Ashok Leyland Limited, CHENNAI V. DCIT, CHENNAI

ITA 2086/CHNY/2010

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8018 (ITAT-CHENNAI)
• Duration Of Justice: 5 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 19-11-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 08-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M M BHUSARI IRS
• Keywords: Depreciation; Transfer pricing; Business expenditure; International transaction; Additional depreciation; Earning of tax free income; Period of limitation; Time period of passing order
• Section: 92C; 43B; 92D; 154; 2

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , . ! ' , #'$ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A. NO.2086/MDS/2010 # % &% / ASSESSMENT YEAR :2006-07 ASHOK LEYLAND LIMITED, NO.1, SARDAR PATEL ROD, GUINDY, CHENNAI 600 032. VS. THE DEPUTY COMMISSIONER OF INCOME TAX, LARGE TAX PAYER UNIT, CHENNAI 600 101. [PAN AAACA 4651L ] ( / APPELLANT) ( /RESPONDENT) '( ) * / APPELLANT BY : SHRI. VIKRAM VIJAYARAGHAVAN, ADVOCATE +,'( ) * /RESPONDENT BY : SHRI. M.M. BHUSARI, IRS, CIT. ! ) - / DATE OF HEARING : 19-11-2015 ./& ) - / DATE OF PRONOUNCEMENT : 16-02-2016 / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AG AINST ORDER OF THE DISPUTE RESOLUTION PANEL (DRP) CHENNAI IN F.NO.DRP/CHENNAI/SECTT/038/2010-11, DATED 28.09.201 0 PASSED U/S. 144C(5) R.W.S.144C(8) AND ASSESSMENT ORDER DATED 0 5.10.2010 ITA NO. 2086/MDS/2010 :- 2 -: PASSED U/S.143(3) R.W.S. 144C AND 250 FOR THE ASSES SMENT YEAR 2006- 2007 OF THE INCOME TAX ACT, 1961 (HEREIN AFTER R EFERRED TO AS THE ACT). 2. THE ASSESSEE HAS RAISED VARIOUS GROUNDS BEFORE THE TRIBUNAL AND DEALT ON THE ISSUE AS UNDER. 3. THE BRIEF FACTS OF THE CASE THAT THE ASSESSEE IS I N THE BUSINESS OF MANUFACTURING OF COMMERCIAL VEHICLES, I NDUSTRIAL AND MARINE ENGINES SPARES AND CASTINGS. FOR THE ASSESSM ENT YEAR 2006- 2007, THE ASSESSEE FILED RETURN OF INCOME ON 27.11. 2006 WITH TOTAL INCOME OF >343,82,08,456/-. SUBSEQUENTLY, THE ASS ESSEE HAS FILED REVISED E-RETURN OF INCOME ON 31.10.2007 DECLARING TOTAL INCOME OF >338,90,27,722/-. THE RETURN OF INCOME WAS PROCESS ED UNDER THE PROVISIONS OF SEC.143(1) OF THE ACT. SUBSEQUENTLY CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTICE U/S.143(2) WAS ISSUED. IN COMPLIANCE TO THE NOTICE, THE LD. AUTHORISED REPRES ENTATIVE OF THE ASSESSEE APPEARED ON VARIOUS DATES AND FILED INFORM ATION. THE LD. ASSESSING OFFICER FOUND THAT THE ASSESSEE IS HAVING INTERNATIONAL TRANSACTIONS WITH ASSOCIATED ENTERPRISE AND REFERR ED TO THE TRANSFER PRICING OFFICER (TPO). THE LD.TPO PASSED AN ORDER U/S.92CA(3) DATED 24.07.2009 AND THE LD. ASSESSING OFFICER FINALIZED DRAFT ASSESSMENT ORDER AND SERVED ON ASSESSEE. THE ASSESSEE OBJECT ED TO THE ITA NO. 2086/MDS/2010 :- 3 -: ADDITIONS OF ASSESSING OFFICER AND FILED OBJECTIONS BEFORE DRP AND AFTER CONSIDERING THE SUBMISSIONS AND OBJECTION DRP ORDER DATED 28.09.2010 AND AS THE DIRECTIONS OF DRP ASSESSING OFFICER COMPLETED ASSESSMENT. 4. THE FIRST GROUND RAISED BY THE ASSESSEE WITH REGAR D TO DISALLOWANCE OF ADDITIONAL DEPRECIATION CLAIMED U/S .32(1)(IIA) OF THE ACT >5,23,08,553/- PERTAINING TO ASSESSMENT YEAR 2005- 06. 4.1 BEFORE THE ASSESSING OFFICER, THE ASSESSEE SUBMITTE D THAT DEPRECATION WAS CLAIMED DURING THE YEAR AT THE RAT E OF 7.5% (BEFORE 50% DEPRECIATION) IN RESPECT OF SECOND HALF OF THE YEAR ON THE ADDITIONS TO PLANT AND MACHINERY IN THE ASSESSMENT YEAR 2005-06, THE LD. ASSESSING OFFICER CONSIDERED THE EXPLANATION AN D WRITTEN SUBMISSIONS FILED BY THE ASSESSEE OBSERVED AT PAGE NO.2 OF ORDER AS UNDER:- SECTION 32(IIA) USES THE EXPRESSION SHALL BE AL LOWED. SUCH VESTED RIGHTS CANNOT BE DIVESTED THOUGH SECOND PROVISO TO SECTION 32(1) RESTRICTS THE DEPRECIATION TO 50% AND IT DOES NOT PROHIBIT THAT THE BALANCE 50% WILL NOT BE ALLOWED IN THE SUCCEEDING YEAR. MOREOVER, AS PER THE FINANCE MINISTERS BUDGET SPEE CH ON 28 TH FEBRUARY, 2005, THE ALLOWANCE OF ADDITIONAL DEPRECIATION IS TO ENCOURAGE NEW INVESTMENTS AND N O CONDITION HAS BEEN PUT TO RESTRICT THE ALLOWANCE BA SED ON THE NUMBER OF DAYS OF USAGE OF ASSETS. ITA NO. 2086/MDS/2010 :- 4 -: HENCE, THE CLAIM OF ADDITIONAL DEPRECATION DURING T HE PREVIOUS YEAR ON THE ADDITIONS MADE DURING THE SECO ND HALF OF THE LAST ASSESSMENT YEAR 2005-06 IS AS PER LAW. THE SUBMISSIONS FILED BY THE ASSESSEE HAS BEEN CARE FULLY CONSIDERED AND THE SAME CANNOT BE ACCEPTED FOR THE FOLLOWING REASONS. AND THE LD. ASSESSING OFFICER MADE CALCULATIONS BASED ON OPENING AND CLOSING WRITTEN DOWN VALUE (WDV) OF THE ASSESSEE A ND CBDT CIRCULAR AND ALLEGED THAT ADDITIONAL DEPRECATION CAN BE CLA IMED ON NEW PLANT AND MACHINERY AND NOT ON ASSETS OF PREVIOUS YEAR. THE DRP CONFIRMED THE FINDINGS OF THE ASSESSING OFFICER. CO NSIDERING THE NATURE OF ASSETS, PROVISIONS OF LAW ON ADDITIONAL DEPRECAT ION, THE ASSESSING OFFICER HAS DISALLOWED CLAIM OF ADDITIONAL DEPRECIA TION >7,24,249/-. AGAINST THE ORDER OF ASSESSING OFFICER THE ASSESSEE FILED AN APPEAL BEFORE THE TRIBUNAL. 4.2. BEFORE TRIBUNAL, THE ASSESSEE HAS RAISED THE G ROUNDS THAT THE ASSESSING OFFICER IS NOT JUSTIFIED IN DISALLOWI NG ADDITIONAL DEPRECATION U./S.32(1)(IIA) OF THE ACT. THERE IS A RIGHT TO CLAIM ADDITIONAL DEPRECIATION FOR ASSETS ACQUIRED AFTER 3 1.03.2005. SINCE THE ASSESSEE HAS NOT CLAIMED FULL DEPRECIATION IN THE P REVIOUS YEAR ON ASSETS AND THE BALANCE TO BE CARRIED FORWARD FOR AL LOWING IN SUCCEEDING ITA NO. 2086/MDS/2010 :- 5 -: ASSESSMENT YEARS AND SUPPORTED HIS ARGUMENTS REFERR ING TO FINANCE MINISTER BUDGET SPEECH ON 28.02.2005 AND ALSO VE STED RIGHTS SHOULD BE FOR ADVANCING THE OBJECTIVE OF BENEFICIAL ENACTM ENT AND RELIED ON THE JUDICIAL DECISION OF M/S. BALAJI TEMPO LTD 196 ITR 188 (SC) AND ALSO MUMBAI TRIBUNAL DECISION OF M/S.GEETANJALI TRA DING AND INVESTMENTS VS. ITO IN ITA NOS.5428/MUM/2007 AND 17 37/MUM/2009 AND ARGUED VEHEMENTLY THAT THE PROVISIONS ARE VERY CLEAR AND THE ISSUE IS DIRECTLY COVERED BY THE DELHI TRIBUNAL DECISION IN DCIT VS. COSMOS FILMS LTD 13 ITR (TRIB) 340 (DELHI). 4.3 CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE RE LIED ON THE FINDINGS OF THE LOWER AUTHORITIES AND DRP AND OBJEC TED TO THE SUBMISSIONS THAT NO ADDITIONAL DEPRECIATION CAN BE CARRIED FORWARDED. 4.4 WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MAT ERIAL ON RECORD AND JUDICIAL DECISIONS CITED. THE LD. AUTHO RISED REPRESENTATIVE DREW ATTENTION TO THE PROVISIONS U/S.32(1)(IIA) OF THE ACT FOR CLAIM OF ADDITIONAL DEPRECIATION AND ALSO PROVISIONS OF LAW ON CARRY FORWARD. SINCE THE ASSET WAS PURCHASED DURING THE SECOND HAL F OF FINANCIAL YEAR 2004-05 AND ONLY 50% OF DEPRECIATION WAS ALLOWED AN D PLEADED FOR CARRY FORWARD OF BALANCE 50% TO BE CLAIMED IN THE A SSESSMENT YEAR ITA NO. 2086/MDS/2010 :- 6 -: 2006-07. ON PERUSAL OF THE JUDICIAL DECISIONS AND OBJECTIONS OF FINANCE MINISTER SPEECH ADDITIONAL DEPRECIATION H AS TO BE ALLOWED ONLY IN THE CASE OF NEW PLANT AND MACHINERY AND NOT WDV VALUE ON SUBSEQUENT YEARS. THE ASSESSEE ALSO RELIED ON THE DECISION COSMOS FILMS LTD (SUPRA) WHERE THE TRIBUNAL HAS ALLOWED THE CLAIM OF ASSESSEE FOR 50% OF ADDITIONAL DEPRECIATION U/S.32( I)(IIA) IN RESPECT OF NEW PLANT & MACHINERY INSTALLED AT THE NEW ELIGIBLE INDUSTRIAL UNDERTAKING WHERE PLANT & MACHINERY WERE PUT TO USE FOR LESS THAN 180 DAYS IN THE YEAR OF INSTALLATION AND THE ASSESS EE HAD CLAIMED ONLY 50% OF THE ADDITIONAL DEPRECIATION AND THE BALANCE AMOUNT WAS CLAIMED IN THE NEXT YEAR. R ESPECTFULLY FOLLOWING THE TRIBUNAL DECISIONS, WE DIRECT THE ASSESSING OFFICER TO ALLOW ADDITIONAL DEPRECIATION CLAIMED BY THE ASSESSEE. THIS GROUND OF THE ASSESSEE IS ALLOWED. 5. THE SECOND GROUND RAISED BY THE ASSESSEE WITH REGA RD TO DISALLOWANCE OF ADDITIONAL DEPRECATION OF >7,24,249 /- CLAIMED ON ASSETS ELIGIBLE FOR 100% DEDUCTION. 5.1 THE ASSESSEE HAS CLAIMED ADDITIONAL DEPRECIATIO N ON THE ASSETS ENTITLED FOR 100% DEPRECIATION THOUGH USED FOR LESS THAN 180 ITA NO. 2086/MDS/2010 :- 7 -: DAYS. THE LD. ASSESSING OFFICER CONSIDERED THE SUB MISSIONS AND INTERPRETED THAT THE PROVISIONS DOES NOT PROHIBIT O R RESTRICT THE CLAIM OF ADDITIONAL DEPRECIATION WERE ASSETS PUT TO USE F OR LESS THAN 180 DAYS BUT ON ASSETS ELIGIBLE FOR 100% DEPRECIATION AND WERE ENTIRE COST OF THE ASSETS IS ALLOWED AS DEDUCTION AND NO ADDITIONA L DEPRECIATION SHALL BE ALLOWED. THE DRP ALSO CONFIRMED THE FINDINGS OF THE ASSESSING OFFICER. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEA L BEFORE TRIBUNAL. 5.2 BEFORE US, THE LD. AUTHORISED REPRESENTATIVE RE ITERATED HIS SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER AND D RP. THE ARGUMENTS OF THE ASSESSEE THOUGH THE ASSETS ARE ALL OWED 100% DEPRECIATION ADDITIONAL DEPRECIATION TO BE ALLOW ED. THE LD. AUTHORISED REPRESENTATIVE DREW ATTENTION TO THE PRO VISIONS OF LAW AND WERE ASSET IS USED FOR LESS THAN 180 DAYS, DEPRECIA TION IS ALLOWED IN PREVIOUS YEAR AND RELIED ON JUDICIAL DECISIONS. 5.3 CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE RE LIED ON THE ORDERS OF THE LOWER AUTHORITIES AND DRP AND OBJECTE D TO THE SUBMISSIONS. ITA NO. 2086/MDS/2010 :- 8 -: 5.4 WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AND JUDICIAL DECISIONS CITED BY THE LD. AUT HORISED REPRESENTATIVE . THE LEGISLATURE IS CLEAR WHERE TH E ASSETS ITSELF IS ALLOWED 100% DEPRECIATION WHICH HAVE BEEN USED FOR LESS THAN FOR 180 DAYS. THE CLAIM FOR ADDITIONAL DEPRECIATION DOES NOT SATISFY THE PROVISIONS UNDER SEC. 32(1)(IIA) OF THE ACT. THERE FORE, WE ARE OF THE OPINION THAT THE ASSESSING OFFICER HAS EXAMINED AND CORRECTLY DISALLOWED AND WE UPHOLD THE FINDINGS OF THE ASSE SSING OFFICER AND DISMISS THE ASSESSEE GROUND. 6. THE THIRD GROUND RAISED BY THE ASSESSEE WITH REGAR D TO DISALLOWANCE OF ADDITIONAL DEPRECATION ON THE LEASE D ASSETS (WINDMILL) OF >5,36,01,076/. 6.1 THE ASSESSEE DURING THE YEAR HAS ACQUIRED WIND MILLS OF >33,73,59,931/- AND LEASED OUT AND CLAIMED ADDITION AL DEPRECIATION. AS PER THE PROVISIONS OF SEC.32(1)(IIA) ADDITIONAL DEPRECIATION SHALL BE AVAILABLE ONLY TO THE ASSETS WHICH IS BEING PUT INT O USE BY THE ASSESSEE IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THINGS. THE ASSESSEE COULD NOT SUBSTANTIVE THE CLAIM AND IN THE MANUFACTURE OR PRODUCTION OF COMMERCIAL VEHICLES, INDUSTRIAL AND MARINE ENGINES, AND ELIGIBLE TO CLAIM ADDITIONAL DEPRECIATION WERE WINDMILLS DOES NOT ITA NO. 2086/MDS/2010 :- 9 -: FALL UNDER ANY CATEGORIES SPECIFIED IN THE PROVISIO NS. BUT THE LD. AUTHORISED REPRESENTATIVE RELIED ON THE DECISION O F JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. M/S. VTM LIMITED IN T.C.(A) NO.881 OF 2009 , WHERE IT IS HELD THAT ADDITIONAL DEPRECIATION ON WINDMILLS CANNOT BE DENIED TO THE ASSESSEE AND WINDMILLS DOES NOT FALL IN THE CATEGORY SPECIFIED AND THERE IS NO FURTHER RESTRICTION FOR C LAIM OF ADDITIONAL DEPRECIATION ON WINDMILLS LEASED OUT. THE LD. AUTHO RISED REPRESENTATIVE SUPPORTED ARGUMENT RELYING ON THE DECISION OF FIRST LEASING COMPANY INDIA LIMITED (216 ITR 455) (MAD) WHERE IT WAS HELD THAT INVESTMENT ALLOWANCE AND INITIAL DEPRECATION I S AVAILABLE EVEN IN THE CASE OF ASSESSEE WHO IS IN THE BUSINESS OF LEAS ING. THE LD. AUTHORISED REPRESENTATIVE SUBSTANTIATED HIS ARGUMEN TS WITH OTHER SUPPORTING DECISIONS. THE LD. ASSESSING OFFICER GA VE ELABORATE FINDINGS AND MADE IN DEPTH STUDY ON THE PROVISIONS OF ADDITIONAL DEPRECIATION AND CLARIFICATION IN FINANCE ACT, 2005 . FURTHER MADE DISTINCTION ON CASE LAWS RELIED BY THE ASSESSEE THA T THE ASSESSEE IS NOT DEALING IN MANUFACTURING OF WINDMILLS AND ADDITION AL DEPRECIATION CANNOT BE ALLOWED. CONSIDERING THE FINDINGS AND ALS O PROVISIONS OF LAW, THE LD. ASSESSING OFFICER HAS DISALLOWED DEPRECIATI ON ON LEASED ASSETS. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, TH E ASSESSEE PREFERRED AN APPEAL BEFORE TRIBUNAL. ITA NO. 2086/MDS/2010 :- 10 -: 6.2 BEFORE THE TRIBUNAL, THE ASSESSEE HAS REITERATE D HIS SUBMISSIONS ON THE CLAIM OF ADDITIONAL DEPRECATION ON LEASED ASSETS WINDMILLS MADE BEFORE THE ASSESSING OFFICER AND ALS O DRP. ON PERUSAL OF THE SEC. 32(1)(IIA) IN THE CASE OF ANY NEW MACHI NERY OR PLANT (OTHER THAN SHIPS AND AIRCRAFT) WHICH HAS BEEN ACQUIRED AN D INSTALLED AFTER THE 31 ST DAY OF MACH, 2005 BY AN ASSESSEE ENGAGED IN THE BU SINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THINGS (OR IN THE BUSINESS OF GENERATION OR GENERATION AND DISTRIBUTION OF POW ER) A FURTHER SUM EQUAL TO TWENTY PERCENT OF THE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION. THE ASSESSEE IS IN T HE MANUFACTURER OF VEHICLES AND ALSO ENGINES AND ELIGIBLE FOR ADDITION AL DEPRECIATION AND SUPPORTED HIS ARGUMENTS WITH THE DECISIONS OF VTM LTD (SUPRA) AND FURTHER AS HELD IN THE CASE OF FIRST LEASING CO OF INDIA LTD (SUPRA) WHERE THE ASSETS ARE ELIGIBLE FOR INITIAL DEPRECATI ON AND INVESTMENT ALLOWANCE IN THE BUSINESS OF LEASING. THE LD. AUTHO RISED REPRESENTATIVE VEHEMENTLY ARGUED THAT THE DEFINITION OF BUSINESS O F MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THINGS, THE ASSESSEE I S ELIGIBLE FOR ADDITIONAL DEPRECATION. ITA NO. 2086/MDS/2010 :- 11 -: 6.3 ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESE NTATIVE RELIED ON THE ORDERS OF THE ASSESSING OFFICER AND D RP PANEL AND OBJECTED TO THE ARGUMENTS OF THE AUTHORISED REPRESE NTATIVE. 6.4 WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AND JUDICIAL DECISIONS CITED. PRIME FACIE THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURE OF COMMERCIAL VEHICLES AND ENGINES AND ADDITIONAL DEPRECIATION IS CLAIMED ON LEASED ASSE T OF WINDMILLS. DURING THE PREVIOUS YEAR THE ASSESSEE HAS PURCHASED WINDMILLS LEASED OUT TO OTHERS AND CLAIMED ADDITIONAL DEPRECIATION ON SUCH LEASED ASSETS. ON PERUSAL OF PROVISIONS U/S.32(1)(IIA) OF THE ACT AND THE DECISIONS RELIED BY THE ASSESSEE WHICH ARE IN LEASI NG BUSINESS AND CANNOT BE BROUGHT INTO CATEGORY OF MANUFACTURE OF C OMMERCIAL VEHICLES. THE PROVISIONS ARE VERY CLEAR ON THIS ISS UE. THE CLAIM OF ADDITIONAL DEPRECIATION IS IN VIOLATION OF PROVISIO NS U/S.32 OF THE ACT WERE DEPRECATION IS ALLOWED. WE ARE OF THE OPINION THAT THE DECISIONS RELIED BY THE ASSESSEE ARE NOT DIRECTLY ON THE ISSU E AND DISTINGUISHABLE AND ADDITIONAL DEPRECATION ON LEASED ASSET DOES NOT FIT INTO THE PROVISIONS OF THE ACT AND WE UPHOLD THE FINDINGS AN D ORDER OF THE ASSESSING OFFICER ON THIS GROUND AND ALLOW THE GROU ND IN FAVOUR OF THE REVENUE. ITA NO. 2086/MDS/2010 :- 12 -: 7. THE FOURTH GROUND RAISED BY THE ASSESSEE WITH RE GARD TO DISALLOWANCE OF DEPRECATION ON RESIDENTIAL BUILDING >2,22,335/-. 7.1 THE ASSESSEE HAS CLAIMED DEPRECIATION @10% ON ALL BUILDINGS REFERRED IN SCHEDULE THOUGH THEY ARE US ED FOR RESIDENTIAL PURPOSE. UNDER THE INCOME TAX RULES DEPRECIATION ON BUILDINGS USED MAINLY FOR RESIDENTIAL PURPOSE EXCEPT HOTELS AND BOARDING HOUSE THE DEPRECIATION RATE APPLICABLE AT 5%. FURTHER, NO DE PRECIATION SHALL BE ALLOWED ON THE VALUE OF THE LAND PERTAINING TO THE BUILDINGS. THE ASSESSING OFFICER ON CONSIDERING THE DEPRECATION CL AIM OF THE ASSESSEE ON THE HIGHER SIDE AND DISALLOWED >2,22,335/- AND T HE DRP ALSO HAS FOUND THAT IN ASSESSEES OWN CASE, THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ALLOWED RELIEF IN THE ASSESSMENT YEAR 1998-99 AND THE DEPARTMENT HAS FILED AN APPEAL BEFORE THE TRIBUNAL AND THE SAME IS PENDING AND DRP ALSO CONFIRMED THE ADDITION. AGAIN ST THIS, THE ASSESSEE ASSAILED AN APPEAL BEFORE THE TRIBUNAL. 7.2 BEFORE THE TRIBUNAL, THE LD. AUTHORISED REPRESE NTATIVE SUBMITTED THAT DEPRECIATION WAS ALLOWED AT 10% IN A SSESSEES OWN CASE IN EARLIER YEAR AND THE APPEAL WAS FILED BY TH E REVENUE FOR THE ITA NO. 2086/MDS/2010 :- 13 -: ASSESSMENT YEAR 1998-99 BEFORE THE TRIBUNAL AND DEP RECATION WAS RESTRICTED TO 5% IN ASSESSEES OWN CASE FOR ASSESSM ENT YEAR 2002-03. 7.3 CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE RE LIED ON THE LOWER AUTHORITIES ORDERS AND CONTESTED THE GROUNDS OF THE ASSESSEE. 7.4 WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AND JUDICIAL DECISIONS CITED BY THE LD. AUT HORISED REPRESENTATIVE. THE ASSESSEE HAS CLAIMED EXCESS DE PRECIATION ON RESIDENTIAL BUILDING. AS PER THE INCOME TAX RULES THE DEPRECIATION ON BUILDING SHALL BE ALLOWED AT 5% INSTEAD OF 10% CLAI MED BY THE ASSESSEE. THE CONTENTION OF THE ASSESSEE THAT COMM ISSIONER OF INCOME TAX (APPEALS) IN EARLIER ASSESSMENT YEAR HAS ALLOWED HIGHER DEPRECIATION CANNOT BE ACCEPTED AND ON REFERENCE T O THE PROVISIONS OF THE ACTS BUILDINGS USED FOR RESIDENTIAL PURPOSE DE PRECIATION ALLOWED @5% AS PER INCOME TAX RULES. HENCE, WE UPHOLD THE ORDER OF THE ASSESSING OFFICER AND DISMISS THE GROUND OF THE ASS ESSEE. 8. THE FIFTH GROUND RAISED BY THE ASSESSEE WITH REGARD TO DISALLOWANCE U/S.14A R.W.R. 8D OF THE ACT >1,24,76, 771/- ITA NO. 2086/MDS/2010 :- 14 -: 8.1 THE ASSESSING OFFICER IN THE ASSESSMENT PROCEED INGS FOUND ON PERUSAL OF STATEMENT OF INCOME THAT THE ASSESSEE IS IN RECEIPT OF DIVIDEND INCOME ON SHARES AND MUTUAL FUNDS AND CLAI MED EXEMPTION U/SEC. 10(34) OF THE ACT >12,28,65,534/- AND THE AS SESSEE HAS EARNED INCOME ON REDEMPTION OF EQUITY ORIENTED MUTUAL FUND OF >7,47,27,668/- AND CLAIMED EXEMPTION U/S.10(38) OF THE ACT. THE ASSESSEE HAS NOT DISALLOWED EXPENDITURE INCURRED ON EARNING SUCH EXEMPTED INCOME AND SHOW CAUSE NOTICE WAS ISSUED. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE SUBMITTED THAT PRO VISIONS OF SEC14A SUB-SECTION (2) AND (3) HAVE BEEN ENACTED IN THE F INANCE ACT, 2006 AND THE PROVISIONS SHALL APPLY FOR ASSESSMENT YEAR 2007-08. FURTHER, RULE 8D HAS BEEN MADE EFFECTIVE FROM 24.03.2008 AND APPLICABLE FROM ASSESSMENT YEAR 2008-09. THE LD. AUTHORISED REPRESE NTATIVE SUBMITTED THAT ASSESSEE HAS NOT INCURRED ANY EXPEN DITURE IN RELATION TO EARNING EXEMPT INCOME THE LD. ASSESSING OFFICER RELIED ON AMENDMENT RULE 8D AND CBDT CIRCULAR AND MUMBAI TR IBUNAL DECISION CALCULATED DISALLOWANCE U/S.14A R.W.W 8D OF THE ACT AND APPLYING THREE LIMBS UNDER RULE 8D (2) AND DETERMINED DISA LLOWANCE AGGREGATING TO >1,24,76,771/- AND DRP OBSERVED TH AT JUDICIAL DECISIONS RELIED UPON BY THE ASSESSEE ARE NOT BEEN FINALLY SETTLED AND APPEALS AND CROSS APPEALS ARE PENDING IN HIGH COURT S AND APEX COURT ITA NO. 2086/MDS/2010 :- 15 -: AND CONFIRMED THE ADDITION OF >1,24,76,771/-. AGGRI EVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE ASSAILED AN APPEAL BEFORE THE TRIBUNAL. 8.2 BEFORE THE TRIBUNAL, THE LD. AUTHORISED REPRESE NTATIVE REITERATED SUBMISSIONS MADE BEFORE THE ASSESSING O FFICER AND DRP PANEL AND EXPLAINED THAT PRIME FACIE THE ASSESSEE H AS NOT INCURRED ANY EXPENDITURE FOR EARNING SUCH EXEMPTED INCOME OF DIV IDEND ON SHARES AND UNITS. FURTHER, THE PROVISIONS OF RULE 8D OF TH E INCOME TAX RULES WERE INSERTED FROM 24.03.2008 AND APPLICABLE FROM A SSESSMENT YEAR 2008-09. THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN EARLIER ASSESSMENT YEAR CONSIDERED 2% OF EX EMPT INCOME AS DISALLOWANCE U/S.14A OF THE ACT. BUT THE ASSESSING OFFICER WITHOUT REALIZING THAT THE ASSESSMENT IN DISPUTE IS ASSESSM ENT YEAR 2006-07 WENT AHEAD IN MAKING CALCULATIONS U/S.8D(2) (III) W HICH IS AGAINST THE LEGISLATURE AND CANNOT BE APPLIED RETROSPECTIVELY. THE LD. ASSESSING OFFICER ALSO DISTINGUISHED THE DECISIONS RELIED BY THE ASSESSEE AND ALSO NOT TAKEN THE COGNISANCE OF THE APPEALS ARE PENDING IN COURTS AND ERRED IN MAKING DISALLOWANCE AND THEREFORE PRAYED F OR DELETION. ITA NO. 2086/MDS/2010 :- 16 -: 8.3 ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESE NTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES AND A RGUED THAT THE SIMILAR ISSUES IN DISPUTE ARE PENDING BEFORE HIGH COURTS AND SUPREME COURT. 8.4 WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AND JUDICIAL DECISIONS CITED. THE LD. AUTH ORISED REPRESENTATIVE SUBMITTED THAT THE ASSESSEE IS IN RECEIPT OF EXEMPT ED INCOME AND NO EXPENDITURE HAS BEEN INCURRED FOR EARNING INCOME. I N ASSESSEES OWN CASE THE CO-ORDINATE BENCH OF TRIBUNAL HAS CONSIDE RED 2% DISALLOWANCE OF EXEMPTED INCOME U/S.14A OF THE ACT. THE ACTION OF THE ASSESSING OFFICER APPLYING RULE 8D IS NOT CORR ECT AS THE PROVISIONS OF RULE 8D ARE INTRODUCED EFFECTIVE FROM 24.03.20 08 AND APPLICABLE FROM THE ASSESSMENT YEAR 2008-09 AND WE RELY ON THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF SIMPSON AND CO. LTD. V. DCIT IN TAX CASE (APPEAL) NO.2621 OF 2006 DATED 15.10.20 12 AND DIRECT THE ASSESSING OFFICER TO DISALLOW 2% OF EXEMPT INCOME A S DISALLOWANCE U/S.14A OF THE ACT. THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. 9. THE SIXTH GROUND RAISED BY THE ASSESSEE WITH RE GARD TO DISALLOWANCE OF WEALTH TAX PAID ON BUSINESS ASSETS >20,00,000/- ITA NO. 2086/MDS/2010 :- 17 -: 9.1 IN THE ASSESSMENT PROCEEDINGS, THE ASSESSING OF FICER FOUND THAT THE ASSESSEE CLAIMED WEALTH TAX PAID ON THE VA LUE OF RESIDENTIAL BUILDINGS AND CARS BEING THE PAT OF BUSINESS ASSETS OF THE COMPANY. UNDER THE PROVISIONS OF SEC U/S.40(IIA) OF THE ACT ANY SUM PAID ON ACCOUNT OF WEALTH TAX IS NOT DEDUCTIBLE. AFTER PERU SING THE PROVISIONS AND THE SUBMISSIONS OF THE LD. AUTHORISED REPRESENT ATIVE, THE LD. ASSESSING OFFICER DISALLOWED WEALTH TAX PAID. IT W AS MENTIONED THAT BY MISTAKE WEALTH TAX PAID WAS CONSIDERED AS >15,75 ,000/- IN THE DRP ORDER AND IS MISTAKE APPARENT ON RECORD AND PET ITION UNDER SEC. 154 OF THE ACT FILED. 9.2 ON APPEAL BEFORE TRIBUNAL, THE LD. AUTHORISED R EPRESENTATIVE REITERATED HIS SUBMISSIONS AND RELIED ON THE GROUND S OF APPEAL AND ARGUED THAT WEALTH TAX PAID ON BUSINESS ASSETS SHOU LD BE ALLOWED. THE ARGUMENTS OF THE LD. AUTHORISED REPRESENTATIVE ARE NOT CONVINCING AND THE PROVISIONS ARE VERY CLEAR U/S.40 (IIA) AS ANY SUM PAID ON ACCOUNT OF WEALTH TAX IS NOT DEDUCTABLE. C ONSIDERING THE APPARENT FACTS, WE CONFIRM THE DISALLOWANCE OF THE ASSESSING OFFICER AND DISMISS THE ASSESSEE GROUND. ITA NO. 2086/MDS/2010 :- 18 -: 10. THE SEVENTH GROUND RAISED BY THE ASSESSEE WITH REGARD TO DISALLOWANCE OF U/S.92C OF THE ACT >2,62,47,376/-. 10.1 THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURI NG OF COMMERCIAL VEHICLES, INDUSTRIAL AND MARINE ENGINES. THE ASSESSEE MADE TRANSACTIONS WITH THE ASSOCIATED ENTERPRISE DU RING THE FINANCIAL YEAR 2005-06 AND PROVISIONS OF SEC.92CA ARE ATTRACT ED. THE LD. ASSESSING OFFICER REFERRED THE MATTER TO THE TRANSF ER PRICING OFFICER, CHENNAI (TPO) FOR THE PURPOSE DETERMINING OF ARMS LENGTH PRICE (ALP). THE LD. TPO BY ORDER DATED 24.07.2009 MADE ADJUSTMENT OF ALP >2,62,47,376/-. BASED ON THE TPO ORDER SHOW CAUSE NOTICE WAS ISSUED IN RESPECT OF ADJUSTMENT OF INTERNATIONAL TR ANSACTIONS. THE ASSESSEE HAS FILED EXPLANATIONS ON 03.12.2009 REFER RED AT PAGE NO. 24 'THE TPO HAS NOT REPUDIATED THE METHOD OF DETERMINATION OF ARMS LENGTH PRICE ADOPTED BY THE ASSESSEE (IN THE ORIGINAL WORKING AS WELL AS THE RE VISED WORKING) BUT HAS NOT CONSIDERED THE REVISED WORKING ON THE WRONG PREMISE THAT THE SAME IS TIME BARRED INVO KING THE PROVISIONS OF SEC. 139(5). THE TPO HAS FAILED TO APPRECIATE THAT THE TERM 'TRANSACTION' IS DEFINED IN RULE 10A - 'TRANSACTION ' INCLUDES A NUMBER OF CLOSELY LINKED TRANSACTIONS. THE TRANSACTIONS THE ASSESSEE HAS ENTERED WITH ASSOCIAT ED ENTERPRISE ARE SUPPLY OF CHESTS, FULLY BUILT VEHICL ES AND SPARE PARTS. THESE THREE TRANSACTIONS WITH AE HAVE RESULTED IN A PROFIT. THE BASIS FOR PRICING OF PRODUCTS TO AE AND NON-AE HAS MANY COMMERCIAL CONSIDERATIONS APART FROM THE ADJUSTMENTS MADE TO THE COMPARABLES SUCH AS LONG STANDING RELATIONSHIP, PAYMENT TERMS, CREDIT RISK, MARKETING FUNCTION PERFORMED ETC. AND THAT ITA NO. 2086/MDS/2010 :- 19 -: AS A MATTER OF BUSINESS PRUDENCE THE COMPANY MAY LOSE IN SOME TRANSACTION BUT OVERALL TRANSACTIONS E NDED IN A PROFIT SITUATION AND HENCE COMPARISON IN PRICE VARIATION ON EVERY SINGLE INVOICE HAS NO MEANING. TO BRING CLARITY TO THE BUSINESS PROCESS IN FIXATIO N OF PRICING TO LANKA ASHOK LEYLAND LIMITED, WE PUT FORW ARD THE FOLLOWING POINTS: ALL PRODUCTION PLANNING AND PRICE FIXATION HAPPENS NOT ON EVERY INVOICE BASIS, BUT ON THE BASIS OF ANNUAL ORDER QUANTITY AND OFF TAKE MODEL-WISE. THERE IS ALWAYS A LEAD-IAG BETWEEN INPUT COST INCREASES AND PRICING TO THE CUSTOMER, WHICH VARY THE PROFITA BILITY ON EACH INVOICE LEVEL, BUT WILL RESULT IN OVERALL P ROFITS. PROFITABILITY THAT IS USUALLY LOST IN ONE CONSIGNME NT IS MADE UP ON OTHERS. THE PRICING OF VEHICLES AND SPARE PARTS ARE BASED O N 'TOTAL COST OWNERSHIP TO THE CUSTOMER'. THIS IS THE GENERAL PRACTICE IN AUTOMOBILE INDUSTRY. SALE OF SP ARE PARTS AND VEHICLES ARE CLOSELY LINKED. ' THE LD. ASSESSING OFFICER FOUND SIMILAR EXPLANATIO NS WERE CONSIDERED IN TPO PROCEEDINGS AND FINDINGS WERE CONFIRMED BY THE DRP. THE ASSESSEE HAS ENTERED INTO THE INTERNATIONAL TRANSAC TIONS AT A PRICE DETERMINED AND CHARGED TO THE ASSOCIATED ENTERPRISE IS NOT RELIABLE AS CONSIDERED BY TPO AND CALCULATED THE DIFFERENCE OF PRICE RECEIVED FROM ASSOCIATED ENTERPRISE AND PRICE RECEIVABLE FO R IDENTICAL PRODUCTS SOLD TO NON ASSOCIATED ENTERPRISE AND MADE ADJUSTM ENT OF INTERNATIONAL TRANSACTIONS BY ADDITION OF >2,62,47 ,376/-. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE AS SAILED AN APPEAL BEFORE THE TRIBUNAL. ITA NO. 2086/MDS/2010 :- 20 -: 10.2 BEFORE US, THE LD. AUTHORISED REPRESENTATIVE R EITERATED HIS SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER, TPO AND DRP. THE LD.TPO PASSED ORDER WITHOUT CONSIDERING REVISED WORKING OF ARMS LENGTH PRICE (ALP) SUBMITTED BY THE ASSESSEE WITHIN TIME LIMIT UNDER THE INCOME TAX ACT. FURTHER, THE ASSESSING OFFICER CONSIDERED THE SUBMISSIONS AND OBJECTIONS RAISED BY THE ASSESSEE AGAINST THE TPO ORDER AND ASSESSEE ALLEGED THAT THE TPO AND THE DRP HAS NOT CONSIDERED COMPARABLES WITH SIMILAR SPECIFICATIONS BUT HAVE ADOPTED DISSIMILAR VEHICLES AS COMPARABLES FOR CALCULATION OF ARMS LENGTH PRICE THOUGH THE ASSESSEE IS IN MANUFACTURER OF COMMERCI AL VEHICLES. THE DRP HAS OVERLOOKED THE SUBMISSIONS ON VOLUME DISCOU NT AND OTHER OBJECTIONS FILED AGAINST THE DRAFT ASSESSMENT ORDER BY THE ASSESSEE. FURTHER, THE LD. AUTHORISED REPRESENTATIVE SUBMITTE D THAT ASSESSEE FILED REVISED FORM 3CEB IN TRANSFER PRICING PROCEE DINGS BEFORE TPO ON 01.06.2009 WITH PROPER COMPARABLES AND WAS VERY MU CH BEFORE PASSING OF TP ORDER U/S.92CA(3) OF THE ACT ON 24.07 .2009. THE LD. TPO TREATED THE REVISED FORM 3CEB AS BELATED AND H ELD TIME LIMIT FOR FILING FORM 3CEB ALONGWITH RETURN IS 31.10.2006 AN D REVISED FORM 3CEB FOR THE RELEVANT ASSESSMENT YEAR CAN BE FILED WITHIN ONE YEAR FROM THE END OF THE ASSESSMENT YEAR OR BEFORE COMPL ETION OF ASSESSMENT WHICHEVER IS EARLIER U/S.139(5) OF THE A CT AND REJECTED THE ITA NO. 2086/MDS/2010 :- 21 -: CONTENTION AND PASSED THE ORDER. THE LD. AUTHORISE D REPRESENTATIVE MADE SUBMISSION ON REJECTION OF REVISED FORM 3CEB A ND DREW ATTENTION TO PROVISIONS OF SEC. 92CA(3) OF THE ACT AS UNDER:- ON THE DATE SPECIFIED IN THE NOTICE UNDER SUB-SEC TION (2) OR AS SOON THEREAFTER AS MAY BE, AFTER HEARING SUCH EV IDENCE AS THE ASSESSEE MAY PRODUCE, INCLUDING ANY INFORMAT ION OR DOCUMENTS REFERRED TO IN SUB-SECTION (3) OF SECTION 92D AND AFTER CONSIDERING SUCH EVIDENCE AS THE TPO MAY REQU IRED ON ANY SPECIFIED POINTS AND AFTER TAKING INTO ACCOUNT ALL RELEVANT MATERIALS WHICH HE HAS GATHERED, THE TPO S HALL, BY ORDER IN WRITING, DETERMINING THE ARMS LENGTH PRIC E IN RELATION TO THE INTERNATIONAL TRANSACTION (OR SPECI FIED DOMESTIC TRANSACTION) IN ACCORDANCE WITH SUB-SECTIO N(3) OF SECTION 92C AND SEND A COPY OF HIS ORDER TO THE ASS ESSING OFFICER AND TO THE ASSESSEE) ON PERUSAL OF PROVISIONS, THERE IS NO TIME LIMIT SP ECIFIED FOR FILING REVISED FORM 3CEB AS ALLEGED BY THE TPO. THE TPO R EJECTED FORM 3CEB WITH CORRECT OBSERVATIONS AND THE CIRCUMSTANCE S OF FILING REVISED FORM AND RELIED ONLY ON ORIGINAL FORM 3CEB IGNORIN G REVISED FORM 3CEB CONTAINING PROPER COMPARABLES AND THE CORRECTI ONS IN (A) CHANGE IN COMPARABLE MODEL (POWER STEERING VS. MANU AL STEERING ETC) (B) CHANGE IN BODY COST AND OPTIONS (STEEL STRUCTUR E IN ORIGINAL COMPARABLE, ALUMINUM STRUCTURE IN REVISED COMPARABL E) (C) CHANGE IN EXPORT INCENTIVES, PACKING CREDIT, DISCOUNTS (ORIGI NAL PRICE WAS AS PER PRICE CIRCULAR, REVISED WORKING AS PER DOMESTIC INV OICE ETC). THE ASSESSEE FILED PAPER BOOK IN THE TRANSFER PRICING PROCEEDINGS WITH ITA NO. 2086/MDS/2010 :- 22 -: COMPLETE DETAILS INCLUDING ANALYSIS ON SAMPLE REVI SED COMPARABLES. THE LD. TPO OVERLOOKED THE PROVISIONS AND EVIDENCE FILED AND RELIED ONLY ON ORIGINAL FORM 3CEB. THE ACTION OF THE TPO I S NOT ACCEPTABLE AS PER THE FACTS AND PROVISIONS OF LAW AND LD. AUTH ORISED REPRESENTATIVE SUPPORTED ARGUMENTS WITH THE DECISIO N OF JURISDICTIONAL BENCH IN DELPHI TVS DIESEL SYSTEMS LTD. VS. ACIT IN ITA NO.2163/MDS/2010 AND PRAYED FOR ALLOWING THE GROUND. 10.3 ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRES ENTATIVE RELIED ON THE ORDER OF LOWER AUTHORITIES AND ARGUED THAT TIME LIMIT FOR FILING REVISED FORM 3CEB HAS EXPIRED. THE TPO HAS RIGHTLY CONSIDERED ORIGINAL FORM 3CEB AND PRAYED FOR DISMISSAL OF APP EAL. 10.4 WE HEARD RIVAL SUBMISSIONS, PERUSED THE MATERI AL ON RECORD AND JUDICIAL DECISIONS CITED. THE ARGUMENT OF THE LD. AUTHORISED REPRESENTATIVE THAT THE TPO ERRED IN NOT CONSIDER ING THE REVISED WORKING OF ARMS LENGTH PRICE (ALP) SUBMITTED BY THE ASSESSEE ON 06.01.2009 VERY MUCH BEFORE PASSING OF ORDER BY TPO ON 24.07.2009. THE TPO HAS DISTINGUISHED THE TIME LIMIT OF COMPLET ION OF ASSESSMENT AND CONCLUDED THAT REVISED FORM 3CEB IS BARRED BY L IMITATION. THE LD. AUTHORISED REPRESENTATIVE ALSO DREW ATTENTION TO PR OVISIONS OF SEC. ITA NO. 2086/MDS/2010 :- 23 -: 92CA(3) OF THE ACT AND THERE IS NO SPECIFIC TIME L IMIT SPECIFIED FOR FILING REVISED FORM. THE STATUTORY FORM 3CEB IS A REPORT OF CHARTERED ACCOUNTANT FURNISHED U/S.92E RELATING TO INTERNATIO NAL TRANSACTIONS AND SPECIFIC DOMESTIC TRANSACTIONS BASED ON THE DOCUMEN TS PRESCRIBED AND MAINTAINED BY THE ASSESSEE IN RESPECT OF INTERNATIO NAL TRANSACTIONS. THE CHARTERED ACCOUNTANT REPORT IS BASED ON THE AU DITED BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE WERE THE INTERN ATIONAL TRANSACTION HAVE BEEN INCORPORATED AND ARE AUTHEN TICATED. THE REPORT OF THE CHARTERED ACCOUNTANT CANNOT BE RULE D OUT AND ALSO FACTUAL POSITION HAS TO BE CONSIDERED TO CORRECT A NY MISTAKE IN CALCULATING OF ARMS LENGTH PRICE(ALP) FOR VALUATION , AND IT IS EVIDENT THAT THE REVISED FORM 3CEB INCLUDES THE PROPER COMP ARABLES IN RESPECT OF VEHICLES, PARTS WHICH ARE INTEGRAL PRODUCT OF CO MMERCIAL VEHICLES. THOUGH LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY ARGUED AGAINST FILING OF REVISED FORM 3CEB AND LIMITATION PERIOD, WE CONSIDER THE APPARENT FACTS, PROVISIONS OF LAW, EVIDENCE AND THE ACTION OF TPO IN REJECTING THE REVISED FORM 3CEB IS NOT PROPER AS F ACTUAL COMPARABLES CERTIFIED BY THE CHARTERED ACCOUNTANT IN REVISED F ORM 3CEB CANNOT BE IGNORED AND WE IN THE INTEREST OF JUSTICE, REMIT THE DISPUTED ISSUE TO THE FILE OF THE ASSESSING OFFICER AND TO CONSIDER REVISED FORM 3CEB FILED BY THE ASSESSEE FOR ASSESSMENT AND CALCULAT ION OF ARMS LENGTH ITA NO. 2086/MDS/2010 :- 24 -: PRICE. FURTHER THE LD. ASSESSING OFFICER SHOULD PR OVIDE ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE AND PASS THE ORDER. WE SET ASIDE THE ORDER OF THE ASSESSING OFFICER AND PARTLY ALLOW THE GROUNDS OF ASSESSEE FOR STATISTICAL PURPOSE. 11. THE EIGHTH GROUND RAISED BY THE ASSESSEE WITH R EGARD TO DISALLOWANCE OF CLAIM MADE BY THE ASSESSEE U/S. 43 B >.11,64,106/- RELATING TO UNITS SOLD AS SLUMP SALE OF THE ACT. 11.1 THE ASSESSEE SOLD UNIT DUCTRON CASTINGS U /S.50B OF THE ACT AND OFFERED LONG TERM CAPITAL GAINS >26,12,01 ,177/- AND ALSO CLAIMED DEDUCTION OF LEAVE ENCASHMENT LIABILITY AND OTHER STATUTORY DUES OF THE SAID UNIT U/S.43B OF THE ACT, BEING SLUMP SALE INCLUDING TRANSFER OF LIABILITIES. IN THE ASSESSMENT PROCEE DINGS, THE ASSESSEE SUBMITTED THAT EXPENDITURE OF >11,64,106/- PERTAINI NG TO PROPERTY TAX, BONUS, GRATUITY, LEAVE ENCASHMENT AND PROVIDENT FUN D WERE DISALLOWED IN EARLIER ASSESSMENT YEARS U/S.43B OF THE ACT. TH E LD. AUTHORISED REPRESENTATIVE EXPLAINED THAT ALL THE ASSETS AND LI ABILITIES OF THE UNITS WERE SOLD BY ADJUSTING THE LIABILITIES AGAINST CONS IDERATION AND SET OFF OF LIABILITY AGAINST RECEIVABLES WHICH DOES NOT BA R THE ASSESSEE FROM CLAIMING DEDUCTION U/S.43B OF THE ACT AS THE LIABIL ITY INCLUDING ITA NO. 2086/MDS/2010 :- 25 -: PROVISIONS HAVE BEEN SET OFF AND DISALLOWED IN EARL IER YEARS. THE SET OFF OF SUCH LIABILITY WITH THE SLUMP SALE CONSIDER ATION INDIRECTLY CONSIDERED AS PAYMENT, THEREFORE DEDUCTION BE ALLOW ED. THE SUBMISSIONS OF THE LD. AUTHORISED REPRESENTATIVE AR E REJECTED AND THE LD., ASSESSING OFFICER STATED THAT THE ASSESSEE HAS SOLD THE UNIT AS SLUMP SALE AND COVERS ALL THE LIABILITIES AND ASSE TS AND THERE IS NO RESIDUAL AVAILABLE WITH THE ASSESSEE AND RELIED ON THE PROVISIONS AND EXPLANATIONS OF SEC. 43B OF THE ACT AND CONCLUDED T HAT THE SUBMISSIONS OF THE ASSESSEE ARE NOT AS PER LAW AND DEEMING PROVISIONS OF NETTING THE LIABILITIES DOES NOT GIVE RIGHT OF P AYMENT AND DISALLOWED THE CLAIM. THE DRP ALSO CONCURRED WITH THE FINDIN GS OF THE ASSESSING OFFICER. AGGRIEVED, THE ASSESSEE ASSAILED AN APPEAL BEFORE THE TRIBUNAL. 11.2 AT THE TIME OF HEARING, THE LD. AUTHORISED REP RESENTATIVE SUBMITTED THAT DUCTRON CASTING UNITS WAS SOLD AS SL UMP SALE AS PER SEC.50B OF THE ACT AND LONG TERM CAPITAL GAINS WAS OFFERED TO TAX. SINCE, IT IS A SLUMP SALE THE MONEY RECOVERABLE IS ADJUSTED OR SET OFF AGAINST LIABILITIES. THE LD. AUTHORISED REPRESENTAT IVE CONTENTED THAT THE LEAVE ENCASHMENT, PROPERTY TAX, PROVIDENT FUND PAYM ENTS WERE DISALLOWED IN EARLIER YEARS AND WERE ADJUSTED AT TH E TIME OF SALE AND ITA NO. 2086/MDS/2010 :- 26 -: DEEMED AS DISCHARGING OF LIABILITIES AND CLAIMED D EDUCTION U/S.43B AND BE ALLOWED. 11.3 CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE R ELIED ON THE ORDERS OF THE ASSESSING OFFICER AND DRP AND SUBMITT ED THAT DUE TO SLUMP SALE THE RIGHT IN THE UNIT HAS BEEN EXHAUSTED AND THE PAYMENTS ARE ADJUSTED AGAINST THE CONSIDERATION. THEREFORE THERE IS NO LIABILITY IN THE HANDS OF THE ASSESSEE AND ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE CLAIM. 11.4 WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE M ATERIAL ON RECORD AND SUBMISSION OF THE LD. AUTHORISED REPRESE NTATIVE. THE UNITS SOLD IS A SLUMP SALE AND ANY GAINS ON SLUMP SALE T AKES THE CHARACTERISTIC OF LONG TERM CAPITAL GAINS AND NOT I NCOME FROM BUSINESS. IN THE SLUMP SALE THE LIABILITIES ARE NETTED OR SET OFF AGAINST SALE CONSIDERATION. THE CLAIM U/SEC. 43B IN RESPECT O F STATUTORY PAYMENTS OUTSTANDING WHICH WERE DISALLOWED IN THE HAND OF TH E ASSESSEE IN EARLIER ASSESSMENT YEARS ARE CARRIED FORWARDED. TH E CONTENTION OF THE AUTHORISED REPRESENTATIVE THAT SINCE THERE IS NETTI NG OF LIABILITY AND SUCH DISCHARGE OF LIABILITY IS TREATED AS DEEMED P AYMENT US/43B OF THE ACT. BEFORE US THE ASSESSEE HAS NOT PRODUCED ANY EV IDENCE TO SHOW ITA NO. 2086/MDS/2010 :- 27 -: THAT SUCH PAYMENTS ARE MADE TO THE CONCERNED GOVERN MENT DEPARTMENTS AND ALSO THERE IS NO LIABILITY IN THE B OOKS OF ACCOUNTS OF THE ASSESSEE. CONSIDERING THE CIRCUMSTANCES, WE AR E OF THE OPINION IF ASSESSEE COMPANY MAKES THE PAYMENT OF STATUTORY DUE S AND PRODUCED CHALLANS, PROOF OF PAYMENTS, DEDUCTION SHALL BE ALL OWED. THEREFORE, WE REMIT THE ISSUE TO THE FILE OF THE ASSESSING OFF ICER FOR VERIFICATION OF CLAIM U/SEC43B OF THE ACT. THE ASSESSING OFFICER IS DIRECTED TO VERIFY AND EXAMINE THE DISCHARGE OF STATUTORY PAYMENTS AND ALLOW THE DEDUCTION. ACCORDINGLY, THE GROUND OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 12. THE NINTH GROUND RAISED BY THE ASSESSEE WITH RE GARD TO DISALLOWANCE OF DEPRECIATION ON UPS CLAIMED >5,56, 020/-. 12.1 THE ASSESSEE HAS PURCHASED UPS SYSTEM OF >14,0 0,004/- AND CLAIMED DEPRECIATION @80% TREATING UPS AS ENERG Y SAVING DEVICE. THE AUTHORISED REPRESENTATIVE SUBMITTED THAT UPS IS A ENERGY SAVING DEVICE WHICH CONTROL THE ELECTRONIC VOLTAGE AND TRE ATED AS A BLOCK OF ASSET AND UPS IS PART OF COMPUTER. THE CONTENTIONS OF THE ASSESSEE AS ENERGY SAVING DEVICE AND INTEGRAL PART OF COMPUT ER WERE NOT ACCEPTED BY THE ASSESSING OFFICER AND THE ASSESSING OFFICER RELIED ON ITA NO. 2086/MDS/2010 :- 28 -: THE DECISION OF DELHI TRIBUNAL OF M/S. NESTLE INDIA LIMITED VS. DCIT 111 TTJ 498 AND WHERE IT WAS HELD THAT UPS IS NOT AN INTEGRAL PART OF COMPUTER AND IT IS A GENERAL PLANT AND MACHINERY. T HE DRP ALSO CONFIRMED THE ADDITION OF THE ASSESSING OFFICER IN RESPECT OF DISALLOWANCE OF DEPRECIATION. AGGRIEVED BY THE ORD ER, THE ASSESSEE FILED AN APPEAL BEFORE THE TRIBUNAL. 12.2 BEFORE THE TRIBUNAL, THE LD. AUTHORISED REPRES ENTATIVE SUBSTANTIATED HIS SUBMISSIONS MADE BEFORE THE ASSES SING OFFICER AND DRP AND SUBMITTED THAT UPS IS A INTEGRAL PART OF TH E COMPUTER AND ENERGY SAVING DEVICE AND ELIGIBLE FOR HIGHER RATE O F DEPRECIATION AND SUPPORTED HIS ARGUMENTS WITH JUDICIAL DECISIONS. 12.3 CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE R ELIED ON THE ORDERS OF THE ASSESSING OFFICER AND DRP. 12.4 WE HAVE HEARD THE SUBMISSIONS, PERUSED THE M ATERIAL ON RECORD. THE CLAIM OF THE ASSESSEE UPS IS A ENERGY SAVING DEVICE AND ALTERNATIVE CLAIM THAT IT IS A INTEGRAL PART OF COM PUTER CANNOT FIT INTO THE BLOCK. THE UPS SYSTEM IS ONLY SUPPORTING THE S YSTEM AND IS LIKE OTHER PLANT AND MACHINERY AND HAS SEPARATE IDENTITY ON ITS OWN. ITA NO. 2086/MDS/2010 :- 29 -: THEREFORE, WE FOLLOW THE CO-ORDINATE BENCH DECISION OF THE TRIBUNAL AND ALLOW DEPRECATION 25% ONLY AND ACCORDINGLY TH E APPEAL IS PARTLY ALLOWED. 13. THE NEXT GROUND RAISED BY THE ASSESSEE WITH REG ARD TO DISALLOWANCE OF SECURITIES TRANSACTION TAX OF >1,12 ,644/-. 13.1 THE ASSESSEE HAS SOLD INVESTMENTS IN SECURITI ES AND SHARES. AS PER THE SEBI NORMS, AND SECURITIES TRANSACTION TAX HAS TO BE PAID. THE LD. ASSESSING OFFICER FOUND THAT THE ASSESSEE H AS NOT MADE ADDITIONS U/S.40(A)(IB) OF THE ACT IN COMPUTATION OF INCOME. THE ASSESSEE HAS REDUCED THE SECURITIES TRANSACTION TAX COMPONENT FROM SALE VALUE AND THE BALANCE WAS CONSIDERED IN THE B OOKS OF ACCOUNTS. THE SALE OF INVESTMENTS HAS BEEN CONSIDERED UNDER CAPITAL GAINS AND WAS ACCEPTED. THE LD. ASSESSING OFFICER ON THE GRO UND THAT PROFIT ON SALE OF SECURITIES IS EXEMPTED U/S.10(38) OF THE AC T AND ASSESSEE HAS DEBITED THE EXPENDITURE OF STT TO PROFIT AND LOSS ACCOUNT AND CLAIMED DEDUCTION AND NOT ADDED IN COMPUTATION OF INCOME ST ATEMENT. HENCE DISALLOWED AND THE DRP ALSO CONFIRMED THE ADDITION . AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE FILED AN APPEAL BEFORE TRIBUNAL. ITA NO. 2086/MDS/2010 :- 30 -: 13.2 BEFORE THE TRIBUNAL, THE LD. AUTHORISED REPRES ENTATIVE SUBMITTED THAT THE SECURITIES TRANSACTION TAX WAS A DJUSTED AGAINST THE SALE PRICE AND NO DISALLOWANCE IS WARRANTED. FURTHE R, THE ASSESSEE HAS NOT CLAIMED SECURITIES TRANSACTION TAX AS A BUSINES S EXPENDITURE AND NO ADDITION BE MADE. THE INCOME ON SALE OF SECURIT IES IS AS EXEMPTED U/S.10(38) OF THE ACT AND CONSIDERED TO TAX UNDER I NCOME FROM CAPITAL GAINS. THEREFORE THE ACTION OF THE ASSESSING OFFICE R IS NOT JUSTIFIED. 13.3 CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE R ELIED ON THE FINDINGS OF THE LOWER AUTHORITIES AND DRP AND OBJEC TED THE SUBMISSIONS OF THE LD. AUTHORISED REPRESENTATIVE. 13.4 WE AFTER HEARING THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD, THE LD. AUTHORISED REPRESENTATI VE SUBMITTED THAT SALE OF SECURITIES ARE COVERED UNDER TRANSACTION TA X AND CONTRACT NOTES ARE INCLUSIVE OF SECURITIES TRANSACTION TAX ON SALE OR PURCHASE OF SECURITIES. DURING THE YEAR THE ASSESSEE HAS SOLD LONG TERM SECURITIES AND CLAIMED EXEMPTION U/S.10(38). THE FACT THAT TH E SECURITIES TRANSACTION TAX IS AUTOMATIC IN STOCK EXCHANGE TRAN SACTIONS. THE ASSESSEE HAS CONSIDERED PROFIT AFTER DEDUCTING SECU RITIES TRANSACTION TAX (STT) AND REFLECTED IN THE BOOKS OF ACCOUNTS. THE ASSESSEE HAS ITA NO. 2086/MDS/2010 :- 31 -: NOT CLAIMED DEDUCTION AS A BUSINESS EXPENDITURE AS THE INCOME ON SALE OF SECURITIES OFFERED UNDER CAPITAL GAINS IN COMPUT ATION OF INCOME. CONSIDERING THE CIRCUMSTANCES, WE DIRECT THE ASSESS ING OFFICER TO VERIFY THE COMPUTATION OF INCOME AND DELETE THE ADD ITION OF SECURITIES TRANSACTION TAX AFTER VERIFICATION. 14. THE NEXT GROUND RAISED BY THE ASSESSEE WITH RE GARD TO DISALLOWANCE OF WEIGHED DEDUCTION ON A EXPENDITURE INCURRED ON DEPARTMENT OF SCIENTIFIC AND INDUSTRIAL RESEARCH U/ S. SEC. 35(2AB) OF THE ACT FOR >.49,47,89,660/- 14.1 THE ASSESSEE HAS INCURRED R & D EXPENDITURE WI TH THE DEPARTMENT OF SCIENTIFIC AND INDUSTRIAL RESEARCH. AS PER PROVISIONS OF SEC. 35(2AB) OF THE ACT EXPENDITURE INCURRED ON R & D IS ALLOWED AS WEIGHTED DEDUCTION BUT THE ASSESSEE COULD NOT SUBMI T FORM 3CL UNDER THE PROVISIONS OF THE ACT AND DEDUCTION WAS DENIED BY THE LD. ASSESSING OFFICER AND CONFIRMED BY THE DRP. AGGRIEV ED, THE ASSESSEE FILED AN APPEAL BEFORE TRIBUNAL. 14.2 AT THE TIME OF HEARING, THE LD. AUTHORISED REP RESENTATIVE SUBMITTED THAT ASSESSING OFFICER HAS GRANTED RELIEF UNDER RECTIFICATION ITA NO. 2086/MDS/2010 :- 32 -: ORDER DATED 10.03.2011 ON SUBMISSION OF FORM 3CL AN D WEIGHTED DEDUCTION WAS ALLOWED. SINCE THE ASSESSING OFFICER HAS RECTIFIED THE ORDER AND ALLOWED THE DEDUCTION, THE ASSESSEE HAS N OT PRESSED THE GROUND AND TREATED AS DISMISSED. 15. THE LAST GROUND RAISED BY THE ASSESSEE WITH RE GARD TO DENYING OF TDS CREDIT TO THE EXTENT OF >7,78,604/-. 15.1 AT THE TIME OF HEARING, THE LD. AUTHORISED REP RESENTATIVE SUBMITTED THAT THE ASSESSING OFFICER HAS NOT ALLOWE D TDS CREDIT TO THE ASSESSEE AND PLEADED FOR DIRECTION TO ALLOW THE TAX CREDIT TO THE ASSESSEE OF >7,78,604/-. 15.2 ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRES ENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES AND D RP. 15.3 WE HEARD BOTH THE PARTIES AND PERUSED THE MAT ERIAL ON RECORD AND WE DIRECT THE ASSESSING OFFICER TO ALLOW TDS CREDIT AS PER FORM 16A AFTER VERIFICATION OF TDS DEDUCTED BY THE DEDUCTOR IN ITA NO. 2086/MDS/2010 :- 33 -: ACCORDANCE WITH LAW AND THIS GROUND OF THE ASSESSEE IS ALLOWED. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.2086/MDS/2010 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON TUESDAY, THE 16TH DAY OF FEBR UARY, 2016, AT CHENNAI. SD/- SD/- ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER ( . ! ' ) (G. PAVAN KUMAR) /JUDICIAL MEMBER / CHENNAI 0 / DATED: 16.02.2016 KV 1 ) +#-23 43&- / COPY TO: 1 . '( / APPELLANT 3. ! 5- () / CIT(A) 5. 3 89 +#-# / DR 2. +,'( / RESPONDENT 4. ! 5- / CIT 6. 9% : / GF