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TMI Blog2019 (3) TMI 735X X X X Extracts X X X X X X X X Extracts X X X X ..... in the pendency before us. It would be fruitless to find out who is responsible for non-disposal of these appeals for all these years, because the answer is that all stakeholders i.e. Assessee, revenue and of course this tribunal is responsible for this state of affairs unquestionably. These matters were adjourned for more than 35 times in past. Therefore, with the consent of the parties, an attempt was made to dispose of all these appeals. At request of parties, we have heard them together and disposed of by this common order. ITA No 4410/Del/2003 AY 2000-01 2. First, we take up ITA number 4410/del/2003 for assessment year 2000 - 01 filed by learned Assistant Commissioner of Income Tax, Range - 1, Moradabad (learned AO) against order of The Commissioner of Income Tax (Appeals), Bareilly dated 10/7/2003 wherein learned AO has raised following grounds of appeal. "1. that LD CIT (A) has erred in law and on facts of case in directing AO not to enhance book profit by a sum of Rs. 10540000/- which represents depreciation on revalued assets for purpose of section 115J of Income Tax Act, 1961. 2. That ld CIT(A) has erred in law and on facts of case in not enhancing book profit by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed. 11. That ld CIT (A) has erred in law and on facts of case in directing AO to treat sum of Rs. 14389000/- and Rs. 34364/- as business income which was correctly assessed under head Income from other source. 12. That ld CIT (A) has erred in law and on facts of case in directing to treat service charges of Rs. 2163586/- as business income. 13. that ld CIT (A) has erred in law and on facts of case in deleting disallowance of expenses of Rs. 2098978/- incurred on books and journals, which was taken as capital expenses by Assessing Officer ass assessee admitted that books are tools for its business activities. 14. That ld CIT (A) has erred in law and on facts of case in treating expenses incurred in purchase of books as revenue expenses while Assessing Officer has rightly taken it capital in nature and treated it as a plant as per section 43(3) and reliance is placed on decisions reported in 132 ITR 401 (Guj) 129 ITR 73 and 206 ITR 30 (Cal) 15. That ld CIT(A) has erred in law on facts of case in allowing relief of Rs. 9131504/- out of Rs. 9829097/- disallowed on account payment of provident fund. 16. That ld CIT (A) has erred in law and on facts of case in deleting pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eserve being credited to profit and loss account does not warrant any further adjustments. It is also noted that amount of INR 10548000 as mentioned in ground of appeal number 1 relates to amalgamation adjustment reserve that has been dealt with in ground number 7 of appeal of learned assessing officer. The ld DR also did not show us how this ground is arising from order of lower authorities. Therefore, it is apparent that this ground has been taken under some misunderstanding or erroneously. In view of this ground number, 1 and 2 of appeal are dismissed. 6. The 3rd ground of appeal is with respect to order of learned CIT - A deleting addition of INR 75230705/- in book profit computation under section 115JA of income tax act as this amount is not actual profit derived from industrial undertaking engaged in business of generation of distribution of power. The 4th ground is also related to same where learned AO has contested that assessee had generated power for internal consumption of its existing unit and it was not distributed for purposes of business and therefore it is not eligible for deduction. Ground number 5 is also on same issue where AO is aggrieved that undertaking for g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of actual sales and generation of power of own use no business was carried on by assessee for generation and distribution of power. The profit shown is notional one. He therefore submitted that claim of assessee is not allowable u/s 80 IA of act and therefore no book profit deduction can be granted. 10. The learned authorised representative stated that order of learned assessing officer is not sustainable and learned CIT - A has correctly deleted addition for following reasons. (a) Re: DG sets were imported for home consumption: The Ld. AO‟s allegation that if custom authorities have marked invoice of DG sets for home consumption, it means that goods are not used for purpose of business is not based on appreciation of Customs Act, 1962. As per section 45 thereof, imported goods may be cleared by Custom authorities in either of following manner: * Home consumption or * Warehoused; or * Transshipped. It manifests from above that home consumption means consumption of goods in Indian Territory. The Customs Act, 1962 is not concerned with whether goods are used for personal purpose or for purpose of business. This becomes clear in section 47 of Customs Act, 1962 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Page 72 to 75 of Paper book). (c) Re: Power not supplied to public i.e. it is for captive use: The Ld. AO‟s allegation that merely because electricity produced is not sold in open market, profits thereof profits there from need not be reduced from book profits under section 115JA of Act is devoid of any merits. It is because no such condition is mentioned in clause (iv) of Explanation to section 115JA (2) of Act. The assessee places reliance on following judgments wherein under similar circumstances profits from captive power generation business have been allowed to be reduced from book profits: * CIT vs. DCM Sriram Consolidated Ltd. [(2014) 368 ITR 720 (SC)] * Tata Iron And Steel Co. Ltd vs. The State of Bihar [1958 AIR 452] Consequently, this means that where assessee is producing something, is using produced product captively (for its own use) to produce an ultimate product and there is a transaction of sale of ultimate product and profit (if any derived from sale) embedded in final realization will be taxed. In present case too, assessee‟s power generation unit is producing power for its own use in other units for producing ultimate product i.e. chemical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Delhi High Court in case of CIT vs. Orient Abrasives Ltd [271 CTR 626] wherein honourable Delhi High Court has held where substantial question of law before honourable High Court was Whether "profit and gain" from captive consumption of electricity supplied from generator set and which cannot be sold to any third person will qualify for deduction under Section 80-IA of Income Tax Act, 1961?. The honourable High Court answered same as under:- "11. A similar issue was raised before Delhi High Court in CIT Vs. Orissa Cement Ltd. [2002] 254 ITR 412 (Delhi), where deduction under Section 80-I was claimed on profits derived from captive consumption of limestone excavated from mines and thereafter used for manufacture of cement in plant of assessee. Revenue‟s submission that one cannot earn profit by indulging in business with oneself, was rejected to negate claim. Division Bench relying on Tata Iron and Steel Co. Ltd. & Ors. Vs. State of Bihar [1963] 48 ITR 123 (SC) and several decisions, rejected similar submission of revenue after quoting following paragraph from judgment in Tata Iron and Steel Co. Ltd. (supra):- "That even in cases where profit resulting from an ultimate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any principle of law which prevents effect being given to this factual position? The learned Attorney-General submitted that in such a situation "profit" is not a real or an actual profit but is one which is merely notional, and that when Act spoke of a "profit" it meant an actual, real and realised profit and not a merely notional "profit". We find ourselves unable to accept this submission. We start with premise that by sale of end product a real "profit" has been realised. When analysed it is found that that profit is aggregate or resultant of profits from different lines of activity. If arithmetically that total represents resultant aggregation of different items of activity we fail to see how it could be said that profit from each item which results in that total is a notional and not an actual or real profit. In interests of clarity, we should add that principle would be same when sale of end product yields no profit, but results in a loss, only in such a case, relevant component, viz, disintegrated profit or loss resulting from mining operation would diminish loss if that were a profit, or add to loss if that were also a loss. No doubt, there was a further contention urged t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and went into question whether there was anything in law which prohibits/bars ascertainment of profit and loss attributable to each line of activity, where sale of final end product has resulted in profit or loss for entire venture. Contra argument raised on behalf of Revenue was rejected for reasons given in paragraph which has been quoted in decision of Delhi High Court in Orissa Cement Ltd. (supra). We have already noted statutory provisions of Section 80 IA of Act and observed that statutory provisions in fact were to contrary and stipulate computation of an eligible undertaking‟s profit or loss, even when sales/transactions were made to a related party or to same assessee, but in such cases, profits have to be computed in manner stipulated in sub-sections (10) and (8) to Section 80-IA. 13. Madras High Court in Tamilnadu Petro Products Ltd. Vs. Assistant Commissioner of Income Tax, [2011] 338 ITR 643, had an occasion to deal with Section 80 IA in a case where assessee had a electricity generation unit, which was supplying electricity to same assessee and not to third parties, observing that profits from captive consumption would be eligible, Division Bench in paragraph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see is able to save to that extent which would certainly be covered by section 80- IA(1). When such will be outcome out of own consumption of power generated and gained by assessee by setting up its own power plant, we do not find any lack of merit in claim of respondent/assessee when it claimed by relying upon section 80-IA(1) of Income-tax Act by way of deduction of value of such units of power consumed by its own plant by way of profits and gains for relevant assessment years." 14. At this stage, it would be appropriate to also notice judgment of Delhi High Court in CIT Vs. DCM Sriram Consolidated Ltd., [2010] 322 ITR 486 (Delhi), wherein explanation clause (iv) to Section 115JA of Act had come up for interpretation. The clause provided for exclusion of profits derived by an industrial undertaking from business of generation or generation and distribution of power. Revenue had raised contention one cannot earn profit by indulging in business with oneself and thus captive consumption would not be covered by explanation clause (iv) to Section 115JA. Rejecting contention and relying upon decision in case of Tata Iron and Steel Co. Ltd. (supra), it was observed:- "Based on ratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss from eligible business." 12. In view of this, we do not find any infirmity in order of learned CIT - A in holding that above sum cannot be included in book profit for taxation. Accordingly, ground numbers 3 - 6 of appeal are dismissed. 13. Ground number 7 and 8 of appeal is against claim of deduction of INR 10540000/- because of transfer from revaluation reserve while computing book profit under section 115JA of act. The learned assessing officer while computing book profit under section 115JA of act has added above sum transferred to amalgamation reserve. The learned AO was of view that sum has been transferred out of profit and loss account though said sum was never debited to profit and loss account. The learned CIT - A allowed claim of assessee. 14. The learned departmental representative relied upon order of learned assessing officer and submitted that assessee has transferred above sum, which was directly credited to amalgamation reserve instead of transferring it to profit and loss account. Therefore, claim of learned departmental representative is that learned assessing officer has made above adjustment, which is permissible according to law. 15. The learned authoris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ror company becomes general reserve of transferee company, capital of transferor company becomes capital reserve of transferee company, and revaluation reserve of transferor company becomes revaluation reserve of transferee company. However if amalgamation is in nature of „amalgamation in nature of purchase‟, then identity of reserve other than statutory reserve dealt with in paragraph 18 of Accounting standard (AS) is not reserve, amount of consideration is deducted from value of net assets of transferor company acquired by transferee company. If result of computation is negative, difference is debited to goodwill arising on amalgamation and dealt with in manner stated in paragraph number 19 - 20 of AS. If result of computation is positive, difference is credited to capital reserve. Therefore, accordingly assessee has credited such reserve to capital reserve account. According to explanation to section 115JA,(b) amount carried to any reserve by whatever name is required to be added to profit shown in profit and loss account. Here assessee has not carried to any reserve from sum credited in profit and loss account. The above sum has been credited in accordance with acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 ITD 112 (Delhi) (SB)] affirmed by Delhi High Court in CIT vs. Amway India Enterprises [2012] 346 ITR 341 (Delhi), (Refer para 6) ,CIT vs. Asahi India Safety Glass Ltd.[(2012) 346 ITR 329 (Delhi)] (Refer para 9, 10), Sumitomo Corpn. India (P.) Ltd. v. Addl. CIT [2005] 1 SOT 91 (Delhi), Para 8, Bank of Punjab Ltd. v. Jt. CIT[2002] 122 Taxman 235 (Chd.) (Mag.) ,Alembic Chemical Works Co. Ltd. v. CIT[1989] 177 ITR 377 (SC), ,Arch Finance Ltd. vs. ACIT[(2007) 165 Taxman 188 (Delhi)(MAG.)], Business Information Processing Services vs. ACIT [(2000) 73 ITD 304(Jaipur)] and ITC Classic finance Ltd. vs. DCIT [(2000) 112 Taxman 155 Mag (Cal)] Glaxo Smithkline Consumer Healthcare Ltd. Vs. ACIT [(2007) 112 TTJ 94 (Chd)], Para 44. 23. Fact shows that assessee has incurred cost of enterprise resource planning software (ERP) as per bill number 34 dated 30/9/97 of INR 9,000,000/- . Vide bill number 30/9/97 cost of implementation of above software was incurred of INR 2,600,000/-. Above two items of expenditure has been incurred by assessee in assessment year 1998- 1999 wherein coordinate bench has given a finding that these are revenue expenditure and not capital expenditure. Further, in this yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... source planning software. In view of this, there is no outright purchase in case of assessee. In view of this facts stated by assessee before us and facts before honourable Rajasthan High Court were all together distinguishable. The learned departmental representative could not show us any reason to deviate from order of coordinate bench. Accordingly following decision of coordinate bench in assessee‟s own case in earlier years, we confirm order of learned CIT - A and dismiss ground number 9 and 10 of appeal. 26. The ground number 11 of appeal is against order of learned CIT Appeal directing AO to treat sum of INR 14389000/- of interest as business income, which was correctly assessed by learned assessing officer under head income from other sources. Ground number 12 of appeal is against direction of learned CIT appeal to treat service charges of INR 2163586 as business income. The learned assessing officer on perusal of schedule of balance sheet noted that assessee has received interest income of INR 14,280,000. Such interest is on interest on inter-corporate deposits, interest on margin money, interest on state bank of India Bonds, interest on state bank of India monthly i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have carefully considered rival contention and perused orders of lower authorities. The interest income earned by assessee is on bank interest as well as on interoperates deposits. The interest was also received on income tax refund. Looking to nature of interest income shown by assessee, we do not find any reason to sustain order of learned CIT appeal. In several decisions cited before us by learned departmental representative, it is apparent that earning of interest income is not business of assessee, and also above income is also not inextricably linked with business of assessee but is altogether a different source of income which should be taxed under income from other sources only. In view of this with respect to interest income of INR 14289000/- , we hold that it is chargeable to tax as income from other sources and not as business income. Accordingly, ground number 11 of appeal of revenue is allowed. 30. Ground number 12 is with respect to service charges received by assessee of INR 2163586/- , both the parties submitted that the identical issue has been considered in the case of the assessee for assessment year 98 - 99 in assessee‟s own case. They also submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been crystallized during assessment year under appeal. Learned AO disallowed prior period expenses as same were not incurred during year but in earlier years , but did not disturb prior period income offered by assessee during year. However, claim of assessee is that such expenditure has crystallized during year. However, learned AO did not accept argument of assessee. The learned CIT - A allowed claim of assessee holding that it is not a prior period expenditure as it has been crystallized during year. 34. The learned departmental representative reiterated facts stated before learned CIT - A as well as before assessing officer and stated that merely because assessee has shown miscellaneous income pertaining to earlier years during year, it cannot be said that prior period expenditure should be also be allowed to assessee on same logic. 35. The learned authorised representative relied upon plethora of case law and stated that all these expenditure have been incurred during year as same has been crystallized during year, assessee has accepted them during year and therefore liability has accrued during year for payment of such expenditure. Therefore, they cannot be held to be prio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s devoid of any merit. It is also not acceptable that without examining facts of case that when these expenses have been crystallized, disallowance cannot be deleted. Before neither learned assessing officer nor before learned CIT appeals or before us has assessee shown that, this expenditure has been crystallized during year. Unless this is shown these expenditure cannot be allowed without verification. It is also fact that definition of prior period expenditure for companies act and definition of prior period expenditure for income tax act are different. Therefore it needs to be examined that how assessee has shown in its balance sheet prior period expenditure following companies act 1956 for preparing balance sheet according to schedule VI of companies act, and while filing return of income, it is contesting that same are not prior period expenditure. This dichotomy in argument of assessee is required to be rebutted by assessee himself before assessing officer. There has to be a categorical answer from assessee that disclosure made by it under companies act is erroneous and it is to be demonstrated by reliable evidences. Further, we also do not accept argument of assessee that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Deduction under section 35(2)(ia) Rs. 1,89,093 Rs. 3,84,35,815 38. The Ld. AO while framing assessment held that assessee is only entitled for weighted deduction under section 35(2AB) of Act amounting to Rs. 3,02,51,250 and balance deduction amounting to Rs. 81,84,565 was disallowed alleging that assessee had claimed excess deduction and same was also not certified by tax auditors in their report. The Ld. AO ignored fact that Annexure 7 to tax audit report clearly stated total capital and revenue scientific research expenditure incurred by assessee as Rs. 281,98,473 and Rs. 41,87,093 respectively. The CIT (A) allowed claim of assessee in respect of deduction claimed under sections 35(1)(i) and 35(2)(ia) observing that assessing officer has himself held that expenditure incurred u/s 35 was an allowable expenditure, but inadvertently same was not reduced from assessed income. The CIT (A), accordingly, directed assessing officer to rectify said mistake. The deduction on balance revenue/capital expenditure was claimed under sections 35(1)(i) and 35(2)(ia) as it was not in nature of expense qualifying for deduction under section 35(2AB). 39. The learned departmental represen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance of Rs. 25,48,000/- made on account of proportionate Interest on interest free advances given to sister concerns. 3. That Ld. CIT(A) has erred in law and on facts of case in reversing action of Assessing Officer who assessed interest income under head „Income from Other Source. 4. That Ld. CIT(A) has failed to consider his own order No. 77 dated 13-5-04 in case of M/s The Dhampur Sugar Mills Ltd., Dhaxnpur wherein action of Assessing Officer was upheld who assessed interest income under head „Income from Other Sources. 5. That Ld. CIT (A) has erred in law and on facts of case in directing to allow deduction u/s 80HHC on interest Income while Kerala High Court did not allow such deduction in decisions reported in 243 ITR 192, 253 ITR 553 and 262 ITR 664 and SLP filed against these order was dismissed as reported in 263 ITR 3(St-l). 6. That Ld. CIT(A) has erred in law and on facts of case in directing to allow deduction u/s 80HHC, 80HH and 80I on interest income as interest income is neither derived from Export business nor from Industrial under taking as per ratio of Hon‟ble Apex Court in decision reported in 262 ITR 278. 7. That Ld. CIT(A) has e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT - A in deleting above disallowance. The fact shows that salary for a calendar month is paid by 10th of succeeding month. The due date for payment of PF contributions would, therefore, be 15th of month following. In that view of matter, payments which have been disallowed by AO have been made within due dates (including grace period) and therefore, disallowance under section 43B and/or section 2(24)(x) read with section 36(v)(a) of Act has rightly been deleted by CIT(A). In any case, payment of employers' and employees' contribution was made before due date of filing of return. In that view of matter, there should be no disallowance under section 43B of Act as held by Hon‟ble Supreme Court in case of PCIT vs. Rajasthan State Beverages Corporation Ltd. [(2017) 84 taxmann.com 185(SC)], CIT vs. Alom Extrusions Ltd.: [(2009) 319 ITR 306], and by Hon‟ble Delhi High Court in case of CIT v. AIMIL Ltd.: [(2010) 321 ITR 508, CIT vs. SPL Industries Ltd. [(2011) 9 taxmann.com 195 (Delhi)], CIT vs. P.M. Electronics Ltd. [(2009) 177 Taxman 1 (Del)]. Further on identical issue in case of assessee for earlier year we have deleted addition/disallowance for same reasons, hen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it, which exceeds amount of advances given without charging interest, then, no disallowance can be made. 51. We have carefully considered rival contention and found that decision taken by learned CIT A in deleting above disallowance where assessee has excess of non-interest-bearing funds in form of share capital and free reserve then amount advanced allegedly without charging interest, then presumption arises in favour of assessee that above advances been given out of interest free funds and not interest-bearing funds, unless learned assessing officer prove contrary. Such view is also supported by plethora of judicial precedents. Where an assessee maintains a composite account where all receipts of business are banked and all outgoings are debited, interest free advances / non-business expenses should be presumed to have come out of profits, where profit for year exceeds interest free advances / non-business expenses. Such is also mandate of decision of honourable Supreme Court and several honourable high courts in Munjal Sales Corpn. vs. CIT [(2008) 298 ITR 298 (SC)](Para 17) , CIT v. Reliance Utilities and Power Ltd. [(2009) 313 ITR 340 (Bom.)](Para 10), CIT v. Tin Box Co. [(20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure is revenue in nature. Therefore, for similar reasons we dismiss ground number 8. 55. Ground number 9 is with respect to disallowance made by learned assessing officer of INR 50471311/- for interest paid on loans utilized in expansion and modernization of existing business which was deleted by learned CIT - A. Both parties agreed that this is identical to ground no 8 f for AY 2000-01 decided . the ld AR also stated that aforesaid issue is squarely covered in favour of assessee vide order dated 22.02.2015 passed by Hon'ble Tribunal in assessee's own case for assessment year 1998-99 bearing ITA No. 4307 & 4409/De1/2003, wherein Tribunal, under identical circumstances, has upheld order of CIT(A) deleting impugned addition/ disallowance. Prior to its decision, Coordinate bench noted fact that moneys were borrowed for modernization and productivity improvement of an existing business and also fact it is not case of Ld. AO that borrowed money was used for other than modernization and productivity improvement purposes. Coordinate bench relied upon decision of Hon‟ble Supreme Court in case of DCIT vs. Core Health Care Limited [(2008] 298 ITR 194 (SC), (Para 11 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reated by learned assessing officer as capital expenditure incurred by assessee of consultancy fees paid. During year, assessee paid Rs. 65 lakhs as consultancy fee to M/s. Shinning Strategic Identity (P) Ltd. Such expenses were incurred for services provided by said company to assessee in respect of developing its corporate and brand identity, therefore this has been claimed as revenue expenditure. The Ld. AO disallowed deduction for aforesaid amount on ground that assessee has got benefit enduring in nature which is going to last for years to come and is thus expenditure of capital nature. The Ld. CIT(A) reversed order of AO. 59. Learned departmental representative vehemently stated that learned CIT - A has held that these expenditure are revenue in nature whereas these are brand building expenditure and brand is a capital expenditure on which depreciation is allowable. He therefore submitted that order of learned CIT - A is not sustainable. 60. The learned authorised representative stated that there is no error in order of learned CIT - A. He submitted that above expenditure are advertisement expenditure incurred by assessee for developing its corporate brand identity such as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fees for loans swaps and interest arbitrage expenses. 63. Heard rival contentions. Facts shows that assessee incurred expenses of Rs. 4,49,91,662/- being upfront fees paid for swap of high interest bearing loans for low cost borrowings. The Ld. AO allowed only 1/5th of entire expenditure i.e. Rs. 89,98,332/- as per provisions of section 35D of Act and disallowed Rs. 3,59,93,330/-. The Ld. CIT(A) allowed deduction for expenditure stating that payments were not made for activities as specified under section 35D but had been incurred to change over high cost loans to low cost loans. The expenditure on upfront fees for loan swap and interest arbitrage expenses is in nature of "interest" as defined in section 2(28A) of Act. Such interest has to be allowed on payment basis in terms of 43B(d) and (e) of Act. The definition of interest as per section 2(28A) of Act is very wide and it categorically covers „upfront fees‟ by referring to phrase "any service fee or other charge in respect of moneys borrowed or debt incurred or in respect of any credit facility which has not been utilized . Similar question came before Hon‟ble Delhi High Court in case of CIT vs. Gujarat Guard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before learned Commissioner of Income Tax Appeals, Bareilly, who passed an order dated 2/2/2006 against which both parties are aggrieved and have preferred appeal before us. 67. The assessee has raised following grounds of appeal ITA No. 1271/Del/2006 for Assessment Year 2002-03:- "1. That learned CIT-A had erred on facts and in law in not allowing reduction of profits eligible for deduction u/s 80HHC amounting to Rs. 1,13,81,193/- in computation of book-profits u/s 115JB of Act. 2. The ld CIT (A) erred on facts and in law in upholding disallowance of a sum of Rs. 1,89,277/- on account of Technical Know how fee u/s 35AB(i) of I.T. Act, 1961. 3. That learned. CIT-A had erred on facts and in law in upholding disallowance of club expenses of Rs. 48,751/-. 4. That learned. CIT-A had erred on facts and in law in upholding addition of a sum of Rs. 2,31,000/- being notional interest on refundable deposits made to clubs. 5. That learned CIT-A had erred on facts and in law in upholding disallowance of a sum of Rs. 5,16,339/- u/s 35D as claimed by appellant and allowed by AO in earlier years.. 6. That learned CIT-A had erred in law in assessing long term capital gains of Rs. 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ets, vehicles and from railways in absence of these details to plug pilferage loopholes. 6. That order of Ld CIT(A),Bareilly being erroneous may be cancelled and order of Assessing Officer lie restored." 69. 1st we take up appeal of assessee. The 1st ground of appeal is against order of learned CIT - A who did not allow deduction of profits eligible for deduction under section 80 HHC amounting to INR 1 1381193/- in computation of book profit under section 115 JB of income tax act. 70. After hearing parties on issue, fact shows that, during captioned assessment year, Appellant in its return (revised)claimed an amount of Rs. 1,13,81,193/- being eligible for deduction under 80HHC of Income-tax Act, 1961 for computing book profits under section 115JB of Act. However, said deduction under section 80HHC of Act was not claimed under normal provision of Act due to set off of brought forward business loss. While claiming deduction under 115JB of Act, Appellant disregarded trading loss amounting to Rs. 6,130 and calculated deduction of 90% of export incentives amounting to Rs. 9,74,06,810. The Appellant thereafter, pro-rated said amount based on adjusted export turnover to adjusted total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction under 80HHC of Act for purpose of section 115JA of Act. Further, Hon‟ble Supreme Court in case of CIT vs. Bhari Information Technology Systems (P.) Ltd. [2012] 340 ITR 593 (SC) upheld ruling of Special Bench Mumbai ITAT in case of DCIT & Ors. Vs. Syncome Formulations India Ltd.[2007] 13 SOT 414 (Mumbai) (SB) wherein in para 61 it was held that computation for deduction under section 80HHC needs to be worked out on basis of adjusted book profits for purpose of section 115JB of Act. The Hon‟ble Supreme Court in case of Ajanta Pharma Ltd. vs. CIT 327 ITR 305 held that for purpose of section 115JB of Act that 100% export profits are „eligible profits‟ for deduction and same cannot be reduced to 80% by relying on section 80HHC (1B) of Act. Considering aforesaid two propositions, Appellant has recomputed deduction under section 80HHC of Act for purpose of section 115JB of Act to be Rs. 55,184,948. From bare perusal of aforesaid computation and Profit & Loss Account of Appellant, it is patently apparent that there are no losses and therefore, Ld. AO‟s reliance on IPCA Lab (Supra) and Rohan Dyes (Supra) is clearly misplaced. Even otherwise, if Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome Tax Act before learned Assessing Officer. The learned AO after examination, in view of above judicial precedents, allow claim of assessee, if it is found in accordance with law. Accordingly, ground number 1 of appeal of assessee is allowed. 74. The assessee did not press ground number 2 and same is dismissed. 75. The 3rd ground of appeal is with respect to disallowance of club expenses of INR 48751/-. The fact shows that during year appellant has made certain payment to various clubs, which was disallowed by learned assessing officer holding that it is not for purpose of business of assessee. The learned CIT - A also upheld disallowance holding that assessee being a corporate body is not capable of utilizing club facilities itself. 76. On hearing parties, it was noticed that above issue is squarely covered in favour of assessee by order of coordinate bench for assessment year 2001 - 02 in case of assessee wherein it has been held that club expenses are in nature of business expenditure and therefore allowable to appellant relying on decision of honourable Bombay High Court and Gujarat High Court. The honourable Supreme Court has also held in CIT vs. United Glass manufactur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be allowed. 81. The learned departmental representative vehemently contested claim of assessee and submitted that according to provisions of section 35D of act no such deduction can be allowed to assessee and further assessee could not furnish nature of expenditure and its details and therefore disallowance made by lower authorities needs to be confirmed. 82. We have carefully considered rival contentions and find that assessee‟s claim is under section 35D of income tax act is not allowable. On careful analysis of provisions of section 35D of income tax act, it is apparent that such expenditure are allowed in case of commencement of business of assessee in connection with extension of his undertaking or in connection of setting up of a unit. There is no provision that expenses are allowable in case of amalgamation. Argument of assessee that in earlier years if same has been allowed it should be allowed in this year too, it needs to be rejected. To perpetuate an error is no heroism, to rectify it is the compulsion of judicial conscience. In result ground, number 5 of appeal of assessee is dismissed. 83. Ground number 6 of appeal is against treatment given to long-ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Long-term capital gain on Rs. 10,84,316/-. The Ld. AO observed that rights relinquished vide relinquishment deed emanated from agreement entered on Jan 6, 1997 and that no rights were created from agreement dated Jan 3,1987. Further, advance was paid for proposed building and not for right in such proposed building concluding that transferred rights only arose in 1997 and indexation for purposes of computation of capital gain shall be done from AY 1997-98. Thereafter, Ld. AO contended that there is absence of correct bifurcation of cost of acquisition of rights. He noted Appellant‟s inability to provide cost of acquisition of rights in proposed building and treated 10% of advance given of Rs. 67,82,966 i.e. 6,78,296 on ad-hoc basis as cost of acquisition. 84. The Ld. CIT(A) observed that- Since in 1989, there was no land with RBPPL it could not have transferred any rights in any building to Appellant. The first agreement of 1989 appears to be an adventure in area of construction activity by Appellant. The agreement of 1989 was merely drawn up to safeguard money advanced by Appellant to RBPPL since it did not specify number of flats, size, cost etc. The genuineness of agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by CIT(A) could not have transferred rights in apartments prior to it acquiring same. RBPPL was allotted said land by Ghaziabad Development Authority („GDA‟) on July 8, 1991. Accordingly, there was no firm plan on number of flats, cost, size etc. The Ld. CIT(A) ought to have appreciated that a construction plan and drawings need approval from GDA and therefore, an agreement regarding number of flats, size, cost etc. was not possible before any draft construction plan was prepared. (d) The Ld. CIT(A) could not have doubted genuineness of agreement and letter dated Jan 6, 1997 for reason that while letter mentioned optimistic estimate of time needed for flat construction whereas agreement provided for a legally binding time available to RBPPL for completion of flat construction. Therefore, both operate in different areas and do not contradict each other. (e) The Ld. CIT(A) is patently wrong in stating that right in a land which is not free from encumbrances could not have been transferred by RBPPL. The clause 20 of agreement dated Jan 6, 1997 states that RBPPL "are fully empowered to carry out activities proposed in this agreement" and also "assures that same (sic la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital asset coming into existence which can result into short-term capital gain or long-term capital gain to assessee. He therefore submitted that income has been correctly taxed as income from other sources. 90. We have carefully considered the rival contentions and perused the orders of the lower authorities. During the previous year the appellant company received a sum of INR 1 6250000/- from Rajshree builder and promoter‟s Private Ltd. The genesis of the above receipt shows that on 3/1/1989 the assessee and the above company entered into an agreement where under the assessee obtained right to purchase of residential apartments proposed to be constructed by the above company on the land situated in Ghaziabad. Surprisingly in the terms of the said agreement there is no reference to the number of apartments that would be purchased by the assessee also the purchase price. It was decided that it can be mutually agreed between the parties. The assessee made an advance payment of INR 4,800,000 in 90 - 91 and further INR 1,982,000 in 94-95. Therefore a total sum of INR 6 782966 was paid up to assessment year 95-96. Further it is stated that on 6/1/1997 that is after 8 years of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 to the above company. Further it was not known whether the assessee company also identified the area on which the above lakhs were constructed. Therefore it is highly improbable that a person would agree to buy a property without all these factors being known to him. It is also apparent that assessee is usually earning very high sum as interest on intercorporate deposits. Further more on 6/1/1997 the area and the number of flats were quantified and identified. However, the assessee was paid the above sum of INR 16,300,000 and assessee did not agree with some of the terms and conditions. There is no identification of all those terms and condition put by Rajshree builder is private limited which were not acceptable to the assessee. Further it is argued by the learned authorised representative that section 2 (14) of the act defines the capital asset which means property of any kind held by an assessee. The learned authorised representative vehemently stated that assessee has obtained right to obtain the conveyance deed of 65flats and therefore such is the right available to the assessee which is a capital right and on transfer of the same the assessee is difference of the considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer as capital expenditure. Both parties submitted that it is identical to ground number 8 in Department‟s appeal for assessment year 2000-01. On careful consideration of arguments of assessee and learned departmental representative, on perusal of facts for year, following order of coordinate bench in assessee‟s own case for 98 - 99, as held by us in ground number 8 of departmental appeal for assessment year 2000-01 for similar reasons we also dismiss ground number 3 of appeal of AO. 96. Ground number 4 is with respect to disallowance of prior period expenses of Rs. 7702730/- debited by assessee in profit and loss account. Both parties submitted that it is identical to ground number 16 of departmental appeal for assessment year 2000 - 01. After hearing parties, on careful consideration of facts for year, and for reasons stated by us by disposing of ground number 16 of departmental appeal for assessment year 2000 - 01, we also set aside this ground of appeal back to file of learned assessing officer with similar directions. Accordingly, ground number 4 of appeal of learned assessing officer is allowed with above direction. 97. Ground number 5 of appeal is with respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 2002 - 03 is partly allowed with above directions. ITA No 2815/Del/2008 Ay 2003-04 By Assessee 101. The brief fact shows that assessee filed its return of income on 27/11/2003 declaring total income of Rs. nil as per normal computation but book profit was declared at INR 359527137 under provisions of section 115JB of income tax act 1961. Assessment under section 143 (3) of income tax act 1961 was passed on 31/3/2006 determining total income of assessee at Rs. at Rs. nil for normal computation but book profit under section 115JB of act were determined at INR 375550511/-. Therefore, assessee aggrieved with order of learned AO preferred an appeal before learned CIT - A who passed an order on 25/06/2008 partly allowing appeal of assessee. Therefore, assessee aggrieved with order has preferred an appeal before us. 102. The assessee has raised following grounds of appeal. ITA No. 2815/Del/2008 for Assessment Year 2003-04:- "1. That learned CIT(A) has erred on facts and in law in upholding interest income of Rs. 2,88,50,000/- as „Income from other sources‟ instead of „Income from business‟ as claimed by appellant. 2. That learned CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecided in case of assessee for assessment year 2001 - 02 wherein it has been held that income from utilities is income from business of assessee as it is inextricably linked therewith. Accordingly, we called for this year too that income of Rs. 2192000/- from utilities is chargeable to tax as income from business and not income from other sources. Accordingly, ground number 2 of appeal of assessee is allowed. 108. Accordingly, ITA number 2815/del/2008 filed by assessee for assessment year 2003 - 04 is partly allowed. AY 2004-05 ITA No 3104/del/2008 ( By Assessee) ITA No 3242/Del/2008 ( By AO ) 109. Assessee company filed its return of income on 31/del/2004 declaring income of INR 229839523/- as per normal computation of total income whereas under section 115 JB of income tax act total income was shown at INR 8 00530189/-. Assessment under section 143 (3) was passed on 27/12/2006 computing total income at INR 376910037/-. The assessee aggrieved with order of learned assessing officer preferred an appeal before learned CIT - A who passed an order on 24/7/2008 partly allowing appeal of assessee. Therefore, both parties are aggrieved and hence they are in appeal. 110. The asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee is not inextricably linked with business of assessee but is interest income earned from fixed deposit receipts, inter corporate deposits, staff etc. , hence, same was held to be income from other sources. For similar reasons we also hold that interest income of INR 15738220/- earned by assessee is chargeable to tax as income from other sources. Accordingly, ground number 3 of appeal is dismissed. 113. Ground number 4 is with respect to treating income from utilities of Rs. 2440000/- as income from other sources instead of income from business. 114. Ground number 5 is with respect to treatment of processing charges of INR 2061378/- as income from other sources instead of income from business as claimed by appellant. This issue is decided in favour of assessee in appeal for assessment year 2001 - 02 wherein it has been held that service charges earned by assessee is inextricably linked with business of assessee and therefore it should be chargeable to tax has business income and not as income from other sources. Therefore following decision in assessee is a own case we also hold that processing charges received by assessee of INR 2 061378/- is chargeable to tax as income from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illy has erred in law and circumstances in allowing benefit of deduction u/s 80IA of profits derived from business off generation of power. Departmental appeal on this issue is pending decision before ITAT in Assessment Year 2000-01. 121. The ground number 1 of appeal of revenue is with respect to holding that expenditure incurred by assessee on account of books and periodicals as revenue expenditure by learned CIT - A whereas learned assessing officer has held them to be of capital nature. Identical issue is decided in case of assessee for assessment year 2000-01 in ground no 13 wherein it has been held that books and periodical expenditure incurred by assessee are revenue in nature. Therefore, for similar reasons we also dismiss ground number 1 of appeal of learned AO and hold that that expenditure incurred on account of books and periodicals are revenue in nature. 122. Ground number 2 is with respect to disallowance of prior period expenses made by learned assessing officer which was allowed by learned CIT - A. The identical issue has been decided by us in appeal of revenue for assessment year 2000-01 in ground no 16 of AO wherein we have set aside whole issue back to file of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue has been decided in assessment year 2000-01 in assessee‟s own case wherein it has been held that club expenditure incurred by assessee are for purposes of business and therefore for same reason club refundable deposit is also for purposes of business. Both disallowances were deleted. Therefore, for similar reason we allow ground number 1 and 2 of appeal of AO. 128. Accordingly, appeal of assessee in ITA number 3724/del/2009 for assessment year 2005 - 06 is allowed. 129. The revenue has filed appeal before us raising following grounds of appeal i. Commissioner of income tax appeal, Bareilly has and in law and circumstances in allowing relief of INR 253301 5/- on account of out of books and periodical is. The departmental appeal on this issue is pending decision before ITAT in assessment year 2004 - 05. ii. The Commissioner of income tax appeal, Bareilly has erred in law and circumstances in allowing relief of INR 143310/- national disallowance out of loss in transit, departmental appeal on this issue is pending decision before ITAT in assessment year 2004 - 05. iii. The Commissioner of income tax appeal, Bareilly has erred in law and in circumstances in all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat assessee is eligible for deduction under section 80 IA on profits derived from business of generation of power. 134. Accordingly, ITA number 3920/del/2009 for assessment year 2005-06 filed on 18/11/2009 by learned Deputy Commissioner Of Income Tax, Circle - 1, Moradabad is partly allowed. ITA No. 3314/Del/2010 & ITA No. 3393/Del/2010 Assessment Year 2006-07 135. For assessment year 2006 - 07 assessee filed its return of income showing total income of INR 405801150/-. The assessment under section 143 (3) of act was passed on 24/12/2009 determining total income of assessee at INR 426513168/- wherein several disallowances/additions were made and certain claims of assessee were rejected as they were not made in original return of income but also same were not made in revised return. The assessee aggrieved with order of learned AO preferred an appeal before learned CIT - A, Bareilly who passed order dated 26/3/2010 partly allowing appeal of assessee. Therefore, both parties are in appeal before us. 136. The assessee has raised following grounds of appeal in ITA No. 3314/Del/2010 for Assessment Year 2006-07:- 1. That learned CIT(A) erred on facts and in law in upholding d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng officer has held that such expenditure is relatable to earning of exempt income and does not form part of total income and are not entitled to be deduction. The simple issue involved in this appeal is disallowance u/s 14 A of income tax act. The fact shows that appellant in assessment year has earned dividend income amounting to INR 2 39648/- which was exempt u/s 10 (34) of act. The learned assessing officer made disallowance holding that there are certain expenses on account of interest etc. Which are directly attributable to exempt income. Accordingly he computed disallowance on account of interest of INR 3 232926/- and also made disallowance of 0.5% of average investment of INR 1629602/- on account of other expenditure. Therefore, total disallowance of INR 4862528/- was made. The above issue is contested by assessee before learned CIT - A which was dismissed. Therefore, assessee is in appeal before us. 140. The learned authorised representative submitted that Ld. AO had no basis to disallow whole of interest expenditure under Section 14A of Act. The Ld. AO while proposing to disallow expenditure under section 14A of Act read with Rule 8D of Rules has no cogent reasons for re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in present case. He further stated that the Appellant had sufficient own funds to extent of Rs. 824,45,60,000 for making any investments. This is evident from Page 154 of Paper book wherein Appellant has provided details of investments made and surplus fund of Appellant. Further, in Schedule F of Balance Sheet details of investment made by Appellant has been enumerated. This makes it abundantly clear that all dividend-earning investments were made out of owned funds. The increase in investments during relevant assessment year was on account of foreign investments, income from which was already offered to tax. It is further submitted that it is an accepted position that if sufficient interest free funds are available with company then there is a presumption in favour of assessee that investments are made out of such interest free funds. The Appellant places reliance on decision rendered by Hon‟ble Bombay High Court in case of CIT vs. Reliance Utilities & Power Ltd.[2009] 178 Taxman 135 (Bombay) to support above proposition, Hon‟ble Bombay High Court had held as under: "10. If there are funds available both, interest-free and overdraft and/or loans are taken, then a pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e submitted that satisfaction has been recorded by AO. 142. We have carefully considered rival contention and found that during year assessee has earned exempt income of INR 2 339648/-. The learned AO Disallowed expenditure of interest of INR 3 232926/-. The claim of assessee is that assessee has sufficient own funds to extent of INR 8244560000/- for investment in exempt income generating investments. On careful examination of the disallowance made by the learned assessing officer it was found that the learned AO has not recorded the satisfaction on examination of the books of accounts of the assessee that assessee has incurred expenditure for earning of exempt income and the explanation given by the assessee is incorrect. Such is the mandate of the decision of the honourable Supreme Court in case of 402 ITR 640. In view of this, the disallowance made by the learned assessing officer cannot be sustained. Therefore orders of the lower authorities are set aside and the AO is directed to delete the disallowance u/s 14 A of the income tax act. Therefore, ground number 3 of the appeal of the assessee is allowed. 143. Ground number 4 of the appeal is against upholding the disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning accounts on the mercantile basis. * Hindustan Gum & Chemicals Ltd. vs. ITO [2008] 23 SOT 143 (Kolkata), (Refer Para 7.3) * Saurashtra Cement and Chemical Industries Ltd. CIT [(1995) 213 ITR 523 (Guj)], Para 10 * CIT v. Shriram Piston & Rings Ltd.[(2008) 220 CTR 404 (Del.)], Para 7, 9, 17 * Toyo Engg India Ltd vs. JCIT [(2006) 100 TTJ 373 (Mum.)] (Refer Para 15, 17) * Essar Steel Ltd. v. DCIT: [(2005) 97 ITD 125 (Ahmd.) (TM)], Refer para 45) * Goetze (India) Ltd. v. DCIT: 112 TTJ 1 (Del.), Para 23, * CIT vs Jagatjit Industries Ltd. [() 194 Taxman 158 (Del), Para 16 * SMCC Construction India Ltd. vs. ACIT [(2014) 220 taxman 354 (Del), para 13 * Sutna Stone & Lime Co. Ltd. vs. CIT [(1991] 192 ITR 478 (Calcutta)], Para 5 * ITO v. Infratex Engg. Co. [(1990) 38 TTJ 551 (Del.), Para 9 * Ericsson India Pvt. Ltd. vs. Addl. CIT [ITA No. 760/Del/2006], para 16 * CIT vs. Excel Industries Ltd. [(2013) 358 ITR 295 (SC)], Para 32, * CIT vs. Vishnu Industrial Gases Pvt. Ltd. [ITR No. 229/1988 (Del)], Para 3, 4 145. The learned departmental representative payment is supported the orders of the lower authorities and stated that when the assessee has not made any claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified machineries, equipments and facilities. The manufacturing agreement was to expire on 30/4/2008 agreed to place order for minimum quantities of the specified products and pay the agreed price for the same. The assessee company in terms of manufacturing agreement set up the new manufacturing facility after making a capital investment of approximately 20,00,00,000. However, the Ranbaxy did not place orders for manufacturing of the minimum quantities and therefore assessee reached on a settlement agreement on 02/06/2006 with Ranbaxy according to which it was to receive INR 72173000 from that company. Part of the above sum INR 3 6520000/- was credited to the profit and loss account on accrual basis and the balance sum was shown as receivable in the next year. The learned assessing officer disallowed the claim, as it was not there in the original return of income. The assessee preferred appeal before the learned CIT - A. The learned CIT appeal also following the decision of the honourable Supreme Court did not entertain the claim of the assessee; therefore, assessee is in appeal. 148. The Ld Authorised representative submitted that i. Appellant engaged in the business of drug di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me claiming such deduction. Hence, the claim of the Appellant is not admissible. iv. The Ld. CIT(A) concurred with the findings of the Ld. AO and dismissed the ground of appeal stating that the assessee cannot raise a new ground of appeal which has not been raised in the return of income after relying on decision of Goetze (India) Ltd. vs. CIT (284 ITR 323). v. The Appellant hereby submits that the case of Hasimara (Supra) is distinguished on the facts that if loss incurred on a capital asset is treated as a capital loss, if any profit or income is incurred on such capital asset, it can be termed as capital income and hence, the case supports the proposition of the Appellant rather than supporting the Ld. AO. vi. It is pertinent to note that in the case of Goetze (India) Ltd. the Hon‟ble Supreme Court went on to hold that the assessee was not allowed to raise a new claim before such assessing authority. However, it was made clear that the issue in this case was limited to the power of the assessing authority and did not impinge on the power of the Income-tax Appellate Tribunal under section 254 of the Income-tax Act, 1961. vii. In the instant case, the Appellant did n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or capital receipt. Accordingly, ground number 5 of the appeal is allowed with above direction. 151. Accordingly, appeal of the assessee is partly allowed. 152. The revenue has raised following grounds of appeal in ITA No. 3393/Del/2010 for Assessment Year 2006-07:- "1. The Commissioner of Income tax (Appeal), Bareilly has erred in law and circumstances in allowing relief of Rs. 40,13,830/- on account of out of books and periodicals. Departmental appeal on this issue is pending decision before ITAT in Assessment Year-2005-06 and earlier assessment years. 2. The Commissioner of Income tax (Appeal), Bareilly has erred in law and circumstances in allowing relief of Rs. 2,80,650/- national disallowance out of loss in transit. Departmental appeal on this issue is pending decision before ITAT in Assessment Year-2005-06 and earlier assessment years. 3. The Commissioner of Income tax (Appeal), Bareilly has erred in law and circumstances in allowing benefit of deduction u/s 80 IA on profits derived from business off generation of power and deleting addition of Rs. 1,11,32,334/- made on this account. Departmental appeal on this issue is pending decision before ITAT in Assessment Yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owable to assessee u/s 80 IA on profits derived from business of generation of power claimed by assessee of INR 11132334/-. The claim was allowed by learned CIT - A. The parties confirmed before us that identical issue has been decided in assessee‟s own case for assessment year 2001 - 02 wherein claim of assessee was also dealt with lower authorities in similar manner. 158. We have carefully considered rival contention and found that identical issue has been decided by us by this order for assessment year 2001 - 02 in ground number 4 of appeal of learned assessing officer wherein we have held that assessee is entitled for deduction u/s 80 IA of income tax act on power generation unit installed by assessee. Therefore for similar reasons we dismiss ground number 3 of appeal of AO and direct him to grant deduction of INR 1 1132334/- under section 80 IA of income tax act being profits derived from business of generation of power. 159. Accordingly, ITA number 3393/del/2010 filed on 6/7/2010 by learned assessing officer for assessment year 2006 - 07 is dismissed. ITA No. 2479/Del/2011 (Assessee) & ITA No. 2596/Del/2011 (by AO) Assessment Year 2007-08:- 160. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by assessee is for purpose of business of assessee therefore no disallowance can be made. Therefore, following decision in assessee‟s own case for earlier years we also direct learned assessing to delete disallowance involved in ground number 1 of appeal. Accordingly, ground number 1 of appeal of assessee is allowed. 164. Second ground of appeal is against the disallowance of expenditure u/s 14A of INR 6695714/- holding that the same is relatable to earning of exempt dividend income that does not form part of total income and are not entitled to deduction. The learned assessing officer noted that assessee has shown income on account of dividend, which does not form part of total income, but there are certain expenses with regard to interest et cetera, which are directly attributable to the exempt income. Therefore he disallowed INR 6 695714 allocating interest to the exempt income with respect to the average investment and the average total assets of the assessee. He also disallowed 0.5% of average investment as other expenditure. The assessee preferred appeal before the learned CIT - A and submitted that assessee has earned dividend of Rs. 2656631/- which is exempt u/s 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the disallowance. 169. The learned authorised representative vehemently submitted that the details of the expenditure are at page 203 of the paper book. The expenses crystallized / became known for the first time during the relevant previous year on claims / bills being received. Even though such expenses pertained to earlier years, deduction for the same needs to be allowed in the year under appeal. Reliance is placed on the following decisions wherein, it has been held that merely because an expense relates to a transaction of an earlier year it does not become a liability payable in the earlier year unless it can be said that the liability was determined and crystallized in the year in question on the basis of maintaining accounts on the mercantile basis. * Hindustan Gum & Chemicals Ltd. vs. ITO [2008] 23 SOT 143 (Kolkata), (Refer Para 7.3) * Saurashtra Cement and Chemical Industries Ltd. CIT [(1995) 213 ITR 523 (Guj)], Para 10 * CIT v. Shriram Piston & Rings Ltd.[(2008) 220 CTR 404 (Del.)], Para 7, 9, 17 * Toyo Engg India Ltd vs. JCIT [(2006) 100 TTJ 373 (Mum.)] (Refer Para 15, 17) * Essar Steel Ltd. v. DCIT: [(2005) 97 ITD 125 (Ahmd.) (TM)], Refer para 45) * Goet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... towards breach of contract for setting up the plant is not a capital receipt. The brief fact shows that assessee has credited the above amount in the profit and loss account but during the proceedings, it has been claimed that the said amount is of the nature of capital receipt. The learned assessing officer did not admit the claim of the assessee relying on the decision of the honourable Supreme Court in 284 ITR 323 stating that assessee cannot claim any deduction unless revised return of income claiming such deduction is filed by it. He also followed the same line of decision as he took for assessment year 2006 - 07. The assessee contested the same before the learned CIT - A unsuccessfully. Therefore this ground. 173. The learned authorised representative submitted that identical ground number 5 is in the appeal of the assessee for assessment year 2006 - 07 and the facts have been narrated therein. He submitted that his arguments are also similar. 174. The learned departmental representative also agreed and stated that his arguments are also similar as made in that ground of appeal for assessment year 2006 - 07. 175. We have carefully considered the rival contentions and foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by this order wherein we have allowed claim of assessee of books and periodicals expenditure holding it to be revenue expenditure confirming order of learned CIT - A, therefore, for similar reason we also hold for this year that INR 2321594/- incurred by assessee on account of books and periodicals is revenue expenditure. Accordingly, ground number 1 of appeal is dismissed. 180. Ground number 2 of appeal is with respect to deletion of addition made by learned CIT - A of Rs. 85988/- - as notional disallowance out of loss in transit with respect to insurance claim received by assessee. During year, assessee has received a sum of Rs. 859988/- on account of insurance claim in respect of various losses incurred. The learned assessing officer made addition of 10% of such claim to total income of assessee. It was deleted by learned CIT - A and therefore learned AO is in appeal. 181. Both parties confirmed that identical issue has been decided in case of assessee for assessment year 2004 - 05 wherein identical addition was made by learned assessing officer was deleted by learned CIT - A. There is no change in facts and circumstances of case. In case of assessee for assessment year 2004 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in law in upholding disallowance of club expenses of Rs. 1,60,264/- by holding that same has not been incurred for purpose of business of appellant company. 2. That ld CIT(A) erred on facts and in law in upholding disallowance of expenditure of Rs. 27,92,587/- by holding inter-alia that these expenses are not relatable to year 2008-09." 187. First ground of appeal is with respect to confirmation of disallowance of club expenses of INR 1 60264/- as held by the lower authorities that these expenses are not incurred for the purposes of the business. Both the parties submitted before us that identical issue has been covered in appeal for assessment year 2002 - 03 wherein while deciding ground number 3 and 4 of the above appeal the issue was decided. On careful analysis and verification of the details it was found that above issue has been considered by us in assessment year 2002 - 03 in appeal of the assessee wherein we have held that the club expenses incurred by the assessee are for the purposes of the business and therefore allowable. Accordingly, ground number 1 of the appeal is allowed. 188. Second ground of appeal is with respect to the disallowance of prior period expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07539/- by the learned assessing officer holding them as capital expenditure whereas the assessee has claimed it to be revenue expenditure. The learned CIT - A allowed the claim of the assessee. Both the parties agreed that identical issue has been considered in the appeal for assessment year 2000 - 01 in ground number 13 of the appeal. Their arguments, the facts of the case were also stated to be identical. Vide ground number 13 of appeal for assessment year 2000 - 01 we have held that the books and periodical expenditure are revenue in nature. For similar reasons we dismiss ground number 1 of the appeal. 193. Ground number 2 of the appeal is with respect to the disallowance of deduction u/s 80 IA of the act of INR 3 02747766/-. Both the parties explained that above issue has already been considered in the earlier appeals of the AO, which are heard together. They also submitted that there is no change in the facts and circumstances of the case as well as in their arguments. In the case of the assessee, we have already allowed the claim of the assessee u/s 80 IA of the income tax act with respect to the generation of power. Therefore for the similar reasons and in absence of any c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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