DCIT, CHENNAI V. M/s. Ennore Port Limited, CHENNAI

ITA 237/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61055 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2004-2005
• Appeal Filed On: 06-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MAHADA SINGH
• Assessee Lawyers: K MEENATCHI SUNDARAM
• Keywords: Depreciation; Revenue expenditure; Capital expenditure
• Section: 145; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI (BEFORE SHRI N.S.SAINI, ACCOUNTANT MEMBER AND SHRI V.DURGA RAO, JUDICIAL MEMBER ) .. I.T.A. NO.237 /MDS/2012 ASSESSMENT YEAR : 2004-05 DY. COMMISSIONER OF INCOME TAX, COMPANY CIRCLE II(1), CHENNAI 600 034. (APPELLANT) V. M/S.ENNORE PORT LTD., 23, RAJAJI SALAI, CHENNAI. PAN : AAACE 9013 G (RESPONDENT) APPELLANT BY : SHRI MAHADA SINGH DR RESPONDENT BY : SHRI K. MEE NATCHI SUNDARAM DATE OF HEARING : 08.05.12 DATE OF PRONOUNCEMENT : 11.05.12 O R D E R PER N.S.SAINI, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST TH E ORDER OF COMMISSIONER OF INCOME TAX(A) III CHENNAI DATED 0 8.11.2011. ITA NO.237/MDS/12 2 2. THE GROUND NOS.1 & 6 ARE GENERAL IN NATURE AND HENCE REQUIRES NO SEPARATE ADJUDICATION BY US. 3. IN GROUND NO.2, THE GRIEVANCE OF THE REVENUE IS THAT THE COMMISSIONER OF INCOME TAX(A) ERRED IN DELETING TH E DISALLOWANCE OF EXPENDITURE INCURRED IN CONNECTION WITH HORTICULTUR E EXPENSES IN EARLIER YEARS TO THE EXTENT OF RS.1.36 CRORES,. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SING OFFICER OBSERVED THAT THE ASSESSING OFFICER OBSERVED THAT T HE ASSESSEE HAD DEBITED IN THE PROFIT AND LOSS ACCOUNT A SUM OF ` 136.83 LAKHS TOWARDS IMPAIRMENT LOSS. IN ITEM NO.18 OF SCHEDULE XII ON ACCOUNTING POLICIES AND NOTES ON ACCOUNTS REVEALED THAT THE T ITLE OF THE LAND IN POSSESSION OF THE ASSESSEE WOULD BE RETAINED BY TH E GOVERNMENT OF INDIA. ACCORDINGLY ` 136.83 LAKHS SHOWN UNDER THE HEAD HORTICULTURE AND LAND SCAPING HAD BEEN TREATED AS IMPAIRMENT L OSS. THE ASSESSING OFFICER STATED THAT AS THIS REPRESENTS L OSS INCURRED ON ACCOUNT OF WRITING OFF OF THE VALUE OF ASSETS, THE SAME CANNOT BE CLAIMED AS REVENUE EXPENDITURE AND DISALLOWED THE S AME BY TREATING ITA NO.237/MDS/12 3 IT AS CAPITAL EXPENDITURE. BEING AGGRIEVED, THE ASS ESSEE FILED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX(A). 5. THE ASSESSEE CONTENDED BEFORE THE COMMISSIONER OF INCOME TAX(A) THAT SINCE THE CRYSTALLIZATION OF THE AMOUN T AS REVENUE EXPENDITURE HAD TAKEN PLACE IN ASSESSMENT YEAR 2004 -05, THERE WAS NO ERROR OR OMISSION IN THE ACCOUNTS OF EARLIER YEA RS AND HENCE THIS EXPENDITURE WAS NOT A PRIOR PERIOD EXPENDITURE AS PER ACCOUNTING STANDARDS NOTIFIED BY THE CBDT U/S.37 R.W.S. 145 OF THE ACT AND THE EXPENDITURE HAS BEEN CORRECTLY CLAIMED AS DEDUCTION BY THE ASSESSEE U/S.37 R.W.S.145 OF THE ACT. FOR THIS, HE PLACED RE LIANCE ON THE DECISION OF HINDUSTAN ELECTRO GRAPHITE LTD. VS. C.I .T. 218 ITR 688 (MP). 6. THE COMMISSIONER OF INCOME TAX(A) ALLOWED THE A PPEAL BY OBSERVING AS UNDER:- 5.2. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE LD. AR. I HAVE ALSO GONE THROUGH THE DECISIONS RELIED ON BY THE LD. AR. THE APPELLANT IN CURRED ITA NO.237/MDS/12 4 EXPENDITURE OF ` 1,36,83,000 TOWARDS PLANTATION, CREATION OF GREEN BELT AND HORTICULTURE IN ITS PORT AREA WHICH WERE REQUIRED FOR OBTAINING POLLUTION CONTROL CLEARANCE. THIS EXP ENDITURE IS INCURRED ON THE LANDS OWNED BY GOVERNMENT OF INDIA AT THE TIME OF INCURRING THIS EXPENDITURE, THE APPELLANT E NVISAGED THAT THE TITLE OF THESE LANDS WILL BE TRANSFERRED TO IT BY THE GOVERNMENT OF INDIA AND ACCORDINGLY TREATED THIS AM OUNT AS CAPITAL EXPENDITURE. NO DEPRECIATION WAS CLAIMED B Y APPELLANT IN RESPECT OF THIS CAPITAL EXPENDITURE. DURING THE RELEVANT PREVIOUS YEAR, VIZ. ON 1903.04, IT WAS DECIDED BY T HE GOVERNMENT OF INDIA THAT THE LAND WHERE THE PORT OF THE APPELLANT IS SET UP WILL VEST WITH GOVERNMENT OF IN DIA AND IT WILL BE LEASED AT A NOMINAL RATE TO THE APPELLANT. THE A PPELLANT CLAIMED THIS ACCOUNT AS REVENUE EXPENDITURE BUT THE ASSESSING OFFICER HAS DISALLOWED THE SAME HOLDING IT AS A CAP ITAL EXPENDITURE. THE APPELLANT ARGUED THAT THIS WAS A R EVENUE EXPENDITURE SINCE IT WAS A STATUTORILY REQUIRED GRE EN BELT EXPENDITURE AND THAT IT WAS NOT A CAPITAL EXPENDITU RE SINCE IT WAS INCURRED ON LEASE-HOLD LANDS OF THE APPELLANT. IT SUBMITTED ITA NO.237/MDS/12 5 THAT IT WAS ALLOWABLE AS DEDUCTION IN ASSESSMENT YE AR 2004-05 SINCE THE CRYSTALLIZATION OF THIS EXPENDITURE HAS O CCURRED ON 19.03.04 IN VIEW OF THE DECISION OF THE GOVT. OF IN DIA ON THAT DAY. THE HONBLE HIGH COURT IN HINDUSTAN ELECTRO GR APHITES LIMITED V. COMMISSIONER OF INCOME TAX (1996) 218 IT R 688 (MP) HAS HELD THAT EXPENDITURE INCURRED BY ASSESSEE ON PLANTATION IN FACTORY PREMISES AND RESIDENTIAL QUAR TERS OF COMPANY WITH A VIEW TO MAKING ATMOSPHERE POLLUTION- FREE WAS ALLOWABLE AS REVENUE EXPENDITURE. RESPECTFULLY FOL LOWING THE DECISION, THE GROUND IS ALLOWED. 7. D.R ARGUED AND SUBMITTED THAT THE EXPENDITURE IN QUESTION WAS CAPITALIZED IN THE BOOKS OF ACCOUNT BY THE ASSE SSEE IN EARLIER YEARS. DURING THE YEAR UNDER APPEAL, THE GOVT. CLAR IFIED THAT THE LAND BELONGS TO THE GOVERNMENT AND NOT TO THE ASSES SEE AND THE ASSESSEE WILL HAVE LEASE HOLD RIGHTS ON THE SAME. THUS, THE EXPENDITURE, WHICH WAS TREATED AS CAPITAL IN NATURE IN THE EARLIER YEARS CANNOT BE CLAIMED AS REVENUE EXPENDITURE DURI NG THE YEAR UNDER APPEAL BY THE ASSESSEE AS AN IMPAIRMENT LOSS. HE ALSO SUBMITTED THAT THE EXPENDITURE DID NOT RELATE TO TH E YEAR UNDER ITA NO.237/MDS/12 6 CONSIDERATION AND THAT THE DAMAGE TO THE TITLE OF T HE LAND WILL NOT MAKE AN EXPENDITURE ON CAPITAL ACCOUNT AS REVENUE I N NATURE. 8. A.R OF THE ASSESSEE ON THE OTHER HAND REITERATE D ON THE SUBMISSION MADE BEFORE THE COMMISSIONER OF INCOME T AX(A) AND SUPPORTED THE ORDER OF THE COMMISSIONER OF INCOME T AX(A). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSEE INCURRED EXPENDITURE ON HORTICULTURE AND LAND SCAPING OF ` 136.83 LAKHS IN THE EARLIER YEARS AND CAPITALIZED THE SAME IN ITS ACCOUNTS IN THE YEAR OF INCURRING OF THE EXPENDITURE. THE ASSESSEE DURING THE YEAR UNDER A PPEAL HAS CHARGED THE EXPENSES TO ITS PROFIT AND LOSS ACCOUNT AS IMPAIRMENT LOSS. THE ASSESSEE EXPLAINED THAT IN THE EARLIER YEAR, THE EXPENDITURE WAS CAPITALIZED. THE ASSESSEE WAS GIVE N TO UNDERSTAND THAT THE LAND WILL BELONG TO THE ASSESSE E, BUT DURING THE YEAR UNDER APPEAL IN THE MEETING HELD ON 19.03. 04 BY MINISTRY OF SHIPPING AND MINISTRY OF FINANCE DECIDED THAT TH E OWNERSHIP OF ITA NO.237/MDS/12 7 THESE LANDS WILL BE RETAINED BY THE GOVERNMENT OF I NDIA. HENCE, THE EXPENDITURE, WHICH WAS CAPITALIZED IN THE EARLI ER YEAR, WAS CHARGED TO P&L ACCOUNT AS IMPAIRMENT LOSS. THE AS SESSING OFFICER HAS NOT ALLOWED THE CLAIM OF ASSESSEE ON TH E GROUND THAT IT WAS A CAPITAL EXPENDITURE DEBITED TO P&L ACCOUNT. THE COMMISSIONER OF INCOME TAX(A) ALLOWED THE CLAIM OF THE ASSESSEE RELYING UPON THE DECISION OF HONBLE MADHYA PRADES H HIGH COURT IN THE CASE OF HINDUSTAN ELECTRO GRAPHITE LTD. VS. C.I.T. 218 ITR 688 (MP) WHERE IT WAS HELD THAT THE EXPENDITURE IN CURRED BY THE ASSESSEE ON PLANTATION IN FACTORY PREMISES AND RESI DENTIAL QUARTERS OF THE COMPANY FOR MAKING ATMOSPHERE POLLU TION FREE WAS ALLOWABLE AS REVENUE EXPENDITURE. 10. WE FIND THAT IT IS NOT IN DISPUTE THAT THE ASS ESSEE IS A COMPANY FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTI NG. FURTHER IT IS ALSO AN ADMITTED FACT THAT THE EXPENDITURE IN QU ESTION WERE INCURRED IN EARLIER YEARS AND IN THOSE YEARS, THE S AME WAS TREATED AS CAPITAL EXPENDITURE BY THE ASSESSEE. THE REASON GIVEN BY THE ASSESSEE FOR CLAIMING THE SAID EXPENDITURE AS DEDUC TION DURING THE YEAR IS THAT THE ASSESSEE GOT THE INFORMATION D URING THE YEAR ITA NO.237/MDS/12 8 THAT THE LAND IN RESPECT OF WHICH EXPENDITURE WAS I NCURRED WILL NOT BE TRANSFERRED IN FAVOUR OF THE ASSESSEE AND WILL C ONTINUE TO REMAIN AS LEASE HOLD LAND IN THE HANDS OF THE ASSES SEE. ACCORDING TO US, THE ABOVE REASON DOES NOT ALLOW TH E ASSESSEE TO CLAIM REVENUE EXPENDITURE OF EARLIER YEAR AS DEDUCT ION DURING THE CURRENT YEAR. IT IS NOT IN DISPUTE THAT IN EARLIER YEARS WHEN THE EXPENDITURE WAS INCURRED, THE ASSESSEE WAS LESSEE O F THE LAND AND DURING THE CURRENT YEAR ALSO, IT REMAINED AS LE SSEE OF THAT LAND. THEREFORE, THERE WAS ABSOLUTELY NO REASON TO TREAT THE REVENUE EXPENDITURE OF THE EARLIER YEAR AS A REVENU E EXPENDITURE OF THE CURRENT YEAR. THE DECISION RELIED UPON BY T HE COMMISSIONER OF INCOME TAX(A) IS TO THE EFFECT THAT EXPENDITURE ON PLANTATION TO MAKE THE ENVIRONMENT POLLUTION FREE WAS ALLOWABLE A S REVENUE EXPENDITURE TO THE ASSESSEE. THE ABOVE DECISION DOE S NOT SUPPORT THE CASE OF THE ASSESSEE IN AS MUCH AS IT WAS NOT H ELD IN THAT CASE THAT THE EXPENDITURE ON PLANTATION WILL BE TRE ATED AS REVENUE EXPENDITURE WHEN THE ASSESSEE INCURS THE EXPENDITUR E ON LAND BELONGING TO OTHERS AND NOT ON THE LAND OWNED BY IT . BE THAT AS IT MAY, WE FIND THAT THE EXPENDITURE IN EARLIER YEARS WERE INCURRED IN ITA NO.237/MDS/12 9 RESPECT OF LEASE HOLD LAND AND THE LAND CONTINUED T O REMAIN AS LEASE HOLD LAND DURING THE CURRENT YEAR AND THEREFO RE, AN EXPENDITURE INCURRED IN EARLIER YEARS IN RESPECT OF THE SAME LAND CANNOT BE TREATED AS EXPENDITURE OF YEAR UNDER CONS IDERATION. WE THEREFORE, SET ASIDE THE ORDER OF THE COMMISSIONER OF INCOME TAX(A) AND RESTORE BACK THE ORDER OF THE ASSESSING OFFICER AND ALLOW THE GROUND OF APPEAL OF REVENUE. 11. THE GROUND NO.3 OF THE APPEAL IS DIRECTED AGAI NST THE ORDER OF THE COMMISSIONER OF INCOME TAX(A) IN DELETING TH E DISALLOWANCE OF PRIOR PERIOD INTEREST CLAIMED TO TH E EXTENT OF ` 1.12 CRORES BY THE ASSESSEE. 12. THE BRIEF FACTS OF THE CASE ARE THAT THE A SSESSING OFFICER FOUND IN FORM 3 CD ( ITEM NO.22(B) THAT THE ASSESSE E HAD DEBITED TO P&L ACCOUNT OF ` 1,27,74,194/- TOWARDS INTEREST RELATING TO PRIOR PERIOD. THE ASSESSING OFFICER RELIED ON THE DECISI ON IN THE CASE OF M/S.KEDARNATH JUTE MANUFACTURING COMPANY LTD. VS. C .I.T. 82 ITR 364 AND M/S.KALINGA TUBES LIMITED VS. C.I.T. (SC) W HERE IT WAS ITA NO.237/MDS/12 10 HELD THAT ONLY SUCH EXPENDITURE THAT ACCRUES IN A YEAR UNDER MERCANTILE SYSTEM OF ACCOUNTING WAS ALLOWABLE. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE MAINTAINS ITS BO OKS OF ACCOUNTS ON MERCANTILE BASIS AND THEREFORE, DISALLOWED ` 1,12,74,194/- DEBITED TOWARDS INTEREST RELATING TO PRIOR PERIOD. 13. ON APPEAL, COMMISSIONER OF INCOME TAX(A) ALL OWED THE INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE BY OBS ERVING AS UNDER:- I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE APPELLANT. I FIND THAT THE AMOUN T OF INTEREST CLAIMED BY THE APPELLANT IN THE EARLIER YEARS WERE BASED ON PROVISIONAL WORKINGS AND THAT THE FINALITY OF THE I NTEREST WORKINGS BETWEEN THE APPELLANT AND CHENNAI PORT TRUST HAVE B EEN ARRIVED AT ON 10.03.2004. THUS, THE LIABILITY CRYS TALLIZED ONLY ON 10.03.2004. IN VIEW OF THIS, I HOLD THAT THE INTER EST OF ` 1,12,74,194/- HAS ACCRUED DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2004-05 AND IS ELIGIBLE FOR DED UCTION ITA NO.237/MDS/12 11 U/S.36(1)(III). IN VIEW OF THE FOREGOING, THE DISAL LOWANCE IS DELETED. THE GROUND IS ALLOWED. 14. AT THE TIME OF HEARING, D.R. DID NOT MAKE ANY SERIOUS ARGUMENTS AND SUBMITTED THAT HE RELIES ON THE GROUN DS OF APPEAL RAISED IN THE APPEAL. HE COULD NOT POINT OUT ANY S PECIFIC ERROR IN THE ORDER OF COMMISSIONER OF INCOME TAX(A). HE COULD N OT BRING ANY MATERIAL ON RECORD TO SHOW THAT THE INTEREST EXPEND ITURE DID NOT CRYSTALLIZE DURING THE YEAR UNDER APPEAL. WE THEREF ORE, DO NOT FIND ANY GOOD AND JUSTIFIABLE REASON TO INTERFERE WITH T HE ORDER OF THE CIT(A), WHICH IS CONFIRMED AND GROUND OF APPEAL OF REVENUE IS DISMISSED. 15. THE GROUND NO.4 OF THE APPEAL IS DIRECTED AGA INST THE ORDER OF COMMISSIONER OF INCOME TAX(A) IN DIRECTING THE ASSE SSING OFFICER TO ALLOW DEPRECIATION ON ELECTRICAL FITTINGS @15% AS A GAINST 10% ALLOWED IN THE ASSESSMENT ORDER. ITA NO.237/MDS/12 12 16. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SING OFFICER OBSERVED THAT THE ASSESSEE CLAIMED DEPRECIATION ON ELECTRICAL AND FITTINGS @ 25% . AS PER THE INCOME TAX RULES, ELEC TRICAL FITTINGS IS GROUPED WITH FURNITURE AND FITTINGS AND IS ENTITLED FOR DEPRECIATION @ 15% ONLY. THEREFORE, HE DISALLOWED THE EXCESS DEPR ECIATION OF ` 31,02,312/- CLAIMED BY THE ASSESSEE. BEING AGGRIEV ED, THE ASSESSEE FILED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX(A). 17. COMMISSIONER OF INCOME TAX(A) ALLOWED THE CLAI M OF DEPRECIATION BY FOLLOWING HIS ORDER FOR THE AY 2003 -04 IN ITA NO.716/08-09/A.III DT. 30.07.10 . 18. AT THE TIME OF HEARING, LD. DR SUBMITTED THAT THE SAME ISSUE WAS DECIDED BY THE TRIBUNAL IN THE APPEAL OF THE R EVENUE AGAINST THE ORDER OF THE CIT(A) IN ASSESSEE'S OWN CASE WHE REIN THE TRIBUNAL VIDE ORDER DT.29.11.11 IN ITA NOS.1681 & 1682(MDS.) /2010 & CO NOS.136 & 137(MDS.)/2010 RESTORED THE MATTER BACK TO THE FILE OF THE AO FOR RE-ADJUDICATION OF THE ISSUE AFTER VERIFICAT ION. THEREFORE, HE SUBMITTED THAT FOLLOWING THE ORDER OF TRIBUNAL FOR ASSESSMENT YEAR ITA NO.237/MDS/12 13 2003-04, THE ISSUE MAY BE REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER. 19. AR OF THE ASSESSEE HAD NO OBJECTION TO THE SUB MISSION OF DR. 20. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PE RUSING THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD, WE FIND THE TRIBUNAL WHILE DECIDING THE ISSUE OF DEPRECIATION O N ELECTRICAL FITTINGS @ 25% CLAIMED BY THE ASSESSEE , HAS RESTORED THE MA TTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR ADJUDICATION AFRESH BY OBSERVING AS UNDER:- 4. WITHOUT PREJUDICE TO THE FINDING OF THE COMMISS IONER OF INCOME TAX(A) ON HIS FINDING OF THE EXACT NATURE OF ELECTRICAL FITTINGS ENTITLED FOR DEPRECIATION AT 25%, WE ONLY SAY THAT THE COMMISSIONER OF INCOME TAX(A) COULD HAVE CALLED FO R A REMAND REPORT FROM THE ASSESSING AUTHORITY SO THAT IF AT ALL A MISREADING OF THE FACT IS MADE BY THE ASSESSING AUT HORITY, THAT COULD HAVE BEEN REALIZED BY THAT AUTHORITY AND THE MATTER SETTLED THERE. IN MATTERS OF SHEER FACTS, IT IS AL WAYS BETTER TO ITA NO.237/MDS/12 14 APPRECIATE THE FRAMEWORK WITH MEANINGFUL MUTUAL DIS CUSSION RATHER THAN CONTESTING ON THE GROUND OF ENORMOUS AR GUMENTS. IN THE PRESENT CASE, WHEN THE ASSESSEE CONTENDS THA T THE ASSESSING AUTHORITY HAS MISCONSTRUED A PORTION OF T HE ELECTRICAL FITTINGS AS FURNITURE AND FITTINGS, THE POSITION CO ULD HAVE BEEN BETTER CURED BY THE COMMISSIONER OF INCOME TAX(A) A FTER HAVING A WORD WITH THE ASSESSING AUTHORITY THROUGH A REMAND REPORT. THEREFORE, THE PROCEDURE ADOPTED BY THE CO MMISSIONER OF INCOME TAX(A) IN DECIDING THIS ISSUE IS NOT ACCE PTABLE. THE FACTS ALWAYS REMAIN THE SAME AND THE SAME CAN BE EX PLAINED BY THE ASSESSEE TO THE SATISFACTION OF THE ASSESSIN G AUTHORITY AS WELL. THE ORDER OF THE CIT(A) ON THIS POINT IS SET ASIDE AND THE ISSUE IS REMITTED BACK TO THE ASSESSING AUTHORITY F OR FRESH CONSIDERATION IN THE LIGHT OF THE SUBMISSIONS THAT MAYBE MADE BY THE ASSESSEE AS WELL AS KEEPING IN MIND THE OBSE RVATIONS MADE BY THE COMMISSIONER OF INCOME TAX(A). THE FACTS BEING IDENTICAL RESPECTFULLY FOLLOWING TH E PRECEDENT, WE RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFF ICER FOR ADJUDICATION ITA NO.237/MDS/12 15 OF THE ISSUE AFRESH IN ACCORDANCE WITH DIRECTIONS O F THE TRIBUNAL GIVEN IN ASSESSMENT YEAR 2003-04. THUS THIS GROUND OF AP PEAL OF REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 21. THE GROUND NO.5 OF THE APPEAL IS DIRECTED AGAIN ST THE ORDER OF COMMISSIONER OF INCOME TAX(A) IN DIRECTING THE ASSE SSING OFFICER TO ALLOW DEPRECIATION ON PORT CREATION CHARGES OF ` 36.70 LAKHS. 22. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE CLAIMED DEPRECIATION @ 25% ON PORT CREATION CHARGES AMOUN TING OF ` 1,46,81,899/-. THE ASSESSING OFFICER OBSERVED THAT THE EXPENDITURE WAS INCURRED FOR CREATING BREAKWATER BARRIER FOR TH E PURPOSE OF CREATING A PORT. THE BARRIER CREATED BY THE ROCKS CAN NEITHER BE TREATED AS BUILDING NOR AS A PLANT AND MACHINERY. FURTHER ASSESSING OFFICER OBSERVED THAT THE INCOME TAX RULES DOES NOT PROVIDE DEPRECIATION ON SUCH ASSETS SUCH AS BREAKWATER BARR IER CREATED WITH THE HELD OF ROCKS. HE OBSERVED THAT ALTHOUGH THE B REAK WATER HAS GIVEN ENDURING BENEFIT TO THE ASSESSEE, HOWEVER, TH E SAME CANNOT BE CONSIDERED FOR THE PURPOSE OF ALLOWING DEPRECIATION SINCE THERE IS NO ITA NO.237/MDS/12 16 PROVISION TO ALLOW DEPRECIATION ON SUCH ASSETS. TH EREFORE, HE DISALLOWED THE CLAIM OF DEPRECIATION OF ` 36,70,475/-. 23. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX(A). 24. THE COMMISSIONER OF INCOME TAX(A) ALLOWED THE CLAIM OF DEPRECIATION BY FOLLOWING HIS ORDER FOR THE AY 2003 -04 IN ITA NO.716/08-09/A.III. 25. THE D.R SUBMITTED THAT THE REVENUE FILED APPEA L AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX(A) PASSED IN AS SESSMENT YEAR 2003-04 AND IN THAT APPEAL THE TRIBUNAL CONFIRMED T HE ORDER OF COMMISSIONER OF INCOME TAX(A) ALLOWING DEPRECIATION TO THE ASSESSEE AND THEREFORE, FOLLOWING THE ORDER OF TRIB UNAL FOR ASSESSMENT YEAR 2003-04, THIS GROUND OF APPEAL OF REVENUE IS TO BE DISMISSED. ITA NO.237/MDS/12 17 26. AFTER HEARING THE DR, WE FIND THAT THE TRIBUN AL VIDE ITS ORDER DT.29.11.11 IN THE ASSESSMENT YEARS 2002-03 & 2003 -04 IN ITA NOS.1681 & 1682(MDS.)/2010 IN THE CASE OF ASSESSEE ITSELF HAD ALLOWED THE CLAIM OF DEPRECIATION TO THE ASSESSEE O N PORT CREATING CHARGES. 27. THE TRIBUNAL WHILE DOING SO HELD AT PARA-6 AS UNDER:- 6. WE CONSIDERED THE ISSUE. WE AGREE WITH THE COMMISSIONER OF INCOME TAX(A). THE LICENCE FEE WAS PAID BY THE PORT TRUST TO THE DISTRICT COLLECTOR FOR OBTAIN ING THE LEASE RIGHT TO EXTRACT THE MINE-SITES FOR OBTAINING BOULD ERS AND BLOCKS FOR CONSTRUCTING THE BREAKWATER AT THE MOUTH OF THE PORT. THEREFORE, THE LICENCE FEE PAID BY THE ASSESS EE PORT-TRUST WAS INCURRED EXCLUSIVELY FOR CONSTRUCTING THE ASSET RECOGNIZED AS BREAKWATER. THE OTHER EXPENSES WERE ALSO INCUR RED BY THE ASSESSEE PORT-TRUST SOLELY FOR THE PURPOSE OF ULTIM ATELY CONSTRUCTING THE BREAK WATER. THEREFORE, THE ASSES SING AUTHORITY WAS NOT JUSTIFIED IN EXCLUDING THOSE EXPE NDITURE FROM THE COMPUTATION OF THE COST OF ASSET WHILE GRANTING ITA NO.237/MDS/12 18 DEPRECIATION ALLOWANCE. THE CIT(A) HAS GRANTED THE RELIEF, WHICH IS RIGHTFUL IN LAW. THE ORDER OF THE COMMISSI ONER OF INCOME TAX(A) ON THIS POINT IS UPHELD. THE FACTS BEING IDENTICAL, RESPECTFULLY FOLLOWING T HE PRECEDENT, WE ALLOW THE CLAIM OF DEPRECIATION ON CREATING BREAKWA TER BARRIER CLAIMED BY THE ASSESSEE OF ` 36,70,475/-. 28. IN THE RESULT, THE APPEAL OF REVENUE IS PARTLY ALLOWED AS ABOVE. ORDER PRONOUNCED ON FRIDAY THE 11 TH MAY, 2012 AT CHENNAI SD/- SD/- ( V.DURGA RAO) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 11 TH MAY, 2012. K S SUNDARAM. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE