Gujarat Alkalies & Chemicals Ltd., Baroda V. The Dy.CIT, Circle-1(1), Baroda

ITA 1254/AHD/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6196 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 21-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 28-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VASUNDRA UPMANYA DATES OF HEAR
• Keywords: Depreciation; Business expenditure; Additional depreciation
• Section: 143(3); 32; 263

Judgement Text

ITA NO. 1254/AHD/2014 GUJARAT ALKALIES & CHEMICALS LTD VS. DCIT ASSESSMENT YEAR: 2009-10 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD D BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND S S GODARA JM] ITA NO. 1254/AHD/2014 ASSESSMENT YEAR: 2009-10 GUJARAT ALKALIES & CHEMICALS LTD ........ .............APPELLANT NEAR IPCL COMPLEX, PO PETROCHEMICALS, AT RANOLI, DIST. BARODA 391 346 [PAN : AAACG 8896 M] VS THE DEPUTY COMMISSIONER OF INCOME-TAX ... ..........RESPONDENT CIRCLE (1)(1), BARODA APPEARANCES BY SUNIL TALATI FOR THE APPELLANT VASUNDRA UPMANYA FOR THE RESPONDENT DATES OF HEARING OF THE APPEAL : FEBRUARY 05, 2018 DATE OF PRONOUNCING THIS ORDER : FEBRUARY 06, 2018 O R D E R PER PRAMOD KUMAR, AM: 1. BY WAY OF THIS APPEAL, THE ASSESSEE-APPELLANT HA S CHALLENGED CORRECTNESS OF THE ORDER DATED 19 TH MARCH 2014 PASSED BY THE LEARNED COMMISSIONER UNDE R SECTION 263 R.W.S. 143(3) OF THE INCOME-TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2009-10. 2. GRIEVANCES RAISED BY THE APPELLANT ARE AS FOLLOW S:- 1) THE ORDER PASSED BY THE HON'BLE CIT-I, BARODA IS BAD IN LAW, SINCE THE CONDITIONS LAID DOWN IN SECTION 263 OF THE ACT VIZ. NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS ; AND (II) IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, ARE NOT SATISFIED. IT BE HELD SO NOW AND ORDER PASSED BY THE HON'BLE CIT-I, BARODA BE QUASHED. 2) THE ACTION OF THE HON'BLE CIT-I, BARODA IS NOT JUSTIFIED, SINCE ALL THE ISSUES INVOLVED ARE HIGHLY DEBATABLE. THEREFORE THE ACTION OF HON'BLE CIT-I, BARODA IS UNJUST AND UNCALLED FOR. IT BE HELD SO NOW AND THE ORDER PASSED BY HON'BLE CIT-I, BARODA BE CANCELLED. ITA NO. 1254/AHD/2014 GUJARAT ALKALIES & CHEMICALS LTD VS. DCIT ASSESSMENT YEAR: 2009-10 PAGE 2 OF 5 3) THE HON'BLE CIT-I, BARODA HAS ERRED IN SETTING ASIDE ALL THE ISSUES INVOLVED IN THE ORDER PASSED U/S 263 OF THE ACT AND DIRECTING THE AO TO PASS THE FRESH ORDER. THE HON'BLE CIT-I HAS WRONGLY DIRE CTED TO EXAMINE ALL THE ISSUES INSTEAD OF ISSUES DIRECTED TO BE REEXAMINED IN VIEW OF THE DIRECTIONS GIVEN BY HIM. ISSUES NO. 2, 3 & 4 OF THE ORDER ARE STATED TO BE DROPPED AND HENCE DO NOT NEED RE-EXAMINATION. 4) THE HON'BLE CIT-I, BARODA HAS ERRED IN HOLDING THAT AS PER PROVISIONS OF SEC.32(1)(IIA) R.W.S. 2(29BA), THE ADDITIONAL DEPRE CIATION OF RS.23,95,21,849 WAS NOT ALLOWABLE IN RESPECT OF ADDITIONS MADE TO P LANT & MACHINERY FOR WIND MILL. THE HON'BLE CIT-I, BARODA HAS WRONGLY RELIED UPON THE AMENDMENT BROUGHT IN SEC.32(1) (IIA) BY FINANCE ACT, 2012 W.E .F 01.04.2013. YOUR APPELLANT SUBMITS THAT ADDITIONAL DEPRECIATION HAS BEEN RIGHTLY CLAIMED AND BE ALLOWED NOW SINCE THE AMENDMENT BROUGHT IN AS ABOVE IS NOT APPLICABLE FOR THE YEAR UNDER CONSIDERATION. 5) THE HON'BLE CIT-I, BARODA HAS ERRED IN SETTING ASIDE THE ISSUE REGARDING ALLOWABILITY OF SO CALLED EXCESS CLAIM OF FOLLOWING EXPENSES TO THE FILE OF AO TO EXAMINE THE NATURE OF THESE EXPENSES AND ALLOW THE SAME AS PER LAW. 1. SPONSORSHIP EXPENSES - RS. 6,77,769/- 2. SOCIAL WELFARE EXPENSES - RS.43,14,189/- 3. DONATION U/S 35AC OF THE ACT - RS.18,10,000/- TOTAL - RS.68,01,958/- YOUR APPELLANT SUBMITS THAT THE SAID EXPENSES DEBIT ED UNDER THE HEAD DONATIONS ARE IN FACT BUSINESS EXPENSES INCURRED IN THE ORDINARY COURSE OF BUSINESS AND FOR THE PURPOSE OF BUSINESS. THERE ARE FULLY ALLOWABLE AS PER THE PROVISIONS OF THE INCOME TAX ACT AND HENCE THE DIRE CTION GIVEN BY THE HON'BLE CIT-I, BARODA IS UNJUST AND UNCALLED FOR. IT BE HEL D SO NOW AND THE DIRECTION GIVEN BY HON'BLE CIT-I, BARODA BE CANCELLED. 3. TO ADJUDICATE ON THIS APPEAL, ONLY A FEW MATERIA L FACTS NEED TO BE TAKEN NOTE OF. THE ASSESSMENT UNDER SECTION 143(3) WAS COMPLE TED ON 30.12.2011. SUBSEQUENTLY, HOWEVER, THE COMMISSIONER INVOKED HIS REVISION POWERS UNDER SECTION 263 ON THE TWO POINTS (I.E. ADDITIONAL DEPR ECIATION ON WINDMILL AND VERIFICATION WITH RESPECT TO CLAIM OF EXPENDITURE) AND THE RELEVANT DIRECTIONS OF THE LEARNED COMMISSIONER WERE AS FOLLOWS:- 3. I HAVE CONSIDERED THE SUBMISSION OF THE ASSESS EE AND ALSO THE FACTS AVAILABLE ON RECORD. IN RESPECT OF CLAIM OF ADDITI ONAL OF RS.38,62,288/- ON WIND MILLS, THE ASSESSEES SUBMISSIONS IS THAT THIS ISSUE IS SETTLED IN FAVOUR OF THE ASSESSEE IN THE CASE OF CIT VS. VTM LTD, 319 IT R 336 (MADRAS) IT HAS FURTHER BEEN CONTENDED THAT SLP FILED AGAINST THAT DECISION HAS BEEN REJECTED BY THE HON'BLE SUPREME COURT. IN THE CASE OF M/S CI T VS VTM LTD, IT HAS BEEN HELD THAT IT IS NOT REQUIRED THAT THE NEW PLANT AND MACHINERY INSTALLED AFTER 31SL ITA NO. 1254/AHD/2014 GUJARAT ALKALIES & CHEMICALS LTD VS. DCIT ASSESSMENT YEAR: 2009-10 PAGE 3 OF 5 MARCH, 2002 SHOULD HAVE ANY OPERATIONAL CONNECTIVIT Y TO THE ARTICLE OR THING THAT WAS ALREADY BEING MANUFACTURED BY THE ASSESSEE . IT IS SUFFICIENT THAT THE ASSESSEE IS ENGAGED IN MANUFACTURING OR PRODUCTION ACTIVITY. IN OTHER WORDS, THE ASSESSEE'S CONTENTION IS THAT IT IS IMMATERIAL WHETHER GENERATION OF ELECTRICITY IS MANUFACTURING OR NOT IS A IRRELEVANT FACTOR FOR THE PURPOSE OF GRANTING ADDITIONAL DEPRECIATION. 3.1. HOWEVER THIS CONTENTION OF THE ASSESSEE IS TO BE EXAMINED IN THE LIGHT OF AMENDMENT BROUGHT U/S 32(1)(IIA) W.E.F. 01-04-2013. THIS AMENDMENT IS PROVIDED FOR ADDITIONAL DEPRECIATION IN RESPECT OF BUSINESS OF GENERATION OR GENERATION AND DISTRIBUTION OF POWER. IN OTHER WORD S PRIOR TO AMENDMENT, ADDITIONAL DEPRECIATION ON PRODUCTION AND GENERATIO N OF POWER WAS NOT INCLUDED IN THE SCHEME OF THINGS. THEREFORE, IT CAN NOT BE SAID THAT THE QUESTION RAISED IN THE PRESENT PROCEEDINGS IS COVER ED BY THE DECISION IN THE CASE OF M/S VTM LTD. IT IS THE CONTENTION OF THE AS SESSEE THAT ASSESSING OFFICER HAD ALLOWED THE CLAIM IN THE LIGHT OF THE D ECISION IN THE CASE OF CIT VS VTM LTD. IT IS APPARENT THAT THE ASSESSING OFFICER HAD NOT CONSIDERED THE IMPLICATIONS OF THE AMENDMENT BROUGHT IN SECTION 32 (1)(IIA) AS NOTED ABOVE. IT IS, THEREFORE, HELD THAT THE ORDER PASSED BY THE AS SESSING OFFICER WAS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE. .... ..... 7. IN RESPECT OF EXCESS CLAIM OF RS.68,02,000/- IT HAS BEEN CONTENDED THAT THESE AMOUNTS WERE IN THE NATURE OF BUSINESS EXPEND ITURE AND NOT DONATIONS AND THEREFORE, PROPOSED DISALLOWANCE IS NOT JUSTIFI ED. THE ASSESSEE HAS NOT HOWEVER EXPLAINED AS TO HOW THESE ARE BUSINESS EXPE NDITURE. SINCE THE ORDER IS BEING SET ASIDE ON OTHER ISSUES, THIS ISSU E IS ALSO SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO EXAMINE THE NATURE OF THESE PAYMENTS AS PER LAW. 4. AGGRIEVED BY THE DIRECTIONS SO GIVEN BY THE LEAR NED COMMISSIONER, THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. 6. WE HAVE NOTED THAT, SO FAR AS ADDITIONAL DEPRECI ATION ON WINDMILL IS CONCERNED, IT WAS SPECIFICALLY POINTED OUT TO THE L EARNED COMMISSIONER THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE, BY TRIBUNALS DECISION IN THE CASE OF ACIT VS. POWER BUILD LTD AND VICE VERSA (ITA NO.1945/AHD/201 0 AND CO NO.198/AHD/2010; ORDER DATED 31.08.2012) WHEREIN THE CO-ORDINATE BEN CH HAD SPECIFICALLY OBSERVED AS FOLLOWS:- 5. WE FIND THAT THE DISALLOWANCE OF CLAIM OF THE A SSESSEE REGARDING ADDITIONAL DEPRECIATION WAS MADE BY THE A.O. ON THIS BASIS THA T AS PER THE CLAUSE (IIA) ITA NO. 1254/AHD/2014 GUJARAT ALKALIES & CHEMICALS LTD VS. DCIT ASSESSMENT YEAR: 2009-10 PAGE 4 OF 5 OF SECTION 32, ADDITIONAL DEPRECIATION IS ALLOWABLE ONLY WHEN THE EXTENSION OF INDUSTRIAL UNDERTAKING ACHIEVED THE SUBSTANTIAL EXP ANSION BY WAY OF INCREASE IN INSTALLED CAPACITY. AS AGAINST THIS, IT IS HELD BY LD. CIT(A) THAT THE PROVISIONS OF SECTION 32(1)(IIA) WERE AMENDED BY FINANCE ACT 2 005 W.E.F. 01.04.2006 I.E. APPLICABLE TO ASSESSMENT YEAR 2006-07 ONWARDS, AS P ER WHICH THERE IS NO CONDITION REGARDING SUBSTANTIAL EXPANSION BY WAY OF INCREASE IN INSTALLED CAPACITY OF AN INDUSTRIAL UNDERTAKING. HE HAS ALSO REFERRED THE EXPLANATORY MEMORANDUM TO THE FINANCE ACTOF 2005. WE FIND THAT IN SUCH EXPLANATORY MEMO, IT IS SPECIFICALLY STATED THAT THE REQUIREMEN T OF FULFILLING THE CONDITIONS OF EXPANSION IN INSTALLED CAPACITY HAS BEEN DISPENSED WITH. UNDER THIS FACTUAL POSITION, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE. THIS GROUND OF THE REVENUE IS REJECTED. 7. THE ABOVE CONTENTIONS ARE DULY NOTED AT PAGE NOS . 3 & 4 OF THE IMPUGNED ORDER, AND YET THE LEARNED COMMISSIONER HAS PROCEED ED TO TREAT THE ORDER PASSED BY THE ASSESSING OFFICER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. WE ARE OF THE CONSIDERED VIEW THAT THE COURSE ADOPT ED BY THE ASSESSING OFFICER, WHICH IS UNAMBIGUOUSLY SUPPORTED BY A BINDING JUDIC IAL PRECEDENT, CANNOT BE SAID TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. AS NOTED BY HONBLE SUPREME COURT, IN THE CASE OF CIT VS. MALABAR INDUS TRIAL CO LTD [(2000) 243 ITR 83 (SC)], EVERY LOSS OF REVENUE, AS A CONSEQUENCE OF AN ORDE R OF THE ASSESSING OFFICER, CANNOT BE TREATED AS PREJUDICIAL TO THE IN TEREST OF THE REVENUE, FOR EXAMPLE, WHEN AN ITO ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE; OR WHERE TWO VIEWS ARE POSSIBLE AN D THE ITO HAS TAKEN ONE VIEW WITH WHICH CIT DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE, UNLESS THE VIEW TA KEN BY THE ITO IS NOT SUSTAINABLE IN LAW . A VIEW TAKEN IN CONSONANCE WITH THE TRIBUNAL DEC ISION CANNOT BE SAID TO UNSUSTAINABLE IN LAW. CLEARLY, THEREFORE, THE LEAR NED COMMISSIONER WAS IN ERROR IN INVOKING HIS REVISION POWERS UNDER SECTION 263 IN R ESPECT OF ADDITIONAL DEPRECIATION ON WINDMILL. 8. AS REGARDS THE LEARNED COMMISSIONERS INVOKING T HE REVISION POWERS UNDER SECTION 263 IN RESPECT OF, WHAT IS TERMED AS BY THE CIT, EXCESS CLAIM OF RS.68,02,000, WE HAVE NOTED THAT THE STAND OF THE ASSESSEE IS THA T THESE EXPENSES ARE DULY DEDUCTABLE UNDER SECTION 37(1), THAT THE A SSESSEE HAD FURNISHED COMPLETE INFORMATION, AS REQUISITIONED BY THE ASSESSING OFFI CER, AT THE ASSESSMENT STAGE COPIES OF WHICH ARE PLACED AT PAGES 44 TO 59 OF THE PAPER-BOOK FILED BEFORE US, AND YET THE COMMISSIONER HAS REMITTED THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR NECESSARY VERIFICATION. AS A MATTER OF FACT, THE L EARNED CIT HAS JUSTIFIED THE ACTION ON THE GROUND THAT SINCE THE ORDER IS BEING SET ASIDE ON OTHER ISSUES, THIS ISSUE IS ALSO SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO EXAMINE THE NATURE OF THESE PAYMENTS AS PER LAW . AS THE THINGS STAND NOW, HOWEVER, THE ORDER UND ER SECTION 263 ON THE OTHER ISSUE (I.E. ADDITIONAL DEPRECIATIO N) STANDS VACATED. IN ANY CASE, IT IS NOT EVEN THE CASE OF THE CIT THAT THERE IS ANY ERRO R IN THE CLAIM OR THIS ASPECT OF THE MATTER WAS NOT EXAMINED IN THE ORIGINAL PROCEEDINGS . ITA NO. 1254/AHD/2014 GUJARAT ALKALIES & CHEMICALS LTD VS. DCIT ASSESSMENT YEAR: 2009-10 PAGE 5 OF 5 9. ON THIS ISSUE ALSO, THEREFORE, ACTION OF THE CIT IN INVOKING POWERS UNDER SECTION 263 CANNOT BE JUSTIFIED. NO ISSUE CAN BE R EMITTED TO THE FILE OF THE ASSESSING OFFICER, BY INVOKING POWERS UNDER SECTION 263, SIMP LY BECAUSE SOME OTHER ISSUES ARE ALSO REMITTED TO THE FILE OF THE ASSESSING OFFI CER. THAT IS A VERY CASUAL APPROACH BY THE CIT. LEARNED CITS ACTION, THEREFORE, DOES NOT MEET OUR APPROVAL. 10. IN VIEW OF THESE DISCUSSIONS, AS ALSO BEARING I N MIND ENTIRETY OF THE CASE, WE VACATE THE IMPUGNED REVISION ORDER ON BOTH THE ISSU ES. THE ASSESSEE THUS SUCCEEDS IN ITS APPEAL. 11. IN THE RESULT, THE APPEAL IS ALLOWED. PRONOUNC ED IN THE OPEN COURT TODAY ON THE 6 TH DAY OF FEBRUARY, 2018. SD/- SD/- S S GODARA PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER ) AHMEDABAD, THE 6 TH DAY OF FEBRUARY, 2018 **BT COPIES TO: (1) THE APPELLANT (2) THE RESPOND ENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD 1. DATE OF DICTATION- ORDER PREPARED AS PER SIX PAG ES MANUSCRIPT OF HONBLE AM, WHICH IS ATTACHED WITH THE APPEAL FILE ....06.02.2018 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER 06.02.2018 OTHER MEMBER 06.02.2018 . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR .P.S./P.S. - 06.02.2018.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT ..06.02.2018.. 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK. 06.02.2018 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER.. 8. DATE OF DESPATCH OF THE ORDER