TMI Blog2019 (3) TMI 735X X X X Extracts X X X X X X X X Extracts X X X X ..... -IA - book profit computation u/s 115JA - profit derived from industrial undertaking engaged in business of generation of distribution of power - generated power used for internal consumption of its existing unit and not distributed for purposes of business - net profit shown in profit and loss account distribution - HELD THAT:- The first ground of rejection of claim of assessee is that diesel-generating sets are imported where invoices show that these were imported for home consumption. The learned assessing officer has noted that the marking show that goods are not used for purpose of business. There is a clear misunderstanding on part of learned AO in holding that when custom authorities have marked for home consumption means that they are not to be used for purpose of business. The only meaning of that particular Mark is that goods are to be used for consumption in Indian Territory. Therefore, allegation of learned assessing officer that Gen sets imported for home consumption and therefore deduction under section 80 IA of income tax act is not allowable on it is devoid of any merit. Further, with respect to power generation unit not being a separate unit and further power is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure - HELD THAT:- In present case, it is apparent that assessee has been granted license for a particular period of enterprise resource planning software. In view of this, there is no outright purchase in case of assessee. As decided in assessee's own case for assessment year 98 – 99 CIT – A upheld holding that above expenditure on software system is revenue in nature. Characterization of interest income - correct head of income - business income or income from other sources - HELD THAT:- The interest income earned by assessee is on bank interest as well as on interoperates deposits. The interest was also received on income tax refund. Looking to nature of interest income shown by assessee, no reason to sustain order of learned CIT appeal. In several decisions cited before us DR, it is apparent that earning of interest income is not business of assessee, and also above income is also not inextricably linked with business of assessee but is altogether a different source of income which should be taxed under income from other sources only. In view of this with respect to interest income, we hold that it is chargeable to tax as income from other sources and not as business i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this, whole issue is set aside back to file of learned assessing officer with a direction to assessee to show that above expenditure is not a prior period expenditure and has been crystallized during year only. If assessee demonstrates that, addition is required to be deleted. Disallowance u/s 35 - AO has himself held that expenditure incurred u/s 35 was an allowable expenditure, but inadvertently same was not reduced from assessed income - HELD THAT:- Assessee is eligible for deduction of INR 8 184685 u/s 35 of income tax act. Even otherwise learned CIT – A has directed assessing officer to rectify mistake. Therefore, revenue cannot be said to be aggrieved by order of learned CIT – A if above mistake stated by assessee as well as by learned CIT appeal is correct. Employees contribution and employers contribution respectively towards provident fund allegedly not paid within stipulated period - HELD THAT:- The fact shows that salary for a calendar month is paid by 10th of succeeding month. The due date for payment of PF contributions would, therefore, be 15th of month following. In that view of matter, payments which have been disallowed by AO have been made within due dates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nization. Therefore, identity or image of assessee is not distorted to various stakeholders. In view of this, we do not find that these expenditure are creating any benefit of enduring nature to assessee. In fact, they are standard operating procedure of communicating with outside world. Accordingly we hold that these are revenue expenditure. Upfront fees for loans swaps and interest arbitrage expenses - revenue or capital expenditure - HELD THAT:- As in case of CIT vs. Meenakshi Mills Ltd. [2006 (9) TMI 139 - MADRAS HIGH COURT] held that upfront fees paid by assessee to bank while availing loan cannot be construed as a capital expenditure and allowed same as revenue expenditure. In view of this, we do not find any infirmity in order of learned CIT – A in allowing claim of assessee as revenue expenditure. MAT computation - how to calculate profit u/s 80 HHC while computing book profit? - HELD THAT:- Hon‟ble Supreme Court in case of CIT vs. Punjab Stainless Steel Industries [2014 (5) TMI 238 - SUPREME COURT] wherein in context of section 80HHC of Act, it was held that “ sale proceeds of scrap cannot be included in the term 'turnover' for reason that respondent-unit is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rials, stocks, finished goods, fixed assets, vehicles and from Railways - HELD THAT:- Insurance companies have surveyors whose primary work is to review claims made and assess losses. Surveyors in insurance industry are domain experts for particular area- be it fire, loss in transit or loss due to any other natural calamity. The Ld. AO does not have any mechanism to estimate it. Receipt of sums from insurance companies is sufficient proof of having incurred losses. Nevertheless, claims received from insurance companies because of raw materials, stocks, unfinished goods, fixed assets, vehicles and from railways was credited to P&L account and offered to tax by Appellant. When sum is offered to tax, Action of Ld. AO cannot doubt correctness of claim without any evidences. Ld. AO‟s addition is based on mere suspicion and surmises therefore have no legal or factual basis. Therefore, we upheld the order of the ld CIT A. Quantum of claim of deduction u/s 80 HHC - claim restricted being 90% of impugned export incentives from profits and gains of business - HELD THAT:- Issue is squarely covered in favour of assessee by decision of honourable Supreme Court in Avani exports [2015 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aina Soin Kapil, Sr. DR For the Respondent : Shri R.M. Gupta, Adv, Ms. Shubhangi Arora, AR ORDER PER Bench 1. This is bunch of 15 appeals pertaining to one assessee for several assessment years involving some common grounds of appeal. Some of these appeals are filed before 16 years; they are being adjourned under one pretext or other. From the pendency of one appeal for assessment year 2000 01 in 2003, now it has become a pendency of 15 appeals of the same assessee over a period of 16 years. Each year appeals are being piled up in the pendency before us. It would be fruitless to find out who is responsible for non-disposal of these appeals for all these years, because the answer is that all stakeholders i.e. Assessee, revenue and of course this tribunal is responsible for this state of affairs unquestionably. These matters were adjourned for more than 35 times in past. Therefore, with the consent of the parties, an attempt was made to dispose of all these appeals. At request of parties, we have heard them together and disposed of by this common order. ITA No 4410/Del/2003 AY 2000-01 2. First, we take up ITA number 4410/del/2003 for assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ects as per explanation 8 to section 43(1) of Act. 9. That ld CIT(A) has erred in law erred on facts of case in treating expenditure of ₹ 2600000/- incurred installation of Software System as revenue expenses while assessing office correctly treated it as capital in nature. 10. That ld CIT(A) has erred in law and on facts of case in allowing relief of ₹ 2600000/- while assessing officer has rightly addressed same and allowed depreciation accordingly which finds support from decision reported in 259 ITR 30 (Raj) wherein decision of Hon‟ble Apex court reported in 166 ITR 66 was followed. 11. That ld CIT (A) has erred in law and on facts of case in directing AO to treat sum of ₹ 14389000/- and ₹ 34364/- as business income which was correctly assessed under head Income from other source. 12. That ld CIT (A) has erred in law and on facts of case in directing to treat service charges of ₹ 2163586/- as business income. 13. that ld CIT (A) has erred in law and on facts of case in deleting disallowance of expenses of ₹ 2098978/- incurred on books and journals, which was taken as capital expenses by Assessing Officer ass assessee admit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... econd ground is also related to ground No 1, which shows that learned AO is aggrieved as learned CIT A has not enhanced book profit, by amount of depreciation on revalued assets. 5. We have heard rival contentions on this issue. It was found that issue of revaluation reserve for purpose of section 115JA of act raised in these grounds of appeal is not arising out of order of learned assessing officer or learned CIT A and thus this ground of appeal has wrongly been taken by learned assessing officer. On careful perusal of page number seven of assessment order it is apparent that learned assessing officer has himself accepted that revaluation reserve being credited to profit and loss account does not warrant any further adjustments. It is also noted that amount of INR 10548000 as mentioned in ground of appeal number 1 relates to amalgamation adjustment reserve that has been dealt with in ground number 7 of appeal of learned assessing officer. The ld DR also did not show us how this ground is arising from order of lower authorities. Therefore, it is apparent that this ground has been taken under some misunderstanding or erroneously. In view of this ground number, 1 and 2 of appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endent unit for generation of power (point v, page 6 of assessment order) iii. In absence of actual sales and generation of power of own use no business was carried on by assessee for generation and distribution of power. The profit shown is notional one (Point ii, iii, iv, vi, vii and viii page 6 of assessment order) 8. The learned CIT A allowed claim of assessee and therefore revenue is aggrieved. 9. The learned departmental representative vehemently supported order of learned assessing officer stating that DG sets were imported for home consumption and there is No separate distinct independent unit for generation of power. He stated that in absence of actual sales and generation of power of own use no business was carried on by assessee for generation and distribution of power. The profit shown is notional one. He therefore submitted that claim of assessee is not allowable u/s 80 IA of act and therefore no book profit deduction can be granted. 10. The learned authorised representative stated that order of learned assessing officer is not sustainable and learned CIT A has correctly deleted addition for following reasons. (a) Re: DG sets were imported for home c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The activity of producing electricity even when it is for captive use per se is eligible to be considered as a business as per serial no. c below. The assessee submits that there is no requirement of having a separate undertaking as per reading of various provisions contained in section 115JA, section 10(15) and section 2(19AA) of Act. Nevertheless, industrial undertaking generating power had independent, separate existence since separate land was earmarked for establishing said undertaking, and undertaking was independent of other undertakings of assessee. The assessee‟s auditor had computed separate profit, which was attributable to power generation business. (Page 72 to 75 of Paper book). (c) Re: Power not supplied to public i.e. it is for captive use: The Ld. AO‟s allegation that merely because electricity produced is not sold in open market, profits thereof profits there from need not be reduced from book profits under section 115JA of Act is devoid of any merits. It is because no such condition is mentioned in clause (iv) of Explanation to section 115JA (2) of Act. The assessee places reliance on following judgments wherein under similar circumstances pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies have marked for home consumption means that they are not to be used for purpose of business. The only meaning of that particular Mark is that goods are to be used for consumption in Indian Territory. Therefore, allegation of learned assessing officer that Gen sets imported for home consumption and therefore deduction under section 80 IA of income tax act is not allowable on it is devoid of any merit. Further, with respect to power generation unit not being a separate unit and further power is not supplied to public but it is for captive consumption and therefore no deduction under section 80 IA of income tax act is allowable is also now judicially settled by decision of honourable Delhi High Court in case of CIT vs. Orient Abrasives Ltd [271 CTR 626] wherein honourable Delhi High Court has held where substantial question of law before honourable High Court was Whether profit and gain from captive consumption of electricity supplied from generator set and which cannot be sold to any third person will qualify for deduction under Section 80-IA of Income Tax Act, 1961?. The honourable High Court answered same as under:- 11. A similar issue was raised before Delhi High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 60/-per ton. There could not be any doubt that this difference of ₹ 10/-per ton of ore would be reflected in profit and loss resulting from sale of steel. It is needles to add that if in a given case mined product costs more than market price of commodity, there would be loss on mining operation notwithstanding that there is a profit realised from sale of end product -steel, but these are matters of calculation not relevant at present stage, for we are endeavouring to ascertain whether there could in law be a profit when mined ore is converted into steel in mills of mining-company. It thus factually profit from mine or from mining operation is imbedded in profit from sale of steel is there any principle of law which prevents effect being given to this factual position? The learned Attorney-General submitted that in such a situation profit is not a real or an actual profit but is one which is merely notional, and that when Act spoke of a profit it meant an actual, real and realised profit and not a merely notional profit . We find ourselves unable to accept this submission. We start with premise that by sale of end product a real profit has been realised. When anal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndoubtedly, in order to ascertain profits from mine there would have to be a disintegration of gross profits which finally emerge from sale of finished steel or steel products. What we desire to point out is that this involves no disintegration of business affording scope for contention based upon principle that a person cannot trade with himself, but one far removed from it, viz., whether when a profit has been made as a conjoint result of different but integrated operations, profits so derived could be broken up so as to permit attribution of specific amounts of profit to each or any of several operations or activities. 12. Thereafter, Supreme Court in Tata Iron and Steel Co. Ltd. (supra) noticed and went into question whether there was anything in law which prohibits/bars ascertainment of profit and loss attributable to each line of activity, where sale of final end product has resulted in profit or loss for entire venture. Contra argument raised on behalf of Revenue was rejected for reasons given in paragraph which has been quoted in decision of Delhi High Court in Orissa Cement Ltd. (supra). We have already noted statutory provisions of Section 80 IA of Act and observed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terprise as referred to in sub-section (4) of section 80-IA. The dictionary meaning of expression 'derive' in New Oxford Dictionary of English states 'obtaining something from a specified source'. In section 80 -IA(1) also no restriction has been imposed as regards deriving of profit or gain in order to state that such profit or gain derived only through an outside source alone would make eligible for benefits provided in said section. 9. Therefore, there is no difficulty in holding that captive consumption of power generated by assessee from its own power plant would enable respondent/assessee to derive profits and gains by working out cost of such consumption of power inasmuch as assessee is able to save to that extent which would certainly be covered by section 80- IA(1). When such will be outcome out of own consumption of power generated and gained by assessee by setting up its own power plant, we do not find any lack of merit in claim of respondent/assessee when it claimed by relying upon section 80-IA(1) of Income-tax Act by way of deduction of value of such units of power consumed by its own plant by way of profits and gains for relevant assessment years. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avour of respondentassessee and against appellant Revenue. 16. At this stage, learned counsel for appellant Revenue has submitted that Tribunal has passed an order of remand on question of computation of profit and gain from business in terms of subsection (8) to Section 80IA. Learned counsel for respondent-assessee submits that Assessing Officer is competent to decide said question as per law and hands and power of Assessing Officer have not been curtailed and present order does not give any specific or clear finding/direction. We take statement made by learned counsel respondent-assessee on said aspect on record. Both parties will be entitled to raise their contentions on computation of eligible profit/loss from eligible business. 12. In view of this, we do not find any infirmity in order of learned CIT A in holding that above sum cannot be included in book profit for taxation. Accordingly, ground numbers 3 6 of appeal are dismissed. 13. Ground number 7 and 8 of appeal is against claim of deduction of INR 10540000/ because of transfer from revaluation reserve while computing book profit under section 115JA of act. The learned assessing officer while computing book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of consideration thereof. Accordingly total fixed assets at book value of ₹ 3300 lakhs and other assets of 563.02 lakhs was acquired along with liabilities which has resulted into excess of assets over liabilities transferred of INR 10,540,000 which was shown as amalgamation reserve account. The above sum was never transferred to profit and loss account and withdrawn there from. As per para number 16 of accounting standard if amalgamation is amalgamation in nature of merger‟ identity of reserve is preserved and they appear in financial statement of transferee company in same form in which they appeared in financial statement of transferor company. Thus, for example, general reserve of transferor company becomes general reserve of transferee company, capital of transferor company becomes capital reserve of transferee company, and revaluation reserve of transferor company becomes revaluation reserve of transferee company. However if amalgamation is in nature of amalgamation in nature of purchase‟, then identity of reserve other than statutory reserve dealt with in paragraph 18 of Accounting standard (AS) is not reserve, amount of consideration is deducted from va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue expenses while assessing officer has treated it as capital expenditure. 20. On hearing of parties it was noted that above issue is squarely covered in favour of assessee by order of coordinate bench for assessment year 98 99 dated 22/2/2015 wherein under identical circumstances order of learned CIT A was upheld holding that above expenditure on software system is revenue in nature. 21. The learned departmental representative vehemently relied upon decision of honourable Rajasthan High Court in 259 ITR 30 to support case of learned assessing officer. 22. The learned authorised representative relied upon CIT v. K. Co.[2003] 181 CTR (Delhi) 378, Para 4, Amway India Enterprises vs. DCIT [(2008) 111 ITD 112 (Delhi) (SB)] affirmed by Delhi High Court in CIT vs. Amway India Enterprises [2012] 346 ITR 341 (Delhi), (Refer para 6) ,CIT vs. Asahi India Safety Glass Ltd.[(2012) 346 ITR 329 (Delhi)] (Refer para 9, 10), Sumitomo Corpn. India (P.) Ltd. v. Addl. CIT [2005] 1 SOT 91 (Delhi), Para 8, Bank of Punjab Ltd. v. Jt. CIT[2002] 122 Taxman 235 (Chd.) (Mag.) ,Alembic Chemical Works Co. Ltd. v. CIT[1989] 177 ITR 377 (SC), ,Arch Finance Ltd. vs. ACIT[(2007) 165 Taxman 188 (De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner (Appeals) was that acquisition of software could not be treated to be an asset of endurable nature. If programme is used in one mining to another mining operation, why it should not be treated as capital asset and expenditure on that, capital expenditure. Considering these facts and decision of their Lordships and later decision of Bombay High Court, in our view, acquisition of technical know-how is a capital expenditure; therefore, Assessing Officer has rightly treated expenditure on acquiring computer software as expenditure of capital nature and rightly allowed depreciation as per rules. 25. In present case, it is apparent that assessee has been granted license for a particular period of enterprise resource planning software. In view of this, there is no outright purchase in case of assessee. In view of this facts stated by assessee before us and facts before honourable Rajasthan High Court were all together distinguishable. The learned departmental representative could not show us any reason to deviate from order of coordinate bench. Accordingly following decision of coordinate bench in assessee‟s own case in earlier years, we confirm order of learned CIT A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue does not now cover in favour of assessee in view of jurisdictional High Court decision as well as decision of honourable Supreme Court. He therefore submitted that interest income cannot be held to be business income but it is income from other sources. 28. The learned authorised representative vehemently stated that coordinate bench in assessment year 1998-99 in assessee‟s own case wherein issue was adjudicated in favour of assessee (page 33 of order). However, in captioned assessment year even Ld. AO has assessed loss in assessment order passed by him. Accordingly, this issue becomes academic and department‟s grounds of appeal be rejected on this premise itself. 29. We have carefully considered rival contention and perused orders of lower authorities. The interest income earned by assessee is on bank interest as well as on interoperates deposits. The interest was also received on income tax refund. Looking to nature of interest income shown by assessee, we do not find any reason to sustain order of learned CIT appeal. In several decisions cited before us by learned departmental representative, it is apparent that earning of interest income is not business o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es mentioned in assessment order also, we also found that assessee has disposed of its liability within due date prescribed under provident fund laws as well as grace period. Accordingly, all provident fund dues have been deposited in time allowed, CIT (A) correctly deleted disallowance. Ground number 15 of appeal of revenue is dismissed. 33. Ground number 16 of appeal is with respect to addition of INR 5862377/ made by learned assessing officer on account of prior period expenses which was deleted by learned CIT A. The fact shows that assessee during year had claimed prior period expenditure amounting to INR 5 862377/ and shown income of INR 9215260 as prior period income, on ground that it has been crystallized during assessment year under appeal. Learned AO disallowed prior period expenses as same were not incurred during year but in earlier years , but did not disturb prior period income offered by assessee during year. However, claim of assessee is that such expenditure has crystallized during year. However, learned AO did not accept argument of assessee. The learned CIT A allowed claim of assessee holding that it is not a prior period expenditure as it has been cryst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt previous year only. By deleting above disallowance also vide para number 1 of order, learned CIT appeal noted that it is clear that assessing officer has not allowed proper opportunity to explain same to assessee and learned AO has straight way referred notes of accounts as mentioned by auditor and concluded that disallowance is made without appreciating proper facts. We do not agree with finding of learned CIT A that disallowance cannot be sustained as assessee has also been taxed on miscellaneous income of earlier years charged to tax this year. The logic given by learned CIT appeal that assessing officer should have treated both these items of prior period income and expenses on same parity is devoid of any merit. It is also not acceptable that without examining facts of case that when these expenses have been crystallized, disallowance cannot be deleted. Before neither learned assessing officer nor before learned CIT appeals or before us has assessee shown that, this expenditure has been crystallized during year. Unless this is shown these expenditure cannot be allowed without verification. It is also fact that definition of prior period expenditure for companies act and d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9.98 lakhs capital expenditure) was considered for 125% weighted deduction under section 35(2AB) of Act as was certified by auditors (Pg 131 of Paper book). The assessee thus claimed weighted deduction amounting to ₹ 3,02,51,250 on said amount. On balance amount revenue expenditure of ₹ 7995472/- and capital expenditure other than land and building of ₹ 189093, assessee has claimed deduction u/s 35 (1) (i) and 35 (2) (ia) respectively. Thus assessee has claimed total deduction amounting to INR 38435815 in respect of expenditure incurred on scientific research as under:- Deduction under section 35(2AB) Rs.3,02,51,250 (125% of ₹ 2,42,01,000) Deduction under section 35(1)(i) ₹ 79,95,472 Deduction under section 35(2)(ia) ₹ 1,89,093 ₹ 3,84,35,815 38. The Ld. AO while framing assessment held that assessee is only entitled for weighted deduction under section 35(2AB) of Act amounting to ₹ 3,02,51,250 and balance deduction amounting to & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... normal computation of income whereas book profit under section 115 JB was shown at INR 5 1182447/ . The assessee was assessed under section 143 of income tax act by order dated 31/3/2004 wherein several additions/disallowances were made and total income of assessee was assessed at a loss of INR 85955505/- under normal computation and book profit was computed at INR 51182447/-. Assessee preferred appeal before learned CIT A, who disposed of appeal of assessee vide order dated 6/5/2004 and therefore this appeal before us by learned AO against disallowances deleted by him. 45. The Revenue has raised following grounds of appeal in this appeal:- 1. That Ld CIT(A) has erred in law and on facts of case in deleting disallowance of ₹ 4,06,135/- which was made on account employees contribution and employers contribution respectively towards PF not paid within stipulated period. 2. That Ld. CIT(A) has erred in law and on facts of case in deleting disallowance of ₹ 25,48,000/- made on account of proportionate Interest on interest free advances given to sister concerns. 3. That Ld. CIT(A) has erred in law and on facts of case in reversing action of Assessing Officer w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein decision of Hon‟ble Apex Court reported in 166 ITR 66 was allowed. 13. That Ld. CIT. (A) has erred in law and on facts of case in allowing relief of ₹ 65 Lakhs, which was treated by Assessing Officer as capital in nature on a/c of consultancy fee paid. 14. That Ld. CIT(A) has erred in law and on facts of case in allowing expenses of ₹ 4,49,91,662/- being upfront fee for loans swap and Interest arbitrage expenses. 15. That order of Ld. CIT (A) being erroneous may be cancelled and order of A.O. may be restored. 46. The 1st ground of appeal was with respect to disallowance deleted of INR 406135/- on account of employees contribution and employers‟ contribution respectively towards provident fund allegedly not paid within stipulated period. 47. On hearing parties, it was found that this ground of appeal is Similar to ground of appeal no. 15 of departmental appeal for AY 2000-01 bearing ITA No. 4410/Del/2003 wherein we have confirmed order of learned CIT A in deleting above disallowance. The fact shows that salary for a calendar month is paid by 10th of succeeding month. The due date for payment of PF contributions would, therefore, be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enough interest free funds to advance to its sister concern. The Ld. CIT(A) thereafter noted that Ld. AO has not made a case that borrowing was not utilized for purpose of business. He thereafter noted that with respect to amount appearing as opening balance of advance, Ld. AO made no disallowance in earlier years, and hence was not entitled to take a different view in year under appeal. As far as amount of ₹ 115 lacs advanced during year under consideration, Ld. CIT (A) noted that assessee had mixed pool of funds and profits for year (Rs. 12.93 crores) far exceeded advances made. The Ld. CIT(A) accordingly held that interest free advances, in such a situation be presumed to have come out of profits in absence of any nexus between borrowed funds and interest free advances. Hence assessing officer is in appeal before us. 50. The learned departmental representative vehemently supported order of learned assessing officer whereas learned authorised representative relied upon order of learned CIT A and submitted that reasons given by learned CIT A are further supported by several judicial precedents where assessee has enough non-interest-bearing bearing surplus funds avail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m industrial undertaking against which deduction has been claimed by assessee or likely to be allowed to assessee. Accordingly, ground numbers 3 6 are allowed. 53. Ground no 7 is with respect to services charges which according to assessee is business income, AO treated it as income from other sources, CIT A upheld it as Business income, AO is in appeal before us. This issue has already been decided by us in appeal of learned assessing officer for assessment year 2000 01 vide ground no 12 of that appeal, wherein we have held that service charges earned by assessee are business income as they are inextricably linked with business of assessee. Therefore, accordingly we dismiss ground number 7. 54. Ground number 8 of appeal is with respect to disallowance of books and journals expenditure amounting to ₹ 4114059/ held by learned assessing officer as capital expenditure, claimed by assessee as revenue expenditure, learned CIT appeal deleting above disallowance. The identical issue has been decided by us in appeal of learned assessing officer for assessment year 2000 01 in ground number 13 of that appeal wherein we have confirmed action of learned CIT A in holding t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned assessing officer with some direction to assessee. Further, with similar directions, we also set aside this ground of appeal to file of learned assessing officer. Accordingly, ground number 10 is allowed with above direction. 57. The ground number 11 of appeal is with respect to disallowance of software expenditure of INR 8902332/ claimed by assessee as revenue expenditure however learned assessing officer was of view that same is a capital expenditure which was reversed by learned CIT appeal holding it to be a revenue expenditure. The ground number 12 is also supporting same for similar reasons. We have identically decided above issue in appeal of assessee for assessment year 2000 01 by this order vide ground no. 9 wherein we have held that software expenditure incurred by assessee are revenue expenditure in nature. We have also noted facts of honourable Rajasthan High Court cited by learned DR as well as in grounds of appeal and distinguished same with facts of case of assessee. Therefore, for similar reason we dismiss ground number 11 and 12 of appeal of AO. 58. Ground number 13 is with respect to deleting addition made by learned assessing officer with respect to I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt shows that what kind of stationary assessee should use, what kind of corporate identity group should have, what kind of identity individual units should have, What are communication guidelines inter-unit as well as external and how signage should be placed. There are also several templates given for the same. On careful perusal of above documents, we are of view that above expenditure is not capital expenditure but revenue expenditure as it helps assessee in maintaining its corporate image to outside world. The corporate image of assessee is created by product of assessee and these products are to be demonstrated to outside world in a proper manner by whole organization. Therefore, identity or image of assessee is not distorted to various stakeholders. In view of this, we do not find that these expenditure are creating any benefit of enduring nature to assessee. In fact, they are standard operating procedure of communicating with outside world. Accordingly we hold that these are revenue expenditure incurred by assessee which has been rightly allowed by learned CIT A. Accordingly, ground number 13 is dismissed. 62. Ground number 14 is with respect to disallowance deleted of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls Ltd. [(2007) 290 ITR 107] held that upfront fees paid by assessee to bank while availing loan cannot be construed as a capital expenditure and allowed same as revenue expenditure. In view of this, we do not find any infirmity in order of learned CIT A in allowing claim of assessee as revenue expenditure. Accordingly, ground number 14 is dismissed. 64. Ground number 15 and 16 of appeal of revenue are general in nature, no arguments advanced, therefore there dismissed. 65. Accordingly appeal number 3426/del/2004 filed by learned assessing officer on 29/07/2004 for assessment year 2001 02 is partly allowed for statistical purposes. AY 2002-03 ITA No 1271/del/2006 ( By Assessee) ITA No ITA no 1308/del/2006 ( By ld AO) 66. The assessee filed its return of income on 29/10/2002 declaring loss of INR 1084320 in normal computation of income and under section 115 JB it disclosed book profit of INR 15646013/ . Assessment order under section 143 (3) of income tax act 1961 was passed on 31/03/2005 by The Assistant Commissioner of Income Tax, Range 1, Moradabad making several disallowances/ additions at Rs. nil. The book profit was computed under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in deleting disallowance on account of misc. expenditure amounting to ₹ 7,26,666/- out of expenditure incurred on journals, periodicals, books etc. treating same as revenue expenditure, which were treated as capital expenditure by AO. 2. The Ld. CIT(A), Bareilly has erred in law and on facts of case in not allowing depreciation from total income on capital expenditure holding ₹ 7,26,666/- as revenue expenditure. 3. The ld. CIT(A), Bareilly has erred in law and on facts of case in deleting disallowance of interest of ₹ 2,14,84,000/- claimed as revenue Expenditure while this amount was actually capitalized in books of account maintained by assessee. 4. The Ld. CIT(A), Bareilly has erred in law and on facts of ease in deleting disallowance of prior period expenses of ₹ 77,02,730/-, which, were debited by assessee in P L Account. This has already been pointed out by auditors in Tax Audit Report. Considering mercantile system of accounting employed by assessee company, it is not allowable for year under consideration. 5. The Ld. CIT(A), Bareilly has erred in law and on facts of case in deleting addition made by A.O. amounting to ₹ 5,16,880/- bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying on judgment of Chowringhee Sales Bureau (P.) Ltd. v. CIT [1973] 87 ITR 542 and he also added miscellaneous receipts in total turnover for computing deduction under 80HHC of Act. 72. On appeal, Ld. CIT(A) remanded back issue to Ld. AO to allow deduction under 80HHC of Act with reference to DEPB if permissible in light of retrospective insertion of fifth proviso to section 80HHC(3) of Act (by Taxation Laws (Amendment) Act, 2005)exclusively dealing with a situation of loss. 73. Therefore, issue before us is how to calculate profit u/s 80 HHC while computing book profit. It is submission of Appellant that for purpose of 115JB of Act, deduction under section 80HHC of Act must be computed with reference to book profits and not business income computed under normal provisions of Act. This issue has been settled by Hon‟ble Supreme Court by dismissal of Special Leave Petition ( SLP‟) in case of CIT vs. Futura Polyester Ltd. SLP (Civil) No(s).3189/2010 wherein judgment of Hon‟ble Madras High Court [186 Taxman 51 (Madras)] in context of deduction under 80HHC for purpose of section 115JA of Act, was upheld. The Hon‟ble High Court relying on CIT vs. Rajanikan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T vs. Lakshmi Machine Works[2007] 290 ITR 667 (SC) wherein it was held that in such a situation the formulae for deduction will be unworkable. The aforesaid judgment was also approved in case of CIT vs. Catapharma (India) (P.) Ltd. [2007] 292 ITR 641 (SC). Further, Ld. AO held that miscellaneous receipts i.e. sale of scraps should be added to total turnover. However, Appellant submitted that such miscellaneous receipts should not be added to total turnover. In context of Ld. AO‟s contention regarding miscellaneous receipts, Appellant relies on Hon‟ble Supreme Court in case of CIT vs. Punjab Stainless Steel Industries [2014] 364 ITR 144 (SC) wherein in context of section 80HHC of Act, it was held that sale proceeds of scrap cannot be included in the term 'turnover' for reason that respondent-unit is engaged primarily in manufacturing and selling of steel utensils and not scrap of steel. This view was also upheld in case of Jagraon Exports vs. CIT [2016] 284 CTR 209 (SC). Applying this analogy to facts of present case, miscellaneous receipts should not be added to total turnover. In view of above judicial precedent it is held that assessee is directed to submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that assessee has sufficient own noninterest bearing funds of ₹ 122 crores and therefore it cannot be held that such interest expenses can be disallowed. Even otherwise when we have held that club expenditure are expenditure incurred by assessee only an extra relief for purpose of business natural corollary will also states that deposit made by assessee with club is also for purposes of business. Therefore we reverse finding of learned CIT A and allow ground number 4 of appeal of assessee. 79. Ground number 5 of appeal is on issue of disallowance of INR 516339/- under section 35D of the act. Assessee has claimed deduction under section 35D of act amounting to INR 516339/- for share issue expenses incurred by amalgamating companies. The claim of assessee is that it has been allowed to assessee in previous assessment years and this being last year of said claim, it should be allowed in this year as well. The assessing officer as well as learned CIT A disallowed deduction alleging that appellant could not furnish nature of expenditure. 80. The learned authorised representative submitted that deduction claimed represent specified expenditure i.e. issue expenditure in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd a further payment of ₹ 19,82,966/- was made in AY 1995-96 amounting to ₹ 67,83,000. On Jan 6, 1997, a second agreement was entered between Appellant and RBPPL for construction of 65 apartments for Appellant in a residential complex within 60 months from date of agreement. It was noted that till that dated Appellant had advanced ₹ 67.83 Lakhs to RBPPL under previous agreement and this sum in terms of clause 3 of agreement was to be adjusted against sale consideration of apartments. The consideration was also agreed between parties at ₹ 875 per square feet. The agreement in clause 19 allowed Appellant an option to withdraw from this agreement and take back advance and interest (if any) due to it. As time period for constructing apartments in terms of agreement dated Jan 6, 1997 was to expire on Jan 6, 2002 with no visible certainty of completion of residential complex and there were revisions in construction plans which were not acceptable to Appellant, on May 24 2001, the Appellant relinquished its rights under the agreement dated Jan 6, 1997 vide a relinquishment deed for a consideration of ₹ 1,62,50,000. In furtherance of same, Appellant computed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld AR submitted that Appellant and RBPPL are unrelated companies having entirely different set of shareholders. Therefore, even if one pierces corporate veil of Appellant, transaction will still be a transaction of transfer of capital asset and thus liable to tax as capital gain. Without prejudice to aforesaid, Appellant vehemently rebuts CIT(A)‟s allegation as follows: (a) As mentioned above, Appellant by virtue of agreement dated Jan 3, 1989, Appellant received a right to have a say in fixation of official rates, a 10% rebate and right to negotiate payment terms. (b) The allegation that first agreement of 1989 appears to be an adventure in area of construction activity by Appellant is merely an allegation which does not have any legs to stand. Further, this allegation is in contradiction to subsequent allegation of CIT(A) that agreement of 1989 was merely drawn up to safeguard money advanced by Appellant to RBPPL for reason that transaction could either be in nature of financing activity or a construction venture but it cannot be both[The Appellant however denies that aforesaid allegation of Ld. CIT(A)]. (c) The Ld, CIT (A)‟s allegation that in absence of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prior to Appellate proceedings before Ld. CIT(A).Therefore, allegation of Ld. CIT(A) that income shall be taxed as income from other sources is devoid of any merit. 87. While as per Appellant, cost of acquisition of rights transferred during captioned year was advances paid to RBPPL however, as per Ld. AO, cost of acquisition is indeterminate. Applying Hon‟ble Supreme Court‟s judgment of CIT vs.B.C. Srinivasa Setty[1981] 128 ITR 294 (SC) capital gains cannot be taxed in case cost of acquisition is indeterminate. 88. Without prejudice to above, regarding Ld. AO‟s allegation that indexation benefits would be allowable from AY 1997-98, Appellant submits that at best Ld. AO could argue that rights mentioned above which Appellant received in 1989 were transformed into undivided interest in land and rights in proposed building in 1997. If that be so, Ld. AO ought to have taxed capital gain in AY 1997-98 on transfer of rights received in year 1989 and treat consideration as cost of acquisition for undivided interest in land and rights in proposed building. Therefore, if he were to treat that Appellant acquired rights in 1997, he cannot tax entire capital gain made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital gain on the above property taking the cost of acquisition of the right to obtain the conveyance of 65 apartments as capital asset whose full value of the consideration was INR 1 6250000 and the cost of acquisition was INR 6 782966/ . The learned AO accepted that there is a transfer of a capital asset however he reduced the sale consideration on ad hoc basis to the 10% of the amount advanced. The learned CIT A held that the above sum is nothing but the compensation paid for using the money of the assessee. The learned CIT A dealt with the whole issue and devoted more than 20 pages to consider the facts of the case. The page number 23 40 of the order of the learned CIT A while dealing with ground number 9 of the appeal of the assessee are very relevant. After considering the same the learned CIT A has held that the above income is nothing but an interest of compensation for the money used by the other company of the assessee for the relevant period. There is no justification available to us to upset the finding of the learned CIT appeal. It is correct that as on 3/1/1989 there were no identification of the area to be purchased by the assessee, number of flats to be ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her sources and not income from business. Therefore, for reasons given therein we also hold this year also that income of assessee from interest is chargeable to tax as income from other sources and not as income from business or profession. Accordingly, ground number 7 of appeal of assessee is dismissed. 92. Accordingly, ITA number 1271/del/2006 filed by assessee for assessment year 2002 03 is partly allowed. 93. Now we come to ITA number 1308/Del/2006 filed by learned assessing officer for assessment year 2002 03. 94. The 1st ground of appeal is with respect to disallowance of INR 726666/ out of expenditure incurred on books and periodicals treating same as capital expenditure which was held by learned CIT A as revenue expenditure. Both parties agreed that facts of this ground of appeal are identical to facts stated in department‟s appeal ground number 13 for assessment year 2000-01. After hearing parties, on perusal of facts for year, for same reasons has given in disposing of ground number 13 for assessment year 2000-01 in appeal of learned AO we also dismiss this ground of appeal. Ground number 2 of appeal is with respect to claim of depreciation there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by learned AO without any basis. 99. We have carefully considered rival contention and find that addition made by learned assessing officer is devoid of any merit. Insurance industry is a highly regulated industry wherein there are standard procedures for raising claims. Seldom, it happens that a person receives full amount of loss from insurance companies because issues of obsolete items, depreciation due to efflux of time etc. It is also known that insurance companies have surveyors whose primary work is to review claims made and assess losses. Surveyors in insurance industry are domain experts for particular area- be it fire, loss in transit or loss due to any other natural calamity. The Ld. AO does not have any mechanism to estimate it. Receipt of sums from insurance companies is sufficient proof of having incurred losses. Nevertheless, claims received from insurance companies because of raw materials, stocks, unfinished goods, fixed assets, vehicles and from railways was credited to P L account and offered to tax by Appellant. When sum is offered to tax, Action of Ld. AO cannot doubt correctness of claim without any evidences. Ld. AO‟s addition is based on mere s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee appeal for AY 2000-01. He submitted that aforesaid issue is squarely covered in favor of Appellant vide order dated Feb /22/ 2015 passed by ITAT in Appellant's own case for assessment year 1998-99 bearing ITA No. 4307 4409/De1/2003 (refer page 33 of ITAT order). However, in captioned assessment year due to NIL business profit, this issue becomes academic. 105. The learned departmental representative vehemently stated that above issue is not an academic but income earned by assessee does not have any Nexus with business of assessee and therefore it is rightly taxed as income from other sources. He reiterated submissions made for assessment year 2001 02. 106. We have carefully considered rival contentions and found that identical issue has been decided by us in departmental appeal vide ground no 11 for assessment year 2000-01 wherein it has been held that interest income earned by assessee is not business income but is chargeable to tax under the head income from other sources only. Accordingly, we also held for this year that above interest income earned by assessee is chargeable to tax under head income from other sources. Accordingly, ground number 1 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny. 5. That learned CIT(A) erred on facts and in law in upholding income from processing charges of ₹ 20,61,378/- as Income from other sources‟ instead of Income from business‟ as claimed by Appellant Company. 6. That learned CIT(A) erred in not holding that interest income on refund is not a taxable real income as Appellate order based on which refund has been granted is subject to Appeal by Department. 7. That learned CIT (A) erred on facts and in law in holding that quantum of claim of deduction u/s 80HHC is to be restricted by a sum of ₹ 11,09,55,402/- being 90% of impugned export incentives from Profits and Gains of Business. 111. Ground number 1 and 2 of appeal are with respect to disallowance confirmed of club expenses as well as national interest disallowed on refundable deposits made with club. Identical issues have been decided by us in assessee‟s appeal for assessment year 2001 02 wherein club expenditure has been allowed and disallowance on account of interest on refundable deposit made with club is deleted. Therefore, for identical reasons we also allow ground number 1 and 2 of appeal. 112. Ground number 3 of appeal i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o INR 29920309/ . The assessee has also submitted a revised computation of deduction allowable under section 80HHC of The act. It was submitted that above computation of deduction may be verified by learned assessing officer. The learned departmental representative also agreed to above fact as issue has now been decided by honourable Supreme Court. 118. In view of above facts and after hearing parties it was noted that now issue is squarely covered in favour of assessee by decision of honourable Supreme Court in 277 CTR 460 wherein decision of honourable Gujarat High Court in Avani exports vs. CIT 348 ITR 391 was confirmed. In view of above facts, we direct assessee to file revised computation of deduction allowable to it before learned AO, who after verification allow claim of assessee, if found in accordance with law. Accordingly, ground number 7 of appeal of assessee is allowed. 119. Accordingly, appeal of assessee for assessment year 2004 05 in ITA number 3104/del/2008 is partly allowed. 120. The revenue has raised following grounds of appeal in ITA No. 3242/Del/2008 for Assessment Year 2004-05:- 1. That Commissioner of Income-tax (Appeals), Bareilly has erred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fits on business of generation of power. 124. Accordingly, ITA number 3242/del/2008 for assessment year 2004 05 filed by learned deputy Commissioner of income tax, range 1, Moradabad on 22/10/2008 is partly allowed. ITA No 3724/ Del/2009 ( Assessee) 3920/Del/09 (Departmental appeal) A Y 2005-06 125. For assessment year 2005 06 assessee filed its return of income on 29/10/2005 declaring income of ₹ 551847983/ . Subsequently return was revised on 4/2/2007 at income of INR 393262221/ . The assessment under section 143 (3) of act was passed on 30/12/2008 wherein total income of assessee was determined at INR 459144871/ . Aggrieved by order of learned assessing officer, assessee preferred an appeal before learned CIT A, Bareilly, who passed an order on 2/7/2009 partly allowing appeal of assessee. Therefore, both parties are in appeal before us. 126. The assessee has raised following grounds of appeal in ITA No. 3724/Del/2009 for Assessment Year 2005-06:- 1. That ld CIT(A) erred on facts and in law in upholding disallowance of club expenses of ₹ 2,34,352/- by holding that same not been incurred for purpose of business of appellant company. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal expenditure incurred by assessee are revenue in nature. Therefore, for similar reasons we dismiss ground number 1 of appeal. 131. Ground number 2 of appeal is with respect to national disallowance of INR 143310 out of loss in transit. The identical issue is decided in assessment year 2002 03 in ground number 5 of revenues appeal wherein we have deleted above addition made by learned assessing officer holding it to be without any justification. For similar reasons we also dismiss ground number 2 of this appeal. 132. Ground number 3 of appeal is with respect to deletion of disallowance on account of INR 3687419/- of prior period expenses. Identical issue has been decided by us in revenues appeal for assessment year 2000-01 in ground number 16 wherein we have set aside whole issue back to file of learned assessing officer with a direction to assessee to justify before assessing officer that above expenditure has crystallized during year. In view of this for similar reasons, we also set aside this ground of appeal back to file of learned assessing officer with similar directions. 133. Ground number 4 of appeal is with respect to deduction allowable u/s 80 IA to assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asstt. year 2006-07. 5. That learned CIT(A) erred on facts and in law in upholding disallowance of ₹ 3,65,20,000/- on account of claim recoverable from Ranbaxy Laboratories Ltd. by holding that amounts receivable towards Breach of contract for setting up plant is not a Capital Receipt. 137. Ground number 1 of appeal is with respect to disallowance of club expenses of INR 1 91676 and ground number 2 is with respect to disallowance of interest expenditure of INR 231000/ on refundable deposits made with club. The parties confirmed that identical issue has been decided by lower authorities in assessee‟s own case for earlier years. It was also submitted that there is no change in facts and circumstances of case. 138. On careful consideration of orders of lower authorities and contentions of rival parties, it was found that identical issue has been decided in assessee‟s own case for assessment year 2002-03 vide ground no 3 4 of assessee‟s appeal . Therein it has been held that club expenditure incurred by assessee is for purpose of business of assessee and therefore deposits made with club is also for purposes of business of assessee and therefore no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional we see no reason for presumption to be restricted to cases where different funds are mixed in a common pool. It is, however, only a presumption. 17. . We respectfully agree with these observations. While it is only a presumption, it is one which is in assessee s favour. The Department could have rebutted this presumption by calling for records from bank itself. It chose not do so at though assessee stated that it was not in possession of records. There was no application either before Tribunal or before us for an opportunity to lead further evidence in this regard. 20. In circumstances, question No.(i) is answered in favour of respondent-assessee. The Appellant submits that it is imperative for Ld. AO to establish a direct or indirect nexus between expenditure alleged to have been incurred for earning exempt income in order to invoke section 14A of Act. He referred judicial precedents of CIT., Mumbai vs. M/s. Walfort Share Stock Brokers P. Ltd. [2010] 326 ITR 1 (SC). Thus, a vague assertion by Ld. AO that Appellant has not considered indirect expenses is not sufficient and cannot automatically trigger Rule 8D of Rules without satisfying provisions of section 14A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The rational for presumption is that an assessee would utilize its funds prudently ensuring that it derives greatest financial advantage. If that be rational we see no reason for presumption to be restricted to cases where different funds are mixed in a common pool Further, Ld. CIT(A) also disallowed expenditure earned on dividend income by applying rule 8D of Income-tax Rules, 1962 ( IT rules‟)which is incorrect as rule 8D of IT rules is not applicable in instant case as same became effective from 24 March 2008. The CIT (A) placed reliance on judgments such as Cheminvest Ltd. vs. CIT [2009] 121 ITD 318 (Delhi) which is highly misplaced since, overruled by Hon‟ble Delhi High Court. It is also pertinent to note that in case of Godrej Boyce Manufacturing Company Ltd. vs. DCIT [2017] 394 ITR 449 (SC) Hon‟ble Supreme Court has held that rule 8D can only be applied prospectively. He further stated that the recording of the satisfaction on examination of the books of the assessee is a mandatory exercise, which should have been carried out by the assessing officer but has not been carried out and therefore on this score itself the disallowance cannot be made. Hen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed by the assessee. However, these amounts were added in the computation of total income out of abundant precaution. The learned CIT A also following the decision of the honourable Supreme Court dismissed the claim of the assessee stating that the claim of the assessee of raising the ground in appeal proceedings which was not claimed in the return of income cannot be entertained at this stage. 144. The learned authorised representative vehemently submitted that details of the expenditure are at pages 98-99 of the paper book. The expenses crystallized / became known for the first time during the relevant previous year on claims / bills being received. Even though such expenses pertained to earlier years, deduction for the same needs to be allowed in the year under appeal. The Appellant places reliance on CIT vs.Pruthvi Brokers Shareholders [2012] 349 ITR 336 (Bombay)wherein the Hon‟ble Bombay High Court held that an assessee is entitled to raise before appellate authorities additional grounds in terms of additional claims not made in return filed by it. The Hon‟ble Bombay High Court in another case of CIT vs. Mukund Bhawan Trust , Pune (ITA No. 60 of 2015)dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to demonstrate before the assessing officer that the above expenditure has crystallized during the year and therefore they are allowable as deduction. Therefore, for similar reasons and with similar direction we set aside this ground of appeal to the file of the learned assessing officer. Accordingly, ground number 4 is allowed with above direction. 147. Ground number 5 is with respect to the disallowance upheld by the learned CIT A of INR 3 6520000/ on account of claim recoverable from Ranbaxy laboratories Ltd by holding that the amounts receivable towards breach of contract for setting up of the plant is not a capital receipt. The brief fact shows that the assessee has received payment from Messer is Ranbaxy laboratories Ltd of INR 3 6520000/ which is credited to the profit and loss account but now during the assessment proceedings the assessee claimed before the learned AO that the said amount is in the nature of capital receipt and therefore should not have been charged to income tax. It was claimed that it is not chargeable to income tax. The assessee submitted that Assessee Company is engaged in drug discovery and chemistry services, custom research and manufacturing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or minimum quantities were not met my Ranbaxy which led to incurrence of losses by the Appellant on account of overheads, depreciation and interest on investment made in setting up the plant. After various negotiations, the parties then executed a termination and settlement contract dated 2 June 2006. The Termination and settlement contract entitled the Appellant to receive the following amounts from Ranbaxy: 1. ₹ 1,25,00,000 towards expenses incurred in maintaining the plant. (40% of amount spent by vendor till the date of termination subject to maximum of ₹ 6,40,00,000 in accordance with clause 16(iv)(a) of the manufacturing agreement) 2. Total Compensation of ₹ 5,96,73,000 (after subtracting the earned profits of ₹ 43,27,000 (ACS-4 Qty procured by Ranbaxy x ₹ 4020 + DKT-3 Qty procured by Ranbaxy x ₹ 1320) from ₹ 6,40,00,000 in accordance with clause 16(iv)(b) of the manufacturing agreement) ii. Hence, the amount of compensation to be received by the Appellant amounted to ₹ 7,21,73,000. The Appellant on an accrual basis treated the amount of ₹ 3,65,00,000 as a capital receipt to be recoverable from Ranbaxy in the curr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... what the assessee was paid was to compensate him for loss of a capital asset. It matters little whether the assessee did continue after the determination of its agency with the Fort William Co. Ltd. to conduct the remaining agencies. The transaction was not in the nature of a trading transaction, but was one in which the assessee parted with an asset of an enduring value. We are, therefore, unable to agree with the High Court that the amount received by the Appellant was in the nature of a revenue receipt 149. Learned departmental representative vehemently supported the order of the lower authorities and submitted that when there is no claim in the original return of income as well as assessee did not file any revised return making such claim, lower authorities have correctly not entertained the claim of the assessee following the decision of the honourable Supreme Court. 150. We have carefully considered the rival contentions and perused the orders of the lower authorities. The learned assessing officer has correctly not entertained the claim of the assessee as assessee neither filed the revised return nor made the claim in the original return of income. He followed the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r assessment year 2000-01 in assessee‟s own case by this order wherein we have allowed claim of assessee of books and periodicals expenditure holding it to be revenue expenditure confirming order of learned CIT A, therefore, for similar reason we also hold for this year that INR 4013830 incurred by assessee on account of books and periodicals is revenue expenditure. Accordingly, ground number 1 of appeal is dismissed. 155. Ground number 2 of appeal is with respect to deletion of addition made by learned CIT A of ₹ 280650/ as notional disallowance out of loss in transit with respect to insurance claim received by assessee. During year, assessee has received a sum of ₹ 2806502/ on account of insurance claim in respect of various losses incurred. The learned assessing officer made addition of 10% of such claim to total income of assessee. It was deleted by learned CIT A and therefore learned AO is in appeal. 156. Both parties confirmed that identical issue has been decided in case of assessee for assessment year 2004 05 wherein identical addition was made by learned assessing officer was deleted by learned CIT A. There is no change in facts and circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both have filed appeal before us. 161. The assessee has raised following grounds of appeal in ITA No. 2479/Del/2011 for Assessment Year 2007-08:- 1. That learned CIT(A) erred on facts and in law in upholding disallowance of club expenses of ₹ 1,52,935/- by holding that same has not been incurred for purpose of business of Appellant Company. 2. That learned CIT(A) erred on facts and in law in disallowing of expenditure u/s 14A of 66,95,714/- by holding that same is relatable to earning of exempt dividend income that does not form part of total income and are not entitled to be debited to P L Account. 3. That learned CIT(A) erred on facts and in law in upholding disallowance of expenditure of ₹ 24,73,697/- by holding inter-alia that these expenses are not relatable to year under consideration and hence, not allowable in asstt. year 2007-08. 4. That learned CIT(A) erred on facts and in law in upholding disallowance of ₹ 3,56,53,000/- on account of claim recoverable from Ranbaxy Laboratories Ltd. by holding that amounts receivable towards Breach of contract for setting up plant is not a Capital Receipt. 162. Ground number 1 of appeal is with respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me tax act. However, on reading of the order of the learned assessing officer we did not find any satisfaction recorded by him that the assessee has incurred expenditure for earning exempt income on examination of the books of account. In absence of such satisfaction, the disallowance u/s 14A cannot be upheld. Honourable Supreme Court in 402 ITR 604 has held that satisfaction is mandatory before applying any apportionment ratio. In view of this second ground of appeal is allowed. 168. Third ground of the appeal is against the disallowance confirmed by the learned CIT of INR 2473697 holding that these expenses are not relatable to the year under consideration and hence not allowable in the assessment year 2007 08. This relates to disallowance of prior period expenses. The fact shows that the assessee did not make claim of deduction of the above expenditure pertaining to prior period in the return of income. Assessee also did not file any revised return to raise the claim before the AO. Accordingly, the AO denied entertaining the claim of the assessee in view of the decision of the honourable Supreme Court in 284 ITR 323. Before the learned Commissioner appeals assessee submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emently supported the orders of the lower authorities and submitted that assessee itself during the course of filing of the return has made the above disallowance. Such disallowances were not rectified by offering the above adjustment in the revised return. In absence of any revised return, the learned assessing officer was bound by the verdict of the honourable Supreme Court. Therefore, the claim of the assessee was not entertained by the learned AO. Before the learned CIT A the assessee did not file requisite details. He therefore submitted that the lower authorities have correctly disallowed the claim of the assessee. 171. On careful consideration of the rival contentions, it is noted that though learned assessing officer disallowed the claim of the assessee relying on the decision of the honourable Supreme Court correctly, the learned CIT A has admitted the claim of the assessee but in absence of adequate details dismissed the same. The issue is the allowability of the prior period expenses. This issue is squarely covered by the decision in the case of the assessee itself for assessment year 2000 01 in appeal of the learned assessing officer wide ground number 16 where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -08:- 1. The Commissioner of Income tax (Appeal), Bareilly has erred in law and circumstances in allowing relief of ₹ 23,21,594/- by deleting disallowance made out of expenses incurred on purchase of books and periodicals by treating same as revenue expenditure. Departmental appeal on this issue is pending decision before ITAT in Assessment Year- 2006-07 and earlier assessment years. 2. The Commissioner of Income tax (Appeal), Bareilly has erred in law and circumstances in allowing relief of ₹ 85,988/- which represented addition on account of notional income @ 10% of insurance claim i.e. ₹ 8,59,988/- in respect of loss in transit. Departmental appeal on this issue is pending decision before ITAT in Assessment Year-2006-07 and earlier assessment years. 3. The Commissioner of Income tax (Appeal), Bareilly has erred in law and circumstances in allowing benefit of deduction u/s 80IA on profits derived from business off generation of power. Departmental appeal on this issue is pending decision before ITAT in Assessment Year-2006- 07 and earlier assessment years. 178. The ground number 1 of appeal of learned assessing officer is with respect to disallowanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim was allowed by learned CIT A. The parties confirmed before us that identical issue has been decided in assessee‟s own case for assessment year 2001 02 wherein claim of assessee was also dealt with lower authorities in similar manner. 183. We have carefully considered rival contention and found that identical issue has been decided by us by this order for assessment year 2001 02 in ground number 4 of appeal of learned assessing officer wherein we have held that assessee is entitled for deduction u/s 80 IA of income tax act on power generation unit installed by assessee. Therefore, for similar reasons we dismiss ground number 3 of appeal of AO and direct him to grant deduction under section 80 IA of income tax act being profits derived from business of generation of power. Assessee is directed to file the working of claim which will be verified by the ld AO and then if found in accordance with law may grant the same. 184. Accordingly, ITA number 2596/Del/2011 for Assessment Year 2007-08 filed by learned assessing officer is dismissed. A Y 2008-09 ITA No. 4793/Del/2012 by Assessee 4975/Del/2012 By AO 185. Assessee company filed its return of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apply to the appellate authorities but only to the assessing officer. Therefore the learned CIT A should have entertained the claim of the assessee and examine date on the merits of the case. Further the issue of disallowance of the prior period expenses has been considered by us in assessment year 2000 01 in the appeal of the learned assessing officer wide ground number 16 wherein we have set aside the whole issue back to the file of the learned assessing officer with a direction to assessee to demonstrate before the learned CIT (A) that above expenditure has crystallized during the year and therefore allowable for this year. Accordingly for similar reasons, with similar directions, we also set aside this ground of appeal to the file of the learned CIT A. Accordingly, ground number 2 of the assessee‟s appeal is allowed with above direction. 190. Accordingly, ITA number 4793/del/2012 for assessment year 2008 09 is allowed. 191. The revenue has raised following grounds of appeal in ITA No. 4975/Del/2012 for Assessment Year 2008-09:- 1. The Commissioner of Income-tax (Appeals), Bareilly has erred in law and facts in allowing relief of ₹ 59,07,539/- by de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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