GSPC Gas Company Ltd., Ahmedabad V. The Jt.CIT.,GNR Range, Gandhinagar

ITA 3117/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76643 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 11-03-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 24-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Additional depreciation; Initiation of penalty proceedings; Difference of opinion; Corroborative evidences; Capital receipt; Revenue expenditure
• Section: 244A; 234B; 32

Judgement Text

, , , , , , , , IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BENCH, AHMEDABAD .., ! '# '# '# '# $ %&, ! BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER APPEAL(S) BY APPELLANT VS. RESPONDENT SL. NO(S) ITA NO(S) ASSESSMENT YEAR(S) APPELLANT RESPONDENT 1. 3117/AHD/2010 2007-08 GSPC GAS COMPANY LTD. 101/106, IT TOWER NO.1 INDRODA CIRCLE INFOCITY GANDHINAGAR-382 011 PAN:AABCG 1813F JT.CIT/ ADDL.CIT GANDHI- NAGAR RANGE GANDHI- NAGAR 2. 2958/AHD/2010 2007-08 REVENUE ASSESSEE 3. 1390/AHD/2012 2008-09 ASSESSEE REVENUE 4. 1300/AHD/2012 2008-09 REVENUE ASSESSEE 5. 239/AHD/2013 2009-10 ASSESSEE REVENUE 6. 678/AHD/2013 2009-10 REVENUE ASSESSEE ASSESSEE BY : SHRI S.N.SOPARKAR, A.R. REVENUE BY : SHRI VIMALENDU VERMA, CIT-DR WITH SHRI K.C.MATHEWS, SR.DR $'' ( & / / / / DATE OF HEARING : 11/03/2014 *+, ( & / DATE OF PRONOUNCEMENT : 11/04/2014 - / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THESE SIX CROSS-APPEALS BY THE ASSESSEE AND THE RE VENUE ARE DIRECTED AGAINST THE SEPARATE ORDERS OF THE LD.COMM ISSIONER OF INCOME TAX(APPEALS)-GANDHINAGAR (CIT(A) FOR SHORT) PERTAINING TO ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 2 - ASSESSMENT YEARS(AYS) 2007-08, 2008-09 & 2009-10 DA TED 31/08/2010, 28/03/2012 AD 28/12/2012 RESPECTIVELY. THESE APPEA LS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS C ONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST, WE TAKE UP THE ASSESSEES APPEAL IN ITA N O.3117/AHD/2010 AND REVENUES APPEAL IN ITA NO.2958/AHD/2010 FOR AY 2007-08. THE FOLLOWING GROUNDS HAVE BEEN RAISED BY THE RESPECTIV E PARTIES:- (A) ASSESSEES APPEAL (AY 2007-08) : GROUNDS ITEM NO.1: ADDITION OF RS.6,39,93,408/- ON ACCOUN T OF CLOSING STOCK ARISING OUT OF CHANGE IN ACCOUNTING POLICY IN THE NEXT FINANCIAL YEAR 2007-08 (A.Y. 200 8-09) I THE LEARNED CIT(A) GANDHINAGAR HAS GROSSLY ERRED ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW IN UPHOLDING THE DECISION OF THE LEARNED A.O. BY CONFIRMING THE ADDITION OF RS.6,39, 93,08/- ON ACCOUNT OF CLOSING STOCK ARISING OUT OF CHANGE IN ACCOUNTIN G POLICY IN THE NEXT FINANCIAL YEAR 2007-08 (A.Y. 2008-09). THE LEARNED CIT(A) HAS CONFIRMED THE ADDITION BY STATING THAT THE STOCK TAKE OVER DUE TO TAKING UP OVER THE DEME RGED BUSINESS OF GSPC AS GIVEN IN NOTES TO ACCOUNTS HAS TO BE ACCOUN TED BY APPELLANT DURING THIS YEAR. SO, NON INCLUSION OF THE ABOVE C LOSING STOCK OF GAS IS NOT ACCEPTABLE IN VIEW OF THE PROVISIONS OF SECTION 145(3) AND ACCORDINGLY BOOK RESULTS ARE REJECTED. THIS IS SU PPORTED BY THE NOTES TO ACCOUNTS AS MENTIONED ABOVE GIVEN IN THE ANNUAL REP ORT OF THE ASSESSEE. ACCORDINGLY, THE ABOVE CLOSING STOCK NEEDS TO BE TA KEN INTO ACCOUNT EVEN IF THERE ARISES TO TAXABLE INCOME. THE LEARNED CIT(A) HAS GROSSLY ERRED BY NOT ACCEPTI NG THE FACTS THAT STOCK OF PETROL AND DIESEL TAKEN OVER DUE TO TAKING UP OVER THE DEMERGED BUSINESS OF GSPC IS ALREADY CONSIDERED AND ACCOUNTE D BY THE APPELLANT IN THE BOOKS OF ACCOUNTS FOR THE F.Y. 2006-07. TH E LEARNED CIT(A) FAILED TO APPRECIATE THAT ONLY W.E.F. F.Y. 07-08 (A .Y. 08-09) THE ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 3 - APPELLANT CHANGED ITS ACCOUNTING POLICY FOR LINE P ACK GAS AND CONSEQUENTLY THE STOCK OF NATURAL GAS AS LINE PACK AS AT 31 ST MARCH, 2008 WOULD CONTINUE TO REMAIN A AN INVENTORY WITH T HE COMPANY AND ALSO SINCE THE COMPANY AS AN OPINION EITHER TO PURC HASE THE SAME AT THE END OF THE AGREEMENT WITH THE SUPPLIER OR RETURN IT BACK TO THE SUPPLIER, THE COMPANY HAS DECIDED TO ACCOUNT FOR THE SAME AS AN INVENTORY AS AT 31 ST MARCH, 2008, WHICH UP TO THE FINANCIAL YEAR 2006-0 7 WAS CHARGED TO THE PROFIT & LOSS ACCOUNT. THE LEARNED CIT(A) H AS FURTHER FAILED TO UNDERSTAND THAT BY MAKING ADDITION OF THE CLOSING S TOCK FOR A.Y. 2006- 07 (A.Y. 2007-08) IT WILL AUTOMATICALLY BECOME OPEN ING STOCK FOR F.Y. 2007-08 (A.Y. 2008-09) AND THUS REVENUE EFFECT WILL BE NIL. THE LEARNED CIT(A) HAS GROSSLY ERRED IN REJECTING THE BOOK RESU LTS. HE HAS FAILED TO UNDERSTAND THAT ACCOUNTS OF THE APPELLANT ARE AUDIT ED BY INTERNAL AUDITORS, STATUTORY AUDITORS, TAX AUDITORS AND EVEN C & AG OF INDIA. HE HAS ALSO FAILED TO APPRECIATE THAT THE LEARNED A .O. HAS ACCEPTED THE BOOK RESULTS. ITEM NO.II : LEVY OF INTEREST UNDER SECTION 234B & 234D OF THE ACT AND RECOVERY OF INTEREST U/S.244A OF THE ACT: 1. THE LEARNED CIT(A) GANDHINAGAR HAS GROSSLY ERR ED IN LAW AND ON FACTS IN PARTLY UPHOLDING THE DECISION OF THE LEARN ED A.O. TO LEVY INTEREST UNDER SECTION 234B & 234D OF THE ACT AND RECOVERING INTEREST U/S.244A OF THE ACT. 2. THE APPELLANT STATES THAT LEVY OF INTEREST IS W HOLLY UNJUSTIFIED AND THE SAME MAY KINDLY BE STATED. 3. THAT THE INTEREST U/S.234B & 234D ON THE FACTS AND CIRCUMSTANCES IS NOT AUTOMATIC OR CONSEQUENTIAL. III. THE APPELLANT RESERVES ITS RIGHT TO ADD, AMEND , ALTER, SUBSTITUTE OR MODIFY ALL OR ANY OF THE GROUNDS STATED HEREINAB OVE AS THE FACTS AND CIRCUMSTANCES OF THE CASE MAY JUSTIFY. APART FROM THE ABOVE GROUNDS, THE ASSESSEE HAS RAIS ED THE FOLLOWING ADDITIONAL GROUND: ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 4 - APPELLANT CRAVES LEAVE TO RAISE THIS ADDITIONAL GRO UND OF APPEAL BEFORE THE HONBLE ITAT. THIS IS A LEGAL GROUND AND THERE FORE AS PER THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF NA TIONAL THERMAL POWER (229 ITR 383) IT CAN BE RAISED BEFORE THE HON BLE ITAT. 1. THE APPELLANT PRAYS THAT ON THE FACTS AND CIRCUMSTA NCES OF THE CASE OF THE GROUND OF APPEAL ADDITION PERTAINING TO PRIO R PERIOD EXPENSES OF RS.15,45,925/- CLAIMED IN APPEAL BEARING ITA # 1 390/AHD/2012 FOR A.Y. 2008-09 IS NOT ACCEPTED O THE GROUND THAT THE EXPENSES PERTAIN TO THIS ASSESSMENT YEAR THEN DIRECTION BE G IVEN TO ALLOW THE SAME IN A.Y. 2007-08. APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, CHANGE , DELETE AND EDIT THE ABOVE GROUND OF APPEAL BEFORE OR AT THE TIME OF THE HEARING OF THE APPEAL. (B) REVENUES APPEAL (AY 2007-08) : (1) THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1,12,14,863/-, MADE ON ACCOUNT O F DISALLOWANCE OF DEPRECIATION CLAIMED ON THE FIXED ASSETS UNDER THE HEAD INTANGIBLES- RIGHT OF WAY (ROW) AND PERMISSIONS. (2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD.CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. (3) IT IS THEREFORE PRAYED THAT THE ORDER OF THE L EARNED CIT(APPEALS) MAY BE SET ASIDE AND THAT OF THE A.O. BE RESTORED T O THE ABOVE EXTENT. REVENUE HAS RAISED THE FOLLOWING ADDITIONAL GROUND : 1. THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND O N FACTS IN ACCEPTING THE CHANGE OF TERMINOLOGY FROM ROU TO ROW BY THE AS SESSEE WITHOUT OBTAINING ANY SUPPORTING EVIDENCES OR THAT DUE PROC ESS HAS BEEN FOLLOWED BEFORE MAKING SUCH A CHANGE, AS THE TERMS HAVE SIGNIFICANTLY DIFFERENT MEANING. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD.CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 5 - IT IS THEREFORE PRAYED THAT THE ORDER OF THE LEARNE D CIT(APPEALS) MAY BE SET ASIDE AND THAT OF THE A.O. BE RESTORED TO THE A BOVE EXTENT. 2.1. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 20/11/2009, THEREBY THE ASSESSING OFFICER(AO) MADE ADDITION IN RESPECT OF DISALLOWANCE OF DEPRECIATION ON INTANGIB LES ASSETS AMOUNTING TO RS.1,12,14,863/- AND ADDITION ON ACCOUNT OF CLOS ING STOCK AMOUNTING TO RS.6,39,93,408/- AGAINST THIS, THE ASSESSEE FIL ED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, PARTLY ALLOWED THE APPEAL, WHEREIN LD.CIT(A) DELETED THE A DDITION MADE ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION AMOUNTING T O RS.1,12,14,863/- AND CONFIRMED THE ADDITION OF RS.6,39,93,408/- MADE ON ACCOUNT OF CLOSING STOCK. NOW, BOTH THE ASSESSEE AND REVENUE HAVE FILED APPEALS CHALLENGING THE ORDER OF THE LD.CIT(A). 3. IN ASSESSEES APPEAL, I.E. IN ITA NO.3117/AHD/20 10 FOR AY 2007- 08 THE FIRST GROUND IS AGAINST THE ADDITION OF RS.6 ,39,93,408/- ON ACCOUNT OF CLOSING STOCK. THE LD.SR.COUNSEL FOR THE ASSESS EE SUBMITTED THAT THE ADDITION MADE BY THE AO AND CONFIRMED BY THE LD.CIT (A) IS NOT JUSTIFIED. HE SUBMITTED THAT THE LD.CIT(A) ERRED BY NOT ACCEP TING THE FACTS THAT STOCK OF PETROL AND DIESEL DUE TO TAKING UP OVER T HE DEMERGED BUSINESS OF GSPC WAS ALREADY CONSIDERED AND ACCOUNTED BY THE A SSESSEE IN THE BOOKS OF ACCOUNTS FOR THE F.Y. 2006-07. THE LD.CIT (A) FAILED TO APPRECIATE THAT ONLY W.E.F. F.Y. 2007-08 (A.Y. 2008 -09) THE ASSESSEE ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 6 - CHANGED ITS ACCOUNTING POLICY FOR LINE PACK GAS A ND CONSEQUENTLY THE STOCK OF NATURAL GAS AS LINE PACK AS AT 31 ST MARCH-2008 WOULD CONTINUE TO REMAIN AS AN INVENTORY WITH THE COMPANY AND ALSO SINCE THE COMPANY HAD AN OPTION EITHER TO PURCHASE THE SAME AT THE EN D OF THE AGREEMENT WITH THE SUPPLIER OR RETURN IT BACK TO THE SUPPLIER . FOR THIS, THE COMPANY DECIDED TO ACCOUNT FOR THE SAME AS AN INVENTORY AS AT 31 ST MARCH-2008, WHICH UPTO THE F.Y. 2006-07 WAS CHARGED TO THE PROF IT & LOSS ACCOUNT. HE SUBMITTED THAT THE LD.CIT(A) FURTHER FAILED TO U NDERSTAND THAT BY MAKING ADDITION OF THE CLOSING STOCK FOR F.Y. 2006- 07 (AY 2007-08) IT WOULD AUTOMATICALLY BECOME OPENING STOCK FOR F.Y. 2 007-08 (AY 2008- 09) AND THUS REVENUE EFFECT WOULD BE NIL. HE SUBMI TTED THAT THE LD.CIT(A) HAS GROSSLY ERRED IN REJECTING THE BOOK R ESULT. HE SUBMITTED THAT THE LD.CIT(A) HAS FAILED TO APPRECIATE THAT AC COUNTS OF THE ASSESSEE ARE AUDITED BY INTERNAL AUDITORS, STATUTORY AUDITOR S, TAX AUDITORS AND EVEN C&AG OF INDIA. HE SUBMITTED THAT THE LD.CIT(A) HAS ALSO FAILED TO APPRECIATE THAT THE LD.A.O. HAS ACCEPTED THE BOOK R ESULTS. HE SUBMITTED THAT IT WAS SUBMITTED BEFORE THE LD.CIT(A) THAT F.Y .2006-07 (AY 2007- 08) WAS THE FIRST MAJOR YEAR OF OPERATION OF THE CO MPANY. IT WAS BROUGHT TO THE NOTICE OF THE LD.CIT(A) THAT FOR THE F.Y. 20 06-07 (AY 2007-08) THE ASSESSEE IN ITS BOOKS OF ACCOUNTS HAD CHARGED TO RE VENUE AND, THEREFORE, FOR THAT YEAR THERE WAS NO CLOSING STOCK OF NATURA L GAS AS PER BOOKS. HOWEVER, W.E.F. F.Y. 2007-08 (AY 2008-09) THE ASSES SEE CHANGED ITS ACCOUNTING POLICY AND, CONSEQUENTLY, THE NATURAL GA S IN LINE PACK WAS SHOWN AS STOCK AND THUS THERE WAS CLOSING STOCK O F PNG WHICH WOULD CONTINUE TO REMAIN AS INVENTORY. HE SUBMITTED THAT THIS FACT WAS DULY ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 7 - DISCLOSED IN THE NOTES ON ACCOUNT FOR THE F.Y. 2007 -08 (AY 2008-09). THE LD.SR.COUNSEL FOR THE ASSESSEE FURTHER SUBMITTE D THAT EVEN IF THE GAS IS MEASURED AT SOME VALUE AND TREATED AS CLOSING STOCK FOR THE CURRENT YEAR, THEN THE SAME MAY BE AUTOMATICALLY QUALIFY AS OPENI NG STOCK OF THE NEXT YEAR. FROM THE INCOME TAX POINT OF VIEW, THE REVE NUE EFFECT WOULD BE NIL. HE SUBMITTED THAT THE AO IS BOUND TO ACCEPT T HE METHODOLOGY IN ACCOUNTING ADOPTED BY THE COMPANY ON REGULAR BASIS ESPECIALLY IN THE CASE WHEN THERE WAS NO REVENUE LOSS TO THE EXCHEQUE R. HE SUBMITTED THAT VARIOUS DECISIONS WERE RELIED UPON BY THE ASSE SSEE BEFORE THE LD.CIT(A) IN SUPPORT OF THIS CONTENTION. HE SUBMIT TED THAT LAW IS WELL- SETTLED THAT CLOSING STOCK OF THE EARLIER YEAR HAS TO FORM THE OPENING STOCK OF THE NEXT ACCOUNTING YEAR. HE SUBMITTED THAT IF THE DISALLOWANCE IS CONFIRMED, THEN THE CLOSING STOCK O F F.Y. 2006-07 (AY 2007-08) BE TREATED AS OPENING STOCK OF F.Y. 2007-0 8 (AY 2008-09). THUS, REVENUE EFFECT WILL BE NIL. 4. ON THE CONTRARY, LD.CIT-DR SUPPORTED THE ORDER O F THE LD.CIT(A) AND SUBMITTED THAT THERE IS NO ERROR IN THE ORDER O F THE LD.CIT(A). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE LD.CIT(A) HAS DECIDED THIS ISSUE IN HIS ORDER, BY OBSERVING AS UNDER:- AS PER NOTES OF ACCOUNTS FROM 1 ST APRIL, 2006 TO 22 ND MAY, 2007 (APPOINTED DATE AND EFFECTIVE DATE RESPECTIVELY), A LL THE PROFITS OF RETAIL GAS BUSINESS ARE TO BE ACCOUNTED FOR BY APPE LLANT AND NOT DEMERGING COMPANY I.E. GSPC IN A.Y. 2007-08. ACCOR DINGLY, TO ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 8 - DETERMINE CORRECT PROFITS, ABOVE CLOSING STOCK NEED S TO BE TAKEN INTO ACCOUNT. THE STOCK TAKEN OVER DUE TO TAKING UP OVER THE DEME RGED BUSINESS OF GSPC AS GIVEN IN NOTES TO ACCOUNTS HAS TO BE ACC OUNTED BY APPELLANT DURING THIS YEAR. SO, NON INCLUSION OF T HE ABOVE CLOSING STOCK OF GAS IS NOT ACCEPTABLE IN VIEW OF THE PROVI SIONS OF SECTION 145(3) AND ACCORDINGLY BOOK RESULTS ARE REJECTED. THIS IS SUPPORTED BY THE NOTES TO ACCOUNTS AS MENTIONED A BOVE GIVEN IN THE ANNUAL REPORT OF THE ASSESSEE. ACCORDINGLY, TH E ABOVE CLOSING STOCK NEEDS TO BE TAKEN INTO ACCOUNT EVEN IF THERE ARISES NO TAXABLE INCOME. ACCORDINGLY, THE ADDITION OF RS.6,39,93,40 8/- MADE BY THE AO IS UPHELD. AS REGARDS THE ALTERNATE GROUND REGARDING ALLOWING THE CLOSING STOCK AS OPENING STOCK NEXT YEAR, IT MAY BE MENTION ED THAT ISSUE UNDER CONSIDERATION IS DETERMINATION OF INCOME OF A .Y. 2007-08 AS PER CORRECT CLOSING STOCK FOR A.Y. 2007-08 WHICH HA S BEEN DECIDED. AS FAR AS ISSUE REGARDING THE DETERMINATION OF EFFE CT ON OPENING STOCK AND INCOME OF A.Y. 2008-09, APPELLANT MAY MAK E APPROPRIATE APPLICATION BEFORE THE A.O. WHO WILL DE CIDE THE ISSUE AS PER LAW. THEREFORE, THE ALTERNATE GROUND IS REJ ECTED. 5.1. WE FIND THAT THE LD.CIT(A) OUGHT NOT TO HAVE R EJECTED THE BOOK RESULTS AS THE BOOKS OF THE ASSESSEE ARE SUBJECTED TO AUDIT BY VARIOUS DEPARTMENTS. THEREFORE, THE ACTION OF THE LD.CIT( A) REJECTING THE BOOK OF ACCOUNTS IS SET ASIDE, HOWEVER WE DO NOT FIND AN Y INFIRMITY IN THE ORDER OF THE LD.CIT(A) IN REJECTING THE ALTERNATE CLAIM O F THE ASSESSEE THAT THE CLOSING STOCK FOR THE AY 2007-08 BE TREATED AS OPEN ING STOCK OF THE AY 2008-09 SINCE THE LD.CIT(A) HAS GIVEN LIBERTY TO T HE ASSESSEE TO APPROACH TO THE AO. THUS, THIS GROUND OF ASSESSEE S APPEAL IS PARTLY ALLOWED. ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 9 - 6. GROUND NOS.2 & 3 ARE AGAINST THE LEVY OF INTERE ST U/S.234B & 234D OF THE ACT AND RECOVERING INTEREST U/S.2344A O F THE ACT. THE SAME ARE BEING CONSEQUENTIAL IN NATURE. THUS, THESE GRO UNDS OF ASSESSEES APPEAL ARE DISMISSED. 7. NOW, WE TAKE UP THE ADDITIONAL GROUND TAKEN BY T HE ASSESSEE. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS GRO UND WAS NOT TAKEN UP BEFORE THE LD.CIT(A). HE SUBMITTED THAT IN CASE TH E CONTENTION IS NOT ACCEPTED IN THE AY 2008-09 ON THE GROUND THAT THE E XPENSES FOR ASSESSMENT YEAR UNDER APPEAL, THEN A DIRECTION BE GIVEN TO THE AO TO ALLOW SUCH EXPENDITURE IN THE AY 2007-08. 7.1. THE LD.CIT-DR HAS OPPOSED THE ADMISSION OF TH E GROUND. 7.2. WE HAVE HEARD THE PARTIES. IN VIEW OF THE JUD GEMENT OF THE HONBLE APEX COURT RENDERED IN THE CASE OF NATIONAL THERMAL POWER REPORTED AT 229 ITR 383 THIS GROUND IS ADMITTED FOR ADJUDICATION AND WOULD DEPEND UPON THE GROUND TAKEN IN ITA NO.1390/A HD/2012 (ASSESSEES OWN CASE) FOR AY 2008-09. IT IS HELD A CCORDINGLY. 8. IN THE RESULT, ASSESSEES APPEAL FOR AY 2007-08 IS PARTLY ALLOWED. 9. NEXT, WE TAKE UP THE REVENUES APPEAL, I.E. ITA NO.2958/AHD/2010 FOR AY 2007-08. 9.1. THE ONLY EFFECTIVE GROUND OF REVENUES APPEAL IS AGAINST THE DELETION OF ADDITION OF RS.1,12,14,863/- MADE ON AC COUNT OF DISALLOWANCE ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 10 - OF DEPRECIATION CLAIMED ON THE FIXED ASSETS UNDER T HE HEAD INTANGIBLES- RIGHT OF WAY (ROW) AND PERMISSIONS. 9.2. THE LD.CIT-DR SUBMITTED THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION. HE SUBMITTED THAT THE LD.CI T(A) HAS TAKEN AS EXPENDITURE INCURRED ON RIGHT OF USE AND THE LD.C IT(A) HAS CHANGED THE TERMINOLOGY RIGHT OF WAY. HE PLACED RELIANCE ON THE DECISION OF HONBLE ITAT MUMBAI BENCH D RENDERED IN THE CASE OF CHEMBUR PATALGANGA PIPELINES LTD. VS. JT.CIT REPORTED AT 10 5 TTJ 788 (MUM.) IN SUPPORT OF CONTENTION THAT DEPRECIATION IS NOT ALLO WABLE. 9.3. ON THE CONTRARY, LD.SR.COUNSEL FOR THE ASSESSE E SUBMITTED THAT THE ORDER OF THE LD.CIT(A) IS JUSTIFIED. HE FURTHER SU BMITTED THAT THE LD.CIT(A) HAS EXAMINED THE ISSUE IN RIGHT PERSPECTI VE. HE ALSO SUBMITTED THAT THE ASSESSEE HAS NOT ACQUIRED ANY RIGHT INTO T HE LAND AND THE PAYMENTS WERE MADE TO THE VARIOUS MUNICIPALITIES FO R GIVING PERMISSION TO HAVE RIGHT OF WAY. THEREFORE, THE DECISION OF T HE HONBLE MUMBAI TRIBUNAL RENDERED IN THE CASE OF CHEMBUR PATALGANGA PIPELINES LTD.(SUPRA) IS NOT APPLICABLE. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. SINCE THE REVENUE HAS RAISED ADDITIONAL GROUND CHAL LENGING THE ACTION OF THE LD.CIT(A) IN ACCEPTING THE CHANGE OF TERMINOLOG Y FROM ROU TO ROW BY THE ASSESSEE WITHOUT OBTAINING ANY SUPPORTIN G EVIDENCES OR THAT DUE PROCESS HAS BEEN FOLLOWED BEFORE MAKING SUCH A CHANGE, AS THE TERMS ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 11 - HAVE SIGNIFICANTLY DIFFERENT MEANING, THE LD.CIT-DR HAS CONTENDED THAT NO REMAND REPORT WAS SOUGHT FROM THE AO BEFORE MAK ING SUCH CHANGE. THE LD.CIT(A) HAS DECIDED THIS ISSUE VIDE PARA-3.3 OF HIS ORDER, BY OBSERVING AS UNDER:- 3.3. I HAVE CONSIDERED THE ASSESSMENT ORDER AS WEL L AS THE SUBMISSION MADE BY THE ASSESSEE. IT IS SEEN THAT BASICALLY TH E AO HAS HELD THAT RIGHT OF WAY (ROW) EXPENSES PAID TO VARIOUS AUTHORI TIES FOR LAYING, CROSSING PERMISSIONS, INTERNAL ROAD, BORING PERMISS ION, DAMS AND BRIDGE CROSSING PERMISSION, RAILWAY AND RIVER CROSS ING PERMISSION ETC. FOR PNG NETWORK FOR PIPE LAYING CHARGES ARE NOT ALL OWABLE BECAUSE BASIC UNDERLYING ASSET IS LAND WHICH IS TAKEN FOR P ERPETUAL OWNERSHIP WHICH DOES NOT DEPRECIATE AS HELD BY VARIOUS DECISI ONS RELIED UPON BY THE ASSESSEE. HE ALSO RELIED ON THE DECISION OF CI T(A) IN THE CASE OF GUJARAT STATE PETRONET LTD. FOR AY 2006-07 IN WHICH THE DISALLOWANCE OF DEPRECIATION WAS UPHELD ON LAND COMPENSATION. T HE APPELLANT HAS MADE IT VERY CLEAR THAT FOR ROW, SECURITY DEPOSIT I S GIVEN TO VARIOUS MUNICIPAL AUTHORITIES, LOCAL AUTHORITIES, RAILWAYS, ETC., WHEREVER APPLICABLE FOR LAYING PIPELINE. THIS AMOUNT IS ACC OUNTED AS CURRENT ASSET AND NOT FIXED ASSET AND NO DEPRECIATION THERE ON HAS BEEN CLAIMED. THE OTHER EXPENSES HAVE BEEN INCURRED FOR OBTAINING PERMISSION FROM VARIOUS MUNICIPALITIES, RAILWAYS, ETC., FOR LAYING PIPELINE AND THEY HAVE BEEN AMORTIZED FOR A PERIOD OF 10 YEARS AS PERMISSI ONS ARE FOR LIMITED TIME PERIOD. THE PERMISSION ONLY ALLOWS THE ASSESS EE TO LAY PIPELINE FOR PNG NETWORK. THE APPELLANT HAS NOT PURCHASED/TAKEN ON LEASE OR TAKEN ON RENT ANY LAND FOR PURPOSE OF ROW. THE DECISIONS RELIED UPON BY THE AO ARE DISTINGUISHABLE ON THIS ACCOUNT. IT IS PERTINENT TO NOTE THAT IN THE CASE OF GUJARAT STATE PETRONET LTD. FOR AY 2006-07. CIT(A) HAD GIVEN THE FINDING REGARDING 3 HEADS I.E. FOR CROP COMPENSATION AND RIGHT OF WAY WHERE H E HAS ALLOWED DEPRECIATION WHILE COST OF LAND COMPENSATION FOR TH E PURPOSE OF DEPRECIATION TOWARDS ROW HAS BEEN ALLOWED BY THE CI T(A) IN GSPL. THE AO HAS CITED ONLY PART OF THE ORDER OF CIT(A) R ELATING TO LAND COMPENSATION (RIGHT OF USE). IN THE PRESENT CASE N O PAYMENT HAS BEEN MADE FOR CROP COMPENSATION AND LAND COMPENSATION HA S OT BEEN CLAIMED BY THE ASSESSEE. THE CHARGES HAVE BEEN PAI D FOR OBTAINING PERMISSION FROM VARIOUS LOCAL AUTHORITIES GIVING TH E ASSESSEE ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 12 - PERMISSION FOR LAYING THE PIPELINES AD THESE PERMIS SIONS ARE STATED TO BE RENEWED PERIODICALLY AND THAT IS WHY IT HAS BEEN AM ORTIZED OVER A PERIOD OF 10 YEARS. IN VIEW OF THE ABOVE DISCUSSION, ADDITION MADE ON A CCOUNT OF DEPRECIATION ON RIGHT OF WAY AMOUNTING TO RS.1,12,1 4,863/- IS DELETED AND THIS GROUND IS ALLOWED. 10.1. DURING THE COURSE OF HEARING, THE ASSESSEE HA S PLACED DOCUMENTS, SUCH AS PROOF OF PAYMENT MADE TO VARIOUS AUTHORITIE S, NAMELY, FIXED ASSETS-ROU FOR THE FYS 2007-08 & 2008-09 AT NADIAD , NAVSARI (DEDUCTION FOR F.Y. 2008-09 RS.31,625/-), VALSAD, M ORBI, RAJKOT, CHOTILA, SURENDRANAGAR, THANGADH TOTALLING TO RS.1, 11,98,273/- (FOR F.Y.2007-08), RS.1,61,85,963 (FOR F.Y. 2008-09) AND GROSS BLOCK AS ON 31/03/2009 OF RS.2,73,52,611/- AND LETTER OF SECON PRIVATE LTD. DATED 10/04/2007 ALONGWITH LAND COMPENSATION AWARD NO.01/ NADIAD CNG PL/2007OF RS.18,18,090/- (APPENDIX A) IN SUPPORT OF ITS CONTENTION ON THIS ISSUE. THE OBJECTION OF THE REVENUE IS THAT T HE LD.CIT(A) HAS NOT GIVEN ANY OPPORTUNITY TO THE AO. 10.2. AFTER CONSIDERING THE TOTALITY OF THE FACTS A ND IN VIEW OF THE FACT THAT THE ASSESSEE HAS PLACED ON RECORD CERTAIN DOC UMENTS (TO VARIOUS AUTHORITIES CITED ABOVE) WHICH WERE NOT BEFORE THE AO, THE ORDER OF THE LD.CIT(A) IS SET ASIDE AND THE ISSUE IS REMITTED BA CK TO THE FILE OF AO FOR DECISION AFRESH. THEREFORE, THIS GROUND OF REVENUE S APPEAL IS ALLOWED FOR STATISTICAL PURPOSES ONLY. ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 13 - 11. IN THE RESULT, THE APPEAL OF THE REVENUE FOR AY 2007-08 IS ALLOWED BUT FOR STATISTICAL PURPOSES. 12. NOW, WE TAKE UP THE ASSESSEES APPEAL IN ITA NO .1390/AHD/2012 AND REVENUES APPEAL IN ITA NO.1300/AHD/2012 FOR AY 2008-09. THE FOLLOWING GROUNDS HAVE BEEN RAISED BY THE RESPECTIV E PARTIES:- (A) ASSESSEE APPEAL (AY 2008-09) : GROUNDS ITEM NO. I: ADDITION OF CLOSING STOCK OF RS. 56,82, 092/- ON ARBITRARY BASIS IN RESPECT OF TRADING OF NATURAL GA S THROUGH PIPELINES - PNG 1.1 THE LEARNED CIT(A) GANDHINAGAR HAS GROSSLY ERRED ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW IN UPHOLDING THE DECISION OF THE LEARNED A.O. BY CONFIRMING THE ADDITION OF RS. 56,82,092/- ON ACCOU NT CLOSING STOCK OF PNG. 1.2 THE LEARNED CIT(A) HAS CONFIRMED THE ADDIT ION BY STATING THAT 'A) THE A Y 2007-08 WAS EFFECTIVELY THE FIRST YEAR OF THIS BUSINESS OF THE APPELLANT AND THE AO HAS ADOPTED THE CORRECT METHOD OF INCORP ORATING THE INCREASE IN STOCK IN THAT YEAR. B) THE APPELLANT ITSELF HAS INCORPORATED THE OPE NING STOCK AS TAKEN BY THE AO (CLOSING STOCK OF LAST YEAR) AS THE DOSING STOCK OF THIS YEAR. BUT, IT IS TOTALLY ILLOGICAL ON THE PART OF THE APPELLANT AGAIN NOT TO ACCOUNT F OR THE INCREASE IN STOCK DUE TO TRADING AND MANUFACTURING IN THE CURRENT YEAR. THE METHOD EMPLOYED BY THE A IS A VERY REASONABLE M ETHOD WHEREIN THE EQUIVALENT QUANTITY OF CNG IN TERMS OF PNG HAS BEEN TAKEN AS P ER ASSESSEE'S OWN DISCLOSED RESULTS IN THE PRECEDING YEAR. THE APPELLANT HAS NO T BEEN ABLE TO GIVE ANY ALTERNATIVE METHOD OF WORKING OUT THE INCREASE IN STOCK IN ITS SUBMISSIONS EITHER BEFORE THE AO OR BEFORE THE UNDERSIGNED. THE WORKING OF DOSING STOCK AS MADE BY THE AO IS UPHELD. THE AO HAS ALREADY ALLOWED THE BENEFIT OF DEDUCTION OF ADDITION OF CLOSING STOCK OF LAST YEAR AS OPENING STOCK OF THIS YEAR. THEREFORE, THE ADDITION OF RS.56,82,0927- AS MADE BY THE AO IS CONFIRMED.' 1.3 THE LEARNED CIT(A) HAS FAILED TO APPRECIAT E THE FACT THAT THE LEARNED A.O HAS NEVER ASKED THE APPELLANT TO FURNISH THE QUANTITATIVE DET AILS OF PURCHASE AND SALES. THE LEARNED CIT(A) HAS ALSO FAILED TO UNDERSTAND THAT T HE LEARNED A.O. HAS MADE ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 14 - ADDITION ON ARBITRARY BASIS BY CONSIDERING THE QUANTITY OF SALE AND PURCHASE AS WELL AS VALUE OF SALES AS PER NOTE NO. 16 OF NOTES FORMI NG PART OF ACCOUNTS OF ANNUAL REPORT FOR F.Y 2007-08 (A.Y 2008-09) I.E. THE YEAR UNDER REFERENCE. WHEREAS LEARNED A.O HAS CONSIDERED THE QUANTITY OF F.Y 2006-07 (A.Y . 2007-08) FOR THE CONVERSION OF CNG MANUFACTURED FROM PNG. FURTHER THE LEARNED A.O HAS CONVENIENTLY NOT CONSIDERED THE 'NOTE' MENTIONED BELOW THE QUANTITATIVE DETAILS. THE APPEL LANT REPRODUCES THE SAME FOR YOUR HONOUR'S READY REFEREN CE. 'NOTES: DIFFERENCE IN RECONCILIATION OF PURCHASES AND SALES OF GAS QUANTITIES IS ON ACCOUNT OF MEASUREMENT TOLERANCE AND NORMAL LOSS. ALSO, THE PURCHASE IS EFFECTED MOSTLY IN ENERGY TERMS (MMBTU / KCALS ETC) WHILE THE SALE IS DONE IN TERMS OF VOLUME (SCM), HENCE BOTH THE FIGURES MAY NOT BE COMPARABLE . SALE IN VALUE OF CNG IS NET OF DISCOUNTS AND EXCISE DUTY.' 1.4 THE LEARNED CIT(A) HAS FAILED TO UNDERSTAN D THE FACT THAT BY CONFIRMING THE ADDITION OF THE CLOSING STOCK FOR F.Y. 07-08 {A.Y 0 8-09) THE CLOSING STOCK WILL AUTOMATICALLY BECOME THE OPENING STOCK OF THE NEXT YEAR FOR F.Y. 08-09 (A.Y. 09-10) AND THE REVENUE LOSS WILL BE NIL WHICH IS IN LINE W ITH THE FOLLOWING JUDGMENTS A. CHATTAR EXTRACTIONS PVT. LTD. VS. ITO (2004) 85 TTJ (ASR)(TM) 405 : (2004) 91 ITD 385 (ASR)(TM) B. WEST COAST PAPER MILLS LTD. VS. ACIT (2006) 105 TTJ (MUMBAI) 344 : (2006) 106 ITD 19 (MUMBAI), C. CYANAMID AGRO LTD. VS. ADDL. CIT (2009) 121 TTJ (MUMBAI) 606 : (2009) THE LEARNED CIT(A) HAS GROSSLY ERRED IN REJECTING THE B OOK RESULTS. HE HAS FAILED TO UNDERSTAND THAT ACCOUNTS OF THE APPELLANT ARE AUDIT ED BY INTERNAL AUDITORS, STATUTORY AUDITORS, TAX AUDITORS AND EVEN CA & AG OF INDIA. ITEM NO. II : DISALLOWANCE OF RS. 2.23,43.676/- TO WARDS ADDITIONAL DEPRECIATION CLAIMED @ 20% ON PLANT & MACHINERY - CNG STATIONS: 2.1 THE LEARNED CIT(A) HAS FAILED TO APPRECIAT E THAT THE LEARNED A.O HAS NEVER SPECIFICALLY ASKED THE APPELLANT ANY DETAILS REGARD ING ADDITIONAL DEPRECIATION CLAIMED BY THE APPELLANT. 2.2 THE LEARNED CIT(A) GANDHINAGAR HAS GROSSLY ERRED ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE LAW IN UPHOLDI NG THE DECISION OF THE LEARNED A.O. BY CONFIRMING THE DISALLOWANCE OF ADDITIONAL D EPRECIATION OF RS.2,23,43,676/- CLAIMED @ 20% ON PLANT & MACHINERY - CNG STATIONS B Y STATING THAT 'ADMITTEDLY THERE IS NO CHANGE IN THE COMPOSITION O R PROPERTIES OF THE GAS WHEN IT IS COMPRESSED. IN FACT, THE GAS IS COMPRESSED ONLY TO FACILITATE ITS EASY STORAGE IN LARGER QUANTITIES IN SMALLER SPACE AND THEREFORE EASY TRAN SPORTATION. IN FACT, THE PROCESS IS ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 15 - SIMILAR TO AIR BEING COMPRESSED TO FILL IN TUBES/TY RES OF VEHICLES AND IT WOULD BE BEYOND IMAGINATION TO SAY THAT IT IS UNDERGOING MAN UFACTURE. ANOTHER IMPORTANT FACTOR IS THAT THE GAS IS AGAIN D ECOMPRESSED BEFORE USE BY JUST PASSING THROUGH A NOZZLE.' THE LEARNED CIT (A) HAS ERRED IN STATING THAT THERE IS NO CHANGE IN THE COMPOSITION OR PROPERTIES OF THE GAS WHEN IT IS COMPRESSED. HE HAS FAILED TO APPRECIATE THAT COMPRESSION OF THE GAS IS NECESSARY FOR ITS EASY US E AND TRANSPORTATION. 2.3 THE LEARNED CIT (A) HAS GROSSLY ERRED ON T HE FACT OF THE CASE AND IN THE LAW BY CONCLUDING THAT THE PROCESS OF COMPRESSION OF NATUR AL GAS DOES NOT AMOUNT TO MANUFACTURE BY RELYING ON THE FOLLOWING DECISION A. IDANDAS V. ANANT RAMCHANDRA PHADKE AIR 1982 SC 127 WHERE IN HON'BLE SUPREME COURT HAS LAID DOWN THREE TESTS AS TO WHAT CONSTITUTES MANUFACTURE. THEY ARE - (I) A CERTAIN COMMODITY SHOULD HAVE BEEN PROD UCED; (II) THE PROCESS OF PRODUCTION MUST INVOLVE EITHER LABOUR OR MACHINERY; AND (III) THE END PRODUCT SHOULD HAVE A DISTINCT CHARACTER, NAME AND USED. THE APPELLANT HUMBLY SUBMITS THAT THE ABOVE CASE IS NOT APPLICABLE TO THE APPELLANT AS HON'BLE SUPREME COURT HAS LAID DOWN THE TEST OF DECIDING MANUFACTURING PURPOSE IN TERMS OF SECTON 106 OF THE TRANSFER OF PROPERTY ACT. B. VS. TATA LOCOMOTIVE & ENGG. CO. LTD. [1968] 68 ITR 325 (BOM.) WHEREIN HON'BLE BOMBAY HIGH COURT HAS HELD THAT 'THE WORD 'MANUFACTURE' HAS A WIDER AND ALSO A NARR OWER CONNOTATION. IN THE WIDER SENSE IT SIMPLY MEANS TO MAKE, OR FABRICATE OR BRIN G INTO EXISTENCE AN ARTICLE OR A PRODUCT EITHER BY PHYSICAL LABOUR OR BY POWER, AND THE WORD 'MANUFACTURER' IN ORDINARY PARLANCE WOULD MEAN A PERSON WHO MAKES, FA BRICATES OR BRINGS INTO EXISTENCE A PRODUCT OR AN ARTICLE BY PHYSICAL LABOU R OR POWER. THE OTHER SHADE OF MEANING, WHICH IS THE NARROWER MEANING, IMPLIES TRA NSFORMING RAW MATERIALS INTO A COMMERCIAL COMMODITY OR A FINISHED PRODUCT WHICH HA S AN ENTITY BY ITSELF, BUT THIS DOES NOT NECESSARILY MEAN THAT THE MATERIALS WITH W HICH THE COMMODITY IS SO MANUFACTURED MUST LOSE THEIR IDENTITY. THUS, BOTH T HE WORDS 'MANUFACTURE AND PRODUCE' APPLY TO THE BRINGING INTO EXISTENCE OF SO METHING WHICH IS DIFFERENT FROM ITS COMPONENTS....' (P. 325) FROM THE ABOVE CONSIDERING THE NARROWER MEANING, IT MEANS THAT THE WORDS MANUFACTURE AND PRODUCE APPLY TO BRINGING IN TO E XISTENCE OF SOMETHING WHICH IS DIFFERENT FROM ITS COMPONENTS. HENCE PROCESS OF COM PRESSION OF THE NATURAL GAS IS MANUFACTURE AS IT IS REQUIRED FOR ITS USE AND THERE FORE THE APPELLANT IS ELIGIBLE FOR ADDITIONAL DEPRECIATION U/S. 32 (IIA) OF THE INCOME TAX ACT, 1961. ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 16 - 2.4 THE LEARNED CIT (A) HAS ALSO GROSSLY ERRED ON THE FACT OF THE CASE AND IN THE LAW BY STATING THAT THE FOLLOWING DECISIONS ARE SQU ARELY APPLICABLE TO THE APPELLANT, I.E. THE USE OF COMPRESSED GAS (WHICH AGAIN IS DECO MPRESSED) IS ESSENTIALLY THE SAME AS BEFORE THE SO CALLED PROCESS OF COMPRESSION. A. HONOURABLE ITAT PUNE SPL. BENCH B.G CHITALE [1 16 TTJ (SB) 658] B. HONOURABLE ITAT CULCATTA SPL. BENCH SHAW SCOTT DISTILLERIES 70 TTJ (SB) 321] C. HONOURABLE ITAT AHMEDABAD AQUA MINERALS PVT LT D 96 ITD 417 THE APPELLANT HUMBLY SUBMITS THAT ABOVE CASE LAWS A RE NOT APPLICABLE TO THE APPELLANT AS IN THE CASE OF APPELLANT, AT CNG STATI ONS, NATURAL GAS IS COMPRESSED TO VERY HIGH PRESSURE BEFORE INJECTING IT INTO THE FUE L TANKS OF AUTOMOBILES. NATURAL GAS IS PRESSURIZED WITH THE HELP OF A COMPRESSOR AND TH EN IT IS STORED IN A STATIONARY CASCADE. THE COMPRESSOR GETS SWITCHED ON WHENEVER T HE PRESSURE OF THIS CASCADE GOES DOWN BELOW A SPECIFIED LEVEL. A CNG STATION TY PICALLY CONSISTS OF ONE OR MORE COMPRESSOR PACKAGES TO COMPRESS NATURAL GAS TO HIGH PRESSURE. THUS, COMPRESSION OF NATURAL GAS IS REQUIRED FOR ITS COMMERCIAL USE AND ITS CHARACTER GETS CHANGED FOR ITS USE. HENCE PROCESS OF COMPRESSION OF THE NATURAL GA S IS MANUFACTURE AND THE APPELLANT IS ELIGIBLE FOR ADDITIONAL DEPRECIATION U /S. 32 (IIA) OF THE INCOME TAX ACT, 1961. 2.5 THE LEARNED CIT(A) HAS ALSO RELIED ON THE DECISION OF THE SACS EAGLES CHICORY 255 ITR 178 AND STATED THAT THE TERM 'MANUFACTURE' IN M UCH SPECIFIC CONNOTE THAN A MERE PROCESS. THE APPELLANT HUMBLY SUBMITS THAT THE CASE IS NOT APPLICABLE TO THE APPELLANT AS COMPRESSION OF GAS IS REQUIRED FOR ITS COMMERCIAL USE. 2.6 THE APPELLANT HUMBLY SUBMITS THAT ADDITION AL DEPRECIATION BE GRANTED IN VIEW OF THE FINDINGS OF THE FOLLOWING DECISIONS. A. DCIT V. N. V. EXPORTS (P) LTD. (2012) 49 SOT 534 (KOL.)(TRIB.) B. STEELFAB BUILDING SYSTEMS VS. INCOME TAX OFF ICER (2010) 127 ITD 419 (MUMBAI) C. FOURWAYS INTERNATIONAL VS. INCOME TAX OFFICE R (2007) 11 SOT 437 (MUMBAI) D. ACIT VS. HYNOUP FOOD & OIL INDUSTRIES (P) LTD.* (1999) 63 TTJ (AHD) 111 E. ACIT VS. NATIONAL LAMINATION INDUSTRIES* (20 07) 111 TTJ (AHD)(TM) 754 F. V.M. JOG ENGG. LTD. VS. JCIT (2006) 104 TTJ (PUNE) 487 G. CIT VS. YAVATMAL CO-OPERATIVE GINNING & PRES SING (1993) 203 ITR 874 (BOM) H. ASPINWALL & CO. LTD. VS. CIT (2001) 170 CTR (SC) 68 I. CIT VS. OSWAL WOOLLEN MILLS LTD. (2002) 175 CTR(P&H) 184 2.7 THE LEARNED CIT{A) HAS FAILED TO UNDERSTAN D THE FACT THAT AS PER THE CENTRAL EXCISE ACT, 1944 THE PROCESS OF COMPRESSION OF NATU RAL GAS (EVEN IF IT DOES NOT ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 17 - INVOLVE LIQUEFACTION), FOR THE PURPOSE OF MARKETING IT AS COMPRESSED NATURAL GAS (CNG), FOR USE AS A FUEL OR FOR ANY OTHER PURPOSE, SHALL AMOUNT TO 'MANUFACTURE'. THE CENTRAL EXCISE ACT, 1944 - SECTION 2 (F) DEFINES MANUFACTURE WHICH INCLUDES ANY PROCESS SECTION 2(F)(II) - WHICH IS SPECIFIED IN RELATION TO ANY GOODS IN TH E SECTION OR CHAPTER NOTES OF THE FIRST SCHEDULE TO THE CENTRAL EXCISE TARIFF ACT , 1985 (5 OF 1986) AS AMOUNTING TO MANUFACTURE. CENTRAL EXCISE TARIFF ACT, 1985 CHAPTER 27 NOTE NO. 5 - REPRODUCED HEREUNDER. 5. IN RELATION TO NATURAL GAS FALLING UNDER HEADING 2711, THE PROCESS OF COMPRESSION OF NATURAL GAS (EVEN IF IT DOES NOT INV OLVE LIQUEFACTION), FOR THE PURPOSE OF MARKETING IT AS COMPRESSED NATURAL GAS ( CNG), FOR USE AS A FUEL OR FOR ANY OTHER PURPOSE, SHALL AMOUNT TO 'MANUFACTURE'. THE APPELLANT HUMBLY DRAWS THE ATTENTION TO THE DECISION OF CIT VS. VTM LTD. WHEREIN IT WAS HELD AS UNDER. DEPRECIATIONADDITIONAL DEPRECIATION UNDER S. 32(1) (IIA)NEW PLANT OR MACHINERY ASSESSES ENGAGED IN MANUFACTURE OF TEXTI LE GOODS HAVING INSTALLED NEW WIND MILL WAS ENTITLED TO ADDITIONAL DEPRECIATIONI T WAS NOT NECESSARY FOR CLAIMING ADDITIONAL DEPRECIATION THAT NEW MACHINERY OR PLANT SHOULD HAVE ANY OPERATIONAL CONNECTIVITY TO THE ARTICLE OR THING THAT WAS ALREA DY BEING MANUFACTURED BY THE ASSESSESFURTHER, WHEN THE TRIBUNAL HAD RIGHTLY APP LIED PROVISIONS OF S. 32(1)(IIA) IT CANNOT BE HELD THAT SIMPLY BECAUSE CO-ORDINATE BENC H OF THE TRIBUNAL HAD EARLIER TAKEN A DIFFERENT VIEW, THE TRIBUNAL ON THIS OCCASI ON ALSO OUGHT TO HAVE FOLLOWED THE SAME' FROM THE ABOVE IT IS CONCLUDED THAT IT NOT NECESSAR Y THAT TO CLAIM ADDITIONAL DEPRECIATION SHOULD HAVE AN OPERATIONAL CONNECTIVIT Y TO THE ARTICLE OR THING THAT WAS ALREADY BEING MANUFACTURED. FURTHER, APPELLANT IS P AYING EXCISE DUTY AS PER THE PROVISIONS OF EXCISE ACT AS COMPRESSION OF NATURAL GAS FALLS WITHIN THE DEFINITION OF MANUFACTURE. 2.8 THE APPELLANT HUMBLY SUBMITS THAT THE PROCE SS OF COMPRESSION OF NATURAL GAS FOR USE AS A FUEL BE CONSIDERED AS 'MANUFACTURE' AN D IN TURN THE IMPUGNED DISALLOWANCE OF CLAIM OF ADDITIONAL DEPRECIATION U/ S. 32 RS.2,23,43,676/- ON ADDITIONS MADE DURING THE YEAR IN RESPECT OF CNG ST ATIONS MAY KINDLY BE DELETED. ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 18 - ITEM NO. ILL: DISALLOWANCE OF PRIOR PERIOD EXPENDITURE RS. 15,45,925/- 3.1 THE LEARNED CIT(A) HAS GROSSLY ERRED ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE LAW IN UPHOLDING THE DECISION OF TH E LEARNED A.O BY CONFIRMING THE DISALLOWANCE OF THE PRIOR PERIOD EXPENSES OF RS.15, 45,925/-. THE LEARNED CIT(A) HAS FAILED TO UNDERSTAND THE FACT THAT THOUGH THE EXPEN SES ARE IN THE NATURE OF SECURITY EXPENSES, COMPUTER EXPENSES, CONSULTANCY & TECHNICA L FEES, INTERNAL AUDIT FEES, VAT CREDIT ETC. AND ARE RELATED TO EARLIER YEARS BU T THEY ARE INCURRED DURING THE YEAR AND CRYSTALLIZED DURING THE YEAR. THE LEARNED CIT ( A) HAS GROSSLY ERRED ON FACTS AND IN LAW BY NOT DEDUCTING THE PRIOR PERIOD INCOME FRO M THE TOTAL INCOME AND THE EXPENSES. 3.2 THE LEARNED CIT (A) HAS FAIL TO UNDERSTAND THE FACT THAT THE EXPENSES CLAIMED BY THE APPELLANT IS IN LINE WITH THE FOLLOWING JUDG MENTS A. CIT VS. JAGATJIT INDUSTRIES LTD. 194TAXMAN 158 (DEL.) B. STERLITE INDUSTRIES (INDIA) LTD. VS. ADDL.CIT ( 2006) 102 TTJ (MUMBAI) 53. ITEM NO. IV: DISALLOWANCE OF INTEREST ON SH ARE APPLICATION MONEY RS. 3,30,46,723/- 4.1. THE APPELLANT HUMBLY DRAWS THE ATTENTION OF YOUR HO NOUR THAT IT HAS PAID INTEREST OF RS. 7,78,07,996/- ON SHARE APPLICATION MONEY AS PER THE FOLLOWING DETAILS F.Y. A.Y. INTEREST ON SHARE APPLICATION MONEY TREATMENT IN THE BOOKS TREATMENT IN THE INCOME TAX 06-07 07-08 35,86,000 CAPITALIZED ONLY DEPRECIATION OF RS. 14,38,200/- HAS BEEN CLAIMED 07-08 08-09 2,34,58,723 CWIP-LNTEREST A/C. NO DEPRECIATION HAS BEEN CLAIMED 3,30,46,723 07-08 08-09 4,47,61,273 TREATED AS REVENUE EXPENSE DISALLOWED IN THE RETURN OF INCOME TOTAL 7,78,07,996 ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 19 - 4.2 THE LEARNED CIT (A) HAS GROSSLY ERRED ON TH E FACT AND CIRCUMSTANCES OF THE CASE AND IN THE LAW BY UPHOLDING THE DECISION OF TH E LEARNED A.O BY CONFIRMING THE DISALLOWANCE OF CAPITALIZED INTEREST ON SHARE APPLI CATION MONEY RS.3,30,46,723/-. 4.3 THE LEARNED CIT(A) HAS GROSSLY ERRED IN LA W AND ON FACTS IN STATING THAT 'THE SHARES FOR WHICH THE APPELLANT HAS BORROWED MONEY A RE ITS INVESTMENTS AND NOT BUSINESS. THE INTEREST PAID FOR INVESTMENTS IS NOT AN ALLOWABLE EXPENSES U/S. 36(III) OF THE IT ACT. NEITHER ARE THE SHARES DEPRECIABLE ASSE TS. THEREFORE, THE APPELLANT CANNOT BE ALLOWED TO CAPITALIZE THE INTEREST AND THEN CLAI M DEPRECIATION ON THE CAPITALIZED INTEREST'. THE LEARNED CIT (A) HAS FAILED TO APPREC IATE THAT APPELLANT HAS NOT BORROWED ANY MONEY FOR INVESTMENT IN SHARES. IN FAC T, THE APPELLANT HAS RECEIVED SHARE APPLICATION MONEY FOR WHICH ALLOTMENT IS PEND ING AND APPELLANT HAS PAID INTEREST ON THE SAME. THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT INVESTMENT WILL BE IN THE HANDS OF THE PERSON FROM WHOM AMOUNT OF S HARE APPLICATION MONEY IS RECEIVED. 4.4 THE LEARNED CIT (A) HAS GROSSLY ERRED ON TH E FACT OF THE CASE BY DISALLOWING THE INTEREST ON SHARE APPLICATION MONEY OF RS. 95,88,00 0/- WHICH WAS CAPITALIZED AND ONLY DEPRECIATION OF RS. 14,38,200/- WAS CLAIMED. T HE LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT APPELLANT HAS NOT CLAIMED RS. 95,88 ,000/- AS EXPENSES BUT APPELLANT HAS CLAIMED ONLY RS. 14,38,200/- BY WAY OF DEPRECIA TION ON CAPITALIZATION OF INTEREST. 4.5 THE LEARNED CIT (A) HAS GROSSLY ERRED ON TH E FACT OF THE CASE BY DISALLOWING THE INTEREST ON SHARE APPLICATION MONEY OF RS. 2,34,58, 723/- WHICH WAS NOT CAPITALIZED AND NO DEPRECIATION WAS CLAIMED. THE LEARNED C,IT(A ) HAS FAILED TO APPRECIATE THAT APPELLANT HAS NOT CLAIMED RS. 2,34,58,723/- AS EXPE NSES BUT THE SAME WAS TREATED AS CWIP-LNTEREST. 4.6 THE LEARNED CIT (A) HAS GROSSLY ERRED ON THE FACT OF THE CASE BY STATING THAT '(A) NO INTEREST ON BORROWED CAPITAL FOR INVESTMENT IN SHARES OR SHARE APPLICATION MONEY IS ALLOWABLE AS REVENUE EXPENDITURE, (B) ANY CLAIM OF DEPRECIATION ON CAPITALZED INTEREST FOR AMOUNTS BORROWED FOR SHARE APPLICATION HAS TO BE DISALLOWED'. THE APPELLANT HUMBLY SUBMITS THAT IT HAS NOT BORROW ED ANY AMOUNT FOR INVESTMENT IN SHARES OR SHARE APPLICATION. IN FACT APPELLANT HAS RECEIVED SHARE APPLICATION MONEY AND PAID INTEREST ON THE SAME. 4.7 WITHOUT PREJUDICE TO THE CLAIM AND CONTENT ION OF THE APPELLANT, THE LEARNED CIT (A) HAS FAILED TO APPRECIATE THE FACT THAT THE APPELLANT HAS USED THE SHARE APPLICATION MONEY FOR THE ACQUISITION OF THE ASSETS AND IN TURN INTEREST PAID ON SUCH SHARE APPLICATION MONEY HAS BEEN CAPITALIZED. THE A PPELLANT HUMBLY SUBMITS THAT IF THE APPELLANT HAS NOT RECEIVED THE SHARE APPLICATIO N MONEY THEN IT WOULD HAVE BORROWED THE MONEY FROM THE BANKS, FINANCIAL INSTIT UTIONS, ETC. AND INTEREST ON THE SAME WOULD HAVE BEEN CAPITALIZED. ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 20 - 4.8 THE APPELLANT REPRODUCE THE SECTION 36 (1) (III) OF THE INCOME TAX ACT, 1961: 'THE AMOUNT OF THE INTEREST PAID IN RESPECT OF CAPI TAL BORROWED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION: [PROVIDED THAT ANY AMOUNT OF THE INTEREST PAID, IN RESPECT OF CAPITAL BORROWED FOR ACQUISITION OF AN ASSET FOR EXTENSION OF EXISTING B USINESS OR PROFESSION (WHETHER CAPITALISED IN THE BOOKS OF ACCOUNT OR NOT); FOR AN Y PERIOD BEGINNING FROM THE DATE ON WHICH THE CAPITAL WAS BORROWED FOR ACQUISITION OF T HE ASSET TILL THE DATE ON WHICH SUCH ASSET WAS FIRST PUT TO USE, SHALL NOT BE ALLOW ED AS DEDUCTION.] FROM THE ABOVE IT IS CLEAR THAT UNDER SECTION 36 (1 ) (III) INTEREST DURING THE PERIOD FROM DATE OF BORROWING OF THE FUNDS FOR THE ACQUISI TION OF THE ASSET TILL THE DATE ON WHICH SUCH ASSET WAS FIRST PUT TO USE SHALL NOT ALL OWED AS DEDUCTION HENCE THE APPELLANT HAS RIGHTLY CAPITALIZED THE INTEREST ON S HARE APPLICATION MONEY AND RIGHTLY CLAIM THE DEPRECIATION ON SUCH CAPITALIZED INTEREST .* 4.9 THE APPELLANT HUMBLY DRAWS THE ATTENTION OF YOUR HONOUR TO THE DECISION OF HON'BLE ITAT BANGALORE IN THE CASE OF ACIT VS. GMR INDUSTRIES LTD. WHERE IN IT WAS HELD THAT SHARE APPLICATION MONEY IS DEBT FOR THE A SSESSEE COMPANY TILL THE TIME ALLOTMENT IS DONE AND HENCE INTEREST ON SHARE APPLI CATION MONEY IS ALLOWABLE EXPENDITURE UNDER SECTION 36 (1) (III) OF THE ACT. 4.10 WITHOUT PREJUDICE TO THE ABOVE APPELLANT HU MBLY SUBMITS THAT DISALLOWANCE OF INTEREST ON SHARE APPLICATION MONEY RS. 3,30,46,723 /- AS MADE BY THE LEARNED CIT (A) MAY KINDLY BE DELETED AND IF THE DISALLOWANCE IS CO NFIRMED THEN THE DISALLOWANCE BE RESTRICTED TO RS. 14,38,200/- I.E AMOUNT 'O F DEPRECIATION CLAIMED ON THE CAPITALIZATION OF INTEREST OF RS. 95,88,000/- ON SH ARE APPLICATION MONEY. ITEM NO&V: ADDITION ON ACCOUNT OF LIQUIDATED DAMAGES OF RS. 2,25,88,566/-: 5.1 THE (EARNED CIT(A) HAS GROSSLY ERRED ON FAC TS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN UPHOLDING THE DECISION OF THE LEARNED A.O BY TREATING LIQUIDATED DAMAGES AS REVENUE RECEIPT AND CONFIRMED THE ADDITI ON OF RS. 2,25,88,566/-. 5.2 THE APPELLANT HUMBLY SUBMITS THAT THE LEARN ED CIT(A) HAS FAILS TO UNDERSTAND THE FACT THAT THE DELIVERY IS ESSENCE OF THE CONTRA CT IN OIL & GAS INDUSTRY, PROJECT DELAY SOME TIME EFFECT THE EXISTENCE OF THE COMPANY, THE LIQUIDATED DAMAGES IS NOT A COMPENSATION AND NOR A REBATE, IT IS TOWARDS DELAY IN SUPPLY OF MACHINERY WHICH IN TURN WILL BE DELAY IN THE STARTING OF PLANT HENCE T HE APPELLANT HAS CORRECTLY TREATED THE LIQUIDATED DAMAGES AS CAPITAL RECEIPT. ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 21 - 5.3 THE LEARNED CIT (A) HAS TREATED LIQUIDATED DAMAGES AS REVENUE RECEIPT BY STATING THAT 'IT IS TO BE SEEN THAT THE BUSINESS WAS ALREADY RUN NING AND IT IS NOT THE CASE THAT NEW MACHINERY WOULD HAVE RESULTED IN COMMENCEMENT OF PR ODUCTION THEREAFTER. WITH DUE RESPECT IT IS SUBMITTED THAT THE DECISION OF THE HO N'BLE GUJARAT HIGH COURT IN THE CASE OF SAURASHTRA CEMENT (SUPRA) IS DISTINGUISHABLE ON FACTS. THE COMPENSATION RECEIVED IS HELD TO BE REVENUE IN NATURE AND THE DECISION OF THE AO IS ACCORDINGLY UPHELD. THE APPELLANT HAS REDUCED THE COMPENSATION FROM THE COS T FOR WORKING THE DEPRECIATION. THE AO IS DIRECTED TO ALLOW THE ENHANCED DEPRECIATI ON BY REVERSING THIS ENTRY. THE GROUND IS DECIDED AS ABOVE.' THE LEARNED CIT (A) HAS ALSO GROSSLY ERRED ON FACT OF THE CASE BY RELYING ON THE DECISION OF SHREE DIGVIJAY CEMENT CO. LTD. (1982) 1 38 ITR 45 (GUJ). HE FURTHER FAILS TO APPRECIATE THE FACT THAT THE APPELLANT HAS RIGHT LY CONSIDERED THE LIQUIDATED DAMAGES AS CAPITAL RECEIPT IN THE VIEW DECISION OF HONORABLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SAURASHTRA CEMENT AND CHEMICAL INDUSTRIES LTD. 253 ITR 373 (GUJ.) AND HONORABLE SUPREME COURT IN THE CASE OF S AURASHTRA CEMENT LTD. (2010) 233 CTR 209. 5.4. THE APPELLANT HUMBLY SUBMITS THAT THE LIQUIDATED D AMAGES BE CONSIDERED AS CAPITAL RECEIPT FOR THE PURPOSE OF CLAIM OF DEPRECI ATION U/S. 32 OF THE INCOME TAX ACT. ITEM NO. VI: LEVY OF INTEREST UNDER SECTION 234B & 234D OF THE ACT AND RECOVERY OF INTEREST U/S. 244A OF THE ACT: 6.1 THE LEARNED CIT (A) GANDHINAGAR HAS GROSSLY ERRED I N LAW AND ON FACTS IN PARTLY UPHOLDING THE DECISION OF THE LEARNED A.O, T O LEVY INTEREST UNDER SECTION 234B & 234D OF THE ACT AND RECOVERING INTEREST U/S. 244A OF THE ACT. 6.2 THE APPELLANT STATES THAT LEVY OF INTEREST IS WHOLLY UNJUSTIFIED AND THE SAME MAY KINDLY BE DELETED. 6.3 THAT THE INTEREST U/S 234B & 234D ON THE FACTS AND CIRCUMSTANCES IS NOT AUTOMATIC OR CONSEQUENTIAL. ITEM NO. VII: INITIATION OF PENALTY PROCEEDINGS U /S 271(1)(C) OF THE ACT: 7. THE LEARNED CIT(A) GANDHINAGAR HAS GROSSLY ERRED IN LAW AND ON FACTS IN NOT DECIDING THE ISSUE BY STATING THAT THE 'INITIATION OF PENALTY PROCEEDINGS U/S. 271(1)(C) BEING PREMATURE IS NOT ENTERTAINED.' ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 22 - THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT T HE APPELLANT HAS NOT FURNISHED ANY INACCURATE PARTICULARS EITHER WITH THE RETURN O F INCOME OR DURING ASSESSMENT PROCEEDINGS AND ALSO APPELLANT HAS NOT CONCEALED AN Y PARTICULARS OF INCOME. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT THE A DDITIONS ARE MADE ON ACCOUNT OF DIFFERENCE OF OPINION IN INTERPRETATION OF THE PROV ISIONS OF LAW AND THEREFORE QUESTION OF INITIATION OF PENALTY PROCEEDING DOES NOT ARISE. VLLL. THE APPELLANT RESERVES ITS RIGHT TO ADD, AMEND, ALT ER, SUBSTITUTE OR MODIFY ALL OR ANY OF THE GROUNDS STATED HEREINABOVE AS THE FAC TS AND CIRCUMSTANCES OF THE CASE MAY JUSTIFY. (B) REVENUES APPEAL (AY 2008-09) : 1. THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND O N FACTS IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF DEPRECIAT ION ON RIGHT OF WAY AMOUNTING TO RS.2,55,19,499/-. 2. THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND O N FACTS IN DELETING THE ADDITION MADE BY THE A.O. IN RESPECT OF DEPRECI ATION (REDUCED COST) AMOUNTING TO RS.26,48,101/-. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD.CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 4. IT IS THEREFORE PRAYED THAT THE ORDER OF THE LE ARNED CIT(APPEALS) MAY BE SET ASIDE AND THAT OF THE A.O. BE RESTORED TO TH E ABOVE EXTENT. 12.1. FACTS :- BRIEF FACTS PERTAINING TO THE AY 2008-09 UPTO THE STAGE OF LD.CIT(A) ARE RECORDED IN PARA-3 OF HIS ORDER WHICH IS REPRODUCED HEREINBELOW:- 3. THE APPELLANT COMPANY IS PROMOTED BY GUJARAT S TATE PETROLEUM CORPORATION LIMITED-GSPC (A GOVERNMENT OF GUJARAT U NDERTAKING) COMPANY WAS ORIGINALLY INCORPORATED AS GUJARAT STAT E FUEL MANAGEMENT CO.LTD. ON 11-03-99. THE COMPANY GOT TH E CERTIFICATE FOR COMMENCEMENT OF BUSINESS ON 07-04-99. THE COMPANY WAS PROVIDING FUEL ADVISORY SERVICES. SUBSEQUENTLY ON 14-12-05, THE COMPANYS NAME WAS CHANGED TO GSPC GAS COMPANY LIMITED. PURSUANT TO A SCHEME OF ARRANGEMENT AS SANCTIONED BY THE HIGH COURT OF GUJA RAT ON 11-04-07, ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 23 - THE RETAIL GAS BUSINESS OF GUJARAT STATE PETROLEUM CORPORATION LTD. GSPC WAS DEMERGED AND TRANSFERRED TO THE APPELLANT COMPANY W.E.F. 01-04-06 I.E. A.Y. 2007-08 WHICH IS THE FIRST YEAR IN WHICH THE APPELLANT PURCHASED AND STARTED DISTRIBUTING NATURAL GAS THRO UGH CITY GAS DISTRIBUTION NETWORK. THE APPELLANT IS MAINLY ENGA GED IN THE BUSINESS OF PROVIDING FUEL ADVISORY SERVICES, RETAIL SALE OF PIPED NATURAL GAS (PNG) AND COMPRESSED NATURAL GAS (CNG), CITY GAS DI STRIBUTION PROJECT AND SETTING UP OF COMPRESSED NATURAL GAS (C NG) STATIONS FOR AUTOMOBILES. THE APPELLANT HAD FILED ITS RETURN OF INCOME FOR TH E ABOVE ASSESSMENT YEAR ON 25-09-2008 DECLARING TOTAL INCOME OF RS.28,63,39,34 0/- UNDER NORMAL PROVISIONS AND BOOK PROFIT U/S.115JB AT RS.5,55,62, 053. THE ASSESSMENT HAS BEEN COMPLETED U/S.143(3) AND INCOME WAS ASSESSED A T RS.47,11,62,073/- AFTER MAKING THE FOLLOWING ADDITIONS/DISALLOWANCES: PARTICULARS RS. DISALLOWANCE OF CLAIM OF DEPRECIATION ON INTANGIBLE S RIGHT OF WAY (ROW)EXPENSES 2,55,19,499 ADDITION ON ARBITRARY BASIS OF CLOSING STOCK IN RES PECT OF TRADING OF NATURAL GAS THROUGH PIPELINES PNG 56,82,092 DISALLOWANCE OF ADDITION DEPRECIATION CLAIMED DEPRECIATION CLAIMED @ 20% ON PLANT & MACHINERY CNG STATIONS 2,23,43,676 DISALLOWANCE OF PRIOR PERIOD EXPENDITURE 15,45,925 DISALLOWANCE OF INTEREST ON SHARE APPLICATION MONEY 3,30,46,723 ADDITION ON ACCOUNT OF LIQUIDATED DAMAGES 2,25,88,5 66 THE ASSESSEE FURTHER CARRIED THE MATTER IN APPEAL B EFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS PA RTLY ALLOWED THE APPEAL, THEREBY LD.CIT(A) DELETED THE DISALLOWANCE OF CLAIM OF DEPRECIATION ON INTANGIBLE RIGHT OF WAY, CONFIRMED THE ADDITION AMOUNTING TO RS.56,82,092/- MADE ON ACCOUNT OF CLOS ING STOCK, DISALLOWANCE OF ADDITIONAL DEPRECIATION, DISALLOWAN CE OF PRIOR PERIOD EXPENSES, DISALLOWANCE OF INTEREST ON SHARE APPLICA TION MONEY AND ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 24 - DISALLOWANCE OF LIQUIDATED DAMAGES. AGAINST THIS, BOTH THE ASSESSEE AND THE REVENUE HAS FILED APPEAL BEFORE THIS TRIBUNAL. 12.2. ASSESSEES APPEAL (ITA NO.1390/AHD/2012) : THE FIRST GROUNDS IS AGAINST THE ADDITION OF CLOSING STOCK OF RS.56,82,0 92/-. THE LD.SR.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD.CIT(A) FAILE D TO APPRECIATE THE FACT THAT THE AO HAD NEVER ASKED THE ASSESSEE TO FURNISH THE QUANTITATIVE DETAILS OF PURCHASE AND SALES. HE SUBMITTED THAT T HE LD.CIT(A) FAILED TO UNDERSTAND THAT THE LD.AO MADE ADDITION ON ARBITRAR Y BASIS BY CONSIDERING THE QUANTITY OF SALE AND PURCHASE AS WE LL AS VALUE OF SALES AS PER NOTE NO.16 OF NOTES FORMING PART OF ACCOUNTS OF ANNUAL REPORT FOR F.Y. 2007-08 (AY 2008-09), I.E. THE YEAR UNDER REFE RENCE. HE SUBMITTED THAT WHEREAS LD.AO HAS CONSIDERED THE QUANTITY OF F .Y. 2006-07 (AY 2007-08) FOR THE CONVERSION OF CNG MANUFACTURED FRO M PNG. FURTHER THE LD.AO HAS CONVENIENTLY NOT CONSIDERED THE NOTE MENTIONED BELOW THE QUANTITATIVE DETAILS. HE SUBMITTED THAT THE DI FFERENCE IN RECONCILIATION OF PURCHASES AND SALES OF GAS QUANTITIES IS ON ACCO UNT OF MEASUREMENT TOLERANCE AND NORMAL LOSS. HE SUBMITTED THAT THE P URCHASE IS EFFECTED MOSTLY IN ENERGY TERMS (MMBTU / KCALS, ETC.) WHILE THE SALE IS DONE IN TERMS OF VOLUME (SCM), HENCE BOTH THE FIGURES MAY N OT BE COMPARABLE. HE SUBMITTED THAT THE LD.CIT(A) HAS NOT CONSIDERED THE CASE-LAWS RELIED UPON BY THE ASSESSEE. HE FURTHER SUBMITTED THAT THE LD.CIT(A) FAILED TO UNDERSTAND THE FACT THAT BY CONFIRMING THE ADDITION OF THE CLOSING STOCK FOR F.Y.2007-08 (AY 08-09) THE CLOSING STOCK WILL A UTOMATICALLY BECOME ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 25 - THE OPENING STOCK OF THE NEXT YEAR FOR F.Y. 2008-09 (AY 09-10). RELIANCE IS PLACED ON THE FOLLOWING JUDGEMENTS:- (A) CHATTAR EXTRACTIONS PVT.LTD. VS. ITO (2004) 85 TTJ (ASR)(TM) 405:: (2004) 91 ITD 385 (ASR) (TM). (B) WEST COAST PAPER MILLS LTD. VS. ACIT (2006) 105 TTJ (MUMBAI) 344: (2006) 106 ITD 19 (MUMBAI). (C) CYANAMID AGRO LTD. VS. ADDL.CIT (2009) 121 TTJ (MUMBAI) 606. 12.3. THE LD.SR.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD.CIT(A) ERRED IN REJECTING THE BOOKS OF THE ASSESSEE-COMPAN Y. HE SUBMITTED THAT ASSESSEE IS A GOVERNMENT COMPANY AND IS SUBJECTED T O AUDIT BY VARIOUS DEPARTMENTS. 12.4. ON THE CONTRARY, LD.CIT-DR SUPPORTED THE ORDE R OF THE LD.CIT(A). HE SUBMITTED THAT THE ORDER OF THE LD.CIT(A) IS COM PLETELY JUSTIFIED. 13. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD.CIT(A) HAS DECIDED THIS ISSUE A T PARA-6.3 OF HIS ORDER, WHICH IS REPRODUCED HEREINBELOW FOR THE SAKE OF CLA RITY. 6.3. I HAVE CONSIDERED THE ASSESSMENT ORDER AS WEL L AS THE SUBMISSION MADE BY THE ASSESSEE. THE FOLLOWING PERTINENT OBSE RVATIONS ARE MADE ON THE ISSUE, AFTER CAREFUL CONSIDERATION ON THE FA CTS: A) AS FAR AS THE STOCK OF NATURAL GAS AS LINE PACK IS CONCERNED, BOTH THE APPELLANT AND THE AO HAVE CONSIDERED IT AS PART OF ASSESSEES STOCK. THE VALUE OF THE STOCK OF CNG OF 6481513 SCM VALUED AT RS.6,39,93,408/- BELONGS TO THE APPELLANT AND AS PE R APPELLANT, IT WAS NOT TAKEN IN STOCK FOR AY 2007-08 BUT HAS NOW BEING INCLUDED AS PER THE COMPANYS DECISION. ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 26 - B) THE STOCK AS PER A) ABOVE WAS THERE AS PER THE AO AND NOW ADMITTED BY THE APPELLANT ON 31/3/2007. THERE IS NO DISPUTE NOW ON THIS ISSUE. C) THE AO AS DISCUSSED EARLIER HAS CALCULATED THE INCREASE IN STOCK DURING THE YEAR I.E. AFTER 31/03/2007 BY CONVERTING THE PURCHASES AND SALES INTO SAME UNIT I.E. QUANTITY OF EQUIVALENT PN G. THE SALE OF CNG HAS BEEN CONVERTED INTO PNG BY TAKING THE BASE OF L AST YEARS PRODUCTION OF CNG FROM PNG BY THE ASSESSEE ITSELF. THE APPELLANT IS MAINTAINING THE BOOKS AS IF THERE IS NO DIFFERENCE (NEITHER INCREASE NOT DECREASE) IN STOCK QUANTITY DURING THE YEAR; IRRES PECTIVE OF THE QUANTITIES PURCHASED AND SOLD. THE METHOD OF ACCOUNTING TRIED TO BE ADOPTED BY THE APPELLANT WITHOUT ACCOUNTING FOR CHANGES IN STOCK WOULD ALWAYS GIVE W RONG PICTURE OF PROFIT; AND THIS HAS BEEN DEMONSTRATED BY THE COMPU TATION DONE BY THE AO WHEREIN THE INCREASE IN STOCK PERTAINING TO THIS YEAR ITSELF IS AMOUNTING TO RS.6,96,75,500/- HAS BEEN IGNORED AND THE PROFITS HAVE BEEN DECLARED LOWER BY THIS AMOUNT. THE CONTENTION OF CONSISTENCY IN METHOD OF ACCOUNTI NG IS ALSO NOT SUSTAINABLE IN THIS CASE BECAUSE: A) THE AY 2007-08 WAS EFFECTIVELY THE FIRST YEAR O F THIS BUSINESS OF THE APPELLANT AND THE AO HAS ADOPTED THE CORRECT METHOD OF INCORPORATING THE INCREASE IN STOCK IN THAT YEAR. B) THE APPELLANT ITSELF HAS INCORPORATED THE OPENI NG STOCK AS TAKEN BY THE AO (CLOSING STOCK OF LAST YEAR) AS THE CLOSING STOCK OF THIS YEAR. BUT, IT IS TOTALLY ILLOGICAL ON THE PART OF THE APPELLAN T AGAIN NOT TO ACCOUNT FOR THE INCREASE IN STOCK DUE TO TRADING AND MANUFACTUR ING IN THE CURRENT YEAR. THE METHOD EMPLOYED BY THE AO IS A VERY REASONABLE METHOD WHEREIN THE EQUIPMENT QUANTITY OF CNG IN TERMS OF PNG HAS B EEN TAKEN AS PER ASSESSEES OWN DISCLOSED RESULTS IN THE PRECEDING Y EAR. THE APPELLANT HAS NOT BEEN ABLE TO GIVE ANY ALTERNATIVE METHOD OF WORKING OUT THE INCREASE IN STOCK IN ITS SUBMISSIONS EITHER BEFORE THE AO OR BEFORE THE UNDERSIGNED. THE WORKING OF CLOSING STOCK AS MADE BY THE AO IS UPHELD. THE AO HAS ALREADY ALLOWED THE BENEFIT OF DEDUCTION OF ADDITION OF CLOSING STOCK OF LAST YEAR AS OPENING S TOCK OF THIS YEAR. ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 27 - THEREFORE, THE ADDITION OF RS.56,82,092/- AS MADE B Y THE AO IS CONFIRMED. 13.1. SO FAR AS THE PROPOSITION THAT CLOSING STOCK OF THE PREVIOUS YEAR BECOME THE OPENING STOCK OF THE NEXT YEAR IS CONCER NED, THERE IS NO DISPUTE IN THIS REGARD AND LAW IS WELL-SETTLED. WE FIND THAT THE AO IN PARA-5.1 OF HIS ORDER HAS CONSIDERED THE QUANTITATI VE DETAILS OF THE PURCHASE AND SALES OF NATURAL GAS. HOWEVER, THE GR IEVANCE OF THE ASSESSEE IS THAT THE ASSESSING OFFICER HAS NEVER AS KED THE APPELLANT- ASSESSEE TO FURNISH THE QUANTITATIVE DETAILS OF PUR CHASE AND SALES. IT IS SUBMITTED BY THE LD.SR.COUNSEL FOR THE ASSESSEE THA T THE AO HAS TAKEN AVERAGE SALE PRICE OF 16.814 SCM. IT SHOULD HAVE BEEN TAKEN ON THE BASIS OF ENERGY TERMS (MMBTU / KCALS, ETC.) SINCE T HE PURCHASE HAVE BEEN TAKEN ON THOSE TERMS. HOWEVER, THE LD.CIT(A) HAS GIVEN A FINDING THAT THE AO HAS CALCULATED THE INCREASE IN STOCK BY CONVERTING THE PURCHASES AND SALES INTO SAME UNIT, I.E. QUANTITY O F EQUIVALENT PNG. THE SALE OF CNG HAS BEEN CONVERTED INTO PNG BY TAKING T HE BASE OF LAST YEARS PRODUCTION OF CNG FROM PNG BY THE ASSESSEE I TSELF. THE SUBMISSION OF THE ASSESSEE IS ON THE FACTUAL ASPECT S NEEDS TO BE VERIFIED BY THE ASSESSING OFFICER. 14. IN VIEW OF THE SUBMISSION, WE ARE OF THE CONSID ERED VIEW THAT THIS ISSUE REQUIRES TO BE EXAMINED AND VERIFIED BY THE A O AND TO BE DECIDED AFRESH. ACCORDINGLY, WE HEREBY SET ASIDE THE ORDER OF THE LD.CIT(A) ON THIS ISSUE AND RESTORE THIS ISSUE BACK TO THE FILE OF AO FOR FRESH DECISION TAKING INTO ACCOUNT ALL THE SUBMISSIONS OF THE ASSE SSEE. NEEDLESS TO SAY ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 28 - THAT THE AO SHALL AFFORD REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE ASSESSEE IS DIRECTED TO FURNISH ALL QUANTITATIVE DETAILS RELATED TO ITS CLAIM TO THE AO. THUS, THIS GROUND OF ASSESSEES APPEAL IS ALLOWED BUT FOR STATISTICAL PURPOSES. 15. GROUND NO.2 IS AGAINST DISALLOWANCE OF RS.2,23, 43,676/- TOWARDS ADDITIONAL DEPRECIATION CLAIMED @ 20% ON PLANT & MA CHINERY. THE LD.SR.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE L D.CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY TH E AO. HE SUBMITTED THAT AS PER CENTRAL EXCISE TARIFF ACT, 1985 CHAPT ER 27, NOTE NO.5 IN RELATION TO NATURAL GAS FALLING UNDER HEADING 2711, THE PROCESS OF COMPRESSION OF NATURAL GAS (EVEN IF IT DOES NOT INV OLVE LIQUEFACTION), FOR THE PURPOSE OF MARKETING IT AS COMPRESSED NATURAL G AS (CNG), FOR USE AS A FUEL OR FOR ANY OTHER PURPOSE, SHALL AMOUNT TO M ANUFACTURE. HE SUBMITTED THAT IT IS NOT NECESSARY THAT FOR CLAIMIN G ADDITIONAL DEPRECIATION THE NEW MACHINERY AND PLANT SHOULD HAVE AN OPERATIO NAL CONNECTIVITY TO THE ARTICLE OR THING THAT WAS ALREADY BEING MANUFAC TURED. IT IS SUBMITTED THAT THE APPELLANT IS PAYING EXCISE DUTY AS PER PRO VISIONS OF EXCISE ACT AS COMPRESSION OF NATURAL GAS FALLS WITHIN THE DEFINIT ION OF MANUFACTURE. HE SUBMITTED THAT THE CASE-LAWS RELIED UPON BY THE LD. CIT(A) IS NOT APPLICABLE ON THE FACTS OF THE PRESENT CASE. THE L D.SR.COUNSEL FOR THE ASSESSEE RELIED UPON THE JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF INCOME TAX OFFICER VS. ARIHANT TILES & MARBLES (P) LTD. REPORTED AT (2010) 320 ITR 79. ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 29 - 15.1. ON THE CONTRARY, LD.CIT-DR VEHEMENTLY ARGUED THAT THE ARGUMENT ADVANCED BY THE LD.SR.COUNSEL FOR THE ASSESSEE IS M ISPLACED. THE LD.CIT- DR SUBMITTED THAT THE PROCESS IS MERELY OCCURRED FO R COMPRESSION OF NATURAL GAS AND DOES NOT AMOUNT TO MANUFACTURE. HE SUPPORTED THE ORDER OF THE LD.CIT(A) AND SUBMITTED THAT AS PER SETTLED PROPOSITION OF LAW BY THE HONBLE SUPREME COURT SINCE THERE IS NO CHANGE IN CHARACTER OF GAS, THE GAS REMAINS THE SAME GAS AND HAVING THE SAME CO NSTITUENT. TO BUTTRESS THIS CONTENTION, THE LD.CIT-DR DREW OUR AT TENTION ON THE DEFINITION OF MANUFACTURE AS GIVEN IN SECTION 2(29) BA OF THE ACT. 15.2. IN REJOINDER, THE LD.SR.COUNSEL FOR THE ASSES SEE SUBMITTED THAT IN THE CASE OF INCOME TAX OFFICER VS. ARIHANT TILES & MARB LES (P) LTD.(SUPRA), THE HONBLE SUPREME COURT HAS OBSERVED THAT IF THE CONTENTION OF THE DEPARTMENT IS TO BE ACCEPTED, NAMELY, THAT THE ACTI VITY UNDERTAKEN BY THE RESPONDENTS HEREIN IS NOT A MANUFACTURE, THEN, IT W OULD HAVE SERIOUS REVENUE CONSEQUENCES. AS STATED ABOVE, EACH OF THE RESPONDENTS IS PAYING EXCISE DUTY, SOME OF THE RESPONDENTS ARE JOB -WORKERS AND THE ACTIVITY UNDERTAKEN BY THEM HAS BEEN RECOGNIZED BY VARIOUS GOVERNMENT AUTHORITIES AS MANUFACTURE. THE LD.SR.COUNSEL FOR T HE ASSESSEE DREW OUR ATTENTION TOWARDS HEADING 2711, OF CHAPTER 27, NOT E NO.5 OF CENTRAL EXCISE TARIFF ACT, 1985, WHEREIN IT HAS BEEN CATEGO RICALLY MENTIONED THAT THE PROCESS OF COMPRESSION OF NATURAL GAS FOR THE P URPOSE OF MARKETING IT AS COMPRESSED NATURAL GAS (CNG)) FOR USE AS A FUEL OR FOR ANY OTHER PURPOSE, SHALL AMOUNT TO MANUFACTURE. HE SUBMIT TED THAT IN VIEW OF THE BINDING PRECEDENT THE CLAIM OF ASSESSEE DESER VES TO BE ALLOWED. ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 30 - 16. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THIS ISSUE IS TO BE EXAMINED WHETHER T HE ASSESSEE IS ENTITLED FOR ADDITIONAL DEPRECIATION CLAIMED @ 20% ON PLANT & MACHINERY. BOTH THE AO AND LD.CIT(A) HAVE REJECTED THE CLAIM ON THE BASIS THAT COMPRESSION OF CONVERSION OF PNG TO CNG DOES NOT T ANTAMOUNT TO MANUFACTURE, THEREFORE, THE ASSESSEE IS NOT ENTITLE D FOR THE ADDITIONAL DEPRECIATION CLAIMED AS THERE IS ONLY CHANGE OF FOR M BUT BASIC INGREDIENTS REMAIN SAME. 16.1. THE HONBLE APEX COURT IN THE CASE OF RENDERE D IN THE CASE OF INCOME TAX OFFICER VS. ARIHANT TILES & MARBLES (P) LTD. REPORTED AT (2010) 320 ITR 79 HAS HELD AS UNDER:- 21. BEFORE CONCLUDING, WE WOULD LIKE TO MAKE ONE OBSERV ATION. IF THE CONTENTION OF THE DEPARTMENT IS TO BE ACCEPTED, NAMELY THAT THE A CTIVITY UNDERTAKEN BY THE RESPONDENTS HEREIN IS NOT A MANUFACTURE, THEN, IT W OULD HAVE SERIOUS REVENUE CONSEQUENCES. AS STATED ABOVE, EACH OF THE RESPONDE NTS IS PAYING EXCISE DUTY, SOME OF THE RESPONDENTS ARE JOB WORKERS AND THE ACTIVITY UN DERTAKEN BY THEM HAS BEEN RECOGNISED BY VARIOUS GOVERNMENT AUTHORITIES AS MAN UFACTURE. TO SAY THAT THE ACTIVITY WILL NOT AMOUNT TO MANUFACTURE OR PRODUCTI ON UNDER S. 80-IA WILL HAVE DISASTROUS CONSEQUENCES, PARTICULARLY IN VIEW OF TH E FACT THAT THE ASSESSEES IN ALL THE CASES WOULD PLEAD THAT THEY WERE NOT LIABLE TO PAY EXCISE DUTY, SALES-TAX ETC. BECAUSE THE ACTIVITY DID NOT CONSTITUTE MANUFACTURE. KEEPIN G IN MIND THE ABOVE FACTORS, WE ARE OF THE VIEW THAT IN THE PRESENT CASES, THE ACTIVITY UNDERTAKEN BY EACH OF THE RESPONDENTS CONSTITUTES MANUFACTURE OR PRODUCTION A ND, THEREFORE, THEY WOULD BE ENTITLED TO THE BENEFIT OF S. 80-IA OF THE IT ACT, 1961. 22. FOR THE AFORE-STATED REASONS, CIVIL APPEALS FILED B Y THE DEPARTMENT STAND DISMISSED WITH NO ORDER AS TO COSTS. ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 31 - 16.2. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN IN THE CASE OF INCOME TAX OFFICER VS. ARIHANT TILES & MARBLES (P) LTD. (SUPRA), IN OUR OPINION, THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN REJECTI NG THE CLAIM OF THE ASSESSEE FOR ADDITIONAL DEPRECIATION. THUS, THE AD DITION MADE IN THIS REGARD IS HEREBY DELETED. THUS, GROUND NO.2 OF ASS ESSEES APPEAL IS ALLOWED. 17. GROUND NO.3 IS AGAINST DISALLOWANCE OF PRIOR PE RIOD EXPENSES OF RS.15,45,925/-. THE LD.SR.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD.CIT(A) ERRED IN UPHOLDING THE ORDER OF THE AO AN D BY CONFIRMING THE AMOUNT OF RS.15,45,925/-. HE SUBMITTED THAT THE AO FAILED TO UNDERSTAND THE FACT THAT THOUGH THE EXPENSES ARE IN THE NATURE OF SECURITY EXPENSES, COMPUTER EXPENSES, CONSULTANCY AND TECHNI CAL FEES, INTERNAL AUDIT FEES, VAT CREDIT, ETC. AND ARE RELATED TO EAR LIER YEARS BUT THEY ARE INCURRED DURING THE YEAR AND CRYSTALLIZED DURING TH E YEAR UNDER APPEAL. 17.1. ON THE CONTRARY, D.CIT-DR SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 18. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE AO HAS GIVEN A FINDING THAT ON VERIFICATION, IT IS FOUND THAT WITH RESPECT TO ALL SEVEN ITEMS, LIABILITY WERE ASCERTAI NABLE OR CRYSTALLIZED IN THE RELEVANT YEAR WHICH COULD NOT BE POSTPONED. TH E LD.CIT(A) CONFIRMED THE ACTION OF THE AO BY OBSERVING THAT TH E EXPENSES ARE NOT OF ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 32 - GRATUITOUS NATURE LIKE BONUS, BUT ARE RELATED TO SE RVICES ALREADY RENDERED AND THE RATES WERE KNOWN TO THE APPELLANT AS PER TH E TERMS OF AGREEMENT WITH THE SERVICE PROVIDERS, ETC. THE EXPENSES ACCR UED IN THOSE YEARS AND ACCORDING TO MERCANTILE SYSTEM OF ACCOUNTING THESE CANNOT BE ALLOWED IN THE YEAR JUST BECAUSE THESE HAVE BEEN ACCOUNTED FOR BY THE APPELLANT IN THIS YEAR. THE ONLY EXPLANATION GIVEN BY THE ASSE SSEE IS THAT THESE EXPENSES ARE CRYSTALLIZED DURING THE YEAR UNDER CON SIDERATION. THE ASSESSEE HAS RELIED ON THE FOLLOWING DECISIONS:- SL.NO(S) IN THE CASE OF. REPORTED AT. 1. CIT VS. JAGATJIT INDUSTRIES LTD. 194 TAXMAN 158 (DEL.) 2. STERLITE INDUSTRIES (INDIA) LTD. VS. ADDL.CIT (2006) 102 TTJ (MUMBAI) 53. 18.1. THE HONBLE DELHI HIGH COURT IN THE CASE OF C IT VS. JAGATJIT INDUSTRIES LTD.(SUPRA) HAS HELD THAT THE ASSESSEE H AS BEEN DEBITING THE EXPENDITURE SPILLED OVER TO THE SUBSEQUENT YEARS AN D THE AO HAD BEEN ALLOWING THE SAME. THE SAID ACCOUNTING PRACTICE HAS BEEN CONSISTENTLY FOLLOWED BY THE ASSESSEE AND ACCEPTED BY THE DEPART MENT. IF A PARTICULAR ACCOUNTING SYSTEM HAS BEEN FOLLOWED AND ACCEPTED AN D THERE IS NO ACCEPTABLE REASON TO DIFFER WITH THE SAME, THE DOCT RINE OF CONSISTENCY WOULD COME INTO PLAY. 18.2. THE HONBLE ITAT D BENCH MUMBAI IN THE CASE OF STERLITE INDUSTRIES (INDIA) LTD. VS. ADDL.CIT(SUPRA) RELYIN G ON THE JUDGEMENT OF HONBLE JURISDICTIONAL HIGH COURT RENDERED IN THE C ASE OF SAURASHTRA ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 33 - CEMENT & CHEMICALS INDUSTRIES LTD. VS. CIT REPORTED AT (1995) 213 ITR 523 (GUJ.) HAS HELD THAT ASSESSEE HAVING RECEIVED BILLS/VOUCHERS FOR SOME PRIOR PERIOD EXPENSES ONLY IN THE RELEVANT PRE VIOUS YEAR, IT IS ENTITLED TO DEDUCTION OF SUCH EXPENDITURE IRRESPECT IVE OF THE FACT THAT THE ASSESSEE HAS BEEN FOLLOWING MERCANTILE SYSTEM OF AC COUNTING. THE ASSESSEE HAS NOT PLACED ANYTHING ON RECORD SUGGESTI NG THAT THE BILLS AND VOUCHERS WERE RECEIVED DURING THE YEAR UNDER CONSID ERATION EXCEPT A STATEMENT IS MADE THAT THESE EXPENSES WERE CRYSTALL IZED AND INCURRED DURING THE YEAR UNDER CONSIDERATION. IT IS NOT DEM ONSTRATED THAT AS TO HOW THESE EXPENDITURE WERE CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION. THE AUTHORITIES BELOW HAVE GIVEN FINDINGS THAT THE EXPENSES SO CLAIMED ON RELATED TO PRIOR PERIOD AND CANNOT BE ALLOWED IN THIS YEAR. AFTER CONSIDERING THE TOTALITY OF THE FACTS AND THE RATIO LAID DOWN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. JAG ATJIT INDUSTRIES LTD.(SUPRA) AND THE HONBLE COORDINATE BENCH OF MUM BAI IN THE CASE OF STERLITE INDUSTRIES (INDIA) LTD. VS. ADDL.CIT(SUPRA ), WE RESTORE THIS ISSUE BACK TO THE FILE OF AO TO DECIDE IT AFRESH. THE A SSESSEE IS DIRECTED TO PRODUCE THE EVIDENCES IN SUPPORT ITS CONTENTION THA T THESE EXPENDITURE WERE CRYSTALLIZED DURING THE YEAR UNDER CONSIDERAT ION. THUS, THIS GROUND OF ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PUR POSES ONLY. 19. THE FOURTH GROUND OF ASSESSEES APPEAL IS AGAIN ST DISALLOWANCE OF INTEREST ON SHARE APPLICATION MONEY RS.3,390,46,723 /-. THE LD.SR.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS PA ID INTEREST OF RS.7,78,07,996/- ON SHARE APPLICATION MONEY OUT OF WHICH AMOUNT OF ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 34 - RS.95,88,000/- WAS CAPITALIZED DURING THE AY 2007-0 8, AN AMOUNT OF RS.14,38,200/- HAS BEEN CLAIMED IN THE AY 2008-09, AN AMOUNT OF RS.2,34,58,723/- IS TREATED AS CAPITALIZED WORK-IN- PROGRESS INTEREST ACCOUNT - NO DEPRECIATION HAS BEEN CLAIMED AND RS.4 ,47,61,273/- TREATED AS REVENUE EXPENSES AND DISALLOWED IN THE RETURN OF INCOME. HE SUBMITTED THAT THE LD.CIT(A) ERRED IN CONFIRMING TH E CAPITALIZED INTEREST ON SHARE APPLICATION MONEY RS.3,30,46,723/-. HE SU BMITTED THAT THE LD.CIT(A) FAILED TO APPRECIATE THAT THE APPELLANT H AS NOT BORROWED ANY MONEY FOR INVESTMENT IN SHARES. IN FACT, THE APPEL LANT HAS RECEIVED SHARE APPLICATION MONEY FOR WHICH ALLOTMENT IS PENDING AN D APPELLANT HAS PAID INTEREST ON THE SAME. HE SUBMITTED THAT THE LD.CIT (A) HAS FAILED TO APPRECIATE THAT INVESTMENT WILL BE IN THE HANDS OF THE PERSON FROM WHOM AMOUNT OF SHARE APPLICATION MONEY IS RECEIVED. HE FURTHER SUBMITTED THAT THE LD.CIT(A) HAS GROSSLY ERRED BY DISALLOWING THE INTEREST ON SHARE APPLICATION MONEY OF RS.95,88,000/- WHICH WAS CAPIT ALIZED AND ONLY DEPRECIATION OF RS.14,38,200/- WAS CLAIMED. THE LD .CIT(A) HAS FAILED TO APPRECIATE THAT THE APPELLANT HAS NOT CLAIMED RS.95 ,88,000/- AS EXPENSES BUT APPELLANT HAS CLAIMED ONLY RS.14,38,200/- BY WA Y OF DEPRECIATION ON CAPITALIZATION OF INTEREST. THE LD.SR.COUNSEL FO R THE ASSESSEE SUBMITTED THAT THE LD.CIT(A) HAS ERRED IN DISALLOWING THE INT EREST ON SHARE APPLICATION MONEY OF RS.2,34,58,723/- WHICH WAS NOT CAPITALIZED AND NO DEPRECIATION WAS CLAIMED. THE LD.CIT(A) HAS FAILED TO APPRECIATE THAT APPELLANT HAS NOT CLAIMED RS.2,34,58,723/- AS EXPEN SES BUT THE SAME WAS TREATED AS CAPITALIZED WORK-IN-PROGRESS INTEREST. THE LD.SR.COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT HAS NOT BORROWED ANY AMOUNT FOR ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 35 - INVESTMENT IN SHARES OR SHARE APPLICATION. IN FACT , APPELLANT HAS RECEIVED SHARE APPLICATION MONEY AND PAID INTEREST ON THE SA ME. HE SUBMITTED THAT WITHOUT PREJUDICE TO THE CLAIM AND CONTENTION OF TH E APPELLANT, THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THE FACT TH AT THE APPELLANT HAD USED THE SHARE APPLICATION MONEY FOR THE ACQUISITIO N OF THE ASSETS AND IN TURN INTEREST PAID ON SUCH SHARE APPLICATION MONEY WAS CAPITALIZED. THE LD.SR.COUNSEL FOR THE ASSESSEE SUBMITTED THAT IF TH E APPELLANT HAS NOT RECEIVED THE SHARE APPLICATION MONEY, THEN IT WOULD HAVE BORROWED THE MONEY FROM THE BANKS, FINANCIAL INSTITUTIONS, ETC. AND INTEREST ON THE SAME WOULD HAVE BEEN CAPITALIZED. HE SUBMITTED THA T THE HONBLE ITAT BANGALORE IN THE CASE OF ACIT VS. GMR INDUSTRIES LT D. HAS HELD THAT SHARE APPLICATION MONEY IS DEBT FOR THE ASSESSEE-CO MPANY TILL THE TIME ALLOTMENT IS DONE AND HENCE INTEREST ON SHARE APPLI CATION MONEY IS ALLOWABLE EXPENDITURE UNDER SECTION 36(1)(III) OF T HE ACT. 19.1. ON THE CONTRARY, LD.CIT-DR SUPPORTED THE ORDE RS OF THE AUTHORITIES BELOW. 20. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD.CIT(A) HAS DECIDED THIS ISSUE A T PARA-10.3 OF HIS ORDER BY OBSERVING AS UNDER:- 10.3. I HAVE CONSIDERED THE ASSESSMENT ORDER AND T HE SUBMISSION. THE SHARES FOR WHICH THE APPELLANT HAS BORROWED MON EY ARE ITS INVESTMENTS AND NOT BUSINESS. THE INTEREST PAID FO R INVESTMENTS IS ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 36 - NOT AN ALLOWABLE EXPENSE U/S.36(1)(III) OF THE IT A CT. NEITHER ARE THE SHARES DEPRECIABLE ASSETS. THEREFORE, THE APPE LLANT CANNOT BE ALLOWED TO CAPITALIZE THE INTEREST AND THEN CLAIM D EPRECIATION ON THE CAPITALIZED INTEREST. THE FOLLOWING DIRECTIONS ARE GIVEN ON THE ISSUE AFTER DUE CONSIDERATION: A) NO INTEREST ON BORROWED CAPITAL FOR INVESTMENT IN SHARES OR SHARE APPLICATION MONEY IS ALLOWABLE AS REVENUE EXP ENDITURE. B) ANY CLAIM OF DEPRECIATION ON CAPITALIZED INTERE ST FOR AMOUNTS BORROWED FOR SHARE APPLICATION HAS TO BE DISALLOWED . C) THE APPELLANT IS CLAIMING THAT IT HAS ITSELF AD DED BACK SOME PART OF INTEREST IN THE RETURN OF INCOME; WHICH IT HAS TREATED AS REVENUE EXPENSE IN THE ACCOUNTS. NO DOUBLE ADDITIO N IS REQUIRED IF SUCH IS THE CASE. THE AO IS DIRECTED TO VERIFY THE CLAIM OF EXPENSES/ DEPRECIATION AS PER THE ABOVE DIRECTIONS, WHILE GIVING THE EFFECT T O THIS ORDER. THE GROUND ARE DECIDED ACCORDINGLY. 21. THE UNDISPUTED FACTS OF THIS CASE AS EMERGED F ROM THE RECORD BEFORE THIS TRIBUNAL IS THAT THE SHARE APPLICATION MONEY OF RS.3,30,46,723/- WHICH WAS USED IN PURCHASES OF ASS ET. THE INTEREST OF RS.2,95,88,000/- WAS CAPITALIZED BY ADDING THE SUM TO THE COST OF THE ASSET ON WHICH DEPRECIATION OF RS.14,38,200/- WAS C LAIMED. THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN DISALLOWING THE C LAIM OF DEPRECIATION OF RS.14,38,200/- AS THE INTEREST EXPENSES INCURRED BE CAME THE COST OF THE ASSET ACQUIRED AND, HENCE, ELIGIBLE FOR DEPRECIATIO N THEREON. OUR THIS VIEW FINDS SUPPORT FROM THE DECISION OF THE HONBLE COORDINATE BENCH BANGALORE RENDERED IN THE CASE OF GMR INDUSTRIES LT D.(SUPRA). ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 37 - 21.1. FURTHER, THE BALANCE INTEREST OF RS.2,34,58,7 23/- WAS NOT CLAIMED AS DEDUCTION BY THE ASSESSEE AS SUBMITTED BY THE LD .AR DURING THE COURSE OF HEARING AND QUESTION OF DISALLOWING THE SAME DOE S NOT ARISE IN AS MUCH AS THE SAME WAS NOT CONTROVERTED BY THE LD.DR. WE, THEREFORE, SET ASIDE THE ORDER OF THE LOWER AUTHORITIES AND DELETE THE A DDITION OF RS.2,34,58,723/-. IN VIEW OF THE ABOVE DISCUSSION, THIS GROUND OF ASSESSEES APPEAL IS ALLOWED. 22. GROUND NO.5 IS AGAINST ADDITION ON ACCOUNT OF LIQUIDATED DAMAGES OF RS.2,25,88,566/-. THE LD.SR.COUNSEL FOR THE ASS ESSEE SUBMITTED THAT THE LD.CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE AO BY TREATING LIQUIDATE DAMAGES AS REVENUE RECEIPT AND CONFIRMED THE ADDITION OF RS.2,25,88,566/-. HE SUBMITTED THAT THE AUTHORIT IES BELOW FAILED TO UNDERSTAND THE FACT THAT THE DELIVERY IS ESSENCE OF THE CONTRACT IN OIL & GAS INDUSTRY, PROJECT DELAY SOMETIME EFFECT THE EXI STENCE OF THE COMPANY, THE LIQUIDATED DAMAGES IS NOT A COMPENSATION AND NO R A REBATE, IT IS TOWARDS DELAY IN SUPPLY OF MACHINERY WHICH IN TURN WILL BE DELAY IN THE STARTING OF PLANT HENCE THE APPELLANT HAS CORRECTLY TREATED THE LIQUIDATED DAMAGES AS CAPITAL RECEIPT. HE SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE JUDGEMENT OF HONBLE SUPREME COURT R ENDERED IN THE CASE OF CIT VS. SAUARASHTRA CEMENT LTD. (2010) 233 CTR 2 09:: (2010) 325 ITR 422(SC). HE SUBMITTED THAT THE AUTHORITIES BE LOW HAVE WRONGLY APPLIED THE JUDGEMENT OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF SHREE DIGVIJAY CEMENT CO.LTD. VS. CIT(1982) 138 ITR 45 (GUJ.). ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 38 - 22.1. ON THE CONTRARY, LD.CIT-DR SUPPORTED THE ORDE RS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THERE IS NO ERROR IN THE O RDER OF THE LD.CIT(A). 23. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE AO HAS OBSERVED THAT THE ASSESSEE HAS CREDITED THE LIQUIDATED DAMAGE OF RS.2,25,88,566/- HOWEVER, IN THE COMPUTATION OF INCOME, IT HAS REDUCED THIS AMOUNT. THE AO RELIED O N THE JUDGEMENT OF THE HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF SHREE DIGVIJAY CEMENT CO.LTD. VS. CIT(1982) 138 ITR 45 (GUJ.) AND THE JUDGEMENT OF HONBLE CALCUTTA HIGH COURT RENDERED IN THE CASE OF CIT VS. ROHTAS INDUSTRIES LTD. (1981) 130 ITR 292 (CAL.). THE AO HAS OBSERVED THAT ON EXAMINATION OF THE LEDGER ACCOUNT OF LIQUIDATED DAM AGE INCOME, THESE ARE RECEIPTS ON VARIOUS DATES BY THE SUPPLIERS OR VENDO RS FOR DELAY IN DELIVERY OF VARIOUS TYPES OF MACHINERIES AND ACCESSORIES TO THE ASSESSEE. THE HONBLE HIGH COURT IN THE CASE OF SHREE DIGVIJAY CE MENT CO.LTD. VS. CIT (1982) 138 ITR 45 (GUJ.) HAS HELD AS UNDER:- HELD, THAT THE ACTUAL COST OR PRICE OF THE MACHINE RY AND COMPENSATION PAYABLE TO THE ASSESSEE-COMPANY WERE T WO DIFFERENT AND DISTINCT THINGS. COMPENSATION WAS PAID TO SET OFF OR REDUCE THE LOSS WHICH THE ASSESSEE SUFFERED AS A RESULT OF DELAY IN SUPPLY OF MACHINERY. IT HAS NOTHING TO DO WITH THE COST O F MACHINERY. THOUGH ADJUSTED AGAINST THE COST OF MACHINERY, IT W AS NONE THE LESS COMPENSATION. THE ACTUAL COST OF MACHINERY CO ULD NOT BE REDUCED BY RS.5,72,216 AND DEPRECIATION AND DEVELOP MENT REBATE HAD TO BE ALLOWED ON THE ENTIRE COST OF MACHINERY A S PER THE AGREEMENT. ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 39 - 23.1. THE HONBLE HIGH COURT OF CALCUTTA IN THE CAS E OF CIT VS. ROHTAS INDUSTRIES LTD. (1981) 130 ITR 292 (CAL.) HAS HELD AS UNDER:- HELD, THAT NO PART OF THE ACTUAL COST OF THE MACHI NERY HAD BEEN MET BY THE GERMAN FIRM. THE PAYMENT WAS COMPENSATI ON FOR LOW OUTPUT BECAUSE THE MACHINERY WAS DEFECTIVE. FURTHE RMORE, THERE WAS NO REDUCTION OF THE COST OF THE MACHINERY ALREA DY SUPPLIED AND THE AMOUNT WHICH THE ASSESSEE HAD RECEIVED ON ACCOU NT OF LOW OUTPUT HAD BEEN TREATED AS A REVENUE RECEIPT AND TA XED AS SUCH. THE AMOUNT OF REBATE RECOVERABLE FROM THE FOREIGN S UPPLIERS WAS NOT DEDUCTIVE IN DETERMINING THE ACTUAL COST OF THE MACHINERY UNDER S.43(1). 23.2. HOWEVER, THE HONBLE SUPREME COURT IN THE CAS E OF CIT VS. SAUARASHTRA CEMENT LTD. (2010) 233 CTR 209:: (2010) 325 ITR 422(SC) HAS HELD AS UNDER:- 13. WE HAVE CONSIDERED THE MATTER IN THE LIGHT OF THE AFORENOTED BROAD PRINCIPLE. IT IS CLEAR FROM CLAUSE NO. 6 OF THE AGR EEMENT DT. 1ST SEPT., 1967, EXTRACTED ABOVE, THAT THE LIQUIDATED DAMAGES WERE TO BE CALCULATED AT 0.5 PER CENT OF THE PRICE OF THE RESP ECTIVE MACHINERY AND EQUIPMENT TO WHICH THE ITEMS WERE DELIVERED LATE, F OR EACH MONTH OF DELAY IN DELIVERY COMPLETION, WITHOUT PROOF OF THE ACTUAL DAMAGES THE ASSESSEE WOULD HAVE SUFFERED ON ACCOUNT OF THE DELA Y. THE DELAY IN SUPPLY COULD BE OF THE WHOLE PLANT OR A PART THEREO F BUT THE DETERMINATION OF DAMAGES WAS NOT BASED UPON THE CAL CULATION MADE IN RESPECT OF LOSS OF PROFIT ON ACCOUNT OF SUPPLY OF A PARTICULAR PART OF THE PLANT. IT IS EVIDENT THAT THE DAMAGES TO THE ASSESS EE WAS DIRECTLY AND INTIMATELY LINKED WITH THE PROCUREMENT OF A CAPITAL ASSET I.E. THE CEMENT PLANT, WHICH WOULD OBVIOUSLY LEAD TO DELAY IN COMIN G INTO EXISTENCE OF THE PROFIT MAKING APPARATUS, RATHER THAN A RECEIPT IN THE COURSE OF PROFIT EARNING PROCESS. COMPENSATION PAID FOR THE DELAY IN PROCUREMENT OF CAPITAL ASSET AMOUNTED TO STERILIZATION OF THE CAPI TAL ASSET OF THE ASSESSEE AS SUPPLIER HAD FAILED TO SUPPLY THE PLANT WITHIN TIME AS STIPULATED IN THE AGREEMENT AND CLAUSE NO. 6 THEREO F CAME INTO PLAY. THE AFORE-STATED AMOUNT RECEIVED BY THE ASSESSEE TO WARDS COMPENSATION FOR STERILIZATION OF THE PROFIT EARNIN G SOURCE, NOT IN THE ORDINARY COURSE OF THEIR BUSINESS, IN OUR OPINION, WAS A CAPITAL RECEIPT ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 40 - IN THE HANDS OF THE ASSESSEE. WE ARE, THEREFORE, IN AGREEMENT WITH THE OPINION RECORDED BY THE HIGH COURT ON QUESTION NOS. (I) AND (II) EXTRACTED IN PARA 1 (SUPRA) AND HOLD THAT THE AMOUN T OF RS. 8,50,000 RECEIVED BY THE ASSESSEE FROM THE SUPPLIERS OF THE PLANT WAS IN THE NATURE OF A CAPITAL RECEIPT. 23.3. WE FIND THAT THE FACTS BEFORE THE HONBLE APE X COURT WERE THAT THE ASSESSEE ENGAGED IN THE MANUFACTURE OF CEMENT, ETC. ENTERED INTO AN AGREEMENT WITH M/S.WALCHANDNAGAR INDUSTRIES LIMITED , BOMBAY FOR PURCHASE OF ADDITIONAL CEMENT PLANT FROM THEM FOR A TOTAL CONSIDERATION OF RS.1,70,00,000/-. AS PER THE TERMS OF CONTRACT, THE AMOUNT OF CONSIDERATION WAS TO BE PAID BY THE ASSESSEE IN FOU R INSTALLMENTS. AS PER THE CLAUSE IN THE AGREEMENT, IN THE EVENT OF DELAY CAUSED IN DELIVERY OF THE MACHINERY, THE ASSESSEE WAS TO BE COMPENSATED A T THE RATE OF 0.5 PER CENT OF THE PRICE OF THE RESPECTIVE PORTION OF THE MACHINERY FOR DELAY OF EACH MONTH BY WAY OF LIQUIDATED DAMAGES BY THE SUPP LIER, WITHOUT PROOF OF ACTUAL LOSS. HOWEVER, THE TOTAL AMOUNT OF DAMA GES WAS NOT TO EXCEED 5 PERCENT OF THE TOTAL PRICE OF THE PLANT AND MACHI NERY. THE SUPPLIER DEFAULTED AND FAILED TO SUPPLY THE PLANT AND MACHIN ERY ON THE SCHEDULED TIME AND, THEREFORE, AS PER THE TERMS OF CONTRACT, THE ASSESSEE RECEIVED AN AMOUNT OF RS.8,50,000/- FROM THE SUPPLIER BY WAY OF LIQUIDATED DAMAGES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE RELEVANT ASSESSMENT YEAR, A QUESTION AROSE WHETHER THE SAID AMOUNT RECE IVED BY THE ASSESSEE AS DAMAGES WAS A CAPITAL OR A REVENUE RECEIPT. THE AO NEGATIVED THE CLAIM OF THE ASSESSEE THAT THE SAID AMOUNT SHOULD B E TREATED AS A CAPITAL RECEIPT. ACCORDINGLY, HE INCLUDED THE SAID AMOUNT I N THE TOTAL INCOME OF ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 41 - THE ASSESSEE. AGGRIEVED, THE ASSESSEE FILED AN APPE AL BEFORE THE CIT(A), BUT WITHOUT ANY SUCCESS. THE ASSESSEE CARRIED THE M ATTER FURTHER IN APPEAL TO THE TRIBUNAL. RELYING ON THE RATIO OF THE DECISI ONS OF THIS COURT IN CIT VS. RAI BAHADUR JAIRAM VALJI & ORS. (1959) 35 ITR 1 48 (SC) AND KETTLEWELL BULLEN & CO. LTD. VS. CIT AIR 1965 SC 65 , THE TRIBUNAL CAME TO THE CONCLUSION THAT THE SAID AMOUNT COULD N OT BE TREATED AS A REVENUE RECEIPT. ACCORDING TO THE TRIBUNAL, THE PAY MENT OF LIQUIDATED DAMAGES TO THE ASSESSEE BY THE SUPPLIER WAS INTIMAT ELY LINKED WITH THE SUPPLY OF MACHINERY I.E. A FIXED ASSET ON CAPITAL A CCOUNT, WHICH COULD BE SAID TO BE CONNECTED WITH THE SOURCE OF INCOME OR P ROFIT MAKING APPARATUS RATHER THAN A RECEIPT IN COURSE OF PROFIT EARNING PROCESS AND, THEREFORE, IT COULD NOT BE TREATED AS PART OF RECEI PT RELATING TO A NORMAL BUSINESS ACTIVITY OF THE ASSESSEE. THE TRIBUNAL ALS O OBSERVED THAT THE SAID RECEIPT HAD NO CONNECTION WITH LOSS OR PROFIT BECAU SE THE VERY SOURCE OF INCOME VIZ., THE MACHINERY WAS YET TO BE INSTALLED. ACCORDINGLY, THE TRIBUNAL ALLOWED THE APPEAL AND DELETED THE ADDITIO N MADE ON THIS ACCOUNT. BEING DISSATISFIED WITH THE DECISION OF T HE TRIBUNAL, AS STATED ABOVE, AT THE INSTANCE OF THE REVENUE, THE TRIBUNAL REFERRED THE AFORENOTED QUESTIONS OF LAW FOR THE OPINION OF THE HIGH COURT. THE REFERENCE HAVING BEEN ANSWERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. 23.4. IN THE PRESENT CASE ALSO, THE ASSESSEE HAS R ECEIVED LIQUIDATED DAMAGES ON ACCOUNT OF DELAY IN SUPPLY OF MACHINERY. THEREFORE, RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE H ONBLE APEX COURT IN ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 42 - THE CASE OF CIT VS. SAUARASHTRA CEMENT LTD. (2010) 233 CTR 209:: (2010) 325 ITR 422(SC), WE HEREBY DIRECT THE AO TO DELETE THE ADDITION MADE IN THIS REGARD. THUS, THIS GROUND OF ASSESSEE S APPEAL IS ALLOWED. 24. THE SIXTH GROUND OF ASSESSEES APPEAL IS AGAINS T LEVY OF INTEREST U/S.234B & 234D OF THE ACT AND RECOVERY OF INTEREST U/S.244A OF THE ACT. THIS ISSUE BEING CONSEQUENTIAL IN NATURE AND, THERE FORE, SAME ARE REJECTED. 25. THE SEVENTH GROUND OF ASSESSEES APPEAL IS AGAI NST INITIATION OF PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT. THIS GROUND IS PRE-MATURE AND DISMISSED AS SUCH. 26. IN THE RESULT, ASSESSEES APPEAL FOR AY 2008-09 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES ONLY AS INDICATED HEREINAB OVE. 27. NOW WE TAKE UP THE REVENUES APPEAL, I.E. ITA NO.1300/AHD/2012 FOR AY 2008-09. 27.1. GROUND NO.1 OF REVENUES APPEAL IS IDENTICAL TO THE GROUND RAISED IN ITA NO.2958/AHD/2010 (REVENUES APPEAL) FOR AY 2 007-08. SINCE NO CHANGE IN THE FACTS AND CIRCUMSTANCES HAS BEEN P OINTED OUT BY THE LD.CIT-DR, FOLLOWING OUR DECISION PASSED IN ITA NO. 2958/AHD/2010 (SUPRA), THEREFORE THIS ISSUE IS ALSO RESTORED BACK TO THE FILE OF AO. THUS, THIS GROUND OF REVENUES APPEAL IS ALLOWED FOR STAT ISTICAL PURPOSES ONLY. ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 43 - 28. GROUND NO.2 IS AGAINST DELETION OF ADDITION MAD E BY THE AO IN RESPECT OF DEPRECIATION (REDUCED COST) AMOUNTING TO RS.26,48,101/-. 28.1. THE LD.CIT-DR SUPPORTED THE ORDER OF THE AO, WHEREAS, LD.SR.COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE LD.CIT(A). 28.2. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A), THE SAME I S HEREBY UPHELD. THEREFORE, THIS GROUND OF REVENUES APPEAL IS DISMI SSED. 29. GROUNDS NO.3 & 4 ARE GENERAL IN NATURE REQUIRE NO INDEPENDENT ADJUDICATION. 30. IN THE RESULT, REVENUES APPEAL FOR AY 2008-09 IS PARTLY ALLOWED BUT FOR STATISTICAL PURPOSES. 31. NOW WE TAKE UP THE ASSESSEES APPEAL FOR AY 200 9-10, I.E. ITA NO.239/AHD/2013 FOR AY 2009-10. AS PER CHART SUBMI TTED BY THE LD.SR.COUNSEL FOR THE ASSESSEE, THE GROUNDS ARE AS UNDER:- GROUND NO.1 :- ERRED IN CONFIRMING DISALLOWANCE OF CLOSING STO CK OF RS.14,09,34,851/- ON ARBITRARY BASIS IN RESPECT OF TRADING OF NATURAL GAS THROUGH PIPELINES PNG. GROUND NO.2 :- ERRED IN ENHANCING CLOSING STOCK OF RS.8,63,10,0 51/- ON ARBITRARY BASIS IN RESPECT OF TRADING OF NATURAL GA S THROUGH PIPELINES PNG. ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 44 - GROUND NO.3 :- ERRED IN NOT CONSIDERING NET ADDITION OF RS.56,8 2,092/- FOR F.Y. 07-08 (A.Y. 08-09) AS OPENING STOCK FOR F. Y. 08-09 (A.Y. 09-10). U:- ERRED IN NOT ALLOWING ADDITION ON ACCOUNT OF CL OSING STOCK FOR F.Y. 08-09 (A.Y. 09-10) AS OPENING STOCK FOR F.Y. 09-10 (A.Y. 10-11). GROUND NO.5 :- ERRED IN CONFIRMING DISALLOWANCE OF RS.5,03,52,2 98/- TOWARDS ADDITIONAL DEPRECIATION @ 20% ON PLANT & MA CHINERY CNG STATIONS. GROUND NO.6 :- ERRED IN NOT CONSIDERING DISALLOWANCE TOWARDS ADDITIONAL DEPRECIATION OF RS.5,03,52,298/- AND FAI LED TO APPRECIATE THAT APPELLANT HAS CLAIMED ADDITIONAL DEPRECIATION ONLY OF RS.2,75,39,442/-. GROUND NO.7 :- ERRED IN CONFIRMING RS.98,22,456/- OF LIQUIDAT ED DAMAGES AS REVENUE RECEIPT. 31.1. GROUND NOS.1, 2, 3 & 4 ARE INTER-CONNECTED IN RESPECT OF ADDITION ON ACCOUNT OF CLOSING STOCK. THE FACTS ARE IDENTICA L AS WERE IN ASSESSEES APPEAL IN THE AY 2008-09 IN ITA NO.1390/AHD/2012, W HEREIN WE HAVE RESTORED THE ISSUE BACK TO THE FILE OF THE AO FOR F RESH DECISION. SINCE NO CHANGE IN THE FACTS ARE POINTED OUT BY THE REVENUE, TAKING A CONSISTENT VIEW, THE ISSUE IS RESTORED BACK TO THE FILE OF AO FOR FRESH ADJUDICATION. THEREFORE, ALL THESE GROUNDS ARE ALLOWED BUT FOR ST ATISTICAL PURPOSES. GROUND NOS.5 & 6 ARE ALSO INTER-CONNECTED. THESE GR OUNDS ARE AGAINST THE REJECTION OF CLAIM FOR ADDITIONAL DEPRECIATION. THE IDENTICAL ISSUE WAS RAISED IN ASSESSEES APPEAL IN ITA NO.1390/AHD/2012 FOR AY 2008-09, WHEREIN WE HAVE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. SINCE NO CHANGE IN THE FACTS HAVE BEEN POINTED OUT BY THE RE VENUE, FOLLOWING OUR DECISION IN AY 2008-09, THESE GROUNDS OF THE ASSESS EES APPEAL ARE ALLOWED. GROUND NO.7 IS AGAINST LIQUIDATED DAM AGES AS REVENUE RECEIPT. THE IDENTICAL ISSUE HAS BEEN DEALT WITH B Y US IN ASSESSEES APPEAL FOR AY 2008-09(SUPRA) IN ITA NO.1390/AHD/201 2. FOR THE SAME ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 45 - REASONING, THIS GROUND IS ALLOWED FOR THIS YEAR AS WELL, SINCE NO CHANGE IN THE FACTS ARE POINTED BY THE REVENUE. 31.2. GROUND NO.8 IS AGAINST LEVY OF INTEREST U/S.2 34B & 234C OF THE ACT WHICH IS CONSEQUENTIAL IN NATURE, SAME IS HELD ACCORDINGLY. 31.3. GROUND NO.9 IS AGAINST INITIATION OF PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT WHICH IS PRE-MATURE AND, H ENCE, THE SAME IS DISMISSED AS SUCH. 32. IN THE RESULT, THE ASSESSEES APPEAL FOR AY 20 09-10 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES ONLY. 33. LASTLY, WE TAKE UP THE REVENUES APPEAL, I.E. ITA NO.678/AHD/2013 FOR AY 20-09-10. THE REVENUE HAS RAISED THE FOLLOW ING GROUNDS OF APPEAL:- 1. THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND O N FACTS IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION ON RIGHT OF WAY AMOUNTING TO RS.3,4 3,18,214/-. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. IT IS THEREFORE PRAYED THAT THE ORDER OF THE LEARNE D CIT(APPEALS) MAY BE SET ASIDE AND THAT OF THE A.O. BE RESTORED T O THE ABOVE EXTENT. 33.1. THE ISSUE IS IDENTICAL AS RAISED IN REVENUES APPEAL FOR AY 2007- 08 IN ITA NO.2958/AHD/2010(SUPRA). SINCE THE FACTS ARE IDENTICAL TO THE FACTS OF REVENUES APPEAL FOR AY 2007-08(SUPRA), FO R THE SAME ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 46 - REASONING, THE REVENUES APPEAL FOR AY 2009-10 IS A LLOWED BUT FOR STATISTICAL PURPOSES. 34. WE SUMMARIZE THE RESULT AS UNDER:- (1) ASSESSEES APPEAL, I.E. ITA NO.3117/AHD/2010 F OR AY 2007-08 IS PARTLY ALLOWED. (2) REVENUES APPEAL, I.E. ITA NO.2958/AHD/2010 F OR AY 2007-08 IS ALLOWED FOR STATISTICAL PURPOSES ONLY. (3) ASSESSEES APPEAL, I.E. ITA NO.1390/AHD/2012 FO R AY 2008-09 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES ONLY AS INDICATED HEREINABOVE. (4) REVENUES APPEAL, I.E. ITA NO.1300/AHD/2012 F OR AY 2008-09 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES ONLY. (5) ASSESSEES APPEAL, I.E. ITA NO.239/AHD/2013 F OR AY 2009- 10 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES ONLY. (6) REVENUES APPEAL, I.E. ITA NO.678/AHD/2013 FO R AY 2009- 10 IS ALLOWED FOR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN COURT ON THE DATE MENTIONED HER EINABOVE AT CAPTION PAGE SD/- SD/- ( .. ) ($ %&) ! ! ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 11 / 04 /2014 0.., '.../ T.C. NAIR, SR. PS ITA NOS.3117 &2958/AHD/2010, 1390 &1300/AHD/2012, 239 & 678/AHD/2013 GSPC GAS CO.LTD. VS. JCIT/ACIT ASST.YEARS 2007-08, 2008-09 & 2009-10 - 47 - - ( 1& - ( 1& - ( 1& - ( 1&2 32,& 2 32,& 2 32,& 2 32,&/ COPY OF THE ORDER FORWARDED TO : 1. 45 / THE APPELLANT 2. 1645 / THE RESPONDENT. 3. ## & $7 / CONCERNED CIT 4. $7() / THE CIT(A)-GANDHINAGAR 5. 2'%8 1& , , / DR, ITAT, AHMEDABAD 6. 89 :' / GUARD FILE. -$ -$ -$ -$ / BY ORDER, 62& 1& //TRUE COPY// ; ;; ;/ // / #< #< #< #< ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 26/27.3.14(DICTATION-PAD 69- PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 27.3.14 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 D ICTATING 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.114.14 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 11.4.14 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER