DY.CIT.-8(1), MUMBAI V. GARWARE CHEMICALS LTD., MUMBAI

ITA 1478/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71696 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 28-10-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 02-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K C P PATNAIK; DR MANJUNATH KARKIHALLI
• Keywords: Capital asset; Depreciation; Capital receipt
• Section: 43B; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO.1438/MUM/2012 ASSESSMENT YEAR : 2007-08 ITA NO.1478/MUM/2012 ASSESSMENT YEAR : 2008-09 JCIT (OSD) RANGE-8(1) ROOM NO.260A, 2 ND FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. VS. M/S. GARWARE CHEMICALS LTD. GARWARE HOUSE 50A, SWAMI NITYANAND MARG. WESTERN EXPRESS HIGHWAY, VILE PARLE(E) MUMBAI-400 057. PAN :AABCG 2467 M (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VIJAY MEHTA RESPONDENT BY : SHRI K.C.P. PATNAIK AND DR. MANJUNATH KARKIHALLI DATE OF HEARING : 28/10/2013 DATE OF PRONOUNCEMENT : 08/11/2013 O R D E R PER VIJAY PAL RAO, JM: THESE TWO APPEALS BY THE REVENUE ARE DIRECTED AGAI NST THE TWO SEPARATE ORDERS OF CIT(A) BOTH DATED 02.12.2011 FOR THE ASSESSMENT YEAR 2007-08 AND 2008-09 RESPECTIVELY. FOR THE ASSESSMEN T YEAR 2007-08, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.1,2 5,08,56,000/- U/S.28(IV)/U/S. 41(1) OF THE ACT ON ACCOUNT OF WAIV ER OF LOANS AND INTEREST FROM BANKS/FINANCIAL INSTITUTES. 2. WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT(A ) ERRED IN NOT DIRECTING THE AO TO REDUCE THE COST OF CAPITAL ASSETS BY THE AMOUNT OF LOANS ITA NO.1438 & 1478/1M/2 A SSESSMENT YEAR :07-08 & 08-09 . 2 WAIVED BY THE BANKS/FINANCIAL INSTITUTION AS ENVISA GED IN SECTION 43(1) READ WITH EXPLANATION 10 THEREOF. 2. GROUND NO.1 IS REGARDING DELETION OF ADDITION MA DE BY THE AO UNDER SECTION 28(IV)/ 41(1)OF THE INCOME TAX ACT, 1961 (T HE ACT). DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT THE ASS ESSEE HAS SHOWN AN AMOUNT OF RS.8,483.20 LACS BEING ADJUSTED AGAINST C ARRYFORWARD LOSS. THE SAID AMOUNT COMPRISING OF RS.7,399.00 LACS BEING WA IVER OF FUNDED INTEREST ON LOAN (RESCHEDULED BY IDBI) AND A SUM OF RS.1,084 .29 LACS BEING WAIVER OF INTEREST ACCRUED AND DUE TO BARCLAYS BANK F.C. THIS REDUCTION OF LOAN HAS BEEN DESCRIBED AS EFFECT OF ONE TIME SETTLEMENT (OT S) PACKAGE BEING WAIVER OF INTEREST ACCRUED AND DUE BY BARCLAYS BANK F.C. A ND WAIVER OF FUNDED INTEREST TERM LOAN BY IDBI BANK. THE AO FURTHER NOT ED THAT AN AMOUNT OF RS.1,530.23 LACS HAS BEEN CREDITED TO THE GENERAL RESERVE ON ACCOUNT OF WAIVER OF FOREIGN CURRENCY PRINCIPAL TERM LOAN BY B ARCLAYS BANK. AND FURTHER A SUM OF RS.2,495.24 LACS HAS BEEN CREDITED TO THE CAPITAL RESERVE ACCOUNT ON ACCOUNT TRANSFERRED FROM SHARE CAPITAL BEING CAN CELLATION OF OPTIONALLY CONVERTIBLE CUMULATIVE REDEEMABLE PREFERENCE SHARES (OCCRPS). SINCE THIS AMOUNT OF RS.12,508.56 COMPRISING OF WAIVED INTERES T, FUNDED INTEREST AND PRINCIPAL LOAN AMOUNT WAS NOT OFFERED TO TAX BY ASS ESSEE, THE AO ISSUED A SHOW CAUSE AS TO WHY A SUM OF RS.12,508.56 LACS SHO ULD NOT BE ADDED TO THE TOTAL INCOME UNDER SECTION 28 OF THE INCOME TAX ACT. IN REPLY THE ASSESSEE CONTENDED THAT IT HAS NOT OFFERED WAIVER O F INTEREST AMOUNT OF RS.8,483.29 LACS BECAUSE THE INTEREST EXPENDITURE P ROVIDED IN THE BOOKS OF ACCOUNT IN THE EARLIER ASSESSMENT YEARS WERE DISALL OWED IN THE RESPECTIVE ASSESSMENT YEARS UNDER SECTION 43B AS WELL AS SECTI ON 40(A) OF THE INCOME TAX ACT. THEREFORE, WHEN THE INTEREST AMOUNT WAS A LREADY SUBJECTED TO TAX THEN ON WAIVER IT CAN NOT BE TAXED UNDER SECTION 41 (1). IT WAS FURTHER SUBMITTED THAT INTEREST DUE TO IDBI ON TERM LOAN WA S CONVERTED INTO LOAN BY THE IDBI FROM TIME TO TIME. THIS INTEREST LIABILITY WAS DEEMED TO HAVE BEEN DISCHARGED IN THAT YEAR AND THE AMOUNT WAS CONVERTE D INTO TERM LOAN. THEREFORE, THERE WAS NO REMISSION OF LIABILITY UNDE R SECTION 41(1) OR INCOME UNDER SECTION 28(IV) OF THE ACT. THE AO DID NOT ACC EPT THE CONTENTION OF THE ITA NO.1438 & 1478/1M/2 A SSESSMENT YEAR :07-08 & 08-09 . 3 ASSESSEE AND MADE AN ADDITION OF RS.12,508.56 LACS. ON APPEAL THE CIT(A) HAS DELETED THE ADDITION MADE BY THE AO ON THE GROU ND THAT THE AMOUNT OF INTEREST ACCRUED AND DUE TO BARCLAYS BANK WAS ALREA DY DISALLOWED IN THE RESPECTIVE YEARS UNDER SECTION 43B AND, THEREFORE, ON WAIVER THE SAID AMOUNT WOULD NOT ATTRACT PROVISIONS OF SECTION 41(1 ) OR 28(IV). FURTHER, LOAN WAS TAKEN FOR PLANT AND MACHINERY AND THEREFORE, IT WAS NOT FOR TRADING PURPOSES. AS REGARDS THE CONVERSION OF THE INTEREST INTO LOAN THERE IS NO WAIVER BUT THE INTEREST LIABILITY WAS DISCHARGED BY CONVERTING INTEREST INTO LOAN AND ASSESSEE DID NOT OBTAIN ANY BENEFIT UNDER THE INCOME TAX ACT IN RESPECT OF WAIVER OF INTEREST. 2.1 BEFORE US, THE LD. DR HAS RELIED UPON THE ORDER OF THE AO THOUGH, HE HAS NOT DISPUTED THE FACTUAL MATRIX THAT THE INTERE ST AMOUNT WAS ALREADY DISALLOWED U/S. 43B. ON THE OTHER HAND THE LD. AR OF THE ASSESSEE HAS SUPPORTED THE ORDER OF CIT(A) AND SUBMITTED THAT TH ERE IS NO REMISSION OF LIABILITY. THE ADDITION U/S. 41(1) OR SECTION 28 IS NOT JUSTIFIED. HE HAS RELIED UPON THE DECISION OF THE HONBLE JURISDICTIONAL HIG H COURT IN CASE OF MAHINDRA AND MAHINDRA LTD. (182 CTR 34) (BOM.) AND SUBMITTED THAT IN CASE OF SICK INDUSTRIAL COMPANY REGISTERED WITH BIFR, OT S WAIVING THE INTEREST CAN NOT BE BROUGHT TO TAX U/S.41(1). 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y GONE THROUGH THE RELEVANT MATERIAL ON RECORD. THE UNDISPUTED FACTS E MERGING FROM RECORD ARE THAT THE ASSESSEE RECEIVED FINANCE FROM IDBI OF RS. 7,150.00 LACS FOR SETTING UP OF PETROCHEMICAL PLANT IN THE FINANCIAL YEAR 199 6-97. THE ASSESSEE CAPITALIZED THE INTEREST AMOUNT TILL THE PLANT COMM ENCED ITS COMMERCIAL OPERATIONS IN THE FINANCIAL YEAR 2000-01. THEREAFTE R THOUGH THE ASSESSEE DEBITED THE INTEREST TO ITS P & L ACCOUNT, HOWEVER , SINCE, THE INTEREST WAS NOT PAID AND FURTHER NO TDS WAS DEDUCTED, THEREFORE , NO CLAIM OF INTEREST WAS ALLOWED FOR ANY OF THE ASSESSMENT YEARS TILL TH E ASSESSMENT YEAR UNDER CONSIDERATION. IN THE MEANTIME, UPTO THE FINANCIAL YEAR 1999-00 OUT OF THE TOTAL INTEREST AMOUNT OF RS.5,912.04 LACS AN AMOUN T OF RS.3,152.94 LACS WAS CONVERTED INTO TERM LOAN. THUS, IT IS CLEAR THA T FOR THE PURPOSE OF ITA NO.1438 & 1478/1M/2 A SSESSMENT YEAR :07-08 & 08-09 . 4 COMPUTATION OF INCOME UNDER THE INCOME TAX ACT THE CONVERSION IS NOT RELEVANT BECAUSE THE INTEREST WAS NOT CLAIMED, BUT, IT WAS CAPITALISED BY THE ASSESSEE PRIOR TO THE COMMENCEMENT OF ITS COMMERCIA L OPERATIONS. EVEN AFTER THE CONVERSION OF THE PART OF CAPITALISED INT EREST INTO TERM LOAN THE ASSESSEE COULD NOT RE-PAY THE LOAN AS WELL AS INTER EST TO THE IDBI BANK AND CONSEQUENTLY DURING THE FINANCIAL YEAR 2004-05 THE ASSESSEE ENTERED INTO RESTRUCTURING OF TERM LOAN WITH IDBI WHEREBY THE OU TSTANDING INTEREST TO THE TUNE OF RS.7,399.00 LACS WAS CONVERTED INTO FUNDED INTEREST TERM LOAN. IN THIS RESTRUCTURING RS.1,400 LACS WERE CONVERTED TO EQUITY AND AN AMOUNT OF RS.2,557.00 LACS WAS WAIVED BY IDBI. EVEN AFTER THE CONVERSION OF THE OUTSTANDING LOAN INTO FUNDED INTEREST ON LOAN (FITL ) THE ASSESSEE COULD NOT MEET THE REPAYMENT SCHEDULE AND AGAIN NEGOTIATED WI TH THE IDBI FOR SETTLEMENT. IN THE FINANCIAL YEAR 2006-07 A SETTLEM ENT WAS REACHED BETWEEN THE ASSESSEE AND IDBI UNDER WHICH THE IDBI AGREED T O GIVE FURTHER WAIVER OF FITL. AS PER RE-STRUCTURING PACKAGE THE IDBI AGREED TO CONVERT THE PRINCIPAL LOAN AMOUNT OF RS.3,218.00 LACS INTO OCCRPS. AGAIN THE ASSESSEE DID NOT FULFILL THE TERMS OF THE RESTRUCTURING PACKAGE AND PAYMENT OF THE OCCRPS AND CONSEQUENTLY AS PER SETTLEMENT BETWEEN ASSESSEE AND IDBI, THE BANK AGREED TO CANCEL OCCRPS PROVIDED THE ASSESSEE PAY A PART OF OCCRPS. THE ASSESSEE MADE A PAYMENT OF RS.5,760.33 LACS TO THE IDBI REMITTING THE BALANCE AMOUNT OF LOAN, HENCE, IDBI CANCELLED THE O CCRPS AMOUNTING TO RS.2,495.24 LACS. 3.1 SIMILARLY, THE ASSESSEE HAS ALSO OBTAINED LOAN FROM BARCLAYS BANK IN THE FINANCIAL YEAR 1997-98 OF RS.2,930.90 LACS FOR THE PURPOSE OF SETTING UP OF PLANT. FROM THE FINANCIAL YEAR 1997-98 TO 1999-2 000 THE ASSESSEE CAPITALISED THE INTEREST. AFTER THE COMMENCEMENT OF COMMERCIAL OPERATIONS THE ASSESSEE STARTED DEBITING INTEREST TO THE P&L A CCOUNT BUT DUE TO THE NON-PAYMENT OF THE INTEREST AND FURTHER NON-DEDUCTI ON OF TAX THE CLAIM OF INTEREST AMOUNT WAS DISALLOWED U/S. 43B AND SECTION 40A. THUS AS ON 30.03.2006 THE TOTAL AMOUNT OF INTEREST OUTSTANDING ON LOAN FROM BARCLAYS BANK WAS RS.1,084.29 LACS. THE ASSESSEE ENTERED IN TO OTS WITH BARCLAYS BANK FOR LOAN OF RS.2,930.90. IN THE SAID OTS THE B ANK AGREED TO WAIVE PART ITA NO.1438 & 1478/1M/2 A SSESSMENT YEAR :07-08 & 08-09 . 5 OF THE LOAN AND ACCORDINGLY THE ASSESSEE MADE THE P AYMENT OF RS.786.29 LACS AND BALANCE PRINCIPAL AMOUNT OF RS.1,530.23 LA CS WAS WAIVED BY THE BARCLAYS BANK. 3.2 IT IS CLEAR FROM THE FACTS OF THE CASE THAT THE WAIVER AMOUNT OF INTEREST WAS NEVER ALLOWED AS A DEDUCTION IN THE RESPECTIVE ASSESSMENT YEARS. THEREFORE, THE SAME DOES NOT RESULT IN ANY INCOME O R BENEFIT TO ASSESSEE UNDER THE INCOME TAX ACT. WHEN THE AMOUNT OF INTERE ST WAS NOT ALLOWED AS DEDUCTION IN THE EARLIER ASSESSMENT YEARS THEN AT T HE TIME OF WAIVER BY THE BANK THE SAME CAN NOT BE TREATED AS EITHER INCOME O F THE ASSESSEE OR CESSATION OF ANY LIABILITY U/S. 28(IV)/41(1) OF THE INCOME TAX ACT. AS REGARDS THE WAIVER OF THE PRINCIPAL LOAN AMOUNT IS CONCERNE D, UNDISPUTEDLY THE LOAN WAS TAKEN FOR SETTING UP OF PLANT AND PURCHASE OF P LANT AND MACHINERY. THEREFORE, THE UTILISATION OF THE LOAN AMOUNT WAS F OR CAPITAL PURPOSES. THE WAIVER OF THE AMOUNT ON CAPITAL ACCOUNT WOULD NOT R ESULT AS INCOME WHEN THE SAME WAS NOT ALLOWED AS AN EXPENDITURE. THE CIT (A) HAS DISCUSSED ELABORATELY THE FACTS AND LAW ON THIS POINT AND CON CLUDED IN PARA 2.2.23 TO 2.3.27 AS UNDER :- 2.3.23 THEREFORE, THE PRINCIPLE THAT CAN BE CULLED OUT FORM THE COMBINED READINGS OF VARIOUS JUDGMENTS IN THE CONTEXT OF WAI VER OF LOAN AMOUNT, THAT THE ANSWER WOULD DEPEND UPON THE PURPOSE FOR W HICH THE SAID LOAN WAS TAKEN. IF THE LOAN WAS TAKEN FOR ACQUIRING THE CAPITAL ASSET, WAIVER THEREOF WOULD NOT AMOUNT TO ANY INCOME EXIGI BLE TO TAX. ON THE OTHER HAND, IF THIS LOAN WAS FOR TRADING PURPOSE AN D WAS TREATED AS SUCH FROM THE VERY BEGINNING IN THE BOOKS OF ACCOUN T, AS PER SUNDARAM IYENGAR (T. V.) AND SONGS LTD. (SUPRA), THE WAIVER THEREOF MAY RESULT IN THE INCOME MORE SO WHEN IT WAS TRANSFERRED TO PROFI T AND LOSS ACCOUNT. IN THE INSTANT CASE, AS FAR AS THE WAIVER OF INTERE ST OF RS.8483.29 LACS IS CONCERNED AS IS EVIDENT FROM THE BALANCE SHEET STAR ING FROM THE F.Y. 1996-97 TO 2003-04 NO INTEREST WAS CLAIMED IN THE C OMPUTATION OF INCOME EVEN THE INTEREST THAT WAS CAPITALIZED TO PL ANT AND MACHINERY AMOUNTING TO RS.2518.00 LAKHS WAS REDUCED FROM THE WDV BY THE APPELLANT ITSELF IN THE F.Y. 2004-05 ACCUMULATIVE D ISALLOWANCE OF RS.12298.82 LAKHS WERE MADE U/S.43B OF THE ACT, PRI OR TO THAT THE ENTIRE INTEREST WAS BY THE IDBI BANK 4IEERTED EITHE R TO EQUITY OR TO FITL BY THE IDBI BANK THEREFORE, IT IS EVIDENT FROM THE RECORDS THAT THE APPELLANT DID NOT OBTAIN ANY BENEFIT UNDER THE INCO ME-TAX ACT IN RESPECT OF THE WAIVER OF INTEREST, EVEN THE INTEREST, THAT WAS CAPITALIZED TO PLANT AND MACHINERY PRIOR TO RESTRUCTURING WAS REVERSED A ND REDUCED FROM ITA NO.1438 & 1478/1M/2 A SSESSMENT YEAR :07-08 & 08-09 . 6 THE WDV BY THE APPELLANT SUO MOTO IN THE F.Y. 2004- 05 WHICH WAS ACCEPTED BY THE DEPARTMENT. THEREFORE, THERE IS NOT HING FROM THE RECORD THAT THE APPELLANT OBTAINED ANY BENEFIT IN RESPECT OF THE WAIVER OF THE INTEREST. THEREFORE, THE PROVISIONS OF SECTION 41(1 ) ARE NOT APPLICABLE AS NONE OF THE WAIVED AMOUNTS AS FAR AS INTEREST IS CO NCERNED WAS ALLOWED AS DEDUCTION IN ANY OF THE PREVIOUS YEARS. 2.3.24 THE CANCELLATION OF OCCRPS AND WAIVER OF TER M LOAN, ARE SUBJECT MATTER OF CAPITAL REDUCTION AND WERE OBTAINED FOR T HE PURPOSE OF SETTING UP DMT PLANT AND NOT FOR ANY TRADING PURPOSES WHICH AS EVIDENT FROM RECORD WAS A TIME CONSUMING PROCESS AND SPILLED OVE R IN FOUR TO FIVE YEARS. THE OBSERVATION OF LD.AO THAT OCCRPS WAS ESS ENTIALLY A LIABILITY WHICH WAS TO BE REPAID BY THE APPELLANT A ND SUBSEQUENT CANCELLATION RESULTED IN A BENEFIT WHICH ARISES DIR ECTLY OUT OF THE BUSINESS. IN THIS CONTEXT, THE JUDGMENT OF THE HON BLE HIGH COURT OF ANDHRA PRADESH IN THE CASE OF LALCHAND SURANA VS. H YDERABAD VANASPATHY LTD. (1990) 68 COMP CAS 415 IS RELEVANT. THE ISSUE THAT WAS CONSIDERED BY THE HONBLE HIGH COURT OF ANDHRA PRADESH WAS WHETHER THE PETITIONER, BEING PREFERENTIAL SHAREHOL DERS CAN CALL THEMSELVES CREDITORS AND ASK FOR WINDING UP OF TH E COMPANY U/S. 433 (E) R.W.S. 434(I) AND SECTION 439(I)(B) OF THE COMP ANIES ACT. THE HIGH COURT WAS OF THE VIEW THAT PREFERENTIAL SHAREHOLDER S ARE ALSO SHAREHOLDERS AND BY NO STRETCH OF IMAGINATION CAN T HEY BECOME CREDITORS. THEREFORE, IT IS DIFFICULT TO SUSTAIN TH E VIEW OF THE LD.AO THAT THE PRINCIPLE LOAN PAYABLE WHICH WAS CONVERTED BY I SSUANCE OF PREFERENTIAL SHARES DOESNT CHANGES ITS COLOUR TO B ECOME LIABILITY. BY ISSUANCE OF THE EQUITY SHARES OR THE PREFERENTIAL S HARES, THE BANK BECOMES A OWNER OF THE APPELLANT COMPANY TO THE EXT ENT OF ITS SHAREHOLDING. THEREFORE, THE APPELLANTS DECISION T O CARRY THE OCCRPS CREDITED TO THE CAPITAL DESERVE WILL NOT MAKE ANY D IFFERENCE AS THE TRANSACTION IN QUESTION REMAINS IN THE CAPITAL FIEL D ONLY. THEREFORE, THE EXTANT CANCELLATION OF OCCRPS BY THE IDBI BANK ALSO DOESNT ATTRACT THE PROVISIONS OF SECTION 41(1). THE APPELLANT HAS ADD ED THE WAIVER OF TERM LOAN BY THE BARCLAYS BANK WHICH WAS OBTAINED FOR TH E PURPOSES OF SETTING UP A PLANT DOESNT ATTRACT THE PROVISIONS O F SECTION 41(2) AS HELD BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CH ETAN CHEMICALS (SUPRA). THE WAIVER OF LOAN IS A CAPITAL RECEIPT, B OOK ENTRY OF THE SAME BEING TRANSFERRED TO THE RESERVES OF THE APPELLANT COMPANY, DOES NOT IN ANY WAY CHANGE THE CHARACTER OF THE LOAN. THUS, THE CREDITS CONSIDERED CAPITAL IN NATURE PRIOR TO THE WAIVER OF A LOAN SHA LL REMAIN CAPITAL CREDITS AFTER THE LOAN IS WAIVED OFF AND HENCE A CA PITAL RECEIPT IN THE NATURE OF LOAN SHALL REMAIN A CAPITAL RECEIPT ON TH E WAIVER BEING TRANSFERRED TO THE RESERVES. 2.3.25 THE LD. AO PLACED HEAVY RELIANCE ON THE DECI SIONS OF SOLID CONTAINERS LTD. (SUPRA) AND ALSO DECISION OF SUPREM E COURT IN THE CASE OF CIT V. T.V. SUNDARAM IYENGAR AND SONS LTD(SUPRA) , AS IS EVIDENT FROM THE FACTS RECORDED BY THE UNDERSIGNED, THE FACTS OF THE APPELLANT CASE IS DISTINGUISHABLE. WHILE RENDERING THE DECISION IN TH E CASE OF SOLID ITA NO.1438 & 1478/1M/2 A SSESSMENT YEAR :07-08 & 08-09 . 7 CONTAINER (SUPRA), THE HONBLE BOMBAY HIGH COURT HA S MADE ITSELF A DISTINCTION ON FACTS AND STATED THAT THE FACTS OF T HE SOLID CONTAINER CASE ARE ENTIRELY DIFFERENT IN AS MUCH AS THE LOAN TAKEN IN THIS CASE WAS FOR THE PURPOSE OF TRADING ACTIVITY AND ULTIMATELY, UPO N WAIVER THE AMOUNT WAS RETAINED IN BUSINESS BY THE ASSESSEE. THEREFORE , AS EVIDENT THE LD.AO MISPLACED HER ARGUMENT ON THE STRENGTH OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SOLID CONT AINER (SUPRA). IT IS THE A SETTLED PRINCIPLE OF LAW AS STATED BY THE HON BLE SUPREME COURT IN THE CASE OF CCE VS. SRIKUMAR AGENCIES & ORS. (2009) 1 SCC 469, THAT A JUDGMENT CANNOT BE READ LIKE A STATUTE. COURTS SHOU LD NOT PLACE RELIANCE ON DECISION WITHOUT DISCUSSING FACTUAL SITUATION IN VOLVED IN THE SAID DECISION AND HOW IT WOULD APPLY TO THE FACTS INVOLV ED IN THE SUBSEQUENT CASE. A RATIO LAID DOWN BY A HIGHER FORUM SHOULD NO T BE TAKEN OUT OF THE CONTEXT AND CONSTRUED LIKE A STATUTE. THEREFORE, AP PARENTLY, THE LD.AO HAS PLACED RELIANCE ON THE DECISION OF THE HONBLE HIGH COURT WITHOUT DISCUSSING THE FACTUAL SITUATION INVOLVED IN THE IN STANT CASE. THEREFORE, THE DECISIONS RELIED BY THE LD.AO ARE OF NO HAIL AN D APPLICABILITY IN THE INSTANT CASE. IN THAT VIEW ALSO, SECTION 41(1) IS N OT APPLICABLE. 2.3.26 THIS DECISION OF BOMBAY HIGH COURT IN THE CA SE OF MAHENDRA & MAHENDRA HAS BEEN FOLLOWED IN THE CASE OF DEEPAK FE RTILIZERS AND PETROCHEMICALS CORPORATION LTD. V. DCIT (304 ITR 16 7). FURTHER, THE ITAT MUM BENCH HAS APPLIED THE SAME RATIO IN THE CASE OF SMARTALK. (P.) LTD. V ITO (313 ITR 96). THE HONBLE COCHIN TRIBUNAL IN THE CASE OF ACCELERATED FREEZ AND DRYING CO. LTD. VS DCIT [31 S OT 442] WHICH HAS SIMILAR FACTS AND CIRCUMSTANCES AS THAT OF THE APPE LLANT COMPANY. THE SIGNIFICANT PORTION OF THE DECISION ARE EXTRACTED A S UNDER: . . IN THE FACTS AND CIRCUMSTANCES OF THE CASE, W E FIND THAT THE WAIVER AMOUNT OF TERM LOAN AVAILED BY THE ASSESSEE DOES NOT PARTAKE THE CHARACTER OF ASSESSABLE INCOME EITHER UNDER SEC TION 28(IV) OR UNDER SECTION 41(L). T7IE DECISION OF THE APEX COURT IN T HE CASE OF T. V. SUNDARAM IYENGAR AND SONS LTD. SUPRA RELIED ON BY THE LOWER AUTHORITIES IS DISTINGUISHABLE ON FACTS. THE DECISI ON RELIED ON BY THE ADDL. COMMISSIONER IN THE CASE OF SOLID CONTAINERS LTD. (SUPRA) IS ALSO NOT APPLICABLE TO THE PRESENT CASE FOR THE REASON T HAT THE SAID DECISION DOES NOT DIFFER FROM THE RATIO LAID DOWN IN THE DEC ISION OF THE BOMBAY HIGH COURT IN THE CASE OF MAHINDRA AND MAHINDRA LTD . SUPRA,. - ON THE OTHER HAND THE ISSUE RAISED IN THE PRESENT A PPEAL IS SQUARELY COVERED BY THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF POLYFIEX (IN DIN) (P.) LTD. (SUPRA THE DECISION OF THE BOMBAY HI GH COURT IN THE CASE OF MAHINDRA AND MAHINDRA LTD. (SUPRA); DECISION OF THE DELHI HIGH COURT IN THE CASE OF PHOOL CHAND JIWAN RAM (SUPRA A ND THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF COCHIN CO. LTD. (SUPRA). ACCORDINGLY, WE DIRECT THE ASSESSING AUTHORITY TO E XCLUDE THE AMOUNT OF RS. 10,36,02,957 IN COMPUTING THE ASSESSABLE INCOME OF THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR 2005-06. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 2.3.27 FURTHER, I FIND THAT THE APPELLANT HAS ITSEL F REDUCED THE LOSSES BELOW THE LINE MEANING THEREBY THAT TO THE EXTENT O F WAIVER OF INTEREST ITA NO.1438 & 1478/1M/2 A SSESSMENT YEAR :07-08 & 08-09 . 8 THE APPELLANT HAD REDUCED ITS LOSSES AS IS EVIDENT BY THE PROFIT & LOSS ACCOUNT WHICH WAS REPRODUCED BY THE LD. AO IN PARA 4 OF HER ORDER WHEREIN THE ONE TIME SETTLEMENT IN RESPECT OF WAIVE R OF INTEREST AMOUNTING TO RS.8483.29 LAKHS WERE REDUCED. IT IS F ROM HERE LD. AC CONCLUDED THAT APPELLANT ITSELF HAS TREATED THE WAI VER OF THE INTEREST AS THE INCOME HOWEVER, THE TREATMENT MADE IS BELOW THE LINE AND NOT ABOVE. HOWEVER WITH RESPECT OF THE PRINCIPLE LOAN, THE LD. AC HAS CLEARLY UPHELD THAT IT IS FOR THE PURPOSE OF THE SE TTING OF THE PLANT AND NOT A TRADING LIABILITY THOUGH THE ADDITION WAS MAD E BY THE LD. AO U/S 28(IV) OF THE ACT. WITHOUT PREJUDICE TO THE AFORESA ID OBSERVATION SINCE I HAVE ALREADY UPHELD IN VIEW OF THE VARIOUS DECISION S PARTICULARLY, THE JURISDICTIONAL HIGH COURT IN THE CASE OF MAHINDRA & MAHINDRA (SUPRA), THE PROVISIONS OF SECTION 28(IV) AND PROVISIONS OF SECTION 41(1) ARE NOT APPLICABLE TO THE FACTS OF INSTANT CASE. THE ADDITI ON MADE BY THE LD.AO IS ACCORDINGLY DELETED. THIS GROUND OF APPEAL IS, T HUS ALLOWED. 3.3 IN VIEW OF ABOVE DISCUSSION AND FACTS AND CIR CUMSTANCES OF THE CASE WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPU GNED ORDER OF THE LD. CIT(A) QUA THE ISSUE . SAME IS UPHELD. 4. GROUND NO.2 . THIS IS AN ALTERNATE PLEA RAISED B Y THE REVENUE AND SUBMITTED IF THE WAIVER IS NOT CONSIDERED AS INCOME OF THE ASSESSEE THEN COST OF THE CAPITAL ASSET HAS TO BE REDUCED BY THE AMOUN T OF LOAN WAIVED BY FINANCIAL INSTITUTIONS FOR PURPOSE OF DEPRECIATION . 4.1 WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATI VE AS WELL AS THE LD. AUTHORISED REPRESENTATIVE AND CONSIDERED MATERIAL R ELEVANT ON RECORD. THE LD. AUTHORISED REPRESENTATIVE HAS SUBMITTED THAT T HIS ISSUE HAS BEEN CONSIDERED AND DECIDED BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN CASE OF DCIT VS. ADYA OIL & CHEMICALS LTD. ORDER DATED 08 TH FEBRUARY, 2012 IN I.T.A NO.4878/MUM/2010 IN ASSESSMENT YEAR 2006-07. AS WELL AS IN THE CAS E OF DCIT VS. M/S. ESSAR STEEL LTD. ORDER DATED 22/03/2013 IN I.T.A NO.4715/MUM/2005 & 2838, 2954 & 5086/MUM/2007 FOR ASSESSMENT YEARS 2001-02 TO 2004-05. 4.2 AFTER CONSIDERING THE RIVAL SUBMISSIONS AT THE OUTSET WE NOTE THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED AND DECIDED BY THE TRIBUNAL IN THE CASE OF DCIT VS. ADYA OIL & CHEMICALS (SUPRA), IN PARA 2 4 TO 27 AS UNDER :- ITA NO.1438 & 1478/1M/2 A SSESSMENT YEAR :07-08 & 08-09 . 9 24. WE HAVE HEARD THE PARTIES AND PERUSED THE RECO RD AS WELL AS GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS OBSERVED THAT THE FINDING OF THE CIT(A) THAT EXPLANATION (10) TO S. 4 3(1) DOES NOT APPLY TO THE FACTS OF THE CASE AND THEREFORE WDV OF ASSETS I S NOT TO BE REDUCED BY THE AMOUNT OF LOAN WAIVED BY THE BANKS., IS IN C ONSONANCE WITH THE JUDGMENT OF THE HONBLE HIGH COURT OF KERALA IN THE CASE OF CIT VS. KOCHIN CO. P. LTD. (SUPRA). THE RELEVANT PORTION OF THE SAID JUDGMENT IS EXTRACTED BELOW:- THE SHORT QUESTION THAT ARISES FOR CONSIDERATION I WHETHER, ON THE FACTS OF THIS CASE, SECTION 43(1) OF THE INCOME TAX ACT I S ATTRACTED. THE SAID SECTION PROVIDES THAT ACTUAL COST MEANS THE ACTUA L COST OF THE ASSETS TO THE ASSESSEE, REDUCED BY THAT PORTION OF THE COST T HEREOF F ANY, AS HAS BEEN MET DIRECTLY OR INDIRECTLY BY ANY OTHER PERSON OR AUTHORITY. COUNSEL FOR THE REVENUE STRESSED THE FACT THAT WHEN ATLANTA CORPORATION WROTE OFF THE AMOUNTS DUE FROM THE ASSE SSEE, WHICH INCLUDED AT LEAST A PORTION OF THE LIABILITY OF THE ASSESSEE, TOWARDS THE PURCHASE OF THE MACHINERY IN 1968, IT SHOULD BE CON SIDERED THAT ATLANTA CORPORATION MET EITHER DIRECTLY OR INDIRECTLY THE C OST OF SUCH MACHINERY AND SO THE ITO WAS JUSTIFIED IN HIS VIEW THAT IN WO RKING OUT THE WRITTEN DOWN VALUE FOR THE ASSESSMENT YEAR, HE SHOULD REDUC E FROM THE ORIGINAL COST THE SUM OF RS. 2,56,757 AND ALSO THE DEPRECIAT ION ACTUALLY ALLOWED TO THE ASSESSEE IN THE PAST. WE ARE UNABLE TO ACCEP T THE SUBMISSION. THE APPELLATE TRIBUNAL HAS CATEGORICALLY FOUND THAT ATLANTA CORPORATION IS ONLY A FINANCIER AND WHEN ATLANTA CORPORATION WR OTE OFF THE LIABILITY OF THE ASSESSEE, IT CANNOT BE SAID IN RETROSPECT TH AT THE COST TO THE ASSESSEE OF ANY PART OF THE MACHINERY PURCHASED IN 1968, WAS MET BY ATLANTA CORPORATION. THE APPELLATE TRIBUNAL HELD TH AT THE REMISSION OF LIABILITY BY ATLANTA CORPORATION LONG AFTER THE LIA BILITY WAS INCURRED CANNOT BE RELIED ON TO HOLD THAT ATLANTA CORPORATIO N MET DIRECTLY OR INDIRECTLY, PART OF THE COST OF THE MACHINERY OF TH E ASSESSEE PURCHASED AS EARLY AS 1968. AS PER SECTION 43(1) OF THE ACT, IF THE COST OF THE ASSET IS MET DIRECTLY OR INDIRECTLY, AT THE TIME OF PURCH ASE OF THE MACHINERY, BY ANY OTHER PERSON OR AUTHORITY, TO THAT EXTENT, THE ACTUAL COST OF THE ASSET TO THE ASSESSEE WILL STAND REDUCED. BUT IT IS A FAR CRY TO STATE THAT THOUGH AT THE TIME OF PURCHASE OF THE MACHINERY, NO PERSON MET THE COST EITHER DIRECTLY OR INDIRECTLY, IF LONG THEREAFTER A DEBT INCURRED IN THAT CONNECTION IS WRITTEN OFF IT COULD BE EQUATED TO A POSITION THAT THE FINANCIER MET PART OF THE COST OF THE ASSET TO THE ASSESSEE. WE ARE UNABLE TO ACCEPT THE PLEA THAT THE REMISSION OF LIA BILITY BY ATLANTA CORPORATION CAN, IN ANY WAY, BE SAID TO BE ONE, WHE RE THE CORPORATION MET DIRECTLY OR INDIRECTLY THE COST OF THE ASSET TO THE ASSESSEE. IN THIS VIEW OF THE MATTER, WE ARE OF THE VIEW THAT THE REM ISSION BY ATLANTA CORPORATION COULD NOT BE REDUCED FROM THE COST OF T HE MACHINERY OF THE ASSESSEE FOR THE PURPOSE OF INCOME- TAX. 25. THE PRINCIPLE LAID DOWN BY THE HONBLE KERALA H IGH COURT IN THE SAID CASE IS SQUARELY APPLICABLE TO THE FACTS OF TH E CASE UNDER CONSIDERATION. ITA NO.1438 & 1478/1M/2 A SSESSMENT YEAR :07-08 & 08-09 . 10 26. IN SO FAR AS EXPLANATION 10 TO SECTION 43(1) IS CONCERNED, THE SAME IS EXTRACTED BELOW: WHERE A PORTION OF THE COST OF AN ASSET ACQUIRED B Y THE ASSESSEE HAS BEEN MET DIRECTLY OR INDIRECTLY BY THE CENTRAL GOVE RNMENT OR A STATE GOVERNMENT OR ANY AUTHORITY ESTABLISHED UNDER ANY L AW OR BY ANY OTHER PERSON, IN THE FORM OF A SUBSIDY OR GRANT OR REIMBURSEMENT (BY WHATEVER NAME CALLED), THEN, SO MUCH OF THE COST AS IS RELATABLE TO SUCH SUBSIDY OR GRANT OR REIMBURSEMENT SHALL NOT BE INCL UDED IN THE ACTUAL COST OF THE ASSET TO THE ASSESSEE. 27. ON PLAIN READING OF THE ABOVE EXPLANATION, IT I S CLEAR THAT THE ASSESSEE NOT RECEIVED ANY SUBSIDY OR GRANT OR REIMB URSEMENT, THEREFORE, THE ABOVE EXPLANATION IS NOT APPLICABLE TO THE CASE OF THE ASSSESEE. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) AND T-SAME IS HEREBY UPHELD AND THE G ROUND OF REVENUE IS DISMISSED. 4.3 THE CO-ORDINATE BENCH OF THIS TRIBUNAL HAS FOLL OWED THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. COCHIN CO.(P) LTD. (184 ITR 230) AND HELD THAT THE PROVISIONS OF SECTION 43(1) ARE NOT APPLICABLE IN THE CASE OF WAIVER OF LOAN. SIMILAR VIEW HAS BEEN T AKEN BY THE TRIBUNAL IN CASE OF DCIT VS. ESSAR STEEL LTD. (SUPRA), IN PARA -47 AS UNDER :- 47. WE HAVE CONSIDERED THE ISSUE. AS FAR AS THE FA CTS AND LAW ARE CONCERNED, THEY WERE ALREADY ELABORATELY STATED ABO VE. THE COORDINATE BENCH IN THE CASE OF AKZO NOBEL COATINGS INDIA (P.) LTD. VS. DCIT (LTU), BANGALORE (SUPRA), CONSIDERED SIMILAR ISSUE AND HEL D IN THAT CASE AS UNDER: FACTUAL RECAPITULATION IT IS NOT IN DISPUTE THAT IN APRIL, 1996 WHEN THE M ACHINERY WAS PURCHASED, THE ACTUAL COST WAS RECORDED IN THE BOOK S OF ACCOUNT INCLUDING THE MONIES PAYABLE TO THE SUPPLIER OF MAC HINERIES. EVEN TODAY THE ASSESSEE HAS NOT MADE ANY ADJUSTMENT IN ITS BOO KS OF ACCOUNT RECOGNIZING THE WRITING OFF OF AMOUNTS PAYABLE FOR PURCHASE OF MACHINERIES. THE BENEFIT AS A RESULT OF WAIVER OF T HE LOAN WAS SHOWN IN THE BOOKS OF ACCOUNT OF THE ASSESSEE IN THE BALANCE SHEET AS A CAPITAL RECEIPT NOT CHARGEABLE TO TAX. THE ABOVE CLAIM OF T HE ASSESSEE HAS ALSO BEEN ACCEPTED BY THE REVENUE. RATIONALE AND PURPOSE BEHIND CONCEPT OF BLOCK OF A SSETS THE RATIONALE AND PURPOSE FOR WHICH THE CONCEPT OF BLOCK ASSET WAS INTRODUCED IS THAT ONCE THE VARIOUS ASSETS ARE CLUB BED TOGETHER AND BECOME BLOCK ASSET WITHIN THE MEANING OF SECTION 2( 11), IT BECOMES ONE ASSET. EVERY TIME, A NEW ASSET IS ACQUIRED, IT IS T O BE THROWN INTO THE ITA NO.1438 & 1478/1M/2 A SSESSMENT YEAR :07-08 & 08-09 . 11 COMMON HOTCHPOTCH, I.E., BLOCK ASSET ON MEETING THE REQUIREMENT OF DEPRECIATION BEING ALLOWABLE AT THE SAME RATE. INDI VIDUAL ASSETS LOSE THEIR IDENTITY AND BECOME AN INSEPARABLE PART OF BL OCK ASSET INSOFAR AS CALCULATION OF DEPRECIATION IS CONCERNED. THE MERGE R OF VARIOUS ASSETS INTO THE BLOCK ASSET CAN BE ALTERED ONLY WHEN THE E VENTUALITY CONTAINED IN CLAUSE (C ) OF SECTION 43(6) TAKES PLACE, VIZ., WHEN A PARTICULAR ASSET IS SOLD, DISCARDED OR DESTROYED IN THE PREVIOUS YEAR ( OTHER THAN THE PREVIOUS YEAR IN WHICH FIRST BROUGHT IN USE). EVEN IN THAT EVENT, THE AMOUNT BY WHICH THE MONEYS PAYABLE IN RESPECT OF TH AT PARTICULAR BUILDING, MACHINERY, ETC. TOGETHER WITH THE AMOUNT OF SCRAP VALUE IS TO BE DEDUCTED FROM TOTAL WRITTEN DOWN VALUE OF THE B LOCK ASSET. IT IS THUS CLEAR FROM THE AFORESAID PROVISIONS THAT THE ONLY WAY BY WHICH THE WRITTEN DOWN VALUE ON WHICH DEPRECIATION IS TO BE ALLOWED AS PER THE PROVISIONS OF SECTION 32(1)(II) CAN BE ALTERED IS AS PER THE SITUATION REFERRED TO IN SECTION 43(6)(C )(I) A AND B. NEITHE R WAS THERE PURCHASE OF THE RELEVANT ASSETS DURING THE PREVIOUS YEAR NOR WA S THERE SALE, DISCARDING OR DEMOLISHING OR DESTRUCTION OF THOSE A SSETS DURING THE PREVIOUS YEAR. THUS, THE RECOURSE BY THE REVENUE TO THOSE PROVISIONS ON THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE, IT IS HELD, CANNOT BE SUSTAINED. THE ISSUE IS THAN EXAMINED FROM THE PROVISIONS OF S ECTION 43(1) AND EXPLANATION 10 THERETO. WAIVER OF LOAN CANNOT FALL WITHIN SCOPE OF ANY OF EXPRESSIONS SUBSIDY OR REIMBURSEMENT USED IN EX PLANATION 10 TO SECTION 43(1) THE PROVISIONS OF EXPLANATION 10 WILL APPLY ONLY WH EN THERE IS A SUBSIDY OR GRANT OR REIMBURSEMENT. IN THE INSTANT C ASE, THERE WAS NO SUCH SUBSIDY OR GRANT OR REIMBURSEMENT, THERE WAS O NLY A WAIVER OF THE AMOUNTS DUE FOR PURCHASE OF MACHINERY WHICH CANNOT FALL WITHIN THE SCOPE OF ANY OF THE EXPRESSIONS USED IN EXPLANATION 10. EVEN OTHERWISE SECTION 43(1) IS APPLICABLE ONLY IN THE YEAR OF PUR CHASE OF MACHINERY AND IN THE INSTANT CASE THE PURCHASE OF THE MACHINE RY IN QUESTION WAS NOT IN AY 01-02. THEREFORE, THE ACTUAL COST WHICH H AS ALREADY BEEN RECOGNIZED IN THE BOOKS IN THE ASSESSMENT YEAR PRIO R TO ASSESSMENT YEAR 2001-02 CANNOT BE DISTURBED IN ASSESSMENT YEAR 2001-02. THERE IS A LACUNA IN LAW IN THIS REGARD THERE IS A LACUNA IN THE LAW AND I T IS FOR THE LEGISLATURE TO PROVIDE APPROPRIATE SAFEGUARDS IN THIS REGARD. I T IS TRUE THAT THE ASSESSEE ON THE ONE HAND GETS THE WAIVER OF MONIES PAYABLE ON PURCHASE OF MACHINERY AND CLAIMS SUCH RECEIPT AS NO T TAXABLE BECAUSE IT IS CAPITAL RECEIPT. ON THE OTHER HAND THE ASSESS EE CLAIMS DEPRECIATION ON THE VALUE OF THE MACHINERY FOR WHICH IT DID NOT INCUR ANY COST. THUS, THE ASSESSEE STAND TO BENEFIT BOTH WAYS. AS PER THE LAW AS IT PREVAILS AS ON DATE, IT IS HELD THAT THE REVENUE IS WITHOUT ANY REMEDY. THE ONLY WAY THAT THE REVENUE CAN REMEDY THE SITUATION IS TH AT IT HAS TO REOPEN ITA NO.1438 & 1478/1M/2 A SSESSMENT YEAR :07-08 & 08-09 . 12 THE ASSESSMENT FOR THE YEAR IN WHICH THE ASSET WAS ACQUIRED AND FALL BACK ON THE PROVISIONS OF SECTION 43(1) WHICH SAYS THAT ACTUAL COST MEANS THE ACTUAL COST OF THE ASSETS TO THE ASSESSEE . EVEN THIS CAN BE DONE ONLY AFTER THE WAIVER OF THE LOAN WHICH WAS US ED TO ACQUIRE MACHINERY. BY THAT TIME F THE ASSESSMENTS FOR THAT ASSESSMENT YEAR GETS BARRED BY TIME, THE REVENUE IS WITHOUT ANY REM EDY. EVEN THE PROVISIONS OF SECTION 155 DO NOT PROVIDE FOR ANY RE MEDY TO THE REVENUE IN THIS REGARD. THE ASSESSING OFFICER HAS MADE A REFERENCE TO THE PROVISIONS OF SECTION 43(6)(B ). IT IS HELD THAT THESE PROVISIONS WERE NOT APPLICABLE TO THE INSTANT CASE. THE APPLICABLE PROVISIONS TO THE INSTANT CASE ARE SECTION 43(6)(C). IT IS HELD THAT THE DISALLOWANCE OF DEPRECIATION CA NNOT BE SUSTAINED. THE COMMISSIONER (APPEALS), IT IS HELD, OUGHT TO HAVE D ELETED THE DISALLOWANCE OF DEPRECIATION IN FRILL. ACCORDINGLY, THE RELEVANT GROUNDS OF APPEAL RAISED BY THE ASSESSEE, ARE ALLOWED. RESPECTFULLY FOLLOWING THE COORDINATE BENCH, WE UPH OLD THE ORDER OF THE CIT (A) WHICH IS ACCORDING TO THE LAW ON THE ISSUE. THEREFORE, WE ARE OF THE OPINION THAT THERE IS NO MERIT-THE REVENUE GROU ND AND ACCORDINGLY GROUND IS REJECTED. 4.4 FOLLOWING THE DECISIONS OF CO-ORDINATE BENCHES OF THIS TRIBUNAL WE DECIDE THIS ISSUE AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. 5. FOR THE ASSESSMENT YEAR 2008-09 THE REVENUE HAS RAISED SOLITARY GROUND AS UNDER :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF DE PRECIATION OF RS.6,03,68,974/- ON PLANT AND MACHINERY, WITHOUT AP PRECIATING THAT THE ASSESSEE HAS NOT USED THE PLANT AND MACHINERY FOR A NY BUSINESS CARRIED OUT BY HIM DURING THE RELEVANT YEAR. 5.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO OBSERVED THAT THE ASSESSEE CLAIMED DEPRECIATION OF RS.6,03,68,974 /- ON PLANT & MACHINERY. THE AO DISALLOWED THE CLAIM OF THE ASSES SEE ON THE GROUND THAT THE ASSESSEE HAS NOT CARRIED OUT ANY BUSINESS ACTIV ITY DURING THE YEAR. THE AO HAS PLACED RELIANCE ON THE ANNUAL REPORT WHEREIN IT HAS BEEN MENTIONED THAT THE PLANT OPERATIONS HAD BEEN SUSPENDED IN THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. ON APPE AL THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY HOLDING THAT T HE ASSETS WERE ALREADY USED FOR THE PURPOSE OF BUSINESS AND ENTERED IN THE BLOCK OF ASSETS, THEN ITA NO.1438 & 1478/1M/2 A SSESSMENT YEAR :07-08 & 08-09 . 13 EVENTHOUGH THEY ARE NOT USED TEMPORARILY FOR THE RE ASON OF A LULL OR SLOWDOWN THE DEPRECIATION ON THIS CAN NOT BE DISALL OWED. LD. CIT(A) HAS PLACED RELIANCE ON SERIES OF DECISIONS OF THE HONB LE HIGH COURTS AND SUPREME COURT ON THIS POINT. 5.2 WE HAVE HEARD THE LD. DR AS WELL AS THE LD. AR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD. DR HAS RELIED ON THE ORDER OF THE AO AND SUBMITTED THAT AS PER ANNUAL REPORT OF THE ASSESSEE THE OPERATION OF PLANT AND MACHINERY WAS SUSPENDED, THEREFORE, THE AO IS J USTIFIED IN DISALLOWING DEPRECIATION AS THE PLANT AND MACHINERY WAS NOT USE D FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. ON THE OTHER HAND THE LD. AR HAS SUBMITTED THAT THOUGH TEMPORARY SUSPENSION OF OPERATION WOULD NOT LEAD TO DISALLOWANCE OF DEPRECIATION WHEN THE PLANT AND MACHINERY IS ALREAD Y PART OF BLOCK OF ASSETS, HOWEVER, DURING THE ASSESSMENT YEAR THE ASS ESSEE HAS SHOWN INCOME OF RS.6.54 LACS FROM JOB WORK OF BIO-DIESEL BY USING THE PLANT AND MACHINERY. THE LD. AR HAS INVITED OUR ATTENTION TO THE ANNUAL REPORT AND SUBMITTED THAT THE REFERENCE IN THE ANNUAL REPORT I S ONLY IN RESPECT OF ASSESSEES PRODUCTION ACTIVITY. HE HAS ALSO REFERRE D TO THE INCOME FROM OPERATIONS FOR THE YEAR UNDER CONSIDERATION AND SUB MITTED THAT THE ASSESSEE HAS SHOWN THE INCOME OF RS.6.54 LACS ON ACCOUNT OF JOB WORK OF BIO-DIESEL. THE LD. AUTHORISED REPRESENTATIVE HAS SUBMITTED THA T THE AO HAS MIS- UNDERSTOOD THE REFERENCE OF SUSPENSION OF MANUFACTU RING AND SALE OF BIO- DIESEL AT PAGE -2 OF THE ANNUAL REPORT WHICH MENTIO NS THAT DURING THE CURRENT FINANCIAL YEAR THERE WAS NO MANUFACTURING A ND SALE OF BIO-DIESEL FROM JUNE, 2007. THUS, THE LD. AR HAS SUBMITTED TH AT THE MANUFACTURING AND SALE OF BIO-DIESEL WAS SUSPENDED IN JUNE 2007 A ND NOT FOR ENTIRE YEAR AND FURTHER WHEN THE ASSESSEE HAS UTILISED ITS PLA NT AND MACHINERY FOR JOB WORK OF BIO-DIESEL THE DISALLOWANCE MADE BY THE AO IS CONTRARY TO THE FACTS. HE HAS ALSO REFERRED TO PAGE-5 OF THE ANNUAL REPORT AND SUBMITTED THAT PLANT OPERATIONS WERE SUSPENDED ONLY TO THE EXTENT OF ENE RGY CONSUMPTION EQUIPMENTS AND IT WAS FOR CONSERVATION OF ENERGY. H E HAS FURTHER SUBMITTED THAT THE AO HAS ALLOWED ALL OTHER EXPENSES EXCEPT T HE DEPRECIATION WHICH SHOWS THAT THE AO HAS ACCEPTED THE BUSINESS ACTIVIT Y OF THE ASSESSEE. THUS, ITA NO.1438 & 1478/1M/2 A SSESSMENT YEAR :07-08 & 08-09 . 14 THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT TH E AO TOOK SUSPENSION OF CAPTIVE CONSUMPTION AS SUSPENSION OF ENTIRE MANUFAC TURING OPERATION WHEREAS THE ASSESSEE HAS CARRIED OUT THE MANUFACTUR ING ACTIVITY UNDER JOB WORK. THUS THE PLANT WAS VERY MUCH IN OPERATION FOR THE PURPOSE OF JOB- WORK. 5.3 IN REBUTTAL THE LD. DR HAS SUBMITTED THAT THERE IS A CHANGE OF BUSINESS ACTIVITY DURING THE YEAR AS THE ASSESSEE H AS CARRIED OUT ONLY JOB WORK. HE HAS FURTHER SUBMITTED THAT THERE MAY BE A CASE OF SEPARATE PLANT AND MACHINERY USED FOR JOB-WORK. 5.4 HAVING CONSIDERED THE RIVAL SUBMISSIONS AND PER USING ALL RELEVANT RECORD WE NOTE THAT THE ASSESSEE HAS SHOWN INCOME F ROM JOB-WORK OF BIO- DIESEL WHICH HAS BEEN ASSESSED BY AO AS BUSINESS IN COME. THERE IS NO ADDITION IN PLANT AND MACHINERY DURING THE YEAR. TH EREFORE, WE DO NOT FIND ANY SUBSTANCE IN THE CONTENTION OF THE LD. DEPARTME NTAL REPRESENTATIVE THAT SEPARATE PLANT AND MACHINERY MIGHT HAVE BEEN USED. THEREFORE, IT IS MANIFEST FROM THE RECORDS THAT PLANT AND MACHINERY HAS BEEN USED FOR THE JOB-WORK OF MANUFACTURING OF BIO-DIESEL. FURTHER, I T IS SETTLED LEGAL PROPOSITION THAT DEPRECIATION HAS TO BE ALLOWED ON BLOCK OF ASSETS AND ONCE THE PLANT AND MACHINERY IS PART OF ASSETS THEN FOR THE REASON OF TEMPORARY NON-UTILISATION OF THE PLANT AND MACHINERY DEPRECIA TION CAN NOT BE DENIED. WE FIND THAT PLANT AND MACHINERY HAS BEEN USED BY T HE ASSESSEE FOR ITS BUSINESS PURPOSE. THEREFORE, THERE IS NO JUSTIFICAT ION FOR DENYING THE CLAIM OF DEPRECIATION. ACCORDINGLY WE DO NOT FIND ANY REA SON TO INTERFERE WITH THE ORDER OF THE CIT(A) QUA THIS ISSUE. 6. IN THE RESULT BOTH THE APPEALS OF THE REVENUE AR E DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 08 TH NOVEMBER, 2013. SD/- SD/- (D. KARUNAKARA RAO) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 08.11.2013. JV ITA NO.1438 & 1478/1M/2 A SSESSMENT YEAR :07-08 & 08-09 . 15 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.