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TMI Blog2013 (9) TMI 633X X X X Extracts X X X X X X X X Extracts X X X X ..... leted the addition made by revenue authorities. Forfeiture of deposit to be treated as revenue loss, allowable for deduction or capital loss not allowed in the profit & loss account - AEPC had forfeited its Earnest Money Deposit – Held that:- Reliance has been placed on the order of the co-ordinate Bench of Delhi ITAT in the case of Pyoginam vs. ACIT, reported in [2010 (2) TMI 819 - ITAT, Delhi], wherein it has been held that amount on account of non-fulfillment of quota cannot be treated as penalty - Assessee got quota allotted on the basis of past performance of export business and not on the basis of the earnest money deposited. The earnest money was paid on percentage basis of quota allotted. Therefore, the payment of earnest money was in the course of business activities and hence, cannot be treated as capital in nature. - Decided in favor of assessee. - I.T.As. No. 3957, 3958 & 3959/Mum/2006 & 3884, 3885 & 3886/Mum/2006 - - - Dated:- 8-6-2012 - SHRI P.M. JAGTAP, SHRI VIVEK VARMA, JJ. Assessee by : Mr. Dinesh Vyas, Senior Advocate Mr. Ajit C. Shah. Revenue by : Mr. Jaya Kumar. O R D E R PER VIVEK VARMA, JM: The appeals are filed by the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crores. The assessee further clarified that out of total borrowings of Rs. 170.64 crores, there were secured loans of Rs. 128.84 crores of unsecured loans, Rs. 41.80 crores. Out of Rs. 128.84 crores of secured loans, Rs. 120.24 crores were utilised for export packing credit in its business of export and Rs. 8.46 crores for acquiring fixed assets. The unsecured loan of Rs. 41.80 represented borrowings for the purpose of long term working capital. The assessee further submitted that borrowings of Rs. 170.64 crores against the total turnover of Rs. 1600 crores is very reasonable. The assessee further submitted that the entire investments had been financed by the shareholder fund and not from the borrowings. The assessee submitted that since the entire investment have been financed from own funds, no expenditure can be said to have been incurred for the purpose of earning the dividend income. The assessee, after having relied upon a number of case laws, submitted that interest payable on such borrowings is admissible as business expense u/s 36(1)(iii). As on the issue of disallowance u/s 14A, the assessee company submitted that investment in shares etc. is indivisible part of the busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee vide letter dated 14-01-2003. Based on this working, the AO made an addition of Rs. 4,67,52,000/- 6. The assessee took this issue before the CIT(A) wherein it raised the issue in grounds no. 1.1 to 1.11 on alternate basis as was claimed before the AO. 7. The assessee virtually reiterated its stand taken before the AO, which the CIT(A) did not accept and the CIT(A) on final analysis sustained the addition made by the AO at Rs. 4,67,52,000/- on account of disallowance of interest paid on borrowed capital. Not satisfied, the assessee is before the ITAT on this issue. 8. Before us, the Senior AR of the assessee company placed a brief synopsis in the form of a table, describing the issues taken up in appeal before us and how the Senior AR intended to deal with each of the issues/grounds. The Senior A.R. has also placed before us the compendium of case law that he intended to rely upon. The Senior AR through the synopsis touched on each of the sub grounds to ground No. 1. i.e. disallowance on ground of alleged diversion of borrowed funds for non business purpose of making share investments by following weighted average cost method. The Senior AR reiterated the fact that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and surplus was available with the bank. 9. The Senior A.R. further dealt with the disallowance u/s 14A, wherein the AO had observed that appellants funds had been diverted for making investments as AO has not established the nexus between the borrowed funds and funds used for making investments. The A.R. relied on the following decisions: a) CIT vs. Reliance Utilities Powers Ltd. [313 ITR 340] b) CIT vs. Hero Cycles Ltd. 189 Taxman 50 (P H) c) Wimco Seedings Ltd. vs. DCIT [107 ITD 267] (Del-TM) d) Indo German International (P) Ltd. vs. ITO 185 Taxman 103 (Del) e) DCIT vs. Beck India Ltd. 26 SOT 141 (Mum) f) Ashok Bros. vs. ITO 76 TTJ (Hyd) 427 g) Allen Bradley India Ltd. vs. DCIT 80 ITD 43 (Del) h) ITO vs. P.S.Sunderrajan Co. 116 TTJ 191 (Mad) and i) ITO vs. Assandas Sons. 18 TTJ 199 (Bom), wherein the basic issue was that unless the AO creates a nexus between the borrowed funds and funds used for making the investments, disallowance cannot be sustained. The A.R. to further his arguments pleaded that if interest is not allowable u/s 36(1)(iii) then it should be allowed as a business deduction u/s 37 or if not u/s 37 then u/s 57(iii). Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15. Coming to ground No. 1, wherein the revenue authorities had disallowed the interest u/s 36(1)(iii), on going through the entire facts, we find that against the total investments of Rs. 99.56 crores, the assessee was having its own funds to the tune of Rs. 115.04 crores. From the facts as placed on record, neither the revenue authorities nor the DR has been able to clearly establish that the investments made by the assessee were either not in the course of business or not from own and non interest bearing funds. The details prove the fact that the assessee s own funds exceeded the investments. The Bench specifically asked the DR to establish that how the funds utilised in investments could be identified from the total funds available with the assessee, more so in a case where there are mixed funds. From the submissions placed before the AO and incorporated in the assessment order, we find that the total turnover of the assessee company exceeded 1600 crores. The assessee had explained to the AO that the assessee had own funds of Rs. 115.04 crores and the current assets of Rs. 143.60 crores and the assessee s utilisation was investments of Rs. 99.55 crores and fixed assets of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest paid u/s 36(1)(iii) as per grounds No. 1.1 and 1.2, holding that the revenue authorities had not been able to establish the connection and/or nexus of borrowed funds to make investments. 17. Ground No. 1.3 also stands allowed and grounds No. 1.4, 1.5 1.6 being alternative grounds (to grounds No. 1.1, 1.2 1.3), are rendered redundant, hence these grounds are dismissed. 18. Grounds No. 1.7 1.8 are against sustaining of the disallowance u/s 14A. The CIT(A) has mentioned in the order that in the instant case it is a question of disallowance of interest paid on borrowed funds diverted for non business purposes, i.e. in investments. We have already held that the issue of interest gets covered u/s. 36 (1)(iii), but in any case, an appropriate disallowance has to be made as per the provisions of section 14A against the exempt income. We, therefore, direct the AO to compute the disallowance of expenditure at 5% of the income claimed exempt u/s 10(33) of the Act. Grounds No. 1.7 to 1.8 are allowed for statistical purposes. 19. Grounds No. 1.9 1.10 are being alternative grounds held to be redundant, hence these grounds are to be dismissed. 20. Ground No. 1.11, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the co-ordinate Benches in the assessee s own cases in the preceding years, we uphold the disallowance and reject the ground. Hence, ground No. 2.1 is rejected. 26. Grounds no. 2.2, 2.3 and 2.4 were not pressed. 27. He referred to ground no. 2.5 wherein the issue of unrealized export proceeds of Rs. 94,44,61,792 was prayed to be excluded from the total export turn over and total turnover. The Sr. A.R. conceded that this issue is covered against the assessee by the decisions of the co-ordinate Benches of the ITAT and prayed that an appropriate decision be taken by the Bench. 28. Respectfully following the decision of earlier years rendered by the co-ordinate Benches, we reject this ground. Accordingly, ground No. 2.5 is rejected. 29. Ground No. 2.6 is not pressed. 30. Ground No. 2.7 pertains to exclusion of direct costs of Rs. 37,64,85,020/-. The Senior AR submitted that this issue was also raised before the co-ordinate Benches of the ITAT, Mumbai and the same is decided in favour of the assessee consistently. The relevant portion of the judgment in I.T.A. Nos. 4823 to 4825/Mum/2005, order dated 26.03.2009 is being reproduced as hereunder: He further submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not correct in deducting the direct cost of unrealized trading export also from trading export turnover for the purpose of calculating profit with regard to trading export as per section 80HHC(3)(b) . Respectfully following the same we allow this ground of the assessee in all the three assessment years under appeal. The Senior AR prayed that an appropriate finding be given by the Bench. On the other hand, DR supported the orders of the revenue authorities. 31. On this issue, we would respectfully follow the decision of the co-ordinate Benches in the assessee s own cases and allow the exclusion of direct costs attributable to unrealised export proceeds. Accordingly, ground No. 2.7 is allowed. 32. Ground No. 2.8 pertains to Explanation (baa) to sec 80HHC according to which the AO should have reduced 90% of the net amount of receipts by way of interest earned, instead of 90% of the gross amount of such receipts. The Sr. A.R. took us through the relevant portion of the CIT(A) s order wherein the CIT(A) has sustained the view of the AO by following the decision of his predecessor, who had relied on various judgments to arrive at the decision. The CIT(A), thus decided the is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) in accordance with law, after giving adequate opportunity to the assessee. 37. Ground No. 2.9, the CIT(A) in his order simply mentions that no such ground is borne out of the records. We have gone through the letter and the ground as taken by the assessee as additional ground and we find that the CIT(A) has not dealt with the same as it may have Ground No. 2.9, the CIT(A) in his order simply mentions that no such ground is borne out of the records. 38. A.R. prayed that the ground needs to be restored to the file of the CIT(A), he prayed accordingly. 39. We have gone through the letter and the ground as taken by the assessee as additional ground and we find that the CIT(A) has not dealt with the same as it may have been got misplaced from his records. In the interests of justice, we direct the CIT(A) to adjudicate on this issue in accordance with the law. Accordingly, ground No. 2.9 is allowed for statistical purposes. 40. Ground No. 2.10 is not pressed by the A.R., hence it is dismissed as not pressed. 41. In the result : Ground No. 2.1 is rejected Grounds no. 2.2, 2.3 and 2.4 are dismissed being not pressed. Ground No. 2.5 is rejected. Ground No. 2.6 is not pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see. 11.2 Since the facts of the case and ground of appeal under consideration is similar to that of AYs. 1996-97 to 1998-99 cited supra, we respectfully follow the decision of the ITAT and in the light of that we allow the ground of appeal of the assessee . Besides, this, the Sr. A.R also relied upon the decision of the Hon'ble Madras High Court in the case of CIT v. Indian Express (Madurai) Pvt. Ltd. (Mad) 255 ITR 68 and in CIT v. Associated Cement Co. Ltd. reported in 68 ITR 478 (Bom). 44. Ground No. 3A was not taken in the grounds of appeal filed along with form No. 35. But while filing the concise grounds, the assessee has taken ground against the disallowance of depreciation in respect of plant machinery used in appellants textiles and garments business at Rs. 19,22,474/-. The CIT(A) had rejected the appeal as his predecessor had disallowed the issue in assessment years 1996-97 to 1999-2000, he, therefore, followed his predecessor s decision. 45. Before us, Sr. A.R submitted that the issue has now been covered by the co-ordinate Benches in the assessee s own cases in the preceding years, whereby decision of the CIT(A) in the earlier years had been over-ruled in ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs, who are accompanied by the personal from the assessee company. Thus, a certain portion of the total expenditure is apportioned towards the employees accompanying its customers and the rest are recovered from its sister concerns. This is a fact on record. Under these facts and circumstances of the case we are of the considered opinion that the assessee has to succeed in its ground. With regard to the allowability of depreciation, the Hon ble jurisdictional High Court in the case of CIT Vs. Associated Cement Ltd. (supra) under similar set of facts and circumstances has held as follows: Held, as depreciation allowance is granted in respect of assets being the property of the assessee, it is the owner of the property who is entitled to the depreciation, it is immaterial as to who uses the asset. Since the Appellate Assistant Commissioner and the Tribunal had concurrently found that the assets belonged to the assessee company and that the assets have been used in the course of carrying on its business and the position of the Cement Marketing Co. was no more than that of a Sales Manager, depreciation should be allowed to the assessee. In the judgment reported in 255 ITR 68 (Mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pertained to the disallowance of Rs. 73,15,005/- and Rs. 16,81,310 on account of provision for income tax chargeable in Nepal and Thailand. The Sr. A.R. conceded that with the insertion of Explanation 1 to sec 40(a)(ii) the issue is covered against the assessee. We hold it accordingly and against the assessee. Accordingly, Grounds No. 6.1 to 6.3 and No. 8 are dismissed. 51. Ground no. 7 pertains to travelling expenses of Rs. 80,564/- on Y2K professionals. The CIT(A) in the order mentions that travelling expenses at Rs. 80,564/- cannot be allowed as the assessee did not submit any evidence in support of its contentions. The CIT(A) further observed that the audit report as prescribed u/s 36(1)(xi) of the Act had excluded this expenditure. The CIT(A) observed that the auditor would have included this expenditure had it been legitimally allowable in the section. On this basis the CIT(A) sustained the addition. 52. The Sr. A.R. submits that an appropriate decision may be taken by the Bench on this issue. 53. Before us also, assessee has not submitted any evidence. We, therefore, do not find any reason to disturb the findings of the revenue authorities and dismiss the same. Gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , i.e. CIT vs. Lake Palace Hotels Motels (P) Ltd. 131 Taxman 836 (Raj), CIT vs. Indian Metal and Metallurgical Corporation 182 ITR 460 (Mad), 141 ITR 40 (Mad) and Modern Traders (Chinese Room) Vs ACIT [1995] 53 TTJ 237. He therefore, submitted that in the light of the above decisions, the expense is an allowable business expense. 60. Ground No. 11 is the treatment of floor coverings on the leased premises. Though the amount is small, but the Sr. A.R submitted that the floor covering was ordinary floor covering used for office premises and not carpets as made out by the revenue authorities. The Sr. A.R has cited judgments in the favor of the assessee but has not assisted us by providing any evidence such as any bills or vouchers to show the factual position, we, cannot decide the issue of facts without any evidence, and purely on the decisions of various courts, we therefore, do not find any reasons to deviate from the findings of the CIT(A), we therefore, dismiss this ground. Ground No. 11 is dismissed. 61. Ground No. 12 is on account of disallowance of liability for central sales tax of Rs. 1,57,638/-, the Sr. A.R. conceded that the issue has been decided against the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AT and in the light of that we remit the matter back to the file of the AO with identical directions given by ITAT for AYs. 1996-97 to 1998-99 . 64. Ground no. 15, the coordinate Bench in assessee s own case in ITA No. 5591/Mum/2005, covering assessment year 1999-2000 has restored the issue to the file of the AO. We also think that in the interest of justice, the issue must go to the file of the AO, who shall along with the earlier year s computations, compute the tax credit in line and in symmetry. The issue is restored to the AO, with specific direction. The ground is allowed for statistical purposes. 65. Ground No. 16 is on account of levy of interest u/s 234B. The Sr. A.R. submits that this being consequential, appropriate directions may be given. 66. Ground no. 16 is consequential. 67. Ground No. 16A is additional ground taken by the assessee, where it says that interest u/s 234B becomes not chargeable in respect of disallowance of claim for deduction u/s 80HHC on Rs. 17,20,46,510/-. The claim of the assessee is that at the time of computation income for the current year, the relevant fifth proviso to section 80HHC(3) vide Taxation Laws (Amendment) Act, 2005 with ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evious year ended 3Jst March, 1998, the assessee had no opportunity to pay advance tax during the year on the basis of law laid down by the Fifth Proviso. Thus, the assessee denies its liability to pay interest u/s 234B in respect of the disallowance in question. The learned counsel placed reliance on the decision of the Chennai Bench of the Tribunal in the case of B.S.C. Textiles Vs. 1840/Mds/2006 dated 26.02.2008 2008-TIOL-459-ITAT (MAD). The learned departmental representative submits that levy of interest is mandatory and consequential and thus it should be upheld. After hearing rival contentions we find that the issue is covered in favour of the assessee by the decision of the Chennai Bench of the Tribunal in the case of B.S.C. Textiles Vs. ITO (supra). Respectfully following the same we decide the issue against the revenue and in favour of the assessee. 17.2 Since the facts of the case and ground of appeal under consideration is similar to that of AYs. 1996-97 to 19 98-99 cited supra, we respectfully follow the decision of the ITAT and in the light of that we allow this ground of appeal of the assessee . and by co-ordinate Bench of ITAT, Chennai in the case of BSC Textil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tical grounds taken in assessment year 2000-01. As the ground is identical, we shall follow the decision taken in assessment year 2000-01, where we have allowed the depreciation in respect of plant machinery used in appellants textiles and garments business. We, therefore, set aside the order of the revenue authorities on this issue and direct the AO to allow the depreciation as claimed by the assessee. Accordingly, ground No. 3A is allowed. Grounds No. 5 6: 74. Grounds No. 5 and 6 are identical grounds No. 6.1 to 6.3 in assessment year 2000-01, wherein we have dismissed the ground. For the reasons/findings given therein, we shall follow the same decision in the current year and dismiss grounds No. 5 and 6. Grounds no. 5 6 are dismissed. 75. Ground No. 7.1 herein is identical to ground No. 10.1 in assessment year 2000-01. As the ground is identical, for the reasons/findings given therein, we shall follow the decision taken in ground No. 10.1 for assessment year 2000-01 where the ground has been dismissed. Hence ground No. 7.1 is dismissed. 76. Ground No. 7.2 herein is identical to ground No. 10.2 taken in assessment year 2000-01, where we have allowed the grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... display and single roof display of one s own products. The Sr. AR submitted that the assessee had only undertaken the repairs and that too, on the leased property, because on the day, the lease expires, the assessee shall have to vacate the premises and the repairs undertaken by the assessee today, shall be of no use, let alone enduring use for tomorrow. The Sr. A.R cited cases of Lakshmi Sugar Mills Co. (P) Ltd. v/s CIT reported in 82 ITR 376 (S.C) and the case of L H. Sugar Factory Oil Mills (P) Ltd. v/s CIT reported in 125 ITR 293 (S.C) for his support. 90. The revenue authorities and the D.R. argued that the repairs undertaken by the assessee even on leased property shall give enduring benefit to the assessee, therefore, the expenses sought to be under repairs were actually capital in nature. 91. We have perused the orders of the revenue authorities and the fact brought to the notice of the Bench by the Sr. A.R. We find that the assessee had undertaken repairs and renovation work in the leased property, meant to be for the purpose to showcase the products under the Brand TATA . There is, no denial from the fact by the revenue authorities and by the DR, that the property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd/or its diversification, if any; the changes brought about due to statutory amendments by law or by professional bodies like the Institute of Chartered Accountants of India, which are given the responsibility of conceiving and formulating the accounting standards from time to time, and perhaps also, by reason of the fact that expenses may have to be incurred on account of corruption of the software due to unintended or intended ingress into the system - ought not give a colour to the expenditure incurred as one expended on capital account. Given the fact that there are myriad factors which may call for expenses to be incurred in the field of software applications, it cannot be said that either the extent of the expense or the expense being incurred in close proximity, in the subsequent years, would be conclusively determinative of its nature. The assessing officer has, in our view, erred precisely for these very reasons. The Senior AR also cited the case of Hon ble Jurisdictional High Court of Bombay in the case of CIT Vs Raychem RPG Ltd., Mumbai, ITA No. 4176 of 2009, order dated 04/07/2011, wherein the Hon ble Bombay High Court has held as under: 7. We have heard both the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade was not for penalty for infraction of any law, but was an expenditure laid out exclusively for the purpose of business. From the above decisions it is clear that payment of amount on account of non-fulfillment of quota cannot be treated as penalty as held by the AO. The learned CIT(A) has, however, confirmed the disallowance on the ground that the EMD was in the nature of capital expenditure as the assessee got allotment of quota because of EMD. This, in our view, is not correct appreciation of facts. As discussed earlier, the assessee got quota allotted on the basis of past performance of export business and not on the basis of the earnest money deposited. The earnest money was paid on percentage basis of quota allotted. Therefore, the payment of earnest money was in the course of business activities and hence, cannot be treated as capital in nature. Hon ble Allahabad High Court in the case of Sugar Dealers case (supra) has held that forfeiture of earnest money due to non-performance of contract to purchase rice was loss attributable to the assessee and was allowable as deduction. Similarly, in the case of Thackers H.P. Co. case (supra) forfeiture of security by the Forest D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.6 are held to be rendered redundant, hence these are dismissed. Grounds No. 1.7 1.8 are restored to the file of the AO with directions. Grounds No. 1.9 1.10 are held to be rendered redundant, hence these are dismissed. Ground No. 1.11 is restored to the file of the AO with directions. Grounds No. 2.1 to 2.10 and 2A : 98. Grounds No. 2.1 to 2.10 are identical grounds taken in assessment year 2000-01. As the grounds are identical, for the reasons given therein, we shall follow the decision taken in each of the grounds numbered 2.1 to 2.10 which are as follwos: 99. Ground No. 2.1 is identical ground taken in assessment years 2000-01 and 2001-02. As the ground is identical, we shall follow the decision taken the ground No. 2.1 therein. 100. Grounds No. 2.2 to 2.3 are not pressed before us, hence being dismissed as not pressed. 101. Ground No. 2.5 is identical ground taken in assessment years 2000-01 and 2001-02. As the ground is identical, we shall follow the decision taken the ground No. 2.5 therein 102. Ground No. 2.6 is not pressed before us. Therefore, same is dismissed as being not pressed. 103. Ground No. 2.7 is identical to ground taken in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts of the case, what prevents the appellant company from establishing them on the basis of appropriate supporting documents. As a matter of fact, the appellant company had taken a stand before AC that no supporting evidence can be produced as it is a forfeiture of Earnest Money Deposit paid earlier to AEPC. I am indeed astonished at the inability of the appellant to produce any evidence in support of its claim that the AEPC had forfeited its Earnest Money Deposit worth Rs.7,42,805/-. Since the appellant itself had admitted its inability to submit supporting evidence to prove its claim of expenditure, the AC was perfectly justified in disallowing the claim preferred in respect of AEPC at Rs.7,42,805/-. Even during the appellate proceedings, no evidence has been furnished to prove the ground of appeal pressed. As a sequel, have no alternative but to confirm the disallowance made by the learned AO at Rs. 7,42,805/-. The ground No.6-C of appeal filed for AY 2002-03 fails clearly on merit due to admission of appellant in respect of its inability to submit any supporting evidence to prove the impugned expenditure. 110. The Sr. A.R submits that the issue in question is now ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of number of spindles working on higher counts. The assessee did not import the allotted quantify of cotton, but paid the agreed guarantee amount for the non-import of the cotton. Hon ble Madras High Court held that payment made was not for penalty for infraction of any law, but was an expenditure laid out exclusively for the purpose of business. From the above decisions it is clear that payment of amount on account of non-fulfillment of quota cannot be treated as penalty as held by the AC. The learned CIT(A) has, however, confirmed the disallowance on the ground that the EMD was in the nature of capital expenditure as the assessee got allotment of quota because of EMD. This, in our view, is not correct appreciation of facts. As discussed earlier, the assessee got quota allotted on the basis of past performance of export business and not on the basis of the earnest money deposited. The earnest money was paid on percentage basis of quota allotted. Therefore, the payment of earnest money was in the course of business activities and hence, cannot be treated as capital in nature. Hon ble Allahabad High Court in the case of Sugar Dealers case (supra) has held that forfeiture of ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .3 taken in assessment year 2001-02. As the ground is identical, we shall follow the decision taken in the ground therein. 114. Ground No. 5 is identical to ground No. 9 taken in assessment year 2001-02. As the ground is identical, we shall follow the decision taken in the ground therein. 115. Ground No. 6 is not pressed before us hence it is dismissed as not pressed. 116. Ground No. 7 is identical to ground No. 15 taken in assessment year 2000-01 and ground No. 12 in assessment year 2001-02. As the ground is identical, we shall follow the decision taken in the ground therein. 117. Ground No. 8 is against the levy of interest charged u/s 234D at Rs. 14,62,067/-. 118. Before the CIT(A) it was pleaded that the assessee received the refund prior to the insertion of section 234D, therefore, the interest so charged must be annulled. The CIT(A) held that the section contemplated the levy of interest where excess interest was granted and the determination of default of granting excess refund was possible only after the completion of regular assessment. The regular assessment was made on 24-03-2005, i.e. after 01-06-2003, when the provision was incorporated, the CIT(A) therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depreciation of Rs. 3,96,89,454/-. This ground is otherwise allowable but consequential effect has to be given, consequential to our findings in the current appeals. Hence ground No. 12 is allowed. 128. In the result, appeal for the assessment year 2002-03 is partly allowed. 129. Now we take up appeals filed by the department in ITAs No. 3884, 3885 3886/Mum/2006. Since most of the grounds are identical, a consolidated order is being passed. 130. Ground No. 1 (identical in all three years) : On the facts and circumstances of the case and in law, the ld. CIT(A) erred in directing to exclude direct cost attributable to the exports and domestic sale of manufactured goods from the total cost. 131. The CIT(A) allowed the ground raised against the disallowance made by the AO, following his predecessor s decision in preceding year years. The issue was taken before the ITAT in the preceding years, wherein in I.T.A. No. 5508/Mum/2005, covering assessment year 1999-2000 and earlier year in assessee s own cases, the co-ordinate Bench had decided the case in favour of the assessee by rejecting the ground filed by the department by holding as under: 20. Ground No. 1 of appeal is ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. The A.R. also cites the case of CIT v/s Laxmi Machine Works, reported in 290 ITR 667 (S.C). Respectfully following the decision in the assessee s own case (as referred in the above para) as also by the decision of the Hon'ble Supreme Court , we dismiss this ground filed by the department. 134. Ground No. 3 (identical in all three years) : On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in directing the AO not to reduce amount of Rs. 46,76,32,192/- being 90% of technical, professional and management services fees from the profits of the business while computing deduction u/s 8OHHC of the Act. 135. The A.R. concedes that the issue now has been decided against the assessee by the decision of the Hon'ble Supreme Court in the case of CIT v/s Ravindranathan Nair, reported in 295 ITR 228 (S.C) and by the decision of the Hon'ble Bombay High Court in the case of CIT v/s Dresser Rand India (P) Ltd., reported in 323 ITR 429 (Bom). 136. As the A.R. has himself conceded the issue to be against itself, we allow the ground, holding that the direction given by the CIT(A) is infirm. 137. Ground No. 4 (identical in assessment years 2000-01 2001-02 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143. In assessment year Ground No. 4 is independently taken wherein the CIT(A) directed the AO to reduce net commission as against gross commission received from profits of business. 144. The Senior AR submitted that the issue is now covered by the decision of Hon ble Supreme Court of India in the case of ACG Associated Capsules Pvt. Ltd Vs CIT (copy appended in the paper book), wherein the Hon ble Apex Court held as under: We have held in our judgment in the case of M/s ACG Associated Capsules Pvt. Ltd. v. Commissioner of Income Tax that ninety per cent of not the gross interest but only the net interest, which has been included in the profits of the business of the assessee as computed under the heads Profits and Gains of Business or Profession is to be deducted under clause (1) of Explanation (baa) to Section 8OHHC for determining the profits of the business. Since, the view taken by the High Court in the impugned order is consistent with our aforesaid view, we find no merit in this appeal and we accordingly dismiss the same. Respectfully following the decision of the Hon ble Apex Court, we hold that the decision taken by the CIT(A) should not be disturbed and has to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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