Pawan Hans Helicopters Ltd., V. DCIT, Special Range-27,

ITA 319/DEL/2001

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 0738 (ITAT-DELHI)
• Duration Of Justice: 20 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 1995-1996
• Appeal Filed On: 05-02-2001
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAMITA M BISWAS
• Keywords: Depreciation; Capital expenditure
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SH. AMIT SHUKLA, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER ITA NO. 419/DEL/1994 : ASSTT. YEAR: 1990-91 M/S PAWAN HANS HELICOPTERS LTD., CORPORATE OFFICE, SAFDARJUNG AIRPORT, NEW DELHI VS DCIT, SPECIAL RANGE-20, NEW DELHI (APPELLANT T (RESPONDENT) PAN NO. AA ACP1561A ITA NO. 319/DEL/2001 : ASSTT. YEAR: 1995-96 M/S PAWAN HANS HELICOPTERS LTD., CORPORATE OFFICE, SAFDARJUNG AIRPORT, NEW DELHI VS DCIT, SPECIAL RANGE-27, NEW DELHI (APPELLANT T (RESPONDENT) PAN NO. AAACP1561A ASSESSEE BY : SH. VED JAIN, ADV. REVENUE BY : MS. PRAMITA M. BISWAS, CIT DR DATE OF HEAR ING: 30 . 06 .20 21 DATE OF PRONOUNCEMENT: 14 .0 7 .20 2 1 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEALS HAVE BEEN FILED BY THE ASSESSE E AGAINST THE ORDER OF LD. CIT (A)-VII, NEW DELHI DAT ED 18.11.1993 AND THE ORDER OF LD. CIT (A)-XIV, NEW DE LHI DATED 30.11.2000. 2. IN ITA NO. 419/DEL/1994, FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESSEE: 1. THAT THE LD. CIT (A) HAS ERRED IN LAW AND ON FA CTS IN UPHOLDING DISALLOWANCE OF INTEREST AGGREGATING ITA NO. 419/DEL/1994 & ITA NO. 319/DEL/2001 PAWAN HANS HELICOPTERS LTD. 2 RS.24,34,72,443/- DUE AND PAYABLE TO THE GOVERNMENT OF INDIA AND IN DIRECTING THAT THE DEDUCTION BE ALL OWED NOT ON ACCRUAL BUT ON ACTUAL PAYMENT OF THE INTERES T. 3. IN ITA NO. 319/DEL/2001, FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESSEE: 1. THAT THE LD. CIT (A) HAS ERRED IN LAW AND ON FA CTS IN CONFIRMING DISALLOWANCE OF INTEREST PAYABLE TO T HE GOVERNMENT OF INDIA AMOUNTING TO RS.23,79,41,269/- 2. THAT THE LD. CIT (A) HAS ERRED IN LAW AND ON FAC TS IN UPHOLDING DISALLOWANCE OF DEPRECIATION ON WESTLAND HELICOPTERS AMOUNTING TO RS.57,60,034/-. INTEREST DUE TO GOVERNMENT OF INDIA: 4. THE BRIEF FACTS OF THE CASE ARE THAT PAWAN HANS LIMITED (INITIAL NAMED AS HELICOPTER CORPORATION OF INDIA L TD.) WAS INCORPORATED IN 1985 AS A GOVERNMENT COMPANY UNDER THE COMPANY ACT, 1956 PRIMARILY TO MEET THE LONG TERM REQUIREMENTS OF ONGC TO PROVIDE THE HELICOPTER SERV ICES IN ITS CRITICAL OFFSHORE EXPLORATION WORK. THE CABINET COM MITTEE ON ECONOMIC AFFAIRS (CCEA) ON 14.03.1986 HAD APPROVED PROPOSAL OF MINISTRY OF CIVIL ASSOCIATION (MOCA) FOR PURCHAS E OF 42 HELICOPTERS, 21 WESTLAND AND 27 DAUPHIN HELICOPTERS . 5. THE ASSESSEE ACQUIRED THESE HELICOPTERS DURING T HE YEARS 1986-88 AT A COST OF RS.250.90 CRORES, FUNDED FROM THE GRANT/AID OF RS.228.08 CRORES FROM UK GOVERNMENT (R S.130.91 CRORES) AND FRANCE GOVERNMENT (RS.97.17 CRORES) TO GOVERNMENT OF INDIA. THE BALANCE OF RS.22.82 CRORES WERE TOWARDS SPARES ENGINES AND INVENTORY TO BE PROCURED DIRECTLY BY THE ASSESSEE. THE MINISTRY OF FINANCE RELEASES PAYM ENT IN ITA NO. 419/DEL/1994 & ITA NO. 319/DEL/2001 PAWAN HANS HELICOPTERS LTD. 3 FOREIGN EXCHANGE ON BEHALF OF THE ASSESSEE TO THE MANUFACTURERS VIZ., M/S WESTLAND HELICOPTERS LIMITE D U.K. AND M/S AEROSPATIALE, FRANCE FROM TIME TO TIME. THE ASS ESSEE COMPANY WAS REQUIRED TO DEPOSIT THE RUPEE EQUIVALEN T OF THESE FOREIGN EXCHANGE PAYMENTS SO RELEASED ALONG WITH TH E COMMISSION AND INCIDENTAL CHARGES OF 1% AD VALOREM AND CROWN AGENT CHARGES PAYABLE TO MINISTRY OF FINANCE. FOR A NY DELAY IN DEPOSIT OF THE AMOUNT DUE, THE MINISTRY OF FINANCE CLAIMS INTEREST AT THE RATE OF 12% PER ANNUM FOR THE FIRST THIRTY DAYS AND 18% PER ANNUM FOR THE BALANCE PERIOD TILL THE A MOUNT DUE IS DEPOSITED. 6. ACCORDINGLY, IN THE ASSESSMENT YEAR 1990-91, THE ASSESSEE WAS REQUIRED TO DEPOSIT THE RUPEE EQUIVALENT COMPUT ED AT BASIC CONVERSION RATES OF THE FOREIGN EXCHANGE PAYMENTS R ELEASED UPTO THE PERIOD ENDED 31.3.1990 AMOUNTING TO RS.2,48,25,01,590/- INTO THE GOVERNMENT TREASURY. T HE ASSESSEE COULD, HOWEVER, DEPOSIT ONLY RS.1,02,87,44 ,072/- LEAVING A SHORTFALL OF RS. 1,45,37,57,518/-. THE BA LANCE IS APPEARING IN THE BALANCE SHEET. THE INTEREST DUE AT THE PRESCRIBED RATES ALONG WITH COMMISSION AND INCIDENT AL CHARGES @ 1% ADVALOREM AND CROWN AGENT CHARGES AMOUNTING IN ALL TO RS. 26,95,58,643/- FOR THE YEAR AND RS.71,75,42,855 /- (NET) TILL 31ST MARCH, 1990 HAS NOT BEEN PROVIDED IN THE ACCOU NTS AS THE MINISTRY OF CIVIL AVIATION HAD REQUESTED THE MINIST RY OF FINANCE TO WAIVE THE INTEREST ON SUCH BELATED PAYMENTS AND OTHER RELATED CHARGES. THE WAIVER OF INTEREST WAS CLAIMED ON THE GROUND THAT THE GOVERNMENT HAD EARLIER DECIDED TO F UND THE HELICOPTER ACQUISITION PROJECT ENTIRELY BY WAY OF E QUITY BUT IT FUNDED THE ASSESSEE TO THE EXTENT OF 45% ONLY AND A CCORDINGLY, ITA NO. 419/DEL/1994 & ITA NO. 319/DEL/2001 PAWAN HANS HELICOPTERS LTD. 4 THE ASSESSEE SHALL NOT BE PENALIZED FOR THE SHORTFA LL IN DEPOSITS OF MINISTRY OF FINANCE. THE ASSESSEE RECEIVED FUNDS OF RS.113.76 CRORES AGAINST THE PROJECT COST OF RS.250 .90 CRORES, LEAVING A SHORTFALL OF RS.137.14 CRORES. 7. HENCE, THE ASSESSEE DID NOT CLAIM THE AMOUNT OF INTEREST IN THE PROFIT AND LOSS ACCOUNT AS THE MINISTRY OF C IVIL AVIATION (MCA) HAD REQUESTED THE MINISTRY OF FINANCE FOR THE WAIVER OF INTEREST AND SHOWN THE SAME AS CONTINGENT LIABILITY . 8. THE ASSESSING OFFICER HELD THAT THE COMPANY HAS CLAIMED RS. 24,34,72,443/- FOR THE ASSESSMENT YEAR 1990-91 AND RS.23,79,41,269/- FOR THE ASSESSMENT YEAR 1995-96 A S A DEDUCTION IN THE COMPUTATION OF TOTAL INCOME ON ACC OUNT OF INTEREST DUE TO GOVERNMENT OF INDIA. THE ASSESSING OFFICER HELD THAT IT HAS BEEN MENTIONED THAT NO ENTRY IN THIS RE GARD HAS BEEN MADE IN THE BOOKS OF ACCOUNTS AS THE COMPANY HAS RE QUESTED TO THE GOVERNMENT FOR WAIVER OF INTEREST CLAIMED ON DE LAYED DEPOSITS OFF THE COUNTER RUPEE FUND ON ACCOUNT OF I MPORT OF WESTLAND HELICOPTERS. 9. BEFORE THE AO, THE COMPANY HAS SUBMITTED THAT TH E REQUEST HAS BEEN TURNED DOWN BY THE MINISTRY OF FIN ANCE, GOVERNMENT OF INDIA VIDE LETTER DATED 27.05.1997 AN D THE COMPANY HAS BEEN ADVISED TO DEPOSIT THE COUNTER RUP EE FUND IMMEDIATELY IN VIEW OF THIS CLAIM OF DEDUCTION SHOU LD BE TREATED AS VALID AS IT IS AN ASCERTAINED LIABILITY. THE ASS ESSING OFFICER HELD THAT THE ACTUAL LIABILITY FOR THE YEAR HAS BEE N VERIFIED BY STATUTORY AND COMPTROLLER AND AUDITORS GENERAL OF I NDIA (CAG) ITA NO. 419/DEL/1994 & ITA NO. 319/DEL/2001 PAWAN HANS HELICOPTERS LTD. 5 AND HELD THAT THE CLAIM IS NOT ADMISSIBLE FOR THE F OLLOWING REASONS: A) THE AMOUNT HAS NOT BEEN PROVIDED FOR IN THE ACCOUNT S. B) THE LIABILITY HAS NOT BEEN ASCERTAINED DURING THE Y EAR UNDER CONSIDERATION AS THE COMPANY HAD APPLIED FOR THE WAIVER OF THIS INTEREST. C) THE BIFURCATION OF THIS SUM UNDER INTEREST, INVENTO RY AND COUNTER RUPEES HAS NOT BEEN PROVIDED BY THE COMPANY . EVEN IN THE LETTER OF MINISTRY OF FINANCE DATED 27. 05.1997, THE ACTUAL AMOUNT TO BE DEPOSITED BY THE COMPANY AS COUNTER RUPEE HAS NOT BEEN SPECIFIED. D) IN THE ABSENCE OF DETAILS FURNISHED BY THE COMPANY IT IS NOT POSSIBLE TO IDENTIFY WHETHER ANY PART OF THE CL AIM REPRESENTS CAPITAL EXPENDITURE. 10. HOLDING SO, THE AMOUNT OF RS.23,79,41,269/- WAS DISALLOWED AS A DEDUCTION CLAIMED BY THE ASSESSEE C OMPANY. 11. THE LD. CIT (A) CONFIRMED THE ADDITION. 12. BEFORE US, THE LD. AR SUBMITTED THE CORRESPONDE NCE BETWEEN THE MINISTRY OF FINANCE AND MINISTRY OF CIV IL AVIATION AT PB 200 TO 211 PERTAINING TO LETTERS DATED 22.12.199 5, 01.02.1996, 02.02.1996, 13.03.1996, 24.04.1996, 27. 05.1997, 24.06.1998, 31.08.2001 AND 31.01.2002. HE ARGUED TH AT THE AMOUNT CLAIMED BY THE ASSESSEE IS THE DEFINITE LIAB ILITY BUT NOT THE CONTINGENT LIABILITY. THE LIABILITIES HAVE ALRE ADY BEEN CRYSTALLIZED. IT WAS ALSO SUBMITTED THAT THE ASSESS EE HAD REQUESTED FOR THE WAIVER FROM THE GOVERNMENT BUT NO SUCH WAIVER/ REDUCTION HAD BEEN ALLOWED. THE ASSESSEE HA D BROUGHT ITA NO. 419/DEL/1994 & ITA NO. 319/DEL/2001 PAWAN HANS HELICOPTERS LTD. 6 ON RECORD VARIOUS CORRESPONDENCES WHICH REFLECT THA T THE GOVERNMENT HAD BEEN CONTINUOUSLY INSISTING FOR THE PAYMENT AND IT IS CLEAR THAT THE CENTRAL GOVERNMENT HAD NO INTENTION OF WAIVER OF ANY PORTION OF THE INTEREST DUE. IT WAS A LSO SUBMITTED THAT THE INTEREST HAD NOT BEEN PROVIDED FOR IN THE BOOKS OF ACCOUNTS AS PER THE COMMENTS OF THE STATUTORY AUDIT ORS IN ORDER TO REFLECT THE CORRECT POSITION OF ACCOUNTS. THUS, THESE AMOUNTS HAVE BEEN CLAIMED IN THE COMPUTATION OF INCOME. 13. THE LD. DR ARGUED THAT NO SUCH PROVISION IS ALL OWED IN THE INCOME TAX ACT 1961. THE LD. DR STRONGLY RELIED ON THE ORDER OF THE AUTHORITIES BELOW. 14. HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PER USED THE MATERIAL AVAILABLE ON RECORD. 15. IN THE PRESENT CASE, THE ASSESSEE HAS TAKEN THE LOAN IN THE YEAR 1986-87 AND INTEREST DURING THAT PERIOD WAS AL SO ALLOWED TO THE ASSESSEE AS IS EVIDENT FROM THE ASSESSMENT O RDER AND NO DISALLOWANCE HAS BEEN MADE BY THE REVENUE. FURTHER, NO DISALLOWANCES WERE MADE IN A.Y. 1988-89 AND A.Y. 19 89-90 AS IS EVIDENT FROM THE ASSESSMENT ORDERS. IT IS ONLY T HEN IN AY 1990-91, IN THE IMPUGNED ASSESSMENT YEAR THE AO HAS MADE THE DISALLOWANCE. IT IS ALSO PERTINENT TO NOTE THAT SUBSEQUENTLY ALSO IN A.Y. 1993-94, A.Y. 1994-95, A.Y. 2000-01 AN D A.Y. 2001-02 SIMILAR EXPENDITURE CLAIMED BY THE ASSESSEE HAVE BEEN ALLOWED AS IS EVIDENT FROM THE ASSESSMENT ORDERS. T HIS ISSUE HAS BEEN GOING ON WITH THE MINISTRY OF FINANCE AND FROM THE CORRESPONDENCES PLACED AT THE PB PG 200-211 IT CAN BE SEEN THAT THE INTEREST DUE TO THE GOVERNMENT IS PAYABLE AND REQUEST ITA NO. 419/DEL/1994 & ITA NO. 319/DEL/2001 PAWAN HANS HELICOPTERS LTD. 7 FOR THE WAIVER HAVE BEEN REJECTED REPEATEDLY BY THE MINISTRY OF FINANCE. THUS, THE LIABILITY PERTAINS TO THE CURREN T YEAR ONLY AND THE ASSESSEE IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING AND THUS THE INTEREST CLAIMED BY THE ASSESSEE HAS T O BE ALLOWED. THE ASSESSEE HAS CLAIMED SIMILAR EXPENDITU RE IN THE FOLLOWING PRECEDING ASSESSMENT YEARS AS WELL AS SUC CEEDING ASSESSMENT YEARS WHICH HAVE BEEN ALLOWED BY THE DEP ARTMENT AND THERE BEING NO DEVIATION IN THE FACTS OF THE CA SE IN THE PRESENT ASSESSMENT YEAR AND THE CLAIM OF INTEREST E XPENDITURE MADE BY THE ASSESSEE HAS TO BE ALLOWED. 16. ON GOING THROUGH THE ENTIRE FACTUM OF THE CASE, WE HEREBY HOLD THAT NO DISALLOWANCE IS CALLED FOR ON ACCOUNT OF INTEREST PAYABLE TO THE MINISTRY OF FINANCE. DISALLOWANCE ON WESTLAND HELICOPTERS: THE GROUND NO. 2 OF THE APPEAL FOR THE A.Y. 1995-96 17. THE ASSESSEE HAS CLAIMED THE DEPRECIATION OF RS.57,60,034/- ON WESTLAND HELICOPTERS WHICH ARE TH E PART OF BLOCK OF ASSETS. THESE ASSETS HAD BEEN ACQUIRED IN 1986-87, HOWEVER, THE SAME WERE NOT USED DURING THE CURRENT ASSESSMENT YEAR. THE AO AT PAGE 12 PARA 10 OF THE O RDER HAS ALLEGED THAT THE DEPRECIATION CLAIMED BY THE ASSESS EE IS NOT ALLOWABLE SINCE THE ASSET WAS NOT USED IN THE CURRE NT YEAR. 18. THE LD. CIT (A) CONFIRMED THE DISALLOWANCE. ITA NO. 419/DEL/1994 & ITA NO. 319/DEL/2001 PAWAN HANS HELICOPTERS LTD. 8 19. THE FACTS IN THE INSTANT CASE THAT THE HELICOPT ERS WERE ACQUIRED IN 1986-87 AND THE ASSESSEE HAS BEEN CLAIM ING THE DEPRECIATION SINCE THEN HAS NOT BEEN IN DISPUTE. TH E AO HAS ALLOWED THE DEPRECIATION ON HELICOPTERS IN THE EARL IER ASSESSMENT YEARS. THIS FACT IS ALSO NOT DISPUTED BY THE AO AS WELL AS CIT(A). FURTHER, THE ASSESSEE IS FOLLOWING THE CONCEPT OF BLOCK OF ASSETS WHICH WERE ALSO NOT IN QUALM BY THE REVENUE. 20. BLOCK OF ASSETS AS DEFINED BY SECTION 2(11) M EANS, GROUP OF ASSETS FALLING WITHIN A CLASS OF ASSETS, COMPRIS ING- (A) TANGIBLE ASSETS, BEING BUILDINGS, MACHINERY, P LANT OR FURNITURE; (B) INTANGIBLE ASSETS, BEING KNOW-HOW, PATENTS, CO PYRIGHTS, TRADE-MARKS, LICENSES, FRANCHISES OR ANY OTHER BUSI NESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE, [NOT BEING GOO DWILL OF A BUSINESS OR PROFESSION, IN RESPECT OF WHICH THE SAME PERCENTAGE OF DEPRECIA TION IS PRESCRIBED. 21. THUS, ONCE AN ASSET IS PART OF THE BLOCK OF ASS ETS AND DEPRECIATION IS GRANTED ON THAT BLOCK, IT CANNOT BE DENIED IN ITS SUBSEQUENT YEAR ON THE GROUND THAT ONE OF THE ASSET S IS NOT USED BY THE ASSESSEE IN SOME OF THE YEARS. THE CONC EPT USER OF ASSETS HAS TO APPLY UPON BLOCK AS A WHOLE INSTEA D OF AN INDIVIDUAL ASSET. 22. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CA SE OF SONY INDIA (P.) LTD VS CIT [2017] 88 TAXMANN.COM 580 (DE LHI) HELD THAT THE ASSESSEE WOULD BE ENTITLED TO DEPRECIATION IN RESPECT OF ASSETS WHICH WERE PART OF BLOCK OF ASSETS EVEN IF S AID ASSETS HAD ITA NO. 419/DEL/1994 & ITA NO. 319/DEL/2001 PAWAN HANS HELICOPTERS LTD. 9 NOT BEEN PUT TO USE DURING RELEVANT ASSESSMENT YEAR AND HAD BEEN SOLD PRIOR TO END OF ACCOUNTING YEAR. SIMILARL Y, IN THE CASE OF CIT VS OSWAL AGRO MILLS LTD. 341 ITR 467 (DEL.) HELD THAT AS PER AMENDED SECTION 32, DEDUCTION IS TO BE ALLOWED IN THE CASE OF ANY BLOCK OF ASSETS, SUCH PERCENTAGE ON THE WDV THEREOF AS MAY BE PRESCRIBED AS PER CIRCULAR NO. 469, DATED 23 .09.1986 THUS IT IS DIFFICULT TO ACCEPT THE SUBMISSION OF TH E REVENUE THAT FOR ALLOWING THE DEPRECIATION, USER OF EACH AND EVE RY ASSET IS ESSENTIAL EVEN WHEN A PARTICULAR ASSET FORMS PART O F 'BLOCK OF ASSETS'. THE HONBLE HIGH COURT HELD THAT THE REVEN UE IS NOT PUT TO ANY LOSS BY ADOPTING SUCH METHOD AND ALLOWING DE PRECIATION ON A PARTICULAR ASSET, FORMING PART OF THE 'BLOCK O F ASSETS' EVEN WHEN THAT PARTICULAR ASSET IS NOT USED IN THE RELEV ANT ASSESSMENT YEAR. 23. THUS, KEEPING IN VIEW, THE JUDGMENTS ON ALLOWAB ILITY OF DEPRECIATION ON THE BLOCK OF ASSETS, WE HEREBY HO LD THAT THE ASSESSEE CANNOT BE DENIED THE BENEFIT OF DEPRECIATI ON CLAIMED U/S 32 WITH REGARD TO THE WESTLAND HELICOPTERS. 24. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14/07/2021. SD/- SD/- (AMIT SHUKLA) (D R. B. R. R. KUMAR) JUDICIAL MEMBER ACCOU NTANT MEMBER DATED: 14/07/2021 *SUBODH*