Jindal Steel & Power Ltd., New Delhi V. ACIT, Hisar

ITA 3128/DEL/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6201 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 28-09-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 21-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K ARORA C; ASHOK MANCHANDA
• Assessee Lawyers: AJAY VOHRA SR SH ROHIT JAIN; DEEPESH S
• Keywords: Capital asset; Recovery proceedings; Business income; Revision of order; Depreciation; Opportunity of being heard; Principle of natural justice; Additional depreciation; Source of fund; Additional evidence; Prejudicial to interest; Capital receipt; Benefit of exemption; Revised return; Revenue expenditure
• Section: 43B; 143(3); 115JB; 80IB; 80G; 263; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D : NEW DELH BEFORE SH. C.M. GARG, JUDICIAL MEMBER AND SH. O.P. KANT, ACCOUNTANT MEMBER ITA NOS. 3283/DEL/2013 & 3128 /DEL/2014 ASSESSMENT YEAR: 2008 - 09 M/S. JINDAL STEEL POWER LTD., JINDAL CENTRE, 12, BHIKAJI CAMA PLACE, NEW DELHI (PAN: AAACJ7097D ) VS. CIT/ACIT , HISAR (APPELLANT) (RESPONDENT) APPELLANT BY SH. AJAY VOHRA, SR. ADVOCATE, SH. ROHIT JAIN & SH. DEEPESH, ADVOCATES RESPONDENT BY SH. ASHOK MANCHANDA, STANDING COUNSEL AND SH. A.K. ARORA, CIT(DR) DATE H EARING CONCLUDED ON 07.03.2016 DATE OF PRONOUNCEMENT 31.03.2016 ORDER PER O.P. KANT, A.M. : THESE TWO APPEALS FILED BY THE ASSESSEE COMPANY RELATE TO ASSESSMENT YEAR 2008 - 09. IN ITA NO. 3283/DEL /2013 , THE ASSESSEE HAS CHALLENGED THE ASSUMPTION OF JURISDICTION U/S 263 OF THE INCOME - TAX ACT, 1961 (IN SHORT THE ACT ) BY THE COMMISSIONER OF INCOME - TAX, HISAR (IN SH ORT CIT ). THE ITA NO. 3128/DEL /2014 ARISE FROM AN ORDER OF ASSESSMENT U/S 143(3) OF THE ACT PASSED BY THE ASSESSING OFFICER IN PURSUANCE TO THE ORDER U/S 263 OF THE ACT. SINCE THE COMMON ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 2 ISSUES ARE INVOLVED IN THESE APPEALS, THE SAME WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENC E AND BREVITY. ITA NO. 3283/DEL/2013 2. FIRST WE WILL DEAL WIT H THE APPEAL IN ITA NO. 3283/DEL /2013. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THE APPEAL ARE AS UNDER: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE ORDER DATED 25.03.2013 PASSED BY THE LEARNED COMMISSIONER OF INCOME - TAX, ('CIT') UNDER SECTION 263 OF THE INCOME - TAX ACT, 1961 ('THE ACT') HOLDING THE ASSESSMENT ORDER DATED 27.12.2010 TO BE ER RONEOUS AND PREJUDICIAL TO INTERESTS OF REVENUE ON CERTAIN ISSUES, IS BEYOND JURISDICTION, BAD IN LAW AND VOID AB INITIO. 1.1 THAT THE CIT ERRED ON FACTS AND IN LAW IN EXERCISING REVERSIONARY POWERS UNDER SECTION 263 OF THE ACT IN RESPECT OF CERTAIN ISSUE S, WITHOUT APPRECIATING THAT THE TWIN CONDITIONS OF THAT SECTION VIZ., ASSESSMENT ORDER BEING ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, WERE NOT SATISFIED IN THE APPELLANT'S CASE. 1.2 THAT THE CIT ERRED ON FACTS AND IN LAW IN SETTI NG ASIDE THE ASSESSMENT ORDER ON CERTAIN ISSUES ALLEGEDLY ON THE GROUND THAT THE ASSESSING OFFICER DID NOT CONDUCT NECESSARY AND PROPER ENQUIRIES/ VERIFICATION AND DID NOT APPLY CORRECT POSITION OF LAW, WHICH IS OUTSIDE THE SCOPE OF REVISIONARY JURISDICTIO N UNDER SECTION 263 OF THE ACT. L.3 THAT THE CIT ERRED ON FACTS AND IN LAW IN SETTING ASIDE THE ASSESSMENT ORDER, WITHOUT ARRIVING AT ANY CONCLUSIVE FINDING ON MERITS AS TO HOW THE ASSESSMENT ORDER WAS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERESTS OF REVENUE. 2. THAT THE CIT ERRED ON FACTS AND IN LAW IN HOLDING THAT THE ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE ON ACCOUNT OF THE FOLLOWING: ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 3 (I) ALLOWING REDUCTION OF SALES TAX INCENTIVE/ SUBSID Y AMOUNTING TO RS.81.5 CRORES FROM THE TAXABLE INCOME BY TREATING THE SAME TO BE NON - TAXABLE, BEING IN THE NATURE OF CAPITAL RECEIPT; (II) ALLOWANCE OF ADDITIONAL DEPRECIATION OF RS.5,91,106 ON COMPUTER SOFTWARE 'PRIMAVERA'. 3. THAT THE CIT ERRED ON FACTS AND IN LAW IN HOLDING THAT THE ASSESSING OFFICER ERRED IN ALLOWING SALES TAX INCENTIVE/ SUBSIDY AMOUNTING TO RS.81.5 CRORES FROM THE TAXABLE INCOME OF THE APPELLANT. 3.1 THAT THE CIT ERRED ON FACTS AND IN LAW IN HOLDING THAT N OTHING WAS ACTUALLY RECEIVED IN THE FORM OF ANY INCENTIVE/ SUBSIDY BY THE APPELLANT, THE HYPOTHETICAL/ NOTIONAL FIGURE CANNOT BE TREATED AS INCENTIVE/ SUBSIDY AND ALLOWED AS REDUCTION FROM THE TAXABLE INCOME. 3.2 THAT THE CIT ERRED ON FACTS AND IN LAW IN HOLDING THAT THE APPELLANT WAS NOT ABLE TO JUSTIFY/ SUPPORT THE CLAIM OF NON - TAXABILITY OF SALES TAX INCENTIVE/ SUBSIDY, BEING IN THE NATURE OF CAPITAL RECEIPT, NOT LIABLE TO TAX. 3.3 THAT THE CIT ERRED ON FACTS AND IN LAW IN HOLDING THAT THE APPELLANT H AS FAILED TO LINK THE AFORESAID TAX CONCESSIONS/ INCENTIVES WITH ANY SCHEME NOTIFICATION ISSUED BY THE GOVERNMENT, WITHOUT APPRECIATING THAT THE APPELLANT PLACED ON RECORD NOT ONLY RELEVANT NOTIFICATIONS/ SCHEME POLICY BUT ALSO VARIOUS REPRESENTATIVES MADE TO THE STATE GOVERNMENT PURSUANT TO WHICH INCENTIVE/SUBSIDY WAS ALLOWED. 3.4 THAT THE CIT ERRED ON FACTS AND IN LAW IN HOLDING THAT INCENTIVES RECEIVED BY THE APPELLANT TO BE IN THE NATURE OF TRADING RECEIPT AND - COULD NOT BE CONSTRUED AS CAPITAL SUBSID Y/ RECEIPT. 3.5 THAT THE CIT ERRED '' FACTS AND IN LAW IN RECORDING VARIOUS INCORRECT FINDINGS/ CONCLUSIONS, LIKE, APPELLANT HAVING CLAIMED DOUBLE BENEFIT, ETC., WITHOUT JUDICIOUSLY APPRECIATING THE FACTS AND THE DETAILED SUBMISSIONS FILED BY THE APPELLA NT. ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 4 4. THAT THE CIT ERRED ON FACTS AND IN LAW IN HOLDING THAT ADDITIONAL DEPRECIATION OF RS.5,91,106 CLAIMED BY THE APPELLANT IN RESPECT OF COMPUTER SOFTWARE 'PRIMAVERA' WAS NOT ALLOWABLE UNDER SECTION 32(1)(IIA) OF THE ACT. 4.1 THAT THE CIT ERRED ON FA CTS AND IN LAW IN HOLDING THAT THE AFORESAID COMPUTER SOFTWARE WAS ONLY OFFICE EQUIPMENT AND DOES NOT QUALIFY AS 'PLANT AND MACHINERY, FOR BEING ELIGIBLE FOR ADDITIONAL DEPRECIATION. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR VARY FROM THE AFORESA ID GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE COMPANY WAS ENGAGED IN GENERATION OF POWER AND MANUFACTURING OF SPONGE IRON PRODUCTS DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDE RATION. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE FILED ITS RETURN OF INCOME ELECTRICALLY ON 29.09.2008, DECLARING INCOME OF RS. 766,99,04,200/ - UNDER NORMAL PROVISIONS OF THE ACT, AFTER AVAILING OF VARIOUS DEDUCTIONS UNDER THE PROVISIONS OF THE ACT. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED ON 28.03.2009. SUBSEQUENTLY, ON 29.03.2010, THE ASSESSEE FILED REVISED RETURN OF INCOME REDUCING INCOME UNDER NORMAL PROVISIONS OF THE ACT TO RS. 766,72,79,900/ - . IN T HE CASE OF THE ASSESSEE, THE TAX ON THE BOOK PROFIT UNDER SECTION 115JB OF THE ACT WAS HIGHER THAN THE TAX UNDER NORMAL PROVISIONS OF THE ACT, AND THEREFORE, THE ASSESSEE COMPANY PAID TAX AS PER THE PROVISIONS OF SECTION 115JB OF THE ACT. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT AT AN ASSESSED INCOME OF RS. 1 0 33,26,17,030/ - BY THE ASSESSING OFFICER ON 27.12.2010. SUBSEQUENTLY, THE LD. CIT , HISAR WHO WAS HAVING ADMINISTRATIVE CONTROL OVER THE ASSESSING OFFICER, CALLED FOR RECORDS FOR EX AMINATION AND OBSERVED THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE ACT ON 27.12.2010 WAS ERRONEOUS IN SO FAR AS IT WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE AS SALES TAX SUBSIDY WHICH WAS REVENUE IN NATURE WAS OMITTED FOR ADDITION , THERE WAS OMISSION ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 5 TO DISALLOW OF CLAIM OF DEDUCTION OF GRATUITY AND ADDITIONAL DEPRECIATION ON THE COMPUTER SOFTWARE AND HE THUS ISSUED NOTICE DATED 3.1.2013 UNDER SECTION 263 OF THE ACT TO THE ASSESSEE ALLOWING OPPORTUNITY OF BEING HEARD. AFTER CONSIDERING THE REPLY OF THE ASSESSEE IN AN ORDER DATED 25.3.2013 HE SET ASIDE THE ASSESSMENT ORDER INVOKING PROVISIONS OF SECTION 263(1) OF THE ACT IN RESPECT OF ABOVE STATED ISSUES AND MATTER WAS RESTORED BACK TO THE FILE OF THE AO WITH DI RECTION TO MAKE FRESH ASSESSMENT AFTER MAKING NECESSARY AND PROPERTY ENQUIRY/INVESTIGATION IN LIGHT OF THE DISCUSSION (BUT NOT NECESSARILY, LIMITING TO THE SAME) AND PROVIDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE COMPANY. HENCE THIS APPEAL IS BEFORE US. 4. IN GROUNDS OF APPEAL RAISED, THE MAIN ISSUE IN DISPUTE IS WHETHER THE FINDING OF THE CIT THAT THE ASSESSMENT ORDER DATED 27.12.2010 WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE ON ISSUE OF TAXABILITY OF INCENTIVE/SUBSIDY AMOUNTING TO R S. 81.59 CRORES AND OTHER ISSUES , WAS BEYOND JURISDICTION, IS BAD IN LAW AND VOID AB - INITIO. IN GROUND 1.1 THE ASSESSEE HAS RAISED THAT TWIN CONDITIONS OF SECTION 263 I.E. ASSESSMENT ORDER BEING ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVE NUE WERE NOT SATISFIED . IN GROUND 1.2, THE ASSESSEE HAS RAISED THAT THE FINDINGS OF THE CIT THAT THE ASSESSING OFFICER DID NOT CONDUCT THE NECESSARY AND PROPER INQUIRIES/VERIFICATIONS AND DID NOT APPLY THE CORRECT PROPOSITION OF LAW , WAS OUTSIDE THE SCOPE OF THE REVISIONARY POWERS UNDER SECTION 263 OF THE ACT . 5. IN GROUND 1.3, THE ASSESSEE HAS RAISED THE ISSUE THAT THE CIT HAS NOT ARRIVED AT ANY CONCLUSIVE FINDING ON THE MERIT AS TO HOW THE ASSESSMENT ORDER WAS ERRONEOUS AS WELL AS PREJUDIC IAL TO THE INTEREST OF REVENUE. ALL THE ABOVE GROUNDS REVOLVE AROUND THE LEGALITY OF PROCEEDINGS UNDER SECTION 263 OF THE ACT. FURTHER, IN GROUND 2, IT HAS BEEN SPECIFICALLY CONTENDED THAT THE CIT ERRED ON FACTS AND IN ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 6 LAW IN HOLDING THAT THE ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE ON ACCOUNT OF THE FOLLOWING: I) ALLOWING REDUCTION OF SALES TAX INCENTIVE/ SUBSIDY AMOUNTING TO RS.81.5 CRORES FROM THE TAXABLE INCOME BY TREATING THE SAME TO BE NON - T AXABLE, BEING IN THE NATURE OF CAPITAL RECEIPT; II) ALLOWANCE OF ADDITIONAL DEPRECIATION OF RS.5,91,106 ON COMPUTER SOFTWARE 'PRIMAVERA'. 6. SO FAR AS THE TAXABILITY OF SALES TAX SUBSIDY IS CONCERNED THE RELEVANT FACTS ARE THAT I N THE FINANCIAL YEAR 200 0 - 01, THE ASSESSEE COMPANY WAS GRANTED AN EXEMPTION FROM CENTRAL SALES TAX (CST) VIDE NOTIFICATIONS OF EVEN NO. DATED 24 TH APRIL, 2000 IN RESPECT OF SALE OF GOODS MANUFACTURED/ BY - PRODUCTS ETC. FROM ITS NEW INDUSTRIAL UNIT(S) ESTABLISHED IN THE STATE OF MADHYA PRADESH, WITH A COMMITMENT OF CAPITAL INVESTMENT IN FIXED ASSETS EXCEEDING RUPEES 100 CRORES OVER A PERIOD OF FIVE YE ARS COMMENCING FROM 1 ST APRIL, 2000. UNDER THE NOTIFICATION, THE ASSESSEE WAS GRANTED EXEMPTION FOR TWELVE YEARS FROM DATE OF COMMENCEMENT OF COMMERCIAL PRODUCTION, IF THE CAPITAL INVESTMENT IN FIXED ASSETS MADE WAS UPTO RS. 500 CRORES AND EXEMPTION WAS T O BE EXTENDED TO EIGHTEEN YEARS FROM THE DATE OF COMMENCEMENT OF COMMERCIAL PRODUCTION, IF THE INVESTMENT IN FIXED ASSETS EXCEEDED RS. 1000 CRORES. THE ABOVE NOTIFICATION WAS ISSUED UNDER SUB - SECTION (5) OF SECTION 8 OF THE CENTRAL SALES TAX ACT, 1956, WHE REIN IT IS PROVIDED THAT IN CASE OF SALE IN COURSE OF INTER - STATE TRADE OR COMMENCE BY A DEALER TO A REGISTERED DEALER OR TO GOVERNMENT, THE STATE GOVERNMENT IN PUBLIC INTEREST BY NOTIFICATION DIRECT THAT NO TAX SHALL BE PAYABLE BY A DEALER HAVING PLACE OF BUSINESS IN THE STATE OF MADHYA PRADESH IN RESPECT OF SALES OF SPECIFIC GOODS IN THE COURSE OF INTER - STATE TRADE OR COMMERCE TO A REGISTERED DEALER OR GOVERNMENT. SIMILAR EXEMPTIONS WERE GRANTED ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 7 TO THE ASSESSEE COMPANY FOR ENTRY TAX AND ELECTRICITY DUTY T HROUGH SEPARATE NOTIFICATION OF EVEN NUMBER DATED 24 - 4 - 2000 AND DATED 29 - 07 - 2000 RESPECTIVELY. ACCORDINGLY, THE ASSESSEE COMPANY MADE INVESTMENTS IN THEIR RAIGARH UNIT , WHICH WAS GRANTED VARIOUS EXEMPTION MENTIONED IN THE NOTIFICATIONS. IN THE MONTH OF NO VEMBER, 2000 A NEW STATE OF CHHATTISGARH WAS CARVED OUT OF PART OF STATE OF MADHYA PRADESH AND THE RAIGARH UNIT OF THE ASSESSEE BECAME PART OF THE STATE OF CHHATTISGARH . THE EXEMPTIONS GRANTED BY STATE OF MADHYA PRADESH WERE NOT ONLY ENDORSED BY THE NEW STATE OF CHHATTISGARH BUT IN CASE OF ELECTRICITY DUTY , EXEMPTION PERIOD WAS EXTENDED. THE ASSESSEE COMPANY IN THE YEARS, SUBSEQUENT TO THE YEAR OF NOTIFICATION , WORKED OUT THE BENEFIT AVAILED OF UNDER THE CST EXEMPTION NOTIFICATION AND OTHER NOTIFICATI ONS. IN THE STATEMENT OF COMPUTATION TO THE RETURN OF INCOME FILED, THE ASSESSEE COMPANY REDUCED THE AMOUNT OF SALES TAX EXEMPTION ENTITLED OUT OF THE PROFIT & GAIN OF THE ASSESSEE COMPANY AS SALES TAX SUBSIDY OF CAPITAL NATURE. HOWEVER, THE CLAIM OF THE ASSESSEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER S AND THE BENEFIT OF SALES TAX EXEMPTION WAS HELD BY THE ASSESSING OFFICER S AS TAXABLE REVENUE RECEIPT. THE CIT (A) CONFIRMED THE STAND OF THE ASSESSING OFFICER AND ON APPEAL BY THE ASSESSEE TO THE TRIBUNAL IN AY 2004 - 05, THE BENCH OF THE TRIBUNAL IN ITA NO. 3319/DEL/2008 HELD THE BENEFIT OF SALES TAX EXEMPTION AS TAXABLE REVENUE RECEIPT. THE AFORESAID DECISION OF THE TRIBUNAL HAS BEEN FOLLOWED BY THE TRIBUNAL IN ASSESSMENT YEAR 2002 - 03 & 2004 - 05 IN ITA NO. 3 68/DEL/2001 AND 136/DEL/2000 RESPECTIVELY VIDE ORDER DATED 06.03.2014. 7. DURING THE PROCEEDINGS UNDER 263 OF THE ACT BEFORE THE CIT, O N THE ISSUE OF THE SALES TAX SUBSIDY , THE ASSESSEE VIDE ITS LETTER DATED 17.12.2013 SUBMITTED THAT THE ORDER WAS NOT ER RONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AS SALES TAX SUBSIDY WAS CLAIMED AND ALLOWED IN ACCORDANCE WITH THE PURPOSE TEST HELD BY THE HON BLE SUPREME COURT IN THE CASE OF PONNI SUGAR AND CHEMICAL LIMITED V ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 8 CIT, 306 ITR 392. FURTHER THE ASSESS EE SUBMITTED THAT THE JUDGMENT IN THE CASE OF ABHISHEK INDUSTRIES LTD. 286 ITR 1 (P&H) WAS NOT APPLICABLE AS THE HON BLE COURT WAS NOT HAVING BENEFIT OF THE JUDGMENT OF THE HON BLE SUPREME COURT IN THE CASE OF PONNI SUGAR AND CHEMICALS (SUPRA). FURTHER, TH E ASSESSEE SUBMITTED THAT THE HON BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. SIYARAM GARG (HUF), 237 CTR 321 HAS FOLLOWED THE JUDGMENT IN THE CASE OF PONNI SUGAR AND CHEMICAL LIMITED (SUPRA) AND SUBSIDY RECEIVED FOR SETTING UP OF INDUSTRIAL UNIT IN BACKWARD AREA WAS HELD AS CAPITAL RECEIPT. FURTHER, THE ASSESSEE SUBMITTED THAT THE ACTION PROPOSED BY CIT UNDER SECTION 263 OF THE ACT WAS BEYOND THE JURISDICTION AS TWIN CONDITIONS OF THE ORDER BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE R EVENUE WERE NOT FULFILLED. THE ASSESSEE FURTHER SUBMITTED THAT ACCORDING TO THE JUDGMENT OF THE HON BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL COMPANY LTD. V CIT, (2000) 243 ITR 83, WHERE TWO VIEW ARE POSSIBLE AND THE ITO HAS TAKEN ONE VIEW WIT H W HICH THE CIT DOES NOT AGREE, T HE ORDER OF THE ITO CANNOT BE TREATED AS ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF REVENUE UNLESS THE VIEW TAKEN BY THE ITO IS UNSUSTAINABLE IN LAW. THE ASSESSEE ALSO SUPPORTED ITS STAND WITH A PLETHORA OF OTHER JUDGMENTS . 8. THE CIT, HOWEVER, HELD THAT ON THE ISSUE OF SALES TAX SUBSIDY ACTUALLY NO VIEW WAS FORMED BY THE LD. ASSESSING OFFICER AT ALL AND THE ASSESSING OFFICER ALLOWED THE CLAIM OF SALES TAX EXEMPTIONS WITHOUT NOTICING THE FACT THAT THE SAID AMOUNT WAS ROOTED BY THE ASSESSEE THROUGH THE RESERVE AND SURPLUS ACCOUNT IN THE YEAR UNDER CONSIDERATION AS AGAINST THE CLAIM FOR SUBSIDY USED TO MAKE IN THE COMPUTATION OF INCOME IN EARLIER YEARS. THE CIT OBSERVED THAT THE SALES TAX EXEMPTIONS AMOUNT WAS HELD BY THE ASSE SSING OFFICER IN EARLIER YEAR S AS REVENUE EXPENDITURE AND THE SAME WAS ALSO UPHELD BY THE CIT (A) AND THUS THE ACTION ON THE PART OF THE ASSESSING OFFICER, THOUGH HAVING CLEAR DEPARTMENTAL VIEW BEFORE HIM, ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 9 RENDERED THE ASSESSMENT ORDER ERRONEOUS. THE CIT CO NCLUDED THAT THE OMISSION ON THE PART OF THE ASSESSING OFFICER LEAVING THE ISSUE UNCONSIDE RED HAS CAUSED PREJUDICE TO THE R EVENUE. HE HAS HELD THAT IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) OF THE ACT BY THE ASSESSING OFFICER, THOUGH ADDITION FOR ENTRY TAX AND ELECTRICITY DUTY EXEMPTION BENEFIT HAVE BEEN MADE BUT NO ADDITION WAS MADE IN RESPECT OF SALES TAX BENEFIT BY THE ASSESSING OFFICER. THE CIT HAS ALSO OBSERVED AS UNDER: I) THAT RS. 81.59 CRORES SHOWN BY THE ASSESSEE AS SALES TAX SUBSIDY/CAPITAL RESERVE UNDER THE HEAD REVENUE AND SURPLUS IN SCHEDULE - 2 OF THE BALANCE - SHEET AS ON 31.03.2008 , WAS NOT RECEIVED BY THE ASSESSEE FROM THE STATE GOVERNMENT. (II) THAT THE INVOICES WERE RAISED IN RESPECT OF INTER - STATE SALES FROM THE EXEMPTED UNIT, WITHOUT INCORPORATING ANY SALES TAX COMPONENT AND ENTIRE AMOUNT OF SALE PROCEEDS WERE CREDITED AS REVENUE ITEM TO THE P & L ACCOUNT, HOWEVER, AT THE FINANCIAL YEAR END TH E PROFIT OF THE ASSESSEE COMPANY WAS REDUCED BY PASSING JOURNAL ENTRY FOR APPROPRIATION OF RS. 81.59 CRORES AS SALES TAX SUBSIDY . II I ) THAT THE UNIT OF THE ASSESSEE WAS EXEMPT FROM PAYMENT OF SALES TAX AND THUS WAS NOT AUTHORIZE TO COLLECT ANY AMOUNT OF SALES TAX, HOWEVER, THE ASSESSEE ASSUMED THAT WITHIN THE TOTAL SALES PROCEED, THERE WAS A COMPONENT OF SALES TAX SUBSIDY, WHICH WAS EQUIVALENT TO THE AMOUNT OF EXEMPTED AMOUNT OF SALES TAX, WHICH WOULD HAVE BEEN PAYABLE BUT FOR SAID EXEMPTION BY THE STATE GOVERNMENT , NOT PAID. III) THAT THE ASSESSEE CLAIMED THE ABOVE SALES TAX EXEMPTION BENEFIT AS NON - TAXABLE CAPITAL SUBSIDY BUT THE ASSESSEE DID NOT SUBTRACT THE SAID AMOUNT FROM THE COST OF THE CAPITAL ASSET, ON WHICH DEPRECIATION WAS CLAIMED AND THUS THE ASSESSEE TOOK DOUBLE BENEFIT OF SOMETHING WHICH WAS ACTUALLY NOT RECEIVED FROM THE STATE GOVERNMENT; AND IV) THAT THE SALES TAX EXEMPTION WAS AVAILABLE TO THE ASSESSEE IN EARLIER YEARS ALSO AND THE PART OF WHICH WAS TREATED AS SALES TAX SUBSIDY , WAS NOT T AKEN TO THE BALANCE - SHEET, BUT IT WAS CLAIMED AS DEDUCTION AT THE TIME OF COMPUTATION OF INCOME AND THE ASSESSING OFFICER AS WELL AS THE CIT(A) REJECTED THE CLAIM OF THE ASSESSEE AND TREATED THE SAME AS REVENUE IN NATURE IN VIEW OF THE DECISION OF JURISDIC TIONAL HIGH COURT IN THE CASE OF ABHISHEK ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 10 INDUSTRIES LTD. 286 ITR 1 (P&H) WHEREIN IT IS HELD THAT SUBSIDY IN THE FORM OF SALES TAX EXEMPTION WAS REVENUE RECEIPT AND CHARGEABLE TO TAX. 9. IN RESPECT OF THE CLAIM OF THE ASSESSEE THAT ON MERIT THE ASSESSEE W AS ENTITLED FOR DEDUCTION OF SALES TAX SUBSIDY AS CAPITAL RECEIPT AND ASSESSING OFFICER HAD RIGHTLY ALLOWED, THE CIT IN HIS ORDER UNDER 263 OF THE ACT OBSERVED AS UNDER: I) NO RIGHT TO COLLECT SALES TAX. AS VIDE NOTIFICATION OF EVEN NO. 24 TH APRIL, 2000 TH E GOVT. OF MADHYA P RADESH EXEMPTED THE RAIGARH UNI T OF THE ASSESSEE COMPANY FROM LEVY OF SALES TAX. THE GOVT. WAS HAVING NO RIGHT OF COLLECTION AND TRANSFER THE SAME AMOUNT BACK TO THE ASSESSEE AS THE SUBSIDY, AS AGAINST THE SALES TAX DEFERMENT SCHEMES OF VARIOUS GOVERNMENTS, WHERE THE ASSESSEE WAS GIVEN RIGHT TO COLLECT THE SALES TAX AND RETAIN THE SAME FOR A PARTICULAR PERIOD AS A LOAN. FURTHER THE SALES TAX BENEFIT WAS NOT SPECIFIED IN THE SALES INVOICES ISSUED BY THE RELEVANT UNIT OF THE ASSESSEE. FURTH ER, ONLY ACCOUNTING ENTRIES HAVE BEEN PASSED AT THE END OF THE PREVIOUS YEAR TRANSFERRING THE AMOUNT CORRESPONDING TO THE SALES TAX EXEMPTED TO THE RESERVE AND SURPLUS ACCOUNT FROM THE SALES ACCOUNT. THE ENTIRE SALE PROCEEDS SHOWN IN INVOICE ACCRUED TO THE ASSESSEE BY WAY OF TRANSFERRING OF PROPERTY AND THE GOODS UNDER SALES AND BY NOT RECOGNIZING THE ENTIRE SALE PROCEEDS (SHOWN IN THE SALES INVOICE AS REVENUE), T HE ASSESSEE VIOLATED THE PROVISIONS OF SALES OF GOODS ACT AND PROVISIONS OF SECTION 145(2) OF T HE ACT IN THE LIGHT OF DEFINITION OF A CCRUAL AND SUBSTANCE OVER FORM ISSUED IN NOTIFICATION NO. SO 69(E) DATED 25.01.1996 BY THE CENTRAL GOVT. SINCE THERE WAS NO RIGHT OF THE STATE GOVT. IN RESPECT OF THIS AMOUNT THERE WAS NO QUESTION THAT THE STATE GOVERNMENT COULD GIVE IT TO THE ASSESSEE AND SINCE THE STATE GOVERNMENT COULD NOT GIVE ANYTHING, THERE WAS ABSOLUTELY NO QUESTION AS TO WHETHER IT WAS CAPITAL OR REVENUE RECEIPT AND THUS THE ACT OF THE ASSESSEE IN PASSING OF ENTRY AT THE YE AR ENDING TREATING PART OF THE SALE RECEIPTS AS CAPITAL SUBSIDY WAS AGAINST ALL PRINCIPLE OF LAW AS WELL AS ACCOUNTANCY. II) ONLY SIMPLE TAX EXEMPTION RATHER THAN SUBSIDY/INCENTIVE UNDER ANY SCHEME OF THE GOVT. OF MADHYA PRADESH. THE CLAIM OF THE ASSESS EE THAT T HE ASSESSEE COMPANY WAS GRANTED SALES TAX EXEMPTION VIDE NOTIFICATION OF EVEN NO. DATED 24 TH APRIL, 2000 , RELYING ON THE EARLIER NOTIFICATION OF EVEN NUMBERS DATED 3.6. 1993 AND INDUSTRIAL POLICY ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 11 OF 1994 OF GOVT. OF MADHYA PRADESH , WAS WITHOUT AN Y BASIS AS THERE WAS NO LIV E LINK BETWEEN THE NOTIFICATION OF 1993/INDUSTRIAL POLICY, 1994 AND THE NOTIFICATION OF EVEN NUMBER DATED 24 TH APRIL, 2000. THERE WAS NO MENTION OF ANY OBJECTS OF GRANTING EXEMPTION LIKE DEVELOPMENT OF BACKWARD AREAS OR GENERAT ION OF EMPLOYMENT ETC IN THE NOTIFICATION UNDER WHICH THE ASSESS WAS GRANTED EXEMPTION FROM PAYMENT OF CST . III) THE BENEFIT GRANTED UNDER THE NOTIFICATION WAS MORE THAN THE INVESTMENT MADE BY THE COMPANY IN THE SAID UNIT. (IV) THE INDUSTRIAL POLICY AND N OTIF ICATIONS ISSUED CLEARLY MENTIONED THAT THE SCHEME OF STATE CAPITAL INVESTMENT SUBSIDY WAS IN OPERATION BEFORE THE ISSUE OF NOTIFICATION IN THE CASE OF THE ASSESSEE AND IF THE ASSESSEE HAD AVAILED ANY BENEFIT UNDER THE SAID SCHEME, THE SAME WAS REQUIRED TO BE REFUNDED BACK. THUS THE EXEMPTION GRANTED WAS NOT PART OF ANY SCHEME OF SUBSIDY OR INDUSTRIAL POLICY. 10. FURTHERMORE CIT AFTER ANALYZING VARIOUS JUDGMENTS OF THE HON BLE SUPREME COURT AND THE HON BLE HIGH COURTS HELD THAT THE JUDGMENT IN THOSE CASES WERE NOT APPLICABLE TO THE FACTS OF THE CASE AS IN THE CASE OF THE ASSESSEE AS THERE WAS NO CLEAR SCHEME SPECIFYING THE OBJECTS OF DEVELOPMENT OR PROVIDING EMPLOYMENT ETC. AND IT WAS A MERE SIMPLE SALES TA X EXE MPTIONS. 11. AS REGARDS DEDUCTION OF RS. 1.81 CRORES UNDER THE HEAD PROVISION OF GRATUITY; THE CIT OBSERVED VARIATION IN THE STATUTORY LIABILITIES IN RESPECT OF PROVISION FOR LEAVE ENCASHMENT AND PROVISION FOR GRATUITY AMOUNTING TO RS. 2.55 CRORES AND THUS IN THE NOTICE ISSUED UNDER SECTION 263(1), THE CIT ASKED THE ASSESSEE AS WHY THAT THE ASSESSMENT ORDER MAY NOT BE HELD AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE ON THAT ISSUE. AFTER GETTING SUBMISSIONS FROM THE ASSESSEE, THE CIT WAS SATISFIED WITH THE EXPLANATION IN RESPECT OF LEAVE ENCASHMENT, HOWEVER, THE EXPLANATIONS IN RESPECT OF PROVISIONS FOR GRATUITY WAS NOT ACCEPTED. ACCORDING TO THE CIT FIGURES OF THE LAST YEAR COULD NOT BE RECONCILED AND THE ASSESSEE ALSO ACCEPTED OMISSION OF THE ADDITION OF RS. 88,00,000/ - ON GRATUITY LIABILITY TRANSFERRED TO GENERAL RESERVE. ACCORDING TO THE CIT FAILURE ON THE PART OF THE ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 12 ASSESSING OFFICER RENDERED THE ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE ON THAT ISSUE. 12. AS REGARDS ADDITIONAL DEPRECIATION OF RS. 5,91,106/ - ON COMPUTER SOFTWARE PRIMAVERA , THE CIT OBSERVED THAT THE ASSESSEE COMPANY CLAIMED THE ADDITION AL DEPRECIATION OF RS. 5,91 , 106/ - ON THE COMPUTER SOFTWARE PRIMA VERA , WHICH ACCORDING TO THE CIT WAS ENTITLED FOR BEING OFFICE APPLIANCES/MACHINERY AND NOT PART OF THE PLANT AND MACHINERY ENGAGED IN THE MANUFACTURING AND THUS IN THE NOTICE ISSUED UNDER SECTION 263(1), THE CIT ASKED AS TO WHY THE ASSESSMENT ORDER MAY NOT BE SUITABLY MODIFIED AS IT WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE ON THIS ISSUE. THE CONTENTIO N OF THE ASSESSEE WAS THAT SOFT WARE PRIMA VERA WAS FOCUSED EX CLUSIVELY ON HELP ING THE PROJECT INTENSIVE BUSINESS , MANAGE THE ENTIRE PROJECT PORTFOLIO LIVE CYCLE AND IT WAS A MULTI PLANNING PROJECT. FURTHER, THE ASSESSEE SUBMITTED THAT TH E SOFTWARE WAS FOR ENABLING ONLINE MANAGEMENT OF PROJECTS AT VARIOUS SITE LOCATIONS IN PRO - ACTIVE COORDINATION WITH RESPECTIVE PERSON AL COMMENCING FROM PROJECT CONCEPTUALIZATION, FINALIZ ATION OF PROJECTS , REAL TIME MONITORING AND INFORMATION EXCHANGE WITH SITE ON PROGRESS MADE ETC. ACCORDING TO THE CIT THE SOFTWARE WAS NOT ACTUALLY INSTALLED WITHIN ANY MANUFACTURING MACHINERY AND IT WAS INDEPENDENT OFFICE EQUIPM ENT WHICH HELPED THE ASSESS EE TO MANAGE THE PROJECT IN BETTER WAY S . THUS, IT WAS ONLY OFFICE EQUIPMENT AND NOT ELIGIBLE FOR ADDITIONAL DEPRECIATION AVAILABLE IN RESPECT OF PLANT AND MACHINERY USED IN MANUFACTURING ACTIVITY. THUS, FAILURE ON THE PART OF THE ASSESSING OFFICER TO CONSI DER THIS ISSUE CAUSED A PREJUDICE TO THE REVENUE ACCORDING TO THE CIT. AGGRIEVED WITH THE ORDER OF THE CIT, THE ASSESSEE FILED AN APPEAL BEFORE US. ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 13 13. AT THE TIME OF HEARING BEFORE US , THE LD AUTHORIZED REPRESENTATIVE OF THE ASSESSEE (I N SHORT AR ) REFERRED TO THE APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE IN TERMS OF RULE 29 OF THE INCOME - TAX (APPELLATE TRIBUNAL) RULES, 1963 CONTAINING CERTAIN DOCUMENTS/NOTIFICATION/CORRESPONDENCE BETWEEN VARIOUS DEPARTMENTS OF THE STATE GOVERNME NT AND THE REPRESENTATIVE S OF THE ASSESSEE COMPANY. ACCORDING TO THE LD. AUTHORIZED REPRESENTATIVE , THE SAID DOCUMENTS/NOTIFICATIONS/CORRESPONDENCES WERE RECEIVED RECENTLY BY THE ASSESSEE UNDER THE RIGHT TO INFORMATION ACT AND, THEREFORE, THE SAME COULD NO T BE SUBMITTED BEFORE EITHER THE ASSESSING OFFICER OR THE COMMISSIONER OF INCOME TAX IN PROCEEDINGS UNDER SECTION 263 OF THE ACT. HE FURTHER SUBMITTED THAT THESE EVIDENCES WERE CRUCIAL FOR ADJUDICATION OF GROUNDS OF THE APPEAL FILED BY THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT THESE DOCUMENTS WERE FILED ONLY IN SUPPORT OF THE AVERMENT OF THE ASSESSEE BEFORE THE LOWER AUTHORITIES. THE LD AR DRAWN OUR ATTENTION TO THE JUDGMENT OF THE HON BLE DELHI HIGH COURT IN THE CASE OF THE CIT V TEXT HUNDRED INDIA (P. ) LTD 351 ITR 57, WHEREIN THEIR LORDSHIP HAS HELD THAT RULE 29 IS MADE TO ENABLE THE TRIBUNAL TO ADMIT ANY ADDITIONAL EVIDENCE WHICH WOULD BE NECESSARY TO DO SO SUBSTANTIAL JUSTICE IN THE MATTER. 14. ON THE OTHER HAND, THE COUNSEL OF THE REVENUE SH . MANCHA NDA OPPOSED ADMISSION OF THE ADDITIONAL EVIDENCE S STATING THAT E NGLISH VERSION OF MOST OF THE CORRESPONDENCES/NOTIFICATIONS WERE ALREADY CONSIDERED AND REPRODUCED BY THE CIT IN THE IMPUGNED ORDER. THE LD. COUNSEL FURTHER SUBMITTED THAT SUFFICIENT OPPORTUNI TY WAS ALREADY PROVIDED TO THE ASSESSEE BY LD. ASSESSING OFFICER IN PROCEEDINGS UNDER SECTION 143(3) AND ALSO BY THE LD. CIT IN THE PROCEEDINGS UNDER SECTION 263 OF THE ACT. FURTHER, THE LD COUNSEL SUBMITTED THAT THE ADDITIONAL EVIDENCES ARE SUBMITTED IN R ESPECT OF ADDITION OF SALES TAX SUBSIDY AND THAT ISSUE HAS ALREADY BEEN DISCUSSED AT LENGTH BY THE TRIBUNAL FOR AYS 2002 - 03, 2004 - 05 AND 2005 - 06 AND THE ISSUE IN ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 14 DISPUTE HAS BEEN HELD AGAINST THE ASSESSEE. IN THE REJOINDER, LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT THE CORRESPONDENCE WITH VARIOUS DEPARTMENT OF THE STATE GOVT. IS HAVING BEARING ON THE ISSUE IN DISPUTE IN RESPECT OF SALES TAX SUBSIDY AND ALL THESE INFORMATION COULD ONLY BE COLLECTED THROUGH THE RIGHT TO INFORMATION ACT (RTI) AND THUS COULD NOT BE P RODUCED IN EARLIER PROCEEDINGS. 15. WE HAVE HEARD THE RIVAL SUBMISSIONS ON THE ISSUE OF ADMISSION OF ADDITIONAL EVIDENCE S . THE ADDITIONAL EVIDENCE S ARE UNDISPUTEDLY CORRESPONDENCE WITH THE VARIOUS DEPARTMENTS OF GOVT. OF MADHYA PRADESH IN RESPECT OF THE ISSUE IN DISPUTE. IT IS ALSO SEEN THAT THESE DOCUMENTS WERE NORMALLY NOT AVAILABLE IN PUBLIC DOMAIN AND THE ASSESSEE COULD OBTAIN ED THROUGH QUERY UNDER RIGHT TO INFORMATION ACT (RTI ) AND THUS WE FEEL IT APPROPRIATE TO ADMIT TH ESE EVIDENCES FOR CONSIDERATION, AND THUS WE ADMIT ACCORDINGLY. 16. AT THE TIME OF HEARING, LD. AUTHORIZED REPRESENTATIVE / COUNSEL FOR THE ASSESSEE HIGHLIGHTED THE LEGAL POSITION AS HELD BY VARIOUS COURTS IN RESPECT OF SECTION 263 OF THE ACT . R EFERRING TO THE JUDGMENT OF HON BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT, REPORTED IN 243 ITR 83, T HE LD. AUTHORIZED REPRESENTATIVE SUBMITTED T HAT UNDER SECTION 263 OF THE ACT , THE COMMISSIONER CAN REVISE THE ORDER OF THE ASSESSMENT ONLY IF THE TWIN CONDITIONS I.E. THE ORDER IS ERRONEOUS AND THE ORDER IS PREJUDICIAL TO THE INTEREST OF REVENUE , ARE SATISFIED CUMULATIVELY. THE LD. AR ALSO REFERRED TO THE JUDGMENT OF THE HON BLE APEX COURT IN THE CASE OF CIT V. MAX INDIA LTD. 295 ITR 282 I N THIS REGARD. FURTHER THE LD. AR SUBMITTED THAT ONCE THE RELEVANT DETAILS/DOCUMENTS ARE AVAILABLE ON RECORD AND A VIEW CAN BE FORMED BY THE ASSESSING OFFICER ON TH E BASIS OF MATERIAL AVAILABLE ON RECORD AND IT MAY NOT BE NECESSARY FOR THE ASSESSING OFFICER TO CONDUCT THE DETAILED INQUIRY. IN SUPPORT OF THE PROPOSITION, HE RELIED ON THE ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 15 JUDGMENT OF THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. EICHER INDIA LTD , 294 ITR 310 (DEL.). FURTHER, THE LD. AR MADE A PROPOSITION THAT WHERE ON A PARTICULAR ISSUE ALL THE MATERIAL FACTS ARE AVAILABLE ON RECORD SUFFICIENT TO FORM AN OPINION ON THE MATTER THAT EVEN IF NO INQUIRY WAS CONDUCTED BY THE ASSESSING OFFICER DURING T HE ASSESSMENT PROCEEDINGS, THE ASSESSMENT ORDER CANNOT BE HELD TO BE ERRONEOUS SO AS TO EXERCISE THE JURISDICTION UNDER SECTION 263 OF THE ACT. IN SUPPORT OF THE ABOVE, THE LD. AR PLACED RELIANCE ON THE JUDGMENT OF THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT V. DLF LTD., 350 ITR 555 AND CIT V HERO AUTO LTD., 343 ITR 342 (DEL.). IN HIS WRITTEN SUBMISSION , HE PROVIDED A LONG LIST OF JUDGMENTS OF VARIOUS HIGH COURTS. FURTHER, THE LD. AR SUBMITTED THAT WHEREIN THE ISSUE HAS BEEN EXAMINED BY THE ASSESSING OF FICER, THE CIT(A) CANNOT SET ASIDE THE ASSESSMENT MERELY BECAUSE ACCORDING TO THE CIT, THE INQUIRY SHOULD HAVE BEEN CONDUCTED IN A PARTICULAR MANNER AND/OR FURTHER INQUIRY OUGHT TO HAVE BEEN CONDUCTED BY THE ASSESSING OFFICER. FURTHER, HE STATED THAT N O JU RISDICTION UNDER SECTION 263 OF THE ACT CAN BE ASSUMED MERELY ON THE INADEQUACIES OF THE INQUIRY. IN SUPPORT OF THE ABOVE PROPOSITION, HE RELIED ON THE JUDGMENT OF THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT V NEW DELHI TELEVISION LTD. 360 ITR 44 AND L IST OF OTHER DECISIONS WHICH WERE GIVEN IN THE WRITTEN SUBMISSION . FURTHER, THE LD. AR SUBMITTED THAT WHERE TWO VIEW S ARE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN THE ONE VIEW WITH WHICH THE COMMISSIONER IS NOT AGREE D, THEN THE ASSESSMENT ORD ER CANNOT BE HELD AS ERRONEOUS, UNTIL T HE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. IN SUPPORT OF THE PROPOSITION ALSO , THE LD. AR SUBMITTED A LIST OF CASES INCLUDING THE JUDGMENT OF THE HON BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. (SUPRA) AND MAX INDIA LTD. (SUPRA) AND OTHER OF CASES. 17. FURTHER ON FACTS OF THE CASE, THE LD AR SUBMITTED THAT THE SALE TAX SUBSIDY RECEIVED OF RS. 81.5 CRORES WAS A CAPITAL RECEIPT AND NOT LIAB LE TO TAX. HE SUBMITTED ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 16 THAT FROM THE YEAR 2000 NEW INDUSTRIAL UNIT WAS SET UP AT RAIGARH IN THE STATE OF MADHYA PRADESH BY THE ASSESSEE. IT WAS CONTENDED THAT GOVT. OF MADHYA PRADESH VIDE NOTIFICATION DATED 24.4.2000 READ WITH NOTIFICATION DATED 3.6.199 3 , EXEMPTED THE ASSESSEE COMPANY U/S 8(V) OF THE CENTRAL SALES TAX ACT 1956 FROM PAYMENT OF CENTRAL SALES TAX. IT WAS THUS SUBMITTED THAT IN ACCORDANCE WITH THE ABOVE SCHEME OF EXEMPTION, RS. 81.59 CRORES WAS AVAILED ON ACCOUNT OF SALES TAX IN THE INSTANT YEAR. IT WAS SUBMITTED THAT SUCH A EXEMPTION WAS PROVIDED TO THE APPELLANT FOR SETTING UP NEW INDUSTRIAL UNIT IN THE BACKWARD AREA, TO PROMOTE INDUSTRIALIZATION , CREATE EMPLOYMENT AND THEREFORE SUCH AN INCENTIVE WAS AN CAPITAL RECEIPT. AS REGARDS THE COM PLETE DISCLOSURE OF FACTS OF SALES TAX SUBSIDY/ INCENTIVE, IT WAS SUBMITTED THAT SUCH INCENTIVE WAS DISCLOSED UNDER THE SUB - HEAD SALES TAX SUBSIDY/CAPITAL RESERVE IN SCHEDULE 2 TO RESERVES AND S URPLUS OF BALANCE SHEET IN COMPLIANCE WITH ACCOUNTING STANDARD 12 I.E. ACCOUNTING FOR GOVERNMENT GRANTS ISSUED BY INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA (ICAI). THE LD. AR FURTHER INVITED OUR ATTENTION TO THE NOTIFICATION ISSUED BY THE GOVT. OF MADHYA PRADESH TO CONTEND THAT THE OBSERVATION OF THE CIT THAT THE SALES TAX SUBSIDY WAS A REVENUE RECEIPT WAS AN ERRONEOUS OBSERVATION. HE EMPHASIZED THAT THE SCHEME/NOTIFICATION WERE AVAILABLE ONLY TO INDUSTRIAL UNITS AND THEREFORE ANY BENEFIT/INCENTIVE WAS INTENDED FOR THE INDUSTRIAL AND ECONOMIC DEVELOPMENT OF THE S TATE AND THEREFORE A CAPITAL RECEIPT. HE PLACED RELIANCE ON THE JUDGMENT OF THE APEX COURT IN THE CASE OF VSSV MEENAKSHI ACHI 60 ITR 253 AND SAHNI STEEL AND PRESS WORKS LTD. VS. CIT 228 ITR 253 TO SUBMIT THAT THE CHARACTER OF THE SUBSIDY IS TO BE DETERMIN ED HAVING REGARD TO THE PURPOSE AND THE SUBSIDY WAS TO HELP THE ASSESSEE TO SETUP A INDUSTRIAL UNIT IN BACKWARD AREA , HENCE SUCH A SUBSIDY IS TO BE TREATED AS CAPITAL RECEIPT AND NOT REVENUE RECEIPT. FURTHER IT WAS SUBMITTED THAT SPECIAL BENCH OF THE TRI BUNAL IN THE CASE OF DCIT VS. RELIANCE INDUSTRIES LTD. 88 ITD 273 (MUM) (SB) ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 17 DEALT WITH A SIMILAR ISSUE AND HELD THAT EXEMPTION FROM LIABILITY FROM PAYMENT OF SALES TAX FOR A PERIOD OF FIVE YEARS IS A CAPITAL RECEIPT NOT LIABLE TO TAX. IT WAS SPECIFICALL Y HIGHLIGHTED THAT THE BASIS ADOPTED BY THE CIT IN THE IMPUGNED ORDER IS IDENTICAL TO WHAT WAS ADOPTED BEFORE THE SPECIAL BENCH AND SINCE THE OBJECT IVES OF THE SCHEME APPLICABLE TO THE ASSESSEE ARE PARI MATERIA WITH THE INCENTIVES SCHEME BEFORE THE SPECIAL BENCH , APPLYING THE PURPOSE TEST THE SALES TAX INCENTIVE BE HELD TO BE A CAPITAL RECEIPT. IT WAS CONTENDED THAT THE FINDING OF CIT THAT SUBSIDY WAS GRANTED FOR DAY - TO - DAY BUSINESS FUNCTION WAS CONTRARY TO THE PURPOSE OF THE SCHEME WHICH IS TO BRING ABOUT NECESSARY INFRASTRUCTURE IN THE BACKWARD AREA OF THE STATE. IT WAS FURTHER SUBMITTED THAT EVEN THE OBSERVATION OF THE CIT THAT THE SUBSIDY EXEMPTION WAS HYPOTHETICAL , IS INCORRECT. IT WAS STATED THAT THE CIT HAS FAILED TO APPRECIATE THAT IN VIEW OF THE EXEMPTION NO SALES TAX WAS SEPARATELY CHARGED IN THE INVOICE , BUT THAT COULD NOT CHANGE THE BASIC CHARACTER OF THE INCENTIVE GRANTED TO THE APPELLANT COMPANY. OUR ATTENTION WAS DRAWN TO FEW BILLS TO STATE THAT FINAL PRICE OF THE PRODUCTS SOLD BY THE APPELLANT COMPANY BOTH FROM THE EXEMPT UNIT AND NON EXEMPT UNIT WAS IDENTICAL AND THEREFORE MERE FACT THAT SALES TAX WAS NOT CHARGED SPECIFICALLY IN CASE OF AN EXEMPT UNIT, IT COULD NOT BE HELD THAT SUCH INCENTIVE W AS NOTIONAL. IT WAS FURTHER CONTENDED THAT THE OBSERVATION OF THE CIT THAT APPELLANT WAS UNABLE TO LINK THE SUBSIDY WITH SCHEME OF THE GOVERNMENT WAS ALSO UNSUSTAINABLE. IT WAS ALSO SUBMITTED THAT THE CIT HAS ERRONEOUSLY APPLIED THE JUDGMENT OF APEX COURT IN THE CASE OF PONNI SUGARS & CHEMICALS LTD. (SUPRA) TO HOLD THAT SUCH SUBSIDY IS REVENUE RECEIPT. IT WAS SUBMITTED THAT MERE FACT THAT THE AMOUNT OF SUBSIDY WAS TO BE UTILIZED FOR THE REPAYMENT OF TERM LOAN WAS NOT THE BASIS FOR THE APEX COURT IN THE CA SE OF POONI SUGAR (SUPRA) TO HOLD THAT SUBSIDY WAS A CAPITAL RECEIPT. IT WAS SUBMITTED THAT IN FACTS OF THE CASE THERE WAS NO SPECIFIC OBLIGATION IN THE SCHEME FOR UTILIZATION OF SUBSIDY BUT AS A MATTER OF FACT ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 18 THAT ASSESSEE HAD NO OTHER ALTERNATIVE BUT T O UTILIZE SUBSIDY FOR REPAYMENT OF SECURED BORROWING. THE LEARNED AR EMPHASIZED THAT SUCH AN TREATMENT HAS NO APPLICATION TO REGARD THE RECEIPT AS REVENUE RECEIPT. IT WAS FURTHER SUBMITTED THAT NO DOUBT THAT IN THE CASE OF THE ASSESSEE IN ASSESSMENT YEAR 2002 - 03, 2004 - 05 AND 2005 - 06 IN ITA NOS 368/D/2009, 3319/D/2008 AND 168/D/2009 HAS VIDE SEPARATE ORDERS HELD THAT THE SUBSIDY TO BE REVENUE RECEIPT AND APPEALS FILED BY ASSESSEE ARE PENDING BEFORE THE HON BLE JURISDICTIONAL HIGH COURT O F PUNJAB & HARYANA YET SINCE SUCH A DECISION IS CONTRARY TO THE BINDING DECISION OF SPECIAL BENCH IN THE CASE OF RELIANCE INDUSTRIES (SUPRA) THEREFORE THE SAME CANNOT BE TREATED AS BINDING PRECEDENT. HE HAS FURTHER REFERRED TO VARIOUS PARAGRAPHS OF THE ORD ER OF TRIBUNAL FOR THE A.Y. 2004 - 05 TO CONTEND THAT SUCH A CONCLUSION WAS NOT IN ACCORDANCE WITH THE DECISION OF SPECIAL BENCH. IT WAS SPECIFICALLY SUBMITTE D THAT THE APPEAL FILED BY THE R EVENUE AGAINST THE ORDER OF SPECIAL BENCH STANDS DISMISSED BY THE H ON BLE BOMBAY HIGH COURT VIDE JUDGMENT REPORTED AS CIT VS. RELIANCE INDUSTRIES LTD. 339 ITR 632 AND ON FURTHER APPEAL THE HON BLE SUPREME COURT IN CIVIL APPEAL NO. 7769 OF 2011 MERELY SET ASIDE THE ORDER OF BOMBAY HIGH COURT AND DIRECTED HIGH COURT TO CONS IDER THE MATTER ON MERITS BUT SUCH A FINDING DOES NOT OVERRULE OR SET - ASIDE THE DECISION OF SPECIAL BENCH WHICH CONTINUES TO BE OPERATING AND BINDING. HE FURTHER ALSO DREW OUR ATTENTION TO NOTES TO ACCOUNTS OF THE AUDITED FINANCIAL STATEMENT, AUDIT REPORT AND TAX AUDIT REPORT TO SUBMIT THAT COMPLETE DISCLOSURE WAS MADE BY THE APPELLANT COMPANY AND VIEW TAKEN BY THE AO WAS A PLAUSIBLE VIEW WHICH COULD NOT BY ANY STRETCH OF ARGUMENTS BE REGARDED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE WARRANT ING EXERCISE OF REVISIONARY JURISDICTION U/S 263 OF THE ACT. HE FURTHER SUBMITTED THAT DURING THE ASSESSMENT PROCEEDINGS THE SPECIFIC QUERY WAS RAISED BY QUESTIONNAIRE 1.2.2010 AND SAME WAS REPLIED VIDE REPLY DATED 12.11.2010 AND THEREFORE THE PRESUMPTION OF CIT THAT THE ISSUE WAS NOT ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 19 EXAMINED IN ABSENCE OF AN OFFICE NOTE IS INCORRECT WITH THE FACT , WHICH CLEARLY DEMONSTRATE THAT ENQUIRIES WERE MADE BY THE ASSESSING OFFICER. 18. IT WAS FURTHER SUBMITTED THAT THE ALLEGATION OF CIT THAT DISALLOWANCE OF PRO VISION FOR GRATUITY EXPENSES WAS LOWER ON THE GROUND THAT THERE WAS A DIFFERENCE IN THE AMOUNT OUTSTANDING STATUTORY LIABILITIES AS PER BALANCE SHEET AS ON 31.3.2008 AND AMOUNT OUTSTANDING AS PER TAX AUDIT REPORT , WAS ALSO NOT JUSTIFIED. IT WAS SUBMITTED THAT COMPLETE DISCLOSURE VIZ - A - VIZ THE AFORESAID PROVISION WAS MADE BY THE ASSESSEE AND SUCH ISSUE WAS SPECIFICALLY EXAMINED BY THE AO DURING THE ASSESSMENT PROCEEDINGS AS WOULD BE SEEN FROM REPLY DATED 12.7.2010 AND 15.9.2010, COPI ES PLACED ON RECORD. LAS TLY , EVEN VIZ - A - VIZ THE ADDITIONAL DEPRECIATION IT WAS SUBMITTED THAT CO MPUTER SOFTWARE ALSO CONSTITUTED PLANT AND MACHINERY WHICH WAS FOR ELIGIBLE DEPREC I ATION U/S 32(1)(II)(A) OF THE ACT. HE SUPPORTED HIS CONTENTION BY THE JUDGMENT OF GUJARAT HIGH COURT IN THE CASE OF CIT VS. STATRONICS & ENTERPRISES (P.) LTD. 288 ITR 455 AND CIT VS. RADLA MACHINERY EXPORT 155 TAXMAN 131 (ALL). IT WAS FURTHER SUBMITTED THAT VIZ - A - VIZ THE AFORESAID CLAIM COMPLETE DISCLOSURE WAS MADE WHICH WAS DULY EXAMINED BY THE LEARNED A O IN THE ORDER OF ASSESSMENT. HAVING REGARD TO THE ABOVE , IT WAS SUBMITTED THAT THE ORDER OF ASSESSMENT WAS FRAMED WITH DUE APPLICATION OF MIND AND AFTER CONSIDERING ALL REQUISITE INFORMATION AND EXPLANATION TENDERED AND THEREFORE SUCH AN ORDER COULD NOT B E REGARD AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE, SO AS TO EXERCISE JURISDICTION U/S 263 OF THE ACT. 19. BEFORE US THE LD COUNSEL FOR THE R EVENUE SH. ASHOK MANCHANDA ALONGWITH LD. CIT DR SH. SA ROHA PLEADED THAT ORDER IN EXERCISE OF POWER U/S 263 OF THE ACT WAS IN ACCORDANCE WITH LAW. IT WAS SUBMITTED THAT MAJOR ISSUE IN THIS CASE REVOLVES AROUND THE AMOUNT OF RS. 81.59 CRORES WHICH THE ASSESSEE CLAIMED AS CAPITAL ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 20 RECEIPT WHEREAS BY THE R EVENUE S ST ANDS IT IS REVENUE RECEIPT. IT WAS CONTENDED BY THE LD. COUNSEL OF THE REVENUE THAT THE FACTS OF THE VARIOUS CASES RELIED UPON BY THE LD AR ARE DIFFERENT FROM THE FACTS OF THE ASSESSEE AND THUS RATIOS OF THOSE CASES WERE NOT APPLICABLE ON THE ISSUE IN DISP UTE. IT WAS FURTHER SUBMITTED THAT IN THE CASE OF THE ASSESSEE THE SALES TAX EXEMPTION WAS MERELY I N THE NATURE OF REVENUE RECEIPT FROM AN EXEMPTION GRANTED BY THE GOVERNMENT AND NOT IN THE NATURE OF SUBSIDY OR INCENTIVE TO BE CONSIDERED AS CAPITAL RECEIPT S. AS REGARDS TO DISCLOSURE OF THE TRANSACTIONS OF SALES TAX EXEMPTION , THE LD. COUNSEL OF THE REVENUE SUBMITTED THAT IN THE YEARS PRIOR TO THE YEAR UNDER CONSIDERATION, THE RECEIPTS CORRESPONDING TO SALES - TAX EXEMPTION WERE SHOWN AS PART OF SALES RECEIP TS IN TRADING ACCOUNT AND THE ASSESSEE USED TO CLAIM THE DEDUCTION HOLDING THE SAME AS CAPITAL RECEIPTS IN THE STATEMENT OF COMPUTATION OF INCOME, BUT IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE AT THE END OF THE YEAR TRANSFERRED THE SAID SUM CORRESPOND ING TO THE SALES TAX EXEMPTION DIRECTLY TO RESERVE AND SURPLUS ACCOUNT AS PART OF BALANCE SHEET AND DID NOT CLAIM THE SAME UNDER THE STATEMENT OF COMPUTATION OF INCOME. THIS WAS A MARKED DEPARTURE FROM THE ACCOUNTING POLICY FOLLOWED BY THE ASSESSEE IN EAR LIER YEARS , AND DESPITE THIS DEPARTURE, THE ASSESSEE OMITTED TO MAKE NECESSARY DISCLOSURE IN THE RETURN OF INCOME FILED. THE LD COUNSEL SUBMITTED THAT THIS TREATMENT TO THE SALES - TAX EXEMPTION WAS DONE DELIBERATELY TO AVOID ANY NOTICE BY THE ASSESSING OFFI CER. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS MADE ACCOUNTING ENTRY OF TRANSFER OF SALES - TAX EXEMPTION DIRECTLY TO RESERVE AND SURPLUS ACCOUNT , STATED TO BE FOLLOWING ACCOUNTING GUIDELINES IN RESPECT OF GOV ERNMENT GRANTS BUT THE ASSESSEE FAILED TO EXPL AIN AS WHY TH E SAME ACCOUNTING GUIDELINES WERE NOT FOLLOWED IN CASE OF OTHER EXEMPTION S OF ELECTRICITY DUTY AND ENTRY TAX, ETC . THE LD COUNSEL OF THE REVENUE SUBMITTED THAT THE ORDER OF THE ASSESSING OFFICER WAS ERRONEOUS AS HE FAILED TO APPLY MIND TO THE POSITION OF THE CLAIM OF THE REVENUE IN EARLIER YEARS, ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 21 WHERE THE REVENUE WAS CONSISTENTLY DISALLOWING THE SALES - TAX EXEMPTION CLAIMED BY THE ASSESSEE AS CAPITAL RECEIPT BEFORE THE ASSESSING OFFICER AND THE APPEAL S OF THE ASSESSE E WERE DISMISSED BY THE CIT (A) . THE COUNSEL SUBMITTED THAT NO QUERY WAS MADE BY THE AO ON THE ISSUE OF SALES - TAX EXEMPTION AND THEREFORE HE CANNOT TO BE DEEMED TO HAVE FORMED A VIEW ON THIS POINT IN THE ASSESSMENT ORDER. HE FURTHER SUBMITTED THAT INADVERT ENT MENTION OF THE WORD SALES - TAX BY THE AO IN COMPOSITE QUERY IN RELATION TO OTHER EXEMPTIONS OF ENTRY TAX AND ELECTRICITY DUTY CANNOT BE TERMED AS ENQUIRY DONE IN RESPECT OF SALES - TAX EXEMPTION AND HAD THE AO AWARE OF THE SALES TAX EXEMPTION AMOUNT IN CLUDED IN SUM OF THE ENTRY TAX AND ELECTRICITY DUTY, HE WOULD HAVE TAKEN THE SAME VIEW THAT HE HAD TAKEN IN RESPECT OF ENTRY TAX AND ELECTRICITY DUTY AND NO DIFFERENT VIEW WOULD HAVE BEEN TAKEN AND THUS THE VIEW OF THE CIT HAS NOT SUBSTITUTED THE VIEW OF THE ASSESSING OFFICER. THE LD. COUNSEL OF THE REVENUE CONTENDED THAT THERE WAS NO OFFICE NOTE B Y THE ASSESSING OFFICER TO JUSTIFY CHANGE IN STAND. THE REVENUE RELIED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF NIIT VS CIT REPORTED AT (2015) 60 TAXMANN. COM 313 (DELHI), JUDGEMENT OF THE HIGH COURT OF MADRAS IN THE CASE OF CIT VS SMT LAXMI NARAYANA REPORTED AT 157 ITR 816, JUDGMENT OF HIGH COURT OF DELHI IN THE CASE OF CIT V. GOETZ (INDIA) LTD. 361 ITR 505 AND SUBMITTED THAT IT WAS A CASE OF NO ENQUIRY AND DUE TO THESE ERRORS ON THE PART OF THE ASSESSING OFFICER PREJUDICE WAS CAUSED TO THE REVENUE AND THE CIT WAS FULLY JUSTIFIED IN DIRECTING THE AO TO PASS A FRESH ASSESSMENT ORDER. HE ALSO RELIED ON THE FOLLOWING JUDGEMENTS IN SUPPORT OF HIS CONTENTION THAT THE AO HAS NOT APPLIED HIS MIND TO THE FACTS OF THE ASSESSEE AND NON A PPLICATION OF MIND HAS RESULTED IN ASSESSMENT ORDER AS ERRONEOUS AS PREJUDICIAL TO THE REVENUE: I) MALABAR INDUSTRIAL CO. LTD VS CIT 243 ITR 83 (SC) II) GEE VEE ENTERPRISE VS. ADDL CIT 99 ITR 375 (DELHI) ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 22 III) K.A. RAMASWAMY CHETTIAR V CIT 220 ITR 657 (M AD) IV) TOYOTA MOTOR CORPORATION V CIT 306 ITR 52 (SC) 20. THE LD COUNSEL OF THE REVENUE ALSO PRESENTED IN DETAIL THAT EVEN ON MERIT, THE ISSUE OF SALES - TAX EXEMPTION AS REVENUE RECEIPT IN THE HANDS OF THE ASSESSEE STOOD IN FAVOUR OF THE REVENUE. HE NARR ATED IN DETAILS THE CONCERNED NOTIFICATIONS ISSUE BY THE GOVERNMENT OF MADHYA PRADESH GRANTING EXEMPTION FOR CENTRAL SALES - TAX (CST), ENTRY TAX, ELECTRICITY DUTY AND SUBMITTED THAT THOSE NOTIFICATIONS WERE NOT LINKED IN ANY WAY WITH THE INDUSTRIAL POLICY OF THE STATE OF MADHYA PRADESH AND THE LETTERS OF CORRESPONDENCE BETWEEN THE MANAGEMENT OF THE COMPANY AND THE OFFICIAL OF THE GOVERNMENT OF MADHYA PRADESH ALSO COULD NOT ESTABLISH THAT NOTIFICATION UNDER WHICH EXEMPTION WAS GRANTED TO THE ASSESSEE WAS A R ESULT OF INDUSTRIAL POLICY OF THE GOVERNMENT AND THUS VARIOUS DECISIONS AND JUDGMENTS RELIED UPON BY THE ASSESSEE IN RESPECT OF THE ISSUE WHETHER THE SALES - TAX SUBSIDY IS A CAPITAL SUBSIDY OR REVENUE SUBSIDY WERE NOT APPLICABLE OVER THE FACTS OF THE ASSESS EE. IT WAS FURTHER CONTENDED THAT THERE WAS IMPROPER DISCLOSURE ON PART OF THE ASSESSEE IN TAX AUDIT R EPORT AND NOTE 5 OF SCHEDULE 2 0 TO THE BALANCE SHEET ALSO DID NOT STATE THAT SALES TAX SUBSIDY WAS OF A CAPITAL NATURE. IT HAS BEEN ALSO CONTENDED THAT D OUBLE BENEFIT HAS BEEN CLAIMED BY INCLUDING SALES TAX SUBSIDY AS PART OF ELIGIBLE PROFIT UNDER SECTIONS 80IA/80IB OF THE ACT AND BY NOT REDUCING THE SAME FROM COST OF ASSETS AS PER EXPLANATION 10 TO SECTION 43(1) OF THE ACT. IT WAS ALSO SUBMITTED THAT SALE S TAX SUBSIDY CLAIMED BY THE ASSESSEE WAS NOTIONA L IN NATURE AS THE ASSESSEE DID NOT CHARG E THE SAME IN INVOICE(S). THE R EVENUE HAS RELIED ON THE DECISION OF TRIBUNAL IN ASSESSEE S OWN CASE FOR ASSESSMENT YEAR 2004 - 05. IT WAS ALSO CONTENDED THAT SALES TA X FORMED PART OF TRADING RECEIPTS AND THERE WAS NO SPECIFIC SECTION FOR EXCLUDING THE SAME. IT WAS FURTHER CONTENDED THAT ASSESSEE ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 23 COULD NOT PRODUCE SUFFICIENT NUMBER OF INVOICES PERTAINING TO THE RELEVANT PERIOD COMPARABLE IN TERMS OF QUALITY, QUANTITY A ND TIME IN CASE OF TWO TYPES OF SALES. THE LEARNED CIT DR CONTENDED THAT THE ASSESSEE DID NOT TAKE AN ALTERNATE PLEA BEFORE THE LOWER AUTHORITIES TO ALLOW CLAIM OF RS. 81.59 CRORES UNDER SECTION 80IB OF THE ACT IN CASE SALES TAX SUBSIDY BE NOT HELD TO BE NON TAXABLE CAPITAL RECEIPT , GOES TO SUBSTANTIATE THAT THE AMOUNT WAS IN THE NATURE OF TAXABLE REVENUE RECEIPT . IT WAS FURTHER CONTENDED THAT SUBSIDY HAS BEEN ASSIGNED A VERY NARRO W MEANING AS PER OXFORD ADVANCED LEARNED DICTIONARY TO INCLUDE ONLY CASES WHERE MONEY IS ACTUALLY PAID . IT WAS ALSO CONTENDED THAT DISCLOSURES MADE IN TAX AUDIT REPORT AND OTHER DOCUMENTS WERE NOT RELEVANT. 21. SO FAR AS THE SECOND ISSUE IS CONCERNED , I T WAS SUBMITTED THAT THERE WAS DIFFERENCE OF RS. 1.81 CRORES UNDER THE HEAD PROVISION FOR GRATUITY . THE R EVENUE CONTENDED THAT INSTEAD OF DISALLOWANCE OF RS. 49.41 LAKHS ENTIRE AMOUNT OF RS. 1.92 CRORES OUGHT TO HAVE BEEN DISALLOWED UNDER SECTION 40A(7) OF THE ACT. IT WAS FURTHER CONTENDED THAT APPELLANT HAD NOT FILED RECONCILIATION AND LEDGER ACCOUNT OF GRATUITY IN THE ASSESSMENT PROCEEDINGS AND HAD IN FACT CONC LUDED THAT THERE WAS PREJUDICE TO INTEREST OF REVENUE. THE THIRD ISSUE I.E. CLAIM OF ADDITIO NAL DEPRECATION OF RS. 5,91,106/ - ON COMP UTER SOFTWARE PRIMAVERA , THE R EVENUE RELIED UPON THE FINDINGS OF THE CIT TO SUPPORT THE ORDER U/S 263 OF THE ACT. 22. THE LEARNED AR IN HIS REJOINDER SUBMISSION CONTENDED THAT THERE WAS NO CHANGE IN THE METHOD OF ACCOUNTING (MERCANTILE BASIS) REQUIRING ANY SPECIFIC DISCLOSURE IN RETURN OF INCOME. IT WAS SUBMITTED THAT TREATMENT WAS DULY SUPPORTED BY AS - 12 , ON THE OPINION OF EXPERT S ADVISORY COMMITTEE OF THE ICAI AND COMPLETE/SPECIFIC/ADEQUATE DISCLOSURES WERE MADE IN THE AUDITED FINANCIAL STATEMENTS, AUDIT REPORT A ND TAX AUDIT REPORT. THE LEARNED AUTHORIZED ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 24 REPRESENTATIVE ALSO CONTENDED THAT ON THE ISSUE OF SALES TAX EXEMPTION, THE ASSESSEE FILED REPLY DATED 11.2.2010 IN RESPONSE TO THE QUESTIONNAIRE DATED 1.2 .2010 DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IT WAS FURTHER CONTENDED THAT ASSESSEE MADE PROPER DISCLOSURE IN FINANCIAL STATEMENTS AND SPECIFIC DISCLOSURES WERE MADE VIDE CLAUSE 13(E) OF TA X AUDIT REPORT. FURTHER, VIDE NO. 5 OF SCHE DULE 2 0 OF AUDIT ED ACCOUNTS, IT WAS SPECIFICALLY DISCLOSED/STATED THAT SALES TAX SUBSIDY WAS ACCOUNTED UNDER SALES TAX SUBSIDY RESERVE ACCOUNT . IT WAS CONTENDED THAT ALLEGATION OF DOUBLE DEDUCTION IS PATENTLY ERRONEOUS AND DENIED. IT WAS SUBMITTED THAT THE ASSESSEE HA D EXCLUDED SALES TAX SUBSIDY FROM SALES OF RESPECTIVE UNITS, THEREBY EXCLUDING THE SAME WHILE COMPUTING DEDUCTION U/S 80IB OF THE ACT. IT WAS FURTHER SUBMITTED THAT ASSESSEE WAS NOT REQUIRED TO REDUCE THE SUBSIDY FROM COST OF ASSETS SINCE SUBSIDY WAS RECE IVED FOR INDUSTRIALIZATION OF THE BACKWARD AREA AND FOR EMPLOYMENT GENERATION AND NOT FOR REIMBURSING/RECOUPING THE COST OF FIXED ASSETS. IT WAS CONTENDED THAT EXEMPTION GRANTED IS NOT BLANKET EXEMPTION/NOTIONAL, WHICH IS EVIDENT FROM THE FACT THAT ASSESS EE CHARGED CENTRAL SALES TAX AND VAT IN CERTAIN INVOICES. IT WAS CONTENDED THAT SALES TAX DEPARTMENT HAS QUANTIFIED/MODIFIED EXEMPT SALES AND HAS CHARGED TAX ON SALES NOT ACCEPTED TO BE EXEMPT. IT WAS CONTENDED THAT RECOVERY PROCEEDINGS WERE INITIATED AND DROPPED IN YEAR 2013. IT WAS ALSO CONTENDED THAT ADDITIONAL BURDEN ON BUYER OF EXEMPT UNIT, PERTINENTLY NO CREDIT OF CST IS AVAILABLE TO THE BUYER EVEN IF THE SAME IS CHARGED IN THE INVOICE. IT WAS FURTHER CONTENDED THAT ORDER OF TRIBUNAL FOR A.Y. 2004 - 05 IS NOT REFERRED BY THE CIT AND THEREFORE, CANNOT BE RELIED UPON TO JUSTIFY PROCEEDINGS U/S 263 OF THE ACT. RELIANCE WAS PLACED ON THE JUDGMENT OF JAGADHRI ELECTRIC SUPPLY: 140 ITR 490 (P&H). FURTHER THE AR HAS FILED A CHART. TITLED AS INCENTIVE SCHE ME SEQUENCES SHOWING PURPOSE OF INCENTIVE (ANNEXURE I TO DETAILED REBUTTAL) BRINGING OUT COMPLETE SEQUENCE AND PURPOSE OF GRANTING SUBSIDY, WHICH IS ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 25 INDUSTRIAL DEVELOPMENT OF BACKWARD AND TRIBAL AREAS, EMPLOYMENT GENERATION, ETC. I.E., OBJECTS IN LARGER PUBLIC INTEREST. THE LEARNED AR ALSO CONTENDE D THAT DECISIONS RELIED BY THE R EVENUE ARE NOT APPLICABLE. IT WAS ALSO CONTENDED THAT TO DETERMINE THE CHARACTER OF SUBSIDY, PURPOSE TEST HAS TO BE APPLIED AND FORM, MODE, MANNER AND TIME AT WHICH SUBSIDY IS GRANTED IS IRRELEVANT. IT WAS NEXT CONTENDED THAT THE CIT DR CONVENIENTLY CHOSE TO IGNORE THE DEFINITION OF SUBSIDY IN THE BLACK S LAW DICTIONARY WHEREIN MUCH WIDER MEANING HAS BEEN GIVEN AND HAS BEEN STATED THAT SUBSIDY IS USUALLY IN INDIRECT FORM (TAX BREAKS ETC.). IT WAS CONTENDED THAT ASSESSEE PLACE D RELIANCE ON CIRCULAR NO. 9/2006 AND VARIOUS JUDICIAL PRECEDENTS WHEREIN IT HAS BEEN HELD THAT DISCLOSURES MADE IN THE AUDITED ACCOUNTS AND TAX AUDIT REPORT FORM INTEGRAL PART OF THE INCOME TAX RETURN. AS REGARDS CERTAIN SPECIFIC ALLEGATIONS OF THE DEPARTMENT, IT WAS CONTENDED THAT THE ASSESSEE HAS NEVER CLAIMED EXEMPTION UNDER NOTIFICATION DATED 3.6.1993, THE ASSESSEE RELIED ON THE INDUSTRIAL POLICY, 1994 AND THE SPECIFIC DISCUSSION BETWEEN THE COUNCIL OF MINISTERS FOR GRANTING EXEMPTION TO THE ASSESSEE. IT WAS SUBMITTED THAT INDUSTRIAL POLICY 1994 WAS IN FORCE TILL 2003 AS AGAINST ALLEGATION OF THE DEPARTMENT THAT THE SAME EXPIRED IN 1999 AND, DECISION IN CASE OF RELIANCE INDUSTRIES LTD. 88 ITD 273 (M UM) (SB) WAS IDENTICAL TO THE FACTS OF THE PRESENT CASE. 23. SO FAR AS THE SECOND ISSUE IS CONCERNED THAT THERE WAS A DIFFERENCE OF RS. 1.81 CRORES UNDER THE HEAD PROVISION FOR GRATUITY , T HE LEARNED AR IN HIS REJOINDER SUBMISSION HAS CONTENDED THAT SECTI ON 40A(7) OF THE ACT APPLIES TO CONTRIBUTION MADE TO UNAPPROVED GRATUITY FUND AND NOT OTHERWISE. ACCORDINGLY, CONTRIBUTION TO UNAPPROVED FUND AMOUNTING TO RS. 49.41 LAKHS IN RESPECT OF TENSA, BARBIL AND ANGUL UNITS WAS SUO - MOTU DISALLOWED BY THE ASSESSEE. AS REGARDS OTHER UNPAID AMOUNT WHICH WAS NOT AT ALL IN RESPECT OF CONTRIBUTION TO BE MADE TO UNAPPROVED GRATUITY FUND, THE SAME WAS DISALLOWED UNDER SECTION 43B OF THE ACT SINCE UNDER ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 26 THAT SECTION DEDUCTION OF GRATUITY IS ALLOWED ONLY ON PAYMENT BASIS. IT WAS FURTHE R CONTENDED THAT ALLEGATION OF R EVENUE THAT ASSESSEE HAD NOT FILED RECONCILIATION AND LEDGER ACCOUNT OF GRATUITY WAS FACTUALLY INCORRECT. IT WAS SUBMITTED THAT LEDGER ACCOUNTS WERE FILED BEFORE THE CIT AS ANNEXURE 3 TO LETTER DATED 11.3.2013 AND RECONCILIATION WAS FILED VIDE LETTERS DATED 17.1.2013 AND 11.3.2013. IT WAS CONTENDED THAT THE ASSESSEE HAS FILED THE CERTIFICATE FROM THE TAX AUDITOR TO SUPPORT ITS CONTENTION THAT THE OMISSION TO OFFER FOR TAX THE AMOUNT OF RS. 88 LACS, WHICH HAD BE EN CREDITED TO GENERAL RESERVE AND SEPARATELY SHOWN AS SUCH IN FINANCIAL STATEMENTS ON ACCOUNT OF FOLLOWING AS - 15 FOR THE FIRST TIME IN AY 2008 - 09 WAS ON ACCOUNT OF THE SAID INADVERTENT ERROR IN THE TAX AUDIT REPORT. 24. TAKING UP THIRD ISSUE I.E. CLAIM OF ADDITIONAL DEPRECATION OF RS. 5,91,106/ - ON COMPUTER SOFTWARE PRIMAVERA , THE LEARNED AR IN HIS REJOINDER SUBMISSION HAS CONTENDED THAT PICTORIAL REPRESENTATION MAKES IT PATENTLY CLEAR THAT THE SOFTWARE, OWING TO ITS NATURE WAS INSTALLED AT THE PLANTS AND DATA INPUT RIGHTS (LEVEL III AUTHORIZATION) WAS MERELY AVAILABLE WITH PLANTS. IT WAS SUBMITTED THAT CERTAIN ACCESS RIGHTS WERE AVAILABLE FOR ACCESSING THE DATA AVAILABLE IN THE SOFTWARE AT VARIOUS LOCATIONS, INCLUDING THE CORPORATE OFFICE; BUT THAT HO WEVER, DOES NOT MEAN THAT THE SOFTWARE WAS INSTALLED AT THE OFFICE PREMISES. IT WAS FURTHER MORE SUBMITTED THAT THERE IS NO REQUIREMENT IN UNDER SECTION 32(1)(II )( A) THAT THE PLANT AND MACHINERY ON WHICH ADDITIONAL DEPRECIATION IS BEING CLAIMED MUST BE DIRECTLY USED FOR MANUFACTURING PURPOSES. 25. THE LEARNED AR THUS CONTENDED THAT THE IMPUGNED ORDER PASSED BY THE CIT UNDER SECTION 263 WAS WITHOUT JURISDICTION AND BAD IN LAW AND ADDITIONS/DISALLOWANCES MADE IN THE CONSEQUENTIAL ORDER U/S 143(3)/263 OF TH E ACT ARE ILLEGAL, UNSUSTAINABLE AND CALL FOR BEING DELETED. IT WAS ALSO CONTENDED THAT THE ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 27 PENALTY IMPOSED ON ALL THE ISSUES IS ILLEGAL, UNSUSTAINABLE AND CALLS FOR BEING DELETED IN TOTO. 26. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE SOLITARY ISSUE INVOLVED IN THIS APPEAL RELATES TO ASSUMPTIO N OF JURISDICTION U/S 263 OF THE ACT. THE SECTION 263 OF THE ACT IS HEADED REVISION OF ORDERS PREJUDICIAL TO R EVENUE AND CONFERS SUO MOTU POWERS OF REVISION ON THE CIT TO TAKE ST EPS FOR ANNULMENT, MODIFICATION, CANCELLATION, ETC. OF AN ORDER OF ASSESSMENT UNDER THE CIRCUMSTANCES INDICATED THEREIN. THE SECTION 263 OF THE ACT PROVIDES AS UNDER: 263. (1) THE COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, HE MAY, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MAKING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT, OR CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMEN T. 27. A PLAIN READING OF THE ABOVE PROVISIONS MAKE IT APPARENT THAT THE COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJU DICIAL TO THE INTERESTS OF THE R EVENUE, HE MAY PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT, OR CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. THUS IN ORDER TO ASSUME JURISDICTI ON UNDER SECTION 263, THE PRE - REQUISITES ARE THAT, THE ORDER PASSED BY THE ASSESSING OFFICER SHOULD BE ERRONEOUS AND IT SHOULD BE PREJUDICIAL TO THE INTERESTS OF REVENUE. BOTH THE PREREQUISITES MUST BE SATISFIED SIMULTANEOUSLY . IN CASE THE ORDER OF THE ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 28 ASSESSING OFFICER IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE INTERESTS OF THE REVENUE, THE COMMISSIONER WOULD NOT BE COMPETENT TO EXERCISE JURISDICTION UNDER SECTION 263. THE SCOPE AND AMBIT OF SECTION 263 HAS BEEN ELABORATED UPON IN THE CASE OF GOETZE I NDIA (P) LTD. (SUPRA). IN THE SAID CASE, REFERENCE WAS MADE TO JUDGMENT IN THE CA SE OF CIT VS NAGESH KNITWEARS (P) LTD. 345 ITR 135 WHEREIN THEIR LORDSHIPS CONSIDERED THE JUDGMENT OF HON BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL COMPANY LTD. V CI T 243 ITR 83 , WHEREIN IT HAS BEEN HELD AS UNDER: THERE CAN BE NO DOUBT THAT THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER, IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION O F MIND. THE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE REVENUE' HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUD ICIAL TO THE INTERESTS OF THE REVENUE. FOR EXAMPLE, WHEN AN INCOME - TAX OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE ; OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME - TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH T HE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE INCOME - TAX OFFICER IS UNSUSTAINABLE IN LAW. 28. FURTHER JUDGMENT IN THE CASE OF GEE VEE ENTERPRISES 99 ITR 375 WA S ALSO CONSIDERED AND IT WAS NOTED THAT IT HAS BEEN HELD THEREIN AS UNDER: THE REASON IS OBVIOUS. THE POSITION AND FUNCTION OF THE INCOME - TAX OFFICER IS VERY DIFFERENT FROM THAT OF A CIVIL COURT. THE STATEMENT MADE IN A PLEADING PROVED BY THE MINIMUM AMOUNT OF EVIDENCE MAY BE ADOPTED BY A CIVIL COURT IN THE ABSENCE OF ANY REBUTTAL. THE CIVIL COURT IS NEUTRAL. IT SIMPLY GIVES DECISION ON THE BASIS OF THE PLEADING AND EVIDENCE WHICH COMES BEFORE IT. THE INCOME - TAX OFFICER IS NOT ONL Y AN ADJUDICATOR BUT ALSO AN INVESTIGATOR. ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 29 HE CANNOT REMAIN PASSIVE IN THE FACE OF THE RETURN WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER INQUIRY. IT IS HIS DUTY TO ASCERTAIN THE TRUTH OF THE FACTS STATED IN THE RETURN WHEN THE CIRCUMSTANCES OF THE CASE ARE SUCH AS TO PROVOKE AN INQUIRY. IT IS BECAUSE IT IS INCUMBENT ON THE ITO TO FURTHER INVESTIGATE THE FACTS STATED IN THE RETURN WHEN CIRCUMSTANCES WOULD MADE SUCH AN INQUIRY PRUDENT THAT THE WORD ERRONEOUS IN SECTION 263 INCLUDES THE FAILURE TO MA KE SUCH AN ENQUIRY. THE ORDER BECOMES ERRONEOUS BECAUSE SUCH AN INQUIRY HAS NOT BEEN MADE AND NOT BECAUSE THERE IS ANYTHING WRONG WITH THE ORDER IF ALL THE FACTS STATED THEREIN ARE ASSUMED TO BE CORRECT. 29. IT HAS BEEN FURTHER NOTED THAT IN THE CASE OF GEE VEE ENTERPRISES (SUPRA), THEIR LORDSHIPS HAD ALSO REFERRED TO EARLIER DECISIONS OF THE SUPREM E COURT IN RAMPYARI DEVI SAROGI V/S CIT (1968) 67 ITR 84 ( SC) AND TARA DEVI AGGARWAL V. CIT (1973) 88 ITR 32 3 (SC), WHEREIN IT HAS BEEN HELD THAT WHERE ASSESSING OFFICER HAS ACCEPTED A PARTICULAR CONTENTION/ISSUE WITHOUT ANY ENQUIRY OR EVIDENCE WHATSOEVER, THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IT WAS NOTED THAT AFTER REFERENCE T O THESE TWO DECISIONS, THE DELHI HIGH COURT OBSERVED AND HELD AS UNDER: 'THESE TWO DECISIONS SHOW THAT IT IS NOT NECESSARY FOR THE COMMISSIONER TO MAKE FURTHER INQUIRIES BEFORE CANCELLING THE ASSESSMENT ORDER OF THE INCOME - TAX OFFICER. THE COMMISSIONER CAN REGARD THE ORDER AS ERRONEOUS ON THE GROUND THAT IN THE CIRCUMSTANCES OF THE CASE THE INCOME - TAX OFFICER SHOULD HAVE MADE FURTHER INQUIRIES BEFORE ACCEPTING THE STATEMENTS MADE BY THE ASSESSEE IN HIS RETURN.' 30. HAVING REGARD TO THE ABOVE, IT WAS HELD IN THE CASE OF NAGESH KNITWEARS (P) LTD (SUPRA) AS UNDER: 14. THE AFORESAID OBSERVATIONS HAVE TO BE UNDERSTOOD IN THE FACTUAL BACKGROUND AND MATRIX INVOLVED IN THE SAID TWO CASES BEFORE THE SUPREME COURT. IN THE SAID CASES, THE ASSESSING OFFICER HAD NOT CONDUCTED ANY ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 30 ENQUIRY OR EXAMINED EVIDENCE WHATSOEVER. THERE WAS TOTAL ABSENCE OF ENQUIRY OR VERIFICATION. THESE CASES HAVE TO BE DISTINGUISHED FROM OTHER CASES (I) WHERE THERE IS ENQUIRY BUT THE FINDINGS ARE INCORRECT /ERRONEOUS; AND (II) WHERE THERE IS FAILURE TO MAKE PROPER OR FULL VERIFICATION OR ENQUIRY. 31. FURTHER TRIBUNAL DELHI BENCH IN THE CASE OF NIIT LTD. (SUPRA) HAS HELD AS UNDER: 28. WE HAVE CONSIDERED THE DETAILED SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORD OF THE CASE KEEPING IN VIEW THE VARIOUS AUTHORITATIVE PRONOUNCEMENTS IN THIS REGARD. THERE CANNOT BE ANY QUARREL WITH THE LEGAL PROPOSITIONS, AS ADVANCED BY BOTH THE PARTIES. IT HAS CONSISTENTLY BEEN HELD THAT IF THE AO'S CONCLUSION IS ARRIVED AT AFTER DUE APPLICATION OF MIND ON A PARTICULAR ISSUE, THEN THE ORDER CANNOT BE SAID TO BE ERRONEOUS. 'DUE APPLICATION OF MIND' IMPLIES THAT IF THE ASSESSEE HAS MERELY RESPONDED TO THE AO'S QUERY AND THE AO, WITHOUT PROPER VERIFICATION OF REPLIES, ACCEPTS THE SAME, THEN, IT CANNOT BE SAID TO BE A CASE OF DUE APPLICATION OF MIND. 28.1 LD. SPECIAL COUNSEL HAS RIGHTLY POINTED OUT THAT THE EXPRESSION, 'INQUIRY', 'LACK OF INQUIRY' AND 'INADEQUATE INQUIRY', HAVE NOT BEEN DEFINED AND, THEREFORE, WHEN THE ACTION OF THE AO WOULD BE SUGGESTIVE OF LACK OF INQUIRY OR INADEQUATE INQUIRY, WILL DEPEND UPON THE FACTS OBTAINING IN A PARTICULAR CASE. WHAT EMERGES AS A BROAD PRINCIPLE FROM THE VARIOUS DECISIONS IS THAT WHERE THE AO HAS REACHED A RATIONAL CONCLUSION, B ASED ON HIS INQUIRIES AND MATERIAL ON RECORD, THE COMMISSIONER SHOULD NOT START THE MATTER AFRESH IN A WAY AS TO QUESTION THE MANNER OF HIS CONDUCTING INQUIRIES. IT IS NOT THE PROVINCE OF THE COMMISSIONER TO ENTER INTO THE MERITS OF EVIDENCE; IT HAS ONLY T O SEE WHETHER THE REQUIREMENTS OF ESSENTIAL INQUIRES AND OF LAW HAVE BEEN DULY AND PROPERLY COMPLIED WITH BY AO OR NOT. 28.2 IT IS WELL SETTLED THAT BEFORE THE COMMISSIONER CAN INVOKE HIS POWERS U/S 263, HE HAS TO ARRIVE AT A CONCLUSION THAT THE ASSESSMENT ORDER IS ERRONEOUS IN SO FAR AS IT WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THEN ONLY THE POWERS U/S 263 CAN BE INVOKED. THEREFORE, IF AO ACCEPTS OR REJECTS ANY CLAIM OF THE ASSESSEE WITHOUT DUE APPLICATION OF MIND AND IF SUCH FAILURE CAUSES PREJU DICE TO REVENUE, THE COMMISSIONER WOULD BE WELL WITHIN HIS POWERS U/S 263 TO INTERVENE IN THE MATTER. AN INQUIRY WHICH IS JUST FARCE OR MERE PRETENCE OF INQUIRY, CANNOT BE SAID TO BE AN INQUIRY AT ALL, MUCH LESS AN ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 31 INQUIRY NEEDED TO REACH THE LEVEL OF SATI SFACTION OF THE AO ON THE GIVEN ISSUE. THE LEVEL OF SATISFACTION WOULD OBVIOUSLY MEAN THAT HE HAS CONDUCTED THE INQUIRY IN A MANNER WHEREBY HE PLACES ON RECORD THE MATERIAL ENOUGH TO REACH THE SATISFACTION, WHICH A RATIONAL PERSON, BEING INFORMED OF THE NU ANCES OF TAX LAWS WOULD REACH AFTER DUE APPRECIATION OF SUCH MATERIAL. IF THIS COMPONENT IS MISSING, IT WILL ALWAYS BE A CASE OF LACK OF INQUIRY AND NOT INADEQUATE INQUIRY. WE FIND THAT LD. COMMISSIONER, WHILE CONSIDERING THIS ARGUMENT OF ASSESSEE HAS OBSE RVED THAT THE REPRESENTATIVE OF THE ASSESSEE WAS ASSURED THAT THIS ISSUE WILL BE CONSIDERED WITH INDEPENDENT APPLICATION OF MIND WHILE PASSING THE ORDER U/S 263. THEREFORE, WHEN SPECIFIC ISSUES WILL BE CONSIDERED, IT WILL BE EXAMINED WHETHER THE AO HAD REA CHED THE LEVEL OF SATISFACTION BY CARRYING OUT NECESSARY INQUIRIES QUA THAT ISSUE OR NOT. GROUND IS DISPOSED OF ACCORDINGLY. 32. IT HAS ALSO BEEN HELD IN PARA 38.5 OF THE SAID DECISION AS UNDER: 38.5 THUS, IT IS EVIDENT THAT HON'BLE DELHI HIGH COURT IN D.G. HOUSING PROJECTS LTD. ( SUPRA ) CLEARLY POINTED OUT THAT THE FACTS IN GEE VEE ENTERPRISE ( SUPRA ) WERE ENTIRELY DIFFERENT. THUS, THE RATIO LAID DOWN IN THE CASE OF GEE VEE ENTERPRISE ( SUPRA ) AS WELL AS D.G. HOUSING PROJECTS LTD. ( SUPRA ), HAVE TO BE TAKEN INTO CONSIDERATION DEPENDING UPON THE FACTS OBTAINING IN A PARTICULAR CASE WHILE DECIDING VARIOUS ISSUES. THE BROAD PRINCIPLE THAT EMERGES FROM VARIOUS DECISIONS IS THAT IF AO HAS MERELY ACCEPTED THE ASSESSEE'S EXPLANATION ON VARIOUS IS SUES WITHOUT PROPER INQUIRY THEN THE SAME WOULD COME WITHIN THE AMBIT OF 'LACK OF ENQUIRY' AND NOT 'INADEQUATE INQUIRY' . IF A PARTICULAR ISSUE COMES WITHIN THE AMBIT OF COMPLETE LACK OF INQUIRY THEN THE ORDER IS TO BE CONSIDERED AS ERRONEOUS AS WELL AS PR EJUDICIAL TO THE INTERESTS OF REVENUE BUT IF THE CASE IS OF INADEQUATE INQUIRY, THEN LD. CIT HAS TO DEMONSTRATE THAT HOW THE ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE . THIS ASPECT WE WILL TAKE INTO CONSIDERATION WHILE DECIDING VARIOUS ISSUES ON MERITS. IN THE RESULT, THIS GROUND IS DISPOSED OF ACCORDINGLY. [EMPHASIS SUPPLIED] 33. ALSO MADRAS HIGH COURT IN THE CASE OF K.A. RAMASWAMY CHETTIAR V CIT 220 ITR 657 HAS HELD THAT WHEN THE ITO IS EXPECTED TO MAKE AN ENQUIRY OF A ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 32 PARTICULAR ITEM OF INCOME AND HE DOES NOT MAKE AN ENQUIRY AS EXPECTED THAT WOULD BE A GROUND FOR THE CIT TO INTERFERE WITH THE ORDER PASSED BY THE ITO SIN CE SUCH AN ORDER PASSED BY THE ITO IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. IT HAS BEEN HELD AS UNDER: IN THE CASE OF ADDL CIT V. MUKUR CORPN. [1978] 111 ITR 312 (GUJ.) , IT WAS HELD THAT 'IN THE PRESENT CASE IT WAS OBVIOUS THAT THE INCOME - TAX OFFICER HAD COMMITTED AN ERROR IN NOT MAKING ENQUIRY INTO THE DETAILS AS REGARDS BOTH THE DEDUCTIONS AND ALSO THAT WANT OF SUCH ENQUIRY HAD RESULTED IN PREJUDICE TO THE INTERESTS OF THE REVENUE. TO THIS EXTENT THE INITIATION OF ACTION UNDER SECTION 263 BY THE COMMISSIONER WAS QUITE PROPER'. IN SMT. TARA DEVI AGGARWAL V. CIT [1973] 88 ITR 323 (SC) , 'WHERE AN ASSESSEE IS ASSESSED ON AN INCOME VOLUNTARILY RETURN, IT IS NOT PREJUDICIAL TO THE INTERESTS OF THE REVENUE ONLY IF IT IS FOUND THAT THE ASSESSMENT WAS MADE ON THE BASIS THAT THE INCOME HAD BEEN EARNED BY THE ASSESSEE WHICH WAS A SSESSABLE. WHERE AN INCOME HAS NOT BEEN EARNED AND IS NOT ASSESSABLE, MERELY BECAUSE THE ASSESSEE WANTS IT TO BE ASSESSED IN HIS OR HER HANDS IN ORDER TO ASSESS SOME OTHERS HE WOULD HAVE BEEN ASSESSED IN A LARGER AMOUNT. AN ASSESSMENT SO MADE WILL BE ERRON EOUS AND PREJUDICIAL TO THE REVENUE AND THE COMMISSIONER HAS JURISDICTION UNDER SECTION 33B OF THE INDIAN INCOME - TAX ACT, 1922 TO CANCEL THE ASSESSMENT AND PROCEEDINGS FOR ASSESSMENT MAY BE INITIATED UNDER THE PROVISIONS OF THE ACT AGAINST SOME OTHER ASSES SEE WHO, ACCORDING TO THE INCOME - TAX AUTHORITIES, WOULD BE LIABLE FOR THE INCOME THEREOF. THEREFORE, THE ABOVESAID DECISIONS WOULD POSTULATE THAT WHEN THE ITO IS EXPECTED TO MAKE AN ENQUIRY OF A PARTICULAR ITEM OF INCOME AND IF HE DOES NOT MAKE AN ENQUIRY AS EXPECTED, THAT WOULD BE A GROUND FOR THE COMMISSIONER TO INTERFERE WITH THE ORDER PASSED BY THE ITO SINCE SUCH AN ORDER PASSED BY THE ITO IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 34. FURTHER THE HON BLE APEX COURT IN THE CASE OF TOYOTA MOTOR CORPORATION V CIT 306 ITR 52 HAS HELD AS UNDER: ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 33 WE ARE NOT INCLINED TO INTERFERE WITH THE IMPUGNED ORDER OF THE HIGH COURT. THE HIGH COURT HAS HELD THAT THE ASSESSING OFFICER HAD DISPOSED THE PROCEEDINGS STATING THE PENALTY PROCEEDINGS INITIA TED IN THIS CASE U/S 271 C READ WITH SECTION 274 OF THE INCOME TAX ACT, 1961 ARE HEREBY DROPPED. ACCORDING TO THE HIGH COURT, THERE WAS NO BASIS INDICATED FOR DROPPING THE PROCEEDINGS. THE TRIBUNAL REFERRED TO CERTAIN ASPECTS AND HELD THAT THE INITIATION OF PROCEEDINGS UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 (IN SHORT, THE I.T. ACT) WAS IMPERMISSIBLE WHEN CONSIDERED IN THE BACKGROUND OF THE MATE RIALS PURPORTEDLY PLACED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER. WHAT THE HIGH COURT HAS DONE IS TO REQUIRE THE ASSESSING OFFICER TO PASS A REASONED ORDER. THE HIGH COURT WAS OF THE VIEW THAT TRIBUNAL COULD NOT HAVE SUBSTITUTED ITS OWN REASONING WHIC H WERE REQUIRED TO BE RECORDED BY THE ASSESSING OFFICER. ACCORDING TO THE ASSESSEE ALL RELEVANT ASPECTS WERE PLACED FOR CONSIDERATION AND IF THE OFFICER DID NOT RECORD REASONS, ASSESSEE CAN NOT BE FAULTED. WE DO NOT THINK IT NECESSARY TO INTERFERE AT THIS STAGE. IT GOES WITHOUT SAYING THAT WHEN THE MATTER BE TAKEN UP BY THE ASSESSING OFFICER ON REMAND, IT SHALL BE HIS DUTY TO TAKE INTO ACCOUNT ALL THE RELEVANT ASPECTS INCLUDING THE MATERIALS, IF ANY, ALREADY PLACED BY THE ASSESSEE, AND PASS A REASONED ORDER . 35. FROM THE AFORESAID IT IS NOW A TRITE PRINCIPLE OF LAW THAT WHERE THERE IS LACK OF ENQUIRY BY THE AO DURING THE ASSESSMENT PROCEEDINGS THEN SUCH AN ORDER WOULD BE SUBJECT TO REVISIONARY JURISDICTION U/S 263 OF THE ACT AS SUCH AN ORDER WOULD BE ER RONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF R EVENUE. THUS THE IDEAL SITUATION IS TO FIND OUT THAT ASSESSING OFFICER HAS INVESTIGATED AN ISSUE IN A PURPOSEFUL MANNER AND DISCUSSION IN RESPECT OF THAT ISSUE SHOULD DISCERN FROM THE ORDER ITSELF . HOWEVER , IF NO DISCUSSION IS AVAILABLE IN THE ORDER THEN IT HAS TO BE GATHERED FROM THE MATERIAL AVAILABLE ON RECORD. THE INTEGRAL IDEA BEING OF DUE APPLICATION OF MIND TO THE FACTS OF CASE AND RELEVANT PROVISION OF LAW , IF THE AO HAS MERELY ACCEPTED EXPLANATION WITHOUT PROPER ENQUIRY THEN THE SAME WOULD ALSO FALL WITHIN THE AMBIT OF LACK OF ENQUIRY AND THE ORDER WILL HAVE TO BE REGARDED AS ERRONEOUS AS WELL AS PREJUDICIAL TO INTEREST OF REVENUE. ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 34 36. APPLYING THE FOREGOING TO THE FACTS OF THE ASSESSEE , WE RECAPITULATE FACTS IN BRIEF WHICH ARE, THAT RETURN OF INCOME FOR THE ASSESSMENT YEAR IN CONSIDERATION WAS E - FILED ON 29.9.2008 DECLARING T OTAL INCOME OF RS. 766,99,04,200/ - AFTER AVAILING OF DEDUCTION UNDER 80IA, 80IB, 80G AND 80GGB OF THE ACT. THER EAFTER A REVISED RETURN WAS FILED ON 29.3.2010 DECLARING INCOME AT RS. 766,72,79,900/ - REDUCING NORMAL INCOME BY R S. 26,24,296/ - . THE ADDL. CIT, HISAR, RANGE - 7, HISAR COMPLETED ASSESSMENT U/S 143(3) OF THE ACT ON 27.12.2010. THE CIT HISAR IN IMPUGNED ORDE R DATED 25.3.2013 HAS SET ASIDE THE AFORESAID ASSESSMENT AND RESTORED THE SAME TO THE FILE OF AO FOR MAKING A FRESH ASSESSMENT AFTER MAKING NECESSARY AND PROPER ENQUIRY/INVESTIGATION ON THE FOLLOWING ISSUES: I) TAXABILITY OF INCENTIVE/SUBSIDY AMOUNTING TO RS. 81.59 CRORES; II) DEDUCTION OF PROVISION FOR GRATUITY UNDER SECTION 43B/40A(7) OF THE ACT; AND; III) ALLOWABILITY OF ADDITIONAL DEPRECATION OF RS. 5,91,106/ - ON COMPUTER SOFTWARE PRIMAVERA 37. AS REGARDS THE FIRST ISSUE THE TAXABILITY OF INCENTIVE/ SUBSIDY AMOUNTING TO RS. 81.59 CRORES, IT IS NOTICED THAT IN THE INSTANT CASE A SUM OF RS. 81.59 CRORES WAS SHOWN AS SALES TAX SUBSIDY/ CAPITAL RESERVE UNDER THE HEAD RESERVES AND SURPLUS IN SCHEDULE - 2 OF THE BALANCE SHEET AS ON 31.3.200 8. IN THE IMPUGNED ORDER CIT HAS NOTED THAT THE AFORESAID SUM WHICH WAS CLAIMED BY THE ASSESSEE AS SALES TAX SUBSIDY WAS NOT RECEIVED FROM THE STATE GOVERNMENT. THE APPELLANT RAISED INVOICES ON CUSTOMERS WITHOUT ANY COMPONENT OF SALES TAX AND THE ENTIR E AMOUNT OF SALE PROCEEDS HAS BEEN CREDITED AS RECEIVED IN THE PROFIT AND LOSS ACCOUNT BY THE ASSESSEE COMPANY, THROUGH A JOURNAL ENTRY PASSED AT THE YEAR END ON THE GROUND ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 35 THAT ONE OF THE UNITS WAS ELIGIBLE FOR EXEMPTION FROM SALES TAX. THE AMOUNT IN T HI S JOURNAL ENTRY IS EQUIVALENT TO THE AMOUNT OF EXEMPTED SALES TAX AND REFLECTED AS SALES TAX SUBSIDY IN THE BALANCE SHEET. T HE CIT IN THIS REGARD HAS HELD THAT THE AFORESAID ISSUE WAS NOT EXAMINED DURING THE ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) BY THE ASSESSING OFFICER . IT HAS BEEN STATED THAT THERE WAS ONE QUESTIONNAIRE ISSUED BY THE ASSESSING OFFICER DATED 1.2.2010 WHEREIN THE ASSESSEE WAS ASKED TO EXPLAIN TREATMENT OF SALES TAX, ENTRY TAX AND ELECTRICITY DUTY (CLAIMED AS CAPITAL RECEIPT IN COM P UTATION OF INCOME) AMOUNTING TO RS. 48,39,36,937/ - IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE COMPANY AND WHY THE SAME SHOULD NOT BE TREATED AS REVENUE SUBSIDY. THE CIT IN RESPECT OF THE SAME HAS CONCLUDED AS UNDER: ON CAREFUL EXAMINATION, RECORDS REVEALED THAT THE SAID AMOUNT OF RS. 48, 39,36,937/ - MENTIONED BY THE AO, IN THE ABOVE STATED QUESTIONNAIRE IS TOTAL SUM OF ENTRY TAX (RS. 17,28,48,148/ - ) AND ELECTRICITY DUTY (RS. 31,10,88,789/ - ). THESE AMOUNTS HAVE BEEN CLAIMED BY THE ASSESSEE IN COMPUTAT ION OF INCOME AS DEDUCTION. IN THE ASSESSMENT ORDER, THE AO HAS DEALT WITH THESE ITEMS AND FINALLY DISALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE. HOWEVER, THE AMOUNT OF RS. 81.59 CRORES (PURPORTED SALES TAX SUBSIDY) HAS BEEN SHOWN IN THE SCHEDULE 2 (O F THE BALANCE SHEET), UNDER THE HEADING RESERVES AND SURPLUS' 'SALES TAX SUBSIDY / CAPITAL RESERVES'. THEREFORE, THE REFERENCE OF THE AO IN THE QUESTIONNAIRE IS ONLY RELATED TO ENTRY TAX AND ELECTRICITY DUTY (ALTHOUGH IT MENTIONED, '....SALES TAX, ENTRY TAX & ELECTRICITY DUTY ..... ). SINCE, ALL THESE ITEMS I.E. SALES TAX 'SUBSIDY', ENTRY TAX 'SUBSIDY' AND ELECTRICITY 'SUBSIDY' ARE TREATED IN SIMILAR WAY (I.E. CAPITAL RECEIPTS) BY THE ASSESSEE, THE WORD 'SALES TAX' IN THE QUESTIONNAIRE IS TYPED IN ROUTINE WAY AND A.O. COULD NOT NOTICE THE FIGURE OF SALES TAX 'SUBSIDY' (RS. 81.59 CRORES) WHICH WAS, FOR THE FIRST TIME, DIRECTLY TAKEN TO THE BALANCE SHEET(WITHOUT ROUTING IT TO THE P&L ACCOUNT ). THE REPLY SUBMITTED BY THE ASSESSEE DURING THE ASSESSMENT PROCEE DINGS, HAS NOWHERE STATED THAT IN ADDITION TO THE ABOVE, FIGURE OF RS, 48,39,36,937/ - , THERE IS ANOTHER FIGURE OF RS. 81.59 CRORES WHICH IS ALSO CLAIMED BY THE ASSESSEE AS ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 36 NON TAXABLE (ALTHOUGH IN THE DIFFERENT WAY LE, BY TAKING IT DIRECTLY TO. THE BALANCE SHEET). 5.4 HAD A,O. NOTICED AND CONSIDERED THE ISSUE OF TAXABILITY OF THE SAID AMOUNT OF RS,81.59 CRORES OF 'SALES TAX 'SUBSIDY', HE WOULD HAVE DEFINITELY DISCUSSED THE SAME IN THE ASSESSMENT ORDER, IN FACT, SINCE ALL THESE 'SUBSIDY' ARE ALMOST ON THE S AME FOOTING, THERE IS NO REASON WHY A.O. COULD NOT HAVE GIVEN THE SAME (TAX) TREATMENT TO THIS SALES TAX 'SUBSIDY' AS .HAS BEEN GIVEN TO THE ENTRY TAX 'SUBSIDY' AND THE ELECTRICITY DUTY `SUBSIDY'. 5.5 ALSO, SINCE THE ISSUE WAS HELD AGAINST THE ASSESSEE IN EARLIER YEARS, HAD AO CHOSEN TO DIFFER FROM THE EARLIER STAND, HE WOULD HAVE RECORDED AT LEAST AN 'OFFICE NOTE' TO SUGGEST REASONING OF HIS DIFFERING FROM EARLIER STAND. HOWEVER, NOTHING OF THAT SORT WAS FOUND ON RECORD. 5.6 IN VIEW OF THE ABOVE, IT IS C ONCLUDED THAT IT WAS OMISSION ON PART OF A.O. AND THE ISSUE REMAINED UN - CONSIDERED, HENCE, PREJUDICE HAS BEEN CAST UPON THE REVENUE. 38. BEFORE US THE LD AR HAS CONTENDED THAT VIDE REPLY DATED 12.11.2010 THE ASSESSEE HAD EXPLAINED THAT TREATMENT OF SALE S TAX SUBSIDY ALONGWITH THE FACTS RELATING TO THE INDUSTRIAL POLICY OF MADHYA PRADESH, RELEVANT NOTIFICATION(S) AND THE LEGAL POSITION DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS. IT WAS ALSO HIGHLIGHTED THAT THE ASSESSING OFFICER AT PAGES 21 - 22 OF ORIGINAL ASSESSMENT ORDER TAKEN A NOTE OF THE SUBMISSION OF THE APPELLANT COMPANY. HOWEVER IT IS NOT DENIED OR ARGUED THAT THE QUESTIONNAIRE ISSUED BY THE ASSESSING OFFICER DID NOT INCLUDE THE QUANTUM OF SALES TAX SUBSIDY OF RS. 81,58,94,102.33/ - AS RE FLECTED IN THE BALANCE SHEET OF THE APPELLANT. THE FIGURES STATED IN THE QUESTIONNAIRE WAS OF RS. 48,39,36,937/ - COMPRISED OF SUMS OF ENTRY TAX (RS. 17,28,48,148/ - ) AND ELECTRICITY DUTY (RS. 31,10,88,789/ - ) WHICH HAD BEEN CLAIMED AS DEDUCTION IN COMPUTATI ON OF INCOM E , WHEREAS AMOUNT OF RS. 81.59 CRORES HAS BEEN SHOWN IN THE SCHEDULE - 2 UNDER THE HEADING RESERVES AND SURPLUS - SALES TAX SUBSIDY / CAPITAL RESERVES BY REDUCING THE CORRESPONDING SUM FROM THE SALES. ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 37 39. THE R EVENUE HAS HIGHLIGHTED DURING T HE COURSE OF HEARING THAT IN THE RETURN OF INCOME FOR ALL ASSESSMENT YEARS FROM 2002 - 03 TO 2007 - 08, THE EXEMPTION AMOUNTS HAVE BEEN TREATED AS PART OF ITS SALE PROCEEDS AND HAVE ALWAYS BEEN INCLUDED IN THE GROSS REVENUE RECEIPTS AND IT WAS DEDUCTED ONLY AT THE TIME OF COMPUTATION OF INCOME WHILE PREPARING THE RETURN OF INCOME. HOWEVER IN THE INSTANT YEAR , THERE WAS A MARKED DEPARTURE WHEREBY THOUGH THE IMPUGNED AMOUNT OF RS. 81.59 CRORES ON ACCOUNT OF SALES TAX EXEMPTION ALSO FORMED PART OF THE SALE PROCEEDS/GROSS REVENUE RECEIPTS RECORDED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS, YET ON 31.3.2008 I.E. THE LAST DATE OF THE ACCOUNTING PERIOD THAT ASSESSEE PASSED A JOURNAL ENTRY DEDUCTING T HIS AMOUNT FROM THE REVENUE RECEIPTS AND STRAIGHTWAY CREDITED IT TO THE SALES TAX CAPITAL SUBSIDY ACCOUNT. THESE FACTS HAVE NOT BEEN DENIED AND DISPUTED BY THE ASSESSEE WHICH LED TO NON CONSIDERATION OF THE SAID ISSUE AT THE TIME OF ORIGINAL ASSESSMENT. IN FACT, NON CONSIDERATION OF THE ISSUE BECOMES APPARENT WHEN IT IS NOTED THAT THE AO HAVING REGARD TO THE EARLIER HISTORY MADE ADDITION OF RS. 48.39 CRORES BY HOLDING THAT ENTRY TAX AND ELECTRICITY DUTY SUBSIDY IS REVENUE RECEIPTS, YET HE DID NOT MAKE ANY ADDITION WITH RESPECT TO THE SALES TAX SUBSIDY. NO REASONS OR MATERIAL HAS BEEN BROUGHT TO OUR NOTICE FOR THIS ACTION OF THE AO; WHICH LEADS TO AN INESCAPABLE CONCLUSION THAT THE ISSUE WAS NOT CONSIDERED BY THE AO. A MECHANICAL REFERENCE IN THE QUESTION NAIRE AND REPLY WITHOUT DUE CONSIDERATION OF THE ISSUE DOES NOT REFLECT APPLICATION OF MIND; WHEN NEITHER THE QUANTUM OF CLAIM; AND NOR THE MANNER AND MODE OF CLAIM MUCH LESS THE ARGUMENTS SUPPORTING THE ALLOWABILITY OF CLAIM HAVE BEEN CONSIDERED. THUS HER E IS A CASE WHERE THERE HAD BEEN COMPLETE LACK OF APPLICATION OF MIND ON THE SAID ISSUE AND AS SUCH THE ORDER OUGHT TO BE HELD AS ERRONEOUS IN AS MUCH AS TO IT THE PREJUDICIAL TO INTEREST OF REVENUE. ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 38 40. HAVING REGARD TO THE ABOVE, WE ARE OF THE OPINION THAT THE FACTS ON RECORD DO NOT INSPIRE CREDENCE WITH THE ANGLE THAT THE ASSESSING OFFICER HAS CONDUCTED A PROPER INQUIRY BEFORE ACCEPTING THE CLAIM OF ASSESSEE. IT GIVES AN IMPRESSION THAT SOME PIECEMEAL FACTS WERE PLACED ON RECORD , WHICH HAVE NEITHER BEE N CONSIDERED AND NOR CAME TO THE NOTICE OF THE ASSESSING OFFICER. IN ANY CASE, IT IS NOT DISCERNIBLE THAT THE ASSESSING OFFICER HAD APPLIED HIS MIND ANALYTICALLY AND LOGICALLY AND THEREAFTER HE TOOK ONE OF THE POSSIBLE VIEW. WE FURTHER HOLD THAT CIT IN H IS ELABORATE, LUCID AND ELOQUENT ORDER HAS POINTED OUT VITAL FLAWS IN THE ORDERS OF ASSESSMENT AND HAS OBSERVED THAT THERE WAS NO APPLICATION OF MIND DURING THE ASSESSMENT PROCEEDINGS ON THE ISSUE OF TAXABILITY OF SALES TAX EXEMPTION . WE ENTIRELY AGREE WI TH THE DISCUSSION IN THE ORDER OF THE LEARNED CIT. THE COMMISSIONER HAS NOT DECIDED THE ISSUE ON MERIT. HE HAS REMITTED IT TO THE FILE OF THE ASSESSING OFFICER FOR A FRESH INQUIRY. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT DEAL INTO THE ARGUMENTS OF MERI T IN RESPECT OF CLAIM OF THE ASSESSEE WITH THE OBSERVATION THAT SAME SHALL DEALT IN THE APPEAL ARISING AGAINST THE CONSEQUENT ASSESSMENT AND THUS , THE GROU NDS RAISED CHALLENGING THE ACTION U/S 263 OF THE ACT ON THE ISSUE OF SALES TAX EXEMPTION/ SUBSIDY ARE DISMISSED . 41. SO FAR AS THE SECOND ISSUE IS CONCERNED , THE RELEVANT FACTS ARE THAT THERE WAS A DIFFERENCE OF RS. 1.81 CRORES UNDER THE HEAD PROVISION FOR GRATUITY BETWEEN OUTSTANDING AS PER BALANCE SHEET AND AUDIT REPORT. THE AMOUNT OUTSTANDING WAS RS. 7.70 CRORE AS PER BALANCE SHEET AS ON 31.3.2008 AND RS. 5.89 CRORES AS PER TAX AUDIT REPORT FOR SECTION 43B OF THE ACT (INCL UDING AMOUNT OF EARLIER YEARS) . 42. THE AFORESAID VARI ATION WAS ATTEMPTED TO EXPLAIN ON BEHALF OF THE ASSESSEE BY STATING THAT AS PER THE AUDIT REPORT DIFFERENCE BETWEEN PROVISION AS PER BALANCE SHEET AS ON 31.3.2007 AND AS ON 31.3.2008 WAS RS. 1.92 CROR ES (RS. 7.70 CRORES ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 39 RS. 5.78 CRORES); WHEREAS THE ASSESSEE HAS DISALLOWED RS. 1,58,03,552/ - U/S 43B AS PER ANNEXURE O TO THE TAX AUDIT REPORT (RS. 1,00,17,892/ - IN RESPECT OF RAIGARH AND RS. 57,85,03,552/ - IN RESPECT OF RAIPUR) AND RS. 49,41,850/ - U/S 40A(7) OF THE ACT AS PER ANNENXURE X TO THE TAX AUDIT REPORT AND SINCE TOTAL IN THESE FIGURE OF DISALLOWANCE IS MORE THAN WHAT HAS BEEN DEBITED TO PROFIT AND LOSS ACCOUNT THIS YEAR , THEREFORE NO DISALLOWANCE WAS WARRANTED. 43. APART FROM THE ABOVE IT WAS CONTENDED BY THE ASSESSEE VIDE REPLY DATED 17.1.2013 AS UNDER: '(B) PROVISION FOR GRATUITY REGARDING DIFFERENCE IN GRATUITY OF RS.1.81 CRS, THE RECONCILIATION IS AS FOLLOWS: - (I) RS.0.49 CRS HAS BEEN ADDED BACK IN THE RETURN O F INCOME WS 40A(7) OF THE 1.TAX ACT DURING THE AY 2008 - 09. COPY OF COMPUTATION FOR THE A.Y. 2008 - 09 IS ATTACHED AS ANNEXURE - I, (II) RS.0.30 CRS & RS,0.13 CRS. HAVE BEEN ADDED BACK IN THE RETURN OF INCOME U/S 40A(7) OF THE L.TAX ACT DURING THE AY 2006 - 07 & AY 2007 - 08 RESPECTIVELY. COPY OF COMPUTATION ATTACHED AS ANNEXURE - 2. (III) RS.0.88 CRS IS THE AMT. TRANSFERRED TO GENERAL RESERVE AS PER THE REQUIREMENT OF REVISED AS - 15. THE ACTUARIAL VALUATION WAS DONE IN FY 2007 - 08 AS PER THE AS - 15 (REVISED) AND THE D IFFERENCE OF EXCESS PROVISION OF GRATUITY AS PER ACTUARIAL VALUATION IN THE ACCOUNTING STANDARD HAS BEEN TRANSFERRED TO GENERAL RESERVE AS PER THE REQUIREMENT OF ACCOUNTING STANDARD. HENCE, THERE IS NO VARIATION IN TH E LIABILITY OF RS.2.55 CRORES U/S 43B ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, FURTHER, THE SAME HAS BEEN DULY EXPLAINED TO THE A O IN THE REPLY AGAINST NOTICE U/ S 154 OF THE ACT ISSUED BY HIM.' 33.3 REGARDING, RS.0.88 CRORE WHICH HAVE BEEN TRANSFERRED TO GENERAL RESERVE ASSES SEE'S AUTHORIZED REPRESENTATIVE EXPLAINED ORALLY THAT THE ENTRY WAS REVERSED BACK. HOWEVER, THE AUTHORIZED REPRESENTATIVE COULD NOT PRODUCE THE LEDGER ACCOUNT TO MAKE THE ISSUE CLEAR BEYOND ANY DOUBT. ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 40 33.4 THE PICTURE IN RESPECT OF THE LAST YEAR'S FIGURES (A.Y.2007 - 08), AS PER ANNEXURE - H (SUM DEBITED TO THE PROFIT & LOSS A/C BUT NOT PAID DURING THE YEAR) & '11/1' (PRE EXISTED ON 1ST DAY OF PREVIOUS YEAR BUT NOT ALLOWED IN ANY ASSESSMENT OF PRECEDING ASSESSMENT YEAR) TO THE TAX AUDIT REPORT, (SUBMITTED DURI NG THE PRESENT PROCEEDINGS TITS 263), EMERGE AS UNDER: - AS PER ANNEXURE (I) RAIGARH RS.2,56,79,295/ - (II) RAIPUR RS. 11,41,320/ - AS PER ANNEXURE M' (III) (II) RAIGARH RS.2,67,67,993/ - (IV) RAIPUR RS. 3,27,000/ - TOTAL (I )+(II)+(III)+(IV) RS5,37,15,609/ - IF WE ADD FIGURES DISALLOWANCE U/S 40A(7) IN ASSESSMENT YEAR 2006 - 07 & 2007 - 08, AS SUBMITTED BY THE ASSESSEE (AS PER REPLY DATED 17.01.2013), (RS.0.30 CRORE AND 0.13 CRORE, RESPECTIVELY), WE GET THE - FIGURE OF RS.5,78 CRORE WHICH TALLIES WITH THE FIGURE AS PER BALANCE - SHEET. 44. THE CIT HAVING REGARD TO THE ABOVE HAS HELD AS UNDER: THEREFORE, ASSESSEE'S EXPLANATION CANNOT BE TAKEN ON FACE VALUE. IF THE FIGURES OF LAST YEAR COULD BE RECONCILED BY TOTALING OF AMOUNTS GIVEN AS PER TAX AUDIT REPORT IN RESPECT OF SECTION 43B AND DISALLOWANCES U/S 40A(7) (IN THAT YEAR AS WELL AS PREVIOUS THEN, THERE IS NO REAS ON AS WHY FIGURES OF THIS YEAR CANNOT BE RECONCILED, IN THE SIMILAR WAY. IT IS SEEN FROM THE REPLY OF THE ASSESSEE DATED 17.01.2013 THAT THE SAID FIGURE OF BALANCE - SHEET IS RECONCILABLE, IF ALSO INCLUDE RS.0.88, CRORES TRANSFERRED TO GENERAL RESERVE. AS T HE SAME HAS NOT BEEN PAID, IT IS LIABLE TO BE DISALLOWED. AO HAS, HOWEVER, FAILED TO NOTICE THE ISSUE AND MAKE PROPER INQUIRY / VERIFICATION. THE FAILURE ON THE PART OF. A.O. RENDERS THE ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE , IN RESPECT OF THIS ISSUE. ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 41 45. FROM THE AFORESAID DISALLOWANCE IT IS APPARENT THAT ASSESSMENT ORDER WAS ERRONEOUS AND PREJUDICI AL TO THE INTEREST OF REVENUE IN RESPECT OF OMISSION TO MAKE AN ADMITTED DISALLOWANCE OF RS. 88 LACS ON ACCOUNT OF PROVISION FOR GRATUITY U/S 40A(7) READ WITH SECTION 43B OF THE ACT. THUS ACTION U/S 263 REVISING AN ORDER OF ASSESSMENT IS HELD TO BE IN ACCORDANCE WITH LAW. 46. TAKING U P THIRD ISSUE I.E. CLAIM OF ADDITIONAL DEPRECATION OF RS. 5,91,106/ - ON COMPU TER SOFTWARE PRIMAVERA , THE LD. CIT ON EXAMINATION OF RECORD S, NOTICED THAT ADDITIONAL DEPREC I ATION HAD BEEN CLAIMED AND ALLOWED ON COMPUTERS . HOWEVER SINCE IN HIS OPINION DEP REC I ATION IS NOT ALLOWABLE ON OFFICE APPLIANCES/MACHINERY , THEREFORE , THE SAME WAS NOT ADMISSIBLE ON COMPUTERS - AS COMPUTERS ARE OFFICE APPLIANCES. THE ASSESSEE IN REPLY TO THE SHOW CAUSE NOTICE EXPLAINED THAT ADDITIONAL DEPRECIATION HAS BEEN CLAIMED ONLY ON PRIMAVERA SOFTWARE APPLICATION TOOLS. IT WAS SUBMITTED THAT PRIMAVERA IS AN COMPREHENSIVE, MULTI PROJECT PLANNING AND CONTROL SOFTWARE, BUILT ON MICROSOFT @ SQL SERVER AND ORACLE DATABASES FOR ORGANIZATION - WIDE PROJECT MANAGEMENT SCALABILITY. IT WAS FURTHER SUBMITTED BY THE ASSESSEE BEFORE THE CIT VIDE REPLY DATED 11.2. 2013 AS UNDER : 'REGARDING CLAIM OF ADDITIONAL DEPRECIATION AMOUNTING TO RS.5.91 LAKHS, AS REQUIRED BY YOUR GOODSELF, PLEASE FIND ATTACHED THE INVOICES OF ASSETS CAPITALIZED AND BUDGETAR Y PROPOSAL FOR ENTERPRISE PROJECT MANAGEMENT AS ANNEXURE 4 WHICH SHOWS THAT THIS ENTERPRISE PROJECT MANAGEMENT SOLUTION HAS BEEN INSTALLED TO ENABLE THE PROJECT TEAMS ACROSS JSPL CARRYOUT ONLINE MONITORING & REPORTING, RESPECTIVE PROJECT COSTS AND / OR SCH EDULES FOR ONGOING & UPCOMING PROJECTS. TO EFFECTIVELY ACHIEVE THE OBJECTIVE OF ENABLING ON - LINE MONITORING OF PROJECTS AT VARIOUS SITE LOCATION(S) IN PROACTIVE COORDINATION WITH RESPECTIVE RESPONSIBLE PERSONNEL COMMENCING FROM PROJECT CONCEPTUALIZATION, FINALIZATION OF PACKAGES, REAL - TIME MONIT ORING & INFORMATION EXCHANGE WITH ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 42 SITE ON PROGRESS MADE AND COOPERATION / IMMEDIATE ACTION (S) TO BE TAKEN, REPORTING AND REGULAR INTERACTION / FEEDBACK WITH DUE UPDATION ON ALL PROJECT RELATED ACTIVITIES AT ALL INVOLVED LOCATIONS, EPM SOLUTION WAS SORT FR OM POSSIBLE SOLUTION PROVIDES PRIMAVERA & MICROSOFT. AFTER DETAILED DELIBERATION PRIMAVERA WAS MORE ACCEPTED TO JSPK LEAM(S) AND WAS FOUND TO BE MOST PREVALENT IN STEEL AND POWER INDUSTRIES FOR SIMILAR PROJECTS AS FORESEEN IN OUR ORGANISATION. TO ILLUSTR ATE THE SAME, SAIL THROUGH RECOMMENDATION FROM PRICE WATER HOUSE COOPERS HAVE STEEL (KALINGANAGAR PROJECT) HAVE ALSO CHOSEN PRIMAVERA IN ALL MAJOR COMPANIES REL/TATA POWER I NTPC NHPC HAVE ALREADY COMMENCED PRIMAVERA FOR PROJECT MANAGEMENT. IN SUMMARY, P RIMAVERA WAS FOUND MORE ADEPT AND FOCUSED FOR PROVIDING OUR REQUIRED SOLUTION COMPARED TO MICROSOFT OFFERING ONE OF THEIR EXISTING PACKAGES AND THE FORMER HAVING RICH EXPERIENCE IN SUCCESSFUL IMPLEMENTATION IN OUR INDUSTRY SPECIFIC. PRIMAVERA DESCRIPTION NO. OF LOGIN P6 - LEVEL 3 (WEB BASED USER FOR TOP MANAGEMENT FOR REVIEW ETC. AND SITE UFGRADATIONS 9 NOS. P6 - LEVEL 4 PLANNER / SCHEDULER 14 NOS. LEVEL - 2 (CONTRIBUTOR) 10 NOS. THUS, PRIRNAVERA OFFERS BEST - IN - CLASS SOLUTIONS FOCUSED ON THE MISSION CRITICAL PPM REQUIREMENTS OF KEY VERTICAL INDUSTRIES INCLUDING ENGINEERING AND CONSTRUCTION, UTILITIES & MANUFACTURING SECTOR. FOR THIS PURPOSE VARIOUS SERVERS HAVE BEEN INSTALLED WHICH ARE INTEGRAL PA RT OF PLANT & MACHINERY. 47. IN LIGHT OF THE ABOVE REPLY THE CIT HAS CONCLUDED AS UNDER: 34.4 REPLY OF THE ASSESSEE HAS BEEN CONSIDERED, CAREFULLY. THERE IS NOTHING ON THE RECORD THAT A.O. HAS CONSIDERED THE ISSUE. NOR DURING PRESENT PROCEEDINGS, ASSES SEE COULD ESTABLISH THAT A.O. ASKED FOR THE DETAILS AND ASSESSEE SUPPLIED RELEVANT DETAILS. THE A.O. HAS FAILED TO CARRY OUT NECESSARY AND PROPER INQUIRY IN THIS RESPECT WHICH HE OUGHT TO HAVE CARRIED OUT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 43 34.5 T HE PERUSAL OF THE MATERIAL ON RECORD, SPECIALLY INVOICES REGARDING PURCHASE THE SAID SOFTWARE, SUBMITTED BY THE .ASSESSEE SHOW THAT SOFTWARE 'PRIMAVERA' IS NOT ACTUALLY INSTALLED WITHIN ANY MANUFACTURING MACHINERY. AS MENTIONED IN THE REPLY OF ASSESSEE, RE PRODUCED IN PARA 29.2 AND 29.3, ABOVE, IT IS WEB BASED TOOL FOR TOP MANAGEMENT FOR REVIEW ETC. AND PLANNER / SCHEDULER. HENCE, IT IS TOOL LIKE ANY OTHER OFFICE EQUIPMENT WHICH HELPS ASSESSEE'S TOP MANAGE TO MANAGE PROJECT IN A BETTER WAY. HENCE, IT IS NOT PART OF 'PLANT AND MACHINERY' WHICH IS USED IN THE PROCESS OF MANUFACTURING. THIS IS ALSO EVIDENT FROM THE SUBMISSION OF ASSESSEE THAT IT HAS APPLICATION ACROSS INDUSTRY WHICH INDICATE THAT IT IS NOT CUSTOMIZED SOFTWARE HOUSED WITHIN A PARTICULAR MACHINE A T SHOP FLOOR. HENCE, IT IS LIKE ANY OTHER MANAGEMENT TOOL AVAILABLE TO THE MANAGEMENT WHICH HELPS THEM IN TAKING DECISION. THEREFORE IT IS ONLY OFFICE EQUIPMENT. 34.6 IT IS THE CLAIM OF ASSESSEE THAT IT HELPS IN PROJECT MANAGEMENT. HOWEVER, THE PART OF T HE (B) PROVISO TO THE SECTION 32(1)(IIA) OF THE INCOME TAX ACT, 1961 (REPRODUCED IN PARS 29.2, ABOVE) SHOW THAT EVEN IF (WITHOUT PREJUDICE) WE CONSIDER THIS SOFTWARE TO BE 'PLANT AND MACHINERY', THIS BEING INSTALLED & WORKING (MAY BE PARTLY), IN OFFICE AND OUTSIDE OFFICE (WHEREVER TOP MANAGEMENT GOES) AND CERTAINLY OUTSIDE ACTUAL MANUFACTURING ACTIVITY, WOULD NOT BE QUALIFIED FOR ADDITIONAL DEPRECIATION. 34.7 AO HAS, HOWEVER, FAILED TO CONSIDER THIS ISSUE. THE FAILURE ON THE PART OF THE A.O. (OF NOT CONSID ERING THIS ISSUE), A PREJUDICE HAS BEEN CAST UPON THE REVENUE. 48. HAVING REGARD TO THE ABOVE , IT IS HELD THAT HERE TOO THERE WAS NO ENQUIRY ON THE PART OF THE AO IN RESPECT OF CLAIM OF ADDITIONAL DEPRECIATION AND THEREFORE THE CIT WAS JUSTIFIED TO CONCLUDE THAT AO FAILED TO CARRY OUT NECESSARY AND PROPER ENQUIRY IN RESPECT OF CLAIM MADE BY THE APP ELLANT COMPANY. EVEN BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT PLACED ON RECORD ANY EVIDENCE IN THE SHAPE OF REPLY SO AS TO SHOW AND ESTABLISH THAT THE ISSUE WAS DULY EXAMINED BY THE ASSESSING OFFICER . THE REPLY DATED 12.7.2010 BEFORE THE A O AS HIGHLIGHTED , IS A ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 44 GENERAL REPLY AND DOES NOT IN ANY MANNER SHOW THAT NECESSARY AND PROPER ENQUIRIES WERE MADE VIZ - A - VIZ THE CLAIM OF THE APPELLANT. MERE DISCLOSURE IN THE RETURN OF INCOME OR THE FINANCIAL STATEMENTS ABOVE DOES NOT SHOW OR DEMONSTRATE THAT THERE WAS DUE APPLICATION OF MIND BY THE AO. ON THE CONTRARY COMPLETE EXPLANATION ALONGWITH INVOICES HAD BEEN PLACED ON RECORD FOR THE FIRST TIME DURING THE REVISION PROCEEDINGS AND NOT IN THE ASSESSMENT PROCEEDING AND THUS THE ASSESSMENT ORDER IS B OTH ERRONEOUS AND PREJUDICIAL TO INTEREST OF REVENUE. HENCE, EVEN ON THIS ISSUE THE CLAIM OF THE APPELLANT IS NOT MAINTAINABLE. 49. IN VIEW OF THE ABOVE , THE GROUNDS RAISED BY THE ASSESSEE IN RELATION TO ORDER UNDER 263 OF THE ACT BY THE CIT , ARE DISMI SSED . WE MAY STATE HERE THAT WHILE DISPOSING OFF THE ABOVE GROUNDS , WE HAVE NOT CONSIDERED THE ARGUMENTS BY BOTH THE SIDES ON MERITS OF ADDITION/DISALLOWANCES MADE, WHICH WILL BE CONSIDERED INDEPENDENTLY IN THE QUANTUM APPEAL IN ITA NO. 3128/D/2014. 50. AS REGARDS GROUNDS 3 AND 4, IT IS NOTICED THAT CIT IN THE IMPUGNED ORDER HAS NOT ADJUDICATED ON MERITS OF THE TAXABILITY OF SUBSIDY OF RS. 81.50 CRORES AND CLAIM OF ADDITIONAL DEPRECIATION OF RS. 5,91,106/ - ON COMPUTER SOFTWARE U/S 32(1)(IIA) OF THE ACT. THIS FACT HAS BEEN ADMITTED BY THE ASSESSEE ITSELF IN ONE OF ITS GROUND. THEREFORE, THE GROUNDS NO. 3 AND 4 RAISED BY THE ASSESSEE ARE MISCONCEIVED & MISPLACED AND W E HAVE ALREADY HELD ABOVE THAT ARGUMENTS ON MERITS WILL BE CONSIDERED INDEPENDENTLY IN ITA NO. 3128/D/2014, AND AS SUCH INSTANT GROUNDS ON MERITS OF THE ADDITION ARE DISMISSED. 51. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 45 ITA NO. 3128/DEL/2014 52. TAKING UP ITA NO. 3128/D EL /2014, T HE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1 THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN MAKING AN ADDITION OF RS. 81,58,94,102/ - ON ACCOUNT OF SALES TAX INCENTIVE/S UBSIDY RECEIVED, BY TREATING THE SAME AS TRADING RECEIPT LIABLE TO TAX UNDER THE PROVISIONS OF THE INCOME TAX ACT,1961 ( THE ACT ) AS AGAINST THE SAME BEING CLAIMED AS CAPITAL RECEIPT BY THE APPELLANT. 1.1 THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN CONFI RMING THE AFORESAID ACTION OF THE ASSESSING OFFICER BY MERELY RELYING ON THE ASSESSMENT ORDER, WITHOUT CONSIDERING THE SUBMISSIONS/ARGUMENTS SUBMITTED BY APPELLANT DURING THE COURSE OF APPELLANT DURING THE COURSE OF APPELLATE PROCEEDINGS. 1.2 THAT THE CIT( A) ERRED ON FACTS AND IN LAW IN CONFIRMING THE AFORESAID ACTION OF THE ASSESSING OFFICER BY RELYING ON THE TRIBUNAL S DECISION IN APPELLANT S OWN CASE FOR A PRECEDING ASSESSMENT YEAR WITHOUT EVEN CONSIDERING THE LATER BINDING DECISIONS OF THE HIGH COURTS. 2 THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING RS. 5,91,106/ - ON ACCOUNT OF ADDITIONAL DEPRECIATION CLAIMED BY THE APPELLANT UNDER SECTION 32(1)(IIA) OF THE ACT IN RESPECT OF COMPUTER SOFTWARE PRIMAVERA . 2.1 THAT THE CIT(A) ERRED ON FACTS AND IN CONFIRMING THE AFORESAID ACTION OF THE ASSESSING OFFICER ON AN ERRONEOUS BASIS THAT THE COMPUTER SOFTWARE DID NOT CONSTITUTED PLANT AND MACHINERY , NOT BEING A PART OF ACTUAL MANUFACTURING ACTIVITY, F OR BEING ELIGIBLE FOR CLAIMING ADDITIONAL DEPRECIATION UNDER SECTION 32(1)(IIA) OF THE ACT. 3 THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 49,41,850 ON ACCOUNT OF PROVISION FOR GRATUITY. 3.1 THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN CONFIRMING THE AFORESAID ACTION OF THE ASSESSING OFFICER WITHOUT APPRECIATING THAT THE ABOVE AMOUNT WAS SUO MOTU DISALLOWED AND ADDED BACK BY APPELLANT IN RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR AND THEREFORE, ADDITION THEREOF RESULTED IN DOUBLE ADDITION OF THE SAME AMOUNT. ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 46 3.2 THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN ALLEGING THAT THE APPELLANT FAILED TO FURNISH RECONCILIATION AND FAILED TO SHOW THAT RS. 49,41,850 HAD BEEN ADDED BACK IN THE COMPUTATION OF INCOME. 3.3 THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN OBSERVING THAT ADDITION OF RS. 1,37,41,850/ - IS CONFIRMED, WITHOUT APPRECIATING THAT THE APPELLANT HAD ONLY CHALLENGED DOUBLE ADDITION OF RS. 49.42 LACS MADE BY THE ASSESSING OFFICER. 53. GROUND S NO. 1 TO 1.2 CHALLE NGE THE ACTION OF THE ASSESSING OFFICER IN MAKING AN ADDITION OF RS. 81,58,94,102/ - REPRESENTING SALE TAX SUBSIDY HELD TO BE TRADING RECEIPT AS AGAINST CAPITAL RECEIPT CLAIMED BY THE APPELLANT COMPANY. 54. FROM THE PERUSAL OF THE ASSESSMENT ORDER IT IS NOTED THAT PURSUANT TO THE ORDER DATED 25.3.2013 U/S 263 OF THE ACT, THE AO ISSUED NOTI CE DATED 31.3.2013 U/S 143(3) READ WITH SECTION 263 OF THE ACT. THE ASSESSEE IN COMPLIANCE FILED REPLY DATED 7.5.2013 AND THE AO NOTED THAT BOTH BEFORE CIT AND BEFORE H IM , THE ASSESSEE CONTENDED THAT SALES TAX SUBSIDY WAS A CAPITAL RECEIPT. IT WAS NOTED THAT THE SUBMISSION OF THE ASSESSEE WAS THAT THE UNIT AT RAIGARH WAS SETUP PURSUANT TO A SCHEME OF THE GOVERNMENT OF MADHYA PRADESH. IT WAS CONTENDED THAT THRUST OF T HE SCHEME WAS TO FUND PART OF THE COST OF SETTING UP OF THE INDUSTRIAL UNIT IN THE NOTIFIED BACKWARD AREAS OF THE STATE FOR INDUSTRIAL DEVELOPMENT OF THE BACKWARD DISTRICTS AS WELL AS GENERATION OF EMPLOYMENT, APART FROM RECEIVING GREATER REVENUES BY WAY O F TAXES, ROYALTY, ETC. FOR OVERALL GROWTH AND DEVELOPMENT OF THE STATE. THE SCHEME WAS LINKED TO THE INVESTMENT IN FIXED CAPITAL ASSETS IN AS MUCH AS MINIMUM INVESTMENT OF RS. 1,00 CRORES IN FIXED CAPITAL ASSETS WAS A CONDITION PRECEDENT TO ELIGIBILITY UN DER THE SCHEME AND THEREFORE THE SALES TAX , ENTRY TAX AND ELECTRICITY DUTY INCENTIVE WERE ENVISAGED TO ENCOURAGE THE S ETTING UP OF INDUSTRIES IN BACK WARD AREA AND NOT FOR SUPPLEMENTING BUSINESS RECEIPTS. IT WAS SUBMITTED THAT INCENTIVE RECEIVED UNDER THE SCHEME BY WAY OF EXEMPTION FROM PAYMENT OF ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 47 CERTAIN TAXES OF DUTY WAS JUST A MODE ADOPTED TO DISBURSE THE SUBSIDY BY THE STATE GOVERNMENT AND TAXATION OF INCENTIVE/SUBSIDY BY WHATEVER NAME CALLED IS DETERMINED BY THE PURPOSE FOR WHICH THE SUBSIDY IS GRANTED AND NOT THE FORM/MODE/MANNER IN WHICH THE SUBSIDY IS RECEIVED/DISBURSED. RELIANCE WAS PLACED ON THE JUDGMENTS IN THE CASE OF V.S.S.V. MEENAKSHI ACHI VS. CIT (SUPRA), SAHNEY STEEL AND PRESS WORKS LTD. AND OTHERS V CIT (SUPRA) AND CIT V BALRAMPUR CHINI MIL LS LTD. 238 ITR 445 (CAL). IT WAS FURTHER STATED THAT SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF RELIANCE INDUSTRIES (SUPRA) RELYING ON THE PRINCIPLES LAID DOWN BY SUPREME COURT IN THE CASE OF SAHNEY STEEL & PRESS WORKS LTD. (SUPRA) CAME TO THE CONCLUSI ON THAT SINCE THE INCENTIVES WERE GIVEN FOR BRINGING ABOUT ADDITION TO NECESSARY INFRASTRUCTURE IN PROCESSING/DEVELOPING THE BACKWARD AREA, THE SAME WOULD BE IN THE NATURE OF CAPITAL RECEIPT NOT LIABLE TO TAX. FURTHER RELIANCE WAS PLACED ON THE JUDGMENT O F APEX COURT IN THE CASE OF PONNI SUGARS & CHEMICALS (SUPRA) AND DECISION OF DELHI BENCH OF THE TRIBUNAL IN THE CASE OF THE BHUSHAN STEEL AND STRIPS LTD. VS. DCIT 91 TTJ 108 WHEREIN THE TRIBUNAL HELD THAT THE SUBSIDY GRANTED BY THE GOVERNMENT BY WAY OF SAL ES TAX WAS CAPITAL IN NATURE. THE APPELLANT ALSO PLACED RELIANCE ON THE JUDGMENT OF JAMMU AND KASHMIR HIGH COURT IN THE CASE OF M/S SHREE BALAJI ALLOYS ( SUPRA) WHEREIN THE HON BLE HIGH COURT DECIDED SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING THAT THE SUBSIDY GIVEN FOR SETTING UP OF UNIT IN THE STATE OF JAMMU FOR EMPLOYMENT GENERATION WAS IN THE NATURE OF A CAPITAL RECEIPT, NOT LIABLE TO TAX UNDER THE PROVISIONS OF THE ACT 55. ON CONSIDERATION OF THE ABOVE REPLY TH E ACIT HISAR, CIRCLE HISAR REJECTED THE CLAIM OF THE ASSESSEE FOR THE FOLLOWING REASONS: I) THE ASSESSEE FAILED TO DISCHARGE ITS ONUS REGARDING THE PREPOSITION THAT THE STATE GOVERNMENT DOES NOT HAVE ANY RIGHT OVER ANY PART OF THE SAID ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 48 TRADE RECEIPT IN LI EU OF GOODS SO LD. THE STATEMENT OF ASSESSEE . THE ONLY DIFFERENCE S THAT IN CASE OF EXEMPT UNIT , SALES TAX IS NOT SEPARATELY REFLECTED IN THIS BILL, BUT IS COLLECTED AND RETAINED BY THE ASSESSEE .. IS BEYOND FACTS. IT IS PROVIDED IN THE HIGHEST LAW OF THE LAND I.E. CONSTITUTION OF INDIA THAT NO TAX COULD BE COLLECTED WITHOUT AUTHORITY OF LAW. IN SUCH A SCENARIO WHEN LEVY OF THE SALES TAX IS NOT THERE, HOW CAN ANY AMOUNT BE COLLECTED AS SALES TAX? II) THE ARGUMENT OF THE ASSESSEE THAT THE EXEMPTION IS SUBJECT TO CERTAIN CONDITION DOES NOT HELP THE CAUSE OF THE ASSESSEE, BECAUSE AS LONG AS THE EXEMPTION IS OPERATIVE FOR THE SALES TAX, THERE IS NO RIGHT OF STATE GOVT. OVER ANY AMOUNT AS SALES TAX . III) THE ASSESSEE POINTED OUT TOWARDS SECTION 64 OF THE SALES OF GOODS ACT, 1930. PLAIN READING OF SECTION 64 SHOWS THAT IT IS NOT RELEVANT TO THE ISSUE. IT IS TALKING ABOUT A SITUATION WHERE A CONTRACT OF SALE IS MADE WITHOUT STIPULATIONS AS TO THE PAYMENT OF TAX; IV) THE ASSESSEE ALSO COULD NOT REBUT THE ARGUMENT THAT ENTIRE AMOUNT, RECEIVED IN LIEU OF TRANSFER OF PROPERTY IN GOODS IS TO BE GIVEN THE SAME TREATMENT. DIFFERENT PARTS OF THE SAME RECEIPT CANNOT HAVE DIFFERENT COLOURS. IN OTHER WORDS, IT IS NOT POSSIBLE TO GIVE DIFFERENT TREATMENT TO ONE PAR T AS TAXABLE (INCOME) AND ANOTHER PART AS NON TAXABLE ( CAPITAL SUBSIDY ). ALSO ASSESSEE COULD NOT REBUT THE FACT THAT ASSESSEE ITSELF HAS BEEN TREATING ENTIRE AMOUNT AS INCOME UPTO JUST PREVIOUS ASSESSMENT YEAR AND EVEN IN THIS YEAR, FIRSTLY ENTIRE SALES PROCEEDS HAVE BEEN CREDITED TO THE PROFIT AND LOSS ACCOUNT AS TRADE RECEIPT; AND V) THE CASE LAWS RELIED UPON BY THE ASSESSEE DO NOT HELP IT S CAUSE. ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 49 56. APART FROM THE ABOVE IT HAS BEEN HELD THAT ITS SUBSIDY HAS FOUR INGREDIENTS I.E. FIRSTLY MONEY SHOULD BE PAID (GENERALLY, BY THE GOVT.) SECONDLY, THE MONEY SHOULD BE PAID TO REDUCE THE COST OF GOODS/MACHINERY/LAND, THIRDLY (WHICH IS A LOGICAL INFERENCE), T HE MONEY PAID CANNOT BE MORE THAN (100% OF THE ACTUAL MARKET COST OF THE GOODS/MACHINERY/LAND WHICH IT INTENDS TO SUBSIDIZE AND FOURTHLY IT IS GRANTED AFTER EXAMINATION OF THE APPLICATION (FOR GRANTS OF SUCH SUBSIDY) BY SPECIFIED AUTHORITY, UNDER SPECIFICA LLY NOTIFIED SCHEME, ON SATISFACTION OF THE SAID AUTHORITY THAT SPECIFIED CONDITIONS HAVE BEEN FULFILLED. IT WAS HELD THAT ON THE FACTS OF THE CASE THE ASSESSEE HAS MIXED THE CONCEPTS OF SUBSIDY/INCENTIVE/FACILITY AND ASTRAY FROM THE FACT THAT WHATEVER MA Y BE NOMENCLATURE , THERE SHOULD BE RECEIPT , EITHER REAL OR SPECIFICALLY COVERED UNDER ANY OF THE DEEMING PROVISIONS OF THE ACT, THEN ONLY QUESTION OF TAXATION (OR OTHERWISE) ARISE. IT WAS SPECIFICALLY HELD THAT TILL ASSESSMENT YEAR 2007 - 08 (LAST ASSESS MENT YEAR) THE ASSESSEE ITSELF WAS TREATING THE ENTIRE AMOUNT AS PART OF PROFIT AND GAINS AND THERE WAS NO DISPUTE THAT THE ENTIRE MONEY IS INCOME OF THE ASSESSEE SINCE ACCORDING TO THE ASSESSEE ITSELF, (MAJOR) PART OF THIS MONEY IS FALLING WITHIN THE DEFINITION OF INCOME , THEREFORE, THIS MONEY IN ENTIRELY FALLS WITHIN THE DEFINITION OF INCOME . 57. APART FROM THE ABOVE IT HAS BEEN CONCLUDED T H A T THE ASSESSEE COULD NOT PRODUCE ANY MATERIAL TO LINK THE ABOVE N OTIFICATIONS TO ANY SCHEME OF SUBSIDY OR INCENTIVE UNDER WHICH THE CASE OF THE ASSESSEE IS COVERED. IT HAS BEEN SPECIFICALLY HELD AS UNDER: 12.2 THE ABOVE CONTENTIONS OF THE ASSESSEE ARE CONSIDERED, CAREFULLY. ASSESSEE COULD NOT POINT OUT TO ANY MATERIAL TO PROVE THAT THE NOTIFICATION DATED 24.2000 (REPRODUCED IN PARA 7.1 ABOVE) IS LINKED TO ANY SCHEME . THE ASSESSEE ONLY REPEATED IT S EARLIER ARGUMENTS. AS DISCUSSED IN EARLIER PARAS, THESE ARGUMENTS OF THE ASSESSEE ARE GENERAL. IT WAS ALSO SEEN THAT THE ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 50 LINKAGES TO THE INDUSTRIAL POLICY OF 1994 AND NOTIFICATION OF 1993 (REPRODUCED INI PARA 8.2.1 ABOVE) ARE LOOSE AND INDICATE DESPERATE ATTEMPTS OF THE ASSESSEE TO BEAT ABOUT THE BUSH. 12.3 AT THE COST OF REPLETION, IT IS STATED THAT OURS IS A WELFARE STATE AND GOVT. KEEPS ON PROVIDING VARIO US FACILITIES/INCENTIVES FOR ENCOURAGEMENT OF ACTIVITIES WHICH ARE CONSIDERED DESIRABLE FOR ECONOMIC DEVELOPMENT. EACH OF SUCH FACILITIES/INCENTIVES GOES TO SAVE SOME MONEY OF A BUSINESSMAN. HOWEVER, GOVT. MAY NOT HAVE INTENTION TO GRANT EVERY BENEFIT/IN CENTIVE/FACILITY IN LIEU OF MONEY. FOR EXAMPLE, GOVT. SUBSIDIES DIESEL TO HELP TRANSPORT INDUSTRY. IT DOES NOT MEAN THAT EQUIVALENT AMOUNT OF SAVINGS BY A TRANSPORTER BECOMES MONEY GRANTED BY THE GOVT. TO THE TRANSPORTER AND CONSEQUENTLY, A PORTION (EQ UAL TO SUCH EQUIVALENT AMOUNT) FROM PROFIT OF THE TRANSPORTER BECOMES NON TAXABLE. IN FACT , IT IS EXCEPTION, RATHER THAN RULE, THAT INCENTIVE ARE PROVIDED IN LIEU OF MONEY . IN SUCH (EXCEPTIONAL) CASES, THE GOVT. EXPRESSES ITS INTENTION BY WAY OF EXPLIC IT AND SPECIFIC DECLARATION. SUCH DECLARATIONS ARE CONTAINED IN THE SCHEME WHICH HAVE BEEN REFERRED TO AND RELIED UPON BY VARIOUS COURTS WHILE DELIVERING THOSE JUDGMENTS. IN CASE OF THE ASSESSEE, ANY SCHEME SHOWING INTENTION OF THE STATE GOVT. THAT THE SE TAX INCENTIVES ARE PROVIDED IN LIEU OF MONEY COULD NOT BE POINTED OUT BY THE ASSESSEE, IN SPITE OF AMPLE OF OPPORTUNITIES PROVIDED. ASSESSEE HAS BEEN BEATING ABOUT THE BUSH AND TRYING TO MAKE CASE BY INDIRECT, LOOSE AND OUT OF CONTEXT REFERENCES TO N ON RELEVANT MATERIAL. 13 IN CONCLUSION, IT CAN BE STATED THAT THE ASSESSEE HAS TRIED TO EVADE TAX LIABILITY BY ENTANGLING THE REVENUE AUTHORITIES IN THE LABYRINTH OF WORDS. 58. THE AO HAS FURTHER DISTINGUISHED EACH OF THE JUDGMENT RELIED UPON BY THE ASSE SSEE ; AND ON CONSIDERATION THEREOF CONCLUDED THAT AMOUNT OF RS. 81,58,94,102/ - WHICH WAS REDUCED FROM TAXABLE INCOME BY TRANSFERRING IT TO SALES TAX SUBSIDY IS ADDED TO THE INCOME OF APPELLANT COMPANY FOR THE INSTANT YEAR. 59 . THE CIT(A) UPHELD THE AFORESAID ADDITION AND CONCLUDED AS UNDER: ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 51 THE AO HAS AT GREAT LENGTH, DEALT WITH THE ISSUE OF WHETHER THE SUBSIDY SHOULD BE TREATED AS REVENUE RECEIPTS OR CAPITAL RECEIPTS. HE HAS, IN PARAS 4.3.1 TO PARA 24 (PAGES 29 TO 96 OF THE ASSESSMENT ORDER) DEALT WITH IN GREAT DETAIL AS TO WHY THE ENTIRE AMOUNT IS BEING TREATED AS REVENUE RECEIPTS. (THIS IS NOT BEING REPRODUCED HERE FOR THE SAKE OF BREVITY). ALSO, THE HON BLE ITAT IN ITS ORDER IN ITA NO. 3254/D/20 08 IN THE ASSESSEE S CASE OF AY 2004 - 05 HAS TREATED THE ENTIRE AMOUNT AS REVENUE RECEIPTS BY RELYING ON THE JUDGMENT OF THE APEX COURT IN SAWHNEY STEELS AND PRESS WORKS. THE HON BLE ITAT HAS IN ITS ORDER AFTER A DETAILED ANALYSIS HELD THAT THE FACTS AND C IRCUMSTANCES OF THE CASE ARE SIMILAR TO THAT OF SAWHNEY STEELS AND PRESS WORKS. THE CASE LAWS SUBMITTED BY THE APPELLANT IN ITS FAVOUR WERE ALSO NOT FOUND TO BE APPLICABLE TO THIS CASE. THEREFORE, RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HON BLE ITAT FO R AY 2004 - 05 IN THE APPELLANT S CASE (SUPRA), I CONFIRM THE ADDITION OF RS. 81,58,94,102/ - . THIS GROUND OF APPEAL IS DISMISSED. 60. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT ISSUE IS NO LONGER RES INTEGRA AND STANDS CONCLUDED BY THE DECISION OF TRIBUNAL IN THE CASE OF ASSESSEE COMPANY IN ITA NO. 3319//D/2008 DATED 22.2.2013 FOR ASSESSMENT YEAR 2004 - 05 WHEREIN IT HAS BEEN HELD AS UNDER: HOWEVER, WE FIND THAT THE ISSUE HAS BEEN EXPLAINED IN DETAIL IN THE APEX COURT JUDGMENT OF SAHNEY STEEL & PRESS WORKS LTD. ( SUPRA ) AND PONNI SUGARS & CHEMICALS LTD. ( SUPRA ) WHEREIN THE HON'BLE COURT HAD TAKEN OPPOSITE VIEWS IN VIEW OF DIFFERENT FACTS AND CIRCUMSTANCES OF BOTH CASES. THE CASE LAW OF SAHNEY STEEL & PRESS WORKS LTD. ( SUPRA ) SQUARELY COVERS THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. THE FACTS OF SAWHNEY STEEL & PRESS WORKS ARE THAT WHETHER SUBSIDY RECEIVED BY THE ASSESSEE COMPANY WAS TAXABLE AS REVENUE RECEIPT OR NOT. AS PER NOTIFICATION ISSUED BY ANDHRA PRADESH GOVT. CERTAIN FACILITIES AND INCENTIVES WERE TO BE GIVEN TO ALL NEW INDUSTRIAL UNDERTAKINGS WHICH COMMENCED PRODUCTION ON OR AFTER 1.1.1969 WITH CAPITAL INVESTMENT NOT EXCEEDING RS. 5 CRORES AND THE INCENTIVES WERE TO BE ALLOWED FOR A PER IOD OF FIVE YEARS FROM THE DATE OF COMMENCEMENT OF PRODUCTION AND INCENTIVE WAS IN THE FORM OF REFUND OF SALES TAX ON RAW MATERIAL, MACHINERY AND FINISHED GOODS SUBJECT TO MAXIMUM OF 10% OF ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 52 EQUITY CAPITAL PAID UP IN THE CASE OF PUBLIC LIMITED COMPANY AND A CTUAL CAPITAL IN THE CASE OF OTHER. THE INCENTIVES WERE ALSO TO BE PAID IN THE FORM OF SUBSIDY ON POWER CONSUMED FOR PRODUCTION AND ALSO EXEMPTION WAS TO BE GIVEN FOR PAYMENT OF WATER CHARGES. THE INCENTIVE SCHEME WAS FOR SETTING UP NEW INDUSTRIAL UNDERTAK ING IN THE STATE AND ALSO FOR THE PURPOSE OF STIMULATING SPECIAL EXPANSION OF THE INDUSTRY. THE PRIMARY OBJECT WAS RAPID INDUSTRIALIZATION OF THE STATE AND THIS OBJECT WAS SOUGHT TO BE ACHIEVED BY VARIOUS INCENTIVES. IT WAS CONTENDED THERE THAT SINCE SUBSI DY WAS CALCULATED ON THE BASIS OF QUANTUM OF INVESTMENT IN CAPITAL, SUCH SUBSIDY CANNOT BE CONSIDERED TO HAVE BEEN RECEIVED BY THE ASSESSEE ON REVENUE ACCOUNT. THE HON'BLE APEX COURT HELD: 'THAT CONTENTION OF ASSESSEE THAT SUBSIDIES WERE OF CAPITAL NATURE AND WERE GIVEN FOR THE PURPOSE OF STIMULATING THE SETTING UP AND EXPANSION OF INDUSTRIES IN THE STATE CANNOT BE UPHELD BECAUSE OF THE SUBSIDY SCHEME ITSELF AS NO FINANCIAL ASSISTANCE WAS GRANTED TO THE ASSESSEE FOR SETTING UP OF THE INDUSTRY. IT IS ONLY WH EN THE ASSESSEE HAD SET UP ITS INDUSTRY AND COMMENCED PRODUCTION AND VARIOUS INCENTIVES WERE GIVEN FOR THE LIMITED PERIOD OF FIVE YEARS.' THEREFORE, THE HON'BLE COURT HELD THAT PURPOSE OF THE STATE WAS TO PROVIDE THE NEWLY SET UP INDUSTRY HELPING HAND FOR FIVE YEARS TO ENABLE THEM TO BE VIABLE AND COMPETITIVE AND IT WAS FURTHER HELD THAT SALES TAX REFUND AND THE RELIEF ON ACCOUNT OF WATER TAX, LAND REVENUE AS WELL AS ELECTRICITY CHARGES WERE INTENDED TO ENABLE THE ASSESSEE TO RUN THE BUSINESS MORE PROFITABL Y. IT WAS FURTHER HELD BY HON'BLE COURT THAT PAYMENTS WERE MADE ONLY AFTER THE INDUSTRIES HAVE BEEN SET UP AND THEREFORE PAYMENTS WERE NOT MADE FOR THE PURPOSE OF SETTING UP OF THE INDUSTRIES BUT THE PACKAGE OF INCENTIVES WERE GIVEN TO THE INDUSTRY TO RUN MORE PROFITABLY FOR A PERIOD OF FIVE YEARS FROM THE DATE OF COMMENCEMENT OF PRODUCTION. THE COURT FURTHER HELD THAT PAYMENTS WERE NOTHING BUT SUPPLEMENTARY TRADE RECEIPTS AND ASSESSEE WAS FREE TO USE THE MONEY IN ITS BUSINESS ENTIRELY AS IT LIKES AND WAS N OT OBLIGED TO SPEND THE MONEY FOR A PARTICULAR PURPOSE. IT WAS FURTHER HELD THAT BY NO STRETCH OF IMAGINATION THE SUBSIDY BY WAY OF REFUND OF SALES TAX OR RELIEF OF ELECTRICITY CHARGES OR WATER CHARGES CAN BE TREATED AS AN AID TO SETTING UP OF THE INDUSTRY OF THE ASSESSEE. IT WAS HELD THAT CHARACTER OF THE SUBSIDY IN THE HANDS OF RECIPIENTS WHETHER REVENUE OR CAPITAL WILL HAVE TO BE DETERMINED BY HAVING REGARD TO THE PURPOSE FOR WHICH THE SUBSIDY WAS GIVEN AND IF IT WAS GIVEN BY WAY OF ASSISTANCE TO THE ASS ESSEE IN CARRYING ON HIS TRADE OR BUSINESS IT HAS TO BE TREATED AS TRADING RECEIPT AND IF THE REFUND OF SALES TAX ON PURCHASE OF MACHINERY AS WELL AS ON RAW MATERIAL IS GIVEN TO ENABLE THE ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 53 ASSESSEE TO ACQUIRE NEW PLANT & MACHINERY FOR FURTHER EXPANSION OF ITS MANUFACTURING CAPACITY THE ENTIRE SUBSIDY MUST BE HELD TO BE A CAPITAL RECEIPT IN THE HANDS OF THE ASSESSEE. THE HON'BLE COURT FURTHER HELD THAT SUBSIDIES WERE NOT GRANTED FOR PRODUCTION OR BRINGING INTO IN EXISTENCE ANY NEW ASSET AND THE SAME WERE GRA NTED YEAR AFTER YEAR ONLY AFTER SETTING UP OF NEW INDUSTRY AND COMMENCEMENT OF PRODUCTION AND SUCH SUBSIDY COULD ONLY BE TREATED AS ASSISTANCE GIVEN FOR THE PURPOSE OF CARRYING ON THE BUSINESS OF THE ASSESSEE AND HELD THAT THESE SUBSIDIES WERE OF REVENUE C HARACTER AND WERE LIABLE TO TAX. 49. THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE ARE SIMILAR TO THE FACTS AND CIRCUMSTANCES OF SAHNEY STEEL & PRESS WORKS LTD. ( SUPRA ) WHEREIN THE GOVT. OF MADHYA PRADESH WITH A VIEW TO INDUSTRIALIZE THE STATE AND UTILIZ E THE HUMAN RESOURCES WITH AN AIM TO INCREASE EMPLOYMENT HAD PROVIDED SUBSIDIES IN THE FORM OF SALES TAX EXEMPTION, ELECTRICITY DUTY AND ENTRY TAX TO THE ASSESSEE FOR HAVING MADE INVESTMENT FOR A MINIMUM AMOUNT OF RS. 1000 CRORES. THE PURPOSE OF ANDHRA PRA DESH GOVT. AND MADHYA PRADESH GOVT. WERE BROADLY SAME I.E. INDUSTRIALIZATION AND CONSEQUENT INCREASE IN EMPLOYMENT OPPORTUNITIES. THE LD AR'S ARGUMENT THAT PURPOSE TEST HAS TO BE APPLIED IN VIEW OF THE OBJECTIVES OF THE SCHEME IS CORRECT AS IN BOTH THE POL ICIES OF ANDHRA PRADESH & MADHYA PRADESH, THE MACRO PURPOSE WAS INDUSTRIALIZATION, INCREASE IN EMPLOYMENT AND BETTER UTILIZATION OF HUMAN AND STATE RESOURCES. THEREFORE, THE FACTS AND CIRCUMSTANCES OF SAWHNEY'S CASE AND PRESENT CASE ARE SIMILAR. THE SUPREM E COURT IN THE CASE OF SAHNEY STEEL & PRESS WORKS LTD. ( SUPRA ) HAS CLEARLY HELD THAT REFUND OF SALES TAX OR RELIEF OF ELECTRICITY CHARGES CANNOT BE TREATED AS AN AID TO SETTING UP OF AN INDUSTRY OF THE ASSESSEE AND THEREFORE CANNOT BE SAID TO BE OF CAPITAL RECEIPT. THE ARGUMENT OF LD AR THAT THE INDUSTRIAL POLICY OF MADHYA PRADESH GOVT. HAD TRIED TO USE TAXATION AS AN INSTRUMENT FOR INCREASE IN EMPLOYMENT, DEVELOPING SCENARIO LINKAGES BETWEEN DIFFERENT SECTOR IS CORRECT TO THE EXTENT THAT STATE GOVT. HAD US ED SALES TAX EXEMPTION AS A POLICY TO ACHIEVE THESE OBJECTIVES AND TAXATION OF SUBSIDY UNDER INCOME TAX ACT CANNOT BE INTENDED TO BE USED FOR THE SAME AS THIS IS NOT A STATE SUBJECT. THE LD AR HAD FURTHER ARGUED THAT HON'BLE SUPREME COURT IN THE CASE OF PO NNI SUGARS & CHEMICALS LTD. ( SUPRA ) HAD OVERRULED ITS OWN JUDGMENT IN THE CASE OF SAHNEY STEEL & PRESS WORKS LTD. ( SUPRA ) WHICH IS NOT CORRECT BECAUSE IN THE LATTER CASE THE AMOUNT OF SUBSIDY WAS NOT AVAILABLE TO THE ASSESSEE FOR USE IN ANY WAY AS IT LIKED BUT IT WAS SPECIFICALLY PAID TO THE ASSESSEE FOR REPAYMENT OF OUTSTANDING LOANS. THE BENEFITS OF THE SCHEME HAD TO B E UTILIZED ONLY FOR REPAYMENT OF LOANS WHICH WERE TAKEN BY THE ASSESSEE TO SET ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 54 UP NEW UNIT OR FOR SUBSTANTIAL EXPANSION OF AN EXISTING UNI T. FROM THE ANALYSIS OF BOTH JUDGMENTS OF HON'BLE SUPREME COURT IT CAN BE CONCLUDED THAT BOTH JUDGMENTS ARE NOT CONTRARY TO EACH OTHER AND RATHER THEY ARE COMPLIMENTARY TO EACH OTHER. IN THE FORMER CASE THE HON'BLE SUPREME COURT HAD DECIDED THE NATURE OF S UBSIDY DEPENDING UPON THE PURPOSE FOR WHICH IT WAS PAID IT WAS HELD TO BE ON REVENUE ACCOUNT IN THE FORM OF SALES TAX EXEMPTION, WATER TAX EXEMPTION ETC. WHEREAS IN THE LATTER CASE THE SUBSIDY WAS PAID FOR REPAYMENT OF OUTSTANDING LOANS WHICH WERE CAPITAL IN NATURE THEREFORE, KEEPING IN VIEW THE PURPOSE TEST WHICH WAS FOR REPAYMENT OF LOANS A CAPITAL RECEIPT THE HON'BLE COURT HAD HELD IT TO BE CAPITAL RECEIPT. THE ASSESSEE HAD RELIED UPON A NUMBER OF JUDGMENTS GIVEN BY LOWER COURTS WHICH HAS CONSIDERED SUBS IDY AS CAPITAL RECEIPT BY APPLYING PURPOSE TEST BUT THE FACTS AND CIRCUMSTANCES OF EACH AND EVERY CASE ARE DIFFERENT FROM THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE WHICH ARE SQUARELY COVERED BY THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF SAH NEY STEEL & PRESS WORKS LTD. ( SUPRA ). THE CASE LAWS RELIED UPON BY THE ASSESSEE ARE DISCUSSED AS UNDER: 50. RASOI LTD. ( SUPRA ). THE OBJECT OF THE SUBSIDY IN THIS CASE WAS EXPANSION OF BUSINESS CAPACITIES, MODERNIZATION AND MARKETING AND CAPABILITY OF THES E WERE ASSISTANCE ON CAPITAL AMOUNT WHEREAS THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE ARE TOTALLY DIFFERENT. 51. SHREE BALAJI ALLOYS ( SUPRA ). THE SUBSIDY IN THE FORM OF EXCISE DUTY REFUND AND INTEREST SUBSIDIES WERE GIVEN IN VIEW OF SPECIAL PACKAGE FOR J&K BY CENTRAL GOVT. IN PUBLIC INTEREST IN VIEW OF SPECIFIC PROBLEMS OF UN - EMPLOYMENT IN THE STATE AND FOR ACCELERATION OF INDUSTRIAL DEVELOPMENT WHICH HAD LAGGED BEHIND. THE HON'BLE COURT HAD HELD THAT INCENTIVES WERE PROVIDED TO ERADICATE SOCIAL PROBLEMS OF UN - EMPLOYMENT AND WERE HELD TO BE IN PUBLIC INTEREST AND THEREFORE WERE HELD TO BE CAPITAL IN NATURE. THE FACTS AND CIRCUMSTANCES OF THE PRES ENT CASE ARE NOT SIMILAR AS IN THE PRESENT CASE, INCENTIVES WERE PROVIDED UNDER NORMAL INDUSTRIAL POLICY OF STATE GOVT. AND FACTS OF PRESENT CASE ARE DIRECTLY SIMILAR TO FACTS AND CIRCUMSTANCES IN SAHNEY STEEL & PRESS WORKS LTD. ( SUPRA ) AS DECIDED BY THE H ON'BLE APEX COURT. 52. SIYA RAM GARG (HUF) ( SUPRA ) IN THIS CASE THE SUBSIDY WAS RECEIVED BY THE ASSESSEE FOR SETTING UP AGRO BASE INDUSTRIAL UNIT IN A BACKWARD AREA AND WAS DETERMINED WITH REFERENCE TO CAPITAL INVESTMENT WHICH IS NOT THE CASE IN THE PRESEN T APPEAL. 53. BHUSHAN STEEL & STRIPS LTD. ( SUPRA ). ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 55 IN THIS CASE THE UP GOVT. QUANTIFIED THE AMOUNT OF SUBSIDY RELATABLE TO CAPITAL INVESTED AND INSTEAD OF PAYING IN CASH EXEMPTED THE ASSESSEE FROM PAYING SALES TAX COLLECTED TO THE EXTENT OF QUANTIFIED AMOU NT OF SUBSIDY. THEREFORE, THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE ARE DISTINGUISHABLE. 54. SHAM LAL BANSAL ( SUPRA ). THE SUBSIDY IN THIS CASE WAS RECEIVED BY THE ASSESSEE UNDER THE TECHNOLOGY UP - GRADATION FUND SCHEME OF MINISTRY OF TEXTILES, GOVT. O F INDIA. THE SUBSIDY WAS RECEIVED FOR RE - PAYMENT OF LOAN TAKEN FOR BUILDING, PLANT & MACHINERY ETC. AND THEREFORE HON'BLE COURT HAD RIGHTLY HELD IT TO BE CAPITAL SUBSIDY APPLYING THE HON'BLE SUPREME COURT'S JUDGMENT IN THE PONNI SUGARS & CHEMICALS LTD. ( SUPRA ). 55. MARUTI SUZUKI OF INDIA LTD. ( SUPRA ). IN THIS CASE THE SUBSIDY WAS ALSO IN THE FORM OF SALES TAX EXEMPTION AND HON'BLE TRIBUNAL HAD HELD THE RECEIPT TO BE CAPITAL RECEIPT, KEEPING IN VIEW THE PROVISIONS OF SECTION 28A OF HARYANA GENERAL SALES TA X ACT, 1973 WHICH IS NOT THE CASE IN THE PRESENT APPEAL. MOREOVER, THE CASE WAS DECIDED AFTER TAKING INTO ACCOUNT THE JUDGMENT IN THE SPECIAL BENCH CASE IN THE CASE OF RELIANCE INDUSTRIES LTD. ( SUPRA ) WHICH HAS NOW BEEN REMITTED BACK BY HON'BLE SUPREME COU RT TO HIGH COURT FOR RE - CONSIDERATION. THE FACTS AND CIRCUMSTANCES OF PRESENT APPEAL ARE SIMILAR TO THE FACTS AND CIRCUMSTANCES OF SAHNEY STEEL & PRESS WORKS LTD. ( SUPRA ) WHICH HAS BEEN ADJUDICATED BY THE APEX COURT. 56. INDO RAMA TEXTILES LTD. ( SUPRA ) IN THIS CASE THE HON'BLE TRIBUNBAL HAS HELD THE SUBSIDY ON ACCOUNT OF SALES TAX EXEMPTION TO BE OF CAPITAL IN NATURE RELYING UPON THE CASE LAW OF RELIANCE INDUSTRIES LTD. ( SUPRA ) WHICH ITSELF HAS BEEN REMITTED BACK BY HON'BLE SUPREME COURT TO HON'BLE HIGH COU RT FOR RECONSIDERATION. 57. AS REGARDS RELIANCE OF LD AR ON CIRCULAR NO.142 DATED 1.8,1974, IT IS OBSERVED THAT THE CIRCULAR WAS IN RESPECT OF 10% CENTRAL OUTRIGHT GRANT OF SUBSIDY FOR INDUSTRIAL UNITS TO BE SET UP IN CERTAIN SELECTED BACKWARD AREAS AND IT WAS SPECIFICALLY INTENDED TO BE CONTRIBUTION TOWARDS CAPITAL OUTLAY OF INDUSTRIAL UNIT WHICH IS NOT THE CASE IN THE PRESENT APPEAL. 58. THE LD AR ALSO ARGUED THAT ASSESSEE HAD CREATED FIXED ASSETS WITH THE HELP OF HUGE BORROWINGS AND THESE BORROWINGS IN A NY CASE WILL HAVE TO BE REPAID OVER A PERIOD OF TIME AND ASSESSEE WILL UTILIZE AMOUNT OF SUBSIDIES FOR REPAYMENT OF LOANS AND THEREFORE SAME SHOULD BE TREATED AS CAPITAL RECEIPT BUT WE ARE NOT IN AGREEMENT WITH LD AR AS HIS ARGUMENT IS BASED UPON HYPOTHESI S ONLY. WHAT IS IMPORTANT TO BE SEEN IS WHETHER ASSESSEE WAS BOUND ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 56 TO UTILIZE THE AMOUNT OF SUBSIDY FOR REPAYMENT OF LOAN OR NOT WHICH IN THE PRESENT CASE IS NO. THEREFORE, THIS ARGUMENT CANNOT BE ACCEPTED. 59. AFTER ANALYZING THE FACTS AND CIRCUMSTANCES OF THE ABOVE NOTED CASES, VIZ - A - VIZ FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND THAT OF SAWHNEY STEEL'S CASE, WE FIND THAT THE MOST APPROPRIATE CASE LAW WHICH FITS INTO THE FACTS AND CIRCUMSTANCES OF THE PRES ENT CASE ARE THAT OF SAHNEY STEEL & PRESS WORKS LTD. ( SUPRA ), THEREFORE, WE HOLD THAT THE AMOUNT OF SUBSIDY WAS REVENUE IN NATURE. THEREFORE, THIS GROUND OF APPEAL OF ASSESSEE IS DISMISSED. 61. IN FACT SUBSEQUENTLY THE ITAT IN HIS ORDER DATED 6.3.2014 I N ITA NO. 368/D/2009 AND 168/2009 FOR ASSESSMENT YEARS 2002 - 03 AND 2005 - 06 IN THE CASE OF ASSESSEE COMPANY HAS FOLLOWED THE AFORESAID DECISION OF TRIBUNAL IN ITA NO. 3319 /D EL /2008 FOR ASSESSMENT YEAR 2004 - 05 DATED 22.2.2013 AND CONFIRMED THE ORDER BY OBSE RVING AS UNDER: 10. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BOTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. AT THE OUTSET, WE MAY MENTION THAT IN THE CASE OF DLF UNIVERSAL LTD. (SUPRA), HON'BLE DELHI HIGH COURT HELD AS UNDER: - IT IS NOT O NLY A MATTER OF JUDICIAL PROPRIETY BUT ALSO A MATTER OF JUDICIAL DISCIPLINE THAT WHEN ONE BENCH OF THE TRIBUNAL TAKES A VIEW, ANOTHER BENCH ON DISAGREEMENT DOES NOT PASS A CONTRARY ORDER BUT REFERS THE MATTER TO A LARGER BENCH FOR GETTING THE MATTER RESOLV ED. 11. FORTUNATELY, ON THIS MATTER OF JUDICIAL PROPRIETY, BOTH THE PARTIES AGREED THAT IT IS A MATTER OF JUDICIAL PROPRIETY/JUDICIAL DISCIPLINE THAT ONE DIVISION BENCH OF THE TRIBUNAL SHOULD NOT TAKE A CONTRARY VIEW TO THE VIEW TAKEN BY ANOTHER DIVISION BENCH. IF AT ALL ONE DIVISION BENCH IS NOT ABLE TO FOLLOW THE VIEW OF ANOTHER DIVISION BENCH, THEN THE ONLY OPTION LEFT IS TO REFER THE MATTER TO THE LARGER BENCH. HOWEVER, THE DISPUTE BETWEEN THE PARTIES IS THAT AS PER THE ASSESSEE S COUNSEL S CONTENTION, THE ITAT, WHILE PASSING THE ORDER FOR AY 2004 - 05, HAS VIOLATED THE ABOVE SETTLED PRINCIPLE OF JUDICIAL PROPRIETY. BUT, THE REVENUE IS OF THE OPINION THAT THE ABOVE PRINCIPLE OF JUDICIAL PROPRIETY SHOULD BE STRICTLY OBSERVED BY US WHILE PASSING THE ORDER F OR AY 2002 - 03. WE ALSO ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 57 RESPECTFULLY AGREE WITH BOTH THE PARTIES THAT IT IS A SETTLED JUDICIAL PROPRIETY THAT ONE DIVISION BENCH SHOULD NOT TAKE A VIEW CONTRARY TO THE VIEW TAKEN BY ANOTHER DIVISION BENCH. NOW, WHETHER THE ITAT VIOLATED THE ABOVE SETTLED P RINCIPLE OF JUDICIAL PROPRIETY OR NOT IS NOT FOR US TO ADJUDICATE. IT HAS BEEN POINTED OUT BY THE LEARNED COUNSEL THAT THE ASSESSEE HAD FILED THE APPEAL BEFORE THE HON'BLE JURISDICTIONAL HIGH COURT AGAINST THE ORDER OF ITAT FOR AY 2004 - 05 AND THE MATTER IS PENDING BEFORE THEM. THEREFORE, WHETHER THERE IS VIOLATION OF PRINCIPLE OF JUDICIAL DISCIPLI NE OR NOT IN AY 2004 - 05, IS SUB - JUDICE BEFORE HON BLE HIGH COURT. NOW, SO FAR AS THIS YEAR IS CONCERNED, WE FIND THAT THERE IS A DECISION OF DIVISION BENCH OF ITAT IN ASSESSEE S OWN CASE FOR AY 2004 - 05. WHETHER THE SUBSIDY IS A CAPITAL RECEIPT OR REVENUE RECEIPT WOULD DEPEND ON THE INCENTIVE SCHEME OF THE CONCERNED GOVERNMENT. IT WOULD BE EVIDENT FROM THE FOLLOWING OBSERVATION OF HON BLE APEX COURT IN THE CASE OF SA HNEY STEEL AND PRESS WORKS LTD. AND OTHERS VS. CIT [1997] 228 ITR 253 : - IF PAYMENTS IN THE NATURE OF SUBSIDY FROM PUBLIC FUNDS ARE MADE TO THE ASSESSEE TO ASSIST HIM IN CARRYING ON HIS TRADE OR BUSINESS, THEY ARE TRADE RECEIPTS. THE CHARACTER OF THE SU BSIDY IN THE HANDS OF THE RECIPIENT - WHETHER REVENUE OR CAPITAL - WILL HAVE TO BE DETERMINED, HAVING REGARD TO THE PURPOSE FOR WHICH THE SUBSIDY IS GIVEN. THE SOURCE OF THE FUND IS QUITE IMMATERIAL. HOWEVER, IF THE PURPOSE IS TO HELP THE ASSESSEE TO SET UP IT S BUSINESS OR COMPLETE A PROJECT THE MONIES MUST BE TREATED AS HAVING BEEN RECEIVED FOR CAPITAL PURPOSES. BUT IF MONIES ARE GIVEN TO THE ASSESSEE FOR ASSISTING HIM IN CARRYING OUT THE BUSINESS OPERATIONS AND THE MONEY IS GIVEN ONLY AFTER AND CONDITIONAL U PON COMMENCEMENT OF PRODUCTION, SUCH SUBSIDIES MUST BE TREATED AS ASSISTANCE FOR THE PURPOSE OF THE TRADE. 12. SIMILAR VIEW HAS BEEN EXPRESSED BY THE SPECIAL BENCH OF ITAT IN THE CASE OF DCIT VS. RELIANCE INDUSTRIES LTD. [2004] 88 ITD 273 (MUM.)(SB) : - THUS, THE INTERPRETATION OF THE TRIBUNAL, OF THE RATIO LAID DOWN IN THE JUDGMENT OF THE SUPREME COURT IN SAHNEY STEEL & PRESS WORKS LTD. S CASE (SUPRA) COULD NOT BE STATED TO BE ERRONEOUS. THE TRIBUNAL DID RECOGNIZE , AS THE SUPREME COURT ITSELF RECOGNIZED , THAT THE OBJECT WITH WHICH THE SUBSIDY IS GIVEN IS DECISIVE. IT DID RECOGNIZE , FOLLOWING THE DISTINCTION POINTED OUT BY THE SUPREME COURT THAT IF THE SUBSIDY IS GIVEN FOR SETTING UP OR EXPANSION OF THE INDUSTRY IN A BACKWARD AREA, IT WILL BE CAPITAL RECE IPT, IRRESPECTIVE OF THE ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 58 MODALITY OR THE SOURCE OF FUNDS THROUGH OR FROM WHICH IT IS GIVEN AND THAT IF MONIES ARE GIVEN FOR ASSISTING THE ASSESSEE IN CARRYING OUT THE BUSINESS OPERATIONS ONLY AFTER, AND CONDITIONAL UPON, THE COMMENCEMENT OF PRODUCTION, IT WILL BE REVENUE RECEIPT. IT WAS ONLY FOR THE PURPOSE OF BRINGING OUT THAT DISTINCTION, THAT THE TRIBUNAL HAD ANALYSED THE FEATURES OF THE MAHARASHTRA SCHEME OF 1979 AND HAD COME TO THE CONCLUSION THAT THE SUBSIDY GIVEN UNDER THE SCHEME HAD A DIRECT NEXUS W ITH THE FIXED CAPITAL INVESTMENT AND THAT IT COULD NOT BE SAID THAT THE SUBSIDY WAS GIVEN WITH THE OBJECT OF ASSISTING OR LENDING A HELPING HAND TO THE ASSESSEE IN ITS BUSINESS OPERATIONS. THE TRIBUNAL WAS, THUS, AWARE OF THE DISTINCTION BETWEEN THE SUBSID Y GIVEN WITH THE OBJECT OF SETTING UP THE INDUSTRY AND THE SUBSIDY GIVEN AFTER THE INDUSTRY COMMENCES PRODUCTION AND CONDITIONAL UPON THE COMMENCEMENT OF PRODUCTION. FACTUALLY, THE TRIBUNAL FOUND THAT THE ASSESSEE S CASE WHICH FELL UNDER THE MAHARASHTRA SC HEME WAS A CASE WHERE THE SUBSIDY WAS GIVEN FOR THE PURPOSE OF FACILITATING THE ASSESSEE TO SET UP AN INDUSTRY IN PATALGANGA, RAIGAD DISTRICT, WHICH WAS A NOTIFIED AREA. THE ACTUAL DISBURSEMENT TOOK PLACE AFTER THE ASSESSEE COMMENCED PRODUCTION, BUT, ACCOR DING TO THE TRIBUNAL, IT WAS ONLY A MODE OF DISBURSEMENT AND HAD NOTHING TO DO WITH THE OBJECT FOR WHICH THE SUBSIDY WAS GIVEN. THUS, IT WAS FOUND THAT THE TRIBUNAL DID NOTICE THE CRUCIAL OBSERVATIONS OF THE SUPREME COURT IN SAHNEY STEEL & PRESS WORKS LTD. S CASE (SUPRA) WHICH GAVE PRIMACY TO THE OBJECT OF THE SUBSIDY OVER THE FACT THAT IT WAS GIVEN AFTER THE COMMENCEMENT OF PRODUCTION. THE TRIBUNAL S OBSERVATIONS MADE ON THE BASIS OF THE OBSERVATIONS OF THE SUPREME COURT IN SAHNEY STEEL & PRESS WORKS LTD. S CASE (SUPRA) ALSO SHOWED THAT THE TRIBUNAL WAS ALIVE TO THE DISTINCTION BETWEEN THE CHARACTER OF THE SUBSIDY GIVEN WITH THE OBJECT OF PROMOTING INDUSTRIAL GROWTH IN A PARTICULAR AREA AND THE SUBSIDY GIVEN CONDITIONAL UPON THE COMMENCEMENT OF PRODUCTION A ND AFTER ACTUAL COMMENCEMENT OF PRODUCTION. IT IS NOT CORRECT TO UNDERSTAND THE JUDGMENT AS LAYING DOWN THE BROAD PROPOSITION THAT WHEREVER THE SUBSIDY IS GIVEN AFTER THE COMMENCEMENT OF PRODUCTION AND CONDITIONAL UPON THE SAME, IT SHOULD BE TREATED AS A R EVENUE RECEIPT IN THE HANDS OF THE ASSESSEE, IRRESPECTIVE OF THE OBJECT FOR WHICH THE SUBSIDY IS GRANTED. THE OBJECT FOR WHICH THE SUBSIDY IS GRANTED TAKES PRIMACY OVER THE FACT THAT IT IS GIVEN AFTER ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 59 THE COMMENCEMENT OF PRODUCTION AND CONDITIONAL UPON THE SAME. THAT THE SUPREME COURT ITSELF RECOGNIZED THAT POSITION HAD BEEN AMPLY MADE CLEAR IN ITS OBSERVATIONS. 13. THAT THE INCENTIVE SCHEME OF EVERY STATE GOVERNMENT IS DIFFERENT. THEREFORE, FOR ARRIVING AT THE CONCLUSION WHETHER THE SUBSIDY RECEIVED BY A PARTICULAR ASSESSEE IS CAPITAL OR REVENUE WOULD DEPEND ON THE CONSIDERATION OF THE INCENTIVE SCHEME OF THAT PARTICULAR STATE. IN THIS CASE, WE FIND THAT THE ITAT HAS CONSIDERED THE FACTUAL ASPECT IN PARAGRAPH 49 OF THE ORDER IN THE LIGHT OF THE DECISION OF HON BLE APEX COURT IN THE CASE OF SAHNEY STEEL AND PRESS WORKS LTD. (SUPRA) AND THEN ARRIVED AT THE CONCLUSION THAT THE INCENTIVE RECEIVED BY THE ASSESSEE AS PER THE INCENTIVE SCHEME OF THE GOVERNMENT OF MADHYA PRADESH IS A REVENUE RECEIPT. THE LEARNED CO UNSEL FOR THE ASSESSEE HAS REFERRED TO VARIOUS DECISION OF HON BLE HIGH COURTS AS WELL AS ITAT BUT IT HAS NOWHERE BEEN SHOWN TO US WHETHER ANY OTHER HIGH COURT OR ITAT CONSIDERED THE INCENTIVE SCHEME OF THE MADHYA PRADESH GOVERNMENT. IN FACT, IF WE GO THRO UGH THE DECISION OF HON BLE APEX COURT IN THE CASE OF SAHNEY STEEL AND PRESS WORKS LTD. (SUPRA), WE FIND THAT THE ABOVE APPEAL BEFORE THE HON BLE APEX COURT WAS AGAINST THE DECISION OF HON BLE ANDHRA PRADESH HIGH COURT. HOWEVER, IN THE SAID DECISION AT PAG E 267, THEIR LORDSHIPS DISCUSSED THE DECISION OF HON BLE MADHYA PRADESH HIGH COURT IN THE CASE OF CIT VS. DUSAD INDUSTRIES [1986] 162 ITR 784. IN THE ABOVE DECISION, HON BLE MADHYA PRADESH HIGH COURT HAS HELD THE SALES TAX SUBSIDY TO BE A REVENUE RECEIPT A FTER CONSIDERING THE INCENTIVE SCHEME OF MADHYA PRADESH GOVERNMENT. HOWEVER, HON BLE APEX COURT HELD THAT THE VIEW TAKEN BY HON BLE MADHYA PRADESH HIGH COURT IN THE CASE OF DUSAD INDUSTRIES (SUPRA) WAS ERRONEOUS. THE RELEVANT OBSERVATION OF THEIR LORDSHIPS REPORTED AT PAGE 267 OF 228 ITR READS AS UNDER: - THE MADHYA PRADESH HIGH COURT IN THE CASE OF CIT V . DUSAD INDUSTRIES 162 ITR 734, DEALT WITH A CASE WHERE GOVERNMENT HAD FRAMED A SCHEME FOR GRANTING SALES TAX SUBSIDIES TO INDUSTRIES SET UP IN BACKWARD A REAS. THE HIGH COURT WAS OF THE VIEW THAT THE OBJECT OF THE SCHEME WAS NOT TO SUPPLEMENT THE PROFITS MADE BY INDUSTRIES. IN THAT VIEW OF THE MATTER, THE HIGH COURT HELD THAT THE SUBSIDIES GIVEN UNDER THE SAID SCHEME BY THE GOVERNMENT TO NEWLY SET UP INDUST RIES WERE CAPITAL RECEIPTS IN THE HANDS OF THE INDUSTRIES AND COULD NOT BE TAXED AS REVENUE RECEIPTS. IN ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 60 THAT CASE, 75 PER CENT OF THE SALES TAX PAID IN A YEAR FOR A PERIOD OF FIVE YEARS FROM THE DAY OF STARTING OF PRODUCTION WAS TO BE GIVEN BACK BY THE GO VERNMENT TO THE INDUSTRY CONCERNED. THE HIGH COURT WAS OF THE VIEW THAT OBVIOUSLY THE SUBSIDY WAS GIVEN BY WAY OF AN INCENTIVE FOR CAPITAL INVESTMENT AND NOT BY WAY OF ADDITION TO THE PROFITS OF THE ASSESSEE AS WAS CLEAR FROM THE FACTS AND CIRCUMSTANCES OF THE CASE. THE MADHYA PRADESH HIGH COURT, HOWEVER, FAILED TO NOTICE THE SIGNIFICANT FACT THAT UNDER THE SCHEME FRAMED BY THE GOVERNMENT, NO SUBSIDY WAS GIVEN UNTIL THE TIME PRODUCTION WAS ACTUALLY COMMENCED. MERE SETTING UP OF THE INDUSTRY DID NOT QUALIFY AN INDUSTRIALIST FOR GETTING ANY SUBSIDY. THE SUBSIDY WAS GIVEN AS HELP NOT FOR THE SETTING UP OF THE INDUSTRY WHICH WAS ALREADY THERE BUT AS AN ASSISTANCE AFTER THE INDUSTRY COMMENCED PRODUCTION. THE VIEW TAKEN BY THE MADHYA PRADESH HIGH COURT IS ERRONEOU S. 14. FROM THE ABOVE, IT IS EVIDENT THAT HON BLE APEX COURT IN THE CASE OF SAHNEY STEEL AND PRESS WORKS LTD. (SUPRA) IMPLIEDLY HELD THAT AS PER THE SCHEME OF THE INCENTIVE OF MADHYA PRADESH GOVERNMENT, SALES TAX SUBSIDY IS TAXABLE. THE VIEW TAKEN BY THE ITAT IN ASSESSEE S OWN CASE FOR AY 2004 - 05 IS SIMILAR. IN VIEW OF THE ABOVE, WE ARE UNABLE TO AGREE WITH THE CONTENTION OF THE LEARNED COUNSEL THAT THE ORDER OF ITAT FOR AY 2004 - 05 SUFFERS FROM GRAVE ERROR AND SHOULD NOT BE FOLLOWED. WE FIND THAT THE ITAT DISCUSSED THE RELEVANT CASE LAW, APPLIED THE SAME TO THE FACTS OF THE CASE, CONSIDE RED THE SCHEME OF THE MADHYA PRADESH HIGH COURT AND THEREAFTER ARRIVED AT THE CONCLUSION THAT THE SALES TAX AND OTHER SUBSIDIES PROVIDED BY MADHYA PRADESH GOVERNMENT WERE REVENUE RECEIPT. WE ARE, THEREFORE, OF THE OPINION THAT JUDICIAL PROPRIETY AND JUDICI AL DISCIPLINE DEMAND THAT WE, AS A SUBSEQUENT COORDINATE BENCH DECIDING THE APPEAL OF THE SAME ASSESSEE, SHOULD NOT TAKE A CONTRARY VIEW. WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF ITAT IN ASSESSEE S OWN CASE FOR AY 2004 - 05 HOLD THAT THE AMOUNT OF SALES TAX AND OTHER SUBSIDIES RECEIVED BY THE ASSESSEE WERE REVENUE IN NATURE. ACCORDINGLY, GROUND NO.1 OF THE ASSESSEE S APPEAL IS REJECTED ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 61 62. WE FIND THAT THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE ARE IDENTICAL AS THE FACTS IN THE CASE OF ASSE SSEE FOR ASSESSMENT YEAR 2004 - 05, 2002 - 03 AND 2005 - 06 , AS THE SALES - TAX EXEMPTION CLAIMED IS IN PURSUANT TO THE SAME NOTIFICATION DATED 24 TH APRIL, 2000 . NO FRESH FACT (S) OR DECISION (S) HAS BEEN CITED SO AS TO PURSUE TO US TO ARRIVE AT A DIFFERENT CONCLUSI ON. THE ADDITIONAL EVIDENCES CONTAINING CORRESPONDENCE BETWEEN STATE GOVERNMENT AND MANAGEMENT OF THE COMPANY SUBMITTED BY THE ASSESSEE IN SUPPORT OF THE CLAIM THAT THE ASSESSEE WAS COV ERED BY THE INDUSTRIAL POLICY, ALSO HAS NOT BROUGHT ANY NEW FACT. IT I S PERTINENT TO STATE HERE THAT THAT PRIOR TO THE YEAR UNDER CONSIDERATION, THE ASSESSEE USED TO TREAT THE CENTRAL SALES TAX EXEMPTION AMOUNT AS PART OF TRADING RECEIPT IN ITS BOOKS OF ACCOUNTS AND FOR THE PURPOSE OF COMPUTING INCOME AS PER INCOME TAX, THE ASSESSEE USED TO REDUCE THE AMOUNT OF CST EXEMPTION AMOUNT ALONG - WITH ENTRY TAX AND ELECTRICITY DUTY EXEMPTION AMOUNT OUT OF THE INCOME OF THE COMPANY AT THE STAGE OF COMPUTATION OF PROFIT AND GAINS OF THE BUSINESS TREATING THE SAME AS CAPITAL RECEIPT NOT TAXABLE BUT IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY CHANGED THE TREATMENT OF BENEFIT OF CENTRAL SALES TAX (CST) EXEMPTION IN BOOKS OF ACCOUNT. THUS RATHER THAN REDUCING SUCH BENEFIT FROM THE PROFIT AND GAIN OF THE BUSINESS, THE ASSESSEE AT T HE END OF THE PREVIOUS YEAR TRANSFERRED THE AMOUNT OF SALES TAX BENEFIT FROM THE SALES ACCOUNT TO RESERVE AND SURPLUS ACCOUNT, HOLDING THE SAME AS CAPITAL RECEIPT NOT TAXABLE. IN THE NOTES TO ACCOUNT TO THE ANNUAL REPORT, THE ASSESSEE STATED THAT THIS NEW TREATMENT WAS TO MEET THE COMPLIANCE OF ACCOUNTING STANDARD (AS - 12) PRESCRIBED FOR GOVERNMENT GRANTS. BUT IN RESPECT OF SIMILAR BENEFIT OF ENTRY TAX EXEMPTION (RS.17,28,48,148/ - ) AND ELECTRICITY DUTY EXEMPTION (RS. 31,10,88,789/ - ) THE ACCOUNTING STANDARD ( AS - 12) WAS NOT FOLLOWED AND THOSE AMOUNT WERE REDUCED OUT OF THE PROFIT AND GAIN OF BUSINESS AT THE STAGE OF COMPUTATION OF INCOME ONLY. IN THE YEAR UNDER CONSIDERATION, TOTAL AMOUNT OF BOTH ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 62 EXEMPTIONS OF THE ENTRY TAX AND THE ELECTRICITY DUTY OF RS. 48,39 ,36,937/ - WAS REDUCED OUT OF PROFIT OF THE BUSINESS AT THE STAGE OF COMPUTATION OF INCOME BY THE ASSESSEE, THUS WE HOLD THAT THE CHANGE IN TREATMENT ALONE CANNOT BE A GROUND TO CONTEND THAT A SUM OTHERWISE TAXABLE AS INCOME IS NOT TAXABLE OR IS A CAPITAL RECEIPT AND THEREFORE FOLLOWING THE AFORESAID ORDERS OF THE TRIBUNAL IN THE CASE OF ASSESSEE ITSELF (SUPRA), WE SUSTAIN THE ADDITION MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A) AND GROUNDS RAISED BY THE ASSESSEE ARE DISMISSED . 63. THE GROUND S NO. 2 TO 2.1 CHALLENGE THE ACTION OF THE AO IN DISALLOWING R S. 5,91,106/ - ON ACCOUNT OF ADDITIONAL DEPRECIATION CLAIMED BY THE APPELLANT UNDER SECTION 32(1)(IIA) OF THE ACT IN RESPECT OF COMPUTER SOFTWARE PRIMAVERA. 64. THE AO PURSUANT TO THE ORDER U/S 263 OF THE ACT AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE HELD IN THE ASSESSMENT ORDER THAT SOFTWARE PRIMAVERA WAS NOT ACTUALLY INSTALLED WITHIN ANY MANUFACTURING MACHINERY AND WAS LIKE ANY OTHER MANAGEMENT TOOL AVAILABLE TO THE MANAGEMENT WHICH HELPS THEM IN TAKING DECISION. HE HAS FURTHER HELD THAT ADDITIONAL DEPRECATION WAS NOT ALLOWABLE ON OFFICE APPLIANCES/MACHINE RY. HAVING REGARD TO THE ABOVE, HE DISALLOWED THE CLAIM OF ADDITIONAL DEPRECATION OF RS. 5,91,106/ - U/S 32(1)(IIA) OF THE ACT 65. BEFORE CIT(A) THE APPELLANT CONTENDED THAT COMPUTER SOFTWARE PRIMAVERA IS MULTI PROJECT PLANNING AND C ONTROL SOFTWARE, WHICH IS USED ON STANDALONE BASIS FOR PROJECT AND RESOURCE MANAGEMENT. THE PRIMAVERA SOFTWARE IS USED BY COMPANIES FOR ONLINE MANAGEMENT OF PROJECTS PORTFOLIO MANAGEMENT SOLUTIONS/DECISIONS, FOR EVALUATION OF RISKS AND REWARDS ASSOCIATED WITH PROJECTS FOR DETERMINATION OF RESOURCE BALANCE QUA WORK ON HAND ETC. IT WAS SUBMITTED THAT COMPUTER SOFTWARE FORMS PART OF HEAD COMPUTERS IN THE ASSET LIST OF APPELLANT AS PER APPENDIX I READ WITH RULE 5 OF THE INCOME TAX RULES, 1962. . IT WAS AL SO ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 63 SUBMI TTED THAT THE HEAD COMPUTERS , PER THE SAID APPENDIX, IS SUB - PART OF BROAD ASSET CATEGORY, VIZ., PLANT AND MACHINERY . IT WAS THUS SUBMITTED THAT THE COMPUTER SOFTWARE PRIMAVERA CONSTITUTES PLANT AND MACHINERY, WHICH IS ELIGIBLE FOR ADDITIONAL D EPRECIATION UNDER THE PROVISIONS OF SECTION 32(1)(IIA) OF THE ACT. RELIANCE WAS PLACED ON THE CASE OF GUJARAT HIGH COURT IN THE CASE OF CIT V. STATRONICS AND ENTERPRISES (P) LTD. (SUPRA) AND ALLAHABAD HIGH COURT IN THE CASE OF CIT V RADLA MACHINERY EXPORT S (SUPRA). 66. THE CIT(A) HAS CONFIRMED THE ADDITION ON THE FOLLOWING BASIS: A PERUSAL OF THE SUBMISSIONS MADE BY THE APPELLANT AND ON THE FACTS ON RECORD SHOW THAT THIS SOFTWARE IS MERELY AN OFFICE TOOL TO MANAGE THE PROJECTS OF THE COMPANY IN AN EFFI CIENT AND BETTER WAY. IT IS EQUIPPED ON OFFICE EQUIPMENT AND IS NOT AN INTEGRAL PART OF PLANT AND MACHINERY WITHIN THE MEANING OF THE ACT. THIS IS A SOFTWARE TOOL WHICH IS NOT PART OF ACTUAL MANUFACTURING ACTIVITY AND IS NOT INTRINSICALLY LINKED TO A PLA NT AND MACHINERY ENGAGED IN THE PRODUCTION PROCESS. IN VIEW OF THE FACT, I CONFIRM THE ADDITION OF RS. 5,91,106/ - ON THIS ACCOUNT. 67. WE HAVE HEARD THE RIVAL SUBMISSIONS MADE ON THE ISSUE AT THE TIME OF HEARING OF APPEAL IN ITA NO. 3283/DEL/2013 AND P ERUSED THE MATERIAL ON RECORD. WE NOTE THAT THE CLAIM OF ADDITIONAL DEPRECIATION HAS BEEN DENIED ON THE BASIS THAT ADDITIONAL DEPRECIATION IS NOT ALLOWABLE ON OFFICES TOOL AND PRIMAVERA SOFTWARE WAS NOT INSTALLED IN ANY MANUFACTURING MACHINERY BUT WAS LIK E ANY OTHER COMMON MANAGEMENT TOOL. WE FIND THAT HON BLE GUJARAT HIGH COURT I N THE CASE OF CIT V STATRONICS AND ENTERPRISES (P) LTD. (SUPRA) HAS HELD THAT COMPUTERS AND DATA PROCESSING MACHINES , EVEN THOUGH INSTALLED IN OFFICE PREMISES, CONSTITUTES PLANT AND MACHINERY AND ARE ELIGIBLE FOR ADDITIONAL DEPRECATION AS PER THE PROVISION OF SECTION 32(1)(IIA) OF THE ACT. THEIR LORDSHIPS HAVE HELD AS UNDER: ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 64 9 IT IS TO BE NOTED THAT THE WORDS 'OFFICE PREMISES' HAVE NOT BEEN DEFINED IN THE INCOME - TAX ACT. THE WORD 'OFFICE' WOULD PARTAKE ITS CHARACTER WITH THE ACTIVITIES CARRIED ON IN THE SAID PROMISES. IN A GIVEN CASE, A DOCTOR S CLINIC WOULD BE HIS OFFICE, BUT, WOULD ALSO BE HIS CLINIC AND IF HE INSTALLS A COMPUTER OR SOME MACHINES FOR THE PURPOSES OF PATHOLOGY, THEN, HIS OFFICE WOULD BE TAKEN TO BE AN INDUSTRIAL PREMISE FOR THE PURPOSES OF DEPRECIATION AND INVESTMENT ALLOWANCE. IN A GIVEN CASE, A COMPUTER KEPT I N THE OFFICE OF A MANAGER FOR HIS PERSONAL USE OR FOR SOME OTHER PURPOSE, THEN, SUCH COMPUTER WOULD NOT BE ENTITLED TO INVESTMENT ALLOWANCE AND/OR ADDITIONAL DEPRECIATION. IN THE PRESENT CASE, THE WORDS 'OFFICE PREMISES' THOUGH WOULD BE COVERING OFFICE BUT , INDUSTRIAL PREMISES WOULD NOT COME WITHIN OFFICE PREMISES IF THE SAID PREMISES ARE USED FOR DATA PROCESSING. IN THE PRESENT CASE, UNDISPUTEDLY, THE OFFICE PREMISES ARE USED AS INDUSTRIAL PREMISES FOR PRODUCTION OF THE DATA PROCESSORS. THE SUBMISSION OF T HE LEARNED COUNSEL IS BASED ON A NARROW INTERPRETATION OF THE WORDS 'OFFICE PREMISES', WHICH WE ARE UNABLE TO CONCEDE.. 68. FROM THE AFORESAID IT IS APPARENT THAT INSTALLATION OF COMPUTERS IN THE OFFICE CANNOT BE MADE A BASIS TO DENY THE CLAIM OF DEPREC ATION PROVIDED SUCH OFFICE CAN ON FACTS BE TAKEN AS AN INDUSTRIAL PREMISES FOR THE PURPOSE OF DEPREC I ATION. IN THE INSTANT CASE THE FINDING OF FACT RECORDED BOTH BY CIT(A) AND AO IS THAT PRIMAVERA IS NOT ACTUALLY INSTALLED WITHIN ANY MANUFACTURING MAC HINERY AND IS A WEB BASED TOOL FOR TOP MANAGEMENT FOR REVIEW ETC. AND PLANNER/SCHEDULER. IT IS A TOOL LIKE ANY OTHER OFFICE EQUIPMENT WHICH HELPS ASSESSEE S TOP MANAGEMENT TO MANAGE PROJECT IN A BETTER WAY. IT IS NOT PART OF PLANT AND MACHINERY WHICH IS USED IN THE PROCESS OF MANUFACTURING. HAVING REGARD TO THE ABOVE WE DO NO T FIND ANY MERIT IN THE CLAIM OF ASSESSEE AND HENCE THE GROUNDS OF THE ASSESSEE ARE DISMISSED . 69. THE GROUND S 3 TO 3.3 CHALLENGES THE ADDITION OF RS. 49,41,850/ - ON ACCOUNT OF PRO VISION FOR GRATUITY. ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 65 70. THE RELEVANT FACTS ARE THAT AN AMOUNT OF RS. 2,95,45,402/ - PERTAIN TO THE PROVISION FOR GRATUITY OUTSTANDING AT THE CLAIM OF THE INSTANT YEAR AND OUT OF WHICH SUM OF RS. 1,58,03,552/ - STOOD DISALLOWED U/S 43B OF THE ACT. THE AO T HEREFORE MADE ADDITION OF RS. 1,37,41,850/ - BEING THE BALANCE FIGURE OF RS. 1,37,41,850 (RS. 2,95,45,402/ - - RS. 1,58,03,552). HE REJECTED THE SUBMISSION OF THE APPELLANT THAT OUT OF THE AFORESAID BALANCE FIGURE OF RS. 1,58,03,552/ - A S UM OF RS. 49,41,8 50/ - BEEN ADDED BACK U/S 40A(7) OF THE ACT. THE CIT(A) HAS UPHELD THE ABOVE ACTION BY HOLDING AS UNDER: THE ASSESSEE HAS CLAIMED THAT IT HAS DEBITED AN AMOUNT OF RS. 49.42 LACS ON ACCOUNT OF PROVISION FOR GRATUITY TO THE P&L A/C. THIS AMOUNT WAS SUO MOTO ADDED BACK BY THE APPELLANT IN THE RETURN OF INCOME IN VIEW OF THE PROVISIONS OF S. 40A(7). I HAVE PERUSED THE SUBMISSIONS MADE BY THE APPELLANT AND THE FACTS ON RECORD. THE ADDITION MADE BY THE AO ON ACCOUNT OF SECTION 43B IS RS. 1,37,41,850/ - . TH IS ISSUE OF AN AMOUNT OF RS. 49.42 LACS BEING ADDED BACK BY THE ASSESSEE IN ITS COMPUTATION CANNOT BE SEEN IN ISOLATION. THE MATTER IS NOT AS ISOLATED AN INSTANCE AS IT HAS BEEN MADE OUT TO BE. THE AO HAS TAKEN UP THE MATTER (PARA 27.1 TO 28.9.7 OF THE OR DER) FROM THE VALUATION IN OUTSTANDING STATUTORY LIABILITIES AS SHOWN IN THE BALANCE SHEET ON 31.3.2008 AND AS PER THE TAR (TAX AUDIT REPORT). THE APPELLANT HAS BEEN UNABLE TO RECONCILE THE LARGER ISSUE OF WHY THERE WAS A DIFFERENCE BETWE EN THE 2 FIGURES I .E. B/S VS TAR IN TERMS OF THESE LIABILITI ES. IT HAS BEEN SEEN THAT IN AY 2006 - 07 AND 2007 - 08 IF DISALLOWANCES U/S 40A(7) WERE CONSIDERED AND TAKEN INTO ACCOUNT, THE SAID AMOUNTS TALLIED WITH THE FIGURE ON THE BALANCE SHEET. THEREFORE, SUCH RECONCILIATIO N WAS POSSIBLE IN THIS YEAR ALSO. HOWEVER, THE ASSESSEE COULD NOT SHOW THAT THE AMOUNT OF RS. 49,41,850/ - (ADDED BACK U/S 40A(7) WAS DISALLOWED OUT OF THE CURRENT YEAR S PROVISION FOR GRATUITY (OUTSTANDING AS ON 31.3.2008). NO LEDGER ACCOUNT WAS PR ODUC ED BEFORE THE LD. CIT HISAR IN PROCEEDINGS BEFORE HIM U/S 263 WAS BEFORE THE AO. THIS FACT HAS NOT BEEN RESOLVED EVEN BEFORE ME. ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 66 THE AO HAS MADE THE DISALLOWANCE OF RS. 1,37,41,850/ - AFTER CALCULATING DISALLOWANCE U/S 40A(7). THE DETAILED CALCULATION BY THE AO IS REPRODUCED AS UNDER: (A) OUTSTANDING AS ON 31.3.2007 (AS PER LAST YEARS FIGURES IN B/S OF FY 2007 - 08) 5,77,87,609 (B) OUT OF A PAID DURING THE YEAR (AS PER ANNEXURE N OF THE TAR. REF. ANNEX 14 - PAYMENT MADE ON 5.1.2008) 1,03,34,161 (C) THE BALANCE OF OUTSTANDING LIABILITY PERTAINING OF EARLIER YEARS INCLUDED IN THE FIGURE OF LIABILITY AS ON 31.3.2008 (A) - (B) 4,74,53,448 (D) TOTAL OUTSTANDING LIABILITY (OF GRATUITY) AS ON 31.3.2008 AS PER B/S OF FY 2007 - 08 7,69,98,850 (E) TOTAL OUTSTANDING LIABILITY (OF GRATUITY) PERTAINING TO THE CURRENT YEAR INCLUDED IN THE FIGURE AS ON 31.3.2008 (D( - (C) 2,95,45,402 ACCORDING TO THE AO AS PER SUCH CALCULATION, AN AMOUNT OF RS. 2,95,45,402/ - OUT OF THE CURRENT YEAR PROVISIONS WAS OUTSTANDING WHICH WAS LIABLE FOR DISALLOWANCE U/S 43. BUT, AS PER TAR ONLY RS. 1,58,03,552/ - HAS BEEN DISALLOWED. HENCE, A SUM OF RS. 1,37,41,850/ - (BEING THE DIFFERENCE BETWEEN THE 2 FIGURES) HAS BEEN DISALLOWED. THE APPELLANT HAS NOT BEEN ABLE TO REBUT THIS CALCULATION ESPE CIALLY THE ISSUE OF PREVIOUS YEARS LIABILITIES AND PAYMENTS THEREOF. NO EFFORT HAS BEEN MADE BY THE APPELLANT TO PRODUCE THE LEDGER COPY OF THE PROVISIONS IN RESPECT OF GRATUITY. I, THEREFORE, CONFIRM THE ADDITION OF RS. 1,37,41,850/ - BEING ADDED BACK U/S 40A(7). 71. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. FROM THE FACTS MENTIONED ABOVE , WE FIND THAT THE SUM OF RS. 1,37,41,850/ - DISALLOWED BY THE AO UNDER SECTION43B OF THE ACT CONSIST OF TWO ITEM S. THE FIRST IS THE DISALLOWANCE OF RS, 88,00,001/ - ADMITTED BY THE ASSESSEE AS GRATUITY AMOUNT TRANSFERRED TO GENERAL RESERVE AND WAS NOT OFFERED IN THE RETURN OF INCOME OR IN THE ITA NO S . 3283 /DEL/2013 & 3128 /DEL/2014 , AY: 2008 - 09 M/S. JINDAL STEEL & POWER LTD. 67 ORIGINAL ASSESSMENT UNDER SECTION 143 (3) OF THE ACT. THE 2 ND ITEM IS A PRO VISION OF GRATUITY OF RS. 49,41,850/ - . S O FAR AS SUM OF RS. 49,41,850/ - IS CONCERNED THE SAME HAS ALREADY BEEN DISALLOWED U/S 40A(7) OF THE ACT BY THE ASSESSEE AND AS SUCH ANY FURTHER DISALLOWANCE U/S 43B OF THE ACT IS ABSOLUTELY UNJUSTIFIED AND UNTENABL E. ACCORDINGLY, T HE DISALLOWANCE MADE OF RS. 49,41,850/ - IS THUS DELETED AND GROUNDS RAISED ARE ALLOWED. 72. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 73. AS, WE PART WITH THE APPEAL, WE WOULD LIKE TO PLACE ON RECORD THE APPRECIATION FOR ILLUMINATING ARGUMENTS PUT FORTH BY BOTH SIDE, WHICH ASSISTED US IN DISPOSING THE ISSUE S . WE ALSO WOULD LIKE TO CLEAR THAT THOUGH ALL THE CASES RELIED UPON BY THE PARTIES HAVE BEEN TAKEN INTO CONSIDERATION, REFERENCE OF SOME OF THE CASES HAVE NOT BEEN MADE EITHER DUE TO REPETITION OR IRRELEVANCE. THE DECISION IS PRONOUNCED IN THE OPEN COURT ON 3 1 S T MARCH , 2016. S D / - S D / - (C.M. GARG) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 3 1 S T MARCH , 2016. RK/ LAPTOP COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI