DCIT Corp. Circle 1(20, CHENNAI V. Consolidated Construction Consortium Limited, CHENNAI

ITA 2676/CHNY/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6574 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 17-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J PAVITHRAN KUMAR
• Assessee Lawyers: S SRIDHAR
• Keywords: Depreciation; Business expenditure; Additional depreciation; Earning of tax free income; Question of law; Rule 8D; Set aside
• Section: 14A; 32(1)(iia); 32; 37

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . , BEFORE SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY, JUDICIAL MEMBER I.T.A. NOS. 473/CHNY/2017, 2676 AND 757/CHNY/2018 ASSESSMENT YEARS: 2012-13, 2013-14 & 2014-15 THE DEPUTY/ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 1(2), CHENNAI . VS. M/S. CONSOLIDATED CONSTRUCTION CONSORTIUM LIMITED, NO. 5, II LINK STREET, CIT COLONY, MYLAPORE, CHENNAI 600 004. [PAN: AAACC4214B] ( /APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI J. PAVITHRAN KUMAR, JCIT / RESPONDENT BY : SHRI S. SRIDHAR, ADVOCATE / DATE OF HEARING : 01.10.2019 /DATE OF PRONOUNCEMENT : 25.10.2019 / O R D E R PER DUVVURU RL REDDY, JUDICIAL MEMBER: THESE THREE APPEALS FILED BY THE REVENUE PERTAINING TO SAME ASSESSEE ARE DIRECTED AGAINST DIFFERENT ORDERS OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 1/4, DATED 30.11.2016, 09.07.2018 & 05.12.2017 RELEVANT TO THE ASSESSMENT YEARS 2012-13, 2013-14 AND 2014-15 RESPECTIVELY. SINCE COMMON ISSUES HAVE BEEN RAISED IN THESE APPEALS, HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF BREVITY. I.T.A. NOS. 473/CHNY/17, 2676/CHNY/18 & 757/CHNY/18 2 2. THE FIRST COMMON ISSUE RAISED IN THESE APPEALS IS THAT THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE CLAIM OF DEDUCTION OF RETENTION MONEY PAYMENT ON ACCRUAL BASIS. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON VERIFICATION OF DETAILS FURNISHED BY THE ASSESSEE, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED THE RETENTION MONEY PAYABLE AND AS PER THE COMPUTATION STATEMENT, THE ASSESSEE HAS REDUCED RETENTION MONEY RECEIVABLE FROM ITS CLIENTS. SINCE THE ASSESSEE COMPANY HAS NOT OFFERED TO TAX THE RETENTION MONEY RECEIVABLE, ON MATCHING CONCEPT, THE RETENTION MONEY PAYABLE CLAIMED AS DEDUCTION WAS DISALLOWED AND BROUGHT TO TAX. 4. ON APPEAL, BY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR EARLIER ASSESSMENT YEARS, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE OF RETENTION MONEY PAYABLE ON ACCRUAL BASIS AFTER QUANTIFICATION THEREOF. 5. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. DR HAS SUBMITTED THAT THE ASSESSE CANNOT TAKE A DUAL STAND ON RECEIPT AND PAYMENT OF RETENTION MONEY BY EXCLUDING FROM ITS INCOME THE RETENTION MONEY RECEIVABLE FROM ITS CLIENTS WHILE CLAIMING THE RETENTION MONEY PAYABLE TO ITS SUB-CONTRACTORS IN ITS EXPENSES AND PLEADED FOR REVERSING THE ORDERS OF THE LD. CIT(A). ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE HAS I.T.A. NOS. 473/CHNY/17, 2676/CHNY/18 & 757/CHNY/18 3 SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR EARLIER ASSESSMENT YEARS. 6. WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. SIMILAR ISSUE WAS SUBJECT MATTER IN APPEAL BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2007-08 TO 2009-10 IN I.T.A. NOS. 592 TO 594/MDS/2014, WHEREIN, VIDE ORDER DATED 06.01.2016, THE COORDINATE BENCHES OF THE TRIBUNAL HAS OBSERVED AND HELD AS UNDER: 12. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. GENERALLY, THE EXPENDITURE WHICH IS ACTUALLY INCURRED OR IS INCURRED IN A RELEVANT YEAR WOULD BE ALLOWED AS DEDUCTION WHILE COMPUTING THE INCOME FROM BUSINESS. SUCH A LIABILITY HAS TO BE IN PRAESENTI. HOWEVER, AT THE SAME TIME, IT RELATES TO THE WORKS UNDERTAKEN BY THE ASSESSEE, COMPLETED CONTRACT METHOD OF ACCOUNTING IS FOLLOWED WHICH IS CONSISTENT WITH THE ACCOUNTING STANDARDS AND THESE ACCOUNTING STANDARDS ALSO LAID DOWN THE NORMS INDICTING THE PARTICULAR POINT OF TIME WHEN THE PROVISIONS FOR ALL KNOWN LIABILITIES AND LOSSES HAVE TO BE MADE. THE MAKING OF SUCH A PROVISION BY THE ASSESSEE APPEARS TO BE JUSTIFIED MORE SO WHEN THE ASSESSEE HAD RECOGNIZED GAIN AS WELL ON SUCH PROJECT DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. THIS APPEARS TO BE IN CONSONANCE WITH THE PRINCIPLE OF MATCHING COST AND REVENUE AS WELL. THE REASON GIVEN BY THE DEPARTMENT IS THAT THE RETENTION MONEY WHICH IS RECEIVABLE WAS NOT RECOGNIZED AS INCOME AS SUCH, RETENTION PAYMENT ALSO CANNOT BE ALLOWED AS DEDUCTION WHILE COMPUTING THE INCOME OF THE ASSESSEE. AS RIGHTLY ARGUED BY THE ASSESSEE, BOTH THESE ARE GOVERNED BY DIFFERENT ACCOUNTING STANDARDS. RETENTION PAYMENT IS GOVERNED BY AS-7 ISSUED BY ICAI, NEW DELHI. ON THE OTHER HAND, RETENTION MONEY RECEIVABLE IS GOVERNED BY AS-9. WHAT IS APPLICABLE TO RETENTION MONEY RECEIVABLE CANNOT BE APPLIED TO RETENTION MONEY PAYABLE AS THESE ARE GOVERNED BY DIFFERENT ACCOUNTING STANDARD. FURTHER IT IS UNDISPUTED THAT WHENEVER ASSESSEE INCURRED EXPENDITURE ON THE PROJECT IT IS ADMISSIBLE FOR DEDUCTION. THE ONLY DISPUTE RAISED BY THE REVENUE IS REGARDING THE YEAR OF LIABILITY OF EXPENDITURE. CONSIDERING THAT THE ASSESSEE COMPANY IS ASSESSED AT UNIFORM RATE OF TAX, THE ENTIRE EXERCISE OF SEEKING TO DISTURB THE YEAR OF ALLOWABILITY OF EXPENDITURE IS, IN ANY CASE, REVENUE NEUTRAL. WE ARE REMINDED OF THE CLASSIC OBSERVATION I.T.A. NOS. 473/CHNY/17, 2676/CHNY/18 & 757/CHNY/18 4 MADE BY THE BOMBAY HIGH COURT IN THE CASE OF CIT VS NAGRI MILLS CO. LTD, 33 ITR 681 WHICH READS AS UNDER: WE HAVE OFTEN WONDERED WHY THE INCOME-TAX AUTHORITIES, IN A MATTER SUCH AS THIS WHERE THE DEDUCTION IS OBVIOUSLY A PERMISSIBLE DEDUCTION UNDER THE INCOME-TAX ACT, RAISE DISPUTES AS TO THE YEAR IN WHICH THE DEDUCTION SHOULD BE ALLOWED. THE QUESTION AS TO THE YEAR IN WHICH A DEDUCTION IS ALLOWABLE MAY BE MATERIAL WHEN THE RATE OF TAX CHARGEABLE ON THE ASSESSEE IN TWO DIFFERENT YEARS IS DIFFERENT; BUT IN THE CASE OF INCOME OF A COMPANY, TAX IS ATTRACTED AT A UNIFORM RATE, AND WHETHER THE DEDUCTION IN RESPECT OF BONUS WAS GRANTED IN THE ASSESSMENT YEAR 1952-53 OR IN THE ASSESSMENT YEAR CORRESPONDING TO THE ACCOUNTING YEAR 1952, THAT IS IN THE ASSESSMENT YEAR 1953-54, SHOULD BE A MATTER OF NO CONSEQUENCE TO THE DEPARTMENT; AND ONE SHOULD HAVE THOUGHT THAT THE DEPARTMENT WOULD NOT FRITTER AWAY ITS ENERGIES IN FIGHTING MATTERS OF THIS KIND. BUT, OBVIOUSLY, JUDGING FROM THE REFERENCES THAT COME UP TO US EVERY NOW AND THEN, THE DEPARTMENT APPEARS TO DELIGHT IN RAISING POINTS OF THIS CHARACTER WHICH DO NOT AFFECT THE ITA NO.1824 ETC :- 14 -: TAXABILITY OF THE ASSESSEE OR THE TAX THAT THE DEPARTMENT IS LIKELY TO COLLECT FROM HIM WHETHER IN ONE YEAR OR THE OTHER.' 12.1 THE AFORESAID OBSERVATION OF THE BOMBAY HIGH COURT WAS REITERATED BY THE DELHI HIGH COURT IN THE CASE OF CIT VS SHRI RAM PISTOS AND RINGS LTD, 220 CTR 404, AS UNDER: 'FINALLY, WE MAY ONLY MENTION WHAT HAS BEEN ARTICULATED BY THE BOMBAY HIGH COURT IN CIT V. NAGRI MILLS CO. LTD. [1958] 33 ITR 681 (BOM) AS FOLLOWS : . . . IN THE REFERENCE THAT IS BEFORE US THERE IS NO DOUBT THAT THE ASSESSEE HAD INCURRED AN EXPENDITURE. THE ONLY DISPUTE IS REGARDING THE DATE ON WHICH THE LIABILITY HAD CRYSTALLIZED. IT APPEARS THAT THERE WAS NO CHANGE IN THE RATE OF TAX FOR THE ASSESSMENT YEAR 1983-84 WITH WHICH WE ARE CONCERNED. THE QUESTION, THEREFORE, IS ONLY WITH REGARD TO THE YEAR OF DEDUCTION AND IT IS A PITY THAT ALL OF US HAVE TO EXPAND SO MUCH TIME AND ENERGY ONLY TO DETERMINE THE YEAR OF TAXABILITY OF THE AMOUNT. 12.2 FURTHER, IN OUR OPINION, THE PROVISION FOR ACCRUED LIABILITY WHICH HAS TO BE DISCHARGED AT A FUTURE DATE BY THE ASSESSEE IS AN ALLOWABLE EXPENDITURE. IN THE CASE OF CIT VS MICRO LAND LTD, 347 ITR 613[KARNATAKA HIGH COURT], THE ASSESSEE CLAIMED DEDUCTION U/S 37 OF THE ACT FOR PROVISION FOR FUTURE WARRANTY. THE ASSESSING OFFICER OPINED THAT PROVISION FOR FUTURE WARRANTY IS CONTINGENT LIABILITY AND CANNOT BE ALLOWED. THE SUPREME COURT IN THE CASE OF ROTORK CONTROLS INDIA PVT. LTD VS CIT, 314 ITR 62, HELD THAT THE PROVISION I.T.A. NOS. 473/CHNY/17, 2676/CHNY/18 & 757/CHNY/18 5 MADE BY THE ASSESSEE FOR WARRANTY CLAIMS ON THE BASIS OF PAST EXPERIENCE IS ALLOWABLE DEDUCTION U/S 37 OF THE ACT. IN THE CASE OF BHARAT EARTH MOVERS VS CIT, 245 ITR 428, THE SUPREME COURT HELD THAT WHERE THE ASSESSEE HAS INCURRED EXPENDITURE WHICH IS MORE THAN THE PROVISION FOR WARRANTY OBLIGATION MADE IN THE BOOKS OF ACCOUNT, IT CANNOT BE SAID THAT THE PROVISION MADE BY THE ASSESSEE IS NOT CAPABLE OF BEING ESTIMATED WITH THE REASONABLE CERTAINTY THOUGH ACTUAL QUANTIFICATION WAS NOT POSSIBLE AND THEREFORE, THE TRIBUNAL WAS JUSTIFIED IN ALLOWING THE DEDUCTION. THE DELHI HIGH COURT IN THE CASE OF CIT VS ERICSSION COMMUNICATIONS P. LTD, 318 ITR 340, HELD THAT PROVISION FOR WARRANTY CLAIMS ON SCIENTIFIC BASIS WHICH IS CONSISTENTLY APPLIED BY THE ASSESSEE FOR ITS BUSINESS WAS ALLOWABLE AS DEDUCTION. THE MADRAS HIGH COURT IN THE CASE OF CIT VS LUK INDIA PVT. LTD, 239 CTR 440, HELD THAT PROVISION FOR WARRANTY CLAIMED BY APPLYING THE SETTLED PRINCIPLES OF HAVING REGARD TO THE FACT THAT CLAIM WAS BASED ON A SCIENTIFIC APPROACH AND IT WAS WORKED OUT ON THE AVERAGE OF PREVIOUS YEARS WARRANTY SETTLEMENT IS ALLOWABLE EXPENDITURE. SAME VIEW WAS TAKEN BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF KONE ELEVATOR INDIA PVT. LTD VS ACIT, 340 ITR 46. FURTHER, THE SUPREME COURT IN THE CASE OF CALCUTTA CO. LTD VS CIT, 37 ITR 1, HELD THAT WHERE THE ASSESSEE WAS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING IS ENTITLED FOR DEDUCTION OF THE EXPENDITURE WHICH IS INCIDENTAL TO THE BUSINESS ON ACCRUAL BASIS THOUGH IT WAS NOT ACTUALLY INCURRED DURING THE RELEVANT ACCOUNTING YEAR. THE KERALA HIGH COURT IN THE CASE OF CIT VS INDIAN TRANSFORMERS LTD, 270 ITR 259, HELD THAT PROVISION CREATED BY THE ASSESSEE FOR AFTER SALES SERVICES BASED ON WARRANTY WAS TOWARDS A DEFINITE AND ASCERTAINED LIABILITY. ON THE BASIS OF RELEVANT FACTS THE PROVISION CANNOT BE TREATED AS A CONTINGENT LIABILITY AND THEREFORE, THE SAME WAS ALLOWABLE AS DEDUCTION. SAME VIEW WAS TAKEN BY THE DELHI HIGH COURT IN THE CASE OF CIT VS WHIRLPOOL OF INDIA LTD, 242 CTR 245, WHEREIN HELD THAT THE ASSESSEE CONSISTENTLY MAKING PROVISION FOR WARRANTY ON THE BASIS OF ACTUARIAL VALUATION IN RESPECT OF MACHINES SOLD DURING THE YEAR COULD NOT BE PRECLUDED FROM REVISING THIS PROVISION AFTER TAKING INTO CONSIDERATION THAT WARRANTY PERIOD OF THE GOODS SOLD UNDER WARRANTY WAS EXCEEDING AND PROVISION ALREADY PROVIDED IN A PARTICULAR YEAR IS FALLING SHORT OF THE EXPECTED CLAIM THAT MAY BE RECEIVED. SUCH A PROVISION IS BASED ON SCIENTIFIC STUDY AND ACTUARIAL BASIS AND TO BE ALLOWED AS A BUSINESS EXPENDITURE. HENCE, IN OUR OPINION, THE PROVISION FOR PAYMENT MADE BY THE ASSESSEE TOWARDS SUB- CONTRACT IS ALLOWABLE EXPENDITURE AS THE ASSESSEE RECOGNIZED THE REVENUE FROM THE SAID CONTRACT AS INCOME IN THE ASSESSMENT YEAR UNDER CONSIDERATION. FURTHER, WE MAKE IT CLEAR THAT THE ASSESSEE CANNOT CLAIM THE SAME EXPENDITURE ON ACTUAL PAYMENT BASIS, OTHERWISE IT AMOUNTS TO DOUBLE DEDUCTION ONE ON THE BASIS OF ACCRUAL AND ANOTHER ON THE BASIS OF ACTUAL PAYMENT. HENCE, WE DIRECT THE ASSESSING OFFICER TO ALLOW THIS RETENTION MONEY PAYMENT ONLY ON ACCRUAL BASIS AND NOT ON ACTUAL PAYMENT BASIS. WITH THESE OBSERVATIONS, WE REMIT THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR QUANTIFICATION. THIS GROUND IS PARTLY ALLOWED. I.T.A. NOS. 473/CHNY/17, 2676/CHNY/18 & 757/CHNY/18 6 6.1 THE LD. DR COULD NOT CONTROVERT BY FILING HIGHER COURT DECISION HAVING MODIFIED OR REVERSED THE ABOVE FINDINGS OF THE TRIBUNAL. FOR THE ASSESSMENT YEARS UNDER CONSIDERATION, THE LD. CIT(A) HAS RIGHTLY FOLLOWED THE ABOVE DECISION OF THE TRIBUNAL AND WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE. THUS, THE GROUND RAISED BY THE REVENUE STANDS DISMISSED FOR THE ASSESSMENT YEARS UNDER CONSIDERATION. 7. THE NEXT COMMON GROUND RAISED RELATES TO DISALLOWANCE OF ADDITIONAL DEPRECIATION CLAIMED TOWARDS READY-MIX CONCRETE. THE ASSESSEE HAS CLAIMED ADDITIONAL DEPRECIATION ON PLANT & MACHINERY. ACCORDING TO THE ASSESSING OFFICER, AS PER SECTION 32(2)(A) OF THE ACT, THE ADDITIONAL DEPRECIATION IS AVAILABLE FOR THE ASSESSEE WHICH IS ENGAGED IN MANUFACTURE OR PRODUCTION. SINCE THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CONSTRUCTION CONTRACT, THE CLAIM OF ADDITIONAL DEPRECIATION TOWARDS READY-MIX CONCRETE WAS DISALLOWED AND BROUGHT TO TAX. ON APPEAL, BY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR EARLIER ASSESSMENT YEARS, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITION AGAINST WHICH THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 7.1 WE HAVE HEARD THE RIVAL CONTENTIONS. WHILE ADJUDICATING SIMILAR ISSUE RAISED IN EARLIER ASSESSMENT YEARS VIDE ORDER DATED 06.01.2016, THE TRIBUNAL HAS OBSERVED AND HELD AS UNDER: I.T.A. NOS. 473/CHNY/17, 2676/CHNY/18 & 757/CHNY/18 7 21. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF READY-MIX CONCRETE AND SHOWN THE INCOME FROM READY-MIX CONCRETE SALES SEPARATELY AND CLAIMED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND PRODUCTION OF NEW ARTICLE AND FOR THAT PURPOSE IT HAS ACQUIRED NEW MACHINERY AND PLANT. ACCORDINGLY, ADDITIONAL DEPRECIATION U/S 32(1)(II) OF THE ACT WAS CLAIMED. THE ASSESSING OFFICER WAS OF THE OPINION THAT THE ASSESSEE WAS IN THE ACTIVITY OF CIVIL CONSTRUCTION AND IT IS NOT IN THE FIELD OF MANUFACTURING. HOWEVER, THE CIT(A) CONSIDERING THE READY-MIX CONCRETE PLANT AS A SEPARATE UNDERTAKING WHICH IS ENGAGED IN THE MANUFACTURE OF ARTICLE OR THING, GRANTED ADDITIONAL DEPRECIATION U/S 32(1)(II) OF THE ACT. IN OUR OPINION, THE FINDINGS OF THE CIT(A) IS JUSTIFIED AND THE CONTENTION OF THE REVENUE IS NOT SUSTAINABLE IN VIEW OF THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS VTM LTD, 319 ITR 336, WHEREIN HELD THAT THE ASSESSEE WHICH WAS A MANUFACTURER OF TEXTILE GOODS WHEN SET UP A WINDMILL WAS ENTITLED TO ADDITIONAL DEPRECIATION. SAME VIEW WAS TAKEN BY THE CO-ORDINATE BENCH IN THE CASE OF SHEELA CLINIC IN I.T.A. NO. 481/MDS/2011 DATED 30.5.2011, BY OBSERVING THAT GENERATION OF ELECTRICITY IS AN INDEPENDENT ACTIVITY THOUGH ORIGINALLY THE ASSESSEE IS ENGAGED IN THE BUSINESS OF RUNNING A HOSPITAL. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE ARE OF THE OPINION THAT THE CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE. THIS GROUND OF THE REVENUE IS DISMISSED. 7.2 FURTHER, WE HAVE PERUSED THE CASE LAW RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE IN THE CASE OF CHETTINAD BUILDERS P. LTD. V. DCIT IN T.C.A. NO. 261 OF 2017 DATED 08.08.2017, WHEREIN, THE SUBSTANTIAL QUESTION OF LAW ARISES AS TO WHETHER THE ADDITIONAL DEPRECIATION OF 20% ON PLANT AND MACHINERY USED FOR PRODUCTION OF READY MIX CONCRETE UNDER SECTION 32(1)(IIA) OF THE ACT COULD HAVE BEEN DISALLOWED WHEN THE ASSESSEE WAS MANUFACTURING READY MIX CONCRETE FOR THE PURPOSE OF SALE APART FROM USE IN CONSTRUCTION OF BUILDINGS AND WAS BEING LEVIED CENTRAL EXCISE DUTY ON SUCH MANUFACTURE? AFTER CONSIDERING VARIOUS CASE LAW, PROVISIONS OF SECTION 32 OF THE ACT AS WELL AS SECTION 2(29BA) OF THE ACT, THE HONBLE JURISDICTIONAL HIGH I.T.A. NOS. 473/CHNY/17, 2676/CHNY/18 & 757/CHNY/18 8 COURT HAS OBSERVED AND HELD AS UNDER: 23. THERE CAN BE NO DOUBT THAT PREPARATION OF READY MIX CONCRETE RESULTS IN TRANSFORMATION OF STONE CHIPS, SAND, CEMENT, FLYASH AND OTHER ARTICLES INTO A NEW AND DISTINCT OBJECT HAVING A DIFFERENT NAME, CHARACTER AND USE. ONCE THE READY MIX CONCRETE IS PREPARED, THE INGREDIENTS USED LOSE THEIR ORIGINAL CHARACTER AND CAN NEVER BE RESTORED TO THEIR ORIGINAL CHARACTER. IT IS NOT IN DISPUTE THAT THE APPELLANT-ASSESSEE IS REGISTERED UNDER THE CENTRAL EXCISE ACT AND HAS BEEN PAYING INTER ALIA EXCISE DUTY FOR MANUFACTURE OF CONCRETE READY MIX, WHICH IS SOLD BY THE APPELLANT-ASSESSEE TO OTHER CIVIL CONTRACTORS. 24. THE JUDGMENT AND ORDER OF THE LEARNED TRIBUNAL CANNOT BE SUSTAINED TO THE EXTENT THAT THE ADDITIONAL DEPRECIATION CLAIMED BY THE APPELLANT-ASSESSEE ON THE MACHINERY USED FOR MANUFACTURE OF READY MIX CONCRETE HAS BEEN DISALLOWED, AND THE SAME IS SET ASIDE. WE RESTORE THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 1 IN THIS REGARD. 25. THE APPEAL IS ACCORDINGLY ALLOWED, AND THE QUESTION FORMULATED IS ANSWERED AGAINST THE REVENUE, IN FAVOUR OF THE APPELLANT-ASSESSEE. NO COSTS. 7. 3 THE LD. DR COULD NOT CONTROVERT THE ABOVE JUDGEMENT OF THE HONBLE JURISDICTIONAL HIGH COURT AS WELL AS DECISION OF THE TRIBUNAL. THUS, WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT(A) HAS RIGHTLY FOLLOWED THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR EARLIER ASSESSMENT YEARS WHILE DELETING THE ADDITION. IN VIEW OF THE ABOVE, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE AND ACCORDINGLY, THE GROUND RAISED BY THE REVENUE FOR THE ASSESSMENT YEARS UNDER CONSIDERATION STANDS DISMISSED. 8. THE NEXT COMMON GROUND RAISED IN THE ASSESSMENT YEAR 2012-13 AND I.T.A. NOS. 473/CHNY/17, 2676/CHNY/18 & 757/CHNY/18 9 2013-14 RELATES TO RESTRICTION OF DISALLOWANCE MADE UNDER SECTION 14A R.W. RULE 8D TO THE EXTENT OF EXEMPT INCOME EARNED. THE ASSESSEE HAS ADMITTED EXEMPT INCOME OF .3,360/-, . 4,512/- AND .4,512/- FOR THE ASSESSMENT YEARS 2012-13, 2013-14 AND 2014-15 AGAINST HUGE INVESTMENTS IN ASSESSEES WHOLLY OWNED SUBSIDIARIES. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS NOT MADE ANY DISTINCT BETWEEN THE SOURCES OF FUND AVAILABLE AS RESERVE & SURPLUS FOR THE PURPOSE OF INVESTMENT AND LOAN AMOUNT FOR THE PURPOSE OF BUSINESS SINCE ALL FUNDS WERE KEPT IN COMMON KITTY AND UTILIZED FOR BOTH BUSINESS PURPOSES AS WELL AS FOR INVESTMENTS. SINCE HUGE INVESTMENTS WARRANT SUBSTANTIAL EXPENDITURE AND THE ASSESSEE HAS NOT ADMITTED ANY EXPENDITURE, THE ASSESSING OFFICER DETERMINED THE EXPENDITURE COMPONENT AS PER THE PROVISIONS OF RULE 8D AT .1,63,40,256/-, .2,38,51,126/- AND .2,49,80,523/- FOR THE ASSESSMENT YEARS 2012-13, 2013-14 & 2014-15 AND BROUGHT TO TAX. ON APPEAL, BY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR EARLIER ASSESSMENT YEARS, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D TO THE EXTENT OF EXEMPT INCOME EARNED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION, AGAINST WHICH THE REVENUE IS IN APPEAL. 8.1 WE HAVE CONSIDERED THE RIVAL CONTENTIONS. IT IS AN ADMITTED FACT THAT THE ASSESSEE HAS ADMITTED EXEMPT INCOME OF .3,360/- ASSESSMENT YEAR I.T.A. NOS. 473/CHNY/17, 2676/CHNY/18 & 757/CHNY/18 10 2012-13 AND .4,512/- FOR BOTH THE ASSESSMENT YEARS 2013-14 AS WELL AS 2014-15 AGAINST HUGE INVESTMENTS IN ASSESSEES WHOLLY OWNED SUBSIDIARIES, WHICH WAS NOT IN DISPUTE. SINCE THE ASSESSEE HAS NOT ADMITTED ANY EXPENDITURE, THE ASSESSING OFFICER DETERMINED THE EXPENDITURE COMPONENT AS PER THE PROVISIONS OF RULE 8D. BY FOLLOWING THE DECISION OF MUMBAI BENCHES OF THE TRIBUNAL IN THE CASE OF DAGA GLOBAL CHEMICALS PVT. LTD. V. ACIT IN I.T.A. NO. 5592/MUM/2012 DATED 01.01.2015 AND THE JUDGEMENT OF THE DELHI HIGH COURT IN THE CASE OF JOINT INVESTMENTS PVT. LTD. V. CIT 372 ITR 694, THE TRIBUNAL DIRECTED THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE TO THE EXTENT OF EXEMPT INCOME EARNED, WHICH WAS FOLLOWED BY THE LD. CIT(A) WHILE DIRECTING THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE. THIS TRIBUNAL IS CONSISTENTLY FOLLOWING THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF JOINT INVESTMENTS PVT. LTD. V. CIT (SUPRA) TO RESTRICT THE DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D TO THE EXTENT OF EXEMPT INCOME EARNED BY THE ASSESSEE, WHERE THE ASSESSEE HAS NOT ADMITTED ANY EXPENSES. SINCE THE LD. CIT(A) HAS FOLLOWED THE DECISION OF THE TRIBUNAL IN DIRECTING THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE TO EXEMPT INCOME EARNED, WHEREIN, THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF JOINT INVESTMENTS PVT. LTD. V. CIT (SUPRA) HAS BEEN REFERRED AND PRODUCED THE OBSERVATIONS OF THE HONBLE DELHI HIGH COURT, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE. ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS DISMISSED FOR THE ASSESSMENT YEARS UNDER CONSIDERATION. I.T.A. NOS. 473/CHNY/17, 2676/CHNY/18 & 757/CHNY/18 11 9. IN THE RESULT, ALL THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON THE 25 TH OCTOBER, 2019 AT CHENNAI. SD/- SD/- (RAMIT KOCHAR) ACCOUNTANT MEMBER (DUVVURU RL REDDY) JUDICIAL MEMBER CHENNAI, DATED, THE 25.10.2019 VM/- /COPY TO: 1. / APPELLANT, 2. / RESPONDENT, 3. ( ) /CIT(A), 4. /CIT, 5. /DR & 6. /GF.