The DCIT, Panchmahal Circle, Godhra V. Panchmahal Steel Ltd., Kalol

ITA 1680/AHD/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68101 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 26-11-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 19-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA
• Assessee Lawyers: J P SHAH
• Keywords: Capital asset; Depreciation; Business expenditure; Commercial expediency; Revenue expenditure; Capital expenditure

Judgement Text

, , , , , , , , IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BENCH, AHMEDABAD .., ! ! ! ! ' #$, BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ! 1 ./ I.T.A. NO.1680/AHD/2010 ( & '& & '& & '& & '& / / / / ASSESSMENT YEAR : 2004-05) DY.CIT PANCHMAHAL CIRCLE GODHRA / VS. PANCHMAHAL STEEL LTD. GIDC ESTATE, KALOK DIST.PANCHMAHAL ( !./)* !./ PAN/GIR NO. : AABCP 2643 Q ( (+ / // / APPELLANT ) .. ( ,-(+ / RESPONDENT ) (+ . / APPELLANT BY : SHRI O.P.BATHEJA, SR.DR ,-(+ / . / RESPONDENT BY : SHRI J.P.SHAH, A.R. ' 0 / $1 / / / / DATE OF HEARING : 26/11/2013 23' / $1 / DATE OF PRONOUNCEMENT : 31/12/2013 4 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-VI, BARODA (CIT(A) FOR SHORT) DATED 17/02/2010 PERTAINING TO ASSESSMENT Y EAR (AY) 2004-05. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL:- 1(I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.13, 29,899/- IN RESPECT OF ADVANCES FOR PURCHASE OF CAPITAL GOODS WRITTEN O FF. 1(II) THE CIT(A) FAILED TO APPRECIATE THAT WHEN AN ADVANCE HAS BEEN INCURRED FOR PURCHASE OF CAPITAL GOODS, THEN ANY WR ITE OFF OF THE SAME SHOULD NECESSARILY BE TREATED AS CAPITAL EXPENDITUR E. ITA NO.1680/AHD /2010 DY.CIT VS.PANCHMAHAL STEEL LTD. ASST.YEAR 2004-05 - 2 - 2(I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.1,1 9,84,344/- IN RESPECT OF PARTS IMPORTED FOR SMS PROJECT NOT PUT TO USE. 1(II) THE CIT(A) FAILED TO APPRECIATE THAT ANY LOSS RELATED TO PURCHASE OF CAPITAL ASSET/NEW PLANT CANNOT BE TERMED AS REVENUE EXPENDITURE. 3. THE APPELLANT CRAVES TO ADD TO, AMEND OR ALTER THE ABOVE GROUNDS AS MAY BE DEEMED NECESSARY. RELIEF CLAIMED IN APPEAL THE ORDER OF THE CIT(A) ON THE ABOVE ISSUES BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. BRIEFLY STATED FACTS ARE THAT THE ASSESSMENT U/S .143(3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS TH E ACT) WAS FRAMED VIDE ORDER DATED 28/10/2009 DETERMINING TOTAL INCOM E AT RS.NIL. THEREFORE, THE CIT-III, BARODA HAS PASSED AN ORDER U/S.263 OF THE IT ACT ON 26/03/2009. THE CIT AFTER CONSIDERING THE SUBMI SSIONS OF THE ASSESSEE, RESTORED TWO ISSUES; I.E. ADVANCE WRITTEN OFF OF RS.13,29,789/- AND WRITE OFF OF ADVANCE ON PURCHASE OF CAPITAL GOO DS AMOUNTING TO RS.1,19,86,344/- TO THE FILE OF AO FOR FRESH DECIS ION. THE AO PASSED AN ORDER U/S.143(3) R.W.S.263 OF THE ACT, THEREBY HE M ADE DISALLOWANCES OF ADVANCES WRITTEN OFF OF RS.13,29,989/- AND ASSETS W RITTEN OFF OF RS.1,19,86,344/-. AGAINST THIS, THE ASSESSEE FILED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS, P ARTLY ALLOWED THE APPEAL. WHILE ALLOWING THE APPEAL, THE LD.CIT(A) D ELETED THE DISALLOWANCE OF RS.13,29,899/- AND ALSO THE DISALLO WANCE OF RS.1,19,86,344/-. HOWEVER, THE GROUND WITH REGARD TO VALIDITY OF THE ORDER PASSED U/S.143(3) RWS 263 OF THE ACT WAS REJE CTED. NOW, THE REVENUE IS IN APPEAL. ITA NO.1680/AHD /2010 DY.CIT VS.PANCHMAHAL STEEL LTD. ASST.YEAR 2004-05 - 3 - 3. THE FIRST GROUND IS AGAINST THE DELETION OF DISA LLOWANCE OF RS.13,29,899/- IN RESPECT OF ADVANCES FOR PURCHASE OF CAPITAL GOODS WRITTEN OFF. THE LD.SR.DR SUBMITTED THAT THE LD.CI T(A) GROSSLY ERRED IN DELETING THE DISALLOWANCE. HE SUBMITTED THAT THE A DVANCES WERE GIVEN TO DIFFERENT PARTIES FOR PURCHASE OF MACHINERY, I.E. C APITAL GOODS. IT IS CLAIMED BY THE ASSESSEE THAT IT COULD NOT PURCHASE THESE GOODS BECAUSE OF ADVERSE FINANCIAL CONDITIONS. HE SUBMITTED THAT TH ESE ADVANCES WERE GIVEN TO THE SUPPLIERS FOR PURCHASE OF GOODS, THE E XPENDITURE THEREOF IS CLEARLY OF CAPITAL IN NATURE AND IT IS CAPITAL EXPE NDITURE AND IT IS RELATED TO ACQUISITION OF A CAPITAL ASSETS. THEREFORE, THE SA ME CANNOT BE ALLOWED AS BUSINESS EXPENDITURE U/S.37 OF THE IT ACT. IN SUPP ORT OF THIS CONTENTION, LD.SR.DR RELIED ON VARIOUS CASE-LAWS. HE RELIED ON THE DECISION OF THE HONBLE ITAT CHENNAI BENCH A RENDERED IN THE CASE OF KWALITY FUN FOODS & RESTAURANTS (P.) LTD. VS. DY.CIT, CHENNAI REPORTED AT (2007) 108 ITD 274 (CEHNNAI). HE ALSO RELIED ON THE DECI SION OF THE HONBLE HIGH COURT CALCUTTA RENDERED IN THE CASE OF KANORIA CHEMICALS & INDUSTRIES LTD. VS. CIT REPORTED AT (1995) 78 TAXMA N 455 (CAL.) 4. ON THE CONTRARY, LD.COUNSEL FOR THE ASSESSEE SUB MITTED THAT THE LD.CIT(A) HAS RIGHTLY DECIDED THIS ISSUE IN FAVOUR OF ASSESSEE. HE PLACED RELIANCE ON THE DECISION OF HONBLE HIGH COURT OF J HARKHAND IN THE CASE OF CIT VS. TATA ROBINS FRASER LTD., DECISION OF HO NBLE HIGH COURT OF KARNATAKA RENDERED IN THE CASE OF CIT/ACIT VS. M/S. TYCO ELECTRONICS CORPORATION INDIA PVT.LTD. IN ITA NO.383 OF 2009 AN D THE DECISION OF THE HONBLE COORDINATE BENCH (ITAT A BENCH-AHMEDABAD) IN THE CASE OF AHMEDABAD FINVEST CO.PVT.LTD. VS. ITO IN ITA NO.305 0/AHD/2004 & ITA NO.1680/AHD /2010 DY.CIT VS.PANCHMAHAL STEEL LTD. ASST.YEAR 2004-05 - 4 - ITA NO.2375/AHD/2006 (CROSS-APPEALS) FOR AY 2001-02 , DATED 16/10/2009. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE LD.CIT(A) HAS DELETED THE DISALLOWANCE BY FOLLO WING THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. ANJANI KUMAR CO.LTD. REPORTED AT (2003) 259 ITR 114 (RAJ). THE CONTENTION OF THE ASSESSEE IS THAT THE EXPENDITURE WAS RELATING TO TH E SMS PROJECT OF THE ASSESSEE. THE SMS PROJECT WAS STARTED IN F.Y. 1993 -94 AS PART OF EXPANSION OF ITS EXISTING BUSINESS. HOWEVER, DUE T O RECESSIONARY MARKET AND FINANCIAL CRUNCHES FACED BY THE COMPANY THE SAI D PROJECT WAS SUSPENDED. IN THE SAID PROJECT ASSESSEE INCURRED L OT OF EXPENDITURE BEFORE COMMISSIONING THE PROJECT AND AS PART OF THE SAID P ROJECT ASSESSEE HAD ADVANCED CERTAIN AMOUNT TO VARIOUS PARTIES FOR PURC HASE OF VARIOUS ITEMS. AS THOSE PURCHASES NEVER MATERIALIZED, THE SAID ADV ANCES AMOUNTING TO RS.13,29,989/- WERE WRITTEN OFF FROM THE BOOKS OF ACCOUNT AS NON- RECOVERABLE. SINCE THOSE ADVANCES WERE GIVEN AS A PART OF EXPANSION OF BUSINESS PROJECT AND SAME ARE NOT RECOVERABLE DESER VES TO BE ALLOWED AS GENUINE BUSINESS LOSS/EXPENDITURE. ON THE CONTRARY , THE CONTENTION OF THE REVENUE IS THAT THE EXPENDITURE INCURRED FOR PURCH ASE OF GOODS, THEREFORE IT IS CLEARLY OF CAPITAL IN NATURE AND IT IS RELAT ED TO ACQUISITION OF CAPITAL ASSETS. THEREFORE, SUCH EXPENDITURE CANNOT BE ALLOW ED AS BUSINESS EXPENDITURE U/S.37 OF THE IT ACT. THE CIT(A) HAS D ELETED THE DISALLOWANCE BY FOLLOWING THE DECISION OF HONBLE R AJASTHAN HIGH COURT IN THE CASE OF CIT VS. ANJANI KUMAR CO.LTD. IN OUR CONSIDERED VIEW, THE ITA NO.1680/AHD /2010 DY.CIT VS.PANCHMAHAL STEEL LTD. ASST.YEAR 2004-05 - 5 - LD.CIT(A) HAS WRONGLY APPLIED THE DECISION OF HONB LE RAJASTHAN HIGH COURT AS IN THAT CASE THE ADVANCES WERE GIVEN FOR P URCHASE OF LAND AND DEAL WAS NEVER MATERIALIZED. THE ASSESSEE HAD FILE D PROCEEDINGS BEFORE THE COURT FOR RECOVERY OF THE ADVANCE. BUT IN THE INSTANT CASE, THERE IS NO MATERIAL HAS BEEN PLACED ON RECORD THAT THE SUPPLIE R OF GOODS HAVE REFUSED TO REFUND THE ADVANCES GIVEN TO THEM. TH ERE IS NO MATERIAL ON RECORD AS TO WHAT EFFORTS WERE MADE BY THE ASSESSEE FOR RECOVERING THE ADVANCES. THEREFORE, UNDER THESE CIRCUMSTANCES, T HE LD.CIT(A) WAS NOT JUSTIFIED IN TREATING THE SAME AS BUSINESS LOSS AND ALLOWABLE U/S.37(1) OF THE ACT. THUS, THIS GROUND OF THE REVENUES APPEAL IS ALLOWED. 6. THE SECOND GROUND IS AGAINST DELETION OF DISALLO WANCE IN RESPECT OF PARTS IMPORTED FOR SMS PROJECT, THE LD.SR.DR SUBMIT TED THAT THE LD.CIT(A) FAILED TO APPRECIATE THE FACT THAT THE AD VANCES OF RS.1,19,86,344/- WAS IN RESPECT OF THE ACQUISITION OF CAPITAL ASSETS. IT IS NOT THE CASE WHERE THE PARTS WERE IMPORTED FOR RUN NING MACHINERY, BUT A NEW PROJECT WAS TO BE ESTABLISHED AND THE PARTS WER E USED FOR THE COMMISSIONING OF THE MACHINERY. HE RELIED ON THE F OLLOWING CASE-LAWS:- 1. SHREE DIGVIJAY WOOLEN MILLS LTD. VS. CIT (1993) 204 ITR 398 (GUJARAT HIGH COURT) 2. CIT VS. SHRI DIGVIJAY CEMENT CO.LTD. (1986) 159 ITR 253 (GUJARAT HIGH COURT) 3. CIT VS. JAIPUR MINERAL DEVELOPMENT SYNDICATE (1995) 216 ITR 469 (RAJASTHAN HIGH COURT) 6.1. ON THE CONTRARY, LD.COUNSEL FOR THE ASSESSEE R ELIED UPON THE DECISION OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF CIT VS. GUJARAT STEEL TUBES LTD. REPORTED AT (2002) 258 ITR 235 (GUJ.). HE ITA NO.1680/AHD /2010 DY.CIT VS.PANCHMAHAL STEEL LTD. ASST.YEAR 2004-05 - 6 - REITERATED THE SUBMISSIONS AS WERE MADE BEFORE THE LD.CIT(A) AND THE SAME IS REPRODUCED AS UNDER:- 3. WE HAVE FURTHER WRITTEN OFF RS.1,19,86,344/- B EING AMOUNT OF ASSET WRITTEN OFF WITHOUT EVEN ACQUIRING OR PUTTING IT TO USE. FOR YOUR HONOUR READY REFERENCE WE ATTACH HERE WITH DETAILS OF EXPE NSES INCURRED FOR THE ASSET WHICH IS OFF OF RS.1,19,86,344/-. WE FURTHE R SUBMIT THAT FOR COMMISSIONING ONE OF THE EQUIPMENT NAMELY VD/VOD UN IT IN THE SMS PROJECT WE WERE REQUIRED TO PURCHASE ELECTRONIC PAR TS FOR THE SAID VD/VOD EQUIPMENT FROM GERMANY. THE SAID PARTS LAND ED IN INDIA WITH CUSTOMS AUTHORITY IN FINANCIAL YEAR 1996-97 AND REL ATED PAYMENT TO THE FOREIGN PARTY WAS DONE IN FINANCIAL YEAR 1996-97. HOWEVER, DUE TO LOSSES AND FINANCIAL CRISES, WE COU LD NOT CLEAR THOSE PARTS FROM THE PORT AUTHORITY WITHIN THE PRESCRIBED TIME. THEREAFTER THE PORT AUTHORITY STARTED IMPOSING DEMURRAGE CHARGES F OR NOT CLEARING THOSE PARTS. SUBSEQUENTLY DURING YEAR UNDER REVIEW , WE DECIDED NOT TO CLEAR THOSE PARTS AND ASKED PORT AUTHORITY TO AUCTI ON OUT THOSE GOODS UNDER THE CUSTOMS ACT AND CLEAR THE IMPORT DUTY, CU STOMS DUTY, ETC. RECOVERABLE ON IMPORT OF SAID GOODS. FURTHER EVEN DURING THE YEAR UNDER REVIEW IF WE COULD HAVE TRIED TO CLEAR THOSE PARTS FROM PORT AUTHORITY WE COULD HAVE SADDLED WITH HUGE EXPENDITU RE IN FORM OF IMPORT DUTY, CUSTOMS DUTY, INTEREST, PENALTIES AND SO ON. FURTHER THOSE PARTS WERE ALL ELECTRONICS ONE AND AFTER LYING IDLE FOR SO MANY YEARS THOSE MUST HAVE EXPIRED OR BECOME UNWORKABLE OR OBS OLETE. IN VIEW THEREOF, LOOKING TO THE COMMERCIAL EXPEDIENCY OR BU SINESS COMPULSIONS WE TOOK THE SAID DECISION WHICH WAS FULLY IN THE IN TEREST OF OUR BUSINESS. IT MAY BE NOTED THAT THOUGH ALL THE EXPENSES INCURR ED BY US WERE FOR ACQUIRING A CAPITAL ASSET, THE SAME CANNOT BE CAPIT ALIZED BY MERELY THE FACT THAT WE NEVER PHYSICALLY ACQUIRED ANY ASSET NO ANY SUCH ASSET WAS PUT TO USE. ACCORDINGLY ENTIRE EXPENDITURE INCURRE D BY US IS NOTHING BUT A BUSINESS EXPENDITURE/LOSS WHICH DESERVES TO BE AL LOWED AS BUSINESS LOSS. IT MAY FURTHER BE NOTED THAT AS AND WHEN THO SE PARTS WILL AGAIN BE PURCHASED FOR COMPLETING VD/VOD UNIT, THOSE WILL BE CAPITALIZED. BUT AT THIS MOMENT THOSE IMPORTED PARTS ARE NEITHER ACQ UIRED NO PURCHASED, THERE IS NO QUESTION OF IT BEING CAPITALIZED. ACCO RDINGLY THE DEAD COST/EXPENDITURE IS DULY ALLOWABLE AS BUSINESS LOSS /EXPENDITURE. 4. WE FURTHER SUBMIT THAT, CAPITAL EXPENDITURE IS INCURRED IN LAW AND ON ACCOUNTANCY PRINCIPLES ONLY IN THE FOLLOWING CIR CUMSTANCES:- (A) A NEW ASSET IS BROUGHT INTO EXISTENCE; (B) AN ADVANTAGE OR ENDURING BENEFIT IS OBTAINED BY THE ASSESSEE; ITA NO.1680/AHD /2010 DY.CIT VS.PANCHMAHAL STEEL LTD. ASST.YEAR 2004-05 - 7 - (C) THE EXPENDITURE RELATES TO THE FIXED CAPITAL A S DISTINCT FROM THE CIRCULATING CAPITAL; (D) THE EXPENDITURE IS OF AN INITIAL NATURE TO COM MENCE A BUSINESS FOR THE FIRST TIME; (E) THE EXPENDITURE INCURRED IS TO ACQUIRE A CONC ERN OR GOODWILL. IN THE PRESENT CASE, NONE OF THE AFORESAID CIRCUMST ANCES HAVE MATERIALIZED, AN EXPENDITURE CANNOT BE TREATED AS C APITAL EXPENDITURE MERELY TO PROVIDE AN ALIBI FOR ITS BEING DISALLOWED . 5. WE FURTHER RELY ON FOLLOWING DECISIONS WHICH SU PPORTS OUR STAND AND ALLOW ABILITY OF THE EXPENSES REFERRED HEREIN ABOVE : (A) GUJARAT MINERAL DEVELOPMENT CORPN LTD. VS. CIT (143 ITR 822)(GUJ.) (B) HYLAM LIMITED V. CIT (87 ITR 310) (AP). (C) ASSAM BENGAL CEMENT CO.LTD. V. CIT (27 ITR 34)(SC) (D) DALMIA JAIN & CO.LTD. VS. CIT (81 ITR 754)(SC). 6. WE FURTHER SUBMIT THAT IT IS FAIRLY WELL SETTLE D THAT THE COMMERCIAL EXPEDIENCY OF A BUSINESSMANS DECISION TO INCUR THE EXPENDITURE CANNOT BE TESTED ON THE TOUCHSTONE OF STRICT LEGAL LIABILI TY TO INCUR SUCH EXPENDITURE. IT WAS HELD IN CASE OF CIT V. PIONEER ENGINEERING SYNDICATE (175 ITR 93)(MAD) THAT, IF THERE IS A PAY MENT MADE ON THE COMMERCIAL EXPEDIENCY AND IF SUCH PAYMENT DOES NOT RESULT IN THE ACQUISITION OF ANY CAPITAL OR AN ENDURING BENEFIT, MERELY BECAUSE SUCH PAYMENT IS MADE TO GET RID OF THE LIABILITY WHICH I S MUCH LARGER, THE OUTGOING AMOUNT CANNOT BE CONSIDERED AS CAPITAL IN NATURE . 7. WE FURTHER SUBMIT THAT THE TESTS FOR DECIDING N ATURE OF EXPENDITURE HAVE BEEN OUTLINED BY HONBLE APEX COURT IN CASE OF EMPIRE JUTE CO.LTD. VS. CIT (124 ITR 1) AND ALEMBIC CHEMICAL WO RKS CO.LTD. VS. CIT (177 ITR 377). YOUR HONOUR WOULD APPRECIATE TH AT IN LIGHT OF THESE JUDICIAL PRONOUNCEMENTS, THE ADVANCES WRITTEN OFF A ND COST OF ASSETS NOT ACQUIRED DOES NOT BECOME CAPITAL IN NATURE. 8. WE FURTHER SUBMIT THAT, IN ONE DECISION THE HON BLE ITAT, BOMBAY (REFER ITA NO.3892/BOM/1974-75 DATED 27 TH DECEMBER, 1978), HELD THAT THE DISALLOWANCE MADE BY THE LOWER AUTHORITIES WAS NOT PROPER BECAUSE THOUGH EMPLOYEES WERE SENT ABROAD FOR PURCHASE OF C APITAL GOODS FOR THEIR EXPANSION PROGRAMME, THE ASSESSEE-COMPANY DID NOT MAKE ANY PURCHASE AS A RESULT THAT THE ASSESSEE COULD NOT BE ALLOWED TO CAPITALIZE THE EXPENDITURE. ACCORDINGLY THE TRIBUNAL HELD THA T THE LOWER ITA NO.1680/AHD /2010 DY.CIT VS.PANCHMAHAL STEEL LTD. ASST.YEAR 2004-05 - 8 - AUTHORITIES SHOULD HAVE ALLOWED THE EXPENDITURE SIN CE NEW MACHINERY INTENDED TO BE PURCHASED WAS NOT SO DONE AND THE EX PANSION WAS IN RESPECT OF THE SAME BUSINESS OF THE ASSESSEE. 9. WITHOUT PREJUDICE TO ABOVE, WE FURTHER SUBMIT T HAT, THOUGH WE HAVE NEVER ACQUIRED THE ASSET THE COST OF WHICH IS WRITT EN OFF, IF FOR SAKE OF ARGUMENT WE ASSUME THAT IT IS ACQUIRED, THAN ALSO W E ARE ELIGIBLE FOR DECUCTIONU/S.32(1)(III) OF THE ACT AS DISCARDED ASS ET. IT WAS HELD IN CASE OF GUIDY MACHINE TOOLS P.LTD. VS. CIT (254 ITR 780) (MAD), WHERE NO DEPRECIATION WAS CLAIMED/ALLOWED, THE ENTIRE COST W ILL HAVE TO BE ALLOWED IN THE YEAR IN WHICH THE ASSET IS DISCARDED . 7. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. ONE OF THE CONTENTIONS OF THE ASSESSEE IS THAT FOR COMMISSIONING ONE OF THE EQUIPMENTS NAMELY VD/VOD UNIT IN THE SMS PROJEC T IT WAS REQUIRED TO PURCHASE ELECTRONIC PARTS FOR THE SAID VD/VOD EQ UIPMENT FROM GERMANY. THE SAID PARTS LANDED IN INDIA WITH CUSTO MS AUTHORITY IN FINANCIAL YEAR 1996-97 AND RELATED PAYMENT TO THE F OREIGN PARTY WAS DONE IN FINANCIAL YEAR 1996-97. HOWEVER, DUE TO LOSSES AND FINANCIAL CRISIS, THE ASSESSEE COULD NOT CLEAR THOSE PARTS FROM THE PORT AUTHORITY WITHIN THE PRESCRIBED TIME. THEREAFTER, THE PORT AUTHORITY ST ARTED IMPOSING DEMURRAGE CHARGES FOR NOT CLEARING THOSE PARTS. SU BSEQUENTLY, DURING YEAR UNDER REVIEW, THE ASSESSEE DECIDED NOT TO CLEA R THOSE PARTS AND ASKED PORT AUTHORITY TO AUCTION OUT THOSE GOODS UNDER THE CUSTOMS ACT AND CLEARS THE IMPORT DUTY, CUSTOMS DUTY, ETC. RECOVERA BLE ON IMPORT OF SAID GOODS. WE FIND THAT THE ASSESSEE HAS NOT PLACED AN YTHING ON RECORD WITH REGARD TO THE CONTENTION THAT THE ASSESSEE WAS UNAB LE TO CLEAR THE PARTS DUE TO INABILITY TO PAY CUSTOMS DUTIES AND OTHER CH ARGES. THE LD.CIT(A) HAS NOT GIVEN ANY FINDING THAT HOW MUCH DUTY AND OT HER CHARGES WERE PAYABLE BY THE ASSESSEE AND HOW MUCH HAS BEEN PAID BY OBTAINING THE ITA NO.1680/AHD /2010 DY.CIT VS.PANCHMAHAL STEEL LTD. ASST.YEAR 2004-05 - 9 - PARTS EVEN IF IT IS ASSUMED THAT NON-CLEARANCE OF P ARTS BY THE ASSESSEE WAS RESULTED INTO BUSINESS LOSS, THEN ALSO THE ASSESSEE IS REQUIRED TO SUBSTANTIATE ITS CLAIM BY PLACING RELEVANT MATERIAL ON RECORD. SO FAR THE UNDISPUTED FACT REMAINS THAT THE PARTS WERE TO BE U TILIZED FOR COMMISSIONING OF A NEW PROJECT, THEREFORE, ARE IN T HE NATURE OF CAPITAL ASSETS. THE HONBLE HIGH COURT OF GUJARAT IN THE C ASE OF CIT VS. GUJARAT STEEL TUBES LTD. REPORTED AT (2002) 258 ITR 235 (GU J.) HAS HELD THAT EVEN IF THE PROJECT IS ABANDONED AND THE PARTS USED BEC OME USELESS WOULD NOT BRING THEM OUT FROM THE NATURE OF BEING CAPITAL. THE LD.CIT(A) HAS ERRED IN NOT CONSIDERING THIS ASPECT. AFTER CONSID ERING ALL ASPECTS OF THE MATTER, WE RESTORE THIS ISSUE BACK TO THE FILE OF L D.CIT(A) TO DECIDE IT AFRESH, AFTER GIVING OPPORTUNITY OF HEARING TO THE RESPECTIVE PARTIES. THUS, GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS PART LY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN COURT ON THE DATE MENTIONED HER EINABOVE AT CAPTION PAGE SD/- SD/- ( .. ) (' #$) ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 31/ 12 /2013 71.., .../ T.C. NAIR, SR. PS ITA NO.1680/AHD /2010 DY.CIT VS.PANCHMAHAL STEEL LTD. ASST.YEAR 2004-05 - 10 - 4 / ,$8 98'$ 4 / ,$8 98'$ 4 / ,$8 98'$ 4 / ,$8 98'$/ COPY OF THE ORDER FORWARDED TO : 1. (+ / THE APPELLANT 2. ,-(+ / THE RESPONDENT. 3. !! $ ': / CONCERNED CIT 4. ':() / THE CIT(A)-VI, BARODA 5. 8 #; ,$ , , / DR, ITAT, AHMEDABAD 6. ;<& =0 / GUARD FILE. 4' 4' 4' 4' / BY ORDER, -8$ ,$ //TRUE COPY// > >> >/ // / !) !) !) !) ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 12.12.13(DICTATION-PAD 26-PA GES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 13.12.13 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH FAIR ORDER PLACED BEFORE OTHER MEMBER 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.31.12.13 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 31.12.13 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