The DCITBharuch Circle, Bharuch V. M/s. Gujarat Narmada Valley Fertilizers Co.Ltd., Bharuch

ITA 1696/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80228 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 21-07-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 20-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: VIMALENDU VERMA
• Keywords: Depreciation; Rule of consistency; Wholly owned subsidiary; Assessment record; Commercial expediency; Revenue expenditure; Reassessment proceedings; Capital expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T. A. NO.1416 & 1696/AHD/2010 (ASSESSMENT YEAR: 2007-08) GUJARAT NARMADA VALLEY FERTILIERS CO. LTD. P.O. NARMADANAGAR -392 015 DIST. BHARUCH V/S THE A.C.I.T, BHARUCH RANGE, BHARUCH (APPELLANT) (RESPONDENT) THE A.C.I.T, BHARUCH RANGE, BHARUCH V/S GUJARAT NARMADA VALLEY FERTILIERS CO. LTD. P.O. NARMADANAGAR -392 015 DIST. BHARUCH (APPELLANT) (RESPONDENT) PAN: AAACG8372Q APPELLANT BY : SHRI SANJAY R. SHAH, A.R. RESPONDENT BY : SHRI VIMALENDU VERMA CIT/DR ( )/ ORDER DATE OF HEARING : 22-07-2014 DATE OF PRONOUNCEMENT : 05-08-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THESE TWO APPEALS ,ONE FILED BY THE ASSESSEE AND TH E OTHER FILED BY THE REVENUE, ARE AGAINST THE ORDER OF CIT(A)-VI, BARODA DATED 25.02.2010 FOR A.Y. 2007-08. ITA NOS. 141 6 & 1696/AHD/2010 . A.Y. 2007- 08 2 2. THE FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE B USINESS OF MANUFACTURING OF FERTILIZERS, VARIOUS CHEMICALS FOR INDUSTRIAL USE AND INFORMATION TECHNOLOGY BUSINESS. ASSESSEE ELECTRONI CALLY FILED ITS RETURN OF INCOME FOR A.Y. 07-08 ON 25.10.2007 DECLARING TO TAL INCOME OF RS. 522,35,54,903/-. THEREAFTER ASSESSEE REVISED ITS RE TURN BY REVISING THE TOTAL INCOME RS. 443,99,08,567/-. THE CASE WAS SELE CTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED U/S. 143(3) VI DE ORDER DATED 31.03.2009 AND THE TOTAL TAXABLE INCOME WAS DETERMI NED AT RS. 447,06,15,430/-. AGGRIEVED BY THE ORDER OF A.O, ASS ESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) VIDE ORDER DATED 25.02 .2010 GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE OR DER OF CIT(A), ASSESSEE AND REVENUE BOTH ARE NOW IN APPEAL BEFORE US. WE FIRST TAKE UP ASSESSEES APPEAL IN ITA NO. 1416/ AHD/2010 4. THE EFFECTIVE GROUND RAISED BY THE ASSESSEE READS AS UNDER:- IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE LD. CIT(A) HAS ERRED IN CONFIRMING DISALLOWANCE OF DEPRECIATION AMOUNTING T O RS. 5,97,218/- ON THE ASSETS LEASED BY THE APPELLANT TO WESTERN RAILWAYS. IT IS SUBMITTED THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) OUGHT TO HAVE ALLOWED DEPRECIATION AS CLAIME D BY THE APPELLANT. IT IS SUBMITTED THAT IT BE SO HELD NOW. 5. ASSESSEE VIDE LETTER DATED 19,04,2011 HAS SUBSEQUEN TLY RAISED THE FOLLOWING THE ADDITIONAL GROUND:- 1. RS. 4,22,24,655 BEING 25% OF GOODWILL AMOUNTING TO RS. 16,88,98,620/- OUGHT TO HAVE BEEN ALLOWED AS DEPRECIATION ON GOODWILL U/S. 32(1)(III) . ITA NOS. 141 6 & 1696/AHD/2010 . A.Y. 2007- 08 3 1 ST GROUND IS WITH RESPECT TO DEPRECIATION OF WAGONS:- 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ON VERIFICATION OF THE DEPRECIATION CHART FILED BY THE ASSESSEE. A.O NOTIC ED THAT ASSESSEE HAD CLAIMED DEPRECIATION OF RS. 6,74,467/- ON THE ASSET S LEASED TO WESTERN RAILWAYS. A.O WAS OF THE VIEW THAT ASSESSEE HAD ONL Y EXTENDED FINANCE TO WESTERN RAILWAYS FOR PURCHASING ASSETS UNDER THE GUISE OF FINANCE LEASE TRANSACTIONS AND HAD WRONGLY CLAIMED DEPRECIA TION. HE FURTHER NOTED THAT SIMILAR ISSUE AROSE IN EARLIER YEARS IN THE CASE OF ASSESSEE AND THE DEPRECIATION WAS DISALLOWED BY THE A.O. AND WA S ALSO CONFIRMED BY LD. CIT(A). HE THEREFORE DISALLOWED THE CLAIM OF DE PRECIATION. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) FOLLOWING THE DECISION OF HIS PREDEC ESSOR, UPHELD THE ORDER OF A.O BY HOLDING AS UNDER:- 10.2 THE ISSUE OF DEPRECIATION ON WAGONS LEASED TO WESTERN RAILWAYS WAS SUBJECT MATTER OF APPEAL BEFORE MY PREDECESSOR. AS THE LEASE IS HELD TO BE F INANCE LEASE, THE ASSESSEE IS SUBJECTED TO TAX NOT IN RESPECT OF ENTIRE AMOUNT OF LEASE CHARGE BUT ONLY I N RESPECT OF ELEMENT OF FINANCE CHARGE INCLUDED THEREIN. THE A.O HAS EXCLUDED THE PRINCIPAL AMOUNT FROM THE LEASE RENT WHILE COMPUTING THE INCOME. 10.3 THE ISSUE IS COVERED BY MY OWN DECISION FOR A. Y. 2006-07 AND PREDECESSORS DECISION IN A.Y. 2003-04 TO 2005-06. FOLLOWING THE SAME, I UPHOLD TH E ACTION OF THE A.O AND DISMISS THE GROUND OF APPEAL. 7. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE IS NOW I N APPEAL BEFORE US. 8. BEFORE US. AT THE OUTSET, LD. A.R. SUBMITTED THAT I N ASSESSEES OWN CASE FOR A.Y. 03-04 TO A.Y. 05-06, THE CLAIM OF DEPRECIATION OF WAGONS HAS BEEN WAS ALLOWED BY HONBLE TRIBUNAL. HE FURTHER SUBMITT ED THAT IN A.Y. 06- 07 THE HONBLE TRIBUNAL HAD SEND BACK THE ISSUE TO THE FILE OF A.O AFTER CONSIDERING THE DECISION OF INDUSIND BANK LTD. HE P LACED ON RECORD THE ITA NOS. 141 6 & 1696/AHD/2010 . A.Y. 2007- 08 4 COPIES OF THE AFORESAID DECISIONS. HE THEREFORE SUB MITTED THAT SINCE THE FACTS IN THE YEAR UNDER APPEAL ARE IDENTICAL TO THA T OF EARLIER YEARS AND THE ISSUE IN THE PRESENT APPEAL IS WITH RESPECT TO THE SAME WAGONS AS IN EARLIER YEARS, FOLLOWING THE DECISION IN EARLIER YEARS, TH E ASSESSEE BE ALLOWED THE CLAIM OF DEPRECIATION. THE LD. D.R. ON THE OTHE R HAND SUPPORTED THE ORDER OF A.O AND CIT(A). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE CO-ORDINATE BENCH OF TRIBUNAL IN I TA NO. 827/AHD/2010 FOR A.Y. 06-07 ORDER DATED 05.07.2013 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING AS UNDER :- 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT FOR EARLIER ASSESSMENT YEARS ONE OF THE ISSUE BEFORE TH E CO-ORDINATE BENCH OF TRIBUNAL WAS WITH RESPECT TO RAILWAY WAGONS. THE ISSUE IN ITA NO. 14 63,1464,4007/A/2007 AND 2400/A/2008 FOR ASSESSMENT YEARS 2000-01, 2003-04, 2004-05 AND 2005 -06 IS AS UNDER:- 33. IT WAS SUBMITTED BEFORE THE ASSESSING OFFICER AS UNDER:- THE COMPANY HAS ACQUIRED THE FOLLOWING ASSETS AS P ER DETAILS GIVEN BELOW AND THE SAME HAS BEEN GIVEN ON LEASE; ASSETS PARTICULARS F.Y. AMOUNT RS. 1 WAGONS 1995-96 93937200 2 CAPTIVE POWER PLANT 1999-00 312990556 3 PLANT AND MACHINERY INCINERATOR 1998-99 26333260 4 PLANTAND MACHINERY- SAT & NOX UNIT 1998-99 54679889 DURING THE YEAR, THE COMPANY EARNED THE LEASE RENT OF RS. 12,51,30,606/-, WHICH HAS BEEN CREDITED TO THE PROFIT AND LOSS ACCOUNT AND SHOWN AS INCOME. FURTHER, AS PER ACCOUNTING GUIDANCE NOTE, AN AMOUNT OF RS. 1,21,41,524/- BEING LEASE EQUALIZATIO N AMOUNT HAS BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT. THE COMPANY IS MAINTAINING THE LEASE EQUALIZATION ACCOUNT FOR THE ASSETS GIVEN ON LEASE IN ORDER TO COMPLY WITH THE ACCOUNTING STANDA RD AND GUIDANCE NOTE ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANT OF INDIA IN ORDER THE JUSTIFY ITS CLAIM OF DEPRECIATION THE ASSESSEE RAISED VARIOUS CONTENTIONS WHICH ARE SUMMARIZED AS UNDER: I. THE COMPANY IS AUTHORISED BY ITS MEMORANDUM OF ASSOCIATION TO DO LEASE BUSINESS AND THUS LEASING IS ONE OF THE BUSINESS, OF THE COMPANY. II. THE COMPANY HAS PURCHASED THE ASSETS VIZ. RAILW AY WAGONS AND CAPTIVE POWER PLANT WHICH ARE GIVEN ON LEASE TO WESTERN RAILWAY AND NARMADA C HEMATUR PETROCHEMICALS CO. LTD. (NCPL) RESPECTIVELY IN THE COURSE OF ITS BUSINESS AND THER EFORE DEPRECIATION HAS BEEN CLAIMED AS ASSESSEE IS THE OWNER OF THE ASSETS WHICH HAS BEEN USED FOR ITS BUSINESS. III. AS REGARDS SPECIFIC CIRCUMSTANCES UNDER WHICH THE ASSETS WERE GIVEN ON LEASE, THE ASSESSEE STATED DURING THE REASSESSMENT PROCEEDINGS FOR A.Y. 2001-01 AS UNDER: ITA NOS. 141 6 & 1696/AHD/2010 . A.Y. 2007- 08 5 INDIAN RAILWAYS WAS FACING ACUTE SHORTAGE OF RAILW AY WAGONS IN GENERAL AND FOR MOVEMENT OF FERTILIZERS IN PARTICULARS. THUS IN ORDER TO GET P RIORITY ALLOTMENT OF WAGONS FOR MOVEMENT OF FERTILIZERS, MANUFACTURED BY THE COMPANY, UNDER GUA RANTEED CLEARANCE OF TRAFFIC, AS PER THE OWN YOUR WAGON SCHEME OF RAILWAYS, COMPANY HAD GIVEN ON LEASE 34 WAGONS TO WESTERN RAILWAYS. FURTHER IN ORDER TO PREVENT SUBSTANTIAL LOSS DUE TO POWER DIPS AS WELL AS TO ACHIEVE ECONOMY ON POWER COST, NCPL, A SUBSIDIARY OF GNFC LTD., DECIDE D INSTALL CAPTIVE POWER PLANT (CPP). HOWEVER, SINCE PRODUCTION AT NCPL HAD NOT ESTABLISH ED TILL THAT TIME, NCPL WAS NOT IN A POSITION TO FINANCE THE COST OF PROPOSED CPP. GNFC PURCHASED THE EQUIPMENTS FOR CPP FOR NCPL AND THE SAME WAS GIVEN ON LEASE BASIS TO NCPL. CNFC ACCOUN TED LEASE RENT FOR THESE ASSETS DURING RESPECTIVE ASSESSMENT YEARS AND CREDITED IT TO THE PROFIT AND LOSS ACCOUNT AND CONSEQUENTLY INCLUDED IN TOTAL INCOME. IT WAS ARGUED BY THE LEARNED COUNSEL FOR THE ASSESS EE THAT THE INCOME-TAX DEPARTMENT HAD ALLOWED DEPRECIATION ON LEASED ASSETS TO THE ASSESSEE SINCE A.Y. 1996-97 TILL A.Y. 2002-03 IN THE ASSESSMENT MADE U/S 143(3) OF THE ACT IN THE CASE O F ASSETS LEASED TO WESTERN RAILWAYS. THE WAGONS SO LEASED WERE PURCHASED BY THE ASSESSEE LE SSOR. THE WAGONS WERE IDENTIFIABLE AND WERE HAVING IDENTIFICATION NUMBERS. THE PRIMARY PERIOD WAS FOR 10 YEARS AS PER CLAUSE 2(III). THE LEASE CHARGES WILL NOT BE PAYABLE FOR A NUMBER OF D AYS THE WAGONS REMAINED UNUTILIZED. THE LESSEE ON BEHALF OF THE LESSOR WILL ENSURE THE EQUI PMENTS. IT WAS FURTHER ARGUED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ASSETS SO LEASED WILL RETURN BACK TO THE LESSOR ASSESSEE AND THE LESSEE WILL NOT HAVE ANY RIGHT. THE ASSETS SO LEAS ED THEREAFTER WILL BE USED BY THE ASSESSEE FOR ITS OWN PURPOSE. THE ALLEGATIONS MADE BY THE A.O. AT P AGES 43 AND 44 OF HIS ORDER ARE WITHOUT ANY BASIS AND HAD BEEN WRITTEN IN THE ORDER OF CONJEC TURES AND SURMISES. THOUGH THE ASSETS HAD BEEN DULY ACQUIRED ON THE SPECIFICATION OF THE LESSEE. IT CANNOT BE SAID THAT IT WILL NOT BE USED FOR THE PURPOSE AND USE OF THE ASSESSEE I.E. THE LESSOR. T HE INSURANCE HAS BEEN TAKEN BY THE LESSEE ON BEHALF OF THE LESSOR. IT IS NOT A FINANCE LEASE SI NCE THE PERIOD OF LEASE DOES NOT START FROM THE DAT E OF FINANCE OF THE ASSETS BUT AT A LATER DATE. 34 ON THE OTHER HAND, THE LEARNED D.R. RELIED UPON THE ORDER OF THE A.O. AS PAGES 43 AND 44 AND IN SPECIFIC RELIED UPON THE DECISION OF THE HON. SU PREME COURT IN THE CASE OF ASEA BROWN BOVERI LTD. VS. INDUSTRIAL FINANCE CORPORATION, DATED 27.1 0.2004 WHICH HAS BEEN PLACED ON RECORD .35. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE FACTS OF THE CASE. AS REGARDS RELIANCE ON THE DECISION OF THE HON. SUPREME COURT IN THE CA SE OF ASEA BROWN BOVERI LTD. (SUPRA) BY THE LEARNED DR, THE ARGUMENTS OF THE LEARNED D.R THAT T HE ASSESSEE HAD PURCHASED THE EQUIPMENTS FOR THE ECONOMIC LIFE OF THE PLANT ITSELF AND NOT MORE THAN THAT. AS A MATTER OF FACT, IT IS NOT A CASE, AS IS APPEARING FROM DIFFERENT CLAUSES OF THE LEASE DE ED THAT THE EQUIPMENTS LEASED WILL BE RETURNED BACK TO THE LESSOR AFTER THE EXPIRY OF THE LEASE. NOTHING HAS BEEN BROUGHT TO DISAPPROVE THE SAID CLAUSES OF THE LEASE DEED BY ANY OF THE AUTHORITIES BELOW OR BY THE LEARNED DR. THE LEARNED DR COULD NOT PROVE THAT IN FACT THE ASSESSEE IS ONLY A FINANCER AND IS NOT INTERESTED IN THE ASSETS AND THEREFORE, IT CANNOT BE SAID AS FULL PAYOUT LEASE. THEREFORE, IN THE CIRCUMSTANCES AND FACTS OF THE CASE, THE ARGUMENTS MADE BY THE LEARNED D.R CANNOT BE ACCEPTED AND FOLLOWING THE RULE OF CONSISTENCY, THE ASSESSEE DESERVES TO BE ALLOWED T HE CLAIM AND WE DIRECT THE ASSESSING OFFICER ACCORDINGLY TO ALLOW THE CLAIM OF THE ASSESSEE. TH E ORDER OF THE LEARNED CIT(A) IS REVERSED. THUS, GROUND NO. 12 OF THE ASSESSEES APPEAL IS ALL OWED. 5. THE AFORESAID ORDER OF TRIBUNAL WAS CHALLENGED B Y REVENUE BEFORE HON. GUJARAT HIGH COURT WHERE IN TAX APPEAL NO. 516/A/2012 (ORDER DATED 12 TH MARCH, 2013). ONE OF THE ISSUE RAISED READS AS UNDER:- VI. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS RIGHT IN LAW IN DELETING THE DISALLOWANCES MADE ON ACCOUNT OF DEPRE CIATION OF RS. 1,61,23,149/- CLAIMED ON CERTAIN ASSETS SINCE THE SAID TRANSACTIONS ARE MERE A FINANCIAL ARRANGEMENTS AND THAT THE ASSESSEE IS NOT ENGAGED IN LEASING BUSINESS? 6. THE HON. HIGH COURT DECIDED THE SAME AS UNDER:- WITH RESPECT TO QUESTIONS-VI AND VII, WE NOTICE THA T THE ISSUES PERTAIN TO DISALLOWANCE OF DEPRECIATION CLAIMED BY THE ASSESSEE ON THE GROUND THAT TRANSACTIONS OF LEASE WERE QUESTIONED BY THE ASSESSING OFFICER. THE ASSESSING OFFICERS STA ND APPEARS TO BE THAT THE ASSESSEE DID NOT RETAIN ITS INTEREST IN THE LEASED OUT EQUIPMENTS. THE TRI BUNAL REVERSED THE ORDER OF THE REVENUE AUTHORITIES, MAKING FOLLOWING OBSERVATION:- ITA NOS. 141 6 & 1696/AHD/2010 . A.Y. 2007- 08 6 35 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE FACTS OF THE CASE. AS REGARDS RELIANCE ON THE DECISION OF THE HON. SUPREME COURT IN THE CA SE OF AREA BROWN BOVERI LTD. (SUPRA) BY THE LEARNED D.R. THE ARGUMENTS OF THE LEARNED D.R. THAT THE ASSESSEE HAD PURCHASED THE EQUIPMENTS FOR THE ECONOMIC LIFE OF THE PLANT ITSELF AND NOT M ORE THAN THAT. AS A MATTER OF FACT, IT IS NOT A CA SE, AS IS APPEARING FROM DIFFERENT CLAUSE OF THE LEASE DEED THAT THE EQUIPMENTS LEASED WILL BE RETURNED BACK TO THE LESSOR AFTER THE EXPIRY OF THE LEASE. NOTHING HAS BEEN BROUGHT TO DISAPPROVE THE SAID CLAUSE OF THE LEASE DEED BY ANY OF THE AUTHORITIES BELOW OR BY THE LEARNED D.R. THE LEARNED DR COULD NOT PROVE THAT IN FACT THE ASSESSEE IS ONLY A FINANCIER AND IS NOT INTERESTED IN THE ASSETS AND THEREFORE, IT CANNOT BE SAID AS FULL PAYOUT LEASE. THEREFORE, IN THE CIRCUMSTANCES AND FACTS OF THE CASE, THE ARGUMENTS MADE BY THE LEARNED DR CANNOT B E ACCEPTED AND FOLLOWING THE RULE OF CONSISTENCY, THE ASSESSEE DESERVES TO BE ALLOWED TH E CLAIM AND WE DIRECT THE ASSESSING OFFICER ACCORDINGLY TO ALLOW THE CLAIM OF THE ASSESSEE. THE ORDER OF THE LEARNED CIT(A) IS REVERSED. THUS, GROUND NO. 12 OF THE ASSESSEES APPEAL IS ALLOWED. 7.1 FROM THE ABOVE, WE NOTICED THAT ONE OF THE PRIM E FACTORS WHICH WEIGHED WITH THE TRIBUNAL WAS THE RULE OF CONSISTENCY. LEARNED COUNSEL FOR THE A SSESSEE RIGHTLY POINTED OUT THAT SUCH CLAIM DID NOT ARISE FOR CONSIDERATION FOR THE FIRST TIME, BUT , IS SPREAD OVER TO THE ENTIRE PERIOD BETWEEN A.Y. 1996-97 TO 1999-2000. SUCH CLAIM WAS MADE BY THE A SSESSEE AND DULY GRANTED BY THE ASSESSING OFFICER. IN THAT VIEW OF THE MATTER, IN OUR OPINIO N, THE TRIBUNAL COMMITTED NO ERROR. 7. IN THE PRESENT CASE A VIEW HAS ALREADY BEEN TAKE N BY CO-ORDINATE BENCH AND THE SAME HAS ALSO BEEN AFFIRMED BY HON. GUJ. HIGH COURT. SINCE THE IS SUE HAS ALREADY BEEN DECIDED BY THE HON. GUJARAT HIGH COURT IN ASSESSEES OWN CASE, WE RESPE CTFULLY FOLLOWING THE ORDER OF HON. GUJ. HIGH COURT. ALLOWED THE CLAIM OF THE ASSESSEE FOR THE DE PRECIATION. THUS THIS GROUND OF ASSESSEE IS ALLOWED. 10. BEFORE US, LD. D.R. HAS NOT BROUGHT ANY CONTRARY BI NDING DECISION IN ITS SUPPORT. WE THEREFORE FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF TRIBUNAL AND WHICH WAS UPHELD BY HONBLE GUJARAT HI GH COURT IN ASSESSEES OWN CASE FOR A.Y. 06-07 AND FOR THE SAME REASONS GIVEN THEREIN HOLD THAT THE ASSESSEE IS ELIGIBLE FOR CLAI M OF DEPRECIATION AND THUS ALLOW THIS GROUND OF ASSESSEE. IN THE RESULT, THIS GROUND OF ASSESSEE IS ALLOWED. 2 ND GROUND IS WITH RESPECT TO DEPRECIATION ON GOODWILL . 11. BEFORE US, THE LD. A.R. SUBMITTED THAT ON THE MERGE R OF ERSTWHILE NARMADA CHEMATUR PETRO CHEMICALS LTD. EFFECTIVE FRO M 1 ST APRIL, 2005 UNDER SCHEME APPROVED BY HONBLE GUJARAT HIGH COURT WITH THE ASSESSEE RESULTED IN ACQUISITION OF GOODWILL. THE C LAIM OF DEPRECIATION ON GOODWILL WAS NOT MADE DUE TO LACK OF CLARITY ON THE LEGAL POSITION OF ITA NOS. 141 6 & 1696/AHD/2010 . A.Y. 2007- 08 7 ITS ALLOWABILITY. HE FURTHER SUBMITTED THAT IN VIEW OF THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. HIN DUSTAN COCO COLA BEVERAGES P. LTD. (2011) TOIL-33-HC-DEL, THE ISSUE OF DEPRECIATION ON GOODWILL HAD RESULTED INTO CLARITY ON THE ISSUE OF DEPRECIATION OF GOODWILL AND THEREFORE THE ADDITIONAL GROUND OF APPEAL ON TH E GOODWILL IS BEING RAISED BEFORE THE HONBLE TRIBUNAL. HE FURTHER SUBM ITTED THAT THE ADDITIONAL GROUND IS A PURELY LEGAL GROUND AND DOES NOT REQUIRE FURTHER FACTS APART FROM THE FACTS WHICH ARE ALREADY AVAILA BLE ON RECORD. HE THEREFORE SUBMITTED THAT THE ADDITIONAL GROUND BE A DMITTED. THE LD. D.R. ON THE OTHER HAND OBJECTED TO THE RAISING OF ADDITI ONAL GROUND. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE ADDITIONAL GROUND RAISED BY THE AS SESSEE IS PURELY A LEGAL GROUND AND WE THEREFORE ADMIT IT FOR ADJUDICA TION. 13. WE FIND THAT GROUND OF DEPRECIATION ON GOODWILL WA S NOT RAISED BEFORE A.O OR CIT(A) BUT IS RAISED BEFORE US FOR THE FIRST TIME. WE THEREFORE FEEL THAT IN THE INTEREST OF JUSTICE, THE MATTER NEEDS T O BE DECIDED AT THE END OF CIT(A). WE THEREFORE REMIT THE ISSUE TO THE FILE OF CIT(A) TO DECIDE THE ISSUE AS PER LAW. NEEDLESS TO STATE THAT CIT(A) SHA LL GRANT ADEQUATE OPPORTUNITY OF HEARING TO BOTH THE PARTIES. IN THE RESULT, THIS GROUND OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 14. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSES. WE NOW TAKE UP REVENUES APPEAL IN ITA NO. 1696/AHD /2010 ITA NOS. 141 6 & 1696/AHD/2010 . A.Y. 2007- 08 8 15. THE GROUNDS RAISED THE REVENUE READS AS UNDER:- 1(A). ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS. 42,15,333/- MADE OUT OF THE INTERES T CLAIMED U/S. 36(L)(III) ON ACCOUNT OF DIVERSION O F BORROWED FUNDS TO SUBSIDIARY AND ASSOCIATE CONCERNS , BY MERELY RELYING ON THE APPELLATE ORDERS FOR EARLIER YEARS (WHICH HAS BEEN CONTESTED BY THE DEPA RTMENT), WITHOUT APPRECIATING THAT EACH YEAR'S INCOME-TAX PROCEEDINGS ARE INDEPENDENT AND THE MATT ER HAD TO BE DECIDED ON MERITS IN THE LIGHT OF THE PRINCIPLES SETTLED BY AUTHORITATIVE JURISDICTIONAL PRONOUNCEMENTS. 1.(B). THE CIT(A) FAILED TO APPRECIATE THE LEGAL PR INCIPLE, THAT ONUS U/S. 36(L)(III) LIES ON THE ASSE SSEE TO PROVE THAT EACH LOAN IS USED FOR THE PURPOSES OF TH E BUSINESS AND THERE IS NO PRESUMPTION IN LAW THAT IT IS OWN CAPITAL OR SURPLUS FUNDS THAT WERE DIVERTED FOR NON-BUSINESS PURPOSES, AS SETTLED IN THE CASE O F KISHANCHAND CHELLARAM VS. CIT. 114 ITR 654 (BOM), R . DALMIYA VS CIT. 133 ITR 169 (DEL.), CIT VS. M.S. VENKATESHWARAN 222 ITR 163 (MAD), K. SO'MASUND ARAM & BROTHERS CIT 238 ITR 939 (MAD) AND CIT VS MOTOR GENERAL FINANCE LTD. 254 ITR 449 (DEL) WHICH WAS CONFIRMED IN PRINCIPLE BY THE SUPREME COURT IN THE CASE OF MOTOR GENERAL FINANCE VS CIT 267 ITR 381 (SC). 2(A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) ERRED IN ALLOWING THE EXPENSES OF RS. 1,95,748/- ON PROTECTING THE ASSETS OF M/S. GUJ ARAT NARMADA AUTO LTD. (GNAL), A SISTER CONCERN OF THE ASSESSEE, WITHOUT APPRECIATING THE LEGAL POSITI ON THAT A SUBSIDIARY IS A SEPARATE LEGAL ENTITY AND THE BUSINESS OF THE SUBSIDIARY CANNOT BE CONSIDERED TO BE BUSINESS OF THE ASSESSEE AS SETTLED IN THE CASE OF PHALTAN SUGAR WORKS LTD. VS CWT 208 ITR 989, 993 (B OM) FOLLOWED IN 215 ITR 582 (BOM) AND 216 ITR 479, 481 (BOM). 2(B) WITHOUT PREJUDICE, THE CIT(A) ERRED IN NOT CON SIDERING THE FACT THAT A LIQUIDATOR WAS APPOINTED B Y THE HIGH COURT WHO WAS IN ACTUAL POSSESSION OF THE ASSETS OF GNAL AND WAS RESPONSIBLE FOR PROTECTING THE SAME AND HENCE THERE WAS NO OBLIGATION ON THE A SSESSEE TO INCUR SUCH EXPENDITURE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN DELETING THE ADDITION OF RS. 2,10,38,563/- MADE OUT OF REPAIRS AND MAINTENANCE E XPENSES TREATING THE SAME AS CAPITAL EXPENDITURE. THE CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT T HAT RENEWAL OR REPLACEMENT OF EXISTING PARTS OR RESTORATION ARE NOT COVERED BY 'CURRENT REPAIRES' R EFERRED TO SECTION 31(I) AND ARE OF CAPITAL NATURE AS SETTLED IN THE CASE OF BALIMAL NAVAL KISHORE VS CIT 224ITR414 (SC). 4. ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE, T HE CIT(A) ERRED IN ALLOWING DEDUCTION OF RS.2,86,000/- BEING PAYMENT FOR INFORMATION TECHNOL OGY RELATED SERVICES PAID TO M/S. INFINIUM (INDIA) LTD. TREATED AS EXPENSES DERIVING BENEFIT O F ENDURING NATURE. 1 ST GROUND IS WITH RESPECT TO DELETION OF DISALLOWANCE OF INTEREST:- 16. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AND ON VERIFICATION OF THE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET, A.O NOTI CED THAT ASSESSEE HAD GRANTED INTEREST FREE ADVANCES TO ITS SUBSIDIAR IES AND ASSOCIATE CONCERN. HE ALSO NOTICED THAT ON THE OTHER HAND ASS ESSEE WAS PAYING HUGE INTEREST ON SECURED AND UNSECURED LOAN. A.O AF TER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE BALANCE SHEET C ONCLUDED THAT THE BORROWED FUNDS WERE UTILIZED BY THE ASSESSEE FOR MA KING INTEREREST FREE ITA NOS. 141 6 & 1696/AHD/2010 . A.Y. 2007- 08 9 ADVANCES AND THUS ASSESSEE HAD DIVERTED ITS INTERES T BEARING FUNDS FOR NON BUSINESS PURPOSES AND THEREFORE THE INTEREST EX PENDITURE CLAIMED U/S. 36(1(III) ON THE BORROWING MADE TO THE EXTENT UTILI ZED FOR NON BUSINESS PURPOSES CANNOT BE ALLOWED. HE ACCORDINGLY WORKED O UT THE DISALLOWANCE AT RS. 42,15,333/-. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) DELETED THE ADDITION M ADE BY THE A.O BY HOLDING AS UNDER:- 5.3. I HAVE CONSIDERED THE SUBMISSION OF THE ID. AR AND FACTS OF THE CASE. THE CLAIM OF THE APPELLANT COMPANY THAT IT HAD ADEQUATE NON INTEREST BEARING F UNDS IN PAST WHEN ADVANCES WERE MADE HAS BEEN ACCEPTED BY THE HON'BLE ITAT IN SEVERAL YEARS. THER E IS NO FURTHER ADVANCE DURING THE YEAR. IN FACT, THERE IS REDUCTION IN ADVANCE DURING THE YEAR. THER EFORE THE FINDING OF THE HON'BLE ITAT IN A.Y. 1992- 93 TO 1997-98 AND A.Y. 2002-03 REMAIN APPLICABLE TO THE YEAR UNDER CONSIDERATION. IN THAT SENSE THE ISSUE IS A COVERED MATTER. EVEN ON THE GROUND OF CO MMERCIAL EXPEDIENCY IN RESPECT OF ADVANCE, THE FOLLOWING FACTS STATED BY THE APPELLANT ARE VERY RE LEVANT:- 'AS REGARDS ELEMENT OF COMMERCIAL EXPEDIENCY IN RE LATION TO ADVANCES TO NE&SRS, WE MAY STATE THAT THE MANUFACTURING UNITS OF THE ASSESSES COMPAN Y ARE SITUATED AT A DISTANCE FROM NEAREST URBAN AREA AND THEREFORE ADEQUATE EDUCATIONAL FACILITIES ARE NOT AVAILABLE. WITH A VIEW TO ENSURE AVAILABILI TY OF REQUIRED HUMAN RESOURCE FOR THE PURPOSES OF COMP ANY'S BUSINESS, IT WAS NECESSARY TO ORGANISE EDUCATIONAL FACILITIES. THE COMPANY THEREFORE CREAT ED EDUCATIONAL FACILITIES UP TO S.S.C IN THE STAFF COLONY ITSELF. IT WAS HOWEVER NOT FEASIBLE TO HAVE COLLEGE IN THE STAFF COLONY. THEREFORE THE MANAGEME NT DECIDED IN 1985 TO CREATE A TRUST WITH LIBERAL CONT RIBUTION FOR ESTABLISHMENT OF A COLLEGE AFFILIATED WITH BHARATIYA VIDYA BHAVAN. THE MANAGEMENT ENSURED RESE RVATION OF SEATS FOR THE CHILDREN OF EMPLOYEES. THE INTEREST FREE ADVANCE GIVEN TO THE TRUST I.E. N E&SRS IS TO SUPPORT THE COLLEGE. THE AFORESAID FACTUAL BACK GROUND CLEARLY ESTABLISHES THE FACT TH AT THE FINANCIAL SUPPORT TO THE TRUST AND 'THEREBY TO COLLEGE IS MOTIVATED OUT OF THE COMMERCIAL EXPEDIEN CY. THUS APART FROM AVAILABILITY OF NON INTEREST BEARIN G FUNDS, THE APPELLANT'S CLAIM FOR DEDUCTIBILITY IS ALLOWABLE EVEN ON THE GROUND OF BUSINESS EXPEDIENCY . THEREFORE THE ASSESSING OFFICER IS DIRECTED TO DELETE THE DISALLOWANCE OF INTEREST OF RS.42,15,333 /-. THE GROUND NO. 2 IS THEREFORE ALLOWED. 17. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 18. BEFORE US, LD. D.R. RELIED ON THE ORDER OF A.O. ON THE OTHER HAND LD. A.R. SUBMITTED THAT ON IDENTICAL FACTS IN THE ASSESSEES OWN CASE FOR A.Y. 03- 04 TO 05-06 SIMILAR DISALLOWANCES WERE MADE BY A.O BUT HONBLE TRIBUNAL DELETED THE DISALLOWANCES MADE. HE THEREFO RE SUBMITTED THAT SINCE THE FACTS OF THE CASE IN THE YEAR UNDER APPEA L ARE IDENTICAL TO THAT OF EARLIER YEARS, THE CLAIM OF ASSESSEE BE ALLOWED. ITA NOS. 141 6 & 1696/AHD/2010 . A.Y. 2007- 08 10 19. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT DISALLOWANCE ON ACCOUNT OF INTEREST WA S MADE BY A.O IN A.Y. 03-04. THE CO-ORDINATE BENCH OF TRIBUNAL WHILE DECIDING THE APPEAL IN ITA NO. 1373/AHD/2007 ORDER DATED 30.12.2 011 FOR A.Y. 03- 04 DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY H OLDING AS UNDER:- 39. NOW, WE TAKE UP THE DEPARTMENTAL APPEAL IN ITA NO,1 373/AHD/2007 FOR AY 2003-04. IN GROUND NO.L, THE BRIEF FACTS ARE THAT THE AO DISALLOWED TH E INTEREST OF RS.8,00,14,405/-CLAIMED U/S 36(L)(III) OF THE ACT ON THE GROUND THAT THE BORROW INGS WERE UTILIZED FOR NON-BUSINESS PURPOSE. 40. THE LEARNED CIT(A) VIDE PARA 5.3 OF HIS ORDER ALLOW ED THE CLAIM OF THE ASSESSEE SINCE THE ASSESSEE HAD BEEN ALLOWED IN EARLIER YEARS THE CLAIM ON IDEN TICAL MATTERS AND THEREFORE IT IS A COVERED MATTER. 41. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. WE CONCUR WITH THE VIEWS OF THE LD CIT(A) AND THE DECISION OF THE TRIBUNAL A HMEDABAD BENCH IN ASSESSEES OWN CASE FOR A.Y. 95-96 AS REFERRED TO IN THE ORDER OF THE LD. C IT(A) VIDE PARA 5.2.3 AND THEREFORE WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A). THUS, GRO UND NO. 1 OF THE REVENUES APPEAL IS DISMISSED. 20. BEFORE US, LD. A.R. HAS SUBMITTED THE FACTS OF THE CASE IN THE YEAR UNDER APPEAL ARE IDENTICAL TO THAT OF EARLIER YEARS AND W HICH THE REVENUE COULD NOT CONTROVERT BY BRINGING ANY CONTRARY MATERIAL ON RECORD. WE THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDIN ATE BENCH AND FOR SIMILAR REASONS, FIND NO REASON TO INTERFERE WITH T HE ORDER OF CIT(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED. GROUND NO. 2(A) AND 2(B) ARE CONSIDERED TOGETHER AN D THEY ARE WITH RESPECT TO EXPENSES INCURRED ON MAINTENANCE ON ASSE TS OF GUJARAT NARMDA AUTO LTD. (GNAL):- 21. A.O NOTICED THAT ASSESSEE HAS INCURRED EXPENSES OF RS. 1,95,748/- FOR MAINTENANCE ON ASSETS OF GNAL, A SUBSIDIARY OF THE ASSESSEE. A.O WAS OF THE VIEW THAT THE SUBSIDIARY WAS A SEPARATE LEGA L ENTITY AND THE BUSINESS OF SUBSIDIARY CANNOT BE CONSIDERED TO BE T HE BUSINESS OF THE ASSESSEE. HE THEREFORE DISALLOWED THE CLAIM OF EXPE NSES. AGGRIEVED BY ITA NOS. 141 6 & 1696/AHD/2010 . A.Y. 2007- 08 11 THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFOR E CIT(A). CIT(A) NOTED THAT ON IDENTICAL FACTS FOR A.Y. 98-99 TO 06- 07 SIMILAR DISALLOWANCES WERE DELETED BY CIT(A). HE THEREFORE FOLLOWING THE DECISION OF HIS PREDECESSOR DELETED THE ADDITION MA DE BY A.O BY HOLDING AS UNDER:- 6.3. I HAVE GONE THROUGH THE SUBMISSIONS OF THE AUT HORIZED REPRESENTATIVE AND THE ASSESSMENT ORDER. I FIND THAT ON IDENTICAL ISSUE FOR A.Y. 1996-97, 1998 -99 TO 2006-07 THE DISALLOWANCE WAS DELETED BY CIT(A). MORE SPECIFICALLY THE CIT(A) WHILE DECIDING THE SAID ISSUE IN FAVOUR OF THE APPELLANT IN ITS O WN CASE FOR THE ASSESSMENT YEAR 1998-99 HELD THAT: '/ HAVE HEARD THE APPELLANT'S COUNSEL AND GONE THR OUGH THE MATERIAL ON RECORD. I AGREE WITH THE ARGUMENTS OF THE APPELLANT'S COUNSEL THAT THE CONCE RN OF GNAL WAS TAKENOVER FOR EXPANDING IT'S BUSINESS ACTIVITIES AND AFTER LIQUIDATION OF THE SA ME SINCE THE APPELLANT BECAME THE SOLE CREDITOR OF THE CONCERN, IT BECAME NECESSARY FOR IT TO PROTECT THE ASSETS OF THAT CONCERN. HENCE IT CANNOT BE SAID THA T THE EXPENSES INCURRED TOWARDS THE PROTECTION OF THE ASSETS OF THE LIQUIDATED CONCERN ARE FOR NON BUSINESS PURPOSES. I AM ALSO OF THE VIEW THAT THIS IS THE ONLY WAY BY WHICH THE RECOVERY OF THE MONEY INVESTED BY THE APPELLANT COMPANY IS POSSIBLE. TAKI NG THIS VIEW INTO CONSIDERATION AND ALSO FOLLOWING THE ABOVE MENTIONED DECISIONS AND DECISION ON THE I SSUE IN APPELLANT'S CASE FOR A. Y. 1996-97, I HOLD THAT THIS ADDITION IS ALSO NOT JUSTIFIED AND THE SA ME STANDS DELETED. I HAVE ALSO ALLOWED THE CLAIM OF THE APPELLANT WHILE DISPOSING OF APPEAL ON THIS GROUND IN A.Y. 1996-97. ' IT BEING A COVERED ISSUE THE ASSESSING OFFICER IS D IRECTED TO ALLOW THE CLAIM OF APPELLANT COMPANY FOR A.Y. 2007-08. THE GROUND NO. 3 IS THEREFORE ALLOWED . 22. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 23. BEFORE US, LD. D.R. RELIED ON THE ORDER OF A.O. ON THE OTHER HAND LD. A.R. SUBMITTED THAT ON IDENTICAL FACTS FOR A.Y. 03-04, A .O HAD MADE SIMILAR DISALLOWANCES AND IN THE REVENUES APPEAL BEFORE HO NBLE ITAT IN ITA NO. 3993/A/2007 FOR A.Y. 04-05, THE ISSUE WAS DECI DED IN FAVOUR OF THE ASSESSEE. HE THEREFORE SUBMITTED THAT SINCE THE ISS UE IN THE YEAR UNDER APPEAL ARE IDENTICAL TO THAT OF 04-05, THE ORDER OF CIT(A) NEEDS TO BE UPHELD. 24. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT SIMILAR ISSUE AROSE FOR A.Y. 04-05 IN ITA NO. 3993/A/07 FOR ITA NOS. 141 6 & 1696/AHD/2010 . A.Y. 2007- 08 12 A.Y. 04-05 AND THE ISSUE WAS DECIDED IN FAVOUR OF T HE ASSESSEE BY THE HONBLE TRIBUNAL VIDE ORDER DATED 30.12.2011 BY HOL DING AS UNDER:- 98 AS REGARDS GROUND NO.2 OF THE REVENUE'S APPEAL, THE BRIEF FACTS ARE THAT THE AO MADE A DISALLOWANCE OF RS. 14.63,659/- BEING THE EXPENDITU RE INCURRED ON PROTECTING THE ASSETS OF WHOLLY OWNED SUBSIDIARY I.E. M/S GUJARAT NARMADA AUTO LTD. THE LEARNED CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER, SINCE OR, IDENTICAL ISSUE FOR AYS 1996-97 TO 2002-03, THE DISALLOWANCE WAS DELETED BY THE LEARNED CIT(A) IN ASSESSEE'S OWN CAS E. 99 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. IT WAS POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE PRESENT I SSUE IS COVERED BY THE DECISION OF THE TRIBUNAL AHMEDABAD BENCH IN ASSESSEE'S OWN CASE FOR AY 2002- 03. 100 AFTER HEARING BOTH THE PARTIES, WE ARE OF THE V IEW THAT THE ISSUE IN HAND IS COVERED BY THE DECISI ON OF THE TRIBUNAL AHMEDABAD BENCH IN THE ASSESSEE'S O WN CASE REFERRED TO HEREINABOVE. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF THE LEARNED CIT(A ) WHO HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE . THUS, GROUND NO.2 OF THE REVENUE'S APPEAL IS DISMIS SED. 25. SINCE THE FACTS OF THE CASE IN THE YEAR UNDER APPEA L ARE IDENTICAL TO THAT OF A.Y. 04-05, WE RESPECTFULLY FOLLOWING THE ORDER OF CO-ORDINATE BENCH AND FOR SIMILAR REASONS FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A). THUS THIS GROUND OF REVENUE IS DISMISSED. GROUND NO. 3 IS WITH RESPECT TO DELETING THE ADDITI ON OF REPAIRS AND MAINTENANCE EXPENSES OF RS. 2,10,38,583/-. 26. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NO TICED THAT ASSESSEE HAD CLAIMED EXPENDITURE OF RS. 7677.19 LACS ON ACCO UNT OF CONSUMPTION AND REPLACEMENT OF STORES SPARES. ON VERIFICATION O F THE DETAILS. A.O NOTICED THAT CERTAIN ITEMS LISTED ON PAGE 20 OF THE ASSESSMENT ORDER ARE OF CAPITAL IN NATURE AS THEY WERE THE NATURE OF INDEPE NDENT MACHINE OR APPARATUS AND ACCORDING TO THE A.O THEY CAN BE INDE PENDENTLY USED FOR MANUFACTURING ACTIVITIES. HE WAS OF THE VIEW THAT T HE REPLACEMENT OF THE ITEMS LISTED THEREIN RESULTED INTO ENDURING NATURE OF BENEFIT AND WERE NOT IN THE NATURE OF CURRENT REPAIRS WITHIN THE MEANING OF SECTION 31. HE THEREFORE DISALLOWED THE CLAIM OF REPLACEMENT BUT H OWEVER ALLOWED ITA NOS. 141 6 & 1696/AHD/2010 . A.Y. 2007- 08 13 DEPRECIATION OF RS. 16,88,528/- AND THUS MADE AND A DDITION OF RS. 2,10,38,563/-. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) AFTER CONS IDERING THE SUBMISSIONS OF THE ASSESSEE AND RELYING ON THE DECI SION OF HONBLE APEX COURT DELETED THE ADDITION BY HOLDING AS UNDER:- 8.3 I HAVE CONSIDERED THE SUBMISSION OF THE ID. AR AND FACTS OF THE CASE. FROM THE NAME ITSELF AS WELL AS THE DESCRIPTION PROVIDED BY THE A SSESSEE, IT IS QUITE CLEAR THAT BY NO STRETCH OF IMAGINATION THE ITEMS CAN BE DESCRIBED AS INDEPENDE NT PLANT AND MACHINERY. THE NATURE IS CLEARLY PART OF MACHINE AND REPLACE PARTS CANNOT FU NCTION THEREON. THEREFORE APPLYING THE TEST LAID DOWN BY HON'BLE SUPREME COURT IN THE CASE OF S AVRANA SPINNING MILLS LTD., IT HAS TO BE HELD THAT THERE IS NO JUSTIFICATION FOR DISALLOWANC E. I DIRECT THE AO TO DELETE THE DISALLOWANCE. 27. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 28. BEFORE US, LD. D.R. RELIED ON THE ORDER OF A.O. THE LD. A.R. ON THE OTHER HAND SUBMITTED THAT ON IDENTICAL FACTS IN A.Y.06-07 IN ITA NO. 827/A/10 ORDER DATED 14.09.2012 ON SIMILAR FACTS THE HONBLE TRIBUNAL HAD REMITTED THE ISSUE TO THE FILE OF A.O. HE THEREFORE FAIRLY SUBMITTED THAT THE ISSUE MAY BE REMITTED BACK TO THE FILE OF A.O WITH SIMILAR DIRECTIONS. 29. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT IDENTICAL ISSUE WITH RESPECT TO THE CL AIM OF EXPENDITURE AS REVENUE EXPENDITURE WAS REMITTED TO THE FILE OF A.O IN ASSESSEES OWN CASE FOR A.Y. 06-07 BY THE CO-ORDINATE BENCH OF TRI BUNAL BY HOLDING AS UNDER:- 12. WE HAVE CONSIDERED THE RIVAL CONTENTIONS OF THE APPELLANT AND PERUSED THE ASSESSMENT RECORD AND HEARD THE ARGUMENTS FROM BOTH SIDES. THE LD. CIT(A) HAD OBSERVED THAT THIS REPLACEMENT OF STORES AND SPARES CAN BE SUED INDEPENDENTLY AND ITS OF REPLACE MENT OF PLANT AND MACHINERY. AS PER A.OS. OBSERVATION IT HAS ENDORSING BENEFIT TO THE ASSESSE E. THE MATTER IS REQUIRED TO RE-EXAMINE WITH REFERENCE TO ADDITION CONFIRMED BY THE CIT(A). THE A.O IS DIRECTED TO RE-EXAMINE THE NATURE OF EXPENDITURE ITEM-WISE AND TAKE DECISIONS AS PER LAW . ITA NOS. 141 6 & 1696/AHD/2010 . A.Y. 2007- 08 14 30. WE THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH AND FOR SIMILAR REASONS AND SIMILAR DIRECTION S REMIT THE ISSUE TO THE FILE OF A.O. IN THE RESULT, THIS GROUND OF REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. GROUND NO. 4 IS WITH RESPECT TO DELETION OF ADDITIO N OF RS. 2,86,000/- 31. A.O NOTICED THAT IN RESPECT OF ASSESSEES I.T RELA TED ACTIVITIES LIKE TELE MEDICINES, SOFTWARE DEVELOPMENT, V-SAT SERVICES ETC . IT HAD ENTERED INTO A VERBAL TRIPARTITE AGREEMENT WITH M/S. INFINIUM IN DIA PVT. LTD AND TIW- USA. AS PER THE AGREEMENT ALL THE PARTIES WERE TO J OINTLY AND EQUALLY FINANCED THE CAPITAL AND OPERATING COST AND SHARE, THE REVENUES OF THE BUSINESS ACTIVITIES RELATED TO V-SAT AND INTERNATIO NAL GATEWAY. A.O NOTICED THAT ASSESSEE HAD DEBITED 48,71,750/- BEING 50% SHARE OF EXPENSES. HE ALSO NOTED THAT THAT ASSESSEE HAD NOT CONSIDERED THE EXPENSES INCURRED IN RESPECT OF SALARY OF EMPLOYEES . THE SUBMISSION OF THE ASSESSEE THAT THE PARTIES HAD DECIDED TO BORNE SALARY OF STAFF AND IT HAD UTILIZED EXISTING STAFF WAS NOT FOUND ACCEPTABL E TO THE A.O. A.O WORKED OUT THE EXPENDITURE FOR SALARY FOR EMPLOYEES PROPORTIONATELY ON THE BASIS OF EXPENSES CLAIMED BY THE ASSESSEE AND W ORKED OUT THE PROPORTIONATE EXPENDITURE FOR IT RELATED BUSINESS A T RS. 5.71 LACS. SINCE THE ASSESSEE SHARE OF EXPENSES WAS TO THE EXTENT OF 50% OF EXPENSES, HE CONSIDERED THE ASSESSEES SHARE TO BE RS. 2.86 LAC AND THE REMAINING 50% SHARE TO BE OF INIFINIUM INDIA LTD. SINCE THE ASSES SEE HAD NOT RECOVERED 50% ON EXPENSES FROM INFINUM INDIA LTD. RS. 2.86 LA C BEING THE AMOUNT NOT RECOVERED FROM INFINIUM INDIA WAS CONSIDERED TO BE NOT ALLOWABLE. ITA NOS. 141 6 & 1696/AHD/2010 . A.Y. 2007- 08 15 AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) FOLLOWING THE DECISION OF HIS PREDEC ESSOR FOR A.Y. 03-04 TO 05-06 DELETED THE ADDITION BY HOLDING AS UNDER:- 9.2 THE APPELLANT SUBMITTED THAT THE EXPENSES INCUR RED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND THAT IT IS IN ACCORDANCE WI TH MUTUAL UNDERSTANDING BETWEEN THE PARTIES. THE AO SHOULD NOT HAVE PROCEEDED ON THE BA SIS OF ASSUMPTION AND SUBSTITUTED HIS OWN JUDGMENT IN PLACE OF JUDGMENT OF BUSINESS MAN. THE APPELLANT ALSO DREW MY ATTENTION TO CIT(A)'S ORDER IN HIS OWN CASE FOR A.Y. 2003-04 TO 2006-07. 32. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 33. BEFORE US, LD. D.R. RELIED ON THE ORDER OF A.O. ON THE OTHER HAND LD. A.R. SUBMITTED THAT ON IDENTICAL FACTS IN THE ASSESSEES OWN CASE IN A.Y. 03- 04 TO 06-07 THE ISSUE HAS BEEN DECIDED BY HONBLE T RIBUNAL IN FAVOUR OF THE ASSESSEE. HE THEREFORE SUBMITTED THAT SINCE THE FACTS OF THE YEAR UNDER APPEAL ARE IDENTICAL TO THAT OF EARLIER YEARS, THE ISSUE BE DECIDED IN ITS FAVOUR. 34. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT IN THE CASE OF ASSESSEE FOR A.Y. 06-07 AND ON IDENTICAL FACTS, THE ISSUE WAS DECIDED BY THE CO-ORDINATE BEN CH OF TRIBUNAL IN FAVOUR OF THE ASSESSEE BY HOLDING AS UNDER:- 30. GROUND NO. 4 IS AGAINST ALLOWING DEDUCTION OF RS. 5 ,83,000/- BY THE CIT(A) FOR INFORMATION TECHNOLOGY RELATED SERVICES PAID TO M/S. INFINIUM ( INDIA) LTD. THE APPELLANT HAD ENTERED INTO A VERBAL TRIPARTITE AGREEMENT WITH M/S. INFINIUM (IND IA) LTD. AND TIW-USA JOINTLY AND EQUALLY FINANCED THE CAPITAL, OPERATING COST AND SHARES THE REVENUES OF ALLIANCE BUSINESS ACTIVITIES RELATED TO V-SAT & INTERNATIONAL GATEWAY. THE APPELLANT DEB ITED RS.1, 26,84,871/-BEING 50% OF GNFC SHARE OF EXPENSES TO P&L ACCOUNT AND CREDITED RS. 7 7,46, 628/- BEING 50% SHARE OF INCOME TO PROFIT AND LOSS ACCOUNT AND CLAIMED LOSS OF RS.49,3 8,243/- IN RESPECT OF ITS IT. RELATED BUSINESS BUT EXPENSES RELATED TO SALARY OF THE EMPLOYEES HAD NOT BEEN CONSIDERED BY THE APPELLANT WHICH WAS WORKED OUT BY A.O. AT RS.11.66 LACS BEING 50% OF SH ARE. HE DISALLOWED RS.5,83,000/- OUT OF THEM. THE CIT(A) HAD ALLOWED THE APPEAL ON THE BASIS OF EXPENSES OTHER THAN THIS REFLECTED IN THE BOOKS OF ACCOUNT WAS TO BE BORN BY BOTH THE PARTIES RESPECTIVELY. THE ID. A .O. HAD NOT POINTED OUT ANY DISCREPANCY IN THE CLAIM. 31. NOW THE REVENUE IS IN APPEAL. LD. CIT.D.R. RELIED U PON THE ORDER OF THE A.O WHEREAS ID. COUNSEL FOR THE APPELLANT VEHEMENTLY ARGUED THAT IT WAS DEC IDED MUTUALLY BY BOTH THE PARTIES THAT IT WOULD BEAR ITS OWN COST FOR SALARY OF STAFFS. THE APPELLA NT HAD EXPLAINED THIS ISSUE IN DETAIL BEFORE THE ITA NOS. 141 6 & 1696/AHD/2010 . A.Y. 2007- 08 16 A.O. HON'BLE TRIBUNAL IN ASSESSEE'S OWN CASE IN A.Y . 03-04 TO 05-06 HAD DELETED THE DISALLOWANCE OF EXPENDITURE INCURRED IN IT BUSINESS. AFTER FOLLO WING THE CO-ORDINATE BENCH DECISION FOR A.Y.05- 06 IN ASSESSEE'S OWN CASE. THE PRESUMPTION OF THE A .O. THAT THESE EXPENSES WERE NOT RECOVERED FROM M/S. TOFINIUM (INDIA) LTD. WITHOUT ANY BASIS. HE HAS NOT BROUGHT ON RECORD ANY CONTRADICTORY EVIDENCE TO SHOW THAT THE EXPENSES CLAIMED BY THE A SSESSEE ARE NOT GENUINE. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) AND C ONFIRM THE ORDER OF CIT(A). THE REVENUE'S APPEAL IS DISMISSED ON THIS GROUND. 35. SINCE THE FACTS IN THE YEAR UNDER APPEAL ARE IDENTI CAL TO THAT OF 06-07, WE RESPECTFULLY FOLLOWING THE DECISION OF TRIBUNAL AND FOR SIMILAR REASONS, FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A ) AND THUS THIS GROUND OF REVENUE IS DISMISSED. 36. THUS THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FO R STATISTICAL PURPOSES. 37. IN THE RESULT THE APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES AND OF REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOS ES. ORDER PRONOUNCED IN OPEN COURT ON 05 - 08 - 2014. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT ,AHMEDABAD