M/s. Gujarat State Fertilisers & Chemicals Ltd., Baroda V. The Dy.CIT.,Circle-1(1), Baroda

CO 117/AHD/2010

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8626 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 05-07-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 10-05-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 05-05-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHELLY JINDAL
• Assessee Lawyers: Y G SHAH
• Keywords: Capital asset; Opportunity of being heard; Competent authority; Revenue expenditure; Capital expenditure
• Section: 14A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH BEFORE: SHRI D.K. TYAGI, JUDICIAL MEMBER AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER THE DCIT, CIR-(1) BARODA (APPELLANT) VS GUJRAT STATE FERTILIZER AND CHEMICAL LIMITED PO FERTILIZER NAGAR, DIST- BARODA PAN: AAACG7996C (RESPONDENT) C.O. NO. 117/A HD/2010 (IN ITA NO. 729/AHD/2010) GUJRAT STATE FERTILIZER AND CHEMICAL LIMITED PO FERTILIZER NAGAR, DIST- BARODA PAN: AAACG7996C (CROSS OBJECTOR) VS THE DCIT, CIR-(1) BARODA (RESPONDENT) REVENUE BY: SRI SHELLY JINDAL, CIT-D.R . ASSESSEE BY: SRI Y.G. SHAH, A.R. DATE OF HEARING : 13-05-2013 DATE OF PRONOUNCEMENT : 05-07-20 13 / ORDER PER BENCH:- ITA NO.729 /AHD/2010 A. Y. 2007-08 I.T.A NO. 729/AHD/2010 & C.O. NO. 117/AHD/2010 A.Y. 2007-08 PAGE NO DCIT VS. GUJRAT STATE FERTILIZER AND CHEMICAL LTD. 2 THIS APPEAL IS FILED BY THE REVENUE AND THE C.O. I S FILED BY THE ASSESSEE. THESE ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A)-I BARODA DATED 25-11-2009 FOR ASSESSMENT YEAR 2007-08. 2. THE CO FILED BY THE ASSESSEE WAS NOT PRESSED BY LD. A.R. OF THE ASSESSEE. HENCE, THE SAME IS REJECTED AS NOT PRESS ED. 3. GROUND NO. 1 OF THE REVENUES APPEAL IS AS UNDER :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE EXPENDITURE OF RS. 74.70 LACS ON ACQUIRING FIRE FIGHTING EQUIPMENTS AND ON SAFETY ME ASURES, AS REVENUE EXPENDITURE, WITH THE OBSERVATION THAT THESE EXPENS ES WERE NECESSARY FOR COMPLYING WITH THE GOVERNMENT REGULATIONS AND DID NOT RESULT IN THE CREATION FOR ANY ASSET, WITHOUT APPRECIATING TH AT THERE ARE NOT THE RELEVANT CONSIDERATIONS FOR DETERMINING CAPITAL VIS --VIS REVENUE NATURE OF AN EXPENDITURE AND THE EXPENSES, BEING IN CAPITAL FIELD AND GIVING AN ADVANTAGE OF ENDURING NATURE, CONSTITUTE CAPITAL EXPENDITURE AS SETTLED IN THE CASE OF BALLIMAL NAVA L KISHORE VS CIT 224 ITR 414 (SC). 4. LD. D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LD. A.R. SUPPORTED THE ORDER OF LD. CIT(A). WE HAVE CO NSIDERED THE RIVAL SUBMISSIONS AND WE FIND THAT THIS ISSUE WAS DECIDED BY LD. CIT(A) AS PER PARA 4.2 OF HIS ORDER, WHICH READS AS UNDER:- 4.2 IT IS OBSERVED THAT THE SAME ISSUE CAME UP BEF ORE ME IN A.Y. 2006-07, AND THAT THE FACTS ARE IDENTICAL IN THIS Y EAR. UNDER THE CIRCUMSTANCES, FOLLOWING MY APPELLATE ORDER FOR THE EARLIER YEARS, THE IMPUGNED EXPENDITURE IS HELD TO BE REVENUE IN NATUR E AND THE ADDITION OF RS. 74.40 LACS IS DIRECTED TO BE DELETED. 5. FROM THE ABOVE PARA, WE FIND THAT THIS ISSUE WAS DECIDED BY LD. CIT(A) ON THIS BASIS THAT FACTS ARE IDENTICAL IN T HIS YEAR AS COMPARED TO FACTS I.T.A NO. 729/AHD/2010 & C.O. NO. 117/AHD/2010 A.Y. 2007-08 PAGE NO DCIT VS. GUJRAT STATE FERTILIZER AND CHEMICAL LTD. 3 IN A.Y. 2006-07. WE DO NOT FIND ANY BASIS REGARDIN G THIS DECISION OF LD. CIT(A) BECAUSE EVEN IF THE EXPENSES ARE INCURRED IN RESPECT OF FIRE FIGHTING EQUIPMENTS IN THE PRESENT YEAR AND IN A.Y. 2006-07, IT IS TO BE SEEN AS TO WHETHER THE SAME IS IN RESPECT OF ACQUIRING NEW EQU IPMENTS OR IN ACQUIRING SOME PARTS OF THE EXISTING EQUIPMENTS. THE TRIBUN AL ORDER IN RESPECT A.Y. 2006-07 IS NOT AVAILABLE TO US BUT THE SAME FOR A.Y . 2003-04, 2004-05 AND 2005-06 ARE AVAILABLE ON PAGE 121, 122, 133 AND 14 8,149 OF THE PAPER BOOK RESPECTIVELY. IN ALL THESE YEARS, THE TRIBUN AL HAS FOLLOWED EARLIER TRIBUNAL ORDER FOR A.Y. 2001-02 & 2002-03 ETC AND E ARLIER ORDERS ARE NOT AVAILABLE BEFORE US. IN THE ABSENCE OF LEAD ORDER FOR THE FIRST YEAR, WHEN THE TRIBUNAL ALLOWED SUCH CLAIM FOR THE FIRST TIME, IT IS NOT POSSIBLE TO FIND OUT WHAT IS THE BASIS OF ALLOWING SUCH CLAIM AND WHAT W AS FACTS OF THAT YEAR. HENCE, WE FEEL THAT THIS ISSUE SHOULD BE DECIDED AF RESH BY LD. CIT(A) AFTER BRINGING ON RECORD THE FIRST ORDER OF THE TRIBUNAL ON SUCH ISSUE AND AFTER EXAMINING AND COMPARING FACTS OF THAT YEAR AND PRES ENT YEAR. WE SET ASIDE THE ORDER OF LD. CIT(A) ON THIS ISSUE AND RESTORE B ACK THIS MATTER TO HIS FILE FOR A FRESH DECISION IN THE LIGHT OF ABOVE DISCUSSI ON AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO BOTH SIDES. THIS GRO UND OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. 6. GROUND NO. 2 OF THE REVENUE IS AS UNDER:- 2(A). ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE O F RS. 1,89,50,647/- U/S 14A TOWARDS INTEREST AND OTHER EXPENSES INCURRE D IN RELATION TO EXEMPTED INCOME OF DIVIDEND, WITHOUT TAKING NOTE OF THE LANDMARK DECISION IN THE CASE OF CIT(A) ABHISHEK INDUSTRIES LTD. 286 ITR 01 ( P & H), LAYING DOWN THAT, IN VIEW OF SECTION 106 OF T HE INDIAN EVIDENCE ACT, THE FACTS BEGIN IN THE SPECIAL KNOWLEDGE OF TH E ASSESSEE, IT WAS UP TO HIM TO ADDUCE EVIDENCE THAT ALL THE BORROWINGS W ERE USED FOR THE PURPOSES OF THE BUSINESS AND IT IS THE ASSESSEES O WN SURPLUS FUNDS I.T.A NO. 729/AHD/2010 & C.O. NO. 117/AHD/2010 A.Y. 2007-08 PAGE NO DCIT VS. GUJRAT STATE FERTILIZER AND CHEMICAL LTD. 4 THAT WERE INVESTED I THE SHARES EARNING EXEMPTED IN COME AND HENCE, EVEN IN CASE OF MIXED FUNDS, THE DISALLOWANCE OF IN TEREST WAS CALLED FOR. 2(B). THE LD. CIT(A) ERRED IN ACCEPTING THE ASSESSE ES PLEA THAT THE INVESTMENT IN SHARES BEING LESS THAN THE ASSESSEES OWN FUNDS IN THE BALANCES SHEET, NO DISALLOWANCE OF INTEREST WAS CAL LED FOR, WITHOUT APPRECIATING THAT THE ASSESSEES OWN FUNDS ALREADY STOOD INVESTED IN FIXED ASSETS OR AS WORKING CAPITAL WHEN THE RELEVAN T BORROWINGS WERE MADE,; OTHERWISE, THERE WAS NO NEED FOR SUCH BORROW INGS AND HENCE IT IS THESE BORROWINGS WHICH WERE UTILIZED TO EARN EXE MPTED INCOME AND THE CO-RELATION BETWEEN THE BORROWINGS AND UTILIZA TION CAN NOT BE REFLECTED IN THE BALANCE SHEET PREPARED ON A PARTIC ULAR DATE. 2(C). THE LD. CIT(A) FAILED TO APPRECIATE THAT, IT WAS UP TO THE ASSESSEE TO PROVE BY FURNISHING DAY-TO-DAY CASH FLO W THAT NO INTEREST BEARING FUNDS WERE DEPLOYED TO EARN EXEMPTED INCOME AND, IN THE ABSENCE OF THE SAME, THE ASSESSING OFFICER WAS JUST IFIED IN DRAWING INFERENCE AS PER THE RATIO SETTLED IN THE CASE OF C IT VS. MOTOR GENERAL FINANCE LTD. 254 ITR 449 (DEL) SINCE CONFIRMED IN P RINCIPLE BY THE SUPREME COURT IN THE CASE OF MOTOR GENERAL FINANCE VS CIT 267 ITR 381 (SC). 2(D). THE LD. CIT(A) ERRED IN DELETING THE DISALLOW ANCE BY PUTTING ARBITRARY AND NARROW MEANING ON THE TERM INCURRED IN SECTION 14A WHEN THIS SECTION NOWHERE REFERS TO INCURRING OF EX PRESSLY QUANTIFIED EXPENDITURE IN RELATION TO EXEMPTED INCOME AND, IN STEAD, USES THE WIDER EXPRESSION IN RELATION TO AND NOT FOR EARN ING OF. 7. LD. D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LD. AR OF THE ASSESSES SUPPORTED THE ORDER OF LD. CIT(A ). HE ALSO SUBMITTED THAT THE OWN FUNDS OF THE ASSESSEE IS FAR IN EXCEED S OF THE INVESTMENT MADE BY THE ASSESSEE IN TAX FREE SECURITIES AND THE QUAN TUM OF BORROWED FUNDS HAS REDUCED. HE ALSO SUBMITTED THAT ON 31-01-2007, OWN FUNDS WERE RS. 79.09 LACS IN THE FORM OF SHARE CAPITAL AND RS. 1285.5 LA CS IN THE FORM OF RESERVE AND SURPLUS AS AGAINST TAX FREE INVESTMENT OF ONLY RS. 19.5 LACS. HE ALSO I.T.A NO. 729/AHD/2010 & C.O. NO. 117/AHD/2010 A.Y. 2007-08 PAGE NO DCIT VS. GUJRAT STATE FERTILIZER AND CHEMICAL LTD. 5 SUBMITTED THAT THE A.O. COULD NOT PROVE ANY NEXUS B ETWEEN THE INTEREST BEARING FUNDS AND THE INVESTMENT MADE BY THE ASSESS EE IN THESE TAX FREE SECURITIES. IN A.Y. 2004-05 AND 2005-06, TRIBUNAL H AS DELETED THE ENTIRE DISALLOWANCE IN RESPECT OF INTEREST EXPENDITURE BUT CONFIRMED THE DISALLOWANCE OF 5 LACS IN A YEAR FOR OTHER EXPENSES UNDER SECTION 14(A). HE SUBMITTED THAT THESE ORDERS OF TRIBUNAL FOR A.Y. 2 004-05 AND 2005-06 ARE AVAILABLE ON PAGES 133-135 AND 149-150 OF PAPER BOO K RESPECTIVELY. 8. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDER OF A UTHORITIES BELOW AND THE TRIBUNAL DECISION CITED BY LD. A.R. OF THE ASSESSEE . REGARDING DISALLOWANCE OUT OF INTEREST EXPENDITURE, WE ARE OF CONSIDERED O PINION THAT NO SUCH DISALLOWANCE IS CALLED FOR WHEN THE OWN INTEREST FR EE FUNDS IS FAR IN EXCESS OF INVESTMENT IN TAX FREE SECURITIES AND THE A.O. COUL D NOT PROVE ANY NEXUS BETWEEN INTEREST BEARING BORROWED FUNDS AND SUCH IN VESTMENT IN TAX FREE SECURITIES AND THEREFORE, THE SAME IS DELETED. IN RESPECT OF DISALLOWANCE U/S 14 (A) OUT OF OTHER EXPENSES, A DISALLOWANCE OF RS. 5 LACS WAS CONFIRMED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN A.Y. 2004-0 5 AND ALSO IN A.Y. 2005- 06 AND ACCORDINGLY, IN THE PRESENT YEAR ALSO, WE CO NFIRM DISALLOWANCE OF RS. 5 LACS U/S 14(A) IN RESPECT OF OTHER EXPENSES AND D ELETE THE BALANCE DISALLOWANCE MADE BY THE A.O. IN RESPECT OF INTERES T EXPENDITURE AND OTHER EXPENSES. THIS GROUND IS PARTLY ALLOWED. 9. GROUND NO. 3 IS AS UNDER:- 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS . 16.31 LACS MADE ON ACCOUNT OF INCOME ACCRUED DURING THE YEAR, WHICH WA S CREDITED BY THE ASSESSEE IN THE SUBSEQUENT ASSESSMENT YEAR. THE CI T(A) ERRED IN NOT I.T.A NO. 729/AHD/2010 & C.O. NO. 117/AHD/2010 A.Y. 2007-08 PAGE NO DCIT VS. GUJRAT STATE FERTILIZER AND CHEMICAL LTD. 6 APPRECIATING THE FACT THAT THE ASSESSEE IS FOLLOWI NG MERCANTILE SYSTEM OF ACCOUNTING, BUT CREDIT TO THE P & L ACCOUNT FOR THE SUBSEQUENT A.Y. AND THEREBY SHIFTING TAX LIABILITY OF THE A.Y. 2007 -08 TO A.Y. 2008-09. 10. REGARDING THIS ISSUE, LD. D.R. SUPPORTED ASSESS MENT ORDER WHEREAS LD. A.R. SUPPORTED THE ORDER OF LD. CIT(A). HE ALS O POINTED OUT THAT AMOUNT MENTIONED IN THE GROUNDS OF APPEAL IS ONLY R S. 16.31 LACS BUT THE CORRECT AMOUNT IS RS. 1631 LACS. HE FURTHER SUBMIT TED THAT THE ASSESSEE HAS BEEN REGULARLY FOLLOWING THE METHOD OF ACCOUNTING S UBSIDY ON RECEIPT BASIS IN THE RELEVANT ACCOUNTING YEAR AND FURTHER SUBSIDI ES, IF ANY, BECOMING DUE ON ACCOUNT OF FINAL RIGHT OF SUBSIDY BEING NOTIFIED , IS ACCOUNTED FOR IN NEXT ACCOUNTING YEAR. HE ALSO SUBMITTED THAT THE ACCOUN TS OF THE ASSESSEE WERE FINALIZED ON 04-05-2007 WHEREAS THE NOTIFICATION ON THE BASIS OF WHICH, THE SUBSIDY OF RS. 1631 LACS WAS ACCOUNTED FOR WAS PASS ED ON 9 TH MAY, 2007 AND 14 TH MAY, 2007 AND THEREFORE, THIS SUBSIDY INCOME HAS A CCRUED IN THE NEXT FINANCIAL YEAR AND WAS ACCORDINGLY ACCOUNTED FOR IN NEXT YEAR 2007-08 RELEVANT FOR ASSESSMENT YEAR 2008-09 AND THEREFORE, THE ORDER OF LD. CIT(A) ON THIS SHOULD BE CONFIRMED. 11. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE FIND THAT THIS ISSUE WAS DECIDED BY LD. CIT(A) AT P ARA 6.2 IN HIS ORDER AND FOR THE SAKE OF READY REFERENCE, THE SAME IS REPRO DUCED BELOW. 6.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE L D. AR AND THE FACTS OF THE CASE. THE TAXABILITY OF THE AMOUNT IS NOT IN DISPUTE. THE ONLY ISSUE IS REGARDING THE YEAR IN WHICH THE IMPUGNED A MOUNT WOULD BE TAXABLE. ACCORDING TO THE APPELLANT, THE AMOUNT OF SUBSIDY WOULD ACCRUE ONLY ON THE QUANTIFICATION OF THE AMOUNT AS WELL AS SANCTION OF THE AMOUNT BY THE COMPETENT AUTHORITY. IN THIS CASE , THE COMPETENT AUTHORITY RELEASED THE AGGREGATE SUBSIDY OF RS, 163 1.00 LAKHS ON 9 TH I.T.A NO. 729/AHD/2010 & C.O. NO. 117/AHD/2010 A.Y. 2007-08 PAGE NO DCIT VS. GUJRAT STATE FERTILIZER AND CHEMICAL LTD. 7 MAY, 2007AND 14 TH MAY, 2007, IN RESPECT OF SECOND, THIRD AND FOURTH QUARTERS RESPECTIVELY. THE SUBSIDY OF FIRST QUARTE R HAD BEEN RECEIVED EARLIER AND WAS DULY ACCOUNTED FOR IN THE ACCOUNTS AS INCOME OF THE CURRENT YEAR ACCOUNTING STANDARD-12 ON 'ACCOUNTING FOR GOVERNMENT GRANTS' HAS BEEN SPECIFICALLY PRESCRIBED FOR DEALIN G WITH CASES OF GRANTS AND SUBSIDIES. AS PER AS-12, 'GOVERNMENT GR ANTS SHOULD NOT BE RECOGNIZED UNTIL THERE IN REASONABLE ASSURANCE T HAT (I) THE ENTERPRISE WILL COMPLY -WITH THE CONDITIONS ATTACHE D TO THEM, AND (II) THE GRANTS WILL BE RECEIVED' THE SANCTION OF THE S UBSIDY WAS CONTINGENT UPON FULFILMENT OF CONDITIONS. THE APPEL LANT HAD NO RIGHT TO CLAIM OR RECEIVE THE SUBSIDY AMOUNT TILL THE SAME W AS NOT ONLY QUANTIFIED, BUT ALSO RELEASED BY THE COMPETENT AUTH ORITY. IN THIS CASE, THE SANCTION ORDERS ARE DATED MAY 2007. THE AMOUN T WAS ALSO ACTUALLY RECEIVED IN PREVIOUS YEAR 2007-08. THUS, THE SUBSIDY OF 2 ND , 3 RD & 4 TH QUARTERS AMOUNTING TO RS. 1631.00 LAKHS ACCRUED IN THE PY RELEVANT TO AY 2008-09. THE ASSESSEE HAD ALSO DULY ACCOUNTED FOR THIS RECEIPT IN AY 2008-09. IT IS PERTINENT TO NOTE THAT THIS PRACTICE HAS BEEN CONSISTENTLY FOLLOWED IN THE PAST AND ACCEPTED BY THE DEPARTMENT AS WELL. HENCE, IF THE IMPUGNED AMOUNT OF RS. 1631 .00 LAKHS IS INCLUDED IN THE INCOME OF THE CURRENT YEAR, IT WOUL D RESULT IN THE SUBSIDY FOR TWO PERIODS BEING ACCOUNTED FOR IN ONE ACCOUNTING YEAR. THIS CLEARLY IS NOT AS PER THE GENERALLY ACCEPTED A CCOUNTING PRINCIPLES. ACCORDINGLY, IT IS HELD THAT THE AO WAS NOT JUSTIFIED IN INCLUDING THE SAID AMOUNT OF RS. 1631.00 LAKHS IN T HE INCOME OF THIS YEAR. THE ADDITION IS, THEREFORE, DIRECTED TO BE DE LETED. 12. WE FIND THAT THIS ISSUE WAS DECIDED BY LD. CIT( A) BY FOLLOWING AS- 12 AND THE REVENUE COULD NOT ESTABLISH THAT THE SUB SIDY HAS ACCRUED IN THE PRESENT YEAR AND THEREFORE, WE FIND NO REASON TO IN TERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE. THIS GROUND IS THEREFORE, RE JECTED. 13. GROUND NO. 4 OF THE REVENUE READS AS UNDER:- 4(A) ON THE FACTS, IN THE CIRCUMSTANCES OF THE CAS E AND LAW, THE LEARNED CIT(APPEALS) ERRED IN RELYING ON THE DECISI ON OF HON. ITAT IN THE CASE OF ALEMBIC LTD FOR A.Y,2003-04 BEARING ITA NO.3594/AHD/2007 DATED 6.6.2006 WHEREIN THE HON. IT AT ALLOWED THE I.T.A NO. 729/AHD/2010 & C.O. NO. 117/AHD/2010 A.Y. 2007-08 PAGE NO DCIT VS. GUJRAT STATE FERTILIZER AND CHEMICAL LTD. 8 APPEAL OF THE ASSESSEE IN RESPECT OF CLAIM OF ASSES SEE U/S. 80IA(4) BY TAKING THE PRICE OF ELECTRICITY SUPPLIED BY GEB. 4(B) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED CIT(APPEALS) AS WELL AS THE HON. ITAT DID NOT RELY ON THE DECISION IN THE CASE OF CHETTINAD CEMENT CORPORATION LTD. IN TH E ITA NO.L026(MDS)/2005 FOR A.Y-2001-02 ON THE GROUND THA T THE ASSESSEE HAD CAPTIVE POWER GENERATION PLANT AND THEREFORE TH E CLAIM WAS NOT ALLOWABLE. 14. LD. D.R. SUPPORTED THE ASSESSMENT ORDER. HE AL SO SUBMITTED THAT IN THE PRESENT CASE, TRIBUNALS DECISION RENDERED IN T HE CHETINAD CEMENT CORPORATION SHOULD BE FOLLOWED IN PREFERENCE TO OTH ER TRIBUNALS DECISION RENDERED IN ALEMBIC LTD (SUPRA). LD. A.R. SUPPORTE D THE ORDER OF LD. CIT(A). HE ALSO STATED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF CIT VS. AHMEDABAD MANUFACTURING AND CALICO PRINTING COMPANY LTD AS REPORTED 162 ITR 760. 15. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND VARIOUS TRIBUNAL DECISIONS WHICH ARE IN FAVOUR OF T HE ASSESSEE AND ALSO TRIBUNAL DECISION RENDERED IN THE CHETINAD CEMENT C ORPORATION WHICH IS IN FAVOUR OF THE REVENUE. WE FIND THAT IN THE CASE OF CIT VS. AHMEDABAD MANUFACTURING CALICO PRINTING CO. LTD. (SUPRA), IT WAS HELD BY THE HONBLE GUJRAT HIGH COURT THAT ASSESSEE IS ENTITLED TO DEDU CTION U/S 80IA(4) OF THE INCOME-TAX ACT 1961 IRRESPECTIVE OF WHETHER THE PR ODUCT IS SOLD IN THE MARKET OR IS USED BY THE ASSESSEE ITSELF. THIS WAS ALSO HELD THAT MARKET VALUE OF SUCH OWN CONSUMPTION SHOULD BE CONSIDERED FOR WO RKING OUT PROFITS AND GAINS FOR THE PURPOSE OF ALLOWING DEDUCTION U/S 80I A OF THE ACT. SO, THIS I.T.A NO. 729/AHD/2010 & C.O. NO. 117/AHD/2010 A.Y. 2007-08 PAGE NO DCIT VS. GUJRAT STATE FERTILIZER AND CHEMICAL LTD. 9 GOES TO SHOW THAT THE ASSESSEE IS ELIGIBLE FOR DEDU CTION U/S 80IA FOR THE POWER USED FOR OWN PLANT AS CAPTIVE CONSUMPTION. THE ONLY DISPUTE IS REGARDING WORKING OUT MARKET RATE OF SUCH POWER PRO DUCTION. A.O. HAS COMPARED THE RATE BY WHICH VARIOUS POWER SUPPLYING COMPANIES ARE PURCHASING POWER FROM THE POWER GENERATING COMPANIE S WHEREAS THE ASSESSEE HAS ADOPTED THE PRICE AT WHICH ELECTRIC SU PPLYING COMPANIES ARE SUPPLYING POWER TO THE POWER CONSUMERS. IN THIS AS PECT, VARIOUS TRIBUNAL DECISIONS ARE IN FAVOUR OF THE ASSESSEE AND IT IS N OW A SETTLED POSITION OF LAW THAT ON A ISSUE, WHERE TWO VIEWS ARE POSSIBLE, THE VIEW FAVOURABLE TO THE ASSESSEE SHOULD BE FOLLOWED AND THEREFORE, WE DO NO T FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE. THIS IS ALSO TO BE APPRECIATED THAT IF OWN POWER PRODUCTION WAS NOT TH ERE, THE ASSESSEE WAS REQUIRED TO PAY FOR SUCH POWER AT THE SAME RATE AT WHICH POWER IS SOLD BY GEB. HENCE, BECAUSE OF OWN POWER PRODUCTION, THE A SSESSEE HAS THAT MUCH SAVING IN POWER COST WHICH IS THE INCOME OF POWER P LANT. ACCORDINGLY, THIS GROUND OF THE REVENUE IS ALSO REJECTED. 16. GROUND NO. 5 IS AS UNDER:- 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(APPEALS) ERRED IN DIRECTING TO ALLOW CO RPORATE DEBT RESTRUCTURING EXPENSE OF RS.2.57 CRORES ON PAYMENT TO FINANCIAL CONSULTANTS IN CONNECTION WITH THE WAIVER OF LOANS, BY SPREADING IT OVER A PERIOD OF 6 YEARS, BY DISREGARDING THE FACT THAT SUCH EXPENDITURE IN RELATION TO CAPITAL ASSETS CONSTITUT ES CAPITAL EXPENDITURE, WHICH IS SPECIFICALLY EXCLUDED IN SECT ION 37(1), AND THE PRINCIPLE OF SPREAD OVER CAN BE APPLIED ONLY IN REL ATION TO THE EXPENDITURE OF REVENUE NATURE AS SETTLED IN MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD. VS. CIT 225 ITR B02 (SC). I.T.A NO. 729/AHD/2010 & C.O. NO. 117/AHD/2010 A.Y. 2007-08 PAGE NO DCIT VS. GUJRAT STATE FERTILIZER AND CHEMICAL LTD. 10 17. LD. D.R. SUPPORTED THE ASSESSMENT ORDER WHEREAS LD. A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF LD. CIT(A). IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAS PAID RS. 2.75 CRORES TO FINANCIAL CONS ULTANTS IN FINANCIAL YEAR 2003-04 (A.Y. 2004-05) FOR CORPORATE RESTRUCTURING. HE ALSO SUBMITTED THAT AS PER TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR A. Y. 2004-05, THE DECISION OF LD. CIT(A) WAS CONFIRMED AS PER WHICH HE HELD TH AT THIS EXPENDITURE OF RS. 2.75 CRORES SHOULD ALLOWED OVER A PERIOD OF SIX YEARS I.E. RS. 4283333 IN EACH OF THESE SIX YEARS. HE ALSO SUBMITTED THAT I N THE PRESENT YEAR, THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY TH IS TRIBUNAL DECISION. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND SINCE THIS IS SUE HAS ALREADY BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE I N A.Y. 2004-05 AND THE DECISION OF LD. CIT(A), IS ON THAT LINE, NO INTERFE RENCE IS CALLED FOR ON THIS ISSUE FROM OUR SIDE. THIS GROUND IS ALSO REJECTED. 18. GROUND NO. 6 READS AS UNDER:- 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING TO ALLOW RELIEF TO AS SESSEE OF EXCESS PROVISIONS FOR LTC WRITTEN BACK OF RS.21,49,80 , 841/- WHICH WAS NOT CLAIMED IN THE RETURN OF INCOME, BUT SUBMITTED AFTE R THE HEARING WAS CONCLUDED. ON THE FACTS AND IN THE CIRCUMSTANCES OF HIN CASE THE LD. CIT (APPEALS) ERRED IN VIEW OF HON'BLE SUPREME COUR T DECISION IN THE CASE OF GOETZ (INDIA) LTD. VS. CIT 157 TAXMAN L (SC). 19. LD. D.R. SUPPORTED THE ASSESSMENT ORDER WHEREAS LD. A.R. SUPPORTED THE ORDER OF LD. CIT(A). HE ALSO SUBMITTED THAT TH E BREAK-UP OF RS. 24.49 CRORES IS AVAILABLE ON PAGE NO. 92 OF THE PAPER BOO K. HE FURTHER SUBMITTED THAT THIS BREAK-UP INCLUDES AN AMOUNT OF RS. 1899 L ACS WHICH WAS DISALLOWED BY THE A.O. IN A.Y. 2003-04 AND THE SAME CAN BE SEE N IN THE ASSESSMENT ORDER FOR THAT YEAR AVAILABLE ON PAGE NO. 107 OF TH E PAPER BOOK. HE ALSO I.T.A NO. 729/AHD/2010 & C.O. NO. 117/AHD/2010 A.Y. 2007-08 PAGE NO DCIT VS. GUJRAT STATE FERTILIZER AND CHEMICAL LTD. 11 SUBMITTED THAT THIS DISALLOWANCE WAS NOT CHALLENGED BY THE ASSESSEE BEFORE LD. CIT(A) AND THIS CAN BE EXAMINED FROM THE ORDER OF LD. CIT(A) FOR THAT ASSESSMENT YEAR WHICH IS AVAILABLE ON PAGE 108 TO 1 14 OF PAPER BOOK. HE ALSO SUBMITTED THAT IN ADDITION TO THIS, THE A.O. H AS ALSO DISALLOWED RS. 263.26 BEING PRIOR PERIOD EXPENSES IN A.Y. 2004-05 WHICH INCLUDED LEAVE ENCASHMENT OF RS. 250.08 LACS. HE ALSO SUBMITTED T HAT THE DISALLOWANCE MADE BY THE A.O. OF RS. 263.26 LACS IN A.Y. 2004-0 5 WAS CONFIRMED BY THIS TRIBUNAL AND THE COPY OF TRIBUNAL ORDER FOR A.Y. 20 04-05 IS AVAILABLE ON PAGES 128-29 OF PAPER BOOK AND THEREFORE, THIS WRIT ING BACK OF LIABILITY IN THE PRESENT YEAR CANNOT BE ASSESSED AS INCOME OF TH E ASSESSEE. 20. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND GO NE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT ON THIS ISSUE, LD. CIT(A) HAS DIRECTED THE AO TO VERIFY THE CLAIM OF THE ASSESSEE THAT THE CLAIM MADE BY THE ASSESSEE FOR DEDUCTION IN RESPECT OF LTC WAS DI SALLOWED IN EARLIER YEAR AND ONLY TO THE EXTENT, THE LIABILITY CREATED BY T HE ASSESSEE BUT DISALLOWED IN THE ASSESSMENT ONLY, THE WRITING BACK OF LIABILITY CAN BE EXCLUDED FROM INCOME. SINCE THE MATTER IS RESTORED BACK BY LD. C IT(A) TO THE FILE OF A.O. FOR A DECISION AFTER VERIFYING THE FACTS, WE DO NOT WANT TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE. THIS GROUND OF REVENUE IS ALSO REJECTED. 21. GROUND NO. 7 IS AS UNDER:- 7(A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADJUSTMENT OF BOOK PROFIT U/S 115JB BY THE ESTIMATED GRATUITY PROVISION OF RS. 3,73,68,158 /- MADE ON THE BASIS OF ACTUARIAL VALUATION, WHICH IS AN UNASCERTA INED LIABILITY AS SPECIFICALLY SETTLED IN THE CASE OF SHREE SAJJAN MI LLS LTD. VS. CIT 156 ITR (SC) & INDIAN MOLASSES CO. PVT.LTD. VS CIT 37 ITR 66 (SC). I.T.A NO. 729/AHD/2010 & C.O. NO. 117/AHD/2010 A.Y. 2007-08 PAGE NO DCIT VS. GUJRAT STATE FERTILIZER AND CHEMICAL LTD. 12 THE LD. CIT(A) WRONGLY EQUATED THIS LIABILITY WITH THAT OF LEAVE ENCASHMENT WHICH ACCRUES YEAR TO YEAR ON ACCOUNT OF THE ELIGIBLE EMPLOYEES NOT AVAILING OF LEAVE DURING THE YEAR WHE REAS GRATUITY LIABILITY PROVIDED IN RESPECT OF ALL THE EMPLOYEES ON ACTUARIAL BASIS IS PURELY CONTINGENT ON THEIR RETIREMENT IN FUTURE AND THE MERE FACT THAT THE ACCOUNTING PRACTICE FORMULATED AS AS-15 ENJOINS SUCH PROVISION DOES NOT RENDER IT AS ASCERTAINED LIABILITY AS SETT LED IN THE CASE OF INDIAN MOLASSES CO. PVT. LTD. VS CIT 37 ITR 66,76-76 (SC) AND TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. VS CIT 227 ITR 172 (SC). 7(B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADJUSTMENT OF BOOK PROFIT U/S 115JB BY THE DISALLOWANCE OF EXPENSES OF RS. 1,89,5 6,647/- IN RELATION TO ESTIMATED INTEREST WHICH DOES NOT FORM PART OF T OTAL INCOME. 22. LD. D.R. SUPPORTED THE ASSESSMENT ORDER WHEREAS LD. A.R. SUPPORTED THE ORDER OF LD. CIT(A). HE ALSO SUBMITTED THIS IS SUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL ORDER IN ASS ESSEES OWN CASE FOR A.Y. 2004-05 & 2005-06 AS AVAILABLE ON PAGES 138-142 OF THE PAPER BOOKS RESPECTIVELY. REGARDING SECOND ASPECT I.E. REGARD ING ADDITION IN BOOK PROFIT IN RESPECT OF DISALLOWANCE U/S 14A, IT WAS SUBMITTE D THAT IN THE GROUND REGARDING DELETION OF DISALLOWANCE ITSELF, THE TRIB UNAL IN EARLIER YEAR HAS DELETED THE DISALLOWANCE ON ACCOUNT OF INTEREST EXP ENDITURE AND ONLY CONFIRMED THE DISALLOWANCE OF RS. 5 LACS IN RESPECT OF OTHER EXPENSES. HE SUBMITTED THAT FOR THE BOOK PROFIT U/S 115JB ALSO, SIMILAR ADDITION OF RS. 5 LACS ONLY WAS CONFIRMED. HE SUBMITTED THAT IN THE PRESENT YEAR ALSO, SIMILAR GROUND IS RAISED BY THE ASSESSEE FOR COMPUTING NORM AL INCOME AS PER GROUND NO. 2, AND HENCE, IN THE PRESENT YEAR, THE ADDITION IN BOOK PROFIT ON ACCOUNT OF DISALLOWANCE U/S 14A SHOULD NOT EXCEED THE DISAL LOWANCE ULTIMATELY CONFIRMED BY THE TRIBUNAL FOR THE PURPOSE OF COMPUT ING NORMAL INCOME. HE SUBMITTED THAT IN A.Y. 2005-06, THIS ISSUE WAS D ECIDED BY THE TRIBUNAL AS I.T.A NO. 729/AHD/2010 & C.O. NO. 117/AHD/2010 A.Y. 2007-08 PAGE NO DCIT VS. GUJRAT STATE FERTILIZER AND CHEMICAL LTD. 13 PER PARA 9.2 TO 9.4 OF THIS TRIBUNAL ORDER AVAILABL E ON PAGES 133-134 OF THE PAPER BOOK. 23. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND WHILE DECIDING GROUND 2 RAISED, WE HAVE CONFIRMED THE ADDITION OF RS. 5 LAC S ON ACCOUNT OF OTHER EXPENSES U/S 14A AND HAVE DELETED THE BALANCE DISAL LOWANCE. IN A.Y. 2005- 06, WE HAVE HELD THAT FOR COMPUTING BOOK PROFIT ALS O, THE ADDITION OF RS. 5 LACS IS JUSTIFIED ON ACCOUNT OF DISALLOWANCE U/S 14 A AND ACCORDINGLY, IN THE PRESENT YEAR ALSO, WE HOLD THAT ADDITION OF ONLY RS . 5 LACS IS JUSTIFIED U/S 14A. ACCORDINGLY, THIS GROUND OF REVENUE IS PARTLY ALLOWED. 24. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED WHEREAS C.O. OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (D.K. TYAGI) ( A.K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 05/07/2013 AK / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. / CONCERNED CIT 4. - / CIT (A) 5. , ! , '# / DR, ITAT, AHMEDABAD 6. $% &' / GUARD FILE. BY ORDER/ , ( / ' ) ! , '#