M/s. Neyveli Lignite CorporationLimited, Neyveli V. ACIT, CHENNAI

ITA 177/CHNY/2009

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9871 (ITAT-CHENNAI)
• Duration Of Justice: 6 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-05-2015
• Assessment Year: 2001-2002
• Appeal Filed On: 16-02-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R VIJAYARAGHAVAN
• Assessee Lawyers: E S NAGENDRA PRASAD
• Keywords: Reopening of assessment; Recovery proceedings; Depreciation; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Revenue expenditure; Capital expenditure
• Section: 143(3); 148; 37; 154

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI . . . , ! , ' #$ % [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ] ./ I.T.A.NOS. 374/2004, 529/2006 & 222/2009 / ASSESSMENT YEARS : 2001-02, 2002-03 & 2000-01. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE IV(4), CHENNAI VS. M/S. NEYVELI LIGNITE CORPORATION LTD, NEYVELI 607 801. [PAN AAACN 1121C] ITA NOS. 782/2005 & 177/2009. (ASSESSMENT YEARS: NIL, 2001-2002) M/S. NEYVELI LIGNITE CORPORATION LTD, THE ASSISTANT COMMISSIONER NEYVELI 607 801. VS. OF INCOME TAX, COMPANY CIRCLE IV(4) CHENNAI . [PAN AAACN 1121C] ( &' / APPELLANT) ( ()&' /RESPONDENT) DEPARTMENT BY : SHRI. E.S. NAGENDRA PRASAD, CIT, DR. /RESPONDENT BY : SHRI. R. VIJAYARAGHAVAN, ADVOCATE / DATE OF HEARING : 07-05-2015 / DATE OF PRONOUNCEMENT : 26-06-2015 I.T.A.NO. 374/04, 529/06, 222/09, 782/05 & 177/09. :- 2 -: / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THE DEPARTMENT HAS FILED APPEALS IN I TA NOS. 222/09, 374/2004 AND 529/06 AND THE ASSESSEE HAS FILED APPE ALS IN ITA NOS.177/09 & 782/2005 ARE DIRECTED AGAINST DIFFEREN T ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS), LARGE TAX PAY ER UNIT, CHENNAI. SINCE CERTAIN ISSUES IN THESE APPEALS AR E COMMON IN NATURE, THESE APPEALS ARE CLUBBED, HEARD TOGETHER, AND DISP OSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE FIRST ISSUE IN ITA NO.222/MDS/2009 FOR THE ASSE SSMENT YEAR 2000-2001 BY REVENUE IS THAT THE COMMISSIONER OF IN COME TAX (APPEALS) ERRED IN HOLDING THAT THE EXPENSES INCURR ED ON LIFE EXTENSION PROGRAM (LEP) OF THERMAL POWER STATION I (TIPS-I) A ND EXPENDITURE ON REJUVENATION OF BUCKET WHEEL EXTRACTORS ARE ALLOWA BLE AS REVENUE EXPENDITURE. 3. THE FACTS OF THE CASE ARE THAT DURING THE RELEVANT ASSESSMENT YEAR THE ASSESSEE HAD INCURRED EXPENDITURE OF D80,2 7,307/- ON REJUVENATION OF BUCKET WHEEL EXCAVTOR (BWE) OF MINE S-I AND LEP OF TPS-I. ACCORDING TO THE ASSESSING OFFICER, THERE W AS INCREASE IN I.T.A.NO. 374/04, 529/06, 222/09, 782/05 & 177/09. :- 3 -: PRODUCTION CAPACITY, HE TREATED THE SAME AS CAPITAL EXPENDITURE. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). 4. THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED T HAT THERE IS NO INCREASE IN PRODUCTION CAPACITY, AND HE ALLO WED THE CLAIM OF THE ASSESSEE AS REVENUE EXPENDITURE. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL AVAILABLE ON RECORD. IN OUR OPINION, THIS ISSUE IS SQUARELY COVERED IN ASSESSEES OWN CASE IN ITA NOS.219, 220,221, 981, 982/MDS/ 2009 AND OTHERS, THE TRIBUNAL VIDE ORDER DATED 18.07.2012 O BSERVED THAT 14. WE HAVE HEARD BOTH SIDES, CONSIDERED THE MATER IALS AVAILABLE ON RECORD AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND RELIANCE PLACED ON THE CASE LAW BY THE COUNSELS . THE ASSESSEE IS ENGAGED IN GENERATION OF ELECTRICITY AND MINING OF LIGNITE INSTALLED POWER GENERATION PLANTS CONSISTING OF 9 U NITS FOR GENERATION OF 600 MW POWER. DURING THE ASSESSMENT Y EARS 1993- 94 TO 99-2000, THE ASSESSEE INCURRED THE FOLLOWING EXPENDITURE TOWARDS REPLACEMENT OF VARIOUS COMPONENTS IN BOILER S AND COMPONENTS OF BWE UNDER THE LEP PROGRAMME STARTING FROM THE ASSESSMENT YEAR 1993-94 TO 1999-2000 AND THE YEAR-W ISE BREAKUP FOR SUCH EXPENDITURE IS AS UNDER: ASST. YEARS AMOUNT (RS) 1993-94 : 10,22,63,348/- 1994-95 : 39,35,07,774/- 1995-96 : 22,65,86,642/- 1996-97 : 27,78,53,677/- 1997-98 : 56,84,06,076/- 1998-99 : 48,23,92,595/- 1999-2000 : 47,35,92,595/- TOTAL : 252,46,02,707/- I.T.A.NO. 374/04, 529/06, 222/09, 782/05 & 177/09. :- 4 -: THE ASSESSEE CLAIMS THIS EXPENDITURE AS ALLOWABLE D EDUCTION EITHER UNDER SECTION 31(I) OR UNDER SECTION 37 OF THE INCO ME TAX ACT. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT REJECTIN G THE CLAIM OF THE ASSESSEE AND TREATING THE SAID EXPENDITURE AS C APITAL EXPENDITURE ON THE GROUND THAT THE ASSESSEE HAS INCURRED HUGE E XPENDITURE ON TPS-I UNDER LEP AND ON REJUVENATION OF BWE AND THIS EXPENDITURE BROUGHT ENDURING BENEFIT TO THE ASSESSEE, ESPECIALL Y THERE IS INCREASE IN THE PRODUCTION/POWER GENERATION CAPACIT Y OF THE ASSESSEE AND THEREFORE, IS IN THE NATURE OF CAPITAL . THE CONTENTION OF THE ASSESSING OFFICER WAS THAT THIS IS ONE TIME EXP ENDITURE AT THE END OF LIFE SPAN OF THE ASSET WITH A VIEW TO GIVE N EW LIFE. THEREFORE, THE EXPENDITURE DID NOT FALL WITHIN THE MEANING OF CURRENT REPAIRS UNDER SECTION 31(I) OF THE ACT. THE COMMISSIONER OF INCOME TAX (APPEALS) IN HIS COMMON ORDER FOR THE ASSESSMENT YE ARS 1995-96 TO 1997-98 ELABORATELY DEALT WITH VARIOUS ISSUES AND T HE ISSUE OF INCREASE IN PRODUCTION CAPACITY AND CAME TO THE CON CLUSION THAT THERE IS NO INCREASE IN PRODUCTION/POWER GENERATION CAPACITY AND PLACING RELIANCE ON THE DECISION OF THE HONBLE SUP REME COURT IN THE CASE OF CIT VS. SARAVANA SPINNING MILLS P. LTD. (SUPRA) HELD THAT THE EXPENDITURE WAS NOT INCURRED IN THE CAPITA L FIELD AND ALLOWABLE AS DEDUCTION. FOR BETTER UNDERSTANDING TH E NATURE OF EXPENDITURE INCURRED, IT IS NECESSARY TO REPRODUCE THE TECHNICAL WRITE-UP OF TPS-I OF LEP AT PAGE 62 TO 63 AND NOTE ON REJUVENATION OF BWE AT PAGE 76 OF THE PAPER BOOKS, WHICH READS AS UNDER: TPS-I: LEP TECHNICAL WRITE UP ELECTRICITY IS GENERATED FROM 600MW THERMAL POWER STATION-I, NEYVELI, HAVING NINE UNITS CONSISTING OF BOILERS, TURBINES, GENERATORS & TRANSFORMERS. THE STEAM, GEN ERATED IN BOILER DRIVES STEAM TURBINE WHICH COUPLED WITH G ENERATOR GENERATES ELECTRIC POWER. NEYVELI THERMAL POWER STATION-I (NTPS-I) HAS AN INS TALLED CAPACITY OF 600MW CONSISTING OF SIX 50MW UNITS AND THREE 100 MW UNITS. THE 50 MW UNITS HAVE ONE BOILER EACH AND 100MW UNITS HAVE TWO BOILERS EACH. THE ENTIRE EQUIP MENTS OF 600MW HAD BEEN SUPPLIED, ERECTED AND COMMISSIONE D BY M/S. TECHNOPRORNEXPORT (TPE), RUSSIA FROM 1962 TO 1 970 IN THREE STAGES ON TURNKEY BASIS. DURING THE YEAR 1989, THE RESIDUAL LIFE ASSESSMENT (RLA) STUDIES IN TWO UNITS (UNITS 1 & 9) WERE CARRIED OUT BY M/S TPE, RUSSIA AS APPROACHED BY NLC SINCE ALMOST ALL T HE UNITS HAD CROSSED 1.3 LAKHS SERVICE HOURS AND EXPER IENCING FREQUENT FAILURES IN HIGH PRESSURE PARTS DUE TO AGE ING. THE RUSSIAN SPECIALISTS CONDUCTED VARIOUS TESTS AND STU DIED ELABORATELY. BASED ON THE STUDY RESULTS, THEY RECOM MENDED I.T.A.NO. 374/04, 529/06, 222/09, 782/05 & 177/09. :- 5 -: FOR OPERATION OF THE EQUIPMENT WITH REDUCED STEAM PARAMETERS UP TO THE END OF 1991 AND THE POSSIBILIT Y OF FURTHER OPERATION OF THE EQUIPMENT AT RATED STEAM PARAMETERS ONLY AFTER REPLACEMENT OF THE CORRESPOND ING PARTS AND GROUPS. THE HIGH PRESSURE PARTS OF BOILERS NAMELY SUPER HEA TERS AND MAIN STEAM LINE ARE SUBJECTED TO CREEP DAMAGE DUE T O REACHING OF SERVICE LIFE OF AROUND 180000 RUNNING H OURS, AND THE WATER WALLS & ECONOMISERS ARE SUBJECTED TO CORROSION AND EROSION. OTHER PARTS NAMELY AIR HEATE RS, DUCTS AND AUXILIARY EQUIPMENTS LIKE PULVERISED FUEL BURNE RS, MILLS, DRAFT FANS ETC. ARE SUBJECTED TO CORROSION EROSION, WEAR AND TEAR. THUS, THE PERFORMANCE OF BOILERS AND SAFE OPE RATING LIFE OF CRITICAL PRESSURE PARTS OF THE BOILER GOT EXHAUS TED. CONSIDERING THE AGEING OF UNITS AND FOR SAFE OPERAT ION OF THE EQUIPMENTS AT RATED STEAM PARAMETERS, THE LIFE EXTE NSION PROGRAMME WORKS IN ALL UNITS WERE CARRIED OUT FROM APRIL 1992 TO MARCH 1999 IN PHASED MANNER WITH THE APPROV AL OF GOVT. OF INDIA. THE COMPONENTS SUBJECTED TO CREEP DAMAGE NAMELY SUP ER HEATERS, MAIN STEAM LINES ETC. AND HIGH PRESSURE VA LVES, ECONOMISERS AND OTHER ALLIED PIPE LINES LOST THEIR HEALTHINESS WERE REPLACED IN FULL, WHERE AS OTHER HIGH PRESSURE S PARTS NAMELY WATER WALLS & FEED WATER LINES AND OTHER PAR TS, AFTER INSPECTION WERE PARTIALLY REPLACED TO THE EXTENT RE QUIRED. BOILERS THE FOLLOWING COMPONENTS WERE REPLACED COMPLETELY I N BOILERS: 1. SUPER HEATERS WITH THEIR HEADERS AND INTER CONNECTING PIPES. 2. MAIN STEAM LINE. 3. UPRISER AND DOWN COMER PIPES. 4. ECONOMISER AND THEIR TRANSFER-PIPES. 5. BOILER CONDENSER AND DE SUPER HEATER. 6. HIGH PRESSURE VALVES. 7. COMPENSATORS OF AIR AND GAS DUCTS. 8. REAR SIDE WATER WALL. THE FOLLOWING COMPONENTS WERE REPLACED PARTIALLY AF TER INSPECTION; 1. FRONT WATER WALL AND SIDE WATER WALLS. 2. BOILER DRUM INTERNALS. 3. AIR HEATERS. 4. FEED WATER PIPE LINE. 5. BOILER SHIELD PLATES AND HYDRAULIC SEAL. 6. LIGNITE PULVERIZING SYSTEM. I.T.A.NO. 374/04, 529/06, 222/09, 782/05 & 177/09. :- 6 -: THE FOLLOWING EQUIPMENTS WERE OVERHAULED: 1. INDUCED AND FORCED DRAUGHT FANS. 2. BELT FEEDERS 3. SLAG CONVEYORS. 4. ASH HANDLING SYSTEM. TURBINE, GENERATOR AND TRANSFORMER: THESE MAJOR EQUIPMENTS WERE OVERHAULED WITH THE REPLACEMENT OF WORN OUT PARTS. THUS THE WORKS UNDER LEP OF THE UNITS OF THERMAL PO WER STATION-I ARE COMPRISED OF FULL AND PARTIAL REPLACE MENT AND OVERHAUL/ REPAIR OF MAIN EQUIPMENTS. NOTE ON EXPENDITURE OF REJUVENATION OF BUCKET WHEEL EXCAVATOR (BWE) OF MINE-I CLAIMED AS REVENUE: REJUVENATION OF BUCKET WHEEL EXCAVATOR (BWE ) OF MI NE-I: A BRIEF WRITE-UP REGARDING THE WORKS CARRIED OUT WITH DETAILS OF EXPENDITURE UNDER THIS FURNISHED BELOW: THE FOLLOWING CRITICAL ITEMS ARE REPLACED: (I) CRAWLER PADS (II) ALL THE SIX CRAWLER FRAMES WITH DRIVES ASSEMBL IES (FOR 3 TRACKS) INCLUDING THE MECHANICAL COMPONENT S. (III) TRAVERSE BOX OF SELF-ALIGNING TRACK (IV) TOWER FRAME COMPLETES INCLUDING PULLY MAST (V) BUCKET WHEEL BOOM COMPLETE (VI) DISCHARGE BOOM COMPLETE (VII) MAIN SLEWING BALL RACE AND MAIN SLEWING GEAR BOX SHELL (VIII) BUCKET WHEEL BOOM HOIST WINCH DRUM (IX) ALL THE HOST WINCH ROPES THE FOLLOWING NON-CRITICAL ITEMS ARE REPLACED: (I) SECONDARY STRUCTURES LIKE WALK WAY AND STAIR CASE FOR UNDER CARRIAGE, TURN TABLE, BUCKET WHEEL BOOM, DISCHARGE BOOM, INTERMEDIATE BOOM AND COUNTER WEIGHT BOOM. (II) MOTOR FOUNDATION AND MOTOR COVERS FOR ALL THE DRIVERS. (III) CABIN AND HOUSES. THE FOLLOWING COMPONENTS HAVE BEEN REPAIRED: I.T.A.NO. 374/04, 529/06, 222/09, 782/05 & 177/09. :- 7 -: (I) STEERING TILLER (FST AND RST) (II) UNDER CARRIAGE (III) TURN TABLE (IV) COUNTER WEIGHT BOOM AND BOX (V) INTERMEDIATE STRUCTURE IT MAY BE NOTED THAT REJUVENATION OF BUCKET WHEEL EXCAVATORS INVOLVES REPAIRS / REPLACEMENT OF CERTAI N CRITICAL WORN OUT PARTS, NONE OF THE PART IS INDEPENDENT NAT URE OF WORKING. ALL THE REPLACED AND REPAIRED ITEMS ARE FO RMING PART OF THE SINGLE MACHINE CALLED BUCKET WHEEL EXCA VATOR AND IN THAT PROCESS THE MACHINE IS BROUGHT TO ITS O RIGINAL CONDITION AND IT DOES NOT RESULT IN A NEW ASSET. DI AGRAMS SHOWING THE PARTS OF THE BUCKET WHEEL EXCAVATOR IS ENCLOSED 15. IT COULD BE SEEN FROM THE ABOVE TECHNICAL WRIT E-UPS, THE WHOLE EXERCISE OF THE LEP OF TPS-I AND REJUVENATION OF BWE IS FOR REPLACEMENT OF CERTAIN PARTS OF BOILERS/BWE ONLY. T HE ASSESSEE HAS NOT REPLACED THE ENTIRE BOILER/BWE AND WHAT WAS REP LACED WAS ONLY THE PARTS OF BOILER/BWE. THESE PARTS OF THE BOILER/ BWE ARE NOT CAPABLE OF FUNCTIONING INDEPENDENTLY AND THIS FACT IS NOT IN DISPUTE. IN OUR VIEW, THESE EXPENDITURES WERE INCURRED ONLY TO REPLACE CERTAIN PARTS OF BOILER/BWE AND OVERHAULING OF THE PARTS IN BOILER AND IS ONLY TO PRESERVE AND MAINTAIN THE EXISTING A SSETS I.E. BOILER/BWE AND THERE IS NO ENDURING ADVANTAGE OBTAI NED ON REPLACEMENT OF SUCH PARTS OF EXISTING ASSETS. THE A SSESSEE ALSO DEMONSTRATED THAT THERE IS NO INCREASE IN PRODUCTIO N/ GENERATION OF POWER CAPACITY AND THEREFORE, THE OBSERVATIONS OF T HE ASSESSING OFFICER THAT THERE IS INCREASE IN PRODUCTION CAPACI TY APPEARS TO BE MISPLACED. 16. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HIMSELF STATED THAT, IF A NEW PLANT IS TO BE INSTALLED, THE COST OF SUCH NEW PLANT WOULD BE ABOUT 4.5 CRORES PER MW AND IN SUCH CASE THE TOTAL PROJECT COST WOULD COME TO 2700 CRORES FOR 600 MW. IF THAT IS THE CASE, THE EXPENDITURE INCURRED FOR THE REPLACEMENT OF PARTS OF MACHINERY I.E. TPS-I/BWE IN ALL THESE SEVEN ASSESSM ENT YEARS I.E. 1993-94 TO 1999-2000 WAS ABOUT 252 CRORES AND THIS IS NOT EVEN 10% OF THE TOTAL PROJECT COST. 17. THEREFORE, WE SHOULD NOT GO BY THE QUANTUM OF EXPENDITURE INCURRED BY THE ASSESSEE IN DECIDING THE ISSUE OF W HETHER SUCH EXPENDITURE IS ALLOWABLE AS DEDUCTION AS CURRENT RE PAIRS/REVENUE EXPENDITURE OR SUCH EXPENDITURE IS A CAPITAL EXPEND ITURE. I.T.A.NO. 374/04, 529/06, 222/09, 782/05 & 177/09. :- 8 -: 18. WHEN THE ASSESSEE IS CLAIMING THE EXPENDITURE AS ALLOWABLE DEDUCTION UNDER SECTION 31(I) OF THE ACT, WHAT IS T O BE SEEN IS THAT BY WAY OF INCURRING THE EXPENDITURE ON REPLACEMENT OF PARTS OF MACHINERY, OVERHAULING THE MACHINERY WHETHER IT WAS INCURRED TO PRESERVE AND MAINTAIN AN ALREADY EXISTING ASSET OR SUCH EXPENDITURE WAS INCURRED TO BRING A NEW ASSET INTO EXISTENCE OR TO OBTAIN A NEW ADVANTAGE. IN THIS CASE, WE SEE THAT THE EXPENDITUR E ON REPLACEMENT OF PARTS OF BOILER/BWE WAS INCURRED ONLY TO PRESERV E AND MAINTAIN THE EXISTING ASSETS AND OBJECT OF INCURRING SUCH EX PENDITURE WAS NOT TO BRING A NEW ASSET INTO EXISTENCE. THE HONBLE AL LAHABAD HIGH COURT IN THE CASE OF CIT V. RENU SUGAR POWER CO. LT D. [298 ITR 94], ALMOST ON SIMILAR CIRCUMSTANCES, FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V. SARAVAN A SPINNING MILLS (P) LTD. (SUPRA) HELD THAT THE TURBINE ROTOR IS A PART OF THE TURBO GENERATOR SET AND EXPENDITURE INCURRED BY THE ASSESSEE ON REPLACEMENT OF ONE TURBINE ROTOR ON ACCOUNT OF CURR ENT REPAIRS IS ALLOWABLE AS REVENUE EXPENDITURE. THE FACTS IN THIS CASE ARE THAT THE ASSESSEE IS A CAPTIVE POWER PLANT AND HAD 2 THERMAL POWER PLANT OF GENERATING CAPACITY WITH 67.5 MW EACH. THE ASSESSEE CLAIMED EXPENDITURE OF `.1,05,44,904/- AS THE COST OF THE T URBINE ROTOR, WHICH WAS DISALLOWED BY THE ASSESSING OFFICER TREAT ING AS CAPITAL EXPENDITURE. IT WAS FOUND BY THE TRIBUNAL THAT THE TURBINE ROTOR WAS AN ESSENTIAL PART OF TURBO GENERATOR SET AND IT WAS NOT AN INDEPENDENT MACHINERY OR PLANT. THE TURBINE ROTOR O F ITS OWN INDEPENDENT FUNCTIONING COULD NOT GENERATE ELECTRIC ITY. THEREFORE, IT WAS HELD THAT THE ASSESSEE WAS ENTITLED TO DEDUCTIO N, WHICH WAS AFFIRMED BY THE HONBLE ALLAHABAD HIGH COURT. WHILE AFFIRMING THE ORDER OF THE TRIBUNAL, THE HONBLE ALLAHABAD HI GH COURT OBSERVED AS UNDER: WE FIND THAT THE CONTROVERSY STANDS CONCLUDED BY T HE JUDGEMENT OF THIS COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. KANODIA COLD STORAGE [1975]100 ITR 1 55 WHEREIN IT HAS BEEN HELD AS FOLLOWS(HEADNOTE): 'REPLACEMENT OF WORN OUT PARTS DOES NOT BY ITSELF B RING IN A NEW ASSET. IN CONSIDERING THE NATURE OF AN EXPEND ITURE ONE SHOULD CONSIDER THE PRODUCTIVE UNIT AS A WHOLE AND NOT PICK OUT PARTS THEREIN WHICH ARE NEW. IF THE PRODUC TIVE UNIT TO THE ASSESSEE REMAINS THE SAME BUT A PART OF IT W HICH HAS BECOME UNSUITABLE FOR ITS USE IS REPLACED BY SOMETH ING WHICH MAKES IT POSSIBLE FOR THE EXISTING SET UP TO FUNCTION EFFICIENTLY, THE COST INCURRED ON SUCH REPLACEMENT WOULD BE REVENUE EXPENDITURE.' THE COMMISSIONER OF INCOME-TAX VS. M/S. SARAVANA SP INNING MILLS PVT. LTD.[2007] 293 ITR 201(SC); [ 2007] 10 J T 111(SC), I.T.A.NO. 374/04, 529/06, 222/09, 782/05 & 177/09. :- 9 -: WHILE INTERPRETING THE WORDS 'CURRENT REPAIRS' IN S ECTION 31 OF THE INCOME-TAX ACT, IT HAS BEEN HELD AS FOLLOWS (PA GE 208):- '.......... IF AN AUTOLEVELER IS TO BE REPAIRED THE N THAT REPAIR WOULD COME WITHIN THE CONNOTATION OF THE WORD 'CURRENT RE PAIRS' BECAUSE IT IS A PART OF THE CARDING MACHINE. EVEN IF IN A GIVE N CASE, REPLACEMENT OF AN AUTOLEVELER COULD COME WITHIN THE CONNOTATION OF THE WORD 'CURRENT REPAIRS' IF THE OLD PART IS NOT A VAILABLE IN THE MARKET. IT IS A 'CURRENT REPAIR' BECAUSE THE CARDIN G MACHINE REMAINS AS AN ASSET WITHOUT ANY CHANGE EVEN AFTER R EPAIR OR REPLACEMENT OF THE AUTOLEVELER. TO GIVE AN EXAMPLE, A COMPRESSOR IN AN IMPORTANT PART OF AN AIR-CONDITION MACHINE. REPA IR OF THE COMPRESSOR WILL COME IN THE CONNOTATION OF THE WORD 'CURRENT REPAIRS' IN SECTION 31 (I) OF THE SAID ACT BECAUSE THE ASSESSEE DOES NOT REPLACE THE AIR-CONDITION MACHINE. AT THE HIGHE ST, HE REPLACES A PART OF THE AIR-CONDITION MACHINE. SO IS IN THE CAS E OF THE PICTURE TUBE IN A TELEVISION SET, WHEN THE PICTURE TUBE IS REPLACED THE TELEVISION SET IS NOT REPLACED, THEREFORE, SUCH REP AIRS ALONE CAN COME WITHIN THE CONNOTATION OF THE WORD 'CURRENT RE PAIRS' IN SECTION 31(I) OF THE SAID ACT AS IT STOOD AT THE MATERIAL T IME. THEY ARE EFFECTED TO PRESERVE AND MAINTAIN THE ASSET, VIZ. AIR-CONDIT IONER OR CARDING MACHINE...... THE BASIC TEST TO FIND OUT AS TO WHAT WOULD CONSTIT UTE CURRENT REPAIRS IS THAT THE EXPENDITURE MUST HAVE BEEN INCURRED TO 'PRESERVE AND MAINTAIN' AN ALREADY EXISTING ASSET, AND THE OBJECT OF THE EXPENDITURE MUST NOT BE TO BRING A NEW ASSET INTO E XISTENCE OR TO OBTAIN A NEW ADVANTAGE.' SO FAR AS THE DECISION RELIED UPON BY THE LEARNED S TANDING COUNSEL FOR THE DEPARTMENT IS CONCERNED, THE SAME IS DISTIN GUISHABLE ON FACTS. IN THAT CASE THE QUESTION WHETHER CERTAIN EX PENDITURE INCURRED BY THE ASSESSEE ON KNIVES AND LOSSES IN THE MATERIA L PERIOD QUALIFIED FOR CAPITAL ALLOWANCE UNDER SECTION 16(3) OF THE FI NANCE ACT, 1954. ON FACTS IT WAS FOUND THAT THE KNIVES ARE NOT PARTS OF THE MACHINE. EACH KNIFE IS A SEPARATE TOOL OR IMPLEMENT DESIGNED TO BE USED IN CONJUNCTION WITH THE MACHINE. ON THESE FACTS IT WAS HELD THAT REPLACEMENT OF KNIVES WAS THE CAPITAL EXPENDITURE. IN THE CASE ON HAND THE FACTUAL POSITION IS QUITE DIFFERENT. IT HA S BEEN FOUND BY THE TRIBUNAL AS A FACT THAT TURBINE ROTOR IS A PART OF TURBO GENERATOR SET. THE TURBINE ROTOR DOES NOT FUNCTION INDEPENDEN TLY. IT IS A PART OF TURBO GENERATOR SET. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE TRIBUNAL. THE TRIBUNAL WAS JUSTIFIED IN HOLD ING THAT THEEXPENDITURE BY THE ASSESSEE ON THE REPLACEMENT O F ONE TURBINE ROTOR AMOUNTING TO `. 1,05,44,904/- WAS ON ACCOUNT OF CURRENT REPAIRS AND AS SUCH IT WAS REVENU E EXPENDITURE. I.T.A.NO. 374/04, 529/06, 222/09, 782/05 & 177/09. :- 10 -: 19. THE CASE LAW RELIED ON BY THE COUNSEL FOR THE R EVENUE IN THE CASES OF BHARAT GEARS LTD. V. CIT [337 368 (DEL.)], CIT V. M ADURA COATS 205 TAXMAN 357/19 (MAD), CIT V. M/S. RANE BRAKE LINING S LTD. T.C.(A) NO. 71 & 72 OF 2008 DATED 25.04.2011, CIT VS. UNIVERSA L COLD STORAGE LTD. T.C.(A) NO. 39 OF 2008 DATED 08.11.2011 ARE DISTING UISHABLE ON FACTS AND THE RATIO OF THESE DECISIONS ARE NOT APPLICABLE TO THE FACTS OF THE ASSESSEES CASE SINCE IN THE ASSESSEES CASE, WHAT WAS REPLACED WAS ONLY THE PARTS OF MACHINERY AND THE EXPENDITURE WAS INCURRED ONLY TO PRESERVE AND MAINTAIN THE EXISTING ASSETS AND THEREFORE, THE EXPENDITURE ON SUCH REPAIRS IS ALLOWABLE AS DEDUCTION UNDER CURRENT REPAIRS. HENCE THE CASE LAW RELIED ON BY THE REVENUE ARE OF NO HELP. THEREFORE, FOLLOWING THE DE CISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V. SARAVANA SPINNI NG MILLS P. LTD. (SUPRA), WE SUSTAIN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN ALLOWING THE EXPENDITURE ON REPLACEMENT/OVERHAULING OF TPS-I/BWE AS DEDUCTION. THE GROUNDS RAISED BY THE REVENUE ARE DI SMISSED ON THIS ISSUE FOR ALL THE ASSESSMENT YEARS FROM 1993-94 TO 1999-2000 . THUS, THE TRIBUNAL HELD THAT THE EXPENDITURE IS REV ENUE IN NATURE AND ALLOWED THE CLAIM OF THE ASSESSEE. RESPECTFULLY, FOLLOWING THE ABOVE ORDER OF THE TRIBUNAL, WE ARE INCLINED TO DISMISS T HIS GROUND RAISED BY THE REVENUE. ACCORDINGLY, THIS GROUND IS DISMISSED . 6. THE NEXT COMMON GROUND IN ITA NOS.222/2009, 374/200 4 AND 529/2006 IS THAT THE COMMISSIONER OF INCOME TAX (AP PEALS) ERRED IN HOLDING THAT THE ASSESSEE IS ENTITLED TO 100% DEDUC TION U/S.80IA, AS SECOND YEAR IN RESPECT OF PROFITS EARNED IN THE UNI T VII OF TPS II - STAGE II WHICH WAS COMMISSIONED IN THE PREVIOUS YEA R 1994-1995. 7. THE COMMISSIONER OF INCOME TAX (APPEALS) ALLOWED TH E CLAIM OF THE ASSESSEE U/S.80IA BY OBSERVING THAT THE ASSESSE E HAS OPTED ASSESSMENT YEAR 1999-2000 AS FIRST YEAR OF COMMENCE MENT AND IN I.T.A.NO. 374/04, 529/06, 222/09, 782/05 & 177/09. :- 11 -: VIEW OF PROVISIONS UNDER SECTION 80IA(2), THE ASSES SEE IS PERMITTED TO CLAIM DEDUCTION FOR ANY TEN YEARS OUT OF FIRST FIFT EEN YEARS. ACCORDINGLY, THE COMMISSIONER OF INCOME TAX (APPEAL S) ALLOWED THE CLAIM OF THE ASSESSEE U/S.80IA BY OBSERVING THAT TH E ASSESSEE CLAIMED THE DEDUCTION U/S.80IA IN ASSESSMENT YEAR 1999-2000 AS FIRST YEAR. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. THE ISSUE IS SQUARELY COVERED BY THE JUDGM ENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD 340 ITR 477 WHEREIN IT WAS OBSERVED THAT FROM READING OF SUB-S (1) OF S. 80IA, IT IS CLEAR THAT IT PROVIDES THAT WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDE S ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FR OM ANY BUSINESS REFERRED TO IN SUB-S (4) I.E. REFERRED TO AS THE EL IGIBLE BUSINESS, THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVIS IONS OF THE SECTIONS, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION OF AN AMOUNT EQUAL TO 100 PER CENT OF T HE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TEN CONSECUTIV E ASSESSMENT YEARS. DEDUCTION IS GIVEN TO ELIGIBLE BUSINESS AND THE SAME IS DEFINED IN SUB-S. (4). SUB-S(2) PROVIDES OPTION TO THE ASSESSEE TO CHOOSE 10 CONSECUTIVE ASSESSMENT YEARS OUT OF 15 YE ARS. OPTION HAS TO BE EXERCISED. IF IT IS NOT EXERCISED, THE ASSES SEE WILL NOT BE GETTING THE BENEFIT. FIFTEEN YEARS IS OUTER LIMIT A ND THE SAME IS BEGINNING FROM THE YEARS IN WHICH THE UNDERTAKING O R THE ENTERPRISE DEVELOPS AND BEGINS TO OPERATE ANY INFRASTRUCTURE A CTIVITY ETC SUB-S. (5) DEALS WITH QUANTUM OF DEDUCTION FOR AN ELIGIBLE BUSINESS. THE WORDS INITIAL ASSESSMENT YEAR ARE USED IN SUB-S (5) AND THE SAME IS NOT DEFINED UNDER THE PROVISIONS. IT IS TO BE NOTE D THAT INITIAL ASSESSMENT YEAR EMPLOYED IN SUB-S (5) IS DIFFERENT FROM THE WORDS BEGINNING FROM THE YEAR REFERRED TO IN SUB-S(2) . IMPORTANT FACTORS ARE TO BE NOTED IN SUB-S(5) AND THEY ARE AS UNDER: (1)IT STARTS WITH NON OBSTANTE CLAUSE WHICH MEANS IT OVERRIDES ALL TH E PROVISIONS OF THE ACT AND OTHER PROVISIONS ARE TO BE IGNORED; (2) IT IS FOR THE PURPOSE OF I.T.A.NO. 374/04, 529/06, 222/09, 782/05 & 177/09. :- 12 -: DETERMINING THE QUANTUM OF DEDUCTION; (3) FOR THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR ; (4) IT IS A DEEMING PROVISION; (5) FICTION CREATED THAT THE ELI GIBLE BUSINESS IS THE ONLY SOURCE OF INCOME; AND (6) DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YEAR AND EVERY SUBSEQUENT AS SESSMENT YEAR. FROM READING OF THE ABOVE, IT IS CLEAR THAT THE ELI GIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME, DURING THE PREVIOUS YEA R RELEVANT TO INITIAL ASSESSMENT YEAR AND EVERY SUBSEQUENT ASSESSMENT YEA RS. WHEN THE ASSESSEE EXERCISES THE OPTION, THE ONLY LOSSES OF T HE YEARS BEGINNING FROM INITIAL ASSESSMENT YEAR ALONE ARE TO BE BROUGH T FORWARD AND NOT LOSSES OF EARLIER YEARS WHICH WERE ALREADY SET OFF AGAINST THE INCOME OF THE ASSESSEE. LOOKING FORWARD TO A PERIOD OF TE N YEARS FROM THE INITIAL ASSESSMENT CONTEMPLATED. IT DOES NOT ALL T HE REVENUE TO LOOK BACKWARD AND FIND OUT IF THERE IS ANY LOSS OF EARLI ER YEARS AND BRING FORWARD NATIONALLY EVEN THOUGH THE SAME WERE SET OF F AGAINST OTHER INCOME OF THE ASSESSEE AND THE SET OFF AGAINST THE CURRENT INCOME OF THE ELIGIBLE BUSINESS. ONCE THE SET OFF IS TAKEN P LACE IN EARLIER YEAR AGAINST THE OTHER INCOME OF THE ASSESSEE, THE REVEN UE CANNOT REWORK THE SET OFF AMOUNT AND BRING IT NOTIONALLY. FICTION CREATED IN SUB-S(5) DOES NOT CONTEMPLATES TO BRING SET OFF AMO UNT NOTIONALLY. FICTION IS CREATED ONLY FOR THE LIMITED PURPOSE AND THE SAME CANNOT BE EXTENDED BEYOND THE PURPOSE FOR WHICH IT IS CREA TED. THERE IS NO DISPUTE THAT LOSSES INCURRED BY THE ASSESSEE WERE A LREADY SET OFF AND ADJUSTED AGAINST THE PROFITS OF THE EARLIER YEARS. DURING THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE EXERCISED THE OPTION UNDER S.80-IA(2). IN TAX CASE NO.918 OF 2008 THE ASSESSMENT YEAR WAS 2004-05. DURING THE RELEVANT PERIOD, THERE WERE NO UNABSORBE D DEPRECIATION OR LOSS OF THE ELIGIBLE UNDERTAKINGS AND THE SAME WERE ALREADY ABSORBED IN THE EARLIER YEARS. THERE IS A POSITIVE PROFIT D URING THE RELEVANT YEAR. THEREFORE, LOSS IN THE YEAR EARLIER TO INITI AL ASSESSMENT YEAR ALREADY ABSORBED AGAINST THE PROFIT OF OTHER BUSINE SS CANNOT BE NOTIONALLY BROUGHT FORWARD AND SET OFF AGAINST THE PROFIT OF THE ELIGIBLE BUSINESS AS NO SUCH MANDATE IS PROVIDED IN S. 80-IA(5) CIT VS. TTK PHARMA LTD (TAX CASE (APPEAL ) NO.298 OF 20 04, DT. 23 RD DEC., 2009) FOLLOWED; CIT VS. MEWAR OIL & GENERAL M ILLS LTD (2004) 186 CTR (RAJ) 141; (2004) 271 ITR 311 (RAJ) CONCURR ED WITH; MOHAN BREWERIES & DISTILLERIES LTD VS. ASST. CIT (2008) 1 14 TTJ (CHENNAI) 532: (2008) 3 DTR (CHENNAI) (TRIB) 477 AFFIRMED . BEING SO, WE ARE INCLINED TO DISMISS THE APPEAL O F THE REVENUE AS THE FIRST YEAR OF CLAIM OF ASSESSEE WAS ASSESSMENT YEAR 1999-2000 AND 80IA(2) PERMITS THE ASSESSEE TO CLAIM DEDUCTION FOR ANY TEN YEARS OUT OF FIRST FIFTEEN YEARS. THIS GROUND OF THE REVENUE IS DISMISSED . I.T.A.NO. 374/04, 529/06, 222/09, 782/05 & 177/09. :- 13 -: 9. THE FIRST GROUND IN ITA NO. 177/2009 FILED BY THE ASSESSEE CHALLENGING THE REOPENING OF ASSESSMENT. 10. THE FACTS OF THE CASE ARE THE ASSESSEE FILED ITS R ETURN OF INCOME FOR THE ASSESSMENT YEAR 2001-02 ON 22.10.2001 SHOWI NG A TOTAL INCOME OF D8,38,92,47,711/-. THE CASE WAS TAKEN UP FOR SCRUTINY AND OTHER U/S.143(3) WAS PASSED ON 28.3.2003. NOTICE U /S 148 WAS ISSUED ON 28.03.2007 TO BRING TO TAX INCOME THAT HAS ESCAP ED FROM THE ASSESSMENT. THE ASSESSEE VIDE LETTER DATED 24.04.20 05 SUBMITTED THE RETURN FILED ON 22.10.2001 MAY BE TREATED THE RETU RN FILED INSTANCE TO THE NOTICE U/S.148. THE ASSESSEE FILED A LETTER ON 24.04.2005 REQUESTING THAT THE RETURN FURNISHED ON 22.10.2001 MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE U/S.148. THE AS SESSEE SOUGHT THE REASONS THAT HAD IMPELLED THE ASSESSING OFFICER TO THE CONCLUSION THAT THERE HAS BEEN ESCAPEMENT OF INCOME WHICH ERE VIDE COMMUNICATION DATED 15.04.2007. THE ASSESSEE SUBMITTED LETTER DA TED 20.06.2007 GIVING THE SUBMISSIONS AGAINST THE PROPOSED REASSES SMENT ON THE GROUND THAT THERE HAS BEEN NO ESCAPEMENT OF INCOME. THE JURISDICTION TO MAKE REASSESSMENT WAS ALSO QUESTIONED. ACCORDIN GLY, THE ASSESSEE PRAYED FOR DROPPING OF THE PROCEEDINGS FOR REASSESS MENT. THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSE E AND HE TREATED THE I.T.A.NO. 374/04, 529/06, 222/09, 782/05 & 177/09. :- 14 -: EXPENDITURE TOWARDS PURCHASER OF CONVEYOR BELTS AND ACCESSORIES AMOUNTING TO D70 CRORES AS REVENUE EXPENDITURE AND INSTEAD TREATING IT AS CAPITAL EXPENDITURE ALLOWED DEPRECIATION AT T HE RATE OF 25% THEREON. FURTHER, THE ASSESSING OFFICER HAS ALSO D ISALLOWED THE CLAIM OF EXPENDITURE ON ACCOUNT OF PURCHASE OF LOOSE TOO LS AS REVENUE EXPENDITURE AND ALLOWED DEPRECIATION AT THE RATE OF 25% THEREON AS CLAIMED BY THE ASSESSEE IN EARLIER YEARS. AGGRIEVED , THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCO ME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE SAME . 11. THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE SUBM ITTED THAT ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT AND WAS REOPENED FOR THE PURPOSE OF CONSIDERING THE INVESTMENT MADE TOWARDS PURCHASE OF CONVEYOR BELTS AND ACCESSORIES CLAIMED AS REVENU E EXPENDITURE AND ALSO CONSIDERED INVESTMENT IN LOOSE TOOLS CLAIMED A S REVENUE EXPENDITURE. ACCORDING TO THE LD. AUTHORISED REPRES ENTATIVE FOR ASSESSEE THAT THE ASSESSMENT WAS COMPLETED U/S.143( 3) AFTER CALLING FOR FULL PARTICULARS RELEVANT TO THE ASSESSMENT AND THE ASSESSEE HAD FURNISHED ALL PARTICULARS NECESSARY FOR THE ASSESS MENT. U/S.147 PROVISO THE POWER TO RE-ASSESS IN A CASE WHERE THE ASSESSMENT HAS I.T.A.NO. 374/04, 529/06, 222/09, 782/05 & 177/09. :- 15 -: BEEN MADE U/S.143(3), AFTER THE EXPIRY OF FOUR YEAR S FROM THE END OF RELEVANT ASSESSMENT YEAR IS EXERCISABLE ONLY IF THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT Y EAR, BY REASON FOR THE FAILURE ON THE PART OF THE ASSESSEE. ACCO RDING TO THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY AL L MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. ACCORDING TO HIM, TH E PROVISO OF 147 WILL NOT APPLY AND CONSEQUENTLY THE RE-ASSESSMENT C ANNOT BE INITIATED AFTER A PERIOD OF 4 YEARS FROM THE END OF THE ASSE SSMENT YEAR. THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE SUBMITTED TH AT THE ASSESSING OFFICER RAISED THREE ISSUES FOR REOPENING OF ASSES SMENT, WHICH WERE DULY CONSIDERED BY THE ASSESSING OFFICER BEFORE FRA MING ASSESSMENT U/S.143(3) OF THE ACT. HE DREW OUR ATTENTION TO THE LETTER OF THE ASSESSING OFFICER DATED 21.11.2002 ASKING THE ASSE SSEE TO FURNISH THE DETAILS WHICH IS PLACED ON RECORD AT PAPER BOOK PAG E NO.9 IN THE COURSE OF ORIGINAL ASSESSMENT. THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE SUBMITTED THAT THE ASSESSEE FURNISHED ALL THE DETAILS VIDE ITS REPLY DATED 7.12.2002. THE ASSESSING OFFICER PASS ED ORIGINAL ASSESSMENT ORDER U/S.143(3) OF THE ACT DATED 28.03. 2003 AFTER RECEIVING ALL THE DETAILS FROM THE ASSESSEE. HENCE, THERE CANNOT BE ANY FAILURE ON THE PART OF THE ASSESSEE IN FURNISHI NG ALL NECESSARY I.T.A.NO. 374/04, 529/06, 222/09, 782/05 & 177/09. :- 16 -: INFORMATION REQUIRED FOR THE PURPOSE OF ASSESSMENT. HE RELIED ON THE FOLLOWING JUDGMENTS:- (1) CIT VS. PREMIER MILLS, 296 ITR 157 (MAD) (2) CIT VS. ELGI FINANCE, 286 ITR 674 (MAD) (3) MERCURY TRAVELS LTD VS. CIT, 258 ITR 533 (CAL) (4) CIT VS. INDIAN OVERSEAS BANK , 252 ITR 640 (MAD) (5) CIT VS. SIVA TRADERS, 255 ITR 77 (KER) (6) CIT VS FENNER INDIA LTD, 241 ITR 672 (MAD) (7) CIT VS. FROAMER FRANCE, 264 ITR 566 (SC) (8) CIT VS. T.N. TRANSPORT DEVELOP FIANCE CORP. LTD 306 ITR 136 (MAD). (9) CIT VS. TVS MOTOR CO. LTD 319, ITR 192 (MAD) (10) SAK INDUSTRIES P. LTD VS. DCIT, 2012-TIOL-562-HC-DE L-IT (11) HINDUSTAN LEVER LTD VS. R.B. WADEKAR, 268 ITR 332 B OM. (12) HARYANA ACRYLIC MFG CO. VS. CIT, 308 ITR 38 (DEL). (13) CIT VS. A.V. THOMAS EXPORTS LTD, 296 ITR 603 MAD. (14) WELL INTERTRADE P. LTD VS. CIT, 308 ITR 22 (DEL) (15) SITARA DIAMOND P. LTD VS. DCIT, 345 ITR 91 (BOM) (16) TITANOR COMPONENTS LTD VS. ACIT, 343 ITR 183 (BOM). 12. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTAT IVE SUBMITTED THAT ASSESSEE HAS NOT DISCLOSED FULLY AND TRULY THE FACTS NECESSARY FOR THE ASSESSMENT. HENCE, REOPENING IS VALID IN LAW. THE MOST MATERIAL PART WHICH WAS ARGUED BY THE LD.AR IS REGARDING THE TIME LAG WHICH IS PROVIDED IN FIRST PROVISO TO SECTION 1 47 WHICH STATES THAT WHERE AN ASSESSMENT U/S SUB-SECTION(3) OF SECTION 1 43 HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, WHICH IS 2001-02, IN THIS CASE, NO ACTION SHALL BE TAKEN U/S 147 AFTER THE EXPIRY OF F OUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS ANY INCO ME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY THE REASON OF I.T.A.NO. 374/04, 529/06, 222/09, 782/05 & 177/09. :- 17 -: THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THA T ASSESSMENT YEAR. ONE HAS TO SEE AS TO WHAT FAILURE OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS SIGNIFY. IT IS TRUE THAT EVERY DISCLOSURE IS NOT AND CANNOT BE TREATED TO BE A TRUE AND FULL DISCLOS URE. A DISCLOSURE CAN BE EVEN FALSE OR TRUE. IT MAY BE A FULL DISCLOSURE OR IT MAY NOT BE A FULL ONE. A PART DISCLOSURE MANY A TIMES MAY BE MISLEADI NG ONE. WHAT IS REQUIRED UNDER THE LAW IS A FULL AND TRUE DISCLOSU RE OF ALL MATERIAL FACTS NECESSARY FOR MAKING ASSESSMENT FOR THAT YEAR. THIS LAW WAS LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF SRI KRISHNA PVT. LTD ETC VS ITO & OTHERS, 221 ITR 538 . THE WORDS OMISSION OR FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR AS SESSMENT FOR THAT YEAR POSTULATES A FAILURE OF THE ASSESSEE TO DISCLOSE FU LLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT. WHAT FACTS ARE MATERIAL AND NECESSARY FOR ASSESSMENT WILL DIFFER FROM CAS E TO CASE. THE MATERIAL SHOULD NOT ONLY BE FULL BUT ALSO BE TRUE. IF SOME MATERIAL FOUND IN THE EVIDENCE PRODUCED BEFORE THE ASSESSING OFFICER WHICH THE ASSESSING OFFICER COULD HAVE UNCOVERED BUT DID NOT, THEN IT IS THE DUTY OF THE ASSESSEE TO BRING IT TO THE NOTICE OF THE AS SESSING AUTHORITY. THIS OMISSION OR FAILURE MAY BE EITHER DELIBERATE, OR EV EN INADVERTENT, THAT IS IMMATERIAL, BUT IN CASE THERE IS OMISSION TO DIS CLOSE THE MATERIAL I.T.A.NO. 374/04, 529/06, 222/09, 782/05 & 177/09. :- 18 -: FACTS THEN SUBJECT TO THE OTHER CONDITIONS JURISDIC TION TO REOPEN IS ATTRACTED. FURTHER, THE LD. DEPARTMENTAL REPRESENT ATIVE RELIED ON THE JUDGMENT OF KERALA HIGH COURT IN THE CASE OF CIT VS. SMT. R. SUNANDA BAI 344 ITR 271 WHEREIN IT WAS HELD THAT SUPPRESSION OF FACTS, TH E ASSESSING OFFICER IS AT LIBERTY TO REOPEN THE ASSES SMENT THOUGH ASSESSMENT WAS COMPLETED U/S143(3) OF THE ACT. THE LD. DEPARTMENTAL REPRESENTATIVE ALSO RELIED ON THE JUDGMENT OF HIGH COURT OF RAJASTHAN IN THE CASE OF PUSHTIKAR LAGHU VYAPARIK PRATISHTHAN BACHAT EVAM S AKH SAHKARI SAMITI LTD VS. UNION OF INDIA, 249 CTR 73 ( RAJ ). FURTHER, HE RELIED ON THE ORDER OF THE TRIBUNAL IN THE CASE OF M/S. MRF LTD VS. DCIT IN ITA NOS. 1374 TO 1377/MDS/2010 FOR THE ASSE SSMENT YEARS 2002-03, 2004-05, 2006-07 & 2007-09 , DATED 11.03.2011. 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE, THE CONTENTION OF THE ASSESS EE COUNSEL IS THAT THE NOTICE FOR RE-ASSESSMENT HAS BEEN ISSUED BEYOND FOU R YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AND BECAUSE THE ASSESSEE HAD PROVIDED ALL MATERIAL FACTS IN THE RETURNS FILED, T HE REVISION DONE ONLY ON THE BASIS OF SOME FACTS WITHOUT THE AVAILABILITY OF FRESH MATERIAL WOULD AMOUNT TO CHANGE OF OPINION WHICH CANNOT BE M ADE A GROUND FOR REOPENING. AFTER ARGUING ON THE REASONS RECORDE D FOR THE I.T.A.NO. 374/04, 529/06, 222/09, 782/05 & 177/09. :- 19 -: REOPENING, TO SUBSTANTIATE HE PLACED RELIANCE ON S OME DECISIONS WHICH ARE KEPT ON RECORD. ON THE OTHER HAND, THE LD. DEPA RTMENTAL REPRESENTATIVE HAS SUPPORTED THE APPELLATE FINDINGS AND HAS ALSO PLACED RELIANCE ON SOME DECISIONS IN FAVOUR OF THE REVENUE. IN THIS CASE ASSESSMENT WAS REOPENED BY RECORDING THE REAS ON AS FOLLOWS:- (I) DURING THE ASSESSMENT YEAR 2001-02, THE ASSESSEE HA D PURCHASED A CONVEYOR BELTS AND ACCESSORIES WORTH OF 70 CRORES AND THIS WAS INCLUDED IN THE COST OF SPARES CLAIMED AND CLAIMED AS REVENUE EXPENDITURE. SINCE THE CONVEYOR BELTS USED BY THE ASSESSEE ARE TO BE TREATED AS GENERAL P LANT AND MACHINERY AND DEPRECIATION IS TO BE ALLOWED AT 25% AS AGAINST REVENUE EXPENDITURE CLAIMED BY ASSESSEE. (II) DURING THE ASSESSMENT YEAR 2001-02, ASSESSEE HAS PU RCHASED LOOSE TOOLS AND CLAIMED DEPRECIATION @ 100%. TILL PREVIOUS YEAR ASSESSEE CLAIMED DEPRECIATION ON LOOSE TOOLS A T 25%. BUT THE ASSESSEE HAS CLAIMED THE CURRENT PURCHASE O F LOOSE AND WDV OF LOOSE TOOLS AS REVENUE EXPENDITURE. SIN CE THE TOOLS FORM PART OF MACHINERY AND DEPRECATION HAS TO BE ALLOWED AT 25% ONLY. (III) IT WAS NOTICED FROM THE DEPRECATION STATEMENT, THAT THE ASSESSEE HAS INCLUDED LEASE HOLD BUILDINGS TRANSFER RED FROM HUDCO, UNDER THE HEAD BUILDINGS AND HAS CLAIMED DEPRECATION AT THE RATE OF 10% U/S.32. SINCE THE A SSESSEE COMPANY IS ONLY LESSEE OF THE PROPERTY DEPRECIATION CLAIMED ON LEASED PROPERTY HAS TO BE WITHDRAWN. IT IS A SETTLED LAW THAT ON THE BASIS OF MATERIAL, PRIMA FACIE, AVAILABLE BEFORE THE ASSESSING OFFICER, OPINED THAT INCOME CH ARGEABLE TO TAX HAS ESCAPED ASSESSMENT CAN BE FORMED. THE WORD REASON IN THE PHRASE REASON TO BELIEVE WOULD MEAN CAUSE OR JUSTIFICATI ON. IN CASE THE ASSESSING OFFICER HAS A CAUSE OR JUSTIFICATION TO K NOW OR SUPPOSE THAT INCOME HAS ESCAPED ASSESSMENT , ACTION U/S 148 CAN BE TAKEN. BUT I.T.A.NO. 374/04, 529/06, 222/09, 782/05 & 177/09. :- 20 -: OBVIOUSLY, THERE SHOULD BE RELEVANT MATERIAL ON WHI CH A REASONABLE MAN COULD HAVE FORMED A REQUISITE BELIEF. WHETHER T HIS MATERIAL(S) WOULD CONCLUSIVELY PROVE THE ESCAPEMENT OF INCOME I S NOT THE CONCERN AT THAT PARTICULAR STAGE. SO WHAT IS REQUIRED IS TH E SUBJECTIVE SATISFACTION OF THE ASSESSING OFFICER BASED ON OBJE CTIVE MATERIAL EVIDENCE. IN THE GIVEN CASE, ASSESSMENT WAS COMPLET ED ON 28.03.2003. THE REASON WAS RECORDED AS DISCUSSED AB OVE. THE ARGUMENT OF THE LD.AR IS THAT U/S 147 IN CASE THE A SSESSMENT ORDER IS COMPLETED U/S 143(3), AS HAS BEEN DONE IN THIS CASE , NO ACTION COULD BE TAKEN AFTER THE EXPIRY OF FOUR YEARS FROM THE EN D OF THE RELEVANT ASSESSMENT YEAR UNLESS THE ASSESSEE HAS DISCLOSED F ULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT FOR THA T ASSESSMENT YEAR, INTER ALIA. 14. AS SEEN FROM THE REASONS RECORDED, GIVE A CL EAR PICTURE THAT THE ASSESSING OFFICER HAS GOT MATERIAL EVIDENCE TO FORM HIS OPINION FOR TAKING RECOURSE TO SECTION 147 R.W.S 148 OF THE ACT . THERE CANNOT BE TWO OPINIONS. THE POINT OF TIME WHEN THE REASONS AR E RECORDED AFTER FORMING OPINION OF ESCAPEMENT OF INCOME IS ONLY R ELEVANT. HENCE, THIS PLEA OF THE LD.AR IS NOT TENABLE IN THE EYES OF LAW . IT IS TRUE THAT U/S 147, THE ASSESSING OFFICER CAN EITHER ASSESS OR RE- ASSESS BUT FOR TAKING I.T.A.NO. 374/04, 529/06, 222/09, 782/05 & 177/09. :- 21 -: ACTION THEREUNDER, HE HAS TO RECORD REASONS THAT IN COME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT . IT IS ALSO MANDATED BY SECTION 148(2) TO RECORD REASONS IN WRITING. THE REASSESSMENT PROCEED INGS U/S 147 ARE FURTHER SUBJECT TO SECTIONS 148,149,150,151,152 AND 153. BUT IN THE PRESENT CASE, WE ARE REQUIRED TO DECIDE THE LIMITED ISSUE REGARDING THE VALIDITY OF PROCEEDINGS UNDERTAKEN AFTER FOUR YEARS OF THE ASSESSMENT YEAR IN QUESTION. THE ASSESSING OFFICER IS REQUIRE D TO SEE IF THE CONDITIONS LAID IN EXPLANATION 2(C) BECAUSE IN THIS CASE THE ASSESSMENT WAS COMPLETED U/S 143(3) ARE SATISFIED OR NOT. IN C ASE, (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDER ASSESSED; OR (II) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW RATE; OR(III) SUCH INCOME HAS BEEN MADE THE SUBJECTIVE OF EXCESS RELIEF UNDER THIS ACT; OR (IV) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED, THE ASSESSING OFFICER WOULD HAVE VALID CO GNIZANCE U/S 147 OF THE ACT. THE REASONS RECORDED BY THE ASSESSING O FFICER CLEARLY SPEAK FOR THE UNDER ASSESSMENT OF TAX HENCE, THE CONDITIO NS LAID ABOVE STAND FULFILLED IN SO FAR AS RE-ASSESSMENT PROCEEDINGS AR E CONCERNED. IN SO FAR AS THE REASONS RECORDED, EXTRACTED IN THE ABOVE PORTION OF THIS ORDER, WE ARE SATISFIED THAT THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. THIS F ACT CONFERS JURISDICTION ON HIM TO REOPEN THE ASSESSMENT. THE P OWER TO RE-ASSESS I.T.A.NO. 374/04, 529/06, 222/09, 782/05 & 177/09. :- 22 -: POST 1ST APRIL, 1989 ARE MUCH WIDER THAN THESE USED TO BE BEFORE. BUT STILL THE SCHEMATIC INTERPRETATION OF THE WORDS RE ASON TO BELIEVE FAILING WHICH SECTION 147 WOULD GIVE ARBITRARILY POWERS TO THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT ON THE BASIS OF ME RE CHANGE OF OPINION, WHICH CANNOT BE, PER SE A REASON TO REOPE N THE CASE. THE ACT HAS NOT GIVEN POWER TO THE ASSESSING OFFICER TO REV IEW BUT HAS ONLY GIVEN POWER TO RE-ASSESS. THERE IS A CONCEPTUAL DIF FERENCE BETWEEN THE TWO ASPECTS AS THE ASSESSING OFFICER HAS NO POW ER AT ALL TO REVIEW THE ASSESSMENT. THE REASSESSMENT, AS STATED ABOVE, HAS TO BE BASED ON FULFILLMENT OF CERTAIN PRE-CONDITIONS BUT THE CO NCEPT CHANGE OF OPINION HAS TO BE TAKEN INTO CONSIDERATION OTHERWI SE IT MAY GIVE UNBRIDLED POWER TO AN ASSESSING OFFICER TO REOPEN A NY AND EVERY ASSESSMENT ORDER WHICH WOULD SIMPLY AMOUNT TO A REV IEW. THE CONCEPT CHANGE OF OPINION IS AN IN-BUILT TEST TO CHECK THE ABUSE OF POWER BY THE ASSESSING OFFICER. SO, NOW ONLY WHEN T HE ASSESSING OFFICER HAS A TANGIBLE MATERIAL TO BASE HIS CONCLUS ION THAT THERE IS AN ESCAPEMENT OF INCOME FROM ASSESSMENT AND THE REASON S RECORDED HAVE A LINK WITH THE FORMATION OF HIS BELIEF, HE HA S THE POWER U/S 147 OF THE ACT. I.T.A.NO. 374/04, 529/06, 222/09, 782/05 & 177/09. :- 23 -: 15. NOW THE MOST MATERIAL PART WHICH WAS ARGUED BY THE LD.AR IS REGARDING THE TIME LAG WHICH IS PROVIDED IN FIRST P ROVISO TO SECTION 147 WHICH STATES THAT WHERE AN ASSESSMENT U/S SUB-SECTI ON(3) OF SECTION 143 HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, WHICH IS 2002- 03, IN THIS CASE, NO ACTION SHALL BE TAKEN U/S 147 AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY THE REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR. THERE ARE TWO OTHER CONDITIONS WHICH ARE NOT RELEVANT FOR DECIDING THE LEGAL ISSUE UNDER APPEAL. WE HAVE TO SEE AS TO WHAT FAILURE OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS SIGNIFY. THE EXPRESSION F AILURE TO DISCLOSE MATERIAL FACTS HAS BEEN EXPLAINED IN THE TAXMANS DIRECT TAXES MANUAL VOLUME 3. IT IS TRUE THAT EVERY DISCLOSURE IS NOT AND CANNOT BE TREATED TO BE A TRUE AND FULL DISCLOSURE. A DISCLOS URE CAN BE EVEN FALSE OR TRUE. IT MAY BE A FULL DISCLOSURE OR IT MAY NOT BE A FULL ONE. A PART DISCLOSURE MANY A TIMES MAY BE MISLEADING ONE. WHAT IS REQUIRED UNDER THE LAW IS A FULL AND TRUE DISCLOSURE OF ALL MATERIAL FACTS NECESSARY FOR MAKING ASSESSMENT FOR THAT YEAR. THIS LAW WAS LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF SRI KRISHNA PVT. LTD ETC VS I.T.A.NO. 374/04, 529/06, 222/09, 782/05 & 177/09. :- 24 -: ITO & OTHERS, 221 ITR 538. THE WORDS OMISSION OR FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR AS SESSMENT FOR THAT YEAR POSTULATES A FAILURE OF THE ASSESSEE TO DISCLOSE FU LLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT. WHAT FACTS ARE MATERIAL AND NECESSARY FOR ASSESSMENT WILL DIFFER FROM CAS E TO CASE. THE MATERIAL SHOULD NOT ONLY BE FULL BUT ALSO BE TRUE. IF SOME MATERIAL FOUND IN THE EVIDENCE PRODUCED BEFORE THE ASSESSING OFFICER WHICH THE ASSESSING OFFICER COULD HAVE UNCOVERED BUT DID NOT, THEN IT IS THE DUTY OF THE ASSESSEE TO BRING IT TO THE NOTICE OF THE AS SESSING AUTHORITY. THIS OMISSION OR FAILURE MAY BE EITHER DELIBERATE, OR EV EN INADVERTENT, THAT IS IMMATERIAL, BUT IN CASE THERE IS OMISSION TO DIS CLOSE THE MATERIAL FACTS THEN SUBJECT TO THE OTHER CONDITIONS JURISDIC TION TO REOPEN IS ATTRACTED. 16. IN THE PRESENT CASE, THE ASSESSEE HAS BEEN CLAIMED EXPENDITURE INCURRED ON LOOSE TOOLS AS CAPITAL EXPENDITURE AND CLAIMING DEPRECATION AT 25% IN EARLIER YEARS. SUDDENLY DURING THE ASSES SMENT YEAR UNDER CONSIDERATION THE ASSESSEE CHANGED ITS POLICY AND C LAIMED IT AS REVENUE EXPENDITURE WITHOUT ANY REASON. IN OUR OPI NION, THE ASSESSEE CANNOT CHANGE THE ACCOUNTING POLICY SUDDENLY AND TH AT REASON FOR CHANGE OF ACCOUNTING POLICY HAS NOT BROUGHT TO THE NOTICE OF THE I.T.A.NO. 374/04, 529/06, 222/09, 782/05 & 177/09. :- 25 -: ASSESSING OFFICER. FURTHER, IT IS ALSO TO BE NOTED THAT SITUATION WHICH WARRANT CHANGE OF ACCOUNTING POLICY IS NOT SUBSTANT IATED. AS PER EXPLANATION 2 OF SECTION147 IT IS VERY CLEAR THAT D UE TO EXCESSIVE CLAIM OF THE ASSESSEE, THE INCOME CHARGEABLE TO TAX HAD E SCAPED ASSESSMENT. THE ASSESSEE HAS NOT PRODUCED ANYTHING BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) TO SHOW AS TO HOW THIS FACT WAS FULLY AND TRULY DISCLOSED BEFORE THE ASSESSING AUTHORITY AND THAT THERE WAS NOT FAILURE ON THE PART OF ASSESSEE, ESPE CIALLY WHEN IT HAS BEEN CLAIMING IT AS PART OF PLANT & MACHINERY AND S UDDENLY IT DECIDES TO CLAIM IT AS REVENUE EXPENDITURE. HENCE, THE COM MISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE ACTION OF THE A SSESSING OFFICER IS FULLY COVERED BY THE PROVISIONS OF EXPLANATION 1 TO SECTION 147 OF THE INCOME TAX ACT WHICH READS AS UNDER: PRODUCTION BEFORE THE ASSESSING OFFICER OF ACCOUN TS BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COUL D WITH DUE DILIGENCE HAVE BEEN DISCOVERED BY THE ASSESSING OFFICER WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE FOREGOING PROVISO. IT IS POSSIBLE THAT WITH DUE DILIGENCE THE ASSESSI NG OFFICER WOULD HAVE ASCERTAINED THIS FAT AT THE TIME OF ORIGINAL ASSESS MENT ALSO, BUT IN VIEW OF THE EXPLANATION (1) IT DOES NOT MEAN THAT THERE WAS NO DEFAULT ON THE PART OF THE ASSESSEE. HENCE, REOPENING U/S.147 IS HELD TO BE VALID. THE ASSESSEE HAS TRIED TO TAKE SHELTER UNDER THE EX CEPTION PROVIDED BY I.T.A.NO. 374/04, 529/06, 222/09, 782/05 & 177/09. :- 26 -: THE ABOVE STATED PROVISO WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 HAS BEEN COMPLETED, NO ACTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR CAN BE TA KEN. BUT AS STATED ABOVE, WHEN THE ASSESSEE HAS NOT DISCLOSED FULLY AN D TRULY THE FACTS NECESSARY FOR THE ASSESSMENT , THIS PROVISO WILL NO T COME TO ITS RESCUE. SAME IS APPLICABLE TO OTHER REASONS RECORDS FOR REO PENING OF ASSESSMENT. CONSEQUENTLY, WE HOLD THAT THE ENTIRE R EASSESSMENT PROCEEDING IN THIS CASE IS VALID AND THEREFORE, THE ACTION OF THE ASSESSING OFFICER IS UPHELD. THE ASSESSEE FAILS ON THIS LEGAL ISSUE. 17. THE SECOND GROUND IN ITA NO. 177/MDS/2009 APPE AL IS THAT COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT LOOSE TOOLS WOULD ONLY PARTAKE OF THE CHARACTER OF CONSUMABLES IN REGARD TO AN ASSESSEE COMPARABLE TO THE ASSESSEE. 17.1 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THIS CASE, THE ASSESSEE HA S BEEN CLAIMING LOOSE TOOLS AS CAPITAL EXPENDITURE AND CLAIMING DEPRECATI ON AT 25%. SUDDENLY IN THE ASSESSMENT YEAR UNDER CONSIDERATION THERE WAS A CHANGE IN THE ACCOUNTING POLICY WITHOUT ANY REASON. EVEN BEFORE US, THE ASSESSEE WAS NOT ABLE TO FURNISH ANY REASON FOR CHANGE IN ACCOUNTING POLICY. IN THE CASE OF GUJARAT SMALL SCALE INDUSTRIES I.T.A.NO. 374/04, 529/06, 222/09, 782/05 & 177/09. :- 27 -: CORPORATION LTD VS. CIT 142 ITR 35(GUJARAT HC) , WHEREIN HELD THAT THE TRIBUNAL PERFECTLY JUSTIFIED IN TAKING THE VIEW THA T THE JIGS AND FIXTURES WERE PART OF THE PLANT AND MACHINERY. THE DEDUCTIO N WAS CLAIMED ON THE GROUND THAT THE TOOLS, JIGS AND FIXTURES WERE L OSING THEIR UTILITY FAST. IT, THEREFORE, AMOUNTED TO A CLAIM FOR DEPRECIATION . THE RATE OF DEPRECATION COULD NOT BE CLAIMED AS FIXED BY THE AS SESSEES EXPERT. IT COULD BE CLAIMED ONLY AT THE PRESCRIBED RATE, I.E. AT THE GENERAL RATE OF 10%. THE TRIBUNAL WAS JUSTIFIED IN DISALLOWING THE CLAIM OF THE ASSESSEE. THE COMMISSIONER OF INCOME TAX(A) IN THI S CASE FOLLOWED THE ABOVE JUDGMENT. BEING SO, WE DO NOT FIND ANY I NFIRMITY IN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). THIS GROUND OF THE ASSESSEE IS REJECTED. 18 THE NEXT GROUND IN ITA NO.782/2005 IS WITH REGARD F AILURE TO DEDUCT TAX AT SOURCE ON PAYMENTS MADE UNDER THE SUP PLY CONTRACT. 19 THE FACTS OF THE CASE RELATES TO THE JURISDICTION O F THE INCOME TAX OFFICER, TDS WARD-I, CUDDALORE (TDS AUTHORITY) IN PASSING THE IMPUGNED ORDER. THE ASSESSEE HAS STATED THAT THE TD S AUTHORITY HAD CONSIDERED THE ISSUE OF DEDUCTIBILITY OF TAX AT SOU RCE IN RESPECT OF PAYMENTS MADE TO ANSALDO FLOWING FROM ALL THE FOUR CONTRACTS MENTIONED ABOVE WHILE PASSING THE ORDER DATED 24.12 .2004 U/S.201 I.T.A.NO. 374/04, 529/06, 222/09, 782/05 & 177/09. :- 28 -: OF INCOME TAX ACT. ACCORDING TO THE ASSESSEE, SINCE THE TDS AUTHORITY HAD ALREADY APPLIED HIS MIND TO ALL THE F OUR CONTRACTS AS FAR AS THE ISSUE OF TDS WAS CONCERNED, HE COULD NOT HAV E REOPENING THE ISSUE AGAIN AND COUNT NOT HAVE PASSED THE IMPUGNED ORDER DATED 18.02.2005. IT HAS ALSO STATED THAT THERE WAS NO P ROVISION FOR REOPENING THE TDS PROCEEDINGS UNDER CHAPTER XVII OF INCOME TAX ACT SIMILAR TO SECTIONS 147/148 IN RESPECT OF ASSES SMENT PROCEEDINGS. ACCORDING TO THE ASSESSEE AT THE BEST THE TDS AUTHO RITY COULD HAVE RESTORED TO SECTION 154 FOR RECTIFICATION OF MISTAK E, IF ASST. YEAR IN THE ORDER DATED 24.12.2004. THE TDS AUTHORITY IN HIS ORDER, HOWEVER, HAS MENTIONED THAT THE ORDER DATED 24.12.2004 WAS C ONFINED ONLY TO PAYMENTS EMANATING FROM CONTRACT NO.II AND THE REFE RENCE TO ALL OTHER CONTRACTS NAMELY CONTRACT NO.I, CONTRACT NO.I II AND CONTACT NO.IV WAS ONLY BY WAY OF PREAMBLE FOR THE PURPOSE O F SETTING FORTH THE COMPLETE FACTS OF THE CASE. HE HAS ALSO STATED THAT THE CONCEPT OF ESTOPPELS WAS NOT APPLICABLE TO INCOME TAX PROCE EDINGS. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). 20 THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT HE AGREE WITH THE TDS AUTHORITY THAT THE ORDER DATED 2 4.12.2004 RELATED I.T.A.NO. 374/04, 529/06, 222/09, 782/05 & 177/09. :- 29 -: ONLY TO THE PAYMENTS EMANATING FROM CONTRACT NO.II AND REFERENCE TO ALL OTHER CONTRACTS INCLUDING CONTRACT NO.I WAS ONL Y TO BRING OUT COMPLETE FACTS OF THE CASE ON RECORD. THE PROVISI ONS OF SEC.195 ARE APPLICABLE TO EACH PAYMENT MADE TO THE NON NON-RESI DENTS. SEC.154 WOULD HAVE BEEN APPLICABLE ONLY IF THERE WAS A MIST AKE IN ORDER DATED 24.12.2004 OF THE TDS AUTHORITY INSPECT OF SAME PAY MENTS (I.E RELATING TO CONTRACT NO.II). HOWEVER, THE IMPUGNED ORDER RELATES TO PAYMENTS EMANATING FROM CONTRACT NO.I. SINCE THERE WAS NO ORDER IN RELATION TO PAYMENTS MADE UNDER CONTRACT NO.I, THE QUESTION OF RECTIFICATION OR REOPENING OR REVISITING OF EARLI ER ORDER DOES NOT ARISE. THEREFORE , THE HE DO NOT FIND ANY MERIT I N THE ASSESSEES ARGUMENT THAT THE TDS AUTHORITY LACKED JURISDICTION IN PASSING THE IMPUGNED ORDER. AGAINST THIS, THE ASSESSEE PREFERR ED AN APPEAL BEFORE US . 21 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MA TERIAL ON RECORD. THE LD. AUTHORISED REPRESENTATIVE FOR ASSE SSEE OBSERVED THAT LEVY OF INTEREST U/S.201(1A) DEPENDS ON THE I NCOME COMPUTED IN THE CASE OF RECIPIENT AS WELL AS DATE OF FILING O F THE RETURN OF THE RECIPIENT. IT WAS BROUGHT TO OUR NOTICE THAT THE A PPEAL OF THE ASSESSEE FOR DETERMINING THE INCOME ACCRUING IN IND IA IS PENDING I.T.A.NO. 374/04, 529/06, 222/09, 782/05 & 177/09. :- 30 -: BEFORE APPELLATE AUTHORITIES/COURT. IN VIEW OF THI S, WE REMIT THIS ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO RE-COM PUTE THE INTEREST U/S.201(1A) AFTER VERIFYING THE RETURN OF RECIPIENT AND ALSO IN THE LIGHT OF JUDGMENT OF SUPREME COURT IN THE CASE OF CIT VS. HINDUSTAN COCA- COLA BEVERAGES (P) LTD, 293 ITR 226 (SC), WHEREIN HELD THAT WHERE THE PAYEE HAS ALREADY PAID TAX ON THE INCOME ON WHI CH THERE WAS A SHORT DEDUCTION OF TAX AT SOURCE, RECOVERY OF TAX C ANNOT BE MADE ONCE AGAIN FROM THE TAX DEDUCTOR. THIS ISSUE IS REMITTED BACK TO THE FILE OF ASSESSING OFFICER FOR FRESH CONSIDERATION. 22 IN THE RESULT, THE REVENUES APPEALS IN ITA NOS.374 /2004, 529/2006 & 222/2009 AND ASSESSEES APPEAL IN ITA NO .177/2009 ARE DISMISSED AND THE ASSESSEES APPEAL IN ITA NO.782/2 005 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON FRIDAY, THE 26TH DAY OF JUNE, 2 015, AT CHENNAI. SD/- SD/- ! . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( ! ) (CHANDRA POOJARI) ' / ACCOUNTANT MEMBER #$ /CHENNAI. %& /DATED:26.06.2015. KV &' () *) /COPY TO: 1. + APPELLANT 2. / RESPONDENT 3. , ( )/CIT(A) 4. , /CIT 5. )-. / /DR 6. .0 1 /GF. I.T.A.NO. 374/04, 529/06, 222/09, 782/05 & 177/09. :- 31 -: