9911796707
TMI Blog2005 (2) TMI 748X X X X Extracts X X X X X X X X Extracts X X X X ..... 2/Mum./1999 for assessment year 1995-96 (concise grounds) On the facts and in the circumstances of the case in law : (i) the ld. CIT(A) has erred in holding that unabsorbed depreciation of Rs. 3,66,60,505 for Kurkumbh Unit for assessment year 1994-95 which has been set off against other income of the assessee for the assessment year 1994-95 can't be carried forward and reduced while computing deduction under section 80-IA of the I.T. Act for assessment year 1995-96. (ii) The ld. CIT(A) erred in holding that Global Profit method adopted by the Assessing Officer in determining the actual income of Kurkumbh Unit eligible for deduction under section 80-IA is erroneous and thereby directing the Assessing Officer to allow deduction under section 80-IA amounting to Rs. 5,70,67,970. (iii) The ld. CIT(A) has erred in holding that as per section 80-IA(9) Kurkumbh Unit has to be treated as a separate business from the business of manufacturing taking place in other units of assessee. (iv) The ld. CIT(A) has erred in directing the Assessing Officer to adopt assessee's computation for allowing deduction under section 80-IA and also holding that the rates applied by the assessee for tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding that the value of the assets is highly jacked up merely to provide higher depreciation to the assessee and also that no income from lease rental from the leased assets had been accounted for in the year under consideration and date of commencement of the lease is doubtful. III. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting an addition of Rs. 48,01,865 made by the Assessing Officer on account of unutilized Modvat credit. IV. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the disallowance of Rs. 2,24,383 and Rs. 2,87,718 respectively made by the Assessing Officer on account of expenditure incurred on gift articles and dry fruits under Rule 6B of the I.T. Rules. V. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting a disallowance of Rs. 73,366 which was made by the Assessing Officer under rule 6D. I.T.A. No. 4619/Mum./2000 for assessment year 1997-98 1.(i) On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in holding that the assessee is entitled for deduction under section 80-IA in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rived from the representative market price being the cost of actual purchases or the prevailing procurement prices. (b) Not directing the valuation of the opening stock at the rates adopted by him for valuation of transfers in the year under consideration. (c) Not considering as part of eligible profit, interest and misc. receipts and miscellaneous earning on technology transfer included in other income. 3. The CIT(A) erred in confirming the disallowance of : (a) Rs. 11,93,012 being 25% of the foreign travel expenses of Dr. Y.K. Hamied, Chairman and Managing Director of the company following the order of the CIT(A) for earlier year. (b) Rs. 4,25,256 being 10% of foreign travel expenses of all persons other than Dr. Y.K. Hamied. 4. The CIT(A) erred in confirming the disallowance of Rs. 4,39,073 being expenditure on food etc. incurred on staff debited to staff welfare expenses by treating the same as entertainment expenses. 5. The CIT(A) erred in confirming the decision of the DCI of disallowance 10% of canteen expenses amounting to Rs. 6,95,712. 6. The CIT(A) has erred in confirming the stand of DCI of taking the total turnover of the appellants, at Rs. 3,75,69,70,44 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the CIT(A) for earlier year. (b) Rs. 3,83,699 being 10% of foreign travel expenses of all persons other than Dr. Y.K. Hamied. 3. The CIT(A) erred in confirming the decision of the JCIT, Spl. Range-23, Mumbai of treating Rs. 9,87,763 being expenditure on food etc. incurred on staff debited to staff welfare expenses, as entertainment expenses. 4. The CIT(A) erred in confirming the decision of the JCIT of treating 10% of canteen expenses amounting to Rs. 6,53,232 as entertainment expenses. 5. The CIT(A) has erred in confirming the stand of JCIT of taking the total turnover of the appellants, at Rs. 4,78,46,06,928 as against Rs. 4,51,88,60,159 taken by them for the purpose of working out the deduction under section 80HHC by including sales tax as part of total turnover. 6. The CIT(A) erred in confirming the additional disallowance of Rs. 1,02,339 made by DCI, being the expenditure incurred on travelling calculated on the basis of each trip instead of accepting the figure of disallowance submitted by the appellant at Rs. 6,27,769 being the disallowance calculated on the basis of all the trips taken together by an employee in the year of account. 7. The CIT(A) erred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d restored the issue to Assessing Officer, who has framed the consequent fresh assessment repeating the same addition/disallowance and the assessee is already in appeal in the 2nd ground, so this issue has now been rendered academic. The ld. AR of assessee agreed that this has now become infructuous in this appeal as the assessee is already in appeal in 2nd round on this issue. As such, considering the contentions and the facts of the case, we find this issue to have become academic and in turn, infructuous. We, therefore, dismiss this issue accordingly for the reason of the same having become academic and in the turn infructuous. 9. Issue No. 1 pertains to deduction under section 80-IA. This issue is contained in concised ground Nos. I to IV in assessment year 1995-96 in respect of Kurkumbh unit only, ground No. 1 in assessment years 1996-97 and 1997-98 in revenue's appeals in respect of Kurkumbh and Patalganga II units; and the same issue is contained in ground No. II in assessment year 1996-97 and ground No. 1 in assessment year 1997-98 in assessee's appeals. In assessment year 1995-96 the ld. CIT(A) accepted assessee's claim, so the revenue is in appeal whereas in assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e profit of this unit by the amount of unabsorbed depreciation. He has contended that as per assessee, the initial assessment year was assessment year 1995-96 inasmuch as assessment year 1994-95 was the trial period and for this the assessee relied on the provision of section 80-IA[12(c)]. He has contended that sub-section [12(c)] of section 80-IA defines initial assessment year being related to previous year in which the industrial undertaking "begins to manufacture or produce" articles or things; and that the assessee having started production in the previous year related to assessment year 1994-95 the initial assessment year of assessee was assessment year 1994-95 and in turn, the year under appeal being assessment year 1995-96 was the second year of production of Kurkumbh unit. He has contended that accordingly the provision of section 80-IA(7) will be applicable to assessment year 1995-96. He has contended that the ld. CIT(A) has treated assessment year 1995-96 as initial assessment year of assessee in respect of Kurkumbh unit. He has contended that the Assessing Officer allowed deduction under section 80-IA in assessment year 1995-96 as profit was there but in assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 1995-96. He has cited Sri Rajarathinam Transports (P.) Ltd. v. CIT [1993] 199 ITR 203 (Mad.) in support of above contention. 12. He has contended that 80-IA(7) will apply to 2nd year following initial assessment year. He has contended that the question as to which year is initial assessment year no more arises for determination by the Tribunal inasmuch as the Assessing Officer himself has given finding of fact that assessment year 1995-96 is the initial assessment year. In this regard, he has referred to para No. 2 on page 2 and para 2nd on page 5 of Assessing Officer. He has contended that the contention of ld. DR that in assessment year 1994-95 there was commercial production and not trial production and referring to assessee's letter dated 10-10-1996 (pages 17 and 18 PB) and that the Tribunal being, final fact-finding authority so it can go into this aspect de novo should not be accepted. He has contended that on page 17 PB at Sr. No. 4 Kurkumbh unit's trial production is mentioned but in this narration there is not a single item showing payment of excise duty. He has contended that in assessment year 1994-95 there is receipt of raw material but no manufacture of goods, so i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its turn, was to be used as a raw material for manufacture of carboxy methyl cellulose. The production of cellulose pulp was started from March 18, 1961 while production of carboxy methyl cellulose was started from June 15, 1961 "The ITO took the view that since the respondent had started production of cellulose pulp from March 18, 1961, it had begun to manufacture or produce finished articles or goods in the year ending on March 31, 1961, and consequently, the assessment year 1961-62 was the first year in which the assessee was entitled to relief under section 84. According to him, the relief contemplated by section 84 being available only for five years, namely, the assessment year 1961-62 and the four assessment years immediately succeeding as contemplated by sub-section (7) of section 84 of the Act, the respondent was not entitled to the relief claimed in the assessment year 1966-67 which fell beyond the aforesaid period. This finding of the ITO was affirmed in appeal by the Appellate Assistant Commissioner. The matter was taken up by the respondent in further appeal before the Income-tax Appellate Tribunal. The respondent's contention that the production of cellulose pulp du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the end/finished product for marketing or to be sold by assessee, nor was there any such production of an intermediary article or product which itself was a marketable product. The Assessing Officer himself has accepted this fact that there is no denying the fact that commercial operations started during assessment year 1995-96 and for the purpose of deduction under section 80-IA assessment year 1995-96 is the first year of claim. As such, considering all the facts and circumstances of the case, we find that the commercial production having been started by assessee in assessment year 1995-96, the 'initial assessment year' or first year for the purpose of deduction under section 80-IA was assessment year 1995-96 and not assessment year 1994-95. Accordingly, the deeming provision of section 80-IA(7) for treating the eligible industrial undertaking as the only source of income of assessee for computation of deduction under section 80-IA(5) is applicable to assessment year 1996-97 and subsequent years, being succeeding to the "initial assessment year" which is assessment year 1995-96. In that view of the matter, the depreciation of Rs. 3.66 crores, allowed in respect of Kurkumbh un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal is common with the Revenue's ground of appeal No. 1 in each of assessment years 1996-97 and 1997-98. We, therefore, deal with the issue of computation of profits derived by the industrial undertakings for all 3 years in a consolidated manner. 18. The facts, relevant to the issue, under our consideration, as ascertainable from the material on record including the fact-sheet, synopsis, write up etc. furnished by the parties before us as also the contentions made by the two rival representatives, may for convenience, be stated as under: (i) The assessee, engaged in the business of bulk drugs and formulations, has undertaking at Bombay Central, Vikhroli, Bangalore, Patalganga I and II, and Kurkumbh. (ii) Patalganga II and Kurkumbh undertakings are eligible for relief under section 80-IA in the year under appeal. (iii) The initial year of Patalganga II undertaking is assessment year 1992-93 whereas in respect of Kurkumbh undertaking, the initial year as concluded by us above, is the year under appeal, being assessment year 1995-96. (iv) In respect of Patalganga undertaking, the assessee claimed eligible derived profits in the amount of Rs. 4.45 crores. The Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Annexure 'A' for increasing the value of receipts. Annexure 'C' to the order of the CIT(A) contains the working of under-valuation of issues by Kurkumbh as alleged by the Assessing Officer. Annexure 'D' to the order of the CIT(A) contains those cases where value of issues would have increased if the Assessing Officer were to have adopted the same transfer pricing policy, which has been adopted by him for the valuation of issues in Annexure 'C' for decreasing the value of issues. (xi) The assessee company manufactures formulations from bulk drugs. These bulk drugs are manufactured by the company itself or are purchased. Some manufactured bulk drugs are sold in the same form, without making formulations. The sale of formulations constitutes 91% of the total sales of the company. (xii) The bulk drugs and the drug intermediates are transferred from one unit to another as and when so required. The inter-unit transfers cover the units eligible for relief under section 80-IA as also the other Units which are not so eligible. 19. The ld. DR has contended that the inter-unit transfer has to be valued on the market rate. Referring to proviso to sub-section (8) of section 80-IA, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r certain items the assessee has taken domestic price while for other items the assessee has taken export price; and there is difference between local/domestic price and the export price. He has contended that on pages 14 and 15 of assessment order, the Assessing Officer has given chart showing the rate adopted for determining the margin in cost audit and the rate adopted in determining net profit for deduction under section 80-IA in respect of transfers in (receipt) and transfers out (issue) of Kurkumbh unit. He has contended that on pages 17 and 18 of assessment order the Assessing Officer has given the chart mentioning the difference between rate as per section 80-IA calculation on the one hand, an average sale rate/cost of production on the other. He has contended that the Assessing Officer has discussed the assessee's price mechanism, that is how the price is determined by assessee on pages 18 and 19 of assessment order. He has contended that the Assessing Officer has calculated the under-valuation of purchases by Rs. 2.71 crores and over valuation of sales by Rs. 2.98 crores, thus total difference of Rs. 5.70 crores and so the Assessing Officer has rejected the assessee's cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very same method is not applied in such cases. Please refer Annexures 'B' & 'D' to the order of CIT(A). (e) The Assessing Officer has not re-allocated the expenses in the ratio of the revised turnover of the undertakings based on his method. (f) Closing stock of transfers-in was not revalued as per the revised rates." 25. The ld. AR of assessee has contended that the Tribunal is to consider and adjudicate upon the question as to whether the assessee has computed the profits of Kurkumbh unit correctly or not. The ld. AR of assessee has contended that the Assessing Officer has observed that the assessee has not computed the profits of Kurkumbh unit correctly. He has contended that the assessee has claimed profits of Kurkumbh unit at Rs. 9 crores whereas the Assessing Officer says that it is of Rs. 3.30 crores and that the assessee has overstated its profits of Kurkumbh unit by Rs. 5.70 crores. He has contended that the assessee purchases raw material and sells manufactured bulk drug as also formulations. He has contended that the formulation sale is 95% of the entire sales and that the bulk drug sale is 5% of entire sales. He has contended that various units of assessee transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... macro analysis but the Assessing Officer failed to consider a number of relevant aspects like taking taxable returned income of assessee-company after considering depreciation on leased assets in respect of leasing activity without adding back the depreciation on leased assets for appropriate comparison; not considering the proportion of other expenses (other than pricing of materials transferred in and out of Kurkumbh unit) the correctness of which he did not doubt in relative terms; not considering the variation in the product mix while observing that on sale of bulk drugs loss suffered is Rs. 9.01 crores as against profit on formulations and other activities of Rs. 39.58 crores, the net profit being of Rs. 30.57 crores (Page 11 of assessment order), though ratio of bulk drugs sales to total sales of Kurkumbh unit is lower at 5% as compared to similar ratio of 9% in respect of other units. He has contended that the prima facie conclusion drawn by Assessing Officer in suggesting that the pricing strategy adopted by the assessee for transfer of goods in and out by Kurkumbh undertaking had engineered disproportionate profits was not proper for the reason that the said conclusion was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices have been given a go-by. He has contended that out of six instances, 3 instances of transfers were of such nature, where the Kurkumbh undertaking had transferred these goods to the other undertaking and therefore, if at all, the profits had come to be understated rather than being overstated. In another instance, the fact of alleged defective transfer pricing was a nominal sum of Rs. 34,164. He has contended that the ld. CIT(A) has considered all these and he relies on ld. CIT(A)'s order in this regard. 31. He has contended that on page 16 of assessment order, the Assessing Officer observed that in respect of Intermediates transferred out of Kurkumbh, the same were not sold by the assessee and therefore there was no market available for determining the market related rates. In this regard he has contended that as per section 80-IA(9) r/w. Explanation thereto what is relevant is not actual sale by the assessee, but the assumption of a hypothetical market and a hypothetical price. Reliance was placed on the decision of the Bombay High Court in the case of CWT v. Purshottam N. Amersey [1969] 71 ITR 180. He has contended that section 80-IA(9) requires the computation of the profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 'D' to the order of CIT(A)]. 33. The Assessing Officer has further observed on page 16 of assessment order that in such cases where sales have been registered of the Intermediates received by Kurkumbh, the average sale price will be the market driven rate. He has contended that the ld. CIT(A) has accepted the submission of assessee that where there is an evidence of more than one market price, the price to be adopted should be the one which bears the more appropriate degree of comparability, this basic principle stands incorporated in the transfer pricing regulations. 34. On page 16 of assessment order the Assessing Officer has further observed that the Kurkumbh undertaking has received formulations and has issued formulations to the other undertakings. He has contended that this is an undisputed fact that Kurkumbh undertaking has neither received nor transferred out any formulations. He has also contended that the Assessing Officer has observed on page 17 of assessment order that in such cases the costs as per the cost records have been ignored. As per Assessing Officer, when there is no market for the company, the cost as per the cost records are to be considered as transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould be held for the purpose of business by the other undertakings. He has contended that this observation of Assessing Officer is unsustainable for the reason that if these observations of Assessing Officer were to be accepted then such a qualifying undertaking will not be able to derive any profits at all under section 80-IA. Citing in the case of Textile Machinery Corpn. Ltd. v. CIT [1977] 107 ITR 195 (SC) he has contended that a qualifying undertaking could be solely a feeder unit for other undertakings. 39. He has contended that on page 21 of assessment order, the Assessing Officer has observed that acceptance of the accounting policy in the earlier years cannot stop the revenue from questioning the correctness of the policy in the year under consideration. Reliance has been placed on the decision of the Supreme Court in the case of CIT v. British Paints India Ltd. [1991] 188 ITR 44 . He has referred to the assessee's submission made before Assessing Officer during proceedings for assessment year 1994-95 as placed on pages 17 and 18 PB wherein the assessee has informed the Assessing Officer about the method of accounting employed right from assessment year 1985-86 for derivi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rket." 42. In our opinion sub-section (9) of section 80-IA is to be read alongwith sub-section (7). A conjoint reading of both of these clauses leaves no room for doubt that the qualifying undertaking is to be treated as if it is the only source of income of the assessee. That is to say, the transaction of the qualifying undertaking with the other undertakings of the assessee are required to be translated into commercial terms while computing profit of the qualifying undertaking, at par with the transactions with the third parties from whom the goods may be actually purchased or to whom the goods may be actually sold. A commercial value has to be assigned to all the transactions of such qualifying undertaking where such transactions are with the other business or undertakings of the assessee. The derivation of the profits of the qualifying undertaking has to be worked out on commercial principle on stand-alone basis, these principles, have been laid down by the Hon'ble Supreme Court in the case of Tata Iron & Steel Co. Ltd. v. State of Bihar [1963] 48 ITR 123. Though these principles have been explained with reference to different fact situation but the ratio does apply in the sit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etical price in the context of section 80-IA(9) and that statutory regulatory control prices can also be applied as representative market prices. 45. On careful consideration of various facts brought on record and argument raised before us, we hold that Assessing Officer has failed to establish that the assessee has in respect of KK unit understated 'transfers in', and overstated the 'transfers out' and has in turn, inflated eligible profits of KK unit. The assessee applied the rates for transfer in and transfer out of KK unit to be in keeping with the market price whereas the rates adopted by Assessing Officer, based on cost of production are not in accordance with the provisions of section 80-IA(9). We agree with the view has been held by the ld. CIT(A) that is the more appropriate market price will be the domestic price of the same goods actually purchased by the assessee in preference to the selling price of a very small quantity by the other undertaking of the assessee. It is necessary to bear in mind that sub-section (9) of section 80-IA does not at all mandate the market price has to be necessarily the selling price of goods actually sold by the assessee. On the other hand, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has contended that the said report of the cost auditor was not in the nature of additional evidence requiring compliance of rule 46A. He has further contended that the ld. CIT(A) had exercised his powers correctly in terms of section 250 of the Income-tax Act and there was no contravention of the provisions of rule 46A at all and he has referred to the discussions made by ld. CIT(A) in various sub-paras of para 4 (paras 4.7, 4.14, 4.29 to 4.32) of his appellate order. He has also contended that the Assessing Officer himself had emphasized only on the determination of the conceptual correctness of the working submitted by the assessee in the course of remand proceedings. The ld. AR submitted that the Assessing Officer had requested that these issues be adjudicated upon by the ld. CIT(A) on merits of the case. Therefore, there is no contravention of Rule 46A on the part of CIT(A). 49. We will now deal with the assessee's ground of appeal No. 2 in assessment year 1996-97 and No. 1 in assessment year 1997-98 dealing with the computation of profits under section 80-IA. 50. The ld. AR of assessee has contended that the facts in assessment years 1996-97 and 1997-98 were reall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tention that duty drawback received on exports, which is major component of Income from Other Sources should be treated as part of the profits derived from the undertaking. It has been contended that the decision of the CIT(A) was directly in conflict with the decision of the Supreme Court in the case of CIT v. Sterling Foods [1999] 237 ITR 579 as also the decision of the Supreme Court in the case of Pandian Chemicals Ltd. v. CIT [2003] 262 ITR 278 . 53. As against this, the ld. AR of assessee has submitted that duty drawback is a trading receipt. In support of this submission, he relied upon the decision of the Delhi Bench of Tribunal in the case of Dy. CIT v. Metro Tyres Ltd. [2001] 79 ITD 557 . He has particularly referred to the following observations in para 8 of the Tribunal's order- "The perusal of section 75(1) clearly shows that the duty drawback is given by way of incentive to boost the export of goods manufactured in India. If any imported goods on which custom duty has been levied, has been used in the manufacture of any goods of any class or description and such manufactured goods have been exported out of India, the custom duty paid on imported goods is given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king is only source of the income. Considering the ratio of Tata Iron & Steel Co. Ltd. v. State of Bihar [1963] 48 ITR 123 (SC) wherein it has been held that the profits of each activity of an enterprise is required to be ascertained in a distributive sense, we are of the view that the proviso to section 80-IA(9) does not militate against the primary objective of section 80-IA(9) which is to derive the profits of the undertaking on commercial principles by adoption of alternative approaches. Accordingly, we uphold the finding of ld. CIT(A) that the proviso to section 80-IA(9) cannot be invoked in a manner which will disturb the profits of the undertaking derived from the external sales in respect of which there is no dispute at all. From the perusal of ld. CIT(A)'s impugned order it is clear that whatever alternative method is applied there is enough evidence on the record to signify that the profits of both the undertakings on the external sales have a higher rating compared to the Global Profit earned by the assessee. As such, we are of the view that the adoption of the formula of global profit by Assessing Officer is not sustainable in view of clear findings of ld. CIT(A) based ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g identical, we need justifiably follow our decision rendered above on similar issue in assessment year 1995-96 and apply the same principle/rationale in assessment years 1996-97 and 1997-98 as well. Since the method of computation of eligible profit for the purpose of deduction under section 80-IA is the same in all the three years in respect of Kurkumbh and Patalganga II, the eligible units, as also the ineligible/other units; and ld. CIT(A) has accepted the method of computation of eligible profit in assessment year 1995-96 and which we have upheld, we do not find any valid reason for CIT(A) to differ in subsequent years 1996-97 and 1997-98. Therefore, the order of CIT(A) is modified in the manner that we direct the Assessing Officer to allow deduction under section 80-IA in accordance with the computation submitted by assessee except with regard to ground No. 2(c) in assessment year 1996-97 and ground Nos. 1(c) and 1(d) in assessment year 1997-98, which were not pressed and subject to verification of OS income as directed by us above. 58. Thus ground No. 1 in revenue's appeal for assessment years 1996-97 and 1997-98 comprised in issue No. 1 tabulated above, together with groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d circumstances of the case as also the legal position, we find no fault with the impugned order of ld. CIT(A) and so we decline to interfere with the same. 64. Issue No. 4 pertains to deletion of addition of unutilized Modvat credit in closing stock. This issue is contained in ground No. VII in assessment year 1995-96, III in assessment year 1996-97 and II in assessment year 1997-98. The ld. DR has contended that the issue of Modvat credit is covered in favour of assessee by the judgment of Hon'ble Supreme Court, no doubt, but appropriate directions be given to the Assessing Officer to give effect in opening balance also together with the closing stock and not in closing stock alone. The ld. AR of assessee expressed no objection to the issuance of directions to Assessing Officer as suggested by ld. DR. 65. We have considered the rival contentions. The issue is covered in favour of assessee by the judgment of Hon'ble Supreme Court in the case of CIT v. Indo Nippon Chemicals Co. Ltd. [2003] 261 ITR 275 . As such, we find no infirmity in the impugned order of ld. CIT(A) on this count. We, therefore, uphold the impugned order of ld. CIT(A) on this count subject to the direction to A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed earlier order dated 16-4-2003 of Tribunal rendered in assessee's own case for assessment year 1993-94 in ITA No. 6208/Mum./1996 and treating the issue covered thereby deleted the addition that was made by Assessing Officer on account of expenditure on dry fruit boxes and sweets. As such, respectfully following the aforesaid order of the Tribunal, we find the issue covered thereby in favour of assessee and in turn, we find no fault with the impugned order of ld. CIT(A) on the count of deletion of expenses contained in Issue No. 5(i) and (ii). We, therefore, decline to interfere with the same. 68. Issue No. 6 pertains to disallowance of expenses u/r 6D. This issue is contained in ground No. X in assessment year 1995-96, Ground No. V for assessment year 1996-97 and III in assessment year 1997-98. The ld. DR has relied on the order of Assessing Officer while the ld. AR of assessee has relied on the order of CIT(A), contending that the issue is covered in favour of assessee by 'F' Bench of Tribunal vide order dated 24-7-2003 in assessee's own case for assessment year 1994-95 rendered in ITA No. 6342/M/97. 69. We have considered the rival contentions as also the relevant material on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for right shares. He has contended that one of the conditions thereof was that shares will be listed in Bombay Stock Exchange and until the shares are so listed the share money will be deposited in the Bank Accounts and the assessee company will not have right/access to that money at all. He has contended that the shares were listed in Bombay Stock Exchange in next year i.e., in assessment year 1997-98. He has contended that accordingly the assessee's plea is that the interest on this money (share money) deposits from this bank became assessee's money in next year (assessment year 1997-98) only and so as per assessee the said interest is taxable in assessment year 1997-98. He has cited CIT v. Henkel SPIC India Ltd. [2004] 266 ITR 490 (Mad.)... and contended that until the Stock Exchange permits the assessee to list the shares in that Stock Exchange, interest is to remain in that Bank Account and the interest will be available and accrue to assessee only after listing. He has contended that in the present case listing of assessee's right share is in assessment year 1997-98 and so the interest accrued to assessee in assessment year 1997-98 only and so the same is not taxable in asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest on share application money deposited in the bank during the period between receipt of share application money and finalisation of allotment of shares or the listing of shares in the Stock Exchange. In that view of the matter, considering all the facts and circumstances of the case and respectfully following the decision of CIT v. Henkel SPIC (India) Ltd. [2004] 266 ITR 490 (Mad.), we hold this interest on right issue proceeds to be income assessable in assessment year 1997-98 and not in assessment year 1996-97. We direct the Assessing Officer accordingly. 76. Issue No. 2 in assessee's appeals for assessment years 1996-97 and 1997-98 contained in Ground Nos. II and I respectively pertains to section 80-IA, which has already been dealt with and decided by us above while dealing with similar issue being Issue No. 1 in revenue's appeals. 77. Issue No. 3 pertains to disallowance of Foreign Travel Expenses. This issue is contained in Ground No. 3(a) regarding Chairman and Managing Director of assessee and 3(b) regarding all other persons in assessment year 1996-97; and in ground No. 2(a) regarding Chairman and Managing Director of assessee and 2(b) regarding all other persons. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide para 11 on page 49 of his order, he has observed as under : "(1) Expenditure on staff on food and refreshment during late sitting Rs. 4,39,073 (2) 10% of Canteen expenses Rs. 6,95,712 (3) Dry fruit boxes etc. Rs. 2,87,718 (4) Gift Articles Rs. 2 (sic) In the order the aforesaid expenses have been treated as entertainment expenses and accordingly 50% thereof amounting to Rs. 8,23,443 has been disallowed. This issue is also covered by the CIT(A) order for assessment year 1995-96. On the same basis the disallowances (1) and (2) are confirmed....." 81. As such considering all the facts and circumstances of the case, we find no fault with the impugned order of ld. CIT(A) on this count as the disallowance has been confirmed only to extent of 50% of expenditure on food etc. 82. As regards the disallowance of 10% of canteen expenses, the Tribunal has in assessment year 1995-96 in ITA No. 2157/Mum./1999 vide paras 8 and 9 of its order reduced the disallowance out of canteen expenses from 10% to 2.5% of the canteen expenses. The facts being identical, we follow the aforesaid order of the Tribunal and hold and direct accordingly. 83. Issue No. 5 disputes the disallowance u/r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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