DCIT, New Delhi V. M/s Steel Authority Of India Ltd., New Delhi

ITA 3274/DEL/2011

• Counselvise Citation: 327420114 RSA 2011
• Duration Of Justice: 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 15-03-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 17-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NIRANJAN KAULI
• Assessee Lawyers: P N SHASTRY
• Keywords: Capital asset; Depreciation; Rule of consistency; Additional depreciation; Cost of acquisition; Capital receipt; Revenue expenditure
• Section: 32; 27; 263; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: G NEW DELHI BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI A.N.PAHUJA, ACCOUNTANT MEMBER ITA NO: 2698/DEL/2011 A.Y. : 2005-06 STEEL AUTHORITY OF INDIA LTD.(SAIL) VS. DCIT, CIRC LE 9(1) ISPAT BHAVAN, LODI ROAD NEW DELHI NEW DELHI 3 ITA NO: 3274/DEL/2011 A.Y. : 2005-06. & DCIT, CIRCLE 9(1) VS. SAIL NEW DELHI NEW DELHI (APPELLANT) (RESPONDE NT) APPELLANT BY : SHRI NIRANJAN KAULI, CIT, D.R. RESPONDENT BY : SHRI P.N.SHASTRY, C.A. O R D E R PER DIVA SINGH, JUDICIAL MEMBER THESE ARE CROSS APPEALS FILED BY THE REVENUE AND TH E ASSESSEE AGAINST THE ORDER DT. 4.3.2011 OF CIT(A)-XII, NEW D ELHI PERTAINING TO THE A.Y. 2005-06 ON THE FOLLOWING GROUNDS RESPECTIVELY. ITA 2698/DEL/2011: 1. THE CIT(A) HAS ERRED IN CONFIRMING THE DISALLO WANCE OF PRO- RATE DEPRECIATION OF RS.15191.18 LAKHS ON ACCOUNT O F DOWNWARD REVALUATION OF ASSETS (BY REDUCTION) IN A. Y. 2000-01. 2.1. THE CIT(A) HAS ERRED IN CONFIRMING THE DISALL OWANCE OF DEPRECIATION ON THE INTANGIBLE ASSET OF MINING RIGH TS DESPITE CHANGES IN SECTION 32 OF THE INCOME TAX ACT, 1961, AND/OR IN THE ALTERNATE CLAIM THAT THE ADDITION TO MINING RIG HTS IN THE CURRENT YEAR WERE OF REVENUE IN NATURE, DESPITE THE FACT THAT THE HONBLE ITAT HAD SET ASIDE SIMILAR ISSUES BESIDES I N OTHER ITA 2698/DEL/11 & ITA 3274/DEL/11 A.Y. 2005-06 STEEL AUTHORITY OF INDIA LTD., N.DELHI 2 YEARS AND THE CIT(A) HAVING ALLOWED IT AS A REVENUE EXPENSES IN SOME YEARS. 2.2. THE CIT(A) HAS ERRED IN NOT PROPERLY DEALING W ITH THE ISSUE OF CONSEQUENTIAL ALLOWANCE OF THE CLAIM OF DEPRECIA TION ON THE INTANGIBLE ASSET OF MINING RIGHTS FROM 1.4.1998 U/S 32(1)(II) OF THE INCOME TAX ACT. 3. THE CIT(A) HAS ERRED IN CONFIRMING THE ADDITION MADE BY THE AO BY TREATING THE FIBER OPTIC COMPUTER NETWORKING AS AN ORDINARY ASSET INSTEAD OF BEING A PART OF THE COMPU TER SYSTEMS AND CONSEQUENTLY DISALLOWING RS.46.42 LACS OF DEPRE CIATION CLAIMED AND THE DISALLOWANCE /ALLOWANCE IS NOT CORR ECT ON FACTS. 4. THAT THE ABOVE GROUNDS ARE INDEPENDENT AND WITHO UT PREJUDICE TO EACH OTHER. 5. THAT THE APPELLANT SEEKS LEAVE TO ADD, AMEND, AL TER, ABANDON OR SUBSTITUTE ANY OF THE ABOVE GROUNDS AT T HE TIME OF HEARING OF APPEAL. 2. THE RELEVANT FACTS OF THE CASE ARE THAT THE ASSE SSEE FILED ITS RETURN OF INCOME ON 29.10.2005 DECLARING A TAXABLE INCOME OF RS. 1779.47 CRORES WHICH INCLUDED LONG TERM CAPITAL GAIN OF RS. 6 CRORES, TAX THEREON WORKED OUT TO RS.650.21 CRORES AS PER THE COMPUTATI ON OF TAX U/S 115 JB THE TAX PAYABLE UNDER MAT WORKED OUT TO RS. 731. 81 CR. SINCE TAX PAYABLE UNDER MAT WAS HIGHER THAN THE TAX PAYABLE U NDER NORMAL PROVISIONS OF THE ACT TAX WAS PAID BY THE COMPANY U NDER MAT U/S 115 JB. THE SAID RETURN WAS PROCESSED U/S 143(1) ON 17 .3.2007 AND THEREAFTER BY ISSUANCE OF NOTICE U/S 143(2) IT WAS SELECTED FOR SCRUTINY. AS PER THE MATERIAL AVAILABLE ON RECORD THE COMPANY IS ENGAGED IN THE MANUFACTURE, PROCESS, SALE AND EXPORT OF IRON AND S TEEL OF VARIOUS GRADES. FOR THE SAID PURPOSE IT WAS ALSO ENGAGED IN THE FI ELDS OF MINING, GENERATION AND DISTRIBUTION (FOR SELF) OF ELECTRICI TY THROUGH THERMAL POWER ITA 2698/DEL/11 & ITA 3274/DEL/11 A.Y. 2005-06 STEEL AUTHORITY OF INDIA LTD., N.DELHI 3 STATIONS, PROCESSING OF COAL INTO COKE WHICH GENERA TES BY PRODUCTS LIKE TAR, COAL, PHENOL ETC. MANUFACTURE OF REFRACTORY AN D FERTILIZERS AND CHEMICALS LIKE CALCIUM NITRATE ETC. 3. REFERRING TO THE GROUNDS RAISED BY THE ASSESSEE, A PERUSAL OF THE RECORD SHOWS THAT THE A.O. VIDE PARAS 4 TO 4.7 AT P AGES 2 TO 5 IN THE ASSESSMENT ORDER WAS OF THE VIEW THAT ONLY REDUCED WRITTEN DOWN VALUE WAS SHOWN FOR DEPRECIATION AND AS SUCH THE CLAIM O F DEPRECIATION MADE BY THE ASSESSEE ON THE ORIGINAL WRITTEN DOWN VALUE WITHOUT TAKING INTO ACCOUNT REDUCTION IN THE VALUE OF ASSETS AMOUNTING TO RS. 2578,14 CRORES IN THE YEAR ENDED 31.3.2000 RELEVANT TO A.Y. 2000-2 001 WAS NOT ALLOWABLE. A PERUSAL OF THE RECORD SHOWS THAT BEFO RE COMING TO THE SAID CONCLUSION THE A.O. REQUIRED THE ASSESSEE TO EXPLAI N AS TO WHY THE EXCESS CLAIM OF DEPRECIATION BE NOT DISALLOWED IN R ESPONSE TO THE SAME THE SUBMISSIONS ADVANCED ON BEHALF OF THE ASSESSEE ARE FOUND REPRODUCED IN PARA 4.3 WHICH ARE REPRODUCED HEREUND ER:- 4 . 3 VIDE - REPLY DA TED 21 . 11 . 2007, THE ASSESSEE HAS SUBMI T TED AS UNDER : - 'YOU ARE AWARE THAT THERE WAS A GLOBAL GLUT IN STEE L AND CONSEQUENT FALL IN STEEL PRICES AROUND THE YEAR 199 7 AND 1998 . THIS WAS CONSEQUENT TO AN ECONOMIC MELT DOWN OR RECESSION IN SOUTH EAST ASIA ESPECIALLY IN KOREA, M ALAYSIA AND INDONESIA ETC . THIS COMPANY BEING ONE OF THE LARGEST STEEL PRODUCERS IN INDIA WAS ADVERSELY AFFECTED AND INCUR RED HUGE LOSSES. THE GOVERNMENT OF INDIA IN ITS WISDOM AND A MEASURE OF REHABILITATING THE COMPANY, WAIVED LOANS TO THE EXT ENT OF RS 5073 CRORES AVAILED BY IT FROM THE SDF (STEEL DEVEL OPMENT FUND)THE GOVT. OF INDIA PLUS ITS OWN LOANS OF RS. 3 81 CRORES . THIS WAIVER WAS DONE IN THE YEAR-ENDED 31 . 3.2000 RELEVANT TO ITA 2698/DEL/11 & ITA 3274/DEL/11 A.Y. 2005-06 STEEL AUTHORITY OF INDIA LTD., N.DELHI 4 AY 2000-01. THE COMPANY HAD GIVEN LOANS TO ITS SUBS IDIARY - IISCO (INDIAN IRON & STEEL CO . LTD) IT HAD WRITTEN OFF LOAN TO THE EXTENT OF &2072 CRORES AND ADJUSTED IT AGAINST THE WAIVER OF SDF LOANS . WHEN A LOAN IS WAIVED IT DOES NOT BECOME AN EXPENSE SINCE IT IS NOT THE BUSINESS OF THE COMPANY TO EXTEND LOANS. THE CONVERSE ALSO (THAT LOAN WAIVED DOES NOT RESULT IN INCOME) ALSO HOLD GOOD THE LOAN WAIVED BY THE GOI I S THUS A CAPITAL RECEIPT AND THE LOAN OF IISCO WAIVED BY THE COMPANY IS ALSO A CAPITAL OUTFLOW. THUS, THE CAPITAL RECEIP T EXCEEDED THE OUTFLOW BY & . 3001 (5073 LESS 2072) CRORES. THE COMPANY WA S HAVING CONSIDERABLE LOSSES IN THE P & L AIC . VARIOUS FINANCIAL INSTITUTIONS HAD OPINED THAT THE PLANT & MACHINER Y AND OTHER ASSETS STOOD OVER CAPITALIZED ON ACCOUNT OF OVERRUNS OF ERRECTIONING AND COMMISSIONING AND C ONSEQUENT CAPITALIZATION OF EXPENSES DURING CONSTRUCTION (EDC ) . IT WAS GIVING A DISTORTED PICTURE OF THE COMPANY WI TH LARGE CAPITAL RESERVES AND ALSO LARGE REVENUE LOS S ES IN THE BALANCE SHEET . THEREFORE, IT WAS DECIDED BY THE COMPANY TO REVALUE ITS FIXED ASSETS DOWNWARDS. ACCORDINGLY, IT REVALUE D DOWNWARDS ITS FIXED ASSETS BY &2578.13 CRORES AND CAPITAL WIP BY &422.87 CRORES AGGREGATIN G TO RS . 3001 C RORES. IT IS A KNOWN FACT THAT ACTUAL COST OF ASSET S AND WD V OF ASSETS FOR THE PURPOSES OF ALLOWANCES OF DEPRECIATION IS TO BE TAKEN AS PER SECTION 43(1) O F THE INCOME TAX ACT 1961. THUS, NO ADDITIONAL DEPRECIATION IS T O BE ALLOWED ON ACCOUNT OF ASSETS BEING REVALUED UPWARDS . IT WILL REMAIN THE SAME AS U/S 43(1) OF THE OF THE INCOME T AX ACT 1961. SIMILARLY, THE ACTUAL COST / WDV U /S 43 WILL NOT GET AFFECTED BY REVALUATION DOWNWARDS ALSO . ACCORDINGLY , THE WD V OF ASSETS FOR THE PURPOSES OF THE INCOME TAX ACT WAS NOT REDUCED BY THE AMOUNT OF SUCH REDUCTION OR REVALUAT ION DOWNWARDS OF THE ASSETS. YOUR KIND ATTENTION IS INVITED TO CLAUSE (I) OF SECTION 43, WHICH DEFINES THE TERM A CTUAL COST. IT PROVIDES ONLY FOR REDUCTION OF THE COST BY THE A MOUNT OF COST MET DIRECTLY OR INDIRECTLY BY OTHERS. IN THE P RESENT CASE THE REDUCTION DONE BY THE COMPANY IN THE GROSS BLOC K OF ASSETS IS ON ITS OWN DECISION AND ON ASSETS ALREADY CAPITALIZED IN THE PAST AS WELL AS PUT TO USE IN TH E PAST. THERE IS NO SPECIFIC SUBSIDY OR GRANT GIVEN BY THE GOI IN WAIVER OF LOAN, TO MEET THE COST OF ACQUISITION OF ASSETS . THUS, THE AMOUNT WRITTEN BACK/REDUCED FROM FIXED AS SETS IS NOT COVERED BY THE PROVISIONS OF SECTION 43 (1) (6) OF THE INCOME TAX ACT 1961. ITA 2698/DEL/11 & ITA 3274/DEL/11 A.Y. 2005-06 STEEL AUTHORITY OF INDIA LTD., N.DELHI 5 CLAUSE (6) OF SECTION 43 DEALS WITH THE WDV, WHICH IS THE COST LESS DEPR E CIATION ALREADY ALLOWED TILL THE EARLIER YEAR. IT DOES NOT PROVIDE FOR ANY SCOP E IN REDUCTION . RELIANCE WAS PLACED ON THE FOLLOWING CASES, WHERE T HE WAIVER O LOAN WOULD NOT AFFECT THE ACTUAL COST OR W DV OF ASSETS. CIT VS TATA IRON & STEEL CO. LTD 231 ITR 285 SC CIT VS COCHIN CO. PVT. LID - 184 ITR 230 (KER) BHARAT FORGE LTD. VS CIT - 205 ITR 339 HOWEVER, THE DEPARTMENT IN AY 2000-01 TOOK A VIEW T HAT THE WAIVER OF LOAN AMOUNTED TO A COST OF ASSETS MET BY THE GOI AND CONSEQUENTLY REDUCED IT FROM WD V OF THE BLOCK OF ASSETS . TH IS RESULTED IN REDUCTION OF THE AMOUNT OF DEPRECIATION ALLOWED THIS ISSUE IS PENDING IN APPEA L BEFORE THE ITAT. THE DEPARTMENT HAS FOLLOWED ITS STAND IN AY 2001-02 , 2002- 03 , 2003-04 & AY 2004-05. THE RESULTANT AFFECT OF THE DEPRECATION FOR AY 2005 -06 ON TH E ABO V E BASIS OF THE DEPARTMENT WILL BE RS. 15191.18IAKHS . (NOTE NO. 3.8 OF ANNEX-2 TO ITR) THIS HOWEVER IS SUBJECT TO THE FINAL OUTCOME OF THE PENDING APPEALS ON THIS ISSUE. 3.1. THE REASONING TAKEN FOR DISALLOWING THE CLAIM WAS ON ACCOUNT OF CONJOINT READING OF S.43(1), 43(6) AND 32(1) WHICH MAKES IT CLEAR THAT DEPRECIATION IS ALLOWABLE ON THE REDUCED WRITTEN DO WN VALUE OF THE ASSETS READ ALONG WITH EXPLANATION 10 TO S.43(1) INSERTED BY FINANCE NO.2 ACT OF 1998 W.E.F. 1.4.1999 . 3.2. IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY THE CLAIM WAS REJECTED RELYING UPON THE ORDER DT. 25.6.2009 IN IT A 2782/DEL/2004, 2481/DEL/2006 AND 1013/DEL/2008 FOR 2000-2001, 2001 -02 AND 2002- 2003 A.YS IN THE CASE OF THE ASSESSEE. ITA 2698/DEL/11 & ITA 3274/DEL/11 A.Y. 2005-06 STEEL AUTHORITY OF INDIA LTD., N.DELHI 6 3.3. AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL B EFORE THE TRIBUNAL. 3.4. BOTH THE PARTIES WERE HEARD. A PERUSAL OF THE ORDER OF THE TRIBUNAL WHICH HAS BEEN RELIED UPON BY THE CIT(A), COPY OF W HICH IS PLACED AT PAGES 91 TO 126 SHOWS THAT THE SAID ISSUE HAS BEEN DISCUSSED AT LENGTH AT PAGE 91 VIDE PARA 2 TO 110, PARA 17, A PERUSAL O F WHICH SHOWS THAT THE VIEW OF THE CIT(A) IN A.Y. 2000-2001 AND THE OTHER YEARS WERE UPHELD AS THE SAME WAS HELD TO BE IN CONFORMITY WITH THE JUDG EMENT OF THE APEX COURT IN THE CASE OF SAHARANPUR ELECTRICITY SUPPLY CO.LTD. VS. CIT, 194 ITR 294 (SC) AND THE INTERPRETATION OF THE PROVISI ONS AS CONSIDERED BY THE GUJARAT HIGH COURT IN CIT VS. HIDES AND LEATHER PRODUCTS P.LTD. 101 ITR 61, 74 RAVI LEATHERS P.LTD. VS CIT 240 ITR 702 MADRAS AND GAURISHANKAR FINANCE LTD. 248 ITR 713 (KARNATAKA). ACCORDINGLY RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL GR OUND NO.1 RAISED BY THE ASSESSEE IS REJECTED. 4. THE RELEVANT FACTS QUA THE SECOND ISSUE AGITATED BY THE ASSESSEE ARE FOUND DISCUSSED IN PARA 9 OF THE IMPUGNED ORDER WHICH READS AS UNDER. 9. THE SIXTH GROUND OF APPEAL IS AGAINST THE DISAL LOWANCE OF RS.1263 LAKHS ON ACCOUNT OF DEPRECIATION ON THE INT ANGIBLE ASSET OF MINING RIGHTS. 9.1. COMING TO THE ISSUE ON ACCOUNT OF PAYMENT OF MINING RIGHTS, IT IS HELD THAT THE ACQUISITION OF MINING R IGHT IS A CAPITAL ASSET FOR IT IS NOT A PART OF THE CIRCULATING CAPIT AL BUT IS THE PART OF THE FIXED CAPITAL. THE ACQUISITION OF MINING RI GHTS LEADS TO THE PRODUCTION OF RAW MATERIAL WHICH ARE NECESSARY TO RUN THE BUSINESS OF THE APPELLANT. THE MINERALS WHICH HAS EXTRACTED ITA 2698/DEL/11 & ITA 3274/DEL/11 A.Y. 2005-06 STEEL AUTHORITY OF INDIA LTD., N.DELHI 7 FORM PART OF CIRCULATING CAPITAL WHERE AS THE MININ G RIGHTS ARE JUST FIXED CAPITAL. 4.1. IN REGARD TO THE SAME IT WAS SUBMITTED ON BEH ALF OF THE ASSESSEE THAT THE PAYMENT TO GOVT. FOR MINING RIGHTS MAINLY ON ACCOUNT OF MINING CHARGES CLAIMED BY ASSESSEE ALLOWED IS A REVENUE EXPENDITURE AND ARE ALLOWED AS DEPRECIATION U/S 32 AS INTANGIBLE ASSE T/RIGHT HAS NOT BEEN CONSIDERED BY THE CIT(A). IT WAS STATED THAT THE T RIBUNAL IN A.Y. 2002-03 AND 2003-04 HAS SET ASIDE THE ISSUE TO THE A.O. AND THE A.O. AS YET HAS NOT DECIDED THE ISSUE. REFERRING TO THE COPY OF TH E SAID ORDER DT. 25.6.2009 FILED IN THE PAPER BOOK IT WAS STATED HAD DISCUSSED THE ISSUE AT PAGES 125. ACCORDINGLY REQUEST WAS MADE THAT TH E ISSUE IN THE YEAR UNDER CONSIDERATION ALSO MAY BE RESTORED TO THE A.O . LD.D.R. HAD PLACED RELIANCE UPON THE IMPUGNED ORDER HOWEVER CON FRONTED WITH THE ORDER OF THE TRIBUNAL NO OBJECTION TO THE REQUEST OF RESTORING THE ISSUE TO THE AO WAS MADE. 4.2. BEFORE COMING TO THE CONCLUSION WE CONSIDER IT APPROPRIATE TO SET OUT THE FACTS, ARGUMENTS AND REASONING TAKEN BY THE COORDINATE BENCH IN RESTORING THE ISSUE BACK TO THE FILE OF A.O. BY THE SAID ORDER IN THE CONSOLIDATED ORDER PASSED IN THE CASE OF THE ASSESS EE FOR THE 3 A.YS AS FOUND DISCUSSED IN PARAS 45 TO 48 IN PAGES 125 OF T HE PAPER BOOK AS UNDER:- 45 . T H E LAST ISSUE FOR CONSIDERATION RELATES TO DEPRECIATION ON MINING R I GHTS . DURIN G TH E C OUR S E OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT ITA 2698/DEL/11 & ITA 3274/DEL/11 A.Y. 2005-06 STEEL AUTHORITY OF INDIA LTD., N.DELHI 8 THE ASSESSEE IN . TH E COMPUTATION OF INCOME HAD ITSELF ADDED BACK AN AMOUNT OF RS.98 . 44 LAKHS REPRESENTING DEPRECIATION ON MINING RIGHTS TREATING IT AS DISALL OWABLE CLAIM. THE CLAIM OF ALLOWABILITY IN EARLIER YEARS W AS NOT PRESSED BEFORE THE APPELLATE AUTHORITY. HOWEVER, DU RING THE COURSE OF ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE CLAIMED THE DEPRECIATION ON MINING RIGHTS . THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE ON THE G ROUND THAT THE MINING RIGHTS HAVE NOT EVEN ENUMERATED AMOUNTS THE LIST OF ELIGIBLE INTANGIBL E AS S E TS . 46 . ON APPEAL THE LD. CIT (APPEALS) OBSERVED THAT CHANGE II1 LAW ON DEPRECIATION ON INTA NG I BLE ASSETS HAS BEEN BROUGHT IN THE STATUTES FROM 110411999 AND THE ASSESSEE HAS RAISED T HE GR OUND FO R THE FIRST TIME BEFORE THE LD. CFT (APPEALS). HE, THEREFORE, UPHELD THE OR DER PASSE D B Y THE A SSES S ING OFFICE R ON TH E GROUND . THAT M IN ING RIGHTS HAVE NOT BEEN E NUM E RAT E D IN TH E S E C TIO N AS I NTAN G IBL E RIGHT S . 47 . BEFORE US THE ID. AR OF THE ASSESSEE SUBMITTED THAT DEPRECIATION ON INTANGIBLE ASSETS IS A V AILABLE UNDER SECTION 32(1 )(II) OF THE ACT WITH EFFECT FROM 1/041L999 I. E . ON ASSETS ACQUIRED A FTER 31ST MARCH, 1998. THE ASSESSING OFFICER DID NOT CONSIDER THE MINING RIGHTS AS BUSIN ESS O R COMMERCIAL RIGHTS AND ACCORDINGLY DISALLOWED THE CLAIM. IT HAS FURTHER BEEN SUBMITTED THAT T H E C LA I M , IN EARLIER YEARS IS PENDING BEFORE THE ID. CIT (APPEALS) FOR RECTIFICATION. ALTE R NAT IV ELY, IT HAS BEEN PLEADED THAT THE EXPENSES ARE REVENUE IN NATURE AND SHOULD BE ALLOW E D . HE PLAC E D RELIANCE ON THE D EC ISION OF HON 'B L E ANDHRA PRADESH HIGH COURT IN THE C ASE O F C I T VS. PANYAM CEMENT & MINERAL INDUSTRIES LT D. 228 ITR 212 CAP) AND IN THE CA SE OF CL ' F VS . WOK E M P. LTD . CO . 258 ITR 350 (RAJ) . ON TH E OTH E R HA ND , THE ID . SR . DR SUBMITTED T H A T THE DEPRECIATION ON INTANGIBLE RIGHTS IS AVAILABLE WITH EFFECT FROM 1I041L999 ON ASSE TS A CQUIR E D AFTER 1104/) 998. THE YEAR IN WHICH THE MINING RIGHTS WERE OBTAINED IS NOT AVA IL A BLE O N RECORD AND, THEREFORE, THE CLAIM FOR DEPRECIATION IS NOT ALLOWA BLE. 4 8 . W E HAVE HEARD BOTH THE PARTIES . DEPRECIATION ON INTANGIBLE ASSETS HAS BEEN PROVIDED I N T HE ST ATUT E WITH EFFECT FROM 1/4/99 ON ASSETS ACQUIRED AFTER 110411 998 . THE DATES ON WHICH T HE MINING RIGHTS WERE ACQUIRED IS NOT AVAILABLE ON RECORD . : NEITHER THE LD . CIT ( APP EA L S ) N O R THE ASSESSING OFFICER HAS GONE THROUGH THE DATE OF ACQU ISITION OF MINING RIGHTS . TH E ID . AR OF THE ASSESSEE, DURING THE ITA 2698/DEL/11 & ITA 3274/DEL/11 A.Y. 2005-06 STEEL AUTHORITY OF INDIA LTD., N.DELHI 9 COURSE OF HEARING, SUBMITTED THAT FOR EARLIE R YEARS RE CT I FICA TI O NS PETITIONS ARE PENDING BEFORE THE LD . CIT (APPEALS). THE ISSUE WHETHER MINING R I GHT S ARE INT A NGIBLE ASSETS HAS NEITHER BEEN EXAMINED BY THE ASSESSING O FFICER NOR BY THE ID . CI T (AP P EA LS). WE ARE, THEREFORE, OF THE CONSIDERED VIEW THAT THIS MATT E R SHOULD BE RESTORED TO T HE F I L E OF THE ASSESSING OFFICER WITH THE DIRECTIONS TO VERIFY THE DATE OF ACQUISITION OF MIN I N G R IGH T S AND EXAMINE THE CASE WHETHER THE MINING RIGHTS ARE COVER E D UNDER INTANGIBLE ASSETS , AS SP E CIFIED IN OLD APPENDIX I APPLICABLE FOR ASSESSMENT YEAR 1988-89TO 2002-03. A S . REGAR D S T HE ALTERNATIVE CLAIM OF THE ASSESSEE A S REVENU E EXPENDITURE , TH IS I S SUE HAS ALSO NOT BE E N EXA MIN E D BY EITHER OF THE AUTHORITIES . WE , THEREFORE , SET ASIDE THE M A TTER TO THE FILE OF TH E ASSESS IN G OFFICER WITH A DIRECTION TO E X AMINE TH E CLAIM OF TH E AS SESSEE WH E TH ER EXPENDI T U RE INCU RR ED O N ACQUISITION OF M IN I N G RI G HTSIS REVENU E E X P E N DI T U R E O R C A PITAL IN NATUR E . 4.3. ACCORDINGLY ON CONSIDERATION OF THE FACTUAL M ATERIAL IN THE LIGHT OF THE ARGUMENTS OF THE PARTIES ADVANCED, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL THE SAID ISSUE IS RESTORED TO THE FILE OF A.O. WITH THE ABOVE DIRECTIONS., GROUND NO.2 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 5. THE FACTS RELEVANT TO GROUND NO. 3 AGITATED BY THE ASSESSEE ARE FOUND DISCUSSED AT PAGES 33, 34 OF THE ASSESSMENT O RDER IN PARAS 15 TO 15.3. A PERUSAL OF THE SAME SHOWS THAT THE ASSESSEE CLAIMED DEPRECIATION OF COMPUTER @ 60% TREATING IT AS COMPUTER INSTEAD O F PLANT AND MACHINERY WHERE THE APPLICABLE RATE WAS 25%. IN TH E YEAR UNDER CONSIDERATION THE ASSESSEE HAD MADE AN ADDITION OF RS. 265.29 (IN THE SECOND HALF PORTION OF THE YEAR) LAKHS AND NET WORK ING OF COMPUTER AND CLAIMED DEPRECIATION OF RS.79.59 LAKHS. ITA 2698/DEL/11 & ITA 3274/DEL/11 A.Y. 2005-06 STEEL AUTHORITY OF INDIA LTD., N.DELHI 10 5.1. THE A.O. BEING OF THE VIEW THAT DEPRECIATION I S ALLOWABLY ONLY @ 25% APPLICABLE TO PLANT & MACHINERY AMOUNTING TO RS . 37.16 LAKHS (LESS THAN 180 DAYS). ACCORDINGLY THE CLAIM OF DEPRECIAT ION OF RS.46.42 LAKHS WAS DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE. 5.2. IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY IT WAS CONTENDED THAT THE NET WORKING OF COMPUTERS IS A SYSTEM BY WHICH A LL THE COMPUTER TERMINALS ARE LINKED TO THE MAIN CPU (CENTRAL PROCE SSING UNIT) OF THE COMPUTER AND AN EXPENDITURE INCURRED FOR INSTALLING FIBER OPTIC NET WORKING FOR ALL COMPUTERS DESERVE TO BE ALLOWED AS IT ENABLES ALL THE PERSONS HAVING COMPUTER TERMINALS TO ACCESS THE DAT A IN THE MAIN CPU OF THE COMPUTER, PROCESS IT AND STORE IT BACK IN TH E COMPUTER. AS SUCH NET WORKING IS AN ESSENTIAL PART OF THE COMPUTER SY STEM WITHOUT WHICH NO LARGE DEPARTMENT OR COMPANY CAN OPERATE ITS COMP UTER. ON FACTS IT WAS SUBMITTED THAT IN ORDER TO BRING THE COMPUTERS IN THE AREA OF NET WORKING SPECIALIZED OPTIC FIBER CABLES ARE USED; TH AT COMPUTER SIGNAL WAVES HAVE DIFFERENT STRUCTURES AS COMPARED TO ELE CTRIC WAVES OR TELEPHONIC WAVES; AS SUCH THE FIBER CABLES USED FO R NET WORKING OF COMPUTERS ARE SUCH THAT THEY CANNOT BE USED FOR ANY OTHER PURPOSE LIKE SUPPLY OF ELECTRICITY FOR LIGHTS AND FANS OR FOR CO NNECTING NORMAL PLANT AND MACHINERY; THAT THEY CAN BE USED ONLY IN CONJU NCTION WITH COMPUTERS WHICH MAKES THEM AN INTEGRAL PART OF THE COMPUTERS. ITA 2698/DEL/11 & ITA 3274/DEL/11 A.Y. 2005-06 STEEL AUTHORITY OF INDIA LTD., N.DELHI 11 5.3. RELIANCE WAS PLACED UPON THE JUDGEMENT OF THE APEX COURT IN CIT VS KARNATAKA, POWER CORPORATION 247 ITR 268 (S.C.) WHEREIN CONSIDERING THE QUESTION WHETHER A BUILDING STRUCTURE WILL BE E LIGIBLE FOR DEPRECIATION IT WAS HELD THAT IF IT HAS BEEN SO PLANNED AND CON STRUCTED TO SERVE SPECIALIZED TECHNICAL REQUIREMENTS THE BUILDING S TRUCTURE WAS SO CONSTRUCTED TO BE AN INTEGRAL PART OF THE GENERATIN G SYSTEM IT WAS A PLANT ELIGIBLE TO DEPRECIATION AS WELL AS INVEST MENT ALLOWANCE. 5.4. RELIANCE WAS ALSO PLACED UPON ITO VS. SAMIRAM MAJUMDAR, 98 ITD 119 (CAL.) WHEREIN IT HAD BEEN HELD THAT A PRINTER AND SCANNER BEING AN INTEGRAL PART OF A COMPUTER SYSTEM HAVE TO BE TREAT ED AS COMPUTER FOR THE PURPOSE OF ALLOWING HIGHER DEPRECIATION. 5.5. IT WAS CONTENDED THAT IN A.Y. 2006-07 THE CIT (A) RELYING UPON THE ORDER OF THE DELHI BENCH OF THE TRIBUNAL IN CASE OF NESTLE INDIA LTD. VS DCIT 94 TTJ 498 IN WHICH IT WAS HELD THAT UPS WERE NOT ELIGIBLE FOR DEPRECIATION AT RATES APPLICABLE TO COMPUTERS SINCE THEY WERE ELECTRICAL EQUIPMENTS BY NATURE. IT WAS CONTENDED THAT THE PR INCIPLE LAID DOWN IN THE SAID JUDGEMENT WAS NOT APPLICABLE AS UPS AND C OMPUTER NET WORKING ARE INDEPENDENTLY DIFFERENT TYPES OF EQUI PMENT AS SUCH THE SAID JUDGEMENT HAS NO APPLICABILITY. 5.6. CONSIDERING THE ARGUMENTS THE CIT(A) UPHELD TH E ACTION OF THE AO VIDE PARA 12.1 HOLDING AS UNDER:- ITA 2698/DEL/11 & ITA 3274/DEL/11 A.Y. 2005-06 STEEL AUTHORITY OF INDIA LTD., N.DELHI 12 12.1. THE SUBMISSIONS GIVEN BY THE APPELLANT HAS B EEN PERUSED. THERE IS A DIFFERENCE BETWEEN A COMPUTER AND ITS AC CESSORIES AND WIRING. THE FIBER OPTIC COMPUTER NETWORKING IS A S YSTEM OF WIRING WHICH CAN BE USED IN MANY OTHER THINGS APART FROM C OMPUTER. THEREFORE, THE A.O. HAS RIGHTLY DECIDED THE ISSUE T HAT FIBER OPTIC COMPUTER NETWORKING IS NOT A PART OF THE COMPUTER S YSTEM. RELIANCE IS ALSO PLACED ON THE DECISION OF DELHI BENCH OF THE H ONBLE ITAT IN THE CASE OF NESTLE INDIA LTD. VS DCIT (ITAT, DEL) 111 T TJ 498 WHEREIN IT HAS BEEN HELD THAT UPS IS NOT AN INTEGRAL PART OF C OMPUTER AND NOT ENTITLED TO HIGHER RATE OF DEPRECIATION. HENCE THI S GROUND IS DECIDED AGAINST THE APPELLANT. 5.7. AGGRIEVED BY THIS THE ASSESSEE IS IN APPEAL B EFORE THE TRIBUNAL. THE LD.AR PLACED RELIANCE UPON THE SUBMISSIONS ADVA NCED BEFORE THE AUTHORITIES BELOW ON THE BASIS OF WHICH IT WAS REIT ERATED THAT FIBER OPTICS EXCLUSIVELY HAVE TO BE USED FOR COMPUTERS AND TRANS FERRING DATA AND CANNOT BE USED FOR SUPPLY OF ELECTRICITY OR FOR THA T MATTER TELEPHONIC LINES AND SINCE IT COULD BE USED ONLY FOR NET WORKING THE RATE OF DEPRECIATION AS CLAIMED SHOULD BE ALLOWED. 5.8. THE LD.D.R. ON THE OTHER HAND RELYING UPON TH E IMPUGNED ORDER CONTENDED THAT ARGUMENTS OF THE ASSESSEE AND CASE L AW STAND CONSIDERED AND REJECTED AS SUCH THE IMPUGNED ORDER DESERVES TO BE UPHELD. 5.9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. ON A CAREFUL CONSIDERATION OF THE SAME IT IS SEEN THAT NO MATERIAL HAS BEEN PLACED BEFORE US TO CONSI DER THE PLEA THAT COMPUTER SIGNAL WAVES HAVE DIFFERENT STRUCTURES AS COMPARED TO ELECTRIC WAVES OR TELEPHONIC WAVES AND AS SUCH CANNOT BE USE D FOR SUPPLY OF ELECTRICITY AND TELEPHONIC COMMUNICATION WHICH HAS BEEN THE PLEA OF THE ASSESSEE ALL ALONG. NO REPORT OF ANY EXPERT HAS BE EN RELIED UPON BY THE ITA 2698/DEL/11 & ITA 3274/DEL/11 A.Y. 2005-06 STEEL AUTHORITY OF INDIA LTD., N.DELHI 13 DEPARTMENT TO REJECT THE CLAIM. IN THE CIRCUMSTANC ES WE CONSIDER IT APPROPRIATE TO RESTORE THE ISSUE TO THE A.O. WITH T HE DIRECTION THAT IN ORDER TO DECIDE THE ISSUE THE OPINION/REPORT OF A T ECHNICAL EXPERT BE SOUGHT, CONFRONTED AND RELIED UPON. WE MAY ALSO MAK E A REFERENCE TO THE JUDGEMENT OF THE JURISDICTIONAL HIGH COURT DELI VERED IN THE CASE OF CIT VS. BSES YAMUNA POWER LTD. ON 31 ST AUGUST, 2010 WHICH HAD ALSO BEEN REFERRED TO BY THE LD.A.R.WHEREIN THE DEPARTME NTS APPEAL WAS DISMISSED WHICH HAD CHALLENGED THE ORDER OF THE TRI BUNAL WHEREIN HIGHER DEPRECIATION AT THE RATE AVAILABLE TO COMPUTERS HA D BEEN GIVEN TO PRINTER, SCANNER, NT SERVER HOLDING THEM TO BE INTE GRAL PART OF COMPUTER. IN THE FACTS OF THE PRESENT CASE EXPERTS OPINION I S NECESSARY BEFORE IT CAN BE HELD IF SO WARRANTED THAT FIBER OPTICS IS AN INT EGRAL PART OF THE COMPUTER. ACCORDINGLY THE ISSUE IS RESTORED WITH T HE ABOVE DIRECTION TO THE FILE OF THE A.O. 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED FOR STATISTICAL PURPOSES. 7. COMING TO THE DEPARTMENTAL APPEAL THE FACTS QUA THE FIRST ISSUE ARE FOUND DISCUSSED AT PAGES 10 TO 15 OF THE ASSESSMENT ORDER. A PERUSAL OF THE SAME SHOWS THAT THE A.O. VIDE PARA 7 OBSERVED A FTER HEARING THE ASSESSEE THAT DISALLOWANCE OF RS.445 LAKHS ON ACCOU NT OF ADJUSTMENT RELATING TO EARLIER YEAR WHICH ARE TREATED AS PRIOR PERIOD EXPENSES HAD TO BE DISALLOWED REQUIRING THE ASSESSEE TO EXPLAIN THE PRIOR PERIOD ITEMS CLAIMED AS PER SCHEDULE 2.13 OF THE PROFIT AD LOSS A/C THE A.O. ACCEPTED THE EXPLANATION IN REGARD TO THE EXTENT OF SALES OF RS.11 LAKHS. HOWEVER ITA 2698/DEL/11 & ITA 3274/DEL/11 A.Y. 2005-06 STEEL AUTHORITY OF INDIA LTD., N.DELHI 14 IN REGARD TO STORES AND SPARES, POWER AND FUEL AND REPAIR AND MAINTENANCE IT APPEARED THAT THE ASSESSEE COULD NOT PROVE THAT THE LIABILITY HAD BEEN INCURRED IN THE YEAR UNDER CONSI DERATION. RELEVANT FINDING IS AT PARA 7.3 AND 7.4 WHICH ARE REPRODUCE D HERE UNDER. 7.3. SUBMISSIONS OF ASSESSEE HAVE BEEN CONSIDERED. THE DEPRECIATION HAS ALREADY BEEN ADDED BACK IN THE COM PUTATION BY THE ASSESSEE. THE DEBIT OF RS.11 LAKHS IN SALES IS ON ACCOUNT OF REVERSAL OF EXCESS INCOME ACCOUNTED FOR DURING A.Y. 2003-04. SINCE THIS IS A REVERSAL OF EXCESS INCOME, THE SAME IS ALLOWED. IN RESPECT OF REPAIR & MAINTENANCE, FUEL & STORE AND S PARES IS NOT ADMISSIBLE AS IT COULD NOT BE PROVED THAT THE LIABI LITY HAS BEEN INCURRED DURING THE YEAR UNDER CONSIDERATION. 7.4 IN VIEW OF THIS NET ADDITION OF RS.445 LAKHS I S MADE. 7.1. AGGRIEVED BY THIS THE ASSESSEE CAME IN APPEAL BEFORE THE CIT(A) WHEREIN REFERENCE TO THE DETAILS PERTAINING TO THE EARLIER YEARS THE ASSESSEE MADE THE FOLLOWING SUBMISSIONS:- DEBIT SIDE RS./LAKHS STORES & SPARES 84 POWER & FUEL 83 REPAIRS & MAINTENANCE T O T A L : 278 445 6.1. T H E A PP E LL A N T H AS S TATE D T H A T: ' TH E STO RE & SPAR E S ( R S .84 L AKHS ) AN D POWER & F U E L ( R S . 83 L A KH S ) WERE CRED IT E D TO TH E R E SPECT I V E E XPENSES DEBITED T O CLAIMS RECE I VAB L E AS TH E G O ODS WE R E NO T D E LIV E RED B Y TH E R AI L WAYS AS PE R RECO RD S IN T HE EA R L I ER YE AR S . T H ESE WERE PR O P E RL Y LINK ED D U R IN G TH E CU R RE NT YE AR T O TH E D E LIV E RI E S ALR E AD Y M A D E . THI S IS A R EG U L AR F E ATUR E S IN CE TH ERE AR E A V E RY L ARG E N U M BE R OF D ISP A T C H ES A ND R ECE IPTS OF G OODS T HR OUGH R A IL W A Y S AND TH E P L ANT S OF TH E C OMPANY H AV E A L ARGE N UMB E R OF DE PARTM E NT S HANDLIN G TH E M. ACCORD IN G L Y , TH E EX P E N SE S HAV E B E EN R E - D E BI T E D IN THI S V EA L ' AND T H E C L A IM S R ECEIVABL E C REDI T E D B Y RE V E R S AL. ITA 2698/DEL/11 & ITA 3274/DEL/11 A.Y. 2005-06 STEEL AUTHORITY OF INDIA LTD., N.DELHI 15 SIN C E T H I S I S A REVE R SA L OF A N I N COME C R E DIT ED IN TH E PA S T ON SE TTL E M E NT I N TH IS YEA R , IT IS A LL OWA BL E U / S . 28 , 36 AND 3 7 OF THE IT AC T . I T W A S O B SE RV E D DURI N G R O UT I N E VE RI F ICATI O N S BY INT E R N A L CO N TRO L AND AUD I T S THAT CE RTAIN MA T E RI A L S I S S U E D F OR NORMAL C O N S UMPTION F OR PRODU C TION IN EA RLI E R YEAR WE R E AC TUALL Y U T ILI Z ED IN ' R EPAI R & M A I N TE N AN C E . ' ACCORDI N G LY, A N AD J US T ME NT WA S M ADE IN T H E CURRE NT YEAR TH E ' R EPAIR & MAINT E NA N CE ' (OF EA RL IER YEA R S) B Y DE B I TI NG TH E M B Y IR S . 2 7 8 L A KH S A ND C R E D I T ING T O ' R AW MATER I A L C ON SU MPTION ' C LA IM R E V E R S A L W HI C H H HA S B EE N S HO W N A S AN IN CO M E /C R ED IT IN T H E SA M E SC H E D U L E. THUS , I T IS ON L Y AN ACCOUN T ING ADJUSTME NT OF HEAD FOR ACADE MI C PURPOSE H AVI N G NO IMPA C T ON TH E IN C OM E FOR TH E YE AR . ' 7.2. CONSIDERING THE SAME THE CIT(A) ACCEPTED THE A SSESSEES CONTENTION HOLDING AS UNDER:- 6 . 2 I HA VE G ON E THROU G H THE S UBM I SS I O N FIL E D B Y THE APP E LL A NT A ND I T I S S EE N T H AT S IMIL A R EX P E N S E S H AVE BE E N AL L OWED B Y CIT(A) IN THE EAR L IER YE AR S . A P E RU S AL OF T H E R E PL Y FI L ED B Y T H E A PP E LL A NT S HOWS TH A T TH ESE E X PENSES H AD CR Y S T A LL IZED D U RIN G TH E YE AR . THU S THE A D DITION OF R S . 445 L AK H S M A D E B Y T H E ASSESS IN G O FFICER IS H EREBY DELETED . THI S G R OU ND I S D EC I D E D IN FAVO U R OF TH E AP P ELL A NT . 7.3. LD.D.R. PLACES RELIANCE UPON THE ASSESSMENT OR DER. 7.4. THE LD.A.R. APART FROM RELYING UPON THE SUBMIS SIONS ADVANCED BEFORE THE CIT(A) CONTENDED THAT SIMILAR EXPENSES O N ACCOUNT OF THE STORES AND SPARES, POWER AND FUEL, REPAIRS ETC. HAV E BEEN ALLOWED BY CIT(A) IN A.Y. 2001-02 ON THE BASIS OF ACCEPTANCE/ACCRUAL/CRYSTALLIZATION OF LIABILITY DUR ING THE YEAR ON THE BASIS OF DOCUMENTARY EVIDENCES AND THE CIT(A) HAS F OLLOWED THIS POSITION IN ALL THE SUBSEQUENT YEARS. THE SAID ISSUE IT WAS STATED IS COVERED IN ITA 2698/DEL/11 & ITA 3274/DEL/11 A.Y. 2005-06 STEEL AUTHORITY OF INDIA LTD., N.DELHI 16 ASSESSEES FAVOUR BY THE JUDGEMENT OF THE JURISDICT IONAL HIGH COURT IN SHRIRAM PISTONS & RINGS LTD. 174 TAXMAN 147 (DELHI) . 7.5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. ON A PERUSAL OF THE SAME WE A RE OF THE VIEW THAT THE FACTUAL FINDINGS ON RECORD REMAINS UNREBUTTED. IN THE FACTS AS THEY STAND WHERE NO INFIRMITY IN THE IMPUGNED ORDER HAS BEEN POINTED OUT NOR ANY MATERIAL FACT HAS BEEN BROUGHT ON RECORD NOR AN Y ARGUMENT HAS BEEN ADVANCED TO CANVASS A CONTRARY VIEW WE ARE OF THE VIEW THAT THE DEPARTMENTS GROUND DESERVES TO BE DISMISSED. BEING SATISFIED WITH THE REASONING AND FINDING BASED ON DOCUMENTARY EVIDENCE S WHICH REMAIN UNCONTROVERTED THE GROUND NO.1 OF THE REVENUE IS DI SMISSED. 8. THE FACTS PERTAINING TO THE NEXT ISSUE AGITATED BY THE REVENUE PERTAINING TO DEPRECIATION OF WATER SUPPLY AND PLA NT IT IS SEEN ARE FOUND DISCUSSED AT PAGES 18 AND 19 OF THE ASSESSMENT ORDE R IN PARAS 9 TO 9.4. A PERUSAL OF THE SAME SHOWS THAT THE A.O. TAKING CO GNIZANCE OF THE FACT THAT THE ASSESSEE HAD CONSTRUCTED CERTAIN WATER SUP PLY SEWERAGE PLANT IN ADDITION TO MEETING THE REQUIREMENTS OF THE VARIOUS FACTORIES OF THE ASSESSEE. THESE PLANTS WERE ALSO UTILIZED FOR RESP ECTIVE TOWNSHIPS BY ASSESSEE AT DIFFERENT FACTORY SITES. TAKING INTO C ONSIDERATION THE PAST POSITION ON THIS ISSUE WHEREIN THE APPELLATE AUTHOR ITY HAS HELD THAT 75% OF THE EXPENDITURE ON THESE PLANTS IS FOR BUSINESS PURPOSES AND THE REMAINING IS FOR RESIDENTIAL PURPOSES. DEPRECIATI ON ON THIS 25% OF THE ITA 2698/DEL/11 & ITA 3274/DEL/11 A.Y. 2005-06 STEEL AUTHORITY OF INDIA LTD., N.DELHI 17 VALUE OF THE PLANT HAD BEEN ALLOWED TO ASSESSEE AT 5% AGAINST THE CLAIM OF 25% OF THE ASSESSEE. IN THE SAID BACKGROUND THE ASSESSEE WAS REQUIRED TO WORK OUT THE AMOUNT OF DEPRECIATION CLA IMED BY IT. THE ASSESSEE RELYING UPON THE ORDER OF THE TRIBUNAL DT . 15.9.2006 ON ITA 4618 AND 4619/DEL/20023 FOR 1995-96, 1996-97 A.YS W HEREIN IT HAD BEEN HELD THAT THE WORD PLANT HAD TO BE TREATED AS PLANT AND MACHINERY CONTENDED THAT IN THE INTERVENING YEARS THERE IS NO EFFECTIVE DECISION OF THE ITAT AS SUCH THE ISSUE WAS DECIDED FOR THE FIRS T TIME IN A.Y. 1995-96 BY THE TRIBUNAL. 8.1. CONSIDERING THE SAME NOT CONVINCED THE AO MADE A DISALLOWANCE OF RS. 1.04 LAKHS OBSERVING AS UNDER. 9.3. SUBMISSIONS MADE BY THE ASSESSEE HAS BEEN CONSIDERED. HOWEVER, THE SAME ARE NOT ACCEPTABLE. AS IN THE EARLIER YEARS, AS PER THE DETAILS FILED BY THE ASSE SSEE VIDE LETTER DT. 5.12.07, IT IS SEEN THAT DEPRECIATION CLAIMED DURIN G THE YEAR ON WATER & SEWERAGE PLANT IS RS.655.19 LAKHS. 25% OF THE DEPRECIATION IS RS.163.80 LAKHS AND AS PER PAST PRA CTICE, 1/5 TH ALLOWABLE ON THIS AMOUNT IS RS.32.76 LAKHS & THE BA LANCE AMOUNT OF RS.131.04 LAKHS IS DISALLOWABLE. ACCORDINGLY, A N AMOUNT OF RS.131.04 LAKHS IS DISALLOWED. 8.2. IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY TAKING COGNIZANCE OF THE FACT THAT IN THE A.Y. 1995-96, 1996-97 THE ADDI TION STOOD DELETED THE SAME VIEW WAS TAKEN BY THE CIT(A). 8.3. AGGRIEVED BY THIS THE DEPARTMENT IS IN APPEAL BEFORE THE TRIBUNAL. LD.D.R. PLACES RELIANCE UPON THE ASSESSMENT ORDER. ITA 2698/DEL/11 & ITA 3274/DEL/11 A.Y. 2005-06 STEEL AUTHORITY OF INDIA LTD., N.DELHI 18 8.4. LD.A.R. OF THE ASSESSEE ON THE OTHER HAND SUBM ITTED THAT THE TRIBUNAL HAD DECIDED THE ISSUE IN FAVOUR OF ASSESSE E IN A.Y. 1995-96, 1996-97 AND CONSISTENTLY THEREAFTER IN 1997-98, 199 8-99, 2000-2001 AND 2001-02 AYS AND THE CLAIM HAS BEEN CONSISTENTLY BEEN ALLOWED IN 2002-03 TO 2004-05 A.YS BY THE CIT(A) AND AGAIN IN 2006-07, 2007-08 ON THE BASIS OF ORDERS OF THE TRIBUNAL. IT WAS ARGU ED THAT THERE IS NO CHANGE IN POSITION EITHER OF LAW OR OF FACT. 8.5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. ON A PERUSAL OF THE SAME IT I S SEEN THAT THE COORDINATE BENCH VIDE ITS ORDER DT., 25.6.09 IN 200 1-02, 2002-03 COPY OF WHICH IS PLACED AT PAGES 118 FOR A.Y. 19095-96 CONC LUDED THE ISSUE VIDE PARAS 33 AND 34 AS UNDER:- 33. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE MATERIAL AVAILABLE ON RECORD. ITAT, DELHI BENCH D IN ORDER DT. 15 TH SEPTEMBER, 2006 IN ITA NO.4618 AND 4619 (DEL) OF 2002 DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. BEFO RE US, THE LD.COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THIS ISSUE STANDS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE B Y THE DECISION OF MUMBAI D BENCH OF ITAT IN THE CASE OF D CIT VS TISCO LTD. RENDERED VIDE ITS ORDER DT. 5.3.2002 IN ITA NOS. 8116 AND 8117(BOM) OF 1991 WHEREIN THE WATER SUPPLY AND SEWERAGE PLANT REQUIRED FOR THE STEEL PLANT WAS HEL D TO BE ENTIRELY AS PLANT AND MACHINERY DESPITE THE FACT THAT THE SAME WAS UTILIZED EVEN FOR PROVIDING THE NECESSARY FACILITIES TO THE EMPLOYEE WHICH DID NTO APPARENTLY HAVE ANY CONNECTION WITH THE MANUFACTURING ACTIVITY OF THE A SSESSEE. THE LD.D.R. HAS NOT RAISED ANY CONTENTION TO DISTIN GUISH THIS DECISION OF THE TRIBUNAL CITED BY THE LD.COUNSEL FO R THE ITA 2698/DEL/11 & ITA 3274/DEL/11 A.Y. 2005-06 STEEL AUTHORITY OF INDIA LTD., N.DELHI 19 ASSESSEE IN ASSESSEES CASE ON THE MERITS OF THE IS SUE UNDER CONSIDERATION. HE, HOWEVER, HAS CONTENDED THAT A S IMILAR ISSUE WAS DECIDED AGAINST THE ASSESSEE BY THE LD.CI T, DELHI II, NEW DELHI, VIDE HIS ORDER DT. 21.8.89 PASSED U/ S 263 IN ASSESSEES OWN CASE FOR A.Y. 1985-86 AND THE ASSESS EE HAVING ACCEPTED THE SAID DECISION BY NOT CHALLENGIN G THE SAID ORDER PASSED U/S 263, THE SAME IS REQUIRED TO BE DECIDED AGAINST IT EVEN FOR THE YEARS UNDER CONSIDE RATION GOING BY THE RULE OF CONSISTENCY. 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL ON RECORD, WE FIND IT DIFFICULT T O ACCEPT THE CONTENTION OF THE LD.D.R. BASED ON THE RULE OF CONS ISTENCY. AS SUBMITTED BY THE LD.COUNSEL FOR THE ASSESSEE BEF ORE US, THE ORDER OF LD.CIT PASSED U/S 263 FOR A.Y. 1985-86 DECIDING A SIMILAR ISSUE AGAINST THE ASSESSEE COMPANY WAS NO T CHALLENGED BY IT IN AN APPEAL BEFORE THE TRIBUNAL T AKING INTO CONSIDERATION ITS MARGINAL TAX IMPLICATIONS. MOREO VER, THE ASSESSEE COMPANY BEING A PUBLIC SECTOR UNDERTAKING WAS REQUIRED TO CROSS MANY PROCEDURAL HURDLES SUCH AS O BTAINING A COD FOR PREFERRING AN APPEAL BEFORE THE TRIBUNAL. BE THAT AS IT MAY, IN ;ALL THE SUBSEQUENT YEARS I.E. A.Y. 1 986-87 ONWARDS, THE ENTIRE WATER SUPPLY AND SEWERAGE PLANT WAS TREATED AS PLANT AND MACHINERY BY THE ASSESSEE COMP ANY FOR THE PURPOSE OF CLAIMING DEPRECIATION AND IN THE A.Y. 1986-87, THIS TREATMENT GIVEN BY THE ASSESSEE WAS N OT DISTURBED BY THE DEPARTMENT. IN A.Y. 1988-89 AND 1 989-90, THE SAID TREATMENT GIVEN BY THE ASSESSEE WAS DISTUR BED BY THE AO IN REASSESSMENTS COMPLETED U/S 147/143(3) AL BEIT, THE TRIBUNAL HAVING QUASHED THE SAID ASSESSMENT, TH E TREATMENT GIVEN BY THE ASSESSEE TO THE WATER SUPPLY AND SEWERAGE PLANT AS PLANT AND MACHINERY FOR THE PUR POSE OF CLAIMING DEPRECIATION STANDS UNDISTURBED. INSOFAR AS THE A.YS 1987-88, 1991-92 AND 1992-93 ARE CONCERNED, TH E SIMILAR ISSUE IS DISPUTED BY THE ASSESSEE IN THE AP PEALS FILED BEFORE THE TRIBUNAL WHICH ARE STILL PENDING. HAVIN G REGARD TO THIS POSITION ON THE ISSUE UNDER CONSIDERATION I N THE SUBSEQUENT YEARS, WE ARE OF THE VIEW THAT THE RULE OF CONSISTENCY HAS NO APPLICATION TO THE FACTS OF THE CASE AND REJECTING THE CONTENTION RAISED BY THE LD.DR BASED ON THE SAID RULE, WE SET ASIDE THE IMPUGNED ORDERS OF THE LD.CIT(A) ON THIS ISSUE AND DIRECT THE AO TO TREAT THE ENTIRE WATER SUPPLY AND SEWERAGE PLANT OF THE ASSESSEE AS A PLA NT AND MACHINERY FOR THE PURPOSE OF DEPRECIATION AS HELD B Y THE MUMBAI BENCH OF ITAT IN THE CASE OF TISCO LTD. (SUP RA). ITA 2698/DEL/11 & ITA 3274/DEL/11 A.Y. 2005-06 STEEL AUTHORITY OF INDIA LTD., N.DELHI 20 34. IN THE YEAR UNDER CONSIDERATION, THE FACTS OF T HE CASE ARE IDENTICAL AND THE REVENUE HAS NOT BROUGHT ANY M ATERIAL ON RECORD TO DISTINGUISH THE FACTS FROM AY 1995-96 AND 1996-97. THEREFORE, THERE IS NOR REASON FOR US NOT TO FOLLOW THE DECISION OF THE TRIBUNAL. ACCORDINGLY, WE DECI DE THIS ISSUE IN FAVOUR OF ASSESSEE AND DIRECT THE AO TO TR EAT THE ENTIRE WATER SUPPLY AND SEWERAGE PLANT OF ASSESSEE AS PLANT&MACHINERY FOR THE PURPOSE OF DEPRECIATION, AS DECIDED BY THE TRIBUNAL IN A.YS 1995-96. 8.6. SINCE NO CHANGE IN THE FACTS AND CIRCUMSTANCES AND POSITION OF LAW HAS BEEN BROUGHT TO OUR NOTICE THE ACTION OF THE CI T(A) IS UPHELD AND THE DEPARTMENTAL GROUND IS DISMISSED. 9. THE REVENUE VIDE GROUND NO.3 HAS AGITATED AGAIN ST THE ACTION OF THE CIT(A) IN DELETING THE ADDITION MADE BY WAY OF A DISALLOWANCE ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATIONS. A PERUS AL OF THE RECORD SHOWS THAT THE A.O. REQUIRED THE ASSESSEE VIDE PARA 10 TO GIVE DETAILS OF FOREIGN EXCHANGE FLUCTUATIONS AND EXPLAIN REASONS AS TO HOW IT IS TO BE ALLOWED 9.1. IN RESPONSE TO THE QUERY THE ASSESSEES SUBMIS SIONS ARE EXTRACTED AT PAGES 20 TO 23 OF THE ASSESSMENT ORDER. A PERUS AL OF THE SAME SHOWS THAT APART FROM FACTUAL AND LEGAL ARGUMENTS RELIANC E WAS ALSO PALCED UPON THE ORDER OF THE CIT(A) FOR 1998-99 A.Y. HOWE VER NOT CONVINCED THE CLAIM WAS REJECTED OBSERVING AS UNDER:- 10.3. SUBMISSIONS MADE BY THE ASSESSEE WERE CONSI DERED. THE ASSESSEE COMPANY HAD AVAILED A LOAN FROM KFW-A GERMAN COMPANY BODY, FOR EXPANSION AND MODERNIZATION OF ST EEL PLANTS. THE FOREIGN COMPANY LOAN CARRIED AN INTEREST OF 8.75% P ER ANNUM. AS PER THE AGREEMENT SIGNED BY GOVT. OF INDIA, 4% OF THE Q UANTUM OF THIS INTEREST IS KEPT IN RESERVE AS SUBSIDY FOR THE PURP OSE OF CAPITAL ASSETS. FURTHER, 4% IS CREDITED TO A RESERVE CREATED TO MEE T FOREIGN EXCHANGE FLUCTUATION ON FUTURE PAYMENT OF LOAN. THUS, ACTUA LLY ONLY 0.75% OF ITA 2698/DEL/11 & ITA 3274/DEL/11 A.Y. 2005-06 STEEL AUTHORITY OF INDIA LTD., N.DELHI 21 THE QUANTUM OF INTEREST IS REMITTED DURING THE YEAR UNDER CONSIDERATION, THOUGH THE ENTIRE AMOUNT WAS DEBITED TO THE PROFIT & LOSS ACCOUNT. THE OUTGO OF INTEREST TO THE LENDER KFW WAS ONLY 0.75% OF THE ENTIRE INTEREST. FOR THE REMAINING 8% INTER EST, IT IS A CLEAR CASE OF REMISSION OF LIABILITY TO PAY IN FAVOUR OF THE A SSESSEE. THE ASSESSEE THUS ON ONE HAND CANNOT CLAIM THIS 8% OF THE INTERE ST AS EXPENSES ON ACCRUAL BASIS, WHILE ON THE OTHER HAND IT REMAINS T HE SAME AND HAS, IN OTHER WORDS EARNED IT BACK. ADMITTEDLY, 4% OF T HE INTEREST HAS BEEN EARNED BACK AS SUBSIDY FOR PURCHASE OF POLLUTI ON CONTROL EQUIPMENT AND THEREFORE, IT IS NOT AN EXPENSE. ANO THER 4% CREDITED TO THE FOREIGN EXCHANGE FLUCTUATION RESERVE TO MEET TH E FUTURE EXIGENCIES OF DEVALUATION OF RUPEE VIS--VIS THE GERMAN DUTCH MARK. THE ULTIMATE UTILIZATION OF RETAINED AMOUNT IS OF NO CO NSEQUENCE AND IT NOT A RELEVANT FACTOR FOR CLAIMING DEDUCTION. THE ASSE SSEES RELIANCE ON THE DECISION OF HONBLE ITAT IN THE CASE OF RBNS SU GAR MILLS LTD. VS DCIT REPORTED IN 85 ITD 552 (DELHI) IS MISPLACED IN AS MUCH THE FACTS ARE CLEARLY DISTINGUISHABLE. IN THE AFORESAID CASE , THE ISSUE AT HAND WAS DEDUCTIBILITY OF ACCRUED INTEREST DURING THE MO RATORIUM PERIOD, AS THE LIABILITY OF PAYMENT OF INTEREST WAS NOT WAIVED . THERE WAS ONLY A MORATORIUM ON THE PAYMENT OF INTEREST. 10.4. ACCORDINGLY, OUT OF TOTAL INTEREST DEBITED ON THIS ACCOUNT DURING THE EYAR AMOUNTING TO RS.1554 LAKHS, ONLY 0. 75% IS ALLOWABLE AND THE BALANCE OF RS.1421 LAKHS IS DISALLOWED. 9.2. IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY RELYING UPON THE ORDER OF ITAT IN ASSESSEES OWN CASE IN ITA 192/DE L/2004 FOR A.Y. 1998- 99 THE ADDITION MADE WAS DELETED. 9.3. AGGRIEVED BY THIS THE REVENUE IS IN APPEAL BE FORE THE TRIBUNAL. 9.4. LD.D.R. PLACES RELIANCE UPON THE ASSESSMENT OR DER. 9.5. LD.A.R. OF THE ASSESSEE RELIED UPON THE IMPUGN ED ORDER AND PLACED FURTHER RELIANCE UPON THE ORDERS OF THE TRIBUNAL IN 2001 TO 2003 A.YS CONTENDED THAT CONSISTENTLY THE SAID CLAIM HAS BEEN ALLOWED IN 2003-04 ALSO BY THE TRIBUNAL. A PERUSAL OF THE ORDER OF TH E COORDINATE BENCH DT. 25.6.2009 FOR 3 CONSECUTIVE A.YS 2001, 2002, 2003 SHOWS THAT WHILE ITA 2698/DEL/11 & ITA 3274/DEL/11 A.Y. 2005-06 STEEL AUTHORITY OF INDIA LTD., N.DELHI 22 DECIDING THE SAID ISSUE RELIANCE WAS PLACED UPON TH E ORDER OF THE TRIBUNAL IN 1998-99 DT. 28.11.2008 WHICH HAS DISCUS SED THE ISSUE FROM PAGES 18 TO 26. THE CONTENTION OF THE REVENUE THAT 8% WAS RECEIVED BACK AS SUBSIDY AS SUCH THE LIABILITY OF ASSESSEE W AS LIMITED TO 0.75% WAS FACTUALLY NOT ACCEPTED IN PARA 18 OF THIS ORDER . 9.6. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD, ON A CAREFUL CONSIDERATION OF THE SAME, WE ARE OF THE VIEW THAT NO CASE HAS BEEN MADE OUT BY THE REVENUE TO COME TO A CONTRARY FINDING ON THE SAME FACTS AND ALSO ON WHIC H THERE ARE CONSISTENT ORDERS OF THE TRIBUNAL. ACCORDINGLY RESP ECTFULLY FOLLOWING THE ORDERS OF THE TRIBUNAL, GROUND NO.3 OF THE DEPARTME NT IS DISMISSED. 10. IN THE LAST GROUND RAISED BY THE REVENUE THE FA CTS ARE DISCUSSED IN PARA 13 AT PAGE 29 OF THE ASSESSMENT ORDER. A PERU SAL OF THE SAME SHOWS THAT THE A.O. REFERRING TO THE FACT THAT AUDI TORS HAD APPENDED A NOTE IN THE ACCOUNTS FOR THE YEAR ENDED 31 ST MARCY, 2001 IN THE ASSESSMENT YEAR 2001-02 THAT THE ASSETS WITH A WRI TTEN DOWN VALUE OF RS.1178 LAKHS WERE NOT IN ACTIVE USE WHICH WAS DISA LLOWED IN THE SAID YEAR. THE A.O. REFERRING TO THE FACT THAT CONSIS TENTLY THE ASSESSEE HAS CLAIMED THE DEPRECIATION ON SUCH UNUSED ASSETS WHIC H WAS BEING DISALLOWED BY THE DEPARTMENT. ACCORDINGLY IN THE S AID BACKGROUND THE ASSESSEE WAS REQUIRED TO EXPLAIN WHY CLAIM OF DEPRE CIATION ON ASSETS NOT IN ACTIVE USE BE NOT DISALLOWED. ITA 2698/DEL/11 & ITA 3274/DEL/11 A.Y. 2005-06 STEEL AUTHORITY OF INDIA LTD., N.DELHI 23 10.1. CONSIDERING THE REPLY OF THE ASSESSEE SET AT PAGES 29 TO 31 IN THE YEAR UNDER CONSIDERATION DEPRECIATION OF WRITTEN DO WN VALUE OF ASSETS ON 31.3.2004 OF RS. 372.74 LAKHS AMOUNTING TO RS.93.18 LAKHS WAS DISALLOWED. 10.2. THE CIT(A) VIDE PARA 10, PAGE 6 OF HIS ORDER TAKING COGNIZANCE OF THE FACT THAT THE ISSUE CAME UP FOR THE FIRST TIME IN A.Y. 2001-02 WHEREIN THE ADDITION BY THE CIT(A) WAS DELETED VIDE HIS ORD ER DT. 29.5.2006 WHICH WAS FOLLOWED IN THE SUBSEQUENT YEARS UP TO 2006-07 WHEREIN ALSO AS PER ORDER DT. 30 TH MARCH, 2010 THE ADDITION MADE BY WAY OF DISALLOWA NCE STOOD DELETED ALLOWED THE CLAIM OF THE ASSESSEE. 10.3. AGGRIEVED BY THIS THE REVENUE IS IN APPEAL BE FORE THE TRIBUNAL. 10.4. LD.D.R. RELIED UPON THE SSESSMENT ORDER. LD. A.R. OF THE ASSESSEE INVITING ATTENTION TO ORDER DT. 29.5.2006 PASSED BY THE CIT(A)-XII NEW DELHI PERTAINING TO A.Y. 2001-02 SUBMITTED THAT THE SAID ISSUE WAS DISCUSSED AT PAGE 135 OF THE PAPER BOOK, INTERNAL P AGE 9, PARA 8. FOR READY REFERENCE THE SAME IS REPRODUCED HEREUNDER:- 8. GROUND NO.7 IS WITH RESPECT TO DEPRECIATION ON ASSETS NOT IN ACTIVE USE. BRIEFLY THE FACTS ARE THAT THE A.O. NO TICED FROM SCHEDULE 1.5 OF THE FIXED ASSET SCHEDULE THAT IT IN CLUDED ASSETS VALUED AT RS.11.78 CRORES WHICH WERE RETIRED FROM A CTIVE USE. IN THE NOTE BELOW THE SCHEDULE, A REMARK HAD BEEN APPE NDED BY THE AUDITORS AS UNDER. GROSS BLOCK AS ON 31.3.2001 INCLUDES RS.11.78 CROR ES BEING ASSETS RETIRED FROM ACTIVE USE. ITA 2698/DEL/11 & ITA 3274/DEL/11 A.Y. 2005-06 STEEL AUTHORITY OF INDIA LTD., N.DELHI 24 THE AO HELD THAT DEPRECIATION ON SUCH ASSETS WAS NO T ALLOWABLE SINCE THE ASSETS WERE IDLE AND WERE NOT BEING USED FOR THE PURPOSES OF THE BUSINESS. ACCORDINGLY DEPRECIATION WAS DISALLOWED TO THE EXTENT OF RS.2,94,50,000/-. 8.2. IT WAS ARGUED IN APPEAL THAT THE COMPANY HAD C ERTAIN ASSETS WHICH WERE NOT IN ACTIVE USE ON ACCOUNT OF CHANGES IN DEMAND OR PROCESS OR OBSOLESCENCE. THE VALUE OF SUCH ASSETS WAS RS.11.78 CRORES OUT OF THE GROSS BLOCK OF RS.26,916/- CRORES . THIS VALUATION WAS AS PER ACCOUNTS PREPARED IN ACCORDANCE WITH THE COMPANIES ACT. HOWEVER, FOR I.T. PURPOSES, AFTER ALLOWING DE PRECIATION ON WDV BASIS, THE WRITTEN DOWN VALUE OF SUCH ASSETS WA S NIL. HENCE, NO DEPRECIATION IN RESPECT OF SUCH ASSETS HAD BEEN CHARGED IN THE ACCOUNTS PREPARED IN ACCORDANCE WITH THE PROVISIONS OF INCOME TAX ACT. FURTHER, WITHOUT PREJUDICE, IT WAS ALTERNATEL Y ARGUED THAT EVEN IF SOME VALUE COULD BE ASSIGNED TO THE ASSETS IN QUESTION, SINCE THEY GOT MERGED IN THE BLOCK OF ASSETS, DEPR ECIATION WILL BE ALLOWABLE ON SUCH ASSETS EVEN IF THEY WERE TEMPORAR ILY NOT PUT TO USE DURING THE YEAR UNDER CONSIDERATION. RELIANCE WAS PALCED ON THE DECISIONS IN INDUCTOR THERMO INDIA LTD. VS DCIT , 73 ITD 329 & NETCO EXPORTS VS ACIT, 83 ITD 445 (HYD.). 8.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE LD.A .R. AND THE FACTS OF THE CASE. THE DETAILS OF THE ASSETS IN QUESTION HAVE BEEN FILED. THESE ARE VERY OLD ASSETS. THE WDV AS ON THE LAST DAY OF ACCOUNTING PERIOD WAS NIL. DEPRECIATION IN RESPECT OF THESE ASSETS HAS NOT BEEN CHARGED IN THE BOOKS FOR INCOME TAX PU RPOSES. EVEN OTHERWISE, AFTER THE CONCEPT OF BLOCK OF ASSETS WAS INTRODUCED W.E.F. AY 1988-89, THE IDENTITY OF EACH ASSET GETS MERGED IN THE BLOCK AND DEPRECIATION COULD NOT BE DENIED ON A PAR TICULAR ASSET ON THE GROUND THAT IT WAS NOT PUT TO USE DURING ANY PA RTICULAR YEAR. EVEN OTHERWISE, ON THE FACTS OF THE CASE SUCH IDLE ASSETS HAVE BEEN REDUCED IN VALUE TO NIL. THE CONFUSION APPARENTLY AROSE ON ACCOUNT OF DISCLOSURE IN THE NOTES TO ACCOUNTS OF THE FACT THAT SUCH IDLE ASSETS HAD BEEN VALUED AT RS.11.78 CRORES AS PER CO MPANIES ACT. HOWEVER, FOR OUR PURPOSES THE VALUATION AS PER THE ACT IS NOT RELEVANT BUT THE VALUE OF THE ASSETS AS PER WDV IS RELEVANT. DEPRECIATION ON SUCH ASSETS WAS NOT CHARGED WHILE C OMPUTING THE TAXABLE INCOME. ON CONSIDERATION OF THE ABOVE MENT IONED FACTS & CIRCUMSTANCES OF THE CASE, I AM OF THE OPINION THAT THE DISALLOWANCE OF RS.294.50 LACS WAS NOT JUSTIFIED AN D IS, THEREFORE, DIRECTED TO BE DELETED. 10.5. IT HAS ALSO BEEN CONTENDED ON BEHALF OF THE A SSESSEE THAT THE DEPARTMENT HAS NOT APPEALED ON THIS POINT BEFORE TH E ITAT IN 2001-02 ITA 2698/DEL/11 & ITA 3274/DEL/11 A.Y. 2005-06 STEEL AUTHORITY OF INDIA LTD., N.DELHI 25 A.Y. AND CONSISTENTLY RELYING ON THIS ORDER OF THE CIT(A) IN SUBSEQUENT YEARS THE SAID VIEW HAS BEEN UPHELD EVEN IN 2006-07 AND 2007-08 A.YS. BY WAY OF DISALLOWANCE IN THE EARLIER YEARS. 10.6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIAL AVAILABLE ON RECORD. TAKING INTO CONSIDERATION THE FACT THAT THE ISSUE HAS EMERGED FROM A.Y. 2001-02 WHEREIN THE FINDING OF TH E CIT(A) WAS ACCEPTED BY THE DEPARTMENT, IT IS NECESSARY TO VERI FY WHETHER THE SAID CLAIM HAS BEEN ACCEPTED BY THE DEPARTMENT OR NOT IN SUBSEQUENT YEARS. ACCORDINGLY FOR NECESSARY VERIFICATION IN REGARD TO THE PAST HISTORY OF THE ASSESSEE ON THE SAID ISSUE IT IS RESTORED BACK TO THE FILE OF A.O. WITH THE DIRECTION TO VERIFY THE CLAIM OF ASSESSEE IN REGARD TO THE DEPARTMENTAL STAND ON THIS ISSUE UP TO THE ITAT STAGE. ACCORDIN GLY GROUND RAISED BY REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 11. IN THE RESULT THE APPEAL OF THE DEPARTMENT IS P ARTLY ALLOWED FOR STATISTICAL PURPOSES. 12. IN THE RESULT ITA 2698/DEL/11 OF ASSESSEE AND I TA 3274/DEL/11 OF DEPARTMENT ARE PARTLY ALLOWED FOR STATISTICAL PURPO SES. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH APRIL, 2012. SD/- SD/- (A.N.PAHUJA) (DIVA SINGH) ACCOUNTNAT MEMBER JUDICIAL MEMBE R DATED: THE 27 TH APRIL, 2012 ITA 2698/DEL/11 & ITA 3274/DEL/11 A.Y. 2005-06 STEEL AUTHORITY OF INDIA LTD., N.DELHI 26 *MANGA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT( A); 5.DR 6.GUARD FILE BY ORDER DY. REGISTRAR // C O P Y //