Gujarat Gas Company Ltd., Ahmedabad V. The Jt.CIT.,Circle-4, Ahmedabad

ITA 1921/AHD/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1695 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 10-05-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 02-08-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Business expenditure; Opportunity of being heard; Earning of tax free income; Proportionate interest; Revenue expenditure; Capital expenditure
• Section: 143(3); 142(1); 14A; 37; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE SHRI SHAILENDRA YADAV, JM, & SHRI MANISH BORAD, AM. ITA NO.1921/AHD/2011 ASST. YEAR: 2005-06 GUJARAT GAS COMPANY LTD., 2, SHANTISADAN SOCIETY, NEAR PARIMAL GARDEN, ELLISBRIDGE, AHMEDABAD. VS. JT. CIT, CIRCLE-4, AHMEDABAD. APPELLANT RESPONDENT PAN AAACG5600M ITA NO.1950/AHD/2011 WITH CO NO.228/AHD/2011 ASST. YEAR: 2005-06 ACIT, CIRCLE-4, AHMEDABAD VS. GUJARAT GAS COMPANY LTD., 2, SHANTISADAN SOCIETY, NEAR PARIMAL GARDEN, ELLISBRIDGE, AHMEDABAD. APPELLANT RESPONDENT APPELLANT BY SHRI SANJAY R. SHAH, AR RESPONDENT BY SHRI DILEEP KUMAR, SR.DR DATE OF HEARING: 10/5/2016 DATE OF PRONOUNCEMENT: 17/5/2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THESE CROSS APPEALS AND THE CROSS OBJECTION BY ASS ESSEE ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A)-VIII, AHME DABAD, DATED ITA NO. 1921. 1950 & CO 228-AHD-2011 ASST. YEAR 2005-06 2 13.05.2011 IN APPEAL NO.CIT(A)-VIII/JC-4/229/07-08 PASSED AGAINST ORDER UNDER SECTION 143(3) OF THE IT ACT, 1961 FOR ASST. YEAR 2005-06 WHICH WAS FRAMED ON 26.12.2007 BY JT.CIT, RANGE-4, AHMEDABAD. 2. BRIEFLY STATED FACTS AS CULLED OUT FROM THE RECO RDS ARE THAT ASSESSEE IS A PUBLIC LIMITED COMPANY ENGAGED IN THE BUSINESS OF PROCESSING AND DISTRIBUTION OF NATURAL GAS TO DOMES TIC, COMMERCIAL AND INDUSTRIAL CONSUMERS AND BOTTLING & MARKETING O F THE LIQUEFIED PETROLEUM GAS. RETURN OF INCOME WAS FOR ASST. YEAR 2005-06 WAS FILED ON 29.10.2005 DECLARING TOTAL INCOME OF RS.10 8,15,96,455/-. CASE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER CAS S. NOTICE U/S 143(2) OF THE ACT WAS ISSUED ON 29.06.2006 AND SERV ED ON THE ASSESSEE ON 4.7.2006 FOLLOWED BY NOTICE U/S 142(1) OF THE ACT ALONG WITH QUESTIONNAIRE DULY SERVED ON THE ASSESSEE ON 6 .2.2007. CASE WAS DISCUSSED, BOOKS OF ACCOUNT WERE VERIFIED, RELE VANT DETAILS WERE FILED AND ASSESSMENT WAS COMPLETED AT AN ASSESSED I NCOME OF 109,68,29,630/- AFTER MAKING ADDITIONS AND DISALLOW ANCE OF RS.1,52,33,175/-. 3. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE LD. CI T(A) AND THE APPEAL WAS PARTLY ALLOWED. 4. NOW ASSESSEE AND THE REVENUE BOTH ARE IN APPEAL AGAINST THE ORDER OF LD. CIT(A) AND ASSESSEE HAS FILED CROSS OB JECTION AGAINST THE ORDER OF LD. CIT(A). ITA NO. 1921. 1950 & CO 228-AHD-2011 ASST. YEAR 2005-06 3 5. FIRST WE TAKE UP APPEAL FILED BY THE ASSESSEE IN ITA NO.1921/AHD/2011 FOR ASST. YEAR 2005-06. 6. FIRST GROUND OF THE APPEAL IS GENERAL IN NATURE WHICH NEED NOT BE ADJUDICATED. 7. GROUND NO.2 OF THE APPEAL READS AS FOLLOWS :- 2. THE LEARNED CIT(A) ERRED IN LAW AND FACTS IN C ONFIRMING THE DISALLOWANCE OF INVENTORY WRITTEN OFF OF RS.12,80,536/-. IN THE FAC TS OF THE CASE, APPELLANT SUBMITS THAT THE INVENTORY WAS LYING WITH IT FOR PA ST SO MANY YEARS, WHICH WAS WRITTEN OFF ON ACCOUNT OF TECHNICAL OBSOLESCENCE & ON GROUND OF CUSTOMER SAFETY AND HENCE IT SHOULD BE ALLOWED AS DEDUCTION TO THE APPELLANT. IT IS SUBMITTED THAT IT BE SO HELD NOW. 8. LD. AR SUBMITTED THAT THE INVENTORY OF RS.12,80, 536/- WHICH WAS A NON-MOVING ITEM WAS WRITTEN OFF BUT THE SAID CLAIM WAS NOT ACCEPTED BY THE LD. ASSESSING OFFICER BECAUSE THERE WAS NO REALIZATION OF SCRAP ON ACCOUNT OF THE INVENTORY WR ITTEN OFF. LD. AR FURTHER SUBMITTED THAT STOCK WRITTEN OFF WAS NON-MO VING FOR LAST MORE THAN THREE YEARS AND THE COPY OF LEDGER A/C OF INVE NTORY WRITTEN OFF WITH COMPLETE SPECIFICATION OF ITEMS, QUANTITY, DAT E OF PURCHASE ALONG WITH THE REPORT OF TECHNICAL DEPARTMENT VERIFYING T HAT THE IMPUGNED INVENTORY IS NON-MOVING AND NON-SALEABLE, WERE SUBM ITTED BEFORE THE LD. ASSESSING OFFICER. THE IMPUGNED INVENTORY/ITEMS WERE PROCURED FOR INSTALLATION PURPOSES IN DOMESTIC/INDUSTRIAL CO NNECTIONS AS A PART OF REGULAR BUSINESS ACTIVITY. HOWEVER, THESE ITEMS COULD NOT BE USED DUE TO TECHNICAL OBSELENCE AND CUSTOMERS SAFETY RE ASONS. THE COMPANY HAS A SYSTEM OF DISPOSING SCRAP MATERIAL ON A QUARTERLY BASIS BY WAY CALLING FOR QUOTATIONS FROM APPROVED S CRAP DEALERS AND ITA NO. 1921. 1950 & CO 228-AHD-2011 ASST. YEAR 2005-06 4 THE REALIZATION FROM SALE OF SCRAP IS ACCOUNTED FOR AS MISCELLANEOUS INCOME AND THE SAME IS OFFERED TO TAX. 9. ON THE OTHER HAND LD. DR SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THROUGH THIS GROUND ASSESSEE IS AGGRIEVE D WITH THE ORDER OF LD. CIT(A) FOR DISALLOWANCE OF INVENTORY WRITTEN OFF OF RS.12,80,536/- WE OBSERVE THAT AT PAGES 180 TO 186 OF THE PAPER BO OK SHOWS APPROVAL NOTE FOR WRITE OFF OF NON-MOVING ITEMS OCC URRED DUE TO PROJECT SURPLUS ITEMS, DISCONTINUED USE DUE TO CHAN GE IN SPECIFICATION/ABANDONED ACTIVITIES, INCOMPLETE ASSE MBLIES, PURCHASE OF HIGHER QUANTITY FOR CONTINGENCY, OBSOLETE DUE TO TECHNICAL UP- GRADATION AND THE TECHNICAL-CUM-APPROVAL NOTE IS DU LY SIGNED BY VICE PRESIDENT, MS, DIRECTOR-TECHNICAL, DIRECTOR FINANCE AND OTHER MANAGEMENT PEOPLE. WE ALSO OBSERVE THAT ITEM-WISE D ETAILS WITH PROPER SPECIFICATION ALONG WITH YEAR SINCE WHICH TH ESE ITEMS ARE LYING IN THE INVENTORY, ARE PLACED BEFORE US. HOWEVER, WH EN SPECIFIC QUESTION WAS RAISED TO THE LD. AR THAT WHAT AMOUNT OF SCRAP VALUE HAS THE COMPANY BEEN ABLE TO REALIZE BY SELLING THE SE OBSOLETE AND SLOW MOVING STOCK OF RS.12,80,536/-, LD. AR REPLIED THAT CERTAINLY THESE SLOW MOVING ITEMS SHOULD HAVE FETCHED SOME SC RAP VALUE BUT THE SAME HAS BEEN ACCOUNTED FOR IN THE BOOKS OF ACC OUNT IN THE FOLLOWING YEARS AS AND WHEN THEY HAVE BEEN SOLD. ITA NO. 1921. 1950 & CO 228-AHD-2011 ASST. YEAR 2005-06 5 11. WE FURTHER OBSERVE FROM THE ORDERS OF LOWER AUT HORITIES THAT THE ONLY BASIS TAKEN FOR PROCESSING THE ADDITION AS WEL L AS CONFIRMING THE SAME FOR NOT ALLOWING THE CLAIM OF INVENTORY WRITTE N OFF AT RS.12,80,536/- RESTED UPON THE FACT THAT NO SCRAP V ALUE WAS REPORTED BY THE ASSESSEE TO HAVE BEEN RECEIVED WHILE WRITING OFF OF THESE SLOW MOVING ITEMS. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT IT WILL BE JUST AND PROPER TO SET ASIDE THIS ISSUE TO THE F ILE OF ASSESSING OFFICER FOR VERIFICATION TO THE LIMITED EXTENT AND THE ASSESSEE SHALL PUT BEFORE HIM NECESSARY DETAILS WHICH CAN PROVE THAT S OME PROCESS HAS BEEN FOLLOWED FOR SELLING SUCH SCRAP ITEMS AND SPEC IFIC SCRAP VALUE OF THE INVENTORY WRITTEN OFF HAS BEEN ACCOUNTED FOR AS AN INCOME IN THE BOOKS OF ACCOUNT. LD. AR AGREED TO THE SAME AND NO OBJECTION WAS RAISED BY THE LD. DR TO THIS FACT AND ACCORDINGLY, WE SET ASIDE THIS ISSUE TO THE FILE OF ASSESSING OFFICER AS DISCUSSED AND NEEDLESS TO SAY THAT PROPER OPPORTUNITY OF BEING HEARD TO THE A SSESSEE WOULD BE GIVEN BY ASSESSING OFFICER. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 12. GROUND NO.3 READS AS UNDER :- 3. THE LEARNED CIT (A) HAS ERRED IN NOT GRANTING CO NSEQUENTIAL DEPRECIATION AT APPROPRIATE RATE TO THE APPELLANT FOR THE FEES PAID OF RS. 8,30,017/- IN RELATION TO DUE DILIGENCE CARRIED OUT IN AY 2002-03 WHICH WA S DISALLOWED IN AY 2002- 03 CONSIDERING THE SAME AS CAPITAL EXPENDITURE. IT IS SUBMITTED THAT DIRECTION BE GIVEN TO ALLOW DEPRECIATION ON THE SAME. 13. THIS GROUND HAS NOT BEEN PRESSED. HENCE DISMIS SED AS NOT PRESSED. ITA NO. 1921. 1950 & CO 228-AHD-2011 ASST. YEAR 2005-06 6 14. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALL OWED FOR STATISTICAL PURPOSES. 15. NOW WE TAKE ITA NO.1950/AHD/2011 (REVENUES APP EAL) FOR ASST. YEAR 2005-06. GROUND NO.1 READS AS UNDER :- 1. THE LD.CLT(A) HAS ERRED IN LAW AND ON FACTS IN D ELETING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF DEPRECIAT ION ON PLANT AND MACHINERY COVERED UNDER SALE LEASE BACK TRANSAC TION WITH RSEB OF RS,29,53,055/-. 16. LD. DR SUPPORTED THE ORDER OF LD. ASSESSING OFF ICER. 17. ON THE OTHER HAND, LD. AR SUBMITTED THAT ASSETS OF ASSESSEE WERE PURCHASED FROM RAJASTHAN STATE ELECTRICITY BOA RD (RSEB) WHICH IS A STATE GOVERNMENT UNDERTAKING, FORMED UNDER THE STATE ELECTRICITY SUPPLY ACT AND THE SAME WERE LEASED BAC K TO RSEB. THIS WAS DONE PURSUANT TO A LEASE AGREEMENT AND IT WAS R EGULARLY RECEIVING LEASE RENT FROM RSEB WHICH ALSO WAS OFFER ED TO TAX. HE ALSO SUBMITTED THAT THIS ISSUE HAS ALREADY BEEN DEC IDED IN FAVOUR OF ASSESSEE BY THE TRIBUNAL IN ITA NO. 2026/AHD/2004 F OR ASST. YEARS 1995-96 AND IN ITA NO.1264/AHD/2006 FOR ASST. YEAR 2002-03 RESPECTIVELY. MOREOVER, HON. GUJARAT HIGH COURT IN THE CASE OF CIT VS. GUJARAT GAS COMPANY LTD. IN TAX APPEAL NO.444 O F 2008 HAS DISMISSED THE APPEAL OF REVENUE VIDE ORDER DATED 10 .09.2008. FURTHER THE SLP OF THE DEPARTMENT AGAINST THE ORDER OF GUJARAT HIGH COURT HAS BEEN DISMISSED BY HON. SUPREME COURT. THU S HE SUBMITTED THAT THE LD. CIT(A) HAS RIGHTLY ALLOWED T HE DEPRECIATION ON ITA NO. 1921. 1950 & CO 228-AHD-2011 ASST. YEAR 2005-06 7 PLANT AND MACHINERY COVERED UNDER SALE LEASE BACK T RANSACTION WITH RSEB. WE OBSERVE THAT SIMILAR ISSUE CAME UP BEFORE THE TRIBUNAL IN ASSESSEE S OWN CASE OF FOR ASST. YEAR 1995-96 AND ASST. YEAR 2002- 03 IN ITA NO. ITA NO. 2026/AHD/2004 FOR CLAIM OF DE PRECIATION ON PLANT AND MACHINERY COVERED UNDER SALES/LEASE BACK WITH RSEB WHICH WAS ALLOWED BY THE CO-ORDINATE BENCH VIDE ITS ORDER DATED 30.11.2006 BY OBSERVING AS UNDER :- 10.6 THE ID. AR HEAVILY RELIED ON THE DECISION OF HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. RAJ ASTHAN STATE ELECTRICITY BOARD 204 CTR 415, WE NOTED IN THIS CASE UNDER PARA 15 HON'BLE HIGH COURT HAS HELD AS UNDER;- 'AFTER GOING INTO FACTS OF THE CASE, WE FIND : : THAT THE ASSESSEE'S BOARD AND THE LESSOR WITH VARIOUS COMPAN IES HAD ENTERED INTO GENUINE AGREEMENT. THE ASSETS HAD BEEN SOLD FOR WHICH CONSIDERATION HAD BEEN RECEIVED. BY THIS COLOURABLE DEVICE, THE ASSESSEE'S BOARD HAD BEEN ABLE TO RAISE FUNDS AT LESSER ROTE WHICH IS PREVALENT IN THE MARKET. BY ENTERING INTO THESE TRANSACTIONS, THE TAX LIABILITY OF THE ASSESSEE BO ARD HAS NOT BEEN REDUCED. WE FIND THAT THIS CANNOT BE TERMED AS SHAM TRANSACTION AS HELD IN THE CASE OF CIT VS. SAKASARIA SONS (P) LTD 25 CTR (BOM) 148 138 ITR 419 FOR THE FOLLOWING REASONS: (I) NO ACTUAL TRANSACTION WAS EXECUTED ON THE BASIS OF THE AGREEMENT. (II) THE AGREEMENT IS WITHOUT ANY CONSIDERATION. (III) THE AMOUNT BE PAID ON THE BASIS OF THE AGREEM ENT WHICH WERE ACTUALLY PAID BUT ONLY THE BOOK ENTRIES WERE MADE.' 10.7 THE ID. DR DID NOT DISPUTE THE FACT THAT THE A GREEMENT ENTERED INTO BY THE ASSESSEE IS DIFFERENT FROM THE ONE WHICH HAS BE EN HELD TO BE GENUINE TRANSACTION BY THE HON'BLE RAJASTHAN HIGH COURT IN THE AFORESAID CASE. WE ALSO NOTED THAT THE REVENUE HAS TAXED THE LEASE REN T AS SHOWN BY THE ASSESSEE ALSO ALTHOUGH THE CIT(A) ON APPEAL DIRECTE D THE ASSESSING OFFICER ONLY TO TAX THE INTEREST. IN OUR VIEW THE D ECISION OF THE RAJASTHAN ITA NO. 1921. 1950 & CO 228-AHD-2011 ASST. YEAR 2005-06 8 HIGH COURT IS BINDING ON US SPECIALLY WHEN THE SIMI LAR AGREEMENT ENTERED INTO BY THE RSEB WAS HELD TO BE THE GENUINE ONE. WE HAVE ALSO GONE JUDGMENT OF JAIPUR BENCH OF THIS TRIBUNAL IN THE CA SE OF RSEB V. C|T ITA NO 42/JP/2001 IN THAT CASE ALSO THE TRIBUNAL HAS HE LD ANSACTION ENTERED INTO BY RSEB TO BE GENUINE ONE. 10.8 WE ALSO NOTED THAT B BENCH OF THIS TRIBUNAL IN ITS ORDER IN ITA NO.427/AHMD/2003 FOR A.Y. 2003-2004 IN THE CASE O F GUJARAT LEASING FINANCING LTD TO WHICH J.M. IS THE AUTHOR HAS HELD AS UNDER:- '13. AFTER HAVING CONSIDERED THE AFORESAID DECIS IONS RELIED UPON BY THE PARTIES WHAT WE ARE ABLE TO UNDERSTAND IS THAT FOR A TRANSA CTION OF SALE AND LEASE BACK/PURCHASE AND LEASE BACK TO BE GENUINE, FOLLOWING INGREDIENTS SHOULD BE SATISFIED. (I) THE ASSETS INVOLVED IN THE TRANSACTION MUST BE PHYSICALLY AVAILABLE AND DULY IDENTIFIABLE. (II) THE ASSETS IN QUESTION MUST BE USED FOR T HE BUSINESS OF THE LESSEE. (III) MOVEMENT OF REQUEST IS REQUIRED ONLY WHEN THE ASSETS IN QUESTION ARE PURCHASED FROM MANUFACTURER/SUPPLIER AND IN THAT CA SE ALSO IT IS NOT NECESSARY THAT THE ASSTS SO PURCHASED SHOULD FIRST MOVE TO THE LESSOR. THE ASSETS IN QUESTION CAN BE DIRECTED TO BE DELIVERED DIRECTLY TO THE LESSOR. IN CASE, THE LESSEE IS ALREADY HAVING THE ASSETS AN D IS IN POSSESSION OF THE SAME, THEN TO RAISE THE FUNDS HE CAN ENTER INTO A T RANSACTION OF SALE AND LEASE BACK AND IN THAT CASE, MOVEMENT OF THOSE ASSE TS FROM LESSEE TO LESSOR AND THEN BACK FROM LESSOR TO LESSEE IS NOT N ECESSARY; MEANING THEREBY THAT THE QUESTION OF MOVEMENT OF ASSETS IS RELEVANT ONLY WHEN THE ASSETS IN QUESTION ARE TO BE PURCHASED FROM A PARTY OTHER THAN THE LESSOR AND LESSEE. (IV) THE INTENTION FOR ENTERING INTO THE TRANSAC TION OF PURCHASE AND LEASE BACK OR SALE AND LEASE BACK SHOULD NOT BE TO DEFRAUD THE REVENUE. (V) ASSETS IN QUESTION SHOULD BE USED BY THE L ESSEE FOR ITS BUSINESS, (VI) THE TRANSACTION OF SALE AND LEASE BACK OR PURCHASE AND LEASE BACK SHOULD BE EVIDENCED BY A DULY EXECUTED LEASE-DEED AND THE PARTY SHOULD HAVE ACTED ACCORDINGLY. (VII) THE LESSOR MUST HAVE PAID THE PURCHASE PRI CE.. 14. IF WE CONSIDER THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, IT WILL BE REVEALED THAT ITA NO. 1921. 1950 & CO 228-AHD-2011 ASST. YEAR 2005-06 9 (I) THERE IS NO DISPUTE WITH RESPECT TO THE P HYSICAL EXISTENCE OF ASSETS WHICH WERE ALREADY OWNED AND USED BY THE LESSEE, (II) THE LESSOR HAS MADE THE PAYMENT FOR PURCH ASE OF RELEVANT ASSETS DIRECTLY TO THE LESSEE; (III) THE LESSEE HAS BEEN USING THE ASSETS EVEN AFT ER THE TRANSACTION FOR HIS BUSINESS. (IV) TRANSACTION IS EVIDENCED BY DULY EXECUTED. (V) THE PARTIES HAVE ACTED UPON THE /EASE-DEED. 14.1 FROM THE ABOVE FACTS OF THE PRESENT CASE, IT IS QUITE CLEAR THAT IT SATISFIES ALL THE REQUIREMENTS FOR. A TRANSACTION TO BE OF PU RCHASE AND LEASE BACK/SALE OR LEASE BACK. 15. IN VIEW OF ABOVE FACTS, WE ARE OF THE OPINION THAT THE ASSESSEE HAS SUCCEEDED IN ESTABLISHING ALL THE INGREDIENTS OF A GENUINE PURCHASE AND LEASE BACK/SALE AND LEASE BACK TRANSACTION AND, THE REFORE, TRANSACTION IN QUESTION IS HELD TO BE GENUINE ONE AND ONCE WE ARRI VE AT THIS CONCLUSION, THEN THE NATURAL OUTCOME IS THAT THERE IS NO REASON FOR DISALLOWING THE CLAIM OF DEPRECIATION OF THE LESSOR AND, THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT (APPEALS) WHO HAS ALLOWED THE ASSESSEE'S (LESSOR) CLAIM OF DEPRECIATION. EVEN OTHERWISE, THE REVENUE HAVING TAXED WHOLE OF T HE LEASE RENT, THERE IS NO JUSTIFICATION FOR THE REVENUE TO DENY THE BEN EFITS OF DEPRECIATION. THE ASSESSEE WAS ENTITLED TO DEPRECIATION ON THE BASIS OF THESE FACTS ALSO AND, THEREFORE, THE ORDER OF THE CIT(APPEALS) STANDS CON FIRMED FOR THIS REASON ALSO.' 10.9 RESPECTFULLY FOLLOWING THE AFORESAID CASE, WE FIND THAT IN THE CASE BEFORE US THE INVOICES ARE IN THE NAME OF THE ASSES SEE AS IS CLEAR COPY OF THESE INVOICES APPEARING AT PAGES 59 TO 63 OF THE P APER BOOK. SIMILAR TRANSACTION WAS HELD TO BE GENUINE TRANSACTION BY H ON/BLE RAJ'ASTHAN HIGH COURT IN THE CASE OF RSEB (SUPRA) THEREFORE, TRANS ACTION IN QUESTION IS HELD TO BE GENUINE ONE AND , THEREFORE, WE SET ASID E THE ORDER OF THE CJT(A) AND DIRECT THE ASSESSING OFFICER TO ALLOW DE PRECIATION TO THE ASSESSEE. ITA NO. 1921. 1950 & CO 228-AHD-2011 ASST. YEAR 2005-06 10 18. WE FURTHER OBSERVE THAT CO-ORDINATE BENCH WHILE DEALING WITH THE SAME ISSUE FOR ASST. YEAR 2002-03 IN ASSESSEES OWN CASE IN ITA NO.1264/AHD/2006 VIDE ORDER DATED 30.5.2014 3. GROUND NO.3 IS REPRODUCED BELOW: 3. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSESSING OFFI CER IN NOT GRANTING DEPRECIATION OF RS.69,99,834/- BEING THE DEPRECIATI ON ON THE ASSETS LEASED BACK TO RAJASTHAN STATE ELECTRICITY BOARD (R SEB). IT IS SUBMITTED THAT SINCE THE ENTIRE TRANSACTION OF SALE AND LEASE BACK TO RSEB BEING AT ARM'S LENGTH AND GENUINE ONE, THE AMO UNT OF DEPRECIATION ELIGIBLE ON THE ASSETS LEASED BACK TO RSEB BE GRANTED TO THE APPELLANT. IT IS SUBMITTED THAT IT BE SO HELD N OW. WITHOUT PREJUDICE TO ABOVE, IT IS SUBMITTED THAT IF THE LEASE TRANSACTIONS WITH RSEB ARE NOT ACCEPTED AS GENUINE, THE LEASE RE NT RECEIVED FROM RSEB WHICH HAS OFFERED FOR TAX SHOULD ALSO BE DIREC TED TO BE EXCLUDED WHILE COMPUTING THE INCOME. IT IS SUBMITTED THAT IT BE SO HELD NOW. 3.1 THE ASSESSEE HAD CLAIMED DEPRECIATION OF RS.69 ,99,834/- IN RESPECT OF ASSETS COVERED UNDER SALES AND LEASE TRANSACTION WI TH RSEB. ACCORDING TO AO, THE TRANSACTION WAS A TOOL FOR TAX AVOIDANCE. THE A SSESSEE HAD NOT DISPUTED THE SALE AND LEASE BACK TRANSACTION. ACCORDING TO AO THE TRANSACTION TOOK PLACE IN EARLIER YEARS, BUT DEPRECIATION WAS CLAIMED DURING THE CURRENT YEAR AS WELL. THE AO HAS COMMENTED THAT IN A.Y.2001-02 LEARNED CIT(A) HAS AFFIRMED THE ADDITION, THEREFORE, FOLLOWING THE PAST HISTORY, FO R THE YEAR UNDER CONSIDERATION AS WELL, THE AO HAD DISALLOWED THE DEPRECIATION. 3.2. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST A PPELLATE AUTHORITY, LEARNED CIT(A) HAS FOLLOWED THE PAST HISTORY. HOWEVER, CONS IDERED THE ALTERNATIVE ARGUMENT AS FOLLOWS: 4.2 WITHOUT PREJUDICE TO THE ABOVE, IT WAS ALSO S UBMITTED THAT IF THE TRANSACTIONS ARE CONSIDERED AS FINANCIAL TRANSACTIO NS, THEN DEEMED RECOVERY OF PRINCIPAL AMOUNT OF RS.26,58,740/- SHOU LD BE EXCLUDED AND ONLY THE INTEREST PORTION INCLUDED IN THE LEASE REN T SHOULD BE TAXED AND NOT THE ENTIRE LEASE RENT RECEIVED OF RS.36,87,992/ - 4.3 THIS ISSUE HAS ALSO BEEN DEALT WITH BY MY PREDE CESSOR IN PARA 7.3 OF THE ABOVE APPELLATE ORDER. FOLLOWING THE DIRECTI ONS GIVEN IN THE SAID ORDER, THE AO IS DIRECTED TO RE-COMPUTED THE ALLOWA BLE DEPRECIATION / INTEREST INCOME AFTER EXCLUDING PRINCIPAL AMOUNT AF TER PROPER VERIFICATION. ITA NO. 1921. 1950 & CO 228-AHD-2011 ASST. YEAR 2005-06 11 3.3 HEARD BOTH THE SIDES. THIS ISSUE HAD CROPPED UP IN THE PAST YEARS AND FOR A.Y. 2000-01 ITAT A BENCH AHMEDABAD SUPRA HAS DEC IDED THIS ISSUE AFTER CONSIDERING THE PAST HISTORY IN THE FOLLOWING MANNE R: 4. GROUND NO.3 RELATES TO CONFIRMATION OF THE ORDE R OF THE AO IN NOT GRANTING DEPRECIATION ON THE ASSETS LEASED TO RAJAS THAN STATE ELECTRICITY BOARD (RSEB) (A STATE GOVERNMENT UNDERTAKING). THE AO, AS OBSERVED IN HIS ORDER, DISALLOWED AND ADDED BACK TO THE TOTAL I NCOME, THE DEPRECIATION OF RS.1,24,44,150/- ON THE ASSETS LEASED TO RSEB AS PER DETAILED DISCUSSIONS IN THE ASSESSMENT ORDER OF THE AY 1999- 2000. ON APPEAL, RELYING UPON HIS OWN ORDER DATED 22.3.2004 FOR THE AY 1995-96 AND THE DECISION OF HON'BLE KARNATAKA HIGH COURT IN THE CAS E OF AVARSALA AUTOMATION LTD V. CIT (268 ITR 178) AND THE DECISIO N OF THE MUMBAI SPECIAL BENCH OF THE ITAT IN THE CASE OF ICICI LTD V. DCIT SR 36, IN ITA NO.3300/MUM/97, THE LEARNED CIT(A) UPHELD THE DISAL LOWANCE MADE BY THE AO FOR THE YEAR UNDER CONSIDERATION. 4.1 BEFORE US, THE LEARNED AR ON BEHALF OF THE ASSE SSEE CONTENDED THAT THERE IS NO JUSTIFICATION IN NOT GRANTING DEDUCTION OF RS.1,24,44,150/- BEING THE DEPRECIATION ON THE ASSETS LEASED TO RAJASTHAN STATE ELECTRICITY BOARD (RSEB). HE SUBMITTED THAT THE ASSESSEE HAD PURCHASE D THE VARIOUS ASSETS FROM RSEB AND LEASED BACK THOSE ASSETS TO TH E RSEB UNDER A LEASE AGREEMENT AND IS REGULARLY RECEIVING THE LEAS E RENT FROM RSEB. ACCORDING TO THE LEARNED AR, THE ASSESSEE HAS OFFER ED THE LEASE RENT SO RECEIVED TO TAX. HE ALSO SUBMITTED THAT THE ASSETS ARE OWNED AND USED FOR THE PURPOSE OF THE BUSINESS AND THEREFORE, THE ASSE SSEE IS ENTITLED TO DEPRECIATION. THE LEARNED AR OF THE ASSESSEE FURTHE R CONTENDED THAT ON SIMILAR FACTS, THE ITAT, C BENCH, AHMEDABAD IN ASSE SSEE'S OWN CASE FOR THE AYS 2003-04 AND 2004-05, FOLLOWING THEIR ORDER FOR THE AY 1995-96, HAVE ALLOWED THE CLAIM OF THE ASSESSEE. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE IMPUGNED ORDERS OF THE AUTHORIT IES BELOW. AFTER DISCUSSION, BOTH THE PARTIES AGREED THAT ISSUE IS S QUARELY COVERED BY THE DECISIONS OF THE TRIBUNAL IN THE ASSESSEE'S OWN CAS E FOR THE AYS 1995-96, 2003-04 & 2004-05. . 4.4 IN THE LIGHT OF AFORESAID DECISION OF THE HONB LE JURISDICTIONAL HIGH COURT IN THE ASSESSEES OWN CASE OF THE A.Y. 1995-9 6 AND DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. RAJASTHAN STATE ELECTRICITY BOARD (SUPRA) AS ALSO DECISION OF THE T RIBUNAL FOR THE A.YS.2003-04 & 2004- 05, FACTS AND ISSUE BEING ADMI TTEDLY SIMILAR IN THE ASSESSMENT YEAR UNDER CONSIDERATION, WE SET ASIDE T HE IMPUGNED ORDER OF THE LEARNED CIT(A) AND DIRECT THE ASSESSING OFFICER TO ALLOW THE DEPRECIATION AS CLAIMED BY THE ASSESSEE. THEREFORE, GROUND NO.3 IN THE APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO. 1921. 1950 & CO 228-AHD-2011 ASST. YEAR 2005-06 12 3.4 WE HAVE ALSO NOTED THAT LEARNED CIT(A) HAS SIMP LY FOLLOWED THE VERDICT OF HIS PREDECESSOR FOR A.Y.2001-02 HOWEVER THAT VIEW OF LE ARNED CIT(A) WAS ALSO REVERSED BY ITAT A BENCH AHMEDABAD (SUPRA) IN THE FOLLOWING MANNER: 4.3 INDISPUTABLY, SINCE THE FACTS OBTAINING IN THE YEAR UNDER CONSIDERATION ARE SIMILAR TO THE FACTS IN THE ASSESSMENT YEARS 19 95-96, 2000-01, 2003- 04 & 2004-05, FOLLOWING THE VIEW TAKEN BY THE HONB LE JURISDICTIONAL HIGH COURT IN THE ASSESSEES OWN CASE IN THE A.Y. 1995-9 6 AND BY THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. RAJASTH AN STATE ELECTRICITY BOARD (SUPRA) A ALSO BY THE ITAT IN THEIR AFORESAID DECISIONS IN THE ASSSESSEES OWN CASE, WE HAVE NO HESITATION IN ALLO WING THE CLAIM OF THE ASSESSEE IN THE YEAR UNDER CONSIDERATION. THEREFORE , GROUND NO.3 IN THE APPEAL OF THE ASSESSEE FOR A.Y. 2001-02 IS ALLOWED. 3.5 IN THE LIGHT OF THE PAST BACKGROUND, WE HEREBY HOLD THAT THE DEPRECIATION ON THE ASSETS LEASED BACK TO RAJASTHAN ELECTRICITY BOA RD (RSBB) IS TO BE ALLOWED AS PER LAW. THIS GROUND OF THE ASSESSEE IS ALLOWED. 19. WE FURTHER OBSERVE THAT IN THE CASE OF CIT VS. GUJARAT GAS CO. LTD. TAX APPEAL NO.444 OF 2008 RELATING TO ASST. YE AR 1995-96 WAS DISMISSED BY HON. GUJARAT HIGH COURT VIDE ITS ORDER DATED 10.9.2008 GIVING FINALITY ON THE ORDER OF THE TRIBUNAL ON THI S ISSUE. 20. RESPECTFULLY FOLLOWING THE DECISIONS OF THE CO- ORDINATE BENCH AND THAT OF HON. GUJARAT HIGH COURT, WE FIND NO REA SON TO INTERFERE WITH THE ORDER OF LD. CIT(A) ALLOWING THE CLAIM OF DEPRECIATION ON PLANT AND MACHINERY COVERED UNDER SALE/LEASE BACK TRANSAC TION WITH RSEB. ACCORDINGLY THIS GROUND OF REVENUE IS DISMISS ED. 21. GROUND NO.2 OF THE APPEAL READS AS UNDER :- 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN D ELETING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF PROPORTIO NATE INTEREST AND ADMINISTRATIVE EXPENSES OF RS.25,41,310/-. 22. LD. DR SUPPORTED THE ORDER OF ASSESSING OFFICER . ITA NO. 1921. 1950 & CO 228-AHD-2011 ASST. YEAR 2005-06 13 23. ON THE CONTRARY LD. AR RELIED ON THE ORDER OF L D. CIT(A) AND FURTHER SUBMITTED THAT THE ASSESSEE ITSELF WHILE FI LING ITS RETURN OF INCOME DISALLOWED A SUM OF RS.6,00,000/- ON AN ESTI MATE BASIS CONSIDERING THEM AS EXPENSES INCURRED IN RELATION T O EARNING OF DIVIDEND INCOME U/S 14A OF THE ACT. EVEN THOUGH RS. 6,00,000/- HAD ALREADY BEEN DISALLOWED U/S 14A, A FURTHER DISALLOW ANCE OF RS.25,41,310/- WAS MADE BY ASSESSING OFFICER WITHOU T GRANTING CREDIT FOR RS.6,00,000/-. IT WAS ALSO SUBMITTED THAT THE I NVESTMENTS WERE MADE OUT OF ASSESSEES OWN FUNDS. THE ASSESSING OFF ICER HAD NOT CONSIDERED THAT THE INVESTMENTS WERE MADE FROM OWN FUNDS, IT HAS NOT BORROWED ANY FUNDS FOR MAKING INVESTMENTS INTO TAX FREE INCOME YIELDING SECURITIES AND ALSO NOT INCURRED ANY EXTRA EXPENDITURE FOR EARNING THE TAX FREE INCOME. FURTHER RELIANCE WAS P LACED ON THE DECISION IN THE CASE OF WINCE SEEDING PRIVATE LTD.1 07 ITD 267 WHEREIN IT WAS HELD THAT COMMON EXPENDITURE INCURRE D AT HEAD OFFICE CANNOT BE BROKEN UP ARTIFICIALLY TO ATTRIBUTE OR AP PORTION A PART THEREOF TO EARNING OF TAX FREE INCOME ON ASSUMPTION THAT SU CH PART OF COMMON EXPENDITURE WAS INCURRED IN RELATION TO TAX FREE INCOME BY APPLYING SECTION 14A OF THE ACT AND BURDEN IS ON AS SESSING OFFICER TO NOT ONLY SHOW THAT SUCH EXPENDITURE WAS FACTUALLY I NCURRED BUT ALSO TO SHOW ITS RELATIONSHIP WITH INCOME EXEMPT FROM TAX. LD. CIT(A) ON AN ESTIMATE BASIS DISALLOWED 2% OF EXEMPT DIVIDEND INC OME CONSIDERING IT AS EXPENDITURE INCURRED FOR EARNING EXEMPT INCOM E. THEREFORE, DISALLOWANCE OF RS.4,54,333/- WAS MADE BY LD. CIY(A ) AFTER CONSIDERING THE DISALLOWANCE OF RS.6,00,000/- ALREA DY MADE BY THE ASSESSEE. FURTHER IT WAS ALSO SUBMITTED THAT THE HO N. TRIBUNAL IN ITA NO. 1921. 1950 & CO 228-AHD-2011 ASST. YEAR 2005-06 14 ASSESSEES OWN CASE IN AY 2004-05 DELETED THE DISAL LOWANCE MADE U/S 14A BY THE ASSESSING OFFICER. IT WAS ALSO SUBMI TTED THAT DISALLOWANCE MADE BY THE ASSESSEE U/S 14A OF THE AC T OF RS.6,00,000/- IS FAIR AND REASONABLE IN THE FACTS A ND IN THE CIRCUMSTANCES OF THE CASE AND IN VIEW OF THE ORDER OF THE TRIBUNAL FOR ASST. YEAR 2004-05 NO DISALLOWANCE SHOULD HAVE BEEN CONFIRMED BY LD. CIT(A). 24. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THROUGH THIS GROUND REVENUE IS AGGRIEVED BY THE ORDER OF LD. CIT(A) DELETING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF PROPORTIONATE INTEREST AND ADMINISTRATIVE EXPENSES OF RS.25,41,310/-. 25. WE OBSERVE THAT DURING THE YEAR UNDER APPEAL AS SESSEE HAS CLAIMED RS.16,40,000/- AS INTEREST PAID DURING THE YEAR AND SHOWN EXEMPT INCOME OF RS.52716647/-. TOTAL INVESTMENTS H ELD BY THE ASSESSEE AS ON 31.3.2005 STOOD AT RS.167.35 CRORES. IN THE RETURN OF INCOME FILED, ASSESSEE SUO MOTO MADE THE DISALLOWAN CE OF RS.6,00,000/- ON AN ESTIMATE BASIS CONSIDERING THE EXPENDITURE INCURRED IN RELATION TO EARNING THE DIVIDEND INCOME U/S 14A OF THE ACT. HOWEVER, LD. ASSESSING OFFICER WHILE FINALIZING THE ASSESSMENT U/S 143(3) OF THE ACT, CALCULATED THE DISALLOWANCE AT R S.25,41,310/- BUT FORGOT TO GIVE CREDIT TO THE EXPENDITURE DISALLOWED BY ASSESSEE ITSELF AT RS.6 LACS WHILE FILING THE RETURN OF INCOME. FUR THER WHEN THE ASSESSEE WENT APPEAL BEFORE LD. CIT(A), DISALLOWANC E UNDER SECTION 14A WAS RESTRICTED TO RS.10,54,333/- AFTER DELETING PROPORTIONATE DISALLOWANCE OF INTEREST EXPENDITURE AT RS.8,84,372 /- AND SUSTAINED DISALLOWANCE OF ADMINISTRATIVE EXPENSES TO RS.10,54 ,333/- AS AGAINST ITA NO. 1921. 1950 & CO 228-AHD-2011 ASST. YEAR 2005-06 15 RS.16,56,938/- MADE BY LD. ASSESSING OFFICER; LD. C IT(A) FURTHER GAVE CREDIT TO RS.6,00,000/- ADMITTED BY ASSESSEE IN ITS RETURN OF INCOME AND FINALLY REMAINING DISALLOWANCE SUSTAINED BY LD. CIT(A) WAS RS.454333/- (1054333 600000).. 26. WE FURTHER OBSERVE THAT ISSUE RELATING TO DISAL LOWANCE U/S 14A OF THE ACT WAS TAKEN UP BEFORE THE CO-ORDINATE BENC H BY THE ASSESSEE FOR ASST. YEAR 2004-05 IN ITA NO.4488/AHD/ 2007 AND THE ISSUE WAS DECIDED IN FAVOUR OF ASSESSEE VIDE ITS OR DER DATED 8.2.2013 WHEREIN CO-ORDINATE BENCH HELD AS UNDER :- 6. BEFORE US, LD. A.R. SUBMITTED THAT THE ASSESSEE ON ITS OWN HAD WORKED OUT THE DISALLOWANCE U/S 14A AT RS.6 LACS ON ACCOUNT OF ADM INISTRATIVE EXPENSES FOR MANAGING THE PORTFOLIO ETC. THE DISALLOWANCE WAS WO RKED OUT ON THE BASIS OF FAIR AND REASONABLE DEPLOYMENT OF MAN-POWER AND REL ATED OPERATIONAL EXPENSES. HE FURTHER SUBMITTED THAT ALL THE INVESTM ENTS WERE IN THE DEMAT FORM AND THE DIVIDEND WAS ALSO ELECTRONICALLY CREDITED T O ITS BANK ACCOUNT AND THEREFORE, ASSESSEE WAS NOT REQUIRED TO INCUR ANY E XPENDITURE TO REALIZE THE DIVIDEND. LD. A.R. THEREFORE, SUBMITTED THAT SINCE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE FOR EARNING TAX FREE INCOME, NO AD-HOC DISALLOWANCE BE MADE ON ESTIMATE BASIS. 7. LD. D.R., ON THE OTHER HAND, RELIED ON THE ORDER OF A.O. AND SUBMITTED THAT CONSIDERING THE DIVIDEND INCOME EARNED BY THE ASSES SEE THE A.O. WAS QUITE ITA NO.4488/AHD/ 2007 REASONABLE AND FAIR IN ESTIMATING THE DISALLOWANCE. HE THEREFORE, SUBMITTED THAT THE DISALLOWANCE MADE BY THE A.O. BE UPHELD. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS UNDISPUTED FACT THAT THE ASSESSEE HAS EARNED DIVIDE ND IN EXCESS OF RS.5 CRORES DURING THE YEAR. IT IS ALSO AN UNDISPUTED FACT THAT THE ASSESSEE, ON THE BASIS OF ITS OWN ESTIMATE HAS WORKED OUT THE DISALLOWANCE OF ADM INISTRATIVE EXPENSES INCURRED FOR MANAGING THE PORTFOLIO U/S 14A. IT IS ALSO AN ADMITTED FACT THAT ALL THE INVESTMENTS OF THE ASSESSEE ARE IN DEMAT FORM A ND DIVIDENDS WERE CREDITED TO ITS ACCOUNT ELECTRONICALLY. THE A.O. WHILE DISAL LOWING THE EXPENDITURE COULD ITA NO. 1921. 1950 & CO 228-AHD-2011 ASST. YEAR 2005-06 16 NOT CONTROVERT OR FIND ANY FAULT IN THE WORKING OF DISALLOWANCE OF ADMINISTRATIVE EXPENSES MADE BY THE ASSESSEE. THE A .O. HAS NOT GIVEN A FINDING THAT THE ASSESSEE HAS INCURRED EXPENDITURE IN EXCES S WHICH HAS BEEN SUO MOTU DISALLOWED BY THE ASSESSEE WHILE COMPUTING ITS INCO ME. IN THE CASE OF GODREJ BOYCE MANUFACTURING COMPANY LTD. VS. DCIT 328 ITR 8 1(BOM), HON'BLE HIGH COURT HAS HELD THAT RULE 8D IS APPLICABLE FROM ASSE SSMENT YEAR 2008-09 AND THE DISALLOWANCE FOR EARLIER PERIODS HAS TO BE DETE RMINED ON REASONABLE BASIS. SINCE THE YEAR UNDER APPEAL IN THE PRESENT CASE IS 2002-03 AND THEREFORE, IN THE CASE BEFORE US THE PROVISION OF RULE 8D ARE NOT APP LICABLE IN VIEW OF THE AFORESAID DECISION OF HON'BLE BOMBAY HIGH COURT. 9. IN THE CASE OF MAXOPP INVESTMENT LTD. V. CIT (2012) 347 ITR 272 (DELHI) HON'BLE DELHI HIGH COURT HAS HELD AS UNDER:- 'THE EXPRESSING 'IN RELATION TO' DOES NOT HAVE ANY EMBEDDED OBJECT. IT SIMPLY MEANS 'IN CONNECTION WITH' OR 'PERTAINS TO'. IF THE EXPENDITURE IN QUESTION HAS A RELATION OR CONNECTION WITH OR PERTA INS TO EXEMPT INCOME IT CANNOT BE ALLOWED AS A DEDUCTION EVEN IF IT QUAL IFIES UNDER OTHER PROVISIONS OF THE ACT. THE ACTUAL EXPENDITURE THAT IS IN CONTEMPLATION UNDER SECTION 14A(1) OF THE ACT IS THE 'ACTUAL' EXPENDITURE IN RELATION TO OR IN CONNECTION WITH OR PERTAINING TO EXEMPT INCOME. THE COROLLARY TO THIS IS THAT IF NO EXPENDITURE IS INCURRED IN ITA NO.448 8/AHD/ 2007 RELATION TO THE EXEMPT INCOME, NO DISALLOWANCE CAN BE MADE U NDER SECTION 14A OF THE ACT. SUB-SECTIONS (2) AND (3) WERE INSERTED BY THE FINANCE ACT , 2006, WITH EFFECT FROM APRIL 1, 2007. HOWEVER, THE EXPRESSION 'SUCH METHOD AS MAY BE PRESCRIBED' GOT MEANING ONLY BY THE INTRODUCTION OF RULE 8D OF THE INCOME-TAX RULES, 1962. SUB-SECTION (2) OF SECTION 14A OF THE ACT PROVIDES THE MANNER IN WHICH THE ASSESSING OFFICER IS TO DETERMINE THE AMOUNT OF EXP ENDITURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. THE REQUIREMENT OF THE ASSESSING OFFICER EMBARKING UPON A DETERMINATION OF THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO E XEMPT INCOME WOULD BE TRIGGERED ONLY IF THE ASSESSING OFFICER RETURNS A FINDING THAT HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE. THEREFORE, THE CONDITION PRECEDEN T FOR THE ASSESSING OFFICER ENTERING UPON A DETERMINATION OF THE AMOUNT OF THE EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME IS THAT THE A SSESSING OFFICER MUST ITA NO. 1921. 1950 & CO 228-AHD-2011 ASST. YEAR 2005-06 17 RECORD THAT HE IS NOT SATISFIED WITH THE CORRECTNES S OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE. SUB-SECTION (3) IS NOTHING BUT AN OFFSHOOT OF SUB-S ECTION (2) OF SECTION 14A . SUB-SECTION (3) APPLIES TO CASES WHERE THE ASSESS EE CLAIMS THAT NO EXPENDITURE HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. IN OTHER WO RDS, SUB- SECTION (2) DEALS WITH CASES WHERE THE ASSESSEE SPECIFIES A POS ITIVE AMOUNT OF EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FO RM PART OF THE TOTAL INCOME UNDER THE ACT AND SUB-SECTION (3) APPLIES TO CASES WHERE THE ASSESSEE ASSERTS THAT NO EXPENDITURE HAD BEEN INCUR RED IN RELATION TO EXEMPT INCOME. IN BOTH CASES, THE ASSESSING OFFICER , IF SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE OR NO EXPENDITURE, AS THE CASE MAY BE, CANNOT EMBARK U PON A DETERMINATION OF THE AMOUNT OF EXPENDITURE IN ACCORDANCE WITH ANY PRESCRIBED METHOD, AS MENTIONED IN SUB-SECTION (2) OF SECTION 14A OF THE ACT. IT IS ONLY IF THE ASSESSING OFFICER IS NOT SATISFIED WITH THE CORRECT NESS OF THE CLAIM OF THE ASSESSEE, IN BOTH CASES, THAT THE ASSESSING OFFICER GETS JURISDICTION TO DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN REL ATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT IN ACCORDANCE WITH THE PRESCRIBED METHOD. THE PRESCRIBED METHOD I S THE METHOD STIPULATED IN RULE 8D OF THE RULES. WHILE REJECTING THE CLAIM OF THE ASSESSEE WITH REGARD TO THE EXPENDITURE, AS THE CAS E MAY BE, IN RELATION TO EXEMPT INCOME, THE ASSESSING OFFICER WOULD HAVE TO INDICATE COGENT REASONS FOR THE SAME. IT IS, THEREFORE, CLEAR THAT DETERMINATION OF THE AMOUNT OF EXPENDITURE IN RELATION TO EXEMPT INCOME UNDER RULE 8D WOULD ONLY COME INTO PLAY WHEN THE ASSESSING OFFICER REJE CTS THE CLAIM OF THE ASSESSEE IN THIS REGARD.' 10. CONSIDERING THE FACTS OF THE PRESENT CASE IN TH E LIGHT OF THE RATIO LAID DOWN BY THE AFORESAID DECISION OF HON'BLE DELHI HIGH COURT, THE A.O., WHILE REJECTING THE CLAIM OF ASSESSEE WITH REGARD TO DISALLOWANCE U/S 1 4A, HAS NOT GIVEN ANY COGENT REASONS FOR REJECTING THE CLAIM OF ASSESSEE. SECOND LY THE OPERATION OF RULE 8D IS APPLICABLE PROSPECTIVELY W.E.F. A.Y. 2007-08 AND TH IRDLY THE ASSESSEE SUO MOTU HAD MADE THE DISALLOWANCE OF ADMINISTRATIVE EXPENSE S, THUS CONSIDERING THE TOTALITY OF THE FACTS AND RELYING ON THE AFORESAID DECISION OF HON'BLE HIGH COURTS, WE ARE OF THE VIEW THAT IN THE PRESENT CASE THE A.O. WAS NOT JUSTIFIED IN ENHANCING THE DISALLOWANCE U/S 14A MADE BY THE ASSE SSEE. WE THUS UPHELD THE GROUND OF THE ASSESSEE. ITA NO. 1921. 1950 & CO 228-AHD-2011 ASST. YEAR 2005-06 18 27. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF TH E CO-ORDINATE BENCH, WE ARE OF THE VIEW THAT CALCULATION OF DISAL LOWANCE U/S 14A AS PER RULE 8D OF THE IT RULES, IS APPLICABLE W.E.F. A SST. YEAR 2007-08 AND WE ARE DEALING WITH APPEAL FOR ASST. YEAR 2005- 06 AND ACCORDINGLY THE DECISION OF THE CO-ORDINATE BENCH S QUARELY APPLIES ON THIS GROUND TAKEN UP BY REVENUE AND THEREFORE, IN T HE GIVEN CIRCUMSTANCES, WHEN THERE IS NO SATISFACTION PLACED ON RECORD BY ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS NOR ANY SPECIFIC DEFECT HAS BEEN POINTED OUT, DISALLOWANCE MADE BY A SSESSEE AT ITS OWN RS.6 LACS. SHOULD HAVE BEEN ACCEPTED BY THE ASS ESSING OFFICER AND NO FURTHER DISALLOWANCE WAS CALLED FOR. ACCORDI NGLY THIS GROUND OF REVENUE IS DISMISSED. 28. GROUND NO.3 OF THE APPEAL READS AS UNDER :- 3. THE LD.CLT(A) HAS ERRED IN LAW AND ON FACTS IN D ELETING THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF REIMBUR SEMENT OF HOLIDAY HOME EXPENSES OF RS.2,46,652/-. 29. LD. DR SUPPORTED THE ORDER OF LD. ASSESSING OFF ICER. 30. LD. AR RELIED ON THE ORDER OF LD. CIT(A) AND SU BMITTED THAT LD. ASSESSING OFFICER DISALLOWED 20% OF HOLIDAY HOME EX PENSES ON THE GROUND THAT THE SAME ARE NON-BUSINESS EXPENSES. IT HAS BEEN SUBMITTED THAT THE HOLIDAY HOME EXPENDITURE WAS INC URRED FOR THE PURPOSE OF KEEPING HEALTHY RELATION WITH ITS EMPLOY EES AND THEREFORE IT WAS PURELY BUSINESS EXPENSES. LD. CIT(A) HAS RIG HTLY HELD THAT IN ABSENCE OF FINDING BY THE ASSESSING OFFICER THAT SU CH EXPENSES WERE ITA NO. 1921. 1950 & CO 228-AHD-2011 ASST. YEAR 2005-06 19 NOT INCURRED FOR BUSINESS PURPOSE, THE SAME SHOULD NOT BE DISALLOWED. 31. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. REVENUE IS IN APPEAL AGAINST THE ORDER OF LD. CIT(A ) DELETING THE DISALLOWANCE OF 20% ON HOLIDAY HOME EXPENSES. FROM GOING THROUGH THE ASSESSMENT ORDER WE OBSERVE THAT IN PARA 4.1 OF THE ORDER HOLIDAY HOME EXPENSES HAVE BEEN SHOWN AT RS.1,54,715/- AND THE DISALLOWANCE MADE BY LD. ASSESSING OFFICER SHOULD H AVE BEEN CALCULATED AT 20% OF RS.1,54,715/- I.E. RS.30,943/- ; WHEREAS IN THE GROUND OF APPEAL NO.3 REVENUE HAS MENTIONED THE AMO UNT WRONGLY AT RS.2,46,652/-, THE SAME NEEDS TO BE CORRECTED AT RS.1,54,715/-. AS REGARDS DISALLOWANCE OF RS.30,943/- BEING 20% ON HO LIDAY HOME EXPENSES MADE BY LD. ASSESSING OFFICER ON ESTIMATE BASIS THAT THEY MAY NOT HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY F OR THE PURPOSE OF BUSINESS. WE FIND THAT LD. CIT(A) HAS RIGHTLY OBSER VED THAT EXPENDITURE ON HOLIDAY HOME HAS BEEN INCURRED FOR T HE PURPOSES OF KEEPING HEALTHY RELATION WITH ITS EMPLOYEES AND THE REFORE THE SAME IS PURELY BUSINESS EXPENSES. LD. ASSESSING OFFICER HAS NOT BEEN ABLE TO SUBSTANTIATE THE CLAIM OF SUCH DISALLOWANCE AND COU LD NOT PROVE THE SAME AS BOGUS OR NON-BUSINESS EXPENSES. ACCORDINGLY IN THESE CIRCUMSTANCES, WHEN THERE IS NO SPECIFIC DETECTION OF ANY MISTAKE IN THE BOOKS OF ACCOUNT OF ASSESSEE, SUCH ESTIMATED DI SALLOWANCE IS UNCALLED FOR. WE, THEREFORE, FIND NO REASON TO INTE RFERE WITH THE ORDER OF LD. CIT(A). ACCORDINGLY THIS GROUND OF REVENUE I S DISMISSED. 32. GROUND NO.4 OF THE APPEAL READS AS UNDER :- ITA NO. 1921. 1950 & CO 228-AHD-2011 ASST. YEAR 2005-06 20 4. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN D ELETING THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF GAS DAY EXPENSES OF RS.1,52,897/-. 33. LD. DR RELIED ON THE ORDER OF ASSESSING OFFICER . 34. ON THE OTHER HAND, LD. AR SUPPORTED THE ORDER O F LD. CIT(A) AND SUBMITTED THAT ON THE GAS DAY THERE IS A POOJA FOLL OWED BY LUNCH WHICH IS A BUSINESS EXPENSES. HON. TRIBUNAL IN ASST . YEARS 1993-94 TO 1996-96 AND ASST. YEAR 2003-04 & 2004-05 IN ASSE SSEES OWN CASE HAS ALLOWED SUCH EXPENSES. ACCORDINGLY, LD. CI T(A) HAS RIGHTLY ALLOWED THE EXPENSES. NO INTERFERENCE IS CALLED FOR IN HIS ORDER. 35. WE HAVE DEALT WITH THIS ISSUE IN GROUND NO.3 AB OVE, WHEREIN GROUND RAISED BY THE REVENUE IS DISMISSED AND DISAL LOWANCE OF 20% WAS MADE BY LD. ASSESSING OFFICER ON ESTIMATE BASIS , WITHOUT POINTING OUT ANY DEFECT IN THE BOOKS OF ACCOUNT OF ASSESSEE. APPLYING OUR DECISION OF GROUND NO.3 ON THIS ISSUE, THE GROUND R AISED BY THE REVENUE IS DISMISSED. 36. GROUND NO.5 OF REVENUES APPEAL READS AS UNDER :- 5 . THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DE LETING THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF FAMILY MEET EXPENSES OF RS.9,90,486/-. 37. LD. DR SUPPORTED THE ORDER OF LD. ASSESSING OFF ICER 38. WHEREAS LD. AR RELIED ON THE ORDER OF LD. CIT(A ) AND REITERATED THE SUBMISSIONS MADE BEFORE LOWER AUTHORITIES. ITA NO. 1921. 1950 & CO 228-AHD-2011 ASST. YEAR 2005-06 21 39. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. WE OBSERVE THAT THIS ISSUE HAS BEEN DEAL T BY US IN GROUND NO.3 ABOVE, WHEREIN GROUND RAISED BY THE REVENUE IS DISMISSED AND DISALLOWANCE OF 20% WAS MADE BY LD. ASSESSING OFFIC ER ON ESTIMATE BASIS, WITHOUT POINTING OUT ANY DEFECT IN THE BOOKS OF ACCOUNT OF ASSESSEE. APPLYING OUR DECISION OF GROUND NO.3 ON T HIS ISSUE, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 40. GROUND NO.6 OF THE APPEAL READS AS UNDER :- 6 THE LD.GT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION MADE BY THE A.O. ON ACCOUNT OF UNUTILIZED MODVAT/CE NVAT CREDIT OF RS.56,08,089/-. 41. LD. DR SUPPORTED THE ORDER OF LD. ASSESSING OFF ICER. 42. WHEREAS LD. AR RELIED ON THE ORDER OF LD. CIT(A ) AND FURTHER SUBMITTED THAT THE UNUTILIZED CENVAT/MODVAT CREDIT IS IN NATURE OF ADVANCE PAYMENT TO EXCISE DEPARTMENT AND THE SAME I S RECOVERABLE/ ADJUSTABLE AGAINST EXCISE PAYABLE ON CNG SALES. IT WAS ALSO SUBMITTED THAT TO THE EXTENT THERE IS MODVAT RECEIV ABLE A/C, THERE WAS CORRESPONDING LESS DEBIT TO THE PURCHASE A/C AND HE NCE TO THAT EXTENT THERE WAS ALREADY INCOME OFFERED TO TAX. LD. AR PL ACED RELIANCE ON THE DECISION OF THE TRIBUNAL IN THE CASE OF DCIT, C IR-4 VS. M/S JAY LAMINART PVT. LTD. (ITA NO.264/AHD/2007 WHEREIN IT WAS HELD THAT UNUTILIZED CENVAT/MODVAT CREDIT DOES NOT CONSTITUTE INCOME. ACCORDINGLY, LD. CIT(A) HAS RIGHTLY ALLOWED THE EXP ENSES. LD. AR ALSO RELIED ON THE FOLLOWING DECISIONS :- ITA NO. 1921. 1950 & CO 228-AHD-2011 ASST. YEAR 2005-06 22 1. SUPREME COURT DECISION IN THE CASE OF INDO NIPPO N CHEMICALS CO. LTD. 130 TAXMAN 179) 2. TRIBUNAL DECISION IN THE CASE OF M/S CAMPHOR & A LLIED PRODUCTS LTD. (IN ITA NO.370/AHD/2013) FOR ASST. YEAR 2005-06. 43. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED ON RECORD. THROUGH THIS GROUND REVENUE IS AG GRIEVED WITH THE ACTION OF LD. CIT(A) DELETING THE DISALLOWANCE MADE BY ASSESSING OFFICER ON ACCOUNT OF UNUTILIZED MODVAT CREDIT. WE FIND FORCE IN THE ARGUMENT OF LD. AR THAT THE UNUTILIZED CENVAT/MODVA T CREDIT IS IN NATURE OF ADVANCE PAYMENT TO EXCISE DEPARTMENT AND THE SAME IS RECOVERABLE/ ADJUSTABLE AGAINST EXCISE PAYABLE ON C NG SALES. WE FURTHER OBSERVE THAT LD. CIT(A) WHILE DELETING THE ADDITION MADE BY LD. ASSESSING OFFICER FOLLOWED THE DECISION OF THE TRIB UNAL IN ITA NO.264/AHD/2007 DATED 3 RD APRIL, 2007 DELETING THE ADDITION MADE ON ACCOUNT OF UNUTILIZED MODVAT CREDIT BY OBSERVING AS UNDER :- 6.. THE FIFTH GROUND OF APPEAL IS WITH REGARD TO A DDITION OF RS. 56,08,089 ON ACCOUNT OF UTILIZATION OF MODVAT/CENVAT CREDIT. THE ADDITION WERE MADE BY A.O. ON THE GROUND THAT UNUTILIZED MODVAT/CENVAT CREDIT IS NOT AN ADVANCE GIVEN TO THE GOVERNMENT ON ACCOUNT OF EXCISE PAYABLE. THE A. O. OBSERVED THAT MODVAT/CENVAT RECEIVED/CLAIMED BY THE ASSESSEE ON P URCHASE OF RAW MATERIAL OR CAPITAL GOODS IS A BENEFIT GIVEN BY THE GOVERNMENT AND IT CAN BE SET OFF AGAINST THE LIABILITY OF THE ASSESSEE ON ACCOUNT OF EXCISE DUTY PAYABLE ON THE FINISHED GOODS MANUFACTURED BY THE APPELLANT. ONCE THE MODVA T/CENVAT IS CLAIMED, IT BECOMES INCOME OF THE APPELLANT FOR THE PREVIOUS YE AR IN WHICH THE CLAIM IS GRANTED BY THE GOVERNMENT. AS SUCH MODVAT/CENVAT CR EDIT CLAIMED BUT NOT UTILIZED BECOMES PART OF THE INCOME OF THE APPELLAN T. THE A.O. RELIED ON VARIOUS CASE LAWS IN THIS REGARD. IN THIS REGARD, THE A.R. MENTIONED THAT UNUTILIZED CENVAT/MODVAT CREDIT IS IN THE NATURE OF ADVANCE PA YMENT TO EXCISE DEPARTMENT & THE SAME IS RECOVERABLE/ADJUSTABLE AGAINST EXCISE PAYABLE ON CNG SALES. THE A.R. ALSO POINTED OUT THAT TO THE EXTENT THERE IS M ODVAT RECEIVABLE A/C, THERE IS CORRESPONDING LESS DEBIT TO THE PURCHASE A/C AND HE NCE TO THAT EXTENT THERE IS ALREADY INCOME OFFERED FOR TAX.THE A.R. ALSO RELIED ON DECISION OF HON'BLE ITA NO. 1921. 1950 & CO 228-AHD-2011 ASST. YEAR 2005-06 23 AHMEDABAD ITAT'S ORDER IN ITA NO. 264/AHD/2007 IN T HE CASE OF DY. CIT CIR.4 VS. JAY LAMINART PRIVATE LIMITED IN WHICH THE ITAT OBSERVED AS UNDER 'THE COST OF RAW MATERIAL & CAPITAL GOODS TO THE EX TENT OF MODVAT CLAIM WERE REDUCED, WAS A FACT, WHICH IS NOT DISPUTED BY THE A SSESSING OFFICER. IT IS DIFFERENCE WHICH REMAINS AS DEBIT BALANCE IN THE BA LANCE SHEET AFTER ADJUSTMENT FOR CURRENT YEARS UTILIZATION. IT IS IN FACT A PRE-PAID EXPENDITURE, NOT CHARGEABLE TO PROFIT & LOSS ACCOUNT AND HENCE C ANNOT CONSTITUTE INCOME. THE CIT(A), IN OUR OPINION, WAS JUSTIFIED I N ALLOWING CLAIM OF THE ASSESSEE. HIS ORDER, THUS, DOES NOT CALL FOR ANY IN TERFERENCE. ' CONSI DERING THE ORDER OF ITAT, I AM OF THE OPINION THAT UNUTLLIZED CENVAT/MODVAT CREDIT DOES NOT CONSTITUTE INCOME AND ACCORDINGLY THE ADDITION MADE BY THE ASSESSING OFFICER IS DELETED. 44. FURTHER WE OBSERVE THAT THE TRIBUNAL IN ITA NO. 264/AHD/2007 FOR ASST. YEAR 2002-03 VIDE ITS ORDER DATED 3 RD APRIL, 2007 HAS ALLOWED THE CLAIM OF ASSESSEE BY OBSERVING AS UNDER :- 3. WE HAVE HEARD THE PARTIES AND CONSIDERED THE R IVAL SUBMISSIONS. THE COST OF RAW MATERIAL AND CAPITAL GOODS TO THE E XTENT OF MODVAT CLAIM WERE REDUCED, WAS A FACT, WHICH IS NOT DISPUTED BY THE ASSESSING OFFICER. IT IS THIS DIFFERENCE WHICH REMAINS AS DEBIT BALANC E IN THE BALANCE SHEET AFTER ADJUSTMENT FOR CURRENT YEARS UTILISATION. IT IS IN FACT A PRE-PAID EXPENDITURE, NOT CHARGEABLE TO PROFIT & LOSS ACCOUN T AND HENCE CANNOT CONSTITUTE INCOME. THE CIT(A) IN OUR OPINION, WAS J USTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE. HIS ORDER, THUS, DOES NOT CA LL FOR ANY INTERFERENCE. 45. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-O RDINATE BENCH, WE ARE OF THE VIEW THAT UNUTILIZED MODVAT PAYMENT IS I N THE NATURE OF ADVANCE PAYMENT AND SHOULD NOT BE TREATED AS INCOME AND, THEREFORE, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) AND UPHOLD THE SAME. THIS GROUND OF REVENUE IS DISM ISSED. 46. GROUND NO.7 OF REVENUES APPEAL READS AS BELOW :- ITA NO. 1921. 1950 & CO 228-AHD-2011 ASST. YEAR 2005-06 24 7 THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF PROVISI ON OF TRAVELING EXPENSES OF RS.1,06,796/-. 47. LD. DR RELIED ON THE ORDER OF ASSESSING OFFICER WHEREAS LD. AR SUPPORTED THE ORDER OF LD. CIT(A) AND SUBMITTED THA T THESE EXPENSES ARE ROUTINE EXPENSES AND AS THE COMPANY FOLLOWS ACC RUAL SYSTEM OF ACCOUNTING, PROVISION FOR EXPENSES ARE REQUIRED TO BE MADE EVEN FROM COMPANIES ACT REQUIREMENT. ACCORDINGLY AT THE TIME OF FINALIZING ACCOUNTS FOR ANY PERIOD, IT IS REQUIRED TO MAKE PRO VISION IN RESPECT OF EXPENSES THAT PERTAIN TO THE PERIOD UNDER CONSIDERA TION BUT BILLS/CLAIMS IN RESPECT THEREOF ARE RECEIVED AFTER THE END OF THE PERIOD. THIS IS REVERSED IN SUBSEQUENT YEAR AND OFFERED AS INCOME. THUS LD. CIT(A) HAS RIGHTLY ALLOWED THE EXPENSES. HIS ORDER MAY BE UPHELD. 48. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. REVENUE IS AGGRIEVED WITH THE ORDER OF LD. CIT(A) IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON A CCOUNT OF PROVISION OF TRAVELING EXPENSES OF RS.1,06,796/-. F ROM GOING THROUGH THE SUBMISSIONS MADE BY LD. AR, WE FIND THAT AT THE TIME OF FINALIZING OF ACCOUNTS AT THE END OF THE YEAR SOME PROVISIONS ARE REQUIRED IN RESPECT OF EXPENSES WHICH HAVE BEEN INCURRED IN THE LAST MONTH OF THE FINANCIAL YEAR BUT THE BILLS/CLAIM IN RESPECT T HEREOF ARE STILL AWAITED AND, THEREFORE, PROVISIONS OF SUCH EXPENSES ARE NEC ESSARY TO BE MADE. CERTAINLY THE PROVISIONS INVOLVE SOME ELEMENT S OF ESTIMATION BUT IN THE NEXT YEAR SUCH PROVISIONS ARE REVERSED A ND ACTUAL EXPENSES ARE BOOKED AND ACCORDINGLY IF THERE IS ANY EXPENDITURE THE SAME IS ADJUSTED IN THE NEXT YEAR. THIS ACCOUNTING PRACTICE HAS BEEN ITA NO. 1921. 1950 & CO 228-AHD-2011 ASST. YEAR 2005-06 25 FOLLOWED CONSISTENTLY BY THE ASSESSEE. WE ARE, THER EFORE, OF THE VIEW THAT LD. CIT(A) HAS RIGHTLY DELETED THE DISALLOWANC E BY OBSERVING AS UNDER :- 7 . THE SIXTH GROUND OF APPEAL IS WITH REGARD TO DISA LLOWANCE OF PROVISION OF TRAVELLING EXPENSES OF RS. 1,06,796. THE APPELLANT HAD MADE PROVISION FOR TRAVELLING EXPENSES FOR RS.12,19,300/- OUT OF WHICH RS.1,06,796 WAS MADE ON ESTIMATE BASIS TO PROVIDE FOR THE EXPENSES OF LAST MONTH FOR WHICH DETAILS WOULD COME IN THE SUBSEQUENT YEAR DUE TO NO. OF LOCATIONS AT WHICH ASSESSEE'S OFFICES ARE SITUATED AND NO. OF EMPLOYEES WHO UNDERTAKE TRA VEL. THE A.O. DISALLOWED THE SAME CONSIDERING THAT THE SAME IS NOT AN EXPENS E BUT ONLY A PROVISION WHICH IS REVERSED IN THE NEXT YEAR. THE A.R. SUBMIT TED THAT THESE ARE ROUTINE EXPENSES AND AS THE COMPANY FOLLOWS ACCRUAL SYSTEM OF ACCOUNTING, PROVISION FOR EXPENSES ARE REQUIRED TO BE MADE EVEN FROM COMP ANIES ACT REQUIREMENT. 7.1 THE A.R. EXPLAINED THAT EVERY YEAR SUCH PROVISI ON IS MADE AT THE END OF THE YEAR FOR THE EXPENSES FOR WHICH BILLS / CLAIM IS NO T RECEIVED BUT AN EXPENSE HAS BEEN INCURRED. SUCH PROVISION DOES INVOLVE SOME ELE MENT OF ESTIMATION. NEXT YEAR SUCH PROVISION IS REVERSED AND ACTUAL EXPENSES ARE BOOKED AND ACCORDINGLY IF THERE IS ANY EXCESS / SHORT PROVISIO N, THE SAME IS ADJUSTED IN THE NEXT YEAR. THIS ACCOUNTING PRACTICE IS FOLLOWED EVE RY YEAR CONSISTENTLY WITH A VIEW TO REFLECT THE TRUE & FAIR VIEW OF THE STATE O F AFFAIRS OF THE COMPANY. 7.2 I HAVE CONSIDERED THE CONTENTION OF A.O. A ND SUBMISSION OF THE APPELLANT AND I AM OF THE CONSIDERED VIEW THAT THOUGH THERE I S SOME ELEMENT OF ESTIMATION IN MAKING SUCH PROVISION, THE ACCOUNTING PRACTICE O F MAKING THE PROVISION EVERY YEAR, REVERSING THE SAME IN THE NEXT YEAR AND THEN BOOKING THE ACTUAL EXPENSES DOES TAKE INTO CONSIDERATION ANY EXCESS/ S HORT PROVISION, THEN NO EXPENSES ARE CLAIMED TWICE AND THEREFORE SUCH PROVI SION OF EXPENSES SHOULD BE ALLOWED. THEREFORE I DIRECT THAT PROVISION OF EXPEN SES SHOULD BE ALLOWED AS A DEDUCTION AND ADDITION MADE IN THIS REGARD BY THE A .O. IS DELETED. HOWEVER, IF SUCH PROVISION IS WRITTEN BACK IN THE NEXT YEAR, TH E SAME SHOULD THEN BE CONSIDERED TAXABLE IN THAT YEAR BY INVOKING PROVISI ONS OF SECTION 41(1). 49. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A). WE UPHOLD T HE SAME. THIS GROUND OF REVENUE IS DISMISSED. ITA NO. 1921. 1950 & CO 228-AHD-2011 ASST. YEAR 2005-06 26 50. GROUND NO.8 OF THE APPEAL READS AS UNDER :- 8. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN D ELETING THE ADDITION MADE BY THE A.O. ON ACCOUNT OF PROJECT LOSS OF RS.7 ,49,000/- IN RELATION TO AMOUNT RECEIVABLE FROM MAHANAGAR GAS LT D. 51. LD. DR SUPPORTED THE ORDER OF ASSESSING OFFICER . 52. LD. AR SUBMITTED THAT THIS IS THE AMOUNT RECEIV ABLE FROM MAHANAGAR GAS LTD. TOWARDS THE AMOUNT TO BE RECEIVE D FROM THEM FOR INSTALLATION OF GAS CONNECTION FOR WHICH CORRES PONDING CREDIT WAS OFFERED AS INCOME IN EARLIER ASSESSMENT YEAR. THIS AMOUNT WAS NOT WRITTEN OFF AND HENCE WAS WRITTEN OFF DURING THE YE AR. AS IT IS THE LOSS ARISEN IN THE COURSE OF CARRYING ON BUSINESS AND SI NCE THE BUSINESS OF GAS DISTRIBUTION IS CARRIED ON IN THE YEAR UNDER CO NSIDERATION IT IS TO BE ALLOWED U/S 37 R.W.S. 28 OF THE ACT. MOREOVER THIS ISSUE WAS ALLOWED BY LD. ASSESSING OFFICER IN FAVOUR OF ASSESSEE IN A SST. YEAR 2002-03. ACCORDINGLY, LD. CIT(A) HAS RIGHTLY ALLOWED THE EXP ENSES. 53. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. REVENUE IS AGGRIEVED BY THE ACTION OF LD. C IT(A) DELETING THE DISALLOWANCE MADE BY ASSESSING OFFICER ON ACCOUNT O F PROJECT LOSS FROM MAHANAGAR GAS LTD. (MGL), MUMBAI. WE OBSERVE T HAT ASSESSEE HAD TAKEN A CONTRACT OF MGL FOR LAYING GAS LINE FOR DOMESTIC CUSTOMERS ON THE SAME LINE AND THE PROJECT INCOME IS ACCOUNTED FOR ON COMPLETION METHOD BASED ON MUTUAL STAND ACHIEVED AS SPECIFIED IN THE CONTRACT. DURING THE PREVIOUS Y EAR I.E. ASST. YEAR 2004-05 ASSESSEE RAISED SALES/INVOICES ON MGL AND O FFERED THE ITA NO. 1921. 1950 & CO 228-AHD-2011 ASST. YEAR 2005-06 27 INCOME FOR TAX. BUT DURING ASST. YEAR 2005-06 WHEN THE SALES INVOICES WERE VERIFIED BY MGL, CERTAIN CONNECTIONS WERE NOT CERTIFIED BY THEM AND SUCH AMOUNT OF INCOME CLAIMED BY THE AS SESSEE BUT NOT BACKED UP BY CERTIFICATE OF MGL WAS REVERSED DURING ASST. YEAR 2005-06. HOWEVER, THIS WRITE OFF WAS NOT ALLOWED BY LD. ASSESSING OFFICER ON THE GROUND THAT PROJECT REFERRED BY THE ASSESSEE WAS NOT IN OPERATION DURING THE YEAR AND IN RESPECT OF SAID PR OJECT THE ASSESSEE WAS FOLLOWING COMPLETION CONTRACT METHOD AND, THERE FORE, SAID METHOD DID NOT RELATE TO THE SAME AND COULD NOT BE ALLOWED U/S 37 OF THE ACT. WE FURTHER OBSERVE THAT LD. CIT(A) WHILE D ELETING THE DISALLOWANCE HAS OBSERVED AS UNDER :- 10.2 I HAVE CONSIDERED THE SUBMISSIONS MADE BY TH E APPELLANT IN THIS REGARD. IT MAY BE NOTED THAT IT IS NOT DISPUTED BY THE A.O. THAT CORRESPONDING INCOME OF THE SAID PROJECT HAS BEEN OFFERED TO TAX IN EARLIER YEARS. APART FROM THAT THE OBSERVATION OF A.O. THAT SINCE THE PROJECT WAS NOT IN OPERATION DURING THE RELEVANT YEAR, THE LOSS ARISING DUE TO WRITE OFF OF AMOUNT RECEIVABLE SHOULD NOT BE ALLOWED IS INCORRECT. THE APPELLANT IS IN THE BU SINESS OF CARRYING ON THE BUSINESS OF GAS DISTRIBUTION AND SINCE THIS LOSS IS PART OF THE SAME BUSINESS OF GAS DISTRIBUTION, THE SAME CAN BE CONSIDERED AS BAD DEBT AS WELL AS LOSS ARISING FROM THE BUSINESS AND SINCE THE AMOUNT RECEIVABLE F ROM MAHANAGAR GAS LIMITED HAS ACTUALLY BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNT ON ACCOUNT DUE TO NON APPROVAL FOR PAYMENT BY THE SAID PARTY, FOLLOWI NG THE SUPREME COURT 1 DECISION OF TRF LIMITED 323 ITR 397, THE ADDITION M ADE BY THE A.O. IS DELETED. 54. IN THE GIVEN CIRCUMSTANCES, WE ARE OF THE VIEW THAT REGULAR BOOKS ARE BEING MAINTAINED BY THE ASSESSEE AND ACCO UNTING POLICIES AND STANDARDS ARE CONSISTENTLY FOLLOWED AND LOOKING TO THE PAST HISTORY OF ASSESSMENTS OF ASSESSEE, WE UNDERSTAND T HAT SUCH CLAIM WAS ALLOWED BY THE REVENUE IN THE PAST ALSO. WE, TH EREFORE, FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) WH O HAS RIGHTLY DELETED ITA NO. 1921. 1950 & CO 228-AHD-2011 ASST. YEAR 2005-06 28 THE DISALLOWANCE MADE ON ACCOUNT OF PROJECT LOSS FR OM MGL AT RS.7,49,000/-. ACCORDINGLY THIS GROUND OF REVENUE I S ALSO DISMISSED. 55. GROUND NO.9 OF THE APPEAL READS AS UNDER :- 9. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN D IRECTING TO ALLOW THE CONSEQUENTIAL DEPRECIATION ON SOFTWARE LICENSE FEE OF RS.20,90,051/- OF A.Y. 2002-03 ON THE CURRENT YEAR. 56. LD. DR SUPPORTED THE ORDER OF LD. DR WHEREAS LD . AR SUBMITTED THAT THAT IN ASST. YEAR 2002-03 LD. CIT(A) HAD CONF IRMED THE DISALLOWANCE OF EXPENDITURE ON SOFTWARE LICENSE FEE S AND THEREFORE, CONSEQUENTIAL EFFECT TO GRANT DEPRECIATION ON EXPEN DITURE CAPITALIZED WOULD BE ALLOWABLE. ACCORDINGLY LD. CIT(A) HAS RIGH TLY ALLOWED DEPRECIATION ON SOFTWARE LICENSE FEES. HOWEVER, NOW THE TRIBUNAL HAS DECIDED THIS ISSUE IN FAVOUR OF ASSESSEE IN ASST. Y EAR 2002-03, SO THE GROUND BECOMES INFRUCTUOUS. 57. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. REVENUE HAS RAISED THIS GROUND AGAINST T HE ACTION OF LD. CIT(A) ALLOWING CONSEQUENTIAL DEPRECIATION ON SOFTW ARE LICENSE FEES FOR ASST. YEAR 2002-03 OF RS. 20,90,051/-. WE OBSERVE THAT DURING ASST. YEAR 2002-03 OUT OF REVENUE EXPENDITURE CLAIM ED AT RS.22,36,196/- TOWARDS SOFTWARE DEVELOPMENT AND SOF TWARE LICENSE EXPENDITURE TO THE EXTENT OF RS.20,90,051/- WAS DIS ALLOWED BY LD. ASSESSING OFFICER AND TREATED AS CAPITAL EXPENDITUR E AND ALLOWED DEPRECIATION AT THE PREVAILING RATES. DURING THE CO URSE OF APPELLATE PROCEEDINGS BEFORE LD. CIT(A) RELATING TO ASST. YEA R 2005-06 GROUND WAS RAISED BY THE ASSESSEE AGAINST THE ORDER OF ASS ESSING OFFICER FOR ITA NO. 1921. 1950 & CO 228-AHD-2011 ASST. YEAR 2005-06 29 NOT ALLOWING DEPRECIATION ON SOFTWARE LICENSE FEE O F RS.20,90,051/- RELATING TO ASST. YEAR 2002-03. THE REASON FOR RAIS ING THIS GROUND BY ASSESSEE WAS THAT AT THE TIME OF APPELLATE PROCEEDI NGS GOING BEFORE LD. CIT(A) FOR ASST. YEAR 2005-06 THE ISSUE RELATIN G TO ASST. YEAR 2002-03 WAS PENDING BEFORE THE CO-ORDINATE BENCH WH EREIN ASSESSEE HAD RAISED THE GROUND AGAINST THE ORDER OF LD. CIT(A) WHEREIN THE VIEW OF LD. ASSESSING OFFICER AND TREAT ING THE EXPENDITURE OF RS.20,90,051/- AS CAPITAL EXPENDITURE WAS CONFIR MED. WE FURTHER OBSERVE THAT CO-ORDINATE BENCH IN ITA NO.1264/AHD/2 006 FOR ASST. YEAR 2002-03 PRONOUNCED ON 30 TH MAY, 2014 HAS ADJUDICATED THIS ISSUE BY OBSERVING AS UNDER :- 8. GROUND NO.8 IS REPRODUCED BELOW: 8(I). THE LEARNED COMMISSIONER OF INCOME-TAX (APPE ALS) ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS.20,90 ,051/- OUT OF RS.22,36,196/- BEING THE EXPENDITURE INCURRED ON SO FTWARE LICENSES AND SOFTWARE DEVELOPMENT. YOUR APPELLANT SUBMITS THAT T HESE EXPENSES BEING OF RECURRING NATURE, THE USE OF LICENSED COPY OF DI FFERENT PROGRAMMES IN FORM OF SOFTWARE ARE TO BE TREATED AS REVENUE EXPEN DITURE. 8(II). THE LEARNED COMMISSIONER OF INCOME-TAX (APPE ALS) ERRED IN HOLDING THAT COMPUTER SOFTWARE ARE ELIGIBLE AS DEPRECIATION @ 25% AND NOT @ 60%. IT IS SUBMITTED THAT COMPUTER SOFTWARE ARE ELI GIBLE @ 60% AND THE SAME MAY BE ALLOWED NOW. 8.1 THE ASSESSEE HAS INCURRED SOFTWARE DEVELOPMENT AND SOFTWARE LICENSE EXPENDITURE OF RS.22,36,196/-, AS PER AO, DEBITED T O P&L A/C. THE ASSESSEE HAS FURNISHED THE DETAILS AND THE EXPLANATION AS FOLLOW S: A) LICENSE COPY OF MS OFFICE, ANTIVIRUS SOLUTION, ANTIGEN FOR MS EXCHANGE MAIL SERVER, OTHER SOFTWARES, ORACLE SERVER TOTALING TO RS.1875851/- B) MIGRATION OF APPLICATION FROM POWER BUILDER AND DATA FROM ORACLE RS.125000/- ITA NO. 1921. 1950 & CO 228-AHD-2011 ASST. YEAR 2005-06 30 C) SOFTWARE REQUIREMENT STUDY RS.L08125/- D) COMPUTER SOFTWARE DEVELOPMENT EXPENSES RS.38,020 /- E) POWER BUILDER UPGRADATION IN SYSTEMS RS.55000/- F) MS PROJECT 2000 SOFTWARE LICENSE RS.18950/- G) MS OFFICE USER LICENSE RS.15250/- 8.2. HOWEVER, THE AO WAS NOT CONVINCED AND HELD AS UNDER: IN VIEW OF UNAMBIGUOUS PROVISION IN THE INCOME TAX ACT, 1961 WITH REGARD TO EXPENDITURE TOWARDS LICENSE THE AFORESAID EXPENDITURES (EXCLUDING THE EXPENDITURE FOR SOFTWARE DEVELOPMENT AND SOFTWARE STUDY) INCURRED BY THE ASSESSEE COMPANY IS HELD TO BE ELIG IBLE FOR DEPRECIATION AT THE RATE OF 25%. SUCH EXPENSES ARE NOT ELIGIBLE FOR DEDUCTION AS REVENUE IN NATURE. THUS THE EXPENDITURE TO THE TUNE OF RS.2 090051/- IS DISALLOWED AS REVENUE EXPENDITURE AND DEPRECIATION AT THE RATE OF 25% IS ALLOWED ON SUCH AMOUNT. IT LEADS TO NET DISALLOWANCE OF RS.156 7538/- 8.3 LEARNED CIT(A) HAS CONSIDERED THE NATURE OF THE EXPENDITURE, AS DISCUSSED BY THE AO, BUT HELD THAT THE EXPENDITURE WAS CAPITA L IN NATURE BECAUSE THE ASSESSEE HAS ACQUIRED INTANGIBLE RIGHT FOR USE OF S OFTWARE. BEING AGGRIEVED, THE ASSESSEE IS FURTHER IN APPEAL. 8.4 HEARD BOTH THE SIDES. THE ASSESSEE HAD OBTAINED THE LICENSE FOR USE OF VARIOUS SOFTWARES. FOR THE PURPOSE OF SOFTWARE, IT IS A STATUTORY REQUIREMENT OF PROCUREMENT OF LICENSE. THEREFORE IT IS A RECURRING EXPENDITURE. IT IS NOT A ONE TIME EXPENDITURES. THE SOFTWARE IS REQUIRED FOR RUN NING OF THE BUSINESS; HENCE, THE EXPENDITURE HAS DIRECT NEXUS WITH THE BUSINESS ACTIVITY OF THE ASSESSEE. BEFORE US A DECISION OF HONBLE ITAT AHMEDABAD IN T HE CASE OF UB ELECTRICALS PVT. LTD. CITED AS 1997 TAX L.R. 250 IS REFERRED WH EREIN IT WAS HELD THAT THE PURCHASE OF SOFTWARE PROGRAMMES ARE SUBJECT TO CHAN GE; THEREFORE, NOT ENDURING IN NATURE BUT REVENUE IN NATURE, HENCE; AN ALLOWABL E EXPENDITURE. THE ASSESSEE HAS ALSO FURNISHED A DECISION OF HONBLE DELHI HIGH COURT PRONOUNCED IN THE CASE OF CIT VS. AMWAY INDIA ENTERPRISES, 22 TAXMANN. COM 22 (DELHI) WHEREIN IT WAS PRONOUNCED THAT AN EXPENDITURE FOR ACQUIRING LICENS E TO USE SOFTWARE APPLICATIONS WOULD BE APPLICABLE AS REVENUE EXPENDITURE. RESPECT FULLY FOLLOWING THESE DECISIONS, WE HEREBY HOLD THAT THE EXPENDITURE IN Q UESTION IS TO BE ALLOWED IN THE HANDS OF THE ASSESSEE. THIS GROUND IS, THEREFORE, A LLOWED. 58. FROM GOING THROUGH THE ORDER OF CO-ORDINATE BEN CH WE OBSERVE THAT GROUND OF THE ASSESSEE HAS BEEN ALLOWED AND EX PENDITURE OF ITA NO. 1921. 1950 & CO 228-AHD-2011 ASST. YEAR 2005-06 31 RS.20,90,051/- HAS BEEN HELD TO BE REVENUE EXPENDIT URE AND IN THESE CIRCUMSTANCES, THIS GROUND RAISED BY THE REVENUE HA S BECOME INFRACTUOUS AND HENCE DISMISSED AS INFRACTUOUS. 59. OTHER GROUNDS ARE OF GENERAL NATURE, HENCE NEED NO ADJUDICATION. 60. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. 61. GROUND RAISED IN CO NO.228/AHD/2011 FOR ASST. Y EAR 2005-06: LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRM ING DISALLOWANCE OUT OF ADMINISTRATIVE TO THE EXTENT OF RS.10,54,333 AS AGA INST RS. 6,00,000 DISALLOWED BY THE ASSESSEE U/S I4A OF THE ACT. IT IS SUBMITTED THAT D ISALLOWANCE MADE BY THE ASSESSEE U/S 14A OF RS. 6,00,000 IS FAIR AND REASONABLE IN THE F ACTS AND CIRCUMSTANCE OF THE CASE AND HENCE NO FURTHER DISALLOWANCE SHOULD HAVE BEEN CONFIRMED BY CIT(A). THE RESPONDENT PRAYS FOR LEAVE TO ADD, ALTER AND/OR AMEND ALL OR ANY OF THE GROUNDS BEFORE THE HEARING OF CROSS OBJECTION. 62. LD. AR IS AGGRIEVED WITH THE ACTION OF LD. CIT( A) IN CONFIRMING THE DISALLOWANCE OUT OF ADMINISTRATIVE EXPENSES TO THE EXTENT OF RS. 10,54,333/-. 63. LD. DR SUPPORTED THE ORDERS OF AUTHORITIES BELO W. 64. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. WE OBSERVE THAT WHILE DEALING WITH GROUN D NO.2 OF REVENUES APPEAL WE HAVE ALREADY DEALT THIS ISSUE I N ITA NO.1950/AHD/2011 FOR ASST. YEAR 2005-06, AND DISMIS SED THE GROUND AND HAVE HELD THAT DISALLOWANCE U/S 14A OF THE ACT, SHOULD BE ITA NO. 1921. 1950 & CO 228-AHD-2011 ASST. YEAR 2005-06 32 SUSTAINED AT RS.6,00,000/- ONLY WHICH HAS BEEN SUO MOTO ACCEPTED BY THE ASSESSEE AS DISALLOWANCE U/S 14A OF THE ACT WHILE FURNISHING OF INCOME TAX RETURN. AS THE GROUND OF REVENUE HAS ALREADY BEEN DISMISSED, THE CROSS OBJECTION RAISED BY THE ASSESS EE HAS BECOME INFRACTUOUS AND IS DISMISSED ACCORDINGLY. 65. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED FOR STATISTICAL PURPOSES, THE APPEAL OF REVENUE AND THE CROSS OBJEC TION OF ASSESSEE BOTH ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH MAY, 2016 SD/- SD/- (SHAILENDRA YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 17/5/2016 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD ITA NO. 1921. 1950 & CO 228-AHD-2011 ASST. YEAR 2005-06 33 1. DATE OF DICTATION: 12/05/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 13/05/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK:1 7/5/2016 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: