M/s. Sharp Menthol India Ltd., New Delhi V. DCIT, New Delhi

CO 70/DEL/2013

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2720 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 4 month(s) 18 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 28-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 02-05-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 09-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Keywords: Depreciation; Business expenditure; Search and seizure; Double taxation relief; Tax effect; Revenue expenditure; Capital expenditure
• Section: 40(a)(ia); 268A; 132

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI G BEN CH, NEW DELHI BEFORE SHRI A.D. JAIN, VICE PRESIDENT, AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO. 1195/DEL/2009 [A.Y 2006-07] & CO NO. 70/DEL/2013 (A/O ITA NO. 379/DEL/2012 [A.Y 2007-08]) M/S SHARP MENTHOL INDIA LTD. VS. THE DY. C.I.T. 1 ST FLOOR, SAGAR CENTRE CENTRAL CIRCLE 22 PLOT NO. 9, GUJRAWALAN TOWN PAN NO: AAACS 1034 M ITA NO. 1291/DEL/2009 [A.Y 2006-07] & ITA NO. 379/DEL/2012 [A.Y 2007-08] THE DY. C.I.T. VS. M/S SHARP MENTHOL INDIA LTD. CENTRAL CIRCLE 22 1 ST FLOOR, SAGAR CENTRE NEW DELHI PLOT NO. 9, GUJRAWALAN TOWN NEW DELHI PAN NO: AAACS 1034 M [APPELLANT] [RESPONDENT] DATE OF HEARING : 13.08.2019 DATE OF PRONOUNCEMENT : 28 .08.2019 ASSESSEE BY : SHRI S.D. KAPILA, A DV SHRI R.R. MOURYA, ADV SHRI BHUVAN MAHAJAN, ADV REVENUE BY : SHRI S.S. RANA, CIT - DR 2 ORDER PER BENCH THE ABOVE TWO APPEALS BY THE REVENUE ARE PREFERRED AGAINST TWO SEPARATE ORDERS OF THE COMMISSIONER OF INCOME TAX [ APPEALS] - 3, NEW DELHI DATED 20.01.2009 AND 30.08.2011 PERTAINING TO ASSESSMENT YEARS 2006-07 AND 2007-08. THE ASSESSEE HAS FILED CROSS APPEAL FOR A.Y 2006- 07 AND CROSS OBJECTION FOR A.Y 2007-08. SINCE ALL T HESE APPEALS AND CROSS OBJECTION PERTAIN TO SAME ASSESSEE AND WERE H EARD TOGETHER, THEY ARE BEING DISPOSED OFF BY THIS COMMON ORDER FO R THE SAKE OF CONVENIENCE AND BREVITY. 2. IN A.Y 2006-07, THE REVENUE IS AGGRIEVED BY THE ALLOWING OF DEPRECIATION ON THE SURRENDERED INCOME OF RS. 75 LA KHS AND IN A.Y 2007-08, THE REVENUE IS AGGRIEVED BY THE DELETION O F DISALLOWANCE OF RS. 1,20,52,213/- MADE BY THE ASSESSING OFFICER U/S 40(A)(IA) OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'T HE ACT']. 3. A PERUSAL OF THE GRIEVANCES OF THE REVENUE SHOWS THAT THE TAX EFFECT WOULD BE LESS THAN RS. 50 LAKHS AND HENCE BO TH THE APPEALS HAVE 3 TO BE DISMISSED IN THE LIGHT OF THE CBDT CIRCULAR N O. 17/2019 DATED 08.08.2019. 4. THE LD. DR VEHEMENTLY STATED THAT THIS CIRCULAR IN NOT APPLICABLE TO THE EXISTING APPEALS AS IT IS PROSPECTIVE IN NAT URE. 5. IN OUR CONSIDERED OPINION, THE LANGUAGE OF THE C IRCULAR 17/2019 DATED 08.08.2019 CLEARLY SHOWS THAT IT HAS REFERRED TO THE EARLIER CIRCULAR 3/2018 AND ITS AMENDMENT DATED 20.08.2018 VIDE WHICH MONETARY LIMIT FOR FILING OF INCOME TAX APPEALS BY THE DEPARTMENT BEFORE THE ITAT, HON'BLE HIGH COURT, SLP/AND APPEAL S BEFORE THE HON'BLE SUPREME COURT HAVE BEEN SPECIFIED. IT WOUL D BE PERTINENT TO REFER TO THE CIRCULAR NO. 17/2019 WHICH READS AS UN DER: CIRCULAR NO. 17/2019 NEW DELHI. 8TH AUGUST 2019 SUBJECT: - FURTHER ENHANCEMENT OF MONETARY LIMITS F OR FILING OF APPEALS BY THE DEPARTMENT BEFORE INCOME T AX APPELLATE TRIBUNAL, HIGH COURTS AND SLPS/APPEALS BEFORE SUPREME COURT - AMENDMENT TO CIRCULAR 3 OF 2018 - MEASURES FOR REDUCING LITIGATION.- 4 REFERENCE IS INVITED TO THE CIRCULAR NO.3 OF2018 DA TED 11.07.2018 (THE CIRCULAR) OF CENTRAL BOARD OF DIREC T TAXES (THE BOARD) AND ITS AMENDMENT DATED 20TH AUGUST. 20 18 VIDE WHICH MONETARY LIMITS FOR FILING OF INCOME TAX APPE ALS BY THE DEPARTMENT BEFORE INCOME TAX APPELLATE TRIBUNAL. HI GH COURTS AND SLPS/APPEALS BEFORE SUPREME COURT HAVE B EEN SPECIFIED. REPRESENTATION HAS ALSO BEEN RECEIVED TH AT AN ANOMALY IN THE SAID CIRCULAR AT PARA 5 MAY BE REMOV ED. 2. AS A STEP TOWARDS FURTHER MANAGEMENT OF LITIGATI ON. IT HAS BEEN DECIDED BY THE BOARD THAT MONETARY LIMITS FOR FILING OF APPEALS IN INCOME-TAX CASES BE ENHANCED FURTHER THR OUGH AMENDMENT IN PARA 3 OF THE CIRCULAR MENTIONED ABOVE AND ACCORDINGLY, THE TABLE FOR MONETARY LIMITS SPECIFIE D IN PARA 3 OF THE CIRCULAR SHALL READ AS FOLLOWS: S.NO. APPEALS/SLPS IN IT MATTERS MONETARY LIMIT (RS.) 1. BEFORE APPELLATE TRIBUNAL 50,00,000/- 2. BEFORE HIGH COURT 1,00.00.000/- 3. BEFORE SUPREME COURT 2.00.00,000/- 3. FURTHER, WITH A VIEW TO PROVIDE PARITY IN FIL ING OF APPEALS IN SCENARIOS WHERE SEPARATE ORDER IS PASSED BY HIGHER APPELLATE AUTHORITIES FOR EACH ASSESSMENT YEAR VIS-A-VIS WHER E COMPOSITE 5 ORDER FOR MORE THAN ONE ASSESSMENT YEARS IS PASSED. PARA 5 OF THE CIRCULAR IS SUBSTITUTED BY THE FOLLOWING PARA: '5. THE ASSESSING OFFICER SHALL CALCULATE THE TAX E FFECT SEPARATELY FOR EVERY ASSESSMENT YEAR IN RESPECT OF THE DISPUTED ISSUES IN THE CASE OF EVERY ASSESSEE. IF, IN THE CASE OF AN ASSESSEE, THE DISPUTED ISSUES ARISE IN M ORE THAN ONE ASSESSMENT YEAR, APPEAL CAN BE FILED IN RESPECT OF SUCH ASSESSMENT YEAR OR YEARS IN WHICH THE TAX EFFECT IN RESPECT OF THE DISPUTED ISSUES EXCEEDS THE MONETARY LIMIT S PECIFIED IN PARA 3. NO APPEAL SHALL BE FILED IN RESPECT OF A N ASSESSMENT YEAR OR YEARS IN WHICH THE TAX EFFECT IS LESS THAN THE MONETARY LIMIT SPECIFIED IN PARA 3. FURTHE R, EVEN IN THE CASE OF COMPOSITE ORDER OF ANY HIGH COURT OR AP PELLATE AUTHORITY WHICH INVOLVES MORE THAN ONE ASSESSMENT Y EAR AND COMMON ISSUES IN MORE THAN ONE ASSESSMENT YEAR, NO APPEAL SHALL BE FILED IN RESPECT OF AN ASSESSMENT YEAR OR YEARS IN WHICH THE TAX EFFECT IS LESS THAN THE MONETARY LIMI T SPECIFIED IN PARA 3. IN CASE WHERE A COMPOSITE ORDE R/ JUDGEMENT INVOLVES MORE THAN ONE ASSESSEE. EACH ASS ESSEE SHALL BE DEALT WITH SEPARATELY.' 4. THE SAID MODIFICATIONS SHALL COME INTO EFFECT FR OM THE DATE OF ISSUE OF THIS CIRCULAR. 5. THE SAME MAY BE BROUGHT TO THE NOTICE OF ALL CON CERNED. 6 6. THIS ISSUES UNDER SECTION 268A OF THE INCOME-TAX ACT, 1961. 7. HINDI VERSION WILL FOLLOW. 6. AS MENTIONED ELSEWHERE BY CIRCULAR 17/2019, THE CBDT HAS FURTHER ENHANCED THE MONETARY LIMIT FOR FILING OF A PPEALS AND THE SAME IS AMENDMENT TO CIRCULAR 3/2018. WE FIND THAT CLAU SE 13 OF CIRCULAR 3/2018 READS AS UNDER: THE CIRCULAR WILL APPLY TO SLPS/APPEALS/CROSS OBJE CTIONS /REFERENCES TO BE FILED HENCEFORTH IN HON'BLE SUPRE ME COURT/TRIBUNAL AND IT SHALL ALSO APPLY RETROSPECTIV ELY TO PENDING SLPS/APPEALS/CROSS OBJECTIONS/REFERENCES. PENDING APPEALS BELOW THE SPECIFIED TAX LIMITS IN PARA 3 ABOVE MAY BE WITHDRAWN/NOT PRESSED. 7. IN LIGHT OF THE ABOVE, WE ARE OF THE CONSIDERED OPINION THAT CIRCULAR NO. 17/2019 SHALL ALSO APPLY RETROSPECTIVE LY TO PENDING APPEALS. IN THAT VIEW OF THE MATTER, THE APPEALS F ILED BY THE REVENUE STAND DISMISSED. 7 8. COMING TO THE ASSESSEES APPEAL IN ITA NO. 1195/ DEL/2009 A.Y 2006-07 AND CROSS OBJECTION IN CO NO. 70/DEL/2013 F OR A.Y 2007-08, FACTS ARE THAT DURING THE ASSESSMENT PROCEEDINGS FO R A.Y 2006-07, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS RECEI VED PRE-SHIPMENT ADVANCE AGAINST EXPORT ORDER FROM M/S CARGILL INTER NATIONAL TRADING PTE LTD [SINGAPORE] ON 09.12.2005. ON 31.03.2006, A SUM OF RS. 2,25,93,901/- HAS BEEN CREDITED BY WAY OF JOURNAL E NTRY, BEING THE AMOUNT OF DISCOUNT ON FUNDS RECEIVED FROM M/S CARGI LL INTERNATIONAL TRADING (I)(P) LTD. 9. THE ASSESSEE WAS ASKED TO EXPLAIN HOW THE DISCOU NT HAS BEEN ACCOUNTED FOR IN THE PROFIT AND LOSS ACCOUNT. THE ASSESSEE FILED DETAILED REPLY EXPLAINING THAT IT HAS ENTERED INTO A TRADE AGREEMENT WITH M/S CARGILL INTERNATIONAL TRADING PTE LTD ON 2 2.11.2005 AND FURNISHED COPY OF THE SAID AGREEMENT. REFERRING TO VARIOUS CLAUSES OF THE AGREEMENT, THE ASSESSEE SUBMITTED THAT HE WAS G IVEN TWO OPTIONS, NAMELY: (I) TO RECEIVE THE PREPAYMENT AMOUNT AT A TRADE DIS COUNT/ PREPAYMENT DISCOUNT BEFORE THE SHIPMENT AGAINST A B ANK GUARANTEE, OR 8 (II) TO RECEIVE THE PAYMENT IN CASH VIA ELECTRONIC TRANSFER OF FUND WITHIN 3 BUSINESS DAYS OF THE RECEIPT OF DOCUM ENTS, THROUGH BANKING CHANNEL. 10. THE ASSESSEE EXERCISED THE FIRST OPTION TO RECE IVE THE PREPAYMENT AMOUNT AS REDUCED BY THE TRADE DISCOUNT/ PREPAYMENT DISCOUNT. IT WAS EXPLAINED THAT A SUM OF RS. 43.61 CRORES WAS RECEIVED FROM THE FOREIGN PARTY AND WAS SHOWN AS TRADE ADVAN CE. THE ASSESSEE FURTHER EXPLAINED THAT IT ALLOWED TRADE DISCOUNT OF RS. 2.25 CRORES ON THE PREPAYMENT OF TRADE ADVANCE AND SINCE IT WAS FO LLOWING THE ACCRUAL SYSTEM OF ACCOUNTING, CREDITED THE SAME INT O THE ACCOUNT OF M/S CARGILL INTERNATIONAL TRADING [SINGAPORE]. IT WAS FURTHER POINTED OUT THAT SINCE THE TRADE AGREEMENT WAS FOR ONE YEAR , THE TRADE DISCOUNT OF RS. 2.25 CRORES WAS BROKEN INTO TWO PER IODS. FIRST PERIOD WAS UPTO 31.03.2006 AND ACCORDINGLY, RS. 77,44,651/ - WAS BOOKED AS EXPENSES UNDER FINANCIAL CHARGES AND SECOND PERIOD WHICH WAS FROM 01.04.2006 TO 27.11.2006, RS. 1,48,49,250/- WAS TRE ATED AS PREPAID EXPENSES AS ON 31.03.2006. ACCORDINGLY, A SUM OF R S. 77,44,651/- WAS SHOWS AS EXPENSE UNDER THE HEAD FINANCIAL CHARGES AND BALANCE AMOUNT WAS CARRIED OVER TO THE NEXT YEAR UNDER THE HEAD PREPAID EXPENSES. 9 11. THE ASSESSING OFFICER FURTHER ASKED THE ASSESSE E TO EXPLAIN THE CLAIM OF EXPENDITURE OF RS. 77,44,651/- AND TO EXPL AIN AS TO WHY THIS SHOULD BE ALLOWED AS BUSINESS EXPENDITURE. 12. IN ITS REPLY, THE ASSESSEE ONCE AGAIN EXPLAINED THAT IT HAD OPTED FOR THE FIRST OPTION AND THERE WAS NO PROVISION IN THE AGREEMENT WHEREBY THE ASSESSEE COULD CANCEL THE AGREEMENT AT AN EARLY DATE. IT WAS CLAIMED THAT THE LIABILITY AROSE AS PER THE AGR EEMENT AND, THEREFORE, EXPENDITURE SHOULD BE ALLOWED. 13. EXPLANATION OF THE ASSESSEE DID NOT FIND ANY FA VOUR WITH THE ASSESSING OFFICER WHO WAS OF THE OPINION THAT THE T RADE DISCOUNT/CASH DISCOUNT MENTIONED IN THE AGREEMENT IS RELATED TO T RADE TRANSACTION MENTIONED IN THE AGREEMENT AND GETS CRYSTALLISED ON LY WHEN TRADE TRANSACTION IS COMPLETED AND SINCE THE TRANSACTION WAS TO BE COMPLETED IN THE PREVIOUS YEAR RELEVANT TO A.Y 2007 -08, LIABILITY ON ACCOUNT OF TRADE ACCOUNT GOT CRYSTALLISED IN A.Y 20 07-08 ONLY. HAVING STATED ALL THAT, THE ASSESSING OFFICER FOUND THAT N O ACTUAL SALE HAS TAKEN PLACE AND THE CONTRACT OF SALE HAS NOT FINALL Y MATERIALISED AND HAS BEEN CANCELLED AND, ACCORDINGLY, PROCEEDED TO T REAT THE TRADE DISCOUNT IN THE NATURE OF FINANCE CHARGES/INTEREST PAYMENT AND 10 INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, THE ASSESSING OFFICER TREATED THE SAID CLAIM DEVOID OF ANY TAX DE DUCTED AT SOURCE AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 14. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT( A) BUT WITHOUT ANY SUCCESS. 15. BEFORE US, THE LD. AR VEHEMENTLY STATED THAT LI ABILITY AROSE PURSUANT TO THE AGREEMENT WITH M/S CARGILL INTERNAT IONAL TRADING PTE LTD AND, THEREFORE, INVOKING THE PROVISIONS OF SECT ION 40(A)(IA) OF THE ACT IS BAD IN LAW. IT IS THE SAY OF THE LD. AR THA T IT IS INCORRECT TO HOLD THAT CASH DISCOUNT IS IN THE NATURE OF INTEREST AND , THEREFORE, IT IS INCORRECT TO HOLD THAT THE SAME HAS TO BE CONSIDERE D IN THE LIGHT OF SECTION 2(28A) OF THE ACT. 16. THE LD. AR FURTHER STATED IN THE CROSS OBJECTIO N TAKEN IN A.Y 2007-08 THAT SINCE THE ASSESSING OFFICER HIMSELF HA S OBSERVED THAT THE TRANSACTION WAS COMPLETED IN A.Y 2007-08 AND LIABIL ITY ON ACCOUNT OF TRADE DISCOUNT GOT CRYSTALLISED IN A.Y 2007-08, THE N THE ENTIRE AMOUNT SHOULD BE ALLOWED AS EXPENDITURE IN A.Y 2007-08. 11 17. IN THE ALTERNATIVE, THE LD. AR CLAIMED THAT IF THE SAID TRANSACTION HAS TO BE CONSIDERED AS INTEREST U/S 2(28A) OF THE ACT, THEN THE SAME SHOULD BE CONSIDERED UNDER ARTICLE 11 OF THE DTAA W ITH SINGAPORE AND ACCORDINGLY, TO BE TAXED @ 15%. 18. PER CONTRA, THE LD. DR STRONGLY SUPPORTED THE F INDINGS OF THE ASSESSING OFFICER. IT IS THE SAY OF THE LD. DR THA T SINCE NO SALE TOOK PLACE, THEREFORE, NO LIABILITY CRYSTALLISED IN A.Y 2007-08. 19. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW. IT IS NOT IN DISPUTE THAT THE TR ADE DISCOUNT WAS AGREED TO BY THE PARTIES MUTUALLY AS A PERCENTAGE O F PRINCIPAL AMOUNT TO BE DEDUCTED BY FOREIGN PARTY AT THE TIME OF PREP AYMENT. IT IS ALSO TRUE THAT THERE IS NO DIRECT OR INDIRECT INDICATION IN THE TRADE AGREEMENT, WHICH COULD SUGGEST THAT THE ASSESSEE WA NTED TO BORROW MONEY FROM THE FOREIGN PARTY. THERE IS NO DISPUTE THAT THIS WAS PURELY A PRE-SHIPMENT ADVANCE OUT OF WHICH CASH/TRADE DISC OUNT WAS DEDUCTED BY FOREIGN PARTY AS PER WRITTEN TRADE AGRE EMENT. THIS MEANS THAT THE DISCOUNT ALLOWED BY THE ASSESSEE TO THE FO REIGN PARTY IS AN INTEGRAL PART OF SALES/PURCHASES. 12 20. HOWEVER, WE FIND THAT THE SALE TRANSACTION DID NOT MATERIALISE AND WAS CANCELLED. HOWEVER, AT THE SAME TIME, WE D O NOT FIND ANY MERIT IN TREATING THE SAID DISCOUNT AS INTEREST U/S 2(28) OF THE ACT THEREBY INVOKING THE PROVISIONS OF SECTION 40(A)(IA ) OF THE ACT. WE FIND THAT IN A.Y 2007-08, THE CIT(A) ACCEPTED THE CONTEN TION OF THE ASSESSEE THAT IT IS NOT PAYMENT OF INTEREST WITHIN THE MEANING OF SECTION 2(28A) OF THE ACT, AND, THEREFORE, THE ASSE SSEE WAS NOT UNDER AN OBLIGATION TO DEDUCT TAX AT SOURCE UNDER CHAPTER XVIIB OF THE ACT. 21. SINCE THE ASSESSEE BY WAY OF ITS CROSS OBJECTIO N FOR A.Y 2007-08 HAS ASKED FOR ALLOWANCE FOR ENTIRE SHIPMENT DISCOUN T OF RS. 2,25,93,901/-, WE ARE OF THE CONSIDERED OPINION THA T SINCE THE CIT(A) HAS ALLOWED PART OF THE SAID DISCOUNT IN A.Y 2007-0 8, THE SAME SHOULD BE ALLOWED IN FULL. WE, ACCORDINGLY, DISMISS THE C LAIM IN A.Y 2006-07 AND ALLOW THE CROSS OBJECTION IN A.Y 2007-08. THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE CASH DISCOUNT OF RS. 2,25,93, 901/- IN A.Y 2007- 08. GROUNDS NOS. 1 TO 1.4 IN ITA NO. 1195/DEL/2009 ARE DISMISSED, WHILE CROSS OBJECTION ON THIS ISSUE IN CO NO. 70/DE L/2013 IS ALLOWED. 13 22. COMING TO GROUND NO. 2 IN A.Y 2006-07, THE GRIE VANCE OF THE ASSESSEE IS THAT THE CIT(A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER BY SUSTAINING THE DISALLOWANCE OF DEPRECIATION ON PLANT AND MACHINERY PURCHASED OUT OF SURRENDERED AM OUNT OF RS. 3.5 CRORES. 23. FACTS ON RECORD SHOW THAT WHILE SCRUTINISING TH E RETURN OF INCOME, THE ASSESSING OFFICER FOUND THAT THE ASSESS EE HAS CLAIMED DEPRECIATION OF RS. 31,87,500/- IS AS UNDER: A.Y AGRO PROFITS REPAIRS TO P & M 2000 - 01 5,00,000 2001 - 02 20,00,000 2002 - 03 25,00,000 7,50,000 2003 - 04 2,50,00,000 10,00,000 2004 - 05 75,00,000 17,50,000 2005 - 06 15,00,000 TOTAL 3,50,00,000 75,00,000 24. THE ASSESSEE WAS ASKED TO SHOW CAUSE WHY THE DE PRECIATION OF RS. 31,87,500/- ON THE PLANT AND MACHINERY CAPITALI SED AT RS. 4.25 CRORES SHOULD NOT DISALLOWED. THE ASSESSEE FILED A DETAILED REPLY VIDE 14 LETTER DATED 30.11.2007 AND CONTENDED THAT IT HAS D ISCLOSED A SUM OF RS. 3.50 CRORES AS ITS ADDITIONAL INCOME FOR THE A. Y 2002-03 TO 2004-25. IT WAS FURTHER EXPLAINED THAT A SUM OF RS. 75 LAKHS WAS FURTHER DISCLOSED AS ADDITIONAL INCOME OVER A PERIOD OF SIX YEARS ON ACCOUNT OF CAPITAL EXPENDITURE DEBITED TO THE REPAIRS AND MAIN TENANCE. IT WAS EXPLAINED THAT THE ASSESSEE HAD UTILISED THE SAID I NCOME TOWARDS THE INSTALLATION OF CERTAIN NEW MACHINERY WHICH WERE PU T TO USE DURING THE A.Y 2006-07. THE ASSESSEE FURNISHED COMPLETE LIST O F PLANT AND MACHINERY ALONGWITH ITS VALUE. IT WAS FURTHER BROU GHT TO THE NOTICE OF THE ASSESSING OFFICER THAT THE INCOME TAX DEPARTMEN T ITSELF HAD PREPARED THE INVENTORY OF PLANT AND MACHINERY DURIN G THE COURSE OF SEARCH ON 17.01.2006. IT WAS ALSO BROUGHT TO THE N OTICE OF THE ASSESSING OFFICER THAT THE EXCISE DEPARTMENT HAD AL SO PREPARED INVENTORY OF PLANT AND MACHINERY DURING THE COURSE OF THEIR SEARCH ON 25.01.2006. 26. THE SUBMISSION OF THE ASSESSEE DID NOT FIND ANY FAVOUR WITH THE ASSESSING OFFICER WHO WAS OF THE OPINION THAT THE A SSESSEE HAS ARBITRARILY PREPARED A LIST OF PLANT AND MACHINERY WHICH HAS NO BASIS. THE ASSESSING OFFICER FURTHER OBSERVED THAT IN THE LIST OF INVENTORY PREPARED BY THE INCOME TAX DEPARTMENT ON 17.02.2006 AND AGAIN BY 15 THE EXCISE DEPARTMENT ON 25.01.2006, THERE IS A DIF FERENCE IN THE INVENTORY OF PLANT AND MACHINERY AND VARIOUS NEW AS SETS APPEARED IN THE LIST PREPARED BY THE EXCISE DEPARTMENT. THE AS SESSING OFFICER DISMISSED THE THEORY WHICH SUGGESTS THAT THE PLANT AND MACHINERY WORTH RS. 4.25 CRORES HAVE BEEN INSTALLED WITHIN SH ORT PERIOD BETWEEN 17.01.2006 AND 25.01.2006. 27. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE HAS NOT SUBMITTED ANY FIXED ASSETS REGISTER WHICH IT WAS RE QUIRED TO MAINTAIN AND FAILED TO SUBMIT PROOF OF PURCHASE, INSTALLATIO N AND USE OF THE PLANT AND MACHINERIES. THE ASSESSING OFFICER WAS O F THE FIRM BELIEF THAT THE CLAIM OF THE ASSESSEE IS NOT IN ACCORDANCE WITH LAW AND HENCE LIABLE TO BE REJECTED. ACCORDINGLY, THE ASSESSING OFFICER DISALLOWED CLAIM OF DEPRECIATION OF RS. 31,87,500/-. 28. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT (A) AND ONCE AGAIN EXPLAINED THE FACTS. 29. AFTER CONSIDERING THE FACTS AND DETAILED SUBMIS SIONS, THE LD. CIT(A) OBSERVED THAT IN SO FAR AS THE CLAIM OF DEPR ECATION ON AMOUNT DISCLOSED AS ADDITIONAL INCOME AMOUNTING TO RS. 75 LAKHS, WHICH WAS 16 CLAIMED AS REVENUE EXPENDITURE IN EARLIER A.YS BUT WERE DISALLOWED, NOW THE SAME IS TREATED AS CAPITAL EXPENDITURE. TH E ASSESSEE IS ENTITLED FOR DEPRECIATION BECAUSE THE GENUINENESS O F THE EXPENDITURE CLAIMED AS REPAIR AND MAINTENANCE WERE NEVER DOUBTE D. THE CIT(A) FURTHER OBSERVED THAT THE SURRENDER MADE BY THE ASS ESSEE HAS ALSO BEEN ACCEPTED BY THE DEPARTMENT. ACCORDINGLY, THE CIT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW DEPRECIATION ON THE ADDITION OF PLANT AND MACHINERY IN THE RESPECTIVE A.YS I.E. A.Y 2000-01 T O 2005-06 AND ON THE WRITTEN DOWN VALUE IN THE YEAR UNDER A.Y 2006-0 7. 30. AS REGARDS CLAIM OF DEPRECIATION ON ACCOUNT OF RS. 3.50 CRORES, THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OF FICER. 31. BEFORE US, THE LD. AR STATED THAT DURING THE CO URSE OF TWO SEARCH AND SEIZURE PROCEEDINGS ONE BY THE INCOME TAX DEP ARTMENT AND THE OTHER BY THE EXCISE DEPARTMENT, PLANT AND MACHINERY WERE FOUND INSTALLED AT THE PREMISES OF THE ASSESSEE. IT IS T HE SAY OF THE LD. AR THAT LIST OF INVENTORIES WERE PREPARED BY THE TWO R EVENUE DEPARTMENTS. THEREFORE, IT CANNOT BE SAID THAT THE PLANT AND MACHINERY WERE NOT IN EXISTENCE OR WERE NOT USED IN THE BUSINESS OF THE ASSESSEE. THE LD. AR STATED THAT THE DECISION IN THE CASE OF SHETH 17 & SURA ENGINEERING [P] LTD 110 ITD 39, RELIED UPON BY THE REVENUE AUTHORITIES, IS MISPLACED AND PRAYED FOR ALLOWANCE OF DEPRECIATION. 32. PER CONTRA, THE LD. DR STRONGLY SUPPORTED THE F INDINGS OF THE ASSESSING OFFICER AND ONCE AGAIN RELIED UPON THE DE CISION OF THE TRIBUNAL IN THE CASE OF SHETH & SURA ENGINEERING [P ] LTD [SUPRA]. 33. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW. THE UNDISPUTED FACT IS THAT THE PLANT AND MACHINERY WERE FOUND INSTALLED AT THE PREMISES OF THE ASSESSE E. THIS FACT IS APPARENT FROM THE LIST OF INVENTORIES PREPARED BY T HE INCOME TAX DEPARTMENT AS WELL AS BY THE CENTRAL EXCISE DEPARTM ENT. WE FIND THAT THE LOWER AUTHORITIES HAVE DISMISSED THE CLAIM OF D EPRECIATION ON THE GROUND THAT THERE IS NO EVIDENCE AND IT IS NOT POSS IBLE TO ASCERTAIN THE VALUE OF PLANT AND MACHINERY CLAIMED TO BE INSTALLE D DURING THE YEAR UNDER CONSIDERATION. THE SURRENDERED AMOUNT OF RS. 3.50 CRORES ON THIS ACCOUNT HAS BEEN ACCEPTED BY THE DEPARTMENT. THEREFORE, THE REVENUE CANNOT BLOW HOT AND COLD IN THE SAME BREATH . 34. THE DECISION OF THE CO-ORDINATE BENCH IN THE CA SE OF SHETH & SURA ENGINEERING [P] LTD [SUPRA] RELIED UPON BY THE REV ENUE AUTHORITIES IS 18 MISPLACED BECAUSE IN THAT CASE THE ASSESSEE HAD SPE CIFICALLY STATED THAT HE IS UNABLE TO FURNISH INVENTORIES IN RESPECT OF PLANT AND MACHINERY AND FURNITURE AND FIXTURES DECLARED AT TH E TIME OF SEARCH ACTION U/S 132 OF THE ACT. WHEREAS, THE FACTS OF T HE CASE IN HAND SHOW THAT THE INVENTORIES OF PLANT AND MACHINERY HAVE BE EN PREPARED BY THE INCOME TAX DEPARTMENT ITSELF AND HAS ACCEPTED THE S URRENDERED AMOUNT OF RS. 3.50 CRORES. 35. CONSIDERING THE FACTS IN TOTALITY, WE ARE OF TH E CONSIDERED OPINION THAT THE ASSESSEE HAS SATISFACTORILY ESTABL ISHED ITS CLAIM OF DEPRECIATION ON RS. 3.50 CRORES. WE, ACCORDINGLY, DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM OF DEPRECIATION ON PLANT AND MACHINERY OF RS. 3.50 CRORES. 36. IN SO FAR AS THE CLAIM OF DEPRECIATION OF RS. 7 5 LAKHS IS CONCERNED, WE DO NOT FIND ANY ERROR OR INFIRMITY IN THE DIRECTIONS OF THE CIT(A). WE, ACCORDINGLY DIRECT THE ASSESSING O FFICER TO COMPUTE THE DEPRECIATION AS PER THE RATES APPLICABLE ON THE WDV OF THE BLOCK OF ASSETS AS DIRECTED BY THE CIT(A). GROUND NO. 2 IS, ACCORDINGLY, ALLOWED. 19 37. IN THE RESULT, THE APPEALS FILED BY THE REVENUE IN ITA NOS. 1291/DEL/2009 AND 379/DEL/2012 STAND DISMISSED. TH E APPEAL OF THE ASSESSEE IN ITA NO. 1195/DEL/2009 IS PARTLY ALLOWED . CROSS OBJECTION IN CO NO. 70/DEL/2013 IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 28.08. 2019. SD/- SD/- [A.D. JAIN ] [N.K. BILLAIYA] VICE PRESIDENT ACCOUNTANT MEMBE R DATED: 28 AUGUST, 2019 VL/ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR ITAT, NEW DELHI 20 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER