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Dy. Commissioner of Income Tax 10(3), Room No.451, 4th Floor, Aayakar Bhavan, Maharshi Karve Road, Mumbai - 400020 Vs. M/s. Ganesh Polychem Ltd., 71, Udyog Kshetra, 2nd Floor, Mulund Goregoan, Link Road, Mulund (W), Mumbai 400 080
May, 28th 2015
                  IN THE INCOME TAX APPELLATE TRIBUNAL,
                         MUMBAI BENCH "G", MUMBAI

            BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND
                  SHRI VIJAY PAL RAO, JUDICIAL MEMBER

                                  ITA No.5910/M/2013
                                Assessment Year: 2008-09

           Dy. Commissioner of Income     M/s. Ganesh Polychem Ltd.,
           Tax 10(3),                     71, Udyog Kshetra, 2nd Floor,
           Room No.451, 4th Floor,        Mulund Goregoan,
           Aayakar Bhavan,            Vs. Link Road, Mulund (W),
           Maharshi Karve Road,           Mumbai ­ 400 080
           Mumbai - 400020                PAN: AABCG 6160B


               (Appellant)                          (Respondent)

      Present for:
      Assessee by                   : Shri Deepesh T. Chheda, A.R.
      Revenue by                    : Shri Vijay Kumar Bora, D.R.

      Date of Hearing               : 25.05.2015
      Date of Pronouncement         : 27.05. 2015

                                       ORDER


Per Vijay Pal Rao, Judicial Member:

      This appeal by the Revenue is directed against the order dated
23.07.2013 of the CIT(A) for the assessment year 2008-09. The Revenue has
raised the following grounds in this appeal:
      "1.      On the facts and in the circumstances of the case and in law, the Ld. CIT(A)
               erred in holding that setting off of the loss of non-eligible undertaking
               against the profits of the eligible undertaking before allowing exemption
               u/s 10B of the Act.

      2.       On the facts and in the circumstances of the case and in law, the Ld. CIT(A)
               erred in deleting addition of Rs. 1,26,46,787/- representing disallowance of
               exemption u/s 10B was untenable without appreciating the fact that
               capital expenditure of AN 2007-08 is not allowable as revenue
               expenditure for the year under consideration.
                                         2                              ITA No.5910/M/2013
                                                                   M/s. Ganesh Polychem Ltd.



      3.     The appellant craves leave to add, amend, vary, omit or substitute any
             of the aforesaid grounds of appeal at any time before or at the time of
             hearing of appeal."

2.    Ground No.1 is regarding restricting the claim of resolution under
section 10B by setting off of the loss of non eligible undertaking against the
profits of eligible undertaking.




3.    We have heard the Ld. D.R. as well as the Ld. A.R. and considered the
relevant material on record. At the outset, we note that this is a recurring issue
and this Tribunal in assessee's own case for the A.Ys. 2006-07 and 2007-08
has decided this issue in favour of the assessee. For the A.Y. 2007-08 the
Tribunal has considered an identical issue vide order dated 28.09.12 in ITA
No.6834/M/2010 in para 3 as under:

      "3. We have heard the arguments of both the sides and also perused the
      relevant material on record. Although the learned DR has relied on the order
      of the AO in support of the Revenue's case on the issue under consideration,
      the learned counsel for the assessee has pointed out that a similar issue has
      been decided by the Tribunal in favour of the assessee in assessee's own
      case for the earlier years. Copies of the relevant orders of the Tribunal are
      also placed on record by him before us and perusal of the same shows that a
      similar issue has been decided by the Tribunal in favour of the assessee in
      assessee's own case for assessment year 2006-07 following the decision of
      Hon'ble Bombay High Court in the case of CIT vs. Black & Veatch Consulting
      (P) Ltd. (2012) 20 Taxmann.com 727 (ITA No. 1237 of 2011 dated 09-04-
      2012) wherein it was held that brought forward losses of the unit, income of
      which is not eligible for deduction u/s 10A, cannot be set off against current
      profit of eligible unit for computing deduction u/s !OA. Following the said
      decision of the Hon'ble jurisdictional High Court in the case of CIT vs. Black
      Veatch Consulting (P) Ltd. (supra), the Tribunal has also decided a similar
      issue in favour of the ssessee for assessment year 2005-06 vide its order
      dated 14th Sept., 2012 passed in ITA No. 22/Mum/2009. Respectfully
      following this judicial pronouncement, we uphold the impugned order of the
      learned CIT(Appeals) directing the AO to allow deduction u/s 1013 from the
      income of the assessee before set off of brought forward business losses and
      dismiss this appeal of the Revenue."
                                          3                         ITA No.5910/M/2013
                                                               M/s. Ganesh Polychem Ltd.



4.    We further note that the appeal filed by the Revenue against the order of
this Tribunal has been dismissed by the Hon'ble High Court vide order dated
28.02.13 whereby the order of this Tribunal has been confirmed. Following
the earlier order of this Tribunal as well as Hon'ble Jurisdictional High Court
in assessee's own case, we do not find any error or illegality in the impugned
order of the Ld. CIT(A) qua this issue.

5.    The ground No.2 is regarding disallowance of the deduction under
section 10B by not allowing the assessee to reduce the expenditure on account
of repairs and maintenance which was already debited to the profit and loss
account. In the statement of computation of income the assessee has claimed
deduction of consumable stores & spares of Rs.73,21,585/- and repairs and
maintenance of Rs.53,25,202/- total amounting to Rs.1,26,46,787/-. On query
from the Assessing Officer (AO) the assessee submitted that the company has
inadvertently considered capital expenditure of Rs.1,26,46,787/- as revenue in
nature in its accounts for the year ending 31.03.07. The said mistake was
realized by the company at the time of preparation of computation of income
for the A.Y. 2007-08 and after finalisation of the account for the said year.
Since the accounts for the year under 31.03.07 were finalized at that point of
time it was not possible to change the accounts for the year ended 31.03.07.
The assessee company taking corrective steps had added the said amount under
the head repairs & maintenance and stores & spares to the net profit while
preparing the computation of the income for the A.Y. 2007-08. Further, the
said expenditure was reduced while working out the net profit of the eligible
undertaking for section 10B deduction and was also added to net profit for the
computation of deduction under section 10B. Thus the assessee has contended
that to rectify the said mistake in the account the assessee has reduced the
stores & spares and repairs & maintenance by the same amount while
                                      4                             ITA No.5910/M/2013
                                                               M/s. Ganesh Polychem Ltd.



preparing the accounts for the year ended 31.03.08. Correspondingly, the same
amount was reduced from the net profit while computing the income for the
A.Y. 2008-09. The AO has not accepted this explanation of the assessee as to
how the capital expenditure for A.Y. 2007-08 can become the revenue
expenditure in the A.Y. 2008-09. Accordingly, the AO disallowed the said
claim of deduction of Rs.1,26,46,787/- and the deduction under section 10B
was revised.

6.    On appeal, the Ld. CIT(A) has allowed the claim of the assessee by
accepting the explanation of the assessee that the said amount was not reduced
from the profits of the A.Y. 2007-08 and accordingly in the year under
consideration it was a rectification and consequential entry carried out in the
books of account.

7.    We have heard the Ld. D.R. as well as the Ld. A.R. and considered the
relevant material on record. The Ld. D.R. has forcibly contended that how an
expenditure of the A.Y. 2007-08 can be allowed for the A.Y. 2008-09. He has
relied upon the order of the AO.
      On the other hand, the Ld. A.R. has submitted that the said amount of
Rs.1,26,46,787/- was debited by the assessee in the profit & loss account for
the A.Y. 2007-08. Subsequently, during the course of tax audit it came to the
notice of the assessee that these expenses were capital in nature and have been
inadvertently debited to the profit & loss account. This error could not be
rectified in the A.Y. 2007-08 as the accounts were already signed and
approved. However, for the purpose of filing the return of income for the year
under consideration the assessee has made the adjustments in the statement of
income and added back the expenses that was inadvertently claimed in its
profit & loss account.    He has supported the impugned order of the Ld.
CIT(A).
                                          5                            ITA No.5910/M/2013
                                                                  M/s. Ganesh Polychem Ltd.






8.       Having considered the rival submissions as well as relevant material on
record, we find that an error was committed by the assessee in the books of
accounts relevant to the A.Y. 2007-08 by debiting the capital expenditure to
the profit & loss account. However, the assessee offered correct income to tax
for A.Y. 2007-08. For the year under consideration the assessee has carried
out the necessary entries to rectify the said mistake occurred in the financial
year 2006-07 by crediting the said amount of Rs.1,26,46,787/- to the respective
expenditures' ledger accounts and correspondingly debiting the fixed capital
account. Thus, as a result of the said rectification adjustment made in the
books of accounts for the year under consideration the profit of the assessee
was increased by the said amount in comparison to the real profit of the year.
Therefore, the assessee in computation of income for the assessment year
under consideration has deducted the said amount to bring the income at the
correct amount. We find that if the income for the year under consideration is
not correctly computed in the statement of income it would have resulted in
double taxation because the assessee has already added back a sum of
Rs.1,26,46,787/- in the profit & loss account in order to rectify the mistake
occurred in the accounts in the earlier year. In view of the above facts and
circumstances of the case, we do not find any error or illegality in the
impugned order of the Ld. CIT(A) qua this issue.

9.       In the result, the appeal of the Revenue is dismissed.

                  Order pronounced in the open court on 27.05.2015.


         Sd/-                                                 Sd/-
    (R.C. Sharma)                                       (Vijay Pal Rao)
ACCOUNTANT MEMBER                                    JUDICIAL MEMBER

Mumbai, Dated: 27.05.2015.
* Kishore, Sr. P.S.
                                            6                           ITA No.5910/M/2013
                                                                   M/s. Ganesh Polychem Ltd.



Copy to: The Appellant
        The Respondent
        The CIT, Concerned, Mumbai
        The CIT (A) Concerned, Mumbai
        The DR Concerned Bench
//True Copy//                           [




                                                By Order



                              Dy/Asstt. Registrar, ITAT, Mumbai.

 
 
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