Shriram Foundry Ltd., V. Additional Commissioner of Income-tax,

ITA 1339/PUN/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7199 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 25-07-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 23-06-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANIL CHAWARE
• Assessee Lawyers: SUNIL PATHAK
• Keywords: Capital asset; Depreciation; Business expenditure; Wrong claim; Bad and doubtful debts; Revised return; Revenue expenditure; Capital expenditure
• Section: 115JB; 37

Judgement Text

] IQ.KS ] IQ.KS ] IQ.KS ] IQ.KS IQ.KS IQ.KSIQ.KS IQ.KS IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , . . , # BEFORE MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, AM . / ITA NOS.1338 & 1339/PUN/2014 % % / ASSESSMENT YEARS : 2010-11 & 2011-12 SHRIRAM FOUNDRY PVT. LTD., (FORMERLY KNOWN AS SHRIRAM FOUNDRY LTD.) 47, SHIVAJI PARK, KOLHAPUR PAN : AADCS7789Q . / APPELLANT V/S ADDL. CIT, RANGE - 2 , KOLHAPUR . / RESPONDENT / APPELLANT BY : SHRI SUNIL PATHAK & SHRI NIKHIL PATHAK / RESPONDENT BY : SHRI SUHAS KULKARNI & SHRI ANIL CHAWARE / ORDER PER R.K. PANDA, AM : THE ABOVE TWO APPEALS FILED BY THE ASSESSEE ARE DIREC TED AGAINST THE COMMON ORDER DATED 21-02-2014 OF THE CIT(A )-KOLHAPUR RELATING TO THE ASSESSMENT YEARS 2010-11 & 2011-12. S INCE COMMON GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE IN BO TH THESE APPEALS, THEREFORE, THESE WERE HEARD TOGETHER AND ARE B EING DISPOSED OF BY THIS COMMON ORDER. / DATE OF HEARING :07.11.2016 / DATE OF PRONOUNCEMENT:18.01.2017 2 ITA NOS.1338 & 1339/PUN/2014 ITA NO.1338/PUN/2014 (A.Y. 2010-11) : 2. GROUNDS OF APPEAL NO. 1 TO 3 BY THE ASSESSEE READ AS UNDER: 1. THE LD.CIT(A) ERRED IN CONFIRMING AN ADDITION O F RS.17,64,990/- ON ACCOUNT OF SALE OF SCRAP ON AN ESTIMATED BASIS WITHOU T APPRECIATING THAT THE ENTIRE ADDITION MADE BY THE LD. AO WAS ON A N ESTIMATED BASIS AND HENCE, THE ADDITION MADE SHOULD HAVE BEEN DELETE D. 2. THE LD.CIT(A) FAILED TO APPRECIATE THAT THERE WA S NO EVIDENCE THAT THE ASSESSEE HAD SOLD ITS SCRAP AND HENCE, THE ADDIT ION MADE ON AN ADHOC BASIS IS NOT JUSTIFIED AT ALL. 3. WITHOUT PREJUDICE, THE ASSESSEE SUBMITS THAT THE ADDIT ION SUSTAINED BY THE LD.CIT(A) IS VERY HIGH AND THE SAME MA Y BE REDUCED SUBSTANTIALLY. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF CAST ING, SALE OF AUTOMOBILE COMPONENTS. IT FILED ITS RETURN OF INCOME ON 1 5-10- 2010 DECLARING TOTAL INCOME OF RS.1,84,24,210/- AND DEEMED TOTAL INCOME U/S.155JB OF RS.14,52,88,588/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESS EE HAS CLAIMED RS.2,21,38,727/- AS PURCHASES DURING THE YEAR UNDE R THE HEAD MACHINERY MAINTENANCE (RS.3,33,62,600/- FOR A.Y. 2011- 12). HOWEVER, NO SALE OF OLD SPARES OR SPARES REPLACED WAS R EFLECTED IN THE BOOKS. THE ASSESSING OFFICER, THEREFORE, REFERRED TO T HE AUDITED ACCOUNTS IN THE CASE OF ASSESSEE S SISTER CONCERN, VIZ E.D. STEELS PVT. LTD. AND FOUND THAT THE SAID COMPANY HAS INDICATED THERE IN 15.20% OF PURCHASES MADE AS SALE OF OLD SPARES/MACHINERIES DUR ING THE YEAR. UNDER THESE CIRCUMSTANCES, THE AO PROPOSED TO DISALLOW 15% OF THE AMOUNT CLAIMED AS PURCHASES SHOWN UNDER THE HEA D MACHINERY MAINTENANCE EXPENSES. 4. THE ASSESSEE EXPLAINED BEFORE THE AO THAT IN ITS CASE INCOME WAS MAINLY GENERATED FROM SALE OF MANUFACTURED GOODS WH EREAS IN THE CASE OF E. D. STEELS PVT. LTD. THE SALE OF SPARES/MAC HINERIES WAS 3 ITA NOS.1338 & 1339/PUN/2014 SHOWN @ 15,27% OF PURCHASES UTILIZED IN THE MACHINERIES MAINLY ENGAGED IN MACHINING WORK AND INCOME WAS GENERATED IN TH E SAID COMPANY FROM JOB WORK RECEIPTS. IT WAS CONTENDED THAT DISALLOWANCE @ 1% WOULD BE REASONABLE. 5. HOWEVER, THE AO DID NOT ACCEPT THE ABOVE CONTENTIO NS OF THE ASSESSEE. HE OBSERVED THAT IF THE OPENING STOCK AS WELL AS PURCHASES AND CLOSING STOCK ARE CONSIDERED, THE CONSUMP TION OF MACHINERY / SPARES WORKED OUT TO RS.1,76,49,894/- FOR A.Y .2010- 11. IN VIEW OF THIS, THE POSSIBILITY OF GENERATION OF OLD SPARES/MACHINERIES COULD NOT BE DENIED. HE OBSERVED THA T E. D. STEELS PVT. HAD SHOWN SALE OF OLD SPARES WHICH WAS 15.27% OF THE CONSUMPTION OF RS. 36,55,141/-, CONSIDERING THIS AND ALSO THA T THE SAID COMPANY HAD NOT SHOWN ANY OLD SCRAP / DEAD STOCK IN ITS ACCOUNTS, THE AO WAS OF THE VIEW THAT IT COULD BE PRESUM ED THAT OLD SPARES / MACHINERIES SOLD WAS GENERATED DURING THE F.Y. 2 009-10 RELEVANT TO ASSESSMENT YEAR 2010-11 AND THIS WAS TRUE IN THE INSTANT CASE AS WELL. THE ARGUMENT OF THE ASSESSEE DISTINGUISHING ITS NATURE OF WORK FROM THAT OF E.D. STEELS PVT. LTD. WAS ALSO DISMISSED BY THE AO ON THE GROUND THAT IN BOTH CASES THERE WAS GENERATION OF OLD SPARES / MACHINERIES, THEREFORE, THE ISSUE REGARDING N ATURE OF WORK HAD NO CONSEQUENCE. THUS, BASED ON THE ABOVE OB SERVATIONS THE AO WORKED OUT SALE OF SCRAP AT RS.26,95,139/- (15.27% OF RS.1,76,49,894/-) AND HELD THIS AMOUNT AS ASSESSEE 'S INCOME DURING THE YEAR UNDER CONSIDERATION, WHICH WAS BROUGHT TO TAX. 6. BEFORE CIT(A) THE ASSESSEE OBJECTED TO THE AOS ACTION IN APPLYING THE RATE OF 15.27% TO ITS CASE ON THE BASIS OF WORKING OF RATIO IN PROFIT AND LOSS ACCOUNT OF THE ASSOCIATE CONCERN, E.D. STEELS 4 ITA NOS.1338 & 1339/PUN/2014 PVT. LTD. IT WAS EXPLAINED THAT THE SALES SHOWN BY E.D. S TEELS PVT. LTD. WAS NOT RELATED TO SCRAP OF OLD PARTS AS PRESUMED BY THE AO BUT WAS SALE OF ITEMS MADE OUT OF PURCHASES TO ITS ASSOC IATED CONCERN SHRIRAM FOUNDRY LTD., UTTARANCHAL UNIT. THE ASS ESSEE ARGUED THAT THE NATURE OF ACTIVITY OF THE ASSESSEE WAS NOT COMPARABLE WITH THAT OF E.D. STEELS PVT. LTD. IT WAS EXPLA INED THAT THE ASSESSEE PRODUCES CAST IRON PRODUCTS BY MELTING IRO N SCRAP IN FURNACE AT HIGH DEGREE OF POWER TEMPERATURE. THE CASTIN GS WERE THEN SENT TO MACHINE SHOP UNITS LIKE E.D. STEELS FOR MOULDING BY MACHINING PROCESS LIKE TURNING, FINE BORING, DRILLING ETC. ON SPEC IFIC LATHE MACHINES. IT WAS FURTHER CONTENDED THAT THE EXTE NT OF BUSINESS AS WELL AS VOLUME OF EXPENDITURE ON REPAIRS AND MAINTENANCE OF THE TWO COMPANIES VARIED AND THAT THE GR OSS SALES AND VALUE OF PLANT AND MACHINERY INSTALLED WERE ALSO INCOMP ARABLE. THE ASSESSEE SUBMITTED THAT THE IRON SCRAP GENERATED FROM OLD REPLACED SPARE PARTS WERE NOT SOLD BUT REUSED BY IT FOR MELTING AND SUCH SCRAP WAS ALSO INCLUDED IN AUDITED BALANCE SHEET AND AUDIT REPORT IN FORM 3CD. IN RESPECT OF ADDITION MADE IN A.Y. 2 011-12 THE ASSESSEE ARGUED THAT THE SAME WAS MADE ON ESTIMA TE BASIS AND WAS NOT BASED ON EVIDENCE OR ANY MATERIAL FACT. IN VIEW OF THE ABOVE CONTENTIONS THE ASSESSEE PLEADED THAT THE ADDITI ON BE DELETED. 7. HOWEVER, THE CIT(A) WAS NOT FULLY SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND SUSTAINED DISALLOWAN CE OF 10% OF SALE BY OBSERVING AS UNDER : 11. I HAVE GIVEN CAREFUL CONSIDERATION TO THE FACT S OF THE CASE AS WELL AS THE SUBMISSIONS OF THE APPELLANT. THE ASSESSING OFF ICER HAS MADE THE DISALLOWANCE AFTER STUDYING THE PURCHASES AND SALES OF REPAIRS AND MAINTENANCE IN THE CASE OF SISTER CONCERN M/S. E.D. STEELS 5 ITA NOS.1338 & 1339/PUN/2014 PVT. LTD. AND WORKED OUT THE DISALLOWANCE AT 15.27%. APPELLANT CONTENDS THAT NATURE OF WORK OF M/S E.D. STEELS IS DIFF ERENT FROM THE APPELLANT'S WORK AND NO DISALLOWANCE IS CALLED FOR. IT IS CERTAIN THAT EVEN IF NATURE OF WORK IS DIFFERENT, SPARES ARE LEFT AFTER REPAIR AND MAINTENANCE WORK. APPELLANT HAS CLAIMED THAT THESE WE RE RECYCLED. HOWEVER, NO DATA, SUPPORTED BY QUANTITATIVE DETAILS OF AUDITED ACCOUNTS WERE FURNISHED TO SUBSTANTIATE THE CLAIM AND SH OW THAT HOW MUCH SPARE WAS PRODUCED AND RECYCLED. CONSIDERING THE APPELLANT'S SUBMISSION AND ASSESSING OFFICER'S LOGIC, I DEEM IT PROPER TO SUSTAIN DISALLOWANCE OF 10% OF SALE. BALANCE DISALLOWANCE IS DELETED. 8. SUBSEQUENTLY, THE LD.CIT(A) VIDE CORRIGENDUM DATED 02-0 5- 2014 HAS OBSERVED AS UNDER : NO.KOP/CIT(A)/CORRIGENDUM/2014-15 DATE D 02-05-2014 CORRIGENDUM THIS IS IN CONTINUANCE WITH THE APPELLATE ORDER IN TH E CASE OF SHRIRAM FOUNDRY LTD. WHERE THE ASSESSEES APPEAL NO.KOP/103/13-1 4 AND NO.KOP/416/13-14 IN RESPECT OF ASSESSMENT YEARS 2010-11 AND 2011- 12, RESPECTIVELY, WERE DISPOSED BY SINGLE ORDER DATED 2 1-12-2014. 2. ONE OF THE ISSUES IN THE APPEALS WAS REGARDING DISALLO WANCE OF MACHINE MAINTENANCE EXPENSES. THE AO HAD DISALLOWED 1 5.25% OF SPARE PURCHASES IN THE ASSESSMENT YEAR 2010-11. AFTER DISC USSING FACTS OF THE CASE IN PARAGRAPH 10 OF THE APPELLATE O RDER, I HAD RESTRICTED DISALLOWANCE TO 10% OF THE SPARES PURCHASES IN PARAGRAPH NO.12. IN A.Y. 2011-12, THE AO HAD DISALLOWED 5% OF MACHINERY MAINTENANCE PURCHASES. THIS FACT WAS DISCUSSED BY ME IN PARAGRAPH 9 O F THE APPELLATE ORDER. HOWEVER, NO FINDING IS GIVEN ON TH IS ISSUE. SINCE IN THE A.Y. 2010-11 I HAD RESTRICTED THE DISALLOWANCE TO 10%, THE DISALLOWANCE MADE BY THE AO AT 5% IN A.Y.2011-12 IS H ELD AS JUSTIFIED AND, THEREFORE, SUSTAINED. SD/- (P.K.MISHRA) COMMISSIONER OF INCOME-TAX (APPEALS) KOLHAPUR 9. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 10. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY OPPOSED T HE ORDER OF THE CIT(A). HE SUBMITTED THAT THERE WAS NO ADDITION ON THIS ACCOUNT IN THE PRECEDING ASSESSMENT YEARS. FURTHER WH ATEVER 6 ITA NOS.1338 & 1339/PUN/2014 SCRAP IS GENERATED IS PUT BACK IN THE FURNACE FOR RE-US E. THEREFORE, DISALLOWANCE ON THE BASIS OF SALE OF SPARES/MACHINERIES OF E D STEELS PVT. LTD. WHOSE ACTIVITY IS DIFFERENT FROM THAT OF THE WORKING OF THE ASSESSEE CANNOT BE THE BASIS FOR MAKING DISALLOWANC E @15% WHICH HAS BEEN REDUCED TO 10% BY THE CIT(A). IN HIS ALTE RNATE CONTENTION HE SUBMITTED THAT THE DISALLOWANCE IS VERY MUC H ON THE HIGHER SIDE. IN THE SUBSEQUENT YEAR, THE ASSESSING OFFICER HAS DISALLOWED 5% ONLY. THEREFORE, THE DISALLOWANCE SHOULD BE R EDUCED SUITABLY. 11. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER H AND HEAVILY RELIED ON THE ORDER OF THE CIT(A). 12. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE P APER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND THE ASSESSEE IN THE INSTANT CASE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF CASTING AND SALE OF AUTOMOBILE COMPONENTS. THE ASSESSEE HAS CLAIMED AN AMOUNT OF RS.2,21,38,727/- AS PURCHASES DURING THE YEAR U NDER THE HEAD MACHINERY MAINTENANCE. IN ABSENCE OF ANY SA LE OF OLD SPARES OR SPARES REPLACED REFLECTED IN THE BOOKS OF ACCO UNT THE ASSESSING OFFICER, ON THE BASIS OF IDENTICAL FACTS IN THE SISTE R CONCERN OF THE ASSESSEE NAMELY ED STEELS PVT. LTD. WHER E 15.20% OF PURCHASES HAVE BEEN SHOWN AS SALE OF OLD SPARES/MACHINE RIES, DISALLOWED 15% OF THE AMOUNT CLAIMED AS PURCHASES SHOWN U NDER THE HEAD MACHINERY MAINTENANCE EXPENSES. WE FIND THE LD.CIT(A) RESTRICTED SUCH DISALLOWANCE TO 10%. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT NO SUCH DISALLOWANCE HAS BEEN MADE IN THE PRECEDING ASSESSMENT YEAR AND WHATEVER SCRAP IS GENERATED 7 ITA NOS.1338 & 1339/PUN/2014 IS PUT INTO FURNACE FOR RECYCLING AND THEREFORE THE COST OF PURCHASE HAS BEEN REDUCED. THEREFORE, NO DISALLOWANCE ON THIS ACCO UNT IS CALLED FOR. IT IS ALSO HIS ALTERNATE SUBMISSION THAT THE DIS ALLOWANCE AT 10% WHICH HAS BEEN SUSTAINED BY THE CIT(A) IS ALSO ON THE HIGHER SIDE. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND CONSIDERING THE FACT THAT IN THE SUBSEQUENT ASSESSMENT YEAR SUCH DISALLOWANCE HAS BEEN MADE AT 5% OF THE PURCHASES ON ES TIMATE BASIS BY THE ASSESSING OFFICER HIMSELF, WE MODIFY THE ORDER OF CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO RESTRIC T THE DISALLOWANCE TO 5% OF THE PURCHASES AS AGAINST 10% SUSTA INED BY THE CIT(A). GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY PARTLY ALLOWED. 13. GROUND OF APPEAL NO.4 BY THE ASSESSEE READS AS UNDER : THE APPELLANT PRAYS TO DELETE THE DISALLOWANCE OF RS. 8,61,904/- FROM REVENUE EXPENDITURE IN MACHINERY MAINTENANCE EXPENS ES PRESUMING THAT THE SAME ARE CAPITAL EXPENDITURE. 14. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSING OFFIC ER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED FROM THE DETAILS OF EXPENSES INCURRED ABOVE RS.20,000/- UNDER THE HEAD MACHINERY MAINTENANCE EXPENSES THAT SUBSTANTIAL EXPENDITURE WAS INCURRED IN THE FORM OF SPARES/TOOLS WHICH WERE CAPITAL IN NATURE. H E ASKED THE ASSESSEE TO FURNISH DETAILS AND EVIDENCES IN RESPECT OF SUCH SPARES/TOOLS PURCHASED AND ALSO TO EXPLAIN AS TO WHY T HESE SHOULD NOT BE TREATED AS CAPITAL EXPENDITURE. THE ASSESSEE AD MITTED SPARES PURCHASED AMOUNTING TO RS.5,20,705/- AS CAPITAL EXPENDITURE. HOWEVER, IN ADDITION TO THIS, THE AO PROPOSE D TO TREAT EXPENSES TO THE TUNE OF RS.5,60,777/- AS CAPITAL EXPENSE S INCURRED FOR PURCHASE OF ELEC. PUMPEM-N-GR.02-FACH-TK 7350001 8 ITA NOS.1338 & 1339/PUN/2014 PANASONIC AC SERVO MOTOR AND DRIVE AND PG CARD. THE ASSESSEE OBJECTED TO THIS STATING THAT THE ABOVE MACHINERIES WER E USED ON DAILY BASIS FOR RUNNING THE EXISTING PLANTS AND MACHINERIES. HOWEVER, OBSERVING THAT THE DESCRIPTION OF THE MACHINERIES INDICATED THAT THESE HAD ENDURING EFFECT AND COULD BE USE D FOR A LONGER PERIOD, THE AO PROCEEDED TO TREAT THE EXPENSES OF RS.5,60,777/- AS CAPITAL EXPENSES. THUS, A TOTAL AMOUNT OF RS.10,81,482/- (RS.5,20,705/- + 5,60,777) WAS TREATED AS CAPIT AL EXPENSES. AFTER ALLOWING DEPRECIATION OF RS.2,19,578/-, THE ASSESSING OFFICER MADE ADDITION OF RS.8,61,904/-. SIMILARLY, IN A.Y. 2011-12, FOLLOWING THE REASONING GIVEN IN A.Y. 2010-11 THE AO TREATED A SUM OF RS.7,42,085/- AS CAPITAL EXPENSE OUT OF W HICH DEPRECIATION OF RS.1,47,274/- WAS ALLOWED TO THE ASSESSEE A ND THE BALANCE RS.5,94,811/- WAS TAXED. 15. BEFORE CIT(A) THE ASSESSEE SUBMITTED THAT THE PERCEN TAGE OF EXPENSES VIS-A-VIS THE VALUE OF MACHINERY WORKED OUT TO 5% AND 2.78% IN ASSESSMENT YEARS 2010-11 AND 2011-12, RESPECT IVELY. FURTHER NONE OF THE ITEMS IDENTIFIED BY THE AO PROVIDED EN DURING BENEFIT TO THE ASSESSEE'S BUSINESS AND THAT THE EXPENS ES WERE INCURRED TO MAINTAIN THE MACHINERIES IN GOOD WORKING CON DITION OR TO REPAIR THE EXISTING MACHINERY. THE ASSESSEE ACCORDING LY REQUESTED THAT THE DISALLOWANCES MADE IN THE YEARS UNDE R CONSIDERATION BE DELETED. 16. HOWEVER, THE CIT(A) WAS NOT SATISFIED WITH THE EXPLANAT ION GIVEN BY THE ASSESSEE AND UPHELD THE ACTION OF THE AO B Y OBSERVING AS UNDER : 9 ITA NOS.1338 & 1339/PUN/2014 14. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT WITH REFERENCE TO THE FACTS OF THE CASE. JUST BECAUSE THE P ERCENTAGE OF EXPENSES VIS-A-VIS THE TOTAL MACHINERY ASSETS IS LESS DOES NOT MAKE A NEW ITEM OF ASSET AS A REPAIR AND MAINTENANCE ITEM. A S PER THE DESCRIPTION OF ASSETS PRODUCED IN THE ASSESSMENT ORDER, THE ASSETS ARE OF ENDURING BENEFIT AND THEIR USE IS NOT LIMITED TO T HE YEAR UNDER CONSIDERATION. THEREFORE, THE ASSESSING OFFICER WAS JUSTI FIED IN MAKING ADDITION OF VALUE OF THESE ASSETS. THE ADDITIONS ARE SUST AINED. 17. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 18. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT OU T OF THE MACHINERY EXPENSES CLAIMED AT RS.2,21,38,727/- THE ASSESS EE ERRONEOUSLY HAD ACCEPTED BEFORE THE ASSESSING OFFICER TH AT SPAREPARTS AMOUNTING TO RS.5,20,705/- ARE CAPITAL IN NAT URE. FURTHER, OUT OF THE DETAILS FILED BY THE ASSESSEE THE ASS ESSING OFFICER MADE FURTHER ADDITION OF RS.5,60,777/- TREATING THE S AME AS CAPITAL IN NATURE. THE ASSESSING OFFICER THUS TREATED AN A MOUNT OF RS.10,81,482/- OUT OF THE MACHINERY MAINTENANCE EXPENSES AS CAPITAL IN NATURE AND ALLOWED DEPRECIATION THEREOF AMOUNTING TO RS.2,19,578/- AND MADE ADDITION OF RS. 8,61,904/-. HE SUBMITT ED THAT THE ENTIRE AMOUNT IS REVENUE IN NATURE WHICH ARE P ARTS OF THE MACHINERY REQUIRED FOR REPLACEMENT OF THE OLD WORN OUT PA RTS WHICH HAS DETERIORATED OR NOT IN USABLE CONDITION. REFERRING TO PAGE 128 OF THE PAPER BOOK THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH REGARDING THE VARIOUS ITEMS WHICH HAS BEEN TREATED BY THE ASSESSING OFFICER AS CAPITAL IN NATURE. RE FERRING TO THE CERTIFICATE ISSUED BY THE ENGINEER OF THE PLANT, A COPY OF WHICH IS PLACED AT PAGE 156 OF THE PAPER BOOK, HE SUBMITTED THA T THE ENGINEER HAS CERTIFIED THAT THE SPARE PARTS PURCHASED D O NOT HAVE A LONG AND DURABLE LIFE AND ARE REQUIRED TO REPLACE THE OLD AND WORN 10 ITA NOS.1338 & 1339/PUN/2014 OUT PARTS. HE SUBMITTED THAT SINCE IN THE INSTANT CASE THE REVENUE EXPENDITURE HAS BEEN TREATED BY THE ASSESSING AUTHORIT Y AS CAPITAL EXPENDITURE, THEREFORE, THE ORDER OF THE CIT(A) BE MODIFIED AND THE GROUND RAISED BY THE ASSESSEE BE ALLOWED. 19. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER H AND HEAVILY RELIED ON THE ORDER OF THE CIT(A). 20. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE P APER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED T HE VARIOUS DECISIONS CITED BEFORE US. WE FIND, THE ASSESSING O FFICER IN THE INSTANT CASE CONSIDERED AN AMOUNT OF RS.10,81,482/- O UT OF MACHINERY MAINTENANCE EXPENSES AS CAPITAL IN NATURE AND ALLOWED DEPRECIATION ON THE SAME AS AGAINST REVENUE EXPENDITURE CLAIMED BY THE ASSESSEE. WE FIND THE LD.CIT(A) UPHELD THE ACTION O F THE ASSESSING OFFICER IN TREATING SUCH REVENUE EXPENDITURE AS CAPITAL IN NATURE. 21. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSE E THAT ALL THE ITEMS ARE REVENUE IN NATURE AND THESE ARE REQUI RED TO REPLACE THE OLD AND WORN OUT PARTS AND/OR REPAIRS OF EX ISTING MACHINERIES WHICH HAS DETERIORATED AND NOT IN USABLE COND ITION. SO FAR AS THE AMOUNT OF RS.5,20,705/- IS CONCERNED WE FIND THE ASSESSEE BEFORE THE ASSESSING OFFICER ITSELF HAD ADMITTED T HAT THE SAME IS CAPITAL IN NATURE AND THEREFORE WE DO NOT FIND ANY FORCE IN THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT T HE SAME SHOULD BE TREATED AS REVENUE IN NATURE. 11 ITA NOS.1338 & 1339/PUN/2014 22. SO FAR AS THE BALANCE AMOUNT OF RS.5,60,777/- IS CONCER NED, WE FIND FROM THE UNDATED CERTIFICATE ISSUED BY THE ENGINEER OF THE ASSESSEE COMPANY THAT THESE ARE USED FOR REPLACEMENT OF OLD WORN OUT MATERIALS AND/OR REPAIRS OF EXISTING MACHINERIES WHICH IS DETERIORATED OR NOT IN USABLE CONDITION. HE HAS ALSO CER TIFIED THAT THE LIFE OF THE SPAREPARTS IS OVER AS SOON AS THE PART IS USED IN THE REPAIRS OF ORIGINAL MACHINES BY REPLACING OF OLD WORN OUT PAR T. FURTHER, HE HAS ALSO CERTIFIED THAT THE SPAREPARTS PURCH ASED DO NOT HAVE A LONG AND DURABLE LIFE AS PER THE INDEPENDENT MACHINE. 23. WE FIND SOME FORCE IN THE ARGUMENTS ADVANCED BY THE LD. COUNSEL FOR THE ASSESSEE THAT ALTHOUGH THESE PARTS ARE HIGHER IN VALUE RANGING FROM RS.1.36 LAKHS TO RS.2.83 LAKHS EACH, HOWE VER, THESE PARTS ARE REQUIRED FOR REPLACEMENT/REPAIR OF THE E XISTING MACHINERIES AND HAS TO BE TREATED AS REVENUE IN NATURE . ADMITTEDLY, IN THE PRESENT CASE, ONLY THE PARTS ARE REP LACED AS THE OLD PARTS WERE CREATING PROBLEM IN THE QUALITY OF THE FINISH ED PRODUCT. AS PER THE FACTS ON RECORD, NO MACHINERY IS RE PLACED AS A WHOLE BUT ONLY SOME PARTS OF THE MACHINERY ARE REPLACED . IN OUR OPINION, THE QUANTUM OF EXPENDITURE INVOLVED IS NOT DECISIVE BUT THE NATURE OF REPAIRS IS DECISIVE TO DECIDE WHETHER IT IS REVENUE OR CAPITAL IN NATURE. SINCE IN THE INSTANT CASE, THE SPARES WERE REQUIRED TO REPLACE THE OLD AND WORN OUT PARTS OF THE M ACHINERY, THEREFORE, UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE , WE ARE OF THE CONSIDERED OPINION THAT THE AMOUNT OF RS.5,60,777/- T REATED BY THE ASSESSING OFFICER AS CAPITAL IN NATURE WHICH HAS BEEN U PHELD BY THE CIT(A) HAS TO BE TREATED AS REVENUE IN NATURE. THE ORDER OF CIT(A) IS ACCORDINGLY MODIFIED AND THE ASSESSING OFFICER IS DIRE CTED TO CONSIDER THE AMOUNT OF RS.5,60,777/-, WHICH WAS TREATED BY HIM 12 ITA NOS.1338 & 1339/PUN/2014 AS CAPITAL IN NATURE, AS REVENUE IN NATURE. THE ASSESSING OFFICER SHALL ALLOW THE SAME AS REVENUE IN NATURE AND WITHDRAW TH E DEPRECIATION ALLOWED THEREON. GROUND RAISED BY THE ASSES SEE IS ACCORDINGLY PARTLY ALLOWED. 24. GROUND OF APPEAL NO.5 BY THE ASSESSEE READS AS UNDER : 6. THE APPELLANT PRAYS NOT TO MAKE ANY ADJUSTMENTS TO THE BOOK PROFIT CALCULATED U/S.115JB OF THE INCOME TAX ACT AS PER THE PROFIT AND LOSS ACCOUNT PREPARED AND SIGNED BY THE STATUTORY AUDIT ORS OF THE COMPANY. 25. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSING OFFIC ER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED T HAT THE ASSESSEE COMPANY HAS CLAIMED BOOK PROFIT U/S.115JB AT RS.14,52,88,588/-. THE ASSESSEE VIDE LETTER DATED 07-02-2 013 CLAIMED THAT THE CORRECT WORKING OF THE TAXABLE INCOME AS PER PROVISIONS OF SECTION 115JB IS RS.11,68,71,688/-. DUE TO OVER SIGHT THE SAME WAS TAKEN AS RS.14,52,88,588/- WHILE FILING THE RETU RN OF INCOME OF THE COMPANY. IT WAS CLAIMED THAT THE MISTAKE HAS RESULTED IN EXCESS PAYMENT OF MAT TAX BY RS.42,62,535/-, SURCHARGE BY RS.4,26,256/- AND EDUCATION CESS BY RS.1,40 ,664/-. IT WAS ACCORDINGLY REQUESTED TO RECTIFY THE MISTAKE AN D CORRECT THE CALCULATION OF TAX LIABILITY AND MAT CREDIT. 26. HOWEVER, THE ASSESSING OFFICER REJECTED THE ABOVE CON TENTION OF THE ASSESSEE. HE OBSERVED THAT ASSESSEE HAS MADE A WRONG CLAIM FOR REDUCTION FOR THE COMPUTATION OF MAT LIABILITY WHICH IS NEIT HER SUPPORTED BY THE PROVISIONS OF THE INCOME TAX ACT NOR S UPPORTED BY ANY JUDICIAL PRONOUNCEMENT. HE OBSERVED THAT IT IS VERY MUCH CLEAR THAT CERTAIN DEDUCTION/EXPENDITURE NOT CLAIMED BY THE A SSESSEE IN THE ORIGINAL RETURN OF INCOME CANNOT BE CLAIMED BY THE ASS ESSEE 13 ITA NOS.1338 & 1339/PUN/2014 DURING THE COURSE OF ASSESSMENT PROCEEDINGS UNLESS THE REVISED RETURN OF INCOME WAS FILED WITHIN THE PROVISIONS OF SECTION 13 9(5) OF THE INCOME TAX ACT, 1961. ACCORDING TO THE ASSESSING O FFICER THE ASSESSEE COMPANY IS NOT ENTITLED TO ITS CLAIM FOR CONSIDER ING THE BOOK PROFIT AT RS.11,68,71,688/-. HE ACCORDINGLY REJECTED THE CLAIM OF THE ASSESSEE AND DETERMINED THE BOOK PROFIT FOR COMPU TATION OF MAT LIABILITY AT RS.14,96,71,606/- BY MAKING ADDITION OF RS.43,83,018/- TO THE BOOK PROFIT DECLARED BY THE ASSESSE E AT RS.14,52,88,588/-. 27. BEFORE CIT(A) IT WAS ARGUED THAT THE ASSESSING OFFICER C ANNOT MAKE ADJUSTMENT OF DISALLOWANCE/ADDITIONS TO THE BOOK PRO FIT CALCULATED U/S.115JB AS PER PROFIT AND LOSS ACCOUNT PREPAR ED AND SIGNED BY THE STATUTORY AUDITORS OF THE COMPANY. IT WA S ARGUED THAT THE ADDITIONS/DISALLOWANCES MADE DURING SCRUTINY ASS ESSMENT CANNOT BE ADJUSTED IN THE BOOK PROFITS AS THE PROVISIONS OF SECTION 115JB DO NOT PERMIT SUCH ADJUSTMENTS. FOR THE ABOVE PROPOSITION, THE ASSESSEE RELIED ON THE DECISION OF HONBLE SUPREME CO URT IN THE CASE OF APOLLO TYRES LT. VS. CIT REPORTED IN 255 ITR 273 AND THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF FO REVER DIAMONDS PVT. LTD. REPORTED IN 152 TTJ 682. 28. HOWEVER, THE CIT(A) WAS NOT SATISFIED WITH THE EXPLANAT ION GIVEN BY THE ASSESSEE AND UPHELD THE ADDITION MADE BY T HE AO BY OBSERVING AS UNDER : 23. I HAVE GONE THROUGH THE FACTS OF THE CASE AND HA VE CONSIDERED THE APPELLANTS SUBMISSIONS. I HAVE ALSO GONE THROUGH VA RIOUS DECISIONS THE APPELLANT HAS CITED IN ITS SUPPORT. AS PER THE AUDITED ACCOUNTS FILED BY THE APPELLANT, PROFIT BEFORE TAX I S RS.14,52,83,588/- WHICH HAS BEEN CORRECTLY ADOPTED BY THE AO. AS PER THE PROFIT AND LOSS ACCOUNT, RS.2,84,16,900/- HAS BEEN DEDUCTED FROM PROF IT BEFORE TAX TO ARRIVE AT THE FIGURE OF RS.11,68,71,688/- WHICH ASSESSEE CONTENDS AS 14 ITA NOS.1338 & 1339/PUN/2014 BOOK PROFIT. HOWEVER, PREMIUM ON REDEMPTION OF PRE FERENCE SHARE IS CAPITAL PAYMENT AND CANNOT BE DEDUCTED TO COMPUTE B OOK PROFIT. THEREFORE, THE CLAIM IS DISALLOWED. 29. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 30. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY OPPOSED T HE ORDER OF THE CIT(A). REFERRING TO THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF GUJARAT GAS COMPANY LTD. VS. JCIT R EPORTED IN 245 ITR 84 HE SUBMITTED THAT ASSESSMENT CAN BE MADE AT LOWER INCOME THAN THE INCOME DECLARED BY THE ASSESSEE. REFERRIN G TO THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF AHMED ABAD ELECTRICITY COMPANY LTD. VS. CIT REPORTED IN 199 ITR 351 HE SUBMITTED THAT THE TRIBUNAL HAS POWER TO CONSIDER THE ENTIRE PROCEEDINGS TO DETERMINE THE TAX LIABILITY OF THE ASSESSEE . THE TRIBUNAL AFTER HEARING BOTH THE SIDES CAN PASS ORDERS TH EREON AS IT THINKS FIT. THUS, WIDE POWER HAS BEEN GIVEN TO THE TRIBUNA L TO PASS, SUCH ORDER AS IT MAY THINK FIT. REFERRING TO THE DECISION O F HONBLE SUPREME COURT IN THE CASE OF APOLLO TYRES LTD. (SUPRA) HE SUBMITTED THAT THE ASSESSING OFFICER CANNOT TINKER WITH TH E AUDITED ACCOUNTS FOR COMPUTATION OF MAT LIABILITY U/S.115JB OF THE AC T. FURTHER, THE AO CANNOT ADD THE EXPENSES WHICH HAS BE EN DISALLOWED IN THE ASSESSMENT PROCEEDINGS FOR COMPUTATION O F MAT LIABILITY. 31. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HA ND HEAVILY RELIED ON THE ORDER OF THE CIT(A). 32. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE P APER BOOK 15 ITA NOS.1338 & 1339/PUN/2014 FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED T HE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ASSESSEE IN THE INSTANT CASE HAS COMPUTED ITS BOOK PROFIT AT RS.14,52,88,5 88/-. WE FIND VIDE LETTER DATED 07-02-2013 THE ASSESSEE REQUE STED THE ASSESSING OFFICER TO CONSIDER THE SAME AT RS.11,68,71,688/- SINCE A MISTAKE HAS OCCURRED DUE TO CERTAIN CALCULATION ERROR. HOWEVER, THE ASSESSING OFFICER FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF GOETZ (INDIA) LTD. VS. CIT REPORTED IN 284 ITR 323 HELD THAT SINCE THE CLAIM HAS NOT BEEN MADE BY FILING A REVISED RETURN THE CLAIM CANNOT BE ALLOWED. THE ASSESSING OFFICER FU RTHER MADE CERTAIN ADDITIONS TOTALING TO RS.43,83,018/- FOR COMPU TATION OF THE BOOK PROFIT WHICH HE DETERMINED AT RS.14,96,71,600/ -. WE FIND IN APPEAL THE LD.CIT(A) UPHELD THE ACTION OF THE ASSESSIN G OFFICER AND SUCH REASON HAS ALREADY BEEN REPRODUCED IN T HE PRECEDING PARAGRAPH. HOWEVER, HE HAS NOT GIVEN ANY REA SONING FOR ADDITION OF RS.43,18,018/- TO THE BOOK PROFIT WHICH WAS ON A CCOUNT OF CERTAIN DISALLOWANCES MADE BY THE ASSESSING OFFICER. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT ALTHOU GH THE ASSESSING OFFICER CANNOT ALLOW A NEW CLAIM FOR NON FILING OF THE REVISED RETURN U/S.139(5), HOWEVER, THE APPELLATE AUTHORIT IES CAN ENTERTAIN SUCH A CLAIM. FURTHER, IT IS ALSO HIS ARGUMENT THAT DISALLOWANCES MADE IN ASSESSMENT PROCEEDINGS CANNOT BE A DDED TO THE BOOK PROFIT FOR COMPUTATION OF MINIMUM ALTERNATE TAX U/S.115JB. 33. SO FAR AS THE COMPUTATION OF BOOK PROFIT AT RS.14,52,88,588/- BY THE ASSESSEE IS CONCERNED, WE FIND FROM THE AUDITED BALANCE SHEET THAT THE ASSESSEE ITSELF HAS DETER MINED THE PROFIT BEFORE INCOME-TAX AT RS.14,52,88,588/- IN THE AUDITED 16 ITA NOS.1338 & 1339/PUN/2014 ACCOUNTS, COPY OF WHICH WAS FILED DURING THE COURSE OF HEA RING OF THE APPEAL. THE HONBLE SUPREME COURT IN THE CASE OF AP OLLO TYRES LTD. (SUPRA) HAS HELD THAT THE ASSESSING OFFICER WHILE COMPU TING THE BOOK PROFITS OF A COMPANY U/S.115J OF INCOME TAX ACT, 1961 HAS ONLY THE POWER OF EXAMINING WHETHER THE BOOKS OF AC COUNT ARE CERTIFIED BY THE AUTHORITIES UNDER THE COMPANIES ACT, AS H AVING BEEN PROPERLY MAINTAINED IN ACCORDANCE WITH THE COMPANIE S ACT. THE ASSESSING OFFICER, THEREAFTER, HAS THE LIMITED POWER OF M AKING INCREASES AND REDUCTIONS AS PROVIDED FOR IN THE EXPLANATIO N TO SECTION 115J. THE ASSESSING OFFICER DOES NOT HAVE THE JUR ISDICTION TO GO BEYOND THE NET PROFITS SHOWN IN THE PROFIT AND LOSS ACCOUNT EXCEPT TO THE EXTENT PROVIDED IN THE EXPLANATION. SINCE IN THE INSTANT CASE THE ASSESSEE ITSELF HAS DECLARED ITS PROFIT BE FORE INCOME-TAX AT RS.14,52,88,588/- IN THE AUDITED PROFIT AND LOS S ACCOUNT, THEREFORE, WE DO NOT FIND ANY MERIT IN THE ARGUME NT OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE SAME SHOULD BE CO MPUTED AT RS.11,68,71,688/-. 34. SO FAR AS THE ADDITION OF RS.43,83,018/- MADE BY THE ASSESSING OFFICER TO THE BOOK PROFIT IS CONCERNED, WE FIND TH E SAME IS ON ACCOUNT OF CERTAIN ADDITIONS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCES OF VARIOUS EXPENSES. IN OUR OPINIO N, ONCE THE ACCOUNTS INCLUDING THE PROFIT AND LOSS ACCOUNT ARE C ERTIFIED BY THE AUTHORITIES UNDER THE COMPANIES ACT, 1956 IT IS NOT O PEN TO THE ASSESSING OFFICER TO CONTEND THAT THE PROFIT AND LOSS ACCO UNT HAS NOT BEEN PREPARED IN ACCORDANCE WITH THE PROVISIONS OF T HE COMPANIES ACT. THIS VIEW OF OURS IS SUPPORTED BY THE DEC ISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ADBHUT TRADING COMPANY PVT. LTD. REPORTED IN 338 ITR 94. THE HONBLE H IGH COURT 17 ITA NOS.1338 & 1339/PUN/2014 WHILE DISMISSING THE APPEAL FILED BY THE REVENUE HAS OBSERVE D AS UNDER : IN THE PRESENT CASE, THE INCOME-TAX APPELLATE TRIBU NAL HAS CONFIRMED THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) IN DELETING THE ADDITION OF RS.1.98 CRORES MADE BY THE ASSESSING OFFICER WHILE COMPUTING THE BOOK PROFIT UNDER SECTION 115JB OF THE INCOME-TAX ACT, 1961, BY FOLLOWING THE DECISION OF THE APEX COURT IN THE CASE OF APOLLO TYRES LTD. VS. CIT [2002] 255 ITR 273 (SC). ACCORDIN G TO THE REVENUE, THE ASSESSEE HAS INTENTIONALLY PREPARED A WRONG PROFIT A ND LOSS ACCOUNT. ONCE THE ACCOUNTS INCLUDING THE PROFIT AND LOSS ACCOUNT ARE CERTIFIED BY THE AUTHORITIES UNDER THE COMPANIES ACT IT IS NOT OPEN TO THE ASSESSING OFFICER TO CONTEND THAT THE PROFIT AND LO SS ACCOUNT HAS NOT BEEN PREPARED IN ACCORDANCE WITH THE PROVISIONS O F THE COMPANIES ACT, 1956. IN THESE CIRCUMSTANCES, THE DELETION OF THE ADDITION B Y THE TRIBUNAL BY FOLLOWING THE DECISION OF THE APEX COURT IN THE CASE OF APOLLO TYRES LTD. [2002] 255 ITR 273 (SC) CANNOT BE FAULTED. IN THE RESULT, WE SEE NO MERIT IN THE APPEAL. THE APPEAL IS ACCORDINGLY DISMI SSED WITH NO ORDER AS TO COSTS. 35. IN VIEW OF THE ABOVE DISCUSSION, WE HOLD THAT THE BOOK PROFIT OF THE ASSESSEE HAS TO BE TAKEN AT RS.14,52,88,588/-, I.E. T HE PROFIT SHOWN BY THE ASSESSEE IN THE AUDITED PROFIT AND LOSS ACC OUNT. THE ASSESSING OFFICER CANNOT MAKE ADDITION TO SUCH BOOK PROFIT ON ACCOUNT OF CERTAIN ADDITIONS/DISALLOWANCES MADE BY HIM IN TH E BODY OF THE ASSESSMENT ORDER. WE HOLD AND DIRECT ACCOR DINGLY. THE GROUND BY THE ASSESSEE IS ACCORDINGLY PARTLY ALLOWED. ITA NO. 1339/PUN/2014 (A.Y. 2011-12) : 36. GROUNDS OF APPEAL NO. 1 TO 3 BY THE ASSESSEE READ AS UNDER: 1. THE LD.CIT(A) ERRED IN CONFIRMING AN ADDITION O F RS.16,68,130/- ON ACCOUNT OF SALE OF SCRAP ON AN ESTIMATED BASIS WITHOU T APPRECIATING THAT THE ENTIRE ADDITION MADE BY THE LD. AO WAS ON A N ESTIMATED BASIS AND HENCE, THE ADDITION MADE SHOULD HAVE BEEN DELETE D. 2. THE LD.CIT(A) FAILED TO APPRECIATE THAT THERE WA S NO EVIDENCE THAT THE ASSESSEE HAD SOLD ITS SCRAP AND HENCE, THE ADDIT ION MADE ON AN ADHOC BASIS IS NOT JUSTIFIED AT ALL. 3. WITHOUT PREJUDICE, THE ASSESSEE SUBMITS THAT THE ADDIT ION SUSTAINED BY THE LD.CIT(A) IS VERY HIGH AND THE SAME MA Y BE REDUCED SUBSTANTIALLY. 18 ITA NOS.1338 & 1339/PUN/2014 37. AFTER HEARING BOTH THE SIDES, WE FIND THE ABOVE GROUND S ARE IDENTICAL TO THE GROUNDS OF APPEAL NO.1 TO 3 IN ITA NO.1338/PUN/2014. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUNDS RAISED BY THE ASSESSEE HAVE BEEN PARTLY ALLOWE D BY SUSTAINING 5% OF THE PURCHASES UNDER THE HEAD MACHINER Y MAINTENANCE. SINCE THE ASSESSING OFFICER FOR THE IMPUGNED ASSESSMENT YEAR HAS DISALLOWED 5% OF THE PURCHASES OUT OF THE MACHINERY MAINTENANCE EXPENSES ON ESTIMATE BASIS, THEREFO RE, WE FIND NO INFIRMITY IN THE SAME. ACCORDINGLY, THE SAME IS UPHELD AND THE ABOVE GROUND BY THE ASSESSEE IS DISMISSED. 38. GROUNDS OF APPEAL NO.4 BY THE ASSESSEE READS AS UNDER : 4. THE APPELLANT PRAYS TO DELETE THE DISALLOWANCE OF RS.5,98,811/- FROM REVENUE EXPENDITURE IN MACHINERY MAINTENANCE E XPENSES PRESUMING THAT THE SAME ARE CAPITAL EXPENDITURE. 39. AFTER HEARING BOTH THE SIDES, WE FIND THE ABOVE GROUND IS IDENTICAL TO THE GROUND OF APPEAL NO.4 IN ITA NO.1338/PN/2 014. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUND RAISED BY THE ASSESSEE HAS BEEN PARTLY ALLOWED. FOLLOWING THE REASONIN GS GIVEN THEREIN REGARDING TREATMENT OF REVENUE EXPENSES AS CAP ITAL IN NATURE BY THE ASSESSING OFFICER TO THE EXTENT NOT ADMITT ED BY THE ASSESSEE WE HOLD THAT THE EXPENDITURE ON ACCOUNT OF MA CHINERY MAINTENANCE IS REVENUE IN NATURE. THE ASSESSING OFFICER, H OWEVER, IS DIRECTED TO WITHDRAW THE DEPRECIATION ALLOWED ON THE ABOVE ITEMS. 40. GROUND OF APPEAL NO.5 BY THE ASSESSEE READS AS UNDER : 5. THE APPELLANT PRAYS TO DELETE THE DISALLOWANCE OF RS.1,29,707/- FROM REVENUE EXPENDITURE IN BAD DEBTS CONSIDERING THE SAME AS CAPITAL EXPENDITURE. 19 ITA NOS.1338 & 1339/PUN/2014 41. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSING OFFIC ER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED TH AT OUT OF THE AMOUNT CLAIMED TO BE LOSS DUE TO NON-SUPPLY OF MATERIAL/S ERVICES, PAYMENTS TOTALLING TO RS.1,99,549/- WERE MADE FOR ACQUIRING CAPITAL ASSETS. THE AO PROPOSED TO DISALLOW THE ABOVE CLAIM FOR THE REASON THAT THIS AMOUNT PERTAINED TO LOSS CLAIMED ON ACCOUNT OF ADVANCES MADE FOR SUPPLY OF MACHINERIES BEING CAPITAL IN NATURE. IT IS MENTIONED IN THE ASSESSMENT ORDER THAT THE AUTHORISED REPRESENTATIVES ADMITTED THAT THE SAID TRANSACTIONS WER E CAPITAL IN NATURE AND, THEREFORE, COULD BE DISALLOWED. CONSEQUENTLY, TH E AO AFTER ALLOWING DEPRECIATION OF RS.69,842/- OUT OF RS.1,99,549/- DISALLOWED THE BALANCE AMOUNT OF RS.1,29,707/-. 42. BEFORE CIT(A) THE ASSESSEE SUBMITTED THAT IT HAD INCUR RED A LOSS DUE TO NON-RECOVERY OF ADVANCES WHICH SHOULD BE DE DUCTIBLE UNDER SECTION 37 OF THE I.T. ACT, 1961 IRRESPECTIVE OF WH ETHER THE ADVANCES MADE WERE CAPITAL OR REVENUE IN NATURE. IT WA S CONTENDED THAT SINCE THE ADVANCES WERE MADE TO ACQUIRE ASSETS W HICH WOULD EVENTUALLY RESULT IN HIGHER TURNOVER/PROFITS, THE SAME SHO ULD BE TREATED AS BUSINESS EXPENDITURE AND BE ALLOWED AS DEDUC TION U/S.37. 43. HOWEVER, THE CIT(A) WAS NOT SATISFIED WITH THE EXPLANAT ION OFFERED BY THE ASSESSEE AND UPHELD THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER : 20. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT WITH REFERENCE TO THE FACTS OF THE CASE. IT IS NOT DENIED BY THE APPELLANT THAT LOSS SUSTAINED WAS OF CAPITAL NATURE. IT CLAIMS THAT THE LOSS SHOULD BE ALLOWED U/S.37. HOWEVER, NO EXPENSES OF CAPITAL NATU RE ARE ALLOWABLE U/S.37 OF THE ACT. THEREFORE, THE LOSS CLAIMED BY APP ELLANT CANNOT BE ALLOWED. THE DISALLOWANCE IS SUSTAINED. 20 ITA NOS.1338 & 1339/PUN/2014 44. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 45. AFTER HEARING BOTH THE SIDES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). ADMITTEDLY, THE ASSESSEE ITSELF HA S ACCEPTED BEFORE THE ASSESSING OFFICER THAT SAID TRANSACTIONS ARE CA PITAL IN NATURE AND THEREFORE COULD BE DISALLOWED. THE LD. COUNSEL FOR THE ASSESSEE COULD NOT BRING ANY MATERIAL BEFORE US TO JUSTIF Y AS TO HOW THE ASSESSING OFFICER AND THE CIT(A) ARE WRONG ON THIS ISSU E. ACCORDINGLY, IN ABSENCE OF ANY CONTRARY MATERIAL BEFORE US THE GROUND RAISED BY THE ASSESSEE IS DISMISSED. 46. GROUND OF APPEAL NO.6 BY THE ASSESSEE READS AS UNDER : 6. THE APPELLANT PRAYS NOT TO MAKE ANY ADJUSTMENTS TO THE BOOK PROFIT CALCULATED U/S.115JB OF THE INCOME TAX ACT AS PER THE PROFIT AND LOSS ACCOUNT PREPARED AND SIGNED BY THE STATUTORY AUDIT ORS OF THE COMPANY. 47. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSING OFFIC ER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED FR OM THE COMPUTATION OF TOTAL INCOME FILED BY THE ASSESSEE THAT THE BOOK PROFIT HAS BEEN DETERMINED AT RS.25,65,00,249/-. SINCE CERT AIN ADDITIONS/ALLOWANCES WERE MADE BY HIM IN THE ASSESSMENT O RDER TOTALLING TO RS.77,70,569/- HE ADDED THE SAME TO THE BOOK PROFIT DECLARED IN THE RETURN OF INCOME AND COMPUTED THE BOOK PROFIT AT RS.26,42,72,620/- FOR THE PURPOSE OF SECTION 115JB. 48. BEFORE CIT(A) IT WAS SUBMITTED THAT ADDITIONS/DISALLOWANCE S MADE IN ASSESSMENT CANNOT BE ADJUSTED IN THE BOOK PRO FIT AS THE PROVISIONS OF SECTION 115JB DO NOT PERMIT SUCH ADJUSTMENT S. FOR 21 ITA NOS.1338 & 1339/PUN/2014 THE ABOVE PROPOSITION, THE DECISION OF HONBLE SUPREME CO URT IN THE CASE OF APOLLO TYRES LTD. (SUPRA) WAS RELIED UPON. 49. HOWEVER, THE LD.CIT(A) WAS NOT CONVINCED WITH THE ARGUMENTS ADVANCED BY THE ASSESSEE AND UPHELD THE AC TION OF THE ASSESSING OFFICER BY OBSERVING AS UNDER : 25. I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT. I FIND THAT THE ASSESSING OFFICER HAS MADE ADDITIONS WHICH HAVE BEEN DEALT WITH IN PREVIOUS PARAGRAPHS. AS PER THE APPELLANT, THE ASSESSING OFFICER CANNOT MAKE ADDITIONS TO BOOK PROFIT ARRIVED AS PER T HE COMPANYS ACT. THE APPELLANT RELIED ON DECISION OF HONOURABLE SUPRE ME COURT IN THE CASE OF APOLLO TYRES LTD. VS. CIT (SUPRA). ON GOING TH ROUGH THIS DECISION, IT IS SEEN THAT FACTS ARE DIFFERENT. THE CA SE RELIED UPON DEALS WITH CHANGE IN BOOK PROFIT. THE COMPANY HAD PROVID ED FOR ARREARS OF DEPRECIATION WHICH AS PER THE ASSESSING OFFICER WAS NOT A S PER PART 11 AND 11.1 OF SCHEDULE VI OF COMPANYS ACT. THEREFORE, THE ASSESSING OFFICER HAS RECOMPUTED THE BOOK PROFIT. THE TRIBUNA L HELD THAT ASSESSING OFFICER CANNOT CHANGE BOOK PROFIT BECAUSE IT W AS CERTIFIED BY AUDITORS. IN THE PRESENT CASE CERTAIN ADDITIONS WERE M ADE TO INCOME DECLARED BY THE APPELLANT. THIS DECLARED INCOME COUL D BE EITHER BOOK PROFIT UNDER SECTION 115JB OR NORMAL INCOME IN CASE O F MAT WAS NOT APPLICABLE. THE ASSESSING OFFICER HAS TO ADD THE DISALLOW ANCES MADE BY HIM TO THE INCOME DECLARED BY THE APPELLANT. IF TH E INCOME DECLARED HAPPENS TO BE INCOME UNDER SECTION 115JB, THIS FACT WI LL NOT PREVENT THE ASSESSING OFFICER FROM MAKING ADDITIONS. THEREFORE, THE GROUND TAKEN BY APPELLANT IS REJECTED. 50. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 51. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE P APER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED T HE VARIOUS DECISIONS CITED BEFORE US. THE ONLY ISSUE THAT HAS TO BE ADJUDICATED IN THE ABOVE GROUND IS REGARDING THE POWER OF THE ASSESSING OFFICER TO MAKE CERTAIN ADJUSTMENT TO THE BOOK PROFIT DECLARED BY THE ASSESSEE ON THE BASIS OF CERTAIN DISALLOW ANCE MADE BY HIM IN THE ASSESSMENT PROCEEDINGS. WE HAVE ALREADY D EALT WITH THIS ISSUE WHILE ADJUDICATING GROUND OF APPEAL NO.5 IN ITA 22 ITA NOS.1338 & 1339/PUN/2014 NO.1338/PUN/2014 AND HELD THAT THE ASSESSING OFFICER CANN OT MAKE ANY ADDITION TO SUCH BOOK PROFIT ON ACCOUNT OF CER TAIN ADDITIONS/DISALLOWANCES MADE BY HIM IN THE BODY OF THE ASSESSMENT ORDER. ACCORDINGLY, THE GROUND RAISED BY TH E ASSESSEE IS ALLOWED. 52. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18-01-2017. SD/- SD/- ( SUSHMA CHOWLA ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER IQ.KS PUNE ; DATED : 18 TH JANUARY, 2017. LRH'K ' (*+ ,+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. % ( ) - THE CIT(A), KOLHAPUR 4. % S / THE CIT-I/II KOLHAPUR 5. ( ++, , , , IQ.KS / DR, ITAT, A PUNE; 6. 0 / GUARD FILE. / BY ORDER , // TRUE COPY // //TRUE COPY// 56 /ASSISTANT REGISTRAR , , / ITAT, PUNE