DCIT, CHENNAI V. Power Soaps P. Ltd., Pondicherry

ITA 306/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96039 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 04-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: G BASKAR
• Keywords: Depreciation; Question of law; Reasonable cause; Fair market value; Revenue expenditure
• Section: 143(3); 80IB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . , ! # , $ & BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A.NO.306/MDS/2015 ( / ASSESSMENT YEAR: 2010-11) DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-I(2) 46, N.H ROAD, CHENNAI-34. VS M/S. POWER SOAPS P.LTD., R.S.NO.94/1, EMBALAM MAIN ROAD, SEMBIAMBALAYAM VILLAGE, KORKADU PO PONDICHERRY-605 110. PAN:AABCN2036R ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. P.RADHAKRISHNAN, JCIT /RESPONDENT BY : MR. G.BASKAR, ADVOCATE /DATE OF HEARING : 12 TH AUGUST, 2015 /DATE OF PRONOUNCEMENT : 16 TH SEPTEMBER, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-VI, CHENNA I DATED 17.07.2014 FOR THE ASSESSMENT YEAR 2010-11. 2. THE APPEAL OF THE REVENUE IS BARRED BY 33 DAYS . THE REVENUE FILED AN AFFIDAVIT EXPLAINING REASONS FOR THE DELAY AS UNDER:- THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-VI, CHENNAI IN ITA NO. 766/13-14 DT. 17.07.2014 FOR THE AY 2010-11 IN THE ABOVE CASE WAS ORIGINALLY RECEIVED IN THE OFFICE OF 2 ITA NO.306/MDS/2015 CIT, PUDUCHERRY ON 26.07.2014 AND FORWARDED TO THE OFFICE OF DCIT, COMPANY CIRCLE-V(2), CHENNAI ON 23.09.2014 BY DCIT, CIRCLE-I, PUDUCHERRY BASED ON CHANGE IN JURISDICTION. HOWEVER, AS THE CASE WAS ALREADY CENTRALIZED BY THE NOTIFICATION NO. 3/2014-15 DT. 03.04.2014,(COPY ENCLOSED) THE DCIT COMPANY CIRCLE V(2) HAS FORWARDED THIS ORDER TO DCIT, CENTRAL CIRCLE-IV(2), CHENNAI ON 07.10.2014, WHO SUBMITTED THE SCRUTINY REPORT THROUGH THE JCIT ON 31.10.2014. ON RECEIPT OF THE SCRUTINY REPORT, THE OFFICE OF CIT, CENTRAL-1 REQUISITIONED AND OBTAINED THE ORDER OF THE CIT(A) ON 03.11.2014(COPY ENCLOSED). SINCE THE CIT, CENTRAL-1 WHO WAS HAVING JURISDICTION OVER THE CASE, RECEIVED THE APPELLATE ORDER ON 03.11.2014, THE SAME DATE WAS MENTIONED IN THE CERTIFICATE UNDER RULE 15. HOWEVER, IN AS MUCH AS THE CIT, PUDUCHERRY, HAS RECEIVED THE APPELLATE ORDER ON 26.07.2014, AND SINCE THE LIMITATION FOR FILING A TAX CASE APPEAL IS 60 DAYS, THE APPEAL OUGHT TO HAVE BEEN FILED ON OR BEFORE 24.09.2014. SINCE THE APPEAL WAS ACTUALLY FILED ON 04/02/2015 ONLY, THERE IS A DELAY OF 133 DAYS. INADVERTENTLY, BY OVERSIGHT, THIS WAS WRONGLY MENTIONED AS 92 DAYS IN THE CONDONATION PETITION FILED ORIGINALLY ALONG WITH APPEAL PAPERS. THE REASONS FOR THE DELAY ARE AS FOLLOWS: 'THE RELEVANT APPELLATE ORDER WAS SENT BY THE OFFICE OF CIT(A)-VI TO THE OFFICE OF CIT, PUDUCHERRY, WHO WAS HOLDING JURISDICTION AT THE TIME OF INSTITUTION OF THE APPEAL BEFORE THE CIT(A).LATER THE CASE WAS CENTRALIZED AND THE CIT, CENTRAL-1 BECAME THE JURISDICTIONAL CIT. AND SINCE THE CIT, CENTRAL-1 RECEIVED THE ORDER OF 3 ITA NO.306/MDS/2015 CIT(A)-VI ONLY ON 03.11.2014, THE LIMITATION DATE FOR FILING APPEAL WAS RECKONED FROM THIS DATE TO BE 01.01.2015 AND JUDICIAL NOTES PUT UP TO CIT, CENTRAL-1 ON 24.12.2014. BUT THE FILE GOT MIXED UP WITH OTHER FILES AT THE OFFICE OF CIT CENTRAL-1 AND WAS HANDED OVER TO THE AO ON 03.02.2015 ONLY. IMMEDIATELY ON RECEIPT OF THE AUTHORIZATION FROM THE CIT, CENTRAL-1, THE APPEAL PAPERS WERE PREPARED AND PROMPTLY FILED ON 04.02.2015 BY DCIT, CENTRAL CIRCLE 1(2) AS THE CHARGE OF CENTRAL CIRCLE IV(2) MERGED WITH CENTRAL CIRCLE- 1(2).' 3. THE DELAY WAS NEITHER WILFUL NOR INTENTIONAL, BUT FOR THE REASONS AFORESAID. 4. IT IS THEREFORE PRAYED THAT THIS HON'BLE ITAT MAY BE PLEASED TO CONDONE THE DELAY IN FILING THE TAX CASE APPEAL AND THUS RENDER JUSTICE. 3. WE HAVE PERUSED THE REASONS AND ARE SATISFIED TH AT THERE IS A REASONABLE CAUSE FOR THE DELAY IN FILING OF THE APPEAL. COUNSEL FOR THE ASSESSEE HAS NO SERIOUS OB JECTION FOR CONDONING THE DELAY. IN THE INTEREST OF JUSTICE , WE CONDONE THE DELAY IN FILING OF THE APPEAL AND ADMIT THE SA ME FOR HEARING. 4. THE FIRST ISSUE IN THE APPEAL OF THE REVENUE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDI NG THAT SECTION 40A(2)(A) IS NOT ATTRACTED SINCE TRADE DISC OUNT IS NOT 4 ITA NO.306/MDS/2015 AN EXPENDITURE AS DISCOUNT WAS NOT MADE IN SALE BIL L BUT ONLY IN THE WAY OF BOOK ADJUSTMENT. 5. BRIEF FACTS ARE THAT ASSESSEE COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF DETERGENT CAKES, DETE RGENT POWER AND TOILET SOAP AND OTHER CHEMICALS. THE AS SESSEE FILED ITS RETURN OF INCOME ON 15.10.2009 ADMITTING TOTAL INCOME OF ` 18,23,79,520/- WHICH WAS REVISED ON 13.01.2011 ADMITTING INCOME OF ` 12,87,49,070/- AFTER CLAIMING DEDUCTION UNDER SECTION 80IA OF THE ACT. ASSESSMENT WAS COMPL ETED UNDER SECTION 143(3) OF THE ACT ON 25.03.2013 DETER MINING THE INCOME OF THE ASSESSEE AT ` 18,11,97,350/- WHILE COMPLETING THE ASSESSMENT ASSESSING OFFICER DISALLO WED ` 5,04,03,180/- UNDER SECTION 40A(2)(A) OF THE ACT BE ING TRADE DISCOUNT HOLDING THAT ASSESSEE ALLOWED EXCESS TRAD E DISCOUNT TO SISTER CONCERNS AT AROUND 7.29% . THE ASSESSING OFFICER WAS OF THE OPINION THAT SISTER CONCERNS ARE ENJOYING DEDUCTION UNDER SECTION 80IB OF THE ACT THEREFORE, THERE IS TRANSFER OF PROFIT TO SISTER CONCERNS WHERE TRADE D ISCOUNT ALLOWED IS EQUAL TO THE NET PROFIT PERCENTAGE OF T HE ASSESSEE. THEREFORE THERE IS A VIOLATION UNDER SECTION 40A(2) OF THE ACT. ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS)FOLL OWING 5 ITA NO.306/MDS/2015 VARIOUS DECISIONS OF HIGH COURT INCLUDING JURISDICT IONAL HIGH COURT IN THE CASE OF CIT VS. A.K.SUBBARAYA CHETTY & SONS (123 ITR 592) HELD THAT ASSESSING OFFICER WAS CLEAR LY IN ERROR IN DISALLOWING TRADE DISCOUNT UNDER SECTION 40A(2)( A) OF THE ACT SINCE TRADE DISCOUNT ALLOWED TO SISTER CONCERNS CANNOT BE CONSIDERED AS AN ITEM OF EXPENDITURE INCURRED BY TH E ASSESSEE. 6. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDER OF ASSESSING OFFICER AND SUBMITS THAT THERE IS SHIFTING OF PROFITS BY THE ASSESSEE TO ITS SISTER CONCERNS B Y WAY OF TRADE DISCOUNT AND THEREFORE THE ASSESSING OFFICER HAS CORRECTLY DISALLOWED THE TRADE DISCOUNT INVOKING TH E PROVISIONS OF SECTION 40A(2)(A) OF THE ACT. 7. COUNSEL FOR THE ASSESSEE STRONGLY PLACES RELIANC E ON THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S) AND THE DECISION OF THE JURISDICTIONAL HIGH COURT IN TH E CASE OF A.K.SUBBARAYA CHETTY & SONS (SUPRA) AND SUBMITS TH AT PROVISIONS OF SECTION 40A(2)(A) HAVE NO APPLICATIO N TO THE FACTS OF THE ASSESSEES CASE AS TRADE DISCOUNT ALLO WED BY THE 6 ITA NO.306/MDS/2015 ASSESSEE IS NOT AN EXPENDITURE FOR DISALLOWANCE WIT HIN THE SCOPE OF SECTION 40A(2)(A) OF THE ACT. 8. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES AND THE DECISION RELIED ON. THE ASSESSING OFFICER W HILE COMPLETING THE ASSESSMENT DISALLOWED TRADE DISCOUNT ALLOWED BY THE ASSESSEE TO ITS SISTER CONCERNS STATING THAT ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 40A(2) OF TH E ACT. THE ASSESSING OFFICER WAS OF THE OPINION THAT SINCE SIS TER CONCERNS ARE ENJOYING DEDUCTION UNDER SECTION 80IB OF THE ACT BY WAY OF SHIFTING PROFITS FROM THE ASSESSEE. THE ISSUE HAS BEEN ELABORATELY CONSIDERED BY THE COMMISSIONER OF INCOME TAX (APPEALS) WITH REFERENCE TO THE FINDINGS OF THE ASSESSING OFFICER AND THE SUBMISSIONS OF THE ASSESS EE AND FOLLOWING THE VARIOUS HIGH COURT DECISIONS INCLUDIN G THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE O F A.K.SUBBARAYA CHETTY & SONS (SUPRA) HELD THAT DISCO UNT ALLOWED TO SISTER CONCERNS WERE NOT UNREASONABLE AN D CANNOT BE EXCESSIVE HAVING REGARD TO THE MARKET RATE. COMMISSIONER OF INCOME TAX (APPEALS) ALSO HELD THAT ASSESSING OFFICER WAS IN ERROR IN DISALLOWING THE T RADE DISCOUNT UNDER SECTION 40A(2)(A) SINCE TRADE DISCO UNT 7 ITA NO.306/MDS/2015 ALLOWED TO SISTER CONCERNS CANNOT BE CONSIDERED AS AN ITEM OF EXPENDITURE INCURRED BY THE ASSESSEE OBSERVING AS UNDER:- 6.1.2 I HAVE CONSIDERED THE FINDINGS GIVEN BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER AND ALSO SUBMISSIONS MADE B Y THE AR OF THE APPELLANT ALONG WITH THE JUDICIAL PRONOUNCEMENTS CI TED ON THIS ISSUE. IT IS AN ADMITTED FACT THAT THE TRADE DISCOU NT ALLOWED TO THE SISTER BUSINESS CONCERNS OF THE APPELLANT WAS BY WA Y OF BOOK ADJUSTMENT AND THAT THE APPELLANT HAS REALIZED THE SALE AMOUNT NET OF TRADE DISCOUNT. THEREFORE, THE APPELLANT CANNOT BE STATED TO HAVE INCURRED ANY EXPENDITURE FOR WHICH PAYMENT WAS MADE, SO AS TO ATTRACT THE PROVISIONS OF SECTION 40A(2)(A). THE DECISION OF THE MADRAS HIGH COURT RELIED ON BY THE ID AR, NAMELY, C IT V A.K. SUBBARAYA CHETTY & SONS (SUPRA) CLEARLY SUPPORT THE CASE OF THE APPELLANT. SINCE THE OPERATIVE PORTION OF THIS DECI SION HAS ALREADY BEEN REPRODUCED IN THE EARLIER PARAGRAPH, THE SAME IS NOT REPEATED HERE. VERY SAME ISSUE CAME UP RECENTLY BEFORE THE D ELHI HIGH COURT IN M/S UNITED EXPORTS V CIT, DELHI [ITA NO 35 6/2009]. IN THIS CASE THE QUESTION BEFORE THE HONORABLE DELHI H IGH COURT WAS 'WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, TRIBUNAL ERRED IN LAW IN INTERPRETING SECTION 40A(2) AND HOL DING IT APPLICABLE TO THE APPELLANT, WHEN TRADE DISCOUNT IS NOT, EXPENDITURE PAID AND IN ANY CASE, WHEN IT WAS LESSE R SALES REALIZATION' THE ABOVE QUESTION WAS ANSWERED BY THE HONORABLE COURT IN PARAGRAPH 11 AND 12 OF THEIR ORDER, WHICH IS REPRODUCED BELOW: ' 11 . LASTLY WE FAIL TO UNDERSTAND HOW THE PROVISIONS OF SECTION 40A(2)(A) ARE, AT ALL, APPLICABLE IN THE FACTS OF THE PRESENT CASE. SECTION 40A(2)(A) RUNS AS UNDER: '(2)(A) . WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT HAS BEEN OR IS TO BE MADE TO ANY PERSON REFERRED TO IN CLAUSE(B) OF THE SUB-SECTION, AND THE (ASSESSING) OFFICER IS OF OPINION THAT SUCH EXPENDITURE I S EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS, SERVICES OR FACILITIES FOR WHICH THE PAYMENT IS MADE OR THE LEGITIMATE NEEDS OF THE BUSINESS OR PROFESSION OF THE ASSESSEE OR THE BENEFIT DERIVED BY OR ACCRUING TO HIM THERE FROM , SO MUCH OF THE EXPENDITURE AS IS SO CONSIDERED BY HIM TO BE EXCESSIVE OR UNREASONABLE SHALL NOT BE ALLOWED AS A 8 ITA NO.306/MDS/2015 DEDUCTION'. THIS PROVISION IN THE ACT PERTAINS TO DISALLOWANCE TO AN EXPENDITURE WHICH IS MADE BY THE ASSESSEE IE, AN AMOUNT ACTUALLY SPENT BY THE ASSESSEE AS AN EXPENDITURE. THE EXPRESSION USED IN THIS PROVISION IS 'INCURS ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT HAS BEEN OR IS TO BE MADE TO ANY PERSON' [EMPHASIS SUPPLIED.] THE EMPHASIZED WORDS CLEARLY SHOW THAT ACTUAL PAYMENT MUST BE. PAID AND THERE HAS TO BE AN EXPENDITURE INCURRED BEFORE THE PROVISION CAN BE SAID TO BE APPLICABLE. A TRADE DISCOUNT, AND ADMITTEDLY IT IS NOT IN DISPUTE THAT THE SUBJECT MATTER OF THE CLAIM IS A TRADE DISCOUNT AND NOT AN EXPENDITURE, CLEARLY THEREFORE THERE DOES NOT ARISE THE QUESTION OF APPLICABILITY OF SECTION 40A(2)(A).12.(II) THE PROVISION SECTION 40A(2) DID NOT APPLY TO THE FACTS OF THE PRESENT CASE INASMUCH AS THE TRADE DISCOUNT IS NOT AN EXPENDITURE WHICH IS INCURRED OR WITH RESPECT TO WHICH A PAYMENT IS MADE. THE FACTS OF THE CASE DECIDED BY THE DELHI HIGH COURT AND THE FACTS IN THE CASE UNDER APPEAL ARE IDENTICAL. IN BOTH CASES THE TRADE DISCOUNT ALLOWED WAS BY WAY OF REDUCING THE DISCOUNT ALLOWED FROM THE SALE AMOUNT. HENCE, IT IS A CASE OF LESS REALIZATION OF SALE, RATHER THAN INCURRING ANY EXPENDITURE. SIMILAR ISSUE CAME UP BEFORE THE MADHYA PRADESH HIGH COURT IN CIT V UDHOJI SRIKRISHNADAS REPORTED IN 139 ITR 827. IN THIS CASE THE ASSESSEE APPOINTED M/S LALCHAND SHYAMSUNDAR, AS THE SOLE SELLING AGENT FOR THE BEEDIS MANUFACTURED BY THE ASSESSEE. THE FIRM WAS ENTITLED TO RECEIVE A COMMISSION OF 10% ON THE SALES. THE AO NOTICED THAT THIS FIRM COULD BE CONSIDERED AS A PERSON' WITHIN THE PURVIEW CLAUSE (B) OF SUB-SECTION (2) OF SECTION 40A AND THAT, SINCE THE ASSESSEE HAD SOLD GOODS TO THIS FIRM AT A RATE LOWER THAN THE MARKET RATE, THE PROFIT OF RS 6,81,987/- EARNED BY THE FIRM WOULD AMOUNT PAYMENT OF ADDITIONAL COMMISSION. IN VIEW OF THIS MATTER, THE AO MADE A DISALLOWANCE OF ` 6,81,987/- U/S 40A(2)(A). IT WAS HELD BY THE COURT THAT THE 9 ITA NO.306/MDS/2015 EXPENDLTURE.TNCURRED BY THE ASSESSEE WAS THE COMMISSION. EVEN IF THE . ASSESSEE SOLD BIDIS TO THE SOLE SELLING AGENTS AT A PRICE LESS THAN THE MARKET RATE, THE DIFFERENCE BETWEEN THE MARKET RATE AND THE PRICE AT WHICH THE BIDIS WERE SOLD CANNOT, IN OUR OPINION, BE TERMED AS EXPENDITURE INCURRED. BY THE ASSESSEE. ON THE FINDING REACHED BY THE TRIBUNAL, IT HAS TO BE HELD THAT THE ITO WAS NOT RIGHT, IN ADDING RS 6,81,987/- UNDER SECTION 40A(2).' YET ANOTHER CASE WHERE THE DECISION WAS ON SIMILAR LINES CAME BEFORE THE PUNJAB & HARYANA HIGH COURT RECENTLY IN CIT V RAJNISH AHUJA [2013] 85 CCH 004 (PHHC), [2013] 219 TAXMAN 85 (MAG) (P&H) HE. IT WAS HELD THAT, 'SECTION 40A(2) CONTEMPLATES AN ASSESSEE INCURRING ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT HAS BEEN MADE OR IS TO BE MADE TO ANY PERSON REFERRED TO IN CLAUSE (B) OF SECTION 40A(2). IF THERE WERE ANY SUCH EXPENDITURE AND IF THE ITO WAS OF THE OPINIOTI THAT SUCH EXPENDITURE WAS EXCESSIVE OR UNREASONABLE, THEN SO MUCH OF THE EXPENDITURE AS WAS CONSIDERED BY HIM AS EXCESSIVE OR UNREASONABLE WAS NOT TO BE ALLOWED AS DEDUCTION. WE THEREFORE HAVE TO CONSIDER WHETHER THERE WAS ANY EXPENDITURE IN THIS CASE. IT WAS HELD BY THE TRIBUNAL THAT THE AO MADE THE ADDITION SOLELY ON THE GROUND THAT THE ASSESSEE HAD CHARGED LESS SALE PRICE FROM THE SISTER CONCERNS. THE PROVISIONS OF SECTION 40A COULD NOT BE INVOKED AS NO PAYMENT HAS BEEN MADE TO THE SISTER CONCERNS FOR ANY ITEM OF EXPENDITURE WHICH THE ASSESSEE MIGHT HAVE BEEN CLAIMED AS REVENUE EXPENDITURE.' THE TRIBUNAL FOUND THAT THE TAXPAYER CAN MANAGE HIS AFFAIRS TO REDUCE TAX LIABILITY WITHIN THE FRAME WORK OF LAW AND THAT THE SALE OF GOODS AT A LESSER PRICE TO THE SISTER CONCERNS THAN THE NON SISTER CONCERNS DOES NOT VIOLATE ANY PROVISIONS OF LAW. IT WAS FOUND THAT THE FINDING RECORDED BY THE TRIBUNAL DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. IT WAS HELD THAT THE ASSESSEE HAD NOT VIOLATED ANY PROVISIONS OF LAW WHILE MAKING SALES TO SISTER CONCERNS AT A LESSER RATE THAN NON SISTER CONCERNS. 6.1.3 RESPECTFULLY FOLLOWING THE DECISIONS CITED ABOVE, THAT THE AO CLEARLY IN ERROR IN 10 ITA NO.306/MDS/2015 DISALLOWING THE SUM OF RS.5,04,03,180/- U/S 40A(2)(A), SINCE THE TRADE DISCOUNT ALLOWED TO ITS SISTER CONCERNS CANNOT BE CONSIDERED AS AN ITEM OF EXPENDITURE INCURRED BY THE APPELLANT. ALSO NO PAYMENT ON THE PART OF THE APPELLANT TO THE SISTER CONCERN ON THIS SCORE TO ATTRACT THE PROVISIONS OF SECTION 40A(2)(A). THE CASES CITED BY THE AO ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. AS POINTED OUT BY THE AR OF THE APPELLANT, IN ALL THOSE CASES, PAYMENT OF COMMISSION OR INTEREST TO 'PERSONS' REFERRED TO IN CLAUSE (B) OF SECTION 40A(2) WAS CLEARLY ESTABLISHED ATTRACTING THE APPLICATION OF THIS PROVISION. IT IS SEEN THAT OUT OF THE TOTAL SALE OF ACID SLURRY OF RS.56,67,70,241/-, SALES TO THE SISTER CONCERNS WERE ` 55,65,16,559/- WHICH WORKS OUT TO ` 98.19 PERCENTAGE OF THE TOTAL SALES. FURTHER EVEN AFTER ALLOWING DISCOUNT, THE RATE AT WHICH THE QOODS WERE SOLD TO SISTER CONCERNS WAS MORE THAN THE RATE AT WHICH THE SALE WAS EFFECTED TO OTHERS. ONLY IN THE CASE OF M/S. ULTRAMARINE & PIGMENTS LTD THE RATE WAS SLIGHTLY MORE. IT IS SEEN THAT, THE PURCHASER WAS RELATIVELY NEW TO THE APPELLANT AND LONGER CREDIT WAS ALLOWED. IT NEEDS HARDLY ANY EMPHASIS THAT BULK PURCHASERS ENJOY BETTER BARGAINING POWER AND THEREFORE ARE ABLE TO GET LOWER RATE AND DISCOUNT. IT IS SEEN THAT THE RATE AT WHICH THE GOODS WERE SOLD TO SISTER CONCERNS WERE NOT A RIDICULOUSLY LOW RATE, BUT, WERE AT REASONABLE RATES COMPARED TO THE SALE TO OTHERS. THEREFORE IT CANNOT BE CONSIDERED THAT THE DISCOUNT ALLOWED TO SISTER CONCERNS WAS UNREASONABLE AND WAS EXCESSIVE HAVING REGARD TO THE MARKET RATE. HENCE, THE GROUNDS OF APPEAL FILED BY THE APPELLANT ON THIS ISSUE ARE ALLOWED AND TREATED AS DISPOSED OFF ACCORDINGLY. 9. ON GOING THROUGH THE ORDER OF THE COMMISSIONER O F INCOME TAX (APPEALS), WE DO NOT FIND ANY VALID REAS ON TO INTERFERE WITH HIS FINDINGS. THE REVENUE HAS NOT FILED ANY EVIDENCE TO REBUT THE FINDINGS OF THE COMMISSIONER OF INCOME 11 ITA NO.306/MDS/2015 TAX (APPEALS), THEREFORE WE SUSTAIN THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS) AND DISMISS TH E GROUNDS RAISED BY THE REVENUE ON THIS ISSUE. 10. THE NEXT GROUND OF APPEAL OF THE REVENUE IS THA T COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDI NG THAT ASSESSEE OPTED TO CLAIM DEPRECIATION AS PER APPEND IX-I AT 80% ON THE WINDMILL BY WAY OF CLAIMING DEPRECIATION IN THE RETURN OF INCOME AND THAT SUCH CLAIM AMOUNTS TO EX ERCISING OPTION ENVISAGED UNDER SECOND PROVISO TO RULE 5(1A) . CONSEQUENTLY THE ASSESSEE IS NOT ENTITLED TO DEPREC IATION AS PER APPENDIX-I. THE ASSESSING OFFICER WHILE COMPLE TING THE ASSESSMENT RESTRICTED THE DEPRECIATION ON WINDMILL TO 7.69% AS AGAINST THE CLAIM OF THE ASSESSEE AT 80% HOLDIN G THAT ASSESSEE HAS NOT EXERCISED OPTION FOR CLAIMING HIGH ER DEPRECIATION. THE ASSESSEE CONTENDED THAT IT HAD AL READY BEEN OPTED TO CLAIM DEPRECIATION FROM ASSESSMENT YE AR 2005-06 ONWARDS FOR THE WINDMILL INSTALLED EARLIER. HENCE, THERE IS NO NEED TO EXERCISE FRESH OPTION FOR THE W INDMILL INSTALLED IN THE PREVIOUS YEAR 2006-07. IT WAS CONT ENDED THAT ONCE SUCH OPTION IS EXERCISED ASSESSEE COMPANY IS DEEMED TO CONTINUE IN THE SAME BLOCK OF ASSETS. HOWEVER, THE 12 ITA NO.306/MDS/2015 ASSESSING OFFICER RESTRICTED THE DEPRECIATION AT ON LY 7.69% AS AGAINST THE CLAIM OF THE ASSESSEE FOR 80% FOR T HE ASSESSMENT YEAR UNDER CONSIDERATION I.E. ASSESSMENT YEAR 2010-11. ON APPEAL, COMMISSIONER OF INCOME TAX (APP EALS) ALLOWED THE CLAIM OF THE ASSESSEE FOLLOWING HIS EAR LIER DECISION RENDERED IN THE CASE OF M/S. NARMADA CHEMI CALS PVT. LTD. IN ITA NO.766/13-14 DATED 17.07.2014. 11. DEPARTMENTAL REPRESENTATIVE PLACES RELIANCE ON THE ORDER OF THE ASSESSING OFFICER. 12. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ISSUE HAS BEEN DECIDED BY THE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT VS. ABT LTD. (370 ITR 159). 13. AFTER HEARING BOTH THE PARTIES AND ON GOING THR OUGH THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE O F M/S. ABT LTD (SUPRA), WE FIND THAT THE ISSUE IS SQUARELY COV ERED IN FAVOUR OF THE ASSESSEE AS THE HONBLE HIGH COURT HE LD THAT IF THE ASSESSEE EXERCISED OPTION IN TERMS OF SECOND PR OVISO TO RULE 5(1A) OF THE INCOME TAX RULES AT THE TIME OF F URNISHING OF RETURN OF INCOME, IT WILL SUFFICE NO FURTHER LE TTER OF REQUEST OR INTIMATION WITH REGARD TO EXERCISE OF OPTION IS REQUIRED. 13 ITA NO.306/MDS/2015 SINCE THE RETURNS WERE FILED IN ACCORDANCE WITH SEC TION 139(1) OF THE ACT AND THE FORM PRESCRIBED THEREIN MAKE A P ROVISION FOR EXERCISING OPTION IN RESPECT OF THE CLAIM OF DE PRECIATION, NO SEPARATE PROCEDURE IS REQUIRED. IN THE CASE ON H AND BEFORE US, THE ASSESSEE HAS CLAIMED HIGHER DEPRECIA TION IN THE RETURN FILED UNDER SECTION 139(1) OF THE ACT C LAIMING HIGHER DEPRECIATION AT 80% ON WINDMILL WHICH AMOUN TS TO EXERCISE OF OPTION FOR HIGHER CLAIM. THUS, RESPECTF ULLY FOLLOWING THE SAID DECISION OF THE JURISDICTIONAL H IGH COURT, WE UPHOLD THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE AND REJECT THE GROUNDS RAIS ED BY THE REVENUE. 14. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH SEPTEMBER, 2015. SD/- SD/- ( # ) ( & (# ) ( CHANDRA POOJARI ) ( CHALLA NAG ENDRA PRASAD ) * / ACCOUNTANT MEMBER ( * / JUDICIAL MEMBER ( /CHENNAI, , /DATED 16 TH SEPTEMBER, 2015 SOMU ./ 0/ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 1 () /CIT(A) 4. 1 /CIT 5. / 5 /DR 6. /GF .