DCIT, CHENNAI V. M/s. Chettinad Cement Corp. Ltd., CHENNAI

ITA 1085/CHNY/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7816 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 31-12-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 18-05-2012
• Court: TRIBUNAL
• Department Lawyers: DR MILIND MADHUKAR BHUSARI
• Assessee Lawyers: S SRIDHAR
• Keywords: Reopening of assessment; Capital asset; Depreciation; Additional depreciation; Bad and doubtful debts; Revenue expenditure
• Section: 115JB; 32; 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI . . . , . ! , ' # $ [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO.1034 & 344/MDS/2012 & 457/MDS/2014 / ASSESSMENT YEARS : 2006-07, 2008-09 & 2006-07 M/S CHETTINAD CEMENT CORPORATION LTD 4 TH FLOOR, RANI SEETHAI BUILDING 603, ANNA SALAI CHENNAI 600 006 VS. THE ASSTT. COMMISSIONER OF INCOME-TAX /JT. CIT COMPANY CIRCLE I(3) / DY. CIT, LARGE TAXPAYER UNIT CHENNAI [PAN AAACC 3130A] ( %& / APPELLANT) ( '(%& /RESPONDENT) ./ I.T.A.NO.1085 & 448/MDS/2012 & 468/MDS/2014 / ASSESSMENT YEARS : 2006-07, 2008-09 & 2010-11 THE DY. COMMISSIONER OF INCOME-TAX LARGE TAXPAYER UNIT CHENNAI VS. M/S CHETTINAD CEMENT CORPORATION LTD 4 TH FLOOR, RANI SEETHAI BUILDING 603, ANNA SALAI CHENNAI 600 006 ( %& / APPELLANT) ( '(%& /RESPONDENT) ASSESSEE BY : SHRI S.SRIDHAR, ADVOCATE DEPARTMENT BY : DR. MILIND MADHUKAR BHUSARI, CIT / DATE OF HEARING : 31 - 12 - 201 5 / DATE OF PRONOUNCEMENT : 04 - 0 3 - 2016 ITA NO.1085/12 ETC. :- 2 -: / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER BOTH THE ASSESSEE AND THE REVENUE FILED APPEALS FOR ASSESSMENT YEARS 2006-07 AND 2008-09. THE REVENUE ALSO FILED APPEAL FOR ASSESSMENT YEAR 2010-11. THEREFORE, WE HEARD ALL THE APPEALS TOGETHER AND DISPOSING OF THE SAME BY THE C OMMON ORDER. I.T.A.NO. 344/MDS/2012 A.Y 2008-09 2. THE FIRST GROUND IN ASSESSEES APPEAL IS WITH REGAR D TO DISALLOWANCE OF DEDUCTION U/S 80IA OF THE ACT. 3. SHRI S.SRIDHAR, LD. COUNSEL FOR THE ASSESSEE SUBMIT TED THAT THE ASSESSEE CLAIMED DEDUCTION U/S 80IA OF THE AC T ON THE PROFIT EARNED BY WAY OF GENERATING POWER BY WINDMILL AND USED FOR CAPTIVE CONSUMPTION. THE POWER GENERATED BY THE ASSESSEE BY WINDMILL AND CONSUMED CAPTIVELY WAS CONSIDERED TO BE A SEPARATE UNIT AND THE ASSESSEE CLAIMED DEDUCTION U/S 80IA OF THE ACT. H OWEVER, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSE SSEE. THE CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER BY PLA CING RELIANCE ON THE ORDER OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE IN I.T.A.NO. 1029/MDS/2009 DATED 5.1.2007 FOR ASSESSMENT YEAR 20 01-02. THE LD. COUNSEL FURTHER SUBMITTED THAT THE ASSESSEE FILED AN APPEAL AGAINST THE ORDER OF THIS TRIBUNAL FOR ASSESSMENT YEAR 2001 -02 IN I.T.A.NO. ITA NO.1085/12 ETC. :- 3 -: 1029/MDS/2009 BEFORE THE MADRAS HIGH COURT. THE MA DRAS HIGH COURT ALLOWED THE CLAIM OF THE ASSESSEE BY A JUDGMENT DA TED 18.1.2012 IN TAX CASE(APPEAL) NO.757 OF 2007. THEREFORE, THE CI T(A) IS NOT JUSTIFIED IN PLACING RELIANCE ON THE ORDER OF THIS TRIBUNAL FOR ASSESSMENT YEAR 2001-02. THE LD. COUNSEL FURTHER PLACED HIS RELIANCE ON THE JUDGMENT OF THE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS P. LTD VS ACIT [2012] 340 ITR 477. 4. ON THE CONTRARY, DR.MILIND MADHUKAR BHUSARI, LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASS ESSEE CLAIMED DEDUCTION U/S 80IA ON THE SO CALLED PROFIT FOR GEN ERATING POWER WHICH WAS ACTUALLY USED FOR CAPTIVE CONSUMPTION. REFERRI NG TO THE ORDER OF THE ASSESSING OFFICER, THE LD. DR POINTED OUT THAT THE POWER GENERATED BY THE ASSESSEE IS AN INTERMEDIARY PRODUCT DURING THE COURSE OF MANUFACTURING ACTIVITY OF THE ASSESSEE . THEREFOR E, THE POWER PLANT VIZ. WINDMILL IS AN INTEGRAL PART OF THE CEMENT FAC TORY OF THE ASSESSEE. ACCORDING TO THE LD. DR, THE CIT(A) HAS RIGHTLY CON FIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. TH E QUESTION ARISES FOR CONSIDERATION IS WHETHER THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT ON THE PROFIT BY WAY OF GENERATION OF ELECTRICITY WHICH ITA NO.1085/12 ETC. :- 4 -: WAS ACTUALLY CONSUMED BY THE ASSESSEE IN THE PRODU CTION OF CEMENT. THE CIT(A) PLACED HIS RELIANCE ON THE ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2001-02. T HE MADRAS HIGH COURT IN ASSESSEES OWN CASE IN TAX CASE (APPEAL) NO.757 OF 2007, DATED 18.1.2012, AFTER CONSIDERING THE ORDER OF TH IS TRIBUNAL, FOUND THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 8 0IA. IN VIEW OF THE JUDGMENT OF THE MADRAS HIGH COURT IN ASSESSEES OW N CASE FOR ASSESSMENT YEAR 2001-02, THIS TRIBUNAL IS OF THE C ONSIDERED OPINION THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 8 0IA OF THE ACT EVEN IN RESPECT OF THE POWER GENERATED AND USED FOR CAPTIVE CONSUMPTION. BY RESPECTFULLY FOLLOWING THE JUDGMENT OF THE MADRAS H IGH COURT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2001-02, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ASSESSING O FFICER IS DIRECTED TO ALLOW DEDUCTION U/S 80IA ON THE PROFIT ARISING OUT OF GENERATION OF POWER WHICH WAS USED FOR CAPTIVE CONSUMPTION. 6. THE NEXT GROUND OF APPEAL IS WITH REGARD TO DISALLO WANCE OF DEPRECIATION ON THE BUILDING ADDED IN THE CAPTIVE P OWER PLANT. 7. SHRI S. SRIDHAR, LD. COUNSEL FOR THE ASSESSEE SUBMI TTED THAT THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE BUILDING CONSTRUCTED BY THE ASSESS EE FORM PART OF THE BLOCK OF ASSET, THEREFORE, HE DISALLOWED THE DEPREC IATION TO THE EXTENT ITA NO.1085/12 ETC. :- 5 -: OF ` 56,45,625/-. PLACING RELIANCE ON THE ORDER OF THI S TRIBUNAL IN ASSESSEES OWN CASE IN I.T.A.NO. 1633/MDS/2008, THE LD. COUNSEL SUBMITTED THAT THIS TRIBUNAL BY PLACING RELIANCE ON THE JUDGMENT OF THE APEX COURT IN CIT VS KARNATAKA POWER CORPORATION, 2 47 ITR 268, CONFIRMED SIMILAR ADDITION DELETED BY THE CIT(A) IN ASSESSMENT YEAR 2003-04. 8. WE HEARD DR.MILIND MADHUKAR BHUSARI, LD. DR ALSO. ACCORDING TO THE LD. DR, THE ASSESSEE CONSTRUCTED ADDITIONAL BUILDING AND CLAIMED DEPRECIATION @ 20%. THE LD. DR SUBMITT ED THAT THE BUILDING WAS USED FOR GENERATION OF POWER FOR CAPTI VE CONSUMPTION. THE ASSESSEE CLAIMED BEFORE THE ASSESSING OFFICER THAT A SUM OF ` 451.65 LAKHS WAS INVESTED IN THE CONSTRUCTION OF PR OPERTY. THEREFORE, THE ASSESSING OFFICER TREATED THE VALUE OF THE BUIL DING UNDER THE BLOCK OF ASSET AND DISALLOWED THE CLAIM OF ADDITIONAL DEP RECIATION. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. TH E ASSESSEE CLAIMED EXCESS DEPRECIATION OF ` 56,45,625/- ON THE ADDITIONAL CONSTRUCTION MADE FOR GENERATION OF ELECTRICITY WHICH WAS USED F OR CAPTIVE CONSUMPTION. WE HAVE GONE THROUGH THE ORDER OF THI S TRIBUNAL FOR THE ASSESSMENT YEAR 2003-04 IN I.T.A.NO. 1633/MDS/2008. THE ASSESSEE CLAIMED 20% ADDITIONAL DEPRECIATION. THIS TRIBUNAL AFTER CONSIDERING ITA NO.1085/12 ETC. :- 6 -: THE NATURE OF THE BUILDING FOUND THAT THE BUILDING CONSTRUCTED BY THE ASSESSEE MAY NOT BE USED FOR ANY OTHER PURPOSE OTHE R THAN FOR GENERATING ELECTRICITY, THEREFORE, BY PLACING RELIA NCE ON THE JUDGMENT OF THE APEX COURT IN CIT VS KARNATAKA POWER CORPORA TION(SUPRA), FOUND THAT THE ASSESSEE IS ELIGIBLE FOR ADDITIONAL DEPRECIATION. IN FACT, THE CIT(A) HAS GRANTED ADDITIONAL DEPRECIATION FOR ASSESSMENT YEAR 2003-04. THIS WAS CHALLENGED BY THE REVENUE BEFORE THIS TRIBUNAL. THE TRIBUNAL CONFIRMED THE ORDER OF THE CIT(A) WHER EIN ADDITIONAL DEPRECIATION WAS ALLOWED. IN VIEW OF THE ABOVE, T HIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSEE IS ELIGIBLE F OR ADDITIONAL DEPRECIATION AS CLAIMED. ACCORDINGLY, BY FOLLOWING THE ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEA R 2003-04, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND T HE ASSESSING OFFICER IS DIRECTED TO ALLOW ADDITIONAL DEPRECIATION. 10. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. I.T.A.NO.448/MDS/2012-A.Y 2008-09 11. IN THIS REVENUES APPEAL, THE FIRST GROUND IS WITH REGARD TO DELETION OF DEDUCTION U/S 80IA OF THE ACT IN RES PECT OF THE POWER GENERATED FROM CAPTIVE POWER PLANT. 12. WE HEARD DR.MILIND MADHUKAR BHUSARI, LD. DR AND SH RI S.SRIDHAR LD. COUNSEL FOR THE ASSESSEE. ITA NO.1085/12 ETC. :- 7 -: 13. ADMITTEDLY, THE VERY SAME ISSUE WAS CONSIDERED BY T HE MADRAS HIGH COURT IN ASSESSEES OWN CASE IN TAX CA SE (APPEAL) NO.757 OF 2007, BY A JUDGMENT DATED 18.1.2012. THE HIGH COURT FOUND THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IA IN RESPECT OF THE POWER GENERATED FROM CAPTIVE POWER PLANT. T HE ONLY CONTENTION OF THE LD. DR IS THAT THE REVENUES SLP FILED AGAIN ST THE JUDGMENT OF THE HIGH COURT IS PENDING BEFORE THE APEX COURT. T HIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT MERE PENDENCY OF THE SL P BEFORE THE APEX COURT IS NOT A GROUND TO TAKE A DIFFERENT VIEW. TH EREFORE, THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A ) AND ACCORDINGLY, THE SAME IS CONFIRMED. 14. COMING TO THE NEXT GROUND OF APPEAL, DR.MILIND MADH UKAR BHUSARI, LD. DR SUBMITTED THAT THE ASSESSEE CLAIME D DEPRECIATION ON GOODWILL. THE ASSESSING OFFICER DISALLOWED THE CLA IM OF THE ASSESSEE BY FOLLOWING THE ORDER OF AHMEDABAD BENCH OF THIS T RIBUNAL IN THE CASE OF BHARABHAI J. VYAS VS ITO, 97 ITD 248. THE LD. D R SUBMITTED THAT THE GOODWILL IS NOT AN INTANGIBLE ASSET ON WHICH DE PRECIATION IS ALLOWABLE. THEREFORE, THE CIT(A) OUGHT TO HAVE CON FIRMED THE ORDER OF THE CIT(A). 15. ON THE CONTRARY, SHRI S.SRIDHAR, LD. COUNSEL FOR TH E ASSESSEE SUBMITTED THAT THE ASSESSEE CLAIMED DEPRECIATION ON GOODWILL TO THE ITA NO.1085/12 ETC. :- 8 -: EXTENT OF ` 77,81,451/-. THE CIT(A) BY FOLLOWING THE JUDGMENT OF THE DELHI HIGH COURT IN THE CASE OF CIT VS HINDUSTAN CO CO COLA BEVERAGES PVT. LTD, 238 CTR 1, ALLOWED THE CLAIM OF THE ASSE SSEE. THEREFORE, NO INTERFERENCE IS CALLED FOR. 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. GOO DWILL IS NOTHING BUT AN INTANGIBLE ASSET. EXPLANATION 3 TO SEC.32 CLEAR LY SAYS THAT INTANGIBLE ASSETS BEING KNOW-HOW, PATENTS, COPYRIG HTS, TRADEMARKS, LICENCES, FRANCHISES OR ANY OTHER BUSINESS OR COMME RCIAL RIGHTS OF SIMILAR NATURE, IS ELIGIBLE FOR DEPRECIATION. THE G OODWILL BEING A COMMERCIAL RIGHT ACQUIRED BY THE ASSESSEE IS ELIGI BLE FOR DEPRECIATION U/S 32 OF THE ACT. THEREFORE, THE CIT(A) HAS RIGHTL Y ALLOWED THE CLAIM OF THE ASSESSEE. THIS TRIBUNAL DO NOT FIND ANY RE ASON TO INTERFERE WITH THE ORDER OF THE CIT(A). ACCORDINGLY, THE SAME IS CONFIRMED. 17. THE NEXT GROUND IS WITH REGARD TO THE PROVISION MAD E FOR DOUBTFUL ADVANCES. 18. DR.MILIND MADHUKAR BHUSARI, LD. DR SUBMITTED THAT T HE ASSESSEE HAS DEBITED A SUM OF ` 45,64,022/- TOWARDS ADVANCES WRITTEN OFF DURING THE CURRENT YEAR. ACCORDING TO THE LD. DR, THE ADVANCES WERE MADE FOR THE PURPOSE OF GETTING SUPPORT SERVIC E FROM THE NON- RESIDENTS. BY WRITING OFF THE ADVANCES MADE BY THE ASSESSEE, IT WILL ITA NO.1085/12 ETC. :- 9 -: BECOME THE INCOME OF THE NON-RESIDENTS U/S 9 OF TH E ACT. THEREFORE, IT CANNOT BE ALLOWED AS EXPENDITURE IN THE HANDS OF THE ASSESSEE MERELY BECAUSE THE SAME WAS WRITTEN OFF. ACCORDI NG TO THE LD. DR, THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE CL AIM OF THE ASSESSEE. HOWEVER, ON APPEAL BY THE ASSESSEE, THE CIT(A) FOU ND THAT THE ADVANCES MADE BY THE ASSESSEE WAS WRITTEN OFF DURI NG THE YEAR UNDER CONSIDERATION AND THE PROVISION MADE WAS ALREADY AD DED BACK TO THE TOTAL INCOME AND OFFERED FOR TAXATION. ACCORDING T O THE LD. DR, THE ADVANCES MADE CANNOT BE ALLOWED EITHER AS A BAD DEB T OR AS A REVENUE EXPENDITURE U/S 32 OF THE ACT. THEREFORE, THE CIT(A) IS NOT JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE. 19. ON THE CONTRARY, SHRI S.SRIDHAR, LD. COUNSEL FOR TH E ASSESSEE SUBMITTED THAT IN THE EARLIER ASSESSMENT YEAR A PRO VISION WAS MADE IN RESPECT OF THE DOUBTFUL ADVANCES MADE BY THE ASSES SEE. THE PROVISION WAS OFFERED FOR TAXATION. THEREFORE, IT IS NOT COR RECT TO SAY THAT THE ADVANCE MADE WAS NOT SUBJECT MATTER OF TAXATION. D URING THE YEAR UNDER CONSIDERATION THE AMOUNT WHICH COULD NOT BE R ECOVERED WAS WRITTEN OFF IN THE BOOKS OF ACCOUNT. SINCE THE PRO VISION MADE WAS ALREADY OFFERED FOR TAXATION, THE AMOUNT WHICH WAS WRITTEN OFF HAS TO BE ALLOWED AS DEDUCTION IN VIEW OF THE JUDGMENT OF THE APEX COURT IN CIT VS TRF LTD, 323 ITR 397. ITA NO.1085/12 ETC. :- 10 -: 20. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE CLAIMS THAT THE PROVISION WHICH WAS MADE EARLIER WAS ADDED BACK TO THE TOTAL INCOME AND OFFERED FOR TAXATION. ONCE THE ADVANCE MADE BY THE ASSESSEE WAS SUBJECT MATTER OF TAXATION AT THE TIME OF PROVISION, THE SAME CANNOT BE ADDED TO THE TOTAL INCOME WHEN IT WA S ACTUALLY WRITTEN OFF. THIS TRIBUNAL IS OF THE CONSIDERED OPINION T HAT DISALLOWING THE SUM OF ` 45,64,022/- WOULD AMOUNT TO DOUBLE TAXATION. IN V IEW OF THE ABOVE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE . THERE FORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). ACCORDINGLY, THE SAME IS CONFIRMED. 21. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED. I.T.A.NO. 1085/MDS/2012-A.Y 2006-07 22. IN THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2006- 07, THE ONLY ISSUE ARISES FOR CONSIDERATION IS WITH REGARD TO DEPRECIATION ON GOODWILL. 23. DR.MILIND MADHUKAR BHUSARI, LD. DR SUBMITTED THAT D URING THE YEAR UNDER CONSIDERATION, M/S ALAGAPPA CEMENTS PVT . LTD AND VALLIAMMAL LINES PVT. LTD. GOT AMALGAMATED WITH THE ASSESSEE- ITA NO.1085/12 ETC. :- 11 -: COMPANY. THE EXCESS AMOUNT OF CONSIDERATION OVER A ND ABOVE THE VALUE OF THE NET ASSET OF THE TRANSFEROR COMPANIES WERE ACCOUNTED AS GOODWILL IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE ASSESSING OFFICER, HOWEVER, DISALLOWED THE CLAIM OF THE ASSE SSEE. THE CIT(A) FOUND THAT THE ASSESSEE IS ELIGIBLE FOR DEPRECIATI ON ON THE GOODWILL. ACCORDING TO THE LD. DR, THE ENTIRE PAID-UP SHARE C APITAL OF THE TRANSFEROR COMPANIES WERE CANCELLED DUE TO AMALGAMA TION. REFERRING TO THE COPY OF THE BALANCE SHEET AS ON 31.3.2005, M ORE PARTICULARLY PAGE NO.3 OF THE PAPER BOOK, THE LD. DR SUBMITTED T HAT THE CAPITAL ASSET WAS NOT SHOWN AS AN ASSET IN THE BALANCE SHEE T. THE QUANTIFICATION OF THE GOODWILL IN THE HANDS OF THE TRANSFEROR COMPANIES WAS MADE ONLY AS A BALANCING FIGURE. ACCORDING TO THE LD. DR, THE ASSESSEE IS NOT ELIGIBLE FOR DEPRECIATION ON THE GO ODWILL. 24. WE HEARD SHRI S.SRIDHAR, LD. COUNSEL ALSO. 25. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. EXP LANATION 3 TO SEC. 32 CLEARLY SAYS THAT COMMERCIAL RIGHT IS ELIGIBLE FO R DEPRECIATION AS AN INTANGIBLE ASSET. IN THE CASE BEFORE US, THE ASSE SSEE ACQUIRED COMMERCIAL RIGHT ON AMALGAMATION OF TWO COMPANIES W ITH IT. THEREFORE, IT CANNOT BE SAID THAT NO GOODWILL WAS T RANSFERRED TO THE ASSESSEE. IN FACT, ON AMALGAMATION, THE RIGHTS AND OBLIGATIONS OF THE ITA NO.1085/12 ETC. :- 12 -: AMALGAMATED COMPANIES WERE TRANSFERRED TO THE ASSES SEE-COMPANY. THEREFORE, IT MAY NOT BE CORRECT TO SAY THAT NO ASS ET WAS TRANSFERRED TO THE ASSESSEE-COMPANY. MOREOVER, EXPLANATION 3 T O SEC. 32 CLEARLY SAYS THAT THE COMMERCIAL RIGHT ACQUIRED BY THE ASS ESSEE IS ELIGIBLE FOR DEPRECIATION AS INTANGIBLE ASSET. GOODWILL BEING A COMMERCIAL RIGHT, THE ASSESSEE IS DEFINITELY ENTITLED FOR DEPRECIATI ON. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH T HE ORDER OF THE CIT(A). ACCORDINGLY, THE SAME IS CONFIRMED. 26. IN THE RESULT, THE REVENUES APPEAL STANDS DISMISSE D. I.T.A.NO.1034/MDS/2012-A.Y 2006-07 27. IN THIS ASSESSEES APPEAL, THE FIRST ISSUE ARISES FOR CONSIDERATION IS DISALLOWANCE OF ADDITIONAL DEPRECI ATION ON THE CAPTIVE POWER PLANT. 28. SHRI S.SRIDHAR, LD. COUNSEL FOR THE ASSESSEE SUBMIT TED THAT AN IDENTICAL ISSUE WAS CONSIDERED BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2003-04 IN I.T.A.NO. 1633/MDS/2 008 AND FOUND THAT THE ASSESSEE IS ELIGIBLE FOR ADDITIONAL DEPRE CIATION U/S 36(1)(IIA) OF THE ACT. THEREFORE, ACCORDING TO THE LD. COUNSE L, THE ASSESSEE IS ELIGIBLE FOR ADDITIONAL DEPRECIATION. ITA NO.1085/12 ETC. :- 13 -: 29. ON THE CONTRARY, DR.MILIND MADHUKAR BHUSARI, LD. DR SUBMITTED THAT THE ASSESSEE IS NOT ELIGIBLE FOR AD DITIONAL DEPRECIATION. ACCORDING TO THE LD. DR, THE MACHINERY ON WHICH ADD ITIONAL DEPRECIATION WAS CLAIMED WAS ALREADY IN USE. THE M ACHINERY ON WHICH THE ASSESSEE CLAIMED ADDITIONAL DEPRECIATION WAS U SED IN THE IMMEDIATELY PRECEDING YEAR AND NOT IN THE YEAR UNDE R CONSIDERATION, THEREFORE, THE ASSESSEE IS NOT ELIGIBLE FOR ADDITI ONAL DEPRECIATION. THEREFORE, LD. DR FURTHER SUBMITTED THAT HE IS PLAC ING HIS RELIANCE ON THE OBSERVATION MADE BY THE CIT(A). 30. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ISSUE OF ADDITIONAL DEPRECIATION ON THE POWER PLANT WHICH IS USED FOR C APTIVE CONSUMPTION WAS SUBJECT MATTER OF CONSIDERATION BEFORE THIS TRI BUNAL IN I.T.A.NO. 1633/MDS/2008 FOR THE ASSESSMENT YEAR 2003-04 IN A SSESSEES OWN CASE. THIS TRIBUNAL FOUND THAT THE ASSESSEE IS EL IGIBLE FOR ADDITIONAL DEPRECIATION. BY FOLLOWING THE ORDER OF THIS TRIBU NAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2003-04 AND FOR THE REASON S STATED THEREIN, THE ASSESSING OFFICER IS NOT JUSTIFIED IN DISALLOWI NG THE CLAIM OF THE ASSESSEE. ACCORDINGLY, THE ORDERS OF THE LOWER AUT HORITIES ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO ALLOW ADDI TIONAL DEPRECIATION ON THE CAPTIVE POWER PLANT. ITA NO.1085/12 ETC. :- 14 -: 31. THE NEXT ISSUE IS WITH REGARD TO ADDITIONAL DEPRECI ATION ON ADDITION MADE TO PLANT AND MACHINERY. 32. WE HEARD DR.MILIND MADHUKAR BHUSARI, LD. DR AND SH RI S.SRIDHAR, LD. COUNSEL FOR THE ASSESSEE . SECTION 32(1)(IIA) PROVIDES FOR ADDITIONAL DEPRECIATION. THE OBJECTION OF THE LD. DR IS THAT THE ASSESSEE MADE UPGRADATION OF THE EXISTING MACHINERY , THEREFORE, IT IS IMPLIED THAT THESE MACHINERIES WERE ALREADY IN USE. THEREFORE, THE ASSESSEE IS NOT ELIGIBLE FOR ADDITIONAL DEPRECIATIO N TO THE EXTENT OF ` 34,79,705/-. 33. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE CLAIMED ADDITIONAL DEPRECIATION TO THE EXTENT OF ` 34,79,705/-. REFERRING TO THE ADDITION MADE BY THE ASSESSEE TOWARDS PLANT AND MA CHINERY FOR THE ASSESSMENT YEAR 2005-06, NO DEDUCTION SHALL BE ALLO WED IN RESPECT OF ANY MACHINERY WHICH WAS ALREADY USED IN INDIA. THE ADDITIONAL MACHINERY PURCHASED BY THE ASSESSEE IS FOR RUNNING THE MACHINERY EFFICIENTLY, THEREFORE, IT HAS TO BE CONSIDERED WHE THER THE UPGRADATION MADE BY THE ASSESSEE WOULD AMOUNT TO INSTALLATION OF A NEW MACHINERY. THE CIT(A) PROCEEDED ON THE PRESUMPTION THAT THE ADDITIONAL CLAIM ON UPGRADATION IS CONCERNED, IT WA S ALREADY ON RECORD THAT THE PLANT AND MACHINERY WAS ACQUIRED AND USED IN THE ITA NO.1085/12 ETC. :- 15 -: IMMEDIATELY PRECEDING YEAR OF ASSESSMENT. IN FACT, THIS TRIBUNAL, IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2003-04, CO NSIDERED THIS ISSUE AND FOUND THAT BUILDING FOR HOUSING THERMAL P OWER PLANT IS ELIGIBLE FOR DEPRECIATION AT HIGHER RATE. THE ADDI TIONAL PLANT AND MACHINERY USED FOR UPGRADING THE EXISTING MACHINERY IS ALSO ELIGIBLE FOR ADDITIONAL DEPRECIATION. THEREFORE, THIS TRIBUNAL IS UNABLE TO UPHOLD THE ORDERS OF THE LOWER AUTHORITIES. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ASSESSING O FFICER IS DIRECTED TO ALLOW ADDITIONAL DEPRECIATION ON THE ADDITIONAL PLA NT AND MACHINERY. 34. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. I.T.A.NO. 468/MDS/2014 A.Y 2010-11 35. IN THIS REVENUES APPEAL, THE FIRST GROUND IS WITH REGARD TO DEPRECIATION ON THE BUILDING WHICH FORMS PART OF TH E CAPTIVE POWER PLANT. 36. WE HEARD DR.MILIND MADHUKAR BHUSARI, LD. DR AND SHR I S.SRIDHAR, LD. COUNSEL FOR THE ASSESSEE. IN VIEW O F THE JUDGMENT OF THE MADRAS HIGH COURT IN ASSESSEES OWN CASE FOR ASSES SMENT YEAR 2001- 02 IN TAX CASE (APPEAL) NO.757 OF 2007, DATED 18.1. 2012, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASS ESSEE IS ELIGIBLE FOR DEPRECIATION ON THE BUILDING WHICH FORM PART OF THE CAPTIVE POWER ITA NO.1085/12 ETC. :- 16 -: PLANT. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY RE ASON TO INTERFERE WITH THE ORDER OF THE CIT(A). ACCORDINGLY, THE SAME IS CONFIRMED. 37. THE NEXT GROUND WITH REGARD TO DEPRECIATION ON GOOD WILL. 38. WE HEARD DR.MILIND MADHUKAR BHUSARI, LD. DR AND SHI R S.SRIDHAR, LD. COUNSEL FOR THE ASSESSEE. THIS TR IBUNAL IS OF THE CONSIDERED OPINION THAT GOODWILL IS AN INTANGIBLE C OMMERCIAL RIGHT, THEREFORE, THE ASSESSEE IS ELIGIBLE FOR DEPRECIATI ON UNDER EXPLANATION 3 TO SEC. 32 OF THE ACT. THE CIT(A), IN FACT, BY FOLLOWING HIS OWN ORDER FOR ASSESSMENT YEARS 2006-07 AND 2008-09 ALLO WED THE CLAIM OF THE ASSESSEE. THE CIT(A) HAS ALSO PLACED HIS RELI ANCE ON THE JUDGMENT OF THE DELHI HIGH COURT IN THE CASE OF CIT VS HINDUSTAN COCO COLA BEVERAGES PVT. LTD(SUPRA). SINCE THE GOODWILL BEING A COMMERCIAL RIGHT WITHIN THE MEANING OF EXPLANATION 3 TO SEC. 3 2 OF THE ACT, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASS ESSEE IS ELIGIBLE FOR DEPRECIATION ON THE GOODWILL. ACCORDINGLY, THE ORD ER OF THE CIT(A) IS CONFIRMED. 39. THE NEXT GROUND IS WITH REGARD TO ADDITIONAL DEPREC IATION ON CAPTIVE POWER PLANT. 40. WE HEARD DR.MILIND MADHUKAR BHUSARI, LD. DR AND SHR I S.SRIDHAR, LD. COUNSEL FOR THE ASSESSEE. ITA NO.1085/12 ETC. :- 17 -: 41. THE VERY SAME ISSUE WAS CONSIDERED BY THIS TRIBUNAL FOR ASSESSMENT YEAR 2003-04 IN ASSESSEES OWN CASE IN I.T.A.NO. 1633/MDS/2008. THIS TRIBUNAL FOUND THAT THE ASSES SEE IS ELIGIBLE FOR ADDITIONAL DEPRECIATION ON THE BUILDING USED FOR CA PTIVE POWER PLANT. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). ACCORDINGLY, THE SAME IS CONF IRMED. 42. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED. I.T.A.NO.457/MDS/2014 A.Y 2006-07 43. THIS APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 20 06-07 IS CONSEQUENT TO THE REOPENING OF ASSESSMENT U/S 147 OF THE ACT. 44. THE FIRST GROUND IS WITH REGARD TO REOPENING OF ASS ESSMENT U/S 147 OF THE ACT. 45. SHRI S.SRIDHAR, LD. COUNSEL FOR THE ASSESSEE SUBMIT TED THAT INITIALLY THE ASSESSING OFFICER ALLOWED THE CLAIM O F THE ASSESSEE FOR BAD AND DOUBTFUL DEBTS TO THE EXTENT OF ` 22,03,700/- WHILE COMPUTING THE INCOME U/S 115JB OF THE ACT. TO BRING THIS PROVIS ION FOR BAD AND DOUBTFUL DEBTS FOR TAXATION, THE ASSESSING OFFICER HAS REOPENED THE ASSESSMENT BY ISSUING NOTICE U/S 148. ACCORDING T O THE LD. COUNSEL, THE PROVISION MADE CANNOT BE CONSIDERED FOR COMPUTA TION OF BOOK ITA NO.1085/12 ETC. :- 18 -: PROFIT. ACCORDING TO THE LD. COUNSEL, THE ASSESSIN G OFFICER HAS NO JUSTIFICATION FOR REOPENING THE ASSESSMENT. 46. ON THE CONTRARY, DR.MILIND MADHUKAR BHUSARI, LD. DR SUBMITTED THAT THE ASSESSMENT WAS REOPENED ON TWO G ROUNDS. THE FIRST GROUND IS TO COMPUTE THE LONG TERM CAPITAL GA INS AND THE SECOND GROUND IS TO ADD BACK THE PROVISION FOR BAD AND DOU BTFUL DEBTS IN THE BOOK PROFITS. REFERRING TO SEC. 115JB OF THE ACT, T HE LD. DR SUBMITTED THAT PROVISION MADE FOR BAD AND DOUBTFUL DEBTS HAS TO BE ADDED BACK TO THE BOOK PROFITS, THEREFORE, THE ASSESSING OFFIC ER HAS RIGHTLY REOPENED THE ASSESSMENT. 47. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER REOPENED THE ASSESSMENT ON THE GROUND THAT PROVISIO N MADE FOR BAD AND DOUBTFUL DEBTS WAS NOT ADDED BACK TO THE BOOK P ROFITS. IN THE ORIGINAL ASSESSMENT, THE ASSESSING OFFICER HAS NOT DISCUSSED ANYTHING ABOUT THE PROVISION MADE FOR BAD AND DOUBTFUL DEBTS . THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSE SSING OFFICER HAS RIGHTLY REOPENED THE ASSESSMENT BY ISSUING NOTICE U/S 148 OF THE ACT. THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE W ITH THE ORDER OF THE CIT(A). ACCORDINGLY, THE SAME IS CONFIRMED. ITA NO.1085/12 ETC. :- 19 -: 48. THE NEXT GROUND OF APPEAL IS ON MERITS WITH REGARD TO ADDITION OF ` 22,03,700/- BEING THE PROVISION FOR BAD AND DOUBTF UL DEBTS WHILE COMPUTING THE BOOK PROFIT U/S 115JB OF THE ACT. 49. WE HEARD SHRI S.SRIDHAR, LD. COUNSEL AND DR.MILIND MADHUKAR BHUSARI, LD. DR ALSO. 50. SECTION 115JB(2) EXPLANATION 1 (C) CLEARLY SAYS THA T THE BOOK PROFITS COMPUTED UNDER THE COMPANIES ACT ARE TO BE INCREASED BY AN AMOUNT OR AMOUNTS SET ASIDE FOR PROVISION MADE FOR MEETING LIABILITIES OTHER THAN ASCERTAINED LIABILITIES. SINCE BAD AND DOUBTFUL DEBTS ARE PART OF THE UNASCERTAINED LIABILITIES, THEY NEED TO BE ADDED BACK TO THE BOOK PROFITS WHILE MAKING ADJUSTMENT U/S 115JB OF THE ACT. IN VIEW OF THE ABOVE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, THE SAM E IS CONFIRMED. 51. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSED. 52. TO SUMMARIZE, ASSESSEES APPEALS I.T.A.NOS.344 AND 1034/ MDS/2012 ARE ALLOWED WHEREAS I.T.A.NO.457/MDS/2014 IS DISMISSED. REVENUES APPEALS I.T.A.NOS.448 & 1085/MDS/2012 AND 468/MDS/2014 ARE DISMISSED. ITA NO.1085/12 ETC. :- 20 -: ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH MARCH, 2016, AT CHENNAI. SD/- SD ( . ! ) (A. MOHAN ALANKAMONY) ' / ACCOUNTANT MEMBER ( . . . ) ) (N.R.S. GANESAN) / JUDICIAL MEMBER / CHENNAI ! / DATED: 4 TH MARCH, 2016 RD !' # $% &% / COPY TO: 1 . '( / APPELLANT 4. ) / CIT 2. #*'( / RESPONDENT 5. %+, # - / DR 3. ) () / CIT(A) 6. ,/ 0 / GF