The ACIT, 2 (1), V. M/s Krshi Upaj Mandi Samiti,

ITA 251/IND/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1471 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2009
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 11-11-2009
• Assessment Year: misc
• Appeal Filed On: 02-06-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V K KARAN
• Assessee Lawyers: SANJAY SODANI
• Keywords: Depreciation; Charitable institution; Opportunity of being heard; Diversion of income; Retrospective amendment; Unabsorbed depreciation; Set aside
• Section: 80IA; 32; 263; 15

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JM AND SHRI V.K. GUPTA, AM ITA NO.251/IND/2008 AY : 2005-06 ACIT-2(1), BHOPAL .....APPELLANT V/S. M/S. KRISHI UPAJ MANDI SAMITI, LAXMIGANJ BERASIA ROAD, KAROND, BHOPAL (PAN AAALK 0335 J) .....RESPONDENT DEPARTMENT BY : SHRI V.K. KARAN, SR. DR ASSESSEE BY : SHRI SANJAY SODANI, CA ORDER PER JOGINDER SINGH, JM THIS APPEAL IS BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A), BHOPAL, DATED 21.2.2008. DURING HEARING OF THIS APPEAL, WE HAVE L D. RESPECTIVE COUNSEL AND CONSIDERED THE ARGUMENTS ADVANCED BY THEM ALONG WIT H MATERIAL AVAILABLE ON THE FILE. THE FIRST GROUND RAISED BY THE REVENUE IS THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. FIRST APPELLATE AUTHORITY ERRED IN DELETING THE ADDITION ON ACCOUNT OF STHAI NIDHI, AARKSHIT NIDHI AND INTEREST THEREON AMOUNTING TO RS.28,70,442/-, RS.11,22,977/- AND RS. 14,40,153/- RESPECTIVELY BY HOLDING THAT THE SAME ARE DEDUCTIBLE IN VIEW OF SEC. 36(1)(VII) OF THE ACT EVEN WHEN THE SAME CANNOT BE ALLOWED TO THE ASSESSE E AS THE SAME WERE NOT UTILIZED FOR THE PURPOSES MEANT FOR AND THE INTERES T ACCRUED ON SUCH AMOUNT IS ALSO TAXABLE. 2 2. AT THE OUTSET, IT WAS POINTED OUT BY THE LD. SR. DR THAT THE IMPUGNED ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL IN THE CASE KRISHI UPAJ MANDI SAMITI, BURHANPUR VS. ITO (2009) (12 ITJ 12) (INDOR E TRIBUNAL). THIS ASSERTION OF THE REVENUE WAS CONSENTED TO BE CORRECT BY THE L D. COUNSEL FOR ASSESSEE. IN VIEW OF THE ABOVE, WE ARE REPRODUCING HEREWITH T HE RELEVANT PARA OF THE AFORESAID ORDER. 6. GROUND NO.2 & 9 : ON GROUND NO.2, ASSESSEE CHALLENGED THE ORDER OF LD. CIT(A) IN NOT EXEMPTING THE INCOME OF RS.38,69,627/- BEING INTEREST ON FDR FROM RESERVE FUND AND ON GROUND NO.9, IN ENHANCING THE INCOME IN RESPECT OF AARAKSHIT NIDHI OF RS.19,25,785/-. THE AO FOUN D THAT ASSESSEE CLAIMED EXEMPTION OF INTEREST OF RS.38,69, 627/- RECEIVED ON THE FUNDS DEPOSITED WITH THE BANK FOR T HE PURPOSE OF PENSION, GRATUITY AND OTHER RETIREMENT BENEFITS OF THE EMPLOYEES. THE AO ASKED THE ASSESSEE TO SHOW WHETHE R THE SAID FUND WAS REGISTERED UNDER THE SUPERANNUATION F UND U/S 10(25) OF THE IT ACT. IT WAS SUBMITTED BY THE ASSES SEE THAT FUND WAS NOT A SUPERANNUATION FUND. THE AO EXAMINED THE PROVISIONS OF SEC. 10(25) AND HELD THAT PROVISIONS OF SEC. 10(25) ARE NOT APPLICABLE IN THIS CASE BECAUSE NEIT HER IT IS RELATED TO PF NOR THE FUND WAS APPROVED SUPERANNUAT ION OR GRATUITY FUND. THE SAME WAS THEREFORE, ADDED AS INT EREST EARNED TO THE INCOME OF THE ASSESSEE. SIMILAR CLAIM WAS MADE BEFORE LD. CIT(A) HOWEVER, THIS GROUND WAS REJECTED ON THE REASONS THAT THE INTEREST IN SUCH RESERVE FUND WERE NOT EXEMPT SINCE THE FUND CREATED WAS NOT REGISTERED U/ S 10(25) OF THE IT ACT. AS REGARDS AARAKSHIT NIDHI OF RS.19, 25,785/-, THE ASSESSEE SUBMITTED THAT THE CONTRIBUTION WAS MA DE IN VIEW OF THE PROVISIONS OF RELEVANT ACT AND RULES FR AMED THEREIN. IT WAS NOTED BY THE LD. CIT(A) THAT THE CO NTRIBUTION MADE TO THE AARAKSHIT NIDHI WAS ACTUALLY A CONTRIBU TION TO A RESERVE FOR MEETING OUT THE FUTURE LIABILITIES OF P ROVISION, GRATUITY ETC. HENCE, CANNOT BE ALLOWED AS EXPENDITU RE U/S 36(1)(XII). IT WAS FURTHER NOTED THAT ASSESSEE WAS FOLLOWING CASH SYSTEM OF ACCOUNTING THEREFORE, ON MERE PROVIS ION MADE IN THE BOOKS, DEDUCTION CANNOT BE ALLOWED. BOTH THE ADDITIONS WERE ACCORDINGLY MADE. 7. LD. COUNSEL FOR ASSESSEE SUBMITTED THAT ASSESSEE IS CREATED UNDER MP KRISHI UPAJ MANDI ADHINIYAM AND RULES THER EIN AND AS PER RULE 10, RESERVE FUND IS TO BE CREATED @5% W HICH PROVIDES LEAVING ASIDE FARMERS ROAD FUND AND AGRIC ULTURAL AND INFRASTRUCTURAL DEVELOPMENT FUND, @5%, OF REMAINING AGGREGATE RECEIPT CHIEF ACCOUNTS OFFICER WILL DEPOS IT IN SEPARATE BANK ACCOUNT EVERY THREE MONTHS IN THE FAR MER 3 RESERVE FUND. USE OF RESERVE FUND SHALL BE MADE FOR THE PAYMENT OF PENSION TO THE MEMBERS OF THE STATE BOAR D SERVICE, FAMILY PENSION, EX-GRATIA, GRATUITY GRANT, LOAN AND ADVANCE AS PER PROCEDURE PRESCRIBED BY THE BOARD AN D EACH MEMBER OF THE SERVICE BOARD SHALL BE ENTITLED TO RE CEIVE PENSION ON RETIREMENT, GRATUITY AND OTHER BENEFITS AS PER RULES AND SEPARATE ACCOUNT OF RESERVE FUND SHALL BE KEPT IN A BANK FOR THE MEMBERS OF SERVICE BOARD POSTED IN MARKET C OMMITTEE (PB-31). HE HAS FURTHER SUBMITTED THAT AARAKSHIT NI DHI IS LIKEWISE TO BE CREATED @5% OF THE TOTAL RECEIPT OF THE MANDI FEES WHICH COULD ENHANCE UP TO 10% AS PER SEC. 7 OF MP KRISHI MANDI (STATE MARKETING FUND RULES)(PB-33). H E HAS ALSO REFERRED TO SEC.25A (6) OF MP KRISHI MANDI ADHINIYA M WHICH PROVIDES THAT MARKET COMMITTEE SHALL MAKE PROVISION IN THE BUDGET FOR CREDITING THE AMOUNT INTO PERMANENT FUND @20%. HE HAS SUBMITTED THAT SEC. 43 OF MP KRISHI UPAJ MAN DI ADHINIYAM PROVIDES STATE MARKETING DEVELOPMENT FUND AND THE MARKET COMMITTEE SHALL PAY AT SUCH PERCENTAGE OUT O F THE GROSS RECEIPT LICENCE FEE AND MARKET FEES TO THE ST ATE GOVT. AND ALL EXPENDITURE INCURRED BY THE BOARD ACCORDING TO THE BUDGET SECTION SHALL BE DEFRAYED. HE HAS THEREFORE, SUBMITTED THAT THESE ARE THE REASONS THROUGH WHICH THE RESERV E FUND IS CREATED AS STATUTORILY REQUIRED WHICH WERE PERMANEN T FUNDS IN NATURE. HE HAS SUBMITTED THAT INTEREST IS OUT OF TH ESE RESERVE FUNDS WHICH CAN BE UTILIZED AS PER DIRECTION OF THE BOARD THEREFORE, NO INTEREST ACCRUED TO THE ASSESSEE EVEN IF THE RESERVE FUNDS WERE IN THE NAME OF THE ASSESSEE. HE HAS SUBMITTED THAT THE SAID INTEREST AND FUNDS CAN BE U SED ONLY FOR PARTICULAR PURPOSE AND THAT ASSESSEE DOES NOT H AVE ANY CONTROL OVER THE SAID STATUTORY FUNDS THEREFORE, IN TEREST ACCRUED THEREON CANNOT BE ADDED TO THE INCOME OF TH E ASSESSEE. IN SUPPORT OF HIS CONTENTION, HE HAS RELI ED UPON FOLLOWING DECISIONS: I. CIT VS. NEW HORISON SUGAR MILLS LTD. 244 ITR 738 IN WHICH, MADRAS HIGH COURT HELD THAT THE AMOUNT SET APART BY THE ASSESSEE TOWARDS MOLASSES RESERVE FUND AND REQUIRED BY MOLASSES CONTROL ORDER, SHOULD BE EXCLUDED FROM ITS INCOME. THIS DECISION IS CONFIRM ED BY SUPREME COURT IN 269 ITR 397. SIMILAR VIEW IS TA KEN BY MADRAS HIGH COURT IN THE CASE OF CIT VS. SALEM COOPERATIVE SUGAR MILL, 229 ITR 285. II. CIT VS. BHOPAL SUGAR INDUSTRIES, 221 ITR 449 IN WHI CH MP HIGH COURT HELD THAT THE AMOUNT CREDITED TO CRE ATE RESERVE FUND GOVT. ORDER ASSESSEE HAD NO CONTROL OVER THE AMOUNT CREDITED AMOUNT NOT INCLUDABLE IN THE TOTAL INCOME OF THE ASSESSEE. III. MOTILAL CHHADAMLAL VS. CIT, 190 ITR 329 IN WHICH, HON'BLE SUPREME COURT HELD EXECUTION OF DEED STATI NG THAT EXPENSES OF THE TRUST WILL BE MADE FROM INCOME OF CERTAIN PROPERTIES AND HE WILL HAVE NO RIGHT IN INC OME IT IS A DIVERSION OF INCOME AND NOT TAXABLE IN THE HANDS OF HUF. 4 IV. SIDHESHWAR SAHAKARI SHAKKAR KHARKHANA VS. CIT, 270 ITR 1 IN WHICH, HON'BLE SUPREME COURT REFERRED TO OTHER DECISIONS IN WHICH, IT WAS OBSERVED THAT THE AMOUNT WAS RETAINED BY THE ASSESSEE AND UTILIZED ACCORDING TO GUIDELINES ISSUED BY THE GOVT. IT WAS A SPECIFIC LEGAL OBLIGATION FOR SPENDING MONIES FOR A SPECIFIC PURPOSE. SUCH RECEIPTS CANNOT BE TREATED A S ASSESSEES INCOME. V. SOMAYYA ORGENE CHEMICALS VS. CIT, 216 ITR 291 IN WHICH, BOMBAY HIGH COURT HELD MANUFACTURE OF RECTIFIED SPRIT PORTION OF SALE PROCEEDS CREDITED TO A SEPARATE FUND BY STATUTORY ORDER FOR UTILIZATION FO R A PARTICULAR PURPOSE AMOUNT DIVERTED AT SOURCE AND REQUIRED TO BE EXCLUDED U/S 20A OF THE ACT. 8. ON THE OTHER HAND, LD. DR SUBMITTED THAT ASSESSEE C ANNOT CHANGE ITS STAND IN CLAIMING DEDUCTION ON THE ABOVE SUBMISSION BECAUSE ADMITTEDLY, THE CASE OF THE ASSE SSEE WOULD NOT FALL U/S 10(25) AND SEC. 36(1)(XII) OF TH E IT ACT THEREFORE, CLAIM OF THE ASSESSEE WAS RIGHTLY REJECT ED BY THE AUTHORITIES BELOW. HE HAS SUBMITTED THAT THE SUBMIS SION OF THE ASSESSEE REQUIRES RECONSIDERATION BY THE AO BECAUSE THE MP KRISHI UPAJ MANDI ADHINIYAM AND RULES WERE NOT REFE RRED TO BEFORE THE AO AND LD. CIT(A). HE HAS SUBMITTED THAT THE ABOVE ACT IS A SUBORDINATE LEGISLATION AND PUBLIC A T LARGE IS NOT BENEFITED AND RESERVE FUNDS CAN BE UTILIZED FOR GIV ING LOANS AND ADVANCES ALSO THEREFORE, ASSESSEE CANNOT CLAIM THAT IT HAS NO CONTROL OVER THE SAME FUNDS. HE HAS SUBMITTED TH AT RESERVE FUNDS ARE CREATED IN THE NAME OF THE ASSESSEE AND T HAT ASSESSEE WAS MAINTAINING THE ACCOUNTS ON YEARLY BAS IS THEREFORE, SAME ARE NOT RELIABLE AND ASSESSEE HAS C ONTROL OVER THE FUNDS THEREFORE, ADDITIONS WERE RIGHTLY MADE. 9. WE HAVE HEARD RIVAL SUBMISSIONS AND MATERIAL AVAILA BLE ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE DID NOT PRESS HIS CLAIM U/SS 10(25) AND 36(1)(XII) OF THE IT ACT BEFO RE THE TRIBUNAL AS WAS THE CLAIM MADE BEFORE THE AUTHORITI ES BELOW THEREFORE, THE CLAIM OF THE ASSESSEE COULD NOT BE C ONSIDERED UNDER THOSE PROVISIONS. THE REASONING GIVEN BY THE AUTHORITIES BELOW ARE JUST AND PROPER IN REJECTING THE CLAIM OF THE ASSESSEE U/SS 10(25) & 36(1)(XII) OF THE IT ACT. HO WEVER, THE LD. COUNSEL FOR ASSESSEE MADE A CLAIM THAT SINCE TH E RESERVE FUNDS WERE STATUTORILY CREATED UNDER THE MP KRISHI UPAJ MANDI ADHINIYAM AND RULES AND THE FUNDS HAVE BEEN CREATED FOR SPECIFIC PURPOSES THEREFORE, ASSESSEE WOULD NOT HAV E CONTROL OVER THE SAID RESERVE FUNDS THEREFORE, THE INTEREST ACCRUED THEREON AND THE DEPOSITS COULD NOT HAVE BEEN TREATE D AS INCOME OF THE ASSESSEE. ON GOING THROUGH THE RULES REFERRED TO BY THE LD. COUNSEL FOR ASSESSEE, WE ARE OF THE V IEW THAT THE RESERVE FUND REMAINED IN THE NAME OF ASSESSEE AND T HAT THE RESERVE FUND COULD BE USED FOR THE PURPOSE OF PAYME NT OF PENSION TO THE MEMBERS OF STATE BOARD OF SERVICE, F AMILY PENSION, EXGRATIA, GRATUITY GRANT, LOAN AND ADVANCE S AS PER PROCEDURE PRESCRIBED BY THE BOARD. IT WOULD THEREFO RE, PROVE 5 THAT THE RESERVE FUNDS REMAINED IN CONTROL, POSSESS ION AND IN THE NAME OF THE ASSESSEE AND WAS TO BE USED FOR THE PURPOSES OF PROVIDING PENSION, EXGRATIA, LOAN AND ADVANCES E TC. THE PROCEDURE IS TO BE PROVIDED BY THE BOARD ONLY FOR L OAN AND ADVANCES. THE ABOVE AMOUNT SHALL BE SPENT FOR THE P ERSONS CONNECTED WITH THE ASSESSEE AND EVEN LOAN AND ADVAN CE SHALL BE GIVEN TO THE MEMBERS OF THE SERVICE POSTED IN MA RKET COMMITTEE. ADMITTEDLY, THE ASSESSEE RECEIVED INTERE ST ON THE FUNDS DEPOSITED WITH THE BANK IN THIS REGARD. SINCE THE RESERVE FUNDS REMAINED WITH THE ASSESSEE THEREFORE, INTERES T EARNED ON SUCH FUNDS SHALL BE INCOME OF THE ASSESSEE. THE DECISIONS RELIED UPON BY LD. COUNSEL FOR ASSESSEE ARE THEREFO RE, NOT APPLICABLE TO ADVANCE THE CASE OF THE ASSESSEE. GRO UND NO.2 OF THE APPEAL OF THE ASSESSEE IS ACCORDINGLY DISMIS SED. AS REGARDS PART OF GROUND NO.9 WITH REGARD TO AARAK SHIT NIDHI, IT IS STATED TO BE CONTRIBUTION MADE FOR MEETING TH E FUTURE LIABILITY ON ACCOUNT OF PENSION, GRATUITY ETC. THE ASSESSEE I S ADMITTEDLY MAINTAINING CASH SYSTEM OF ACCOUNTING AND AS SUCH, AUTHORITIES BELOW WERE JUSTIFIED IN HOLDING THAT THE PROVISION COULD NOT HAVE BEEN ALLOWED UNLESS THE LIABILITY AROSE. THE AUTHOR ITIES BELOW HAS HOWEVER NOT CONSIDERED THE RULE REFERRED TO BY LD. COUNSEL FOR ASSESSEE IN HIS ARGUMENTS AND HAVE ALSO NOT GIVEN A NY FINDING IF THE ASSESSEE SPENT ANY ACTUAL AMOUNT ON THIS HAND U NDER THE YEAR APPEAL BECAUSE ON PROVISION BASIS THIS YEAR, T HE ASSESSEE MIGHT HAVE MADE CLAIM IN EARLIER YEAR FOR WHICH, TH E AMOUNT COULD HAVE BEEN SPENT BY THE ASSESSEE. LD. COUNSEL FOR AS SESSEE HAS FILED COPY OF THE LETTER DATED 9.7.8 (PB-34) THROUG H WHICH ASSESSEE WAS DIRECTED TO KEEP AARAKSHIT NIDHI IN SU CH A FIND FOR THE PURPOSE OF MAKING THE PAYMENTS. LD. COUNSEL FOR ASSESSEE ALSO REFERRED TO THE PROCEDURE FOR KEEPING ACCOUNTS ON THIS ISSUE. HOWEVER, WE FIND THAT THE SAME IS NOT CONSIDERED BY THE AUTHORITIES BELOW. THIS ISSUE THEREFORE, REQUIRES R ECONSIDERATION AT THE LEVEL OF THE AO. WE ACCORDINGLY SET ASIDE THE O RDERS OF THE AUTHORITIES BELOW ON THIS ISSUE AND RESTORE THE ISS UE TO THE FILE OF THE AO FOR RECONSIDERATION IN THE LIGHT OF THE SUBM ISSION MADE BY THE LD. COUNSEL FOR ASSESSEE. THE AO SHALL GIVE REA SONABLE SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. AS A RESULT, PART OF THIS GROUND OF THE APPEAL OF THE ASSESSEE I S ALLOWED FOR STATISTICAL PURPOSES. ASSESSEE MAY PROVIDE ADEQUATE MATERIAL BEFORE THE AO IN SUPPORT OF THE CONTENTION. IN VIEW OF THE ARGUMENTS/ADMISSION PUTFORTH BY THE LD. RESPECTIVE COUNSEL AND THE AFORESAID DECISION OF THE TRIBUNAL, WHEREIN VARIOUS JUDICIAL PRONOUNCEMENTS AND FACTUAL POSITION HAS ALREADY BEE N DISCUSSED, THEREFORE, THE SAME ARE NOT BEING REPEATED FOR THE SAKE OF BRE VITY, CONSEQUENTLY, WE REMAND THIS ISSUE TO THE FILE OF THE LD. ASSESSING OFFICER ON THE SAME 6 REASONING/DIRECTION AS CONTAINED IN THE AFORESAID O RDER. NEEDLESS TO MENTION HERE THAT DUE OPPORTUNITY OF BEING HEARD BE PROVIDE D TO THE ASSESSEE. THE ASSESSEE IS ALSO AT LIBERTY TO SUBSTANTIATE ITS CLA IM WITH DOCUMENTARY EVIDENCE, IF ANY, CONSEQUENTLY, THIS GROUND OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES ONLY. 3. GROUNDS NO.2 & 3 RAISED ARE THAT ON THE FACTS AN D IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN DELETING THE ADDITION ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION CLAIM AMOUNTING TO RS.29,81,485/- BY HOLDING THAT IT IS C LAIMED AS PER LAW AS CONTAINED IN SEC. 32 OF THE ACT EVEN WHEN THE ASSES SEE FAILED TO SUBMIT THE SPECIFIC DOCUMENTS REQUIRED UNDER THE ACT FOR ALLOW ANCE OF CLAIM OF DEPRECIATION UNDER SEC. 32 OF THE ACT AND THE FINDI NG ARE CONTRARY TO THE MATERIAL PLACED ON RECORD. 4. THE LD. COUNSEL FOR THE REVENUE, AT THE OUTSET, POINTED OUT THAT THE IMPUGNED ISSUE IS COVERED AGAINST THE ASSESSEE BY T HE AFORESAID DECISION OF THE TRIBUNAL IN THE CASE OF KRISHI UPAJ MANDI SAMIT I, BURHANPUR VS. ITO (SUPRA). THIS ASSERTION OF LD. DR COULD NOT BE CONT ROVERTED BY THE ASSESSEE BEING FACTUALLY CORRECT. IN VIEW OF THESE FACTS, WE ARE REPRODUCING HEREWITH THE RELEVANT PORTION FROM THE AFORESAID ORDER AS CO NTAINED IN PARA 20: 20. GROUND NO.8 : ON GROUND NO.8, THE ORDER OF THE LD. CIT(A) IS CHALLENGED IN NOT ALLOWING THE DEPRECIATI ON AS CLAIMED BY THE ASSESSEE ON THE BASIS OF ACTUAL COST INCURRE D BY THE ASSESSEE WITHOUT DEDUCTING THE DEPRECIATION WHICH I S NOT CLAIMED 7 AND ALLOWED IN THE EARLIER YEARS. LD. REPRESENTATIV ES OF BOTH THE PARTIES SUBMITTED THAT THE ISSUE IS COVERED AGAINST THE ASSESSEE BY THE ORDER OF ITAT, INDORE BENCH IN THE CASE OF K RISHI UPAJ MANDI ETC. IN ITA NO.42 OF 2008 VIDE ORDER DATED 30 .9.2008 IN WHICH, IT WAS HELD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES HA VE SUBMITTED THAT THE IDENTICAL ISSUE HAS BEEN DECIDED BY THE IT AT, INDORE BENCH, IN THE CASE OF KRISHI UPAJ MANDI SAMITI, UNH EL, V. ITO IN ITA NO. 457/IND/06 REPORTED IN 9 ITJ 593 AND THE IS SUE IS DECIDED IN FAVOUR OF THE REVENUE BY DISMISSING THE APPEALS OF THE ASSESSEE. THE SUBMISSIONS OF THE PARTIES AND THE F INDINGS OF THE TRIBUNAL IN THAT CASE FROM PARA 9 TO 16 ARE REPRODU CED AS UNDER :- 9. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSING OFFICER IS NOT JUSTIFIED IN MAKING THE DISALLOWANCE OUT OF DEPRECIATION ON NOTIONAL DEDUCTION AND DEPRECIATION AND THAT AS PER SECTION 43(6), THE MEANING OF WRITTEN DOWN VALUE MEANS (B) IN CASE OF ASSETS ACQUIRED BEFORE THE PREVIOUS YEAR, THE ACTUAL COST OF ASSETS LESS ALL DEPRECIATION ACTUALL Y ALLOWED TO HIM UNDER THE ACT. HE SUBMITTED THAT SINCE THE ASSESSEE HAS NOT BEEN ALLOWED DEPRECIATION ACTUALLY IN EARLIER YEAR, THE LEARNED CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ORDER O F THE ASSESSING OFFICER. HE HAS FURTHER SUBMITTED THA T EXPLANATION 5 TO SEC. 32(1)(II) IS APPLICABLE WITH EFFECT FROM 1.4.2002. THEREFORE, IT IS NOT RETROSPECTIVELY APPLICABLE. THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE FOLLOWING DECISIONS :- 1. 55 ITR 329 DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF DHARAMPUR LEATHER CLOTH COMPANY LTD. IN WHICH IT WAS HELD THAT UNLESS AND 8 UNTIL DEPRECIATION HAS BEEN ACTUALLY ALLOWED IN ANY ASSESSMENT OF PREVIOUS YEARS, WRITTEN DOWN VALUE OF THE MACHINERY OR ASSETS CONTINUES TO REMAIN THE COST PRICE INCURRED BY THE ASSESSEE IN ACQUIRING TH E MACHINERY OR ASSETS. 2. 80 TTJ 539 ORDER OF THE ITAT, PUNE BENCH IN THE CASE OF G.C. ASSOCIATES V. DCIT IN WHICH IT WAS HELD THAT WDV HAS BEEN DEFINED U/S 43(6) TO MEAN IN CASE OF ASSETS ACQUIRED IN THE PREVIOUS YEAR, ACTUAL COST TO THE ASSESSEE AND IN THE CASE O F ASSETS ACQUIRED PRIOR TO PREVIOUS YEAR ACTUAL COST TO THE ASSESSEE LESS ALL THE DEPRECIATION ACTUALLY ALLOWED TO HIM UNDER THE ACT. IF THE ASSESSEE HAS NOT FILED RETURN OF INCOME, THE FACT IT HAS COMPUTE D ITS INCOME OR ITS BOOKS OF HAS NO RELEVANCE SO FAR AS COMPUTATION OF WDV UNDER THE ACT IS CONCERNED BECAUSE WHAT THE ASSESSEE HAS DONE IN THE BOOKS OF ACCOUNTS CANNOT BE EQUATED WITH DEPRECIATION ACTUALLY ALLOWED UNDER THE INCOMETAX ACT. 3. 17 ITR 130 DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF KAMALA MILLS LIMITED V. CIT IN WHICH IT WAS HELD WRITTEN DOWN VALUE ACTUALLY ALLOWED MEANING OF WRITTEN DOWN VALUE WHEN UNABSORBED DEPRECIATION IS CARRIED FORWARD. 4. 62 ITD 398 ORDER OF THE ITAT, BANGALORE BENCH, IN THE CASE OF TRITON VALUES LIMITED IN WHIC H IT WAS HELD THAT THE ASSESSEE HAD NOT CLAIMED DEPRECIATION FROM THE ASSESSMENT YEAR 1983-84 TO 1987-88 BUT CLAIMED DEPRECIATION IN THE ASSESSMENT YEAR 1988-89 WHETHER ASSESSEE WOULD BE ENTITLED TO DEPRECIATION ON WRITTEN DOWN VALUE FIXED FOR THE YEAR 1982-83 HELD YES 5. 204 ITR 719 DECISION OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT V. SUMAN TEA 9 & PLYWOOD INDUSTRIES (P) LIMITED IN WHICH ALSO SAME LEGAL PROPOSITION IS HELD AS NOTED ABOVE. 6. 197 ITR 13 DECISION OF THE HON'BLE KERALA HIGH COURT IN THE CASE OF JOSE KURUVILLA IN WHICH I T WAS HELD ACTUAL COST OF CAR FOR CALCULATING DEPRECIATION WAS THE PRICE PAID IN 1978 BECAUSE THE ASSESSEE HAS NOT CLAIMED DEPRECIATION TILL ASSESSMENT YEAR 1982-83. 7. 98 ITR 209 DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF MADEVA UPENDRA SINAI V. UOI IN WHICH IT WAS HELD THAT CONNOTATION OF THE PHRASE ACTUALLY ALLOWED IS THUS LIMITED TO DEPRECIATION ACTUALLY TAKEN INTO ACCOUNT OR GRANTED AND GIVEN EFFECT TO I.E. DEBITED BY THE ITO AGAINST THE INCOMINGS OF BUSINESS IN COMPUTING THE TAXABLE INCOME OF THE ASSESSEE BUT CANNOT BE STRETCHED TO MEAN NOTIONALLY ALLOWED OR MERELY ALLOWABLE ON NOTIONAL BASIS. 8. 146 ITR 28 DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. SOCIETY OF THE SISTERS OF STATISTICAL PURPOSES. ANNE. 9. 180 ITR 579 DECISION OF THE HON'BLE HIGH COURT OF MADHYA PRADESH IN THE CASE OF RAIPUR PALLOTTINE SOCIETY. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT ITAT, SMC BENCH, INDORE, IN THE CASE OF KRISHI UPAJ MANDI SAMITI, SHAJAPUR, DISALLOWED THE CLAIM OF THE ASSESSEE ON THE IDENTICAL FACTS VIDE ORDER DATED 3 RD NOVEMBER, 2006 BUT THE ABOVE DECISIONS, AS RELIED UPON ABOVE, WERE NOT CONSIDERED. THEREFORE, THE SAME IS NOT APPLICABLE TO THIS CASE . 10. ON THE OTHER HAND, THE LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 11. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE MATERIAL AVAILABLE ON RECORD INCLUDING WRITTEN 10 SUBMISSIONS FILED BY THE LD. COUNSEL FOR THE ASSESSEE. BEFORE CONSIDERING THE SUBMISSIONS OF THE PARTIES IT WOULD BE RELEVANT TO NOTICE CERTAIN CERTAIN RELEVANT PROVISIONS OF LAW. 12. SECTION 32(1) OF THE ACT PROVIDES DEPRECIATION IN RESPECT OF DEPRECIATION OF (I) BUILDINGS, MACHINERY, PLANT OR FURNITURE, BEING TANGIBLE ASSETS (II) KNOW-HOW, PATENTS, COPYRIGHTS, TRADE MARKS, LICENCES,FRANCHISE OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE, BEING INTANGIBLE ASSETS ACQUIRED ON OR AFTER THE IS T DAY OF APRIL, 1998, OWNED WHOLLY OR PARTLY BY THE ASSESSEE AND USED FOR THE PURPOSE OF THE BUSINESS OR PROFESSION, THE FOLLOWING DEDUCTIONS SHALL BE ALLOWED (I) IN THE CASE OF ASSETS OF AN UNDERTAKING ENGAGED IN GENERATION OR GENERATION AND DISTRIBUTION OF POWER, SUCH PER CENTAGE ON THE ACTUAL COST THEREOF TO THE ASSESSEE AS MAY BE PRESCRIBED (II) IN CASE OF ANY BLOCK OF ASSETS, SUCH PERCENTAGE ON THE WRITTEN DOWN VALUE THEREOF AS MAY BE PRESCRIBED : PROVIDED . EXPLANATION 5 TO SECTION 32(1)(II) PROVIDES FOR TH E REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT THE PROVISIONS OF THIS SUB-SECTION SHALL APPLY WHETHER OR NOT THE ASSESSEE HAD CLAIMED THE DEDUCTION IN RESPECT OF DEPRECIATION IN COMPUTING HIS TOTAL INCOME. THE ABOVE EXPLANATION 5 IS INSERTED IN THE INCOMETAX ACT BY THE FINANCE ACT, 2001 WITH EFFECT FROM 1.4.2002. 13. SECTION 43(6) PROVIDES THE MEANING OF WRITTEN DOWN VALUE AND READS - 11 43 (6) WRITTEN DOWN VALUE MEANS (A) IN THE CASE OF ASSETS ACQUIRED IN THE PREVIOUS YEAR, THE ACTUAL COST TO THE ASSESSEE. (B) IN THE CASE OF ASSETS ACQUIRED BEFORE THE PREVIOUS YEAR, THE ACTUAL COST TO THE ASSESSEE LESS ALL DEPRECIATION ACTUALLY ALLOWED TO HIM UNDER THIS ACT, OR UNDER THE INDIAN INCOMETAX ACT, 1922 (11 OF 1922) OR ANY ACT REPEALED BY THAT ACT, OR UNDER ANY EXECUTIVE ORDERS ISSUED WHEN THE INDIAN INCOMETAX ACT, 1886 (2 OF 1886), WAS IN FORCE : PROVIDED THAT IN DETERMINING THE WRITTEN DOWN VALUE IN RESPECT OF BUILDINGS, MACHINERY OR PLANT F OR THE PURPOSE OF CALUSE (II) OF SUB- SECTION (1) OF SECTION 32, DEPRECIATION ACTUALLY ALLOWED SHAL L NOT INCLUDE DEPRECIATION ALLOWED UNDER SUB-CLAUSES (A), (B) AND () OF CLAUSE (VI) OF SUB- SECTION (2) OF SECTION 10 OF THE INDIAN INCOMETAX ACT, 1922 (11 OF 1922), WHERE SUCH DEPRECIATION WAS NOT DEDUCTIBLE IN DETERMINING THE WRITTEN DOWN VALUE FOR THE PURPOSES OF THE SAID CLAUSE (VI); SECTION 10(20) PROVIDES THE INCOME WHICH DO NOT FORM PART OF THE TOTAL INCOME IN RESPECT OF LOCAL AUTHORITY. HOWEVER, BY INSERTING EXPLANATION WITH EFFECT FROM 1.4.2003 THE DEFINITION OF LOCAL AUTHORITY IS RESTRICTED TO ONLY 4 ITEMS. THEREFORE , THE ASSESSEES CASE WOULD NOT FALL WITHIN THE DEFINITION OF THE LOCAL AUTHORITY AS PER THE ABOVE AMENDMENT IN THE PROVISIONS OF SECTION 10(20). THE LD. DEPARTMENTAL REPRESENTATIVE , THEREFORE, RIGHTLY CONTENDED THAT SECTION 10(20) PROVIDES EXEMPTION OF INCOME OF THE LOCAL AUTHORITY AS IN TH E CASE OF THE ASSESSEE PRIOR TO 1.4.2003. 12 14. CONSIDERING THE ABOVE LEGAL PROVISIONS, I AM OF THE VIEW THAT THE LEARNED CIT(A) IS JUSTIFIED I N REJECTING THE CLAIM OF THE ASSESSEE WITH REGARD TO CLAIM OF EXCESSIVE DEPRECIATION. THE INCOME OF THE ASSESSEE BEING LOCAL AUTHORITY WAS EXEMPT PRIOR TO 1.4.2003 AND AS PER SETTLED ACCOUNTING PRINCIPLES AND THE METHOD OF ACCOUNTING GENERALLY ADOPTED, THE INCOME IS TO BE COMPUTED BY REDUCING THE EXPENDITURE FROM THE RECEIPTS. THE ASSESSEE WHILE PREPARING THE ACCOUNTS BEING IN THE STATUS OF LOCAL AUTHORITY SHALL HAVE TO PREPARE THE ACCOUNTS AS PER ACCOUNTING STANDARDS AND HAVE TO REDUCE THE DEPRECIATION ON THE WRITTEN DOWN VALUE OF THE EARLIER YEARS. THE LD. DEPARTMENTAL REPRESENTATIVE , THEREFORE, RIGHTLY CONTENDED THAT AS PER SECTION 10(20) THE INCOME OF LOCAL AUTHORITY WAS EXEMPT AND NOT THE TOTAL RECEIPTS. THEREFORE, EVEN IF THE ASSESSEE HAS NOT CLAIMED DEPRECIATION I N EARLIER YEAR WOULD BE OF NO CONSEQUENCE BECAUSE ULTIMATELY THE VALUE OF ASSETS WOULD REDUCE ON BEING THE USER OF THE SAME FOR BUSINESS PURPOSES OF THE ASSESSEE. HON'BLE HIGH COURT OF MADHYA PRADESH IN THE CASE OF CIT V. RAIPUIR PALLOTTINE SOCIETY; 180 ITR 579 HELD - DEPRECIATION IS THE EXHAUSTION OF THE EFFECTIVE LIFE OF A FIXED ASSET OWING TO USE OR OBSOLESCENCE. IT MAY BE COMPUTED AS THAT PART OF THE COST OF THE ASSET WHICH WILL NOT BE RECOVERED WHEN THE ASSET IS FINALLY PUT OUT OF USE. THE OBJEC T OF PROVIDING FOR DEPRECIATION IS TO SPREAD THE EXPENDITURE INCURRED IN ACQUIRING THE ASSET OVER IT S EFFECTIVE LIFETIME AND THE AMOUNT OF PROVISION MADE IN RESPECT OF AN ACCOUNTING PERIOD IS INTENDED TO REPRESENT THE PROPORTION OF SUCH EXPENDITURE WHICH 13 HAS EXPIRED DURING THAT ERIOD. IF DEPRECIATION IS NOT ALLOWED AS A NECESSARY DEDUCTION IN COMPUTING THE INCOME OF A CHARITABLE TRUST, THEN THERE WOULD BE N O WAY TO PRESERVE THE CROPUS OF THE TRUST. A CHARITABLE TRUST IS, THEREFORE, ENTITLED TO DEPRECIATION IN RESPECT OF THE ASSETS OWNED BY IT. 15. AS PER SECTION 32(1)(II) THE ASSESSEE WOULD BE ENTITLED TO DEPRECIATION ON THE ASSETS OWNED BY IT IN CASE OF ANY BLOCK OF ASSETS ON THE WRITTEN DO WN VALUE AND THE EXPLANATION 5 TO THE ABOVE SECTION PROVIDES THAT THE PROVISION OF THIS SUB-SECTION SHA LL APPLY WHETHER OR NOT THE ASSESSEE HAS CLAIMED THE DEDUCTION IN RESPECT OF HIS DEPRECIATION IN COMPUTING THE TOTAL INCOME. EXPLANATION 5 IS APPLICABLE WITH EFFECT FROM 1.4.2002 AND THE ASSESSMENT YEAR INVOLVED IN APPEAL IS ASSESSMENT YEAR 2003-04. THEREFORE, EVEN AS PER EXPLANATION 5 TO SECTION 32(`1)(II) THE ASSESSEE SHALL HAVE TO MAKE ADJUSTMENTS WITH REGARD TO DEPRECIATION OF THE EARLIER YEARS INCLUDING THE PREVIOUS ASSESSMENT YEAR 2002-03. THE ASSESSEE THUS CANNOT ESCAPE FROM THE LIABILITY IN MAKING PROPER ADJUSTMENT ENTRIES IN THE BOOKS OF ACCOUNTS AND THE ACCOUNTS OF THE ASSESSEE EVEN IF INCOME WAS EXEMPT U/S 10(20) OF THE ACT BECAUSE THE INCOME COULD BE COMPUTED ONLY BY DEDUCTING THE EXPENDITURE AND THE STATUTORY DEDUCTIONS ALLOWABLE TO THE ASSESSEE INCLUDING THE DEPRECIATION. SECTION 43(6)(B) IS APPLICABLE IN THIS CASE AND THE MEANING OF THE WRITTEN DOWN VALUE IN THE CASE OF ASSETS ACQUIRED BEFORE THE PREVIOUS YEAR, THE ACTUAL COST TO THE ASSESSEE LESS ALL DEPRECIATION ACTUALLY ALLOWED TO HIM UNDER THIS ACT OR UNDER THIS INCOMETAX ACT. IF 14 THE PROVISIONS OF EXPLANATION 5 TO SECTION 32(1)(II ) ARE READ TOGETHER WITH SECTION 43(6)(B) OF THE INCOMETAX ACT, IT WOULD MAKE IT CLEAR THAT EVEN IF THE ASSESSEE HAS NOT CLAIMED DEPRECIATION ON THE ASSETS WHILE COMPUTING THE INCOME OF THE ASSESSEE, THE DEPRECIATION SHALL HAVE TO BE DEDUCTED WHILE COMPUTING THE INCOME AND WRITTEN DOWN VALUE. EXPLANATION 5 IS MANDATORY IN NATURE AND SHALL HAVE TO GIVE EFFECT WHETHER OR NOT THE ASSESSEE HAS CLAIMED DEDUCTION IN RESPECT OF DEPRECIATION IN COMPUTING HIS TOTAL INCOME. THEREFORE, WHILE INTERPRETING PROVISIONS OF SECTION 43(6)(B) THE WOR D ALL DEPRECIATION ACTUALLY ALLOWED WOULD HAVE TO B E READ AS IF WHETHER THE ASSESSEE CLAIMED DEPRECIATION OR NOT WHILE CLAIMING THE DEDUCTION, THE ASSESSING OFFICER SHALL HAVE TO DEDUCT THE DEPRECIATION WHILE COMPUTING THE TOTAL INCOME OF THE ASSESSEE. EXPLANATION 5 THUS SHALL HAVE THE EFFECT WHILE COMPUTING THE TOTAL INCOME OF THE ASSESSEE AND SHALL HAVE TO BE APPLIED STRICTLY. TH E CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE IS T HAT UNLESS THE ACTUAL DEPRECIATION IS ALLOWED AND CLAIMED BY THE ASSESSEE IN EARLIER YEAR, THE ASSESSING OFFICER CANNOT DEDUCT NOTIONAL DEPRECIATION AND RELIED UPON CERTAIN DECISIONS REFERRED TO ABOVE IN SUPPORT OF HIS CONTENTION. HOWEVER, I FIND THAT ALL THE DECISIONS RELIED UPON BY THE LD. COUNSEL FOR THE ASSESSEE ARE PRIOR TO INSERTION OF EXPLANATION 5 IN THE ACT AND AS SUCH HAVE BEEN GIVEN OUT OF THE CONTEXT OF EXPLANATION 5 TO SECTION 32(1)(II) OF THE ACT. THEREFORE, THE S AME ARE NOT APPLICABLE TO THE CASE OF THE PRESENT ASSESSEE. THE CONTENTION OF THE LD. COUNSEL FOR TH E ASSESSEE IS , THEREFORE, REJECTED BEING AGAINST TH E MANDATORY PROVISIONS CONTAINED IN EXPLANATION 5 TO 15 SECTION 32(1)(II) OF THE ACT. THE ITAT, SMC BENCH, INDORE, IN THE CASE OF KRISHI UPAJ MANDI, SHAJAPUR AND OTHERS IN ITA NOS. 524 AND 525/IND/06 FOR THE SAME ASSESSMENT YEAR 2003-04 ON THE IDENTICAL FACTS AND THE SUBMISSIONS, DISMISSED THE APPEAL OF THE ASSESSEE VIDE ORDER DATED 3.11.2006. THEREFORE, THE DECISION IS SQUARELY APPLICABLE TO THE PRESENT CASE. 16. CONSIDERING THE ABOVE DISCUSSION, I DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT( A) IN MAKING THE DISALLOWANCE OUT OF DEPRECIATION. THUS, THE ORDER OF THE LEARNED CIT(A) TO THAT EXTE NT IS CONFIRMED AND THE GROUND NO. 1 OF THE APPEAL OF THE ASSESSEE IS ,ACCORDINGLY, DISMISSED. 6. THE LEARNED COUNSELS FOR THE ASSESSEES HAVE, HOW EVER, SUBMITTED THAT CERTAIN POINTS WERE NOT BROUGHT TO THE NOTICE OF THE TRIBUNAL WHILE PASSING THE AFORESAID DECISION AND THEY TRIED TO DISTINGUISH THE CASES BY MAKING FURTHER SUBMISSIONS. THE LEARNED C OUNSEL FOR THE ASSESSEES REFERRED TO EXPLANATION 6 TO SECTION 43(6 ) EXPLANATION 6.- WHERE AN ASSESSEE WAS NOT REQUIRED TO COMPUTE HIS TOTAL INCOME FOR THE PURPOS ES OF THIS ACT FOR ANY PREVIOUS YEAR OR YEARS PRECEDING T HE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION,- (A) THE ACTUAL COST OF AN ASSET SHALL BE ADJUSTED BY THE AMOUNT ATTRIBUTABLE TO THE REVALUATION OF SUCH ASSET, IF ANY, IN BOOKS OF ACCOUNT (B) THE TOTAL AMOUNT OF DEPRECIATION ON SUCH ASSET, PROVIDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE 16 IN RESPECT OF SUCH PREVIOUS YEAR OR YEARS PRECEDING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION SHALL BE DEEMED TO BE THE DEPRECIATION ACTUALLY ALLOWED UNDER THIS ACT FOR THE PURPOSES OF THIS CLAUSE; AND (C) THE DEPRECIATION ACTUALLY ALLOWED UNDER CLAUSE (B) SHALL BE ADJUSTED BY THE AMOUNT OF DEPRECIATION ATTRIBUTABLE TO SUCH REVALUATION OF THE ASSET. WHICH IS INSERTED BY THE FINANCE ACT, 2008 I N THE ACT WITH EFFECT FROM 1.4.2003 AND SUBMITTED THAT SINCE THE ASSESSEES HAV E NOT CLAIMED DEPRECIATION FOR THE EARLIER YEARS AS THE INCOME WA S EXEMPT UNDER SECTION 10(2) OF THE ACT PRIOR TO 1.4.2003, THEREFO RE, NO ADJUSTMENT WAS MADE FOR CLAIMING DEPRECIATION AND AS SUCH THE WDV SHOULD NOT BE REDUCED BY REDUCING THE DEPRECIATION OF THE EARL IER YEARS AND THE DEPRECIATION SHOULD HAVE BEEN ALLOWED BY THE ASSESS ING OFFICER ON THE ACTUAL COST OF THE ASSET. THEY HAVE ALSO REFER RED TO DEFINITION OF ACTUAL COST UNDER SECTION 43(1) AND SUBMITTED THA T THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REDUCING THE DEPRECIAT ION OF THE EARLIER YEARS WHILE CONSIDERING THE DEPRECIATION OF THE YEA R UNDER CONSIDERATION. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE, HOWEVER , OBJECTED TO THE SUBMISSIONS OF THE LEARNED COUNSELS FOR THE ASS ESSEES ON THE GROUND THAT THE ISSUE IS SQUARELY COVERED AGAINST T HE ASSESSEES AND THAT THE AFORESAID EXPLANATION 6 TO SECTION 43(6) W AS INSERTED IN THE 17 ACT IN ORDER TO NULLIFY THE EFFECT OF THE ORDER OF THE ITAT, RAJKOT BENCH IN THE CASE OF KANDLA PORT TRUST V. ACIT; 104 ITD 1. 8. ON CONSIDERATION OF THE RIVAL SUBMISSIONS OF THE PARTIES AND THE MATERIAL ON RECORD, WE ARE OF THE VIEW THAT EXPLANA TION 6 TO SECTION 43(6) WOULD BE OF NO HELP TO THE CASES OF THE ASSES SEES AS RIGHTLY POINTED OUT BY THE LD DEPARTMENTAL REPRESENTATIVE B ECAUSE THE SAME WAS INSERTED IN THE ACT WITH A VIEW TO NUTRALISE TH E JUDGMENT IN THE CASE OF KANDLA PORT TRUST (SUPRA). WE FIND THAT IN THAT CASE THE ASSESSEE PORT TRUST WAS EXEMPTED FROM INCOMETAX UND ER SECTION 10(2) TILL 31 ST MARCH, 2002 AND WITH EFFECT FROM 1.4.2002 THE INCO ME BECAME TAXABLE AND THE ASSESSEE FILED RETURN OF INC OME FOR THE ASSESSMENT YEAR 2003-04 FOR THE FIRST TIME. IN COM PUTATION OF TOTAL INCOME, THE ASSESSEE CLAIMED DEPRECIATION WHICH WAS COMPUTED ON THE ORIGINAL COST OF ASSETS I.E. THE ASSESSEE HAS T AKEN OPENING WDV OF ASSETS AS ON 1.4.2002 AS AGAINST ORIGINAL COST OF A SSETS. THE ASSESSING OFFICER HELD THAT THE DEPRECIATION COULD NOT BE ALLOWED ON THE ORIGINAL COST SINCE IN ALL THESE YEARS THE ASSE TS HAD DEPRECIATED FOR WHICH PROVISION HAD BEEN MADE IN THE BOOKS OF ACCOU NTS. HE FURTHER ALLOWED DEPRECIATION ON THE BLOCK VALUE OF ASSET WH ICH WAS ARRIVED AT AFTER REDUCING FROM THE ORIGINAL COST OF ASSETS, DE PRECIATION PROVIDED IN THE BOOKS OF ACCOUNTS TILL 31 ST MARCH, 2002. THE TRIBUNAL CONSIDERING THIS ISSUE HELD THAT MERE PASSING OF TH E ACCOUNTING ENTRY MADE FOR DEPRECIATION IN THE BOOKS OF ACCOUNTS WAS NOT DEPRECIATION ACTUALLY ALLOWED AS THERE WAS NO LIABILITY TO TAX A ND AS THERE WAS NO ASSESSMENT TILL THE ASSESSMENT YEAR 2002-03. THUS, THE WDV AS ON 1.4.2002 WOULD BE ORIGINAL COST LESS NIL I.E. ORIGI NAL COST. THE AFORESAID 18 EXPLANATION 6 TO SECTION 43(6) WAS THEREFORE, INSE RTED IN THE ACT IN ORDER TO UNTRALISE THE ABOVE DECISION OF THE RAJKOT BENCH OF THE TRIBUNAL IN THE CASE OF KANDLA PORT TRUST. IT WOUL D HAVE, THEREFORE, NO BEARING ON THE ISSUE WHICH IS ALREADY DECIDED BY THIS BENCH IN THE CASE OF KRISHI UPAJ MANDI SAMITI, UNHEL. 9. THE LEARNED COUNSELS FOR THE ASSESSEES HAVE REFE RRED TO THE DECISION OF THE HONBLE HIGH COURT OF KERALA IN THE CASE OF KERALA ELECTRIC LAMP WORKS LIMITED; 183 CTR 182 IN WHICH I T WAS HELD THAT THE ASSESSEE HAVING NOT CLAIMED DEPRECIATION FOR TH E ASSESSMENT YEARS 1989-90 AND 1990-91, THE ASSESSING OFFICER WA S NOT JUSTIFIED IN ALLOWING THE SAME BY GIVING EXPLANATION 5 TO SECTIO N 32(1) A RETROSPECTIVE EFFECT. THEY HAVE ALSO RELIED UPON T HE DECISION OF THE HON'BLE HIGH COURT OF MADRAS IN THE CASE OF COMMISS IONER OF INCOMETAX V. SREE SENHAVALLI TEXTILES (P) LTD.; 18 3 CTR 453 FOR THE ASSESSMENT YEAR 1988-89 DEPRECIATION COULD NOT BE COMPUTED WHEN THE ASSESSEE GAVE UP THE CLAIM FOR FILING REVISED R ETURN. EXPLANATION 5 TO SECTION 32(1) APPLIED ONLY FROM 1.4.2002. 10. CONSIDERING THE ABOVE DECISIONS, WE RESPECTFULL Y NOTE THAT IN ALL THE DECISIONS OF THE HONBLE HIGH COURTS, THE ASSES SMENT YEARS, UNDER REFERENCE, WERE 1989-90 AND 1990-91 AND ASSESSMENT YEAR 1988-89 WHICH WERE PRIOR TO INSERTION OF EXPLANATION 5 TO S ECTION32(1) OF THE INCOMETAX ACT. THE ASSESSMENT YEARS, UNDER APPEAL, BEFORE US ARE ASSESSMENT YEARS 2003-04 AND 2004-05 I.E. AFTER INS ERTION OF EXPLANATION 5 TO SECTION 32(1) IN THE ACT. THE RAT IO OF THESE DECISIONS WOULD THUS NOT BE APPLICABLE TO THE MATTERS IN ISSU E BEFORE THE TRIBUNAL. THE LEARNED COUNSELS FOR THE ASSESSEES H AVE ALSO RELIED 19 UPON THE ORDER OF THE ITAT, CHANDIGARH BENCH IN THE CASE OF MOREPEN LABORATORIES LIMITED V. JCIT; 95 TTJ 404 IN WHICH IT WAS HELD THAT IN THE SET ASIDE ASSESSMENT, THE ASSESSEE CANNOT RAISE THE CLAIM OF DEPRECIATION DURING THE ASSESSMENT PROCEEDINGS CONS EQUENT TO THE ACTION UNDER SECTION 263 OF THE ACT AS THE ASSESSIN G OFFICER HAS TO PASS THE ORDER AS PER THE DIRECTIONS OF THE CIT. TH E LEARNED COUNSELS FOR THE ASSESSEES HAVE ALSO RELIED UPON THE DECISIO N OF THE ITAT, MUMBAI BENCH IN THE CASE OF PLASTIBLENDS INDIA LTD. V. ITO; 95 TTJ 1062 IN WHICH IT WAS HELD THAT THE ASSESSEE HAVING NOT CLAIMED DEPRECIATION, THE SAME CANNOT BE THRUST UPON HIM FO R THE PURPOSES OF COMPUTING THE DEDUCTION UNDER SECTION 80IA OF THE A CT. THIS CASE PERTAINED TO THE ASSESSMENT YEAR PRIOR TO INSERTION OF EXPLANATION 5 TO SECTION 32 OF THE ACT. BOTH THE DECISIONS ARE, THE REFORE, CLEARLY DISTINGUISHABLE ON FACTS. THE LEARNED COUNSELS FOR THE ASSESSEES ALSO RELIED UPON THE DECISION OF THE HON'BLE HIGH COURT OF MADHYA PRADESH IN THE CASE OF COMMISSIONER OF INCOMETAX V. G.M. MI TTAL STAINLESS STEEL LIMITED; 271 ITR 219. HOWEVER, IT IS NOT RE LEVANT TO THE MATTER IN ISSUE. 11. CONSIDERING THE ABOVE DISCUSSION, WE ARE OF THE VIEW THAT THE ISSUE IS SQUARELY COVERED BY OUR EARLIER ORDER IN T HE CASE OF KRISHI UPAJ MANDI SAMITI, UNHEL AS AGREED BY THE LEARNED R EPRESENTATIVES OF BOTH THE PARTIES. THE SUBMISSIONS OF THE LEARNED C OUNSELS FOR THE ASSESSEES NOTED ABOVE COULD NOT DISTINGUISH THE EAR LIER DECISION. WE THEREFORE, DO NOT FIND ANY MERIT IN ALL THE APPEALS OF THE ASSESSEES. THE SAME ARE ACCORDINGLY DISMISSED. 20 21. BY FOLLOWING THE ABOVE ORDER, THIS GROUND OF AP PEAL OF ASSESSEE IS DISMISSED. IN THE AFORESAID ORDER, THE BENCH HAS ALREADY CONS IDERED VARIOUS JUDICIAL PRONOUNCEMENTS, FACTUAL POSITION, CONSEQUE NTLY, KEEPING IN VIEW THE FAIR ADMISSION FROM BOTH SIDES THAT THE IMPUGNED IS SUE IS COVERED AGAINST THE ASSESSEE, CONSEQUENTLY, THIS GROUND OF THE REVENUE IS ALLOWED. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 11.11.2009. SD/- SD/- (V.K. GUPTA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 11.11.2009 {VYAS} COPY TO: APPELLANT/RESPONDENT/CIT/ CIT(A)/DR