Gujarat Industries Power Co.Ltd., Baroda V. The Dy.CIT.,Circle-1(1), Baroda

CO 173/AHD/2012

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 4204 (ITAT-AHMEDABAD)
• Duration Of Justice: 9 year(s) 7 month(s) 22 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 25-05-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: D
• Assessment Year: 2004-2005
• Appeal Filed On: 03-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; TDS
• Section: 63; 15; 43B; 234B; 115JB; 73; 13; 22

Judgement Text

, ‘D’ । IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD (Convened through Virtual Court) BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMEBR & SHRI WASEEM AHMED, ACCOUNTANT MEMEBR आयकर अपील सं./I.T.A. Nos. 1770/Ahd/2012 and 1826/Ahd/2010, ( Assess ment Ye ars : 2 004-05 & 2005-06 De pu ty C o mmi ss io ner o f In co me T ax , C ir cl e -1( 1) , Aa yk a r Bh av an , Va do dar a / V s . Gu ja rat I n du str ie s Pow er C o. L td . P. O. P et ro ch e mica ls, Di st. - Ba ro da - 39 1 34 6 यी ल सं./ ीआ आर सं./P A N / G IR N o . : A A A C G 7 2 7 7 Q (Appellant/ Respondent) . . (Appellant/Respondent) ITA No .1485/Ahd/2010 AND CO No.173/Ahd/2012 IN आयकर अपील सं./I.T.A. Nos. 1770/Ahd/2012 ( Assess ment Ye ars : 2 004-05 & 2005-06 Gu ja rat I n du str ie s Pow er Co. Lt d. P. O. P et ro ch e mica ls, D is t. - Bar od a – 39 13 46 / V s . De pu ty C o mmi ss io ner o f In co me T ax Cir cl e- 1( 1), Aa yk a r Bh av an , Ra ce Co ur se , Va do dar a यी ल सं./ ीआ आर सं./P A N / G IR N o . : A A A C G 7 2 7 7 Q (Appellant/ Respondent) Cross-Objector . . (Appellant/Respondent) र क र स /Revenue by : Sh ri M oh d. Us ma n, CI T D R & Sh ri Pu ru sh ot ta m K u mar, S r. DR अपील र स /Assessee by : Shri Milin Mehta, A.R. स क र D a t e o f H e a r i n g 22-04-2022 ! क र /D a t e o f P r o n o u n c e m e n t 26 -05-2022 ITA Nos.1770/Ahd/2012 & Ors. (Gujarat Industrial Power Co. Ltd. ) - 2 - ORDER PER BENCH: This is a bunch of four appeals filed by the Revenue and assessee and cross objection filed by the assessee. The details are as under: S l . N o . IT A / C O N o . A . Y . Fi l e d b y 1 IT A N o . 1 7 7 0 / A h d / 2 0 1 2 2 0 0 4 - 0 5 R e v e n u e 2 C O N o . 1 7 3 / A h d / 2 0 1 2 2 0 0 4 - 0 5 A s s e s s e e 3 IT A N o . 1 4 8 5 / A h d / 2 0 1 0 2 0 0 5 - 0 6 A s s e s s e e 4 IT A N o . 1 8 2 6 / A h d / 2 0 1 0 2 0 0 5 - 0 6 R e v e n u e 2. The issues involved in these appeals are recurrin g in nature for all the assessment years, since for the sake of brevity ITA No. 1770/Ahd/2012 and CO No. 173/Ahd/2012 relevant to the Asst. Year 2004-05 is taken as lead case for disposal of the above batch of appeals. 3. The grounds of appeal raised by Revenue in ITA No. 1770/Ahd/2012 for A.Y. 2004-05 read as under: “1 . O n t he fa ct s a nd in th e c ir cu ms t anc es of t he case an d i n la w, t he L d. CI T (A ppe al s ) e rr ed in d ele ti ng t he ad dit io n of Rs. 19 ,3 3, 23 ,3 90 /- ( net of d ep rec ia ti o n ) ma de on ac co u nt of cap it al ex pe nd it ure . T he Id .C IT (A ) e r red i n n ot ap pr ec i ati ng the fa ct th at h ug e exp en di tu re i nc ur r ed t ow ar ds sp ar e pa rts wh ich ext en de d th e lif e ti me of t he mac hi ne ry. Rel ia nce i s pla ce d on t he de ci sio n in t he c ase o f Ba ll im al N av al K i sh or vs. CI T 22 2 I TR 4 1 4 (SC ) a nd t he Su pre me C ou rt de ci si on m the ca se of CI T vs Sar av an a S pi nn in g Mi ll s P vt .L td . (2 00 7 ) 29 3 I TR 2 01 (SC ) 2. O n t he fac ts an d in th e ci rc um st a nce s o f t he c ase a nd i n la w, t he l d. C IT (A ) e rr ed in d el eti ng t he ad dit io n of ITA Nos.1770/Ahd/2012 & Ors. (Gujarat Industrial Power Co. Ltd. ) - 3 - Rs. 18 ,3 1, 26 ,5 25 /- o n a cc ou nt of C or po rat e De bt Re stru ct u rin g (C DR ) ex pe ns es a s cap it al exp en di tu re . Th e I d. CI T (A) e rr ed i n not -a pp re ci at in g t h at th e a ss es se e h as de ri ve d a ll th e be nef it s in t he fo rm o f r est ri ct in g o f t he deb t r ep ay me nt , mo re con ve ni en t an d e as y re sc hed ul ed ti me -fr am e f or r ep ay m ent s, red uc ti on i n i nt er es t r at es , e tc . ov er a lon g pe ri od o f t im e , i .e . the as se ss ee h as der iv ed ben ef it or adv an ta ge of e nd uri ng nat ur e on acc o un t o f t he Co rp or a te Deb t Res tr uc tu rin g exp en se s (CD R ) e xer ci se , an d a s s uch th e ex pe nd it u re i s cap it al i n nat ur e. 3. O n t he fac ts an d in th e ci rc um st a nce s o f t he c ase a nd i n la w, t he I d. CI T (A ) e rr ed i n r es tr ic tin g t he a dd itio n t o Rs . 16. 01 c ro re s, b ei n g the a mo un t of T DS o n the t ot al d e lay ed pay me nt c ha rg es a s pe r TD S c ert if ic ate s, f or the purp o se o f sec ti on 11 5J B as w ell as n or ma l p ro vi sio ns o f t he Ac t f or th e yea r u nd er a pp ea l ins te ad of t he c or r esp on di ng inc ome of R s. 78. 10 cr or es wit ho ut a pp re ci ati ng tha t th e a ss es s ee i s fol lo wi ng m er ca nt ile s ys te m of a c cou nt in g an d th a t the ass es se e its el f ha s o ff er ed th e en ti re am ou nt o f Rs. 78. 10 cro re s a s in co me u nde r n or ma l pr ov is ion s o nl y (a nd n ot un der the p ro vi si on s of sec ti on 1 15 JB o f the A ct ) in i ts r e vis ed ret ur n of i nc ome . 4. T he a pp el la nt c rav es l ea ve t o a dd to am en d o r alte r the ab ove g ro un ds a s m ay be d ee me d n ec es sar y. Rel ie f Cl ai me d i n A ppe al . Th e or de r o f th e C IT (Ap pe al s ) on t he abo ve i ss ue may b e se t asi de a nd t ha t of th e A ss es si ng O ff ice r be r es to re d. ” 4. The grounds of appeal raised by assessee in cross objection (CO No. 173/Ahd/2012 in ITA No.1770/Ahd/2012) for A.Y. 2004-05 read as under: “1 . T he le ar ne d C om mi ss io ner o f I nc om e T ax (A pp ea ls) - I , Ba ro da [ " the CI T (A )"] erred in fa ct an d i n la w i n co nf i rm in g the ac tio n o f th e Ass is ta nt Co mm i ssi on er of I nc om e Tax , Ci rcl e - 1 (1 ), B ar od a [ " the AO"] in mak in g a dd iti on of R s. 1,5 8, 58 5 (ne t o f dep re ci at io n ) bei n g ex pe ns es in cu rr ed on sof tw ar e on t he g ro un d t ha t th e sa me a re ca pi ta l i n na tu re . 2. Wit ho ut p re ju dic e to ab ov e, t he lea rn ed C IT (A ) e rr ed in fac t an d in l aw i n c onf ir mi ng t he a ct io n of th e AO i n al lo wi ng ITA Nos.1770/Ahd/2012 & Ors. (Gujarat Industrial Power Co. Ltd. ) - 4 - dep re ci at io n @ 25 % i n st ea d o f 6 0 % on t he so ft wa re e xp ens es tre at ed a s c ap it al i n n at ur e. 3. T he le ar ne d C I T (A ) er red i n f ac t an d i n l aw i n c on fi rm in g the a ct io n of th e A O i n ma ki ng a dd it i on u/ s. 1 4A o f t he A ct. 4. Th e le ar ne d CI T (A ) e rre d i n fa ct an d in l aw in e nh a nci ng the a dd it io n u/s . 14 A t o Rs . 8, 97, 1 94. 5. T he le ar ne d C I T (A ) er red i n f ac t an d i n l aw i n c on fi rm in g the a ct io n of t he AO i n di sa ll ow in g dep rec ia ti on o n MD 's res id en ce a mo un ti n g t o Rs .4 ,3 6, 38 9/- Bo ok Pr of it s U/ s. 1 15J B: 1. Th e lea rn ed C IT (A ) e rre d in f act a nd in l aw in con fir mi n g the ac ti on of the AO to t he ex te nt of mak in g a dd it io n of Rs. 16 ,0 1, 04 ,7 88 be ing d el aye d pa ym e nt ch ar ge s t o the bo ok pr ofi ts c om pu te d u/ s. 11 5J B of t he Ac t. 2. Th e le ar ne d AO er red in fa ct an d in la w i n c hargi ng int er es t u/ s. 2 34 B on th e ad di ti on mad e on acc ou n t of pr ovi si on fo r d efe r red ta x a mo un ti ng to R s. 41 ,6 0, 67,0 0 0 in the bo ok pr of it s u / s. 1 15 JB de sp it e t h e fa ct th at th e a dd iti on wa s m ad e in vi e w o f ret ro sp ec ti ve am en dm en t i n se cti on 11 5JB b y th e Fi na nce A ct , 20 08 w he rea s th e As se ss ee ha d fil ed t he re tu rn o f i nco me o n 1- 11 -2 00 4” 5. As against the Grounds of Appeal raised by both parties, five issues/disallowances were a lread y considered by this Tribunal in ITA No.3003/Ahd/2010 & ors. relating to A.Ys. 2003-04 & ors., vide order dated 28.02.2022. It is being agreed by both the parties that those four issues are alread y covered in assessee’s own ca se in ITA No.3003/Ahd/2010. Si milarl y, issue regarding disallowance under s.14A of the Act in computation of book profit under s.115JB of the Act is the issue considered by the Tribunal in ITA No.472/AHD/2013 & Others vide order dated 13-04-2022 relating to assessee’s own case for the Asst. Year 2009-10. Thus the recurring issues considered by this ITA Nos.1770/Ahd/2012 & Ors. (Gujarat Industrial Power Co. Ltd. ) - 5 - Tribunal in assessee’s own case for other Asst. Years are as follows: (i) Replace ment of parts of machines treated as capital expenditure; (ii) Disallowance under s.14A (iii) Disallowance under s.14A In co mpu tation of Book Profit u/s. 115JB (iv) clai m of deduction under 43B (v) depreciation on Managing Director’s residence. 6. New issues/Grounds that is required for consideration in the present appeals for the Assess ment Years 2004-05 & 2005- 06 are (vi) Disallowance of Corporate Debt Restructuring Expenses (vii) Additions under section 115 JB on account of TDS on dela yed pa yment charges (viii) Disallowance on upgradation of software expenses (ix) Charging of interest under section 234B on book Profits u/s. 115JB (x) Loss due to foreign exchange difference rate 7. As the first five issues are being covered in assessee’s own case in ITA No . 3 003/Ahd/2010 & ors. relating to A.Ys. 2003- 04 & ors., dated 28.02.2022. The findings of the same had been reproduced hereunder: “14. Is s u e N o . 1 r e g a r d i n g R e p l a c e m e n t o f p a r t s i n m a c h i n er i e s t r e a t e d a s c a p i t a l i n n a t u r e. T h e L d A R M r . M i l a n M e t h a a p p e a r i n g f o r t h e a s s e s s e e s u b m i s s i o n i s o f t w o f o ld s [ a] t h a t t h e A c c o u n t i n g m e t h o d o r a c c o u n t i n g t r e a t m e n t w h e t h e r st a t u t o r i l y ITA Nos.1770/Ahd/2012 & Ors. (Gujarat Industrial Power Co. Ltd. ) - 6 - p r e s c r i b e d u n d e r a n y l a w o r o t h e r w i s e c a n n o t o v e r r id e t h e p r o v i s i o n s o f t h e I n c o m e T a x A c t . F u r t h e r C l a s s i f i ca t i o n o f i t e m s i n t h e b o o k s i s n o t r e l e v a n t f o r d e c i d i n g t h e t r e a tm e n t o f s u c h i t e m s w h i l e c o m p u t i n g t a x a b l e i n c o m e a s h e l d b y t h e H o n ’ b l e S u p r e m e C o u r t i n t h e c a s e o f K e d a r n a t h J u t e M a n u f a ct u r i n g C o L t d - 8 2 I T R 3 6 3 . T h u s t h e b o o k e n t r i e s a r e n o t c o nc l u s i v e f o r d e t e r m i n i n g t h e n a t u r e o f e x p e n d i t u r e . T h e p r o v i s i on s o f l a w p r e v a i l o v e r t h e b o o k e n t r i e s . A c c o r d i n g l y , c o n s u m pt i o n o f s p a r e s b e i n g o n l y r e p l a c e m e n t o f s p a r e p a r t s w o u l d q u a l i f y u n d e r t h e h e a d " c u r r e n t r e p a i r s " a n d t r e a t e d a s R e v e n u e E x p e nd i t u r e . T h e L d A R s u b m i t t e d b e f o r e t h e B e n c h a “ T e c h n i c a l Wr i t e U p ” a b o u t t h e m a c h i n e r y a n d a l s o d e t a i l s o f s p a r e s c o n s u m e d at r e g u l a r i n t e r v a l s f o r v a r i o u s a s s e s s m e n t y e a r s a s f o l l o w s : Technical Write up Stage # 1 Bucket Kit- General Electric, USA- G.E.Fr.6 Gas Turbine G.E.Fr.6 (ms6001B) Gas Turbine is 3 Stage turbine having set of Nozzle, Bucket and Shroud in each stage. Bucket set is assembled on turbine rotor in inverted fur- tree slots provided on rotor. Stage # 2 Bucket Kit consists of 92 buckets which when assembled on the rotor forms a series like wheel. The basic function of Buckets is to convert the heat energy of hot flue gases in to mechanical energy and thereby driving the coupled generator, which generates the POWER. Stage # 3 Due to high working temperature of around 800' C and high speed of the turbine (5100 RPM), this component is the most critical in the turbine and failure of this component may lead to catastrophic damage to the machine. The buckets are designed with special profile of airfoil cross section for efficient energy conversion. It is manufactured using precision investment casing process using GTD-1 11 material, which is General Electric. USA proprietary material. To overcome very high operating temperature, Buckets are coated with proprietary Thermal Barrier Coating (TBC)-GT FN33 and designed with cooling provision. Because of the above specialties, buckets are designed and manufactured as per General Electric, USA proprietary material and process under very stringent quality control and tests. For a power generating company, these spares are in the nature of consumables spares only notwithstanding its high cost. It is also to be submitted that the Original Equipment Manufacturer which in the case of the assessee company is BHEL / General Electric, USA have very categorically prescribed the operating life of the above bucket which helps to ensure trouble free operation and to avoid any catastrophic damage to the machine. Further it is also to be stated that by replacement of the buckets on completion of 48000 hours of continuous operation the power generation capacity is neither ITA Nos.1770/Ahd/2012 & Ors. (Gujarat Industrial Power Co. Ltd. ) - 7 - increased nor is the power plant efficiency or life of the plant gets increased. The cost of the Gas Turbine parts such as Buckets and Nozzles are high primary due to very special metallurgy and manufacturing process provided by the manufacturer viz. General Electric. USA. The landed cost to the assessee company also increases as the same is required to be imported and thus attracts custom duty, air freight, insurance etc. T h e d e t a i l s o f s p a r e s c o n s u m e d a t r e g u l a r i n t e r v a l s f o r v a r i o u s A s s t . y e a r s i s a s u n d e r : A s s t Y e a r I t e m D e s c r i p t i o n A m o u n t ( R s. ) 2 0 0 3 - 0 4 S t a g e - 1 B u c k e t K i t , F r a m e - V I 3 , 96 , 9 2 , 5 5 7 P N o . 3 1 4 B 7 1 6 2 G 0 1 5 2 0 0 4 - 0 5 S t a g e - 1 B u c k e t K i t a l o n g w i t h s e t o f h a r d w a r e f o r G a s T u r b i n e 3 , 1 1 , 3 8 , 0 0 1 S t a g e - 1 B u c k e t K i t - C u t t e r t o o t h a l o n g w i t h s e t o f h a r d w a r e f o r G a s T u r b i n e s p a r e 2 , 3 0 , 6 1 , 2 9 2 S t a g e - 2 N o z z l e K i t w i t h i n t e r - s t a g e R u s h S e a l s f o r F R - 9 G a s T u r b i n e 9 , 7 9 , 2 0 , 7 88 S t a g e - 2 B u c k e t K i t , C u t t e r t e e t h D e s i g n F o r F R - 9 G a s T u r b i n e 6 , 8 8 , 2 0 , 9 4 3 2 0 0 5 - 0 6 S t a g e - 1 B u c k e t K i t a l o n g w i t h s e t o f h a r d w a r e f o r G a s T u r b i n e 3 , 3 5 , 4 4 , 3 0 5 S t a g e - 1 B u c k e t K i t - C u t t e r t o o t h a l o n g w i t h s e t o f h a r d w a r e f o r G a s T u r b i n e s p a r e 2 , 3 0 , 6 1 , 2 9 2 2 0 0 6 - 0 7 C o m p r e s s o r R o t o r B l a d e G T F r . 6 1 ,6 3 , 2 6 , 1 2 6 C o m p r e s s o r S t a t o r B l a d e G T F r . 6 2 , 1 9 , 6 5 , 9 6 1 E n t r A r m ( E x c i t o r ) 6 7 , 6 9 , 3 5 8 2 0 0 7 - 0 8 S t a g e - 1 N o z z l e A r r a n g e m e n t f o r G T F R - 6 1 , 06 , 0 1 , 6 7 7 S t a g e - 1 B u c k e t K i t f o r G T F R – 6 3 , 2 5 , 6 8 , 4 5 6 2 0 0 8 - 0 9 S t a g e - 1 N o z z l e - F r - 6 G a s T u r b i n e 3 , 0 7 , 1 0 , 0 0 0 S t a g e - 2 B u c k e t f o r G T F R – 6 2 , 3 0 , 2 1 , 0 0 0 1 4 . 1 . T h e s e c o n d f o l d o f a r g u m e n t o f t h e L d . C o u n s el f o r t h e a s s e s s e e i s t h a t t he spares consumed during the year under the consideration does not give enduring benefit to the assessee nor it increases the life or capacity of the machines and therefore are in nature of current repairs allowable as revenue expenditure. The assessee being in the business of generation and distribution of power requires specialized machines for ITA Nos.1770/Ahd/2012 & Ors. (Gujarat Industrial Power Co. Ltd. ) - 8 - generating power. Some of the parts of the machines require replacement from time to time on being used for fixed number of hours. The number of hours after which the machines are to be replaced are prescribed by the original equipment manufacturer (OEM). As soon as the machines complete the prescribed number of firing hours, the same are replaced. T h u s t he replacement is of parts of machines and not the entire machinery. The classification of spares in the books is not relevant for determining taxability of such items as per Income Tax Act. Fu r t h e r t he consumption of spares is 0.50% of the net block of plant and machinery as on 31.03.2005. Every year such expenditure is required to be incurred with regularity considering the nature of business. 1 4 . 2 . I n s u p p o r t o f t h i s c o n t e n t i o n t h e L d A R f u r t he r s u b m i t t e d t h a t t h i s i s s u e i s s q u a r e l y c o v e r e d b y t h e d e c i s i o n o f t h e c o - o r d i n a t e B e n c h e s o f I T A T , H y d e r a b a d i n t h e c a s e o f D C I T - V s - A P G a s P o w e r C o r p o r a t i o n L t d r e p o r t e d i n 2 0 1 4 [ I D 2] - G JX - 0 2 2 4 - T H Y D w h e r e i n a f t e r d e t a i l e d d i s c u s s i o n o f S u p r e m e Co u r t s a n d o t h e r J u d g e m e n t s h e l d a s f o l l o w s : “ ... ... 1 5 . W e h a v e h e a r d t h e s u b m i s s i o n s o f t h e p a r t ie s a n d p e r u s e d t h e o r d e r s o f t h e r e v e n u e a u t h o r i t i e s as w e l l a s o t h e r m a t e r i a l s p l a c e d o n r e c o r d . I t i s q u i t e e vi d e n t f r o m t h e f a c t s e m a n a t i n g f r o m r e c o r d t h a t t h e e x p e nd i t u r e i n c u r r e d o f R s . 2 0 , 2 1 , 4 6 , 2 7 8 / - w h i c h i s s u b j e c t m a t te r o f d i s a l l o w a n c e w a s t o w a r d s r e p a i r / r e p l a c e m e n t o f n o z zl e s , b u c k e t s , s h r o u d s , b e a r i n g s , p i e c e s a n d c o m b u s t i o n li n e r s w h i c h a r e p a r t s o f t h e t h r e e g a s t u r b i n e s u t i l i z e d f o r g e n e r a t i n g p o w e r . I t i s a l s o a f a c t t h a t t h e p o w e r g e n e r a t i o n p l a n t c o n s i s t s o f t w o s y s t e m s i . e . , g a s t u r b i n e s a n d g e n e r a t i n g u n i t . A s c a n b e n o t i c e d f r o m t h e p r oc e s s o f g e n e r a t i o n o f p o w e r a s d i s c u s s e d b y t h e C I T ( A ) i n hi s o r d e r , t h e r e i s n o i n t e r m e d i a t e p r o d u c t i n t h e g e n er a t i o n o f p o w e r . I t i s a l s o a f a c t o n r e c o r d t h a t t h e r e p l a c ed / r e p a i r e d p a r t s w e r e r e l a t i n g t o t h r e e g a s t u r b i n e s . A b o o k le t s u b m i t t e d b y t h e a s s e s s e e r e g a r d i n g o p e r a t i o n a n d m a i n t e n a n c e o f h e a v y d u t y g a s t u r b i n e c l e a r l y s h o w s t h a t a w e l l p l a n n e d m a i n t e n a n c e p r o g r a m m e i s r e q u i r e d f o r g e t t i n g t h e m a x i m um e q u i p m e n t a v a i l a b i l i t y a n d o p t i m i z a t i o n o f m a i n t e n a n c e c o s t s . T h e s a i d b o o k l et f u r t h e r s p e c i f i c a l l y n o t i f i e s t h e p a r t s w h i c h r e q u ir e c a r e f u l a t t e n t i o n a n d m a i n t e n a n c e a r e t h o s e a s s o c i a t e d w i t h t h e c o m b u s t i o n p r o c e s s t o g e t h e r w i t h t h o s e e x p o s e d t o th e h o t g a s e s d i s c h a r g e d f r o m t h e c o m b u s t i o n s y s t e m . T h i s in c l u d e c o m b u s t i o n l i n e r s , e n d c a p s , f u e l n o z z l e s a s s e m b l i es , c r o s s f i r e t u b e s , t r a n s i t i o n p i e c e s , t u r b i n e n o z z l e s , t u rb i n e s t a t i o n e r y s h r o u d s a n d t u r b i n e b u c k e t s . T h e s a i d b oo k l e t m e n t i o n s a b o u t p e r i o d i c i n s p e c t i o n a n d r e p a i r / r e f u r b i s h / r e p l a c e m e n t o f t h e a f o r e s a i d p a r t s o f t h e g a s t u r b i n e . I t a l s o m e n t i o n s t h a t w h e n t h e p a r t s ar e n o t r e p a i r a b l e , t h e y a r e t o b e r e p l a c e d . F r o m t h i s , i t i s v e r y ITA Nos.1770/Ahd/2012 & Ors. (Gujarat Industrial Power Co. Ltd. ) - 9 - m u c h c l e a r t h a t t h e e n t i r e g a s t u r b i n e s a r e n o t r e pl a c e d b u t s o m e o f i t s p a r t s a r e e i t h e r r e p a i r e d o r r e p l a ce d a s p e r t h e m a i n t e n a n c e r e q u i r e m e n t . I t i s t o b e n o t e d f r o m t h e d e t a i l e d d i s c u s s i o n m a d e b y t h e C I T ( A ) t h a t t h e a s se s s e e h a s s u b m i t t e d t h e d e t a i l s o f p e r i o d i c i n s p e c t i o n t o b e m a d e a s r e c o m m e n d e d b y t h e e q u i p m e n t m a n u f a c t u r e r . F u r t he r i t i s a f a c t t o b e t a k e n n o t e o f t h a t t h e a s s e s s e e h a s b e e n c l a i m i n g s u c h e x p e n d i t u r e t o w a r d s r e p l a c e m e n t o f n oz z l e , s h r o u d s , b u c k e t s e t c . , f r o m t h e F . Y . 1 9 9 8 - 9 9 a n d a ll a l o n g t h e d e p a r t m e n t h a s a l l o w e d s u c h e x p e n d i t u r e . T h i s fa c t h a s n o t b e e n c o n t r o v e r t e d b y t h e l e a r n e d D . R . I t i s a l so a f a c t t h a t o u t o f t h e t o t a l b l o c k o f t h e a s s e t s r e l a t i n g t o g a s t u r b i n e s o f R s . 5 1 7 c r o r e s , t h e r e p a i r a n d m a i n t e n a nc e t o t h e e x t e n t o f R s . 2 0 , 2 1 , 4 6 , 2 7 8 / - . T h e r e f o r e , c o n s i d er i n g t h e q u a n t u m o f e x p e n d i t u r e , i t c a n n o t b e s a i d t h a t t h e re i s r e p l a c e m e n t o f t h e e n t i r e g a s t u r b i n e s o a s t o b r i ng i n t o e x i s t e n c e a c o m p l e t e l y n e w a s s e t r e s u l t i n g i n e n d u ri n g b e n e f i t t o t h e a s s e s s e e . I t i s a f u r t h e r f a c t o n r ec o r d t h a t t h e a s s e s s e e ’ s c o n t e n t i o n t h a t t h e r e i s n o e n h a n c e me n t o f c a p a c i t y o f t h e g a s t u r b i n e s o r g e n e r a t i o n o f p o w e r a f t e r r e p l a c e m e n t / r e p a i r o f t h e p a r t o f t h e g a s t u r b i n e s r e m a i n s u n c o n t r o v e r t e d . T h e r e f o r e , i n t h e a f o r e s a i d c i r c u m s t a n c e s , i t c a n n ot b e s a i d t h a t t h e e x p e n d i t u r e i n c u r r e d b y t h e a s s e s s e e i n r e p a i r / r e p l a c e m e n t o f t h e p a r t s o f t h e g a s t u r b i n e , h a s r e s u l t e d i n b r i n g i n g i n t o e x i s t e n c e o f a n a s s e t o f e n d u r i n g b e n e f i t t o t h e a s s e s s e e s o a s t o t r e a t i t a s c a p i t al e x p e n d i t u r e . S o f a r a s t h e d e c i s i o n i n t h e c a s e o f C I T V/ s . S a r a v a n a S p i n n i n g M i l l s ( s u p r a ) i s c o n c e r n e d , t h e CI T ( A ) h a s c l e a r l y b r o u g h t o u t t h e d i s t i n g u i s h i n g f e a t u r e s. I t i s t o b e n o t e d t h a t i n t h e c a s e o f C I T V/ s . S a r a v a n a S p i nn i n g M i l l s , t h e r e i s a c l e a r o b s e r v a t i o n o f t h e H o n ’ b l e S u p r e m e C o u r t t h a t t h e T e x t i l e P l a n t c o n s i s t s o f d i f f e r e n t d e p a r t m e n t s h a v i n g i t s o w n i n d e p e n d e n t p l a n t s a n d m a c h i n e r y w h i c h p r o d u c e d i f f e r e n t i n t e r m e d i a t e p r o du c t s . H o w e v e r , i n t h e c a s e o f t h e a s s e s s e e t h e r e i s n o s uc h i n t e r m e d i a t e p r o d u c t s w h i c h r e q u i r e s i n d e p e n d e n t a nd s e p a r a t e p l a n t s a n d m a c h i n e r y . O n t h e c o n t r a r y , w h at t h e a s s e s s e e h a s r e p l a c e d i s c e r t a i n p a r t s o f t h e g a s tu r b i n e s a n d t h e g a s t u r b i n e s a s a w h o l e h a v e n o t b e e n r e p l ac e d . T h e r e f o r e , i n t h i s c o n t e x t t h e o b s e r v a t i o n m a d e b y t h e H o n ’ b l e S u p r e m e C o u r t i n t h e c a s e o f C I T V/ s . S a r a va n a S p i n n i n g M i l l s r a t h e r f a v o u r s t h e a s s e s s e e . B e c a u s e t h e H o n ’ b l e S u p r e m e c o u r t i n t h e s a i d d e c i s i o n h a s h e l d t h a t w h e n c e r t a i n p a r t s o f a a i r c o n d i t i o n e r o r a T . V. is r e p l a c e d , i t d o e s n o t a m o u n t t o r e p l a c e m e n t o f e n t ir e u n i t . T h e r e f o r e , a p p l y i n g t h e s a m e l o g i c t o t h e f a c t s o f t h e a s s e s s e e ’ s c a s e , i t c a n b e s a i d t h a t t h e r e i s n o r ep l a c e m e n t ITA Nos.1770/Ahd/2012 & Ors. (Gujarat Industrial Power Co. Ltd. ) - 10 - o f t h e g a s t u r b i n e a s a w h o l e b u t c e r t a i n r e p a i r a nd r e p l a c e m e n t t o s o m e o f t h e p a r t s o f t h e g a s t u r b i n e, w h i c h d o e s n o t r e s u l t i n b r i n g i n g i n t o e x i s t e n c e a n e w a ss e t o f e n d u r i n g n a t u r e , r a t h e r , t h e r e p a i r a n d m a i n t e n a n c e a r e o f r e c u r r i n g n a t u r e a n d e s s e n t i a l l y r e q u i r e d f o r s m o o th r u n n i n g o f b u s i n e s s o f t h e a s s e s s e e i . e , g e n e r a t i o n o f p o w e r . T h e o t h e r d e c i s i o n o f t h e H o n ’ b l e S u p r e m e C ou r t r e l i e d u p o n b y t h e l e a r n e d D . R . i n t h e c a s e o f C I T V/ s . S r i M a n g a y a r k a r a s i M i l l s ( P ) L t d . 3 1 5 I T R 1 1 4 a l s o f o l lo w i n g t h e d e c i s i o n i n t h e c a s e o f C I T V/ s . S a r a v a n a S p i n ni n g M i l l s ( s u p r a ) , h a s l a i d d o w n t h e s a m e p r o p o s i t i o n of l a w . O n t h e o t h e r h a n d , t h e d e c i s i o n s r e l i e d u p o n b y t h e a s s e s s e e a s n o t e d i n t h e o r d e r o f t h e C I T ( A ) c l e a r ly s u p p o r t s t h e v i e w t h a t t h e e x p e n d i t u r e i n c u r r e d b y t h e a s s e s s e e c a n n o t b e t r e a t e d a s c a p i t a l e x p e n d i t u r e . I n t h e a f o r e s a i d v i e w o f t h e m a t t e r , w e d o n o t f i n d a n y r ea s o n t o i n t e r f e r e w i t h t h e f i n d i n g s o f t h e C I T ( A ) i n t h i s re g a r d . W e t h e r e f o r e , c o n f i r m t h e o r d e r o f t h e C I T ( A ) a n d d i r ec t t h e A s s e s s i n g O f f i c e r t o d e l e t e t h e a d d i t i o n m a d e o n a cc o u n t o f d i s a l l o w a n c e o f e x p e n d i t u r e t o t h e t u n e o f R s . 2 0 , 2 1 , 4 6 , 2 7 8 / - . 1 4 . 3 . P e r c o n t r a t h e L d D R a p p e a r i n g f o r t h e R e v e n ue c o u l d n o t b r i n g a n y c o n t r a r y v i e w o n t h e a b o v e p r e p o s i t i o n b ut h o w e v e r c o n t e n t e d t h a t w h e n t h e a s s e s s e e i t s e l f c l a i m e d t h e a b o v e e x p e n s e s i n i t s b o o k s o f a c c o u n t a s “ C a p i t a l ” n o w c a n n o t c l ai m t h e s a m e a s “ R e v e n u e ” a n d r e l i e d u p o n t h e o r d e r p a s s e d b y t h e As s e s s i n g O f f i c e r a n d p r a y e d f o r c o n f i r m i n g t h e a d d i t i o n s i n ce i t i s r e c u r r i n g i n n a t u r e . 1 5 . We h a v e g i v e n o u r t h o u g h t f u l c o n s i d e r a t i o n o n th e m a t e r i a l s p l a c e d b e f o r e u s n a m e l y T e c h n i c a l Wr i t e U p , D e t a i l s o f s p a r e s c o n s u m e d a t r e g u l a r i n t e r v a l s f o r v a r i o u s A s s t . y e ar s a n d t h e c a s e l a w s r e l i e d b y t h e a s s e s s e e . We n e e d n o t l a b o u r o u rs e l f i n c o m i n g t o a c o n c l u s i o n t h a t t h e R e p l a c e m e n t o f p a r t s i n m ac h i n e r i e s t r e a t e d a s N o t C a p i t a l b u t “ R e v e n u e ” i n n a t u r e f o r t h e f o l l o w i n g r e a s o n s : a . F o r a p o w e r g e n e r a t i n g c o m p a n y , t h e s e b u c k e t sp a r e s a r e i n t h e n a t u r e o f c o n s u m a b l e s s p a r e s o n l y n o t w i t h s t a n d in g i t s h i g h c o s t . b . T h e b u c k e t s a r e d e s i g n e d w i t h s p e c i a l p r o f i l e o f a i r f o i l c r o s s s e c t i o n f o r e f f i c i e n t e n e r g y c o n v e r s i o n . c . D u e t o h i g h w o r k i n g t e m p e r a t u r e o f a r o u n d 8 0 0 ' C a n d h i g h s p e e d o f t h e t u r b i n e ( 5 1 0 0 R P M ) , t h i s c o m p o n e n t i s t h e m o s t c r i t i c a l i n t h e t u r b i n e a n d f a i l u r e o f t h i s c o m p o n en t m a y l e a d t o c a t a s t r o p h i c d a m a g e t o t h e m a c h i n e . ITA Nos.1770/Ahd/2012 & Ors. (Gujarat Industrial Power Co. Ltd. ) - 11 - d . I t i s a l s o s e e n f r o m t h e O r i g i n a l E q u i p m e n t M a n uf a c t u r e r n a m e l y B H E L / G e n e r a l E l e c t r i c , U S A h a v e v e r y c a t e g o ri c a l l y p r e s c r i b e d t h e o p e r a t i n g l i f e o f t h e a b o v e b u c k e t wh i c h h e l p s t o e n s u r e t r o u b l e f r e e o p e r a t i o n a n d t o a v o i d a n y c a t as t r o p h i c d a m a g e t o t h e m a c h i n e . e . F u r t h e r i t i s a l s o s t a t e d t h a t b y r e p l a c e m e n t of t h e b u c k e t s o n c o m p l e t i o n o f 4 8 0 0 0 h o u r s o f c o n t i n u o u s o p e r a t i o n th e p o w e r g e n e r a t i o n c a p a c i t y i s n e i t h e r i n c r e a s e d n o r i s t h e p o w e r p l a n t e f f i c i e n c y o r l i f e o f t h e p l a n t g e t s i n c r e a s e d . f . T h e c o s t o f t h e G a s T u r b i n e p a r t s s u c h a s B u c k et s a n d N o z z l e s a r e h i g h p r i m a r y d u e t o v e r y s p e c i a l m e t a l l u r g y a n d m a n u f a c t u r i n g p r o c e s s p r o v i d e d b y t h e m a n u f a c t u r e r o u t s i d e I n d i a a n d t h e a s s e s s e e c o m p a n y p r o c u r e s t h e s a m e b y i m p o r t a n d t h u s a t t r a c t s c u s t o m d u t y , a i r f r e i g h t , i n s u r a n c e et c . g . F u r t h e r t h e r e p l a c e m e n t o f p a r t s i s C a p i t a l o r Re v e n u e i s N o m o r e R e s i n t e g r a b a s e d o n t h e o b s e r v a t i o n m a d e b y th e H o n ’ b l e S u p r e m e C o u r t i n t h e c a s e o f C I T V / s . S a r a v a n a S p i nn i n g M i l l s a n d C I T V / s . S r i M a n g a y a r k a r a s i M i l l s (P ) L t d . 3 1 5 I T R 1 1 4 w h e r e i n h e l d t h a t w h e n c e r t a i n p a r t s o f a n a i r - c o n di t i o n e r o r a T . V . i s r e p l a c e d , i t d o e s n o t a m o u n t t o r e p l a c e m e n t o f e n t i r e u n i t . h . T h u s t h i s i s s u e i s a l r e a d y d e a l t b y t h e c o - o r d in a t e B e n c h e s o f I T A T , H y d e r a b a d i n t h e c a s e o f D C I T - V s - A P G a s P o we r C o r p o r a t i o n L t d w h e r e i n a f t e r d e t a i l e d d i s c u s s i o n he l d t h a t e x p e n d i t u r e i n c u r r e d b y t h e a s s e s s e e c a n n o t b e t r e at e d a s c a p i t a l e x p e n d i t u r e b u t R e v e n u e e x p e n d i t u r e o n l y . i . T h u s , a p p l y i n g t h e s a m e l o g i c t o t h e f a c t s o f t he a s s e s s e e ’ s c a s e , i t c a n b e s a i d t h a t t h e r e i s n o r e p l a c e m e n t o f t h e g a s t u r b i n e a s a w h o l e b u t c e r t a i n r e p a i r a n d r e p l a c e m e n t t o s o m e o f t h e p a r t s o f t h e g a s t u r b i n e , w h i c h d o e s n o t r e s u l t i n b r i n g i n g i n t o e x i s t e n c e a n e w a s s e t o f e n d u r i n g n a t u r e , r a t h e r , t h e r e p a i r a nd m a i n t e n a n c e a r e o f r e c u r r i n g n a t u r e a n d e s s e n t i a l l y r e q u i r e d f or s m o o t h r u n n i n g o f b u s i n e s s o f t h e a s s e s s e e i . e , g e n e r a t i o n o f p o w e r . j . T h e r e f o r e w e h a v e n o h e s i t a t i o n i n h o l d i n g t h a t t h e r e p l a c e m e n t o f s p a r e s i n t h e m a c h i n e r i e s w o u l d b e a l l o w a b l e a s R e v e n u e e x p e n d i t u r e o n l y a n d a d d i t i o n m a d e b y t h e A O i s d i re c t e d t o b e d e l e t e d . T h u s t h e D e p a r t m e n t g r o u n d i s r e j e c t e d . 2 0 . I s s u e N o . 3 r e l a t e s t o d i s a l l o w a n c e u n d e r S e c t i on 1 4 A o f t h e A c t . T h e L d C o u n s e l f o r t h e a s s e s s e e s u b m i t t e d t h a t t h e a s s e s s e e d i s c l o s e d t a x f r e e i n c o m e o f R s . 6 5 , 3 6 , 0 7 0 / - , c o m p r is i n g o f d i v i d e n d i n c o m e a n d i n t e r e s t o n t a x f r e e b o n d . H o we v e r t h e r e w e r e n o a d m i n i s t r a t i v e e x p e n s e s w e r e i n c u r r e d s i n c e t h e t a x f r e e i n c o m e w a s e s s e n t i a l l y p a s s i v e i n c o m e r e q u i r i n g n o e f f o r t s o n t h e p a r t o f t h e a s s e s s e e . T h e n e x t p a r t n a m e l y o f f i n a nc i a l e x p e n s e s ITA Nos.1770/Ahd/2012 & Ors. (Gujarat Industrial Power Co. Ltd. ) - 12 - a r e c o n c e r n e d t h e a s s e s s e e s u b m i t t e d i t h a d n o t m a de a n y i n v e s t m e n t s d u r i n g t h e y e a r i n t h e a s s e t s y i e l d i n g t h e t a x f r e e i n c o m e . T h e a d h o c d i s a l l o w a n c e o f 1 0 % o n t h e e x e mp t i n c o m e u n d e r S . 1 4 A o f t h e A c t m a d e b y t h e A O i s a g a i n s t l aw a n d t h e C I T [ A] i s a l s o n o t c o r r e c t i n d i r e c t i n g t o a d o p t R ul e 8 D , s i n c e t h e a s s e s s m e n t y e a r s a r e p r i o r t o t h e i n t r o d u c t i o n R u l e 8 D . I n t h e a b s e n c e o f a n y a d m i n i s t r a t i v e e x p e n s e s a n d n o b a r r ow e d f u n d s f o r s u c h i n v e s t m e n t s , t h e q u e s t i o n o f d i s a l l o w a n c e u / s .1 4 A i s u n w a r r e n t e d . 2 1 . P e r c o n t r a t h e L d D R a p p e a r i n g f o r t h e R e v e n u e a c c e p t e d t h a t m a n y r u l i n g s b y v a r i o u s C o u r t o n t h i s i s s u e a n d h o we v e r s u p p o r t e d t h e o r d e r s o f t h e l o w e r a u t h o r i t i e s . 2 2 . We h a v e g i v e n o u r t h o u g h t f u l c o n s i d e r a t i o n o n th e m a t e r i a l s p l a c e d b e f o r e u s , t h e i s s u e i s n o w s e t t l e d b y t h e Ho n ’ b l e S u p r e m e C o u r t i n t h e c a s e o f M a x o p p I n v e s t m e n t L t d . - V s - C om m i s s i o n e r o f I n c o m e T a x , N e w D e l h i r e p o r t e d i n [ 2 0 1 8] 9 1 t a x m a n n. c o m 1 5 4 ( S C ) w h e r e i n i t c l e a r l y h e l d t h a t R u l e 8 D i s p r o s p ec t i v e i n n a t u r e a n d c o u l d n o t h a v e b e e n m a d e a p p l i c a b l e i n r e s p e c t o f a s s e s s m e n t y e a r s p r i o r t o 2 0 0 7 w h e n t h i s r u l e w a s i n s e r t e d w . e. f . M a r c h 2 4 , 2 0 0 8 v i d e I n c o m e T a x ( F i f t h A m e n d m e n t ) R u l e s , 2 0 0 8 . F u r t h e r j u r i s d i c t i o n a l H i g h C o u r t i n t h e c a s e o f P r i n c i p a l C o m m i s s i o n e r o f I n c o m e - t a x - 4 - V s - S i n t e x I n d u s t r i e s L t d . r e p o r t e d [ 2 0 1 7] 8 2 t a x m a n n . c o m 1 7 1 ( G u j a r a t ) w h e r e i n i t i s c l e a r l y h e ld t h a t t h e E x p e n d i t u r e i n c u r r e d i n r e l a t i o n t o i n c o m e n o t i n c lu d i b l e i n t o t a l i n c o m e ( A d m i n i s t r a t i v e e x p e n s e s ) - Wh e t h e r w h e r e a ss e s s e e a l r e a d y h a d i t s o w n s u r p l u s f u n d a g a i n s t w h i c h m i n or i n v e s t m e n t w a s m a d e , n o q u e s t i o n o f m a k i n g a n y d i s a l l o w a n c e o f e x p e n d i t u r e i n r e s p e c t o f i n t e r e s t a n d a d m i n i s t r a t i v e e x p e n s e s u n d e r s e c t i o n 1 4 A a r o s e a n d , t h e r e f o r e , t h e r e w a s n o q u e s t i o n o f a n y e s t i m a t i o n o f e x p e n d i t u r e i n r e s p e c t o f i n t e r e s t a n d a d m i n i s t ra t i v e e x p e n s e s u n d e r r u l e 8 D . F u r t h e r t h e H o n ’ b l e C o u r t r e f e r r e d th e a n o t h e r d e c i s i o n i n t h e c a s e o f Pr. CIT v. India Gelatine & Chemicals Ltd. [2015] 376 ITR 553/[2016] 66 taxmann.com 356 wherein i t i s o b s e r v e d t h a t w h e n t h e a s s e s s e e h a d s u f f i c i e n t i n t e r e s t - f r e e f u n d s o u t o f w h i c h c o n c e r n e d i n v e s t m e n t s h a d b e e n m a d e , d i s a l l o w a n c e un d e r S e c t i o n 1 4 A i s n o t j u s t i f i e d . T h u s w e c l e a r i n o u r m i n d t h e d i r e c t i o n g i v e n b y t h e L d C I T [ A] t o a p p l y R u l e 8 D i s n o t p r o p e r a n d t h e r e b e i n g t h e s u r p l u s f u n d s w e r e i n v e s t e d b y t h e a s s e s s e e a n d t h e r e w e r e n o a d m i n i s t r a t i v e e x p e n s e s , t h e d i s a l l o w a n c e m a d e u / s .1 4 A i s u n w a r r a n t e d a n d l i a b l e t o b e d e l e t e d . T h u s t h e C r os s O b j e c t i o n f i l e d b y t h e a s s e s s e e i s a l l o w e d b y d e l e t i n g t h e a dd i t i o n m a d e u / s . 1 4 A o f t h e A c t . 2 3 . I s s u e N o . 4 r e l a t e s t o d e p r e c i a t i o n o n b u i l d i n g u s e d f o r M a n a g i n g D i r e c t o r ’ s r e s i d e n c e. L d A R s u b m i t t e d t h a t a s p e r t h e d e p r e c i a t i o n c h a r t i n t h e t a x a u d i t r e p o r t , a n a d d it i o n o f R s . 8 7 , 2 7 , 7 5 0 / - o n a c c o u n t o f G I P C L H o u s e u n d e r t h e h e a d f a c t o r y b u i l d i n g . T h e a s s e s s e e c l a i m e d M D ’ s h o u s e i s r e s i d en c e - c u m - ITA Nos.1770/Ahd/2012 & Ors. (Gujarat Industrial Power Co. Ltd. ) - 13 - o f f i c e b u i l d i n g i s u s e d f o r t h e p u r p o s e o f r e s i d e n ce / o f f i c e o f t h e M a n a g i n g D i r e c t o r a n d h e d i s c h a r g e s h i s o f f i c i a l d ut i e s 3 6 5 d a y s f o r o f f i c i a l m e e t i n g s , t h e r e f o r e t h e r a t e o f d e p r e ci a t i o n o f 1 0 % i s c l a i m e d b y t h e a s s e s s e e . P e r C o n t r a t h e L d D R r e l i ed o n t h e o r d e r s o f t h e L o w e r A u t h o r i t i e s . 2 4 . We h a v e g i v e n o u r t h o u g h t f u l c o n s i d e r a t i o n o n th e m a t e r i a l s p l a c e d b e f o r e u s , a s t h e b u i l d i n g i s u s e d f o r o f f i ci a l - c u m - r e s i d e n t i a l p u r p o s e b y t h e M a n a g i n g D i r e c t o r , w i t h a l l o f f i c e f a c i l i t i e s w e f i n d t h a t 1 0 % d e p r e c i a t i o n c a n b e g r an t e d o n t h i s B u i l d i n g a n d d i r e c t t h e A O t o a l l o w t h e s a m e . A c c o rd i n g l y t h e C O f i l e d o n t h i s g r o u n d i s a l l o w e d . 2 5 . I s s u e N o . 5 r e l a t e s t o d i s a l l o w a n c e o f c o n t r i b u t i o n m a d e t o v a r i o u s o r g a n i z a t i o n s : T h e a s s e s s e e c l a i m e d p a y m e n t o f R s . 2 , 0 0 , 0 0 0 / = t o S V A D E S , R s . 9 5 , 6 5 , 5 5 9 / = t o D E E P a n d R s . 1 5 , 3 6 , 5 0 0 / = t o v a r i o u s N G O s t h e s a m e w e r e d i s a l lo w e d b y t h e A O . B u t t h e L d C I T [ A] g r a n t e d r e l i e f i n c a s e s w e r e t h e a s s e s s e e h a s s u b m i t t e d C e r t i f i c a t e o f R e g i s t r a t i o n o f 8 0 G i n r e s p e c t o f p a y m e n t s m a d e t o S V A D E S a n d D E E P a n d b a l a n c e a m o u n t w a s c o n f i r m e d . 2 6 . I n o u r c o n s i d e r e d v i e w t h e C I T [ A] h a s g r a n t e d ap p r o p r i a t e r e l i e f t o t h e a s s e s s e e , w h i c h d o e s n o t r e q u i r e a n y f u r t h e r i n f e r e n c e . A c c o r d i n g l y t h e C O f i l e d o n t h i s g r o u n d i s d i s m i s s e d . 2 7 . I s s u e N o . 6 r e l a t e s t o c l a i m o f d i s a l l o w a n c e u n d e r S. 4 3 B o f t h e A c t. T h e l e a r n e d C I T ( A ) b y h i s d e t a i l e d o r d e r h a s h e l d t h a t t h e A O w a s c o r r e c t i n n o t a l l o w i n g t h e d e d u c t i o n o f i n te r e s t a m o u n t i n g t o R s . 2 , 4 9 , 8 2 , 5 9 7 / - . H o w e v e r , t h e A O i s d i r e c t e d t o a l l o w t h i s a s a d e d u c t i o n i n A Y 2 0 0 8 - 0 9 . S i m i l a r l y, t h e i n t e r e s t p a y m e n t d i s a l l o w e d i n t h e e a r l i e r y e a r , w h i c h w a s ac t u a l l y p a i d i n t h e P Y c o r r e s p o n d i n g t o A Y 2 0 0 7 - 0 8 s h o u l d b e a l l o w ed a s d e d u c t i n g i n t h i s y e a r . 2 8 . I n o u r c o n s i d e r e d v i e w t h e C I T [ A] h a s g r a n t e d ap p r o p r i a t e r e l i e f t o t h e a s s e s s e e , w h i c h d o e s n o t r e q u i r e a n y f u r t h e r i n f e r e n c e . A c c o r d i n g l y t h e C O f i l e d o n t h i s g r o u n d i s d i s m i s s e d . ” 8. Thus, the above five issues [though differently nu mbe red] are covered by as sessee’s own case which is admitted by both the parties. Now we proceed with the re maining five issues. 9. Disallowance of Corporate Debt Restructuring Expenses, this expenses were incurred by the assessee towards resettling ITA Nos.1770/Ahd/2012 & Ors. (Gujarat Industrial Power Co. Ltd. ) - 14 - of interest rate a nd for restructuring debt. The assessee also paid fees to consult in respect of restructuring. The assessing officer disallowed the restructuring expenses on the ground the assessee has derailed benefit of enduring in nature which is not revenue expenditure. The assessee submitted on negotiation of interest rate and ter m loans fro m I DBI Bank and restructured its debts payment schedule. As a result of restructuring activity no asset co mes into existence nor it leads to i mprove ment of efficienc y or productivity of an y existing assets. There is no increase in capital, production capacity re mains the sa me . Thus the assessee relied upon Supreme Court judgement in the case of India cements Ltd’s 60 ITR 52, CIT versus GSF C 358 ITR 323 Gujarat, and other decisions on si milar lines and clai med that the AO is not correct in making the disallowance. 10. We have given our thoughtful consideration and perused the material available on record. This issue is been settled by the judgement of the honourable Supre me Court in the case of India ce ments Ltd wearing it is held that loan is not an asset or a advantage of enduring nature and expenditure incurred in connection with obtaining loan is not capital expenditure. Further in the case of Co mpton engineering Co Ltd 242 ITR 317 honourable Madras High Court held that professional fee paid to manage ment consultant for comprehensive restructuring of business could not be treated as capital expenditure, since the report was not for the purpose of any new business, but for efficient carr ying on of existing business. Further it is a fact that out of Rs.17.3 crore of total resetting pre mium paid, as recover y was mad e fro m the assessee to the extent of Rs.14.62 ITA Nos.1770/Ahd/2012 & Ors. (Gujarat Industrial Power Co. Ltd. ) - 15 - crores in the financial year 2004-05 onwards and credited to sales account. This also shows that resetting premiu m paid was on revenue account. This the assessing officer contention that by incurring expenses in question, the assessee derailed benefit of enduring nature is not tenable in view of the decis ion of the hon’ble Supre me Court in the case of India ce ments Ltd., thus addition made b y the assessing officer is hereb y d eleted and expenditure is to be treated only R evenue in nature. Thus issue no. vi is allowed in favour of the assessee. 11. Additions under section 115 JB on account of TDS on this delayed pa yment charges. The a ssessee charged interest to Gujarat Electricity Board [ GEB ] on account of delayed payments for the period 1-4-2003 to 31-3-2004 a sum of rupees 78.09 crores. The matter was ref err ed to high-power co mmittee by GEB. On 11- 06-2004, after finalisation of accounts. The TDS Certificate re ceived from GEB wherein GEB deducted TDS to the tune of Rs.16.01 crores on late payment ch arges of Rs.78.09 crores, the assessee offered this Rs.16.01 crore actually rec eived and no change ma de in 115 JB profits as the accounts where alread y finalised. Therefore roof revise return filed on 31-03-2006 offering entire a mount of Rs. 78.09 crores to tax under normal solutions leaving the book profit under section 115 JB unchanged, where the assessing officer added this 78.09 crores in the book profit under section 115 JB. 12. The ld CIT[A] deleted the addition by passing a detailed speaking order wh ich is as follows: ITA Nos.1770/Ahd/2012 & Ors. (Gujarat Industrial Power Co. Ltd. ) - 16 - “1 3. 2 I ha ve c on s ide re d fa ct s of th e ca se a nd a pp ell ant 's su bm is sio ns . I n br ief , f ac ts of th e m att er ar e t ha t er st wh ile GE B (n ow G UV N L ) cr ea te d pr ov isi on of i nt er es t to wa rd s del ay ed pa ym en t c ha rge s (DP C ) of R s.7 8. 1 c ro re in fa v ou r of ap pel la nt o n 31 .3 . 20 04, on w hi ch t a x of R s.1 6. 01 c ro r e wa s ded uc te d a t s o urc e an d d ep os ite d to th e c red it of Gov er n me nt. On b ei ng i nfo r me d ab ou t thi s in Jun e, 2 00 4, a pp e llant inc lu de d t he t ax d edu ct ed at s ou rc e of R s. 16 .0 1 cr or e as i ts inc om e un der n or ma l p ro vi si on s o f t he A ct a nd fil ed ret ur n of i nc o me a cc or di ng ly. A ppe ll an t d id n ot in clu de suc h am ou nt of Rs . 16. 01 cr or e i n i ts bo ok pr ofi ts u/ s. 11 5JB . On get ti ng on ly p ro po rti on at e c re dit of t ax at so urce i.e . Rs. 3. 28 c ro re u/ s. 14 3 (1 ), a pp el la nt re vi se d i ts retu r n o f inc om e fo r A.Y . 20 0 4-0 5 on 3 1. 3. 20 06 t o i nc lu de en tire a m ou nt of R s. 78. 1 c ro re, bei ng del ay ed p ay me nt c ha rge rec ei vab le fro m G EB as i ts in c om e un de r th e n or ma l pr ov is io ns o f A ct. I n the rev is ed r et ur n f ile d, a pp el la nt d id not inc lu de t he del aye d pay me nt ch ar ge s of Rs. 78 .1 c ro re or f or t ha t m att er eve n TDS of R s. 16 .0 1 c ro re i n th e b oo k p ro fi t u / s.1 15 JB on th e p le a tha t its a cc ou nt s we re pre pa re d in a cc or da nce wit h Pa rt I I and Pa rt I II t o S che du l e VI o f t he Co mp a nie s' Ac t & a ccou n tin g sta nd ar ds ap pl ica b le t her e u nd er a nd net p ro fi t sh ow n i n th e pr ofi t a nd lo ss ac c ou nt c ou ld be al te red o nly fo r pre sc rib ed ite ms o f ad ju st me n ts s pec if ie d in t ha t sec ti on . Re li anc e was pla ce d o n d ec is io n in t he ca se of Ap oll o T yr es Lt d. vs . CI T 25 5 I TR 2 73 (SC ) in t hi s reg ar d. Dec is io n in th e c ase o f Ap oll o Ty re s (s up r a ) wa s in t he c on t ext o f sec ti on 1 15 J an d not se cti on 11 5J B. In t he c as e of Su mer Bu il de rs P vt . Lt d. (20 12 ) 1 9 t ax ma n. co m 4 3 (Mu mb ai ), di sti nc ti on wa s dra wn bet we en pr ovi si on s of se ct io n 11 5J an d pr ov is io ns 'of s e cti on 11 5JB an d it w as hel d th at u/ s.1 15 J B, A O ha s p ow er s to g o beh in d ac co un ts o f a com pa ny a nd s ee as to w he th er sa me hav e be en p re pa re d in ac co rd an ce w i th re qu ir em en ts o f Pa rt II an d Pa rt I II of Sch ed ul e VI o f t he C om pa ni es ' Act , 1 95 6. Rel ev an t po rti on o f th e de cis io n is a s un der :- " Whe n o ne c om pa r e th e pr ov is io ns o f sec tio n 1 15 J as t o th e req ui re me nt of t he pre pa ra ti on of a cc o unt s, it c an be se en th at ori gi na ll y th e r eq uir em en t wa s on ly li mi te d th at acc ou nts sh all be p re pa red i n a cco rd a nce w ith the pr ov is io ns of P art II an d Pa rt II I of Sc h edu le V I of t he C o mp an ies A ct , 19 56 . Bu t thi s re qu ir em en t h as b ee n en la rge d un der sec ti on 1 15 J B. A s per th e 1 st pr ov is o the re qu ir em en t i s t hat w hi le pre pa ri ng the acc ou nt s it sh ou ld be en su re d th at Acc ou nt in g Pol icie s a nd Acc ou nt in g St an da r d etc ., a do pt ed f or pre pa ri ng t he a cc o unt s sh all be t he sa me as p er t he acc ou nt s la id d o wn b efor e the ITA Nos.1770/Ahd/2012 & Ors. (Gujarat Industrial Power Co. Ltd. ) - 17 - co mp any i n i ts an nu al ge ner al m eet i ng. A s p er th e se con d pr ovi so it ha s b ee n pr ovi de d t ha t i f t h e co mp an y h as ad o pte d the f in an ci al ye ar wh ich i s di ff er en t fro m th e pr evio us yea r, the n it sh ou ld b e e ns ure d t hat wh il e ad opt in g s uc h ac c ou nts sa me A cc ou nti ng Pol ic ie s an d A cc o unt in g S ta nd ar d etc. a re fol lo we d. Th us , t he Act h as rec og ni ze d tha t t he re may be c ase s wh ere f in anc ia l y ea r o f t he co mp an y m ay be di ffe re nt fr o m t he pre vi ou s y ea r a nd i f th e f in an cia l a cc o unt s a re ad op te d i n the pre vi ou s y ea r t h en suc h acc ou nt s m us t h av e s i mil ar Acc ou nt in g Po lic ie s a nd A cc ou nt in g St an da rd et c. (Par a 9 ) No w, w ho i s g oi n g to c he ck t his a spe ct ? Ob vi ou sly , the Reg is tr ar of Co mp ani es is no t c on ce rne d wit h t he se as pec ts wh eth er acc ou nt s ad opt ed f or t he pr evi ou s ye ar a re s a me o r not b ec au se th e Re gis tr ar o f Co mp an i es at be st i s co nce rne d wh eth er t he a cco u nts a do pt ed a nd l aid b ef or e the a nnu al gen er al m ee ti ng a r e in ac co rd an ce w ith t he r eq ui re me n ts of Pa rt I I an d P ar t I II o f Sc he du le V I of t he C om pa ni es Act , 19 56. T he re fo re, i n vi ew of th es e e nl a rge d re qu ire me nt s, it is hel d t ha t A ss es si n g O ffi ce r h as p o we rs to go be hi n d t he acc ou nt s a nd s ee wh et he r s am e h ave be en p rep ar e d i n acc or da nc e wit h th e r eq ui re men ts o f Pa rt II an d Pa rt I II of Sch ed ul e VI of t he Co mp an ie s A ct , 19 56. (Pa ra 1 0 )" Fu rth er , S pec ia l Ben ch of I TA T i n th e ca se of Rai n Co mm od it ies L td . (20 10 ) 1 31 T TJ 5 14 (Hy d ) he ld th a t th e As ses si ng O ff ice r h as po we r to al te r n et pr of it fo r t he p ur po se of se ct io n 11 5J B in two s it uat io ns , fi r stl y if i t wa s di sc o ver ed by hi m th at p rof it an d lo ss a cc ou nt w as no t dr aw n up i n acc or da nc e wi th P art I I & P ar t II I of Sc he dul e VI to the Co mp an ie s' Ac t an d s ec on dl y i f acc ou nt in g po lic ie s & acc ou nt in g st an d ar ds we re i nc o rre ct ly a do pte d fo r pre pa ra ti on of p rof it an d l os s a cc ou nt la id be fo re t he a n nu al gen er al m ee ti ng. A ppe ll an t' s co nte nt i on th at f or t he pu rp ose of se ct io n 11 5J B, n o alt er at io n at all , u nde r any cir cu ms ta nc es is p erm it te d to th e ne t pr of it a rri ved at i n t he acc ou nt s p rep ar ed in ac co rd an ce w ith Pa rt s II & II I of Sch ed ul e VI o f the Co mp an ie s Act i s t her ef or e no t te na bl e. As dis cu ss ed he nc ef or t h, th e p ro fi t & l os s ac co un t p lace d b e for e the A GM in a pp ell ant 's c as e w as n ot as pe r its a cc ou n tin g pol ic y of re ve nue rec og ni ti on in r es p ect o f d el ay ed pa y me nt cha rg es . A s pe r ' Si gni fi ca nt Acc ou nt in g Po li ci es ' co nt ai n ed i n Sch ed ul e 21 o f ap p ell an t' s An nu al R ep ort f or 20 03- 04 , de l aye d pay me nt c ha rg es u nde r P ow er P ur ch ase Ag ree me nt s w e re t o be re co gn iz ed a s rev en ue , on g ro un ds of p ru de nc e, as and wh en re co ve re d. Ta x o f Rs .1 6. 01 cr or e w as de du ct ed at s o urc e ITA Nos.1770/Ahd/2012 & Ors. (Gujarat Industrial Power Co. Ltd. ) - 18 - fro m pr ov is io n o f del ay ed pa ym en t c ha rge s of Rs .7 .1 c ror es bef or e 3 1. 3. 20 04 . Out of to ta l d el a yed pa ym en t c harg es o f Rs. 78 .1 cr or e, a m ou nt o f R s. 16 .0 1 cro re wa s u nd is puted ly rec ov er ed /re ce iv ed by ap pe ll an t a nd s ho ul d ha ve been rec og ni ze d a s i n co me o f F.Y .2 00 3-0 4 as per re v enu e rec og ni ti on no r ms an d acc ou nt in g po li cie s fo llo w e d b y ap pel la nt . T he AG M t ook pl ac e m uc h lat er , i .e. on 25.9 . 20 04 an d a mp le ti me w as av ai la ble w it h ap pel la nt to m od if y t he acc ou nt s t o be pr ese nt ed be fo re th e AG M by re co gn i zin g rev en ue o f R s.1 6. 01 c ro re i n ac co rd anc e w it h ap pe l lan t' s acc ou nt in g po lic y o n r ev en ue re co gn it i on. H o wev er , ap pe l lan t did no t r ec og ni ze del ay ed pa ym en t c ha rge s o f R s. 16 .0 1 cro re in it s P & L acc ou nt. S in ce th e ac co u nts p re se nt ed be fo r e t he AG M w er e no t p re pa red a s p er ac co u nti ng p oli cy o n rev enu e rec og ni ti on of del a yed pa ym en t c ha rg es, it wo ul d b e j us t ifi ed to a lt er ne t p ro fit arr iv ed at by th e ap pe ll an t b y a d din g am ou nt of R s. 16. 0 1 c ro re , b ei ng de lay ed p ay me nt ch ar ges rec ov er ed t o t he bo ok p ro fi t u /s. 11 5JB . A s f ar as ba lan ce am ou nt ou t of R s. 7 8.1 c ro re is c on ce rne d, t he sa me w a s n ot rec ov er ed an d s ho uld n ot h ave be en r eco gn iz e d a s inc om e/ re ve nue in A.Y .2 00 4- 05 fo r the pu rp os e o f s ecti on 11 5JB as we ll as n or ma l p rov is io ns of the Ac t. To su m u p , it is hel d th at i n A.Y . 20 04- 05 , ou t of R s. 78 .1 cr or e, o nly R s. 1 6.0 1 cro re s ho ul d ha ve bee n in cl ud ed i n t h e b oo k pr of it s u/ s.1 15J B as w el l as i n th e inc om e ch ar ge abl e to t ax u nd er n orm al pr ovi si on s o f t he A ct. In vi ew of a bo v e, a dd it io n to t he bo ok pr ofi t u/ s. 11 5J B is con fi rm ed a t Rs .1 6. 01 cr or e ou t of R s. 78. 1 cro re a nd b al an ce i s d el et ed. 13. 2. 1 A no th er as p ect of th e m at te r (wh ich is al so ra is e d by the AO ) i s r eg ar din g a ll ow ab il it y of c re di t of en tir e ta x ded uc te d at s ou r ce of Rs .1 6.0 1 cro re i n A .Y .2 00 4-0 5. As ses si ng O ff ice r r efe rr ed to p ro vi sio ns of se ct io n 1 9 9 i n t hi s reg ar d; ho we ver , ult im at el y he ld e n tir e a mo un t of Rs ,78 .1 cro re a s in clu di b le in b oo k p ro fi t s u /s .1 15 JB f or suc h alt er na te re as on in g . A s p er sec ti on 19 9, as it st ood b ef or e it s am en dm ent by Fi n anc e A ct , 2 00 8, c r edi t f or ta x de d uct ed a t so urc e i s to g iv en on pr o duc ti on of TDS cer ti fi ca te i n th e ass es sm en t y ea r f o r w hic h i nc om e i s ass es sa bl e. It ha s bee n hel d a bov e in pa ra 13. 2 ab ov e th at o ut o f Rs .7 8. 1 cr or e , on ly Rs. 16 .0 1 cr or e is to be co nsi de re d a s inc o me a ss es sa bl e in A.Y .2 00 4- 05 . I n A . Y .20 06- 07 , a pp el la nt r ec ei ved pa rt ia l cla im of Rs. 23 c ro re (ou t of DP C o f R s. 78 .1 cr ore ) a nd i ncl ud e d t he sa me i n b ook pr of its u/ s. HS JB. Am o unt of R s. 23 cr ore was exc lu de d by ap pe ll ant fr om th e t axa bl e in co me of A.Y .2 0 06- 07 un der n or ma l pr ov isi on s on th e gr ou nd th at R s.7 8. 1 cr ore i n ITA Nos.1770/Ahd/2012 & Ors. (Gujarat Industrial Power Co. Ltd. ) - 19 - ful l h ad a lr ea dy be en inc lu de d i n tax a ble in co me of A .Y .2 00 4- 05 as p er n or ma l pr ovi si on s of th e Act . Si nce o nl y Rs. 16. 01 cro re o ut o f DP C of R s. 78 .1 c ro re ' hn s b ee n di re cte d to be ass es se d as i nc om e of A.Y . 20 04 -0 5 un der no rm al p ro vis i on s of the Ac t; c on se qu ent ly , in A.Y . 20 0 6-0 7, de la yed pa yme nt cha rg es o f Rs .2 3 cro re a re d ir ec ted to be as se ss ed u nde r no rm al p ro vi si on s of t he A ct b es id es bei ng i nc lu de d in bo ok pr ofi ts fo r t he pu r po se of sec ti on 11 5JB . I n a cc or da nc e w ith sec ti on 1 99 , cr ed it to be a llo w ed i n A.Y .2 00 4- 05 o ut o f tax ded uc te d at s ou rce o f R s.1 6. 01 cro re w ou ld b e o n pr op ort io na te ba si s on ly . C re dit of bal an ce TD S o u t of Rs. 16 .0 1 c ro re i s to b e a ll ow ed o n pr op ort io na te basi s in A.Y .2 00 5- 07 & 2 00 7-0 8, w he re r em ain in g in co me wa s ass es sa bl e a nd wa s in f act cr edi te d i n the bo oks of acc o unt s als o. I n ot he r wo r ds, c re di t of T DS of Rs .1 6. 01 c rore to be all ow ed i n v ar io us ass es sm en t ye ar s w oul d be R s. 3.281 9 cro re (16 .0 1/ 78 .1 ) in A . Y .20 04- 05 , R s.4 .7 1 49 c ro re (23/ 78.1 ) i n A.Y .2 00 6- 07 an d r e ma ini ng , i .e . Rs .8 .0 13 2 cr or e i n A .Y .2 00 7- 08, s ubj ec t t o v er ifi ca ti on by th e A sse ss in g Off ic er o f th e cal cu la ti on s w it h ref er en ce t o i nc o me ass es sa bl e i n eac h yea r. ” 13. On going through the above facts and circu mstances of the case we do not find any infir mit y in the order passed by the ld.CIT[ A]. Thus no interference is called for and we uphold the order passed by the ld CIT[A]. Thus issue no. (vii) is allowed in favour of the assessee. 14. Disallowance on upgradation of software expenses of Rs.1,58,585/-. The assessee incurred upgradation of software expenditure to integrate the internal co mmunication syste m e mail to Lotus notes within the compan y. This expenditure has been incurred only for f acilitating the trading operation leaving the fixes untouched. However the assessing officer has disallowed the above expenditure under treated as capital expenditure being enduring the nature. The ld CIT[A] also ITA Nos.1770/Ahd/2012 & Ors. (Gujarat Industrial Power Co. Ltd. ) - 20 - confir med this addition after allowing Depreciation on this expenses. 15. Before us the Ld Counsel submi tted that jurisdictional High Court in the case of CIT -Vs- N.J. India Invest (P.) Ltd. reported in [2013] 32 tax mann.co m 367 (Gu jarat) held that Expenditure on maintenance, back-up and support services to existing hardware and software is revenue in nature, and therefore allow the expenditure as revenue in nature. Per contra the Ld DR could not contravent this decision and could not produce any decision in favour of the Revenue. Therefore respectfully following the jurisdictional judgement i n the case of the NJ India Invest P Ltd [cited supra] we allow this ground and delete the addition made b y the AO. Thus issue no. (viii) is allowed in favour of the assessee. 16. Charging of interest under section 234B on book profits. The AO charged i nterest u/s.234B on addition made on account of provision for deferred tax a moun ting to Rs.41,60,67,000/= in the book profit u/s.115JB relying on restrospective amend ment made in section 115JB by the Finance Act, 2008. This issue is squarly covered against the assessee by re cent judgement of the Karnataka High Court judgement in the case of CIT -Vs- JS W Steel Ltd. reported in [2020] 121 tax mann.co m 39 (Karnataka) as follows: 7. T he Su pre me Co urt in t he ca se o f St ar I nd ia (P. ) L td. , s up r a ha s h el d th at li ab il ity t o p ay i nt er est ari si ng o n de fa ult is in the n at ur e o f q u asi p un is hm en t a nd ev en th ou gh it is per mi ss ib le f or t he le gi sl at ur e t o re tr os pec ti vel y le gi sl at e y et , suc h re tr os pe ct ivi t y is n or ma ll y no t per mi ss ib le t o cr ea te a n ITA Nos.1770/Ahd/2012 & Ors. (Gujarat Industrial Power Co. Ltd. ) - 21 - off en ce re tr os pec ti vel y. It i s t ru e t ha t th e a ss es se e c oul d n o t hav e pa id a dv anc e ta x in ca se o f a def er re d tax l iabi li ty in res pe ct of A ss es sm ent Y ea r 20 05- 06 , wh en th e am en dme nt wa s br ou ght i nt o fo rc e i n 2 0 08. H o wev er , it is p er ti ne nt to men tio n her e th at c la us e (h ) t o se co nd pr ovi so to se cti on 11 5JB ( 2 ) of the A ct h as be en i n cor po ra te d wi th ef f ect f ro m 1- 4-2 00 1. T he ret ro sp ec tiv e op er ati on o f th e af or e sai d p rov is io n ha s not bee n c ha ll en ge d b y the a sse ss ee an d t her ef or e, th e a fo re sai d pr ovi si on ha s t o be g iv en eff ec t t o . Th e T ri bu na l cl ear ly acc ed ed to i ts ju ri s dic ti on in h ol di ng t hat n o i nt er es t c ou l d b e lev ie d un de r sec ti o n 23 4B o f the A ct . In th e re su lt, the s e con d su bst an ti al q ue st io n of la w is a ns w ere d in f av ou r of th e rev en ue a nd a gai ns t t he a ss es see . 17. Respectfully following the above judge ment in the ca se of the JSW Steel Lt d we reject this ground and the confir m the addition made b y AO. Thus issue no. (ix) is allowed in favour of the Revenue. 18. Loss due to foreign exchange di fference rate: 19. The assessee incurred a loss of Rs.21,26,000/- due to foreign exchange rate difference, which is a actual loss and not notional loss. The assessee-company itself availed foreign currency demand loan from various banks. As part of the terms and conditions all these FCDL loans the assessee was required to take forward contract in respect of these for repayment of the loans on the date of maturity. Difference between the exchange rate and the rate as per the forward contract was debited to the profit & loss account as foreign exchange loss. The AO has not accepted this loss. The ldAR claimed that the issue is directly covered by the judgment of Hon’ble Delhi High Court in the case of CIT Vs. Industrial Financial Corporation of India Ltd., reported in 185 taxmann.com 296 wherein it has been held that where the assessee enters into a contract for purchase of foreign currency on a future date at pre-determined rates, the ITA Nos.1770/Ahd/2012 & Ors. (Gujarat Industrial Power Co. Ltd. ) - 22 - difference between the forward contract rate and exchange rate on the date of entering into contract has to be recognized as income or expenses, which ascertained and definite in terms of contract and would be alone as business expenditure in the year of entering into forward contract itself, though as per the contract part payment is to be succeeding year. 20. Respectfully following the above judgments, we allow the grounds raised by the assessee. Thus, the issue no.(x) is allowed in favour of the assessee. 21. In the result, appeals and cross objection of the assessee are partly allowed, whereas the appeal of the Revenue also is partly allowed. Sd/- Sd/- (WASEEM AHMED) (MAHAVIR PRASAD) ACC OUNTANT MEMB ER JUDICIAL MEMBER Ahmedabad: Dated 26/05/2022 S.K.SINHA ेश ! " #े" / Copy of Order Forwarded to:- ". र / Revenue 2. आ दक / Assessee %. सं&ं'( आयकर आय ) / Concerned CIT 4. आयकर आय ) - अपील / CIT (A) ,. - . /ीय 01 1 '(2 आयकर अपील य अ'(कर!2 अ34द & द / DR, ITAT, Ahmedabad 5. / 67 8 ल / Guard file. By order/आद श स 2 उप/स3 यक पं ीक र आयकर अपील य अ'(कर!2 अ34द & द । This Order pronounced in Open Court on 26 /05/2022