TMI Blog2009 (1) TMI 881X X X X Extracts X X X X X X X X Extracts X X X X ..... t holding that the proposed textile unit was a part of existing business of the assessee and, expenditure of revenue nature incurred on setting up the new unit which unit was not ultimately set up, was allowable deduction. 2. That the CIT(A) erred on facts and in law in confirming the disallowance of consultancy fee paid to Mckinsey Co. amounting to ₹ 74,04,128 holding the same to be capital expenditure. 2.1 That the CIT(A) erred on facts and in law in observing that consultancy fee paid for improving the operational efficiency, productivity and profitability resulted in enduring benefit to the assessee and was, therefore, capital expenditure. 3. That the CIT(A) erred on facts and in law in confirming the disallowance of expenses incurred on implementation of software packages aggregating to ₹ 1,06,35,341 holding the same to be capital expenditure. 3.1 That the CIT(A) erred on facts and in law in holding that since the implementation of the software packages would bring efficiency and profitable structural changes in the business operations of the assessee it would be an enduring benefit accruing to the assessee and, therefore, the expenditure incurred thereon was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 142 CTR (SC) 261 : (1997) 228 ITR 253 (SC), the subsidy received by the assessee was taxable revenue receipt, whereas, in fact, the said decision supports the case of the assessee. 1.2 That the CIT(A) erred on facts and in law in observing that the subsidy was required to be reduced for the purposes of determining the cost of the assets of the assessee. 2. That the CIT(A) erred on facts and in law in confirming disallowance of ₹ 9,319 under s. 14A of the IT Act, 1961 ( the Act ). 2.1 That the CIT(A) erred on facts and in law in upholding the adjustment of ₹ 9,319 while calculating book profit under s. 115JB of the Act on the ground that such expense related to earning tax free dividend income. 3. That the CIT(A) erred on facts and in law in upholding investment of the following amounts for computing book profit under s. 115JB of the Act : 3.1 That the CIT(A) erred on facts and in law in upholding the addition of ₹ 15,39,95,499 on account of provision for doubtful debts and advances while computing of book profit under s. 115JB of the Act holding that the same represented unascertained liabilities and no evidence was produced by the assessee to the contrary. 3.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on India Ltd. vs. CIT in IT Appeal No. 469 of 2007, dt. 7th April, 2008 [since reported at (2008) 9 DTR (Del) 303-Ed.]. 6. Opposing the applications, the learned Departmental Representative for the Revenue submitted that since the assessee itself treated the said receipt as a revenue receipt and offered it for taxation and the AO having not made any addition on this account the issue was not at all in dispute and as per provision of sub-s. (1) of s. 253 of IT Act the additional ground taken by the assessee cannot be admitted as it does not emerge from the order of first appellate authority. Learned Departmental Representative placed reliance on the decision of apex Court in the case of Addl. CIT vs. Gurjargravures (P) Ltd. 1978 CTR (SC) 1 : (1978) 111 ITR 1 (SC) wherein their Lordships held that additional grounds of appeal are not admissible if no such claim was made before the ITO. 7. On considering the submissions of both the parties, we find that the additional ground of appeal taken by the assessee is purely legal in nature and all the facts are on record. Their Lordships of Delhi High Court in the case of DCM Benetton India Ltd. (supra), while relying upon the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacture of fabric and textiles for which the existing products of the assessee would have been utilized as raw material. For the aforesaid purpose, the assessee had identified, largely from within its existing resources, certain manpower and resources to explore the possibility of expanding in the same line of business, within the purview of the objects authorized by its memorandum and articles of association. The assessee incurred, from time to time, expenditure in the nature of salary, wages, repair, maintenance, design and engineering fee, traveling and other expenses of administrative nature in respect of the resources so identified for the proposed expansion. The expenses incurred by the assessee were accumulated from year to year. The assessee had identified the State of Karnataka for the purpose of setting up the proposed unit. The assessee, however, could not procure the allotment of requisite land from the Karnataka Government and therefore, the proposed expansion of the unit of the assessee had to be abandoned. The entire expenditure incurred on the proposed unit was written off and claimed as deduction. The AO, disagreeing with the view of the assessee, was of the opi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied largely from within the existing set up of the appellant. Further, the proposed unit was being established under the common control of the assessee s board of directors, have common source of capital and a common balance sheet and P L a/c with the existing units of the assessee. 16. He placed reliance on the following decisions in which it has been held that the decisive test of whether two lines of business constitute the same business is unity of control : (a) CIT vs. Prithvi Insurance Co. Ltd. (1967) 63 ITR 632 (SC); (b) Produce Exchange Corporation Ltd. vs. CIT (1970) 77 ITR 739 (SC); (c) Standard Refinery Distillery Ltd. vs. CIT (1971) 79 ITR 589 (SC); (d) Prem Spinning Weaving Mills Co. Ltd. vs. CIT (1975) 98 ITR 20 (All); (e) CIT vs. Alembic Glass Industries Ltd. (1976) 103 ITR 715 (Guj); (f) B.R. Ltd. vs. V.P. Gupta, CIT 1978 CTR (SC) 82 : (1978) 113 ITR 647 (SC); (g) Bansidhar (P) Ltd. vs. CIT (1981) 20 CTR (Guj) 90 : (1981) 127 ITR 65 (Guj); (h) CIT vs. Tata Chemicals Ltd. (2002) 175 CTR (Bom) 443 : (2002) 256 ITR 395 (Bom). 17. He further placed reliance on the following decisions in which it has been held that expenditure incurred in the course of extens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court did not consider its earlier decision in Modi Industries (supra) wherein such expenditure had been allowed deduction. It is further pointed out that the Delhi High Court and Madras High Court in the recent judgments held that expenses incurred by the assessee for setting up a new unit, which is part of the existing business is allowable as revenue expenditure : (a) CIT vs. Relaxo Footwears Ltd. (2007) 293 ITR 231 (Del); (b) Jay Engineering Works Ltd. vs. CIT (2007) 212 CTR (Del) 562; (c) CIT vs. Usha Iron Ferro Metal Corpn. Ltd. (2008) 296 ITR 140 (Del); and (d) CIT vs. Rane (Madras) Ltd. (2008) 215 CTR (Mad) 250. Whereas on the other hand, learned Departmental Representative for the Revenue, countering the submissions of learned Authorised Representative for the assessee, contended that the CIT(A) in his well reasoned and well discussed order placing reliance on the decision of jurisdictional High Court in the case of Triveni Engineering Works Ltd. (supra) has rightly disallowed the expenditure holding the same to be of capital in nature. We have considered the rival submissions of both the parties, gone through the relevant records, perused the orders of the tax au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stituted the same business within the meaning of s. 24(2) as that section stood before it was amended in 1955. (iii) In the case of B.R. Ltd. vs. V.P. Gupta, CIT (supra), wherein their Lordships held as under : The decisive test, as held by this Court in Produce Exchange Corporation Ltd. vs. CIT (1970) 77 ITR 739 (SC) is unity of control and not the nature of the two lines of business. The CIT also fell into the error of supposing that, apart from the fact that the two activities must form an integral part of the entire business, the main consideration which has to prevail is whether, notwithstanding the fact that the assessee may close one activity, it does not interfere in the carrying on of the other activity . The fact that one business cannot conveniently be carried on after the closure of the other may furnish a strong indication that the two business constitute the same business. But the decision of this Court in CIT vs. Prithvi Insurance Co. Ltd. (1967) 63 ITR 632 (SC) shows that no decisive inference can be drawn from the fact that after the closure of one business, another may or may not conveniently be carried on . (iv) In the case of Prem Spinning Weaving Mills C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction of the cinema building. The High Court held that the interest and travelling expenditure must be treated as part of expenditure incurred for the purposes of business and deductible in the hands of the assessee. (ii) In the case of CIT vs. Hindustan Machine Tools Ltd. (supra), wherein their Lordships were considering whether revenue expenditure incurred by the assessee in connection with the establishment of its new divisions was deductible business expenditure. The Court observed that there was complete unity and interlacing as regards the management, finance and administration, etc. of the various divisions of the business. The Court, therefore, held that the revenue expenditure incurred on establishment of the new divisions was deductible expenditure. The Court in that case followed its decision in the case of CIT vs. Indian Telephone Industries Ltd. (1989) 175 ITR 215 (Kar), wherein on similar facts it was held by the Court that the new units being established were only expansion of the existing business of the assessee and not a new business and, therefore, revenue expenditure incurred in connection with the establishment of the new units was allowable revenue expenditur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra), the assessee, which was manufacturing diverse items, started manufacturing special alloy wires and billets. The assessee incurred expenditure on debentures issued for raising funds for the new unit. The Court, placing reliance on the several earlier decisions, rendered by the other High Courts and the apex Court, observed as under : In the present case, however, the finding of fact arrived at by the Tribunal on the basis of evidence on record, is that the management of the new business and the earlier business was the same and there was also unity of control and a common fund....... In view of the above the only conclusion which can be arrived at, therefore, is that the Tribunal was justified in holding that the business of manufacture of special alloy wires and billets was an extension of the business and not a new business. The question referred is, therefore, answered in the affirmative and in favour of the assessee. (vi) In the case of Veecumsees vs. CIT (supra), wherein their Lordships held that the business carried on by the assessee as in jewellery and in running the cinema theatre was a composite one and, therefore, the interest expenditure could not be said to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r and clariflocculator was allowable expenditure. The Tribunal further held that foreign travel expenditure incurred by the officers of the assessee in connection with a proposal to set up a separate unit for A.F.H. Boilers and HDO, which project ultimately did not materialize, was allowable revenue expenditure. (xiii) In the case of Cama Hotels Ltd. vs. IAC (supra), the Tribunal held that consultancy fee paid by an assessee engaged in hotel business for preparation of feasibility report for opening a new hotel would constitute revenue expenditure. (xiv) In the case of Jay Engineering Works Ltd. vs. CIT (supra), their Lordships of Delhi High Court held : The nature of the new business is not a decisive test for determining whether or not there is an expansion of an existing business. The nature of the business could be distinct. What is of importance is that the control of both the ventures, the existing venture as well as the new venture, must be in the hands of one establishment or management or administration. The place of business of the existing business and the new business may not be in close proximity. However, the funds utilized for the management of both the concerns mus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ependent because of the interconnection of management, financial, administrative and production aspects, such expenditure has to be construed as revenue in nature and, therefore, deductible. On appreciation of law laid down in various decisions (supra) referred to by learned Authorised Representative for the assessee, it is clear that the tests decisive for determining whether or not there is an expansion of the existing business or whether two lines of business constitute same business was that the assessee was required to prove that the control over the two units is in the hands of same management and administration; that the new venture was managed from common funds and there is the necessary unity of control leading to interconnection, inter-dependence and interlacing of the two ventures only then it can be said that the new project was only an extension of the existing business of the assessee and the expenditure incurred by the assessee on the new project could be treated as revenue in nature. Therefore, each case is required to be dealt with on broad principles that have been accepted by the various Courts in the abovementioned cases. It means that the assessee was requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pansion of the existing business the same was allowable, as revenue expenditure. However, in view our finding recorded hereinabove, wherein we have held that the assessee failed in establishing that the new unit proposed to be set-up by the assessee constituted same business as the existing business or it was an expansion of the existing business, the expenditure incurred by the assessee cannot be treated as revenue expenditure because s. 37(1) clearly provides that any expenditure, not being capital expenditure, laid out or expended wholly and exclusively for the purpose of the business or profession shall be allowed to the assessee while computing the income chargeable under the head Profit and gains of business or profession , whereas in the instant case the expenditure incurred by the assessee on the proposed unit, which never came into existence, has already been held to be neither constituting the same business as the existing business of the assessee or an expansion of the existing business. It means that the impugned expenditure cannot be treated as expenditure laid out or expended wholly and exclusively for the purpose of business of the assessee. Therefore, the case law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expenditure would not change to revenue. Thus, even applying the principles laid down by their Lordships of jurisdictional High Court of Delhi in the case of Triveni Engineering Works Ltd. (supra) to the instant case of the assessee it is clear that the impugned expenditure incurred by the assessee cannot be treated as revenue expenditure under s. 37(1) of the Act. Accordingly, the order of the CIT(A) in this regard is upheld and the ground No. 1 of the instant appeal of the assessee for asst. yr. 2000-01 is rejected. Now we shall deal with ground No. 2 of the appeal of the assessee pertaining to asst. yr. 200001 relating to the issue of disallowance of consultancy fee paid to Mckinsey Co. amounting to ₹ 74,04,128. Briefly the facts relating to the issue involved in the ground of appeal are that the assessee had appointed M/s Mckinsey Co. an international firm of consultants, for the purposes of carrying out a detailed study on the various aspects relating to the operations of the appellant and to suggest appropriate measures for improving the operational efficiency and profitability of the assessee. The assignment was, however, terminated after a short period on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on the decision of Tribunal, Amritsar Bench in the case of Dy. CIT vs Max India Ltd. (2006) 105 TTJ (Asr) 1002 wherein the Tribunal held that the expenses incurred for improving and developing new varieties of films were not capital in nature since these did not pertain to extension of its business nor there was any change in the installed capacity. Also, the expenses were allowable under s. 37(1) of the Act even if the assessee had amortised these expenses in its books of accounts. Learned Authorised Representative lastly referring to p. 14 of the paper book submitted that object of the assignment was clear from the report of Mckinsey Co. There was no acquisition of capital assets or any enduring advantage in the capital field. The disallowance has been upheld by the CIT(A) merely stating that the expenditure resulted in advantage of an enduring nature. The decision in the case of Triveni Engineering Works Ltd. (supra) has been applied by the CIT(A) not appreciating that the facts of the assessee were totally different. On the other hand learned Departmental Representative for the Revenue placing strong reliance on the reasoning given in the order of CIT(A) and on the decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The borderline between a capital expenditure and a revenue expenditure is a blurred one. Different minds may come to different conclusions and may yet have valid reasons justifying each of the two view points. As stated above, the amount spent on the study by the consultants for improving operational efficiency, productivity and profitability would have been towards an enduring benefit to the assessee company. I am, therefore, in agreement with the view of the AO that the expenditure incurred is capital in nature. Hence, applying the ratio of the decision (supra) to the facts of the instant case we hold that the impugned expenditure incurred by the assessee towards consultancy fee cannot be treated as revenue expenditure and the same has been rightly treated by the tax authorities below as capital expenditure. Accordingly, the order of CIT(A) in this regard is upheld and ground No. 2 of the appeal of the assessee in asst. yr. 2000-01 is rejected. Now, we shall deal with ground No. 3 of the appeal for asst. yr. 2000-01 and ground No. 1 of the appeal for asst. yr. 2001-02 relating to the issue whether expenditure incurred on software system is revenue or capital in nature. Briefl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re under ERP package and incurred an expenditure of ₹ 1,06,35,341 and ₹ 2,21,59,248 in assessment years under consideration, which was amortized as deferred revenue expenditure in the books of accounts, but being in the nature of revenue expenditure claimed deduction in the return of income in entirety. That a similar question i.e., whether the expenditure incurred by the assessee on account of computer software was of revenue or capital nature, came up for consideration before the Special Bench of Tribunal in the case of Amway India Enterprises vs. Dy. CIT (2008) 114 TTJ (Del)(SB) 476 : (2008) 111 ITD 112 (Del) (SB) and the Tribunal laid down following three tests for the AO to decide the nature of the expenditure whether capital or revenue (i) ownership test; (ii) test of enduring benefit and (iii) functional test. Learned Authorised Representative for the assessee further referring to the decision of the Tribunal, Chandigarh Bench in the case of Glaxo Smith Kline Consumer Healthcare Ltd. vs. Asstt. CIT ITA Nos. 379/Chd/2004, 534/Chd/2004, 309/Chd/2005 and 310/Chd/2005 [reported at (2007) 112 TTJ (Chd) 94-Ed.], placed at pp. 35 to 56 of paper book placed reliance on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue field. 48. The decision (supra) of the Tribunal needs to be followed in the instant cases of the assessee and the issue involved in the grounds of appeals relating to expenditure on software require to be set aside to the file of the AO for deciding the nature of the software expenses claimed by the assessee by applying the tests laid down by the Special Bench of the Tribunal in the decision (supra). Accordingly, the orders of the tax authorities below on this issue are set-aside and the issue is restored to the file of the AO for deciding the same afresh for both the assessment years under consideration as per the directions issued by the Special Bench of the Tribunal in the case of Amway India Enterprises (supra). 49. The ground No. 3 of the appeal for asst. yr. 2000-01 and ground No. 1 of the appeal for asst. yr. 2001-02 stand allowed for statistical purposes. 50. Now, we shall deal with ground No. 2 of the appeal of the assessee for asst. yr. 2001-02 regarding amount of ₹ 26,11,73,704 credited by the assessee company to its P L a/c on account of withdrawal of revaluation reserve deducted by it while computing the book profits under s. 115JB of the Act. 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lance sheet, there cannot be any question of taking the same to the P L a/c and since it cannot be taken to the P L a/c there is no question of adjusting the book profit on account of creating of revaluation reserve account. To read the provisions in any other manner would go against the intent of the provisions and would also lead to absurd results. Reading down to a statute to avoid absurd results has been upheld in the following cases : (i) K.P. Varghese vs. ITO (1981) 24 CTR (SC) 358 : (1981) 131 ITR 597 (SC); (ii) CIT vs. J.H. Gotla (1985) 48 CTR (SC) 363 : (1985) 156 ITR 323 (SC). The accounting treatment done by the appellant is in accordance with AS-10 on accounting for fixed assets , AS-6 on depreciation accounting and guidance note on treatment of reserves created on revaluation of fixed assets issued by the ICAI. It is relevant to note that in the following cases, the Tribunal has held that, where revaluation reserve is not created through the process of debiting it to the P L a/c subsequent withdrawal from the revaluation reserve would go to reduce the figure of book profit as computed under provisions of erstwhile s. 115J of the Act (analogous to s. 115JB of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 33AC, if debited to P L a/c is to be added back to the book profits of the assessee company. As per cl. (i) the amount withdrawn from any reserve or provision, if any, such amount credited to P L a/c is required to be reduced from P L a/c after adjustment as specified in cls. (a) to (f). From the amended provision it is clear that prior to the insertion/substitution of cl. (i) of aforesaid Explanation it was open to the assessee to reduce the sum withdrawn from revaluation reserve, while computing book profit, amounts withdrawn from provision/reserve and credited to P L a/c, even if in the year in which the provision/reserve had been created but the amount of such reserve had not been added back while computing book profit for that year, notwithstanding that the reserve had been debited to the P L a/c. From the comparison of the provisions of s. 115JB it is clear that prior to insertion of the proviso to cl. (i) of the Explanation of s. 115JB the assessee was entitled to reduce the sum from revaluation reserve while computing book profit under s. 115JB of the Act even if in the year in which the provision/reserve had been created but the amount of such reserve has not been added ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, the assessee company had admittedly not increased its book profit for the previous year relevant to asst. yr. 2000-01 in which the revaluation reserve was created by it and this being the undisputed position, we are of the view that it was not entitled to reduce from the book profit the amount withdrawn from such reserve as per proviso to cl. (i) of Expln. (1) to s. 115JB. Relying on the AS-10 and AS-6 as well as the guidance notes issued by the ICAI on Treatment of Reserve Created on Revaluation of Fixed Assets , the learned counsel for the assessee has contended that the revaluation reserve is essentially in the nature of an adjustment entry to balance both the sides of the balance sheet and there being no question of taking the same to the P L a/c, the issue of adjusting the book profit on account of creation of revaluation reserve does not arise. However, as already observed by us, there is no dispute that the provisions of cl. (i) of Expln. (1) to s. 115JB are applicable to the issue in question and the same being plain and clear in this context, we have to decide the said issue in accordance with the said provisions and not relying on the Accounting Standards or the guid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he CIT(A) in this regard is upheld and ground No. 2 of the appeal of the assessee for asst. yr. 2001-02 is rejected. Now, we shall deal with the identical issue involved in additional grounds of the assessee s appeal in asst. yrs. 2000-01, 2001-02 and ground No. 1 of the appeal in asst. yr. 2002-03 pertaining to sales-tax subsidy of ₹ 61,61,67,407 each in asst. yrs. 2000-01 and 2001-02 and ₹ 69,76,93,476 in asst. yr. 2002-03 which were received by the assessee under the provisions of Disposal of Industries New Packages Scheme of Incentive, 1993 notified by the Industries, Energy and Labour Department, Government of Maharashtra. The assessee for the first time has claimed before the Tribunal in asst. yrs. 2000-01 and 200102 that the same is not assessable to tax as sales-tax subsidy received by the assessee was in the nature of capital receipt not liable to tax. In asst. yr. 2002-03, the assessee during assessment proceedings vide letter dt. 2005 revised the computation of the income and claimed the sales-tax subsidy as capital receipt but the AO did not consider the claim of the assessee on the reasoning that the assessee did not revise the return of income within th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nough to concede to the above submission of learned Departmental Representative for the Revenue. In this view of the matter the issue involved in the ground taken in the cross-objection by the assessee is restored to the file of AO for compliance in the term of the submissions of learned Departmental Representative for the Revenue by considering the decision (supra) of the Special Bench. The ground taken in the cross-objection stands allowed for statistical purpose. In this view of the matter judicial proprietary and discipline demands that we should regard and follow the orders of the Co-ordinate Bench delivered in the case of this very assessee in earlier years deciding a similar issue which subsequently again come for consideration in subsequent assessment years in the case of this very assessee. Hence, respectfully following the decision (supra) of the Tribunal decided in the case of this assessee in asst. yr. 1997-98 the orders of the tax authorities below on the issuing receipts of sales-tax subsidiary are set aside and the issue of sales-tax subsidy involved in asst. yr. 2000-01 to asst. yr. 2002-03 is restored to AO to decide the same afresh in compliance with the direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we find that this issue is no more res integra in view of plethora of decisions of Hon ble Supreme Court, various High Courts and Tribunal wherein unequivocally it has been held as under : (i) In the case of CIT vs. HCL Comnet Systems Services Ltd. (2008) 219 CTR (SC) 222 : (2008) 13 DTR (SC) 105, their Lordships of apex Court have held that provision for bad and doubtful debts is made to cover up probable diminution in value of asset and cannot be said to be provision for liability; Item (c) of Explanation not attracted and thus provision cannot be added back. (ii) In the case of Jt. CIT Ors. vs. Usha Martin Industries Ltd. (2006) 105 TTJ (Kol)(SB) 543 : (2006) 288 ITR 63 (Kol)(SB)(AT), the Tribunal held that the provision for bad and doubtful debt is a provision for diminution in the value of asset, i.e., debt and not a liability, and thus the question of adjustment as provision for an unascertained liability does not arise. 78. In following decisions also similar view was taken : (1) IBM India Ltd. vs. CIT (2007) 108 TTJ (Bang) 531 : (2007) 290 ITR 183 (Bang)(AT); (2) Maharashtra State Electricity Board vs. Jt. CIT (2002) 77 TTJ (Mumbai) 33 : (2002) 82 ITD 422 (Mumbai); ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. CIT Ors. vs. Usha Martin Industries Ltd. (supra); (4) ITO vs. Hawai Holdings (P) Ltd. (ITA No. 2725/Del/2002); (5) N.W. Exports Ltd. vs. Asstt. CIT (2004) 86 TTJ (Mumbai) 294 : (2003) SOT 136 (Mumbai); (6) Piramal Polymers vs. Dy. CIT 2008 TIOL 7 (Mumbai). No decision contrary to decision (supra) of Delhi High Court and other decisions (supra) have been cited by learned Departmental Representative for the Revenue. In this view of the matter and respectfully following the decisions (supra) which fully apply to the facts and issue involved in this ground of appeal of the assessee and accordingly this issue is decided in favour of the assessee and against the Revenue and as a consequence thereof the order of CIT(A) in this regard is set aside and 2nd part of ground No. 3 of the appeal of the assessee stands allowed. Consequent upon our findings in ground No. 3 of the appeal of the assessee given hereinabove, the ground No. 3 stands allowed in part. Now, we shall deal with ground No. 4 of the appeal of the assessee relating to the issue of claim of deduction under s. 80HHC of the Act. In brief, the facts relating to this issue are that the AO noticed that the assessee has cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, the appellant had not reduced brought forward unabsorbed depreciation as per normal provisions from profits of the business for the year. The AO, however, while computing the admissible deduction under s. 80HHC of the Act for arriving at the book profit, set off unabsorbed loss/depreciation of the assessee amounting to ₹ 9,88,92,25,084 computed as per the normal provisions of the Act. On appeal, the CIT(A) did not discuss the ground in the appellate order relating to deduction under s. 80HHC while determining the book profits under s. 115JB. Further, according to him in determining the book profits under s. 115JB of the Act, the amount to be reduced from the net profit as per the P L a/c are the book profits which are eligible for deduction under s. 80HHC of the Act. It is respectfully submitted that the unabsorbed brought forward depreciation cannot be reduced from profits of the business for calculation, the deduction eligible to the assessee under s. 80HHC of the Act. He placed reliance on various decisions in support of his contentions. Reliance in this regard is further placed on the following decisions : (a) CIT vs. G.T.N. Textiles Ltd. (2000) 164 CTR (Ker) 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tutory profit, which has already been overwhelmed by ss. 115J, 115JA and 115JB. Therefore, the deduction under s. 80HHC in a case of MAT assessment is to be worked out on the basis of the adjusted book profit and not on the basis of the profit computed under the regular provisions of law applicable to the computation of profits and gains of business or profession . On similar proposition of law we can refer to the following decisions also : (a) CIT vs. G.T.N. Textiles Ltd. (supra); (b) Dy. CIT vs. Govind Rubber (P) Ltd. (supra); (c) Starchik Specialities Ltd. vs. Dy. CIT (supra); (d) Jt. CIT vs. BEC Impex International (P) Ltd. (supra); (e) J.K. Industries vs. Asstt. CIT (supra); (f) Banswara Syntex Ltd. vs. Asstt. CIT (supra); (g) Tushako Pumps Ltd. vs. Asstt. CIT (supra); (h) Prime Textiles Ltd. vs. Asstt. CIT (supra); (i) Smruthi Organics Ltd. vs. Dy.CIT (supra). 98. Hence in view of the decision (supra) of the Special Bench of the Tribunal, Mumbai in the case of Dy. CIT vs. Syncome Formulations (I) Ltd. (supra) as well as the other decisions (supra) the issue now stands covered in favour of the assessee. Accordingly, it is held that while computing the book profits under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l of the assessee is allowed. Now we shall deal with the issue involved in ground No. 6 relating to charging of interest under ss. 234B and 234C of the Act. In brief the facts are that the assessee filed its return of income of rupees nil under the normal provisions of the Act for the year under consideration and also declared its book profits under s. 115JB of the Act, after setting off brought forward loss/unabsorbed depreciation at rupees nil. The AO, after making several disallowances and additions, recomputed normal income at rupees nil, after setting off brought forward business loss and unabsorbed depreciation of earlier years and book profits at ₹ 22,51,70,633. The AO further sought to levy interest under ss. 234B and 234C of the Act. The AO levied interest under s. 234B for short payment of advance tax and charged interest under s. 234C for deferment of advance tax payment. On appeal the CIT(A) held the same to be consequential in nature and directed the AO to give consequential relief while giving appeal effect to the order. Before us the learned Authorised Representative for the assessee submitted that even if assuming that the said additions and dis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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