DCIT, Panchkula V. M/s Haryana Power Generation Corpn. Ltd, Panchkula

ITA 19/CHANDI/2011

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8943 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 25-07-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 06-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: HARISH NAYYAR
• Keywords: Capital asset; Depreciation; Business expenditure; Source of fund; Question of law; Capital receipt; Capital expenditure
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.454/CHD/2010 (ASSESSMENT YEAR : 2004-05) THE D.C.I.T., VS. M/S HARYANA POWER GENERATION PANCHKULA CIRCLE, CORPORATION LTD., SECTOR 6, PANCHKULA. PANCHKULA. PAN: AABCH4536J ITA NO.453/CHD/2010 (ASSESSMENT YEAR : 2005-06) HARYANA POWER GENERATION VS. THE ADDL.CIT, CORPORATION LTD., SECTOR 6, RANGE PANCHKULA, PANCHKULA. PANCHKULA. PAN: AABCH4536J AND ITA NO.398/CHD/2010 (ASSESSMENT YEAR : 2005-06) THE D.C.I.T., VS. M/S HARYANA POWER GENERATION PANCHKULA CIRCLE, CORPORATION LTD., SECTOR 6, PANCHKULA. PANCHKULA. PAN: AABCH4536J ITA NO.1048/CHD/2010 (ASSESSMENT YEAR : 2006-07) THE A.C.I.T., VS. M/S HARYANA POWER GENERATION PANCHKULA CIRCLE, CORPORATION LTD., SECTOR 6, PANCHKULA. PANCHKULA. PAN: AABCH4536J ITA NO.19/CHD/2011 (ASSESSMENT YEAR : 2007-08) THE D.C.I.T., VS. M/S HARYANA POWER GENERATION PANCHKULA CIRCLE, CORPORATION LTD., SECTOR 6, PANCHKULA. PANCHKULA. PAN: AABCH4536J 2 AND ITA NO.26/CHD/2011 (ASSESSMENT YEAR : 2007-08) HARYANA POWER GENERATION VS. THE ADDL.CIT, CORPORATION LTD., SECTOR 6, RANGE PANCHKULA, PANCHKULA. PANCHKULA. PAN: AABCH4536J AND ITA NO.698/CHD/2012 (ASSESSMENT YEAR : 2008-09) HARYANA POWER GENERATION VS. THE ADDL.CIT, CORPORATION LTD., URJA BHAWAN, RANGE PANCHKULA, SECTOR 6,PANCHKULA. PANCHKULA. PAN: AABCH4536J (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI HARISH NAYYAR DEPARTMENT BY : SHRI MANOJ MISHRA, CIT DR DATE OF HEARING : 10.08.2016 DATE OF PRONOUNCEMENT : 21.11.2016 O R D E R PER BENCH : THE ABOVE MENTIONED SEVEN APPEALS, OUT OF WHICH THE APPEAL OF THE REVENUE IN ITA NO.454/CHD/2 010 IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSION ER OF INCOME TAX (APPEALS), PANCHKULA DATED 16.2.2010 FOR ASSESSMENT YEAR 2004-05, THE CROSS APPEALS IN ITA N O. 453/CHD/2010 & ITA NO.398/CHD/2010 ARE DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), PANCHKULA DATED 12.2.2010 FOR ASSESSMENT YEAR 2005-06, THE APPEAL OF THE REVENUE IN ITA 3 NO.1048/CHD/2010 IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), PANCH KULA DATED 17.5.2010 FOR ASSESSMENT YEAR 2006-07, THE CR OSS APPEALS IN ITA NO. 19/CHD/2011 & ITA NO.26/CHD/2011 ARE DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIO NER OF INCOME TAX (APPEALS), PANCHKULA DATED 22.10.2010 FO R ASSESSMENT YEAR 2007-08, AND THE APPEAL OF THE ASSE SSEE IN ITA NO.698/CHD/2012 IS DIRECTED AGAINST THE ORDE R OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), PANCH KULA DATED 18.4.2012 FOR ASSESSMENT YEAR 2008-09. 2. SINCE THE ISSUES ARISING IN ALL THE ABOVE APPEA LS ARE COMMON, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR THE SAK E OF CONVENIENCE. 3. WE WILL FIRST DEAL WITH THE APPEAL OF THE REVEN UE IN ITA NO.454/CHD/2010 . ITA NO.454/CHD/2010 : (REVENUES APPEAL) : 4. THE REVISED GROUND NO.1 RAISED BY THE REVENUE READS AS UNDER : 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE THE LD. C1T (A) WAS JUSTIFIED IN DELETING THE ADDITIO N OF RS.4,66,12,183/- MADE BY THE ASSESSING OFFICER ON ACCO UNT OF PRIOR PERIOD EXPENSES DESPITE THE FACT THAT ASSE SSEE IS FOLLOWING A MERCANTILE SYSTEM OF ACCOUNTING AND THUS ON LY THOSE EXPENSES WHICH RELATE TO CURRENT YEAR CAN BE A LLOWED AGAINST THE INCOME. 4 5. IN THIS GROUND, THE REVENUE HAS CHALLENGED THE DELETION OF DISALLOWANCE MADE ON ACCOUNT OF PRIOR P ERIOD EXPENSES. 6. BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAD CLAIM ED DEDUCTION OF RS.4,66,12,183/- ON ACCOUNT OF PREVIOU S YEAR EXPENSES. THE ASSESSING OFFICER HELD THAT SINCE TH E ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTI NG, THESE EXPENSES WERE NOT ALLOWABLE IN THE IMPUGNED Y EAR AND COULD BE CLAIMED IN THE YEAR OF INCURRING LIABI LITY. HE, THEREFORE, DISALLOWED THE EXPENSES HOLDING THEM TO BE PREVIOUS YEAR EXPENSES. 7. DURING APPELLATE PROCEEDINGS, THE ASSESSEE SUBMITTED THAT ALL THE EXPENSES HELD AS PREVIOUS YE AR EXPENSES BY THE ASSESSING OFFICER, HAD IN FACT CRYSTALLIZED IN THE IMPUGNED ASSESSMENT YEAR ONLY SINCE THE BILL S HAD BEEN RECEIVED IN THE IMPUGNED YEAR AND, THEREFORE, EVEN FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING, THE SAME COULD NOT BE CATEGORIZED AS PREVIOUS YEAR EXPENSES. THE ASSESSEE SUBMITTED THAT OUT OF TOTAL EXPENSES OF RS.4,66,12,183/- HELD AS PREVIOUS YEAR EXPENSES, AN AMOUNT OF RS.38,70,342/- RELATED TO FUEL EXPENSES W HOSE BILLS WERE RECEIVED IN THE CURRENT YEAR. SIMILARLY , THE ASSESSEE SUBMITTED THAT OPERATING EXPENSES OF THE PREVIOUS YEAR AMOUNTING TO RS.44,89,932/- IN RESPEC T OF RLA STUDY RENDERED BY M/S UTILITY TECH HAD BEEN CLA IMED IN THE IMPUGNED YEAR SINCE THE BILLS WERE RECEIVED DURING 5 THE YEAR. THE ASSESSEE STATED THAT THE SAME WAS TH E POSITION WITH REGARD TO ALL THE ABOVE EXPENSES AND FURTHER ENCLOSED DETAILS OF THE SAME. THE LEARNED CIT (APP EALS) AFTER CONSIDERING THE ASSESSEES ARGUMENT AND GOING THROUGH THE DETAILS FILED BY THE ASSESSEE HELD THAT THE LIABILITY OF THE IMPUGNED EXPENSES HAD IN FACT CRYS TALLIZED DURING THE YEAR AND THE ASSESSING OFFICER WAS, THER EFORE, NOT JUSTIFIED IN MAKING THESE EXPENSES. HE, THEREF ORE, DELETED THE DISALLOWANCE MADE. THE RELEVANT FINDIN GS OF THE LD. CIT (APPEALS) AT PARA 5 OF THE ORDER IS AS FOLLOWS : 5. THE THIRD GROUND OF APPEAL IS REGARDING DISALLO WANCE OF RS.4,66,12,183/- BEING PRIOR PERIOD EXPENSES. THE C OUNSEL FOR THE APPELLANT HAS EXPLAINED THAT THE LIABILITY OF THESE EXPENSES CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION. T HE COUNSEL HAS FILED DETAILS OF ALL THE EXPENSES PERTAINING TO THE PREVIOUS PERIOD THE LIABILITY OF WHICH HAS CRYSTALLIZED DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. THESE DETAILS AS DISCUSSED AS PART OF THE WRITTEN SUBMISSIONS OF THE COUNSEL. IN VIEW OF THE FACT THA T THE LIABILITY OF THE EXPENSES CRYSTALLIZED DURING THE YEAR UNDER CON SIDERATION THE AO IS NOT JUSTIFIED MAKING DISALLOWANCE OF THESE EX PENSES. THE ADDITION MADE BY THE AO IS ORDERED TO BE DELETED. THIS GROUND OF APPEAL IS ALLOWED. 8. AGAINST THE IMPUGNED ORDER, THE REVENUE HAS COME UP IN APPEAL BEFORE US. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE SUBMISSION S MADE BEFORE THE LEARNED CIT (APPEALS) AND THE ORDER OF THE CIT(A), WHILE THE LEARNED D.R. RELIED UPON THE ORDE R OF THE ASSESSING OFFICER. 6 9. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTIES. WE FIND THAT THE ORDER PASSED BY THE LD. CIT (APPEALS), ALLOWING THIS GROUND RAISED BY THE ASSES SEE, IS A CRYPTIC AND NON-SPEAKING ORDER. THE LD. CIT (APP EALS) HAS GIVEN NO REASON FOR HOLDING THAT THE LIABILITY PERTAINING TO THE IMPUGNED EXPENSES CRYSTALLIZED IN THE YEAR UNDER APPEAL, EXCEPT FOR STATING THAT THE ASSE SSEE EXPLAINED THAT THE EXPENSES CRYSTALLIZED DURING THE YEAR AND FILED DETAILS OF THE SAME. THE LD. CIT (APPEAL S) HAS SIMPLY ACCEPTED THE ASSESSEES CONTENTIONS THAT SIN CE BILLS PERTAINING TO THE EXPENSES WERE RECEIVED IN THE IMP UGNED YEAR, THE LIABILITY CRYSTALLIZED IN THE YEAR UNDER APPEAL. 10. THE RECEIPT OF BILLS IN A PARTICULAR YEAR CANN OT ALONE LEAD TO THE CRYSTALLIZATION OF LIABILITY IN T HAT YEAR. WHAT IS IMPERATIVE FOR CRYSTALLIZATION OF A LIABIL ITY IS INCURRING OF THE SAME AND QUANTIFICATION OF THE SAM E WITH REASONABLE CERTAINTY. ASSESSEES MAINTAINING MERCANT ILE SYSTEM OF ACCOUNTING CAN TREAT THE LIABILITY TO INC UR THE EXPENSES HAVING CRYSTALLIZED IN THE YEAR IN WHICH I T BECOMES DEFINITE, CERTAIN OR ASCERTAINABLE. FOR AN SWERING THE QUESTION WHETHER PRIOR PERIOD EXPENSES CAN BE C LAIMED AS BUSINESS EXPENSES FOR THE RELEVANT ASSESSMENT YE AR, THE POINT TO BE CONSIDERED IS WHETHER THE CLAIMS WE RE ASCERTAINED AND CRYSTALLIZED ONLY DURING THE YEAR. IN THE ABSENCE OF ANY FINDING GIVEN ON THE ABOVE LINES FOR HOLDING THE LIABILITY PERTAINING TO PRIOR PERIOD EXPENSES T O HAVE CRYSTALLIZED IN THIS YEAR, WE CONSIDER IT FIT TO RE STORE THE 7 ISSUE BACK TO THE FILE OF THE LD. CIT (APPEALS) TO CONSIDER THE EXPENDITURE AND EVIDENCES FILED BY THE ASSESSEE AFRESH AND THEREAFTER PASS A REASONED ORDER ,IN ACCORDANCE WITH LAW. WE MAY ADD THAT THE ASSESSEE BE GRANTED DUE OPPORTUNITY OF HEARING IN THIS REGARD. 11. IN VIEW OF THE ABOVE, THE GROUND OF APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 12. REVISED GROUND NO.2 RAISED BY THE REVENUE READS AS UNDER : 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE THE LD. C1T (A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS.2,01,88,372/- DESPITE THE FACT THAT THE EXPENSES IN CURRED AND CLAIMED BY THE ASSESSEE ON ACCOUNT OF MODERNIZA TION AND RENOVATION OF THE PROJECT ARE CAPITAL IN NATURE S INCE IT GIVES THE ASSESSEE A LONG BENEFIT SPREAD OVER A NUMB ER OF YEARS. 13. BRIEF FACTS RELATING TO THE ISSUE ARE THAT DUR ING THE IMPUGNED ASSESSMENT YEAR, INTEREST AMOUNTING TO RS.2,01,88,372/-HAD BEEN BOOKED AGAINST RENOVATION/MODERNIZATION OF PROJECT. THE ASSESSING OFFICER HELD THIS EXPENDITURE TO BE CAPITAL IN NATU RE BEING ON ACCOUNT OF RENOVATION AND MODERNIZATION OF PROJE CT WHICH GAVE LONG TERM BENEFIT TO THE ASSESSEE AND, THEREFORE, DISALLOWED THE SAME. 14. BEFORE THE LEARNED CIT (APPEALS), THE ASSESSEE PLEADED THAT OUT OF THE IMPUGNED EXPENSES, A SUM OF RS.78,60,710/- HAD BEEN CAPITALIZED BY THE ASSESSEE 8 ITSELF, WHILE THE BALANCE PERTAINED TO INTEREST INC URRED AFTER THE DATE OF CAPITALIZATION OF ASSETS ON ACCOU NT OF INCREASE IN THE LOAN UNDER CENTRAL ASSISTANCE FOR RENOVATION AND MODERNIZATION. THE ASSESSEE STATED THAT THE LOAN AMOUNTING TO RS.15,82,47,351/- WAS TAKEN B Y ERSTWHILE HSEB, WHICH HAS BEEN TRANSFERRED TO THE ASSESSEE AND THE INTEREST ON THE SAME HAD BEEN CORR ECTLY CLAIMED BY THE ASSESSEE AS REVENUE. THE ASSESSEE S TATED THAT A LOAN OF RS.50,04,98,245/- WHICH WAS TAKEN FO R NEW PROJECTS AND INTEREST ON THE SAME HAD ALREADY BEEN CAPITALIZED WHILE THE BALANCE LOAN HAVING BEEN TAKE N ON EXISTING ASSETS HAD BEEN CORRECTLY CLAIMED AS REVEN UE. THE LEARNED CIT (APPEALS) AFTER CONSIDERING ASSESS EES SUBMISSIONS AND GOING THROUGH DETAILS FILED BY IT A LLOWED THE ASSESSEES CLAIM FOR EXPENSES. 15. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSE E REITERATED SUBMISSIONS MADE BEFORE THE LEARNED CIT (APPEALS) AND STATED THAT HAVING CAPITALIZED THE IN TEREST WHICH RELATED TO PROJECTS UNDER CONSTRUCTION, THE B ALANCE RELATED ONLY TO INTEREST PAID ON LOANS ON ACCOUNT O F COMPLETED PROJECTS WHICH WERE TO BE TREATED AS REVE NUE IN NATURE AS PER THE PROVISIONS OF SECTION 36(1)(III) OF THE ACT. 16. THE LEARNED D.R., ON THE OTHER HAND, RELIED UP ON THE ORDER OF THE ASSESSING OFFICER. 9 17. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTIES AND GONE THROUGH THE ORDERS OF THE ASSESSIN G OFFICER AND CIT (APPEALS). THE RELEVANT PARA OF THE CIT (APPEALS)S ORDER DELETING THE DISALLOWANCE IS REPR ODUCED AS UNDER : 6. THE FOURTH GROUND OF APPEAL IS REGARDING DISALL OWANCE OF RS.2,01,88,372/- ON ACCOUNT OF RENOVATION /MODE RNIZATION OF THE PROJECT. THE AO HAS MENTIONED THAT THE APPELLAN T HAS CLAIMED THIS AMOUNT AS EXPENDITURE ON ACCOUNT OF INTEREST O N RENOVATION AND MODERNIZATION OF THE PROJECT WHICH IS CAPITAL E XPENDITURE SINCE IT GIVES A LONG TERM BENEFIT TO THE APPELLANT . THE COUNSEL ON THE OTHER HAND ARGUED THAT A SUM OF RS.78,60,710 /- HAS BEEN CAPITALIZED AS INTEREST ON ADDITIONAL LOAN REC EIVED DURING THE YEAR 2001-02 AND THE BALANCE INTEREST IS FOR THE LO ANS TRANSFERRED BY ERSTWHILE HSEB AGAINST THE COMPLETED SCHEMES AND IS REVENUE IS NATURE. THE COUNSEL HAS FILED DETAILS OF THE EXP ENSES CAPITALIZED AND THE BALANCE EXPENSES WHICH PERTAIN TO THE LOANS RAISED FOR COMPLETED PROJECTS. SINCE THE APPELLANT HAS ALREADY CAPITALIZED THE INTEREST EXPENDITURE REQUIRED TO BE CAPITALIZED , THE AO IS NOT JUSTIFIED IN DISALLOWING THE INTEREST EXPENDITURE. THE ADDITION MADE BY THE AO IS ORDERED TO BE DELETED. THIS GROU ND OF APPEAL IS ALLOWED. 18. ON GOING THROUGH THE ABOVE, WE FIND THAT THE C IT (APPEALS) HAS DELETED THE IMPUGNED DISALLOWANCE BY SIMPLY ACCEPTING THE ASSESSEES SUBMISSIONS, GIVING NO REASON FOR DOING SO, NOR REFERRING TO ANY DOCUMENTS , WHICH SUPPORTS THE ASSESSEES ARGUMENT. CLEARLY, T HE CIT (APPEALS) HAS NOT PASSED A WELL-REASONED ORDER SUPP ORTING HIS FINDINGS. THE LD. CIT (APPEALS) HAS MERELY REI TERATED THE ASSESSEES SUBMISSIONS THAT A PART OF INTEREST HAD 10 BEEN CAPITALIZED BY IT, WHILE THE BALANCE PERTAINED TO LOANS TRANSFERRED BY HSEB AGAINST COMPLETED SCHEME AND HENCE IS REVENUE IN NATURE. THERE IS NO MENTION OF HOW THE CIT (APPEALS) WAS SATISFIED ON BOTH THE ASPECTS OF THE MATTER OR WHAT DOCUMENTS PRODUCED BEFORE HIM LEAD H IM TO CONCUR/AGREE WITH THE ASSESSEES SUBMISSIONS. 19. IN VIEW OF THE NON-SPEAKING ORDER PASSED BY TH E LD. CIT (APPEALS), WE CONSIDER IT FIT TO RESTORE TH E MATTER BACK TO THE FILE OF THE CIT (APPEALS) TO CONSIDER T HE ISSUE AFRESH AFTER GIVING DUE OPPORTUNITY OF HEARING TO T HE ASSESSEE AND PASS A REASONED ORDER IN ACCORDANCE W ITH LAW. 20. THIS GROUND OF APPEAL RAISED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 21. THE APPEAL OF THE REVENUE IS, THEREFORE, ALLOW ED FOR STATISTICAL PURPOSES. 22. WE WILL NOW DEAL WITH THE CROSS APPEALS IN IT A NOS.453 & 398/CHD/2010, TAKING UP THE ASSESSEES AP PEAL IN ITA NO.453/CHD/2010 FIRST. ITA NO.453/CHD/2010 : (ASSESSEES APPEAL) : 23. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE I N ITS APPEAL READ AS UNDER: 1] THAT THE ORDER PASSED BY THE CIT (A) CONFIRMING TH E ADDITIONS MADE BY THE LEARNED ASSESSING OFFICER IS I LLEGAL, 11 ARBITRARY, AND HAS BEEN PASSED IN A HASTE AND HAS I GNORED BASIC ASPECTS AN FACTS OF THE CASE THUS CAUSING UND UE HARDSHIP TO THE ASSESSEE. 2] THAT THE CIT (A) HAS ERRED BOTH ON FACTS AND LAW I N CONFIRMING THE DISALLOWANCE OF RS.1,57,47,347/- ON AC COUNT OF DEPRECIATION RELATABLE TO CAPITAL GRANT IN AID RECEIVED. THE ADDITION IS UNJUSTIFIED HAS BEEN MADE WITHOUT C ONSIDERING THE FACTS OF THE CASE CORRECTLY AND DESERVES TO BE DELETED. IT IS PREYED THAT ADDITION OF RS. 1,57,47,347/- MAY KINDLY BE ORDERED TO BE DELETED. 3] THAT THE APPELLANT CRAVES TO ADD, DELETE, CONCEDE, MODIFY ANY OR ALL THE GROUNDS OF APPEAL AT THE TIME OF HEA RING OF APPEAL. 24. THE ONLY ISSUE IN THE PRESENT APPEAL RELATES T O THE DISALLOWANCE MADE ON ACCOUNT OF DEPRECIATION RELATABLE TO CAPITAL-GRANT-IN-AID RECEIVED BY THE A SSESSEE AMOUNTING TO RS.1,57,47,347/-. 25. BRIEF FACTS RELATING TO THE CASE ARE THAT THE ASSESSING OFFICER OBSERVED, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THAT THE ASSESSEE HAD SHOWN CAPITAL-GRANT-IN-AID IN THE BALANCE SHEET AS ONE OF THE SOURCE OF FUND. THE ASSESSEE EXPLAINED THAT THIS A ID WAS GIVEN BY THE GOVERNMENT TO PARTLY MEET EXPENDITURE RELATING TO FIXED ASSETS. THE ASSESSING OFFICER AS KED THE ASSESSEE TO EXPLAIN AS TO WHY THIS AMOUNT MAY NOT BE REDUCED FROM THE ORIGINAL COST OF THE ASSETS. THE ASSESSEE PLACED RELIANCE ON THE DECISION IN THE CASE OF CIT VS. P.J. CHEMICAL LIMITED, 210 ITR 830 TO STATE THAT IT WAS A 12 CAPITAL RECEIPT. THE ASSESSING OFFICER HELD THAT I N VIEW OF THE AMENDMENT TO SECTION 43(1) BY WAY OF INSERTION OF EXPLANATION 10 TO THE SAME, SUBSIDY OR GRANT IN THE NATURE OF CAPITAL GRANT WOULD REDUCE THE ACTUAL CO ST OF THE ASSETS ELIGIBLE FOR DEPRECIATION AND, THEREFORE , THE DECISION RELIED UPON BY THE ASSESSEE WAS NO LONGER RELEVANT. THE ASSESSING OFFICER THEREAFTER REDUCED THE GRANT RECEIVED FROM THE WRITTEN DOWN VALUE OF ASSET S FROM PLANT & MACHINERY AND THUS AS A CONSEQUENCE REDUCED THE DEPRECIATION ALLOWABLE TO THE ASSESSEE BY RS,.1,57,47,347/-. 26. DURING THE APPELLATE PROCEEDINGS THE ASSESSEE SUBMITTED THAT OUT OF TOTAL GRANT OF RS.6,29,89,387 /- RECEIVED, ONLY A PART OF IT I.E. RS.1,17,44,719/- H AD BEEN UTILIZED AND REDUCED FROM THE COST OF THE ASSETS AN D NO DEPRECIATION HAD BEEN CLAIMED ON THE SAME. THE REMAINING AMOUNT OF RS.5,12,44,668/-, THE ASSESSEE STATED, HAD BEEN TRANSFERRED TO OTHER LIABILITIES A ND PROVISIONS HAVING BEEN RECEIVED FOR CAPITAL WORKS W HICH HAD NOT BEEN INITIATED BY THE END OF THE RELEVANT P REVIOUS YEAR I.E. 31.3.2005. THE LEARNED CIT (APPEALS) REJ ECTED THE CONTENTION OF THE ASSESSEE AND HELD THAT IN VIE W OF THE EXPLANATION 10 TO SECTION 43(1) OF THE ACT, THE ASS ESSING OFFICER HAD RIGHTLY DISALLOWED DEPRECIATION CORRESP ONDING TO THE ENTIRE AMOUNT OF THE CAPITAL-GRANT-IN-AID AN D, THEREFORE, UPHELD THE DISALLOWANCE MADE BY THE ASSE SSING OFFICER. 13 27. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSE E, REITERATED THE CONTENTIONS MADE BEFORE THE CIT (APP EALS) AND STATED THAT THE ENTIRE GRANT-IN-AID RECEIVED HA D NOT BEEN UTILIZED FOR PURCHASE OF ASSET AND TO THAT EXT ENT EXPLANATION-10 TO SECTION 43(1) WAS NOT ATTRACTED. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER STATED THA T ON THE GRANT-IN-AID UTILIZED TO THE EXTENT OF RS.1,17,44,7 19/- THE ASSESSEE HAD ITSELF NOT CLAIMED DEPRECIATION TO THA T EXTENT HAVING REDUCED THE SAME FROM THE COST OF THE ASSET. 28. THE LD. DR, ON THE OTHER HAND,, RELIED UPON TH E ORDER OF THE LOWER AUTHORITIES AND STATED THAT EXPLANATION-10 TO SECTION 43 OF THE ACT WAS IN ANY CASE ATTRACTED AS THE UTILIZATION OF THE AID WAS TOWARD S CAPITAL ASSETS ONLY AND ON ACCOUNT OF THE EXPRESS PROVISION S OF THE ACT, THE DISALLOWANCE OF DEPRECIATION HAD BEEN RIGHTLY MADE. 29. HAVING HEARD THE RIVAL CONTENTIONS, WE FIND TH AT THERE IS NO CASE AT ALL FOR MAKING ANY DISALLOWANCE OF DEPRECIATION. THE CONTENTIONS OF THE ASSESSEE BEFO RE THE LD. CIT (APPEALS) THAT IT HAD USED ONLY A PART OF T HE GRANT- IN-AID FOR ACQUIRING ASSETS, WHICH WAS SET OFF FRO M THE VALUE OF THE ASSETS, WHILE THE BALANCE, WHICH WAS N OT UTILIZED, WAS REFLECTED AS LIABILITY IN THE BALANCE SHEET, HAS REMAINED UNCONTROVERTED. EVEN BEFORE US, THE REVENUE HAS NOT CONTROVERTED THIS ASSERTION OF THE LEARNED COUNSEL FOR THE ASSESSEE. IN FACT, THE LEARNED CO UNSEL FOR THE ASSESSEE ESTABLISHED THIS FACT BEFORE US BY DRA WING 14 OUR ATTENTION TO THE SCHEDULE OF RESERVES AND SURPL US IN THE BALANCE SHEET OF THE ASSESSEE FOR THE YEAR REFL ECTING THE GRANTS-IN-AID ACCOUNT AND SHOWING THEREIN THE T OTAL GRANTS-IN-AID AS ON 31.3.2004 OF RS.6,29,89,387/- B EING THE SUM OF THE OPENING BALANCE OF RS.5,92,00,000/- AND RECEIPTS DURING THE YEAR OF RS.37,89,387/-. THEREA FTER, THE LEARNED COUNSEL FOR THE ASSESSEE DREW OUR ATTEN TION TO THE AMOUNT UTILIZED SHOWN AT RS.1,17,44,719/- AND TRANSFERRED TO DEPOSITS AS RS.5,12,44,668/-. THE SCHEDULE-2 OF THE BALANCE SHEET, I.E RESERVES AND SURPLUS, REFLECTED GRANTS-IN-AID AS FOLLOWS : SCHEDULE-2: RESERVES & SURPLUS PARTICULARS ACCOUNT CODE AS AT MARCH 31 ST 2005 AS AT MARCH 31 ST 2004 CAPITAL RESERVE CAPITAL RESERVE AS AT THE BEGINNING OF THE YEAR GAIN ON SALE OF FIXED ASSETS SUB TOTAL 62.4 - - - - SUB TOTAL TOWARDS COST OF THE CAPITAL ASSETS AS AT THE BEGINNING OF THE YEAR ADD: RECEIVE D DURING THE YEAR SUB TOTAL 55.2 - - GRANTS TOWARDS COST OF THE CAPITAL ASSETS AS AT THE BEGINNING OF THE YEAR ADD : RECEIVED DURING THE YEAR LESS: UTILISED LESS : TRANSFERRED TO DEPOSITS 55.2 55.3 1,923.035 1,923.035 59,200.00 3,789.387 11,744,719 51,244,668 SUB TOTAL - - GRAND TOTAL - - 15 30. IT IS, THEREFORE, CLEAR THAT THE ASSESSEE HAD UTILIZED ONLY A PORTION OF THE GRANT-IN-AID FOR ACQ UIRING ASSETS ON WHICH IT HAD ALSO NOT CLAIMED DEPRECIATIO N. TO THIS EXTENT, WE HOLD THAT THE DEPRECIATION DISALLOW ED IS INCORRECT AND ONLY TANTAMOUNTS TO DENIAL OF DEPRECI ATION TWICE, ONCE BY THE ASSESSEE ITSELF WHEN IT REDUCED THE GRANT-IN-AID FROM THE COST OF THE ASSET AND THE SEC OND TIME BY THE REVENUE BY APPLYING EXPLANATION-10 TO S ECTION 43(1) ON THE SAME. THIS IS TOTALLY UNWARRANTED AND DENIAL OF DEPRECIATION TO THIS EXTENT IS, THEREFORE, DELET ED. 31. AS FOR THE CLAIM OF THE ASSESSEE THAT THE BALA NCE AMOUNT WAS NOT UTILIZED BY IT FOR PURCHASING ANY AS SET BUT WAS REFLECTED AS A LIABILITY IN THE BALANCE SHEET, WE FIND THAT THIS ALSO REMAINS UNCONTROVERTED BOTH BY THE C IT (APPEALS) AND ALSO BEFORE US, WHILE THE ASSESSEE HA S CLEARLY DEMONSTRATED THE SAME REFLECTING THE BALANC E AS TRANSFERRED TO DEPOSITS IN THE SCHEDULE OF RESERVES AND SURPLUS, REPRODUCED ABOVE. THE LD. CIT (APPEALS) H AS MERELY STATED THAT THE UTILIZATION OF THE GRANTS-IN -AID IS TOWARDS ACQUIRING OF CAPITAL ASSETS, WITHOUT POINTI NG OUT HOW, WHEN THE ASSESSEE HAD CATEGORICALLY STATED THA T THE SAME HAD BEEN REFLECTED AS LIABILITY IN THE BALANCE SHEET, MEANING THEREBY THAT IT HAS NOT BEEN REDUCED FROM T HE COST OF ANY ASSET SINCE NONE WAS ACQUIRED. THUS, I T REMAINS AN UNCONTROVERTED FACT THAT THE BALANCE GRA NT-IN- AID WAS NOT UTILIZED FOR ACQUIRING ANY ASSET. IN S UCH CIRCUMSTANCES, WE HOLD THAT EXPLANATION-10 TO SECTI ON 16 43(1) OF THE ACT, IS NOT ATTRACTED SINCE IT CLEARLY STATES THAT WHERE A PART OF THE ASSET IS ACQUIRED DIRECTLY OR INDIRECTLY THROUGH GRANT OR SUBSIDY, THE COST OF TH E ASSET IS TO BE REDUCED FROM THE SAME. EXPLANATION-10 TO SECTION 43(1) OF THE ACT READS AS UNDER: EXPLANATION 10.WHERE A PORTION OF THE COST OF AN ASSET ACQUIRED BY THE ASSESSEE HAS BEEN MET DIRECTLY OR I NDIRECTLY BY THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT OR A NY AUTHORITY ESTABLISHED UNDER ANY LAW OR BY ANY OTHER PERSON, IN THE FORM OF A SUBSIDY OR GRANT OR REIMBURSEMENT (B Y WHATEVER NAME CALLED), THEN, SO MUCH OF THE COST AS IS RELATABLE TO SUCH SUBSIDY OR GRANT OR REIMBURSEMENT SHALL NOT BE INCLUDED IN THE ACTUAL COST OF THE ASSET TO THE ASSES SEE 32. IT IS EVIDENT FROM A PLAIN READING OF THE ABO VE THAT ACQUIRING OF AN ASSET OUT OF THE GRANT RECEIVE D IS A SINE QUA NON FOR APPLYING EXPLANATION-10 TO SECTION 43(1) AND LOGICALLY ALSO SINCE THE PURPOSE OF THE EXPLANA TION IS TO REFLECT THE ACTUAL COST OF THE ASSET TO THE PURC HASER ONLY, REDUCING THE COST CONTRIBUTED BY ANY OTHER PE RSON THEREFROM. WE, THEREFORE, HOLD THAT EXPLANATION-10 TO SECTION 43(1) IS NOT ATTRACTED ON THE PORTION OF TH E GRANTS- IN-AID NOT UTILIZED FOR ACQUIRING CAPITAL ASSET AND THE SAME WILL NOT GO TO REDUCE THE COST OF ASSETS ACQUI RED BY THE ASSESSEE. EXPLANATION-10 TO SECTION 43(1) IS N OT AUTOMATICALLY ATTRACTED THE MOMENT GRANTS-IN-AID ARE RECEIVED. IT IS ONLY WHEN THEY ARE UTILIZED FOR AC QUIRING ASSETS THAT THE EXPLANATION GETS ATTRACTED IN. IN VIEW OF THE SAME, WE HOLD, THAT TO THE EXTENT OF GRANT-IN-A ID IS NOT UTILIZED FOR ACQUIRING CAPITAL ASSETS, THE SAME WI LL NOT BE 17 ADJUSTED AGAINST COST OF ASSETS OF THE ASSESSEE AND THE DENIAL OF DEPRECIATION TO THIS EXTENT ALSO IS DELET ED. 33. IN VIEW OF THE ABOVE, WE DELETE THE DISALLOWAN CE OF DEPRECIATION ON THE GRANTS-IN-AID RECEIVED AND A LLOW THE GROUND RAISED BY THE ASSESSEE. 34. THE APPEAL OF THE ASSESSEE, THEREFORE, STANDS ALLOWED. ITA NO.398/CHD/2010 : (REVENUES APPEAL) : 35. GROUND NOS.(A) AND (B) RAISED BY THE REVENUE READ AS UNDER : (A) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE DELETION OF ADDITION OF RS. 13,92,00,000/- MADE BY THE AO U/ S 40(A)(IA) ON ACCOUNT OF TRANSPORT CHARGES IGNORING TH E SUBSTANCE OF THE TRANSACTION WHICH IS ESSENTIALLY A PA YMENT FOR THE TRANSPORT CHANGES AND NOT A PAYMENT FOR THE PURCHASE OF GOODS ? (B) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE DELET ION OF ADDITION OF RS.13,92,00,000/- MADE BY THE AO U/S 40(A)(IA) IGNORING THE FACT THAT THE INCLUSION OF TRANSPORTATION CHARGES IN THE SALES BILL DOES NOT CH ANGE THE NATURE OF PAYMENT BEING FOR THE PURPOSE OF TRANSPORTATION ESPECIALLY WHEN FROM THE BILLS IT IS CLEAR THAT THE ASSESSEE MADE THE PAYMENT SPEC IFICALLY FOR THE PURPOSE OF TRANSPORTATION. 36. BOTH THE ABOVE GROUNDS ARE AGAINST THE ACTION OF THE LD. CIT (APPEALS) IN DELETING THE ADDITION OF R S.13.92 18 CRORES MADE BY THE ASSESSING OFFICER UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961 (IN SHORT TH E ACT) ON ACCOUNT OF NON-DEDUCTION OF TDS ON PAYMENT OF TRANSPORTATION CHARGES BY THE ASSESSEE. 37. BRIEF FACTS RELATING TO THE ISSUE ARE THAT DUR ING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE WAS PURCHASING COAL PRIM ARILY FROM CENTRAL COAL FIELDS LIMITED AND COAL INDIA LIM ITED AND THE PURCHASE INVOICE OF THE COLLIERY INDICATED THAT TRANSPORTATION CHARGES WERE ALSO BEING PAID BY THE ASSESSEE ON PURCHASE OF COAL AND WERE INCLUDED AS A SEPARATE HEAD IN THE BILL. THE ASSESSING OFFICER ALSO OBSERVED THAT WHILE MAKING THE PAYMENT OF THE CHARG ES NO TDS WAS DEDUCTED BY THE ASSESSEE ON TRANSPORTATION CHARGES. ON BEING ASKED TO EXPLAIN THE SAME, THE ASSESSEE STATED THAT ITS CONTRACT WITH COAL INDIA W AS NOT A TRANSPORT CONTRACT OF SALE AND, THEREFORE, IT WAS N OT REQUIRED TO DEDUCT ANY TDS. THE ASSESSING OFFICER DID NOT ACCEPT THE ARGUMENT OF THE ASSESSEE AND HELD THAT S INCE THE BILLS SPECIFIED THE PURPOSE F PAYMENT ON ACCOUN T OF TRANSPORTATION CHARGES, TDS WAS REQUIRED TO BE DEDU CTED ON THE SAME IN ACCORDANCE WITH THE PROVISIONS OF SE CTION 194C OF THE ACT. THE ASSESSING OFFICER HELD THAT I NCLUSION OF TRANSPORTATION CHARGES IN THE BILL DID NOT CHANG E THE NATURE OF PAYMENT BEING FOR THE PURPOSE OF TRANSPOR TATION. HE, THEREFORE, MADE AN ADDITION OF RS.13.92 CRORES UNDER 19 SECTION 40(A)(IA) OF THE ACT ON ACCOUNT OF NON-DEDU CTION OF TDS ON TRANSPORTATION CHARGES PAID. 38. DURING APPELLATE ORDER PROCEEDINGS THE ASSESSE E REITERATED THE SUBMISSIONS MADE BEFORE THE ASSESSIN G OFFICER AND STATED THAT THE TRANSPORTATION OF COAL FROM COLLIERY TO THE SITE WAS UNDERTAKEN BY CENTRAL COAL FIELDS LIMITED AND COAL INDIA LIMITED ON THEIR OWN AND WAS PART OF THE COAL SUPPLIED AND CST WAS BEING CHARGED ON T HE SAME BY THE SUPPLIER. THE ASSESSEE SUBMITTED THAT THE CONTRACT WITH CENTRAL COAL FIELDS LIMITED WAS, THE REFORE, A CONTRACT FOR SALE OF GOODS NOT A WORK CONTRACT. THE ASSESSEE FURTHER SUBMITTED THAT IT WAS THE LIABILIT Y OF CENTRAL COAL FIELDS LIMITED AND COAL INDIA LIMITED TO DEDUCT TDS ON THE TRANSPORTATION CHARGES INCURRED B Y THEM WHICH WAS DULY COMPLIED WITH BY THEM AND THE ASSESSEE FURTHER ANNEXED A LETTER TO THIS EFFECT FR OM THEM. THE ASSESSEE SUBMITTED THAT IT HAD NOT ENTERED INTO ANY CONTRACT WITH TRANSPORTER NOR MADE ANY PAYMENT TO T HEM NOR RECEIVED ANY BILLS FROM THEM AND, THEREFORE, TH E PAYMENT MADE ON ACCOUNT OF TRANSPORTATION CHARGES C OULD NOT BE TERMED TO BE ON ACCOUNT OF ANY WORK CONTRACT FOR TRANSPORTATION OF THE GOODS LIABLE TO DEDUCTION OF TDS UNDER SECTION 194C OF THE ACT. THE ASSESSEE FURTHE R RELIED UPON DECISION OF THE I.T.A.T., CHANDIGARH BE NCH IN THE CASE OF HARYANA TOURISM CORPORATION LTD. IN IT A NO.1056/CHD/2008, WHEREIN THE HON'BLE I.T.A.T. VIDE ITS ORDER DATED 25.3.2009 FOR ASSESSMENT YEAR 2005-06 H AD 20 DECIDED AN IDENTICAL ISSUE IN FAVOUR OF THE ASSESSE E. THE LD. CIT (APPEALS) AFTER CONSIDERING THE ASSESSEES SUBMISSIONS HELD THAT THE CONTRACT OF THE ASSESSEE WITH COAL INDIA LIMITED AND CENTRAL COAL FIELDS LIMITED WAS CONTRACT FOR SALE OF GOODS AND NOT CONTRACT OF WORK . RELYING UPON THE DECISION OF THE I.T.A.T., CHANDIGA RH BENCH IN THE CASE OF HARYANA TOURISM CORPORATION LIMITED (SUPRA) HELD THAT WHERE TRANSPORTATION CHAR GES ARE MADE PART OF SALE INVOICE THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ARE NOT ATTRACTED. THE LD. CI T (APPEALS), THEREFORE, DELETED THE DISALLOWANCE MADE BY TH ASSESSING OFFICER OF TRANSPORTATION CHARGES OF RS.1 3.92 CRORES UNDER SECTION 40(A)(IA) OF THE ACT. 39. BEFORE US THE LD. DR RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND STATED THAT SINCE THE BIL L FOR PURCHASE OF COAL SEPARATELY SHOWED TRANSPORTATION C HARGES AND COLLECTED THE SAME FROM THE ASSESSEE, THE PAYME NT MADE ON ACCOUNT OF THE SAME WAS TO BE TREATED AS FO R THE PURPOSE OF TRANSPORTATION OF COAL ATTRACTING THE PR OVISIONS OF SECTION 194C OF THE ACT ON THE SAME. 40. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE LD. CIT (A PPEALS) AND ON THE DECISION OF THE I.T.A.T., CHANDIGARH BEN CH IN THE CASE OF HARYANA TOURISM CORPORATION LIMITED (S UPRA) IN THIS REGARD. 21 41. WE HAVE HEARD THE RIVAL CONTENTIONS. WE FIND NO INFIRMITY IN THE ORDER OF THE CIT (APPEALS) DELETIN G THE ADDITION MADE UNDER SECTION 40(A)(IA) OF THE ACT. IT IS NOT DISPUTED THAT THE TRANSPORTATION CHARGES WERE PAID TO THE SUPPLIERS OF COAL WHO INCLUDED THE SAME IN THE BILL RELATING TO SUPPLY OF COAL RAISED BY THEM. IT IS A LSO NOT DISPUTED THAT THE CONTRACT BETWEEN THE ASSESSEE AND SUPPLIERS OF COAL RELATED TO SUPPLY OF GOODS/COAL. THE FACT THAT THE TRANSPORTATION WAS TO BE UNDERTAKEN BY THE SUPPLIER OF GOODS AS PART OF THE CONTRACT FOR SALE OF GOODS, AS STATED BY THE ASSESSEE BEFORE THE LOWER AUTHORIT IES, HAS ALSO NOT BEEN CONTROVERTED BY THE LD. CIT (APPEALS) , NOR BY THE LD. DR BEFORE US. IN VIEW OF THE ABOVE FACT S, THE CONCLUSION DRAWN BY THE LD. CIT (APPEALS) THAT THER E WAS NO CONTRACT FOR TRANSPORTATION OF GOODS BETWEEN THE ASSESSEE AND THE SUPPLIER OF COAL IS CORRECT. MEREL Y BECAUSE THE SUPPLIER OF COAL ADDED TRANSPORTATION C HARGES TO THE COST OF GOODS, IT CANNOT BE INFERRED THAT TH E ASSESSEE HAD PAID CERTAIN AMOUNT ON ACCOUNT OF THOS E SERVICES SEPARATELY. IT WAS NOT EVIDENT FROM THE B ILLS THAT THE EXPENSES SO INCURRED BY THE SUPPLIERS OF COAL W AS ON BEHALF OF THE ASSESSEE. IN FACT, INCLUSION OF THE SAME IN THE BILLS OF THE SUPPLIER ONLY POINTED TO THE FACT THAT IT WAS PART OF THE COST OF THE GOODS SOLD. THE HON'BL E PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. ASSISTANT MANAGER (ACCOUNTS) FOOD CORPORATION OF IN DIA (2010) 326 ITR 106, ON IDENTICAL SET OF FACTS HELD THAT THERE WAS NO WORK CONTRACT BETWEEN THE ASSESSEE AND 22 SUPPLIER OF GOODS, BUT ONLY CONTRACT FOR SALE OF GO ODS AND TRANSPORT COST INCLUDED IN THE BILLS WAS PART OF TH E COST OF THE COMMODITY SOLD AND THUS NO LIABILITY TO DEDUCT TAX UNDER SECTION 194C OF THE ACT. THE HON'BLE HIGH CO URT IN THE CASE OF ASSISTANT MANAGER (ACCOUNTS) FOOD CORPORATION OF INDIA (SUPRA) HELD AT PARAS 2 AND 3 OF ITS ORDER AS FOLLOWS : 2. THE ASSESSEE IN THE PRESENT CASE IS FOOD CORPORATI ON OF INDIA WHICH IS ENGAGED IN PROCUREMENT OF FOOD GRAINS FOR THE CENTR AL POOL. THE FOOD GRAINS IS PROCURED THROUGH THE STATE AGENCIES AND D IRECTLY AS WELL. PROCEEDINGS WERE INITIATED UNDER S. 201 OF THE IT A CT, 1961, WITH THE ALLEGATIONS THAT THE ASSESSEE HAD FAILED TO DEDUCT TAX AT SOURCE ON THE INTEREST, RENT AND TRANSPORTATION CHARGES PAID BY I T TO VARIOUS AGENCIES. THE ORDER CAME TO BE PASSED BY THE ITO (TDS) ON 25T H FEB., 2005, RAISING A DEMAND OF RS. 12,34,814. THE ORDER WAS UPHELD BY THE CIT(A). IN FURTHER APPEAL BEFORE THE TRIBUNAL, THE PLEA SET UP BY THE ASSESSEE WAS ACCEPTED. IT WAS NOTICED THAT IN THE INVOICES RAISE D BY VARIOUS STATE AGENCIES WHO PROCURED FOOD GRAINS ON BEHALF OF THE ASSESSEE, THE COST OF WHEAT HAS BEEN SHOWN APART FROM THE COST ON ACCOUNT OF OTHER INCIDENTAL EXPENSES INCURRED BY THE PROCUREMENT AGENCIES. VAT HAD ALSO BEEN CHARGED. IT WAS NOT EVIDENT FROM THERE THAT THE EXP ENSES SO INCURRED BY THE PROCUREMENT AGENCIES WERE ON BEHALF OF THE ASSESSEE RATHER IT WAS FOUND TO BE PART OF THE COST AT WHICH THE FOOD GRAINS WER E TO BE TRANSFERRED BY THE PROCUREMENT AGENCIES TO THE ASSESSEE. WITH THES E FACTS, IT WAS FOUND THAT AS THE ASSESSEE HAD NOT PAID ANY AMOUNT TO THE PROCUREMENT AGENCIES ON ACCOUNT OF TRANSPORTATION, INTEREST OR STORAGE C HARGES AS SUCH, ACCORDINGLY, THERE WAS NO LIABILITY FOR DEDUCTION O F TAX. 3. THE CONTENTION OF LEARNED COUNSEL FOR THE REVENUE THAT IN FACT ALL THESE FACTORS HAD BEEN TAKEN CARE OF WHILE FIXING THE PRI CE AT WHICH THE FOOD GRAIN WAS TO BE BILLED TO THE ASSESSEE, CARRIES NO WEIGHT. IF EXPENSES INCURRED BY A PERSON ON ACCOUNT OF TRANSPORTATION, INTEREST, STORAGE, ETC., ARE ADDED TO THE COST OF THE GOODS, IT CANNOT BE IN FERRED THAT THE PERSON WHO IS BILLED HAD PAID CERTAIN AMOUNT ON ACCOUNT OF THOSE SERVICES SEPARATELY AS THE SAME BECOMES PART OF THE COMMODIT Y SO SOLD. 23 FOR THE REASONS MENTIONED ABOVE, WE DO NOT FIND ANY SUBSTANTIAL QUESTION OF LAW ARISES IN THE PRESENT APPEAL. THE SAME IS ACCORDINGLY DISMISSED. 42. IN VIEW OF THE ABOVE, WE HOLD THAT, THERE WAS NO WORK CONTRACT BETWEEN THE ASSESSEE AND THE SUPPLIER OF COAL AND HENCE THE LD. CIT (APPEALS) HAS RIGHTLY HE LD THAT THE LIABILITY OF THE ASSESSEE TO DEDUCT TAX UNDER T HE PROVISIONS OF SECTION 194C OF THE ACT DID NOT ARISE IN THE PRESENT CASE. THE LD. CIT (APPEALS), THEREFORE, H AS CORRECTLY DELETED THE DISALLOWANCE MADE UNDER SECTI ON 40(A)(IA) OF THE ACT ON ACCOUNT OF NON-DEDUCTION OF TDS ON TRANSPORTATION CHARGES OF RS.13.92 CRORES. GROUND NOS.(A) AND (B) OF THE REVENUE ARE, THEREFORE, DISMISSED. 43. GROUND NOS.(C), (D), (E) AND (F) RAISED BY THE REVENUE READ AS UNDER : (C) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS.2,01,88,372/- DESPITE THE FACT THAT THE DETAILS FILED BY THE ASSESSEE BEFORE THE CIT(A) WERE NEVER FILED BEFORE THE AO AND THE CIT(A) ALSO DID NOT AFFOR D THE AO AN OPPORTUNITY TO REBUT/VERIFY THESE DETAILS FIL ED BY THE ASSESSEE FOR THE FIRST TIME BEFORE THE LD. CIT(A). (D) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD.CIT(A) WAS JUSTIFIED IN DELETING T HE ADDITION OF RS. 2,01,88,372/- DESPITE THE FACT THAT THE EXPENSES INCURRED AND CLAIMED BY THE ASSESSEE ON ACC OUNT OF MODERNIZATION AND RENOVATION OF PROJECT ARE CAPI TAL NATURE SINCE IT GIVES THE ASSESSEE A LONG BENEFIT SPRE AD OVER A NUMBER OF YEARS. 24 (E) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 68,45,000/- (OUT OF RS.2,01,88,372/- ) DESPITE THE FACT THAT THERE IS NO MENTION IN THE SCHEDULE 2 2/NOTES ON ACCOUNT ATTACHED TO THE BALANCE SHEET OF THE ASS ESSEE THAT RS. 68,45,000/- HAS BEEN CAPITALIZED ON ACCOUN T OF RENOVATION AND MODERNIZATION OF THE PROJECT UNDER A PDRP SCHEME, FARIDABAD. (F) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDI TION OF RS. L,31,58,372/-(OUT OF RS. 2,01,88,372/)- DESPITE THE FACT THAT THERE IS NOTHING ON RECORD TO SHOW THAT THESE EXPENSES RELATE TO COMPLETED PROJECTS AND NOT TO THE CAPITAL WORK-IN-PROGRESS. 44. IN THE ABOVE GROUNDS, WE FIND THAT THE REVENUE HAS CHALLENGED DELETION OF ADDITION OF RS.2,01,88,3 72/- ON ACCOUNT OF MODERNIZATION AND RENOVATION OF PROJECT HOLDING THE SAME TO BE CAPITAL IN NATURE. 45. BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSING OFFICER HAD FOUND THAT THE ASSESSEE HAD C LAIMED AN AMOUNT OF RS.2,01,88,372/- ON ACCOUNT OF INTERES T ON RENOVATION AND MODERNIZATION OF PROJECT AND DISALLO WED THE SAME HOLDING IT TO BE CAPITAL IN NATURE SINCE I T GAVE THE ASSESSEE A LONG BENEFIT SPREAD OVER A NUMBER OF YEARS. 46. IN THE APPELLATE PROCEEDINGS, THE ASSESSEE CONTENDED THAT IT HAD ACTUAL INCURRED AN AMOUNT OF RS.2,00,03,372/- AS INTEREST ON ACCOUNT OF RENOVATI ON AND MODERNIZATION OF PROJECT INSTEAD OF RS.2,01,88,372/ - WHICH PERTAINED TO FINANCIAL YEAR 2003-04 RELATING TO 25 ASSESSMENT YEAR 2004-05. FURTHER, THE ASSESSEE STA TED THAT OUT OF THE IMPUGNED AMOUNT OF RS.2,01,88,272/- A SUM OF RS.68,45,000/- HAD BEEN CAPITALIZED BY THE ASSESSEE ITSELF AGAINST RENOVATION AND MODERNIZATIO N UNDERTAKEN UNDER APDRP SCHEME FARIDABAD. THE ASSESSEE SUBMITTED DETAIL OF INTEREST CAPITALIZED D URING THE YEAR WHICH REFLECTED THE ABOVE SUM OF RS.68,45, 000/-. THE ASSESSEE FURTHER STATED THAT THE BALANCE AMOUNT OF INTEREST PERTAINED TO INCREMENTAL AMOUNT OF LOAN UN DER CENTRAL ASSISTANCE FOR RENOVATION AND MISCELLANEOUS TAKEN BY HSEB DURING THE YEAR 1989-90 AND TRANSFERRED TO THE ASSESSEE VIDE HARYANA GOVERNMENT NOTIFICATION DATED 13.8.1999 AGAINST COMPLETED SCHEMES/WORKS AND, THEREFORE, HAD BEEN CORRECTLY CHARGED TO THE PROFIT & LOSS ACCOUNT. THE LD. CIT (APPEALS) AFTER CONSIDERING ASSESSEES SUBMISSIONS ALLOWED ASSESSEES APPEAL AN D DELETED THE DISALLOWANCE MADE. 47. BEFORE US, THE LD. DR RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND FURTHER STATED THAT THE L D. CIT (APPEALS) ERRED IN ACCEPTING THE EXPLANATION OF THE ASSESSEE WITHOUT ANY CORROBORATING EVIDENCE, WHILE THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE OR DER OF THE LD. CIT (APPEALS) AS ALSO SUBMISSIONS MADE BEFO RE HIM. 48. WE HAVE HEARD THE RIVAL CONTENTIONS. THE LD. CIT (APPEALS), WE FIND, HAS AFTER GOING THROUGH THE DETAILS FILED BY THE ASSESSEE HELD THAT OUT OF THE TOTAL IN TEREST 26 CLAIMED BY THE ASSESSEE AN AMOUNT OF RS.68,45,000/- HAD ALREADY BEEN CAPITALIZED BY THE ASSESSEE AND IT WAS REFLECTED IN SCHEDULE-22 OF THE BALANCE SHEET OF TH E ASSESSEE. FURTHER, THE LD. CIT (APPEALS) HAS GIVEN A FINDING THAT THE BALANCE INTEREST OF RS.1,31,58,372 /- PERTAINED TO LOAN TAKEN BY HSEB FOR RENOVATION AND MODERNIZATION DURING THE FINANCIAL YEAR 1985-86 TO 1987- 88, WHICH WAS PUT TO USE IN MARCH, 1991 AND, THEREF ORE, THE INTEREST EXPENDITURE OF THE IMPUGNED YEAR RELAT ING TO ASSETS ALREADY PUT TO USE WAS TO BE TREATED AS REVE NUE EXPENDITURE. THE LD. DR HAS COUNTERED BY STATING T HAT NEITHER WAS THE INTEREST CAPITALIZED AND REFLECTED IN SCHEDULE-22 OF THE BALANCE SHEET, NOR ANY EVIDENCE BROUGHT ON RECORD AND REFERRED TO BY THE CIT (APPEA LS) TO PROVE THAT THE REMAINING INTEREST WAS INCURRED ON A CCOUNT OF COMPLETED PROJECTS. 49. WE FIND MERIT IN THE CONTENTIONS OF THE LD. DR THAT THE LD. CIT (APPEALS) HAS DELETED THE DISALLOW ANCE BY SIMPLY ACCEPTING THE CONTENTIONS OF THE ASSESSEE WI THOUT ANY CORROBORATING EVIDENCE RELATING TO THE SAME. N EITHER THE CAPITALIZATION OF INTEREST TO THE EXTENT OF RS.68,45,000/- ALLEGEDLY REFLECTED IN SCHEDULE-22 O F THE BALANCE SHEET WAS SHOWN TO US, NOR ANY EVIDENCE FIL ED BEFORE US TO PROVE THAT THE BALANCE INTEREST PAID P ERTAINED TO LOANS WHICH HAD BEEN UTILIZED TO ACQUIRE ASSETS IN EARLIER YEARS. FURTHER, WE FIND THAT EVEN THE LD. CIT (APPEALS) HAS MADE NO REFERENCE TO ANY EVIDENCE PRO VING 27 THE SAME EXCEPT FOR SCHEDULE-22 OF THE BALANCE SHEE T, WHICH THE LD. DR HAS CONTROVERTED. BUT IN THE ABSE NCE OF PRODUCTION OF THE SAID SCHEDULE-22 BEFORE US, BY EI THER OF THE PARTIES, THE AFORESTATED FACT REMAINS UNVERIFIE D. IN VIEW OF THE NON-SPEAKING ORDER PASSED BY THE LD. CI T (APPEALS), WE CONSIDER IT FIT TO RESTORE THE ISSUE BACK TO THE FILE OF THE LD. CIT (APPEALS) TO CONSIDER THE M ATTER AFRESH AFTER GIVING DUE OPPORTUNITY OF HEARING TO T HE ASSESSEE AND PASS A REASONED ORDER AFTER DECIDING THE ISSUES IN ACCORDANCE WITH LAW. 50. GROUND NOS.(C), (D), (E) AND (F) RAISED BY THE REVENUE ARE, THEREFORE, ALLOWED FOR STATISTICAL PUR POSES. 51. IN EFFECT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.1048/CHD/2010 : (REVENUES APPEAL) : 52. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : (A) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 19 .94 CRORES MADE BY THE AO U/S 40(A)(IA) ON ACCOUNT OF TRANSPORT CHARGES IG NORING THE SUBSTANCE OF THE TRANSACTION WHICH IS ESSENTIALLY A PAYMENT F OR THE TRANSPORT CHANGES AND NOT A PAYMENT FOR THE PURCHASE OF GOODS ? (B) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS. 1 9.94 CRORES MADE BY THE AO U/S 4()(A)(IA) IGNORING THE FACT THAT THE IN CLUSION OF TRANSPORTATION CHARGES IN THE SALES BILL DOES NOT CHANGE THE NATUR E OF PAYMENT BEING FOR THE PURPOSE OF TRANSPORTATION ESPECIALLY WHEN FROM THE BILLS IT IS CLEAR THAT 28 THE ASSESSEE MADE THE PAYMENT SPECIFICALLY FOR THE PURPOSE OF TRANSPORTATION? (C) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION O F RS.1.98.18.372/- DESPITE THE FACT THAT THE EXPENSES INCURRED AND CLA IMED BY THE ASSESSEE ON ACCOUNT OF MODERNIZATION AND RENOVATION OF THE P ROJECT ARE CAPITAL NATURE SINCE IT GIVES THE ASSESSEE A LONG BENEFIT SPREAD OVER A NUMBER OF YEARS ? (D) THE APPELLANT CRAVES FOR LEAVE TO ADD OR AMEND THE GROUND OF APPEAL BEFORE THE APPEAL IS HEARD AND DISPOSED OFF. (E) IT IS PRAYED THAT THE ORDER OF LD. CIT(A) BE SET ASIDE AND THAT OF THE AO BE RESTORED. 53. IT IS RELEVANT TO OBSERVE HERE THAT IT WAS ADMITTED BY BOTH THE PARTIES THAT THE ISSUE RAISED IN THE PRESENT APPEAL AS ALSO THE FACTS AND CIRCUMSTANCES OF THIS CASE ARE SIMILAR TO THAT IN ITA NO.398/CHD/2010. W E, THEREFORE, HOLD THAT THE FINDINGS GIVEN IN ITA NO.398/CHD/2010,VIS-AVIS DISALLOWANCE OF TRANSPORT ATION CHARGES U/S 40(A)(IA) OF THE ACT GIVEN AT PARA 41 & 42 OF THE ORDER AND VIS--VIS DISALLOWANCE OF INTEREST ON MODERNIZATION AND RENOVATION OF PROJECTS ,GIVEN AT PARA 48-50 OF THE ORDER, SHALL APPLY TO THIS CASE ALSO W ITH EQUAL FORCE. 54. THE APPEAL OF THE REVENUE IS THEREFORE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.19/CHD/2011 : (REVENUES APPEAL) : 29 55. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. ON THE BASIS OF THE FACTS AND IN THE CIRCUMSTAN CES OF THE CASE, THE LD. C.I.T.(A)IS NOT JUSTIFIED IN DELETING THE ADDIT ION OF RS.23,03,69,578/- MADE UNDER SECTION 40(A)(IA)OF THE I.T.A.T. ON ACC OUNT OF TRANSPORT CHARGES IGNORING THE SUBSTANCE OF THE TRANSACTION W HICH IS ESSENTIALLY A PAYMENT FOR TRANSPORT CHARGES AND NOT A PAYMENT F OR THE PURCHASE OF GOODS AND FURTHER IGNORING THE FACT THAT THE INCLUS ION OF TRANSPORT CHARGES WITH THE SALE BILL DOES NOT CHANGE THE NATU RE OF PAYMENT AND THE SUM BEING PAID FOR THE PURPOSE OF TRANSPORT. 2. ON THE BASIS OF THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE, THE LD. C.I.T.(A) IS NOT JUSTIFIED IN DELETING THE ADDI TION OF RS.1,96,33,372/- ON ACCOUNT OF INTEREST ON RENOVATION AND MODERNIZAT ION OF THE PROJECT DESPITE THE FACT THAT THE EXPENSES INCURRED AND CLA IMED BY THE ASSESSEE ON ACCOUNT OF MODERNIZATION AND RENOVATION OF THE P ROJECT ARE OF CAPITAL NATURE SINCE IT GAVE THE ASSESSEE A LONG BENEFIT SPREAD OVER A NUMBER OF YEARS. 3. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE G ROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DISPOSED OFF. 4. IT IS PRAYED THAT THE ORDER OF THE LD. CIT (A) B E SET ASIDE AND THAT OF AO RESTORED. 56. IT IS RELEVANT TO OBSERVE HERE THAT IT WAS ADMITTED BY BOTH THE PARTIES THAT THE ISSUE RAISED IN THE PRESENT APPEAL AS ALSO THE FACTS AND CIRCUMSTANCES OF THIS CASE ARE SIMILAR TO THAT IN ITA NO.398/CHD/2010. W E, THEREFORE, HOLD THAT THE FINDINGS GIVEN IN ITA NO.398/CHD/2010,VIS-AVIS DISALLOWANCE OF TRANSPORT ATION CHARGES U/S 40(A)(IA) OF THE ACT GIVEN AT PARA 41 & 42 OF THE ORDER AND VIS--VIS DISALLOWANCE OF INTEREST ON MODERNIZATION AND RENOVATION OF PROJECTS ,GIVEN AT PARA 30 48-50 OF THE ORDER, SHALL APPLY TO THIS CASE ALSO W ITH EQUAL FORCE. 57. THE APPEAL OF THE REVENUE IS THEREFORE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.26/CHD/2011 : (ASSESSEES APPEAL) : 58. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : L. THAT THE ORDER PASSED BY THE CIT(A) IN CONFIRMI NG THE ADDITIONS MADE BY THE AO ARE ILLEGAL, ARBITRARY, HA VE BEEN PASSED IN A HASTE AND HAVE IGNORED BASIC ASPECTS AND FACTS THUS CAUSING UNDUE HARDSHIP TO THE APPELLANT. 2.THAT THE CIT(A) HAS ERRED BOTH ON FACTS AND LAW I N CONFIRMING THE DISALLOWANCE OF RS.2705917.00 ON ACCOUNT OF 'GUARAN TEE COMMISSION' BY HOLDING THAT THE SAME IS IN THE NATURE OF CAPITA L EXPENDITURE. THE ADDITION IS UNJUST, ILLEGAL AND DESERVES TO BE QUASHED. IT IS PRAYED THAT ADDITION OF RS.2705917.00 MAY KINDLY BE ORDERED TO BE DELETED. 3. THAT THE CIT (A) HAS ERRED BOTH ON FACTS AND LAW IN CONFIRMING THE DISALLOWANCE OF RS.694164.00 ON ACCOUNT OF 'COM MITMENT CHARGES' BY HOLDING THAT THE SAME IS IN THE NATURE OF CAPITAL EXPENDITURE. THE ADDITION IS UNJUST, ILLEGAL AND DESERVES TO BE QUASHED. IT IS PRAYED THAT ADDITION OF RS.694164.00 MAY KINDLY BE ORDERED TO BE DELETED. 4.THAT THE APPELLANT CRAVES TO ADD, DELETE, CONCEDE , MODIFY AND ALTER ANY OR ALL THE GROUNDS OF APPEAL AT THE T IME OF HEARING. 31 59. THE ASSESSEE IN THE PRESENT APPEAL HAS CHALLENGED THE DISALLOWANCE MADE OF GUARANTEE COMMISSION EXPENSES AMOUNTING TO RS.27,05,917/- AND COMMITMENT CHARGES OF RS.6,94,164/- MADE BY HOLDING THE SAME TO BE IN THE NATURE OF CAPITAL EXPENDITURE. 60. BRIEFLY STATED, THE FACTS RELATING TO THE ISSU E ARE THAT THE ASSESSING OFFICER MADE THE IMPUGNED DISALLOWANCES BY HOLDING THE SAME TO BE CAPITAL IN NATURE AND BY FOLLOWING HIS ORDERS IN THE PREVIOUS YEARS. THE LD. CIT (APPEALS) UPHELD THE DISALLOWANCE FOLLOWING THE ORDER PASSED BY THE CIT (APPEALS) IN PRECEDING YEAR IN TH E CASE OF THE ASSESSEE. THE LD. CIT (APPEALS) UPHELD THE DISALLOWANCE BY HOLDING AT PARAS 6 AND 7 OF HIS ORD ER AS FOLLOWS : 6. THIS GROUND OF APPEAL IS REGARDING ADDITION OF RS.27,05,917/- ON ACCOUNT OF GUARANTEE COMMISSION B Y TREATING THE SAME AS CAPITAL EXPENDITURE. THE AO HAS MENTIONED T HAT THIS EXPENDITURE IS CAPITAL IN NATURE. THE COUNSEL ON TH E OTHER HAND ARGUED THAT THIS AMOUNT HAVE BEEN PAID TO THE HARYA NA GOVT. FOR BORROWING MONEY FOR FUNDING WORKING CAPITAL REQUIRE MENT. MY PREDECESSOR WHILE DECIDING SIMILAR GROUND OF APPEAL IN THE EARLIER YEAR OBSERVED AS UNDER :- 'I DO NOT FIND ANY MERIT IN THE ARGUMENT OF THE COU NSEL. THE COUNSEL HAS NOT FURNISHED ANY EVIDENCE IN SUPPORT O F HIS CONTENTION THAT THE GUARANTEE CHARGES HAVE BEEN PAI D FOR WORKING CAPITAL BORROWINGS AND NOT FOR FINANCING OF CAPITAL PROJECTS. THE AO HAS RIGHTLY TREATED THIS EXPENDITU RE AS CAPITAL IN NATURE IN THE ABSENCE OF ANY EVIDENCE. THE ADDITION MADE BY THE A O IS JUSTIFIED AND IS UPHELD. THIS GROUND OF APPE AL IS REJECTED. ' 32 AGREEING WITH MY PREDECESSOR, THE ADDITION OF RS. 2 7,05,917/- MADE BY THE AO ON ACCOUNT OF GUARANTEE CHARGES IS UPHELD . THIS GROUND OF APPEAL IS DISMISSED. THIS GROUND OF APPEAL IS REGARDING ADDITION OF RS.6 ,94,164/- RELATING TO THE COMMITMENT CHARGES. THE AO HAS TREATED THIS EXPENDITURE AS CAPITAL EXPENDITURE. THE COUNSEL ON THE OTHER HAND ARGUED THAT THIS AMOUNT HAVE BEEN PAID TO THE HARYA NA GOVT. FOR BORROWING MONEY FOR FUNDING WORKING CAPITAL REQUIRE MENT. MY PREDECESSOR WHILE DECIDING SIMILAR GROUND OF APPEAL IN THE EARLIER YEAR OBSERVED AS UNDER :- 'I DO NOT FIND ANY MERIT IN THE ARGUMENT OF THE COU NSEL. THE COUNSEL HAS NOT FURNISHED ANY EVIDENCE IN SUPPORT O F HIS CONTENTION THAT THE COMMITMENT CHARGES HAVE BEEN PA ID FOR WORKING CAPITAL BORROWING AND NOT FOR FINANCING OF CAPITAL PROJECTS. THE AO HAS RIGHTLY TREATED THIS EXPENDITU RE AS CAPITAL IN NATURE IN THE ABSENCE OF ANY EVIDENCE. THE ADDITION MADE BY THE AO IS JUSTIFIED AND IS UPHELD. THIS GROUND OF A PPEAL IS REJECTED.' 61. BEFORE US, THE LD. DR ARGUED THAT IDENTICAL DISALLOWANCE MADE IN THE PRECEDING YEARS I.E AY 200 6-07 & 2004-05, WHICH HAD BEEN UPHELD BY THE CIT (APPEAL S), HAD BEEN ACCEPTED BY THE ASSESSEE, AS NO GROUND WAS RAISED AGAINST THE SAME IN THE APPEAL FILED FOR THO SE YEARS BEFORE THE I.T.A.T. THE LD. DR FURTHER STATED THAT NO EVIDENCE HAD BEEN PRODUCED BY THE ASSESSEE IN SUPPO RT OF ITS CLAIM IN THE IMPUGNED YEAR ALSO. THE LD. DR, THEREFORE, STATED THAT THE CIT (APPEALS) HAD RIGHTL Y UPHELD THE DISALLOWANCE. 33 62. THE LEARNED COUNSEL FOR THE ASSESSEE, HOWEVER, REITERATED ITS SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES THAT THE EXPENSES HAD BEEN INCURRED FOR BORROWING FUNDS FOR WORKING CAPITAL REQUIREMENT AND WERE, THEREFORE, REVENUE IN NATURE. 63. HAVING HEARD THE RIVAL CONTENTIONS, WE FIND NO MERIT IN THE ASSESSEES CONTENTIONS. UNDISPUTEDLY, IDENTICAL DISALLOWANCES WERE MADE IN ASSESSMENT YEA R 2004-05 AND 2006-07, WHICH, IN ASSESSMENT YEAR 2006 - 07,WERE UPHELD BY THE CIT (APPEALS) AND NOT FURTHER CHALLENGED BY THE ASSESSEE BEFORE THE I.T.A.T. WHI LE IN ASSESSMENT YEAR 2004-05,THE ADDITION WAS NOT CHALLE NGED BEFORE THE CIT(A), THUS IMPLYING THAT THE ASSESSEE HAS ACCEPTED THAT THE NATURE OF THE GUARANTEE COMMISSIO N AND COMMITMENT CHARGES PAID WAS CAPITAL. FURTHER, BEFO RE US, NO DISTINGUISHING FACTS HAVE BEEN BROUGHT TO SHOW H OW THE FACTS IN THE PRESENT CASE ARE DIFFERENT FROM TH AT IN THE PRECEDING YEARS, NOR ANY EVIDENCE ADDUCED TO SHOW T HAT THE IMPUGNED EXPENSES WERE INCURRED FOR AVAILING WO RKING CAPITAL FUNDS AND HENCE WERE REVENUE IN NATURE. WE , THEREFORE, FIND NO REASON TO DIFFER FROM THE ORDER OF THE LD. CIT (APPEALS) AND UPHOLD THE DISALLOWANCE OF GUARANTEE COMMISSION OF RS.27,05,917/- AND COMMITME NT CHARGES OF RS.6,94,164/-. IN VIEW OF THE ABOVE, BO TH THE GROUNDS OF THE ASSESSEE ARE DISMISSED. 64. THE APPEAL OF THE ASSESSEE, THEREFORE, STANDS DISMISSED. 34 ITA NO.698/CHD/2012 : (ASSESSEES APPEAL) : 65. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 2. THAT THE CIT (A) HAS ERRED BOTH ON FACTS AND LA W IN CONFIRMING THE ADDITION OF RS.271034982 BE ING DISALLOWANCE UNDER SECTION 40 (A) (IA) OF INCOME TA X ACT BEING PAYMENT MADE TO TRANSPORTERS WITHOUT DEDUCTIO N OF TAX AT SOURCE. THE ADDITIONS IS UNTENABLE, ILLEGAL AND IS NOT BASE D UPON CORRECT APPRECIATION OF PROVISIONS OF LAW AND HAS BEEN CONF IRMED BY CIT(A)WITHOUT CONSIDERING THE PAST HISTORY OF THE A PPELLANT AND THEREFORE THE SAME DESERVES TO BE DELETED. IT IS PRAYED THAT ADDITION OF RS.271034982 MAY KIND LY BE ORDERED TO BE DELETED. 3. THAT THE CIT (A)HAS ERRED BOTH ON FACTS AND LAW IN CONFIRMING THE ADDITION OF RS.19448372 BEIN G EXPENDITURE INCURRED ON RENOVATION AND MODERNIZATIO N OF PROJECTS. THE ADDITIONS IS UNTENABLE, ILLEGAL AND IS NOT BASE D UPON CORRECT APPRECIATION OF PROVISIONS OF LAW AND HAS BEEN CONF IRMED BY CIT(A) WITHOUT CONSIDERING THE PAST HISTORY OF THE APPELLA NT AND THEREFORE THE SAME DESERVES TO BE DELETED. IT IS PRAYED THAT ADDITION OF RS.19448372 MAY KINDL Y BE ORDERED TO BE DELETED. 4. THAT THE CIT (A) HAS ERRED BOTH ON FACTS AND LAW IN CONFIRMING THE ADDITION OF RS.3216500 ON ACCOUNT OF GUARANTEE CHAR GES. THE ADDITION IS UNJUST, ILLEGAL AND DESERVES TO BE QUASHED. IT IS PRAYED THAT ADDITION OF RS.3216500 MAY KINDLY BE ORDERED TO BE DELETED. 35 5. THAT THE CIT (A) HAS ERRED BOTH ON FACTS AND LAW FOR INITIATING PROCEEDINGS U/S 201 OF INCOME TAX ACT FOR NON DEDUC TION OF TDS ON INTEREST. THE PROCEEDINGS HAVE BEEN INITIATED BY THE CIT(A) WITHOUT ANY COGENT REASONS AND WITHOUT ANY MATERIAL AVAILABLE O N RECORD. THE PROCEEDINGS INITIATED BY THE CIT (A) UNDER SECT ION 201 THEREFORE ARE ILLEGAL AND THUS DESERVES TO BE QUASHED. 66. IT IS RELEVANT TO OBSERVE HERE THAT IT WAS CONCEDED BY BOTH THE PARTIES THAT THE GROUND NOS.2 AND 3 RAISED IN THIS APPEAL ARE SIMILAR TO THE GROUNDS RA ISED IN ITA NO.398/CHD/2010. WE, THEREFORE, HOLD THAT THE FINDINGS GIVEN IN ITA NO.398/CHD/2010,VIS-AVIS DISALLOWANCE OF TRANSPORTATION CHARGES U/S 40(A)(IA ) OF THE ACT GIVEN AT PARA 41 &42 OF THE ORDER AND VIS--VIS DISALLOWANCE OF INTEREST ON MODERNIZATION AND RENOV ATION OF PROJECTS ,GIVEN AT PARA 48-50 OF THE ORDER, SHAL L APPLY TO THESE TWO GROUNDS ALSO WITH EQUAL FORCE. 67. FURTHER, GROUND NO.4 RAISED IN THIS APPEAL, IT WAS CONCEDED BY BOTH THE PARTIES, IS SIMILAR TO GRO UND NO.2 IN ITA NO.26/CHD/2011 AND THE FINDINGS GIVEN I N ITA NO.26/CHD/2011 SHALL APPLY MUTATIS MUTANDIS TO THIS GROUND ALSO. 68. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED F OR STATISTICAL PURPOSES. 69. IN THE RESULT, 36 I) THE APPEAL OF THE REVENUE IN ITA NO.454/CHD/2010 IS ALLOWED FOR STATISTICAL PURPOSES. II) THE APPEAL OF THE ASSESSEE IN ITA NO.453/CHD/2010 IS ALLOWED. III) THE APPEAL OF THE REVENUE IN ITA NO.398/CHD/2010 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. IV) THE APPEAL OF THE REVENUE IN ITA NO.1048/CHD/2010 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. V) THE APPEAL OF THE REVENUE IN ITA NO.19/CHD/2011 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. VI) THE APPEAL OF THE ASSESSEE IN ITA NO.26/CHD/2010 IS DISMISSED. VII) THE APPEAL OF THE ASSESSEE IN ITA NO.698/CHD/2012 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 21 ST NOVEMBER, 2016 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH