TMI Blog2023 (7) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... nd claim awarded by the arbitrator in the profit and loss account of as not recoverable - HELD THAT:- Loss to the assessee was known at the time of signing the audited financial statements. The accounting principles also provide if it is likely that a contingency will result in a loss to the enterprise, then it is prudent to provide for that loss in the financial statements. Thus, the assessee cannot be denied the deduction as discussed above merely for the reason that the order of the arbitrator was passed after the balance sheet date. Thus, it is transpired that the assessee was known to the fact of the loss in accordance with the award of the arbitration before filing the return of income. Therefore, the event for writing off the loss certainly occurred after the balance sheet date but before signing the financial statements and filing the income tax return. Whether the loan advanced by the assessee to Shri Babubhai Ramanlal Patel who is engaged in the activity of structural engineering works is capital in nature or it is trading advance? - The act of advancing loan on interest is one of the business activities of the assessee. Moreover, we note that even advances given in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount claimed as deduction represents provision only and no amount of bad debt or part thereof is written off as irrecoverable in the books of account. Thus, considering the fact that the amount of bad debt or part thereof was not written off as irrecoverable in the year consideration therefore we hold that the assessee is not eligible to claim the deduction of bad debt in the year under consideration. However, the assessee will be eligible to claim deduction of the same in the year in which bad debts actually written off as irrecoverable i.e. A.Y. 2010-11 as claimed by the learned AR subject to verification. Hence, the grounds of the appeal of the assessee is hereby dismissed in the light of the above discussion. Deduction u/s 80IA - deduction not claimed at the time of filing the return of income since total income was declared at Rs. NIL - HELD THAT:- Only AO who has no power under the statute to entertain a claim of deduction otherwise than by filing a revised return. However, there is no restriction on the power of the CIT(A) and ITAT being quasi-judicial authority. Thus, CIT(A) should have accepted the claim of the assessee by extending the benefit of deduction envisa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I 1023 - GUJARAT HIGH COURT] wherein issues involved in these appeals are squarely covered by the decisions of this Court in Birla VXL Ltd. [ 2013 (7) TMI 655 - GUJARAT HIGH COURT] and in Munjal Auto Industries Ltd [ 2013 (10) TMI 650 - GUJARAT HIGH COURT] . Therefore, the questions of law posed for our consideration in these appeals are answered in favour of the assessee. Addition on account of set-off of losses and unabsorbed depreciation of a unit of Core Healthcare Ltd. merged with the assessee - HELD THAT:- Issue decided in favour of assessee as in own case AY 2005-06 . TDS u/s 194C - Disallowance of transportation charges u/s 40(a)(ia) - transportation charges paid by the assessee to the GAIL - HELD THAT:- Transportation charges paid by the assessee to the GAIL is not in the nature of work contract for the purpose of section 194C of the Act, therefore no default committed by the assessee. Hence the ground of appeal of the revenue is hereby dismissed. Disallowance of depreciation on heavy vehicles - HELD THAT:- We uphold the order of the ld. CIT-A and direct the AO to allow the depreciation to the assessee on closing WDV as decided in A.Y. 2003-04. Additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demurrage and detention and sales tax liabilities to capital reserve - whether the writing off the statutory liabilities being custom duty, demurrage, detention, and sales tax amounting is chargeable in the hands of the assessee either under the provisions of section 28(iv) of the Act or section 41(1) of the Act? - HELD THAT:- To bring any item under the net of income in pursuance to the provisions of section 41(1) of the Act, there must be recovery either in cash or in-kind in respect of loss, expenditure or trading liability which was allowed as deduction in any of the assessment year. CIT(A) has given clear finding that the deduction on account of impugned statutory liability was never allowed to the assessee. Thus, the very first precondition to invoke the provision of section 41(1) of the Act is not satisfied. Therefore, we do not find any infirmity in the order of the learned CIT(A). Hence the ground of appeal of the Revenue is hereby dismissed. Addition on account of difference between assets and liabilities taken on merger - HELD THAT:- Surplus of assets cannot be taxed under section 28(iv) because firstly, such surplus does not arise from carrying on the business, sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we limit the disallowance on an ad-hoc basis @ 1 % of the exempted income as per the clause (f) to Explanation-1 of Sec. 115JB of the Act subject to the maximum adjustment made by the AO. Thus, the ground of appeal of the Revenue is partly allowed. TP Adjustment - Addition of guaranteed fee - international transaction or not? - HELD THAT:- We find that in the case of PCIT vs. Redington [ 2020 (12) TMI 516 - MADRAS HIGH COURT] has held that corporate guarantee is covered under the limb of international transaction and having bearing on profit and loss account. Bank/corporate guarantee is an international transaction. Therefore, the same has to be bench marked for determining the ALP. Determine the benchmarking for working out the ALP of the impugned international transaction - As extension of corporate/guarantee to AEs is an international transaction which needs to be benchmarked and in view of several order of the tribunal as referred above 0.5% commission on the value of corporate/ bank guarantee will serve the justice to both the assessee and the Revenue. Thus, in view of the above, the ground of appeal of the revenue is hereby partly allowed. Disallowance of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Patel HUF [ 2022 (12) TMI 1083 - ITAT AHMEDABAD] assessee is entitled to additional compensation of interest under section 244A of the Act on account of delay in the issue of refund - ITA No(s). ITA Nos.515-516/Ahd/2014, ITA Nos.685-686/Ahd/2014, ITA No.1744/Ahd/2016, ITA No.911/Ahd/2012, ITA No.969/Ahd/2012, ITA No.2236/Ahd/2015, ITA No.2411/Ahd/2015, ITA No.2412/Ahd/2015 With C.O. No.63/Ahd/2019 - - - Dated:- 30-6-2023 - ITA No.1872/Ahd/2016, ITA No.2237/Ahd/2016 And ITA No.2049/Ahd/2017 Shri Waseem Ahmed, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member For the Assessee : Shri S.N. Soparkar, Sr. Advocate with Shri Parin Shah and Shri Hemanshu Shah, A.Rs For the Revenue : Shri Sanjeev Jain, CIT, D.R ORDER PER BENCH: 1. The above captioned appeals have been filed by the assessee and the Revenue against the separate orders of ld. Commissioner of Income-Tax (Appeals) arising in the matter of assessment order passed under section 143(3) of the Income tax Act 1961 (in short, the Act ) involving respective Assessment Years. 1.1 First, we take up ITA No. 515/Ahd/2014, an appeal by the assessee for the AY 2006-07. 2. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The list of such expenses is reproduced on page 51 in the order of the ld. CIT-A. It was submitted that it (the assessee) has made contribution towards general public utility in the locality where its business premises are situated in order to maintain harmony with local environment. Accordingly, it was contented that the same are incurred wholly and exclusively for the purpose of the business. 5.1 However, the AO disagreed with the reasoning of the assessee and held that the assessee failed to explain the nexus of such expenditure with the business. Thus, the AO disallowed the same under the provisions of section 37(1) of the Act and added to the total income of the assessee. 6. On appeal by the assessee, the learned CIT(A) following the order of his predecessor in the own case of the assessee for AY 2008-09 deleted the addition made by the AO in part by observing as under: 9.6 It is seen that appellant s factories are located at village: Mandali, Savali, Near Baroda and Moraiya. Many of the staff and worker are residing in the vicinity of these areas. In view of these facts, I am of the opinion that donation/payments are nothing but an exercise of maintaining good rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT-A for Rs. 2,72,563.00 whereas the Revenue is in appeal against the deletion of the addition made by the learned CITA for Rs. 26,69,286.00 (wrongly written as Rs. 17,69,286.00) in ITA No. 685/AHD/2014 on the following ground of appeal: The CIT(A) has further erred in law and on facts in deleting the addition of Rs. 17,69,286/- on account of disallowance of expenses u/s. 37(1) of I.T Act. 8. The ld. AR before us filed a paper book running from pages 1 to 323 and contended that all the expenses were incurred for the smooth running of the business. These expenses were incurred in the areas where the factories of the assessee were located. Furthermore, it is the prerogative of the assessee to decide the expenses to be incurred for the purpose of the business and the revenue is not expected to sit on the armchair of the assessee to decide the expenses to be incurred for the commercial purposes. 9. On the other hand, the ld. DR before us contended that there was no nexus of the expenses incurred by the assessee with its business and therefore the same cannot be allowed as deduction. 10. Both the ld. AR and DR before us vehemently supported the order of the authorities b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its appeal is that the learned CIT(A) erred in confirming the disallowance of Rs. 11,66,51,168/- made by the AO on account of loss of loans advances. 13. The assessee company during the financial years 2000-01 to 2003-04 has given loan advance to one Shri Babubhai Ramanlal Patel in his personal capacity as well as to his propriety concern namely M/s Ajay Structural Engineering Works. As per the assessee, the party namely Shri Babubhai Ramanlal Patel was to pay interest on such loans advances at the rate varying between 15%, 12%, 12%, 12% and 6% for the different accounting years. As on 6th March 2006, there was outstanding loan advance to the impugned party including interest was at Rs. 32,16,51,167/- only. Due to a dispute regarding the claim of outstanding amount, the mater reached to for arbitration before the sole arbitrator Hon ble justice S.B. Mazumdar (retired from Hon ble Supreme court). The Hon ble arbitrator vide order dated 3rd August 2006 held that the assessee company was not able to prove the claim of interest on such loan and advance and finally directed the party namely Shri Babubhai Ramanlal Patel to pay an amount of Rs. 20,50,00,000/- for full and final ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed on by Babubha! R. Patel to Nirma Group at the nominal price. Hence, the transactions of write off of advance are colourable device intended to defraud the revenue. In view of the above facts and circumstances also the legal position, advances written off of Rs. 11,66,51,168/- are disallowed. Since the assessee has furnished inaccurate particulars of income, penalty proceedings u/s. 271(1)(c) are initiated separately. 14. The aggrieved assessee preferred an appeal to the learned CIT(A) and submitted that it is carrying out financial transaction of lending money on year-to-year basis and earned interest income on the same which was duly offered to tax as business income. Therefore, any loss arising in carrying out the activity of money lending should be considered as revenue loss. The impugned amount of claim of Rs. 11,61,51,168/- was based on arbitration award given by the retired justice of Hon ble supreme court wherein full and final settlement reached for Rs. 20.5 crores against the total outstanding of Rs. 32,16,51,168/- only. The assessee further submitted that there cannot be nexus between the money lent to Shri Babubhai Ramanlal Patel and land transaction between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itution, banking or non-banking, which has the business of receiving deposits and lending money, both for interest. 35. It is never the case of the assessee that it had been receiving deposits on payment of interest and it was lending money. Either on facts or from the activity carried on by the assessee or from the circumstance, the tribunal could have never used the reasoning of the assessing officer or the appellate authority to conclude that the assessee should be taken to be carrying on the activity of money lending as a business activity and therefore on the same reasoning the amount of Rs 5,34 crore advanced to its sister concern also should be allowed. This view is not supportable for more than one reason that it is not based on any material on record; that there was nothing on record to indicate that the assessee had been recognized as money lender in terms of any legal provisions or business practice and the mere fact that the assessing officer and the appellate authority have opined correctly or otherwise that deposit of Rs 75 qualifies for deduction under Section 36(1)(vii) of the Act being a deposit made in the money lending business activity of the assessee autom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business income and therefore the same should be allowed as deduction in the event of non-recovery of such interest from the party. It was also pointed out by the learned AR that it is not necessary to have a license from the RBI for advancing money on interest. It was the decision of the assessee to extend the loan on an interest basis to the party discussed above. 18. On the other hand, the learned DR before us vehemently supported the order of the authorities below. 19. We have heard the rival contentions of both the parties and perused the materials available on record. The 1st controversy arises whether the claim made by the assessee based on the award of the arbitrator dated 3 August 2006 relates to the year in dispute i.e F.Y. 2005-06 corresponding to A.Y. 2006-07. As per the AO, the order for the arbitration was made on 3 August 2006 and therefore if at all the assessee wishes to make a claim based on such award, the same can be made only in the previous year 2006-07 corresponding to the assessment year 2007-08 and not in the year under consideration. There is no confusion that the order of the arbitration was made on 3rd August 2006 based on the application made by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned counsel for the parties and have perused the record. From perusal of clause 13 of the memorandum of Association, it is evident that one of the object's of the assessee is to lend money and the assessee has been engaged in money lending business since its inception from financial year 2004-05. The schedule of loans and advances is a continuing feature in all the past years and has been accepted by the department as part of business by taxing the income under the head 'income from business'. However, the fact that assessee has been carrying on the money lending business and it has been taxed so under the head business for past 9 years has been over looked. It is pertinent to mention here that holding of money lending licence is not a prerequisite for allowing a claim of bad debts as is held by Supreme Court in TRF Ltd. Supra and it is enough if the irrecoverable debt is written off in the books of accounts. It is also pertinent to note that non charging of interest is not fatal to the claim for deduction. However, the aforesaid aspect of the matter has not been appreciated by the tribunal. Alternatively, the claim of the assessee under section 37(1) of the Act has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the transaction assumes relevance in a case where the transaction itself is of such a dubious character that one may not know whether the transaction falls under a particular character as, namely, money-lending business. A perusal of the statement filed before the authorities below shows that apart from M/s. Dyes and Pigments India, the assessee had money transactions with other concerns too, which were treated as part of the money-lending business. In the circumstances, we have no hesitation in confirming the finding of the Tribunal that the assessee had money-lending business also as part of its business. Given the fact that the assessee had been carrying on business in moneylending, which had been accepted so by the Revenue, and in the absence of any other material to show that the memorandum and articles of association of the company did not permit carrying on of money-lending business, the only question that survives for us to consider is whether the amount advanced by the assessee to the extent of Rs. 40 lakhs was really in the nature of a loan. 19.3 Based on the above, it can be concluded that the assessee is engaged in the business of moneylending and therefore once ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant observation of Hon ble supreme court extracted as under: 4. This position in law is well-settled. After 1-4-1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. 19.7 In view of the above we hold that the assessee cannot be denied the claim merely on the reasoning that the assessee has not been able to take necessary steps for the recovery of the loan/interest from the party. 19.8 The last controversy arises whether the assessee has adopted the colourable device by writing off the loan/interest as not recoverable to avoid the tax liability. The onus lies upon the revenue to prove based on the documentary evidence that the assessee has adopted the colourable device. From the reading of the order of the AO, no detail is forthcoming about the land purchased by the group of the assessee at the alleged nominal price. The AO was expected to prove the impugned transaction of the purchase of land by the group company of the assessee based on the documentary evidence suggesting that the land has been purchased by the group compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest being offered to tax on above loan transactions are not verifiable. Further, it is seen that the assessee has also debited the principal amount as an expenditure. (c) that the transaction with these concerns to whom loan has been given are not genuine and are in the nature of colourable device as discussed in detail above. (d) that the primary conditions laid down in section 36 of 1.T. Act have not been satisfied and the assessee has not been able to prove that these advances have become Bad . 22. Aggrieved assessee preferred an appeal before the learned CIT(A). The learned CIT(A) confirmed the disallowances made by the AO for two reasons. The first reason is that the assessee is not in the business of money lending, hence not eligible to claim the deduction for loan extended as loan for non-business purpose on account of non-recovery. The second reason being the impugned amount represents provision only whereas to claim bad debts it is necessary to write off the amount as irrecoverable in the books of account. The relevant finding of the learned CIT(A) is extracted as under: 12.6 I have already held while deciding the 10th ground of appeal that the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was the provision for bad and doubtful debt made during the current year. Reliance is also placed on the decision of Hon'ble Supreme Court in the case of HCL Comnet Systems and Services Ltd. reported in 305 ITR 409. In view of the above, 11 ground of appeal is dismissed. 23. Being aggrieved by the order of learned CIT(A) the assessee is in appeal before us. 24. The learned AR before us contended that income on such loan by way of interest was offered to tax under the head business and profession which was also accepted by the revenue and therefore any loss on account of non-recovery of the loan should be allowed as business loss. It was also pointed out by the learned AR that it is not necessary for the assessee to have the license from the RBI for granting the loan to the parties as discussed above. However, the learned AR fairly agreed that the assessee this year has made the provision for nonrecovery of the loan but the same was actually written of in the later year. If the deduction of such a provision is disallowed in the year under consideration, then the same should be allowed in the year in which such provision has actually been written off in the books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove discussion. 27. The next issues raised by the assessee vide ground Nos. 5 to 8 of its appeal are either consequential or premature to decide. Hence, the same are dismissed accordingly as infructuous. 28. The next issue raised by the assessee vide ground No. 9 of its appeal is that the learned CIT(A) erred in dismissing the additional ground raised before him for claiming the deduction under section 80IA of the Act. 29. The necessary facts are that the assessee during the appellate proceeding before the learned CIT(A) raised additional ground of appeal wherein it was contended that the power undertaking located at Bhavnagar is eligible for deduction under section 80IA of the Act. But the deduction under section 80IA of the Act on the said unit was not claimed at the time of filing the return of income since total income was declared at Rs. NIL. However, the AO assessed the income in the assessment framed under section 143(3) of the Act at Rs. 449,07,95,360/- only. Therefore, the amount eligible for deduction under section 80IA of the Act should be provided. The assessee in support of its claim furnished audit report of eligible undertaking and claimed that similar deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 80 IA of the Act for the simple reason that it has offered the income under the provisions of MAT. As such the assessee has declared NIL income under normal computation of income. Thus, there was no occasion for the assessee to claim the deduction in the return of income under section 80IA of the Act. As such, the issue of claiming the deduction under section 80IA of the Act has come on the surface once the AO has made the disallowance of various expenses while computing the income under normal computation of income in the assessment framed under section 143(3) of the Act. 34.1 However, the authorities below have denied the benefit of deduction to the assessee on the reasoning that such deduction was not claimed in the return of income. In doing so, the revenue authorities have referred the judgement of Hon ble Supreme Court in the case of Goezte India Ltd reported in 284 ITR 323. The relevant extract of the judgement is under: 4. The decision in question is that the power of the Tribunal under section 254 of the Income-tax Act, 1961, is to entertain for the first time a point of law provided the fact on the basis of which the issue of law can be raised before the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) while computing the taxable income. The appellant craves leave to add, alter, amend or withdraw all or any of the Grounds of Appeal and to submit such statements, documents and papers as may be considered necessary either at or before the appeal hearing. 36. At the outset, we note that the additional ground of appeal raised by the assessee vide letter dated 15-02-2021 involving the issue of deduction of CESS has not been pressed by the learned AR for the assessee. Therefore, the same is dismissed as being not pressed. 37. Coming to the additional ground of appeal raised vide letter dated 26-032019 and 02-03-2020, it was pleaded by the assessee in the application filed for the admission of the additional ground that the issues raised in the additional grounds of appeal are legal in nature and go to the root of the matter. The necessary facts qua such legal grounds are already available on record as they are arising from the order of authorities below. Accordingly, it was prayed by the learned AR for the assessee that the same should be admitted for adjudication. 38. On the other hand, the learned DR opposed admitting the additional grounds of appeal on the reasonin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e admit the additional grounds raised by the assessee. 40. As far as the issue of exclusion of sales tax benefit of Rs. 92,63,70,395/- from the computation of minimum alternate tax under the provisions of section 115JB is concerned, we note that the AO while assessing the income under normal provisions of the Act treated the benefit of sale tax exemption as revenue receipt and added to the total income of the assessee. On appeal by the assessee, the learned CIT(A) held the same as capital receipt not liable to be taxed under the Act. On second appeal by the Revenue before us in ITA No. 685/AHD/2014, we have confirmed the order of the learned CIT(A) vide paragraph no. 62 of this order i.e. impugned sales tax benefit are in the nature of capital receipt not liable to tax. Thus, the question arises that a receipt which is not taxable under the normal provision of the Act can be made subject to tax under the scheme of MAT as provided under section 115JB of the Act. The question has been answered by the Hon ble Calcutta High Court in the case of CIT vs. Ankit Metal Power Ltd reported in 109 taxmann.com 93 wherein the Hon ble bench held that once any receipt which is not income unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tuous and we accordingly dismiss the same. 42. In the result, the appeal filed by the assessee is partly allowed. Coming to ITA No. 685/Ahd/2014, an appeal by the Revenue for AY 2006-07 43. The Revenue has raised following grounds of appeal: i) The CIT(A) has erred in law and on facts in deleting the disallowance of Rs. 15,71,96,4288/- on account of Disallowance of interest expenses on DDEs . ii) The CIT(A) has further erred in law and on facts in deleting the addition of Rs. 8,79,65,829/- on account of Interest written back in books of account on DDBs. iii) The CIT(A) has further erred in law and on facts in deleting the addition of Rs. 99,19,95,360/- on account of Sales tax benefit, iv) The CIT(A) has further erred in law and on facts in deleting the addition of Rs. 209,41,67,551/- on account of Set off of losses and depreciation of demerged undertaking of Sachana division of Core Healthcare Ltd. v) The CIT(A) has further erred in law and on facts in deleting the addition of Rs. 17,69,286/- on account of disallowance of expenses u/s. 37(1) of I.T Act. vi) The CIT(A) has further erred in law and on facts in deleting the addition of Rs. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The date of redemption, liability to incur cost (being interest/discount/premium) is not certain in a situation where the assessee buys back the bonds before the maturity. Therefore, no cost can be determined before the maturity period. iv. As per the provisions of section 193 of the Act, if the assessee claims any interest on securities on an accrual basis, then the TDS should be deducted on such debiting of interest. However, the assessee has not deducted TDS on the same. 45.1 In view of the above, the AO disallowed the interest expense of Rs. 15,71,96,428/- on deep discount bonds (DDBs) and added to the total income of the assessee. 46. On appeal by the assessee, the learned CIT(A) deleted the disallowance made by the AO by following the order of this Tribunal in the own case of the assessee for AY 2002-03. The relevant finding of the learned CIT(A) reads as under: 3.3 On verification of case records, it has been observed that this issue has been decided by Hon. ITAT, Bench: A1, Ahmedabad in the case of appellant in the combined appellate order vide ITA . No.1245/Ahd/2006 dtd.13th July, 2009 for Asst.Year: 2002-03. ITAT discussed this issue in details in para 4 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purposes of the business and therefore it should be allowed as deduction. Let us consider the issue first from the accounting point of view and then from the legal point of view. 17. It is not at all in dispute that the assessee maintains its accounts on accrual basis; rather the Companies Act mandates the assessee to do so. Accrual basis of accounting (also referred to as mercantile basis) is the method of recording transactions by which revenues, costs, assets and liabilities are recognised in the accounts in the period in which they accrue, i.e., when transactions occur rather than when they are settled by receipt or payment in cash. This results in matching the accomplishments (i.e., revenues) with the efforts (ie., costs) in a given period. Therefore, two essential features of accrual basis of accounting are: (a) Revenues are recognized as they are earned; and (b) For determining the periodic income, costs are matched against revenues so recognised or against the time period to which they relate. The matching concept is thus an integral part of accrual accounting. In fact, they are often used interchangeably. The matching concept requires proper allocation of costs into a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... object. Section 28 taxes the profits and gains of the must match and relate to the accounting period. Section 28 of the Income-tax Act al LAW Pess or profession of the previous year, e.g., accounting period which, substance, requires matching the accomplishments (i.e., revenues).with efforts (ie, expenses incurred) in a given accounting period. Both the revenues as well as costs/expenses relating to a particular year must be accounted for in that year itself to arrive at the correct or real profits. There is a plethora of authorities, e.g., Kedarnath Jute Manufacturing Co. Ltd. v. CIT, 82 ITR 363 (SC) and Madeva Upendra Sinai v. Union of India, 98 ITR 209 (SC), etc., for the proposition that the profits assessable under section must be real profits to be ascertained on ordinary principles of trading and commercial accounting. If the assessee is under a liability or liability has been incurred in relation to a given period or is bound to make a certain payment from the gross profits, the profits and gains can only be the net amount after the said liability or amount is deducted from the gross profits or receipts. 20. It is evident on bare perusal of the Information Memorandum o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aforesaid aspects of the case and lays down the principles governing such claims. In that case, the assessee had issued. debentures at a discount on 10th December 1966, redeemable after 12 years. The issue price of debenture of Rs. 100/- was Rs. 98. The total amount of discount on the entire issue was Rs. 3 lakhs while the pro-rata discount, i.e., the proportionate amount of discount for the period of six months ending with June 30, 1967 was Rs. 12,500/-, taking the period of 12 years which was the period of redemption and dividing the total amount of discount by 12 years. Relevant propositions laid down by the Hon'ble Supreme Court in the aforesaid judgment can be summed up as under: (i) When a company issues debentures at a discount, it incurs a liability to pay a amount than what it has borrowed, at a future date. The liability to pay the discounted amount over and above amount received for the debentures is a liability which has been incurred by the company for the purposes of its business in order to generate funds for its business activities. The amounts so obtained by issue of debentures are used by the company for the purposes of its business. This would theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... poses of the business. Therefore the claim of the assessee, which remains uncontroverted by the Department, that the capital was borrowed for the purposes of the business has to be accepted and is accordingly accepted. Since the liability incurred by the assessee towards interest is with reference to the borrowed capital utilized for the purposes of its business in the year under appeal and also that it relates to the year under appeal, the assessee, in our view, is entitled to succeed in its claim for deduction on pro-rata basis. We hold accordingly. FLAWpective orders for denying the deduction claimed by the assessee. These are: The AO and the learned CIT(A) have made various other observations in their respective orders for denying the deduction claimed by the assessee. These are (i) The assessee-company is a cash-rich company; (ii) There was no need to raise the funds through DDBS; (iii) The investors in the DDBS belong to the same group to which the assessee belongs; (iv) The investors in DDBS have not offered corresponding income to tax in their respective hands; (v) Since the assessee did not deduct the tax at source in terms of section 193, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue is hereby dismissed. 51. The next issue raised by the Revenue is that the learned CIT(A) erred in deleting the addition of interest written back in the books on repurchase of DDBs for Rs. 8,79,65,829/- only. 52. The AO during the assessment proceedings found that the assessee in the year under consideration has made buyback of 175 DDB on which it incurred actual discount/premium of Rs. 34.06 crores whereas the assessee against such bonds has already claimed interest expenses on accrual basis for Rs. 42.86 crores leading to difference of Rs. 8,79,65,829/- which was written back in the books. However, the assessee has not offered the same to tax in the return filed for the year under consideration since interest/discount claimed for Rs. 42.86 crore in the earlier year on accrual basis was disallowed by the AO. However, the AO found that the order of the AO for earlier year has been reversed by the ld. CIT(A) and the matter is pending before higher authority. Therefore, the AO added the same to the total income of the assessee on protective basis subject to outcome of identical issue pending before higher authority. 53. On appeal by the assessee, the learned CIT(A) allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee on protective basis subject to allowances of claim made in earlier years. The assessee before the learned CIT(A) contended that interest expenses claimed in earlier years on pro-rata basis has been allowed by the ITAT. However, the AO while passing effect giving order has not allowed the excessive claim of Rs. 8,79,65,829/- only. The learned CIT(A) in view the above directed the AO to verify the fact whether interest was allowed more than actual cost, then the same should be added to the income of the year otherwise no addition is to be made. Considering the facts in totality as discussed above, we do not find any infirmity in the order of the learned CIT(A). As such, the learned CIT(A) rightly held that if claim of interest on 175 DDB allowed is more than actual interest cost incurred on buyback, then such excess interest should be added to the total income otherwise no addition is required to be made on the same if the interest claimed is not more than actual interest cost. Hence, the ground of appeal of the Revenue is hereby dismissed. 58. The next issue raised by the Revenue is that the learned CIT(A) erred in deleting the addition made by the AO on account of sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is in appeal before us. 61.1. The learned DR before us reiterated the findings contained in the assessment order. 61.2. On the other hand, the learned AR before us submitted that issue on hand is covered in favour of the assessee by the judgment of Hon ble Gujarat High Court in its own case bearing Tax appeal No. 226 of 2010. The learned AR before us vehemently supported the order of the ld. CIT-A. 62. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we note that the issue on hand was also in dispute in earlier year i.e. AY 2004-05 which traveled up-to the Hon ble Gujarat High in tax appeal No. 226 of 2010 where following question was framed: 2. The question of law framed at the time of admitting Tax Appeal No.226 of 2010 reads as under: Whether the Appellate Tribunal is right in law and on facts in reversing the order passed by CIT (A) and thereby holding that amount of Sales-tax incentive received by the assessee is a capital receipt? 62.1. The Hon ble bench answered the above question in favour of the assessee by holding as under: 12. We have heard both the learned counsel and perus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rected to allow depreciation after giving benefit of carry forward business loss and unabsorbed depreciation u/s. 72A of I.T. Act in the A.Y. 2005-06 and subsequent years. Following the above appellate orders in the case of appellant, I direct the AO to allow the claim of appellant. This ground of appeal is allowed. 66. Being aggrieved by the order of the learned CIT(A), the Revenue is in appeal before us. 66.1. The learned DR before us reiterated the findings contained in the assessment order. 67. On the other hand, the learned AR before us submitted that in the immediate previous year i.e. A.Y. 2005-06, the impugned claim was made for the first time which allowed by the learned CIT(A) and order of the learned CIT(A) was also confirmed by ITAT in the appeal of revenue in ITA No. 2208/AHD/2009. Therefore, the claim of the assessee for the year under consideration should also be allowed. The learned AR before us vehemently supported the order of the ld. CIT-A. 68. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we note the issue of claim of losses and unabsorbed depreciation of the unit of Core Health ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated at JMC House, Opposite Parimal Garden, S.M. Road, Ahmedabad (hereinafter referred to as the Escrow Bank'), titled CHL Lenders' Discharge Account . The Resulting Company shall, within three working days of the Court according its sanction to this Scheme in each of the proceedings initiated by the Demerged Company and Resulting Company pay to the Lenders the balance/remainder of the Settlement Amount by depositing the same in the said CHL Lenders' Discharge Account. As a condition precedent to Scheme becoming effective, the Resulting Company shall notify Arcil and the Escrow Bank, in writing that the 'escrow' status of the CHL Lenders' Discharge Account shall be released. Upon such notification the 'escow' status of the CHL Lenders' Discharge Account shall come to an end and the CHL Lenders' Discharge Account shall along with the settlement Amount deposited therein forthwith and without any act, deed or instrument belong to, vest in an be operated by Arcil and the liabilities shall be deemed to be discharged. The interest accrued upto the Effective credit of and net taxes shall be paid over to the Resulting Company. Thus all the li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emerger which to take place on 2-12-2004 Thereafter, when on the date on which demerger is take place i.e. on 01-12-2004, the liabilities of demerged hits have already been settled at Rs. 138 Crores. This is the cheme as per para 7.1.2, 7.1.3 and 7.1.4 of the scheme. The YOF LAW ELLATE TR contention of the A.O that there is no basis for reduction of liabilities or that all the liabilities have not been taken over is incorrect infact the appellant took over liabilities in relation to demerged undertaking, para-1.10.1.5 provides as under: All liabilities (contingent or otherwise) pertaining to or relatable to the Demerged undertaking as appearing in the Opening Financial Statement, including: (a) The debts, liabilities, duties and obligations of the Demerged Company, which arise out of the activities or operations of the Demerged Undertaking. (b) Specific loans borrowings (including debentures, if any) raised, incurred and utilized solely for the activities or operations of or pertaining to the Demerged Undertaking. (c) The liabilities (including debentures, if any) other than those referred to in sub-clause (a) and (b) above, being the amounts of general or mult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 CARRY FORWARD AND SET-OFF OF ACCUMULATED LOSSES AND UNABSORBED DEPRECITION ALLOWANCE UNDER SECTION 72a OF THE INCOME TAX ACT, 1961. 8.1 The Resulting Company shall be allowed to carry reward the accumulated losses and allowance for absorbed depreciation of the Demerger Company as at March 31, 2004 (upto Assessment Year 2004-05) ( Tax Losses ) in accordance with the provisions of Section 72A of the Income Tax Act, 1961. APPELLATE 8.2 In case any clause in this Scheme is in conflict with the definition 'Demerger' within meaning of Section 2 (19AA) of the Income-tax Ac 1961, notwithstanding what is stated elsewhere in this Scheme the relevant clause shall stand modified as to be in conformity with the said definition so as to make this Scheme eligible for benefits available under section 72A of the Income Tax Act, 1961. Provided that no such modifications shall be made/effected under this clause which may impact, affect, prejudice and impair in way whatsoever the rights of the Lenders' to the Settlement Amount (in terms of Clause 7 of this Scheme, absolutely towards discharge of Liabilities) and the new equity shares of the Resulting Company (in terms of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y for the purpose of the business. 70. At the outset, we note that the ground raised by the Revenue has been adjudicated along with assessee s ground of appeal in ITA No. 515/AHD/2014 for the AY 2006-07. The ground of appeal of the assessee has been decided by us vide paragraph No. 11 of this order in favour of the assessee and against the Revenue. For detailed discussion, please refer to the para of the order. Hence, the ground of appeal of the Revenue is hereby dismissed. 71. The next issue raised by the Revenue is that learned CIT(A) erred in deleting the disallowance of transportation charges for Rs. 66,37,143/- under section 40(a)(ia) of the Act. 72. The AO during the assessment proceedings found that the assessee was purchasing gas from Gas Authority of India Ltd (GAIL). In the invoice issued to the assessee, GAIL besides charging sale price also charged transportation for supply of gas to the factory of the assessee which was shown separately from purchase cost in the books by the assessee. Thus, the AO was of the view that the transportation charges paid by the assessee to the GAIL were in the nature of work contract on which tax under section 194C of the Act ought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchase of the material purchased. Simply, that the assessee has separately disclosed transportation charges in the books of accounts does not make it liable for the deduction of TDS under section 194C of the Act on such transportation charges. The assessee, instead of showing the amount of purchases along with the transportation charges, has shown both the cost of purchase and the transportation charge separately. But such an act of the assessee does not make it liable for the deduction of TDS under the provisions of section 194C of the Act. 77.1 The Hon ble Gujarat High Court in the identical facts in the case of CIT(TDS) vs. Krishak Bharati Cooperative Limited reported in 27 taxmann.com 304 has held as under: 17. In our view, the agreement essentially was for purchase and sale of gas. Transportation of gas was only a part of the entire sale transaction. Laying down the pipeline and supplying gas through such pipeline were the steps in furtherance of the terms of such a contract. Clear understanding of the parties that the ownership of gas would pass on to the buyer at the delivery point would clearly show that transport of gas by the seller was a step towards execution of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... XVII-B of the Act are not applicable on the component of Gas Transportation Charges paid by the purchaser to the Owner/Seller of the gas. The use of different modes of transportation of gas by Owner/Seller will not alter the position. 77.3 Thus in view of the above discussion, we hereby hold that transportation charges paid by the assessee to the GAIL is not in the nature of work contract for the purpose of section 194C of the Act, therefore no default committed by the assessee. Hence the ground of appeal of the revenue is hereby dismissed. 78. The last issue raised by the Revenue is that the learned CIT(A) erred in deleting the disallowance of depreciation on heavy vehicles for Rs. 11,68,377/- only. 79. The AO during the assessment proceedings noticed that the assessee in the block of assets has shown addition of heavy vehicles for Rs. 77,89,177/- which were put to use as on 31st March 2006. The assessee claimed depreciation on the same for half year. However, the AO found that the assessee failed to prove that the vehicles were put to use as on 31st March 2006. Hence, the AO disallowed the depreciation on the same for Rs. 11,68,377/- and added to the total income of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ason to interfere in the finding of the learned CIT-A. Accordingly, the ground of appeal of the revenue is hereby dismissed. 85. In the result, the appeal of the Revenue is hereby dismissed. Coming to ITA No. 1744/AHD/2016 an appeal by the Revenue for A.Y. 2006-07 86. The only issue raised by the Revenue is that the learned CIT(A) erred in deleting the penalty levied for Rs. 21,02,00,000/- under the provisions of section 271(1)(c) of the Act. 87. The AO in the assessment order made various additions/disallowances and against such addition/disallowances, initiated penalty proceeding under section 271(1)(C) of the Act. Finally, the AO vide penalty order dated 26-03-2015 levied penalty of Rs. 21,02,00,000/- against the following additions/disallowances: 1. General Public utility Expenses Rs. 30,07,849/- 2. Bad debt written off Rs. 11,66,51,168/- 3. Claim of Provision for Doubtful debt Rs. 48,96,52,916/- 4. Prior Period Income Rs. 1,17,56,630/- 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee is engaged in the business of moneylending and eligible to claim the deduction in case such loan or advances become bad. However, we confirmed the disallowances merely because amount of bad debt was not written off as irrecoverable in the books of account for the year under consideration. We further noted that the amount was actually written off in the A.Y. 2010-11 and accordingly given the direction that the claim of the assessee should be allowed in A.Y. 2010-11. Thus, it is transpired that the claim made by the assessee was neither amounting to furnishing inaccurate particular of income nor the concealment of income. As such, it is the case of claim of the assessee which was not allowable in the year under consideration. To levy the penalty under section 271(1)(c) of the Act there should exist inaccurate claim made with bad intention. Merely certain additions made to the total income will not ipso facto empower the revenue authority to levy penalty under section 271(1)(c) of the Act. Therefore, in our considered view no penalty under section 271(1)(c) of the can be levied on account of disallowances of impugned claim of provision for doubtful debt. 88.3 Coming to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty levied by him. Hence, the ground of appeal of the Revenue is hereby dismissed. 88.7 In the result, the appeal of the Revenue is hereby dismissed. Coming to ITA No. 516/AHD/2014, an appeal by the assessee for AY 2007-08 89. The assessee has raised following grounds of appeal: 1) In law and in facts and circumstances of the Appellant's case, the learned CIT(A) has grossly erred in the points of law and facts. 2) In law and in facts and circumstances of the Appellant's case, the learned CIT(A) has grossly erred in confirming disallowance of expenses Rs. 6,52,637 u/s. 37(l)of I.T.Act 3) In law and in facts and circumstances of the Appellant's case, the learned CIT(A) has grossly erred in confirming disallowance Rs. 6,749 u/s. 14A of Income-tax Act. 4) In law. and ,in. facts and circumstances of the Appellant's case, the learned CIT(A) has grossly erred in confirming disallowance Rs. 11,66,51,168. The same was claimed in earlier Asst.Year: 2006-07 and alternatively in current Asst.Year. 5) In law and in facts and circumstances of the Appellant's case, the learned CIT(A) has grossly erred in dismissing appellant's ground r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t pressed during the appellate proceeding. Hence the same was confirmed. 92. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us. 93. At the outset, we note that the learned AR for the assessee before us submitted that he has been instructed by the assessee not to press the issue on hand on account of smallness of amount in dispute. Hence, the ground of appeal of the assessee is hereby dismissed accordingly. 94. The next issue raised by the assessee vide ground No. 4 of its appeal is that the learned CIT(A) erred in confirming the disallowance of bad debt of Rs. 11,66,51,168/- only. 95. At the outset, we note that the issue raised by the assessee in the captioned ground of appeal relates to A.Y. 2006-07 and the assessee was also in appeal for A.Y. 2006-07 before us vide ITA No. 515/AHD/2014 which we have dealt vide paragraph No. 12 to 19 of this order. Thus, the ground of appeal of the assessee for same issue which has already been dealt by us vide aforesaid para of this order is hereby dismissed as infructuous. 96. The next issue raised by the assessee vide ground Nos. 5 to 8 of its appeal are either consequential or premature to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aised by the assessee in ITA No. 515/AHD/2014 for the assessment year 2006-07. Therefore, the findings given in ITA No. 515/AHD/2014 shall also be applicable for the assessment year 2007-08. The grounds of appeal of the assessee for the A.Y. 2006-07 have been decided by us vide paragraph No. 36 40 of this order partly in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2006-07 shall also be applied for the assessment year 2007-08. Hence, the additional grounds of appeals filed by the assessee are hereby partly allowed. 101.1 In the result, appeal of the assessee is hereby partly allowed. Coming to ITA No. 686/Ahd/2014, an appeal by the Revenue for AY 2007-08 102. The Revenue has raised following grounds of appeal: i) The CIT(A) has erred in law and on facts in deleting the disallowance of Rs. 60,83,39,826/-claimed by the Assessee toward interest expenses on Deep Discount Bonds. ii) The CIT(A) has further erred in law and on facts in deleting the addition of Rs. 9,98,90,845/- on account of Interest written back in books of account on DDBs. iii) The CIT(A) has further erred in law a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed by the Revenue is hereby dismissed. 105. The next issue raised by the Revenue is that the learned CIT(A) erred in deleting the addition of interest written back in books on the re-purchase of DDBs for Rs. 9,98,90,845/- only. 106. At the outset, we note that the issue raised by the Revenue in its ground of appeal for the AY 2007-08 is identical to the issue raised by the Revenue in ITA No. 685/AHD/2014 for the assessment year 2006-07. Therefore, the findings given in ITA No. 685/AHD/2014 shall also be applicable for the assessment year 200708. The appeal of the Revenue for the AY 2006-07 has been decided by us vide paragraph No. 57 of this order against the Revenue subject to verification. The learned DR and the AR also agreed that whatever will be the findings for the assessment year 2006-07 shall also be applied for the assessment year 2007-08. Hence, the ground of appeal filed by the Revenue is hereby dismissed subject to direction. 107. The next issue raised by the Revenue is that the learned CIT(A) erred in deleting the addition made on sales tax benefit of Rs. 38,29,13,332/- only. 108. At the outset, we note that the issue raised by the Revenue in its ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decided at Rs. 249,07,23,831/- by this ITAT in ITA No. 1599 1280/Ahd/2013. The relevant ground and finding of the bench read as under: 40. Ground No.5: In this ground of appeal, grievance of the Revenue is that the ld.CIT(A) has erred in law and on facts in holding that correct value of intangible assets of the Nirma Industries was Rs. 500 crores and not Rs. 53.43 crores as determined by the AO and in directing the AO to allow depreciation on entire written down value of Rs. 2,49,07,23,831/-. 41. With the assistance of the ld.representatives, we have gone through the record carefully. Issue whether brand/trademark of Nirma would be taken at Rs. 500 crores or its value is to be taken at Rs. 53.43 cores considered by the AO has been disputed in the case of Nirma Industries in the Asstt.Year 2003-04. The ld.AO has made disallowance of Rs. 61.8 crores out of depreciation claimed which was deleted by the ld.CIT(A). This issue has been considered by us in ITA No.1738/Ahd/2014 at para 8 of this order. We have followed order of the ITAT in the Asstt.Year 2001-02 wherein value of intangible assets was upheld at Rs. 500 crores. Thus, following order in the case of Nirma Industrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liability in the hand of the assessee was correctly credited to profit and loss account as well offered to tax. Further remission of liability on account of demerger is also taxable under the provision of section 28(iv) of the Act. Accordingly, the AO rejected the claim of the assessee made by filing a letter dated 23-12-2009. 118. Aggrieved assessee preferred an appeal before the learned CIT(A) and submitted that the benefit arising on the remission of principal amount of loan liability is not taxable as there was no deduction claimed on principal amount against the taxable income. 119. The learned CIT(A) allowed the appeal of the assessee by following the decision of his predecessor in own case of the assessee for A.Y. 2008-09. The relevant finding of the learned CIT(A) reads as under: 11.4 Identical addition was deleted by my predecessor while deciding the appeal in the case of appellant for Asst. Year: 2008-09 in appeal No. CIT(A)-XI/94/Cir.5/10-11 dtd. 2702-2012 after considering the order of Core Healthcare Ltd. v/s. DCIT in ITA No.25432547/Ahd/2007 dtd.5-6-2009 and ratio of Hon'ble Jurisdictional High Court decision in the case of CfT v/s. Chetan Chemicals Pvt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the amount of Rs 57.74 lakhs can be taxed under the provisions of section 28(iv).[Para 13] 123.1 From the above discussion, there remains no ambiguity to the fact that the waiver of loan cannot be made subject to tax under the provisions of section 28 (iv) of the Act. 123.2 The next aspect arises whether such waiver of loan can be brought to tax under the provisions of section 41(1) of the Act. To bring any item under the net of income in pursuance to the provisions of section 41(1) of the Act, there has to be recovery either in cash or in-kind in respect of loss, expenditure or trading liability which was allowed as deduction in any of the assessment year. Thus, first, we have to see whether the waiver of loan in the given case represents the loan for the acquisition of the capital assets or it represents the working capital loan. Again, if the loan is capital loan, used for the purpose of the fixed assets, then the assessee cannot be made subject to tax under the provisions of section 41(1) of the Act. In holding so we draw support and guidance from the judgement of Hon ble Supreme Court in the case of CIT vs. Mahindra and Mahindra Ltd (supra) where it was held as und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital loan, then the waiver of such loan represents the benefit to the assessee in respect of which the expenditure was claimed by the assessee and allowed as deduction to the assessee. Accordingly, such working capital loan has to be treated as income of the assessee within the provisions of section 41(1) of the Act. In holding so, we draw support and guidance from the judgement of Hon ble Delhi High Court in the case of Logitronics (P) Ltd vs. CIT reported in 9 taxmann.com 302 wherein it was held as under: 23. In the context of waiver of loan amount, what follows from the reading of the aforesaid judgment is that the answer would depend upon the purpose for which the said loan was taken. If the loan was taken for acquiring the capital asset, waiver thereof would not amount to any income exigible to tax. On the other hand, if this loan was for trading purpose and was treated as such from the very beginning in the books of account, as per T.V. Sundaram Iyengar Sons Ltd.'s case (supra), the waiver thereof may result in the income more so when it was transferred to Profit and Loss account. 123.4 Now coming to the case on hand, we note that the loan was taken by the Sac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it on account of cessation of liabilities in the process of merger/demerger which was liable to be taxed under the provision of section 28(iv) of the Act. Accordingly, the AO added the same to the total income of the assessee. 126. On appeal by the assessee, the learned CIT(A) deleted the addition made by the AO by observing that since the expenditure on account of impugned statutory liability being custom duty and sales tax liability has not been allowed in any of earlier assessment years, therefore writing off the same would not amount to income. 127. Being aggrieved by the order of the learned CIT(A), the Revenue is in appeal before us. 128. The learned DR before us reiterated the findings of the AO contained in the assessment order by supporting the order of the AO. 129. On the other hand, the learned AR for the assessee submitted that the liabilities written back in the year under consideration were not allowed as deduction in the earlier year and therefore the same cannot be subject to tax in the year in which such liabilities were written off. The learned AR before us vehemently supported the order of the ld. CIT-A. 130. We have heard the rival contentions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to be tax. 132.1 However, the AO held that the assessee on one hand is claiming the losses and unabsorbed depreciation brought from scheme of merger against its profit, whereas no income has been offered in respect to the benefit arising in such scheme of merger. As such, the assessee in the scheme of merger acquired assets more than liabilities which resulted in the benefit of ₹ 350,71,61,552/- to the assessee. Accordingly, the AO added the same to the total income the assessee. 133. On appeal by the assessee, the Learned CIT-A deleted the addition made by the AO by observing as under: 14.2 I have considered the contention of the appellant and facts of the case. No benefit of the nature specified under s.28(iv) of I.T. Act has accrued to the appellant. It is merely an accounting entry passed by the appellant. Moreover, the value of the assets in the books is on the basis of Companies Act and does not indicate WDV of the assets after depreciation. The credit to capital reserve is merely to satisfy the requirements of accounting and does not bring any benefit to the appellant. The addition is not called for and is directed to be deleted. The thirteenth ground of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l field as it is relatable to the non-trading assets and it only affects capital structure of the transferee company. 136.3 Before parting we also not that there was amendment brought in the statute w.e.f. April 1, 2017, which provides that the difference between the consideration and the fair market value of property received by any person is liable to be taxed as income from other sources in the hands of the recipient if they are acquired without consideration or for a consideration that is less than the aggregate fair market value (provided aggregate fair market value of such properties exceeds consideration paid, if any, by more than INR 50,000). However, the Act has provided a specific exemption from the aforesaid provision where capital assets of the amalgamating company are transferred to the amalgamated company in pursuant to a scheme of amalgamation and the amalgamated company is an Indian company. Thus, it also strengthens the fact that legislator does want to tax the benefit or surplus on transfer of assets or liabilities in the scheme of merger, demerger or to say amalgamation. Thus, in view of the above and after considering the facts in totality we do not find any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t not chargeable to tax under the Act. The assessee during the assessment proceeding submitted that as per revised vat audit report the sales tax benefit was of Rs. 42,30,14,976/only. Therefore, an amount of Rs. 42,30,14,976/- should be excluded from profit as capital receipt not chargeable to tax. However, the AO disagreed with the contention of the assessee and held that sale tax benefit arises to the assessee is revenue receipt chargeable to tax. Accordingly, the AO made addition of Rs. 41,55,36,734/- the amount which the assessee excluded from the computation of income. On appeal the learned CIT(A) held the sale tax benefit arising to the assessee is capital receipt not chargeable to tax and deleted the addition made by the AO. On subsequent appeal by the Revenue, we have also confirmed the order of the CIT-A vide paragraph 151 of this order. 140.1 Now the assessee before us and prayed that the actual sales tax benefit as per revised vat audit report is of Rs. 42,30,14,976/- whereas amount excluded from the business income for Rs. 41,55,36,734/-only. Therefore, direction should be provided to exclude the amount of Rs. 42,30,14,976/- from business income instead of Rs. 41,55, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said assessment year. 145. At the outset, we note that the assessee claimed deprecation on purchase of second-hand truck dated 30-03-2006 in the A.Y. 2006-07 which was disallowed by the AO by holding that the impugned truck was not put to use in the A.Y. 2006-07. On appeal by the assessee, the learned CIT(A) set aside the finding of the AO and held that the assessee is eligible to claim the depreciation allowances from A.Y. 2006-07. On further appeal by the Revenue in ITA No. 685/Ahd/2014 for A.Y. 2006-07, we have confirmed the finding of learned CIT(A) vide Para No. 84 of this order. Thus, the assessee has been allowed the depreciation from A.Y. 2006-07. Therefore, in our considered view the learned CIT(A) has rightly dismissed the claim of the assessee for additional depreciation on the amount disallowed in the AY 2006-07. Hence, the ground of appeal of the assessee is hereby dismissed. 146. The next issue raised by the assessee vide ground Nos. 6 to 8 of its appeal are either general, consequential, or premature to decide. Hence the same are dismissed accordingly as infructuous. 147. The assessee, vide applications dated 01-04-2013, 02-03-2020 and 15-022021 has pleaded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts in treating the sales tax subsidy of Rs. 41,55,36,734/- as capital receipt, and thereby deleting the addition made by the Assessing Officer. ii) The Id. CIT(A) has erred in law and on facts in allowing the Assesses fs claim of setoff of brought forward losses and. 'unabsorbed depreciation of Rs. 210,78,03,786/- on account of merger of its demerged undertaking of Core Health Care Ltd. iii) The Id. CIT(A) has erred in law and on facts in deleting the disallowance of excess claim of depreciation of Rs. 34,79,41,087/-, and in directing the Assessing Officer to Work out the WDV of intangible assets with reference to the market value of the assets at Rs. 152.89 crores as worked out by his Predecessor in the A. Y. 2001 -02. iv) The Id. CIT(A) has erred in law and on facts in deleting the addition of Rs. 1,53,33,661/-, being benefit derived by the Assessee on account of demerger. v) On the facts and circumstances of the case, the Ld. Commissioner of Income tax (A) ought to have upheld the order of the Assessing Officer. vi) It is, therefore, prayed that the order of the Ld. Commissioner of Income tax (A) may be set-aside and that of the Assessing Officer b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de paragraph No. 112 of this order against the Revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2007-08 shall also be applied for the assessment year 2008-09. Hence, the ground of appeal filed by the Revenue is hereby dismissed. 156. The next issue raised by the Revenue is that the learned CIT(A) erred in deleting the addition of Rs. 1,53,33,661/- on account of benefit of settlement of loan. 157. At the outset, we note that the issue raised by the Revenue in its ground of appeal for the AY 2008-09 is identical to the issue raised by the Revenue in ITA No. 686/AHD/2014 for the assessment year 2007-08. Therefore, the findings given in ITA No. 686/AHD/2014 shall also be applicable for the assessment year 200809. The appeal of the Revenue for the AY 2007-08 has been decided by us vide paragraph No. 123 of this order against the revennue. The learned DR and the AR also agreed that whatever will be the findings for the assessment year 2007-08 shall also be applied for the assessment year 2008-09. Hence, the ground of appeal filed by the Revenue is hereby dismissed. 157.1 In the result appeal of the Revenue is hereby dismis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsumption. However, the assessee during the year extracted salt and sold outside. Therefore, the Government of Gujarat levied penalty of Rs. 22,05,579/- for infringement of law/condition. Accordingly, the AO disallowed the impugned penalty and added to the total income of the assessee. 163. The aggrieved assessee preferred an appeal before the learned CIT(A) and submitted that the land was given by the Government to it for extraction of salt for its captive consumption. However, a sale of salt was made to outside party. Therefore, a payment of Rs. 22,05,579/- was made for breach of condition. The payment made was in nature of compensation for making additional sale of goods and not in the nature of infringement of law as alleged by the AO. 164. However, the learned CIT(A) dismissed the submission of the assessee and confirmed the addition made by the AO by holding that the payment made to the Government for breach of condition was penal in nature. 165. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us. 166. The learned AR before us contended that he has been instructed not to press the impugned ground of appeal. 167. On the other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2006-07 shall also be applied for the assessment years 2009-10. Hence, the additional grounds of appeals filed by the assessee are hereby partly allowed. 172. In the result, the appeal of the assessee is partly allowed. Coming to ITA 2411/AHD/2015, an appeal by the Revenue for the A.Y. 2009-10 173. The Revenue has raised following grounds of appeal: 1. The Id. CIT(A) has erred in law and on facts in treating the sales tax subsidy of Rs. 54,58,47,279/- as capital receipt instead of revenue receipt, and thereby deleting the addition made by the Assessing Officer. 1.1 The Id. CIT(A) has erred in law and on facts by not following the judgments of Hon'ble Supreme Court in the case of Sahney Steel and press works ltd. and others v CIT (228 ITR 253) and in the case of Rajaram Maize Products (251 ITR 427). 2. The Id. CIT(A) has erred in law and on facts in allowing the Assessee's claim of setoff of brought forward losses and unabsorbed depreciation of Rs. 96,86,00,918/- on account of merger of its demerged undertaking of Core HealthCare Ltd. 2.1 The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9.2 The Id. CIT(A) has errsd in law'and on facts by not considering the judgment of Hon'ble Mumbai Tribunal in the case of Nimbus Communications Ltd (2013) 34 Taxmann.com 298 wherein it is explained that where higher credit rating of AE is'due to a guarantee by another group member, there was clear benefit accrued to the AEs by the guarantee provided by the assessee and when such benefit was passed on by the assessee to the said AEs, guarantee commission should have been charged at Arm's Length Price. 10. On the facts and circumstances of the case, the Ld. Commissioner of Income tax (A) ought to have upheld the order of the Assessing Officer. 11. It is, therefore, prayed that the order of the Ld. Commissioner of Income tax (A) may be set-aside and that of the Assessing Officer be restored. 174. The first issue raised by the Revenue is that the learned CIT(A) erred in deleting the addition made by the AO by treating the benefit sales tax of Rs. 54,58,47,279/- as revenue receipt. 175. At the outset, we note that the issue raised by the Revenue in its ground of appeal for the AY 2009-10 is identical to the issue raised by the Revenue in ITA No. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of general public utility expense for Rs. 23,36,500/- only. 180.1 At the outset, we note that the issue raised by the Revenue in its ground of appeal for the AY 2009-10 is identical to the issue raised by the Revenue in ITA No. 685/AHD/2014 for the assessment year 2006-07. Therefore, the findings given in ITA No. 685/AHD/2014 shall also be applicable for the assessment year 200910. The appeal of the Revenue for the AY 2006-07 has been decided by us vide paragraph No. 70 of this order against the Revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2006-07 shall also be applied for the assessment year 2009-10. Hence, the ground of appeal filed by the Revenue is hereby dismissed. 181. The next issue raised by the Revenue is that the learned CIT(A) erred in deleting the disallowance of Rs. 15,18,778/- made under section 14A of the Act. 182. The assessee in the year under consideration earned exempted income in the form of dividend. The AO, by invoking the provisions of section 14A r.w. rule 8D of Income Tax Rule made the disallowance of Rs. 15,18,778/- only. 182.1 On appeal by the assessee, the learned CIT(A) delete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both the parties and perused the material available on record. At the outset we note that the assessee company earned dividend income of Rs. 70,75,768/- which was claimed as exempted income under the provision of section 10(38) of the Act. The AO invoked the provisions of section 14A read with rule 8D of the Income Tax Rule and worked out the amount of disallowance at Rs. 15,18,778/- which include disallowances of interest expenses as well as administrative expenses. 186.1 As far as disallowance of interest expenses is concerned, it is fairly settled position of law that if the assessee having interest free fund/own fund then no disallowance of interest under the provision of section 14A r.w.r. 8D of the Act can be made. In holding so, we draw support and guidance from the judgment of Hon ble jurisdictional High court in the case of CIT vs. Torrent Power Ltd reported in 363 ITR 474 wherein it was held as under: It was noted from records that the assessee was having share holding funds to the extent of 2607.18 crores and the investment made by it was to the extent of`Rs. 195.10 crores. In other words, the assessee had sufficient funds for making the investments and it had not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on expenses incurred to get the pharmaceutical products registered with the local health authorities, association and their counterparts -at the foreign destinations. Without getting the products registered the appellant cannot sell the pharmaceutical product in a specific territory. In view of above, I hold that these expenses are enabling expenses and no new assets having enduring benefit have been created. In this regard reliance is placed on the decision of Cadila Healthcare Ltd., vide ITA No.3140/Ahd/2010. Further the said case is also confirmed by the-jurisdictional High Court in case of Cadila Healthcare Ltd (Tax Appeal No 752 of 2012). Following the above order of Hon. Jurisdictional High Courts. I allow the claim of appellant regarding product Registration expenses of Rs. 15,98,115/-. This ground of appeal is allowed. 190. Being aggrieved by the order of the learned CIT(A), the Revenue is in appeal before us. 191. The learned DR before us vehemently supported the findings of the assessment order. 192. On the other hand, the learned AR contended that there is no benefit arising out of such product registration expense which is of enduring nature and therefore the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit under the provisions of section 115 JB of the Act. Therefore, the learned CIT-A rightly treated such expenses as revenue in nature. The learned AR vehemently supported the order of the learned CIT-A. 199. We have heard the rival contention of both the parties and perused the materials available on record. At the outset we note that the Special Bench of Hon ble Delhi Tribunal in the case of ACIT vs. Vireet Investment Pvt. Ltd. reported in 82 Taxmann.com 415 has held that the disallowance made u/s 14A r.w.r. 8D cannot be the subject matter of disallowance while determining the net profit u/s 115JB of the Act. The relevant portion of the said order is reproduced below: In view of above discussion, the computation under clause (f) of Explanation 1 to section 115JB(2), is to be made without resorting to the computation as contemplated under section 14A, read with rule 8D of the Income-tax Rules, 1962. 199.1 The ratio laid down by the Hon ble Tribunal is squarely applicable to the facts of the case in h.and. Thus, it can be concluded that the disallowance made under section 14A r.w.r. 8D cannot be resorted while determining the expenses as mentioned under clause (f) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. But now we note that there is no mechanism provided under the clause (f) to Explanation-1 of Sec. 115JB of the Act to make the disallowance independently. Therefore our action for restoring back the issue to the file of AO would unnecessarily cause further litigation. Thus we limit the disallowance on an ad-hoc basis @ 1 % of the exempted income as per the clause (f) to Explanation-1 of Sec. 115JB of the Act subject to the maximum adjustment made by the AO. Thus, the ground of appeal of the Revenue is partly allowed. 200. The next issue raised by the Revenue is that the learned CIT(A) erred in allowing the deduction under section 80IA of the Act for Power generation unit at Bhavnagar. 201. At the outset, we note that the issue raised by the Revenue in its ground of appeal for the AY 2009-10 is identical to the issue raised by the assessee in ITA No. 515/AHD/2014 for the assessment year 2006-07. Therefore, the findings given in ITA No. 515/AHD/2014 shall also be applicable for the assessment year 200910. The appeal of the assessee for the A.Y. 2006-07 has been decided by us vide paragraph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to the parties dealing with the AEs; These guarantees do not have any impact on profits, income, losses or assets of the enterprise. Therefore, corporate guarantees do not fall within the scope of the term 'international transaction' even after insertion of Explanation to section 92B by Finance Act, 2012 with retrospective effect from 01.04.2002. Considering the submissions made by appellant as above, it is concluded that the appellant did not incur any costs in providing the corporate guarantee to the associated enterprises and neither was any amount of guarantee commission charged by the appellant. As the transaction did not have any impact on the income, profits, losses or assets of the appellant the same could, not be classified as an international transaction as per the provisions of chapter X of the income tax act. In view of decision of Hon'ble Delhi Tribunal, in the case of Bharti Airtel Ltd Vs. CIT (43 taxrriann.com 150), It is held that, the bank guarantee to the foreign bank for providing finance to associated enterprise at U.S.A. which is wholly owned subsidiary of the appellant company, is not covered within the purview of making any adjustme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ope of the term 'international transaction' to include the Corporate Guarantee in the nature provided by the assessee therein. The Tribunal held that in case of default, Guarantor has to fulfil the liability and therefore, there is always an inherent risk in providing guarantees and that may be a reason that Finance provider insist on non-charging any commission from Associated Enterprise as a commercial principle. Further, it has been observed that his position indicates that provision of guarantee always involves risk and there is a service provided to the Associate enterprise in increasing its creditworthiness in obtaining loans in the market, be from Financial institutions or from others. There may not be immediate charge on profit loss account, but inherent risk cannot be ruled out in providing guarantees. U1 and adjustment are to be made on guarantee commissions on such guarantees provided by the Bank directly and also on the guarantee provided to the erstwhile shareholders for assuring the payment of Associate Enterprise. In the light of the above decisions, the Tribunal committed an error in deleting the additions made against Corporate and Bank Guarantee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was considered as at ALP. (iii) Manugraph India Ltd. v. Dy. CIT [2015] 62 taxmann.com 347 (Mum. - Trib.), The corporate guarantee was not treated as international transaction by the parent company but the Tribunal treated it as international transaction u/s 92B and upheld the ALP of 0.50%, following the order in the case of the assessee for the earlier year. The Tribunal followed Everest Kento Cylinder Ltd. v. Asstt. CIT [2015] 56 taxmann.com 361 (MumTrib). It seems that the decision in Bharti Airtel Ltd. (supra) was not referred to in this case. (iv) Aditya Birla Mincas Worldwide Ltd. v. Dy. CIT [2015] 56 taxmann.com 317/69 SOT 18 (URO) (Mum - ITAT). The assessee had not classified this transaction as international transaction. However, guarantee commission was fixed at 0.50%. (v) Mylan Laboratories Ltd. v. Asstt. CIT [2015] 155 ITD 1123/63 taxmann.com 179 (Hyd. - Trib.). The assessee admitted corporate guarantee as international transaction, then as against 2% fixed by TPO the Tribunal upheld the claim of the assessee at 0.53% following the decision in Prolifics Corpn. Ltd. v. Dy. CIT [2015] 68 SOT 104 (URO)/55 taxmann.com 226 (HYD - Trib.). (vi) Everes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ores.; 4. The CIT(A) has erred in law and on facts in deleting the addition of Rs. 9,68,231/- made on account of disallowance u/s. 14A of the Act r.w Rule SDof the IT Rule. 5. The CIT(A) has erred in law and on facts in deleting the addition of Rs. 9,68,231/- made on account of disallowance u/s. 14A of the Act r.w. Rule 8D of the I T Rule under the MAT provisions. 6. The Id. CIT(A) has erred in law and on facts in deleting the disallowance of Rs. 76,86,229/- made on account of product registration expenses, 6.1 The Id. CIT(A) has erred in law and on facts by not appreciating the facts that the benefit of the registration of the product is of enduring nature and therefore the expenses are not allowable u/s 37(1) of the Act. 7. The Id. CIT(A) has erred in law and on facts in deleting the addition of Rs. 2,62,88,016/- made on account of disallowance of doubtful advances written off. 7.1 The Id. CIT(A) has erred in law and on facts by not appreciating the facts that the amount in question would not qualify for deduction either u/s 36(1)(vii) or 36(1)(1) of the Act. 8. The Id. CIT(A) has erred in law and on facts in treating the consultation for future ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year 201011. The appeal of the Revenue for the A.Y. 2006-07 has been decided by us vide paragraph No. 62 of this order against the Revenue. The learned DR and the AR also agreed that whatever will be the findings for the assessment year 2006-07 shall also be applied for the assessment year 2010-11. Hence, the ground of appeal filed by the Revenue is hereby dismissed. 211. The next issue raised by the Revenue is that the learned CIT(A) erred in deleting the addition of Rs. 131,00,00,000/- made on account of setoff of losses and unabsorbed depreciation of demerged unit of Core Healthcare Ltd. 212. At the outset, we note that the issue raised by the Revenue in its grounds of appeal for the AY 2010-11 is identical to the issue raised by the Revenue in ITA No. 685/AHD/2014 for the assessment year 2006-07. Therefore, the findings given in ITA No. 685/AHD/2014 shall also be applicable for the assessment year 201011. The appeal of the Revenue for the A.Y. 2006-07 has been decided by us vide paragraph No. 68 of this order against the Revenue. The learned DR and the AR also agreed that whatever will be the findings for the assessment year 2006-07 shall also be applied for the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenue for the A.Y. 2009-10 has been decided by us vide paragraph No. 199 of this order partly in favour of Revenue. The learned DR and the AR also agreed that whatever will be the findings for the assessment year 2009-10 shall also be applied for the assessment year 2010-11. Hence, the ground of appeal filed by the Revenue is hereby partly allowed. 218. The next issue raised by the Revenue is that the learned CIT(A) erred in deleting the disallowance of product registration expense of Rs. 76,86,229/- only. 218.1 At the outset, we note that the issue raised by the Revenue in its ground of appeal for the AY 2010-11 is identical to the issue raised by the Revenue in ITA No. 2411/AHD/2015 for the assessment year 2009-10. Therefore, the findings given in ITA No. 2411/AHD/2015 shall also be applicable for the assessment year 2010-11. The appeal of the Revenue for the A.Y. 2009-10 has been decided by us vide paragraph No. 193 of this order against the Revenue. The learned DR and the AR also agreed that whatever will be the findings for the assessment year 2009-10 shall also be applied for the assessment year 2010-11. Hence, the ground of appeal filed by the Revenue is hereby dismis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the same business. After considering the entirety of facts, am not inclined to agree with the contentions of the Id.A.O. as appellant paid consultation fee to IFCI regarding feasibility of study to know updated status of cement industry in India. Accordingly, I am of the opinion that the payment made to IFCI of Rs. 25,00,000/- is rightly claimed by the appellant as consultation expenses. The said disallowance made by the Id.A.O. of Rs. 25,00,000/- is deleted. This ground of appeal is allowed. 223. Being aggrieved by the order of the learned CIT(A) the Revenue is in appeal before us. 223.1 Both the learned DR and learned AR before vehemently supported the order of the authorities below to the extent favourable to them. 224. We have heard the rival contentions of both the parties and perused the materials available on record. In the present case, the AO has disallowed the deduction claimed by the assessee for ₹25 lakhs for the feasibility study conducted by the IFCI Limited to know the updated status of the Cement Industries in India on the reasoning that the impugned expenditure is capital in nature. But the learned CIT(A) allowed the same on the reasoning that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the objects mentioned in the memorandum of association. However, ultimately the project was given up by the assessee for some reason even otherwise it is a business loss of the existing company. Considering the entire circumstances of the case and the decisions which have been relied upon by the assessee, in our opinion, the Assessing Officer should have allowed the expenditure as revenue expenditure. Never materialized, whether expenses incurred towards such project was rightly treated as revenue expense and not as capital expenditure. In view of the above, we do not find any reason to interfere in the finding of the Ld. CIT-A. Accordingly, we hold that the assessee is eligible for the deduction of such expenses under the provisions of section 37 of the Act. Hence, the ground of appeal of the revenue is hereby dismissed. 225. The last issue raised by the Revenue is that the learned CIT(A) erred in deleting the upward adjustment in TP report for Rs. 6,00,00,397/- made by the AO/TPO on account of guaranteed fee and interest free loans. 226. In the caption ground of appeal, there were involved the disputes of upward adjustment on account of extension of bank guarant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry company) should be computed at LIBOR plus 200 to 250 points. Appellant submitted that considering the fact that the LIBOR rate during FY 09-10 was 1.28% and by applying the higher rate of 250 basis points the total interest percentage comes to 3.78%. Appellant submitted that it charged interest of 5% and there was no justification for the TPO to take the interest rate at 5.38% by considering the basis points at 409.72 instead of the settled rate as accepted by various Tribunals as relied upon by the appellant in the written submission. After considering the entirety of facts, I am inclined to agree with the contention of appellant and the addition made by the A.O. for 32,23,160/-, which is now revised to Rs. 13,92,104/- as per order u/s. 92CA(5) r.w.s. 154 of the I.T. Act dtd. 18.07.2014 passed by TPO. Accordingly, the addition made for Rs. 13,92,104/- is deleted. This ground of appeal raised by the appellant is allowed. 229. Being aggrieved by the order of the learned CIT(A) the revenue is in appeal before us. 229.1 The learned DR before us vehemently supported the findings of the assessment order. 229.2 On the other hand, the learned AR before us reiterated the findi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the findings for the assessment year 200607 shall also be applied for the assessment year 2010-11. Hence, the ground of appeal filed by the Revenue is hereby dismissed. 233. In the result, the appeal of the Revenue is partly allowed. Coming to CO No. 63/AHD/2019 in ITA No. 2414/AHD/2015, by the assessee for A.Y. 2010-11 234. The assessee has raised the following grounds of objection: 1) In law and in the facts and circumstances of the Respondent's case, the learned CIT(A) has grossly erred in points of law and facts. 2) In law and in facts and circumstances of the Respondent's case, if the addition on account of provision for doubtful advances of Rs. 48,96,52,916/- is confirmed, in part or full, for Asst. Year 2006-07, then the said claim should be allowed in current Asst. Year 2010-11 when advances were actually written off. 3) Your respondent reserves the right to add, alter, amend or vary all or any of the above Grounds of Cross Objection as may be advised from time to time. 234.1 The only ground of objection raised by the assessee is that if disallowances of bad doubtful debt claimed in A.Y. 2006-07 is confirmed then same should be all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee in ITA No. 515/AHD/2014 for the assessment year 200607. Therefore, the findings given in ITA No. 515/AHD/2014 shall also be applicable for the assessment year 2010-11. The appeal of the assessee for the A.Y. 2006-07 has been decided by us vide paragraph No. 36 to 40 of this order in partly in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2006-07 shall also be applied for the assessment year 2010-11. Hence, the additional grounds of CO filed by the assessee are hereby partly allowed. 239. In the result, the CO of the assessee partly allowed. Coming to ITA No. 1872/Ahd/2016, an appeal by the assessee for A.Y. 2011-12 240. The assessee has raised following grounds of appeal: 1) In law and in facts and circumstances of the Appellant s case, the learned CIT(A) has grossly erred in the points of law and facts. 2) In law and in facts and circumstances of the Appellant s case, the learned CIT(A) has grossly erred in confirming part disallowance of expenses Rs. 5,13,814/- u/s. 37(1) of the I.T Act. 3) In law and in facts and circumstances of the Appellant s case, the learned CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of Hon ble Gujarat High Court in case of CIT vs. G.S.R.T.C. in tax appeal No. 673/2010 treated the same as income of the assessee and added to the total income. 245. Aggrieved, assessee preferred an appeal before the learned CIT(A). 246. The assessee before the learned CIT(A) submitted that in case of deposit of ESI, there was delay of just 7 days which occurred due to online payment system. Under ESIC, the technology for online payment was introduced for the first time in the year under consideration. Likewise, the delay in the deposit of PF was for 1 or 4 days which is within the grace period of 5 days. Further, the cheque for the payment of PF was issued before the due date but cleared after due date. Therefore, the delay was beyond its control. Thus, no addition on this account is required to be made. 247. However, the learned confirmed the addition made by the AO by observing as under: 15.2 I have carefully considered the rival contentions as well as the observation of the A O. It can be observed from para-14 of the assessment order that the appellant has failed in depositing employees contribution in respect of ESIC PF amounting to Rs. 2,733/- and Rs. 40,9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of every month pay the same to the fund such contribution and administrative charges. If not so paid then no deduction 36(1)(va) 250.1 From the above it is very clear that the payment under section 36(1)(va) would be allowed in respect to the payment of employee contribution towards ESI/EPF if such payment is made on/before due date as specified under the relevant Act (i.e. 15 days from the month for which salary is due). Thus, the payment made by the assessee on account of employee contribution towards ESI/EPF after the due date stands disallowed in view of the judgment in the case of M/s Checkmate Facility and Electronics Solutions Pvt. Ltd. v/s DCIT (Supra). We uphold the order of the lower authorities. Hence the ground of appeal of the assessee is dismissed. 251. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the disallowance of previous year adjustment for Rs. 28,84,009/- only. 252. The assessee during the assessment filed application for deduction on account of certain adjustment pertaining to the previous year which was rejected by the AO after placing reliance on the judgment of Hon ble Supreme Court in case of Goetze (India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me on the reasoning that these expenses do not pertain to the previous year 2012-13 corresponding to the assessment year 2013-14. However, it was contended by the assessee that these expenses pertain to the year under consideration and therefore the assessee has claimed deduction for the same by way of letter filed during the assessment proceedings. But the AO disallowed the contention of the assessee on the reasoning that such claim was not made in the income tax return or revised income tax return. The AO while doing so has placed reliance on the judgment of Hon ble Supreme Court in case of Goetze (India) Ltd vs. CIT 284 ITR 323. Subsequently, the learned CIT-A confirmed the order of the AO. 257.1 There is no dispute with the fact that the assessee during the assessment proceedings can make the fresh claim which was not made during in the return of income. The decision of Hon ble Supreme Court in the case of Goetze (India) Ltd. (supra) was regarding the limitation of the power of the assessing authority and did not impinge on the power of the Tribunal. 257.2 It is also a fact on record that the learned CIT(A) in his order has observed that the necessary supporting documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 260. At the outset, we note that identical additional grounds were raised by the assessee in ITA NO. 515/Ahd/2014 which were accepted by us vide paragraph No. 37 of this order. Hence, following the same, the additional grounds raised in captioned appeal are also accepted. 261. At the outset, we note that the issues raised by the assessee in its additional grounds of appeal for the AY 2011-12 are identical to the issues raised by the assessee in ITA No. 515/AHD/2014 for the assessment year 2006-07. Therefore, the findings given in ITA No. 515/AHD/2014 shall also be applicable for the assessment year 2011-12. The appeal of the assessee for the A.Y. 2006-07 has been decided by us vide paragraph No. 36 to 40 of this order partly in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2006-07 shall also be applied for the assessment year 2011-12. Hence, the additional grounds of appeal filed by the assessee are hereby partly allowed. 262. In the result, appeal of the assessee is hereby partly allowed. Coming to ITA No. 2237/AHD/2016, an appeal by the Revenue for A.Y. 2011-12 263. The Revenue has rais ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21,38,408/- as revenue receipt. 265. At the outset, we note that the issue raised by the Revenue in its ground of appeal for the AY 2011-12 is identical to the issue raised by the Revenue in ITA No. 685/AHD/2014 for the assessment year 2006-07. Therefore, the findings given in ITA No. 685/AHD/2014 shall also be applicable for the assessment year 201112. The appeal of the Revenue for the A.Y. 2006-07 has been decided by us vide paragraph No. 62 of this order against the Revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2006-07 shall also be applied for the assessment year 2011-12. Hence, the ground of appeal filed by the Revenue is hereby dismissed. 266. The next issue raised by the Revenue is that the learned CIT(A) erred in deleting the disallowance made by the AO of excess depreciation on intangible assets for Rs. 13,00,87,749/- only. 267. At the outset, we note that the issue raised by the Revenue in its ground of appeal for the AY 2011-12 is identical to the issue raised by the Revenue in ITA No. 686/AHD/2014 for the assessment year 2007-08. Therefore, the findings given in ITA No. 686/AHD/2014 shall also be appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 273. At the outset, we note that the issue raised by the Revenue in its ground of appeal for the AY 2011-12 is identical to the issue raised by the Revenue in ITA No. 2411/AHD/2015 for the assessment year 2009-10. Therefore, the findings given in ITA No. 2411/AHD/2015 shall also be applicable for the assessment year 2011-12. The appeal of the Revenue for the A.Y. 2009-10 has been decided by us vide paragraph No. 199 of this order partly in favour of revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2009-10 shall also be applied for the assessment year 2011-12. Hence, the ground of appeal filed by the Revenue is hereby partly allowed. 274. The next issue raised by the Revenue is that the learned CIT(A) erred in deleting the disallowance of product registration expense of Rs. 70,35,164/- only. 275. At the outset, we note that the issue raised by the Revenue in its ground of appeal for the AY 2011-12 is identical to the issue raised by the Revenue in ITA No. 2411/AHD/2015 for the assessment year 2009-10. Therefore, the findings given in ITA No. 2411/AHD/2015 shall also be applicable for the assessment year 2011-12. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l for the AY 2011-12 is identical to the issues raised by the assessee in ITA No. 515/AHD/2014 for the assessment year 2006-07. Therefore, the findings given in ITA No. 515/AHD/2014 shall also be applicable for the assessment year 201112. The appeal of the assessee for the A.Y. 2006-07 has been decided by us vide paragraph No. 19 of this order in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 200607 shall also be applied for the assessment year 2011-12. Hence, the ground of appeal filed by the Revenue is hereby dismissed. 282. The next issue raised by the Revenue is that the learned CIT(A) erred in deleting the addition of Rs. 4,89,80,354/- made by the AO on excess provision written off. 283. At the outset, we note that the issue raised by the Revenue in its ground of appeal for the AY 2011-12 is identical to the issues raised by the assessee in ITA No. 515/AHD/2014 for the assessment year 2006-07. Therefore, the findings given in ITA No. 515/AHD/2014 shall also be applicable for the assessment year 201112. The appeal of the assessee for the A.Y. 2006-07 has been decided by us vide paragraph No. 19 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The AO in the effect giving order dated 07-082015 granted interest of Rs. 22,12,583/- on the amount of refund for the period March 2004 to January 2009. The amount of refund for Rs. 22,12,583/- being interest under section 244A was adjusted against demand of A.Y. 2011-12 as on 04-05-2016. 288.1 Thus, the assessee made a claim for additional compensation of interest under section 244A of the Act for the period February 2009 to May 2016. But the AO rejected the claim of the assessee for additional compensation as claimed by the assessee. 289. On appeal, the learned CIT (A) was also pleased to confirm the order of the AO by relying on the order of the Tribunal in case of Hirenbhai Karsanbhai Patel vs. ACIT bearing IT(SS)A No 462/AHD/2013. 290. Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us. 290.1 The learned AR before us filed a paper book running from pages 1 to 105 and contended that the amount of refund given by the revenue first should be adjusted against the interest payable by the Revenue. As such the amount of the refund first should be adjusted against the interest payable to the assessee. Accordingly, the ld. AR requeste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not necessarily as per strict rule of law. Thus, since the statute itself has already prescribed a particular method of adjustment in explanation to section 140A(1), then justice, fairness, equity and good conscience demands that same method should be followed while making adjustment for refund of taxes, especially when no contrary provision has been provided. Under these circumstances and aforesaid discussion, we find that the judicial proprietary demands that order of the Tribunal of earlier years must be followed and therefore we direct the AO to re-compute the amount of interest u/s. 244A by first adjusting the amount of refund already granted towards the interest component and balance left if any shall be adjusted towards the tax component. Thus, with these directions, the appeal of the assessee is allowed. 291.1 From the above we hold that the amount of refund granted to the assessee, first, has to be adjusted against the interest payable to the assessee in the given facts and circumstances. Considering the fact that the amount of refund issued to the assessee for Rs. Rs. 75,00,281/- was first to be adjusted against the interest of Rs. 22,12,583/- then refund of princi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1-2 515-516/AHD/2014 2006-07 2007- 08 Assessee Partly Allowed 3-4 685-686/AHD/2014 2006-07 2007- 08 Department Dismissed 5 1744/AHD/2016 2006-07 Department Dismissed 6 911/AHD/2012 2008-09 Assessee Partly Allowed 7 969/AHD/2012 2008-09 Department Dismissed 8 2236/AHD/2015 2009-10 Assessee Partly Allowed 9-10 2411 2412/AHD/2015 2009-10 2010- 11 Department Partly Allowed 11 CO. NO. 63/Ahd/2019 (in ITA No.2412/Ahd/2015) 2010-11 Assessee Partly Allowed 12 1872/AHD/2016 2011- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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