Universal Cables Limited, Kolkata V. The DCIT, Circle-6(1), Kolkata, Kolkata

ITA 1766/KOL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1533 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 06-09-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Additional depreciation; Earning of tax free income; Bad and doubtful debts; Capital receipt; Commercial expediency
• Section: 43B; 143(3); 14A; 260A; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA [BEFORE HONBLE SHRI M.BALAGANESH, AM & SHRI S.S. VISWANETHRA RAVI, JM] I.T.A NO. 1766/KOL/20 16 ASSESSMENT YEAR : 2010-1 1 UNIVERSAL CABLES LTD. -VS- DCIT, CIRCLE-6(1), KOLKATA [PAN: AAACU 3547 P] (APPELLANT) (RESPON DENT) I.T.A NO. 2142 /KOL/2016 ASSESSMENT YEAR : 2010-1 1 DCIT, CIRCLE-6(1), KOLKATA -VS- UNIVERSAL CABLES LTD. [PAN: AAACU 3547 P] (APPELLANT) (RESPON DENT) I.T.A NO. 1767/KOL/20 16 ASSESSMENT YEAR : 2011-1 2 UNIVERSAL CABLES LTD. -VS- DCIT, CIRCLE-6(1), KOLKATA [PAN: AAACU 3547 P] (APPELLANT) (RESPON DENT) I.T.A NO. 2143/KOL/2016 ASSESSMENT YEAR : 2011-1 2 DCIT, CIRCLE-6(1), KOLKATA -VS- UNIVERSAL CABLES LTD. [PAN: AAACU 3547 P] (APPELLANT) (RESPON DENT FOR THE APPELLANT : SHRI J.P. KHAITAN, SR. COUNSEL SHRI VINOD SHARMA, CA FOR THE RESPONDENT : SHRI SALLONG YADEN, ADDL . CIT DATE OF HEARING : 06.02.2018 DATE OF PRONOUNCEMENT : 14.02.2018 2 ITA NOS.1766&1767/KOL/2016 ITA NOS.2142&2143/KOL/2016 UNIVERSAL CABLES LTD. A.YRS. 2010-11& 2011-12 2 ORDER PER M.BALAGANESH, AM 1. THESE CROSS APPEALS BY THE ASSESSEE AS WELL AS REVENUE ARISE OUT OF THE SEPARATE ORDERS OF THE LEARNED COMMISSIONER OF INCOME TAX(AP PEALS)-17, KOLKATA [IN SHORT THE LD CIT(A)] IN APPEAL NOS.279&280/CIT(A)-17/KOL/15-1 6 DATED 29.07.2016 AND 05.08.2016 RESPECTIVELY AGAINST THE ORDER PASSED B Y THE DCIT, CIRCLE-6, KOLKATA [ IN SHORT THE LD AO] UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 28.03.2013 AND 31.01.2014 FOR THE ASSESSMENT YEARS 2010-11 & 2011-12 RESPECTIVELY. THE FACTS OF ASSESSMENT YEAR 2010-11 ARE TAKEN UP TOGETHER FOR ADJUDICATION AND THE DECISION RENDERED THEREON WOUL D APPLY WITH EQUAL FORCE FOR ASSESSMENT YEAR 2011-12 ALSO EXCEPT WITH VARIANCE I N FIGURES. 2. DISALLOWANCE OF LEAVE ENCASHMENT: GROUND NOS. 1 AND 2 OF ASSESSEE APPEAL FOR ASSESSME NT YEAR 2010-11 GROUND NO. 1 OF ASSESSEE APPEAL FOR ASSESSMENT YEAR 2011-12 THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESSEE IS A COMPANY ENGAGED IN MANUFACTURING AND SELLING OF CABLES, CAPACITORS AND OPTIC FIBERS. THE LD AO OBSERVED THAT THE ASSESSEE MADE A PROVISION FOR LEAVE ENCASHMENT FOR RS 1,04,6 9,715/- AND RS 34,12,071/- FOR THE ASST YEARS 2010-11 & 2011-12 RESPECTIVELY AND CLAIM ED THE SAME AS DEDUCTION BY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONA L HIGH COURT IN THE CASE OF EXIDE INDUSTRIES LTD REPORTED IN 292 ITR 470 (CAL). TH E LD AO SOUGHT TO DISALLOW THE SAME IN TERMS OF SECTION 43B(F) OF THE ACT AS THE SAME W AS NOT PAID WITHIN THE DUE DATE OF FILING THE RETURN OF INCOME. THE LD AO OBSERVED THA T THE SAID DECISION HAS BEEN STAYED BY THE HONBLE SUPREME COURT AND ACCORDINGLY DISALL OWED THE PROVISION FOR LEAVE ENCASHMENT ON THE GROUND THAT THE SAME IS ALLOWABLE ONLY ON PAYMENT BASIS IN TERMS OF 3 ITA NOS.1766&1767/KOL/2016 ITA NOS.2142&2143/KOL/2016 UNIVERSAL CABLES LTD. A.YRS. 2010-11& 2011-12 3 SECTION 43B(F) OF THE ACT, WHICH WAS UPHELD BY THE LD CITA. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS: I.T.A. NO. 1766/KOL/2016 FOR ASSESSMENT YEAR 2010-1 1 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LEARNED CIT(APPEALS) ERRED IN NOT HOLDING THAT PROVISION FO R LEAVE ENCASHMENT FOR RS. 1,04,69,715/- IS NEITHER STATUTORY LIABILITY NOR CO NTINGENT LIABILITY AND THEREFORE NOT TO BE CONSIDERED FOR THE PURPOSE OF COMPUTING D ISALLOWANCE U/S 43B(F) OF THE I.T. ACT, 1961. 2. THAT WITHOUT PREJUDICE TO GROUND NO. 1, THE LD. DCIT BE DIRECTED TO EXCLUDE A SUM OF RS. 33,64,322/- BEING PAYMENT MADE ON ACCOUN T OF LEAVE LIABILITY DURING THE ASSESSMENT YEAR 2002-03 IN CASE THE DEPARTMENT S APPEAL IS ALLOWED IN THEIR FAVOUR AND DEDUCTION FOR PROVISION MADE FOR LEAVE L IABILITY IS WITHDRAWN. I.T.A. NO. 1767/KOL/2016 FOR ASSESSMENT YEAR 2011-1 2 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LEARNED CIT(APPEALS) ERRED IN NOT HOLDING THAT PROVISION FO R LEAVE ENCASHMENT FOR RS. 34,12,071/- IS NEITHER STATUTORY LIABILITY NOR CONT INGENT LIABILITY AND THEREFORE NOT TO BE CONSIDERED FOR THE PURPOSE OF COMPUTING D ISALLOWANCE U/S 43B(F) OF THE I.T. ACT, 1961. 2.1. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND T HAT THOUGH THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF EXIDE INDUSTRIES LTD VS U NION OF INDIA REPORTED IN 292 ITR 470 (CAL) HAD STRUCK DOWN THE PROVISIONS OF SECTION 43B(F) OF THE ACT AS UNCONSTITUTIONAL, THE REVENUE HAD CARRIED THE MATTE R FURTHER TO THE HONBLE SUPREME COURT WHICH INITIALLY IN SPECIAL LEAVE TO APPEAL (C IVIL) CC 12060 / 2008 DATED 8.9.2008 HAD HELD AS UNDER:- THE PETITION WAS CALLED ON FOR HEARING TODAY. UPON HEARING COUNSEL THE COURT MADE THE FOLLOWING O RDER. ISSUE NOTICE. IN THE MEANTIME, THERE SHALL BE STAY OF THE IMPUGNE D JUDGEMENT, UNTIL FURTHER ORDERS. LATER THE HONBLE SUPREME COURT IN SPECIAL LEAVE TO APPEAL (CIVIL) NO(S). CC 22889 / 2008 DATED 8.5.2009 HAD HELD AS UNDER:- 4 ITA NOS.1766&1767/KOL/2016 ITA NOS.2142&2143/KOL/2016 UNIVERSAL CABLES LTD. A.YRS. 2010-11& 2011-12 4 THE PETITION WAS CALLED ON FOR HEARING TODAY. UPON HEARING COUNSEL THE COURT MADE THE FOLLOWING O RDER DELAY CONDONED. LEAVE GRANTED. PENDING HEARING AND FINAL DISPOSAL OF THE CIVIL APP EAL, DEPARTMENT IS RESTRAINED FROM RECOVERING PENALTY AND INTEREST WHICH HAS ACCRUED T ILL DATE. IT IS MADE CLEAR THAT AS FAR AS THE OUTSTANDING INTEREST DEMAND AS OF DATE IS CO NCERNED, IT WOULD BE OPEN TO THE DEPARTMENT TO RECOVER THAT AMOUNT IN CASE CIVIL APP EAL OF THE DEPARTMENT IS ALLOWED. WE FURTHER MAKE IT CLEAR THAT THE ASSESSEE WOULD, D URING THE PENDENCY OF THIS CIVIL APPEAL , PAY TAX AS IF SECTION 43B(F) IS ON THE STA TUTE BOOK BUT AT THE SAME TIME IT WOULD BE ENTITLED TO MAKE A CLAIM IN ITS RETURNS. HENCE FROM THE AFORESAID SUPREME COURT JUDGEMENT, I T COULD BE INFERRED THAT THE HONBLE SUPREME COURT HAD NOT STAYED THE JUDGEMENT OF THE CALCUTTA HIGH COURT DURING LEAVE PROCEEDINGS. BUT THE HONBLE SUPREME COURT H AD ONLY PASSED AN INTERIM ORDER ON THE IMPUGNED ISSUE. HENCE WE DEEM IT FIT AND APP ROPRIATE , IN THE INTEREST OF JUSTICE AND FAIR PLAY, TO REMAND THIS ISSUE TO THE FILE OF THE LD AO TO PASS ORDERS BASED ON THE OUTCOME OF THE MAIN APPEAL ON MERITS BY THE HONBLE SUPREME COURT AS STATED SUPRA. 2.2. WITH REGARD TO GROUND NO. 2 RAISED BY THE ASSE SSEE FOR ASSESSMENT YEAR 2010-11 SEEKING DEDUCTION FOR ACTUAL PAYMENT MADE IN THE SU M OF RS. 33,64,322/- ON ACCOUNT OF LEAVE LIABILITY, THE SAME ALSO WOULD BE DECIDED BY THE LD. AO BASED ON THE FINAL OUTCOME OF THE DECISION OF HONBLE SUPREME COURT IN THE CAS E OF EXIDE INDUSTRIES REFERRED TO SUPRA. ACCORDINGLY, GROUND NO. 1&2 FOR ASSESSMENT Y EAR 2010-11 AND GROUND NO. 1 FOR ASSESSMENT YEAR 2011-12 RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 3. TAXABILITY OF ENTRY TAX: GROUND NO. 3 OF ASSESSMENT YEAR 2010-11 GROUND NO. 2 OF ASSESSMENT YEAR 2011-12 5 ITA NOS.1766&1767/KOL/2016 ITA NOS.2142&2143/KOL/2016 UNIVERSAL CABLES LTD. A.YRS. 2010-11& 2011-12 5 THE FACTS OF ASST YEAR 2010-11 ARE TAKEN UP FOR ADJ UDICATION AND THE DECISION RENDERED THEREON WOULD APPLY WITH EQUAL FORCE TO ASST YEAR 2 011-12 ALSO EXCEPT WITH VARIANCE IN FIGURES. THE BRIEF FACTS OF THIS ISSUE IS THAT THE LD. AO OB SERVED THAT THE STATE GOVERNMENT OF MADHYA PRADESH HAD GRANTED CERTAIN FISCAL INCENTIVE TO THE ASSESSEE COMPANY DURING THE YEAR . AS PER THE SAID SCHEME, THE AMOUNT OF ASSIS TANCE WAS DETERMINED AT 75% OF TOTAL COMMERCIAL TAX (MPVAT + GST) DEPOSITED (NET OF TAX REBATE) IN RESPECT OF SALE OF PRODUCTS PRODUCED USING VCV TECHNOLOGY ON A YEARLY BASIS DURING THE ELIGIBILITY PERIOD. BESIDES NO ENTRY TAX WAS REQUIRED TO BE PAI D ON RAW MATERIALS, BOOKING MATERIALS ETC. THE LD. AO OBSERVED THAT THE ASSESSEE HAD AVAI LED ENTRY TAX EXEMPTION AS PER THE ABOVE SCHEME TO THE TUNE OF RS. 1,05,47,005/- AND T REATED THE SAME AS CAPITAL RECEIPT IN THE RETURN OF INCOME FILED BY THE ASSESSEE. THE LD. AO OBSERVED THAT SINCE THE ENTRY TAX OF RS. 1,05,47,005/- FOR THE ASSESSMENT YEAR 2010-1 1 IS NOT REQUIRED TO BE PAID BY THE ASSESSEE, THE SAME REPRESENTS THE BENEFIT DERIVED B Y THE ASSESSEE AND ACCORDINGLY CONSTITUTES REVENUE RECEIPT THEREON. ACCORDINGLY, H E TAXED THE SAME AS BUSINESS INCOME OF THE ASSESSEE. THIS ACTION OF THE LD. AO WAS UPHE LD BY THE LD. CIT(A). AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GR OUNDS: I.T.A. NO. 1766/KOL/2016 FOR ASSESSMENT YEAR 2010-1 1 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LEARNED CIT(APPEALS) ERRED IN NOT DIRECTING THE AO TO TREAT EXEMPTION OF CLAIM FOR ENTRY TAX OF RS. 1,05,47,005/- AS CAPITAL RECEIPT. I.T.A. NO. 1767/KOL/2016 FOR ASSESSMENT YEAR 2011-1 2 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LEARNED CIT(APPEALS) ERRED IN NOT DIRECTING THE AO TO TREAT EXEMPTION OF CLAIM FOR ENTRY TAX OF RS. 1,42,91,630/- AS CAPITAL RECEIPT. 3.1. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LD. A R FAIRLY STATED THAT THE ISSUE IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF CO- ORDINATE BENCH OF THIS 6 ITA NOS.1766&1767/KOL/2016 ITA NOS.2142&2143/KOL/2016 UNIVERSAL CABLES LTD. A.YRS. 2010-11& 2011-12 6 TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSM ENT YEAR 2008-09 AND 2009-10 IN I.T.A NOS. 679,910,1051&1906/KOL/2013 DATED 27.0 2.2015 WHEREIN IT WAS HELD THAT: 21. WE HAVE HEARD THE RIVAL SUBMISSIONS AND GONE T HROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEE HAS CLAIMED ENT RY TAX AMOUNTING TO RS. 1,01,09,282/- AS DEDUCTION WITHOUT TAKING IT THROUGH P & L ACCOUN T. THE AO MADE ADDITION OF THIS AMOUNT. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) CLAIMING THE ENTRY TAX AS EXEMPT BEING CAPITAL RECEIPT SIMILAR TO THE SCHE ME OF GOVT. OF MADHYA PRADESH BEING INDUSTRIAL INVESTMENT PROMOTION ASSISTANCE. BUT LD. CIT(A) CONFIRMED THE ACTION OF THE AO BY OBSERVING IN PARA 72 TO 76 AS UNDER: '72. THE PROVISIONS OF SECTION 43B ARE VERY CLEAR A ND IT STARTS WITH A NON OBSTANTE CLAUSE STATING THAT NOTWITHSTANDING ANYTHING CONTAI NED IN AN)' OTHER PROVISION OF THIS ACT CERTAIN DEDUCTIONS ARE TO BE ONLY ON ACTUAL PAY MENT. ANY SUM PAYABLE BY THE ASSESSEE BY WAY OF TAX, DUTY, CESS OR FEE, BY WHATE VER NAME CALLED. UNDER AN)' LAW FOR THE TIME BEING IN FORCE SHALL BE ALLOWED (IRRESPECT IVE OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED BY THE ASSES SEE ACCORDING 10 THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY HIM) ONLY IN COMPU TING THE INCOME REFERRED 10 IN SECTION 28 OF THAT PREVIOUS YEAR IN WHICH SUCH SLI M IS ACTUALLY PAID BY HIM. IT FURTHER PROVIDES THAT FOR THE PURPOSES OF CLAUSE (A), AS IN FORCE AT ALL MATERIAL TIMES, 'ANY SUM PAYABLE' MEANS A SUM FOR WHICH THE ASSESSEE INCURRE D LIABILITY IN THE PREVIOUS YEAR EVEN THOUGH SUCH SUM MIGHT NOT HAVE BEEN PAYABLE WI THIN THAT YEAR UNDER THE RELEVANT LAW WAS NOT PAYABLE UNDER IN THE RELEVANT PERIOD. 73. THE PROVISIONS OF INCOME TAX ACT, 1961 WILL OVE R RIDE THE PROVISIONS OF ANY OTHER ACT BEING SPECIFICALLY PROVIDED IN THE INCOME TAX A T/TO ALLOW THE DEDUCTION ONLY ON THE BASIS OF PAYMENT ALTHOUGH THE RELEVANT ACTS UNDER W HICH THE CESS IS COLLECTED MAY PROVIDE TO PAY IN THE NEXT YEAR. IN THE MATTER OF T AXATION THE PROVISIONS OF INCOME TAX . ACT, 1961 ONLY WILL DETERMINE THE ACCOUNTING OF RE CEIPT FOR THE PURPOSES OF TAXATION. NO ACT WILL OVERRIDE THE PROVISIONS OF INCOME-TAX IN T HE MATTER OF TAXATION UNLESS SPECIFICALLY PROVIDED TO OVERRIDE THE PROVISIONS OF THE INCOME TAX ACT, 1961. BOTH ACTS I.E. THE INDUSTRIAL PROMOTION POLICY 2004 WAS FORMU LATED BY THE STARE GOVERNMENT OF MADHYA PRADESH FOR THE PROMOTION OF INDUSTRY IN THE STATE AND DOES NOT PROVIDE THAT IT WILL OVERRIDE THE PROVISIONS OF THE INCOME TAX ACT, 1961 FOR INCOME TAX PURPOSES AND ACCOUNTING OF ENTRY TAX IN THE INCOME TAX ACT, 1961 . 74. THE HON 'BLE MADRAS HIGH COURT HAS HELD THAT TH AT THE DIRECTIONS ISSUED BY RESERVE BANK DJ INDIA TO PROVIDE [OR NON-PERFORMING ASSETS CANNOT OVERRIDE THE MANDATORY PROVISIONS OF THE INCOME-TAX ACT CONTAINED IN SECTI ON 36(1)(VIIA). IT OBSERVED IN THE ORDER AS UNDER.- 'FURTHER, THE COMMISSIONER (APPEALS), ON THE FACTS OF THE CASE, FOUND THAT MERELY BECAUSE THE RESERVE BANK OF INDIA HAS DIRECTED THE ASSESSEE TO PROVIDE FOR NON- PERFORMING ASSETS, THAT DIRECTION CANNOT OVERRIDE T HE MANDATORY PROVISIONS OF THE INCOME-TAX ACT CONTAINED IN SECTION 36(1)(VIIA) WHI CH STIPULATE FOR DEDUCTION NOT EXCEEDING 5 PER CENT, OF THE TOTAL INCOME ONLY IN R ESPECT OF THE PROVISION FOR BAD AND 7 ITA NOS.1766&1767/KOL/2016 ITA NOS.2142&2143/KOL/2016 UNIVERSAL CABLES LTD. A.YRS. 2010-11& 2011-12 7 DOUBTFUL DEBTS WHICH ARE PREDOMINATELY REVENUE IN N ATURE OR TRADE RELATED AND NOT FOR PROVISION FOR NON-PERFORMING ASSETS WHICH ARE OF PR EDOMINATELY CAPITAL NATURE, AND HELD THAT THE ASSESSING OFFICER WAS RIGHT IN DISALL OWING THE PROVISION OF RS.30 LAKHS DEBITED IN THE PROFIT AND LOSS ACCOUNT OF THE ASSE SSEE TOWARDS NON-PERFORMING ASSETS. 75. SIMILARLY, THE HON'BLE ORISSA HIGH COURT HAS HE LD IN THE CASE OF ORISSA RURAL HOUSING DEVELOPMENT CORPN. LTD. V ASSISTANT COMMISS IONER OF INCOME-TAX REPORTED IN [2012] 17 TAXMANN.COM 186 (ORISSA): 20 TAXMANN 673 HAS HELD IN PARA 19 THAT NATIONAL HOUSING BANK ACT, 1987 DOES NOT OVERRIDES THE INCOME TAX ACT, 1961 AND FURTHER OBSERVED AS FOLLOWS:- '19. QUESTION NO. (H) IS AS TO WHETHER THE NATIONAL HOUSING BANK ACT, 1987 OVERRIDES THE INCOME TAX ACT, 1961.? THOUGH BOTH THE ACTS ARE CENTRAL ACT THEY ARE OCCUP YING DIFFERENT FIELDS. THE PURPOSE OF ENACTING BOTH THE ACTS ARE DIFFERENT. INCOME TAX ACT HAS BEEN ENACTED TO LEVY TAX ON INCOME WHICH IS COVERED UNDER ENTRY NO.82 OF LIST- I- UNION LIST OF SEVENTH SCHEDULE 10 THE CONSTITUTION. THE NATIONAL HOUSING BANK ACT, 1987 HAS BEEN ENACTED TO PROMOTE HOUSING FINANCE INSTITUTIONS BOTH AT LOCAL AND REG IONAL LEVELS 10 PROVIDE FINANCIAL AND OTHER SUPPORT TO SUCH INSTITUTIONS WHICH ARE COVERE D UNDER ENTRYRY-45 OF LIST-I- UNION LIST OF SEVENTH SCHEDULE TO THE CONSTITUTION OF IND IA. THERE IS NO SUCH PROVISION IN THE NATIONAL HOUSING BANK ACT [HA! IT WILL OVERRIDE THE INCOME TAX ACT. SINCE THE IMPUGNED ORDERS ARE PASSED UNDER THE INCOME TAX ACT , 1961, THEY ARE GOVERNED BY THE PROVISIONS OF INCOME TAX ACT, THEREFORE, THE CONTEN TION OF THE PETITIONER THAT NATIONAL HOUSING BANK ACI, 1987 OVERRIDES THE INCOME TAX ACT , 1961 IS WHOLLY UNTENABLE IN LAW. 76. THE APPELLANT HAS NOT PAID THE ENTRY LAX UNDER THE INDUSTRIAL PROMOTION POLICY 2004 FORMULATED BY THE STATE GOVERNMENT OF MADHYA P RADESH FOR THE PROMOTION OF INDUSTRY IN THE STATE AND DID NOT DEPOSIT WITH THE STATE GOVT. ENTRY TAX WAS CALCULATED BASED ON HYPOTHETICAL BASIS THAT IF WOULD AMOUNT RS .1,01,09,282/- AT THE LIME OF PAYMENT, (IF WOULD NOT HAD BEEN EXEMPTED) TO THE ST ATE GOVT. THE APPELLANT'S CLAIM THAT SINCE THE ENTRY TAX UNDER THE INDUSTRIAL PROMOTION POLICY 2004 FORMULATED BY THE STATE GOVERNMENT OF MADHYA PRADESH FOR THE PROMOTION OF I NDUSTRY IN THE STATE WAS EXEMPTED AND HENCE SAME IS ITS EXPENDITURE AND TO B E DEDUCTED FROM ITS TAXABLE INCOME AS EXPENDITURE DOES NOT HOLD GOOD IN VIEW OF THE CL EAR PROVISIONS OF SECTION 43B AND THE VARIOUS JUDGMENTS OF THE APPELLATE AUTHORITIES INCL UDING OF HO'N'BLE APEX COURT. HENCE, THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF RS. 1,01 ,09,2821- IS NOT ALLOWED. THIS GROUND OF APPEAL IS DISMISSED. ' WE FIND THAT EVEN NOW BEFORE US, LD. COUNSEL FOR TH E ASSESSEE COULD NOT ESTABLISH THAT HOW THIS IS EQUIVALENT TO THE INDUSTRIAL INVESTMENT PROMOTION ASSISTANCE, THE SCHEME OF GOVT. OF MADHYA PRADESH. WE' FIND NO INFIRMITY IN T HE ORDER OF CIT(A) AND THE SAME IS CONFIRMED. THIS COMMON ISSUE IN BOTH THE YEARS OF A SSESSEE'S APPEALS IS DISMISSED. RESPECTFULLY FOLLOWING THE SAME WE DISMISS THE GROU ND NO. 3 RAISED BY THE ASSESSEE FOR ASSESSMENT YEAR 2010-11 AND GROUND NO. 2 RAISED BY THE ASSESSEE FOR ASSESSMENT YEAR 2011-12. 8 ITA NOS.1766&1767/KOL/2016 ITA NOS.2142&2143/KOL/2016 UNIVERSAL CABLES LTD. A.YRS. 2010-11& 2011-12 8 4. DISALLOWANCE U/S 14A OF THE ACT READ WITH RULE 8D O F THE RULES: GROUND NO. 4 OF ASSESSMENT YEAR 2010-11 GROUND NO. 3 OF ASSESSMENT YEAR 2011-12 GROUND NOS. 2 AND 3 OF ASSESSMENT YEAR 2010-11 GROUND NO. 2 AND 3 OF ASSESSMENT YEAR 2011-12 THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESSEE IN THE RETURN CLAIMED EXEMPT INCOME IN THE FORM OF DIVIDEND OF RS. 21,66,110/- F OR THE ASSESSMENT YEAR 2010- 11 AND RS. 18,69,380/- FOR ASSESSMENT YEAR 2011-12. THE ASSESSEE STATED THAT NO EXPENSES WERE INCURRED FOR THE PURPOSE OF EARNING S UCH DIVIDEND INCOME AND ACCORDINGLY MADE NO DISALLOWANCE U/S 14A OF THE ACT IN THE RETURN OF INCOME. THE LD. AO RESORTED TO MAKE THE DISALLOWANCE BY APP LYING RULE 8D OF THE RULES AND MADE DISALLOWANCE UNDER SECOND AND THIRD LIMB O F THE SAID RULE IN THE SUM OF RS. 92,10,000/- FOR ASSESSMENT YEAR 2010-11 AND RS. 1,05,32,000/- FOR ASSESSMENT YEAR 2011-12. THE ASSESSEE PLEADED THAT IT HAD RECEIVED DIVIDEND FROM THREE COMPANIES AS UNDER: NAME OF COMPANY DIVIDEND RECEIVED ASSESSMENT YEAR 2010-11 ASSESSMENT YEAR 2011-12 BIRLA CORPORATION LTD. 20,77,110/- 17,80,380/- INDUSTRY HOUSE LTD. 9,000/- 9,000/- BARODA AGENTS & TRADING CO. PVT. LTD. 80,000/- 80,000/- TOTAL DIVIDEND RECEIVED 21,66,110/- RS. 18,69,380 /- THE LD. CIT(A) OBSERVED THAT THE ASSESSEE HAD SUFFI CIENT OWN FUNDS AND NO PART OF BORROWED FUNDS WERE UTILIZED FOR MAKING INVESTME NTS AND ACCORDINGLY DELETED 9 ITA NOS.1766&1767/KOL/2016 ITA NOS.2142&2143/KOL/2016 UNIVERSAL CABLES LTD. A.YRS. 2010-11& 2011-12 9 THE DISALLOWANCE MADE UNDER RULE 8D(2)(II) OF THE R ULES FOR BOTH ASSESSMENT YEARS. IN RESPECT OF DISALLOWANCE MADE UNDER THE TH IRD LIMB OF RULE 8D(2) OF THE RULES, THE LD. CIT(A) BY PLACING RELIANCE ON THE DE CISION OF THIS TRIBUNAL IN REI AGRO LTD. REPORTED IN 144 ITD 141 HELD THAT ONLY DI VIDEND BEARING INVESTMENTS SHOULD BE CONSIDERED FOR WORKING OUT THE DISALLOWAN CE AT 0.5% OF AVERAGE VALUE OF INVESTMENTS. AGGRIEVED, BOTH THE ASSESSEE AS WEL L AS REVENUE ARE IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS: I.T.A. NO. 1766/KOL/2016 FOR ASSESSMENT YEAR 2010-1 1(ASSESSEE APPEAL) 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LEARNED CIT(APPEALS) ERRED IN NOT DELETING THE ENTIRE DISAL LOWANCE OF RS. 92,10,000/- TREATED BY LD. DCIT AS EXPENSES ATTRIBUTABLE TO EAR NING DIVIDEND INCOME AND DID NOT HOLD THAT NO EXPENSES HAVE BEEN INCURRED TO EAR N THE SAID INCOME. I.T.A. NO. 1767/KOL/2016 FOR ASSESSMENT YEAR 2011-1 2 (ASSESSEE APPEAL) 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LEARNED CIT(APPEALS) ERRED IN NOT DELETING THE ENTIRE DISAL LOWANCE OF RS. 1,05,32,000/- TREATED BY LD. DCIT AS EXPENSES ATTRI BUTABLE TO EARNING DIVIDEND INCOME AND DID NOT HOLD THAT NO EXPENSES H AVE BEEN INCURRED TO EARN THE SAID INCOME. I.T.A. NO. 2142/KOL/2016 FOR ASSESSMENT YEAR 2010-1 1(REVENUE APPEAL) 2. THAT THE LD. CIT(A) HAS ERRED IN LAW IN HOLDING THAT SINCE THE ASSESSEE HAS SUFFICIENT OWN FUNDS, EXPENDITURE BY WAY OF INTERES T ARE NOT TO BE TAKEN INTO ACCOUNT WHILE CALCULATING THE DISALLOWANCE U/S 14A R.W.RULE 8D(2)(II) OF THE I.T. ACT. 3. THAT THE LD. CIT(A) HAS ERRED IN LAW IN APPRECIA TING THE FACT THE ASSESSEE WAS NOT ABLE TO PRODUCE ANY SATISFACTORY EVIDENCE THAT ITS LOAN FUNDS ARE NOT USED FOR INVESTMENTS TO EARN EXEMPT INCOME. I.T.A. NO. 2143/KOL/2016 FOR ASSESSMENT YEAR 2011-1 2 (REVENUE APPEAL) 2. THAT THE LD. CIT(A) HAS ERRED IN LAW IN HOLDING THAT SINCE THE ASSESSEE HAS SUFFICIENT OWN FUNDS, EXPENDITURE BY WAY OF INTERES T ARE NOT TO BE TAKEN INTO 10 ITA NOS.1766&1767/KOL/2016 ITA NOS.2142&2143/KOL/2016 UNIVERSAL CABLES LTD. A.YRS. 2010-11& 2011-12 10 ACCOUNT WHILE CALCULATING THE DISALLOWANCE U/S 14A R.W.RULE 8D(2)(II) OF THE I.T. ACT. 3. THAT THE LD. CIT(A) HAS ERRED IN LAW IN APPRECIA TING THE FACT THE ASSESSEE WAS NOT ABLE TO PRODUCE ANY SATISFACTORY EVIDENCE THAT ITS LOAN FUNDS ARE NOT USED FOR INVESTMENTS TO EARN EXEMPT INCOME. 4.1. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND T HAT THE DISALLOWANCE HAD BEEN MADE BY THE LD. AO BY APPLYING THE PROVISIONS OF RU LE 8D(2) UNDER SECOND AND THIRD LIMBS THEREON. FROM THE PERUSAL OF THE DETAIL S OF INVESTMENTS PLACED ON RECORD, WHICH ARE FORMING PART OF THE PAPER BOOK FI LED BEFORE US, WE FIND THAT THE ASSESSEES SHARE INVESTMENTS OF RS. 25.61 CRORES WE RE MADE DURING THE YEARS 1993-94 TO 1996-97 OUT OF ITS OWN FUNDS. DURING THE FINANCIAL YEAR 2009-10 RELEVANT TO ASSESSMENT YEAR 2010-11, THE ASSESSEE INVESTED RS. 22.41 CRORES IN THE JOINT VENTURE COMPANY NAMED BIRLA FURUKAWA FIBER OP TICS LTD. THE MATERIAL FACTS IN THIS BEHALF ARE THAT THE OPTIC FIBER BUSIN ESS OF THE ASSESSEE WAS TECHNOLOGY DRIVEN AND HEAVILY DEPENDENT ON TECHNOLOGY WHICH RE QUIRED CONSTANT UPGRADATION IN KEEPING WITH THE LATEST DEVELOPMENTS. THE ASSESS EE WAS NOT ABLE TO UPGRADE ITS OPTIC FIBER MANUFACTURING FACILITY WITH THE LATEST TECHNOLOGY AND AS SUCH ENTERED INTO JOINT VENTURE AGREEMENT WITH FURUKAWA ELECTRON IC COMPANY LTD., JAPAN ON 11.04.2009 WHICH RESULTED IN FORMATION OF NEW JOINT VENTURE COMPANY, BIRLA FURUKAWA FIBER OPTICS LTD. THE ASSESSEE SOLD THE EN TIRE PLANT AND MACHINERY OF ITS OPTIC FIBER UNIT TO THE NEW JOINT VENTURE COMPA NY IN TWO PHASES DURING THE MONTHS OF FEBRUARY, 2010 AND OCTOBER, 2010. THE PRO CEEDS OF SUCH SALE IN FEBRUARY, 2010 AMOUNTING TO RS. 13.48 CRORES WERE U SED FOR ACQUIRING SHARES IN THE NEW JOINT VENTURE COMPANY. THE REMAINING AMOUNT OF RS. 8.93 CRORES WAS INVESTED BY THE ASSESSEE IN THE JOINT VENTURE COMP ANY OUT OF ITS OWN FUNDS. IN THIS 11 ITA NOS.1766&1767/KOL/2016 ITA NOS.2142&2143/KOL/2016 UNIVERSAL CABLES LTD. A.YRS. 2010-11& 2011-12 11 REGARD, WE FIND THAT THE RETAINED EARNINGS OF THE A SSESSEE AFTER DISTRIBUTION OF DIVIDEND ARE AS UNDER: 31.03.2008 RS. 10.77 CRORES 31.03.2009 RS. 4,29 CRORES 31.03.2010 RS. 20.38 CRORES THE ASSESSEE HAD ALSO ENCLOSED CHARTERED ACCOUNTANT S CERTIFICATE TO PROVE THAT THE ENTIRE INVESTMENTS WERE MADE ONLY OUT OF OWN FU NDS AND NOT OUT OF BORROWED FUNDS. THE LD. AR PLEADED THAT THE AFORESAID FACT W OULD CLEARLY PROVE THAT THE INVESTMENTS MADE IN JOINT VENTURE COMPANY WERE MADE OUT OF BUSINESS COMPULSION AND HENCE TO BE TREATED AS STRATEGIC INV ESTMENT IN NATURE. WE ARE INCLINED TO ACCEPT THIS ARGUMENT OF THE LD. AR AND HOLD THAT THE INVESTMENT MADE BY THE ASSESSEE IN JOINT VENTURE COMPANY NAMELY BIR LA FURUKAWA FIBER OPTICS LTD. IS TO BE TREATED AS STRATEGIC INVESTMENT ONLY. FROM THE PERUSAL OF THE FINANCIALS OF THE ASSESSEE, WE HOLD THAT THE ASSES SEE IS FLOODED WITH SUFFICIENT OWN FUNDS IN ITS KITTY WHICH WERE USED FOR MAKING I NVESTMENTS IN SHARES. HENCE, THE LD. CIT(A) HAD RIGHTLY APPRECIATED THIS FACT AN D HAD RIGHTLY DELETED THE DISALLOWANCE MADE UNDER RULE 8D(2)(II) FOR BOTH THE ASSESSMENT YEARS UNDER APPEAL. IN RESPECT OF THIRD LIMB OF RULE 8D(2), WE FIND THAT THE LD. CIT(A) HAD RIGHTY PLACED RELIANCE ON THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF REI AGRO LIMITED REPORTED IN 144 ITD 141, WHEREIN I T WAS HELD THAT ONLY DIVIDEND BEARING INVESTMENTS WERE TO BE CONSIDERED FOR THE PURPOSE OF MAKING DISALLOWANCE UNDER RULE 8D. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A) IN THIS REGARD. WHILE CONSIDERI NG THE DIVIDEND BEARING INVESTMENTS , WE FURTHER HOLD THAT STRATEGIC INVEST MENT ALSO SHOULD BE EXCLUDED AS ADMITTEDLY THE SAME WERE NOT MADE WITH A VIEW TO EA RN DIVIDEND INCOME BUT RATHER MADE FOR THE PURPOSE OF PROTECTING THE BUSIN ESS INTERESTS ARISING OUT 12 ITA NOS.1766&1767/KOL/2016 ITA NOS.2142&2143/KOL/2016 UNIVERSAL CABLES LTD. A.YRS. 2010-11& 2011-12 12 BUSINESS COMPULSIONS AND ACCORDINGLY, TO BE TREATED AS INVESTMENT MADE AS A MEASURE OF COMMERCIAL EXPEDIENCY. THIS STRATEGIC IN VESTMENT WOULD ACCORDINGLY TO BE OUTSIDE THE AMBIT OF THE DISALLOWANCE U/S 14A OF THE ACT READ WITH RULE 8D OF THE RULES. 4.2. IN VIEW OF THE AFORESAID FINDINGS THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED AND GROUNDS RAISED BY THE ASSESSEE ARE P ARTLY ALLOWED. 5. DISALLOWANCE OF BALANCE PORTION OF ADDITIONAL DEPRE CIATION: GROUND NO. 1 FOR ASSESSMENT YEAR 2010-11 GROUND NO. 1 FOR ASSESSMENT YEAR 2011-12 THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESSEE DURING THE FINANCIAL YEAR 2008-09 PURCHASED AND INSTALLED NEW PLANT AND MACHINERY FOR ITS MANUFACTURING BUSINESS. SOME OF SUCH PLANT AND MACHINERY WERE PUT TO USE FO R A PERIOD OF LESS THAN 180 DAYS DURING THE SAID FINANCIAL YEAR AND IN RESPECT OF SUCH PLANT AND MACHINERY, THE ASSESSEE CLAIMED ONLY 50% OF ADDITIONAL DEPRECIATIO N U/S 32(1)(IIA) OF THE ACT IN VIEW OF THE SECOND PROVISO TO SECTION 32(1) OF THE ACT. NOW DURING THE YEAR UNDER APPEAL I.E. ASSESSMENT YEAR 2010-11, THE ASSESSEE C LAIMED FURTHER DEPRECIATION (I.E. BALANCE 10% WHICH IS 50% OF 20%) ON THIS PLAN T AND MACHINERY ON THE PLEA THAT IT IS ENTITLED TO GET THE BALANCE DEPRECIATION THIS YEAR ALSO. THE LD. AO HELD THAT AFTER ALLOWING A PORTION OF ADDITIONAL DEPRECI ATION IN ASSESSMENT YEAR 2009- 10, WRITTEN DOWN VALUE HAS BEEN WORKED OUT BY THE L D. AO AND THE SAME HAS BEEN BROUGHT FORWARD DURING THE YEAR UNDER APPEAL AS OPE NING WRITTEN DOWN VALUE, ON WHICH REGULAR DEPRECIATION WOULD BE APPLICABLE TO T HE ASSESSEE AT THE RATES PRESCRIBED FOR PLANT AND MACHINERY. WITH THESE OBSE RVATIONS, HE DISALLOWED THE REMAINING PORTION OF UNCLAIMED ADDITIONAL DEPRECIAT ION PERTAINING TO ASSESSMENT 13 ITA NOS.1766&1767/KOL/2016 ITA NOS.2142&2143/KOL/2016 UNIVERSAL CABLES LTD. A.YRS. 2010-11& 2011-12 13 YEAR 2009-10 (I.E. BALANCE 10%) IN THE ASSESSMENT A ND GRANTED ONLY REGULAR DEPRECIATION. THE LD. CIT(A) BY PLACING RELIANCE ON THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2007 -08 TO 2009-10 GRANTED RELIEF TO THE ASSESSEE AND DELETED THE DISALLOWANCE MADE T HEREON BY THE LD. AO. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON TH E FOLLOWING GROUNDS: I.T.A. NO. 2142/KOL/2016 FOR ASSESSMENT YEAR 2010-1 1 1. THAT THE LD. CIT(A) HAS ERRED IN LAW BY ALLOWING THE CLAIM OF BALANCE OF ADDITIONAL DEPRECIATION AMOUNTING TO RS. 1,29,62,03 9/- IN SUBSEQUENT ASSESSMENT YEAR. THE DEPARTMENT FILED AN APPEAL U/S 260A BEFOR E THE HONBLE HIGH COURT IN THE CASE OF M/S CENTURY ENKA LTD. FOR A.Y. 2008-09 ON THE SIMILAR ISSUE. I.T.A. NO. 2143/KOL/2016 FOR ASSESSMENT YEAR 2011-1 2 1. THAT THE LD. CIT(A) HAS ERRED IN LAW BY ALLOWING THE CLAIM OF BALANCE OF ADDITIONAL DEPRECIATION AMOUNTING TO RS. 1,29,62,03 9/- IN SUBSEQUENT ASSESSMENT YEAR. THE DEPARTMENT FILED AN APPEAL U/S 260A BEFOR E THE HONBLE HIGH COURT IN THE CASE OF M/S CENTURY ENKA LTD. FOR A.Y. 2008-09 ON THE SIMILAR ISSUE. 5.1. WE HAVE HEARD RIVAL SUBMISSIONS. WE FIND THAT THE ISSUE UNDER DISPUTE IS COVERED BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2007-08 IN I.T.A. NO. 4/KOL/2012 DATED 14.01.2015 WHEREIN I T WAS HELD THAT : 4. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE SHR I J. P. KHAITAN, ADVOCATE SUBMITTED THAT THE ISSUE IS COVERED BY THE DECISION OF COORDINATE BENCH IN THE CASE OF BIRLA CORPORATION LIMITED VS. DCIT, ITA NO. 683/K/2 011 & DCIT VS. BIRLA CORPORATION LIMITED, ITA NO. 581/K/2011 FOR AY 2007 -08 DATED 08.12.2014, WHEREIN THE TRIBUNAL HAS HELD AS UNDER: 15. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROU GH FACTS AND CIRCUMSTANCES OF THE CASE. THE FACTS ARE ADMITTED AND THERE IS NO DISPUTE ON THE FACTS. ONLY ISSUE FOR ADJUDICATION IS WHETHER THE ASSESSEE IS ENTITLED FOR THE BALANCE 50% ADDITIONAL DEPRECIATION IN VIEW OF SEC. 32(1)(IIA) OF THE ACT IN THE NEXT ASSESSMENT YEAR FOR REMAINING UNUTILIZED ADDIT IONAL DEPRECIATION. WE HAVE GONE THROUGH THE RELEVANT PROVISIONS OF SECOND PROV ISO TO SECTION 32(1)(II) AND 32(1)(IIA) OF THE ACT. IN THE PRESENT CASE BEFORE US, THE ASSESSEE HAS PURCHASED 14 ITA NOS.1766&1767/KOL/2016 ITA NOS.2142&2143/KOL/2016 UNIVERSAL CABLES LTD. A.YRS. 2010-11& 2011-12 14 AND INSTALLED NEW PLANT AND MACHINERY FOR ITS MANUF ACTURING UNIT AND PUT TO USE FOR A PERIOD OF LESS THAN I.E. 180 DAYS, DURING THE FY 2005-06 RELEVANT TO AY 2006-07 AND CLAIMED 50% ADDITIONAL DEPRECIATION U/S . 32(1)(IIA) OF THE ACT IN VIEW OF THE SECOND PROVISO TO SECTION 32(1)(II) OF THE ACT. FURTHER, THE BALANCE 50% OF ADDITIONAL DEPRECIATION ON SUCH PLANT AND MA CHINERY HAS BEEN CLAIMED BY THE ASSESSEE COMPANY DURING THE YEAR UNDER CONSI DERATION I.E. THE FY 2006- 07 RELEVANT TO THIS ASSESSMENT YEAR 2007-08. A BAR E READING OF CLAUSE (IIA) OF SECTION 32(1) OF THE ACT W.E.F. THE AY 2006-07, PRO VIDES FOR ALLOWANCE OF ADDITIONAL DEPRECIATION EQUAL TO 20% OF ACTUAL COST OF NEW PLANT AND MACHINERY ACQUIRED AND INSTALLED AFTER MARCH, 31 ST 2005 BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICL E OR THING. SUCH ADDITIONAL DEPRECIATION IS TO BE ALLOWED AS DEDUCTION U/S. 32( 1)(IIA) OF THE ACT BUT SECOND PROVISO TO SECTION 32(1)(II) RESTRICTS THE ALLOWANC E OF DEPRECIATION AT 50%, IF THE PLANT AND MACHINERY IS ACQUIRED DURING THE PREVIOUS YEAR IS PUT TO USE FOR A PERIOD OF LESS THAN 180 DAYS IN THAT PREVIOUS YEAR. THE SECOND PROVISO SPECIFICALLY MAKES A REFERENCE TO AN ASSET REFERRED TO IN CLAUSE (IIA) OF THE SAID SECTION 32(1) OF THE ACT. AND IT IS BECAUSE OF THE SECOND PROVISO ASSESSEE CLAIMED ONLY 50% ADDITIONAL DEPRECIATION FOR AY 200 6-07 AND ACCORDINGLY, CLAIMED THE BALANCE AMOUNT OF ADDITIONAL DEPRECIATI ON IN THE IMMEDIATELY SUBSEQUENT YEAR I.E. THE YEAR UNDER CONSIDERATION A Y 2007-08. WE ARE IN FULL AGREEMENT WITH THE ARGUMENT OF SHRI J. P. KHAITAN, SENIOR ADVOCATE THAT A BARE READING OF SECTION 32(1)(IIA) CLEARLY SHOWS THAT TH E ASSESSEE IS ELIGIBLE FOR ADDITIONAL DEPRECIATION IN CASE THE NEW MACHINERY A ND PLANT WAS ACQUIRED AND INSTALLED AFTER 31-03-2005. THERE IS NO RESTRICTIVE CONDITION IN THE CLAUSE FOR THE ELIGIBILITY OF THE ASSESSEE TO CLAIM ADDITIONAL DEP RECIATION. WHEN THE ASSESSEE IS ELIGIBLE FOR DEPRECIATION @ 20%, IN THE ABSENCE OF ANY SPECIFIC PROVISION, THE AO CANNOT CUT DOWN THE SCOPE OF DEDUCTION BY REFERR ING TO SECOND PROVISO TO SECTION 32(1)(II) OF THE ACT. HE ALSO POINTED OUT T HAT EVEN IF THERE IS ANY CONTRADICTION BETWEEN SECTIONS 32(1)(IIA) AND SECON D PROVISO TO SECTION 32(1)(II), IT HAS TO BE RECONCILED SO AS TO GIVE HA RMONIOUS EFFECT TO THE LEGISLATIVE INTENT. THE BENEFITS CONFERRED ON THE ASSESSEE BY W AY OF INCENTIVE PROVISION CANNOT BE TAKEN AWAY BY ADOPTING AN IMPLIED MEANING TO SECOND PROVISO TO SECTION 32(1)(II) OF THE ACT. SINCE THE SECOND PROV ISO TO SECTION 32(1)(II) DOES NOT EXPRESSLY PROHIBIT THE ALLOWANCE OF THE BALANCE 50% DEPRECIATION IN THE SUBSEQUENT YEAR, SECOND PROVISO TO SECTION 32(1)(II ) SHALL NOT BE INTERPRETED TO MEAN THAT IT IMPLIEDLY RESTRICT THE ADDITIONAL DEPR ECIATION TO BE ALLOWED IN THE SUBSEQUENT ASSESSMENT YEAR. WE ARE OF THE VIEW THA T THE ASSESSEE NOW IS ENTITLED FOR 50% ADDITIONAL DEPRECIATION, BECAUSE IN THE YEA R IN WHICH THE MACHINERY WAS FIRST PUT TO USE THE ASSESSEE CLAIMED ONLY 50% OF ADDITIONAL DEPRECIATION FOR THE REASON THAT THE SAME WAS PUT TO USE FOR LESS TH AN 180 DAYS, IN THIS ASSESSMENT YEAR FOR THE BALANCE OF DEPRECIATION. IN VIEW OF THE ABOVE DISCUSSION AND CONSIDERING THE ORDER OF COORDINATE BENCH, CITED SUPRA, WE ARE OF THE CONSIDERED VIEW THAT THE ASSES SEE IS ENTITLED FOR ADDITIONAL DEPRECIATION U/S. 32(1)(IIA) OF THE ACT IN THIS ASS ESSMENT YEAR. WE DIRECT THE AO ACCORDINGLY. 15 ITA NOS.1766&1767/KOL/2016 ITA NOS.2142&2143/KOL/2016 UNIVERSAL CABLES LTD. A.YRS. 2010-11& 2011-12 15 RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT THE L D. CIT(A) HAD RIGHTLY DELETED THE DISALLOWANCES AND HAD RIGHTLY GRANTED THE RELIE F TO THE ASSESSEE. ACCORDINGLY, GROUND NO.1 RAISED BY THE REVENUE FOR ASSESSMENT Y EAR 2010-11 AND 2011-12 ARE DISMISSED. 6. IN THE RESULT, TO SUM UP I.T.A. NO. ASSESSMENT YEAR RESULT 1766/KOL/2016 2010-11 PARTLY ALLOWED FOR STATISTICAL PURPOSES. 1767/KOL/2016 2011-12 PARTLY ALLOWED FOR STATISTICAL PURPOSES. 2142/KOL/2016 2010-11 DISMISSED 2143/KOL/2016 2011-12 DISMISSED ORDER PRONOUNCED IN THE COURT ON 14.02.2018 SD/- SD/- [S.S. VISWANETHRA RAVI] [ M.BAL AGANESH ] JUDICIAL MEMBER ACCOUNTANT MEM BER DATED : 14.02.2018 SB, SR. PS 16 ITA NOS.1766&1767/KOL/2016 ITA NOS.2142&2143/KOL/2016 UNIVERSAL CABLES LTD. A.YRS. 2010-11& 2011-12 16 COPY OF THE ORDER FORWARDED TO: 1. UNIVERSAL CABLES LIMITED, BIRLA BUILDING, 4 TH FLOOR, 9/1, R.N. MUKHERJEE ROAD, KOLKATA- 700001. 2. DCIT, CIRCLE-6(1), KOLKATA, AAYAKAR BHAWAN, 6 TH FLOOR, P-7, CHOWRINGHEE SQUARE, KOLKATA- 700069. 3..C.I.T.- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S