TMI Blog2009 (1) TMI 880X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee at the first instant agitated the issue in ground No.2, which is as under: 2. The learned CIT (A) erred in confirming the disallowance in respect of cost of restructuring of Ambalapuzha and Narendrapur Plant. 2.1. He failed to appreciate that (he operations at both these were not viable and a decision was taken to restructure the business on principle of commercial expediency. 2.2. He failed to appreciate that the appellant was required to incur the restructuring costs in order to streamline its business operation and viability and therefore these costs ought to be allowed as deductible expenditure us 37 (I) of the Act. 4. The brief facts of the case are that the assessee is carrying on the business of sec food culturing and processing. The assessee initially had three units i.e.. first at Sandesh Kali Centre, which was the prawns culturing division; the second unit at Ambalapuzha for processing the prawns and the third unit at Narendrapur for again processing prawns. The claim of the assessee is that at Ambalapuzha and Narendrapur the assessee was processing the prawns cultured at Sandesh Kali Centre or cultured by other parties. From Assessment Year 1995-96, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the culturing division at Sandesh Kali Centre unit in Assessment Year 1995-96. Our attention was drawn to the grant of Industrial License in lieu of the applications submitted on 19.05.1995. The said evidence is placed at pages 1 to 2 of the paper book. The learned AR submitted that the assessee was an EOU and after the shut down of the Sandesh Kali Centre unit, it had applied for the industrial license as is evidenced by the letter issued by the Ministry of Industry, dated 07.07.1997 placed at pages 3 and 4 of the paper book. On page No.5 to 13 of the paper book is the copy of sourcing agreement entered into by the assessee company on 16.09.1997 with the three other parties for procuring culture prawns. The lease deed dated 17.02.1992 is placed at pages 14 to 23 of the paper book and the learned AR pointed out that the preamble of the said lease deed at page 15 itself provided that the entire plot of land and the factory constructed thereon was to be referred in said agreement para 20 of the lease agreement further provided that on the termination of lease, the possession of the said premises will be riveted back in the same condition. The next additional evidence filed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee was prevented by a sufficient cause from not producing the same before the authorities below and in view of the fact that the said evidence is necessary for the adjudication of the issue in the interest of the justice, we are of the opinion that the issue with regard to the claim of expenditure on restructuring of Narendrapura unit needs to go back to Assessing Officer for proper verification. The Assessing Officer is hereby directed to look into the additional evidence produced by the assessee in order to determine the allowability of claim of restructuring expenses. The Assessing Officer shall allow a fair and reasonable opportunity of hearing to the assessee and decide the matter afresh after considering the necessary evidence as produced by the assessee. 8. The Assessing Officer while completing the assessment as per his observations in para 5.2 of the observations have capitalized certain expenditure incurred by the assessee in respect of relocation of the assets of Ambalapuzna unit and its transportation. The assessee in ground No.2 has also raised the issues of allowability of the said expenditure. However, during the course of hearing before us, the Learned AR for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned DR for the Revenue pointed out that the issue is covered by the decision of Special Bench of the Tribunal in Daga Capital Management Pvt. Ltd. vs. ITO (26 SOT 603) and the matter needs to be restored back to the file of Assessing Officer for recalculating the interest as held by the Special Bench. The learned DR further pointed out that as per judgment in the case of CIT vs. Assam Travels Shipping Co. Services (1993) 199 ITR 1 (SC). the amount of disallowance could be recalculated. 11. The learned AR for the assessee stressed that the Revenue has raised a limited ground of appeal, which is as under: 1. On the facts and in the circumstances of the case, the Ld CIT (A) erred in restricting without giving any reason, the disallowance of expenses. The learned AR further pointed that the grievance of the Revenue was only upto the disallowance made by the Assessing Officer and by applying the ratio laid down by the Special Bench, the disallowance as worked out under Rule 8 could not exceed the above said disallowance. With regard to the reliance of learned AR on CIT vs. Assam Travels Shipping Co. Services (1993) 199 ITR 1 (SC), it was pointed out by the learned AR that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal Management Pvt Ltd. vs. ITO (supra), we remit the matter back to the file of Assessing Officer with a direction to recalculate the disallowance. However, the grievance of the Revenue in the present appeal is only to the extent of disallowance totaling ₹ 6,74,345/- being the estimated disallowance of other expenses at 10%. The Assessing Officer had disallowed ₹ 6,74,345/- and the CIT (A) had restricted the disallowance of ₹ 3,37,172/-. While deciding the appeal of the Revenue the assessee cannot be put in a position worse of than it was originally in. Accordingly, we direct the Assessing Officer to re-work the disallowance under Section 14A of the Act in line with the ratio laid down by the Special Bench. However, the disallowance shall be restricted to the original disallowance made by the Assessing Officer. A reasonable opportunity of hearing to the assessee shall be allowed before deciding the issue. The learned DR had placed reliance on the judgment of CIT vs. Assam Travels Shipping Co, Services (1993) 199 ITR 1 (SC). From the facts of the case, we find that the Court had directed the CIT (A) to recalculate the penalty as it had made a calculation error in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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