M/s. MRF Limited, CHENNAI V. DCIT, CHENNAI

ITA 1376/CHNY/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96350 (ITAT-CHENNAI)
• Duration Of Justice: 5 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 08-10-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 23-08-2010
• Court: TRIBUNAL
• Department Lawyers: JOE SEBASTIAN
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Depreciation; Rule of consistency; Additional depreciation; Question of law

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , ! ' . #$ , % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ ITA NO. 1676/MDS/2010 / ASSESSMENT YEAR : 2002-03 THE DEPUTY COMMISSIONER OF INCOME-TAX, LARGE TAXPAYER UNIT, CHENNAI 600101. (/ APPELLANT) V. M/S. MRF LTD., 124, GREAMS ROAD, CHENNAI 600006. PAN AAACM4154G (/ RESPONDENT) ./ ITA NOS. 1376 & 1377/MDS/2010 / ASSESSMENT YEARS : 2006-07 & 2007-08 M/S. MRF LTD., CHENNAI 600006. (/ APPELLANT) V. THE DEPUTY COMMISSIONER OF INCOME-TAX, CHENNAI 600101 (/ RESPONDENT) DEPARTMENT BY : SHRI JOE SEBASTIAN, CIT ASSESSEE BY : SHRI R. VIJAYARAGHAVAN, ADVOCATE !' / DATE OF HEARING : 08.10.2015 #$ !' / DATE OF PRONOUNCEMENT: 06.11.2015 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THESE CROSS APPEALS BY THE ASSESSEE AND BY THE REVENUE ARE DIRECTED AGAINST DIFFERENT ORDERS OF TH E - - ITA 1676, 1376/10 ETC. 2 COMMISSIONER OF INCOME-TAX(APPEALS) FOR THE ASSESSM ENT YEARS 2002-03, 2006-07 AND 2007-08. 2. THE ISSUE NOW FOR OUR CONSIDERATION IN REVENUES APPEAL IN ITA NO.1676/MDS/10 IS WITH REGARD TO CHARGING OF INTEREST U/S.234D OF THE I.T. ACT, 1961 AND OTHER ISSUES IN REVENUES APPEAL WERE ALREADY ADJUDICATED BY THIS TRIBUNAL IN ITS ORDER DATED 11.3.2011. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAS CONTESTED CHARGING OF INTEREST U/S.234D OF THE ACT IN THE REA SSESSMENT ORDER DATED 23.12.2009. IN DETERMINING THE TAX PAY ABLE IN HIS ORDER DATED 23.12.2009, THE ASSESSING OFFICER CHARG ED INTEREST U/S.234D FOR REFUNDS GRANTED EARLIER IN REVISIONS F OR GIVING EFFECT TO APPELLATE ORDER ETC. THE ASSESSEE SUBMITTED THA T SUCH INTEREST CAN BE CHARGED ONLY IF THE REFUND ORIGINAT ES FROM AN ORDER PASSED U/S.143(1) AND NOT OTHERWISE. TO SUPP ORT THIS VIEW, THE ASSESSEE HAS PLACED RELIANCE ON THE DECIS ION OF THE MADRAS HIGH COURT IN THE CASE OF CIT V. RAMCO INDUS TRIES (TAX CASE NO.1343/2009). AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX(APPEALS). 4. ON APPEAL, THE COMMISSIONER OF INCOME-TAX(APPEAL S) OBSERVED THAT THE PROVISIONS OF SEC.234D OF THE ACT WERE INTRODUCED INTO THE STATUTE W.E.F. 1.6.2003. THE COMMISSIONER OF INCOME-TAX(APPEALS), FURTHER OBSERVED THAT IN TH E CASE OF ITO - - ITA 1676, 1376/10 ETC. 3 V. EKTA PROMOTERS PVT. LTD.(113 ITD 719)[DEL]{SB},W HEREIN IT WAS HELD THAT PROVISIONS OF SEC.234D OF THE ACT, WHICH HAVE BEEN BROUGHT ON STATUTE FROM 1.6.2003, WILL HAVE APPLICA TION ONLY WITH EFFECT FROM A.Y. 2004-05 AND, THEREFORE, INTEREST U /S.234D CANNOT BE CHARGED FOR EARLIER YEARS EVEN THOUGH REGULAR AS SESSMENT FOR THOSE YEARS WERE FRAMED AFTER 1.6.2003 OR REFUND WA S GRANTED FOR THOSE YEARS AFTER SAID DATE. FURTHER, THE COMM ISSIONER OF INCOME-TAX(APPEALS) OBSERVED THAT IN THE CASE OF OR ACLE INDIA (P) LTD. V. DCIT (118 TTJ 812)(DELHI), IT WAS HELD THAT INTEREST U/S.234D OF THE ACT IS CHARGEABLE FROM A.Y. 2004-05 ONLY AND NOT PRIOR TO THAT. ACCORDINGLY, HE ALLOWED THE GR OUND OF APPEAL. AGAINST THIS, THIS REVENUE CAME IN APPEAL BEFORE TH E TRIBUNAL. 5. ON EARLIER OCCASION, THE TRIBUNAL DECIDED THE IS SUE IN FAVOUR OF THE ASSESSEE VIDE PARAGRAPH 6 IN ITA NOS. 1374 TO 1377/MDS/2010 AND ITA NOS.1676 TO 1679/MDS/2010 DA TED 11.3.2011 BY OBSERVING AS FOLLOWS: 6. AFTER HEARING BOTH SIDES, WE ARE IN AGREEME NT WITH THE LD. CIT(A) BECAUSE THE PROVISION OF SECTI ON 234D WAS INTRODUCED FROM 1.6.2003 AND TO HAVE EFFEC T FROM ASSESSMENT YEAR 2004-05. HENCE, INTEREST U/S 234D CANNOT BE CHARGED FOR EARLIER YEARS EVEN THOUG H THE ASSESSMENTS OF THOSE YEARS WERE FRAMED AFTER 1.4.2003 AND REFUND WAS GRANTED AFTER THE SAID DATE . THIS ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE ITAT, DELHI IN THE CASE OF ITO VS. - - ITA 1676, 1376/10 ETC. 4 EKTA PROMOTERS, 113 ITD 719(DELHI)(SB) AND ALSO BY THE DECISION IN THE CASE OF ORACLE INDIA (P) LTD. V . DCIT, 118 TTJ (DEL) 812. CONSEQUENTLY, WE UPHOLD THIS FINDING OF THE LD. CIT(A) AND DISMISS GROUND N O.3 OF THIS APPEAL. 6. THE ABOVE ISSUE TRAVELLED TO THE JURISDICTIONAL HIGH COURT AT THE INSTANCE OF THE DEPARTMENT. THE HIGH COURT REMITTED THE ISSUE BACK TO THE FILE OF THE TRIBUNAL BY OBSERVING THAT THE LEVIABILITY OF INTEREST UNDER SEC.234D OF THE ACT I S IN THE CONTEXT OF THE REFUND MADE AND DIRECTED THE TRIBUNAL TO DEC IDE THE ISSUE AFRESH VIDE ORDER DATED 9.4.2012 IN TC(APPEAL) NO. 319 OF 2011. 7. BEFORE THE TRIBUNAL, THE ASSESSEE HAS FILED A MISCELLANEOUS PETITION IN MP NO.200/MDS/2011 AND VI DE ORDER DATED 31.1.2012, IT WAS OBSERVED VIDE PARA 4 AS UND ER: 4. AFTER GETTING THIS ORDER OF THE LD. CIT(A), TH E ASSESSEE HAS NOT RAISED ANY ISSUE IN APPEAL BEFORE THE TRIBUNAL AND HAS ACCEPTED WHAT HAS BEEN DECIDE AND THE REASONS FOR THAT DECISION. MEANING THEREBY , THE FINDINGS OF THE LD. CIT(A) HAVE NOT BEEN CHALLE NGED BY THE ASSESSEE IN SECOND APPEAL BEFORE THE TRIBUN AL. BY ACCEPTING THE VERSION OF THE PETITIONER THAT THE HONBLE HIGH COURT HAS DIRECTED TO GET CLARIFICATIO N IN THIS REGARD ALTHOUGH NO WRITTEN ORDER WAS PLACED NO R ANY AFFIDAVIT IN SUPPORT OF THIS VERSION HAVING FIL ED FROM THE PETITIONERS SIDE, BUT STILL HAVING BELIEF IN T HE ADVOCATE WHATEVER HAS BEEN STATED AT THE BENCH WHILE ARGUING ORALLY, WE HAVE CIRCUMSPECTED ON THE ISSUE ON THE ISSUE BUT WE ARE UNABLE TO STATE AS TO WHETHER REFUND U/S 143(1) OF THE ACT WAS GRANTED OR NOT GRANTED DURING THIS YEAR TO THE ASSESSEE. THE ASSESSEE HAD NOT CLEARLY BROUGHT THE FACTS OF THIS ISSUE - - ITA 1676, 1376/10 ETC. 5 EITHER BEFORE THE LD. CIT(A) OR BEFORE THE TRIBUNAL . THE ONLY AVERMENT WAS REGARDING CHARGEABILITY OF INTERE ST IN THE LIGHT OF THE ABOVEMENTIONED HONBLE MADRAS HIGH COURTS DECISION. IN THE ASSESSMENT ORDER, TH E DATE OF PROCESSING OF RETURN U/S 143(1) OF THE ACT HAS NOT BEEN MENTIONED AND THE ASSESSMENT WAS PASSED U/S.143(3) ON 31.3.2005 WHICH WAS SUBJECTED TO RE- ASSESSMENT PROCEEDINGS AND FURTHER ASSESSMENT ORDER WAS PASSED U/S.143(3) R.W.S. 147 ON 23.12.2009. IN THESE CIRCUMSTANCES, WE ARE UNABLE TO DECIDE THE ISSUE AND FOR THAT MATTER, THE GROUND RA ISED BY THE REVENUE IN THIS REGARD AS GROUND NO.3 (3.1 T O 3.4) HAS TO BE DEALT WITH AFTER RECALLING THE ORDER TO THAT EXTENT. ACCORDINGLY, IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, WHERE HONBLE JURISDICTIONAL HIGH COURTS DECISION REMAINED TO BE CONSIDERED, WE RECALL THE ORDER IN QUESTION FOR THE LIMITED PURPOSE OF DECIDING THIS ISSUE, AND DIRECT THE REGISTRY TO FIX THE APPEAL FOR HEARING IN DUE COURS E. IN VIEW OF THIS, THE CASE HAS COME FOR HEARING BEFO RE US. 8. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE OP INION THAT THIS ISSUE IS NOW SETTLED THAT WHEN NO REFUND HAS B EEN GRANTED TO THE ASSESSEE VIDE INTIMATION U/S.143(1) OF THE A CT, THERE CANNOT BE LEVY OF INTEREST U/S.234D OF THE ACT. TH IS VIEW IS FORTIFIED BY THE JURISDICTIONAL HIGH COURT IN THE C ASE OF CIT V. RAMCO INDUSTRIES LTD. IN TAX CASE APPEAL NO. 1343 O F 2009 DATED 7 TH DEC., 2009, 2010-TIOL-35-HC-MAD-IT. IT IS ALSO T O BE NOTED THAT THE ASSESSING OFFICER VIDE LETTER DATED 12.4.2012 TO THE SENIOR AUTHORIZED REPRESENTATIVE CLARIFIED THAT ON VERIFICATION OF RELEVANT CASE RECORDS, IT WAS FOUND THAT NO REFU ND HAS BEEN - - ITA 1676, 1376/10 ETC. 6 GRANTED TO THE ASSESSEE COMPANY U/S.143(1) OF THE A CT, WHILE PROCESSING THE RETURN OF INCOME U/S.143(3) VIDE ORD ER DATED 30.3.2004. BEING SO, IN OUR OPINION, THERE IS NO Q UESTION OF LEVY OF INTEREST U/S.234D OF THE ACT. ACCORDINGLY, THIS GROUND OF APPEAL IS DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS PART LY ALLOWED. 10. NOW, WE TAKE UP THE ASSESSEES APPEAL. THE FIR ST ISSUE IN ASSESSEES APPEAL IN ITA NO.1376/MDS/2010 IS THA T THE COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN CONFIR MING THE DISALLOWANCE OF AMORTIZATION OF LEASE CHARGES PAID IN RESPECT OF LEASEHOLD LAND TAKEN ON LEASE BY THE ASSESSEE AND USED IN ITS BUSINESS. 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THIS ISSUE CAME UP FOR CONSIDERATION BE FORE THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NOS. 1849 AN D 2230/MDS/2004 DATED 13.10.2006 AND DECIDED THE ISSU E AGAINST THE ASSESSEE BY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.1848/MDS/2004 FOR THE ASSESSMENT YEAR 200-01. VIDE ORDER DATED 21.7.2006, THE TRIBUNAL H ELD AS FOLLOWS: WE ARE OF THE OPINION THAT ONCE LEASE RIGHTS FOR - - ITA 1676, 1376/10 ETC. 7 INDUSTRIAL LANDS ARE OBTAINED FOR 30 TO 99 YEARS, T HEN NORMALLY ASSESSEE IS OWNER OF SUCH LANDS, PARTICULA RLY BECAUSE THERE IS ALWAYS A RENEWAL CLAUSE IN SUCH LEASE DEEDS. IN ANY CASE THE KOLKATTA BENCH OF THE TRIBUNAL HAS ALREADY HELD IN YAGYAWATI JAYASWAL FAMILY TRUST V. ITO 89 ITD 199 THAT WHEREVER LEASE PERIOD IS FOR MORE THAN 12 YEARS, THE ASSESSEE WOUL D BE DEEMED TO BE THE OWNER OF SUCH PROPERTY FOR THE PURPOSE OF THE ACT. THE HONBLE APEX COURT ALSO IN THE CASE OF ADITYA MINERALS PVT. LTD. 239 ITR 817 H ELD THAT WHERE LEASE DEED ALLOWING USE OF LAND EVEN FOR EXCAVATION PURPOSES AND WHERE RENT WAS DEPOSITED IN ADVANCE, THEN ONLY ADJUSTMENT OF SUCH RENT WAS NOT DEDUCTIBLE. WE THINK THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE SUPREME COURT AND THEREFORE WE CONFIRM THE ORDER OF LD CIT(A). RESPECTFULLY FOLLOWING THE ABOVE ORDERS OF THIS TRI BUNAL, WE ARE INCLINED TO DISMISS THIS GROUND OF APPEAL OF THE AS SESSEE. 12. THE NEXT GROUND RAISED BY THE ASSESSEE IN ITS A PPEAL IS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF ADDITIONAL DEPRECIAT ION IN RESPECT OF ADDITIONS TO PLANT AND MACHINERY IN THE PREVIOUS ASSESSMENT YEAR (2005-06). 13. THE LD. AR SUBMITTED THAT SUB CLAUSE (IIA) OF S EC.32(1) BEFORE ITS AMENDMENT BY THE FINANCE ACT, 2005, ALLO WED AN ASSESSEE IN RESPECT OF AN EXISTING INDUSTRIAL UNDER TAKING TO CLAIM 15% ADDITIONAL DEPRECIATION IF ACHIEVES SUBSTANTIAL EXPANSION BY WAY OF INCREASE IN INSTALLED CAPACITY BY 10% OR MOR E AND HE - - ITA 1676, 1376/10 ETC. 8 RELIED ON THE DECISION OF THE TRIBUNAL IN THE CASES OF DEVI POLYMERS IN ITA NO.165/MDS/2014 DATED 9.4.2014 AND ALSO DY.CIT V. COSMO FILMS LTD., 13 ITR 340(DELHI)(TRIB. ). 14. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORD ERS OF THE LOWER AUTHORITIES. 15. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN OUR OPINION THIS ISSUE IS COVERED AG AINST THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN THE CASE O F M/S. I.P.RINGS LTD. IN ITA NOS.728/MDS/2014 AND 1328/MDS /2014 DATED 26.9.2014, WHEREIN IT WAS HELD AS UNDER: 14. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIA LS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIE S BELOW. THE ONLY ISSUE FOR OUR CONSIDERATION IS WHEN THE AS SESSEE HAS USED PLANT AND MACHINERY LESS THAN 180 DAYS WHE THER IT WILL BE ELIGIBLE TO CARRY FORWARD THE REMAINING BAL ANCE OF ADDITIONAL DEPRECIATION TO NEXT YEAR OR NOT. SECTIO N 32(1)(IIA) OF THE ACT PROVIDES FOR ADDITIONAL DEPRECIATION @ 2 0% IN THE CASE OF NEW MACHINERY AND PLANT ACQUIRED BY THE ASS ESSEE. AGAIN PROVISO TO SECTION 32(1) PROVIDES THAT IF THE ASSET IS PUT TO USE FOR LESS THAN 180 DAYS IN THE PREVIOUS Y EAR, THE DEDUCTION SHALL BE RESTRICTED TO 50% OF THE PRESCRI BED RATES. IT IS VERY CLEAR FROM THE PLAIN READING OF SECTION 32(1)(IIA) OF THE ACT THAT THE ADDITIONAL DEPRECIATION HAS TO BE ALLOWED ONLY IN THE CASE OF NEW PLANT AND MACHINERIES ACQUI RED BY THE ASSESSEE AND IT IS AVAILABLE ONLY IN THE YEAR I N WHICH IT WAS PUT TO USE AND THE STATUTE DOES NOT PROVIDE TO CARRY FORWARD AND EXTEND THE BENEFIT OF ADDITIONAL DEPREC IATION TO NEXT YEAR. IN THIS CONTEXT, THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF CRI PUMPS (P) LTD. V. ACIT IN I.T.A. NO. 1824/MDS/2010 FOR THE ASSESSMENT YEAR 2007-08 V IDE ORDER DATED 04.04.2013 [WHERE THE JUDICIAL MEMBER W AS PARTY OF THE BENCH], BY FOLLOWING THE DECISION OF T HE COORDINATE BENCH OF THE TRIBUNAL, HAS HELD THAT ADD ITIONAL - - ITA 1676, 1376/10 ETC. 9 DEPRECIATION IS ELIGIBLE IN THE YEAR IN WHICH ASSET S WERE PUT TO USE AND NOT FOR ANY SUCCEEDING YEAR. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF M.M. FORGI NGS LTD. V. ADDL. CIT [2011] 11 TAXNMANN.COM 367, BY CONSIDERIN G SECTION 32(1) AS WELL AS 32(1)(IIA) OF THE ACT, HAS HELD AS UNDER: 3. THE ASSESSING AUTHORITY BY APPLYING THE SECOND PROVISO TO SECTION 32(1) OF THE ACT, RESTRIC TED THE ALLOWABILITY OF THE DEPRECIATION TO 50 PER CENT OF THE AMOUNT PERMISSIBLE UNDER SECTION 32(1)(IIA)OF T HE ACT. ACCORDING TO THE APPELLANT, WHEN IT SATISFIED ALL THE CONDITIONS STIPULATED UNDER THE PROVISOS TO SECTION 32(1)(IIA) OF THE ACT, THE ASSESSING AUTHOR ITY OUGHT NOT TO HAVE RESTRICTED THE DEPRECIATION PERMISSIBLE UNDER THE SAID SECTION BY RESORTING TO THE SECOND PROVISO TO SECTION 32(1) OF THE ACT. THE LEARNED COUNSEL HOWEVER FAIRLY POINTED OUT BEFORE U S THAT IN THE SECOND PROVISO TO SECTION 32(1) OF THE ACT, THAT VERY CLAUSE (IIA) ITSELF WAS INSERTED BY FINAN CE ACT, 2002 WITH EFFECT FROM 01.04.2003. THEREFORE, I T WAS IMPERATIVE THAT ON AND AFTER 01.04.2003, THE CLAIM OF THE ASSESSEE MADE UNDER SECTION 32(1)(IIA) OF THE ACT, HAD TO BE NECESSARILY ASSESSED BY APPLYING THE SECOND PROVISO TO SECTION 32(1) OF THE ACT. THEREFORE, WHEN THERE WAS STATUTORY STIPULATIO N PROVIDING FOR RESTRICTION TO 50 PER CENT OF THE AMO UNT ALLOWABLE UNDER SECTION 32(1)(IIA) OF THE ACT, NO F AULT CAN BE FOUND WITH THE CONCLUSION OF THE ASSESSING AUTHORITY AS WELL AS THAT OF THE APPELLATE AUTHORIT Y AND THE TRIBUNAL IN HAVING AFFIRMED THE ACTION OF T HE ASSESSING AUTHORITY. WE, THEREFORE, DO NOT FIND ANY SCOPE TO ENTERTAIN THE SAID QUESTION OF LAW. 15. IN THE PRESENT CASE THE ASSESSEE USED NEW PLAN T AND MACHINERY BELOW 180 DAYS AND THEREFORE, ADDITIO NAL DEPRECIATION SHALL BE ALLOWED ONLY 50%. WE FIND THA T THE ABOVE DECISION OF THE HONBLE JURISDICTIONAL HIGH C OURT IS SQUARELY APPLIES TO THE CASE AND BY FOLLOWING THE D ECISION, WE REVERSE THE ORDER PASSED BY THE LD. CIT(APPEALS) AND CONFIRM THE ORDER OF THE ASSESSING OFFICER. ACCORDI NGLY, THIS - - ITA 1676, 1376/10 ETC. 10 GROUND OF APPEAL RAISED BY THE REVENUE IS ALLOWED. BEING SO, THIS ISSUE IS DECIDED AGAINST THE ASSESSE E. 16. THE NEXT GROUND IN THIS APPEAL IS THAT THE COMM ISSIONER OF INCOME-TAX(APPEALS) ERRED IN CONFIRMING THE DISA LLOWANCE OF INTEREST ON ADDITIONAL EXCISE DUTY(AED) U/S.43B OF THE ACT. 17. THE FACTS OF THE CASE ARE THE ASSESSEE, IN THE RETURN, HAD CLAIMED AED INTEREST OF ` 3.11 CRORES ON ACCRUAL BASIS. THE AO HAS HELD THAT THE PROVISIONS OF SEC.43B WOULD APPLY AND INTEREST REMAINING UNPAID AS ON THE DATE OF FILING OF RETURN WOULD HAVE TO BE DISALLOWED. THE AO, THEREFORE, DISALLOWED ` 3.11 CRORES, BEING THE INTEREST UNPAID AS ON 31.10.2006. THE AO RELIED ON THE DECISION OF RAJASTHAN HIGH COURT IN THE CASE OF SHREE PIPES V. DCIT (289 ITR 154) IN SUPPORT OF HIS ACTION. AG AINST THIS, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(APPEALS), WH O CONFIRMED THE FINDING OF THE AO. AGGRIEVED, THE AS SESSEE IS IN APPEAL BEFORE US. 18. THE LD. AR SUBMITTED THAT THIS PAYMENT IS NOT C OVERED U/S.43B OF THE ACT AND HE RELIED ON THE FOLLOWING J UDGMENTS: I) CIT V. DINESH MILLS LTD. (302 ITR 164) (GUJ.) II) HINDUSTAN MOTORS LTD. V. CIT (218 ITR 450)(CAL. ) III) CIT V. PADMAVATI RAJE COTTON MILLS LTD. (239 I TR 355) IV) ACIT V. FORT GLOSTER INDUSTRIES LTD. (252 ITR 1 00 AT) V) CIT V. ORIENT BEVERATES LTD. (247 ITR 230) - - ITA 1676, 1376/10 ETC. 11 VI) CIT V. E.L.PROPERTIES (P) LTD. (248 ITR 14) VII) NATIONAL ALUMINUM CO. LTD. V. DCIT (10 TTJ 948 ). 19. THE LD. DR RELIED ON THE JUDGMENT OF THE GUJARA T HIGH COURT IN THE CASE OF SHREE DIGVIJAY CEMENT CO. LTD. V. CIT (289 ITR 250) AND IN THE CASE OF SHREE PIPES V. DCIT (2 89 ITR 154). 20. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE CLAIM OF THE ASSESSEE IS THAT THE INTEREST PAID ON AED CANNOT BE COVERED U/S.43B AND THE PROVISIONS OF SEC.43B IS APPLICABLE ONLY IN RESPECT OF TAX, DUTY, CESS, FEE ETC. IT DOES NOT APPLY TO ANY INTEREST CHARGEABLE OR PAYABLE ON SUCH TAX, DUTY, CESS, FEE ETC. IN OUR OPINION, THE CASE LAWS RELIE D ON BY THE ASSESSEES COUNSEL ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. AS IN THE PRESENT CASE, THE PRINCIPAL AMOUNT OF AED IS NOT A DECRETAL AMOUNT. THE FINANCE ACT, 2005, PRESCRIB ED THE PROCEDURE TO BE FOLLOWED FOR THE RECOVERY OF THE AE D CREDIT AVAILED BY THE ASSESSEE AND INTEREST PAYABLE THEREO N. THE FINANCE ACT REQUIRED THE AMOUNT TO BE PAID BACK TO THE GOVERNMENT, WHICH COULD BE PAID BACK IN INSTALMENTS WITH INTEREST AT THE RATE OF 13% PER ANNUM. THEREFORE, THE INTEREST PAYABLE ON AED IS PART OF THE DUTY PAYABLE AND PROV ISIONS OF SEC.43B ARE APPLICABLE. BEING SO, THE ARGUMENT OF THE LD. AR - - ITA 1676, 1376/10 ETC. 12 THAT INTEREST PAYABLE ON AED IS ONLY COMPENSATORY I N NATURE AND DOES NOT FALL WITHIN THE PURVIEW OF SEC.43B CANNOT BE UPHELD. HENCE, THE JUDGMENT RELIED ON BY THE CIT(A) IN THE CASE OF SHREE PIPES V. DCIT (289 ITR 154) IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE, WHEREIN IT WAS HELD THAT INTERES T ACCRUED ON DELAYED PAYMENT OF TAX WHICH IS OTHERWISE ALLOWABLE AS DEDUCTION UNDER THE PROVISIONS OF THE INCOME-TAX AC T WHILE COMPUTING THE TOTAL INCOME IS PART OF TAX WITHIN TH E MEANING OF SECTION 43B. THE LIABILITY TOWARDS INTEREST DUE WA S NOT ALLOWABLE. IN VIEW OF THIS, WE ARE OF THE OPINION THAT THE CIT(APPEALS) IS JUSTIFIED IN DISALLOWING THE CLAIM OF THE ASSESSEE. 21. THE NEXT GROUND IN THIS APPEAL OF THE ASSESSEE IS WITH REGARD TO CONFIRMING THE REFUNDS ALLOWED IN SALES T AX ASSESSMENT AS THE INCOME OF THE CURRENT YEAR AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 22. THE LD. AR SUBMITTED THAT THE ASSESSEE ACCOUNTS FOR REFUNDS FROM GOVERNMENT DEPARTMENTS ONLY ON RECEIPT . SALES TAX REFUNDS ALLOWED IN SALES-TAX ASSESSMENTS ARE ACCOUN TED IN THIS MANNER. ACCORDING TO THE LD. AR, THAT THIS HAS BEE N CONSISTENTLY FOLLOWED BY THE ASSESSEE COMPANY IN ALL THE YEARS A ND THIS PRACTICE HAS BEEN ACCEPTED BY THE REVENUE IN THE PA ST YEARS - - ITA 1676, 1376/10 ETC. 13 WHILE COMPLETING THE INCOME-TAX ASSESSMENTS. FURTH ER, THE LD. AR SUBMITTED THAT IT IS NOT A CASE WHERE THE ASSESS EE DISPUTES THE AMOUNT REFUNDABLE, BUT AS A MATTER OF CONSISTEN CY IT ACCOUNTS FOR REFUNDS ON RECEIPT BASIS. HE FURTHER SUBMITTED THAT THESE REFUNDS, AS AND WHEN RECEIVED, ARE ACCOUNTED FOR AND OFFERED FOR TAXATION IN THE YEAR OF RECEIPT. THE L D. AR STATED THAT IN MANY CASES, THE AMOUNTS DETERMINED TO BE REFUNDA BLE ARE ADJUSTED BY THE DEPARTMENT AGAINST CURRENT TAX PAYA BLE OR AGAINST ANY PENDING DEMANDS. IN OTHER CASES, THE R EFUNDS ARE HELD BACK UNTIL THE ASSESSEE FILES CERTAIN DETAILS IN CONNECTION WITH THE SALES TAX ASSESSMENTS. THEREFORE, THE LD. AR SUBMITTED THAT THE SALES-TAX REFUNDS ARE TAKEN INTO ACCOUNT O NLY WHEN THEY ARE RECEIVED AND OFFERED TO TAX. THIS HAS BEEN THE CONSISTENT PRACTICE ADOPTED BY THE COMPANY IN ALL THE YEARS AN D HAS BEEN ACCEPTED BY THE DEPARTMENT AND THE CLAIM OF THE ASS ESSEE MAY BE ACCEPTED. 23. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORD ERS OF THE LOWER AUTHORITIES. 24. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MA TERIAL ON RECORD. THE AO HAS INCLUDED THE SALES-TAX REFUN D OF ` 29,39,077/- IN THE CURRENT YEAR ON ACCRUAL BASIS AS THE REFUND - - ITA 1676, 1376/10 ETC. 14 PERTAINS TO THE PERIOD 1.4.2005 TO 31.3.2006. IT I S NOT DISPUTED THAT THE ASSESSEE FOLLOWS MERCANTILE SYSTEM OF ACCO UNTING. SEC.145 DEALS WITH THE METHOD OF ACCOUNTING. IT HA S BEEN RADICALLY RECAST WITH EFFECT FROM 1.4.1997, SO AS T O PERMIT ONLY CASH OR MERCANTILE SYSTEM OF ACCOUNTING. FURTHER, THE SUPREME COURT IN NALINIKANT AMBALAL MODY V. S.A.I. NARAYAN ROW. CIT 61 ITR 428 HAS HELD THAT SEC.145 IS MANDATORY. IN VIE W OF THE CLEAR STATUTORY PROVISION AND RATIO OF THE SUPREME COURT, IT MAY BE STATED THAT THE ASSESSEE CAN FOLLOW ONLY ONE OF THE METHODS OF ACCOUNTING I.E. CASH OR MERCANTILE SYSTEM OF ACCOUN TING. SINCE THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM, THE DI SALLOWANCE MADE BY THE AO IS IN ORDER. THEREFORE, NO INTERFER ENCE IS CALLED FOR ON THE ACTION OF THE AO. THE OTHER PLEA OF THE ASSESSEE THAT IT IS CONSISTENTLY FOLLOWING THE ABOVE PRACTICE AND THE SAME HAS BEEN ACCEPTED BY THE DEPARTMENT WILL ALSO NOT COME TO ITS RESCUE BECAUSE RELIANCE ON RULE OF CONSISTENCY AL ONE CANNOT BE THE BASIS FOR SUCH ALLOWANCE AS HELD BY THE SUPR EME COURT IN THE CASE OF CIT V. OSTWAL AGRO MILLS LTD. (183 TAXM AN 241(SC). FURTHER, ESTOPPEL WILL NOT OPERATE IN SUCH A SITUAT ION AND THE DEPARTMENT IS ENTITLED TO JUDGE THE ACCOUNTS OF AN ASSESSEE EACH YEAR ON THEIR MERITS (JAMNE DAS RAMESWAR DAS V . CIT 21 - - ITA 1676, 1376/10 ETC. 15 ITR 109(PUNJ.). ACCORDINGLY, THIS GROUND IS DISMIS SED AND THE APPEAL OF THE ASSESSEE IN ITA NO.1376/MDS/10 IS DIS MISSED. 25. IN ITA NO.1377/MDS/2010, THE FIRST GROUND IS WI TH REGARD TO CONFIRMING THE DISALLOWANCE OF AMORTIZATION OF L EASE CHARGES PAID IN RESPECT OF LEASEHOLD LAND, TAKEN ON LEASE B Y THE ASSESSEE AND USED IN ITS BUSINESS. 26. AS DISCUSSED IN EARLIER ASSESSMENT YEAR 2006-07 , THIS ISSUE IS SQUARELY COVERED AGAINST THE ASSESSEE BY T HE ORDER OF THE TRIBUNAL IN ITA NO.1849 AND 2230/MDS/2004 DATED 13.10.2006. ACCORDINGLY, THIS GROUND IS REJECTED. 27. NEXT GROUND IN THIS APPEAL IS THAT THE CIT(APPE ALS) ERRED IN CONFIRMING THE DISALLOWANCE OF EXPENSES OF ` 34,58,444/- ALLEGED TO BE RELATABLE TO EARNING THE DIVIDEND INC OME, BY APPLYING RULE 8D. 28. THE FACTS OF THE CASE ARE THAT THE AO DISALLOWE D A SUM OF ` 1,92,63,136/- U/S.14A OF THE ACT ON THE GROUND THA T THE ABOVE EXPENDITURE WAS INCURRED TO EARN INCOME EXEMPT UNDE R THE ACT. 29. WE HAVE HEARD BOTH THE PARTIES. THE ASSESSMEN T YEAR INVOLVED IN THIS APPEAL IS 2002-03 AND THERE IS NO RULE 8D OF THE I.T. RULES AT THIS RELEVANT TIME. RULE 8D WAS INS ERTED WITH EFFECT FROM 24.3.2008 AND RULE 8D HAS NO APPLICATION THIS ASSESSMENT - - ITA 1676, 1376/10 ETC. 16 YEAR. IT IS PROSPECTIVE IN NATURE. HOWEVER, CONSI DERING THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF SIMPSONS & CO. LTD. IN TC(A) NO. 2621 OF 2006 DATED 15.10.2012, WE DIRECT THE AO TO DISALLOW 2% OF THE TOTAL INCOME. 30. THE NEXT GROUND IS WITH REGARD TO LEVY OF INTER EST U/S.234C OF THE ACT. 31. REGARDING THE ISSUE OF LEVY OF INTEREST U/S.23 4C IS CONCERNED, IT IS CONSEQUENTIAL AND MANDATORY IN NAT URE AND TO BE COMPUTED ACCORDINGLY WHILE GIVING EFFECT TO THE ORD ER OF THE TRIBUNAL. THIS APPEAL IN ITA NO.1377/MDS/2010 BY T HE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 32. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.1676/MDS/2010 IS PARTLY ALLOWED AND THE APPEAL O F THE ASSESSEE IN ITA NO.1376/MDS/2010 IS DISMISSED AND I TA NO.1377/MDS/2010 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON FRIDAY, THE 06 TH OF NOV., 2015 AT CHENNAI. SD/- SD/- ( % & . ' ()* ) ( + , - .! ) ( DUVVURU RL REDDY ) (CHANDRA POOJARI) : ;< /JUDICIAL MEMBER (' ;