The ITO, Ward-4(1), Ahmedabad V. Gujarat State Warehousing Corporation, Ahmedabad

ITA 2901/AHD/2008

• Counselvise Citation: 290120514 RSA 2008
• Duration Of Justice: 3 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 28-03-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 08-08-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Assessee Lawyers: S N SOPARKAR
• Keywords: Depreciation; Business expenditure; Bad and doubtful debts; Corroborative evidences; Capital receipt; Revised return; Revenue expenditure; Capital expenditure
• Section: 43B; 142(1); 37(1)

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE SHRI D. K. TYAGI, JM AND A. MOHAN ALANKAMON Y, AM) ITA NO.2901/AHD/2008 (WITH C. O. NO.224/AHD/2008): AY.: 2004-05) THE INCOME TAX OFFICER, WARD 4 (1), R. NO.105, 1 ST FLOOR, NAVJIVAN TRUST BUILDING, NAVJIVAN P.O., AHMEDABAD VS GUJARAT STATE WAREHOUSING CORPORATION, SHANTI SADAN ESTATE, OPP. DINBHAI TOWER, MIRZAPUR, AHMEDABAD 381 001 PA NO. AABCG 6778 P (APPELLANT) (RESPONDENT) APPELLANT BY SHRI DINESH SINGH, SR. DR RESPONDENT BY SHRI S. N. SOPARKAR, AR DATE OF HEARING: 28-03-2012 DATE OF PRONOUNCEMENT: 30-04-2012 O R D E R PER A. MOHAN ALANKAMONY: THIS APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AG AINST THE ORDER OF THE LEARNED CIT(A)-VIII, AHMEDABAD DATED 06-05-2008 IN APPEAL NO. CIT(A)-VIII/ITO WD.4(1)/171/06-07, FOR ASSESSMENT Y EAR 2004-05. BOTH THE APPEALS ARE DISPOSED OF BY THIS COMMON ORD ER FOR THE SAKE OF CONVENIENCE. I. ITA NO.2901/AHD/2008 (REVENUES APPEAL) THE REVENUE IN THEIR APPEAL HAS TAKEN THE FOLLOWING GROUNDS: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACT S OF THE CASE IN DELETING THE ADDITION OF RS.3,16,584/- MADE ON ACCOUNT OF STORAGE CHARGES RECEIVABLE. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE DISALLOWANCE OF RS.2,17,489/-, BEING PRIOR PERIOD EXPENSES. ITA NO.2901/AHD/2008 (AY: 2004-05) ITO, W-4(1), AHMEDABAD VS GUJARAT STATE WAREHOUSING CORPORATION 2 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE DISALLOWANCE OF RS.1,34,119/-, BEING PRIOR PERIOD INCOME. 4. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE DISALLOWANCE OF DEPRECIATION O F RS.70,635/- 5, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DIRECTING THE ASSESSING OFFICER NOT TO TAX THE S UBSIDY OF RS.7,06,350/-, WHEN THE SAME HAD BEEN OFFERED BY TH E ASSESSEE IN ITS RETURN OF INCOME. THE DIRECTION OF THE LD. CIT(A) IS IN CONTRAVENTION TO THE DECISION OF THE H ONBLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. VS . CIT (2006) 284 ITR 323 (SC). 6. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DIRECTING THE ASSESSING OFFICER TO REDUCE THE IN COME BY THE AMOUNT OF RS.33,90,270/-, BEING EXCESS DEPRECIA TION PROVIDED IN THE BOOKS OF ACCOUNTS. THE DIRECTION OF THE LD. CIT(A) IS ALSO IN CONTRAVENTION TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. VS. CIT (2006) 284 ITR 323 (SC). GROUNDS NO.7 AND 8 ARE GENERAL IN NATURE AND THEREF ORE, DO NOT SURVIVE FOR ADJUDICATION. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE CORPORATION IS ENGAGED IN WAREHOUSING AND INCIDENTA L ACTIVITIES. THE ASSESSEE FILED IT RETURN OF INCOME ON 29-10-2004 DE CLARING TOTAL LOSS OF RS.84,31,770/-. THE SAID RETURN WAS PROCESSED U/ S. 143(1) OF THE IT ACT ON 08-02-2005 AND THE CASE WAS SELECTED FOR SCRUTINY BY ISSUING NOTICE U/S 143(2) OF THE ACT ON 31-03-2005 WHICH WAS DULY SERVED ON 06-04-2005. THE ASSESSEE FILED REVISED RE TURN ON 18-10- 2005 REVISING THE FIGURES FOR LEAVE ENCASHMENT PAYM ENT OF PF ETC. AFTER THAT, NOTICE U/S 143(2) AND 142(1) OF THE ACT WERE ISSUED ALONG WITH QUESTIONNAIRES AND SERVED ON 27-04-2006 AND FU RTHER NOTICE WAS ISSUED U/S 143(2) OF THE ACT ON 13-06-2006. ON VER IFICATION OF THE ITA NO.2901/AHD/2008 (AY: 2004-05) ITO, W-4(1), AHMEDABAD VS GUJARAT STATE WAREHOUSING CORPORATION 3 DETAILS FILED BY THE ASSESSEE AND THE RETURN OF INC OME THE LD.AO OBSERVED THAT THE ASSESSEE HAD ISSUED BILL FOR WAR EHOUSE CHARGES FOR RS.3,86,412/- TO CIRCLE STAMP DEPOT FOR THE FINANCIAL YEAR 2003- 04, BUT ACCOUNTED FOR RS.69,828/- ONLY IN THE B OOKS OF ACCOUNTS AS WAREHOUSE CHARGES. THE AO ACCORDINGLY MADE THE ADD ITION OF RS.3,16,584/- TO THE INCOME OF THE ASSESSEE AS THE SAME WAS NOT OFFERED FOR TAXATION. 2.1 BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R IN APPEAL BEFORE THE LEARNED CIT(A) AND IT WAS SUBMITTED THA T THE ASSESSEE HAD DISCLOSED THE SAME IN THE NOTES FORMING PART OF THE ACCOUNTS NO.12 OF SCHEDULE S TO THE ANNUAL REPORT, BEING AC COUNTED ON RECEIPT BASIS. THE CIRCLE STAMP DEPOT RESERVED THE GODOWNS OF THE ASSESSEE FROM 22-08-1979. THE ASSESSEE REVISED ITS WAREHOUSE CHARGES FROM TIME TO TIME BUT THE CIRCLE STAMP DEPO T REFUSED TO PAY REVISED CHARGES. THE ASSESSEE ALSO FILED CIVIL SUIT FOR RECOVERY OF THE ADDITIONAL CHARGES IN 1995. IT WAS ALSO SUBMITTED T HAT THE BILLS RAISED BY THE ASSESSEE AT REVISED RATES IS CONTINGENT INCO ME TILL ACCEPTANCE BY THE OTHER PARTY. IT WAS FURTHER SUBMITTED THAT T HE CONCERNED PARTY VACATED THE GODOWNS ON 31-10-2005 AND THE ASSESSEE DECIDED TO WRITE OFF THE BALANCE OUTSTANDING IN THE FINANCIAL YEAR 2005-06 IN ITS BOOKS OF ACCOUNTS. THE LEARNED AR ALSO DREW ATTENT ION OF THE LEARNED CIT(A) TO SCHEDULE R OF THE ANNUAL REPORT IN WHICH SIGNIFICANT ACCOUNTING POLICIES AND PROCEDURES HAVE BEEN DISCLOSED BY THE ASSESSEE. THE ASSESSEE SUBMITTED THAT THE AO HAD NOT CONSIDERED THE FACT THAT THIS INCOME WAS DISPUTED A ND WAS NOT RECEIVED BY THE ASSESSEE AND THE SAME HAD BEEN WRIT TEN OFF AS ITA NO.2901/AHD/2008 (AY: 2004-05) ITO, W-4(1), AHMEDABAD VS GUJARAT STATE WAREHOUSING CORPORATION 4 IRRECOVERABLE IN THE FINANCIAL YEAR 2005-06 AND THE REFORE, THERE WAS NO ACCRUAL OF INCREMENTAL RENTAL INCOME AND THE ADD ITION ON ACCOUNT OF THE SAME MAY BE DELETED. 2.2 THE LEARNED CIT(A) CONSIDERING THE FACTS OF THE CASE AND THE SUBMISSION OF THE ASSESSEE DELETED THE ADDITION BY OBSERVING AS UNDER IN PARA 3.2 OF HIS ORDER: 3.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE LEAR NED AR CAREFULLY. IT IS SEEN THAT THE APPELLANT DID NOT RE CEIVE THE INCREASE IN STORAGE RENT ULTIMATELY AND THE GODOWNS WERE VACATED BY THE POST MASTER GENERAL SUBSEQUENTLY ON 30-10- 2005. IT WAS AN INCREASE MADE UNILATERALLY BY THE A SSESSEE WHICH WAS NOT ACCEPTED BY THE TENANT. THE INCREASE IN RENT BECAME DISPUTED, SO IT CANNOT BE HELD THAT THE RENT HAS ACCORD TO THE APPELLANT. IN VIEW OF THE FACTS OF THE CASE AS THE DISPUTED INCOME HAS NOT BEEN RECEIVED BY THE APPELLANT AND T HE SAME HAS BEEN WRITTEN OFF IN THE F 2005-06, THERE IS NO QUESTION OF ACCRUAL OF ADDITIONAL RENTAL INCOME OF RS.3,16,584/ -, THEREFORE, THE ADDITION OF THE SAID AMOUNT IS DELETED. 2.3 AGGRIEVED, THE REVENUE IS IN SECOND APPEAL BEFO RE US. 3. AT THE BEGINNING OF THE HEARING LD. AR SUBMITT ED THAT THE ISSUE IS COVERED BY THE ORDER OF THE TRIBUNAL FOR THE ASS ESSMENT YEAR 2003- 04 DATED 17/07/09 IN ITA NO.837/AHD/2006 WHEREIN IT WAS HELD AS UNDER: IN THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT UNDER THE MERCANTILE S YSTEM OF ACCOUNTING, THE ASSESSEE IS REQUIRED TO ACCOUNT FOR THOSE INCOME WHICH HAS ACCRUED TO THE ASSESSEE. AN INCOME ACCRUED TO THE ASSESSEE ONLY WHEN IT ACQUIRES A RIGHT TO RE CEIVE THAT INCOME. IN THE INSTANT CASE, THE ASSESSEE REVISED W AREHOUSING ITA NO.2901/AHD/2008 (AY: 2004-05) ITO, W-4(1), AHMEDABAD VS GUJARAT STATE WAREHOUSING CORPORATION 5 CHARGES WHICH WAS NOT ACCEPTED BY THE CIRCLE STAMP DEPOT. THEREFORE, THE ASSESSEE FILED A CIVIL SUIT FOR RECO VERY OF THE REVISED WAREHOUSING CHARGES. THUS, THE REVISED WARE HOUSE CHARGES WILL BE RECEIVABLE BY THE ASSESSEE ONLY WHE N THIS DISPUTE IS SETTLED BETWEEN THE ASSESSEE AND CIRCLE STAMP DEPOT AS BECAUSE THE CLAIM MADE BY THE ASSESSEE WAS NOT ACCEPTED BY THE CIRCLE STAMP DEPOT. THE LD. DEPARTM ENTAL REPRESENTATIVE BROUGHT NO MATERIAL BEFORE US TO SHO W THAT THE CLAIM MADE BY THE ASSESSEE FOR THE REVISED WAREHOUS ING CHARGES WAS ACCEPTED AT ANY POINT OF TIME DURING TH E YEAR UNDER CONSIDERATION BY CIRCLE STAMP DEPOT. IN ABSEN CE OF SUCH A MATERIAL, THE LOWER AUTHORITIES WERE NOT JUSTIFIE D IN ASSUMING THAT ASSESSEE GOT RIGHT TO RECEIVE THE REMAINING AM OUNT OF RS.3,86,412/- DURING THE YEAR UNDER CONSIDERATION. WE, THEREFORE, SET ASIDE THE ORDER OF THE LD. CIT(APPEA LS) AND DIRECT THE ASSESSING OFFICER TO EXCLUDE THE WAREHOUSING CH ARGES RECEIVABLE OF RS.3,86,412/- FROM THE TOTAL INCOME O F THE ASSESSEE. HENCE, THE GROUND OF APPEAL OF THE ASSESS EE IS ALLOWED. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. THIS ISSUE FOR THE RE LEVANT ASSESSMENT YEAR IS IDENTICAL TO THE ISSUE DECIDED BY THE TRIBU NAL FOR THE ASSESSMENT YEAR 2003-04 AS POINTED OUT BY THE LD. A R. BEFORE US FOR THE RELEVANT ASSESSMENT YEAR ALSO THE REVENUE H AS NOT BROUGHT OUT ANY MATERIALS TO SHOW THAT THE CLAIM MADE BY TH E ASSESSEE FOR THE REVISED WAREHOUSING CHARGES WAS ACCEPTED AT ANY POINT OF TIME DURING THE YEAR UNDER CONSIDERATION BY CIRCLE STAMP DEPOT. THEREFORE WE ARE INCLINED TO FOLLOW THE DECISION RE NDERED BY THE EARLIER BENCH AND HOLD THE MATTER IN FAVOUR OF THE ASSESSEE. 5.1 GROUND NO.2 DELETING THE DISALLOWANCE OF PRIO R PERIOD EXPENSES OF RS.2,17489/- : THE LEARNED AO ON VERIFI CATION OF SCHEDULE Q TO THE PROFIT & LOSS ACCOUNT FILED AL ONG WITH THE RETURN ITA NO.2901/AHD/2008 (AY: 2004-05) ITO, W-4(1), AHMEDABAD VS GUJARAT STATE WAREHOUSING CORPORATION 6 OF INCOME, NOTICED THAT THE ASSESSEE HAD DEBITED A SUM OF RS.4,40,119/- RELATED TO PRIOR PERIOD EXPENSES. ON BEING QUESTIONED THE ASSESSEE FILED THE DETAILS OF THESE EXPENSES AL ONG WITH VOUCHERS AND SUPPORTING EVIDENCES AND SUBMITTED THAT THE ASS ESSEE HAS SUO MOTU DISALLOWED AN AMOUNT OF RS.1,42,520/- IN T HE STATEMENT OF TOTAL INCOME FILED ALONG WITH THE RETURN OF INCOME ON 18-10-2005 AND IN VIEW OF THIS FACT, ALLOWABILITY OF THE EXPENSES AMOUNTING TO RS.2,97,599/- WAS EXAMINED. ON EXAMINING THE DETAI LS THE LD.AO BIFURCATED THE EXPENSES AS FOLLOWS: A) U/S. 43B OF THE ACT ON PAYMENT BASIS. B) OF ORIGINAL BILLS NOT RECEIVABLE BY HEAD OFFICE . C) EXPENSES PAID RELATES TO CURRENT YEAR. D) EXPENSES REMAIN TO BE PROVIDED AND E) EXPENSES RECEIVED MANAGING DIRECTORS APPROVAL. 5.2 THE LD.AO DID NOT ACCEPT THE CLAIM OF THE A SSESSEE FOR THE FOLLOWING REASONS: A) THE CLAIM OF THE ASSESSEE U/S 43(B) OF THE ACT I S NOT APPEARING IN PAYMENT IN PREVIOUS YEARS. HOWEVER, EV EN, IF IT WOULD HAVE BEEN PAID, THE INCOME OF THE ASSESSEE BE ING EXEMPT IN THE EARLIER YEARS, THE CLAIM WOULD NOT HA VE BEEN ALLOWABLE. B) THE CLAIM OF THE ASSESSEE THAT THE ORIGINAL BILL S NOT RECEIVED IS NOT TENABLE BECAUSE THE EXPENSES ARE TO BE ACCOUNTED FOR ON DUE BASIS UNDER THE MERCANTILE SYS TEM OF ACCOUNTING. ITA NO.2901/AHD/2008 (AY: 2004-05) ITO, W-4(1), AHMEDABAD VS GUJARAT STATE WAREHOUSING CORPORATION 7 C) THE ASSESSEE WAS REQUESTED TO SUBMIT THE DETAILS OF ALLOWABILITY OF THE EXPENSES RELATING TO CURRENT YE AR. D) IT IS NOT RELEVANT AS TO WHETHER THE EXPENSES AR E REMAINED TO BE PROVIDED OR NOT AND E) THE MANAGING DIRECTORS APPROVAL IS AN INTERNAL MATTER AND HENCE NO RELEVANCE TO THE ACCOUNTING OF THE INCOME/EXPENSES UNDER MERCANTILE SYSTEM OF ACCOUNTI NG. ACCORDINGLY, THE LD. AO DISALLOWED THE CLAIM OF PRI OR PERIOD EXPENSES AND MADE ADDITION OF RS.2,17,489/-. 6. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(A) AND THE ASSESSEE VIDE ITS LETTER DATED 07-0 8-2006 SUBMITTED AS UNDER: THE ASSESSEE IS A STATE GOVERNMENT CORPORATION EST ABLISHED UNDER GOVERNMENT NOTIFICATION, RURAL DEVELOPMENT DE PARTMENT NO.WHA-1860-B DATED 5 TH DECEMBER, 1960. IT IS GOVERNED BY WAREHOUSING CORPORATION ACT, 1962. RURAL DEVELOPMEN T DEPARTMENT, GOVERNMENT OF GUJARAT HAS ISSUED NOTIFI CATION NO.GT/204/WHA, 4263/5858 DATED 13 TH OCTOBER, 1964 IN EXERCISE OF THE POWERS CONFERRED BY SECTION 41 OF T HE WAREHOUSING CORPORATION ACT, 1962, SPECIFYING THE R ULES FOR THE ADMINISTRATION OF THE ASSESSEE CORPORATION. ACCORDI NGLY, THE MANAGING DIRECTOR OF THE CORPORATION HAS THE AUTHOR ITY TO SANCTION THE EXPENDITURE. AS PER THE ACCOUNTING MET HOD FOLLOWED BY THE ASSESSEE FROM ITS INCEPTION, THE EX PENDITURE IN THE BOOKS OF ACCOUNTS HAS BEEN ACCOUNTED AFTER OBTA INING SANCTION FROM THE MANAGING DIRECTOR. IN THE DETAIL GIVEN IN BOOKS OF ACCOUNTS THE EXPENDITURE RELATING TO EARLI ER AND SANCTIONED BY THE MANAGING DIRECTOR IN THE CURRENT YEAR ARE ACCOUNTED UNDER THE HEAD PRIOR PERIOD EXPENSES. ALL THE EXPENDITURE ARE SANCTIONED IN THE NORMAL COURSE OF BUSINESS. HOWEVER, SOMETIME IN THE ABSENCE OF M. D. THE EXPEN DITURES COULD NOT BE SANCTIONED, AND IN SOME CASES THE EXPE NDITURE ITA NO.2901/AHD/2008 (AY: 2004-05) ITO, W-4(1), AHMEDABAD VS GUJARAT STATE WAREHOUSING CORPORATION 8 HAS BEEN SANCTIONED AFTER OBTAINING EXPLANATION, IF ANY. THIS HAS RESULTED IN DELAY IN SANCTION AND CONSEQUENTIAL DELAY IN ACCOUNTING OF EXPENDITURE. AS PER PAST PRACTICE, TH E EXPENDITURE ACCRUES ON GETTING SANCTION OF THE M. D . IRRESPECTIVE OF THE PERIOD TO WHICH IT RELATES. THE REFORE, THE EXPENDITURE DEBITED TO PRIOR PERIOD IS ACCRUED ANY CRYSTALISED DURING THE CURRENT ASSESSMENT YEAR AND ALLOWABLE AS BUSINESS EXPENDITURE U/S 37(1) OF THE I.T. ACT, 1961. IT WAS FURTHER SUBMITTED THAT THE ABOVE EXPLANATION OF THE ASSESSEE WAS NOT ACCEPTED BY THE LEARNED AO STATING THAT SAN CTION BY THE HEAD OF THE ORGANIZATION I.E. MANAGING DIRECTOR IS NOT R ELEVANT. THE ASSESSEE PLEADED THAT SINCE ALL THE NECESSARY DETAI LS ALONG WITH SUPPORTING VOUCHERS WERE FILED DURING THE ASSESSMEN T PROCEEDINGS PRIOR PERIOD EXPENSES MAY BE ALLOWED AS BUSINESS EX PENDITURE OF THE ASSESSEE FOR CURRENT YEAR. 6.1 THE LEARNED CIT(A) CONSIDERING THE SUBMISSION O F THE ASSESSEE TO BE CONVINCING ALLOWED THE PRIOR PERIOD EXPENSES OF RS.2,17,489/- BY OBSERVING AS UNDER IN PARA 5.1 OF HIS ORDER: 5.1 I HAVE CONSIDERED THE SUBMISSIONS OF THE A. R. CAREFULLY. I FIND THE EXPLANATION OF THE A. R. CONVINCING. THE P RIOR PERIOD EXPENSES OF RS.2,17,489/- HAVE BEEN ACCOUNTED AFTER OBTAINING SANCTION FROM THE MANAGING DIRECTOR OF THE APPELLAN T. THUS THE LIABILITY OF THE ABOVE EXPENSES HAS CRYSTALISED DUR ING THE YEAR UNDER CONSIDERATION AND THEREFORE THE SAME IS DIREC TED TO BE ALLOWED IN THIS YEAR. 6.2 AGGRIEVED, THE REVENUE CARRIED THE MATTER IN SE COND APPEAL BEFORE US. ITA NO.2901/AHD/2008 (AY: 2004-05) ITO, W-4(1), AHMEDABAD VS GUJARAT STATE WAREHOUSING CORPORATION 9 7. THE LEARNED DR SUPPORTED THE ORDER OF THE LEARNE D AO AND SUBMITTED THAT THE PRIOR PERIOD EXPENSES CANNOT BE ALLOWED AS DEDUCTION FOR THE CURRENT YEAR. 8. ON THE OTHER HAND, THE LEARNED AR SUPPORTED THE ORDER OF THE LEARNED CIT(A) AND REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. 9.1 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE REASONS OBSERVED BY THE LD .AO FOR THE ADDITION ARE HEREIN BELLOW DISCUSSED AND ADJUDICATE :- REASONING OF AO 1. THE CLAIM OF THE ASSESSEE U/S 43(B) OF THE ACT I S NOT APPEARING IN PAYMENT IN PREVIOUS YEARS. HOWEVER, EVEN, IF IT WOU LD HAVE BEEN PAID, THE INCOME OF THE ASSESSEE BEING EXEMPT IN TH E EARLIER YEARS, THE CLAIM WOULD NOT HAVE BEEN ALLOWABLE OUR DECISION:- THE ITEMS OF PAYMENT FALLING U/S 43 (B) OF THE ACT SHALL BE ALLOWED TO BE CLAIMED STRICTLY AS PER THE PROVISIONS STIPULATED IN THAT SECTION AND NOT OTHERWISE. REASONING OF AO 2. THE CLAIM OF THE ASSESSEE THAT THE ORIGINAL BILLS N OT RECEIVED IS NOT TENABLE BECAUSE THE EXPENSES ARE TO BE ACCOUNTED FO R ON DUE BASIS UNDER THE MERCANTILE SYSTEM OF ACCOUNTING. OUR DECISION:- THE LD.AO IS ABSOLUTELY CORRECT IN STATING SO, SINCE IN MERCANTILE SYSTEM OF ACCOUNTING, THE EXPEN SE WILL CRYSTALIZE ITA NO.2901/AHD/2008 (AY: 2004-05) ITO, W-4(1), AHMEDABAD VS GUJARAT STATE WAREHOUSING CORPORATION 10 ON THE DATE OF RAISING OF THE BILL AS PER THE AGREE D TERMS AND NOT ON THE DATE OF THE RECEIPT OF BILLS. REASONING OF AO 3. THE ASSESSEE WAS REQUESTED TO SUBMIT THE DETAILS OF ALLOWABILITY OF THE EXPENSES RELATING TO CURRENT YEAR. OUR DECISION:- NOT RELEVANT. REASONING OF AO 4. IT IS NOT RELEVANT AS TO WHETHER THE EXPENSES ARE R EMAINED TO BE PROVIDED OR NOT OUR DECISION:- EXPENSES CAN BE CLAIMED AS DEDUCTION ONLY WHEN IT IS CRYSTALIZED AND NOT OTHERWISE SUBJECT TO THE OTHER PROVISIONS OF THE ACT. REASONING OF AO 5. THE MANAGING DIRECTORS APPROVAL IS AN INTERNAL MAT TER AND HENCE NO RELEVANCE TO THE ACCOUNTING OF THE INCOME/EXPENS ES UNDER MERCANTILE SYSTEM OF ACCOUNTING. OUR DECISION:- THE REASONING OF THE LD.AO IS PERFEC TLY CORRECT BECAUSE EXPENDITURE INCURRED BY THE ASSESSEE CAN BE CLAIMED ONLY WHEN IT CRYSTALLIZES. THE INTERNAL MATTER WITH REGA RD TO PROCEDURES WILL HAVE NO BEARING. SINCE THE APPROVAL OF THE MANAGING DIRECTOR IS AN INTERNAL PROCEDURE THE SAME WILL HAVE NO BEARING IN THE CLAIM OF DEDUCTION UNDER INCOME TAX ACT WHICH RECOGNIZES MER CANTILE SYSTEM ITA NO.2901/AHD/2008 (AY: 2004-05) ITO, W-4(1), AHMEDABAD VS GUJARAT STATE WAREHOUSING CORPORATION 11 OF ACCOUNTING. THEREFORE WE DO NOT ACCEDE TO THE VI EW OF THE LD.CIT ON THIS ISSUE. 9.2. THUS WITH RESPECT TO THIS GROUND OF THE REVEN UE ON DELETING THE DISALLOWANCE OF RS. 2,17,489/- BEING PRIOR PERIOD E XPENSES, WE HEREBY SET ASIDE THE ORDER OF LD.CIT(A) AND REMIT IT BACK TO THE FILE OF LD.CIT(A) IN ORDER TO PASS APPROPRIATE ORDER IN THE LIGHT OF OUR OBSERVATIONS ABOVE. 10. GROUND NO.3: DELETION OF DISALLOWANCE OF RS.1, 34,119/- BEING BAD DEBTS RELATED TO THE PRIOR PERIOD OF EXEMPT INC OME : THE LEARNED AO NOTED ON VERIFICATION OF SCHEDULE P FILED WIT H THE RETURN OF INCOME THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF R S.13,70,693/- TOWARDS PRIOR PERIOD INCOME(DEBIT). THE ASSESSEE WA S ASKED AS TO WHY THE SAME SHOULD NOT BE ADDED TO THE INCOME. IN RESPONSE THERETO, THE ASSESSEE FILED THE STATEMENT SHOWING D ETAILED BREAK-UP OF PERIOD INCOME (DEBIT) CONTAINING DATE, NAME OF T HE PARTY, DETAILS OF VOUCHER NUMBER AND AMOUNT ETC. THE LEARNED AO ON VE RIFICATION OF THE ACCOUNTS AND VOUCHERS FOUND THAT THE DETAILS RE GARDING A TOTAL SUM OF RS.1,34,119/ - WERE NOT SUBMITTED BY THE ASS ESSEE. THE ASSESSEE WAS AGAIN SPECIFICALLY ASKED TO SUBMIT THE DETAILS. THE ASSESSEE IN RESPONSE THERETO SUBMITTED THAT THE WAR EHOUSE CHARGES FOR THE ABOVE AMOUNT WERE TAKEN INTO ACCOUNT IN COM PUTING INCOME OF EARLIER YEARS AND THE SAME ARE NOT RECOVERABLE NOW AND THEREFORE, THE IT IS ALLOWABLE AS BAD DEBT U/S 36(1) (VII) OF THE ACT. THE LEARNED AO DID NOT FIND THE ABOVE REPLY OF THE ASSESSEE TO BE ACCEPTABLE BECAUSE THIS INCOME RELATES TO THE PERIOD WHEN THE INCOME OF THE ITA NO.2901/AHD/2008 (AY: 2004-05) ITO, W-4(1), AHMEDABAD VS GUJARAT STATE WAREHOUSING CORPORATION 12 ASSESSEE WAS NOT TAXABLE. ACCORDINGLY THE LEARNED A O DISALLOWED A SUM OF RS.1,34,119/- AND ADDED THE SAME TO THE INCO ME OF THE ASSESSEE. 10.1 BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTE R IN APPEAL BEFORE THE LEARNED CIT(A). IT WAS SUBMITTED THAT TH E REVENUE ACKNOWLEDGED THE DEBT AND THAT THE DEBT WAS WRITTEN OFF IN THE ACCOUNTS. THE ONLY DISPUTE OF THE REVENUE WAS THAT THE INCOME SHOWN ON ACCOUNT OF THE DEBT WAS NOT TAXABLE IN THE RELEVANT EARLIER YEAR AND THEREFORE, THE CLAIM OF BAD DEBTS IS NOT A CCEPTABLE. IT WAS FURTHER SUBMITTED THAT AS PER PROVISIONS OF SECTION 36(2) OF THE ACT THE AMOUNT OF DEBT IS TO BE TAKEN INTO ACCOUNT WHILE CO MPUTING THE INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR IN WHIC H THE SAID AMOUNT IS WRITTEN OFF OR ANY EARLIER PREVIOUS AND THAT THE RE IS NO PROVISION IN THE ACT THAT INCOME SHOULD HAVE BEEN LIABLE TO TAX AND THE ASSESSEE SHOULD HAVE PAID THE TAX THEREON SINCE FOR VARIOUS PROVISIONS UNDER THE ACT SUCH INCOME COULD BE EXEMPT. THE ASSESSEE FURTHER PLEADED THAT AS THE CORRESPONDING DEBT HAD BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE EARLIER YEAR, SAME IS A LLOWABLE AS BAD DEBT IRRESPECTIVE OF THE TAXABILITY OF THE INCOME I N RESPECTIVE EARLIER YEAR AND AS SUCH DEDUCTION OF RS.1,34,119/- MAY BE ALLOWED. THE LEARNED CIT(A) CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE DISALLOWANCE BY OBSERVING AS UNDER IN PARA 6.2 OF HIS ORDER: 6.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE A. R. CAREFULLY. AS THE APPELLANT HAS SHOWN THE SAID AMOUNT AS INCOM E IN THE EARLIER YEAR, THOUGH THE SAME WAS NOT TAXABLE IN VI EW OF SECTION 10(29) OF THE I. T., ACT, THE SAME IS ALLOWABLE WHE N IT HAS BECOME BAD AND THE APPELLANT HAS WRITTEN OFF THE AM OUNT IN THE ITA NO.2901/AHD/2008 (AY: 2004-05) ITO, W-4(1), AHMEDABAD VS GUJARAT STATE WAREHOUSING CORPORATION 13 ACCOUNTS. ACCORDINGLY THE A. O. IS DIRECTED TO ALLO W THE SAME AS BAD DEBT. 10.2 BEING AGGRIEVED, THE REVENUE CARRIED THE MATTE R IN APPEAL BEFORE US. 10.3 THE LEARNED DR SUPPORTED THE ORDER OF THE LEAR NED AO AND SUBMITTED AND ON THE OTHER HAND THE LEARNED AR SUP PORTED THE ORDER OF THE LEARNED CIT(A) 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE FINDINGS OF THE LD.CIT(A ) ON THIS ISSUE IS QUITE REASONABLE. THE APPELLANT HAS BROUGHT IN THIS AMOUNT AS ITS INCOME DURING THE EARLIER YEAR ON MERCANTILE BASIS THOUGH THE INCOME OF THE ASSESSE WAS NOT TAXABLE BY VIRTUE OF SECTION 10(29) OF THE I.T ACT AND NOW THIS DEBTS HAS GONE BAD. BAD DEBTS ARE ALLOWABLE AS PER THE PROVISIONS OF SECTION 36(VII) OF THE ACT. HENCE WE ARE INCLINED TO ACCEPT THE ORDER OF THE LD.CIT(A) ON THIS ISSUE. 12. GROUND NO.4: DELETION OF DISALLOWANCE OF DEPREC IATION OF RS.70,635/- AND GROUND NO.5 : DIRECTION TO AO NOT TO TAX SUBSIDY OF RS.7,06,350/-: THE LEARNED AO ON VERIFICATION OF THE BALANCE SHEET FILED ALONG WITH THE RETURN OF THE ASSESSEE OBSERVE D THAT THE ASSESSEE HAS WRITTEN OFF SUBSIDY OF RS.68,69,397 RE CEIVED FROM THE GOVERNMENT AND ON FURTHER VERIFICATION OF THE AUDIT ORS REPORT IT WAS SEEN THAT THE ASSESSEE HAS DEDUCTED A SUM OF RS.61, 83,047/- FROM BUILDING AND WAREHOUSING . IN VIEW OF THIS, THE ASS ESSEE WAS ASKED TO SHOW CAUSE WHY THE AMOUNT OF RS.7,06,350/- WAS NOT DEDUCTED FROM BUILDING ACCOUNT TOWARDS SUBSIDY. THE ASSESSEE SUBM ITTED THAT THE ITA NO.2901/AHD/2008 (AY: 2004-05) ITO, W-4(1), AHMEDABAD VS GUJARAT STATE WAREHOUSING CORPORATION 14 SUBSIDY RECEIVED IN EARLIER YEAR WAS TO MEET THE CO ST OF THE GODOWN WHICH HAD BEEN SOLD PRIOR TO THE CURRENT YEAR. HOWE VER LD.AO WAS OF THE VIEW THAT SINCE THE INDIVIDUAL ASSETS HAD MERG ED WITH BLOCK OF ASSETS HAVING SAME RATE OF DEPRECIATION, IT HAD LOS T ITS IDENTITY, AND THEREFORE THE AMOUNT OF RS.7,06,350/- HAS TO BE RED UCED FROM THE BLOCK OF ASSETS AND FURTHER THE AMOUNT OF RS.70,635 /- IS TO BE REDUCED FROM THE ALLOWABLE DEPRECIATION. THE AO TH US ADDED RS.70,635/- TO THE INCOME OF THE ASSESSEE. 12.1 BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTE R IN APPEAL BEFORE THE LEARNED CIT(A). THE LEARNED CIT(A) NOTE D THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE LEARNED AO HAS CALLED FOR THE DETAILS OF PRIOR PERIOD INCOME FROM THE ASSESSEE FO R VERIFICATION AND THAT THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS A GOVERNMENT OWNED CORPORATION. AS PER THE SCHEME THE ASSESSEE H AS RECEIVED THE SUBSIDY DURING THE YEARS 1982 TO 1992 FOR CONST RUCTION OF GODOWNS. THE SAID SUBSIDY WAS SHOWN ON THE LIABILIT Y SIDE OF THE BALANCE SHEET UNDER THE HEAD SUBSIDY FROM GOVERNME NT. THE ACCOUNTING TREATMENT WAS GIVEN AS PER THE ADVICE OF THE AUDITORS OF THE RESPECTIVE YEARS. ON RECEIVING OBJECTIONS FROM THE A. G.S AUDITORS DURING THE RELEVANT ASSESSMENT YEAR THE A SSESSEE HAD TRANSFERRED THE SUBSIDY TO CONSTRUCTION ACCOUNT AND REWORKED THE DEPRECIATION PROVIDED IN THE BOOKS OF ACCOUNTS. BUT IN RESPECT OF THE GODOWNS SOLD IN PAST, THE SUBSIDY OF RS.7,06,350/- HAS BEEN CREDITED TO PRIOR YEAR INCOME. IT WAS SUBMITTED BEFORE THE L EARNED CIT(A) THAT THE SUBSIDY RECEIVED FOR ACQUIRING THE CAPITAL ASSE TS IS NOT REVENUE RECEIPT AND FURTHER THE SUBSIDY HAS NOT BEEN RECEI VED DURING THE ITA NO.2901/AHD/2008 (AY: 2004-05) ITO, W-4(1), AHMEDABAD VS GUJARAT STATE WAREHOUSING CORPORATION 15 RELEVANT ASSESSMENT YEAR. FURTHER IT WAS PRAYED T HAT DEPRECIATION OF RS.70,635/- BE ALLOWED AS PRIOR PERIOD INCOME AND N OT TO BE TAXED BECAUSE THE SUBSIDY RECEIVED DO NOT FALL IN THE REV ENUE FIELD. 12.2 THE LEARNED CIT(A) CONSIDERING THE FACTS AND SUBMISSION OF THE ASSESSEE DELETED THE DISALLOWANCE MADE BY THE A O AND NOT TO TAX THE SUBSIDY OF RS.7,06,350/- BY OBSERVING IN PA RA 9.1 OF HIS ORDER AS UNDER: 9.1 I HAVE CONSIDERED THE SUBMISSIONS OF THE A. R. CAREFULLY. AS THE SUBSIDY RECEIVED FOR CONSTRUCTION OF GODOWNS IS A CAPITAL RECEIPT, THE SUBSIDY AMOUNT WAS TO BE REDUCED FROM THE COST OF GODOWNS FOR COMPUTING DEPRECIATION ALLOWABLE TO THE APPELLANT. THE SUBSIDY WAS NOT RECEIVED DURING THE YEAR IT WAS RECEIVED IN THE EARLIER YEARS. THEREFORE IN THE EARLIER YEARS T HE COST OF RESPECTIVE GODOWNS WAS TO BE REDUCED. NOW THE GODOW NS HAVE BEEN SOLD, SO IN THE CURRENT YEAR NO DISALLOWANCE O F DEPRECIATION CAN BE MADE. ACCORDINGLY THE DISALLOWA NCE OF DEPRECIATION IS DELETED. THE SAID AMOUNT OF SUBSIDY CANNOT BE TAXED AS REVENUE RECEIPT AS IT HAS NOT BEEN GRANTED TO MEET REVENUE EXPENSES. ACCORDINGLY THE A. O. IS DIRECTED NOT TO TAX THE SAID RECEIPT. 12.3 BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFO RE US. 12.4 THE LEARNED DR RELIED ON THE ORDER OF THE LEAR NED AO. ON THE OTHER HAND THE LEARNED AR SUPPORTED THE ORDER OF TH E LEARNED CIT(A). 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE MATERIALS ON RECORD. DURING THE PREVIOUS YEAR THE N ET AMOUNT OF SUBSIDY OF RS.7,06,350/- REMAINED IN THE BOOKS OF A CCOUNTS AS THEY WERE NOT WRITTEN OFF FROM THE VALUE OF THE ASSETS ( GODOWN). THESE ASSETS (GODOWN) DID NOT FORM PART OF THE ASSET OF T HE ASSESSEE FOR THE ITA NO.2901/AHD/2008 (AY: 2004-05) ITO, W-4(1), AHMEDABAD VS GUJARAT STATE WAREHOUSING CORPORATION 16 PREVIOUS YEAR SINCE THEY WERE SOLD. THE LD. AO OPIN ED THAT THIS AMOUNT OF RS.7,06,350/- REQUIRES TO BE DELETED FROM THE BLOCK OF ASSETS SINCE THE SAME WAS NOT DEDUCTED WAS NOT DEDUCTED FR OM THE BUILDING ACCOUNT KEEPING IN VIEW OF THE FACT THAT THE ASSESSEE HAD R ECEIVED SUBSIDY FROM THE GOVERNMENT TO THAT EXTEND AND ACCORDINGLY DEPRECIATION THEREON AMOUNTING TO RS.70,635/- IS TO BE DISALLOWE D. HOWEVER THE LD.CIT(A) DELETED THE SAME BECAUSE THE SUBSIDY WAS RECEIVED FOR EARLIER ASSESSMENT YEAR AND THE ASSET WAS ALSO SOLD PRIOR TO THE RELEVANT PREVIOUS YEAR AND SINCE NO DEPRECIATION ON THE RELEVANT ASSET WAS CLAIMED DURING THE CURRENT YEAR DISALLOWA NCE IS UNWARRANTED. FURTHER THE LD.CIT(A) HELD THAT THE AM OUNT OF SUBSIDY RECEIVED FOR THE EARLIER YEAR CANNOT BE REVENUE RE CEIPT FOR THE CURRENT YEAR AND ACCORDINGLY THE SAME CANNOT BE TAXED IN TH E CURRENT YEAR AND THE SAME WAS ALSO NOT GRANTED TO MEET THE REVEN UE EXPENDITURE. WE ARE IN TOTAL CONFORMITY WITH THE ORDER OF THE LD .CIT(A) ON THESE ISSUES BECAUSE THE RECEIPT OF SUBSIDY FALLS IN REVE NUE FIELD AND THE DEPRECIATION OF RS.70,635/- WAS NOT CLAIMED BY THE ASSESSEE FOR THE CURRENT ASSESSMENT YEAR AND THEREFORE, WE SUSTAIN T HE ORDER OF THE LD.CIT(A)WITH RESPECT TO THE DELETION OF RS. 70,635 /- AND RS. 7,06,350/-. GROUND NO. 4 AND 5 ARE DISPOSED OF ACCO RDINGLY IN FAVOUR OF THE ASSESSEE. 14. GROUND NO.6: DIRECTION TO AO BY LD.CIT(A) TO R EDUCE THE INCOME BY RS.33,90,270/- BEING EXCESS DEPRECIATION : DURING THE ASSESSMENT PROCEEDINGS THE LD.AO HAS CALLED FOR THE DETAILS OF THE PRIOR YEAR INCOME FROM THE ASSESSEE FOR VERIFICATIO N. THE ASSESSEE SUBMITTED THE DETAILS AND REASONS FOR ITS NON TAXAB ILITY. IT WAS ITA NO.2901/AHD/2008 (AY: 2004-05) ITO, W-4(1), AHMEDABAD VS GUJARAT STATE WAREHOUSING CORPORATION 17 SUBSIDY FROM GOVERNMENT. THE ACCOUNTING TREATMENT WAS GIVEN AS PER ADVICE OF THE AUDITORS OF THE CORPORATION. ON R ECEIVING OBJECTIONS FROM THE A. G. AUDITORSS DURING THE YEAR THE ASSES SEE HAS TRANSFERRED THE SUBSIDY TO CONSTRUCTION ACCOUNT AND REWORKED THE DEPRECIATION PROVIDED IN THE BOOKS OF ACCOUNTS. THE ASSESSEE IN RESPECT OF THE EXISTING GODOWNS HAS REDUCED THE SUB SIDY OF RS.61,83,047/- FROM THE COST OF GODOWNS AND WAREHOU SE AND THE EXCESS DEPRECIATION OF RS.33,90,270/- PROVIDED IN T HE BOOKS OF ACCOUNTS HAS BEEN CONSIDERED IN THE PRIOR YEAR INCO ME. IN THE STATEMENT OF TOTAL INCOME THE ASSESSEE HAS REDUCED SUBSIDY OF RS.61,83,047/- FROM THE OPENING WRITTEN DOWN VALUE AS PER INCOME TAX RETURN AND CALCULATED THE DEPRECIATION ON BALAN CE AMOUNT. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE HAS SUBMITT ED THAT THE EXCESS PROVISION OF DEPRECIATION WRITTEN BACK AS PR OVIDED IN THE BOOKS OF ACCOUNT IN THE EARLIER YEARS IS NOT TAXABL E. THE AO HAD NOT ACCEPTED THE SUBMISSION OF THE ASSESSEE BECAUSE THE ASSESSEE HAS NOT CONSIDERED THIS ISSUE IN ITS REVISED RETURN AND THAT EFFECT OF REDUCTION OUT OF THE DEPRECIABLE ASSETS HAS A CONTI NUOUS EFFECT IN THE FUTURE ASSESSMENTS OF THE ASSESSEE. 14.1 BEFORE THE LEARNED CIT(A) IT WAS SUBMITTED BY THE ASSESSEE AS UNDER: 'THE ASSESSEE HAS NOT MADE ANY FRESH CLAIM. THE A.O . HAS VERIFIED THE TAXABILITY OR OTHERWISE OF THE PRIOR Y EAR INCOME AND WHEN HE FOUND THAT PRIOR YEAR INCOME IS NOT LIA BLE TO TAX. AT THAT TIME HE HAS RAISED THE OBJECTION THAT SUCH CLAIM HAS NOT BEEN MADE IN THE REVISED RETURN OF IN COME. THE ASSESSMENT OF THE INCOME IS TO BE MADE AS PER T HE ITA NO.2901/AHD/2008 (AY: 2004-05) ITO, W-4(1), AHMEDABAD VS GUJARAT STATE WAREHOUSING CORPORATION 18 PROVISIONS OF THE INCOME TAX ACT AND ON THE BASIS O F RETURN OF INCOME FILLED. WHILE MAKING ASSESSMENT THE A.O. HAS TO EXAMINE THE ALLOWABILITY OF THE EXPENSES AS WELL AS TAXABILITY OF THE INCOME. FURTHER, HE HAS TO FOLLOW THE DIRECTIONS ISSUED BY THE CENTRAL BOARD OF DIRECT TA XES BY WAY OF CIRCULARS. IN THIS REGARD WE DRAW YOUR HONOR 'S KIND ATTENTION TO CIRCULAR NO. 14(2 T- 35) DATED 11 TH APRIL, 1955. AS PER CBDT CIRCULAR, THE ASSESSING AUTHORITY SHOUL D NOT TAKE ADVANTAGE OF THE IGNORANCE OF THE TAX PAYERS A ND THE TAXPAYERS SHOULD NOT BE MADE TO SUFFER DUE TO NEGLI GENCE OR LACK OF KNOWLEDGE ON THEIR PART IN MAKING A CLAI M THAT IS LEGITIMATELY ADMISSIBLE AND IT IS THE DUTY OF THE R EVENUE AUTHORITIES TO EDUCATE THE ASSESSEE CONCERNED ABOUT HIS RIGHTS AND CLAIMS AND ALLOW THE SAME ACCORDING TO L AW. TAXPAYERS SHOULD NOT BE EXPLOITED BY THE REVENUE AUTHORITIES BY-DENYING LEGITIMATE CLAIM MERELY BECA USE THE SAME HAD NOT BEEN MADE IN THE RETURN OF INCOME. IN CASE OF ITO V/S COSMIC ENGINEERING CO. (1984) 20 TTJ (AHD) 271, 273, THE HONORABLE AHMEDABAD ITAT HAS MADE THE FOLLOWING OBSERVATIONS: 'WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE DE CISION OF CIT(A) NOT ONLY IN ADMITTING THE ADDITIONAL GROUND BUT ALSO IN CONSIDERING THE CLAIM EVEN IN RESPECT OF EXPENDI TURE ON VARIOUS HEADS. INCIDENTALLY, WE ALSO WOULD LIKE TO HOLD THAT EVEN WITHOUT THE CIRCULAR IT IS THE DUTY OF TH E ITO AND ALSO THE FIRST APPELLATE AUTHORITY TO REMOVE ALL TH E ANOMALIES INCLUDING THE GRANTING THE RELIEF TO THE ASSESSEE EVEN IF NO CLAIM WAS MADE VIDE PROPERLY FRAMING THE ASSESSMENTS OF INCOME.....' FURTHER IT IS SUBMITTED THAT IN CASE OF THE ASSESSE E THE SUBSIDY AMOUNT HAS BEEN TAXED TWICE. ONCE AS A REVE NUE RECEIPT AS CREDITED IN PROFIT AND LOSS ACCOUNT UNDE R THE HEAD PRIOR YEAR INCOME AND SECONDLY BY WAY OF REDUC TION OF WRITTEN DOWN VALUE FOR THE PURPOSE OF COMPUTATIO N CLAIM OF DEPRECIATION U/S 32(L) OF THE I.T. ACT, 1961. TH EREFORE, IT IS SUBMITTED THAT THE INCOME SHOULD NOT BE TAXED TW ICE. ITA NO.2901/AHD/2008 (AY: 2004-05) ITO, W-4(1), AHMEDABAD VS GUJARAT STATE WAREHOUSING CORPORATION 19 THERE IS NO PROVISION IN THE INCOME TAX ACT TO TAX THE INCOME TWICE. IN THE CASE OF THE ASSESSEE NO FRESH CLAIM HAS BEEN MADE BUT THE INCOME OFFERED FOR TAX IN THE WRITTEN OF IN COME HAS BEEN WITHDRAWN. THE LEARNED A.O. HIMSELF HAS VERIFI ED THE FACTS OF THE CASE AND TAXABILITY OF THE INCOME DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IN VIEW OF AB OVE OF SUBMISSION, YOUR HONOR MAY ISSUE NECESSARY DIRECTIO N TO THE A.O. FOR NOT TAXING RS.33,90,270/- BEING EXCESS PROVISION OF DEPRECIATION AS PER BOOKS OF ACCOUNTS. ' 14.2 THE LEARNED CIT(A) CONSIDERING THE SUBMISSION S OF THE ASSESSEE DIRECTED THE LEARNED AO TO REDUCE THE INCO ME BY RS.33,90,270/- BY OBSERVING AS UNDER IN PARA 10.2 O F HIS ORDER: 10.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE A.R. CAREFULLY. THE EXCESS DEPRECIATION WHICH WAS PROVID ED IN THE BOOKS OF THE APPELLANT IN THE EARLIER YEARS HAS BEEN WITHDRAWN THIS CAN NOT BE INCOME AS IN ASSESSMENTS OF EARLIER YEARS DEPRECIATION HAS BEEN ALLOWED AS PER IT. ACT IN THE EARLIER YEARS. AS THE AMOUNT REPRESENTING EX CESS DEPRECIATION WRITTEN BACK CAN NOT BE INCOME, THE A. O. IS DIRECTED TO REDUCE THE INCOME BY THE SAID AMOUNT. 14.3 BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFO RE US. 14.4 THE LEARNED DR SUPPORTED THE ORDER OF THE AO. ON THE OTHER HAND THE LEARNED AR SUPPORTED THE ORDER OF THE LEAR NED CIT(A). ITA NO.2901/AHD/2008 (AY: 2004-05) ITO, W-4(1), AHMEDABAD VS GUJARAT STATE WAREHOUSING CORPORATION 20 15. WE HAVE HEARD THE RIVAL SUBMISSION AND CAREFULL Y PERUSED THE ORDERS OF THE AUTHORITIES BELOW. IT IS VERY OBVIOU S THAT THE EXCESS DEPRECIATION CLAIMED DURING THE PRECEDING YEARS AS A RESULT OF REDUCTION IN VALUE OF THE GODOWN FOR IT BEING CREDI TED WITH THE GOVERNMENT SUBSIDY RECEIVED CANNOT BE CONSTRUED TO BE PROFIT OF THE CURRENT YEAR AND TAXED. GOVERNMENT SUBSIDY RECEIVED BY THE CORPORATION FOR CONSTRUCTION OF GODOWN IS A CAPITAL RECEIPT AND DO NOT FALL IN THE REVENUE FIELD. THEREFORE WE ARE INCLINED TO FOLLOW THE ORDER OF THE LD. CIT(A). IT IS ORDERED ACCORDINGLY . THUS GROUND NO.6 IS DECIDED IN FAVOUR OF THE ASSESSEE. FURTHER, IT IS PERTINENT TO NOTE THAT THE RELIANCE PLACED BY THE REVENUE IN THE CASE OF GOETZE INDIA LTD. VS CIT WITH RESPECT TO GROUNDS NO.5 AND 6 ARE NOT APPLICABLE TO THE FACTS OF THIS CASE SINCE THE SAID DECISION REFERS TO THE POWERS OF ASSESSING AUTHORITIES TO ENTERTAIN FR ESH CLAIM MADE OTHERWISE THAN BY WAY OF REVISED RETURN WHILE AS IN THE PRESENT CASE THE LD. CIT(A) HAS GIVEN RELIEF TO THE ASSESSEE FOR THE INCORRECT ASSESSMENT CONCLUDED BY THE LD. AO. II.C. O. NO.224/AHD/2008(ASSESSEES C.O.) 16. THE ASSESSEE IN ITS CROSS OBJECTION HAS TAKEN T HE FOLLOWING GROUNDS: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANCE OF RS.60,752/- OUT OF RS.70,915/- ACCO UNTED AS PRIOR PERIOD EXPENSES BUT ARE ALLOWABLE U/S 43B OF THE ACT ON ACTUAL PAYMENT BASIS. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANCE OF RS.16,700/- BEING PROFESSIONAL FEES PAID FOR THE VALUATION OF THE GODOWN TREATING IT AS A CA PITAL EXPENDITURE. ITA NO.2901/AHD/2008 (AY: 2004-05) ITO, W-4(1), AHMEDABAD VS GUJARAT STATE WAREHOUSING CORPORATION 21 17. GROUND NO.1: CONFIRMING DISALLOWANCE OF RS.60,7 52/- BEING EMPLOYERS CONTRIBUTION TO P.F., NOT PAID BEFORE FI LING OF THE RETURN OF INCOME. THE LEARNED AO HAD DISALLOWED AN AMOUNT OF RS.70,915/- BEING EXPENSES RELATED TO PRIOR PERIOD. THE LEARNED CIT(A) CONFIRMED THE ADDITION OF RS.60,752/- SINCE THE AMOUNT RELAT ED TO THE EARLIER YEARS AND THE SAME WAS PAID ON 28-02-2004 AS OBSERV ED BY THE LEARNED CIT(A) IN PARA 4.1 OF HIS ORDER. WE ARE NOT IN AGREEMENT WITH THIS DECISION OF THE LEARNED CIT(A) SINCE SECTION 4 3B OF THE ACT MAKES IT CLEAR THAT SUCH EXPENDITURE SHALL BE ALLOW ED IN THE PREVIOUS YEAR IN WHICH SUCH SUM IS ACTUALLY PAID. IN THE INS TANT CASE, THE AMOUNT OF RS.60,752/- BEING EMPLOYERS P. F. CONTRI BUTION RELATED TO EARLIER YEARS WAS PAID ON 28-02-2004 I.E. IN THE PR EVIOUS YEAR 1-04-2003 TO 31-03-2004 AND THE RELEVANT ASSESSMEN T YEAR 2004-05. HENCE, THIS AMOUNT OF RS.60,752/- SHALL BE ALLOWED FOR THE ASSESSMENT YEAR 2004-05. THEREFORE, GROUND NO.1 OF THE C.O. IS ALLOWED IN FAVOUR OF THE ASSESSEE. 18. GROUND NO.2:- CONFIRMING DISALLOWANCE OF RS.16, 700/- BY LEARNED CIT(A) BEING PROFESSIONAL FEES PAID FOR VAL UATION OF GODOWN TREATING IT AS CAPITAL EXPENDITURE. THE ASSESSEE HA D PAID AN AMOUNT AGGREGATING TO RS.16,700/- FOR VALUATION OF PROPERT Y HELD AT VARIOUS PLACES TO GITCO. THE LEARNED AO DISALLOWED THIS AMO UNT CONSIDERING THE SAME TO BE IN THE CAPITAL FIELD BECAUSE THE ASS ESSEE HAD VALUED ITS PROPERTY WITH THE INTENTION OF SELLING THEM. TH E LEARNED CIT(A) CONFIRMED THE ADDITION. THE LEARNED AR ARGUED BEFOR E US STATING THAT THESE EXPENDITURES ARE REVENUE IN NATURE AND MAY BE ALLOWED. THE LEARNED DR SUPPORTED THE ORDERS OF THE REVENUE. AFT ER HEARING BOTH ITA NO.2901/AHD/2008 (AY: 2004-05) ITO, W-4(1), AHMEDABAD VS GUJARAT STATE WAREHOUSING CORPORATION 22 THE SIDES AND PERUSING THE RECORDS AVAILABLE BEFORE US, WE ARE OF THE VIEW THAT THESE EXPENDITURES FALL IN THE REVENUE FI ELD AND NOT IN CAPITAL FIELD AS HELD BY THE REVENUE. EXPENDITURE INCURRED BY THE ASSESSEE FOR REVALUATION OF THE ASSET DO NOT BRING ANY ENDUR ING BENEFIT TO THE ASSESSEE. THESE EXPENSES ARE ROUTINE IN NATURE AND HAS TO BE WRITTEN OFF AS REVENUE EXPENDITURE. ACCORDINGLY, WE HOLD THIS ISSUE IN FAVOUR OF THE ASSESSEE. 19. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES AND THE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30-04-2012 SD/- SD/- (D. K. TYAGI) JUDICIAL MEMBER (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ 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 D Y. REGISTRAR, ITAT, AHMEDABAD