The ACIT, Circle-1(1), Baroda V. Gujarat State Fertilisers & Chemicals Ltd., Baroda

ITA 2907/AHD/2007

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6801 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-04-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 06-07-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: YOGESH G SHAH
• Keywords: Capital asset; Depreciation; Business expenditure; Double taxation relief; Retrospective amendment; Additional evidence; Permanent establishment; Revenue expenditure; Capital expenditure
• Section: 143(3); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, A BENCH (BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND BHAVNESH SAINI, JUDICIAL MEMBER) ITA NO.2877/AHD/2007 [ASSTT. YEAR : 2002-2003] GUJARAT STATE FERTILIZERS & CHEMICALS LTD. P.O. FERTILIZERNAGAR BARODA. VS. ACIT, CIR.1(1) BARODA. ITA NO.2907 AND 3310/AHD/2007 [ASSTT. YEAR : 2001-2002 AND 2002-2003] WITH CO. NO.250/AHD/2007 IN ITA NO.2907/AHD/2007 ACIT, CIR.1(1) BARODA. VS. GUJARAT STATE FERTILIZERS & CHEMICALS LTD. P.O. FERTILIZERNAGAR BARODA. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI YOGESH G SHAH REVENUE BY : SHRI ANILKUMAR. O R D E R PER G.D. AGARWAL, VICE-PRESIDENT: THESE CROSS-APPEALS ARE BY THE ASSESSEE AND THE REVENUE AGAINST THE ORDER O F THE COMMISSIONER OF INCOME TAX(APPEALS)-I, BARODA ARISING OUT OF THE OR DER OF THE ASSESSING OFFICER PASSED UNDER SECTION 143(3) THE INCOME TAX ACT, 1961. SINCE THE ISSUES ARE CONNECTED FOR THE SAKE OF CONVENIENC E, WE DISPOSE OF ALL THESE APPEALS BY THIS COMMON ORDER. 2. FIRST WE SHALL TAKE UP ITA NO.2907/AHD/2007 (A.Y .2001-2002): REVENUES APPEALS. IN THIS APPEAL, THE FOLLOWING GR OUNDS ARE RAISED: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD CIT(A) ERRED IN DELETING THE ADDITION OF RS. 2,00,03,000/- AND RS.1,79,75,000/-, BEING THE SALE PRICE OF AMONIA US ED FOR CAPTIVE ITA NO.2877/AHD/2007 ITA NO.2907 AND 3310/AHD/2007 WITH CO. NO.250/AHD/2007 -2- CONSUMPTION AND SOLD TO THIRD PARTIES RESPECTIVELY, MADE AS INCOME FROM OTHER SOURCES, BY ACCEPTING THE CLAIM OF THE A SSESSEE THAT THESE CONSTITUTED PRE-COMMENCEMENT INCOME FROM TRIA L RUN OF AMONIA-IV PLANT ELIGIBLE FOR ADJUSTMENT AGAINST THE CAPITAL COST OF THE SAID PLANT, WITHOUT APPRECIATING THE BASIC PRIN CIPLES LAID DOWN BY THE APEX COURT IN TUTICORIN ALKALI CHEMICALS & F ERTILZERS LTD. VS CIT 227 ITR 172(SC) AND BY APPLYING THE RATIO OF CIT VS BOKARO STEEL LTD. 236 ITR 315 (SC) WHICH WAS DECIDE D ON THE PECULIAR FACTS OF THAT CASE WITHOUT LAYING DOWN ANY GENERAL PRINCIPLE CONTRARY TO THAT LAID DOWN IN TUTICORIN ( SUPRA) AND WHOSE FACTS ARE CLEARLY DISTINGUISHABLE. 3. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL PLACED BEFORE US. WE FIND THIS ISSUE TO BE COVERED IN FAV OUR OF THE ASSESSEE BY THE DECISION OF THE ITAT IN ASSESSEES OWN CASE FOR A.Y.1999-2000 VIDE ITA NO.3228/AHD/2003 WHEREIN THE ITAT HELD AS UNDER : 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. UNDISPUTEDLY, AMMONIA-IV PLANT WAS UNDER TRIAL PRODUCTION DURING THE YEAR UNDER CONSIDERATION AND THE COMMERCIAL PRODUCTION IS YET TO COMMENCE. THEREFORE , AS CONCLUDED BY THE LD. CIT(A), THE CLAIMS HAVE TO BE CONSIDERED, HOLDING THE AMMONIA-IV PLANT TO BE AT THE PRE- COMM ENCEMENT STAGE. IT IS WELL SETTLED THAT UNDER THE ACCOUNTING PRACTICES, ALL EXPENDITURE INCLUDING INTEREST COST INCURRED DURING THE PROJECT CONSTRUCTION PERIOD ARE ACCUMULATED AND DISCLOSED A S CAPITAL WORK-IN-PROGRESS UNTIL THE ASSETS ARE READY FOR COM MERCIAL USE. INCOME EARNED FROM INVESTMENT OF SURPLUS BORROWED F UNDS DURING CONSTRUCTION/TRIAL RUN PERIOD IS REDUCED FROM CAPIT AL WORK-IN- PROGRESS FOR ACCOUNTING PURPOSES WHILE EXPENDITURE/ INCOME ARISING DURING TRIAL RUN IS ADDED TO/REDUCED FROM C APITAL WORK-IN- PROGRESS. HONBLE APEX COURT IN THE CASE OF BOKARO STEEL VS. CIT, 236 ITR 315 HELD THAT IF THE ASSESSEE RECEIVES ANY AMOUNT WHICH ARE INEXTRICABLY LINKED WITH THE PROCESS OF SETTING UP ITS PLANT AND MACHINERY, SUCH RECEIPTS WOULD GO TO REDUCE THE COS TS OF ASSETS AND WOULD BE RECEIPT OF A CAPITAL NATURE, WHICH CANNOT BE TAXED. IN THE CASE UNDER CONSIDERATION, UNDISPUTEDLY AND AS FOUND BY THE ID. CIT(A), THE PLANT IS UNDER TESTING FOR ITS EFFICIEN CY PRIOR TO COMMENCEMENT OF COMMERCIAL PRODUCTION AND THE INPUT S AND ITA NO.2877/AHD/2007 ITA NO.2907 AND 3310/AHD/2007 WITH CO. NO.250/AHD/2007 -3- OUTPUTS HAVE ALREADY BEEN NETTED BY GSFC AND THE NE T RESULT HAS BEEN CAPITALIZED. CONSIDERING THE FACTS AND CIRCUMS TANCES OF THE CASE AND THE GUIDELINES OF THE ICAI, WE ARE IN AGRE EMENT WITH THE ID. CIT(A) THAT ANY ATTEMPT TO TAX THE PRODUCTION, WHICH IS ALREADY ACCOUNTED FOR AS INPUT FOR THE FERTILIZER PLANT AND THE CAPTIVE INPUTS OF OTHER UNITS UTILIZED IN AMMONIA IV PLANT, IF NOT ALLOWED TO BE SET OFF AGAINST THE PRODUCTION OF THE PLANT, WOULD LEAD TO A DISTORTED PICTURE OF THE ACCOUNTS OF M/S. GSFC. IN THESE CIRC UMSTANCES, ESPECIALLY WHEN REVENUE HAVE NOT PLACED BEFORE US A NY MATERIAL CONTRARY TO THE AFORESAID FINDINGS OF THE ID. CIT(A ) IN SO FAR AS ADDITION OF RS.10,99,25,676 IS CONCERNED NOR POINTE D OUT ANY CONTRARY DECISION, WE HAVE NO HESITATION IN UPHOLDI NG THE FINDINGS OF THE ID. CIT(A) WHILE RELYING UPON THE DECISION O F THE HONBLE APEX COURT IN BOKARO STEEL LTD.. THEREFORE, GROUND NO.1 IN THE APPEAL OF THE REVENUE IS DISMISSED. THE SAME WAS FOLLOWED BY THE ITAT IN A.Y.2000-2001 VIDE ITA NO.3743/AHD/2003. SINCE THE FACTS ARE ADMITTED TO BE IDENTICAL, RESPECTFULLY FOLLOWING THE DECISION OF THE ITAT IN ASSESSEES OWN CASE, WE UPHOLD THE ORDER OF THE CIT(A) ON THIS POINT AND REJECT GROUND NO.1 OF THE REVENUES APPEAL. 4. GROUND NO.2 READS AS UNDER: 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 68.89 LACS, BEING THE EXPENDITURE ON THE RELEASE OF WATER AND DISCHAR GE OF EFFLUENT AND POLLUTION CONTROL, AS CAPITAL EXPENDITURE WITH THE OBSERVATION THAT THIS EXPENDITURE DID NOT RESULT IN THE CREATIO N OF ANY SPECIFIC ASSET WITHOUT APPRECIATING THAT THE EXPENDITURE GAV E AN ADVANTAGE OF ENDURING NATURE AND FELL IN THE CAPITAL FIELD AN D FOR BEING CAPITAL EXPENDITURE, IT WAS NOT ALWAYS NECESSARY TO RESULT IN CREATION OF A NEW ASSET 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL PLACED BEFORE US. WE FIND THIS ISSUE ALSO TO BE COVERED I N FAVOUR OF THE ASSESSEE BY THE DECISION OF THE ITAT IN ASSESSEES OWN CASE FOR A.Y.2000-2001 ITA NO.2877/AHD/2007 ITA NO.2907 AND 3310/AHD/2007 WITH CO. NO.250/AHD/2007 -4- VIDE ITA NO.3743/AHD/2003. THE LEARNED DR HAS ALSO FAIRLY ADMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSE E BY THE ABOVE DECISION OF THE ITAT IN ASSESSEES OWN CASE AND THE FACTS OF THE YEAR UNDER CONSIDERATION ARE ADMITTED TO BE IDENTICAL. IN VIE W OF THE ABOVE, WE RESPECTFULLY FOLLOWING DECISION OF THE ITAT IN ASSE SSEES OWN CASE FOR A.Y.2000-2001 UPHOLD THE ORDER OF THE CIT(A) ON THI S POINT AND REJECT GROUND NO.2 OF THE REVENUES APPEAL. 6. GROUND NO.3 OF THE REVENUES APPEAL READS AS UND ER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS .69.14 LACS BEING THE EXPENDITURE ON ACQUIRING FIRE FIGHTING EQ UIPMENTS AND ON SECURITY MEASURES AS CAPITAL EXPENDITURE, WITH THE OBSERVATION THAT THESE EXPENSES WERE NECESSARY FOR COMPLYING WITH TH E GOVERNMENT REGULATIONS AND DID NOT RESULT IN THE CREATION OF A NY ASSET, WITHOUT APPRECIATING THAT THESE ARE NOT THE RELEVANT CONSID ERATIONS FOR DETERMINING THE CAPITAL VIS-A-VIS REVENUE NATURE OF AN EXPENDITURE AND THE EXPENSES IN CAPITAL FIELD GIVING AN ADVANTA GE OF ENDURING NATURE AS THE IMPUGNED EXPENSE DID CONSTITUTED CAPI TAL EXPENDITURE AS SETTLED IN THE CASE OF BALLIMAL NAVAL KISHORE VS CIT 224 ITR 414 (SC) RELIED UPON BY THE ASSESSING OFFICER. 7. AT THE TIME OF HEARING BEFORE US, BOTH THE PARTI ES FAIRLY AGREED THAT THIS ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSE BY THE DECISION OF THE ITAT IN ASSESSEES OWN CASE FOR A.Y.2000-2001 VIDE ITA NO.3743/AHD/2003 WHEREIN THE ITAT HELD AS UNDER: 18. GROUND NO.1(V) RELATES TO EXPENDITURE ON FIRE FIGHTING EQUIPMENTS ETC. OF RS.9325000/-. SIMILAR ISSUE HAD ARISEN IN THE EARLIER ASSTT.YEAR AND IT WAS DECIDED IN FAVOUR OF ASSESSEE. NO APPEAL HAS BEEN FILED BY WAY REVENUE. BOTH THE PAR TIES ACCEPT THAT THIS ISSUE HAS BEEN SETTLED AT THE LEVEL OF CIT(A) WHEREBY IT IS DECIDED IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, NO DISPUTE SURVIVES AND, THEREFORE, THIS GROUND OF REVENUE IS REJECTED. ITA NO.2877/AHD/2007 ITA NO.2907 AND 3310/AHD/2007 WITH CO. NO.250/AHD/2007 -5- SINCE FACTS OF THE YEAR UNDER CONSIDERATION IS IDEN TICAL, WE RESPECTFULLY FOLLOWING THE DECISION OF THE ITAT IN ASSESSEES OW N CASE FOR A.Y.2000- 2001 (SUPRA) UPHOLD THE ORDER OF THE LEARNED COMMIS SIONER OF INCOME TAX (APPEALS) ON THIS POINT AND REJECT GROUND NO.3 OF THE REVENUES APPEAL. 8. GROUND NO.4 OF THE REVENUES APPEAL READS AS UND ER: 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW. THE ID. CIT(A) ERRED IN DELETING THE DISALLOWANCE O F RS.16.18 CRORES MADE ON ACCOUNT OF PENAL INTEREST PAYABLE TO THE GOVERNMENT UNDER THE RETENTION PRICE SCHEME, WITHOU T APPRECIATING THE REAL CHARACTER OF THE IMPOST AND T HE RATIO LAID DOWN IN THE CASE OF SWADESHI COTTON MILLS CO. LTD. VS CIT 233 ITR 199 (SC) HOLDING THAT THE DAMAGES FOR DELAYED PAYME NT OF EMPLOYEES' CONTRIBUTION TO PROVIDENT FUND ALSO CONT AINED THE ELEMENT OF PENAL LEVY. 9. AT THE TIME OF HEARING BEFORE US, IT WAS STATED BY THE LEARNED DR THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESS EE PAID PENAL INTEREST OF RS.16.18 CRORES TO THE GOVERNMENT. SINCE THE NA TURE OF THE LEVY WAS PENAL, THE SAME WAS RIGHTLY DISALLOWED BY THE ASSES SING OFFICER. HE THEREFORE REQUESTED THAT THE ORDER OF THE CIT(A) ON THIS POINT MAY BE REVERSED AND THAT OF THE AO MAY BE RESTORED. 10. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OT HER HAND, STATED THAT THE ASSESSEE IS A STATE GOVERNMENT UNDERTAKING AND IT IS MANUFACTURING FERTILIZERS AND CHEMICALS APART FROM OTHER ACTIVITI ES. THAT IN THE CASE OF FERTILIZERS THE SALE PRICE IS FIXED BY THE GOVERNME NT AND AFTER DETERMINING THE COST OF PRODUCTION, THE GOVERNMENT GIVES SUBSID Y TO THE FERTILIZER MANUFACTURERS. THAT THERE WAS DOWNWARD REVISION OF SUBSIDIARY WITH ITA NO.2877/AHD/2007 ITA NO.2907 AND 3310/AHD/2007 WITH CO. NO.250/AHD/2007 -6- RETROSPECTIVE EFFECT AND THEREFORE THE ASSESSEE WAS REQUIRED TO REFUND THE SUBSIDY ALREADY RECEIVED BY IT WITH INTEREST. THAT AS PER THE SCHEME ITSELF THE INTEREST WAS PAYABLE AS PER BANK RATE PLUS 2.5% . SUCH INTEREST WAS WORKED OUT AT RS.16.18 CRORES AND PAID TO THE GOVER NMENT. THIS IS CLEARLY IN THE NATURE OF INTEREST WHICH WAS COMPENS ATORY AND THE SAME WAS PROVIDED IN THE SCHEME OF THE SUBSIDY ITSELF. THE CIT(A) CONSIDERED THE ENTIRE FACTS INCLUDING THE SCHEME AND THEREAFTE R ALLOWED THE RELIEF. THAT THE ASSESSING OFFICER MERELY WENT BY THE NOMEN CLATURE USED IN THE LETTER ISSUED BY FERTILISER DEPARTMENT AS PENAL IN TEREST. IN FACT IT WAS ONLY INTEREST AND NO PENALTY WAS INVOLVED. THE INT EREST PAYMENT WAS COMPENSATORY IN NATURE BECAUSE THE GOVERNMENT MONEY REMAINED WITH THE ASSESSEE THEREFORE TO COMPENSATE THE USE OF GOV ERNMENT MONEY BY THE ASSESSEE INTEREST WAS PAID TO THE GOVERNMENT. 12. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF B OTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND TH AT THE CIT(A) HAS CONSIDERED THIS ISSUE AT LENGTH FROM PAGES 13 TO 23 OF THE HIS ORDER. AFTER CONSIDERING THE FACTUAL AS WELL LEGAL POSITION, HE RECORDED THE FOLLOWING FINDINGS: IT IS PERTINENT TO NOTE THE FACT THAT UNDER THE NO TIFICATION DATED 29-9- 1980 THAT PROVIDED FOR THE CHARGING OF INTEREST, IT WAS TO BE PAID ONLY AS INTEREST FOR THE DELAYED DEPOSIT OF THE AMOUNT D UE FROM IT TO THE CREDIT OF THE FICC AND, THAT THE NOMENCLATURE OF TH IS AMOUNT AS PENAL INTEREST WAS GIVEN IN THE DEPT. OF FERT, LETTER DAT ED 1-11-2000. FROM THIS, IT IS OBSERVED THAT THE ACTUAL NATURE OF THIS AMOUNT WAS BY WAY OF COMPENSATION FOR DELAYED DEPOSIT / CREDIT OF THE AM OUNT TO FICC. MOREOVER, THE LETTER DATED 1-11-2000 FROM THE ACCOU NTS OFFICER OF THE DEPT. OF FERT. SHOULD NOT BE ALLOWED TO TAKE PRECED ENCE OVER THE GOVT. NOTIFICATION ARID, THE GOVT. NOTIFICATION DES CRIBES IT AS INTEREST AND NOT PENAL INTEREST. IT IS FURTHER OBSERVED IN T HIS REGARD THAT THE INTEREST IS CHARGEABLE NOT UNDER ANY STATUTORY LAW BUT BY WAY OF A ITA NO.2877/AHD/2007 ITA NO.2907 AND 3310/AHD/2007 WITH CO. NO.250/AHD/2007 -7- REVISED PROCEDURE UNDER THE RETENTION PRICE SCHEME NOTIFIED BY THE DEPT. OF FERT. AND THIS SCHEME, BY ITS VERY NATURE, CAN BE AMENDED FROM TIME TO TIME WITHOUT NEEDING ANY FORMAL ASSENT OF THE LEGISLATURE. THIS DISTINGUISHES IT FROM STATUTORY L AW. IN FACT, IT IS TO BE NOTED THAT THE SCHEME ITSELF PROVIDED FOR THE PAYME NT OF INTEREST. UNDER THE CIRCUMSTANCES, IT CAN SAFELY BE SAID THAT THE AMOUNT OF INTEREST WAS NEITHER IN THE NATURE OF A PENALTY NOR SOMETHING AKIN TO PENALTY. IT IS HELD THAT MERELY BECAUSE IN THE LETT ER SENT BY THE ACCOUNTS OFFICER, DEPT. OF FERT. IT WAS SHOWN AS PE NAL INTEREST, IT DOES NOT PARTAKE THE CHARACTER OF PENALTY. UNDER TH E CIRCUMSTANCES, IT IS HELD THAT THE AMOUNT OF INTEREST WAS NOT ACTUALL Y PENAL IN CHARACTER AND WAS NOT FOR INFRACTION OF LAW. THE QUESTION POS ED IN THE BEGINNING OF THE DISCUSSION ABOVE IS ANSWERED IN TH E NEGATIVE. UNDER THE CIRCUMSTANCES, THE SAME IS HELD TO BE ALLOWABLE AS A BUSINESS EXPENDITURE. THE ADDITION MADE BY THE ASSESSING OF FICER IS ORDERED TO BE DELETED. THUS, THE CIT(A) AFTER EXAMINING THE CLAIM AND THE NOTIFICATION RECORDED FOUND THAT THE FERTILIZER MANUFACTURES WERE REQUIRE D TO REFUND THE MONEY ALONG WITH INTEREST FOR THE DELAYED REFUND OF THE D EPOSIT. THE USE OF WORD PENAL INTEREST WAS MADE ONLY SUBSEQUENTLY IN THE LETTERS ISSUED BY THE DEPARTMENT OF FERTILIZERS. THE SCHEME ONLY PROVIDE D FOR CHARGING OF INTEREST. HE THEREFORE CONCLUDED THAT THE LETTER I SSUED BY THE FERTILIZER DEPARTMENT CANNOT TAKE PRECEDENT OVER THE GOVERNMEN T NOTIFICATION WHICH DESCRIBED THE PAYMENT AS INTEREST AND NOT PENAL INTEREST. THIS FINDING RECORDED BY THE CIT(A) HAS NOT BEEN CONTROV ERTED BEFORE US. WE THEREFORE DO NOT FIND ANY JUSTIFICATION TO INTERFER E WITH THE ORDER OF THE CIT(A) ON THIS POINT ACCORDINGLY GROUND NO.4 OF THE REVENUES APPEAL IS DISMISSED. 13. CO NO.250/AHD/2007: 1.THE LD.CIT(A) ERRED IN CONFIRMING DISALLOWANCE M ADE BY ASSESSING OFFICER FOR RS.6,15,000/- U/S.40(A) IN RE SPECT OF PAYMENTS ITA NO.2877/AHD/2007 ITA NO.2907 AND 3310/AHD/2007 WITH CO. NO.250/AHD/2007 -8- MADE TO BRITISH SAFETY COUNCIL. IT IS SUBMITTED TH AT IT BE SO HELD NOW. 14. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. IT WAS CONTENDED BY THE LEARNED COUNSEL THAT THE AMOUNT PAID TO BRITISH SAFETY COUNCIL (BSC FOR SHORT) WAS NO T TAXABLE IN INDIA AND THEREFORE THERE WAS NO LIABILITY TO DEDUCT THE TAX AT SOURCE. HE ALSO RELIED UPON DTAA BETWEEN INDIA AND UK AND RELATED MATERIAL SO AS TO ESTABLISH THAT ON THE PAYMENT MADE TO BSC THE ASSESSEE WAS NOT LIABLE TO DEDUCT THE TAX AT SOURCE. WE FIND THAT THE CIT(A) HAS CON SIDERED THIS ISSUE AT LENGTH AS UNDER: I HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT IS OBS ERVED FROM THE APPELLANT'S LETTER DATED 27TH FEB., 2004 ADDRESSED TO THE DCIT, CIRCLE-1, BARODA IN RESPECT OF ASSESSMENT PROCEEDIN GS FOR A.Y. 2001-02 THAT AT SR.NO. 31 ON PAGE 5, THE APPELLANT HAS REPLIED TO THE QUERY FROM THE ASSESSING OFFICER WITH REGARD TO THE ALLOWABILITY OF THE AMOUNT OF RS.6,15,000/- AS UNDER: 'AS PER THE STATUTORY REQUIREMENTS UNDER AMENDED GU JARAT FACTORIES RULES (RULE NO. 68-B), IT IS REQUIRED TO DEVELOP RELEVANT TECHNIQUES AND METHODS SUCH AS SAFETY AUDI T AND RISK ASSESSMENT FOR PERIODICAL ASSESSMENT AT LEAST ONCE IN EVERY TWO YEARS OF THE STATUS OF HEALTH, SAFETY AND ENVIRONMENT AND TALKING ALL THE REMEDIAL MEASURES. IT IS ALSO LAID DOWN UNDER THE MANUFACTURE, STORAGE & IMPORT OF CHEMICALS RULES, 1989 (RULE 10) UNDER THE ENVIRONMENT PROTECTION ACT, 1986 INDEPENDENT SAFETY AUDIT BY OUTSIDE EXPERT FOR NEW AS WELL AS EXISTING INSTALLATIONS IS MANDATORY. THIS TYPE OF AUDIT IS GOING TO HELP OUR COMPANY IN DEVELOPING FEW MORE SYSTEMS IN THE FIELD OF CONTROL OF SUBSTANCE HAZARDOUS TO HEALTH, RISK ASSESSMENT, DEVELOPMENT OF CHECK-LIST FOR VARIOUS MANUAL ACTIVI TIES AND EFFECTIVE PARTICIPATION IN UTILIZING SAFETY COM MITTEE ITA NO.2877/AHD/2007 ITA NO.2907 AND 3310/AHD/2007 WITH CO. NO.250/AHD/2007 -9- AND OTHER SIMILAR AREA. ACCORDINGLY, THE AMOUNT OF RS.6,15,000/- HAVE BEEN PAID.' IT IS SEEN FROM ABOVE THAT THE APPELLANT HAD FURNIS HED A VERY GENERAL AND INCOMPLETE REPLY TO THE ASSESSING OFFIC ER WHEREBY NO REFERENCE HAS BEEN MADE TO THE KIND OF ELABORATE AR GUMENTS AND ALTERNATIVE ARGUMENTS THAT HAVE BEEN NOW MADE BEFOR E ME INCLUDING THE REFERENCES TO THE DTAA BETWEEN INDIA AND UK AND CONSIDERING THE NATURE OF PAYMENT AS 'FEES FOR TECH NICAL SERVICES' AS ALSO THE REFERENCE TO THE MOU EXECUTED BETWEEN U SA AND INDIA. IT HAS ALSO FURNISHED A PHOTO COPY OF THE LE TTER PURPORTEDLY FROM THE BRITISH SAFETY COUNCIL CONFIRMING THAT M/S . BRITISH SAFETY COUNCIL SERVICES HAS NO PERMANENT ESTABLISHMENT IN INDIA AS DEFINED IN ARTICLE-5 OF THE DTA BETWEEN INDIA AND U NITED KINGDOM. ALL THIS MATERIAL HAD NOT BEEN PLACED BEFO RE THE ASSESSING OFFICER. IT IS, THEREFORE, IN THE NATURE OF ADDITIONAL EVIDENCE NOW PRODUCED BEFORE ME. IT IS ALSO NOTED T HAT IT IS NOT THE APPELLANT'S CASE THAT IT WANTED TO SUBMIT THIS EVIDENCE BUT THAT THE ASSESSING OFFICER HAD REFUSED TO ADMIT THE SAME . IT HAD ALSO NOT BEEN CLAIMED THAT IT HAD BEEN PREVENTED BY SUFF ICIENT CAUSE FROM PRODUCING THIS EVIDENCE BEFORE THE ASSESSING O FFICER. THE FACTS IS THAT IT HAD FURNISHED ITS REPLY BUT FAILED TO PRODUCE AND INCLUDE THIS MATERIAL EVIDENCE IN SUPPORT OF ITS CL AIM. THE APPELLANT HAS NOT MADE ANY PRAYER EITHER THAT THIS MAY BE ADMITTED. UNDER THE CIRCUMSTANCES, THIS GROUND OF A PPEAL IS DISMISSED AND THE OTHER OF THE ASSESSING OFFICER ON THIS POINT IS UPHELD. FROM THE ABOVE, IT IS EVIDENT THAT BEFORE THE ASSES SING OFFICER THE ASSESSEE FURNISHED A VERY GENERAL AND INCOMPLETE RE PLY. BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THE AS SESSEE CLAIMED THAT THE AMOUNT PAID TO BSC WAS NOT TAXABLE IN INDIA B ECAUSE BSC DID NOT HAVE ANY PERMANENT ESTABLISHMENT IN INDIA. IT ALSO PRODUCED A LETTER FROM BSC IN THIS REGARD. FURTHER, THE CIT(A) OBS ERVED THAT ALL THE MATERIAL PLACED BEFORE HIM WERE IN THE NATURE OF AD DITIONAL EVIDENCE AND THE ASSESSEE DID NOT MAKE ANY PRAYER FOR THE ADMISS ION OF THE ADDITIONAL ITA NO.2877/AHD/2007 ITA NO.2907 AND 3310/AHD/2007 WITH CO. NO.250/AHD/2007 -10- EVIDENCE. EVEN AT THE TIME OF HEARING BEFORE US, N O REQUEST HAS BEEN MADE BY THE LEARNED COUNSEL FOR ADMISSION OF ADDITI ONAL EVIDENCE. THE LEARNED COUNSEL MERELY REITERATED THE ARGUMENTS AS WERE ADVANCED BEFORE THE CIT(A) BUT AGAIN WITHOUT ANY REQUEST FOR ADMISS ION OF ADDITIONAL EVIDENCE. IN THE ABSENCE OF ANY REQUEST FROM THE ASSESSEES SIDE FOR ADMISSION OF ADDITIONAL EVIDENCE SUCH ADDITIONAL EV IDENCE WAS RIGHTLY NOT ADMITTED BY THE CIT(A) AND THE SAME ALSO CANNOT BE ENTERTAINED BY US. IN THE ABSENCE OF ANY EVIDENCE, THE CONTENTION OF THE LEARNED COUNSEL THAT THE AMOUNT PAID BY IT TO BSC WAS NOT FEE FOR TECH NICAL SERVICES AND NOT TAXABLE IN INDIA, CANNOT BE ACCEPTED. WE THEREFORE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE CI T(A) ON THIS POINT, THE SAME IS SUSTAINED AND GROUND NO.1 OF THE ASSESSEES CO IS REJECTED. 15. WITH REGARD TO GROUND NO.2 OF THE ASSESSEES CO , IT IS STATED BY THE LEARNED COUNSEL THAT IT IS IN THE NATURE OF ALTERNA TIVE GROUND AND WOULD REQUIRE ADJUDICATION IF GROUND NO.1 TO 3 OF THE REV ENUES APPEAL IS ALLOWED. IF THE GROUND NO.1 TO 3 OF THE REVENUES APPEAL ARE REJECTED, GROUND NO.2 OF THE ASSESSEES CO WILL NOT SURVIVE. SINCE WHILE DISPOSING OF THE REVENUES APPEAL, WE HAVE REJECTED GROUND NO.1 TO 3 OF THE REVENUES APPEAL, GROUND NO.2 OF THE ASSESSEES CO DOES NOT SURVIVE AND IS ACCORDINGLY REJECTED. ITA NO.3310/AHD/2007 (REVENUES APPEAL : A.Y.2002-2 003) 16. GROUND NO.1 OF THE REVENUES APPEAL IS AGAINST THE DELETION OF DISALLOWANCE OF RS.88.11 LAKHS BEING THE EXPENSES O N RELEASE OF WATER AND DISCHARGE OF EFFLUENT AND POLLUTION CONTROL. THIS GROUND IS SIMILAR TO GROUND NO.2 OF THE REVENUES APPEAL FOR A.Y.2001-20 02. FOR DETAILED ITA NO.2877/AHD/2007 ITA NO.2907 AND 3310/AHD/2007 WITH CO. NO.250/AHD/2007 -11- DISCUSSION THEREIN GROUND NO.1 OF THE REVENUE HAS N O MERIT ACCORDINGLY, THE SAME IS REJECTED. 17. GROUND NO.2 OF THE REVENUES APPEAL IS AGAINST THE DELETION OF DISALLOWANCE OF RS.45.45 LAKHS BEING THE EXPENSES I NCURRED ON FIRE FIGHTING EQUIPMENTS AND ON SAFETY MEASURES. THIS G ROUND IS SIMILAR TO GROUND NO.3 OF THE REVENUES APPEAL FOR A.Y.2001-20 02 AND FOR THE DETAILED DISCUSSION IN PARA-14 ABOVE, THIS GROUND O F THE REVENUE IS REJECTED. 18. GROUND NO.3 OF THE REVENUES APPEAL IS AGAINST THE DELETION OF THE ADDITION OF RS.1,82,718/- BEING THE PROVISION FOR B AD DEBTS. AT THE TIME OF HEARING BEFORE US, THE LEARNED COUNSEL FOR THE A SSESSEE FAIRLY CONCEDED THAT THIS ISSUE IS NOW IN FAVOUR OF THE REVENUE BEC AUSE OF THE RETROSPECTIVE AMENDMENT IN SECTION 115JB OF THE ACT . THE FINANCE (NO.2) ACT OF ACT 2009, WITH RETROSPECTIVE EFFECT F ROM 1-4-2001, INSERTED CLAUSE (I) UNDER EXPLANATION-1 TO SECTION 115JB OF THE IT ACT. THIS CLAUSE READS AS UNDER: (I) THE AMOUNT OR AMOUNTS SET ASIDE AS PROVISION F OR DIMINUTION IN THE VALUE OF ANY ASSET, SINCE THE ABOVE CLAUSE IS MADE APPLICABLE W.E.F. 1- 4-2001, IT WOULD BE APPLICABLE FOR THE YEAR UNDER CONSIDERATION. THERE FORE ANY PROVISION FOR BAD DEBT IS TO BE ADDED TO THE BOOK PROFIT. ACCORD INGLY, THIS GROUND OF THE REVENUES APPEAL ALLOWED. 19. GROUND NO.4, 4(A) AND 5 OF THE REVENUES APPEAL ARE IN RESPECT OF THE ADDITION MADE BY THE ASSESSING OFFICER WHILE CO MPUTING THE BOOK ITA NO.2877/AHD/2007 ITA NO.2907 AND 3310/AHD/2007 WITH CO. NO.250/AHD/2007 -12- PROFIT IN RESPECT OF ESTIMATED LIABILITY OF GRATUIT Y, ESTIMATED LIABILITY ON LEAVE ENCASHMENT AND THE PROVISION FOR SUPERANNUATI ON. 20. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. AT THE TIME OF HEARING BEFORE US, IT IS STATED BY THE LEARNED COUNSEL THAT ALL THE ABOVE THREE PROVISIONS I.E. PR OVISION FOR GRATUITY, PROVISION FOR LEAVE ENCASHMENT AS WELL AS PROVISION FOR SUPERANNUATION WAS MADE AS PER ACTUARIAL VALUATION IN RESPECT OF T HIS EXPENDITURE. THEREFORE, ON THESE FACTS, THE DECISION OF HONBLE APEX COURT IN THE CASE OF BHARAT EARTH MOVERS VS. CIT, 245 ITR 428 WOULD B E SQUARELY APPLICABLE. THE LEARNED DR ON THE OTHER HAND, RELI ED UPON THE ORDERS OF THE AUTHORITIES BELOW. 21. WE FIND THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS RECORDED THE FINDING THAT THE PROVISIONS ARE MA DE ON THE BASIS OF SCIENTIFIC AND ACCURATE CALCULATION AS PER ACTUARIA L VALUATION. THIS FINDING OF THE CIT(A) HAS NOT BEEN CONTROVERTED BY THE REVE NUE AT THE TIME OF HEARING BEFORE US. ON THIS FACT, THE DECISION OF H ONBLE APEX COURT IN THE CASE OF BHARAT EARTHMOVERS (SUPRA)WOULD BE SQUA RELY APPLICABLE, WHEREIN THEIR LORDSHIPS HELD AS UNDER: REVERSING THE DECISION OF THE HIGH COURT, THAT THE PROVISION MADE BY THE ASSESSEE-COMPANY FOR MEETING THE LIABILITY I NCURRED BY IT UNDER THE LEAVE ENCASHMENT SCHEME PROPORTIONATE WIT H THE ENTITLEMENT EARNED BY THE EMPLOYEES OF THE COMPANY, INCLUSIVE OF THE OFFICERS AND THE STAFF, SUBJECT TO THE CEILING ON ACCUMULATION AS APPLICABLE ON THE RELEVANT DATE, WAS ENTITLED TO DE DUCTION OUT OF THE GROSS RECEIPTS OF THE ACCOUNTING YEAR DURING WHICH THE PROVISION IS MADE FOR THE LIABILITY. THE LIABILITY WAS NOT A CON TINGENT LIABILITY. RESPECTFULLY FOLLOWING THE SAME, WE UPHOLD THE ORDE R OF THE CIT(A) ON THIS POINT AND REJECT GROUND NO.4, 4(A) AND 5 OF TH E REVENUES APPEAL. ITA NO.2877/AHD/2007 ITA NO.2907 AND 3310/AHD/2007 WITH CO. NO.250/AHD/2007 -13- ITA NO.2877/AHD/2007 (A.Y.2002-2003) ASSESSEES APP EAL: 22. GROUND NO.1 OF THE ASSESSES APPEAL IS OF GENER AL NATURE, NEEDS NO ADJUDICATION. 23. GROUND NO.2 OF THE ASSESSEES APPEAL IS AGAINST THE DISALLOWANCE OF RS.32,69,863/- BEING EXPENSES INCURRED ON REPLACEME NT OF BOILER FEED WATER PUMP IN THE CO-GENERATION-II PLANT CONSIDERIN G THE SAME AS CAPITAL EXPENSES. AT THE TIME OF HEARING BEFORE US, IT IS STATED BY THE LEARNED COUNSEL THAT WATER PUMP IS NOT AN INDEPENDENT MACHI NERY IN ITSELF BUT IT IS INTEGRAL PART OF THE EXISTING PLANT I.E. CO-GENERAT ION PLANT. HE SUBMITTED THAT THE REPLACEMENT OF WATER PUMP HAS HELPED IN RU NNING THE BUSINESS ON SAME LEVEL OF SMOOTHNESS AND EFFICIENCY AND HAS NOT INCREASED THE LEVEL OF EFFICIENCY. HE ALSO RELIED UPON THE FOLLOWING D ECISIONS: I) CIT VS. SOUTHERN ROADWAYS LTD., 288 ITR 15 (MAD); II) CIT VS. RENU SAGAR POWER CO. LTD., 298 ITR 94 (ALL) ; III) ALEMBIC CHEMICAL WORKS CO. LTD. VS. CIT, 177ITR 377 (SC); 24. THE LEARNED DR ON THE OTHER HAND RELIED UPON TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND HA S STATED THAT WATER PUMP IS SEPARATE AND INDEPENDENT MACHINERY AND THER EFORE THE ASSESSING OFFICER HAS RIGHTLY TREATED THE SAME AS CAPITAL EXP ENDITURE. 25. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF B OTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. THE CIT(A) IN THIS REGARD HAS RECORDED THE FOLLOWING FINDINGS: ITA NO.2877/AHD/2007 ITA NO.2907 AND 3310/AHD/2007 WITH CO. NO.250/AHD/2007 -14- 12. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT IS OBSERVED THAT WHAT IS CRITICAL TO BE SEEN IS THE BASIC NATURE AND CHARACTER OF AN EXPENDITURE RATHER THAN THE SIZE OF THE EXPENDITURE . THEREFORE, THE APPELLANT'S PLEA THAT THE COST OF THE PUMP ES TOO S MALL IN COMPARISON TO THE COST OF THE TOTAL COGEN-II PLANT DOES NOT HOLD GOOD IN VIEW OF THE KERALA HIGH COURT DECISION IN T HE CASE OF CIT V. VANAJA TEXTILE LTD. 208 ITR 161. IT IS FURTHER O BSERVED THAT EVERY INDEPENDENT ITEM SHALL ALWAYS BE A PART OF THE LARG ER PLANT AND MACHINERY IN ONE WAY OR THE OTHER. THEREFORE, THAT A PARTICULAR ITEM IS A PART OF THE TOTAL PLANT AND MACHINERY CAN NOT BE A CONCLUSIVE ARGUMENT IN FAVOUR OF HOLDING AN EXPENDI TURE ON SUCH ITEM AS A REVENUE EXPENDITURE. IT IS SEEN THAT BOIL ER FEED WATER PUMP IS A MAJOR UNIT / PART OF PLANT AND MACHINERY. MOREOVER, A REPLACEMENT OF SUCH A MAJOR PART CANNOT CONSTITUTE A REGULAR REPAIR IN THE NATURE OF CURRENT REPAIR. UNDER THE C IRCUMSTANCES, THE EXPENDITURE OF RS.32.69 LACS IS HELD TO BE OF CAPIT AL NATURE. THE ACTION OF THE ASSESSING OFFICER IN THIS REGARD IS U PHELD. SHE HAS RIGHTLY ALLOWED THE DEPRECIATION ON THIS CAPITALISE D AMOUNT. UNDER THE CIRCUMSTANCES, THE NET ADDITION OF RS.28.61 LAC S IS UPHELD 26. AFTER HEARING ARGUMENTS OF BOTH THE SIDES AND T HE FACTS OF THE CASE, WE FIND NO INFIRMITY IN THE ABOVE FINDINGS OF THE C IT(A). THAT MERELY BECAUSE THE WATER PUMP IS A PART OF CO-GENERATION P LANT, IT CANNOT BE SAID THAT IT IS NOT AN INDEPENDENT PLANT AND MACHINERY. THE WATER PUMP IS A SEPARATE AND INDEPENDENT PLANT & MACHINERY AND BY A CQUIRING THE NEW WATER PUMP THE ASSESSEE HAS ACQUIRED A NEW CAPITAL ASSET. THE AO HAS ALREADY ALLOWED DEPRECIATION THEREON IN ACCORDANCE WITH LAW. THE FACTS OF THE CASES RELIED UPON BY THE LEARNED COUNSEL ARE ALTOGETHER DIFFERENT ITA NO.2877/AHD/2007 ITA NO.2907 AND 3310/AHD/2007 WITH CO. NO.250/AHD/2007 -15- AND THEREFORE WILL NOT APPLICABLE TO THE CASE UNDER APPEAL BEFORE US. IN THE CASE OF SOUTHERN ROADWAYS LTD. (SUPRA), THE ISS UE BEFORE THE HONBLE MADRAS HIGH COURT WAS WITH REGARD TO THE EXPENDITUR E INCURRED BY THE ASSESSEE ON UPGRADATION OF COMPUTER. THE HONBLE H IGH COURT HELD THE EXPENDITURE ON UPGRADATION OF COMPUTER TO BE REVENU E EXPENDITURE. IN CASE OF RENU SAGAR POWER CO. LTD., THE QUESTION BEF ORE THE HONBLE ALLAHABAD HIGH COURT WAS WITH REGARD TO REPLACEMENT OF ONE TURBINE AND THE HONBLE HIGH COURT HELD THE SAME TO BE REVENUE EXPENDITURE. THAT THE FACTS IN THE CASE OF THE ASSESSEE ARE ALTOGETHE R DIFFERENT. HERE THE ASSESSEE REPLACES THE MOTOR PUMP WHICH IS AN INDEPE NDENT MACHINERY. THAT THE FACTS IN THE CASE OF ALEMBIC CHEMICALS WOR KS CO. LTD. (SUPRA) WAS WITH REGARD TO THE ACQUISITION OF KNOW-HOW, IN THE CASE OF AN ASSESSEE, WHO WAS IN THE BUSINESS OF MANUFACTURING OF ANTI-BIOTIC. OBVIOUSLY, THE FACTS OF THE ASSESSEES CASE ARE ALT OGETHER DIFFERENT. THEREFORE, NONE OF THE CASE RELIED UPON BY THE LEAR NED COUNSEL WOULD BE APPLICABLE TO THE CASE UNDER APPEAL BEFORE US. CIT (A) HAS ALREADY RECORDED THE FINDING THAT MOTOR PUMP WAS AN INDEPEN DENT MACHINERY. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE CIT(A) IN THIS REGARD. ACCORDINGLY GR OUND NO.1 OF THE ASSESSEES APPEAL IS REJECTED. 27. GROUND NO.2 OF THE ASSESSEES APPEAL IS AGAINST DISALLOWANCE OF EXPENSES OF RS.40.77 LAKHS INCURRED ON MATERIAL REL ATING TO LPG PROJECT AT SIKKA UNIT HOLDING THE SAME TO BE PRE-OPERATIVE EXPENDITURE. 28. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THAT IN A.Y.1999-2000, THE ASS ESSEE HAS ABANDONED LPG PROJECT AND THE EXPENDITURE IN THAT PROJECT WAS CLAIMED AS REVENUE ITA NO.2877/AHD/2007 ITA NO.2907 AND 3310/AHD/2007 WITH CO. NO.250/AHD/2007 -16- EXPENDITURE. THE ITAT IN ITS ORDER FOR A.Y.1999-20 00 VIDE ITA NO.3228/AHD/2003 SET ASIDE THE MATTER BACK TO THE F ILE OF THE ASSESSING OFFICER WITH THE FOLLOWING FINDINGS: 23. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE FACTS OF THE CASE. IT IS WELL SETTLED COMMERCIAL PRINCIPL E OF ACCOUNTING THAT THE NATURE OF EXPENDITURE IS DETERMINED AT THE FIRST INSTANCE WHEN IT IS INCURRED AND ITS NATURE CANNOT BE ALTERE D ON ACCOUNT OF SUBSEQUENT EVENTS. WE FIND THAT IN THE ASSESSMEN T YEAR 1996- 97 THE ASSESSEE HAD STARTED A NEW JOINT VENTURE WIT H THE EQUITY PARTICIPATION BY THE ASSESSEE AND THE GOVERNMENT OF UGANDA. SUBSEQUENTLY, THE PROJECT WAS FOUND NOT FEASIBLE AN D ACCORDINGLY, AN AMOUNT OF RS.91 .20 LACS WAS WRITTE N OFF. IN THAT YEAR ALSO, THE ASSESSEE CLAIMED THAT THE EXPEN DITURE WAS FOR THE EXPANSION OF EXISTING BUSINESS THE FACTS AN D CIRCUMSTANCES IN THE YEAR UNDER CONSIDERATION BEING SIMILAR TO THOSE IN THE ASSESSMENT YEAR 1996-97,WE FIND MERIT IN THE CONTENTION OF THE LEARNED AR ON BEHALF OF THE ASSES SEE AND ACCORDINGLY, FOLLOWING THE AFORESAID DECISION OF TH E ITAT FOR THE AY 1996-97, VACATE THE FINDINGS OF THE LEARNED CIT(A) AND RESTORE THIS ISSUE BACK TO THE FILE OF THE AO FOR F RESH CONSIDERATION, IN ACCORDANCE WITH LAW, AFTER ALLOWI NG SUFFICIENT OPPORTUNITY OF HEARING TO THE ASSESSEE. WITH THESE DIRECTIONS, GROUND NO.6 IN THE APPEAL OF THE ASSESSEE IS DISPOS ED OF. SINCE THE ISSUE OF ALLOWABILITY OF EXPENDITURE RELA TING TO THE LPG PROJECT EXPENSES HAS BEEN SET ASIDE BY THE ITAT TO THE FILE OF THE ASSESSING OFFICER IN A.Y.1999-2000, WE ARE OF THE OPINION THA T SIMILAR TREATMENT IS ITA NO.2877/AHD/2007 ITA NO.2907 AND 3310/AHD/2007 WITH CO. NO.250/AHD/2007 -17- REQUIRED TO BE GIVEN TO THE EXPENDITURE OF RS.40.77 LAKHS CLAIMED BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION INCURRED I N RESPECT OF LPG PROJECT. WE THEREFORE SET ASIDE THE ORDER OF THE A UTHORITIES BELOW ON THIS POINT AND RESTORE THE MATTER BACK TO THE FILE OF TH E ASSESSING OFFICER. WE DIRECT HIM TO RE-ADJUDICATE THE ISSUE IN THE LIGHT OF HIS FINDING FOR A.Y.1999-2000. 29. IN RESULT REVENUES APPEAL IN ITA NO.2907AHD/20 07 IS DISMISSED AND ITA NO.3310/AHD/2007 IS PARTLY ALLOWED. THE AS SESSEES CO NO.250/AHD/2007 IS DISMISSED AND THE ASSESSEES APP EAL IN ITA NO.2877/AHD/2007 IS DEEMED TO BE ALLOWED FOR STATIS TICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON 21 ST APRIL, 2011 SD/- SD/- (BHAVNESH SAINI) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 21-04-2011 C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD ITA NO.2877/AHD/2007 ITA NO.2907 AND 3310/AHD/2007 WITH CO. NO.250/AHD/2007 -18- 1. DATE OF DICTATION : 08-04-2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER. : 12-04-2011 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P.S./P.S : 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT. : 5. DATE ON WHICH FAIR ORDER PLACED BEFORE OTHER MEMBER : 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P.S./P.S. : 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK. : 21-04-2011 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK. : 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER. : 10. DATE OF DESPATCH OF THE ORDER :