9911796707
TMI Blog2005 (2) TMI 748X X X X Extracts X X X X X X X X Extracts X X X X ..... 94-95; and so the same was rightly set off in assessment year 1994-95 and in turn, the said notional unabsorbed depreciation amount of Rs. 3.66 crores, could not be carried forward in assessment year 1995-96 so as to deduct the same from the eligible profit of Kurkumbh unit in assessment year 1995-96 for the purpose of computing deduction under section 80-IA. Thus, we find no fault with the impugned order of ld. CIT(A) in directing the Assessing Officer not to reduce the amount of Rs. 3.66 crores as unabsorbed depreciation from the eligible profits of Kurkumbh unit while computing deduction u/s 80-IA for assessment year 1995-96. We, therefore, decline to interfere with the same on this count. Following the judgment of the Hon ble Apex Court of India in the case of Tata Iron Steel Co. Ltd. v. State of Bihar [ 1962 (9) TMI 49 - SUPREME COURT] , we are of the considered view that whatever principle the assessee may have adopted in the cost audit records for value of captive or internal transfers, such transfers, will have to be assigned a commercial value in terms of sub-section (9) of section 80-IA. We agree with the view has been held by the ld. CIT(A) that is the more appropriate m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the purpose of deduction u/s 80-IA is the same in all the three years in respect of Kurkumbh and Patalganga II, the eligible units, as also the ineligible/other units; and ld. CIT(A) has accepted the method of computation of eligible profit in assessment year 1995-96 and which we have upheld, we do not find any valid reason for CIT(A) to differ in subsequent years 1996-97 and 1997-98. Therefore, the order of CIT(A) is modified in the manner that we direct the Assessing Officer to allow deduction u/s 80-IA in accordance with the computation submitted by assessee except with regard to ground No. 2( c ) in assessment year 1996-97 and ground Nos. 1( c ) and 1( d ) in assessment year 1997-98, which were not pressed and subject to verification of OS income as directed by us above. Thus ground No. 1 in revenue s appeal for assessment years 1996-97 and 1997-98 comprised in issue No. 1 tabulated above, together with ground Nos. II and I in assessee s appeals for assessment years 1996-97 and 1997-98 respectively, comprised in issue No. 2 in assessee s appeals, stand disposed of by this decision. In the result, assessee s appeals are allowed in part as indicated above. X X X X Extracts X X X X X X X X Extracts X X X X ..... er for estimating the value of the boilers for the purpose of claim of depreciation. (vi) The ld. CIT(A) has erred in deleting Rs. 57,82,509 by holding that repairs to Machinery, building etc. are of revenue nature and fall within the purview of section 37. (vii) The ld. CIT(A) has erred in deleting the addition of Rs. 77,10,345 made by the Assessing Officer on account of unutilized Modvat credit. (viii) The ld. CIT(A) erred in deleting Rs. 42,69,617 being disallowance made by Assessing Officer on account of gift articles having no logo/name of the company. (ix) The ld. CIT(A) has erred in deleting Rs. 4,06,760 being disallowance made by the Assessing Officer on account of expenditure incurred on dry fruits etc. (x) The ld. CIT(A) has erred in deleting the disallowance of Rs. 3.5 lakhs which was made by the Assessing Officer under rule 6D. I.T.A. No. 3036/Mum./2000 for assessment year 1996-97 I. (i) On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in holding that the assessee is entitled for deduction under section 80-IA in respect of Kurkumbh and Patalganga Units on profits of Rs. 10,37,23,216 and Rs. 5,97,44,407 respectively inst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts and in the circumstances of the case and in law, the ld. CIT(A) erred in relying on the Cost Auditor's report called during appeal proceedings, which was never produced before the Assessing Officer during assessment proceedings and thus the Assessing Officer was precluded from making his submissions on the said Cost Auditor's report. 2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting an addition of Rs. 3,19,40,657 made by the Assessing Officer on account of unutilized Modvat credit. 3. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the disallowance of Rs. 3,50,000 made by the Assessing Officer under rule 6D on account of incidental expenses on tour. 4. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the disallowance of Rs. 2,65,677 on dry fruits boxes and sweets to staff on festival and Rs. 92,896 on account of gifts which were made by the Assessing Officer under Rule 6B of the I.T. Rules. Assessee's Appeal I.T.A. No. 3057/Mum./2000 for assessment year 1996-97 1. The CIT(A) erred in confirming the decision of the DCIT, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g calculated on the basis of each trip instead of accepting the figure of disallowance submitted by the appellant at Rs. 4,96,676 being the disallowance calculated on the basis of all the trips taken together by an employee in the year of account. 8. The CIT(A) erred in following the order of his predecessor for assessment year 1995-96 in restoring to the DCI the issue of depreciation claim on two boilers purchased by the appellants from M/s. Triveni Engg. Works Ltd. and subsequently leased back to them. 9. The CIT(A) erred in confirming the addition of Rs. 25,00,000 being freight element to be included on closing stock of finished goods lying at depots. I.T.A. No. 4731/Mum./2000 for assessment year 1997-98 1. The CIT(A)-XV, Mumbai erred in quantifying the profits of the eligible undertaking for purpose of section 80-IA deduction at Rs. 36,52,22,757 as against Rs. 50,35,66,605 claimed by the appellant and sustainable as per order of the CIT(A) for the assessment year 1995-96. Without prejudice to the generality the CIT(A) further erred in : (a) Adopting the rates of captive transfers on the basis of or derived from the realizations from exports, which, as per the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to ground No. 1 in assessment year 1997-98, which was not specifically mentioned in the said main grounds; and the same are as under : In assessment year 1996-97 "d. holding as per page 40, para 4.27 of the appellate order, that actual sale price wherever available will represent market price." In assessment year 1997-98 "e. holding, following the appellate order for assessment year 1996-97, that actual sale price where available will represent market price." Considering the facts of the case, we admit the same and we will dispose of the same on merits since the same is only by way of elaboration of main ground of appeal and it does not require any investigation into the facts, which are not already on record. 7. In the Department's appeal before us under consideration following are the issues contained in various grounds of appeal in various years, as detailed in tabulation, which arise for our consideration : Issues in Department's appeals Issue No. Particulars A.Y. 1995-96 Ground of appl. No. A.Y. 1996-97 Ground of appl. No. A.Y. 1997-98 Ground of appl. No. 1. Deduction under section 80-IA concise ground Nos. (i) to (iv) I I 2. Lease & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) Whether unabsorbed loss of assessment years 1994-95 in specified unit can be set off before allowing deduction under section 80-IA for assessment year 1995-96. (b) Whether purchase and sale of goods by Kurkumbh unit was on market value ? 10. As regards the issue of set off of Rs. 3,66,60,505 being the depreciation allowed in respect of Kurkumbh (for short KK) Unit in assessment year 1994-95 by way of reducing the same from the eligible profit of Kurkumbh, the ld. DR has referred to para 2 on page 2 of Assessing Officer's order and contended that the assessee is a pharmaceutical manufacturing company engaged in the manufacture of bulk chemicals, pharmaceutical formulations etc. He has contended that the assessee has its manufacturing units at five places namely Bombay Central, Bangalore, Vikhroli, Patalganga and Kurkumbh. He has contended that this first aspect (set off of depreciation) in assessment year 1995-96 is related to Kurkumbh only. He has contended that in assessment year 1994-95 there was loss in Kurkumbh unit and unabsorbed depreciation of Rs. 3,66,60,505 was set off against other income of Kurkumbh Unit in assessment year 1994-95, and so at the end of assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred to page 17 PB and contended that this is letter by assessee written to department wherein the assessee has mentioned the factum of trial production at Sr. No. 4, and these details were given for claiming depreciation in assessment year 1994-95. He has contended that thus it is clear from record that in assessment year 1994-95 the production was there and so the initial assessment year is 1994-95. He has contended that the production had started in the previous year 1993-94 related to assessment year 1994-95. He has contended that the ld. CIT(A) is holding that the manufacture of article or things means the end/final product and not the intermediary product, and also that the production should be on commercial basis and not on trial basis. He has contended that in the present case, as per the fact-situation, there is commercial production in assessment year 1994-95. He has contended that there was huge investment of Rs. 10 crores and a depreciation of Rs. 3.66 crores was claimed, excise duty was also paid as is reflected from the details given in assessee's letter placed on page 17PB. The ld. DR has contended that if intermediary product is marketable then that may also be the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... production and sale of any output/product from the raw materials received by Kurkumbh unit. He has also drawn our attention to the fact of copies of work orders of trial batches, as mentioned at Sr. No. 4(d) on page 17 PB, submitted during assessment proceedings for assessment year 1994-95 and accordingly contended that there was no output at all as a result of trial operation in assessment year 1994-95 and so the question of there being production as such in that year cannot arise. He contended that in the situation it cannot be said that the initial assessment year is assessment year 1994-95. He has contended that payment of excise duty, sale invoices etc. would have shown production, which are not there on page 17 PB. Citing CIT v. Hindustan Antibiotics Ltd. [1974] 93 ITR 548 (Bom.), he has contended that the year of trial run is not the first/initial assessment year for section 80-IA. Referring to the ld. DR's citation in CIT v. Cellulose Products of India Ltd. [1991] 192 ITR 155 (SC) he has contended that it will be commercial production only when intermediary product is marketable whereas in assessee's case there is no such finding, but the finding is that it is a trial prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the respondent having begun production or manufacture of a finished product which was capable of being sold in the market in the year of account relevant to the assessment year 1961-62, the last year in which the respondent was entitled to get relief under section 84 of the Act was the assessment year 1965-66 and the claim made by it for the said relief in the assessment year in question, namely, 1966-67, was not maintainable." This finding of Tribunal was upheld by the Hon'ble Supreme Court. Thus, on facts the case relied on by ld. DR is distinguishable. 15. For the sake of convenience and ready reference we may reproduce below the relevant provisions of section 80-IA: "(7) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under sub-section (5) for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set off in assessment year 1994-95 and in turn, the said notional unabsorbed depreciation amount of Rs. 3.66 crores, could not be carried forward in assessment year 1995-96 so as to deduct the same from the eligible profit of Kurkumbh unit in assessment year 1995-96 for the purpose of computing deduction under section 80-IA. As such, considering all the facts and circumstances of the case as also the legal position, we find no fault with the impugned order of ld. CIT(A) in directing the Assessing Officer not to reduce the amount of Rs. 3.66 crores as unabsorbed depreciation from the eligible profits of Kurkumbh unit while computing deduction under section 80-IA for assessment year 1995-96. We, therefore, decline to interfere with the same on this count. While deciding this issue, we have considered the following decisions : (1) CIT v. Hindustan Antibiotics Ltd. [1974] 93 ITR 548 (Bom.) (2) Addl. CIT v. Southern Structurals Ltd. [1977] 110 ITR 164 (Mad.) (3) CIT v. Ennore Foundries Ltd. [1985] 151 ITR 464 (Mad.) 17. Now we take up the second aspect of issue No. 1 raised by revenue in assessment year 1995-96 being against the finding of ld. CIT(A) holding the Global Profit me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diminution in the amount of profit made by the Assessing Officer has been on the ground that the transfer pricing policy adopted by the assessee in terms of section 80-IA(9) of the Act is not wholly appropriate. (v) The Profit & Loss Account of Kurkumbh undertaking as juxtaposed with the Profit & Loss Account of the other undertakings is at page 33 of the Paper book. (vi) The direct sales of Kurkumbh undertaking are of Rs. 42.23 crores whereas the direct sales of other undertakings are of Rs. 253.59 crores, aggregating in all to Rs. 295.82 crores for the Company as a whole. (vii) Out of total inter-unit transfers of goods and materials of Rs. 36.36 crores, the goods issued by Krukumbh undertaking have been valued by the assessee at Rs. 5.32 crores and the goods received in Kurkumbh are valued at Rs. 4.04 crores. (viii) The Assessing Officer has accepted the transfer pricing policy adopted in respect of Patalganga undertaking and has accordingly not disturbed the computation of the assessee in respect thereof. (ix) However, in respect of Kurkumbh undertaking the Assessing Officer has not accepted the value of issues of Rs. 5.32 crores. Instead, he has adopted a value of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended that the Assessing Officer found that there was overstatement of profits of Kurkumbh unit for assessment year 1995-96. He has contended that in respect of Kurkumbh unit the assessee has understated the value of transfers in and has overstated the value of goods transferred out, in the matter of inter-unit transfers in and out, which has resulted in overstatement of profits of Kurkumbh unit, which is eligible for benefit under section 80-IA though all units being of assessee, the overall effect may be nil to assessee. 20. Referring to page 8 para 3(a) the ld. DR has contended that the overall net profit of assessee company in its all the units from entire business, called the global profits, was of Rs. 17.70 crores on a turnover of Rs. 295 crores which is 6% n.p. on sales whereas the net profit of Kurkumbh unit is declared at Rs. 9 crores as per IT Act on sales of Rs. 47.55 crores, which is 19% n.p. on sales and that is the reason, why Assessing Officer has doubted the assessee's transfer pricing strategy. He has contended that the Assessing Officer has elaborately dealt with the matter on pages 8 to 22 of assessment order. 21. Referring to pages 11 and 12 of assessment orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the ld. CIT(A) has relied on assessee's submission discussing the issue on pages 13 to 40 of his appellate order. The ld. CIT(A) says that the Assessing Officer has not pointed out any exceptional difficulty in computing the reasonable rate for intra-unit transfer. The ld. CIT(A) has also accepted the assessee's contention that whatever pricing policy the assessee is following in other units, has also been followed in Kurkumbh unit. He has contended that when global profit rate is 6% and the assessee is declaring profit rate of Kurkumbh unit at 19%, this fact itself supports the Assessing Officer's conclusion in not accepting the assessee's transfer pricing policy and accordingly the Assessing Officer is justified to estimate the reasonable rate and profit. For the above reasons and reasons given by the Assessing Officer, the ld. DR fully relied on the order of Assessing Officer. 23. In his written submission, fact-sheet and synopsis (Explanatory chart), the ld. AR of assessee has contended that for the purpose of computing profits under section 80-IA the internal transfers are valued at market price under sub-section (9) of the said section. He has contended that as per Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rkumbh unit also similarly transfers to other units bulk intermediate as also bulk drug. 26. He has contended that similar fact-situation of PG-II is there. He has contended that the assessee is maintaining inter-unit transfer in and out. He has contended that in respect of PG-II also the assessee is following the same method of accounting in transfer in and out and that this has been followed consistently. He has contended that the Assessing Officer has accepted this method that is transfer pricing policy in respect of PG-II and the fact of this transfer pricing policy regarding PG-II has been explained to Assessing Officer during assessment proceedings for assessment year 1994-95 as mentioned at Sr. No. 5 in assessee's letter dated 10-10-1996 to Assessing Officer (pages 17, 18 PB). He has contended that the assessee has been following this method since the beginning of PG-II in the year 1983 and it was accepted in assessment year 1985-86 and continued to be accepted upto assessment year 1994-95 and it was for the first time in assessment year 1995-96 that the Assessing Officer has not accepted this method for Kurkumbh unit, though for PG-II the Assessing Officer has accepted thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e book profit earned on the sale of formulations and export of bulk drugs of Kurkumbh undertaking is only Rs. 1.74 crores vis-a-vis the profits of Rs. 9 crores derived for the purpose of claiming deduction under section 80-IA. He has contended that the Assessing Officer has accepted that the profits, as per costing records cannot be adopted for the purpose of computing derived profits under section 80-IA for the reason that profits as per cost records are not derived as per section 80-IA(9); and that as against assessee's working out of derived profits at Rs. 9 crores the Assessing Officer himself has computed such eligible profits at Rs. 3.3 crores (after his adjustments on account of transfer pricing policy) as against costing profits of Rs. 1.74 crores. He has contended that the Assessing Officer failed to take into account that the profits as per costing records are computed without considering Modvat credit. 29. He has contended that Assessing Officer has observed on page 14 of assessment order that in respect of Kurkumbh unit transfer price adopted in the case of receipts for the purpose of section 80-IA is less than the cost determined as per costing records and vice versa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e profits are made or received at the ultimate point of sale of the final output but the profits are earned or derived in a distributive sense which are required to be telescoped in all the activities of the enterprise which finally culminate into the receipt of profits at the last stage. He has contended that the assessee has adopted the well known commercial accounting principle of Profits split method by deriving the transfer price from the sale price of the final bulk drug which is produced out of the Intermediates transferred from Kurkumbh. For the method of working he has referred to Annexure 'C' to the order of CIT(A). 32. He has contended that the Assessing Officer has observed on page 16 of assessment order that the cost of production of Intermediates received in Kurkumbh where there are no sales effected by the company are required to be determined on the basis of cost of production of those Intermediates in the other undertakings. In this regard, referring to Annexure 'A' to CIT(A)'s order, he has contended that this contains the cases where Assessing Officer has applied this principle. He has contended that out of 11 items mentioned in the list, only three items mentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch limitation and moreover, his observation is contrary to the basic legal principles that the profits of the undertaking have to be derived on commercial principles so as to impute appropriate profits to the activities of the undertaking on stand-alone basis. 35. He has contended that the Assessing Officer has observed on page 18 of assessment order as under : (a) When it comes to receipts at Kurkumbh, the yardstick is domestic quotation. When it comes to issues, the yardstick is export rate. (b) When it comes to receipt at Kurkumbh, the yardstick is domestic market price, when it comes to issues, the yardstick is export rate of final bulk drug on the basis of yields. (c) When it comes to receipt at Kurkumbh, the yardstick is domestic market price of third party quotations (like Hira Pharma's quotation for Alprazolan at Rs. 16,000 even though the assessee has itself sold Alprazolan at Rs. 55,319 per kg. during the year. 36. In this regard, he has contended that the observations of Assessing Officer are contrary to the facts on records and has referred to para II(4) of statement filed before CIT(A), which has been considered by ld. CIT(A) on pages 25 and 26 of his appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout disturbing the profits of Patalganga undertaking. Citing in the case of Radhasoami Satsang v. CIT [1992] 193 ITR 321 (SC), he has relied on the following observation made therein - "Where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. He has supported the order of ld. CIT(A)". 40. We have considered the rival contentions, relevant material on record as also the cited decisions. From the perusal of the record we find that the assessee has been following the same method of intra-unit transfer in respect of all other units of assessee which the assessee has been following in respect of KK unit. 41. For the sake of convenience/ready reference we may reproduce below the provisions of sub-section (9) of section 80-IA : "(9) Where any goods held for the purposes of the eligible business are transferred to any other business carried on by the assessee, or where any goods held for the purpose of any other business carried ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it realized from the sale of the end product. We start with the premise that by the sale of the end product a real "profit" has been realized. When analyzed it is found that profit is the aggregate or resultant of the profits from different lines of activity." 43. As such, considering the facts of the case as also the legal position as emanating from the aforesaid judgment of the Hon'ble Apex Court of India, we are of the considered view that whatever principle the assessee may have adopted in the cost audit records for value of captive or internal transfers, such transfers, will have to be assigned a commercial value in terms of sub-section (9) of section 80-IA. 44. Considering the rival contentions, we are of the view that if the transferred goods do not have any comparable market price, it will be wrong to value such transfers at their cost without assigning any commercial value of such transfers. If such transfers are used in producing the final output will have to be telescoped for assigning a commercial value of the transfers. Only then it will be possible to derive profits of the undertaking on commercial principles. In our view, the proviso to section 80-IA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such a selling price can be discarded in favour of more appropriate and representative market price. Considering all the facts and circumstances of the case together with the legal position and the elaborated discussion made by the ld. CIT(A) and together with the contentions of the rival representatives we are of the considered view that the findings/conclusions drawn by ld. CIT(A) are justified. 46. As regards the alternative contention of the ld. CIT-DR that if the claim of assessee in respect of deduction under section 80-IA is allowed then atleast income from other sources should be excluded from eligible profit for the purpose of computing deduction under section 80-IA. 46A. We have considered/examined the above submission of ld. CIT-DR and we find that the complete details are not readily available. Whatever details are available, from the same we find that the major component of OS income is duty drawback and we are holding the same as trading receipt in one finding being drawn ahead, so the remaining components of the OS income should be examined by Assessing Officer to find out nexus between the said OS income and the industrial undertaking of assessee. If the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ular, the ld. AR objected to the Assessing Officer's finding that the evidence obtained by the assessee in the course of the assessment proceedings in support of the market price of goods was too complex to admit of reasonable verification. Objecting to the observations of the Assessing Officer in the assessment order that the assessee had failed to produce any evidence in support of higher profitability of the undertakings at Kurkumbh and Patalganga, the ld. AR of assessee has contended that the working available with the Assessing Officer was eloquent enough to lead the Assessing Officer to the conclusion that the application of the Global Profit Percentage would result in gross understatement of the profits derived by these undertakings. He has contended that the issue has been dealt with by ld. CIT(A) elaborately. He has contended that what the ld. CIT(A) has done is to adopt the working of the Assessing Officer for assessment year 1995-96 itself by not disturbing the profits derived on external sales. It has been contended that the ld. CIT(A) has rightly focused his attention to the valuation of captive transfers which alone are covered by the provisions of section 80-IA(9) in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... already paid. Whenever such duty paid, it directly affects the profits of industrial undertaking inasmuch as it is debited to Manufacture & Profit and Loss Account. Such payment of custom duty increases the cost of manufacturing but when the same is received back as drawback, it nullifies the affect of aforesaid increase in the cost of manufacturing. Therefore, in our opinion, the duty drawback is inextricably linked with the production cost of the goods manufactured by assessee. Accordingly, it is held that duty drawback is the trading receipt of the industrial undertaking having direct nexus with the activity of such industrial undertaking and accordingly, the same forms part of the income derived from such industrial undertaking." 54. We have considered the rival contentions as also the relevant material on record. 55. In our view, proviso to section 80-IA(9) is not an exception to the main provisions of section 80-IA. Ordinarily, the principles of statutory interpretation advocate that the proviso carves out an exception to the main provision of the law. However, we are of the considered view that the proviso to section 80-IA(9) does not admit such an interpretation; and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rice and application of such average to the total transfers during the year should understandably be acceptable. If the market price on each day of transfer is not ascertainable then the principle of averaging will meet the test of the proviso to section 80-IA(9) also. Besides, in the case of wide fluctuations between two extremes, the adoption of the weighted average formula will avoid any distortion in the depiction of reasonable profits. The principle of averaging will result in a reasonable depiction of a representative market price, which can be applied to the totality of transfers during the year. We, therefore, find no fault with the decision of CIT(A) on the issue to the extended not disputed by the assessee. 56. Coming to the issue of duty drawback, we respectfully follow the decision of the Delhi Bench of Tribunal in the case of Dy. CIT v. Metro Tyres Ltd. [2001] 79 ITD 557 . The decision of the Supreme Court in the case of Pandian Chemicals Ltd. (supra) is not applicable since in that case it was held that interest earned on Electricity Deposits cannot be considered to be part of the profits derived from the undertaking. On the other hand, in the assessee's case, the qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to dispose of the remaining issues/grounds in revenue's appeals. 60. Issue No. 3 pertains to deletion of disallowance of expenditure made by Assessing Officer treating the same as capital expenditure; and this issue is contained in Ground No. VI in assessment year 1995-96. Citing Ballimal Naval Kishore v. CIT [1997] 224 ITR 414 (SC) the ld. DR has relied on Assessing Officer's order whereas the ld. AR of assessee has supported the ld. CIT(A)'s order. 61. We have considered the rival contentions as also the relevant material on record. In Ballimal Naval Kishore (supra), the Hon'ble Supreme Court has held as under : ". . . the expression 'Current Repairs' means expenditure on buildings, machinery, plant or furniture which is not for the purpose of renewal or restoration but which is only for the purpose of preserving or maintaining an already existing asset and which does not bring a new asset into existence or does not give to the assessee a new or difference advantage." 62. From the perusal of record we find that the expenditure on repairs is comprised of the following three items-- (1) Repairs to Machineries Rs. 1.81 crores (2) Repairs to Building Flats Rs. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition made by Assessing Officer on account of entertainment expenses. This issue has the following two parts- (i) Gift articles not bearing logo (ii) Expenses on dry fruits. Issue No. 5 (i) i.e., Gift articles not bearing logo is contained in ground No. VIII in assessment year 1995-96, IV(a) in assessment year 1996-97 and IV(b) in assessment year 1997-98. Issue No. 5 (ii) i.e., Expenses on Dry fruits is contained in Ground No. IX in assessment year 1995-96, IV(b) in assessment year 1996-97 and IV(a) in assessment year 1997-98. The ld. DR has relied on the orders of Assessing Officer in respect of disallowance of both these entertainment expenses comprised in Issue No. 5(i) and 5(ii). The ld. AR of assessee has relied on the impugned orders of ld. CIT(A) as also on Tribunal's common order dated 30-7-2003 rendered in assessee's case in ITA Nos. 6957/Mum./1996 and 6629/M/1997 for assessment years 1993-94 and 1994-95 respectively and has furnished a copy of the same. 67. We have considered the rival contentions as also the relevant material on record. In the aforesaid common order of the Tribunal for assessment years 1993-94 and 1994-95 ITAT, Mumbai has, vide para 8 of its orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rendered in ITA No. 6208/Mum./1996 and accordingly deleted similar addition made by Assessing Officer u/r 6D incurred during travel. As such, we find the issue covered in favour of assessee and so respectfully following the aforesaid order of the Tribunal, we uphold the impugned order of ld. CIT(A) on this count. We order accordingly. 70. In the result, revenue's appeal Nos. 2062/Mum./99 for assessment year 1995-96, 3036/M/2000 for assessment year 1996-97 and 4619/M/2000 for assessment year 1997-98 are dismissed. 71. Now we will take up the assessee's appeals being ITA No. 3057/Mum./2000 for assessment year 1996-97 and ITA No. 4731/Mum./2000 for assessment year 1997-98, in respect of the remaining issues/grounds. 72. The matters involved in various grounds of the above two appeals of assessee may be summarized in the issues as tabulated below : Issues in Assessee's appeals Issue No. Particulars A.Y. 1996-97 Ground of appl. No. A.Y. 1997-98 Ground of appl. No 1. Int. on Right Issue proceeds - Timing Difference 1 -- 2. Deduction under section 80-IA 2 1 3. Foreign Travel Exp. of Managing Director Others 3(a) 3(b) 2(a) 2(b) 4. Entertainment Exp. Food Exp. on sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that if Stock Exchange does not give permission for listing then the principal amount alone will be refunded and the liability for interest does not arise to the assessee. He has referred to the provisions of section 73(3) & (3A) of Companies Act read with section 73(2) of the Companies Act contending that these provisions provide for depositing of share application money in separate bank account and these provisions also provide that on refusal of permission by Stock Exchange, principal amount of share money alone is to be refunded to the share applicant immediately without any interest thereon. He has contended that the question is as to who is the claimant of that bank interest for this period ? He has relied on AS-9 which deals with as to when the income should be recognized; when there is no uncertainty regarding measurability/collectability, then income is to be recognized, that is the income is accrued. He has cited Smt. Rama Bai v. CIT [1990] 181 ITR 400 (SC). . . in his support, contending that in the case of Land Acquisition the Hon'ble Supreme Court held that interest accrues year-to-year. He has accordingly contended that in this case therefore the interest accrues in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich has been furnished on record. The ld. DR has relied on the orders of authorities below. 78. We have considered the rival contentions, relevant material on record as also the cited decisions. From the perusal of record we find that in assessment year 1995-96 the Tribunal has discussed/decided this issue vide para Nos. 4 and 5 of its order whereby the Tribunal has followed the earlier orders of the Tribunal in assessee's own case for assessment years 1993-94 and 1994-95 and reduced the disallowance of foreign travel expenses in the case of Chairman and Managing Director from 25% to 10% and in the case of all other persons from 10% to 5%. The facts being identical, we follow the aforesaid order of the Tribunal for assessment year 1995-96 and hold and direct the Assessing Officer accordingly for both the assessment years 1996-97 and 1997-98. 79. Issue No. 4 pertains to disallowance of entertainment expenses and comprises (i) Food expenses on staff, as contained in ground Nos. IV and III in assessment years 1996-97 and 1997-98 respectively and (ii) Canteen Expenses, as contained in Ground Nos. V and IV in assessment years 1996-97 and 1997-98 respectively. The ld. AR of assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said order rejected the assessee's ground by following the judgment of Hon'ble Jurisdictional High Court in the case of CIT v. Aorow India Ltd. [1998] 229 ITR 325 (Bom.). As such, respectfully following the aforesaid judicial decisions, we uphold the impugned order of ld. CIT(A). 84. Issue No. 6 pertains to inclusion of Sales tax in total turnover for the purpose of deduction under section 80HHC. This issue is covered in favour of assessee by the judgment of Hon'ble Jurisdictional High Court in the case of CIT v. Sudarshan Chemicals Industries Ltd. [2000] 245 ITR 769 (Bom.). Accordingly, this issue is decided in favour of assessee. 85. Issue No. 7 pertains to Lease & Buy back and is contained in ground No. 8 in assessment year 1996-97. From the perusal of impugned order of CIT(A) we find that the ld. CIT(A) has simply restored the issue to Assessing Officer for deciding afresh. Inasmuch as the assessee has opportunity to contest the issue before Assessing Officer, so we find no genuine grievance to assessee against the impugned order of ld. CIT(A) on this count and so we decline to interfere with the same. 86. Issue No. 8 pertains to inclusion of freight outward in closing stock ..... X X X X Extracts X X X X X X X X Extracts X X X X
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