Income Tax Appellate Tribunal - Ahmedabad
Gujarat Alkalies & Chemicals Ltd.,, ... vs Assessee on 16 September, 2007
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH "D"
[BEFORE SHRI MAH AVIR SINGH,JM AND SHRI A N P AHUJ A, AM]
ITA No.4461/Ahd/2007
(Assessment Year:-2003-04)
Gujarat Alkalies and V/s Assistant Commissioner of
Chemicals Limited, Income-tax, Circle-1(1),
P O Petrochemicals, Vadodara
Dist. Vadodara -391346
[PAN:AAACG8896M]
[Appellant] [Respondent]
ITA No.4555/Ahd/2007
(Assessment Year:-2003-04)
Assistant Commissioner of V/s Gujarat Alkalies and
Income-tax, Circle-1(1), Chemicals Limited,
Vadodara P O Petrochemicals,
Dist. Vadodara
[Appellant] [Respondent]
Assessee by :- Shri J P Shah,AR
Department by:- Shri S R Malik, DR
O R D E R
A N Pahuja: These cross appeals directed against an order dated 16-09-2007 of the ld. CIT(Appeals)-I, Baroda, raise the following grounds:
ITA No.4461/ Ahd/2007[ Assessee]:
1. The order passed by the learned Commissioner of Income Tax (Appeals) is bad in law, contrary to legal pronouncements and same be quashed. The additions/disallowances confirmed by him are unwarranted and same be deleted now.
2. The learned Commissioner of Income Tax (Appeals) has erred in confirming disallowance of Rs.3,36,224/- being amortization of lease rent paid for land treating the same as of capital nature. It is submitted that disallowance made is unwarranted and unjustified and same be deleted now.
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3. The learned Commissioner of Income Tax (Appeals) has erred in confirming disallowance of Rs.1,59,50,000/- being contribution to "GACL Employees Welfare Trust Fund". It is submitted that contribution so made is an" allowable revenue expenditure u/s 37(1) of the Act. It be held now and disallowance made be deleted.
4. The learned Commissioner of Income Tax (Appeals) has erred in confirming disallowance of Rs.3,18,340/- being contribution to GACL Employees Benevolent Fund. It is submitted that contribution so made is an allowable revenue expenditure u/s 37(1) of the Act. It be held now and disallowance made be deleted.
5. The learned Commissioner of Income Tax (Appeals) has erred in confirming expenditure of Rs.14,18,62,240/- incurred for replacement of Membrane Cell as of Capital nature on the ground that expenditure incurred bring enduring benefit and treated the same in the nature of capital expenditure. Your appellant submits that expenses incurred being of revenue nature, CIT (A) is not justified in treating the same of capital expenditure. It be held now and the Assessing Officer be directed to allow the same as claimed.
6. The learned Commissioner of Income Tax (Appeals) has erred in confirming disallowance of Rs.97,043/- (20% of Rs.4,85,216/-) by invoking provisions of Section 40A(3) of the Act. Your appellant submits that provisions of section 40A(3) are not applicable to the items of transactions in cash. It be held so now and disallowance made by the AO be deleted.
Your appellant craves for leave to alter/amend/withdraw/modify any of the above grounds before hearing ITA No.4555/ Ahd/2007[Revenue]
1.(a) On the facts and in the circumstances of the case and in law, the Id.
CIT(A) erred in allowing deduction of Rs.9,61,12,494/- which was claimed as part of lease rent of Rs.15,43,66,589/-, disregarding the fact that, in substance, the amount represented repayment of loan (balance being interest) and the disallowance of the component of repayment of loan was in conformity with the accepted accounting practice formalized in Accounting Standard-19 (AS-19) as well as International Accounting Standard-17 and also in conformity with the entries in the books of account of the assessee, treating the relevant transaction as a finance transaction and not a lease transaction and debiting only interest component in the accounts.
(b) The Id CIT(A) has wrongly assumed that the assessee had followed AS-19 when the fact is that the assessee had contravened AS-19 in claiming the deduction in the computation of income for income-tax 2 ITA No . 44 61 & 4 5 5 5/ A hd /2 0 0 7 purposes while working out profits in the audited accounts in accordance with AS-19.
(c) The Id CIT(A) failed to appreciate that the relevant machinery was imported by the assessee for its own use and the so-called lessor, M/s Gujarat Lease Financing Ltd., was only a financier, financing the cost of the machinery on its security and the lien of the financier over the machinery was confined to ensuring recovery of repayment of loan along with interest, but in the documents the transaction was given the colour of 'finance lease', showing the financier as the owner, when AS-19 as well as International Accounting Standard- 17 treat finance lease as a finance transaction and not a lease transaction and rightly so in view of the substance of the transaction being finance and not lease.
(d) The Id. CIT(A) erred in overlooking the ratio of Sundaram Finance Ltd. vs. State of Kerala 1966 AIR SC 1178 holding that it is the true effect of the transaction as determined from the terms of the agreement considered in the light of the surrounding circumstances and not mere the recitals in the documents that determines its character and the transaction of finance could not be converted into a transaction of hiring merely by making documents to give it the colour of hiring, and also overlooking the law settled in CIT vs Durga Prasad More 82 ITR 540 (SC), Juggilal Kamlapal vs CIT 73 ITR 702 (SC) and McDowell & Co LTD vs CTO 154 ITR 171 (SC) on substance versus form in tax proceedings.
(e) The CIT(A) failed to appreciate that the profit had to be determined according to the accepted accounting practice as held in the case of P.M. Mohammed Meerakhan vs CIT 73 ITR 735 (SC) and a departure can be made from such accounting practice only where there is a conflict with the principles of law as held in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd. vs. CIT 227 ITR 172 and, since the treatment of this transaction in the books of the assessee was in conformity with the accepted accounting practice as also the substance of the transaction, which only is relevant for income-tax proceedings, the CIT(A) was not justified in going against the entries in the assessee's own books of account, which were in conformity with the accepted accounting practice as well as the principles of law.
2.(a) On the facts and in the circumstances of the case and in law, the Id CIT(A) erred in negating the adjustment of provision for bad debts of Rs.1,17,06,905/- in the computation of book profit u/s 115JB on the ground that it was not a liability for expenses but a liability relating to assets, without appreciating that the word 'liability' in clause (c) of the Explanation below section 115JB(2) does not 3 ITA No . 44 61 & 4 5 5 5/ A hd /2 0 0 7 distinguish between a liability towards expenses and a liability relating to assets both of which are a charge on the profits.
(b) Without prejudice, the Id CIT(A) failed to appreciate that if the amount did not constitute liability, it was a reserve 'by whatever name called' within the meaning of clause (b) of the Explanation below section 115JB (2) in view of not being actual amount of debts written off but only an arbitrary provision at an estimated fraction of total debts, which is treated as reserve even under rule 7(2) of Schedule VI of the Companies Act.
3.(a) On the facts and in the circumstances of the case and in law, the Id CIT(A) erred in negating the adjustment of diminution of Rs.1,35,13,671/- in the value of investments in the computation of book profit u/s 115JB on the ground that it was not a liability for expenses but a liability relating to assets, without appreciating that the word 'liability' in clause (c) of the Explanation below section 115JB(2) does not distinguish between a liability towards expenses and a liability relating to assets both of which are a charge on the profits.
(b) Without prejudice, the Id. CIT(A) failed to appreciate that if the amount did not constitute liability, it was a reserve 'by whatever name called' within the meaning of clause (b) of the Explanation below section 115JB (2) in view of not being actual diminution in the value of investments but an arbitrary provision to meet the diminution in future at the time of actual disposal of the investments, which is treated as reserve even under rule 7(2) of Schedule VI of the Companies Act.
4.(a) On the facts and in the circumstances of the case and in law, the Id.
CIT(A) erred in directing to adjust deduction u/s 80HHC as per book profit and not as computed under the provisions of section 80HHC(3) in the computation of deemed total income under section 115JB, by ignoring the language of clause (iv) of the Explanation below section 115JB(2) referring to amount of profits eligible for deduction u/s 80HHC as computed under section 80HHC(3) subject to the conditions specified in section 80HHC which includes the condition laid down in Explanation (baa) below section 80HHC.
(b) The CIT(A) erred in placing an interpretation which is discriminatory between an assessee paying tax on the normal total income and an assessee paying tax on the deemed total income under section 115JB, making only the latter entitled to benefit unintended in the letter as well as the scheme of the Act.
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5.(a) On the facts and in the circumstances of the case and in law, the Id.
CIT(A) erred in cancelling the interest charged u/s 234B and 234C on the basis of deemed total income under section 115JB totally disregarding sub-section (5) of section 115JB, clearly providing that all other provisions of the Act shall apply to a company covered by this provision, thus, removing the scope of dispute in this regard that arose in relation to section 115J, which was not having such enabling provision.
(b) The Id CIT(A) erred in going by some decisions of the ITAT in contravention of the law laid down by the authoritative pronouncements in the following High Courts decisions:
i. CIT vs. Kotak Mahindra Finance Ltd. 265ITR 119 (Bom), ii. CIT vs. Geetha Ramkrishana Mills Pvt. Ltd. 288 ITR 489 (Mad), iii. CIT vs. Upper India Steel Mfg. & Eng. Co. 279 ITR 123 (P&H);
when there is no authoritative pronouncement holding to the contrary in relation to section 115JB containing specific provision of sub-section (5) to meet the situation.
6. The appellant craves leave to add to, amend or alter the above grounds as may be deemed necessary ITA No.4555/ Ahd/2007[Revenue] 2 Adverting first to ground no.1 relating to deduction of lease rent in the appeal of the Revenue, facts, in brief, as per relevant orders are that return declaring nil income under the normal provisions and book profits of Rs.52,81,75,051/- in terms of provisions of sec. 115JB of the Income-tax Act,1961[hereinafter referred to as the 'Act'] filed on 21.10.2003 by the assessee, manufacturing caustic soda, soda ash and other chemicals besides generating power for captive consumption, after being processed on 10.3.2004 u/s 143(1) of the Act, was taken for scrutiny with the issue of notice u/s 143(2) of the Act on 6.10.2004.During the course of assessment proceedings, the Assessing Officer[AO in short] noticed that the assessee claimed lease rent of Rs.15,43,66,589/- on capital assets, treating the transactions of finance lease as finance transaction. To a query by the AO, as to why only interest be not 5 ITA No . 44 61 & 4 5 5 5/ A hd /2 0 0 7 allowed instead of entire lease rent, the assessee replied that they were not the owner of the leased assets and had not claimed depreciation thereon. Following the Accounting Standard- 19 , the assessee capitalized the assets and charged depreciation accordingly. The assessee further explained that it had bifurcated the lease rent; interest was charged to P & L account and the principal had been reduced from the liability of lessor in the final accounts. However, in the computation of income, interest charged to P & L account had been added back to the income and the entire lease rent paid was claimed as deduction. It was argued that if lease rent was not allowed, then depreciation may be allowed on the lease assets. However, the AO did not accept the submissions of the assessee and treating the lease in the nature of financial lease,allowed only interest of Rs.5,82,54,095/- and added the principal amount of Rs.9,61,12,494/- to the total income besides observing that in principle, the assessee was entitled to depreciation of Rs.2,40.28,123/-, the ownership of the assets being with the assessee.
3 On appeal, the ld. CIT(A) allowed the claim for deduction of Rs.9,61,12,494/-,following the order dated 15-11-2000 of the ld. CIT(A) for the AY 1991-92,upheld by the ITAT vide their order dated 24-5-2006 in ITA No.745/Ahd/2001.
4 The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A). Before us, both the parties agreed that the issue is squarely covered by the decision dated 24-05-2006 of the Tribunal in the assessee's own case for AY 1991-92 in ITA No.745/Ahd/2001. The ld. AR also pointed out that the Revenue have accepted the decision of the ld. CIT(A),deleting a similar disallowance in the AY 2004-05.The ld. DR did not dispute this submission on behalf of the assessee.
6ITA No . 44 61 & 4 5 5 5/ A hd /2 0 0 7 5 W e have heard both the parties and gone through the facts of the case as also the decision relied upon. Undisputedly, a co-ordinate Bench in the assessee's own case for AY 1991-92 in ITA No.745/Ahd/2001 upheld the findings of the ld. CIT(A),deleting a similar disallowance while the Revenue have accepted the findings the ld. CIT(A),deleting a similar disallowance in the AY 2004-05. In these circumstances, especially when the facts in the year under consideration are stated to be undisputedly similar to the facts obtaining in the AY 1991-92 & AY 2004-05 , we have no alternative but to uphold the findings of the ld. CIT(A). Therefore, ground no.1 in the appeal of the Revenue is dismissed.
6. Ground nos.2 & 3 relate to adjustments of provision for bad debts of Rs. 1,17,06,905/- and diminution of Rs. 1,35,13,671/- in value of investments while determining book profits in terms of provisions of sec. 115JB of the Act. The AO noticed that though the assessee debited provision for doubtful debts-Rs.1,17,06,905/- and provision for diminution of investments- Rs.1,35,13,671/-, these were not added back while calculating book profits u/s. 115JB of the Act. To a query by the AO, the assessee submitted that the explanation to proviso to section 115JB(2) of the Act categorically mentioned that profit and loss account of a company was to be prepared in accordance with the provisions of Parts II and III of Schedule VI to Companies Act 1956. The provision for doubtful debts/advances and diminution of investments were, therefore, required to be made in the accounts to comply with the requirements of accounting standards. Relying upon the decisions in the case of N W Exports Ltd. Vs CIT (2003) SOT 136 (Mum,),Usha Martin Industries Ltd Vs CIT (2003) 81 TTJ (Kol) 518,IOL Ltd Vs CIT (2003) 81 TTJ (Cal) 525, CIT Vs Echjay Forgings P Ltd (2001) 116 Taxman 322 (Bom) and Apollo Tyres Ltd Vs CIT (2002) 255 ITR 273, 174 CTR 521 (SC), the assessee contended that the AO did not have the 7 ITA No . 44 61 & 4 5 5 5/ A hd /2 0 0 7 jurisdiction to go behind the net profit shown in profit and loss account except to the extent provided in explanation to section 115JB of the Act. However, the AO did not accept the contentions of the assessee and added both the aforesaid amounts on the ground that the provision for bad debts and diminution in value of investments were not ascertained liabilities and the latter was of capital in nature.
7. On appeal, the ld. CIT(A) deleted the additions on the ground that the provision made for doubtful debts and diminution in investments can in no way be said to be in respect of a liability.
8. The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A). Both the parties agreed that issue is squarel covered by the decision of Hon'ble Supreme Court in CIT Vs. HCL Comet,305 ITR 409(SC).
9. We have heard both the parties and gone through the facts of the case as also the decision relied upon. We find that Hon'ble Supreme Court in their decision dated September 23, 2008, in the case of CIT v. HCL Comnet Systems & Service Ltd. , civil appeal no.. 5800 of 2008 on the issue of addition of provision for bad and doubtful debts while determining book profits, held as under:
As stated above, the said Explanation has provided six items, i.e., Item Nos.(a) to (f) which if debited to the profit and loss account can be added back to the net profit for computing the book profit. In this case, we are concerned with Item No.
(c) which refers to the provision for bad and doubtful debt. The provision for bad and doubtful debt can be added back to the net profit only if Item (c) stands attracted. Item (c) deals with amount(s) set aside as provision made for meeting liabilities, other than ascertained liabilities. The assessee's case would, therefore, fall within the ambit of Item (c) only if the amount is set aside as provision; the provision is made for meeting a liability; and the provision should be for other than ascertained liability, i.e., it should be for an unascertained liability. In other words, all the ingredients should be satisfied to attract Item (c) of the Explanation to Section 115JA. In our view, Item (c) is not attracted. There are two types of "debt". A debt payable by the assessee is different from a debt receivable by the assessee. A debt is payable by the assessee where the assessee has to pay the 8 ITA No . 44 61 & 4 5 5 5/ A hd /2 0 0 7 amount to others whereas the debt receivable by the assessee is an amount which the assessee has to receive from others. In the present case "debt" under consideration is "debt receivable" by the assessee. The provision for bad and doubtful debt, therefore, is made to cover up the probable diminution in the value of asset, i.e., debt which is an amount receivable by the assessee. Therefore, such a provision cannot be said to be a provision for liability, because even if a debt is not recoverable no liability could be fastened upon the assessee. In the present case, the debt is the amount receivable by the assessee and not any liability payable by the assessee and, therefore, any provision made towards irrecoverability of the debt cannot be said to be a provision for liability. Therefore, in our view Item (c) of the Explanation is not attracted to the facts of the present case. In the circumstances, the AO was not justified in adding back the provision for doubtful debts of Rs.92,15,187/- under clause (c) of the Explanation to Section 115JA of the 1961 Act."
9.1 Prior to the aforesaid decision, the ITAT Kolkata Special Bench of ITAT in the case of Jt. CIT v. Usha Martine Industries Ltd. [2007] 104 ITD 249 held that the provision for bad and doubtful debt is not a provision for liability but it is a provision for diminution in the value of the assets. Once the provision is not for any liability, the question whether the liability is ascertained or unascertained does not arise. Therefore, clause (c) of the Explanation to section 115JA would not be applicable. In the case under consideration admittedly, provision of Rs. 1,35,13,671 has been made on account of diminution in value of investments. The Revenue have not placed before us any material suggesting that this provision is for meeting any liability, whether ascertained or not. Even the Assessing Officer has also not given any finding that the provision made by the assessee for diminution in the value of investments is unreasonable or incorrect. At the time of hearing before us also, the Revenue has not brought on record any evidence to prove that the provision made by the assessee for diminution in the value of investments is unreasonable or excessive.
9.2 In view of the foregoing, we do not find any justification to interfere with the order of the ld. CIT(A),holding that the provision made for doubtful debts and diminution in investments can in no way be said to be in respect of a liability . Therefore, we do not find any merit in the ground nos. 2& 3 raised by the Revenue and accordingly, these grounds are dismissed.
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10. Ground no. 4 in the appeal of the Revenue relates to deduction u/s 80HHC of the Act while determining book profits u/s 115JB of the Act. The AO noticed that the assessee claimed deduction of Rs.46,05,652 u/s. 80HHC while computing book profits u/s.115JB of the Act. Since the income determined under the normal provisions of Act resulted in loss, apparently the assessee was not entitled to any deduction u/s. 80HHC of the Act. To a query by the AO, the assessee while referring to the relevant provisions and decision in case of CIT Vs GIN Textiles Ltd, 248 ITR 372 (Ker), submitted that though loss was computed under normal provisions, MAT profit has to be considered while calculating deduction u/s 80HHC of the Act. However, the AO did not accept the submissions of the assessee on the ground that the profit of the business being NIL, deduction u/s. 80HHC cannot be computed and consequently, the assessee was not entitled to any deduction u/s. 80HHC while determining book profits u/s. 115JB of the Act.
11. On appeal, the assessee reiterated their submissions before the AO and relied upon the decision of the Bombay ITAT in the case of DCIT Vs. Syncome Formulations (I) Ltd.,106 ITD 193(Mum) (SB). Following the said decision, the ld. CIT(A) allowed the claim of the assessee.
12. The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A). The ld. DR pointed out that decision of the Special Bench in the case of Syncome Formulations (I) Ltd.(supra) followed by the ld. CIT(A) has since been reversed by the Hon'ble Bombay High Court in the case of CIT Vs. Ajanta Pharma Ltd.,223 CTR(Bom.)441. On the other hand ,the ld. AR contended that the decision of Special Bench has not been totally reversed as held in the case of DCIT Vs. Glenmark Laboratories Ltd.,127TTJ(Mumbai)719.
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13. W e have heard both the parties and gone through the facts of the case as also the decisions relied upon. W e find that while adjudicating a claim for deduction u/s 80HHC of the Act from the book profits determined u/s 115JB of the Act ,the Mumbai Special Bench of ITAT in the case of Syncome Formulations (I) Ltd.(supra) held as under:
"66. The deduction under section 80HHC in a MAT scheme is from the taxable income, which is otherwise the adjusted book profit. If no deduction is available to an assessee, the gross total income itself is the taxable income of the assessee. MAT scheme does not provide for deductions. Therefore, the interpretation is that the adjusted book profit of a company itself is the gross total income of that assessee-company. The deduction under section 80HHC is in that way given out of gross total income in a case falling under MAT. This in turn means that deduction under section 80HHC should be computed on the adjusted book profit. Sections 115J, 115JA and 115JB come into operation, as the regular profits has been substituted by the book profit. Once the substitution is over, there is no way to go back to the normal computation process of statutory profit, which has already been overwhelmed by sections 115J, 115JA and 115JB. This reconciles the alleged incompatibility pointed out by the Revenue that the deduction available to an assessee under Chapter VI-A is subject to section 80AB.
Therefore, we find that the deduction under section 80HHC in a case of MAT assessment is to be worked out on the basis of the adjusted book profit and not on the basis of the profit computed under the regular provisions of law applicable to the computation of profit and gains of business or profession."
13.1 However, subsequently, Hon'ble Bombay High Court in their aforesaid decision in Ajanta Pharma Ltd.(supra) overruled the decision in the case of Syncome Formulations (I) Ltd.(supra), holding as under:
23. Until s. 115JB was introduced, the whole of the profits computed under s.
80HHC were eligible for reduction for computing the book profits. Pursuant to sub-s. (1B) of s. 80HHC the deduction available to the extent provided in s. (1B) and after 1st April, 2005 the deduction of export profits is discontinued. The assessee's argument is that only in case of companies not covered by s. 115JB to then sub-s. (1B) of s. 80HHC would apply. Insofar as MAT companies are concerned, the profits eligible for deduction are as computed under sub-s. (3) or (3A) of s. 80HHC without applying sub-s. (1B). This argument is based on the expression "computed under sub-s. (3) or sub-s. (3A) as the case may be".
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24. For that purpose, we will have to examine the true scope and effect of s. 80HHC. In s. 80HHC, the relevant provisions to which we have earlier reproduced is sub-s. (1), which provides, that in computing the total income of the assessee, a deduction is to be made to the extent of profits referred to in sub-s. (1B) derived by the assessee from the export of such goods. The section as amended has brought in the words "deduction to the extent of profits" referred to in sub-s. (1B) by Finance Act, 2000 w.e.f. 1st April, 2001. If the construction sought to be given by counsel for assessee is accepted it would make sub-s. (1B) irrelevant for the purpose of s. 115JB. Sub-s. (1B) provides for deduction in terms set out therein. Sub-s. (3) sets out the method of computation of profits. The computation of profits is, therefore, for the purpose of working out the deduction of profits available under s. 80HHC(1B). Earlier it was in terms of sub-s. (1). Now s. 80HHC(1) in term refers to sub-s. (1B). All the provisions are inter-related and cannot be read de hors one and other. If sub-s. (1B) is not read in sub-s. (1) then the expression "no deduction shall be allowed in respect of the assessment beginning on the 1st day of April, 2005 and any subsequent year", shall be rendered otiose.
25. Insofar as s. 115JB(2), Expln. 1(iv) is concerned, in computing the book profits the export profits under s. 80HHC had to be reduced. The object of s. 115JB was to impose tax on companies which are known as zero tax companies. These companies though making huge profits and paying handsome dividends, were not paying any tax. The object of the section was, therefore, that they pay tax not in a manner of total income computed by other companies, but on the book profits which had to be calculated in terms of s. 115JB(2). The assessee's do not dispute this. Their argument is that reduction must be of the whole of the book profits computed under sub-s. (3) or (3A) of s. 80HHC. The object of s. 80HHC as originally introduced was to exempt the whole of the export profits. By virtue of sub-s. (1B) introduced w.e.f. 1st April, 2001 the deduction is only a percentage of the export profits as allowed therein and no reduction after 1st April, 2005. This benefit of reduction was initially not made available to MAT companies, but the benefit was extended from 1st April, 1989.
26. It is then sought to be contended that the expression "conditions" in cl. (iv) of Expln. 1 of s. 115JB cannot be referable to sub-s. (1B) of s. 80HHC as sub-s. (1B) is not a condition but in the nature of computation. We have referred to the dictionary meaning of the word "conditions". Even if we accept that sub-s. (1B) of s. 80HHC is not a condition and proceed on that footing, nevertheless it is impossible of reading s. 80HHC(3) or (3A) independent of s. 80HHC(1B). To our mind, the language is clear. The literal meaning does not in any way defeat the object of the section and/or lead to an absurdity. The object of s. 115JB is to allow even MAT companies to avail of the benefit of deduction. If we consider the assessee's arguments that MAT companies are entitled to full deduction of export profits it will lead to anomaly, whereby the companies which are paying tax on total income under the normal rules, for them the deduction of export profits will be lesser than what MAT companies are entitled to. Is this a possible view? When s. 115J was originally introduced, MAT companies were not entitled to deduction of profits under s. 80HHC while working out the book profits. That 12 ITA No . 44 61 & 4 5 5 5/ A hd /2 0 0 7 came to be introduced by Direct Tax Laws (Amendment) Act, 1989 w.e.f. 1st April, 1989 a year later. Parliament, therefore, initially had even denied to MAT companies deduction under s. 115J. When s. 115JA was introduced w.e.f. 1st April, 1997, s. 80HHC benefits were once again not available for MAT companies. The amendment by Finance Act, 1997 to give the benefit was w.e.f. 1st April, 1998. Can it now be argued that MAT companies considering s. 115JB(2) Expln. 1 (iv) are entitled to be placed in a better position than the other companies entitled to the export deduction under s. 80HHC though earlier they constituted one class? No rule of construction nor the language of the s. 80HHC r/w s. 115JB, in our opinion, will permit such construction. If such construction is not possible then both the classes of companies will be entitled to the same deduction. This would contemplate that both would be entitled to deductions of profits in terms of s. 80HHC(1B). So read, it would be a harmonious construction. A class of companies covered by s. 80HHC cannot be sub-classified into two classes, when more so, for intermittent periods Parliament had even denied the benefit of s. 80HHC to MAT companies. If the argument of the assessee is to be accepted, what then is the mischief, that s. 115JB sought to avoid? What s. 115JB did was to continue the deductions also to the MAT companies. The only difference was that instead of calculating tax at 30 per cent of the book profits as in the case of ss. 115J, 115JA, it was made 7.5 per cent and from 1st April, 2007 it is 10 per cent. The language used in cl. (iii) to Expln. 1 to sub-s. (2) of s. 115J or cl. (vii) to Expln. 1 of s. 115JA(2) or cl. (iv) of Expln. 1 of s. 115JB(2) is "eligible for deduction".
27. The argument of the assessee is basically based on the memorandum of understanding in the Finance Bill, 2000 which we have earlier reproduced. It only says that export profits under s. 80HHC and others are kept out of the purview of the provision during the period of phasing out of deductions available under the provisions. At the same time, in the Notes of Clauses it is clearly stated that the profits will be as reduced by the certain adjustments which are eligible for deduction under s. 80HHC. The profits eligible for deduction are export profits in terms of s. 80HHC(1B). There is nothing in the Finance Minister's speech of 29th Feb., 2000, [(2000) 159 CTR (St) 1 : (2000) 242 ITR (St) 1] to hold otherwise. We have earlier referred to rules of construction as set out in the judgments earlier quoted. The Notes of Objects and Reasons is only an aid to construction. That aid to construction is only when the literal reading leads to ambiguous result or absurdity. To our mind considering the literal language there is no absurdity or ambiguity being caused or any mischief sought to be remedied. The language used in s. 115JB is deduction available under s. 80HHC. It is difficult to conceive of any rational reason as to why the legislature should have thought to give MAT companies additional benefits than the other companies who are paying tax on total income and not the tax based on book profit as calculated under s. 115JB. Is it possible to conceive of any degree of fairness and/or justice that MAT companies, who for some periods were denied the benefit of s. 80HHC, because of the introduction of s. 115JB Expln. 1(iv) are entitled to have their entire export profits reduced? The object of s. 115JB or for that matter s. 115J or s. 115JA was to impose tax on those companies which otherwise considering various exemptions or deductions available under the Act, though making huge profits 13 ITA No . 44 61 & 4 5 5 5/ A hd /2 0 0 7 and paying large dividends were not paying any tax. It is therefore, not possible to accept the construction as sought to be advanced on behalf of the assessee, that they should be treated on a different footing in computing export profits under s. 80HHC, for the purpose of s. 115JB.
28. We have had the benefit of going through reasoning and the orders of Tribunal in Syncome as also in the case of Dy. CIT vs. Govind Rubber (P) Ltd. It is not possible to agree with the view taken by the Benches. Those decisions in view of this judgment stand overruled.
29. Our attention was also invited to the judgment of the Kerala High Court in the case of CIT vs. GTN Textiles Ltd. In the first instance, the Kerala High Court was considering the provisions of s. 115J. Sec. 115JB was not under consideration. The High Court noted that original s. 115J of the Act did not contain exemption under s. 80HHC. That section as we have noted, did not originally include exemption allowed to exporters under s. 80HHC. By the virtue of the Explanation and cl. (iii) thereto, which came into effect from 1st April, 1989, the reduction under s. 80HHC became available. The issue before the Kerala High Court was, what is profit that should be taken into consideration considering the accounting system that have to be followed while working out the book profits. Therefore, the judgment would be of no assistance in considering the question framed for consideration.
30. It was also sought to be then contended that if two views are possible then the construction of s. 115JB, Expln. 1(iv) considering the decided law, the view in favour of the assessee should be accepted. The question is whether there are two views possible. In our opinion, no two views are possible. The only view as explained earlier is that the MAT companies are entitled to the same deduction of export profits under s. 80HHC as any other company involved in export in terms of s. 80HHC(1B). Once that be the case, this argument is also devoid of merit.
13.2 The ld. AR while referring the decision in the case of Glenmark Laboratories Ltd.(supra) contended that decision of Special Bench has not been fully overruled by the Hon'ble Bombay High Court. Since the ld. CIT(A) did not have the benefit of the views in the aforecited decisions and thus, could not record any findings on the pleas now raised on behalf of the assessee before us on their claim for deduction u/s 80HHC of the Act while determining book profits u/s 115JB of the Act , we consider it fair and appropriate to set aside the order of the ld. CIT(A) and restore the matter to his file for deciding the issue of claim for deduction u/s 80HHC of the Act in terms of clause (iv) of the explanation to sec. 115JB of the Act in accordance with law in the light of various judicial pronouncements including the aforecited decisions, after allowing sufficient 14 ITA No . 44 61 & 4 5 5 5/ A hd /2 0 0 7 opportunity to both the parties . Needless to say that while redeciding the appeal, the learned CIT(A) shall pass a speaking order, keeping in mind, inter alia, the mandate of provisions of sec. 250(6) of the Act and ensuring that the conditions of section 80HHC are satisfied in the instant case while computing the deduction allowable to the assessee .With these directions, ground no. 4 in the appeal filed by the Revenue is disposed of.
14. Next ground no.5 in the appeal relates to levy of interest u/s 234B & 234C of the Act on tax determined on book profits in terms of provisions of sec. 115JB of the Act. The AO levied interest u/s 234B & 234C of the Act while determining book profits in terms of provisions of sec. 115JB of the Act.On appeal, the ld. CIT(A) concluded as under:
"As regards Ground No.(9), the appellant has argued that interest u/s. 234B & 234C cannot be charged since the final income has been determined under MAT u/s. 115JB and has submitted that the ITAT Ahmedabad in the appellant's own case has held that interest u/s. 234B & 234C cannot be levied on the deemed income assessed u/s. 115J. A copy of the I.T.A.T. order dated 30-12-2005 for a.y. 2003-04 has been placed on record. In this order, the ITAT have decided the issue in favour of the appellant at para 5 of the order where it has also mentioned that a similar view has been taken by it in assessee's own case for the preceding assessment years. Under the circumstances, it is held that since the issue in the appellant's own case has been decided by the ITAT, the interest charged by the Assessing Officer u/s. 234B & 234C on the income assessed under MAT s cancelled."
15. The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A). Both the parties agreed that issue is squarely covered by the decision of ITAT Special Bench in the case of Additional CIT Vs. Ashima Syntex Ltd., 310 ITR (AT)1,as also decision of the Third Member in the case of M/s. Kanel Oil and Export Industries Limited Vs. JCIT, 2009-TIOL-646 ITAT- Ahd-TM.
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16. We have heard both the parties and gone through the facts of the case as also the decisions relied upon . In the case of Ashima Syntax Ltd.(supra) in the context of levy of interest u/s 234C of the Act while determining book profits u/s 115JA of the Act, the Special Bench analysed the provisions of advance tax and provisions of sec. 115J & 115JA of the Act in detail as also the decision of the Hon'ble Karnataka High Court in the case of Kwality Biscuits Ltd. [2000] 243 ITR 519, in the context of provisions of sec. 115J of the Act, later affirmed by the Hon'ble Supreme Court in CIT v. Kwality Biscuits Ltd. 284 ITR 434 (SC) and concluded that interest u/s 234B & 234C of the Act is leviable while computing income in terms of provisions of sec. 115JA of the Act. A similar view has been taken in the case of .M/s. Kanel Oil and Export Industries Limited (supra) as also in a recent decision by the Hon'ble Karnataka High Court in the case of CIT Vs. Brindavan beverages Ltd.,321 ITR 197(Kar.). Earlier also, Hon'ble Karnataka High Court in the case of Jindal Thermal Power Company Ltd. Vs. DCIT & Another,286 ITR 182(Kar) after considering their own decision in the case of Kwality Biscuits Ltd. v. CIT [2000] 243 ITR 519, held in the context of levy of interest u/s 234B & 234C of the Act while computing income in terms of provisions of sec. 115JB of the Act that "The Central Board of Direct Taxes Circular No. 13/2001 was issued on 18 November 9, 2001, regarding the liability for payment of advance tax under the new MAT provisions of section 115JB of the Act and it is abundantly made clear in the said circular that the new provision of the section 115JB as introduced by the Finance Act, 2000 is a self-contained code. Sub-section (1) lays down the manner in which income-tax payable is to be computed. Sub-section (2) provides for computation of "book profit". Sub-section (5) specifies that save as otherwise provided in this section, all other provisions of this Act shall apply to every assessee, being a company mentioned in that section. In other words, except for substitution of tax payable under the provision and the manner of computation of book profits, all the provisions of the tax including the provision relating to charge, definitions, recoveries, payment, assessment, etc., would apply in respect of the provisions of this section and in view of the scheme of the Income-tax Act. Section 4 of the Act charges to tax the income at any rate or rates which may be prescribed by the Finance Act every year and section 207 deals with liability for payment of advance tax and section 209 deals with its computation based on the rates in force for the financial year, as are contained in the Finance Act and the first proviso to section 2(8) of the Finance Act, 2001, provides that the tax payable by way of advance tax in respect of income chargeable under section 115JB as introduced by the Finance Act, 2000, and consequently the provisions of sections 234B and 234C for interest on defaults in payment of advance 16 ITA No . 44 61 & 4 5 5 5/ A hd /2 0 0 7 tax and deferment of advance tax would also be applicable where the facts of the case warrant."
16.1 In CIT Vs. Geetha Ramakrishna Mills P .Ltd., 288 ITR 489(Mad).,Hon'ble Madras High Court ,inter alia, observed that "That apart, in view of the introduction of sections 115JA and 115JB of the Act with effect from April 1, 1997 by the Finance (No.2) Act, 1996, the question whether a company which is liable to pay tax under either of the provisions should pay advance tax does not assume much importance as specific provisions have been made in the section providing that all provisions of the Act shall apply to the assessee being a company mentioned in the said section and therefore, section 115J of the Act is no more available for the assessee for delaying the payment of advance tax in view of the insertion of sections 115JA and 115JB of the Act. "
16.2 In light of the view taken in the aforesaid decisions , we hold that the total income computed under the provisions of sec. 115JB of the Act, is liable to advance tax and in the event of default in relevant provisions of payment of advance tax, levy of interest u/s 234B & 234C of the Act is mandatory. In this view of the matter, the findings of ld. CIT(A) are reversed and the order of the AO is restored. Therefore, ground no.5 in the appeal of the Revenue is allowed.
ITA No.4461/ Ahd/2007[ Assessee]:
17 Ground no.1 in the appeal of the assessee, being general in nature, does not require any separate adjudication and is therefore, dismissed.
18. Ground no.2 relates to disallowance of claim for amortization of lease hold land expenses of Rs.3,36,224/-.The AO noticed that the assessee claimed an amount of Rs.3,36,224/-towards amount amortised in the books for land taken on lease from GIDC for 99 years. Since the payment was made for securing right of possession and peaceful enjoyment of the land for 99 years, the AO concluded that payment being for a right ,providing enduring benefit, was capital in nature.17
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19. On appeal, it was admitted on behalf of the assessee that a similar issue had been decided against the assessee in an earlier years. Accordingly, the ld. CIT(A) upheld the disallowance.
20. The assessee is now in appeal before us against the aforesaid findings of the ld. CIT(A). The ld. AR contended that issue has been decided in favour of the assessee in the AY 1991-92 while the ld. DR pointed out to the admission of the assessee before the ld. CIT(A) that issue had been decided against the assessee in an earlier year.
21. W e have heard both the parties and gone through the facts of the case. Undisputedly, the assessee admitted before the ld. CIT(A) that the issue of claim for deduction of amortised expenses had been decided against them in an earlier year and consequently, the ld. CIT(A) dismissed the appeal on the issue. The decision of the ITAT for the AY 1991-92 referred to before us, does not reveal any such issue having been decided in para 3 to 9 of the said ITAT order. In these circumstances, especially when there is no material before us to interfere with the findings of the ld. CIT(A), we have no alternative but to reject the ground no.2 in the appeal of the assessee.
22. Ground nos.3 and 4 in the appeal of the assessee relate to confirmation of disallowance of Rs.1,59,50,000/-, being contribution to 'GACL Employees W elfare Trust Fund' and Rs.3,18,340/-, being contribution to 'GACL Employees Benevolent Fund'. During the course of assessment proceedings, to a query by the AO, seeking disallowance of the aforesaid two amounts in terms of provisions of sec, 40A(9) of the Act, the assessee submitted that the contribution to GACL Employees W elfare Trust was made only to meet the 18 ITA No . 44 61 & 4 5 5 5/ A hd /2 0 0 7 employees welfare activities and a similar claim has been allowed in earlier years by the CIT(A) in assessee's own case. Inter alia, the assessee placed reliance on the decision in the case of Charan Engg. Corporation Ltd. Vs. CIT 148 CTR 597. However, the AO did not accept the submissions of the assessee on the ground that such contributions to any fund, trust or body of individuals, society, etc. were expressly prohibited u/s 40A(9) of the Act except where such amounts were covered under clause (iv) or (v) of section 36(1). Relying on the decision dated 25.8.2000 of the ITAT in ITA nos.3216/Ahd./1997 for the AY 1994-95 & ITA no.1553/Ahd./1999 for the AY 1995-96, the AO disallowed the claim of the assessee.
23. On appeal, the ld. CIT(A) upheld the disallowance in the following terms:-
"10. As regards Ground No.(4) & (5), the Assessing Officer disallowed the contribution of Rs.1,59,50,000/- and Rs.3,18,340/-made by the company to GACL Employees Welfare Trust and the Benevolent Fund respectively stating that u/s.40A(9) such deductions are expressly prohibited and also that the ITAT in its order for a.y. 94-95 & 95-96 had upheld the disallowance.
Before me, the appellant has fairly admitted that the issue stands decided against it in earlier years.
11. I have considered the submissions. In view of the orders of the ITAT on the issue against the appellant for a.y. 94-95 & 95-96 dated 25-8-2000, the disallowance is confirmed."
24. The assessee is now in appeal before us against the aforesaid findings of the ld. CIT(A).Both the parties agreed that the issue is squarely covered by the decision dated 25-09-2009 of the Tribunal in the assessee's own case for AY 1999-2000 & 2000-01 in ITA nos.569&570/Ahd/2004..
25. W e have heard both the parties and gone through the facts of the case as also the aforesaid order of the Tribunal in the 19 ITA No . 44 61 & 4 5 5 5/ A hd /2 0 0 7 assessee's own case in ITA nos. 569&570/Ahd/2004,where it was held:-
"14 We have heard both the parties and gone through the facts of the case as also the decisions relied upon. We find that the ld. CIT(A) upheld the disallowance on the ground that the assessee neither submitted any factual details of the aforesaid welfare trust and benevolent fund nor made any submissions on the applicability or otherwise of provisions of section 40A(9) and 40A(10) of the Act. Even before us, the situation is no better nor the ld. AR placed before us any material, controverting the aforesaid findings of the ld. CIT(A). The reliance by the ld. AR on the decisions of the ITAT in the case of other assessees is totally misplaced, especially when the assessee did not submit the requisite details before the AO or the ld. CIT(A) and even before us while similar disallowance has been upheld by the ITAT in the AYs 1989-90, 1995-96 and 1996-97. In view of the foregoing, especially when there is no material before us to take a different view in the matter, we have no alternative but to uphold the findings of the ld. CIT(A) in these two assessment years. Therefore, ground no.5 in the appeal for the AY 1999-2000 and ground no.4 in the AY 2000-01 are dismissed."
26. Since the facts and issues involved in the assessment year under consideration are similar as were obtaining in the AYs.1999-2000 & 2000-01, following the aforesaid order dated 25.9.2009 of the ITAT, we have no option but to uphold the conclusion of the ld. CIT(A) and consequently ground nos.3 and 4 in the appeal of the assessee are dismissed.
27. Next ground no.5 in the appeal of the assessee relates to disallowance of Rs.14,18,62,240/-on account of replacement of membrane cells. The AO noticed during the course of assessment proceedings that the assessee claimed depreciation of Rs.100,97,47,590/- vide their submission dated 24-12-2005 while in the return, claim of depreciation was made only to the extent of Rs.91,13,90,804/-.To a query by the AO, the assessee explained that replacement of membrane cells was a continuous process to keep the plant operational since membranes were the essential composition of the process system and these had a specified life requiring replacement at periodical 20 ITA No . 44 61 & 4 5 5 5/ A hd /2 0 0 7 intervals. The assessee pointed out that the expenditure being substantial, was treated as deferred revenue expenditure in the books of account and amortized over a period accordingly while the AO had allowed similar expenditure on remembraning as revenue expenditure in the AY 1993-94 and 1995-96 . However, the AO rejected the contentions of the assessee on the ground that the company earned an advantage of enduring benefit from the same and therefore, expenditure was capital in nature. Accordingly, depreciation was allowed.
28. On appeal, the ld. CIT(A) dealt with the issue as under:-
" 12..............Before me, the appellant has fairly admitted that the issue stands decided against it by the order of the ITAT. However, it has argued that it places strong reliance on the decision in the case of CIT v. Saravana Spg. Mills P. Ltd., (2007) 163 Taxman 196 (SC).
13. I have considered the rival submissions. In view of the fact that the issue stands decided against the appellant by the ITAT on the basis of the peculiar facts and circumstances existing in the appellant's own case. It is also observed that the ratio of the CIT v. Saravana Spg. Mills P. Ltd. (supra) cannot be applied due to the existence of peculiar and different facts in the appellant's case. Under the circumstances, the disallowance made by the Assessing Officer of Rs. 14,18,62,240/- is confirmed."
29. The assessee is now in appeal before us against the aforesaid findings of the ld. CIT(A). The ld. AR on behalf of the assessee submitted that the issue is squarely covered in favour of the assessee by the decision dated 25.9.2009 of the ITAT in the assessee's own case for AY 1999-2000 and 2000-01 in ITA Nos.569 and 570/Ahd/2004. On the other hand, the ld. DR supported the findings of the ld. CIT(A).
30. W e have heard both the parties and gone through the facts of the case as also the decision relied upon. W e find that a co- ordinate Bench in their decision dated 25.9.2009 in the assessee's own case for AY 1999-2000 and 2000-01 in ITA nos.569& 570/Ahd/2004 concluded on a similar issue as under:
21ITA No . 44 61 & 4 5 5 5/ A hd /2 0 0 7 "11. We have heard both the parties and gone through the facts of the case.
We find that the AO himself has treated the expenditure incurred by the assessee in the A.Y.1993-94 on installation/replacement of re-membraining in Membrane Cell plant, revenue in nature. Though the ld. CIT(A) observed in the impugned order that a similar claim has been accepted by the AO in the AY 1993-94 & 1995-96, no reasons have been given as to how the facts relating to the claim in the year under consideration are different from the AY 1993-94 or AY 1995-96, so as to take a different view in the matter. In these circumstances , we find merit in the undisputed contentions of the ld. AR that principles of consistency should have been adhered to . In this connection, Hon'ble jurisdictional High Court in their decision in the case of Taraben Ramanbhai Patel & Another (supra) in the context of levy of penalty u/s 271(1)observed as under:
" It is no doubt true that the strict rule of the doctrine of res judicata does not apply to proceedings under the Income-tax Act. At the same time, it is equally true that unless there is a change of circumstances, the authorities will not depart from previous decisions at their sweet will in the absence of material circumstances or reasons for such departure : Joint Family of Udaya Chinubhai v. CIT [1967] 63 ITR 416 (SC), AIR 1967 SC 762 ; Radhasoami Satsang v. CIT [1992] 193 ITR 321 (SC) ; AIR 1992 SC 377 ; H. A. Shah and Co. v. CIT/EPT [1956] 30 ITR 618 (Bom).
In the last mentioned case, it was observed that if the question was not considered in detail in earlier proceedings, it is open to the authorities to consider those documents and to come to a different conclusion. But if the question is already decided on the basis of the facts and there is no change in that factual position, it cannot be reopened. In the instant case, as observed by us hereinabove, the fact was brought to the notice of the respondent authority by the petitioners that litigation was going on between the parties and the receiver was appointed by the High Court of Bombay. That fact was also accepted by the Department for the assessment year 1978-79 and even for the year 1982-83 in respect of a number of appeals filed by other co-owners as also by some of the petitioners. In our opinion, there was no good and justifiable cause to take a different view when some appeals came before a different officer without there being any change in the factual position and when the earlier decision was not challenged by the Department."
11.1 The aforesaid decision has been followed by the Hon'ble jurisdictional High Court in their subsequent decision in Lalludas Children Trust Vs, CIT,251 ITR 50(Guj) .Similar view has been taken in the other decisions relied upon on behalf of the assessee as also in several cases including in Arihant Builders Developers & Investors (P.) Ltd v. ITAT [2005] 277 ITR 239 (MP), Asstt. CIT v. Gendalal Hazarilal & Co. [2003] 263 ITR 679 (MP), CIT v. Neo Poly Pack (P.) Ltd [2000] 245 ITR 492 (Delhi),4. Dhansiram Agarwalla v. CIT [1996] 217 ITR 4 (Gauhati). CIT v. Shiv Sagar Estate [2002] 257 ITR 59 (SC) Union of India v. Satish Pannalal Shah [2001] 249 ITR 221 (SC).In the case of CWT v. M.K. Gupta [1990] 185 ITR 393 (Delhi) . Since in the case under consideration, the 22 ITA No . 44 61 & 4 5 5 5/ A hd /2 0 0 7 AO himself has allowed the claim in the AY 1993-94 , treating the expenditure revenue in nature while no change of facts and circumstances have been pointed out on behalf of the Revenue in the years under consideration, we are of the opinion that the AO is not justified in departing from his previous decision in the AY 1993-94, in the absence of material circumstances or reasons for such departure. Therefore, ground no.4 in the appeal for the AY 1999-2000 & ground no.2 in the AY 2000-01 are allowed."
30.1 In the light of view taken in the aforesaid decision, especially when in the assessments years 1993-94 & 1995-96, the AO himself allowed the claim of the assessee as revenue expenditure and therebeing no variation in facts in the year under consideration vis-à-vis AY 1999-2000 & 2000-01 nor the Revenue having placed before us any material or even the order of the ITAT referred to by the ld. CIT(A) in para 13 of his order so as to enable us to take a different view in the matter, we have no hesitation in allowing ground no.5 in this appeal of the assessee.
31. Ground no.6 in the appeal assessee's relates to disallowance of Rs.97,043/- (20% of Rs.4,85,216/-) u/s 40A(3) of the Act. The AO found on going through the audit report that there were payments amounting to Rs.4,85,216/- covered u/s 40A(3)of the Act. However, 20% of this amount i.e. Rs.97,043/- had not been added back by the assessee in the computation of income. To a query by the AO, the assessee submitted that these amounts were towards advance given to the employees for medical/gifts and were not debited to P&L Account Therefore, no disallowance can be made. However, the AO did not accept the submissions of the assessee and in view of the specific report given by the auditors, disallowed 20% of the amount of Rs.4,85,216/- i.e. Rs.97,043/-.
32. On appeal, the CIT(A) concluded as under:
"Before me, the appellant has reiterated its submissions made before the AO. However, no details in this regard have been furnished to show that these have not been debited to the P&L Account.23
ITA No . 44 61 & 4 5 5 5/ A hd /2 0 0 7
15. I have considered the rival submissions. It is observed that the Auditors have pointed out the expenditure incurred in cash and shown the same in the audit report u/s. 40A(3). The Auditors appear not to have qualified this by saying that the payments in question has been in the nature of advance. The appellant has also not led any evidence to show that these are in the nature of advances and have been recouped subsequently. Under the circumstances, the disallowance made is confirmed."
33. The assessee is now in appeal before us against the aforesaid findings of the ld. CIT(A). The ld. AR on behalf of the assessee reiterated their submissions before the lower authorities while the ld. DR supported the findings of the ld. CIT(A)
34. W e have heard both the parties and gone through the facts of the case. We find that the ld. CIT(A) upheld the disallowance on the ground that the assessee did not place any evidence before him that the amount was in the nature of advance and had not been debited to the profit and loss account. Even before us situation is no better . Despite sufficient opportunity allowed by the AO and the ld. CIT(A) , the assessee did not adduce any evidence that the amount was in the nature of advance and that the observations of their own auditors were incorrect. In these circumstances, especially when there is no material before us so as to enable us to take a different view in the matter, we are not inclined to interfere with the findings of the ld. CIT(A).Therefore, ground no 6 in the appeal is dismissed.
35. No additional ground having been raised in terms of the residuary ground in the appeal of the assessee or in terms of ground no. 6 in the appeal of the Revenue, both these grounds are dismissed.
24ITA No . 44 61 & 4 5 5 5/ A hd /2 0 0 7
36. In the result, appeal of the Revenue is partly allowed,but for statistical purposes while that of the assessee is partly allowed.
Order pronounced in the open court today on 9 -04-2010 Sd/- Sd/-
(MAH AVIR SINGH) (A N P AHUJ A)
JUDICI AL MEMBER ACCOUNTANT MEMBER
Date : 9-04-2010
Copy of the order forwarded to :
1. Gujarat Alkalies and Chemicals Limited, P O.
Petrochemicals, Dist. Vadodara
2. The ACIT, Circle-1(1), Vadodara
3. CIT concerned
4. CIT(A)-I, Baroda
5. The DR, ITAT,'D' Bench, Ahmedabad
6. Guard File
BY ORDER
Deputy Registrar
Assistant Registrar
ITAT, AHMEDABAD
25