M/s R.N. Gupta & Co., Ludhiana V. ACIT, Ludhiana

CO 38/CHANDI/2012

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8220 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 28 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 31-01-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 21-01-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 02-11-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J S NAGARDR
• Assessee Lawyers: SUBHASH AGGARWAL
• Keywords: Depreciation; Additional depreciation; Capital expenditure
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.967/CHD/2012 (ASSESSMENT YEAR : 2007-08) THE A.C.I.T., VS. R.N.GUPTA & CO., CIRCLE 1, C-55, FOCAL POINT, LUDHIANA. LUDHIANA. PAN: AABCR 9636 F AND C.O.NO.38/CHD/2012 ARISING OUT OF ITA NO.967/CHD/2012 (ASSESSMENT YEAR : 2007-08) R.N.GUPTA & CO., VS. THE A.C.I.T., C-55, FOCAL POINT, CIRCLE 1, LUDHIANA. LUDHIANA. PAN: AABCR 9636 F (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SUBHASH AGGARWAL DEPARTMENT BY : SMT.J.S.NAGAR,DR DATE OF HEARING : 21.01.2013 DATE OF PRONOUNCEMENT : 31.01.2013 O R D E R PER SUSHMA CHOWLA, J.M, : THE APPEAL FILED BY THE REVENUE IS AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME-TAX(APPEALS)-II, LUDHIANA DA TED 19.07.2012 RELATING TO ASSESSMENT YEAR 2007-08 AGAINST THE ORD ER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). THE ASSESSEE HAS FILED CROSS OBJECTIONS AGAINST THE APPEAL FILED BY THE RE VENUE. 2 2. BOTH THE APPEAL OF THE REVENUE AND THE CROSS OBJ ECTIONS FILED BY THE ASSESSEE ON THE SIMILAR ISSUE WERE HEARD TOGETH ER AND ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR THE SAK E OF CONVENIENCE. 3. THE REVENUE IN ITA NO.967/CHD/2012 HAS RAISED FO LLOWING GROUNDS OF APPEAL: 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FA CTS IN DELETING THE ADDITION OF RS.11,86,735/- MADE BY THE A.O. O N ACCOUNT OF DISALLOWANCE OF DEPRECIATION CLAIMED BY THE ASSESSE E @100%(80%+20%) ON TRANSFORMER, WHICH, IN FACT, WAS NOT A ENERGY SAVING DEVICE. 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS IN ' RESTRICTING THE DISALLOWANCE OF INTEREST TO @ 15% I NSTEAD OF RATE APPLIED BY THE A.O. @ 18% IN RESPECT OF INTERE ST PAID TO THE PERSONS SPECIFIED U/S 40A(2)(B). 3. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS IN DELETING THE ADDITION OF RS.1,21,409/- MADE BY THE A.O. ON ACCOU NT OF DISALLOWANCE OF DEPRECIATION CLAIMED BY THE ASSESSE E ON LATHE MACHINE WHICH WAS NOT PUT TO USE AND THERE WAS NO INCREASE IN THE PRODUCTION OF THE ASSE SSEE COMPANY. 4. THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND TH AT OF A.O. BE RESTORED. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUND OF APPEAL BEFORE IT IS FINALLY DISPOSED OFF. 4. THE ASSESSEE IN C.O.NO.38/CHD/2012 HAS RAISED FO LLOWING GROUNDS OF APPEAL: 1. THAT THE LEARNED CIT(A)-II, LUDHIANA, HAS ERRED IN HOLDING THAT THE EQUIPMENT K NOWN AS AIRIER VENT WIND DRIVEN VENTILATORS IS IN THE NATURE OF FT MACHINERY ENTITLED TO DEPRECIATION @ 35% AS AGAINST HIGHER DEPRECIATION CLAIMED BY THE APPELLANT TREATING THE SAID EQUIPMEN T IN THE NATURE OF RENEWAL ENERGY DEVICES. 2. THAT THE LEARNED CIT(A) - II, LUDHIANA, HA S ERRED IN CONFIRMING DISALLOWANCE OF DEPRECIATION ON RS.6,33,090/- IGNORING THE FACTS OF THE CASE. 3. THAT THE LEARNED CIT(A) - II, LUDHIANA, HAS ERRE D IN CONFIRMING THE DISALLOWANCE OF INTEREST @ 3% BY APP LYING THE PROVISIONSOF SECTION 40A(2)(B) IGNORING THE PAST HISTORY OF THE CASE. 4. THAT THE LEARNED CIT(A) - II, LUDHIANA, H AS ERRED IN CONFIRMING DISALLOWANCE OF RS.59,419/- BY WRONGLY 3 APPLYING THE PROVISIONS OF SECTION 14A R.W.R 8D OF THE INCOME TAX RULES, IGNORING THE SUBMISSIONS MADE BEF ORE. 5. THAT IN ANY CASE THE AFORESAID ADDITIONS/DISALLO WANCES ARE AGAINST THE FACTS OF THE CASE. 6. THAT THE ASSESSEE CRAVES FOR PERMISSION TO ADD, AMEND OR ALTER ANY CROSS-OBJECTION AT THE TIME OF HEARING. 7. HENCE THE CROSS-OBJECTION. ITA NO.967/CHD/2012 : 5. THE FIRST ISSUE RAISED BY THE REVENUE IS AGAINST ALLOWANCE OF DEPRECIATION ON TRANSFORMER. THE ASSESSEE HAD CLAI MED 100% DEPRECIATION ON TRANSFORMER AND AIRIERVENT WIND. T HE ASSESSING OFFICER RESTRICTED THE RATE OF DEPRECIATION ON THE SAID TRA NSFORMER HOLDING IT TO BE AN ELECTRIC EQUIPMENT AND NOT AN ENERGY SAVER. THE ASSESSING OFFICER ALLOWED DEPRECIATION @ 15% AND DISALLOWED ADDITIONA L DEPRECIATION @ 20% ON THE STEP DOWN TRANSFORMER RESULTING IN ADDIT ION OF RS.11,86,756/- . 6. THE CIT (APPEALS) ALLOWED THE CLAIM OF THE ASSES SEE IN VIEW OF THE NATURE OF EQUIPMENT PURCHASED BY THE ASSESSEE HOLDI NG IT TO BE AN ENERGY SAVING DEVICE, IN TURN RELYING UPON THE RATIO LAID DOWN IN INDUSTRIAL DEVELOPMENT CORPORATION OF ORISSA LTD. VS. CIT REPO RTED IN 268 ITR 130 (ORI). 7. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF THE ASSESSING OFFICER. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING VIDE GROUND NO.1 IS IN RELATION TO AP PLICATION OF RATE OF DEPRECIATION ON THE ELECTRIC TRANSFORMER PURCHASED BY THE ASSESSEE. THE ASSESSEE HAD PLACED ON RECORD PURCHASE BILL OF TRAN SFORMER AT PAGE 2 OF THE PAPER BOOK, UNDER WHICH THE OBSERVATION OF THE CIT (APPEALS) IN 4 RESPECT OF THE ASSET PURCHASED BY THE ASSESSEE VIDE PARA 3.3 AT PAGES 5 AND 6 OF THE ORDER WERE AS UNDER: I HAVE CAREFULLY CONSIDERED THE APPELLANT'S SUBMIS SION AND PERUSED THE ASSESSMENT ORDER. 1 HAVE ALSO PERUSED THE RELEVANT PURCHASE BILL OF TRANSFORMER. THE FOLLOWING DESCRIPTION IS GIVEN IN THE BILL: 'ELECTRICAL TRANSFORMER (DISTRIBUTION) 2000 KVA, 11 KV/433V, OIL COOLED COPPER WOUND, WITH OLTC, RTCC & AVR. ' THE ONLY ISSUE IS WHETHER THE EQUIPMENT PURCHASED BY THE APP ELLANT IS AN ENERGY SAVING DEVICE AND IS ELIGIBLE FOR DEPRECIATION @ 80%+20%. THE APPELLANT HAS CLAIMED THAT THE SAID MACHINERY IS AN AUTOMATIC ELECTRIC LOAD MONITORING SYSTEM WHICH FALLS UNDER CLAUSE B(A) OF THE SCHEDULE OF RATE OF DEPRECIATION RELEVANT FOR A/Y 2007-08. IN THIS REGARD THE APPELLANT EXPLAINED THAT TRANSMISSION OF ELECTRICAL ENERGY IS MADE AT A HIGH VOLTAGE WITH A VIEW TO PREVENT LOSS OF ELECTRICAL E NERGY DURING TRANSMISSION & IF AFTER SUCH TRANSMISSION ANY PLANT & MACHINERY ARE USED TO STEP DOWN THE HIGH VOLTAGE TRANSMISSION TO LOWER VOLTAGE TRANSMISSION, SUCH PLANT & MACHINERY FOR STEPPING D OWN THE HIGH VOLTAGE TO LOWER VOLTAGE ARE PART OF THE LARGER SYS TEM OF SAVING ELECTRICAL ENERGY. THE APPELLANT ALSO SUBMITTED A C ERTIFICATE FROM THE SELLER TO THIS EFFECT. THIS ISSUE HAD BEEN CONSIDER ED BY THE HON'BLE HIGH COURT OF ORISSA IN THE CASE O LNDUSTRIAL DEVE LOPMENT CORPORATION OF ORISSA LTD., VS. C1T REPORTED IN 268 ITR 130 (ORI)\ THE HON'BLE HIGH COURT IN THIS CASE OBSERVED AS UND ER.- 'TRANSMISSION OF ELECTRICAL ENERGY IS MADE AT HIGH VOLTAGE WITH A VIEW TO PREVENT LOSS OF ELECTRICAL ENERGY DURING TRANSMISSI ON AND IF AFTER SUCH TRANSMISSION, ANY PLANT AND MACHINERY ARE USED FOR STEPPING DOWN THE HIGH VOLTAGE TRANSMISSION TO LOWER VOLTAGE, SUCH PL ANT AND MACHINERY FOR STEPPING DOWN THE HIGH VOLTAGE TO LOWER VOLTAGE ARE PART OF A, LARGER SYSTEM OF SAVING ELECTRICAL ENERGY. ' THE FACTS OF THE APPELLANT'S CASE ARE THEREFORE SQU ARELY COVERED BY THE AFORESAID CASE KEEPING IN VIEW THE AFORESAID FA CTUAL AND LEGAL POSITION, THE DISALLOWANCE MADE BY THE AO AMOUNTIN G TO RS.11,86,756/-- IS DELETED. THIS GROUND OF APPEAL I S ALLOWED. 9. WE ARE IN AGREEMENT WITH THE FINDINGS OF THE CI T (APPEALS) THAT THE ASSET PURCHASED BY THE ASSESSEE WAS AN ENERGY S AVING DEVICE, WHICH IN TURN WAS ELIGIBLE FOR DEPRECIATION @ 80% PLUS 20 %. THE ISSUE STANDS COVERED BY THE RATIO LAID DOWN BY THE HON'BLE ORISS A HIGH COURT IN INDUSTRIAL DEVELOPMENT CORPORATION OF ORISSA LTD. ( SUPRA). UPHOLDING THE ORDER OF CIT (APPEALS) WE DISMISS GROUND NO.1 R AISED BY THE REVENUE. 5 10. THE ISSUE IN GROUND NO.2 RAISED BY THE REVENUE IS AGAINST RESTRICTION OF DISALLOWANCE OF INTEREST PAID TO SPE CIFIED PERSONS UNDER SECTION 40A(2)(B) OF THE ACT TO 15% AS AGAINST 18% CLAIMED BY THE ASSESSEE. THE ASSESSEE VIDE GROUND NO.3 RAISED IN THE CROSS OBJECTION IS AGGRIEVED BY THE DISALLOWANCE OF INTEREST @ 3% IN R ELATION TO THE INTEREST PAID TO SPECIFIED PERSON UNDER SECTION 40A (2)(B) OF THE ACT. 11. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE DURING THE YEAR UNDER CONSIDERATION HAD PAID INTEREST TO THE SPECIF IED PERSONS UNDER SECTION 40A(2)(B) OF THE ACT @ 18%. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE SAID RATE OF INTEREST WAS HIGHER AND THE SAME SHOULD BE RESTRICTED TO 12% IN VIEW OF THE PROVISIONS OF SECT ION 40A(2)(B) OF THE ACT. THE CIT (APPEALS) RESTRICTED THE SAID INTERES T RATE TO 15%. 12. BOTH THE REVENUE AND THE ASSESSEE ARE IN APPEAL AGAINST THE ORDER OF THE CIT (APPEALS). THE CONTENTION OF THE ASSESS EE IN THIS REGARD WAS THAT IT HAD PAID INTEREST @ 18% TO CREDITORS WHO WE RE FAMILY MEMBERS AND SIMILAR RATE OF INTEREST WAS ALLOWED IN THE EAR LIER YEARS. DURING THE YEAR UNDER CONSIDERATION THE CIT (APPEALS) OBSERVED THAT IN FACT IT PROVIDED THE INTEREST @ 12% TO 14% AGAINST MORTGAGE OF PROPERTY/OTHER ASSETS. IN VIEW THEREOF, THE CIT (APPEALS) HAD RES TRICTED THE RATE OF INTEREST TO 15% AS AGAINST 18% CLAIMED BY THE ASSES SEE. 13. WE FIND NO MERIT IN THE PLEA OF THE ASSESSEE TH AT SIMILAR RATE OF INTEREST BEING ALLOWED IN THE EARLIER YEAR SHOULD B E ALLOWED IN THE INSTANT YEAR ALSO, AS EACH YEAR OF THE ASSESSMENT I S INDEPENDENT AND THE FACTS OF EACH CASE ARE TO BE CONSIDERED FOR DECIDIN G THE ISSUE. THE DISALLOWANCE UNDER SECTION 40A(2)(A) OF THE ACT IS TO BE COMPUTED IN LINE WITH THE MARKET CONDITIONS AND ADMITTEDLY THER E WAS LOWERING OF INTEREST RATE FROM YEAR TO YEAR. IN VIEW THEREOF, WE ARE IN CONFORMITY 6 WITH THE ORDER OF THE CIT (APPEALS) IN ALLOWING INT EREST PAID TO THE SPECIFIED PERSONS UNDER SECTION 40A(2)(B) OF THE AC T @ 15%. THUS GROUND NO.2 RAISED BY THE REVENUE AND GROUND NO.3 R AISED BY THE ASSESSEE IN CROSS OBJECTION ARE DISMISSED. 14. THE ISSUE IN GROUND NO.3 RAISED BY THE REVENUE IS AGAINST ALLOWANCE OF DEPRECIATION ON LATHE MACHINE PURCHASE D BY THE ASSESSEE, WHICH WAS NOT PUT TO USE. THE ASSESSING OFFICER HA D DISALLOWED THE CLAIM OF DEPRECIATION OF LATHE MACHINE AS THE SAID ASSET WAS READY TO USE ON 30.3.2007 BUT WAS NOT PUT TO USE DURING THE YEAR . THE CIT (APPEALS) VIDE PARA 6.3 HELD AS UNDER: 6.3 I HAVE CAREFULLY CONSIDERED THE APPELLANT'S S UBMISSIONS. THE APPELLANT HAD PURCHASED THE MACHINE ON 23.03.2007 AND THE MOT OR ON 30.03.2007. BOTH THESE ITEMS WERE PURCHASED FROM LU DHIANA AND THEREFORE THERE IS NO REASON TO DOUBT THAT THE SAME WAS NOT RECEIVED BY THE APPELLANT ON THOSE DATES. IT IS THUS APPARENT F ROM THE FACTS ON RECORD THAT THE MACHINE WAS READY FOR USE OF 30.03.2007. T HE ONLY ISSUE AS PER THE AO IS THAT THE MACHINE WAS NOT USED DURING THE YEAR. IN THIS REGARD THE APPELLANT HAS SUBMITTED THAT LATHE MACHI NE IS A COMPLETE MACHINE IN ITSELF AND THE ELECTRIC MOTOR ATTACHED T O THIS LATHE MACHINE WAS PURCHASED ON 30.03.2007. THE APPELLANT FURTHER SUBMITTED THAT NO RECORDS ARE MAINTAINED OR MAINTAINABLE TO SHOW INCR EASE IN PRODUCTION. MOREOVER AS PER THE CASE LAWS RELIED UPON BY THE AP PELLANT DEPRECIATION IS .ALLOWABLE ON THE ASSETS WHICH WERE READY FOR US E DURING THE YEAR. KEEPING IN VIEW THE AFORESAID FACTUAL AND LEGAL POS ITION THE DISALLOWANCE OF DEPRECIATION ON LATHE MACHINE AMOUN TING TO RS.1,21,409/- IS DELETED. THIS GROUND OF APPEAL IS ACCORDINGLY ALLOWED. 15. THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT T HAT NO INSTALLATION OF THE SAID MACHINERY WAS REQUIRED AND FURTHER RELI ANCE WAS PLACED IN CIT VS. SHAHBAD CO-OPERATIVE SUGAR MILLS LTD. (2011 ) 56 DTR 414 (P&H). 16. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANC E ON THE ORDER OF THE ASSESSING OFFICER. 17. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE HON'BLE PUNJAB & HARYANA HIGH COURT IN SHAHBAD CO-O PERATIVE SUGAR 7 MILLS LTD. (SUPRA) ALLOWED THE CLAIM OF DEPRECIATIO N ON ASSETS, IN TURN RELYING UPON THE RATIO LAID DOWN IN CIT VS. SHAHBAD CO-OP. SUGAR MILLS LTD. (2011) 49 DTR (P&H) 321 VIDE ORDER DATED 17.12 .2010 WHEREIN IT WAS HELD AS UNDER: 10. WE ALSO FIND HAT EXPRESSION USED IN S.32 OF THE ACT HAS BEEN JUDICIALLY INTERPRETED TO INCLUDE MACHINERY KEPT FOR USE, EVEN IF THE SAME WAS NOT ACTIVELY USED. PASSIVE USER HAS ALSO BEEN HELD TO BE USER WHERE IT MAY BE NECESSARY FOR BUSINESS OF THE ASSESSEE TO KEEP THE MACHINERY READY FOR USE. REFERENCE MAY BE MADE TO THE JUDGMENT OF DELHI HIGH COURT IN CIT VS. REFRIGERATION & ALLIED INDUSTRIES LTD. (2000) 163 CTR (DEL) 498: (2001) 247 ITR 12 (DEL). 18. IN THE FACTS OF THE PRESENT CASE BEFORE US, THE ASSESSEE HAD CLAIMED DEPRECIATION ON LATHE MACHINERY WHICH WAS PURCHASED ON 20.3.2007 AND WAS READY FOR USE AS ON 30.3.2007. IN VIEW OF THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT AND FOLLOWING T HE SAME WE UPHOLD THE ORDER OF THE CIT (APPEALS) AND DISMISS GROUND N O.3 RAISED BY THE REVENUE. C.O.NO.38/CHD/2012 : 19. THE GROUND NO.1 RAISED BY THE ASSESSEE VIDE ITS CROSS OBJECTION IS AGAINST RESTRICTION IN THE RATE OF DEPRECIATION TO BE ALLOWED ON AIRIER VENT WIND DRIVEN VENTILATORS. THE ASSESSEE HAD PUR CHASED 14 NUMBER OF 24 OF AIRIER VENT WIND DRIVEN VENTILATORS FOR TOTAL COST OF RS.1,07,920/- ON 13.2.2007. THE ASSESSEE HAD CLAIM ED DEPRECIATION @ 50% ON THE SAID ASSET WHICH WAS PURCHASED AFTER 30. 9.2006. THE CLAIM OF THE ASSESSEE WAS THAT THE EQUIPMENT PURCHASED WA S AIR POLLUTION CONTROLLING SYSTEM AND HENCE ENTITLED TO DEPRECIATI ON @ 100%. THE ASSESSING OFFICER HELD THAT THE SAID DEVICE WAS ONL Y LIKE AN EXHAUST FAN AND ALLOWED DEPRECIATION @ 17.5% RESULTING IN DISAL LOWANCE OF RS.35,074/-. 8 20. THE CIT (APPEALS) UPHELD THE ORDER OF THE ASSES SING OFFICER OBSERVING THAT THE SAID ASSET DOES NOT RUN ON WIND MILLS AND MERELY REPLACES THE AIR BY EXHAUST SYSTEM. 21. THE LEARNED A.R. FOR THE ASSESSEE DREW OUR ATTE NTION TO THE BROCHURE ISSUED BY THE AIRIER INDIA IN RESPECT OF T HE SAID ASSET WHICH IS DESIGNED TO WORK ALONGWITH WIND MILLS. 22. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANC E ON THE ORDERS OF THE AUTHORITIES BELOW. 23. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD PU RCHASED AIRIER VENT WIND DRIVEN VENTILATORS FROM M/S AIRIER INDIA BANGA LORE ON 15.2.2007. AS PER THE BROCHURE ISSUED BY THE SUPPLIER AIRIER WIND TURBINE VENTILATOR IS ENGINEERED AND COMPUTER DESIGNED TO P ROVIDE OPTIMUM AIR VENTILATION. IT IS LIGHT WEIGHT, HIGH CORROSION RE SISTANT, MAINTENANCE FREE, ENERGY SAVING, PROVIDES EFFICIENT OPERATION E VEN IN A BREEZE OF WIND . THE COMPOSITION OF THE SYSTEM IS AS UNDER: AIRIER VENTS AIRIERVENT IS A WIND DRIVEN VERTICAL ROOF EXHAUST B ASED ON THE REVOLUTIONARY FREE-FLOATING CONCEPT ACTUATED BY NATI CONVECTION OF THE BUILDING ASSISTED BY THE NAT URAL WIND OUTSIDE. RIGID CONSTRUCTION AIRIERVENTS IS IN-BUILT WITH A HEAT AND FRICTION RE SISTANT TEFLON CAP, WHICH PROVIDES A NEAR FRICTION FREE MOT ION. THE MOVEMENT LIFTS AND SEPARATES THE TURBINE FROM CONTRACT WITH CENTRAL S.S.SHAFT RESULTING IN HIGHER EXHAUST. AIRIERVENTS VANES ARE FABRICATED WITH SPECIAL GRADE ALUMINIUM TO ANODIZED SPECIFICATION OF JIS SPECIAL GRADE H24, IT STRESS RESISTANT. THE TEFLON SELF LUBRICATED IMPREGNATED BEARING GIVES A SMOOTH ROTAT ION AND NO MAINTENANCE FOR. 9 24. THE SAID APPARATUS OPERATES ON WIND ENERGY AS W ELL AS STACK EFFECT. THE BENEFITS OF THE SAID SYSTEM ARE AS UNDER: A) PROPER AIR VENTILATION WILL ENHANCE THE LIFE OF THE ROOF SHEET, STRUCTURES, WALL ETC BY REMOVING ACCUMULATED, HUMIDITY (DAMPNESS), AND POLLUTED AIR. B) AS THE POLLUTED AIR IS REPLACED BY FRESH AIR, PEOPLE WORKING INSIDE WILL BE ACTIVE AND HEALTHY & THEIR PRODUCE WILL BE INCREASED. C) AIRIERVENTS SAVES TOTAL ELECTRICITY USED FOR POW ER EXHAUST SYSTEM. ROUND THE CLOCK IT WORKS WITHOUT ANY EXPENDITURE. 25. IN VIEW THEREOF, WE FIND MERIT IN THE CLAIM OF THE ASSESSEE THAT THE SYSTEM INSTALLED BY THE ASSESSEE IS AN ENERGY SAVIN G DEVICE AND NOT EXHAUST SYSTEM AND CONSEQUENTLY DIRECT THE ASSESSIN G OFFICER TO ALLOW DEPRECIATION @ 100% I.E. 50% FOR THE YEAR UNDER CON SIDERATION AS THE ASSESSEE HAD INSTALLED THE SAID ASSET AFTER 30.9.20 06. THE GROUND NO.1 RAISED BY THE ASSESSEE IN ITS CROSS OBJECTION IS TH US ALLOWED. 26. THE GROUND NO.2 RAISED BY THE ASSESSEE IN ITS C ROSS OBJECTION IS AGAINST THE RESTRICTION IN THE CLAIM OF DEPRECIATIO N ON TOOLS AND DYES. 27. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE HAD CLAIMED DEPRECIATION ON TOOLS AND DYES AND HAD ALSO CLAIMED ADDITIONAL DEPRECIATION ON THE SAME. HOWEVER, THE ASSESSEE WA S GETTING SOME OF THE AMOUNT OF TOOLS AND DYES REIMBURSED FROM THE BU YERS. THE ASSESSEE WAS DEBITING THE REIMBURSEMENT OF SAID TOOLS AND DY ES AS CAPITAL EXPENDITURE IN THE BOOKS OF ACCOUNT AND AS AND WHEN IT RECEIVES THE SAME, IT WAS REDUCED FROM THE OPENING BALANCE. THE ASSESSING OFFICER HELD THE ACCOUNTING TREATMENT TO BE INCORRECT AND H ELD THAT THE AMOUNT REIMBURSED SHOULD HAVE BEEN REDUCED FROM THE ADDITI ONS MADE TO TOOLS AND DYES DURING THE YEAR AND ACCORDINGLY, NO DEPREC IATION ON THE SAID TOOLS AND DYES TO THE EXTENT OF REIMBURSEMENT RECEI VED WAS ALLOWABLE. 10 THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HA D RECEIVED SUM OF RS.8,19,210/- ON ACCOUNT OF SALE/TRANSFER OF TOOLS AND DYES. THE ASSESSING OFFICER THUS DISALLOWED ADDITIONAL DEPREC IATION ON THE SAID TOOLS AND DYES OF RS.8,19,210/- @ 20% AMOUNTING TO RS.1,63,842/-. 28. THE ASSESSEE BEFORE THE CIT (APPEALS) CLAIMED T HAT THE REIMBURSEMENT WAS ON ACCOUNT OF OLD CLAIMS RECOVERE D FROM THE BUYERS ON OLD SUPPLY AND HAD NO LINKAGE WITH THE SUPPLY MA DE DURING THE YEAR. THE CIT (APPEALS) ACCEPTED THE PLEA IN RESPECT OF R ECOVERY OF RS.1,86,120/- AND HELD THAT THE ASSESSEE WAS JUSTIF IED IN REDUCING THE SAID SUM OF RS.1,86,120/- FROM THE WRITTEN DOWN VAL UE OF TOOLS AND DYES AS SUPPLIES TO THE SAID PARTIES WERE MADE IN THE PR ECEDING YEAR. HOWEVER, WITH REGARD TO THE RECOVERY OF RS.6,33,090 /- THE CIT (APPEALS) OBSERVED AS UNDER: AS REGARDS THE RECOVERY OF RS.6,33,090/- FROM AGRY MIN COMPONENT S.A., IT IS SEEN FROM THE DETAILS SUBMITTED BY THE APPELLANT TH AT DURING THE YEAR THE APPELLANT HAD CARRIED OUT WORK OF THIS CUSTOMER AND THE TOTAL AMOUNT OF DEBIT ENTRIES IN THE ACCOUNT AMOUNT TO RS.2,21,74,194/-. IT INCLUDED THE TOOLING COST OF RS.1,69,580/-DEBITED ON 13.06.2006 AND TOOLING COST OF RS.4,63,510/- DEBITED ON 8.02.007. FROM THE DETAILS SUBMITTED BY THE APPELLA NT IT IS PRIMA FACIE EVIDENT THAT THE TOOLS AND DIES WERE MANUFACTURED BY THE AP PELLANT DURING THE YEAR FOR THE WORK TO BE DONE FOR THIS CUSTOMER DURING YEAR. THE APPELLANT HAS FAILED TO SHOW THAT THESE TOOLS AND PERTAIN U THE WORK DONE D URING THE LAST YEAR AND WERE MANUFACTURED DURING LAST YEAR ON WHICH ADDITIO NAL DEPRECIATION HAD ALREADY BEEN CLAIMED. IN THESE STANCES, THE REI MBURSEMENT OF RS. 6,33,090/- RECEIVED FROM AGRYMIN IT S.A. SHOULD HAVE BEEN REDUCED FROM THE EXPENDITURE OF RS.54,28,508/- TOOLS AND DIES DURING YEAR AND NO ADDITIONAL DEPRECIATION ON THIS AMOUNT SHOULD HAVE BEEN CLAIME D. THE AO WAS THEREFORE JUSTIFIED IN DISALLOWING DEPRECIATION CLA IMED ON THIS AMOUNT OF RS.6,33, 090/- @20%. THIS GROUND OF APPEAL IS ACC ORDINGLY PARTLY ALLOWED. 29. THE ASSESSEE HAS FAILED TO MEET THE FINDINGS OF THE CIT (APPEALS) AND IN THE ABSENCE OF THE SAME WE FIND NO MERIT IN GROUND NO.2 RAISED BY THE ASSESSEE IN CROSS OBJECTION AND THE SAME IS REJ ECTED. 30. THE GROUND NO.3 RAISED BY THE ASSESSEE IN ITS C ROSS OBJECTION HAS ALREADY DECIDED BY US ALONGWITH GROUND NO.2 RAISED BY THE REVENUE AND THE SAME IS DISMISSED. 11 31. THE ISSUE IN GROUND NO.4 IS IN RELATION TO THE DISALLOWANCE WORKED OUT UNDER SECTION 14A R.W.R. 8D OF INCOME TAX RULES . THE ASSESSING OFFICER AND THE CIT (APPEALS) HAD DISALLOWED SUM OF RS.59,419/- UNDER SECTION 14A OF THE ACT R.W.R. 8D OF INCOME TAX RULE S. 32. THE LEARNED A.R. FOR THE ASSESSEE FAIRLY POINTE D OUT THAT THE DISALLOWANCE WAS ON ACCOUNT OF INTEREST ATTRIBUTABL E TO TAX FREE INVESTMENTS WHICH WERE MADE IN THE FAG OF THE YEAR AND DISALLOWANCE HAD TO BE WORKED OUT FROM THE DATE OF INVESTMENT AND NO T FOR THE FULL YEAR. 33. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANC E ON THE ORDERS OF THE AUTHORITIES BELOW. 34. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. IN VIEW OF THE CONFESSION MADE BY THE LEARNED A.R. FOR THE ASSESSEE WE UPHOLD THE DISALLOWANCE MADE UNDER SECTION 14A OF T HE ACT. HOWEVER, WE DIRECT THE ASSESSING OFFICER TO VERIFY THE CLAIM OF THE ASSESSEE THAT THE INTEREST RELATABLE TO THE PERIOD FROM THE DATE OF THE INVESTMENT TILL THE CLOSE OF THE YEAR IS TO BE COMPUTED AND DISALLO WED AND THERE IS NO MERIT IN DISALLOWING THE INTEREST RELATABLE TO THE FULL YEAR. THE GROUND NO.4 RAISED BY THE ASSESSEE IS THUS ALLOWED FOR STA TISTICAL PURPOSES. 35. IN THE RESULT, THE APPEAL OF THE REVENUE IS AND CROSS OBJECTION FILED BY THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST DAY OF JANUARY, 2013. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 31 ST JANUARY, 2013 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 12