D.B. Corp.Ltd., Ahmedabad V. The Addl.CIT., Range-1, Ahmedabad

ITA 2373/AHD/2011

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8960 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 08-03-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 19-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Revision of order; Depreciation; Additional depreciation; Earning of tax free income; Question of law; Unabsorbed depreciation; Capital expenditure; Rule 8D; Set aside
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 14A; 115JB; 32(1)(iia); 48

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER, AND SHRI S. S. GODARA, JUDICIAL MEMBER. ITA NOS. 2373/AHD/2011 & 1088/AHD/2014 (ASSESSMENT YEARS: 2008-09 & 2006-07) D. B. CORP LIMITED, 280, SARKHEJ GANDHINAGAR HIHWAY, NR. YMCA CLUB, MAKARBA, AHMEDABAD 380051 APPELLANT VS. ADDITIONAL COMMISSIONER OF INCOME-TAX RANGE-1, AHMEDABAD & COMMISSIONER OF INCOME TAX, AHMEDABAD-I RESPONDENT PAN: AACCM57726 /BY ASSESSEE : SHRI DHINAL SHAH, A.R. /BY REVENUE : SHRI JAMES KURIAN, SR. D.R. /DATE OF HEARING : 08.03.2017 /DATE OF PRONOUNCEMENT : 23.03.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THESE TWO ASSESSEES APPEALS FOR ASSESSMENT YEARS 2 008-09 & 2006-07 ARISE AGAINST THE CIT(A)-VI, AHMEDABAD & THE CIT-I, AHMEDABADS ORDERS DATED 25.07.2011 & 21.02.2014, IN PROCEEDINGS U/S.1 43(3) AND SECTION 263 OF THE INCOME TAX ACT, 1961, IN SHORT THE ACT; R ESPECTIVELY. ITA NOS. 2373/AHD/11 & 1088/AHD/14 (D. B. CORP. LTD .) A.Y. 2008-09 & 2006-07 - 2 - WE PROCEED APPEALWISE FOR THE SAKE OF CONVENIENCE AND BREVITY. 2. THE ASSESSEES FORMER APPEAL ITA NO.2373/AHD/20 11 RAISES FOUR SUBSTANTIVE GROUNDS. ITS FIRST SUBSTANTIVE GROUND PLEADS THAT THE CIT(A) HAS ERRED IN UPHOLDING DISALLOWANCE OF RS.49,62,875/- A S MADE BY THE ASSESSING OFFICER PERTAINING TO ITS DEPRECIATION CLAIM ON PUR CHASE OF BUSINESS RIGHTS / INTANGIBLE ASSETS TRANSFERRED FROM M/S. INDIA INFO. COM. IT EMERGES THAT BOTH THE LOWER AUTHORITIES REFER TO THEIR RESPECTIVE FIN DINGS IN PRECEDING ASSESSMENT YEAR 2007-08 TO CONCLUDE THAT ASSESSEES PURCHASE TRANSACTION HEREINABOVE FROM THE VERY ENTITY IS NOT GENUINE. 3. WE NOTICE AT THE OUTSET THAT THE ASSESSEE HAD FI LED ITA NO.1113/AHD/2011 BEFORE THIS TRIBUNAL CHALLENGING T HE VERY DISALLOWANCE IN ASSESSMENT YEAR 2007-08. A CO-ORDINATE BENCH DECID ED THE SAID ISSUE AGAINST THE REVENUE BY OBSERVING AS FOLLOWS: 5. IN THE LIGHT OF VARIOUS CASE-LAWS RELIED UPON B Y THE LD.COUNSEL FOR THE ASSESSEE, WE ARE OF THE CONSIDERED VIEW THAT THE DEPRECIATION ON GOODWILL IS ALLOWABLE. THE OBJECTIONS OF AUTHORITIES BELOW ARE NOT FOUNDED ON SOUND LEGAL PRINCIPLES. THE AUTHORITIES HAVE MISCONSTRUED THE PROVISIONS OF SEC TION 32 OF THE ACT, WHILE REJECTING THE CLAIM OF THE ASSESSEE. IN THE CASE IN HAND, THE AUTHORITIES BELOW HAVE DOUBTED THE TRANSACTIONS EFFECTED BY THE ASSESSEE-C OMPANY. MORE PARTICULARLY, THE LD.CIT(A) IN THE CASE OF RKIT, TO WHOM THE ASSESSEE HAS PAID A SUM OF RS.2 CRORES FOR ACQUIRING THE OVERSEAS RIGHTS. THE LD.CIT(A) HA S PROCEEDED ON THE ASSUMPTION THAT THE CONTRACTS AS ENTERED INTO BY THE ASSESSEE- COMPANY WERE NOT GENUINE. SUCH ASSUMPTION WAS ON THE BASIS THAT THE ASSIGNMENT AGR EEMENT WAS EXECUTED ON A PLAIN-PAPER AND TERMINATION AGREEMENT WAS EXECUTED ON A STAMP-PAPER. UNDER THE CONTRACT ACT, THERE IS NO DISTINCTION BETWEEN A CON TRACT EXECUTED ON PLAIN-PAPER AND EXECUTED ON A STAMP-PAPER. BOTH THE CONTRACTS A RE ENFORCEABLE UNDER THE CONTRACT ACT. ANY NON-PAYMENT OF THE STAMP DUTY ATT RACTS THE PROVISIONS OF THE RESPECTIVE STAMP ACT. THE AUTHORITIES HAVE NOT GIVE N ANY FINDING AS TO HOW THIS CONTRACT IS THE SHAM TRANSACTION WHO HAVE EXECUTED THE SAME. UNDER THESE FACTS, WE ARE UNABLE TO AGREE WITH THE VIEW OF THE AUTHORI TIES BELOW THAT THE TRANSACTIONS WERE SHAM OR OTHERWISE NOT FOR BUSINESS PURPOSE. TH EREFORE, RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE APEX COURT IN TH E CASE OF CIT VS. SMIFS SECURITIES LTD.(SUPRA) AND THE HON'BLE DELHI HIGH C OURT IN THE CASE OF AVERA T & D INDIA LTD. VS. DCIT(SUPRA), WE ARE OF THE VIEW TH AT THE ASSESSEE IS ELIGIBLE FOR ITA NOS. 2373/AHD/11 & 1088/AHD/14 (D. B. CORP. LTD .) A.Y. 2008-09 & 2006-07 - 3 - DEPRECIATION ON GOODWILL AS CLAIMED AND THIS ADDITI ON MADE ON THIS COUNT IS HEREBY DIRECTED TO BE DELETED. THUS, THIS GROUND OF ASSES SEES APPEAL IS ALLOWED. LEARNED DEPARTMENTAL REPRESENTATIVE FAILS TO PINPOI NT ANY DISTINCTION ON FACTS OR LAW IN THE TWO ASSESSMENT YEARS IN QUES TION. WE THUS ACCEPT ASSESSEES INSTANT SUBSTANTIVE GROUND AND DIRECT TH E ASSESSING OFFICER TO DELETE THE IMPUGNED DISALLOWANCE. 4. LEARNED COUNSEL REPRESENTING ASSESSEE STATES THE REAFTER THAT ITS SECOND SUBSTANTIVE GROUND AVERRING THAT BOTH THE LOWER AUT HORITIES HAVE ERRED IN RESTRICTING SET OFF OF UNABSORBED DEPRECIATION AS P ER RETURNED INCOME OF RS.84,99,417/- TO THAT AS PER ASSESSED INCOME OF RS .16,58,588/- IN THEIR RESPECTIVE ORDERS. HE THEN SUBMITS THAT THIS SUBST ANTIVE GROUND IS CONSEQUENTIAL TO THE FIRST ONE WHICH STANDS ALREADY ACCEPTED. LEARNED DEPARTMENTAL REPRESENTATIVE IS FAIR ENOUGH IN NOT D ISPUTING THE SAME. WE THUS ORDER THAT THE SECOND SUBSTANTIVE GROUND IS RE NDERED INFRUCTUOUS IN VIEW OF OUR FINDINGS IN ASSESSEES FAVOUR IN RELATION TO FIRST SUBSTANTIVE GROUND. 5. THE ASSESSEES THIRD SUBSTANTIVE GROUND CHALLENG ES CORRECTNESS OF BOTH THE LOWER AUTHORITIES ACTION DISALLOWING STAMP DUT Y CHARGES OF RS.1,23,72,972/- PAID FOR INCREASE IN AUTHORIZED SH ARE CAPITAL BY TREATING IT AS CAPITAL EXPENDITURE. WE NOTICE THAT THE ASSESSING OFFICER AS WELL AS THE CIT(A) FOLLOW HONBLE APEX COURTS DECISION IN BROO K BOND INDIA VS. CIT 225 ITR 798 (SC). LEARNED COUNSEL SUBMITS THAT THE ASSESSEE HAD ACTUALLY INCURRED THE IMPUGNED EXPENDITURE IN FURTHERANCE TO ITS OBJECT OF INCREASE IN SHARE CAPITAL THROUGH ISSUANCE OF BONUS SHARES ALRE ADY HELD ALLOWABLE IN ANOTHER APEX COURTS DECISION IN CIT VS. GIC [2006] 156 TAXMANN 96 (SC) AFTER CONSIDERING THE ABOVESTATED CASE LAW. HE HOW EVER STATES VERY FAIRLY THAT THE ASSESSEE DID NOT FILE ITS FACTUAL EVIDENCE OF H AVING INCURRED IMPUGNED EXPENDITURE IN RELATION TO ISSUANCE OF BONUS SHARES . WE THEREFORE REMIT THE ITA NOS. 2373/AHD/11 & 1088/AHD/14 (D. B. CORP. LTD .) A.Y. 2008-09 & 2006-07 - 4 - ISSUE BACK TO THE ASSESSING OFFICER FOR AFRESH DECI SION AFTER AFFORDING ADEQUATE OPPORTUNITY TO ASSESSEE ENABLING IT TO PRO DUCE NECESSARY EVIDENCE PROVING ISSUANCE OF BONUS SHARES. THIS GROUND SHAL L BE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 6. THE ASSESSEES LAST SUBSTANTIVE GROUND ASSAILS B OTH THE LOWER AUTHORITIES ACTION IN DENYING IT CREDIT OF SURCHAR GE AND EDUCATION CESS PAID ON MAT AT THE TIME OF COMPUTING TAX LIABILITY OF TH E IMPUGNED ASSESSMENT YEAR AFTER HOLDING THAT BOTH OF THEM ARE IN THE NAT URE OF CHARGE ON TAX INSTEAD OF TAX ITSELF PAID U/S. 115JB OF THE ACT TO BE ELIG IBLE FOR TAX CREDIT. LEARNED COUNSEL REPRESENTING ASSESSEE MAKES US TO READ SECT ION 2(43) R.W.S. 115JAA, PAGES 48 TO 50 OF THE PAPER BOOK ALONG WITH COMPUT ATION IN PAGES 53 AND 87, FORM ITR-6 FOR THE IMPUGNED ASSESSMENT YEAR AND BLA NK ITR-6 IN ASSESSMENT YEAR 2012 IN SUPPORT OF ASSESSEES PLEA. LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTS THE CIT(A)S ACTIO N UNDER CHALLENGE. WE NOTICE IN THIS FACTUAL BACKDROP THAT THE VERY ISSUE AROSE BEFORE THIS TRIBUNALS CO-ORDINATE BENCH IN ASSESSMENT YEAR 2007-08 WYETH LTD. VS. ACIT ITA NO.6682/MUM/2011 DECIDED ON 09.01.2015 WHEREIN THE SAME WAS DECIDED AGAINST THE REVENUE WITH THE FOLLOWING OBSERVATIONS : 4. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD, WE NOTE THAT THE AUTHORITIES BELOW HELD THA T THE MAT CREDIT IS ALLOWABLE AGAINST THE TAX LIABILITY INCLUSIVE OF SURCHARGE AN D CESS AND NOT THE TAX PAYABLE BEFORE THE SURCHARGE AND CESS. THE ASSESSEE HAS REL IED UPON THE JUDGMENT OF ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. VACMENT INDIA (349 ITR 304) WHEREIN THE HON'BLE HIGH COURT WHILE CONSIDERING TH E QUESTION OF SURCHARGE AND EDUCATION CESS ON TAX PAYABLE HAS BEEN CALCULAT ED BEFORE ALLOWING THE CREDIT OF MAT U/S 115JAA HELD IN PARA 5 TO 7 AS UND ER:- 5. THE ONLY QUESTION WHICH IS RAISED PERTAINS TO TH E COMPUTATION OF TAX IN ACCORDANCE WITH THE MODALITIES WHICH ARE PRE SCRIBED IN THE RELEVANT FORM, ITR-6. IN SO FAR AS IS MATERIAL THE RELEVANT ENTRIES IN THE FORM (PART B-TTI) ARE AS FOLLOWS: 3. GROSS TAX PAYABLE (ENTER HIGHER OF 2C AND 1) ITA NOS. 2373/AHD/11 & 1088/AHD/14 (D. B. CORP. LTD .) A.Y. 2008-09 & 2006-07 - 5 - 4. CREDIT UNDER SECTION 115JAA OF TAX PAID IN EARLIER YEARS (IF 2C IS MORE THAN 1) (7 OF SCHEDULE MATC) 5. TAX PAYABLE AFTER CREDIT UNDER SECTION 115JAA [3- 4] 6. SURCHARGE ON 5 7 EDUCATION CESS, INCLUDING SECONDARY AND HIGHER ED UCATION CESS ON (5+6) 8. GROSS TAX LIABILITY (5+6+7) 6 THE AFORESAID ENTRIES LEAVE NO MANNER OF AMBIGUIT Y IN REGARD TO THE METHOD OF COMPUTATION OF TAX LIABILITY. ENTRY 3 REQUIRES COMPUTATION OF THE GROSS TAX PAYABLE. UNDER ENTRY 4, CREDIT IS REQUIRED TO BE GIVEN UNDER SECTION 115JAA OF THE ACT OF THE TAX PAID IN EARLIER YEARS. ENTRY 5 REQUIRES A COMPUTATION OF THE TAX PAYABLE AFTER CRE DIT UNDER SECTION 11BJAA OF THE ACT. THE MATTER IS PLACED BEYOND DOUB T BY THE PARENTHESIS, WHICH INDICATES THAT TAX PAYABLE UNDER ENTRY 5 IS TO BE 'ARRIVED AT BY DEDUCTING THE CREDIT UNDER SECTION 1 15JAA OF THE ACT (UNDER ENTRY 3) FROM THE GROSS TAX PAYABLE (UNDER E NTRY 4). THE SURCHARGE 'IS COMPUTED ON THE AMOUNT REFLECTED IN E NTRY 5. 7 THE TRIBUNAL HAS NOTED THAT FROM THE NEXT ASSESSM ENT YEAR, THE ASSESSMENT YEAR 2012-13, THE POSITION WAS MATERIALL Y ALTERED BUT, IN THE PRESENT CASE, SINCE TH E DISPUTE RELATED TO THE ASSESSMENT YEAR 2011-12, THE METHOD OF COMPUTATION, AS DIRECTED BY THE COMMI SSIONER (APPEALS) WAS PLAINLY IN ACCORDANCE WITH THE METHODOLOGY AS P ROVIDED IN ITR-6. 'THE TRIBUNAL IN CONFIRMING THE ORDER OF THE COMMIS SIONER (APPEALS) HAS, HENCE, NOT COMMITTED ANY ERROR. THE APPEAL-WIL L NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW AND IS, ACCORDINGLY , DISMISSED.' 5. THUS IT IS CLEAR THAT THE HON'BLE HIGH COURT HAS TAKEN INTO ACCOUNT THE ORDER OF ENTRIES THE FORM ITR-6 FOR THE A.Y. 2011-1 2 IN THE SAID CASE AND HELD THAT AS PER FORM ITR-6, THE MAT CREDIT HAS TO BE GI VEN AGAINST THE GROSS TAX PAYABLE EXCLUSIVE OF SURCHARGE /CESS AND ONLY AFTER THE MAT CREDIT TAX LIABILITY, THE SURCHARGE AND CESS HAS TO BE CALC ULATED FOR THE PURPOSE OF WORKING OUT THE GRAND TAX LIABILITY. WE ALSO FIND MERIT AND SUBSTAN CE IN THE ALTERNATIVE CONTENTION OF THE ASSESSEE THAT IF THE MAT CREDIT I S TAKEN INTO ACCOUNT WITHOUT INCLUDING THE SURCHARGE AND EDUCATION CESS THEN ALL OWING THE SURCHARGE AND EDUCATION CESS ON THE TAX LIABILITY HAS TO BE CALCU LATED ONLY AFTER ALLOWING THE MAT CREDIT. ALTERNATIVELY, THE AMOUNT OF MAT CREDIT SHOULD ALSO INCLUDE SURCHARGE AND EDUCATION CESS FOR THE PURPOSE OF ALL OWING THE CREDIT AGAINST THE TAX LIABILITY INCLUSIVE OF SURCHARGE AND EDUCATION CESS. THEREFORE, THE MAT AS WELL AS NORMAL TAX BEFORE ALLOWING THE MAT CREDIT H AS TO BE TAKEN ON PARITY EITHER EXCLUSION OF SURCHARGE AND EDUCATION CESS OR INCLUSIVE OF SURCHARGE AND EDUCATION CESS OR INCLUSIVE OF SURCHARGE AND EDUCAT ION CESS. ACCORDINGLY WE SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND DIREC T THE ASSESSING OFFICER TO ALLOW THE MAT CREDIT AGAINST THE TAX LIABILITY PAYA BLE BEFORE SURCHARGE AND EDUCATION CESS OR ALTERNATIVELY THE AMOUNT OF MAT C REDIT SHOULD ALSO BE INCLUSIVE OF SURCHARGE AND EDUCATION CESS AND THEN ALLOW THE CREDIT AGAINST THE TAX PAYABLE INCLUSIVE OF SURCHARGE AND EDUCATION CE SS. ITA NOS. 2373/AHD/11 & 1088/AHD/14 (D. B. CORP. LTD .) A.Y. 2008-09 & 2006-07 - 6 - IT IS THEREFORE CLEAR THAT THE CIT(A)S REASONING UNDER CHALLENGE IS NOT SUSTAINABLE. WE ACCORDINGLY ACCEPT ASSESSEES INST ANT SUBSTANTIVE GROUND AND DIRECT THE ASSESSING OFFICER TO FINALIZE NECESSARY COMPUTATION. THIS FORMER APPEAL ITA NO.2373/AHD/2011 IS PARTLY ALLOWED. 7. WE NOW ADVERT TO ASSESSEES LATTER APPEAL ITA NO .1088/AHD/2014 PREFERRED AGAINST THE CIT-I, AHMEDABADS ORDER DATE D 21.02.2014 PASSED U/S.263 OF THE ACT. 8. WE COME TO BASIC FACTS IN THIS INSTANT CASE. TH E ASSESSEE HAD FILED ITS RETURN ON 27.12.2006 DECLARING INCOME OF RS.36.06CR ORES. THE ASSESSING OFFICER FRAMED A REGULAR ASSESSMENT ON 24.12.2008 M AKING DISALLOWANCE OF FOREIGN TRAVEL EXPENSES AMOUNTING TO RS.10.13LACS. HE THEREAFTER FORMED REASONS TO BELIEVE THAT THE ASSESSEES TAXABLE INCO ME LIABLE TO BE ASSESSED HAD ESCAPE ASSESSMENT. HE ACCORDINGLY REOPENED THE ABO VE REGULAR ASSESSMENT ON TWO GROUNDS THAT ALTHOUGH THE ASSESSEE HAD INVES TED RS.70.08 CRORES IN SHARES IN THE RELEVANT PREVIOUS YEAR, IT DID NOT MA KE ANY DISALLOWANCE U/S.14A OF THE ACT. HIS NEXT ISSUE TO REOPEN THE A BOVE ASSESSMENT WAS ON THE GROUND THAT THE ASSESSEE WAS NOT ELIGIBLE FOR ADDIT IONAL DEPRECIATION OF RS.1.99 CRORES OVER AND ABOVE NORMAL DEPRECIATION @ 80% ON WINDFARM. THE ASSESSING OFFICER THEREAFTER FRAMED THE RE-ASSESSME NT IN QUESTION ON 30.12.2011 ACCEPTING ASSESSEES EXPLANATION ON BOTH COUNTS. 9. IT IS EVIDENT THAT LEARNED CIT TERMED THE ABOVE RE-ASSESSMENT TO BE ERRONEOUS CAUSING PREJUDICE TO INTEREST OF THE REVE NUE ON THE VERY TWO GROUNDS FORMING SUBJECT MATTER OF RE-ASSESSMENT. I T EMERGES THAT THE CIT HAS THEREAFTER REJECTED ASSESSEES OBJECTION TO HIS REV ISION SHOW CAUSE NOTICE THAT THE ASSESSING OFFICER HAD MADE ALL NECESSARY ENQUIR IES DURING RE-ASSESSMENT IN NOT DISALLOWING THE ABOVE TWO CLAIMS. THE CIT H OWEVER HOLDS THAT THE ITA NOS. 2373/AHD/11 & 1088/AHD/14 (D. B. CORP. LTD .) A.Y. 2008-09 & 2006-07 - 7 - ASSESSING OFFICER HAD NOT CONDUCTED ALL DUE INQUIRI ES BEFORE ACCEPTING THE ABOVE TWO CLAIMS. HE THEN DIRECTS THE ASSESSING OF FICER TO MAKE AFRESH ASSESSMENT AS UNDER: 8. I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS MADE BY THE LD. AR OF THE ASSESSEE. SO FAR AS THE OBJECTION OF THE ASSESSEE AGAINST PROCEEDINGS U/S 263 IS CONCERNED ON THE GROUND THAT ACTION U/S 263 IS NOT POSSIBLE IN CASES WHERE TILE A.O. HAD ALREADY EXAMINED THE ISSUE, THIS PROP OSAL IS PALPABLY UNTENABLE FOR THE REASON THAT THE POWER U/S 263 IS INTENDED TO CO RRECT THE WRONG ASSESSMENT MADE BY THE ASSESSING AUTHORITY. THIS IS ALSO NOT A CASE OF TWO VIEWS ON AN ISSUE SINCE THIS IS A MATTER OF NOT APPLYING THE ACTUAL P ROVISIONS OF THE ACT WITH THE FACTS OF THE CASE WHICH HAS NOT BEEN EXAMINED BY THE AO. THE PLEA OF THE ASSESSEE THAT THE AO HAD VERIFIED THE CLAIM OF ADDITIONAL DEPRECI ATION DURING THE ASSESSMENT PROCEEDINGS IS NOT SUBSTANTIATED FROM THE ASSESSMEN T RECORDS. NO ENQUIRY WAS DONE BY THE AO REGARDING THE ADMISSIBILITY OF CLAIM FOR ADDITIONAL DEPRECIATION MADE BY THE ASSESSEE. IN THIS CONNECTION, REFERENCE IS MADE TO THE DECISION OF DELHI HIGH COURT IN THE CASE OF GEE VEE ENTERPRISES V. AD DL. CIT (99 ITR 375), WHEREIN AFTER CONSIDERING THE DECISION OF SUPREME C OURT IN THE CASES OF RAM PYARI DEVI SARAOGI V C1T (67 ITR 84) AND SMT. TARA DEVI A GARWAL V CIT (88 ITR 323), IT WAS HELD THAT 'THE POSITION AND FUNCTION OF THE INCOME-TAX OFFICER IS VERY, DIFFERENT FROM THAT OF A CIVIL COURT. THE STATEMENT S MADE IN A PLEADING PROVED BY MINIMUM AMOUNT OF EVIDENCE MAY BE ACCEPTED BY A CIV IL COURT IN ABSENCE OF ANY REBUTTAL, THE CIVIL COURT IS NEUTRAL, IT IS SIMPLY GIVEN DECISION ON THE BASIS OF THE PLEADINGS AND EVIDENCE WHICH COMES BEFORE IT. THE I NCOME-TAX OFFICER IS NOT ONLY AN ADJUDICATOR BUT ALSO AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF A RETURN WHICH IS APPARENT IN THE ORDER BUT CALL FOR FARTHER INQUIRY. IT IS HIS DUTY TO ASCERTAIN THE TRUTH, OF THE FACTS, STATED IN THE RE TURN WHEN THE CIRCUMSTANCES OF THE CASE ARE SUCH AS TO PROVOKE AN INQUIRY. THE MEANING TO BE GIVEN TO THE WORD 'ERRONEOUS' IN SECTION 263 EMERGES OUT OF THIS CONT EXT, IT IS BECAUSE IT IS INCUMBENT ON THE INCOME-TAX OFFICER TO FURTHER INVESTIGATE TH E FACTS STATED IN THE RETURN WHEN CIRCUMSTANCES WOULD MAKE SUCH AN INQUIRY PRUDENT TH AT THE WORD 'ERRONEOUS' IN SECTION 263 INCLUDES THE FAILURE TO MAKE SUCH AN IN QUIRY. THE ORDER BECOMES ERRONEOUS BECAUSE SUCH AN INQUIRY HAS NOT BEEN MADE AND NOT BECAUSE THERE IS ANYTHING WRONG WITH THE ORDER IF ALL THE FACTS STAT ED THEREIN ARE ASSUMED TO BE CORRECT. MOREOVER, IN THE CASE OF MALABAR INDUSTRI AL CO. LTD. (243 ITR 83) THE SUPREME COURT HAS CLEARLY SPELT OUT THAT INCORRECT ASSUMPTION OF FACTS AND INCORRECT APPLICATION OF LAW AS ALSO NON APPLICATIO N OF MIND WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS, AS PER TH E PROVISIONS OF SECTION 263(1), ANY PROCEEDING UNDER THE INCOME TAX ACT AND ANY ORD ER PASSED THEREIN COMES WITHIN THE AMBIT OF REVISION U/S 263. IF THE STAND TAKEN BY THE A.O. WERE FINAL, THEN THERE WAS NO NEED TO HAVE SECTION 263 ON THE STATUT E BOOK AT ALL. SUCH INTERPRETATION WOULD RENDER THE SECTION SUPERFLUOUS WHICH COULD NEVER BE THE INTENTION OF THE LEGISLATURE. FURTHER, IN SWARUP VE GETABLE PRODUCTS VS CIT, 187 ITR 412 (ALL.), IT WAS HELD THAT IT WAS BEYOND DISP UTE THAT U/S 263 THE COMMISSIONER JOES HAVE THE POWER TO SET ASIDE-THE A SSESSMENT ORDER AND SEND THE MATTER FOR FRESH ASSESSMENT IF HE IS SATISFIED THAT FURTHER ENQUIRY IS NECESSARY AND THAT THE IMPUGNED ORDER IS ERRONEOUS AND PREJUDICIA L TO THE INTERESTS OF REVENUE. ITA NOS. 2373/AHD/11 & 1088/AHD/14 (D. B. CORP. LTD .) A.Y. 2008-09 & 2006-07 - 8 - THE SUPREME COURT HAS HELD IN CIT VS SHREE MANJUNAT HSWARE PACKING PRODUCTS & CAMPHOR WORKS, 231 ITR 53, THAT THE REVISIONAL POWE R CONFERRED ON THE COMMISSIONER U/S 263 IS OF WIDE AMPLITUDE. HENCE, H AVING REGARD TO THE JUDICIAL PRONOUNCEMENTS ON THE SUBJECT, I AM OF THE VIEW THA T THIS OBJECTION OF THE AR IS NOT MAINTAINABLE. 9. COMING TO THE ARGUMENTS ON MERITS, FIRSTLY REGA RDING INVOKING OF PROVISIONS OF SECTION 14A, THE ASSESSEE CANNOT JUST STATE THAT , THERE IS NO NEXUS BETWEEN THE EXPENSES AND EARNING OF EXEMPT INCOME. IT IS A FAC T THAT THE ASSESSEE ENGAGED IN THE BUSINESS OF PUBLISHING NEWS PAPERS, HAS INVESTE D RS.70.08 CRORES IN SHARES FOR WHICH NO SEPARATE ACCOUNTS HAVE BEEN MAINTAINED. TH E ASSESSEE HAS ALSO INCURRED INTEREST AND ADMINISTRATIVE EXPENSES WHICH ARE THUS PARTLY ATTRIBUTABLE, TO THE ACTIVITY OF INVESTMENT IN SHARES. IT IS ALSO NOT NE CESSARY THAT THE ASSESSEE ACTUALLY EARNS EXEMPT INCOME SINCE THE ASSESSEE HAS ALREADY DEPLOYED SUBSTANTIAL FUNDS AS A GROUND WORK FOR EARNING EXEMPT INCOME DURING THE YEAR. IN THIS REGARD, RELIANCE IS PLACED OIL THE DECISION OF SPECIAL BENCH OF ITAT , DELHI IN THE EASE OF CHEMINVEST LTD. V ITO (124 TTJ 577). SECTION 14A HA S BEEN INSERTED BY THE FINANCE ACT 2001 W.E.F 1.4.1962 WITH A VIEW TO CURT AIL CLAIM OF EXPENDITURE WHICH IS RETABLE TO INCOME WHICH IS NOT INCLUDABLE IN TOT AL INCOME. SUCH EXPENDITURE IS THEREFORE REQUIRED TO BE QUANTIFIED AND DISALLOWED WHILE COMPUTING TOTAL INCOME OF THE ASSESSEE. THE PROVISIONS OF RULE 8D WHICH HAVE BEEN INSERTED. W.E.F 24.03.2008 CAN VERY WELL BE APPLIED IN ASSESSMENTS PASSED AFTER THIS DATE THOUGH THE ASSESSMENT YEARS MAY BE BEFORE THAT DATE. RULE 8D IS A FORM OF A METHOD FOR QUANTIFICATION OF EXPENDITURE WHICH IS RELATABLE TO EARNING OF EXEMPT INCOME WHEN THE LESSEE .HAS ITSELF NOT DISALLOWED SUCH EXPENDIT URE IN A PROPER MANNER. THE SAID METHOD GIVEN IN RULE 8D(2)(I)/(II)/(III) CAN LOGICA LLY, BE USED TO QUANTIFY THE DISALLOWANCE FOR THE PURPOSE OF REFERENCE AS IT IS A METHOD AND NOT A PROVISION OF THE ACT, IT IS THUS OBVIOUS THAT WHEN SUBSTANTIAL I NVESTMENT HAS BEEN MADE BY THE ASSESSEE IN SHARES DURING THE FINANCIAL YEAR AND NO SEPARATE ACCOUNTS ARE MAINTAINED, EXPENDITURE ATTRIBUTABLE TO THE SAME MU ST BE DISALLOWED AS THE SAME CANNOT BE REGARDED AS SPENT FOR THE PURPOSE OF BUSI NESS. FOR THIS, RELIANCE IS PLACED ON THE DECISION OF CALCUTTA HIGH COURT IN TH E OF CIT-III, KOLKATA V RKBK FINANCIAL SERVICES (P) LTD. (32 TAXMAN.COM 153). 10. REGARDING THE ISSUE OF ADDITIONAL DEPRECIATION ON WIND FARM THE ASSESSEE'S CONTENTION THAT IT WAS ELIGIBLE TO CLAIM ADDITIONAL DEPRECIATION AS IT HAD EXERCISED THE OPTION AS PER RULE 5(1 A) IS NOT FOUND TENABLE, AS PER RULE 5(1 A) THE DEPRECIATION U/S 32(1)(I) IS TO BE CALCULATED AS PE R PERCENTAGE SPECIFIED IN APPENDIX 1A. AS PER THE PROVISO AN 'UNDERTAKING SPE CIFIED U/S 32(1)(I) MAY OPT FOR ALLOWANCE OF DEPRECIATION UNDER RULE 5(1) R.W APPEN DIX I, AS PER APPENDIX I, WIND MILLS INSTALLED BEFORE 31.03.2012 ARE ELIGIBLE FOR NORMAL DEPRECIATION AS PER CLAUSE (XIII). IT IS THEREFORE APPARENT THAT THE EX ERCISE OF AN OPTION TO CLAIM DEPRECIATION EITHER AS PER APPENDIX I OR IA RELATES TO NORMAL DEPRECIATION ONLY. THE RATE OF ADDITIONAL DEPRECIATION HAS BEEN GIVEN IN THE SECTION 32(L)(IIA) ITSELF WHICH DOES NOT REQUIRE REFERENCE TO ANY RATES OF NO RMAL DEPRECIATION GIVEN EITHER IN APPENDIX I OR IA, FOR CLAIMING ADDITIONAL DEPREC IATION THE ACTUAL PROVISIONS OF SECTION 32(L)(IIA) ARE REQUIRED TO BE SATISFIED IRR ESPECTIVE OF THE OPTION TAKEN BY THE ASSESSES FOR CLAIMING NORMAL DEPRECATION. MOREOVER THE WIND TERM DOES NOT MANUFACTURE ANY ARTICLE OR THING AS ENVISAGED IN SE CTION 32(1)(IIA) AND SECTION 2(29BA). IT IS ALSO SEEN THAT SECTION 32(L)(IIA) HA S BEEN AMENDED BY FINANCE ACT ITA NOS. 2373/AHD/11 & 1088/AHD/14 (D. B. CORP. LTD .) A.Y. 2008-09 & 2006-07 - 9 - 2012 W.E.F 1.4.2013 TO INCLUDE THE BUSINESS OF GENE RATION OR GENERATION AND DISTRIBUTION OF POWER. IT IS THEREFORE, CLEAR THAT IN THE PRESENT FORM THE SECTION WILL NOT BE APPLICABLE FOR GENERATION OF POWER FOR AY 20 06-07. THE JUDICIAL DECISIONS RELIED UPON BY THE ASSESSEE IN THIS REGARD WERE NEI THER PRESENTED BEFORE THE AO DURING ASSESSMENT PROCEEDINGS NOR EXAMINED BY HIM. 11. CONSIDERING THE ABOVE FACTS AND FINDINGS, IT IS AMPLY CLEAR THAT THE AO HAS ERRED IN NOT DISALLOWING PROPORTIONATE EXPENDITURE RELATED TO EARNING EXEMPT INCOME AS PER SECTION 14A R.W.R 8D AND ALSO IN ALLO WING ADDITIONAL DEPRECIATION ON WIND FARM. AS A RESULT THEREOF, THERE WAS SUBSTA NTIAL 'LOSS OF REVENUE TO THE EXCHEQUER SINCE THE INCOME OF THE ASSESSEE WAS ASSE SSED AT A LOWER RATE. ACCORDINGLY, IT IS HELD THAT THE ASSESSMENT ORDER P ASSED U/S 143(3) R.W.S 147 DATED 30-12-2011 WAS ERRONEOUS AND PREJUDICIAL TO THE INT EREST OF REVENUE, HENCE, THE SAID ASSESSMENT FOR A.Y.2006-07 DATED 30-12-2011 IS CANCELLED AND THE AO IS DIRECTED TO MAKE FRESH ASSESSMENT OF THE TOTAL INCO ME OF THE ASSESSEE FOR THE SAID ASSESSMENT YEAR, AFTER ALLOWING OPPORTUNITY TO THE ASSESSEE AS PER LAW. THIS LEAVES THE ASSESSEE AGGRIEVED. 10. WE HAVE HEARD BOTH PARTIES REITERATING THEIR RE SPECTIVE STANDS. THERE CAN HARDLY BY ANY DISPUTE THAT HONBLE APEX COURTS LANDMARK DECISION IN MALABAR INDUSTRIAL CO. LTD. VS. CIT [2000] 243 ITR 83 (SC) TERMS LACK OF ENQUIRY ON AN ASSESSING OFFICERS PART TO BE A CASE OF ERROR CAUSING PREJUDICE TO INTEREST OF THE REVENUE EXIGIBLE TO SECTION 263 REVISIONAL JURISDICTION. WE KEEP IT MIND THE SAID LEGAL BACKDROP TO DECIDE THE INSTANT ISSUE. IT EMANATES FROM ASSESSING OFFICERS RE-ASSESSMENT ORDER THAT H E DECIDED BOTH ISSUES IN ASSESSEES FAVOUR THEREBY NOT MAKING ANY DISALLOWAN CE. HE FIRST OF ALL OBSERVED IN RESPECT OF DISALLOWANCE OF INTEREST AND ADMINISTRATIVE EXPENSES THAT RULE 8D IS APPLICABLE ONLY FROM ASSESSMENT YEA R 2008-09. LEARNED DEPARTMENTAL REPRESENTATIVE FAILS TO DISPUTE HONBL E BOMBAY HIGH COURTS DECISION TO THIS EFFECT IN GODREJ BOYCE CASE 328 IT R PAGE 1. SIMILAR IS THE FACTUAL POSITION REGARDING LATTER ISSUE OF ADDITION AL DEPRECIATION. WE NOTICE THAT THE ASSESSING OFFICER HAS DISCUSSED THE ISSUE AT LENGTH IN HIS REASSESSMENT DATED 30.12.2011 BEFORE EXPRESSING AGR EEMENT WITH ASSESSEES CLAIM OF ADDITIONAL DEPRECIATION. WE THEREFORE ARE OF THE OPINION THAT THE CITS FORMER REASON HOLDING THE ASSESSING OFFICER T O HAVE NOT CONDUCTED ALL ITA NOS. 2373/AHD/11 & 1088/AHD/14 (D. B. CORP. LTD .) A.Y. 2008-09 & 2006-07 - 10 - DUE INQUIRIES ITSELF IS NOT SUSTAINABLE IN VIEW OF THE ABOVESTATED CASE LAW. WE THEREFORE RESTORE THE ABOVE RE-ASSESSMENT AND REVER SE THE CITS ORDER UNDER CHALLENGE. ITA NO.1088/AHD/2014 IS ACCEPTED. 11. THIS ASSESSEES FORMER APPEAL ITA NO.2373/AHD/2 011 IS PARTLY ALLOWED AND LATTER APPEAL ITA NO.1088/AHD/2014 IS A LLOWED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 23 RD DAY OF MARCH, 2017.] SD/- SD/- ( N. K. BILLAIYA ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 23/03/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE 3 ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 45 / GUARD FILE. BY ORDER / . // . /0