The DCIT, Circle-1(1)(1), Ahmedabad V. M/s. Adani Mining Pvt. Ltd., Ahmedabad

ITA 1972/AHD/2015

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9397 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 03-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Source of fund; Capital expenditure
• Section: 143(3); 201; 56

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL , B BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED , ACCOUNTANT MEMBER AND MS . MADHUMITA ROY , JUDICIAL MEMBER ./ ITA NO .1972 /AHD/2015 WITH C.O. 155/AHD/2015 / ASSTT. YEAR : 2011 - 2012 D. C . I . T, CIRCLE - 3 (2), AHMEDABAD. VS. ADANI MINING PVT. LTD. , (NOW MERGED WITH ADANI ENTERPRISES LTD.) 9 TH FLOOR, SHIKHAR BUILDING, NR. MITHKHALI SIX ROAD , NAVRANGPURA, AHMEDABAD - 380009 . PAN: AAGCA5276M (APPLICANT) (RESPON D ENT) REVENUE BY : SHRI MUDIT NAGPAL, S R. D.R ASSESSEE BY : SHRI S.N. SOPARKAR & MS URVASHI SHODHAN, A.R S / DATE OF HEARING : 11 / 07 / 201 9 / DATE OF PRONOUNCEMENT: 25 / 09 /201 9 / O R D E R PER BENCH : THE APPEAL IS FILED BY THE REVENUE AND THE CO IS FILED BY THE ASS ESSEE AGAINST THE COMMON ORDER OF THE LEARNED COMMIS S IONER OF INCOME TAX (APPEALS) - 6 AHMEDABAD , [ LD. CIT (A) IN SHORT] DATED 07/09 / 2015 ARISING IN THE MATTER OF ASSESSMENT ORDER PASSED UNDER S. 143(3) OF THE INCOME TAX ACT, 1961 ( HERE - IN - AFTER REFERRED TO AS 'THE ACT') DATED 21 / 03 /201 4 RELEVANT TO I TA NO .1972 /AHD /2015 CO NO.155/AHD/2015 A SSTT. YEAR 2011 - 12 2 ASSESSMENT YEAR 2011 - 12 . THE A SSESS E E HAS FILED CROSS OBJECTION IN THE REV E NUE S APPEAL BEARING NO.1972 /AHD /2 015 FOR THE ASSESSMENT YEAR 2011 - 2012 . THE REVENUE HAS RAIS ED FOLL OWING GROUNDS OF APPEALS . 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.3,81,36,986/ - MADE U/S.56 OF THE ACT WITHOUT APPRECIATING THE FACT THAT THE SAID INCOME EARNED IS NOT INEXTRICABLY LINKED WITH THE BUSINESS OF THE ASSESSEE AND CANNOT BE REDUCED FROM CAPITAL EXPENDITURE. 2. THE ID. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF UNUTILIZED CENVAT CREDIT OF RS.29,60,018/ - WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS FOLLOWED EXCLUSIVE METHOD FOR ACCOUNTING CENVAT AS AGAINST INCLUSIVE METHOD MANDATED U/S.145A OF THE ACT. THE 1 ST ISSUE RAISED BY THE R EVENUE IS THAT THE LEARNED CIT (A) ERRED IN DELETING THE ADDITION MADE BY THE AO FOR RS. 3, 81 , 36 , 986 .00 ON ACCOUNT OF INTEREST INCOME TREATING THE SAME AS INEXTR I CABLY LINKED WITH THE BUSINESS AND ACCORDINGLY REDUCED FROM THE COST OF THE PROJECT. 2. THE FACTS OF THE CASE AS CULLED OUT FROM THE ORDER OF THE AUTHORITIES BELOW ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND HUNDRED PERCENT SUBSIDIARY OF A DANI E NTERPRISES LTD. (FOR SHORT AEL). THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MINING/EXPLORATION ACTIVITIES. AEL WAS AWARDED A CONTRACT BY UCM C OAL COMPANY LIMITED DURING THE YEAR IN A CONSORTIUM FOR THE DEVELOPMENT AND OPERATION OF COAL BLOCK SITUATED IN ORISSA. 2.1 AEL SUBSEQUENTLY ASSIGNED THE CONTRACT TO ITS SUBSIDIARY COMPANY BEING THE ASSESSEE. AFTER THAT , THE ASSESSEE ENTERED INTO A WASHER Y AGREEMENT I TA NO .1972 /AHD /2015 CO NO.155/AHD/2015 A SSTT. YEAR 2011 - 12 3 WITH GVI INFO PRIVATE LTD. AS PER THE AGREEMENT, GVI HAS UNDERTAKEN THE WORK OF CONSTRUCTING, OPERATING , AND MANAGING THE COAL WASHERY FOR THE PROJECT. 2.2 THE ASSESSEE IN PURSUANCE TO THE AGREEMENT WITH GVI P ROVIDED A SECURITY DEPOSIT OF 1 5 0 CRORES SUBJECT TO THE INTEREST AT THE RATE OF 6% PER ANNUM. THE ASSESSEE ACCORDINGLY EARNED AN INTEREST INCOME OF 3 , 81 , 36 , 986 .00 , WHICH WAS REDUCED FROM THE PROJECT DEVELOPMENT EXPENDITURE . A S SUCH INCOME WAS INEXTRICABLY LINKED WITH THE BUSINESS/ THE P ROJECT WHICH WAS NOT COMMENCED IN THE YEAR UNDER CONSIDERATION. ACCORDINGLY, THE ASSESSEE CLAIMED THAT THE IMPUGNED INTEREST INCOME CANNOT BE TREATED AS INCOME FROM OTHER SOURCES UNDER SECTION 56 OF THE ACT. 2.3 SIMILARLY, THE ASSESSEE ALSO CLAIMED THA T IT HAS ALSO ENTERED INTO AN AGREEMENT WITH GUJARAT M INERAL D EVELOPMENT CORPORATION LTD ( FOR SHORT GMDCL) FOR CARRYING OUT THE ACTIVITY OF CORE DRILLING, NON - CORE DRILLING AND WELL LOGGING FOR ALL EXPLORATION AT MORGA - II IN C HATTISGARH. AS PER THE AGREEM ENT IT HAS PROVIDED A SECURITY DEPOSIT OF 1, 25 , 00 , 000 AND 19 , 99 , 000 .00 FOR DUE PERFORMANCE IN FAVOR OF GMDCL BY WAY OF FURNISHING THE BANK GUARANTEE. THE ASSESSEE FURTHER CLAIMED THAT THE INTEREST EARNED BY IT ON THE DEPOSIT WITH THE BANK FOR OBTAINING TH E BANK GUARANTEE IS INEXTRICABLY LINKED WITH THE IMPUGNED PROJECT AND T HE COMMERCIAL OPERATION IN RESPECT OF SUCH PROJECT HAS NOT COMMENCED IN THE YEAR UNDER CONSIDERATION. T HEREFORE THE INTEREST EARNED ON BANK GUARANTEE OF 1 , 04 , 463 .00 WAS REDUCED FROM TH E PROJECT DEVELOPMENT EXPENDITURE . 2.4 HOWEVER, THE AO DURING THE ASSESSMENT PROCEEDINGS FOUND THAT I TA NO .1972 /AHD /2015 CO NO.155/AHD/2015 A SSTT. YEAR 2011 - 12 4 I. TAS INTEGRATORS PRIVATE LTD HAS ADVANCED LOAN OF RS. 100 CRORES TO AEL WHICH WAS RECEIVED BY IT FROM GVI. SIMILARLY, GVI RECEIVED SUCH FUND OF RS. 100 CRORES FROM THE ASSESSEE/AEL. II. THERE WAS NO EVIDENCE TO PROVE THAT GVI HAS UTILI Z ED THE FUND RECEIVED FROM THE ASSESSEE ON THE EXECUTION OF THE IMPUGNED PROJECT. IN VIEW OF THE ABOVE, THE AO OBSERVED THAT THE SECURITY DEPOSIT FORWARDED TO GVI WAS NOTHING BUT AN ARRANGEMENT AMONG THE PARTIES AND THE SAME WAS NOT LINKED WITH THE PROJECT OF THE ASSESSEE. ACCORDINGLY, THE AO TREATED THE IMPUGNED INTEREST EXPENSES UNDER THE HEAD INCOME FROM OTHER SOURCES. THE AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LEARNED CIT (A). 3. THE ASSESSEE BEFORE THE LEARNED CIT (A) SUBMITTED THAT IT HA D PROVIDED A SECURITY DEPOSIT TO GVI IN PURSUANCE TO THE WASHERY AGREEMENT. AS PER TH E AGREEMENT , GVI WAS TO PERFORM THE FOLLOWING ACTIVITIES: (I) CONSTRUCT, OPERATE AND MANAGE THE COAL WASHERY WITH 40MT PER ANNUM CAPACITY AT MINE HEAD WITHIN TIME LINE TO ENABLE AML TO DELIVER COAL UNDER THE CONTRACT TO UCM. THE TOTAL CAPACITY OF THE COAL WAS HERY SHALL BE REQUIRED UNDER THE CONTRACT. (II) TRANSPORT OF COAL FROM MINE TO WASHERY THROUGH BELT CONVEYOR SUSTEM. (III) THE WASHING TECHNOLOGY, OTHER EQUIPMENT TECHNOLOGY AND COST SHALL BE MUTUALLY DISCUSSED AND FINANLIZED BY AML AND GVL IN CONCURRENCE. (IV) TO MAKE AVAILABLE FOR DISPATCH THE AGREED QUANTITY OF WASHED COAL MEETING THE PARAMETERS. (V) TO OPERATE AND MAINTAIN THE WASHERY AS PER THE BEST STANDARDS IN THE INDUSTRY. I TA NO .1972 /AHD /2015 CO NO.155/AHD/2015 A SSTT. YEAR 2011 - 12 5 (VI) GVI SHALL MAINTAIN ALL THE REQUISITE RECORDS PROPERLY FOR THE INSPECTION BY GOVERNMENT AGEN CIES CONCERNED WITH RESPECT TO THE DETAILS OF RUN OF MINE COAL, WASHED COAL AND REJECTS ETC. 3.1 ACCORDINGLY , THE ASSESSEE CLAIMED THAT SUCH AGREEMENT WITH THE GVI WAS ESSENTIAL TO EX ECUTE THE IMPUG N ED PROJECT AND GVI WOULD NOT HAVE AGREED FOR SUCH PROJE CT WITHOUT THE SECURITY DEPOSIT. ACCORDINGLY , THE ASSESSEE CLAIMED THAT SUCH INTEREST INCOME ON THE SECURITY DEPOSIT FURNISHED TO GVI WAS INEXTRICABLY LINKED WITH THE PROJECT. 3.2 THE ASSESSEE ALSO CLAIMED THAT SECURITY DEPOSIT BY WAY OF FURNISHING THE BANK GUARANTEE TO GMDCL WAS INE XT RICABLY LINK WITH THE PROJECT. THEREFORE, SUCH INTEREST INCOME CANNOT BE TREATED AS INCOME FROM OTHER SOURCES UNDER SECTION 56 OF THE ACT. 3.3 THE LEARNED CIT (A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE HELD THAT THE SECURITY DEPOSIT TO THE GVI WAS DIRECTLY LINKED WITH THE PROJECT UNDERTAKEN BY THE ASSESSEE FROM AEL/UCM. THEREFORE , HE DIRECTED TO REDUCE THE INTEREST INCOME FROM THE PROJECT DEVELOPMENT EXPENDITURE. 3.4 HOWEVER , THE LEARNED CIT (A) CONFIRMED THE ACTION OF THE AO WITH RESPECT TO THE INTEREST INCOME OF RS. 1, 04 , 463 .00 FROM THE FIXED DEPOSITS MADE WITH THE BANK IN ORDER TO OBTAIN THE BANK GUARANTEE IN FAVOUR OF GMDCL BY OBSERVING THAT THE ASSESSEE FAILED TO SUBSTAN TIATE ITS CLAIM THAT IT WAS LINKED WITH THE PROJECT . 4. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A), BOTH THE R EVENUE AND THE ASSESSEE ARE IN APPEAL BEFORE US. THE R EVENUE IS IN AN APPEAL AGAINST I TA NO .1972 /AHD /2015 CO NO.155/AHD/2015 A SSTT. YEAR 2011 - 12 6 THE DIRECTION OF TREATING THE INTEREST INCOME OF 3 , 81 , 36 , 986 .00 AS CONNECTED WITH THE PROJECT OF THE ASSESSEE , AND THE ASSESSEE IS IN AN APPEAL AGAINST THE UPHOLDING THE ORDER OF THE AO TRE ATING THE INTEREST INCOME OF 1, 04 , 463 .00 AS INCOME FROM OTHER SOURCES. 5. BOTH THE PARTIES BEFORE US RELIED ON TH E ORDER OF THE AUTHORITIES BELOW TO THE EXTENT FAVORABLE TO THEM. 6 . WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THERE IS NO QUARREL TO THE FACT THAT ALL THE EXPENDITURES INCURRED BY THE ASSESSEE BEFORE THE COMMENCEMENT OF THE COMMERCIAL PRODUCTION SHOULD BE CAPITAL I Z ED TO THE COST OF THE PROJECT PROVIDED THESE ARE INEXTRICABLY L INKED WITH THE PROJECT. SIMILAR LOGIC ALSO APPLIES TO THE INCOME GENERATED BY THE ASSESSEE BEFORE THE COMMENCEME NT OF THE COMMERCIAL PRODUCTION. T HEREFORE THE SAME SHOULD BE REDUCED FROM THE COST OF THE PROJECT PROVIDED THESE ARE INEXTRICABLY LINKED WITH THE PROJECT. THUS THE CRITERIA, BE IT EXPENSES OR THE INCOME IS THAT THE SAME SHOULD BE DIRECTLY CONNECTED AND HAVE A LIVE LINK WITH THE PROJECT. 6 .1 IN HOLDING SO, WE FIND SUPPORT AND THE ST RENGTH FROM THE JUDGMENT OF H ON BLE SUPREME COURT IN THE CASE OF CIT VS. BOKAR O STEEL LTD. REPORTED IN 236 ITR 315 WHEREIN THE INCOME SUCH AS RENTAL CHARGES, MACHINE HIGHER CHARGES , AND INTEREST INCOME , ET C WERE REDUCED FROM THE COST OF THE PROJECT AS THES E INCOMES WERE DIRECTLY CONNECTED WITH THE BUSINESS OF THE ASSESSEE. 6 .2 SIMILARLY, THE H ON BLE SUPREME COURT IN THE CASE OF T UTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. VS CIT REPORTED IN 227 ITR 172 HAS TREATED THE I TA NO .1972 /AHD /2015 CO NO.155/AHD/2015 A SSTT. YEAR 2011 - 12 7 INTEREST INCOME AS THE INCOME FROM OT HER SOURCES DUE TO THE FACT THAT THE SAME WAS NOT LINKED WITH THE PROJECT OF THE ASSESSEE. 6 .3 THUS , THE CRITERIA TO SEE ANY RECEIPT OR PAYMENT IS WHETHER THE SAME IS INEXTRICABLY LINK WITH THE PROJECT. ACCORDINGLY, ANY RECEIPT SHALL BE TREATED AS INEXTR ICABLY LINKED WITH THE PROJECT IF IT ARISES IN THE COURSE OF THE PROJECT OF THE ASSESSEE. 6 .4 NOW COMING TO THE PRESENT FACTS OF THE CASE WHETHER THE IMPUGNED INTEREST INCOME FROM GVI REPRESENTS THE INCOME IN CONNECTION WITH THE PROJECT. REGARDING THE I NTEREST INCOME FROM THE GVI, WE AMONG OTHER THING, NOTE THAT A QUESTION ALSO ARISES ABOUT THE SOURCE OF FUND FORWARDED BY THE ASSESSEE TO GVI IN THE FORM OF SECURITY DEPOSIT , WHETHER IT WAS OWN FUND OR NON - INTEREST /INTEREST - BEARING FUND. ON PERUSAL OF THE BALANCE SHEET, WE NOTE THAT THE OWN FUND OF THE ASSESSEE STANDS AT 5 CRORES WHICH ARE NOT SUFFICIENT ENOUGH TO PROVIDE SUCH SECURITY DEPOSIT. THUS THE BORROWED FUND HAS BEE N UTILIZED FOR FURNISHING SUCH SECURITY DEPOSIT. THE AO HAS NOT DISTURBED THE INTEREST EXPENSES ON SUCH BORROWED FUND WHICH WAS CAPITALIZED TO THE COST OF THE PROJECT. BUT THE AO TREATED THE INTEREST INCOME FROM SUCH BORROWED FUND AS INCOME FROM OTHER SOUR CES AND NOT AS PART OF THE IMPUGNED PROJECT. IN OUR CONSIDERED VIEW, THE AO CANNOT TREAT THE INTEREST EXPENSES AND INTEREST INCOME DIFFERENTLY ARISING FROM THE SAME FUND. IN OUR VIEW, IF THE AO WAS NOT SATISFIED ABOUT THE UTILIZATION OF THE FUND, THEN HE S HOULD HAVE TREATED THE INTEREST INCOME AND INTEREST EXPENSES IN THE SIMILAR FASHION. IN OTHER WORDS, THE AO SHOULD HAVE TREATED THE INTEREST INCOME FROM OTHER SOURCES AND AGAINST THAT INTEREST EXPENSES SHOULD HAVE BEEN ALLOWED AS EXPENSES AGAINST THE SAME AS THESE ARE INEXTRICABLY LINKED. BUT THE AO HAS NOT DONE SO. ACCORDINGLY, WE I TA NO .1972 /AHD /2015 CO NO.155/AHD/2015 A SSTT. YEAR 2011 - 12 8 ARE OF THE VIEW THAT THE AO ERRED IN TREATING THE INTEREST EXPENSES AND INCOME DIFFERENTLY DESPITE THESE ARE INEXTRICABLY LINKED. THUS, WE ARE OF THE VIEW THAT ONCE THE AO HAS AC CEPTED THE INTEREST COST AS PART OF THE PROJECT THEN THE SAME TREATMENT NEEDS TO BE GIVEN EVEN TO THE INTEREST INCOME BY ADJUSTING THE SAME AGAINST THE PART OF THE PROJECT COST AS THE INTEREST EXPENSE AND INCOME ARE INEXTRICABLY LINKED. ACCORDINGLY, WE DO NOT FIND ANY REASON TO DISTURB THE FINDING OF THE LD. CIT - A. 6 . 5 REGARDING THE INTEREST INCOME FROM GMDCL, WE NOTE THAT SUCH INCOME WAS EARNED BY THE ASSESSEE ON THE FIXED DEPOSITS ON THE BANK GUARANTEE MADE IN CONNECTION WITH THE PROJECT AWARDED BY GMDC L. THIS FACT CAN BE VERIFIED FROM THE BANK GUARANTEE FURNISHED BY THE A XIS BANK LTD ON BEHALF OF THE ASSESSEE , WHICH IS PLACED ON PAGES 98 TO 101 OF THE PAPER BOOK. THERE WAS ALSO NO ALLEGATION THAT SUCH BANK GUARANTEE REPRESENTS THE CIRCULAR TRANSACTION . M OREOVER , THERE WAS NO DEFECT POINTED OUT BY THE AUTHORITIES BELOW IN THE BANK GUARANTEE FURNISHED BY THE ASSESSEE. ACCORDINGLY , WE DISAGREE WITH THE FINDING OF THE LEARNED CIT (A). HENCE THE GROUND FILED BY THE ASSESSEE IN ITS CO IS ALLOWED. IN VI EW OF THE ABOVE, THE GROUND OF APPEAL OF R EVENUE IS DISMISSED AND THE GROUND FILED BY THE ASSESSEE IN ITS CO IS ALLOWED. THE NEXT ISSUE RAISED BY THE R EVENUE IS THAT THE LEARNED CIT (A) ERRED IN DELETING THE ADDITION MADE BY THE AO FOR RS. 29 ,60,018 .00 ON ACCOUNT OF CENVAT CREDIT. I TA NO .1972 /AHD /2015 CO NO.155/AHD/2015 A SSTT. YEAR 2011 - 12 9 7 . THE ASSESSEE IN ITS AUDITED FINANCIAL STATEMENT HAS SHOWN AN UN UTILI Z ED CENVAT CREDIT AMOUNTING TO RS. 2 9 , 60 , 018 .00 AS ON 31 MARCH 2011. THE ASSESSEE DURING THE ASSESSMENT CLAIMED THAT THE IMPUGNED CENVAT CREDIT REPRESENT S AGAINST THE SERVICES RECEIVED BY IT AND AS SUCH IT DOES NOT PERTAIN TO THE INVENTORIES AS ENVISAGED UNDER THE PROVISIONS OF SECTION 145A OF THE ACT. ACCORDINGLY, THE ASSESSEE CLAIMED THAT THE PROVISIONS OF SECTION 145A OF THE ACT DOES NOT APPLY TO IT. 7 .1 HOWEVER, THE AO WAS NOT SATISFIED WITH THE CONTENTION OF THE ASSESSEE BY OBSERVING THAT AS PER THE PROVISIONS OF SECTION 145A OF THE ACT THE ASSESSEE IS LIABLE TO INCLUDE THE AMOUNT OF DUTY, CESS, TAX ETC IN THE AMOUNT OF PURCHASES, SALES AND THE CLOSIN G STOCK. ACCORDINGLY, THE AO ADDED THE AMOUNT OF CENVAT CREDIT AS ON THE BA LANCE SHEET DATE TO THE TOTAL INCOME OF THE ASSESSEE. 7 .2 AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LEARNED CIT (A) WHO DELETED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDE R: 5.2 THIS ISSUE WAS DISCUSSED BY THE A.O AT PARA 3 OF THE ASSESSMENT ORDER. AS SEEN FROM THE APPELLANT S REPLY DATED 20.01.2014, IT WAS CONTENDED THAT THE APPELLANT COMPANY WAS ENGAGED IN THE MINING ACTIVITY I.E SERVICE SECTOR; THE CENVAT CREDIT PERTAI NED TO THE SERVICES RECEIVED BY THE APPELLANT; THE CREDIT DID NOT PERTAIN TO THE INVENTORIES AND THEREFORE THE PROVISIONS OF SECTOR 145A WERE NOT APPLICABLE. A.O. DID NOT MAKE ANY OBSERVATIONS ON THESE CONTENTIONS. INSTEAD HE MADE THE ADDITION OF THE CNEVA T CREDIT TO THE CLOSING STOCK. HAVING CONSIDERED THE FACTS OF THE MATTER, I AM INCLINED TO ACCEPT THE CONTENTIONS OF THE AR THAT GIVEN THE NATURE OF BUSINESS OF THE APPELLANT THE PROVISIONS OF SECTION 145A ARE NOT ATTRACTED. 5.3 EVEN IF THE PROVISIONS OF SECTION 145A ARE ATTRACTED, THE ADDITION IS NOT SUSTAINABLE. JUDICIAL OPINION IS SETTLED THAT ALL THE THREE ITEMS NAMELY, PURCHASES, SALE AND THE INVENTORY AS MENTIONED IN SECTION 145A ARE TO BE ADJUSTED TO INCLUDE ELEMENT OF VAT. SUCH AN EXERCISE IS REVEN UE NEUTRAL. I TA NO .1972 /AHD /2015 CO NO.155/AHD/2015 A SSTT. YEAR 2011 - 12 10 IMPUGNED ADDITION IS NOT IN ACCORDANCE WITH LAW. IT IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. BEING AGGRIEVED BY THE ORD ER OF THE LEARNED CIT (A), THE R EVENUE IS IN APPEAL BEFORE US. 8 . BOTH THE LEARNED DR AND THE AR BEFORE US RELIED O N THE ORDER OF THE AUTHORITIES BELOW TO THE EXTENT FAVOURABLE TO THEM. 9 . WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ALLEGATION OF THE ASSESSING OFFICER IN THE INSTANT CASE IS THAT THE ASSESSEE WHILE VALUING THE CLOSING STOCK OF ITS GOODS AS ON 31/03/2011 HAS NOT INCLUDED THE AMOUNT OF CENVAT WHICH IS CONTRARY TO THE PR OVISIONS OF SECTION 145A OF THE ACT. THEREFORE, THE CLOSING STOCK OF THE ASSESSEE WAS ENHANCED BY THE AMOUNT OF CENVAT CREDIT OF RS.29 ,6 0 , 018 / - AS ATTRIBUTABLE TO THE CLOSING STOCK OF THE ASSESSEE. 9.1 HOWEVER, THE LD. CIT(A) DELETED THE A DDITION MADE BY THE ASSESSING OFFICER BY OBSERVING THAT THE ASSESSEE HAS BEEN FOLLOWING ITS METHOD OF VALUATION CONSISTENTLY AND THERE WAS NO DISSATISFACTION OF THE ASSESSING OFFICER ABOUT THE CORRECTNESS/COMPLETENESS OF THE BOOKS OF ACCOUNTS OF THE ASSESS EE. 9.2 FROM THE PRECEDING DISCUSSION, WE NOTE THAT THE ASSESSEE HAS BEEN RECORDING ITS TRANSACTIONS OF PURCHASE, SALES, AND VALUATION OF INVENTORIES, NET OF CENVAT CONSISTENTLY. THUS, IF THE INVENTORY OF CLOSING STOCK IS ENHANCED BY THE AMOUNT OF CENVAT CREDIT ATTRIBUTABLE TO IT, THEN THE AMOUNT OF CORRESPONDING PURCHASES SHOULD ALSO BE INCREASED BY THE SAID AMOUNT WHICH I TA NO .1972 /AHD /2015 CO NO.155/AHD/2015 A SSTT. YEAR 2011 - 12 11 WILL RESULT IN TAX NEUTRAL EXERCISE. THUS, IN OUR CONSIDERED VIEW, THE ASSESSING OFFICER ERRED IN ENHANCING THE VALUE OF THE CLOSING S TOCK WITHOUT GIVING EFFECT TO THE PURCHASES. IN THIS REGARD, WE FIND SUPPORT AND GUIDANCE FROM THE JUDGMENT OF HON BLE GUJARAT HIGH COURT IN THE CASE OF PR.CIT VS. GUJARAT GAS COMPANY LTD. IN TAX APPEAL NO.90 OF 2017 VIDE ORDER DATED 07/02/2017, WHEREIN I T WAS HELD AS UNDER: - 3.03. NOW, SO FAR AS QUESTION NO. [B] I.E. WITH RESPECT TO ADDITION MADE BY THE A.O. ON ACCOUNT OF UNUTILIZED MODVAT / CENVAT CREDIT OF RS. 56,08,089/ - IS CONNECTED, IT IS REQUIRED TO BE NOTED THAT THE LEARNED TRIBUNAL HAS TAKEN NOTE THAT WITH RESPECT TO MODVAT RECEIVABLE ACCOUNT, THERE IS CORRESPONDING LESS DEBIT TO THE PURCHASE ACCOUNT AND HENCE TO THAT EXTENT THERE IS ALREADY INCOME OFFERED FOR TAX. IF THAT BE SO, THERE WAS NO QUESTION OF FU RTHER ADDING MODVAT / CENVAT CREDIT TO THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. UNDER THE CIRCUMSTANCES, WE SEE NO REASON TO INTERFERE WITH THE IMPUGNED JUDGEMENT AND ORDER PASSED BY THE LEARNED TRIBUNAL SO FAR AS CONFIRMING THE ORDER PAS SED BY THE LEARNED CIT(A) DELETING THE ADDITION MADE BY THE A.O. ON ACCOUNT OF UNUTILISED MODVAT / CENVAT CREDIT OF RS. 56,08,089/ - . WE ARE IN COMPLETE AGREEMENT WITH THE VIEW TAKEN BY THE LEARNED TRIBUNAL. 9.3 THERE IS NO AMBIGUITY THAT THE ASSESSEE HAS BEEN FOLLOWING THE EXCLUSIVE METHOD OF ACCOUNTING. IN VIEW OF THE ABOVE, WE CONCUR WITH THE VIEW OF THE LD. CIT(A) AND ACCORDINGLY DECLINE TO INTERFERE IN HIS ORDER. HENCE, THE GROUND OF APPEAL OF THE REVENUE I S DISMISSED . 10 . IN THE RESULT, THE APPEAL FILED BY THE R EVENUE IS DISMISSED WHEREAS THE CO FILED BY THE ASSESSEE IS ALLOWED. O RDER PRONOUNCED IN THE COURT ON 25/09/ 2019 AT AHMEDABAD. - SD - - SD - (MS MADHUMITA ROY ) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (TRUE COPY) A HMEDABAD; DATED 25/09 /2019 MANISH