Shri T.P.Textiles (P) Ltd., Rajapalayam V. DCIT, Madurai

ITA 1944/CHNY/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8694 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 01-08-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 07-09-2015
• Court: TRIBUNAL
• Department Lawyers: M M BHUSARI
• Assessee Lawyers: A KANAGARAJ
• Keywords: Depreciation; Additional depreciation; Revised return; Unabsorbed depreciation
• Section: 143(3); 32; 263

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . , . , BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I T.A. NO. 1944/MDS/2015 / ASSESSMENT YEAR :2011 - 12 M/S. SHRI T.P. TEXTILES (P) LTD., 1021 - A, JOTHIMAHAAL COTTON MARKET, RAJAPALAYAM 626 117. [PAN: AACCS8824P] VS. THE COMMISSIONER OF INCOME TAX - 1 , MADURAI. ( / APPELLANT ) ( / RESPONDENT ) ./ I T.A. NO. 2 6 /MDS/2016 / ASSESSMENT YEAR :20 09 - 1 0 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2 , MADURAI. VS. M/S. SHRI T.P. TEXTILES (P) LTD., 1021 - A, JOTHIMAHAAL COTTON MARKET, RAJAPALAYAM 626 117. ( / APPELLANT ) ( / RESPONDENT ) ASSESSEE BY : SHRI A. KANAGARAJ, C.A. DEPARTMENT BY : SHRI M.M. BHUSARI, CIT / DATE OF HEARING : 01 . 0 8 .201 6 / DATE OF P RONOUNCEMENT : 24 .08 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX - 1, MADURAI DATED 30 .0 3 .201 5 RELEVANT TO THE ASSESSM ENT YEAR 20 11 - 1 2 PASSED UNDER SECTION 263 OF THE INCOME TAX I.T.A. NO . 1944 /M/ 15 & I.T.A. NO. 26/M/16 2 ACT, 1961 [ ACT IN SHORT], WHEREAS, THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) 1, MADURAI DATED 13.10.2015 FOR THE ASSESSMENT YEAR 2009 - 10 . 2. FIRST WE SHA LL TAKE UP THE APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2011 - 12 CHALLENGING THE 263 ORDER PASSED BY THE LD CIT WITHDRAWING THE CLAIM OF BALANCE 10% ADDITIONAL DEPRECIATION UNDER SECTION 32(1)(IIA) OF THE ACT. 3. BRIEF FACTS OF THE CASE ARE T HAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF BUILDING PRODUCTS AND TEXTILES. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011 - 12 ON 23.09.2011 DECLARING TOTAL INCOME OF .2,98,68,587/ - . THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ACCEPTING THE RETURN FILED BY THE ASSESSEE. 4. ON PERUSAL OF THE RECORDS, THE LD. CIT WAS OF THE OPINION THAT THE ASSESSMENT PASSED UNDER SECTION 143(3) OF THE A CT DATED 27.02.2014 WAS APPARENTLY ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE SINCE THE ASSESSING OFFICER HAS ALLOWED THE CLAIM OF BALANCE ADDITIONAL DEPRECIATION OF .8,03,233/ - I.E., @ 10% , FOR THE MACHINERY PURCHASED AND USED FOR LESS THAN 180 DAYS DURING THE PREVIOUS YEAR AND ACCORDINGLY, HE ISSUED NOTICE UNDER SECTION 263 OF THE ACT TO THE ASSESSEE . AFTER CONSIDERING THE I.T.A. NO . 1944 /M/ 15 & I.T.A. NO. 26/M/16 3 SUBMISSIONS OF THE ASSESSEE VIDE ITS REPLY DATED 04.03.2015, THE LD. CIT HAS OBSERVED THAT NORMALLY THE ADDITIONAL DEPRECIATION WOULD BE AVAILABLE ONLY IN THE YEAR IN WHICH THE NEW PLANT AND MACHINERY IS FIRST PUT TO USE AND THEREFORE, THE CLAIM OF THE ASSESSEE FOR ADDITIONAL DEPRECIATION IN THE SE COND YEAR OF PURCHASE/USE OF THE MACHINERY IS NOT IN CONSONANCE WITH THE PROVISIONS OF SECTION 32(1)(IIA) OF THE ACT. HENCE, THE LD. CIT HAS HELD THAT THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND BY CANCELL ING THE ASSESSMENT ORDER , HE DIRECTED THE ASSESSING OFFICER TO REDO THE ASSESSMENT AFTER EXAMINING AND VERIFYING THE CLAIM OF THE ASSESSEE . 5. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. COUNSEL FOR THE ASS ESSEE HAS SUBMITTED THAT THE JURISDICTIONAL TRIBUNAL HAS ON MANY CASES ALLOWED THE CLAIM OF BALANCE 10% ADDITIONAL DEPRECIATION UNDER SECTION 32(1)(IIA) OF THE ACT INCLUDING THE RECENT DECISION OF THE TRIBUNAL IN THE CASE OF FRESH & HONEST CAF LTD. V. DCI T IN I.T.A. NO. 1373/MDS/2016 FOR THE ASSESSMENT YEAR 2012 - 13 VIDE ORDER DATED 10.08.2016 AND THUS, THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE. 6. ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORDER PASSED BY THE LD. CIT. I.T.A. NO . 1944 /M/ 15 & I.T.A. NO. 26/M/16 4 7. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. FROM THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT, THE LD. CIT HAS OBSERVED THAT THE ASSESSEE IS NOT ELIGIBLE TO CLAIM 10% OF BALANCE ADDITIONAL DE PRECIATION OF .8,03,233/ - FOR THE MACHINERY PURCHASED AND USED FOR LESS THAN 180 DAYS DURING THE PREVIOUS YEAR. SIMILAR ISSUE CAME UP BEFORE THE COORDINATE BENCH OF THIS TRIBUNAL FOR ADJUDICATION IN THE CASE OF FRESH & HONEST CAF LTD. V. DCIT (SUPRA) FOR THE ASSESSMENT YEAR 2012 - 13, WHEREIN, BY FOLLOWING ITS OWN ORDER DATED 05.05.2016 FOR EARLIER ASSESSMENT YEARS 2009 - 10, 2010 - 11 & 2011 - 12 IN I.T.A. NOS. 1499 & 1500/MDS/2014 & 1485/MDS/2015, THE TRIBUNAL HAS DIRECTED THE ASSESSING OFFICER TO ALLOW THE BAL ANCE 50% OF DEPRECIATION I.E., 10% ADDITIONAL DEPRECIATION AS CLAIMED BY THE ASSESSEE IN THE ASSESSMENT YEAR 2012 - 13 ALSO. IN THE ORDER DATED 05.05.2016, THE TRIBUNAL HAS OBSERVED AND HELD AS UNDER: 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER S IDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE MACHINERY WAS INSTALLED AND USED FOR MANUFACTURING ACTIVITY FOR LESS THAN 180 DAYS. THEREFORE, THE ASSESSING OFFICER ALLOWED THE ADDITIONAL DEPRECIATION AT THE RATE OF 10%. THE QUESTION ARISES FOR CONSIDERATION IS WHETHER THE ASSESSEE CAN CLAIM THE REMAINING 10% UNDER SECTION 32(1)(IIA) OF THE ACT IN THE SUBSEQUENT YEAR? THIS ISSUE WAS CONSIDERED BY THIS TRIBUNAL IN M/S AUTOMOTIVE COACHES & COMPONENTS LTD. (SUPRA) AND F OUND THAT THE ASSESSEE IS ENTITLED FOR REMAINING 10% ADDITIONAL DEPRECIATION DURING THE SUBSEQUENT YEAR. IN FACT, THIS TRIBUNAL OBSERVED AS FOLLOWS: - 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. SECTION 32(1)(IIA) PROVIDES FOR ADDITIONAL DEPRECIATION AT THE RATE OF I.T.A. NO . 1944 /M/ 15 & I.T.A. NO. 26/M/16 5 20%. THE ASSESSING OFFICER ALLOWED 10% OF ADDITIONAL DEPRECIATION IN RESPECT OF THE PLANT AND MACHINERY PURCHASED DURING THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER F OUND THAT THE ADDITIONS TO FIXED ASSETS WERE MADE IN THE SECOND HALF OF THE FINANCIAL YEAR, THEREFORE, 50% OF ADDITIONAL DEPRECIATION HAS BEEN CLAIMED. THE BALANCE 50% WAS CARRIED FORWARD IN THE NEXT YEAR. THE ASSESSING OFFICER FOUND THAT THE ADDITIONAL DE PRECIATION IS ALLOWABLE ONLY DURING THE YEAR IN WHICH THE MACHINERY WAS INSTALLED AND USED FOR BUSINESS OF THE ASSESSEE. THERE IS NO PROVISION IN THE INCOME - TAX ACT FOR CARRY FORWARD OF THE ADDITIONAL DEPRECIATION TO THE SUBSEQUENT ASSESSMENT YEAR. THIS IS SUE WAS EXAMINED BY THE COCHIN BENCH OF THIS TRIBUNAL IN APOLLO TYRES LTD. V. ACIT (SUPRA). THE COCHIN BENCH FOUND THAT IF ADDITIONAL DEPRECIATION COULD NOT BE ALLOWED AT THE RATE OF 20% DURING THE YEAR IN WHICH THE MACHINERY WAS INSTALLED, THE BALANCE 50% HAS TO BE ALLOWED IN THE SUBSEQUENT YEAR. IN FACT, THE COCHIN BENCH OF THIS TRIBUNAL HAS OBSERVED AS FOLLOWS: - 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. SECTION 32(1)(IIA) READS AS FOL LOWS: '32(1)(IIA) IN THE CASE OF ANY NEW MACHINERY OR PLANT (OTHER THAN SHIPS AND AIRCRAFT), WHICH HAS BEEN ACQUIRED AND INSTALLED AFTER THE 31 ST DAY OF MARCH, 2005, BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR TH ING, A FURTHER SUM EQUAL TO TWENTY PER CENT OF THE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UNDER CLAUSE (II): PROVIDED THAT NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF (A) ANY MACHINERY OR PLANT WHICH, BEFORE ITS INSTALLATION BY THE ASSESSEE, WAS USED EITHER WITHIN OR OUTSIDE INDIA BY ANY OTHER PERSON; OR (B) ANY MACHINERY OR PLANT INSTALLED IN ANY OFFICE PREMISES OR ANY RESIDENTIAL ACCOMMODATION, INCLUDING ACCOMMODATION IN THE NATURE OF A GUEST - HOUSE; OR (C) ANY OFFICE A PPLIANCES OR ROAD TRANSPORT VEHICLES; OR I.T.A. NO . 1944 /M/ 15 & I.T.A. NO. 26/M/16 6 (D) ANY MACHINERY OR PLANT, THE WHOLE OF THE ACTUAL COST OF WHICH IS ALLOWED AS A DEDUCTION (WHETHER BY WAY OF DEPRECIATION OR OTHERWISE) IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUS INESS OR PROFESSION' OF ANY ONE PREVIOUS YEAR.' 10. WE HAVE ALSO CAREFULLY GONE THROUGH THE SECOND PROVISO TO SECTION 32(1)(II) OF THE ACT, WHICH READS AS FOLLOWS: 'PROVIDED FURTHER THAT WHERE AN ASSET REFERRED TO CLAUSE (I) OR CLAUSE (II) OR CLAUSE (I IA), AS THE CASE MAY BE, IS ACQUIRED BY THE ASSESSEE DURING THE PREVIOUS YEAR AND IS PUT TO USE FOR THE PURPOSE OF BUSINESS OR PROFESSION FOR A PERIOD OF LESS THAN ONE HUNDRED AND EIGHTY DAYS IN THAT PREVIOUS YEAR, THE DEDUCTION UNDER THIS SUB - SECTION IN R ESPECT OF SUCH ASSET SHALL BE RESTRICTED TO FIFTY PER CENT OF THE AMOUNT CALCULATED AT THE PERCENTAGE PRESCRIBED FOR AN ASSET UNDER CLAUSE (I) OR CLAUSE (II) OR CLAUSE (IIA) AS THE CASE MAY BE.' 11. A BARE READING OF THIS SECTION 32(1)(IIA) CLEARLY SAYS THAT IN CASE A NEW MACHINERY OR PLANT WAS ACQUIRED AND INSTALLED AFTER 31 - 03 - 2005 BY AN ASSESSEE, WHO IS ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCE OF ARTICLE OR THING, THEN, A SUM EQUAL TO 20% OF THE ACTUAL COST OF THE MACHINERY AND PLANT SHALL BE ALLOWED AS A DEDUCTION. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS ACQUIRED AND INSTALLED THE MACHINERY AFTER 31 - 03 - 2005. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE IS ENGAGED IN THE MANUFACTURE OF ARTICLE OR THING. THEREFORE, THE ASSESSEE IS ELIGIBLE FOR ADDITIONAL DEPRECIATION WHICH IS EQUIVALENT TO 20% OF THE ACTUAL COST OF SUCH MACHINERY. THE DISPUTE IS THE YEAR IN WHICH THE DEPRECIATION HAS TO BE ALLOWED. THE ASSESSEE HAS ALREADY CLAIMED 10% OF THE DEPRECIATION IN THE EARLIER ASSESSMENT YEAR SINCE THE MACHINERY WAS USED FOR LESS THAN 180 DAYS AND CLAIMING THE BALANCE 10% IN THE YEAR UNDER CONSIDERATION. SECTION 32(1)(IIA) DOES NOT SAY THAT THE YEAR IN WHICH THE ADDITIONAL DEPRECIATION HAS TO BE ALLOWED. IT SIMPLY SAYS THAT THE ASSESSEE IS ELIGIBLE FOR ADDITIONAL DEPRECIATION EQUAL TO 20% OF THE COST OF THE MACHINERY PROVIDED THE MACHINERY OR PLANT IS ACQUIRED AND INSTALLED AFTER 31 - 03 - 2005. PROVISO TO SECTION 32(1)(IIA) SAYS THAT IF THE MACHINERY WAS ACQUIRED BY THE ASSESSING DURING THE PREVIOUS YEAR AN D HAS PUT TO USE FOR THE PURPOSE OF BUSINESS LESS THAN 180 DAYS, THE DEDUCTION SHALL BE I.T.A. NO . 1944 /M/ 15 & I.T.A. NO. 26/M/16 7 RESTRICTED TO 50% OF THE AMOUNT CALCULATED AT THE PRESCRIBED RATE. THEREFORE, IF THE MACHINERY IS PUT TO USE IN ANY PARTICULAR YEAR, THE ASSESSEE IS ENTITLED FOR 50% OF THE PRESCRIBED RATE OF ADDITIONAL DEPRECIATION. THE INCOME - TAX ACT IS SILENT ABOUT THE ALLOWANCE OF THE BALANCE 10% ADDITIONAL DEPRECIATION IN THE SUBSEQUENT YEAR. TAKING ADVANTAGE OF THIS POSITION, THE ASSESSEE NOW CLAIMS THAT THE YEAR IN WHICH THE MACHI NERY WAS PUT TO USE THE ASSESSEE IS ENTITLED FOR 50% ADDITIONAL DEPRECIATION SINCE THE MACHINERY WAS PUT TO USE FOR LESS THAN 180 DAYS AND THE BALANCE 50% SHALL BE ALLOWED IN THE NEXT YEAR SINCE THE ELIGIBILITY OF THE ASSESSEE FOR CLAIMING 20% OF THE ADDIT IONAL DEPRECIATION CANNOT BE DENIED BY INVOKING SECOND PROVISO TO SECTION 32(1)(II) OF THE ACT. 12. THIS ISSUE WAS CONSIDERED BY THE DELHI BENCH OF THIS TRIBUNAL IN THE CASE OF COSMO FILMS LTD (SUPRA). THE REVENUE HAS TAKEN A SIMILAR GROUND AS TAKEN BEF ORE THIS TRIBUNAL THAT THE ASSESSEE CANNOT CARRY FORWARD THE ADDITIONAL DEPRECIATION TO BE ALLOWED IN THE SUBSEQUENT ASSESSMENT YEAR. THE DELHI BENCH OF THIS TRIBUNAL AFTER CONSIDERING THE PROVISIONS OF SECTION 32(1)(IIA) AND PROVISO TO SECTION 321)(II) OF THE ACT FOUND THAT WHEN THERE IS NO RESTRICTION IN THE ACT TO DENY THE BENEFIT OF BALANCE 50%, THE ASSESSEE IS ENTITLED FOR THE BALANCE ADDITIONAL DEPRECIATION IN THE SUBSEQUENT ASSESSMENT YEAR. IN FACT, THE DELHI BENCH OF THIS TRIBUNAL HAS OBSERVED AS FO LLOWS AT PAGES 641 AND 642 OF THE ITD: ' THUS, THE INTENTION WAS NOT TO DENY THE BENEFIT TO THE ASSESSEES WHO HAVE ACQUIRED OR INSTALLED NEW MACHINERY OR PLANT. THE SECOND PROVISO TO SECTION 32(1)(II) RESTRICTS THE ALLOWANCES ONLY TO 50% WHERE THE ASSETS HAVE BEEN ACQUIRED AND PUT TO USE FOR A PERIOD LESS THAN 180 DAYS IN THE YEAR OF ACQUISITION. THIS RESTRICTION IS ONLY ON THE BASIS OF PERIOD OF USE. THERE I NO RESTRICTION THAT BALANCE OF ONE TIME INCENTIVE IN THE FORM OF ADDITIONAL SUM OF DEPRECIATION S HALL NOT BE AVAILABLE IN THE SUBSEQUENT YEAR. SECTION 32(2) PROVIDES FOR A CARRY FORWARD SET UP OF UNABSORBED DEPRECIATION. THIS ADDITIONAL BENEFIT IN THE FORM OF ADDITIONAL ALLOWANCE U/S 32(1)(IIA) IS ONE TIME BENEFIT TO ENCOURAGE THE INDUSTRIALIZATION AN D IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF BAJAJ TEMPO LTD. V. CIT [1992] 196 ITR 188 , THE PROVISIONS RELATED TO IT HAVE TO BE CONSTRUED REASONABLY, I.T.A. NO . 1944 /M/ 15 & I.T.A. NO. 26/M/16 8 LIBERALLY AND PURPOSIVE TO MAKE THE PROVISION MEANINGFUL WHILE GRANTING THE ADDITION AL ALLOWANCE. THIS ADDITIONAL BENEFIT IS TO GIVE IMPETUS TO INDUSTRIALIZATION AND THE BASIC INTENTION AND PURPOSE OF THESE PROVISIONS CAN BE REASONABLY AND LIBERALLY HELD THAT THE ASSESSEE DESERVES TO GET THE BENEFIT IN FULL WHEN THERE IS NO RESTRICTION IN THE STATUTE TO DENY THE BENEFIT OF BALANCE OF 50% WHEN THE NEW MACHINERY AND PLANT WERE ACQUIRED AND USED FOR LESS THAN 180 DAYS. ONE TIME BENEFIT EXTENDED TO ASSESSEE HAS BEEN EARNED IN THE YEAR OF ACQUISITION OF NEW MACHINERY AND PLANT . IT HAS BEEN CAL CULATED @15% BUT RESTRICTED TO 50% ONLY ON ACCOUNT OF USAGE OF THESE PLANT & MACHINERY IN THE YEAR OF ACQUISITION. IN SECTION 32(1)(IIA), THE EXPRESSION USED I 'SHALL BE ALLOWED'. THUS, THE ASSESSEE HAD EARNED THE BENEFIT AS SOON AS HE HAD PURCHASED THE NE W MACHINERY AND PLANT IN FULL BUT IT IS RESTRICTED TO 50% IN THAT PARTICULAR YEAR ON ACCOUNT OF PERIOD USAGES. SUCH RESTRICTIONS CANNOT DIVEST THE STATUTORY RIGHT. LAW DOES NOT PROHIBIT THAT BALANCE 50% WILL NOT BE ALLOWED IN SUCCEEDING YEAR. THE EXTRA DEP RECIATION ALLOWABLE U/S 32(1)(IIA) IN AN EXTRA INCENTIVE WHICH HAS BEEN EARNED AND CALCULATED IN THE YEAR OF ACQUISITION BUT RESTRICTED FOR THAT YEAR TO 50% ON ACCOUNT OF USAGE. THE SO EARNED INCENTIVE MUST BE MADE AVAILABLE IN THE SUBSEQUENT YEAR. THE OVE RALL DEDUCTION OF DEPRECIATION U/S 32 SHALL DEFINITELY NOT EXCEED THE TOTAL COST OF MACHINERY AND PLANT . IN VIEW OF THIS MATTER, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DIRECT TO EXTEND THE BENEFIT. WE ALLOW GROUND NO.2 OF THE ASSESSEE'S APPE AL. SINCE WE HAVE DECIDED GROUND NO.2 IN FAVOUR OF ASSESSEE, THERE IS NO NEED TO DECIDE THE ALTERNATE CLAIM RAISED IN GROUND NO.3. THE SAME IS DISMISSED.' 13. THIS ISSUE WAS ALSO CONSIDERED BY ANOTHER BENCH OF THIS TRIBUNAL AT DELHI IN SIL INVESTMENT LTD (SUPRA). AT PAGE 233 OF THE TTJ, THE TRIBUNAL HAS OBSERVED AS FOLLOWS: '40. THERE IS NOTHING ON RECORD TO SHOW THAT THE DIRECTIONS GIVEN BY THE LEARNED CIT(A) ARE NOT PROPER. THE ELIGIBILITY FOR DEDUCTION OF ADDITIONAL DEPRECIATION STANDS ADMITTED, SINC E 50 PER CENT THEREOF HAD ALREADY BEEN ALLOWED BY THE AO IN THE ASST.YR.2005 - 06, I.E. THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. THEREFORE, I.T.A. NO . 1944 /M/ 15 & I.T.A. NO. 26/M/16 9 OBVIOUSLY, THE BALANCE 50 PER CENT OF THE DEDUCTION IS TO BE ALLOWED IN THE CURRENT YEAR, I.E. ASST. YR. 2006 - 07. TH E LEARNED CIT(A) HAS MERELY DIRECTED THE VERIFICATION OF THE CONTENTIONS OF THE ASSESSEE AND TO ALLOW THE BALANCE ADDITIONAL DEPRECIATION AFTER SUCH FACTUAL VERIFICATION. ACCORDINGLY, FINDING NO MERIT THEREIN, GROUND NO.3 RAISED BY THE DEPARTMENT IS REJECT ED.' 14. A SIMILAR VIEW WAS TAKEN BY MUMBAI BENCH OF THIS TRIBUNAL IN MITC ROLLING MILLS (P.) LTD. (SUPRA). IN VIEW OF THE ABOVE DECISIONS OF THE CO - ORDINATE BENCHES OF THIS TRIBUNAL ON IDENTICAL SET OF FACTS THIS TRIBUNAL IS OF THE CONSIDERED OPINION T HAT THE BALANCE 50% OF THE DEPRECIATION HAS TO BE ALLOWED IN THE SUBSEQUENT YEAR, THEREFORE, THE ORDERS OF THE LOWER AUTHORITIES ON THIS ISSUE ARE SET SIDE AND THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE CLAIM OF BALANCE 50% ADDITIONAL DEPRECIATION IN T HE YEAR UNDER CONSIDERATION. WE HAVE ALSO CAREFULLY GONE THROUGH THE JUDGMENT OF KARNATAKA HIGH COURT IN RITTAL INDIA PVT. LTD. (SUPRA). THE KARNATAKA HIGH COURT, AFTER EXTRACTING THE PROVISIONS OF SECTION 32(1)(IIA) OF THE ACT, FOUND THAT BENEFICIAL LEG ISLATION HAS TO BE INTERPRETED LIBERALLY SO AS TO BENEFIT THE ASSESSEE. KARNATAKA HIGH COURT HAS ALSO FOUND THAT THE INTENTION OF THE LEGISLATION IS TO ALLOW ADDITIONAL BENEFIT. THE KARNATAKA HIGH COURT OPINED THAT THE PROVISO WOULD NOT RESTRAIN THE ASSESS EE FROM CLAIMING THE BALANCE OF THE BENEFIT OF ADDITIONAL DEPRECIATION IN THE SUBSEQUENT ASSESSMENT YEAR. ACCORDINGLY, CONFIRMED THE ORDER OF THE BANGALORE BENCH OF THIS TRIBUNAL. IN FACT, THE KARNATAKA HIGH COURT HAS OBSERVED AS FOLLOWS: - 7. CLAUSE (II A) OF SECTION 32(1) OF THE ACT, AS IT NOW STANDS, WAS SUBSTITUTED BY THE FINANCE ACT, 2005, APPLICABLE WITH EFFECT FROM 0L.04.2006. PRIOR TO THAT, A PROVISO TO THE SAID CLAUSE WAS THERE, WHICH PROVIDED FOR THE BENEFIT TO BE GIVEN ONLY TO A NEW INDUSTRIAL U NDERTAKING, OR ONLY WHERE A NEW INDUSTRIAL UNDERTAKING BEGINS TO MANUFACTURE OR PRODUCE DURING ANY YEAR PREVIOUS TO THE RELEVANT ASSESSMENT YEAR. 8. THE AFORESAID TWO CONDITIONS, I.E., THE UNDERTAKING ACQUIRING NEW PLANT AND MACHINERY SHOULD BE A NEW IND USTRIAL UNDERTAKING, OF THAT IT SHOULD BE CLAIMED IN I.T.A. NO . 1944 /M/ 15 & I.T.A. NO. 26/M/16 10 ONE YEAR, HAVE BEEN DONE AWAY BY SUBSTITUTING CLAUSE (IIA) WITH EFFECT FROM 01.0.2006. THE GRANT OF ADDITIONAL DEPRECIATION, UNDER THE AFORESAID PROVISION, IS FOR THE BENEFIT OF THE ASSESSEE AND WITH THE PURPOSE OF ENCOURAGING INDUSTRIALIZATION, BY EITHER SETTING UP A NEW INDUSTRIAL UNIT OR BY EXPANDING THE EXISTING UNIT BY PURCHASE OF NEW PLANT AND MACHINERY, AND PUTTING IT TO USE FOR THE PURPOSE OF BUSINESS. THE PROVISO TO CLAUSE [II] OF THE SAID SECTIO N MAKES IT CLEAR THAT ONLY 50% OF THE 20% WOULD BE ALLOWABLE, IF THE NEW PLANT AND MACHINERY SO ACQUIRED IS PUT TO USE FOR LESS THAN 180 DAYS IN A FINANCIAL YEAR. HOWEVER, IT NOWHERE RESTRICTS THAT THE BALANCE 10% WOULD NOT BE ALLOWED TO BE CLAIMED BY THE ASSESSEE IN THE NEXT ASSESSMENT YEAR. 9. THE LANGUAGE USED IN CLAUSE (IIA) OF THE SAID SECTION CLEARLY PROVIDES THAT 'A FURTHER SUM EQUAL TO 20% OF THE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UNDER CLAUSE (II)'. THE WORD 'SHA LL' USED IN THE SAID CLAUSE IS VERY SIGNIFICANT. THE BENEFIT WHICH IS TO BE GRANTED IS 20% ADDITIONAL DEPRECIATION. BY VIRTUE OF THE PROVISO REFERRED TO ABOVE, ONLY 10% CAN BE CLAIMED IN ONE YEAR, IF PLANT AND MACHINERY IS PUT TO USE FOR LESS THAN 180 DAYS SAID FINANCIAL YEAR. VERY PURPOSE OF INSERTION OF CLAUSE (IIA) WOULD BE DEFEATED BECAUSE IT PROVIDES FOR 20% DEDUCTION WHICH SHALL BE ALLOWED. 10. IT HAS BEEN CONSISTENTLY HELD BY THIS COURT, AS WELL AS THE APEX COURT, THAT BENEFICIAL LEGISLATION, AS IN THE PRESENT CASE, SHOULD BE GIVEN LIBERAL INTERPRETATION SO AS TO BENEFIT THE ASSESSEE. IN THIS CASE, THE INTENTION OF THE LEGISLATION IS ABSOLUTELY CLEAR, THAT THE ASSESSEE SHALL BE ALLOWED CERTAIN ADDITIONAL BENEFIT, WHICH WAS RESTRICTED BY THE PROVI SO TO ONLY HALF OF THE SAME BEING GRANTED IN ONE ASSESSMENT YEAR, IF CERTAIN CONDITION WAS NOT FULFILLED. BUT, THAT, IN OUR CONSIDERED VIEW, WOULD NOT RESTRAIN THE ASSESSEE FROM CLAIMING THE BALANCE OF THE BENEFIT IN THE SUBSEQUENT ASSESSMENT YEAR. THE TRI BUNAL, IN OUR VIEW, HAS RIGHTLY HELD, THAT ADDITIONAL DEPRECIATION ALLOWED UNDER SECTION 32(1)(IIA) OF THE ACT IS A ONE TIME BENEFIT TO ENCOURAGE INDUSTRIALIZATION, AND PROVISIONS RELATED TO IT HAVE TO BE CONSTRUED REASONABLY, LIBERALLY AND PURPOSIVELY, TO MAKE THE PROVISION MEANINGFUL WHILE I.T.A. NO . 1944 /M/ 15 & I.T.A. NO. 26/M/16 11 GRANTING ADDITIONAL ALLOWANCE. WE ARE IN FULL AGREEMENT WITH SUCH OBSERVATIONS MADE BY THE TRIBUNAL. 6. IN VIEW OF THE ABOVE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSEE IS ENTITLED FOR REMAINING 10% OF THE DEPRECIATION DURING THE YEAR UNDER CONSIDERATION. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO ALLOW BALANCE 50% OF DEPRECIATION, NAMELY, 10% OF ADDITIONAL DEPRECIATION DURING THE YEAR UNDE R CONSIDERATION. 5. IN VIEW OF THE ABOVE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSEE IS ELIGIBLE FOR REMAINING 10% ADDITIONAL DEPRECIATION UNDER SECTION 32(1)(IIA) OF THE ACT. THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE BALANCE 50% DEPRECIATION, NAMELY, 10% ADDITIONAL DEPRECIATION DURING THE YEAR UNDER CONSIDERATION. 7. IN VIEW OF THE ABOVE DETAILED ORDER OF THE TRIBUNAL, WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT WAS NOT CORRECT IN HOLDING THAT THE ASSESSEE IS NOT ELIGIBLE TO CLAIM 10% ADDITIONAL DEPRECIATION FOR THE MACHINERY PURCHASED AND USED FOR LESS THAN 180 DAYS DURING THE PREVIOUS YEAR. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY THE LD. CIT UNDER SECTION 263 OF THE ACT AND RESTORE THAT OF THE ASSESSING OFFICER. THUS, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 8. COMING TO THE REVENUE S APPEAL IN I.T.A. NO. 26/MDS/2016 FOR THE ASSESSMENT YEAR 2009 - 10, THE REVENUE HAS RAISED TWO EFFECTIVE GROUNDS VIZ., (I) THE LD. CIT(A) HAS ERRED IN DELET ING THE ADDITION MADE ON ACCOUNT OF EXCESS CLAIM OF POWER AND FUEL (DIESEL EXPENDITURE) AND (II) THE LD. CIT(A) I.T.A. NO . 1944 /M/ 15 & I.T.A. NO. 26/M/16 12 HAS ERRED IN ALLOWING THE ADDITION MADE TOWARDS EXCESS PURCHASE PRICE PAID FOR GINNED COTTON. 9. THE ASSESSE E IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF YARN AND FILED ITS RETURN OF INCOME ON 24.09.2009 ADMITTING LOSS OF .1,75,85,394/ - . THE ASSESSEE HAS ALSO FILED A REVISED RETURN CLAIMING A LOSS OF .2,08,82,433/ - ON 4.05.2010 . THE REVISED RETURN FILED BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT]. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED TO THE ASSESSEE ON 26.08.2010 OF THE ACT . IN RESPONSE THERETO, THE ASSESSEE FILED ALL DETAILS AND EXPLANATIONS AND AFTER VERIFICATION OF THE SAME, THE ASSESSMEN T UNDER SECTION 143(3) OF THE ACT WAS COMPLETED ON 14.12.2011 BY DETERMINING TOTAL LOSS AT .1,41,87,275/ - AFTER MAKING VARIOUS ADDITIONS. 9.1 THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND ALSO BY CONSIDERING THE FACTS OF THE CASE, THE LD. CIT(A) ALLOWED THE APPEAL FILED BY THE ASSESSEE. 9.2 AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 9.3 WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WITH REGARD TO THE FIRST ISSUE OF ADDITION MADE TOWARDS EXCESS CLAIM OF POWER AND FUEL (DIESEL EXPENDITURE), I.T.A. NO . 1944 /M/ 15 & I.T.A. NO. 26/M/16 13 THE ASSESSING OFFICER HAS OBSERVED THAT THERE IS HUGE VARIATION IN THE COST PER UNIT FOR GENERATION OF ELECTRICITY THROUGH DIESEL GENERATOR IN RESPECT OF 14 TEXTILES MILLS. IN VIEW OF THE HUGE VARIATION, THE A SSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE SOUTH INDIAN TEXTILES RESEARCH ASSOCIATION (SITRA) NORMS FOR STANDARD UNIT CONSUMPTION FOR SPINNING MILLS SHOULD NOT BE ADOPTED OR WHY A COMMON STANDARD FOR THE PURPOSE OF ASSESSING THE POWER AND FUEL EXPENSES SHO ULD NOT BE ADOPTED. IN RESPONSE TO THE ABOVE QUERY, BY OBJECTING THE ABOVE PROPOSAL OF THE ASSESSING OFFICER, THE ASSESSEE HAS SUBMITTED THAT THE SITRA NORMS MAY BE USEFUL AS A GUIDELINE TO THE MILLS TO TRY TO IMPROVE THEIR EFFICIENCY AND PRODUCTIVITY BUT THESE NORMS ARE NEVER AND CANNOT BE TAKEN AS A YARDSTICK TO MEASURE AND COMPARE THE PERFORMANCE OF THE MILLS. HOWEVER, T HE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSEE'S EXPLANATION FOR THE FOLLOWING REASONS: BY MAKING A DETAILED ANALYSIS OF POWER AND FU EL THE ASSESSING OFFICER HAS PREPARED A CHART CONTAINED THE DETAILS RELATING TO POWER AND FUEL EXPENDITURE (CLAIMED BY THE 14 MILLS IN VIRUDHUNAGAR DISTRICT) VIZ: (A) GROSS TURNOVER (B) POWER AND FUEL EXPENDITURE DEBITED (C) PERCENTAGE OF POWER AND F UEL EXPENDITURE CLAIMED BY THE ASSESSEE WITH REFERENCE TO ITS GROSS TURNOVER (D) AVERAGE POWER AND FUEL PERCENTAGE OF 14 MILLS (E) THE DIFFERENCE BETWEEN AVERAGE AND CLAIM (F) THE DIESEL EXPENDITURE CLAIMED FOR GENERATION OF ELECTRICITY (G) COST OF DIESEL FOR PRODUCTION OF PER UNIT ELECTRICITY (H) AVERAGE COST OF 14 MILLS AND (I) THE DIFFERENCE BETWEEN AVERAGE AND CLAIM I.T.A. NO . 1944 /M/ 15 & I.T.A. NO. 26/M/16 14 9.4 FROM THE CHART, THE ASSESSING OFFICER NOTED THAT THE AVERAGE COST OF DIESEL FOR PRODUCTION OF PER UNIT ELECTRICITY IN THE CASE OF THE ASSESSEE WAS .10.24 WHEREAS THE AVERAGE CONSUMPTION OF DIESEL PER UNIT FOR PRODUCTION OF 14 MILLS WAS ONLY .10.12. THE REFORE, THE ASSESSING OFFICER WAS OF THE VIEW THAT IN THE NORMAL CONDITIONS, THE AVERAGE COST OF PRODUCTION OF ELECTRICITY BY DIESEL GENERATOR CANNOT VARY AND HENCE THE CLAIM OF DIESEL EXPENDITURE OF THE ASSESSEE WAS CONSIDERED EXCESSIVE. THEREFORE, THE EXCESS AMOUNT (DIFFERENCE BETWEEN AVERAGE AND COMPANY) ( .10.24 .10.12) WAS DISALLOWED IN RESPECT OF EACH UNIT OF ELECTRIC ITY GENERATED BY THE ASSESSEE AND ADDED TO THE TOTAL INCOME. 9.5 BY FILING A WRITTEN SUBMISSION, THE AR OF THE ASSESSEE HAS STRONGLY CONTENDED BEFORE THE LD. CIT(A) THAT THE ASSESSING OFFICER WAS NOT CORRECT IN MAKING THIS ADHOC ADDITION ON LUMPSUM BASIS WITHOUT EXAMINING THE BOOKS OF ACCOUNTS AND SPECIFYING THE DEFECTS IN THE BOOKS OF ACCOUNT. IT WAS ALSO SUBMITTED THAT CONSUMPTION OF DIESEL FOR GENERATOR DEPENDS ON VARIOUS FACTORS LIKE AGE OF THE GENERATOR, PROPER MAINTENANCE AND NUMBER OF TIMES IT IS S WITCHED OFF AND SWITCHED ON AS DIESEL CONSUMPTION AT THE TIME OF STARTING GENERATOR WOULD BE HIGH. AFTER CONSIDERING THE SUBMISSIONS OF THE AR OF THE ASSESSEE, THE LD. CIT(A) HAS OBSERVED AS UNDER: 3.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE REPRESENTAT IVE AND PERUSED ALL THE DETAILS. ASSESSEE SUBMITTED MONTH WAR POWER CONSUMPTION DETAILS ALONG WITH COPIES OF BILLS FOR PURCHASE OF DIESEL AND CORRESPONDING RECEIPTS EVIDENCING PAYMENT FOR THE SAME. ASSESSING I.T.A. NO . 1944 /M/ 15 & I.T.A. NO. 26/M/16 15 OFFICER DID NOT FIND ANY MATERIAL EVIDENCE TO HO LD THAT THERE WAS EXCESS CLAIM OF PAYMENT OF DIESEL CHARGES. I AM NOT ABLE TO AGREE WITH THE LOGIC OF ASSESSING OFFICER IN COMPUTING AVERAGE PERCENTAGE OF EXPENDITURE OF POWER AND FUEL WITH REFERENCE TO THE GROSS TURNOVER OF 14 MILLS AND THEN COMPARING THE SAME WITH THAT OF ASSESSEE TO ARRIVE AT EXCESS CONSUMPTION FOR THE FOLLOWING REASONS: - A. COST OF ELECTRICITY PRODUCEDL UNIT BY DIESEL GENERATOR: (I) THE TYPE / VARIETY OF COTTON AND ITS QUALITY HAS A DIRECT BEARING ON THE POWER UTILIZATION IN A TE XTILE MILL. THE COARSER THE YARN COUNT, THE LOWER THE POWER CONSUMED AND LOWER THE POWER COST (PER KG OF YARN). CONVERSELY, THE HIGHER THE COUNT, THE HIGHER THE COST OF POWER. A SPINNING MILL HAVING AN AVERAGE SPINNING COUNT OF SAY 30S YARN WILL REPORT SIG NIFICANTLY LOWER POWER COSTS COMPARED TO A MILL THAT PRODUCES AN AVERAGE SPINNING COUNT OF SAY 70S YARN. THIS IS THE REASON WHY SITRA NORMS ARE GIVEN AS A GUIDELINE FOR A (CONVERTED / EXTRAPOLATED) BASE COUNT OF 40S YARN AT 4.72 UNITS PER KG OF YARN. (II ) ANOTHER IMPORTANT PARAMETER THAT EFFECTS POWER CONSUMPTION IN A MILL IS THE STAPLE LENGTH OF COTTON AND STRENGTH (REFERRED TO AS CSP) OF THE YARN OUTPUT. THE HIGHER THE TWIST (STRENGTH), THE MORE AMOUNT OF TWINING THAT IS REQUIRED WHICH RESULTS IN HIGHE R POWER CONSUMPTION. ASSESSEE IS MANUFACTURING OF HIGH QUALITY YARN (WITH HIGH CSP) AND THEREFORE HAS REPORTED HIGH POWER CONSUMPTION. IT IS INCORRECT TO USE A SINGLE ARITHMETIC MEAN TO STANDARDIZE POWER CONSUMPTION ACROSS MILLS THAT PRODUCE YARN WITH COMP LETELY DIFFERENT CSP PROFILES. (III) POST SPINNING PROCESSES ARE AN IMPORTANT PART OF TEXTILE MANUFACTURE. THESE ARE VALUE - ADDING PROCESSES THAT WERE NOT TRADITIONALLY UNDERTAKEN. NEEDLESS TO SAY, THE PLANT AND MACHINERY REQUIRED TO RUN THESE PROCESSES ARE HIGHLY SOPHISTICATED AND ARE POWER INTENSIVE. SOME OF THESE MACHINES ARE CHEESE WINDERS, TWO - FOR - ONE TWISTERS, AUTO - CORNERS, YARN DOUBLING MACHINES ETC. THESE SPECIALIZED MACHINES ALSO CONSUME A LOT OF ELECTRICITY. THE ASSESSEE HAS A WELL SPREAD OUT PO ST - SPINNING FACILITY WITH HIGH CAPACITY USING HE ABOVE PLANT AND MACHINERY. (IV) THE SITRA POWER CONSUMPTION NORMS THAT HAVE BEEN USED BY THE ASSESSING OFFICER DO NOT CONSIDER POST - SPINNING PROCESSES. THIS IS FLAWED. I.T.A. NO . 1944 /M/ 15 & I.T.A. NO. 26/M/16 16 (V) THE ASSESSING OFFICER HAS CON SIDERED ONLY 14 MILLS (ALL WHICH WERE SELECTED SCRUTINY FOR THE ASST. YEAR IN QUESTION). FIRST OF ALL, THESE 14 MILLS CHOSEN ARE NOT REPRESENTATIVES OF THE ENTIRE POPULATION OF TEXTILE MILLS IN THE REGION (THERE ARE AROUND 130 TEXTILE MILLS IN AND AROUND T HE VIRUDHUNAGAR AND RAJAPALAYAM AREAS) SECONDLY, THE EXERCISE HAS BEEN CONDUCTED BY AVERAGING ELECTRICITY CONSUMPTION VALUES ONLY FOR THESE 14 MILLS, SOME OF THE MILLS NOT CHOSEN OUT OF THE POPULATION MAY HAVE DIFFERENT PROCESSES, CAPACITIES, EFFICIENCIES ETC. THAT IF CONSIDERED MAY COMPLETELY DISTORT THE MEAN FIGURES ARRIVED AT BY THE ASSESSING OFFICER. (VI) SOME TEXTILE UNITS ARE OE (OPEN ENDED) UNITS THAT ARE ENGAGED IN THE MANUFACTURE OF COARSER COUNT YARN (GENERALLY 20S AND BELOW). OE SPINNING IS AN ENTIRELY DIFFERENT SPINNING PROCESS AND THE MACHINERY AND PROCESSES ARE ABSOLUTELY DIFFERENT WHEN COMPARED WITH (TRADITIONAL) RING - SPINNING. SINCE OE MILLS PRODUCE COARSER COUNT YARN ONLY, POWER CONSUMPTION STATISTICS ARE VASTLY DIFFERENT FROM OTHER MILLS . A CASE IN POINT IS JAI JAGADHAMBIGA TEXTILES MILLS(P) LTD. , AN OE UNIT, WHERE 20S COUNT YARN IS PRODUCED. THE AVERAGE POWER CONSUMPTION PER KG OF YARN PRODUCED IS 2.10 KW AS COMPARED TO 4 AND ODD FOR THE ASSESSEE. (VII) MOREOVER, MODERN PLANTS USE MA CHINERY RATED WITH HIGH SPINDLE SPEED (THE SPEED AT THE SPINDLES ROTATE). TYPICALLY THIS IS ABOUT 20,000 RPM AS OPPOSED TO OLDER MACHINES RATES AT BETWEEN 12,000 AND 13,000 RPM. WHERE JUST ONE MOTOR WAS REQUIRED WITH THESE OLDER MACHINES, THE NEWER MACHINE S REQUIRE 3 MOTORS FOR JUST ONE MACHINE. CONSEQUENTLY, THE POWER REQUIREMENT IS ALSO TRIPLED. (VIII) POWER CONSUMPTION IS DIRECTLY PROPORTIONATE TO THE AGE OF MACHINERY. THE OLDER THE MACHINE, THE MORE THE CONSUMPTION. (IX) WHEN VARIOUS FACTORS (PARA METERS) DETERMINE THE POWER CONSUMPTION COST, IN MY VIEW, ASSESSING OFFICER'S JUSTIFICATION FOR ADDITION RELYING ON AVERAGE OF 14 MILLS 'ARITHMETIC MEAN POWER AND FUEL PERCENTAGE WITH REFERENCE TO THEIR GROSS TURNOVER IS BASICALLY FAULTY. THIS ARITHMETIC M EAN CANNOT BE A BENCH MARK ACROSS THE INDUSTRY. (X) BOOKS OF ASSESSEE COMPANY ARE SUBJECT TO STATUTORY AUDIT. AS THE TURNOVER OF THE COMPANY EXCEEDED THE PRESCRIBED LIMITS, THIS CASE IS COVERED U/S.44AB OF THE ACT. ASSESSING OFFICER HAS NOT FOUND ANY MI STAKE IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. HE HAS NOT REJECTED ASSESSEE'S BOOKS OF ACCOUNT. FOR MAKING ANY ADDITION, I.T.A. NO . 1944 /M/ 15 & I.T.A. NO. 26/M/16 17 ASSESSING OFFICER SHOULD FIND NECESSARY MATERIAL EVIDENCE FROM THE ASSESSEE'S BOOKS OF ACCOUNT OR MAKE USE OF ANY OTHER INF ORMATION (ABOUT ASSESSEE) AVAILABLE THROUGH INTERNAL OR EXTERNAL SOURCES. COMPARISON OF POWER CONSUMPTION FIGURES OF INDUSTRIES IN SIMILAR LINE OF BUSINESS IS NOT THE CORRECT METHOD FOR MAKING ADDITIONS IN ASSESSEE'S CASE. SUCH AN ADDITION IS AN ESTIMATE D ONE. ESTIMATION ADDITION, IN VIEW, CANNOT BE SUSTAINED SINCE - A. ASSESSING OFFICER HAS NOT REJECTED ASSESSEE'S BOOKS OF ACCOUNTS AND B. ADDITION WAS MADE ON THE BASIS OF COMPARATIVE DATA CULLED OUT FROM OTHERS (I.E. EXTRANEOUS TO ASSESSEE). C. B ENCH MARKING BASED ON INDICATIVE RESULTS IN FRAUGHT WITH RISK AND INHERENT CHANCE OF GETTING FALSE (MEANINGLESS) RESULTS. IN VIEW OF THE ABOVE, THE ESTIMATED DISALLOWANCE MADE BY THE ASSESSING OFFICER IS NOT SUSTAINABLE AND THE SAME IS DELETED. 9.6 AD MITTED, IN THE PRESENT CASE, BOOKS OF ACCOUNTS OF THE A SSESSEE ARE SUBJECT TO STATUTORY AUDIT. AS THE TURNOVER OF THE COMPANY EXCEEDED THE PRESCRIBED LIMITS, TH E ASSESSEE S CASE IS COVERED U NDER SECTION 44AB OF THE ACT. THE ASSESSEE HAS ALSO FILED THE 44AB AUDIT REPORT BEFORE THE ASSESSING OFFICER AND HE HAS NOT FOUND ANY MISTAKE IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. HE HAS ALSO NOT REJECTED A SSESSEE'S BOOKS OF ACCOUNT. FOR MAKING ANY ADDITION, ASSESSING OFFICER SHOULD FIND NECESSARY MATERIAL EVIDENCE FROM THE A SSESSEE'S BOOKS OF ACCOUNT OR MAKE USE OF ANY OTHER INFORMATION AVAILABLE THROUGH INTERNAL OR EXTERNAL SOURCES. HOWEVER, IN THIS CASE, ESTIMATED ADDITION WAS MADE BY THE ASSESSING OFFICER ON THE BASIS OF COMPARATIVE DATA CULLED OUT FROM OTHERS. UNDER THE I.T.A. NO . 1944 /M/ 15 & I.T.A. NO. 26/M/16 18 ABOVE FACTS AND CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT(A) HAS RIGHTLY DELETED THE ESTIMATED ADDITION AND WE FIND NO REASON TO INTERFERE WITH THE ABOVE FINDINGS OF THE LD. CIT(A). THUS, THE GROUND RAISED BY THE R EVENUE IS DISMISSED. 10. THE NEXT GROUND RAISED IN THE APPEAL OF THE REVENUE IS WITH REGARD TO DELETION OF ADDITION MADE TOWARDS EXCESS PURCHASE PRICE OF .65,79,350/ - PAID FOR GINNED COTTON. 10.1 THE ASSESSING OFFICER HAS NOTICED THAT THERE WAS CONSI DERABLE VARIATION IN THE PURCHASE OF PRICE OF VARIOUS TYPES OF GINNED COTTON (RAW MATERIALS) AMONG 14 MILLS. HENCE, THE ASSESSEE WAS ASKED TO FURNISH THE PURCHASE DETAILS. THE A SSESSING OFFICER MADE A COMPARATIVE ANALYSIS IN ORDER TO VERIFY WHETHER THE COS T OF PURCHASE OF GINNED COTTON WAS IN TUNE WITH THE (AVERAGE) COST OF GINNED COTTON ANNOUNCED I PUBLISHED BY THE COTTON ASSOCIATION OF INDIA (CAI),MUMBAI. HE MADE A DETAILED ANALYSIS WITH VARIOUS TYPES OF GINNED COTTON PURCHASED WITH DATE, MONTH AND YEAR, TOTAL AMOUNT OF PURCHASE, PER KG PRICE PAID BY THE ASSESSEE COMPANY, PER KG PRICE OF CANDY AS ANNOUNCED BY COTTON ASSOCIATION OF INDIA (CAI) ,MUMBAI (MONTH - WISE, YEAR WISE) AND THE DIFFERENCE BETWEEN THE PRICE PAID BY THE ASSESSEE COMPANY AND PER KG PRICE I PER CANDY PRICE ANNOUNCED BY CAI AND ARRIVED AT TOTAL EXCESS PRICE PAID BY THE ASSESSEE COMPANY. I.T.A. NO . 1944 /M/ 15 & I.T.A. NO. 26/M/16 19 10.2 OUT OF THE TOTAL PURCHASES MADE, THE ASSESSING OFFICER HAS TAKEN A SAMPLE PURCHASE OF 38 NUMBERS ON RANDOM BASIS AND THE PRICE PAID BY THE ASSESSEE WA S COMPARED WITH THE AVERAGE MONTHLY PRICE ANNOUNCED BY THE CAI. O UT OF 38 PURCHASES MADE, FOR 14 PURCHASES, THE ASSESSING OFFICER HAS NOTICED THAT THE ASSESSEE HAS PURCHASED AT A PRICE LESSER THAN THE AVERAGE MONTHLY PRICE OF CAI. FOR THE REMAINING 24 PURC HASES, THE PRICE PAID BY THE ASSESSEE WAS IN EXCESS OF PRICE ANNOUNCED BY CAI. THE TOTAL PRICE PAID FOR 38 PURCHASES IS .4,07,93,047/ - AND THE TOTAL EXCESS PRICE PAID FOR 24 PURCHASES WAS QUANTIFIED AT .20,25,489/ - . THE TOTAL PURCHASE VALUE OF 38 SAMPLE PURCHASES .4,07,93,047 THE TOTAL PURCHASE PRICE (100%) . 13,25,07,092 PERCENTAGE OF SAMPLE 30.786 EXCESS PRI CE PAID FOR TOTAL PURCHASE (20,25,489 X 100) 30.786 . 65,79,350 ON THE BASIS OF RANDOM SAMPLING AS DISCUSSED ABOVE, OUT OF THE TOTAL PURCHASE PRICE, THE ASSESSING OFFICER HAS ARRIVED AT .65,70,350/ - AS EXCESS PURCHASE PRICE PAID BY THE ASSESSEE IN C OMPARISON TO THE MONTHLY AVERAGE PRICE AS ANNOUNCED BY CAI AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 10.3 THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). BY FILING DETAILED WRITTEN SUBMISSIONS , THE AR OF THE ASSESSEE HAS STRONGLY CO NTENDED BEFORE THE LD. CIT(A) THAT THE ASSESSING OFFICER RESORTED TO ESTIMATED ADDITION WITHOUT PIN - POINTING THE SPECIFIC DEFECTS EVEN THOUGH THE I.T.A. NO . 1944 /M/ 15 & I.T.A. NO. 26/M/16 20 ASSESSEE MAINTAINED REGULAR BOOKS OF ACCOUNTS AND TAX AUDIT WAS FILED. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAS MADE PAYMENT IN RESPECT OF COTTON PURCHASES ONLY BY MEANS OF ACCOUNT PAYEE CHEQUES AND, THEREFORE, THIS KIND OF ESTIMATED ADDITION IS NOT SUSTAINABLE ON FACTS AND IN LAW. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) HAS OBSERVED A ND HELD AS UNDER: 4.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE REPRESENTATIVE. IT IS SEEN THAT THE ASSESSING OFFICER HAD NOT CONDUCTED ANY ENQUIRY WITH THE ACTUAL SELLERS OF COTTON ASSESSING OFFICER BY COMPARING ASSESSEE'S PURCHASE PRICE OF COTTON WITH T HE FIGURES OF COTTON ASSOCIATION OF INDIA(CSI) I.E. CONTEMPORANEOUS MARKET CONDITIONS IS FRAUGHT WITH RISK AND INHERENT CHANCE OF GETTING FALSE (MEANINGLESS) RESULTS FOR THE FOLLOWING REASONS: - I) DIFFERENT TEXTILE MILLS PRODUCE DIFFERENT COUNTS OF YARN - SOME COARSE AND SOME FINE. NEEDLESS TO SAY, COTTON CONSUMPTION WILL BE DEPENDENT ON THE COUNT MIX AND THE STAPLE LENGTH OF COTTON AND STRENGTH (REFERRED TO AS CSP) SOLD BY THE PARTICULAR MILL. NATURALLY THE PRICE PAID FOR COTTON DEPENDS ON THE VARIETY CHO SEN STAPLE LENGTH, COLOUR, MOISTURE CONTENT ETC. II) APART FROM THE COUNT MIX, THE COTTON VARIETY PURCHASED WILL DETERMINE PRICE. III) A) PURCHASES FROM THE COTTON EXCHANGE (CAI) ARE COMPLETELY DIFFERENT FROM THAT OF PURCHASE FROM COTTON DEALERS. IN THE FORMER MECHANISM, THE BUYER HAS TO PAY ONCE THE CONTRACT IS DECIDED, I.E. IN ADVANCE, AND CANNOT ALTER THE PRICE IF THE DELIVERED QUANTITY DOES NOT MATCH SPECIFICATIONS THAT WERE CONTRACTED WHEN COTTON IS PURCHASED FROM DEALERS, ANY DIFFERENCE IN QUALI TY IS COMPENSATED BY WAY OF REBATES OR IN SUBSEQUENT DELIVERIES. B) CAI PRICE QUOTED IS FOR READY MONEY CASH PRICE WHEREAS ASSESSEE'S PURCHASES ARE ON CREDIT BASIS ALSO. I.T.A. NO . 1944 /M/ 15 & I.T.A. NO. 26/M/16 21 C) CAI PRICE IS THE PRICE FOR THE DELIVERY AT THE UP - COUNTRY SPOT MARKET PLACE W HEREAS IN ASSESSEE'S CASE DELIVERY IS AT ASSESSEE'S FACTORY SITE. D) CAI PRICE IS EXCLUSIVE OF SALES TAX OR EXPENSES OF SUCH NATURE AS THE CASE MAY BE WHEREAS ASSESSEE'S PURCHASES ARE THROUGH BROKERS AND AGENTS AND ACTUAL PRICE WILL BE MORE FOR THE INCLUSION OF INTEREST ELEMENT I LORRY FREIGHT I INSURANCE I BROKERAGE ETC. IV) PRICES HAVE BEEN OBTAINED FROM THE COTTON EXCHANGE AFTER THE EVENT. CIRCUMSTANCES ARE HARDLY THE SAME WHEN A BUYER MAKES A COMMOD ITY PURCHASE ON THE SPOT MARKET. IN OTHER WORDS, AS IS TRUE OF ANY COMMODITY MARKET, THE PRICES THAT PREVAIL IN AN EXCHANGE ARE THE RESULT OF SPECULATIVE EFFORTS BY THE TRADERS AND OTHER STOCKHOLDERS IN A MARKET. A SPOT MARKET ON THE OTHER HAND, IS A PHYSI CAL AND TANGIBLE EXCHANGE THAT ENABLES A BUYER TO MAKE AN INFORMED DECISION ON THE SPOT AND THE PRICE IS THEN DETERMINED CONSIDERING THE VARIOUS PARAMETERS MENTIONED ABOVE. V) A BUYER'S STANDING, HIS CREDIT WORTHINESS, PURCHASE VOLUME, DELIVERY TERMS AN D A PLETHORA OF OTHER PARAMETERS PLAY A ROLE IN THE PRICE THAT IS ULTIMATELY PAID. AN EFFICIENT BUYER WILL CONSIDER A MIX OF THESE FACTORS AND ULTIMATELY CHOOSE THE OPTIMAL QUALITY OF COTTON AT THE BEST AVAILABLE PRICE FOR THESE PARAMETERS. VI) COMMERCI AL EXPEDIENCY MUST BE DECIDED FROM BUSINESS MAN'S POINT OF VIEW. IN THE CASE OF CIT VS. SALES MAGNESITE PVT. LTD.[1995] 214 ITR PAGE 1 (BOMBAY), HON'BLE BOMAY HIGH COURT HELD AS UNDER : - 'THE QUESTION WHETHER IT WAS NECESSARY COMMERCIALLY EXPEDIENT OR NO T IS A QUESTION THAT HAS TO BE DECIDED FROM THE POINT OF VIEW OF THE BUSINESSMAN AND NOT BY THE SUBJECTIVE STANDARD OF REASONABLENESS OF THE REVENUE. ' IN VIEW OF THE ABOVE, I HOLD THAT THE ESTIMATED DISALLOWANCE MADE BY THE ASSESSING OFFICER IS NOT SUST AINABLE AS IT WAS NOT ESTABLISHED BY THE ASSESSING OFFICER WITH REFERENCE TO SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE APPELLANT. I.T.A. NO . 1944 /M/ 15 & I.T.A. NO. 26/M/16 22 10.4 WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. ADMITTEDLY, IN THIS CASE, THE ASSESSING OFFICER HAS NOT NOTICED ANY MISTAKE IN THE BOOKS OF ACCOUNTS MAINTAINED AND THE TAX AUDIT REPORT FILED BY THE ASSESSEE. IT IS AN ADMITTED FACT THAT EACH AND EVERY MILL HAS A DISTINCT PURCHASE POLICY DEPENDING UPON THE PRODUCTS MANUFACT URED AS WELL AS THE END USE OF THE YARN AND ALSO THE STRENGTH AND COLOUR. SIMILARLY, THE RATES OF COTTON SHALL VARY WITH THE AREA OF THE CROP AS WELL AS THE PICKING OF THE CROP. MOREOVER, THE RATE VARIES WITH THE PAYMENT SCHEDULE OF THE MILLS. ADMITTEDLY, THE ASSESSEE PURCHASED THE RAW MATERIALS ON CREDIT BASIS AND MADE THE PAYMENT ON ACCOUNT PAYEE CHEQUES. FOR WORKING OUT THE PRICE OF GINNED COTTON, THE ASSESSING OFFICER HAS TAKEN THE PRICE DECLARED BY THE COTTON ASSOCIATION OF INDIA, WHICH IS NOT APPLICAB LE TO THE ASSESSEE SINCE THE CAI PRICE QUOTED IS FOR READY MONEY CASH PRICE, WHEREAS, THE ASSESSEE HAS PURCHASED THE MATERIALS ON CREDIT BASIS. IN THE APPELLATE ORDER, THE LD. CIT(A) HAS GIVEN A DETAILED FINDINGS OVER THE METHODOLOGY ADOPTED BY THE ASSESSI NG OFFICER FOR ESTIMATING THE DISALLOWANCE, WHICH CANNOT BE SUSTAINABLE, WHEN THE ASSESSING OFFICER HAS NOT DISPUTED THE BOOKS OF ACCOUNTS AND OTHER PARTICULARS FILED BY THE ASSESSEE. UNDER THE ABOVE FACTS AND CIRCUMSTANCES, WE FIND NO REASON TO INTERFERE WITH THE ORDER PASSED BY THE LD. CIT(A). SIMILAR VIEW WAS ALSO TAKEN BY THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF DCIT V. M/S. SREE KARPAGAMBAL MILLS LTD. IN I.T.A. NO. 234/MDS/2016 FOR THE ASSESSMENT YEAR I.T.A. NO . 1944 /M/ 15 & I.T.A. NO. 26/M/16 23 2009 - 10 VIDE ORDER DATED 11.08.2016 , WHE REIN, THE FACTS AND ISSUE RAISED BEFORE THE TRIBUNAL ARE IDENTICAL . THUS, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 11 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN I.T.A. NO. 1944/MDS/2015 IS ALLOWED AND THE APPEAL FILED BY THE REVENUE IN I. T.A. NO. 26/MDS/2016 IS DISMISSED. ORDER PRONOUNCED ON THE 24 TH AUGUST , 2016 AT CHENNAI. SD/ - SD/ - (A. MOHAN ALANKAMONY ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 24 . 0 8 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.