M/s. National Fertilizers Ltd., New Delhi V. DCIT, New Delhi

ITA 3367/DEL/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 6319 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 29-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GAURAV PUNDIR
• Keywords: Depreciation; Additional depreciation; Earning of tax free income; Retrospective amendment; Question of law; Tax effect; Revenue expenditure; TDS; Rule 8D
• Section: 43B; 143(3); 14A; 40(a)(ia); 32(1)(iia); 37(1); 43; 40a(ia); 13; 119; 32; 145; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DLEHI BEFORE SHRI O.P. KANT, ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER ITA NO. 3367/DEL/2017 ASSESSMENT YEAR: 2012-13 M/S. NATIONAL FERTILIZERS LTD., VS. DCIT, CENTRAL CIRCLE 18(1), CORE-111, SCOPE COMPLEX, NEW DELHI. 7, INSTITUTIONAL AREA, LODHI ROAD, NEW DELHI. ITA NO. 4023/DEL/2017 ASSESSMENT YEAR: 2012-13 DCIT, CENTRAL CIRCLE 18(1), VS. M/S. NATIONAL FERT ILIZERS LTD., NEW DELHI. CORE-111, SCOPE COMPLEX, 7, INSTITUTIONAL AREA, LODHI ROAD, NEW DELHI. PAN : AAACN0189N (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. VED JAIN, ADVOCATE REVENUE BY : SH. GAURAV PUNDIR, SR. DR DATE OF HEARING: 17/08/2021 DATE OF ORDER : 17/08/2021 ORDER PER K. NARASIMHA CHARY, J.M. AGGRIEVED BY THE ORDER DATED 16.02.2017 PASSED BY T HE COMMISSIONER OF INCOME TAX (APPEALS)-39, NEW DELHI ('LD. CIT(A)') FOR THE ASSESSMENT YEAR 2012-13 IN THE CASE OF M/S. NATIONA L FERTILIZERS LTD. (THE 2 ASSESSEE), BOTH THE ASSESSEE AND THE REVENUE PREFE RRED THESE CROSS APPEALS. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C OMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF NITROGENOUS FERTIL IZERS AND TRADING OF INDUSTRIAL PRODUCTS. FOR THE ASSESSMENT YEAR 2012-1 3, THEY HAVE FILED THEIR RETURN OF INCOME ON 28.09.2012 DECLARING INCOME OF RS.2,44,97,30,812/-. ASSESSMENT U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (THE ACT) WAS COMPLETE BY ORDER DATED 27.02.2015 AT AN INCOME OF RS.2,78,54,24,300/- BY MAKING THE FOLLOWING ADDITIONS : 1. UNDISCLOSED INTEREST INCOME 6,48,20,000 2. DISALLOWANCE OF DEMURRAGE CHARGES 3,41,00,000 3. DIMINUTION OF SLOW SPARES 4,26,00,000 4. PROVISION FOR POST RETIREMENT BENEFITS 8,58,00,000 5. PROVISION FOR DEFINED CONTRIBUTION PENSION SCHEM E 8,94,00,000 6. DISALLOWANCE OUT OF REPAIR AND MAINTENANCE EXP 1,26,92,268 7. DISALLOWANCE OF DEPRECIATION ON UPS AND OTHER COMPUTER PERIPHERALS 21,25,780 8. DISALLOWANCE OF EXP. U/S 14A 15,688 9. DISALLOWANCE OF ADDITIONAL DEPRECATION 2,32,750 10. DISALLOWANCE OF BANK GUARANTEE COMMISSION 1,79,931 11. ADDITION ON ACCOUNT OF INTEREST INCOME ON DEPOS ITS OF RS. 1.32 CRORE 2,42,880 12. DISALLOWANCE OF OTHER WRITE OFF EXP. 34,53,629 13. ADDITION OF INCOME SHORT BOOKED 30,561 3. AGGRIEVED BY SUCH ADDITIONS, THE ASSESSEE PREFER RED APPEAL BEFORE THE LD. CIT(A), CHALLENGING THE ADDITIONS UNDER SL. NO. 1 TO 11. BY IMPUGNED ORDER, LEARNED CIT(A) UPHELD THE ADDITION OF RS.8.9 4 CRORES ON ACCOUNT OF PROVISION FOR DEFINED CONTRIBUTION PENSION SCHEME A ND DELETED ALL OTHER ADDITIONS. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) IN SUSTAINING THE ADDITION IN RESPECT OF THE PROVISION FOR DEFINED CO NTRIBUTION PENSION 3 SCHEME, THE ASSESSEE PREFERRED ITA NO. 3367/DEL/201 7 ON THE FOLLOWING GROUNDS : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS BAD , BOTH IN THE EYE OF LAW AND ON FACTS. 2(I). ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW, IN CONFIRMING THE A DDITION OF AN AMOUNT OF RS.8,94,00,000/- MADE BY THE A.O. ON ACCOUNT OF DEF INED CONTRIBUTION TO PENSION SCHEME. (II). THAT THE ADDITION HAS BEEN CONFIRMED REJECTIN G THE EXPLANATION & EVIDENCE BROUGHT ON RECORD BY THE ASSESSEE TO PROVE THAT THE SAME IS AN ASCERTAINED LIABILITY & NOT A CONTINGENT LIABILITY. 4. CHALLENGING THE DELETION OF ADDITIONS, THE REVEN UE PREFERRED ITA NO. 4023/DEL/2017 ON THE FOLLOWING GROUNDS : 1. WHETHER IN FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A) IS LEGALLY JUSTIFIED IN DELETING ADDITION OF RS. 6,48,20,000/- ON ACCOUNT OF ACCRUED INTEREST MADE BY THE ASSESSING OFFICER (THE AO) WIT HOUT CONSIDERING FACT THAT THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM O F ACCOUNTING AND THE ARBITRATION AWARD GIVES A RIGHT TO THE ASSESSEE TO CHARGE SIMPLE INTEREST @5% P. A. ON THE AMOUNT OF ADVANCE TILL THE DATE OF PAYMENT? 2. WHETHER IN FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A) IS LEGALLY JUSTIFIED IN DELETING DISALLOWANCE OF RS. 3,41,00,0 00/- ON ACCOUNT OF DEMURRAGE AND WHARFAGE CHARGES BY IGNORING PROVISIO N OF THE RAILWAY ACT, 1989 AND EXPLANATION 1 TO SECTION 37 (1) OF TH E INCOME TAX ACT 1961 (THE ACT)? 3. WHETHER IN FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A) IS LEGALLY JUSTIFIED IN DELETING DISALLOWANCE OF RS.4,26,00,00 0/- ON ACCOUNT OF WRITE- OFF VALUE OF SLOW MOVING STORES AND SPARES BY IGNOR ING THE PROVISION OF SECTION 145 OF THE ACT AND WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE IS NOT ALLOWED TO ADOPT ANY ACCOUNTING STANDARD OF ITS CHOICE AS AND WHEN IT DEEMED TO BE BENEFICIAL TO IT ? 4 4. WHETHER IN FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A) IS LEGALLY JUSTIFIED IN DELETING DISALLOWANCE OF RS. 8,58,00,0 00/- ON ACCOUNT OF POST- RETIREMENT BENEFITS WITHOUT CONSIDERING PROVISIONS OF SECTION 37 (1) OF THE ACT AND A FACT THAT THE PROVISION WAS MANY TIMES HI GHER THAN ACTUAL EXPENDITURE AND NOT DETERMINED ACCURATELY AND SCIEN TIFICALLY? 5. WHETHER IN FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A) IS LEGALLY JUSTIFIED IN DELETING DISALLOWANCE OF RS.1, 26,92,268/- ON ACCOUNT OF REPAIR & MAINTENANCE EXPENSE WITHOUT CONSIDERING THE FACTS RECORDED BY THE AO IN ASSESSMENT ORDER AND ALSO BY IGNORING THE PROVISIONS OF SECTION 37 (1) OF THE ACT IN THIS REGARD? 7. WHETHER IN FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) IS LEGALLY JUSTIFIED IN DELETING DISALLOWANCE OF RS. 15,688/- U/S 14A OF THE ACT WITHOUT CONSIDERING LEGISLATIVE INTEND OF INTRODUCI NG SECTION 14A BY THE FINANCE ACT 2001 AS CLARIFIED BY THE CBDT'S CIRCULA R NO. 5/2014 DATED 10.02.2014? 8. WHETHER IN FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) IS LEGALLY JUSTIFIED IN DELETING DISALLOWANCE OF RS. 15,688/- U/S 14A OF THE ACT WITHOUT CONSIDERING A LEGAL PRINCIPLE THAT ALLOWABI LITY OR DISALLOWABILITY OF EXPENDITURE UNDER THE ACT IS NOT CONDITIONAL UPON T HE EARNING OF THE INCOME AS UPHELD BY HONBLE SUPREME COURT IN CASE O F CIT VS. RAJENDRA PRASAD MOODY [1978] 115 ITR 519? 9. WHETHER IN FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) IS LEGALLY JUSTIFIED IN DELETING DISALLOWANCE OF RS. 15,688/- U/S 14A OF THE ACT WITHOUT CONSIDERING RATIO DECIDENDI AS UPHELD IN CA SES OF CIT VS. WALFORT SHARE AND STOCK BROKERS P. LTD [2010] 326 ITR 1 (SC ) AND MAXOPP INVESTMENT VS CIT [2012) 347 ITR 272 (DELHI) ON APP LICATION OF PROVISIONS OF SECTION 14A OF THE ACT? 10. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) IS LEGALLY JUSTIFIED IN DELETING THE DISALLOWANCE OF R S. 2,32,750/- ON ACCOUNT OF ADDITIONAL DEPRECIATION CLAIMED U/S 32 (L)(IIA) OF THE ACT WITHOUT CONSIDERING THE FACT THAT THE RELEVANT PROVISIONS A RE AFFECTED W.E.F. 01.04.2013? 11. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CA SE, THE LD.CIT(A) IS LEGALLY JUSTIFIED IN DELETING DISALLOWANCE OF RS. 1 ,79,931/- U/S 40(A)(IA) OF 5 THE ACT ON ACCOUNT OF NON-DEDUCTION OF TDS ON 'BANK GUARANTTEE EXPENSES' BY IGNORING THE CONTENTS OF NOTIFICATION NO. 56/2012 OF THE CBDT IN THIS REGARD ISSUED VIDE F.NO. 275/53/2012-I T(B) /SO 3069 (E) DATED 31.12.2012 AND ALSO BY IGNORING THE FACT THAT THE SAID NOTIFICATION HAD COME INTO FORCE W.E.F. 1ST JANUARY, 2013? 12. WHETHER IN FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A) IS LEGALLY JUSTIFIED IN DELETING ADDITION OF RS. 2,42,880/- ON ACCOUNT OF ACCRUED INTEREST MADE BY THE ASSESSING OFFICER (THE AO) ON DEPOSITS WITHOUT CONSIDERING FACTS THAT THE ASSESSEE WAS FOLLOWING M ERCANTILE SYSTEM OF ACCOUNTING? 5. AT THE OUTSET, LEARNED AR SUBMITTED THAT MOST OF THE ADDITIONS ARE COVERED BY THE ORDERS FOR EARLIER ASSESSMENT YEARS IN ASSESSEES OWN CASE AND THE LD. CIT(A) IS, THEREFORE, JUSTIFIED IN DELE TING THE SAME. HE ALSO SUBMITTED THAT EVEN THE DISALLOWANCE OF CONTRIBUTIO N TO DEFINED CONTRIBUTION PENSION SCHEME IS ALSO COVERED IN ASSE SSEES OWN CASE FOR THE ASSESSMENT YEAR 2010-11 BY ORDER DATED 28.07.20 17 PASSED BY A COORDINATE BENCH OF THIS TRIBUNAL. HE DREW OUR ATTE NTION TO PARAGRAPH NO. 7 OF THE TRIBUNAL ORDER, WHEREIN WHILE FOLLOWING TH E DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS. RANBAXY LABORATORIES LTD. 334 ITR 341 (DEL), THE COORDINATE BENCH OF THIS TRIBUNAL ALLOWED RELIEF TO THE ASSESSEE. HAVING GONE THROUGH THE ORDER DATED 28.07.2017 IN ITA NO. 5122/DEL/2014 IN ASSESSEES O WN CASE FOR THE ASSESSMENT YEAR 2010-11, WE ARE SATISFIED THAT THE GROUND OF APPEAL OF THE ASSESSEE IS SQUARELY COVERED BY THE FINDINGS OF THE CO-ORDINATE BENCH OF TRIBUNAL AND SINCE THERE IS NO CHANGE OF CIRCUMS TANCES, WE FOLLOW THE SAME AND ALLOW THE GROUNDS OF APPEAL OF THE ASSESSE E. CONSEQUENTLY, ITA NO. 3367/DEL/2017 FILED BY THE ASSESSEE IS ALLOWED. 6. NOW COMING TO THE REVENUES APPEAL, THE FIRST GR OUND RELATES TO THE ADDITION OF RS.6,48,20,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF 6 INTEREST ACCRUED ON ADVANCES GIVEN TO M/S. KARSAN. LEARNED COUNSEL DREW OUR ATTENTION TO THE JUDGMENT DATED 24.04.2017 OF H ONBLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE FOR THE ASSESSMEN T YEARS 2006-07 TO 2009-10 IN ITA NOS. 551, 782, 784 AND 817 OF 2016. HE ALSO SUBMITTED THAT IN ITA NO. 5201/DEL/2017 BY ORDER DATED 28.07.2017, A COORDINATE BENCH OF THIS TRIBUNAL DEALT WITH THIS ISSUE IN THE LIGHT OF THE JUDGMENT OF HONBLE HIGH COURT AND GRANTED RELIEF TO THE ASSESSEE. ON A PERUSAL OF THIS ORDER, WE FIND THAT COORDINATE BENCH OF THIS TRIBUNAL VIDE PARAGRAPH NO. 9 OBSERVED AS FOLLOWS : 9. NOW, WE TAKE UP THE APPEAL OF THE REVENUE. IN THE GROUNDS NO. 1 TO 4 ARE REGARDING THE INTEREST ACCRUED ON ADVANCE GIVEN TO M/S. KARSAN. 9.1 LEARNED SR. DR RELIED ON THE ORDER THE ASSESSI NG OFFICER. 9.2 LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THA T THE ISSUE IS SQUARELY COVERED BY THE JUDGMENT OF HONBLE JURISDI CTIONAL HIGH COURT IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2006-07 TO 2009-10 (SUPRA). 9.3 WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSE D THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE ISSUE IN DISP UTE IS SQUARELY COVERED BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT I N THE ASSESSEES OWN CASE (SUPRA) WHEREIN THE HONBLE HIGH COURT OBSERVED AS UNDER: 10. THE THIRD GROUND URGED BY THE REVENUE IS REGAR DING THE FAILURE BY ITAT TO DISCLOSE AS PART OF ITS INCOME, THE INTERES T ACCRUED ON THE ADVANCE MADE BY IT TO M/S. KARSAN. LEARNED COUNSEL FOR THE REVENUE POINTED OUT THAT BY A JUDGMENT DATED 4TH DECEMBER 2 006 OF THIS COURT, THE ARBITRAL AWARD IN FAVOUR OF THE ASSESSEE UNDER THE ARBITRATION ACT, 1940 WAS MADE RULE OF THE COURT. H E SUBMITTED THAT ALTHOUGH UP TO THAT DATE IT COULD BE SAID THAT THE INTEREST ON THE ADVANCE HAD NOT CRYSTALLIZED (AS WAS HELD BY THIS C OURT IN ITS ORDER DATED 24TH SEPTEMBER, 2012 IN ITA 541/2012 IN THE A SSESSEE'S OWN CASE FOR THE AY 2005-2006), FOR THE SUBSEQUENT AYS THE RIGHT TO RECEIVE INTEREST HAD ACCRUED TO THE ASSESSEE AND SHOULD HAV E BEEN ADDED TO ITS INCOME. 7 11. LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, STATES THAT THE CONCEPT OF 'REAL INCOME HAS BEEN ACCEPTED BY THE SUPREME COURT IN GODHRA ELECTRICITY CO. LTD. V. CIT, (1997) 225 ITR 746 (SC) AND THIS WAS FOLLOWED BY THIS COURT IN ITS DECISION DAT ED 19LH MAY, 2015 IN ITA NO.268/2008 (LIQUIDATOR POLYMERLAND INDIA PVT. LTD. V. DCLT). IT IS POINTED OUT THAT WHERE NO PART OF THE ADVANCE HAS B EEN ABLE TO BE RECOVERED BY THE ASSESSEE, NOTWITHSTANDING THE AWAR D IN ITS FAVOUR, NO 'REAL INCOME' CAN BE SAID TO HAVE ACCRUED TO IT. 12.THE ITAT HAS IN THE IMPUGNED ORDER HELD AS UNDER : 'THERE IS NO DISPUTE THAT THE ICA HAS AWARDED INTER EST TO THE ASSESSEE @5% P.A. ON THE ADVANCE MADE TO M/S. KARSA N. IT IS ALSO NOT DISPUTED THAT THE ASSESSEE COULD NOT MAKE RECOVERY AGAINST THE ADVANCE (PRINCIPAL AMOUNT) OF RS.130.69 CRORES, AN AMOUNT OF RS.1.05 CRORES ONLY COULD BE RECOVERED LE AVING BALANCE ADVANCE OF RS.129.64 CRORES WHICH COULD NOT BE RECOVERED TILL DATE. THE NOTATIONAL INTEREST AWARDE D BY THE INTERNATIONAL COURT OF ARBITRATION, WHICH HAS NOW A TTAINED FINALITY IS A HYPOTHETICAL INCOME WHICH CANNOT BE SUBJECTED TO TAX. MERELY BECAUSE THE SAIE AMOUNT HAS BEEN AWARDE D BY WAY OF AN ORDER, DOES NOT MEAN THAT THE ASSESSEE HAS RE CEIVED SUCH INCOME. THE ASSESSEE FOLLOWED MERCANTILE SYSTEM OF ACCOUNTING WHERE THERE CANNOT BE A SITUATION OF HYPOTHETICAL I NCOME BEING TAXED. 13. INDEED, IT IS SEEN THAT NO PART OF THE ADVANCE GIVEN BY THE ASSESSEE TO M/S. KARSAN HAS BEEN ABLE TO BE RECOVERED BY IT. AS POINTED OUT BY LEARNED COUNSEL FOR THE ASSESSEE, THERE WAS A CASE REGISTERED WITH THE CENTRAL BUREAU OF INVESTIGATION (CBI) IN THAT REGAR D AND ANY PROSPECT OF THE MONEY BEING RECOVERED HAS ALL BUT VANISHED. SINCE NO PART OF THE PRINCIPAL AMOUNT COULD ACTUALLY BE RECOVERED BY THE ASSESSEE, THERE WAS NO REAL INCOME' AND THE QUESTION OF ADDING ANY NOTIONAL ACCRUED INTEREST TO ITS INCOME ON SUCH AMOUNT DOES NOT ARIS E. IN THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE, THE COURT AGREES WIT H THE CONCURRENT FINDINGS OF THE CIT (A) AND ITAT. NO SUBSTANTIAL QU ESTION OF LAW ARISES AS REGARD THIS ISSUE AS WELL. 9.4 RESPECTFULLY FOLLOWING THE ABOVE DECISION OF H ONBLE HIGH COURT, WE UPHOLD THE ORDER OF THE CIT(A) REGARDING THE ISSUE IN DISPUTE. ACCORDINGLY, GROUNDS NO. 1 TO 4 ARE DISMIS SED. 8 7. GROUND NO.2 OF REVENUES APPEAL RELATES TO ADDIT ION OF RS.3,41,00,000/- MADE ON ACCOUNT OF DISALLOWANCE OF DEMURRAGE AND WHARFAGE EXPENSES, WHICH AGAIN IS COVERED BY THE OR DER OF HONBLE HIGH COURT IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEA RS 2006-07 TO 2009- 10, REFERRED TO SUPRA AND FOLLOWED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2010-11. RELEVANT OBSERVATI ONS OF THE TRIBUNAL VIDE PARAGRAPH NO. 10 READ AS FOLLOWS : 10. GROUND NO. 5 TO 8 ARE REGARDING THE ADDITION MADE ON ACCOUNG OF DISALLOWANCE OF DEMURRAGE AND WHARFAGE EXPENSES. 10.1 LEARNED SR. DEPARTMENTAL REPRESENTATIVE RELI ED ON THE ORDER OF THE LEARNED ASSESSING OFFICER. 10.2 LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THA T THIS ISSUE IS SQUARELY COVERED BY THE JUDGMENT OF HONBLE JURISDI CTIONAL HIGH COURT IN THE ASSESEES OWN CASE FOR ASSESSMENT YEAR 2006-07, 2007-08, 2008-09 AND 2009-10 IN ITA NOS. 551,782,784 AND 817 OF 2016 , DATED 24.04.2017. 10.3 WE HAVE HEARD THE RIVAL SUBMISSION OF THE PAR TIES AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THIS ISSUE IS ALSO SQUARELY COVERED BY THE DECISIONS OF HONBLE JURISDICTIONAL HIGH COURT (SUPRA), WHERE THE HONBLE COURT HELD AS UNDER: 3. THESE FOUR APPEALS SEEK TO RAISE A COMMON QUES TION WHETHER THE ITAT WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF DEMURRAGE AND WHARFAGE CHARGES, WHICH ACCORDING TO THE REVENUE WA S IN THE NATURE OF PENALTY AND, THEREFORE, NOT AMENABLE TO DEDUCTIO N UNDER SECTION 37(1) OF THE INCOME TAX ACT, 1961? 4. THE SAID QUESTION ALREADY STANDS ANSWERED IN FAV OUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE JUDGMENT OF THIS COURT IN MAHALAXMI SUGAR MILLS COMPANY V. COMMISSIONER OF INCO ME TAX, (1986) 157 ITR 683 (DELHI) AND OF THE ALLAHABAD HIGH COURT IN NANHOOMAL JYOTI PRASAD V. COMMISSIONER OF INCOME TA X, (1980) 123 ITR 269 (ALL.) 9 5. HOWEVER, LEARNED COUNSEL FOR THE REVENUE SEEKS TO REPLY OF THE JUDGMENT OF THE RAJASTHAN HIGH COURT IN TATA IRON & STEEL CO. LTD. V. UNION OF INDIA (DECISION DATED 28 TH JANUARY, 2014 IN SB CIVIL MISC. APPEAL NO. 65/1997). HAVING PERUSED THE SAID JUDGME NT, THE COURT IS NOT PERSUADED TO TAKEN A VIEW DIFFERENT FROM THAT E ARLIER TAKEN BY THIS COURT MAHALAXMI SUGAR MILLS COMPANY V. COMMISSIONER OF INCO ME- TAX (SUPRA). 10.4 RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT, WE UPHOLD THE ORDER OF T HE LEARNED CIT(A). ACCORDINGLY, GROUNDS NO. 5 TO 8 OF THE REVENUE ARE DISMISSED. 8. GROUND NO.3 RELATES TO DELETION OF ADDITION OF R S.4.26 CRORES, MADE ON ACCOUNT OF SLOW MOVING STORES AND SPARES, WHICH AGAIN IS COVERED BY THE DECISION OF HONBLE HIGH COURT AS WELL AS THE T RIBUNAL AND THE RELEVANT OBSERVATIONS OF THE TRIBUNAL WHILE FOLLOWING THE HI GH COURTS VIEW READ AS FOLLOWS : 5. IN GROUND NO. 2(I) AND (II), THE ASSESSEE HAS CHALLENGED THE ADDITION OF RS.4,20,00,000/- MADE ON ACCOUNT OF SLOW MOVING, NO N-MOVING AND OBSOLETE STORES WRITTEN OFF. 5.1 AT THE TIME OF HEARING, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED BY THE JUD GMENT OF HONBLE JURISDICTIONAL HIGH COURT IN ASSESEES OWN CASE FOR ASSESSMENT YEARS 2006-07, 2007-08, 2008-09 AND 2009-10 IN ITA NOS. 783,785,81 5 AND 816 OF 2016 DATED 08.02.2017. 5.2 ON THE OTHER HAND, THE SR. DEPARTMENTAL REPRES ENTATIVE RELIED ON THE ORDER OF ASSESSING OFFICER AND CONTENTED THAT THE A SSESSEE HAS NOT GIVEN ANY SATISFACTORY REASONS FOR CHANGING THE METHOD OF ACC OUNTING, THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFICER IS JUSTIFIED . 5.3 WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE ISSUE IN DISPUTE IS SQUARE LY COVERED BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE ASSESSE ES OWN CASE (SUPRA) WHEREIN THE HONBLE HIGH COURT OBSERVED AS UNDER: 10 6. HAVING REGARD TO THESE CIRCUMSTANCES, THE REVEN UES CONTENTION THAT THE ACCEPTED OF 5% AS THE BASIS FOR VALUING THE SLOW MOVING STOCK BEING UNSCIENTIFIC, IS BASELESS IN OUR OPINION. ONCE THE ENGINEERING EXPERT EXAMINED ALL THE HEADS OF STOCK VALUED THEM, TO THE BEST OF HIS JUDGMENT, AND IN THE ABSENCE OF ANY FIN DING THAT THE 5% WAS NOT RELATABLE TO SUCH VALUATION WITHOUT AN ALTE RNATIVE VALUATION OR THAT IT IS A FLAWED METHOD OF VALUATION, THE AO COU LD NOT HAVE REJECTED WHAT WAS OFFERED AS THE REDUCED VALUE OF THE SLOW-M OVING STOCK. IN OTHER WORDS, THERE IS NOTHING ON THE RECORD TO DOUB T THE BONAFIDES OF THE VALUATION. IN THE EVENT OF LIKELIHOOD OF THE ST OCKS REALIZING A HIGHER AMOUNT THAN THE VALUE SHOWN, THE SAME WOULD BE REFL ECTED IN THE SUBSEQUENT YEAR IN THE INCOME OR PROFIT OF THE ASSE SSEE, THE REVENUES CONTENTION IS WITHOUT ANY MERIT. 6. RESPECTFULLY FOLLOWING THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT, WE DELETE THE ADDITION OF RS.4,20,00,000/- M ADE BY THE ASSESSING OFFICER. ACCORDINGLY, GROUND NOS. 2(I) & (II) ARE AL LOWED. 9. GROUND NO. 4 RELATES TO DISALLOWANCE OF RS.8.58 CRORES, MADE ON ACCOUNT OF POST-RETIREMENT BENEFITS, WHICH AGAIN IS COVERD BY THE DECISION OF HONBLE HIGH COURT AS WELL AS THE TRIBUNAL REFER RED TO SUPRA AND RELEVANT OBSERVATIONS OF THE TRIBUNAL VIDE PARAGRAP H NO. 11 ARE AS FOLLOWS : 11. IN GROUND NO. 9 & 10 IS REGARDING THE ADDITIO N MADE ON ACCOUNT OF PROVISION OF POST RETIREMENT BENEFITS. 11.1 LEARNED SR. DR RELIED ON THE ORDER OF THE AS SESSING OFFICER. 11.2 LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED TH AT THIS ISSUE IS ALSO SQUARELY COVERED BY THE JUDGMENT OF HONBLE JURISDI CTIONAL HIGH COURT IN THE ASSESEES OWN CASE FOR ASSESSMENT YEAR 2006-07, 2007-08, 2008-09 AND 2009-10 (SUPRA). 11.3 WE HAVE HEARD THE RIVAL SUBMISSION OF THE PAR TIES AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THIS ISSUE IS ALSO SQUARELY COVERED BY THE DECISIONS OF HONBLE JURISDICTIONAL HIGH COURT (SUPRA), WHEREIN THE HONBLE COURT HELD AS UNDER: 11 6. THE OTHER QUESTION RAISED BY THE REVENUE CONCE RNS THE PROVISION MADE FOR SUPERANNUATION/POST-RETIREMENT B ENEFITS OF THE EMPLOYEES OF THE ASSESSEE. THE ASSESSEE MADE THE PR OVISION N THE BASIS OF AN ACTUARIAL REPORT. ITS CONSISTENT STAND WAS ACCEPTED BY THE COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] WHO C AME TO THE CONCLUSION THAT IT WAS NOT AN ITEM OF DEDUCTION COV ERED UNDER SECTION 43B OF THE ACT. THE ITAT IN THE IMPUGNED ORDER FOLL OWED THE DECISION OF THE SUPREME COURT IN BHARAT EARTH MOVERS V CIT, [2000] 245 1TR 428 (SC) AND THE DECISION OF THIS COURT IN CIT VS. BHARAT HEAVY ELECTRICAL LTD. [2013] 352 ITR 08 (DEL) AND UPHELD THE ORDER OF THE CIT (A). 7. THE COURT'S ATTENTION IS DRAWN BY LEARNED COUNSE L FOR THE ASSESSEE TO THE DECISION IN CIT V RANBAXY LABORATORIES LTD. (2011) 334 ITR 341 (DEL). THE RATIO OF THE ABOVE DECISION IS THAT WHERE THER E ARE ACTUARIAL REPORTS SUPPORTING THE PROVISION TO MEET A CONTINGENT LIABILITY, IT CANNOT BE GONE BEHIND BY THE ASSESSIN G OFFICER (AO) UNLESS IT IS SHOWN TO BE NOT BASED ON ANY SCIENTIFIC OR KN OW FINANCIAL PRINCIPLES. 8. IT IS SOUGHT TO BE URGED BY LEARNED COUNSEL FOR THE REVENUE THAT ONLY BECAUSE THE ACTUAL PAYOUTS BY WAY OF POST-RETI REMENT BENEFITS TO THE EMPLOYEES IN THE AYS IN QUESTION WERE FAR LESS THAN THE PROVISION MADE FOR THAT PURPOSE, THE ACTUARIAL REPORT CANNOT BE SAID TO HAVE BEEN PREPARED ON A SCIENTIFIC BASIS AND WAS THEREFO RE NOT BINDING ON THE AO. 9. THE COURT IS UNABLE TO ACCEPT THIS SUBMISSION. THE MAKING OF A PROVISION TO MEET A CONTINGENT LIABILITY NEED NOT B E IN ORDER TO MEET SUCH LIABILITY ENTIRELY IN THE YEAR OF ITS CREATION . THE PROVISION HAVING BEEN MADE ON THE BASIS OF AN ACTUARIAL REPORT, WHIC H IS NOT SHOWN BY THE REVENUE TO BE UNACCEPTABLE ON THE GROUND THAT I T IS NOT BASED ON KNOWN ACCOUNTING OR FINANCIAL PRINCIPLES, THE MERE FACT THAT THE ACTUAL PAY OUT IN A PARTICULAR AY MAY BE FAR LESS THAN THE PROVISION CANNOT PROVIDE A JUSTIFICATION TO DENY THE DEDUCTION. THE COURT CONCURS WITH THE VIEW OF THE CIT (A) AND ITAT THAT THE PROVISION DOES NOT ATTRACT SECTION 43 B OF THE ACT. THE CONCURRENT FINDING OF THE CIT(A) AND THE ITAT ON THE ABOVE ISSUE DOES NOT GIVE RISE TO ANY S UBSTANTIAL QUESTION OF LAW. 12 11.4 RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT, WE UPHOLD THE ORDER OF T HE LEARNED CIT(A). ACCORDINGLY, GROUNDS NO. 9 & 10 OF THE REVENUE ARE DISMISSED. 10. GROUND NO. 6 RELATES TO DISALLOWANCE OF RS.21,2 5,780/- ON ACCOUNT OF DEPRECIATION CLAIMED ON UPS AND ACCORDING TO THE LD. AR, THIS GROUND TOO IS COVERED BY THE ORDER DATED 15.07.2011 OF THE TRIBUNAL IN ITA NO. 2149/DEL/2009 FOR THE ASSESSMENT YEAR 2005-06 AND, THEREFORE, THE ESTABLISHED VIEW MAY NOT BE DISTURBED. ON A PERUSAL OF THE ORDER, WE FIND THAT THE CLAIM OF THE ASSESSEE FOR DEPRECIATION AT 60% ON COMPUTER PERIPHERALS AND ACCESSORIES SUCH AS PRINTERS, SCANN ERS, SERVERS ETC. WAS CONSIDERED AND ALLOWED BY THE TRIBUNAL IN THE LIGHT OF THE DECISION DATED 31 ST AUGUST, 2010 OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. BSES YAMUNA POWERS LTD. (ITA NO. 1267/2010) FOLLOWE D BY A COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ITO VS. SAMIR AN MAJUMDAR (2006) 98 ITD 119 (KOL). IN THIS WAY, THIS ISSUE IS COVERED B Y THE ORDERS OF THE TRIBUNAL FOR EARLIER ASSESSMENT YEARS IN ASSESSEES OWN CASE. 11. NOW COMING TO GROUND NO. 10, IT RELATES TO THE DISALLOWANCE OF RS.2,32,750/- ON ACCOUNT OF ADDITIONAL DEPRECIATION ON THE GROUND THAT BENEFIT IS AVAILABLE ONLY TO THOSE UNDERTAKINGS WHI CH ARE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICL E OR THING; THAT GENERATION OF POWER ACCORDING TO THE ASSESSING OFFI CER CANNOT BE EQUATED WITH THE PRODUCTION OF ANY ARTICLE OR THING; AND TH AT CLAUSE II(A) OF SUB-SEC. (1) OF SECTION 32 OF THE ACT WAS AMENDED WITH EFFEC T FROM 1 ST APRIL 2013 AND THEREFORE, SUCH ADDITIONAL DEPRECIATION COULD B E ALLOWED ONLY W.E.F. 1 ST APRIL, 2013 AND THUS THE SAME WAS DISALLOWED BY TH E ASSESSING OFFICER. LEARNED CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE. 13 12. LEARNED AR BROUGHT TO OUR NOTICE THE DECISION D ATED 18.02.2019 OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PC IT VS. NTPC SAIL POWER CO. PVT. LTD. (ITA NO. 1290/2018) WHEREIN THIS ISSU E IS DEALT WITH AND THE HONBLE HIGH COURT WHILE NOTICING THE DECISION OF H ONBLE APEX COURT IN THE CASE OF STATE OF ANDHRA PRADESH VS. NTPC LTD., AIR 2002 SC 1895 AND ALSO A TRIBUNAL JUDGMENT NTPC VS. DCIT (ITA NO. 143 8/DEL/2009) HELD THE ISSUE IN FAVOUR OF THE ASSESSEE. HONBLE HIGH COURT OBSERVED THAT ELECTRICITY IS CAPABLE OF ABSTRACTION, TRANSMISSION , TRANSFER, DELIVERY, POSSESSION, CONSUMPTION AND USE LIKE ANY OTHER MOVA BLE PROPERTY; THAT FOLLOWING THE SAME LOGIC, TO DENY THE BENEFIT OF AD DITIONAL DEPRECIATION TO A GENERATING ENTITY ON THE BASIS THAT ELECTRICITY I S NOT AN ARTICLE OR THING IS IN OUR VIEW AN ARTIFICIALLY RESTRICTIVE MEANING OF THE PROVISIONS; AND THAT THE BENEFIT OF ADDITIONAL DEPRECIATION UND ER SECTION 32(1)(IIA) HAS, THEREFORE, BEEN RIGHTLY GRANTED TO THE ASSESSE E BY THE CONCURRENT JUDGMENTS OF THE CIT(A) AND THE TRIBUNAL. IN VIEW O F THE DECISION OF THE JURISDICTIONAL HIGH COURT, WE ANSWER THIS ISSUE IN FAVOUR OF THE ASSESSEE AND GROUND NO. 10 OF THE REVENUES APPEAL IS DISMIS SED. 13. SINCE THERE IS NO CHANGE IN THE CIRCUMSTANCES N OR THE LAW, WE FIND IT DIFFICULT TO TAKE A DIFFERENT VIEW AND WHILE RESPEC TFULLY FOLLOWING THE CONSISTENT VIEW TAKEN IN ASSESSSEES OWN CASES FOR THE EARLIER ASSESSMENT YEARS RELATING TO GROUNDS NOS. 1 TO 4, 6 & 10, WE D O NOT FIND ANY SUBSTANCE IN THE CONTENTIONS OF THE REVENUE. ACCORDINGLY, WE DISMISS GROUNDS NOS. 1 TO 4, 6 & 10 OF THE REVENUES APPEAL. 14. COMING TO GROUND NO. 5, WHICH IS IN RESPECT OF DISALLOWANCE OF 1,26,92,268/- ON ACCOUNT OF REPAIR AND MAINTENANCE CHARGES, DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE CLAIMED REPA IR AND MAINTENANCE EXPENDITURE TO THE TUNE OF RS.80.31 CRORES; THAT TH E ASSESSEE SUBMITTED 14 THE COMPLETE DETAILS OF REPAIR AND MAINTENANCE CHAR GES BEFORE THE ASSESSING OFFICER; THAT THE ASSESSEE SUBMITTED BEFO RE THE ASSESSING OFFICER THAT WHEN MAJOR EQUIPMENT IS ADDED OR REPLACED, ITE M WITH SIMILAR DESCRIPTION NEED TO BE CAPITALIZED, HOWEVER, IF FEW SMALL PARTS ARE REPLACED WITH SIMILAR DESCRIPTION SUCH ITEMS ARE TR EATED AS MAINTENANCE; THAT AS PER ASSESSEE, THERE IS NO ESTIMATE THAT THE ANNUAL REPAIR AND MAINTENANCE SHOULD BE A PARTICULAR PERCENTAGE OF SA LES; AND THAT THE ASSESSING OFFICER CALCULATED THE DISALLOWANCE AT 2. 23% ON THE BASIS OF PROPORTION OF AMOUNT THAT THE LD. ASSESSING OFFICER WAS OF THE OPINION THAT FOR SIMILAR NATURE OF ITEMS THE ASSESSEE IN ONE OF ITS UNITS CLAIMED AS REVENUE EXPENDITURE WHILE IN SOME OTHER UNITS IT WA S CAPITALIZED. THE ASSESSING OFFICER, HOWEVER, COMPUTED THE DISALLOWAN CE AT THE RATE OF 2.23% OF RS.66.96 CRORES, I.E., RS.1,49,32,080/- AN D AFTER ALLOWING THE DEPRECIATION MADE THE NET DISALLOWANCE OF RS.1,26,9 2,268/- HOLDING THAT THE SAME SHALL BE TREATED AS THE PART OF BLOCK OF P LANT AND MACHINERIES. THE ASSESSING OFFICER CALCULATED THE ABOVE DISALLOW ANCE AT 2.23% ON THE BASIS OF PROPORTION OF AMOUNT CAPITALIZED OVER THE REPAIR AND MAINTENANCE IN PANIPAT UNIT. 15. LEARNED CIT(A), HOWEVER, DELETED THE SAID DISAL LOWANCE ON THE GROUND THAT THE ASSESSEE HAD GIVEN VALID EXPLANATIO N FOR NOT CAPITALIZING THE SAME ITEMS IN DIFFERENT UNITS AND DISALLOWANCE WAS MADE ON PRESUMPTION BASIS AND ADHOC BASIS. LEARNED AR PLACE S RELIANCE ON THE DECISIONS IN THE CASES OF CIT VS. MS. SHEHNAZ HUSSA IN, 267 ITR 572 (DEL), ACIT VS. M/S. MODI RUBBER LIMITED (ITA NO. 1952/DEL /2014)(ITAT DELHI), ACIT VS. AMTEK AUTO LTD., 112 TTJ 455, M/S. NINE DO T NINE MEDIA WORK PVT. LTD. VS. ITO (ITANO. 1262/DEL/2016 AND ITA NO. 863/DEL/2016) DATED 30.07.2018, DCIT VS. GRINTEX INDIA LTD (ITA NO. 462 2/DEL/2016, DHIR & DHIR 15 ASSOCIATES VS. ACIT (ITA NO. 2169/DEL/2014) DATED 1 6.06.2017 AND ACIT VS. PRECISION PIPES & PROFILES CO. LTD. (IYA NO. 4257 A ND 4258/DEL/2012) DATED 12.10.2012. 16. WE UNDERSTAND FROM THE ORDERS OF THE AUTHORITIE S BELOW THAT THE ASSESSEE CONTENDED BEFORE THE AUTHORITIES BELOW THA T SUCH REPLACEMENT OF PARTS WHICH HAVE IMPACTED THE CAPACITY UTILIZATI ON OF THE PLANT AND MACHINERY ARE CAPITALIZED AND THE VALUE OF SMALL PA RTS WHICH WERE REQUIRED TO BE REPLACED HAVING REGARD TO THEIR LIFE TIME, THEIR CONTRIBUTION IN THE CAPACITY UTILIZATION AS EXPENDITURE. LEARNED ASSESSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE STATING THA T FOR SIMILAR NATURE OF ITEMS, THE ASSESSEE IN ONE OF THE UNITS CLAIMED IT AS REVENUE EXPENDITURE WHILE IN SOME OTHER UNITS, IT WAS CAPITALIZED AND O N THAT BASIS, HE CALCULATED THE DISALLOWANCE AT 2.23% ON PRO-RATA BA SIS AND AGAIN IT IS ON ADHOC BASIS. 17. IT COULD BE SEEN FROM THE IMPUGNED ORDER, LEARN ED CIT(A) AFTER CONSIDERING THE SUBMISSIONS MADE ON BEHALF OF THE A SSESSEE FOUND THAT DUE TO CONTINUOUS PROCESS PLANTS IN THE ASSESSEES UNITS, WHEN MAJOR EQUIPMENT IS ADDED OR REPLACED WITH SIMILAR DESCRIP TION OF EQUIPMENT IT IS CAPITALIZED BUT IF FEW SMALL PARTS ARE REPLACED WIT H SIMILAR DESCRIPTION ITEMS THIS IS TREATED AS MAINTENANCE. LEARNED CIT(A ) REACHED SUCH CONCLUSION ON A PERUSAL OF THE DOCUMENTS REGARDING THE POLICY OF THE ASSESSEE ON THIS ASPECT WHICH WERE PROVIDED AT THE ASSESSMENT STAGE ITSELF. ON AN ANALYSIS OF FACTS IN THE LIGHT OF POL ICY DOCUMENTS, LEARNED CIT(A) INFERRED THAT THE PRESUMPTIVE DISALLOWANCE O N ADHOC BASIS CANNOT BE SUSTAINED. 16 18. ON A CAREFUL CONSIDERATION OF THE MATTER IN THE LIGHT OF OBSERVATIONS MADE BY THE LD. CIT(A), WE FIND THAT THE LD. CIT(A) REACHED THIS CONCLUSION ON THE BASIS OF THE REPAIR & MAINTENANCE EXPENSES O F ONE UNIT. WE ARE, THEREFORE, OF THE OPINION THAT ALTHOUGH THE LD. CIT (A) IS RIGHT IN HIS APPROACH IN RESPECT OF ONE UNIT, HE WAS REQUIRED TO EXAMINE THE EXPENDITURE IN RESPECT OF OTHER UNITS ALSO. WE, ACC ORDINGLY WHILE REJECTING THE PERCENTAGE APPROACH ADOPTED BY THE LD. ASSESSIN G OFFICER, DIRECT THE LEARNED ASSESSING OFFICER TO VERIFY THE REPAIR & MA INTENANCE EXPENDITURE IN RESPECT OF OTHER UNITS IN TUNE WITH THE APPROACH OF THE LD. CIT(A). ASSESSEE WILL PRODUCE ALL THE NECESSARY DOCUMENTS B EFORE THE LD. ASSESSING OFFICER IN THIS REGARD. THIS GROUND IS AC CORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 19. GROUNDS NOS. 7 TO 9 OF THE DEPARTMENTAL APPEAL RELATE TO THE DISALLOWANCE OF RS.15,688/- BY INVOKING SECTION 14A OF THE ACT READ WITH RULE 8D OF THE INCOME-TAX RULES. IT CAN BE SEEN FRO M THE ASSESSMENT ORDER THAT THE ASSESSEE REPRESENTED BEFORE THE ASSESSING OFFICER THAT IN THIS YEAR, THE ASSESSEE HAS NOT RECEIVED ANY EXEMPT INCO ME ON INVESTMENT AND THEREFORE, NO DISALLOWANCE IS WARRANTED U/S. 14A OF THE ACT. ASSESSING OFFICER DID NOT DISPUTE THE FACTUAL ASPECT, BUT PRO CEEDED ON THE ASSUMPTION THAT EVEN IN THE ABSENCE OF ANY EARNINGS OF EXEMPT INCOME, SECTION 14A READ WITH RULE 8D ARE ATTRACTED. 20. LEARNED CIT(A) FOLLOWED THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CHEMINVEST LIMITED VS. CI T, 378 ITR 33 AND ALLOWED THE PLEA OF THE ASSESSEE. IN CHEMINVEST LTD . (SUPRA), HONBLE JURISDICTIONAL HIGH COURT HELD THAT THE EXPRESSION DOES NOT FORM PART OF THE TOTAL INCOME IN SECTION 14A OF THE ACT ENVISAG E THAT THERE SHOULD BE AN ACTUAL RECEIPT OF INCOME WHICH IS NOT INCLUDABLE IN THE TOTAL INCOME 17 DURING THE RELEVANT PREVIOUS YEAR FOR THE PURPOSE O F DISALLOWANCE OF ANY EXPENDITURE INCURRED IN RELATION TO THE SAID INCOME ; AND THAT IN OTHER WORDS, SECTION 14A WILL NOT APPLY IF NO EXEMPT INCO ME IS RECEIVED OR RECEIVABLE. 21. GROUND NO. 11 RELATES TO DISALLOWANCE OF RS.1,7 9,931/- ON ACCOUNT OF NON-DEDUCTION OF TDS ON BANK GUARANTEE EXPENSES. LEARNED ASSESSING OFFICER WAS OF THE OPINION THAT THE NOTIFICATION NO . 56/2012 DATED 31.12.2012 WHICH PROVIDES RELIEF FROM TDS ON SPECIF IED PAYMENTS MADE TO SCHEDULED BANKS IS EFFECTIVE FROM 01.01.2013 AND WI LL APPLY PROSPECTIVELY ONLY AND THEREFORE, THE ASSESSEE IS LIABLE TO DEDUC T TDS ON SUCH PAYMENTS. LEARNED CIT(A), HOWEVER, HELD THAT THE NOTIFICATION IS APPLICABLE RETROSPECTIVELY ALSO. LEARNED AR PLACES RELIANCE ON THE DECISION DATED 31.05.2021 OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DCIT VS. NALWA STEEL AND POWER LTD. THAT THE NOTIFICATION NO . 56/2012 DATED 31.12.2012 HAS RETROSPECTIVE EFFECT. RELEVANT OBSER VATIONS OF THE TRIBUNAL IN THE CASE OF NALWA STEEL AND POWER LTD.(SUPRA) AR E AS FOLLOWS : WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTION A ND FIND THAT THE ASSESSEE HAS PAID GUARANTEE COMMISSION CHARGES OF S TATE BANK OF INDIA FOR GIVING GUARANTEE IN FAVOUR OF THE SELLER OF COA L TO THE ASSESSEE. IT IS ONE OF THE BANKING SERVICES PROVIDED BY THE STATE B ANK OF INDIA TO THE ASSESSEE. IT CANNOT BE SAID TO BE A COMMISSION AS INTENDED TO U/S 194H OF THE BUT IT IS IN THE NATURE OF BANK CHARGES CHAR GED BY THE BANK FOR PROVISION OF SERVICES TO THE ASSESSEE. NOW THIS ISS UE HAS BEEN DECIDED BY THE HONOURABLE BOMBAY HIGH COURT IN CASE OF CIT - T DS (1), BOMBAY VERSUS LARSEN AND TOUBRO LTD 101 TAXMANN.COM 83 WHE REIN THE HONOURABLE HIGH COURT WHILE DEALING WITH THE CASE F OR ASSESSMENT YEAR 2010 - 11 HELD AS UNDER:- 3. LEARNED COUNSEL FOR THE REVENUE STATED THAT THE REVENUE STATED THAT THE REVENUE HAD FILED AN APPEAL AGAINST THE JUDGMENT OF THE TRIBUNAL IN CASE OF KOTAK SECURITIES LTD. BU T THAT THE APPEAL WAS WITHDRAWN ON THE GROUND OF LOW TAX EFFECT. HE H AS, HOWEVER, 18 MADE AVAILABLE A COPY OF THE JUDGMENT OF THE TRIBUN AL IN THE SAID CASE WHICH CONTAINS A DETAILED DISCUSSION ON THE IS SUE AT HAND. IN THE SAID JUDGMENT, THE TRIBUNAL REFERRED TO SECTION 194H OF THE ACT WHICH REQUIRES AN ASSESSEE RESPONSIBLE FOR PAYI NG ANY INCOME BY WAY OF COMMISSION OR BROKERAGE TO DEDUCT TAX AT SOURCE. THE TRIBUNAL WAS OF THE OPINION THAT THE WORDS 'COMMISS ION OR BROKERAGE' MUST TAKE COLOUR FROM EACH OTHER. THE TR IBUNAL WAS OF THE OPINION THAT THE PAYMENT IN QUESTION, THOUGH CA TEGORIZED AS 'BANK GUARANTEE COMMISSION' IS NOT STRICTLY SPEAKIN G PAYMENT OF COMMISSION SINCE THERE IS NO PRINCIPAL TO AGENT REL ATIONSHIP BETWEEN THE PAYER AND THE PAYEE. THE TRIBUNAL, THER EFORE, HELD THAT THE REQUIREMENT OF DEDUCTING TAX AT SOURCE EMA NATING FROM SECTION 194H OF THE ACT IN THE PRESENT CASE DOES NO T ARISE. 4. WE ARE BROADLY IN AGREEMENT WITH THE VIEW OF THE TRIBUNAL. THE SO CALLED BANK GUARANTEE COMMISSION IS NOT IN THE NATU RE OF COMMISSION PAID TO AN AGENT BUT IT IS IN THE NATURE OF BANK CH ARGES FOR PROVIDING ONE OF THE BANKING SERVICE. THE REQUIREMENT OF SECTION 194H OF THE ACT, THEREFORE, WOULD NOT ARISE. NO QUESTION OF LAW ARIS ES. THE INCOME TAX APPEAL IS DISMISSED. 7. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION O F THE HONOURABLE BOMBAY HIGH COURT RENDERED IN CASE FOR ASSESSMENT Y EAR 2010 -11 AND ALSO THE NOTIFICATION NO 56/2012 OF CBDT WHICH HAS BEEN CONSIDERED BY SEVERAL COORDINATE BENCHES AND HELD THAT SAME ALSO APPLIES TO EARLIER PERIOD THEN THE DATE OF ISSUE OF NOTIFICATION, WE H OLD THAT THE ASSESSEE WAS NOT REQUIRED TO WITHHELD ANY TAX ON BANK GUARAN TEE CHARGES PAID TO STATE BANK OF INDIA AND THEREFORE NO DISALLOWANCE W OULD HAVE BEEN MADE U/S. 40A(IA) OF THE ACT. SO WE CONFIRM THE ORDER OF THE LD. CIT(A). IN VIEW OF THIS GROUND NO. (1) OF THE APPEAL IS DISMISSED. 22. IN THESE CIRCUMSTANCES, WE DO NOT FIND ANY MERI T IN THE ADDITION MADE AND THE LD. CIT(A) RIGHTLY DELETED THE ADDITIO N AND IT DOES NOT WARRANT ANY INTERFERENCE. WE, THEREFORE, DECLINE TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) IN DELETING THE ADDITION. 23. GROUND NO. 12 OF REVENUES APPEAL RELATE TO THE ADDITION OF RS.2,42,880/- ON ACCOUNT OF ACCRUED INTEREST ON DEP OSITS. LD. AR 19 SUBMITTED THAT GROUND NO. 1 HAS A BEARING ON THIS G ROUND. WE HAVE PERUSED THE RECORD AND SINCE WE DELETED THE ADDITIO N OF RS.6,48,20,000/- RELATING TO GROUND NO.1, WE FIND NO JUSTIFICATION T O INTERFERE WITH THE FINDING OF LD. CIT(A) THAT THE ADVANCES GIVEN BY TH E ASSESSEE TO KARSAN PENDING RECOVERY CANNOT BE ASSESSED AS INCOME OF TH E ASSESSEE. THUS, THIS GROUND DOES NOT STAND AND IS ACCORDINGLY DISMISSED. 24. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED AND THAT OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS THE 17 TH DAY OF AUGUST, 2021 JUST AFTER CONCLUSION OF HEARING ON VIRTUAL MO DE. SD/- SD/- (O.P. KANT) (K. NARSIMHA CHARY ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 17/08/2021