M/s Modi Spinning and Weaving Mills Co. Ltd., Ghaziabad V. DCIT, New Delhi

ITA 2290/DEL/2011

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0171 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 17-06-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 06-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJNA
• Assessee Lawyers: K S KRISHNA
• Keywords: Business income; Depreciation; Opportunity of being heard; Rule of consistency; Assessment record
• Section: 43B; 143(3); 32; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E, NEW DELHI) BEFORE SHRI I. C. SUDHIR, JUDICIAL MEMBER AND SHRI J. S. REDDY, ACCOUNTANT MEMBER I.T.A. NO. 2290/DEL/2011 ASSESSMENT YEAR : 2003-04 M/S. MODI SPINNING AND VS. DCIT, CIRCLE 5(1), WEAVING MILLS CO. LTD., NEW DELHI MODINAGAR, GHAZIABAD U.P. 201201 GIR / PAN:AAACM2067L I.T.A.NO. 2583/DEL/2011 (ASSESSMENT YEAR 2003-04) DCIT, CIRCLE 5(1), VS. M/S. MODI SPINNING AND NEW DELHI WEAVING MILLS CO. LTD., MODINAGAR, GHZAIABAD U.P. 201201 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.S. KRISHNA, ADV. RESPONDENT BY : SHRI P. DAM KANUNJNA, SR. DR DATE OF HEARING : 17.06.2015 DATE OF PRONOUNCEMENT : 29.07.2015 ORDER PER J. S. REDDY, AM: THESE ARE CROSS APPEALS DIRECTED AGAINST THE ORDER OF DCIT, NEW DELHI DATED 26.12.2008 FOR THE ASSESSMENT YEAR 2003 -04. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PUBLIC LIMITED COMPANY ENGAGED IN THE BUSINESS OF TEXTILE AND LIQU OR. IT IS A BIFR COMPANY AND IT FILED ITS RETURN OF INCOME DECLARING NIL ASSESSABLE INCOME ITA NO.2290, 2583/DEL/2011 2 ON 28.11.2003 AT LOSS OF RS.15,51,14,298/-. ASSESS MENT U/S 143(3) WAS COMPLETED AND AN ADDITION OF RS.10,13,94,201/- WAS MADE. THE ASSESSEE CARRIED THE MATTER IN APPEAL. THE FIRST APPELLATE AUTHORITY PARTLY ALLOWED THE APPEAL OF THE ASSESSEE AND PARTLY RESTORED CERTAIN ISSUES TO THE OFFICE OF A.O. THE A.O. PASSED AN ORDER U/S 250 READ WITH SECTION 143(3) OF THE ACT ON 26.12.2008 ON THE ISSUES WHICH WERE REMITTED BACK T O HIS FILE BY THE FIRST APPELLATE AUTHORITY. AGGRIEVED, THE ASSESSEE CARRI ED THE MATTER IN APPEAL. THE FIRST APPELLATE AUTHORITY GRANTED PART RELIEF. ON THE ISSUES, WHICH WERE DECIDED AGAINST THE ASSESSEE, THE ASSESSEE FILED AP PEAL AND ON THE ISSUE WHICH WAS DECIDED IN FAVOUR OF ASSESSEE, THE REVENUE HAS FILED APPEAL. 3. WE HAVE HEARD SHRI K. S. KRISHNA, ADVOCATE, LD. COUNSEL FOR THE ASSESSEE AND SHRI P. DUM KANUNJNA, SR. DR ON BEHALF OF REVENUE. WE NOW TAKE UP THE ASSESSEES APPEAL IN I.T.A. NO. 2290/DE L/2011. THE GROUND TAKEN BY ASSESSEE ARE AS FOLLOWS: 1.1 THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN ALLEGING THAT NO PLAUSIBLE EXPLANATIO N WAS FURNISHED BY THE APPELLANT TO JUSTIFY CRYSTALLIZATION OF SAID LI ABILITY DURING THE YEAR CONSIDERATION WITHOUT APPRECIATING THAT THE APPELLA NT HAD FILED NECESSARY DETAILS/DOCUMENTS IN SUPPORT THEREOF. 2. THAT THE COMMISSIONER OF INCOME TAX(APPEALS) ERR ED ON FACTS AND IN LAW IN SUSTAINING DISALLOWANCE OF DEPRECIATI ON UNDER SECTION 32 OF THE INCOME TAX ACT, 1961 ('THE ACT') TO THE E XTENT OF RS.51,24,595/- CLAIMED BY THE APPELLANT. 2.1 THAT THE COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THAT DEPRECIATION RELATABLE TO CLOTH UNI T WAS NOT DISALLOWABLE UNDER SECTION 32 OF THE ACT SINCE THE CLOTH UNIT WAS LEASED OUT AND INCOME THEREFROM WAS DULY ASSESSED A S BUSINESS INCOME. 2.2 THAT THE COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THAT DEPRECIATION ALLOWABLE ON THE' WRIT TEN DOWN VALUE' OF THE BLOCK OF ASSETS AND THERE IS NO MANDATE IN LAW TO EXCLUDE ASSETS RELATING TO ANY PARTICULAR UNIT. ITA NO.2290, 2583/DEL/2011 3 2.3 THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN NOT ADJUDICATING THE LEGAL ISSUE OF A LLOWABILITY OF DEPRECIATION ON ASSETS FORMING PART OF THE' BLOCK O F ASSETS', THOUGH NOT ACTUALLY PUT TO USE, CANNOT BE EXAMINED SINCE THE S COPE OF PROCEEDINGS .BEFORE THE ASSESSING OFFICER WAS LIMIT ED AS PER THE DIRECTIONS OF THE CIT(A) VIDE ORDER DATED 03.04.200 7. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPR ECIATE THAT THERE WAS NO LEGAL IMPEDIMENT TO ADJUDICATION OF THE AFOR ESAID LEGAL ISSUE OF ALLOWABLITY OF DEPRECIATION ON THE WDV OF THE EN TIRE 'BLOCK OF ASSETS'. THAT THE COMMISSIONER OF INCOME TAX (APPEA LS) ERRED ON FACTS AND IN LAW IN HOLDING THAT THE APPELLANT FAIL ED TO IDENTIFY THE ASSETS OF THE THREE UNITS. WITHOUT PREJUDICE THAT T HE COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN C ONFIRMING DISALLOWANCE OF RS.51,24,595 OUT OF TOTAL DEPRECIAT ION OF RS.53,79,818, WITHOUT APPRECIATING THAT THE DEPRECI ATION CLAIMED PRIMARILY RELATED TO ASSETS OF HARYANA DISTILLERY. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN NOT ONLY SUSTAINING THE DISALLOWANCE OF RS.4,05,79, 713/-, BUT ENHANCING THE SAME TO RS. 4,25,52,958, UNDER SECTIO N 43B OF THE ACT. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE ABOVE SUM OF RS. 4 ,25,52,958 RELATES TO THE INTEREST PAYABLE TO BANKS/DEBENTURE HOLDERS, WHICH DOES NOT FALL WITHIN THE AMBIT OF SECTION 43B OF THE ACT AND THER EFORE THE SAME WAS ALLOWABLE AS REVENUE DEDUCTION. THAT THE COMMISSION ER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW, IN ENHANCI NG THE DISALLOWANCE UNDER SECTION 43B OF THE ACT, WITHOUT PROVIDING OPPORTUNITY OF BEING HEARD TO THE APPELLANT, AND WI THOUT ISSUING NOTICE OF ENHANCEMENT IN TERMS OF SECTION 251 OF TH E ACT. 3.1 GROUND NO.1 IS CONNECTED WITH THE GROUND RAISED BY REVENUE AND WE WOULD BE ADJUDICATING THE SAME ALONG WITH GROUND IN THE REVENUES APPEAL. 3.2 GROUND NO.2 IS REGARDING DISALLOWANCE OF DEPREC IATION U/S 32 OF I. T. ACT, 1961. THE ASSESSEE HAS CLAIMED AN AMOUNT OF R S.53,79,818/- AS DEPRECIATION, ON FIXED ASSET OF THREE UNITS NAMELY: (I) CLOTH UNIT SITUATED IN MODINAGAR WHICH WAS RUNNING PARTLY ON LEASE DURING THE YEAR; (II) HARYANA DISTILLERY AND (III) CLOTH UNIT AT ABOHAR, MAKING C OTTON YARN. THE A.O. IN THE ITA NO.2290, 2583/DEL/2011 4 ORIGINAL ASSESSMENT ORDER DISALLOWED OF ENTIRE DEPR ECIATION CLAIMED, ON THE BASIS OF TAX AUDITORS COMMENT THAT ASSET OF CLOTH A ND WEAVING SECTION WERE NOT ASCERTAINABLE. THE FIRST APPELLATE AUTHORITY H AD RESTORED THE MATTER BACK TO THE FILE OF A.O. THE A.O. DISALLOWED THE ENTIRE DEPRECIATION BY OBSERVING AS FOLLOWS: DEPRECIATION OF RS.53,79,818/- THE A.O HAD DISALLOWED DEPRECIATION OF RS.53,79,81 8/- IN RESPECT OF THE CLOTH UNIT OF THE ASSESSEE COMPANY IN VIEW OF T HE AUDITOR'S REMARK ABOUT THE UNACERTAINABILITY OF THE ASSETS AN D THAT THE SEPARATE DETAILS OF OPENING WDV BLOCK WISE WAS NOT AVAILABLE . DURING THE ASSESSMENT PROCEEDINGS ALSO, THE ASSESSEE DID NOT F URNISH THE REQUISITE INFORMATION. IN ITS REPLY DATED 15.09,2008, THE ASSESSEE STATED THAT THE CLOTH MILL SITUATED AT MODINAGAR WAS SET UP IN 1946 AND S TARTED INCURR1NG LOSSES FROM THE YEAR 1980-81 DUE TO LABOUR UNREST. THE UNIT WAS THUS CLOSED IN 1994. IT WAS ALSO STATED THAT NO SUBSTANT IAL ADDITIONS WERE MADE TO BLOCK OF ASSETS, DETAILS OF DEPRECATION CLA IMED FOR THE A.Y 2003-04 HAD BEEN GIVEN IN RESPECT OF THREE DIVISION S, NAMELY- HEAD OFFICE, HARYANA DISTILLERY, AND THE CLOTH UNIT AT A BOHAR. HAND WRITTEN SUMMARY OF BLOCK OF ASSETS IN THE YEAR 1989-90 AS W ELL AS WDV OF ASSETS UP TO 1989-90 WAS ALSO FURNISHED. NO FURTHER INFORMATION DOCUMENTARY PROOF WAS FURNISHED. . LD. CIT(A) HAD DIRECTED TO IDENTIFY ASCERTAINABLE A SSETS. HOWEVER, THE INFORMATION FURNISHED BY THE ASSESSEE IS GROSSLY INADEQUATE. MOREOVER, THE INFORMATION FURNISHED IS NOT BACKED BY ANY SUPPORTING DOCUMENT. IN VIEW OF THE ABOVE, THE IDE NTITY OF ASSETS WAS NOT ESTABLISHED. ACCORDINGLY: DEPRECIATION OF THE AMOUNT OF RS.53,79 ,818/- IS NOT ALLOWED TO THE ASSESSEE COMPANY. 3.3 THE FIRST APPELLATE AUTHORITY CONFIRMED HIS FIN DING BY HOLDING AS FOLLOWS: ITA NO.2290, 2583/DEL/2011 5 6. IN THE COURSE OF APPELLATE PROCEEDINGS, IT HAS BEEN ARGUED ON BEHALF OF THE APPELLANT COMPANY THAT DURING THE YEA R UNDER CONSIDERATION THE APPELLANT COMPANY CLAIMED DEPRECI ATION OF RS.5379818 PERTAINING TO NOT ONLY THE CLOTH MILL SI TUATED AT MODI NAGAR(UP) BUT ALSO THE HARYANA DISTILLERIES AND MOD I COTTON PROCESSING CO. ABOHAR. IT IS SUBMITTED THAT THE ID. CIT(A) WHILE SET ASIDING THE ISSUE IN QUESTION, HAS DIRECTED THE AO TO IDENTIFY THE ASSETS OWNED BY CLOTH MILL AND THEN DECIDE THE CLAIM OF TH E APPELLANT. HOWEVER, THE ID.AO HAS DISREGARDED THE SUBMISSION M ADE' IN THE COURSE OF IMPUGNED ASSESSMENT PROCEEDINGS AND DISAL LOWED THE ENTIRE CLAIM OF DEPRECIATION INCLUDING THE DEPRECIATION CL AIMED ON HARYANA DISTILLERIES AND MODI COTTON PROCESSING CO. ABOHAR. IT WAS SUBMITTED THAT THE ACTION OF THE AO NOT SUSTAINABL E BOTH ON FACTS AND IN LAW. THE LD. COUNSELS HAVE POINTED OUT THAT OUT OF TOTAL CLAIM OF RS.53,79,817/-, DEPRECIATION OF RS.49,17,172/- WAS PERTAINING TO HARYANA DISTILLERIES AND ANOTHER SUM OF RS.2,55,223 /- WAS CLAIMED IN RESPECT OF FURNITURE & FIXTURES, MOTOR CAR, PLAN T & MACHINERY AND COMPUTERS ETC. PERTAINING TO THE HEAD OFFICE OF THE APPELLANT COMPANY. THUS, ONLY A SUM OF RS 207422 WAS CLAIMED IN RESPEC T OF MODI COTTON PROCESSING CO. ABOHAR AND NO DEPRECIATION WA S CLAIMED IN RESPECT OF THE CLOTH UNIT SITUATED AT MODI NAGAR, A S THE WRITTEN DOWN VALUE OF THE FIXED ASSETS HAD BECOME NEGLIGIBLE AND THEREFORE WAS IGNORED. AS REGARDS MERITS OF THE CLAIM OF DEPRECIA TION, IT WAS SUBMITTED BY THE LD. COUNSELS THAT THE BLOCK OF ASS ETS OF THE APPELLANT COMPANY COMPRISED OF THE ASSETS RELATING TO ITS THR EE UNITS, NAMELY, CLOTH MILL UNIT AT MODI NAGAR, HARYANA DISTILLERIES & MODI COTTON PROCESSING CO, ABOHAR. THERE WAS NO JUSTIFICATION F OR DISALLOWING THE DEPRECIATION ON THE ASSETS BELONGING TO THE AFORESA ID TWO UNITS. SIMILARLY, THERE WAS NO JUSTIFICATION FOR DISALLOWA NCE OF DEPRECIATION ON THE VEHICLES, FURNITURE AND FIXTURE AND COMPUTER S AND OTHER ITEMS OWNED BY THE HEAD OFFICE OF THE APPELLANT COMPANY. THEREFORE, ACCORDING TO THE LD. COUNSELS, THE ONLY DISPUTE WAS IN RELATION TO THE DEPRECIATION, IF ANY, CLAIMED IN RESPECT OF CLOTH U NIT. THE LD. COUNSELS SUBMIT THAT THE DURING THE COURSE OF REASSESSMENT, THE APPELLANT COMPANY HAS FILED DETAILS OF FIXED ASSETS OWNED BY HARYANA DISTILLERIES AND MODI COTTON PROCESSING CO, ABOHAR AND ALSO THE ASSETS OWNED BY THE HEAD OFFICE. HOWEVER, THE ID.AO HAS IGNORED THE DETAILS FURNISHED BEFORE HIM AND THE DISALLOWANCE O F THE ENTIRE AMOUNT OF DEPRECIATION CLAIMED BY THE APPELLANT COM PANY. IT IS ITA NO.2290, 2583/DEL/2011 6 POINTED OUT BY THE LD. COUNSELS FOR THE APPELLANT C OMPANY THAT OUT OF WRITTEN DOWN VALUE OF PLANT AND MACHINERY AMOUNTING TO RS 19596729, A SUM OF RS 111.971ACS WAS OUT OF THE ASS ETS ACQUIRED BY HARYANA DISTILLERIES DURING THE FY S 1999-2000 & 20 02-03 AS UNDER.- ASSTT. RATE OF YEAR DEPRECIATION GROSS BLOCK ADDITION DE PRECIATION WRITTEN DOWN VALUE 19992000 25% '0.00 28.74 7.19 21.56 AS ON 31.03.1999 2000-2001 25% 21.56 22.69 11.06 33.18 AS ON 31.03.2000 20012002 25% 33.18 148.44 45.41 136.22ASON 31 .03.2001 20022003 25% 136.22 13.07 37.32 111.97 AS ON 31.03.2002 THEREFORE, IT IS ARGUED THAT THE AO WAS NOT JUSTIFI ED IN DISALLOWING THE DEPRECIATION PERTAINING TO THE HARYANA DISTILLERIES , MODI COTTON PROCESSING CO. AND THE HEAD OFFICE. 6.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MA DE ON BEHALF OF THE APPELLANT COMPANY AND THE FINDINGS RECORDED BY THE ID.AO. ON CONSIDERATION, I FIND THAT THE APPELLANT COMPANY VI DE ITS REPLY DATED 15-9-08 HAS SUBMITTED DETAILS OF THE ASSETS OWNED B Y MODI CLOTH, MODI COTTON PROCESSING CO, ABOHAR, HARYANA DISTILLE RIES AND THE HEAD OFFICE. AS PER THESE DETAILS, DEPRECIATION OF RS 255223 WAS PERTAINING TO THE HEAD OFFICE AND DEPRECIATION OF R S 4917172 WAS IN RESPECT OF HARYANA DISTILLERIES. THUS, ACCORDING TO THE APPELLANT ONLY A SUM OF RS 207422 WAS CLAIMED IN RESPECT OF FIXED ASSETS OWNED BY MODI CLOTH AND MODI COTTON PROCESSING CO. ABOHAR UN ITS. FURTHER, ASSETS WORTH RS 212.941ACS WERE PURCHASED BY HARYAN A DISTILLERIES DURING THE FY S 1999-2000- 2002-03 AND WRITTEN DOWN VALUE OF THE SAME WAS RS 111.97 LACS ON 31-3-02. HOWEVER ON BEIN G ASKED TO SUBMIT THE NECESSARY BILLS/VOUCHERS AND OTHER EVIDE NCE SUGGESTING ADDITION OF RS 212.941ACS TO THE FIXED ASSETS OWNED BY HARYANA DISTILLERIES, THE LD. COUNSELS HAVE EXPRESSED THEIR INABILITY TO SUBMIT THE SAME. THEREFORE, IN MY VIEW, THE APPELLANT COMP ANY HAS FAILED TO IDENTIFY THE ASSETS SEPARATELY OWNED BY THE THREE U NITS OF THE APPELLANT. IN THIS SITUATION, I DO NOT FIND ANY INF IRMITY IN THE ACTION OF THE AO SO FAR AS DISALLOWANCE OF DEPRECIATION PERTA INING TO THE V OF ASSETS OWNED BY THE AFORESAID THREE UNITS IS CONCER NED. HOWEVER, AS STATED ABOVE, DEPRECIATION OF RS255223/- WAS CLAIME D BY THE APPELLANT IN RESPECT OF ASSETS OWNED BY THE HEAD OF FICE AND THEREFORE, IN MY VIEW, THERE WAS NO CASE FOR DISALLOWANCE OF T HE SAME. ITA NO.2290, 2583/DEL/2011 7 ACCORDINGLY, THE AO IS DIRECTED TO ALLOW NECESSARY RELIEF TO THE APPELLANT COMPANY. 6.4 IN THE COURSE OF APPELLATE PROCEEDINGS, THE LD . COUNSELS HAVE ALSO RAISED A LEGAL ISSUE THAT EVEN IN THE ABSENCE OF IDENTIFICATION OF ASSETS OWNED BY INDIVIDUAL UNITS, THE DEPRECIATION COULD NOT HAVE BEEN DISALLOWED AS THE ENTIRE ASSETS ARE FORMING PART OF THE WDV OF RS 19596729 AS ON 01-4-02. HOWEVER, ON A CAREFUL CONSI DERATION, I DO NOT FIND MYSELF IN AGREEMENT WITH THE CLAIM OF THE APPELLANT COMPANY. IT HAS TO BE APPRECIATED THAT THE MANDATE GIVEN TO THE ID.AD IN TERMS OF MY PREDECESSOR'S ORDER DATED 03-4-07 WAS LIMITED AND THE AO COULD NOT HAVE TRAVELLED BEYOND THE SAME. MY LD. PR EDECESSOR HAS GIVEN CLEAR DIRECTIONS TO THE AO TO CARRY OUT AN EX ERCISE OF IDENTIFYING ASCERTAINABLE ASSETS AND ALLOW DEPRECIATION ON THE SAME. HOWEVER, AS DISCUSSED EARLIER, THE APPELLANT COMPANY HAS NOT BE EN ABLE TO RENDER ANY ASSISTANCE/SUBMIT ANY EVIDENCE WHICH COULD HAVE ENABLED THE AO TO IDENTIFY THE ASCERTAINABLE ASSETS. THEREFORE, TH E LEGAL ISSUE RAISED BY THE APPELLANT COMPANY IN THIS ROUND OF APPEAL IS ALSO BEING DISMISSED. 3.4 BEFORE US LD. COUNSEL FOR THE ASSESSEE REFERRED TO THE FOLLOWING NOTE GIVEN BY AUDITORS TO THE TAX AUDIT REPORT: 4. DEPRECIATION CHARGE AS PER INCOME TAX RULES (AN NEXURE III) INCLUDES WRITTEN DOWN VALUE (WDV) OF CLOTH UNIT OF THE COMPANY I.E. PROCESSING HOUSE, SPINNING AND WEAVING SECTIONS FOR WHICH SEPARATE DETAILS OF OPENING WDV BLOCK-WISE ARE NOT AVAILABLE . PROCESS HOUSE WAS LYING CLOSED SINCE APRIL, 1994 TO MARCH, 2000 A ND SPINNING SECTION WAS ALSO LYING CLOSED DURING THE CURRENT FI NANCIAL YEAR. PROCESSING AND WEAVING SECTIONS WERE PRESENTLY RUNN ING ON LEASE DURING THE CURRENT YEAR. DEPRECIATION IF ANY, ON T HESE ASSETS INCLUDED IN RS.53,79,818/- IS NOT ASCERTAINABLE . (EMPHASIS OWN) 3.5 HE REITERATED HIS CONTENTIONS BEFORE THE FIRST APPELLATE AUTHORITY THAT, FOR THE ENTIRE DEPRECIATION TO BE ALLOWABLE, IT I S NOT NECESSARY THAT EACH ASSET MUST BE INDEPENDENTLY PUT TO USE AND IT IS SU FFICIENT IF THE BLOCK AS A WHOLE IS PUT TO USE AND CLOTH UNIT WAS LEASED AND I NCOME THEREFROM WAS DULY ITA NO.2290, 2583/DEL/2011 8 ASSESSED AS BUSINESS INCOME AND THEREFORE, DEPRECIA TION OF CLOTH UNIT IS ALLOWABLE AND WITHOUT PREJUDICE, DEPRECIATION ON SU CH ASSET WAS ALLOWABLE U/S 32 UNDER THE PRINCIPLE OF CONSISTENCY AS DEPREC IATION WAS ALLOWED IN THE EARLIER ASSESSMENT YEAR. 3.6 A PERUSAL OF NOTE NO.4 OF TAX AUDIT REPORT EXTR ACTED ABOVE, CLEARLY SHOWS THAT THE AUDITOR HAS STATED THAT THE W.D.V. O F ASSETS OF CLOTH UNIT IS INCLUDED IN THE TOTAL W.D.V. AND THE VALUE INCLUDED IS NOT ASCERTAINABLE. IF A DISALLOWANCE HAS TO BE DONE ON THE PLAIN READING OF THIS NOTE, THEN AT BEST, THE W.D.V. OF CLOTH UNIT CAN BE ESTIMATED OR ASCERT AINED AND DEPRECIATION TO THAT EXTENT DISALLOWED. ENTIRE DEPRECIATION CANNOT BE DISALLOWED WHEN W.D.V. OF HARYANA DISTILLERIES UNIT, IS AVAILABLE O N RECORD AND WHEN DEPRECIATION HAS BEEN GRANTED ON THIS W.D.V. IN ALL THE EARLIER ASSESSMENT YEARS. WHEN THERE IS NO CHANGE IN THE FACTS OF TH E CASE THIS YEAR, DEPRECIATION CANNOT BE DISALLOWED ON THIS W.D.V. T HUS, WE DIRECT THE A.O. TO GRANT DEPRECIATION ON THE W.D.V. OF ASSETS OF HA RYANA DISTILLERIES. AS REGARDS THE BALANCE ASSETS I.E. THE ASSETS OF THE O THER TWO UNITS, AS THE ASSESSEE HAS NOT MAINTAINED RECORDS AND HAD NOT PRO DUCED EVIDENCE, THE DISALLOWANCE IS CONFIRMED. IN THE RESULT, THIS GRO UND IS ALLOWED IN PART. 3.7 GROUND NO.3 IS REGARDING DISALLOWANCE U/S 43B. THE FIRST OBJECTION OF ASSESSEE IS THAT THE FIRST APPELLATE AUTHORITY H AD ENHANCED THE DISALLOWANCE WITHOUT GIVING A NOTICE AS MANDATED BY LAW. THE SE COND GROUND IS THIS THAT THE INTEREST PAYABLE TO BANKERS / DEBENTURES, DO NO T FALL WITHIN THE PURVIEW OF SECTION 43B. IN ANY EVENT, THE ASSESSEE HAS DEMONS TRATED BEFORE US THAT THE ISSUE REQUIRES FRESH CONSIDERATION BY THE A.O. AS T HE FACTS HAVE NOT BEEN VERIFIED. IN VIEW OF ABOVE CIRCUMSTANCES, WE SET ASIDE THE MATTER TO THE FILE OF A.O. FOR DE NOVO ADJUDICATION IN ACCORDANCE WITH LAW. ITA NO.2290, 2583/DEL/2011 9 3.9 IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D IN PART. 4. NOW, WE TAKE UP THE REVENUES APPEAL IN I.T.A. N O. 2583/DEL/2011. THE SOLE GROUND OF REVENUES APPEAL IS THAT LD. CI T(A) HAS ERRED IN RESTRICTING THE ADDITION ON ACCOUNT OF PRIOR PERIOD EXPENSES TO RS.2,82,220/- AS AGAINST RS.39,86,301/- MADE BY THE A.O. THE FI RST APPELLATE AUTHORITY HAS PASSED AN ORDER AND HELD AS FOLLOWS: 5. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MAD E ON BEHALF OF THE APPELLANT COMPANY AND HAVE ALSO GONE THROUGH THE DO CUMENTS PLACED BEFORE THE AO AND BEFORE ME. ON CONSIDERATION, I FI ND THAT OUT OF TOTAL CLAIM OF RS 3986301, A SUM OF RS 3541901PERTAINS TO INTEREST PAID TO MCL SECURITIES & FINANCE LTD BEING INTEREST ON LATE PAYMENT OF LEASE RENTALS FOR THE FY 2000-01& 01-02 . A PERUSAL OF RECORDS SUGGESTS THAT OWING TO FINANCIAL DIFFICULTIES THE APPELLANT COMPA NY WAS NOT IN A POSITION TO MAKE PAYMENT OF LEASE RENTALS TO MCL SE CURITIES & FINANCE LTD. HOWEVER, DURING THE YEAR UNDER CONSIDE RATION THE MANAGEMENT OF THE APPELLANT COMPANY DECIDED TO RECO GNIZE NOT ONLY THE OUTSTANDING LEASE RENTALS BUT ALSO AGREED TO PA Y INTEREST ON THE OUTSTANDING BALANCES. ACCORDINGLY, CREDIT NOTES WER E ISSUED BY HARYANA DISTILLERIES UNIT OF THE APPELLANT COMPANY TO MCL SECURITIES & FINANCE LTD AND CORRESPONDING EXPENDITURE WAS LIM ITED TO THE P & L A/C. I FIND THAT THE SUMMARY OF PRIOR PERIOD EXPE NSES WAS DULY FURNISHED BEFORE THE ID.AO WHICH, INTER ALIA, INCLU DED THE PAYMENT OF INTEREST OF RS 3541901 PAID TO MCL SECURITIES & FIN ANCE LTD. I ALSO FIND THAT NECESSARY DETAILS IN RESPECT OF THE LIABI LITY FOR PAYMENT OF INTEREST TO MCL SECURITIES & FINANCE LTD HAVE BEEN FILED BEFORE THE ID.AO ALONG WITH APPLICATION U/S 154 OF THE IT ACT, 1961 DATED 15-4- 09 AND ARE THUS, FORMING PART OF ASSESSMENT RECORDS . IN VIEW OF THE AFORESAID, I AM OF THE VIEW THAT SINCE THE DECISION REGARDING PAYMENT OF INTEREST ON THE OUTSTANDING LEASE RENTAL WAS TAK EN BY THE MANAGEMENT OF THE APPELLANT COMPANY DURING THE YEAR UNDER CONSIDERATION, THE PRIOR PERIOD EXPENSES TO THE EXT ENT OF RS 3541901 BEING INTEREST PAID TO MCL SECURITIES & FINANCE LTD REQUIRE TO BE ALLOWED TO THE APPELLANT COMPANY. AS REGARDS BALANC E OF RS 444400, A SUM OF RS 162200 PERTAINS TO LEGAL CHARGES FOR WH ICH BILL WAS RECEIVED FROM VAISH ASSOCIATES, ADVOCATES IN THE MO NTH OF SEPTEMBER, 2002 AND THUS, THE SAME ALSO REQUIRES TO BE ALLOWED . HOWEVER, AS ITA NO.2290, 2583/DEL/2011 10 REGARDS BALANCE OF RS 282200, NO PLAUSIBLE EXPLANAT ION HAS BEEN FURNISHED ON BEHALF OF THE APPELLANT COMPANY AS TO HOW THE LIABILITY IN QUESTION GOT CRYSTALLIZED DING THE YEAR UNDER CONSI DERATION AND WAS ALLOWABLE. THEREFORE, THE DISALLOWANCE TO THE EXTEN T OF RS.28,200/- BEING SUSTAINED. 4.1 LD. COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDE R OF FIRST APPELLATE AUTHORITY ON THE GROUND THAT LIABILITY HAS CRYSTALL IZED DURING THE YEAR. AT THE SAME TIME HE HAS SUBMITTED THAT THE EXPENSES I.E. I NTEREST, WAS A PERIOD COST. ON CONSIDERATION OF THESE SUBMISSIONS, AS INTEREST IS PERIOD COST, ONLY THE INTEREST WHICH PERTAINS TO THE PERIOD OF THE PREVIO US YEAR RELATABLE TO THE ASSESSMENT YEAR, CAN BE ALLOWED. THE INTEREST IN Q UESTION, WHICH HAS BEEN ALLOWED BY THE LD. CIT(A), PERTAINS TO FINANCIAL YE ARS 2000-01 AN 2001-02. THIS CANNOT BE ALLOWED DURING THE YEAR. THUS, WE H OLD THAT THE A.O. WAS RIGHT IN DISALLOWING INTEREST COST OF RS.35,41,901/ - AS IT PERTAINS TO THE FINANCIAL YEARS 2000-01 AND 2001-02. THIS DECISION OF LD. CIT(A) IS REVERSED AND THE GROUND OF REVENUE TO THIS EXTENT I S ALLOWED. AS REGARDS THE OTHER PRIOR PERIOD EXPENSES, WE UPHOLD THE DECISION OF THE LD. CIT(A) AS THE EXPENDITURE CRYSTALLIZED DURING THE YEAR. AS REGAR DS GROUND NO.1 OF THE ASSESSEES APPEAL, WE HAVE TO DISMISS THE SAME AS N O EVIDENCE HAS BEEN FILED BY THE ASSESSEE. 4.2 IN VIEW OF ABOVE DISCUSSION, WE ALLOW THIS GROU ND OF REVENUE IN PART. 4.3 IN THE RESULT APPEAL OF REVENUE IS ALLOWED IN P ART. 5. IN THE RESULT, APPEALS OF ASSESSEE AS WELL AS TH AT OF REVENUE ARE PARTLY ALLOWED. 6. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JULY 2015. SD./- SD./- ( I. C. SUDHIR) (J. S. RED DY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 29 TH JULY, 2015 SP ITA NO.2290, 2583/DEL/2011 11 COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 27/7 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 28,29 SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS 29/7/15 SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 29/7 SR. PS/PS 7 FILE SENT TO BENCH CLERK 29/7 SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER