUIRED BY THE ASSESSEE WHEN N OTHING PREVENTED THE ASSESSEE FROM ACQUIRING SUCH MACHINE DIRECTLY FROM THE SUPPORT AND THE TRANSACTION OF GRANTING INTEREST FREE FUNDS FOR SUC H A LONG PERIOD NOT TO THE SUPPLIER OF THE MACHINERY BUT TO A THIRD PERSON PUR PORTEDLY AS FINANCIAL SUPPORT TO ENABLE HIM TO PROCURE THE MACHINERY IS C ONTRARY TO NORMAL BUSINESS PRACTICE. THE LD. CIT(A) FAILED TO APPRECI ATE THAT THE FACTS BEING IN THE SPECIAL KNOWLEDGE OF THE ASSESSEE, THE ONUS U/S 36(1)(III) BY VIRTUE OF SECTION 106 BY THE INDIAN EVIDENCE ACT, WAS ON T HE ASSESSEE TO PROVE THAT ALL THE BORROWINGS WERE USED FOR THE PURPOSE O F THE BUSINESS AND THAT THE PARKING OF INTEREST FREE FUNDS WITH THE ASSOCIA TE CONCERN WAS FOR BUSINESS PURPOSE, AS SETTLED IN THE CASE OF CIT VS. ABHISHEK INDUSTRIES LTD. 288 ITR 1 (P & H). IN THIS CONNECTION THE LD. DR ALSO RELIED ON THE DECISION OF HONBLE SUPREME COURT OF INDIA IN THE C ASE OF GOETZE (INDIA) LTD. VS. CIT 284 ITR 323 (SC). THEREFORE, THE LD. C IT(A) WAS NOT ITA NO.884/AHD/2009 ASST. YEAR 2005-06 10 JUSTIFIED IN ALLOWING THE CLAIM OF ASSESSEE. HIS OR DER MAY KINDLY BE SET ASIDE AND THAT OF THE AO BE RESTORED. 5. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESS EE RELYING ON THE ORDER OF LD. CIT(A) SUBMITTED THAT THE ISSUE IS NOW COVERED IN FAVOUR OF ASSESSEE BY THE TRIBUNAL IN ITA NO.134 & 158/AHD/20 08 ASST. YEAR 2004-05 IN THE CASE OF DCIT VS. ANIGA BRUSHES (P) L TD. AND JEWEL CONSUMER CARE (P) LTD. VS. ACIT VIDE ITS ORDER DATE D 14/05/2010. THEREFORE, THERE IS NO INFIRMITY IN THE ORDER OF LD . CIT(A). THE SAME MAY KINDLY BE UPHELD. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND GOIN G THROUGH THE MATERIAL ON RECORD, WE FIND FORCE IN THE SUBMISSION S OF THE LD. COUNSEL OF THE ASSESSEE THAT THE ISSUE IS NOW COVERED BY THE D ECISION OF THE TRIBUNAL IN ITA NO.134 & 158/AHD/2008 FOR ASST. YEAR 2004-05 IN ASSESSEES OWN CASE VIDE ORDER DATED 14/05/2010, WHEREIN THE T RIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER :- 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE HAVE ALSO PERUSED THE CASE RECORDS INCLUDING THE ASSESSMENT ORDER AS WELL AS THE ORDER OF CIT(A). WE FIND THAT THE ASSESSEE HAS GIVEN INTEREST FREE INTER-CORPORATE DEPOSITS DURING THE Y EAR AS UNDER:- ITA NO.884/AHD/2009 ASST. YEAR 2005-06 11 NAME OF THE PARTY OPENING BALANCE FURTHER GIVEN (NET) REPAID CLOSING BALANCE AMIGO SECURITIES PVT. LTD. 1,69,82,464 NIL 1,69,57,464 25,000 DENTABRUSH PVT. LTD. 3,68,34,816 15,80,184 NIL 3,84,15,000 TOTAL 3,84,40 ,000 WE FIND THAT THE MAIN ARGUMENTS OF THE LD. COUNSEL FOR THE ASSESSEE WAS THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE-COMPANY E NTERED INTO MEMORANDUM OF UNDERSTANDING (MOU IN SHORT) WITH AMIGO SECURITIES PVT. LTD. FOR UTILIZATION OF OFFICE SPACE AND OTHER FACILITIES. IN TURN, THE ASSESSEE-C OMPANY PROVIDED INTEREST FREE DEPOSIT TO AMIGO SECURITIES PVT. LTD. FOR FINANCING INSTRUCTION AS PER THE TERMS AND CONDITIONS OF MOU. THE RELEVANT TERMS AND CONDITION S AS NARRATED BEFORE US AS UNDER:- I) ASPL SHALL CONSTRUCT THE PREMISES ON A PRE-FIXE D SCHEDULE AND HAVING PREFIXED SPECIFICATION II) ON COMPLETION OF THE CONSTRUCTION, ASPL SHALL A LLOT 7,000 SQ. FT. OF SPACE IN THE SAID PREMISES ON A PRIORITY BASIS. BROADLY SPEAKING, THE ASSESSEE-COMPANY WILL TAKE PR EMISES ON LEASE ON PRE-FIXED MONTHLY RENTAL OF RS.24/- PER SQ. FT., WHICH WOULD BE INCLUSIVE OF RENT & CHARGES FOR THE FURNITURE AND FIXTURES. THE ASSESSEE COMPANY H AS TO GIVE INTEREST FREE LOAN OF RS.1 CRORE AND A FLOATING OF ADVANCE OF RS.1.5 CROR ES FOR ENABLING ASPL TO FINANCE THE CONSTRUCTION OF THESE PREMISES. THERE WAS ANOTHER C ONDITION / OPTION WITH THE ASSESSEE IN THE SAID AGREEMENT TO PURCHASE THE PREMISES WITH IN THE SPECIFIED PERIOD AND THAT ALSO AT THE SOLE DISCRETION OF THE ASSESSEE. IN VIE W OF THESE FACTS, WE ARE OF THE CONSIDERED VIEW THAT THE AMOUNT ADVANCED FOR OBTAIN ING THE PREMISES ON LEASE AND WAS FOR THE PURPOSES OF BUSINESS EXPEDIENCY. ACCORD INGLY, THE DECISION OF HONBLE APEX COURT IN THE CASE OF S.A. BUILDERS V. CIT(A) ( 2007) 288 ITR 1 (SC) WILL SQUARELY APPLY. ACCORDINGLY, WE REVERSE THE FINDINGS OF LOWE R AUTHORITIES AND THIS ISSUE IS ALLOWED IN FAVOUR OF THE ASSESSEE. 6. AS REGARDS TO PLACEMENT OF FUNDS WITH DENTA BRU SH PVT. LTD. WE FIND THAT THE ASSESSEE-COMPANY IS IN THE SAME LINE OF BUSINESS I. E. MANUFACTURING OF TOOTH BRUSHES AND ADVANCE TO DENTA BRUSH PVT. LTD. FOR PURCHASE O F BLUSTER MACHINE IS MAINLY A BUSINESS TRANSACTION AND THERE IS COMMERCIAL EXPEDI ENCY AS HELD BY CIT(A). THE REVENUE COULD NOT ADDUCE ANYTHING AGAINST THIS FIND ING. ACCORDINGLY, WE UPHOLD THE ORDER OF CIT(A) AND THIS ISSUE OF REVENUES APPEAL IS DISMISSED. ITA NO.884/AHD/2009 ASST. YEAR 2005-06 12 FOLLOWING THE ABOVE ORDER OF THE TRIBUNAL, WE OBSER VE THAT THERE IS NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A). WE UPHOLD THE SAME. THE GROUND RAISED BY THE REVENUE IS DISMISSED. 7. THE SECOND GROUND RAISED BY THE REVENUE RELATES TO HOLDING THE AMOUNT OF RS.2,10,561/- AS REVENUE EXPENDITURE BY L D. CIT(A). THE AO NOTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS T HAT THE FOLLOWING EXPENSES WERE CLAIMED FOR REPAIRS AND MAINTENANCE : - I) REPLACEMENT OF POWER CARD, CPU RS.1,69,290/- II) REPLACEMENT OF CRT ELECTRONIC PANEL FOR BRISTLI NG MACH RS.1,02,456/- III) REPLACEMENT OF TEFC ELECTRIC MOTOR RS. 29 ,008/- IV) REPLACEMENT OF PUMP RS. 58,995/- THE AO HELD THAT THE NATURE OF THE ABOVE EXPENDITUR E REFLECTS THAT AN ENDURING BENEFIT OR ADVANTAGE ACCRUED TO THE ASSESS EE BY SUCH REPAIRS. ACCORDINGLY, THE AO DISALLOWED THE ABOVE EXPENDITUR E OF RS.3,59,749/- AND ALLOWED DEPRECIATION ON THE SAME (RS.1,49,188/- ), THEREBY MAKING A NET DISALLOWANCE OF RS.2,10,561/-. 8. IN APPEAL BEFORE LD. CIT(A) IT WAS SUBMITTED BY THE LD. AR THAT A PERUSAL OF THE BILLS OF THE ABOVE ITEMS WOULD ITSEL F REVEAL THAT THE SAID ITEMS WERE IN THE NATURE OF SPARES AND COMPONENTS. THE COMPANY WAS THE OWNER OF BRISTLING MACHINES AND MOULDS AND OTHER AC CESSORIES. THESE WERE AUTOMATIC/COMPUTERIZED, HIGH PRECISION MACHINE S. DUE TO THE NATURE OF MACHINES, THERE ARE MANY OCCASIONS WHEN SPARES O N COMPONENTS ARE TO ITA NO.884/AHD/2009 ASST. YEAR 2005-06 13 BE REPLACED. THE LD. AR ALSO SUBMITTED THAT WHILE I N RESPECT OF POWER CARD AND CPU (RS.1,69,290/-) AND CRT ELECTRONIC PAN EL (RS.1,02,456/-), THE INVOICES THEMSELVES INDICATED THAT THEY ARE REP LACEMENT PARTS OF MACHINES OF THE COMPANY, IN RESPECT OF TEFC ELECTRI C MOTOR (RS.29,008) AND DENSION PUMP (RS.58,995/-) A CONFIRMATION FROM THE COMPANY CERTIFYING THAT THE SAID ITEMS WERE REPLACEMENT OF PARTS OF MACHINES AND DETAILS OF THE MACHINES IN WHICH SUCH PARTS ARE REP LACED, WERE PROVIDED. IT WAS FURTHER SUBMITTED THAT SUCH REPLACEMENT MERELY RESULTS IN ENSURING THAT THE MACHINE CONTINUED TO FUNCTION AT ITS STATE D CAPACITIES AND FUNCTIONALITIES. IT DID NOT RESULT IN ANY NEW FEATU RE OR CAPABILITIES IN THE MACHINES. THERE WAS NO LITMUS TEST TO SAY THAT A PA RTICULAR EXPENDITURE WAS REVENUE EXPENDITURE OR CAPITAL EXPENDITURE. EVE RY CASE HAS TO BE DECIDED ON ITS OWN FACTS KEEPING IN MIND THE BROAD PICTURE OF THE WHOLE OPERATION IN RESPECT OF WHICH THE EXPENDITURE HAD B EEN INCURRED. THE TEST OF ENDURING BENEFIT WAS NOT A CERTAIN OR CONCLUSIVE TEST AND IT COULD NOT BE APPLIED BLINDLY AND MECHANICALLY WITHOUT REGARD TO THE PARTICULAR FACTS AND CIRCUMSTANCES OF A GIVEN CASE. WHAT WAS RELEVAN T WAS THE PURPOSE OF THE OUTLAY AND ITS INTENDED OBJECT AND EFFECT, CONS IDERED IN A COMMONSENSE WAY HAVING REGARD TO THE BUSINESS REALI TIES. THE LD. CIT(A) AFTER CONSIDERING THE FACTS OF THE CASE AND SUBMISS IONS OF THE ASSESSEE DELETED THE IMPUGNED ADDITION BY FOLLOWING THE DECI SION OF HONBLE ITA NO.884/AHD/2009 ASST. YEAR 2005-06 14 SUPREME COURT IN THE CASE OF CIT VS. SARAVANA SPINN ING MILLS (P) LTD. 293 ITR 201 (SC). AGGRIEVED BY THIS ORDER OF LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 9. AT THE TIME OF HEARING, THE LD. DR RELIED ON THE ORDER OF AO AND SUBMITTED THAT EXPENDITURE INCURRED BY THE ASSESSEE DURING THE YEAR UNDER APPEAL ON REPAIRS AND MAINTENANCE IS OF THE CAPITAL NATURE AS BY INCURRING THIS EXPENDITURE THE ASSESSEE GOT ADVANTAGE OF ENDU RING BENEFIT AND, THEREFORE, COULD NOT BE ALLOWED AS REVENUE EXPENDIT URE. 10. THE LD. COUNSEL OF THE ASSESSEE ON THE OTHER HA ND, RELIED ON THE ORDER OF LD. CIT(A). 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD. WE FIND THAT THE LD. CIT(A) HAS GIVEN RELIEF TO THE ASSESSE E BY HOLDING THAT REPLACEMENT OF A PART OF A LARGER MACHINE WOULD NOT AMOUNT TO CREATION OF ANY NEW ASSET OR INCURRING OF CAPITAL EXPENDITURE O N THE PART OF THE ASSESSEE. THERE IS NO DISPUTE TO THE EFFECT THAT IN THE INSTANT CASE ASSESSEE USED THE BRISTLING MACHINES EACH ONE OF THEM COST A PPROXIMATELY RS.1.00 CRORES. SIMILARLY MOULDING MACHINES NORMALLY COST A NYWHERE FROM RS.30 LACS TO RS.1.00 CRORES. THE PARTS OF THESE MACHINES WHICH HAVE BEEN REPLACED DURING THE YEAR UNDER APPEAL ARE QUITE INS IGNIFICATE COMPARED TO THE COST OF THE MACHINES. THESE PARTS ARE JUST COMP ONENTS OF THE ITA NO.884/AHD/2009 ASST. YEAR 2005-06 15 MACHINES. THEREFORE, THE EXPENDITURE INCURRED BY TH E ASSESSEE FOR REPLACING THESE PARTS CANNOT BE SAID TO BE OF CAPIT AL NATURE. ON THESE FACTS OF THE CASE, THE RATIO OF THE DECISION OF HONBLE S UPREME COURT IN THE SARAVANA SPINNING MILLS (P) LTD. (SUPRA) IS SQUAREL Y APPLICABLE WHEREIN FOLLOWING WAS HELD :- SIMILARLY, IN THE CARDING DEPARTMENT WE HAVE CARDI NG MACHINES WITH AUTOLEVELERS. IF THE AUTOLEVELER FAILS, THE CARDING MACHINE BECOM ES NON-FUNCTIONAL. IF AN AUTOLEVELER IS TO BE REPAIRED THEN THAT REPAIR WOULD COME WITHI N THE CONNOTATION OF THE WORD CURRENT REPAIRS BECAUSE IT IS A PART OF THE CARDI NG MACHINE. EVEN IF IN A GIVEN CASE, REPLACEMENT OF AN AUTOLEVELER COULD COME WITH IN THE CONNOTATION OF THE WORD CURRENT REPAIRS IF THE OLD PART IS NOT AVAILABLE IN THE MARKET. IT IS A CURRENT REPAIR BECAUSE THE CARDING MACHINE REMAINS AS AN A SSET WITHOUT ANY CHANGE EVEN AFTER REPAIR OR REPLACEMENT OF THE AUTOLEVELER. TO GIVE AN EXAMPLE, A COMPRESSOR IS AN IMPORTANT PART OF AN AIR-CONDITION MACHINE. REPA IR OF THE COMPRESSOR WILL COME IN THE CONNOTATION OF THE WORD CURRENT REPAIRS IN SECTION 31(I) OF THE SAID ACT BECAUSE THE ASSESSEE DOES NOT REPLACE THE AIR-CONDI TION MACHINE. AT THE HIGHEST HE REPLACES A PART OF THE AIR-CONDITION MACHINE. SO IS IN THE CASE OF THE PICTURE TUBE IN A TELEVISION SET, WHEN THE PICTURE TUBE IS REPLACED T HE TELEVISION SET IS NOT REPLACED, THEREFORE, SUCH REPAIRS ALONE CAN COME WITHIN THE C ONNOTATION OF THE WORD CURRENT REPAIRS IN SECTION 31(I) OF THE SAID ACT AS IT STO OD AT THE MATERIAL TIME. THEY ARE EFFECTED TO PRESERVE AND MAINTAIN THE ASSET, VIZ., AIR-CONDITIONER OR CARDING MACHINE. IN VIEW OF THE ABOVE, WE FIND NO INFIRMITY IN THE O RDER OF LD. CIT(A) AND THE SAME IS HEREBY UPHELD. 12. THE THIRD GROUND RELATES TO DEDUCTION U/S 80IB AMOUNTING TO RS.51,67,315/-. DURING THE ASSESSMENT PROCEEDINGS T HE AO DENIED THIS DEDUCTION ON THE GROUND THAT ASSESSEE DID NOT CLAIM THE DEDUCTION IN ITS ORIGINAL RETURN OF INCOME AND THE REPORT OF THE AUD ITOR IN FORM 10CCB WAS NOT FILED ALONG WITH THE ORIGINAL RETURN OF INC OME. IT WAS ALSO OBSERVED BY THE AO THAT IN TERMS OF SECTION 80IB(13 ) READ WITH SECTION ITA NO.884/AHD/2009 ASST. YEAR 2005-06 16 80IA(7) THE ASSESSEE WAS REQUIRED TO CLAIM THE DEDU CTION AND SUBMIT THE SAID REPORT IN FORM 10CCB ALONG WITH THE ORIGINAL R ETURN OF INCOME WHICH HAD ONLY BEEN FILED ALONG WITH THE REVISED RETURN O N 26.3.2006. THE DEDUCTION CLAIMED U/S 80IB WAS, THEREFORE, DISALLOW ED ON THE GROUND OF NON-COMPLIANCE OF PROVISIONS OF SECTION 80IB. 13. BEFORE LD. CIT(A) THE CLAIM OF THE ASSESSEE WAS THAT THOUGH THE COMPANY HAD OMITTED TO CLAIM THE DEDUCTION U/S 80IB AND FILE AUDIT REPORT IN SUPPORT OF ITS CLAIM U/S 80IB ALONG WITH THE ORI GINAL RETURN, THROUGH OVERSIGHT, BUT ASSESSEE RECTIFIED ITS MISTAKE OR OM ISSION BY WAY OF FILING OF REVISED RETURN WELL IN TIME. THEREFORE, RELYING ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. G UJARAT OIL & ALLIED INDUSTRIES 201 ITR 325 IT WAS PRAYED THAT DEDUCTION U/S 80IB MAY BE GIVEN TO THE ASSESSEE. AFTER TAKING INTO CONSIDERAT ION THE SUBMISSIONS OF THE ASSESSEE LD. CIT(A) DIRECTED THE AO TO ALLOW TH E CLAIM OF ASSESSEE U/S 80IB. AGGRIEVED BY THIS ORDER OF LD. CIT(A), NOW THE REVE NUE IS IN APPEAL. 14. AT THE TIME OF HEARING THE LD. DR RELYING ON TH E DECISION OF HONBLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. VS. CIT 284 ITR 323 (SC) SUBMITTED THAT AO CANNOT ENTERTAIN THE CLAIM FOR DEDUCTION OTHERWISE THAN BY FILING A REVISED RETURN. FURTHER HE SUBMITTED THAT SINCE THE ORIGINAL RETURN FILED BY THE ASSESSEE WAS LATE, THE REVISED RETURN FILED ITA NO.884/AHD/2009 ASST. YEAR 2005-06 17 BY THE ASSESSEE WAS NOT VALID AND HENCE LD. CIT(A) WAS NOT JUSTIFIED IN DIRECTING THE AO TO GIVE RELIEF TO THE ASSESSEE. 15. THE LD. COUNSEL ON THE OTHER HAND, RELIED ON TH E ORDER OF LD. CIT(A). 16. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD, WE FIND THAT AO HAS DENIED THE CLAIM OF THE ASSESSEE FOR DEDUCTI ON U/S 80IB ON THE GROUND THAT ASSESSEE DID NOT CLAIM THIS DEDUCTION I N THE ORIGINAL RETURN NOR FILED THE REQUISITE AUDIT REPORT IN FORM NO.10CCB T HOUGH THE ASSESSEE CLAIMED THIS DEDUCTION BY WAY OF FILING REVISED RET URN ALONG WITH WHICH FORM NO.10CCB WAS ALSO FILED. THE AO HAS IGNORED TH E REVISED RETURN AND FORM NO.10CCB ONLY ON THE GROUND THAT NOTICE UN DER SECTION 143(2) INITIATING THE ASSESSMENT PROCEEDINGS U/S 143(3) HA D ALREADY BEEN ISSUED. ON THESE FACTS THE AO WAS NOT JUSTIFIED TO DENY THE CLAIM OF DEDUCTION U/S 80IB AND THE RATIO OF DECISION OF HONBLE SUPREME C OURT IN THE CASE OF GOETZE (INDIA) LTD. VS. CIT (SUPRA) IS NOT APPLICAB LE BECAUSE HONBLE APEX COURT DID NOT SAY THAT REVISED RETURN CANNOT B E ENTERTAINED BY THE AO AFTER THE ISSUANCE OF NOTICE U/S 143(2) OF THE A CT AND, THEREFORE, WE FEEL THAT LD. CIT(A) HAS RIGHTLY DIRECTED THE AO TO ALLOW THE CLAIM OF THE ASSESSEE BY PLACING RELIANCE ON THE DECISION OF HON BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. GUJARAT OIL & ALLIED I NDUSTRIES (SUPRA) WHEREIN IT HAS BEEN HELD THAT FILING OF AUDIT REPOR T WAS NOT MANDATORY CONDITION FOR CLAIMING DEDUCTION AND EVEN IF DURING THE ASSESSMENT ITA NO.884/AHD/2009 ASST. YEAR 2005-06 18 PROCEEDINGS THE SAME IS FURNISHED THE CLAIM OF ASSE SSEE ON THE BASIS OF SUCH REPORT CANNOT BE DENIED. THEREFORE, WE FEEL NO NEED TO INTERFERE WITH THE ORDER OF LD. CT(A) AND THE SAME IS HEREBY UPHEL D.. 17. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 21.12.11. SD/- SD/- (B.P. JAIN) (D.K. TYAGI) ACCOUNTANT MEMBER JUDICI AL MEMBER AHMEDABAD, MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 8/12/2011. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER.OTHER MEMBER 13/12/2011 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..