ACIT, Ludhiana V. M/s Vardhman Textiles Limited, Ludhiana

ITA 894/CHANDI/2015

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4376 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 21-02-2019
• Assessment Year: 2011-2012
• Appeal Filed On: 10-12-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SUBHASH AGGARWAL
• Keywords: Business income; Depreciation; Non-deduction of tax; Notional interest; Capital receipt; Revenue expenditure; Capital expenditure; TDS; Rule 8D; Set aside
• Section: 14A; 40(a)(ia); 80IB; 10B; 80IA; 80IC

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, B, CHANDIGARH , , BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NO. 787/CHD/2015 ! ' / ASSESSMENT YEARS : 2011-12 M/S VARDHMAN TEXTILES LIMITED, CHANDIGARH ROAD, LUDHIANA # THE ADDL. CIT, RANGE-1, LUDHIANA $ ./ PAN NO. AABCM4692E $% / APPELLANT &'$% / RESPONDENT APPEAL AGAINST THE ORDER OF CIT(A-1, LUDHIANA DATE D 30.9.2015 ./ ITA NO. 894/CHD/2015 ! ' / ASSESSMENT YEARS : 2011-12 THE ACIT, CIRCLE-1, LUDHIANA # M/S VARDHMAN TEXTILES LIMITED, CHANDIGARH ROAD, LUDHIANA $ ./ PAN NO. AABCM4692E $% / APPELLANT &'$% / RESPONDENT APPEAL AGAINST THE ORDER OF CIT(A-1, LUDHIANA DATE D 30.9.2015 ./ ITA NO. 483/CHD/2016 ! ' / ASSESSMENT YEARS : 2012-13 M/ S VARDHMAN TEXTILES LIMITED, CHANDIGARH ROAD, LUDHIANA # THE DCIT, CIRCLE-1, LUDHIANA $ ./ PAN NO. AABCM4692E $% / APPELLANT &'$% / RESPONDENT APPEAL AGAINST THE ORDER OF CIT(A-1, LUDHIANA DATE D 29.2.2016 ./ ITA NO. 518/CHD/2016 ! ' / ASSESSMENT YEARS : 2012-13 THE DCIT, CIRCLE-1, LUDHIANA # M/S VARDHMAN TEXTILES LIMITED, CHANDIGARH ROAD, LUDHIANA $ ./ PAN NO. AABCM4692E $% / APPELLANT &'$% / RESPONDENT APPEAL AGAINST THE ORDER OF CIT(A-1, LUDHIANA DATE D 29.2.2016 ITA NO.483-518-C-16 & 787-894-C-15- M/S VARDHMAN TEXTILES LIMITED LUDHIANA 2 & ! ( ) * /ASSESSEE BY : SHRI SUBHASH AGGARWAL, ADVOCATE ) * / REVENUE BY : SHRI G.S. PANI KISHORE, CIT DR + ) , /DATE OF HEARING : 21.02.2019 -./' ) , /DATE OF PRONOUNCEMENT : 14.03.2019 /ORDER PER SANJAY GARG, JUDICIAL MEMBER : THE PRESENT CROSS APPEALS PREFERRED BY THE ASSESSEE AND REVENUE FOR DIFFERENT ASSESSMENT YEARS ARE AGAI NST THE ORDER RESPECTIVE ORDERS OF THE COMMISSIONER OF INCO ME TAX (APPEALS) [HEREINAFTER REFERRED TO AS CIT(A)]. 2. SINCE COMMON ISSUES ARE INVOLVED IN ALL THE APPE ALS, HENCE, THEY WERE HEARD TOGETHER AND ARE BEING DISPO SED OFF BY THIS COMMON ORDER. 3. FIRST, WE SHALL DEAL WITH THE APPEAL FILED BY TH E ASSESSEE IN ITA NO. 787/CHD/2015. THE ASSESSEE IN THIS APPEAL HAS TAKEN FOLLOWING GROUNDS OF APPEAL:- ITA NO. 787/CHD/2015 1. THAT THE ORDER PASSED BY THE LD. CIT(A)-I, LUDHIANA IS PRECONCEIVED, BIASED, PERVERSE UNSUSTAINABLE IN THE EYES OF LAW, ARBITRARY AND HAVE BEEN PASSED WITHOUT APPRECI ATION OF FACTS AND WITHOUT APPIICATION OF MIND. 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S IN UPHOLDING THE DISALLOWANCE OF RS.1055.23 LACS UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D. 3. THAT THE LD.CIT (A) HAS ERRED IN LAW AND ON FACTS WHI LE UPHOLDING THE DISALLOWANCE OF INTEREST EXPENDITURE ON NOTIONAL BASIS AMOUNTING TO RS.4231.77 LACS ON INVESTMENTS UND ER THE PROVISIONS OF SECTION 36(L)(III). 4. WITHOUT PRE-JUDICE TO GROUND NO.3, THE LD.CIT(A) HA S ERRED IN NOT ALLOWING THE ABOVE MENTIONED INTEREST EXPENDITUR E UNDER ITA NO.483-518-C-16 & 787-894-C-15- M/S VARDHMAN TEXTILES LIMITED LUDHIANA 3 SECTION 57 OF THE ACT AND SETTING OFF THE SAME AGAIN ST INCOME FROM OTHER SOURCES. 5. THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THAT THE PREMIUM OF RS.10350 LACS PAID ON REDEMPTION OF FOREIGN CURRENCY CONVERTIBLE BONDS (F CCB} IS CAPITAL EXPENDITURE AND NOT REVENUE EXPENDITURE AS CLAIMED BY THE ASSESSEE AND HAS FURTHER ERRED IN HOLDING THAT THE ASSESSEE DELIBERATELY CLAIMED PREMIUM AS REVENUE EXPENDITURE IN ITS COMPUTATION OF INCOME IN ORDER TO REDUCE ITS TAX LI ABILITY, THE LD. CIT(A) WHILE HOLDING THIS LOST SIGHT OF THE VIE W TAKEN BY THE AO'S FROM AY 06-07 TO AY 10-11 (5 YEARS) WHEREIN TH EY HAVE CONSISTENTLY HELD THAT, 'PREMIUM WILL BE ALLOWED AS E XPENDITURE AGAINST TAXABLE INCOME OF THE ASSESSEE ONLY IN THE YEAR WHEN THE ACTUAL REDEMPTION OF FCCB'S WILL TAKE PLACE'. 6. WITHOUT PRE-JUDICE TO GROUND NO. 5, THE LD. CIT(A) HAS ERRED IN NOT ALLOWING ALTERNATE PLEA OF THE ASSESSEE REGARDI NG ALLOWING DEPRECIATION ON THE PREMIUM OF RS. 10350 LACS IF TH E SAME IS HELD TO BE CAPITAL EXPENDITURE. 7. THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS I N UPHOLDING THE DISALLOWANCE OF RS.1704.23 LACS UNDER SECTION 40(A)(IA) FOR NON-DEDUCTION OF WITHHOLDING TAX/TDS ON THE AMOUNT OF COMMISSION PAID TO NON-RESIDENT AGENTS AGAINST EX PORT SALES. 8. THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN TREATING INTEREST RECEIVED AMOUNTING TO RS.21,21,35,487/- AS 'INCOME FROM OTHER SOURCES' INSTEAD OF 'INCOME FROM BUSINESS A ND PROFESSION'. 9. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE AO TO REDUCE THE FOLLOWING INCOME S FROM THE PROFITS OF THE UNITS ELIGIBLE FOR DEDUCTION U/S 80I B/IC OF THE INCOME TAX ACT, 1961; PARTICULARS AURO SPINNING AURO TEXTILES ARISHT SPINNIN G MILLS AURO WUG. MILLS UNIT - 3 INSURANCE CLAIM RECEIVED 55,90,132 - 9,65,606 - KENT INCOME - 36,20.728 1,48,766 EXCHANGE RATE FLUCTUATION 1,11,31,153 58,66,385 2,13,701 MISCELLANEOUS INCOME 40,75,289 82/10,471 27,82,975 32,059 INTEREST FROM 27333 148848 2063 _ TOTAL 2,11,23,907 1,20,10,047 96,17,029 3,94,526 10. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE AO TO ALLOCATE HEAD OFF ICE EXPENSES TO UNITS ELIGIBLE FOR DEDUCTION U/S 80IB/1C OF THE ACT. 11. THAT THE LD. CIT(A) HAS ERRED IN LAW IN NOT ALLOWIN G THE CLAIM OF THE ASSESSEE FOR TREATING INTEREST REIMBURSEMENT OF ITA NO.483-518-C-16 & 787-894-C-15- M/S VARDHMAN TEXTILES LIMITED LUDHIANA 4 RS.94,90,50,718/- UNDER TECHNOLOGY UPGRADATION FUND SCHEME (TUFS) AS CAPITAL RECEIPT AND HAS FURTHER ER RED IN STATING THAT THE ASSESSES HAD NOT RAISED ITS CLAIM TO TREAT INTEREST REIMBURSEMENT UNDER TUFS AS CAPITA! RECEIPT BEFORE AO. 12. THAT THE LD. CLT(A) HAS ERRED IN LAW AND ON FACTS I N TREATING SALES TAX SUBSIDY AMOUNTING TO RS.12,31,25,525/- AS REVENUE RECEIPT INSTEAD OF CAPITAL RECEIPT AS CLAIMED BY T HE ASSESSEE. 13. WITHOUT PREJUDICE TO GROUND NO.12, THE LD. CIT(A) H AS ERRED IN TREATING SALES TAX SUBSIDY OF RS. 12,31,25,525/- AS 'INCOME FROM OTHER SOURCES' INSTEAD OF 'INCOME FROM BUSINESS AND PROFESSION'. 14. THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS I N TREATING LINE/BAY CHARGES AMOUNTING TO RS. 33,75,000/- AS CA PITAL EXPENDITURE INSTEAD OF REVENUE EXPENDITURE. 15. THAT THE APPELLANT CRAVES LEAVE TO ADD/ALTER/AMEND A NY GROUND OF APPEAL ON OR BEFORE THE DUE DATE OF HEARI NG OF APPEAL 4. GROUND NO.1 : GROUND NO.1 IS GENERAL IN NATURE AND DOES NOT REQUIRE ADJUDICATION ON ANY SPECIFIC ISSUE . 5. GROUND NO.2 : VIDE THIS GROUND THE ASSESSEE HAS AGITATED THE ACTION OF THE CIT(A) IN UPHOLDING THE DISALLOWANCE OF RS. 1055.23 LACS UNDER SECTION 14A OF THE INCOME-TAX ACT, 1961 READ WITH RULE 8D OF THE INCOM E TAX RULES. 6. AT THE OUTSET, THE LD. COUNSEL HAS INVITED OUR ATTENTION TO THE CHART FURNISHED BY HIM TO SHOW THA T THE ASSESSEE DURING THE YEAR RECEIVED DIVIDEND INCOME F ROM SUBSIDIARIES AMOUNTING TO RS. 7.91 CRORES AND DIVID END INCOME FROM INVESTMENT IN OTHER COMPANIES OF RS. 4. 68 CORES TOTALLING TO RS. 12.59 CORES. FURTHER, THE AS SESSEE DURING THE YEAR EARNED CASH PROFITS AT RS. 711 CORE S. THE LD. COUNSEL HAS FURTHER DEMONSTRATED THAT THE INVES TMENT MADE DURING THE YEAR WAS RS. 72 CRORES. HOWEVER, TH E TOTAL ITA NO.483-518-C-16 & 787-894-C-15- M/S VARDHMAN TEXTILES LIMITED LUDHIANA 5 INVESTMENTS ON 31.3.2011 WERE RS. 352 CORES. THE LD . COUNSEL HAS FURTHER SUBMITTED THAT THE TOTAL RESERV ES AND SURPLUSES AS ON 31.3.2011 WAS RS. 3671 CRORES . THE LD. COUNSEL FOR THE ASSESSEE, THEREFORE, HAS SUBMITTED THAT THE ASSESSEE HAD SUFFICIENT OWN FUNDS / INTEREST FREE F UNDS AVAILABLE WITH IT TO MEET THE INVESTMENTS YIELDING TAX EXEMPT DIVIDEND INCOME. THE LD. COUNSEL FOR THE ASS ESSEE HAS FURTHER SUBMITTED THAT IN THE LIGHT OF THE DEC ISION OF THE JURISDICTIONAL PUNJAB AND HARYANA HIGH COURT I N CIT VS. KAPSON ASSOCIATES (2016) 381 ITR 204 (P&H) AND FURTHER BY THE RECENT DECISION OF THE COORDINATE B ENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. JANAK GLOBAL RESOURCES PVT LTD ITA NO. 470/CHD/2018 ORDER DATED 16.10.2018 FOR ASSESSMENT YEAR 2014-15, THE ABOVE C OURTS OF LAW HAVE BEEN UNANIMOUS IN HOLDING THAT IF THE O WN FUNDS OF THE ASSESSEE WERE SUFFICIENT TO MEET THE INVESTMENTS MADE BY THE ASSESSEE, THEN THE PRESUMPT ION WILL BE THAT THE ASSESSEE HAS USED ITS OWN FUNDS F OR MAKING THE INVESTMENTS. UNDER THE CIRCUMSTANCES, NO DISALL OWANCE OF INTEREST EXPENDITURE IS ATTRACTED. 7. THE LD. DR, ON THE OTHER HAND, HAS RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT THE CASE OF MAXOPP INVESTMENT LTD VS. CIT., 402 ITR 640 (SC) AND SUBM ITTED THAT IN THE SAID CASE THE HON'BLE SUPREME COURT HAS APPROVED THE DECISION IN THE CASE OF AVON CYCLES L TD. VS. CIT IN ITA NO.277 OF 2013 OF HON'BLE PUNJAB & HARY ANA HIGH COURT , WHEREIN, THE NOTIONAL INTEREST EXPENDITURE ITA NO.483-518-C-16 & 787-894-C-15- M/S VARDHMAN TEXTILES LIMITED LUDHIANA 6 DISALLOWED BY THE LOWER AUTHORITIES HAVE BEEN UPHEL D BY THE HON'BLE HIGH COURT. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE I SSUE RELATING TO THE PRESUMPTION THEORY IN THE LIGHT OF THE DECISION OF THE HON'BLE SUPREME COURT IN MAXOPP INVESTMENT LTD VS. CIT., 402 ITR 640 (SC) (SUPRA) HAS BEEN DISCUSSED BY THE TRIBUNAL IN THE LATEST DECISION OF THE TRIBUNAL IN THE CASE OF ACIT VS. JANAK GLOBAL RESO URCES PVT LTD (SUPRA), WHEREIN, THE TRIBUNAL AFTER CONSI DERING THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF HERO CYCLES PVT. LTD. VS. CIT, 379 ITR 347(SC), A ND OTHER DECISIONS AS WELL AS IN THE CASE OF AVON CYCLES LT D. VS. CIT OF THE HON'BLE HIGH COURT (SUPRA) HAS DECIDED THE I SSUE IN FAVOUR OF THE ASSESSEE. AT THIS STAGE, LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT NOW THE ISSUE IS SQUARE LY COVERED BY THE LATEST DECISION OF THE HON'BLE SUPRE ME COURT IN THE CASE OF IN THE CASE OF CIT (LTU) VS. RELIAN CE INDUSTRIES LTD. [2010] 410 ITR 466 (SC), WHEREIN, THE HON'BLE SUPREME COURT HAS REITERATED THE PROPOSITIO N THAT IF THERE ARE INTEREST FUNDS AVAILABLE WITH THE ASSE SSEE, WHICH ARE SUFFICIENT TO MEET THE INVESTMENT, IT CA N BE PRESUMED THAT THE INVESTMENTS ARE MADE FROM THE IN TEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE. IN VIEW OF THIS, THIS QUESTION IS NOW SETTLED BY THE DECISION OF THE HON' BLE SUPREME COURT AND THE ISSUE ACCORDINGLY IS DECIDED IN FAVOUR OF THE ASSESSEE SO FAR AS THE ISSUE OF DISAL LOWANCE OF INTEREST EXPENDITURE IS CONCERNED. ITA NO.483-518-C-16 & 787-894-C-15- M/S VARDHMAN TEXTILES LIMITED LUDHIANA 7 9. HOWEVER, SO FAR AS THE ISSUE OF DISALLOWANCE OF ADMINISTRATIVE EXPENDITURE IS CONCERNED, THE LD. CO UNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE E ARLIER ORDER OF THE TRIBUNAL TO STATE THAT IN THE APPEAL F OR THE ASSESSMENT YEAR 2006-07, THE ASSESSEE HAS EARNED DI VIDEND INCOME OF RS. 1.59 CRORES AND THE TRIBUNAL RESTRICT ED THE DISALLOWANCE OF ADMINISTRATIVE EXPENDITURE TO RS. 2 LACS AND FURTHER IN THE ASSESSMENT YEAR 2007-08, THE ASS ESSEE HAD EARNED DIVIDEND INCOME OF RS. 219 CRORES AND TH E TRIBUNAL RESTRICTED THE DISALLOWANCE TO RS. 2.5 LAC S. IN THE YEAR UNDER CONSIDERATION, THE LD. COUNSEL FOR THE A SSESSEE HAS SUBMITTED THAT OUT OF THE TOTAL DIVIDED OF RS. 12.59 CRORES, THE ASSESSEE HAS EARNED A DIVIDED OF RS. 7 .91 CORES FROM ITS SUBSIDIARIES. HE, IN THIS RESPECT HAS SUB MITTED THAT FOR MAKING INVESTMENTS IN OWN SUBSIDIARIES, NO T MUCH OF ADMINISTRATIVE RESOURCES ARE USED, HENCE, THE DISALLOWANCE ON ADMINISTRATIVE EXPENDITURE CANNOT B E DISALLOWED SOLELY IN THE RATIO OF THE QUANTUM OF TH E INVESTMENTS SHOWN. HE, HOWEVER, HAS FAIRLY ADMITTE D THAT THE ASSESSEE HAS ALSO RECEIVED DIVIDEND OF RS. 4.6 CORES FROM THE INVESTMENT IN OTHER COMPANIES. THE LD. COU NSEL HAS FURTHER SUBMITTED THAT THE ASSESSEE HAS SUO MOT TO DISALLOWED A SUM OF RS. 2 LACS FOR THE YEAR UNDER CONSIDERATION ON ACCOUNT OF ADMINISTRATIVE EXPENSES U/S 14A OF THE I.T.ACT. 10. CONSIDERING THE OVER ALL FACTS AND CIRCUMSTANCE S OF THE CASE AND SUBMISSIONS OF BOTH THE PARTIES AND ALSO ITA NO.483-518-C-16 & 787-894-C-15- M/S VARDHMAN TEXTILES LIMITED LUDHIANA 8 CONSIDERING THE QUANTUM OF INVESTMENT MADE, THE AMO UNT OF DIVIDED EARNED BY THE ASSESSEE FROM ITS OWN SUBSIDI ARY AS WELL FROM OUTSIDE / OTHER COMPANIES, IN OUR VIEW, A TOTAL DISALLOWANCE OF RS. 5 LACS WILL BE JUSTIFIED IN TH IS CASE ON ACCOUNT OF ADMINISTRATIVE EXPENSES. HOWEVER, SINCE THE ASSESSEE ITSELF HAS SUO MOTU MADE DISALLOWANCE OF R S. 2 LACS, THE ASSESSEE WILL BE GIVEN THE BENEFIT OF TH E SAME. 11. GROUND NO.3 : VIDE GROUND NO.3, THE ASSESSEE HAS AGITATED THE DISALLOWANCE OF INTEREST ON NOTIONAL B ASIS UNDER THE PROVISIONS OF SECTION 36(I)(III) OF THE A CT. IN VIEW OF THE ABOVE DISCUSSIONS AND IN THE LIGHT O F THE DECISION OF THE ON SUPREME COURT IN THE CASE OF CI T (LTU) VS. RELIANCE INDUSTRIES LTD. (SUPRA), NO DISALLOWA NCE IS ATTRACTED UNDER THIS HEAD AS THE ASSESSEE HAS DEMON STRATED THAT IT HAD SUFFICIENT OWN FUNDS TO MEET THE INVEST MENTS / ADVANCES GIVEN ETC. THIS ISSUE IS ACCORDINGLY DECI DED IN FAVOUR OF THE ASSESSEE. 12. GROUND NO.4 : THE COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT AS PER THE INSTRUCTIONS OF THE CLIEN T, HE DOES NOT PRESS THIS GROUND. GROUND NO.4 IS, THEREFORE, D ISMISSED AS NOT PRESSED. 13. GROUND NO.5 : VIDE GROUND NO.5, THE ASSESSEE HAS AGITATED THE ACTION OF THE LOWER AUTHORITIES IN HOL DING THAT THE PREMIUM PAID ON REDEMPTION OF FOREIGN CURRENCY CONVERTIBLE BONDS (FCCB) IS CAPITAL RECEIPT AS AGAI NST THE CLAIM OF THE ASSESSEE THAT THE SAME IS REVENUE EXPE NDITURE. ITA NO.483-518-C-16 & 787-894-C-15- M/S VARDHMAN TEXTILES LIMITED LUDHIANA 9 THE FACTS RELEVANT TO THE ISSUE ARE THAT THE ASSESS EE ISSUED FOREIGN CURRENCY CONVERTIBLE BONDS IN THE YEAR 2006 AND THESE WERE TO BE MATURED IN FEBRUARY 2011. AS THE B ONDS HOLDERS DID NOT EXERCISE THEIR OPTION TO CONVERT TH E BONDS IN EQUITY SHARES, SO FCCB WERE REPAID ALONG WITH PREMI UM / INTEREST @ 6% PER ANNUM. THE LOWER AUTHORITIES TREA TED THE AFORESAID PAYMENT AS CAPITAL PAYMENT AND DENIED THE DEDUCTION OF EXPENDITURE IN THIS RESPECT. 14. THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OU R ATTENTION TO THE DECISION OF THE TRIBUNAL IN THE OW N CASE OF THE ASSESSEE M/S VARDHMAN TEXTILES LTD VS. ADDL. CI T LUDHIANA IN ITA NO. 1429/CHD/2010 FOR THE ASSESSME NT YEAR 2006-07 AND IN ITA NO. 270/CHD/2011 FOR ASSES SMENT YEAR 2007-08 ORDER DATED 18.12.2018, WHEREIN, ON ID ENTICAL FACTS, THE TRIBUNAL AFTER CONSIDERING THE RELEVANT FACTS HAS HELD THAT THE SAID EXPENDITURE IS TO BE TREATED AS REVENUE EXPENDITURE, IN THE YEAR OF PAYMENT. THE RELEVANT F INDINGS OF THE TRIBUNAL ON THIS ISSUE ARE REPRODUCED AS UND ER:- 20. GROUND NO. 9 : VIDE GROUND NO.9, THE ASSESSEE HAS AGITATED THE ACTION OF THE CIT(A) IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN NOT ALLOWING PREMIUM PAYABLE ON REDEMPTION OF OPTIONALLY CONVERTIBLE FOREIGN CURRENCY BONDS AS REVENUE EXPENDITURE. 21. THE LD. COUNSEL FOR THE ASSESSEE IN THIS RESPECT HAS RELIED UPON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT PATIALA VS. INDUSTRIAL CABLES (P) LTD. REPORTED IN (2007) 162 TAXMAN 272 (P&H), WHEREIN, THE ISSUE IS AS TO WHETHER THE PREMIUM PAID ON EXPIRY / REDEMPTION OF DEBENTURES WAS TO BE TREATED AS CAPITAL EXPENDITURE OR REVENUE EXPENDITURE. THE HON'BLE COURT WHILE RELYING UPON THE OTHER CASE ITA NO.483-518-C-16 & 787-894-C-15- M/S VARDHMAN TEXTILES LIMITED LUDHIANA 10 LAWS HELD THAT THE SAID PREMIUM PAID BY THE ASSESSEE ON REDEMPTION OF DEBENTURES AS REVENUE EXPENDITURE. THE LD. COUNSEL HAS FURTHER RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF TAPARIA TOOLS LTD VS. JCIT (2015) 7 TAXMAN 361 WHEREIN, THE HON'BLE SUPREME COURT HAS HELD THAT SUCH TYPE OF PREMIUM / INTEREST PAID TO DEBENTURE HOLDERS WAS TO BE ALLOWED AS REVENUE EXPENDITURE IN THE YEAR OF PAYMENT ITSELF. ADMITTEDLY, IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS BOOKED THE AFORESAID EXPENSES PAYABLE WHICH WAS PAID IN THE ASSESSMENT YEAR 2011-12. IN VIEW OF THIS, THE SAID EXPENDITURE IS T O BE ALLOWED IN THE YEAR OF PAYMENT. SUBJECT TO THE ABOVE OBSERVATION, THIS GROUND OF THE ASSESSEES APPEAL FOR THE YEAR UNDER CONSIDERATION IS HEREBY DISMISSED. 15. THE LD. DR COULD NOT REBUT THE ABOVE FINDINGS O F THE TRIBUNAL BY BRINGING OUT ANY DISTINGUISHING FACT OR CASE LAW. IN VIEW OF THIS, THIS ISSUE, IN THE ABOVE TERMS, I S DECIDED IN FAVOUR OF THE ASSESSEE. 16. GROUND NO. 6 : THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT AS PER THE INSTRUCTIONS OF THE CLIEN T, HE DOES NOT PRESS THIS GROUND. GROUND NO.6 IS, THEREFORE, D ISMISSED AS NOT PRESSED. 17. GROUND NO.7: VIDE GROUND NO. 7, THE ASSESSEE HAS AGITATED THE ACTION OF THE CIT(A) IN UPHOLDING DISA LLOWANCE OF 1704.23 LACS U/S 40(A)(IA) FOR NON-DEDUCTION OF TAX AT SOURCE ON THE AMOUNT OF COMMISSION PAID TO NON-RESI DENT AGENTS AGAINST EXPORT SALES. ITA NO.483-518-C-16 & 787-894-C-15- M/S VARDHMAN TEXTILES LIMITED LUDHIANA 11 18. THE UNDISPUTED FACTS ON THE FILE IS THAT THE AS SESSEE HAD PAID CERTAIN COMMISSION TO FOREIGN AGENTS FOR P ROCURING ORDERS. THE ASSESSEE HAS JUSTIFIED THE PAYMENT OF A FORESAID COMMISSION BY STATING THAT THOSE FOREIGN AGENTS HAD DIRECT LIAISON WITH THE PARTIES, THEY NOT ONLY FULFILLED T HE PROCUREMENT OF ORDERS BUT ALSO ARE HELPFUL IN ACQU IRING THE PAYMENTS OF THE SALES MADE. THE ASSESSING OFFIC ER DISALLOWED THE AFORESAID COMMISSION HOLDING THAT TH E ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE IN RES PECT OF THE AFORESAID PAYMENTS. HOWEVER, AFTER GOING THROUG H THE ASSESSMENT ORDERS, WE FIND THAT THE ASSESSING OFFIC ER HAS NOT DISPUTED THAT THE AFORESAID PAYMENTS WERE MADE TO FOREIGN AGENTS WHO WERE NOT TAXABLE IN INDIA. SINCE INCOME, IF ANY, RECEIVED OR ACCRUED TO FOREIGN AGENTS WAS N OT TAXABLE IN INDIA, HENCE, AS PER THE SETTLEMENT LAW, THE EXP ENDITURE CANNOT BE DISALLOWED FOR NON-DEDUCTION OF TDS ON SU CH PAYMENTS. 19. IN VIEW OF THIS, WE DO NOT FIND ANY JUSTIFICATI ON ON THE PART OF THE LOWER AUTHORITIES IN DISALLOWING THE EX PENDITURE UNDER THIS HEAD. THIS ISSUE IS ACCORDINGLY DECIDED IN FAVOUR OF THE ASSESSEE AND THE DISALLOWANCE MADE, I F ANY, ON THE ISSUE FOR NON-DEDUCTION OF TDS IS ORDERED T O BE SET ASIDE/DELETED. 20. GROUND NO.8 : VIDE GROUND NO.8, THE ASSESSEE HAS AGITATED THE ACTION OF THE LOWER AUTHORITIES IN TRE ATING THE INTEREST RECEIVED AMOUNTING TO RS. 21,21,35,487/- A S ITA NO.483-518-C-16 & 787-894-C-15- M/S VARDHMAN TEXTILES LIMITED LUDHIANA 12 INCOME FROM OTHER SOURCES INSTEAD OF INCOME FORM BUSINESS AND PROFESSION. 21. IT IS AN UNDISPUTED FACT ON THE FILE THAT THE A FORESAID AMOUNT OF INTEREST HAS NOT BEEN RECEIVED BY THE ASS ESSEE DURING THE COURSE OF BUSINESS I.E. TO SAY THAT FROM CUSTOMERS OR SUPPLIERS ETC., HENCE, THE SAME, IN OU R VIEW, CANNOT BE TREATED AS INCOME FROM BUSINESS OR PROF ESSION. HOWEVER, THERE IS FORCE IN THE ALTERNATIVE CONTENTI ON OF THE LD. COUNSEL FOR THE ASSESSEE THAT THERE SHOULD BE N ETTING OF THE INTEREST EXPENDITURE AND THE INTEREST INCOME RE CEIVED FROM OTHER PARTIES / BANKS ETC. 22. WE ACCORDINGLY DIRECT THE ASSESSING OFFICER TO ALLOW THE EXPENDITURE INCURRED BY THE ASSESSEE FOR EARNING OF THE INTEREST INCOME I.E., IF ASSESSEE IS ABLE TO BRING NEXUS BETWEEN THE EXPENDITURE INCURRED AND THE INTEREST I NCOME EARNED, NET OF THE INCOME WILL BE TAXABLE UNDER TH E HEAD INCOME FROM OTHER SOURCES. THIS GROUND IS ACCORD INGLY PARTLY ALLOWED IN FAVOUR OF THE ASSESSEE . 23. GROUND NO.9 . VIDE THIS GROUND THE ASSESSEE HAS AGITATED THE ACTION OF THE LOWER AUTHORITIES IN TRE ATING THE INCOME FROM THE PROFITS OF THE UNITS ELIGIBLE FOR D EDUCTION U/S 80IB / 80IC OF THE ACT. SO FAR AS THE CLAIM OF DEDUCTION IN RESPECT OF THE INSURANCE CLAIM, WHICH ADMITTEDLY WAS ON ACCOUNT OF LOSS OF TRADING ASSETS IS CONCERNED, IT HAS BEEN HELD TIME AND AGAIN THAT IF THE LOSS THEREIN IS INDEMNIFIED BY WAY OF ITA NO.483-518-C-16 & 787-894-C-15- M/S VARDHMAN TEXTILES LIMITED LUDHIANA 13 COMPENSATION RECEIVED FROM INSURANCE COMPANY THAT C AN BE SAID TO BE NOT A SEPARATE INCOME, RATHER, THE SAME WILL HAVE EFFECT FOR REDUCING LOSS / EXPENDITURE. HENCE, IF T HE ASSESSEE HAS BOOKED THE AFORESAID LOSS, IN RELATION TO WHICH INSURANCE CLAIM HAS BEEN RECEIVED, AS EXPENDITURE, THEN THE AMOUNT RECEIVED BY THE ASSESSEE FROM INSURANCE COMP ANY WILL BE ELIGIBLE FOR DEDUCTION U/S 80IB/80IC OF THE ACT. THIS ISSUE IS ACCORDINGLY RESTORED TO THE FILE OF THE AS SESSING OFFICER FOR VERIFICATION OF THE FACTS. SO FAR AS THE ISSUE RELATING TO THE GAINS ON THE FO REIGN EXCHANGE RATE FLUCTUATION IS CONCERNED, THE LD. COU NSEL FOR THE ASSESSEE HAS SUBMITTED THAT GAIN ON FOREIGN EXC HANGE RATE FLUCTUATION HAS BEEN RECEIVED ON ACCOUNT OF PR OCEEDS OF EXPORTS RECEIVABLE AND THAT THE SAME WAS A PART OF THE SALE CONSIDERATION. THE LD. COUNSEL HAS FURTHER SUBMITTE D THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASS ESSEE IN THE OWN CASE OF THE ASSESSEE FOR ASSESSMENT YEARS 2 006-07 AND 2007-08 VIDE COMMON ORDER OF THE TRIBUNAL DATED 18.12.2018 (SUPRA). 24. WE HAVE GONE THROUGH THE ORDER OF THE TRIBUNAL DATED 18.12.2018. THE RELEVANT PART OF THE ORDER OF THE T RIBUNAL IS REPRODUCED AS UNDER:- 28. THE THIRD PART OF GROUND NO.2 IS AGAINST THE ACTION OF THE CIT(A) IN DIRECTING THE ASSESSING OFFICER NOT TO REDUCE FOREIGN EXCHANGE FLUCTUATION GAIN FROM ELIGIBLE PROFITS OF UNITS ELIGIBLE FOR DEDUCTION U/S 80IB AND 80IC AND EXEMPTION U/S 10B OF THE ACT. 29. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE FOREIGN EXCHANGE FLUCTUATION ITA NO.483-518-C-16 & 787-894-C-15- M/S VARDHMAN TEXTILES LIMITED LUDHIANA 14 GAIN IS IN RESPECT OF EXPORT RECEIPTS / RECEIVABLE OF THE ASSESSEE AND ANY GAIN IN RESPECT OF RECEIVABLE ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION IN FACT CONTRIBUTES TO THE PROFITS OF T HE ASSESSEE FROM THE SALE/ EXPORT OF THE PRODUCTS. WE FIND FORCE IN THE AFORESAID CONTENTION. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) I N THIS RESPECT ALSO. 25. IN VIEW OF THE ABOVE FINDINGS OF THE TRIBUNAL, THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE . THE ASSESSEE IS HELD TO BE ELIGIBLE TO CLAIM DEDUCTION U/S 80 IB / 80 IC OF THE ACT IN THIS RESPECT. SO FAR AS THE CLAIM OF THE ASSESSEE REGARDING RECEI PT OF INCOME / MISC. INCOME AND INTEREST FROM EMPLOYEES, RENTAL INCOME IS CONCERNED, THE SAID INCOME, IN OUR VIEW, IS NOT GENERATED FROM THE BUSINESS ACTIVITY OF THE ASSESSE E AND THE LOWER AUTHORITIES HAVE RIGHTLY HELD THAT THE IN COME FROM THE SAME IS NOT ELIGIBLE TO BE CONSIDERED FOR DEDUC TION U/S 80IB/80IC OF THE ACT. SO FAR AS THE CLAIM IN RESPECT OF MISC. INCOME IS CONCERNED, THE LD. COUNSEL FOR THE ASSESSEE HAS INV ITED OUR ATTENTION TO PAGE 202 OF THE PAPER BOOK, WHEREIN, F OLLOWING ITEMS HAVE BEEN MENTIONED:- I) RENT INCOME II) MISC. INCOME III) SUNDRY BALANCE WRITTEN BACK IV) COMMISSION DISCOUNT RECEIVED V) EXCHANGE RATE FLUCTUATION VI) PRIOR PERIOD INCOME. ITA NO.483-518-C-16 & 787-894-C-15- M/S VARDHMAN TEXTILES LIMITED LUDHIANA 15 THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THESE RECEIPTS ARE INDEPENDENT OF THE RECEIPTS OTHERWISE CLAIMED UNDER THE HEAD RENTAL INCOME / EXCHANGE RATE FLUCT UATION ETC. 26. WE DIRECT THE ASSESSING OFFICER TO VERIFY WHETH ER THESE ARE INDEPENDENT RECEIPTS, IF FOUND SO, THE ASSESSIN G OFFICER IS DIRECTED TO ALLOW THE INCOME FROM SUNDRY BALANC E WRITTEN BACK, COMMISSION / DISCOUNT RECEIVED AND EXCHANGE R ATE FLUCTUATION AS THE SAME IS RELATED TO THE BUSINESS ACTIVITY OF THE ASSESSEE, HOWEVER, THE INCOME FROM RENT IS NOT ALLOWABLE TO BE ELIGIBLE U/S 80IC / 80IB OF THE AC T. 27. SO FAR AS THE MISC. RECEIPTS IS CONCERNED, SINC E WE DO NOT HAVE EXACT DETAILS OF SUCH MISC. RECEIPTS, HENC E, LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT HE DOES NOT PRESS THE ISSUE RELATING TO MISC. RECEIPTS UNDER TH E HEAD MISC. INCOME. SO FAR AS THE PRIOR PERIOD INCOME IS CONCERNED, THE SAME IS ALSO NOT PRESSED. GROUND NO. 9 IS ACCORDINGLY PARTLY ALLOWED. 28. GROUND NO.10 : VIDE THIS GROUND, THE ASSESSEE HAS AGITATED THE ACTION OF THE CIT(A) IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER TO ALLOCATE HEAD OFFICE EXPEN SES TO UNITS ELIGIBLE FOR DEDUCTION U/S 80IC/ 80IC OF THE ACT. 29. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET , HAS SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY TH E EARLIER DECISION OF THE TRIBUNAL FOR ASSESSMENT YEARS 2006- 07 AND 2007-08 VIDE ORDER DATED 18.12.2018 (SUPRA) IN THE OWN ITA NO.483-518-C-16 & 787-894-C-15- M/S VARDHMAN TEXTILES LIMITED LUDHIANA 16 CASE OF THE ASSESSEE, WHEREIN, THE ISSUE IS DISCUSS ED IN PARA 11 OF THE ORDER. THE TRIBUNAL IN THE SAID ORDE R HAS UPHELD THE FINDINGS OF THE CIT(A) TO ALLOCATE THE N ET OF HEAD OFFICE EXPENSES. FOLLOWING THE SAME PROPOSITION AND FOR THE SAKE OF CONSISTENCY, THE ASSESSING OFFICER IS DIREC TED TO ALLOCATE THE NET OF HEAD OFFICE EXPENDITURE, AND NO T THE GROSS NET EXPENDITURE UNDER THIS ISSUE. THIS GROUND IS TREATED AS PARTLY ALLOWED. 30. GROUND NO.11 : VIDE THIS GROUND THE ASSESSEE HAS AGITATED THE ACTION OF THE CIT(A) IN NOT ALLOWING T HE CLAIM OF THE ASSESSEE FOR TREATING INTEREST REIMBURSEMENT UN DER TECHNOLOGY UPGRADATION FUND SCHEME (TUFS) AS CAPITA L RECEIPT. 31. BOTH THE LD. REPRESENTATIVES OF THE PARTIES HAV E BEEN FAIR ENOUGH TO SUBMIT THAT IN THE EARLIER ASSESSMEN T YEARS I.E. FOR 2006-07 AND 2007-08, THIS ISSUE IS RESTOR ED TO THE FILE OF THE CIT(A) FOR DECISION AFRESH. WITH THE SA ME DIRECTIONS IN IDENTICAL TERMS AS ARE GIVEN FOR EARL IER ASSESSMENT YEAR, THIS ISSUE IS ACCORDINGLY RESTORED TO THE FILE OF THE CIT(A) FOR DECISION AFRESH IN ACCORDANC E WITH LAW. 32. GROUND NOS.12 & 13 : VIDE GROUND NOS.12 & 13, THE ASSESSEE HAS AGITATED THE ACTION OF THE CIT(A) IN T REATING THE SALES TAX SUBSIDY AS REVENUE RECEIPT INSTEAD O F CAPITAL RECEIPT AS CLAIMED BY THE ASSESSEE. THIS ISSUE IS N OW WELL SETTLED BY THE DECISION OF THE HON'BLE SUPREME COUR T IN CIT-I VS. M/S CHAPHALKAR BROTHERS, PUNE AND OTHERS IN ITA NO.483-518-C-16 & 787-894-C-15- M/S VARDHMAN TEXTILES LIMITED LUDHIANA 17 CIVIL APPEAL NOS. 6513-6514 OF 2012 ORDER DATED 7.1 2.2017, WHEREIN, IT HAS BEEN HELD THAT THE SALES TAX SUBSID Y IS A GOVERNMENT INCENTIVE TO SET UP NEW INDUSTRIAL UNI TS IN SPECIFIED AREAS AND TO BE IS TREATED AS CAPITAL REC EIPT. FURTHER, THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO INVITED OUR ATTENTION TO THE DECISION OF THE TRIBUNAL DATE D 18.12.2018, (SUPRA) WHEREIN AFTER CONSIDERING THE R ELEVANT DECISIONS IT HAS BEEN SO HELD THAT THE SALES TAX SU BSIDY IS A CAPITAL RECEIPT. THIS ISSUE IS ACCORDINGLY DECIDED IN FAVOUR OF THE ASSESSEE. 33. GROUND NO.14 : VIDE GROUND NO.14, THE ASSESSEE HAS AGITATED THE ACTION THE CIT(A) IN TREATING THE LINE /BAY CHARGES AS CAPITAL RECEIPT INSTEAD OF REVENUE RECEI PT. 34. THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OU R ATTENTION TO THE DECISION OF THE TRIBUNAL IN THE OW N CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2007-08 IN ITA NO. 1430/CHD/2010 ORDER DATED 31.3.2010 , WHEREIN, THE TRIBUNAL AFTER DISCUSSING THE DETAILS UPHELD THE O RDER OF THE CIT(A) IN THAT YEAR TREATING THE AFORESAID EXPE NDITURE AS REVENUE EXPENDITURE. NO CONTRARY DECISION HAS B EEN CITED BEFORE US. IN VIEW OF THIS, THE ISSUE IS ACCO RDINGLY DECIDED IN FAVOUR OF THE ASSESSEE AND THE ASSESSING OFFICER IS DIRECT TO TREAT THE AFORESAID EXPENDITURE AS REV ENUE EXPENDITURE. 35. THE ASSESSEE APART FROM ABOVE GROUND HAS ALSO R AISED ADDITIONAL GROUND WHICH READS AS UNDER:- ITA NO.483-518-C-16 & 787-894-C-15- M/S VARDHMAN TEXTILES LIMITED LUDHIANA 18 THAT THE AUTHORITIES BELOW HAVE ERRED IN TREATING SALES TAX SUBSIDY OF RS. 1,67,984/- UNDER MADHYA PRADESH INDUSTRIAL PROMOTIONAL ASSISTANCE SCHEME 2004 AS REVENUE RECEIPT INSTEAD OF CAPITAL RECEIPT. 36. THIS ISSUE IS RELATING TO SALES TAX SUBSIDY REC EIVED FROM M.P. GOVERNMENT. THIS ISSUE IS IDENTICAL TO TH AT HAS BEEN TAKEN IN GROUND NO.12 OF THE APPEAL. ACCORDIN GLY, THE SALES TAX SUBSIDY IN RESPECT OF M.P. UNIT IS ALSO O RDERED TO BE TREATED AS CAPITAL RECEIPT. IN VIEW OF OUR FINDINGS GIVEN ABOVE, THIS APPEAL OF THE ASSESSEE IS TREATED AS PARTLY ALLOWED. ITA NO. 894/CHD/2015(A.Y. 2011-12) 37. NOW COMING TO THE REVENUE APPEAL IN ITA NO. 894/CHD/2015, WHEREIN, REVENUE IN THIS APPEAL HAS TAKEN FOLLOWING GROUNDS OF APPEAL:- 1. WHETHER UPON FACTS AND CIRCUMSTANCES OF THE CASE, WA S THE LD. C1T(A) LAWFULLY JUSTIFIED IN ALLOWING THE E XCESS EXPENDITURE CLAIMED BY THE ASSESSEE ON POWER GENERATION, AFTER RELYING UPON OWN JUDGMENT IN ASSESSEE'S OWN CASE FOR A.Y. 2007-08 WHEREAS THE SAME WAS NOT ACCEPTED WAS PREFERRED BEFORE HON'BLE ITAT? 2. WHETHER UPON THE FACTS AND CIRCUMSTANCES OF THE CAS E, WAS LD. CIT(A) JUSTIFIED IN ALLOWING INTEREST RECEIVED FROM CUSTOMERS/ SUPPLIERS AMOUNTING TO RS.4,98,61,335 /- TO BE TREATED AS BUSINESS INCOME AS AGAINST A.O, TREA TING THE SAME AS INCOME FROM OTHER SOURCES? 3. WHETHER UPON THE FACTS AND CIRCUMSTANCES OF THE CASE , WAS LD. CIT(A) JUSTIFIED IN EXCLUDING THE AMOUNT OF INTEREST FROM CUSTOMERS / SUPPLIERS FROM THE DISALLOW ANCE OF INTEREST NETTED OFF WITH EXPENSES AND HOLDING THE SAME FOR CALCULATING DEDUCTION U/S 80IB/ 80IC OF THE INC OME - TAX ACT, 1961? 4. WHETHER UPON THE FACTS AND CIRCUMSTANCES OF THE CASE , ITA NO.483-518-C-16 & 787-894-C-15- M/S VARDHMAN TEXTILES LIMITED LUDHIANA 19 WAS LD. CIT(A) LAWFULLY JUSTIFIED IN DELETING THE SUM OF RS. 11,96,65,327/- ON ACCOUNT OF INTEREST REIMBURSED UNDER TUFS (TECHNOLOGY UPGRADATION FUNDS SCHEMES) DISALLOWED BY A,O. AND HOLDING THE SAME AS ELIGIBLE FOR CALCULATING DEDUCTION U/S 80IB/ 80IC OF THE INCOME- TAX ACT, 1961? 5. THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND TH AT OF THE ASSESSING OFFICER BE RESTORED. 6. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUND OF APPEAL BEFORE IT IS FINALLY DISPOSED OFF. 38. GROUND NO.1 : THE FIRST GROUND IS RELATING TO THE ACTION OF THE CIT(A) IN ALLOWING EXCESS EXPENDITURE CLAIMED BY THE ASSESSEE ON POWER GENERATION. IT HAS BEEN ME NTIONED IN THE GROUND OF APPEAL ITSELF THAT THE LD. CIT(A) HAS FOLLOWED HIS OWN JUDGEMENT IN THE ASSESSEES OWN CA SE FOR ASSESSMENT YEAR 2007-08. IT HAS BEEN ALSO PLEADED T HAT THE REVENUE IS IN APPEAL BEFORE ITAT ON THE SAID ISSUE. HOWEVER, A PERUSAL OF THE ORDER OF THE TRIBUNAL IN RESPECT OF ASSESSMENT YEAR 2007-08 DATED 18.12.2018 (SUPRA) R EVEALS THAT THE REVENUE IN ITS APPEAL FOR ASSESSMENT YEAR 2007-08 BEFORE THE ITAT IN ITA NO. 286/CHD/2011 HAS NOT RAI SED / TAKEN UP THIS ISSUE AND THEREBY IMPLIEDLY ADMITTED THE FINDINGS OF THE CIT(A) AND THUS HAS NOT BEEN LEFT W ITH ANY GRIEVANCE ON THIS ISSUE. 39. EVEN WE FIND THAT IN THE IMPUGNED ORDER, THE AS SESSEE HAS EXPLAINED THE REASONS FOR EXCESS CONSUMPTION OF POWER ETC. DURING THE YEAR IN ITS MANUFACTURING ACTIVITY. IN VIEW OF THIS, WE DO NOT FIND ANY REASON TO INTERFERE WIT H THE FINDINGS OF THE CIT(A) ON THIS ISSUE. ITA NO.483-518-C-16 & 787-894-C-15- M/S VARDHMAN TEXTILES LIMITED LUDHIANA 20 THIS GROUND OF THE REVENUE IS ACCORDINGLY DISMISSED . 40. GROUND NO.2: THIS GROUND IS IN RELATION TO THE INTEREST RECEIVED FROM CUSTOMERS / SUPPLIERS WHETHER IS TO B E TREATED AS BUSINESS INCOME OR NOT. ADMITTEDLY, THE INTEREST RECEIVED FORM CUSTOMERS / SUPPLIERS IS A PART OF TH E BUSINESS TRANSACTION AND IS RECEIVED IN THE REGULAR COURSE OF BUSINESS, HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) WHILE TREATING IT AS BUSINESS INCOME OF THE ASSESSEE. 41. GROUND NO.3: VIDE THIS GROUND THE REVENUE HAS AGITATED THE ACTION OF THE CIT(A) IN NETTING OF THE INTEREST FROM CUSTOMERS / SUPPLIERS WITH THE EXPENDITURE. AS WE HAVE ALREADY HELD THAT THE INTEREST FROM CUSTOMERS AND SUPPLIERS IS TO BE TREATED AS BUSINESS INCOME OF TH E ASSESSEE, HENCE, THE SAME HAS RIGHTLY BEEN ALLOWED TO BE NETTED OF BY THE LD. CIT(A) AND, THEREFORE, WE DO N OT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) ON THIS IS SUE 42. GROUND NO.4 : THIS GROUND IS RELATING TO THE INTEREST REIMBURSED UNDER TUFS (TECHNOLOGY UPGRADATION FUNDS SCHEME). WHILE DECIDING THE APPEAL OF THE ASSESSEE , WE HAVE RESTORED THIS ISSUE TO THE FILE OF THE LD. CIT (A) FOR DECISION AFRESH ON THIS ISSUE. ACCORDINGLY, THIS I SSUE IS RESTORED TO THE FILE OF THE CIT(A) FOR DECISION AFR ESH. 43. GROUND NOS. 5 & 6 : GROUND NOS. 5 & 6 ARE GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATI ON. ITA NO.483-518-C-16 & 787-894-C-15- M/S VARDHMAN TEXTILES LIMITED LUDHIANA 21 IN THE RESULT, THE APPEAL OF THE REVENUE IS TREATED AS PARTLY ALLOWED. ITA NO.483/CHD/2016 (A.Y. 2012-13) ASSESSEES APP EAL &ITA NO. 518/CHD/2016 (A.Y. 2012-13)REVENUES APPE AL 44. NOW COMING TO APPEALS OF THE ASSESSEE AND REVEN UE FOR ASSESSMENT YEAR 2012-13. THE ASSESSEE IN THIS APPE AL HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- ITA NO.483/CHD/2016 (A.Y. 2012-13) ASSESSEE APPEAL 1. THAT THE ORDER PASSED BY LD.CIT(A), LUDHIANA IS CON TRARY TO LAW AND FACTS OF THE CASE. 2. THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE DISALLOWANCE OF RS.1719.99 LACS UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 READ WITH R ULE 8D. 3. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS W HILE UPHOLDING THE DISALLOWANCE OF INTEREST EXPENDITURE ON NOTIONAL BASIS AMOUNTING TO RS. 3270.47 LACS ON INVESTMENTS UNDER THE PROVISIONS OF SECTION 36(L)(I II). 4. WITHOUT PRE-JUDICE TO GROUND NO.3, THE LD. CIT(A) H AS ERRED IN NOT ALLOWING THE ABOVE MENTIONED INTEREST EXPENDITURE UN DER SECTION 57 OF THE ACT AND SETTING OFF THE SAME AGAINST INCOM E FROM OTHER SOURCES. 5. THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE DISALLOWANCE OF RS.2544.03 LACS UNDER SECTION 40(A)(IA) FOR NON-DEDUCTION OF WITHHOLDING TAX/TDS ON THE AMOUNT OF COMMISSION PAID TO NON-RESIDENT AGENT S AGAINST EXPORT SALES. 6. THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN TREATING INTEREST RECEIVED AMOUNTING TO RS.19,57,19,837 AS ' INCOME FROM OTHER SOURCES' INSTEAD OF 'INCOME FROM BUSINES S AND PROFESSION'. 7. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS I N CONFIRMING THE ACTION OF THE AO TO REDUCE THE FOLLO WING INCOMES FROM THE PROFITS OF THE UNITS ELIGIBLE FOR DEDUCTION U/S 80IA/IB/IC OF THE INCOME TAX ACT, 1961; ITA NO.483-518-C-16 & 787-894-C-15- M/S VARDHMAN TEXTILES LIMITED LUDHIANA 22 ITEMS NOT EXCLUDED BY THE ASSES SEE MSMTD AURO SPG. AURO TEXTILES ARLSHT SPG MILLS AURO WVG - ILL VSM VFCPP RENT INCOME 2,842,922 3,435,419 3,879,285 2,736,498 153,906 1,354,726 310,595 COMMISSION RECEIVED - 34,078 - 52,629 - - - MISCELLANEOUS INCOME - 174,168 1,33,086 55,511 - 32,161 899 TOTAL 28,42,922 36,43,665 40,12,371 28,44,638 1,53,906 13,86,887 3,11,494 8. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS I N CONFIRMING THE ACTION OF THE ASSESSING OFFICER TO ALLOCATE HEAD OF FICE EXPENSES TO UNITS ELIGIBLE FOR DEDUCTION U/S 80IB/IC OF THE ACT . 9. THAT THE LD. CIT(A) HAS ERRED IN LAW IN NOT ALLOWIN G THE CLAIM OF THE ASSESSES FOR TREATING INTEREST REIMBURSEMENT OF RS. 98,90,18,921/- UNDER TECHNOLOGY UPGRADATION F UND SCHEME (TUFS) AS CAPITAL RECEIPT. 10. THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN TREATING LINE/BAY CHARGES AMOUNTING TO RS.27,160/- AS CAPITA L EXPENDITURE INSTEAD OF REVENUE EXPENDITURE. 11. THAT THE APPELLANT CRAVES LEAVE TO ADD/ALTER/AMEND A NY GROUND OF APPEAL ON OR BEFORE THE DUE DATE OF HEARING OF APPE AL. WHEREAS, THE REVENUE IN ITS APPEAL (ITA NO. 518/CHD/2016) HAS TAKEN FOLLOWING GROUNDS OF APPEAL:- 1. WHETHER UPON THE FACTS AND CIRCUMSTANCES OF THE CASE, WAS LD. CIT(A) JUSTIFIED IN ALLOWING INTEREST RECEIVED FROM CUSTOMERS / SUPPLIERS AMOUNTING T O RS. 5,25,23,848/-TO BE TREATED AS BUSINESS INCOME AS AG AINST THE A.O. TREATING THE SAME AS INCOME FROM OTHER SOU RCES? 2. WHETHER UPON THE FACTS AND CIRCUMSTANCES OF THE CASE, WAS LD. CIT(A) JUSTIFIED IN EXCLUDING THE AMO UNT OF INTEREST FROM CUSTOMERS / SUPPLIERS FROM THE DISALL OWANCE OF INTEREST NETTED OFF WITH EXPENSES AND HOLDING THE SAME FOR CALCULATING DEDUCTION U/S 80IA / 80IB / 80IC OF THE INCOME-TAX ACT, 1961? 3. WHETHER UPON THE FACTS AND CIRCUMSTANCES O F THE CASE, WAS LD. CIT(A) JUSTIFIED IN LAW IN DELETING THE RECEIPTS ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATIONS DISALLO WED BY A.O. AND HOLDING THE SAME AS ELIGIBLE FOR CALCU LATING DEDUCTION U/S 80IA 8OIB / 80IC OF THE INCOME -TAX ACT, 1961? ITA NO.483-518-C-16 & 787-894-C-15- M/S VARDHMAN TEXTILES LIMITED LUDHIANA 23 4. WHETHER UPON THE FACTS AND CIRCUMSTANCES O F THE CASE, WAS LD. CIT(A) LAWFULLY JUSTIFIED IN DELETING THE RECEIPTS ON ACCOUNT OF INTEREST REIMBURSED UNDER TUFS (TECHNOLOGY UPGRADATION FUNDS SCHEME) DISALLO WED BY A.O. AND HOLDING THE SAME AS ELIGIBLE FOR CALC ULATING DEDUCTION U/S 80IA / 80IB/ 8OIC OF THE INCOME-TAX A CT, 1961? 5. THAT THE ORDER OF THE LD. CIT (A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 6. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUND OF APPEAL BEFORE IT IS FINALLY DISPOSED OFF. 45. BOTH THE LD. REPRESENTATIVES OF THE PARTIES HAVE FAIRLY SUBMITTED THAT THE ISSUES RAISED IN THESE APPEALS A RE IDENTICAL TO THAT HAVE BEEN TAKEN UP IN ITA NO. 787/CHD/2015 AND ITA NO. 894/CHD/2015 FOR ASSESSMEN T YEAR 2011-12 AS ADJUDICATED ABOVE. 46. OUR FINDINGS GIVEN ABOVE IN RESPECT OF EACH OF THE ISSUE, AS ABOVE, WILL APPLY MUTATIS-MUTANDIS TO EAC H OF GROUND FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. HOWEVER, SO FAR AS THE ISSUE OF DISALLOWANCE U/S 14 A OF THE ACT IS CONCERNED, THE FACTUAL FIGURES ARE DIFFE RENT. THE ASSESSEE HAS RECEIVED DIVIDED INCOME OF RS. 14.87 C RORES OUT OF WHICH THE INCOME FROM SUBSIDIARY HAS BEEN RE CEIVED IS RS. 8.5 CRORES AND OTHERS RS. 6.36 CORES AND SUO MOTU DISALLOWANCE MADE BY THE ASSESSEE DURING THE YEAR IS 1.53 LACS. 47. CONSIDERING THE ABOVE FACTS AND IN VIEW OF OUR DISCUSSION MADE ABOVE, WHILE DISCUSSING THE ISSUE I N ASSESSEES APPEAL FOR ASSESSMENT YEAR 2011-12 ITA N O. 787/CHD/2015, IN OUR VIEW, THE DISALLOWANCE OF RS. 6 LACS ITA NO.483-518-C-16 & 787-894-C-15- M/S VARDHMAN TEXTILES LIMITED LUDHIANA 24 WILL BE JUSTIFIED ON ACCOUNT OF ADMINISTRATIVE EXPE NDITURE FOR THE YEAR UNDER CONSIDERATION. HOWEVER, OUR FIN DINGS IN RESPECT TO DISALLOWANCE OF INTEREST EXPENDITURE WIL L APPLY ACCORDINGLY FOR THE YEAR UNDER CONSIDERATION ALSO. IT IS MADE CLEAR THAT THE ASSESSEE WILL BE GIVEN BENEFIT OF DISALLOWANCE SUO MOTU OFFICERED UNDER THIS HEAD. IT IS ALSO MADE CLEAR THAT THERE IS NO ISSUE OF EXPENDITURE INCURRED IN RESPECT TO FOREIGN CURRENCY CONVERTIBLE BONDS IN THIS YEAR. 48. REST OF THE ISSUES ARE COVERED BY OUR DECISION GIVEN ABOVE FOR APPEAL FOR ASSESSMENT YEAR 2011-12 AND, THEREFORE, OUR FINDINGS GIVEN ABOVE WILL APPLY MUTA TIS- MUTANDIS TO THESE ISSUES ALSO. IN THE RESULT, THE APPEALS OF THE ASSESSEE AND REV ENUE ARE PARTLY ALLOWED IN TERMS OF THE OBSERVATIONS MA DE ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 14.3.2019. SD/- SD/- ( / ANNAPURNA GUPTA) ! '#/ ACCOUNTANT MEMBER ( '%& / SANJAY GARG) ' '#/ JUDICIAL MEMBER DATED : 14.03.2019 .. 1 ) & 23 43' / COPY OF THE ORDER FORWARDED TO : 1. $% / THE APPELLANT 2. &'$% / THE RESPONDENT 3. 5 / CIT 4. 5 ( )/ THE CIT(A) 5. 36 & 7! , , 7! , 89:; / DR, ITAT, CHANDIGARH 6. : < + / GUARD FILE ITA NO.483-518-C-16 & 787-894-C-15- M/S VARDHMAN TEXTILES LIMITED LUDHIANA 25 1 / BY ORDER, = / ASSISTANT REGISTRAR