DCIT Corporate Circle 2(2), CHENNAI V. India Piston Ltd., CHENNAI

ITA 2383/CHNY/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9534 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 28-09-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R ANITHA IRS
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Depreciation; Additional depreciation; Earning of tax free income; Unabsorbed depreciation; Rule 8D; Set aside
• Section: 143(3); 14A; 32(1)(iia); 201; 32; 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI . . . , , [BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ] ./I.T.A. NOS.2339 & 2340/CHNY/2017 ! / ASSESSMENT YEARS :2010-11 AND 2011-12. M/S. INDIA PISTONS LIMITED, HUZUR GARDENS, SEMBIUM, CHENNAI 600 011. VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2(2) CHENNAI. ./I.T.A. NOS.2383 & 2384/CHNY/2017 ! / ASSESSMENT YEARS : 2010-11 AND 2011-12 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2(2) CHENNAI. VS. M/S. INDIA PISTONS LIMITED, HUZUR GARDENS, SEMBIUM, CHENNAI 600 011. [PAN AAACI 1439E] ( / APPELLANT) ( /RESPONDENT) ASSESSEE BY : SHRI. R. VIJAYARAGHAVAN, ADV DEPARTMENT BY : MS. R. ANITHA, IRS, JCIT. ' # $ % /DATE OF HEARING : 27-08-2019 &'! $ % /DATE OF PRONOUNCEMENT : 26-09-2019 ITA NO. 2339-40-83-84/2017 :- 2 -: / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND R EVENUE DIRECTED AGAINST THE COMMON ORDER OF THE LEARNED CO MMISSIONER OF INCOME TAX (APPEALS)-9, CHENNAI (HEREINAFTER CALLED AS CIT(A)) DATED 09.06.2017 FOR THE ASSESSMENT YEARS (AY) 2010-2011 AND 2011-2012. 2. SINCE, THE IDENTICAL FACTS AND ISSUES ARE INVOLVED IN THESE APPEALS, WE PROCEED TO DISPOSE OF THE SAME VIDE THI S COMMON ORDER. 3. FOR THE SAKE OF CONVENIENCE AND CLARITY THE FACTS R ELEVANT TO THE APPEAL FOR ASSESSMENT YEAR 2010-11 ARE STATED HEREI N. 4. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE APPELLANT NAMELY INDIA PISTONS LTD IS A COM PANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956. IT IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF PISTON AND PISTON ASSEMBLIES. THE RETURN OF INCOME FOR THE AY 2010-1 1 WAS FILED ON 12.10.2010 AND THE SAME WAS REVISED ON 27.03.2012 DISCLOSING TOTAL INCOME OF RS.27,13,491/-. AGAINST THE SAID RETURN O F INCOME, THE ASSESSMENT WAS COMPLETED BY THE DY. CIT, COMPANY C IRCLE-II(3), CHENNAI (HEREINAFTER CALLED AO) VIDE ORDER DATED 28.03.2013 PASSED ITA NO. 2339-40-83-84/2017 :- 3 -: U/S. 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) AT TOTAL INCOME OF RS.15,68,73,550/-. WHILE DOING SO, THE A SSESSING OFFICER MADE DISALLOWANCE OF I2,02,62,946/- U/S.14A OF THE ACT, ADDITIONAL DEPRECIATION OF I41,54,090/- AND EXPORT PROMOTION EXPENDITURE OF I21,00,000/-. 5. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE LD. CIT(A), WHO VIDE IMPUGNED ORDER HAD PARTLY ALLOWED THE APPE AL BY SETTING ASIDE THE ISSUE OF DISALLOWANCE OF INTEREST U/S.14A R.W.R. 8D (2) (II) OF THE ACT TO THE ASSESSING OFFICER TO VERIFY WHETHER OWN FUNDS WERE UTILIZED FOR MAKING INVESTMENTS WHICH YIELDED EXEM PT INCOME WHILE CONFIRMING THE DISALLOWANCE UNDER RULE 8D(2) (III) OF THE ACT. AS REGARDS TO THE DISALLOWANCE OF ADDITIONAL DEPRECIAT ION CLAIMED U/S.32(1) (IIA) OF THE ACT, THE LD. CIT(A) FOLLOWIN G THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF B RAKES INDIA LTD VS. DCIT, 2017-TIOL-710-HC-MAD-IT HELD THAT BALANCE OF DEPRECIATION CAN BE CLAIMED IN THE SUBSEQUENT ASSESSMENT YEARS, ACCORDINGLY DELETED THE ADDITION. AS REGARDS TO THE EXPORT PROM OTION EXPENDITURE, LD. CIT(A) CONFIRMED THE DISALLOWANCE FOLLOWING T HE DECISION OF CO- ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN C ASE IN ITA NO.2186/MDS/2010, DATED 30.09.2016 FOR ASSESSMENT Y EAR 2006-07. ITA NO. 2339-40-83-84/2017 :- 4 -: 6. AGGRIEVED BY THAT PART OF THE LD. CIT(A) ORDER, WHI CH IS AGAINST ASSESSEE-COMPANY, THE ASSESSEE COMPANY IS IN APPEAL IN ITA NO.2339/CHNY/2017, WHEREAS THE REVENUE IS IN A PPEAL IN ITA NO.2383/CHNY/2017 ON THE GROUNDS WHICH ARE DECIDED IN FAVOUR OF THE ASSESSEE COMPANY. 7. NOW, WE TAKE UP APPEAL OF THE ASSESSEE IN ITA NO.2339/CHNY/2017, FOR ASSESSMENT YEAR 2010-2011 FO R ADJUDICATION. 8. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (A PPEALS) IS CONTRARY TO LAW, FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 2.1 THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.15,16,995/- (0.5% OF AVERAGE INV ESTMENT) U/S 14A BY APPLYING RULE 8D(III). 2.2 THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT ONLY THOSE INVESTMENTS MADE IN THE CURRENT ASSESSMENT YEAR THAT HAD YIELDED DIVIDEND INCOME AF TER EXCLUDING THE INVESTMENTS MADE IN SUBSIDIARIES/GROUP COMPANIES AS HELD BY THE HONBLE CHENNAI TRIBUNAL IN THE CASE OF EIH ASSOCIA TED HOTELS LTD VS. CIT REPORTED IN 201 3-TIOL-796-ITAT- MAD, 2.3 THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE HONBLE CHENNAI ITAT IN THE CA SE OF COMPUTER AGE MANAGEMENT SERVICES (P) LTD IN ITA NOS. 1236, 1240, 1259,1261/2014 DT 28.11.2014 HELD THAT DISALLOWANCE U/S 14A R.W.R 8D CAN BE MADE ONLY BY TAKING INTO CONSIDERATION THE INVESTMENTS W HICH HAS GIVEN RISE TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTA L INCOME. 3. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N CONFIRMING THE DISALLOWANCE OF EXPORT PROMOTION EXPENSES AMOUNTING TO RS.21 ,00,000/- 3.1 THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THIS AMOUNT REPRESENTS THE SHARE O F (CENTRAL BANK OF ITA NO. 2339-40-83-84/2017 :- 5 -: INDIA APPROVED) LONDON OFFICE MAINTENANCE EXPENSES REIMBURSED TO M/S. AMALGAMATIONS PVT. LTD, THE HOLDING COMPANY OF THE AMALGAMATIONS GROUP TO WHICH THE APPELLANT COMPANY BELONGS. 3.2 THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT FOREIGN BRANCH LIAISON REPRESENTAT IVE IS ACTING FOR AND ON BEHALF OF ALL THE GROUP COMPANIES AND THE EXPENS ES INCURRED BY THE LIAISON REPRESENTATIVE IS SHARED BY THE GROUP COMPA NIES. 3.3 THE COMMISSIONER OF INCOME TAX(APPEALS) OUGHT T O HAVE APPRECIATED THAT FOR CONVENIENCE; AMALGAMATIONS PRI VATE LTD MAKES THE PAYMENT TO THE LIAISON OFFICE AND RECOVERS THE SHARE OF EXPENSES FROM THE INDIVIDUAL GROUP COMPANIES. 3.4 THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE AMALGAMATIONS PRIVATE LTD IS N OT RENDERING ANY SERVICE TO THE GROUP COMPANIES EXCEPT MAKING THE PA YMENT IN ADVANCE AND RECOVERING FROM THE GROUP COMPANIES. 3.5 THE COMMISSION OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE LIAISON OFFICE IS RENDERING SE RVICE DIRECTLY TO THE GROUP COMPANIES BY WAY OF PROVISION OF OFFICE PREMI SES AND PROVISION FOR SECRETARIAT SERVICE FOR THE USE OF PARTICIPATIN G COMPANIES FOR MEETING EXPORTERS/IMPORTERS OF THE RESPECTIVE COMPA NIES. 3.6 THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE EXPENDITURE HAS BEEN INCURRED FOR THE PURPOSES OF BUSINESS OF THE APPELLANT AND THE EXPENSES ARE THUS REVENUE IN NATURE. HENCE THE ENTIRE EXPENSES ARE ALLOWABLE AS DEDUCTIO N. 4. THE APPELLANT CRAVES LEAVE TO ADDUCE ADDITIONAL GROUNDS AT THE TIME OF HEARING. 9. THE GROUNDS OF APPEAL NO.1 & 4 ARE GENERAL IN NATU RE THEREFORE, DOES NOT REQUIRE ANY ADJUDICATION. 10. GROUNDS OF APPEAL NO.2 CHALLENGES THE CORRECTNESS OF THE ORDER OF THE CIT(A), CONFIRMING THE ADDITION U/S.1 4A R.W.R.8D(2) (III) OF THE ACT. IT IS SUBMITTED THAT FOR THE PURPOSE OF C OMPUTING ITA NO. 2339-40-83-84/2017 :- 6 -: DISALLOWANCE UNDER CLAUSE (III) OF RULE 8D(2) ONL Y THOSE INVESTMENTS WHICH YIELDED EXEMPT INCOME ALONE TO BE RECKONED WI TH, IN THIS CONNECTION HE PLACED RELIANCE ON THE JUDGMENT OF H ONBLE DELHI HIGH COURT IN THE CASE OF ACB INDIA LIMITED VS. ACIT, (2 015) 374 ITR 108. 11. ON THE OTHER HAND, THE LD. SR. DEPARTMENTAL REPRESE NTATIVE PLACED RELIANCE ON THE ORDERS OF LOWER AUTHORITIES. 12. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD, HAVING REGARD TO THE DECISION OF HONBLE DE LHI HIGH COURT IN THE CASE OF ACB INDIA LTD (SUPRA ) AND THE DECISION OF THE DELHI SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. VIREET INVESTMENT PVT. LTD, 2017-TIOL-923-ITAT-DEL-SB, WE ARE OF THE CONSIDERED OPINION THAT THE AVERAGE VALUE OF INVESTMENTS WHICH YIELDED EXEMPT INCOME ALONE ARE TO BE CONSIDERED FOR THE PURPOSE OF COMPU TING DISALLOWANCE. ACCORDINGLY, WE REMIT THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO RECOMPUTE THE AMOUNT OF DISALLOWANCE UNDER CLAUS E (III) OF RULE 8D(2) BY ADOPTING ONLY AVERAGE VALUE OF INVESTMENT S WHICH YIELDED EXEMPT INCOME. THUS, GROUNDS OF APPEAL NO.2 IS PAR TLY ALLOWED FOR STATISTICAL PURPOSE. 13. GROUND NO.3 RELATES TO DISALLOWANCE OF BUSINESS PR OMOTION EXPENDITURE. WE WOULD REMAND BACK THE ISSUE TO TH E FILE OF THE ITA NO. 2339-40-83-84/2017 :- 7 -: ASSESSING OFFICER, FOLLOWING THE DECISION OF THE CO -ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.56/ MDS/2013, FOR ASSESSMENT YEAR 2008-09, DATED 12.06.2015 FOR FRES H ADJUDICATION IN ACCORDANCE WITH LAW. THUS, GROUNDS OF APPEAL NO.3 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.2339/CHNY/2017 FOR ASSESSMENT YEAR 2010-2011 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 15. NOW, WE TAKE UP APPEAL OF THE REVENUE IN ITA NO.2383/CHNY/2017, FOR ASSESSMENT YEAR 2010-2011 FO R ADJUDICATION. 16. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL. 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOM E TAX (APPEALS) IS CONTRARY TO THE LAW AND FACTS OF THE CASE. 2.1. THE CIT(A) ERRED IN HOLDING THAT IF THE OWN FU NDS AVAILABLE IN THE POSSESSION OF THE ASSESSEE IS MORE THAN THE TAX FREE INVESTMENTS NO DISALLOWANCE COULD BE MADE UNDER RULE 8D(2)(II). 2.2. THE CIT(A) ERRED IN ALLOWING THE DISALLOWANCE MADE U/S.14A R.W.R. 8D(2)(II) AND DIRECTING THE AC TO VERIFY AND CONSIDER WHETHER OWN FUNDS ARE MORE THAN THE INVESTMENT MADE IN TAX FREE SECURITIES. 2.3. THE CIT(A) ERRED IN DIRECTING THE AC TO MODIFY THE 14A DISALLOWANCE MADE UNDER RULE 8D WITHOUT THE CONSIDE RING THE FACTS THAT WHEN ASSESSEE HAD MIXED BAG OF FUNDS AND HUGE INVESTMENTS WERE MADE IN ASSETS YIELDING EXEMPT INCOME. 2.4. THE CIT(A) ERRED IN APPLYING ONLY THE CLAUSE U NDER 8D(2)(III) FOR DISALLOWANCE U/S.14A, WHEN THERE IS NO SUCH EXEMPTI ON AVAILABLE IN THE PROVISIONS OF SECTION/RULE. ITA NO. 2339-40-83-84/2017 :- 8 -: 2.5. IT IS SUBMITTED THAT CBDT IN CIRCULAR NO.51201 4 DATED 11.02.2014 HAS CLARIFIED THAT RULE 8D R.W.S. 14A OF THE ACT PROVIDES FOR DISALLOWANCE OF THE EXPENDITURE EVEN WHERE TAXP AYER IN A PARTICULAR YEAR HAS NOT EARNED ANY EXEMPT INCOME. 3.1 THE CIT(A) ERRED IN ALLOWING THE BALANCE OF THE ADDITIONAL DEPRECIATION CARRIED FORWARD FROM THE EARLIER ASSES SMENT YEAR TO THE NEXT YEAR. 3.2 THE CIT(A) ERRED IN ALLOWING THE BALANCE OF THE ADDITIONAL DEPRECIATION BASED ON THE DECISION OF THE HONBLE M ARAS HIGH COURT IN THE CASE OF BRAKES INDIA LTD WHICH WAS NOT ACCEP TED BY THE DEPARTMENT AND FURTHER APPEAL IS PENDING THE APEX C OURT. 3.3. THE CIT(A) FAILED TO APPRECIATE THE 3RD PROVIS O OF SECTION 32(1)(IIA) ALLOWING PART OF ADDITIONAL DEPRECIATION IN THE YEAR SUBSEQUENT TO ACQUISITION OF ASSETS CAME INTO BEING PROSPECTIVELY W.E.F. 01.04.2016 AND THEREFORE DOES NOT APPLY TO T HE ASST. YEAR IN QUESTION. 3.4 THE CIT(A) OUGHT TO HAVE APPRECIATED THAT AS PE R THE PROVISO TO SECTION 32(1)(IIA) OF THE ACT WHERE THE ASSET IS AC QUIRED AND PUT TO USE BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS FOR A PERIOD OF LESS THAN ONE HUNDRED AND EIGHTY DAYS IN THAT PREVIOUS Y EAR DEDUCTION UNDER THIS SUB-SECTION SHALL BE RESTRICTED TO FIFTY PER CENT OF SUCH ASSET. 3.5 THE CIT(A) FAILED TO APPRECIATE THE JURISDICTIO NAL HIGH COURTS DECISION IN THE CASE OF M/S. MM FORGINGS LTD. (349 ITR 673) WHICH IS IN FAVOUR OF THE DEPARTMENT. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) BE SET ASIDE AND THAT OF THE A SSESSING OFFICER BE RESTORED. 17. THE GROUNDS OF APPEAL NO.1 & 4 ARE GENERAL IN NATU RE THEREFORE, DOES NOT REQUIRE ANY ADJUDICATION. 18. IN GROUND NO.2, THE REVENUE IS AGGRIEVED BY THE DE CISION OF THE LD. CIT(A) TO REMIT THE ISSUE OF DISALLOWANCE U /S.14A R.W.R.8D(2) ITA NO. 2339-40-83-84/2017 :- 9 -: (II) TO THE ASSESSING OFFICER. THOUGH THE LD. CIT(A ) HAD NO POWER OF SETTING ASIDE TO THE ASSESSING OFFICER BUT THERE A RE NO SUCH FETTERS ON THE POWERS OF THE TRIBUNAL TO SET ASIDE THE ISSU E TO THE ASSESSING OFFICER. THEREFORE, WE ARE OF THE CONSIDERED OPINI ON THAT THE ISSUE WHETHER INVESTMENTS ARE MADE OUT OF OWN FUNDS OR BO RROWED FUNDS IS A QUESTION OF FACT WHICH REQUIRES TO BE VERIFIED BY THE ASSESSING OFFICER WITH EVIDENCE AND THEREFORE WE REMIT THE MATTER BA CK TO THE FILE OF THE ASSESSING OFFICER TO DECIDE WHETHER THE INVEST MENTS ARE MADE OUT OF BORROWED FUNDS OR OWN FUNDS, IF THE INVESTMENT S ARE MADE OUT OF OWN FUNDS, NO DISALLOWANCE OF INVESTMENTS CAN BE M ADE. THUS, GROUNDS OF APPEAL NO.2 FILED BY THE REVENUE IS PART LY ALLOWED FOR STATISTICAL PURPOSE. 19. VIDE GROUND NO.3, THE REVENUE CHALLENGES THE DECIS ION OF THE LD. CIT(A) IN ALLOWING ADDITIONAL DEPRECIATION. THIS ISSUE IS NO MORE RES INTEGRA AS IT STANDS CONCLUDED BY THE DEC ISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF BRAKES IND IA LTD (SUPRA), WHERE THE HONBLE JURISDICTIONAL HIGH COURT FOLLOWING TH E DECISIONS OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF RITTAL INDIA (P ) LTD (2016) TIOL- 07-HC-KAR-IT AND ITS OWN DECISION IN THE CASE OF C IT VS. M/S. SHRI. T.P. TEXTILES PRIVATE LTD, TCA NO.157 OF 2017 HAD H ELD AS UNDER:- ITA NO. 2339-40-83-84/2017 :- 10 -: 3.THIS ISSUE HAS BEEN DEALT WITH BY US VIDE JUDGMEN T DATED 06.03.2017, PASSED IN T.C.A.NO.157 OF 2017, TITLED: COMMISSIONER OF INCOME TAX, MADURAI VS. M/S.SHRI T. P.TEXTILES PRIVATE LIMITED. WE HAVE MADE THE FOLLOWING OBSERV ATIONS THEREIN: 6.1. THEREFORE, THE ONLY ISSUE, WHICH AROSE FOR CON SIDERATION BEFORE THE TRIBUNAL WAS, WHETHER THE ADDITIONAL DEP RECIATION, IN THE SUM OF RS.8,03,233/-, COULD BE CLAIMED BY THE A SSESSEE IN THE RELEVANT ASSESSMENT YEAR, I.E., A.Y.2011-12, IN RESPECT OF MACHINERY, WHICH WAS PURCHASED AND USED FOR LESS TH AN 180 DAYS, IN THE PREVIOUS YEAR, 2009-10 (I.E., A.Y.2010 -11). 7. THE TRIBUNAL, RELYING UPON ITS OWN JUDGMENT IN T HE CASE OF FRESH & HONEST CAFE LTD. V. DCIT, DATED 10.08.2016, PASSED IN I.T.A.NO.1373/MDS/2016 ALLOWED THE APPEAL OF THE AS SESSEE. 7.1. PERTINENTLY, IN THE JUDGMENT OF THE TRIBUNAL, DELIVERED IN THE CASE OF FRESH & HONEST CAFE LTD. V. DCIT, RELI ANCE WAS PLACED ON THE JUDGMENT OF THE KARNATAKA HIGH COURT IN THE CASE OF : CIT V. RITTAL INDIA (P.) LTD., [2016] 66 TAXMANN.COM 4 (KARNATAKA). 7.2. THE ISSUE, WHICH AROSE FOR CONSIDERATION BEFOR E THE TRIBUNAL IN THE FRESH & HONEST CAFE LTD. V. DCIT, W AS ALSO, WHETHER THE ASSESSEE COULD BE ALLOWED BALANCE ADDIT IONAL DEPRECIATION IN THE RELEVANT A.Y., FOLLOWING THE A. Y., IN WHICH, THE MACHINERY HAD BEEN PURCHASED, AND PUT TO USE, A LBEIT, FOR A PERIOD OF LESS THAN 180 DAYS. 7.3. THE TRIBUNAL HAS, THUS, IN THE CONTEXT OF THE PROVISIONS OF SECTION 263 OF THE ACT, CONSIDERED, AS TO WHETHER T HE ASSESSMENT ORDER, AS PASSED, QUA THE ISSUE ENCAPSUL ATED ABOVE, ERRONEOUS AND/OR PREJUDICIAL TO THE INTEREST OF THE REVENUE. 7.4. IN ORDER TO APPRECIATE THE ISSUE AT HAND, RELE VANT PROVISIONS OF SECTION 32 OF THE ACT, TO THE EXTENT APPLICABLE IN THE A.Y. IN ISSUE, WOULD BE REQUIRED TO BE NOTICED : 'SECTION 32 (1) IN RESPECT OF DEPRECIATION OF - (I) BUILDINGS, MACHINERY, PLANT OR FURNITURE, BEING TANGIBLE ASSETS; ITA NO. 2339-40-83-84/2017 :- 11 -: (I) IN THE CASE OF ASSETS OF AN UNDERTAKING ENGAGE D IN GENERATION OR GENERATION AND DISTRIBUTION OF POWER, SUCH PERCENTAGE ON THE ACTUAL COST THEREOF TO THE ASSESS EE AS MAY BE PRESCRIBED; (II) IN THE CASE OF ANY BLOCK OF ASSETS, SUCH PERCE NTAGE ON THE WRITTEN DOWN VALUE THEREOF AS MAY BE PRESCRIBED: PROVIDED .... (A)... (B).... PROVIDED FURTHER THAT WHERE AN ASSET REFERRED TO IN CLAUSE (I) OR CLAUSE (II) OR CLAUSE (IIA), AS THE C ASE MAY BE, IS ACQUIRED BY THE ASSESSEE DURING THE PREVIOUS YEAR AND IS PUT TO USE FOR THE PURPOSES OF BUSINESS OR PROFESSION FOR A PERIOD OF LESS THAN ONE HUNDRED AN D EIGHTY DAYS IN THAT PREVIOUS YEAR, THE DEDUCTION UN DER THIS SUB-SECTION IN RESPECT OF SUCH ASSET SHALL BE RESTRICTED TO FIFTY PER CENT OF THE AMOUNT CALCULAT ED AT THE PERCENTAGE PRESCRIBED FOR AN ASSET UNDER CLAUSE (I) OR CLAUSE (II) 1`OR CLAUSE (IIA), AS THE CASE MAY B E: PROVIDED ALSO .... PROVIDED ALSO... PROVIDED ALSO.... PROVIDED ALSO... EXPLANATION 1.... EXPLANATION 2.... EXPLANATION 3... EXPLANATION 4... EXPLANATION 5... (IIA) IN THE CASE OF ANY NEW MACHINERY OR PLANT (OT HER THAN SHIPS AND AIRCRAFT), WHICH HAS BEEN ACQUIRED A ND INSTALLED AFTER THE 31ST DAY OF MARCH, 2005, BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING OR GENERATION OR GENERATION AND DISTRIBUTION OF POWER, A FURTHER SUM EQUAL TO TWENTY PER CENT OF THE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UN DER CLAUSE (II). (EMPHASIS IS OURS) ITA NO. 2339-40-83-84/2017 :- 12 -: 8. PERTINENTLY, THE KARNATAKA HIGH COURT, IN A DECI SION RENDERED IN THE CASE OF CIT V. RITTAL INDIA (P.) LTD., [2016 ] 66 TAXMANN.COM 4 (KARNATAKA), HAS INTERPRETED THE AFOR ESAID PROVISION, IN PARTICULAR, THE PROVISO INCORPORATED THEREIN. THE KARNATAKE HIGH COURT, IN THE SAID CASE, HAS COME TO THE CONCLUSION THAT ADDITIONAL DEPRECIATION GRANTED UND ER CLAUSE (IIA) OF SECTION 32(1) OF THE ACT IS FOR THE PURPOS E OF AFFORDING BENEFITS TO THE ASSESSEES AND, TO ENCOURAGE INDUSTR IALIZATION, EITHER BY SETTING UP A NEW INDUSTRIAL UNIT, OR, BY EXPANDING A NEW INDUSTRIAL UNIT, BY PURCHASING AND INSTALLING A NEW MACHINERY, OR, PLANT, AND PUTTING THE SAME TO USE F OR THE PURPOSES OF BUSINESS. 8.1. THE COURT, WENT ON TO SAY, THAT WHILE, THE PRO VISO APPEARING IN SECTION 32(1) RESTRICTS THE CLAIM OF D EPRECIATION TO 50% OF THE AMOUNT CALCULATED AT THE PERCENTAGE PRES CRIBED FOR AN ASSET REFERRED TO IN CLAUSE (IIA), NOWHERE DOES IT RESTRICT ALLOWANCE OF THE BALANCE 50% OF THE ADDITIONAL DEPR ECIATION, WHICH IN PERCENTAGE TERMS, WOULD BE 10% IN THE SUCC EEDING A.Y. 8.2. THE RELEVANT OBSERVATIONS MADE BY THE DIVISION BENCH OF THE KARNATAKA HIGH COURT IN THE CASE OF CIT V. RITT AL INDIA (P.) LTD., AS CONTAINED IN PARAGRAPHS 7, 8 AND 9 OF THE SAID JUDGMENT, FOR THE SAKE OF CONVENIENCE ARE EXTRACTED HEREAFTER : '..... 7. CLAUSE (IIA) OF SECTION 32(1) OF THE ACT, AS IT NOW STANDS, WAS SUBSTITUTED BY THE FINANCE ACT, 2005, APPLICABLE WITH EFFECT FROM 01.04.2006. PRIOR TO T HAT, A PROVISO TO THE SAID CLAUSE WAS THERE, WHICH PROVIDE D FOR THE BENEFIT TO BE GIVEN ONLY TO A NEW INDUSTRIAL UNDERTAKING, OR ONLY WHERE A NEW INDUSTRIAL UNDERTA KING BEGINS TO MANUFACTURE OR PRODUCE DURING ANY YEAR PREVIOUS TO THE RELEVANT ASSESSMENT YEAR. 8. THE AFORESAID TWO CONDITIONS, I.E., THE UNDERTA KING ACQUIRING NEW PLANT AND MACHINERY SHOULD BE A NEW INDUSTRIAL UNDERTAKING, OR THAT IT SHOULD BE CLAIME D IN ONE YEAR, HAVE BEEN DOWN AWAY BY SUBSTITUTING CLAUS E (IIA) WITH EFFECT FROM 01.04.2006. THE GRANT OF ADDITIONAL DEPRECIATION, UNDER THE AFORESAID PROVIS ION, IS FOR THE BENEFIT OF THE ASSESSEE AND WITH THE PURPOS E OF ENCOURAGING INDUSTRIALIZATION, BY EITHER SETTING UP A NEW INDUSTRIAL UNIT OR BY EXPANDING THE EXISTING UNIT B Y PURCHASE OF NEW PLANT AND MACHINERY, AND PUTTING IT TO ITA NO. 2339-40-83-84/2017 :- 13 -: USE FOR THE PURPOSE OF BUSINESS. THE PROVISO TO CL AUSE (II) OF THE SAID SECTION MAKES IT CLEAR THAT ONLY 5 0% OF THE 20% WOULD BE ALLOWABLE, IF THE NEW PLANT AND MACHINERY SO ACQUIRED IS PUT TO USE FOR LESS THAN 1 80 DAYS IN A FINANCIAL YEAR. HOWEVER, IF NOWHERE REST RICTS THAT THE BALANCE 10% WOULD NOT BE ALLOWED TO BE CLAIMED BY THE ASSESSEE IN THE NEXT ASSESSMENT YEAR . 9. THE LANGUAGE USED IN CLAUSE (IIA) OF THE SAID SE CTION CLEARLY PROVIDES THAT 'A FURTHER SUM EQUAL TO 20% O F THE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALL OWED AS DEDUCTION UNDER CLAUSE (II)'. THE WORD 'SHALL' USED IN THE SAID CLAUSE IS VERY SIGNIFICANT. THE BENEFI T WHICH IS TO BE GRANTED IS 20% ADDITIONAL DEPRECIATION. B Y VIRTUE OF THE PROVISO REFERRED TO ABOVE, ONLY 10% C AN BE CLAIMED IN ONE YEAR, IF PLANT AND MACHINERY IS PUT TO USE FOR LESS THAN 180 DAYS IN THE SAID FINANCIAL YEAR. THIS WOULD NECESSARILY MEAN THAT THE BALANCE 10% ADDITIO NAL DEDUCTION CAN BE AVAILED IN THE SUBSEQUENT ASSESSME NT YEAR, OTHERWISE THE VERY PURPOSE OF INSERTION OF CL AUSE (IIA) WOULD BE DEFEATED BECAUSE IT PROVIDES FOR 20% DEDUCTION WHICH SHALL BE ALLOWED.....' 9. WE ARE IN RESPECTFUL AGREEMENT WITH THE VIEW TAK EN BY THE DIVISION BENCH OF THE KARNATAKA HIGH COURT, PASSED IN CIT V. RITTAL INDIA (P.) LTD. 10. ACCORDING TO US, THESE ARE PROVISIONS INCLUDED BY THE LEGISLATURE IN THE STATUTE TO GIVE A FILLIP TO NEW INDUSTRIES AS ALSO TO EXISTING INDUSTRIES, WHICH SEEK TO EXPAND ITS SW AY, BY INVESTING IN AND MAKING USE OF NEW PLANT AND MACHINERY. 10.1. THE PLAIN LANGUAGE OF SECTION 32(1)(IIA) READ ALONG WITH THE RELEVANT PROVISO WOULD HAVE US COME TO THE CONCLUSI ON THAT, THERE IS NO LIMITATION IN THE ASSESSEE CLAIMING THE BALAN CE 10% OF ADDITIONAL DEPRECIATION IN THE SUCCEEDING ASSESSMEN T YEAR. 10.2. AS A MATTER OF FACT, WITH EFFECT FROM 01.04.2 016, THE AMBIGUITY, IF ANY, IN THIS REGARD, IN THE MIND OF T HE ASSESSING OFFICER, STANDS REMOVED BY VIRTUE OF THE LEGISLATUR E, INCORPORATING IN THE STATUTE, THE NECESSARY CLARIFICATORY AMENDME NT. 10.3. THE AMENDMENT BROUGHT IN THE RELEVANT PROVISO OBTAINING IN SECTION 32, READS AS FOLLOWS: .... 32. (1) ...... ITA NO. 2339-40-83-84/2017 :- 14 -: PROVIDED ALSO THAT WHERE AN ASSET REFERRED TO IN CL AUSE (IIA) OR THE FIRST PROVISO TO CLAUSE (IIA), AS THE CASE MAY BE, IS ACQUIRED BY THE ASSESSEE DURING THE PREVIOUS YEAR AND IS PUT TO USE FOR THE PURPOSES OF BUSINESS FOR A PERIOD OF LESS THAN ONE HUNDRED AND EIGHTY DAYS IN THAT PREVIOUS YEAR, AND THE DEDUCTION UNDER THIS SUB-SEC TION IN RESPECT OF SUCH ASSET IS RESTRICTED TO FIFTY PER CENT OF THE AMOUNT CALCULATED AT THE PERCENTAGE PRESCRIBED FOR AN ASSET UNDER CLAUSE (IIA)FOR THAT PREVIOUS YEAR, THEN, THE DEDUCTION FOR THE BALANCE FIFTY PER CENT OF THE AMOUNT CALCULATED AT THE PERCENTAGE PRESCRIBED FOR SUCH ASSET UNDER CLAUSE (IIA) SHALL BE ALLOWED UNDER THI S SUB- SECTION IN THE IMMEDIATELY SUCCEEDING PREVIOUS YEAR IN RESPECT OF SUCH ASSET: ....... (EMPHASIS IS OURS) 11. WE MAY ONLY INDICATE THAT DURING THE COURSE OF THE ARGUMENTS, OUR ATTENTION WAS DRAWN TO THE 'MEMORAND UM EXPLAINING THE PROVISIONS IN FINANCIAL BILL, 2015', WHEREBY, THE AFOREMENTIONED AMENDMENT WAS BROUGHT ABOUT. 11.1. THE RELEVANT PART OF THE MEMORANDUM IS EXTRA CTED HEREAFTER: ` '..... TO REMOVE THE DISCRIMINATION IN THE MATTER O F ALLOWING ADDITIONAL DEPRECIATION ON PLANT OR MACHIN ERY USED FOR LESS THAN 180 DAYS AND USED FOR 180 DAYS O R MORE, IT IS PROPOSED TO PROVIDE THAT THE BALANCE 50 % OF THE ADDITIONAL DEPRECIATION ON NEW PLANT OR MACHINE RY ACQUIRED AND USED FOR LESS THAN 180 DAYS WHICH HAS NOT BEEN ALLOWED IN THE YEAR OF ACQUISITION AND INSTALL ATION OF SUCH PLANT AND MACHINERY, SHALL BE ALLOWED IN TH E IMMEDIATELY SUCCEEDING PREVIOUS YEAR. THIS AMENDMENT WILL TAKE EFFECT FROM 1ST APRIL, 201 6 AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASS ESSMENT YEAR 2016-17 AND SUBSEQUENT ASSESSMENT YEARS.' 11.2. A PERUSAL OF THE EXTRACT OF THE MEMORANDUM RE LIED UPON WOULD SHOW THAT THE LEGISLATURE RECOGNISED THE FACT THAT THE MANNER IN WHICH THE REVENUE CHOSE TO INTERPRET THE PROVISION, AS IT STOOD PRIOR TO ITS AMENDMENT WOULD LEAD TO DISCR IMINATION, IN RESPECT OF PLANT AND MACHINERY, WHICH WAS USED FOR LESS THAN 180 DAYS, AS AGAINST THAT, WHICH WAS USED FOR 180 DAYS OR MORE. 11.3. IN OUR OPINION, AS INDICATED ABOVE, THE AMEND MENT IS CLARIFICATORY IN NATURE AND NOT PROSPECTIVE, AS IS SOUGHT TO BE ITA NO. 2339-40-83-84/2017 :- 15 -: CONTENDED BY THE REVENUE. THE MEMORANDUM CANNOT BE READ IN THE MANNER, IN WHICH, THE REVENUE HAS SOUGHT TO REA D IT, WHICH IS, THAT THE AMENDMENT BROUGHT IN WOULD APPLY ONLY PROSPECTIVELY. 11.4. WE ARE, CLEARLY, OF THE VIEW THAT THE MEMORAN DUM, WHICH IS SOUGHT TO BE RELIED UPON BY THE REVENUE, ONLY CLARI FIES AS TO HOW THE UNAMENDED PROVISION HAD TO BE READ ALL ALONG. 11.5. IN ANY EVENT, IN SO FAR AS THE COURT IS CONCE RNED, IT HAS TO GO BY THE PLAIN LANGUAGE OF THE UNAMENDED PROVISION , AND THEN, COME TO A CONCLUSION IN THE MATTER. AS ALLUDED TO A BOVE, OUR VIEW, IS THAT, UPON A PLAIN READING OF THE UNAMENDED PROV ISION, IT COULD NOT BE SAID THAT THE ASSESSEE COULD NOT CLAIM BALAN CE DEPRECIATION IN THE A.Y., WHICH FOLLOWS THE A.Y., IN WHICH, THE MACHINERY HAD BEEN BOUGHT AND USED, ALBEIT, FOR LESS THAN 180 DAY S. 4.WE WOULD HAVE THOUGHT, THAT THIS WOULD HAVE PUT A N END TO THE MATTER. HOWEVER, THE LEARNED COUNSEL FOR THE REVEN UE, MR.RAVIKUMAR SEEKS TO ADVANCE THE FOLLOWING ADDITIO NAL SUBMISSIONS: 4.1.FIRSTLY, THAT, THIS COURT DID NOT TAKE INTO ACC OUNT, WHILE PASSING THE JUDGMENT IN COMMISSIONER OF INCOME TAX, MADURAI VS. M/S.SHRI T.P.TEXTILES PRIVATE LIMITED, THE JUDG MENT OF THE DIVISION BENCH OF THIS COURT IN M.M.FORGINGS LIMITE D VS. ADDITIONAL COMMISSIONER OF INCOME TAX, (2012) 349 I TR 673. 4.2.SECONDLY, THE CIRCULARS ISSUED BY THE CENTRAL B OARD OF DIRECT TAXES BEING: CIRCULAR NO.8 OF 2002 DATED 27.08.2002 AND CIRCULAR NO.281 DATED 29.11.1979, HAVE NOT BEEN TAKEN NOTE O F IN OUR JUDGMENT RENDERED IN COMMISSIONER OF INCOME TAX, MA DURAI VS. M/S.SHRI T.P.TEXTILES PRIVATE LIMITED. 4.3.THIRD AND LASTLY, THAT THE PROVISIONS OF SECTIO N 32(1)(IIA) DOES NOT ALLOW FOR ADDITIONAL DEPRECIATION, TO BE CARRIE D FORWARD TO THE FOLLOWING YEAR, IN WHICH, THE ASSET IS INSTALLED AN D PUT TO USE FOR THE FOLLOWING REASON. 4.4.IT IS THE SUBMISSION OF THE LEARNED COUNSEL THA T AFTER DEPRECIATION IS PROVIDED FOR, IN THE YEAR OF INSTAL LATION AND USE THE WRITTEN DOWN VALUE OF THE ASSET IS MADE PART OF THE BLOCK OF ASSETS, AND IT IS THIS BLOCK OF ASSETS, WHICH ARE S UBJECTED TO DEPRECIATION, AND THEREFORE, THE ASSESSEE IS NOT PE RMITTED TO ITA NO. 2339-40-83-84/2017 :- 16 -: CALCULATE AND PROVIDE FOR DEPRECIATION SEPARATELY, QUA, THE ASSET, ON WHICH, ADDITIONAL DEPRECIATION IS PROVIDED. 5.IN ORDER TO APPRECIATE THE AFORESAID SUBMISSIONS, THE FOLLOWING FACTS ARE REQUIRED TO BE NOTICED: 5.1.THE ASSESSEE HAD CLAIMED ADDITIONAL DEPRECIATIO N UNDER SECTION 32(1)(IIA) AMOUNTING TO RS.1,89,67,159/- DU RING THE RELEVANT ASSESSMENT YEAR, I.E., AY 2006-07. 5.2.THE ADDITIONAL DEPRECIATION WAS CLAIMED AT THE RATE OF 7.5% BEING 50% OF THE PRESCRIBED RATE, WHICH WAS 15%. 5.3.THE DEPRECIATION WAS CLAIMED AT THE SAID RATE A S THE SUBJECT ASSET WAS USED FOR LESS THAN 180 DAYS. 5.4.THE SAID DEPRECIATION WAS CLAIMED IN THE PRECED ING ASSESSMENT YEAR, I.E., AY 2005-06, WHICH IS, WHEN T HE ASSET WAS INSTALLED AND PUT TO USE. 5.5.IN THE RELEVANT ASSESSMENT YEAR I.E., AY 2006-0 7, THE ASSESSEE SOUGHT TO CLAIM THE BALANCE DEPRECIATION E QUIVALENT TO 7.5%. THE ASSESSING OFFICER, HOWEVER, REJECTED THE CLAIM MADE BY THE ASSESSEE QUA THE BALANCE ADDITIONAL DEPRECIA TION. 5.6.BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R IN APPEAL TO THE COMMISSIONER OF INCOME TAX (APPEALS) [IN SHORT, CIT(A)]. THE CIT(A) SUSTAINED THE ORDER OF THE ASSESSING OFF ICER. THE TRIBUNAL, DID LIKEWISE AND THEREFORE, THE ASSESSEE, IS IN APPEAL, BEFORE US. 6.AS INDICATED RIGHT AT THE OUTSET, THE ISSUE IS CO VERED IN FAVOUR OF THE ASSESSEE, BY VIRTUE OF OUR JUDGMENT IN THE MATT ER OF COMMISSIONER OF INCOME TAX, MADURAI VS. M/S.SHRI T. P.TEXTILES PRIVATE LIMITED. AS NOTICED ABOVE, THE KARNATAKA H IGH COURT IN CIT V. RITTAL INDIA (P.) LTD., [2016] 66 TAXMANN.CO M 4 (KARNATAKA), HAS ALSO TAKEN THE SAME VIEW. 6.1.WE ARE INFORMED THAT THE REVENUE HAS NOT ASSAIL ED THE JUDGMENT OF THE KARNATAKA HIGH COURT. 6.2.IN OUR JUDGMENT IN THE MATTER OF COMMISSIONER O F INCOME TAX, MADURAI VS. M/S.SHRI T.P.TEXTILES PRIVATE LIMI TED, WE HAVE ITA NO. 2339-40-83-84/2017 :- 17 -: NOTICED THE AFOREMENTIONED JUDGMENT OF THE KARNATAK A HIGH COURT. 7.IN SO FAR AS THE FIRST SUBMISSION ADVANCED BY MR. RAVI IS CONCERNED, ACCORDING TO US, THE SAME IS COMPLETELY UNTENABLE. 7.1.THE JUDGMENT OF THE DIVISION BENCH OF THIS COUR T IN M.M.FORGINGS LIMITED VS. ADDITIONAL COMMISSIONER OF INCOME TAX, DID NOT DEAL THE ISSUE, WHICH IS AT HAND. 7.2.THE ISSUE, IN HAND, IS AS TO WHETHER BALANCE AD DITIONAL DEPRECIATION COULD BE CARRIED FORWARD TO THE YEAR, FOLLOWING THE PREVIOUS YEAR, IN WHICH, ADDITIONAL DEPRECIATION WA S CLAIMED. 7.3.THE DIVISION BENCH IN M.M.FORGINGS CASE THE SAI D CASE WAS NOT CONCERNED WITH THE ISSUE, WITH WHICH, WE ARE FA CED, THAT IS, THE RIGHT TO CARRY FORWARD THE BALANCE ADDITIONAL D EPRECIATION. THEREFORE, THE JUDGMENT IS COMPLETELY DISTINGUISHAB LE. 8.THE SECOND SUBMISSION OF MR.RAVI, THAT CIRCULAR N O.8 OF 2002 DATED 27.08.2002 AND CIRCULAR NO.281 DATED 29.11.19 79, HAVE NOT BEEN TAKEN NOTE OF, IN OUR JUDGMENT RENDERED IN COMMISSIONER OF INCOME TAX, MADURAI VS. M/S.SHRI T. P.TEXTILES PRIVATE LIMITED, ACCORDING TO US, WILL NOT IMPACT, EITHER THE REASONING OR THE CONCLUSION REACHED BY US, IN THE S AID MATTER. 8.1.IT IS PERTINENT TO NOTE THAT THE CIRCULAR NO.28 1 DATED 29.11.1979, PRE-DATES THE INSERTION OF THE RELEVANT PROVISION, I.E., SECOND CLAUSE TO SECTION 32 (1) (IIA). THE SAID CL AUSE (IIA), ADMITTEDLY, WAS INSERTED BY VIRTUE OF THE FINANCE ( NO.2) ACT, 2002, WITH EFFECT FROM 01.04.2003. 8.2.IN SO FAR AS THE SECOND CIRCULAR IS CONCERNED, I.E, CIRCULAR NO.8 OF 2002 DATED 27.08.2002, IN OUR VIEW, IN NO WAY, H ELPS THE CASE OF THE REVENUE. THE CIRCULAR DOES NOT DWELL ON THE POINT WHICH WE ARE CONFRONTED WITH. 8.3.IN ANY CASE, ACCORDING TO US, THE CIRCULARS ARE NOT BINDING ON THE COURT, THOUGH, THEY MAY BE BINDING ON THE REVEN UE. [SEE CIT V. HERO CYCLES PVT. LTD., (1997) 228 ITR 463 (S C)]. ITA NO. 2339-40-83-84/2017 :- 18 -: 9.THE LAST SUBMISSION THAT MR.RAVI ADVANCED, WAS, I N FACT, PREDICATED ON THE REASONING GIVEN BY THE ASSESSING OFFICER, WHICH, ACCORDING TO US, IS MISCONCEIVED, AS THE MAN NER OF CALCULATION OF DEPRECIATION, CANNOT, TO OUR MINDS, IMPEDE THE CLAIM OF THE ASSESSEE FOR BALANCE ADDITIONAL DEPREC IATION, IN THE YEAR FOLLOWING THE PREVIOUS YEAR, IN WHICH, THE SAI D ASSET IS INSTALLED AND PUT TO USE. 10.THEREFORE, FOR THE AFORESAID REASONS, WE FIND NO MERIT IN THE SUBMISSIONS ADVANCED BY THE REVENUE. 11.THE APPEAL IS ACCORDINGLY, ALLOWED AND THE IMPUG NED JUDGMENT OF THE TRIBUNAL IS SET ASIDE. HOWEVER, TH ERE SHALL BE NO ORDER AS TO COSTS. SINCE THE DECISION OF LD. CIT(A) IS IN CONSONANCE WITH THE LAW LAID DOWN BY THE JURISDICTIONAL HIGH COURT, WE DO NOT FI ND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). THE GRO UNDS OF APPEAL NO.3 FILED BY THE REVENUE STANDS DISMISSED. 20. IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO.2383/CHNY/2017 FOR ASSESSMENT YEAR 2010-2011 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 21. NOW, WE TAKE UP APPEAL OF THE ASSESSEE IN ITA NO.2340/CHNY/2017, FOR ASSESSMENT YEAR 2011-2012. 22. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (A PPEALS) IS CONTRARY TO LAW, FACTS AND IN THE CIRCUMSTANCES OF THE CASE. ITA NO. 2339-40-83-84/2017 :- 19 -: 2.1 THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.12,91,939/- (0.5% OF AVERAGE INVESTMENT) U/S 14A BY APPLYING RULE 8D(III). 2.2 THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT ONLY THOSE INVESTMENTS MADE IN THE CURRENT ASSESSMENT YEAR THAT HAD YIELDED DIVIDEND INCOME AF TER EXCLUDING THE INVESTMENTS MADE IN SUBSIDIARIES/GROU P COMPANIES AS HELD BY THE HONBLE CHENNAI TRIBUNAL IN THE CASE OF EIH ASSOCIATED HOTELS LTD VS. CIT REPORTED IN 2013-TIOL -796-ITAT- MAD, 2.3 THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE HONBTE CHENNAI ITAT IN THE CA SE OF COMPUTER AGE MANAGEMENT SERVICES (P) LTD IN ITA NOS . 1236, 1240, 1259,1261/2014 DT 28.11.2014 HELD THAT DISALL OWANCE U/S 14A R.W.R 8D CAN BE MADE ONLY BY TAKING INTO CONSID ERATION THE INVESTMENTS WHICH HAS GIVEN RISE TO SUCH INCOME WHI CH DOES NOT FORM PART OF THE TOTAL INCOME. 3. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N CONFIRMING THE DISALLOWANCE OF EXPORT PROMOTION EXP ENSES AMOUNTING TO RS.20,73,625/- 3.1 THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THIS AMOUNT REPRESENTS THE SHARE O F (CENTRAL BANK OF INDIA APPROVED) LONDON OFFICE MAINTENANCE E XPENSES REIMBURSED TO M/S. AMALGAMATIONS PVT. LTD, THE HOLD ING COMPANY OF THE AMALGAMATIONS GROUP TO WHICH THE APP ELLANT COMPANY BELONGS. 3.2 THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT FOREIGN BRANCH LIAISON REPRESENTAT IVE IS ACTING FOR AND ON BEHALF OF ALL THE GROUP COMPANIES AND TH E EXPENSES INCURRED BY THE LIAISON REPRESENTATIVE IS SHARED BY THE GROUP COMPANIES. 3.3 THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT FOR CONVENIENCE; AMALGAMATIONS PRI VATE LTD MAKES THE PAYMENT TO THE LIAISON OFFICE AND RECOVER S THE SHARE OF EXPENSES FROM THE INDIVIDUAL GROUP COMPANIES. ITA NO. 2339-40-83-84/2017 :- 20 -: 3.4 THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE AMALGAMATIONS PRIVATE LTD IS N OT RENDERING ANY SERVICE TO THE GROUP COMPANIES EXCEPT MAKING TH E PAYMENT IN ADVANCE AND RECOVERING FROM THE GROUP COMPANIES. 3.5 THE COMMISSION OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE LIAISON OFFICE IS RENDERING SE RVICE DIRECTLY TO THE GROUP COMPANIES BY WAY OF PROVISION OF OFFICE P REMISES AND PROVISION FOR SECRETARIAT SERVICE FOR THE USE OF PA RTICIPATING COMPANIES FOR MEETING EXPORTERS/IMPORTERS OF THE RE SPECTIVE COMPANIES. 3.6 THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE EXPENDITURE HAS BEEN INCURRED FOR THE PURPOSES OF BUSINESS OF THE APPELLANT AND THE EXPEN SES ARE THUS REVENUE IN NATURE. HENCE THE ENTIRE EXPENSES ARE AL LOWABLE AS DEDUCTION. 4. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N CONFIRMING THE DISALLOWANCE OF SETOFF OF UNABSORBED DEPRECIATION OF RS.2,28,05,4501- AND BUSINESS LOSS OF RS.4,93,43 ,275/- U/S 72A. 4.1 THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ER RED IN NOT APPRECIATING THE FACT THAT APPELLANT HAS APPLIED FO R CLARIFICATION BEFORE THE CBDT FOR WHICH THE APPELLANT HAS RECEIVE D A REPLY DATED 5TH APRIL 2013 WHEREIN CBDT INSTRUCTED TO APP ROACH THE ASSESSING OFFICE IN THIS REGARD. 4.2 THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT APPELLANT APPROACHED THE ASSESSING OFFICE VIDE ITS LETTER DATED 8 TH AUGUST 2013 BY PROVIDING ALT THE DETAILS REQUIRED AS INSTRUCTED BY CENTRAL BOARD OF DIRECT T AXES. 4.3 THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ER RED IN NOT APPRECIATING THE FACTS THAT APPELLANT HAS BEEN IN T HE SAME TINE OF BUSINESS TILL DATE AND THAT THREE-FOURTH OF THE ASSETS AT THE TIME OF MERGER I.E. ON 01.07.2007 WAS RS. 794.97 LA KHS AND FIXED ASSETS AT THE END OF FIFTH YEAR WAS 775.52 LA KHS AND THEREFORE, THE REQUIREMENT OF HOLDING ASSETS FOR FI VE YEARS HAVE BEEN MET BY THE APPELLANT. ITA NO. 2339-40-83-84/2017 :- 21 -: 4.4 AS REGARDS REQUIREMENT OF ACHIEVING PRODUCTION OF 50% OF THE INSTALLED CAPACITY OF THE AMALGAMATING COMPANY WITHIN 4 YEARS, THE APPELLANT HAS ACHIEVED THE REQUISITE LEV EL OF PRODUCTION ON THE FIFTH YEAR AND HAVE APPROACHED TH E CBDT FOR WAIVER OF THE REQUIREMENT OF ACHIEVING THE PRODUCTI ON ON THE FOURTH YEAR ITSELF. AS THE APPLICATION FOR WAIVER I S PENDING BEFORE THE CBDT, THE DISALLOWANCE IS PREMATURE. 5. THE APPELLANT CRAVES LEAVE TO ADDUCE ADDITIONAL GROUNDS AT THE TIME OF HEARING. 23. T HE GROUNDS OF APPEAL NO.1 & 5 ARE GENERAL IN NATUR E THEREFORE, DOES NOT REQUIRE ANY ADJUDICATION. 24. GROUNDS OF APPEAL NO.2 CHALLENGES THE CORRECTNESS OF THE ORDER OF THE CIT(A), CONFIRMING THE ADDITION U/S.1 4A R.W.R.8D(2) (III) OF THE ACT. THIS ISSUE IS REMITTED BACK TO THE FILE O F THE ASSESSING OFFICER IN ASSESSEES APPEAL IN ITA NO.2339/CHNY/2017 FOR A SSESSMENT YEAR 2010-2011 AT PARA 12 OF THE IMPUGNED ORDER. ACCORDINGLY, GROUNDS OF APPEAL NO.2 RAISED BY THE A SSESSEE IN ASSESSMENT YEAR 2011-12 IS ALSO REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION. GROUNDS O F APPEAL NO.2 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 25. GROUND NO.3 RELATES TO DISALLOWANCE OF BUSINESS PRO MOTION EXPENDITURE. THIS ISSUE IS REMITTED BACK TO THE FIL E OF THE ASSESSING OFFICER IN ASSESSEES APPEAL IN ITA NO.2339/CHNY/2 017 FOR ASSESSMENT YEAR 2010-2011 AT PARA 13 OF THE IMPUGNE D ORDER. ITA NO. 2339-40-83-84/2017 :- 22 -: ACCORDINGLY, GROUNDS OF APPEAL NO.3 RAISED BY THE A SSESSEE IN ASSESSMENT YEAR 2011-12 IS ALSO REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION. GROUNDS O F APPEAL NO.3 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 26. GROUND NO.4 CHALLENGES THE DISALLOWANCES SET OFF OF LOSS U/S.72A OF THE ACT. REASONING OF THE LD. CIT(A) WHI LE DENYING THE SET OFF OF LOSS IS BASED ON PROPER APPRECIATION OF FAC TS AND LAW AND WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDERS OF THE LOWER AUTHORITIES. GROUNDS OF APPEAL NO.4 FILED BY THE A SSESSEE STANDS DISMISSED. 27. IN THE RESULT THE APPEAL OF THE ASSESSEE IN ITA NO.2340/CHNY/2017 FOR ASSESSMENT YEAR 2011-12 IS P ARTLY ALLOWED FOR STATISTICAL PURPOSE. 28. NOW WE TAKE UP APPEAL OF THE REVENUE IN ITA NO.2384/CHNY/2017 FOR ASSESSMENT YEAR 2011-12. 29. SINCE, THE FACTS IN THE PRESENT APPEAL ARE IDENTIC AL TO THE FACTS IN REVENUE APPEAL IN ITA NO.2383/CHNY/2017 FOR ASSE SSMENT YEAR 2010-11 FOR THE REASONS MENTIONED THEREIN, WE REMI T THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER AS IN THE SAM E LINES INDICATED IN ITA NO. 2339-40-83-84/2017 :- 23 -: APPEAL ITA NO.2383/CHNY/2017 SUPRA. HENCE, THE ABOV E CAPTIONED APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 30. TO SUMMARIZE THE RESULTS, APPEALS OF THE ASSESSEE I N ITA NOS.2339 & 2340/CHNY/2017 AND APPEALS OF THE REVENU E IN ITA NOS. 2383 & 2384/CHNY/2017 FOR ASSESSMENT YEARS 2010-11 AND 2011- 2012 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 26TH DAY OF SEPTEMBER, 2019, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ) (INTURI RAMA RAO) /ACCOUNTANT MEMBER ( # / CHENNAI ) / DATED:26TH SEPTEMBER, 2019 KV $ +%,- .-!% / COPY TO: 1 . /0 / APPELLANT 3. ' 1% () / CIT(A) 5. -4 +%5 / DR 2. +6 /0 / RESPONDENT 4. ' 1% / CIT 6. 7 8# / GF