The DCIT, Circle-1, Ahmedabad V. Arcoy Industries (India) Pvt. Ltd., Ahmedabad

ITA 2546/AHD/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0106 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 21-09-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 29-10-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: P M MEHTA; GM THAKOR
• Keywords: Depreciation; Business expenditure; Earning of tax free income; Cost of acquisition; Difference of opinion
• Section: 143(3); 142(1); 14A; 32; 145; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE SHRI RAJPAL YADAV, JM, & SHRI MANISH BORA D, AM. ITA NO.2546/AHD/2013 ALONG WITH CO NO.71/AHD/2014 ASST. YEAR: 2010-11 DCIT, CIRCLE-1, AHMEDABAD. VS. M/S ARCOY INDUSTRIES (INDIA) (P) LTD., 606, ABHIJEET BUILDING, NR. MITHAKHALI SIX ROADS, ELLISBRIDGE, AHMEDABAD. APPELLANT RESPONDENT PAN AABCA 2785J APPELLANT BY SHRI PRASOON KABRA, SR. DR RESPONDENT BY SHRI P. M. MEHTA & G. M. THAKOR, AR DATE OF HEARING: 29/9/2016 DATE OF PRONOUNCEMENT: 07/11/2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THIS APPEAL BY REVENUE AND CROSS OBJECTION BY ASSE SSEE FOR ASST. YEAR 2010-11 ARE DIRECTED AGAINST THE ORDER O F LD. CIT(A) VI, AHMEDABAD, DATED 5.8.2013 VIDE APPEAL NO.CIT(A)-VI/ 182/DCIT- CIR1/12-13 ARISING OUT OF THE ORDER U/S 143(3) OF T HE IT ACT, 1961 (IN SHORT THE ACT) FRAMED ON 22.01.2013 BY DCIT, CIRCLE .1, AHMEDABAD. ITA NO. 2546/AHD/13 & CO 71/A/14 ASST. YEAR 2010-11 2 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF ANTI CORROSIVE MATERIALS AND UNDERTA KING JOB WORKS ON TURNKEY BASIS. RETURN OF INCOME WAS FILED ON12/10/2 010 DECLARING TOTAL INCOME OF RS.51,02,170/-. CASE WAS SELECTED F OR SCRUTINY. NOTICE U/S 143(2) OF THE ACT FOLLOWED BY NOTICE U/S 142(1) OF THE ACT ALONG WITH QUESTIONNAIRE WERE ISSUED AND DULY SERVED ON T HE ASSESSEE. NECESSARY DETAILS AS CALLED FOR WERE SUPPLIED BY TH E ASSESSEE. INCOME WAS ASSESSED AT RS.87,07,761/- AFTER MAKING ADDITION OF RS.16,69,270/- TOWARDS DISALLOWANCE U/S 14A R.W.R. 8D, DISALLOWANCE OF RS.14,47,108/- FOR UNUTILIZED CENVAT CREDIT, DI SALLOWANCE AT RS.23,502/- U/S 41(1) OF THE ACT FOR UNCLAIMED LIAB ILITY, DISALLOWANCE OF RS.4,51,838/- FOR DEPRECIATION AND CAR REPAIR EXPEN SES BEING CAR OWNED BY DIRECTOR AND DISALLOWANCE OF RS.13,873/- TOWARDS EMPLOYEES CONTRIBUTION TO PROVIDENT FUND PAID AFTER THE DUE DATE. ALSO BOOK PROFIT OF THE ASSESSEE SHOWN AT RS.49,04,175/- WAS ASSESSED AT RS.99,09,557/- AFTER MAKING DISALLOWANCE OF RS.50,0 5,382/- U/S 14A OF THE ACT. 3. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE LD. CI T(A) AND SUCCEEDED PARTLY AND NOW REVENUE IS IN APPEAL BEFOR E THE TRIBUNAL RAISING FOLLOWING GROUNDS :- 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETIN G THE DISALLOWANCE U/S 14A TO THE EXTENT OF RS14.71 LACS DESPITE THE FACT THAT THE DISALLOWANCE WAS WORKED OUT AS PER THE PROVISIONS OF SECTION 14A REA D WITH RULE 8D. THE AO HAD NOT TREATED ANY EXPENDITURE AS DIRECTLY RELATED TO EARNING EXEMPT INCOME AND HAD ONLY MADE PROPORTIONATE DISALLOWANCE OF INT EREST AS PER RULE 8D(2)(II) ITA NO. 2546/AHD/13 & CO 71/A/14 ASST. YEAR 2010-11 3 2. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OFRS.14.47 LACS DESPITE THE FACT THAT THE ASSESSEE HAD FOLLOWED EXCLUSIVE METHOD FOR VALUATION OF INVENTORY INSTEAD OF INCLUS IVE METHOD MANDATED U/S 145A. 3. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALL OWING EPRECIATION/EXPENSES RELATED TO MOTOR CARS WHICH WERE NOT OWNED BY THE A SSESSEE. THE ASSESSEE WAS UNABLE TO ESTABLISH THAT THE CARS WERE USED FOR THE PURPOSE OF BUSINESS. THE PROVISIONS OF SECTION 32 WERE THEREFORE, NOT SATISFIED. 4. THE CIT(A) HAS ERRED IN LAW AND ON FACT BY DELE TING THE ADDITION OF RS.13,873/- BEING LATE PAYMENT OF EMPLOYEES CONTRIB UTION TO PF. SUCH LATE (TY PAYMENT IS NOT DEDUCTIBLE U/S 36(L)(VA) AND IS REQU IRED TO BE TREATED AS INCOME $\/ U/S2(24)(X). ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER TO THE EXTENT MENTIONED ABOVE SINCE THE ASSESSEE HAS FAILED TO DI SCLOSE HIS TRUE INCOME/BOOK PROFIT. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED TO THE ABOVE EXTENT. THE APPELLANT CRAVES, TO LEAVE, TO AMEND OR ALTER ANY G ROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 3.1 WHEREAS ASSESSEE HAS FILED CROSS OBJECTION ON T HE FOLLOWING GROUNDS :- 1. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE RESPONDENT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED, EVEN WHILE PA RTLY ALLOWING GROUND NO.2 OF THE RESPONDENT'S APPEAL BEFORE HIM, IN NOT ORDERING FOR THE DELETION OF THE DISALLOWANCE OF RS.16,69,27 0 MADE U/S. 14A READ WITH RULE 8D IN ITS ENTIRETY. 2. THE RESPONDENT CRAVES LEAVE TO ADD, AMEND AND/O R ALTER THE GROUND OR GROUNDS OF CROSS-OBJECTIONS EITHER BEFORE OR AT THE TIME OF HEARING. ITA NO. 2546/AHD/13 & CO 71/A/14 ASST. YEAR 2010-11 4 3.2 FURTHER ASSESSEE PLACED FOLLOWING ADDITIONAL G ROUNDS OF CROSS OBJECTION :- 1. IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE RESPONDENT'S CASE, NO DISALLOWANCE U/S. 14A R.W.R. 8D CAN BE MADE IN CASE OF ASSESSEE, AS THE ASSESSEE HAS NOT CLAIMED ANY INCOME EXEMPT FROM PAY MENT OF TAX. 2. WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT(A) H AS ERRED IN WORKING OUT THE DISALLOWANCE U/S. 14A R.W.R. 8D AT RS. 52,37,391 WH ICH WAS WORKED OUT ON THE BASIS OF GROSS INTEREST EXPENDITURE AND WITHOUT MAKING ADJUSTMENT OF INTEREST INCOME OF RS. 45,51,912. 3. THE RESPONDENT CRAVES LEAVE OF YOUR HONOURS TO A DD, AMEND, ALTER, VARY, RESCIND AND/OR MODIFY ANY OF THE GROUNDS ABOVE, IN THE INTEREST OF JUSTICE. 4. FIRST WE TAKE UP REVENUES APPEAL 5. GROUND NO.1 AND THE CROSS OBJECTION BY ASSESSEE ARE IN RELATION TO DISALLOWANCE U/S 14A R.W.R. 8D OF THE I T RULES, 1962 (IN SHORT THE RULES). AT THE OUTSET LD. AR SUBMITTED TH AT THE ISSUE RELATING TO DISALLOWANCE U/S 14A OF THE ACT IN THIS APPEAL I S SQUARELY COVERED IN FAVOUR OF ASSESSEE BY THE JUDGMENT OF HON. JURIS DICTIONAL HIGH COURT IN THE CASE OF CIT VS. CORRTECH ENERGY (P) LT D. 45 TAXMANN.COM 116 (GUJARAT) WHEREIN IT HAS BEEN HELD THAT IF ASSESSEE HAS NOT CLAIMED ANY INCOME EXEMPT FROM PAYMENT OF T AX THEN NO DISALLOWANCE IS CALLED FOR U/S 14A OF THE ACT. 6. ON THE OTHER HAND LD. DR SUPPORTED THE ORDERS OF LOWER AUTHORITIES BUT COULD NOT CONTROVERT THE SUBMISSION S MADE BY LD. AR. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE RAISED BY THE REVENUE AND BY A SSESSEE IN THE ITA NO. 2546/AHD/13 & CO 71/A/14 ASST. YEAR 2010-11 5 C.O. ARE IN RELATION TO DISALLOWANCE U/S 14A OF THE ACT R.W.R.8D OF THE RULES. WE OBSERVE THAT ASSESSEE HAS MADE SUO MOTU D ISALLOWANCE U/S 14A IN ITS INCOME-TAX RETURN AT RS.33,36,112/-. LD. ASSESSING OFFICER CALCULATED IT AT RS.50,05,382/- AND MADE AD DITION OF THE DIFFERENCE AT RS.16,69,270/-. WHEN THE ISSUE CAME U P BEFORE LD. CIT(A), THE SAME WAS REMITTED BACK TO LD. ASSESSING OFFICER FOR MAKING FRESH CALCULATION WITH REGARD TO THE INTERES T EXPENDITURE WHICH WAS ADOPTED BY ASSESSING OFFICER AT RS.2,18,77,746/ - WHEREAS LD. CIT(A) WORKED OUT THE INTEREST EXPENDITURE TO BE CO NSIDERED UNDER RULE 8D AT RS.1,50,08,332/-. WE FURTHER OBSERVE THA T ASSESSEE HAS FILED ADDITIONAL GROUNDS IN ITS CROSS OBJECTION CLA IMING THAT NO DISALLOWANCE U/S 14A OF THE ACT AT ALL CAN BE MADE IN THE CASE OF ASSESSEE AS NO EXEMPT INCOME HAS BEEN CLAIMED DURIN G THE YEAR UNDER APPEAL IN VIEW OF THE JUDGMENT OF THE HON. JU RISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. CORRTECH ENERGY (P) LT D.(SUPRA), WHICH SQUARELY APPLIES TO THE FACTS OF ASSESSEE. 8. IN ORDER TO APPRECIATE THE FACTS, WE HAVE GONE T HROUGH THE COMPUTATION OF INCOME PLACED AT PAGES 51 TO 55 OF T HE PAPER BOOK AND FIND THAT ASSESSEE HAS MADE SUO MOTU DISALLOWAN CE OF RS.33,36,112/- AND ALSO SHOWN DIVIDEND INCOME AT RS .2,09,842/-, WHICH HAS NOT BEEN CLAIMED AS EXEMPT BUT OFFERED TO TAX. IN ALL ASSESSEE HAS NOT CLAIMED ANY INCOME AS EXEMPT FROM TAX. WE THEREFORE, FIND THE CONTENTIONS OF ASSESSEE TO BE C ORRECT THAT NO INCOME HAS BEEN CLAIMED EXEMPT BY THE ASSESSEE FO R THE YEAR UNDER APPEAL. FURTHER WE OBSERVE THAT HON. GUJARAT HIGH COURT IN THE ITA NO. 2546/AHD/13 & CO 71/A/14 ASST. YEAR 2010-11 6 CASE OF CIT VS. CORRTECH ENERGY (P) LTD.(SUPRA) HAS OBSERVED AS UNDER :- SECTION 14A(1) PROVIDES THAT FOR THE PURPOSE OF COM PUTING TOTAL INCOME UNDER CHAPTER IV. NO DEDUCTION SHALL BE ALLO WED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE AC T. IN THE INSTANT CASE, THE TRIBUNAL HAS RECORDED THE FINDING OF FACT THAT THE ASSESSEE DID NOT MAKE ANY CLAIM FOR EXEMPTION OF ANY INCOME FROM PAYMENT OF TAX. IT WAS ON THIS BASIS THAT THE TRIBUNAL HELD TH AT DISALLOWANCE UNDER SECTION 14A COULD NOT BE MADE. IN THE PROCESS TRIBU NAL RELIED ON THE DECISION OF DIVISION BENCH OF PUNJAB AND HARYANA HI GH COURT IN CASE OF CIT V. WINSOME TEXTILE INDUSTRIES LTD. [2009] 31 9 ITR 204 IN WHICH ALSO THE COURT HAD OBSERVED THAT WHERE THE ASSESSEE DID NOT MAKE ANY CLAIM FOR EXEMPTION, SECTION 14A COULD HAVE NO APPLICATION. 9. APPLYING THE FACTS OF THE CASE TO THE JUDGMENT O F HON. JURISDICTIONAL HIGH COURT IN THE ABOVE CASE, WE FIN D THAT THE FACTS ARE SQUARELY COVERED BY THE JUDGMENT. RESPECTFULLY FOLL OWING THE SAME, WE ARE OF THE VIEW THAT NO DISALLOWANCE U/S 14A OF THE ACT IS CALLED FOR IN THE CASE OF ASSESSEE DURING THE YEAR UNDER A PPEAL. ACCORDINGLY, THIS GROUND NO.1 OF REVENUE IS DISMISS ED AND ADDITIONAL GROUND NO.1 OF THE CROSS OBJECTION IS AL LOWED. OTHER GROUNDS OF CROSS OBJECTION ARE ACADEMIC/GENERAL IN NATURE AND THE SAME ARE DISMISSED. 10. GROUND NO.2 OF REVENUES APPEAL IS AGAINST THE ACTION OF LD. CIT(A) DELETING THE ADDITION TOWARDS UNUTILIZED CEN VAT CREDIT OF RS.14,47,108/-. ITA NO. 2546/AHD/13 & CO 71/A/14 ASST. YEAR 2010-11 7 11. LD. DR VEHEMENTLY ARGUED AND SUPPORTED THE ORDE R OF ASSESSING OFFICER WHEREAS THE LD. AR REITERATED TH E SUBMISSIONS MADE BEFORE LD. CIT(A) AND FURTHER SUBMITTED THAT T HE ISSUE OF CENVAT CREDIT IS WELL SETTLED IN FAVOUR OF ASSESSEE BY THE DECISION OF THE TRIBUNAL IN THE CASE OF JALARAM CERAMIC LTD. VS . DCIT IN ITA NO.2187/AHD/2009 FOR ASST. YEAR 2005-06. 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED BEFORE US. THROUGH THIS GROUND REVENUE HAS C HALLENGED THE ACTION OF LD. CIT(A) DELETING THE ADDITION OF RS.14 ,47,108/- TOWARDS UNUTILIZED CENVAT CREDIT. WE OBSERVE THAT LD. ASSES SING OFFICER WHILE PASSING THE ASSESSMENT ORDER CAME ACROSS THE FACT THAT THE ASSESSEE HAS AVAILED CENVAT CREDIT OF RS.6209174/- AND HAS UNUTILIZED CENVAT CREDIT OF RS.47,62,066/- AND ACCO RDINGLY ADDED RS.14,47,108 TO THE INCOME OF ASSESSEE. WE FURTHER OBSERVE THAT LD. CIT(A) HAS DELETED THE IMPUGNED ADDITION BY OBSERVI NG AS UNDER :- 6.2. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE A.R. OF THE APPELLANT AND THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE AS SESSMENT ORDER. IT IS WORTHWHILE TO REFER TO SOME CASE-LAWS ON THE ISSUE. IN THE CASE OF ACIT VS. S.P. FABRICATORS (P) LTD. (10 SOT 652 (MUMBAI) THE YEAR UNDER CONSIDERATION WAS ASSESSMENT YEAR 1999-2000. SECTIO N 145A WAS INSERTED WITH EFFECT FROM 1.4.99. IN OTHER WORDS ASSESSMENT YEAR 1999-2000 WAS THE FIRST YEAR OF ASSESSMENT TO WHICH SECTION 145A IS A PPLICABLE. IN THE CASE IT WAS HELD THAT 'WHEN THE LEGISLATURE HAS IMPOSED A N EW SYSTEM OF VALUING THE CLOSING STOCK IT IS BOUND TO HAVE AN IMPACT IN THAT YEAR, BUT BECOMES NEUTRAL IN NATURE IN THE SUBSEQUENT YEAR. WHILE APP LYING SEC. 145A FOR VALUING CLOSING STOCK IN THE FIRST YEAR, THE ASSESS EE CANNOT BE PERMITTED TO ADJUST THE OPENING STOCK OF THE YEAR'. THUS THE RAT IO LAID DOWN IS THAT FOR THE A.Y. 1999-2000 THERE WAS NO NEED TO ADJUST THE OPEN ING STOCK IN COMPLIANCE WITH SECTION 145A IN THE CASE OF CROYDON CHEMICAL W ORKS LTD. LTD. VS. ITA NO. 2546/AHD/13 & CO 71/A/14 ASST. YEAR 2010-11 8 ACIT (11 SOY 295) (MUMBAI) THE YEAR UNDER CONSIDERA TION WAS A.Y. 1999- 2000. IT WAS HELD THAT 'IN VIEW OF S.145A, A.O. WAS JUSTIFIED IN ADDING THE DEBIT BALANCE IN MODVAT ACCOUNT AS ON 31 ST MARCH 1999, TO THE VALUE OF CLOSING STOCK'. THE SAID DECISION HAS NO APPLICATIO N AS TO WHETHER THE OPENING STOCK IS ALSO TO BE ADJUSTED BY TAKING INTO ACCOUNT THE ELEMENT OF MODVAT. MOREOVER, IN THIS CASE ALSO THE YEAR UNDER CONSIDERATION WAS THE FIRST YEAR AFTER INSERTION OF SECTION 145 A. * V .-'''-(.''' L ' 6.3. IN THE CASE OF DCIT VS. BECK INDIA LTD., 26 SO T 141 (MUMBAI) RELIED ON BY THE LEARNED A.R., IT WAS HELD THAT 'CIT(A) WA S JUSTIFIED IN DIRECTING THE A.O. TO MAKE CORRESPONDING ADJUSTMENTS IN THE O PENING INVENTORY ALSO WHERE A.O. ADDED BACK CENVAT CREDIT TO CLOSING STOC K ONLY'. THE ASSESSMENT YEAR INVOLVED WAS 2001-02. IN THE CASE O F L & T DEMAG PLASTICS MACHINERY (P) LTD. VS. ITO 124 TTJ (MUMBAI) 490 IT WAS HELD THAT 'IN VIEW OF MANDATORY PROVISION OF SEC. 145A, IS BOUND TO MA KE ADJUSTMENTS FOR ANY CENVAT ACTUALLY PAID OR INCURRED BY THE ASSESSEE IN RELATION TO PURCHASES AND SALE OF GOODS AND INVENTORY; MATTER REMITTED BACK T O THE A.O. FOR COMPUTING ASSESSEE'S INCOME AFTER MAKING ADJUSTMENT SUCH'. TH E ASSESSMENT YEAR INVOLVED WAS 2001-02. IN THE CASE OF DCIT VS. HITEC H PLAST CONTAINERS (I) LTD. 31 SOT 112 (MUMBAI), IT WAS HELD THAT 'FOR MAK ING ADJUSTMENT OF UNUTILIZED MODVAT CREDIT IN THE CLOSING STOCK THE A O CANNOT SIMPLY RELY ON THE COMMENTS IN THE AUDITOR'S REPORT BUT HAS TO MAK E THE ADJUSTMENT AFTER CONSIDERING THE EFFECT OF DUTY PAYMENTS ON PURCHASE , SALE OF GOODS AND CLOSING STOCK AS WELL AS OPENING INVENTORY AND ONLY THEREAFTER THE ACTUAL AMOUNT WHICH IS REQUIRED TO BE ADDED UNDER S. 145A, IF ANY SHOULD BE ASCERTAINED'. THE ASSESSMENT YEAR INVOLVED WAS 2004 -05. IN THE CASE OF CIT VS. MAHAVIR ALUMINIUM LTD. 297 ITR 77 (DEL.), IT WA S HELD THAT 'WHEN THERE IS ADJUSTMENT IN THE VALUATION OF CLOSING STOCK, TO GIVE EFFECT TO S. 145A, THE OPENING STOCK HAS TO BE INCREASED BY ANY TAX, DUTY, CESS OR FEE ACTUALLY PAID OR INCURRED WITH REFERENCE TO SUCH STOCK IF THE SAM E HAS NOT BEEN ADDED FOR THE PURPOSE OF VALUATION IN THE ACCOUNTS'. THE ASSE SSMENT YEAR INVOLVED IS A.Y.I 999-2000. IN THE CASE OF CIT VS. MAHALAXMI GL ASS WORKS (P) LTD. (318 ITR 116) (BOM), IT WAS HELD THAT 'WHERE IN THE CLOSING STOCK UNUTILIZED MODVAT CREDIT IS ADJUSTED, SIMILAR ADJUSTMENT SHOUL D BE MADE TO OPENING STOCK ALSO'. 6.4. IT IS SEEN FURTHER IN THE CASE OF FOURESS ENGG . (INDIA) LTD. VS. ITO 26 SOT 178 (MUMBAI), IT WAS HELD THAT 'TO GIVE EFFECT S. 145A, THE OPENING STOCK AS ON 1 ST APRIL, 1998 WILL HAVE TO BE INCREASED BY ANY TAX, D UTY CESS OR ITA NO. 2546/AHD/13 & CO 71/A/14 ASST. YEAR 2010-11 9 FEE ACTUALLY PAID OR INCURRED WITH REFERENCE TO SUC H STOCK IF THE SAME HAS NOT BEEN ADDED FOR THE PURPOSE OF VALUATION IN THE ACCO UNTS'. THE ASSESSMENT YEAR INVOLVED WAS 1999-2000. IN THE CASE OF DCIT VS . AKASAKA ELECTRONICS LTD. 32 SOT 392 (MUMBAI), IT WAS HELD THAT 'IN THE CASE OF CYANAMID AGRO LTD. VS. ADDL. CIT (2009) 121 TTJ (MUMBAI) 606 THE TRIBUNAL HELD THAT 'THE GROSS METHOD HAS GOT TO BE FOLLOWED AS PER PROVISIO NS OF S. 145A CONTRAST WITH THE NET METHOD AS MANDATED UNDER THE SECTION, WHICH WILL PUT AN END TO UNNECESSARY LITIGATION. ACCORDING TO THE TRIBUNAL T HERE MAY NOT BE ANY SUBSTANTIAL BENEFIT OR LOSS TO THE ASSESSEE BY FOLL OWING GROSS METHOD IN RESPECT OF THE INPUTS AND THE INVENTORIES, ETC. AS MANDATED UNDER S. 145A. ACCORDINGLY IN THAT CASE THE TRIBUNAL DIRECTED THE AO TO GO THROUGH THE EXERCISE AND WORK OUT THE ADDITION OR RELIEF, AS TH E CASE MAY, BY MAKING THE FOLLOWING ADJUSTMENTS IN ACCORDANCE WITH S. 145 A, READ WITH THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF CIT VS. MAHAVIR ALUMINIUM LTD. (2008) 214 CTR (DEL.) 45 AFTER GIVING REASONABLE OPPORTUNI TY OF BEING HEARD TO THE ASSESSEE : (A) VALUE THE OPENING STOCK INCLUSIVE OF ELEMENT OF TAXES, EVEN IF THE MODVAT CREDIT IS AVAILABLE IN RESPECT OF THE SA ME ; (C) CREDIT SALES AS PER THE BILLS AND ADD THE MODVAT CREDIT THAT HAS AC CRUED TO THE ASSESSEE IN RESPECT OF THE IMPUTES INCLUDING IN RESPECT OF THE OPENING STOCK (D) VALUE THE CLOSING STOCK INCLUSIVE OF ELEMENT OF TAXES WITHOUT DEDUCTION OF MODVAT CREDIT AVAILABLE TO THE ASSESSEE IN RESPECT OF THE UNUTILIZED STOCKS' THE ASSESSMENT YEAR INVOLVED IS 2004-05. 6.5. THE AHMEDABAD TRIBUNAL IN ITS DECISION DT.07.06.201 1 IN THE CASE OF ASIAN TUBES LTD. FOR THE A.Y. 2003-04 IN ITA NO.I35 8/AHD/2009, HELD : J'3. AT THE TIME OF HEARING, BOTH THE PARTIES AGREE D THAT THE ISSUE IS NOW SQUARELY COVERED BY THE DECISION OF HON 'BLE JU RISDICTIONAL HIGH COURT IN THE CASE OF ACIT VS. NARMADA CHEMATUR PETR OCHEMICALS LTD. 327 ITR 369 (GUN.), WHEREIN FOLLOWING WAS HELD : - 'HELD, DISMISSING THE APPEAL, THAT THE TRIBUNAL WAS JUSTIFIED IN EXCLUDING THE EXCISE DUTY AT THE TIME OF VALUATION OF THE CLOSING STOCK OF FINISHED GOODS AT THE END OF THE ACCOUNTING PERI OD BECAUSE ; (A) NO DEDUCT ION FOR THE LIABILITY HAD BEEN CLAIME D BY THE ASSESSEE. THE EXCISE DUTY PAYABLE ON THE FINISHED GOODS LYING IN THE CLOSING STOCK AT THE END OF THE RELEVANT ACCOUNTING PERIOD HAD BEEN PAID IN THE SUBSEQUENT YEAR BEFORE THE DUE DATE OF FILING OF TH E RETURN OF INCOME ITA NO. 2546/AHD/13 & CO 71/A/14 ASST. YEAR 2010-11 10 AND THAT WAS HOW THE AMOUNT WAS AVAILABLE CONSIDERING THE FACT THAT THE ASSESSMENT HAD BEEN FRAMED AND THE SHOW-CAUSE NOTI CE WAS ISSUED MUCH AFTER THE CLOSE OF THE ACCOUNTING YEA; (B) THE ASSESSING OFFICER HAD NOT HAD RECOURSE TO S UB-SECTION (3) OF SECTION 145 OF THE ACT. THE ASSESSEE WAS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING BUT IT WAS NOT THE CASE OF THE ASSESS ING OFFICER THAT THE ASSESSING OFFICER WAS NOT IN A POSITION TO DEDUCE T RUE PROFITS OF THE YEAR UNDER CONSIDERATION. SUCH DUTY OF CENTRAL EXCISE IF ADDED TO ENHANCE THE VALUE OF CLOSING STOCK WOULD RESULT IN ENHANCED OPE NING STOCK ON THE FIRST DAY OF THE NEXT ACCOUNTING PERIOD, NAMELY, APRIL 1, 1997. SO THE NEXT YEAR'S PROFITS WOULD GET DEPRESSED ACCORDINGLY. OVE R A PERIOD OF TIME THE WHOLE EXERCISE WOULD EVEN OUT, IN OTHER WORDS, BE R EVENUE NEUTRAL. AT THE SAME TIME WHILE DISTURBING THE VALUE OF THE CLO SING STOCK THE ASSESSING AUTHORITY COULD NOT CHANGE THE METHOD OF ACCOUNTING REGULARLY EMPLOYED. : (C) THE ASSESSMENT YEAR BEING 1997-98 THE PROVISION S OF SECTION 145A OF THE ACT INSERTED BY THE FINANCE (NO.2) ACT, 1998 WI TH EFFECT FROM APRIL, 1 1999 COULD NOT BE INVOKED.' 4. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF HON 'BLE JURISDICTIONAL HIGH COURT, THE ADDITION MADE BY THE A.O. AND CONFI RMED BY THE LD. C1T(A) IS HEREBY DELETED.' 6.6. AHMEDABAD TRIBUNAL IN ITS DECISION DT. 06.01.2 012 IN THE CASE OF JALARAM CERAMICS LTD. VS. DCIT, CIRCLE-4 IN ITA NO. 2187/AHD/2009 FOR A.Y. 2005-06, HELD:- '5. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES, IT WAS FOUND THAT THE ASSESSEE HAD MAINTAINED A SEPARATE ACCOUNT FOR THE EXCISE DUTY AND THAT THE ASSESSEE HAD PAID THE EXCISE DUTY LEVIABLE ON FINIS HED GOOD STOCK BEFORE THE FILING OF THE RETURN. THE EXCISE DUTY WAS NOT DEB ITED TO P & L ACCOUNT AND IT 'WAS NOT CLAIMED AS AN EXPENDITURE. FOR THIS PRO POSITION CASE LAW CITED IS CIT VS. PARRY CONFECTIONARY 299 ITR 321. THE NEXT A RGUMENT IS THAT THE EXCISE DUTY IS LEVIABLE AND INCLUDABLE IN THE CLOSING STOC K WHEN THE STOCK IS CLEARED FROM THE FACTORY. SINCE IT WAS NOT CLEARED FROM THE FACTORY, THEREFORE NOT INCLUDABLE IN THE VALUE OF THE CLOSING STOCK. CASE LAW RELIED UPON IS ASST. CIT VS. NARMADA CHEMATUR PETROCHEMICALS LTD. 327 ITR 36 9 (GUJ.). IT HAS ALSO BEEN ARGUED THAT IN THE PAST NO SUCH ADJUSTMENT WAS EVER MADE, HENCE THE ADJUSTMENT FOR THE YEAR UNDER CONSIDERATION IT OTHE RWISE REVENUE NEUTRAL FOR ITA NO. 2546/AHD/13 & CO 71/A/14 ASST. YEAR 2010-11 11 THIS LEGAL PROPOSITION CASE LAW RELIED UPON IS CIT VS. REALEST BUILDERS AND SERVICES LTD. 307 ITR 202 (SC). ASSESSEE HAS ALSO P LACED RELIANCE ON ASHWIN A. SHAH 1 ITR 356 (TRIB) [AHD] FOR THE LEGAL PROPOS ITION THAT THE LIABILITY ARISES ONLY AT THE TIME OF REMOVAL OF GOODS FORM THE FACTO RY. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE LAW DISCUSSED ABOVE WE HEREBY REVERSE THE FINDING OF THE ID. CIT(A) AND AL LOW THIS GROUND. ASSESSEE'S APPEAL IS ALLOWED. ' 6.7. IT IS SEEN FROM THE RATIO LAID DOWN IN THE ABO VE MENTIONED CASE-LAWS THAT ONLY IN RESPECT OF A.Y. 1999-2000, BEING THE FIRST YEAR AFTER THE INSERTION OF SECTION 145A, THERE IS DIFFERENCE OF OPINION AS TO WHETHER ONLY CLOSING STOCK HAD TO BE ADJUSTED OR WHETHER ALL THE THREE ELEMENT S NAMELY, PURCHASES, SALE AND INVENTORY ARE TO BE ADJUSTED TO INCLUDE THE ELE MENT OF VAT. IN RESPECT OF ALL THE SUBSEQUENT ASSESSMENT YEARS THE RATIO LAID DOWN IS THAT ALL THE THREE ITEMS NAMELY, PURCHASES, SALE AND THE INVENTORY (AS MENTIONED IN SECTION 145A) ARE TO BE ADJUSTED TO INCLUDE ELEMENT OF VAT. SUCH AN EXERCISE IS REVENUE NEUTRAL. 13. WE FURTHER OBSERVE THAT ASSESSEE IS FOLLOWING E XCLUSIVE METHOD OF ACCOUNTING TO RECOGNIZE PURCHASE AND SALE, NET O F EXCISE DUTY. FURTHER IN RESPECT OF EXCISE DUTY PAID ON PURCHASES FOR WHICH THE ASSESSEE IS ELIGIBLE TO CLAIM CENVAT IS DEBITED UND ER THE HEAD CENVAT CREDIT AND EXCISE DUTY CHARGED ON SALES IS CLAIMED AS SET OFF AGAINST CENVAT CREDIT. THROUGH THIS ACCOUNTING TREATMENT WE OBSERVE THAT EXCISE DUTY IS NEVER CHARGED TO PROFIT AND LOSS ACC OUNT AND CENVAT CREDIT ACCOUNT IS IN THE FORM OF CURRENT ACCOUNT IN WHICH EXCISE DUTY PAID ON PURCHASES IS DEBITED AND THAT ON SALES IS C REDITED. AT THE END OF THE YEAR IF THE CENVAT IS RECEIVABLE THEN IT IS CARRIED FORWARD AND IF IT IS PAYABLE THEN HAS TO BE PAID IN THE FOLLOWING MONTH. THEREFORE, THERE REMAINS NO REASON FOR ADDING THE CENVAT TO TH E PROFIT U/S 145 OF THE ACT. WE FURTHER OBSERVE THAT SIMILAR ISSUE CAME UP BEFORE THE CO- ORDINATE BENCH, AHMEDABAD IN THE CASE OF ACIT VS. K IRAN INDUSTRIES PVT. LTD. IN ITA NO.1450/AHD/2012 & CO NO.135/AHD/2 012 WHEREIN ITA NO. 2546/AHD/13 & CO 71/A/14 ASST. YEAR 2010-11 12 THE ISSUE HAS BEEN DECIDED IN FAVOUR OF ASSESSEE BY OBSERVING AS FOLLOWS :- 8.WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED TH E MATERIAL ON RECORD. WE FIND THAT THE ISSUE IN THE PRESENT APPEAL IS WITH RESPECT TO INCLUSION OF EXCISE DUTY AND VAT TO THE VALUE OF CLOSING STOCK, IN A CASE WHERE THE ASSESSE E IS FOLLOWING EXCLUSION METHOD OF ACCOUNTING OF EXCISE AND VAT FOR VALUATION OF STOCK . WE FIND SIMILAR ISSUE WERE BEFORE THE CO-ORDINATE BENCH OF TRIBUNAL. WE FURTHER FIND THAT IN THE CASE OF SNEHAL PHARMA CHEM (SUPRA) THE ISSUE WAS DECIDED IN THE FAVOUR OF ASSESSEE BY THE CO-ORDINATE BENCH OF TRIBUNAL BY HOLDING AS UNDER:- 3. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. D. R. AND HAVE GONE THROUGH THE MATERIAL ON RECORD AND THE ORDERS PASSED BY AUTHORI TIES BELOW. WE FIND THAT THERE IS SUBMISSION OF THE ASSESSEE BEFORE THE AUTHORITIE S BELOW THAT WHILE THE ENTIRE AMOUNT OF EXCISE DUTY REALIZED ON SALES WAS INCLUDE D IN THE SALE AMOUNT BUT OUT OF ENTIRE AMOUNT OF EXCISE DUTY PAID ON PURCHASES, ONL Y THAT PORTION OF SUCH EXCISE DUTY PAID WHICH WAS UTILIZED BY WAY OF MOD VAT, HAD BEEN INCLUDED IN THE VALUE OF PURCHASES AND THE BALANCE AMOUNT OF MODVAT CREDIT WHICH COULD NOT BE UTILIZED IN THE PRESENT YEAR WAS SHOWN IN THE BALAN CE SHEET AS AN AMOUNT RECEIVABLE AND THIS PORTION OF RS.11,25,342/- WAS N OT INCLUDED IN THE VALUE OF PURCHASES. LD. D.R. COULD NOT CONTROVERT THESE SUBM ISSIONS OF THE ASSESSEE MADE BY THE ASSESSEE BEFORE THE A.Y. 2005-06 AUTHORITIE S BELOW. ONCE IT IS ACCEPTED THAT THESE SUBMISSIONS OF THE ASSESSEE ARE CORRECT, IT MEANS THAT EXCISE DUTY PAID BUT NOT INCLUDED IN THE PURCHASES WAS SHOWN IN THE BALANCE SHEET AS EXCISE DUTY RECEIVABLE AND THEREFORE, THERE CANNOT BE A REASON TO MAKE ANY ADDITION IN THE INCOME OF THE ASSESSEE BECAUSE EVEN IF WE INCLUDE S UCH EXCISE DUTY RECEIVABLE IN THE VALUE OF CLOSING STOCK, THE SAME IS ALSO REQUIR ED TO BE INCLUDED IN THE VALUE OF PURCHASES AND IT WILL HAVE NO IMPACTS ON THE PROFIT S OF THE ASSESSEE. THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A). 9. WE FURTHER FIND THAT IN THE CASE OF BLOOM DEKOR LTD. (SUPRA) SIMILAR ISSUE WAS DECIDED BY THE CO-ORDINATE BENCH OF TRIBUNAL IN FAV OUR OF THE ASSESSEE BY HOLDING AS UNDER:- 4. ON PERUSING THE FINANCIAL STATEMENTS ASSESSING O FFICER NOTICED THAT AS PER THE NOTES TO ACCOUNTS, EXCISE DUTY ON FINISHED GOODS NO T CLEARED AS PER FACTORY WAS ESTIMATED AT R. 47.38 LACS AND CUSTOM DUTY ON STOCK LYING AT PORT ESTIMATED AT RS. 46.5 LACS WAS NOT PROVIDED FOR IN THE BOOKS AND WAS ALSO NOT CONSIDERED IN THE VALUATION OF INVENTORIES. ASSESSING OFFICER WAS OF THE VIEW THAT AS PER PROVISION OF SECTION H5A INSERTED WITH EFFECT FROM 1.04.1999 EXCISE DUTY HAS TO BE ADDED WHILE VALUING FINISHED GOODS. HE THUS CONSIDERED TH E AMOUNT OF EXCISE DUTY ON FINISHED GOODS NOT CLEARED FROM FACTORY AT RS. 47.3 8 LACS AND CUSTOM DUTY ON STOCK LYING AT PORT AT 46.51 LACS AGGREGATING TO RS . 93,89,000/- AND ADDED IT TO THE VALUE OF INVENTORY. AGGRIEVED BY THE ACTION OF THE ASSESSING OFFICER, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) AFTER CONS IDERING THE SUBMISSIONS OF THE ITA NO. 2546/AHD/13 & CO 71/A/14 ASST. YEAR 2010-11 13 ASSESSEE AND RELYING ON THE DECISION OF AHMEDABAD T RIBUNAL IN THE CASE OF ITA 1358/AHD/2009 ALLOWED THE APPEAL OF THE ASSESSEE BY HOLDING AS UNDER:- THE APPELLANT ALSO POINTED OUT THAT HON'BLE IT AT, AHMEDABAD VIDE ITA NO. 13587AHD/SOOG HAS ALSO CONCURRED WITH A VIEW THAT E XCISE DUTY AND/OR CUSTOMS DUTY SHOULD NOT BE INCLUDED IN THE CLOSING STOCK. THE OP ERATIVE PART INDICATING OBSERVATION OF THE HON'BLE ITAT IS REPRODUCED HEREIN AS UNDER: 'AT THE TIME OF HEARING, BOTH THE PARTIES AGREED TH AT THE ISSUE IS NOW SQUARELY COVERED BY THE DECISION OF HON'BLE JURISDICTIONAL H IGH COURT IN THE CASE OF ACIT VS. NARMADA CHEMATUR PETROCHEMICALS LTD. 327ITR 369 (GUJ.), WHEREIN FOLLOWING WAS HELD: 'HELD, DISMISSING THE APPEAL, THAT TRIBUNAL WAS JUS TIFIED IN EXCLUDING THE EXCISE DUTY AT THE TIME OF VALUATION OF THE CLOSING STOCK OF FINISHED GOODS AT THE END OF THE ACCOUNTING PERIOD BECAUSE: (A) NO DEDUCT ION FOR THE LIABILITY HAD BEEN CLAIME D BY THE ASSESSEE.THE EXCISE DUTY PAYABLE ON THE FINISHED GOODS LYING IN THE CLO SING STOCK AT THE END OF THE RELEVANT ACCOUNTING PERIOD HAD BEEN PAID IN THE SUB SEQUENT YEAR BEFORE_THE DUE DATE OF FILING OF THE RETURN OF INCOME AND THAT WAS HOW THE AMOUNT WAS AVAILABLE CONSIDERING THE FACT THAT THE ASSESSMENT HAD BEEN F RAMED AND THE SHOW-CAUSE NOTICE WAS ISSUED MUCH AFTER THE CLOSE OF THE ACCOU NTING YEAR; . A.Y. 2005-06 (B) THE ASSESSING OFFICE HAD NOT HAD RECOURSE TO SU B-SECTION (3) OF SECTION 145 OF THE ACT. THE ASSESSEE WAS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING BUT IT WAS NOT THE CASE OF THE ASSESSING OFFICER THAT THE ASSESSING OFFICER WAS NOT IN A POSITION TO DEDUCE TRUE PROFITS OF THE YEAR UNDER C ONSIDERATION. SUCH DUTY OF CENTRAL EXCISE IF ADDED TO ENHANCE THE VALUE OF CLO SING STOCK WOULD RESULT IN ENHANCED OPENING STOCK ON THE FIRST DAY OF THE NEXT ACCOUNTING PERIOD, NAMELY, APRIL I, 1997. SO THE NEXT YEAR'S PROFITS WOULD GET DEPRESSED ACCORDINGLY, OVER A PERIOD OF TIME THE WHOLE EXERCISE WOULD EVEN OUT, I N OTHER WORDS, BE REVENUE NATURAL. AT THE SAME TIME WHILE DISTURBING THE VALU E OF THE CLOSING STOCK THE ASSESSING AUTHORITY COULD NOT CHANGE THE METHOD OF ACCOUNTING REGULARLY EMPLOYED. [C] THE ASSESSMENT YEAR BEING 1997-98 THE PROVISION S OF SECTION 145A OF THE ACT INSERTED BY THE FINANCE (NO. 2) ACT, 1998 WITH EFFE CT FROM APRIL I, 1999 COULD NOT BE INVOKED'. [4.4] I HAVE PERUSED THE ASSESSMENT ORDER AND THE W RITTEN SUBMISSIONS MADE IN THIS REGARD. SINCE THE ISSUE IS SQUARELY COVERED BY THE JURIS DICTION AL ITAT, I AM OF THE VIEW THAT NO ADDITION SHOULD BE MADE ON ACCO UNT OF EXCISE AND CUSTOMS ITA NO. 2546/AHD/13 & CO 71/A/14 ASST. YEAR 2010-11 14 DUTY IN THE VALUATION OF CLOSING STOCK. THE ADDITIO N MADE BY THE AO IS THUS DIRECTED TO BE DELETED. THE GROUNDS RAISED BY THE A PPELLANT ARE THUS ALLOWED. 5. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER REVENUE IS NOW IN APPEAL BEFORE US. 6. BEFORE US, LEARNED D.R. RELIED ON THE ORDER OF T HE ASSESSING OFFICER. 7. WE HAVE HEARD THE LEARNED D.R. AND PERUSED THE M ATERIAL ON RECORD. CIT(A) WHILE DELETING THE ADDITION HAS HELD THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF JURISDICTIONAL TRIBUNAL AND ACCORDINGLY RELYING ON THE AFORESAID DECISION DELETED THE ADDITION. NOTHING HAS BEEN BRO UGHT ON RECORD TO CONTROVERT THE FINDINGS OF CIT(A) AND THUS WE FIND NO REASON T O INTERFERE IN HIS ORDER AND THIS THE APPEAL OF REVENUE IS DISMISSED. 10. SINCE THE ISSUE IN THE PRESENT APPEAL IS SIMILA R TO THE ISSUES IN THE APPEALS CITED HEREINABOVE, WE RESPECTFULLY FOLLOWING THE DECISION S OF CO-ORDINATE BENCH OF TRIBUNAL CITED HEREINABOVE, WE ARE OF THE VIEW THAT NO ADDIT ION ON ACCOUNT OF MODVAT AND VAT AS MADE BY THE A.O NEEDS TO BE MADE IN THE PRESENT CASE. WE THEREFORE DIRECT ITS DELETION. THUS THIS GROUND OF ASSESSEE IS ALLOWED. 10. WE FURTHER FIND THAT ON THE ISSUE OF GUIDANCE N OTES AND ACCOUNTING STANDARDS ISSUED BY THE' INSTITUTE OF CHARTERED ACCOUNTANT OF INDIA, THE HIGH COURT OF TELENGANA AND ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS. PA CTS SECURITIES AND FINANCIAL SERVICES LTD. (2015) 374 ITR 681 (T & A.P) AT PARA 13 HAS NOTED THAT THE MERELY BECAUSE T HE CENTRAL GOVERNMENT HAS NOT. A.Y. 2005-06 NOTIFIED I N THE OFFICIAL GAZETTE 'ACCOUNTING STANDARDS' TO BE FOLLOWED BY ANY CLASS OF ASSESSEES OR IN RESPECT OF ANY CLASS OF INCOME, IT CANNOT BE STATED THAT THE ACCOUNTING STANDARDS PRES CRIBED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA OR THE ACCOUNTING STANDARDS RE FLECTED IN THE 'GUIDANCE NOTE' CANNOT BE ADOPTED AS AN ACCOUNTING METHOD BY AN ASSESSEE. IT FURTHER HELD THAT NOTWITHSTANDING THE FACT THAT THE OPINION OF THE CHARTERED ACCOUNTA NTS OF INDIA WAS EXPRESSED IN THE 'GUIDANCE NOTE', WHICH HAD NOT ATTEND A MANDATORY S TATUS, WOULD NOT BE A GROUND TO DISCARD THE BOOKS OF ACCOUNTS OF THE ASSESSEE OR TH E METHOD OF ACCOUNTING FOLLOWED. 11. IN VIEW OF THE AFORESAID FACTS AND FOLLOWING TH E DECISIONS OF THE CO-ORDINATE BENCH CITED AND THE DECISION OF HON'BLE HIGH COURT HEREIN ABOVE, WE ARE OF VIEW THAT NO ADDITION ON ACCOUNT OF UNUTILIZED CENVAT CREDIT WAS CALLED FOR IN THE PRESENT CASE. WE THUS DISMISS THE APPEAL OF REVENUE AND ALLOW THE C. O. OF ASSESSEE. 14. RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDIN ATE BENCH AS REFERRED ABOVE AND IN VIEW OF OUR DISCUSSION IN PRE CEDING PARAGRAPH NO ADDITION WAS CALLED FOR BY THE ASSESSING OFFICER TOWARDS UNUTILIZED CENVAT CREDIT RECEIVABLE. ACCORDINGLY, WE FIND NO R EASON TO INTERFERE ITA NO. 2546/AHD/13 & CO 71/A/14 ASST. YEAR 2010-11 15 WITH THE ORDER OF LD. CIT(A) ON THIS ISSUE AND WE U PHOLD THE SAME. THIS GROUND OF REVENUE IS DISMISSED. 15. GROUND NO.3 RAISED BY THE REVENUE ASSAILING THE ORDER OF LD. CIT(A) FOR DELETING THE DISALLOWANCE TOWARDS DEPREC IATION ON CAR OWNED BY THE DIRECTORS BUT USED BY THE COMPANY AT R S.3,30,593/- AND ALSO DELETING 20% DISALLOWANCE FOR VEHICLE EXPENSES AT RS.1,21,245/- 16. LD. DR VEHEMENTLY ARGUED AND SUPPORTED THE ORDE R OF ASSESSING OFFICER AND ALSO RELIED ON THE DECISION O F CO-ORDINATE BENCH, MUMBAI IN THE CASE OF EDWISE CONSULTANTS (P) LTD. VS. ADDL. CIT (2013) 35 TAXMANN.COM 149 (MUMBAI-TRIB).WHEREIN DEPRECIATION ON THE CARS WAS NOT ALLOWED AS THEY WERE REGISTERED IN THE NAME OF THE DIRECTORS. 17. ON THE OTHER HAND, LD. AR REITERATED THE SUBMIS SIONS MADE BEFORE LD. CIT(A) AND SUBMITTED THAT THE IMPUGNED M OTOR CAR WAS PURCHASED IN THE NAME OF DIRECTOR BUT THE PAYMENT H AS BEEN MADE BY THE COMPANY AND HAS BEEN REGULARLY USED FOR BUSINES S PURPOSES BY THE ASSESSEE. FURTHER ASSESSEE HAS CAPITALIZED THE PURCHASE COST OF MOTOR CAR AND HAS REFLECTED IN THE FIXED SCHEDULE F ORMING PART OF THE AUDITED BALANCE SHEET. BANK LOAN WAS TAKEN FOR PURC HASE OF CAR AND THE INTEREST EXPENDITURE THEREON HAS BEEN CLAIMED I N THE PROFIT AND LOSS ACCOUNT AND DULY ALLOWED BY REVENUE. FURTHER I N SUPPORT OF ABOVE CONTENTION LD. AR RELIED ON THE DECISION OF T HE HONORABLE I.T.A.T. AHMEDABAD HELD IN THE CASE OF DHAVANI TEXT ILE PVT. LTD. VS. /TO WARD- 1(4) AHMEDABAD REGISTERED AT ITA NO. 873/ AHD/2009, ITA NO. 2546/AHD/13 & CO 71/A/14 ASST. YEAR 2010-11 16 WHEREIN THE CO-ORDINATE BENCH DECIDED BY RELYING ON THE JUDGMENT OF MYSORE MINERAL LTD. VS. CIT (1999) 239 ITR 775 (SC) AND GOWERSONS PUBLISHER (P) LTD. VS. CIT (1990) 240ITR 191 (DELHI) AND OBSERVED AS UNDER:- 'IT IS NOT IN DISPUTE THAT THE ASSETS WERE IN THE P OSSESSION OF THE ASSESSEE COMPANY, PURCHASE VALUE OF ASSETS WERE PAI D BY THE ASSESSEE COMPANY AND THE VEHICLES WERE USED FOR BUS INESS PURPOSES OF THE ASSESSEE AS NO PART OF FNE EXPENSES INCURRED IN RESPECT OF THE ABOVE VEHICLES WERE DISALLOWED IN THE ASSESSMENT FU RTHER, IT IS NOT THE CASE OF THE REVENUE THAT THE REGISTERED OWNER IN TH E RTO RECORDS HAVE CLAIMED THAT THEY ARE OWNER OF THE VEHICLES AN D NOT THE ASSESSEE COMPANY. IN THE ABOVE CIRCUMSTANCES AS WE FIND THAT THE VEHICLES WERE PURCHASED OUT OF THE FUNDS OF THE ASSESSEE COMPANY AND THE SAME WERE USED IN THE BUSINESS OF THE ASSESSEE COMPANY, THE ASSESS EE COMPANY WAS THE OWNER OF THE VEHICLE, THUS IN OUR C ONSIDERED VIEW THE LOWER- AUTHORITIES WERE NOT JUSTIFIED IN DISALLOWING THE C LAIM OF DEPRECIATION OF RS.28,670/-. OUR ABOVE VIEW FINDS SUPPORT FROM T HE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF MYSORE MINERAL LTD. VS. CIT (1999) 239 ITR 775(SC) AND DECISION OF HON'BLE DELHI HIGH COURT IN GOWERSONS PUBLISHER (P) LTD. VS. CIT (1999) 240 ITR 191 (DELH I) WHEREIN IT WAS HELD THAT ANYONE IN POSSESSION OF PROPERTY IN HIS OWN TI TLE EXERCISING SUCH DOMINION OVER THE PROPERTY AS WOULD ENABLE OTHERS B EING EXCLUDED THEREFROM AND HAVING RIGHT TO USE AND OCCUPY THE PR OPERTY IN HIS OWN RIGHT WOULD BE THE OWNER OF BUILDING FOR THE PURPOSE OF S . 32(1) THOUGH A FORMAL DEED OF TITLE MAY NOT HAVE BEEN EXECUTED AND REGIST ERED, AND HE WOULD BE ENTITLED TO DEPRECIATION THEREON. WE THEREFORE DELE TE THE DISALLOWANCE OF RS.28,670/-. THUS THIS GROUND OF APPEAL OF THE ASSE SSEE IS ALLOWED.' FURTHER RELIANCE IS PLACED INTO THE FOLLOWING DECIS IONS:- I) CIT V. U.P. STATE AGRO INDUSTRIAL CORPORATION ( 127ITR 97,ALL.) II) KALA RANI VS. CIT (130 ITR 321 (P & H) III) CIT VS. NAVDURGA TRANSPORT CO.235 ITR 158, ALL .) IV) CIT VS. DILIP SINGH SARDARSINGH BAGGA (201 ITR 995, BOM). IN VIEW OF WHAT IS STATED HEREIN ABOVE, THE ASSESSE E SUBMITS NECESSARY CONDITIONS FOR ALLOWANCE OF DEPRECIATION CLAIM ON MOTOR CAR ARE SATISFIED AND HENCE ITS CLAIM SHOULD GET ALLOWED FU LLY. ITA NO. 2546/AHD/13 & CO 71/A/14 ASST. YEAR 2010-11 17 18. LD. AR FURTHER ADDED AS THE NECESSARY CONDITION S FOR ALLOWANCE OF DEPRECIATION ON MOTOR CAR HAVE BEEN SATISFIED IN VIEW OF THE JUDICIAL PRECEDENCE ITS CLAIM WAS RIGHTLY ALLOWED BY LD. CIT (A). 19. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD PLACED BEFORE US. THE ISSUE RAISED BY THE REVENUE I N THIS GROUND IS AGAINST THE DELETION OF DISALLOWANCE ON DEPRECIATIO N AND PROPORTIONATE VEHICLE EXPENSES TOTALING TO RS.4,51, 838/- MADE BY CIT(A). IT IS NOT IN DISPUTE THAT THE MOTOR CAR WAS PURCHASED IN THE NAME OF DIRECTOR, PAYMENT HAS BEEN MADE BY THE COMP ANY AND DEPRECIATION HAS BEEN CLAIMED. THESE FACTS FURTHER GET STRENGTHENED BY THE AUDITED FINANCIAL STATEMENTS AND TAX AUDIT R EPORT ON FIRM 3CD WITH ANNEXURES SHOWING DEPRECIATION ON THE IMPUGNED CAR. WE FURTHER OBSERVE THAT ASSESSEE HAS TAKEN LOAN FROM N UTAN NAGARIT SAHAKARI BANK LTD. FOR CAR PURCHASE AND HAS CLAIME D INTEREST EXPENDITURE OF RS.3,17,835/- AS EVIDENT FROM PAGE 1 50 OF THE PAPER BOOK. 20. FURTHER FROM GOING THROUGH THE ASSESSMENT ORDER , WE FIND THAT LD. ASSESSING OFFICER HAS ONLY DISALLOWED THE DEPRE CIATION ON THE IMPUGNED MOTOR CAR BUT HAS ALLOWED THE INTEREST ON CAR LOAN. LD. ASSESSING OFFICER HAS ALSO NOT DISPUTED THE FACT TH AT THE IMPUGNED MOTOR CAR HAS BEEN USED FOR THE BUSINESS PURPOSES O F THE ASSESSEE AND THE DISALLOWANCE TOWARDS VEHICLE EXPENSES @ 20% WAS MERELY ON AD HOC BASIS BY TAKING A VIEW THAT CAR BEING IN PERSONAL NAME MUST HAVE BEEN USED FOR PERSONAL PURPOSES. ITA NO. 2546/AHD/13 & CO 71/A/14 ASST. YEAR 2010-11 18 21. FURTHER FROM GOING THROUGH THE DECISION RELIED ON BY THE LD. DR IN THE CASE OF EDWISE CONSULTANTS (P) LTD. VS. ADDL . CIT (SUPRA) WE OBSERVE THAT SIMILAR TYPE OF ISSUE WHEREIN MOTOR CA RS WERE OWNED BY DIRECTORS AND NO PLAUSIBLE REASON WAS PLACED BEFORE THE ASSESSING AUTHORITY FOR NOT PURCHASING THE CAR IN COMPANYS NAME. CO-ORDINATE BENCH IN THIS CASE HAVE GIVEN A DETAILED FINDING AN D DIFFERENCIATED THE FACTS OF ITS CASE WITH THOSE DULY CONSIDERED BY HON. APEX COURT IN THE CASE OF MYSORE MINERALS LTD. VS. CIT (1999) 10 6 TAXMAN 166 (SC) AND OTHERS BY OBSERVING AS FOLLOWS :- 7. WE HAVE HEARD THE LEARNED REPRESENTATIVES ON THI S POINT AND HAVE ALSO GONE THROUGH THE RECORD. WE MAY OBSERVE THAT IN THIS CASE ALL THE TH REE CARS ON WHICH THE ASSESSEE CLAIMS OWNERSHIP AND HAS CLAIMED DEPRECIATION, WERE PURCHA SED BY THE ASSESSEE COMPANY IN THE INDIVIDUAL NAMES OF THE DIRECTORS. NOT ONLY INVOICE /BILLS HAVE BEEN ISSUED IN THE INDIVIDUAL NAMES OF THE DIRECTORS, THEY ARE ALSO TH E REGISTERED OWNERS OF THE SAID CARS. THE CLAIM OF THE ASSESSEE COMPANY IS THAT THE PAYME NT FOR THE PURCHASE OF SAID CARS WAS MADE BY THE ASSESSEE COMPANY AND THE SAID CARS HAVE BEEN SHOWN AS ASSETS IN THE BOOKS OF ACCOUNT OF THE COMPANY. WE DO NOT AGREE WITH THE CONTENTION OF THE LEARNED AR IN THIS RESPECT. THE ASSESSEE COMPANY HAS FAILED TO GIVE AN Y EXPLANATION AS TO WHY THE CARS WERE PURCHASED IN THE INDIVIDUAL NAMES OF THE DIRECTORS AND REGISTERED IN THEIR NAME, WHEN THE COMPANY WANTED TO CLAIM OWNERSHIP OVER THE SAID CAR S. THE LEARNED AR HAS SUBMITTED THAT IN THE AUTHORITIES CITED BY HIM IT HAS BEEN HELD THAT IT IS NOT NECESS ARY THAT THE CARS SHOULD BE REGISTERED IN THE NAME OF THE COMPANY. HE HAS FURTHER STRESSED THAT EVEN IF THE CARS ARE NOT REGISTERED IN THE NAME OF THE COMPANY ITSELF IS NO GROUND FOR DISALLOWANCE OF DEPRECIATION ON THE CARS ESPECIALLY WHEN THE SAID C ARS ARE FOUND IN THE LIST OF ASSETS AS WELL AS BOOKS OF ACCOUNT OF THE COMPANY. IN OUR VIE W THE AUTHORITIES CITED BY THE LEARNED AR DOES NOT FIT INTO THE FACTS AND CIRCUMSTANCES OF THIS CASE. FIRSTLY, WE TAKE UP THE AUTHORITY OF THE HON'BLE SU PREME COURT IN THE CASE OF 'MYSORE MINERALS LTD. (SUPRA). THE SAID CASE IS RELATING TO THE OWNERSHIP OF A BUI LDING. IN THE SAID CASE THE ASSESSEE COMPANY HAD PURCHASED FOR THE USE OF ITS STAFF SEVEN LOW INCOME GROUP HOUSES FROM THE HOUSING BOARD. THE ASSESSEE HAD MAD E PART PAYMENT AND WAS IN TURN GIVEN ALLOTMENT OF THE HOUSES FOLLOWED BY DELIVERY OF POSSESSION BY THE HOUSING BOARD. THE ACTUAL DEED OF CONVEYANCE WAS NOT YET EXECUTED BY THE HOUSING BOARD IN FAVOUR OF THE ASSESSEE. THE ASSESSEE MADE A CLAIM U/S. 32 OF THE ACT IN RESPECT OF DEPRECIATION OF BUILDINGS USED FOR THE PURPOSE OF THE BUSINESS OF T HE ASSESSEE. THE CLAIM WAS REJECTED BY THE AO FORMING AN OPINION THAT THE ASSESSEE HAD NOT BECOME THE OWNER FOR WANT OF DEED OF CONVEYANCE IN ITS FAVOUR. IT WAS UNDER SUCH CIRC UMSTANCES, THE HON'BLE SUPREME COURT ITA NO. 2546/AHD/13 & CO 71/A/14 ASST. YEAR 2010-11 19 WHILE INTERPRETING THE TERM 'OWNED' AS OCCURRING IN SECTION 32(1 )OF THE I.T ACT HAS HELD AS UNDER: 'IN OUR OPINION, THE TERM 'OWNED' AS OCCURRING IN S ECTION 32(1) OF THE INCOME-TAX ACT. 1961. MUST BE ASSIGNED A WIDER MEANING. ANYONE IN POSSESSION OF PROPERTY IN HIS OWN TITLE EXERCISING SUCH DOMINION OVER THE PROPERTY AS WOULD ENABLE OTHERS BEING EXCLUDED THEREFROM AND HAVING THE RIGH T TO USE AND OCCUPY THE PROPERTY AND/OR TO ENJOY ITS USUFRUCT IN HIS OWN RI GHT WOULD BE THE OWNER OF THE BUILDINGS THROUGH A FORMAL DEED OF TITLE MAY NOT HA VE BEEN EXECUTED AND REGISTERED AS CONTEMPLATED BY THE TRANSFER OF PROPE RTY ACT, THE REGISTRATION ACT, ETC. 'BUILDING OWNED BY THE ASSESSEE' THE EXPRESSIO N AS OCCURRING IN SECTION 32(1) OF THE INCOME-TAX ACT MEANS THE PERSON WHO HAVING A CQUIRED POSSESSION OVER THE BUILDING IN HIS OWN RIGHT USES THE SAME FOR THE PUR POSES OF THE BUSINESS OR PROFESSION THOUGH A LEGAL TITLE HAS NOT BEEN CONVEY ED TO HIM CONSISTENTLY WITH THE REQUIREMENTS OF LAWS SUCH AS THE TRANSFER OF PROPER TY ACT AND THE REGISTRATION ACT. ETC., BUT NEVERTHELESS IS ENTITLED TO HOLD THE PROPERTY TO THE EXCLUSION OF ALL OTHERS.' THE HON'BLE SUPREME COURT HAS FURTHER OBSERVED AS U NDER: 'IT IS WELL SETTLED THAT THERE CANNOT BE TWO OWNERS OF THE PROPERTY SIMULTANEOUSLY AND IN THE SAME SENSE OF THE TERM. THE INTENTION OF THE LEGISLATURE IN ENACTING SECTION 32 OF THE ACT WOULD BE BEST FULFILLED BY AL LOWING DEDUCTION IN RESPECT OF DEPRECIATION TO THE PERSON IN WHOM FOR THE TIME BEI NG VESTS THE DOMINION OVER THE BUILDING AND WHO IS ENTITLED TO USE IT IN HIS OWN R IGHT AND IS USING THE SAME FOR THE PURPOSES OF HIS BUSINESS OR PROFESSION. ASSIGNING A NY DIFFERENT MEANING WOULD NOT SUB-SERVE THE LEGISLATIVE INTENT. TO TAKE THE C ASE AT HAND IT IS THE APPELLANT- ASSESSEE WHO HAVING PAID PART OF THE PRICE, HAS BEE N PLACED IN POSSESSION OF THE HOUSES AS AN OWNER AND IS USING THE BUILDINGS FOR T HE PURPOSES OF ITS BUSINESS IN ITS OWN RIGHT. STILL THE ASSESSEE HAS BEEN DENIED T HE BENEFIT OF SECTION 32. ON THE OTHER HAND, THE HOUSING BOARD WOULD BE DENIED THE B ENEFIT OF SECTION 32 BECAUSE IN SPITE OF ITS BEING THE LEGAL OWNER IT WAS NOT US ING THE BUILDING FOR ITS BUSINESS OR PROFESSION. WE DO NOT THINK SUCH A BENEFIT-TO-NO NE SITUATION COULD HAVE BEEN INTENDED BY THE LEGISLATURE. THE FINDING OF FACT AR RIVED AT IN THE CASE AT HAND IS THAT THOUGH A DOCUMENT OF TITLE WAS NOT EXECUTED BY THE HOUSING BOARD IN FAVOUR OF THE ASSESSEE. BUT THE HOUSES WERE ALLOTTED TO TH E ASSESSEE BY THE HOUSING BOARD, PART PAYMENT RECEIVED AND POSSESSION DELIVERED SO A S TO CONFER DOMINION OVER THE PROPERTY ON THE ASSESSEE WHEREAFTER THE ASSESSEE HA D IN ITS OWN RIGHT ALLOTTED THE QUARTERS TO THE STAFF AND THEY WERE BEING ACTUALLY USED BY THE STAFF OF THE ASSESSEE. IT IS COMMON KNOWLEDGE, UNDER THE VARIOUS SCHEMES F LOATED BY BODIES LIKE HOUSING BOARDS, HOUSES ARE CONSTRUCTED ON A LARGE S CALE AND ALLOTTED ON PART PAYMENT TO THOSE WHO HAVE BOOKED. POSSESSION IS ALS O DELIVERED TO THE ALLOTTEE SO AS TO ENABLE ENJOYMENT OF THE PROPERTY. EXECUTION O F DOCUMENTS TRANSFERRING TITLE NECESSARILY FOLLOWS IF THE SCHEDULE OF PAYMENT IS O BSERVED BY THE ALLOTTEE. NO THIRD PERSON INTERVENES. THE PART PAYMENTS MADE BY THE ALLOTTEE ARE WITH THE INTENTION OF ACQUIRING TITLE. THE DELIVERY OF POSSE SSION BY THE HOUSING BOARD TO ITA NO. 2546/AHD/13 & CO 71/A/14 ASST. YEAR 2010-11 20 THE ALLOTTEE IS ALSO A STEP TOWARDS CONFERRING OWNE RSHIP. DOCUMENTATION IS DELAYED ONLY WITH THE IDEA OF COMPELLING THE ALLOTTEE TO OB SERVE THE SCHEDULE OF PAYMENT.' IN THIS CASE, WE MAY OBSERVE THAT THE HOUSES WERE A LLOTTED IN THE NAME OF THE ASSESSEE COMPANY AND THE POSSESSION OF THE SAME WAS ALSO GIV EN TO THE ASSESSEE COMPANY. THE ASSESSEE COMPANY EXERCISED ITS DOMAIN OVER THE PROP ERTY TO THE EXCLUSION OF ALL OTHERS BUT DUE TO CERTAIN EXIGENCIES THE CONVEYANCE DEED COULD NOT BE EXECUTED IN THE NAME OF THE ASSESSEE COMPANY AS THERE WAS A FIXED SCHEDULE OF P AYMENT TO BE PAID BY THE ASSESSEE COMPANY TO THE HOUSING BOARD. IT WAS HELD BY THE HO N'BLE SUPREME COURT THAT THE DELIVERY OF POSSESSION BY THE HOUSING BOARD TO THE ALLOTTEE TOWARDS CONFERRING OWNERSHIP. DOCUMENTATION WAS DELAYED ONLY WITH THE IDEA OF COMPELLING THE ALLOTTEE TO OBSERVE THE SCHEDULE OF PAYMENT. IT WAS NOT THE CAS E THAT THE HOUSES WERE ALLOTTED IN THE NAME OF THE PERSONS OTHERS THAN THE ASSESSEE COMPAN Y. NOT ONLY THE HOUSES WERE ALLOTTED TO THE ASSESSEE COMPANY BUT ALSO THE POSSESSION WAS GIVEN BY THE HOUSING BOARD TO THE ASSESSEE COMPANY. IT WAS UNDER SUCH CIRCUMSTANCES, THE HON'BLE SUPREME COURT HAS HELD THAT THE ASSESSEE COMPANY WAS EXERCISING ITS DOMAIN , POSSESSION AND OWNERSHIP OVER THE PROPERTY TO THE EXCLUSION OF ALL OTHERS AND ONLY BE CAUSE THE DOCUMENTATION OF THE TITLE DEED WAS DELAYED DUE TO CERTAIN REASONS, THAT ITSEL F WAS NOT A GROUND TO DISALLOW THE DEPRECIATION ON THE HOUSES OF WHICH THE ASSESSEE CO MPANY WAS HAVING USE AND POSSESSION BEING ITS OWNER. IN THE CASE OF NAVDURGA TRANSPORT CO. (SUPRA], THE ASSESSEE FIRM WAS CONSTITUTED OF SEVEN PARTNERS TO CARRY ON TRANSPORT BUSINESS. FOUR PARTNERS CONTRIBUTED MONEY AS CAPITAL WHILE THE OTHER THREE PARTNERS BROUGHT THEIR TRUCKS INTO THE FIRM AS THEIR CAPITAL CONTRIBUTION. THE THREE VEHICLES WERE SHOWN AS ASSE TS OF THE FIRM IN THE BALANCE-SHEET. THE AO REJECTED THE CLAIM OF DEPRECIATION ON THE SA ID VEHICLES. IT WAS OBSERVED IN THE SAID AUTHORITY THAT THE VEHICLES WERE CONTRIBUTED B Y THE PARTNERS AS THEIR CAPITAL CONTRIBUTION. THE ASSESSEE FIRM APPOINTED THREE AGE NTS FOR SUPERVISION, CONTROL AND PLYING OF VEHICLES. THE THREE TRUCKS BECAME THE ASSETS OF THE FIRM AND THEY WERE USED THROUGH AGENTS BY THE ASSESSEE FIRM. IT WAS UNDER SUCH CIRC UMSTANCES THAT THE TRIBUNAL CAME TO THE CONCLUSION THAT THE ASSESSEE OWNED AND USED THE TRUCKS THOUGH THE REGISTRATION OF THE VEHICLE CONTINUED IN THE NAME OF THREE PARTNERS, WH O INITIALLY ACQUIRED THE VEHICLES. THOUGH THE REGISTRATION OF THE VEHICLE COULD NOT BE MADE IN THE NAME OF THE FIRM, THE ASSESSEE FIRM WAS IN A POSITION TO EXERCISE THE RIG HTS OF AN OWNER AND NOT ON BEHALF OF THE PERSON IN WHOM THE TITLE VESTED, BUT IN ITS OWN RIG HTS. SIMILARLY, IN THE CASE OF 'DILIP SIRIGH SARDARSINGH BAGGTT' (SUPRA), THE ASSESSEE HAD PURCHASED A TRUCK FROM ONE SHRI AGRAWAL. THE BRAND NEW TRUCK WAS ORIGINALLY ALLOTTED TO MR. AGARWAL. SINCE THE VENDOR DID NOT HAVE SUFFICIE NT FUNDS TO PURCHASE THE TRUCK, HE MADE AN OFFER TO THE ASSESSEE TO FINANCE THE PURCHA SE OF THE SAID TRUCK AND TO OPERATE THE SAID TRUCK ON LICENCE AS OWNING TO THE RESTRICTIONS UNDER THE MOTOR VEHICLES ACT. THE TRUCK IN QUESTION COULD NOT BE REGISTERED IMMEDIATE LY IN THE NAME OF THE ASSESSEE. IT WAS UNDER SUCH CIRCUMSTANCES, THE HON'BLE BOMBAY HIGH C OURT HELD THAT THE ASSESSEE, WHO HAD ACTUALLY PURCHASED THE MOTOR VEHICLE, FOR VALUA BLE CONSIDERATION AND USED THE SAME FOR BUSINESS CANNOT BE DENIED THE BENEFIT OF DEPREC IATION ON THE GROUND THAT DUE TO SOME ITA NO. 2546/AHD/13 & CO 71/A/14 ASST. YEAR 2010-11 21 RESTRICTIONS ITS TRANSFER WAS NOT RECORDED IN THE N AME OF THE ASSESSEE UNDER THE MOTOR VEHICLES ACT. THUS, IN THE CASE LAWS RELIED UPON BY THE LEARNED A R. THE COMMON FACT WAS THAT THOUGH THE OWNERSHIP AND POSSESSION OVER THE ASSET WAS TRA NSFERRED TO THE ASSESSEE, THE TITLE COULD NOT BE REGISTERED DUE TO CERTAIN EXIGENCIES, REASONS, COMPULSIONS OR OMISSIONS. HOWEVER, IN THE CASE IN HAND, THERE WAS NO RESTRICT ION OR COMPULSION OR EXPLANATION FOR THE ASSESSEE COMPANY AS TO WHY THE CARS HAD BEEN PU RCHASED IN THE NAME OF ITS DIRECTORS WHEN, IN FACT, THE ASSESSEE COMPANY WANTED TO HAVE OWNERSHIP AND DOMAIN OVER THE SAID CARS. IT IS NOT THE CASE WHERE DUE TO SOME REASONS AS EXPLAINED ABOVE, THE REGISTRATION OF THE VEHICLE COULD NOT BE TRANSFERRED IN THE NAME OF THE ASSESSEE COMPANY, WHEREAS THE ASSESSEE COMPANY HAD BEEN USING THE SAID VEHICLES B EING ITS OWNER AND EXERCISING ITS DOMAIN OVER THE VEHICLES TO THE EXCLUSION OF ALL OT HERS. THE ASSESSEE COMPANY WITHOUT ASSIGNING ANY REASONS, NOT ONLY PURCHASED THE VEHIC LE IN THE NAME OF THE DIRECTORS BUT ALSO THE SAID VEHICLES WERE REGISTERED IN THE INDIV IDUAL NAME OF THE DIRECTORS. THE DIRECTORS UNDER LAW ARE NOT ONLY THE LEGAL OWNERS O F THE PROPERTY (CAR) BUT ARE ALSO IN ACTUALLY USING AND POSSESSING THE SAME. ONLY BECAUS E THE SAID CARS HAVE BEEN SHOWN IN THE BALANCE SHEET OR BOOKS OF ACCOUNT AS ASSET OF T HE COMPANY, THAT DOES NOT MEAN THAT THE COMPANY HAS BECOME THE OWNER OF THE SAME. AS HELD B Y THE SUPREME COURT IN THE CASE OF 'MYSORE MINERALS LID.' (SUPRA)', OWNER IS ONE WHO IS ENTITLED TO OWN THE PROPERTY TO THE EXCLUSION OF THE OTHERS. IN THE PRESENT CASE, THE A SSESSEE COMPANY CANNOT BE SAID TO BE HOLDING THE PROPERTY TO THE EXCLUSION OF THE DIRECT ORS ESPECIALLY WHEN THE CARS ARE NOT ONLY PURCHASED IN THE NAME OF THE DIRECTORS BUT ALS O THEY ARE THE REGISTERED OWNERS OF THE CARS. THE SAID DIRECTORS OF THE ASSESSEE COMPANY HA VE NOT SOLD OR TRANSFERRED THE CARS TO THE COMPANY ITSELF. THE AUTHORITIES CITED BY THE AS SESSEE CAN BE APPLIED TO A CASE WHERE IN FACT THE PROPERTY HAS BEEN TRANSFERRED TO THE ASSES SEE AND THE ASSESSEE HAS BEEN USING, POSSESSING AND EXERCISING ITS RIGHTS AS OWNER OVER IT, BUT DUE TO CERTAIN CIRCUMSTANCES THE TITLE COULD NOT BE TRANSFERRED IN THE NAME OF THE A SSESSEE. BUT WHERE A PERSON WHO CLAIMS HIMSELF TO BE THE OWNER OF THE PROPERTY HE DOES NOT WITHOUT ANY SUFFICIENT EXPLANATION PURCHASE THE PROPERTY IN ITS OWN NAME AND NEVER MAK E ANY EFFORTS FOR GETTING ITS OWNERSHIP OR TITLE TRANSFERRED IN ITS OWN NAME, RAT HER ALLOWS DELIBERATELY ITS TITLE REGISTRATION IN THE NAME OF OTHER PERSON CANNOT CLA IM ITS OWNERSHIP TO THE EXCLUSION OF THE SAID REGISTERED OWNER/PURCHASER OF THE PROPERTY. TH E PURCHASE OF THE CARS IN THE NAME OF OTHER PERSONS BY THE ASSESSEE COMPANY ITSELF IMPLIE S THAT THE ASSESSEE COMPANY TREATED THE SAID PERSONS AS OWNER OF THE PROPERTY AND DID N OT WANT TO EXERCISE ITS DOMAIN OVER THE PROPERTY. MERELY BECAUSE THE COMPANY HAS SHOWN THE CARS AS ITS ASSETS IN THE BOOKS OF ACCOUNT, CANNOT PUT IT INTO THE DEFINITION OF OWNER OF THE CARS TO THE EXCLUSION OF THE LEGAL/REGISTERED OWNERS OF THE CARS. UNDER SUCH CIR CUMSTANCES, THE COMPANY CANNOT BE SAID TO THE OWNER OF THE CARS EVEN IN THE LIGHT OF THE EXTENDED DEFINITION OF OWNERSHIP U/S, 32(1) OF THE IT ACT. THE LEARNED CIT(A) HAS RIGHTLY OBSERVED THAT PAYMENT HAVING BEEN MADE BY THE ASSESSEE COMPANY FOR THE CARS WHICH WER E PURCHASED BY THE DIRECTORS IN THEIR OWN NAME REQUIRES THAT SUCH PAYMENT BE TREATE D AS ADVANCE/LOAN TO THE DIRECTORS. THE FINDING OF THE LEARNED C1T(A) ON THIS ISSUE IS HEREBY UPHELD. ITA NO. 2546/AHD/13 & CO 71/A/14 ASST. YEAR 2010-11 22 22. FROM GOING THROUGH THE ABOVE DECISION OF THE CO -ORDINATE BENCH IN THE CASE OF EDWISE CONSULTANTS (P) LTD. VS . ADDL. CIT (SUPRA) WE FIND THAT FACTS ARE QUITE SIMILAR, TO TH IS EXTENT THAT CAR IS ALSO OWNED IN THE CASE OF APPEAL BEFORE US BY THE D IRECTOR WITH THE ONLY VARIATION OBSERVED ABOUT THE INTEREST ON CAR L OAN. AS DISCUSSED, WE HAVE OBSERVED THAT LD. ASSESSING OFFICER HAS ALL OWED THE CLAIM OF ASSESSEE FOR INTEREST ON CAR LOAN WHICH ITSELF PROV ED THAT LD. ASSESSING OFFICER HAS ACCEPTED TO THIS EXTENT THAT THE INTEREST ON CAR LOAN WAS A BUSINESS EXPENDITURE. ON ONE HAND CAR LO AN INTEREST ON THE IMPUGNED CAR HAS BEEN ALLOWED BY REVENUE AND ON THE OTHER HAND DEPRECIATION AND VEHICLE EXPENSES HAVE BEEN D ISALLOWED. BOTH CANNOT GO TOGETHER. IN SUCH A SITUATION THE NEEDLE OF JUSTICE TILT IN FAVOUR OF ASSESSEE. HERE WE WOULD LIKE TO TAKE NOTE OF THE JUDGMENT OF HON. RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. MD. BUX SHAOKAT ALI 256 ITR 357 (RAJ) WHEREIN THE ISSUE WAS RELATIN G TO VEHICLES PURCHASED IN THE NAME OF PARTNERS BUT THE DEPRECIAT ION WAS CLAIMED IN THE NAME OF FIRM, HON. HIGH COURT DISMISSED THE REFERENCE BY OBSERVING THAT THE FIRST FINDING REACHED BY THE TRI BUNAL WAS THAT THE CONSIDERATION FOR PURCHASE OF VEHICLES HAD BEEN MAD E BY THE FIRM CONSISTING OF 8 PARTNERS AND DEBITED TO THE BOOKS O F ACCOUNT OF FIRM ONLY. IT WAS ALSO A FINDING OF FACT ARRIVED AT BY T HE TRIBUNAL THAT THE VEHICLES WERE EXCLUSIVELY USED FOR THE PURPOSE OF B USINESS OF THE FIRM. MERELY BECAUSE THE VEHICLES HAVE BEEN REGISTE RED UNDER THE MOTOR VEHICLE ACT IN THE NAME OF ONE OF THE PARTNER S NAME IT WOULD NOT DEPRIVE THE FIRM OF THE OWNERSHIP OF THE VEHICL ES AS IT IS NOT DISTINCT FROM THE PARTNERS. THE TRIBUNAL WAS CORREC T IN HOLDING THAT DEPRECIATION IS ALLOWABLE ON THE VEHICLE. ITA NO. 2546/AHD/13 & CO 71/A/14 ASST. YEAR 2010-11 23 22.1 RESPECTFULLY FOLLOWING THE JUDGMENT OF HON. RA JASTHAN HIGH COURT AND IN THE GIVEN FACTS AND CIRCUMSTANCES OF T HE CASE WHEREIN ASSESSEE HAS MADE PAYMENT TOWARDS CAR PURCHASE, IMP UGNED CAR IN THE NAME OF DIRECTOR HAS BEEN SHOWN IN THE BALANCE SHEET OF THE ASSESSEE, INTEREST ON CAR LOAN TAKEN FOR PURCHASE O F IMPUGNED CAR HAS BEEN ALLOWED BY THE REVENUE, NO OBJECTION HAS B EEN RAISED AS REGARDS THE USE OF THE CAR FOR BUSINESS PURPOSE BY THE ASSESSEE, AND ALL THE DAY TO DAY EXPENSES ON THE CAR ARE BEING IN CURRED BY THE ASSESSEE, WE FIND NO REASON TO INTERFERE WITH THE O RDER OF LD. CIT(A). WE UPHOLD THE SAME. THIS GROUND OF REVENUE IS DISMI SSED. 23. GROUND NO.4 RAISED BY REVENUE IS AGAINST THE OR DER OF LD. CIT(A) DELETING THE ADDITION OF RS.13,873/- BEING L ATE PAYMENT MADE TOWARDS EMPLOYEES CONTRIBUTION TO P.F EVEN WHEN SUC H PAYMENT WAS NOT DEDUCTIBLE U/S 36(1)(VA) OF THE ACT AND ARE TO BE TREATED AS INCOME U/S 2(24)(X) OF THE ACT. 24. AT THE OUTSET LD. DR SUBMITTED THAT POST THE OR DER OF LD. CIT(A) HON. JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V S. GUJARAT STATE ROAD TRANSPORT CORPORATION (GSRTC) 366 ITR 170 (GUJ ) AS HELD THAT THE EMPLOYEES CONTRIBUTION TO PF IF PAID BEYOND DUE DATE SHOULD NOT BE ALLOWED AS AN EXPENDITURE U/S 36(1)(VA) OF THE A CT. 25. LD. AR COULD NOT CONTROVERT THE SUBMISSIONS MAD E BY LD. DR. 26. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE ONLY ISSUE IN THIS GROUND IS RELATIN G TO EMPLOYEES PF ITA NO. 2546/AHD/13 & CO 71/A/14 ASST. YEAR 2010-11 24 CONTRIBUTION OF RS.13,873/- DEPOSITED AFTER THE DUE DATE BUT HAS BEEN DELETED BY LD. CIT(A). WE OBSERVE THAT THE ISSUE IN THIS GROUND IS NOW WELL SETTLED BY THE JUDGMENT OF HON. GUJARAT HIGH C OURT IN THE CASE OF CIT VS. GSRTC (SUPRA) WHEREIN IT HAS BEEN OBSERVED. '8.00. IN VIEW OF THE ABOVE AND FOR THE REASONS STA TED ABOVE, AND CONSIDERING SECTION 36(1 )(VA) OF THE INCOME TAX ACT, 1961 READ WITH SU B-CLAUSE (X) OF CLAUSE 24 OF SECTION 2, IT IS HELD THAT WITH RESPECT TO THE SUM RECEIVED BY THE ASSESSEE FROM ANY OF HIS EMPLOYEES TO WHICH PROVISIONS OF SUB-CLAUSE (X) OF CLAUSE (24) OF SECTION (2) APPLIES, THE ASSESSEE SHALL BE ENTITLED TO DEDUCTIO N IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 WITH RESPECT TO SUCH SUM CREDITED BY THE ASSESSEE TO THE EMPLOYEES' ACCOUNT IN THE RELEVANT FUND OR FUNDS ON OR BEFORE THE 'DUE DATE' MENTIONED IN EXPLANATION TO SECTION 36(1 )(VA). CONSEQUENTLY, IT IS HELD THAT THE LEARNED TRIBUNAL HAS ERRED IN DELETING RESPECTIVE DISALLOWANCES BEIN G EMPLOYEES' CONTRIBUTION TO PF ACCOUNT / ESI ACCOUNT MADE BY THE AO AS, AS SUCH, S UCH SUMS WERE NO! CREDITED BY THE RESPECTIVE ASSESSEE TO THE EMPLOYEES' ACCOUNTS IN THE RELEVANT FUND OR FUNDS (IN THE PRESENT CASE PROVIDENT FUND AND/OR ESI FUND ON OR B EFORE THE DUE DATE AS PER THE EXPLANATION TO SECTION 36(1 )(VA) OF THE ACT I.E. D ATE BY WHICH THE CONCERNED ASSESSEE WAS REQUIRED AS AN EMPLOYER TO CREDIT EMPLOYEES' CO NTRIBUTION TO THE EMPLOYEES' ACCOUNT IN THE PROVIDENT FUND UNDER THE PROVIDENT F UND ACT AND/OR IN THE ESI FUND UNDER THE ESI ACT. CONSEQUENTLY, ALL THESE APPEALS ARE ALLOWED AND THE IMPUGNED JUDGEMENT AND ORDERS PASSED BY THE TRIBUNAL IN DELETING THE DISALLOWANCE S MADE BY THE AO ARE HEREBY QUASHED AND SET ASIDE AND THE DISALLOWANCES OF THE RESPECTIVE SUMS WITH RESPECT TO THE PROVIDENT FUND / ESI FUND MADE BY THE AO IS HER EBY RESTORED. THE QUESTIONS RAISED IN PRESENT APPEAL ARE ANSWERED IN FAVOUR OF THE REVENUE. WITH THIS, ALL THESE APPEALS ARE ALLOWED. ' 27. RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT OF HO N. GUJARAT HIGH COURT IN THE CASE OF CIT VS. GSRTC (SUPRA), WE ARE OF THE VIEW THAT EMPLOYEES PF NEEDS TO BE DISALLOWED AS IT HAS BEEN PAID AFTER THE DUE DATE. ACCORDINGLY, THIS GROUND OF REVENUE IS AL LOWED. 28. IN THE RESULT, APPEAL FILED BY THE REVENUE IS P ARTLY ALLOWED AND THE CROSS OBJECTION BY ASSESSEE IS ALLOWED.. ITA NO. 2546/AHD/13 & CO 71/A/14 ASST. YEAR 2010-11 25 ORDER PRONOUNCED IN THE OPEN COURT ON 07 TH NOVEMBER, 2016 SD/- SD/- (RAJPAL YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 07/11/2016 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 28/10/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 31/11/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK:7 /11/2016 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: