National Aluminium Compamy Limited, Bhubaneswar V. ACIT, Corporate Circle-1(2), Bhubaneswar

CO 30/CTK/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9577 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 1 month(s) 13 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 23-09-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 06-02-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 09-08-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PIYUSH KOLHE
• Assessee Lawyers: B K MAHAPATRA
• Keywords: Business income; Depreciation; Business expenditure; Principle of natural justice; Additional depreciation; Earning of tax free income; Rule 8D; Set aside; Capital Gains
• Section: 43B; 142(1); 14A; 115JB; 201; 207; 37

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI C.M. GARG , J M & SHRI L.P. SAHU, A M ./ ITA NO. 10 6 / CTK/201 8 ( / ASSESSMENT YEAR : 201 4 - 201 5 ) NATIONAL ALUMINIUM COMPANY LIM ITED, NALCO BHAWAN, P/1, NAYAPALLI, BHUBANESWAR VS. ASST.CIT, CORPORATE CIRCLE - 1(2), BHUBANESWAR / PAN NO. : AA ACN 7449 M ( / APPELLANT ) .. ( / RESPONDENT ) AND ./ ITA NO. 110 /CTK/201 8 ( / ASSESSMENT YEAR : 201 4 - 201 5 ) ASST.CIT, CORPORATE CIRCLE - 1(2), BHUBANESWAR VS. NATIONAL ALUMINIUM COMPANY LIMITED, NALCO BHAVAN, P/1, NAYAPALLI, BHUBANESWAR ./ PAN NO. : AAACN 7449 M ( / APPELLANT ) .. ( / RESPONDENT ) AND CROSS OBJECT ION NO. 30 /CTK/201 8 (ARISING OUT OF ITA NO. 1 10 /CTK/201 8 ) ( / ASSESSMENT YEAR : 201 4 - 201 5 ) NATIONAL ALUMINIUM COMPANY LIMITED, NALCO BHAVAN, P/1, NAYAPALLI, BHUBANESWAR VS. ASST.CIT, CORPORATE CIRCLE - 1(2), BHUBANESWAR ./ PAN NO. : AAACN 7449 M ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI B.K.MAHAPATRA, AR /REVENUE BY : SHRI PIYUSH KOLHE, CIT DR / DATE OF HEARING : 05/09/2019 / DATE OF PRONOUNCEMENT : 23 /09/2019 / O R D E R PER L.P.SAHU , A M : TH ESE ARE THE CROSS APPEAL S FILED BY THE ASSESSEE AND REVENUE AND CROSS OBJECTION BY THE ASSESSEE, AGAINST THE ORDER OF THE CIT(A) - 1 , BHUBANESWAR, DATED 21.12.2017 FOR THE ASSESSMENT YEAR 20 1 4 - 201 5 . ITA NO S. 106 & 110 /CTK/201 8 CO NO. 30 /CTK/201 8 2 2 . SINCE ISSUES IN BOTH THE APPEALS ARE COMMON, THEY WE RE HEARD TOGETHER AND DISPOSED OF BY TH IS COMMON ORDER. FIRST WE SHALL CONSIDER THE G ROUNDS RAISED IN ASSESSEES APPEAL AND FACTS NARRATED THEREIN FOR THE ASSESSMENT YEAR 201 4 - 201 5 IN ITA N O. 106 /CTK/201 8 AS UNDER : - 1. THAT THE ORDER DATED 21.12.2017 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [IN SHORT 'CIT(APPEALS)'], IN SO FAR AS SUSTAINING THE ADDITIONS AND DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFICER, IS BASED ON I RRELEVANT CONSIDERATIONS, AGAINST THE PRINCIPLES OF NATURAL JUSTICE, CONTRARY TO FACTS, ARBITRARY, ERRONEOUS AND BAD IN LAW. 2. DISALLOWANCE OF INTEREST ON DISPUTED GOVT, DUTY (ELECTRICITY DUTY AND WATER CHARGES - RS.202,61,47,249/ - , A. THAT ON THE FACTS AND IN THE CIRCUMSTANCES THE CASE, SUSTAINING THE ADDITION/DISALLOWANCE OF RS.202,61,47,249/ - UNDER 'INTEREST ON DISPUTED GOVT, DUTY (ELECTRICITY DUTY AND WATER CHARGES)' BY THE LEARNED CIT (APPEALS), IGNORING THE WRITTEN SUBMISSIONS AND THE ORDERS O F THE JURISDICTIONAL ITAT BENCH, IS AGAINST THE PRINCIPLES OF NATURAL JUSTICE, ARBITRARY, ERRONEOUS, BAD IN LAW AND LEGALLY UNTENABLE. B. THAT THE LEARNED CIT (APPEALS) IGNORING ARID NOT FOLLOWING THE ORDER OF THE JURISDICTIONAL ITAT (HON'BLE ITAT CUT TACK BENCH, CUTTACK) FOR THE ASST. YEAR 2005 - 06 IN APPELLANT'S OWN CASE), WHEREIN IN UNDER SIMILAR CIRCUMSTANCES, THE ISSUE OF ALLOWBILITY OF 'INTEREST ON DISPUTED GOVT, DUTY (ELECTRICITY DUTY AND WATER CHARGES)' HAVING BEEN DECIDED IN FAVOUR OF THE ASSESS EE, HIS ORDER IN CONFIRMING THE ADDITION/DISALLOWANCE OF RS.202,61,47,249/ - UNDER 'INTEREST ON DISPUTED GOVT, DUTY (ELECTRICITY DUTY AND WATER CHARGES)' IS AN ACT OF JUDICIAL IMPROPRIETY, BAD IN LAW AND ILLEGAL AND DESERVES TO BE SET ASIDE ON THIS GROUND AL ONE. C. THAT IN SIMILAR FACTS AND CIRCUMSTANCES, FOR THE ASST. YEAR 2005 - 06 AND IN THE PAST YEARS, IN ASSESSEE'S OWN CASE, THE HON'BLE ITAT CUTTACK BENCH HAVING HELD THAT 'INTEREST ON UNPAID ELECTRICITY DUTY AND WATER CHARGES' IS FULLY ALLOWABLE, THE LEARNED CIT (APPEALS) IN NOT DELETING THE SAID ADDITION/DISALLOWANCE OF RS.202,61,47,249/ - UNDER 'INTEREST ON DISPUTED GOVT, DUTY (ELECTRICITY DUTY AND WATER CHARGES)' IS ARBITRARY, ERRONEOUS, AND BAD, BOTH IN THE EYE OF LAW AND ON FACTS AND LEGALLY UNTENA BLE. D. THAT THE AFORESAID RS.202,61,47,249/ - UNDER 'INTEREST ON UNPAID ELECTRICITY DUTY AND WATER CHARGES, ALTHOUGH A STATUTORY LIABILITY NOT COVERED U/S 43B OF THE ACT, , THE LEARNED CIT (APPEALS) HOLDING THAT THE SAME IS A PROVISION AND DISALLOWABLE BECAUSE THE SAME IS UNDER DISPUTE AND NO DEMAND HAS BEEN RAISED IN RESPECT THEREOF, IS ITA NO S. 106 & 110 /CTK/201 8 CO NO. 30 /CTK/201 8 3 ARBITRARY, ERRONEOUS, AND BAD, BOTH IN THE EYE OF LAW AND ON FACTS AND LEGALLY UNTENABLE. 3. DISALLOWANCE OF PROVISION FOR LEAVE ENCASHMENT' - U/S.43B(F) OF THE ACT - RS.21,97,37,131/ - THAT ON THE FACTS AND IN THE CIRCUMSTANCES THE CASE, THE SUSTAINING OF THE DISALLOWANCE OF RS.21,97,37,131/ - U/S.43B(F) OF THE ACT BY THE LEARNED CIT(APPEALS) IS ERRONEOUS AND BAD IN LAW. 4. DISALLOWANCE U/S. 14A RS.6,82,43,072/ - A. THAT ON THE FACTS AND IN THE CIRCUMSTANCES THE CASE, THE ORDER OF THE LEARNED CIT (APPEALS) IN SUSTAINING THE DISALLOWANCE OF RS.6,82,43,072/ - U / S .14A OF THE ACT IS BASED ON IRRELEVANT CONSIDERATIONS, CONTRARY TO FACTS, ARBITRARY, ERRONEOUS AND BAD IN LAW. B. THAT IN SIMILAR FACTS AND CIRCUMSTANCES, FOR THE ASST. YEAR 2011 - 12, THE LEARNED PREDECESSOR CIT (APPEALS) HAVING FULLY DELETED SIMILAR ADDITION U/S. 14A OF THE ACT, THE ORDER OF THE LEARNED CIT (APPEALS) IN IGNORING/NOT FOLLOWING THE ORDE R AND SUSTAINING THE DISALLOWANCE OF RS.6,82,43,072/ - IS UNJUSTIFIED, ARBITRARY, ERRONEOUS AND BAD IN LAW. C. THAT THE ASSESSEE HAVING ALREADY ADDED SUM OF RS.82,378/ - U/S.14A OF THE ACT IN THE COMPUTATION OF INCOME (RETURNED INCOME), RULE 8D IS NOT AP PLICABLE AND THE SUSTAINING OF THE ADDITION OF RS.6,82,43,072/ - U/S.L4A OF THE ACT IS UNJUSTIFIED, ARBITRARY, CONTRARY TO FACTS, ERRONEOUS AND BAD IN LAW. D. THE APPELLANT'S COMPUTATION OF THE AFORESAID RS.82,378/ - U/S. 14A OF THE ACT IS BASED ON ITS BOOKS OF ACCOUNTS AND IS WORKED OUT IN A REASONABLE AND FAIR MANNER, THE LEARNED LOWER AUTHORITIES HAVE MIS APPRECIATED/MISCONSTRUED THE SAME AND THE DISALLOWANCE U / S .14A OF THE ACT IS INCORRECT, ARBITRARY, ERRONEOUS AND BAD IN LAW. E. THAT THE LEARNED CIT(APPEALS) HOLDING THAT THE AFORESAID RS.82,378/ - HAS NO BASIS AND PURELY ADHOC' IS INCORRECT, CONTRARY TO FACTS, ARBITRARY AND ERRONEOUS AND BAD, BOTH IN THE EYE OF LAW AND ON FACTS, 5. TREATMENT OF SHORT TERM CAPITAL GAINS OF RS.67,67,666/ - AND NOT ACCEPTING LOSS UNDER LONG TERM CAPITAL GAINS OF RS.13,75,90,268/ - AND TREATING THE SAME AS 'BUSINESS INCOME' AND THE ADDITION UNDER 'BUSINESS INCOME' OF RS.114,80,58,652/ - A. THAT ON THE FACTS AND IN THE CIRCUMSTANCES THE CASE, THE DISMISSAL OF THE G ROUND FOR TREATMENT OF SHORT TERM CAPITAL GAINS OF RS.67,67,666/ - AND NOT ACCEPTING LOSS UNDER LONG TERM CAPITAL GAINS OF RS. 13,75,90,268/ - AND TREATING THE SAME AS 'BUSINESS IN COME' AND THE ADDITION OF RS.1 14,80,58,652/ - UNDER 'BUSINESS INCOME' B Y THE LEARNED CIT (APPEALS) IS ARBITRARY, ERRONEOUS, BAD, BOTH IN THE EYE OF LAW AND ON FACTS. ITA NO S. 106 & 110 /CTK/201 8 CO NO. 30 /CTK/201 8 4 B. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LOWER AUTHORITY HOLDING THAT THE TRANSACTIONS OF THE ASSESSEE IN MUTUAL FUNDS AND SHARES AND S ECURITIES SHOULD BE TREATED AS BUSINESS ACTIVITIES AND INCOME EARNED FROM THAT SHOULD BE TREATED AS INCOME FROM BUSINESS IS CONTRARY TO FACTS, ARBITRARY, ERRONEOUS AND BAD IN LAW. BAD, BOTH IN THE EYE OF LAW AND ON FACTS. C. THAT THE ASSESSEE HAVING M AINTAINED ITS ACCOUNTS AND DISCLOSED THE INVESTMENTS IN THE BALANCE SHEET UNDER LONG TERM INVESTMENTS AND HAVING RIGHTLY COMPUTED ITS INCOME UNDER THE HEAD CAPITAL GAINS I.E. LOSS UNDER LONG TERM CAPITAL GAINS (LOSS) OF RS.L3,75,90,268/ - AND SHORT TERM CAP ITAL GAINS OF RS.67,67,666/ - , THE TREATMENT OF THE AFORESAID AS 'BUSINESS I NCOME' AND THE ADDITION OF RS.1 14,80,58,652/ - BY THE LEARNED AO AND THE CONFIRMATION OF THE SAME BY THE LEARNED CIT(APPEALS) IS BASED ON IRRELEVANT CONSIDERATIONS, ARBITRARY, ERRONE OUS AND BAD, BOTH IN THE EYE OF LAW AND ON FACTS. D. THAT IN THE PAST YEARS THE ASSESSEE'S ABOVE METHOD HAVING BEEN ACCEPTED BY THE IT DEPARTMENT, THE ASSESSING OFFICER, WITHOUT BRINGING ANY NEW MATERIAL EVIDENCE ON RECORD, IS NOT JUSTIFIED AND IS ERR ONEOUS IN TREATING THE AFORESAID SHORT TERM CAPITAL GAINS OF RS.67,67,666/ - AND NOT ACCEPTING THE LOSS ON LONG TERM CAPITAL GAINS OF RS.13,75,90,268/ - AND TREATING RS.L 14,46,74,819/ - AS 'BUSINESS INCOME' OF THE AS SESSEE AND THE ADDITION OF RS.1 14,80,58,652 / - UNDER 'BUSINESS INCOME' IS UNJUSTIFIED, ARBITRARY, CONTRARY TO FACTS, ERRONEOUS AND BAD IN LAW. E. THAT WITHOUT PREJUDICE TO GROUND (A) TO (D) ABOVE, IN ANY CASE AS PER BOARD CIRCULAR WHICH RECOGNIZES THAT AN ASSESSEE CAN HAVE TWO PORTFOLIOS, ONE I NVESTMENT AND OTHER TRADING, THE IGNORING AND DISCARDING OF THE AFORESAID LOSS UNDER LONG TERM CAPITAL GAINS OF RS.L3,75,90,268/ - AND THE TREATMENT OF THE AFORESAID GAINS INCLUDING SHORT TERM CAPITAL GAINS OF RS.67,67,666/ - , AS 'BUSINESS INCOME' BY THE LOW ER AUTHORITIES IS UNJUSTIFIED, ARBITRARY, CONTRARY TO FACTS, ERRONEOUS AND BAD IN LAW. F . THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT (APPEALS) OUGHT NOT HAVE CONFIRMED THE ACTION OF THE LEARNED ASSESSING OFFICER IN CHANGING THE 'HEAD OF INCOME' AS PER THE RETURN OF INCOME FILED BY THE ASSESSEE. 6. ADDL. DEPRECIATION U/S.32(I)(IIA) OF THE ACT - RS. 85,65,464/ - THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (APPEALS) OUGHT TO / HAVE ALLOWED THE CLAIM OF AD DITIONAL DEPRECIATION RS. 85,65,464/ - U/S.32(L)(IIA) OF THE I.T ACT, INSTEAD OF DIRECTING THE MATTER TO THE LD. ASSESSING OFFICER AS ALL THE DETAILS AND SUPPORTING WERE AVAILABLE WITH HIM. 6. THAT THE APPELLANT CRAVES LEAVE TO ADD, SUPPLEMENT, MODIFY TH E GROUNDS HERE - IN - ABOVE BEFORE OR AT THE HEARING OF THE APPEAL. ITA NO S. 106 & 110 /CTK/201 8 CO NO. 30 /CTK/201 8 5 3 . THE BRIEF FACTS ARE THAT THE ASSESSEE IS A PUBLIC SECTOR COMPANY IS ENGAGED IN THE BUSINESS OF BAUXITE MINING , MANUFACTURE OF ALUMINA AND ALUMINUM & POWER GENERATION AND FILED ITS RETURN O F INCOME FOR THE ASSESSMENT YEAR 201 4 - 201 5 ELECTRONICALLY ON 28.11.2014 WITH TOTAL INCOME OF RS. 748 , 62 , 49 , 500 / - AND UNDER THE PROVISION OF SECTION 115JB OF THE ACT AT RS. 642 , 35 , 18 , 317 / - AND T HE RETURN OF INCOME WAS PROCESSED U/S.143(1) OF THE ACT AND S UBSE QUENTLY, THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTICE S U/S.143(2) & 142(1) OF THE ACT WERE ISSUED. IN COMPLIANCE , THE AR OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FILED WRITTEN SUBMISSIONS AND T HE ASSESSING OFFICER COMPLETED THE ASSESSMEN T U/S.143(3) OF THE ACT , DATED 29.02.2016 , INTER ALIA , MAKING ADDITIONS/DISALLOWANCES AGGREGATING TO RS. 358 , 42 , 88 , 775 / - UNDER THE FOLLOWING HEADS AND ASSESSED THE TOTAL INCOME OF RS. 1107,05,38,280 / - : - I) DISALLOWANCE OF CLAM OF ADDITIONAL DEPRECIATION AT RS. 85,65,464 / - ; II) DISALLOWANCE OF U/S.43B OF THE ACT AT RS. 21,97,37,131 / - ; III) INTEREST ON DISPUTED GOVT. DUES (ELECTRICITY DUTY AND WATER CHARGES) AT RS. 202 , 61 , 47 , 249 / - ; IV) TREATING SHORT TERM AND LONG TERM CAPITAL GAIN AS BUSINESS INCOME AT RS. 114 , 80 , 58 , 652 / - ; V) DISALLOWANCE U/S.14A OF THE ACT AT RS. 6 , 82 , 43 , 072 / - ; AND VI) DISALLOWANCE OF THE LOSS ON ACCOUNT OF REVALUATION OF NON - MOVING STORES AND SPARES AT RS. 11 , 35 , 37 , 207 / - 4 . AGAINST THE ABOVE ADDITIONS AND THE ORDER OF THE AO, THE ASSESSEE F ILED AN APPEAL BEFORE THE CIT(A). IN THE APPELLATE PROCEEDINGS THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AO AND FILE D ITA NO S. 106 & 110 /CTK/201 8 CO NO. 30 /CTK/201 8 6 DETAILED WRITTEN SUBMISSIONS. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE AND FINDINGS OF AO HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 5 . FEELING AGGRIEVED BY THE ORDER OF CIT(A), BOTH THE ASSESSEE AND REVENUE ARE IN APPEAL S BEFORE THE INCOME TAX APPELLATE TRIBUNAL . 6. GROUND NO.1 IS GENERAL IN NATURE. GROUND NO. 2 : DISALLOWANCE OF INTEREST ON DISPUTED GOVT. D UTY (ELECTRICITY DUTY AND WATER CHARGES AT RS.202,61,47,246/ - 7 . THE AO IN THE ASSESSMENT ORDER STATED THAT THE PAYMENTS OF INTEREST ON SUCH DISPUTE OF ELECTRICITY DUTY AND WATER CHARGES ARE NOT ASCERTAINED LIABILITIES, AND, THEREFORE, SUCH UNASCERTAINED LIABILITIES ARE NOT ALLOWABLE AS BUSINESS EXPENDITURE. THE AO FURTHER NOTED THAT IN THE EARLIER YEARS THE ISSUE IS PENDING BEFORE THE HIGHER APPELLATE STAGE AND THE MATTER HAS NOT YET BEEN FINALISED, THEREFORE, DISALLOWED INTEREST ON DISPUTED GOVT. DUTY A ND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. IN APPEAL, THE CIT(A) OBSERVED THAT THE AMOUNT IS A PROVISION AND HAS BEEN CALCULATED ON THE BASIS OF THE ENHANCED ELECTRICITY DUTY WHICH ITSELF IS IN DISPUTE. SINCE THE AMOUNT HAS NOT BEEN ARISEN OUT OF ANY DE MAND RAISED BY ANY AUTHORITY AND IS IN THE NATURE OF PROVISIONS, THEREFORE, THE CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE AO. 8 . LD. AR BEFORE US SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA ITA NO S. 106 & 110 /CTK/201 8 CO NO. 30 /CTK/201 8 7 NO.211/CTK/2017, ORDER DATED 29.06.2018 , AND DREW OUR ATTENTION TO PARA 11 OF THE AFORESAID ORDER , WHEREIN THE TRIBUNAL HAS OBSERVED AS UNDER : - 11 . ON FURTHER APPEAL TO THE TRIBUNAL , THE LD. AR OF THE ASSESSEE BEFORE US SUBMITTED THAT THE ISSUE UNDER C ONSIDERATION IS SQUARELY COVERED BY THE ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2006 - 07 AND 2007 - 08 IN ITA NOS. 233, 234/CTK/2011 DATED 20.07.2012 AND IN ITA NOS. 66 - 68, 459, 511 - 512/CTK/2003 DATED 20.11.2005 IN RESPECT OF A.Y. 1994 - 95 TO 19 98 - 99 AND 2000 - 01. LD. AR FURTHER STATED THAT THE INTEREST LIABILITY IS AS PER STATUTE AND HAS BEEN CHARGED TO THE PROFIT & LOSS ACCOUNT ON ACCRUAL BASIS AND COMPLY THE MERCANTILE SYSTEM OF ACCOUNTING, AND IS ALLOWABLE U/S 37 OF THE ACT AND PRAYED THAT ADD ITION BY THE LOWER AUTHORITIES BE DELETED . THE LD. AR FILED A COPY OF ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2010 - 2011 IN ITA NO.352/CTK/2016 AND OTHER CONNECTED APPEALS, DATED 27.04.2018, WHEREIN THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE RELYING ON THE EARLIER DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2006 - 2007 & 2007 - 2008 IN ITA NOS.233&234/CTK/2011, DATED 20.07.2012 AND ALSO FOR THE ASSESSMENT YEAR 2005 - 06 IN ITA NO.286/CTK /2013, ORDER DATED 11.05.2016. THE OBSERVATIONS OF THE TRIBUNAL IN THIS REGARD ARE AS UNDER : - 12. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ISSUE UNDER CONSIDERATION IS COVERED BY THE ORDER OF THE TRI BUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006 - 07 & 2007 - 08 IN ITA NO.233 & 234/CTK/2011, ORDER DATED 20.07.2012 AND ALSO FOR THE ASSESSMENT YEAR 2005 - 06 IN ITA NO.286/CTK/2013, ORDER DATED 11.05.2016 HAS FOLLOWED THE ABOVE ORDER OF TRIBUNAL AND DECIDED IN FAVOUR OF THE ASSESSEE. THE OBSERVATION OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2005 - 06 ARE AS UNDER : - 4. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT THE ISSUE UNDER CONSIDERATION IS COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE VIDE ORDER DATED 20 - 07 - 2012 FOR THE ASSESSMENT YEAR 2006 - 07 & 2007 - 08, WHEREIN THE TRIBUNAL ON MERIT ALLOWED SUCH INTEREST AFTER OBSERVING AS UNDER : - 6.1 WITH RESPECT TO THE INTEREST ON ELECTRICITY DUTY PROVIDED FOR BY THE ASSESSEE WAS IN CONSE QUENCE TO THE PREFERENCE AND NOT CLAIMED AS PRIOR PERIOD EXPENSES ON THE BASIS OF STATUTORY AUDITORS POINTING OUT THAT THE AMOUNT HELD BY THE ASSESSEE TO BE PAID AS STATUTORY DUTY IN A BANK WAS FOR EARNING INTEREST. THEREFORE, CORRESPONDING PAYMENT OF INTE REST WAS TO ITA NO S. 106 & 110 /CTK/201 8 CO NO. 30 /CTK/201 8 8 BE PROVIDED FOR. WHEN THE ISSUE IS SUBJUDICE, NEITHER THE ASSESSEE NOR THE DEPARTMENT MAY SIT ON THE JUDGMENT TO AWARD INTEREST. THEREFORE, INTEREST BEING A PERIOD PAYMENT FOR THE IMPUGNED YEAR, HAS BEEN PROVIDED FOR IN THE IMPUGNED ASSESSMENT YEAR CANNOT BE SUBJECTED TO DISALLOWANCE FOR CLAIMING DEDUCTION U/S.37. THE ASSESSING OFFICER AFTER HAVING APPLIED HIS MIND ALLOWED THE CLAIM IN THE IMPUGNED ASSESSMENT YEAR ON BOTH THESE ISSUES THEREFORE CANNOT BE THRUST UPON BY THE LEARNED CIT HOLDING A VIEW OTHER THAN THE VIEW WHICH WAS LEGITIMATELY ACCEPTED BY THE ASSESSING OFFICER BUT ON THE BASIS OF ARITHMETICAL FINDING OF THE LEARNED CIT WHICH RATHER LEANS IN FAVOUR OF THE ASSESSEE. 5. THE ISSUE UNDER CONSIDERATION ARE SAME, RESPECTFULLY FOLLOWING T HE ORDER OF THE TRIBUNAL, WE DIRECT THE AO TO ALLOW ASSESSEES CLAIM OF INTEREST INSOFAR AS ASSESSEE IS ALSO OFFERING INTEREST ON THE AMOUNT DEPOSITED IN THE BANK ACCOUNT AS PER THE DIRECTION OF THE HONBLE HIGH COURT. WHEN INTEREST ON SUCH DEPOSIT IS BROU GHT TO TAX, THERE IS NO REASON FOR DISALLOWING INTEREST PAYABLE TO GOVERNMENT FOR NON - PAYMENT OF SUCH DUTY IN GOVERNMENT ACCOUNT. 6. THE REASONING GIVEN BY THE AO FOR DISALLOWING INTEREST ON NON/DELAYED PAYMENT OF WATER CHARGES ARE THAT IT WAS A CONTINGENT LIABILITY. WE FOUND THAT TRIBUNAL IN ASSESSEES OWN CASE IN EARLIER YEARS HAD ALLOWED THIS CLAIM UNDER SIMILAR CIRCUMSTANCES AND HELD THAT INTEREST ON UNPAID ELECTRICITY DUTY AND WATER CHARGES IS FULLY ALLOWABLE U/S.37 OF THE ACT AND PROVISIONS OF SECTION 44A OF THE ACT FOR DISALLOWANCE IS NOT ATTRACTED. 7. IT IS PERTINENT TO MENTION HERE THAT THE ITAT CUTTACK BENCH IN THE CASE OF NALCO IN THE COMBINED ORDER DATED 30 - 11 - 2005 HAS HELD THAT INTEREST ON DISPUTED ELECTRICITY DUTY ARE ALLOWABLE U/S.37 OF THE AC T AND FURTHER THE INTEREST ON ELECTRICITY DUTY, EVEN IF A STATUTORY LIABILITY, THE SAME DO NOT FALL UNDER THE AMBIT OF SECTION 43B OF THE ACT AND THEREFORE, EVEN IF SUCH INTEREST IS NOT PAID THE SAME IS NOT TO BE DISALLOWED UNDER SECTION 43B. 8. FOLLOWING THE REASONING GIVEN HEREINABOVE WITH REGARD TO THE INTEREST ON DELAYED PAYMENT OF ELECTRICITY BILL, WE DIRECT THE AO TO ALLOW INTEREST ON THE WATER BILL. WE DIRECT ACCORDINGLY. WE RESPECTFULLY FOLLOW THE ABOVE ORDERS OF THE TRIBUNAL AND DIRECT THE AO TO ALLOW THE CLAIM OF THE ASSESSEE ON ACCOUNT OF ITA NO S. 106 & 110 /CTK/201 8 CO NO. 30 /CTK/201 8 9 INTEREST ON DISPUTED GOVT. DUTY (ELECTRICITY DUTY AND WATER CHARGES) AND THIS GROUND OF ASSESSEE IS ALLOWED. WE R ESPECTFULLY FOLLOW THE REASONING AND OBSERVATION OF THE JUDICIAL DECISION AND DIRECT THE AO TO DELETE THE DISALLOWANCE OF INTEREST ON DISPUTED GOVT. DUTY (ELECTRICITY DUTY AND WATER CHARGES) AND THIS GROUND OF APPEAL OF ASSESSEE IS ALLOWED. LD. DR ALSO COULD NOT BRING ANY MATERIAL BEFORE US TO CONTROVERT THE ABOVE FINDINGS OF THE TRIBUNAL. ACCORD INGLY, RESPECTFULLY FOLLOWING THE ABOVE OBSERVATIONS OF THE TRIBUNAL, WE DIRECT THE AO TO DELETE THE DISALLOWANCE MADE ON ACCOUNT OF INTEREST ON DISPUTED GOVT. DUTY (ELECTRICITY DUTY AND WATER CHARGES. THUS, GROUND NO.2 OF APPEAL OF THE ASSESSEE IS ALLOWED . GROUND NO.3 : DISALLOWANCE OF PROVISION FOR LEAVE ENCASHMENT U/S.43B OF THE ACT AT RS.21,97,37,131/ - 9. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE PROVISION FOR LEAVE ENCASHMENT HAS NOT BEEN ADDED BACK TO THE INCOME AS PER TH E PROVISIONS OF SECTION 43B. THEREFORE, THE AO RELYING ON THE DECISION OF HONBLE KOLKATA HIGH COURT IN THE CASE OF EXIDE INDUSTRIES LTD. 292 ITR 470 ADDED THE UNPAID LIABILITIES TO THE TOTAL INCOME OF THE ASSESSEE. IN APPEAL, THE CIT(A) UPHELD THE SAME. 10. BEFORE US, LD. AR SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.211/CTK/2017, ORDER DATED 29.06.2018, AND DREW OUR ATTENTION TO PARA 28 OF THE AFORESAID ORDER, WHEREIN THE TRIBUNAL HAS RE STORED THE ITA NO S. 106 & 110 /CTK/201 8 CO NO. 30 /CTK/201 8 10 ISSUE TO THE FILE OF AO TO EXAMINE AND ALLOW THE CLAIM OF THE ASSESSEE. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL READ AS UNDER : - 28. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE TRIBUNAL IN AS SESSEES OWN CASE FOR THE ASSESSMENT YEAR 2010 - 2011 IN ITA NO.352/CTK/2016 ALONG WITH OTHER APPEALS, ORDER DATED 27.04.2018 RELYING ON ITS EARLIER ORDER HAS RESTORED THE DISPUTED ISSUE TO THE FILE OF AO. THE OBSERVATIONS OF THE TRIBUNAL IN THIS REGARD ARE AS UNDER : - 31. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FOUND THAT THE SIMILAR ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2007 - 08 & 2008 - 2009 IN ITA NO.343 & 392/CTK/2015, ORDER DATED 23.04.2018, WHEREIN THE TRIBUNAL HAS OBSERVED AS UNDER : - 28. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE HAS MADE THE PROVISION FOR LEAVE ENCASHMENT AND THE PROVISION WAS NOT ADDED BACK IN THE COMPUTATION OF IN COME. AS THE LD. AR SUBMITTED THAT THE ABOVE ISSUE IS COVERED BY THE ORDER OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF BAITARANI GRAMYA BANK IN ITA NOS.318 & 319/CTK/2013 FOR ASSESSMENT YEARS 2008 - 09 & 2009 - 10, WHEREIN THE TRIBUNAL HELD AS UNDER : - 19.1 THE DR ALSO AGREED WITH THE SUBMISSION OF LD. AR OF THE ASSESSEE. IN THE CIRCUMSTANCES OF THE CASE, WE SET ASIDE THE ORDER OF THE CIT(A) AND REMIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO RE - ADJUDICATE THE ISSUE IN THE LIGHT OF THE HON BLE SUPREME COURT DECISION. HENCE, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 20. IN THE RESULT, APPEAL FOR THE ASSESSMENT YEAR 2008 - 09 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 29. WE CONSIDERING THE RATIO OF THE DECISION AND THE FACTS TO THE P RESENT CASE, REMIT THIS ISSUE TO THE FILE OF THE AO TO EXAMINE AND ALLOW THE CLAIM AND THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL AND WE RESTORE THIS ISSUE TO THE FILE OF AO TO EXAMINE AND ALLOW THE CLAIM OF THE ASSESSEE AND WE ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE FOR STATISTICAL PURPOSES. ITA NO S. 106 & 110 /CTK/201 8 CO NO. 30 /CTK/201 8 11 WE FOLLOW THE REASONING OF THE TRIBUNAL AND ACCEPT THE JUDICIAL PRECEDENCE AND REMIT THE DISPUTED ISSUE TO THE FILE OF AO TO EXAMINE AND ALLOW TH E CLAIM OF THE ASSESSEE. ACCORDINGLY, THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. RESPECTFULLY FOLLOWING THE ABOVE OBSERVATIONS OF THE TRIBUNAL, WE REMIT THE ISSUE TO THE FILE OF AO TO EXAMINE AND ALLOW THE CLAIM OF THE ASSESSEE. GROUND NO .3 IS ALLOWED FOR STATISTICAL PURPOSES. GROUND NO.4 : DISALLOWANCE U/S.14A OF THE ACT AT RS.6,82,43,072/ - 11. INVOKING THE PROVISIONS OF SECTION 14A R.W.RULE 8D, THE AO HAS MADE THE DISALLOWANCE OF RS. 6,82,43,072/ - BY OBSERVING THAT THE DISALLOWANCE SUO - MO TO MADE BY THE ASSESSEE IS VERY LESS COMPARED TO THE ADMINISTRATIVE AND EMPLOYEE COST DEVOTED TO EARN THE EXEMPT INCOME. IN APPEAL , THE CIT(A) HAS CONFIRMED THE DISALLOWANCE AS THERE MAY NOT BE ANY DIRECT EXPENSE AND THAT THE ASSESSEE HAS NOT MADE ANY INTE REST PAYMENTS RELATED TO EARNING OF EXEMPTED DIVIDENDS AND ACCORDINGLY, THE ONLY WAY DISALLOWANCE CAN BE COMPUTED PROPORTIONATE LY AS PER RULE 8D(2)(III) OF I.T.RULES . 12 . LD. AR BEFORE US SUBMITTED THAT THE ASSESSEE HAS ALREADY ADDED THE SUM OF RS. 82,378 / - IN THE COMPUTATION OF INCOME WITH THE (RETURN OF INCOME) U/S.14A OF THE ACT IN RESPECT OF EXPENSES INCURRED RELATING TO ITS EXEMPTED INCOME AND RULE 8D IS NOT APPLICABLE. LD. AR FURTHER SUBMITTED THAT THIS ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN ITA NO . 211 /CTK/2016 ALONG WITH OTHER CONNECTED APPEALS, ORDER DATED ITA NO S. 106 & 110 /CTK/201 8 CO NO. 30 /CTK/201 8 12 29.06.2018 FOR THE ASSESSMENT YEAR 201 3 - 201 4 . ON THE OTHER HAND, LD. DR RELIED ON THE ORDER OF AO. 13 . WE FIND THAT THIS ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASS ESSMENT YEAR 2010 - 2011 IN ITA NO.211/CTK/2016 ALONG WITH OTHER CONNECTED APPEALS, ORDER DATED 29.06.2018 FOR THE ASSESSMENT YEAR 2013 - 2014 , WHEREIN THE TRIBUNAL RELYING ITS EARLIER ORDER DATED 27.04.2018, PASSED IN ITA NO. 352/CTK/2016 FOR THE ASSESSMENT YE AR 2010 - 2011 ALONG WITH OTHER CONNECTED APPEALS HAS OBSERVED AS UNDER : - 22. FROM THE ABOVE JUDICIAL DECISIONS, WE FIND THAT THE TRIBUNAL HAS RESTORED THE DISPUTED ISSUE TO THE FILE OF AO FOR RE - EXAMINATION AND RE - VERIFICATION AND APPLY THE PROVISIONS OF S ECTION 14A R.W.RULE 8D AND I N THE INSTANT CASE, THE ISSUE BEING SIMILAR, WE FIND THAT THE AO HAS NOT COMPLIED WITH THE MANDATORY REQUIREMENT OF SECTION 14A (2) OF THE ACT READ WITH RULE 8D (1) (A) OF THE RULES AND WE R ESPECTFULLY FOLLOW THE ABOVE JUDICIAL DECISION OF THE TRIBUNAL AND REMIT THE DISPUTED ISSUE TO THE FILE OF AO FOR RE - EXAMINATION AND VERIFICATION AND TO DECIDE THE ISSUE ON MERITS AFTER COMPLYING THE MANDATORY REQUIREMENT OF THE PROVISIONS OF SECTION 14A OF THE ACT AND T HIS GROUND OF APPEAL I S ALLOWED FOR STATISTICAL PURPOSES. 14. FROM THE ORDERS BOTH THE AUTHORITIES BELOW, WE OBSERVE THAT THE ASSESSEE IS EARNING INCOME UNDER DIFFERENT HEADS, AS MENTIONED ABOVE. DURING THE YEAR, THE ASSESSEE HAS RECEIVED DIVIDEND OF RS. 1 10, 068 , 076 / - AND CLAI MED SUCH INCOME AS EXEMPT INCOME . THE ASSESSEE HAS ONLY MADE DISALLOWANCE AT RS.1,20,828/ - U/S.14A TO EARN THE EXEMPT INCOME . THE ASSESSING OFFICER HAS APPLIED SECTION 14A READ WITH RULE 8D AND DISALLOW ED THE EXPENDITURE AS PER FORMULA PROVIDED ITA NO S. 106 & 110 /CTK/201 8 CO NO. 30 /CTK/201 8 13 UNDER RULE 8D. THE ASSESSEE IS STATED TO HAVE MADE NO FRESH INVESTMENTS OUT OF BORROWED FUNDS. THE ASSESSING OFFICER APPEARS TO HAVE CALCULATED THE DISALLOWANCE AS PER RULE 8D(2)(III) OBSERVING THAT ADMINISTRATIVE EXPENSES CANNOT BE DENIED TO EARN EXEMPT INCOME. WE , HOWEVER, FIND THAT THE ASSESSING OFFICER HAS CONSIDERED AVERAGE TOTAL INVESTMENT APPEARING ON THE FIRST DAY AND LAST DAY OF THE FINANCIAL YEAR, WHICH IN OUR OPINION IS NOT JUSTIFIED. THESE INVESTMENTS M AY ALSO INCLUDE SUCH INVESTMENTS FROM WHICH NO EXEMPT INCOME WOULD HAVE BEEN EARNED BY THE ASSESSEE. AS IS CLEAR FROM THE RULE ITSELF, THE AVERAGE OF ONLY SUCH INVESTMENTS HAVE TO BE TAKEN INTO ACCOUNT, WHICH YIELDED THE INCOME NOT FORMING PART OF THE TOTA L INCOME. THEREFORE, THE AO WAS REQUIRED TO WORK OUT THE AVERAGE OF SUCH INVESTMENT, THE INCOME FROM WHICH DID NOT FORM PART OF THE TOTAL INCOME INSTEAD OF TOTAL VALUE OF INVESTMENT. FOR THIS VIEW, OUR STAND IS FORTIFIED BY THE DECISION OF SPECIAL BENCH IN THE CASE OF ACIT VS. VIREET INVESTMENT (P) LTD ., (2017) 82 TAXMAN.COM 415 (DELHI TRIB.)(SB). NONE OF THE PARTIES BEFORE US, HOWEVER, HAVE LAID ANY DETAILS TO EXAMINE AS TO WHICH OF THE INVESTMENTS HA VE YIELDED SUCH INCOME WHICH DID NOT FORM PART OF THE TOTAL INCOME. WE, THEREFORE, RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR CALCULATING THE DISALLOWANCE U/S. 14A READ WITH RULE 8D AFRESH, IN THE LIGHT OF OBSERVATIONS MADE IN THE BOD Y OF THIS ITA NO S. 106 & 110 /CTK/201 8 CO NO. 30 /CTK/201 8 14 ORDER ABOVE. ACCORDINGLY, GROUND NO.4 IS ALLOWED FOR STATISTICAL PURPOSES. GROUND NO. 5 : TREATMENT OF SHORT TERM CAPITAL GAINS OF RS.67,67,666/ - AND NOT ACCEPTING LOSS UNDER LONG TERM CAPITAL GAINS OF RS.13,75,90,268/ - AND TREATING THE SAME AS B USINESS INCOME AND THE ADDITION UNDER BUSINESS INCOME OF RS.114,80,58,652/ - . 15. AT THE OUTSET, LD. AR PLACED A COPY OF THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.211/CTK/2017, ORDER DATED 29.06.2018 AND SUBMITTED THAT THIS ISSUE HAS A LREADY BEEN DECIDED AND ALLOWED BY THE TRIBUNAL FOLLOWING ITS EARLIER ORDER DATED 27.04.2018 PASSED IN I TA NO. 352/CTK/2016. ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS OF AUTHORITIES BELOW. LD. AR FURTHER DREW OUR ATTENTION TO THE PARA 25 OF THE ORDER D ATED 29.06.2018, WHEREIN THE TRIBUNAL HAS OBSERVED AS UNDER : - 25. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT IN THE INSTANT CASE THE AO HAS TREATED THE SHORT - TERM AND LONG - TERM CAPITAL GAIN EARNED BY THE ASS ESSEE AS BUSINESS INCOME OF THE ASSESSEE AND IN APPEAL, THE CIT(A) HAS CONFIRMED THE ACTION OF AO. AT THE OUTSET, WE FIND THAT THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2010 - 2011 IN ITA NO.352/CTK/2016, ORDER DATED 27.04.2018 ALONG WITH O THER CONNECTED APPEALS, HAS ALLOWED THE APPEAL OF THE ASSESSEE. THE OBSERVATIONS OF THE TRIBUNAL IN THIS REGARD ARE AS UNDER : - 39. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE MAIN OBJECT OF THE ASSESSEE IS MANUFACTURING AND ASSESSEE BEING A PUBLIC SECTOR COMPANY HAS ENOUGH FUNDS AND MADE INVESTMENT IN THE MUTUAL FUNDS AND ON REDEMPTION THE INCOME IS OFFERED UNDER THE CAPITAL GAIN AND THE MAIN OBJECT BEING THE BUSINESS AND THE MAXIMUM INCOME IS ESTABLISHED THROUGH THE DIRECT BUSINESS OPERATIONS AND NOT FROM THE FINANCIAL TRANSACTION. THE INVESTMENT HAS BEEN MADE WITH THE MUTUAL FUNDS/LIQUID FUNDS/ CLOSED ENDED FUNDS AND ENCASHMENT ON REDEMPTION/MATURITY. FURTHER, THE TOTAL ITA NO S. 106 & 110 /CTK/201 8 CO NO. 30 /CTK/201 8 15 PROFIT EARNED BY THE ASSESSEE COMP ANY BY WAY OF CAPITAL GAINS IS ONLY ABOUT 4% OF THE TOTAL INCOME OF THE ASSESSEE COMPANY, WHICH CLEARLY SHOWS THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MINING, MANUFACTURING, GENERATION AND PRODUCTION OF ALUMINIUM AND NOT DEALING IN MUTUAL FU NDS / LIQUID FUNDS. WE FIND THE HONBLE GUJARAT HIGH COURT IN THE CASE OF PR. CIT VS. RAMNIWAS RAMJIVAN KASAT [2017] 248 TAXMAN 484, HAS HELD AS UNDER : - 5. THE SECOND ISSUE PERTAINS TO THE TREATMENT TO THE INCOME EARNED BY THE ASSESSEE ON SALE OF SHARES. THE ASSESSEE CONTENDED THAT THE SHARES WERE IN THE NATURE OF HIS INVESTMENT AND THE INCOME EARNED SHOULD BE TREATED AS LONG TERM CAPITAL GAIN. THE REVENUE CONTENDS THAT LOOKING TO THE PATTERN OF HOLDING THE SHARES, THE FREQUENCY OF TRANSACTIONS AND OTHER RELEVANT CONSIDERATIONS, THE ASSESSEE WAS DEALING IN THE BUSINESS OF BUYING AND SELLING THE SHARES AND THE INCOME SHOULD BE TAXED AS A BUSINESS INCOME AND THE TRIBUNAL TOOK THE RELEVANT FACTS INTO CONSIDERATION AND REFERRED TO THE CIRCULAR OF THE CBDT DATE D 29.2.2016 AND HELD THAT THE RETURN SHOULD BE TAXED AS CAPITAL GAIN, BE IT LONG TERM OR SHORT TERM, AS THE CASE MAY BE, AND NOT AS A BUSINESS INCOME. 6. WHETHER TO TAX THE INCOME GENERATED FROM THE SALE OF SHARES AS CAPITAL GAIN OR BUSINESS INCOME IS AN I SSUE OF FREQUENT DISPUTE BETWEEN THE REVENUE AND THE ASSESSEES. THE COURTS IN THE PAST HAVE HAD OCCASIONS TO CONSIDER SUCH ISSUE AND THROUGH JUDICIAL PRONOUNCEMENT VARIOUS PARAMETERS HAVE BEEN LAID DOWN TO CHECK WHETHER THE SALE OF SHARES WOULD LEAD TO BUS INESS INCOME OR CAPITAL GAIN. DESPITE SEVERAL JUDICIAL PRONOUNCEMENTS, THE CONTROVERSY DID NOT SUBSIDE. EACH CASE WOULD HAVE TO BE CONSIDERED INDIVIDUALLY LEADING TO LONG DRAWN LITIGATIONS. THE CBTD THEREFORE IN ORDER TO REDUCE THE LITIGATIONS, ISSUED THE SAID CIRCULAR DATED 29.2.2016, RELEVANT PORTION WHICH READS AS UNDER: 2. OVER THE YEARS, THE COURTS HAVE LAID DOWN DIFFERENT PARAMETERS TO DISTINGUISH THE SHARES HELD AS INVESTMENTS FROM THE SHARES HELD AS STOCK - IN - TRADE. THE CENTRAL BOARD OF DIRECT TAXES ('CBDT') HAS ALSO, THROUGH INSTRUCTION NO. 1827, DATED AUGUST 31, 1989 AND CIRCULAR NO. 4 OF 2007 DATED JUNE 15, 2007, SUMMARIZED THE SAID PRINCIPLES FOR GUIDANCE OF THE FIELD FORMATIONS. 3. DISPUTES, HOWEVER, CONTINUE TO EXIST ON THE APPLICATION OF THESE PRINCIPLES TO THE FACTS OF AN INDIVIDUAL CASE SINCE THE TAXPAYERS FIND IT DIFFICULT TO PROVE THE INTENTION IN ACQUIRING SUCH SHARES/SECURITIES. IN THIS BACKGROUND, WHILE RECOGNIZING THAT NO UNIVERSAL ITA NO S. 106 & 110 /CTK/201 8 CO NO. 30 /CTK/201 8 16 PRINCIPAL IN ABSOLUTE TERMS CAN BE LAID DOWN TO DECIDE THE CHARACTER OF INCOME FROM SALE OF SHARES AND SECURITIES (I.E. WHETHER THE SAME IS IN THE NATURE OF CAPITAL GAIN OR BUSINESS INCOME), CBDT REALIZING THAT MAJOR PART OF SHARES/SECURITIES TRANSACTIONS TAKES PLACE IN RESPECT OF THE LISTED ONES AND WITH A VI EW TO REDUCE LITIGATION AND UNCERTAINTY IN THE MATTER, IN PARTIAL MODIFICATION TO THE AFORESAID CIRCULARS, FURTHER INSTRUCTS THAT THE ASSESSING OFFICERS IN HOLDING WHETHER THE SURPLUS GENERATED FROM SALE OF LISTED SHARES OR OTHER SECURITIES WOULD BE TREATE D AS CAPITAL GAIN OR BUSINESS INCOME, SHALL TAKE INTO ACCOUNT THE FOLLOWING - A) WHERE THE ASSESSEE ITSELF, IRRESPECTIVE OF THE PERIOD OF HOLDING THE LISTED SHARES AND SECURITIES, OPTS TO TREAT THEM AS STOCK - IN - TRADE, THE INCOME ARISING FROM TRANSFER OF SUC H SHARES/SECURITIES WOULD BE TREATED AS ITS BUSINESS INCOME, (B) IN RESPECT OF LISTED SHARES AND SECURITIES HELD FOR A PERIOD OF MORE THAN 12 MONTHS IMMEDIATELY PRECEDING THE DATE OF ITS TRANSFER, IF THE ASSESSEE DESIRES TO TREAT THE INCOME ARISING FROM TH E TRANSFER THEREOF AS CAPITAL GAIN, THE SAME SHALL NOT BE PUT TO DISPUTE BY THE ASSESSING OFFICER. HOWEVER, THIS STAND, ONCE TAKEN BY THE ASSESSEE IN A PARTICULAR ASSESSMENT YEAR, SHALL REMAIN APPLICABLE IN SUBSEQUENT ASSESSMENT YEARS ALSO AND THE TAXPAYER S SHALL NOT BE ALLOWED TO ADOPT A DIFFERENT/CONTRARY STAND IN THIS REGARD IN SUBSEQUENT YEARS; (C) IN ALL OTHER CASES, THE NATURE OF TRANSACTION (I.E. WHETHER THE SAME IS IN THE NATURE OF CAPITAL GAIN OR BUSINESS INCOME) SHALL CONTINUE TO BE DECIDED KEEPIN G IN VIEW THE AFORESAID CIRCULARS ISSUED BY THE CBDT. 5. IT IS REITERATED THAT THE ABOVE PRINCIPLES HAVE BEEN FORMULATED WITH THE SOLE OBJECTIVE OF REDUCING LITIGATION AND MAINTAINING CONSISTENCY IN APPROACH ON THE ISSUE OF TREATMENT OF INCOME DERIVED FROM TRANSFER OF SHARES AND SECURITIES. ALL THE RELEVANT PROVISIONS OF THE ACT SHALL CONTINUE TO APPLY ON THE TRANSACTIONS INVOLVING TRANSFER OF SHARES AND SECURITIES.' 7. TWO THINGS EMERGE FROM THIS CIRCULAR. ONE IS THAT THE CBDT DESIRES TO OBVIATE THE DIFFIC ULTIES OF THE ASSESSEES AND SIMULTANEOUSLY TO REDUCE THE LITIGATION. IN PARAGRAPH 3 OF THE CIRCULAR, CERTAIN PARAMETERS HAVE BEEN LAID DOWN. CLAUSE (B) THEREOF IN PARTICULAR PROVIDES THAT IN RESPECT OF LISTED SHARES AND SECURITIES HELD FOR A PERIOD OF MORE THAN 12 MONTHS IMMEDIATELY PRECEDING THE DATE OF ITS TRANSFER, IF THE ASSESSEE DESIRES TO TREAT THE INCOME ARISING FROM THE TRANSFER THEREOF AS CAPITAL GAIN, THE SAME SHALL NOT BE PUT ITA NO S. 106 & 110 /CTK/201 8 CO NO. 30 /CTK/201 8 17 TO DISPUTE BY THE ASSESSING OFFICER. IN OTHER WORDS, THE REVENUE WOULD NOT PURSUE THIS ISSUE IF THE NECESSARY INGREDIENTS ARE SATISFIED, ONLY RIDER BEING THE STAND TAKEN BY THE ASSESSEE IN A PARTICULAR YEAR WOULD BE FOLLOWED IN THE SUBSEQUENT YEARS ALSO AND THE ASSESSEE WOULD NOT BE ALLOWED TO ADOPT A CONTRARY STAND IN SUCH S UBSEQUENT YEARS. 8. THE CIRCULAR APPLIES WITH FULL FORCE IN THE PRESENT CASE. THE TRIBUNAL THEREFORE CORRECTLY ACCEPTED THE ASSESSEE'S STAND. WE RESPECTFULLY FOLLOW THE DECISION OF THE HONBLE HIGH COURT AND WE DIRECT THE AO TO TREAT THE INCOME AS CAPITAL GAINS AND NOT AS BUSINESS INCOME AND THIS GROUND OF APPEAL OF ASSESSEE IS ALLOWED. WE AGREE WITH THE RATIO OF JUDICIAL DECISION APPLICABILITY TO THE PRESENT CASE AND WE DIRECT THE AO TO TREAT THE INCOME UNDER THE CAPITAL GAINS AND NOT AS BUSINESS INCOME AND ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE. 16. RESPECTFULLY FOLLOWING THE ABOVE OBSERVATIONS OF THE TRIBUNAL, WE DIRECT THE AO TO ACCEPT THE LOSS UNDER LONG TERM CAPITAL GAINS AND TREAT THE INCOME UNDER THE CAPITAL GAINS INSTEAD OF BUSINESS INCOME. GROUND NO.5 IS ALLOWED. GROUND NO.6 : ADDITIONAL DEPRECIATION U/S.32(I)(IIA) OF THE ACT AT RS.85,65,464/ - . 17. LD. AR BEFORE US SUBMITTED THAT THE ASSESSEE IS ELIGIBLE FOR CLAIM OF ADDITIONAL DEPRECIATION AND THE ASSESSEE HAD ALSO SUBSTANTIATED ITS CLAIM BEFORE THE LOWER AUTHORITIES. THEREFORE, CLAIM OF ADDITIONAL DEPRECIATION MAY KINDLY BE ALLOWED. ON THE OTHER HAND, LD. DR RELIED ON THE ORDER OF AO. 18. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD ALONG WITH ORDERS OF AUTHORITIES B ELOW, WE FIND THAT THE ASSESSEE ITA NO S. 106 & 110 /CTK/201 8 CO NO. 30 /CTK/201 8 18 HAS CLAIMED ADDITIONAL DEPRECATION U/S.32(1)(IIA) OF THE ACT, HOWEVER, THE AO DISALLOWED THE SAME ON ACCOUNT OF THE FACT THAT THE ASSESSEE COULD NOT PRODUCE THE PARTICULARS/DETAILS OF ACTUAL COST DURING THE COURSE OF ASSESSM ENT PROCEEDINGS. THE CIT(A) HAS DEALT WITH THE ISSUE IN DETAILS AND RESTORE THE ISSUE TO THE FILE OF AO FOR VERIFICATION OF CLAIM OF DEPRECIATION AS PER THE NECESSARY DETAILS TO BE FILED BY THE ASSESSEE TO ASCERTAIN THE DATE OF ACQUISITION AND DIRECTED TH E AO TO ALLOW THE ADDITIONAL DEPRECIATION AS PER THE LAW AFTER SUCH VERIFICATION. THE RELEVANT OBSERVATIONS OF THE CIT(A) READ AS UNDER : - 5.2 I HAVE CONSIDERED THE MATTER. SIMILAR ISSUE HAS BEEN DECIDED BY THE CIT(A) - II, BHUBANESWAR VIDE HER ORDER DT.16. 7.2014 IN ITA NO.0700/2013 - 14 FOR THE AY 2011 - 12 WITH THE FOLLOWING OBSERVATIONS: 'THE APPELLANT COMPANY SUBMITTED THAT THE MAJORITY OF THE PLANT AND MACHINERY INSTALLED IN A MANUFACTURING PLANT LIKE THEIRS; ARE COMMISSIONED IN THE PREMISES OF THE APPELLA NT COMPANY AND ARE NOT TAILOR - MADE, RATHER ASSEMBLED IN THEIR PREMISES OVER A PERIOD AND COMMISSIONED ON A SPECIFIC DATE. SINCE DATE OF ACQUISITION OF THE INDIVIDUAL COMPONENTS RUNNING IN TO THOUSANDS OF NUMBERS AND CONSTRUCTION AND COMMISSIONING OF THE PL ANT ITSELF RUNNING OVER YEARS TOGETHER, DATE OF ACQUISITION IS CONSTRUED TO BE THE DATE - PUT - TO - USE. THE APPELLANT FURTHER SUBMITTED THAT ADDITIONAL DEPRECIATION HAS BEEN CLAIMED RIGHTLY ON THE ADDITIONS TO ITS PLANTS AND NOT IN RESPECT OF INDIVIDUAL MACHIN ERY AS PER THE PROVISIONS OF THE ACT. THE APPELLANT FURTHER SUBMITTED FULL DETAILS OF PLANTS ACQUIRED AND INSTALLED AND THE SUMMARY STATEMENTS OF PARTICULARS OF PURCHASE ORDER. THE APPELLANT HAD GIVEN AN EXAMPLE OF THE ACCOUNT OF WORK IN PROGRESS WHERE CAP ITALIZATION HAS ALREADY BEEN MADE FOR ASSETS ACQUIRED BEFORE F/Y. 2005 - 06. THE APPELLANT COMPANY EMPHASIZED THAT THE ASSETS FOR WHICH THE ADDITIONAL DEPRECIATION ARE CLAIMED HAVE BEEN ACQUIRED AFTER 31.03.2005 AND ASSEMBLED OVER THE PERIOD AND CAPITALIZE A S AND WHEN COMPLETE. THE AO HAD REFERRED TO THE ORDER TO THE LD. ITAT FOR THE AY. 2003 - 04 WHICH WAS PASSED BEFORE THE AMENDMENT TO THE ACT W.E.F. 01.04.2005. FOR THE AY. 2006 - 07, THE HON'BLE TRIBUNAL HAVE RESTORED THE MATTER TO THE FILE OF THE AO OBSERVIN G THAT THE AO SHOULD FIND OUT WHETHER THE ASSETS WERE ACQUIRED OR INSTALLED AFTER 01.04.2005. THE AO IS THEREFORE ONCE AGAIN DIRECTED TO VERIFY THE ITA NO S. 106 & 110 /CTK/201 8 CO NO. 30 /CTK/201 8 19 SAME AND FIND OUT WHETHER THE MAIN ASSETS TO WHICH ADDITIONS OF FURTHER ASSETS WERE MADE AND ADDITIONAL DEPR ECIATION WERE CLAIMED HAVE BEEN ACQUIRED AFTER 01.04.2005 AND ALLOW ADDITIONAL DEPRECIATION TO SUCH PART OF THE ADDITIONAL ASSETS FOR WHICH THE MAIN ASSETS HAVE BEEN ACQUIRED AFTER 01.04.2005.' MY PREDECESSOR HAS ALSO DECIDED THE ISSUE UNDER SIMILAR FACTS AND CIRCUMSTANCES FOR THE AY 2007 - 08 VIDE ORDER DT.7.5.2015 IN APPEAL NO.0176/14 - 15 AND FOR THE AY 2008 - 09 VIDE ORDER DT.8.6.2015 IN APPEAL NO.0544/14 - 15, BY DIRECTING THE AO FOR NECESSARY VERIFICATION, WHICH HAVE BEEN FOLLOWED BY ME IN MY ORDER DT.9.6.20 16 IN ITA NO.0492/14 - 15 FOR THE AY 2010 - 11 AND ORDER DT.30.6.2016 IN ITA NO.0713/14 - 15 FOR THE AY 2012 - 13. THE ISSUES BEING SIMILAR IN THE ASSESSMENT YEAR UNDER APPEAL, THE AO IS DIRECTED TO VERIFY ONCE AGAIN THE ADDITIONS TO THE PLANT & MACHINERY TO THE E XTENT OF RS.7,77,14,686/ - , ON WHICH ADDITIONAL DEPRECIATION CLAIM HAS BEEN DISALLOWED IN ASSESSMENT, AFTER CALLING FOR THE NECESSARY DETAILS FROM THE ASSESSEE TO ASCERTAIN THE DATE OF ACQUISITION, AND ALLOW ADDITIONAL DEPRECIATION AS PER LAW AFTER SUCH VER IFICATION. FROM THE ABOVE OBSERVATIONS OF THE CIT(A), WE ARE OF THE CONSIDERED OPINION, THAT THE CIT(A) HAS ALREADY REMITTED THE ISSUE TO THE FILE OF AO TO ALLOW THE CLAIM OF THE ASSESSEE AFTER VERIFICATION OF NECESSARY DETAILS. THEREFORE, ANY ORDER/ DIRE CTION BY US, AT THIS STAGE, ON THIS ISSUE , WOULD BE FUTILE EXERCISE. HOWEVER, A REASONABLE ORDER IS EXPECTED FROM THE AO ON THE ABOVE OBSERVATIONS OF CIT(A). HENCE, GROUND NO.6 IS DISPOSED OF ACCORDINGLY. 19. THUS, THE APPEAL OF THE ASSESSEE IN ITA NO. 106 /CTK/2018 IS ALLOWED PARTLY FOR STATISTICAL PURPOSES. 20. NOW, WE SHALL DECIDE THE APPEAL OF REVENUE IN ITA NO.110/CTK/2018 , WHEREIN THE REVENUE HAS RAISED THE FOLLOWING GROUNDS : - 1. THE ORDER OF THE LD. CIT(A) IS ERRONEOUS ON FACTS AND IN LAW. ITA NO S. 106 & 110 /CTK/201 8 CO NO. 30 /CTK/201 8 20 2 . ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) IS NOT JUSTIFIED IN DELETING THE ADDITION OF RS. 11,35,37,207/ - MADE BY THE AO TOWARDS 'DISALLOWANCE OF LOSS ON REVALUATION OF NON - MOVING STORES AND SPARES' WHEN THE ASSESSEE, DURING THE ASSESSMENT PROCEEDINGS, COULD NOT EXPLAIN PROPERLY, THE METHOD ADOPTED FOR VALUATION OF NON MOVING STORES AND SPARES AT THE RATE OF 5% OF THE ORIGINAL COST. 3. THE APPELLANT CRAVES TO ALTER, AMEND OR ADD ANY OTHER GROUND THAT MAY BE CONSIDERED NECESSA RY IN COURSE OF THE APPEAL PROCEEDINGS. 21 . THE SOLE GROUND RAISED IN APPEAL OF REVENUE IS RELATING TO DISALLOWANCE OF THE LOSS CLAIMED ON ACCOUNT OF RE - VALUATION OF NON - MOVING STORES AND SPARES . FURTHER THE L D. DR SUBMITTED THAT THE CIT(A) IS NOT JUSTIFI ED IN DELETING THE ADDITION MADE BY THE AO TOWARDS 'DISALLOWANCE OF LOSS ON REVALUATION OF NON - MOVING STORES AND SPARES' WHEN THE ASSESSEE, DURING THE ASSESSMENT PROCEEDINGS, COULD NOT EXPLAIN PROPERLY, THE METHOD ADOPTED FOR VALUATION OF NON MOVING STORES AND SPARES AT THE RATE OF 5% OF THE ORIGINAL COST. THEREFORE, PRAYED THAT THE ORDER OF THE AO SHOULD BE RESTORED. 22. ON THE OTHER HAND, LD. AR RELIED ON THE ORDER OF CIT(A) AND SUBMITTED THAT THE CIT(A) HAS RIGHTLY FOLLOWED ITS EARLIER YEARS ORDER AND DI RECTED THE AO TO ALLOW THE LOSS ON VALUATION OF NON - MOVING STORES AND SPARES. LD. AR FURTHER SUBMITTED THAT THIS BENCH OF THE TRIBUNAL IN ITA NO.197/CTK/2017, ORDER DATED 29.06.2018 HAS DECIDED THE ISSUE RELYING ON ITS EARLIER ORDER FOR THE ASSESSMENT YE AR 2011 - 2012. THEREFORE, THE APPEAL OF THE REVENUE DESERVES TO BE DISMISSED. ITA NO S. 106 & 110 /CTK/201 8 CO NO. 30 /CTK/201 8 21 23 . AFTER HEARING SUBMISSIONS OF THE BOTH THE PARTIES AND PERUSING THE ENTIRE MATERIAL ON RECORD AS WELL AS ORDERS OF AUTHORITIES BELOW ALONG WITH THE ORDER OF THE TRIBUNAL ON WH ICH RELIANCE HAS BEEN PLACED BY THE LD. AR, WE FOUND THAT THE TRIBUNAL IN ITA NO.197/CTK/2017, ORDER DATED 29.06.2018 HAS DISMISSED THIS GROUND OF REVENUE RELYING ON ITS EARLIER ORDER FOR THE ASSESSMENT YEAR 2011 - 2012. THE RELEVANT OBSERVATIONS OF THE TRIB UNAL READ AS UNDER : - WE HAVE DECIDED THIS ISSUE IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2011 - 2012 IN ITA NOS.374/CTK/2014, WHEREIN THE TRIBUNAL HAS OBSERVED AS UNDER : - WE HAVE DECIDED THIS ISSUE IN APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2011 - 2012 (ITA NO.374/CTK/2014) IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE RELYING ON THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE EARLIER ASSESSMENT YEARS. WE FOLLOW THE SAME REASONING GIVEN IN THE AFORESAID APPEAL AND WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A), WHO HAS PASSED A REASONED. ACCORDINGLY, WE DISMISS THIS GROUND OF REVENUE RAISED IN BOTH THE YEARS UNDER CONSIDERATION. WE RESPECTFULLY FOLLOW THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR EARL IER YEAR AND DISMISS THIS GROUND OF APPEAL OF REVENUE. FOLLOWING THE ABOVE OBSERVATIONS OF THE COORDINATE BENCH OF THE TRIBUNAL, WE DISMISS THE SOLE GROUND RAISED BY THE REVENUE. 24. THUS, APPEAL OF REVENUE IN ITA NO.110/CTK/2018 IS DISMISSED. 25. THE AS SESSEE HAS FILED CROSS OBJECTION I.E. CO NO.30/CTK/2018 (ARISING OUT OF ITA NO.110/CTK/2018) FOR THE ASSESSMENT YEAR 2014 - 2015, WHICH IS IN SUPPORTIVE TO THE ORDER OF CIT(A). AS WE HAVE DISMISSED THE APPEAL OF REVENUE, THE CROSS OBJECTION FILED BY THE ASSE SSEE HAS BECOME INFRUCTUOUS, HENCE, THE SAME IS DISMISSED. ITA NO S. 106 & 110 /CTK/201 8 CO NO. 30 /CTK/201 8 22 26 . IN THE RESULT, APPEAL OF THE ASSESSEE I.E. ITA NO. 106 /CTK/201 8 IS ALLOWED PARTLY FOR STATISTICAL PURPOSES AND APPEAL OF REVENUE I.E. ITA NO. 110 /CTK/201 8 AND CROSS OBJECTION OF ASSESSEE I.E. CO NO. 30 /CTK/201 8 ARE DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 23 / 0 9 /201 9 . SD/ - ( C.M.GARG ) SD/ - ( L.P.SAHU ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER CUTTACK ; DATED 23 / 0 9 /201 9 PRAKASH KUMAR MISHRA , S R.P.S . / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( SENIOR PRIVATE SECRETARY ) , / ITAT, CUTTACK 1. APPELLANT - 2. RESPONDENT 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR, ITAT, CUTTACK 6. / GUARD FILE. //TRUE COPY//