GANESH BENZOPLAST LTD., MUMBAI V. PRINCIPAL COMMISSIONER OF INCOME TAX -1, MUMBAI

ITA 2047/MUM/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1791 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2009-2010
• Appeal Filed On: 05-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LAXMI VARA PRASAD GUDE
• Keywords: Revision of order; Depreciation; Capital receipt; Unabsorbed depreciation; Reassessment proceedings; Set aside
• Section: 43B; 143(3); 43; 32; 148; 263; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO.2047/M/2019 ASSESSMENT YEAR: 2009-10 M/S. GANESH BENZOPLAST LTD., 1 ST FLOOR, DINA BLDG., 53, M.K. ROAD, MARINE LINES, MUMBAI 400 020 PAN: AAACG1259J VS. PR. CIT-1, AAYAKAR BHAVAN, MUMBAI - 400020 (APPELLANT) (R ESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI HARIDAS BHAT, C.A. REVENUE BY : SHRI LAXMI VARA PRASAD GUDE , D.R. DATE OF HEARING : 15.07.2019 DATE OF PRONOUNCEMENT : 11.09.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 25.03.2019 OF THE PR. COMMI SSIONER OF INCOME TAX [HEREINAFTER REFERRED TO AS THE PR. CIT] RELEVANT TO ASSESSMENT YEAR 2009-10. 2. THE VARIOUS GROUNDS RAISED BY THE ASSESSEE ARE A S UNDER: 1. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED PR. CIT WAS NOT JUSTIFIED IN PASSING ORDER UNDER SECTION 263 OF THE ACT, 1961. 2. THE PR. CIT FAILED TO APPRECIATE THAT:- A) THE AO HAD MADE MEANINGFUL ENQUIRY IN ALL ASPECT S OF OTS AND TREATMENT IN BOOKS BEFORE MAKING THE ADDITION DURING THE ASSE SSMENT U/S 143(3) R.W.S. 147 OF THE ACT, SINCE THE REASON FOR THAT ASSESSMEN T WAS THE SAME OTS MATTER. ITA NO.2047/M/2019 M/S. GANESH BENZOPLAST LTD. 2 B) DEPRECIATION AS PER INCOME TAX ACT IS DIFFERENT FROM DEPRECIATION AS PER BOOKS COMPUTED AS PER COMPANIES ACT AND BOTH ARE IN DEPENDENT OF EACH OTHER. C) INCOME TAX ACT DOES NOT REQUIRE ANY ADJUSTMENT TO THE BLOCK OF ASSETS ON ACCOUNT OF CESSATION OF LIABILITY DUE TO REVERSAL O F LOAN UNDER OTS FOR CALCULATING DEPRECIATION. D) WAIVER OF LOAN IS NOT TAXABLE AS A REMISSION OF LIABILITY UNDER SECTION 41 (1) OF THE IT ACT SINCE IT IS CAPITAL IN NATURE AND NOT CLAIMED AS EXPENDITURE ANY TIME. HON'BLE SUPREME COURT IN THEIR LATEST JUD GEMENT OF MAHINDRA AND MAHINDRA HAS UPHELD THE SAME. E) THE ASSESSEE IS REGISTERED UNDER BIFR AND THE FI NAL SANCTIONED SCHEME OF BIFR WAS APPROVED BY HON'BLE DELHI HIGH COURT, AND DUE TO WHICH THERE CANNOT BE ANY INCOME TAXABLE U/S 41(1) OF THE IT AC T. 3. THE APPELLANT PRAYS THAT THE ORDER PASSED U/S 2 63 OF THE ACT MAY PLEASE BE ANNULLED. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 3. THE ONLY ISSUE RAISED BY THE ASSESSEE IS AGAINST THE REVISIONARY ORDER PASSED UNDER SECTION 263 OF THE I NCOME TAX ACT BY PR. CIT WITHOUT JURISDICTION ON THE GROUND T HAT THE WAIVER OF LOAN IS NOT TAXABLE AS REMISSION OF LIABILITY UN DER SECTION 41(1) OF THE ACT AS THE LOAN WAS OF THE CAPITAL IN NATURE AND NOT CLAIMED AS EXPLAINED AND HAS BEEN COVERED BY THE DE CISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. MAHIND RA & MAHINDRA LTD. (2018) 404 ITR 001 (SC) AND ALSO THE FACT THAT THE ISSUE SOUGHT TO BE RAISED BY THE PR. CIT HAS BEEN E XAMINED BY THE AO IN THE REASSESSMENT PROCEEDINGS UNDER SECTIO N 147 READ WITH SECTION 148 OF THE ACT BY ASKING SPECIFIC QUE RY DURING ASSESSMENT PROCEEDINGS AND ASSESSEE HAS FILED ALL T HE NECESSARY DETAILS IN RESPONSE THERETO WHICH WAS DULY CONSIDER ED BY THE AO AND THEN THE ASSESSMENT WAS FRAMED. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED T HE RETURN OF INCOME ON 29.09.2009 DECLARING A LOSS OF RS.13,09,7 2,199/-. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) R .W.S.147 OF ITA NO.2047/M/2019 M/S. GANESH BENZOPLAST LTD. 3 THE ACT AT 26.02.2004 ASSESSING THE LOSS AT RS.13,1 5,59,890/-. THEREAFTER, THE AO RECEIVED INFORMATION FROM DGIT I NVESTIGATION, MUMBAI THAT ASSESSEE HAS BEEN GIVEN ONE TIME SETTLE MENT (HEREINAFTER CALLED OTS) OF RS.841.05 BY CANARA BAN K. THEREAFTER, THE CASE OF THE ASSESSEE WAS REOPENED O N THE GROUND THAT ASSESSEE HAS NO MORE LIABILITY OF LOAN PAYABLE TO CANARA BANK AND THEREFORE THE AMOUNT WAIVED CONSTITUTED INCOME OF THE ASSESSEE WHICH HAS NOT BEEN OFFERED TO THE INC OME TAX AND ESCAPED ASSESSMENT ACCORDINGLY. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) READ WITH SECTION 14 7 OF THE ACT ON 26.12.2016 DETERMINING THE TOTAL LOSS AT RS.6,94 ,63,609/- AS AGAINST THE RETURN LOSS OF RS.13,09,72,199/- AFTER MAKING ADDITION OF RS.2,92,39,200/- ON ACCOUNT OF PROFIT R ESULTING FROM ONE TIME SETTLEMENT WITH CANARA BANK AND SBI AND RS.3,22,69,390/- ON ACCOUNT OF DISALLOWANCE OF EXPE NSES CLAIMED UNDER SECTION 43B OF THE ACT. THE LD. PR. CIT OBSERVED FROM THE RECORDS RELATING TO THE ASSESSMENTS MADE ON 26.12.2016 UNDER SECTION 143(3) READ WITH SECTION 1 47 OF THE ACT THAT WHILE COMPLETING THE ASSESSMENT, THE AO HA S FAILED TO DISALLOW THE DEPRECIATION OF RS.58.37 CRORES ON ACC OUNT OF DECAPITALIZATION IN CONSEQUENCE OF WAIVER OF LOANS BY THE BANKS. THE LD. PR. CIT OBSERVED THAT SINCE THERE IS A CESS ATION OF LIABILITY IN RESPECT OF CAPITALIZED INTEREST OF RS. 58.37 CRORES DUE TO OTS, THE SAME AMOUNT WAS REQUIRED TO BE REDUCED FROM WDV OF PLANT AND MACHINERY SO AS TO AVOID THE EXCESS DE PRECIATION ON THE ABOVE AMOUNT. THE LD. PR. CIT CAME TO THE CONC LUSION THAT THIS HAS RESULTED IN THE UNDER ASSESSMENT OF RS.58. 37 CRORES BY WAY OF ALLOWING IRREGULAR AND WRONG DEPRECIATION WI TH CONSEQUENT SHORT LEVY OF TAX OF RS.18.84 CRORES AND ACCORDINGLY ITA NO.2047/M/2019 M/S. GANESH BENZOPLAST LTD. 4 THE ASSESSMENT WAS PROPOSED TO REVISED BY SHOW CAU SE NOTICE ISSUED UNDER SECTION 263 OF THE ACT DATED 12.12.20 18 CALLING UPON THE ASSESSEE TO SHOW CAUSE AS TO WHY THE ASSE SSMENT ORDER DATED 26.12.2016 SHOULD NOT BE REVISED. THE ASSESSEE REPLIED THE SAID SHOW CAUSE NOTICE BY SUBMITTING AS UNDER: ASSESSEE HAS STATED THAT IT IS A PUBLIC LIMITED CO MPANY AND UNDER BIFR SINCE YEAR 2004-05.WITH REGARDS TO DISALLOWING DEPRECIATION OF RS. 58.37 CRORE ON ACCOUNT OF DECAPITALISATION IN CONSEQUENCE TO WAIVER OF LOAN I T IS SUBMITTED THAT THE INCOME TAX DEPRECIATION IS INDEPENDENT OF THE B OOKS DEPRECIATION WHICH IS GOVERNED BY THE BLOCK OF ASSETS METHOD. 'WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS' IS EXPL AINED IN CLAUSE*(C) OF SUB- SECTION* (6) OF SECTION 43. WHICH SPECIFIES WHICH ARE THE ITEMS TO BE REDUCED FROM THE BLOCK OF ASSETS. (C) IN THE CASE OF ANY BLOCK OF ASSETS, - (I) IN RESPECT OF ANY PREVIOUS YEAR RELEVANT TO THE ASS ESSMENT YEAR COMMENCING ON THE 1 ST DAY OF APRIL, 1988, THE AGGREGATE OF THE WRITTEN DOWN VALUES OF ALL THE ASSETS FALLING WITHI N THAT BLOCK OF ASSETS AT THE BEGINNING OF THE PREVIOUS YEAR AND AD JUSTED, - (A) BY THE INCREASE BY THE ACTUAL COST OF ANY ASSET FALLING WITHIN THAT BLOCK, ACQUIRED DURING THE PREVIOUS YEAR; (B) BY THE REDUCTION OF THE MONEYS PAYABLE IN RESPE CT OF ANY ASSET FALLING WITHIN THAT BLOCK, WHICH IS SOLD OR DISCARD ED OR DEMOLISHED OR DESTROYED DURING THAT PREVIOUS YEAR TOGETHER WITH T HE AMOUNT OF THE SCRAP VALUE, IF ANY, SO, HOWEVER, THAT THE AMOUNT O F SUCH REDUCTION DOES NOT EXCEED THE WRITTEN DOWN VALUE AS SO INCREA SED; AND (C) IN THE CASE OF A SLUMP SALE, DECREASE BY THE AC TUAL COST OF THE ASSET FALLING WITHIN THAT BLOCK AS REDUCED (A) BY THE AMOUNT OF DEPRECIATION ACTUALLY ALLOWED TO HIM UNDER THIS ACT OR UNDER THE CORRESPONDING PROVISION S OF THE INDIAN INCOME-TAX ACT, 1922 (11 OF 1922) IN RESPECT OF ANY PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMME NCING BEFORE THE 7 TH DAY OF APRIL 1988; AND (B) BY THE AMOUNT OF DEPRECIATION THAT WOULD HAVE B EEN ALLOWABLE TO THE ASSESSEE FOR ANY ASSESSMENT YEAR COMMENCING ON OR AFTER THE 1 ST DAY OF APRIL 1988 AS IF THE ASSET WAS THE ONLY ASSET IN THE RELEVANT BLOCK OF A SSETS, ITA NO.2047/M/2019 M/S. GANESH BENZOPLAST LTD. 5 SO, HOWEVER, THAT THE AMOUNT OF SUCH DECREASE DOES NOT EXCEED THE WRITTEN DOWN VALUE ;0THER THAN THE ABOVE MENTIONED SECTION ONLY OTHER SECTION WHICH CALLS FOR THE ADJUSTMENT IN THE WDV IS SECTIO N 43A WITH RESPECT THE FOREIGN EXCHANGE LOSS/GAIN. CAPITALIZED INTEREST TO FIXED ASSETS WHICH LATER ON WAIVED AND THEN DECAPITALIZED CANNOT BE TREATED AS WAIVER OF TRADIN G LIABILITY. DEPRECIATION CLAIMED ON SUCH CAPITALIZED INTEREST IS NOT ANY LOS S OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY. IT'S A DEPRECIATION ALLOWANCE FOR DOING THE CAPITAL EXPANSION AND NOT THE DEPRECIATIO N EXPENSES AND PERTAINS TO FIXED ASSETS ACCOUNT AND NOT OF TRADING LIABILIT Y AT ALL. FURTHER, THE SAID WAIVERS ARE WAIVER OF INTEREST WHICH WERE CAPITALIZ ED, ACCORDINGLY, THERE IS NO NEED TO REDUCE THE BLOCK OF FIXED ASSETS ON ACCO UNT OF RECAPITALIZATION. FURTHER, THE DEPRECIATION IS AN ALLOWANCE, WHICH IS GOVERNED BY THE INCOME TAX ACT. A STATUTORY ALLOWANCE UNDER SECTION 32 IS NOT AN EXPENDITURE. HON'BLE SUPREME COURT OF INDIA IN THE MATTER OF NEC TAR BEVERAGES PVT. LTD. VS. DCIT (2009) 314 ITR 314 CIVIL APPEAL NO.5291 OF 2004 CLEARLY HELD THAT DEPRECIATION IS NEITHER A LOSS, NOR AN EXPENDITURE, NOR A TRADING LIABILITY, REFERRED TO IN SECTION 41(1). THE ACT DOES NOT PROVIDE FOR REVERSAL OF DEPRECIATI ON. THE ADJUSTMENT OF COST AS PRESCRIBED BY THE LAW WAS DONE BY THE ASSES SEE AND THE SAME WERE ACCEPTED BY THE AO. THE ADJUSTMENT OF THE COST IS P RESCRIBED IN SECTION 43 OF THE ACT, WHICH DOES NOT INCLUDE THE INTEREST PAR T. THE DECAPITALIZATION IS A BOOK ENTRY AND DOES NOT W ARRANT FOR ANY FURTHER ADJUSTMENT IN THE DEPRECIATION WORKING. THE SAID EN TRY DOES NOT AFFECT THE BLOCK OF ASSETS. THE SAID ENTRY OF DECAPITALIZATION CAN BE COMPARED WITH THE REVALUATION OF THE ASSETS OR DEPRECIATION ON THE RE VALUED ASSETS, WHEREIN THOUGH THERE ARE ENTRIES IN THE BOOKS OF ACCOUNTS T HERE ARE NO ADJUSTMENTS ARE CALLED FOR IN THE BLOCK OF ASSETS. THE DEPRECIA TION IS GOVERNED BY THE RULE OF BLOCK OF ASSETS, WHEREIN THE ADDITIONS AND DELET ION FROM THE BLOCK ARE WELL DEFINED. THE CURRENT ENTRY OF DECAPITALIZATION DOES NOT GET COVERED IN THE BLOCK ADJUSTMENTS. THE CONCEPT OF BLOCK OF ASSE TS HAS SEPARATED THE BOOK OF ACCOUNTS AND DEPRECIATION CLAIM. THIS FACT WAS WELL UNDERSTOOD BY THE AO AND HE DID NOT MAKE ANY ADJUSTMENTS IN THE B LOCK FOR THE INTEREST DECAPITALIZATION. THE ADJUSTMENT OF RS.58.37 CRORES IN THE BOOKS DOES NOT FALL IN ANY OF THE ABOVE CATEGORIES. SINCE, THE BLOCK OF ASSETS ARE IN DEPENDENT OF THE BOOK VALUE OF ASSETS, THE SAID ADJUSTMENT IS NOT MADE IN THE WDV FOR INCOME TAX. THE SAME IS MENTIONED IN THE NOTES AND EXPLAINED DU RING THE ASSESSMENT U/S. 147. THE AO HAS MADE THE MEANINGFUL ENQUIRY AN D AGREED WITH THE SITUATION AND DID NOT MAKE ANY FURTHER ADDITIONS/AD JUSTMENTS. WE FURTHER REITERATE THAT THERE IS NO LOSS OF REVENUE IN THIS ENTRY OF DECAPITALIZATION AS COMPANY HAS ASSESSED INCOME TAX LOSSES / UNABSORBED DEPRECIATION OF MORE THAN 150 CRAS ON THE SAID DATE. ITA NO.2047/M/2019 M/S. GANESH BENZOPLAST LTD. 6 WITH REGARD TO YOUR OBSERVATION THAT THE CESSATION OF LIABILITY ON ACCOUNT OF CAPITALIZED INTEREST NEEDS TO BE REDUCED FROM THE W DV, WE SUBMIT THAT, AS MENTIONED IN YOUR OBSERVATIONS IT IS THE CAPITALIZE D INTEREST. ANY CAPITAL RECEIPT ON ACCOUNT OF OTS IS NOT A REVENUE ITEM AS CLARIFIED IN THE LATEST JUDGMENT OF SUPREME COURT IN THE CASE OF MAHINDRA & MAHINDRA LTD. 5. THE LD. PR. CIT REJECTING THE CONTENTIONS OF THE ASSESSEE CAME TO THE CONCLUSION THAT WAIVER OF INTEREST IS O BVIOUSLY IN THE NATURE OF COMPENSATION MONEY AND IS TO BE REDUCED FROM BLOCK OF ASSETS AS THE INTEREST WAS CAPITALIZED IN THE FI XED ASSETS. THE LD. PR. CIT NOTED THAT AO HAS NOT EXAMINED THIS ISS UE DURING THE RE-ASSESSMENT PROCEEDINGS. THE LD PR CIT FINA LLY, BY EXERCISING THE REVISIONARY POWERS UNDER SECTION 263 OF THE ACT ,SET ASIDE THE ORDER FRAMED UNDER SECTION 143(3) RE AD WITH SECTION 147 OF THE ACT DECIDED ON 26.12.2016 ON THE ISSUE OF EXCESSIVE AND ERRONEOUS DEPRECIATION ALLOWED BY THE AO. THE LD. PR. CIT, HOWEVER, NOT REACHED ANY CATEGORICAL F INDING THAT THE ORDER OF THE AO IS ERRONEOUS IN SO FAR AS PREJU DICIAL TO THE INTEREST OF THE REVENUE. THE LD. A.R. VEHEMENTLY S UBMITTED BEFORE US THAT IT IS TRUE THAT THE SAID TERM LOANS WERE TAKEN FOR THE CAPITAL PURPOSES AND ASSESSEE REACHED ONE TIME SETTLEMENT WITH THESE BANKERS AND INTEREST OF RS.58.37 CRORES WAS WAIVED OFF. THE LD. A.R. SUBMITTED THAT ACCORDING TO THE LD. PR. CIT, THE INTEREST WAS CAPITALIZED IN THE FIXED ASSETS AND TH E ASSESSEE HAS CLAIMED DEPRECIATION ON THE INCREASED COST OF THE A SSETS RESULTING INTO EXCESS ALLOWANCE OF DEPRECIATION TO THE EXTENT WAIVER OF INTEREST BY THE BANKERS IN THE OTS SCHEME . THE LD. A.R., HOWEVER, SUBMITTED THAT THE DEPRECIATION IS A REDUCTION IN THE VALUE OF ASSETS OVER A PERIOD OF TIME DUE TO WE AR AND TEAR AND IS NOT AN EXPENSE. THE LD. A.R. SUBMITTED THAT THE CAPITALIZED INTEREST IN THE FIXED ASSETS WHICH WAS LATER ON WAIVED ITA NO.2047/M/2019 M/S. GANESH BENZOPLAST LTD. 7 OFF. THE LS AR ARGUED THAT DE-CAPITALIZED INTEREST CAN NOT BE TREATED AS WAIVER OF TRADING LIABILITY. THE LD. A. R. SUBMITTED THAT DEPRECIATION CLAIMED ON SUCH CAPITALIZED INTER EST IS NOT ANY LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF S UCH TRADING LIABILITY. IT IS A DEPRECIATION ALLOWANCE FOR DOIN G CAPITAL EXPANSION AND NOT EXPENSES IN ANY WAY AND PERTAINED TO FIXED ASSETS ACCOUNTS AND NOT TRADING LIABILITY AT ALL AN D THEREFORE THERE IS NO NEED TO REDUCE THE BLOCK OF FIXED ASSET S ON ACCOUNT OF DE-CAPITALIZATION. THE LD. A.R. SUBMITTED THAT THE DEPRECIATION IS A STATUTORY ALLOWANCE GOVERNED BY THE PROVISION OF SECTION 32 OF THE ACT AND IS NOT AN EXPENDITURE AND THUS THE P R CIT HAS NO JURISDICTION U/S 263 TO SET ASIDE THE ASSESSMENT. THE LD. A.R. SUBMITTED THAT THE HONBLE SUPREME COURT IN THE CAS E OF NECTAR BEVERAGES PVT. LTD. VS. DCIT (2009) 314 ITR 314 CIV IL APPEAL NO.5291 OF 2004 HELD THAT DEPRECIATION IS NEITHER A LOSS NOR AN EXPENDITURE NOR A TRADING LIABILITY AS REFERRED TO IN SECTION 41(1) OF THE ACT. THE LD. A.R. SUBMITTED THAT DE-CAPITAL IZATION IS A BOOK ENTRY AND DOES NOT WARRANT ANY FURTHER ADJUSTM ENT IN THE DEPRECIATION CALCULATION AS IT DOES NOT AFFECT THE BLOCK OF ASSETS. THE LD. A.R. IN DEFENCE OF HIS ARGUMENT RELIED ON T HE SERIES OF DECISIONS. THE LD. A.R. RELIED ON THE DECISION OF APEX COURT IN THE CASE OF CIT VS. MAHINDRA & MAHINDRA LTD. (2018) 404 ITR 001 (SC). THE LD. A.R. ALSO SUBMITTED THAT IN THE REASSESSMENT PROCEEDINGS THE AO HAS SPECIFICALLY REOPENED THE AS SESSMENT OF THE ASSESSEE AFTER RECEIVING INFORMATION FROM THE DGIT INVESTIGATION THAT ASSESSEE HAS RECEIVED ONE TIME S ETTLEMENT OF LOAN FROM CANARA BANK WHICH WAS SPECIFICALLY RAISED BY THE AO IN THE NOTICE ISSUED TO THE ASSESSEE ON 22.09.2016 CALLING FOR THE DETAILS AND INFORMATION QUA ONE TIME SETTLEMENT. T HEREAFTER, THE ITA NO.2047/M/2019 M/S. GANESH BENZOPLAST LTD. 8 SAID WAS REPLIED COMPREHENSIVELY BY THE ASSESSEE. THE LD. A.R. SUBMITTED THAT THE AO AFTER CONSIDERING THE REPLY O F THE ASSESSEE FRAMED THE ASSESSMENT UNDER SECTION 143(3) READ WIT H SECTION 147 OF THE ACT DATED 26.12.2016 WHEREIN THESE ISSUE S WERE SPECIFICALLY DEALT WITH IN THE ASSESSMENT ORDER AND ADDITION WAS MADE TOWARDS PROFIT OF OTS ON CANARA BANK RS.80,63, 686/- AND PROFIT ON OTS WITH SBI OF RS.2,11,75,714/-. THE LD . A.R. SUBMITTED THAT A SPECIFIC QUERY RAISED BY THE AO AN D RESPONDED BY THE ASSESSEE AND THE AO AFTER DUE CONSIDERATION AND APPLICATION OF MIND FRAMED THE ASSESSMENT. THEREFO RE, THE ORDER PASSED BY THE PR COMMISSIONER EXERCISING THE REVISI ONARY JURISDICTION IS BAD IN LAW. THE LD. A.R. RELIED ON A SERIES OF DECISIONS IN DEFENCE OF HIS ARGUMENTS NAMELY; 1. CIT VS. MAHINDRA & MAHINDRA LTD. (2018) 101 CCH 0194 2. CIT VS. GABRIAL INDIA LTD. (1993) 203 ITR 108 (B OM) 3. CIT VS. GANPAT RAM BISHNOI (2008) 296 ITR 292 ( RAJ.) 4. GIRDHAR LAL B. ROHRA VS. CIT (2004) 86 TTJ 0177 5. MOIL LTD. VS. CIT 396 ITR 0244 (BOM) 6. GRASIM INDUSTRIES LTD. VS. CIT (2010) 78 CCH 01 08 MUM HC (2010) 229 CTR 0347 : (2010) 188 TAXMAN 0327 7. CIT VS. FINE JEWELLERY (INDIA) LTD. (2015) 372 I TR 0303 8. CIT VS. MAX INDIA LTD. (2007) 295 ITR 0282 9. CIT VS. DEVELOPMENT CREDIT BANK LTD. (2010) 78 C CH 0230 MUM HC (2010) 40 DTR 0061 : (2010) 323 ITR 020 6 : (2011) 196 TAXMAN 0329 10. CIT VS. FINE JEWELLERY (INDIA) LTD. (2015) 92 C CH 0045 MUM HC (2015) 372 ITR 0303 (BOM). 11. STERLING CONSTRUCTION AND INVESTMENTS VS. ACIT (INVESTIGATION) (2015) 93 CCH 0139 MUMHC (2015) 277 CTR 0202 (BOM) 12. CIT VS. KIRAN HIRJI SHAH (2014) 90 CCH 0507 MUM HC (2015) 231 TAXMAN 0670 (BOMBAY) FINALLY, THE LD. A.R. SUBMITTED THAT THE ORDER BY THE LD. PR. CIT HAS NOWHERE RECORDED A CLEAR CUT FINDING THAT O RDER OF THE ITA NO.2047/M/2019 M/S. GANESH BENZOPLAST LTD. 9 AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE WHICH ARE THE PRE-CONDITIONS TO BE SATISFIED FOR RE SORTING THE JURISDICTION UNDER SECTION 263 OF THE ACT. THE LD. A.R. FINALLY PRAYED THAT IN VIEW OF THE AFORESAID SUBMISSIONS, T HE ORDER OF LD. PR. CIT MAY KINDLY BE QUASHED. 6. THE LD. D.R., ON THE OTHER HAND, RELIED HEAVILY WITH ORDER OF LD. PR. CIT BY SUBMITTING THAT JURISDICTION WAS ORI GINALLY EXERCISED BY THE LD. PR. CIT UPON EXAMINATION OF AS SESSMENT FRAMED BY THE AO DATED 26.12.2016 WHEREIN THE AO HA S FAILED TO DISALLOW THE DEPRECIATION OF RS.58.37 CRORE ON ACCO UNT OF DE- CAPITALIZATION OF INTEREST CONSEQUENT TO WAIVER OF LOAN. THE LD. D.R., THEREFORE, PRAYED THAT THE ORDER OF LD. PR. C IT MAY KINDLY BE AFFIRMED AS THE ORDER OF AO IS ERRONEOUS AND PRE JUDICIAL TO THE INTEREST OF THE REVENUE TO THIS EXTENT. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD INCLUDING THE IM PUGNED ORDER. WE OBSERVE THAT IN THIS CASE UNDISPUTEDLY T HE ASSESSEE HAS REACHED OTS WITH CANARA BANK AND STATE BANK OF INDIA. WE FURTHER FIND THAT THE ASSESSMENT ALREADY FRAMED BY THE AO VIDE ORDER DATED 26.02.2014 UNDER SECTION 143(3) RE AD WITH SECTION 147 WAS REOPENED BY THE AO. AFTER PERUSAL OF THE REASONS RECORDED WE OBSERVE THAT THE ASSESSMENT WAS REOPENED FOR THE REASON THAT THE PROFIT ON OTS SCHEME HAS ES CAPED ASSESSMENT AND IN THE REASSESSMENT PROCEEDINGS THE ISSUE WAS SPECIFICALLY RAISED BY THE AO AND WAS REPLIED BY TH E AO. THE AO, THEREAFTER, AFTER CONSIDERING THE REPLY OF THE ASSESSEE FRAMED THE ASSESSMENT AND MADE THE ADDITION TO THE INCOME OF THE ASSESSEE TOWARDS PROFIT OF RS.2,92,39,200/- ON OTS WITH CANARA ITA NO.2047/M/2019 M/S. GANESH BENZOPLAST LTD. 10 BANK AND STATE BANK OF INDIA AS STATED (SUPRA) AND TOTAL LOSS WAS ASSESSED AT RS.6,94,63,609/- AS AGAINST THE RET URN LOSS OF RS.13,09,72,199/-. NOW THE ISSUE BEFORE US IS WHET HER THE ISSUE RAISED BY THE LD. PR. CIT BY EXERCISING THE R EVISIONARY JURISDICTION U/S 263 OF THE ACT THAT AO HAS FAILED TO DISALLOW DEPRECIATION OF RS.58.37 CRORES ON ACCOUNT OF DECAP ITALISATION IN CONSEQUENCE OF WAIVER OF LOAN IS CORRECT OR NOT. I N THIS CASE, WE OBSERVE THAT THE LOANS WERE TAKEN FOR THE PURPOSE O F FIXED ASSETS AND UP TO A SPECIFIED DATE THE INTEREST ON THE LOAN S WAS CAPITALIZED AND ASSESSEE HAS CLAIMED DEPRECIATION O VER THE YEARS ON THE COST OF FIXED ASSETS. NOW THE ISSUE BEFORE US IS WHETHER THE DEPRECIATION CLAIMED ON THE FIXED ASSETS FALLS WITHIN THE AMBIT OF SECTION 41(1) OR NOT. AFTER CONSIDERING T HE OVERALL FACTS OF THE CASE, WE ARE OF THE VIEW THAT THE PROVISIONS OF SECTION 41(1) OF THE ACT ARE NOT APPLICABLE TO THE PRESENT CASE A S THERE IS NO PROFIT ON CESSATION OF LIABILITY UPON OTS. IN THIS CASE THE ASSESSEE HAS CLAIMED DEPRECIATION WHICH IS ALLOWABL E UNDER THE PROVISIONS OF SECTION 32 AND IS NOT AN EXPENSE BUT A WEAR AND TEAR RESULTING FROM THE AGING AND USE OF THE ASSETS . THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE DECISION OF THE APEX COURT IN THE CASE OF CIT VS. MAHINDRA & MAHINDRA LT D. (SUPRA) WHEREIN THE HONBLE SUPREME COURT HAS HELD THAT WAI VER OF SAID LOAN RESULTED INTO CESSATION OF LIABILITY OTHER THA N THE TRADING LIABILITY AND THUS NOT COVERED BY THE PROVISIONS OF SECTION 41(1). THE APEX COURT HELD THAT THE DEDUCTION CLAIMED BY T HE ASSESSEE WAS ON ACCOUNT OF DEPRECIATION OF MACHINES AND NOT ON INTEREST PAID ON IT. ACCORDINGLY, APEX COURT HELD THAT THE WAIVER OF LOAN BY THE CREDITOR IS NOT TAXABLE AS PERQUISITE UNDER SECTION 28(IV) OF THE ACT NOR TAXABLE AS REMISSION OF LIABILITY UN DER SECTION ITA NO.2047/M/2019 M/S. GANESH BENZOPLAST LTD. 11 41(1) OF THE ACT. WE ARE, THEREFORE, OF THE CONSID ERED VIEW THAT THE WAIVER OF LOAN BY THE BANKS WOULD NOT RESULT IN TO ANY PROFIT TO BE ASSESSED UNDER SECTION 28(IV) OR AS REMISSION OF LIABILITY UNDER SECTION 41(1) OF THE ACT AS IN THIS CASE THE ASSESSEE HAS CLAIMED DEPRECIATION ON FIXED ASSETS AND NOT INTER EST PAID BY IT AND THUS WAIVER OF LOAN AMOUNTED TO CESSATION OF LI ABILITY OTHER THAN TRADING LIABILITY. SO ON THIS COUNT, THE EXER CISE OF REVISIONARY JURISDICTION OF THE PR. CIT IS WRONG AN D AGAINST THE PROVISION OF THE ACT. EVEN OTHERWISE ,WE NOTICE TH AT THE ISSUE STOOD EXAMINED IN DEPTH BY THE AO IN THE REASSESSME NT PROCEEDINGS AND AO WAS SATISFIED WITH THE EXPLANATI ON OF THE ASSESSEE AND THUS THE EXERCISE OF REVISIONARY JURIS DICTION IS NOT JUSTIFIED. THE CASE OF THE ASSESSEE IS ALSO COVERE D BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F CIT VS. GABRIAL INDIA LTD. (SUPRA) WHEREIN THE HONBLE BOMB AY HIGH COURT HAS HELD WHERE ITO HAS CONDUCTED ENQUIRY AND ASSESSEE HAS GIVEN DETAILED SUBMISSION AND ITO AFTER BEING S ATISFIED WITH THE EXPLANATION OF THE ASSESSEE PASSED THE ASSESSME NT ORDER ,THEN CIT CAN NOT SET ASIDE THE SAME AND DIRECT THE AO TO REEXAMINE THE FACTS. SIMILARLY, IN THE CASE OF MOI L LTD. VS. CIT THE HONBLE BOMBAY HIGH COURT HAS HELD THAT WHERE T HE AO IS SATISFIED ABOUT THE ADMISSIBILITY OF CLAIM ON THE B ASIS OF MATERIALS AND DETAILS SUPPLIED BY THE ASSESSEE THEN THE PR. CIT CAN NOT EXERCISE THE JURISDICTION UNDER SECTION 263 OF THE ACT. IN VIEW OF THE ABOVE FACTS AND RATIO LAID DOWN BY T HE HONBLE BOMBAY HIGH COURT AND JURISDICTIONAL HIGH COURT, T HE ORDER OF PR. CIT IS NOT SUSTAINABLE. ACCORDINGLY, THE ORDER PASSED UNDER SECTION 263 IS QUASHED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ITA NO.2047/M/2019 M/S. GANESH BENZOPLAST LTD. 12 ORDER PRONOUNCED IN THE OPEN COURT ON 11.09.2019. SD/- SD/- ( AMARJIT SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 11.09.2019. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASS TT. REGISTRAR, ITAT, MUMBAI.