ACIT, Circle-3, Kolkata, Kolkata V. M/s Tata Metalics Ltd., Kolkata

ITA 956/KOL/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4985 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 18-06-2012
• Court: TRIBUNAL
• Department Lawyers: RAJAT SUBHRA BISWAS
• Assessee Lawyers: ASHISH AGA
• Keywords: Capital asset; Business expenditure; Rule of consistency; Earning of tax free income; Capital receipt; Revenue expenditure
• Section: 43B; 14A; 115JB

Judgement Text

I.T.A. NOS. 956 & 737/KOL./2012 ASSESSMENT YEARS 2005-2006 & I.T.A. NOS. 957 & 738/KOL/2012 ASSESSMENT YEAR : 2006-2007 & I.T.A. NOS. 958 & 739/KOL/2012 ASSESSMENT YEAR : 2007-2008 & I.T.A. NOS. 959 & 740/KOL/2012 ASSESSMENT YEAR : 2008-2009 PAGE 1 OF 22 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO.956/KOL/ 2012 ASSESSMENT YEAR: 2005-2006 ASSISTANT COMMISSIONER OF INCOME TAX,.............. ..................APPELLANT CIRCLE-3, KOLKATA, 8/2, ESPLANADE EAST, DWARLI HOUSE, 2 ND FLOOR, KOLKATA-700 069 -VS.- M/S. TATA METALICS LIMITED,........................ ..........................RESPONDENT 43, CHOWRINGHEE ROAD, TATA CENTRE, KOLKATA-700 071 [PAN : AABCT 1389 B] & I.T.A. NO. 737/KOL/2012 ASSESSMENT YEAR: 2005-2006 M/S. TATA METALICS LIMITED,........................ ..........................APPELLANT 43, CHOWRINGHEE ROAD, TATA CENTRE, KOLKATA-700 071 [PAN : AABCT 1389 B] -VS.- ADDITIONAL COMMISSIONER OF INCOME TAX,............. ...................RESPONDENT RANGE-3, KOLKATA, 8/2, ESPLANADE EAST, DWARLI HOUSE, 2 ND FLOOR, KOLKATA-700 069 & I.T.A. NO.957/KOL/ 2012 ASSESSMENT YEAR: 2006-2007 ASSISTANT COMMISSIONER OF INCOME TAX,.............. ..................APPELLANT CIRCLE-3, KOLKATA, 8/2, ESPLANADE EAST, DWARLI HOUSE, 2 ND FLOOR, KOLKATA-700 069 I.T.A. NOS. 956 & 737/KOL./2012 ASSESSMENT YEARS 2005-2006 & I.T.A. NOS. 957 & 738/KOL/2012 ASSESSMENT YEAR : 2006-2007 & I.T.A. NOS. 958 & 739/KOL/2012 ASSESSMENT YEAR : 2007-2008 & I.T.A. NOS. 959 & 740/KOL/2012 ASSESSMENT YEAR : 2008-2009 PAGE 2 OF 22 -VS.- M/S. TATA METALICS LIMITED,........................ ..........................RESPONDENT 43, CHOWRINGHEE ROAD, TATA CENTRE, KOLKATA-700 071 [PAN : AABCT 1389 B] & I.T.A. NO. 738/KOL/2012 ASSESSMENT YEAR: 2006-2007 M/S. TATA METALICS LIMITED,........................ ..........................APPELLANT 43, CHOWRINGHEE ROAD, TATA CENTRE, KOLKATA-700 071 [PAN : AABCT 1389 B] -VS.- DEPUTY COMMISSIONER OF INCOME TAX,................. ...............RESPONDENT CIRCLE-3, KOLKATA, 8/2, ESPLANADE EAST, DWARLI HOUSE, 2 ND FLOOR, KOLKATA-700 069 & I.T.A. NO. 958/KOL/2012 ASSESSMENT YEAR: 2007-2008 ASSISTANT COMMISSIONER OF INCOME TAX,.............. ..................APPELLANT CIRCLE-3, KOLKATA, 8/2, ESPLANADE EAST, DWARLI HOUSE, 2 ND FLOOR, KOLKATA-700 069 -VS.- M/S. TATA METALICS LIMITED,........................ ..........................RESPONDENT 43, CHOWRINGHEE ROAD, TATA CENTRE, KOLKATA-700 071 [PAN : AABCT 1389 B] & I.T.A. NO. 739/KOL/2012 I.T.A. NOS. 956 & 737/KOL./2012 ASSESSMENT YEARS 2005-2006 & I.T.A. NOS. 957 & 738/KOL/2012 ASSESSMENT YEAR : 2006-2007 & I.T.A. NOS. 958 & 739/KOL/2012 ASSESSMENT YEAR : 2007-2008 & I.T.A. NOS. 959 & 740/KOL/2012 ASSESSMENT YEAR : 2008-2009 PAGE 3 OF 22 ASSESSMENT YEAR: 2007-2008 M/S. TATA METALICS LIMITED,........................ ..........................APPELLANT 43, CHOWRINGHEE ROAD, TATA CENTRE, KOLKATA-700 071 [PAN : AABCT 1389 B] -VS.- DEPUTY COMMISSIONER OF INCOME TAX,................. ...............RESPONDENT CIRCLE-3, KOLKATA, 8/2, ESPLANADE EAST, DWARLI HOUSE, 2 ND FLOOR, KOLKATA-700 069 & I.T.A. NO. 959/KOL/2012 ASSESSMENT YEAR: 2008-2009 ASSISTANT COMMISSIONER OF INCOME TAX,.............. ..................APPELLANT CIRCLE-3, KOLKATA, 8/2, ESPLANADE EAST, DWARLI HOUSE, 2 ND FLOOR, KOLKATA-700 069 -VS.- M/S. TATA METALICS LIMITED,........................ ..........................RESPONDENT 43, CHOWRINGHEE ROAD, TATA CENTRE, KOLKATA-700 071 [PAN : AABCT 1389 B] & I.T.A. NO. 740/KOL/2012 ASSESSMENT YEAR: 2008-2009 M/S. TATA METALICS LIMITED,........................ ............................APPELLANT 43, CHOWRINGHEE ROAD, TATA CENTRE, KOLKATA-700 071 [PAN : AABCT 1389 B] -VS.- DEPUTY COMMISSIONER OF INCOME TAX,................. ...............RESPONDENT I.T.A. NOS. 956 & 737/KOL./2012 ASSESSMENT YEARS 2005-2006 & I.T.A. NOS. 957 & 738/KOL/2012 ASSESSMENT YEAR : 2006-2007 & I.T.A. NOS. 958 & 739/KOL/2012 ASSESSMENT YEAR : 2007-2008 & I.T.A. NOS. 959 & 740/KOL/2012 ASSESSMENT YEAR : 2008-2009 PAGE 4 OF 22 CIRCLE-3, KOLKATA, 8/2, ESPLANADE EAST, DWARLI HOUSE, 2 ND FLOOR, KOLKATA-700 069 APPEARANCES BY: SHRI RAJAT SUBHRA BISWAS, CIT, D.R. FOR THE DEPARTMENT SMT. SHREYA LOYALKA, FCA AND SHRI ASHISH AGARWAL, F CA , FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : JANUARY 18, 2016 DATE OF PRONOUNCING THE ORDER : MARCH 04, 2016 O R D E R PER SHRI P.M. JAGTAP :- THESE EIGHT APPEALS, FOUR FILED BY THE ASSESSEE AND FOUR FILED BY THE REVENUE, ARE CROSS APPEALS FOR ASSESSMENT YEARS 200 5-06, 2006-07, 2007- 08 AND 2008-09 AND SINCE THE SAME INVOLVE SOME COMM ON ISSUES, THEY HAVE BEEN HEARD TOGETHER AND ARE BEING DISPOSED OF BY A SINGLE CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST WE SHALL TAKE UP THE CROSS APPEALS FOR A.Y . 2005-06 BEING ITA NO.737/KOL/2012 (ASSESSEES APPEAL) AND ITA NO.956/ KOL/2012 (REVENUES APPEAL), WHICH ARE DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-I DATED 01.03. 2012. 3. IN THE FIRST & SECOND GROUND RAISED IN ITS APPEA L, THE REVENUE HAS CHALLENGED THE DELETION BY THE LD. CIT(APPEALS) OF THE ADDITION OF RS.8,52,83,712/- MADE BY THE ASSESSING OFFICER ON A CCOUNT OF DISALLOWANCE OF ASSESSEES CLAIM FOR DEDUCTION UNDE R SECTION 80IA. 4. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF PIG IRON. THE RETU RN OF INCOME FOR THE I.T.A. NOS. 956 & 737/KOL./2012 ASSESSMENT YEARS 2005-2006 & I.T.A. NOS. 957 & 738/KOL/2012 ASSESSMENT YEAR : 2006-2007 & I.T.A. NOS. 958 & 739/KOL/2012 ASSESSMENT YEAR : 2007-2008 & I.T.A. NOS. 959 & 740/KOL/2012 ASSESSMENT YEAR : 2008-2009 PAGE 5 OF 22 YEAR UNDER CONSIDERATION, I.E. A.Y. 2005-06 WAS FIL ED BY IT ON 30.10.2005 DECLARING TOTAL INCOME OF RS.86,56,89,360/-. IN THE SAID RETURN, DEDUCTION OF RS.8,52,83,712/- WAS CLAIMED BY THE ASSESSEE UND ER SECTION 80IA IN RESPECT OF ONE OF ITS TWO POWER GENERATING UNITS, N AMELY TURBINE POWER GENERATING UNIT. DURING THE COURSE OF ASSESSMENT PR OCEEDINGS, IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ENTIRE PO WER GENERATED BY THE SAID UNIT IS CONSUMED BY THE PIG IRON MANUFACTURING UNIT OF THE ASSESSEE- COMPANY. ACCORDING TO HIM, THE ASSESSEE WAS NOT ENT ITLED FOR DEDUCTION UNDER SECTION 80IA IN RESPECT OF CAPTIVE POWER PLAN T ON THE GROUND THAT A PERSON COULD NOT UNDERGO ANY COMMERCIAL TRANSACTION WITH HIMSELF. HE, THEREFORE, DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SECTION 80IA. ON APPEAL, THE LD. CIT(APPEALS) DELET ED THE SAID DISALLOWANCE MADE BY THE ASSESSING OFFICER AND ALLO WED THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SECTION 80IA BY RELYIN G ON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF TAMILN ADU PETRO PRODUCTS LIMITED VS.- ACIT REPORTED IN 51 DTR 67, WHEREIN I T WAS HELD THAT THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 80I A IN RESPECT OF NOTIONAL INCOME FROM GENERATION OF ELECTRICITY, WHICH WAS CA PTIVELY CONSUMED BY ITSELF. HE ALSO RELIED ON THE CBDTS INSTRUCTION NO . 1116 CLARIFYING THAT DEDUCTION UNDER SECTION 80IA IS AVAILABLE TO CAPTIV E POWER GENERATING UNIT. THE LD. CIT(APPEALS) ALSO RELIED ON THE DECIS ION OF THE TRIBUNAL RENDERED IN ASSESSEES OWN CASE FOR A.YS. 2003-04 A ND 2004-05 VIDE A COMMON ORDER DATED 23.10.2009, WHEREIN THE DEDUCTIO N CLAIMED BY THE ASSESSEE UNDER SECTION 80IA IN RESPECT OF CAPTIVE P OWER PLANT WAS ALLOWED BY THE TRIBUNAL. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS AGREED BY THE LD. REPRESENTATIVES OF BOTH THE SIDES, THIS ISSUE INVOL VED IN GROUND NO. 1 & 2 OF THE REVENUES APPEAL IS SQUARELY COVERED IN FAVO UR OF THE ASSESESE, I.T.A. NOS. 956 & 737/KOL./2012 ASSESSMENT YEARS 2005-2006 & I.T.A. NOS. 957 & 738/KOL/2012 ASSESSMENT YEAR : 2006-2007 & I.T.A. NOS. 958 & 739/KOL/2012 ASSESSMENT YEAR : 2007-2008 & I.T.A. NOS. 959 & 740/KOL/2012 ASSESSMENT YEAR : 2008-2009 PAGE 6 OF 22 INTER ALIA, BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR A.YS. 2003-04 AND 2004-05 R ENDERED VIDE ITS ORDER DATED 23.10.2009 IN ITA NOS. 752 & 785/KOL/20 08, WHEREIN THE SIMILAR CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER S ECTION 80IA IN RESPECT OF CAPTIVE POWER UNITS HAS BEEN ALLOWED BY THE TRIB UNAL RELYING ON THE VARIOUS JUDICIAL PRONOUNCEMENTS AS WELL AS THE CBDT INSTRUCTION NO. 1116. RESPECTFULLY FOLLOWING THE SAID DECISION OF T HE COORDINATE BENCH, WE UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(APPEALS ) ALLOWING THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SECTION 80IA ON CAPTIVE POWER UNIT AND DISMISS GROUNDS NO. 1 & 2 OF THE REVENUES APPE AL. 6. THE ISSUE INVOLVED IN GROUNDS NO. 3 & 4 OF REVEN UES APPEAL FOR A.Y. 2005-06 RELATES TO THE DETERMINATION OF THE NATURE OF SALES TAX REMISSION AMOUNT RECEIVED AS SUBSIDY, WHETHER CAPITAL OR REVE NUE. 7. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSE E-COMPANY HAD RECEIVED A SUM OF RS.11,61,154/- UNDER THE SALES TA X REMISSION ARRANGEMENT AS INCENTIVE FOR EXPANSION/ MODERNISATI ON CARRIED OUT BY IT. THE SAID INCENTIVE WAS GRANTED UNDER WEST BENGAL IN CENTIVE SCHEME, 1983 IN RESPECT OF INDUSTRIAL UNITS OF LARGE AND ME DIUM SCALE, SET UP IN THE STATE OF WEST BENGAL. IN THE RETURN OF INCOME, THIS AMOUNT OF INCENTIVE WAS CLAIMED TO BE EXEMPT BY THE ASSESESE BEING IN THE NATURE OF CAPITAL RECEIPT. RELIANCE IN SUPPORT OF THIS CLAIM WAS PLACED ON THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS.- BALRAMPUR CHINI MILLS LIMITED REPORTED IN 238 ITR 4 45 AS WELL AS THE DECISION OF THE SPECIAL BENCH OF ITAT IN THE CASE O F DCIT VS.- RELIANCE INDUSTRIES LIMITED REPORTED IN 84 ITD 273 (BOM.)(SB ). IT WAS EXPLAINED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER THAT T HE SUBSIDIES IN THE FORM OF SALES TAX REMISSION WERE DIRECTLY RELATED TO EXP ANSION OF UNDERTAKING, SALES, INVESTMENT OF FIXED CAPITAL AND THE SAME, TH EREFORE, WAS A RECEIPT OF I.T.A. NOS. 956 & 737/KOL./2012 ASSESSMENT YEARS 2005-2006 & I.T.A. NOS. 957 & 738/KOL/2012 ASSESSMENT YEAR : 2006-2007 & I.T.A. NOS. 958 & 739/KOL/2012 ASSESSMENT YEAR : 2007-2008 & I.T.A. NOS. 959 & 740/KOL/2012 ASSESSMENT YEAR : 2008-2009 PAGE 7 OF 22 CAPITAL IN NATURE. THIS STAND OF THE ASSESSEE WAS N OT FOUND ACCEPTABLE BY THE ASSESSING OFFICER. ACCORDING TO HIM, THE SALES TAX REMISSION GRANTED BY THE WEST BENGAL GOVERNMENT WAS NOT CAPITAL IN NA TURE SINCE THERE WAS NO STIPULATION IN THE SCHEME THAT THE AMOUNT OF SAL ES TAX REMISSION SHOULD BE KEPT ASIDE FOR PURCHASE OF PLANT AND MACH INERY. HE, THEREFORE, TREATED THE SAID RECEIPT AS OF REVENUE IN NATURE AN D BROUGHT THE SAME TO TAX IN THE HANDS OF THE ASSESSEE. ON APPEAL, THE LD . CIT(APPEALS) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER ON THIS ISSUE BY RELYING ON THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF RASOI LIMITED REPORTED IN 335 ITR 438, WHEREIN IT WAS HELD THAT S ALES TAX INCENTIVE RECEIVED BY THE ASSESSEE UNDER WEST BENGAL INCENTIV E SCHEME FOR EXPANSION OF CAPACITY, MODERNISATION AND IMPROVING THE MARKETING CAPABILITIES TO TIDE OVER THE CRISIS FOR PROMOTION OF INDUSTRY IN THE STATE WAS CAPITAL IN NATURE. THE LD. CIT(APPEALS) ALSO RE LIED ON THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.YS. 2003- 04 AND 2004-05 RENDERED VIDE ITS ORDER DATED 23.10.2009, WHEREIN A SIMILAR ISSUE WAS DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. 8. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS AGREED BY THE LD. REPRESENTATIVES OF BOTH THE SIDES, THIS ISSUE INVOL VED IN GROUNDS NO. 3 & 4 OF THE REVENUES APPEAL IS SQUARELY COVERED IN FAVO UR OF THE ASSESSEE, INTER ALIA, BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR A.YS. 2003-04 AND 2004-05 R ENDERED VIDE ITS ORDER DATED 23.10.2009 (SUPRA), WHEREIN THE SIMILAR AMOUNT OF INCENTIVE RECEIVED BY THE ASSESSEE-COMPANY UNDER THE SAME SCH EME OF WEST BENGAL GOVERNMENT HAS BEEN HELD TO BE CAPITAL IN NATURE NO T CHARGEABLE TO TAX. RESPECTFULLY FOLLOWING THE SAID DECISION OF THE TRI BUNAL, WE UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) GIVING RELIE F TO THE ASSESSEE ON THIS ISSUE AND DISMISS GROUNDS NO. 3 & 4 OF THE REV ENUES APPEAL. I.T.A. NOS. 956 & 737/KOL./2012 ASSESSMENT YEARS 2005-2006 & I.T.A. NOS. 957 & 738/KOL/2012 ASSESSMENT YEAR : 2006-2007 & I.T.A. NOS. 958 & 739/KOL/2012 ASSESSMENT YEAR : 2007-2008 & I.T.A. NOS. 959 & 740/KOL/2012 ASSESSMENT YEAR : 2008-2009 PAGE 8 OF 22 9. THE SOLITARY ISSUE INVOLVED IN THE APPEAL OF THE ASSESSEE FOR A.Y. 2005-06 RELATES TO THE ADDITION OF RS.21,66,000/- M ADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(APPEALS) BY WA Y OF DISALLOWANCE OF ASSESSEES CLAIM FOR DEDUCTION ON ACCOUNT OF LEAVE ENCASHMENT ON PROVISION BASIS. 10. IN THE PROFIT & LOSS A/C. FILED ALONG WITH ITS RETURN OF INCOME FOR A.Y. 2005-06, THE ASSESSEE-COMPANY HAD DEBITED A SU M OF RS.21,66,000/- ON ACCOUNT OF PROVISION FOR LEAVE ENCASHMENT AND TH E SAID AMOUNT WAS ADDED BACK IN THE COMPUTATION OF TOTAL INCOME AS PE R CLAUSE (F) OF SECTION 43B AS THE SAME WAS NOT PAID BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LD. CIT(APPEALS), THE ASSESS EE, HOWEVER, RAISED AN ADDITIONAL GROUND CLAIMING DEDUCTION ON ACCOUNT OF LEAVE ENCASHMENT ON PROVISION BASIS. ALTHOUGH THE SAID ADDITIONAL GROUN D WAS ADMITTED BY THE LD. CIT(APPALS), HE DISALLOWED THE CLAIM OF THE ASS ESSEE FOR DEDUCTION ON ACCOUNT OF LEAVE ENCASHMENT ON PROVISION BASIS ON T HE GROUND THAT DEDUCTION ON ACCOUNT OF LEAVE ENCASHMENT COULD BE A LLOWED ONLY ON PAYMENT BASIS AS PER CLAUSE (F) OF SECTION 43B. HE ALSO TOOK NOTE OF THE INTERIM ORDER PASSED BY THE HONBLE SUPREME COURT I N THE CASE OF EXIDE INDUSTRIES LIMITED, WHEREIN THE OPERATION OF SECTIO N 43B(F) WAS ALLOWED TO BE CONTINUED UNTIL FURTHER ORDERS. 11. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES O N THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON REC ORD. IT IS OBSERVED THAT THE SIMILAR ISSUE HAD COME UP FOR CONSIDERATION BEF ORE THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DY. CIT VS.- BLA INDUSTRIES PVT. LTD. (ITA NO. 1434/KOL/2012 DATED 16.01.2015) AND AFTER TAKING NOTE OF THE INTERIM ORDERS PASSED BY THE HONBLE SUPREME COURT IN THE CASE OF EXIDE I.T.A. NOS. 956 & 737/KOL./2012 ASSESSMENT YEARS 2005-2006 & I.T.A. NOS. 957 & 738/KOL/2012 ASSESSMENT YEAR : 2006-2007 & I.T.A. NOS. 958 & 739/KOL/2012 ASSESSMENT YEAR : 2007-2008 & I.T.A. NOS. 959 & 740/KOL/2012 ASSESSMENT YEAR : 2008-2009 PAGE 9 OF 22 INDUSTRIES LIMITED, THE TRIBUNAL RESTORED THE SAME TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO AWAIT TILL TH E FINAL DECISION OF THE HONBLE SUPREME COURT ON THE ISSUE AND THEN TO DECI DE THE ISSUE ACCORDINGLY. FOLLOWING THE SAID DECISION OF THE COO RDINATE BENCH, WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFF ICER WITH THE SIMILAR DIRECTION. THE APPEAL OF THE ASSESSEE ON THIS ISSUE IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 12. NOW WE TAKE UP THE CROSS APPEALS FOR A.Y. 2006- 07 BEING ITA NO. 738/KOL/2012 (ASSESSEES APPEAL) AND ITA NO. 957/KO L/2012 (REVENUES APPEAL), WHICH ARE DIRECTED AGAINST THE ORDER OF LD . CIT(APPEALS)-I DATED 01.03.2012. 13. AS REGARDS THE GROUNDS NO. 1 & 2 RAISED BY THE REVENUE IN ITS APPEAL FOR A.Y. 2006-07, IT IS OBSERVED THAT THE IS SUE INVOLVED THEREIN RELATING TO THE ASSESSEES CLAIM FOR DEDUCTION UNDE R SECTION 80IA IN RESPECT OF ITS CAPTIVE POWER UNITS IS SIMILAR TO TH E ONE INVOLVED IN GROUNDS NO. 1 & 2 OF THE REVENUES APPEAL FOR A.Y. 2005-06, WHICH HAS ALREADY BEEN DECIDED BY US IN THE FOREGOING PORTION OF THIS ORDER. FOLLOWING OUR CONCLUSION DRAWN ON THE SIMILAR ISSUE IN A.Y. 2005-06, WE UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) G IVING RELIEF TO THE ASSESSEE ON THIS ISSUE AND DISMISS GROUNDS NO. 1 & 2 OF THE REVENUES APPEAL FOR A.Y. 2006-07. 14. THE ISSUE INVOLVED IN GROUND NO. 3 OF THE REVEN UES APPEAL IS WHETHER THE LOSS OF ONE ELIGIBLE UNIT IS REQUIRED T O BE SET OFF AGAINST THE PROFIT OF OTHER ELIGIBLE UNIT FOR THE PURPOSE OF CO MPUTING DEDUCTION UNDER SECTION 80IA. I.T.A. NOS. 956 & 737/KOL./2012 ASSESSMENT YEARS 2005-2006 & I.T.A. NOS. 957 & 738/KOL/2012 ASSESSMENT YEAR : 2006-2007 & I.T.A. NOS. 958 & 739/KOL/2012 ASSESSMENT YEAR : 2007-2008 & I.T.A. NOS. 959 & 740/KOL/2012 ASSESSMENT YEAR : 2008-2009 PAGE 10 OF 22 15. DURING THE YEAR UNDER CONSIDERATION, ONE OF THE TWO CAPTIVE POWER PLANTS NAMELY DIESEL GENERATING POWER UNIT HAD SUFF ERED A LOSS, WHEREAS THE OTHER CAPTIVE POWER PLANT, NAMELY TURBINE GENER ATING POWER UNIT HAD EARNED PROFIT. IN THE RETURN OF INCOME, THE ASS ESSEE-COMPANY HAD CLAIMED DEDUCTION UNDER SECTION 80IA IN RESPECT OF PROFIT OF TURBINE GENERATING UNIT WITHOUT SETTING OFF THE LOSS OF DIE SEL GENERATING UNIT AGAINST THE SAID PROFIT. ACCORDING TO THE ASSESSING OFFICER, HIS COMPUTATION OF DEDUCTION UNDER SECTION 80IA MADE BY THE ASSESSEE- COMPANY WAS NOT IN ACCORDANCE WITH THE PROVISION OF SECTION 80AB AS THE LOSS OF DIESEL GENERATING UNIT AS PER THE SAID PROV ISION WAS REQUIRED TO BE SET OFF WITH THE PROFIT OF THE TURBINE GENERATIN G UNIT FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 80IA. THE LD. CIT(APPEALS), HOWEVER, DID NOT APPROVE THIS STAND OF THE ASSESSIN G OFFICER BY RELYING ON THE DECISION OF HIS PREDECESSOR IN ASSESSEES OWN C ASE FOR AY 2003-04, WHEREIN A SIMILAR ISSUE WAS DECIDED IN FAVOUR OF TH E ASSESSEE AND THE SAID DECISION WAS ACCEPTED BY THE DEPARTMENT BY NOT RAIS ING THIS ISSUE IN THE APPEAL FILED BEFORE THE TRIBUNAL FOR A.Y. 2003-04. 16. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES O N THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON REC ORD. AS AGREED BY THE LD. REPRESENTATIVES OF BOTH THE SIDES, THIS ISSUE I NVOLVED IN GROUND NO. 3 OF THE REVENUES APPEAL FOR AY 2006-07 IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE, INTER ALIA, BY THE DECISION OF THE HO NBLE DELHI HIGH COURT IN THE CASE OF CIT VS.- DEWAN KRAFT SYSTEM PVT. LTD. REPORTED IN 297 ITR 305. IT IS ALSO NOTED THAT A SIMILAR ISSUE HAS BEEN DECIDED BY THE LD. CIT(APPEALS) IN FAVOUR OF THE ASSESSEE IN THE ASSES SEES OWN CASE FOR A.YS. 2005-06, 2007-08 & 2008-09 AND THE DEPARTMENT HAS A CCEPTED THE SAME BY NOT RAISING THIS ISSUE IN THE APPEALS FILED BEFO RE THE TRIBUNAL FOR THE SAID YEARS. FOLLOWING THE DECISION OF THE HONBLE D ELHI HIGH COURT IN THE CASE OF DEWAN KRAFT SYSTEM PVT. LIMITED AND KEEPING IN VIEW THE I.T.A. NOS. 956 & 737/KOL./2012 ASSESSMENT YEARS 2005-2006 & I.T.A. NOS. 957 & 738/KOL/2012 ASSESSMENT YEAR : 2006-2007 & I.T.A. NOS. 958 & 739/KOL/2012 ASSESSMENT YEAR : 2007-2008 & I.T.A. NOS. 959 & 740/KOL/2012 ASSESSMENT YEAR : 2008-2009 PAGE 11 OF 22 PRINCIPLE OF CONSISTENCY, WE UPHOLD THE IMPUGNED OR DER OF THE LD. CIT(APPEALS) GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE AND DISMISS GROUND NO. 3. 17. GROUND NO. 4 OF THE REVENUES APPEAL AND GROUND NO. 2 OF THE ASSESSEES APPEAL FOR A.Y. 2006-07 INVOLVE A COMMON ISSUE RELATING TO THE DISALLOWANCE UNDER SECTION 14A. 18. DURING THE YEAR UNDER CONSIDERATION, I.E. AY 20 06-07, THE ASSESESE- COMPANY HAD RECEIVED DIVIDEND INCOME OF RS.34,75,40 9/- ON THE INVESTMENT OF RS.4 CRORES MADE IN THE SHARES OF RAL LIES INDIA LIMITED AND THE SAME WAS CLAIMED TO BE EXEMPT FROM TAX. NO DISA LLOWANCE ON ACCOUNT OF EXPENSES INCURRED IN RELATION TO THE EARNING OF SAID EXEMPT INCOME, HOWEVER, WAS MADE BY THE ASSESSEE AS REQUIRED BY TH E PROVISION OF SECTION 14A, ON THE GROUND THAT NO EXPENDITURE ATTR IBUTABLE TO THE EARNING OF DIVIDEND INCOME WAS INCURRED. THIS STAND OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE ASSESSING OFFICER. ACCO RDING TO HIM, THE COMMON OR GENERAL EXPENSES, SUCH AS RENT, RATES & T AXES, INSURANCE, DIRECTORS FEES, MISCELLANEOUS EXPENSES, ETC. WERE P ARTLY ATTRIBUTABLE TO THE EARNING OF TAX-FREE DIVIDEND INCOME AND ACCORDI NGLY A DISALLOWANCE TO THE EXTENT OF 0.5% OF SUCH EXPENSES AMOUNTING TO RS .8,76,000/- WAS MADE BY THE ASSESSING OFFICER UNDER SECTION 14A. HE ALSO MADE A FURTHER DISALLOWANCE OF RS.8,00,000/- ON AD HOC BASIS ON AC COUNT OF INTEREST EXPENSES BY HOLDING THAT THE PART OF INVESTMENT IN SHARES MUST HAVE BEEN MADE BY THE ASSESSEE OUT OF INTEREST-BEARING FUNDS. ON APPEAL, THE LD. CIT(APPEALS) DELETED THE DISALLOWANCE MADE BY THE A SSESSING OFFICER ON ACCOUNT OF INTEREST AFTER HAVING FOUND THAT THE INV ESTMENT IN SHARES WAS ENTIRELY MADE BY THE ASSESSEE OUT OF ITS OWN FUNDS AND THE BORROWED FUNDS WERE NOT UTILIZED FOR MAKING SUCH INVESTMENT. AS REGARDS THE DISALLOWANCE MADE UNDER SECTION 14A BY THE ASSESSIN G OFFICER TO THE I.T.A. NOS. 956 & 737/KOL./2012 ASSESSMENT YEARS 2005-2006 & I.T.A. NOS. 957 & 738/KOL/2012 ASSESSMENT YEAR : 2006-2007 & I.T.A. NOS. 958 & 739/KOL/2012 ASSESSMENT YEAR : 2007-2008 & I.T.A. NOS. 959 & 740/KOL/2012 ASSESSMENT YEAR : 2008-2009 PAGE 12 OF 22 EXTENT OF 0.5% OF THE COMMON AND GENERAL EXPENSES, THE LD. CIT(APPEALS) FOLLOWED THE CONSISTENT STAND TAKEN BY THE KOLKATA BENCHES OF THIS TRIBUNAL IN SEVERAL CASES TO RESTRICT THE SAME TO 1 % OF THE DIVIDEND INCOME. ACCORDINGLY, THE DISALLOWANCE OF RS.16,76,0 00/- MADE BY THE ASSESSING OFFICER UNDER SECTION 14A WAS RESTRICTED BY THE LD. CIT(APPEALS) TO RS.34,750/-. 19. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES O N THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON REC ORD. IT IS OBSERVED THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDE R SECTION 14A ON ACCOUNT OF INTEREST AMOUNTING TO RS.8,00,000/- HAS BEEN DELETED BY THE LD. CIT(APPEALS) AFTER HAVING FOUND THAT THE INVESTMENT IN SHARES WAS MADE BY THE ASSESSEE-COMPANY OUT OF ITS OWN FUNDS AND TH E BORROWED FUNDS WERE NOT UTILIZED FOR MAKING SUCH INVESTMENT. AT TH E TIME OF HEARING BEFORE US, THE LD. D.R. HAS NOT BEEN ABLE TO REBUT OR CONTROVERT THIS FINDING RECORDED BY THE LD. CIT(APPEALS). WE, THERE FORE, FIND NO JUSTIFIABLE REASON TO INTERFERE WITH THE SAME. AS R EGARDS THE DISALLOWANCE UNDER SECTION 14A ON ACCOUNT OF COMMON AND GENERAL EXPENSES, IT IS OBSERVED THAT THE COORDINATE BENCH OF THIS TRIBUNAL HAS TAKEN A CONSISTENT STAND ON THIS ISSUE IN SEVERAL CASES BY HOLDING THAT A DISALLOWANCE TO THE EXTENT OF 1% OF THE EXEMPT INCO ME WOULD BE FAIR AND REASONABLE. SINCE THE LD. CIT(APPEALS) IN HIS IMPUG NED ORDER HAS FOLLOWED THIS STAND CONSISTENTLY TAKEN BY THE TRIBUNAL WHILE RESTRICTING THE DISALLOWANCE UNDER SECTION 14A ON ACCOUNT OF COMMON AND GENERAL EXPENSES TO 1% OF THE EXEMPT INCOME, WE FIND NO INF IRMITY IN THE SAME. ACCORDINGLY, THE IMPUGNED ORDER OF THE LD. CIT(APPE ALS) RESTRICTING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SE CTION 14A TO RS.34,750/-IS UPHELD THEREBY DISMISSING GROUND NO. 4 OF THE REVENUES APPEAL AND GROUND NO. 2 OF THE ASSESSEES APPEAL. I.T.A. NOS. 956 & 737/KOL./2012 ASSESSMENT YEARS 2005-2006 & I.T.A. NOS. 957 & 738/KOL/2012 ASSESSMENT YEAR : 2006-2007 & I.T.A. NOS. 958 & 739/KOL/2012 ASSESSMENT YEAR : 2007-2008 & I.T.A. NOS. 959 & 740/KOL/2012 ASSESSMENT YEAR : 2008-2009 PAGE 13 OF 22 20. AS REGARDS THE GROUND NO. 1 OF THE ASSESSEES A PPEAL FOR A.Y. 2006- 07, IT IS OBSERVED THAT THE ISSUE INVOLVED THEREIN RELATING TO THE ASSESSEES CLAIM FOR DEDUCTION ON ACCOUNT OF LEAVE ENCASHMENT OF RS.17,94,000/- ON PROVISION BASIS IS SIMILAR TO THE ONE INVOLVED IN THE APPEAL OF THE ASSESSEE FOR AY 2005-06, WHICH HAS AL READY BEEN DECIDED BY US IN THE FOREGOING PORTION OF THIS ORDER. FOLLOWIN G OUR CONCLUSION DRAWN ON THE SIMILAR ISSUE IN A.Y. 2005-06, WE RESTORE TH IS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING THE SAME AFRESH AS PER THE SAME DIRECTION AS GIVEN IN A.Y. 2005-06. GROUND NO. 1 OF THE ASSESSEES APPEAL IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL P URPOSES. 21. NOW WE TAKE UP THE CROSS APPEALS FOR AY 2007-08 BEING ITA NO. 739/KOL/2012 (ASSESSEES APPEAL) AND ITA NO. 958/KO L/2012 (REVENUES APPEAL), WHICH ARE DIRECTED AGAINST THE ORDER OF THE LD. CIT(APPEALS) DATED 01.03.2012. 22. AS REGARDS GROUNDS NO. 1, 2 & 3 OF THE REVENUE S APPEAL FOR A.Y. 2007-08, IT IS OBSERVED THAT THE ISSUE INVOLVED THE REIN RELATING TO THE DELETION BY THE LD. CIT(APPEALS) OF THE ADDITION OF RS.16,15,08,683/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLO WANCE OF ASSESSEES CLAIM FOR DEDUCTION UNDER SECTION 80IA IS SIMILAR T O THE ONE INVOLVED IN GROUND NO. 1 & 2 OF THE REVENUES APPEAL FOR AY 200 5-06 WHICH HAS ALREADY BEEN DECIDED BY US IN THE FOREGOING PORTION OF THIS ORDER. FOLLOWING OUR CONCLUSION DRAWN ON THE SIMILAR ISSUE IN A.Y. 2005-06, WE DISMISS GROUNDS NO. 1, 2 & 3 OF THE REVENUES APPEA L FOR AY 2007-08. 23. AS REGARDS GROUNDS NO. 4 & 5 OF THE REVENUES A PPEAL AND GROUND NO. 2 OF THE ASSESSEES APPEAL FOR AY 2007-08, IT I S OBSERVED THAT THE COMMON ISSUE INVOLVED THEREIN RELATING TO THE DISAL LOWANCE UNDER SECTION 14A IS SIMILAR TO THE ONE INVOLVED IN GROUND NO.2 O F ASSESSEES APPEAL I.T.A. NOS. 956 & 737/KOL./2012 ASSESSMENT YEARS 2005-2006 & I.T.A. NOS. 957 & 738/KOL/2012 ASSESSMENT YEAR : 2006-2007 & I.T.A. NOS. 958 & 739/KOL/2012 ASSESSMENT YEAR : 2007-2008 & I.T.A. NOS. 959 & 740/KOL/2012 ASSESSMENT YEAR : 2008-2009 PAGE 14 OF 22 AND GROUND NO. 4 OF REVENUES APPEAL FOR A.Y. 2006- 07, WHICH HAS ALREADY BEEN DECIDED BY US IN THE FOREGOING PORTION OF THIS ORDER. FOLLOWING OUR CONCLUSION DRAWN ON THE SIMILAR ISSUE IN A.Y. 2006- 07, WE DISMISS THE GROUNDS NO. 4 & 5 OF THE REVENUES APPEAL AS WELL A S THE GROUND NO. 2 OF ASSESSEES APPEAL. 24. IN GROUND NO. 6 OF ITS APPEAL FOR A.Y. 2007-08, THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT(APPEALS) IN DI RECTING THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.6,43,924/- MAD E TO THE BOOK PROFIT COMPUTED UNDER SECTION 115JB OF THE ACT ON ACCOUNT OF DISALLOWANCE OF EXPENSES INCURRED BY THE ASSESSEE IN RELATION TO TH E EARNING OF EXEMPT INCOME UNDER SECTION 14A. 25. WHILE COMPUTING THE BOOK PROFIT UNDER SECTION 1 15JB FOR THE YEAR UNDER CONSIDERATION, I.E. A.Y. 2007-08, NO DISALLOW ANCE ON ACCOUNT OF EXPENSES INCURRED FOR EARNING OF EXEMPT INCOME WAS MADE BY THE ASSESSEE. RELYING ON EXPLANATION (1)(F) TO SECTION 115JB, THE AMOUNT OF DISALLOWANCE AS WORKED OUT BY HIM UNDER SECTION 14A WHILE COMPUTING THE INCOME OF THE ASSESSEE UNDER THE NORMAL PROVISI ONS WAS ADDED BY THE ASSESSING OFFICER WHILE COMPUTING THE BOOK PROFIT OF THE ASSESSEE UNDER SECTION 115JB. ALTHOUGH THE DISALLOWANCE SO MADE UN DER SECTION 14A AMOUNTING TO RS.6,43,924/- WHILE COMPUTING THE INCO ME OF THE ASSESSEE UNDER THE NORMAL PROVISIONS OF THE ACT WAS RESTRICT ED BY THE LD. CIT(APPEALS) TO RS.30,000/-, HE HELD THAT THE AMOUN T OF DISALLOWANCE SO SUSTAINED, HOWEVER, COULD NOT BE ADDED WHILE COMPUT ING THE BOOK PROFIT OF THE ASSESSEE-COMPANY UNDER SECTION 115JB AS THE DISALLOWANCE SO SUSTAINED AT 1% OF THE EXEMPT DIVIDEND INCOME WAS O N NOTIONAL BASIS, WHICH COULD NOT BE TERMED AS EXPENSES ACTUALLY INCU RRED BY THE ASSESSEE IN RELATION TO THE EXEMPT DIVIDEND INCOME. RELIANCE IN THIS REGARD WAS PLACED BY THE LD. CIT(APPEALS) ON THE DECISION OF D ELHI BENCH OF ITAT IN I.T.A. NOS. 956 & 737/KOL./2012 ASSESSMENT YEARS 2005-2006 & I.T.A. NOS. 957 & 738/KOL/2012 ASSESSMENT YEAR : 2006-2007 & I.T.A. NOS. 958 & 739/KOL/2012 ASSESSMENT YEAR : 2007-2008 & I.T.A. NOS. 959 & 740/KOL/2012 ASSESSMENT YEAR : 2008-2009 PAGE 15 OF 22 THE CASE OF GOETZE INDIA LIMITED REPORTED IN 32 SOT 101, WHEREIN IT WAS HELD THAT THE PROVISIONS OF SUB-SECTION (2) AND SUB -SECTION (3) OF SECTION 14A COULD NOT BE IMPORTED INTO CLAUSE (F) OF EXPLAN ATION (1) TO SECTION 115JA. 26. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS AGREED BY THE LD. REPRESENTATIVES OF BOTH THE SIDES, THIS ISSUE INVOL VED IN GROUND NO. 6 OF REVENUES APPEAL FOR AY 2007-08 IS SQUARELY COVERED , INTER ALIA, BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL I N THE CASE OF GOETZE INDIA LIMITED (SUPRA), WHEREIN THE SIMILAR ADDITION MADE TO THE BOOK PROFIT OF THE ASSESSEE-COMPANY COMPUTED UNDER SECTI ON 115JB ON ACCOUNT OF DISALLOWANCE OF EXPENSES MADE UNDER SECTION 14A WAS HELD TO BE UNSUSTAINABLE BY THE TRIBUNAL HOLDING THAT THE PROV ISIONS OF SECTION 14A COULD NOT BE IMPORTED INTO CLAUSE (F) OF EXPLANATIO N (1) TO SECTION 115JA. RESPECTFULLY FOLLOWING THE SAID DECISION OF THE COO RDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF GOETZE INDIA LIMITED, WE UP HOLD THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE AND DISMISS GROUND NO. 6 OF THE REVENUES APPEAL. 27. IN GROUNDS NO. 7 & 8 OF ITS APPEAL FOR AY 2007- 08, THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT(APPEALS) IN DE LETING THE ADDITION OF RS.3,15,00,000/- MADE BY THE ASSESSING OFFICER BY W AY OF DISALLOWANCE OF EXPENDITURE INCURRED ON RAILWAY SIDINGS. 28. DURING THE YEAR UNDER CONSIDERATION, THE ASSESS EE-COMPANY, AS PER THE UNDERSTANDING ENTERED INTO WITH THE KONKAN RAIL WAY CORPORATION LIMITED, HAD PAID A SUM OF RS.3,50,00,000/- TOWARDS THE COST OF DEVELOPMENT OF LOADING AND UNLOADING LINE AT SAWANT WADI ROAD STATION IN MAHARASHTRA. AGAINST THE SAID PAYMENT, THE KONKAN R AILWAY CORPORATION I.T.A. NOS. 956 & 737/KOL./2012 ASSESSMENT YEARS 2005-2006 & I.T.A. NOS. 957 & 738/KOL/2012 ASSESSMENT YEAR : 2006-2007 & I.T.A. NOS. 958 & 739/KOL/2012 ASSESSMENT YEAR : 2007-2008 & I.T.A. NOS. 959 & 740/KOL/2012 ASSESSMENT YEAR : 2008-2009 PAGE 16 OF 22 LIMITED HAD AGREED TO GIVE PREFERENCE TO THE ASSESS EE-COMPANY OR OTHER CUSTOMERS FOR UNLOADING OF IRON ORE FOR A PERIOD OF TEN YEARS. IN THE RETURN OF INCOME FILED FOR THE YEAR UNDER CONSIDERA TION, THE AMOUNT OF RS.3,50,00,000/- INCURRED ON RAILWAY SIDINGS WAS CL AIMED BY THE ASSESSEE AS DEDUCTION BEING REVENUE EXPENDITURE BY PLACING R ELIANCE, INTER ALIA, ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF CIT VS.- ASSOCIATED CEMENT CO. LIMITED REPORTED IN 172 ITR 2 57. THIS CLAIM OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE ASSESSING OFFICER. ACCORDING TO HIM, THE EXPENDITURE OF RS.3.50 CRORES INCURRED BY THE ASSESSEE WAS GOING TO GIVE ENDURING BENEFIT OF TEN YEARS. ACCORDINGLY, HE ALLOWED THE EXPENDITURE IN QUESTION INCURRED BY THE ASSESSEE ON RAILWAY SIDINGS ONLY TO THE EXTENT OF 1/10 TH , I.E. RS.35,00,000/- AND DISALLOWED THE BALANCE AMOUNT OF RS.3.15 CRORES. ON APPEAL, THE LD. CIT(AP PEALS) DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON THIS ISSUE BY RELYING ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F ASSOCIATED CEMENT CO. LIMITED (SUPRA), WHEREIN IT WAS HELD THAT EXPEN DITURE INCURRED BY THE ASSESSEE TOWARDS INSTALLING WATER PIPE LINES AND AC CESSORIES OUTSIDE THE FACTORY PREMISES, WHICH WERE TO BELONG TO AND BE MA INTAINED BY THE MUNICIPALITY WAS DEDUCTIBLE IN COMPUTING THE BUSINE SS PROFIT SINCE THE INSTALLATION AND ACCESSORIES WERE ASSETS OF THE MUN ICIPALITY AND NOT OF THE ASSESSEE AND THE EXPENDITURE DID NOT RESULT IN BRIN GING INTO EXISTENCE ANY CAPITAL ASSET FOR THE COMPANY. THE LD. CIT(APPEALS) ALSO RELIED ON THE DECISION OF THE HONBLE GAUHATI HIGH COURT IN THE C ASE OF BONGAIGAON REFINERY & PETRO CHEMICALS LIMITED REPORTED IN 222 ITR 208. 29. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS AGREED BY THE LD. REPRESENTATIVES OF BOTH THE SIDES, THIS ISSUE INVOL VED IN GROUNDS NO. 7 & 8 OF THE REVENUES APPEAL IS SQUARELY COVERED IN FAVO UR OF THE ASSESSEE, INTER ALIA, BY THE DECISION OF THE HONBLE GAUHATI HIGH COURT IN THE CASE OF I.T.A. NOS. 956 & 737/KOL./2012 ASSESSMENT YEARS 2005-2006 & I.T.A. NOS. 957 & 738/KOL/2012 ASSESSMENT YEAR : 2006-2007 & I.T.A. NOS. 958 & 739/KOL/2012 ASSESSMENT YEAR : 2007-2008 & I.T.A. NOS. 959 & 740/KOL/2012 ASSESSMENT YEAR : 2008-2009 PAGE 17 OF 22 BONGAIGAON REFINERY & PETRO CHEMICALS LIMITED (SUPR A), WHEREIN IT WAS HELD BY RELYING ON THE DECISION OF THE HONBLE SUPR EME COURT IN THE CASE OF ASSOCIATED CEMENT CO. LIMITED (SUPRA) THAT THE A MOUNT INCURRED BY THE ASSESSEE FOR CONSTRUCTION OF RAILWAY SIDINGS AND TR ACK OUTSIDE THE REFINERY COMPLEX WAS A REVENUE EXPENDITURE IN THE Y EAR IN WHICH IT WAS INCURRED SINCE THE SAID EXPENDITURE DID NOT RESULT IN BRINGING INTO EXISTENCE ANY CAPITAL ASSET FOR THE ASSESSEE. RESPE CTFULLY FOLLOWING THE SAID DECISION OF THE HONBLE GAUHATI HIGH COURT IN THE CASE OF BONGAIGAON REFINERY & PETRO CHEMICALS LIMITED (SUPRA), WE UPHO LD THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE AND DISMISS GROUNDS NO. 7 & 8 OF THE REVENUES APPE AL FOR A.Y. 2007-08. 30. AS REGARDS GROUND NO. 1 RAISED IN THE APPEAL OF THE ASSESSEE FOR AY 2007-08, IT IS OBSERVED THAT THE ISSUE INVOLVED THE REIN RELATING TO THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF L EAVE ENCASHMENT AMOUNTING TO RS.24,87,000/- ON PROVISION BASIS IS S IMILAR TO THE ONE IN GROUND NO. 1 OF THE ASSESSEES APPEAL FOR AY 2005-0 6, WHICH HAS ALREADY BEEN DECIDED BY US IN THE FOREGOING PORTION OF THIS ORDER. FOLLOWING OUR CONCLUSION DRAWN ON THE SIMILAR ISSUE IN A.Y. 2005- 06, WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH THE SIMILAR DIRECTION. GROUND NO. 1 OF THE ASSEESSEES APPEAL IS ACCORDING LY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 31. NOW WE SHALL TAKE UP THE CROSS APPEALS FOR AY 2 008-09 BEING ITA NO. 740/KOL/2012 (ASSESSEES APPEAL) AND ITA NO. 959/KOL/2012(REVENUES APPEAL), WHICH ARE DIRECTED AGAINST THE ORDER OF THE LD. CIT(APPEALS)-1 DATED 01.03.2012. I.T.A. NOS. 956 & 737/KOL./2012 ASSESSMENT YEARS 2005-2006 & I.T.A. NOS. 957 & 738/KOL/2012 ASSESSMENT YEAR : 2006-2007 & I.T.A. NOS. 958 & 739/KOL/2012 ASSESSMENT YEAR : 2007-2008 & I.T.A. NOS. 959 & 740/KOL/2012 ASSESSMENT YEAR : 2008-2009 PAGE 18 OF 22 32. AS REGARDS GROUNDS NO. 1, 2 & 3 RAISED BY THE R EVENUE IN ITS APPEAL FOR AY 2008-09, IT IS OBSERVED THAT THE ISSUE INVOL VED THEREIN RELATING TO THE ASSESSEES CLAIM FOR DEDUCTION U/S. 80IA IS REL ATION OF CAPTIVE POWER UNITS IS SIMILAR TO THE ISSUE INVOLVED IN GROUND NO . 1 OF REVENUES APPEAL FOR AY 2005-06, WHICH HAS ALREADY BEEN DECIDED BY U S IN THE FOREGOING PORTION OF THIS ORDER ALLOWED BY THE TRIBUNAL RELYI NG ON THE VARIOUS JUDICIAL PRONOUNCEMENTS AS WELL AS FOLLOWING OUR CO NCLUSION DRAWN THE SAID DECISION ON A SIMILAR ISSUE IN AY 2005-06, WE UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) ALLOWING THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SECTION 80IA IN RESPECT OF CAPTIVE POWER UNITS AND DISMISS GROUNDS NO. 1, 2 & 3 OF THE REVENUES APPEA L. 33. GROUNDS NO. 4 & 5 OF THE REVENUES APPEAL AND G ROUND NO. 2 OF THE ASSESSEES APPEAL INVOLVED A COMMON ISSUE RELATING TO THE DISALLOWANCE OF RS.6,26,987/- MADE BY THE ASSESSING OFFICER U/S 14A WHICH IS SUSTAINED BY THE LD. CIT(APPEALS) TO THE EXTENT OF RS.2,91,26 0/-. 34. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES O N THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON REC ORD. IT IS OBSERVED THAT THIS ISSUE RELATING TO THE DISALLOWANCE UNDER SECTI ON 14A TO THE EXTENT INTEREST IS SIMILAR TO THE ONE INVOLVED IN THE APPE ALS FOR THE EARLIER YEARS, I.E. AY 2006-07 AND 2007-08, WHEREIN THE ORDERS OF THE LD. CIT(APPEALS) DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFF ICER ON ACCOUNT OF INTEREST UNDER SECTION 14A HAS BEEN UPHELD BY US AF TER HAVING FOUND THAT THE ASSESSEE WAS HAVING SUFFICIENT OWN FUNDS TO MAK E INVESTMENT IN SHARES AND THE INTEREST BEARING BORROWED FUNDS HAD NOT BEEN UTILIZED FOR MAKING SUCH INVESTMENT. FOLLOWING OUR CONCLUSIONS D RAWN IN A.YS 2006- 07 AND 2007-08, WE UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFF ICER ON ACCOUNT OF INTEREST UNDER SECTION 14A. I.T.A. NOS. 956 & 737/KOL./2012 ASSESSMENT YEARS 2005-2006 & I.T.A. NOS. 957 & 738/KOL/2012 ASSESSMENT YEAR : 2006-2007 & I.T.A. NOS. 958 & 739/KOL/2012 ASSESSMENT YEAR : 2007-2008 & I.T.A. NOS. 959 & 740/KOL/2012 ASSESSMENT YEAR : 2008-2009 PAGE 19 OF 22 35. AS REGARDS THE DISALLOWANCE MADE BY THE ASSESSI NG OFFICER UNDER SECTION 14A ON ACCOUNT OF COMMON AND GENERAL EXPENS ES, THE LD. CIT(APPEALS) HELD THAT RULE 8D OF INCOME TAX RULES BEING MADE APPLICABLE TO AY 2008-09, SUCH DISALLOWANCE IS REQU IRED TO BE MADE TO THE EXTENT OF 0.5% OF AVERAGE VALUE OF INVESTMENT AS PE R THE SAID RULE ACCORDINGLY, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 14A ON ACCOUNT OF COMMON AND GENERAL EXPENS ES TO THE EXTENT OF RS.2,91,260/- BY APPLYING RULE 8D WAS CONFIRMED BY THE LD. CIT(APPEALS). AT THE TIME OF HEARING BEFORE US, THE LD. COUNSEL F OR THE ASSESSEE HAS NOT DISPUTED THAT RULE 8D IS APPLICABLE TO THE YEAR UND ER CONSIDERATION, I.E. AY 2008-09 AND ACCORDINGLY THE DISALLOWANCE UNDER S ECTION 14A ON ACCOUNT OF COMMON AND GENERAL EXPENSES IS REQUIRED TO BE MADE TO THE EXTENT OF 0.5% OF AVERAGE VALUE OF INVESTMENT AS PR OVIDED IN THE SAID RULE. THE LIMITED CONTENTION RAISED BY HER IS THAT WHILE COMPUTING SUCH DISALLOWANCE, INVESTMENT WHICH YIELDED DIVIDEND INC OME DURING THE YEAR UNDER CONSIDERATION ONLY SHOULD BE CONSIDERED. SINC E THIS CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE IS DULY SUPPORTED BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF RE I AGRO LIMITED VS.- DCIT REPORTED IN 144 ITD 141, WE MODIFY THE IMPUGNE D ORDER OF THE LD. CIT(APPEALS) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO COMPUTE THE DISALLOWANCE TO BE MADE UNDER RULE 8D(2)(III) BY TA KING INTO CONSIDERATION THE AVERAGE VALUE OF THAT INVESTMENT APPEARING IN THE BALANCE-SHEET AS ON FIRST AND LAST DAY OF THE PREVI OUS YEAR, FROM WHICH THE EXEMPT INCOME WAS EARNED. GROUNDS NO. 4 & 5 OF THE REVENUES APPEAL ARE ACCORDINGLY DISMISSED, WHILE GROUND NO. 2 OF TH E ASSESSEES APPEAL IS PARTLY ALLOWED. I.T.A. NOS. 956 & 737/KOL./2012 ASSESSMENT YEARS 2005-2006 & I.T.A. NOS. 957 & 738/KOL/2012 ASSESSMENT YEAR : 2006-2007 & I.T.A. NOS. 958 & 739/KOL/2012 ASSESSMENT YEAR : 2007-2008 & I.T.A. NOS. 959 & 740/KOL/2012 ASSESSMENT YEAR : 2008-2009 PAGE 20 OF 22 36. AS REGARDS THE GROUNDS NO. 6 & 7 OF THE REVENUE S APPEAL FOR AY 2008-09, IT IS OBSERVED THAT THE ISSUE INVOLVED REL ATING TO THE SALES TAX INCENTIVE SUBSIDY IS SIMILAR TO THE ONE INVOLVED IN GROUNDS NO. 3 & 4 IN THE APPEAL OF THE REVENUE FOR THE A.Y. 2005-06, WHI CH HAS ALREADY BEEN DECIDED BY US IN THE FOREGOING PORTION OF THIS ORDE R. FOLLOWING OUR CONCLUSION DRAWN ON AY 2005-06, WE UPHOLD THE IMPUG NED ORDER OF THE LD. CIT(APPEALS) GIVING RELIEF TO THE ASSESSEE ON T HIS ISSUE AND DISMISS GROUNDS NO. 6 & 7 OF THE REVENUES APPEAL. 37. THE ISSUE INVOLVED IN GROUND NO. 8 OF THE REVEN UES APPEAL FOR AY 2008-09 RELATES TO THE DELETION BY THE LD. CIT(APPE ALS) OF THE DISALLOWANCE OF RS.3,55,395/- MADE BY THE ASSESSING OFFICER OUT OF FOREIGN TRAVEL EXPENSES. 38. ON EXAMINATION OF THE FOREIGN TRAVEL EXPENSES I NCURRED BY THE ASSESSEE, THE ASSESSING OFFICER FOUND THAT A SUM OF RS.3,55,395/- WAS INCURRED ON THE FOREIGN TOUR OF ITS EMPLOYEES BY TH E ASSESSEE-COMPANY TO PATTAYA. IN THIS REGARD, THE EXPLANATION OFFERED BY THE ASSESSEE THAT THE SAID VISIT WAS FOR ATTENDING TATA QUALITY MANAGEMEN T CONVENTION HELD AT PATTAYA WAS NOT FOUND ACCEPTABLE BY THE ASSESSING O FFICER AS, ACCORDING TO HIM, PATTAYA WAS A WORLD FAMOUS TOURIST SPOT, WH ERE NO BUSINESS RELATED ACTIVITIES COULD TAKE PLACE. THE LD. CIT(AP PEALS), HOWEVER, DID NOT AGREE WITH THIS STAND OF THE ASSESSING OFFICER AND DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OUT OF F OREIGN TRAVEL EXPENSES AFTER HAVING FOUND THAT THE TATA QUALITY MANAGEMENT MEET IS AN ANNUAL TATA BUSINESS EXCELLENCE CONVENTION IN WHICH HUNDRE DS OF OFFICIALS FROM VARIOUS TATA GROUP COMPANIES MEET IN PURSUIT OF BUS INESS EXCELLENCE. HE ALSO NOTED THAT THE MAIN AGENDA OF SUCH MEET WAS TO MAKE THE EMPLOYEES OF THE TATA GROUP OF COMPANIES AWARE WITH THE LATES T DEVELOPMENTS IN THE I.T.A. NOS. 956 & 737/KOL./2012 ASSESSMENT YEARS 2005-2006 & I.T.A. NOS. 957 & 738/KOL/2012 ASSESSMENT YEAR : 2006-2007 & I.T.A. NOS. 958 & 739/KOL/2012 ASSESSMENT YEAR : 2007-2008 & I.T.A. NOS. 959 & 740/KOL/2012 ASSESSMENT YEAR : 2008-2009 PAGE 21 OF 22 WHOLE WORLD. ACCORDINGLY, HE HELD THAT THE EXPENDIT URE INCURRED ON FOREIGN TRAVEL TO ATTEND SUCH CONVENTION ORGANIZED AT PATTAYA WAS ALLOWABLE BUSINESS EXPENDITURE. 39. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES O N THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON REC ORD. IT IS OBSERVED THAT AFTER TAKING INTO CONSIDERATION THE NATURE AND PURP OSE OF TATA BUSINESS EXCELLENCE CONVENTION ORGANIZED AT PATTAYA, A FINDI NG HAS BEEN RECORDED BY THE LD. CIT(APPEALS) THAT THE FOREIGN TOUR UNDER TAKEN BY THE EMPLOYEES OF THE ASSESSEE-COMPANY TO PARTICIPATE IN THE SAID CONVENTION WAS FOR THE PURPOSE OF ITS BUSINESS AND THE EXPENDITURE INCURRE D ON SUCH TRAVEL WAS AN ALLOWABLE EXPENDITURE. AT THE TIME OF HEARING BE FORE US, THE LD. D.R. HAS NOT BEEN ABLE TO REBUT OR CONTROVERT THE FINDIN G RECORDED BY THE LD. CIT(APPEALS) IN THIS REGARD AND THIS BEING SO AS WE LL AS KEEPING IN VIEW THE REASONS GIVEN BY THE LD. CIT(APPEALS) IN HIS IM PUGNED ORDER, WE FIND NO JUSTIFIABLE REASON TO INTERFERE WITH THE IMPUGNE D ORDER OF THE LD. CIT(APPEALS) ALLOWING RELIEF TO THE ASSESSEE ON THI S ISSUE. THE SAME IS ACCORDINGLY UPHELD DISMISSING GROUND NO. 8 OF THE R EVENUES APPEAL. 40. AS REGARDS GROUND NO. 1 RAISED IN THE APPEAL OF THE ASSESSEE FOR AY 2008-09, IT IS OBSERVED THAT THE ISSUE INVOLVED THE REIN RELATING TO THE ASSESSEES CLAIM FOR DEDUCTION OF RS.41,85,000/- ON ACCOUNT OF LEAVE ENCASHMENT ON PROVISION BASIS IS SIMILAR TO THE ONE INVOLVED IN GROUND NO. 1 OF THE ASSESSEES APPEAL FOR AY 2005-06, WHIC H HAS ALREADY BEEN DECIDED BY US IN THE FOREGOING PORTION OF THIS ORDE R. FOLLOWING OUR CONCLUSION DRAWN IN AY 2005-06, WE RESTORE THIS ISS UE TO THE FILE OF THE ASSESSING OFFICER WITH THE SIMILAR DIRECTION. GROU ND NO. 1 OF THE I.T.A. NOS. 956 & 737/KOL./2012 ASSESSMENT YEARS 2005-2006 & I.T.A. NOS. 957 & 738/KOL/2012 ASSESSMENT YEAR : 2006-2007 & I.T.A. NOS. 958 & 739/KOL/2012 ASSESSMENT YEAR : 2007-2008 & I.T.A. NOS. 959 & 740/KOL/2012 ASSESSMENT YEAR : 2008-2009 PAGE 22 OF 22 ASSESSEES APPEAL FOR AY 2008-09 IS ACCORDINGLY TRE ATED AS ALLOWED FOR STATISTICAL PURPOSES. 41. IN THE RESULT, ALL THE FOUR APPEALS OF THE REVE NUE ARE DISMISSED, WHILE ALL THE FOUR APPEALS OF THE ASSESSEE ARE TREA TED AS PARTLY ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON MARCH 04, 20 16. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER KOLKATA, THE 4 TH DAY OF MARCH, 2016 COPIES TO : (1) ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-3, KOLKATA, 8/2, ESPLANADE EAST, DWARLI HOUSE, 2 ND FLOOR, KOLKATA-700 069 (2) M/S. TATA METALICS LIMITED, 43, CHOWRINGHEE ROAD, TATA CENTRE, KOLKATA-700 071 (3) COMMISSIONER OF INCOME-TAX (APPEALS)-I, KOLKAT A (4) COMMISSIONER OF INCOME TAX, KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.