Naroda Enviro Projects Ltd., Ahmedabad V. The Income tax Officer,Ward-5(1), Ahmedabad

ITA 2976/AHD/2010

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9537 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 07-01-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 01-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Assessee Lawyers: SHIR S N SOPARKAR
• Keywords: Reopening of assessment; Depreciation; Audit objection; Retrospective amendment; Question of law; Bad and doubtful debts; Revised return; Reassessment proceedings
• Section: 80HHC; 115JB; 80IB; 32; 148; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD BEFORE SHRI SHAILENDRA KUMAR YADAV , JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ITA NOS. 2976/AHD/2010 & 152/AHD/2013 ASSESSMENT YEARS :2004-05 & 2005-06 NARODA ENVIRO PROJECTS LTD. PLOT NO.512-515, PHASE-I, GIDC, NARODA AHMEDABAD 382330 V/S . INCOME TAX OFFICER, WARD 5 (1), AHMEDABAD. PAN NO. AAAC N5399J (APPELLANT) .. (RESPONDENT) ' /BY ASSESSEE SHIR S. N. SOPARKAR, A.R. $ ' / BY REVENUE SHRI DINESH SINGH, SR. D.R. % ' /DATE OF HEARING 07.01.2016 () ' /DATE OF PRONOUNCEMENT 12.02.2016 O R D E R PER : SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER THESE TWO APPEALS FILED BY ASSESSEE ARE AGAINST THE ORDERS OF CIT(A)-XI, AHMEDABAD, DATED 21.09.2010 AND 15.02.2012 FOR A.Y. 2004-05 & 2005-06 RESPECTIVELY. 2. BEFORE US, AT THE OUTSET, LD. A.R. SUBMITTED THA T THOUGH THE TWO APPEALS OF THE ASSESSEE PERTAIN TO DIFFERENT ASSESSMENT YEARS, BUT MOST OF THE ISSUES ARE IDENTICAL EXCEPT FOR THE AMOUNTS AND ASSESSMENT YEA RS AND THEREFORE THE SUBMISSION MADE BY HIM AS FAR AS TO THE COMMON ISSU ES ARE CONCERNED, IT WOULD BE APPLICABLE TO BOTH THE ASSESSMENT YEARS. LD. D. R. DID NOT OBJECT TO THE ITA NOS. 2976/AHD/10 & 152/AHD/13 A.YS. 04-05 & 05- 06 [NARODA ENVIRO PROJECTS LTD. VS. ITO] PAGE 2 AFORESAID SUBMISSION OF LD. A.R. WE THEREFORE FOR THE SAKE OF CONVENIENCE PROCEED TO DISPOSE OF BOTH THE APPEALS BY A COMMON ORDER AND PROCEED WITH THE FACTS FOR A.Y. 2004-05. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER: 3. THE ASSESSEE IS A COMPANY STATED TO BE ENGAGED I N THE BUSINESS OF PROVIDING POLLUTION CONTROL TREATMENT FOR DISPOSAL OF LIQUID AND SOLID INDUSTRIAL WASTE. THE ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 04-05 ON 30.10.2004 DECLARING TOTAL INCOME AT RS.2,99,450/-. THE RETUR N WAS INITIALLY PROCESSED ON 25.10.2005. SUBSEQUENTLY, NOTICE U/S.148 WAS ISSUE D ON 01.06.2007 AND SERVED ON ASSESSEE ON 29.06.2007 AND THEREAFTER, THE ASSES SMENT WAS FRAMED U/S.143(3) R.W.S. 147 OF THE ACT VIDE ORDER DATED 31.07.2008 A ND THE TOTAL INCOME WAS DETERMINED AT RS.27,76,763/-BEFORE SETTING OFF OF U NABSORBED FORWARD LOSSES. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, ASSESS EE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO VIDE ORDER DATED 21.09.2010 DISM ISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD. CIT(A), AS SESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE GROUNDS WHICH WERE LA TER CONCISED AND THE CONCISED GROUNDS READ AS UNDER: 1. GENERAL 2. LD. CIT (A) ERRED IN LAW AND ON FUELS IN HOLDING THE REOPENING OF ASSESSMENT MADE BY AO U/S 147 OF THE ACT AS VALID. LD. CIT (A) OUGHT T O HAVE APPRECIATED THAT REASON RECORDED BY AO DOES NOT DIRECTLY REFER TO ESCAPEMEN T OF INCOME. 2.1 LD. CIT (A) ERRED IN LAW AND ON FACTS IN CONFIR MING ACTION OF AO IN REJECTING APPELLANT'S CONTENTION THAT ASSESSMENT WAS REOPENED ON BASIS OF AUDIT OBJECTIONS RAISED BY REVENUE AUDIT PARTY. 2.2 LD. CIT (A) ERRED IN LAW AND ON FACTS IN CONFIR MING DISALLOWANCE OF DEPRECIATION MADE BY AO OF RS.18,19,520/- BY REDUCING AMOUNT OF SUBSIDY, NOT RECEIVED FROM ANY AUTHORITY DURING THE YEAR UNDER APPEAL. LD. CIT (A) OUGHT TO HAVE HELD THAT REOPENING OF ASSESSMENT IS VOID AND THEREBY DELETED THE ADDITION MADE BY AO. IT BE SO HELD NOW. 3. LD. CIT (A) ERRED IN LAW AND ON FACTS IN CONFIRM ING ACTION OF AO OF ADDING BACK BAD AND DOUBTFUL DEBTS OF RS.34,96,231/- FOR COMPUTING BOOK PROFIT AT RS.33,84,878/- U/S 115JB OF THE ACT, BY APPLYING EXPLANATION 3 TO SECT ION 147 & EXPLANATION 1 (I) TO SECTION 115JB OF THE ACT, WHEN BOTH THE PROVISIONS DID NOT EXIST IN THE ACT. LD. CIT (A) OUGHT TO HAVE APPRECIATED THAT AN AMENDMENT INT RODUCED IN THE ACT SUBSEQUENT TO ITA NOS. 2976/AHD/10 & 152/AHD/13 A.YS. 04-05 & 05- 06 [NARODA ENVIRO PROJECTS LTD. VS. ITO] PAGE 3 THE DATE OF PASSING THE ASSESSMENT ORDER WILL NOT B E APPLICABLE TO THE ASSESSMENT ORDER ALREADY PASSED, AND THEREBY DELETING THE ADDI TION OF BAD DEBTS MADE BY AO. IT BE SO HELD NOW. 4. BEFORE US, AT THE OUTSET LD. A.R. SUBMITTED THAT HE DID NOT WISH TO PRESS GROUND NOS.1, 2 & 2.1 WHICH ARE WITH RESPECT TO REO PENING OF ASSESSMENT U/S.147. IN VIEW OF THE AFORESAID SUBMISSION OF LD . A.R., THESE GROUNDS ARE DISMISSED AS NOT PRESSED. 5. GROUND NO.2.2 IS WITH RESPECT TO CONFIRMING DISA LLOWANCE OF DEPRECIATION MADE BY AO OF RS.18,19,520/-. 5.1 ASSESSING OFFICER (AO) ON PERUSING THE ANNUAL A CCOUNTS NOTICED THAT ASSESSEE HAD RECEIVED SUBSIDY OF RS.72,28,081/- FRO M THE GOVERNMENT OF GUJARAT, WHICH WERE SHOWN UNDER THE HEAD RESERVE A ND SURPLUS AND IT WAS RECEIVED AGAINST THE INSTALLATION OF EFFLUENT TREAT MENT PLANT. AO WAS OF THE VIEW THAT SINCE THE PART OF THE COST WAS MET BY THE STATE GOVERNMENT IN FORM OF SUBSIDY, THE SAME WAS REQUIRED TO BE DEDUCTED FROM THE COST OF ASSET AS PER THE MANDATE OF SECTION 43(1) OF THE ACT AND THE SUBSIDY AMOUNT SHOULD NOT HAVE BEEN CREDITED TO RESERVE AND SURPLUS. IN SUCH A SI TUATION, HE WAS OF THE VIEW THAT THE DEPRECIATION ON EFFLUENT TREATMENT PLANTS WAS TO BE ALLOWED NOT ON THE BASIS OF ACTUAL COST BUT THE COST AFTER REDUCING THE SUBSIDY FROM THE COST OF ASSET. HE WAS THEREFORE OF THE VIEW THAT THE CLAIM OF DEPRECIATION SHOULD HAVE BEEN ON THE COST REDUCED BY SUBSIDY AND NOT ON THE ORIGINAL COST. HE, THEREFORE, WORKED OUT THE EXCESS DEPRECIATION CLAIMED BY ASSES SEE ON ACCOUNT OF SUBSIDY AT RS.18,19,520/- AND DISALLOWED THE SAME. 5.2 AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, AS SESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO UPHELD THE ORDER OF ASSES SING OFFICER BY HOLDING AS UNDER: 4.2 BRIEFLY STATED THE CONTENTIONS OF THE APPELLAN T ARE THAT THE SUBSIDY OF RS.72.78 LAKHS WAS RECEIVED IN THE PREVIOUS YEARS RELEVANT TO A.YS. 19 99-2000 AND 2000-01; NO SUBSIDY IS RECEIVED DURING THE YEAR UNDER CONSIDERATION; AND T HEREFORE NO DISALLOWANCE OF DEPRECIATION IS CALLED FOR. ITA NOS. 2976/AHD/10 & 152/AHD/13 A.YS. 04-05 & 05- 06 [NARODA ENVIRO PROJECTS LTD. VS. ITO] PAGE 4 4.2.1. WHILE MAKING THE DISALLOWANCE A.O. RELIED O N THE CASE OF SAHARANGPUR ELECTRIC SUPPLY CO. LTD. & ORS VS. CIT (194 ITR 294) (SC), I N WHICH IT WAS HELD THAT THE ACTUAL COST OF ALL ASSETS, INCLUDING THOSE ACQUIRED IN EARLIER YEARS, IS TO BE DETERMINED IN EACH A.Y. AND THAT THE A.O. HAS TO ENSURE THAT THE DEPRECIATION A LLOWED IS NOT MORE THAN THE ACTUAL COST. IN THE INSTANT CASE, IT IS NOT THE CLAIM OF THE APPELL ANT THAT IN THE EARLIER YEARS, DEPRECIATION WAS ALLOWED AFTER DEDUCTING THE SUBSIDY RECEIVED. THER EFORE, A.O.S ACTION IN REDUCING THE SUBSIDY FROM COST AND DISALLOWING DEPRECIATION IS U PHELD. THESE GROUNDS OF APPEAL ARE DISMISSED. 5.3 AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE I S NOW IN APPEAL BEFORE US. 5.4 BEFORE US, LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER AND LD. CIT(A) AND FURTHER SUBMITTED THAT I MPUGNED SUBSIDY WAS NOT RECEIVED IN THE YEAR UNDER CONSIDERATION BUT WAS RE CEIVED IN A.Y.2000-01 AND PRIOR TO A.Y. 2000-01 AND THAT NO SUBSIDY WAS RECEI VED SUBSEQUENT TO A.Y. 2000-01. HE FURTHER SUBMITTED THAT THE OPENING BAL ANCE OF THE BLOCK OF ASSETS UNDER THE HEAD EFFLUENT TREATMENT PLANT AMOUNTING TO RS.6,36,233/- RELATES TO THE ASSETS ACQUIRED IN A.Y. 2003-04 AND THAT NO SUB SIDY WAS RECEIVED IN A.Y.2003-04. HE FURTHER SUBMITTED THAT ON EFFLUENT TREATMENT PLANTS THAT WERE ACQUIRED IN A.Y. 1999-2000 AND 2000-01, DEPRECIATIO N WAS CLAIMED AT PREVAILING RATE OF 100% AND THEREFORE THE WRITTEN D OWN VALUE (WDV) OF EFFLUENT TREATMENT PLANT AMOUNTING TO RS.6,36,233/- IS NOT RELATABLE TO THE ASSETS ACQUIRED IN A.Y. 1999-2000 AND A.Y. 2000-01 IN WHICH YEARS THE SUBSIDY WAS RECEIVED AND THAT THE OPENING BALANCE OF WDV RE LATES TO ASSETS ACQUIRED IN A.Y. 2003-04 AS THE DEPRECIATION ON PLANT AND MACHI NERY OF POLLUTION CONTROL EQUIPMENTS HAVE BEEN REVISED TO 80% AS AGAINST 100% FOR A.Y. 2003-04. HE FURTHER SUBMITTED THAT AS PER THE PROVISIONS OF SEC TION 32 OF THE ACT, DEPRECIATION IS TO BE COMPUTED AS A PERCENTAGE OF W RITTEN DOWN VALUE. AS PER SECTION 43(6) OF THE ACT WRITTEN DOWN VALUE MEANS (A) IN THE CASE OF ASSETS ACQUIRED IN THE PREVIOUS YEAR, THE ACTUAL COST TO T HE ASSESSEE; (B) IN THE CASE OF ASSETS ACQUIRED BEFORE THE PREVIOUS YEAR, THE ACTUA L COST TO THE ASSESSEE LESS ALL DEPRECIATION ACTUALLY ALLOWED TO HIM UNDER THIS ACT . HE FURTHER SUBMITTED THAT ITA NOS. 2976/AHD/10 & 152/AHD/13 A.YS. 04-05 & 05- 06 [NARODA ENVIRO PROJECTS LTD. VS. ITO] PAGE 5 THE EXPRESSION ACTUAL COST IN SECTION 43(1) MEANS THE ACTUAL COST OF ASSETS TO THE ASSESSEE AS REDUCED BY THAT PORTION OF THE COST WHICH HAS BEEN MADE DIRECTLY OR INDIRECTLY BY ANY PERSON OR AUTHORITY. IN THE C ASE OF ASSESSEE, HE SUBMITTED THAT WDV OF EFFLUENT TREATMENT PLANT DID NOT INCLUD E ANY ITEM OF ASSET, THE COST OF WHICH HAD BEEN MET DIRECTLY OR INDIRECTLY BY ANY OTHER PERSON OR AUTHORITY. HE FURTHER SUBMITTED THAT AS PER THE DEFINITION OF WDV AS CONTAINED IN SECTION 43(6) IN THE CASE OF BLOCK OF ASSETS MEANS THE OPEN ING WRITTEN DOWN VALUE AS INCREASED OR DECREASED BY THE TWO CIRCUMSTANCES, NA MELY, INCREASE IN THE BLOCK OF ASSETS ON ACCOUNT OF ACQUISITION OF NEW ASSET, P ROVIDED SUCH ASSET IS PUT TO BE USED IN THE YEAR UNDER CONSIDERATION; AND DECREASE IN CASE WHERE THE ASSET IS SOLD OR OTHERWISE DISPOSED OF IN THE PREVIOUS YEAR. HE FURTHER SUBMITTED THAT THE SECTION DOES NOT PERMIT ANY OTHER ADJUSTMENT TO BE MADE FROM THE WRITTEN DOWN VALUE AND THE CONCEPT OF ACTUAL COST HAS BEARI NG ONLY IN YEAR ONE IN WHICH THE ASSETS ARE ACQUIRED. HE FURTHER SUBMITTED THAT WHEN ONCE THE ASSET ENTERS THE BLOCK, IT LOSES ITS INDEPENDENT IDENTITY AND THE COST OF SUCH ASSETS GETS MERGED WITH OTHER ASSETS IN THE BLOCK AND ONCE THE ASSETS FORMS PART OF THE BLOCK, THE DEPRECIATION IS COMPUTED ON THE WRITTEN DOWN VALUE ON THE BLOCK OF ASSETS AS ENVISAGED IN SECTION 43(6)(C) OF THE ACT AND SECTION 43(6)(C) DOES NOT PERMIT REDUCING THE WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS BY THE AMOUNT OF SUBSIDY RECEIVED IN RELATION TO SOME OF THE ASSETS FORMING PART OF THE BLOCK OF ASSETS AND THEREFORE, THE COST OF ASSETS CANNOT BE REDUCED OUT OF THE WRITTEN DOWN VALUE AND FOR THIS PROPOSITION HE PLACED RELIA NCE ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN CASE OF BANCO PRODUCT S (INDIA) LTD. VS. DCIT IN TAX APPEAL NO.255 OF 2007, ORDER DATED 05.10.2015. HE ALSO PLACED ON RECORD THE COPY OF THE AFORESAID DECISION AT PAGE NOS. 17 TO 32 OF THE PAPER BOOK. HE FURTHER SUBMITTED THAT RELIANCE PLACED BY THE REVEN UE IN CASE OF SAHARANPUR ELECTRIC SUPPLY CO. LTD. VS. CIT (1992) 194 ITR 29 4 IS MISPLACED IN VIEW OF THE FACT, IN THAT CASE, THE MATTER WAS WITH RESPECT TO THE PROVISION OF DEPRECIATION WHEN THE BLOCK OF ASSETS METHOD NOT IN STATUTE. HE THUS SUBMITTED THAT THE ITA NOS. 2976/AHD/10 & 152/AHD/13 A.YS. 04-05 & 05- 06 [NARODA ENVIRO PROJECTS LTD. VS. ITO] PAGE 6 ASSESSING OFFICER WAS IN ERROR IN REDUCING THE SUBS IDY FOR THE PURPOSE OF COMPUTING DEPRECIATION AND IN SUCH A SITUATION, HE SUBMITTED THAT ASSESSEES GROUND DESERVES TO BE ALLOWED. LD. D.R. ON THE OT HER HAND RELIED UPON THE ORDER OF A.O. 5.5 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO RE DUCING THE SUBSIDY FOR THE PURPOSE OF CALCULATION OF DEPRECIATION. BEFORE US, IT IS ASSESSEES CONTENTION THAT THE IMPUGNED AMOUNT OF SUBSIDY THAT THE ASSESS ING OFFICER HAS REDUCED FROM THE COST OF ASSETS WAS RECEIVED BY THE ASSESSE E IN A.Y. 2000-01 AND PRIOR TO A.Y. 2000-01 AND NO PART OF SUBSIDY WAS RECEIVED IN THE YEAR UNDER CONSIDERATION AND THE BLOCK OF ASSETS DOES NOT RELA TE TO ANY ASSETS WHICH HAS BEEN ACQUIRED IN THE YEAR IN WHICH THE SUBSIDY WAS RECEIVED BY THE ASSESSEE. THIS CONTENTION OF LD. A.R. HAS NOT BEEN CONTROVERT ED BY THE REVENUE BY PLACING ANY MATERIAL ON RECORD. WE FIND THAT ON ISSUE OF R EDUCING THE SUBSIDY FROM THE BLOCK OF ASSET, THE HONBLE GUJARAT HIGH COURT IN CASE OF BANCO PRODUCTS (INDIA) LTD. VS. DCIT (SUPRA) HAS HELD AS UNDER: 8. THE FACTS OF THE CASE ARE REQUIRED TO BE EXAMIN ED IN THE LIGHT OF THE ABOVE STATUTORY PROVISIONS. AT THE RELEVANT TIME WHEN THE ASSETS CA ME TO BE ACQUIRED IN THE YEAR 1993-94, THE SUBSIDY, THOUGH SANCTIONED HAD NOT BEEN DISBURSED. AT THE TIME WHEN THE ASSETS CAME TO BE ACQUIRED, SECTION 43(1) OF THE ACT DID NOT PROVIDE FOR NON-INCLUSION OF THE SUBSIDY RECEIVED IN THE ACTUAL COST. ACCORDINGLY, THE ACTUAL COST CAME TO BE COMPUTED IN TERMS OF THE PROVISIONS IN FORCE AT THE RELEVANT TIME. IT MAY BE NOTED THAT TH E ASSETS IN RELATION TO WHICH SUBSIDY HAS BEEN GRANTED, FORM PART OF A BLOCK OF ASSETS AND DE PRECIATION IS GRANTED ON THE WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS. IN RELATION TO BLOCK OF ASSETS, IT IS NOT POSSIBLE TO SEGREGATE ITEMS FALLING WITHIN THE BLOCK FOR THE PURPOSES OF GRANTI NG DEPRECIATION OR RESTRICTING THE CLAIM THEREOF. THE SUBSIDY OF RS.25,00,000/- IN RELATION TO THE ASSETS IN QUESTION CAME TO BE RELEASED IN THE YEAR UNDER CONSIDERATION, BY WHICH TIME EXPL ANATION 10 TO SECTION 43(1) CAME TO BE INSERTED IN THE STATUTE BOOK, AND ACCORDINGLY, THE ASSESSING OFFICER HELD THAT THE COST OF ASSETS IS REQUIRED TO BE REDUCED OUT OF THE WRITTEN DOWN V ALUE OF THEIR RESPECTIVE BLOCKS TO THE EXTENT OF RS.25,00,000/-. 9. AT THIS JUNCTURE, IT MAY BE NOTED THAT THE EXPR ESSION 'ACTUAL COST' ENVISAGES THE ACTUAL COST OF ASSET AS REDUCED BY ANY AMOUNT RECEIVED DIRECTLY OR INDIRECTLY FROM ANY PERSON OR AUTHORITY AND EXPLANATION 10 TO SECTION 43 (1) OF T HE ACT, CLEARLY PROVIDES THAT WHERE A PORTION OF THE COST OF AN ASSET ACQUIRED BY THE ASS ESSEE HAD BEEN MET DIRECTLY OR INDIRECTLY BY THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT OR ANY AUTHORITY ESTABLISHED UNDER ANY LAW OR BY ANY PERSON, IN THE FORM OF A SUBSIDY, THEN, SO M UCH OF THE COST AS IS RELATABLE TO SUCH SUBSIDY, SHALL NOT BE INCLUDED IN THE ACTUAL COST O F THE ASSET TO THE ASSESSEE. A PLAIN READING OF SECTION 43 (1) OF THE ACT, SHOWS THAT, ORDINARILY, WHEN ANY SUBSIDY IS RECEIVED QUA AN ASSET, IT WOULD NOT BE INCLUDED IN THE ACTUAL COST OF THE ASS ET TO THE ASSESSEE. LN OTHER WORDS, THE COST ITA NOS. 2976/AHD/10 & 152/AHD/13 A.YS. 04-05 & 05- 06 [NARODA ENVIRO PROJECTS LTD. VS. ITO] PAGE 7 OF THE ASSET IN THE HANDS OF THE ASSESSEE WOULD STA ND REDUCED TO THE EXTENT OF SUBSIDY RECEIVED BY THE ASSESSEE FOR THE PURCHASE OF SUCH ASSET. HOW EVER, IN THE PRESENT CASE, THE ASSESSEE CREATED TOTAL FACILITY BY CONSTRUCTING BUILDING AND INSTALLING VARIOUS MACHINERIES IN 1993-94, THUS, THE ACTUAL COST OF THE ASSETS IN RESPECT OF W HICH SUBSIDY HAS BEEN GRANTED, CAME TO BE DETERMINED AT THE RELEVANT TIME. THEREAFTER, THE AS SETS ENTERED THE BLOCK OF ASSETS AND LOST THEIR INDEPENDENT IDENTITY AND THE COST OF SUCH ASS ETS MERGED WITH THE OTHER ASSETS IN THE BLOCK. AT THE TIME WHEN THE ACTUAL COST OF THE ASSE TS CAME TO BE COMPUTED UNDER SECTION 43(1) OF THE ACT, EXPLANATION 10 WAS NOT ON THE STATUTE B OOK AND THEREFORE, THE ASSESSEE WAS NOT REQUIRED TO REDUCE THE AMOUNT OF SUBSIDY FROM THE A CTUAL COST. MOREOVER, AT THAT POINT OF TIME, THOUGH THE SUBSIDY HAD BEEN SANCTIONED, THE SAME WA S NOT DISBURSED. THE SUBSIDY CAME TO BE ACTUALLY GIVEN IN THE YEAR UNDER CONSIDERATION; A L ONG TIME AFTER THE ACTUAL -COST OF ASSETS CAME TO BE DETERMINED UNDER SECTION 43(1) OF THE AC T. THE QUESTION THAT ARISES FOR CONSIDERATION IS AS TO WHETHER EXPLANATION 10 TO SE CTION 43(1) OF THE ACT CAN BE GIVEN EFFECT TO IN THE FACTS AND CIRCUMSTANCES OF THIS CASE, BY REDUCING THE ACTUAL COST OF THE ASSETS BY THE AMOUNT OF SUBSIDY RECEIVED BY THE ASSESSEE. TO PUT IT DIFFERENTLY, WHETHER AT THIS STAGE IT WOULD BE POSSIBLE TO ASCERTAIN THE ACTUAL COST OF S UCH ASSETS IN TERMS OF EXPLANATION 10 TO SECTION 43(1) OF THE ACT, INASMUCH AS, ONCE SUCH AS SETS ENTER THE BLOCK, THE DEPRECIATION IS COMPUTED ON THE WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS AS ENVISAGED IN SECTION 43(6) (C) OF THE ACT. IN TERMS OF SECTION 43(6)(C) OF THE ACT, T HE WRITTEN DOWN VALUE CAN BE COMPUTED ONLY IN THE MANNER PROVIDED THEREUNDER, NAMELY, BY ADDIN G THE ACTUAL COST OF ANY ASSET FALLING WITHIN THAT BLOCK ACQUIRED DURING THE PREVIOUS YEAR OR BY DEDUCTING THE MONEYS PAYABLE IN RESPECT OF ANY ASSET WITHIN THE BLOCK, WHICH IS SOL D, DISCARDED OR DEMOLISHED OR DESTROYED DURING THE PREVIOUS YEAR TOGETHER WITH THE AMOUNT O F THE SCRAP VALUE. THE STATUTE DOES NOT CONTEMPLATE ANY OTHER CATEGORY FOR COMPUTING THE WR ITTEN DOWN VALUE OF A BLOCK OF ASSETS. THEREFORE, SECTION 43(6)(C) OF THE ACT DOES NOT PER MIT REDUCING THE WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS BY THE AMOUNT OF SUBSIDY RECEIVED I N RELATION TO SOME OF THE ASSETS FORMING PART OF THE BLOCK OF ASSETS. CONSEQUENTLY, THE COST S OF ASSETS CANNOT BE REDUCED OUT OF THE WRITTEN DOWN VALUE OF THEIR RESPECTIVE BLOCKS TO TH E EXTENT OF RS.25,00,000/-AS THE STATUTE DOES NOT ENVISAGE ANY MANNER OF DOING SO. WHEN THE ASSES SING OFFICER REDUCES THE COST OF ASSETS OUT OF THE WRITTEN DOWN VALUE OF THE BLOCK OF ASSET S, HE IS REDUCING NOT ONLY THE COST OF ASSETS IN RELATION TO WHICH THE SUBSIDY IS GRANTED, BUT TH E COST OF ALL ASSETS FORMING PART OF THE BLOCK, IRRESPECTIVE OF WHETHER ANY SUBSIDY WAS GRANTED IN RESPECT OF SUCH ASSETS. UNDER THE CIRCUMSTANCES, WHEN THE STATUTE DOES NOT CONTEMPLAT E COMPUTATION OF ACTUAL COST OF ASSET AFTER IT BECOMES PART OF A BLOCK OF ASSETS, EXPLANA TION 10 TO SUBSECTION (1) OF SECTION 43 OF THE ACT CANNOT BE MADE APPLICABLE TO ASSETS OF WHICH TH E ACTUAL COST HAS BEEN DETERMINED MUCH BEFORE THE INSERTION THEREOF AND WHICH ALSO FORM PA RT OF A BLOCK OF ASSETS. THEREFORE, WHEN IT IS NOT POSSIBLE TO APPLY EXPLANATION 10 OF SECTION 43(1) OF THE ACT, IN RELATION TO AN ASSET WHICH HAS ENTERED INTO THE BLOCK MUCH BEFORE THE IN SERTION THEREOF, IT MUST BE REGARDED AS NEVER HAVING BEEN INTENDED BY THE LEGISLATURE TO AP PLY TO ASSETS FORMING PART OF A BLOCK OF ASSETS WHICH HAVE ENTERED THE BLOCK MUCH BEFORE THE INSERTION OF EXPLANATION 10 TO SUB- SECTION (1) OF SECTION 43 OF THE ACT. WE THUS FIND THAT HONBLE GUJARAT HIGH COURT IN THE DECISION CITED HEREINAOVE HAS HELD THAT IN TERMS OF SECTION 43(6)(C) OF THE A CT, THE WDV OF AN ASSET CAN BE COMPUTED ONLY IN THE MANNER PROVIDED THEREUNDER NAMELY BY ADDING THE ACTUAL COST OF ANY ASSET FALLING WITHIN THAT BLOCK ACQUIRED DURING THE PREVIOUS YEAR OR BY DEDUCTING THE MONEY PAYABLE IN RESPECT O F ANY ASSET WITHIN THE BLOCK, WHICH IS SOLD, DISCARDED OR DEMOLISHED OR DESTROYED DURING THE PREVIOUS YEAR TOGETHER WITH THE AMOUNT OF SCRAP VALUE. IT HAS FU RTHER HELD THAT THE STATUTE DOES ITA NOS. 2976/AHD/10 & 152/AHD/13 A.YS. 04-05 & 05- 06 [NARODA ENVIRO PROJECTS LTD. VS. ITO] PAGE 8 NOT CONTEMPLATE ANY OTHER CATEGORY FOR COMPUTING TH E WDV OF A BLOCK OF ASSETS AND THAT SECTION 43(6)(C) OF THE ACT DOES NOT PERMI T REDUCING THE WDV OF THE BLOCK OF ASSETS BY THE AMOUNT OF SUBSIDY RECEIVED I N RELATION TO SOME OF THE ASSETS FORMING PART OF THE BLOCK OF ASSETS. HONBL E HIGH COURT FURTHER HELD THAT WHEN THE STATUTE DOES NOT CONTEMPLATE COMPUTATION O F ACTUAL COST OF ASSETS AFTER IT BECOMES PART OF A BLOCK OF ASSETS, EXPLANATION 1 0 TO SUBSECTION (1) OF SECTION 43 OF THE ACT CANNOT BE MADE APPLICABLE TO ASSETS O F WHICH THE ACTUAL COST HAS BEEN DETERMINED AND FORMS PART OF A BLOCK OF ASSETS . BEFORE US, REVENUE HAS NOT BROUGHT ANY CONTRARY BINDING DECISION IN ITS SU PPORT NOR HAS POINTED OUT AS TO WHY THE RATIO OF THE DECISION RENDERED BY HONBL E GUJARAT HIGH COURT IN THE CASE OF BANCO PRODUCTS (SUPRA) WOULD NOT BE APPLICA BLE TO THE PRESENT FACTS OF THE CASE. IN SUCH A SITUATION, WE ARE OF THE VIEW THAT THE GROUND OF ASSESSEE DESERVED TO BE ALLOWED AND THUS ALLOW THE GROUND OF ASSESSEE. 6. GROUND NO.3 IS WITH RESPECT TO ADJUSTMENT OF BAD AND DOUBTFUL DEBTS FOR COMPUTING BOOK PROFIT U/S.115JB OF THE ACT. 6.1 ASSESSING OFFICER WHILE FRAMING ASSESSMENT NOTI CED THAT THE TOTAL TAXABLE INCOME ASSESSED WORKED OUT TO RS.NIL. ASSESSING OF FICER WHILE COMPUTING THE TAX PAYABLE U/S.115JB NOTICED THAT ASSESSEE HAS MAD E PROVISION FOR BAD AND DOUBTFUL DEBTS AMOUNTING TO RS.34,96,231/-. HE WAS OF THE VIEW THAT THE AFORESAID PROVISION NEEDS TO BE ADDED TO THE NET PR OFIT SHOWN IN THE P&L ACCOUNT FOR WORKING OUT U/S.115JB. HE ACCORDINGLY ADDED IT TO THE INCOME. 6.2 AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, AS SESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO UPHELD THE ACTION OF ASSE SSING OFFICER BY HOLDING AS UNDER: 5.2. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE A. R ,. OF THE APPELLANT AND THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESS MENT ORDER. THE FIRST CONTENTION OF THE APPELLANT IS THAT THE ISSUE OF COMPUTATION OF BOOK- PROFITS U/S. 115JB IS NOT PART OF THE REASONS RECORDED FOR REOPENING AND THEREFORE A.O. COULD NOT DISTURB THE BOOK-PROFITS. IN THIS REGARD IT IS SEEN THAT EXPLN. 3 BELOW SEC. 147, INSERTED BY T HE F. A. (NO.2) OF 2009 W.R.E.F. 1.4.1989 EXPRESSLY EMPOWERS THE A.O. TO TRAVEL BEYOND THE RE ASONS RECORDED FOR REOPENING. IN THE CASE ITA NOS. 2976/AHD/10 & 152/AHD/13 A.YS. 04-05 & 05- 06 [NARODA ENVIRO PROJECTS LTD. VS. ITO] PAGE 9 OF PIONEER OVERSEAS CORPORATION VS. DCIT 131 TTJ 40 9 (DEL.) THIS VIEW WAS UPHELD. THEREFORE, THIS CONTENTION OF THE APPELLANT HAS TO FAIL. 5.2.1. THE NEXT CONTENTION OF THE APPELLANT IS THAT AS ON THE DATE OF PASSING OF ASSESSMENT ORDER EXPLN. 1 (I) BELOW SEC. 115JB WAS RIOT ON THE STATUTE AND THEREFORE THE PROVISION FOR BAD AND DOUBTFUL DEBTS OF RS. 34,96,231/- SHOULD NOT HAVE BEEN ADDED BOCK FOR COM PUTING BOOK-PROFITS. IT IS SEEN THAT THE SAID AMOUNT WAS A DDED BACK BY THE A.0. ON THE GROUND THAT IT WAS NOT AN ASCERTAINED LIABILITY. BESIDES THE ABOVE MENTIONED EXPLN.1(I) WAS INSERTED BY FINANCE (NO.2) ACT, 2009 W.R.E.F. 1.4.2001. IN VIEW OF THIS A. O'S ACTION IS PERFECTLY IN TUNE WITH LAW. THEREFORE [HIS CONTENTION OF THE APPELLAN T ALSO FAILS. 5.2.2. ACCORDINGLY A.O'S ACTION IN ADDING BACK THE PROVISI ON IS UPHELD. THESE GROUNDS OF APPEAL ARE DISMISSED. 6.3 AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE IS N OW IN APPEAL BEFORE US. 6.4 BEFORE US, LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER AND LD. CIT(A) AND FURTHER SUBMITTED THAT O N IDENTICAL FACTS IN THE CASE OF ACIT VS. VODAFONE ESSAR GUJARAT LTD. IN ITA NO.1 999/AHD/2008 ORDER DATED 11.05.2012, THE CO-ORDINATE BENCH OF TRIBUNAL HAS HELD THAT BAD AND DOUBTFUL DEBTS CANNOT BE TERMED AS THE PROVISION FO R LIABILITY. HE, THEREFORE, RELYING ON THE AFORESAID DECISION OF TRIBUNAL SUBMI TTED THAT THIS GROUND OF ASSESSEE NEEDS TO BE DECIDED IN FAVOUR OF ASSESSEE. LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDERS OF ASSESSING OFFICER AND CIT(A ). 6.5 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO AD JUSTMENT OF BAD AND DOUBTFUL DEBTS TO THE BOOK PROFIT. WE FIND THAT IDENTICAL I SSUE WAS BEFORE THE CO-ORDINATE BENCH OF TRIBUNAL IN CASE OF ACIT VS. VODAFONE ESSA R GUJARAT LTD. (SUPRA) AND IT WAS DECIDED IN FAVOUR OF ASSESSEE BY OBSERVING A S UNDER: 8. BEFORE US THE LD. D.R. URGED AND STATED THAT CON SEQUENT TO THE AMENDMENT BROUGHT IN THE PROVISION OF SEC. 115JB BY FINANCE ACT, 2009 W.E.F. 1-4-2001, PROVISION FOR BAD DEBTS IS TO BE ADDED WHILE COMPUTING BOOK PROFITS U/S. 115JB. HE R ELIED ON THE DECISION OF DCM SHRIRAM CONSOLIDATED LTD. VS. ACIT (2010) 39 SOT 203 DELHI WHEREIN IT WAS HELD THAT THE PROVISION FOR DOUBTFUL DEBTS AND PROVISION FOR DOUBTFUL ADVAN CES ARE PROVISION FOR DIMINUTION IN THE VALUE OF ASSETS AND HENCE THE SAME ARE TO BE ADDED BACK IN COMPUTING BOOK PROFIT IN VIEW OF THE RETROSPECTIVE AMENDMENT INTRODUCED IN S. 115JB BY INSERTION OF CL. (I) IN EXPLANATION TO S. 115JB(2) WHICH SPECIFICALLY MENTIONS THE AMOUNT OR AMOUNTS SET ASIDE AS PROVISION FOR DIMINUTION IN THE VALUE OF ANY ASSET. ITA NOS. 2976/AHD/10 & 152/AHD/13 A.YS. 04-05 & 05- 06 [NARODA ENVIRO PROJECTS LTD. VS. ITO] PAGE 10 9. THE LD. A.R. ON THE OTHER HAND CITED THE DECISIO N OF HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS. YOKOGWA INDIA LTD. (2012) 17 TAXMANN COM.15 (KAR.) (IT APPEAL NO.1062 OF 2008) OF AUGUST 29, 2011. IN THIS CASE THE QUESTION BEFOR E THE HON'BLE HIGH COURT WAS AS UNDER:- 'WHETHER THE APPELLATE AUTHORITIES WERE CORRECT IN HOLDING THAT THE PROVISIONS MADE FOR BAD AND DOUBTFUL DEBTS CANNOT BE ADDED BACK IN ACCORDANCE WITH THE EXPLANATION (C) TO SECTION 115JB(1) OF THE ACT AS THE SAME IS N OT AN ASCERTAINED LIABILITY WHEN COMPUTING THE BOOK PROFITS UNDER SECTION 115JB OF T HE ACT?' 10. THE HON'BLE HIGH COURT HELD AS UNDER:- '8. IN THE PRESENT CASE, THE DEBT IS AN AMOUNT RECE IVED BY THE ASSESSEE AND, THEREFORE, ANY PROVISION MADE TOWARDS RECOVERABILITY OF THE DE BT CANNOT BE SAID TO BE A PROVISION FOR LIABILITY. THEREFORE IT WAS HELD THAT ITEM (C) OF THE EXPLANATION IS NOT ATTRACTED TO THE FACTS OF THE CASE. ITEM (C) IN SEC TION 115JA AND 115-JB(1) ARE IDENTICAL. IN ORDER TO ATTRACT THE EXPLANATION THE DEBT WHICH IS DOUBTFUL OR BAD SHOULD SATISFY THE REQUIREMENT CONTEMPLATED IN ITEM (C) OF THE EXPLANATION. IT IS THE AMOUNT OR AMOUNTS SET ASIDE AS PROVISIONS MADE FOR MEETING THE LIABILITY OTHER THAN THE ASCERTAINED LIABILITIES. IN THE INSTANT CASE ALSO T HE BAD AND DOUBTFUL DEBT FOR WHICH A PROVISION IS MADE WHICH IS IN THE NATURE OF DIMINUT ION IN THE VALUE OF ANY ASSET WOULD NOT FALL WITHIN ITEM (C) OF EXPLANATION(I), IT IS I N THE CONTEXT THE APPELLATE COMMISSIONER AS WELL AS THE TRIBUNAL HAS GRANTED RE LIEF TO THE ASSESSES. REALISING THE FATALITY OF THE SAID ARGUMENT, IT IS CONTENDED NOW THAT ITEM (I) CANNOT AMOUNT TO SATISFACTION AS PROVISION FOR DIMINISHING IN THE VA LUE OF ASSETS IS SUBSTITUTED, IN CASE OF THE ASSESSEE FALLS UNDER ITEM (C). IN MEETING TH E AFORESAID CASE, THE LD. COUNSEL FOR THE ASSESSEE BROUGHT TO OUR NOTICE THE JUDGMENT OF THE APEX COURT IN THE CASE OF VIJAYA BANK (SUPRA) WHERE THE APEX COURT HAD AN OCC ASION TO CONSIDER HIS EXPLANATION. IT ACCEPTED THE ARGUMENT ON BEHALF OF THE REVENUE TO THE EFFECT THAT THE EXPLANATION MAKES IT VERY CLEAR THAT THERE IS A DIC HOTOMY BETWEEN ACTUAL WRITE OFF ON THE ONE HAND AND PROVISION FOR BAD AND DOUBTFUL DEB T ON THE OTHER. A MERE DEBIT OF THE PROFIT AND LOSS ACCOUNT WOULD CONSTITUTE A BAD AND DOUBTFUL DEBT, BUT IT WOULD NOT CONSTITUTE ACTUAL WRITE OFF AND THAT WAS THE VERY R EASON WHY THE EXPLANATION STOOD INSERTED. PRIOR TO THE FINANCE ACT, 2001 MANY ASSES SEES USED TO TAKE THE BENEFIT OF DEDUCTION UNDER SECTION 36(1)( (VII) OF THE 1961 AC T BY MERELY DEBITING THE IMPUGNED BAD DEBT TO THE PROFIT AND LOSS ACCOUNT AND, THEREF ORE, THE PARLIAMENT STEPPED IN BY WAY OF EXPLANATION TO SAY THAT A MERE REDUCTION OF PROFITS BY DEBITING THE AMOUNT TO THE PROFIT AND LOSS ACCOUNT PER SE WOULD NOT CONSTI TUTE ACTUAL WRITE OFF. THE APEX COURT ACCEPTED THE SAID LEGAL POSITION. HOWEVER, IT WAS CLARIFIED THAT BESIDES DEBITING THE PROFIT AND LOSS ACCOUNT AND CREATING A PROVISIO N FOR BAD AND DOUBTFUL DEBT THE ASSESSEE CORRESPONDINGLY/SIMULTANEOUSLY OBLITERATED THE SAID PROVISION FROM ITS ACCOUNTS BY REDUCING THE CORRESPONDING AMOUNT FROM LOANS AND ADVANCES/DEBTORS ON THE ASSETS SIDE OF THE BALANCE SHEET AND, CONSEQUEN TIALLY, AT THE END OF THE YEAR, THE FIGURE IN THE LOANS AND ADVANCES OR THE DEBTORS ON THE ASSETS SIDE OF THE BALANCE SHEET WAS SHOWN AS NET OF THE PROVISION FOR THE IMPUGNED BAD DEBT. THEN THE SAID AMOUNT REPRESENTING BAD DEBT OR DOUBTFUL DEBT CANNOT BE AD DED IN ORDER TO COMPUTE BOOK PROFIT. THEREFORE, AFTER THE EXPLANATION THE ASSESS EE IS NOW REQUIRED NOT ONLY TO DEBIT THE PROFIT AND LOSS ACCOUNT BUT SIMULTANEOUSLY ALSO REDUCE THE LOANS AND ADVANCES OR THE DEBTORS FROM THE ASSETS SIDE OF THE BALANCE SHE ET TO THE EXTENT OF THE CORRESPONDING AMOUNT SO THAT, AT THE END OF THE YEA R, THE AMOUNT OF LOANS AND ADVANCES/DEBTORS IS SHOWN AS NET OF THE PROVISIONS FOR THE IMPUGNED BAD DEBT. THEREFORE, IN THE FIRST PLACE IF THE BAD DEBT OR DO UBTFUL DEBT IS REDUCED FROM THE LOANS AND ADVANCES OR THE DEBTORS FROM THE ASSETS ASIDE O F THE BALANCE SHEET, THE EXPLANATION TO SECTION 115JA OR JB IS NOT AT ALL AT TRACTED. IN THAT CONTEXT EVEN IF AMENDMENT WHICH IS MADE RETROSPECTIVE THE BENEFIT G IVEN BY THE TRIBUNAL AND THE APPELLATE COMMISSIONER TO THE ASSESSEE IS IN NO WAY AFFECTED. IN THAT VIEW OF THE MATTER, WE DO NOT SEE ANY MERIT IN THIS APPEAL.' ITA NOS. 2976/AHD/10 & 152/AHD/13 A.YS. 04-05 & 05- 06 [NARODA ENVIRO PROJECTS LTD. VS. ITO] PAGE 11 11. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, THE C ASE LAWS CITED AND PERUSED THE DOCUMENTS ON RECORD. IT IS AN A FACT THAT THE ASSESSEE HAD MA DE PROVISION FOR BAD AND DOUBTFUL DEBTS AND THE SAME HAS BEEN CHARGED TO THE PROFIT AND LOSS AC COUNT FOR THE YEAR ENDED 31 ST MARCH 2003. IN THE BALANCE SHEET AS ON 31 ST MARCH 20023 OF THE ASSESSEE, IT CAN BE SEEN THAT T HE PROVISION OF BAD AND DOUBTFUL DEBTS HAS BEEN REDUCED FROM THE GROSS DEBTORS AND THE NET SUNDRY DEBTORS ARE SHOWN AS ASSET IN THE BALANCE SHEET. THUS THE P ROVISION FOR BAD AND DOUBTFUL DEBTS CANNOT BE TERMED AS A PROVISION FOR LIABILITY BUT IS IN TH E NATURE OF DIMINUTION IN THE VALUE OF ASSET. IN VIEW OF THE AFORESAID FACTS, WE ARE OF THE VIEW THA T THE FACTS IN THE PRESENT CASE ARE IDENTICAL TO THAT OF THE CASE OF YOKOGWA INDIA LTD (SUPRA). W E THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE HIGH COURT IN THE CASE OF CIT V S. YOKOGWA INDIA LTD., (SUPRA) WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A). ACCORDIN GLY THE APPEAL OF THE REVENUE IS DISMISSED. BEFORE US, REVENUE HAS NOT POINTED OUT ANY CONTRARY BINDING DECISION IN ITS SUPPORT NOR HAS NOT POINTED ANY DISTINGUISHING FEAT URE IN THE FACTS OF THE PRESENT CASE TO THAT OF ACIT VS. VODAFONE ESSAR GUJARAT LTD . (SUPRA). WE, THEREFORE, RESPECTFULLY FOLLOWING THE ORDER OF CO-ORDINATE BEN CH IN ABOVE CASE, ARE OF THE VIEW THAT ASSESSING OFFICER WAS NOT JUSTIFIED IN AD DING THE PROVISION FOR BAD AND DOUBTFUL DEBTS TO THE NET PROFITS FOR THE PURPOSE O F SECTION 115JB. WE THUS SET ASIDE THE ADDITION MADE BY ASSESSING OFFICER. THUS , THIS GROUND OF ASSESSEE IS ALLOWED. 7. IN THE RESULT, THIS APPEAL IS PARTLY ALLOWED. ITA NO.152/AHD/2013, A.Y. 2005-06 8. THE GROUNDS RAISED BY ASSESSEE IN A.Y.2005-06 AR E AS UNDER: 1. THE ORDER PASSED BY CIT (APPEALS) IS BAD IN LAW AND ON FACTS AND HENCE, IT IS SUBMITTED THAT THE SAME BE CANCELLED AND BE SUITABL Y MODIFIED. 2. THE LEARNED CIT (A) GROSSLY ERRED IN LAW AND ON FACTS OF THE CASE IN UPHOLDING THE ACTION OF THE AO IN REOPENING THE ASSESSMENT U/S. 1 47 AND ISSUING NOTICE U/S. 148 IN UTTER DISREGARD TO THE FACT THAT AT THE MATERIAL PO INT OF TIME WHEN THE REASON FOR REOPENING THE ASSESSMENT U/S. 147 WAS RECORDED AND NOTICE U/S. 148 WAS ISSUED, THE AO DID NOT HAVE JURISDICTION OVER THE APPELLANT'S C ASE. THE APPELLANT SAYS THAT JURISDICTION IN THE CASE OF THE APPELLANT ASSESSEE IS WITH THE DEPUTY DIRECTOR OF INCOME TAX (EXEMPTION), AHMEDABAD AND THE INCOME-TA X OFFICER WHO HAD TO RECORD THE REASON FOR REOPENING THE ASSESSMENT, ISSUED THE NOTICE U/S. 148 DATED 30/04/2008 AND ULTIMATELY PASSED THE IMPUGNED ASSESSMENT ORDER DID NOT HAVE JURISDICTION OVER THE APPELLANT'S CASE. THEREFORE, THE INITIATION OF REASSESSMENT PROCEEDINGS AND ISSUANCE OF NOTICE U/S. 148 ARE AB-INITIO VOID AND CONSEQUENTLY THE ASSESSMENT ORDER PASSED PURSUANT TO SUCH NOTICE U/S. 148 IS ALSO NUL L AND VOID BEFORE THE EYES OF LAW. THE IMPUGNED ASSESSMENT ORDER THEREFORE PLEASE BE C ANCELLED. ITA NOS. 2976/AHD/10 & 152/AHD/13 A.YS. 04-05 & 05- 06 [NARODA ENVIRO PROJECTS LTD. VS. ITO] PAGE 12 3. THE LEARNED CIT (A) GROSSLY ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING THE ACTION OF THE AO IN DISALLOWING THE ASSESSEE'S CLAI M FOR DEPRECIATION BY CAPRICIOUSLY RECOMPUTING THE WDV OF THE BLOCK OF DEPRECIABLE ASS ETS AT RS. NIL. 4. THE LEARNED CIT (A) GROSSLY ERRED IN LAW AND O N FACTS OF THE CASE IN CONFIRMING THE ACTION OF THE AO IN DISALLOWING THE ASSESSEE'S CLAI M FOR DEPRECIATION BY CAPRICIOUSLY DEDUCTING AN AMOUNT OF RS.8,04,93,623/-BEING CONTRI BUTIONS RECEIVED FROM THE MEMBERS IN EARLIER YEARS PRIOR TO THE ASSESSMENT YE AR UNDER APPEAL IN UTTER DISREGARD TO THE FACT THAT THE PREDECESSOR ASSESSING OFFICER IN THE SCRUTINY ASSESSMENT MADE FOR A.Y. 2004-05 HAD CORRECTLY WORKED OUT THE DEPRECIAT ION AND THE WRITTEN DOWN VALUE OF THE DEPRECIABLE ASSETS FOR A.Y. 2004-05. THE LEA RNED AO OUGHT TO HAVE ADOPTED THE WDV OF THE DEPRECIABLE ASSETS ON THE BASIS OF THE A SSESSMENT ORDER FOR A.Y. 2004-05. 5. THE LEARNED CIT (A) GROSSLY ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING THE ACTION OF THE AO IN DISALLOWING THE ASSESSEE'S CLAI M FOR DEPRECIATION BY CAPRICIOUSLY DEDUCTING AN AMOUNT OF RS.8,04,93,623/-BEING CONTRI BUTIONS RECEIVED FROM THE MEMBERS IN EARLIER YEARS PRIOR TO THE ASSESSMENT YE AR UNDER APPEAL IN UTTER DISREGARD TO THE FACT THAT THE CONTRIBUTION RECEIVED FROM THE MEMBERS ARE REQUIRED TO BE ADJUSTED TOWARDS THE COST OF LAND AS WELL AS PLANT & MACHINERY. 6. THE LEARNED CIT (A) IS IN GROSS ERROR IN CONFIRM ING THE ACTION OF THE AO IN DEDUCTING THE AMOUNT OF RS. 8,04,93,623/- BEING CONTRIBUTION RECEIVED FROM THE MEMBERS IN EARLIER YEARS ONLY FROM THE WDV OF THE DEPRECIABLE ASSETS WITHOUT APPORTIONING TO THE COST OF LAND. 7. THE LEARNED CIT (A) GROSSLY ERRED IN LAW AND ON FACTS OF THE CASE IN NOT SPECIFICALLY ADJUDICATING THE 7 TH GROUND OF APPEAL TAKEN BEFORE HIM WHICH READS AS U NDER: 'WITHOUT PREJUDICE TO THE ABOVE GROUND, IF AT ALL T HE AMOUNT OF CONTRIBUTION RECEIVED FROM THE MEMBERS WERE TO BE REDUCED FROM T HE COST IN ORDER TO ARRIVE AT THE ACTUAL COST AS PER THE PROVISIONS OF SECTION 32 R.W.S. 43(1), THE AO OUGHT TO HAVE REDUCED THE SAME IN THE RESPECTIVE ASSESSMENT YEAR IN WHICH THE CONTRIBUTIONS WERE RECEIVED FROM THE MEMB ERS.' 8. THE LEARNED CIT (A) IS THEREFORE IN GROSS ERROR IN CONFIRMING THE ACTION OF THE AO IN DEDUCTING THE AMOUNT OF CONTRIBUTION RECEIVED FROM THE MEMBERS IN THE EARLIER YEARS FROM THE OPENING WDV OF THE DEPRECIABLE ASSETS DURI NG ASSESSMENT YEAR UNDER APPEAL. IT IS THEREFORE PRAYED THAT THE DISALLOWANCE OF DEP RECIATION MADE BY THE AO BY RECOMPUTING THE WDV OF THE DEPRECIABLE ASSETS MAY P LEASE BE DELETED AND THE DEPRECIATION AS CLAIMED IN THE RETURN OF INCOME MAY PLEASE BE ALLOWED. 9. THE LEARNED CIT (A) GROSSLY ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING THE ACTION OF THE AO IN NOT ALLOWING DEDUCTION U/S. 80I A OF THE I.T. ACT THOUGH THE APPELLANT ASSESSEE HAD BY FOOTNOTE IN THE STATEMENT OF INCOME CATEGORICALLY STATED THAT IT IS ENTITLED TO DEDUCTION U/S, 80IA (4) BUT AS THERE IS A LOSS, THE SAME HAS NOT BEEN CLAIMED IN THE CURRENT YEAR. THE APPELLANT SAY S THAT IN THE COURSE OF REASSESSMENT PROCEEDINGS IT HAD SUBMITTED BEFORE TH E AO THAT IT IS ENTITLED TO EXEMPTION U/S. 80IA (4). 10. THE LEARNED CIT (A) GROSSLY ERRED IN LAW AND ON FACTS OF THE CASE IN NOT APPRECIATING THE APPELLANT'S CONTENTIONS IN THE COURSE OF APPELL ATE PROCEEDINGS THAT THE INCOME OF THE APPELLANT FROM THE OPERATION OF COMMON EFFLUENT TREATMENT PLANT AND TRANS- ITA NOS. 2976/AHD/10 & 152/AHD/13 A.YS. 04-05 & 05- 06 [NARODA ENVIRO PROJECTS LTD. VS. ITO] PAGE 13 BOUNDARY TRANSPORTATION OF SOLID WASTES IS NOT TAXA BLE ON PRINCIPLE OF MUTUALITY AS THE RECEIPTS ARE FROM THE MEMBERS ONLY. IT IS THEREFORE PRAYED THAT THE INCOME OF THE APPEL LANT MAY BE PLEASE HELD AS NOT TAXABLE ON PRINCIPLE OF MUTUALITY. 9. LD. A.R. AT THE OUTSET SUBMITTED THAT FIRST GROU ND IS GENERAL AND NEEDS NOT BE ADJUDICATED. WE THEREFORE DISMISS THE GROUND OF ASSESSEE. 10. GROUND NO.2 IS WITH RESPECT TO REOPENING. LD. A.R. DID NOT WISH TO PRESS THIS GROUND AND THEREFORE, THE SAME IS DISMISSED AS NOT PRESSED. 11. LD. A.R. SUBMITTED THAT GROUND NOS. 3 TO 8 ARE IDENTICAL TO THE GROUND NO.2.2 RAISED IN A.Y. 2004-05 HEREINABOVE AND WHICH WAS NOT CONTROVERTED BY LD. D.R. 11.1 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD. IN VIEW OF THE SUBMISSIONS OF BOTH PARTIES THAT THE FACTS OF THE CASE IN THE PRESENT GROUNDS ARE IDENTICAL TO THAT OF GROUND NO2 .2 FOR A.Y. 2004-05 WHICH HAS BEEN DECIDED HEREINABOVE BY US. WE THEREFORE F OR SIMILAR REASONS STATED HEREINABOVE WHILE DECIDING THE ISSUE FOR A.Y. 2004- 05 ALLOW THE PRESENT GROUND OF ASSESSEE. THUS, THIS GROUND OF ASSESSEE IS ALLO WED. 12. GROUND NO.9 IS WITH RESPECT TO NOT ALLOWING DED UCTION U/S.80IA OF THE ACT. 12.1 ASSESSING OFFICER NOTICED THAT IN THE STATEMEN T OF INCOME THAT WAS FILED BY THE ASSESSEE THAT A MENTION WAS MADE THAT THE AS SESSEE THAT IT IS ENTITLED TO EXEMPTION U/S.80IA BUT SINCE, THERE WAS A LOSS, THE SAME WAS NOT CLAIMED IN THE CURRENT YEAR. ASSESSING OFFICER WAS OF THE VIEW TH AT FOR CLAIMING EXEMPTION U/S.80IA, ASSESSEE IS REQUIRED TO FULFILL THE CONDI TIONS LAID DOWN U/S.80IA(4) OF THE ACT AND JUST BY MENTIONING ABOUT ITS ELIGIBILIT Y, DOES NOT PROVE THE FULFILLMENT OF THE NECESSARY CONDITIONS FOR BEING E LIGIBLE FOR DEDUCTION. HE ACCORDINGLY DENIED THE CLAIM OF DEDUCTION. AGGRIEV ED BY THE ORDER OF ASSESSING ITA NOS. 2976/AHD/10 & 152/AHD/13 A.YS. 04-05 & 05- 06 [NARODA ENVIRO PROJECTS LTD. VS. ITO] PAGE 14 OFFICER, ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO UPHELD THE ORDER OF ASSESSING OFFICER BY HOLDING AS UNDER: 5.2 I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. I HAVE ALSO PERUSED VARIOUS CASES RELIED UPON BY THE APPELLANT. IT IS SEEN THAT THE A PPELLANT HAS CLAIMED DEDUCTION U/S.80IA BY MAKING A NOTE BELOW THE COMPUTATION OF INCOME. THE LAW IN THIS REGARD IS CLEARLY LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF GOETEZ (INDIA) LTD., VS CIT REPORTED AT 284 ITR 323. IN THIS CASE IT IS CLEARLY HELD THAT DEDUCTION S CANNOT BE CLAIMED BY FILING A STATEMENT. THE CASE OF THE APPELLANT IS WHOLLY AND SQUARELY COVERE D WITH THE RATIO OF THIS CASE. IN VIEW OF THIS, I AM INCLINED TO AGREE WITH THE CONTENTIONS O F LD. A.O. THIS GROUND OF APPEAL IS DISMISSED. 12.2 AGGRIEVED BY THE ORDER OF LD. CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US. 12.3 BEFORE US, LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER AND LD. CIT(A) AND FURTHER SUBMITTED THAT T HOUGH ASSESSING OFFICER HAD COMPUTED POSITIVE INCOME FROM BUSINESS BUT DID NOT ALLOW THE BENEFIT OF DEDUCTION U/S.80IA(4) WHICH WAS CLAIMED BY THE ASSE SSEE IN THE STATEMENT OF INCOME FILED ALONG WITH RETURN. HE SUBMITTED THAT ASSESSEE FULFILLS ALL THE CONDITIONS PRESCRIBED IN THE ACT AND IS ELIGIBLE FO R DEDUCTION. HE SUBMITTED THAT LD. CIT(A) ALSO SUMMARILY DISMISSED THE GROUND OF A SSESSEE BY FOLLOWING THE DECISION IN THE CASE OF GOETZ INDIA LTD. VS. CIT(SU PRA). HE SUBMITTED THAT IT IS SETTLED LAW THAT APPELLATE AUTHORITIES HAVE POWERS TO ENTERTAIN A NEW CLAIM FOR THE FIRST TIME THOUGH NOT MADE BEFORE AO AND FOR TH IS PROPOSITION HE RELIED ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE C ASE OF CIT VS. MITESH IMPEX REPORTED IN (2014) 46 TAXMANN.COM 30 (GUJ). HE ALS O PLACED ON RECORD COPY OF THE SAME. HE HOWEVER SUBMITTED THAT SINCE ASSESSIN G OFFICER HAS SUMMARILY REJECTED THE CLAIM OF ASSESSEE WITHOUT EXAMINING TH E ISSUE THE MATTER BE RESTORED TO THE FILE OF ASSESSING OFFICER FOR DECIDING THE C LAIM OF ASSESSEE. LD. D.R. SUPPORTED THE ORDERS OF ASSESSING OFFICER AND LD. C IT(A). 12.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) AFTER RELYING UPON THE DECI SION OF HONBLE APEX COURT IN THE CASE OF GOETEZ (INDIA) LTD., VS CIT REPORTED AT 284 ITR 323 UPHELD THE ITA NOS. 2976/AHD/10 & 152/AHD/13 A.YS. 04-05 & 05- 06 [NARODA ENVIRO PROJECTS LTD. VS. ITO] PAGE 15 ORDER OF ASSESSING OFFICER. WE FIND THAT HONBLE G UJARAT HIGH COURT IN CASE OF CIT VS. MITESH IMPEX REPORTED IN (2014) 46 TAXMANN. COM 30 (GUJARAT) HAS HELD THAT IF A CLAIM THOUGH AVAILABLE IN LAW IS NOT MADE EITHER INADVERTENTLY OR ON ACCOUNT OF ERRONEOUS BELIEF OF COMPLEX LEGAL POSITI ON, SUCH CLAIM CANNOT BE SHUT OUT FOR ALL TIMES TO COME, MERELY BECAUSE IT IS RAI SED FOR THE FIRST TIME BEFORE THE APPELLATE AUTHORITY WITHOUT RESORTING TO REVISING T HE RETURN BEFORE THE ASSESSING OFFICER. THE RELEVANT FINDING OF HONBLE GUJARAT H IGH COURT READS AS UNDER: 38. IT THUS BECOMES CLEAR THAT THE DECISION OF THE SUPR EME COURT IN THE CASE OF GOETZE (INDIA) LTD (SUPRA) IS CONFINED TO THE POWERS OF TH E ASSESSING OFFICER AND ACCEPTING A CLAIM WITHOUT REVISED RETURN. THIS IS WHAT SUPREME COURT OBSERVED IN THE SAID JUDGMENT WHILE DISTINGUISHING THE JUDGMENT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD-(SUPRA) AND THAT IS HOW VARIOUS HIGH COURTS HAVE VIEWED THE DICTUM O F THE DECISION IN THE CASE OF GOETZE (INDIA) LTD.(SUPRA). WHEN IT COMES TO THE POWER OF APPELLATE COMMISSIONER OR THE TRIBUNAL, THE COURTS HAVE RECOGNIZED THEIR JURISDICTION TO EN TERTAIN A NEW GROUND OR A LEGAL CONTENTION. A GROUND WOULD HAVE A REFERENCE TO AN ARGUMENT TOUC HING A QUESTION OF FACT OR A QUESTION OF LAW OR MIXED QUESTION OF LAW OR FACTS. A LEGAL CONT ENTION WOULD ORDINARILY BE A PURE QUESTION OF LAW WITHOUT RAISING ANY DISPUTE ABOUT THE FACTS. NOT ONLY SUCH ADDITIONAL GROUND OR CONTENTION, THE COURTS HAVE ALSO, AS NOTED ABOVE, R ECOGNIZED THE POWERS OF THE APPELLATE COMMISSIONER AND THE TRIBUNAL TO ENTERTAIN A NEW CL AIM FOR THE FIRST TIME THOUGH NOT MADE BEFORE THE ASSESSING OFFICER. INCOME-TAX PROCEEDING S ARE NOT STRICTLY SPEAKING ADVERSARIAL IN NATURE AND THE INTENTION OF THE REVENUE WOULD BE TO TAX REAL INCOME. 39. THIS IS PRIMARILY ON THE PREMISE THAT IF A CLAI M THOUGH AVAILABLE IN LAW IS NOT MADE EITHER INADVERTENTLY OR ON ACCOUNT OF ERRONEOUS BELIEF OF COMPLEX LEGAL POSITION, SUCH CLAIM CANNOT BE SHUT OUT FOR ALL TIMES TO COME, MERELY BECAUSE I T IS RAISED FOR THE FIRST TIME BEFORE THE APPELLATE AUTHORITY WITHOUT RESORTING TO REVISING T HE RETURN BEFORE THE ASSESSING OFFICER. 40. THEREFORE, ANY GROUND, LEGAL CONTENTION OR EVEN A CLAIM WOULD BE PERMISSIBLE TO BE RAISED FOR THE FIRST TIME BEFORE THE APPELLATE AUTHORITY O R THE TRIBUNAL WHEN FACTS NECESSARY TO EXAMINE SUCH GROUND, CONTENTION OR CLAIM ARE ALREAD Y ON RECORD. IN SUCH A CASE THE SITUATION WOULD BE AKIN TO ALLOWING A PURE QUESTION OF LAW TO BE RAISED AT ANY STAGE OF THE PROCEEDINGS. THIS IS PRECISELY WHAT HAS HAPPENED IN THE PRESENT CASE. THE APPELLATE COMMISSIONER AND THE TRIBUNAL DID NOT NEED TO NOR DID THEY TRAVEL BEYOND THE MATERIALS ALREADY ON RECORD, IN ORDER TO EXAMINE THE CLAIMS OF THE ASSESSEES FOR DEDUCTIO NS UNDER SECTIONS 80IB AND 80HHC OF THE ACT. 41. IN THE DECISIONS THAT WE HAVE NOTED ABOVE, THE COUR TS HAVE CONSIDERED SUCH QUESTIONS WHEN A LEGAL CONTENTION OR A CLAIM WAS BASED ON MAT ERIAL ALREADY ON RECORD BUT RAISED AT AN APPELLATE STAGE. ON SUCH PREMISE WE WHOLEHEARTEDLY AGREE THAT THE APPELLATE AUTHORITY AND THE TRIBUNAL WOULD HAVE THE POWER TO ENTERTAIN ANY SUCH NEW GROUND, LEGAL CONTENTION OR CLAIM. HOWEVER, IT IS ONLY THE BOMBAY HIGH COURT IN THE CASE OF CIT PRUTHVI BROKERS & SHAREHOLDERS (P.) LTD. (SUPRA), WHICH HAS TRAVELLED A LITTLE BEYOND THIS PREPOSITION AND COME TO THE CONCLUSION THAT EVEN IF FACTS NECESSARY TO E XAMINE SUCH A CLAIM ARE NOT PLACED BEFORE THE ASSESSING OFFICER AND, THEREFORE, NOT ON RECORD , THERE WOULD BE NO IMPEDIMENT IN THE COMMISSIONER (APPEALS) ENTERTAINING SUCH A CLAIM. S UCH AN ISSUE DOES NOT ARISE IN THESE APPEALS. WE WOULD, THEREFORE, RESERVE OUR OPINION O N THIS LIMITED ASPECT OF THE MATTER IF AND WHEN IN FUTURE THE QUESTION PRESENTS BEFORE US IN S UCH FORM. FOR THE PRESENT, WE ANSWER QUESTIONS (3) AND (4) AGAINST THE REVENUE AND IN FA VOUR OF THE ASSESSEES IN MANNER DESCRIBED ABOVE. ITA NOS. 2976/AHD/10 & 152/AHD/13 A.YS. 04-05 & 05- 06 [NARODA ENVIRO PROJECTS LTD. VS. ITO] PAGE 16 12.5 IN THE PRESENT CASE, WE FIND THAT ASSESSING OF FICER HAS SUMMARILY DISMISSED THE CLAIM OF ASSESSEE WHEREAS IT IS ASSES SEES CONTENTION THAT IT IS ELIGIBLE FOR CLAIM OF DEDUCTION U/S.80IA(4). AFTER PLACING RELIANCE ON THE AFORESAID DECISION OF HONBLE GUJARAT HIGH COURT CI TED HEREINABOVE, IN THE PRESENT FACTS OF THE CASE, WE ARE OF THE VIEW THAT IN THE INTEREST OF JUSTICE, THE GROUND NEEDS TO BE RESTORED TO THE FILE OF ASSESSIN G OFFICER TO DECIDE THE CLAIM OF ASSESSEE OF DEDUCTION AFRESH IN ACCORDANCE WITH LAW. NEEDLESS TO STATE THAT AO SHALL GRANT ADEQUATE OPPORTUNITY OF HEARING TO T HE ASSESSEE. ASSESSEE IS ALSO DIRECTED TO CO-OPERATE BY PROMPTLY FILING ALL THE REQUIRED DETAILS CALLED FOR BY THE ASSESSING OFFICER. THUS, THIS GROUND OF ASS ESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 13. THUS, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. 14. IN THE RESULT, BOTH THE APPEALS OF ASSESSEE A RE PARTLY ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 12/02/2016 SD/- SD/- ( SHAILENDRA KUMAR YADAV ) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBE R AHMEDABAD: DATED 12/02/2016 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- *+ , -. / APPELLANT /+ 01-. / RESPONDENT 2+ 345 6 / CONCERNED CIT 4+ 6- , / CIT (A) 9+ :; < 045 , 45) = 3 / DR, ITAT, AHMEDABAD >+ < ?@ A B / GUARD FILE. BY ORDER/ ,/= ,$ , 45) = 3