Ita/315/2018 Of Coffeeday Global Ltd v. Additional Commissioner Of Income Tax

IN THE HIGH COURT OF KARNATAKA AT BENGALURUDATED THIS THE 12 DAY OF MARCH 727071 PRESENT| THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’BLE MR. JUSTICE ASHOK S. KINAGL ILT.A. NO.315 OF ZO18 C/W LT.A.§NOQ.388 OF JZQOLT.A. NOCO.313 OF ZO1 LIT.A.§NOQ.31L5 OF ZQ BETWEEN: COFFEEDAY GLOBAL LID.(FORMERLY KNOWN AS AMALGAMATED.BEAN COFFEE TRADING CO LTD) |NO.23/2, VITTAL MALLYA ROADBENGALURU - 560001|REP. HEREIN BY ITS COMPANY SECRETARY |MR. SADANAND POOJARY. (BY SRI. SURYANARAYANA T, ADV.,) — APPELLANT. AND" 1.|ADDITIONAL COMMISSIONER | OF INCOME TAX, RANGE-11 BANGALORE, BMTC BUILDING | KORAMANGALA 6TH BLOCKBANGALORE - 560095.BANGALORE - 560095. 2 |THE COMMISSIONER OF INCOME TAX - 1, BANGALORE |BMTC BUILDING, KORAMANGALA|61TH BLOCK, BANGALORE - 560095.BMTC BUILDING, KORAMANGALA|61TH BLOCK, BANGALORE - 560095. .., RESPONDENTS| (BY SRI. JEEVAN J. NEERALGI, ADV.) THIS I.T.A. IS FILED UNDER SEC. J6O0-A OF INCOME TAXACT 1961, ARISING OUT OF ORDER DATED 06.12.2017 PASSEDIN M.P. NOS.211 & 212/BANG/2017 FOR THE ASSESSMENT YEAR.2010-11, PRAYING TO: | (i) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW,STATED ABOVE. (ii) ALLOW THE APPEAL AND SET ASIDE THE IMPUGNED|COMMON ORDER PRONOUNCED ON 66.12.2017 BY THE TRIBUNALIN M.P.NOS.211 & 212/BANG/2017 (ANNEXURE-D) TO THEEXTENT QUESTIONED & ETC. LT.A. NCO.388 OF 2ZO1 BETWEEN: 1.|PR, COMMISSIONER OF INCOME TAX (CENTRAL), C.R. BUILDING QUEENS ROAD, BANGALORE-560001.. 2 |THE ASSISTANT COMMISSIONER OF INCOME-TAX RANGE-11, BENGALURU. .., APPELLANTS. (BY SRI. JEEVAN J. NEERALGI, ADV.,) AND" M/S. AMALGAMATED BEANCOFFEE TRADING CO. LTD.,(PRESENTLY M/S. COFFEEDAY|GLOBAL LTD)NO.23/2, VITTAL MALLYA ROADBENGALURU|PAN: AABCA52791P .., RESPONDENT (BY SRI. T. SURYANARAYANA, ADV.) THIS I.T.A. IS FILED UNDER SEC. 260-A OF INCOME TAX|ACT 1961, ARISING OUT OF ORDER DATED 06.12.2017 PASSED IN M.P. NOS.211 & 212/BANG/2017 IN ITA NOS.1501 &1586/BANG/2013 FOR THE ASSESSMENT YEAR 2010-11, PRAYINGTO: (1) DECIDE THE FOREGOING QUESTION OF LAW AND/OR-SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BYTHE HON BLE COURT AS DEEMED FIT. (ii) SET ASIDE THE APPELLATE ORDER DATED 6.12.2017/PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, A’ BENCH:BANGALORE,IN|APPEAL|PROCEEDINGSM.P.NOS.211.a212/BANG/2017 IN ITA NOS.1501 & 1586/BANG/2013 FOR)ASSESSMENT YEAR 2010-11, AS SOUGHT FOR IN THIS APPEALAND TO GRANT SUCH OTHER RELIEF AS DEEMED FIT, IN THEINTEREST OF JUSTICE. LT.A. NOCO.313 OF ZO1 BETWEEN: COFFEEDAY GLOBAL LTD.(FORMERLY KNOWN AS AMALGAMATEDBEAN COFFEE TRADING CO LTD) |NO.23/2, VITTAL MALLYA ROADBENGALURU - 560001|REP. HEREIN BY ITS COMPANY SECRETARY |MR. SADANAND POOJARY. (BY SRI. SURYANARAYANA T, ADV.,) — APPELLANT. AND" 1.|ADDITIONAL COMMISSIONER |OF INCOME TAX, RANGE-11BANGALORE, BMTC BUILDING |KORAMANGALA 6TH BLOCKBANGALORE - 560095.OF INCOME TAX, RANGE-11BANGALORE, BMTC BUILDING |KORAMANGALA 6TH BLOCKBANGALORE - 560095. 2.|THE COMMISSIONER OFINCOME TAX - 1, BANGALORE |INCOME TAX - 1, BANGALORE | BMTC BUILDING, KORAMANGALA| 61TH BLOCK, BANGALORE - 560095. 3.|ASSISTANT COMMISSIONER OF INCOME TAX, RANGE-11| BMTC BUILDING, 6TH BLOCK|KORAMANGALA, BANGALORE-560095.|KORAMANGALA, BANGALORE-560095.| .., RESPONDENTS| (BY SRI. T.N.C. SRIDHAR, ADV.) THIS I.T.A. IS FILED UNDER SEC. 260-A OF INCOME TAX|ACT 1961, ARISING OUT OF ORDER DATED 06.12.2017 PASSEDIN ITA NOS.1501 & 1586/BANG/2013 FOR THE ASSESSMENT YEAR-2010-11 (ANNEXURE-D), PRAYING TO: |(i) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW,STATED ABOVE. (ii) ALLOW THE APPEAL AND SET ASIDE THE IMPUGNED|COMMON ORDER PRONOUNCED ON 66.12.2017 BY THE TRIBUNALIN ITA NOS.1501 & 1586/BANG/2013 (ANNEXURE-D) TO THE.EXTENT QUESTIONED & ETC. THESE I.7T.As. COMING ON FOR ORDERS, THIS DAY, ALOK ARADHE J.,DELIVERED THE FOLLOWING: | COMMON JUDGMENT These appeals under Section 260A of the Income 3.|ASSISTANT COMMISSIONER OF INCOME TAX, RANGE-11| BMTC BUILDING, 6TH BLOCK|KORAMANGALA, BANGALORE-560095.|KORAMANGALA, BANGALORE-560095.| .., RESPONDENTS| (BY SRI. T.N.C. SRIDHAR, ADV.) THIS I.T.A. IS FILED UNDER SEC. 260-A OF INCOME TAX|ACT 1961, ARISING OUT OF ORDER DATED 06.12.2017 PASSEDIN ITA NOS.1501 & 1586/BANG/2013 FOR THE ASSESSMENT YEAR-2010-11 (ANNEXURE-D), PRAYING TO: |(i) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW,STATED ABOVE. (ii) ALLOW THE APPEAL AND SET ASIDE THE IMPUGNED|COMMON ORDER PRONOUNCED ON 66.12.2017 BY THE TRIBUNALIN ITA NOS.1501 & 1586/BANG/2013 (ANNEXURE-D) TO THE.EXTENT QUESTIONED & ETC. THESE I.7T.As. COMING ON FOR ORDERS, THIS DAY, ALOK ARADHE J.,DELIVERED THE FOLLOWING: | COMMON JUDGMENT These appeals under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act forsnort) have been filed by the assessee as well as therevenue.I.T.A.No.313/2018anaI.T.A.No.315/2018have|beenfiledby|theaSSe@SSCEwhereas,I.T.A.No.388/2018 has been filed by the revenue.preferred by the assessee. Since, the appeal pertain to.the same Assessment year 2010-11 and arise out of thecommon order dated 21.06.2017 and order dated|06.12.2017, passed by the Income Tax AppellateTribunal (hereinafter referred to as the tribunal’ for short), they were heard together and are being decided|by this common judgment. The appeals were admittedby a bench of this Court on the following substantial|questions of law:| “(1) Whether tribunal committed anerror of law in upholding disallowance of.interest on borrowed capital at the rate of|6% as being attributable to investments|made by the appellant in_ its’ foreigsubsidiary, although the investments had|been made to further sales in foreignmarkets, which is wholly for the purposes ofits business and no part of the borrowed|capital was utilized for such investment inany event? (ii) Whether the tribunal is correct inupholdingthedisallowanceOF|Rs.7,97,/0,326/- as interest on_ capitalattributable to capital work in_ progressrelying on the proviso to Section 36(1)(ili)when the said proviso was inapplicable to the case of the appellant and no part of the borrowed capital was utilized for investment|in work in progress in any event? (iii) Thetribunal WasCorrectIn.upholding the disallowance of interest on.borrowed capital as attributable to capital|work in progress at 12% as against 7.6% ofthe average capital work inProgress determinedDy theCIT(A),withoutassigning any reasons whatsoever? (iV) Whether tribunal was Justified inremanding the issue of disallowance ofinterest in regard to investments made inAN.Coffeeday International Ltd to the file of|theASSeSSING|Officer,althoughtheAssessingOfficerhimself,fortheAssessment Year 2009-10, was. satisfiedthat no disallowance of tinterest UnderSection 14A was warranted as regards tne|very same investments and the _ factremained the same In the Assessment Year|in question? (v) Whetner the tribunal has acted incontravention of tne provision of Section| 254(2) of the Act while passing the order.dated 06.12.2017 on an application for|rectification filed by the assessee. ? 2.|Facts leading to filing of these appeals brieflystated are that assessee is engaged in the business ofselling coffee to domestic and overseas customers and is)also engaged in retailing coffee and other relatedproducts through a chain of outlets under Cafe andExpress Kiosks, under the name and style of 'CafeCoffee Day. The assessee filed the return of income forthe Assessment Year 2010-11 and declared total income.of Rs.23,82,29,824/-. The said return of income wastaken up for assessment and an order of assessmentWaspassedON|31.03.7013|by|whichfollowingdisallowances were made to the income of the assessee. (i) disallowance of claim under Section 14A of the|Act for a sum of Rs.7/7,/72,330/- (ii)|disallowance of interest of Rs.1,90,81,831/-on borrowed capital as having been utilized for share application money to a foreign company A.N.Coffeeday|International Ltd. ("AN Coffeeday for short and as suchwarranting capitalization; (ii)|disallowance of interest of Rs.1,90,81,831/-on borrowed capital as having been utilized for share application money to a foreign company A.N.Coffeeday|International Ltd. ("AN Coffeeday for short and as suchwarranting capitalization; (iii) disallowance of interest of Rs.7,97,/0,326/- onborrowed capital as having been utilized towards capitalwork-in-capital has having been utilized towards capital|work-in-progress and as such warranting capitalization;|and (iv) disallowanceofexpenditureofRs.9,7/7,23,650/- incurred towards processing and othercharges for raising loans and compulsorily convertible|debentures on the ground that the same ought to have)been capitalized.| The assessee thereupon filed an appeal before the|Commissioner of Income Tax (Appeals) who by an order.dated 14.08.2013 disposed of the appeal holding as)follows: (i)the disallowance under Section 14A of theAct, to tne extent of Rs.7,35,920/- under Rule 8D(2)(Iil) was upheld and to the extent of the balance ofRs./0,36,410/- under Rule 8D(2)(ii), was deleted, and itwas held that the said investments were made out of.funds owned by the assessee and not from the borrowedfunds. (ii)|the disallowance of Interest on borrowedcapital allegedly utilized for the purposes of investment.in shares of AN Coffeeday was upheld but the quantumof the disallowance was reduced from Rs.1,90,81,831/-.to Rs.1,48,54,153/- by reducing the interest rate to)8.5% as against 12% as held by the Assessing Officer. (iii) the disallowance of interest on borrowed|capital allegedly utilized for capital work-in-progress was.upheld but the quantum of disallowance was reducedfrom Rs.7,97,/9,326/- to Rs.5,05,06,362/- by reducingthe interest rate from 12@ to 7.6%. (iv) the disallowance of processing charges of|Rs.9,/77,23,650/- was deleted in view of the decision of the Supreme Court in)INDIA CEMENTS VS. CIT[(19660 60 ITR 52(SC)]. 3Being aggrieved by the order passed by theCommissioner of Income Tax (Appeals), the assessee aswell as the revenue filed theappeals before the tribunalThe tribunal by an order dated 21.06.2017 partlyallowed theappeal preferred by the assessee andrevenue and held as under: (i) claim for disaliowance under Section 14A of hteAct was set aside on the ground that there was no)exempt income. (ii) the disallowance of interest in respect of share|application money was upheld but the rate of interestattridDutable was reduced to 6% as against 12% held byAssessing Officer and Commissioner of Income Tax(Appeals) who had upheld the rate of interest at 8.5%. | (iii) The claim for disallowance of interest in|respect of capital work in progress was upheld by relying on Proviso to Section 36(1)(iil) which was.brought into force with effect from 01.04.2004. (iv) In respect of claim for disallowance of processing and other charges, the matter was remittedto the Commissioner of Income Tax (Appeals). 4The assessee thereafter filed a miscellaneouspetition under Section 254(2) of the Act which wasdisposed of by an order dated 06.12.2017 and it wasneld as under: (i)The claim for disallowance of interest made§with regard to investments in the share capital ofA.N.Coffeeday,thematterWaSremittedCOtheAssessing Officer. (il)|With regard to claim made on interest onborrowed capital attributed to capital work in progress,the prayer for rectification was rejected. (iii) The claim for loan processing and othercharges, the order of the Commissioner of Income Tax(Appeals) directing deletion of disallowance was upneld. In the aforesaid factual Dackground, these appeals|have been filed. 4The assessee thereafter filed a miscellaneouspetition under Section 254(2) of the Act which wasdisposed of by an order dated 06.12.2017 and it wasneld as under: (i)The claim for disallowance of interest made§with regard to investments in the share capital ofA.N.Coffeeday,thematterWaSremittedCOtheAssessing Officer. (il)|With regard to claim made on interest onborrowed capital attributed to capital work in progress,the prayer for rectification was rejected. (iii) The claim for loan processing and othercharges, the order of the Commissioner of Income Tax(Appeals) directing deletion of disallowance was upneld. In the aforesaid factual Dackground, these appeals|have been filed. 5.|Learned counsel for the assessee submittedthat the assessee had made investments by way of.Share application money in one of its foreign subsidiary|viz., A.N.Coffeeday for an amount of Rs.17,47,54,/752/-,whereas, the assessee's own fund were to the extent ofRs.386,91,31,0/6/- which were far in excess of the)investment made in A.N.Coffeeday. Therefore, thetribunal ought to Nave appreciated that there was apresumption that the investments were made out of noninterest bearing funds and the burden was on therevenue to prove that investments were made out ofborrowed funds which was not discharged by therevenue by adducing any evidence. It is also pointed out.that the remand by the tribunal following its earlierorder for the Assessment Year 2009-10 was whollyunnecessary as for the Assessment Year 2009-10 itselfthe Commissioner of Income Tax (Appeals) had returned the finding that investments in A.N.Coffeeday as on31.03.2009 were made out of the funds of the assesseein the context of disallowance under Section 14A read.with Rule8D(2)(ii) of the Rules and therefore, sameconclusion ought to have been drawn to Section36(1)(ili) of the Act and therefore, the order of remandwas wholly unwarranted. It is also urged that prior to)amendment of Section 36(1)(iii) of the Act by FinanceAct, 2003 with effect from 01.04.2004, it has been held.that interest on borrowed capital utilized for the purposeofbuSINeSSOrprofession.hasCO be|disallowedirrespective of whether the same is towards extension or.expansion of business. It is also urged that expression.‘expansion and extension connote different meaningand the legisiature in its wisdom nas used the aforesaidexpressions differently. In this connection, our attention.was invited to Section 80-IC(2)(b) and 80-IE(2)(ii)wherein the term expansion is used and substantial‘expansion is defined as increase in investment of plant and machinery by a specified percentage out of Dookvalue of plant and machinery, whereas, under Section.35D(1)(il) and proviso to Section 36(1)(iii) prior to itsamendment used the word ‘extension’.. 6.|It is also submitted that for the subsequentAssessment Years 2011-12, 2012-13, 2013-14, theCommissioner of Income Tax (Appeals) had granted|relief to the assessee. It is also contended that against.the capital work in progress, the assessee hadsubstantial funds of Rs.386.91 Crores and therefore, thepresumption was that the assessee had applied its fundfor expansion and not from the borrowed capital and no-part of interest on the borrowed capital can bedisaliowed. It is also argued that the tridDunal whilepassing the order dated 06.12.2017 has rectified the|errors, which were apparent on the record. In support of.aforesaid submissions, reliance has been placed ondecisions In/‘CIT VS. RELIANCE INDUSTRIES LTD. ,(2019)102.TAXMANN,.COM52(SC),"CITYS, RELIANCE UTILITIES & POWER LTD, (2009) 178TAXMAN 135 (BOMBAY), ‘CIT VS. BRINDAVANBEVERAGES (P.) LTD’, (2017) 88 TAXMANN.COM4//(KARNATAKA),'CIT|VS,BRIGADEENTERPRISES LTD.', (2021) 124 TAXMANN.COM237 (KARNATAKA), ‘CIT VS. MONNET INDUSTRIESLTD’, (2009) 176 TAXMAN 81 (DELHI), ‘CIT VS.MONNETINDUSTRIES|LTD. , (2012)a5TAXMANN.COM 236 (SC). RELIANCE UTILITIES & POWER LTD, (2009) 178TAXMAN 135 (BOMBAY), ‘CIT VS. BRINDAVANBEVERAGES (P.) LTD’, (2017) 88 TAXMANN.COM4//(KARNATAKA),'CIT|VS,BRIGADEENTERPRISES LTD.', (2021) 124 TAXMANN.COM237 (KARNATAKA), ‘CIT VS. MONNET INDUSTRIESLTD’, (2009) 176 TAXMAN 81 (DELHI), ‘CIT VS.MONNETINDUSTRIES|LTD. , (2012)a5TAXMANN.COM 236 (SC). 7On the other hand, learned counsel for therevenue while inviting the attention of this court to |Section 254(2) of the Act submitted that the tridunalnas the power to rectify the mistake apparent on record.However, the tribunal in the instant case, has reviewedthe order passed by it which is per se withoutjurisdiction. It is submitted that in the guise ofrectification the entire order is reviewed. While referringto order dated 21.06.2017, it is pointed out that thetribunal Nad recorded the findings of fact on merits and for the limited purpose the mater was remitted.However, while passing the order dated 06.12.2017, thematter has been reviewed on merits and the finding.recorded with regard to Section 36(1)(iii) is a pure}finding of fact. 8 _We have considered the submissions made§by learned counsel for the parties and have perused therecord. Twin issues arise for consideration in the appealpreferred by the assessee viz., disallowance of intereston borrowed capital insofar as it pertains to investmentmade in the foreign subsidiary of the assessee and.disallowance.ofinterestunder.Section36ancddisaliowance of interest under Section 36(1)(ill) of theAct. Similarly twin issues arise for consideration in thisappeal viz., whether loan processing and other charges|can be allowed as revenue expenditure or has to betreated as capital in nature and whether the tridDunal hasacted in contravention of the provision of Section 254(2). of the Act while passing the order dated 06.12.2017 onan application for rectification filed by the assessee. oiIt is well settled legal proposition that whereinterest free funds are available to the assessee andwere sufficient to meet its investment, the presumption.is that the investments were made from interest free.funds available with the assessee. [See: RELIANCEINDUSTRIES LTD., SUPRA]. The assessee had madeinvestment by way of share application money in one ofItsforeignsubsidiaries1.e.,|A.N.Coffeeday.The.investment which was made as on 31.03.2009 and31.03.2010 was for an amount of Rs.14,32,/75,/66/-and Rs.17,47,54,/752/- respectively. Tne assessee neidits own funds to the extent of Rs.17,47,54,752/- which|were far in excess of the tnvestment made inA.N.Coffeeday. Therefore, the presumption in law arises.that the Investments were made out of non interest.bearing funds and burden was on revenue to show thatinvestments were made out of borrowed funds. The. revenue has not discharged the aforesaid burden.Therefore, it has to be presumed that the investments.were made from interest free funds which were available.with the assessee. It is also noteworthy that forAssessment Year 2008-09, the Commissioner of Income.Tax (Appeals) had recorded a finding that investments|made during the aforesaid Assessment Year including)investments in A.N.Coffeeday as on 31.03.2009 weremade out of the funds of the assessee, witn reference to.claim of disallowance under Section 14A read with Rule.8D(iijof the Rules and therefore, the same conclusionought to have been applied to Section 36(1)(ili) as well. Therefore, in the fact situation of the case, the remandby the tribunal to the Assessing Officer to examinewhether tne investments were made out of the funds of.the assessee or from borrowed funds, is not warrantedas the Assessing Officer for the Assessment Year 2009-10, the Assessing Officer on examination of the details|furnisned by the assessee had accepted tne contention that investment was made by the assessee out of thefunds owned by it. that investment was made by the assessee out of thefunds owned by it. 10. The|Supreme|CourtInRADHASOAMTSATSANG Vs. COMMISSIONER OF INCOME-TAX’(1992) 60 TAXMAN 248 (SC)has held that even.though principles of res judicata do not apply to income)tax proceedings, but where a fundamental aspectpermeating through the different Assessment Years has.been found as the fact one way or the other and theparties have allowed the position to be sustained by notchallenging the order, it would not be at all appropriate|to allow the position to be changed in subsequent year.FOr|tneaforementionedFEaASONS,tnesubstantialquestion of law No.1 is answered in the negative and infavour of the assessee. 11. Now we may advert to the claim of the.assessee in respect of upholding the disallowance of.Rs.7,97,/0,326/- as interest on capital attributable to capital work in progress relying on proviso Section|36(1)(ili) of the Act. The assessee is in the business ofmanufacture and trade in coffee and allied products. Ithas more than 1000 coffee shops with brand name 'CafeCoffee Day’. The assessee had capital work in progress|ofRs.59,41,92,500/-.as|On|31.03.7010|whichrepresented various coffee shops being set up which|WereIndifferent|stages.TheAssessingOfficerdisallowed the interest on borrowed capital to the extentof Rs.7,97,/0,326/- has been attributable to work inprogress on the ground that the same will have to be|capitalized along with cost of fixed asset. The orderpassed by the Assessing Officer was upheld by theCommissioner of Income Tax (Appeals) and the tridunalupheld the disallowance on the ground that in terms ofproviso to Section 36(1)(iii) which was incorporated in-the At with effect form 01.04.7004 the Interest cost.ought to have been capitalized. 12. It is pertinent to mention here that prior to.amendment of Section 36(1)(iii) vide Finance Act, 2003,it is a well settled proposition of law that interest onborrowed capital utilized for the purpose of business orprofession has be allowed irrespective of the fact that istowards extension or expansion. In this connection,reference may be made to decision of the High Court ofDelhi in Monnet Industries Ltd. supra, which was upheld.Dy the Supreme Court in a decision in (2012) 25.taxmann.com 236 (SC). In CIT VS. UP ASBESTOS LTD.supra Allahabad High Court held that were the assesseeincreased the capacity of its manufacturing plant, the.proposed business was not an individual business butvertical expansion of present business. Therefore,Section 36(1)(lil) was amended by Finance Act, 2003 byinserting a proviso to curtail the deduction insofar as—interest on borrowed capital is relatable to extension ofexisting business, which reads as under: 36. (1) The deductions provided for in thefollowing clauses shall be allowed in respect ofthe matters dealt with therein, in computing theincome referred to in section J8— (iii) the amount of the interest paid inrespect of capital borrowed for the purposes ofthe business or profession : 13. The word ‘expansion and extension connotedifferent meaning and legislature in its wisdom has usedthe terms differently under various provisions of the Act.itself and therefore, the words cannot be usedsynonymously. In this connection reference may be.made to Section 80-IC(2)(b) and Section 80-IE(2)(ii)wheretheexpression‘expansion:1S|uUSeCand|‘substantial expansion|IS.defined|asincrease|In|investment in plant and machinery by a= specifiedpercentage of book value of plant and machinery. In.Section 35D(1)(ii) and proviso to Section 36(1)(ili)(prior to its amendment in the year 2015), the (iii) the amount of the interest paid inrespect of capital borrowed for the purposes ofthe business or profession : 13. The word ‘expansion and extension connotedifferent meaning and legislature in its wisdom has usedthe terms differently under various provisions of the Act.itself and therefore, the words cannot be usedsynonymously. In this connection reference may be.made to Section 80-IC(2)(b) and Section 80-IE(2)(ii)wheretheexpression‘expansion:1S|uUSeCand|‘substantial expansion|IS.defined|asincrease|In|investment in plant and machinery by a= specifiedpercentage of book value of plant and machinery. In.Section 35D(1)(ii) and proviso to Section 36(1)(ili)(prior to its amendment in the year 2015), the legislature has employed the expression ‘extension’.Therefore, prior to its amendment the extension ofbusiness was covered under Section 36(1)(ili) of the Actand not the expansion of business. In the instant case,the assessee has set up new coffee shops, whichamounts to expansion of business and therefore, the barunder the proviso Section 36(1)(iii) is not applicable. Itis only after the amendment of Section 36(1)(iii) of theAct with effect from 01.04.2016 the proviso can beattracted to the case of expansion of business which isnot applicable to the facts of the case as the case of theassessee pertains to Assessment Year 2010-11. 14. For the subsequent Assessment Years 1.ée.,2011-12, 2012-13 and 2013-14, the Commissioner ofIncome Tax (Appeals) had granted relief to the assessee|and had accepted the stand of the assessee that thesetting up of new shops is a case of expansion ofexisting business and not extension of the same.However, on an appeal being preferred by the revenue, the tribunal though noted that a similar issue wasdecided in favour of the assessee in another assessee's.case allowed the appeal preferred by the revenuefollowing the order passed in case of the assessee for|Assessment Year 2010-11. The assessee had funds of.Rs.386.91 Crores as against the capital work in progressof Rs.59.41 Crores, which leads to a presumption thatassessee had used its funds towards the expansion andnotfor.borrowedcapital. Therefore,interestonborrowed capital could not have been disallowed. 15. The Assessing Officer had disallowed theclaim in respect of processing charges on the groundthat the same ought to have been capitalized with theloans as they are directly linked to the borrowings anddisallowed the same. However, the Commissioner of.Income Tax (Appeals) by placing reliance on decision of|the Supreme Court in CIT VS. INDIA CEMENTS supraallowed the appeal preferred by the assessee in anappeal filed by the revenue though tribunal originally restored the matter to the Commissioner of Income Tax.(Appeals), however, on an application for rectificationmade by the assessee, the tribunal allowed theaforesaid application and on merits held in favour of theassessee. From perusal of the order passed by thetribunal on an application filed by the assessee forrectification of the order, it is evident that tribunal hasrecorded a finding in the para 13 of the order that there|has been no adjudication of the claim for disallowance of.processingchargesand|capitalizationOf Rs.9,/77,23,650/-. The tribunal has therefore decided theclaim of the assessee on merits. Since, the omission onthe part of the tribunal was an error apparent on theface of the record, and therefore, the tribunal rightlyinvoked provisions of Section 254(2) of the Act.Similarly, in view of decision of Rajasthan High Court in-Secure Meters Ltd. supra, the matter pertaining toexpenses incurred for convertible debenture is decidedin favour of the assessee and the application for rectification has been partly allowed. On close scrutinyof the order dated 06.12.2017 passed by the tribunal,we find that the tribunal has invoked the jurisdiction to|rectify the error apparent on the face of the record. rectification has been partly allowed. On close scrutinyof the order dated 06.12.2017 passed by the tribunal,we find that the tribunal has invoked the jurisdiction to|rectify the error apparent on the face of the record. In view of preceding analysis, the remaining|substantial questions of law involved in these appealsare answered in favour of the assessee and against the|revenue. In the result, the orders dated 21.06.2017 and06.12.2017 to the extent the same are against theassessee are hereby quashed. In the result, the appeal preferred by the assessee|succeeds, whereas, the appeal preferred by the revenue.is dismissed. Sd/-—JUDGE. Sd/-JUDGE.