TMI Blog2012 (7) TMI 587X X X X Extracts X X X X X X X X Extracts X X X X ..... mercial expediency - against assessee. Disallowance on account of interest capitalized for the period prior to putting the assets to use - Held that:- Considering the facts and circumstances of the case where the assessee has failed to establish its case of availability of non-interest bearing funds and specially in view of the mixed pool of funds available with the assessee no merit in the present ground of appeal raised by the assessee - against assessee. Dis allowance of deduction u/s 80IB/80IC on AMC charges - Held that:- as AMC charges received by the assessee are directly relatable to the business carried on by the assessee of manufacturing, commissioning and erection of cooling system and consequently the assessee is eligible to the claim of deduction u/s 80IB/80IC - in favour of assessee. Dis allowance of deduction u/s 80IB/80IC on bad debts recovered - Held that:- The amount received on recovery of bad debts is income derived from industrial undertaking and as the outflow of bad debts written off is allowable as a deduction while computing the income of the industrial undertaking eligible for deduction under section 80IB/80IC consequently, the inflow of the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the fact that no explanation was tendered by the assessee during the course of the assessment proceedings with regard to the claim of bad debt. (iv) Granting relief to the assessee subject to the verification by the AO when no such power is vested with the CIT(A) under the provisions of the Act. (v) Deleting the addition to the extent of ₹ 13,68,671/- without appreciating the fact that no explanation was tendered by the assessee during the course of the assessment proceedings with regard to the claim of prior period expenses. (vi) Considering the employee benefit expense as ascertained liability instead of contingent liability without appreciating the fact of the case. (vii) Allowing the deduction u/s 80IB and 80IC on the facts and circumstances of the case. (viii) Appreciating the decision of the Hon'ble Supreme Court in the case of Textile Machinery Corporation Ltd., (107 ITR 195) wherein the Hon'ble Supreme Court approved the definition of 'reconstruction of business already in existence.' (ix) Appreciating the fact that there is specific provision viz sub-section 12) of Section 80IA which provides that when an undertaking o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omponents as being ineligible for deduction u/s 80IB and 80IC. b. The ld. CIT(A) has erred in accepting the method of calculation of ineligible profit used in above point No. 5(a), which has been computed at the assumed rate of 15% of the total purchase price of ₹ 6,12,68,584/- and is arbitrary and bad in law. 6. Consequential: a. That the AO erred in levying interest u/s 234B/234D and withdrawing interest u/s 244A of the Act. b. That AO erred in initiating penalty proceedings u/s 271(1)(c). 7. That the appellant craves leave to add, alter, amend, modify or forego any ground of appeal with the permission of the Hon'ble Bench of Income Tax Appellate Tribunal, before or at the time of hearing/final disposal of this appeal. Any other point as may be necessary at the time of hearing of appeal. That the above grounds are independent and without prejudice to one another. 5. The assessee in ITA No. 1021/Chd/2011 has raised the following grounds of appeal: That the ld. CIT(A) Chandigarh has erred in law and as well as on facts while passing orders on the following grounds: 1. Applicability of section 14A: That the ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total amount of ₹ 64,52,083/- which is arbitrary and bad in law. 9. Deduction u/s 80IB / 80 IC on bought out components: a. That the ld. CIT(A) has erred in confirming the treatment of AO on ₹ 1,15,07,683/- as profit from sale of bought out components as ineligible for deduction u/s 80IB and 80IC. b. The ld. CIT(A) has erred in accepting the method of calculation of ineligible profits used in above point No. 9(a), which has been computed as the difference of sale and purchase of bought out components and is arbitrary and bad in law. 10. Deduction u/s 80IB/80IC on High Sea Sales: That the ld. CIT(A) has erred in confirming the treatment of AO on ₹ 16,26,261/- as profit from High Sea Sales as being ineligible for deduction u/s 80IB and 80IC. 11. Deduction of profits eligible for Section 80 - Hon'ble High Court in AT calculation: Despite being fully covered by Hon'ble Supreme Court, the ld. CIT(A) has erred in confirming the addition of ₹ 2,35,61,691/- in Book Profits u/s 115JB which was claimed as deduction as amount of profits eligible u/s 80HHC vide clause (iv) of Explanation 1 to Section 115JB. 12. That the AO erre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO noted that special resolution was passed at the extra ordinary general meeting held on 31.3.2006 for the purpose of issue of equity shares to the employees as Sweat equity. The fair value of the equity share was adopted at ₹ 106.26p and the shares were issued under the scheme with lock in period of five years. No allotment to issue such shares was done and the same was pending on 31.3.2006. The said shares were included in shares outstanding account. In case any of the employees left the employment before the expiry of lock in period of five years, his shares were to be forfeited by the Management. As per the AO, the said expenditure booked to the profit and loss account, was not an ascertained liability but was a contingent liability, as it was not benefit conferred on the employees without any restrictions. Accordingly the same was not allowed as an expenditure during the year. 6.1. The assessee had claimed deduction u/s 80IC/80IB of the Act. The plea of the assessee was that it had started its commercial production w.e.f. 1.12.2004 after taking over as going concerns, two running manufacturing partnership firms namely M/s Spray Engineering Devices, a partnership fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices and estimated the same to be 30% and deduction u/s 80IB and 80IC on the income of ₹ 12,52,627/- was not allowed. Further the assessee had shown other income of ₹ 23,39,114/- on which a sum of ₹ 8,36,020/- was claimed as deduction u/s 80IB/80IC of the Act. The AO held that the nature of income shown under other income could not be derived from manufacturing activity. Interest on income tax refund was held to be income from other sources and other amounts were the income u/s 41 of the Act and rental income were not derived from manufacturing activities. The word 'derived from' being narrower, the claim of deduction u/s 80IB/80IC on other income of ₹ 8,36,620/- was rejected. 8. The next issue considered by the AO were the items being purchased directly from the market and being supplied to the customers i.e. the Voltage stabilizers, motors etc. The AO was of the view that the benefit of deduction u/s 80IB/80IC on such items had been considered and was not part of goods manufactured, could not be allowed. The total purchases of such goods were ₹ 6.12 crores and profit earned on the said goods was estimated at 15% being ₹ 1.08 crores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Chennai Bench of the Tribunal allowed the claim of the assessee in view of the assertion of the assessee that in case the employee leaves the organization, the assessee was offering to tax in the subsequent year, the value of forfeited shares by the Management. The CIT(A) thereafter considered the claim of the deduction u/s 80IB/80IC of the Act elaborately vide paras 72 to 80 of the appellate order. Placing reliance on the circular issued and the ratio laid down in Tech Books Electronics Services P.L. , 100 ITD 125 (Delhi) where identical issue was involved held that the assessee was entitled to deduction u/s 80IB/80IC of the Act for the unexpired period. 11. The next issue before the CIT(A) was the disallowance of deduction u/s 80IB which relates to AMC and other incomes. The deduction claimed on AMC was not held to be derived from the business of undertaking in view of ratio laid down by any Coral Telecom Ltd. in ITA No. 203/Chd/2005. The order of the AO in estimating the expenditure allowable out of the aforesaid receipts was also upheld by the CIT(A). The CIT(A) also upheld the disallowance u/s 80IB/80IC on other income. The CIT(A) also upheld the order of the AO on not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15JB and 115J, which were before the Hon'ble Supreme Court in Apollo Tyres ( supra ), are peri metria. As per the Explanation to section 115JB of the Act, book profit is defined to be the net profit shown in the Profit Loss Account for the relevant previous years as increased/reduced by the amounts specified in the clauses mentioned thereunder. The disallowance worked in the hands of the assessee under the provisions of section 14A of the Act is not covered by the aforesaid clauses and consequently we are in conformity with the order of the CIT (Appeals) in allowing the claim of the assessee by holding that no addition of ₹ 14,05,700/- is warranted, while computing the book profits under section 115JB of the Act. The ground Nos. 1(i) and 1(ii) raised by the Revenue are thus dismissed. 15. The issue in ground No. 1(iii) and 1(iv) is in relation to the deduction claimed on account of bad debts. The Assessing Officer had made an addition of ₹ 39,68,062/- on account of bad debts as the assessee had failed to furnish any information in respect thereof. 16. Before the CIT (Appeals) the claim of the assessee was that by an error the aforesaid evidence was not fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e are thus dismissed. 19. The issue in ground No. 1(v) is against the deletion of addition made on account of prior period expenses. The assessee during the year under consideration had claimed prior period expenses totaling ₹ 16,49,912/- and in the absence of the details, the said amount was disallowed by the Assessing Officer. 20. Before the CIT (Appeals), the claim of the assessee was that sum of ₹ 13,68,671/- was disallowed by the assessee itself and added back as its income in the computation of income filed for the year under consideration. The CIT (Appeals) vide para 56 noted that sums of ₹ 8,36,671/-, and ₹ 5,32,000/- were disallowed by the assessee under the head 'preliminary expenses written off in unit-I' and ₹ 9,63,000/- under the head 'gratuity'. The CIT (Appeals) in view thereof allowed the claim of the assessee to the extent of ₹ 13,68,671/- and the balance addition of ₹ 2,81,241/- was confirmed by the CIT (Appeals). 21. The Revenue is in appeal against the aforesaid deletion of ₹ 13,68,671/-. 22. We are in conformity with the observations of the CIT (Appeals) that where the amount relating t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses. Pending allotment of 3,94,972 equity share to employees as on 31st March, 2006, the sum of ₹ 4,19,39,9721- has been shown as share outstanding account in the balance sheet. The reason for creating this share outstanding account of ₹ 4,19,39,972/- in the balance sheet is that at the time of finalizing the balance sheet i.e. 31st March, 2006, the company had offered fro sale 3,94,692 sweat equity shares by passing a board resolution and disclosure have been made in the balance sheet under the head issued share capital . 25. The Assessing Officer vide para 11.4 observed as under: Now from above it becomes evident that the said expenditure booked to Profit and Loss account was not an ascertained liability of ₹ 4,19,39,972/- but a contingent liability. It is not a benefit conferred on the employees without any restrictions. The employee was not free to encash these shares. Further resolution was passed on 31-03-2006 and amount taken to share outstanding account. No option was given or exercised by the employees for these shares upto the end of the financial year. The liability of the company would get determined when the employee gives its option and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the Board during the meeting and the shares were allotted thereafter. 29. The learned D.R. for the Revenue placing reliance on the order of the Assessing Officer pointed out that the issue stands covered by the ratio laid down in Ranbaxy Laboratories Ltd. v. Addl. CIT [124 TTJ 771 (Del)], EIMC K.C.P. Ltd. v. CIT [242 ITR 659 (SC) and VIP Industries v. DCIT [ITA No. 7242/Mum/2008 - date of order 17.9.2010. The learned D.R. for the Revenue also pointed out that the facts are enumerated by the CIT (Appeals) at page 28 of the appellate order. 30. The learned A.R. for the assessee pointed out that liability had crystallized and it was not contingent liability. The above said expenditure was incurred for benefit of the employees and was to be allowed as a deduction. The learned A.R. for the assessee further pointed out that the reliance placed by the learned D.R. for the Revenue on the ratio laid down in Ranbaxy Laboratories Ltd. [124 TTJ 771 (Del)] was in respect of allotment of shares of technical know-how and it was not applicable. 31. We have heard the rival contentions and perused the record. The issue raised vide present grounds of appeal is in relation to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under ESOP scheme. Similarly issue before the Hon'ble Supreme Court in EIMCO K.C.P. Ltd. v. CIT ( supra ) was at variance with the issue raised in the present appeal. The next reliance by the learned D.R. for the Revenue on the ratio laid down in VIP Industries v. DCIT ( supra ) where the issue raised was in respect of claim of expenditure being the difference between the market price of the shares and price at which shares were allotted to the employees under ESOP scheme. In the facts of the present case before us, what has been booked as expenditure, is the value of shares allotted to the employees under the sweat equity scheme. In the totality of the facts and circumstances of the case, we are in agreement with the CIT (Appeals) in allowing claim of deduction. 32. Ground Nos. 1((vii) to 1(ix) raised by the Revenue are against deduction claimed under section 80IB/80IC of the Act by the resultant company. 33. The assessee company had taken over the business of two partnership firms and as per the Assessing Officer because there was no demerger or amalgamation but reconstruction of the business of the assessee, it was not eligible for deduction under section 80IB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee company on amalgamation claimed the above said deduction under section 80IB/80IC of the Act for the unexpired period as postulates under the Act. The issue arising in the present grounds of appeal is whether after the said amalgamation or take over by the assessee company, deduction under section 80IB/80IC of the Act for the remaining period was available to the assessee company. The Tribunal ( supra ) in assessee's own case while deciding appeal in assessment year 2005-06 have held that deduction under section 80IB/80IC of the Act was available to the undertaking and not the assessee as envisaged in CBDT Circular No. F15/5/63/IT (A-1) dated 13.12.1963. The Tribunal further held that the provisions of section 80IA(12) of the Act were not applicable to the facts of the present case as business of the two firms had been transferred under the scheme of the Income Tax Act. The Hon'ble Punjab Haryana High Court in CIT v. Mega Packages ( supra ) had also laid down the proposition that the benefit admissible to an undertaking under section 80IC of the Act for the remaining period could not be denied to the assessee on the ground that section 80IA(12) of the Act em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of section 14A of the Act. The Assessing Officer vide para 4.3 has noted the fact that during the year under consideration the assessee had not received any dividend income. Further in para 4.8 the Assessing Officer admits that there was no prescribed method for making disallowance under section 14A of the Act. The Assessing Officer vide para 4.8 considering the total expenditure and the investment made by the assessee which admittedly was made in the preceding years in relation to the total assets held by the assessee, computed the disallowance on account of interest under Rule 8D(2)(ii) of the Act at ₹ 12,55,100/- and further made disallowance of ₹ 1,50,600/- on account of other amount disallowable, resulting in disallowance of ₹ 14,05,700/-. The said observation of AO was upheld by the CIT (Appeals) vide para 2.1 of the appellate order against which assessee is in appeal. 38. The learned A.R. for the assessee pointed out that the assessee company had made investment of ₹ 3.01 crores in M/s Shree Sai Baba Sugar Mills Ltd, which was a sick sugar mill and there was no intention to earn dividend income from such investment and further no dividend wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee out of its accruals, does not warrant any disallowance under section 14A of the Act, in view of the ratio laid down by the Hon'ble Supreme Court in S.A. Builders ( supra ). We find merit in the plea of the assessee that where a business strategy had been adopted by the assessee by way of investment in shares of sick company in order to take over the said company for widening its operation of business, cannot be held to be investment per se. The decision making of a business man by way of strategy planning in allied line of business is a decision made in the course of carrying on the business and the Assessing Officer cannot sit in judgment seat to comment upon the same. Once the assessee has been found to have made a business investment by way of shares in related line of business, the said investment though held by way of shares in the said company cannot be subjected to disallowance under section 14A of the Act, which in any case is relatable to disallowance of the expenditure out of the exempt income earned by the assessee, by way of its investment in shares of other company. In the facts of the present case the investment was purely of business nature as the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ized for specific business needs i.e. purchase of fixed assets investment in shares/securities. The disallowance of ₹ 4,40,150/- was made out of the interest expenditure claimed by the assessee by invoking provisions of section 36(1)(iii) of the Act. 43. After hearing both the parties and the plea of the assessee that the transaction was on account of commercial expediency and consequently the ratio laid down by the Hon'ble Supreme Court in S.A. Builders ( supra ) was applicable, we find that the assessee has raised secured advances against which it was paying interest, which is claimed an expenditure in the Profit Loss Account. The perusal of the copy of account placed at Annexure A-3 reflects that the assessee had transferred funds for day-to-day running of the business of its subsidiary. The amounts have been advanced for the payment of salaries or for payment of rent and even for the payment to the parties i.e. for various bills raised by the subsidiary. In addition, on monthly basis the assessee had simply transferred funds to the bank account of the assessee on various dates for which there is no justification or no commercial expediency brought on record. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee undertakes substantial expansation during the period specified thereunder section 2(a) to section 80IC of the Act and under section 2(b) refers to manufacture or production of any article or thing specified in Fourteenth Schedule or commencing any operation specified in that Schedule between the period enumerated thereunder. Implication of section is that the profits and gains which are eligible for deduction under section 80IC of the Act should be derived from the manufacturing or production activity carried on by the assessee. 49. Now coming to the facts of the present case, the explanation of the assessee vis-a-vis the AMC charges received by it is as under: With regard to the above we would like to bring to your notice that we are providing customized cooling and condensing systems to the sugar systems to the sugar systems based on our own assessment of the clients' specific needs. Client needs are based on the sizes of the sugar mill and the type of the existing equipment of the sugar mill. We also provide automation of the above said equipments based on the client needs. Further the smooth running of the automation units the AMC of these units is provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee of manufacturing, commissioning and erection of cooling system and consequently the assessee is eligible to the claim of deduction u/s 80IB/80IC of the Act. Ground No.3 raised by the assessee is allowed. 52. The next issue raised is against non-allowance of deduction under section 80IB/80IC of the Act on the addition made of ₹ 8,36,020/- being bad debts recovered. The assessee during the year under consideration had claimed deduction under section 80IB/80IC of the Act on other income of ₹ 8,36,020/-, the detail of which are as under: Amount (Rs. ) Excess provision written back 1,29,662/- Bad Debts recovered 5,56,696/- Income tax Refund 92,090/- Amount written off 38,234/- Rental Income 18,000/- Excess and short 1338/- Total 8,36,020/- 53. The assessee has raised the issue vide ground No.4 against the addition on account of bad debts r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The Assessing Officer referred to the voltage stabilizers, motors, pumps, switch gear, control valve, cable, etc.. The assessee was requisitioned to furnish copies of its contract with the customers or the purchase orders placed by the customers and to explain how the profits on the said items not manufactured by it, were eligible for deduction under section 80IB/80IC of the Act. Copy of purchase order is enclosed as Annexure A-7 of the order. The Assessing Officer was of the view that the assessee is just a supplier of some major parts of the cooling and condensing system or sugar industry machinery which go into making of a complete cooling and condensing system or sugar industry machinery. Civil work is an important ingredient of the system as without proper foundation no such installation of heavy machinery is possible but the assessee is not into doing the said work. The contract is normally for supply of such manufactured components as well as the other bought out things and the assessee enters into a civil contract for the same. So claim of the assessee that it is claiming deduction for manufacture of sugar industry machinery or cooling systems is not correct. The Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee were that in addition to manufacturing certain parts of the cooling and condensing system, it was also assembling -the bought out items in order to make available the whole unit in running condition at the site of the company/plant. The components manufactured by the assessee in addition of the bought out items were integral part of the cooling and condensing system, which was the manufacturing business carried by the assessee. The issue arising in the present appeal is whether deduction under section 80IB/80IC of the Act is to be allowed on such bought out components. 61. Similar issue arose before the Mumbai Bench of the Tribunal in Mihir Engineers Ltd. ( supra ) where the Tribunal vide paras 23 to 30 held as under: 23.The deduction under section 80-IA of the Act is restricted to the profits and gains derived from the business of an industrial undertaking being an eligible business, subject to conditions enumerated in sub-section (2) of section 80-IA of the Act. The clause (iii) to section 80-IA(2) of the Act provides that for the eligibility of deduction, the industrial undertaking should manufacture or produce any article or thing, other than those specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us or truck chasis from imported parts in a 'knocked down' condition, could give rise to an article which is totally different from the parts and could amount to manufacture. This is so even though the component parts from which the automotive chasis is made, retain their individual identity in the whole article which is thus manufactured or produced. 25. The requirement of law is manufacturing but the whole process may not be carried out the assessee himself. The Chandigarh Bench of Tribunal in the case of Sond Bharat Pedals (India) v. ITO [2003] 84 ITD 89 had held as under :- It is not necessary that the assessee should carry out all the manufacturing operations itself, in order to be entitled to benefit of deduction under section 80-I. Such operations can be got done from outside agencies on payment of labour service charges. In fact certificate issued by the Punjab Government showed that the assessee was registered as a small scale industrial unit and the trading account showed the assessee's sales of ₹ 45.98 lakhs for the year under consideration. Since the assessee was engaged in the business of manufacturing cycle pedals, it would be entitled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er : It is apparent from a plain reading of the judgment of the Supreme Court in N.C. Budharaja Co.'s case (supra) that the various findings given related solely and exclusively to concerns engaged in the business of construction of dams and civil works. There was not a single word or whisper in the said judgment by which it could be inferred that an assessee engaged in the activities of designing, fabricating, erecting, supplying, installation and commissioning of a plant like the one supplied by the assessee could be covered by the aforesaid judgment. It is well-settled law that the judgment in each case has to be seen in the light of the facts of that case. A decision is to be understood in the context of the facts in which the decision is rendered. A case is precedent for what it explicitly decides and nothing more in the conditions of people, even the words occurring in a statute are required to be interpreted differently keeping in mind the context in which such expressions have been used in the relevant provisions of law. Therefore, the aforesaid judgment did not in any manner support the revenue's contention. The provisions of section 80-I are intended to pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 80HH. The contention of the assessee was that only 11.45 per cent of the total receipt had been taken for deduction under section 80HH as that work alone was done in backward area and it was not expected from the assessee to have its office or plant in backward area. The crux of the case laws is that if an industrial undertaking begins to manufacture or produce outside in any backward area, it is entitled to deduction under section 80HH. The assessee for, set up its own industrial undertaking at the site of its customers for whom water air pollution control plant was manufactured and of the places which were falling under the backward area declared under the Act, then, naturally the assessee should be getting benefit of the same and the computation made by the assessee-firm of the same was correct one. 29. The objection of the learned DR for the revenue that situs of assembly is important, has been dealt with by the Pune Bench of Tribunal in Indocan Engg. Systems (P.) Ltd. v. Dy. CIT [1997] 60 ITD 649. There is no merit in the contention of the learned DR for the revenue that main activity of the assessee is of erection at client's site. The end-product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hose gross total income includes profits and gains derived from an industrial undertaking as per stipulations in section 80-IA(2), which inter alia requires the manufacturing or production of an article or thing not being any article or thing specified in Eleventh Schedule. In the instant case before us, the assessee was manufacturing components of cooling towers in its factory unit at Chhatral, which in-turn were exigible to Excise Duty. The profits on sale of said components were entitled to deduction under section 80-IA of the Act and as allowed by Assessing Officer. The assessee in the present case was not in the business of sale of components of cooling towers, but the cooling tower as a whole, as is evident from the enquiries of the client, Quotations and Performa Invoice raised by the assessee. In the instant case, the assessee purchases various bought out components, which along with manufacturing components are assembled at the client's site and the cooling tower is erected. The ultimate product erected by the assessee was a cooling tower, which was a distinct product from the various components, bought from outside or manufactured by it. The aforesaid activities of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (RB) Cooling Towers, no deduction/benefit under section 80-IA shall be allowed on bought out components used for erection of Round Bottle Cooling Towers. The Assessing Officer is directed to allow the deduction under section 80-IA of the I.T. Act only on profits on sale of cross flow (XE series) and counter flow (CM series) cooling towers. 63. The CIT (Appeals) while deciding the present issue had relied upon the ratio laid down by the Hon'ble Punjab Haryana High Court in M/s Arisudana Spinning Mills Ltd. ( supra ) where the assessee in addition to manufacturing yarn was engaged in the trading of raw wool and knitted cloths. In respect of the trading activities carried on by the assessee the Hon'ble High Court held that the assessee was not entitled to the deduction under section 80IA of the Act. However, in the facts of the present case before us the assessee is not engaged in the trading of any items, but is purchasing certain items from the market like electric motors, Watt. conductor, cables, etc. In order to complete its project of supply the customers cooling and condensing system for the sugar industry on the specific need of its clients, the bought out comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance under section 36(1)(iii) of the Act as raised vide ground No.2 by the assessee in assessment year 2006-07. In line with our decision in paras hereinabove the facts being identical, we dismiss ground No.3 raised by the assessee. 69. The issue in ground No. 4 raised by the assessee is against the allowance of deduction under section 80IB/80IC of the Act for unexpired period of the eligible deduction available to the erstwhile partnership firms. In line with our decision to ground Nos.1(vii) to 1(ix) raised by the Revenue in assessment year 2006-07, the facts being identical, we allow the claim of the assessee. Ground No.4 raised by the assessee is thus allowed. 70. The issue in ground No.5 raised by the assessee is against the computation of deduction under section 80IB/80IC of the Act on recovery of bad debts. In line with our decision to ground No.4 raised by the assessee in assessment year 2006-07 the facts being identical, we allow the claim of the assessee. Ground No.5 raised by the assessee is thus allowed. 71. Ground No.6 raised by the assessee is not pressed hence the same is dismissed as not pressed. 72. The issue in ground No.7 raised by the assessee is ..... 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