The ACIT, GNR Circle, Gandhinagar V. Gujarat State Energy Generation Ltd., Gandhinagar

ITA 1777/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6846 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 07-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 28-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Business income; Depreciation; Notional interest; Revised return
• Section: 43B; 234B; 14A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : B BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HON' BLE SHRI N.S.SAINI, A.M. ) I.T.A. NO. 1777/AHD./2009 : ASSESSMENT YEAR 2006-2007 A.C.I.T., GNR. CIRCLE, GANDHINAGAR -VS- G UJARAT STATE ENERGY GENERATION LTD. (PAN: AABCG 1359A) (APPELLANT) (RESPONDENT) I.T.A. NO. 2028/AHD./2009 : ASSESSMENT YEAR 2006-2007 GUJARAT STATE ENERGY GENERATION LTD. VS- A.C.I.T., GNR. CIRCLE, GANDHINAGAR DEPARTMENT BY : SHRI K. MADHUSUDAN, SR.D.R ASSESSEE BY : SHRI S.N. SOPARKA R, SR. ADV. & DR. PANKAJ R. SHAH O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THESE CROSS APPEALS FILED BY THE REVENUE AND THE A SSESSEE ARE AGAINST THE ORDER DATED 31.03.2009 PASSED BY THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS), GANDHINAGAR FOR THE ASSESSMENT YEAR 2006-2007. 2. THE VARIOUS GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 1. THE LD.CIT(A) WAS NOT JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE ASSESSEE DEPRECIATION AS PER WDV METHOD AS THE ASS ESSEE OPTED FOR STRAIGHT LINE METHOD BEFORE THE DUE DATE OF FILING OF RETURN U/S .139(1) OF THE INCOME TAX ACT, 1961 AND SUCH OPTION WAS FINAL AND APPLICABLE TO ALL SU BSEQUENT ASSESSMENT YEARS. 2. IN VIEW OF THE FACT THAT THE ASSESSMENT ORDER S IN EARLIER YEARS HAVE BEEN CONFIRMED BY THE C1T(A), THE LD.CIT(A) WAS NOT JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE OSSESSEE'S CLAIM OF DEPRECIATION AS PER WDV METHOD IN THE A.Y.2006-07. 3. THE LD.CIT(A) WAS NOT JUSTIFIED IN DELETING T HE ADDITION OF RS.19,29,184/-, MADE ON ACCOUNT OF EARLIER YEAR EXPENSES. 4. THE LD.CIT(A) WAS NOT JUSTIFIED IN DELETING T HE ADDITION OF RS.6,00,000/- MADE TO THE BOOK PROFIT ON ACCOUNT OF DISALLOWANCE OF INTE REST EXPENSES U/S.14A OF THE INCOME TAX ACT. 2 ITA NO. 1777&2028-AHD-2009 5. THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.1,30,000/-MADE TO THE BOOK PROFIT ON ACCOUNT OF INTEREST ON INVESTME NT IN BONDS. 6. THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS,19 R 29,184/-MADE TO THE BOOK PROFIT ON ACCOUNT OF PRIOR PERIOD EXPENSE S. 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LD. CIT(A) OUGHT TO HA VE UPHELD THE ORDER OF THE ASSESSING OFFICER. 3. AT THE OUTSET, SHRI S.N.SOOPARKAR, APPEARED ON B EHALF OF THE ASSESSEE AND WITH REGARD TO GROUND NOS. 1 AND 2, POINTED OUT THAT IN THE IMP UGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS FOLLOWED THE DECISION DATED 03.03.2009 OF ITAT, A BENCH, AHMEDABAD IN ASSESSEES OWN CASE IN ITA NO.1271/A/2 006 FOR THE ASSESSMENT YEAR 2002-03. THEREFORE, THE VIEW TAKEN BY THE LEARNED COMMISSION ER OF INCOME TAX(APPEALS), WHICH IS IN CONFORMITY WITH THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE BE UPHELD. 4. SHRI K. MADHUSUDAN, SR. D.R., APPEARING FOR THE REVENUE, COULD NOT CONTROVERT THE AFORESAID SUBMISSIONS MADE BY THE LD. COUNSEL OF TH E ASSESSEE . 5. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT IN THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS FOLLOWED TH E DECISION DATED 03.03.2009 OF ITAT, A BENCH, AHMEDABAD IN ASSESSEES OWN CASE ( SUPRA ). AS PER PARA 17.1 AT PAGE 12, THE ITAT OBSERVED AS UNDER: 'FROM THE AFORESAID RULING OF HON'BLE SUPREME COUR T, IT CAN BE HELD THAT WHERE THE ASSESSEE IN REQUIRED TO EXERCISE AN OPTION BEFORE A PARTICULAR DATE AND THUS SUCH OPTION IS EXERCISED IN THE ORIGINAL RETURN, YET IF THE ASSESSEE FILES A VALID REVISED RETURN, THE OPTION CANNOT HE SAID TO HAVE BEEN EXE RCISED AND HE WILL HAVE RIGHT TO CHANGE HIS OPTION BY FILING AFRESH AND REVISED RET URN BEFORE THE ASSESSMENT IS MADE FOR THAT YEAR, IN VIEW OF THIS, IT CAN BE HELD THA T THE OPTION EXERCISED BY THE ASSESSEE IN RESPECT OF CLAIM ON DEPRECIATION ON SLM METHOD GET S SUBSTITUTED BY THE OPTION OF CLAIM OF DEPRECIATION AS PER WDV METHOD. ACCORDING LY, THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE DEPRECIATION ON THE BASIS OF REVISED CLAIM MADE M THE REVISED RETURN.' 5.1 FOLLOWING THE DECISION OF THE ITAT IN ASSESSEE S OWN CASE ( SUPRA ) FOR THE ASSESSMENT YEAR 2002-03, THE LEARNED COMMISSIONER OF INCOME TA X(APPEALS) HAS DIRECTED THE 3 ITA NO. 1777&2028-AHD-2009 ASSESSING OFFICER TO RECOMPUTED THE DEPRECIATION, A S PER WDV METHOD. SINCE THE VIEW TAKEN BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IS IN CONFORMITY WITH THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSM ENT YEAR 2002-03 ( SUPRA ), WE ARE INCLINED TO UPHOLD THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). THUS, GROUND NOS. 1 AND 2 OF THE REVENUES APPEAL ARE REJECTED. 6. THE FACTS RELATING TO CONTROVERSY INVOLVED IN GR OUND NO.3 IS THAT IN THE IMPUGNED ORDER VIDE PARA 6.3 AT PAGE 8, THE LEARNED COMMISSI ONER OF INCOME TAX(APPEALS) HELD THAT FOLLOWING PRIOR PERIOD EXPENSES SHOULD BE ALLOWED. SR. NO. DATE AMOUNT (RS.) PARTICULARS JUSTIFICATION 1. 07/07/2005 1,40,430 PURCHASE OF SPARE PARTS THIS IS THE AMOUNT OF PURCHASE OF SPARES FOR AIR- COMPRESSOR, SOME MATERIAL FOR WHICH WAS RECEIVED ON 14/10/2005 , THOUGH THE BILLS FOR THE SAME WERE RECEIVE D BEFORE 31/12/2004. SINCE THE MATERIAL RECEIVED WAS IN THE YEAR UNDER CONSIDE RATION, THE LIABILITY TO PAY ALSO CRYSTALLIZED IN THE YEAR AND THEREFORE THE SAME IS DEDUCTIBLE. 2. 22/08/2005 17,558 AMOUNT PAID TO CONTRACTOR THIS IS THE AMOUNT WE PAID TO MR. U.P SINGH WHICH WAS IN RESPECT OF SOME WORK DONE B Y THEM FOR WHICH THE DISPUTES WERE SETTLED ON 22-08- 05 AND HENCE CLAIMED AS EXPENSES FOR ASST. YEAR 2006-07. 4. 21/12/2005 3,83,379 PURCHASE OF GAS FROM GSPCL. THIS IS T HE AMOUNT PAYABLE TO GUJARAT STATE PETROCHEMICAL CO. LTD. IN RESPECT OF FUEL USED BY COMPRESSOR AND FOR HIGH VALUE OF N.C.V. FOR THE PERIOD 1-06-2003 TO 15-06- 2003 FOR WHICH THE SETTLEMENT TOOK PLACE FOR TH E YEAR UNDER CONSIDERATION AND HENCE CLAIMED ACCORDINGLY 4 ITA NO. 1777&2028-AHD-2009 5. 31/03/2006 84,126 SERVICE TAX RECOVERED BY HDFC BANK BY DEBIT TO OUR ACCOUNT. THIS IS THE AMOUNT OF SERVICE TAX DEDUCTED BY BANK IN OUR ACCOUNT IN RESPECT OF THE PAST SERVICES FOR WHICH THEY HAD FORGOTTEN TO COLLECT SERVICE TAX FROM US, IN ANY CASE, THIS AMOUNT BEING DEDUCTIBLE U/S.43B ON PAYMENT MADE, THE SAME HAS TO BE ALLOWED FROM THE PROFIT FOR THE YEAR UNDER CONSIDERATION BEING THE YEAR OF PAYMENT. 7. AT THE TIME OF HEARING BEFORE US, THE LD. D.R. P OINTED OUT THAT THE ASSESSEE IS MAINTAINING ITS ACCOUNT ON MERCANTILE BASIS. THEREF ORE, THE AFORESAID FOUR ITEMS WERE RIGHTLY DISALLOWED BY THE ASSESSING OFFICER AS PRIOR PERIOD EXPENSES AND LD. CIT(A) IS NOT JUSTIFIED IN DELETING THE SAID DISALLOWANCES. 8. ON THE OTHER HAND, SHRI K. MADHUSUDAN, SR.D.R, A PPEARING FOR THE REVENUE, POINTED OUT THAT AMOUNT MENTIONED AGAINST PURCHASE OF SPARE PARTS, AMOUNT PAID TO CONTRACTORS AND PURCHASE OF GAS FROM GSPCL WERE CRYSTALLIZED IN THE PREVIOUS YEAR, RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL. THEREFORE, THE LEARNE D COMMISSIONER OF INCOME TAX(APPEALS) IS LEGALLY AND FACTUALLY CORRECT IN AL LOWING THE SAME. WITH REGARD TO SERVICE TAX AMOUNTING TO RS.84,126/-, THE COUNSEL OF THE ASSESS EE POINTED OUT THAT THIS IS THE AMOUNT OF SERVICE TAX DEDUCTED BY THE BANK, IN RESPECT OF PAS T SERVICES. THIS AMOUNT IS DEDUCTIBLE UNDER SECTION 43B ON PAYMENT MADE AND THE SAME HAS TO BE ALLOWED FROM THE PROFIT FOR THE YEAR UNDER CONSIDERATION, BEING THE PAYMENT MADE IN PREV IOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL. 9. AFTER HEARING BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT IN PARA 6.2 OF THE IMPUGNED ORDER AGAINST EACH AND EVERY ITEM, JUSTIFICATION FOR ALLOWANCE OF PRIO R PERIOD EXPENSES IS MENTIONED. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), AFTER APPRECIATING THE FACTS THAT ITEM NOS.1,2 AND 4 WERE CRYSTALLIZED IN THE PREVIOUS YEA R, RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL, HELD THAT THESE ARE ALLOWABLE. WITH REGARD TO ITEM NO.5 I.E., SERVICES TAX RECOVERED AMOUNTING TO RS.84,126/-, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), IN THE 5 ITA NO. 1777&2028-AHD-2009 IMPUGNED ORDER, ACCEPTED THE PLEA OF THE ASSESSEE T HAT THE SAME IS DEDUCTIBLE UNDER SECTION 43B OF THE I.T. ACT. THE VIEW TAKEN BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IS LEGALLY AND FACTUALLY CORRECT. WE, THEREFORE, DE CLINE TO INTERFERE. HENCE, GROUND NO.3 OF THE REVENUES APPEAL IS REJECTED. 10. WITH REGARD TO CONTROVERSY INVOLVED IN GROUND N OS.4,5 AND 6, BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), IT WAS CONTEND ED BY THE LD. COUNSEL FOR THE ASSESSEE THAT WHILE COMPUTING THE BOOK PROFIT UNDER SECTION 115JB, AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF APOLLO TYRES REPORTED IN 255 I TR 273, THE ADDITIONS MADE (A) ON ACCOUNT OF DISALLOWANCE U/S.14A RS.6,00,000/-, (B) INTERE ST ON INVESTMENT IN BONDS RS.1,30,000/- AND (C) PRIOR PERIOD EXPENSES RS.19,29,184/- ARE BEYOND THE SCOPE OF EXPLANATION TO SECTION 115JB. WITHOUT PREJUDICE TO THIS, IT WAS AL SO CONTENDED THAT INTEREST ON INVESTMENT IN BONDS AMOUNTING TO RS.1,30,000/- STOOD ALREADY INCL UDED IN THE BOOK PROFIT AS COMPUTED IN PROFIT & LOSS A/C. AND HENCE COULD NOT HAVE BEEN CO MPUTED IN THE BOOK PROFIT. AFTER CONSIDERING BOTH THE SIDES, IN THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) TOOK THE VIEW THAT DISALLOWANCE UNDER SECTION 14A AND ADDITION OF RS.1,30,000/- TO THE BOOK PROFIT CANNOT BE MADE FOR THE DETAILED REASONS GIVEN IN PARA 7.2, WHICH READS AS UNDER: 7.2 THE MATTER HAS BEEN CONSIDERED. THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF APOLLY TYRES (SUPRA) IS QUITE UNAMBIGUOUS. ONLY SUCH ITEMS WHICH ARE SPECIFICALLY MENTIONED IN THE EXPLANATION TO SECTI ON 115JB NEED TO BE EXCLUDED OR INCLUDED, AS THE CASE BE, AND NOTHING MORE CAN BE BROUGHT IN. ALL THE THREE ITEMS LISTED ABOVE DO NOT FEATURE IN THE EXPLANATION. OT HERWISE, THE DISALLOWANCE U/S.14A WOULD BE MATERIAL IN COMPUTATION OF THE NORMAL PRO CESS OF INCOME WHILE THE SECOND ITEM INTEREST ON INVESTMENT IN BONDS STANDS ALREAD Y INCLUDED IN THE BOOK PROFIT. AS FAR AS THE PRIOR PERIOD EXPENSES ARE CONCERNED, THERE IS NO SUCH MENTION IN THE EXPLANATION. THE ASSESSMENT ORDER ON THE OTHER HAN D IS SILENT AS TO UNDER WHICH CATEGORY IT IS BEING INCLUDED FOR THE MATTER TO BE FURTHER ANALYSED. THEREFORE, AS THE MATTER STANDS, NONE OF THE THREE ITEMS CAN BE ADDE D FOR COMPUTATION OF BOOK PROFIT. 11. AT THE TIME OF HEARING BEFORE US, THE LD. D.R. COULD NOT POINTED OUT HOW THE VIEW TAKEN BY THE LEARNED COMMISSIONER OF INCOME TAX(APP EALS) IS NOT ACCEPTABLE. WE ARE, THEREFORE, INCLINED TO UPHOLD THE ORDER OF THE LEAR NED COMMISSIONER OF INCOME TAX(APPEALS). THUS, GROUND NOS. 4, 5 AND 6 OF THE R EVENUES APPEAL ARE REJECTED. 6 ITA NO. 1777&2028-AHD-2009 12. NOW WE TAKE UP THE ASSESSEES APPEAL. THE VARIO US GROUNDS RAISED BY THE ASSESSEE IN ITS APPEAL ARE AS UNDER: I) THAT THE LD. CIT(A) ERRED IN DIRECTING A.O. TO D ISCUSS THE ISSUE OF ALLOWABILITY OF DEDUCTION U/S.80IA AND TO CONSIDER THE DECISION OF CIT VS. ELTEK SGP LTD. MAY KINDLY BE DELETED AND APPELLANT MAY BE GRANTED DEDUCTION U/S.80IA. THE OTHER INCOME SHOULD BE CONSIDERED AS BUSINESS INCOME WHILE CALCULATING DEDUCTION U/S.80IA. II) THAT THE LD. CIT(A) ERRED IN DIRECTING A.O. T O RE-COMPUTE THE DISALLOWANCE OF RS.6,00,000/- U/S.14A AS PER PROVISIONS OF RULE 8D MAY KINDLY BE DELETED. FURTHER, THE DISALLOWANCE U/S.14A AS RE-COMPUTED BY THE LD. ASSESSING OFFICER AS PER THE DIRECTIONS OF CIT(A) MAY KINDLY BE DELETED. (III) THAT THE LD. CIT(A) ERRED IN UPHOLDING THE D ECISION OF THE LD. A.O. REGARDING DISALLOWANCE OF PRIOR PERIOD EXPENSES RS.12,43,335 /- (INTEREST ON PUBLIC DEPOSIT RS.9,28,335/- AND PAID TO PWC FOR CARBON CREDIT A SSIGNMENT RS.3,15,000/-) BE DELETED. (IV) THAT THE LD. CIT(A) ERRED IN CONFIRMING THE LEVY OF INTEREST UNDER SECTION 234B AND RECOVERY OF INTEREST UNDER SECTION 244A. 13. WITH REGARD TO GROUND NO.1 OF THE ASSESSEES AP PEAL, WE HAVE HEARD BOTH THE SIDES. IN THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INC OME TAX(APPEALS) HELD THAT THERE IS NO POSITIVE INCOME, THEREFORE ASSESSEE IS NOT IN A POS ITION TO CLAIM DEDUCTION UNDER SECTION 80- IA IN THIS YEAR. FURTHER, IF SUITATION HAPPENS I.E. THERE IS POSITIVE INCOME FOR THIS YEAR, LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO DISCUSS TH E ISSUE OF ALLOWABILITY OF DEDUCTION UNDER SECTION 80IA AND TAKE INTO ACCOUNT THE DECISION O F CIT VS. ELTEK SGP LTD. BEFORE GIVING ANY CONCLUSION. AT THE TIME OF HEARING, LD. COUNSE L OF THE ASSESSEE COULD NOT POINT OUT WHAT IS THE INFIRMITY IN THE DIRECTIONS GIVEN BY THE LEA RNED COMMISSIONER OF INCOME TAX(APPEALS). WE, THEREFORE, DECLINE TO INTERFERE. HENCE, GROUND NO.1 OF THE ASSESSEES APPEAL IS REJECTED. 14. THE FACTS RELATING TO CONTROVERSY INVOLVED IN G ROUND NO.2 ARE THAT IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER, IN LINE WITH THE EAR LIER YEARS TREATMENT, DISALLOWED RS.6 LAKHS, BEING NOTIONAL INTEREST @12% ON INVESTMENT OF RS.50 LAKHS MADE BY THE ASSESSEE IN THE QUALITY SHARES. ON APPEAL, IN THE IMPUGNED ORDER, T HE LEARNED COMMISSIONER OF INCOME 7 ITA NO. 1777&2028-AHD-2009 TAX(APPEALS), FOLLOWING THE TRIBUNALS DECISION IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2002-03, DIRECTED THE ASSESSING OFFICER TO RE- COMPUTE THE DISALLOWANCE, AS PER THE PROVISIONS OF RULE 8D OF I.T. RULES OF 1962. AGGRIE VED, THE ASSESSEE IS IN APPEAL. 15. AT THE TIME OF HEARING, THE LD. COUNSEL OF THE ASSESSEE, RELYING ON THE LATEST JUDGEMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MANUFACTURING CO. LTD. VS- DCIT REPORTED IN 328 ITR 81, CONTENDED THAT RULE 8D IS NOT RETROSPECTIVE AND APPLIES FROM THE ASSESSMENT YEAR 2008-09. FOR EARLIER YEARS, DIS ALLOWANCE HAS TO BE WORKED OUT ON REASONABLE BASIS UNDER SECTION 14A(1). ON THIS BA SIS, HE CONTENDED THAT THE MATTER BE RESTORED TO THE FILE OF ASSESSING OFFICER WITH THE DIRECTION THAT HE SHOULD RE-WORK OUT THE DISALLOWANCE, KEEPING IN VIEW THE RATIO OF JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MANUFACTURING CO. LTD. ( SUPRA ) AND OTHER DECISIONS AVAILABLE AT THE TIME OF GIVING APPEAL EFFECT. 16. SHRI K.MADHUSUDAN, SR.D.R., APPEARING ON BEHALF OF THE REVENUE, COULD NOT CONTROVERT THE AFORESAID SUBMISSIONS OF THE LD. COU NSEL OF THE ASSESSEE. 17. WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF TH E AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT IN THE IMPUGNED ORDER, THE LEARNED COMMIS SIONER OF INCOME TAX(APPEALS) DIRECTED THE ASSESSING OFFICER TO RE-WORK OUT THE D ISALLOWANCE, AS PER RULE 8D, FOLLOWING THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2002-03. THE HON'BLE BOMBAY HIGH COURT, IN THE CASE OF GODREJ BOYCE MANU FACTURING CO. LTD. VS- DCIT REPORTED IN 328 ITR 81, HELD THAT RULE 8D IS NOT RE TROSPECTIVE AND APPLIES FROM THE ASSESSMENT YEAR 2008-09. FOR EARLIER YEAR, DISALLOW ANCE HAS TO BE WORKED OUT ON REASONABLE BASIS UNDER SECTION 14A(1). WE ACCORDINGLY SET ASID E THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ON THIS ISSUE AND RESTORE TH E MATTER BACK TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION THAT HE WILL RE-WORK OUT THE DISALLOWANCE UNDER SECTION 14A, KEEPING IN VIEW THE RATIO OF JUDGEMENT OF HON'BLE B OMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MANUFACTURING CO. LTD. ( SUPRA ). THE ASSESSING OFFICER IS AT LIBERTY TO CONSIDER ANY OTHER DECISION ON THIS ISSUE AVAILABLE AT THE TIME OF HEARING APPEAL EFFECT. 8 ITA NO. 1777&2028-AHD-2009 18. THE FACTS RELATING TO THE CONTROVERSY INVOLVED IN GROUND NO.3 ARE THAT IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER DISALLOWED PRIOR PERIOD EXPENSES AMOUNTING TO RS.19,29,184/-. IN THE IMPUGNED ORDER, VIDE PARA 6. 3, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CONFIRMED THE DISALLOWANCE OF FOLLOWIN G PRIOR PERIOD EXPENSES. (1) RS.20,276/- BEING WEALTH TAX PAYMENT AND HENCE NOT ALLOWABLE AS PER SECTION 40(A)(IIA). (2) RS.9,28,335/- BEING INTEREST PAYABLE ON PUBLIC DEPOSIT. THIS AMOUNT WAS SHORT PROVIDED BY THE APPELLANT IN THE YEAR IN WHICH BE ACCURED. HENCE CANNOT BE CLAIMED TO HAVE CRYSTALLIZED DURING THIS YEAR, AND CAN BE CHA RGED AGAINST THIS YEARS INCOME. (3) RS.3,15,000/- BEING WRITE OFF OF THE PAYMENT M ADE TO P.W.C. IN CONNECTION WITH CARBON CREDIT ASSIGNMENT. CLEARLY, THE ASSESSEE HA S CHANGED THE NATURE OF EXPENSES DURING THIS YEAR, FROM CAPITAL OR PRE-OPERATIVE TO REVENUE. HENCE THE SAME WOULD NOT FALL IN THE CATEGORY OF LIABILITY HAVING BEEN CRYS TALLIZED DURING THIS YEAR. 19. AT THE TIME OF HEARING BEFORE US, THE COUNSEL O F THE ASSESSEE COULD NOT DEMONSTRATE HOW THE AFORESAID EXPENSES ARE ALLOWABLE IN THE PRE VIOUS YEAR, RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL. IT IS PERTINENT TO NOTE THAT WEA LTH TAX OF RS.20,276/- IS NOT ALLOWABLE, KEEPING IN VIEW THE PROVISIONS CONTAINED IN SECTION 40(A)(IIA) OF THE INCOME-TAX ACT. THE OTHER TWO ITEMS I.E. RS.9,28,335/- AND RS.3,15,000/ - WERE NOT CRYSTALLIZED IN THE PREVIOUS YEAR, RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL. WE, THEREFORE, INCLINED TO UPHOLD THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APP EALS) ON THIS ISSUE. HENCE, GROUND NO.3 OF THE ASSESSEES APPEAL IS REJECTED. 20. WITH REGARD TO THE GROUND RAISED BY THE ASSESSE E RELATING TO LEVY OF INTEREST UNDER SECTION 234B, IT IS MANDATORY. HOWEVER, THE ASSESSI NG OFFICER WILL ALLOW CONSEQUENTIAL RELIEF IN LEVYING OF INTEREST UNDER THIS SECTION. FINALLY, WITH REGARD TO RECOVERY OF INTEREST UNDER SECTION 244A, NO SPECIFIC ARGUMENT WAS RAISED BEFOR E US. WE, THEREFORE, DECLINE TO INTERFERE. 9 ITA NO. 1777&2028-AHD-2009 21. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED WHEREAS THE APPEAL OF THE ASSESSEE IS TREATED AS PARTLY ALLOWED FOR STATISTIC AL PURPOSES. THE ORDER PRONOUNCED IN THE COURT ON 15.04.2011. SD/- SD/- (N.S.SAINI) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 15/04/2011 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE 2) THE DEPARTMENT. 3) CIT(A.) CONCERNED, 4) CIT CONCERNED, 5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AHMEDABAD TALUKDAR/SR.P.S.