The DCIT, Circle-1(1)(1), Vadodara V. M/s. Gujarat Alkalies & Chemicals Ltd., Vadodara

ITA 1589/AHD/2016

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6369 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 13-06-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: O P SHARMA
• Keywords: Depreciation; Question of law; Revenue expenditure; Capital expenditure; Set aside
• Section: 115JB; 80IA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER & MS. MADHUMITA ROY, JUDICIAL MEMBER I.T.A. NO.1455/AHD/2016 (ASSESSMENT YEAR : 2012-13) GUJARAT ALKALIES AND CHEMICALS LTD., NEAR IPCL COMPLEX, P.O. PETROCHEMICALS, AT RANOLI DIST. BARODA 391 346. VS. THE DCIT, CIRCLE 1(1)(1), BARODA 390 007. AND I.T.A. NO.1589/AHD/2016 (ASSESSMENT YEAR : 2012-13) THE DCIT, CIRCLE 1(1)(1), VADODARA 390 007. VS. GUJARAT ALKALIES AND CHEMICALS LTD., NEAR IPCL COMPLEX, P.O. PETROCHEMICALS, AT RANOLI DIST. BARODA 391 346. [PAN NO. AAACG 8896 M] ( APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI SULABH PADSHAH, A.R. R EVENUE BY : SHRI O. P. SHARMA, CIT - D.R. DATE OF HEARING 29 .0 7 .2019 DATE OF PRONOUNCEMENT 16.10.2019 O R D E R PER SHRI WASEEM AHMED ACCOUNTANT MEMBER : THESE TWO CROSS APPEALS (FILED BY THE ASSESSEE AND THE REVENUE) ARE DIRECTED AGAINST THE ORDER DATED 31.03.2016 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-1, VADODARA UNDER SECTION 143( 3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS TO THE ACT) AR ISING OUT OF THE ORDER DATED ITA NOS.1455 & 1589/AHD/2016 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT (CROSS A PPEALS) ASST.YEAR 2012-13 - 2 - 05.03.2015 PASSED BY THE DCIT, CIRCLE-1(1)(1), VADO DARA FOR THE ASSESSMENT YEAR 2012-13. SINCE BOTH THE APPEALS RELATE TO THE SAME ASSESSEE, HENCE THE SAME ARE HEARD ANALOGOUSLY AND ARE BEING DISPOSED OF BY WAY OF THIS COMMON ORDER. 2. FIRST, WE TAKE UP ASSESSEES APPEAL BEARING ITA NO. 1455/AHD/2016 PERTAINING TO THE A.Y. 2012-13. THE ASSESSEE HAS RA ISED THE FOLLOWING GROUNDS OF APPEAL: YOUR APPELLANT BEING DISSATISFIED WITH THE ORDER P ASSED BY THE HON'BLE COMMISSIONER OF INCOME TAX(APPEALS)-1 BARODA, U/S 1 43(3) OF THE ACT, DATED 31.03.2016 RECEIVED BY US ON 21.04.2016, PRESENTS T HIS APPEAL AGAINST THE SAID ORDER ON THE FOLLOWING AMONGST OTHER GROUNDS: 1. THE ORDER PASSED BY THE HON'BLE COMMISSIONER OF INC OME TAX(APPEALS)-1 BARODA, IS BAD IN LAW, CONTRARY TO LEGAL PRONOUNCEM ENT AND SAME BE QUASHED. THE ADDITIONS/DISALLOWANCES CONFIRMED BY T HE HON'BLE COMMISSIONER OF INCOME TAX(APPEALS)-1 BARODA, ARE U NWARRANTED AND UNJUSTIFIED. IT BE HELD SO NOW AND SAME BE DELETED. 2. THE HON'BLE CIT(A)-1 HAS ERRED IN UPHOLDING THE ORD ER OF THE AO BY HOLDING THAT NO DEDUCTION U/S 80IA(4) IS ALLOWED SI NCE THE CAPTIVE POWER PLANT HAS INCURRED LOSS DURING THE YEAR. YOUR APPEL LANT SUBMITS THAT THE HON'BLE CIT(A) HAS ERRED IN NOT CONSIDERING THE ORD ERS PASSED BY HON'BLE ITAT AHD IN APPELLANT'S OWN CASE FOR A.Y. 2005-06 T O 2007-08 AND A.Y. 2008-09 IN WHICH THE DEDUCTION AS CLAIMED BY THE AP PELLANT HAS BEEN HELD AS ALLOWABLE ON BOTH THE GROUNDS (RE: CAPTIVE CONSU MPTION AND MARKET RATE PER UNIT). YOUR APPELLANT THEREFORE SUBMITS TH AT DIRECTIONS BE GIVEN TO FOLLOW THE DECISION OF ITAT AHD IN A.Y. 2005-06 TO 2007-08 AND A.Y 2008- 09 AND ALLOW THE DEDUCTION AS CLAIMED. 3. THE HON'BLE CIT(A) HAS ERRED IN NOT DISPOSING THE G ROUND NO. 8 REGARDING RE-COMPUTATION OF PROFIT U/S 115JB BY INCREASING TH E BOOK PROFIT BY RS. 18,72,000/- BEING PRIOR PERIOD INCOME. YOUR APPELLA NT SUBMITS THAT THERE IS NO PROVISION IN SECTION 115JB TO MAKE SUCH ADJUS TMENTS. IT BE HELD SO NOW AND ADDITION MADE BY AO BE DELETED. ITA NOS.1455 & 1589/AHD/2016 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT (CROSS A PPEALS) ASST.YEAR 2012-13 - 3 - 3. THE 1 ST ISSUE RAISED BY THE ASSESSEE IN GROUND NO. 1 AND 2 IS THAT THE LEARNED CIT (A) ERRED IN DENYING THE DEDUCTION CLAI MED UNDER SECTION 80 IA(4) OF THE ACT BY HOLDING THAT THE ASSESSEE HAS INCURRE D LOSSES IN ITS ELIGIBLE UNDERTAKING. 4. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IN TH E PRESENT CASE IS A LIMITED COMPANY AND ENGAGED IN THE BUSINESS OF MANUFACTURIN G & TRADING OF CHEMICALS AND GENERATION OF POWER. THE ASSESSEE HAS SET UP A 90 MW POWER PLANT AT DAHEJ IN THE YEAR 1998. THE PROFIT FROM SUCH POWER PROJECT WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IA(4)(IV)(A) OF THE ACT. THE ASSESSEE WAS UTILIZING THE POWER GENERATED BY IT FOR ITS CAPTIVE CONSUMPTI ON WITH RESPECT TO ITS PLANTS LOCATED AT DAHEJ AND VADODARA. THE ASSESSEE WAS ALS O SELLING SURPLUS POWER AVAILABLE WITH IT TO GUVNL. THE ASSESSEE WAS CHARGI NG DIFFERENT RATES FROM THE SUPPLY OF ELECTRICITY TO ITS PLANTS AND GUVNL A S DETAILED UNDER: SR. NO. PARTICULARS KWH RATE PER KWH (RS.) AMOUNT (RS./LACS) (1) CAPTIVE USAGE AT DAHEJ PLANT 59,20,03,761 5.8482 34621.30 (2) CAPTIVE USAGE AT VADODARA PLANT (WHEELED FROM DAHEJ CPP) 64,68,750 8.4663 547.66 (3) SALE OF GUVNL 44,52,013 4.7355 210.82 (4) OTHER FROM SALE OF UTILITIES - 2445.49 TOTAL 60,29,24,524 - 37825.27 THE ASSESSEE ON THE BASIS OF ABOVE PRICE CHARGED FR OM ITS UNDERTAKINGS/ GUVNL HAS COMPUTED THE PROFIT OF RS 40,51,74,000/- AND CLAIMED THE DEDUCTION FOR THE SAME UNDER SECTION 80 IA (4) OF T HE ACT. ITA NOS.1455 & 1589/AHD/2016 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT (CROSS A PPEALS) ASST.YEAR 2012-13 - 4 - HOWEVER, THE AO DISAGREED WITH THE DEDUCTION CLAIME D BY THE ASSESSEE UNDER SECTION 80 IA (4) OF THE ACT BY OBSERVING THA T THE UNDERTAKING ENGAGED IN GENERATING POWER FOR ITS CAPTIVE CONSUMPTION IS NOT ELIGIBLE FOR DEDUCTION. THE AO WITHOUT PREJUDICE TO THE ABOVE ALSO DISAGREE D WITH THE PRICE CHARGED BY THE ASSESSEE FROM ITS UNDERTAKINGS AND G UVNL. AS PER THE AO PRICE CHARGED BY THE GUJARAT STATE ELECTRICITY CORP ORATION LTD, A COMPANY ENGAGED IN THE GENERATION OF POWER, FROM GUVNL (GUJ ARAT URJA VIKAS NIGAM LTD) BEING 3.39 PER UNIT SHOULD BE THE BASIS FOR WORKING OUT T HE DEDUCTION UNDER SECTION 80-IA(4) OF THE ACT. THE AO ACCORDING LY WORKED OUT THE PROFIT OF THE ASSESSEE WITH RESPECT TO ITS ELIGIBLE UNDERT AKING FOR COMPUTING THE DEDUCTION UNDER SECTION 80 IA(4) OF THE ACT. THE RE LEVANT EXTRACT OF THE ASSESSMENT ORDER READS AS UNDER: SR. NO. PARTICULARS KWH RATE PER KWH (RS.) AMOUNT (RS./LACS) REVISED AMOUNT @ RS.3.39 (IN LACS) (1) CAPTIVE USAGE AT DAHEJ PLANT 59,20,03,761 5.8482 34621.30 20068.93 (2) CAPTIVE USAGE AT VADODARA PLANT (WHEELED FROM DAHEJ CPP) 64,68,750 8.4663 547.66 219.29 (3) SALE OF GUVNL 44,52,013 4.7355 210.82 150.92 (4) OTHER FROM SALE OF UTILITIES - - 2445.49 2445.49 TOTAL 60,29,24,524 - 37825.27 22884.63 ON TAKING THE RATE AT RS.3.39 PER UNIT THE SALE VAL UE COMES TO RS.22884.63 LAKHS WHEREAS THE EXPENDITURE OF THE ASSESSEE IS AT RS.35773.53 LAKHS AND THEREFORE, NO PROFIT AND ACTUALLY INCURRED LOSSES, HENCE DEDUCTION U/S 80IA(4) IS TREATED AT NIL. 5. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LE ARNED CIT (A) WHO HAS ALSO CONFIRMED THE ORDER OF THE AO BY OBSERVING THA T HIS PREDECESSOR IN THE ITA NOS.1455 & 1589/AHD/2016 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT (CROSS A PPEALS) ASST.YEAR 2012-13 - 5 - EARLIER YEAR HAS DECIDED THE ISSUE AGAINST THE ASSE SSEE. THE RELEVANT FINDING OF THE CIT (A) STANDS AS UNDER: 4.3.3. I HAVE CONSIDERED THE APPELLANT'S SUBMISSIO N. REGARDING THE MARKET VALUE OF ELECTRICITY UNITS, THE ITAT, AHMADABAD BEN CH IN APPELLANT'S OWN CASE FOR AY.2009-10 VIDE ORDER DATED 19/11/2015 IN ITA N O.2398/AHD/2012 HAS HELD AS FOLLOWS: - '20. GROUND NO. 4 - HAS ARISEN DUE TO REDUCTION IN THE DEDUCTION CLAIMED BY ASSESSEE UNDER SECTION 80IA WHEREIN THE ASSESSING OFFICER HAS ESTIMATED THE RATE OF RS.2.23 PER UNIT FOR UNIT S OF ELECTRICITY SOLD AND ARRIVED AT A CONCLUSION THAT ASSESSEE EARNED HA S NOT EARNED ANY PROFIT RATHER INCURRED LOSSES. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) WHO REPLACED THE RATE TAKEN BY TH E ASSESSING OFFICER AT RS.2.23 BY RS.3.11 PER UNIT AND ACCORDINGLY ASKE D THE ASSESSING OFFICER TO RECOMPUTED THE PROFITS OF ELIGIBLE UNDER TAKING FOR THE PURPOSE OF SECTION 80IA(IV). HOWEVER, LD CIT(A) HAS CONFIRMED IN HIS ORDER THAT ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA(4) IN RESPECT OF ELECTRICITY GENERATED BY IT FOR CAPTIVE CONSUMPTION. AGGRIEVED, THE ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL. 21. THE LD. AR OF THE ASSESSEE SUBMITTED THAT SIMI LAR ISSUE IN ASSESSEE'S OWN CASE HAS BEEN DEALT BY THE TRIBUNAL IN ITA NOS.179, 180 & 181/AHD/2010 FOR ASSTT.YEARS 2005-06 TO 2007- 08 (COPY PLACED ON RECORD). SO HE SUBMITTED THAT THE ISSUE MAY BE D ECIDED IN VIEW OF THE ABOVE DECISION OF THE TRIBUNAL. 22. THE LD. DR SUPPORTED THE ORDERS OF LOWER AUTHO RITIES. 23. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL ON RECORD. WE FIND THAT THE CO-ORDINATE BE NCH IN ASSESSEE'S OWN CASE FOR ASSTT. YEARS 2005-06 TO 2007-08 HAS DE CIDED SIMILAR ISSUE BY OBSERVING AS UNDER:- '5.4.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS A ND WE FIND THAT THIS ISSUE WAS DECIDED BY ID. CIT(A) AS PER TH E TRIBUNAL DECISION IN THE CASE OF ALEMBIC LTD. (SUPRA) AND AL SO IN THE CASE OF JINDAL STEELS & POWER LTD. (SUPRA) AND WORK ED OUT DEDUCTION ALLOWABLE TO THE ASSESSEE U/S.80IA IN RES PECT OF CAPTIVE CONSUMPTION OF POWER, THE RATES FIXED BY EL ECTRICITY BOARD I.E. GEB IN THE PRESENT CASE, HAS TO BE APPLI ED AND NOT THE PRICE FIXED BY THE LEGISLATIVE MANDATE. HE HAS ALSO NOTED THAT IN THE PRESENT CASE, THE ASSESSEE IS PREVENTED BY LEGISLATIVE MANDATE FROM SELLING POWER TO ANY PERSON OTHER THAN GEB AND ITA NOS.1455 & 1589/AHD/2016 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT (CROSS A PPEALS) ASST.YEAR 2012-13 - 6 - THE RATES FIXED BY GEB WAS RS.1.86 PER UNIT ONLY BU T THE GEB IS ASKING THE ASSESSEE TO PAY AT RS.4.55 PER UNIT A ND HENCE, HE HAS DIRECTED THE AO TO ALLOW DEDUCTION U/S.80IA AS CLAIMED, BEING THE MARKET RATE OF RS.4.55 PER UNIT OF POWER. NO CONTRARY DECISION WAS BROUGHT TO OUR NOTICE BY THE ID.DR AND HENCE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF ID.CIT(A) ON THIS ISSUE WHICH IS IN LINE WITH VARIOUS TRIBUNAL D ECISIONS. THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND THES E GROUNDS OF THE REVENUE IN ALL THE THREE YEARS ARE REJECTED.' 24. APPLYING THE SAME RATIO TO THE CASE OF ASSESSEE ON THIS GROUND, WE DO NOT FIND ANY REASON TO INTERFERE IN T HE ORDER OF CIT(A) AND ACCORDINGLY THE GROUND OF ASSESSEE IS PA RTLY ALLOWED.' 4.3.4. THUS, IN THE AY.2009-10, THE ITAT HAS UPHEL D THE ORDER OF THE CIT(A) OF ADOPTING THE AMOUNT OF RS. 3.11 PER UNIT FOR RE- COMPUTING THE PROFITS OF ELIGIBLE UNDERTAKING FOR THE PURPOSE OF SECTION 80I A(IV). THE RATE DETERMINED IN PRESENT APPEAL BY THE AO IS AT THE RATE OF 3.39 PER UNIT ON THE BASIS OF DIRECTION GIVEN BY THE CIT(A) IN THE APPELLATE ORDE R FOR AY.2009-10. HENCE, THE ORDER OF THE AO DOES NOT REQUIRE ANY INFERENCE. THE AO HAS HELD THAT BY TAKING RATE AT RS.3.39 PER UNIT, THE SALE VALUE OF ELECTRICITY UNITS COMES TO RS.22884.63 LAKHS WHEREAS THE EXPENDITURE OF THE AS SESSEE IS AT RS.35773.53 LAKHS AND THEREFORE NO PROFIT HAS BEEN EARNED ON WH ICH DEDUCTION U/S.80IA(4) CAN BE ALLOWED. THE RATE OF RS.3.39 PER UNIT ADOPTE D BY THE AO IS THE AVERAGE RATE OF PURCHASE OF POWER BY GUVNL FROM GENERATOR C OMPANIES. 4.3.5. ACCORDINGLY, THE ORDER OF THE AO IS UPHELD A ND SINCE THE CAPTIVE POWER PLANT HAS INCURRED LOSS DURING THIS YEAR, HEN CE NO DEDUCTION U/S 80IA(4) IS ALLOWED. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A) THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LEARNED AR BEFORE US SUBMITTED THAT THIS TRI BUNAL IN THE OWN CASE OF THE ASSESSEE HAS DECIDED THE ISSUE IN ITS FAVOUR BEARING ITA NO. 688/AHD/2015 PERTAINING TO THE ASSESSMENT 2011-12 V IDE ORDER DATED 25 TH FEBRUARY 2019. ITA NOS.1455 & 1589/AHD/2016 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT (CROSS A PPEALS) ASST.YEAR 2012-13 - 7 - 7. ON THE OTHER HAND THE LD. DR VEHEMENTLY SUPPORTE D THE ORDER OF THE AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET WE NOT E THAT IMPUGNED ISSUE HAS ALREADY BEEN DECIDED IN FAVOR OF THE ASSESSEE BY TH IS TRIBUNAL IN ITS OWN CASE (SUPRA) . THE RELEVANT EXTRACT OF THE ORDER IS REPRODUCED A S UNDER: 25. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE MATERIALS AVAILABLE ON RECORDS. AT THE OUTSET, WE FIND THAT T HE ISSUE HAS ALREADY BEEN ADJUDICATED BY THE JURISDICTIONAL HIGH COURT IN FAV OR OF THE ASSESSEE AS DISCUSSED ABOVE. THE RELEVANT EXTRACT OF THE ORDER IS REPRODUCED BELOW: 3. SINCE BOTH THE ISSUES ARE COVERED BY VARIOUS J UDGMENTS OF THIS COURT, WE DO NOT FIND IT NECESSARY TO RECORD FACTS AT ANY LENGTH. DIVISION BENCH OF THIS COURT BY JUDGMENT DATED 22.1 1.2011 IN TAX APPEAL NO.2092/2010 IN SOMEWHAT SIMILAR CONTROVERSY OBSERVED AS UNDER '3. WITH RESPECT TO QUESTION [B], THE ISSUE PERTAI NS TO SUB SECTION (8) OF SECTION 80IA OF THE INCOME TAX ACT, 1961. TH E ASSESSEE HAD A CPP UNIT GENERATING ELECTRICITY, WHICH WAS SUPPLYIN G IT TO A GENERAL UNIT. THE ELECTRICITY GENERATED IS BEING SUPPLIED T O OTHER CONSUMERS ALSO. THE CPP UNIT CHARGED RS. 5.40 PS. PER UNIT FR OM THE GENERAL UNIT. THE ASSESSING OFFICER APPLYING SUB-SECTION (8) OF S ECTION 80IA RESTRICTED THE SAME TO RS. 5.32 PS. PER UNIT AND, T HEREBY, RESTRICTED THE DEDUCTIONS CLAIMED BY THE ASSESSEE UNDER SECTION 80 IA OF THE ACT. THIS RESTRICTION WAS PRIMARILY ON THE BASIS THAT THE RAT E OF RS. 5.40 PS. CHARGED BY GUJARAT ELECTRICITY BOARD (' GEB' FOR SH ORT) WAS INCLUSIVE OF 8 PAISE PER UNIT OF ELECTRICITY DUTY. THIS COMPO NENT OF ELECTRICITY DUTY THE ASSESSING OFFICER DISCARDED FOR THE PURPOS ES OF ASCERTAINING MARKET VALUE OF THE ELECTRICITY GENERATED BY THE CP P UNIT AND SUPPLIED TO ITS GENERAL UNIT. 4. CIT (APPEALS) CONFIRMED THE VIEW OF THE ASSESSI NG OFFICER ON THE SAME LINE OF REASONING. THE TRIBUNAL, HOWEVER, ON FURTHER APPEAL BY THE ASSESSEE, REVERSED THE ORDERS PASSED BY THE REVENUE AUTHORITIES REFERRING TO AND RELYING UPON THE DECISIONS OF OTHE R TRIBUNALS. THE TRIBUNAL WAS OF THE OPINION THAT THE MARKET VALUE O F THE ELECTRICITY SUPPLIED BY THE CPP UNIT TO THE GENERAL UNIT WOULD BE THE SAME BEING CHARGED BY GEB FROM THE CONSUME RS. ITA NOS.1455 & 1589/AHD/2016 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT (CROSS A PPEALS) ASST.YEAR 2012-13 - 8 - 5. COUNSEL FOR THE REVENUE CONTENDED THAT THE COMP ONENT OF 8 PAISE PER UNIT WAS THE ELECTRICITY DUTY WHICH GEB W AS NOT AUTHORIZED TO RETAIN BUT HAD TO PASS ON TO THE GOVERNMENT. IN ESSENCE, GEB WAS ONLY COLLECTING 8 PAISE PER UNIT AS ELECTRICITY DUT Y FOR AND ON BEHALF OF THE GOVERNMENT. HE SUBMITTED THAT THE MARKET VALUE OF THE ELECTRICITY SHOULD BE RECKONED ON RS. 5.32 PS. PER UNIT AS WAS DONE BY THE REVENUE AUTHORITY. 6. UNDER SUB-SECTION(8) OF SECTION 80IA OF THE ACT , IF IT IS FOUND THAT WHERE ANY GOODS OR SERVICES HELD FOR THE PURPO SES OF THE ELIGIBLE BUSINESS ARE TRANSFERRED TO ANY OTHER BUSINESS CARR IED ON BY THE ASSESSEE OR WHERE ANY GOODS OR SERVICES HELD FOR TH E PURPOSES OF ANY OTHER BUSINESS CARRIED ON BY THE ASSESSEE ARE TRANS FERRED TO THE ELIGIBLE BUSINESS AND IN EITHER CASE THE CONSIDERAT ION FOR SUCH TRANSFER DOES NOT CORRESPOND TO THE MARKET VALUE OF SUCH GOO DS AS ON THE DATE OF THE TRANSFER, THEN FOR THE PURPOSES OF DEDUCTION UNDER SECTION 80IA IN CASE OF THE ELIGIBLE BUSINESS AS IF THE TRANSFER HAD BEEN MADE AT THE MARKET VALUE OF SUCH GOODS OR SERVICES. IT IS IN TH IS CONTEXT THAT THE QUESTION OF SUBSTITUTING THE ACTUAL CONSIDERATION B Y THE MARKET VALUE COMES INTO PICTURE. 7. WE MAY NOTICE THAT THE TRIBUNAL DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE THAT THE ELECTRICITY IS NEITHER GOO DS NOR SERVICES AND THAT, TRANSFER OF ELECTRICITY, THEREFORE, WOULD NOT BE COVERED UNDER SUB- SECTION (8) OF SECTION 80IA OF THE ACT. HOWEVER, IN SO FAR AS THE TRIBUNAL'S REASONING TO ADOPT THE MARKET VALUE OF T HE GOODS AT RS. 5.40 PS. PER UNIT IS CONCERNED, WE FIND NO ERROR. U NDISPUTEDLY, GEB SUPPLIED THE ELECTRICITY TO ITS CONSUMERS AT THE SA ME RATE. THIS, THEREFORE, WAS A MARKET VALUE OF THE ELECTRICITY SU PPLIED BY THE CPP UNIT TO THE GENERAL UNIT. THE FACT THAT THIS AMOUNT OF RS. 5.40 PS. COMPRISES OF A COMPONENT OF 8 PAISE, WHICH WAS ELEC TRICITY DUTY, TO OUR MIND, WOULD MAKE NO DIFFERENCE IN SO FAR AS THE MAR KET VALUE IS CONCERNED. TO A CONSUMER, THE PRICE BEING PAID REMA INS 5.40 PS. PER UNIT. THE FACT THAT THE SELLER RETAINS ONLY RS. 5.3 2 PS. OUT OF THE SAID COLLECTION AND PASSES ON 8 PAISE PER UNIT TO THE GO VERNMENT IN THE FORM OF ELECTRICITY DUTY, TO OUR MIND, WOULD MAKE N O DIFFERENCE. THIS QUESTION IS, THEREFORE, NOT REQUIRED TO BE CONSIDER ED.' 4. THIS WAS FOLLOWED IN CASE OF CIT V. SHAH ALLOYS LTD. IN TAX APPEAL NO. 2093/2010. THIS WAS REITERATED IN TAX AP PEAL NO.1646/2010 IN CASE OF ACIT V. PRAGATI GLASS WORKS (P.) LTD. (ORDER DATED 30.1.2012), IN WHICH FOLLOWING OBSERVATIONS W ERE MADE ITA NOS.1455 & 1589/AHD/2016 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT (CROSS A PPEALS) ASST.YEAR 2012-13 - 9 - '7. TO OUR MIND, TRIBUNAL HAS COMMITTED NO ERROR. ASSESSING OFFICER AND CIT (APPEALS) WHILE ADOPTING RS. 4.51 P ER UNIT AS THE VALUE OF ELECTRICITY GENERATED BY ELIGIBLE UNIT OF ASSESSEE AND SUPPLIED THROUGH ITS NON ELIGIBLE UNIT ONLY WORKED OUT COST OF SUCH ELECTRICITY GENERATION. IN FACT CIT(APPEALS) IN TERMS RECORDED THAT RS. 4.51 WAS COMPUTED AS THE REASONABLE VALUE OF THE ELECTRICITY GENERATED BY ELIGIBLE UNIT OF ASSESSEE. THIS AMOUNT INCLUDED RS. 4.17 PER UNIT WHICH WAS THE COST OF ELECTRICITY GENERATION AND RS. 0.34 PER UNIT WHICH WAS DUTY PAID BY THE ASSESSEE TO GEB FOR SUCH POWER GEN ERATION. THUS THE SUM OF RS. 4.51 PER UNIT ONLY REPRESENTED THE COST OF ELECTRICITY GENERATION TO THE ASSESSEE. IN SECTION 80IA(8) OF T HE ACT WHAT IS REQUIRED TO BE ASCERTAINED IS THE MARKET VALUE OF T HE GOODS TRANSFERRED BY THE ELIGIBLE BUSINESS, WHEN SUCH TRANSFER IS BY ELIGIBLE BUSINESS TO ANOTHER NON ELIGIBLE BUSINESS OF THE SAME ASSESSEE AND THE CONSIDERATION RECORDED IN THE ACCOUNTS OF THE ELIGI BLE BUSINESS DOES NOT CORRESPOND TO MARKET VALUE OF SUCH GOODS. TERM 'MARKET VALUE' IS FURTHER EXPLAINED IN EXPLANATION TO SAID SUB-SECTIO N TO MEAN IN RELATION TO ANY GOODS OR SERVICES, PRICE THAT SUCH GOODS OR SERVICES WILL ORDINARILY FETCH IN THE OPEN MARKET. TO OUR MI ND SUM OF RS. 4.51 PER UNIT OF ELECTRICITY ONLY REPRESENTED COST OF EL ECTRICITY GENERATION TO THE ASSESSEE AND NOT THE MARKET VALUE THEREOF. IT I S NOT IN DISPUTE THAT THE GEB CHARGED RS. 5 PER UNIT FOR SUPPLYING ELECTR ICITY TO OTHER INDUSTRIES INCLUDING NON ELIGIBLE UNIT OF THE ASSES SEE ITSELF. TRIBUNAL THEREFORE, WHILE ADOPTING THE SAID BASE FIGURE AND EXCLUDING EXCISE DUTY THEREFROM TO WORK OUT RS. 4.90 AS THE MARKET V ALUE OF THE ELECTRICITY GENERATED BY THE ASSESSEE, TO OUR MIND, COMMITTED NO ERROR. IT CAN BE EASILY SEEN THAT IF THE ASSESSEE WERE TO SUPPLY SUCH ELECTRICITY OR WAS ALLOWED TO DO SO IN THE OPEN MARKET, SURELY IT WOULD NOT FETCH RS. 4.51 PER UNIT BUT RS. 5 PER UNIT AS WAS BEING C HARGED BY GEB. SINCE THE EXCISE DUTY COMPONENT THEREOF WOULD NOT B E RETAINED BY THE ASSESSEE, TRIBUNAL REDUCED THE SAID FIGURE BY THE N ATURE OF EXCISE DUTY AND CAME TO THE FIGURE OF RS. 4.90 TO ASCERTAIN THE MARKET VALUE OF ELECTRICITY GENERATED BY THE ELIGIBLE UNIT AND SUPP LIED TO NON ELIGIBLE BUSINESS OF THE ASSESSEE. NO ERROR WAS COMMITTED BY THE TRIBUNAL. NO QUESTION OF LAW THEREFORE, ARISES. TAX APPEAL IS DI SMISSED.' 5. ISSUE ONCE AGAIN REACHED THE DIVISION BENCH OF THIS COURT IN CASE OF CIT V. ALEMBIC LTD. IN TAX APPEAL NO.471/20 09 AND CONNECTED APPEALS. THE DIVISION BENCH REFERRING TO EARLIER JU DGMENTS OF THE COURT HELD AS UNDER: '11. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY TH E LEARNED COUNSEL FOR THE PARTIES. WE HAVE ALSO CONSIDERED TH E CASE LAWS CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE. TAKING INTO C ONSIDERATION THE JUDEMENTS OF THIS COURT AND OTHER HIGH COURTS, CITE D ABOVE, WE ARE OF ITA NOS.1455 & 1589/AHD/2016 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT (CROSS A PPEALS) ASST.YEAR 2012-13 - 10 - THE OPINION THAT THE TRIBUNAL HAS RIGHTLY ALLOWED T HE CLAIM OF THE ASSESSEE. IN THAT VIEW OF THE MATTER, WE DO NOT FIN D ANY INFIRMITY IN THE ORDER OF THE TRIBUNAL. THEREFORE, WE ANSWER QUESTIO N (C) AND (D) IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE.' 6. ISSUES ARE THUS CONSIDERED ON NUMBER OF OCCASIO NS BY THE COURT AND HELD AGAINST THE REVENUE. QUESTIONS ARE A NSWERED AGAINST THE REVENUE. BOTH THE TAX APPEALS ARE THEREFORE, DI SMISSED. 25.1 AS THE ISSUE IS COVERED IN FAVOR OF THE ASSES SEE BY THE HONBLE JURISDICTIONAL HIGH COURT AS DISCUSSED ABOVE. THUS RESPECTFULLY FOLLOWING THE SAME WE REVERSE THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION MADE BY HIM. HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. IN VIEW OF THE ABOVE, WE ALSO NOTE THAT THE IMPUGNE D ISSUE HAS ALSO BEEN DECIDED BY THE HONBLE GUJARAT HIGH COURT IN THE OW N CASE OF THE ASSESSEE IN ITS FAVOR IN TAX APPEAL NO. 708 OF 2016. THE RELEVA NT EXTRACT OF THE JUDGMENT HAS ALREADY BEEN REPRODUCED IN THE PRECEDING PARAGR APH. WE ALSO NOTE THAT THE LEARNED CIT (A) HAS RELIED ON THE ORDER OF THIS TRIBUNAL IN THE OWN CASE OF THE ASSESSEE BEARING IT A NO. 2398/AHD/2012 FOR THE ASSESSMENT YEAR 2009-10 VIDE ORDER DATED 19-11- 2015. HOWEVER, IT IS PERTINENT TO NOTE THAT THIS TRIBUNAL HAS REVISED IT S ORDER DATED 19-11-2015 IN THE MA BEARING NO. 160/AHD/2016 ARISING OUT OF ITA NO. 2398/AHD/2012 FOR THE ASSESSMENT YEAR 2009-10 VIDE ORDER DATED 3 RD MARCH 2017. THE RELEVANT EXTRACT OF THE ORDER IS REPRODUCED AS UNDER: 4. WE HAVE HEARD THE RIVAL CONTENTIONS. ASSESSEE THROUGH THIS MISCELLANEOUS APPLICATION IS REFERRING TO AN APPARE NT MISTAKE WHICH HAS OCCURRED IN THE TRIBUNALS ORDER DATED 19.11.20 15 IN PARA 24 ADJUDICATING GROUND NO.4 RAISED BY THE ASSESSEE IN ITA NO.2398/AHD/2012 FOR ASST. YEAR 2009-10. WE OBSERVE THAT ASSESSEE, WHICH IS ELIGIBLE FOR CLAIMING DEDUCTION U/S 80IA O F THE ACT ADOPTED THE SALE PRICE OF ELECTRICITY AT RS.4.55 PER UNIT W HICH WAS RESTRICTED TO RS.2.23 PER UNIT BY THE ASSESSING OFFICER AND WAS F URTHER SUSTAINED TO RS.3.11 PER UNIT BY LD.CIT(A). AGGRIEVED, ASSESSEE CAME UP IN APPEAL ITA NOS.1455 & 1589/AHD/2016 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT (CROSS A PPEALS) ASST.YEAR 2012-13 - 11 - BEFORE THE TRIBUNAL AGAINST LD. COMMISSIONER OF INC OME TAX(A)S ORDER ALLOWING DEDUCTION U/S 80IA ON THE BASIS OF S ALE PRICE OF ELECTRICITY AT RS.3.11 AS AGAINST RS.4.55 PER UNIT. WE FURTHER OBSERVE THAT CO-ORDINATE BENCH VIDE ITS ORDER FOR ASST. YEA R 2005-06 TO 2007- 08 IN ASSESSEES OWN CASE ALLOWED ASSESSEES CLAIM OF DEDUCTION U/S 80IA OF THE ACT BY TAKING THE SALE PRICE AT RS.4.55 PER UNIT. HOWEVER, IN PARA 24 OF THE TRIBUNALS ORDER DATED 19.11.2015 IT WAS WRONGLY MENTIONED THAT GROUND OF ASSESSEE IS PARTLY ALLOWED AND NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LD. COMM ISSIONER OF INCOME TAX(A). 5. IN VIEW OF OUR ABOVE DISCUSSION, WE ARE OF THE OPINION THAT IN THESE PECULIAR FACTS AN APPARENT MISTAKE HAS CROPPED UP I N THE TRIBUNALS ORDER DATED 19.11.15 GIVING RISE TO A CONTRADICTORY VIEW OCCURRING IN PARA 23 AND PARA 24 OF THE ORDER. WE THUS RECALL OU R MA NO.160/AHD/2016 IN ITA NO. 2398/AHD/2012 ASST. YEAR 2009-10 5 FINDING MENTIONED IN PARA 24 OF THE ORDER DATED 19. 11.15 AND REPLACE IT WITH THE FOLLOWING PARAGRAPH :- RESPECTFULLY FO LLOWING THE RATIO OF DECISION TAKEN BY THE CO-ORDINATE BENCH IN ASSESSEE S OWN CASE, WE SET ASIDE THE ORDER OF LD. COMMISSIONER OF INCOME T AX(A) AND ALLOW THE GROUND OF ASSESSEE. 6. IN THE RESULT, MISCELLANEOUS APPLICATION FILED BY THE ASSESSEE IS ALLOWED IN THE ABOVE STATED TERMS. THUS, IT IS CLEAR THAT THE ORDER OF THIS TRIBUNAL A S RELIED BY THE LEARNED CIT (A) AS DISCUSSED ABOVE HAS BEEN REVISED SUBSEQU ENTLY BY THE SAME TRIBUNAL BY DECIDING THE ISSUE IN FAVOUR OF THE ASS ESSEE. IN VIEW OF THE ABOVE, WE HOLD THAT THE IMPUGNED ISSUE HAS ALREADY BEEN DE CIDED IN FAVOUR OF THE ASSESSEE BY THIS TRIBUNAL WHICH WAS ALSO SUBSEQUENT LY CONFIRMED BY THE HONBLE GUJARAT HIGH COURT AS DISCUSSED ABOVE. ACCO RDINGLY, WE REVERSE THE ORDER OF THE LEARNED CIT (A) AND DIRECT THE AO TO D ELETE THE ADDITION MADE BY HIM. HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 9. THE 2 ND ISSUE RAISED BY THE ASSESSEE IN GROUND NO. 3 IS TH AT THE LD. CIT- A ERRED IN NOT ADJUDICATING THE ISSUE FOR THE ADDIT ION OF RS. 18.72 LACS MADE BY ITA NOS.1455 & 1589/AHD/2016 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT (CROSS A PPEALS) ASST.YEAR 2012-13 - 12 - THE AO UNDER MAT COMPUTATION OF INCOME UNDER SECTIO N 115 JB OF THE ACT ON ACCOUNT OF PRIOR INCOME. 10. THE SIMILAR ISSUE WAS ALSO RAISED BY THE REVENU E IN ITA NO. 1589/AHD/2016 IN GROUND NO. 3 CHALLENGING THE DELET ION OF THE ADDITION MADE BY THE AO FOR RS. 39.11 LACS UNDER NORMAL AND MAT C OMPUTATION OF INCOME ON ACCOUNT OF PRIOR PERIOD EXPENSES. 11. THE ISSUES AS RAISED BY THE ASSESSEE AND THE RE VENUE ARE INTER- CONNECTED. THEREFORE, WE HAVE CLUBBED BOTH OF THEM FOR THE PURPOSE OF THE ADJUDICATION. 12. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HA S SHOWN PRIOR PERIOD INCOME AND EXPENSE IN THE MANNER AS DETAILED BELOW: PRIOR PERIOD ADJUSTMENT (NET) DISCLOSURE PURSUANT TO NOTE NO.5(I)(I) OF PART II O F SCHEDULE VI TO THE COMPANIES ACT, 1956[RS. IN LAKH S] 2011-12 2010-11 INCOME SALES OTHER INCOME EXPENDITURE RAW MATERIALS CONSUMED ADMINISTRATIVE, GENERAL AND MARKETING EXPENSES INTEREST DEPRECIATION (NET) NET DEBIT / (CREDIT) TOTAL : 4.36 14.36 - - 18.72 - 8.08 3.45 1.64 25.94 (15.29) - - 2.32 39.11 (12.97) 20.39 (12.97) ITA NOS.1455 & 1589/AHD/2016 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT (CROSS A PPEALS) ASST.YEAR 2012-13 - 13 - THE ASSESSEE ACCORDINGLY CLAIMED NET EXPENSES UNDER THE HEAD PRIOR PERIOD ITEM AMOUNTING TO RS. 20.39 LACS ONLY. AS PE R THE ASSESSEE, THE PRIOR PERIOD EXPENSES WERE CRYSTALLIZED IN THE YEAR UNDER CONSIDERATION. THEREFORE THE SAME WAS CLAIMED AS DEDUCTION AGAINST THE PROFI T OF THE CURRENT YEAR. THE ASSESSEE FURTHER SUBMITTED THAT THERE CANNOT BE ANY ADJUSTMENT WHILE DETERMINING THE BOOKS PROFIT UNDER SECTION 11 5 JB OF THE ACT AS THERE IS NO PROVISION TO MAKE ANY ADJUSTMENT UNDER THE MAT. HOWEVER, THE AO DISAGREED WITH THE CONTENTION OF TH E ASSESSEE BY OBSERVING THAT THE ASSESSEE IS MAINTAINING ITS BOOK S OF ACCOUNTS BASED ON MERCANTILE SYSTEM OF ACCOUNTING. THEREFORE, THE PRI OR PERIOD EXPENSES ARE NOT ELIGIBLE FOR DEDUCTION AGAINST THE PROFIT OF THE CU RRENT YEAR. THE AO IN HOLDING SO PLACED HIS RELIANCE ON THE JUDGMENT OF HONBLE H IGH COURT OF KERALA IN THE CASE OF SREE BHAGAWATHY TEXTILES LTD. VS. ACIT REPORTED IN 199 TAXMAN 14. SIMILARLY, THE AO NOTICED THAT THE AMOUNT OF PRIOR PERIOD INCOME OF 18.72 LAKHS HAS NOT BEEN ADDED BACK BY THE ASSESSEE IN COMPUTING THE INCOME UNDER NORMAL AS WELL AS MAT PROVISIONS OF THE ACT. ACCORDINGLY THE AO ADDED BACK THE PRIOR PERIOD EXPE NSES OF 39.11 LACS UNDER NORMAL AS WELL AS MAT COMPUTATION OF INC OME AS WELL AS PRIOR PERIOD INCOME OF 18.72 LAKHS UNDER NORMAL AND MAT COMPUTATION OF INC OME. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LEARN ED CIT (A). ITA NOS.1455 & 1589/AHD/2016 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT (CROSS A PPEALS) ASST.YEAR 2012-13 - 14 - THE ASSESSEE BEFORE THE LEARNED CIT (A) SUBMITTED T HAT THE LIABILITY TOWARDS THE PRIOR PERIOD EXPENSES WAS CRYSTALLIZED IN THE YEAR UNDER CONSIDERATION THEREFORE THE SAME WAS CLAIMED AS DED UCTION. THE ASSESSEE ALSO SUBMITTED THAT IT HAS ALREADY MAD E THE DISALLOWANCE OF RS. 25,93,976 REPRESENTING THE AMOUNT OF DEPRECIATI ON EMBEDDED IN THE AMOUNT OF PRIOR PERIOD EXPENSES. ACCORDINGLY THE AS SESSEE CLAIMED THAT IF ANY DISALLOWANCE IS REQUIRED TO BE MADE ON ACCOUNT OF P RIOR PERIOD EXPENSES THEN THERE WILL BE DOUBLE ADDITION TO THE EXTENT OF RUPE ES 25,93,976.00 ONLY. HOWEVER, THE LEARNED CIT (A) OBSERVED THAT THE ASSE SSEE HAS NOT FURNISHED ANY EVIDENCE SUGGESTING THAT THE PRIOR PE RIOD EXPENSES WERE CRYSTALLIZED IN THE YEAR UNDER CONSIDERATION. THE LEARNED CIT (A) FURTHER AGREED WITH THE SUBMISS ION OF THE ASSESSEE THAT THE DISALLOWANCE OF RS. 25,93,976.00 WILL AMOU NT TO DOUBLE ADDITION AS PER THE SUBMISSION OF THE ASSESSEE. ACCORDINGLY THE LEA RNED CIT (A) DIRECTED THE AO TO VERIFY WHETHER THE ASSESSEE HAS MADE THE DISA LLOWANCE OF RS. 25,93,976 BEING REPRESENTING PRIOR PERIOD EXPENSES. IF THE CL AIM OF THE ASSESSEE IS FOUND CORRECT THEN HE DIRECTED THE AO TO DELETE THE ADDIT ION MADE BY HIM UNDER NORMAL COMPUTATION OF INCOME. REGARDING THE ADDITION MADE UNDER BOOK PROFIT FOR 3 9.11 LACS, THE LEARNED CIT (A) DIRECTED THE AO TO DELETE THE ADDIT ION MADE BY HIM BY OBSERVING THAT IN THE IMMEDIATE PRECEDING ASSESSMEN T YEAR 2011-12 SUCH ADDITION WAS DELETED. ITA NOS.1455 & 1589/AHD/2016 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT (CROSS A PPEALS) ASST.YEAR 2012-13 - 15 - 13. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A) BOTH THE ASSESSEE AND THE REVENUE ARE IN APPEAL BEFORE US. THE ASSESS EE IS IN APPEAL BEFORE US FOR THE CONFIRMATION OF THE ADDITION MADE BY THE LEARNE D CIT (A) FOR 18,72,000 IN THE COMPUTATION UNDER SECTION 115 JB OF THE ACT WHEREAS THE REVENUE IS IN APPEAL AGAINST THE DELETION OF THE CONFIRMATION OF 39.11 LACS UNDER MAT COMPUTATION OF INCOME. 14. THE LEARNED AR BEFORE US SUBMITTED THAT THE ISS UE WAS RAISED BEFORE THE LEARNED CIT (A) FOR THE ADDITION MADE BY THE AO FOR 18,72,000.00 UNDER MAT COMPUTATION OF INCOME. BUT THE LEARNED CIT (A) HAS NOT ADJUDICATED THE SAME. ACCORDINGLY, THE LEARNED AR PRAYED BEFORE US TO RESTORE THE ISSUE TO THE FILE OF THE LEARNED CIT-A FOR FRESH ADJUDICATION AS PER THE PROVISIONS OF LAW. 15. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THA T THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. THEREFOR E, THE PRIOR PERIOD EXPENSES CANNOT BE ALLOWED AS DEDUCTION IN THE YEAR UNDER CONSIDERATION. BOTH THE LEARNED AR AND THE DR VEHEMENTLY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW TO THE EXTENT FAVORABLE TO THEM. 16. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE CASE ON HAND, THE AO HAS HELD THAT THE PRIOR PERIOD INCOME AS WELL AS PRIOR PERIOD EXPENSE S AS INCOME OF THE ASSESSEE. ACCORDINGLY, THE AO ADDED THE PRIOR PERIOD INCOME A MOUNTING TO RS. 18.72 LACS UNDER NORMAL COMPUTATION AND MAT COMPUTATION O F INCOME. SIMILARLY THE AO ALSO ADDED THE PRIOR PERIOD EXPENSES AMOUNTING T O RS. 39.11 LACS UNDER NORMAL AND MAT COMPUTATION OF INCOME. ITA NOS.1455 & 1589/AHD/2016 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT (CROSS A PPEALS) ASST.YEAR 2012-13 - 16 - AT THE OUTSET WE NOTE THAT THE ASSESSEE HAS OFFERED THE PRIOR PERIOD INCOME AMOUNTING TO 18.72 LACS TO TAX UNDER NORMAL AND MAT COMPUTATION OF INCOME. THIS FACT CAN BE VERIFIED FROM THE FROM THE PROFIT AND LOSS STATEMENT OF INCOME UNDER NORMAL AND MAT COMPUTATION OF INCOM E PLACED ON PAGE 7 AND 9 -11 OF THE PAPER BOOK. THEREFORE, ANY FURTHER ADDITION ON ACCOUNT OF PRIOR PERIOD INCOME TO THE TOTAL INCOME AND THE BOO K PROFIT WOULD LEAD TO DOUBLE ADDITION WHICH IS UNWANTED UNDER THE PROVISI ONS OF ACT. SIMILARLY, WE ALSO NOTE THAT THE ASSESSEE HAS ONLY CLAIMED PRIOR PERIOD EXPENSES AMOUNTING TO 20.39 LAKHS (39.11 LACS 18.72 LACS) AFTER ADJUSTI NG THE PRIOR PERIOD INCOME AS DISCUSSED ABOVE. NOW TURNING TO THE APPEAL FILED BY THE ASSESSEE 17. AT THE OUTSET WE NOTE THAT THE PRIOR PERIOD INC OME HAS ALREADY BEEN OFFERED TO TAX BY THE ASSESSEE UNDER NORMAL AS WELL AS MAT COMPUTATION OF INCOME WHICH WAS SUBSEQUENTLY ADDED BY THE AO RESUL TING TO THE DOUBLE ADDITION. HOWEVER, WE NOTE THAT THE ASSESSEE BEFORE THE LEARN ED CIT (A) AS WELL AS BEFORE US HAS NOT CHALLENGED THE IMPUGNED ADDITI ON UNDER NORMAL COMPUTATION OF INCOME. THEREFORE, WE ARE NOT INCLIN ED TO COMMENT ANYTHING ON SUCH ASPECT. REGARDING THE ADDITION OF 18.72 LAKHS UNDER MAT COMPUTATION OF INCOME, WE NOTE THAT THE ASSESSEE HAS CHALLENGED BE FORE THE LEARNED CIT (A) ITA NOS.1455 & 1589/AHD/2016 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT (CROSS A PPEALS) ASST.YEAR 2012-13 - 17 - BUT THE SAME HAS NOT BEEN ADJUDICATED BY HIM. THERE FORE IN THE INTEREST OF JUSTICE AND FAIR PLAY WE ARE INCLINED TO RESTORE TH IS ISSUE TO THE FILE OF THE LEARNED CIT (A) FOR FRESH ADJUDICATION AS PER THE P ROVISIONS OF LAW. HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR THE STATISTICAL PURPOSES. NOW TURNING TO THE APPEAL FILED BY THE REVENUE 18. AT THE OUTSET, WE NOTE THAT THE GROUND RAISED B Y THE REVENUE IS NOT CLEAR WHETHER IT IS AGAINST THE NORMAL COMPUTATION OF INC OME OR MAT COMPUTATION OF INCOME. HOWEVER IN THE INTEREST OF JUSTICE AND F AIR PLAY WE ADJUDICATE THE ISSUE UNDER NORMAL AS WELL AS MAT COMPUTATION OF IN COME. REGARDING THE NORMAL COMPUTATION OF INCOME, WE NOTE THAT THE ASSESSEE HAS CLAIMED DEDUCTION ONLY TO THE TUNE OF 39.11 LACS. OUT OF SUCH EXPENSES, WE ALSO NOTE THAT THE ASSESSEE HAS MADE THE DISALLO WANCE OF PRIOR PERIOD EXPENSES IN THE FORM OF DEPRECIATION AMOUNTING TO R S. 25,93,976.00. THIS FACT CAN BE VERIFIED FROM THE NORMAL COMPUTATION OF INCO ME PLACED ON PAGE 9 OF THE PAPER BOOK. THUS, AS A RESULT OF SUO-MOTO DISALLOWA NCE BY THE ASSESSEE, WE NOTE THAT THERE CANNOT BE FOR THE DISALLOWANCE ON A CCOUNT OF PRIOR PERIOD EXPENSES UNDER NORMAL COMPUTATION OF INCOME FOR THE ENTIRE AMOUNT. IT IS BECAUSE THE ASSESSEE HAS CLAIMED THE DEDUCTION FOR 39.11 LAKHS WHEREAS IT HAS MADE THE DISALLOWANCE OF RS. 25, 93, 976.00 IN THE STATEMENT OF INCOME. THUS THE AMOUNT INVOLVED IN THE DISPUTE IS LIMITED TO TH E EXTENT OF 13,17,024.00 ONLY WHICH HAS NOT BEEN CHALLENGED BEFORE US. REGARDING THE MAT COMPUTATION OF INCOME, WE NOTE TH AT WHILE DETERMINING THE INCOME UNDER THE PROVISIONS OF SECT ION 115 JB OF THE ACT, ITA NOS.1455 & 1589/AHD/2016 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT (CROSS A PPEALS) ASST.YEAR 2012-13 - 18 - THERE CAN BE MADE LIMITED ADJUSTMENTS IN THE BOOK P ROFIT AS SPECIFIED THEREIN. ON PERUSAL OF THE PROVISIONS OF SECTION 115 JB OF T HE ACT, WE NOTE THAT THERE IS NO ADJUSTMENT ON ACCOUNT OF PRIOR PERIOD EXPENSES. IN HOLDING SO WE FIND SUPPORT AND GUIDANCE FROM THE JUDGMENT OF HONBLE S UPREME COURT IN THE CASE OF APOLLO TYRES LTD. VS. CIT REPORTED IN 255 ITR 27 3 WHEREIN IT WAS HELD AS UNDER: THEREFORE, THE ASSESSING OFFICER WHILE COMPUTING THE INCOME UNDER SECTION 115J HAS ONLY THE POWER OF EXAMINING WHETHER THE BO OKS OF ACCOUNT ARE CERTIFIED BY THE AUTHORITIES UNDER THE COMPANIES AC T AS HAVING BEEN PROPERLY MAINTAINED IN ACCORDANCE WITH THE COMPANIES ACT. TH E ASSESSING OFFICER THEREAFTER HAS LIMITED POWER OF MAKING ADDITIONS AN D REDUCTIONS AS PROVIDED FOR IN THE EXPLANATION TO THE SAID SECTION. TO PUT IT DIFFERENTLY, THE AS SESSING OFFICER DOES NOT HAVE THE JURISDICTION TO GO BEHIND THE NET PROFIT SHOWN IN THE PROFIT AND LOSS ACCOUNT EXCEPT TO THE EXTENT PROVID ED IN THE EXPLANATION TO SECTION 115J. IN VIEW OF THE ABOVE, WE HOLD THAT THERE CANNOT BE ANY ADDITION TO THE BOOK PROFIT ON ACCOUNT OF PRIOR PERIOD EXPENSES AS DISCUSSED ABOVE. IN THE RESULT THE APPEAL OF THE REVENUE IS PARTLY ALLOWED. 19. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR THE STATISTICAL PURPOSES. COMING TO THE REVENUES APPEAL BEARING ITA NO. 1589 /AHD/2016 PERTAINING TO THE ASSESSMENT YEAR 2012-13 20. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE AMORTIZATION OF LEA SE RENT AMOUNTING TO RS. 15.35 LACS, WHICH IN FACT, THE EXPENDITURE I S TO TREATED AS CAPITAL IN NATURE AND NOT AS REVENUE IN NATURE AS HELD BY T HE LD. CIT(A). ITA NOS.1455 & 1589/AHD/2016 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT (CROSS A PPEALS) ASST.YEAR 2012-13 - 19 - 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE CLAIM OF REPLACEMEN T COST OF REMEMBERAINING IN MEMBRANE CELLS AMOUNTING TO RS. 8 ,85,94,567/-, WHICH IN FACT, THE EXPENDITURE IS TO TREATED AS CAP ITAL IN NATURE AND NOT AS REVENUE IN NATURE AS HELD BY THE LD. CIT(A). 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE PRIOR PERIOD EXPENSES AMOUNTING TO RS.39.11 LACS, CLAIMED BY THE ASSESSEE. SINCE THE A SSESSEE COMPANY IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING, THE EXPENSES RELATED TO THE PRIOR PERIOD ARE NOT AN ALLOWABLE EXPENSES. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE UNUTULIZED MODVAT CRED IT IN RAW MATERIAL AMOUNTING TO RS. 6,08,47,130/-. THE AO HAS RIGHTY J USTIFIED IN ADDING BACK THE UNUTILIZED MODVAT CREDIT FOR THE YEAR AS P ER THE NEW PROVISIONS OF SECTION 145A OF THE I. T. ACT, WHEREI N THE UNUTILIZED MODVAT CREDIT HAD TO BE INCLUDED IN THE CLOSING STO CK OF RAW MATERIAL AND WORK IN PROGRESS, WHEREAS THE EXCISE D UTY PAID ON UNSOLD FINISHED GOODS HAD TO BE INCLUDED IN THE INVENTORY OF FINISHED GOODS.' 5. THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND OR ALTER THE ABOVE GROUNDS AS MAY BE DEEMED NECESSARY. RELIEF CLAIMED IN APPEAL IT IS PRAYED THAT THE ORDER OF THE CIT (APPEALS) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 21. THE 1 ST ISSUE RAISED BY THE REVENUE IS THAT THE CIT (A) ER RED IN DELETING THE ADDITION MADE BY THE AO FOR 15.35 LACS ON ACCOUNT OF LEASE RENT. 22. THE ASSESSEE HAS AMORTIZED THE LUMP-SUM PAYMENT PAID TO GUJARAT INDUSTRIAL DEVELOPMENT CORPORATION FOR THE LAND TAK EN ON LEASE OVER A PERIOD OF LEASE I.E. 99 YEARS. ACCORDINGLY, THE ASSESSEE H AS CHARGED THE AMOUNT AMORTIZED FOR THE SUM OF 15.35 LACS IN THE PROFIT AND LOSS ACCOUNT. HOWEVER , THE SAME WAS DISALLOWED BY THE AO TREATING THE SAME AS CAPITAL IN NATURE AND AFTER HAVING RELIANCE ON THE ORDER OF IMMEDIATE PRE CEDING ASSESSMENT YEAR ITA NOS.1455 & 1589/AHD/2016 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT (CROSS A PPEALS) ASST.YEAR 2012-13 - 20 - 2011-12. THUS, THE SUM OF 15.35 LACS WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 23. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE L EARNED CIT (A) WHO HAS DELETED THE ADDITION MADE BY THE AO AFTER HAVING RE LIANCE ON THE ORDER OF HIS PREDECESSOR FOR THE IMMEDIATE PRECEDING ASSESSMENT YEAR. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A) , THE REVENUE IS IN APPEAL BEFORE US. BEFORE US THE LEARNED DR AND THE LEARNED AR RELIED ON THE ORDER OF THE AUTHORITIES BELOW AS FAVOURABLE TO THEM. 24. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET WE NOT E THAT THE IMPUGNED ISSUE HAS ALREADY BEEN DECIDED BY THE JURISDICTIONAL HIGH COURT IN FAVOUR OF THE ASSESSEE IN TAX APPEAL NO. 578 OF 2016 WIDE ORDER D ATED 3 OCTOBER 2016. THE RELEVANT EXTRACT IS REPRODUCED AS UNDER: 2. SINCE THE ISSUE IS COVERED BY THE DECISION OF T HIS COURT, WE HAD ISSUED NOTICE FOR FINAL DISPOSAL. LEARNED ADVOCATE FOR THE PARTIES DO NOT DISPUTE THAT BY JUDGEMENT DATED 21.10.2013 IS TAX APPEAL NO.778/ 2013 AND CONNECTED APPEALS, THIS COURT IN CASE OF THIS VERY ASSESSEE C ONSIDERED THIS ISSUE AS UNDER: 9.0 NOW, SO FAR AS QUESTION NO 2 IN TAX APPEAL NOS .778 OF 2013 AND 779 OF 2013 AND SOLE QUESTION IN TAX APPEAL NO. 780 OF 2013I.E. WHETHER THE LEARNED TRIBUNAL WAS RIGHT IN LAW IN HO LDING THAT RS, 3,36.224/- BEING AMORTISATION OF LEASE RENT FOR THE LAND IS CAPITAL EXPENDITURE IS CONCERNED, ON CONSIDERING THE DECISI ON OF THIS COURT IN THE CASE OF SUN PHARMACEUTICAL INDUSTRIES LIMITED (SUPRA) AS WELL AS DECISION OF THE HON'BLE SUPREME COU RT IN THE CASE OF MADRAS AUTO SERVICES PVT. LIMITED (SUPRA), WE ARE OF THE OPINION THAT THE LEARNED TRIBUNAL HAS COMMITTED AN ERROR IN DIST INGUISHING THE ITA NOS.1455 & 1589/AHD/2016 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT (CROSS A PPEALS) ASST.YEAR 2012-13 - 21 - AFORESAID DECISIONS AND NOT APPLYING THE SAME TO TH E FACTS OF THE CASE ON HAND. CONSIDERING THE AFORESAID TWO DECISIONS, I T IS TO BE HELD THAT THE AFORESAID LEASE RENT WAS DEDUCTIBLE AS REVENUE EXPENDITURE AND THE LEARNED TRIBUNAL HAS ERRED IN HOLDING THAT RS.3,36, 224/- AFTER AMORTISATION OF LEASE RENT PAID FOR THE LAND IS CAP ITAL EXPENDITURE. UNDER THE CIRCUMSTANCES, CONSIDERING THE AF ORESAID TWO DECISIONS OF THE HON'BLE SUPREME CONN IN THE CASE OF MADRAS AUTO SERVICES PVT, LIMITED (SUPRA) AND THE DECISION OF THIS HON'BLE COURT IN THE CASE OF SUN PHARMACEUTICAL INDUSTRIES LIMITED (SUPRA) THE QUESTION NO. 2 IN TAX APPEAL NOS. 778 AND 779 OF 2013 AND S OLE QUESTION NO.1 IN TAX APPEAL NO. 780 OF 2013 IS REQUIRED TO BE AN SWERED IN FAVOUR OF THE ASSESSOR AND AGAINST THE REVENUE. 3. IN THE RESULT, APPEAL IS ALLOWED. QUESTION IS AN SWERED IN FAVOUR OF THE ASSESSEE. JUDGEMENT OF THE TRIBUNAL TO THAT EXTENT IS REVERSED. TAX APPEAL IS DISPOSED OF. RESPECTFULLY, FOLLOWING THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE OWN CASE OF THE ASSESSEE (SUPRA) , WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE LEARNED CIT-A. HENCE THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 25. THE NEXT ISSUE RAISED BY THE REVENUE IS THAT TH E LEARNED CIT (A) ERRED IN DELETING THE ADDITION MADE BY THE AO FOR 8,85,94,567/- ONLY ON ACCOUNT OF REPLACEMENT COST OF REMEMBERAINING IN MEMBRANE CELL S TREATING THE SAME AS CAPITAL EXPENDITURE. 26. THE AO DURING THE ASSESSMENT PROCEEDINGS OBSERV ED THAT THE ASSESSEE HAS INCURRED CERTAIN EXPENDITURE OF RS. 19,71,24,45 4.00 REPRESENTING THE REPLACEMENT OF PARTS/COMPONENTS OF THE PROCESS SYST EM WHICH HAS USEFUL LIFE FOR MORE THAN ONE YEAR. ACCORDINGLY, THE AO TREATED THE SAME AS CAPITAL EXPENDITURE AND DISALLOWED THE SAME AFTER ALLOWING THE DEPRECIATION ON SUCH EXPENDITURE. THUS, THE SUM OF 18,23,40,120 AFTER DEPRECIATION WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ITA NOS.1455 & 1589/AHD/2016 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT (CROSS A PPEALS) ASST.YEAR 2012-13 - 22 - 27. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE L EARNED CIT (A) WHO DELETED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER: 4.2.1 IDENTICAL ISSUE WAS INVOLVED IN APPELLANTS OWN CASE IN EARLIER YEARS ALSO AND THE ITAT, AHMEDABAD BENCH, IN ITS ORDERS F OR A.Y. 1999-2000 TO A.Y. 2004-05, HAS DECIDED THE ISSUE IN FAVOUR OF THE APP ELLANT, BESIDES, IN THE APPELLATE ORDER FOR A.Y. 2011-12 REFERRED TO ABOVE, ENTIRE EXPENDITURE INCURRED AS COST OF REPLACEMENT OF MEMBRANE CELLS H AS BEEN ALLOWED AS REVENUE EXPENDITURE. HENCE, THE AO IS DIRECTED TO A LLOW THE ENTIRE EXPENDITURE AS REVENUE EXPENDITURE AND AT THE SAME TIME THE DEPRECIATION ALLOWED BY THE AO BY TREATING THIS AMOUNT AS CAPITA L EXPENDITURE WILL BE WITHDRAWN AT THE TIME OF GIVING EFFECT TO THIS DECI SION. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A) , THE REVENUE IS IN APPEAL BEFORE US. 28. BEFORE US THE LEARNED DR AND THE LEARNED AR REL IED ON THE ORDER OF THE AUTHORITIES BELOW AS FAVOURABLE TO THEM. 29. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET WE NOT E THAT THE IMPUGNED ISSUE HAS ALREADY BEEN DECIDED BY THE JURISDICTIONAL HIGH COURT IN FAVOUR OF THE ASSESSEE IN TAX APPEAL NO. 577 OF 2016 VIDE ORDER D ATED 1 AUGUST 2016. THE RELEVANT EXTRACT IS REPRODUCED AS UNDER: 3. THOUGH THREE DIFFERENT QUESTIONS ARE FRAMED, T HE ISSUE IS SINGLE VIZ. THE CORRECTNESS OF THE DECISION OF THE ITAT IN DELETING ADDITION OF RS. 4.67 CRORES MADE ON ACCOUNT OF EXPENSES INCURRED FOR REPLACEMEN T OF REMEMBERING CELLS- II. THE REVENUE WOULD CONTEND THAT THE EXPENDITURE IS CAPITAL IN NATURE AND THEREFORE, WAS NOT ALLOWABLE DEDUCTION. 4. BOTH SIDES AGREED THAT THIS ISSUE IN CASE OF TH IS VERY ASSESSEE FOR EARLIER ASSESSMENT YEARS CAME UP FOR CONSIDERATION BEFORE THIS COURT IN CASE OF COMMISSIONER OF INCOME TAX VS. GUJARAT ALKALIES AND CHEIMCALS LTD . ITA NOS.1455 & 1589/AHD/2016 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT (CROSS A PPEALS) ASST.YEAR 2012-13 - 23 - REPORTED IN 372 ITR 237. DIVISION BENCH OF THIS COU RT DISMISSED THE REVENUE'S APPEAL MAKING FOLLOWING OBSERVATIONS: '12. THE ATTEMPT TO CONTEND THAT LIFE OF MEMBRANE W OULD BE SPREAD OVER FROM 3 TO 5 YEARS OR THAT THE AMOUNT INVOLVED FOR REPLACEMENT OF MEMBRANE IS HUGE AND, THEREFORE, THE DEPARTURE ON T HE PART OF THE REVENUE COULD BE SAID AS JUSTIFIED, IN OUR VIEW, CA NNOT BE COUNTENANCE FOR TWO REASONS. ONE IS THAT THE AMOUNT INVOLVED WO ULD NOT MAKE DIFFERENCE FOR CHARGABILITY OF THE TAX BUT THE NAT URE OF EXPENDITURE WOULD BE RELEVANT FOR THE CHARGABILITY OF TAX. IT H ARDLY MATTERS WHETHER THE AMOUNT IS MORE OR LESS. FURTHER, ON THE ASPECT OF LIFE OF THE MEMBRANE, NOTHING IS REFERRED TO BY THE A.O. NOR BY C.I.T. (APPEALS) THAT EARLIER, SUCH ASPECT, NAMELY, LIFE OF THE MEMB RANE SPREAD OVER FROM 3 TO 5 YEARS WAS NOT CONSIDERED OR IT HAD MISS ED OR OTHERWISE.' 5. IN THE RESULT, THIS TAX APPEAL IS DISMISSED. RESPECTFULLY, FOLLOWING THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE OWN CASE OF THE ASSESSEE (SUPRA) , WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE LEARNED CIT-A. HENCE THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. NOTE: WE FIND THAT THERE WAS MISMATCH IN THE AMOUNT OF DISPUTE. THEREFORE WE DIRECT THE AO TO GIVE EFFECT IN THE ORDER OF THE CO RRECT AMOUNT INVOLVED IN THE DISPUTE. 30. THE 3 RD ISSUE RAISED BY THE REVENUE IS THAT THE LEARNED CI T (A) ERRED IN DELETING THE ADDITION MADE BY THE AO FOR 39.11 LACS ON ACCOUNT OF PRIOR PERIOD EXPENSES. 31. AT THE OUTSET, WE NOTE THAT THE IMPUGNED ISSUE HAS ALREADY BEEN ADJUDICATED ALONG WITH THE APPEAL OF THE ASSESSEE B EARING ITA NO.1455/AHD/2017 BY DISMISSING THE GROUND OF APPEAL OF THE REVENUE. FOR THE DETAILED DISCUSSION, PLEASE REFER THE RELEVANT PARAGRAPH BEARING NO. 16 OF ITA NOS.1455 & 1589/AHD/2016 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT (CROSS A PPEALS) ASST.YEAR 2012-13 - 24 - THIS ORDER. RESPECTFULLY FOLLOWING THE SAME, THE GR OUND OF APPEAL OF THE REVENUE IS PARTLY ALLOWED. 32. THE NEXT ISSUE RAISED BY THE REVENUE IS THAT TH E LEARNED CIT (A) ERRED IN DELETING THE ADDITION MADE BY THE AO FOR 6,08,47,130/- ON ACCOUNT OF UNUTILIZED MODVAT CREDIT. 33. THE AO DURING THE ASSESSMENT PROCEEDINGS OBSERV ED THAT THERE WAS AN UTILIZED MODVAT CREDIT AMOUNTING TO 6,08,47,130/- WHICH WAS REQUIRED TO BE INCLUDED IN THE STOCK OF RAW MATERIAL AND WORK-I N-PROGRESS. BUT THE ASSESSEE HAS NOT DONE SO. ACCORDINGLY, THE AO ENHANCED THE V ALUE OF THE CLOSING STOCK BY THE AMOUNT OF UNUTILIZED MODVAT CREDIT WHICH RES ULTED INCREASE IN THE INCOME OF THE ASSESSEE. THUS THE AMOUNT OF MODVAT C REDIT WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 34. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE L EARNED CIT (A) WHO HAS DELETED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER: 4.5.1 IDENTICAL ISSUE WAS INVOLVED IN THE APPELLAN TS OWN CASE IN A.Y. 2011- 12. IN THE APPELLATE ORDER REFERRED TO ABOVE, MY P REDECESSOR HAS HELD AS UNDER: 10.13 IN VIEW OF ABOVE, DISCUSSION AS WELL AS DEC ISIONS OF HON'BLE COURTS, IT IS HELD THAT THE AO IS NOT CORRE CT IN INCREASING ONLY THE AMOUNT OF CLOSING STOCK BY THE UNUTILIZED AMOUN T OF CENVAT CREDIT, THE AO IS REQUIRED TO INCLUDE THE EXCISE DU TY ELEMENT IN THE COST OF PURCHASES, SALES AND OPENING STOCK. THE AO IS ACCORDINGLY DIRECTED TO MAKE ADJUSTMENT IN THE VALUES OF OPENIN G STOCK, PURCHASES AS WELL AS SALES ALSO AND COMPUTE THE NET ADDITION OR RELIEF TO THE APPELLANT AS THE CASE MAY BE. AS PER THE AR OF THE APPELLANT IT IS MENTIONED BY THE AUDITOR IN THE AUDIT REPORT THAT T HERE IS NO IMPACT ON THE PROFIT IF NET METHOD (I.E. EXCLUSIVE METHOD) IS FOLLOWED. IN VIEW OF THIS THE AO IS DIRECTED TO VERIFY FROM THE AUDIT RE PORT AND RELEVANT RECORD OF THE APPELLANT AND FIND OUT WHETHER AS A R ESULT OF FOLLOWING INCLUSIVE METHOD AS PER SECTION 145A OF THE ACT THE RE IS ANY IMPACT ON ITA NOS.1455 & 1589/AHD/2016 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT (CROSS A PPEALS) ASST.YEAR 2012-13 - 25 - THE NET PROFIT IN ITS CASE FOR THE YEAR UNDER CONSI DERATION. IF THERE IS NO IMPACT ON THE NET PROFIT OF THE APPELLANT AS A RESU LT OF FOLLOWING INCLUSIVE METHOD (I.E. BY INCLUDING THE CENVAT IN T HE OPENING STOCK, PURCHASES, SALES AND CLOSING STOCK), THEN THE AO IS DIRECTED TO DELETE THE ADDITION OF RS.5,31,03,250/-. HOWEVER, IF THERE IS INCREASE IN THE PROFIT IN THE CASE OF APPELLANT AS A RESULT OF FOLL OWING SUCH INCLUSIVE METHOD, THEN THE PROFIT TO THE EXTENT SO INCREASED IS CONFIRMED. THUS, THE GROUND OF APPELLANT IS DISPOSED OFF ACCORDINGLY .' 4.5.2. THE AO IS DIRECTED TO FOLLOW THE SAME DIREC TIONS FOR THE CURRENT YEAR. IF THERE IS NO IMPACT ON THE NET PROFIT OF THE APPL LANT AS A RESULT OF FOLLOWING INCLUSIVE METHOD (I.E. BY INCLUDING THE CENVAT IN T HE OPENING STOCK, PURCHASES, SALES AND CLOSING STOCK), THEN HE AO IS DIRECTED TO DELETE THE ADDITION OF RS.6,08,47,130/-. HOWEVER, IF THERE IS INCREASE IN THE PROFIT IN THE CASE OF APPELLANT AS A RESULT OF FOLLOWING INCLUSIV E METHOD, THEN THE AMOUNT EQUAL TO INCREASE IN PROFIT WILL BE ADDED TO THE TO TAL INCOME. THIS GROUND OF APPEAL IS DISPOSED OFF ACCORDINGLY. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A) , THE REVENUE IS IN APPEAL BEFORE US. 35. BEFORE US THE LEARNED DR AND THE LEARNED AR REL IED ON THE ORDER OF THE AUTHORITIES BELOW AS FAVOURABLE TO THEM. 36. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE PRECEDING D ISCUSSION, WE NOTE THAT THE ASSESSEE HAS BEEN RECORDING ITS TRANSACTIONS OF PUR CHASE, SALES, AND VALUATION OF INVENTORIES, NET OF MODVAT CONSISTENTLY. THUS, IF THE INVENTORY OF CLOSING STOCK IS ENHANCED BY THE AMOUNT OF MODVAT CREDIT AT TRIBUTABLE TO IT, THEN THE AMOUNT OF CORRESPONDING PURCHASES/OPENING STOCK SHO ULD ALSO BE INCREASED BY THE SAID AMOUNT WHICH WILL RESULT IN TAX NEUTRAL EX ERCISE. THUS, IN OUR CONSIDERED VIEW, THE ASSESSING OFFICER ERRED IN ENH ANCING THE VALUE OF CLOSING STOCK WITHOUT GIVING EFFECT TO THE PURCHASES/ OPENI NG STOCK AS THE CASE MAY BE. IN THIS REGARD, WE FIND SUPPORT AND GUIDANCE FROM T HE JUDGMENT OF HONBLE ITA NOS.1455 & 1589/AHD/2016 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT (CROSS A PPEALS) ASST.YEAR 2012-13 - 26 - GUJARAT HIGH COURT IN THE CASE OF PR.CIT VS. GUJARA T GAS COMPANY LTD. IN TAX APPEAL NO.90 OF 2017 VIDE ORDER DATED 07/02/2017, W HEREIN IT WAS HELD AS UNDER:- 3.03. NOW, SO FAR AS QUESTION NO. [B] I.E. WITH RE SPECT TO ADDITION MADE BY THE A.O. ON ACCOUNT OF UNUTILIZED MODVAT/CENVAT CRE DIT OF RS. 56,08,089/- IS CONNECTED, IT IS REQUIRED TO BE NOTED THAT THE LEAR NED TRIBUNAL HAS TAKEN NOTE THAT WITH RESPECT TO MODVAT RECEIVABLE ACCOUNT, THE RE IS CORRESPONDING LESS DEBIT TO THE PURCHASE ACCOUNT AND HENCE TO THAT EXT ENT THERE IS ALREADY INCOME OFFERED FOR TAX. IF THAT BE SO, THERE WAS NO QUESTI ON OF FURTHER ADDING MODVAT/CENVAT CREDIT TO THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. UNDER THE CIRCUMSTANCES, WE SEE NO R EASON TO INTERFERE WITH THE IMPUGNED JUDGEMENT AND ORDER PASSED BY THE LEAR NED TRIBUNAL SO FAR AS CONFIRMING THE ORDER PASSED BY THE LEARNED CIT(A) D ELETING THE ADDITION MADE BY THE A.O. ON ACCOUNT OF UNUTILISED MODVAT/CENVAT CREDIT OF RS. 56,08,089/-. WE ARE IN COMPLETE AGREEMENT WITH THE VIEW TAKEN BY THE LEARNED TRIBUNAL. RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONBLE JURISDICTIONAL COURTS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER O F THE LEARNED CIT (A). HENCE THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 37. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S DISMISSED. 38. IN THE COMBINED RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR THE STATISTICAL PURPOSES WHEREAS THE APPEAL FIL ED BY THE REVENUE IS PARTLY ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 16/10/2019 SD/- SD/- ( MADHUMITA ROY ) (W ASEEM AHMED ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 16/10/2019 PRITI YADAV, SR.PS ITA NOS.1455 & 1589/AHD/2016 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT (CROSS A PPEALS) ASST.YEAR 2012-13 - 27 - / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. () / THE CIT(A)-1, VADODARA. 5. , ! ', #$%% / DR, ITAT, AHMEDABAD 6. &' () / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) !, #$ / ITAT, AHMEDABAD 1. DATE OF DICTATION 07.10.2019 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 09.10.2019 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 14.10.2019 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER