M/s. Nestle India Ltd, New Delhi V. DCIT, LTU, New Delhi

ITA 1954/DEL/2014

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8715 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 26-07-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 03-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: PRAMITA M BISWAS
• Keywords: Capital asset; Depreciation; Transfer pricing; International transaction; Earning of tax free income; Capital receipt; Rule 8D; Set aside
• Section: 244A; 14A; 143(1); 13; 22; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E, NEW DELHI (THROUGH VIDEO CONFERENCING) BEFORE, SHRI G.S. PANNU, VICE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO.2020/DEL/2014 (ASSESSMENT YEAR-2009-10) DY. CIT (LTU),NBCC PLAZA PUSHP VIHAR, NEW DELHI-1100017 VS. M/S NESTLE INDIA LTD. DLF CITY, PHASE-II, JACARANDA MARG, GURGAON-122002 PAN AAACN 0757G (APPELLANT) (RESPONDENT) ITA NO.1954/DEL/2014 (ASSESSMENT YEAR-2009-10) M/S NESTLE INDIA LTD. M-5A, CONNAUGHT CIRCUS, NEW DELHI-110001 PAN AAACN 0757G VS. DY. CIT (LTU),NBCC PLAZA PUSHP VIHAR, NEW DELHI-1100017 (APPELLANT) (RESPONDENT) APPELLANT BY M/S. PRAMITA M. BISWAS, CIT-DR RESPONDENT BY SH. AJAY VOHRA, SR. ADV. SH. NEERAJ JAIN, ADV. SH. KARAN JAIN, CA DATE OF HEARING 01.07.2020 DATE OF PRONOUNCEMENT 22.07.2020 2 ITA NOS.2020 & 1954/DEL/2014 D CIT VS. NESTLE INDIA LTD. ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER: THESE ARE CROSS APPEALS BY THE DEPARTMENT AND TH E ASSESSEE AGAINST ORDER PASSED BY THE LD. COMMISSION ER OF INCOME TAX (APPEALS)-LTU, NEW DELHI, {THE LD. CIT(A)}, VID E ORDER DATED 20.01.2014 PERTAINING TO ASSESSMENT YEAR 2009-10. 2.0 THE BRIEF FACTS OF THE CASE ARE THAT THE AS SESEEE COMPANY IS A MANUFACTURER OF VIDE RANGE OF FOOD ITE MS COVERING BEVERAGES, BABY FOOD POWDERS, CHOCOLATES AND CONFECT IONERY, CULINARY PRODUCTS, ETC. THE ASSESSEE FILED ITS RETU RN OF INCOME DECLARING TOTAL INCOME OF RS.7,28,92,72,770/-. AFTE R INITIALLY PROCESSING THE RETURN U/S 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED THE ACT), THE CASE WAS SELECTE D FOR SCRUTINY. SINCE, DURING THE YEAR UNDER CONSIDERATION THE ASSE SSEE HAD ENTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISE (AE) AND THE VALUE OF SUCH TRANSACTIONS EXCEEDED RS.15 C RORES, THE CASE WAS REFERRED TO THE TRANSFER PRICING OFFICER (TPO) U /S 92 CA OF THE ACT FOR COMPUTING THE ARMS LENGTH PRICE (ALP). AS PER THE ORDER OF THE TPO, NO ADJUSTMENT WAS PROPOSED ON ACCOUNT OF AL P OF THE INTERNATIONAL TRANSACTIONS. HOWEVER, THE FOLLOWING 3 ITA NOS.2020 & 1954/DEL/2014 D CIT VS. NESTLE INDIA LTD. ADDITIONS/DISALLOWANCES WERE MADE BY THE ASSESSING O FFICER (AO) WHILE COMPLETING THE ASSESSMENT PROCEEDINGS: (I) DISALLOWANCE OF LICENSE FEE - RS.61,01,74,000/ - (II) DISALLOWANCE U/S 14A - RS.39,25,411/- (III) ADDITION OF INTEREST U/S 244A - RS.8,01,12,2 24/- (IV) DISALLOWANCE OF DEPRECIATION - RS.35,29,482/- (V) ADDITION OF SUBSIDY FROM GOVERNMENT OF GOA - RS.25,00,000/- 2.1 THUS, THE INCOME WAS ASSESSED AT RS.798,95,13,8 87/- BY THE AO. 2.2 AGGRIEVED, THE ASSESSEE APPROACHED THE LD. FI RST APPELLATE AUTHORITY CHALLENGING THE ADDITIONS AND D ISALLOWANCES. THE LD. CIT (A) ALLOWED THE ASSESSEES APPEAL PARTL Y BY DELETING THE ADDITION OF RS.61,01,74,000/- MADE ON ACCOUNT OF LI CENSE FEES. THE LD. CIT (A) ALSO RESTRICTED THE DISALLOWANCE MADE U/ S 14A OF THE ACT TO RS.32,93,106/-. WITH RESPECT TO DEPRECIATION ON UPS, THE SAME WAS DELETED. THE LD. CIT (A) ALSO DELETED THE DISALL OWANCE OF DEPRECIATION OF RS.33,90,330/- IN RESPECT OF ENERGY SAVING AND POLLUTION CONTROLLING EQUIPMENT. THE LD. CIT (A) AL SO DIRECTED THE 4 ITA NOS.2020 & 1954/DEL/2014 D CIT VS. NESTLE INDIA LTD. ASSESSING OFFICER TO TREAT THE SUBSIDY RECEIVED FRO M THE GOVERNMENT. OF GOA AS CAPITAL IN NATURE THEREBY DELETING THE AD DITION OF RS.25 LACS. THE CIT (A), HOWEVER, DIRECTED THE ASSESSING OFFICER TO REDUCE, ON PROPORTIONATE BASIS, THE CAPITAL SUBSIDY RECEIVE D DURING THE RELEVANT ASSESSMENT YEAR FROM THE WRITTEN DOWN VALUE OF RESPECTIVE BLOCK OF ASSETS FOR THE PURPOSE OF COMPUTING DEPREC IATION ALLOWANCE UNDER THE ACT WHILE DIRECTING THAT THE SUBSIDY SHOUL D BE TREATED AS CAPITAL SUBSIDY. THE LD. CIT (A) ALSO UPHELD THE AD DITION OF RS.8,01,12,224/- WITH RESPECT TO THE INTEREST RECEIV ED U/S 244A. 2.3 AGGRIEVED WITH THE LD. CIT (A)S ORDER, BOTH THE DEPARTMENT AS WELL AS THE ASSESSEE IS NOW IN APPEAL B EFORE THIS TRIBUNAL. THE FOLLOWING GROUNDS HAVE BEEN RAISED BY THE PARTIES: GROUNDS RAISED BY THE DEPARTMENT IN ITA NO. 2020/DEL/2014: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT (A) HAS ERRED IN DELETING THE AD DITION OF RS. 61,01,74,000/- MADE ON ACCOUNT OF LICENCE FEE . 2. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LA W, THE LD CIT (A) HAS ERRED IN REDUCING THE DISALLOWANCE M ADE U/S 14A FROM RS. 39,25,411/- TO RS.32,93,106/-. 5 ITA NOS.2020 & 1954/DEL/2014 D CIT VS. NESTLE INDIA LTD. 3. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LA W, THE LD CIT (A) HAS ERRED IN DELETING THE DISALLOWANCE O F RS. 1,39,152/- MADE BY AO BY RESTRICTING THE CLAIM OF DEPRECIATION IN RESPECT OF UPS FROM 60% TO 15%. 4. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LA W, THE LD. CIT (A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.33,90,330/- MADE BY AO BY DENYING THE CLAIM OF DEPRECIATION IN RESPECT OF ENERGY SAVING AND POLLUT ION CONTROL EQUIPMENT ON THE GROUND THAT IT WAS NOT PUT TO USE. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD CIT (A) HAS ERRED IN DIRECTING TO TREAT THE SUBS IDY AS CAPITAL IN NATURE THEREBY DELETING THE ADDITION OF RS,.25,00,000/- 6. THE APPELLATE CRAVE LEAVE TO ADD, ALTER, AMEND OR V ARY THE ABOVE GROUND OF APPEAL AT OR BEFORE THE TIME OF HEA RING. GROUNDS RAISED BY THE ASSESSEE IN ITA NO.1954/DEL/2 014: 1. THAT CIT(A) ERRED ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF ASSESSING OFFICER IN DISALLOWING EXPENDIT URE TO THE EXTENT OF RS. 32,93,106/- INVOKING SECTION 14A OF THE INCOME TAX ACT, 1961 (THE ACT), READ WITH RULE 8D OF THE INCOME-TAX RULES. 1.1 THAT THE CIT (A) ERRED ON FACTS AND IN LAW IN C ONFIRMING THE AFORESAID DISALLOWANCE WITHOUT APPRECIATING THA T NO 6 ITA NOS.2020 & 1954/DEL/2014 D CIT VS. NESTLE INDIA LTD. EXPENDITURE WAS ACTUALLY INCURRED IN EARNING THE EX EMPT DIVIDEND INCOME. 1.2 THAT THE CIT (A) ERRED ON FACTS AND IN LAW IN N OT APPRECIATING THAT ASSESSING OFFICER MADE THE DISALL OWANCE INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT W ITHOUT RECORDING HIS SATISFACTION THAT HAVING REGARD TO TH E BOOKS OF ACCOUNTS OF THE APPELLANT CERTAIN EXPENDITURE WAS A CTUALLY INCURRED FOR EARNING THE EXEMPT DIVIDEND INCOME. 1.3 THAT WITHOUT PREJUDICE, THE CIT (A) ERRED ON FA CTS AND IN LAW IN NOT APPRECIATING THAT DISALLOWANCE, IF ANY, UNDER SECTION 14A OF THE ACT HAD TO BE RESTRICTED TO RS. 8,34,934 AS PER CALCULATION PROVIDED BY THE APPELLANT. 2. THAT THE CIT (A) ERRED ON FACTS AND IN LAW IN CONFI RMING THE ADDITION OF RS. 8,01,12,224/- MADE BY THE ASSES SING OFFICER IN RELATION TO THE INTEREST RECEIVED UNDER SECTION 244A OF THE ACT BY THE APPELLANT DURING THE RELEVANT PRE VIOUS YEAR, NOT APPRECIATING THAT THE AFORESAID AMOUNT WAS NOT REAL INCOME IN VIEW OF THE ORDERS GIVING RISE TO THE REF UND AND INTEREST THEREON HAVING BEEN CHALLENGED IN APPEAL B Y THE REVENUE BEFORE HIGHER FORUMS. 2.1 THAT THE CIT (A) ERRED ON FACTS AND IN LAW IN H OLDING THAT THE PRINCIPAL AMOUNT ON WHICH INTEREST WAS GRANTED HAD BECOME DUE AND THEREFORE, INTEREST INCOME UNDER S ECTION 244A OF THE ACT HAD CRYSTALLIZED. 7 ITA NOS.2020 & 1954/DEL/2014 D CIT VS. NESTLE INDIA LTD. 3. THAT THE CIT (A) ERRED ON FACTS AND IN LAW IN DIREC TING THE ASSESSING OFFICER TO REDUCE ON PROPORTIONATE BASIS THE CAPITAL SUBSIDY RECEIVED DURING THE RELEVANT ASSESSMENT YEA R FROM THE WRITTEN DOWN VALUE OF THE RESPECTIVE BLOCK OF A SSETS FOR THE PURPOSES OF COMPUTING DEPRECIATION ALLOWANCE UN DER THE ACT, ON THE GROUND THAT SUCH SUBSIDY WAS PROVIDED O N MAKING CAPITAL INVESTMENT IN LAND, BUILDING AND PLANT AND MACHINERY AND WAS NOT A GENERAL OR UNDIRECTED SUBSIDY. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR VARY FROM THE ABOVE GROUNDS OF APPEAL AT OR BEFORE THE TIME O F HEARING. 3.0 THE LD. AUTHORIZED REPRESENTATIVE (AR) SUBM ITTED THAT GROUND NO.1 OF THE ASSESSEES APPEAL CHALLENGE D THE ACTION OF THE LD. CIT (A) IN UPHOLDING THE DISALLOWANCE U/S 1 4A OF THE ACT TO THE EXTENT OF RS.32,93,106/-. IT WAS SUBMITTE D BY THE LD. AR THAT DURING THE RELEVANT ASSESSMENT YEAR, THE ASSES SEE HAD RECEIVED DIVIDEND INCOME AMOUNTING TO RS.4,31,86,107/- IN RE SPECT OF UNITS HELD IN VARIOUS MUTUAL FUNDS WHICH WAS CLAIMED AS EX EMPT U/S 10(35) OF THE ACT. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE, VIDE LETTER DATED 17.12.2012, FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, HAD SUBMITTED THAT THE DISALLOWANCE CO ULD NOT HAVE EXCEEDED RS.8,34,934/- BEING THE COSTS OF ITS TREAS URY OPERATIONS 8 ITA NOS.2020 & 1954/DEL/2014 D CIT VS. NESTLE INDIA LTD. WHICH HAD BEEN COMPUTED ON THE BASIS OF THE TIME SPE NT BY THE TREASURY DEPARTMENT IN SUCH ACTIVITIES AND THAT THE ASSESSING OFFICER HAD FAILED TO POINT OUT ANY DEFECT IN SUCH COMPUTAT ION AND HAD PROCEEDED TO DISALLOW AN AMOUNT OF RS.39,25,411/- BY APPLYING RULE-8D OF THE INCOME TAX RULES, 1962 IN A MECHANIC AL MANNER. IT WAS SUBMITTED THAT THE ASSESSING OFFICER COULD NOT H AVE MADE THE DISALLOWANCE IN ABSENCE OF ANY NEXUS OF EXPENDITURE AND THE EXEMPT INCOME BEING ESTABLISHED AND THAT FURTHER IN ABSENC E OF THE ASSESSING OFFICER HAVING RECORDED SATISFACTION THE IMPUGNED DISALLOWANCE U/S 14A READ WITH RULE-8D WAS UNWARRANTED . RELIANCE WAS PLACED ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. MAXOPP INVESTMENT LIMITED, REPORTED IN 347 ITR 272 (DELHI) WHEREIN IT HAD BEEN HELD BY THE HONBLE DELH I HIGH COURT THAT BEFORE MAKING ANY DISALLOWANCE UNDER THE PROVIS IONS OF SECTION 14A READ WITH RULE-8D, THE ASSESSING OFFICER HAS TO RECORD A FINDING THAT HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE EXPENDITURE INCURRED. ALTERNATIVELY, IT WAS PLEADED THAT THE DISALLOWANCE, IF ANY, U/S 14A OF THE ACT SHOULD BE R ESTRICTED TO RS.8,34,934/- AS PER THE COMPUTATION PROVIDED BY TH E ASSESSEE. 9 ITA NOS.2020 & 1954/DEL/2014 D CIT VS. NESTLE INDIA LTD. 3.0.1 IT WAS ALSO SUBMITTED BY THE LD. AR THAT TH E ASSESSEES GROUND NO.1 WAS CONNECTED TO GROUND NO. 2 OF THE DEPARTMENTS APPEAL. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAD SUBSTANTIAL INTEREST FREE FUNDS AND, THEREFORE, THE DISALLOWANCE UNDER RULE-8D (III) OF THE ACT WAS NOT WARRANTED. A C HART DEPICTING SURPLUS FUND AVAILABLE WITH THE ASSESSEE FOR MAKING INVESTMENTS WAS POINTED OUT BY THE LD. AR AND IT WAS SUBMITTED TH AT SINCE INTEREST FREE FUNDS WERE AVAILABLE WITH THE ASSSSEE TO THE TUNE OF RS.578 CRORES, THE LD. CIT (A) HAD RIGHTLY DELETED THE DISALLOWANCE. 3.1 WITH RESPECT TO GROUND NO. 2 PERTAINING TO A DDITION ON ACCOUNT OF INTEREST EARNED BY THE ASSESSEE U/S 2 44A OF THE ACT, IT WAS FAIRLY ACCEPTED BY THE LD. AR THAT THIS ISSUE WAS COVERED AGAINST THE ASSESSEE. IT WAS, HOWEVER, PLEADED BY THE AR THA T SINCE THE QUANTUM OF INTEREST RECEIVED BY THE ASSESSEE WAS LI ABLE TO CHANGE SINCE APPEALS WERE PENDING BEFORE THE HONBLE HIGH COURT AND THE HONBLE APEX COURT, SUITABLE DIRECTIONS MAY BE INCO RPORATED IN THE ORDER THAT THE INTEREST ORIGINALLY TAXED BE SUBSTIT UTED BY THE 10 ITA NOS.2020 & 1954/DEL/2014 D CIT VS. NESTLE INDIA LTD. REDUCED/INCREASED AMOUNT DEPENDING ON FINAL OUTCOME OF THE APPEALS. 3.2 WITH RESPECT TO GROUND NO.3 OF THE ASSSESSEE S APPEAL PERTAINING TO THE ACTION OF THE LD. CIT (A) IN DIRE CTING THAT THE CAPITAL SUBSIDY BE REDUCED FROM THE WRITTEN DOWN VALUE OF ASS ETS, THE LD. AR SUBMITTED THAT THIS GROUND AND DEPARTMENTAL APPE ALS GROUND NO.5 WERE RELATED AND COULD BE TAKEN UP TOGETHER. T HE LD. AR DREW OUR ATTENTION TO THE SCHEME OF SUBSIDY RECEIVED FRO M THE GOVERNMENT OF GOA WHICH WAS PLACED AT PAGES 237 & 23 8 OF THE PAPER BOOK AND IT WAS SUBMITTED THAT THE SAID SUBSID Y WAS GRANTED FOR MAKING INVESTMENT IN BACKWARD AREAS. IT WAS SUBM ITTED THAT SINCE THE PURPOSE OF RECEIVING THE SUBSIDY WAS NOT T O REIMBURSE THE COSTS OF FIXED ASSETS, DIRECTLY OR INDIRECTLY, THE SUBSIDY WAS, THEREFORE, NOT REQUIRED TO BE REDUCED FROM THE COST S OF CAPITAL ASSETS ACQUIRED. RELIANCE WAS PLACED ON NUMEROUS CASE LAWS WHEREIN IT HAS BEEN HELD THAT IF THE PURPOSE OF INCENTIVE/SUBS IDY IS TOWARDS CAPITAL ACCOUNT, THEN NOTWITHSTANDING THE MODE OF CO MPUTATION OF INCENTIVE/SUBSIDY WITH REFERENCE TO THE INVESTMENT I N ASSETS, EXPLANATION-10 TO SECTION 43(1) OF THE ACT WOULD NOT BE ATTRACTED. IT 11 ITA NOS.2020 & 1954/DEL/2014 D CIT VS. NESTLE INDIA LTD. WAS PLEADED THAT THE DIRECTIONS OF THE LD. CIT (A) H OLDING THAT THE AFORESAID SUBSIDY WAS TO BE REDUCED FROM THE ACTUAL COST OF FIXED ASSETS AND DEPRECIATION WAS TO BE ALLOWED ON ACTUAL COST SO ARRIVED AT WAS NOT CORRECT. 3.2.1 THE LD. AR, HOWEVER, SUPPORTED THE ORDER OF THE LD. CIT (A) ON THE ISSUE TO THE EXTENT THAT THE LD. CIT (A) HAD HELD THAT THE SUBSIDY WAS CAPITAL IN NATURE. 4.0 IN RESPONSE TO THE ARGUMENTS OF THE LD. AR WIT H RESPECT TO THE ASSESSEES APPEAL, THE LD. CIT-DR SU BMITTED THAT AS FAR AS THE DISALLOWANCE U/S 14A WAS CONCERNED, THE L D. CIT (A) HAD GIVEN A CATEGORICAL FINDING IN THIS REGARD AND HAD GIVEN PARTIAL RELIEF TO THE ASSESSEE ALREADY. IT WAS SUBMITTED BY THE LD . CIT-DR THAT IT WAS AN INCORRECT ASSERTION BY THE ASSESSEE THAT NOT A SINGLE PAISA WAS ATTRIBUTABLE TOWARDS EARNING EXEMPT INCOME. THE L D. CIT-DR SUBMITTED THAT THE ASSESSING OFFICER HAD RIGHTLY IN VOKED THE PROVISIONS OF RULE-8D. 4.0.1 THE LD. CIT-DR ALSO SUBMITTED THAT THE ACTI ON OF THE LD. CIT (A) IN ALLOWING PARTIAL RELIEF TO THE ASSESS EE ON THE GROUND THAT THE ASSESSEE COMPANY HAD SIGNIFICANT SURPLUS F UNDS WAS 12 ITA NOS.2020 & 1954/DEL/2014 D CIT VS. NESTLE INDIA LTD. INCORRECT AS IT COULD NOT BE ESTABLISHED BY THE ASS ESSEE THAT IT WAS THE SURPLUS FUNDS WHICH HAD BEEN UTILIZED FOR MAKING THE INVESTMENTS. 4.1 WITH RESPECT TO ASSESSEES GROUND NO.2 CHALLE NGING THE ADDITION ON ACCOUNT OF INTEREST U/S 244A, THE L D. CIT-DR SUPPORTED THE ORDERS OF THE LD. CIT (A). 4.2 WITH RESPECT TO ASSESSEES GROUND NO.3 CHALLE NGING THE DIRECTIONS OF THE LD. CIT (A) TO REDUCE THE VAL UE OF THE SUBSIDY FROM THE COST OF CAPITAL INVESTMENT, THE LD. CIT-DR VEHEMENTLY ARGUED THAT THE CONDITIONS PRESCRIBED IN THE SUBSID Y SCHEME WERE NOT FULLY MET BY THE ASSESEE AND, THEREFORE, THE LD . CIT (A) HAD ERRED IN DIRECTING THAT THE SUBSIDY SHOULD BE TREATED AS CAPITAL INVESTMENT. 5.0 ARGUING ON THE GROUNDS RAISED BY THE DEPARTME NT, THE LD. CIT-DR FAIRLY ACCEPTED THAT GROUND NO.1 OF THE DEPARTMENTS APPEAL CHALLENGING THE ACTION OF THE LD. CIT (A) IN DELETING THE ADDITION OF RS.61,01,74,000/- ON ACCOUNT OF LICENSE FEE WAS COVERED AGAINST THE DEPARTMENT BY THE ORDERS OF THE TRIBUNA L IN EARLIER ASSESSMENT YEARS. 13 ITA NOS.2020 & 1954/DEL/2014 D CIT VS. NESTLE INDIA LTD. 5.1 WITH RESPECT TO GROUND NO.3 OF THE DEPARTMENTS APPEAL, THE LD. CIT-DR AGAIN FAIRLY AC CEPTED THAT THE ISSUE WAS COVERED AGAINST THE DEPARTMENT BY THE ORDE R OF THE HONBLE DELHI HIGH COURT AS FAR AS THE DEPRECIATION ON UPS WAS CONCERNED 5.2 WITH RESPECT TO GROUND NO.4 OF THE DEPARTMENTS APPEAL CHALLENGING THE DELETION OF DIS ALLOWANCE OF RS.33,90,330/- MADE BY THE ASSESSING OFFICER IN RES PECT OF DEPRECIATION ON ENERGY SAVING EQUIPMENT AND POLLU TION CONTROLLING DEVICES, THE LD. CIT-DR ARGUED THAT THE ASSESSEE CO ULD NOT DEMONSTRATE THAT THE ASSETS HAD BEEN PUT TO USE DUR ING THE YEAR UNDER CONSIDERATION. IT WAS SUBMITTED THAT BY THE LD . CIT-DR THAT DEPRECIATION WAS NOT ALLOWABLE SINCE THE SO CALLED EN ERGY SAVING ASSETS AND POLLUTION CONTROLLING DEVICES HAD NOT BE EN PUT TO USE BY THE ASSESSEE. 6.0 IN RESPONSE TO THE ARGUMENTS OF THE LD. CIT- DR MADE IN RESPECT OF THE DEPARTMENTS APPEAL, THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT GROUND NO.4 OF DEPART MENTS APPEAL 14 ITA NOS.2020 & 1954/DEL/2014 D CIT VS. NESTLE INDIA LTD. CHALLENGING THE DISALLOWANCE OF DEPRECIATION ON ENER GY SAVING AND POLLUTION CONTROLLING EQUIPMENT HAD RIGHTLY BEEN DE LETED BY THE LD. CIT (A) AS THERE WERE THREE CERTIFICATES FROM THE C HARTERED ENGINEERS ON RECORD CERTIFYING THAT THE EQUIPMENT IN QUESTION WAS ENERGY SAVING AND POLLUTION CONTROL EQUIPMENT. IT WAS ALSO SUBMITTED THAT IF AN ASSET IS READY TO BE PUT TO USE, THEN DEPRECATIO N HAS TO BE ALLOWED IN VIEW OF THE NUMEROUS SETTLED JUDICIAL PRE CEDENTS. 6.1 WITH RESPECT TO THE LICENSE FEE DISALLOWED B Y THE ASSESSING OFFICER BUT DELETED BY THE LD. CIT (A), R ELIANCE WAS PLACED ON THE ORDER OF THE LD. CIT (A) WHEREIN THE LD. CIT (A) HAD DECIDED THE ISSUE IN ASSESSEES FAVOUR BY RELYING ON THE OR DERS OF THE HONBLE HIGH COURT AND THE TRIBUNAL. 6.2 SIMILARLY WITH RESPECT TO DEPARTMENTS GROUND NO.3 REGARDING DEPRECIATION ON UPS, IT WAS SUBMITTED THAT THE ISSUE WAS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER O F THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. BS ES RAJDHANI POWERS LTD. IN ITA 1226/2010. 15 ITA NOS.2020 & 1954/DEL/2014 D CIT VS. NESTLE INDIA LTD. 7.0 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALSO PERUSED THE MATERIAL ON RECORD. WE NOW TAKE BO TH THE APPEALS FOR ADJUDICATION. 7.1 AS FAR AS THE ASSESSEES APPEAL IS CONCERNED , GROUND NOS.1, 1.1, 1.2, 1.3 ARE RELATED TO GROUND N O.2 OF THE DEPARTMENTS APPEAL WHEREIN THE ISSUE UNDER DISPUTE PERTAINS TO DISALLOWANCE U/S 14A OF THE ACT. THE ASSESSING OFFIC ER HAD MADE A DISALLOWANCE OF RS. 39,25,411/- U/S 14A OF THE ACT R .W.RULE-8D OF THE RULES, 1962 AND THE LD. CIT (A) RESTRICTED THE DISALLOWANCE TO RS.32,93,106/- BY HOLDING THAT NO DISALLOWANCE COULD HAVE BEEN MADE UNDER THE PROVISIONS OF RULE 8D(2) (II) IN RES PECT OF INTEREST EXPENSES AS THE ASSESSEE COMPANY HAD ACCUMULATED SU RPLUS AMOUNTING TO RS.302 CRORES AND GENERAL RESERVE OF 2 76 CRORES. THE LD. CIT (A) ALSO OBSERVED THAT THE OPENING BALANCE OF INVESTMENTS WAS RS.85.67 CRORES, AND, THUS, INVESTMENTS SUBJECTE D TO RULE-8D WERE NOT BROUGHT FORWARD FROM EARLIER YEARS. IT WAS AL SO OBSERVED BY THE LD. CIT (A) THAT THE ASSESSING OFFICER COULD NO T DEMONSTRATE THAT LOANS WERE BORROWED FOR MAKING INVESTMENTS IN DIVIDE ND YIELDING 16 ITA NOS.2020 & 1954/DEL/2014 D CIT VS. NESTLE INDIA LTD. ASSETS ONLY. WE FIND NO REASON TO INTERFERE WITH THI S FACTUAL FINDING OF THE LD. CIT (A). 7.1.1 HOWEVER, IT HAS FURTHER BEEN BROUGHT TO OU R NOTICE THAT IN THE ALTERNATE, THE ASSESSEE HAD SUBM ITTED A COMPUTATION BEFORE THE ASSESSING OFFICER WHEREIN IT WAS SUBMITTED THAT THE DISALLOWANCE, IF ANY, COULD NOT EXCEED RS. 8,34,934/- BEING THE COSTS OF TREASURY OPERATIONS. HOWEVER, IT IS SE EN THAT NEITHER THE ASSESSING OFFICER NOR THE LD. CIT (A) HAS COMMENTED ON THIS COMPUTATION OF THE ASSESSEE. THUS, APPARENTLY, THE SATISFACTION, AS CONTEMPLATED AND LAID DOWN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF MAXOPP INVESTMENT LTD. (SUPRA) TO BE RECORD ED BY THE ASSESSING OFFICER IS COMPLETELY ABSENT AND, THEREFO RE, IN ABSENCE OF THE REQUIRED SATISFACTION, SUCH DISALLOWANCE COULD NOT HAVE BEEN MADE. HOWEVER, SINCE, THE LD. AR HAS ARGUED THAT TH E DISALLOWANCE MAY BE RESTRICTED TO RS.8,34,934/-, WE, ACCORDINGLY, RESTRICT THE DISALLOWANCE TO RS.8,34,934/- AND DIRECT THE AO TO D ELETE THE REMAINING DISALLOWANCE. THUS, GROUND NO.1 OF THE AS SESSEES APPEAL STANDS PARTLY ALLOWED. 17 ITA NOS.2020 & 1954/DEL/2014 D CIT VS. NESTLE INDIA LTD. 7.2 AS FAR AS GROUND NO.2 OF THE ASSESSEES APPE AL IS CONCERNED, IT CHALLENGES THE ADDITION OF RS.8,01 ,12,224/- ON ACCOUNT OF INTEREST ON INCOME TAX REFUND FOR VARIOU S EARLIER ASSESSMENT YEARS VIZ. 1999-2000, 2001-02, 2003-04. THE LD. AR HAS FAIRLY ACCEPTED THAT THIS AMOUNT IS TAXABLE IN THE HANDS OF THE ASSESSEE. HOWEVER, WHILE DISMISSING THIS GROUND OF T HE ASSESSEES APPEAL, WE DIRECT THAT SHOULD THE INTEREST AMOUNT V ARY SUBSEQUENTLY DEPENDING ON THE OUTCOME OF THE APPEALS BEFORE THE HONBLE HIGH COURT AND THE HONBLE APEX COURT, THE AO SHOULD SUB STITUTE SUCH VARIED AMOUNT AS THE CASE MAY BE. 7.3 AS FAR AS GROUND NO.3 OF THE ASSESSEES AP PEAL IS CONCERNED WHEREIN THE ACTION OF THE LD. CIT (A) I N DIRECTING THE ASSESSING OFFICER TO REDUCE ON PROPORTIONATE BASIS THE CAPITAL SUBSIDY RECEIVED DURING THE RELEVANT ASSESSMENT YEA R FROM THE WRITTEN DOWN VALUE OF THE RESPECTIVE BLOCK OF ASSETS IS CONCERNED, IT IS SEEN THAT IT IS CONNECTED WITH THE GROUND NO. 5 O F THE DEPARTMENTS APPEAL. IT IS ALSO SEEN THAT THE LD. C IT (A) HAS ADJUDICATED IN ASSESSEES APPEAL THAT THE SUBSIDY O F RS.25 LACS RECEIVED UNDER THE STATE INVESTMENT SUBSIDY SCHEME WAS CAPITAL 18 ITA NOS.2020 & 1954/DEL/2014 D CIT VS. NESTLE INDIA LTD. RECEIPT. THE FACTUAL MATRIX PERTAINING TO THIS CONT ROVERSY IS THAT THE ASSESSEE HAD, DURING THE YEAR ENDING 31.03.1997 REL EVANT TO ASSESSMENT YEAR 1997-98, SET UP A NEW UNIT IN BICHOL IM IN THE STATE OF GOA FOR MANUFACTURE OF CONSUMER FOOD PRODUCTS NA MELY NOODLES, TOMATO KETCHUP AND OTHER SAUCES, TOMATO BASED COOKI NG SAUCES, DEHYDRATED SOUPS, CURRY PASTE ETC. THE UNIT WAS GRAN TED REGISTRATION UNDER THE STATE INVESTMENT SUBSIDY SCHEME BY THE DI RECTORATE OF INDUSTRY AND MINES AS A LARGE SCALE NEW UNIT WHICH WA S ENTITLED TO THE BENEFIT OF GOA STATE INVESTMENT SUBSIDY GRANTED TO IT UNDER THE PROVISIONS OF GOA STATE INVESTMENT SUBSIDY SCHEME, 1990 FOR INDUSTRIAL UNITS IN SELECTED BACKWARD DISTRICTS/AREA S NOTIFIED BY DIRECTOR OF INDUSTRIES, TRADE & COMMERCE, GOVERNMEN T OF GOA (DOI). ACCORDINGLY, AN APPLICATION WAS MADE IN SEPT EMBER, 1997 BEFORE THE DOI FOR SANCTION OF 25% STATE INVESTMENT SUBSIDY. DURING THE RELEVANT FINANCIAL YEAR CORRESPONDING TO ASSESS MENT YEAR 2009- 10, THE DOI, VIDE LETTER DATED 21.10.2008 SANCTIONE D THE SUBSIDY OF RS.25,00,000/- IN RESPONSE TO ASSESSEES APPLICATIO N RECEIVED BY IT ON 29.09.1997. THE SAID AMOUNT OF SUBSIDY WAS CLAIM ED AS CAPITAL RECEIPT NOT LIABLE TO TAX BY THE ASSESSEE AS THE AF ORESAID SCHEME WAS 19 ITA NOS.2020 & 1954/DEL/2014 D CIT VS. NESTLE INDIA LTD. INTRODUCED WITH A VIEW TO ACHIEVE FASTER DISPERSAL OF INDUSTRIES AND TO ATTRACT INDUSTRIES TO THE UNDERDEVELOPED AND DEV ELOPING AREAS OF THE STATE AND FOR EMPLOYMENT GENERATION. THE SCHEME POSTULATED THE FOLLOWING IMPORTANT CONDITIONS, AMONG OTHERS, FO R ELIGIBILITY UNDER THE SCHEME: - EFFECTIVE POSSESSION OF LAND, BUILDING, PLANT AND M ACHINERY BY AN ELIGIBLE UNIT; - TYING UP OF THE MEANS OF FINANCE FOR THE PROJECT TO THE SATISFACTION OF THE CONCERNED IMPLEMENTING AGENCY; - ACQUISITION OF FIXED ASSETS AT SITE TO THE EXTENT O F AT LEAST 25% OF THE TOTAL FIXED ASSETS AS ENVISAGED FOR THE PROJ ECT; AND - EVIDENCE REGARDING EXPENDITURE ON THE PROJECT INCLU DING EVIDENCE OF OWNERSHIP, REGISTRATION CERTIFICATE AND OTHER EXPENSES PAID, AGGREGATING TO AT LEAST 25% OF THE C APITAL COST ENVISAGED FOR THE PROJECT. - EMPLOYMENT OF LOCALS TO THE EXTENT OF 80% OF THE TO TAL WORKFORCE. 7.3.1 THE QUANTUM OF THE SUBSIDY UNDER THE AFORESAID SCHEME WAS SUBJECT TO MONETARY CEILING OF RS.25 LAKHS, SPECIFIED AS A PERCENTAGE OF FIXED CAPITAL INVESTME NT. THE AO HELD THAT THE AMOUNT OF SUBSIDY WAS TAXABLE AS A REVENUE RECEIPT BUT ON 20 ITA NOS.2020 & 1954/DEL/2014 D CIT VS. NESTLE INDIA LTD. APPEAL, THE LD. CIT (A) HELD THAT THE AFORESAID SUB SIDY WAS A CAPITAL RECEIPT IN VIEW OF THE FOLLOWING: - THE SCHEME WAS FOR PROMOTING INDUSTRIALIZATION OF NO TIFIED BACKWARD DISTRICTS; - IT WAS APPLICABLE TO SSI UNITS HAVING VALID SSI REG ISTRATION; - THE QUANTUM OF SUBSIDY WAS 25% SUBJECT TO A MAXIMUM OF RS.25 LAKHS ON THE INVESTMENT MADE ON THE FIXED CAP ITAL INVESTMENT AFTER 01.10.1998 ONLY; - ONE OF THE MAJOR REQUIREMENT OF THE SCHEME WAS THAT THE UNIT SHOULD EMPLOY AT LEAST 80% OF THE LOCAL EMPLOYEES. 7.3.2 THE LD. CIT (A) PLACED RELIANCE ON THE FOLLOWING DECISIONS WHILE HOLDING AS AFORESAID: - PONNI SUGAR & CHEMICALS LTD. VS. CIT: 306 ITR 392 ( SC) DATED 16.09.2008 - SAHNEY STEEL AND PRESS WORKS LTD. AND OTHERS V. CIT : 228 ITR 253 (SC) DATED 19.09.1997 - CIT V. RUBY RUBBER WORKS LTD.: 178 ITR 181 (KERALA) DATED 06.04.1989 [THE SAID DECISION HAS BEEN APPROVED BY THE SUPREME COURT IN THE CASE OF KALPETTA ESTATE LTD. V . CIT: 221 ITR 601 (SC) DATED 16.06.1996] 7.3.3 WE NOTE THAT IT IS SETTLED LAW THAT THE TAXATION OF SUBSIDY, BY WHATEVER NAME CALLED, IS DET ERMINED BY THE 21 ITA NOS.2020 & 1954/DEL/2014 D CIT VS. NESTLE INDIA LTD. PURPOSE FOR WHICH THE SUBSIDY IS GRANTED AND NOT TH E FORM/MODE/MANNER IN WHICH THE SUBSIDY IS RECEIVED/DI SBURSED. THEREFORE, WE FIND NO REASON TO INTERFERE WITH THE F INDINGS OF THE LD. CIT (A) ON THE ISSUE THAT THE IMPUGNED SUBSIDY WAS A CAPITAL RECEIPT. THUS GROUND NO.5 OF THE DEPARTMENTS APPEAL DOES NO T HOLD ANY SUBSTANCE AND THE SAME IS DISMISSED. 7.3.4 COMING BACK TO THE ASSESSEES CONNECTED GROUND NO.3, WE NOTE THAT THE HONBLE APEX COURT IN THE CASE OF CIT VS. PJ CHEMICALS LTD. REPORTED IN 2010 ITR 830 (SC) HAD HELD THAT WHERE THE GOVERNMENT SUBSIDY IS INTENDED AS AN INCEN TIVE TO ENCOURAGE ENTREPRENEURS TO MOVE TO BACKWARD AREAS AN D ESTABLISH INDUSTRIES, THE SPECIFIED PERCENTAGE OF FIXED CAPIT AL COSTS, WHICH IS THE BASIS FOR DETERMINING THE SUBSIDY, IS ONLY A M EASURE ADOPTED IN THE SCHEME TO QUANTIFY THE AMOUNT OF SUBSIDY AND IT IS NOT A PAYMENT DIRECTLY OR IN DIRECTLY TO MEET ANY PORTION OF THE ACTUAL COSTS OF ASSETS. IN THE PRESENT CASE, AS PER THE SC HEME OF THE SUBSIDY, THE SAME HAS NOT BEEN RECEIVED FOR MEETING THE COSTS OF FIXED ASSET DIRECTLY OR INDIRECTLY AND IT IS ONLY F OR THE PURPOSES OF INVESTMENT IN BACKWARD AREAS AND FOR GENERATION OF E MPLOYMENT IN 22 ITA NOS.2020 & 1954/DEL/2014 D CIT VS. NESTLE INDIA LTD. SUCH AREA. THIS IS EVIDENT FROM THE CONDITION THAT THE INDUSTRY RECEIVING THE SUBSIDY SHOULD EMPLOY 80% OF THE LOCA L POPULATION. THEREFORE, IT IS OUR CONSIDERED OPINION THAT THE LD . CIT (A) WAS NOT CORRECT IN DIRECTING THE ASSESSING OFFICER TO REDUC E THE AMOUNT OF SUBSIDY FROM THE ACTUAL COST OF FIXED ASSETS AND, T HEREAFTER, ALLOW DEPRECIATION ON SUCH ACTUAL COSTS SO ARRIVED THAT. WE SET ASIDE THE ORDER OF THE LD. CIT (A) ON THIS ISSUE AND WE DIREC T THE ASSESSING OFFICER TO ALLOW DEPRECATION ON THE ACTUAL COST OF ASSETS WITHOUT REDUCING THE AMOUNT OF SUBSIDY THERE FROM. THUS GRO UND NO.3 OF THE ASSESSEES APPEAL STANDS ALLOWED. 7.4 COMING TO THE REMAINING ISSUES IN THE DEPARTMENTS APPEAL, GROUND NO.1 CHALLENGES THE ACT ION OF THE LD. CIT (A) IN DELETING THE ADDITION OF RS.61,01,74,000 /- MADE ON ACCOUNT OF LICENSE FEE. IT IS SEEN THAT THE ASSESSI NG OFFICER, FOLLOWING THE ORDER OF HIS PREDECESSOR FOR THE IMMEDIATELY PR ECEDING ASSESSMENT YEAR 2008-09, DISALLOWED ON AD HOC BASIS 40% OF THE GENERAL LICENSE FEE PAID BY THE ASSESSEE TO M/S SOC IETE DES PRODUTIS NESTLE, S.A. SWITZERLAND FOR USE FOR KNOW-HOW AND T ECHNICAL ASSISTANCE, ALLEGING THAT THE SAME WAS EXCESSIVE AND NOT REASONABLE 23 ITA NOS.2020 & 1954/DEL/2014 D CIT VS. NESTLE INDIA LTD. AND HAD NOT BEEN INCURRED FOR THE PURPOSES OF BUSIN ESS OF THE ASSESSEE. THE LD. CIT (A) ON APPEAL, RELYING ON THE VARIOUS ORDERS OF THE HONBLE HIGH COURT AND THE TRIBUNAL IN ASSESSEE S OWN CASE DELETED THE DISALLOWANCE. 7.4.1 IT IS SEEN THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE FOLLOWING ORDERS OF TH E HONBLE HIGH COURT AND THE TRIBUNAL RENDERED IN ASSESSEES CASE IN THE EARLIER ASSESSMENT YEARS AS UNDER: ASSESSMENT YEARS AUTHORITY PASSING ORDER APPEAL NO. DATE OF ORDER 1997 - 98 ITAT ITA NO.4545/DEL/200 0 10.01.2005 199 8 - 9 9 ITAT ITA NO. 2239 /DEL/200 2 10.01.2005 199 9 - 00 ITAT ITA NO. 2755 /DEL/200 3 30 .0 4 .200 7 2000 - 01 ITAT ITA NO. 2714 /DEL/200 4 1 5 .0 6 .200 7 2001 - 02 ITAT ITA NO. 1979 /DEL/200 6 27 .0 3 .200 9 2002 - 03 ITAT ITA NO. 1980 /DEL/200 6 27 .0 3 .200 9 2003 - 04 ITAT ITA NO.1612/DEL/2007 24.07.2009 2004 - 05 ITAT ITA NO.3096/DEL/2007 24.07.2009 2005 - 06 ITAT ITA NO.319/DEL/2010 22.03.2010 2006 - 07 ITAT ITA NO.4477/DEL/2010 18.11.2011 2007 - 08 ITAT ITA NO.4669/DEL/2012 03.01.2014 2008 - 09 ITAT ITA NO.4670/DEL/2012 03.01.2014 1997 - 98 TO 2000-01 AND 2005- 06 DELHI HIGH COURT ITA NO.662/2005, ITA NO.1202/2005, ITA NO.96/2008, ITA NO.294/2008, ITA NO.288/2011, 11.05.2011 2006 - 07 DELHI HIGH COURT ITA NO.644/2012 21.11.2012 24 ITA NOS.2020 & 1954/DEL/2014 D CIT VS. NESTLE INDIA LTD. 2007 - 08 DELHI HIGH COURT ITA NO.502/2014 10.09.2014 2008 - 09 DELHI HIGH COURT ITA NO.532/2014 10.09.2014 7.4.2 THE LD. CIT-DR ALSO COULD NOT CONTROVERT T HIS FACT. THEREFORE, IN VIEW OF THE BINDING JUDICIAL PRE CEDENTS IN ASSSESSEES OWN CASE AS ENUMERATED ABOVE, WE FIND NO REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT (A) ON TH E ISSUE. ACCORDINGLY, GROUND NO.1, OF THE DEPARTMENTS APPEA L STANDS DISMISSED. 7.5 GROUND NO.3 OF THE DEPARTMENTS APPEAL CHALLENGES THE ACTION OF THE LD. CIT (A) IN DELETIN G THE DISALLOWANCE OF RS.1,39,152/- MADE BY THE ASSESSING OFFICER BY R ESTRICTING THE CLAIM OF DEPRECIATION IN RESPECT OF UPS FROM 60% TO 15%. THE LD. CIT-DR AS FAIRLY ACCEPTED THAT THIS ISSUE IS COVERE D IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. BSES RAJDHANI POWER LIMITED IN ITA N O.1266/2010 VIDE ORDER DATED 31.08.2010 AND CIT VS. BSES YAMUNA POWER LTD. VIDE ORDER DATED 31.08.2010. IT IS SEEN THAT THE HO NBLE DELHI HIGH COURT HAS HELD THAT UPS IS TO BE CONSIDERED AS AN I NTEGRAL PART OF 25 ITA NOS.2020 & 1954/DEL/2014 D CIT VS. NESTLE INDIA LTD. THE COMPUTERS AND DEPRECIATION IS TO BE ALLOWED @ 6 0%. ACCORDINGLY, IN VIEW OF THE SETTLED LEGAL POSITION, WE FIND NO REA SON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT (A) ON THIS ISSUE A LSO AND DISMISS GROUND NO.3 OF THE DEPARTMENTS APPEAL. 7.6 GROUND NO.4 OF THE DEPARTMENTS APPEAL CHALLENGES THE ACTION OF THE LD. CIT (A) IN DELETIN G THE DISALLOWANCE OF RS. 33,90,330/- MADE BY THE ASSESSING OFFICER BY DENYING THE CLAIM OF THE DEPRECIATION IN RESPECT OF ENERGY SAVI NG AND POLLUTION CONTROL EQUIPMENT ON THE GROUND THAT IT WAS NOT PUT TO USE. IT IS SEEN THAT THE ASSESSING OFFICER DISALLOWED THE CLAI M OF DEPRECIATION BY ALLEGING THAT THE ASSESSEE HAS ONLY ESTABLISHED THE FACTUM OF PURCHASE OF ASSETS AND NOT THE CONDITION OF ASSESTS BEING PUT TO USE. THE ASSESSING OFFICER FURTHER OBSERVED THAT COMPARA TIVE RESULTS WERE NOT SUBMITTED TO ESTABLISH THAT ASSETS WERE ENERGY SAVING AND POLLUTION CONTROL EQUIPMENT. IT IS ALSO SEEN THAT N O ADVERSE OBSERVATION HAD BEEN MADE BY THE ASSESSING OFFICER WITH RESPECT TO THE PURCHASE AND INSTALLATION OF SUCH ASSETS. IN AD DITION TO THIS, THE ASSESSEE HAD ALSO SUBMITTED CERTIFICATES FROM CHART ERED ENGINEERS TO THE EFFECT THAT THE ASSETS PURCHASED FALL WITHIN THE CATEGORY OF AIR 26 ITA NOS.2020 & 1954/DEL/2014 D CIT VS. NESTLE INDIA LTD. POLLUTION CONTROL EQUIPMENT, WATER CONTROL EQUIPMEN T, ENERGY SAVING DEVICES AND RENEWABLE ENERGY DEVICES. THESE CERTIFICATES SUBMITTED BY THE ASSESSEE HAVE BEEN TAKEN NOTE OF B Y THE ASSESSING OFFICER BUT HAVE NOT BEEN COMMENTED UPON. IT IS NOT IN DISPUTE THAT THE ASSETS FALL WITHIN THE DESCRIPTION OF THE ASSETS REFERRED TO IN THE INCOME TAX RULES WHICH CONTAINS THE DEPRECATION SCHE DULE. THE ONLY OBJECTION OF THE ASSESSING OFFICER SEEMS TO BE THAT THE ASSETS HAD NOT BEEN PUT TO USE AND THAT THE ASSESSEE COULD NOT FURNISH COMPARATIVE RESULTS. HOWEVER, PROVISIONS OF SEC.32 OF THE ACT DO NOT MANDATE SUCH REQUIREMENT. TO ASSUME THAT HAVING PUR CHASED AND INSTALLED THE ENERGY SAVING DEVICES AND POLLUTION C ONTROL EQUIPMENT BUT NOT PUTTING THE SAME TO USE IS, THUS, JUST A BA SELESS SURMISE AND CONJECTURE WHICH STANDS NEGATED BY THE CERTIFICA TES FROM THE CHARTERED ENGINEERS. THEREFORE, IT IS OUR CONSIDERE D OPINION THAT THE LD. CIT (A) WAS ABSOLUTELY CORRECT IN HOLDING THAT H AVING INSTALLED THE DEVICES, THE ASSESSEE HAD EXTENSIVELY PUT THE A SSETS TO USE FOR THE PURPOSES OF BUSINESS AND THAT UNDER THE LAW, THE ASSESSEE WAS NOT REQUIRED TO MONITOR THE OUTCOME OF USE OF SUCH ITEMS IN ITS BUSINESS. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. INSILCO 27 ITA NOS.2020 & 1954/DEL/2014 D CIT VS. NESTLE INDIA LTD. LTD. REPORTED IN 2009 ITOL 115-HC-DEL HAD HELD THAT IT WOULD BE MORE APPROPRIATE TO UNDERSTAND THE EXPRESSION USE AS COMPREHENDING CASES WHERE THE MACHINERY IS KEPT READ Y BY THE OWNER FOR ITS USE IN ITS BUSINESS. THEREFORE, WE FIN D NO REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT (A) ON TH IS ISSUE ALSO AND WE DISMISS GROUND NO.4 OF THE DEPARTMENTS APPEAL. 8.0 IN THE FINAL RESULT, THE APPEAL OF THE ASSES SEE BEARING ITA NO.1954/DEL/2014 STANDS PARTLY ALLOWED AND THE DEPARTMENTS APPEAL BEARING ITA NO.2020/DEL/2014 ST ANDS DISMISSED. ORDER PRONOUNCED ON 22/07/2020. SD/- SD/- (G.S.PANNU) (SUDHANSHU SRIVASTAVA) VICE PRESIDENT JUDICIAL MEM BER DATED: 22/07/2020 PK/PS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI