M/s. Bilag Ind. Pvt.Ltd.., Vapi v. The Addl.CIT., Valsad Range,, Valsad

CO 274/AHD/2004 | 2001-2002
Pronouncement Date: 18-02-2010 | Result: Dismissed

Appeal Details

RSA Number 27420523 RSA 2004
Assessee PAN ATEOF3961P
Bench Ahmedabad
Appeal Number CO 274/AHD/2004
Duration Of Justice 5 year(s) 4 month(s) 3 day(s)
Appellant M/s. Bilag Ind. Pvt.Ltd.., Vapi
Respondent The Addl.CIT., Valsad Range,, Valsad
Appeal Type Cross Objection
Pronouncement Date 18-02-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 18-02-2010
Date Of Final Hearing 04-02-2010
Next Hearing Date 04-02-2010
Assessment Year 2001-2002
Appeal Filed On 15-10-2004
Judgment Text
- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE S/SHRI T.K. SHARMA JM AND D.C.AGRAWAL AM ITA NO. ASST. YEAR 1. 2207/AHD/2005 1999-2000 2. 2469/AHD/2004 2001-2002 M/S BILAG INDUSTRIES (P) LTD. (FORMERLY KNOWN AS M/S MITSU INDUSTRIES LTD. 306//3 II PHASE GIDC VAPI GUJARAT. VS. ASSTT. CIT VAPI CIRCLE AJITH NAGAR CHALA VAPI. ITA NO. ASST. YEAR 3. 2268/AHD/2005 1999-2000 4. 2452/AHD/2004 2001-2002 ASSTT. CIT VAPI CIRCLE VAPI VS. M/S BILAG INDUSTRIES (P) LTD. (FORMERLY KNOWN AS M/S MITSU INDUSTRIES LTD. 306//3 II PHASE GIDC VAPI GUJARAT. CO NO ASST. YEAR 5. CO NO.242/AHD/2005 1999-2000 6. CO NO.274/AHD/2004 2001-2002 M/S BILAG INDUSTRIES (P) LTD. (FORMERLY KNOWN AS M/S MITSU INDUSTRIES LTD. 306//3 II PHASE GIDC VAPI GUJARAT. ASSTT. CIT VAPI CIRCLE VAPI (APPELLANT) (RESPONDENT) ASSESSEE BY :- SHRI MEHUL K. PATEL AR REVENUE BY:- SHRI ANIL KUMAR CIT DR 2 O R D E R PER BENCH THESE ARE CROSS APPEALS TWO APPEALS FILED BY ASS ESSEE AND TWO FILED BY THE REVENUE. THE CROSS OBJECTIONS ARE FILE D BY THE ASSESSEE IN SUPPORT OF THE ORDERS OF LD. CIT(A). SINCE COMMON I SSUES ARE INVOLVED IN THESE APPEALS THEY ARE TAKEN UP TOGETHER FOR THE S AKE OF CONVENIENCE. ITA NO.2207/AHD/2005 ASST. YEAR 19991-2000 (ASSESSE ES APPEAL) 2. IN THIS APPEAL FOLLOWING GROUNDS HAVE BEEN RAISE D :- (1) THE ORDER OF ASSESSMENT IS CONTRARY TO THE FACT S OF THE CASE AND PREJUDICIAL TO THE ASSESSES (2) ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW THE ADDITIONS MADE BY THE LEARNED ASSESSING OFFICER AND CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ARE CONTRARY TO LAW AND BASED ON ERRONEOUS UNDERSTA NDING OF THE FACTS (3) ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN UPHOLDING THE ACTION OF THE LEARNED ASSESSING OFFIC ER IN ISSUING NOTICE U/S 147 R.W S. 148 OF THE INCOME LAX ACT 19 61 AND PASSING ASSESSMENT ORDER U/S 147 R.W.S 148 OF THE INCOME T AX ACT 1961. THE ACTION OF THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) IS CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE C ASE AND LAW AND PREJUDICIAL TO THE APPELLANT AND DESERVES TO BE DEL ETED. (4) ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HA S ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSESSING OFFI CER IN NOT 3 ALLOWING THE CLAIM OF THE APPELLANT THAT CONTRIBUTI ON TOWARDS PF / ESIC PAID BEFORE THE DUE DATE OF FILING RETURN OF I NCOME TO THE TUNE OF RS. 15 97 563/- ARE DEDUCTIBLE EXPENDITURE. THE ACTION OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS CON TRARY TO THE FACTS AND LAW AND DESERVES TO BE DELETED (5) ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HA S ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSESSING OFFI CER OF EXCLUDING FOLLOWING ITEMS OF INCOME WHILE GRANTING DEDUCTION U/S 80-IA:- INTEREST RECEIVED 46 85 906 INCOME FROM WIND MILL POWER GENERATION 2 26 150 MISCELLANEOUS INCOME 1 26 472 INSURANCE CLAIM OTHERS 7.01 869 THE ACTION OF THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) IS CONTRARY TO THE FACTS AND LAW AND DESERVES TO BE DE LETED- (6) ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HA S ERRED IN UPHOLDING THE ACTION OF THE LEARNED ASSESSING OFFIC ER IN NOT CONSIDERING THE EXPORT BENEFIT RECEIVABLE TO THE TU NE OF RS. 2 62 82 847/- AS INCOME DERIVED FROM INDUSTRIAL UND ERTAKING AND ELIGIBLE FOR DEDUCTION U/S. 80-1A OF THE INCOME TAX ACT 1961. THE ACTION OF THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) IS CONTRARY TO THE FACTS AND LAW AND DESERVES TO BE DELETED. 07. ON APPRECIATION OF THE FACTS AND CIRCUMSTANCE S OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ER RED IN NOT DIRECTING THE LEARNED ASSESSING OFFICER TO GRANT DE DUCTION U/S 80IA OF THE INCOME TAX ACT TO THE APPELLANT COMPANY CORRECTLY AS PER LAW 08. ON APPRECIATION OF THE FACTS AND CIRCUMSTAN CES OF THE CASE AND LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HA S ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSESSING OFFI CER OF EXCLUDING FOLLOWING ITEMS OF INCOME WHILE GRANTING DEDUCTION U/S 80-HHC :- 4 INCOME FROM WINDMILL POWER GENERATION 2 2 6 150 MISCELLANEOUS INCOME 1 26 472 INSURANCE CLAIM OTHERS 7 01 869 THE ACTION OF THE LEARNED COMMISSIONER OF INCOME LA X (APPEALS) IS CONTRARY TO THE FACTS AND LAW AND DESERVES TO BE DE LETED. (9) O N APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ER RED IN UPHOLDING THE ACTION OF THE LEARNED ASSESSING OFFIC ER IN NOT CONSIDERING THE EXPORT BENEFIT RECEIVABLE TO THE TU NE OF RS. 2 62 82 847'- AS INCOME DERIVED FROM INDUSTRIAL UND ERTAKING AND ELIGIBLE FOR DEDUCTION U/S 80-HHC OF THE INCOME TAX ACT 961. THE ACTION OF THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) IS CONTRARY TO THE FACTS AND LAW AND DESERVES TO BE DELETED. (10) ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ER RED IN NOT DIRECTING THE LEARNED ASSESSING OFFICER TO GRANT DE DUCTION U/S 80- HHC OF THE INCOME TAX ACT TO THE APPELLANT COMPANY CORRECTLY AS PER LAW. (11) ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ER RED IN CONFIRMING THE ACTION OF THE LEARNED ASSISTANT COM MISSIONER OF INCOME TAX IN ADDING LOSS AMOUNTING TO RS.20.44 721 /- OF WIND MILL AS NEGATIVE INCOME FOR CALCULATING BOOK PROFIT U/S 115JB. THE ACTION OF THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) IS CONTRARY TO THE FACTS AND LAW AND DESERVES LO BE DE LETED. (12) THE APPELLANT CRAVES TO ADD AMEND MODIFY OR ALTER THE ABOVE GROUNDS OF APPEAL AT ANY STAGE OF APPELLATE PROCEED INGS. (13) THE APPELLANT HUMBLY PRAYS THAT THE APPEAL BE ALLOWED IN TO-TO. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS E NGAGED IN THE BUSINESS OF MANUFACTURING OF PESTICIDES AND ITS INT ERMEDIATES. IT IS A COMPANY IN WHICH PUBLIC ARE NOT SUBSTANTIALLY INTER ESTED. 5 4. GROUND NOS. 1 & 2 ARE GENERAL. THEY ARE NOT PRES SED THEREFORE THEY ARE REJECTED AS NOT PRESSED. 5. GROUND NO.3 IS REGARDING REOPENING OF THE ASSESS MENT UNDER SECTION 147. THE SAME IS ALSO NOT PRESSED HENCE RE JECTED. 6. GROUND NO.4 IS ABOUT CONTRIBUTION TO PF AND ESIC . THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE TRIBUNAL FOR ASST. YEAR 2000-01 IN ITA NO.1796 & 2817/AHD/2003 & CO NO.227/AHD/2004 WHEREIN THE TRIBUNAL HAS OBSERVED AS UNDER :- 3. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE STA TED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAI NST THE REVENUE BY THE CASE LAW OF HONBLE APEX COURT IN THE CASE OF CIT(A ) V. VINAY CEMENT LTD.(2007) 213 CTR 208 (SC). IT IS SEEN THAT THE PA YMENTS MADE DURING THE YEAR AS WELL AS PAID BEFORE THE DUE DATE FOR FI LING THE RETURN OF INCOME THE PAYMENTS OF PF & ESIC IS COVERED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF ALEMBIC GL ASS INDUSTRIES LIMITED (SUPRA) AND EVEN BY THE HONBLE APEX COURT IN THE C ASE OF CIT(A) V. VINAY CEMENT LTD. (2007) 213 CTR 208 (SC) .FROM THE ASSESSEES PAPER BOOK AT PAGE 67 IT IS NOTICED THAT THE COMPLETE DET AILS OF PF / ESI AS REGARDS TO EMPLOYEES CONTRIBUTION AND EMPLOYERS CO NTRIBUTION IS PROVIDED. FROM THESE DETAILS ARE MADE IN THE IMMEDI ATELY NEXT MONTH OF THE SAME YEAR. RESPECTFULLY FOLLOWING THE ABOVE CAS E LAWS WE DELETE THE DISALLOWANCE AND QUASH THE FINDINGS OF CIT(A)S ORD ER ON THIS ISSUE. THIS ISSUE OF THE ASSESSEES APPEAL IS ALLOWED. THE ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HON. SUPREME COURT IN THE CASE OF ALAM EXTRUSION 319 ITR 306 (SC). 7. THE LD. CIT(A) HELD THAT SINCE THE PAYMENTS WERE MADE AFTER DUE DATES THE CLAIM IS NOT ALLOWABLE BUT FOLLOWING THE ABOVE DECISIONS IF PAYMENTS ARE MADE AFTER DUE DATE BUT BEFORE FILING OF RETURN THE CLAIM IS ALLOWABLE. IT HAS TO BE ONLY SEEN THAT THERE IS NO CASE OF DOUBLE CLAIM I.E. 6 ALREADY MADE IN THE CURRENT ASST. YEAR AND OTHER ON THE BASIS OF ACTUAL PAYMENT. SUBJECT TO THIS THIS GROUND OF ASSESSEE I S ALLOWED. 8. GROUND NO.5 RELATES TO CLAIM OF DEDUCTION UNDER SECTION 80IA IN RESPECT OF INTEREST WINDMILL INCOME MISCELLANEOUS INCOME AND RECEIPT FROM INSURANCE FOR SUM OF RS.46 85 906 RS. 2 26 15 0 RS. 1 26 472/- AND RS.7 01 869/- RESPECTIVELY. 9. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE AO DISALLOWED THE CLAIM ON THE GROUND TH AT INCOME UNDER THESE HEADS ARE NOT DERIVED FROM MANUFACTURING ACTI VITIES AND THEREFORE THE SAME WILL BE EXCLUDED FROM PROFITS OF THE BUSIN ESS FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80IA. LD. CIT(A) CONFIRMED THE SAME FOR DETAILED REASONS GIVEN BY HIM IN PARA NOS. 11.2 11 .11 11.14 & 11.16 OF HIS ORDER. THE CRUX OF THE REASONING GIVEN BY THE L D. CIT(A) IS THAT THESE INCOME ARE NOT DERIVED FROM MANUFACTURING ACTIVITIE S. HE REFERRED TO THE DECISION OF HON. SUPREME COURT IN CIT VS. STERLING FOODS 237 ITR 579(SC) AND THAT OF PANDIAN CHEMICALS 262 ITR 539 ( SC). 10. THE LD. AR ON THE OTHER HAND SUBMITTED THAT A T LEAST IN RESPECT OF INTEREST INCOME NETTING SHOULD BE ALLOWED IN VIEW O F THE DECISION OF HON. DELHI HIGH COURT IN THE CASE OF CIT VS. SHRI RAM HO NDA POWER EQUIPMENT & OTHERS 289 ITR 475 (DEL). ACCORDING TO HIM INTEREST INCOME HAS BEEN TREATED AS BUSINESS INCOME AND THE REFORE IT SHOULD BE CONSIDERED FOR THE PURPOSE OF ALLOWING DEDUCTION U/ S 80IA. 11. THE LD. DR ON THE OTHER HAND SUBMITTED THAT TH IS INCOME HAS BEEN EARNED BY DEPOSITING SURPLUS FUNDS WITH THE BANK T HEREFORE IT SHOULD NOT 7 BE CONSIDERED AS BUSINESS INCOME AND THEREFORE NO QUESTION OF NETTING IS TO BE ALLOWED. 12. IN OUR CONSIDERED VIEW INTEREST INCOME IS NOT D ERIVED FROM BUSINESS OF INDUSTRIAL UNDERTAKING AND IS ASSESSABL E UNDER THE HEAD INCOME FROM OTHER SOURCES. MERELY BECAUSE AO HAS NOT APPLIED HIS MIND AS TO UNDER WHICH HEAD INTEREST INCOME SHOULD BE ASSESSED IT WOULD NOT CONVERT THE SOURCE OF INTEREST INCOME TO THAT OF INDUSTRIAL UNDERTAKING WHERE IT IS ACTUALLY FIXED DEPOSIT OF S URPLUS FUNDS. IT IS CLEARLY NOT DERIVED FROM INDUSTRIAL UNDERTAKING TH EREFORE WILL NOT BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA. THE AUTH ORITIES HAVE RIGHTLY RELIED ON THE DECISIONS OF HON. SUPREME COURT IN CI T VS. STERLING FOODS (SUPRA) AND THAT OF PANDIAN CHEMICALS (SUPRA). THER EFORE ONCE INTEREST IS NOT TREATED AS DERIVED FROM INDUSTRIAL UNDERTAKING THEN NO BENEFIT OF NETTING CAN BE ALLOWED FOR THE PURPOSES OF DEDUCTIO N U/S 80IA. SO FAR AS DEDUCTION U/S 80IA ON THE INCOME FROM WIN DMILL MISCELLANEOUS AND INSURANCE INCOME ARE CONCERNED L D. AR DID NOT PRESS FOR THE GROUND SERIOUSLY. EVEN OTHERWISE THEY ARE F AR REMOTELY CONNECTED TO INDUSTRIAL UNDERTAKING AND THEREFORE INCOME TH EREFROM CANNOT BE SAID TO BE DERIVED FROM BUSINESS OF INDUSTRIAL UNDERTAKI NG WHICH IS THE MANUFACTURING OF INSECTICIDES. ACCORDINGLY GROUND N O.5 IS REJECTED. 13. GROUND NO.6 RELATES TO CLAIM OF DEDUCTION UNDER SECTION 80IA ON EXPORT BENEFIT RECEIVABLE. 14. WE HAVE HEARD THE PARTIES. THE ASSESSEE HAS CLA IMED DEDUCTION UNDER SECTION 80IA ON RS.2 62 82 847/- BEING NOTION AL CREDITS PROFIT ON ACCOUNT OF EXPORT TRADE PRESUMING THAT IT WILL RECEIVE CERTAIN 8 EXPORT BENEFIT. IT CLAIMED DEDUCTION UNDER SECTION 80IA THEREON. HOWEVER THE ISSUE IS NOW DIRECTLY COVERED AGAINST THE ASSESSEE BY THE DECISION OF HON. SUPREME COURT IN THE CASE OF LIBER TY INDIA VS. CIT (2009)317 ITR 218 (SC) WHEREIN IT HAS HELD THAT DEPB DUTY DRAW BACK BENEFIT DO NOT FORM PART OF NET PROFIT FOR THE PURP OSE OF DEDUCTION UNDER SECTION 80I 80IA AND 80IB. HON. SUPREME COURT IN T HIS REGARD HELD AS UNDER :- SECTIONS 80-I 80-IA AND 80-IB PROVIDE FOR INCENTI VES IN THE FORM OF DEDUCTIONS WHICH ARE LINKED TO PROFITS AND NOT I NVESTMENT. ON ANALYSIS OF SECTIONS 80-IA AND 80-IB IT BECOMES CLE AR THAT ANY INDUSTRIAL UNDERTAKING WHICH BECOMES ELIGIBLE ON SA TISFYING SUB- SECTION (2) WOULD BE ENTITLED TO DEDUCTION UNDER SU B-SECTION (1) ONLY TO THE EXTENT OF PROFITS DERIVED FROM SUCH IND USTRIAL UNDERTAKING AFTER THE SPECIFIED DATE. APART FROM EL IGIBILITY SUB- SECTION (1) PURPORTS TO RESTRICT THE QUANTUM OF DED UCTION TO A SPECIFIED PERCENTAGE OF THE PROFITS. THIS IS THE IM PORTANCE OF THE WORDS 'DERIVED FROM AN INDUSTRIAL UNDERTAKING' AS A GAINST 'PROFITS ATTRIBUTABLE TO AN INDUSTRIAL UNDERTAKING'. DEPB/DUTY DRAWBACK ARE INCENTIVES WHICH FLOW FROM T HE SCHEMES FRAMED BY THE CENTRAL GOVERNMENT OR FROM SECTION 75 OF THE CUSTOMS ACT 1962. INCENTIVE PROFITS ARE NOT PROFITS DERIVED FROM ELIGIBLE BUSINESS UNDER SECTION 80-IB : THEY BELONG TO THE CATEGORY OF ANCILLARY PROFITS OF SUCH UNDERTAKING. PROFITS D ERIVED BY WAY OF INCENTIVES SUCH AS DEPB/DUTY DRAWBACK CANNOT BE CRE DITED AGAINST THE COST OF MANUFACTURE OF GOODS DEBITED IN THE PROFIT AND LOSS ACCOUNT AND THEY DO NOT FALL WITHIN THE EXPRES SION 'PROFITS DERIVED FROM INDUSTRIAL UNDERTAKING' UNDER SECTION 80-IB. RESPECTFULLY FOLLOWING THE ABOVE DECISION WE DISMIS S THIS GROUND OF ASSESSEE. 15. GROUND 7 IS GENERAL IN NATURE. THE SAME IS REJE CTED AS NOT PRESSED. 16. GROUND NO.8 RELATES TO CLAIM OF DEDUCTION UNDER SECTION 80 HHC ON WIND-MILL INCOME OF RS.2 26 150/- MISCELLANEOUS INCOME OF 9 RS.1 26 472 AND INSURANCE INCOME OF RS.7 01 869/-. LD. AO AND LD. CIT(A) DISALLOWED THE CLAIM ON THE GROUND THAT THEY ARE NOT EITHER DERIVED FROM INDUSTRIAL ACTIVITIES OR FROM EXPORT A CTIVITIES. 17. IN OUR CONSIDERED VIEW ALSO THERE IS NO CASE FO R INTERFERENCE IN THE ORDER OF LD. CIT(A). NO DEDUCTION ON INCOME UNDER T HESE HEADS COULD BE ALLOWED UNDER SECTION 80 HHC BECAUSE IT IS NOT THE INCOME GENERATED FROM EXPORT OF ANY TRADING ITEM OR EXPORT OF ANY MA NUFACTURING ITEM. THIS GROUND OF ASSESSEE IS THEREFORE REJECTED. 18. GROUND NO.9 RELATES TO NOT GIVING DEDUCTION U/S 80 HHC ON EXPORT BENEFIT OF RS.2 62 82 847/-. ACCORDING TO LD. AR AS SESSEE HAS BEEN CARRYING OUT EXPORT AND AGAINST THOSE EXPORT PROCEE DS IT HAS CREDITED CERTAIN BENEFITS ALLOWABLE UNDER THE SCHEME FRAMED BY THE GOVERNMENT OF INDIA AND HAS OFFERED IT FOR TAXATION. IT HAS THER EFORE CLAIMED DEDUCTION UNDER SECTION 80 HHC. IF IT IS NOT A BENEFIT THEN I T SHOULD ALSO NOT BE CONSIDERED AS INCOME. IF IT IS TREATED AS BENEFIT D UE TO EXPORT IT SHOULD BE CONSIDERED FOR DEDUCTION UNDER SECTION 80 HHC. FOR CALCULATING THE ALLOWABLE DEDUCTION HE REFERRED TO THE DECISION OF THE TRIBUNAL MUMBAI SPECIAL BENCH IN TOPMAN EXPORTS VS. ITO (2009) 125 TTJ 289 (MUM). THE GIST THERE-FROM IS AS UNDER:- (I) THE ARGUMENT OF THE REVENUE THAT DEPB IS A POST EXPORT EVENT AND HAS NO RELATION WITH THE PURCHASE OF GOODS CANNOT BE ACCEPTED. THER E IS A DIRECT RELATION BETWEEN DEPB AND THE CUSTOMS DUTY PAID =ON THE PURCHASES. F OR PRACTICAL PURPOSES DEPB IS A REIMBURSEMENT OF THE COST OF PURCHASE TO THE EXTE NT OF CUSTOMS DUTY; (II) THE DEPB BENEFIT (FACE VALUE) ACCRUES AND BECO MES ASSESSABLE TO TAX WHEN THE APPLICATION FOR DEPB IS FILED WITH THE CONCERNED AU THORITY. SUBSEQUENT EVENTS SUCH AS SALE OF DEPB OR MAKING IMPORTS FOR SELF CONSUMPTION ETC ARE IRRELEVANT FOR DETERMINING THE ACCRUAL OF THE INCOME ON ACCOUNT OF DEPB; (III) THOUGH S. 28 (IIIB) REFERS TO A CASH ASSISTA NCE AGAINST EXPORTS IT IS WIDE ENOUGH TO COVER THE FACE VALUE OF THE DEPB BENEFIT; 10 (IV) S. 28 (IIID) WHICH REFERS TO THE PROFITS ON T RANSFER OF THE DEPB OBVIOUSLY REFERS ONLY TO THE PROFIT ELEMENT AND NOT THE GROSS SALE PROCEEDS OF THE DEPB. IF THE REVENUES ARGUMENT THAT THE SALE PROCEEDS SHOULD BE CONSIDERED IS ACCEPTED THERE WOULD BE ABSURDITY BECAUSE THE FACE VALUE OF THE DE PB WILL THEN GET ASSESSED IN THE YEAR OF RECEIPT OF THE DEPB AND ALSO IN THE YEAR OF ITS TRANSFER; (V) CONSEQUENTLY ONLY THE PROFIT (I.E. THE SALE VALUE LESS THE FACE VALUE) IS REQUIRED TO BE CONSIDERED FOR PURPOSES OF S. 80HHC. INTEREST INCOME FROM FUNDS PLACED WITH THE BANK IS NOT INCLUDIBLE IN PROFITS. ACCORDING TO THE LD. AR FOR CALCULATING AL LOWABLE DEDUCTION MATTER SHOULD BE REFERRED TO AO IN ACCORDANCE WITH THE DECISION OF TRIBUNAL MUMBAI (SPECIAL BENCH) IN THE ABOVE CASE . 19. ON THE OTHER HAND LD. DR SUBMITTED THAT ASSESS EE HAS ONLY CREATED NOTIONAL PROFIT AND IT HAS NOT REFERRED TO ANY SCHE ME UNDER WHICH THE ASSESSEE IS ENTITLED FOR ANY EXPORT INCENTIVE. ONCE IT IS NOT IN ANY SCHEME IT WILL NOT BE TREATED AS EXPORT BENEFIT AND NO DED UCTION UNDER SECTION 80 HHC CAN BE ALLOWED. 20. LD. AR IN REJOINDER SUBMITTED THAT DEDUCTION UN DER SECTION 80 HHC IS ALLOWABLE ON SUCH NOTIONAL CREDIT INCENTIVES IN VIEW OF DECISION OF THE TRIBUNAL IN THE CASE OF UNITED PHOSPHORUS LT D.VS. JCIT (2002) 81 ITD 553 (AHD) ALSO. HE REFERRED TO THIS DECISION BE CAUSE IT IS PERTAINED TO ALLOWABLE DEDUCTION ON EXPORT BENEFITS UNDER SECTIO N 80I AND 80IA. THIS IS ISSUE IS ALSO COVERED BY THE DECISION OF HON. SU PREME COURT IN LIBERTY INDIAS CASE (SUPRA). THE PRESENT ISSUE IS ABOUT DE DUCTION UNDER SECTION 80 HHC ON EXPORT BENEFIT AND APPLICABILITY OF DECIS ION IN TOPMAN EXPORTS CASE (SUPRA). 11 21. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE RES TORE THE MATTER TO THE FILE OF AO. THE ASSESSEE WILL PROVIDE THE SCHEM E UNDER WHICH ASSESSEE IS ENTITLED FOR BENEFIT CREDITED BY IT IN THE P & L ACCOUNTS. THE AO WILL EXAMINE WHETHER ASSESSEE IS SO ENTITLED FOR SUCH BENEFIT AS PER THE SCHEME; WHETHER ANY CERTIFICATE OR SANCTION ORD ER HAS BEEN ISSUED BY THE GOVERNMENT DEPARTMENT CONFERRING EXPORT INCENTI VE TO THE ASSESSEE; OR WHETHER ANY APPLICATION HAS BEEN FILED BY THE AS SESSEE FOR RECEIVING SUCH EXPORT BENEFIT FROM THE CONCERNED DEPARTMENT; OR EVEN OTHERWISE HOW ASSESSEE WILL BE ENTITLED FOR EXPORT BENEFIT ON SUCH NOTIONAL CREDIT INCOME. WHAT HAS BEEN THE BASIS FOR CALCULATING SUC H INCOME? WHETHER SUCH BASIS IS APPROVED BY ANY SCHEME FRAMED BY GOVE RNMENT OF INDIA? EVEN IF IT IS SO WHETHER CALCULATION MADE BY THE AS SESSEE IS CORRECT? THUS IN THE LIGHT OF DECISION OF TRIBUNAL MUMBAI (SPECI AL BENCH) IN THE CASE OF TOPMAN EXPORTS (SUPRA) AO WILL EXAMINE THE CASE AND IF NECESSARY CALCULATE ALLOWABLE INCENTIVE TO THE ASSESSEE AND A CCORDINGLY PART OF THE PROFITS TO BE INCLUDED AS EXPORT PROFITS ELIGIBLE F OR DEDUCTION UNDER SECTION 80 HHC. FOR CARRYING OUT NECESSARY ENQUIRY AND CALCULATION ON THE ISSUE MATTER IS RESTORED TO THE FILE OF AO. TH IS GROUND IS ALLOWED BUT FOR STATISTICAL PURPOSES. 22. GROUND NO.10 IS GENERAL IN NATURE. IT IS NOT PR ESSED HENCE IT IS REJECTED. 23. GROUND NO.11 RELATES TO ADDING LOSS OF WINDMILL FOR BOOK PROFIT UNDER SECTION 115JB. 24. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IAL ON RECORD. THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASST. YEAR 2000-01. THE TRI BUNAL ON PAGE 16 AT 12 PARA 18 OF ITS ORDER IN ITA NO.1776 & 2817/AHD/2003 & C.O. 227/AHD/2004 DATED 5/12/2008 HAS OBSERVED AS UNDER :- 17. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE T HROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE LOW ER AUTHORITIES HAS DEALT WITH THE ISSUE AS UNDER:- DEPRECIATION RS.60 00 000/- THE ASSESSING OFFICER OBSERVES IN PARA 22 OF THE AS SESSMENT ORDER AS UNDER:- DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AS SESSEE HAS FURNISHED REVISED CLAIM OF DEPRECIATION. THE ASSES SEE HAS INCURRED THE CLAIM OF DEPRECIATION FROM RS.28 06 05 439/- TO RS.28 16 57 069/-. THE SAME HAS BEEN VERIFIED AND F OUND IN ORDER. THE ADDITION IS THEREFORE WITHOUT BASIS AND IS DIRE CTED TO BE DELETED. BUT WE FIND THAT THE ASSESSING OFFICER HAS ACTUALLY DEALT WITH THIS ISSUE AT PARA 5.17 AT PAGE-4 OF THE ASSESSMENT ORDER WHEREI N THE ASSESSING OFFICER HAS RELIED ON THE STATEMENT RECORDED DURING THE COURSE OF SURVEY PROCEEDINGS. THE ASSESSING OFFICER ISSUED A SHOW C AUSE NOTICE DATED. 04- 03-2002 STATING AS TO WHY EXCESS DEPRECIATION CLAI MED TO THE EXTENT OF RS.60 LAKHS SHOULD NOT BE DISALLOWED. THE ASSESSEE -COMPANY REPLIED THAT DURING THE COURSE OF SURVEY THE DEPARTMENT HAD INFE RRED THAT THE ASSESSEE HAS CLAIMED EXCESS DEPRECIATION BUT ACTUALLY NOTHIN G WAS CLAIMED IN EXCESS. BUT THE ASSESSING OFFICER EVEN AFTER VERI FYING THE DEPRECIATION INCLUDING THE W.D.V. RATE OF DEPRECIATION AND ITS CALCULATION ADDED THE SO-CALLED EXCESS DEPRECIATION IN VIEW OF THE STATEM ENT RECORDED DURING THE COURSE OF SURVEY. WE FIND THAT THERE IS NO ACT UAL DISCREPANCY POINTED OUT BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDE R. AS THERE IS NO INDICATION IN THE ASSESSMENT ORDER THAT HOW THE EX CESS DEPRECIATION IS TO BE ADDED IN THE ABSENCE OF THE SAME WE CONFIRM TH E DELETION OF DISALLOWANCE. ACCORDINGLY THIS ISSUE OF THE REVEN UES APPEAL IS DISMISSED. ACCORDINGLY THIS GROUND IS ALLOWED. 13 25. GROUND NOS.12 & 13 ARE GENERAL IN NATURE THEY ARE NOT PRESSED HENCE REJECTED. ITA NO.2268/AHD/2005 ASST. YEAR 1999-2000 (REVENUE S APPEAL) 26. THIS APPEAL HAS BEEN FILED BY THE REVENUE WHERE IN FOLLOWING GROUNDS HAVE BEEN RAISED :- (1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION ON ACCOUN T OF STAFF WELFARE EXPENSES AMOUNTING TO RS.24 038/- WITHOUT A PPRECIATING THE FACT THAT THE ASSESSEE FAILED TO EXPLAIN THAT T HE EXPENDITURE WAS INCURRED WHOLLY EXCLUSIVELY AND NECESSARILY FO R THE BUSINESS PURPOSES (2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION ON ACCOUN T OF LEGAL & PROFESSIONAL EXPENSES AMOUNTING TO RS.1 20 000/- WI THOUT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO G IVE THE DETAILS OF KIND AND NATURE OF SERVICES RENDERED BY THE RECIPIE NT AND PAYMENT WAS ATTRACTED BY THE PROVISIONS OF SECTION 40A(2)(B ) OF THE ACT. (3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED C1T(A) HAS ERRED IN DELETING THE ADDITION ON ACCOUN T OF FOREIGN TRAVELING EXPENSES AMOUNTING TO RS.20 40 425/- WITH OUT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO S UBSTANTIATE ITS CLAIM THAT THE EXPENDITURE WAS INCURRED WHOLLY EXC LUSIVELY AND NECESSARILY FOR THE BUSINESS PURPOSE. (4) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIR(A) HAS ERRED IN DELETING THE ADDITION ON ACCOUN T OF PETROL AND DIESEL EXPENSES WITHOUT CONSIDERING THE FACT THAT T HE ASSESSES FAILED FILE THE LOG BOOK TO ESTABLISH THAT THE VEHICLES WERE U SED FOR BUSINESS PURPOSES AND IT FAILED TO SUBSTANTIATE ITS CLAIM TH AT THE EXPENDITURE WAS INCURRED WHOLLY NECESSARILY AND EX CLUSIVELY FOR THE BUSINESS SINCE PART OF DISALLOWANCE WAS MADE BY IT VOLUNTARILY. (5) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE ID. CIT(A) HAS ERRED IN ALLOWING THE BENEFIT OF 'NETTIN G OUT' IN RESPECT 14 OF INTEREST INCOME OF 46 85 906/- AND DIRECTED NOT TO EXCLUDE THE SAME FROM THE PROFITS ELIGIBLE FOR DEDUCTION U/S 80 HHC/80IA WITHOUT APPRECIATING THE FACT THAT IT HAS NO DIRECT OR NEXUS WITH THE EXPORT/MANUFACTURING ACTIVITY CARRIED ON BY THE ASS ESSEE AS PER THE PRINCIPLES LAID DOWN BY THE HON'BLE APEX COURT IN THE IN THE CASE C1T VS STERLING FOODS (1999) 237 ITR 579 AND IN THE CASE OF PANDIAN CHEMICALS VS C1T (2003) 262 ITR 278(SC) AN D THE INTEREST INCOME WAS EARNED ON THE SURPLUS FUNDS AVA ILABLE WITH THE COMPANY. (6) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. C1T(A) HAS ERRED IN HOLDING THAT THE EXCHANGE RATE DIFFERENCE OF RS 96 87 736/- SHOULD NOT BE EXCLUDED FROM THE PROF ITS ELIGIBLE FOR DEDUCTION U/S.80HHC/80LA OF THE ACT (7) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN ALLOWING THE BENEFIT OF 'NETTIN G OUT' IN RESPECT OF INCOME EARNED ON SALE OF ADVANCE LICENCE OF RS.4 94 14 249/- AND DIRECTED NOT TO EXCLUDE THE SAME FROM THE PROFI TS ELIGIBLE FOR DEDUCTION U/S 80 HHC/80IA WITHOUT APPRECIATING THE FACT THAT IT HAS NO DIRECT OR IMMEDIATE NEXUS WITH THE EXPORT/ M ANUFACTURING ACTIVITY CARRIED ON BY THE ASSESSEE AND SECTION 28| IIIA) (NIB) AND (IIIC) REFER TO GROSS AMOUNTS OF THE RECEIPTS BY WA Y OF PROFITS ON SALE OF A LICENCE CASH ASSISTANCE AND DULY DRAWBAC K ETC (8) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE ID. C1T(A) HAS EARNED IN HOLDING THAT THE INCOME EARNED IN DUTY DRAW BACK SCHEME OF RS. 87 79 331/- SHOULD NOT BE EXCLUD ED FROM THE PROFITS ELIGIBLE FOR DEDUCTION U/S 80HHC/80LA OF TH E ACT (9) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CTT(A) HAS ERRED IN ALLOWING THE APPEAL OF THE ASSE S SEE -COMPANY IN RESPECT OF GRANTING DEDUCTION U/S.80LA ON THE EN TIRE PROFITS OF THE COMPOSITE UNIT WITHOUT CONSIDERING THE FACT THA T THE ASSESSEE HAS NOT JUST 'EXPANDED' HIS UNIT BUT STARTED A NEW UNDERTAKING WHICH HAS A DISTINCT IDENTITY OF ITS OWN. (10) H IS THEREFORE PRAYED THAT THE ORDER OF T HE LEARNED C1T(A1 BE SET ASIDE AND THAT THE ORDER OF THE AO BE RESTORED. 27. GROUND NO.1 RELATES TO STAFF WELFARE EXPENDITUR E. 1/5 TH OF THE CLAIM WAS DISALLOWED AT RS.24 038/-. IT IS OBSERVED BY TH E AUTHORITIES BELOW THAT 15 ASSESSEE WAS NOT ABLE TO SUBSTANTIATE THE EXPENDITU RE OR THAT THEY WERE ACTUALLY INCURRED FOR BUSINESS PURPOSES. AFTER HEAR ING THE PARTIES WE CONFIRM THE DISALLOWANCE FOR THE REASONS MENTIONED BY LD. CIT(A) IN HIS ORDER. BUT NO FURTHER DISALLOWANCE IS CALLED FOR. T HIS GROUND OF REVENUE IS REJECTED. 28. NEXT GROUND RELATES TO LEGAL AND PROFESSIONAL E XPENSES. THE AO DISALLOWED THE CLAIM ON THE GROUND THAT EXACT NATUR E AND KIND OF SERVICES RENDERED BY SMT. KIRAN MINOCHA BEING WIFE OF DIRECT OR DR. P. K. MINOCHA WAS NOT FURNISHED. IT WAS CLAIMED THAT THIS SUM WAS PAID FOR ADVISORY SERVICES RENDERED BY HER AND PAYMENT IS IN CLUDED UNDER THE HEAD LEGAL AND PROFESSIONAL EXPENSES. IT WAS CLAIMED AND ALLOWED EARLIER. AO DID NOT AGREE AND DISALLOWED THE CLAIM. THE LD. CIT (A) DELETED THE ADDITION ON THE GROUND THAT IN EARLIER YEARS IT WAS DELETED. 29. LD. AR SUBMITTED THAT TRIBUNAL HAS CONFIRMED TH E DELETION IN EARLIER YEARS. THEREFORE FOLLOWING THE CONSISTENCY NO INTERFERENCE SHOULD BE DONE IN THE ORDER OF LD. CIT(A). 30. ON THE OTHER HAND LD. DR SUBMITTED THAT FACT O F RENDERING SERVICES IS PECULIAR TO EVERY YEAR AND IF ASSESSEE HAS NOT S UBMITTED ANY EVIDENCE OF WHAT SERVICES SMT. KIRAN MINOCHA HAD RENDERED THEN THE CLAIM CANNOT BE ALLOWED. 31. AFTER HEARING THE PARTIES WE ARE OF THE VIEW T HAT CLAIM HAS BEEN WRONGLY ALLOWED BY LD. CIT(A). HERE THE PRINCIPLE O F CONSISTENCY WILL NOT BE APPLICABLE BECAUSE ASSESSEE HAS TO FURNISH EVIDE NCE AS TO WHAT SERVICES THE RECIPIENT OF THE FEES HAS RENDERED TO THE ASSESSEE. THIS IS TO BE DONE EVERY YEAR. IN OUR CONSIDERED VIEW CONSISTE NCY IS THE RECOGNIZED 16 PRINCIPLE AND CURBS OUT AN EXCEPTION FROM THE PRINC IPLE OF RES JUDICATA IF FACTS AND CIRCUMSTANCES OF THE CASE REMAIN THE SAME AND POSITION OF LAW HAS NOT CHANGED. IN ANY CASE THERE IS A NECESSARY C ONDITION INHERENT IN THE PRINCIPLE OF CONSISTENCY THAT STAND OF THE AO IN THE PAST SHOULD BE LEGALLY CORRECT AND THERE IS NO ERROR EITHER OF LA W OR OF FACT. IT IS ALSO A JUDICIALLY RECOGNIZED PRINCIPLE THAT THERE IS NO HE ROISM TO CONTINUE TO COMMIT ERRORS FROM ONE YEAR TO ANOTHER. IF AO HAS N OT AT ALL CONSIDERED THE ISSUE; OR ASSESSMENT HAS BEEN ACCEPTED UNDER SE CTION 143(1); OR ALL THE NECESSARY FACTS FOR APPLYING MIND ON THE ISSUE ARE NOT BROUGHT INTO THE KNOWLEDGE OF THE AO; OR WHILE ACCEPTING A POSITION IN THE EARLIER ASSESSMENT YEARS GRAVE ERROR OF LAW OR FACT HAS BE EN COMMITTED; OR THERE HAS BEEN CHANGE IN LAW; OR THERE IS A JUDICIAL DECI SION ON THE SUBJECT; OR THERE ARE DISCOVERY OF NEW FACTS WHICH WERE NOT AVA ILABLE IN THE EARLIER YEARS THEN PRINCIPLE OF CONSISTENCY CANNOT BIND THE AO AND HE HAS TO APPLY HIS MIND AFRESH AND ARRIVE AT A FRESH DECISIO N. 32. IN THE PRESENT CASE IN SPITE OF AO ASKING FOR I T NO SUCH EVIDENCE WAS FURNISHED. EVEN BEFORE US NO DOCUMENT WAS REFER RED WHICH COULD SHOW THAT SMT. MINOCHA HAS RENDERED ANY ADVICE TO T HE ASSESSEE COMPANY. SHE IS ONLY POST-GRADUATE IN CHEMISTRY. SH E DOES NOT HAVE ANY LEGAL KNOWLEDGE. NO PROOF OF SERVICE RENDERED IN TH E PAST IS ALSO FURNISHED SO AS TO SHOW THAT SHE HAS BEEN DOING THI S WORK SINCE SEVERAL YEARS. IT IS TO BE EXPLAINED AS TO IN WHAT CAPACITY SHE IS WORKING; WHAT ARE HER JOB PROFILE WHETHER THERE WAS ANY APPOINTMENT LETTER WHETHER THERE WAS ANY SERVICE CONDITION WHO HAS BEEN SEEKING ADV ICE FROM HER WHETHER SHE IS TECHNICALLY COMPETENT TO RENDER ANY TECHNICAL ADVICE ON MANUFACTURING OF INSECTICIDES. IN ABSENCE OF SUCH D ETAILS MERELY DEBITING A SUM OF RS.1 206 000/- EVERY YEAR AND CREDITING TH E SAME TO HER ACCOUNT WILL NOT BE SUFFICIENT PROVE THAT SMT. KIRAN MINOCH A RENDERED SERVICES TO 17 THE ASSESSEE COMPANY. ACCORDINGLY CLAIM IS NOT ALLO WABLE UNDER SECTION 37(1). THIS GROUND OF REVENUE IS ALLOWED. THE ORDER OF AO IS RESTORED. 33. NEXT GROUND IN REVENUES APPEAL IS ABOUT FOREIG N TRAVEL EXPENSES DISALLOWED AT RS.20 40 425/- BEING AD HOC DISALLOWA NCE AT 1/5 TH . THE ASSESSEE HAD FURNISHED DETAILS OF THE FOREIGN TRAVE L OF EMPLOYEES AND DIRECTORS WHICH ARE ENCLOSED AT PAGES 64 TO 74 OF T HE PAPER BOOK. THE AO DISALLOWED THE CLAIM ON THE GROUND THAT BUSINESS CO NNECTION OF THE EXPENDITURE IS NOT ESTABLISHED. THE LD. CIT(A) DELE TED THE ADDITION ON THE GROUND THAT THERE IS NO MATERIAL ON RECORD TO SUGGE ST THAT 1/5 TH OF BUSINESS EXPENDITURE IS NOT FOR BUSINESS PURPOSE AND 4/5 TH IS FOR BUSINESS PURPOSE. ACCORDING TO HIM IT IS THE DUTY OF THE AO TO ANALYS E EACH AND EVERY TRIP TO PROVE THAT THE PARTICULAR TRIP OR EXPENDITURE ON FOREIGN TRAVEL WAS NOT FOR BUSINESS PURPOSES. 34. ACCORDING TO LD. AR THE ISSUE IS COVERED IN ITS FAVOUR BY THE DECISION OF THE TRIBUNAL IN ASST. YEAR 2000-01IN AS SESSEES OWN CASE AT PAGE 14 PARA 25 OF THE TRIBUNALS ORDER WHICH IS AS UNDER :- 25. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE T HROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE HAVE ALSO PERUSED ASS ESSMENT ORDER AS WELL AS THE ORDER OF CIT(A). THE ASSESSING OFFICER DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE HA S DEBITED FOREIGN TRAVEL AT RS.88 58 774/-. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO FURNISH NAME DESIGNATION OF THE PERSON DURATION OF STAY I N VARIOUS CITIES OF FOREIGN COUNTRIES AND JUSTIFICATION OF THE STAY OF PARTICUL AR NUMBER OF DAYS IN A PARTICULAR CITY OF FOREIGN COUNTRY AS REQUIRED UND ER RULE 6D. IN THE DETAILS FILED WITH THE LETTER DATED 06.02.2002 THE ASSESSEE HAS THOUGH GIVEN NAME OF THE PERSON AND COUNTRIES VISITED BUT HAS NOT GIVEN DUR ATION OF STAY IN EACH COUNTRY. FOR EXAMPLE SHRI PRASHANT DESAI HAS VISIT ED SINGAPORE AND BEIJING BUT THE DURATION OF THE STAY HAS NOT BEEN SEPARATEL Y MENTIONED AS WELL JUSTIFICATION OF STAY IN EACH OF THE COUNTRY HAS NO T BEEN FURNISHED. IN REMARK COLUMN ONLY THE TOTAL EXPENSES INCURRED BY SHRI PR ASHANT DESAI IS MENTIONED. ANOTHER EXAMPLE IS OF PARTHO DUTTA WHO HAS VISITED EUROPE & AFRICA FROM 03.05.1999 TO 11.06.1999; HOWEVER DURA TION OF STAY IN EACH PLACE HAS NOT BEEN SEPARATELY GIVEN. JUSTIFICATION REGARD ING THE VISIT ABROAD AS WELL 18 AS JUSTIFICATION OF NUMBER OF DAYS STAYED IN A PART ICULAR CITY OF FOREIGN COUNTRY EITHER WHOLLY OR MAINLY FOR THE BUSINESS PURPOSE OF THE ASSESSEE HAS NOT BEEN GIVEN. SIMILAR IS THE POSITION AS REGARDS TO VARIOU S OTHER VISITS MADE BY THE PERSONS THE EXPENDITURE OF WHICH HAS BEEN DEBITED BY THE ASSESSEE. IT WAS CONTENDED THAT THE ASSESSEE IS HAVING EXPORT OF ARO UND RS. 273.1CRORE (GROSS). ACCORDINGLY VARIOUS EXECUTIVES ARE NECESSA RILY REQUIRED TO TRAVEL ABROAD TO STUDY THE MARKET AND DEVELOPMENT OF THE M ARKET. IT MAY BE CORRECT THAT THE ASSESSEE IS HAVING EXPORT BUSINESS AND REQ UIRED ITS EMPLOYEES TO GO ABROAD HOWEVER THE EXPENDITURE OF FOREIGN TRAVEL I S ALLOWABLE ONLY FOR SO MANY NUMBER OF DAYS WHICH HAVE BEEN EITHER WHOLLY O R MAINLY USED FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. ACCORDING TO THE ASSESSING OFFICER IN FACT RULE 6D HAS SPECIFICALLY PROVIDED AFORESAID CONDITION AND ACCORDINGLY THE EXPENDITURE FOR THOSE DAYS WHICH HAVE BEEN PROV ED TO BE SPENT FOR THE BUSINESS PURPOSE IS TO BE ALLOWED. IN ABSENCE OF SP ECIFIC JUSTIFICATION GIVEN BY THE ASSESSEE IN RESPECT OF VARIOUS VISITS TO FOREIG N COUNTRIES IT IS HELD THAT PART OF DAYS STAYED BY DIFFERENT PERSONS IS NOT USED FOR THE BUSINESS PURPOSE OF THE ASSESSEE COMPANY. THEREFORE 1/5 TH OF THE EXPENDITURE IS DISALLOWED BY THE AO ON ADD HOC BASIS. ACCORDINGLY AN ADDITION OF R S.17 71 755/- WAS MADE. THE CIT(A) DELETED THE ADDITION. NOW BEFORE US THE ASSESSEE FILED THE COMPLETE DETAILS OF FOREIGN TRAVEL WITH THE AMOUNT SPENT AS UNDER:- NAME OF PERSONS VISITED DESIGNATION AMOUNT SPENT SHRI YANUS G BILAKHIA CHAIRMAN RS.1 93 431/- SHRI K.K.UNNI VICE-CHAIRMAN RS.2 20 000/- DR. P.K.MINOCHA DIRECTOR RS.2 86 472/- SHRI PRASHANT DESAI -DO- RS.22 50 931/- SHRI S.M.GUPTE -DO- RS.1 38 174/- SHRI SATISH KHANNA -DO- RS. 74 623/- APART FROM THIS THE ASSESSEE HAS ALSO FILED THE DET AILS OF EXPENDITURE INCURRED IN CONNECTION WITH FOREIGN TRAVEL EXPENDITURE IN IT S PAPER BOOK AT PAGES 76-77. THE DETAILS OF AMOUNT ARE FILED AND TOTAL COMES TO RS.57 34 454/-. THE ASSESSEE HAS ALSO FILED THE COMPLETE DETAILS OF COU NTRIES VISITED FOR PURPOSE OF VISIT AS WELL AS THE EXPENDITURES AS DETAILS AT PAGES 72-73 OF ITS PAPER BOOK. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES WE AR E OF THE VIEW THAT THE FOREIGN TRAVEL EXPENDITURES DISALLOWED BY THE AO ON AD HOC BASIS IS REALLY INCURRED BY THE ASSESSEE FOR THE PURPOSE OF BUSINES S. ACCORDINGLY WE UPHOLD THE DELETION AND THIS ISSUE OF THE REVENUES APPEAL IS DISMISSED. SINCE THE FACTS AND CIRCUMSTANCES OF THE CASE REMAI N THE SAME NO DIFFERENT DECISION SHOULD BE TAKEN. 35. AFTER HEARING THE PARTIES WE DECLINE TO INTERFE RE BECAUSE AO HAS TO SPECIFICALLY POINT OUT WHICH TRIP IS NOT FOR BUSINE SS PURPOSE. AO HAS TO ENQUIRE IN RESPECT OF EACH TRIP AND GIVE HIS FINDIN G. GENERAL DISALLOWANCE 19 ON ESTIMATE BASIS UNDER THIS HEAD CANNOT BE SUSTAIN ED. ACCORDINGLY THIS GROUND OF REVENUE IS DISMISSED. 36. GROUND NO.4 RELATES TO PETROL AND DIESEL EXPENS ES. DISALLOWANCE IS MADE AT RS.1 99 789/-. THE REASONS FOR DISALLOWANCE HAVE BEEN THAT EXPENDITURE HAS BEEN INCURRED FOR THE NON-BUSINESS PURPOSES. THE ASSESSEE HAS RELIED ON THE DECISION IN SAYAJI IRON & ENGG. CO.VS. CIT 253 ITR 749 (GUJ). 37. LD. DR POINTED OUT THAT THE DECISION IN SAYAJI IRON & ENGG. CO. (SUPRA) WAS IN RESPECT OF PERSONAL USE OF THE VEHIC LE. IN THE PRESENT CASE BY NOT SUBMITTING BASIC RECORDS SUCH AS LOG BOOKS A ND VOUCHERS AND WHO HAS USED THE VEHICLE AND FOR WHAT PURPOSES ENTIRE C LAIM CANNOT BE ALLOWED. 38. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE UPH OLD THE DISALLOWANCE. WE AGREE WITH THE LD. DR THAT THE DEC ISION IN THE CASE OF SAYAJI IRON & ENGG. CO. (SUPRA) PERTAINS TO PERSONAL USE OF THE VEHICLE WHEREAS THE DISALLOWANCE IN THE PRESENT CASE HAS BE EN MADE FOR NON- BUSINESS USE OF THE VEHICLE. ONUS IS ON THE ASSESSE E TO ESTABLISH TO THE SATISFACTION OF THE AO THAT VEHICLES WERE USED FOR BUSINESS PURPOSES. IN ABSENCE OF BASIC RECORDS LIKE LOG BOOK AND VOUCHERS AN ESTIMATE OF ALLOWANCE/DISALLOWANCE HAS TO BE MADE. ACCORDINGLY AO WAS JUSTIFIED IN ALLOWING THE CLAIM AT 4/5 TH AND DISALLOWING THE CLAIM AT 1/5 TH . ACCORDINGLY THIS GROUND OF REVENUE IS ALLOWED. THE ADDITION MAD E BY THE AO IS RESTORED. 39. GROUND NO.5 RELATES TO NETTING OF INTEREST INCO ME FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80 HHC/80IA. THIS ISSUE HAD ALSO COME UP 20 BEFORE US IN ASSESSEES APPEAL. THERE WE HAVE HELD THAT DEDUCTION UNDER SECTION 80IA WOULD NOT BE ADMISSIBLE TO THE ASSESSE E ON INTEREST INCOME AS IT WAS NOT DERIVED FROM INDUSTRIAL UNDERTAKING. THE CLAIM OF DEDUCTION UNDER SECTION 80HHC ON THE AMOUNT IS NOT EXAMINED. THE AO HAS NOT TAXED INTEREST AS INCOME FROM OTHER SOURCE AND BY I MPLICATION LD. AR THAT ARGUES THAT IT SHOULD BE TREATED AS BUSINESS INCOME . AGAIN WHETHER THIS INTEREST INCOME WOULD BE TREATED AS INCOME FROM EXP ORT BUSINESS OR INCOME FROM OTHER BUSINESS HAS TO BE DECIDED BY THE AO. ACCORDINGLY THE ISSUE IS RESTORED TO THE FILE OF AO FOR FIRST DECI DING WHETHER INTEREST INCOME EARNED FROM DEPOSITS ON SURPLUS FUNDS WOULD BE EXPORT INCOME OR NON-EXPORT INCOME. IN CASE IT IS TREATED AS EXPORT INCOME THEN NETTING WOULD BE REQUIRED IN VIEW OF THE DECISION OF HON. D ELHI HIGH COURT IN THE CASE OF CIT VS. SHRI RAM HONDA POWER EQUIPMENT & OTHERS (SUPRA). THE ASSESSEE WILL PRODUCE NECESSARY EVIDENCE TO SHO W THAT EXPENDITURE OF INTEREST WAS IN CONNECTION WITH EARNING OF INTEREST INCOME IN CASE INTEREST INCOME IS TREATED AS INCOME EARNED FROM BUSINESS OF EXPORT. ACCORDINGLY FOR THIS LIMITED PURPOSE WE RESTORE THIS MATTER TO THE FILE OF AO. AS A RESULT THIS GROUND OF REVENUE IS PARTLY ALLOWED BU T FOR STATISTICAL PURPOSES. 40. GROUND NO.6 RELATES TO CLAIM OF DEDUCTION UNDER SECTION 80 HHC IN RESPECT OF EXCHANGE GAIN ON GOODS MANUFACTURED A ND EXPORTED BY THE ASSESSEE. THE ISSUE IS COVERED IN FAVOUR OF THE ASS ESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.1776 & 2817/AHD/2003 & CO 227/AHD/2004 FOR ASST. YEAR 2000-01 VIDE PARA 8 OF ITS ORDER DATED 5/12/2008 WHICH IS REPRODUCED AS UNDER :- 8. AS REGARDS TO FOREIGN EXCHANGE GAINS THE ISSUE RAISED BY THE ASSESSEE WE FIND THAT THE ISSUE IS SQUARELY COVERE D IN FAVOUR OF THE 21 ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. AMBA IMPEX (2006) 282 I TR 144 (GUJ) WHEREIN IT IS HELD AS UNDER:- THE ENTIRE CASE OF THE REVENUE IS BUILT ON THE FAC T THAT THE AMOUNT HAS BEEN RECEIVED IN A YEAR SUBSEQUENT TO THE YEAR OF EXPORT S. AS CAN BE SEEN FROM THE ASSESSMENT ORDER IT TALKS OF EXPORT REALIZATION FOR EXPORTS MADE UP IN MARCH 31 2000. THERE IS NOTHING TO INDICATE AND NONE O F THE AUTHORITIES HAVE APPLIED THEIR MIND AS TO WHETHER THE SUM OF RS.13 18 068 IS RELATABLE TO EXPORTS MADE DURING ONLY ONE FINANCIAL YEAR OR MORE THAN ONE FINANCIAL YEAR PRECEDING MARCH 31 2000. THIS WOULD HAVE A MATERI AL BEARING TAKING INTO CONSIDERATION THE PROVISIONS OF SUB-SECTION (2) OF SECTION 80HHC OF THE ACT AS WAS APPLICABLE DURING THE YEAR UNDER CONSIDERATION. UNDER SUB-SECTION (2) OF SECTION 80HHC OF THE A CT SALE PROCEEDS OF GOODS OR MERCHANDISE EXPORTED OUT OF INDIA AND RECEIVED I N CONVERTIBLE FOREIGN EXCHANGE BECOME ENTITLED TO THE DEDUCTION SUBJECT T O FULFILLMENT OF OTHER REQUISITE CONDITIONS. CLAUSE (A) OF SUB-SECTION (2 ) OF SECTION 80HHC OF THE ACT PROVIDES THAT SUCH SALE PROCEEDS HAVE TO BE REC EIVED IN CONVERTIBLE FOREIGN EXCHANGE WITHIN A PERIOD OF SIX MONTHS FROM THE END OF THE PREVIOUS YEAR OR WITHIN SUCH FURTHER PERIOD AS THE COMPETENT AUTHORI TY MAY ALLOW IN THIS BEHALF. THUS A PLAIN READING OF THE PROVISION MAKES IT CLE AR THAT ONCE THE COMPETENT AUTHORITY HAS EXTENDED THE TIME IN A CASE WHERE IT IS NECESSARY OR WHERE THE SALE PROCEEDS HAVE BEEN RECEIVED WITHIN A PERIOD OF SIX MONTHS FROM THE END OF THE PREVIOUS YEAR SUCH SALE PROCEEDS ARE DIRECTLY RELATABLE TO THE EXPORTS MADE AND NO FURTHER INQUIRY IS NECESSARY. THEREFOR E THE ENTIRE CONTROVERSY AS TO WHETHER SUCH RECEIPT AMOUNTS TO ANY OTHER RECEI PT STIPULATED IN EXPLANATION (BAA)(1 ) NEED NOT BE TAKEN UP FOR CONSIDERATION. ONCE THE LEGISLATURE HAS PROVIDED FOR TREATING A RECEIPT WIT HIN A PERIOD OF SIX MONTHS AFTER THE END OF THE PREVIOUS YEAR OR WITHIN FURTH ER EXTENDED PERIOD AS SALE PROCEED RELATABLE EXPORTS IT WOULD NOT BE OPEN TO THE REVENUE TO RAISE SUCH A CONTROVERSY. THE LEGISLATURE IN ITS WISDOM HAS TAKE N INTO CONSIDERATION THE FACT THAT IN THE CASE OF EXPORTS MADE SALE PROCEED S ARE NOT NECESSARILY REALIZABLE IMMEDIATELY WITHIN THE ACCOUNTING PERIOD IN WHICH EXPORTS HAVE BEEN MADE. AS A COROLLARY BY THE TIME SUCH SALE PR OCEEDS ARE RECEIVED WITHIN THE PRESCRIBED TIME BY VIRTUE OF EXCHANGE RATE DIF FERENCE THERE MIGHT BE A SITUATION WHERE A LARGER AMOUNT IS RECEIVED THAN TH E AMOUNT AS REFLECTED IN THE SHIPPING BILL. HENCE MERELY BECAUSE AN AMOUNT IS RECEIVED IN A YEAR SUBSEQUENT TO THE YEAR OF EXPORT BY WAY OF EXCHANGE RATE DIFFERENCE IT DOES NOT NECESSARILY ALWAYS FOLLOW THAT THE SAME IS NOT RELATABLE TO THE EXPORTS MADE. AS CAN BE SEEN FROM THE IMPUGNED ORDER OF THE TR IBUNAL AS WELL AS THE ORDERS OF THE COMMISSIONER (APPEALS) AND THE ASSESS ING OFFICER NONE OF THE AUTHORITIES HAVE APPROACHED THE ISSUE IN THE LIGHT OF THE PROVISIONS OF SUBS- SECTION (2) OF SECTION 80HHC OF THE ACT. NO EVIDENC E IS AVAILABLE ON RECORD TO ESTABLISH FULFILLMENT OR OTHERWISE OF THE CONDITIO NS STIPULATED BY SUBS-SECTION (2) OF SECTION 80HHC OF THE ACT. IN THESE CIRCUMST ANCES IT WOULD NOT BE FAIR 22 AND JUST FOR EITHER SIDE TO RESOLVE THE CONTROVERSY IN THE ABSENCE OF THE RELEVANT FACTS AND EVIDENCE BEING AVAILABLE ON RECO RD. IN THE LIGHT OF WHAT IS STATED HEREINBEFORE THE QUESTION IS LEFT UNANSWERED AND THE APPEAL IS RESTORED TO THE FILE OF THE TRIBU NAL ONLY IN RELATION TO THE ISSUE RELATABLE TO DEDUCTION UNDER SECTION 80HHC OF THE ACT WITHOUT EXPRESSING ANY FINAL OPINION ON THE MERITS OF THE M ATTER. THE TRIBUNAL SHALL AFTER HEARING BOTH THE SIDES DECIDE THE APPEAL ON THIS COUNT BE OPEN TO THE TRIBUNAL TO RESTORE THE ISSUE TO THE FILE OF THE AS SESSING AUTHORITY TO ASCERTAIN PROPER FACTS IN THE CIRCUMSTANCES. WE FIND THAT THE ISSUE IS SQUARELY COVERED BY THE J URISDICTIONAL HIGH COURT DECISION IN THE CASE OF AMBA IMPEX (SUPRA) R ESPECTFULLY FOLLOWING THE SAME WE ALLOW THE CLAIM OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE ABOVE DECISION WE CONFI RM THE ORDER OF LD. CIT(A) AND DISMISS THIS GROUND OF REVENUE. 41. GROUND NO.7 RELATES TO CLAIM OF DEDUCTION UNDER SECTION 80 HHC ON SALE OF ADVANCE LICENCE. THE ISSUE REGARDING DED UCTION UNDER SECTION 80IA OR IN NETTING FOR THAT PURPOSE IN RESPECT OF I NCOME FROM SALE OF ADVANCE LICENCE IS COVERED AGAINST THE ASSESSEE BY THE HON. SUPREME COURT IN THE CASE OF LIBERTY INDIA VS. CIT (SUPRA). THUS NO DEDUCTION UNDER SECTION 80IA WOULD BE AVAILABLE IN RESPECT OF ANY BENEFIT IN ANY EXPORT SCHEME INCLUDING ADVANCE LICENCE OR SALE THE REOF. SO FAR AS DEDUCTION UNDER SECTION 80 HHC IS CONCERNED WHILE CONSIDERING ASSESSEES APPEAL IN GROUND NO.9 THEREOF WE HAVE RE STORED THE MATTER TO THE FILE OF AO TO CALCULATE AVAILABLE DEDUCTION IN ACCORDANCE WITH THE DECISION OF THE TRIBUNAL MUMBAI (SPECIAL BENCH) IN THE CASE OF TOP MAN EXPORTS (SUPRA). AS A RESULT THIS GROUND OF REVENU E IS PARTLY ALLOWED AND PARTLY ALLOWED FOR STATISTICAL PURPOSES. 23 42. GROUND NO.8 RELATES TO DEDUCTION U/S 80 HHC AND U/S 80IA ON DUTY DRAW BACK. WE HAVE HEARD THE PARTIES. OUR DECISION IS THE SAME AS IN GROUND NO.7. NO DEDUCTION UNDER SECTION 80IA WOULD BE AVAILABLE WHEREAS FOR COMPUTATION OF DEDUCTION UNDER SECTION 80HHC MATTER IS RESTORED TO THE FILE OF AO IN ACCORDANCE WITH THE D ECISION IN THE CASE OF TOP MAN EXPORTS (SUPRA). 43. GROUND NO.9 RELATES TO DEDUCTION UNDER SECTION 80IA ON ENTIRE PROFIT OF COMPOSITE UNIT. WE HAVE HEARD THE PARTIES . THE FACTS RELATING TO THIS ISSUE ARE SAME AS IN ASST. YEAR 2000-01. THE T RIBUNAL FOR THAT ASST. YEAR HAS DECIDED THE ISSUE IN ITA NO.1776 & 2817/AH D/2003 & CO 227/AHD/2004 FOR ASST. YEAR 2000-01 VIDE PARA 2 OF ITS ORDER DATED 5/12/2008 WHICH IS REPRODUCED AS UNDER :- 4. THE NEXT COMMON ISSUE IN BOTH THE APPEALS OF RE VENUE AND THAT OF ASSESSEE ARE RAISED BY WAY OF GROUND NO.7 AND GROUN D NO.4 RESPECTIVELY AS UNDER:- 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) SURAT HAS ERRE D IN ALLOWING DEDUCTION U/S. 80IA ON THE ENTIRE PROFITS OF THE COMPOSITE UN DERTAKING 4. ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND INTERPRETATION OF LAW THE LEARNED ASST. COMMISSIONE R OF INCOME TAX HAS ERRED IN NOT GRANTING THE DEDUCTION TO THE APPELLANT- COM PANY IN ACCORDANCE WITH THE PROVISIONS OF SECTION 80IA OF THE INCOME TAX AC T 1961. THE ACTION OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS CON TRARY TO THE FACTS AND LAW AND DESERVES TO BE DELETED. 5. AT THE OUTSET THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THIS TRIBUNAL I N ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1997-98 AND 1998-99 IN ITA NO.415 & 1657/AHD/201 DATED 09-03-2007. HE REFERRED TO PARA-12 OF THIS TRIBUNA LS ORDER AND THE SAME READS AS UNDER:- 12. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF T HE PARTIES PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD AND GONE THRO UGH THE DECISIONS CITED. SOME OF THE IMPORTANT FACTS NOTICED ARE THAT THE AS SESSEE STARTED 24 MANUFACTURING OF PESTICIDES IN THE YEAR 1991-92. A LL THE PLANT AND MACHINERY OF THE ASSESSEE IS OF SAME TYPES AND MANUFACTURING PROCESS CARRIED ON BY THE ASSESSEE IS SAME IN ALL THE YEARS. THE ASSESSEE WAS CAPABLE OF MANUFACTURING ALL THE PESTICIDES MANUFACTURED BY IT IN ALL THE YE ARS. THE INFRASTRUCTURE FOR PRODUCTION BELONGING TO THE ASSESSEE CONSISTED OF A CENTRAL UTILITY CENTRE COMMON MAN POWER COMMON MANAGEMENT COMMON BOOKS O F ACCOUNTS AND SAME PROCESS WITH INPUT DIFFERING MARGINALLY DEPEND ING UPON THE SPECIFIC PRODUCTS WITHIN THE BROAD CATEGORY OF THE THING CAL LED PESTICIDES AND INSECTICIDES. THE ASSESSEE EXPANDED ITS PRODUCTION FACILITIES YEAR-AFTER-YEAR. THE ASSESSEE HAS FILED DETAILS REGARDING MANUFACTUR ING PROCESS OF VARIOUS TYPES OF PESTICIDES THROUGH LETTER DATED 16 TH DEC. 99 OF WHICH COPY IS AT PAGE 157 OF THE ASSESSEES PAPER BOOK. THE ASSESSEE BY VARIOUS SUPPORTING EVIDENCE AND DETAILS ESTABLISHED THAT THE BUSINESS OF THE ASSESSEE IS NOT FORMED BY SPLITTING UP OR RECONSTRUCTION OF A BUSINESS ON EXISTENCE. IT IS USING POWERS FOR ITS MANUFACTURING PROCESS AND HAS EMPLOYED MORE THAN 10% DURING THE YEARS. IT HAS MANUFACTURED / PRODUCED PESTICIDES A ND INTERMEDIATES CONSISTENTLY FROM ASSESSMENT YEAR 1991-92. IT HAS BEEN NOTICED FROM PAGE 190 OF ASSESSEES PAPER BOOK THAT THE IDENTICAL ITEM O F PESTICIDES HAS BEEN MANUFACTURED BY THE ASSESSEE EVEN BEFORE 1 ST APRIL 1995. FROM THE FINANCIAL STATEMENTS IT HAS BEEN NOTICED THAT THE ASSESSEE MA INTAINED ONE SET OF BOOKS OF ACCOUNTS AND ACCORDINGLY ONE PROFIT AND LOSS ACCOUN T AND BALANCE SHEET IS PREPARED. ON THE BASIS OF THE ABOVE FACTUAL POSITI ON IT CANNOT BE SAID THAT THE ASSESSEE HAS STARTED A NEW PRODUCT AFTER 31 ST MARCH 1995. IF FOR THE SAKE OF ARGUMENT IT IS PRESUMED THAT THE ASSESSEE STARTED N EW UNITS OF THE EXISTING BUSINESS AND THERE IS COMPLETE INTER-CONNECTION IN TERLACING AND INTER- DEPENDENCE OF THE UNITS THE BUSINESS OF THE ASSESS EE IS TO BE CALLED AS SAME BUSINESS. THIS VIEW IS FORTIFIED BY THE JUDGMENT O F THE JURISDICTIONAL HIGH CURT IN THE CASE OF CIT VS. ALEMBIC GLASS INDUSTRIES LTD. 103 ITR 715 (GUJ). WHEN THERE IS A SAME BUSINESS OF THE ASSESSEE SINCE 1991 -92 WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE IS ENTITLED FOR D EDUCTION U/S.80IA. APART FROM ABOVE IT HAS ALSO BEEN NOTICED THAT THE DEPART MENT ITSELF HAS ALLOWED THE DEDUCTION UNDER SIMILAR CIRCUMSTANCES IN ASSESSMENT YEARS 1995-96 1997-98 AND 1999-2000. ON CONSIDERING THE PRINCIPLE OF CON SISTENCY THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S.80IA. IN THE LIGHT OF AB OVE DISCUSSION WE DO NOT FIND ANY ERROR IN THE ORDER OF THE CIT(APPEALS) IN DIREC TING THE ASSESSING OFFICER TO ALLOW DEDUCTION U/S.80IA TO THE ASSESSEE. THE ORDE R OF THE CIT(APPEALS) IS CONFIRMED. THE LD. COUNSEL FOR THE ASSESSEE ALSO STATED THAT T HE HON'BLE JURISDICTIONAL HAS ALSO AFFIRMED THE ALLOWANCE OF DEDUCTION U/S.80 IA BY STATING THAT NO SUBSTANTIAL QUESTION OF LAW ARISES OUT OF THE ORDER OF THE TRIBUNAL. THE RELEVANT PORTION OF JUDGMENT IN MISC. CIVIL APPLICA TION NO.91 OF 2008 IN TAX APPEAL NO.57 OF 2008 IS REPRODUCED AS UNDER:- 2. THE APPLICANT REVENUE AS THE APPELLANT HAD PROPOSED FIVE QUESTIONS OUT OF WHICH VIDE ORDER DATED 19.03.2008 THE COURT ADMITTED THE APPEAL IN RELATION TO THE THREE QUESTIONS RECORDED IN THE SAI D ORDER OF 19.03.2008 BEING PROPOSED QUESTIONS NO.S [A] [B] AND [E] AS APPEARI NG IN THE MEMORANDUM OF APPEAL. THE APPLICANT-REVENUE CONTENDS THAT IN SO F AR AS THE REMAINING TWO QUESTIONS ARE CONCERNED THE COURT HAS NOT RECORDED ANY REASONS AND HENCE 25 THE SAME ARE REQUIRED TO BE HEARD ON MERITS AND THE REAFTER APPEAL IS REQUIRED TO BE ADMITTED. 3. ON BEHALF OF THE RESPONDENT ASSESSEE ORDER DATE D 17.07.2008 MADE IN MISC. CIVIL APPLICATION NO.62 OF 2008 BETWEEN THE S AME PARTIES IS PLACED ON RECORD WHEREIN SIMILAR ISSUE WAS RAISED BY THE APPL ICANT REVENUE AND THIS COURT CAME TO THE CONCLUSION THAT THE QUESTIONS WER E RIGHTLY NOT FORMULATED AS THE SAME ARE ESSENTIAL QUESTIONS OF FACT. 4. AS CAN BE SEEN FROM THE TWO QUESTIONS WHICH RE AD AS UNDER: [B] WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I LAW APPELLATE TRIBUNAL WAS RIGHT IN UPHOLDING THE ORDER OF CIT(A) IN RESPECT DISALLOWANCE OF FOREIGN TRAVEL EXPENSES WITHOUT CONSIDERING THE FAC T THAT ASSESSEE FAILED FURNISH THE JUSTIFICATION WITH REGARD NUMBER OF DAY S STAY AT A PARTICULAR STATION JUSTIFICATION FOR THE STAY TO BE ON ACCOUN T OF BUSINESS PURPOSE ONLY ETC.? [C] WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW APPELLATE TRIBUNAL WAS RIGHT IN UPHOLDING THE ORDER OF CIT(A) REGARDING ALLOWANCE OF DEDUCTION U/S.80IA OF I.T. ACT IN RESPECT OF STATIS TICAL PURPOSES UNIT WITHOUT CONSIDERING THE FACT THAT MERE UTILIZATION OF COMMO N UTILITIES BY BOTH THE UNDERTAKING VIZ. NSP DIVISION AND STATISTICAL PURPO SES DIVISION CANNOT MAKE THEM ON UNDERTAKING? ESSENTIALLY BY BOTH THE PROPOSED QUESTIONS AS THE FRAME OF THE QUESTIONS ITSELF SUGGESTS THE APPLICANT IS SEEKING TO RAISE AN ISSU E OF FACT BY CONTENDING THAT A PARTICULAR FACT HAS NOT BEEN CONSIDERED BY THE TRIB UNAL. 5. IN THE AFORESAID FACT SITUATION IT IS APPARENT THAT NONE OF THE AFORESAID TWO QUESTIONS CAN BE TERMED TO BE A QUESTION OF LAW MUCH LESS A SUBSTANTIAL QUESTION OF LAW SO AS TO BE RAISED AND ADMITTED. HENCE NO INTERFERENCE IS WARRANTED AND THE APPLICATION IS REJECTED ACCORDING LY. IN VIEW OF THE ABOVE JUDGMENT OF HON'BLE JURISDICTI ONAL HIGH COURT IN ASSESSEES OWN CASE IN EARLIER YEAR AND THE ORDER O F THE TRIBUNAL IN THE EARLIER YEARS THE FACTS BEING EXACTLY THE SAME IN THIS YEA R AND THERE IS NO CHANGE IN FACTS TAKING A CONSISTENCE VIEW AND RESPECTFULLY F OLLOWING THE HON'BLE JURISDICTIONAL HIGH COURT WE UPHOLD THE ORDER OF C IT(A) ALLOWING THE CLAIM OF THE ASSESSEE. THE COMMON ISSUE OF THE APPEAL OF THE REVENUE IS DISMISSED. THIS ISSUE OF THE ASSESSEES APPEAL HAS NOT BEEN PR ESSED BY THE COUNSEL OF THE ASSESSEE AS THE CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE. ACCORDINGLY THE ISSUE RAISED BY THE ASSESSEE IS DI SMISSED AS INFRUCTUOUS. ACCORDINGLY THIS ISSUE OF BOTH THE APPEALS IS DISM ISSED AS INDICATED ABOVE. 26 44. SINCE THE FACTS AND CIRCUMSTANCES OF THE CASE R EMAIN THE SAME WE CONFIRM THE ORDER OF LD. CIT(A) ON THIS ISSUE AND D ISMISS THIS GROUND RAISED BY THE REVENUE. 45. AS A RESULT APPEAL FILED BY THE REVENUE IS PAR TLY ALLOWED AND PARTLY ALLOWED FOR STATISTICAL PURPOSES. 46. CROSS OBJECTION NO. 242/AHD/2005 FOR ASST. YEAR 1999-2000 FILED BY THE ASSESSEE IS NOT PRESSED AND HENCE IT IS RE JECTED. ITA NO.2469/AHD.2004 ASST. YEAR 2001-02 (ASSESSEES APPEAL) 47. IN THIS APPEAL THE FOLLOWING GROUNDS HAVE BEEN RAISED :- 01 THE ORDER OF ASSESSMENT IS CONTRARY TO THE F ACTS AND PREJUDICIAL TO THE ASSESSEE. 02. ON APPRECIATION OF THE FACTS AND CIRCUMSTAN CES OF THE CASE AND LAW THE ADDITIONS MADE BY THE LEARNED ASSESSING OFFICER AND CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ARE CONTRARY TO LAW AND BASED ON ERRONEOUS UNDERSTA NDING OF THE FACTS. 03. ON APPRECIATION OF THE FACTS AND CIRCUMSTANC ES OF THE CASE AND LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HA S ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSESSING OFFI CER IN DISALLOWING CONTRIBUTIONS TO THE TUNE OF RS.14 812/ - TO PF/ESI. THE ACTION OF THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) IS CONTRARY TO THE FACTS AND LAW AND DESERVES TO BE DE LETED. 04. ON APPRECIATION OF THE FACTS AND CIRCUMSTANCE S OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ER RED IN UPHOLDING THE ACTION OF THE LEARNED ASSESSING OFFIC ER IN NOT CONSIDERING THE EXPORT BENEFIT RECEIVABLE TO THE TU NE OF RS. 27 41 88 599/- AS INCOME DERIVED FROM INDUSTRIAL UN DERTAKING AND ELIGIBLE FOR DEDUCTION U/S 80-IB. THE ACTION OF THE LEARNED 27 COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO THE FACTS AND LAW AND DESERVES TO BE DELETED. 05. ON APPRECIATION OF THE FACTS AND CIRCUMSTAN CES OF THE CASE AND LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HA S ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSESSING OFFI CER OF EXCLUDING FOLLOWING ITEMS OF INCOME WHILE GRANTING DEDUCTION U/S. 80-IB - (A) INTEREST RECEIVED RS. 6 58 937/- (B) LIABILITY W/OFF RS . 64 817/- (C)MISC. INCOME RS. 7 63 715/- RS. 14 87 469/- THE ACTION OF THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) IS CONTRARY TO THE FACTS AND LAW AND DESERVES TO BE DE LETED. 06. ON APPRECIATION OF THE FACTS AND CIR CUMSTANCES OF THE CASE AND LAW THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSESSING OFFI CER OF NOT GRANTING DEDUCTION TO THE APPELLANT COMPANY U/S 80- IB OF THE INCOME TAX ACT CORRECTLY AS PER LAW 07. ON APPRECIATION OF THE FACTS AND CIRCUMSTANCE S OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ER RED IN UPHOLDING THE ACTION OF THE LEARNED ASSESSING OFFIC ER IN NOT CONSIDERING THE EXPORT BENEFIT RECEIVABLE TO THE TU NE OF RS 27 41 88 599- AS INCOME FROM BUSINESS FOR THE PURP OSE OF COMPUTING DEDUCTION U/S 8O-HHC. THE ACTION OF THE L EARNED COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO THE FACTS AND LAW AND DESERVES TO BE DELETED 08. ON APPRECIATION OF THE FACTS AND CIRCUMSTANCE S OF THE CASE AND LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) HAS ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSESSING O FFICER OF EXCLUDING FOLLOWING ITEMS OF INCOME WHILE GRANTING DEDUCTION U/S. 80-HHC :- (A) INTEREST RECEIVED RS. 6 5 8 937/- (B) LIABILITY W/OFF RS 64 817/- (C) MISC. INCOME RS. 7 63 715/- RS. 14 87 469/- 28 THE ACTION OF THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) IS CONTRARY TO THE FACTS AND LAW AND DESERVES TO BE DE LETED. 09 ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ER RED IN CONFIRMING THE ACTION OF THE LEARNED ASSESSING OFFI CER OF NOT GRANTING DEDUCTION TO THE APPELLANT COMPANY U/S 80H HC OF THE INCOME TAX ACT CORRECTLY AS PER LAW. 10. THE APPELLANT CRAVES TO ADD AMEND MODIFY OR A LTER THE ABOVE GROUNDS OF APPEAL AT ANY STAGE OF APPELLATE PROCEED INGS. 11. THE APPELLANT HUMBLY PRAYS THAT THE APPEAL BE A LLOWED IN TOTO. 48. GROUND NOS.1 & 2 ARE NOT PRESSED AND HENCE THEY ARE REJECTED. 49. GROUND NO.3 RELATES TO CONTRIBUTION TO PF/ESI A MOUNTING TO RS.14 812/-. WHILE DISPOSING OF THE APPEAL FOR ASST . YEAR 2000-01 THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. T HE REASONS AND DECISION REMAIN THE SAME AS GIVEN IN ASST. YEAR 200 0-01. FOLLOWING THE SAME THIS GROUND OF ASSESSEE IS ALLOWED. 50. GROUND NO.4 RELATES TO CLAIM OF DEDUCTION UNDER SECTION 80IB ON EXPORT BENEFITS AVAILABLE. WE HAVE DISPOSED OF SIMI LAR GROUND FOR ASST. YEAR 1999-00 IN RESPECT OF CLAIM OF DEDUCTION UNDER SECTION 80IA. IN THAT YEAR WE HAVE HELD THAT THE ISSUE IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF HON. SUPREME COURT IN LIBERTY INDIA (SU PRA). RESPECTFULLY FOLLOWING THE SAME WE CONFIRM THE ORDER OF LD. CIT( A) AND REJECT THIS GROUND OF ASSESSEE. 29 51. GROUND NO.5 RELATES TO NOT ALLOWING DEDUCTION U NDER SECTION 80IB ON INTEREST LIABILITY WRITTEN OFF AND MISCELLANEOU S INCOME TOTALING TO RS.14 87 469/-. SIMILAR ISSUE HAD COME BEFORE US IN ASST. YEAR 1999-00 FOR CLAIM OF DEDUCTION UNDER SECTION 80IA. WE HAVE HELD THAT ASSESSEE IS NOT ENTITLED TO DEDUCTION UNDER SECTION 80IA ON THE SE INCOMES AS THESE INCOMES ARE NOT DERIVED FROM THE INDUSTRIAL UNDERTA KING. FOLLOWING OUR REASONING AND DECISION IN ASST. YEAR 1999-00 WE UPH OLD THE ORDER OF LD. CIT(A) ON THE ISSUE AND REJECT THE GROUND TAKEN BY THE ASSESSEE. 52. GROUND NO.6 IS GENERAL WHICH IS NOT PRESSED AND HENCE DISMISSED AS NOT PRESSED. 53. GROUND NOS 7 TO 11 ARE ALSO NOT PRESSED AND THE REFORE THEY ARE REJECTED. 54. IN THE RESULT THIS APPEAL OF ASSESSEE IS PARTL Y ALLOWED FOR STATISTICAL PURPOSES. ITA NO.2452/AHD/2004 ASST. YEAR 2001-02 (REVENUES APPEAL) 55. IN THIS APPEAL REVENUE HAS RAISED THE FOLLOWING GROUNDS :- 1] ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN LAW THE LEARNED CIT(A) ERRED IN OBSERVING AND HOLDING THAT THE LOWE R AUTHORITIES ARE NOT FOLLOWING THE DIRECTIONS OF THE HIGHER AUTH ORITIES WITHOUT APPRECIATING THE FACT THAT THE REVENUE IS IN APPEAL IN THE HIGHER COURT I.E. THE TRIBUNAL AGAINST THE RELIEF GRANTED BY THE CTT(A) IN THIS CASE FOR THE EARLIER YEARS. 1-1] ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN LAW THE LEARNED CIT(A) ERRED IN OBSERVING AND HOLDING THAT THE LOWE R AUTHORITIES ARE NOT FOLLOWING THE DIRECTIONS OF THE HIGHER AUTH ORITIES WITHOUT CONSIDERING THE FACT THAT THE APPELLANT HAS RIGHT T O APPEAL TO THE HIGHER AUTHORITIES AGAINST THE RELIEF GRANTED BY TH E LOWER AUTHORITIES 30 AND THE LAW BECOMES FINAL AS WHEN THE SUPREME COURT DECIDES THE ISSUES IN QUESTION. 1.2] THE LEARNED CIT(A) HAS GRANTED RELIEF TO THE ASSESSEE-COMPANY IN A ROUTINE MANNER RELYING ON THE APPELLATE ORDERS OF THE EARLIER YEARS WITHOUT CONSIDERING THE FACT THAT IF THE ADDITIONS ARE NOT MADE AND THE STAND TAKEN BY THE REVENUE IN THE EARLIER YEARS GETS CONFIRMED BY THE HIGHER COURT THEN AT THAT TIME LIMITATION P ERIOD FOR TAKING THE ACTION MAY GET LAPSED. 1.3] THE LEARNED CIT(A) HAS IGNORED THE PRINCIPLE S OF RES-JUDICATA WHICH IS NOT APPLYING IN THE INCOME-TAX PROCEEDINGS BECAU SE EACH ASSESSMENT AND EACH PROCEEDINGS ARE SEPARATE PROCEE DINGS 2] ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN LAW THE LEARNED CIT(A) ERRED IN DELETING MAJORITY OF THE ADDITIONS IN A ROUTINE MANNER RELYING UPON THE APPELLATE ORDERS PASSED BY HIS PREDECESSORS IN THE OFFICE WITHOUT CONSIDERING THE FRESH FACTS MATERIAL EVIDENCES JUDICIAL REFERENCES INCLUDING THE DECISIONS OF THE HON'BLE SUPREME COURT BROUGHT ON RECORD BY THE ASSESSING OFFICER WHILE MAKING THE ADDITIONS AND BEFORE THE C IT(A) DURING THE APPELLATE PROCEEDINGS IN THE REMAND REPORT CALL ED FOR 3] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION ON ACCOUN T OF STAFF WELFARE EXPENSES AMOUNTING TO RS.61 042/- WITHOUT A PPRECIATING THE FACT THAT NO COMPLETE SET OF DETAILS WITH THE S UPPORTING EVIDENCES WERE FILED BY THE ASSESSEE-COMPANY DESPIT E SUFFICIENT TIME GIVEN TO IT. 4] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED C1T(A) HAS ERRED IN DELETING THE ADDITION ON ACCOUN T OF LEGAL & PROFESSIONAL EXPENSES AMOUNTING TO RS.1 20 000/- WI THOUT APPRECIATING THE FACT THAT THE PAYMENT WAS ATTRACTE D BY THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. 4 1] THE LEARNED CIT(A) HAS SUMMARILY DELETED THE D ISALLOWANCE WITHOUT CONSIDERING THE FACT THAT THE EXPENDITURE C LAIMED WAS GENUINE AND REASONABLE LOOKING TO THE LEGIT IMATE NEEDS OF THE BUSINESS OF ASSESSEE-COMPANY. 31 5] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED C1T(A) HAS ERRED IN DELETING THE ADDITION ON ACCOUN T OF FOREIGN TRAVELING EXPENSES AMOUNTING TO RS. 13 87 I59/- WIT HOUT APPRECIATING THE FACT THAT NO COMPLETE SET OF DETAI LS WITH THE SUPPORTING EVIDENCES WERE FILED BY THE ASSESSEE-COM PANY DESPITE SUFFICIENT TIME AND OPPORTUNITIES GIVEN TO IT AND A SSESSEE-COMPANY FAILED TO SUBSTANTIATE ITS CLAIM THAT THE EXPENDITU RE WAS INCURRED WHOLLY NECESSARILY AND EXCLUSIVELY FOR THE BUSINESS PURPOSE AND NOT FOR THE PERSONAL PURPOSE. 6] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION ON ACCOUN T OF PETROL AND DIESEL EXPENSES WITHOUT CONSIDERING THE FACT THAT N O COMPLETE SET OF DETAILS WITH THE SUPPORTING EVIDENCES WERE FILED BY THE ASSESSEE- COMPANY DESPITE SUFFICIENT TIME AND OPPORTUNITIES G IVEN TO IT AND ASSESSEE-COMPANY FAILED TO SUBSTANTIATE ITS CLAIM T HAT THE EXPENDITURE WAS INCURRED WHOLLY NECESSARILY AND EX CLUSIVELY FOR THE BUSINESS PURPOSE AND NOT FOR THE PERSONAL PURPO SE. 6.1] THE LEARNED CJT(A) ERRED IN GRANTING RELIEF TO THE ASSESSES- COMPANY WITHOUT CONSIDERING THE FACT THAT NO LOG BO OK WAS MAINTAINED BY THE ASSESSEE COMPANY TO ESTABLISH THA T THE EXPENDITURE WAS INCURRED WHOLLY NECESSARILY AND EX CLUSIVELY FOR THE BUSINESS PURPOSE AND NOT FOR THE PERSONAL PURPO SE. 6.2] THE LEARNED CIT(A) GRANTED RELIEF TO THE AS SESSEE-COMPANY ON THE GROUND THAT NO SUCH DISALLOWANCE CAN BE MADE IN THE CASES OF COMPANIES WITHOUT CONSIDERING THE FACT THAT THE AS SESSEE-COMPANY ITSELF HAS DISALLOWED PART OF EXPENDITURE FOR PERSO NAL NATURE AND NO DETAILS WHATSOEVER WERE FILED TO SHOW THAT THE FACI LITIES/SERVICES WERE TREATED AS PERQUISITES IN THE INDIVIDUAL CASES OF DIRECTORS/EMPLOYEES OF THE COMPANY. 6.3] THE LEARNED CIT(A) ERRED IN GRANTING THE REL IEF TO THE ASSESSEE- COMPANY WITHOUT CONSIDERING THE FACT THAT PART DISA LLOWANCE BY THE ASSESSEE-COMPANY ITSELF PROVES THAT THE VEHICLES WE RE USED FOR OTHER THAN THE BUSINESS PURPOSES I.E. FOR THE PERSO NAL PURPOSES AND THUS FURTHER DISALLOWANCE BY THE AO IN ABSENCE OF D ETAILS NOT BEING FURNISHED BY THE ASSESSEE-COMPANY IS JUSTIFIED. 7] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION ON ACCOUN T OF OFFICE EXPENSES AMOUNTING TO RS.63 651/- WITHOUT CONSIDERI NG THE FACT 32 THAT NO COMPLETE SET OF DETAILS WITH THE SUPPORTING EVIDENCES WERE FILED BY THE ASSESSEE-COMPANY DESPITE SUFFICIENT TI ME AND OPPORTUNITIES GIVEN TO IT AND ASSESSEE-COMPANY FAIL ED TO SUBSTANTIATE ITS CLAIM THAT THE EXPENDITURE WAS INC URRED WHOLLY NECESSARILY AND EXCLUSIVELY FOR THE BUSINESS PURPOS E AND NOT FOR THE PERSONAL PURPOSE. 7.1] THE LEARNED CIT(A) HAS ERRED IN GRANTING TH E RELIEF TO THE ASSESSEE- COMPANY WITHOUT CONSIDERING THE FACT THAT THE DISAL LOWANCE WAS MADE OUT OF THE EXPENDITURE OF RS.1 63 529/- FOR WH ICH NO DETAIL OR EVIDENCES WERE AVAILABLE WITH THE ASSESSEE-COMPANY AND THE SAME WERE CLAIMED ON AD-HOC BASIS. 8] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION ON ACCOUN T OF MISC. EXPENSES AMOUNTING TO RS L 55 485/- WITHOUT APPRECI ATING THE FACT THAT NO COMPLETE SET OF DETAILS WITH THE SUPPORTING EVIDENCES WERE FILED BY THE ASSESSEE-COMPANY DESPITE SUFFICIENT TI ME AND OPPORTUNITIES GIVEN TO IT AS ALSO ASSESSEE COMPANY FAILED TO JUSTIFY ITS CLAIM THAT THE EXPENDITURE WAS INCURRED WHOLLY NECESSARILY AND EXCLUSIVELY FOR THE BUSINESS PURPOSE AND NOT FOR TH E PERSONAL PURPOSE. 9] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION ON ACCOUN T OF EXPORT SALES COMMISSION AMOUNTING TO RS.39 01 785/- WITHOUT CONS IDERING THE FACT THAT THE PAYMENT WAS ATTRACTED BY THE PROVISIO NS OF SECTION 40A(2)(B) OF THE ACT. 9.1] THE LEARNED CIT(A) HAS ERRED IN GRANTING REL IEF TO THE ASSESSEE- COMPANY WITHOUT CONSIDERING THE FACT THAT THE DECIS ION RELIED ON BY HIM OF HON'BLE DELHI HIGH COURT REPORTED AT 254 ITR 377 IS ON ALLOWANCE OF ANY EXPENDITURE U/S.37(1) OF THE ACT WHEREAS THE ASSESSEE-COMPANY'S CASE IS GOVERNED BY THE PROVISIO NS OF SECTION 40A(2)(B) I.E. TO SAY THE EXPENDITURE CLAIMED IS EX CESSIVE AND UNREASONABLE HAVING REGARD TO THE SERVICES OR FACIL ITIES FOR WHICH THE PAYMENT IS ALLEGED TO HAVE BEEN MADE OR THE LEG ITIMATE NEEDS OF THE BUSINESS OF THE ASSESSEE-COMPANY OR THE BENEFIT DERIVED BY OR ACCRUING TO IT THERE-FROM. 9.2] THE LEARNED CIT(A) ERRED IN GRANTING RELIEF T O THE ASSESSEE- COMPANY WITHOUT CONSIDERING THE FACT THAT THERE WAS NO 33 COMMERCIAL EXPEDIENCY ATTACHING TO THE DISALLOWED E XPENSE FOR THE DETAILED REASONS WHICH ARE GIVEN BY THE ASSESSING O FFICER IN HIS ORDER AS HELD BY THE HON'BLE MADHYA PRADESH HIGH CO URT IN THE CASE OF GANESH SOAP WORKS RAIPUR VS. CIT [161 ITR 876] 10] ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION ON ACCOUN T OF EXCISE REFUND RECEIVABLE AMOUNTING TO RS.5 30 27 670/- WIT HOUT CONSIDERING THE FACTS DISCUSSED IN THE FOLLOWING JU DICIAL DECISIONS DELIVERED BY THE VARIOUS COURTS ON THE ISSUE; 1) CIT VS. THIRUMALAISWAMY NAIDU & SONS [1998] 23 0 ITR 534 [SC] 2) CIT VS. CHOWRANGHEE SALES BUREAU - 87 ITR 542 [SC] 3) CIT VS. SLNCLALREMURRY &CO 97 ITR 615 4) CIT VS. T NAGGI REDDY [1993] 202 ITR 253 [SC] 5) J. NARSJMHARAO&CO VS CIT[1993] 200 ITR588 ( SC] 6) NAV]IVAN UDYOG MANDLR LTD. VS.CIT [1994] 207 ITR 40 [GUJ] 7) KEDARNATH JUTE MANUFACTURING CO. LTD VS H CIT [1971] 82 ITR 363 8) POLYFLEX [INDIA[ P. LTD. VS CIT [257 ITR 343 ] 11] ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION ON ACCOUN T OF DISCOUNT AMOUNTING TO RS. 17 92 404/- WITHOUT CONSIDERING TH E FACT THAT THE DISALLOWANCE WAS MADE AFTER WORKING OUT AVERAGE DIS COUNT RATE OF LAST THREE YEARS AND THEREBY 1/3 RD OF EXCESS EXPENDITURE CLAIMED WAS DISALLOWED WHILE FINALIZING THE ASSESSMENT ORDE R. 11.1] THE LEARNED CIT(A) HAS GRANTED THE RELIEF TO THE ASSESSES-COMPANY WITHOUT CONSIDERING THE FEET THAT THE RATE OF DISCO UNT WITH REFERENCE TO THE TURNOVER IN THE YEAR UNDER CONSIDERATION INC REASED SUBSTANTIALLY AS COMPARED THE LAST YEAR ON THE OTHE R HAND THERE WAS MARGINAL INCREASE IN THE TURNOVER AS COMPARED TO TH E LAST YEAR. 12] ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT(A) HAS ERRED IN ALLOWING THE APPEAL OF THE ASSE SSEE-COMPANY IN RESPECT OF GRANTING DEDUCTION U/S. 80IB ON THE E NTIRE PROFITS OF THE COMPOSITE UNIT WITHOUT CONSIDERING THE FACT THA T AS PER THE PROVISIONS OF SECTION 80IB OF THE ACT IT CAN ONLY BE ALLOWED TO THE PROFITS AND GAINS OF THE ONE AND NEW INDUSTRIAL UND ERTAKING AND NOT ON COMPOSITE UNIT OR UNDERTAKING 12.1] THE LEARNED CIT(A) ERRED IN GRANTING RELIEF T O THE ASSESSEE- COMPANY IN A ROUTINE MANNER RELYING ON THE ORDERS OF HIS PREDECESSORS IGNORING THE FACTS EVIDENCES AND MAT ERIAL BROUGHT TO 34 HIS NOTICE IN THE REMAND REPORT CALLED FOR THAT THE ASSESSEE HAS MANAGED TO GET RELIEF BY PUTTING WRONG FACT OF ALLO WING DEDUCTION BY THE AO IN A Y. 1996-97 WHEREAS NO SUCH CLAIM W AS MADE OR ALLOWED BY THE AO AS IT WAS LOSS CASE. 12.2] THE LEARNED CIT(A) ERRED IN GRANTING RELIEF T O THE ASSESSEE- COMPANY IGNORING AND REJECTING THE MATERIAL EVIDENC ES FACTS BROUGHT TO HIS NOTICE THAT THE LEARNED C1T(A) [THE PREDECESSOR] HAD GRANTED RELIEF ON ACCOUNT OF DISALLOWANCE OF DEDUCT ION U/S 801A/80IB TO THE ASSESSEE COMPANY FOR A Y. 1997-98 ON THE GROUND THAT THE SAME WAS ALLOWED FOR THE FIRST YEAR I.E. A. Y 1996- 97 AND IT CANNOT BE WITHDRAWN/DISALLOWED SUBSEQUENT LY FOR A. Y. 1997-98 DESPITE THE FACT THAT IT WAS THE LOSS CASE FOR A Y 1996-97 AND DEDUCTION U/S. 80IA/80LB COULD NOT BE ALLOWED I N A LOSS CASE. 12.3] THE LEARNED CIT(A) ERRED IN GRANTING RELIEF T O THE ASSESSEE- COMPANY ON THE BASIS OF APPELLATE ORDERS OF EARLIER YEARS ON THE GROUND THAT SUCH RELIEF WAS GRANTED BY HIS PREDECES SORS IN A YS. 1997-98 1998-99 & 2000-01 DESPITE THE FACTS BROUGH T TO HIS NOTICE THAT SUCH RELIEF WAS OBTAINED AND MANAGED BY THE AS SESSEE- COMPANY BY PUTTING THE WRONG FACTS BEFORE THE CIT{A ) AND SUCH RELIEF WAS GRANTED YEAR AFTER YEAR WITHOUT VERIFYIN G THE TRUTH BY THE C1T(A). 12.4] THE LEARNED CIT(A) HAS ERRED IN GRANTING THE RELIEF TO THE ASSESSEE- COMPANY ON THE ISSUE WITHOUT CONSIDERING THE MATERI AL FACTS DISCUSSED BY THE AO IN THE REMAND REPORT CALLED FOR BY HIM AND WITHOUT GETTING EXAMINED THE FACTS AND ADDITIONAL M ATERIAL EVIDENCES ADMITTED BY HIM FROM THE AO DESPITE THE FACT THAT THE AO HAD MAD REQUEST TO THE CIT(A) FOR INTENSIVE VERI FICATION OF ADMITTED MATERIALS AND MATERIAL ON RECORD IN THE RE MAND REPORT CALLED FOR. 12.5] THE LEARNED CIT(A) HAS ERRED IN GRANTING THE RELIEF TO THE ASSESSEE- COMPANY ON THE ISSUE WITHOUT GIVING OPPORTUNITY TO THE AO TO CARRY OUT INTENSIVE VERIFICATION ON THE ADDITIONAL MATERIAL/FACTS ADMITTED BY HIM IN RESPECT OF STARTING OF PRODUCTIO N OF SYNTHETIC PYRETHORID FROM F Y. 1994-95 THOUGH IT WAS SPECIFI CALLY REQUESTED IN THE REMAND REPORT IN VIOLATION OF PROVISIONS OF RULE 46A OF THE INCOME-TAX RULES 1962. 12.6] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW THE LEARNED CIT(A) HAS ERRED IN ALLOWING THE APPEAL OF THE ASSE SSEE-COMPANY 35 TO INCLUDE THE EXCHANGE GAIN OF RS.1 45 62 673/- WH ILE CALCULATING THE PROFITS OF THE BUSINESS FOR DEDUCTION U/S.80IB . 12.7] THE LEARNED CIT(A) HAS ERRED IN GRANTING RELI EF TO THE ASSESSEE- COMPANY WITHOUT CONSIDERING THE FACT THAT THE AO'S ACTION TO EXCLUDE THE EXPORT BENEFITS RECEIVABLE AMOUNTING TO RS 27 41 88 599/- INTEREST INCOME OF RS.1 15 94 60 4/- MISC. INCOME OF RS.21 61 358/- AND LIABILITY WRITTEN OFF OF RS.64 817/- WHILE CALCULATING THE PROFITS OF THE BUSINESS FOR D EDUCTION U/S.80LA HAS BEEN CONFIRMED BY THE CIT(A) FOLLOWING THE DECI SION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. STERLI NG FOODS 237 ITR 579 AND HENCE THE LEARNED CIT(A) HAS ERRED AND CONTRADICTED HIMSELF IN GRANTING RELIEF ON THE SIMILAR ISSUE SUC H AS EXCHANGE GAIN WHICH COULD NOT BE SAID TO BE DERIVED FROM' T HE INDUSTRIAL UNDERTAKING AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. STERLING FOODS 237 ITR 579 AND PANDIAN CHEM ICAJS LTD. VS. CIT-262 ITR 278 [SC] 13] ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT(A) HAS ERRED IN ALLOWING THE APPEAL OF THE ASSE SSEE-COMPANY TO INCLUDE EXCHANGE GAIN OF RS.1 45 62 673/- WHILE CALCULATING THE PROFITS OF THE BUSINESS FOR DEDUCTION U/S.80HHC OF THE ACT 13.1] THE LEARNED CIT(A) HAS ERRED IN GRANTING RELI EF TO THE ASSESSEE- COMPANY WITHOUT APPRECIATING THE FACT THAT WHERE TH E ITEM OF INCOME HAS NO NEXUS TO THE EXPORTS MADE BY THE ASSE SSEE THEN SAME IS TO BE EXCLUDED BOTH FROM THE TOTAL TURNOVER AS WELL AS FROM THE PROFITS OF THE BUSINESS AS HELD BY THE FOLLOWIN G COURTS: 1) TANNA EXPORTS [MUMBAL TRIBUNAL] 2) NATHANI STEELS [57 ITD 584] [MUMBAI TRIBUNAL] 3) CIT VS. STERLING FOODS - 237 ITR 579 [SC] 4) PANDIAN CHEMICALS LTD. VS.CIT [262 ITR 276] [S C] 13.2] THE LEARNED CIT(A) HAS GRANTED RELIEF TO THE ASSESSEE-COMPANY WITHOUT APPRECIATING THE FACT THAT ANY RECEIPT BY W AY OF BROKERAGE COMMISSION INTEREST RENT CHARGES OR ANY OTHER REC EIPT OF SIMILAR NATURE INCLUDED IN SUCH PROFIT IS NOT EXHAUSTIVE BU T IS ILLUSTRATIVE IN NATURE AS HELD BY THE HON'BLE COCHIN TRIBUNAL IN TH E CASE OF G. GANGHADHARAN NAIR 54 ITD 15. 36 14. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN ALLOWING THE APPEAL OF THE ASSE SSEE-COMPANY AND DIRECTING THE AO TO EXCLUDE THE EXCISE DUTY AND SALES TAX FROM THE TOTAL TURNOVER FOR WORKING OUT THE DEDUCTION U/ S.80HHC OF THE ACT. 14.1] THE LEARNED C1T(A) HAS GRANTED THE RELIEF TO THE ASSESSEE-COMPANY WITHOUT APPRECIATING THE FACT THAT IN THE CASE OF MC DOWEL & CO. LTD REPORTED IN 154 ITR 148 IT HAS BEEN HELD BY THE HON'BLE SUPREME COURT THAT THE SALES TAX AND EXCISE DUTY ET C ARE PART OF TRADING RECEIPT AND ACCORDINGLY THE TOTAL TURNOVER WOULD OBVIOUSLY INCLUDE THE SALES TAX AND EXCISE DUTY. 14 2] THE LEARNED CIT(A) HAS GRANTED THE RELIEF TO THE ASSESSEE-COMPANY WITHOUT APPRECIATING THE FEET THAT THE SALES-TAX AS WELL AS EXCISE DUTY FORM PAT OF THE TRADING RECEIPT IRRESPECTIVE OF THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE I.E. EVEN IF TH E ASSESSEE IS NOT CREDITING THIS TAX AS PART OF SALES BUT IS SHOWING THEM SEPARATELY; AS HELD BY THE HON'BLE COURTS IN THE CASE OF CHOWRINGH EE SALES BUREAU P. LTD. VS. C1T 11997] 87 ITR 542 [SC] AND S YNCLAIRE MURRAY & CO. 97 ITR 615[SC]. 4.3] THE LEARNED CIT(A) HAS GRANTED THE RELIEF TO THE ASSESSEE-COMPANY WITHOUT APPRECIATING THE FACT THAT THE SALES-TAX AN D EXCISE DUTY IS PART OF THE TOTAL TURNOVER AS HELD BY THE LEARNED C IT(A)-I SURAT IN THE CASE OF ASSESSEE-COMPANY ITSELF IN A. Y 2000- 01 RELYING UPON THE DECISION OF THE ITAT AHMEDABAD IN THE CASE OF GUJARAT FLURO CHEMICALS LTD. [2000] 76 TTJ (AHD) 313. 15] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE IN LAW THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE ASSESSMENT ORDER OF THE ASSESSING OFFICER PASSED U/S 143(3) OF THE ACT. 16] IT IS THEREFORE PRAYED THAT THE ORDER OF THE LEARNED C1T(A) BE SET ASIDE AND THAT THE ORDER OF THE AO BE RESTORED. 56. GROUND NOS. 1 & 2 ARE GENERAL IN NATURE AND DO NOT REQUIRE ANY SPECIFIC ADJUDICATION AND HENCE REJECTED. 37 57. GROUND NO.3 RELATES TO STAFF WELFARE EXPENSES. CIT(A) HAS RESTRICTED THE DISALLOWANCE TO 1/5 TH ON THE GROUND OF NON-VERIFICATION. SIMILAR ISSUE HAD COME IN ASST. YEAR 1999-00 ALSO. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE WE HAVE CONFIRMED THE DISALLOWANCE AS RETAINED BY THE LD. CIT(A). FOLLOWING THE REASONING S GIVEN THEREIN WE CONFIRM THE DISALLOWANCE RETAINED BY THE LD. CIT(A) THIS YEAR ALSO. THIS GROUND OF REVENUE IS REJECTED. 58. GROUND NO.4 RELATES TO LEGAL AND PROFESSIONAL C HARGES OF RS.1 20 000/- PAID TO SMT. KIRAN MINOCHA WIFE OF M ANAGING DIRECTOR. FOR THE REASONS GIVEN BY US IN ASST. YEAR 1999-00 W E UPHOLD THE DISALLOWANCE AS NO EVIDENCE OF SERVICES RENDERED AR E FURNISHED AT IN ANY STAGE. THIS GROUND OF REVENUE IS ALLOWED AND ADDITI ON IS RESTORED. 59. GROUND NO.5 RELATES TO FOREIGN TRAVELING EXPENS ES. THE AO HAD DISALLOWED 1/5 TH OF EXPENSES ON AD HOC BASIS WHEREAS THE ASSESSEE H AS FURNISHED DETAILS OF FOREIGN TRAVELS OF EMPLOYEES A ND DIRECTORS WHICH ARE ANNEXED AT PAGES 40 TO 48 OF THE ASSESSEES PAPER B OOK. SIMILAR ISSUE HAD COME BEFORE US IN ASST. YEAR 1999-00 AS ABOVE. FOLL OWING THE REASONINGS GIVEN THEREIN WE HOLD THAT ADDITION WAS NOT JUSTIFI ED AND ACCORDINGLY CONFIRM THE ORDER OF LD. CIT(A). THIS GROUND OF REV ENUE IS REJECTED. 60. GROUND NO.6 RELATES TO PETROL AND DIESEL EXPENS ES AND GROUND NO.7 RELATES TO OFFICE EXPENSES WHEREIN 1/5 TH EXPENDITURE WAS MADE BY THE AO WHICH WAS DELETED BY LD. CIT(A). THE ISSUE REGARDIN G DISALLOWANCE OUT OF PETROL AND DIESEL EXPENSES HAD COME BEFORE US IN AS ST. YEAR 1999-00 WHEREIN WE HAVE UPHELD THE ADDITION. FOLLOWING OUR REASONING IN THAT YEAR WE RESTORE THE ADDITION. ACCORDINGLY THESE TWO GROUNDS OF REVENUE ARE ALLOWED. 38 61. GROUND NO.8 RELATES TO DISALLOWANCE OF MISCELLA NEOUS EXPENSES. THIS IS SIMILAR TO OTHER EXPENSES COVERED IN GROUND NOS.6 & 7 IN REVENUES APPEAL AND DISPOSED OF AS ABOVE. ASSESSEE WAS NOT ABLE TO FURNISH EVIDENCE THAT THESE EXPENDITURE WERE INCURR ED FOR BUSINESS PURPOSES. LD. CIT(A) ALLOWED THE CLAIM WITHOUT SATI SFYING HIMSELF THAT ENTIRE EXPENDITURE WAS INCURRED FOR BUSINESS PURPOS ES. CONSIDERING THE LACK OF EVIDENCE IN RESPECT OF MISCELLANEOUS EXPENS ES DISALLOWANCE AT RS.1 55 485/- IS CONFIRMED. THIS GROUND OF REVENUE IS ALLOWED. 62. GROUND NO.9 RELATES TO EXPORTS SALES AMOUNTING TO RS.39 01 785/-. LD. NOTED THAT ASSESSEE HAS PAID COMMISSION TO VARI OUS PARTIES AS UNDER :- NAME OF THE PARTY COMMISSION PAID TO INR DISCOVERY 2 41 748 IMASPRO RESOURCES IND BHD 22 282 KAILASH ENTERPRISES 4 24 473 MR. LI FA GEN 94 76 998 MAXGROW PTE LTD. 5 04 350 NADIA ABDEL SAMAD IBRAHIM ABOU 5 62 162 POINEERS 1 39 336 ROCOS BEST DEVELOPMENT CO. LTD. 4 25 337 HENG JI DA YE (HK) LTD. 14 50 398 SHINWON CHEMTRADE CO. LTD. 2 03 861 MR.HAYTHAM MOHS KAMIS 2 74 000 CHARU AGROCHEM AGENCIES 70 200 ARIHANT CHEMICALS 6 41 515 ANOO CHEMICALS 24 228 AVENTIS CROPSCIENCE LTD. 51 76 785 OTHER COMMISSION & BROKERAGE 14 420 39 RATE OF COMMISSION PAID TO VARIOUS AGENTS WAS AS HI GH AS 3962.70 PER KG. AND IN ONE CASE IT WAS 6474.07 PER KG. THERE WA S ONE PARTY WITH THE NAME AVENTIS CROPSCIENCE LTD. WHICH A SISTER CONCER N OF THE ASSESSEE. IT WAS PAID A TOTAL SUM OF RS.51 76 785/-. IT WAS EXPL AINED TO THE AO THAT AVENTIS CROPSCIENCE LTD. IS PARENT COMPANY OF THE A SSESSEE. THERE WAS AN AGREEMENT WITH THE PARENT COMPANY ACCORDING TO W HICH AMOUNT REALIZED BY FOREIGN COMPANY OVER AND ABOVE RS.6 400 /- PER KG. ON ONE PRODUCE UNDER THE NAME ESBIOTHRIN WOULD BE GIVEN T O PARENT COMPANY. THE AO HOWEVER HELD THAT ASSESSEE HAS NOT PROVED T HAT PAYMENT TO SISTER CONCERN IS REASONABLE. HE HELD THAT COMMISSION PAID IN EXCESS OF RS.1 000/- PER KG. IS EXCESSIVE UNDER SECTION 40A(2 )(B). HE ACCORDINGLY CALCULATED RS.12 75 000/- AS ALLOWABLE COMMISSION PAID @ RS.1 000/- PER KG. AND REST RS.39 01 785/- WAS DISALLOWED AND ACCORDINGLY HE MADE THE ADDITION. 63. LD. CIT(A) DELETED THE ADDITION BY FOLLOWING TH E DECISION OF HON. DELHI HIGH COURT IN CIT VS. DALMIA CEMENT (BHARAT) LTD. 254 ITR 377 (DEL) WHEREIN IT IS HELD THAT REASONINGS OF COMMISS ION PAYMENT IS TO BE SEEN FROM THE POINT OF VIEW OF BUSINESSMAN AND NOT FROM REVENUES POINT OF VIEW. 64. BEFORE US LD. DR SUBMITTED THAT ASSESSEE HAS N OT BEEN ABLE TO PROVE THAT PAYMENT OF COMMISSION WAS COMMENSURATE W ITH MARKET RATE. ON THE ONE HAND IT HAS PAID COMMISSION AT LOWER RAT E OF 3961 PER KG. WHEREAS TO THIS PARTY IT HAS BEEN PAID @ 4060 PER K G. (RS.51 76 786/- 1275 KG). 65. LD. AR ON THE OTHER HAND SUBMITTED THAT PAYMEN T OF COMMISSION TO PARENT COMPANY IS SUPPORTED BY LEGALLY ENFORCEAB LE DOCUMENTS AND 40 FURTHER COMMISSION HAS BEEN PAID ONLY @ 4060 PER KG . AS WORKED OUT BY THE AO HIMSELF ON TOTAL SALES OF 1275 KG. OF ESBIOT HRIN ON WHICH COMMISSION OF RS.51 76 786/- WAS PAID. 66. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE DECL INE TO INTERFERE. FIRSTLY COMMISSION PAID IS NOT UNREASONABLE. IT HAS BEEN PAID @ RS.4060/- PER KG. WHICH IS QUITE NEAR TO LOWEST RAT E OF RS.3961.70 AS POINTED OUT BY THE AO IN HIS ORDER. THE COMMISSION PAID TO OTHERS HAD GONE AS HIGH AS RS.6474.07 PER KG. WHICH HAS NOT BE EN DOUBTED BY THE AO AND HAS BEEN ALLOWED. SECONDLY THE PAYMENT OF CO MMISSION TO PARENT COMPANY IS SUPPORTED BY A VALID DOCUMENT WHICH HAS NOT BEEN FOUND SHAM BY THE AUTHORITIES BELOW. UNLESS IT IS SHOWN T HAT THERE WAS A TRANSFER OF INCOME TO THE FOREIGN COMPANY UNDER THE GARB OF SALES COMMISSION AND LEGAL DOCUMENTS AND AGREEMENTS FRAMED WERE SAM NO DISALLOWANCE CAN BE UPHELD. ACCORDINGLY THIS GROUND OF REVENUE IS RE JECTED. 67. GROUND NO.10 RELATES TO EXCISE REFUND AMOUNTING TO RS.5 30 27 670/-. THE AO TREAT THIS AMOUNT AS INCOM E AND TAXED IT ACCORDINGLY. LD. CIT(A) EXAMINED THE ISSUE AND FOUN D AS UNDER :- 27. THE GROUND NO.12 IS REGARDING THE ADDITION OF RS.5 30 27 670/- MADE ON ACCOUNT OF EXCISE REFUND RECEIVABLE. THE LD . COUNSEL HAS STATED THAT EXCISE REFUND ARISES OUT OF DEPOSITS PLACED WI TH THE EXCISE AUTHORITIES WHERE THE PROOF OF EXPORT SHIPPING DOCU MENTS IS PENDING. SUCH REFUND OF EXCISE DUTY ACCOUNTED UNDER THE HEAD EXCISE REFUND RECEIVABLE IS IN THE NATURE OF SECURITY DEPOSITS. T HE APPELLANT COMPANY HAS DURING THE COURSE OF ASSESSMENT PROCEEDINGS EXP LAINED THE NATURE OF ACCOUNTING ENTRY TO THE AO. HOWEVER NOTHING IN THI S RESPECT WAS EITHER DEBITED TO PROFIT AND LOSS ACCOUNT OR CLAIMED AS EX PENDITURE DURING THE RELEVANT PREVIOUS YEAR. HE ALSO BROUGHT TO MY NOTIC E THAT THE AO HAS ALSO ACCEPTED THE CONTENTION PUT FORTH BY HIM DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 41 28. I HAVE CAREFULLY CONSIDERED THE ABOVE SUBMISSIO N OF THE LD. COUNSEL AND ALSO THE FACTS OF THE CASE. THIS ADDITION HAS B EEN MADE BY THE AO FOR THE FIRST TIME IN THE CASE OF THE APPELLANT THOUGH THIS ITEM WAS EVERY YEAR APPEARING IN THE BALANCE-SHEET OF THE APPELLANT COM PANY. THIS ADDITION HAS BEEN MADE FOR THE FIRST TIME ON A VERY ABSURD F INDING STATING THAT I AGREE WITH THE AUTHORISED REPRESENTATIVE OF THE ASS ESSEE AS REGARDS THE NATURE OF ACCOUNTING ENTRY AND TRANSACTION. CONSIDERING THE A DDITIONS MADE ON THIS GROUND IN THE CASE OF OTHER ASSESSEE COMPANY BY THIS OFFICE THE ENTIRE AMOUNT OF EXCISE DUTY REFUND RECEIVABLE FOR RS.5 30 27 670/- IS TREATED A S INCOME IN THE HANDS OF THE ASSESSEE COMPANY AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE COMPANY . THE ACTION OF THE AO WAS TOTALLY AGAINST THE PROVISIONS OF THE ACT. FIRSTLY THE ADDITION WAS NOT WARRANTED AT ALL. WHEN THE DEPOSIT S ARE MADE WITH THE EXCISE DEPARTMENT THE SAME ARE NOT CLAIMED AS EXPE NDITURE IN PROFIT AND LOSS ACCOUNT. THEREFORE WHEN THE AMOUNT IS REFUNDE D TO THE APPELLANT BY THE EXCISE DEPARTMENT IT CANNOT BE PART OF THE INC OME. SECONDLY THE AO HAS MADE THIS ADDITION BECAUSE SUCH TYPES OF ADDITI ONS WERE MADE IN THE CASES OF AMOLI ORGANICS LTD. AND IN THE CASE OF UME DICA LABORATORIES. THOUGH SUCH ADDITIONS WERE MADE IN THE CASES OF TH E ABOVE COMPANIES BUT IT WAS IN THE KNOWLEDGE OF THE AO THAT SUCH ADD ITIONS HAVE BEEN DELETED BY THE CIT(A) IN THE CASE OF BOTH THE COMPA NIES IN EARLIER YEARS. THUS ON THE BASIS OF ADDITIONS MADE IN OTHER CASES ALSO CANNOT HOLD GOOD. THE ADDITION WAS MADE BY THE AO JUST TO CREATE A NEW ISSUE FOR RAISING HEAVY DEMAND IN THE CASE OF T HE APPELLANT COMPANY BECAUSE NOW THIS ISSUE WILL BE REPETITIVE AND WILL BE RAISED IN FURTHER APPEALS TO THE ITAT OR TO THE HIGH COURTS. THE AO H AS MADE A SEPARATE BASIS FOR REPETITIVE ADDITION 68. WE HAVE HEARD THE PARTIES. SINCE THE AMOUNT DEP OSITED WITH THE EXCISE DEPARTMENT WAS NEVER CLAIMED AS DEDUCTION IN THE TRADING ACCOUNT OR IN THE PROFIT AND LOSS ACCOUNT IN ANY OF THE EAR LIER YEARS THEN REFUND FROM EXCISE AUTHORITIES CANNOT BE TREATED AS INCOME OF THE ASSESSEE. SIMILAR ISSUE CAME UP BEFORE THE TRIBUNAL IN THE CA SE OF ACIT VS. M/S MITSU LTD. IN ITA NO.2453/AHD/2004 FOR ASST. YEAR 2 001-02 WHEREIN VIDE PARA 28.1 & 28.2 THE TRIBUNAL HAS OBSERVED AS UNDER :- 28.1 GROUND NO.9 RELATES TO DELETION OF THE ADDITION OF RS.1 71 50 151/- ON ACCOUNT OF EXCISE R EFUND RECEIVABLE. THE AO OBSERVED THAT THIS OFFICE HAS TR EATED SUCH EXCISE REFUND RECEIVABLE AS INCOME IN THE CASE OF M /S AMOLI 42 ORGANICS LTD. AND M/S UMEDICA LABORATORIES LTD. THE ASSESSEE SUBMITTED THAT THE SAID ITEM IS NOT DEBITE D IN THE PROFITS AND LOSS ACCOUNT OR CLAIMED AS EXPENDITURE DURING THE YEAR UNDER CONSIDERATION OR PREVIOUS YEARS. THE AO TREATED THE EXCISE DUTY REFUND RECEIVABLE AS INCOME IN THE HANDS OF THE ASSESSEE AND MADE THE ADDITION. WHEN THE MATTER WEN T BEFORE THE CIT(A) THE CIT(A) THE CIT(A) DELETED THE ADDI TION BY OBSERVING AS UNDER:- 21 I HAVE CAREFULLY CONSIDERED THE ABOVE SUBMISSIO N OF THE LEARNED COUNSEL AND ALSO THE FACTS OF THE CASE. THI S ADDITION HAS BEEN MADE BY THE AO FOR THE FIRST TIME IN THE CASE OF THE APPELLANT THOUGH THIS ITEM MUST HAVE EVERY YEAR APPEARING IN THE BALANCE- SHEET OF THE APPELLANT COMPANY. THIS ADDITION HAS B EEN MADE FOR THE FIRST TIME ON A VERY ABSURD FINDING STATING TH AT I AGREE WITH THE AR OF THE ASSESSEE AS REGARDS THE NATURE OF ACC OUNTING ENTRY AND TRANSACTION. CONSIDERING THE ADDITIONS MADE ON THIS GROUND IN THE CASE OF OTHER ASSESSEE COMPANY BY THIS OFFICE THE ENTIRE AMOUNT OF EXCISE DUTY REFUND RECEIVABLE FOR RS.1 71 50 151 /- IS TREATED AS INCOME IN THE HANDS OF THE ASSESSEE COMPANY AND ADD ED BACK TO THE TOTAL INCOME OF THE ASSESSEE COMPANY. THE ACTION OF THE AO WAS TOTALLY AGAINST THE PROVISIONS OF THE ACT. FIRS TLY THE ADDITION WAS NOT WARRANTED AT ALL. WHEN THE DEPOSITS ARE MAD E WITH THE EXCISE DEPARTMENT THE SAME ARE NOT CLAIMED AS EXPE NDITURE IN PROFIT AND LOSS ACCOUNT. THEREFORE WHEN THE AMOUNT IS REFUNDED TO THE APPELLANT BY THE EXCISE DEPARTMENT IT CAN NOT BE PART OF THE INCOME. SECONDLY THE AO HAS MADE THIS ADDITION BEC AUSE SUCH TYPE OF ADDITIONS WERE MADE IN THE CASES OF AMOLI O RGANICS LTD. AND IN THE CASE OF UMEDICA LABORATORIES. THOUGH SU CH ADDITIONS WERE MADE IN THE CASES OF THE ABOVE COMPANIES BUT I T WAS IN THE KNOWLEDGE OF THE AO THAT SUCH ADDITIONS HAVE BEEN D ELETED BY THE CIT(A) IN THE CASE OF BOTH THE COMPANIES IN EARLIER YEARS. THUS ON THE BASIS OF ADDITIONS MADE IN OTHER CASES ALSO CAN NOT HOLD GOOD. THE ADDITION WAS MADE BY THE AO JUST TO CREATE A NE W ISSUE FOR RAISING HEAVY DEMAND IN THE CASE OF THE APPELLANT C OMPANY BECAUSE NOW THIS ISSUE WILL BE REPETITIVE AND WILL BE RAISED IN FURTHER APPEALS TO THE ITAT OR TO THE HIGH COURTS. THE AO HAS MADE A SEPARATE BASIS FOR REPETITIVE ADDITION. 22 I WOULD LIKE TO REFER TO THE FINDING GIVEN BY TH E CIT(A) IN THE CASE OF UMEDICA LABORATORIES PVT. LTD. FOR THE AY 2 000-01 WHICH IS AS UNDER: 43 THUS IN VIEW OF THE PAST HISTORY OF THE CASE AND AFTER GOING THROUGH THE APPELLATE ORDERS FOR THE AYS 1996 - 97 98-99 AND ALSO DIRECTIONS OF THE TRIBUNAL AS SP ELT OUT IN THE ORDER DTD.9.11.2000 FOR THE AY 1996-97 I SEE NO REASON AS TO WHY THE CLAIM OF THE APPELLANT REGARDING NON-TAXABILITY OF REFUND ON EXCISE DUTY SHOULD NOT BE ACCEPTED. THE FACTUAL POSITION FOR TH E AY 2000-01 IN RESPECT OF THIS ISSUE IS THE SAME AS IN THE EARLIER YEARS INCLUDING THE AY 1996-97 AND AY 1998-99. FOR THE REASONS DISCUSSED IN MY APPELLATE ORDERS FOR THE AY 1996-97 DTD. 20-10-2002 THE ADDITION MADE OF RS.88 67 803/- IN RESPECT OF EXCIS E REFUND IS HELD AS NOT TAXABLE FOR THE YEAR UNDER CONSIDERATION AND THIS ADDITION IS ACCORDINGLY DELE TED. 23 FOLLOWING THE SAME FINDING AS REFERRED TO ABOVE SUCH ADDITIONS WERE ALSO DELETED BY ME IN THE AFORESAID CASE VIDE PARA 4 OF THE APPELLATE ORDER DTD. 5.4.2004 IN APPEAL NO. CIT(A)/VLS/242/03-04 FOR THE AY 2001-02. 24 CONSIDERING THE FACTS OF THE CASE AND THE FINDIN G GIVEN IN THE APPELLATE ORDERS OF M/S UMEDICA LABORATORIES I AM OF THE CONSIDERED OPINION THAT EXCISE REFUND RECEIVABLE CA N NOT BE A PART OF TAXABLE INCOME. THE ADDITION WAS NOT WARRANTED A ND THE SAME IS HEREBY DELETED. 28.2 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMIS SIONS AND PERUSED THE MATERIAL ON RECORD ALONG WITH THE ORDER OF THE TAX AUTHORITIES BELOW. WE HAVE ALSO GONE THROUG H THE ORDERS OF THE CIT(A) FOR AYS 1996-97 AND 1998-99. F OR AY 2001-02 IN THE CASE OF M/S UMEDICA LABORATORIES P LTD. THIS TRIBUNAL HAS HELD THAT EXCISE REFUND IS NOT TAXABLE IF THE ASSESSEE HAS NOT DEBITED EXCISE DUTY IN ITS P&L ACC OUNT IN EARLIER YEAR WE FIND THAT THE CIT(A) HAS RIGHTLY HE LD THAT ON THE BASIS OF ADDITIONS MADE IN THE CASES CAN NOT HO LD GOOD. WE DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDE R OF THE CIT(A). WE ACCORDINGLY UPHOLD THE ORDER OF THE CIT( A). THUS THIS GROUND STANDS DISMISSED. RESPECTFULLY FOLLOWING ABOVE DECISION WE DECIDE IN FAVOUR OF THE ASSESSEE. THIS GROUND OF REVENUE IS REJECTED. 44 69. GROUND NO.11 RELATES TO DISALLOWANCE OF DISCOUN T AMOUNTING TO RS. 17 82 404/-. THE ASSESSEE HAS ALLOWED DISCOUNT TO I TS CUSTOMERS. THE TOTAL CLAIM MADE BY THE ASSESSEE AMOUNTED TO RS.1 43 14 3 25/- WHICH 0.41%. THE AO COLLECTED DATA FOR THREE AYS AS UNDER :- THE AO INFERRED THAT ASSESSEE HAS ALLOWED HIGHER DI SCOUNT TO ITS CUSTOMERS AS COMPARED TO EARLIER YEARS. IT WAS CLAI MED THAT DISCOUNT WAS ALLOWED FOR HIGHER TURNOVER AND SEVERAL KINDS OF IN CENTIVES ARE REQUIRED TO BE GIVEN. THE AO HOWEVER DID NOT AGREE AND HELD THAT DISCOUNT IS EXCESSIVE. HE TOOK THE AVERAGE FOR THREE YEARS WHIC H WAS DETERMINED 0.26% OF THE TURNOVER AND WHEN COMPARED WITH THE CL AIM AT 0.41% HE FOUND THE DIFFERENCE AT 1.5% WHICH WAS WORKED OUT A T RS.53 47 212/-. HE DISALLOWED 1/3 RD OF THE ABOVE AT RS.17 82 404/-. LD. CIT(A) DELETED THE ENTIRE ADDITION ON THE GROUND THAT IT IS THE DECISI ON OF A BUSINESSMAN TO DECIDE THE EXTENT OF DISCOUNT. 70. WE HAVE HEARD THE PARTIES. IN OUR CONSIDERED VI EW THE ASSESSEE WAS NOT ABLE TO JUSTIFY THE EXCESSIVE DISCOUNT GIVEN TH IS YEAR WHEN THERE IS NO INCREASE IN TURNOVER. ACCORDINGLY SOME AMOUNT OF DI SALLOWANCE IS NECESSARY. WE RESTRICT THE DISALLOWANCE TO 50% OF W HAT HAS BEEN MADE BY THE AO. ACCORDINGLY THE ADDITION TO THE EXTENT OF 5 0% OF RS.17 82 404/- IS RESTORED. THIS GROUND OF REVENUE IS PARTLY ALLOW ED. ASST. YEAR TOTAL TURNOVER DISCOUNT % OF DISC. WITH SALES 1999-2000 1416000935 8650909 0.25 2000-2001 3398062257 3729495 0.11 2001-2002 3467494744 14314325 0.41 45 71. GROUND NO.12.1 TO 12.5 RELATES TO DEDUCTION UND ER SECTION 80IB ON THE ENTIRE PROFIT OF COMPOSITE UNIT. THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASST. Y EAR 1999-2000 & 2000- 2001. FOR THE REASONS DISCUSSED THEREIN WE DECIDE T HIS GROUND IN FAVOUR OF ASSESSEE. THIS GROUND OF REVENUE IS REJECTED. 72. GROUND NOS.12.6 TO 12.7 & 13 TO 13.2 RELATE TO FOREIGN EXCHANGE GAIN FOR CALCULATING DEDUCTION UNDER SECTION 80IB A ND 80HHC. SIMILAR ISSUE HAD COME BEFORE IN REVENUES APPEAL FOR ASST. YEAR 1999-2000 WHEREIN WE HAVE HELD FOLLOWING THE TRIBUNALS DECIS ION FOR ASST. YEAR 2000-2001 THAT ASSESSEE IS ENTITLED TO DEDUCTION U NDER SECTION 80 HHC AND 80IA ON FOREIGN EXCHANGE FLUCTUATION GAIN RESU LTING ON BALANCE AGAINST CUSTOMERS TO WHOM THE PRODUCE OF ASSESSEE I S EXPORTED. ACCORDINGLY THESE GROUNDS OF REVENUE ARE REJECTED. 73. GROUND NO.14 RELATES TO INCLUSION OF EXCISE DUT Y AND SALES-TAX FROM TOTAL TURNOVER FOR DEDUCTION UNDER SECTION 80 HHC. 74. WE HAVE HEARD THE PARTIES. THE IS NOW COVERED A GAINST THE REVENUE BY THE DECISION OF HON. SUPREME COURT IN THE CASE O F CIT VS. LAXMI MACHINE WORKS 290 ITR 667 (SC). IT HAS BEEN HELD TH EREIN THAT EXCISE DUTY AND SALES-TAX ARE OF THE SAME NATURE AS BROKER AGE COMMISSION INTEREST AND RENT. THEY ARE TO BE EXCLUDED FROM TOT AL TURNOVER. RESPECTFULLY FOLLOWING THE ABOVE DECISION WE CONFIR M THE ORDER OF LD. CIT(A) AND DISMISS THIS GROUND OF REVENUE. 46 75. GROUND NOS. 15 & 16 ARE GENERAL IN NATURE AND T HEY ARE REJECTED. 76. CROSS OBJECTION NO.274/AHD/2004 FOR ASST. YEAR 2001-2002 FILED BY THE ASSESSEE IS NOT PRESSED AND HENCE DISMISSED. 77. IN THE RESULT ASSESSEES APPEAL NOS.2207 & 246 9 AND REVENUES APPEAL NOS.2268 & 2452 ARE PARTLY ALLOWED FOR STATI STICAL PURPOSES WHEREAS THE CROSS OBJECTION NOS.242 & 274 FILED BY THE ASSESSEE ARE DISMISSED. SD/- SD/- (T.K. SHARMA) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD DATED : 18/2/2010 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD ORDER PRONOUNCED IN OPEN COURT ON 18/2/2010