THE DY CIT CIR 1(1), V. M/S. THE ASSOCIATED CEMENT CO. LTD,

ITA 9613/MUM/2004

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1853 (ITAT-MUMBAI)
• Duration Of Justice: 8 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 26-11-2012
• Assessment Year: 2000-2001
• Appeal Filed On: 30-12-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A P SINGH
• Assessee Lawyers: AMIT KUMAR MISHRA
• Keywords: Depreciation; Source of fund; Question of law; Capital receipt; Revenue expenditure
• Section: 115JB; 80IB; 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F, MUMBAI BEFORE SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO.9613/MUM/2004 ASSESSMENT YEAR : 2000-01 THE ASSOCIATED CEMENT COMPANIES LIMITED CEMENT HOUSE 121, MAHARISHI KARVE MARG MUMBAI-400 020. PAN NO. AAACT 1507 C VS. ADDL. COMMISSIONER OF INCOME TAX RANGE-1 AAYAKAR BHAVAN MAHARISHI KARVE MARG MUMBAI-400 020. (APPELLANT) (RESPONDENT) ITA NO.9570/MUM/2004 ASSESSMENT YEAR : 2000-01 ADDL. COMMISSIONER OF INCOME TAX RANGE-1 AAYAKAR BHAVAN MAHARISHI KARVE MARG MUMBAI-400 020. VS. THE ASSOCIATED CEMENT COMPANIES LIMITED CEMENT HOUSE 121, MAHARISHI KARVE MARG MUMBAI-400 020. PAN NO. AAACT 1507 C (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SOUMEN ADAK & SHRI AMIT KUMAR MISHRA REVENUE BY : SHRI A.P. SINGH DATE OF HEARING : 16.01.13 DATE OF PRONOUNCEMENT : 30.01.13 O R D E R PER RAJENDRA SINGH, AM: THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 30.9.2004 OF CIT(A) FOR THE ASSESSMENT YEAR 2000-01. THESE APPEA LS ARE BEING DISPOSED OFF BY THIS SINGLE CONSOLIDATED ORDER FOR THE SAKE OF CONV ENIENCE. ITA NO.9613 & 9570/M/04 THE ASSOCIATED CEMENT COMPANIES LTD. 2 2. ITA NO.9613/MUM/2004 (APPEAL BY THE ASSESSEE) (A.Y. 2000-01) : THE ASSESSEE IN THIS APPEAL HAS RAISED DISPUTES ON SEVERAL GROUNDS WHICH HAVE BEEN DEALT WITH IN THE SUCCEEDING PARAS. 2.1 THE FIRST DISPUTE IS REGARDING NATURE OF TRANSP ORT SUBSIDY AMOUNTING TO RS.13,78,51,483/- RECEIVED BY THE ASSESSEE. THE AS SESSEE HAD RECEIVED SUBSIDY UNDER TRANSPORT SUBSIDY SCHEME, 1971, WHICH HAD BEE N INTRODUCED BY THE GOVERNMENT WITH THE BROAD OBJECTIVE OF ACHIEVING IN DUSTRIALIZATION. ASSESSEE HAD RECEIVED SUBSIDY IN RELATION TO ONE OF ITS UNIT AT GAGAL, BILASPUR DIST. HIMACHAL PRADESH WHICH HAD STARTED PRODUCTION IN THE YEAR 19 82-83. THE SUBSIDY WAS BASED ON VOLUME OF INCOMING RAW-MATERIAL AND OUTWARD TRAN SIT OF CEMENT. THE ASSESSEE HAD BEEN DECLARING SUBSIDY RECEIVED AS CAPITAL RECE IPT. THE AO HOWEVER, HAD BEEN TREATING THE SUBSIDY AS REVENUE RECEIPT AND ADDING TO THE TOTAL INCOME WHICH HAD ALSO BEEN UPHELD BY CIT(A). THE AO IN THIS YEAR FOL LOWING THE DECISION OF EARLIER YEAR TREATED SUBSIDY AS CAPITAL RECEIPT AND ADDED T O THE TOTAL INCOME WHICH WAS CONFIRMED BY CIT(A) AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 2.2 WE HAVE HEARD BOTH PARTIES, PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. WE FIND THAT THE SAME ISSUE HAS BEEN DEC IDED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN EARLIER YEARS. IN THE IMMEDI ATE PRECEDING YEAR ALSO I.E. ASSESSMENT YEAR 1999-00 ALSO, SIMILAR ADDITION HAD BEEN MADE BY THE AO AND CONFIRMED BY CIT(A) WHICH HAD BEEN DELETED BY THE T RIBUNAL IN ITA NO.7594/MUM/2004 FOR ASSESSMENT YEAR 1999-00. THE TRIBUNAL HAD FOLLOWED THE ITA NO.9613 & 9570/M/04 THE ASSOCIATED CEMENT COMPANIES LTD. 3 ORDER IN THE EARLIER YEAR IN WHICH THE CLAIM HAD BE EN ALLOWED FOLLOWING THE JUDGMENT OF HON'BLE HIGH COURT OF BOMBAY IN THE CAS E OF CIT VS. RELIANCE INDUSTRIES IN WHICH THE HON'BLE HIGH COURT UPHELD T HE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE SAME CASE REPORTED IN 88 ITD 273 IN WHICH IT WAS HELD THAT SUBSIDY GIVEN FOR SETTING UP OR EXPANSION OF INDUSTRIES WILL BE CAPITAL IN NATURE IRRESPECTIVE OF SOURCE OF FUND OR THE MANNE R OF DISBURSEMENT. THE SAME VIEW HAD BEEN TAKEN BY THE TRIBUNAL IN THE CASE OF ASSAM ASBESTORS LTD. VS. INSPECTING ASSISTANT (45 ITD 81) WHICH WAS UPHELD BY THE GAUHATI HIGH COURT AND SLP FILED HAS BEEN DISMISSED BY THE HONBLE APE X COURT. FOLLOWING THESE JUDGMENTS, THE CLAIM OF THE ASSESSEE HAS BEEN ALLOW ED IN 1999-2000. FACTS IN THIS YEAR ARE IDENTICAL. THEREFORE, RESPECTFULLY FOLLOWI NG THE DECISION IN EARLIER YEAR (SUPRA), WE SET ASIDE THE ORDER OF CIT(A) AND ALLOW THE CLAIM OF THE ASSESSEE. 3. THE SECOND DISPUTE IS REGARDING THE ADDITION OF RS.2,63,51,000/- MADE BY THE AO ON ACCOUNT OF SUBSIDY RELATING TO ELECTRICIT Y/POWER TARIFF FREEZE. THE AMOUNT RECEIVED WAS INCENTIVE IN THE FORM OF EXEMPT ION FROM PAYMENT FOR ELECTRICITY DUTY UNDER H.P. INCENTIVE SCHEME-1991 F OR SETTING UP OF NEW INDUSTRIAL UNIT AT BILASPUR. PURPOSE WAS TO PROMOTE GROWTH OF INDUSTRIES AND GENERATION OF EMPLOYMENT. THE ASSESSEE DECLARED THE INCENTIVE AS CAPITAL RECEIPT AND DID NOT OFFER THE SAME FOR TAX. THE AO HOWEVER FOLLOWING TH E DECISION OF EARLIER YEARS HELD THAT INCENTIVE IN THE FORM OF ELECTRICITY DUTY WAS GIVEN TO REDUCE BURDEN OF COST INCURRED ON CONSUMPTION OF POWER AND IN TURN M AKE BUSINESS OPERATION MORE PROFITABLE AND COMPETITIVE AND ACCORDINGLY TREATED THE SAME AS REVENUE RECEIPT ITA NO.9613 & 9570/M/04 THE ASSOCIATED CEMENT COMPANIES LTD. 4 WHICH WAS UPHELD BY CIT(A). AGGRIEVED BY THE DECISI ON OF CIT(A), ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL . 3.1 WE HAVE HEARD BOTH PARTIES PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. WE FIND THIS ISSUE IS A RECURRING ISSUE COMING FROM EARLIER YEARS IN WHICH THE AMOUNT WAS TREATED AS REVENUE RECEIPT BY AO AND UPHELD BY CIT(A). HOWEVER THE TRIBUNAL FOLLOWING THE DECISION OF THE SPECIAL BENCH IN THE CASE OF RELIANCE INDUSTRIES (88 ITD 273) WHICH AS POINTED O UT EARLIER (IN PARA 2.2) HAS BEEN UPHELD BY HON'BLE HIGH COURT OF BOMBAY, HELD T HAT SUBSIDY WAS CAPITAL RECEIPT. FACTS THIS YEAR ARE IDENTICAL. THEREFORE, RESPECTIVELY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE EARLIER YEAR, WE SE T ASIDE THE ORDER OF CIT(A) AND ALLOW THE CLAIM OF THE ASSESSEE. 4. THE THIRD DISPUTE IS REGARDING ALLOWABILITY OF C LAIM OF DEDUCTION OF RS.4,53,19,214/- ON ACCOUNT OF ADDITIONAL GRATUITY PAID. THE CLAIM HAS BEEN DISALLOWED BY THE AO FOLLOWING THE DECISION IN EARL IER YEARS ON THE GROUND THAT THE AMOUNT COULD BE PAID BY THE ASSESSEE IN PURSUAN CE OF RULES FRAMED UNDER COMPANY LAW AND NOT UNDER THE PROVISIONS OF GRATUIT Y ACT. THE AO HELD THAT THE CLAIM WAS NOT ALLOWABLE UNDER SECTION 37(1) WHICH W AS UPHELD BY CIT(A) AGGRIEVED BY WHICH, ASSESSEE IS IN APPEAL BEFORE TH E TRIBUNAL. 4.1 AT THE TIME OF HEARING OF APPEAL BEFORE US, THE LD. AR FOR THE ASSESSEE DID NOT PRESS THIS GROUND AND, THEREFORE, THE GROUND RA ISED BY THE ASSESSEE IS DISMISSED AS NOT PRESSED. ITA NO.9613 & 9570/M/04 THE ASSOCIATED CEMENT COMPANIES LTD. 5 5. THE FOURTH GROUND IS REGARDING CLAIM OF DEDUCTIO N ON ACCOUNT OF COMPENSATORY CHARGES PAID BY THE ASSESSEE TO THE ST ATE GOVERNMENT FOR NOT CARRYING OUT MINING; PAYMENT MADE TO STATE AUTHORIT IES FOR USE OF DIESEL, OIL FOR PURPOSES OTHER THAN POWER GENERATION AND PAYMENT OF INTEREST ON DELAYED PAYMENT OF TDS. THE AO HAD DISALLOWED THESE CLAIMS HOLDING THAT THE SAME WERE PENAL IN NATURE FOR VIOLATION OF LAWS, WHICH WAS CO NFIRMED BY CIT(A) AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBU NAL. 5.1 BEFORE US THE LD. AR FOR THE ASSESSEE AT THE OU TSET SUBMITTED THAT HE WAS NOT PRESSING THE GROUNDS RELATING TO PAYMENT TO STA TE AUTHORTIES FOR USE OF DIESEL, PAYMENT OF INTEREST ON DELAYED PAYMENT OF TDS. THE DISALLOWANCE OF THESE CLAIMS IS THEREFORE UPHELD. 5.2 AS REGARDS THE PAYMENT FOR NOT CARRYING OUT MIN ING ACTIVITY, IT WAS SUBMITTED THAT THE ASSESSEE WAS MINING LIMESTONE IN AND AROUND THE AREA OF THE FACTORY IN RAJASTHAN SITUATED AT LAKHERI DIST. THE ASSESSEE WAS TO PAY ROYALTY FOR MINING LIMESTONE. HOWEVER IN THIS ACCOUNTING YEAR, NO MINING WAS DONE FOR LIMESTONE AND THE ASSESSEE HAD TO MAKE PAYMENT TO T HE STATE GOVERNMENT FOR NOT MINING ANY LIMESTONE. IT WAS SUBMITTED THAT AO HAD DISALLOWED THE CLAIM AS PENAL IN NATURE WHICH WAS NOT CORRECT AS THE PAYMENT WAS COMPENSATORY IN NATURE. IT WAS ALSO POINTED OUT THAT CIT(A) WAS NOT CORRECT IN STATING THAT AO HAD NOT MADE ANY DISALLOWANCE BECAUSE AO HAD MADE THE DISALLOWAN CE UNDER PENAL CHARGES AND NOT UNDER THE HEAD COMPENSATORY CHARGES AS ME NTIONED BY CIT(A). IT WAS ACCORDINGLY URGED THAT THE CLAIM SHOULD BE ALLOWED. THE LD. DR ON THE OTHER HAND ITA NO.9613 & 9570/M/04 THE ASSOCIATED CEMENT COMPANIES LTD. 6 SUBMITTED THAT IT WAS NOT CLEAR WHETHER THE PAYMENT WAS FOR VIOLATION OF CONTRACTUAL APPLICATION OR FOR VIOLATION OF LAW AND THEREFORE THE ISSUE REQUIRED FRESH EXAMINATION. 5.3 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDING ALLOWABILITY OF CLAIM ON ACCOU NT OF PAYMENT MADE BY THE ASSESSEE FOR NOT CARRYING OUT MINING OF LIMESTONE. THE ASSESSEE WAS MINING LIMESTONE ON PAYMENT OF ROYALTY AND THIS YEAR SINCE THERE WAS NO MINING, THE ASSESSEE HAD TO MAKE CERTAIN PAYMENTS TO STATE GOVE RNMENT WHICH HAS BEEN TREATED BY AUTHORITIES AS PENAL IN NATURE. THE CLAI M OF THE ASSESSEE IS THAT THE PAYMENT WAS NOT PENALTY BUT COMPENSATORY IN NATURE FOR VIOLATION OF CONTRACTUAL AGREEMENT. THE LD. AR HOWEVER COULD NOT BRING TO OU R NOTICE THE RELEVANT PROVISIONS OF THE CONTRACT UNDER WHICH THE PAYMENT HAD BEEN MADE. IT IS NOT CLEAR WHETHER THE PAYMENT WAS FOR VIOLATION OF CONTRACTUA L OBLIGATION OR FOR VIOLATION OF LAW. THE ISSUE THEREFORE REQUIRES FRESH EXAMINATION AT THE LEVEL OF AO. WE, THEREFORE SET ASIDE THE ORDER OF CIT(A) AND RESTORE THE ISSUE TO THE FILE OF AO FOR PASSING A FRESH ORDER AFTER NECESSARY EXAMINATION A ND AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE . 6.1 THE FIFTH DISPUTE IS REGARDING DISALLOWANCE OF RAILWAYS AND INSURANCE CLAIMS WRITTEN OFF BY THE ASSESSEE AMOUNTING TO RS. 41,96,766/-. THE ASSESSEE HAD WRITTEN OFF UNSETTLED RAILWAY AND INSURANCE CLAIMS AS THESE WERE NOT RECOVERABLE AND ACCORDINGLY CLAIMED AS DEDUCTION. THE AO OBSERV ED THAT SETTLEMENT OF CLAIM HAD BECOME FINAL IN THE EARLIER YEARS WHEN THE CLAI M COULD HAVE BEEN MADE AS ITA NO.9613 & 9570/M/04 THE ASSOCIATED CEMENT COMPANIES LTD. 7 DEDUCTION. IT WAS ACCORDINGLY HELD BY HIM THAT THE CLAIM WAS NOT ADMISSIBLE IN THIS YEAR. CIT(A) AGREED WITH THE AO THAT THE CLAIM PERTAINED TO THE EARLIER YEAR AND, THEREFORE THE CLAIM COULD NOT BE ALLOWED THIS YEAR. AGGRIEVED BY THE DECISION OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRI BUNAL. 6.1 BEFORE US, THE LD. AR FOR THE ASSESSEE SUBMITTE D THAT THE CLAIM HAS TO BE ALLOWED AS BAD DEBT AS THE SAME HAD BEEN ACTUALLY W RITTEN OFF AS IRRECOVERABLE. HE PLACED RELIANCE ON THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF TRF LTD. VS. CIT(323 ITR 397). HE ALSO REFERRED TO THE JUDGMENT OF HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. PHALTON SUGA R WORKS LTD. (162 ITR 622) IN WHICH IT HAS BEEN HELD THAT WHERE A LIABILITY AR ISING OUT OF CONTRACTUAL OBLIGATION IS DISPUTED THE CLAIM HAS TO BE ALLOWED IN THE YEAR IN WHICH THE DISPUTE HAD SETTLED . THE LD. CIT-DR ON THE OTHER HAND SUBM ITTED THAT THE CLAIM HAS TO BE ALLOWED IN THE YEAR IN WHICH THE LIABILITY HAD BEEN ACTUALLY INCURRED. IN THIS CASE, THE CLAIM HAD BEEN SETTLED IN THE EARLIER YEAR AND, THEREFORE, EXPENDITURE COULD BE ALLOWED ONLY IN THAT YEAR AND THIS YEAR. 6.2 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING ALLOWABILITY OF CLAIM OF DEDUCTION ON ACCOUNT OF WRITE-OFF OF RAILWAY AND INSURANCE CLAIMS. THE C LAIMS RELATE TO SHORTAGES FOUND IN THE TRANSPORTATION OF GOODS BY THE RAILWAYS. THE EXACT NATURE OF CLAIM IS NOT CLEAR FROM THE RECORDS. THE LD. AR PLACED RELIANCE ON THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF TRF LTD.(SUPRA), WHICH WILL BE RELEVANT ONLY IN RELATION TO BAD DEBT. THE CLAIM OF BAD DEBT CAN BE ALLOWED ONLY WHEN THE AMOUNT ITA NO.9613 & 9570/M/04 THE ASSOCIATED CEMENT COMPANIES LTD. 8 HAS BEEN TAKEN INTO ACCOUNT IN THE COMPUTATION OF I NCOME IN THE EARLIER YEAR. IT HAS NOT BEEN MADE CLEAR AS TO HOW THE AMOUNT CLAIME D AS DEDUCTION HAS BEEN TAKEN INTO ACCOUNT IN THE COMPUTATION OF INCOME OF EARLIER YEAR. ON ACCOUNT OF SHORTAGES FOUND IN TRANSPORTATION OF GOODS ASSESSEE MUST HAVE MADE CLAIM OF THE LOSSES IN THE RELEVANT YEAR AND SIMULTANEOUSLY MUST HAVE LODGED CLAIM WITH INSURANCE AGENCIES AND RAILWAYS. IT IS NOT CLEAR WH ETHER CLAIM LODGED BY THE ASSESSEE WITH RAILWAYS/INSURANCE HAD BEEN DECLARED AS INCOME IN THE YEAR OF CLAIM BECAUSE ONLY IN THAT CASE ASSESSEE CAN MAKE CLAIM O F BAD DEBT IN THE SUBSEQUENT YEAR WHEN THE FULL CLAIM IS NOT RECEIVED. FACTS BEI NG NOT CLEAR, THE ISSUE IN OUR OPINION REQUIRES FRESH EXAMINATION. WE, THEREFORE S ET ASIDE THE ORDER OF CIT(A) AND RESTORE THE MATTER TO AO FOR FRESH ORDER AFTER NECESSARY EXAMINATION IN THE LIGHT OF OBSERVATIONS MADE ABOVE AND AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. 7. THE SIXTH DISPUTE IS REGARDING THE CLAIM OF DEDU CTION OF RS.73,37,000/- INCURRED BY THE ASSESSEE IN RESPECT OF QUARTZ PROJE CT. THE ASSESSEE HAD INCURRED AN EXPENDITURE OF RS.152.73 LACS FOR QUARTZ PROJECT AT KOLKATA. DURING THE CURRENT YEAR, WEBEL ACQUIRED THE PROJECT ON PAYMENT OF RS.7 9.36 LACS. THE BALANCE AMOUNT OF RS.73.37 LACS RELATING TO MARKET SURVEY E XPENSES, ARCHITECTURAL FEES, POLLUTION CONTROL FEE, ETC. RELATING TO THE SAID P ROJECT HAD BEEN WRITTEN OFF AND CLAIMED AS DEDUCTION FROM THE TOTAL INCOME. THE AO DID NOT ACCEPT THE CLAIM. IT WAS OBSERVED BY HIM THAT THE EXPENDITURE HAD BEEN C LAIMED IN CONNECTION WITH THE NEW PROJECT FOR SETTING UP A TOTALLY DIFFERENT BUSINESS AND THEREFORE NOT ALLOWABLE AS REVENUE EXPENDITURE. CIT(A) AGREED WIT H THE AO THAT CLAIM WAS ITA NO.9613 & 9570/M/04 THE ASSOCIATED CEMENT COMPANIES LTD. 9 CAPITAL IN NATURE AND ACCORDINGLY CONFIRMED THE DIS ALLOWANCE. AGGRIEVED BY THE DECISION OF THE CIT(A) THE ASSESSEE IS IN APPEAL BE FORE THE US. 7.1 BEFORE US, THE LD. AR SUBMITTED THAT THE NEW PR OJECT WAS UNDER THE CONTROL OF THE SAME MANAGEMENT AND COMMON FUNDS WERE UTILIZ ED FOR MANAGEMENT AND ADMINISTRATION. IT WAS ONLY AN EXPANSION OF THE EXI STING BUSINESS AND THEREFORE EXPENDITURE HAD TO BE ALLOWED AS REVENUE IN NATURE. HE PLACED RELIANCE ON THE JUDGMENT OF HON'BLE HIGH COURT OF DELHI IN THE CAS E OF JAY ENGINEERING WORKS LTD. VS. CIT (311 ITR 405). HE ALSO REFERRED TO T HE JUDGMENT OF HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. TATA CHEMIC ALS LTD. (256 ITR 395). THE LD. CIT-DR ON THE OTHER HAND SUBMITTED THAT IT WAS NOT CLEAR AS TO WHEN THE EXPENDITURE HAD BEEN INCURRED AND HOW IT WAS TREATE D IN THE BOOKS OF ACCOUNT. IT WAS POINTED OUT THAT IN THIS YEAR, PROJECT HAD ONLY BEEN SOLD AND THEREFORE NO CLAIM OF EXPENDITURE COULD BE MADE THIS YEAR. 7.2 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING ALLOWABILITY OF EXPENDITURE INCURRED IN CONNECTION WITH NEW PROJECT WHICH HAD BEEN WRITTEN OFF THIS YEAR. IT APPEARS THAT DURING THIS YEAR, THE PROJECT HAD BEEN SOLD TO WEBE L ON PAYMENT OF RS.79.36 LACS. THE DIFFERENCE OF EXPENDITURE INCURRED ON THE PROJECT AND AMOUNT RECEIVED HAS BEEN CLAIMED AS LOSS. IT IS NOT CLEAR AS TO THE YEAR IN WHICH EXPENDITURE HAD BEEN INCURRED ACTUALLY BY THE ASSESSEE AND HOW IT W AS TREATED DURING THAT YEAR. IF THE EXPENDITURE HAD BEEN TREATED AS CAPITAL IN NATU RE THE SAME CAN NOT BE ALLOWED. EVEN IF IT WAS REVENUE IN NATURE, IT COULD NOT BE A LLOWED IN THE SUBSEQUENT YEAR ITA NO.9613 & 9570/M/04 THE ASSOCIATED CEMENT COMPANIES LTD. 10 WHEN THE PROJECT WAS SOLD. THE LD. AR ADMITTED THAT THE QUARTZ PROJECT WAS A NEW BUSINESS AND NOT EXPANSION OF THE EXISTING BUSINESS . EVEN IF THERE WAS COMMON MANAGEMENT AND INTERLACING OF FUNDS AND QUARTZ PROJ ECT IS TREATED AS INTEGRAL PART OF THE SAME BUSINESS, ANY EXPENDITURE INCURRED IN C ONNECTION WITH THE BUSINESS CAN NOT BE ALLOWED REVENUE EXPENDITURE. AN EXPENDIT URE INCURRED WHICH RESULTS INTO ADDITION OR AUGMENTATION OF PROFIT EARNING APP ARATUS OR IS A NEW SOURCE OF INCOME WITHIN THE SAME BUSINESS, CAN NOT BE CONSIDE RED AS REVENUE IN NATURE IN VIEW OF THE PRINCIPLE LAID DOWN BY THE HON'BLE SUPR EME COURT IN CASE OF EMPIRE JUTE CO. (124 ITR 01) IN WHICH IT HAS BEEN HELD THA T ONLY EXPENDITURE INCURRED FOR EFFICIENT AND MORE PROFITABLE WORKING OF THE EXISTI NG PROFIT EARNING APPARATUS CAN BE ALLOWED AS REVENUE EXPENDITURE AND NOT THE EXPEN DITURE INCURRED FOR ADDITION/AUGMENTATION OF THE PROFIT EARNING APPARAT US. THE JUDGMENTS RELIED UPON BY THE LD. AR ARE DISTINGUISHABLE AND NOT APPLICABL E TO THE FACTS OF THE CASE. THE JUDGMENT OF HON'BLE HIGH COURT OF DELHI IN THE CAS E OF JAY ENGINEERING WORKS LTD. (SUPRA) WAS REGARDING EXPENDITURE INCURRED IN CONNECTION WITH EXPLANATION OF EXISTING BUSINESS WHEREAS IN THE PRESENT CASE THE Q UARTZ PROJECT WAS A TOTALLY DIFFERENT BUSINESS FROM THE EXISTING BUSINESS, THER EFORE, CASE IS NOT APPLICABLE. THE JUDGMENT OF HON'BLE HIGH COURT OF BOMBAY IN THE CAS E OF TATA CHEMICALS (SUPRA), RELATED TO ALLOWABILITY OF INTEREST PAID O N BORROWINGS MADE FOR THE PURPOSE OF BUSINESS. THE INTEREST HAS TO BE ALLOWED UNDER SECTION 36(1)(III) IF THE BORROWINGS ARE MADE FOR THE PURPOSE OF BUSINESS. TH E PRESENT CASE IS NOT REGARDING ALLOWABILITY OF INTEREST. THIS IS REGARDI NG ALLOWABILITY OF EXPENDITURE INCURRED FOR SETTING UP A NEW PROJECT TO AUGMENT TH E PROFIT EARNING APPARATUS OF ITA NO.9613 & 9570/M/04 THE ASSOCIATED CEMENT COMPANIES LTD. 11 THE EXISTING BUSINESS AND THEREFORE, JUDGMENT CITED IS NOT APPLICABLE. THE MATTER IN OUR OPINION REQUIRES FRESH EXAMINATION AS FULL F ACTS RELATING TO THE PROJECT ARE NOT ON RECORD. WE, THEREFORE, SET ASIDE THE ORDER O F CIT(A) AND RESTORE THE MATTER TO AO FOR PASSING A FRESH ORDER FOR NECESSARY EXAMI NATION IN THE LIGHT OF OBSERVATIONS MADE ABOVE AND AFTER ALLOWING OPPORTUN ITY OF HEARING TO THE ASSESSEE. 8. GROUND NO.7 (A) AND 7(B) RELATING TO CLAIM OF DE DUCTION; GROUND NO.8 RELATING TO CLAIM OF DEDUCTION UNDER SECTION 80HHC; GROUNDS NO.9(A), 9(B) AND 9(C) RELATING TO CLAIM OF DEDUCTION UNDER SECTION 8 0IA AND 80IB WERE NOT PRESSED BEFORE US BY THE LD. AR. AS THE GROUNDS WERE NOT PR ESSED, THESE ARE DISMISSED AS NOT PRESSED. 9. THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROUNDS BEFORE THE TRIBUNAL BEING GROUND NOS. 10 TO16. IN THE GROUND NO.10, THE ASSES SEE HAS CLAIMED DEDUCTION ON ACCOUNT OF INTEREST ON BORROWINGS AMOUNTING TO RS.1 6,29,09,000/- AND UPFRONT FEE OF RS.1,18,29,881/- IN CONNECTION WITH EXPLANATION OF EXISTING BUSINESS. THE AO DISALLOWED THE CLAIM ON THE GROUND THAT THE ASSESSE E HAD CAPITALIZED THE INTEREST AND UPFRONT PAYMENTS IN THE BOOKS OF ACCOUNT. THE A O TOOK THE VIEW THAT THE ENTRY IN THE BOOKS SHOWS REAL NATURE OF EXPENDITURE AND UNLESS ENTRIES WERE PROVED WRONG BY THE ASSESSEE, THE CLAIM COULD NOT B E ALLOWED. HE FOLLOWED THE DECISION OF THE TRIBUNAL IN THE CASE OF JCT LTD. VS . ACIT (65 ITD 169) . CIT(A) CONFIRMED THE DISALLOWANCE ON THE GROUND THAT THE S AME WAS NOT PRESSED BEFORE HIM. THE ASSESSEE HAS RAISED THE ADDITIONAL GROUND BEFORE THE TRIBUNAL PLACING ITA NO.9613 & 9570/M/04 THE ASSOCIATED CEMENT COMPANIES LTD. 12 RELIANCE ON THE JUDGMENT OF HON'BLE SUPREME COURT I N THE CASE OF NTPC LTD. VS. CIT (229 ITR 383) IN WHICH IT HAS BEEN HELD THAT QU ESTION OF LAW ARISING ON THE BASIS OF FACTS ON RECORD COULD BE RAISED BEFORE THE TRIBUNAL FOR THE FIRST TIME. 9.1 WE HAVE HEARD BOTH PARTIES ON THE ADMISSION OF ADDITIONAL GROUNDS. THE LD. CIT-DR OBJECTED TO THE ADDITIONAL GROUND BEING RAISED FOR THE FIRST TIME BEFORE THE TRIBUNAL . WE HAVE CONSIDERED THE MATTER CAREFU LLY. IT IS A SETTLED LEGAL POSITION THAT QUESTION OF LAW ARISING FROM THE FACT S ON RECORD CAN ALWAYS BE RAISED FOR THE FIRST TIME BEFORE THE TRIBUNAL. IN THIS CAS E FACTS RELATING TO THE CLAIM OF DEDUCTION ARE ALREADY ON RECORD AND QUESTION OF LAW DOES ARISE WHETHER SUCH CLAIM CAN BE ALLOWED. THE BENCH, THEREFORE, ADMITTE D THE ADDITIONAL GROUND FOR ADJUDICATION. 9.2 AS FOR THE MERIT, THE LD. AR SUBMITTED THAT THE SAME ISSUE OF DISALLOWANCE OF INTEREST HAS ALREADY BEEN DECIDED BY THE TRIBUNA L IN ASSESSMENT YEAR 1999-00 IN ITA NO.7594/M/2004. IN THAT YEAR ALSO, THE AO HA D DISALLOWED THE CLAIM CITING THE SAME REASONS WHICH HAD BEEN CONFIRMED BY CIT(A) . THE TRIBUNAL HOWEVER ALLOWED THE CLAIM. THE LD. CIT-DR PLACED RELIANCE O N THE ORDER OF AO. 9.3 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING DISALLOWANCE OF INTEREST AND OTHER CHARGES WHILE COMPUTING THE TOTAL INCOME. THESE EXPENSES H AVE BEEN CLAIMED IN CONNECTION WITH THE EXPANSION OF EXISTING LINE OF B USINESS AND AO AND CIT(A) HAVE TREATED THE SAME AS CAPITAL RECEIPT AS THESE P AYMENTS HAD BEEN CAPITALIZED IN THE BOOKS OF ACCOUNT. HOWEVER, WE FIND THAT THE SAM E ISSUE HAS ALREADY BEEN ITA NO.9613 & 9570/M/04 THE ASSOCIATED CEMENT COMPANIES LTD. 13 CONSIDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE I N ASSESSMENT YEAR 1999-00 IN ITA NO.7594/MUM/2004 IN WHICH THE TRIBUNAL FOLLOWIN G THE DECISION OF THE TRIBUNAL IN EARLIER YEARS ALLOWED THE CLAIM OF THE ASSESSEE. THE TRIBUNAL HAS FOLLOWED THE JUDGMENT OF THE HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. TATA CHEMICALS LTD. (256 ITR 395) IN WHICH IT H AS BEEN HELD THAT IN CONSIDERING THE CLAIM OF INTEREST ON BORROWINGS THE DECISIVE TEST WAS UNITY OF CONTROL INDICATED BY INTERLACING, INTEREST-DEPENDEN CE AND INTER-CONNECTION BETWEEN BUSINESSES AND DOVE-TAILING OF ONE INTO THE OTHER. THEREFORE, THE EXPANSION HAD BEEN CONSIDERED AS PART OF THE SAME B USINESS AND CLAIM OF DEDUCTION HAS BEEN ALLOWED. THE FACTS IN THIS YEAR ARE IDENTICAL AND, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSMENT YEAR 1999-00 (SUPRA), THE CLAIM OF DEDUCTION ON ACCOUNT OF INTER EST IS ALLOWED. THE UPFRONT CHARGES AND COMMITMENT CHARGES HAVE BEEN CLAIMED AS DEDUCTION FOLLOWING THE JUDGMENT OF HON'BLE HIGH COURT OF BOMBAY IN THE CAS E OF CIT VS. ASSOCIATED CEMENT COMPANY LTD. (249 ITR 3). THESE CHARGES HAVE BEEN PAID IN CONNECTION WITH BORROWINGS FOR THE EXPANSION OF THE BUSINESS W HICH WAS PART OF THE SAME BUSINESS. THE CLAIM IS, THEREFORE, ALLOWED. 10. THE NEXT ADDITIONAL GROUND RAISED AS GROUND NO. 11 IS REGARDING TREATMENT OF SALES TAX INCENTIVE AS CAPITAL RECEIPT. THE SALE S TAX INCENTIVE HAD BEEN AVAILED BY THE ASSESSEE UNDER VARIOUS SCHEMES FORMULATED BY STATE GOVT. FOR SETTING UP OF NEW INDUSTRIAL UNITS. THE SAME HAD BEEN TREATED BY THE ASSESSEE AS REVENUE RECEIPT. HOWEVER, SINCE IN THE EARLIER YEAR THE CLA IM OF THE ASSESSEE RAISED BY WAY OF IDENTICAL ADDITIONAL GROUND HAS BEEN ALLOWED BY THE TRIBUNAL, THE ASSESSEE HAS ITA NO.9613 & 9570/M/04 THE ASSOCIATED CEMENT COMPANIES LTD. 14 RAISED ADDITIONAL GROUND FOR THE FIRST TIME BEFORE THE TRIBUNAL. THE LD. DR OPPOSED ADMISSION OF ADDITIONAL GROUND ON THE GROUN D THAT THE SAME WAS BEING RAISED FOR THE FIRST TIME BEFORE THE TRIBUNAL. THE ASSESSEE HAS PRESSED FOR ADMISSION OF ADDITIONAL GROUND FOLLOWING THE DECISI ON IN THE EARLIER YEAR AND BASED ON THE JUDGMENT OF HON'BLE SUPREME COURT IN T HE CASE OF NTPC (SUPRA) IN WHICH IT HAS BEEN HELD THAT QUESTION OF LAW ARISING ON THE BASIS OF FACTS ON RECORD CAN BE ADMITTED BY THE TRIBUNAL FOR THE FIRST TIME. IN THIS CASE FACTS RELATING TO RECEIPT OF SALES TAX INCENTIVE ARE ON RECORD AND, T HEREFORE, CONSIDERING THAT SIMILAR CLAIM HAS BEEN ALLOWED BY THE TRIBUNAL IN THE EARLI ER YEAR, THE QUESTION OF LAW DOES ARISE WHETHER CLAIM CAN BE ALLOWED THIS YEAR. IN ASSESSMENT YEAR 1999-00 ALSO, THE TRIBUNAL ALLOWED THE CLAIM BY ADMITTING T HE ADDITIONAL GROUND RAISED FOR THE FIRST TIME BEFORE THE TRIBUNAL. THE BENCH, THE REFORE, ADMITTED THE ADDITIONAL GROUND RAISED BY THE ASSESSEE. HOWEVER, THE SALES T AX INCENTIVE SCHEME HAS BEEN FILED BEFORE THE TRIBUNAL FOR THE FIRST TIME AND TH EREFORE, IT IS REQUIRED TO BE EXAMINED WHETHER IT IS THE SAME SCHEME BASED ON WHI CH CLAIM HAS BEEN ALLOWED IN ASSESSMENT YEAR 1999-00. WE, THEREFORE RESTORE T HIS GROUND TO THE FILE OF AO FOR FRESH ADJUDICATION AFTER NECESSARY EXAMINATION AND AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. 11. THE NEXT ADDITIONAL GROUND WHICH IS RAISED ASN GROUND NO.12 IS REGARDING ALLOWABILITY OF PROVISION OF ADDITIONAL GRATUITY AN D GRATUITY OF SOLD UNITS ON ACCRUAL BASIS. THE LD. CIT-DR OPPOSED THE ADMISSION OF THE ADDITIONAL GROUND. HOWEVER, WE FIND THAT AN IDENTICAL ADDITIONAL GROUN D HAS ALREADY BEEN ADMITTED BY THE TRIBUNAL IN THE EARLIER ASSESSMENT YEARS AND CLAIM OF THE ASSESSEE HAS BEEN ITA NO.9613 & 9570/M/04 THE ASSOCIATED CEMENT COMPANIES LTD. 15 ALLOWED. THE BENCH AFTER HEARING BOTH THE PARTIES A DMITTED THE ADDITIONAL GROUND AS A QUESTION OF LAW DOES ARISE ON THE BASIS OF FAC TS AVAILABLE ON RECORD. AS FOR THE MERIT, THE ASSESSEE IN THE RETURN OF INCOME FOLLOWI NG THE STAND ADOPTED BY THE REVENUE AUTHORITIES, HAD OFFERED THE PROVISION FOR ADDITIONAL GRATUITY FOR EMPLOYEES RETIRED DURING THE YEAR AND GRATUITY ON S OLD UNITS AS INCOME. BUT SINCE THE CLAIM HAD BEEN DISALLOWED IN THE EARLIER YEAR, THE ASSESSEE RAISED THE ADDITIONAL GROUND BEFORE THE TRIBUNAL. THE TRIBUNAL IN THE ASSESSMENT YEAR 1999- 00 IN ITA NO.7594/M/2004 HAS ALLOWED THE CLAIM OF T HE ASSESSEE BY ADMITTING ADDITIONAL GROUND AS IDENTICAL CLAIM HAD BEEN ALLOW ED BY THE TRIBUNAL IN THE EARLIER YEARS. THEREFORE, FOLLOWING THE DECISION IN THE EARLIER YEARS, THE CLAIM OF DEDUCTION OF ADDITIONAL GRATUITY FOR EMPLOYEES RETI RED DURING THE YEAR AND GRATUITY ON SOLD UNITS ON ACCRUAL BASIS HAS TO BE ALLOWED. W E, ACCORDINGLY ALLOW THE CLAIM OF THE ASSESSEE. 12. THE ADDITIONAL GROUND RAISED AS THE GROUND NO.1 3 IS REGARDING TREATMENT OF SALES TAX INCENTIVE, ELECTRICITY DUTY, ROAD TRANSPO RT SUBSIDY AND PROFIT ON SALE OF FIXED ASSETS AND INVESTMENTS WHILE COMPUTING BOOK P ROFIT UNDER SECTION 115JA. THE ASSESSEE IN THE COMPUTATION OF BOOK PROFIT HAD NOT EXCLUDED THESE RECEIPTS WHICH ACCORDING TO IT ARE PURE CAPITAL RECEIPTS WHI CH SHOULD NOT BE TAKEN INTO ACCOUNT IN THE COMPUTATION OF BOOK PROFIT. THE ASSE SSEE HAS THEREFORE, RAISED THE ADDITIONAL GROUND. THIS BEING PURELY A QUESTION OF LAW ARISING ON THE BASIS OF FACTS ON RECORDS WAS ADMITTED BY THE TRIBUNAL AFTER HEARI NG BOTH THE PARTIES. ITA NO.9613 & 9570/M/04 THE ASSOCIATED CEMENT COMPANIES LTD. 16 12.1 AS FOR THE MERIT OF THE CASE, THE LD. AR FOR T HE ASSESSEE SUBMITTED THAT PURE CAPITAL RECEIPTS ARE NOT INCOME UNDER SECTION 2(24) AND HENCE NOT CHARGEABLE UNDER INCOME TAX ACT AS HELD BY HON'BLE SUPREME COU RT IN THE CASE OF PADMARAJE R KARDAMBANDE VS. CIT (195 ITR 877). IT WAS ALSO SU BMITTED THAT A RECEIPT WHICH IS NEITHER PROFIT NOT INCOME CANNOT BE PART OF PROF IT AS PER P/L ACCOUNT PREPARED IN TERMS OF PART-II AND PART-III OF SCHEDULE-VI OF COMPANIES ACT. HE ALSO REFERRED TO THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CAS E OF INDO RAMA SYNTHETICS (I) PVT. LTD. VS. CIT (330 ITR 363) IN WHICH IT HA S BEEN HELD THAT OBJECT OF MAT PROVISIONS IS TO BRING OUT TRUE WORKING RESULT OF T HE COMPANY. THEREFORE, IT WAS ARGUED THAT THE THRUST UNDER THE MAT PROVISIONS IS TO FIND OUT REAL WORKING RESULT AND, THEREFORE, CAPITAL RECEIPTS WHICH HAVE NO INCO ME ELEMENT INVOLVED HAVE TO BE EXCLUDED WHILE COMPUTING BOOK PROFIT UNDER SECTION 115JA. THE LD. CIT-DR ON THE OTHER HAND SUBMITTED THAT BOOK PROFIT UNDER SEC TION 115JA HAS TO BE COMPUTED ON THE BASIS OF P&L ACCOUNT PREPARED UNDER THE COMP ANIES ACT AND ONLY ADJUSTMENT AS PROVIDED IN EXPLANATION TO SECTION 11 5JA CAN BE MADE. 12.2 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING COMPUTATION OF BOOK PROFIT UNDER SECTION 115JA. IT IS A SETTLED LEGAL POSITION AS HELD BY HO N'BLE SUPREME COURT IN CASE OF APOLLO TYRES VS. CIT (255 ITR 273) THAT AO WHILE CO MPUTING BOOK PROFIT HAS ONLY THE POWER TO VERIFY AS TO WHETHER THE P&L ACCO UNT PREPARED UNDER THE PROVISIONS OF PART-II AND PART-III OF SCHEDULE-V OF THE COMPANIES ACT HAVE BEEN CERTIFIED BY THE AUTHORITIES UNDER THE SAID ACT AND THEREAFTER THE AO CAN ONLY MAKE ADJUSTMENTS AS PROVIDED IN EXPLANATION-1 TO SE CTION 115J (2). THE AO HAS ITA NO.9613 & 9570/M/04 THE ASSOCIATED CEMENT COMPANIES LTD. 17 NO POWER TO TINKER WITH THE P/L ACCOUNT PREPARED UN DER THE COMPANIES ACT AND CERTIFIED BY AUTHORITIES UNDER THE SAID ACT. NO CAS E HAS BEEN MADE BEFORE US BY THE LD. AR THAT THE AO HAS MADE ANY ADJUSTMENT IN T HE P/L ACCOUNT PREPARED UNDER THE COMPANIES ACT WHICH HE IS NOT AUTHORIZED TO DO UNDER SECTION 115JA OF THE ACT. IN CASE THE RECEIPTS UNDER REFERENCE HAVE BEEN SHOWN AS PART OF THE P/L ACCOUNT PREPARED UNDER THE COMPANIES ACT, THE AO HA S NO POWER TO EXCLUDE THE SAME WHILE COMPUTING BOOK PROFIT. THE JUDGMENT CITE D BY THE LD. AR IS DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN THE CASE OF PADMARAJE R KARDAMBANDE (SUPRA), THE ISSUE WAS REGA RDING NATURE OF RECEIPT WHETHER CAPITAL OR REVENUE UNDER NORMAL PROVISIONS OF THE ACT WHEREAS WE ARE CONCERNED WITH, COMPUTATION OF BOOK PROFIT UNDER SE CTION 115JA WHICH IS A SEPARATE CODE AND THEREFORE THE CASE IS NOT APPLICA BLE. IN CASE OF INDO RAMA SYNTHETICS (SUPRA), THE HON'BLE SUPREME COURT WAS C ONCERNED WITH THE ADJUSTMENT MADE AS PROVIDED IN EXPLANATION TO SECTION 115JB(2) . IN TERMS OF CLAUSE (I) OF THE EXPLANATION AMOUNT WITHDRAWN FROM RESERVE CREATED E ARLIER WAS REQUIRED TO BE REDUCED FROM BOOK PROFIT IF SUCH AMOUNT HAD BEEN CR EDITED TO THE P/L ACCOUNT. THE HON'BLE SUPREME COURT HELD THAT THE AMOUNT WITH DRAWN FROM REVALUATION RESERVE COULD BE REDUCED FROM BOOK PROFIT ONLY IF T HE AMOUNT WITHDRAWN HAD BEEN ADDED BACK IN THE YEAR OF CREATION OF RE-VALUATION RESERVE. THUS THE HON'BLE SUPREME COURT WAS CONCERNED WITH THE INTERPRETATION OF THE PROVISIONS RELATING TO ADJUSTMENT TO BE MADE AS PER THE EXPLANATION. IT WA S NOWHERE HELD IN THE SAID JUDGMENT THAT THE PROFIT/LOSS PREPARED IN ACCORDANC E WITH THE PROVISIONS OF PART-II AND PART-II OF SCHEDULE-VI OF THE COMPANIES ACT CAN BE TINKERED WITH BY THE AO. ITA NO.9613 & 9570/M/04 THE ASSOCIATED CEMENT COMPANIES LTD. 18 THIS ASPECT IS ALREADY SETTLED BY THE JUDGMENT OF H ON'BLE SUPREME COURT IN THE CASE OF APOLLO TYRES LTD. (SUPRA) AND THEREFORE, TH E PLEA RAISED BY THE ASSESSEE FOR EXCLUSION OF CERTAIN RECEIPTS CREDITED IN THE P/L A CCOUNT PREPARED UNDER THE COMPANIES ACT CAN NOT BE ACCEPTED. THE GROUND RAISE D IS, THEREFORE, DISMISSED. 13. THE ADDITIONAL GROUND RAISED AS GROUND NO.14 IS REGARDING EXCLUSION OF DIVIDEND DISTRIBUTION TAX AND TRANSFER TO DEBENTURE REDEMPTION RESERVE WHILE COMPUTING BOOK PROFIT UNDER SECTION 115JA. THE ASSE SSEE HAD NOT EXCLUDED THESE ITEMS WHILE COMPUTING BOOK PROFIT AND ACCORDINGLY T HE ADDITIONAL GROUND HAS BEEN RAISED FOR THE FIRST TIME AT THE LEVEL OF THE TRIBUNAL. THE ADDITIONAL GROUND BEING A QUESTION OF LAW WHICH DOES ARISE ON THE BAS IS OF FACTS ON RECORD WAS ADMITTED BY THE TRIBUNAL AFTER HEARING BOTH THE PAR TIES AS IDENTICAL GROUND HAD BEEN ADMITTED BY THE TRIBUNAL IN THE EARLIER YEAR. THE ISSUE HAS ALSO BEEN DECIDED BY THE TRIBUNAL ON MERIT IN THE EARLIER YEAR. IN AS SESSMENT YEAR 1999-00 IN ITA NO.7594/M/09, THE TRIBUNAL DECIDED THE ISSUE OF AD JUSTMENT ON ACCOUNT OF DIVIDEND DISTRIBUTION TAX. THE TRIBUNAL NOTED THAT AMENDMENT HAD BEEN MADE ONLY IN SECTION 115JB AND NO SIMILAR AMENDMENT WAS MADE IN SEC. 115JA AND THEREFORE, THE DIVIDEND DISTRIBUTION TAX WOULD NOT FALL UNDER THE INCOME TAX PAID OR PAYABLE AS MENTIONED IN CLAUSE (A) OF EXPLANATIO N TO SECTION 115JA(2). THE TRIBUNAL, THEREFORE, ALLOWED THE CLAIM OF THE ASSES SEE. THE FACTS BEING IDENTICAL, THE CLAIM IS ALLOWED THIS YEAR ALSO. AS REGARDS THE DEBENTURE REDEMPTION RESERVE, THIS ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN ASSESSMENT YEAR 1998-99 IN ITA NO.6289.M/03 AND REVENUE HAD NOT CH ALLENGED THE ORDER OF THE TRIBUNAL BEFORE THE HONBLE COURT. THE CLAIM IS THE REFORE, ALLOWED THIS YEAR ALSO. ITA NO.9613 & 9570/M/04 THE ASSOCIATED CEMENT COMPANIES LTD. 19 14. THE ADDITIONAL GROUND RAISED IN THE GROUND NO.1 5 IS REGARDING CLAIM OF DEDUCTION ON REVERSAL OF PROVISION TOWARDS COMMITTE D EXPENDITURE. IN ASSESSMENT YEAR 1999-00, THE ASSESSEE HAD PROVIDED RS.3802431/ - FOR EXPENDITURE COMMITTED PENDING DISBURSEMENT AS REPORTED IN TAX AUDIT REPOR T OF THAT YEAR. THE SAID PROVISION HAD BEEN DISALLOWED BY THE AO IN THE ASSE SSMENT YEAR 1999-2000 UNDER SECTION 143(3). OUT OF THE SAID PROVISION, AN AMOUN T OF RS.34,85,730/- HAD BEEN WRITTEN BACK BY THE ASSESSEE IN ASSESSMENT YEAR 200 0-01. AS THE PROVISION HAD BEEN DISALLOWED IN ASSESSMENT YEAR 1999-00, THE WRI TE BACK IN ASSESSMENT YEAR 2000-01 IN RELATION TO THE SAID PROVISION IS NOT CH ARGEABLE TO TAX. THE ASSESSEE HOWEVER IN THE RETURN OF INCOME HAD NOT REDUCED THE AMOUNT WRITTEN BACK FROM TOTAL INCOME AND ADDITIONAL GROUND HAS BEEN RAISED AT THE LEVEL OF THE TRIBUNAL. THE ADDITIONAL GROUND BEING QUESTION OF LAW WHICH D OES ARISE ON THE BASIS OF FACTS ON RECORD WAS ADMITTED BY THE TRIBUNAL AFTER HEARIN G BOTH THE PARTIES. THE ASSESSEE HAD WRITTEN BACK PART OF THE PROVISION AS INCOME IN ASSESSMENT YEAR 2000-01 AS THE PROVISION HAD BEEN CLAIMED AS DEDUCT ION IN P/L ACCOUNT. SINCE THE PROVISION WAS DISALLOWED BY AO IN ASSESSMENT YEAR 1 999-2000, NO AMOUNT IN RELATION TO THE SAID PROVISION CAN BE ASSESSED AS I NCOME IN ASSESSMENT YEAR 2000- 01 AS PROVISIONS OF SECTION 41(1) WILL NOT APPLY. W E, THEREFORE ALLOW THE CLAIM OF THE ASSESSEE. 15. THE ADDITIONAL GROUND RAISED IN THE GROUND NO.1 6 IS REGARDING RELIEF CLAIMED UNDER SECTION 91 IN RESPECT OF TAX DEDUCTED ON FEES RECEIVED FROM YANBU CEMENT CORPORATION, SAUDI ARABIA. THE ASSESSEE HAD RECEIVED A SUM OF RS.12.93 ITA NO.9613 & 9570/M/04 THE ASSOCIATED CEMENT COMPANIES LTD. 20 CRORES BEING FEES FROM PROJECT FROM YANBU CEMENT CO RPN., SAUDI ARABIA, NET OF TAX DEDUCTED AT SOURCE. THE SAID FEES HAD BEEN DECL ARED BY THE ASSESSEE IN THE P/L ACCOUNT AND WAS INCLUDED IN THE TOTAL INCOME. THE A SSESSEE HAD HOWEVER OMITTED TO CLAIM RELIEF UNDER SECTION 91 IN RESPECT OF TAX DEDUCTED AT SAUDI ARABIA. THEREFORE ADDITIONAL GROUND HAS BEEN RAISED BEFORE THE TRIBUNAL WHICH BEING A LEGAL GROUND WAS ADMITTED BY THE TRIBUNAL AFTER HEA RING BOTH THE PARTIES. 15.1 AS FOR THE MERIT, THE LD. AR FOR THE ASSESSEE SUBMITTED THAT IDENTICAL ADDITIONAL GROUND HAD BEEN ADMITTED BY THE TRIBUNAL IN ASSESSMENT YEAR 1999-00 IN ITA NO.7594/M/04 AND FOLLOWING THE DECISION IN E ARLIER YEAR THE TRIBUNAL DIRECTED THE AO TO ALLOW RELIEF UNDER SECTION 91 IN RESPECT OF TAX DEDUCTED IN THE SAID YEAR. FACTS THIS YEAR ARE IDENTICAL. WE, THERE FORE, DIRECT THE AO TO ALLOW THE CLAIM AFTER NECESSARY VERIFICATION. ITA NO.9613/MUM/2004 (APPEAL BY THE REVENUE ) (A.Y. : IN THIS APPEAL, THE REVENUE HAS RAISED DISPUTES ON FIVE DIFFERENT GROUNDS WHICH HAVE BEEN DEALT WITH IN THE SUCCEEDING PARAS. 16.1 THE FIRST DISPUTE IS REGARDING DISALLOWANCE OF CONTRIBUTION TO HIMACHAL PRADESH STATE ELECTRICITY BOARD (HPSEB) FOR SETTING UP OF KANGOO POWER SUB- STATION. FACTS IN BRIEF ARE THAT IN ORDER TO ENSURE ADEQUATE AND REGULAR POWER SUPPLY TO GAGAL CEMENT PLANT, THE ASSESSEE AND GUJA RAT AMBUJA CEMENT IN A TRIPARTITE AGREEMENT WITH HPSEB HAD CONTRIBUTED TO THE COST OF KANGOO POWER SUB-STATION AMOUNTING TO RS.13.25 CRORES IN WHICH S HARE OF THE ASSESSEE WAS ITA NO.9613 & 9570/M/04 THE ASSOCIATED CEMENT COMPANIES LTD. 21 RS.6,62,50,000/-. THE ASSESSEE HAD CLAIMED THE AMOU NT AS REVENUE EXPENDITURE. THE AO DISALLOWED THE SAME AFTER OBSERVING THAT THE EXPENDITURE HAD BEEN DEFERRED IN THE BOOKS OF ACCOUNT AND TAX AUDITOR HA D STATED THAT THE EXPENDITURE HAD RESULTED IN CREATION OF INFRASTRUCTURE. CIT(A) HOWEVER NOTED THAT THE SUB- STATION BELONGED TO HPSEB AND POWER WAS USED IN THE FACTORY OF THE ASSESSEE AT GAGAL FOR CEMENT MANUFACTURE AND THEREFORE, CIT(A) TREATED THE EXPENDITURE AS REVENUE IN NATURE AND ALLOWED THE CLAIM OF THE ASSE SSEE AGGRIEVED BY WHICH, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL . 16.1 AFTER HEARING BOTH PARTIES WE FIND THAT THE S AME ISSUE HAS ALREADY BEEN DECIDED BY THE TRIBUNAL IN ASSESSMENT YEAR 199 9-2000 IN ITA NO.7644/M/2004 IN WHICH THE TRIBUNAL FOLLOWING THE DECISION OF EARLIER YEARS ALLOWED THE CLAIM OF THE ASSESSEE. THE FACTS THIS Y EAR ARE IDENTICAL AND, THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN EARLIER YEARS (SUPRA), WE CONFIRM THE ORDER OF CIT(A) IN ALLOWING THE CLAIM O F THE ASSESSEE. 17. THE SECOND DISPUTE IS REGARDING ALLOWABILITY OF VRS EXPENDITURE OF RS.29,09,85,056/-. VRS EXPENDITURE HAD BEEN INCURRE D TO RATIONALIZE WORKFORCE FOR BETTER PERFORMANCE AND AMOUNT HAD BEEN PAID IN ACCORDANCE WITH SCHEME APPROVED U/S. 10(10C). THE ASSESSEE HAD THEREFORE C LAIMED THE EXPENDITURE AS DEDUCTION. THE AO HOWEVER DID NOT ALLOW THE CLAIM A ND TREATED THE SAME AS CAPITAL IN NATURE ON THE GROUND THAT THE PAYMENT HA D RESULTED INTO ENDURING BENEFIT TO THE ASSESSEE. CIT(A) HOWEVER ALLOWED THE CLAIM F OLLOWING THE DECISION OF THE ITA NO.9613 & 9570/M/04 THE ASSOCIATED CEMENT COMPANIES LTD. 22 TRIBUNAL IN ASSESSMENT YEAR 1999-2000 AGGRIEVED BY WHICH THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL . 17.1 WE HAVE HEARD BOTH THE PARTIES, PERUSED THE RE CORDS AND CONSIDERED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THIS IS A RECURRING ISSUE WHICH HAS ALREADY BEEN DECIDED BY THE TRIBUNAL IN EARLIER YEA RS. IN ASSESSMENT YEAR 1999-00 ON IDENTICAL FACTS, THE TRIBUNAL FOLLOWING THE DECI SION OF THE EARLIER YEARS ALLOWED THE CLAIM OF THE ASSESSEE AFTER OBSERVING THAT THE CLAIM WAS DIRECTLY COVERED BY THE JUDGMENT OF HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. BHOR INDISTRIES (264 ITR 180). FACTS THIS YEAR ARE IDENT ICAL AND THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSMEN T YEAR 1999-00 (SUPRA), WE CONFIRM THE ORDER OF CIT(A) IN ALLOWING THE CLAIM. 18. THE THIRD DISPUTE IS REGARDING ALLOWABILITY OF CLAIM OF EXPENDITURE IN RESPECT OF TEMPORARY STRUCTURES AMOUNTING TO RS.52, 07,469/-. THE ASSESSEE HAD INCURRED EXPENDITURE ON SETTING UP OF TEMPORARY STR UCTURES AT CLIENT SITES FOR MANUFACTURE OF READY MIX CONCRETE (RMC). THE ASSESS EE HAD CLAIMED EXPENDITURE AS REVENUE IN NATURE. THE AO HOWEVER HELD THAT TEMP ORARY STRUCTURES WERE IN EXISTENCE FOR MORE THAN 12 MONTHS AND WERE OF THE N ATURE OF PLANT AND MACHINERY. HE, THEREFORE, TREATED THE SAME AS CAPITAL IN NATUR E AND ALLOWED DEPRECIATION @ 25%. CIT(A) HOWEVER HELD THAT THE EXPENDITURE HAD B EEN INCURRED FOR SETTING UP OF TEMPORARY ARRANGEMENT FOR PROVIDING RMC TO CONTR ACTORS AT THE CLIENTS SITES. IT WAS ALSO OBSERVED BY HIM THAT THE EXPENDITURE HAD B EEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. CIT(A) TH EREFORE ALLOWED THE CLAIM AS ITA NO.9613 & 9570/M/04 THE ASSOCIATED CEMENT COMPANIES LTD. 23 REVENUE EXPENDITURE AGGRIEVED BY WHICH THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 18.1 BEFORE US, THE LD. AR FOR THE ASSESSEE SUBMITT ED THAT THE TEMPORARY STRUCTURES HAD BEEN CREATED AT THE CLIENT SITES FOR MANUFACTURE OF RMC IN CONNECTION WITH THE PROJECTS WHICH WERE FOR PERIODS VARYING FROM 36 TO 42 MONTHS. IT WAS ALSO SUBMITTED THAT THE ENTIRE CLAIM HAD NOT BEEN MADE IN ONE YEAR. THE CLAIM HAD BEEN MADE ON THE BASIS OF YEARLY PROD UCTION @ TOTAL COST OF TEMPORARY STRUCTURE DIVIDED BY TOTAL CONTRACTED PRO DUCTION FOR THE ENTIRE PERIOD. THUS COST OF TEMPORARY STRUCTURE HAD BEEN CLAIMED O VER THE ENTIRE PROJECT PERIOD. THEREFORE, TEMPORARY STRUCTURES WHICH HAD BEEN CREA TED ON LAND NOT BELONGING TO THE ASSESSEE SHOULD BE ALLOWED. THE LD. DR PLACED R ELIANCE ON THE ORDER OF AO. 18.2 WE HAVE HEARD BOTH PARTIES, PERUSED THE RECORD S AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDING ALLOWABILITY OF CLAIM OF EXPENDITURE ON TEMPORARY STRUCTURE ERECTED BY THE ASSESSEE AT CLIE NT SITES FOR MANUFACTURE OF RMC. THESE STRUCTURES WERE NOT ON THE LAND BELONGIN G TO THE ASSESSEE. THE CLAIM HAS NOT BEEN MADE IN ONE YEAR BUT HAS BEEN SPREAD O VER THE ENTIRE PROJECT PERIOD AND ALLOWED ON THE BASIS OF YEARLY PRODUCTION IN TH E RATIO OF TOTAL COST OF STRUCTURE DIVIDED BY TOTAL CONTRACTED PRODUCTION FOR THE ENTI RE PERIOD. IN OUR VIEW THE CLAIM MADE BY THE ASSESSEE IS REASONABLE AND HAS TO BE AL LOWED. THE ASSESSEE HAD NO ADVANTAGE IN THE CAPITAL FIELD AS THE STRUCTURES HA D BEEN ERECTED ON LAND BELONGING TO OTHER PARTIES. THE CLAIM IS THEREFORE ALLOWABLE. WE, THEREFORE, SEE NO INFIRMITY ITA NO.9613 & 9570/M/04 THE ASSOCIATED CEMENT COMPANIES LTD. 24 IN THE ORDER OF CIT(A) IN ALLOWING THE CLAIM OF THE ASSESSEE MADE ON PRORATA BASIS. THE ORDER OF CIT(A) IS ACCORDINGLY UPHELD. 19. THE FOURTH DISPUTE IS REGARDING ALLOWABILITY OF EXPENDITURE INCURRED ON CONSTRUCTION OF STADIUM AMOUNTING TO RS.20.00 LACS. THE ASSESSEE MADE CONTRIBUTION ON REQUEST MADE BY GOVERNMENT OF HIMAC HAL PRADESH FOR CONSTRUCTION OF STADIUM. THE AO DISALLOWED THE CLAI M AS HAVING NO CONNECTION WITH ASSESSEES BUSINESS BASED ON THE DECISION TAKE N IN EARLIER ASSESSMENT YEAR CIT(A) HOWEVER FOLLOWING THE DECISION IN ASSESSMENT YEAR 1997-98, HELD THAT EXPENDITURE HAD BEEN INCURRED ON COMMERCIAL EXPEDIE NCY AND, THEREFORE ALLOWED THE CLAIM AGGRIEVED BY WHICH THE REVENUE IS IN APPE AL BEFORE THE TRIBUNAL. 19.1 WE HAVE HEARD BOTH PARTIES, PERUSED THE RECORD S AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. WE FIND THAT SIMILAR CLAIM H AS ALREADY BEEN CONSIDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT Y EAR 1997-98 (ITA NO.4730/M/01) IN WHICH CONTRIBUTION MADE BY THE ASS ESSEE TOWARDS COST OF CONSTRUCTION OF HIMACHAL PRADESH INDOOR STADIUM AT BILASPUR HAS BEEN ALLOWED BY THE TRIBUNAL. THE TRIBUNAL REFERRED TO THE DECIS ION OF THE TRIBUNAL IN HPCL VS. DCIT (96 ITD 186) IN WHICH THE TRIBUNAL HAD ALLOWED THE EXPENDITURE ON IMPLEMENTATION OF 20-POINT PROGRAMME OF THE GOVT. T HE TRIBUNAL OBSERVED THAT THE EXPENDITURE WAS NOTHING BUT FOR DISCHARGE OF RE SPONSIBILITY OF A GOOD CORPORATE CITIZEN WHICH BROUGHT GOOD-WILL AND THER EBY CREATED AN ATMOSPHERE IN WHICH BUSINESS COULD SUCCEED IN A GREATER MEASURE. THE TRIBUNAL THEREFORE, ALLOWED THE CLAIM. FACTS THIS YEAR ARE IDENTICAL AN D, THEREFORE RESPECTFULLY ITA NO.9613 & 9570/M/04 THE ASSOCIATED CEMENT COMPANIES LTD. 25 FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSMEN T YEAR 1997-98 (SUPRA), WE CONFIRM THE ORDER OF CIT(A) IN ALLOWING THE CLAIM. 20. THE FIFTH GROUND IS REGARDING ALLOWABILITY OF C LAIM OF INTEREST PAID ON BORROWED FUNDS IN CONNECTION WITH INVESTMENT, INCOM E FORM WHICH WAS EXEMPT. THE AO NOTED THAT THE ASSESSEE HAD DECLARED DIVIDEN D OF RS.2,21,01,474/- WHICH WAS EXEMPT FROM TAX. THE ASSESSEE WAS ALSO PAYING H UGE INTEREST ON BORROWINGS. THE AO THEREFORE, DISALLOWED INTEREST PROPORTIONATE TO THE INTEREST PAID FOR EARNING OF DIVIDEND INCOME. CIT(A) HOWEVER ALLOWED THE CLAIM FOLLOWING THE DECISION IN ASSESSMENT YEAR 1999-00 AND AFTER CONSI DERING THE FACTS THAT THE DIVIDEND HAD BEEN EARNED OUT OF INVESTMENT IN EARLI ER YEARS. AGGRIEVED BY THE DECISION OF CIT(A), REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 20.1 BEFORE US THE LD. AR FOR THE ASSESSEE SUBMITTE D THAT SIMILAR CLAIM HAS BEEN ALLOWED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1999-00. IT WAS ARGUED THAT THE ASSESSEE HAD OWN SUFFICIENT FUN DS AND INTERNAL ACCRUALS WHICH WERE MUCH MORE THAN THE INVESTMENTS MADE AND FOLLOW ING THIS THE TRIBUNAL IN THE EARLIER YEAR HAD ALSO ALLOWED THE CLAIM OF THE ASSE SSEE. IT WAS, THEREFORE, URGED THAT THE CLAIM SHOULD BE ALLOWED THIS YEAR ALSO. TH E LD. DR PLACED RELIANCE ON THE ORDER OF AO. 20.2 WE HAVE HEARD BOTH PARTIES, PERUSED THE RECORD S AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING DIS ALLOWANCE OF INTEREST PROPORTIONATE TO INVESTMENTS GENERATING TAX FREE IN COME. WE FIND THAT THE SAME ISSUE HAS ALREADY BEEN CONSIDERED BY THE TRIBUNAL I N ASSESSEES OWN CASE IN ITA NO.9613 & 9570/M/04 THE ASSOCIATED CEMENT COMPANIES LTD. 26 ASSESSMENT YEAR 1999-00 IN WHICH THE TRIBUNAL NOTED THAT THE CIT(A) HAD GIVEN A FINDING THAT THE ASSESSEE HAD OWN FUNDS TO MAKE INV ESTMENTS AND ACCORDINGLY HELD THAT NO DISALLOWANCE OF INTEREST WAS REQUIRED . FAC TS THIS YEAR ARE IDENTICAL. NO DISTINGUISHING FEATURE HAS BEEN BROUGHT TO OUR NOTI CE BY THE LD. DR. CIT(A) HAS ALLOWED THE CLAIM FOLLOWING THE DECISION IN ASSESSM ENT YEAR 1999-00 WHICH HAS BEEN UPHELD BY THE TRIBUNAL. THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSMENT YEAR 1999-2000 (SUPRA) WE CO NFIRM THE ORDER OF CIT(A). 21. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED WHEREAS THAT BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.01.2013. SD/- SD/- ( AMIT SHUKLA ) JUDICIAL MEMBER (RAJENDRA SINGH) ACCOUNTANT MEMBER MUMBAI, DATED: 30.01.2013. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.