Appeal details
Counselvise Citation
[2021] 107 COUNSELVISE.COM (IT) 5683 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 5 month(s) 8 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
15-09-2021
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
A
Assessment Year
2015-2016
Appeal Filed On
06-04-2018
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A : NEW DELHI) BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCE) ITA NO.2419/DEL./2018 (ASSESSMENT YEAR : 2015-16) ACIT, CENTRAL CIRCLE 29, VS. M/S. ABHISAR BUILDWEL L (P) LTD., NEW DELHI. 1711, S.P. MUKHERJEE MARG, DELHI 110 006. (PAN : AAFCA6845D) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SATYAJEET GOEL, ADVOCATE REVENUE BY : SHRI RAJESH KUMAR, SENIOR DR DATE OF HEARING : 26.08.2021 DATE OF ORDER : 15.09.2021 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, ACIT, CENTRAL CIRCLE 29, NEW DELHI (HEREINAFTER REFERRED TO AS THE REVENUE) BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 31.01.2018 PASSE D BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-30, NEW DELHI QUA THE ASSESSMENT YEAR 2015-16 ON THE GROUNDS INTER ALIA T HAT :- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE AO T O DELETE THE ADDITION OF RS.3,54,59,399/- MADE ON ACCOUNT OF DIS ALLOWANCE OF DEPRECIATION U/S 32(1) R.W.S. 43(1) OF THE ACT. ITA NO.2419/DEL./2018 2 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT EXCIS E REFUND BEING REVENUE RECEIPT CANNOT BE REDUCED FROM THE CO ST OF PLANT & MACHINERY. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN RELYING UPON THE H ON'BLE SUPREME COURT DECISION IN THE CASE OF CIT VS. MEGHA LYA STEEL LTD. WHEREIN IT WAS HELD THAT EXCISE DUTY REFUND IS A REVENUE RECEIPT FORMING PART OF PROFITS AND GAINS, ARISING FROM BUSINESS WHILE DEALING WITH DEDUCTION CLAIMED U/S 80IBIIC OF THE ACT WHEREAS THE ISSUE UNDER CONSIDERATION IS CLAIM OF D EPRECIATION IN A SITUATION IN WHICH THE DEFERRED GOVERNMENT GRA NTS HAVE BEEN UTILIZED BY THE DEMERGED COMPANY IN A DIRECT M ANNER IN PURSUANCE OF NOTIFICATION ISSUED UNDER CENTRAL EXCI SE ACT, 1944. 4. THAT THE GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO EACH OTHER. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : ASSESSEE COMPANY CAME INT O EXISTENCE PURSUANT TO A SCHEME OF DEMERGER APPROVED BY HONBL E DELHI HIGH COURT VIDE ORDER DATED 11.09.2007 AS A RESULT OF DE MERGER OF LATEX RUBBER THREAD UNIT OF M/S. DHARAMPAL SATYAPAL LTD. HAVING ITS MANUFACTURING UNIT AT AGARTALA. ASSESSEE COMPANY B Y FILING RETURN OF INCOME FOR THE YEAR UNDER ASSESSMENT DECLARED A NET LOSS OF RS.13,43,34,403/- AND HAS CLAIMED DEPRECIATION AMOU NTING TO RS.2,82,24,375/-. ASSESSING OFFICER (AO) NOTICED F ROM THE DEPRECIATION CHART AND AUDITORS REPORT PREPARED AS PER PROVISIONS CONTAINED U/S 44AB OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) THAT DEPRECIATION HAS BEEN CLAIMED IN RESPEC T OF VARIOUS BLOCK OF ASSETS CONSISTING OF BUILDING (FACTORY), F URNITURE & FIXTURES ITA NO.2419/DEL./2018 3 AND PLANT & MACHINERY. AO FURTHER NOTICED THAT ASS ETS ON WHICH DEPRECIATION HAS BEEN CLAIMED BY THE ASSESSEE COMPA NY HAS BEEN ACQUIRED OUT OF GOVERNMENT GRANTS (EXCISE DUTY EXEM PTIONS) OBTAINED BY THE DEMERGED COMPANY. SINCE THE ENTIRE COST FOR ASSETS HAS BEEN BORNE BY THE CENTRAL GOVERNMENT, TH E ACTUAL COST OF ASSETS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 43(1) OF THE ACT SHALL BE NIL. DECLINING THE CONTENTIONS RAISED BY THE ASSESSEE COMPANY THAT IT HAS ACQUIRED THE ASSETS IN THE SCHE ME OF DEMERGER APPROVED BY HONBLE DELHI HIGH COURT AND NO PART OF COST OF ASSETS HAS BEEN BORNE BY THE GOVERNMENT, AO PROCEED ED TO HOLD THAT THE ASSETS WERE ACQUIRED BY DEMERGED COMPANY O UT OF THE AMOUNT OF EXCISE DUTY EXEMPTIONS WHICH HAS BEEN CLA SSIFIED BY THE DEMERGED COMPANY IN ITS BOOKS OF ACCOUNTS AS DEFERR ED GOVERNMENT GRANTS AND THEREBY REDUCED THE COST OF A SSETS BY AN AMOUNT OF RS.78,32,12,592/- AND CONSEQUENTLY CLAIM OF DEPRECIATION HAS BEEN RECOMPUTED BY REDUCING THE AC TUAL COST OF ASSETS BY AN AMOUNT OF RS.78,32,12,592/-. ACCORDIN GLY, DEPRECIATION OF PLANT & MACHINERY AMOUNTING TO RS.2 0,37,338/- IS ALLOWED AND THE BALANCE DEPRECIATION AMOUNTING TO R S.3,54,59,399 IS DISALLOWED AND MADE ADDITION THEREOF TO THE TOTA L INCOME OF THE ASSESSEE. ITA NO.2419/DEL./2018 4 3. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT ( A) BY WAY OF FILING APPEAL WHO HAS DELETED THE ADDITION BY ACCEP TING THE APPEAL OF THE ASSESSEE. FEELING AGGRIEVED, THE REVENUE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT AP PEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. LD. DR FOR THE REVENUE CHALLENGING THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) REFERRED TO PARAS 16 & 17 OF THE ASSESSMENT ORDER THAT WHEN THE ASSETS WERE ACQUIRED BY THE DEMERGED COMPANY OUT OF AMOUNT OF EXCISE DUTY EXEMP TIONS WHICH HAS BEEN CLASSIFIED BY THE DEMERGED COMPANY IN ITS BOOKS OF ACCOUNTS AS DEFERRED GOVERNMENT GRANTS, THE ACTUAL COST OF ASSETS TO THE ASSESSEE COMPANY SHALL BE REDUCED BY THE AMO UNT OF DEFERRED GOVERNMENT GRANTS UTILIZED FOR ACQUISITION OF SUCH ASSETS WHETHER BY THE DEMERGED COMPANY OR BY THE RESULTING COMPANY AND AS SUCH, AO HAS NOT REDUCED THE COST DURING THE YEAR UNDER CONSIDERATION. 6. HOWEVER, ON THE OTHER HAND, LD. AR FOR THE ASSES SEE TO REPEL THE CONTENTIONS RAISED BY THE LD. DR CONTENDED THAT THE ISSUE IN QUESTION IS COVERED IN FAVOUR OF THE ASSESSEE IN IT S OWN CASE ITA NO.2419/DEL./2018 5 DECIDED BY THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSMENT YEARS 2010-11, 2011-12 AND 2012-13 & 2013-14 IN ITA NOS.4990/DEL/2014, 823/DEL/2015, AND 5129 & 5130/DE L/2016 RESPECTIVELY. 7. AT THE SAME TIME, LD. DR FOR THE REVENUE HAS FAI LED TO BRING ON RECORD DISTINGUISHABLE FACTS, IF ANY, QUA THE YE AR UNDER ASSESSMENT VIS--VIS EARLIER YEARS. 8. LD. CIT (A) BY FOLLOWING EARLIER YEAR ORDER PASS ED BY HIS PREDECESSOR FOR AY 2012-13 AND 2013-14, SUBSEQUENTL Y CONFIRMED BY THE TRIBUNAL, DELETED THE DISALLOWANCE MADE ON A CCOUNT OF DEPRECIATION CLAIMED BY THE ASSESSEE BY RETURNING F OLLOWING FINDINGS :- THE APPELLANT HAS FURTHER SUBMITTED THAT ON THE S AME ISSUE OF DISALLOWANCE OF DEPRECIATION, ADDITIONS HA VE BEEN MADE IN THE ASSESSMENT ORDER PASSED FOR A. Y.2012-1 3 AND A Y.2013-14, AND THE SAME HAS BEEN DELETED BY ME VIDE ORDER DATED 15.07.2016 IN APPEAL NO. 328/15-16/2305 AND 7 0/16- 17/2504 AND ON THIS GROUND ALSO, THE APPELLANT HAS SUBMITTED THAT THE ADDITIONS MADE ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION, SHOULD BE DELETED. FROM THE ABOVE, FOLLOWING FACTS EMERGED: THE EXCISE DUTY REFUND IS GIVEN TO THE APPELLANT ON ACCOUNT OF THE MANUFACTURING ACTIVITIES CARRIED OUT IN THE NOTIFIED AREA, UPON FULFILLMENT OF CERTAIN CONDITIO NS; AND THE EXCISE DUTY REFUND, IS DERIVED FROM THE MANUFACTURING ACTIVITIES AND PURCHASING THE ASSETS FROM THIS EXCISE DUTY REFUND ON FULFILLMENT OF CERTAIN CONDITIONS, IS NOTHING, BUT APPLICATION OF PROFITS, THE EXCISE DUTY REFUND IS OF THE NATURE OF REVENUE RECEIPT, FORMING PART OF PROFITS AND GAINS, ARISING FROM BUS INESS. ITA NO.2419/DEL./2018 6 THE SAME IS A REVENUE RECEIPT, AS HAS BEEN HELD BY HON'BLE SUPREME COURT, IN THE CASE OF COMMISSIONER OF INCOME TAX VS. MEGHALAYA STEELS LTD. [2016J 383 ITR 217 (SC) AND THEREFORE, THIS EXCISE REFUND, BEING A REVENUE RECEIPT, CANNOT BE REDUCED FROM THE COST OF PLANT & MACHINERY. FROM THE ABOVE, IT IS CLEAR THAT THE EXCISE DUTY RE FUND, IS A REVENUE RECEIPT, FORMING PART OF TOTAL TAXABLE IN COME AND THEREFORE, SAME CANNOT BE REDUCED FROM THE BLOCK OF ASSETS, IN ORDER TO DETERMINE THE ACTUAL COST OF ASSETS. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, I AM OF THE CONSIDERED OPINION THAT EXCISE DUTY REFUND, IS NOT IN THE FORM OF CAPITAL SUBSIDY OR GRANT, WHICH CAN BE REDUCED F ROM THE COST OF ASSETS. THEREFORE, I AGREE WITH THE ARGUMENT OF THE APPELLANT AND IN FACTS AND CIRCUMSTANCES AS DISCUSSED ABOVE, WITH DUE RESPECT, I DIFFER FROM THE FINDINGS OF LD. CIT(A) I N THE EARLIER ASSESSMENT YEARS I.E. FOR A Y. 2007-08 TO A Y.2011- 12 ON THE SAME ISSUE AND ALSO, IN VIEW OF THE RATIO LAID DOWN BY HON'BLE SUPREME COURT, IN THE ABOVE REFERRED CASE AND THE O RDER DATED 15.07.2016 PASSED BY ME FOR THE PRECEDING ASSESSMEN T YEARS I.E. A Y.2012-13 AND A Y.2013-14 VIDE APPEAL NO. 328/15- 16/2305 AND 70/16-17/2504 RESPECTIVELY. ACCORDINGLY, FINDIN GS OF THE AO ARE ERRONEOUS AND THEREFORE, DISALLOWANCE OF RS. 4, 12, 17,481/ - IS DELETED. ACCORDINGLY, ALL THE GROUNDS ARE HEREBY ALLOWED. 9. WE HAVE PERUSED THE ORDER PASSED BY THE LD. CIT (A) AND ORDER PASSED BY THE COORDINATE BENCH OF THE TRIBUNAL IN ITA NO.4990/DEL/2014 FOR AY 2010-11 WHICH IS ON IDENTICAL FACTS, OPERATIVE PART OF WHICH IS EXTRACTED FOR READY PERU SAL AS UNDER :- 9. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. I T IS NOTICED THAT AN IDENTICAL ISSUE HAVING SIMILAR FACTS WAS A SUBJECT MATTER OF THE ASSESSEES APPEAL IN ITA NO.823/DEL/2015 FOR THE ASSESSMENT YEAR 2011-12 WHEREIN VIDE ORDER DATED 17 .09.2018, THE RELEVANT FINDINGS HAVE BEEN GIVEN IN PARAS 6 TO 14 WHICH READ AS UNDER: 6. UNDISPUTEDLY, FLEXIBLE PACKAGING UNIT OF M/S. DHARAMPAL SATYAPAL LTD. WAS DEMERGED INTO THE ASSES SEE COMPANY. THE ID. AR FOR THE ASSESSEE CONTENDED THAT NO PORTION OF COST OF ASSET ACQUIRED BY THE ASSESSEE C OMPANY ITA NO.2419/DEL./2018 7 WAS MET OUT OF THE GRANT OR SUBSIDY OR REIMBURSEMEN T OF THE GOVERNMENT OR ANY OTHER PERSON RATHER COST OF T HE ASSETS IN THE HANDS OF ASSESSEE COMPANY ARE AS PER DEMERGER SCHEME APPROVED AND AS SUCH, THERE IS NO QUESTION OF REDUCING THE COST OF ASSET AND DEPRECIA TION. 7. HOWEVER, THE AO AS WELL AS ID. CIT (A) BY INVOKING THE EXPLANATION 7 TO SECTION 43 (1) OF THE ACT PROCEEDED TO HOLD THAT THE ACTUAL COST OF THE ASSET TO THE ASSESSEE COMPANY WHICH IS A RESULTING COMPANY SHALL BE THE SAME WHICH WAS TO BE DEMERGED COMPANY AND THERE BY RECOMPUTED THE CLAIM OF DEPRECATION U/S 32 (1) OF T HE ACT BY REDUCING THE ACTUAL COST OF ASSET BY RS.78,32,12 ,592/-. 8. LD. AR FOR THE ASSESSEE BY RELYING UPON CBDT CIRCULAR NO.37/2016 DATED 02.11.2016 CONTENDED THAT BENEFIT OF DEDUCTION U/S 80IC IS ADMISSIBLE ON PROF ITS ENHANCED BY DISALLOWANCE MADE U/S 32 OF THE ACT WHI CH MAKES THE CLAIM OF DEPRECIATION AS REVENUE NEUTRAL AND FURTHER CONTENDED THAT THE ASSESSEE IS ENTITLED TO CLAIM BENEFIT OF STATUTORY DEDUCTIONS U/S 80IC ON ADDITIO NAL INCOME ARISING FROM DISALLOWANCE OF CLAIM OF DEPRECIATION. 9. ON THE OTHER HAND, ID. DR ALSO BY RELYING UPON EXPLANATION 7 & 10 TO SECTION 43 (1) CONTENDED THAT THE ACTUAL COST OF RESULTING COMPANY SHALL ALSO BE NIL AND AS SUCH, ACTUAL COST OF ASSET IS TO BE REDUCED BY THE AMOUNT OF RS.78,32,12,592/-. THE LD. DR FURTHER CONTENDED THAT THE EXCISE DUTY IS REIMBURSEMENT TO THE ASSESSEE. 10. IN THE BACKDROP OF THE AFORESAID FACTS AND CIRCUMSTANCES OF THE CASE AND ARGUMENTS ADDRESSED B Y THE LD. AR OF THE PARTIES TO THE APPEAL, THE FIRST QUES TION ARISES FOR DETERMINATION IN THIS CASE IS:- AS TO WHETHER THE ASSESSEE IS ENTITLED TO CLAIM BENEFIT OF STATUTORY DEDUCTION U/S 80IC OF THE ACT ON ADDITIONAL INCOME ARISING FROM DISALLOWANCE OF CLAIM OF DEPRECIATION AND THAT THE BENEFIT OF DEDUCTION U/S 80IC IS ADMISSIBLE ON PROFITS ENHANCED BY THE DISALLOWANCE MADE U/S 32 OR THAT THE CLAIM OF DEPRECIATION IS REVENUE NEUTRAL? 11. BEFORE PROCEEDING FURTHER, THE RELEVANT PARA O F CIRCULAR NO.37/2016 DATED 02.11.2016 ISSUED BY THE CBDT, RELIED UPON BY THE LD. AR FOR THE ASSESSEE, I S EXTRACTED AS UNDER:- ITA NO.2419/DEL./2018 8 CHAPTER VI-A OF THE INCOME-TAX ACT, 1961 ('THE ACT'), PROVIDES FOR DEDUCTIONS IN RESPECT OF CERTAI N INCOMES. IN COMPUTING THE PROFITS AND GAINS OF A BUSINESS ACTIVITY, THE ASSESSING OFFICER MAY MAKE CERTAIN DISALLOWANCES, SUCH AS DISALLOWANCES PERTAINING TO SECTIONS 32, 40(A)(IA),40A(3), 43B ETC., OF THE ACT. AT TIMES DISALLOWANCE OUT OF SPECIFIC EXPENDITURE CLAIMED MAY ALSO BE MADE. THE EFFECT OF SUCH DISALLOWANCES IS AN INCREASE IN THE PROFITS. DOUBTS HAVE BEEN RAISED AS TO WHETHER SUCH HIGHER PROFITS WOULD ALSO RESULT IN CLAIM FOR A HIGHER PROFIT-LINKED DEDUCTION UNDER CHAPTER VI- A. 3. IN VIEW OF THE ABOVE, THE BOARD HAS ACCEPTED THE SETTLED POSITION THAT THE DISALLOWANCE S MADE UNDER SECTIONS 32, 40(A)(IA),40A(3), 43B, ETC. OF THE ACT AND OTHER SPECIFIC DISALLOWANCES, RELATE D TO THE BUSINESS ACTIVITY AGAINST WHICH THE CHAPTER VI-A DEDUCTION HAS BEEN CLAIMED, RESULT IN ENHANCEMENT OF THE PROFITS OF THE ELIGIBLE BUSINESS , AND THAT DEDUCTION UNDER CHAPTER VI-A IS ADMISSIBLE ON THE PROFITS SO ENHANCED BY THE DISALLOWANCE. 4. ACCORDINGLY, HENCEFORTH, APPEALS MAY NOT BE FILED ON THIS GROUND BY OFFICERS OF THE DEPARTMENT AND APPEALS ALREADY FILED IN COURTS/TRIBUNALS MAY BE WITHDRAWN / NOT PRESSED UPON. THE ABOVE MAY BE BROUGHT TO THE NOTICE OF ALL CONCERNED. 12. BARE PERUSAL OF THE OPERATIVE PART OF THE CIRCULAR(SUPRA)GOES TO PROVE THAT DISALLOWANCE MADE BY THE ASSESSEE U/S 32 OF THE ACT RELATING TO BUSINESS ACTIVITY AGAINST WHICH DEDUCTIONS HAVE BEEN CLAIMED UNDER CHAPTER VI-A, AS IN THE INSTANT CASE, RESULTS IN ENHANCEMENT OF THE PROFITS OF THE ELIGIBLE BUSINESS AND THAT DEDUCTION UNDER CHAPTER VI-A IS ADMISSIBLE ON PROFITS SO ENHANCED BY THE DISALLOWANCE. IN THESE CIRCUMSTANCES, THE CLAIM OF DEPRECIATION MADE BY TH E ASSESSEE COMPANY OF RS.6,40,38,391/- IS ALLOWABLE DEDUCTION AND AS SUCH, THE BENEFIT OF DEDUCTION U/S 80IC IS ALLOWABLE ON PROFITS ENHANCED BY THE DISALLOWANC E MADE U/S 32 OF THE ACT AND IN THESE CIRCUMSTANCES, THE CLAIM OF DEPRECIATION IS REVENUE NEUTRAL. 13. SO FAR AS QUESTION OF TREATING THE REFUND OF E XCISE DUTY AS PART OF THE COST IS CONCERNED, IT IS THE CA SE OF THE ASSESSEE THAT THE ENTIRE COST HAS BEEN PAID BY THE ASSESSEE ITA NO.2419/DEL./2018 9 FOR PLANT & MACHINERY AND AS SUCH, IT CANNOT BE RED UCED FROM THE COST OF ASSET. LD. AR FOR THE ASSESSEE REL IED UPON ORDER PASSED BY CIT (A) DATED15.07.2016 IN ASSESSEE S OWN CASE FOR AYS 2012-13 & 2013-14 WHERE IN EXCISE DUTY REFUND HAS NOT BEEN TREATED IN THE FORM OF CAPITAL SUBSIDY OR GRANT WHICH CAN BE REDUCED FROM THE COST OF ASSE TS. 14. SINCE FINDINGS RETURNED BY THE LD. CIT (A) ARE BASED UPON THE DECISION RENDERED BY HONBLE APEX CO URT IN CIT VS. MEGHALAYA STEELS LTD. (2016) 383 ITR 2 17 (SC), WE ARE OF THE CONSIDERED VIEW THAT THE EXCISE REFUND IS IN THE NATURE OF REVENUE RECEIPT FORMING PART OF PROFITS AND GAINS ARISING FROM THE BUSINESS AND AS SUCH CAN NOT BE REDUCED FROM THE COST OF PLANT & MACHINERY. SO, THE FINDINGS RETURNED BY LD. CIT (A) ON THIS ISSUE ARE CONFIRMED. 14. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE A RE OF THE CONSIDERED VIEW THAT AO AS WELL AS CIT (A) H AVE ERRED IN MAKING ADDITION OF RS.6,40,38,391/- BY DISALLOWING THE CLAIM OF DEPRECIATION OF THE ASSET MADE U/S 32 OF THE ACT WHICH WOULD FURTHER ENTITLE TO TH E ASSESSEE THE BENEFIT OF DEDUCTION U/S 80IC ON PROFI TS ENHANCED BY SUCH DISALLOWANCES MADE U/S 32 OF THE A CT. CONSEQUENTLY, APPEAL FILED BY THE ASSESSEE IS PARTL Y ALLOWED. SO, RESPECTFULLY FOLLOWING THE AFORESAID REFERRED T O ORDER DATED 17.09.2018 IN ASSESSEES OWN CASE, THE ISSUE UNDER CONSIDERATION IS DECIDED IN ASSESSEES FAVOUR. 10. FURTHERMORE, COORDINATE BENCH OF THE TRIBUNAL IN ITA NO.823/DEL/2015 FOR AY 2011-12 VIDE ORDER DATED 17. 09.2018 ALSO DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE A SSESSEE BY DETERMINING FOLLOWING FINDINGS :- 10. IN THE BACKDROP OF THE AFORESAID FACTS AND CIR CUMSTANCES OF THE CASE AND ARGUMENTS ADDRESSED BY THE LD. AR O F THE PARTIES TO THE APPEAL, THE FIRST QUESTION ARISES FOR DETERM INATION IN THIS CASE IS:- AS TO WHETHER THE ASSESSEE IS ENTITLED TO CLAIM BE NEFIT OF STATUTORY DEDUCTION U/S 80IC OF THE ACT ON ADDITION AL INCOME ARISING FROM DISALLOWANCE OF CLAIM OF DEPRECIATION AND THAT THE BENEFIT OF DEDUCTION U/S 80IC IS ITA NO.2419/DEL./2018 10 ADMISSIBLE ON PROFITS ENHANCED BY THE DISALLOWANCE MADE U/S 32 OR THAT THE CLAIM OF DEPRECIATION IS REVENUE NEUTRAL? 11. BEFORE PROCEEDING FURTHER, THE RELEVANT PARA OF CIRCULAR NO.37/2016 DATED 02.11.2016 ISSUED BY THE CBDT, REL IED UPON BY THE LD. AR FOR THE ASSESSEE, IS EXTRACTED AS UNDER :- CHAPTER VI-A OF THE INCOME-TAX ACT, 1961 ('THE ACT'), PROVIDES FOR DEDUCTIONS IN RESPECT OF CERTAI N INCOMES. IN COMPUTING THE PROFITS AND GAINS OF A BU SINESS ACTIVITY, THE ASSESSING OFFICER MAY MAKE CERTAIN DISALLOWANCES, SUCH AS DISALLOWANCES PERTAINING TO SECTIONS 32, 40(A)(IA), 40A(3), 43B ETC., OF THE AC T. AT TIMES DISALLOWANCE OUT OF SPECIFIC EXPENDITURE CLAI MED MAY ALSO BE MADE. THE EFFECT OF SUCH DISALLOWANCES IS AN INCREASE IN THE PROFITS. DOUBTS HAVE BEEN RAISED AS TO WHETHER SUCH HIGHER PROFITS WOULD ALSO RESULT IN CL AIM FOR A HIGHER PROFIT-LINKED DEDUCTION UNDER CHAPTER VI-A . .. 3. IN VIEW OF THE ABOVE, THE BOARD HAS ACCEPTED THE SETTLED POSITION THAT THE DISALLOWANCES MADE UNDER SECTIONS 32, 40(A)(IA), 40A(3), 43B, ETC. OF THE AC T AND OTHER SPECIFIC DISALLOWANCES, RELATED TO THE BUSINE SS ACTIVITY AGAINST WHICH THE CHAPTER VI-A DEDUCTION H AS BEEN CLAIMED, RESULT IN ENHANCEMENT OF THE PROFITS OF THE ELIGIBLE BUSINESS, AND THAT DEDUCTION UNDER CHAPTER VI-A IS ADMISSIBLE ON THE PROFITS SO ENHANCED BY THE DISALLOWANCE. 4. ACCORDINGLY, HENCEFORTH, APPEALS MAY NOT BE FILE D ON THIS GROUND BY OFFICERS OF THE DEPARTMENT AND AP PEALS ALREADY FILED IN COURTS/TRIBUNALS MAY BE WITHDRAWN / NOT PRESSED UPON. THE ABOVE MAY BE BROUGHT TO THE NOTI CE OF ALL CONCERNED. 12. BARE PERUSAL OF THE OPERATIVE PART OF THE CIRCU LAR (SUPRA) GOES TO PROVE THAT DISALLOWANCE MADE BY THE ASSESSE E U/S 32 OF THE ACT RELATING TO BUSINESS ACTIVITY AGAINST WHICH DED UCTIONS HAVE BEEN CLAIMED UNDER CHAPTER VI-A, AS IN THE INSTANT CASE, RESULTS IN ENHANCEMENT OF THE PROFITS OF THE ELIGIBLE BUSIN ESS AND THAT DEDUCTION UNDER CHAPTER VI-A IS ADMISSIBLE ON PROFI TS SO ENHANCED BY THE DISALLOWANCE. IN THESE CIRCUMSTANC ES, THE CLAIM OF DEPRECIATION MADE BY THE ASSESSEE COMPANY OF RS. 6,40,38,391/- IS ALLOWABLE DEDUCTION AND AS SUCH, THE BENEFIT OF DEDUCTION U/S 80IC IS ALLOWABLE ON PROFITS ENHANCED BY THE DISALL OWANCE MADE U/S 32 OF THE ACT AND IN THESE CIRCUMSTANCES, THE C LAIM OF DEPRECIATION IS REVENUE NEUTRAL. 13. SO FAR AS QUESTION OF TREATING THE REFUND OF EX CISE DUTY AS PART OF THE COST IS CONCERNED, IT IS THE CASE OF TH E ASSESSEE THAT THE ITA NO.2419/DEL./2018 11 ENTIRE COST HAS BEEN PAID BY THE ASSESSEE FOR PLANT & MACHINERY AND AS SUCH, IT CANNOT BE REDUCED FROM THE COST OF ASSET. LD. AR FOR THE ASSESSEE RELIED UPON ORDER PASSED BY CIT (A ) DATED 15.07.2016 IN ASSESSEES OWN CASE FOR AYS 2012-13 & 2013-14 WHEREIN EXCISE DUTY REFUND HAS NOT BEEN TREATED IN THE FORM OF CAPITAL SUBSIDY OR GRANT WHICH CAN BE REDUCED FROM THE COST OF ASSETS. 14. SINCE FINDINGS RETURNED BY THE LD. CIT (A) ARE BASED UPON THE DECISION RENDERED BY HONBLE APEX COURT IN CIT VS. MEGHALAYA STEELS LTD. (2016) 383 ITR 217 (SC), WE ARE OF THE CONSIDERED VIEW THAT THE EXCISE REFUND IS IN THE NA TURE OF REVENUE RECEIPT FORMING PART OF PROFITS AND GAINS ARISING F ROM THE BUSINESS AND AS SUCH CANNOT BE REDUCED FROM THE COS T OF PLANT & MACHINERY. SO, THE FINDINGS RETURNED BY LD. CIT (A) ON THIS ISSUE ARE CONFIRMED. 14. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE AR E OF THE CONSIDERED VIEW THAT AO AS WELL AS CIT (A) HAVE ERR ED IN MAKING ADDITION OF RS.6,40,38,391/- BY DISALLOWING THE CLA IM OF DEPRECIATION OF THE ASSET MADE U/S 32 OF THE ACT WH ICH WOULD FURTHER ENTITLE TO THE ASSESSEE THE BENEFIT OF DEDU CTION U/S 80IC ON PROFITS ENHANCED BY SUCH DISALLOWANCES MADE U/S 32 OF THE ACT. CONSEQUENTLY, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 11. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE AND FO LLOWING THE ORDERS PASSED BY THE COORDINATE BENCH OF THE TRIBUN AL IN ASSESSMENT YEARS 2010-11, 2011-12 AND 2012-13 & 201 3-14 (SUPRA) WHICH ARE BASED UPON THE DECISION RENDERED BY HONBLE APEX COURT IN CASE OF CIT VS. MEGHALAYA STEELS LTD. (2016) 383 ITR 217 (SC) , WE ARE OF THE CONSIDERED VIEW THAT THE EXCISE REF UND IS IN THE NATURE OF REVENUE RECEIPT FORMING PART OF THE PROFIT AND GAINS ARISING FROM THE BUSINESS AND AS SUCH CANNOT BE REDUCED FROM THE COST OF PLANT & MACHINERY. IN THESE CIRCUMSTAN CES, THE ITA NO.2419/DEL./2018 12 CONTENTIONS RAISED BY THE LD. DR FOR THE REVENUE AR E NOT SUSTAINABLE. 12. SO, LD. CIT(A) PASSED THE IMPUGNED ORDER BY FOL LOWING THE EARLIER YEARS ORDER PASSED BY HIS PREDECESSOR, SUBS EQUENTLY CONFIRMED BY THE TRIBUNAL, BY RIGHTLY REACHING THE CONCLUSION THAT, THE ASSETS ACQUIRED BY DEMERGED COMPANY, M/S. DHAR AMPAL SATYAPAL LTD., OUT OF THE AMOUNT OF EXCISE DUTY REF UND, ACCOUNTED AS DEFERRED GOVERNMENT GRANTS IN ITS BOOKS OF ACCOU NT DOES NOT CARRY ANY FORCE TO MAKE REDUCTION IN THE COST OF AS SETS AND THEREBY DELETED THE ADDITION MADE ON ACCOUNT OF DISALLOWANC E OF DEPRECIATION . CONSEQUENTLY, FINDING NO ILLEGALITY OR INFIRMITY IN THE IMPUGNED ORDER PASSED BY THE LD. CIT (A), THE A PPEAL FILED BY THE REVENUE IS HEREBY DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 15 TH DAY OF SEPTEMBER, 2021. SD/- SD/- (ANADEE NATH MISSHRA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 15 TH DAY OF SEPTEMBER, 2021 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-30, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.
