Appeal details
Counselvise Citation
26722514 RSA 2013
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 9 month(s) 18 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
18-12-2015
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
B
Next Hearing Date
30-11-2015
Assessment Year
2009-2010
Appeal Filed On
01-03-2013
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NOS. 580/HYD/2012 ASSESSMENT YEAR: 2007-08 M/S PENNA CEMENT INDUSTRIES, HYDERABAD PAN AABC 2290 D VS. ADDL. COMMISSIONER OF INCOME-TAX, RANGE - 6 HYDERABAD. (APPELLANT) (RESPONDENT) ITA NO. 795/HYD/2013 ASSESSMENT YEAR: 2008-09 M/S PENNA CEMENT INDUSTRIES, HYDERABAD PAN AABC 2290 D VS. ADDL. COMMISSIONER OF INCOME-TAX, RANGE - 6 HYDERABAD. (APPELLANT) (RESPONDENT) ITA NO. 267/HYD/2013 ASSESSMENT YEAR: 2008-09 THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE 16(3), HYDERABABD VS. M/S PENNA CEMENT INDUSTRIES, HYDERABAD PAN AABC 2290 D (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI A.V. RAGHURAM REVENUE BY : SHRI J. SIRI KUMAR DATE OF HEARING 03-12-2015 DATE OF PRONOUNCEMENT 18-12-2015 O R D E R PER S. RIFAUR RAHMAN, A.M.: THESE APPEALS ARE FILED BY THE ASSESSEE AGAINST TH E ORDERS OF CIT-IV, HYDERABAD FOR AY 2007-08 DATED 17/02/2012 & FOR AY 2008- 2 ITA NO. 580/H/12 AND 795 & 267/HYD/2013 M/S PENNA CEMENT INDUSTRIES LTD. 09 DATED 25/03/2013. FOR AY 2009-10, REVENUE FILED THIS APPEAL AGAINST THE ORDER OF CIT(A)-V, HYDERABAD. THESE APP EALS ARE CONSOLIDATED AND FOR SAKE OF CONVENIENCE, A CONSOLI DATED ORDER IS PASSED. ITA NO. 580/HYD/2012 FOR AY 2007-08 2. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINES S OF MANUFACTURING AND SALE OF CEMENT. FOR THE AY 2007-0 8, FILED ITS RETURN OF INCOME ADMITTING TOTAL INCOME OF RS. 150,53,83,6 06/-. THE CASE WAS SELECTED FOR REGULAR ASSESSMENT AND AO DETERMIN ED THE TOTAL ASSESSED INCOME AT RS. 156,53,55,920 U/S 143(3) OF THE INCOME-TAX ACT, 1961 ( IN SHORT ACT). SUBSEQUENTLY, CIT-IV I SSUED NOTICE U/S 263 USING HIS REVISIONAL POWER TO REVISE THE ASSESSMENT COMPLETED U/S 143(3) OF THE ACT ON 30/11/2011 ON THE GROUND THAT IT WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. THE CI T RAISED THE FOLLOWING ISSUES TO REVISE THE ASSESSMENT ORDER: I) ON GOING THROUGH THE ASSESSMENT RECORD, IT IS N OTICED FROM THE ANNUAL REPORT, SCHEDULE M TO P&L ACCOUNT UNDER ADMINIS TRATIVE AND SELLING EXPENSES THAT YOU HAD DEBITED AN AMOUNT OF RS. 5, 32,98,365/- TOWARDS DIRECTORS REMUNERATION. THE ANNEXURE VI TO FORM 3CD REVEALS THAT A SUM OF RS. 5,15,92,000/- WAS PAID AS FEE OR COMMIS SION TO SHRI P. PRATAP REDDY, MANAGING DIRECTOR. THIS SUM OF RS. 5.15 CRO RES COMPRISES OF SALARY OF RS. 6,72,000 AND COMMISSION OF RS. 5,09,20,000/ -. IT IS NOTICED FROM THE ASSESSMENT RECORD FOR AY 2007-08 OF SRI P. PRATAP REDDY THAT HE HAD OFFERED A SUM OF RS. 1,10,65,184/- AS SALARY FROM PENNA CEMENT INDUSTRIES LTD. THUS, THE CLAIM MADE BY THE COMPANY BY WAY OF REMUNERATION TO MANAGING DIRECTOR IN THE P&L ACCOUNT IS MORE THAN THE SUM OFFERED FOR TAX RATES BY SRI P. PRATAP REDDY. THE AO OUGHT TO HAVE RESTRICTED THE MANAGING DIRECTORS REMUNERATION TO RS. 1,10,65,18 4/-. FAILURE TO DO SO HAS RESULTED IN AN ERRONEOUS ORDER WHICH IS PREJUD ICIAL TO THE REVENUE TO THE TUNE OF RS. 4.05 CRORES. YOU ARE, THEREFORE, R EQUESTED TO SHOW CAUSE WHY AN AMOUNT OF RS. 4.05 CRORES SHOULD NOT BE DIS ALLOWED. (II) IT IS NOTICED FROM ANNEXURE -II TO FORM NO. 3 CD REPORT, DEPREDATION SCHEDULE, THAT YOU' HAD CLAIMED DEPRECIATION OF RS . 1,05,74,877/ON ELECTRICAL INSTALLATIONS @ 15%. AS PER SECTION 32 OF THE ACT, THE ELIGIBLE DEPRECIATION ON ELECTRICAL INSTALLATIONS IS (Q! 10 % AND NOT @ 15% CLAIMED BY YOU. THE ASSESSING OFFICER OUGHT TO HAVE EXAMIN ED THIS ASPECT WHILE COMPLETING THE ASSESSMENT. FAILURE TO DO SO HAS RE SULTED IN AN ERRONEOUS ORDER WHICH IS PREJUDICIAL TO THE REVENUE TO THE T UNE OF RS. 35,24,959/-. YOU ARE, THEREFORE, REQUESTED TO SHOW CAUSE WHY AN AMOUNT OF RS.35,24,959/- SHOULD NOT BE DISALLOWED FROM THE A MOUNT OF DEPRECIATION CLAIMED WITH RESPECT TO THIS ITEM. 3 ITA NO. 580/H/12 AND 795 & 267/HYD/2013 M/S PENNA CEMENT INDUSTRIES LTD. (III) IT IS NOTICED FROM SCHEDULE N TO THE ANNUAL REPORT UNDER ADDITIONAL INFORMATION (F) YOU HAD INCURRED A SUM OF RS. 10,1 4,415/- TOWARDS CONSULTANCY CHARGES IN FOREIGN CURRENCY. BUT AS SE EN FROM ANNEXURE X ITEM NO. 27(B) OF 3CD REPORT NO TAX WAS DEDUCTED. PROVISIONS OF SECTION 40A(I) STIPULATE THAT ANY INTEREST (NOT BEING INTE REST ON A LOAN ISSUED FOR PUBLIC SUBSCRIPTION BEFORE THE 1ST DAY OF APRIL, 1 938) ROYALTY, FEES FOR TECHNICAL SERVICES OR OTHER SUM CHARGEABLE UNDER T HIS ACT, WHICH IS PAYABLE (A) OUTSIDE INDIA OR (B) IN INDIA TO A NON-RESIDENT, NOT BEING A COMPAN Y OR TO A FOREIGN COMPANY ON WHICH TAX IS DEDUCTABLE AT SOURCE UNDER CHAPTER XVIIB AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION , HAS NOT BEEN PAID DURING THE PREVIOUS YEAR, OR IN THE SUBSEQUENT YEA R BEFORE THE EXPIRY OF THE TIME PRESCRIBED. UNDER SUB-SECTION (1) OF SECTION 200. ASSESSEE FILED ITS OBJECTION TO THE ABOVE ISSUES, W HICH WAS REJECTED BY THE CIT AND CIT PASSED ORDER U/S 263 OF THE ACT, ON 17/02/2012. 3. AGGRIEVED WITH THE ABOVE ORDER, ASSESSEE HAS RAI SED THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF CIT - IV, HYDERABAD IS CONTRARY TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE CIT ERRED IN SETTING ASIDE THE ASSESSMENT O RDER AND DIRECTING THE AO TO COMPLETE THE ASSESSMENT FRESH. 3. THE CIT ERRED IN COMING TO A CONCLUSION THAT TH E COMMISSION PAID TO THE MANAGING DIRECTOR DID NOT PERTAIN TO THE AY.2007-0 8 AND WAS THEREFORE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVE NUE. 4. THE CIT ERRED IN COMING TO A CONCLUSION THAT TH E ASSESSEE HAS WRONGLY CLAIMED DEPRECIATION @ 15% WAS THEREFORE IS ERRONE OUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. 5. THE CIT ERRED IN COMING TO A CONCLUSION THAT NO TDS WAS DEDUCTED ON CONSULTING CHARGES AND HENCE WAS TO BE DISALLOWED AND TO THAT EXTENT THE ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTERES T OF REVENUE. 6. THE CIT ERRED IN SETTING ASIDE THE WHOLE ASSESS MENT WHEN IN LAW A SUBSTANTIAL PORTION OF ASSESSMENT HAD MERGED WITH THE ORDER OF THE APPELLATE COMMISSIONER. 4. LET US ANALYSE THE ISSUES RAISED BY THE LD. CIT IN HIS ORDER. THE FIRST ISSUE RELATING TO PAYMENT OF COMMISSION AND S ALARY TO THE MANAGING DIRECTOR (M.D.). LD. CIT NOTICED IN ANNUAL REPORTS OF THE COMPANY THAT ASSESSEE PAID RS. 5,09,20,000/- AS COM MISSION TO MD MR. PRATAP REDDY BASED ON THE RESOLUTION PASSED ON 21/08/2003 FOR A PERIOD OF FIVE YEARS (30/01/2003 TO 29/01/2008). TH E ISSUE IS ONLY RELATING TO COMMISSION, WILL CONFINE ONLY TO THIS P AYMENT. THE 4 ITA NO. 580/H/12 AND 795 & 267/HYD/2013 M/S PENNA CEMENT INDUSTRIES LTD. COMMISSION AUTHORIZED BY THIS SPECIAL RESOLUTION WA S 1% OF THE NET PROFIT. SUBSEQUENTLY ON 27 TH SEPTEMBER, 2007, A RESOLUTION WAS PASSED TO APPOINT MR. PRATAP REDDY AS CHAIRMAN AND REVISING THE COMMISSION PAYMENT FOR A PERIOD OF FIVE YEARS WITH EFFECT FROM SEPTEMBER 01, 2007. THE ASSESSEE CLAIMED THE ABOVE COMMISSION ON ACCRUAL BASIS FOR THE AY 2007-08 BASED ON THE ACCOU NT ADOPTED BY THE SHAREHOLDER IN THE ANNUAL GENERAL MEETING (AGM) . THE SAME COMMISSION WAS OFFERED TO TAX BY MR. P. PRATAP REDD Y IN THE AY 2008-09 CONSIDERING THE FACT THAT THE PAYMENT WAS M ADE BY THE COMPANY IN THAT AY 2008-09 FOLLOWING THE CASH BASIS OF ACCOUNTING SYSTEM. THE ABOVE BASIS WAS REJECTED BY LD. CIT CON SIDERING THE FACT THAT IN RESPECT OF COMMISSION AS REMUNERATION DID N OT CONTAIN THE TIME OF ACCRUAL OF THE COMMISSION TO MD. IN THE SPE CIAL RESOLUTION PASSED ON 21/04/03 BY THE SHAREHOLDERS IN EGM/AGM A LSO, THERE WAS NO TIME OF ACCRUAL OF THE COMMISSION TO THE MD. THE COMMISSION TO MD INCREASED FROM 1% TO 3% ON 27/09/2007. THUS, THE TERMS OF EMPLOYMENT OF MD WERE SILENT IN RESPECT OF TIME OF ACCRUAL OF COMMISSION. HE ALSO RAISED THE QUESTION AT WHAT POI NT OF TIME THE EXPENDITURE ACCRUES IN THE BOOKS OF ACCOUNT OF ASSE SSEE. THE ASSESSEE FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND WHEN THE CONTRACT OF EMPLOYMENT WAS SILENT AND THE RESOLUTIO N FOR INCREASE OF COMMISSION PASSED IN SEPTEMBER, 2007. THE CIT REJEC TED THE REPRESENTATION OF ASSESSEE THAT IT ACCRUES TO THE A Y 2007-08. 5. THE LD. AR SUBMITTED THAT MR. P. PRATAP REDDY WA S DRAWING REMUNERATION IN THE FORM OF COMMISSION BASED ON THE RESOLUTION PASSED ON 21/04/2003 @ 1% OF NET PROFIT. SUBSEQUENT TO THE RESOLUTION PASSED IN SEPTEMBER, 2007, THE COMMISSIO N WAS REVISED FROM 1% TO 3%. SINCE THE SERVICES RENDERED BY MD FO R THE PERIOD 01/04/2006 TO 31/03/2007, THE SAME HAS TO BE ACCOUN TED IN THE FY 2006-07 BY CONSIDERING THE MATCHING PRINCIPLES OF A CCOUNTING TO THE EXPENSES RELATING TO THE PERIOD TO WHICH THE INCOME ACCRUES. SINCE THE SERVICE WAS RENDERED FOR THE PERIOD 2006-07, TH E SAME HAS TO BE 5 ITA NO. 580/H/12 AND 795 & 267/HYD/2013 M/S PENNA CEMENT INDUSTRIES LTD. PROVIDED FOR THE COMMISSION IN THE SAME RELEVANT PE RIOD. HE ALSO SUBMITTED THAT CIT CANNOT REJECT THE ABOVE COMMISSI ON ADOPTED ON ACCRUAL BASIS BY COMPARING THE SAME WITH THE RETURN OF INCOME OF MR. P. PRATAP REDDY THAT THE SAME COMMISSION WAS OFFERE D TO TAX IN THE SUBSEQUENT AY 2008-09. CONSIDERING THE FACT THAT MD WAS FOLLOWING CASH BASIS OF ACCOUNTING, HE HAD RECEIVED THE COMMI SSION IN THE NEXT AY 2008-09. MR. REDDY WAS OFFERING TO TAX SIMILARLY IN ALL THE AYS I.E. THE COMPANY WILL RECOGNIZE THE EXPENSE IN THE YEAR OF ACCRUAL WHEREAS THE MD WILL OFFER THE SAME ON CASH BASIS IN THE NEXT AY. LD. AR SUBMITTED THAT EXPENSES HAS TO BE RECOGNIZED BA SED ON ACCRUAL AND MATCHING PRINCIPLES. HE RELIED ON THE FOLLOWING CASE LAWS: A) CIT VS. DINESH KUMAR (DEL) B) J.K. INDUSTRIES, 297 ITR 176 (SC) C) CIT VS. NAGARI, 33 ITR 681 (SC) D) AMAR RAJA BATTERIES VS. ACIT, 272 ITR (AT) 17 ( ITAT) 6. LD. DR RELIED ON THE ORDER OF CIT. 7. CONSIDERING THE SUBMISSIONS OF BOTH THE COUNSELS AND PERUSING THE MATERIAL FACTS ON RECORD, WE OBSERVE THAT THE L D. AR SUBMITTED THAT THE COMMISSION HAS TO BE RECOGNIZED ON THE BAS IS OF ACCRUAL AND THE MD HAD ALREADY RENDERED THE SERVICE, CONSEQUENT TO THE RESOLUTION PASSED BY THE SHAREHOLDERS IN THE AGM, T HE NEW COMMISSION OF 3% TO BE ADOPTED FOR THE FY 2006-07 I RRESPECTIVE OF THE FACT THAT THE RESOLUTION WAS PASSED IN SEPTEMBE R07 SINCE THE ACCOUNTS ARE CONSIDERED AS FINALIZED ONLY WHEN THE SAME WAS ADOPTED BY THE SHAREHOLDERS IN THE AGM. TILL THAT T IME, THE PROFITS ARE NOT CONSIDERED AS FINAL UNTIL IT IS ADOPTED BY THE SHAREHOLDERS. SINCE THE ACCOUNTS WERE ADOPTED IN AGM WHICH WAS HELD IN THE MONTH OF SEPT07, THE SAME WAS APPLIED TO ARRIVE THE COMMISS ION FOR THE SAME FY. BASED ON THE ACCRUAL SYSTEM ADOPTED BY THE ASSE SSEE, THE COMMISSION WAS RECOGNIZED IN THE FINANCIAL STATEMEN T FOR THE PERIOD APRIL06 TO MARCH07. WHEREAS THE LD. DR SUBMITTED THAT THE RESOLUTION 6 ITA NO. 580/H/12 AND 795 & 267/HYD/2013 M/S PENNA CEMENT INDUSTRIES LTD. WAS PASSED IN THE MONTH OF SEPT.07 AND THE TERMS O F EMPLOYMENT OF THE MD WAS SILENT IN RESPECT OF ACCRUAL OF COMMISSI ON, THE SAME CANNOT BE APPLIED DURING THIS FY AND IT CAN BE ADOP TED FOR THE SUBSEQUENT YEAR I.E. AY 2008-09. ON ANALYZING BOTH THE SUBMISSIONS, WE FIND THAT THE LD. DRS CONTENTION THAT THERE WAS NO TERMS OF THE EMPLOYMENT OF THE MD WAS IN CORRECT. ON CAREFUL PER USAL OF THE RESOLUTION PASSED BY THE SHAREHOLDERS IN THE AGM, W E NOTICE THAT THE FOLLOWING WORDS WERE RECORDED IN THE RESOLUTION PAS SED ON 27/09/2007: THE APPROVAL BE AND IS HEREBY ACCORDED TO THE REAPP OINTMENT OF SHRI P. PRATAP REDDY, AS CHAIRMAN AND MANAGING DIRECTOR, FOR A PERIOD OF FIVE YEARS WITH EFFECT FROM SEPTEM BER 01, 2007 ON THE FOLLOWING TERMS AND CONDITIONS FROM THE ABOVE RESOLUTION, IT IS CLEAR THAT THE TER MS OF EMPLOYMENT WAS ALREADY PRESCRIBED IN THE ABOVE RESOLUTION, WHI CH WAS FOR A PERIOD OF FIVE YEARS WITH EFFECT FROM SEPT01, 2007 . HENCE, THE REAPPOINTMENT OF THE MD WAS WITH EFFECT FROM 01/09/ 2007. THE COMPANY CAN ADOPT THE REVISED COMMISSION OF 3% WITH EFFECT FROM 01/09/2007 AND NOT FROM THE PERIOD 01/04/06 TO 31/0 3/07. WE FIND THAT THE CITS CONTENTION WAS RIGHT PARTIALLY AS THE AO HAD NOT CONSIDERED THESE POINTS WHILE COMPLETING THE ASSESSMENT. THE A SSESSEE IS ALLOWED TO CLAIM THE COMMISSION FOR THIS PERIOD ONL Y @ 1% NOT 3%. CONSIDERING THE ABOVE OBSERVATIONS, WE DISMISS THE GROUND OF APPEAL OF THE ASSESSEE. AO IS, THEREFORE, DIRECTED TO ALLO W THE COMMISSION PAID TO THE MD @ 1% OF THE NET PROFIT. 8. THE NEXT ISSUE IS WITH REGARD TO THE CLAIM OF DE PRECIATION ON ELECTRICAL INSTALLATIONS @ 15%. THE LD. CIT FOUND T HAT THE AMENDED RULE 5 OF THE IT RULES WITH EFFECT FROM AY 2006-07, THE ELECTRICAL FITTINGS OR ELECTRICAL INSTALLATIONS ARE BROUGHT UN DER THE HEADING FURNITURES AND FITTINGS. THE STIPULATED RATE OF D EPRECIATION IS 10% ON FURNITURES AND FITTINGS. THE ELECTRICAL FITTINGS HAVE BEEN DEFINED IN THE DEPRECIATION SCHEDULE ITSELF. IT INCLUDES ELECT RICAL WIRING, SWITCHES, SOCKETS, OTHER FITTINGS AND FANS ETC. HENCE, IT IS INCLUSIVE DEFINITION OF 7 ITA NO. 580/H/12 AND 795 & 267/HYD/2013 M/S PENNA CEMENT INDUSTRIES LTD. ELECTRICAL FITTINGS IN DEPRECIATION SCHEDULE FROM A Y 2006-07 ONWARDS. IT IS CLEAR THAT THE ELECTRICAL FITTINGS WILL COME UNDER FURNITURES AND FITTINGS AND IT WILL ATTRACT 10% ONLY INSTEAD OF 1 5%. 9. LD. AR SUBMITTED THAT THE ASSESSEE CLAIMED DEPRE CIATION ON ELECTRICAL INSTALLATION @ 15% AS PER THE PROVISIONS OF SECTION 32 OF THE ACT AS THESE ELECTRICAL INSTALLATION ARE PART AND P ARCEL OF PLANT & MACHINERY. THE DETAILS OF THE ELECTRICAL FITTINGS A RE I) LINE METERING EQUIPMENT, II) SWITCH YARD, III) HT MOTORS & AUTO L OSSES, IV) INSTRUMENTATION MATERIAL, V) SERVICE LINE EQUIPMENT , VI) CABLE WORK AND VII) LIGHTING EQUIPMENT. THESE ARE ELECTRICAL INSTA LLATION AND PART AND PARCEL OF PLANT & MACHINERY. 10. LD. DR SUBMITTED THAT HE RELIES ON THE ORDER OF CIT. 11. CONSIDERING THE SUBMISSIONS OF BOTH THE COUNSEL S AND PERUSING THE MATERIAL FACTS ON RECORD, WE ARE OF THE VIEW TH AT THE DEFINITION OF ELECTRICAL FITTINGS GIVEN ARE ELECTRICAL WIRING, SW ITCHES, SOCKETS, FANS ETC. THESE ARE ELECTRICAL FITTINGS WHICH ARE INDEPE NDENT IN NATURE AND IT DOES NOT FORM PART OF ANY ASSETS. WHEREAS IN THE PRESENT CASE THE ELECTRICAL INSTALLATIONS WHICH ARE DIFFERENT TO ELE CTRICAL FITTINGS AS DEFINED IN THE DEPRECIATION SCHEDULE IN THE IT RULE S. THESE INCLUDE LINE METERING EQUIPMENT, SWITCH YARD, HT MOTORS AND AUTO LOSSES, CABLE WORK, LIGHTING EQUIPMENT ETC. ARE INSTALLED A S PART OF THE PLANT & MACHINERY. IT CANNOT BE SEPARATED FROM THE PLANT & MACHINERY. HENCE, IT HAS TO BE TREATED IN LINE WITH THE PLANT & MACHINERY AND THE RATE OF DEPRECIATION OF PLANT & MACHINERY ALONE HAS TO BE ADOPTED NOT OF THE RATE OF FURNITURES AND FITTINGS. CONSIDERI NG THE ABOVE DISCUSSION, WE ALLOW THE GROUNDS OF THE ASSESSEE. 12. ON THE LAST ISSUE OF NON-DEDUCTION OF TDS ON TH E PAYMENT OF CONSULTANCY CHARGES IN FOREIGN CURRENCY, CIT FOUND IN THE 3CD REPORT THAT NO TAX WAS DEDUCTED AT SOURCE ON THIS PAYMENT. THE ASSESSEE HAD SUBMITTED THAT THESE PAYMENTS WERE MADE ONLY AF TER FOLLOWING THE TDS PROVISIONS AND FILED THE DETAILS OF TDS PAYMENT S. THE SAME WAS 8 ITA NO. 580/H/12 AND 795 & 267/HYD/2013 M/S PENNA CEMENT INDUSTRIES LTD. REMITTED BACK TO THE FILE OF AO BY THE CIT TO VERIF Y THE SAME AND TAKE NECESSARY ACTION IN THIS REGARD. 13. SINCE IT WAS REMITTED BACK TO THE FILE OF AO BY THE CIT, IT DOES NOT REQUIRE ANY ADJUDICATION. 14. FINALLY, THE ACTION OF CIT TO REVIEW THE ORDER OF THE AO WAS QUESTIONED BY THE ASSESSEE IN THE GROUND NOS. 2 & 6 ARE CONSIDERED AND FOUND THAT IN THE MATTER OF COMMISSION PAYMENT TO MD, THE CIT WAS PARTIALLY CORRECT. HENCE, WE TREAT THE ACTION O F THE CIT IS JUSTIFIED AND ACCORDINGLY, WE DISMISS THE GROUNDS RAISED BY A SSESSEE. IT MAY BE MENTIONED HERE THAT THE FINDINGS OF CIT ARE PART LY FOUND TO BE CORRECT, THE CIT CANNOT HOLD THAT THE WHOLE ASSESSM ENT MADE U/S 143(3) IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST S OF REVENUE. HENCE, WE DIRECT THE AO TO CARRY OUT THE FINDINGS O F THIS TRIBUNAL. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 795/HYD/13 FOR AY 2008-09 16. IN THIS AY, THE CIT FOUND THE FOLLOWING REASONS TO REVISE THE ORDER U/S 263: A. THE ASSESSEE CLAIMED ADDITIONAL DEPRECIATION OF RS. 5,73,54,115/- ON THE 'AIR POLLUTION EQUIPMENT' IN ADDITION TO THE A LREADY CLAIMED OF 100% DEPRECIATION. AS PER THE PROVISO(D) OF THE SECTION 32 (L)(IIA), NO ADDITIONAL DEPRECIATION IS ALLOWED IN RESPECT OF ANY PLANT OR MACHINERY IN WHICH THE WHOLE OF THE ACTUAL COST IS ALLOWED AS DEDUCTION- IN THE INSTANT CASE, THE ASSESSEE HAS ALREADY CLAIMED DEPRECIATION @100% ON THE SAID 'AIR POLLUTION EQUIPMENT'. AS PER THE PROVISIONS OF THI S SECTION, THE ASSESSEE IS ENTITLED FOR ADDITIONAL DEPRECIATION OF 20% OF ACT UAL COST OF MACHINERY PROVIDED THAT THE DEDUCTION OF ADDITIONAL DEPRECIA TION SHALL NOT BE ALLOWED U/S 32 (1 )(II A) (D) , WHEN WHOLE OF THE ACTUAL C OST IS ALREADY ALLOWED AS DEDUCTION IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' - IN THIS CASE, T HE A.O. HAS ALLOWED DEPRECIATION I.E. 100%. AS THE ASSET HAD BEEN PUT TO USE FOR LESS THAN 180 DAYS, THE AO HAS RESTRICTED THE DEPRECIATION. THIS DOES NOT MEAN THAT THE A.O. HAS NOT ALLOWED WHOLE OF THE ACTUAL COST OF DEPRECIATION. HENCE, IT IS CLEAR THAT THE A.O. HAS MADE THE MIND TO ALLOW THE DEPRECIATION @1 00% AND RESTRICTED THE SAME TO 50% ON ACCOUNT OF 'USAG E PERIOD CRITERIA' OF THE 'PLANT AND MACHINERY' HENCE, THE ADDITIONAL DEPREC IATION CLAIMED ON THE AIR POLLUTION EQUIPMENT AMOUNTING TO RS.5,73,54, 1 15/- OUGHT NOT TO HAVE BEEN ALLOWED BY THE ASSESSING OFFICER IN THE IMPUG NED ASSESSMENT ORDER DATED 29.12.2010 AND ON THIS COUNT, THE ORDER HAS BECOME ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 9 ITA NO. 580/H/12 AND 795 & 267/HYD/2013 M/S PENNA CEMENT INDUSTRIES LTD. B. FURTHER, IT IS SEEN THAT THE ASSESSEE ADMITTED THE OUTSTANDING LIABILITY AS ON 31.3.2008 FOR PAYMENT OF LEAVE ENCASHMENT FOR R S.1 ,09,24,528/- AND THE SAME WAS DEBITED TO P&L ACCOUNT. HOWEVER, ONLY AN AMOUNT OF RS.22,733/- WAS PAID BY THE ASSESSEE ON 7.4.2008. BALANCE AMOUNT WAS REMAINED OUTSTANDING TO THE EXTENT OF RS.1,09,01 , 795/- TILL THE FILING OF RETURN OF INCOME. HENCE, THE UNASCERTAINED PROVISI ON OF RS.1,09,01,795/- NEEDED TO BE DISALLOWED BY THE A.O. BY ALLOWING TH E SAME, THE ORDER HAS BECOME ERRONEOUS AND PREJUDICIAL TO THE INTEREST O F THE REVENUE. C. FURTHER, THE ASSESSEE CLAIMED DEPRECIATION OF R S.5,13,76,985/- ON 'ELECTRICAL INSTALLATIONS'. THE ACTUAL AMOUNT @1'5 % ON THE SAID 'ELECTRICAL INSTALLATIONS' WORKS OUT AT RS.4,23,25,293/-. HENC E, AN EXCESS AMOUNT OF RS.90,51,692/- WAS ALLOWED AS DEPRECIATION ON ELEC TRICAL INSTALLATIONS. BY ALLOWING THE SAME, THE ORDER HAS BECOME ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE ASSESSEE SUBMITTED THE OBJECTION TO THE ABOVE R EVIEW AND THE SAME WAS REJECTED BY THE CIT. 17. AGGRIEVED WITH THE ABOVE ORDER, ASSESSEE IS IN APPEAL BEFORE US AND RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF CIT-IV, HYDERABAD IS CONTRARY TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE CIT ERRED IN REVISING THE ASSESSMENT ORDER AND DIRECTING THE AO TO COMPLETE THE ASSESSMENT ON THE DIRECTIONS GIVEN BY HIM. 3. THE CIT ERRED IN COMING TO A CONCLUSION THAT TH E CLAIM OF IEAVE ENCASHMENT WAS WRONG. 4. THE CIT ERRED IN COMING TO A CONCLUSION THAT TH E ASSESSEE HAD WRONGLY CLAIMED DEPRECIATION 15% WAS THEREFORE IS ERRONEOU S AND PREJUDICIAL TO THE INTERESTS OF REVENUE. 5. THE CIT ERRED IN COMING TO A CONCLUSION THAT TH E ASSESSEE WAS NOT ENTITLED TO ADDITIONAL DEPRECIATION ON AIR POLLUTI ON EQUIPMENT. 18. ON THE FIRST ISSUE RAISED BY THE CIT ON ADDITIO NAL DEPRECIATION CLAIMED ON AIR POLLUTION EQUIPMENT U/S 32(1)(IIA), THE LD. AR SUBMITTED THAT THE ASSESSEE HAS CLAIMED DEPRECIATIO N INCLUDING ADDITIONAL DEPRECIATION OF RS. 34,41,24,692/- ON NE W PLANT AND MACHINERY (AIR POLLUTION EQUIPMENT) ELIGIBLE FOR 10 0% DEPRECIATION OF RS. 57,35,41,154/- ACQUIRED AND INSTALLED AS PER TH E PROVISION OF SECTION 32(1)(IIA) FOR THE AY 2008-09. IT IS SUBMI TTED THAT THE SAID PLANT AND MACHINERY IS INSTALLED AND USED FOR LESS THAN 180 DAYS DURING THE YEAR AND HENCE CLAIMED DEPRECIATION AT 5 0% ONLY AND IS CALCULATED AS RS. 34,41,24,692/-. IT IS SUBMITTED T HAT THE SAID PLANT 10 ITA NO. 580/H/12 AND 795 & 267/HYD/2013 M/S PENNA CEMENT INDUSTRIES LTD. AND MACHINERY DOES NOT FALL UNDER THE PROVISION (D) OF SECTION 32(1)(IIA) I.E. 'ANY MACHINERY OR PLANT, THE WHOLE OF THE ACTUAL COST OF WHICH IS ALLOWED AS A DEDUCTION (WHETHER BY WAY OF DEPRECIATION OR OTHERWISE) IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD' PROFIT AND GAINS OF BUSINESS OR PROFESSION OF ANYONE PREVI OUS YEAR' AS THE COMPANY HAS NOT FULLY DEPRECIATED THE SAID PLANT AN D MACHINERY IN ONE PREVIOUS YEAR. 18.1 WITHOUT PREJUDICE TO WHAT HAVE BEEN STATED ABO VE, THE LD. AR SUBMITTED THAT THE POLLUTION CONTROL EQUIPMENTS ARE ENTITLED FOR SPECIAL RATE OF DEPRECIATION OF 100% HAVING SPECIAL IDENTIT Y. IN THIS CONTEXT IT IS RELEVANT TO MENTION THE PRINCIPLE OF INTERPRETAT ION CONTAINED IN THE LEGAL MAXIM 'GENERALIA SPECIALIBUS NON DEROGANT'. A SPECIAL PROVISION NORMALLY EXCLUDES THE OPERATION OF GENERAL PROVISIO N. THIS PRINCIPLE CAN BE RESORTED FOR DECIDING THE COMPETING AVERMENT S OF TWO PROVISIONS IN THE SAME ENACTMENT, A GENERAL AND A S PECIAL PROVISION WITH SOME OVERLAPPING BETWEEN THE TWO. EVEN THOUGH POLLUTION CONTROL EQUIPMENT IS CLASSIFIED UNDER PLANT AND MACHINERY A S A GENERAL ITEM, IS STILL QUALIFIED AS A DIFFERENT CLASS UNDER THE H EADING 'AIR POLLUTION CONTROL EQUIPMENT' ENTITLED FOR HIGHER AMOUNT OF DE PRECIATION. THEREFORE, THE SPECIAL CATEGORY, UNDER WHICH AIR PO LLUTION CONTROL EQUIPMENT IS PLACED, APPLIED TO THE POLLUTION CONTR OL EQUIPMENT INSTALLED BY THE ASSESSEE. ITS ELIGIBILITY FOR HIGH ER AMOUNT OF DEPRECIATION WILL NOT BE SHADOWED BY THE GENERAL RA TE PROVIDED FOR PLANT AND MACHINERY. ACCORDINGLY, LD. AR SUBMITTED THAT EVEN THOUGH THE ASSET IS PUT TO USE FOR LESS THAN 180 DAYS STIL L QUALIFIES FOR 100% DEPRECIATION AS PER THE LEGAL MAXIM ''GENERALIA SPE CIALIBUS NON DEROGANT' REFERRED ABOVE. 18.2 FURTHER, THE LD. AR REFERRED TO THE DECISION O F ADAR TEA PRODUCTS CO, (SUPRA), WHEREIN THE THE HON'BLE JURIS DICTIONAL HIGH COURT HAS HELD AS UNDER: 'THE SUPREME COURT HAS HELD THAT IF A PROVISION IS MADE IN THE CONTEXT OF A LAW PROVIDING FOR CONCESSIONAL RATES OF TAX FOR THE 11 ITA NO. 580/H/12 AND 795 & 267/HYD/2013 M/S PENNA CEMENT INDUSTRIES LTD. PURPOSE OF ENCOURAGING AN INDUSTRIAL ACTIVITY, A L IBERAL CONSTRUCTION SHOULD BE PUT UPON THE LANGUAGE OF TH E STATUTE - VIDE CIT V. STRAW BOARD MANUFACTURING CO. LTD [198 9] SUPP. 2 SCC 523. 18.3 THE LD. AR ALSO REFERRED THE DECISION OF THE ITAT, CHENNAI BENCH IN THE CASE OF KKSK LEATHER PROCESSORS (P) LD . VS. ITO WHEREIN THE TRIBUNAL HELD AS UNDER: THE TRIBUNAL, AFTER EXAMINING THE EXPLANATION 5 TO SUB-SEC.(1) OF SEC.32, HELD THAT THE PROVISIONS OF SUB-SECTION (1) OF SEC.32 WAS APPLIED WHETHER OR NOT THE ASSESSEE HAS CLAIM ED THE DEDUCTION IN RESPECT OF DEPRECIATION IN COMPUTING HIS TOTAL INCOME. THE TRIBUNAL HELD THAT THE ASSESSING OFFIC ER IS DUTY BOUND AND UNDER OBLIGATION TO ALLOW THE DEDUCTION OF DEPRECIATION AS PER THE PROVISIONS OF SEC.32(1). W HEN SUCH A STATUTORY OBLIGATION IS CAST ON THE ASSESSING AUT HORITY, IT IS INCUMBENT ON HIM TO APPLY THE CORRECT RATE OF DEPR ECIATION, ESPECIALLY IN THE PRESENT CASE WHERE THE OPTION EX ERCISED BY THE ASSESSEE IS MANIFESTLY CLEAR. 18.4 HE ALSO RELIED ON THE DECISION IN THE CASE OF COSMO FILMS LD., 13 ITR (T) 340 (DEL.) 19. LD. DR RELIED ON THE ORDER OF CIT. 20. CONSIDERING THE SUBMISSIONS OF BOTH THE COUNSEL S AND PERUSING THE MATERIALS FACTS ON RECORD, WE ARE VIEW OF THAT TO ADJUDICATE THE ISSUE, FIRST, WE REFER TO SECTION 32(I)(IIA), WHICH IS AS UNDER: 32. (1) . 32(1)(IIA) IN THE CASE OF ANY NEW MACHINERY OR PL ANT (OTHER THAN SHIPS AND AIRCRAFT), WHICH HAS BEEN ACQUIRED AND INSTALLED AFTER THE 31 ST DAY OF MARCH, 2005, BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF AN Y ARTICLE OR THING OR IN THE BUSINESS OF GENERATION OR GENERATION AND DISTRIBUTION OF POWER , A FURTHER SUM EQUAL TO TWENTY PER CENT OF THE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL B E ALLOWED AS DEDUCTION UNDER CLAUSE (II) PROVIDED [FURTHER] THAT NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF (A) ANY MACHINERY OR PLANT WHICH, BEFORE ITS INSTA LLATION BY THE ASSESSEE, WAS USED EITHER WITHIN OR OUTSIDE INDIA BY ANY OTHER PERSON; OR (B) ANY MACHINERY OR PLANT INSTALLED IN ANY OFFICE PREMISES OR ANY RESIDENTIAL ACCOMMODATION, INCLUDING ACCOMMODATION IN THE NATURE OF A GUEST-HO USE; OR (C) ANY OFFICE APPLIANCES OR ROAD TRANSPORT VEHICL ES; OR (D) ANY MACHINERY OR PLANT, THE WHOLE OF THE ACTUA L COST OF WHICH IS ALLOWED AS A DEDUCTION (WHETHER BY WAY OF DEPRECIATION OR OTHERWISE) IN CO MPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSI ON' OF ANY ONE PREVIOUS YEAR; 12 ITA NO. 580/H/12 AND 795 & 267/HYD/2013 M/S PENNA CEMENT INDUSTRIES LTD. FROM THE ABOVE DEFINITION, IT IS CLEAR THAT THE ASS ETS, ON WHICH THE WHOLE OF THE ACTUAL COST OF WHICH IS ALLOWED AS A D EDUCTION DENOTES TO THOSE ASSETS WHICH WAS ALLOWED AS DEPRECIATION @ 10 0%. THESE RATES ARE CATEGORIZED FOR THE SPECIAL CATEGORY OF ASSETS WHICH ARE SIMILAR TO THE POLLUTION CONTROL EQUIPMENTS, WHICH ARE ENTITLE D FOR SPECIAL RATE OF 100%. IN THE PRESENT CASE, THE ASSESSEE HAD CATEGOR IZED THE AIR POLLUTION EQUIPMENT AS SPECIAL CATEGORY ASSETS AND CLAIMED ACCORDINGLY. SINCE, IT IS CATEGORIZED AS SPECIAL CA TEGORY AND CLAIMED 100% RATE OF DEPRECIATION, THE ASSESSEE APPLIED THE SPECIAL PROVISION OF CLAIMING DEPRECIATION, AS PER THE SECTION 32(1)( IIA)(D), IT CANNOT AGAIN CLAIM THE ADDITIONAL DEPRECIATION. EVEN THOUG H IT HAS NOT CLAIMED 100% OF THE QUANTUM OF THE VALUE OF ASSETS DUE TO THE FACT THAT THE ASSETS WERE ACQUIRED AND UTILIZED LESS THA N 180 DAYS, IT WAS ELIGIBLE FOR ONLY 50% OF THE RATE OF DEPRECIATION. AGAIN, IT CANNOT CLAIM THE ADDITIONAL DEPRECIATION U/S 32(1)(IIA). ASSESSE E ALSO RELIED ON THE CASE OF COSMO FILMS LTD. (SUPRA). RELIANCE PLACED B Y THE ASSESSEE ON THE SAID CASE IS ON THE SUBJECT WHETHER THE ASSE SSEE CAN CLAIM THE WHOLE ADDITIONAL DEPRECIATION WHICH IS AS INCENTIVE TO THE ASSESSEE, WHO ARE IN THE MANUFACTURING SECTOR AND MADE INVEST MENT ON THE PLANT & MACHINERY. THE SAME WAS RESTRICTED FOR THE USAGE, WHICH WAS INSTALLED AND UTILIZED FOR LESS THAN 180 DAYS IN TH E YEAR OF INSTALLATION. CAN THE ASSESSEE CLAIM THE BALANCE DEPRECIATION IN THE FOLLOWING YEAR. IT WAS DECIDED AFFIRMATIVE. BUT IN THE PRESEN T CASE, THE FACTS ARE DIFFERENT, HENCE, THE SAID CASE CANNOT BE APPLICABL E TO ASSESSEE. IN THIS SITUATION, THE GROUND RAISED BY THE ASSESSEE I S DISMISSED. 21. ON THE NEXT ISSUE OF DISALLOWANCE OF OUTSTANDIN G LIABILITY OF LEAVE ENCASHMENT OF RS. 109,01,795/-, THE LD. AR SU BMITTED THAT THE DISALLOWANCE MADE BY THE CIT WAS WRONG AND THE PROV ISION MADE ON THE LEAVE ENCASHMENT WITHOUT ACTUAL PAYMENT AS PER SECTION 43B(F) WAS ALLOWABLE AS DEDUCTION BY RELYING ON THE CASE O F AP STATE SEEDS 13 ITA NO. 580/H/12 AND 795 & 267/HYD/2013 M/S PENNA CEMENT INDUSTRIES LTD. DEVELOPMENT CORPORATION LTD. IN ITA NO. 1530/HYD/20 12 OF THE COORDINATE BENCH OF THIS TRIBUNAL. 22. LD. DR, ON THE OTHER HAND, RELIED ON THE CITS ORDER. 23. CONSIDERING THE SUBMISSIONS OF BOTH THE COUNSEL S AND FACTS ON RECORD, WE FIND THAT IN THE CASE OF AP STATE SEEDS DEVELOPMENT CORPORATION LTD. (SUPRA) THE COORDINATE BENCH OF TH IS TRIBUNAL DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE FOLLOWING ITS E ARLIER ORDER IN ASSESSEES OWN CASE FOR AY 2005-06 IN ITA NO. 1442/ HYD/2009 VIDE ORDER DATED 07/08/2009. THE OPERATIVE PORTION AS EX TRACTED IN THE ORDER OF THE TRIBUNAL IN ITA NO. 1530/HYD/2012 IS R EPRODUCED BELOW: '5. WE HAVE GONE THROUGH ABOVE JUDGMENT AND IT WAS OBSERVED IN THIS JUDGEMENT THAT THE ORIGINAL SECTION 43B IN IT ACT 1961, THE INTEN TION OF WHICH WAS TO CURB UNREASONABLE DEDUCTION ON THE BASIS OF MERCANTILE SYSTEM OF ACCOUNT WITHOUT DISCHARGING STATUTORY LIABILITY. IT WAS OBSERVED B Y THE LEGISLATURE, THAT SUCH ENACTMENT WAS NECESSARY AS THERE HAD BEEN TREND TO EVADE STA TUTORY LIABILITY ON ONE HAND AND CLAIM APPROPRIATE BENEFIT UNDER THE ACT ON THE OTH ER. UNDER CLAUSE (F) OF 43B, ANY SUM PAYABLE BY THE EMPLOYER TO HIS EMPLOYEES AS LEAVE ENCASHMENT SHALL BE DEDUCTIBLE ONLY IN COMPUTING THE INCOME REFERRED TO IN S. 28 OF THAT PREVIOUS YEAR IN WHICH SUM IS ACTUALLY PAID BY THE EMPLOYER TO ITS EMPLOYEES. WH ILE INSERTING CLAUSE (F) NO SPECIAL REASONS WERE DISCLOSED. ALTHOUGH SUCH DISCLOSURE W AS NOT MANDATORY YET THE SUBJECT AMENDMENT WIDEN THE SCOPE OF THE ORIGINAL SECTION. LEAVE ENCASHMENT IS NEITHER A STATUTORY LIABILITY NOR A CONTINGENT LIABILITY. IT IS PROVISION TO BE MADE FOR THE ENTITLEMENT OF AN EMPLOYEE ACHIEVED IN A PARTICULA R FINANCIAL YEAR. AN EMPLOYEE EARNS CERTAIN AMOUNT BY NOT TAKING LEAVE WHICH HE OR SHE IS OTHERWISE ENTITLED DURING THE PARTICULAR YEAR. HENCE, THE EMPLOYER IS OBLIGED TO MAKE APPROPRIATE PROVISION FOR THE SAID AMOUNT. ONCE THE EMPLOYEE RETIRES HE/SHE HAS TO BE PAID SUCH SUM ON CUMULATIVE BASIS WITH THE EMPLOYEE 3 EARNS THROUGH OUT HIS/HER SERVICE CAREER UNLESS HE/SHE AVAILS OF THE LEAVE EARNED BY HIM OR HER. T HAT DOES NOT HAVE ANY NEXUS WITH THE ORIGINAL ENACTMENT. AN EMPLOYER IS ENTITLED FO R DEDUCTION FOR THE EXPENDITURE HE INCURS FOR RUNNING HIS BUSINESS WHICH INCLUDES PAYMENT OF SALARY AND OTHER PERQUISITES TO HIS EMPLOYEES. HENCE, IT IS TRADING LIABILITY. AS SUCH HE IS OTHERWISE ENTITLED TO DEDUCTION OF SUCH AMOUNT BY SHOWING IT AS A PROVISIONAL EXPENDITURE IN HIS ACCOUNT. THE LEGISLATURE BY WAY OF AMENDMENT RESTR ICT SUCH DEDUCTION IN THE CASE OF LEAVE ENCASHMENT UNLESS IT IS ACTUALLY PAID IN THA T PARTICULAR FINANCIAL YEAR. THE LEGISLATURE IS FREE TO DO SO AFTER IT DISCLOSES RE ASONS THERE FOR AND SUCH REASONS ARE NOT INCONSISTENT WITH THE MAIN OBJECT OF THE ENACTMENT . WITHOUT SUCH REASON THE ENACTMENT IS INCONSISTENT WITH THE ORIGINAL PROVIS ION. THE LEGISLATURE MUST DISCLOSE REASONS WHICH WOULD BE CONSISTENT FOR THE PROVISIO N OF THE CONSTITUTION AND THE LAWS OF THE LAND AND NOT FOR THE SOLE OBJECT OF NULLIFY ING THE JUDGMENT IN THE CASE OF BHARAT EARTH MOVERS VS. CIT (245 ITR 428) (SC). 6. AS DIS CUSSED ABOVE, SECTION 43B(F) ALREADY STRUCK DOWN BY THE CALCUTTA HIGH COURT IN THE JUDG EMENT CITED SUPRA AND AS PER JUDGMENT OF THE SUPREME COURT IN THE CASE OF BHARA T EARTH MOVERS LTD. (SUPRA), THE PROVISIONS MADE ON ACCOUNT OF LEAVE ENCASHMENT SHO ULD BE ALLOWED ALTHOUGH THE 14 ITA NO. 580/H/12 AND 795 & 267/HYD/2013 M/S PENNA CEMENT INDUSTRIES LTD. LIABILITY MAY HAVE TO BE QUANTIFIED AND DISCHARGED AT A FUTURE DATE'. FOLLOWING THE CONSISTENT VIEW TAKEN BY THE TRIBUNAL IN ASSESSEE S OWN CASES FOR EARLIER YEARS, WE FIND NO JUSTIFICATION TO INTERFERE WITH THE IMPUGNED OR DER OF THE CIT(A) FOR THE YEAR UNDER APPEAL. WE ACCORDINGLY UPHOLD THE SAME AND REJECT THE GROUNDS OF THE REVENUE IN THIS APPEAL. FOLLOWING THE CONSISTENT VIEW TAKEN BY THE TRIBUNAL IN THE SAID CASE, WE ALLOW THE GROUND OF APPEAL OF THE ASSESSEE. 24. ON THE LAST ISSUE OF CLAIM OF DEPRECIATION ON E LECTRICAL INSTALLATION @ 15% BY THE ASSESSEE, WE HAVE ALREADY ADJUDICATED THE SAME IN PARA 11 ABOVE RELATING TO AY 2007-08. BY FO LLOWING THE SAME, THIS GROUND OF ASSESSEE IS ALLOWED. 25. IT MAY BE MENTIONED HERE THAT THE FINDINGS OF C IT ARE PARTLY FOUND TO BE CORRECT, THE CIT CANNOT HOLD THAT THE W HOLE ASSESSMENT MADE U/S 143(3) IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. HENCE, WE DIRECT THE AO TO CARRY OUT THE F INDINGS OF THIS TRIBUNAL. 26. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 267/HYD/13 FOR AY 2009-10 27. IN THIS YEAR, AO FOUND THAT THE ASSESSEE CLAIME D DEPRECIATION OF RS. 480,49,493/- ON ELECTRICAL INSTALLATION @ 15 % INSTEAD OF 10% AS PER THE DEPRECIATION CHART IN APPENDIX 1A OF IT R ULES, WHICH IS APPLICABLE TO FURNITURES & FITTINGS SINCE, THE EL ECTRICAL FITTINGS ARE CATEGORIZED UNDER FURNITURES & FITTINGS. 28. AGGRIEVED WITH THE ABOVE ORDER, ASSESSEE PREFER RED APPEAL BEFORE THE CIT(A) AND THE CIT(A) ALLOWED THE ASSESS EES GROUND OF CLAIM OF DEPRECIATION IN FAVOUR OF ASSESSEE. 29. AGGRIEVED WITH THE ABOVE ORDER, REVENUE FILED T HIS APPEAL BEFORE US. THE DEPARTMENT RAISED THE SAME IN GROUND NO. 2 OF THE APPEAL. 15 ITA NO. 580/H/12 AND 795 & 267/HYD/2013 M/S PENNA CEMENT INDUSTRIES LTD. 30. SINCE WE HAVE ALREADY ADJUDICATED THE SAID ISSU E OF DEPRECIATION IN PARAS 11 AND 23 ABOVE, WE DISMISS T HIS GROUND OF REVENUE. 31. IN THE RESULT, ASSESSEES APPEALS IN AY 2007-08 AND AY 2008- 09 ARE PARTLY ALLOWED AND REVENUES APPEAL FOR AY 2 009-10 IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 18 TH DECEMBER, 2015. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACC OUNTANT MEMBER HYDERABAD, DATED: 18 TH DECEMBER, 2015 KV COPY TO:- 1) M/S PENNA CEMENT INDUSTRIES LTD., PLOT NO. 703, SRINIKETAN COLONY, ROAD NO. 3, BANJARA HILLS, HYDERABAD 500 034. 2) ADDL. CIT, RANGE 16, HYDERABAD 3) CIT - IV, HYDERABAD 4) ASST. CITI, RANGE 16, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.
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