Vildirect: IncomeTax-caselaws-2003-VIL-193-ITAT-CHD

2003-VIL-193-ITAT-CHD

Equivalent Citation: TTJ 089, 439,

Income Tax Appellate Tribunal CHANDIGARH

Date: 15.01.2003

PUNJAB TRACTORS LTD.

DEPUTY COMMISSIONER OF INCOME TAX.

BENCH

Member(s) : VIMAL GANDHI., JOGINDER PALL.

JUDGMENT

By this order we shall dispose of this appeal of the assessee filed against the order of CIT(A), Patiala, for the asst. yr. 1995-96.

2. The first issue raised in this appeal is that the CIT(A) was not justified in sustaining the action of the AO in disallowing deduction under s. 80-I. The relevant grounds of appeal relating to this issue are at Sl. Nos. 1, 2, 4 and 5 and read as under:

1. That the learned CIT(A) is not justified in confirming the action of the learned AO in rejecting the claim of deduction under s. 80-I of IT Act, 1961, of the appellant as a whole.

2. That the learned CIT(A) is not justified in confirming the learned AO's action though on different ground/basis of not accepting the expansion of the existing manufacturing tractor unit as a new industrial undertaking and thereby rejecting the claim of deduction under s. 80-I of IT Act, 1961.

(sic 3.) 4. It is also contended that the CIT(A) had erred on facts that the profits between the old and the new industrial undertaking could not be bifurcated since the appellant produces the same product in the new industrial undertaking also, and accordingly erred in law in not allowing deduction under s. 80-I as claimed by the appellant.

4. The learned CIT(A) has not appreciated that having allowed 80-I deduction in asst. yr. 1994-95, the assessing authority was not entitled to change its opinion, particularly when no new facts had emerged. The facts of the case are that in the return of income, the assessee had claimed deduction under s. 80-I to the tune of Rs. 3,64,65,000. It was submitted before the AO that the assessee had undertaken substantial expansion programme for raising the production of tractors from 12,000 units to 25,000 units in the financial year 1989-90. Such expansion programme involved the creation of a new industrial unit with substantial investment in plant and machinery totalling Rs. 40.90 crores up to financial year 1994-95. Since the product of both the old and new units was tractor and sold at uniform market price, profits of the new industrial unit could be computed on proportionate basis, as the assessee had not maintained separate books of accounts. On the basis of such proportionate working, the assessee's claim for deduction worked out to Rs. 3,64,65,000 in respect of new industrial unit. However, the AO was not satisfied with the working of profit of the new unit claiming deduction under s. 80-I. He observed that the assessee had shown profit on sale of its assets at Rs. 7.21 lacs but it was not known whether profit on sale of assets related to the old or new unit. Such income was entitled to deduction under s. 80-I and, therefore, the same required to be reduced from the eligible profit. Besides, the assessee had claimed deduction of interest of Rs. 2,51,27,602 (net). This working was not correct, as the assessee had adjusted interest receipts on bank deposits, loan to employees and interest from IT Department aggregating to Rs. 1,13,73,436, which was taxable under the head "income from other sources". The assessee was not entitled to deduction on such interest receipts and in this manner the assessee had inflated its claim for deduction under s. 80-I. Similarly, the assessee had wrongly included interest income of Rs. 1.56 lacs on HDFC bonds and insurance recovery claims amounting to Rs. 3.2 lacs for the purpose of claiming deduction under s. 80-I. Besides, the AO also observed that the assessee had not maintained any separate books of accounts for the new industrial unit and both the old and the new units were being run from the same premises. The assessee had also not shown depreciation on vehicles, furniture and fixtures and this mistake was found out during the course of assessment proceedings. He also observed that the computation of profits on the basis of pro rata production was found to be grossly erroneous. The assessee had knowingly not kept the proper accounts so that eligible profits may be manipulated to claim undue advantage. Thus, the AO denied the deduction under s. 80-I.

3. Being aggrieved, the assessee challenged the action of the AO in appeal before the CIT(A). It was contended before the CIT(A) that the assessee had undertaken a massive expansion programme for raising the production from 12,000 units to 25,000 units. Thus, resulted in creation of new industrial unit with total investment of Rs. 4,090.51 lacs up to financial year 1994-95. The increase in the tractor output was steadily achieved over the last six years. The details of the production both in respect of old unit and the new unit and year-wise details of investment in buildings and plant and machinery in the new unit were submitted as under:

Tractors Production

(In Nos.)

	1989-90	1990-91	1991-92	1992-93	1993-94	1994-95
Old Unit	12,015	12,025	12,030	12,050	12,075	12,100
New Unit	2,314	2,784	2,560	4,395	6,120	11,049
Total Prod.	14,329	14,809	14,590	16,445	18,195	23,149

The investment in plant and machinery and buildings in the new industrial unit was as under:

Rs. in lacs

	1989-90	1990-91	1991-92	1992-93	1993-94	1994-95
Bldgs.	43.12	111.17	142.17	76.47	28.75	11.42
Plant & Mach.	627.09	499.43	913.10	676.69	588.86	372.34
Total Inv.	670.21	610.60	1055.17	753.16	617.61	383.76

It was submitted that deduction under s. 80-I was claimed on proportionate basis as the tractors were being sold at the same price both in respect of the old unit and new unit. It was also submitted that earlier the capacity of production was increased from 5,000 units to 12,000 units in asst. yr. 1980-81. It was held by the Punjab and Haryana High Court that the assessee was entitled to deduction under s. 80-I in respect of new unit. It was submitted that the facts of the present case were the same as for the increasing the capacity from 5,000 units to 12,000 units. The new additions to plant and machinery were based on latest technology and, therefore, represented an improvement in each area of production, i.e., while in the existing industrial undertaking, machining drilling and turning activities were done by radial drilling machine and Capston lathe machines, in the new industrial unit, the same processes were carried out by means of CNC machining centres and CNC turning centres. Similarly, substantial improvement was made in assembly expansion, i.e., while the earlier assembly was manually operated on push trolley line. But, in the new expansion, the existing set up was dismantled and a new overhead-conveyorised assembly line was set up. 'This resulted in enhancing the assembly capacity to 30,000 tractors. It was also submitted that it was not necessary that the assessee must maintain separate books of accounts in order to claim deduction under s. 80-I. It was also not necessary that part use of the old machinery would disentitle the assessee for deduction under s. 80-I. However, these submissions did not find favour with the CIT(A) who upheld the order of the AO for the following reasons:

(a) The sanction to increase the capacity from 12,000 tractors to 25,000 tractors per annum was accorded by the Government of India, Ministry of Industry, vide their order dt. 6th Nov., 1989. This was only, a re-endorsement of the original industrial licence granted to the assessee. Thus, it was purely an expansion programme of the already existing unit.

(b) During the course of appeal proceedings, the assessee was asked to furnish evidence that new building had been constructed for housing the new machinery. In response thereof, the assessee produced site plans duly sanctioned by the Estate Office, Mohali. The same showed that assessee was allowed merely expansion of existing shops and shifting of the canteen premises. No new building to use the new machinery had been constructed. The old machinery and the new machinery continued to be installed in common premises on the common floor. Even the expansion of the existing shed was sanctioned on 4th May, 1992.

(c) The assessee itself admitted that the existing assembly line was dismantled and a new common assembly line within the same premises was set up. In the absence of separate books of accounts, there was no distinction in the production area so far as manufacturing process was concerned. The old and new machines were operating from common premises on the same floor with the same workers with no distinction whatsoever between the old and the new units. Due to these reasons, it was not possible at any point of time to determine as to which part of the tractor was manufactured/assembled in the old or the new unit.

(d) The assessee continued to maintain common stock register and manufacturing record. The situation was such that the manufactured tractors might have parts, which had been either assembled/manufactured on the old machines or the new machines. Thus, it was not possible to demarcate whether the tractors were manufactured in the old unit or the new unit.

(e) The manufacturing process consisting of various operations were co-existing in the common industrial sheds and these processes continued to be done either on the new machinery or old machinery. The assessee had been disposing of part of the machinery and even in the assessment year under reference the assessee had sold substantial part of capital assets. This fact only showed that the assessee with the induction of the new machines had sold old and obsolete machines. Thus, in the light of these facts, the CIT(A) came to the conclusion that no new industrial unit had come into existence. The entire exercise was undertaken for modernizing and expansion of the manufacturing capacity of the existing unit. The assessee continued to produce the same product as in the past. It was not possible to bifurcate the profits between the old and new industrial units. The whole manufacturing activity was intermingled with no clear-cut demarcations. The basis adopted by the assessee for computing the profits from the new industrial undertaking was not in accordance with law as many items of income like interest on bank deposits, income-tax refund, loans to employees, income from HDFC bonds, recovery insurance claims and sale of fixed assets were not the profits "derived from" an industrial undertaking. Aggrieved with order of the CIT(A), the assessee has now come up in appeal before us.

4. Both the parties were heard at some length and hearing was concluded on 20th Aug., 2002. But, subsequently, the learned counsel for the assessee filed further submissions on 28th Aug., 2002. These were directed to be put up before the Bench on 29th Aug., 2002. Accordingly, these were placed before the Bench on 29th Aug., 2002. The learned Departmental Representative, Smt. Rachna Singh, strongly opposed filing of submissions after the hearing was already over. However, a copy of the submissions was also given to the learned Departmental Representative to make her submissions, if any, and the case was posted for hearing on 7th Oct., 2002. The learned Departmental Representative filed detailed submissions vide her letter dt. 7th Oct., 2002. A copy of the same was also given to the learned counsel for the assessee for making counter-submissions, if any. The case was posted for hearing on 18th Oct., 2002. On this date, the hearing was concluded, as the learned counsel did not make any further submissions. Considering the fact that both the parties have been allowed full opportunities to make counter-submissions, if any, the subsequent submissions filed by the assessee and written submissions filed by the learned Departmental Representative on 7th Oct., 2002, were taken on record for deciding the appeal. Respective submissions of both the parties are discussed in the succeeding paragraphs.

5. The learned counsel for the assessee, Shri P.C. Jain, submitted that the assessee is a Punjab Government undertaking. Earlier, the capacity of production of tractors was increased from 5,000 to 12,000 units in the asst. yr. 1980-81. The assessee had claimed deduction under s. 80-I in respect of the new unit for increased capacity and Punjab and Haryana High Court allowed the claim of the assessee in IT Case No. 106 of 1995. A copy of the order of Punjab and Haryana High Court was placed on our file at pp. 1 and 2 of the paper book. He submitted that likewise capacity of production was enhanced from 12,000 units to 25,000 units and necessary sanction for the same was accorded by the Government of India, Ministry of Industry, vide their order dt. 6th Nov., 1989, copy whereof is placed at pp. 9, 9A and 9B of the paper book. He submitted that the facts of the case for the assessment year under reference are the same as for the asst. yr. 1980-81. Therefore, the abovementioned judgment of Punjab and Haryana High Court would equally apply to the facts of the case for the assessment year under reference. He further submitted that on the same facts, the assessee had claimed deduction under s. 80-I for the asst. yr. 1994-95 and the claim was allowed by the AO. A copy of the assessment order for the asst. yr. 1994-95 was also placed on our file. Thus, he submitted that there was absolutely no reason for the Revenue not to allow such claim for the assessment year under reference. He further submitted that nowhere the AO had mentioned that assessee was not entitled to deduction under s. 80-I. But, he had only raised a doubt about the quantification of the claim. He further submitted that the observation made by the AO that since the assessee had not maintained separate books of accounts, it was not possible to quantify the deduction under s. 80-I was not correct. He submitted that it was not necessary that assessee must maintain separate books of accounts for the purpose of claiming deduction under s. 80-I. He further submitted that even if the new plant and machinery is installed at the existing unit, the assessee would be entitled to deduction under s. 80-I. He further submitted that as a result of substantial expansion programme the assessee had installed new plant and machinery worth Rs. 4,090.51 lacs up to asst. yr. 1994-95. He submitted that there were five different stages of production, namely, heavy machine shop, assembly shop, paint shop, light machine shop and heat treatment plant and each shop contained number of machines for which absolutely separate and distinct details were available. He submitted that in case of a heavy machine shop, there were 32 existing machines and in respect of expanded capacity, 27 new machines were added. Besides, new modern machines were set up independently and further expansion of the shop had been made in the building by constructing a new shed. It has also been submitted that each machine is an independent machine and not dependent on the other machine. The same could work independently without the interference of the old machines. He further submitted that out of the total cost of new project worth Rs. 40.90 crores, the cost of building was Rs. 4.13 crores and the plant and machinery was worth Rs. 36.78 crores. In respect of the old unit, the cost of old building and plant and machinery was to the tune of Rs. 2.74 crores and Rs. 14.70 crores, respectively. As regards the assembly line, which is automatic and mechanically operated, the total cost of the old assembly line was not more than 4 per cent to 5 per cent of the new assembly line. He further submitted that whole of the new unit was independently earmarked and was not dependent on the working of the old unit. He submitted that the authorities below have disallowed the claim merely on the basis of surmises and conjectures. The assessee was entitled to deduction under s. 80-I. He also relied on the following judgments to support his view point that for the purpose of claiming deduction under s. 80-I it was not necessary that separate books of accounts should be maintained and that the new unit must be installed at a different place than the already existing unit:

(i) Textile Machinery Corporation Ltd. vs. CIT 1977 CTR (SC) 151 : (1977) 107 ITR 195 (SC);

(ii) CIT vs. Indian Aluminium Co. Ltd. (1977) 108 ITR 367 (SC);

(iii) CIT vs. Batala Engineering Co. Ltd. (1979) 12 CTR (P&H) 120 : (1979) 120 ITR 683 (P&H);

(iv) CIT vs. Sree Krishna Pulversing Mills (2000) 163 CTR (AP) 151 : (2000) 241 ITR 262 (AP);

(v) CIT vs. J.K. Synthetics Ltd. (1989) 79 CTR (Del) 197 : (1990) 182 ITR 125 (Del); and

(vi) Hind Tools & Dies (P) Ltd. vs. ITO (1987) 20 ITD 94 (Pat)(TM);

(vii) ITO vs. Carborandum Universal Ltd. (1982) 13 TTJ (Mad) 370 : (1982) 1 ITD 23 (Mad);

(viii) Saurashtra Cement & Chemical Industries (1979) 11 CTR (Guj) 139 : (1980) 123 ITR 669 (Guj);

(ix) CIT vs. Metropolitan Springs (P) Ltd. (1991) 95 CTR (Bom) 265 : (1991) 191 ITR 288 (Bom);

(x) CIT vs. Hindustan Malleables & Forgings Ltd. (1991) 191 ITR 70 (Pat);

(xi) CIT vs. Ambur Co-operative Sugar Mills Ltd. (1981) 127 ITR 495 (Mad);

(xii) Rajasthan Petro Synthetics Ltd. vs. Dy. CIT (1997) 60 ITD 682 (Del);

(xiii) ITO vs. Youngman Hosiery Factory (1985) 23 Taxman 105 (Chd);

(xiv) CIT vs. Premier Cotton Mills Ltd. (1999) 154 CTR (Mad) 538 : (2000) 108 Taxman 218 (Mad);

(xv) CIT vs. Rohtas Industries Ltd. (1979) 120 ITR 110 (Cal);

(xvi) CIT vs. Gopi Chand Textile Mills Ltd. (1990) 82 CTR (P&H) 309 : (1989) 179 ITR 371 (P&H);

(xvii) Tribunal, Chandigarh Bench, in the case of Smithkline Beecham Consumers Healthcare Ltd., Nabha vs. Dy. CIT (ITA Nos. 1458 and 1609 of 1995 for the asst. yr. 1989-90).

Thus, he submitted that assessee had set up a new and distinct unit engaged in the manufacture of tractors and, therefore, the assessee was entitled to deduction under s. 80-I.

6. The learned Departmental Representative, Smt. Rachna Singh, on the other hand, heavily relied on the orders of authorities below. She submitted that the contention of the assessee that for the asst. yr. 1994-95 the claim of the assessee for deduction under s. 80-I was allowed by the Revenue is not correct. She drew our attention to p. 7 of her paper book, which is a copy of notice issued under s. 148 for the asst. yr. 1994-95. She further drew our attention to pp. 8 and 9 of the paper book, which is a copy of the reasons recorded by the AO for the asst. yr. 1994-95 for reopening the assessment on the ground that the assessee was not entitled to deduction under s. 80-I. Thus, she submitted that assessment for the asst. yr. 1994-95 already stood reopened. She further drew our attention to pp. 10 to 16 of the paper book, which is a copy of reassessment order passed by the AO for the asst. yr. 1994-95 where claim of the assessee for deduction under s. 80-I was disallowed. She further submitted that in the asst. yr. 1989-90 the assessee had only undertaken substantial expansion programme for raising the production capacity from 12,000 to 25,000 tractors per annum. This fact is conceded by the directors in the note on deduction under s. 80-I filed along with the return. Thus, she submitted that the assessee had undertaken only an expansion programme of the existing unit and not setting up a new unit. She further submitted that the assessee was entitled to deduction under s. 80-I only in respect of profits 'derived from' an industrial undertaking. Drawing our attention to the reasons given by the AO in the assessment order, she submitted that the working of the profit was faulty any it was not possible to arrive at the correct profit derived from the new industrial unit/undertaking. She relied on the following judgments:

(i) CIT vs. Sterling Foods (1999) 153 CTR (SC) 439 : (1999) 237 ITR 579 (SC);

(ii) Hindustan Lever Ltd. vs. CIT (1999) 156 CTR (SC) 506 : (1999) 239 ITR 297 (SC);

(iii) Nanji Topanbhai & Co. vs. Asstt. CIT (1999) 157 CTR (Ker) 225 : (2000) 243 ITR 192 (Ker).

She further submitted that it was not possible to determine the correct profit from the new unit because the assessee had not maintained separate books of accounts. There were no separate premises for both the units. Further, identification of the same was not possible. She further drew our attention to the observations recorded by the CIT(A) where he had mentioned that earlier assembly line was manually operated by push trolley line. However, in the expansion programme, the existing set up was dismantled and new overhead conveyorised assembly line was set up. This clearly indicated that there was no new unit. The assessee had only expanded the existing unit. Even the sanction accorded by the Government for increasing the existing capacity to 25,000 units was an endorsement of the expansion programme of the existing unit. She submitted that old and new machines were operating from the same premises with the same workers without any distinction whatsoever between the old and the new units. Thus, it was not possible to find out which particular tractor was manufactured in the old unit and which was manufactured in the new unit. She submitted that since no new industrial undertaking had come into existence and the whole exercise tantamount to modernizing and expansion of the existing industrial unit, the assessee was not entitled to deduction under s. 80-I. She further distinguished the judgments relied upon by the learned counsel for the assessee as under :

(i) CIT vs. Rohtas Industries Ltd.; The facts before the Calcutta High Court were that there was a separate and distinct entity, which had come into existence. But, in the instant case, there is no separate and distinct entity as the physical premises of the old unit as well as the new unit were the same.

(ii) CIT vs. Indian Aluminium Co. Ltd.; In this case also, the new unit was set up side by side of the old unit. But, in the present case no such evidence was adduced that the new unit was set up as a separate entity in its own right.

(iii) Textile Machinery Corp Ltd. vs. CIT; In this case, the assessee launched a new activity by establishing a new plant and machinery. But, in the present case, there is no independent unit that came into being.

(iv) CIT vs. Gopichand Textile Ltd.; This is altogether on a different issue not relating to deduction under s. 80-I.

(v) ITO vs. Youngman Hosiery Factory; Here also, the Tribunal held that assessee was entitled to deduction under s. 80-J in respect of spinning unit and maintenance of separate books of accounts in respect of new unit was not necessary so long as the profits for the new units could reasonably be ascertained. This is not possible in the present case.

(vi) CIT vs. Premier Cotton Mills Ltd.; In this case, the Tribunal had recorded a specific finding that the entire expansion undertaken by the assessee was an independent unit and was capable of functioning as such. But, this is not so in the present case.

(vii) ITA Nos. 1458 and 1609 of 1995 of Tribunal, Chandigarh Bench, in the case of Smithkline Beecham Consumer Healthcare Ltd., Nabha vs. Dy. CIT for the asst. yr. 1989-90; In this case, new production lines were established which could be identified separately and the layout plan was such that it clearly showed the location of new units. She further relied on the decision of the Tribunal, Chandigarh Bench, in the case of H.P. Cotton Textile Mills Ltd., Hissar vs. CIT, Patiala in ITA No. 1762/Del/1997, wherein deduction under s. 80-I was not allowed on the ground that the assessee was not able to place any material to demonstrate that the unit was a new unit. A copy of this order was also placed on our file. She further submitted that the decision of Punjab and Haryana High Court in assessee's own case is also of no help because the judgment was given with reference to the fact that there was a new unit set up by the assessee. Thus, it has been pleaded that the order of the CIT(A) does not merit any interference.

7. We have heard both the parties and given our thoughtful consideration to the rival submissions, both oral and written. We have carefully gone through the orders of authorities below and referred to the various judgments cited at the Bar by both the parties. The undisputed facts of the case are that up to asst. yr. 1988-89, the assessee had installed/sanctioned capacity of manufacturing 12,000 units. The said capacity was enhanced to 25,000 units for which necessary sanction was given by the Government of India, Ministry of Industry. It is also a fact that the assessee constructed building and installed new plant and machinery worth Rs. 40.91 crores up to financial year 1994-95. The details placed before us and discussed in the order of CIT(A) on p. 5 of the impugned order further show that the new unit became functional in the financial year 1989-90, when it manufactured 2,314 tractors although the total investment in building and plant and machinery up to that year aggregated to Rs. 6.70 crores. It is also a fact that in the asst. yr. 1980-81, the existing production capacity was increased from 5,000 tractors to 12,000 tractors. It is also a fact that the assessee had claimed deduction under s. 80-I for the asst. yr. 1980-81, which was denied by the Revenue authorities. However, on appeal before the Tribunal, the claim of the assessee was allowed. On a reference to the High Court at the instance of the Revenue, the High Court upheld the order of the Tribunal by relying on the following judgements:

(i) Textile Machinery Corpn Ltd. vs. CIT: The facts of the case before the Supreme Court were that there already existed a unit. The assessee set up a new unit to manufacture articles to be used in the existing business. The question before the Supreme Court was whether it amounted to reconstruction of business already in existence or it was a new unit entitled to deduction under s. 80-I. In the light of these facts, it was held that the assessee was entitled to deduction under s. 80-I in view of the fact that new undertaking was not formed out of the existing business. The articles produced by the new unit may be consumed by the old unit or it might be sold to outside parties. This fact would not come in the way of allowing deduction under s. 80-I.

(ii) CIT vs. Indian Aluminium Co. Ltd.: Earlier, the assessee had four manufacturing centers at different places. Subsequently, the assessee established one more unit at a new place and also made substantial expansion to the existing two units and installed a new plant and machinery. The assessee claimed deduction under s. 80-I in respect of new unit and also in respect of two existing units where substantial expansion had been carried out. In the light of these facts, Hon'ble Supreme Court held that the assessee was entitled to deduction under s. 80-I in respect of a new unit and also in respect of expanded capacity of the already two existing units.

(iii) CIT vs. Gopi Chand Textile Mills Ltd.: In this case, the issue before the Punjab and Haryana High Court was whether the value of plant and machinery under installation should also be included for computing the special deduction under s. 80-I or not. The Hon'ble Punjab and Haryana High Court held that value of assets under installation should also be included in the capital of the assessee for the purpose of computing deduction under s. 80-I of the IT Act. The relevant finding recorded by the Hon'ble High Court in the aforesaid case is reproduced as under:

"We have heard Shri Sawhney, learned counsel for the Revenue and Shri S.K. Mukhi, learned counsel for the assessee, and have carefully gone through the order passed by the Tribunal, Chandigarh Bench, Chandigarh. We have also gone through the decisions of the Supreme Court in Textile Machinery Corporation Ltd. vs. CIT 1977 CTR (SC) 151 : (1977) 107 ITR 195 (SC) and CIT vs. Indian Aluminium Co. Ltd. (1977) 108 ITR 367 (SC) and a decision of this Court in CIT vs. Gopi Chand Textile Mills Ltd. (1990) 82 CTR (P&H) 309 : (1989) 179 ITR 371 (P&H) and, in our opinion, the questions sought to be raised must be deemed to have been finally settled by the aforementioned decisions. We, therefore, do not find any ground to direct the Tribunal to refer the above-mentioned questions of law. Consequently, these petitions are dismissed."

Now, the first issue that requires to be considered by us is whether the judgment of Punjab and Haryana High Court in assessee's own case for the asst. yr. 1980-81, i.e., ITC No. 106 of 1995 would be applicable to the facts of the present case or not. Admittedly, in this case, the assessee had invested a huge amount in plant and machinery worth Rs. 36.97 crores and Rs. 4.13 crores in the building. Thus, looking to the nature of these huge investments, it could not be said that the unit was not new industrial unit by itself. In any case, the production capacity of tractors was enhanced from 12,000 units to 25,000 units as done in 1980-81, when the capacity was enhanced from 5,000 units to 12,000 units. Therefore, the facts of the present case are identical to the facts for the year 1980-81. In the light of these facts, the judgment of Hon'ble High Court in the case for 1980-81 would squarely apply to the present year as well. Therefore, the assessee would be entitled to deduction under s. 80-I on this ground itself. Further, the judgment of Hon'ble Supreme Court in the case of CIT vs. Indian Aluminium Co. Ltd. also applies to the facts of the present case. There also, the assessee had, inter alia, expanded the existing capacity of the two units by installing a new plant and machinery worth Rs. 50 lakhs. The Hon'ble Supreme Court held that assessee was entitled to deduction under s. 80-I, both in respect of a new unit and also in respect of the expanded capacity of the already two existing units. As regards the merits of the reasons given by the AO for disallowing the claim, it is obvious from a perusal of the order of the AO that he has disallowed the claim purely on the ground that no separate books of accounts have been maintained, and the working of profit derived from new industrial unit was not possible as the assessee had included many items of income which could not strictly fall in the category of profit 'derived from' an industrial undertaking. The fact that assessee had not maintained books of accounts separately could not be a ground by itself for disallowing the claim of the assessee. In fact, proviso to s. 80-I empowers the AO to compute the profits and gains of an industrial undertaking on a reasonable basis in case the computation made by the AO presents exceptional difficulties. Thus, if the working made by the assessee was faulty, the AO should have computed the profit on a reasonable basis. The following judgments support the view that maintenance of separate books of accounts is not necessary:

(i) CIT vs. Sree Krishna Pulverising Mills;

(ii) CIT vs. Hindustan Malleables & Forgings Ltd.;

(iii) CIT vs. Metropolitan Springs (P) Ltd.;

(iv) Hind Tools & Dies (P) Ltd. vs. Fourth ITO.

8. Sec. 80-I does not provide that in order to entitle the assessee to the claim of deduction under s. 80-I, the new unit must manufacture different articles than being manufactured by the existing unit. The new unit can manufacture the same articles, which are being manufactured by the old unit or the new unit can even manufacture some components/parts which could either be consumed for manufacturing articles by the existing unit or may be sold to outside parties. Reliance in this regard is placed on the judgment of Supreme Court in the case of Textile Machinery Corpn. Ltd. vs. CIT. Besides, the assessee can also use the same premises/building for installing the plant and machinery of the new unit. It can also use part of the components manufactured by the old unit in its own manufacturing. The only conditions imposed under s. 80-I are that the new undertaking should not be formed by the splitting up or reconstrution of business already in existence, it is not formed by the transfer to a new business of machinery or plant previously used for any purpose, it manufactures or produces articles other than specified in XIth Schedule and the new undertaking employs 10 or more workers in a manufacturing process carried on with the aid of power or employs 20 or more workers in a manufacturing process carried on without the aid of power. Nowhere the AO has recorded a finding that the assessee does not fulfil these conditions. However, the CIT(A) has recorded a finding that it is not possible to identify as to which particular tractor has been manufactured in the old unit and which tractor has been manufactured in the new unit. These findings are not supported by evidence on record. The CIT(A) has not examined the details of the new plant and machinery costing Rs. 36.78 crores installed in the new unit, as to whether these machines were capable of manufacturing tractors independent of the old unit. Besides, the assessee has incurred a cost of Rs. 4.13 crores to the existing building. The fact that the assessee has been allowed depreciation on the new plant and machinery and building would only show that the Revenue has accepted the position that these were new additions to the plant and machinery. Coupled with this is the fact of substantial increase in the production capacity from 12,000 units to 25,000 units. The very fact that part of the old machinery was discarded or sold does not mean that the new unit had not come into being. Moreover, the assessee had furnished separate details of the tractors manufactured in the old unit and the new unit. The number of tractors manufactured in the old unit were higher than the number of tractors manufactured in the new unit. The Revenue has not found any fault with the working of figures of production shown in the old and new units. On the other hands, if separate details were not possible, the assessee could have shown higher production in the new unit as compared to old unit in order to claim deduction under s. 80-I at a higher amount. This fact further shows that the new unit was a separate and independent unit for which it was possible to find out the exact number of tractors manufactured therein. Therefore, the assessee is entitled to deduction under s. 80-I in respect of such unit. Following judgments/decisions relied upon by the learned counsel further support the above view:

(i) CIT vs. Ambur Co-operative Sugar Mills Ltd.: In this case, the assessee had installed a new unit with the production capacity of 400 MTs in addition to the old unit having production capacity of 5 MTs. The assessee installed machinery worth Rs. 45 lacs in the new unit. The old machinery used was less than 20 per cent. In these facts, it was held that the second unit was not tide up with the existing unit and both were independent units and, therefore, the assessee was entitled to deduction under s. 80-I in respect of the new unit and the new unit was not an undertaking formed by the splitting up or reconstruction of the existing unit.

(ii) Saurashtra Cement & Chemical Industries Ltd. vs. CIT: In this case also, the existing capacity of 600 tons was expanded to 1,600 tons per day by setting up new plant and machinery. It was held that the assessee was entitled to deduction under s.80-I.

(iii) ITO vs. Carborandum Universal Ltd.: In this case also, the assessee increased the installed capacity by installing new plant and machinery. The AO declined deduction under s. 80-I on the ground that it was only an expansion/reconstruction of existing business. In these facts, Tribunal, Madras Bench, held that assessee had opened a separate and viable expansion unit in respect of which the assessee was entitled to deduction under s. 80-I. In the light of the detailed discussion in the preceding paragraphs and respectfully following the judgment of jurisdictional High Court of Punjab and Haryana in ITC No. 106 of 1995, in assessee's own case for the asst. yr. 1980-81 and other judgments/decisions mentioned above, we are of the considered opinion that assessee is entitled to deduction under s. 80-I in respect of the new unit. Accordingly, we set aside the order of the CIT(A) and direct the AO to recompute the deduction under s. 80-I subject to our finding recorded in respect of ground No. 3 hereinafter.

9. Ground No. 3 reads as under:

"The learned CIT(A) is not justified in confirming the action of learned AO in holding that interest income from bank deposits, income-tax refund, loans to employees, etc., income from HDFC bonds, recovery of insurance claims and sale of fixed assets are not profits which can be derived from the industrial undertaking and hence do not qualify for deduction under s. 80-I of the IT Act, 1961."

The facts of the case are that the assessee had computed deduction under s. 80-I by including the following items of income:

(i)	Interest received on bank deposits :	Rs. 90,32,947
(ii)	Interest on income-tax refund :	Rs. 11,50,377
(iii)	Interest on loans to employees :	Rs. 11,90,113
	Total		Rs. 1,13,73,436

The assessee had explained before the AO that interest income from deposits in the bank was earned by utilizing the surplus funds. However, the AO was of the view that the said income did not relate to industrial activity and was, therefore, not includible for the purpose of computing deduction under s. 80-I. Similarly, the AO held that interest on income-tax refund and loans to employees was not eligible for deduction under s. 80-I. In addition to the above, the assessee had also received following income, which was included for the purpose of computing deduction under s. 80-I: (i)

(i)	Interest on HDFC bonds :	Rs. 1,56,000
(ii)	Recovery of insurance claims :	Rs. 3,02,000
(iii)	Profit on sale of fixed assets :	Rs. 7,21,000

However, the AO was of the view that these items of income had nothing to do with the industrial undertaking and, therefore, were not includible for the purpose of computing deduction under s. 80-I.

10. Being aggrieved, the assessee carried the matter in appeal before the CIT(A). The CIT(A), by referring to the provisions of s. 80-I, which provide for deduction in respect of profits "derived from" the industrial undertaking, held that interest received from bank on deposits, loans to employees and interest on income-tax refund was not profit derived from the industrial undertaking. He also relied on the judgment of Madras High Court in the case of CIT vs. Pandian Chemicals Ltd. (1998) 147 CTR (Mad) 5 : (1998) 233 ITR 497 (Mad). Accordingly, the CIT(A) upheld the action of the AO. As regards items of income being interest on HDFC bonds, recovery of insurance claims and profit on sale of fixed assets, the CIT(A) has not recorded any separate finding thereon, perhaps for the reason that the entire claim of the assessee under s. 80-I was held to be inadmissible. The assessee is aggrieved by the order of the CIT(A) and hence the present appeal before us.

11. The learned counsel for the assessee by relying on the judgement of the Supreme Court in the case of CIT vs. Karnal Co-operative Sugar Mills Ltd. (2000) 161 CTR (SC) 241 : (2000) 243 ITR 2 (SC), submitted that interest on amounts deposited to open letters of credit for purchase of machinery required for setting up a plant was held to be directly connected and incidental total to construction of plant and machinery. He further relied on the judgment of Supreme Court in the case of CIT vs. Bokaro Steel Ltd. (1999) 151 CTR (SC) 276 : (1999) 236 ITR 315 (SC), where assessee had given advances to contractors for construction and setting up of plant. Interest received on such advances was held to be incidental to construction of plant by assessee. He further relied on two judgments of Bombay High Court in the cases of CIT vs. Paramount Premises (P) Ltd. (1991) 190 ITR 259 (Bom), where the High Court has held that whether interest income was income from other sources or income from business would depend on its own facts and CIT vs. United Carbon India Ltd. (1991) 190 ITR 622 (Bom), where the High Court has held that interest on amounts set apart in the form of bank deposit for expansion of undertaking and to discharge liabilities of undertaking was held to be eligible for deduction under s. 80-I. He also relied on the following decisions:

(i) Tribunal, Jaipur Bench, in the case of Wolkem India LTD. vs. Dy. CIT (1999) 65 TTJ (Jp) 68:

Where interest received from IT Department was held to be includible for deduction under s. 80-I.

(ii) Tribunal, Delhi Bench, in the case of Rollatainers Ltd. vs. Dy. CIT (2000) 69 TTJ (Del) 8:

Where interest on fixed deposits from bank was held to be not includible for computing deduction under s. 80-I but exclusion can only be made in respect of net interest income. It was also held that insurance claim received on goods damaged in transit and profit on sale of fixed assets would be includible for the purpose of claiming deduction under s. 80-I.

12. The learned Departmental Representative, on the other hand, heavily relied on the orders of authorities below. She submitted that deduction under s. 80-I is admissible only in respect of profit "derived from" an industrial undertaking. Relying on the judgment of the Supreme Court in the case of CIT vs. Sterling Foods, the learned Departmental Representative submitted that only such receipt, which has direct nexus between the profits and gains and the industrial undertaking can be said as profit derived from an industrial undertaking. She further relied on the judgment of the Supreme Court in the case of Hindustan Lever Ltd. vs. CIT, where the Supreme Court by referring to the expression "derived from" has held that profit on sale of goods manufactured by utilizing the import entitlements was not profit derived from an industrial undertaking and the assessee was not entitled to deduction under s. 80-I. She further relied on the judgment of Kerala High Court in the case of Nanji Topanbhai & Co. vs. Asstt. CIT, where the Kerala High Court has held that interest earned on fixed deposits offered as collateral security for obtaining loan was not arising from export but the same was income from other sources and, therefore, the assessee was not entitled to deduction under s. 80HHC.

13. We have heard both the parties and carefully considered their rival submissions with reference to the facts, evidence and material placed on record. We have also referred to the various decisions/judgments relied on by both the parties. As per provisions of s. 80-I, the assessee is entitled to deduction only in respect of profit derived from an industrial undertaking. Similar expression has been used in s. 80HHC. Similar issue had come up before the Tribunal, Chandigarh Bench, in the case of Asstt. CIT vs. Nav Bharat Knitwears in ITA No. 1601/Chd/1993 for the asst. yr. 1990-91, where the issue was whether interest on FDRs, etc. would be considered as profit derived from export of goods and merchandise and also whether for the purpose of computing deduction under s. 80-I net interest or gross interest was to be considered and the Tribunal vide its order dt. 25th April, 2001, decided the issue as under :

"7. We have heard both the parties and carefully considered the rival submissions. We have examined the facts, evidence and material on record. We have also perused the orders of the authorities below. As per provisions of s. 80HHC, the assessee is entitled to deduction on the profits derived by the assessee on export of such goods or merchandise. The expression used in s. 80HHC, i.e., "derived from" has much narrower meaning as compared to "profit attributable to" which means that there should be direct nexus between the profits on the one hand and the export activity on the other hand. Reliance in this regard is placed on the judgment of the Supreme Court in the case of Cambay Electric Supply Industrial Co. vs. CIT 1978 CTR (SC) 50 : (1978) 113 ITR 84 (SC), where the Hon'ble Supreme Court has held that the expression "derived from" used by the legislature intends to cover only the receipt from the actual conduct of the business specified of the specified nature, whereas the expression "attributable to" having a wider import than the expression "derived from" thereby intending to cover receipts from sources other than the actual conduct of the business of the specified nature. This view also finds support from the judgment of the Supreme Court in the case of CIT vs. Sterling Foods, cited supra, where the apex Court has held that the source of import entitlements could not be said to be the industrial undertaking of the assessee. The source of import entitlements could only be said to the export promotion scheme of the Central Government whereunder the export entitlements became available. There must be a direct nexus between the profits and gains and the industrial undertaking. If such nexus was not direct but only incidental, the profit derived from such by incidental activities would not constitute profit and gains derived from the assessee's industrial undertaking. Therefore, the receipts from the sale of import entitlements could not be included in the income of the assessee for the purpose of computing deduction under s. 80HHC. Now, the issue before us is as to whether income by way of rental charges from machinery and interest income can be considered to have direct nexus between the profits and gains and the industrial undertaking or the nexus is not direct but only incidental. In the case of Nanji Topanbhai & Co., cited supra, the assessee had earned interest on fixed deposit offered as collateral security for loan. It was contended by the assessee that interest earned on the fixed deposit was during the course of assessee's business and, therefore, the assessee was entitled to deduction under s. 80HHC. The Kerala High Court has held that unless the assessee is able to show that income received by way of interest from the fixed deposit is income derived from export business, it will not be entitled to claim deduction under s. 80HHC. The High Court has also held that interest earned on the fixed deposit was not a profit derived from export of goods or merchandise and, therefore, could not be treated as business income. While taking such a view, the Kerala High Court has followed its own judgments in the cases of CIT vs. Cochin Refineries Ltd. (1984) 43 CTR (Ker) 103 : (1985) 154 ITR 345 (Ker) and Collis Line (P) Ltd. vs. ITO (1982) 135 ITR 390 (Kar). Even Bombay High Court in the case of CIT vs. K.K. Doshi & Co. (2000) 163 CTR (Bom) 472 : (2000) 245 ITR 849 (Bom), where the assessee had claimed income by way of service charges as business profit, has held that amount earned by way of service charges had no direct nexus with export activities and, therefore, amount could not be taken into account in calculating special deduction under s. 80HHC. The same High Court has also considered this issue in the case of CIT vs. S.G. Jhaveri Consultancy Ltd. (2000) 163 CTR (Bom) 593 : (2000) 245 ITR 854 (Bom), where the assessee had claimed income by way of labour charges, service charges and interest as business profit for the purpose of computing deduction under s. 80HHC. The Bombay High Court by referring to cls. (b) and (ba) of the Explanation to s. 80HHC has held that receipts like labour charges, service charges and interest cannot be included in the business profits as the said items do not have any linkage with the export activities. The same High Court has again considered this issue in the case of CIT vs. Ravi Ratna Exports (P) Ltd. (2000) 246 ITR 443 (Bom), where the High Court has held that interests on fixed deposits do not form part of business profits for the purpose of computing special deduction under s. 80HHC. Similar issue came up for consideration before Madras High Court in the case of CIT vs. Pandian Chemicals Ltd., where by referring to the meaning of the expression "derived from" the Hon'ble High Court has held that interest on deposits with the electricity department made out of a statutory compulsion was not a profit derived from industrial undertaking and, therefore, not to be taken into account in computing deduction under s. 80HHC. In the case of Salgaonkar Mining Industries vs. Dy. CIT (1997) 58 TTJ (Pune) 468 : (1997) 61 ITD 105 (Pune), the Tribunal, Pune Bench, has held that interest earned on loans was liable to be assessed under the head "income from other sources" as surplus funds given to sister concerns have no nexus with the business activities of the assessee. Similar view has been taken by the Tribunal, Chandigarh Bench, in the case of Greatway Ltd. vs. Asstt. CIT (ITA No. 2251/Chd/1992) for asst. yr. 1991-92 and Eastman Industries, Ludhiana vs. Dy. CIT, Ludhiana (ITAT No. 599/Chd/1994) for asst. yr. 1991-92. Further in the case of CIT vs. Dinjoye Tea Estate (P) Ltd. (1997) 141 CTR (Gau) 146 : (1997) 224 ITR 263 (Gau), the Gauhati High Court has held that interest and dividend income are not profits derived from the business and these are liable to tax as income from other sources. Now, so far as interest income is concerned, the judgments cited above are directly on this issue, where the various High Courts and Benches of the Tribunal have taken the view that there is no direct nexus between the earning of interest income and export activities of the industrial undertaking. Earning of interest on the deposits kept as margin money with the bank for availing credit facilities could only be considered as incidental to assessee's business. By relying on the judgment of the Supreme Court in the case of Sterling Foods, cited supra, and various other judgments/decisions, cited supra, we hold that interest income would not constitute a profit and gain derived from export activities of the industrial undertaking and, therefore, the same could not be included in the business profit for the purpose of computing deduction under s. 80HHC of the IT Act. The reliance of the learned counsel for the assessee on the judgment of the Supreme Court in the case of Karnal Co-operative Sugar Mills Ltd. cited supra, is misplaced because the issue before the Supreme Court was, whether interest earned on money deposited to open a letter of credit for the purchase of machinery constituted a capital receipt or a revenue receipt. The Hon'ble Supreme Court has not considered the case from the point of view of allowing deduction under s. 80HHC, where the expression used is profit derived from export of goods and merchandise where a direct nexus is required to be established. The learned counsel for the assessee has also relied on the decision of the Tribunal, Amritsar Bench, in the case of Ishar Dass Mahajan & Sons, cited supra. The decision in that case was rendered in the light of the facts and circumstances of that case. Moreover, the Tribunal, Amritsar Bench had no occasion to consider the judgment of the Supreme Court in the case of Sterling Foods cited supra, where the Supreme Court has clearly that there should be a direct nexus between the profits and gains and the industrial undertaking and in case where the nexus is not direct but only incidental, the same would not constitute a profit and gain derived from the industrial undertaking and, therefore, would not qualify for deduction under s. 80HHC. The other judgments of Bombay High Court reported in (2000) 163 CTR (Bom) 472 : (2000) 245 ITR 849 (Bom), (2000) 163 CTR (Bom) 593 : (2000) 245 ITR 854 (Bom) and (2000) 246 ITR 443 (Bom) being of later dates, when the Tribunal, Amritsar Bench, decided the matter in May, 1999, the Tribunal did not have the benefit of the ratio of these decisions. Besides, the Tribunal, Chandigarh Benches, have consistently been taking the view that interest income would not constitute business profit eligible for computing deduction under s. 80HHC. The judicial propriety demands that we must follow the orders of Chandigarh Benches in order to maintain consistency in our decisions. Having regard to the facts and circumstances of the case, we hold that the CIT(A) was not justified in holding that interest income of Rs. 5,290 formed part of the business profit and was, therefore, includible in the profit for computing deduction under s. 80HHC. We set aside his order and direct the AO to exclude interest income for working out deduction under s. 80HHC.

8. The next submission of the assessee is that only net interest should be taken into account. We find that no such plea was taken before the authorities below. Even otherwise, we find this submission is not acceptable. Interest paid on the amounts borrowed and utilized for the purpose of assessee's business is directly linked with the business activities of the industrial undertaking. But, for payment of interest, the assessee would have not earned profit from export of goods or even indigenous business. Therefore, interest debited to P&L a/c is directly linked with the business profits of the assessee and has to be considered as such against the business income. As regards interest earned by the assessee on deposits, the assessee has not adduced any evidence to establish direct link to show that amounts were borrowed and then deposited with the bank. Even otherwise, such activity would be incidental to assessee's business and, therefore, the same is liable to be considered under the head "income from other sources". Further, interest earned is only the result of application of income and not earning of business income, particularly when the assessee has not been able to adduce any evidence that amounts were borrowed and then deposited in the bank. If this was a case, the assessee could have credited the interest to the interest a/c rather than making separate entries, one for receipt of interest and another for payments/debts of interest. In this view of the matter, we hold that interest credited to P&L a/c cannot be allowed set off against interest debited to P&L a/c."

The above findings would equally apply to deduction under s. 80-I. The same view was taken by the Tribunal, Chandigarh Bench, in the case of Asstt. CIT, Ludhiana vs. Nahar Spinning Mills Ltd. in ITA No. 191/Chd/1993 for the asst. yr. 1989-90. A copy was placed on our file. In the recent judgment, in the case of CIT vs. Anand Fisheries (2002) 177 CTR (Ker) 532 : (2002) 258 ITR 641 (Ker), Kerala High Court has held that interest earned on FDRs by utilizing surplus funds is not a profit derived from export of goods and, therefore, not entitled to deduction under s. 80HHC. Now in this case also, the assessee has earned interest on FDRs by depositing the surplus funds in the bank deposits. Thus, it does not have any direct nexus between the interest income and the industrial undertaking. Therefore, this cannot be considered as profit derived from an industrial undertaking. Same position would prevail in regard to interest received on income-tax refund and interest from HDFC bonds. Even the interest earned on loans given to employees does not have direct nexus with the industrial undertaking. It is only incidental to the business. Therefore, our findings recorded in the abovementioned case would equally apply to the facts of the present case.

14. As regards the judgment of Hon'ble Supreme Court relied upon by the learned counsel in the cases of Karnal Co-operative Sugar Mills Ltd., the same is on different set of facts and, therefore, is not applicable to the facts of the present case. Even the two judgments of the Bombay High Court relied on by the learned counsel are prior to the judgment of Hon'ble Supreme Court in the case of CIT vs. Sterling Foods. Therefore, the ratio of those decisions would not apply to the facts of the present case. Therefore, respectfully following the abovementioned orders of the Tribunal, Chandigarh Bench, we hold that interest on fixed deposits, interest on income-tax refund and loan to employees and interest on HDFC bonds would not be profits derived form by an industrial undertaking and, therefore, these would not be includible for the purpose of allowing deduction under s. 80-I. This part of the ground is rejected.

15. This leaves us with the only two items of income, i.e., recoveries of insurance claims and profits on sale of fixed assets. As regards recoveries of insurance claims, the same would bear a direct nexus as such insurance claims have been received on goods lost in transit. The decision of the Tribunal, Delhi Bench, in the case Rollatainers Ltd. vs. Dy. CIT (2000) 69 TTJ (Del) 8 also supports this view. Similarly, profits on sale of fixed assets would also be eligible for deduction under s. 80-I because this is directly connected with the industrial undertaking. Moreover, the decision of the Tribunal, Delhi Bench, in the case of Rollatainers Ltd. vs. Dy. CIT also supports this view. We, therefore, set aside the order of the CIT(A) and direct the AO to compute deduction under s. 80-I after including these two items of income as business profits. This ground of appeal is partly allowed.

16. The last ground relates to sustaining a disallowance of management expenses of Rs. 1 lakh on estimate basis while computing deduction under s. 80M of the IT Act. The facts of the case are that the assessee had shown receipts of dividend income of Rs. 34,32,500 from Swaraj Engineering Ltd. and Rs. 5.46 crores (gross) from UTI. The assessee had also claimed deduction under s. 80M in regard to dividend income without apportioning any management expenses. The AO, therefore, considered an amount of Rs. 1 lakh towards proportionate management expenses and allowed deduction under s. 80M after reducing the expenses of Rs. 1 lakh.

17. Being aggrieved, the assessee took the matter in appeal before the CIT(A). The learned CIT(A) upheld the action of the AO by relying on the appellate orders for the asst. yrs. 1993-94 and 1994-95. Assessee is aggrieved by the order of the CIT(A) and hence this appeal before us.

18. The learned counsel for the assessee simply submitted that management expenses apportioned by the AO are on the higher side. However, he did not furnish any details of the dividends income received from various sources.

19. The learned Departmental Representative submitted that proportionate management expenses were required to be deducted from the gross dividend income. She relied on the judgment of the Supreme Court in the case of CIT vs. United General Trust Ltd. (1994) 116 CTR (SC) 194 : (1993) 200 ITR 488 (SC).

20. We have heard both the parties and carefully considered their rival submissions. The learned counsel was fair enough to concede that proportionate management expenses are required to be deducted from the gross dividend income. However, he submitted that estimate of expenses at Rs. 1 lakh is little on the higher side. But, the learned counsel has not furnished the details of dividend income received by the assessee. Therefore, we are unable to appreciate as to how the management expenses apportioned at Rs. 1 lakh could be considered excessive keeping in view the volume of such investments resulting in substantial dividend income. Moreover, learned CIT(A) has based his decision on the appellate orders for the asst. yrs. 1993-94 and 1994-95, where similar disallowance was upheld. The assessee has not brought to our notice the outcome of appeal, if any, in the earlier assessment years. Therefore, we do not find any justification to interfere with the order of the CIT(A). The same is confirmed and this ground of appeal is dismissed.

21. In the result, the appeal of the assessee is partly allowed.

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