National Aluminium Company Ltd., Bhubaneswar V. DCIT, Bhubaneswar

CO 49/CTK/2015

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 4571 (ITAT-CUTTACK)
• Duration Of Justice: 2 year(s) 7 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 23-04-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 22-09-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A K MOHAPATRA
• Assessee Lawyers: B K MAHAPATRA CA A K SABAT
• Keywords: Gift; Depreciation; Business expenditure; Principle of natural justice; Rule of consistency; Additional depreciation; Commercial expediency; Revenue expenditure; Reassessment proceedings; Capital expenditure; TDS; Set aside
• Section: 43B; 234B; 40(a)(ia); 37(1); 194C; 64; 263; 154

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI N.S.SAINI, AM & SHRI PAV AN KUMAR GADALE, JM ./ ITA NO. 343 & 392 /CTK /20 1 5 ( [ [ / ASSESSMENT YEAR :20 07 - 20 08 & 2008 - 2009 ) NAT IONAL ALUMINIUM COMPANY LIMITED, NALCO BHAVAN, P/1, NAYAPALLI, BHUBANESWAR VS. AD.CIT, RANGE - 2, BHUBANESWAR ./ ./ PAN/GIR NO. : AA ACN 7449 M ( / APPELLANT ) .. ( / RESPONDENT ) AND ./ ITA NO. 3 53 & 383 /CTK / 20 15 ( [ [ / ASSESSMENT YEAR :2007 - 2008 & 2008 - 2009 ) AD.CIT, RANGE - 2, BHUBANESWAR VS. NATIONAL ALUMINIUM COMPANY LIMITED, NALCO BHAVAN, P/1, NAYAPALLI, BHUBANESWAR ./ ./ PAN/GIR NO. : AAACN 7449 M ( / APPELLANT ) .. ( / RESPONDENT ) AND CROSS OBJECTION NO. 49 & 51 /CTK /20 15 (ARISING OUT OF ITA NOS.353&383/CTK/2015) ( [ [ / ASSESSMENT YEAR :2007 - 2008 & 2008 - 2009 ) NATIONAL ALUMINIUM COMPANY LIMITED, NALCO BHAVAN, P/1, NAYAPALLI, BHUBANESWAR VS. AD.CIT, RANGE - 2, BHUBANESWAR ./ ./ PAN/GIR NO. : AAACN 7449 M ( / APPELLANT ) .. ( / RESPONDENT ) [ /AS SESSEE BY : SHRI B.K.MAHAPATRA ,CA /A.K.SABAT ,CA /REVENUE BY : SHRI A.K.MOHAPATRA, C ITDR / DATE OF HEARING : 10 /0 4 /201 8 / DATE OF PRONOUNCEMENT 23 /0 4 /201 8 / O R D E R PER SHRI PAV AN KUMAR GADALE, JM : TH ESE ARE THE CROSS APPEAL S FILED BY THE ASSESSEE AND REVENUE AND CROSS OBJECTIONS BY THE ASSESSE E, AGAINST THE SEPARATE ORDER S OF THE ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 2 CIT(A) - 1 , BHUBANESWAR, PASSED IN IT APPEAL NO. 0176 / 1 4 - 15 & 0544/14 - 15 , DATED 7.5.2015 & 8.6.2015 FOR THE ASSESSMENT YEAR S 20 07 - 2008 & 2008 - 2009 . 2 . SINCE ISSUES IN ALL 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 FOR THE ASSESSMENT YEAR 2007 - 2008 IN ITA NO.343/CTK/2015 AS UNDER : - 1. THAT THE ORDER DATED 07.05.2015 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 IRRELEVANT CONSIDERATIONS, AGAINST NATURAL JUSTICE, CONTRARY TO FACTS, ARBITRARY, ERRONEOUS AND BAD IN LAW. 2. DI SALLOWANCE UNDER PERIPHERAL DEVELOPMENT EXPENSES RS.56,27,609/ - A. THAT ON THE FACTS AND IN THE CIRCUMSTANCES THE CASE, THE ORDER OF THE LEARNED CIT (APPEALS) IN PARTLY SUSTAINING THE DISALLOWANCE OF RS.56,27,609/ - UNDER PERIPHERAL DEVELOPMENT EXPENSES IS BASED ON IRRELEVANT CONSIDERATIONS, CONTRARY TO FACTS, ARBITRARY, ERRONEOUS AND BAD IN LAW. B THAT THE AFORESAID EXPENDITURE OF RS.56,27,609/ - HAVING BEEN INCURRED BY THE ASSESSEE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS THE SUS TAINING THE DISALLOWANCE BY THE LEARNED CIT(APPEALS) IS ON MIS - APPRECIATION OF FACTS, ARBITRARY, ERRONEOUS AND BAD BOTH ON FACTS AND IN LAW. C. THAT THE LEARNED CIT(APPEALS) HAS ERRED IN HOLDING THAT THE AFORESAID RS.56,27,609/ - IS NOT BUSINESS EXPENDITURE ARE IN THE NATURE OF DONATIONS / CHARITY AND NOT CONNECTED WITH THE RUNNING OF BUSINESS. D. THAT IN SIMILAR FACTS AND CIRCUMSTANCES, IN THE PAST YEARS, IN ASSESSEES OWN CASE, THE HONBLE ITAT HAVING DECIDED THAT THE AFORESAID EXPENDITURE ARE FULLY ALLOWA BLE, THE LEARNED CIT (APPEALS)'S ORDER IN NOT ALLOWING THE SAME IS, ARBITRARY, ERRONEOUS AND BAD BOTH ON FACTS AND IN LAW. 3. DISALLOWANCE U/S.40(A)(IA) OF THE ACT FOR WHEELING CHARGES - RS.4,37,24,505/ - A. THAT ON THE FACTS AND IN THE CIRCUMSTANCES THE CA SE, THE SUSTAINING OF THE DISALLOWANCE OF RS.4,37,24,505/ - U/S.40(A)(IA) IN RESPECT OF WHEELING CHARGES TO GRIDCO FOR TRANSMISSION OF POWER BY THE LEARNED CIT(APPEALS) IS ON MIS - APPRECIATION OF ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 3 FACTS, CONTRARY TO FACTS, ARBITRARY, UNJUSTIFIED, ERRONEOUS AN D BAD, BOTH IN THE EYE OF LAW AND ON FACTS. B. THAT THE ASSESSEE HAVING NOT VIOLATED ANY PROVISIONS OF CHAPTER XVIIB OF THE IT ACT. RELATING TO TDS IN RESPECT OF RS.4,37,24,505 TOWARDS WHEELING CHARGES FOR TRANSMISSION OF POWER, THE SAME DOES NOT FALL UNDE R THE PROVISIONS U/S.40(A)(IA) AND HENCE THE DISALLOWANCE OF RS.4,37,24,505 IS ARBITRARY, UNJUSTIFIED, ERRONEOUS AND BAD IN LAW. C . THAT IN SIMILAR FACTS AND CIRCUMSTANCES, THE HONBLE JURISDICTIONAL ITAT CUTTACK BENCH AND OTHER JUDGMENTS/ORDERS HAVING DE CIDED THAT PAYMENTS TOWARDS WHEELING CHARGES FOR TRANSMISSION OF POWER DO NOT ATTRACT TDS, THE LEARNED CIT (APPEALS) IN IGNORING/NOT FOLLOWING THE SAME AND SUSTAINING THE DISALLOWANCE OF RS.4,37,24,505/ - U/S.40(A)(IA) OF THE ACT IS ARBITRARY, ERRONEOUS AND BAD, BOTH IN THE EYE OF LAW AND ON FACTS. D. WITHOUT PREJUDICE TO GROUND ('A' TO 'C') ABOVE, THE AFORESAID AMOUNT OF RS.4,37,24,505 TOWARDS WHEELING CHARGES FOR TRANSMISSION OF POWER DO NOT FALL UNDER SECTION 194C OF THE ACT AND HENCE THE PROVISIONS U/S.4 0(A)(IA) OF THE ACT BEING NOT ATTRACTED, THE DISALLOWANCE OF RS.4,37,24,505 IS ARBITRARY, UNJUSTIFIED, ERRONEOUS AND BAD IN LAW. E. THAT WITHOUT PREJUDICE TO GROUNDS (A) TO (D) ABOVE, THE CBDT HAVING CREATED COMMISSIONERATE OF TDS AND ACCORDINGLY HAVING NO TIFIED, AS SUCH, THE PROVISIONS OF CHAPTER XV1I - B OF THE ACT FALL UNDER JURISDICTION OF TDS COMMISSIONERATE AND OFFICERS UNDER IT [FOR SHORT COM (TDS)] AND WITHOUT ANY FINDING FROM COM (TDS) THAT THE TDS IS APPLICABLE UNDER CHAPTER XVII - B OF THE ACT ON THE AFORESAID AMOUNT OF RS.4,37,24,505 TOWARDS WHEELING CHARGES FOR TRANSMISSION OF POWER, THE LEARNED AO DOES NOT HAVE ANY JURISDICTION TO DECIDE THAT TAX IS DEDUCTIBLE UNDER CHAPTER XVII - B OF THE ACT FOR THE SAME AND HENCE THE SUSTAINING OF THE DISALLOWA NCE U/S. 40(A)(7A) OF THE ACT IS NOT JUSTIFIED, WITHOUT JURISDICTION, ERRONEOUS AND BAD IN LAW. 4. DISALLOWANCE OF ADDITIONAL DEPRECATION U/S.32(L)(IIA) OF THE ACT - RS.44,82,76,006/ - A. THAT THE LEARNED CIT (APPEALS) HAS MIS - APPRECIATED THE FACTS AND HI S SUSTAINING OF DISALLOWANCE OF RS.44,82,76,006/ - UNDER ADDITIONAL DEPRECATION U/S.32(L)(IIA) OF THE I.T ACT IS CONTRARY TO FACTS, ERRONEOUS AND BAD, BOTH IN THE EYE OF LAW AND ON FACTS. B. THAT ON THE FACTS AND IN THE CIRCUMSTANCES THE CASE, THE LEARNED CIT(APPEALS) OUGHT TO HAVE ALLOWED THE CLAIM OF ADDL. DEPRECIATION OF RS.44,82,76,006/ - U/S.32(I)(IIA) OF THE ACT. 5. DISALLOWANCE OF PROVISION FOR LEAVE ENCASHMENT - U/S.43B(F) OF THE ACT - RS.7,11,48,731/ - THAT ON THE FACTS AND IN THE CIRCUMSTANCES THE C ASE, THE SUSTAINING OF THE DISALLOWANCE OF RS.7,11,48,731/ - U/S.43B(F) OF ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 4 THE ACT BY THE LEARNED CLT(APPEALS) IS ERRONEOUS AND BAD IN LAW. 6. EXPENDITURE ON DEPARTMENTAL MEETINGS, OFFICIAL LUNCH & DINNER AND COMPANY GUESTS - RS.43,12,439/ - . A. THAT THE LE ARNED CIT(APPEALS) HAS MIS - APPRECIATED THE FACTS AND HIS SUSTAINING OF DISALLOWANCE OF RS.43,12,439/ - UNDER EXPENDITURES ON DEPARTMENTAL MEETINGS, OFFICIAL LUNCH & DINNER AND COMPANY GUESTS IS BASED ON IRRELEVANT CONSIDERATIONS, CONTRARY TO FACTS, EXCESS IVE, UNJUSTIFIED, ERRONEOUS AND BAD IN LAW. B. THAT THE AFORESAID EXPENDITURE OF RS.43,12,439/ - HAVING BEEN INCURRED BY THE ASSESSEE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS, THE SUSTAINING OF THE DISALLOWANCE BY THE LEARNED CIT(APPEALS) IS ARB ITRARY, EXCESSIVE, ERRONEOUS AND BAD IN LAW. C. THAT IN SIMILAR FACTS AND CIRCUMSTANCES, IN THE PAST YEARS, IN ASSESSEES OWN CASE, THE HON'BLE 1TAT HAVING FULLY DELETED THE DISALLOWANCE MADE UNDER EXPENDITURES ON DEPARTMENTAL MEETINGS, OFFICIAL LUNCH & DIN NER AND COMPANY GUESTS, THE LEARNED CIT (APPEALS)'S ORDER IN NOT ALLOWING THE SAME IS, ARBITRARY, ERRONEOUS AND BAD BOTH ON FACTS AND IN LAW. 7. EXPENDITURE ON CEREMONIAL EXPENSES, OTHER STAFF WELFARE EXPENSES AND CULTURAL ACTIVITIES - RS. 6,18,019/ - . A. THAT THE LEARNED CIT(APPEALS) IN LIMITING THE DISALLOWANCE UNDER EXPENDITURE ON CEREMONIAL EXPENSES, OTHER STAFF WELFARE EXPENSES AND CULTURAL ACTIVITIES TO RS.6,18,019/ - @5%, IS ON MIS - APPRECIATION OF FACTS AND IS ARBITRARY, EXCESSIVE, ERRONEOUS AND BAD IN LAW. B. THAT THE AFORESAID HAVING BEEN INCURRED BY THE ASSESSEE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS, THE CIT(APPEALS) OUGHT TO HAVE ALLOWED THE EXPENDITURE IN FULL. C. THAT IN SIMILAR FACTS AND CIRCUMSTANCES, IN THE PAST YEARS, I N ASSESSEES OWN CASE, THE HONBLE ITAT HAVING FULLY DELETED THE DISALLOWANCE MADE UNDER EXPENDITURE ON CEREMONIAL EXPENSES, OTHER STAFF WELFARE EXPENSES AND CULTURAL ACTIVITIES, THE LEARNED CIT (APPEALS)'S ORDER IN NOT ALLOWING THE SAME IN FULL IS, ARBI TRARY, ERRONEOUS AND BAD BOTH ON FACTS AND IN LAW. 8. DISALLOWANCE UNDER OTHER MISC. EXPENSES - RS.34,85,383/ - A. THAT THE LEARNED CIT(APPEALS) HAS MIS - APPRECIATED THE FACTS AND HIS SUSTAINING OF DISALLOWANCE OF RS.34,85,383/ - UNDER OTHER MISC. EXPENS ES IS CONTRARY TO FACTS, EXCESSIVE, UNJUSTIFIED, ERRONEOUS AND BAD IN LAW. ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 5 B. THAT THE AFORESAID EXPENDITURE OF RS.34,85,383/ - HAVING BEEN INCURRED BY THE ASSESSEE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS, THE SUSTAINING OF THE DISALLOWANCE BY THE LEARNED CIT(APPEALS) IS ARBITRARY, EXCESSIVE, ERRONEOUS AND BAD IN LAW. 9. DISALLOWANCE UNDER 'PRIOR PERIOD ADJUSTMENTS - RS.2,45,25,765/ - A. THAT THE LEARNED CIT(APPEALS) HAS MIS - APPRECIATED THE FACTS AND HIS SUSTAINING OF RS.2,45,25,765/ - UNDER 'PRIOR PERIOD ADJUSTMENTS' IS CONTRARY TO FACTS, ARBITRARY, ERRONEOUS AND BAD, BOTH IN THE EYE OF LAW AND ON FACTS. B. THAT THE LEARNED AO HAVING ACCEPTED THE CREDITS UNDER THE NOMENCLATURE PRIOR PERIOD ADJUSTMENTS, THE LEARNED CIT(APPEALS) IS UNJUSTIF IED AND HAS ERRED IN NOT ALLOWING THE DEBITS UNDER THE SAID PRIOR PERIOD ADJUSTMENTS C. THAT WITHOUT PREJUDICE TO GROUNDS (A) TO (C) ABOVE, ASSUMING BUT NOT ADMITTING THAT THE SAID AMOUNT OF RS.2,45,25,765/ - IS FOR PAST YEARS, IT IS SUBMITTED THAT THE R ATES OF INCOME TAX FOR THE ASSESSMENT UNDER CONSIDERATION BEING EITHER EQUAL TO OR LOWER THAN THE RATES IN THE PAST ASSESSMENT YEARS, AS THE EXPENSES DEBITED UNDER THE SAID PRIOR PERIOD EXPENDITURE ARE OTHERWISE ALLOWABLE IN THE PAST YEARS, THE AFORESAID AMOUNT OF RS.2,45,25,765/ - , EVEN THOUGH DEBITED TO THE P/L ACCOUNT OF THE CURRENT YEAR OUGHT TO BE ALLOWED. 10. DISALLOWANCE OF AMOUNTS WRITTEN OFF IN RESPECT OF CLAIMS/RECEIVABLES - RS.1,38,08,341/ - A. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE SUSTAINING OF THE ADDITION/ DISALLOWANCE OF RS. 1,38,08,341/ - IN RESPECT OF AMOUNTS WRITTEN OFF TOWARDS CLAIMS/ RECEIVABLES/ ADVANCES BY THE LEARNED CIT(APPEALS) IS ARBITRARY, ERRONEOUS, BAD, BOTH IN THE EYE OF LAW AND ON FACTS. B. THAT THE LEARNED CIT(APPEALS) HAS MIS - APPRECIATED THE FACTS AND HAS ERRED IN HOLDING THAT THE AFORESAID RS.1,38,08,341/ - IS ON CAPITAL ACCOUNT. 11. DISALLOWANCE UNDER SECTION 43B - ELECTRICITY DUTY - RS.47,35,67,572/ - A. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE SUSTAINING OF ADDITION /DISALLOWANCE OF RS.47,35,67,572/ - UNDER ELECTRICITY DUTY U/S. 43B OF THE I.T ACT BY THE LEARNED CIT(APPEALS) IS ERRONEOUS AND BAD, BOTH IN THE EYE OF LAW AND ON FACTS. B. THAT WITHOUT PREJUDICE TO (A) ABOVE, THE LEARNED CIT(A PPEALS) HAS MIS - APPRECIATED THE FACTS AND THAT AMOUNTS HAVING BEEN DEPOSITED IN TO THE DESIGNATED BANK ACCOUNTS AS PER DIRECTION OF THE HONBLE ORISSA HIGH COURT, HIS ORDER THAT THE AMOUNTS SO ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 6 DEPOSITED ARE LIABLE FOR DISALLOWANCE U/S.43B OF THE ACT IS CON TRARY TO FACTS, ERRONEOUS AND BAD IN LAW. 3 . WE SHALL TAKE INTO CONSIDERATION THE FACTS NARRATED IN ASSESSEES APPEAL IN ITA NO. 343/CTK/2015 FOR THE ASSESSMENT YEAR 2007 - 2008 FOR DECIDING THE APPEALS AND CROSS OBJECTIONS . 4 . FACTS IN BRIEF ARE THAT THE AS SESSEE IS A PUBLIC SECTOR COMPANY WHEREIN 87.15% OF THE SHARES ARE OWNED BY THE GOVERNMENT OF INDIA. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MINING OF BAUXITE, EXTRACTION OF ALUMINA AND PRODUCTION OF ALUMINIUM AND RUNS A CAPTIVE POWER PLANT AND THE SUR PLUS POWER FROM WHICH IS SOLD . F OR THE ASSESSMENT YEAR 2007 - 08 , T HE ASSESSEE HAS FILED ITS RETURN OF INCOME ELECTRONICALLY ON 31.10.2007 WITH TOTAL INCOME OF RS. 3639,04,50,026/ - . SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE S U/S.143(2) & 14 2(1) WERE ISSUED. IN COMPLIANCE THE AR OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FILED EXPLANATIONS AND DETAILS AND T HE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S.143(3) OF THE ACT , DATED 31.12.2009, INTER ALIA, MAKING VARIOUS ADDITIONS/DISALLOW ANCES. 5 . AGAINST THE ADDITIONS MADE BY THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). IN THE APPELLATE PROCEEDINGS THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AO AND FILE D DETAILED WRITTEN SUBMISSIONS. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE AND FINDINGS OF AO HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 6 . AGAINST THE ORDER OF CIT(A), BOTH THE ASSESSEE AND REVENUE ARE IN APPEAL BEFORE THE TRIBUNAL. ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 7 7 . FIRST GROUND WITH RESPECT TO THE DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE CIT(A) UNDER PERIPHERAL DEVELOPMENT EXPENSES , IN THE ASSESSMENT PROCEEDINGS, T HE AO OBSERVED THAT THE PERIPHERAL DEVELOPMENT CLAIMED BY THE ASSESSEE ARE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSE AND DISALLOWED THE CLAIM . IN APPEAL THE CIT(A) HAS PARTLY ALLOWED THE PERIPHERAL DEVELOPMEN T EXPENSES AND SUSTAINED THE DISALLOWANCE TO THE EXTENT OF RS. 56,27,609/ - 8 . BEFORE US, L D. AR SUBMITTED THAT THE PERIPHERAL EXPENDITURE WAS INCURRED THROUGH CORPORATE OFFICE AT BHUBANESW AR AMOUNTING TO RS.56,27,609/ - . THE CIT(A) HAS CATEGORISED THAT THE PERIPHERAL DEVELOPMENT EXPENDITURE DOES NOT COVER AS PER THE GOVT. OF ODISHA NOTIFICATION AND THE EXPENSES ARE IN THE NATURE OF DONATION, CHARITY AND ARE NOT CONNECTED WITH THE BUSINESS A ND THE SUBSTANTIAL PAYMENT S WERE MADE TO VARIOUS INSTITUTIONS. LD. AR FURTHER EMPHASIZED THAT THE PERIPHERAL EXPENDITURE HAS BEEN ALLOWED FOR THE EARLIER ASSESSMENT YEARS AND THE ASSESSEE HAS DISCLOSED THESE FACTS IN BOTH ASSESSMENT AND IN THE APPELLATE PR OCEEDINGS. FURTHER THE PERIPHERAL EXPENDITURE WAS ALLOWED IN ASSESSEES OWN CASE IN ITA NO. 66 - 68 , 459 , 511 & 512/CTK/2003 ORDER DATED 30.11.2015 AND IN SUBSEQUENT YEARS AND SU PPORTED WITH JUDICIAL DECISIONS . 9 . CONTRA, LD. DR RELIED ON THE ASSESSMENT ORDER OF THE AO. 1 0 . WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE HAS CLAIMED THE PERIPHERAL EXPENDITURE OF RS.8,19,11,108/ - AND THE AO HAS MADE THE ADDITIONS WITHOUT CONSIDERING ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 8 THE NATURE OF EXPENDITURE AND ITS BENEFIT TO T HE ASSESSEE. THE CIT(A) AFTER VERIFYI NG THE FACTS AND CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE IN THIS REGARD GRANTED THE RELIEF BUT RESTRICTED PERIPHERAL EXPENDITURE IN RESPECT OF OTHER AREAS OTHER THAN THE EXPENDITURE INCURRED THROUGH CORPORATE O FFICE. LD. AR REFERRED TO THE PAPER BOOK AND THE NATURE OF EXPENDITURE INCURRED BY THE CORPORATE OFFICE. LD. AR SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE EARLI ER ORDER OF THE TRIBUNAL. ON A QUERY FROM THE BENCH TO SUBSTANTIATE THE EXPENDITURE INCURRED FROM THE CORPORATE OFFICE, THE LD. AR REFERRED TO THE PAPER BOOK AND SUBMITTED THAT ASSESSEE HAS COMPLETE INFORMATION OF THE EXPENDITURE INCURRED IN PERIPHERAL AREA OF VARIOUS DISTRICTS AND TH E AREA INCLUDES TALUKA AND VILLAGES WHE RE COMPANYS ACTIVITIES ARE CARRIED OUT AND THIS EXPENDITURE IS INCURRED ON THE ORDER OF THE GOVERNMENT OF ODISHA. IT IS WHOLLY AND EXCLUSIVELY USED FOR THE PURPOSE OF BUSINESS. THE LD. AR REFERRED TO THE NATURE OF THE EXPENDITURE INCURRED THROUGH THE CORP ORATE OFFICE AT BHUBANESWAR AND FURTHER SUBSTANTIATE D THAT THE ASSESSEE HAS EVIDENCE TO PROVE THE CLAIM. THEREFORE, W E, CONSIDERING THE APPARENT FACTS AND MATERIAL ON RECORD, ARE OF THE OPINION THAT THE CLAIM OF THE ASSESSEE IN RESPECT OF INCURRING OF EXPE NDITURE AT PERIPHERAL AREAS AS PER THE ORDER OF THE GOVT. IS NOT D ISPUTED AND THE REASONS RECORDED BY THE LOWER AUTHORITIES IN RESPECT OF SUSTENANCE OF THE ADDITION TO THE EXTENT OF RS.56,27,609/ - CANNOT BE OVERLOOKED. ACCORDINGLY, IN THE INTEREST OF JUSTI CE, WE REMIT THIS ISSUE TO THE FILE OF AO TO VERIFY THE NATURE OF ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 9 EXPENDITURE INCURRED ON THE PERIPHERAL AREAS AND DECIDE THE SAME ON MERITS. THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 11 . NEXT GROUND IS WITH RESPECT TO DISALLOWANCE OF WHEE LING CHARGES FOR NON - DEDUCTION OF TDS UNDER SECTION 40(A)(IA) AND 194C OF THE ACT . 12 . THE AO FOUND THAT THE ASSESSEE HAS PAID WHEELING CHARGES OF RS. 4,37,24,505/ - TO GRIDCO WITHOUT DEDUCTION OF TDS UNDER THE PROVISIONS OF SECTION 194C. THE ASSESSEE EXPLAI NED THAT WHEELING CHARGES ARE PAID AS PER THE TARIFF FIXED BY THE GRIDCO FOR THE TRANSMISSION OF POWER FROM ITS CAPTIVE POWER PLANT TO DAMANJODI AND POWER TRANSMISSION CHARGES DOES NOT ATTRACT THE PROVISIONS OF SECTION 194C AND NO DEDUCTION IS MADE, WHEREA S THE AO FOUND THE WHEELING CHARGES ARE CLEARLY SUBJECT TO PROVISIONS OF SECTION 194C AS THERE WAS A CONTRACTUAL PAYMENT AND MADE ADDITION. 1 3 . ON APPEAL, THE CIT(A) DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE AND CONFIRMED THE FINDINGS OF THE AO. 14 . BEFORE US, LD. AR EMPHASIZED THAT THE ASSESSEE HAS PAID WHEELING CHARGES TO GRIDCO AND THE TDS PROVISIONS UNDER SECTION 194C OF THE ACT DOES NOT APPLY AND IN THE SUBSEQUENT ASSESSMENT YEAR THE EXPENDITURE OF WHEELING CHARGES WHERE THE INTERPRETATION WAS M ADE ON APPLICABILITY OF PROVISIONS U/S.194 - I AND 194 - J OF THE ACT AND THE CIT(A) HAS ALLOWED IN ASSESSEES OWN CASE . FURTHER , THE LD. AR SUBMITTED THAT IN THE CASE OF RECIPIENT OF WHEELING CHARGES THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF GRIDCO VS. ACIT IN ITA NO.404/CTK/2011 ORDER DATED 07.11.2011 HAS ALLOWED THE CLAIM A ND PRAYED FOR ALLOWING THE CASE . ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 10 1 5 . CONTRA, LD. DR OBJECTED TO THE SUBMISSIONS ON THE NON - APPLICABILITY OF SECTION 194C OF THE ACT AND ALSO THE CIT(A) IN THE SUBSEQUENT ASSESSME NT YEARS HAS DEALT ON THE SECTIONS 194 - I & 194 - J AND NOT SECTION 194C OF THE ACT AND PRAYED FOR THE DISMISSAL. 1 6 . WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE SOLE ISSUE IN THIS GROUND RELATES TO APPLICABILITY OF TDS PROVISIONS TO WHEELING CHARGES PAID AND PROPER SECTION UNDER WHICH THE TDS HAS TO BE DEDUCTED. LD. ARS CONTENTION IS THAT WHEELING CHARGES DOES NOT ATTRACT TDS PROVISIONS, AND, THEREFORE, NO TDS HAS BEEN DEDUCTED BY THE ASSESSEE, WHEREAS THE LD. DRS CONTENTION IS T HAT THE ISSUE IS COVERED BY THE PROVISIONS OF SECTION 194C OF THE ACT AND THE LD. AR EMPHASISED THAT WHEELING CHARGES RECEIVED BY THE GRIDCO IN THEIR CASE HAS BEEN ALLOWED BUT THE FACTS REMAIN THAT THE ASSESSEE IS A PAYER AND THE GRIDCO IS PAYEE. THEREFORE , WE ARE OF THE OPINION THAT IF THE RECIPIENT GRIDCO HAS OFFERED THE SAME IN THEIR INDIVIDUAL ASSESSMENT AND SUBJECTED TO THE INCOME TAX, AS PER THE SECOND PROVIS O TO SECTION 40 SUB - CLAUSE (IA) OF CLAUSE (A) , WHICH WAS INSERTED BY THE FINANCE ACT, 20 12 WIT H EFFECT FROM 1ST APRIL, 20 13 WHICH READS AS UNDER: 40 (A)(IA) . NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTIONS 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTED THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' ** ** ** (IA) THIRTY PER CENT OF ANY SUM PAYABLE TO A RESIDENT, ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII - B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE SPECIFIED IN SUB - SECTION (1) OF SECTION 139. ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 11 PROVIDED FURTHER THAT WHERE AN ASSESSEE FAILED TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISION OF CHAPTER - XVII - B ON ANY SUCH SUM BUT IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER THE FIRST PROVISO TO SUB - SECTION (1) OF SECTION 201, THEN FOR THE PURPOSE OF THIS SUB - CLAUSE IT SHALL BE DEEMED THAT THE ASSESSEE HAS DEDUCTED AND PAID THE TAX ON WHICH SUM OF THE DATE OF FURNISHING OF RETURN OF INCOME BY THE RESIDENT PAYEE REFERRED TO IN THE SAID PROVISO . 17. WE FOUND THE ABOVE PROVISION IS EFFECTIVE RETROSPECTIVELY AS PER THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP (P) LTD. [2015] 61 TAXMANN.COM 45 (DELHI) HELD THAT THE PROVISO ADDED U/S.40(A)(IA) OF THE INCO ME TAX ACT,1961 WAS RETROSPECTIVE IN OPERATION AND THE ASSESSEE IS ENTITLED TO THE BENEFIT OF THE SAME. ACCORDINGLY, IF THE ASSESSEE SUBSTANTIATES WITH EVIDENCE THAT GRIDCO HAS OFFERED TH E INCOME IN THE IR INCOME TAX ASSESSMENT, THE ASSESSEE CANNOT BE TREAT ED A S ASSESSEE IN DEFAULT. ACCORDINGLY, WE ARE OF THE OPINION THAT THE MATTER NEEDS TO BE EXAMINED AND WE REMIT THIS DISPUTED INCOME TO THE FILE OF THE AO AND THE ASSESSEE SHALL COOPERATE AND SUBMIT THE INCOME TAX PARTICULARS IN THE ASSESSMENT PROCEEDING S FOR EARLY DISPOSAL OF THE CASE AND THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 18. IN THE NEXT GROUND OF APPEAL THE GRIEVANCE OF THE ASSESSEE IS THAT THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF ADDITIONAL DEPRECIATIO N U/S.32(1)(IIA) OF THE ACT. THE AO IN THE COURSE OF ASSESSMENT PROCEEDINGS BASED ON THE INFORMATION OF THE NEW PLANT & MACHINER Y FOUND THAT DATES OF ACQUISITION OF VARIOUS PLANT AND MACHINERIES ARE THE SAME AS THE DATES OF INSTALLATION. THE ASSESSEE EXPLA INED THAT THE PLANT AND MACHINERIES WHICH ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 12 ARE ASSEMBLED OUT OF NUMEROUS SMALL PARTS, RAW MATERIALS AND MACHINES, THE DATES OF INSTALLATION SHOULD BE TAKEN AS THE DATES OF ACQUISITION AS WELL WHERE THE LD. AO OBSERVED THAT I N ABSENCE OF THE DATES OF ACQUISI TION OF THE PLANTS AND MACHINERIES THE ASSESSEE CANNOT BE PRESUMED TO HAVE COMPLIED WITH THE REQUIREMENT OF ACQUISITION TO BE MADE AFTER 31.03.2005, THEREFORE, DISALLOWED THE CLAIM OF ADDITIONAL DEPRECIATION. 19. ON APPEAL, THE CIT(A) RELYING THE ORDER OF HIS PREDECESSOR IN ASSESSES OWN CASE FOR THE ASSESSMENT YEAR 2006 - 07 IN ITA NO.0132/08 - 09 DTD. 31.12.2009, UPHELD THE DISALLOWANCE. 20. AGAINST THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 21. LD. AR SUBMITTED THAT THE ASSESSEE IS ELIGIBLE FOR CLAIM OF ADDITIONAL DEPRECIATION AND ASSESSEE ALSO SUBSTANTIATED ITS CLAIM BEFORE THE LOWER AUTHORITIES. LD. AR FURTHER SUBMITTED THAT SIMILAR ISSUE HAS BEEN DECIDED BY THIS BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2005 - 06 & 2006 - 07 IN ITA NOS.196&91/CTK/2010, IN ORDER DATED 29.06.2012 . 22. CONTRA, LD. DR RELIED ON THE ORDERS OF LOWER AUTHORITIES. 2 3 . WE HAVE HEARD THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSE ES OWN CASE FOR THE ASSESSMENT YEARS 2005 - 06 & 2006 - 07 IN ITA NOS.196&91/CTK/2010, ORDER DATED 29.06.2012 HAS DEALT THE ISSUE AND HELD AS UNDER : - 26. HAVING HEARD BOTH PARTIES, WE FIND THAT SIMILAR ISSUE HAD COME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2004 - 05 AND THE TRIBUNAL VIDE ITS ORDER DATED 25.5.2012 RESTORED THE MATTER TO THE FILE OF THE AO FOR RECONSIDERATION AND ALLOW THE CLAIM OF ADDITIONAL DEPRECIATION ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 13 U/S.32(1 )(IIA) ON THE PLANT AND MACHINERY ACQUIRED AND INSTALLED AFTER 1.4.2002, OBSERVING AS UNDER: 'HAVING CONSIDERED THE RIVAL SUBMISSIONS, WE FIND THAT ON A PLAIN READING OF SECTION 31(1 )(IIA) INSERTED BY THE FINANCE ACT, 2002, IT IS DEAR THAT BOTH ACQUISITION AND INSTALLED OF PLANT OR MACHIN ERIES SHOULD TAKE PLACE AFTER 31.3.2002 TO ENABLE THE ASSESSEE TO CLAIM ADDITIONAL DEPRECIATION OF 15% IF IT ACHIEVES SUBSTANTIAL EXPANSION BY WAY OF INCREASE IN THE INSTALLED CAPACITY BY NOT LESS THAN 25% IN THE PREVIOUS YEAR. THE RPU UNIT AS CONTENDED BY THE ASSESSEE THOUGH ACQUIRED BY THE ASSESSEE ON AMALGAMATION WHICH THE AMALGAMATED COMPANY HAD STARTED COMMENCEMENT OF INSTALLATION OF THE SAID UNIT. THE ASSESSEE ALSO CONTENDED BEFORE US THAT TO START THE UNIT, MANY PLANT & MACHINERY WERE ACQUIRED AND IN STALLED AFTER 1.4.2002 (DURING F.Y. 2002 - 03 AND 2003 - 04) ENABLING THE UNIT TO BECOME OPERATIVE AND CAPABLE O MANUFACTURING ROLLED PRODUCTS FOR COMMERCIAL PURPOSE. SUCH SUBMISSION WAS ALSO MADE BEFORE THE AUTHORITIES BELOW BUT WE FIND THAT ASSESSING AUTHOR ITIES HAVE NOT EXAMINED THIS ASPECT OF THE CASE WHETHER ANY SUCH PLANT AND MACHINERY ACQUIRED AND INSTALLED AFTER 1.4.2002 IN THE SAID PLANT BY THE ASSESSEE. THEREFORE, FINDING F ORCE IN THE CONTENTION OF ID A.R. OF THE ASSESSEE, WE RESTORE THIS ISSUE O THE FILE OF THE AO FOR RECONSIDERATION IN THE LIGHT OF ABOVE OBSERVATION AND ALLOW THE CLAIM OF ADDITIONAL DEPRECIATION U/S.32( 1 )(IIA) ON THE PLANT AND MACHINERY ACQUIRED AND INSTALLED AFTER 1.4.2002 ENABLING THE UNIT TO BECOME OPERATIVE AND CAPABLE OF MANUFA CTURING RPU FOR COMMERCIAL PURPOSE.' 2 7. CONSISTENT WITH THE VIEW TAKEN BY THE TRIBUNAL IN THE PRECEDING ASSESSMENT YEAR, WE RESTORE THE MATTER TO THE FILE OF THE AO UNDER SIMILAR OBSERVATION FOR A.Y. 2006 - 07. THIS GROUND IS ALLOWED FOR STATISTICAL PURPO SES. HOWEVER, WE DO NOT FIND MERIT IN THE CONTENTION OF ID CIT(A) IN ARBITRARILY DISA LL OWING THE ADDITIONAL DEPRECIATION CLAIMED IN ACCORDANCE WITH LAW WITHOUT CONTROVERTING FACTS AS HAVE BEEN BROUGHT ON RECORD AS PER LAW AND THE DIRECTIONS OF THE TRIBUNAL . THE SAME IS DIRECTED TO BE DELETED FOR THE ASSESSMENT YEAR 2005 - 06. RESPECTFULLY FOLLOWING THE ORDER OF THE COORDINATE BENCH OF TH E TRIBUNAL, WE RESTORE THIS MATTER TO THE FILE OF THE AO FOR FRESH ADJUDICATION IN RESPECT OF THE CLAIM OF ADDITIONAL DEPR ECIATION U/S.32(1)(IIA) OF THE ACT AND T HIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 2 4 . NEXT GROUND OF APPEAL IN RESPECT OF CONFIRMATION OF DISALLOWANCE OF PROVISION FOR LEAVE ENCASHMENT U/S.43B(F) OF THE ACT. ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 14 25. THE AO ON PE RUSAL OF FINANCIAL STATEMENTS FOUND THAT THE ASSESSEE HAS CLAIMED PROVISION FOR LE AVE ENCASHMENT IN THE BOOKS OF ACCOUNTS AND THE ASSESSEE HAS NOT MADE DISALLOWANCE AS PER PROVISION OF SECTION 43B OF THE ACT. THE L D. AO DEALT ON THE SECOND PROVISION OF SEC TION 43B(F) OF THE ACT AND RELIED ON THE JUDICIAL DECISIONS AND MADE THE DISALLOWANCE. IN APPEAL THE CIT(A) CONFIRMED THE ACTION OF THE AO. 26. BEFORE US, LD. AR SUBMITTED THAT THE MATTER HAS BEEN CONSIDERED BY THE COORDINATE BENCH OF THE TRIBUNAL AND, THE REFORE, THIS GROUND SHOULD BE ALLOWED. 27. ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS OF LOWER AUTHORITIES. 28. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE HAS MADE THE PROVISION FOR LE AVE ENCASHMENT AND THE PROVI SION WAS NOT ADDED BACK IN THE COMPUTATION OF INCOME. 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 HONBLE 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. ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 15 2 9 . WE CONSIDERING THE RATIO OF THE DECISION AND THE FACTS TO THE PRESENT 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. 30 . THE ASSESSEE HAS RAISED THE GROUND NO.6, 7 & 8 IN RESPECT OF DISALLOWANCE OF EXPENDITURE ON DEPARTMENTAL MEETINGS, OFFICIAL LUNCH AND DINNER AND COMPANY GUESTS AND THE GROUND WITH REGARD TO EXPENDITURE ON CEREMONIAL EXPENSES, OTHER STAFF WELFARE EXPENSES AND CULTURAL ACTIVITIES AND ALSO DISALLOWANCE UNDER OTHER M ISCELLANEOUS EXPENSES. 31 . THE AO FOUND THAT THE EXPENSES CLAIMED BY THE ASSESSEE ARE NOT COVERED UNDER ANY OTHER HEAD OF MISCELLANEOUS EXPENSES, THEREFORE, DISALLOWED 20% OF SUCH OTHER EXPENSES. FURTHER THE AO DISALLOWED 30% OF THE EXPENSES CLAIMED ON DEP ARTMENTAL MEETINGS, OFFICIAL LUNCH AND DINNER AND COMPANY GUESTS AND FURTHER ON CEREMONIAL EXPENSES, OTHER STAFF WELFARE EXPENSES AND CULTURAL ACTIVITIES. 32 . IN APPEAL, T HE CIT(A) HAS SUSTAINED THE DISALLOWANCES. 33 . AGAINST THE ORDER OF CIT(A), THE ASSES SEE IS IN APPEAL BEFORE US. 34 . LD. AR SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2005 - 06 & 2006 - 07 IN ITA NOS.196&91/CTK/2010, ORDER DATED 29.06.2012 AND RELIED ON THE PAPER BOOK . 35 . CONTRA, LD. DR SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 36 . WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE COORDINATE BENCH OF THE TRIBUNAL IN ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 16 ASSESSEES OWN CASE FOR THE ASSESSMENT Y EAR 2005 - 06 & 2006 - 07 ITA NOS.196&91/CTK/2010, ORDER DATED 29.06.2012 HAS OBSERVED AS UNDER : - 41. THE NEXT COMMON ISSUE IS RELATING TO OTHER MISC. EXPENSES ON ESTIMATE BASIS FOR BOTH THE ASSESSMENT YEARS. 42. THIS ISSUE HAS BEEN CONSIDERED BY THE TRIBUNA L IN ASSESSEE'S OWN CASE TOR ASSESSMENT YEAR 2004 - 05 IN I.T.A. NO.191/CTK/2008 ORDER DATED 25.5.2012, WHEREIN, THE AO DISALLOWED 20% ON ESTIMATE BASIS AND ID CTF(A) RESTRICTED THE DISALLOWANCE TO RS.3 LAKHS, WHICH WAS UPHELD BY THE TRIBUNAL AS A TOKEN AMOU NT ON THE FACTS. IN THE ASSESSMENT YEARS UNDER CONSIDERATION, ON VERIFYING THE DETAILS FILED, THE AO DISALLOWED 20% ON ESTIMATE BASIS AND ID CFT(A) CONFIRMED THE ACTION OF AO. HENCE, IN CONSISTENT VIEW TAKEN BY THE TRIBUNAL, WE RESTRICTED THE DISALLOWANCE TO RS. 10,00,000 FOR BOTH THE ASSESSMENT YEARS UNDER CONSIDERATION. THIS GROUND FOR BOTH THE ASSESSMENT YEARS IS PARTLY ALLOWED. 43. THE NEXT COMMON ISSUE RELATING TO BOTH THE ASSESSMENT YEARS IS WITH RESPECT TO DISALLOWANCE UNDER EXPENSES ON DEPARTMENTA L MEETINGS, OFFICIAL LAUNCH & DINNER AND COMPANY GUESTS' ON ESTIMATE BASIS @ 30%. 44. FACTS IN BRIEF ARE THAT FOR ASSESSMENT YEAR 2006 - 0 7, THE ASSESSEE HAS CLAIMED RS. 1,27,44,828, TOWARDS EXPENSES ON DEPARTMENTAL MEETING, OFFICIAL LAUNCH AND DINNER AND EX PENDITURE ON OFFICIAL GUESTS. B EFORE THE AO, DETAILS OF EXPEND ITURE INCURRED HAVE BEEN FLED IN RESPECT OF CORPORATE OFFICE, CHENNAI AND VIZAG OFFICES AND DAMANJODI UNIT. HOWEVER, IT .WAS OBSERVED BY THE AO THAT NO DETAILS WERE FLED IN RESPECT OF THE SMELTE R UNIT, CPP, DELHI AND KOLKATA OFFICES. SINCE, FULL DETAILS WERE NOT FURNISHED WITH PROPER EVIDENCE, THE AO OBSERVED THAT TOTAL EXPENDITURE HAS NOT BEEN INCURRED - WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. IT WAS IN THIS BACKDROP THAT THE ASSESSI NG OF FI CER, FOR THE FIRST TIME, HAS DISALLOWED 30% OF THE TOTAL CLAIM FOR THE ASSESSMENT YEAR 2006 - 07, WHICH COMES TO RS.38,23,448 ON ESTIMATE BASIS. IN THE FIRST APPEAL, ID CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER ON THE GROUND THAT FULL DETAI LS WERE NOT FURNISHED. IN THE ASSESSMENT YEAR 2005 - 06, THE AO DID NOT DISALLOW THE EXPENSES UNDER THIS HEAD. HOWEVER, ID CIT(A) SUO - MOTO, WITHOUT GIVING ANY NOTICE FOR ENHANCEMENT , DISALLOWED 30% ON ESTIMATE BASIS. AGGRIEVED, ASSESSEE IS IN FURTHER APPEAL BEFORE US. 45. IT WAS SUBMITTED BY ID A.R. THAT WHILE DISALLOWING 30% OF THE TOTAL CLAIM, NO ADEQUATE OPPORTUNITY WAS PROVIDED TO THE ASSESSEE FOR FURNISHING THE PARTICULARS. HE SUBMITTED THAT THE AO HAS NOT POINTED, OUT A SINGLE INSTANCE FOR DISALLOWING THE SAME. HE SUBMITTED THAT KEEPING IN VIEW THE SIZE AND THE NATURE OF BUSINESS ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 17 OF THE ASSESSEE COMPANY AND PARTICULARLY BEING A CENTRAL GOVERNMENT PUBLIC SECTOR COMPANY, ITS EXPENSES ARE FULLY SUPPORTED BY BILLS/VOUCHERS AND IS SUBJECTED TO VARIOUS RULES, REGULATIONS, AUDITS BOTH INTERNAL, STATUTORY AS WELL AS C& AG. HE SUBMITTED THAT ASSESSEE COMPANY BEING A CORPORATE ENTITY THERE C ANNOT BE ANY ELEMENT OF PERSONAL EXPENSES DEBITED TO PROFIT AND LOSS ACCOUNT PARTICULARLY IN VIEW OF THE CATEGORICAL REQUIREM ENT U/S.227(LA)(E) OF THE COMPANIES ACT, 1956. LD A.R. SUBMITTED THAT FROM A.Y. 2006 - 07, FRINGE BENEFIT TAX HAS BECOME APPLICABLE & THE COMPANY PAYS FRINGE BENEFIT TAX ON ABOVE ITEMS ON AMOUNT FIXED AS PER ACCOUNTING POLICIES AND QUESTION OF ADHOC DISALLOW ANCE AGAIN DOES NOT ARISE WHEN SUCH DISALLOWANCE WAS NEVER THERE IN ANY OF THE EARLIER ASSESSMENTS COMPLETED. HE SUBMITTED THAT SINCE THE ADDITION HAS BEEN MADE ON ESTIMATE BASIS WITHOUT BRINGING INTO RECORDS ANY MATERIAL EVIDENCE, THE SAME DESERVES TO BE DELETED. 46. ON THE OTHER HAND, ID D.R. SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 47. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND FORCE IN THE SUBMISSION OF ID A.R. THAT FRINGE BENEFIT TAX BECOMES APPLICABLE FROM A.Y. 2006 - 07. UNDISPUTEDLY, NO DISALLOWANCE - WAS MADE BY THE AUTHORITIES BELOW IN THE PRECEDING ASSESSMENT YEARS. ONLY IN THE ASSESSMENT YEAR 2006 - 07, FOR THE FIRST TIME, 30% OF THE DISALLOWANCE ON THE TOTAL CLAIM WAS MADE IN THE ASSESSMENT YEAR 2006 - 07 FOR THE FIRST TIME IN THE A.Y. 2005 - 06, THIS DISALLOWANCE WAS MADE BY THE ID CIT ( A) AND NOT THE AO. WE ALSO FIND FORCE IN THE SUBMISSIONS OF ID COUNSEL FOR ASSESSEE THAT ASSESSEE BEING A CENTRAL GOVERNMENT PUBLIC SECTOR COMPANY, ITS EXPENSES ARE FULLY SUPPORTED BY BILLS/VOUCHERS. THERE CANNOT BE ANY DEVIATION IN THE RULES AND REGULATIONS FOR COMPENSATING PERSONAL EXPENSES AS A MATTER OF CONTROL. SINCE THE FRINGE BENEFIT TAX APPLICABLE FROM A.Y. 2006 - 07, THE ASSESSEE PAID THE TAX ACCORDINGLY, I N VIEW THIS WE ARE O F THE CONSIDERED VIEW THAT THERE IS NO REASON TO DISALLOW 30% ON THE TOTAL CLAIM MADE BY THE ASSESSEE ON AN ESTIMATE BASIS. ACCORDINGLY, WE DIRECT THE AO TO DELETE THE SAME. FOR THE ASSESSMENT YEAR 2005 - 06, AS THE ID CIT(A) ENHANCED WITHOUT FOLLOWING PROPE R PROCEDURE AS PER THE INCOME TAX ACT FOR A FFORDING OPPORTUNITY, WE HAVE NO REASON TO SUSTAIN THE SAME AND DIRECT THE DELETION THEREOF. THIS GROUND IS ALLOWED FOR BOTH THE ASSESSMENT YEARS. 48. THE NEXT COMMON ISSUE RELATING TO BOTH THE ASSESSMENT YEARS I S WITH RESPECT TO DISALLOWANCE UNDER 'CEREMONIAL EXPENSES, OTHER STAFF WELFARE EXPENSES AND CULTURAL ACTIVITIES' ON ESTIMATE BASIS. 49. FACTS IN BRIEF ARE THAT FOR ASSESSMENT YEAR 2005 - 06 AND 2006 - 07, THE ASSESSEE HAS CLAIMED RS.50,06,926 AND RS.88,89,753 , RESPECTIVELY TOWARDS EXPENSES UNDER 'CEREMONIAL EXPENSES, OTHER STAFF WELFARE EXPENSES AND CULTURAL ACTIVITIES'. ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 18 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT SOME SAMPLE DETAILS RELATING TO EXPENDITURE INCURRED IN CORPO RATE OFFICE WERE PRODUCED. IN THE ABSENCE OF FULL DETAILS, THE AO DISALLOWED 30% OF THE TOTAL CLAIM MADE BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2006 - 06. HOWEVER, HE DID NOT DISALLOW IN THE ASSESSMENT YEAR 2005 - 06. IN THE FIRST APPEAL, ID CIT(A) RESTRICTED THE DISALLOWANCE RS.5,00,000 FOR A.Y. 2006 - 07, HOWEVER, IN A.Y. 2005 - 06, ID CIT(A) WITHOUT GIVING ANY ENHANCEMENT NOT ICE DISALLOWED' RIS.3,00,000/ - . AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE U S. 50. AT THE TIME OF HEARING, ID COUNSEL FOR THE ASSESSEE SUBMI TTED THAT THE EXPENSES INCURRED BY THE ASSESSEE COMPANY FOR 'CEREMONIES, OTHER STAFF WELFARE A.NC SOCIAL/CULTURAL ACTIVITIES' ARE USUAL AND REGULAR FEATURES IN ITS BUSINESS ACTIVITIES AND AM WHOLLY AND EXCLUSIVELY INCURRED FOR ITS BUSINESS PURPOSES. THE EX PENSES ARE INCURRED ACROSS THE COMPANY IS ON ACCOUNT OF VARIOUS NOTIONAL/STATE CELEBRATION OCCASIONS L IKE UTKAL DIVAS, NATIONAL SAVINGS DAY, NALCO FOUNDATION DAY, INDEPENDENCE DAY, ETC FOR ORGANIZING VARIOUS SOCIAL/CULTURAL ACTIVITIES ON ACCOUNT OF DIFFERE NT OCCASIONS. HE RELIE D UPON THE FOLLOWING JUDICIAL PRONOUNCEMENTS FOR THIS PROPOSITION AND CONTENDED THAT THE EXPENSES ARE FULLY ALLOWABLE. 51. HAVING HEARD BOTH THE SIDES AND HAVING PERUSED THE MATERIALS ON RECORD, WE FIND THAT THE EXPENSES INCURRED BY THE ASSESSEE COMPANY FOR 'CEREMONIES, OTHER STAFF WELFARE AND SOCIAL/CULTURAL ACTIVITIES' ARE USUAL AND REGULAR FEATURES IR ITS BUSINESS ACTIVITIES ARE WHOLLY AND EXCLUSIVELY INCURRED FOR ITS BUSINESS PURPOSES. THE EXPENSES ARE INCURRED ACROSS THE COMPANY IS ON ACCOUNT OF VARIOUS NOTIONAL/STATE CELEBRATION OCCASIONS LIKE UTKAL DIVAS, NATIONAL SAVINGS DAY, NALCO FOUNDATION DAY, INDEPENDENCE DAY, ETC FOR ORGANIZING VARIOUS SOCIAL/CULTURAL ACTIVITIES ON ACCOUNT OF DIFFERENT OCCASIONS. THE AO HAS MADE THE DISA LLOWANCE OF 30% FOR THE FIRST TIME FOR THE ASSESSMENT YEAR 2006 - 07 AND FOLLOWING THE ORDER OF ID CIT(A), THE AO DISALLOWED 30% IN A.Y. 2005 - 06. THE EXPENSES CLAIMED BY THE ASSESSEE UNDER THE ABOVE HEAD ARE WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS AND IS ALLOWABLE U/S.37 OF THE I.T.ACT. THE RELIANCE PLACED BY THE ASSESSEE FULLY SUPPORTS THE CASE OF THE ASSESSEE. THEREFORE, WE DIRECT THE DELETION OF DISALLOWANCE MADE ON AN ESTIMATE BASIS. THIS GROUND IS ACCORDINGLY ALLOWED. WE R ESPECTFULL Y FOLLOW THE ORDER OF THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE AND RESTRICT THE DISALLOWANCE TO RS.10,00,000/ - UNDER OTHER MISCELLANEOUS EXPENSES AS AGAINST RS.34,85,383/ - DISALLOWED BY THE AO AND IN RESPECT OF ESTIMATION OF EXPENSES, ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 19 DE PARTMENTAL MEETING, OFFICIAL LUNCH AND DINNER AND COMPANY GUESTS, CEREMONIAL EXPENSES, OTHER STAFF WELFARE EXPENSES AND EXPENSES ON SOCIAL & CULTURAL ACTIVITIES, WE RELY ON THE TRIBUNAL DECISION AND ARE OF THE OPINION THAT THE EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS AND ALLOWABLE U/S.37(1) OF THE ACT AND ACCORDINGLY DIRECT THE AO TO DELETE THE ADDITION AND ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE. 37 . GROUND NO.9 IS WITH RESPECT TO CONFIRMATION OF DISALLOWANCE MADE BY THE AO UNDER PRIOR PERIOD ADJUSTMENTS. 38 . THE AO FOUND THAT MANY OF THE EXPENSES WERE NOT ACCOUNTED FOR IN THE EARLIER YEARS FOR UNSPECIFIED REASONS AND FURTHER OBSERVED THAT THE NON - ACCOUNTING OF THE SAME IN EARLIER YEAR/S WAS DUE TO INADVERTENT MISTAKE S AND, THEREF ORE, DISALLOWED THE CLAIM. IN APPEAL THE CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE AO. 39 . AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 40 . LD. ARS CONTENTION THAT THE CIT(A) HAS ERRED IN OVERLOOKING THE FACTS THAT T HIS PRIOR PERIOD ADJUSTMENTS HAS ACCRUED TO THE ASSESSEE DUE TO CRYSTALLIZATION OF THE CLAIM AND THE LD. AO HAS NOT CONSIDERED THE PRIOR PERIOD INCOME FOR SET OFF AND MADE DISALLOWANCE . 4 1 . CONTRA, LD. DR SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 4 2 . WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FOUND THAT THE TERMINOLOGY PRIOR PERIOD ADJUSTMENT REFERS TO THE EXPENDITURE WHICH WAS NOT ACCRUED DURING THE YEAR BUT PERTAINING TO EARLIER YEAR BUT CRYSTALLIZED. THE LD. AR EMP HASIZED ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 20 THAT THE AO HAS MADE ADDITION BUT FAILED TO CONSIDER THE PRIOR PERIOD INCOME SET OFF AGAINST THE EXPENDITURE AND HAS SOLELY RELIED ON THE EXPENDITURE AND IGNORED THE INCOME. LD. AR FURTHER SUBMITTED THAT TH E PRIOR PERIOD EXPENSES CONSISTS OF ADMINI STRATIVE EXPENSES AND OTHER INCOME AND SETTLEMENT OF CLAIMS OR CRYSTALLIZATION OF LIABILITY DISCLOSED UNDER PRIOR PERIOD EXPENSES ADJUSTMENTS AS PER THE ACCOUNTING DISCLOSURE . LD. AR SUBSANTIATED THE ARGUMENTS WITH THE PAPER BOOK. WHEREAS THE CIT(A) FOUND THAT THE LIABILITY HAS ACCRUED IN THE EARLIER YEARS AND THE ASSESSEE CANNOT CLAIM THE S AME IN THE CURRENT ASSESSMENT YEAR AND ALSO THE REASONS ENVISAGED WERE NOT SUPPORTED WITH THE EVIDENCE FOR CLAIM DURING THE CURRENT FINANCIAL YEAR. WE CONSIDERING THE M ATERIAL ASPECTS AND THE CONCEPT OF INCOME AND EXPENDITURE REMIT THIS DISPUTED ISSUE TO THE FILE OF AO TO VERIFY THE CLAIMS AND GRANT THE SET OFF OF PRIOR PERIOD INCOME AGAINST THE PRIOR PERIOD EXPENSES AND PASSED THE ORDER ON MERITS AND THE ASSESSEE SHALL COOPERATE IN SUBMITTING THE INFORMATION AND THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 4 3 . GROUND NO.10 IS WITH RESPECT TO DISALLOWANCE OF AMOUNTS WRITTEN OFF IN RESPECT OF CLAIMS/RECEIVABLES. THE AO HAS DISALLOWED THE CLAIM OF RECEIVABLES OF RS.1,86,07,855/ - AS THE ASSESSEE HAS NOT FURNISHED ANY EXPLANATION S WITH REGARD TO THE ALLOWABILITY. 4 4 . IN APPEAL, THE CIT(A) HAVING CONSIDERED THE FACTS FOUND THAT THE ASSESSEE COULD NOT EXPLAIN AS TO HOW THE CLAIMS AND ADVANCES COULD BE WRITTEN OFF WHEN THEY ARE NOT PART OF INCOME IN THE EARLIER YEARS AND REDUCED THE DISALLOWANCE TO THE EXTENT OF RS.1,38,08,341/ - . ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 21 4 5 . BEFORE US, THE L D. AR SUBMITTED THAT THE ASSESSEE HAS RIGHTLY CLAIMED THE ADVANCES AND THEY ARE PERTAINING TO EARLIER YEARS AND REFERRED TO THE DETAILS IN PAPER BOOK VOL - II AT PAGE 64 AND PRAYED THAT THE ASSESSEE CAN RECONCILE AND EXPLAIN THE CLAIMS AND PRAYED FOR AN OPPORTUNITY BE PROVIDED TO SUBMIT THE RECONCILEMENT AND EXPLAIN THE CLAIMS. CONTRA, LD. DR RELIED ON THE O RDER OF CIT(A). 46 . WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FOUND THAT THE ASSESSEE HAS CLAIMED RS.1,86,07,855/ - ON ACCOUNT OF WRITE OFF SCRAPS AND THE SAME WAS CONSIDERED BY THE CIT(A) AND GRANTED PARTIAL RELIEF. THIS ISSUE OF CLAIM OF RECEIVABLES OF THE COMPANY PERTAINS TO EARLIER YEARS BUT THE AO HAS NOT BROUGHT ON RECORD THE SE FACTS THAT THE ASSESSEE HAS NOT DISCLOSED. WHEREAS LD. AR BEFORE US PRAYED THAT THE ASSESSEE IS ELIGIBLE TO WRITE OFF THE CLAIM AS THEY A RE PERTAINING TO EARLIER YEARS AND PRAYED FOR AN OPPORTUNITY BEFORE THE AO. WE FIND STRENGTH IN THE SUBMISSIONS OF THE LD AR. ACCORDINGLY, WE REM IT THIS ISSUE TO THE FILE OF AO AND THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 47 . GROUND NO.11 RELATES TO DISALLOWANCE OF ELECTRICITY DUTY U/S.43B OF THE ACT. THE AO ON PERUSAL OF FINANCIAL STATEMENTS FOUND THAT THE ASSESSEE HAS DEBITED A SUM OF RS. 131,32,65,663/ - IN THE PROFIT AND LOSS ACCOUNT ON ACCOUNT OF ELECTRICITY DUTY AND THE REMAINING WAS PAID BEFORE DUE DATE OF FILING OF RETURN. SINCE THE ASSESSEE DISPUTED AN AMOUNT OF RS.47,35,67,572/ - , THE SAME WAS DEPOSITED IN A DESIGNATED BANK ACCOUNT AS PER THE DIRECTION OF THE HONBLE HIGH COURT AND THE ASSESSEE CLAIMED ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 22 DEDUCTIONS U/S. 43B OF THE ACT AND THE BALANCE AMOUNT OF RS.12,93,46,730/ - WAS DISALLOWED. THE AO IS OF THE OPINION TH AT THE REMAINING AMOUNT OF RS.4 7,35,67,572/ - DEPOSITED IN THE BANK AS PER THE DIRECTION OF THE HONBLE ODISHA HIGH COURT DOES NOT COMPLY THE REQUISITE PRO VISIONS OF SECTION 43B OF THE ACT, AND MADE ADDITION AND O N APPEAL THE CIT(A) CONFIRMED THE DISALLOWANCE. 48 . LD. AR SUBMITTED BEFORE US THAT THIS ISSUE HAS ALREADY DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE AND THE MATTER IS PENDING BEFORE THE HONBLE HIGH COURT. CONTRA, LD. DR SUPPORTED THE ORDERS OF AO. 49 . WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE LIABILITY OF RS. 47,35,67,572/ - UNDER THE PROVISIONS OF SECTION 43B OF THE ACT DISALLOWED BY THE AO DEALT BY THE CUTTACK BENC H OF THE TRIBUNAL IN ASSESSEES OWN CASE AND MATTER IS PENDING BEFORE THE HONBLE HIGH COURT. W E RELY ON THE ORDER OF ITAT IN ITA NOS.196&91/CTK/2010, ORDER DATED 29.06.2012, PARA 16 TO 23 AT PAGES 10 TO 13. THE RELEVANT OBSERVATIONS OF THE ITAT IN THIS RE GARD ARE AS UNDER : - 23. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. TO SET THE CONTROVERSY AT REST, WE ARE OF THE CONSIDERED VIEW THAT A DISALLOWANCE U/S.43B HAS TO BE PRIMARILY WHEN SUCH ELECTRICITY DUTY H AS BEEN CLAIMED AS EXPENDITURE IN THE IMPUGNED ASSESSMENT YEAR. THE ASSESSEE COULD NOT OVERRIDE THE HONBLE HIGH COURT DIRECTIONS. THE EXPENDITURE REMAINED UNPAID FOR BOTH THE YEARS IN SPITE OF THESE DIRECTIONS, THEREFORE, WAS RIGHTLY BROUGHT TO TAX BY THE LD AO U/S.43B, WE UPHOLD THE CONFIRMATION THEREOF BY THE LD CIT(A). THIS GROUND FOR BOTH YEARS STANDS DISMISSED. RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR EARLIER YEAR , WE DISMISS THIS GROUND OF APPEAL OF THE ASSESSEE. ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 23 5 0 . IN THE RESULT, APPEAL OF THE ASSESSEE I.E. ITA NO.343/CTK/2015 FOR THE ASSESSMENT YEAR 2007 - 08 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 51 . NOW, WE SHALL TAKE REVENUES APPEAL FOR ASSESSMENT YEAR 2007 - 08 IN ITA NO.353/CTK/ 2015 , WHEREIN THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED INLAW AS WELL AS ON FACTS IN DELETING THE ADDITION OF RS.3,89,53,362/ - MADE BY THE AO ON ACCOUNT OF LOSS ON VALUATION OF NON - MOVING STORES & SPARES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD, CIT(A) IS NOT JUSTIFIED IN LAW AS WELL AS ON FACTS IN DELETING THE ADDITION OF RS.22,76,054/ - MADE BY THE AO ON ACCOUNT OF PAYMENT TO BENEV OLENT SCHEME. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN LAW AS WELL AS ON FACTS IN DELETING THE ADDITION OF RS.9,23,77,013/ - MADE BY THE AO ON ACCOUNT OF POT - RELING EXPENSES. 4. ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN LAW AS WELL AS ON FACTS IN DELETING THE ADDITION OF RS.7,62,83,499/ - MADE BY THE AO ON ACCOUNT OF PERIPHERAL DEVELOPMENT EXPENSES. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT( A) IS NOT JUSTIFIED IN LAW AS WELL AS ON FACTS IN DELETING THE ADDITION OF RS.24,23,10,044/ - MADE BY THE AO ON ACCOUNT OF GIFT COUPENS TO EMPLOYEES. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW IN NOT ACCEPTING THE EXAMINATION OF FINDINGS MADE BY THE AO ON THE ISSUE. 7. THE APPELLANT CRAVES TO ALTER, AMEND OR ADD ANY OTHER GROUND THAT MAY BE CONSIDERED NECESSARY IN COURSE OF THE APPEAL PROCEEDING. 52 . GROUND NO.1 RELATES TO DISALLOWANCE ON ACCOUNT OF LOSS ON VALUA TION OF NON - MOVING STORES AND SPARES. THE AO DISALLOWED THE ENTIRE ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 24 CLAIM OF THE ASSESSEE ON ACCOUNT OF DIMINUTION IN THE VALUE OF NON - MOVING STORES & SPARES OF RS.3,89,53,362/ - . 5 3 . IN APPEAL, THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE RELYING THE ORDER OF HIS PREDECESSOR IN ASSESSEES OWN CASE AND DEALT ON THE ISSUE AT PARA 2.2 OF THE ORDER WHICH READS AS UNDER : - 2.2 I HAVE CONSIDERED THE MATTER. THIS ISSUE WAS DECIDED BY THE CIT(A) - II, BHUBANESWAR, IN THE CASE OF THE APPELLANT VIDE ORDER DT.31 . 03.2008 IN ITA NO.0250/06 - 07 FOR THE AY 2004 - 05 IN PARA - 5.3, WHICH IS REPRODUCED BELOW: '5.3 IT WAS POINTED OUT BY THE LEARNED REPRESENTATIVE THAT THIS ISSUE HAD COME UP IN THE ASSESSMENT ORDERS FOR EARLIER YEARS ALSO. IN FACT, THIS DISPUTE HAD BEEN IN EXISTENCE , RIGHT FROM A. Y. 93 - 94 AND ONWARDS. SIMILAR DISALLOWANCES MADE WERE UPHELD BY THE CIT(A) UPTO A. Y. 02 - 03. THE ISSUE CAME UP BEFORE THE HON'BLE IT AT, CUTTACK BENCH, CUTTACK FOR A.YS. 94 - 95 TO 98 - 99 AND FOR 2000 - 01 IN ITA NOS. 66 TO 68 - 459, 511,512/CTK /2003. THE IT AT HAS DEALT WITH THE ISSUE IN PARAGRAPHS 2 TO 19 OF THE ORDER DT.30.11,05. THE IT AT WENT INTO THE GENESIS OF THIS ISSUE AND ALSO EXAMINED ALL ASPECTS OF THE ISSUE INCLUDING THE LEGAL PRECEDENTS. IT WAS NOTED THAT, AFTER GOING THROUGH THE AC COUNTS FOR THE F.Y.92 - 93, THE C&AG GAVE A DETAILED AUDIT MEMO TO THE COMPANY. THE C&AG POINTED OUT THAT VARIOUS ITEMS OF STORES AND SPARES HAD BEEN LYING SURPLUS, UNUTILISED AND NOT ISSUED FOR LONG PERIODS OF TIME, EXCEEDING 3 YEARS. IT IS THEREFORE NATURA L THAT SUCH STORES AND SPARES WOULD HAVE LOST THEIR INTRINSIC WORTH, SINCE THEY HAD BECOME OBSOLETE. THE C&AG WAS THEREFORE OF THE VIEW THAT THE COMPANY HAD OVERSTATED THE PROFITS FOR THE YEAR ENDED 31.3.92, BY AN AMOUNT OF RS.8.87 CRORES. IT WAS IN THIS B ACKDROP THAT THE COMPANY CARRIED OUT REVALUATION OF NON - MOVING STORES AND SPARES. THE ITAT ALSO NOTED THAT M/S. RASHTRIYA ISPAT NIGAM LTD. HAD CARRIED OUT REVALUATION OF OBSOLETE AND NON - MOVING SPARES AND HAD STARTED VALUING SUCH SPARES AT 80% OF THEIR COS T. SIMILAR WAS THE CASE WITH M/S. HINDUSTAN ZINC LTD. AND M/S. STEEL AUTHORITY OF INDIA. THE ITAT, THEREFORE, CONCLUDED THAT THE CLAIM OF LOSS ON ACCOUNT OF REVALUATION CAN NEITHER BE SAID TO BE IMPROPER NOR WITHOUT ANY BASIS. THE COMPANY WAS BOUND TO CARR Y OUT THIS EXERCISE IN THE LIGHT OF THE OBJECTION RAISED BY C&AG. THE CHANGE WAS BONA FIDE AND WAS NECESSARY TO SHOW THE CORRECT BUSINESS PROFITS, SINCE, OTHERWISE, THE LOSS IN THE VALUE OF SUCH STORES AND SPARES WOULD NOT GET REFLECTED IN THE COMMERCIAL P ROFITS. THE ITAT RELIED ON VARIOUS DECISIONS IN 243 ITR 284, 51 ITR 329, ETC. AND ALSO THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CHAINRUP SAMPATRAM VS. CIT(24 ITR 481). IT WAS HELD IN THESE DECISIONS THAT, IF AN ITEM IS LYING IN THE INVENTOR Y EITHER UNSOLD OR UNUTILISED, IF THERE IS A CHANGE IN THE INTRINSIC VALUE, AN ASSESSEE CAN REVALUE SUCH ASSETS, AND CLAIM THE LOSS ON ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 25 ACCOUNT OF REVALUATION AS A CHARGE AGAINST PROFITS. THE ITAT CONSEQUENTLY ALLOWED THE CLAIM FOR THE YEARS BEFORE IT. IN T HE SUBSEQUENT ORDERS IN ITA NO.511 AND 512/CTK/2005 FOR AATS.1999 - 2000 - AND 2002 - 03, THE ITAT REITERATED THEIR DECISION IN PARA - 4 & 5 OF THE ORDER DT.17 .07.07. AS MENTIONED EARLIER, FROM A. Y.97 - 98 THERE WAS A CHANGE IN THE VALUATION OF OBSOLETE AND NON - MO VING STORES AND SPARES AND THE COMPANY STARTED INCLUDING ONLY 5% OF THE ORIGINAL COST OF SUCH SPARES IN THE DOSING STOCK. THIS WAS TAKEN NOTE OF IN THE ASSESSMENT AND APPELLATE ORDERS FOR THE SUBSEQUENT PERIODS. THE ORDER OF THE IT AT FOR A.YS. 99 - 00 AND 0 2 - 03 TAKES INTO ACCOUNT THE ISSUE OF REVALUATION IN THE BACKDROP OF THE NEW FORMULA. THE IT AT HAS HELD THAT THE EARLIER DECISION FOR A. Y. 94 - 05 TO 98 - 99 AND 00 - 01 WOULD CONTINUE TO HOLD GOOD. 5.4 IT IS FURTHER BROUGHT TO MY NOTICE THAT THE DEPARTMENT W A NTED TO FILE AN APPEAL TO THE HIGH COURT ON THIS ISSUE AGAINST THE ORDER OF THE ITAT DT. 30.11.05. THE MATTER WAS EXAMINED BY THE COMMITTEE ON DISPUTES (COD) IN THE CABINET SECRETARIAT IN THE MEETING HELD ON 17.10.06 . THE MINUTES OF THE MEETING HAVE BEEN CO MMUNICATED IN NO. CO D /56/2006 DT 31.10.06 . IN PARA - 6, THE COD DECLINED TO ACCORD PERMISSION TO THE DEPARTMENT TO APPROACH THE HIGH COURT, SINCE NO SUBSTANTIAL QUESTIONS OF FACT AND LAW WERE INVOLVED. 5.5 RESPECTFULLY FOLLOWING THE TWO DECISIONS OF THE ITA T, CUTTACK BENCH, MENTIONED ABOVE, THE AO IS DIRECTED TO ALLOW THE LOSS OF RS.3,28,37,525/ - AS A DEDUCTION.' THE FACTS ARE IDENTICAL FOR THIS YEAR ALSO. ACCORDINGLY, THE DISALLOWANCE OF RS.3,89,53,362/ - IS DELETED. GROUND NO.2 IS THEREFORE, ALLOWED. 5 4 . LD. DR RELIED ON THE ORDER OF AO, WHEREAS LD. AR OF THE ASSESSEE RELIED ON THE ORDER OF CIT(A). 5 5 . WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE AO DISALLOWED THE ENTIRE CLAIM OF THE ASSESSEE ON ACCOUNT OF DIMINUTIO N IN THE VALUE OF NON - MOVING STORES & SPARES. THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE RELYING THE ORDER OF HIS PREDECESSOR IN ASSESSEES OWN CASE AND DEALT ON THE ISSUE AT PARA 2.2 OF THE ORDER. WE ALSO FIND THAT THIS ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 26 ASSESSEES OWN CASE IN ITA NOS.66 - 68 , 459, 511 - 512/CTK/2003, ORDER DATED 30.11.2005, WHEREIN THE TRIBUNAL AFTER RELYING UPON THE VARIOUS JUDICIAL PRONOUNCEMENTS HAS HELD AS UNDER : - 19. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND RELYING ON THE ABOVE CASE DECISIONS WE SET ASIDE THE ORDER OF THE CIT(A) ON THIS GROUND AND DIRECT THE AO TO ALLOW THE CLAIM OF LOSS ON ACCOUNT OF VALUE OF NON - MOVING STORES AND SPARES AT RS.4,86, 70,639/ - . WE DIRECT ACCORDINGLY. THE GROUNDS OF APPEAL NO.1 BY THE APPELLANT IS ACCORDINGLY ALLOWED. 56. RESPECTFULLY FOLLOW THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE AND WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A), WHO H AS PASSED A REASONED ORDER O N THIS ISSUE RELYING ON VARIOUS DECISIONS OF THE TRIBUNAL AND THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CHAINRUP SAMPATRAM VS. CIT, 24 ITR 481. ACCORDINGLY, WE DISMISS THIS GROUND OF REVENUE. 57 . GROUND NO.2 IS WITH RESPECT TO DISALLOWANCE MADE BY THE AO ON ACCOUNT OF PAYM ENT TO BENEVOLENT SCHEME. THE COMPANY MADE PAYMENTS AGGREGATING TO RS.22,76,054/ - TO THE MEMBERS OF THE FAMILIES OF PERSONS WHO DIED WHILE IN SERVICE. THE AO DISALLOWED THE CLAIM APPLYING THE PROVISI ONS OF SECTION 40A(9) OF THE ACT. IN APPEAL, THE CIT(A) FOLLOWED THE ORDERS OF TRIBUNAL FOR THE ASSESSMENT YEARS 1997 - 98, 1998 - 99, 1999 - 2000, 200 1 - 0 2 AND 2002 - 03 AND ALLOWED THE DEDUCTION TOWARDS THE CLAIM. THE OBSERVATION OF THE CIT(A) ON THIS GROUND IS A S UNDER : - 3. GROUND NO.3 RELATES TO DISALLOWANCE OF PAYMENT UNDER BENEVOLENT SCHEME FOR RS.22,76,054/ - . THE COMPANY HAD MADE PAYMENTS AGGREGATING RS.22,76,054/ - TO THE MEMBERS OF THE FAMILIES OF PERSONS WHO DIED WHILE IN SERVICE. THE AO DISALLOWED THE CL AIM APPLYING THE PROVISIONS OF SECTION 40A(9). THIS WAS CONSISTENT WITH THE STAND OF THE DEPARTMENT FOR THE EARLIER YEARS. THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE APPELLANT FOR THE AYS ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 27 1997 - 98, 1998 - 99 AND 2000 - 01 BY THE ITAT IN THE ORDERS DT.30.11.200 5, 08.09.2006 AND 17.07.2007 FOR THE AYS 1999 - 00 , 2001 - 02 AND 2002 - 03. IN THE ORDER DT.17.7.2007 THE CLAIM HAS BEEN ALLOWED BY THE ITAT IN PARA - 8 OF THEIR ORDER. RESPECTFULLY, FOLLOWING THE ABOVE DECISIONS OF THE ITAT, CUTTACK BENCH, CUTTACK, THE AO IS D IRECTED TO ALLOW THE DEDUCTION TOWARDS THE CLAIM. GROUND NO.3 IS THEREFORE, ALLOWED. WE HAVE ALSO PERUSED THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.66 - 68/CTK/2 003 AND OTHER CONNECTED APPEALS IN ORDER DATED 30.11.2005 AND WE FIND IN THE I NSTANT CASE THAT THE CIT(A) IS JUSTIFIED IN ALLOWING THE DEDUCTION TOWARDS THE CLAIM OF PAYMENT UNDER BENEVOLENT SCHEME. ACCORDINGLY, WE DISMISS THIS GROUND OF REVENUE. 58 . IN GROUND NO.3 THE GRIEVANCE OF THE REVENUE IS THAT CIT(A) HAS ERRED IN DELETING TH E ADDITION MADE BY THE AO ON ACCOUNT OF POT - RELING EXPENSES. 59 . BRIEF FACTS RELATING TO THIS ISSUE ARE THAT THE ASSESSEE HAS MADE TOTAL CLAIM OF RS.9,23,77,013/ - INCURRED ON RELINING 37 POTS IN THE SMELTER PLANT. DETAILS OF THE EXPENDITURE INCURRED WERE F URNISHED TO THE AO. THERE IS NO DISPUTE ON EXPENDITURE WHICH WAS ACTUALLY INCURRED. IT WAS CONTENDED BEFORE THE AO THAT THE POTS FORM PART OF A SINGLE UNIT OF PLANT & MACHINERY, AND AS SUCH, EXPENDITURE INCURRED ON RELINING A FEW OF THE POTS HAS TO BE TREA TED AS REVENUE EXPENDITURE. IT WAS FURTHER SUBMITTED THAT WHEN A POT IS RELINED, NO NEW ASSET IS BROUGHT INTO EXISTENCE. THEREFORE, THE EXPENDITURE CANNOT BE TREATED AS CAPITAL EXPENDITURE. THE ANALOGY OF REPLACEMENT OF A PICTURE TUBE IN A TELEVISION OR RE PLACEMENT OF TYRES OF A VEHICLE WAS CITED, TO DRIVE HOME THE POINT. THE AO EXAMINED THE MANUFACTURING PROCESS AS WELL AS THE TECHNOLOGY INVOLVED IN THE SMELTING ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 28 PROCESS. THE AO CONCLUDED THAT WHEN THE POTS ARE RELINED, IT WOULD PRACTICALLY AMOUNT TO PURCHA SE OF NEW POTS, BUT FOR THE RELINING, THE POTS WOULD HAVE NO PRACTICAL UTILITY IN THE INDUSTRY. THE EXPENDITURE OBVIATED THE NEED TO PURCHASE NEW POTS. T HE AO OBSERVED THAT THE EXPENDITURE INCURRED ON POT RELINING IS CAPITAL IN NATURE. ACCORDINGLY, DISALL OWED THE CLAIM OF ASSESSEE OF RS.9,23,77,013/ - INCURRED ON RELINING OF THE POTS AS CAPITAL EXPENDITURE. 60 . IN APPEAL, THE CIT(A) FOLLOWING THE ORDER OF HIS PREDECESSOR IN ASSESSEES OWN CASE FOR THE EARLIER ASSESSMENT YEAR 2004 - 05 IN ITA NO.0250/06 - 07, DA TED 31.03.2008 ALLOWED THE GROUND OF APPEAL OF THE ASSESSEE OBSERVING AS UNDER : - 4.2 I HAVE CONSIDERED THE MATTER. THIS ISSUE HAS COME UP FOR CONSIDERATION IN EARLIER ASSESSMENTS ALSO. THE CIT(A) - II, BHUBANESWAR, IN THE CASE OF THE APPELLANT FOR AY 2004 - 0 5, VIDE ORDER DT.31.03.2008 IN ITA NO.0250/06 - 07 HAS ELABORATELY DISCUSSED THIS ISSUE BEFORE DELETING THE DISALLOWANCE. THE OPERATIVE PART OF HIS ORDER FOR AY 2004 - 05 IS REPRODUCED BELOW: '8.2 DURING THE PROCEEDINGS, THE LEARNED REPRESENTATIVE POINTED OUT THAT A SIMILAR ISSUE HAD COME UP IN THE ASSESSMENT FOR A. Y. 01 - 02. FOR MORE OR LESS IDENTICAL REASONS, AS THOSE GIVEN BY THE AO IN THE ASSESSMENT ORDER FOR A. Y. 04 - 05, THE EXPENDITURE WAS TREATED AS CAPITA / EXPENDITURE IN THE ASSESSMENT ORDER FOR 01 - 02. IN HIS APPELLATE ORDER IN ITA NO.0010/04 - 05 DT.29.7.04, THE CIT(A) - II IN PARA - 12 HAS HELD THAT THE EXPENDITURE IS REVENUE IN NATURE. IN DOING THIS, THE CIT(A) ALSO TOOK NOTE OF THE ORDER OF THE IT AT 'E' BENCH, CALCUTTA DT. 19.9.01 IN ITA NO.L41(CAL)/1997 IN THE CASE M/S. INDIAN ALUMINIUM CO. LTD. IN THAT CASE, THE CIT HAD ISSUED AN ORDER U/S.263 DIRECTING THE AO TO TREAT EXPENDITURE ON 'POT RELINING AND RESTART EXPENSES' AS CAPITAL EXPENDITURE. THE ITAT SET - ASIDE THE ORDER AND GAVE A CLEAR FINDING THAT P OT RELINING EXPENSES ARE REVENUE IN NATURE. 8.3. IN THE APPELLANT'S CASE, THE ASSESSING OFFICER HAD ALLOWED DEDUCTION TOWARDS POT RELINING EXPENSES IN THE ASSESSMENT ORDER FOR THE ASST. YEAR 2000 - 01. BY AN ORDER U/S. 263 OF THE ACT DT.31.01.03, THE CIT, B HUBANESWAR HELD THAT POT RELINING EXPENDITURE WAS CAPITAL IN NATURE AND DIRECTED THE AO TO DISALLOW THE SAME. THE ASSESSEE FILED AN APPEAL TO THE ITAT, CUTTACK BENCH AND THE HON'BLE ITAT IN ITA NO.400/CTK/2005 DT.8.9.06 DECIDED THE ISSUE IN FAVOUR OF THE A PPELLANT. THE HON'BLE ITAT TOOK NOTE OF THE FACT THAT THE CIT(APPEALS) HIMSELF HAD HELD THAT THE ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 29 EXPENDITURE WAS REVENUE IN NATURE, IN THE APPELLATE ORDER FOR A.Y. 2001 - 02 REFERRED TO ABOVE, AND GAVE THE FOLLOWING FINDINGS IN PARA - 10 OF THE ORDER; 'WE AFT ER HEARING BOTH THE PARTIES AND TAKING INTO CONSIDERATION THE ORDERS OF THE TAX AUTHORITIES AND THE WRITTEN SUBMISSION FILED BY BOTH THE PARTIES AND ALSO TAKING INTO CONSIDERATION THE CASE LAWS RELIED UPON, ARE OF THE OPINION THAT THE ASSESSING OFFICER WHI TE MAKING THE ADDITION HAS NOT MADE A CASE THAT BY RELINING THE POTS AND THE ASSESSEE HAS VIRTUALLY OBTAINED AN ASSET WHICH COU L D HAVE BEEN RESULTED INTO ENDURING BENEFIT FOR THE ASSESSEE TO TREAT SUCH EXPENDITURE AS CAPITAL IN NATURE. APART FROM ABOVE FAC TS, WE HAVE ALSO CONSIDERED THE FACT THAT THE CLAIM OF THE ASSESSEE WAS ACCEPTED BY THE LD. CIT IN SUCCEEDING YEAR AND THE DEPARTMENT IS NOT IN APPEAL AGAINST THE ORDER OF THE L D. C I T B EFORE THIS TRIBUNAL. WE, THEREFORE, KEEPING IN VIEW OF THE ABOVE FACTS AND THE PRINCIPLE OF CONSISTENCY, ARE OF THE OPINION THAT THE LD. CIT WAS NOT JUSTIFIED IN SUSTAINING THE ADDITION. WE, THEREFORE, DELETE THE SAME AND ACCEPT THE GROUND RAISED BY THE ASSESSEE.' 8.3 N THE APPELLATE ORDER IN IT A NO .515/CTK/2005 DT. 17.07.0 7, FOR A.Y.2002 - 03 THE ITAT HAS FOLLOWED THE ABOVE DECISION AND HELD THAT POT RELINING EXPENDITURE IS REVENUE IN NATURE. 8.4 THE FACTS HAVE REMAINED THE SAME IN THE PERIOD RELEVANT TO THIS ASSESSMENT YEAR. THE REASONS GIVEN FOR THE DISALLOWANCE ARE IDENTI CAL TO THOSE IN THE ASSESSMENT ORDER FOR A.Y.01 - 02. THE DECISION OF THE HON'BLE ITAT, CUTTACK BENCH ON THIS ISSUE FOR A.Y.01 - 02 WOULD SQUARELY APPLY TO THIS YEAR ALSO. THE AO IS THEREFORE DIRECTED TO DELETE THE DISALLOWANCE OF POT RELINING EXPENSES OF RS. 12,48,65,503/ - .' IN VIEW OF THE FOREGOING, THE DISALLOWANCE OF RS.9,23,77,013/ - FOR THIS YEAR IS ALSO DELETED, AS THE FACTS ARE IDENTICAL. GROUND NO.4 IS THEREFORE, ALLOWED. 61 . BEFORE US, THE L D. DR RELIED ON THE ORDER OF AO, WHEREAS LD. AR OF THE ASSES SEE SUPPORTED THE ORDER OF CIT(A). 62 . WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT AS PER THE AO THE EXPENDITURE CLAIMED BY THE ASSE SSEE ON ACCOUNT OF POT RELINING IS CAPITAL IN NATURE, WHEREAS THE CIT(A) RELIED ON THE ORDER OF HIS PREDECESSOR FOR THE EARLIER ASSESSMENT YEAR I.E. A.Y.2004 - 05 AND ALLOWED IN FAVOUR OF THE ASSESSEE. ON PERUSAL OF THE OBSERVATIONS OF THE CIT(A) IN THIS REGARD, WE FIND NO ERROR IN THE ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 30 ORDER OF CIT(A) AND ACCORDINGLY THE SAME IS UPHE LD AND DIS MISS THIS GROUND OF APPEAL OF THE REVENUE . 63 . IN GROUND NO. 4, THE GRIEVANCE OF THE REVENUE IS THAT THE CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF PERIPHERAL DEVELOPMENT EXPENSES. 64 . FACTS RELATING TO THIS GROUND ARE THAT THE AO DISALLOWED RS.8,19,11,108/ - ON ACCOUNT OF PERIPHERAL DEVELOPMENT EXPENSES. IN APPEAL THE CIT(A) THOROUGHLY DEALT ON THE ISSUE AND HAS OBSERVED THAT THE EXPENSES CLAIMED BY THE ASSESSEE ARE NOT IN THE NATURE OF BUSINESS EXPENDITURE AND MOST OF THE EXPENS ES ARE IN THE NATURE OF DONATIONS, CHARITY AND NOT CONNECTED TO RUNNING OF BUSINESS E.G. SUBSTANTIAL PAYMENTS HAVE BEEN MADE TO RAMAKRISHNA MISSION WHICH IS IN THE NATURE OF DONATIONS. THEREFORE, THE CIT(A) REDUCED THE DISALLOWANCE TO RS.56,27,609/ - AND GR ANTED RELIEF TO THE ASSESSEE FOR RS.7,62,83,499/ - , AGAINST WHICH THE REVENUE IS IN APPEAL BEFORE US. 65 LD. DR RELIED ON THE ORDER OF CIT(A) AND THE LD. AR SUBMITTED THAT THIS GROUND OF APPEAL OF THE REVENUE SHOULD BE DISMISSED. 66 . WE HAVE HEARD RIVAL SUB MISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE CIT(A) WHILE CONSIDERING THIS ISSUE HAS DEALT ON THE SUBMISSIONS OF THE ASSESSEE AND FINDINGS OF THE AO AND DECIDED THE DISPUTED ISSUE BASED ON THE ORDER OF THE GOVERNMENT OF ORISSA AN D TREATED THE ENTIRE EXPENDITURE ON DEVELOPMENT OF THE TWO DISTRICTS VIZ.: ANGUL AND KORAPUT AS PERIPHERAL DEVELOPMENT EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND RESTRICTED ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 31 THE DISALLOWANCE TO RS.56,27,609/ - AND GRANTED REL IEF TO THE ASSESSEE FOR RS.7,62,83,499/ - . HENCE, WE ARE NOT INCLINED TO INTERFERE WITH THE ORDER OF CIT(A) ON THIS GROUND AND A CCORDINGLY, WE DISMISS THIS GROUND OF APPEAL OF REVENUE. 67 . GROUND NO. 5 RELATES TO DISALLOWANCE MADE ON ACCOUNT OF GIFT COUPONS TO EMPLOYEES . THE AO IN THE ASSESSMENT PROCEEDINGS OBSERVED THAT THERE WAS NO OBLIGATION ON THE PART OF THE COMPANY TO MAKE THESE PAYMENTS AND THE PAYMENTS MADE WERE IN THE NATURE OF EX - GRATIA PAYMENTS, THEREFORE, AO DISALLOWED THE CLAIM . 68 . IN APPEAL, TH E CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE VIS - - VIS EXPLANATION OF THE ASSESSEE AND FINDINGS OF AO AND FOLLOWING THE ORDER OF HIS PREDECESSOR FOR EARLIER ASSESSMENTS YEARS I.E. A.YS.1997 - 98 AND 1998 - 99, DELETED THE ADDITION . THE OBSERVATIONS O F THE CIT(A) IN THIS REGARD ARE AS UNDER : - 6.2 I HAVE CONSIDERED THE MATTER. THE CLAIMS MADE BY THE COMPANY HAVE BEEN ALLOWED IN THE EARLIER ASSESSMENT YEARS. ONLY FOR THE AYS 1997 - 98 AND 1998 - 99, THE ENTIRE CLAIMS WERE DISALLOWED BY THE AO. THE CIT(A) IN HIS ORDER IN ITA NO.0022/00 - 01 DT.18.06.2003 AND ITA NO.0006/03 - 04 DT.30.07.2003 DELETED THE DISALLOWANCE. THE OPERATIVE PART OF THE ORDER OF THE CIT(A) FOR AY 1997 - 98 IS REPRODUCED BELOW: '13.1. FROM THE DETAILS OF STAFF WELFARE EXPENSES FURNISHED, TH E AO FOUND THAT THE APPELLANT HAS INCURRED AN EXPENDITURE OF RS.278.31 LAKHS TOWARDS GIFT COUPONS GIVEN TO THE EMPLOYEES. THE APPELLANT CONTENDED BEFORE THE AO THAT THE GIFT COUPONS WERE GIVEN TO MAINTAIN CORDIAL AND HARMONIOUS RELATIONSHIP WITH THE EMPLOY EES AND THE EXPENSES ARE ALLOWABLE U/S 37(1) OF THE I. T. ACT. THE AO DID NOT ACCEPT THE ABOVE CONTENTION HOLDING THAT THE PAYMENT IS IN THE FORM OF GIFT WHICH IS OUTSIDE THE TERMS OF PAYMENT OF SALARY AND OTHER EMOLUMENTS. THE EXPENDITURE IS TO BE TREATED AS APPLICATION OF A PART OF THE PROFIT FOR THE YEAR FOR NON BUSINESS PURPOSE. THE AO DISALLOWED THE CLAIM OF RS.278.31 LAKHS. . ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 32 13.2 IN THE WRITTEN SUBMISSIONS FILED THE APPELLANT COMPANY HAS CONTENDED THAT IT ISSUED 'GIFT TOKENS' WHICH CAN BE UTILIZED IN EXCHANGING FOR ARTICLES/THINGS OF DAILY USE IN SPECIFIC SHOPS TO ITS EMPLOYEES IN ORDER TO MAINTAIN CORDIAL AND HARMONIOUS RELATIONSHIP WITH ITS EMPLOYEES AND ALSO AS AN INCENTIVE TO ENCOURAGE THE EMPLOYEES TO ATTEND TO WORK MORE DILIGENTLY AND FOR BETTER PERFORMANCE. COPIES OF THE RELEVANT COMPANY CIRCULARS WERE FILED. THEREFORE, THE EXPENSES WERE INCURRED FOR COMMERCIAL EXPEDIENCY AND ARE FULLY ALLOWABLE U/S 37(1) OF THE I.T.ACT. IT WAS FURTHER CONTENDED THAT THE TAXABILITY OF THE GIFT TOKENS IN THE HAND S OF THE EMPLOYEES IS IMMATERIAL PARTICULARLY IN VIEW OF THE OMISSION OF SECTION 40(C) AND 40A(5) OF THE I. T. ACT W. E ,F. 01.04.1989. IT WAS FURTHER, POINTED OUT THAT THE GOVT., HAS NOTIFIED IN SEPTEMBER 2001 BY LIMITING GIFT COUPONS ETC., GIVEN TO EMPLO YEES FOR BEING TREATED AS PERQUISITES IN THE HANDS OF THE EMPLOYEES, IF THE AMOUNT EXCEEDED RS.5,000/ - IN A YEAR. THE ABOVE NOTIFICATION IS EFFECTIVE FROM A.Y 2002 - 03 ONWARDS. THE APPELLANT HAS ALSO POINTED OUT THAT THE VALUE OF SUCH GIFT COUPONS HAS BEEN TREATED AS TAXABLE SALARY ( PERQUISITES ) BY THE ITO (TDS) FOR THE PURPOSE OF DEDUCTION OF TAX AT SOURCE AND THIS HAS BEEN CONFIRMED IN THE FIRST APPEAL. THE COMPANY HAS PAID THE TAX IN THIS REGARD. THE APPELLANT FILED A COPY OF THE CHALLAN SHOWING PAYMENT OF RS.7,96,800/ - WHICH HAS BEEN ISSUED BY THE ITO (TDS) ON 27.3.2001. THEREFORE, THE EXPENSES ON GIFT COUPONS ARE NOT ONLY ALLOWABLE EXPENSES BUT HAS ALSO SUFFERED TAX BY BEING TREATED AS INCOME ARISING TO THE EMPLOYEES. 13.3 I HAVE GIVEN CAREFUL CONSIDE RATION TO THE ORDER OF THE AO AND THE WRITTEN SUBMISSIONS FILED BY THE APPELLANT ON THIS ISSUE. THE PERUSAL OF COMPANY CIRCULARS FILED SHOW THAT THE GIFT COUPONS HAVE BEEN HANDED OUT IN APPRECIATION OF THE CONTRIBUTION OF THE EMPLOYEES FOR THE OVERALL BETT ER PERFORMANCE OF THE COMPANY. THEREFORE, IT IS AN INCENTIVE TO THE EMPLOYEES TOWARDS BETTER PRODUCTIVITY. THE BUSINESS CONSIDERATION BEHIND THE PAYMENT OF GIFT TOKENS IS QUITE MANIFEST. THE AO HAS VIEWED THE AMOUNT AS GIFTS TO EMPLOYEES OUTSIDE THE OBLIGA TION TO PAY SALARY AND WAGES. THIS WILL NOT BE A CORRECT VIEW. OTHERWISE ALSO, THE AMOUNT WILL COME UNDER STAFF WELFARE EXPENSES. THEREFORE, THE EXPENSES WILL COME UNDER THE PURVIEW OF THE SECTION 37(1) OF THE I. T. ACT. THE ALLIED ISSUE IS WHETHER THE AMO UNT CONSTITUTES PERQUISITE TO THE EMPLOYEES. THE AO HAS HELD SO AND HAS REALIZED THE TPS FROM THE ABOVE AMOUNT. THEREFORE, THERE IS A CONTRADICTION JRTTREATING THE AMOUNT SIMULTANEOUSLY AS PAYMENT NOT ALLOWABLE U/S 37 OF THE ACT AND SALARY BEING PERQUISITE WHICH IS OBVIOUSLY ALLOWABLE U/S 37 OF THE ACT. BE THAT IT MAY, THE EXPENDITURE, IN QUESTION, FULFILS THE REQUIREMENT OF SECTION 37(1) AND THE ADDITION IS DELETED. THE FACTS ARE IDENTICAL IN THIS YEAR ALSO. THE EXPENDITURE IS CLEARLY INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND HAS TO BE ALLOWED AS A DEDUCTION U/S.37(1) OF THE ACT. THE DISALLOWANCE OF RS.24,23,10,444/ - IS THEREFORE, DELETED. GROUND NO.6 IS ALLOWED. ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 33 69 . LD. DR RELIED ON THE ORDER OF AO, WHEREAS LD. AR RELIED ON THE ORDE R OF CIT(A). 70 . WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE AR OF THE ASSESSEE SUBMITTED THAT THE EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, SINCE THE GIFT COUPONS WERE L INKED TO THE PERFORMANCE OF THE INDIVIDUALS AND THE ORGANISATION. HOWEVER, THE AO DISALLOWED THE CLAIM OF THE ASSESSEE BECAUSE THE PAYMENTS MADE BY THE ASSESSEE WERE IN THE NATURE OF EX - GRATIA PAYMENTS. THE CIT(A) HELD THAT THE EXPENDITURE IS CLEARLY INCUR RED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND HAS TO BE ALLOWED AS A DEDUCTION U/S.37(1) OF THE ACT. WE FIND THAT THE SIMILAR EXPENDITURES WERE CLAIMED IN THE EARLIER YEARS AND THE REVENUE HAS ACCEPTED THE SAME. IN OUR CONSIDERED VIEW THE CIT( A) HAS RIGHTLY DELETED THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF GIFT COUPONS TO THE EMPLOYEES. ACCORDINGLY, WE UPHELD THE ACTION OF THE CIT(A) AND DISMISS THE GROUND OF APPEAL OF REVENUE. 71 . IN THE RESULT, APPEAL OF REVENUE I.E. ITA NO. 353/CTK/2015 F OR THE ASSESSMENT YEAR 2007 - 2008 IS DISMISSED. 72 . THE ASSESSEE HAS FILED CROSS OBJECTION I.E. CO NO. 49/CTK/2015 (ARISING OUT OF ITA NO.353/CTK/2015) FOR THE ASSESSMENT YEAR 2007 - 08 , WHICH IS IN SUPPORTIVE TO THE ORDER OF CIT(A). SINCE WE HAVE DISMISSED TH E APPEAL OF REVENUE, THE CROSS OBJECTION FILED BY THE ASSESSEE HAS BECOME INFRUCTUOUS, HENCE, THE SAME IS DISMISSED. ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 34 73 . NOW, WE SHALL TAKE UP THE APPEAL THE ASSESSEE FOR THE ASSESSMENT YEAR 2008 - 2009 IN ITA NO.392/CTK/2015, WHICH IS FILED AGAINST THE ORDE R OF CIT(A) - 1, BHUBANESWAR, DATED 08.06.2015 IN ITAPPEAL NO.05444/14 - 15, WHEREIN THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : - 1. THAT THE ORDER DATED 08.06.2015 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 IRRELEVANT CONSIDERATIONS, AGAINST NATURAL JUSTICE, CONTRARY TO FACTS, ARBITRARY, ERRONEOUS AND BAD IN LAW. 2. RE - OPENING U/S.147 OF THE ACT A. THAT ON TH E FACTS AND IN THE CIRCUMSTANCES THE CASE, THE DISMISSAL OF THE GROUND IN RESPECT OF THE RE - OPENING OF THE ASSESSMENTS OF THE LEARNED AO U/S.147 OF THE ACT BY THE LEARNED CLT(APPEALS) IS ON MIS - APPRECIATION OF FACTS, ARBITRARY, ERRONEOUS AND BAD BOTH ON FA CTS AND IN LAW. B. THAT THE LEARNED CIT(APPEALS) HAS MIS - APPRECIATED THE FACTS AND HIS HOLDING THAT THE APPELLANT HAS NOT FOUND FAULT WITH THE REASONS RECORDED BY THE LEARNED ASSESSING OFFICER FOR THE RE - OPENING IS ARBITRARY, ERRONEOUS AND BAD BOTH ON FACT S AS WELL IN LAW. C. THAT THE NOTICE ISSUED U/S.148 OF THE ACT IS ERRONEOUS, WITHOUT JURISDICTION, BAD IN LAW AND LEGALLY UNTENABLE AND THE ASSESSING OFFICER HAVING FAILED TO PASS ANY ORDER FOR HOLDING THE VALIDITY OF THE REOPENING BEFORE PASSING THE REASS ESSMENT ORDER DT 24.01.2014, THE LEARNED CIT(APPEALS) HOLDING THE REASSESSMENT ORDER DT 24.01.2014 AS VALID IS ARBITRARY, ERRONEOUS AND BAD, BOTH IN THE EYE OF LAW AND ON FACTS. 3. DISALLOWANCE UNDER PERIPHERAL DEVELOPMENT EXPENSES RS.4,16,65,787/ - A. T HAT ON THE FACTS AND IN THE CIRCUMSTANCES THE CASE, THE ORDER OF THE LEARNED C I T (APPEALS) IN PARTLY SUSTAINING THE DISALLOWANCE OF RS.4,16,65,787/ - UNDER PERIPHERAL DEVELOPMENT EXPENSES IS BASED ON IRRELEVANT CONSIDERATIONS, CONTRARY TO FACTS, ARBITRARY , ERRONEOUS AND BAD IN LAW. . B. THAT THE AFORESAID EXPENDITURE OF RS.4,16,65,787/ - HAVING BEEN INCURRED BY THE ASSESSEE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS THE SUSTAINING THE DISALLOWANCE BY THE LEARNED CIT(APPEALS) IS ON MIS - AP PRECIATION OF FACTS, ARBITRARY, ERRONEOUS AND BAD BOTH ON FACTS AND IN LAW. C. THAT THE LEARNED CIT(APPEALS) IN HOLDING THAT THE AFORESAID RS.4,16,65,787/ - IS NOT SPENT IN CONNECTION WITH RUNNING OF BUSINESS AND IN VIOLATION OF GOVT, OF ODISHA NOTIFICATION IS ON MIS - APPRECIATION OF FACTS, ARBITRARY, ERRONEOUS AND BAD BOTH ON FACTS AND IN LAW. ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 35 D. THAT IN SIMILAR FACTS AND CIRCUMSTANCES, IN THE PAST YEARS, IN ASSESSEES OWN CASE, THE HON'BLE ITAT HAVING DECIDED THAT THE AFORESAID EXPENDITURE ARE FULLY ALLOWAB LE, THE LEARNED CIT (APPEALS)'S ORDER IN NOT ALLOWING THE SAME IS, ARBITRARY, ERRONEOUS AND BAD BOTH ON FACTS AND IN LAW. E. THAT WITHOUT PREJUDICE TO GROUNDS ('A' TO 'D') ABOVE, THE SUM OF RS.4,16,65,787/ - UNDER PERIPHERAL DEVELOPMENT EXPENSES DISALLOWE D BY THE LEARNED ASSESSING OFFICER IN THE RE - ASSESSMENTS ORDER IS ARBITRARY, ERRONEOUS, AND BAD, BOTH IN THE EYE OF LAW AND ON FACTS, THE LEARNED CIT(APPEALS) OUGHT TO HAVE DELETED THE SAME. 4. DISALLOWANCE OF INTEREST ON DISPUTED GOVT, DUTY (ELECTRICITY DUTY AND WATER CHARGES RS.59,55,89,734/ - A. THAT THE LEARNED CIT(APPEALS) HAS MIS - APPRECIATED THE FACTS AND HIS DISMISSING THE GROUND FOR DISALLOWANCE OF INTEREST ON DISPUTED GOVT, DUTY (ELECTRICITY DUTY AND WATER CHARGES - RS.59,55,89,734/ - IS BASED ON I RRELEVANT CONSIDERATIONS, UNJUSTIFIED, ARBITRARY, ERRONEOUS, AND BAD, BOTH IN THE EYE OF LAW AND ON FACTS. B. THAT THE SUM OF RS.59,55,89,734/ - UNDER INTEREST ON DISPUTED GOVT, DUTY (ELECTRICITY DUTY AND WATER CHARGES) BEING STATUTORY LIABILITY IS FULLY DEDUCTIBLE ON ACCRUAL BASIS AND THEREFORE, THE LEARNED CIT(APPEALS) OUGHT TO HAVE ALLOWED THE SAME. C. THAT THE LEARNED CIT(APPEALS) IS UNJUSTIFIED, ARBITRARY AND HAS ERRED IN IGNORING/NOT FOLLOWING THE ORDERS PASSED BY THE HONBLE ITAT, CUTTACK BENCH IN RESPECT OF PAST ASSESSMENT YEARS IN ASSESSEES OWN CASE WHEREIN, IN SIMILAR CIRCUMSTANCES, IT HAS BEEN HELD THAT INTEREST ON ELECTRICITY DUTY AND WATER CHARGES ARE FULLY ALLOWABLE. 5. ADDITION UNDER LOSS ON SALE OF ASSETS RS.67,52,495/ - : A. THAT THE L EARNED CIT(APPEALS HAS MIS - APPRECIATED THE FACTS AND HIS DISMISSING THE GROUND FOR ADDITION UNDER LOSS ON SALE OF ASSETS OF RS.67,52,495/ - IS UNJUSTIFIED, ARBITRARY, ERRONEOUS, AND BAD, BOTH IN THE EYE OF LAW AND ON FACTS. B. THAT THE SUM OF RS.67,52,49 5/ - UNDER LOSS ON SALE OF ASSETS HAVING ALREADY BEEN ADDED IN THE COMPUTATION OF INCOME/ TAX RETURN AS PER IT ACT, THE ADDITION OF THE SAID RS.67,52,495/ - BY THE LEARNED ASSESSING OFFICER OUGHT TO HAVE BEEN DELETED THE LEARNED CIT(APPEALS). 6. DISALLOW ANC E OF PROVISION FOR LEAVE ENCASH MENT - U/S.43B(F) OF THE ACT - RS. 12,04,58,663/ - ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 36 THAT ON THE FACTS AND IN THE CIRCUMSTANCES THE CASE, THE SUSTAINING OF THE DISALLOWANCE OF RS . 12,04,58,663/ - U/S.43B(F) OF THE ACT BY THE LEARNED CIT(APPEALS) IS ERRONEOUS A ND BAD IN LAW. 7. DISALLOWANCE UNDER 'PRIOR PERIOD ADJUSTMENTS - RS.4,85,17,888/ - A. THAT THE LEARNED CIT(APPEALS) HAS MIS - APPRECIATED THE FACTS AND HIS SUSTAINING OF ADDITION/ DISALLOWANCE OF RS.4,85,17,888/ - UNDER 'PRIOR PERIOD ADJUSTMENTS' IS CONTRAR Y TO FACTS, ARBITRARY, ERRONEOUS AND BAD, BOTH IN THE EYE OF LAW AND ON FACTS. B. THAT THE LEARNED ASSESSING OFFICER HAVING ACCEPTED THE CREDITS UNDER THE NOMENCLATURE PRIOR PERIOD ADJUSTMENTS, THE LEARNED CIT(APPEALS) IS UNJUSTIFIED AND HAS ERRED IN NO T ALLOWING THE DEBITS UNDER THE SAID PRIOR PERIOD ADJUSTMENTS C. THAT WITHOUT PREJUDICE TO GROUNDS (A) TO (C) ABOVE, ASSUMING BUT NOT ADMITTING THAT THE SAID AMOUNT OF RS.4,85,17,888/ - IS FOR PAST YEARS, IT IS SUBMITTED THAT THE RATES OF INCOME TAX FOR THE ASSESSMENT UNDER CONSIDERATION BEING EITHER EQUAL TO OR LOWER THAN THE RATES IN THE PAST ASSESSMENT YEARS, AS THE EXPENSES DEBITED UNDER THE SAID PRIOR PERIOD EXPENDITURE ARE OTHERWISE ALLOWABLE IN THE PAST YEARS, THE AFORESAID AMOUNT OF RS.4,85,17,8 88/ - , EVEN THOUGH DEBITED TO THE P/L ACCOUNT OF THE CURRENT YEAR OUGHT TO BE ALLOWED. 8. DISALLOWANCE OF AMOUNTS WRITTEN OFF IN RESPECT OF CLAIMS/RECEIVABLES - RS.58,35,505/ - A. THAT ON THE FACTS AND IN THE CIRCUMSTANCES THE CASE, THE SUSTAINING OF THE AD DITION/DISALLOWANCE OF RS.58,35,505/ - IN RESPECT OF AMOUNTS WRITTEN OFF TOWARDS CLAIMS/ RECEIVABLES/ ADVANCES BY THE LEARNED CIT(APPEALS) IS ARBITRARY, ERRONEOUS, BAD, BOTH IN THE EYE OF LAW AND ON FACTS. B. THAT THE LEARNED CIT(APPEALS) HAS MIS - APPRECIAT ED THE FACTS AND HAS ERRED IN HOLDING THAT THE AFORESAID RS.58,35,505/ - IS ON CAPITAL ACCOUNT. 9. DISALLOWANCE UNDER SECTION 43B - ELECTRICITY DUTY - RS.35,98,95,314/ - A. THAT ON THE FACTS AND IN THE CIRCUMSTANCES THE CASE, THE SUSTAINING OF ADDITION /DI SALLOWANCE OF RS.35,98,95,314/ - UNDER ELECTRICITY DUTY U/S. 43B OF THE I.T ACT BY THE LEARNED CIT(APPEALS) IS ERRONEOUS AND BAD, BOTH IN THE EYE OF LAW AND ON FACTS. B. THAT WITHOUT PREJUDICE TO (A) ABOVE, THE LEARNED CIT(APPEALS) HAS MIS - APPRECIATED TH E FACTS AND THAT AMOUNTS HAVING BEEN DEPOSITED IN TO THE DESIGNATED BANK ACCOUNTS AS PER DIRECTION OF ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 37 THE HONBLE ORISSA HIGH COURT, HIS ORDER THAT THE AMOUNTS SO DEPOSITED ARE LIABLE FOR DISALLOWANCE U/S.43B OF THE ACT IS CONTRARY TO FACTS, ERRONEOUS AND BAD IN LAW. 10. DISALLOWANCE OF ADDITIONAL DEPRECATION U/S.32(L)(NA) OF THE ACT - RS. 8,91,29,640/ - A. THAT ON THE FACTS AND IN THE CIRCUMSTANCES THE CASE, THE LEARNED CIT(APPEALS) OUGHT TO HAVE ALLOWED THE CLAIM OF ADDL. DEPRECIATION OF RS.8,91,29,640/ - U/S.32(I)(IIA) OF THE ACT INSTEAD OF DIRECTING THE MATTER TO THE LEARNED ASSESSING OFFICER. B. THAT IN SIMILAR FACTS AND CIRCUMSTANCES, IN THE ASSESSMENT YEAR 2005 - 06 , IN ASSESSEES OWN CASE, THE HON'BLE ITAT HAVING DECIDED THAT THE AFORESAID ADDITIONAL DEPRECIATION ALLOWANCE ARE FULLY ALLOWABLE, THE LEARNED C1T (APPEALS)'S OUGHT TO HAVE ALLOWED THE SAME INSTEAD OF DIRECTING THE MATTER TO LD. ASSESSING OFFICER.. 11. DISALLOWANCE UNDER MANAGEMENT DEVELOPMENT & TRAINING EXPENSES U/S.40(AHIA) OF THE ACT - RS.2,46,04,175/ - . A. THAT ON THE FACTS AND IN THE CIRCUMSTANCES THE CASE, THE LEARNED CIT(APPEALS) OUGHT TO HAVE DELETED THE ADDITION/ DISALLOWANCE OF RS.2,46,04,175/ - UNDER MANAGEMENT DEVELOPMENT & TRAINING EXPENSES U/S.40(A)(IA) OF THE ACT. B. THAT WIT HOUT PREJUDICE TO GROUNDS ('A') ABOVE, THE AMOUNT UNDER MANAGEMENT DEVELOPMENT & TRAINING EXPENSES DISALLOWED BY THE LEARNED ASSESSING OFFICER U/S.40(A)(IA) OF THE ACT IN THE RE - ASSESSMENTS ORDER IS ARBITRARY, ERRONEOUS, AND BAD, BOTH IN THE EYE OF LAW AND ON FACTS, THE LEARNED CIT(APPEALS) OUGHT TO HAVE DELETED THE SAME. 12. LE VY OF INTEREST U/S 220(2) OF THE ACT RS.3,66,043/ - . THAT ON THE FACTS AND IN THE CIRCUMSTANCES THE CASE, THE DISMISSAL OF THE GROUND IN RESPECT OF CHARGING OF INTEREST RS. 15,56,64 ,564/ - AND RS.43,07,985/ - U/S. 234B AND 220(2), (SUBSEQUENTLY MODIFIED TO RS. 3,66,043 U/S 220(2) BY AO VIDE ORDER U/S 154 DATED 11.03.2014) OF THE ACT RESPECTIVELY BY THE LEARNED CIT(APPEALS) IS ARBITRARY, ERRONEOUS AND BAD, BOTH IN THE EYE OF LAW AND ON FACTS. 13. THAT THE APPELLANT CRAVES LEAVE, TO ADD, SUPPLEMENT, MODIFY THE GROUNDS HERE - IN - ABOVE BEFORE OR AT THE HEARING OF THE APPEAL. 74 . BRIEF FACTS OF THE CASE ARE THE ASSESSEE IS A PUBLIC SECTOR COMPANY WHEREIN 87.15% OF THE SHARES ARE OWNED BY THE GOVERNMENT OF INDIA. THE ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 38 COMPANY IS IN THE BUSINESS OF MINING OF BAUXITE, EXTRACTION OF ALUMINA FROM THE ORE AND THEN PRODUCTION OF ALUMINIUM AND FILED THE RETURN OF INCOME ON 31.10.2008 DECLARING TOTAL INCOME OF RS. 2490,75,51,736/ - AND SUBSEQUENTLY THE A SSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT ON 30.12.2010 WITH TOTAL INCOME OF RS. 2638,30,64,340/ - AND WHEN THE APPEAL WAS FILED BEFORE THE CIT(A) - II, BHUBANESWAR, THE CIT(A) - II, BHUBANESWAR VIDE ORDER DATED 21.02.2013 IN ITA NO.0161/10 - 11 HAS DISMISSED THE APPEAL OF THE ASSESSEE FOR STATISTICAL PURPOSES ON THE GROUND THAT THE AO HAS REOPENED ASSESSMENT U/S.147 OF THE ACT AND ISSUED NOTICE U/S.148 OF THE ACT DTD. 10.07.2012 AND NOW THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER PASSED U/S.143(3)/147 OF THE ACT DATED 24.01.2014. 75 . AT THE TIME HEARING, WE FOUND THAT THE ASSESSEE HAS RAISED GROUND S IN RESPECT OF ADDITIONS MADE U/S.143(3) OF THE ACT DATED 30.12.2010, WHICH WAS DISMISSED BY THE CIT(A) ON 21.02.2013 AND THE ASSESSEE HAS NOT PURSUED THE MA TTER FURTHER AND FILED AN APPEAL BEFORE THE TRIBUNAL ON THE ORDER OF CIT(A) PASSED U/S.143(3)/147 R.W.S.250 OF THE I.T.ACT, 1961, DATED 08.06.2015. 76 . ON PERUSAL OF THE ASSESSMENT ORDER U/S.143(3)/147 OF THE ACT, DATED 24.01.2014, THE AO HAS MADE ADDITIO N ON THE REASONS RECORDED IN THE REASSESSMENT PROCEEDINGS ON TWO ASPECTS ONE ON ACCOUNT OF DISALLOWANCE OF MANAGEMENT DEVELOPMENT AND TRAINING EXPENSES U/S.40(A)(IA) OF THE ACT FOR RS.7,87,00,000/ - AND SECONDLY DISALLOWANCE OF PERIPHERAL DEVELOPMENT EXPE NSES RS.4,16,65,787/ - . SINCE THE GROUND NOS.3 TO 11 RAISED BY THE ASSESSEE BEFORE THE TRIBUNAL DOES NOT EMANATE ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 39 FROM THE ORDER U/S.143(3)/147 OF THE ACT DATED 24.01.2014 , WE RESTRICT OUR ADJUDICATION TO THE ABOVE TWO ADDITIONS MADE IN THE REASSESSMENT PROC EEDINGS. 77 . BEFORE US, L D. AR SUBMITTED THAT THE ASSESSEE HAS CLAIMED MANAGEMENT DEVELOPMENT AND TRAINING EXPENSES AND NO TDS WAS DEDUCTED AND FURTHER THE DETAILS OF EXPENDITURE WERE NOT FILED BEFORE THE AO AND HENCE, THE AO HAS DISALLOWED THE CLAIM AND ON APPEAL THE CIT(A) HAS C ONSIDERED THE ACTION OF AO. THE CIT(A) ON THE ISSUE OF DISALLOWANCE OF MANAGEMENT DEVELOPMENT AND TRAINING EXPENSES CONSIDERED THE WRITTEN SUBMISSION OF THE ASSESSEE AND DEALT AT PARA 3.2 OF THE ORDER AND DIRECTED THE AO, WHICH RE ADS AS UNDER: - 3.2 I HAVE CONSIDERED THE MATTER. IT HAS BEEN SUBMITTED THAT IN RESPECT OF MANAGEMENT DEVELOPMENT FEE OUTSIDE INDIA FOR RS.12,35,939/ - , MANAGEMENT DEVELOPMENT FEES IN INDIA FOR RS.1,47,25,696/ - AND MANAGEMENT DEVELOPMENT IN HOUSE FACULTY FE ES FOR RS.86,42,540/ - , TDS PROVISIONS ARE APPLICABLE AND TDS HAVE BEEN MADE WHEREVER APPLICABLE. IN VIEW OF THE SAME, THE AO IS DIRECTED TO FIND OUT, ON THE BASIS OF INFORMATION FURNISHED BY THE APPELLANT, THE CASES WHERE TAX HAS BEEN DEDUCTED AND IN SUCH CASES NO ADDITION U/S.40(A)(IA) CAN BE MADE. HOWEVER, NO TAX IS DEDUCTIBLE IN RESPECT OF MANAGEMENT DEVELOPMENT - TRAVEL OUTSIDE INDIA FOR RS.33,57,317/ - AND MANAGEMENT DEVELOPMENT - TRAVEL IN INDIA FOR RS.4,49,27,425/ - SINCE THE SAME IS ON ACCOUNT OF EXPENS ES INCURRED IN TRAVELLING . FURTHER, THE AMOUNT OF RS.7,20,250/ - RELATES TO EXPENSES IN RESPECT OF MANAGEMENT DEVELOPMENT IN HOUSE FACULTY MEMBERS, RS.14,02,657/ - RELATES TO MANAGEMENT DEVELOPMENT IN HOUSE FOR PURCHASE OF MATERIALS, RS.30,73,649/ - RELATES TO MANAGEMENT DEVELOPMENT EXPENSES ON TQM/ISO/BS AND RS.6,70,919/ - RELATES TO MANAGEMENT DEVELOPMENT EXPENSES ON RAJABHASA ON WHICH NO TAX IS DEDUCTIBLE BEING FOR PURCHASE OF MATERIALS OR ON ACCOUNT OF EXPENSES. ACCORDINGLY, NO ADDITION U/S.40(A)(IA) CAN B E MADE IN RESPECT OF THE AFORESAID ITEMS. THE AO IS ACCORDINGLY DIRECTED TO RE - COMPUTE THE ADDITION U/S.40(A)(IA). ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 40 78 . WE FOUND THAT THE DIRECTION OF CIT(A) TO THE AO TO VERIFY THE CLAIM OF EXPENDITURE IS IN ORDER AND THE CIT(A) HAS CONSIDERED THE SUBMI SSIONS VIS - - VIS EXPLANATION OF THE ASSESSEE AND PASSED A REASONED ORDER O N THIS ISSUE AND ACCORDINGLY WE UPHOLD THE SAME AND DISMISS THE GROUND OF APPEAL OF THE ASSESSEE . 79 . IN RESPECT OF DISALLOWANCE UNDER PERIPHERAL DEVELOPMENT EXPENSES, THE AO IN REASS ESSMENT PROCEEDINGS FOUND THAT THE ASSESSEE HAS INCURRED RS.4,16,65,787/ - IN CONTRAVENTION OF NOTIFICATION ISSUED BY THE GOVERNMENT OF ORISSA. THE ASSESSEE SUBMITTED THAT THIS EXPENDITURE WAS INCURRED THROUGH TRUST AND SOCIETIES AND THE ASSESSEE HAS COMPLI ED THE COMMERCIAL EXPEDIENCY TO CLAIM THE EXPENSES AND THE AMOUNT HAS BEEN SPENT THROUGH SOCIETY, TRUST AND DISTRICT LEVEL HEADS BY RESPECTIVE COLLECTORS AND RDCS, WHEREAS THE AO WAS NOT SATISFIED WITH THE EXPLANATION S OF THE ASSESSEE AND OBSERVED THAT THE RE IS NO NEXUS TO THE ASSESSEES BUSINESS AND MADE ADDITION. IN APPEAL, THE CIT(A) HAS CONFIRMED THE SAME. 80 . WE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE CONTENTION OF LD. AR THAT THIS PERIPHERAL DEVELOPMENT EXPENSES WAS INCURRED THROUGH SOCIETIE S AND TRUST AS PER THE DIRECTIONS OF THE GOVERNMENT. WE FOUND THAT THE LD. CIT(A) HAS DEALT ON THIS ISSUE AND ASSESSEE COULD NOT PRODUCE ANY EVIDENCE. IN THE EARLIER ASSESSMENT YEAR ON THE ISSUE OF PERIPHERAL EXPENDITURE, WE HAVE REMITTED T HIS ISSUE TO THE FILE OF AO. ACCORDINGLY, WE FOLLOW THE SAME AND REMIT THIS ISSUE TO THE FILE OF AO AND PARTLY ALLOW THE APPEAL OF THE ASSESSEE. ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 41 81 . NOW WE SHALL TAKE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2008 - 09 IN ITA NO.383/CTK/2015, WHEREIN THE REV ENUE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN LAW AS WELL AS ON FACTS IN DELETING THE ADDITION OF RS.3,92,84,875/ - MADE BY THE AO ON ACCOUNT OF WHEELING - CHARGES DI SALLOWED U/S.40(A)(IA). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW IN NOT ACCEPTING THE EXAMINATION OF FINDINGS MADE BY THE AO ON THE ISSUE. 3. THE APPELLANT CRAVES TO ALTER, AMEND OR ADD ANY OTHER GROUND THAT MAY BE CONSIDERED NECESSARY IN COURSE OF THE APPEAL PROCEEDING. 82 . I N THE APPEAL THE REVENUE HAS RAISED THE GROUNDS WHICH DOES NOT EMANATE FROM THE ORDER U/S.143(3)/147 OF THE ACT DATED 24.01.2014, THEREFORE, WE DISMISS THE GROUND OF APPEAL OF THE REVENUE . ACCORDINGLY, TH E APPEAL OF THE REVENUE IS DISMISSED. 83 . THE ASSESSEE HAS FILED CROSS OBJECTION I.E. CO NO.51/CTK/2015 (ARISING OUT OF ITA NO.383/CTK/2015) FOR THE ASSESSMENT YEAR 2008 - 09, WHICH IS IN SUPPORTIVE TO THE ORDER OF CIT(A). AS WE HAVE DISMISSE D THE APPEAL OF REVENUE, THE CROSS OBJECTION FILED BY THE ASSESSEE HAS BECOME INFRUCTUOUS, HENCE, THE SAME IS DISMISSED. 84 . IN THE RESULT, APPEAL OF THE ASSESSEE I.E. ITA NO.3 43 & 392/CTK/2015 ARE ALLOWED FOR STATISTICAL PURPOSES AND APPEAL OF REVENUE I.E . ITA NO.353 & 383/CTK/2015 AND CROSS OBJECTIONS OF ASSESSEE I.E. CO NOS. 49&51/CTK/2015 ARE DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 / 0 4 /201 8 . SD/ - (N. S. SAINI) SD/ - ( PAVAN KUMAR GADALE ) / ACCOUNTANT M EMBER / JUDICIAL MEMBER CUTTACK ; DATED 23 / 0 4 /201 8 . . / PKM , SENIOR PRIVATE SECRETARY ITA NO S.343, 353, 383 & 392/CTK/2015 CO NOS.49&51/CTK/2015 42 / 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//