Ascent Finchem Pvt.Ltd., Ahmedabad V. The Dy.CIT.,Circle-1, Ahmedabad

ITA 1596/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1186 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 15-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 23-07-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: PF JAIN
• Keywords: Capital asset; Depreciation; Principle of natural justice; Additional depreciation; Earning of tax free income; Capital expenditure
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD .., , !' BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER 1. ./ I.T.A. NO.1126/AHD/2013 2. ./ I.T.A. NO.1596/AHD/2012 ( / ASSESSMENT YEARS : 2008-09 & 2009-10 RESPECTIVELY) 1-2. ASCENT FINECHEM PVT.LTD. 11, GROUND FLOOR, SURYARATH B/H. WHLE HUSE PANCHWATI AHMEDABAD / VS. 1-2.ACIT/DCIT CIRCLE-1 AHMEDABAD $ ./ ./ PAN/GIR NO. : AABCA 6349 Q ( $' / APPELLANT ) .. ( ()$' / RESPONDENT ) $'* / APPELLANT BY : SHRI P.F. JAIN, AR ()$'+* / RESPONDENT BY : SHRI K. MADHUSUDAN, SR.DR ,+ / DATE OF HEARING 15/06/2016 -./+ / DATE OF PRONOUNCEMENT 07/07/2016 / O R D E R PER SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER : THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AG AINST THE SEPARATE ORDERS OF THE COMMISSIONER OF INCOME TAX(A PPEALS)-III/6, AHMEDABAD DATED 28/03/2013 & 04/06/2012 FOR THE A SSESSMENT YEARS (AYS) 2008-09 & 2009-10 RESPECTIVELY. ITA NO.1126/AHD /2013 AND ITA NO.1596/AHD/2012 ASCENT FINECHEM PV.LTD. VS. ACIT/DCIT ASST.YEARS 2008-09 & 2009-10 RESPECTIVELY - 2 - 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- ITA NO.1126/AHD/2013 FOR AY 2008-09 2.1. ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE BUSINESS OF TRADING AND MANUFACTURING OF CHEMICALS. ASSESSE E FILED ITS RETURN OF INCOME FOR AY 2008-09 ON 30/09/2008 DECLARING TOTAL INCOME OF RS.1,85,23,207/-. THE CASE WAS SELECTED FOR SCRUT INY AND THEREAFTER ASSESSMENT WAS FRAMED U/S.143(3) OF THE ACT VIDE OR DER DATED 21/12/2010 AND THE TOTAL INCOME WAS DETERMINED AT RS.2,05,27,1 49/-. AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE CARRIED THE MATTER BE FORE THE LD.CIT(A), WHO VIDE ORDER DATED 28/03/2013 (IN APPEAL NO.CIT( A)- III/258/ACIT.CIR.I/12-13) DISMISSED THE APPEAL OF T HE ASSESSEE. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), ASSESSEE I S IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS:- 1. THE LEARNED CIT(APPEALS) HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN PASSING EX-PARTE APPEAL ORDER WITHOUT CONSIDERIN G THE ADJOURNMENT APPLICATIONS FILED FOR VALID REASONS. 2. HE HAS ERRED IN LAW AND ON FACTS IN PASSING EX-PART E ORDER WITHOUT CONSIDERING THE FACT THAT THE CHANGE OF JURISDICTIO N FROM CIT(APPEALS)-VI TO CIT(APPEALS)-III BY ORDER DATED 07/03/2013 AS MENTIONED IN PARA 1 OF THE APPEAL ORDER WAS NOT COM MUNICATED TO THE ASSESSEE. 3. HE HAS ERRED IN LAW AND ON FACTS IN PASSING EX-PART E ORDER WITHOUT GRANTING REASONABLE OPPORTUNITY IN AS MUCH AS THAT FIRST NOTICE OF HEARING AFTER CHANGE OF JURISDICTION WAS SERVED ON 16/03/2013 FIXING HEARING ON 22/03/2013 RESULTING INTO VIOLATION OF P RINCIPLE OF NATURAL JUSTICE. ITA NO.1126/AHD /2013 AND ITA NO.1596/AHD/2012 ASCENT FINECHEM PV.LTD. VS. ACIT/DCIT ASST.YEARS 2008-09 & 2009-10 RESPECTIVELY - 3 - 4. HE HAS ERRED IN LAW AND ON FACTS IN PASSING EX-PART E ORDER WITHOUT CONSIDERING AND REJECTING THE ADJOURNMENT APPLICATI ON FURNISHED ON 22/03/2013 FOR VALID REASON. 5. HE HAS ERRED IN LAW AND ON FACTS IN MAKING IRRELEVA NT OBSERVATION IN PARA 4 & 5 OF HIS ORDER. 6. HE HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN UPHO LDING THE DISALLOWANCES AS MENTIONED IN APPEAL MEMO BY SIMPLY REPRODUCING THE ASSESSMENT ORDER WITHOUT RECORDING HIS OWN INDE PENDENT FINDINGS ON THE GROUNDS OF APPEAL. 7. HE HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE F OLLOWING DISALLOWANCES: A) CLAIM U/S.35 OF RS.1,75,100/- B) DONATION OF RS.8,000/- C) REDUCING THE PROFIT OF EOU UNIT BY RS.3574125/- AND CONSIDERING THE SAME AS EXPENSES RELATING TO TRADIN G UNIT. D) NOT ALLOWING REVISED ELIGIBLE CLAIM U/S.10B OF RS.3 ,08,30,571/- IN PLACE OF WRONG COMPUTATION OF CLAIM OF RS.2,59,27,2 72/-. 8. HE HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE R EJECTION OF ENHANCED CLAIM U/S.10B MADE DURING COURSE OF ASSESS MENT PROCEEDING BY NOT PROPERLY CONSTRUING THE DECISION OF SUPREME COURT IN THE CASE OF GOETS INDIA LTD. 284 ITR 323. 9. ON THE FACTS THE APPEAL OF THE APPELLANT OUGHT TO H AVE BEEN ALLOWED. 3. BEFORE US, AT THE OUTSET, LD.AR SUBMITTED THAT THE LD.CIT(A) HAS PASSED AN EX-PARTE ORDER AND WHILE DECIDING THE APPEAL AND HE HAS NOT GIVEN ANY FINDING ON THE ISSUE RAISED BEFORE HIM. HE FURTHER SUBMITTED THAT THE LD.AR HAD SOUGHT ADJOURNMENT BEFORE THE LD .CIT(A) AS HE WAS BUSY WITH TIME BARRING ASSESSMENTS. HE SUBMITTED T HAT THE LD.CIT(A) DID NOT GIVE ANY ADJOURNMENT AND PASSED AN EX-PARTE ORDER. HE THEREFORE PRAYED THAT IN THE INTEREST OF JUSTICE, THE MATTER MAY BE REMITTED BACK TO THE FILE OF LD.CIT(A) AND FURTHER GAVE AN UNDERTA KING THAT ASSESSEE WILL ITA NO.1126/AHD /2013 AND ITA NO.1596/AHD/2012 ASCENT FINECHEM PV.LTD. VS. ACIT/DCIT ASST.YEARS 2008-09 & 2009-10 RESPECTIVELY - 4 - CO-OPERATE AND FURNISH ALL THE DETAILS CALLED FOR B Y THE LD.CIT(A). ON THE OTHER HAND, LD.SR.DR SUPPORTED THE ORDERS OF AO AND LD.CIT(A) AND SUBMITTED THAT LD.CIT(A) HAD GRANTED VARIOUS OPPORT UNITIES TO ASSESSEE BUT ASSESSEE CHOSE NOT TO APPEAR BEFORE THE LD.CIT( A) AND IN SUCH A SITUATION, LD.CIT(A) WAS FULLY JUSTIFIED IN DISMISS ING THE APPEAL OF THE ASSESSEE. HE THUS SUPPORTED THE ORDER OF THE LD.CI T(A). 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 LD.CIT(A) HAS PASSED AN EX-PARTE ORDER AND DISMISSED THE APPEAL OF THE ASSESSEE WITHOUT GOING INTO THE M ERITS OF THE ISSUE BEFORE HIM. IT IS A SETTLED LAW THAT LD.CIT(A) HAS NO JURISDICTION TO DISMISS THE APPEAL OF THE ASSESSEE WITHOUT GOING I NTO THE MERITS OF THE ISSUE BEFORE HIM. EVEN IN AN EX-PARTE ORDER, THE LD.CIT(A) SHOULD HAVE DECIDED THE GROUNDS OF APPEAL OF THE ASSESSEE ON ME RITS THEREOF. CONSIDERING THE AFORESAID FACTS, WE ARE OF THE VIEW THAT IN THE INTEREST OF JUSTICE, THE ASSESSEE BE GIVEN ONE MORE OPPORTUNITY TO PRESENT ITS CASE BEFORE LD.CIT(A). WE THEREFORE REMIT THE ISSUE BAC K TO LD.CIT(A) TO PASS A DE NOVO ORDER ON MERITS AND IN ACCORDANCE WITH LAW. NEEDLE SS TO STATE THAT LD.CIT(A) SHALL GRANT ADEQUATE OPPORTUNITY OF HEARING TO BOTH THE PARTIES. ASSESSEE IS ALSO DIRECTED TO PROMPTLY FUR NISH ALL THE INFORMATION CALLED FOR THE AUTHORITIES. IN VIEW OF OUR DECISION TO RESTORE THE ISSUE TO LD.CIT(A), WE ARE NOT ADJUDICATING ON MERITS THE GR OUNDS OF APPEAL RAISED ITA NO.1126/AHD /2013 AND ITA NO.1596/AHD/2012 ASCENT FINECHEM PV.LTD. VS. ACIT/DCIT ASST.YEARS 2008-09 & 2009-10 RESPECTIVELY - 5 - BY THE ASSESSEE. THUS, THE GROUND RAISED BY THE AS SESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 5. IN THE RESULT, APPEAL OF THE ASSESSEE FOR AY 200 8-09 IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.1596/AHD/2012 FOR AY 2009-10 6. ASSESSEE HAS RAISED FOLLOWING GROUNDS:- 1. THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND O N FACTS IN UPHOLDING THE DISALLOWANCE OF THE CLAIM OF THE ASSESSEE U/S.3 5 FOR RS.10,20,000/- BEING EXPENDITURE OF CAPITAL NATURE ON SCIENTIFIC R ESEARCH PERTAINING TO THE BUSINESS CARRIED ON BY THE ASSESSEE WITHOUT PRO PERLY APPRECIATING AND CONSIDERING THE FACTS OF THE APPELLANT. 2. HE HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE DISALLOWANCE OF RS.95,642/- U/S.14A R.W.RULE 8D WITHOUT APPRECIATIN G AND CONSIDERING THE FACTS OF THE APPELLANT. 3. HE HAS ERRED IN LAW AND ON FACTS IN UPHOLDING TH E DISALLOWANCE OF DEPRECIATION OF RS.1,74,325/- ON STORAGE TANK WI THOUT PROPERLY APPRECIATING AND CONSIDERING THE FACTS OF THE APPEL LANT. 6.1. FIRST GROUND WITH RESPECT TO DISALLOWANCE OF C LAIM U/S.35 OF THE OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO A S 'THE ACT'). 6.2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTICED THAT ASSESSEE HAS CLAIMED DEDUCTION OF RS.10,20,000/- U/ S.35 OF THE ACT ON PURCHASE OF GAS CHROMOTOGRAPHY MACHINE. ASSESSEE W AS ASKED TO SUBSTANTIATE ITS CLAIM. THE SUBMISSIONS OF THE ASS ESSEE WERE NOT FOUND ITA NO.1126/AHD /2013 AND ITA NO.1596/AHD/2012 ASCENT FINECHEM PV.LTD. VS. ACIT/DCIT ASST.YEARS 2008-09 & 2009-10 RESPECTIVELY - 6 - ACCEPTABLE TO THE AO AS HE WAS OF THE VIEW THAT U/S .35(1)(IV), DEDUCTION IS ALLOWABLE IN RESPECT OF CAPITAL EXPENDITURE INCU RRED ON SCIENTIFIC RESEARCH ONLY IF SCIENTIFIC RESEARCH IS RELATED TO THE BUSINESS OF THE ASSESSEE AND AS PER AO, THE SCIENTIFIC RESEARCH SHO ULD BE ONE THAT MAY LEAD TO OR FACILITATE IN EXTENSION OF THAT BUSINESS . AO CONCLUDED THAT ASSESSEE WAS DOING NORMAL MANUFACTURING ACTIVITY AN D NO SCIENTIFIC RESEARCH WAS CARRIED OUT BY THE ASSESSEE AND THERE FORE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION U/S.35 OF THE ACT AND HE THE REFORE DENIED THE CLAIM OF DEDUCTION. AGGRIEVED BY THE ORDER OF THE AO, A SSESSEE CARRIED THE MATTER BEFORE THE LD.CIT(A), WHO UPHELD THE ORDER O F THE AO BY HOLDING AS UNDER:- 3.3. I HAVE CONSIDERED THE FACTS OF THE CASE; ASSE SSMENT ORDER AND APPELLANTS WRITTEN SUBMISSION. APPELLANT CLAIMED DEDUCTION UNDER SECTION 35 OF IT ACT AN EQUIPMENT PURCHASED BY IT. APPELLANT CLAIMED THAT IT WAS USED FOR ANALYTICAL RESEARCH AND THEREF ORE IT IS ENTITLED TO CLAIM DEDUCTION UNDER SECTION 35 OF IT ACT. ASSESS ING OFFICER DID NOT ALLOW THE CLAIM SINCE APPELLANT WAS NOT DOING ANY S CIENTIFIC RESEARCH BUT WAS ONLY A MANUFACTURER. THE MACHINE PURCHASED WAS USED IN APPELLANTS DAY-TO-DAY BUSINESS ACTIVITY. ASSESSIN G OFFICER FURTHER MENTIONED THAT APPELLANT DID NOT DEMONSTRATE AS TO HOW SCIENTIFIC RESEARCH IS LEADING TO EXTENSION OF KNOWLEDGE TO TH E BUSINESS BEING CARRIED OUT BY THE APPELLANT. EVEN BEFORE THE UNDE RSIGNED IN APPEAL PROCEEDING, APPELLANT SUBMITTED THE SAME SUBMISSION WITHOUT DEMONSTRATING THAT REQUIREMENTS OF SECTION 35 ARE F ULFILLED. PURCHASE OF ONLY EQUIPMENT FOR THE USE IN APPELLANTS BUSINESS EVEN IN LABORATORY WILL NOT BE ELIGIBLE FOR DEDUCTION UNDER SECTION 35 . THIS DEDUCTION IS ALLOWABLE ONLY FOR SCIENTIFIC RESEARCH. THE EQUIPM ENT WAS USED BY THE APPELLANT IN ITS DAY-TO-DAY MANUFACTURING ACTIVITY AND THEREFORE IT ITA NO.1126/AHD /2013 AND ITA NO.1596/AHD/2012 ASCENT FINECHEM PV.LTD. VS. ACIT/DCIT ASST.YEARS 2008-09 & 2009-10 RESPECTIVELY - 7 - CANNOT BE SAID THAT APPELLANT CARRIED OUT SCIENTIFI C RESEARCH RESULTING IN EXTENSION OF KNOWLEDGE TO ITS BUSINESS. ACCORDINGL Y THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS CONFIRMED. 6.3. AGGRIEVED BY THE ORDER OF THE LD.CIT(A) ASSESS EE IS NOW IN APPEAL BEFORE US. 6.4. BEFORE US, LD.AR REITERATED THE SUBMISSIONS MA DE BEFORE THE LD.CIT(A) AND FURTHER SUBMITTED THAT INCURRING OF E XPENDITURE FOR PURCHASE OF EQUIPMENT HAS NOT BEEN DOUBTED BY THE A O. ON THE ISSUE OF ALLOWABILITY OF EXPENSES OF U/S.35 OF THE ACT, HE S UBMITTED THAT THE MACHINE WAS USED FOR ANALYTICAL RESEARCH WHICH WAS AN ONGOING PROCESS TO IMPROVE AND DEVELOP NEW PRODUCTS IN THE CHEMICAL BUSINESS OF THE ASSESSEE AND THEREFORE AO SHOULD HAVE ALLOWED THE E XPENDITURE U/S.35(1)(IV) OF THE ACT. IN THE ALTERNATE, HE S UBMITTED THAT IN CASE THE EXPENDITURE WAS NOT ALLOWED U/S.35 OF THE ACT AND S INCE THE PURCHASE OF MACHINERY, BEING A CAPITAL ASSET HAS NOT BEEN DOUBT ED BY AO, THE AO OUGHT TO HAVE ALLOWED DEPRECIATION ON THE MACHINERY U/S.32 OF THE ACT. HE THEREFORE SUBMITTED THAT ASSESSEE CANNOT BE DENI ED DEDUCTION AT ALL. LD.DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF L OWER AUTHORITIES. 7. 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 ASSESSEE WAS DENIED THE CLAIM OF D EDUCTION U/S.35 OF THE ITA NO.1126/AHD /2013 AND ITA NO.1596/AHD/2012 ASCENT FINECHEM PV.LTD. VS. ACIT/DCIT ASST.YEARS 2008-09 & 2009-10 RESPECTIVELY - 8 - ACT FOR THE REASON THAT AS PER THE AO, ASSESSEE HAS NOT CARRIED OUT ANY SCIENTIFIC RESEARCH AND THE MACHINERY WAS USED IN T HE NORMAL BUSINESS OF THE ASSESSEE. BEFORE US, LD.AR APART FROM REITERA TING THE SUBMISSIONS MADE BEFORE AO AND LD.CIT(A) HAS NOT PLACED ANY MAT ERIAL ON RECORD TO DEMONSTRATE AS TO HOW THE EXPENDITURE IS ALLOWABLE U/S.35 OF THE ACT. BEFORE US, ASSESSEE HAS RAISED AN ALTERNATE PLEA OF ALLOWING DEPRECIATION U/S.32 OF THE ACT. WE ARE OF THE VIEW THAT THE AL TERNATE PLEA OF ASSESSEE OF DEPRECIATION NEEDS TO BE ACCEPTED IN VIEW OF THE FACT THAT THE PURCHASE OF MACHINERY BEING USED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE HAS NOT BEEN DOUBTED BY AO. IN SUCH CIRCUMSTANCES, W E ARE OF THE VIEW THAT AO SHOULD HAVE ALLOWED THE CLAIM OF DEPRECIATI ON U/S.32 OF THE ACT. WE THEREFORE DIRECT THE AO TO ALLOW THE DEPRECIATIO N IN THE YEAR UNDER CONSIDERATION AND IN SUBSEQUENT YEARS IN ACCORDANCE WITH LAW. THUS, THIS GROUND OF ASSESSEE IS ALLOWED. 8. NEXT GROUND IS WITH RESPECT TO DISALLOWANCE U/S. 14A OF THE ACT. 8.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A O NOTICED THAT ASSESSEE HAS EARNED DIVIDEND INCOME TO THE TUNE OF RS.7,28,770/- WHICH WAS CLAIMED AS EXEMPT FROM TAX. HE ALSO NOTICED TH AT ASSESSEE MADE INVESTMENT IN EXCESS OF RS.3.80 CRORES. THE ASSESS EE WAS THEREFORE ASKED TO SHOW-CAUSE AS TO WHY NO DISALLOWANCE U/S.14A OF THE ACT BE MADE TO WHICH ASSESSEE INTER-ALIA SUBMITTED THAT ASSESSEE H AS NOT INCURRED ANY ITA NO.1126/AHD /2013 AND ITA NO.1596/AHD/2012 ASCENT FINECHEM PV.LTD. VS. ACIT/DCIT ASST.YEARS 2008-09 & 2009-10 RESPECTIVELY - 9 - EXPENDITURE FOR EARNING THE EXEMPT INCOME AND NOR H AS BORROWED ANY FUNDS FOR INVESTMENTS AND THEREFORE NO DISALLOWANCE OF INTEREST U/S.14A CAN BE MADE. THE SUBMISSION OF THE ASSESSEE WAS NO T FOUND ACCEPTABLE TO THE AO AS HE WAS OF THE VIEW THAT DURING THE YEA R UNDER CONSIDERATION, PROVISIONS OF SECTION 14A OF THE ACT R.W.RULE 8D OF THE IT RULES, 1962 WERE APPLICABLE. HE THEREFORE BY APPLYING THE METH OD PRESCRIBED UNDER RULE 8D, WORKED OUT THE DISALLOWANCE U/S.14A AT RS. 95,642/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE THE LD.CIT(A), WHO UPHELD THE ORDER OF AO BY HOLDING AS UNDER:- 4.3 I HAVE CONSIDERED THE FACTS OF THE CASE; ASSES SMENT ORDER AND APPELLANT'S WRITTEN SUBMISSION. ASSESSING OFFICER M ADE DISALLOWANCE OF EXPENSE RELATING TO EXEMPT INCOME. SUCH DISALLOWANC E WAS CONSIDERED NECESSARY SINCE APPELLANT DID NOT DISALLOW ANY PART OF OTHER EXPENSES TREATING THE SAME AS RELATING TO INVESTMENT RESULTI NG IN EXEMPT INCOME. NOW RULE 8D IS HELD TO BE APPLICABLE WITH EFFECT FR OM ASSESSMENT YEAR 2008-09 BY BOMBAY HIGH COURT, THE DISALLOWANCE OF EXPENSES RELATING TO EXEMPT INCOME ARE TO BE MADE BY THE METHOD PRESC RIBED IN THE SAID RULE. IT IS NOT IN DISPUTE THAT APPELLANT MADE INVESTMENT OF RS 191.19 LACS WHICH CAN ONLY RESULT IN EXEMPT INCOME IN THE FORM OF DIVIDEND. APPELLANT INCURRED OTHER ADMINISTRATIVE EXPENSES, P ART OF WHICH MAY RELATE TO INVESTMENT ONLY RESULTING IN EXEMPT INCOM E THEREFORE DISALLOWANCE UNDER SECTION 14 A ON ACCOUNT OF OTHER EXPENSES ARE NECESSARY. COMING TO THE METHOD OF COMPUTATION OF DISALLOWANCE UNDER SECTION 14 A, ASSESSING OFFICER DISALLOWED EXPENSES RELATABLE TO EXEMPT INCOME AS PER RULE 8D WHICH IS MANDATORY FROM ASSESSMENT YEAR 2008-09. FOR INTEREST, PROPORTIONATE EXPENSE IS DISALLOWABLE WHE REAS FOR OTHER EXPENSES .5% OF AVERAGE INVESTMENT VALUE IS DISALLO WABLE. CONSIDERING THE FACT THAT APPELLANT CLAIMED HUGE ADMINISTRATIVE AND OTHER EXPENSES, ITA NO.1126/AHD /2013 AND ITA NO.1596/AHD/2012 ASCENT FINECHEM PV.LTD. VS. ACIT/DCIT ASST.YEARS 2008-09 & 2009-10 RESPECTIVELY - 10 - THE DISALLOWANCE OF ADMINISTRATIVE EXPENSES MADE BY THE ASSESSING OFFICER @.5% OF INVESTMENT RESULTING IN EXEMPT INCO ME IS AS PER THE FORMULA GIVEN IN RULE 8D WHICH IS MANDATORY FOR MAK ING DISALLOWANCE. IN VIEW OF THIS THE ADDITION @.5% OF INVESTMENT RES ULTING IN EXEMPT INCOME AS PER RULE 8D MADE BY THE ASSESSING OFFICER IS CONFIRMED. AS REGARDS INTEREST, ASSESSING OFFICER DISALLOWED T HE SAME AS PER RULE 8D HOWEVER IT IS SEEN THAT THE TOTAL CLAIM OF INTER EST IS JUST RS 583 AND THEREFORE ANY DISALLOWANCE OF INTEREST OUT OF SUCH SMALL AMOUNT IS NOT WARRANTED. ACCORDINGLY INTEREST DISALLOWANCE OF RS 45 IS DELETED. 8.2. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US. BEFORE US, LD.AR REITERATED THE SUBMISS IONS MADE BEFORE THE AO AND LD.CIT(A) AND ON THE OTHER HAND, LD.DR SUPPO RTED THE ORDERS OF AO & LD.CIT(A). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO DI SALLOWANCE OF INTEREST U/S.14A OF THE ACT. IT IS AN UNDISPUTED FACT THAT FOR THE YEAR UNDER CONSIDERATION, IN VIEW OF THE DECISION OF HONBLE B OMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG.CO. REPORTED AT 328 ITR 81 PROVISIONS OF RULE 8D ARE APPLICABLE. WE FIND THAT THE LD.CI T(A) WHILE DECIDING THE ISSUE HAS HELD THAT NO DISALLOWANCE ON ACCOUNT OF INTEREST IS CALLED FOR ON ACCOUNT OF SMALLNESS OF AMOUNT BUT HOWEVER T HE DISALLOWANCE WITH RESPECT TO ADMINISTRATIVE EXPENSES WAS UPHELD. BEF ORE US, LD.AR HAS NOT PLACED ANY MATERIAL TO CONTROVERT THE FINDINGS OF L D.CIT(A), THEREFORE WE ITA NO.1126/AHD /2013 AND ITA NO.1596/AHD/2012 ASCENT FINECHEM PV.LTD. VS. ACIT/DCIT ASST.YEARS 2008-09 & 2009-10 RESPECTIVELY - 11 - FIND NO REASON TO INTERFERE WITH THE ORDER OF LD.CI T()A AND THE GROUND NO.2 OF ASSESSEE IS DISMISSED. 10. THIRD GROUND IS WITH RESPECT TO DEPRECIATION OF STORAGE TANK. 10.1 THE AO NOTICED THAT DURING THE YEAR ASSESSE E HAS PURCHASED STORAGE TANK OF RS.43,58,150/- AND HAD CLAIMED DEPR ECIATION @ 15% BEING THE RATE APPLICABLE TO PLANT AND MACHINERY AN D HAD ALSO CLAIMED ADDITIONAL DEPRECIATION. THE AO WAS OF THE VIEW TH AT STORAGE TANK WAS IN THE NATURE OF STRUCTURE AND THE DEPRECIATION @ 10% BEING THE RATE APPLICABLE TO BUILDING SHOULD HAVE BEEN CLAIMED BY THE ASSESSEE. HE ACCORDINGLY, WORKED OUT THE EXCESS DEPRECIATION AT RS.1,74,325/- AND DISALLOWED IT. AGGRIEVED BY THE ORDER OF AO, ASSE SSEE CARRIED THE MATTER BEFORE THE LD.CIT(A), WHO DECIDED THE ISSUE AGAINST THE ASSESSEE BY HOLDING AS UNDER:- 5.3 I HAVE CONSIDERED THE FACTS OF THE CASE; ASSES SMENT ORDER AND APPELLANT'S WRITTEN SUBMISSION. ASSESSING OFFICER T REATED STORAGE TANK PURCHASED BY THE APPELLANT AS BUILDING WHEREAS APPE LLANT SUBMITTED THAT IT IS PART OF PLANT AND MANUFACTURING PROCESS. IT IS NOT IN DISPUTE THAT THE STORAGE TANKS PURCHASED WERE FOR USE OF ST ORAGE OF CHEMICAL AND THE SAME WERE NOT USED FOR MANUFACTURING PROCES S. JUST BECAUSE STORAGE TANKS ARE ATTACHED WITH MANUFACTURING PLANT AND MACHINERY AND THE SAME IS FABRICATED, IT WILL NOT BECOME PLANT AN D MACHINERY. THE BASIC FUNCTION OF STORAGE TANK IS STORAGE OF RAW MA TERIAL, SEMI-FINISHED GOODS AND FINISHED GOODS AND THEREFORE THE SAME CAN NOT BE TREATED AS MANUFACTURING PLANT. DRAWING MAY INCLUDE STORAGE TA NK BUT THAT WILL NOT MAKE STORAGE TANK THE PART OF PLANT. THIS IS SO BECAUSE DRAWING WILL ALSO HAVE FOUNDATION AND OTHER STRUCTURES WHICH CAN NOT BE TREATED AS ITA NO.1126/AHD /2013 AND ITA NO.1596/AHD/2012 ASCENT FINECHEM PV.LTD. VS. ACIT/DCIT ASST.YEARS 2008-09 & 2009-10 RESPECTIVELY - 12 - PLANT. ACCORDINGLY I UPHOLD THE DISALLOWANCE OF DEP RECIATION MADE BY THE ASSESSING OFFICER BY TREATING STORAGE TANK AS P ART OF BUILDING AND NOT PLANT AND MACHINERY. 10.2. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), ASSE SSEE IS NOW IN APPEAL BEFORE US. 10.3. BEFORE US, LD.AR REITERATED THE SUBMISSIONS M ADE BEFORE THE AO AND LD.CIT(A) AND FURTHER SUBMITTED THAT ASSESSEE H AD ALSO CLAIMED SIMILAR DEPRECIATION IN EARLIER YEARS AND SUBMITTED THAT SINCE THE MATTER FOR AY 2008-09 HAS BEEN REMITTED BY THE TRIBUNAL TO LD.CIT(A) TO DECIDE THE ISSUE ON MERITS AND THE ISSUE OF DEPRECIATION S TORAGE TANK IS ALSO FOR AY 2008-09, THEREFORE THE MATTER IN THE CURRENT YE AR MAY ALSO BE REMITTED BACK TO THE FILE OF LD.CIT(A). LD.DR DID NOT SERIOUSLY OBJECT TO THE REQUEST OF REMITTING THE MATTER TO LD.CIT(A). 11. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. BEFORE US, LD.AR HAS SUBMITTED THAT IDENTICAL ISSUE OF DEPRECIATION ON STORAGE TANKS IS IN AY 2008-09 ALSO. SINCE THE APP EAL FOR AY 2008-09 HAS BEEN REMITTED BACK TO LD.CIT(A) BY US HEREINABO VE, WE ARE OF THE VIEW THAT THIS GROUND ALSO NEEDS TO BE REMITTED BAC K TO LD.CIT(A), SO THAT THE DECISION, AS TAKEN BY HIM IN AY 2008-09, WOULD APPLY TO THE PRESENT GROUND. THUS, THIS GROUND OF ASSESSEE IS ALLOWED F OR STATISTICAL PURPOSES. ITA NO.1126/AHD /2013 AND ITA NO.1596/AHD/2012 ASCENT FINECHEM PV.LTD. VS. ACIT/DCIT ASST.YEARS 2008-09 & 2009-10 RESPECTIVELY - 13 - 12. IN THE RESULT, ASSESSEES APPEAL FOR AY 2009-10 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 13. IN THE COMBINED RESULT, ASSESSEES APPEAL FOR A Y 2008-09 IS ALLOWED FOR STATISTICAL PURPOSES, WHEREAS ASSESSEES APPEAL FOR AY 2009-10 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER PRONOUNCED IN OPEN COURT ON 07 /0 7 /2016 SD/- SD/- .. () () ( R.P. TOLANI) ( ANIL CHATURVEDI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 07/ 07 /2016 3..,.../ T.C. NAIR, SR. PS !'#$%$' / COPY OF THE ORDER FORWARDED TO : 1. $' / THE APPELLANT 2. ()$' / THE RESPONDENT. 3. 456 7 / CONCERNED CIT 4. 7 ( ) / THE CIT(A)-III/6, AHMEDABAD 5. 89:(56 , 56/ , 4 / DR, ITAT, AHMEDABAD 6. :< , / GUARD FILE. / BY ORDER, )8( //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD