DCIT, CIR-12, KOLKATA, KOLKATA vs. M/S HINDUSTAN GUMS & CHEMICAL LTD., KOLKATA

1 ITA Nos. 462&752 of 2014 & CO 63 of 2014 Hindustan Gum & Chemicals Ltd., AY 2008-09 IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH: KOLKATA [Before Shri M. Balaganesh, AM & Shri Partha Sarathi Chaudhury, JM]

I.T.A No.462/Kol/2014 Assessment Year: 2008-09

Hindustan Gum & Chemicals Ltd. Vs. Deputy Commissioner of Income-tax, (PAN: AAACH7214E) Circle-12, Kolkata. (Appellant) (Respondent) & I.T.A No.752/Kol/2014 Assessment Year: 2008-09

Deputy Commissioner of Income-tax, Vs. Hindustan Gum & Chemicals Ltd. Circle-12, Kolkata. (Appellant) (Respondent) & C.O. No. 63/Kol/2014 Arising out of ITA No.752/Kol/2014 Assessment Year: 2008-09

Hindustan Gum & Chemicals Ltd. Vs. Deputy Commissioner of Income-tax, Circle-12, Kolkata. (Cross Objector) (Respondent)

Date of hearing: 02.03.2017 Date of pronouncement: 08.03.2017

For the Assessee: S/Shri J. P. Khaitan, Sr. Adv. & Sanjay Bhaumik, Adv. For the Revenue: Shri S. S. Alam, JCIT, Sr. DR

ORDER Per Shri M. Balaganesh, AM: Both these appeals by assessee and revenue and cross objection by assessee are arising out of common order of CIT(A)-XII, Kolkata vide Appeal No. 475/XII/12/08-09 dated 13.01.2014. Assessment was framed by DCIT, circle-12, Kolkata u/s. 143(3) of the Income tax Act, 1961 (hereinafter referred to as the “Act”) for AY 2008-09 vide his order dated 20.12.2011. Since some of the issues are common and facts are identical, we dispose

2 ITA Nos. 462&752 of 2014 & CO 63 of 2014 Hindustan Gum & Chemicals Ltd., AY 2008-09 of all these appeals and the cross objection by this consolidated order for the sake of convenience.

ITA No. 462/Kol/2014 – Assessee Appeal 2. The first issue to be decided in this appeal is as to whether the ld CITA was justified in upholding the disallowance made on account of provision for leave encashment for Rs. 17,63,884/- in the facts and circumstances of the case.

2.1. The brief facts of this issue is that the assessee made provision for leave encashment to the tune of RS. 17,63,884/- and claimed the same as deduction which was disallowed by the ld AO by invoking the provisions of section 43B(f) of the Act. The ld CITA sustained the disallowance by placing reliance on the decision of the Hon’ble Supreme Court in the case of Exide Industries Ltd. Aggrieved, the assessee is in appeal before us on the following ground:- “That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in not holding that provision for leave encashment for Rs.17,63,884/- is neither statutory liability nor contingent liability and therefore not to be considered for the purpose of computing disallowance u/s. 43B(f) of the I. T. Act, 1961.”

2.2. The Learned AR argued that since the decision of the Calcutta High Court in the case of Exide Industries Ltd 292 ITR 470 (Cal) has struck down the provisions of section 43B(f) of the Act, the deduction may be granted towards leave encashment made on provision basis itself in line with the decision of the Supreme Court in the case of Bharat Earth Movers Ltd reported in 245 ITR 428 (SC). In response to this, the Learned DR vehemently supported the orders of the lower authorities.

2.3. We have heard the rival submissions and perused the materials available on record. We find that though the Hon’ble Calcutta High Court in the case of Exide Industries Ltd vs Union of India reported in2 92 ITR 470 (Cal) had struck down the provisions of section 43B(f) of the Act as unconstitutional, the revenue had carried the matter further to the Hon’ble Supreme Court which initially in Special Leave to Appeal (Civil) CC 12060 / 2008 dated 8.9.2008 had held as under:-

3 ITA Nos. 462&752 of 2014 & CO 63 of 2014 Hindustan Gum & Chemicals Ltd., AY 2008-09

“The petition was called on for hearing today. Upon hearing counsel the court made the following Order. Issue Notice. In the meantime, there shall be stay of the impugned judgement, until further orders.”

Later the Hon’ble Supreme Court in Special Leave to Appeal (Civil) No(s). CC 22889 / 2008 dated 8.5.2009 had held as under:-

“The petition was called on for hearing today. Upon hearing counsel the court made the following Order Delay condoned. Leave granted. Pending hearing and final disposal of the Civil appeal, Department is restrained from recovering penalty and interest which has accrued till date. It is made clear that as far as the outstanding interest demand as of date is concerned, it would be open to the department to recover that amount in case Civil Appeal of the department is allowed. We further make it clear that the assessee would, during the pendency of this Civil Appeal , pay tax as if Section 43B(f) is on the statute book but at the same time it would be entitled to make a claim in its returns.”

Hence from the aforesaid Supreme Court judgement, it could be inferred that the Hon’ble Supreme Court had not stayed the judgement of the Calcutta High Court during Leave proceedings. But the Hon’ble Supreme Court had only passed an interim order on the impugned issue. Hence we deem it fit and appropriate , in the interest of justice and fair play, to set aside this issue to the file of the Learned AO to pass orders based on the outcome of the main appeal on merits by the Hon’ble Supreme Court as stated supra. Accordingly Ground No. 2 raised by the assessee is allowed for statistical purposes.

3.1. The brief facts of this issue is that the ld AO observed that the assessee had received dividend income of Rs. 45,63,162/- and claimed exemption for the same. The assessee had not considered any proportionate interest and administrative expenses related to earning of this exempt income and accordingly sought to invoke Rule 8D of the Rules. The assessee replied that it is engaged in the business of manufacture and sale of Guar Gum, Powder

4 ITA Nos. 462&752 of 2014 & CO 63 of 2014 Hindustan Gum & Chemicals Ltd., AY 2008-09 Gum, Guar Split etc. All the expenses incurred were in relation to its business only. The shares on which dividend was received were purchased out of own funds and no borrowed funds were utilized for investments. It was also submitted that the dividend in respect of units of mutual funds is usually reinvested in the respective schemes without being actually received by the assessee. The dividend warrants received from companies are required to be deposited in the assessee’s bank account for which practically no expenditure was incurred. Accordingly it prayed that no disallowance u/s 14 A of the Act is required to be made. The ld AO observed that the facilities and set up of the company has also been used to manage the investments from which dividend was earned. Hence a part of the total expenses has been incurred and utilized for earning of dividend income. Accordingly he invoked Rule 8D of the Rules and disallowed a sum of Rs. 17,261/- under Rule 8D(2)(ii) and Rs. 2,49,404/- under Rule 8D(2)(iii) of the Rules. Accordingly the total disallowance u/s 14A of the Act read with Rule 8D of the Rules worked out to Rs. 2,66,665/- ( 17,261 + 2,49,404).

3.2. Before the ld CITA, it was stated that the assessee had made investments in debt funds of the mutual fund for Rs. 4,60,00,000/- out of surplus funds and dividend income was earned from such mutual funds. He reiterated the findings of the ld AO and sustained the disallowance made u/s 14A of the Act. Aggrieved, the assessee is in appeal before us on the following ground:- “1. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in not deleting the disallowance of Rs.2,66,665/- treated by Ld. DCIT as expenses attributable to earning dividend income and did not hold that no expenses have been incurred to earn the said income.”

3.3. The ld AR argued that all the investments were very old and were made in the earlier years and the borrowed funds were not utilized for making investments. Hence no disallowance should be made under Rule 8D(2)(ii) of the Rules. With regard to application of Rule 8D(2)(iii) of the Rules, he prayed that only dividend bearing investments should be taken into account for which purpose, he placed reliance on the decision of the co-ordinate bench of this tribunal in the case of REI Agro Ltd vs DCIT reported in 36 CCH 360 (Kol). In response to this, the ld DR placed reliance on the decision of the Hon’ble Jurisdictional

5 ITA Nos. 462&752 of 2014 & CO 63 of 2014 Hindustan Gum & Chemicals Ltd., AY 2008-09 High Court in the case of Dhanuka & Sons reported in 339 ITR 319 (Cal) wherein it was held that the onus is on the assessee to prove that the investments were made out of own funds even though the investments were made in the earlier years.

3.4. We have heard the rival submissions. We find that the Hon’ble Jurisdictional High Court in the case of Dhanuka & Sons supra had categorically held that even though the investments were made in the earlier years, the onus is on the assessee to prove that in those respective years, the investments were made out of own funds and no borrowed funds were utilized for the same. However, we find that the ld AO while framing the assessment for Asst Year 2004-05 u/s 143(3) of the Act had not made any disallowance under Rule 8D(2)(ii) of the Rules appreciating the contentions of the assessee that investments in earlier years were made out of own funds. We also find that the assessee had explained the source of each investments made by it before the ld CITA during appellate proceedings for Asst Year 2005-06 together with the details of investments made in respective years out of its own funds. The ld CITA granted relief to the assessee in this regard and against which the revenue had not preferred any appeal before us. In view of these facts and circumstances, we hold that no disallowance under Rule 8D(2)(ii) of the Rules towards proportionate interest is warranted in the instant case.

In respect of disallowance made towards administrative expenses under Rule 8D(2)(iii) of the Rules, we hold that the co-ordinate bench of this tribunal in the case of REI Agro Ltd supra had held that only dividend bearing investments should be taken into account for the purpose of working out the disallowance under Rule 8D(2)(iii) of the Rules. We direct the ld AO accordingly. Henc,e the Ground No. 1 raised by the assessee is partly allowed for statistical purposes.

CO No. 63/Kol/2014 – Assessee CO 4. The only issue to be decided in this cross objection of the assessee is as to whether the ld CITA was justified in disallowing the expenditure of Rs. 2,45,835/- by invoking Explanation to Section 37(1) of the Act in the facts and circumstances of the case.

6 ITA Nos. 462&752 of 2014 & CO 63 of 2014 Hindustan Gum & Chemicals Ltd., AY 2008-09 4.1. The brief facts of this issue is that the ld AO observed that the assessee had debited a sum of Rs. 2,45,835/- towards penalty in its profit and loss account. The ld AO sought to disallow the same by invoking provisions of Explanation to Section 37(1) of the Act on the plea that the same was paid for infraction of law. The ld AO also observed that the penalty sum of Rs. 2,45,835/- was also reflected in the tax audit report vide Column 17(e)(iii) of Form 3CD. In response the assessee replied that it had procured LDO/FO/LPG etc as consumables at concessional rate on the strength of Form No. 26 and 40 prescribed under Sales Tax Act. However, the sales tax authorities held that it is neither raw material nor processing material and consumables and raised a demand of Rs. 7.16 lacs which included penalty of Rs. 2.46 lacs against which assessee preferred an appeal before the appellate authority. The said appeal is still pending. The assessee contended that the penalty is not for violation of any law and the same is an expenditure incurred wholly and exclusively for the purpose of business. The ld AO however held the same to be penal in nature and disallowed in the assessment. The ld CITA upheld the action of the ld AO. Aggrieved, the assessee had preferred cross objection before us on the following ground:- “That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in not holding that penalty of Rs.2,45,835/- is not paid for violation of any law and therefore the same is allowable as business expenditure.”

4.2. The ld AR argued that the said penalty was levied u/s 45(6) of Gujarat Sales Tax Act according to which, any sales tax levied by the sales tax department in excess of tax paid by the assessee dealer, then the deficit shall be deemed to be defaulted by the assessee dealer and therefore liable for penalty. He argued that only pursuant to deeming fiction of a provision contained in Gujarat Sales Tax Act, the assessee dealer in the instant case is invited with levy of penalty. It is not for infraction of any law for the time being in force. He also argued that assessee had preferred an appeal against the levy of penalty before the appellate authority and the same is pending disposal. He argued that in the meanwhile, similar issue in the case of another assessee dealer (i.e Ami Pigments) had travelled upto High Court and the Hon’ble High Court had set aside the issue to the file of the assessment officer to have a relook on the facts and the applicability of relevant provisions of sales tax act. Accordingly he argued that the issue under dispute is squarely debatable and no penalty

7 ITA Nos. 462&752 of 2014 & CO 63 of 2014 Hindustan Gum & Chemicals Ltd., AY 2008-09 would be exigible automatically. He stated that by taking shelter on the said High Court judgement, the assessee is confident of winning its appeal before the appellate authority for cancellation of levy of penalty of Rs. 2,45,835/-. In these circumstances, he prayed that the same may not be treated as incurred for infraction of any law for the time being in force . In response to this, the ld DR vehemently supported the orders of the lower authorities and stated that the same is incurred only for infraction of law and thereby the Explanation to Section 37(1) of the Act would automatically apply.

4.3. We have heard the rival submissions. We find that the issue under dispute had emanated from the sales tax assessment. The appeal against the levy of penalty had been preferred by the assessee dealer before the appellate authority under Sales tax act and the same is pending disposal. Hence, in these circumstances, we deem it fit and appropriate, to set aside this issue to the file of the ld AO, to decide the disallowance of expenditure, based on the outcome of the appeal by the first appellate authority under Sales Tax Act. The assessee is directed to expedite the sales tax appeal at the earliest and inform the outcome of the same to the ld AO for his expeditious disposal of this set aside proceeding. Accordingly, the cross objection of the assessee is allowed for statistical purposes.

ITA No. 752/Kol/2014 – Revenue Appeal 5. The first issue to be decided in this appeal is as to whether the ld CITA was justified in allowing exemption u/s 10B of the Act in respect of other income of the assessee to the tune of Rs. 18,20,101/- in the facts and circumstances of the case.

5.1. The brief facts of this issue is that the assessee is having a100% Export Oriented Unit (EOU) at Viramgam and had claimed exemption u/s 10B of the Act in respect of profits of the business of the said undertaking in the return. The said profits admittedly includes the following incomes which in the opinion of the ld AO was not derived from export of articles as per section 10B of the Act :-

Rent from staff quarters 5,712 Insurance claims realized 36,390 Excess liabilities no longer required 8

8 ITA Nos. 462&752 of 2014 & CO 63 of 2014 Hindustan Gum & Chemicals Ltd., AY 2008-09 Miscellaneous income & receipts (including Duty Drawback of Rs. 20,64,901) 20,69,044 Interest received (net) (-) 2,91,053 ------------------ 18,20,101

The ld AO held that the aforesaid incomes were not derived from the export of articles or things and accordingly denied the exemption u/s 10B of the Act on the same. In support of his contention, he placed reliance on various decisions. The ld CITA granted the exemption u/s 10B of the Act and gave relief to the assessee by following the co-ordinate bench decision of this tribunal in assessee’s own case for the Asst Years 2003-04 and 2004-05 vide order dated 28.12.2007 in ITA No.s 150 and 277 (Kol) of 2007 and ITA Nos. 5678 and 580/Kol/2009 respectively. Aggrieved, the revenue is in appeal before us on the following ground:- “1. That is the facts and in law of the case the Ld. CIT(A) erred in allowing the exempted income u/s. 10B for interest earned from other income in the form of interest, duty drawback etc. of Rs. 18,20,101/-."

5.2. The ld DR argued that Staff accommodation rent is not derived from export of articles or things as per section 10B of the Act. The income in the form of duty drawback is squarely covered in favour of the revenue by the decision of the Hon’ble Supreme Court in the case of Liberty India vs CIT reported in 317 ITR 218 (SC) wherein it was held that duty drawback receipts and DEPB benefits do not form part of the net profits eligible industrial undertakings for the purpose of deduction u/s 80IA / 80IB of the Act as they are not derived from the industrial undertaking. In respect of excess liabilities written back, he argued that it is not known whether the liabilities were originally created in this 100% EOU or for other units as admittedly the assessee is having both taxable unit as well as exempt unit. In response to this, the ld AR argued that the provisions of section 10B(1) of the Act starts with ‘subject to the provisions of this section’ . The provisions of section 10B(4) of the Act clearly specifies that the profit derived from the 100% EOU should be as follows:- Profits of the business of the undertaking * Export Turnover / Total Turnover

9 ITA Nos. 462&752 of 2014 & CO 63 of 2014 Hindustan Gum & Chemicals Ltd., AY 2008-09 Hence, the entire income of the 100% EOU shall be eligible for exemption u/s 10B of the Act. He further stated that the assessee maintains separate profit and loss account and balance sheet for the 100% EOU which is also part of the records. In respect of rent recovered from staff, the same only represents recovery of rent from staff quarters in respect of the quarters let out by the assessee on the rented premises. In other words, the assessee pays rent for the total premises including staff quarters and recovers the rent from staff for their quarters accommodation. Hence it is effectively recovery of expenditure and not any income for assessee. In respect of insurance claims received, the same was received for damages for goods pertaining to 100% EOU and hence is the income of the 100% EOU. In respect of duty drawback, the ld AO concedes the fact that the same belongs to the category of ancillary profits of the 100% EOU and having said so, that also would only add to the profits of the business of the undertaking and hence is eligible for exemption u/s 10B in terms of section 10B(4) of the Act. He further stated that the decision of Hon’ble Apex Court in Liberty India case supra and other decisions relied upon by the ld AO were all rendered in the context of deductions under sections 80HH / 80HHC / 80IA / 80IB etc and hence the same cannot be used for section 10B where the language of the statute is covered and exemption is to be reckoned as per computation mechanism provided in section 10B(4) of the Act. He placed reliance on the decision of the Hon’ble Calcutta High Court in assessee’s own case in ITA 666 of 2008 with GA No. 3269 of 2014 ITAT 159 of 2014 dated 30.6.2016 where the similar issue was held in favour of the assessee by following the provisions of section 10B(4) of the Act. He accordingly prayed for non-interference of the order of the ld CITA.

5.3. We have heard the rival submissions and perused the materials available on record. The details of other income to the tune of Rs 18,20,101/- as detailed hereinabove pertains to 100% EOU as could be evident from the segmental profit and loss account of 100% EOU furnished by the assessee before the lower authorities. Hence the entire other income becomes the profits of the business of the undertaking (i.e 100% EOU) . Then automatically the assessee is entitled for deduction as per the computation mechanism

10 ITA Nos. 462&752 of 2014 & CO 63 of 2014 Hindustan Gum & Chemicals Ltd., AY 2008-09 provided in section 10B(4) of the Act. For the sake of convenience, the provisions of section 10B(1) and 10B(4) of the Act are reproduced hereunder:-

“10B (1) Subject to the provisions of this section, a deduction of such profits and gains as are derived by a hundred per cent export-oriented undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things or computer software, as the case may be, shall be allowed from the total income of the assessee :

Provided that where in computing the total income of the undertaking for any assessment year, its profits and gains had not been included by application of the provisions of this section as it stood immediately before its substitution by the Finance Act, 2000, the undertaking shall be entitled to the deduction referred to in this sub-section only for the unexpired period of aforesaid ten consecutive assessment years”

“10B(4) For the purposes of sub-section (1), the profits derived from export of articles or things or computer software shall be the amount which bears to the profits of the business of the undertaking, the same proportion as the export turnover in respect of such articles or things or computer software bears to the total turnover of the business carried on by the undertaking.”

From the aforesaid section, it is very clear as rightly pointed out by the ld AR that section 10B(1) of the Act starts with the expression ‘subject to the provisions of this section’--------. The provisions of section 10B(4) of the Act which stipulates the computation mechanism clearly states that the entire profits of the business of the eligible undertaking should be taken into account for computing the amount eligible for section 10B of the Act. We also find that the Hon’ble Jurisdictional High Court in assessee’s own case vide its order dated 30.6.2016 supra had held this issue in favour of the assessee. The question raised before the court is as below:- “(a) Whether on the facts and circumstances of the case the Income Tax Appellate Tribunal erred in law in directing the Assessing Officer to treat the interest income of Rs.28,74,473/- as part of the profits of business of the 100% E. O. U. eligible for deduction under Section 10B of the Income Tax Act, 1961 and compute deduction accordingly without appreciating the fact that the said interest income was not profit from the business but accrued on fixed deposit kept by the assessee in bank?”

“A bare reading of sub-section (1) suggests that 100 % export oriented undertakings are entitled to a deduction of profits and gains derived from the export of articles for a period of 10 years. The aforesaid entitlement is, however, subject to the provisions of Section 10B. In other words, subject to the provisions contained in the other parts of the Section 10B, the benefit is available to an assessee. It was not disputed that the only relevant provision to be

11 ITA Nos. 462&752 of 2014 & CO 63 of 2014 Hindustan Gum & Chemicals Ltd., AY 2008-09 taken into account is subsection (4) which we already have quoted. Sub-section (4) provides the quantum of deduction which can be availed by an assessee. The quantum of deduction is dependent upon the total turnover of the business of the undertaking and the export turnover of the undertaking. Once these two figures are available, one has to divide the total turnover by the export turnover in order to work out the percentage of the export turn over, vis-à-vis the total turn over. Suppose total turn over is Rs. 100/- and total export turn over is for Rs 10/-, then the export turn over is 10 % of the total turnover. Then one has to find out the total profit of the business of the undertaking. Suppose the total profit of the business of the undertaking is Rs. 100, in that case, deduction available to the assessee under Section 10 sub-section (1) of Section 10B shall be 10% of Rs. 100, i.e. to say Rs. 10/-. This is the formula which has been provided by subsection (4) for the purpose of working out the benefit or deduction under subsection (1). Total turnover shall naturally include receipt on account of 5 interest. The legislature does not appear to have provided for excluding the amount of interest from the total turn over as has been done in the case of 80HHC by explanation (baa) of sub-section (4C) thereof. In that case, 90% of the income arising out of interest has to be excluded from the profits of the business for the purpose of arriving at deduction available under Section 80HHC. But an identical provision is not there. Therefore, that provision cannot be imported by implication. The submission that the amount earned from interest was not intended to be taken into account for the purpose of giving benefit under subsection (1) of Section 10B may be correct. But the amount of deduction available to a 100% export oriented undertaking is necessarily dependent upon the formula provided in subsection (4). There is, as such, no scope for any controversy that part of the money was earned from interest and not from export. This question came up before the Karnataka High Court and was answered in the case of CIT vs. Motorola India Electronics (P.) Ltd. reported in [2014] 46 Taxmann.com 167 (Karnataka) as follows : “In the instant case, the assessee is a 100% EOU, which has exported software and earned the income. A portion of that income is included in EEFC account. Yet another portion of the amount is invested within the country by way of fixed deposits, another portion of the amount is invested by way of loan to sister concern which is deriving interest or the consideration received from sale of the import entitlement, which is permissible in law. Now the question is whether the interest 6 received and the consideration received by sale of import entitlement is to be construed as income of the business of the undertaking. There is a direct nexus between this income and the income of the business of the undertaking. Though it does not partake the character of a profits and gains from the sale of an article, it is the income which is derived from the consideration realized by export of articles. In view of the definition of income from Profits and Gains incorporated in Subsection (4), the assessee is entitled to the benefit of exemption of the said amount as contemplated under Section 10B of the Act. Therefore, the Tribunal was justified in extending the benefit to the aforesaid amounts also. We do not find any merit in these appeals. Therefore, the first substantial question of law raised in ITA No. 428/2007 is answered in favour of the revenue and against the assessee and the first substantial question of law in ITA No. 447/2007 is answered in favour of the assessee and against the revenue.

In the light of the aforesaid findings, the second question of law in both the appeals do not arise for consideration.” Mr. Dudhoria, learned Advocate appearing for the revenue drew our attention to a judgment of the Madras High Court in the case of International 7 Components India Ltd. vs. Assistant Commissioner of Income Tax reported in 2015 - (372) – ITR- 0190 - Madras wherein the following view was taken :

12 ITA Nos. 462&752 of 2014 & CO 63 of 2014 Hindustan Gum & Chemicals Ltd., AY 2008-09 “In the light of the above said decision, we are of the firm view that the interest earned from deposits with Corporation Bank, Electricity Board and on staff advances does not have direct or immediate nexus with the business of the assessee’s undertaking and, consequently, they are not eligible for grant of deduction under Section 10B of the Act, which is akin to Section 80HH of the Act dealt with in the decision referred supra.” Mr. R.N.Bajoria, Learned senior advocate rightly pointed out that the judgment of the Madras High Court is of no relevance for the simple reason that sub-section (4) of Section 10B was not taken into account by the Hon’ble Madras High Court. Therefore, this judgment is of no assistance in deciding the issue. The learned Tribunal has passed the following order: “There is no requirement for the purposes of section 10B to establish direct nexus between the income and the undertaking. The entire business income of the 100% EOU will be the “profits of the business of the undertaking”. It has been held above that the interest earned on temporarily surplus business funds of the 100% EOU deposited with banks for short periods is business income and has in fact been so assessed. It is not in dispute that the surplus funds were of the 100% EOU. As such, the interest earned thereon has to be regarded as part of the “profit of the business of the undertaking”. We 8 further find that the Tribunal in the case of Cheviot Co. Ltd. for assessment years 2003-04 and 2004-05, relied upon by the assessee, has dealt with similar issue. In those cases, the difference between the provisions of sections 10B and 80HH was noted and after considering the judgments of the Hon’ble Supreme Court in Sterling Foods (supra) and in P.R.Prabhakar versus CIT (284 ITR 548 (SC) ) approving the Special Bench decision of the Tribunal in International Research Park Laboratories Limited versus Assistant C.I.T. (212 ITR (AT) 1 (SB) ), it was held that the profits of the business of the undertaking would include its entire business income. Keeping in view the above decision and the decision of the Tribunal, we are of the considered opinion that the assessee has to succeed. The Assessing Officer is directed to treat the interest of Rs. 28,74,473/- as part of the profits of the business of the 100% EOU eligible for deduction under section 10B and compute the deduction accordingly. The Assessing Officer should deduct the sum of Rs. 8,01,30,294/- (Rs. 7,72,54,821/- + Rs. 28,74,473/-) and not only Rs. 7,72,54,821/- from the profit as per profit and loss account for the purpose of separate consideration under section 10B Ground Nos. 3,4 and 5 of the assessee’s appeal are thus allowed.” We are of the opinion that the Tribunal was right in the view they took for the reasons discussed by us. In that view of the matter, the question no. 1 is 9 answered in the negative and in favour of the assessee. The appeal is, therefore, dismissed.”

5.3.1. We also agree with the argument of the ld AR that the decisions relied upon by the ld AO and ld DR were rendered in the context of deductions u/s 80HH / 80HHC / 80IA / 80IB of the Act and the words used thereon cannot be imported into section 10B of the Act when the language stipulated in section 10B (4) of the Act is very categorical and unambiguous.

13 ITA Nos. 462&752 of 2014 & CO 63 of 2014 Hindustan Gum & Chemicals Ltd., AY 2008-09 5.3.2. In view of our aforesaid findings and respectfully following the decision of the Hon’ble Jurisdictional High Court in assessee’s own case supra, we do not find any infirmity in the order of the ld CITA in this regard. Accordingly, we dismiss the Ground No. 1 raised by the revenue.

6.1. The brief facts of this issue is that the assessee installed plant and machinery in the earlier year which was put to use for less than 180 days and had claimed additional depreciation at 50% of applicable rates. The remaining 50% was claimed by the assessee during the year under appeal on the premise that the grant of additional depreciation is an incentive provision and is granted for encouraging investment in capital field by the assessee and the same is an one time allowance which is allowable only in the year of installation. Hence it was argued that there is nothing wrong in claiming the remaining 50% of additional depreciation pertaining to the earlier year in the immediately succeeding year (i.e in the year under appeal). The ld AO however rejected this claim on the ground that the asset had entered into the block of assets and the depreciation for the year shall be granted based on the opening Written Down Value (WDV) and for assets added during the year depending upon the usage of asset for number of days. The ld CITA granted relief to the assessee by placing reliance on the decision of the co-ordinate bench of Ahmedabad Tribunal in the case of Aswani Industries vs DCIT in ITA No. 140/Ahd/2013 dated 31.5.2013 wherein the very same issue was held in favour of the assessee. Aggrieved, the revenue is in appeal before us on the following ground:- “2. That is the facts and in law of the case the Id. CIT(A) erred in allowing the additional depreciation of Plant & Machinery as the said depreciation u/s. 32(i)(iia) is not allowable depreciation."

6.2. The ld DR vehemently relied on the order of the ld AO and drew the attention of the bench to second proviso to section 32(1) of the Act wherein clause (iia) is also included. He

14 ITA Nos. 462&752 of 2014 & CO 63 of 2014 Hindustan Gum & Chemicals Ltd., AY 2008-09 further argued that the amendment brought in the statute with effect from 1.4.2016 by introduction of third proviso thereon should have only prospective application. In response to this, the ld AR placed reliance on the co-ordinate bench decision of this tribunal in assessee’s own case for the Asst Year 2007-08 in ITA No. 1364/Kol/2013 dated 8.7.2016 in support of his arguments.

6.3. We have heard the rival submissions. We find that the issue under dispute is squarely covered by the decision of the co-ordinate bench of this tribunal supra wherein it was held as under :- “4. Ground no. 1 relating to depreciation on plant and machinery which were put to use less than 180 days during the said financial year. During the previous assessment year (2006- 07) the assessee claimed 50% of depreciation and it was allowed. Now for the year under consideration, the assessee claimed further 10% depreciation to the extent of Rs.20,97,495/- under second proviso to Sec. 32(1)(iia) of the Act. The AO denied the same on the ground that the Act does not have option where assessee can claim remaining depreciation in subsequent year. The CIT(A) confirmed the order of the AO, however, directed the AO to recalculate the amount of depreciation on written down value (WDV). 5. The Ld AR before us submits that the case in hand is squarely covered by the decision of the Hon’ble Karnataka High Court in the case of CIT & Anr Vs. Rittal India Pvt. Ltd reported in (2016) 380 ITR 423(Karn). 6. The Ld. Sr. DR relied on the orders of the authorities’ below. 7. Heard both the parties and perused the relevant material on record. In this regard, we may refer to the decision of the Hon’ble High Court of Karnataka in the case of CIT and another vs Rittal India Private Ltd (supra). The facts of the case therein are that the assessee being an existing industrial undertaking had acquired and installed new plant and machinery in the F.Y 2006-07 and claimed 50% of additional 20% depreciation i.e, 10% additional depreciation under section 32(1)(iia) of the Act in the corresponding assessment year 2007-08 for the reason that the new machinery was acquired after 01-10-2006. The relevant portions at page no’s at 9 and 10 of which is reproduced herein below for better understanding:- “The language used in clause (iia) of the said section clearly provides that “a further sum equal to 20 per cent. of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii)". The word "shall" used in the said clause is very significant. The benefit which is to be granted is 20 per cent. additional depreciation. By virtue of the proviso referred to above, only 10 per cent. can be claimed in one year, if plant and machinery is put to use for less than 180 days in the said financial year. This would necessarily mean that the balance 10 per cent. additional deduction can be availed of in the subsequent assessment year, otherwise the very purpose of insertion of clause (iia) would be defeated because it provides for 20 per cent. deduction which shall be allowed. It has been consistently held by this court, as well as the apex court, that the beneficial legislation, as in the present case, should be given liberal interpretation so as to benefit

15 ITA Nos. 462&752 of 2014 & CO 63 of 2014 Hindustan Gum & Chemicals Ltd., AY 2008-09 the assessee. In this case, the intention of the legislation is absolutely clear, that the assessee shall be allowed certain additional benefit, which was restricted by the proviso to only half of the same being granted in one assessment year, if certain condition was not fulfilled. But, that, in our considered view, would not restrain the assessee from claiming the balance of the benefit in the subsequent assessment year. The Tribunal, in our view, has rightly held, that additional depreciation allowed under section 32(1)(iia) of the Act is a one-time benefit to encourage industrialisation, and the provisions related it have to be construed reasonably, liberally and purposively, to make the provision meaningful while granting the additional allowance. We are in full agreement with such observations made by the Tribunal.” 8. Heard both parties and perused the relevant material on record. By reading of Clause (iia) to sub-section (1) of section 32 provides for allowance of initial depreciation equal to 20% of the actual cost of new plant and machinery acquired and installed after March 31, 2005 with effect from the assessment year 2006-07 to those who engaged in the business of manufacture or production of any article or thing. Therefore, the assessee is entitled to claim 20% of depreciation equal to the actual cost of plant and machinery, but, where as the 2nd proviso to section 32(1) of the Act restrains the authority to allow depreciation to 50% of such 20% if the subjected plant and machinery acquired during the previous year and is put to use for a period of less than 180 days in that previous year. According to AO in his order at page no-4 referred that the assessee put to use new plant and machinery for less than 180 days and confirmed by the CIT-A in para-8 of impugned order and it is a requirement under 2nd proviso to section 32(1) which lifts the restriction on AO allow the further depreciation of 10% of which remained unclaimed out of 20% as referred in Clause (iia) to sub-section (1) of section 32 of the Act. The facts of the present are similar to the decision supra relied on by the assessee. Therefore, we are of the view that the law laid down by the Hon’ble High Court of Karnataka in the case of CIT and another vs Rittal India Private Ltd supra is applicable to the present case, thus we hold that the assessee is entitled to claim remaining 50% depreciation of such 20% which is equal to the actual cost of new plant and machinery, accordingly ground no-1 raised by the assessee is allowed.”

Respectfully following the same, we dismiss Ground No. 2 raised by the revenue.

7.1. The brief facts of this issue is that the ld AO observed that the current liabilities of the assessee included provision for mark to market loss on forward contracts amounting to Rs. 82,32,966/- which was created by corresponding debit to profit and loss account and the same was claimed as deduction in the return of income by the assessee. When assessee was show caused as to why the same should not be disallowed by the ld AO , the assessee replied that the assessee is engaged in manufacturing / trading of Guar products and its

16 ITA Nos. 462&752 of 2014 & CO 63 of 2014 Hindustan Gum & Chemicals Ltd., AY 2008-09 major revenues are derived from exports. The total export turnover during the year was Rs. 236.57 crores out of total turnover of Rs. 336.44 crores. In order to hedge its exchange risk, the assessee entered into foreign exchange forward contracts with banks for its export bills. It was submitted that The Institute of Chartered Accountants of India (ICAI) had made an announcement on 29.3.2008 with regard to accounting for such derivative contracts. It was stated that in view of prudence, an entity was required to provide for losses in respect of all outstanding derivative contracts at the balance sheet date by marking them to market. It was stated that the said clarificatory announcement applied to financial statements for the period ending 31.3.2008 and thereafter. It was stated that in view of the said announcement by ICAI and following the principle of prudence on which the mercantile system of accounting is based, in respect of the forward contracts outstanding as on 31.3.2008, the assessee determined the loss of Rs. 82,32,966/- with reference to the exchange rate prevailing at the end of the year i.e 31.3.2008. The said loss was provided for in the assessee’s accounts for 31.3.2008 and such provision was reversed in the next year and the assessee accounted for the actual profit / loss upon settlement of the forward contract. The ld AO not satisfied with this explanation concluded that the loss accounted for by the assessee is only notional and contingent. The ld AO also placed reliance on the Instruction No. 3/2010 dated 23.3.2010 in support of his contention.

7.2. Before the ld CITA, apart from explaining the facts of the case, it was submitted that the loss accounted for by the assessee with reference to the exchange rate prevailing on 31.3.2008 was neither notional nor contingent but represented an actual loss as on the balance sheet date. Due to adverse fluctuations in the exchange rate as on 31.3.2008, the assessee was required to pay the aforesaid sum of Rs. 82,32,966/- to the bank with whom the forward contracts were made. The principle of prudence demanded that an assessee following the mercantile system of accounting had to provide for such loss in its accounts for the year ended 31.3.2008. The ld CITA appreciated the contentions of the assessee and by placing reliance on the decision of co-ordinate bench of Delhi Tribunal in the case of Bechtel India (P) Ltd vs Additional CIT reported in (2013) 33 taxmann.com 213 (Delhi

17 ITA Nos. 462&752 of 2014 & CO 63 of 2014 Hindustan Gum & Chemicals Ltd., AY 2008-09 Trib) , deleted the disallowance of Rs. 82,3,2966/- . Aggrieved, the revenue is in appeal before us on the following ground:- “3."That is the facts and in law of the case the Ld. CIT(A) erred in allowing the provision from mark to market losses as the said provision is not allowable as per the CBDT Instruction No. 312011."

7.3. The ld DR reiterated the findings of the ld AO and stated that the loss arising due to restatement based on exchange rate prevailing on 31.3.2008 is only notional and contingent. Moreover, it is like assessee holding investments in its kitty and trying to understand the value of investments based on market rates as on 31.3.2008 by watching the stock prices on the screen. Based on the prevailing stock prices as on 31.3.2008, the assessee cannot book the notional loss or gain in its books. The situation in the instant case is exactly similar to the example quoted herein. He heavily relied upon the Instruction No. 3./2010 dated 23.3.2010 wherein it has been mentioned that mark to market loss where sale or settlement has actually not taken place, the said loss would be notional and contingent in nature and cannot be allowed as deduction. Accordingly he prayed that the order of the ld AO be restored.

7.4. In response to this, the ld AR argued that out of the total turnover of the assessee to the tune of Rs. 336.44 crores , the assessee had derived export turnover of Rs. 236.57 crores. Hence it could be evident that the assessee is exposed to huge risk arising due to exchange fluctuation. Hence in order to hedge the said risk, the assessee had entered into forward contracts with banks for its export bills, which was carried on during the course of its business. He argued that the reliance on Instruction No. 3/2010 dated 23.3.2010 is clearly misplaced in as much as it talks about losses arising to an assessee on account of trading in forex derivatives. Admittedly the assessee had not dealt in trading in forex derivatives. Hence the said Instruction No. 3/2010 cannot be made applicable to the instant case. He placed reliance on the following decisions in support of his arguments :- (a) Delhi Tribunal in the case of Bechtel India (P) Ltd vs Addl CIT reported in (2013) 33 taxmann.com 213 (Delhi Trib) dated 8.3.2013

18 ITA Nos. 462&752 of 2014 & CO 63 of 2014 Hindustan Gum & Chemicals Ltd., AY 2008-09 (b) Mumbai Tribunal in the case of Reliance Industries Ltd vs CIT reported in (2013) 40 taxmann.com 431 (Mumbai Trib) dated 20.11.2013

(c ) Bombay High Court in the case of CIT vs D Chetan & Co reported in (2016) 75 taxmann.com 300 (Bom) dated 1.10.2016

7.5. We have heard the rival submissions and perused the materials available on record. We find that the ld AO had placed heavy reliance on Instruction No. 3/2010 dated 23.3.2010. From the perusal of the said Instruction, we find that the same was issued in respect of loss on account of trading in foreign exchange derivatives. The assessee had entered into forward contracts in order to hedge its exchange risk in respect of export proceeds receivable by it in foreign exchange. The assessee’s forward contracts were not by way of trading as such in foreign exchange derivatives. Hence, Instruction No. 3/2010 cannot be made applicable to the facts of the instant case. We find that the decision relied upon by the ld AR on the decision of the Hon’ble Bombay High Court supra is in favour of the assessee wherein the question raised before the Hon’ble Court and the decision rendered thereon is as under:- “The Revenue has urged the following question of law for our consideration:- “Whether on the facts and in the circumstances of th case and in law, the Tribunal was justified in deleting the addition of ‘Mark to Market’ Loss of Rs.78,10,000/- made by the Assessing Officer on account of disallowance of loss on foreign exchange forward contract loss and not appreciating the fact that the said loss was a notional loss and hence cannot be allowed?” 7. The impugned order of the Tribunal has, while upholding the finding of the CIT (Appeals), independently. come to the conclusion that the transaction entered into by the Respondent assessee is not in the nature-of speculative activities. Further the hedging transactions were entered into so as to cover variation in foreign exchange rate which would impact its business of import and export of diamonds. These concurrent finding of facts are not shown to be perverse in any manner. In fact, the Assessing Officer also in the Assessment Order does not find that the transaction entered into by the Respondent assessee was speculative in nature. It further holds that at no point of time did Revenue challenge the assertion of the Respondent assessee that the activity of entering into forward contract was in the regular course of its business only to safe guard against the loss on account of foreign exchange variation. Even before the Tribunal, we find that there was no submission recorded on behalf of the Revenue that the Respondent assessee should be called upon to explain the nature of its transactions. Thus, the submission now being made is without any foundation as the stand of the assessee on facts was never disputed. So far as the reliance on Accounting Standard-l l is concerned, it would not by itself determine whether the activity was a part of the Respondent-assessee's regular business transaction or it was a speculative transaction. On present facts, it was never the Revenue's contention that the transaction was speculative but

19 ITA Nos. 462&752 of 2014 & CO 63 of 2014 Hindustan Gum & Chemicals Ltd., AY 2008-09 only disallowed on the ground that it was notional. Lastly, the reliance placed on the decision in S. vinodkumar Diamonds (P) Ltd. (supra) in the Revenue's favour would not by itself govern the issues arising herein. This is so as every decision is rendered in the context of the facts which arise before the authority for adjudication. Mere conclusion in favour of the Revenue in another case by itself would not entitle a party to have an identical relief in this case. In fact, if the Revenue was of the view that the facts in S. Vinodkumar (supra) are identical/similar to the present facts, then reliance would have been placed by the Revenue upon it at the hearing before the Tribunal. The impugned order does not indicate any such reliance. It appears that in S. Vinodkumar Diamonds (P.) Ltd. (supra), the Tribunal held the forward contract on facts before it to be speculative in nature in view of Section 43(5) of the Act. However, it appears that the decision of this court in CITv. Badridas Gauridu (P.) Ltd. [2003] 261 ITR 256/[2004] 134 Taxman 376 (Mum.) was not brought to the notice of the Tribunal when it rendered its decision in S. Vinodkumar Diamonds (P.) Ltd. (supra). In the above case, this court has held that forward contract in foreign exchange when incidental to carrying on business of cotton exporter and done to cover up losses on account of differences in foreign exchange valuations, would not be speculative activity but a business activity. 8. In the above view, the question of law, as formulated by the Revenue, does not give rise to any substantial of law. Thus, not entertained.”

7.5.1. We find that the co-ordinate bench of Mumbai Tribunal supra had also decided this issue in favour of the assessee wherein it was held that:- “8. We have carefully considered the order of Ld. Commissioner of Income Tax and the submissions of Ld. Representatives of the parties. We have also carefully considered the cases cited before us (supra). It is relevant to state that in the case of Woodward Governor India (P.) Ltd. (supra), the Hon'ble Apex Court observed and held that the assessee debited to its profit and loss account certain unrealized loss due to foreign exchange fluctuation in foreign currency transactions towards revenue items as on the last day of the accounting year. The A.O. held that the liability as on the last date of the previous year was not an ascertained but a contingent liability. Resultantly, the same was added back to the total income. The CIT(A) echoed the assessment order. However, the Tribunal held that the claim of the assessee for deduction of unrealized loss due to foreign exchange fluctuation as on the last date of the previous year was deductible. The said order of the Tribunal was upheld by the Hon'ble High Court. On further appeal by the department, the Hon'ble Supreme Court held that the loss suffered by the assessee is on revenue account towards foreign exchange difference as on the date of balance sheet and is an item of expenditure deductible u/s 37(1). It further observed than an enterprise has to report outstanding liability relating to import of raw material using closing rate of foreign exchange and any difference, loss or gain, arising on conversion of said liability at closing rate should be recognized in profit and loss account for reporting period. From the judgment of the Hon'ble Supreme Court it can be clearly deduced that unrealized loss due to foreign exchange fluctuation in foreign currency transactions on revenue item as on the last the accounting year is deductible.”

7.5.2. We also find that the co-ordinate bench of Delhi Tribunal supra had rendered a decision in favour of the assessee on an identical issue after considering the Instruction No. 3/2010 wherein it was held that :-

20 ITA Nos. 462&752 of 2014 & CO 63 of 2014 Hindustan Gum & Chemicals Ltd., AY 2008-09 “8. Coming to the corporate additions i.e. disallowance of loss, it clearly emerges from the record that the assessee in respect of foreign exchange realization follows mercantile system of accounting and not cash system of accounting. The loss has been incurred for hedging of foreign currency fluctuation involved in sales invoices on the basis of forward contracts, which is a business decision to safeguard its interest. The loss has been incurred on the basis of scientific method in the ordinary course of business. The loss being based on a scientific method, on the basis of contractual liability with banks and on mercantile system has to be allowed to the assessee following Hon’ble Supreme Court judgment in the case of Woodward Governor India (P) Ltd. (supra). Our view is further fortified by the fact that DRP in its own order in subsequent year has itself held that the issue about the loss on mercantile system is pending dispute in AY 2008-09. Therefore, the allowability of the loss on actual payment in AY 2009-10 has been made subject to the allowability of the loss for AY 2008-09. This stand of the DRP itself negates the observations of assessing officer that it is a notional loss and establishes that it is a business loss incurred by the assessee on mercantile system which method is consistently followed by the assessee. Under these circumstances, we are inclined to allow the foreign exchange fluctuation loss to assessee in this year. This ground of the assessee is allowed.”

7.5.3. Respectfully following the aforesaid decisions and in view of the facts and circumstances, we do not find any infirmity in the order of the ld CITA in this regard. Hence the Ground No. 3 raised by the revenue is dismissed.

8.1. The brief facts of this issue is that the ld AO observed that the assessee had debited provision of Rs. 1,88,88,720/- in its profit and loss account and the details of the same were called for from the assessee. The assessee replied that as regards provision made in the sum of Rs. 1,88,88,720/-during the year but not considered as disallowable u/s 43B of the Act, as per Rajasthan VAT Act, the company was allowed to get refund of VAT on consumption of raw materials used in goods meant for export. Accordingly the assessee received refund of VAT on those raw materials. Subsequently vide Notification No. F012(15)FD/Tax/2008/85 dated 25.2.2008 issued by Govt of Rajasthan, Finance Department, VAT was exempted with retrospective effect. The company was therefore liable to refund the VAT and as such necessary provision was made in the accounts for the year which was not meant for any statutory liability and not covered under the provisions of section 43B of the Act. Subsequently the Govt of Rajasthan has withdrawn this notification and this provision has also been reversed in the subsequent year and included in the total

21 ITA Nos. 462&752 of 2014 & CO 63 of 2014 Hindustan Gum & Chemicals Ltd., AY 2008-09 income. The ld AO however concluded that the provision made by the assessee was not an ascertained liability. The ld AO also observed that the refund was not credited by the assessee in its profit and loss account and the debit to the profit and loss account would be justified only if there is a corresponding credit of refund received in the profit and loss account. Hence he concluded that the same is in the nature of statutory liability and disallowed u/s 43B of the Act as the same was not paid by the assessee.

8.2. The ld CITA deleted the addition appreciating the contentions of the assessee and also by the fact that the assessee had reversed this provision in the subsequent year based on subsequent notification of Govt of Rajasthan , VAT department. Aggrieved, the revenue is in appeal before us on the following ground:- “4. That is the facts and in law of the case the Ld. CIT(A) erred in allowing the provision on account of VAT as the said provision is not allowable u/s 43B on which the said provision is allowable only on actual payment."

8.3. The ld DR vehemently relied on the order of the ld AO. In response to this, the ld AR relied on the relevant pages in the paper book containing the relevant notifications issued by Govt of Rajasthan, VAT department. He argued that the same is not tax payable so as to fall within the ambit of section 43B of the Act. Moreover, pursuant to withdrawal of notification by the Govt of Rajasthan, VAT department , the assessee had reversed this provision and offered the same to the total income in the subsequent year. Hence if this addition is sustained, then it would result in double taxation of the same item.

8.4. We have heard the rival submissions and perused the materials available on record. We find that the ld CITA had deleted the disallowance by observing as under:- “5.9 Ground No.10 This ground of appeal is against the action of the Assessing Officer for making disallowance of Rs.18888720/- as not ascertained liability and further that the liability was not allowable u/s 438 of the IT Act. I am inclined to agree with the submissions of the appellant. The provision made by the appellant for the previous year relevant to the assessment year 2008-09 was an ascertained liability. According to the notification issued on February 25, 2008, Guar Gum was exempt from VAT with effect from April 1, 2006. Accordingly, no VAT was payable on the said commodity with effect from April 1, 2006. The VAT paid by the appellant as part of the purchase price of the commodity and deposited by the seller with the Government did not have

22 ITA Nos. 462&752 of 2014 & CO 63 of 2014 Hindustan Gum & Chemicals Ltd., AY 2008-09 the character of tax since no tax was in fact leviable. In such circumstances, the appellant was not entitled to refund of Rs.l ,88,88,720/- on account of VAT paid on raw materials. The appellant had to return the sum of Rs.l,88,88,720/- to the Government and made a provision for the same treating it as an ascertained liability. The refund which the appellant was obliged to return cannot be treated as any sum payable by the appellant by way of tax within the meaning of clause (a) of section 43B of the Act. In my opinion, the appellant has correctly reversed the provision in the next year consequent to issue of notification dated August 29, 2008 and offered the amount for taxation in the assessment year 2009-10. In view of the above factual position and finding, this ground of appeal of the appellant is allowed.”

We do not find any infirmity in the order of the ld CITA in this regard. Hence, the Ground No. 4 raised by the revenue is dismissed.

Order is pronounced in the open court on 08.03.2017 Sd/- Sd/- (Partha Sarathi Chaudhury) (M. Balaganesh) Judicial Member Accountant Member Dated : 8th March, 2017

Jd.(Sr.P.S.) Copy of the order forwarded to: APPELLANT – Hindustan Gum & Chemicals Ltd., Birla Building, 4th 1. floor, 9/1, R. N. Mukherjee Road, Kolkata-700 001. 2 Respondent –DCIT, Circle-12, Kolkata. 3. The CIT(A), Kolkata 4. CIT, Kolkata. 5. DR, Kolkata Benches, Kolkata

/True Copy, By order,

Asstt. Registrar.