Patel Alloy Steel Pvt.Ltd., Ahmedabad V. The Dy.CIT.Circle-5, Ahmedabad

ITA 1404/AHD/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68071 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 20-11-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 03-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: URVASHI SHODHAN ARS; S N SOPARKAR
• Keywords: Capital asset; Depreciation; Initiation of penalty proceedings; Revenue expenditure; Capital expenditure

Judgement Text

, , , , , , , , IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BENCH, AHMEDABAD .., ! ! ! ! ' #$, BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER APPEAL(S) BY APPELLANT VS. RESPONDENT SL. NO(S) ITA NO(S) ASSESSMENT YEAR(S) APPELLANT RESPONDENT 1. 1404/AHD/2010 2003-04 PATEL ALLOY STEEL PVT.LTD. 279-300, PHASE-II, GIDC VATVA, AHMEDABAD PAN: AABCP 2984J DY.CIT CIRCLE-5 CU SHAH BUILDING AHMEDABAD 2. 1405/AHD/2010 2006-07 ASSESSEE REVENUE 3. 2834/AHD/2012 2006-07 ASSESSEE REVENUE 4. 250/AHD/2013 2003-04 REVENUE ASSESSEE 5. 251/AHD/2013 2006-07 REVENUE ASSESSEE ASSESSEE BY : SHRI S.N.SOPARKAR & MS.URVASHI SHODHAN ARS REVENUE BY : S/SHRI J.P. JHANGID & D.K.MISHRA SR.D.R. ' % & $' / / / / DATE OF HEARING : 20/11/2013 )*+ & $' / DATE OF PRONOUNCEMENT : 19/12/2013 , / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : OUT OF THESE FIVE APPEALS, THREE APPEALS ARE PERT AINING TO THE PENALTY PROCEEDINGS AND TWO ARE QUANTUM PROCEEDINGS BOTH BY THE ASSESSEE AND THE REVENUE RESPECTIVELY HAVE CHALLENG ED THE DIFFERENT ORDERS OF THE LD.COMMISSIONER OF INCOME-TAX (APPEAL S)-XI, AHMEDABAD (CIT(A) FOR SHORT). SINCE ALL THESE APPEALS PERTA IN TO THE SAME ASSESSEE ITA NOS.1404&1405/AHD/10 ITA NOS.2834/AHD/12 (BY ASSESSEE)& 250 & 251/AHD/13 (BY REVENUE) PATEL ALLOY STEEL PVT.LTD. VS. DY.CIT - 2 - AND COMMON ISSUES INVOLVED, THESE WERE HEARD TOGETH ER AND ARE BEING DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER FOR T HE SAKE OF CONVENIENCE. 2. FIRST WE TAKE UP THE QUANTUM APPEAL FILED BY THE ASSESSEE IN ITA NO.1404/AHD/2010 FOR AY 2003-04. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL. 1. YOUR APPELLANT BEING AGGRIEVED BY THE ORDER PA SSED BY LEARNED C.I.T. (APPEALS)-XI, AHMEDABAD, DATED 05.03 .2010, PRESENTS THIS APPEAL ON FOLLOWING GROUNDS. 2. THE LEARNED C.I.T.(APPEALS) HAS ERRED IN DISALLOWAN CE OF RS.68,52,056/- CONSIDERING CURRENT REPAIRS AS CAPIT AL EXPENDITURE INSTEAD OF 100% ALLOWABLE AS REVENUE EXPENDITURE. THE DISALLOWANCE MADE OF RS.68,52,056 /- BE DELETED. 3. THE APPELLANT CRAVES, LEAVE TO ADD, AMEND, ALTER, E DIT, DELETE, MODIFY OR CHANGE ALL OR ANY OF THE GROUNDS OF APPEA L AT THE TIME OF OR BEFORE HEARING OF THIS APPEAL. 2. AT THE OUTSET, LD.COUNSEL FOR THE ASSESSEE SUBMI TTED THAT GROUND NOS.1 & 3 ARE GENERAL IN NATURE REQUIRE NO INDEPEND ENT ADJUDICATION. 2.1. AS REGARDS GROUND NO.2, BRIEFLY STATED FACTS A RE THAT THIS IS THE SECOND INNING AND IN EARLIER THE MATTER TRAVELED UP TO THE HONBLE TRIBUNAL AND THE TRIBUNAL (ITAT C BENCH AHMEDABAD ) IN ITA NO.1537/AHD/2007 FOR AY 2003-04 VIDE ORDER DATED 03 /03/2008 HAD DIRECTED AS UNDER:- WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED MATERI AL AVAILABLE ON RECORD. AS THE FACTS EMERGE, WE ARE IN AGREEMENT W ITH LEARNED DR THAT OSTENSIBLY THE CORRECT RATE OF DEPRECIATION ALLOWAB LE TO ASSESSEE ON MB & P IS AT THE RATE OF 25%. ASSESSING OFFICER HAS A LLOWED IT AT 100% ITA NOS.1404&1405/AHD/10 ITA NOS.2834/AHD/12 (BY ASSESSEE)& 250 & 251/AHD/13 (BY REVENUE) PATEL ALLOY STEEL PVT.LTD. VS. DY.CIT - 3 - WITHOUT ASSIGNING ANY REASON AND MERELY FOLLOWING E ARLIER ORDERS. IN OUR VIEW, EACH YEAR UNDER IT IS A SEPARATE UNIT OF ASSESSMENT AND RULE OF RES-JUDICATA DOES NOT APPLY. IN VIEW THEREOF, A SSESSING OFFICER IS UNDER STATUTORY OBLIGATION TO APPLY CORRECT RATE OF DEPRECIATION. ANY ERROR IN THIS MATTER WILL RENDER HIS ORDER ERRONEOU S AND PREJUDICIAL TO THE INTEREST OF REVENUE. IN VIEW THEREOF, WE UPHO LD INVOCATION OF JURISDICTION UNDER SECTION 263. HOWEVER, WE FIND MERIT IN ALTERNATE CONTENTION OF T HE LD.COUNSEL THAT HAVING GOT ALLOWANCE OF 100% DEPRECIATION, IT HAD N O OCCASION TO MAKE OUT AN ALTERNATE CLAIM THAT MB&P ARE FREQUENTLY REP LACEABLE AND SHORT LIFE ASSETS, WHICH MAY BE ELIGIBLE TO BE TREATED AS REVENUE EXPENDITURE. IN VIEW THEREOF, IN THE INTEREST OF JUSTICE, WE ENL ARGE SCOPE OF DIRECTION OF CIT AND DIRECT ASSESSING OFFICER TO EXAMINE ALTE RNATE CLAIM OF ASSESSEE AS MENTIONED ABOVE ALONG WITH ISSUE ABOUT EXAMINATION OF CLAIM OF 100% DEPRECIATION IN ACCORDANCE WITH LAW. 2.2. IN THE SECOND INNING, AO DID NOT ACCEPT THE CL AIM OF THE ASSESSEE AND THE LD.CIT(A) ALSO REJECTED THE CLAIM OF THE A SSESSEE. NOW, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN ORIGINAL ASSESSMENT PROCEEDINGS, CLAIM OF THE ASSESSEE REGARDING DEPRECIATION WAS ALLOWED AND SUBSEQUENTLY , LD.CIT INVOKED THE JURISDICTION U/S.263 OF THE ACT AND SET ASIDE THE A SSESSMENT ORDER. AGAINST THIS, APPEAL WAS FILED AND HONBLE TRIBUNAL WAS PLEASED TO ENLARGE SCOPE OF DIRECTION OF CIT AND THE AO WAS DI RECTED TO EXAMINE ALTERNATIVE CLAIM OF THE ASSESSEE ALONG WITH THE IS SUE ABOUT EXAMINATION OF CLAIM OF 100% DEPRECIATION IN ACCORDANCE WITH LA W. THE AO RESTRICTED THE DEPRECIATION TO THE EXTENT OF 25% AN D DISALLOWED THE EXCESS CLAIM. HOWEVER, THE CLAIM OF THE ASSESSEE THAT ADD ITION OF RS.1,10,26,524/- BE TREATED AS REVENUE EXPENDITURE AND SAME MAY BE ACCEPTED. THE AO DID NOT ACCEPT THIS CLAIM AND RES TRICTED THE ITA NOS.1404&1405/AHD/10 ITA NOS.2834/AHD/12 (BY ASSESSEE)& 250 & 251/AHD/13 (BY REVENUE) PATEL ALLOY STEEL PVT.LTD. VS. DY.CIT - 4 - DEPRECIATION TO THE EXTENT OF 25% ONLY. THE LD.CIT (A) ALSO DID NOT ALLOW THE ALTERNATIVE CLAIM OF THE ASSESSEE. HE SUBMITTE D THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF HONBLE KARNATA KA HIGH COURT IN THE CASE OF CIT VS. MYSORE SPUN CONCRETE PIPE PVT.LTD. REPORTED AT 194 ITR 159, WHEREIN IT HAS BEEN CATEGORICALLY HELD THAT TH E REPLACEMENT OF MOULDS WAS NOT IN THE NATURE OF REPLACEMENT CAPITAL MACHINERY BUT IN THE NATURE OF REPLACING A PART OF A MACHINERY ESPECIAL LY IN THE CONTEXT OF THE ENTIRE SET UP BEING TREATED AS ONE UNIT. THE REPL ACEMENT OF MOULDS WAS IN THE NATURE OF MAINTENANCE OF THE MACHINERY INSTA LLED IN THE FACTORY. THEREFORE, THE EXPENDITURE INCURRED ON REPLACEMENT OF DAMAGED MOULDS AND REPLACEMENT OF RUNNERS AND END RINGS WAS REVENU E IN NATURE. HE PLACED RELIANCE ON THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. MALERKOTLA STEELS AND ALLOYS P.LTD. REPORTED AT (2011) 336 ITR 49 (P&H). LD.COUNSEL FOR THE ASSESS EE HAS ALSO PLACED RELIANCE ON THE DECISION OF THE ITAT VISAKHAPATNAM BENCH IN THE CASE OF CHODAVARSAM CO-OP.SUGAR LTD. VS. DCIT (82 ITD 47)[V ISAKHA]. 2.3. LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT A C ERTIFICATE BY THE ENGINEER WAS ALSO PLACED BEFORE THE AUTHORITIES BEL OW, WHEREIN IT HAS BEEN CATEGORICALLY STATED THAT THE MOULDS ARE OF TH E LIFE SPAN OF 2-3 MONTHS. LD.COUNSEL FOR THE ASSESSEE HAS DRAWN OUR ATTENTION TOWARDS PAPER-BOOK WHEREIN THE CERTIFICATE ISSUED BY THE EN GINEER IS PLACED IN THE PAPER-BOOK AT PAGES 70-71. LD.COUNSEL FOR THE ASSE SSEE SUBMITTED THAT THE CERTIFICATE ISSUED BY THE CHARTERED ENGINEER WA S NOT CONSIDERED BY ITA NOS.1404&1405/AHD/10 ITA NOS.2834/AHD/12 (BY ASSESSEE)& 250 & 251/AHD/13 (BY REVENUE) PATEL ALLOY STEEL PVT.LTD. VS. DY.CIT - 5 - THE AUTHORITIES BELOW. HE SUBMITTED THAT IF THEY H AD ANY DOUBT, THEY COULD HAVE VERY-WELL CROSS-EXAMINED AND GOT THIS FA CT VERIFIED FROM ANY OTHER AGENCY. 3. ON THE CONTRARY, LD.SR.DR SUPPORTED THE ORDERS O F THE AUTHORITIES BELOW AND SUBMITTED THAT THE FACTS IN THE PRESENT C ASE ARE DIFFERENT AS IN THIS CASE THE ASSESSEE ITSELF HAS ORIGINALLY TREATE D THE MOULDS AS CAPITAL ASSETS AND CLAIMED DEPRECIATION THEREOF. THE DEC ISIONS AS RELIED UPON BY THE LD.COUNSEL FOR THE ASSESSEE WOULD NOT HELP. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE AO HAS DISALLOWED THE CLAIM ON THE BASIS THAT THE ASSESSEE HAS TREATED AN ITEM OF EXPENSE AND CAPITAL IZE IT IN THE BOOKS OF ACCOUNTS, SUBSEQUENTLY THE ASSESSEE CANNOT CHANGE T HE STAND MERELY BECAUSE THE DEPARTMENT SEEKS TO DISALLOW THE CLAIM. THE AO RECORDED THAT THE ALTERNATIVE CLAIM OF THE ASSESSEE WAS EXAM INED IN VIEW OF THE DIRECTION OF THE ITAT. IT IS RECORDED THAT DURING THE COURSE OF HEARING, THE ASSESSEE WAS ASKED TO FURNISH COPY OF THE RELEV ANT ACCOUNTS. HOWEVER, THE SAME HAS NOT BEEN FURNISHED. IT WAS A LSO RECORDED THAT THE ASSESSEE HAS CLAIMED REPAIRS TO MACHINERY EXPENSES AT AN AMOUNT OF RS.5,12,839/-. NOW THE ASSESSEE WANTS TO HAVE ENTI RE CLAIM OF ADDITION IN MB&P ASSETS, TO BE TREATED AS REVENUE EXPENSES A ND IF THIS CONTENTION IS ACCEPTED, THEN THE REPAIRS CLAIM OF THE ASSESSEE GOES UP BY AN AMOUNT OF RS.68,52,056/-. THE TOTAL ADDITION IN MB&P CATE GORY COMES TO RS.1.2 ITA NOS.1404&1405/AHD/10 ITA NOS.2834/AHD/12 (BY ASSESSEE)& 250 & 251/AHD/13 (BY REVENUE) PATEL ALLOY STEEL PVT.LTD. VS. DY.CIT - 6 - CRORES. ADMITTEDLY, THIS IS A VERY HUGE FIGURE IF THE VALUE OF PLANT & MACHINERY IS CONSIDERED AND THEREFORE, LOOKING TO T HE SCALE OF EXPENDITURE, THE ALTERNATIVE CLAIM OF THE ASSESSEE TO TREAT THIS ADDITION AS REVENUE EXPENDITURE, IS NOT ACCEPTABLE BECAUSE BY T HE SCALE OF ADDITION, NEW ASSET IS CREATED AND THE LIFE SPAN OF THE ASSET HAS INCREASED. IT IS THE CONTENTION OF THE ASSESSEE THAT AFTER ADDITION, THE LIFE SPAN OF THE ASSET IS ONLY 2 TO 3 MONTHS, IS NOT SUPPORTED BY ANY EVIDENC E IN THIS REGARD. MOREOVER, EVERY YEAR THE ASSESSEE IS CLAIMING SUCH TYPE OF ADDITION IN THIS ASSET. IF THE AMOUNT IS OF REVENUE IN NATURE, THEN THE SCALE OF SUCH EXPENSE IN EACH YEAR SHOULD BE VERY NEGLIGIBLE AND SHOULD NOT BE SO HIGH AS IS THE CASE OF ASSESSEE. AS AGAINST OPENING BAL ANCE OF RS.76,29,212/-, UNDER THE HEAD MB&P, THE ASSESSEE HAS SHOWN ADDITIO N OF RS.1,10,26,524/-. THE TOTAL COMES TO RS.1,86,55,73 6/-. HENCE, IF THE ALTERNATIVE CLAIM OF ASSESSEE TO TREAT ADDITION OF RS.1,10,26,524/- AS REVENUE EXPENDITURE IS ACCEPTED, THEN THE TOTAL REV ENUE CLAIM WILL BE RS.1.86 CRORES, WHICH IS VERY HIGH AND THEN THE ENT IRE ASSET WILL DISAPPEAR FROM THE BALANCE-SHEET. THIS IS RATHER ABSURD. HE RECORDED THAT AS AGAINST OPENING BALANCE OF RS.76 LAKHS, THE ASSESSE E WANTS TO CLAIM REVENUE EXPENDITURE OF RS.1.10 CRORES, WHICH IS NOT ACCEPTABLE AND ALSO NOT ALLOWABLE BECAUSE THE SCALE OF EXPENDITURE ITSE LF GOES ON TO PROVE THAT THE SAME IS IN THE NATURE OF CAPITAL EXPENDITURE. THEREFORE, THE ALTERNATIVE CLAIM OF THE ASSESSEE THAT EXCESS DEPRE CIATION ALLOWANCE OF RS.68,52,056/- SHOULD BE ALLOWED AS REVENUE EXPENDI TURE IS NOT ACCEPTABLE. THE LD.CIT(A) UPHELD THE ORDER OF THE AO ON THE BASIS THAT THE AO OBSERVED THAT THE COPIES OF RELEVANT ACCOUN TS WERE NOT FURNISHED, ITA NOS.1404&1405/AHD/10 ITA NOS.2834/AHD/12 (BY ASSESSEE)& 250 & 251/AHD/13 (BY REVENUE) PATEL ALLOY STEEL PVT.LTD. VS. DY.CIT - 7 - THAT THE APPELLANT CLAIMED REPAIRS TO MACHINERY EXP ENSES SEPARATELY AT AN AMOUNT OF RS.5,12,839/-, IF THE ENTIRE EXPENDITURE IS CONSIDERED TO BE TOWARDS CURRENT REPAIRS, AS AGAINST OPENING BALANCE OF RS.76,29,212/- UNDER THE HEAD MB & P THE APPELLANT HAD SHOWN ADDIT ION OF RS.1,10,26,524/-. IN OTHER WORDS, AS AGAINST OPENI NG BALANCE OF RS.76 LAKHS, THE APPELLANT WANTED TO CLAIM EXPENDITURE OF RS.1.1 CRORE AND ACCORDINGLY THE CLAIM FOR REVENUE EXPENDITURE WAS N OT ACCEPTABLE. THE LD.CIT(A) OBSERVED THAT THE ASSESSEES GRIEVANCE IS THAT THE AMOUNT SHOULD HAVE BEEN ALLOWED BY WAY OF CURRENT REPAIRS. IN VIEW OF THE SPECIFIC DIRECTION OF TRIBUNAL TO CONSIDER THE CLAI M OF 100% DEPRECIATION OR ALTERNATIVELY AS REVENUE EXPENDITURE, THERE IS N O BASIS WHATSOEVER ON WHICH THE APPELLANT CAN CLAIM THE EXPENDITURE TO BE ALLOWED AS CURRENT REPAIRS. THE LD.CIT(A) WAS OF THE VIEW THAT THE LA W IS WELL SETTLED THAT ANY EXPENDITURE SPECIFICALLY FALLING U/S.30 TO 36 C ANNOT BE CONSIDERED FOR DEDUCTION U/S.37. THEREFORE, HE CONCLUDED THAT TO A LLOW THE IMPUGNED EXPENDITURE UNDER CURRENT REPAIRS IS BEYOND THE MAN DATE OF TRIBUNALS ORDER AND ACCORDINGLY CANNOT BE ADJUDICATED UPON. HE HELD THAT ON MERITS ALSO, THE APPELLANT HAS NOT BEEN ABLE TO ADD UCE ANY EVIDENCE TO SAY THAT ONLY REPAIRS WERE CARRIED OUT AND NO PURCHASES OF MB&P WERE MADE. THEREFORE, THIS GROUND TO ALLOW THE AMOUNT AS FOR C URRENT REPAIRS FAILS. ADMITTEDLY, BOTH THE AUTHORITIES BELOW, THE JUDDGEM ENTS OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MYSORE SPUN CONCRETE PIPE PVT.LTD.(SUPRA) AND THE HONBLE PUNJAB & HARYANA HI GH COURT IN THE CASE OF CIT VS. MALERKOTLA STEELS & ALLOYS P.LTD.(S UPRA) HAVE NOT CONSIDERED. THE HONBLE PUNJAB & HARYANA HIGH COUR T HAS HELD THAT THE ITA NOS.1404&1405/AHD/10 ITA NOS.2834/AHD/12 (BY ASSESSEE)& 250 & 251/AHD/13 (BY REVENUE) PATEL ALLOY STEEL PVT.LTD. VS. DY.CIT - 8 - EXPENDITURE INCURRED ON FREQUENT REPLACEMENT OF MOU LDS AS REVENUE EXPENDITURE AND ALLOWABLE U/S.37 OF THE ACT. SIMIL ARLY, VIEW HAS BEEN EXPRESSED BY THE HONBLE KARNATAKA HIGH COURT BY HO LDING THAT IT WAS A MATTER OF COMMON KNOWLEDGE THAT MOULDS DO NOT LAST LONG. THE ASSESSEE REQUIRED MOULDS WHICH, BY CONSTANT USE, NEEDED REPL ACEMENT. THE REPLACEMENT OF MOULDS WAS NOT IN THE NATURE OF REPL ACEMENT OF A CAPITAL MACHINERY BUT IN THE NATURE OF REPLACING A PART OF A MACHINERY ESPECIALLY IN THE CONTEXT OF THE ENTIRE SET UP BEING TREATED A S ONE UNIT. THE HONBLE COORDINATE BENCH IN ITA NO.1537/AHD/2007 DATED 03/ 03/2008 HAD DIRECTED AS UNDER:- WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED MATERI AL AVAILABLE ON RECORD. AS THE FACTS EMERGE, WE ARE IN AGREEMENT W ITH LEARNED DR THAT OSTENSIBLY THE CORRECT RATE OF DEPRECIATION ALLOWAB LE TO ASSESSEE ON MB & P IS AT THE RATE OF 25%. ASSESSING OFFICER HAS A LLOWED IT AT 100% WITHOUT ASSIGNING ANY REASON AND MERELY FOLLOWING E ARLIER ORDERS. IN OUR VIEW, EACH YEAR UNDER IT IS A SEPARATE UNIT OF ASSESSMENT AND RULE OF RES-JUDICATA DOES NOT APPLY. IN VIEW THEREOF, A SSESSING OFFICER IS UNDER STATUTORY OBLIGATION TO APPLY CORRECT RATE OF DEPRECIATION. ANY ERROR IN THIS MATTER WILL RENDER HIS ORDER ERRONEOU S AND PREJUDICIAL TO THE INTEREST OF REVENUE. IN VIEW THEREOF, WE UPHO LD INVOCATION OF JURISDICTION UNDER SECTION 263. HOWEVER, WE FIND MERIT IN ALTERNATE CONTENTION OF T HE LD.COUNSEL THAT HAVING GOT ALLOWANCE OF 100% DEPRECIATION, IT HAD N O OCCASION TO MAKE OUT AN ALTERNATE CLAIM THAT MB&P ARE FREQUENTLY REP LACEABLE AND SHORT LIFE ASSETS, WHICH MAY BE ELIGIBLE TO BE TREATED AS REVENUE EXPENDITURE. IN VIEW THEREOF, IN THE INTEREST OF JUSTICE, WE ENL ARGE SCOPE OF DIRECTION OF CIT AND DIRECT ASSESSING OFFICER TO EXAMINE ALTE RNATE CLAIM OF ASSESSEE AS MENTIONED ABOVE ALONG WITH ISSUE ABOUT EXAMINATION OF CLAIM OF 100% DEPRECIATION IN ACCORDANCE WITH LAW. 4.1. WE FIND THAT A CATEGORICAL DIRECTION WAS GIVEN BY THE HONBLE COORDINATE BENCH AS UNDER:- ITA NOS.1404&1405/AHD/10 ITA NOS.2834/AHD/12 (BY ASSESSEE)& 250 & 251/AHD/13 (BY REVENUE) PATEL ALLOY STEEL PVT.LTD. VS. DY.CIT - 9 - HOWEVER, WE FIND MERIT IN ALTERNATE CONTENTION OF T HE LD.COUNSEL THAT HAVING GOT ALLOWANCE OF 100% DEPRECIATION, IT HAD NO OCCASION TO MAKE OUT AN ALTERNATE CLAIM THAT MB&P A RE FREQUENTLY REPLACEABLE AND SHORT LIFE ASSETS, WHICH MAY BE ELI GIBLE TO BE TREATED AS REVENUE EXPENDITURE. IN VIEW THEREOF, I N THE INTEREST OF JUSTICE, WE ENLARGE SCOPE OF DIRECTION OF CIT AND D IRECT ASSESSING OFFICER TO EXAMINE ALTERNATE CLAIM OF ASSESSEE AS M ENTIONED ABOVE ALONG WITH ISSUE ABOUT EXAMINATION OF CLAIM OF 100% DEPRECIATION IN ACCORDANCE WITH LAW. 4.2. IN OUR CONSIDERED VIEW, THE AUTHORITIES BELOW FAILE D TO ADJUDICATE UPON THE DIRECTION OF THE HONBLE TRIBUNAL THAT MB& P ARE FREQUENTLY REPLACEABLE AND SHORT LIFE ASSETS, WHICH MAY BE ELI GIBLE TO BE TREATED AS REVENUE EXPENDITURE. THEREFORE, THE ISSUE IS REMIT TED BACK TO THE FILE OF LD.CIT(A) TO DECIDE THE SAME IN VIEW OF THE JUDGEME NTS OF HONBLE KARNATAKA HIGH COURT AND HONBLE PUNJAB & HARYANA H IGH COURT COUPLED WITH THE CLAIM OF THE ASSESSEE IN THE FORM OF THE CHARTERED ENGINEERS CERTIFICATE THAT THE MOULDS ARE FREQUENT LY USED AND HAVE VERY SHORT LIFE SPAN. THUS, THIS GROUND OF THE ASSESSEE S APPEAL IS ALLOWED FOR STATISTICAL PURPOSES ONLY. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.1404/AHD/2010 IS ALLOWED BUT FOR STATISTICAL PUR POSES. 6. NOW, WE TAKE UP THE ASSESSEES APPEAL IN ITA NO. 1405/AHD/2010 FOR AY 2006-07. THE ASSESSEE HAS RAISED FOLLOWING REVISED GROUNDS OF APPEAL: 1. LD.CIT(A) ERRED IN LAW AND ON FACT IN NOT ENTER TAINING CLAIM OF THE APPELLANT IN ALLOWING EXPENSES INCURRED ON MOULDING BOXES AND PATTERNS AS CURRENT REPAIRS U/S.31 OR ALTERNATIVELY AS REVENUE EXPENDITURE U/S.37 OF THE ACT AS THESE ITEMS ARE FR EQUENTLY REPLACEABLE ITA NOS.1404&1405/AHD/10 ITA NOS.2834/AHD/12 (BY ASSESSEE)& 250 & 251/AHD/13 (BY REVENUE) PATEL ALLOY STEEL PVT.LTD. VS. DY.CIT - 10 - AS PER THE CERTIFICATE OF APPROVED ENGINEER PLACED ON RECORD. CIT(A) OUGHT TO HAVE ALLOWED THE EXPENSES CLAIMED AS CURRE NT REPAIRS. IT BE SO HELD NOW. 2. LD.CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMI NG ACTION OF AO IN GRANTING 25% DEPRECIATION TREATING MEMBERSHIP FEES PAID TO WIND ENERGY ASSOCIATION AS CAPITAL EXPENDITURE ON ACQUIR ING TANGIBLE ASSET INSTEAD OF REVENUE EXPENDITURE. LD.CIT(A) OUGHT TO HAVE ALLOWED MEMBERSHIP FEES PAID AS REVENUE EXPENDITURE. IT BE SO HELD NOW. 3.LEVY OF INTEREST U/S.234A/234B/234C & 234D OF THE ACT IS UNJUSTIFIED. 4.INITIATION OF PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT IS UNJUSTIFIED. 7. GROUND NO.1 IS IDENTICAL WITH THE GROUND NO.2 AS WAS IN ASSESSEES APPEAL BEARING ITA NO.1404/AHD/2010 FOR AY 2003-04( SUPRA). THE FACTS ARE IDENTICAL AND THE SAME SUBMISSIONS WERE M ADE BY BOTH THE PARTIES. SINCE WE HAVE TAKEN A VIEW IN ASSESSEES OWN CASE IN ITA NO.1404/AHD/2010 THAT THE LD.CIT(A) HAS NOT ADJUDIC ATED THE DIRECTION ISSUED BY THE TRIBUNAL WHETHER THE MOULD HAS A SHO RT SPAN OF LIFE OR NOT. SINCE THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTA NCES OF THE CASE, THIS ISSUE IS ALSO REMITTED BACK TO THE FILE OF LD.CIT(A ) FOR DECISION AFRESH. GROUND IS ALLOWED BUT FOR STATISTICAL PURPOSES. 8. GROUND NO.2 IS AGAINST CONFIRMING THE ACTION OF AO IN TREATING MEMBERSHIP FEES PAID TO WIND ENERGY ASSOCIATION AS CAPITAL EXPENDITURE AND GRANTING 25% DEPRECIATION ON SAME. 8.1. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION(S) - OF HONBLE JURISDICTI ONAL HIGH COURT RENDERED IN THE CASE OF GUJARAT STATE EXPORT CORPOR ATION REPORTED AT 209 ITA NOS.1404&1405/AHD/10 ITA NOS.2834/AHD/12 (BY ASSESSEE)& 250 & 251/AHD/13 (BY REVENUE) PATEL ALLOY STEEL PVT.LTD. VS. DY.CIT - 11 - ITR 649 (GUJ.), OF THE HONBLE DELHI HIGH COURT I N THE CASE OF NESET HOLDING PVT.LTD. (282 ITR 601), OF MUMBAI HIGH COU RT IN THE CASE OF S.VENKATASUBRAMANIAM (291 ITR 193), OF MUMBAI ITAT IN THE CASE OF LUBRIZOL INDIA P.LTD. (IN ITA NO.2848/MUM/2008 FOR AY 2004-05) AND OF DELHI ITAT IN THE CASE OF KRISHNA COMMODITIES ( IN ITA NO.3617/DEL/2012 FOR AY 2007-08). 9. ON THE CONTRARY, LD.SR.DR SUPPORTED THE ORDERS O F THE AUTHORITIES BELOW. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE DECISIONS RELIED UPON BY THE LD.COUN SEL FOR THE ASSESSEE. WE FIND THAT THE JURISDICTIONAL HIGH COURT IN THE CASE OF GUJARAT STATE EXPORT CORPORATION VS. CIT(SUPRA) HAS DECIDED THIS ISSUE I N FAVOUR OF ASSESSEE. THE HONBLE HIGH COURT OF MADRAS IN THE CASE OF CIT VS. S.VENKATASUBRAMANIAM(SUPRA) HAS HELD IN FAVOUR OF T HE ASSESSEE. SIMILARLY, THE HONBLE DELHI HIGH COURT HAS ALSO TA KE A VIEW IN FAVOUR OF THE ASSESSEE. THE HONBLE COORDINATE BENCH IN ITA NO.3617/DEL/2012 FOR AY 2007-08 IN THE CASE OF M/S.KRISHNA COMMODITI ES VS. ACIT HAS TAKEN A VIEW THAT THE AMOUNT PAID BY THE ASSESSEE A S ADMISSION FEE TO VARIOUS EXCHANGES AND COST OF APPLICATION FORM WAS A REVENUE EXPENDITURE. ITA NOS.1404&1405/AHD/10 ITA NOS.2834/AHD/12 (BY ASSESSEE)& 250 & 251/AHD/13 (BY REVENUE) PATEL ALLOY STEEL PVT.LTD. VS. DY.CIT - 12 - 10.1. IN VIEW OF THESE JUDICIAL PRONOUNCEMENTS, WE FIND THAT LD.CIT(A) AS WELL AS THE AO ERRED IN HOLDING THE MEMBERSHIP F EES PAID BY THE ASSESSEE AS A CAPITAL EXPENDITURE. THE AO IS HEREBY DIRECTED TO DELETE THE ADDITION OF RS.7,84,898/- TREATED AS CAPITAL EXPEND ITURE. THEREFORE, THE GROUND OF ASSESSEES APPEAL IS ALLOWED. 11. GROUND NO.3 IS AGAINST CHARGING OF INTEREST U/S .234A/B/C/D OF THE I.T. ACT IS CONSEQUENTIAL IN NATURE. IT IS HELD AC CORDINGLY. THIS GROUND IS THEREFORE REJECTED. 12. GROUND NO.4 IS AGAINST INITIATION OF PENALTY PR OCEEDINGS U/S.271(1)(C) OF THE ACT. THIS GROUND IS PRE-MATURE , HENCE REJECTED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.1405/AHD/2010 FOR AY 2006-07 IS PARTLY ALLOWED B UT FOR STATISTICAL PURPOSES. 14. NEXT, WE TAKE UP THE ASSESSEES APPEAL IN ITA N O.2834/AHD/2012 FOR AY 2006-07, WHEREIN FOLLOWING GROUNDS HAVE BEEN RAISED:- 1. LD.CIT(A)(ORDER DATED 09/11/2012) ERRED IN LAW A ND ON FACTS IN CONFIRMING PENALTY LEVIED BY AO U/S.271(1) (C) OF THE ACT TREATING THE ASSESSEE IN DEFAULT FOR FURNISHING INA CCURATE PARTICULARS IN RESPECT OF CLAIM OF MEMBERSHIP FEES PAID TO INDIAN WIND ENERGY ASSOCIATION. LD.CIT(A) ERRED IN NOT AP PRECIATING THE FACT THAT CLAIM OF DEDUCTION MERELY BEING TREATED A S CAPITAL EXPENDITURE IN QUANTUM PROCEEDINGS DOES NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS OR CONCEALMENT OF INCOME AS ALL THE ITA NOS.1404&1405/AHD/10 ITA NOS.2834/AHD/12 (BY ASSESSEE)& 250 & 251/AHD/13 (BY REVENUE) PATEL ALLOY STEEL PVT.LTD. VS. DY.CIT - 13 - RELEVANT FACTS ARE DULY DISCLOSED. THE PENALTY LEV IED BEING WITHOUT ANY JUSTIFICATION OUGHT TO BE QUASHED. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, ED IT, DELETE,MODIFY OR CHANGE ALL OR ANY OF THE GROUNDS OF APPEAL AT TH E TIME OF OR BEFORE THE HEARING OF THE APPEAL. 14.1. WE HAVE HEARD BOTH THE PARTIES. IN THIS CAS E, THE PENALTY WAS LEVIED ON THE ADDITION MADE ON ACCOUNT OF DISALLOWA NCE OF DEPRECIATION ON MOULDING BOXES AND PATTERNS AND ALSO THE ADDITIO N MADE ON THE MEMBERSHIP FEE TREATED AS CAPITAL EXPENDITURE. THE LD.CIT(A) CONFIRMED THE PENALTY ON THE DISALLOWANCE OF MEMBERSHIP FEE O F RS.7,84,898/-. THIS ADDITION HAS BEEN DELETED BY OUR ABOVE ORDER P ASSED IN ITA NO.1405/AHD/2010 IN ASSESSEES OWN CASE FOR AY 2006 -07. THEREFORE, THE PENALTY ALSO DOES NOT SURVIVE, THE SAME IS HERE BY DIRECTED TO BE DELETED. THE AO IS DIRECTED TO DELETE THE ADDITION . 15. IN THE RESULT, ASSESSEES APPEAL IN ITA NO.283 4/AHD/2012 FOR AY 2006-07 IS ALLOWED. 16. NOW, WE TAKE UP THE REVENUES APPEAL IN ITA NO. 251/AHD/2013 FOR AY 2006-07, WHEREIN THE FOLLOWING GROUNDS HAVE BEEN RAISED:- I) THE LD.CIT(A) (ORDER DATED 9/11/2012) HAS ERRED IN LAW AND ON FACTS IN DELETING THE PENALTY OF RS.22,61,177/- (FI GURE APPEARED IN CIT(A)S ORDER IS RS.11,50,944/-) LEVIED U/S.271(1) (C) OF THE ACT, AGAINST THE DISALLOWANCE OF DEPRECIATION. II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD.COMMISSIONER OF INCOME TAX (A) OUGHT TO HAVE UPH ELD THE ORDER OF THE ASSESSING OFFICER. ITA NOS.1404&1405/AHD/10 ITA NOS.2834/AHD/12 (BY ASSESSEE)& 250 & 251/AHD/13 (BY REVENUE) PATEL ALLOY STEEL PVT.LTD. VS. DY.CIT - 14 - III) IT IS, THEREFORE, PRAYED THAT THE ORDER OF TH E LD.COMMISSIONER OF INCOME TAX (A) MAY BE SET-ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 16.1. WE HAVE HEARD BOTH THE PARTIES. WE HAVE PASS ED AN ORDER IN ASSESSEES CASE(SUPRA), I.E. IN ITA NO.1405/AHD/201 0 FOR AY 2006-07 THE ADDITION IN RESPECT OF DISALLOWANCE OF DEPRECIA TION, WHEREIN THE ISSUE HAS BEEN RESTORED BACK TO THE FILE OF LD.CIT(A) FOR FRESH DECISION, THEREFORE THIS APPEAL IS ALSO RESTORED BACK TO THE FILE OF LD.CIT(A) TO DECIDE THE SAME IN ACCORDANCE WITH LAW. THEREFORE, REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 17. LASTLY, WE TAKE UP THE REVENUES APPEAL IN ITA NO.250/AHD/2013 FOR AY 2003-04, WHEREIN THE FOLLOWING GROUNDS HAVE BEEN RAISED:- I) THE LD.CIT(A) (ORDER DATED 9/11/2012) HAS ERRED IN LAW AND ON FACTS IN DELETING THE PENALTY OF RS.22,61,177/- LEV IED U/S.271(1)(C) OF THE ACT, AGAINST THE DISALLOWANCE OF DEPRECIATIO N. II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD.COMMISSIONER OF INCOME TAX (A) OUGHT TO HAVE UPH ELD THE ORDER OF THE ASSESSING OFFICER. III) IT IS, THEREFORE, PRAYED THAT THE ORDER OF TH E LD.COMMISSIONER OF INCOME TAX (A) MAY BE SET-ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 16.1. WE HAVE HEARD BOTH THE PARTIES. WE HAVE PASS ED AN ORDER IN ASSESSEES CASE(SUPRA), I.E. IN ITA NO.1404/AHD/201 0 FOR AY 2003-04 THE ADDITION IN RESPECT OF DISALLOWANCE OF DEPRECIA TION, WHEREIN THE ISSUE HAS BEEN RESTORED BACK TO THE FILE OF LD.CIT(A) FOR FRESH DECISION, THEREFORE THIS ISSUE IS ALSO RESTORED BACK TO THE F ILE OF LD.CIT(A) TO DECIDE ITA NOS.1404&1405/AHD/10 ITA NOS.2834/AHD/12 (BY ASSESSEE)& 250 & 251/AHD/13 (BY REVENUE) PATEL ALLOY STEEL PVT.LTD. VS. DY.CIT - 15 - THE APPEAL AFRESH CONSEQUENT TO DECISION IN QUANTUM APPEAL. THUS, GROUNDS RAISED BY THE REVENUE IS ALLOWED FOR STATIS TICAL PURPOSES ONLY. 17. WE SUMMARIZE THE RESULT AS UNDER:- 1. ASSESSEES APPEAL ITA NO.1404/AHD/2010 IS ALLOW ED FOR STATISTICAL PURPOSES. 2. ASSESSEES APPEAL ITA NO.1405/AHD/2010 IS PART LY ALLOWED FOR STATISTICAL PURPOSES. 3. ASSESSEES APPEAL ITA NO.2834/AHD/2012 IS ALL OWED. 4. REVENUES APPEAL ITA NO.251/AHD/2013 IS ALLOWE D FOR STATISTICAL PURPOSES. 5. REVENUES APPEAL ITA NO.250/AHD/2013 IS ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN COURT ON THE DATE MENTIONED HER EINABOVE AT CAPTION PAGE SD/- SD/- ( .. ) (' #$) ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 19/ 12 /2013 /'.., .../ T.C. NAIR, SR. PS , & 0$1 21+$ , & 0$1 21+$ , & 0$1 21+$ , & 0$1 21+$/ COPY OF THE ORDER FORWARDED TO : 1. 34 / THE APPELLANT 2. 0534 / THE RESPONDENT. 3. !! $ '6 / CONCERNED CIT 4. '6() / THE CIT(A)-XI, AHMEDABAD 5. 1 #7 0$ , , / DR, ITAT, AHMEDABAD 6. 789 :% / GUARD FILE. ,' ,' ,' ,' / BY ORDER, 51$ 0$ //TRUE COPY// ; ;; ;/ // / !< !< !< !< ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD