M/s.G.K.Granites Ltd, Cochin V. JCIT, Cochin

ITA 25/COCH/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8524 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2016
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 24-05-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 09-01-2015
• Court: TRIBUNAL
• Department Lawyers: K P GOPAKUMAR
• Assessee Lawyers: V C JAMES
• Keywords: Depreciation; Opportunity of being heard; Principle of natural justice; Additional depreciation
• Section: 143(3); 115JB; 194C; 32

Judgement Text

ITA NO.25/COCH/2015 1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI B P JAIN, AM & GEORGE GEORGE.K, JM ITA NO.25/COCH/2015 (ASST YEAR : 2006-07) M/S. G.K. GRANITES LTD., KUREEKAL, KIZHAKKAMBALAM ERNAKULAM, KOCHI-683 562. THE JOINT COMMISSIONER OF INCOME-TAX, CIRCLE-1(2), KOCHI. ( ASSESSEE APPELLANT) VS (REVENUE -RESPONDENT) PAN NO. AACCG 0500A ASSESSEE BY SHRI V.C. JAMES, CA REVENUE BY SHRI K.P. GOPAKUMAR, SR. DR DATE OF HEARING 24/05/2016 DATE OF PRONOUNCEMENT 15/06/2016 ORDER PER B.P. JAIN, AM: THIS APPEAL OF THE ASSESSEE ARISES FROM THE O RDER OF THE LD. CIT(A)-II DATED 30/09/2014 FOR THE ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER THE LEARNED CIT(APPEALS) IS CONTRARY T O LAW, FACTS AND CIRCUMSTANCES OF THE CASE AND IS OPPOSED TO THE PRI NCIPLES OF NATURAL JUSTICE EQUITY AND FAIR PLAY. IN MOST OF THE CASES, THE LE ARNED CIT(A) HAD NOT APPLIED HER MIND BASED ON THE SITUATION. 2. DISALLOWANCE OF ADDITIONAL DEPRECIATION TO THE TUNE OF RS.27,36,552/- THE COMMISSIONER OF INCOME TAX(APPEALS)-II, OUGHT T O HAVE TAKEN NOTE OF THE FACT THAT BASED ON SEC.32(1)(IIA) (2002 ACT) OF THE INCOME TAX ACT YOUR ITA NO.25/COCH/2015 2 APPELLANT IS ELIGIBLE TO CLAIM ADDITIONAL DEPRECIAT ION SINCE INSTALLATION OF THE MACHINERY ITEMS WAS DONE BEFORE 31-3-2005 AND THE C LAIM WAS MADE IN THE A.Y. 2006-08, SINCE THAT IS THE FIRST YEAR OF PRODU CTION. LEARNED CIT(A)DISALLOWED THE ADDITIONAL DEPRECIATIO N CLAIM ON THE GROUND THAT, AS PER SEC. 32(1)(IIA)IN THE CASE OF ANY NEW MACHINERY OR PLANT WHICH HAS BEEN ACQUIRED OR INSTALLED AFTER 31.3.2005 ADDI TIONAL DEPRECIATION IS AVAILABLE TO THE ASSESSEE. SINCE THIS PROVISION IS AMENDED WITH FINANCE ACT 2005, THEREFORE FOR THE A.Y. 2006-07, THE ASSESSEE IS NOT ELIGIBLE FOR ADDITIONAL DEPRECIATION FOR THE MACHINERY ACQUIRED AND INSTALL ED AFTER 31.3.2002 BUT BEFORE 31.3.2005. HENCE THE ASSESSING OFFICER IS J USTIFIED IN DISALLOWING HIS EXCESS CLAIM OF DEPRECIATION. IT CAN BE SEEN FROM THE FINANCIAL STATEMENTS OF GK GRANITES LTD THAT THE COMPANY HAD COMMENCED THE PRODUCTION & SALES IN THE A.Y. 2006-07, HENCE IT IS NOT POSSIBLE FOR THE COMPANY TO CLAIM D EPRECIATION BEFORE THE PREVIOUS YEAR BECAUSE THE ASSETS WAS NOT PUT TO USE . DISALLOWING ADDITIONAL DEPRECIATION DEFEATS THE PROVISIONS OF INCOME TAX A CT BECAUSE WE WERE DEPRIVED FROM GETTING THE BENEFIT OF ADDITIONAL DEP RECIATION. YOUR APPELLANT IS NOT AGREEABLE TO THE ABOVE VIEWS BECAUSE THE ABOVE VIEW IS NOT IN LINE WITH THE SECTION 32(1)(IIA) OF THE I NCOME TAX ACT. THE ADDITIONAL DEPRECIATION @ 15% IS CHARGED ON THE BASIS OF AMEND MENT MADE IN CLAUSE (IIA) TO SEC. 32 OF INCOME TAX ACT 1961 BY FINANCE ACT, 2002, W.E.F. 1-04-2003 WHICH READS AS UNDER: IN THE CASE OF ANY NEW MACHINERY OR PLANT (OTHER T HAN SHIPS AND AIRCRAFT), WHICH HAS BEEN ACQUIRED AND INSTALLED AFTER 31 ST DAY OF MARCH 2002, BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING, A FURTHER SUM EQUAL TO FIFTEEN PE R CENT OF THE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTI ON UNDER CLAUSE (II). AS PER THE ABOVE SECTION, THESE ASSETS ARE ELIGIBLE FOR ADDITIONAL DEPRECIATION OF 15% IN THE YEAR OF ADDITION AND ALSO FOR THE SUB SEQUENT ASSESSMENT YEARS. SUBSEQUENTLY, THE ABOVE PROVISION WAS AMENDED BY FI NANCE ACT, 2005 AS FOLLOWS: IN THE CASE OF ANY NEW MACHINERY OR PLANT (OTHER T HAN SHIPS AND AIRCRAFT), WHICH HAS BEEN ACQUIRED AND INSTALLED AFTER 31 ST DAY OF MARCH 2005, BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING, A FURTHER SUM EQUAL TO TWENTY PER CENT OF THE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTI ON UNDER CLAUSE (II). ITA NO.25/COCH/2015 3 BASED ON THE ABOVE PROVISION YOUR APPELLANT HAVE CL AIMED ADDITIONAL DEPRECIATION @ 15% ON THE MACHINERY ACQUIRED AND I NSTALLED ON 31/03/2002. CERTIFICATE IN FORM 3AA WITH ANNEX. 8 HAS BEEN DULY FILED. THE ASST. COMMISSIONER OF INCOME TAX DURING THE ASSESSMENT TH E SAME HAS ALSO BEEN VERIFIED AND WAS ACCEPTED, APPROVED. YOUR APPELLAN T FURTHER SUBMIT THAT THE COMMERCIAL PRODUCTION WAS STARTED ONLY IN THE Y EAR 2005-06 AND THE SAME YEAR WAS THE FIRST YEAR OF THE COMPANY. IN CASE OF DEPRECIATION IT IS MADE CLEAR THAT IN OR DER TO CLAIM DEPRECIATION THE ASSET HAS TO BE PUT TO USE HENCE CIT(A) REJEC TION ON GROUND THAT ASSET WAS BOUGHT IN BEFORE THE PREVIOUS YEAR, HENCE ADDIT IONAL DEPRECIATION CANNOT BE GIVEN SHOULD BE SET ASIDE. SECTION 32(1)(IIA)WAS INSERTED BY THE FINANCE ACT, 2002 AND CAME INTO EFFECT FROM THE ASSESSMENT YEAR 2003-04. THE MEMORANDUM E XPLAINING PROVISIONS OF FINANCE BILL 2002 STATED THAT THIS PROVISION WAS EN ACTED TO PROVIDE BOOST TO MANUFACTURING SECTOR. THE INTENTION WAS TO PROMOT E CREATION OF ADDITIONAL PRODUCTION CAPACITIES IN MANUFACTURING SECTOR BY IN STALLATION OF NEW PLANT AND MACHINERY. THE INTENTION OF THE LEGISLATURE WA S TO ENCOURAGE THE ASSESSEES IN MANUFACTURING SECTOR NOT ONLY TO PURCH ASE NEW PLANT AND MACHINERY BUT ALSO TO INSTALL THE SAME RESULTING IN CREATION OF ADDITIONAL PRODUCTION CAPACITIES. IT IS, FOR THIS PURPOSE, THE YEAR OF ALLOWANCE WAS FIXED WITH REFERENCE TO THE YEAR OF INSTALLATION AND NOT YEAR OF ACQUISITION BECAUSE THE INSTALLATION OF NEW MACHINERIES RESULTING IN EX PANSION OF PRODUCTION CAPACITY MAY TAKE MORE THAN ONE FINANCIAL YEAR TO C OMPLETE. THE LANGUAGE USED IN SECTION 32(1)(IIA) WHICH COMPELS T HE ASSESSEE TO COMPLETE BOTH ACQUISITION AND INSTALLATION OF NEW PLANT AND MACHINERY IN THE SAME FINANCIAL YEAR. IN ABSENCE OF ANY SUCH EXPRESS PROV ISION, THE ASSESSING OFFICER COULD NOT READ SUCH ADDITIONAL CONDITION IN SECTION 32(1)(IIA). DISALLOWANCE OF DRILLING EXPENSES (AMT. RS.2,50,264 .41/-) THE CIT(APPEALS)-II, KOCHI, WENT WRONG IN PRESUMING THE PAYMENT MADE TO VARIOUS PERSONS UNDER THE HEAD DRILLING EXPENSE IS BASED ON SOME CONTRACT. THE LEARNED CIT(A) WITHOUT CONSIDERING THE NATURE O F WORK AND THE TYPE OF ACTIVITY DISALLOWED AN AMOUNT OF RS.25264/- CLAIMED UNDER THE HEAD DRILLING EXPENSES ON PLEA THAT TDS U/S. 194C IS APPLICABLE A ND TAX HAS NOT DEDUCTED. THE DRILLING EXPENSES COMPRISES OF MAINLY OF PURCHA SE OF DRILLING RODS, BITS, GRINDING STONES, WIRES, CONSUMABLES ETC. AND THE DR ILLING WAGE. DRILLING WAGES ARE PAID TO ORDINARY LABORERS MAINLY FROM TAMIL NA DU, ORISSA ETC. THESE TYPE ITA NO.25/COCH/2015 4 OF WORKERS WILL WORK FOR ONE MONTH OR TWO MONTHS IN AN YEAR. MORE THAN FIFTY TO SIXTY PEOPLE WORKERS OF THIS CATEGORY ARE THERE IN THE SITE. ALL OF THEM PERSONS WERE PAID LESS THAN RS.20000/- IN A YEAR AND DOES NOT ATTRACT THE PROVISIONS OF SEC. 194C. LEDGER COPY OF THESE EXPENSES AND LEDGER COPY OF MR. TITUS ARE ENCLOSED AND THE SAME WILL CLEARLY SHOW THE NATURE OF THIS EXPENSE. THE LEARNED CIT(A) HAD CIT ED AN EXAMPLE OF ONE MR. TITUS WHOM THE TOTAL PAYMENT MADE WAS ONLY RS.10,16 6.75 AS DRILLING EXPENSES. (LEDGER COPY ENCLOSED). TDS IS NOT APPLI CABLE IN THIS CASE SINCE THE PAYMENT IS LESS THAN RS.20000. THERE IS NO CONTRACT BETWEEN ANYBODY OR WITH ANY AG ENCY IN THIS REGARD AND ALL THE PAYMENTS ARE MADE DIRECTLY TO THE LABORERS AND FOR THE PURCHASE OF DRILLING CONNECTED SPARES & CONSUMABLES. LEARNED CI T(A) HAD CONSIDERED TO TOTAL PAYMENT AS A PAYMENT TO A CONTRACTOR EVEN THO UGH WE PROVIDED LEDGERS AND BILLS. 4. DISALLOWANCE OF INTEREST ON ADVANCES AMT. RS.28, 750/- THE CIT(APPEALS)-II, KOCHI, WAS NOT JUSTIFIED IN CO NSIDERING FACT THAT THE MOBILISATION ADVANCE RECEIVED FROM A CUSTOMER IS IN NO WAY CONNECTED TO BANK ADVANCE. WHILE CONSIDERING FACTS OF THE CASE AND THE DETAILS OF THE TRANSACTION LEARNED CIT(A) HAS DISALLOWED RS.28750/- BEING THE INTEREST RELATING TO THE ADVANCE GIVEN ON THE ASSUMPTION THAT THE AMOUNT ADV ANCED IS FROM THE BORROWED FUNDS. THE ADVANCES AGAINST ACQUISITION FOR ASSETS STOOD A S FOLLOWS: 2005-06 2004-05 1. A.L. JACOB & SONS 20000.00 20000.00 2. NOBEL EXPLOSIVES 22600.00 3. GK GRANITES 9304201.92 4. OXFORD RUBBERS 26732.00 5. LAND ADVANCE 50000.00 50000.00 9554201.92 502732.00 THE ASSESSING OFFICER HAS DISALLOWED THE INTEREST E XPENSE ON CONTENTION THAT THESE ADVANCES WERE MADE FROM BANK OVERDRAFTS. DUR ING THE YEAR THE ADVANCE FOR PURCHASE OF ASSETS IS ONLY RS9304201.92 . DURING THE YEAR 2005-05, THERE IS A CASH PROFIT OF RS.93,90,143.29 (NET PROF IT + DEPRECIATION). IN ADDITION ITA NO.25/COCH/2015 5 TO THAT, AROUND RS.32 LAKHS WAS RECEIVED DURING THE YEAR AS MOBILISATION ADVANCE FROM CUSTOMERS. THERE IS ALSO A CONSIDERAB LE REDUCTION IN BANK LOANS AND ALSO BANK INTEREST (RS.85 L TO RS.59.77 L )COMPARED TO THE PREVIOUS YEAR. DURING THAT PERIOD (2004-2005) THERE WAS NO OD ALSO. COMMERCIAL PRODUCTION STARTED ONLY DURING THE YEAR 2005-06). THE ABOVE ADVANCES CANNOT BE DEEMED AS GIVEN FROM BANK OVERDRAFT AND H ENCE THE DISALLOWANCE OF INTEREST BY ASSESSING OFFICER ITSEL F IS NOT JUSTIFIED. 5. THE CIT(APPEALS)-II, KOCHI WAS NOT JUSTIFIED FOR NOT CONSIDERING THE HIGH COURT ORDER TO CONSIDER THE PAYMENT MADE BY ASSESSE E RS.4,48,462, WHILE CONSIDERING THE CASE & PASSING THE ORDER. INCOME TAX PAID U/S. 115JB RS.448462 HAS NOT BEEN C ONSIDERED BY THE ASSESSING OFFICER WHILE COMPUTING THE TAX PAYABLE A ND REJECTED BY CIT(A) ON GROUND THAT THE MERE PAYMENT U/S. 115JB WOULD NOT E NTITLE ASSESSEE FOR THE MAT TAX CREDIT. BUT YOUR APPELLANT WOULD LIKE TO BR ING TO YOUR ATTENTION YOUR APPELLANT IS NOT CLAIMING TAX CREDIT ON MAT PAID, B UT JUST TO TREAT THE TAX PAID BY US U/S. 115JB AS SELF ASSESSMENT FOR THE SA ME ASSESSMENT YEAR. FURTHER HIGH COURT ON ITS JUDGMENT PASSED ON WRIT P ETITION FILED BY THE ASSESSEE, THAT PAYMENT MADE BY THE ASSESSEE AS PER CHALLAN DTD 20/06/2007 FOR RS.4,48,462/- SHALL BE ADVERTED TO BY THE SECON D RESPONDENT WHILE PASSING ORDER & COPY OF THE ORDER IS ATTACHED HEREWITH. 6. SUCH OTHER GROUNDS WHICH WILL BE SUBMITTED AT T HE TIME OF HEARING. 3. GROUND NOS. 1 & 6 ARE GENERAL IN NATURE AND TH EREFORE, DO NOT REQUIRE ADJUDICATION. 4. AS REGARDS GROUND NO. 2, THE ASSESSING OFFICE R MADE THE DISALLOWANCE OF ADDITIONAL DEPRECIATION OF RS.27,36,552/- WHICH WAS CONFIRMED BY THE LD. CIT(A). 5. THE BRIEF FACTS OF THE CASE AS EMANATING FROM THE ORDER OF THE ASSESSING OFFICER ARE REPRODUCED HEREINBELOW FOR THE SAKE OF CONVENIENCE: ITA NO.25/COCH/2015 6 2. THE ASSESSEE HAS CLAIMED AN AMOUNT OF RS.87,11, 361/- AS DEPRECIATION ON ITS FIXED ASSETS. THIS INCLUDES ADDITIONAL DEPR ECIATION ON PLANT AND MACHINERY AMOUNTING TO RS.28,04,043/-. ADDITIONAL DEPRECIATION FOR THE AY 2006-07 IS AVAILABLE ONLY IN RESPECT OF NEW PLANT A ND MACHINERY ACQUIRED AND INSTALLED AFTER 31.03.2005. FROM THE SCHEDULE FORMING PART OF THE BALANCE SHEET, IT IS SEEN THAT THE FOLLOWING ITEMS OF MACHINERY WERE ACQUIRED AND INSTALLED BEFORE 31.03.2005. DETAILS & P&M AMOUNT DATE OF PURCHASE DATE OF INSTALLATION ADDL. DEP. CLAIMED 1. IMPACTOR MACHINE 2475000 18.12.03 10.01.04 371 250 2. CRUSHER MACHINE 2684000 18.06.04 20.08.04 14088 00 3900000 10.12.04 05.01.05 280800 10.03.04 15.04.04 3. PLANT & MACHINERY 5675062 DT. NOT SHOWN 31.03.05 851259 4. WEIGH BRIDGE 701562 27.09.03 01.11.03 105243 2736552 GE AARE THAT GS 2.2 SINCE THE ABOVE ASSETS HAVE BEEN ACQUIRED AND INSTALLED BEFORE 31.3.2005, THE ASSESSEE WAS ASKED TO EXPLAIN WHY TH E ADDITIONAL DEPRECIATION CLAIMED AMOUNTING TO RS.27,36,552 SHOU LD NOT BE DISALLOWED. 2.2 THE ASSESSEE COMPANY, VIDE ITS LETTER DATED 14. 11.201, SUBMITTED THAT ADDITIONAL DEPRECIATION IS CLAIMED AT THE RATE OF 1 5% IN RESPECT OF PLANT AND MACHINERY INSTALLED AFTER 31.3.2002. FURTHER, IT W AS SUBMITTED THAT ADDITIONAL DEPRECIATION HAS BEEN CLAIMED IN ACCORDANCE WITH TH E PROVISIONS OF SECTION 32(1)(IIA) AS IT EXISTED BEFORE ITS AMENDMENT BY TH E FINANCE ACT, 2005. 2.3 THOUGH, AS CONTENDED BY THE ASSESSEE, ADDITIO NAL DEPRECIATION IS ALLOWABLE ON PLANT AND MACHINERY ACQUIRED AND INSTA LLED BEFORE 31.3.2005 BUT AFTER 31.3.2002, IT IS ALLOWABLE ONLY IN THE YE AR IN WHICH SUCH ASSETS WERE ACQUIRED AND INSTALLED. AS COULD BE SEEN FROM THE TABLE SHOWN ABOVE THAT SUCH ASSETS HAVE BEEN ACQUIRED AND INSTALLED IN EAR LIER YEARS. ADDITIONAL DEPRECIATION, IF AT ALL ALLOWABLE, IS TO BE CLAIMED ONLY IN SUCH YEARS NAMELY AY 2005-06 AND AY 2004-05. THEREFORE, THE ADDITION AL DEPRECIATION CLAIMED ON THE ASSETS ACQUIRED AND INSTALLED IN EARLIER YEA RS TO AN EXTENT OF RS.27,36,552 IS DISALLOWED AND ADDED BACK TO THE AS SESSEES INCOME. ITA NO.25/COCH/2015 7 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE FACTS OF THE CASE. IT IS ABSOLUTELY NECESSARY TO REPRODUCE SECTION 32(1)(IIA ) WHICH READS AS FOLLOWS: (IIA) IN THE CASE OF ANY NEW MACHINERY OR PLANT (O THER THAN SHIPS AND AIRCRAFT), WHICH HAS BEEN ACQUIRED AND INSTALLED AFTER THE 31 ST DAY OF MARCH,2005, BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING (OR IN THE BUSINESS OF GENERATION OR GENER ATION AND DISTRIBUTION OF POWER), A FURTHER SUM EQUAL TO TWENTY PER CENT OF T HE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UN DER CLAUSE (II). FROM THE READING OF THE PROVISION OF SECTION 32(1)( IIA), IT IS EVIDENT THAT ANY NEW MACHINERY OR PLANT WHICH HAS BEEN ACQUIRED AND INST ALLED AFTER 31-03-2005, A SUM EQUAL TO THE ACTUAL COST OF THE PLANT OR MACHI NERY SHALL BE ALLOWED AS DEDUCTION UNDER CLAUSE (II). AS A MATTER OF FACT, ADDITIONAL DEPRECIATION WAS ALLOWED AT THE RATE OF 15%, IF THE NEW MACHINERY OR PLANT WAS ACQUIRED AND INSTALLED UPTO 31-03-2005. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE HAS INSTALLED THE NEW MACHINERY AND PLANT UPTO 31-03-20 05 WHICH IS MENTIONED IN PARA 2.1 OF THE ORDER OF THE ASSESSING OFFICER REPR ODUCED HEREINABOVE AND THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE H AS CLAIMED 15% OF THE ACTUAL COST OF PLANT AND MACHINERY ACQUIRED AND INSTALLED BY THE ASSESSEE UPTO 31-03- 2005. ACCORDINGLY, AS PER THE STATUTE, WE DO NOT F IND ANY MISTAKE IN THE CLAIM MADE BY THE ASSESSEE. IN FACT, IT IS A MISCONCEIVE D FACT THE CLAIM WAS NOT ALLOWABLE AS ADDITIONAL DEPRECIATION, BEING A FURTH ER SUM U/S. 32(1)(IIA) IF THE MACHINERY OR PLANT IS ACQUIRED OR INSTALLED UP TO 3 1.03.2005 AND ACCORDINGLY, THE DISALLOWANCE WAS MADE. IT WAS INFACT THE ASSESSEE HAS RIGHTLY CLAIMED ITA NO.25/COCH/2015 8 ADDITIONAL DEPRECIATION @ 15%, BEING A FURTHER SUM ON THE ACTUAL COST OF PLANT AND MACHINERY ACQUIRED AND INSTALLED BY THE ASSESSE E UPTO 31-03-2005. WE FIND NO ERROR IN THE CLAIM OF THE ASSESSEE. IN THE CIRC UMSTANCES AND FACTS OF THE CASE, THIS GROUND OF THE ASSESSEE IS ALLOWED. 7. AS REGARDS GROUND NO. 3, THE ASSESSING OFFIC ER MADE THE DISALLOWANCE OF DRILLING EXPENSES AMOUNTING TO RS.2,50,264/- WHICH WAS CONFIRMED BY THE LD. CIT(A) SINCE THE ASSESSEE HAS NOT DEDUCTED TAX AT S OURCE. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE FACTS OF THE CASE. IT WAS EXPLAINED THAT DRILLING EXPENSES COMPRISES MAIN LY OF PURCHASE OF DRILLING RODS, BITS, GRINDING STONES, WIRES, CONSUMABLES ETC . AND THE DRILLING WAGES WHICH WERE PAID TO ORDINARY LABOURERS MAINLY FROM TAMIL N ADU, ORISSA ETC. WHO WORK FOR ONE OR TWO MONTHS IN A YEAR AND MORE THAN 50 TO 60 WORKERS ARE THERE ON THE SITE. NO PAYMENT OF RS.20,000/- OR MORE HAS BEEN M ADE AS PER THE COPY OF THE LEDGER PLACED ON RECORD. IN SUCH CIRCUMSTANCES AND FACTS OF THE CASE, THE ASSESSEE IS NOT LIABLE TO THE PROVISIONS OF CHAPTER XVII OF THE ACT REGARDING THE DEDUCTION OF TAX AT SOURCE. THEREFORE, THE ASSESSIN G OFFICER IS DIRECTED TO ALLOW THE SAID EXPENSES AND ACCORDINGLY, THE ORDER OF THE LD. CIT(A) IS REVERSED. THUS GROUND NO. 4 OF THE ASSESSEE IS ALLOWED. ITA NO.25/COCH/2015 9 9. AS REGARDS GROUND NO. 4, IT IS WITH REGARD TO THE DISALLOWANCE OF RS.28,750/- BEING INTEREST O ADVANCE RECEIVED FROM THE SISTER C ONCERN. INTEREST DECLARED ON THE LOAN TAKEN FOR THE ACQUISITION OF FIXED ASSETS ARE TO BE CAPITALIZED FOR THE PERIOD FROM THE DATE ON WHICH THE CAPITAL WAS BORRO WED FOR THE ACQUISITION OF ASSETS TILL THE DATE WHEN THE SAID ASSET WAS PUT TO USE AND ACCORDINGLY, THE SAID AMOUNT OF RS.28,750/- WAS DISALLOWED. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PER USED THE FACTS OF THE CASE. IT WAS EXPLAINED BEFORE BOTH THE AUTHORITIES BELOW AND BEFORE US THAT THE AMOUNT ADVANCED WAS NOT FROM THE BORROWED FUNDS AND IT WAS ONLY A MISCONCEPTION OF THE AUTHORITIES BELOW THAT THE AMOUNT HAS BEEN ADVA NCED FROM THE BORROWED FUNDS. THE ASSESSEE WAS HAVING A CASH PROFIT OF RS .43,69,012/- AND IN ADDITION, THE ASSESSEE HAD RECEIVED RS. 70 LAKHS AS MOBILIZAT ION ADVANCE FROM THE CUSTOMERS AS PER THE COPY OF THE BALANCE SHEET PLAC ED ON RECORD. WE APPRECIATE THE SAID REFERENCE AND THE EXPLANATION G IVEN BY THE LD. AR THAT SUCH SMALL DISALLOWANCE AMOUNTING TO RS.28,750/- IS NOT WARRANTED AND THE SAME IS DIRECTED TO BE DELETED AND ACCORDINGLY, THE ORDER OF THE LD. CIT(A) IS REVERSED. THUS GROUND NO. 4 OF THE ASSESSEE IS ALL OWED. 11. AS REGARDS GROUND NO. 5, THE BRIEF FACTS AS E MANATING FROM THE ORDER OF THE ASSESSING OFFICER ARE REPRODUCED HEREINBELOW: ITA NO.25/COCH/2015 10 5.1 THE ASSESSEE IN COMPUTING ITS BOOK PROFIT HAS REDUCED AN AMOUNT OF RS.16,961 FROM ITS PROFITS AS SHOWN IN THE P&L ACCO UNT. THE ASSESSEE SUBMITTED THAT, AS CLARIFIED BY THE CBDT IN ITS CIRCULAR NO.8 /2005, FBT PAID IS AN ALLOWABLE DEDUCTION IN COMPUTING THE BOOK PROFIT. 5.2 THOUGH, IT IS TRUE THAT FBT IS AN ALLOWABLE D EDUCTION FOR COMPUTING BOOK PROFIT, IN THE ASSESSEES CASE, SUCH FBT PAID HAS B EEN CLAIMED TWICE AS A DEDUCTION. THE ASSESSEE HAS ALREADY DEBITED THE SU M OF RS.16,961 IN ITS P&L ACCOUNT. FROM THE PROFITS DERIVED AFTER DEBITING FB T, AGAIN A SUM OF RS.16,961/- HAS BEEN CLAIMED AS A DEDUCTION IN THE COMPUTATION OF BOOK PROFIT U/S. 115JB. THEREFORE, EXCESS DEDUCTION CLAIMED AMOUNTING TO RS .16,961/- IS ADDED BACK TO THE BOOK PROFIT. 12. THE LD. CIT(A) CONFIRMED THE ACTION OF THE AS SESSING OFFICER. 13. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE FACTS OF THE CASE. IT WAS EXPLAINED BY THE LD. COUNSEL FOR THE ASSESSEE B EFORE BOTH THE AUTHORITIES BELOW AND BEFORE US THAT THE INCOME TAX PAID U/S. 1 15JB AMOUNTING TO RS.4,48,462/- HAS NOT BEEN CONSIDERED BY THE ASSESS ING OFFICER WHILE COMPUTING THE TAX PAYABLE ON THE GROUND THAT THE MERE PAYMENT U/S. 115JB WOULD NOT ENTITLE THE ASSESSEE FOR THE MAT TAX CREDIT. IN FA CT THE ASSESSEE COMPANY HAS PAID THE TAX OF RS.4,48,462/- AS PER THE 143(3) SCR UTINY ASSESSMENT FOR THE SAME YEAR AND IT HAS NOT CLAIMED ANY TAX CREDIT ON MAT P AID. IN SUCH CIRCUMSTANCES AND FACTS OF THE CASE, IT APPEARS THAT THE ASSESSIN G OFFICER HAS NOT EXAMINED THE ISSUE IN THE RIGHT SPIRIT AND ACCORDINGLY, THE MATTER IS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE CHALLAN OF THE TAX PAID AND GIVE CREDIT AFTER AFFORDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THUS GROUND NO. 5 IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.25/COCH/2015 11 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 15-0 6-2016 SD/- SD /- (GEORGE GEORGE K.) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE : COCHIN DATED: 15 TH JUNE,2016 GJ COPY TO: 1. M/S. G.K. GRANITES LTD., KUREEKAL, KIZHAKKAMBALA M, ERNAKULAM, KOCHI-683 562. 2. THE JOINT COMMISSIONER OF INCOME-TAX, CIRCLE-1( 2), KOCHI. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-II, KOCH I. 4. THE COMMISSIONER OF INCOME-TAX, KOCHI. 5. THE DR/ITAT, COCHIN BENCH. 6. GUARD FILE. BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN