ABBOTT INDIA LTD, MUMBAI V. ADDL CIT RG 2(1), MUMBAI

ITA 3974/MUM/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9707 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Next Hearing Date: 19-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 25-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH DESH
• Keywords: Depreciation; Transfer pricing; International transaction; Additional depreciation; Earning of tax free income
• Section: 92C; 143(3); 14A; 32; 6; 12; 10; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES K , MUMBAI BEFORE S HRI G.S. PANNU (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 3974 /MUM/20 1 5 ASSESSMENT YEAR: 2009 - 2010 M/S ABBOTT INDIA LIMITED, UNIT 3 - 4, CORPORATE PARK, SION TROMBAY ROAD, CHEMBUR, MUMBA I - 400071 PAN: AAACB5170B VS. THE ADDITIONAL COMMISSIONER OF INCOME TAX - RANGE 2 (1), MUMBAI (APPELLANT) (RESPONDENT) & ITA NO. 3977 /MUM/201 5 ASSESSMENT YEAR: 2009 - 2010 THE ACIT - 2(1)(1), ROOM NO. 561, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUM BAI - 4000020 VS. M/S ABBOTT INDIA LIMITED, UNIT 3 - 4, CORPORATE PARK, SION TROMBAY ROAD, CHEMBUR, MUMBAI - 400071 PAN: AAACB5170B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MADHUR AGARWAL RESPONDENT BY : SHRI SAURABH DESHPANDE DATE OF HEARING: 18/05 /201 7 DATE OF PRONOUNCEMENT: 31/ 0 7 /201 7 O R D E R PER RAM LAL NEGI, JM THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE AGAINST ORDER DATED 26/02 /2015 PASSED BY THE COMMISSI ONER OF INCOME TAX 2 ITA NO S . 3974 & 3977 /MUM/2015 ASSESSMENT YEAR: 2009 - 2010 (APPEALS) - 55 , MUMBAI, PERTAINING TO THE ASSESSMENT YEAR 2009 - 10, WHEREBY THE LD. CIT (A) HAS PARTLY ALLOWED THE APPEAL FILED BY THE APPELLANT/ASSESSEE AGAINST ASSESSMENT ORDER PASSED U/S 143(3) R.W.S. 144 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). ITA NO. 3974 /MUM/2015 (ASSESSMENT YEAR: 2009 - 2010 ) 2. BRIEF FACTS , LEADING TO THE PRESENT APPEAL ARE THAT THE APPELLATE COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING AND MARKETING IMPORTED PHARMACEUTICALS FORMULATIONS COVERING DIVERSE THERA PEUTIC CATEGORIES SUCH AS GASTROE NT E RO L OGY, ANTI - DIABETES (INSULIN) ANTI - INFECTIVE , PAIN MANAGEMENT, CNS, ANTI - OBESITY AND UROLOGY , FILED ITS RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR DECLARING THE TOTAL INCOME OF RS. 1,00,87 ,62,950/ - . THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE S U/S 143 (2) AND 142 (1) WERE ISSUED. IN RESPONSE TO THE SAID NOTICE S , THE AUTHORIZED REPRESENTATIVE APPEARED BEFORE THE AO , MADE DETAILED WRITTEN SUBMISSIONS AND DISCUSSED THE CASE. DRAFT ASSESSMENT WAS ACCORDINGLY PASSED AND CONVE YED TO THE ASSESSEE . 3. SINCE, T HE ASSESSEE HAD ENTERED INTO AN INTERNATIONAL TRANSACTION , A REFERENCE WAS MADE U/S 92CA (1) OF THE ACT BY THE ASSESSING OFFICER FOR COMPUTING THE ARMS LENGTH PRICE OF THE TRANSACTION AND S INCE DCIT TRANSFER PRICING MADE AND UPWARD ADJUSTMENT OF RS. 36,52,944/ - IN ORDER U/S 92CA (3) , THE ASSESSEE WAS ASKED TO EXPLAIN A S TO WHY THE ADJUSTMENT PROPOSED BY THE TPO SHOULD NOT BE CONSIDERED AS AN ADDITION IN THE ASSESSMENT ORDER, THE ASSESSEE SUB MITTED THAT THE ARMS LENGTH PRICE PROPOSED BY THE TPO IS BINDING ON THE ASSESSING OFFICER AS PER THE PROVISIONS OF SECTION 92C (4) OF THE ACT. ACCORDINGLY, SAID SUM OF RS. 36,52,994/ - WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 3 ITA NO S . 3974 & 3977 /MUM/2015 ASSESSMENT YEAR: 2009 - 2010 4. ON PERUSAL OF DETAIL S SUBMITTED BY THE ASSESSEE IT WAS SEEN THAT ASSESSEE HAD EARNED AN AMOUNT OF RS. 10,17,787/ - AS DIVIDEND INCOME. THE ASSESSEE WAS ACCORDINGLY ASKED TO EXPLAIN AS TO WHY HIS EXPENSES RELATED TO EXEMPT INCOME SHOULD NOT BE COMPUTED AS PER THE PROVISIONS OF SECTION 14A R EAD W ITH RULE 8D. AFTER HEARING THE CONTENTION OF THE ASSESSEE , THE AO MADE DISALLOWANCE OF RS. 39,30,894/ - I.E., 0.5% OF AVERAGE VALUE OF TAX FREE INVESTMENT SHOWN BY THE ASSESSEE . SINCE THE ASSESSEE HAD ALREADY MADE DISALLOWANCE OF RS. 39,169 / - , T HE AO ADDED THE AMOUNT OF RS. 38,91,725/ - TO THE INCOME OF THE ASSESSEE. 5. THE ASSESSEE HAD FURTHER MADE ADDITIONS IN RESPECT OF PLANT AND MACHINERY INSTALLED DURING THE YEAR UNDER CONSIDERATION AMOUNTING TO RS. 12, 61,22,825/ - AND CLAIMED ADDITION AL DEPRECIATION THEREON AND OUT OF WHICH AN AMOUNT OF RS. 97,20,200/ - HAD BEEN CLAIMED ON VAPORIZERS , T HE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE ADDITIONAL DEPRECIATION CLAIMED ON VAPORIZERS SHOULD NOT BE DISALLOWED. AFTER TAKING INTO CONSIDERATION THE CONTENTION OF THE ASSESSEE, THE AO DISALLOWED THE SAID DEPRECIATION AND ADDED THE SAID AMOUNT TO THE INCOME OF THE ASSESSEE. 6. THE ASSESSEE HAD FURTHER CLAIMED ADDITIONAL DEPRECIATION OF RS. 1,33,87,616/ - ON MACHINERY INSTALLED I.E., EXHAUST FANS, AC DU CTING OF BOTTLE, WASHING DEPT., PLASTIC PALLETS, SS CONTAINERS WITH LEAD TROLLEY ETC. THE AO AFTER HEARING THE ASSESSEE ADDED THE SAID AMOUN T TO THE INCOME OF THE ASSESSEE AND ASSESSMENT ORDER WAS PASSED U/S 143(3) R.W.S. 144 OF THE ACT DETERMINING THE TOT AL INCOME OF THE ASSESSEE AT RS. 103,94,15,440/ - . 7. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE ASSAILED THE SAME BY FILING FIRST APPEAL BEFORE THE CIT(A). THE LD. CIT(A) AFTER HEARING THE ASSESSEE, 4 ITA NO S . 3974 & 3977 /MUM/2015 ASSESSMENT YEAR: 2009 - 2010 PARTLY ALLOWED THE APPEAL. HOWEVER, STILL AGGRIEVED , THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 8 . THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL AGAINST THE IMPUGNED ORDER PASSED BY THE LD. CIT (A): - 1.0 DISALLOWANCE UNDER SECTION 14A OF THE ACT IN RESPECT OF EXPENDITURE ATTRIBUTABLE TOWARDS EARNING EXEMPT INCOME RS. 3,00,000: 1:1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) ERRED IN UPHOLDING THE DISALLOWANCE UNDER SECTION 14A OF THE ACT TO THE EXTENT OF RS. 3,00,000/ - AS BEING INCURRED BY THE APPELLAN T FOR EARNING EXEMPT INCOME. 1:2 THE CIT (A) ERRED IN NOT APPRECIATING THE FACT THAT THE PROVISIONS OF SUB - SECTION (2) OF SECTION 14A OF THE ACT CAN BE INVOKED ONLY IF THE LEARNED AO, HAVING REGARD TO THE ACCOUNTS OF THE APPELLANT, WAS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE APPELLANT IN RESPECT OF SUCH EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM A PART OF THE TOTAL INCOME UNDER THE ACT. 1:3 THE CIT (A) ERRED IN NOT APPRECIATING THE FACT THAT THE INVESTMENTS WERE STATIC AND NO DIR ECT AND INDIRECT EXPENSES WERE INCURRED TO EARN EXEMPT INCOME. 1:4 THE CIT (A) ERRED IN NOT APPRECIATING THE FACT THAT THE PERIOD OF HOLDING OF THE DEBT FUNDS WAS ONLY 1 OR 2 DAYS DURING THE RELEVANT PREVIOUS YEAR. 1:5 THE CIT (A) ERRED IN NOT APPRECIATIN G THE FACT THAT REASONABLE EXPENDITURE AMOUNTING TO RS. 39,169/ - WHICH COULD BE PROPORTIONATELY ALLOCATED TO THE PERIOD OF HOLDING OF DEBT FUNDS WAS ALREADY DISALLOWED BY THE APPELLANT. 2:0 ADDITIONAL DEPRECIATION ON VAPORIZERS CLAIMED AS A DEDUCTION UND ER SECTION 32(1)(IIA) RS. 97,20,200 5 ITA NO S . 3974 & 3977 /MUM/2015 ASSESSMENT YEAR: 2009 - 2010 2.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 97,20,000 BEING ADDITIONAL DEPRECIATION UNDER SECTION 32(1)(IIA) OF THE INCOME TAX ACT, 1961 CL AIMED BY THE APPELLANT ON VAPORIZERS INSTALLED AT HOSPITALS. 3:0 NON COMPUTATION OF DEPRECIATION ON THE REVISED WRITTEN DOWN VALUE OF THE VAPORIZERS 3:1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE APPELLANT SUBMITS THAT DEPRECIATIO N ON VAPORIZERS UNDER SECTION 32 OF THE ACT OUGHT TO BE COMPUTED ON THE REVISED OPENING WRITTEN DOWN VALUE OF THE VAPORIZERS ON GIVING EFFECT TO THE ASSESSMENT/APPELLATE ORDERS FOR EARLIER YEAR. 4:0 QUANTIFYING THE BROUGHT FORWARD LONG TERM CAPITAL LOSS A ND THE LONG TERM CAPITAL LOSS INCURRED DURING THE YEAR TO BE CARRIED FORWARD TO SUBSEQUENT ASSESSMENT YEARS 19,53,40,841 4:1 ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) ERRED IN NOT DIRECTING THE AO TO QUANTIFY THE BROUGHT FORW ARD LONG TERM CAPITAL LOSS AND THE LONG TERM CAPITAL LOSS INCURRED DURING THE YEAR AGGREGATING TO RS. 19,53,40,841 TO BE CARRIED FORWARD FOR SET OFF TO THE SUBSEQUENT ASSESSMENT YEARS. 9. THE FIRST ISSUE PERTAINS TO DISALLOWANCE U/S 14A OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT THE ASSESSEE HAS MADE SUO MOTU DISALLOWANCE OF RS.39,169/ - U/S 14A OF THE ACT, BY ALLOCATING PART OF EMPLOYEES EXPENSES AND ADMINISTRATIVE EXPENSES FOR EARNING THE EXEMPT INCOME IN QUESTION. THE LD. COUN SEL FURTHER CONTENDED T HAT THE INVESTMENTS IN MUTUAL FUNDS UNITS WERE MADE OUT OF SURPLUS FUNDS AVAILABLE WITH THE ASSESSEE AND THAT THE ASSESSEE WAS NOT HAVING ANY BORROWED FUNDS AND IF AT ALL THE DISALLOWANCE SHOULD BE RESTRICTED TO RS. 39,169/ - ALREADY MADE BY THE ASSESSEE. THE LD. COUNSEL FURTHER POINTED OUT THAT SINCE THE DEBT MUTUAL FUNDS 6 ITA NO S . 3974 & 3977 /MUM/2015 ASSESSMENT YEAR: 2009 - 2010 WERE HELD FOR ONE OR TWO DAYS, NO FURTHER DISALLOWANCE U/S 14A WAS CALLED FOR. RELYING UPON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT RENDERED IN GODREJ & BOYCE MFG. LTD. VS. DCIT, 234 CTR 1 (BOM) , THE LD. COUNSEL SUBMITTED THAT THE PROVISION S U/S 14A (2) DO NOT IPSO FACTO EMPOWER THE AO TO APPLY THE METHOD PRESCRIBED UNDER RULE 8D OF THE INCOME TAX RULES. THE SAME CAN BE DONE IF THE AO HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. IN THE PRESENT CASE THE AO HAS NOT RECORDED ANY SATISFACTION TO THIS EFFECT. THE LD. COUNSEL FURTHER SUBMITTED THAT AS PER THE SETTLED LAW IF THE ASSESSEE HAS NO T INCURRED ANY EXPENDITURE TO EARN EXEMPT INCOME NO EXPENDITURE CAN BE DISALLOWED U/S14A OF THE ACT. 10. WITHOUT PREJUDICE IT WAS FURTHER CONTENDED THAT EVEN IF SECTION 14A READ WITH RULE 8D IS APPLICABLE INVESTMENTS IN GROWTH FUNDS AMOUNTING TO RS. 30 , 00,00,000/ - SHOULD BE EXCLUDED FOR CALCULATION PURPOSES AS THE GROWTH FUNDS ARE NOT CAPABLE OF EARNING EXEMPT INCOME. 11. ON THE OTHER HAND THE LD. DEPARTMENTAL REPRESENTATIVE RELYING ON THE FINDINGS OF THE AO SUBMITTED THAT THE AO HAS RIGHTLY APPLIED RULE 8D AND MADE THE DISALLOWANCE ACCORDINGLY. SINCE THE LD. CIT(A) HAS WRONGLY RESTRICTED THE DISALLOWANCE TO RS. 3,00,000/ - , THE DEPARTMENT HAS CHALLENGED THE ACT ION OF THE LD. CIT(A) . 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE MATERIAL ON RECORD IN THE LIGHT OF THE RESPECTIVE SUBMISSIONS. AS POINTED OUT BY THE LD. COUNSEL THE AUTHORITIES BELOW HA VE NOT GIVEN ANY REASON OR POINTED OUT ANY EVI DENCE TO SHOW THAT THE DISALLOWANCE WORKED OUT BY THE ASSESSEE IS WRONG. 13. THE AO HAS NOT RECORDED ANY SATISFACTION BEFORE APPLYING RULE 8D. THE HONBLE DELHI HIGH COURT HAS HELD IN MAXOPP INVESTMENT LTD. VS. CIT(2012) 7 ITA NO S . 3974 & 3977 /MUM/2015 ASSESSMENT YEAR: 2009 - 2010 247 CTR (DELHI) 162 THAT IF THE AO IS SATISFIED ON AN OBJECTIVE ANALYSIS AND FOR COGENT REASONS THAT THE AMOUNT OF SUCH EXPENDITURE AS CLAIMED BY THE ASSESSEE IS NOT CORRECT, HE IS REQUIRED TO DETERMINE THE AMOUNT OF SUCH EXPENDITURE ON THE BASIS OF A REASONABLE AND ACCEPTABLE METHOD OF APP ORTIONMENT . SO THE NECESSITY OF RECORDING SATISFACTION HAS BEEN UPHELD IN THE SAID CASE. HOWEVER, IN THE PRESENT CASE THE AO HAS COMPUTED THE DISALLOWANCE BY APPLYING RULE 8D OF THE INCOME TAX RULES, IN A MECHANICAL MANNER. IN OUR CONSIDERED OPINION, SINCE THE AOS ACTION OF MAKING DISALLOWANCE IS NOT IN ACCORDANCE WITH LAW, THE FINDINGS OF THE LD. CIT(A) IS LIABLE TO BE SET ASIDE. WE, ACCORDINGLY, SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE. AO IS DIRECTED TO RE TAIN THE DISALLOWANCE ALREADY MADE BY THE ASSESSEE IN ITS RETURN OF INCOME AND DELETE THE REMAINING AMOUNT. 14. GROUND NO 2, PERTAINS TO DISALLOWANCE OF ADDITIONAL DEPRECIATION OF RS. 97,20,200/ - CLAIMED U/S 32(1)(IIA) ON VAPORIZERS . THE LD. COUNSEL SUBMI TTED THAT THE MUMBAI BENCH ITAT HAS ALREADY DECIDED THE IDENTICAL GROUND IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE ITA NO 8428/MUM/2011 FOR THE ASSESSMENT YEAR 2007 - 08 AND THE SAID ORDER WAS FOLLOWED IN ASSESSEES APPEAL PERTAINING TO THE ASSESSMENT YEARS 2006 - 07 AND 2008 - 09. 15. ON THE OTHER HAND THE LD. DR RELIED ON THE FINDINGS OF THE LD. CIT(A). HOWEVER, ADMITTED THAT THE IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE. WE NOTICE THAT THE COORDINATE BENCH HAS D ECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN APPEAL FOR THE ASSESSMENT YEAR 2007 - 08 REFERRED ABOVE . THE RELEVANT PORTION OF THE ORDER READS AS UNDER: GROUND NO. 2 DISALLOWANCE OF ADDITIONAL DEPRECIATION CLAIMED BY THE ASSESSEE. 8 ITA NO S . 3974 & 3977 /MUM/2015 ASSESSMENT YEAR: 2009 - 2010 4. THE LD. DRP OF THIS ISSUE IS HELD AS UNDER: THE DRP HAS CAREFULLY CONSIDERED THE FACTS OF THE CASE AND WE ARE OF THE VIEW THAT THE AOS ORDER SHOULD NOT BE INTERFERED WITH. THE PLAIN READING OF THE PROVISION OF SEC. 32(1)(IIA) CLEARLY SHOWS THA T ADDITIONAL DEPRECIATION IS ALLOWED TO AN ASSESSED ENGAGED IN THE BUSINESS OF MANUFACTURING OR PRODUCTION OF AN ARTICLE OR THING. THE ASSESSEE HERE IS INVOLVED PURELY IN TRADING ACTIVITY AND THE ASSET OR PLANT OR MACHINERY ACQUIRED BY IT FOR THE PURPOSE O F ENHANCING ITS TRADING BUSINESS SHOULD NOT BE GET THE BENEFIT OF ADDITIONAL DEPRECIATION. THE VAPORIZERS ARE NOT EVEN DISTINCTLY RELATED TO ITS MANUFACTURING ACTIVITY, HENCE THIS GROUND IS REJECTED. 5. THE LD. AR SUBMITTED THAT ADMITTEDLY VAPORIZERS HAVE BEEN PURCHASED BY THE ASSESSEE. IT IS ALSO AN ADMITTED FACT THAT THE ASSESSEE IS ENGAGED IN MANUFACTURING ACTIVITIES. THE LD. AR SUBMITS THAT THE ASSESSEE HAS ENGAGED IN MANUFACTURING ACTIVATES AND SINCE VAPORIZERS ARE NOT INSTALLED AT ITS OFFICE PRE MISES, THE SUM IS QUALIFIED FOR ADDITIONAL DEPRECIATION. THE LD. AR PLACED HIS RELEVANCE ON: 1. CIT VS. DIAMINES AND CHEMICALS LTD. REPORTED IN 109 DTR (GUJ) 62. 2. CIT VS. VTM LTD. REPORTED IN (2009) 319 ITR 336 (MAD). 6. THE LD. DR RELIES ON THE ORDER O F DRP. 5. WE HAVE PERUSED THE ORDERS PASSED BY THE AUTHORITIES BELOW, THE SUBMISSION BY BOTH THE PARTIES AND THE JUDGMENTS RELIED UPON BY THE LD. AR BEFORE WE START WITH OUR OBSERVATION, SECTION (1)(IIA), AS IT STOOD AT THE RELEVANT ASSESSMENT YEAR, I S UNDER: DEPRECIATION 32.5 ITA NO. 8428/ MUM/2011 ENGAGED IN MANUFACTURING ACTIVITIES. THE LD. AR SUBMITS THAT THE ASSESSEE HAS BEEN ENGAGED IN MANUFACTURING ACTIVATES, AND SINCE 9 ITA NO S . 3974 & 3977 /MUM/2015 ASSESSMENT YEAR: 2009 - 2010 VAPORIZERS ARE NOT INSTALLED AT ITS OFFICE PREMISES, THE SUM IS QUALIFIED F OR ADDITIONAL DEPRECIATION. THE LD. AR PLACED HIS RELEVANCE ON: 1. CIT VS. DIAMINES AND CHEMICALS LTD. REPORTED IN 109 DTR (GUJ) 62. 2. CIT VS. VTM LTD. REPORTED IN (2009) 319 ITR 336 (MAD 6. THE LD. DR RELIES ON THE ORDER OF DRP. 5. WE HAVE PERUSED T HE ORDERS PASSED BY THE AUTHORITIES BELOW, THE SUBMISSIONS BY BOTH THE PARTIES AND THE JUDGMENTS RELIED UPON BY THE LD. AR. BEFORE WE START WITH OUR OBSERVATION, SECTION 32(1)(IIA), AS IT STOOD AT THE RELEVANT ASSESSMENT YEAR, IS UNDER: DEPRECIATION 32* (1) IN RESPECT OF DEPRECIATION OF - (IIA) IN THE CASE OF ANY NEW MACHINERY OR PLANT (OTHER THAN SHIPS AND AIRCRAFT), WHICH HAS ACQUIRED AND INSTALLED AFTER THE 31 ST DAY OF MARCH, 2005, BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING OR IN THE BUSINESS OF GENERATION OR GENERATION AND DISTRIBUTION OF POWER, A FURTHER SUM EQUAL TO TWENTY PER CENT OF THE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UNDER CLAUSE (II): PROVIDED THAT NO DEDUCTIO N SHALL BE ALLOWED IN RESPECT OF - (A) ANY MACHINERY OR PLANT WHICH, BEFORE ITS INSTALLATION BY THE ASSESSEE, WAS USED EITHER WITHIN OR OUTSIDE INDIA BY ANY OTHER PERSONS, OR (B) ANY MACHINERY OR PLANT INSTALLED IN ANY OFFICE PREMISES OR ANY RESIDENTIAL ACCOMMODATI ON, INCLUDING ACCOMMODATION IN THE NATURE OF A GUEST - HOUSE, OR (C) ANY OFFICE APPLIANCES OR ROAD TRANSPORT VEHICLES, OR (D) ANY MACHINERY OR PLANT, THE WHOLE OF THE ACTUAL COST OF WHICH IS ALLOWED AS A DEDUCTION (WHETHER BY WAY OF DEPRECIATION OR OTHERWISE) IN C OMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 10 ITA NO S . 3974 & 3977 /MUM/2015 ASSESSMENT YEAR: 2009 - 2010 PROFITS AND GAINS OF BUSINESS OR PROFESSION OF ANYONE PREVIOUS YEAR. 7. THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. IS. COSMO FILMS LTD., BEARING ITA NO. 2831/DEL/2007, INTER - ALIA HAD THE OC CASION TO EXAMINE THE PROVISIONS RELATING TO THE GRANT OF ADDITIONAL DEPRECIATION . THE TRIBUNAL HELD THEREIN THAT, THE ASSESSE E WOULD BE ABLE TO CLAIM THE ADDITIONAL DEPRECIATION. WHILE DOING SO, THE TRIBUNAL REFERRED TO THE SPEECH OF FINANCE MINISTER WHIL E INSERTING THE RELEVANT PROVISIONS, WHEN IT WAS STATED THAT THIS CLAUSE WAS INSERTED TO PROVIDE AN INCENTIVE FOR FRESH INVESTMENT IN INDUSTRIAL SECTOR. 8. IT OBSERVED THAT THIS PROVISION HAS BEEN DIRECTED TOWARDS ENCOURAGING INDUSTRIALIZATION BY ALL OWING ADDITIONAL BENEFIT TO THE TAX PAYERS SETTING UP NEW INDUSTRIAL UNDERTAKINGS/MAKING MORE INVESTMENT IN CAPITAL GOODS. THUS, THESE ARE INCENTIVES AIMED TO BOOST NEW INVESTMENTS IN SETTING UP AND EXPANDING THE UNITS. 9. IN THE FACTS OF THE PRESENT CASE THE ASSESSEE HAS INSTALLED VAPORIZERS AMOUNTING TO RS. 35,58,040/ - AT ITS HOSPITALS. THE REVENUE HAS NOT DISPUTED THE FACT THAT, THE ASSESSEE IS NOT ENGAGED IN MAN UFACTURING ACTIVITIES, CARRIED ON AT GOA PLANT. THE ASSESSEE PROVIDES HEALTH CARE SOLUT IONS THROUGH ITS FAIR MARKETING ARMS BEING PRIMARY CARE, SPECIALTY CARE, NEUROSCIENCE AND HOSPITALS CARE. AS FAR AS THE APPLICATION OF SEC. 32(1)(IIA) OF THE ACT AS CONCERN, THE ASSESSEE IS REQUIRED SATISFY THE STIPULATED CONDITIONS IN ORDER TO CLAIM ADDIT IONAL DEPRECIATION. WE OBSERVE THAT IN PARA 23.2 OF THE FINAL ORDER PASSED BY THE LD. AO, THE FACTUAL POSITION IN RESPECT OF THE MACHINERY, HAS BEEN PROVIDED VIS - - VIS THE CONDITIONS U/S 321(IIA) OF THE ACT. THE LD. AO, HAS DISALLOWED THE ADDITIONAL DEPREC IATION ONLY ON THE GROUND THAT THE ASSESSEE HAS BEEN INTO TRADING ACTIVITY. APART FROM THE MANUFACTURING ACTIVITY CARRIED ON BY THE ASSESSEE, IT ALSO PROVIDES HEALTH CARE SOLUTIONS. THE VAPORIZERS PURCHASED BY THE ASSESSEE ARE RETAINED BY THE ASSESSEE ITSE LF. 10. IN OUR CONSIDERED OPINION, SECTION 32(1)(IIA) DOES NOT STATE THAT SETTING UP OF A NEW MACHINERY OR A PLANT, WHICH WAS ACQUIRED AND INSTALLED AFTER 31.03.2005, SHOULD HAVE AN OPERATIONAL CONNECTIVITY TO 11 ITA NO S . 3974 & 3977 /MUM/2015 ASSESSMENT YEAR: 2009 - 2010 THE ARTICLE OR THING THAT WAS ALREADY BEI NG MANUFACTURED BY THE ASSESSEE. THEREFORE THE REASONING OF THE LD. AO THAT THE VAPORIZERS, HAS NOTHING TO DO WITH THE MANUFACTURING OF ARTICLES ETC., IS TOTALLY NOT GERMANE TO THE SPECIFIC PROVISIONS CONTAINED IN SECTION 31 (1) (IIA) OF THE ACT. 11. I N THE LIGHT OF THE ABOVE THAT DISCUSSION, WE HOLD THAT THE ASSESSEE IS ELIGIBLE FOR ADDITIONAL DEPRECIATION ON VAPORIZERS U/S 32(1)(IIA) OF THE ACT. 16. WE FURTHER NOTICE THAT THE COORDINATE BENCH HAS DECIDED THE IDENTICAL ISSUE S IN FAVOUR OF THE ASSE SSEE IN ASSESSEES OWN APPEAL ITA NO 3472/MUM/2013 FOR THE ASSESSMENT YEAR 2006 - 07 AND ITA NO. 832/ MUM/ 2 013 FOR THE ASSESSMENT YEAR 2008 - 09 BY FOLLOWING THE EARLIER DECISION OF THE COORDINATE BENCH RENDERED IN ASSESSEES OWN APPEAL PE RTAINING TO THE ASSES SMENT YEAR 2007 - 08 DISCUSSED ABOVE. WE, THEREFORE, RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THE COORDINATE BENCH SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND ALLOW THIS GROUND OF THE APPEAL OF THE ASSESSEE . 17. SO FAR AS THE G ROUND NO 3 IS CONCERNED, SIN CE WE HAVE ALLOWED GROUND NO 2 OF THE APPEAL, THE SAME HAS BECOME INFRUCTUOUS. HENCE, NO ADJUDICATION IS REQUIRED ON THE ISSUE INVOLVED IN THIS GROUND. 18. THE LAST GROUND OF APPEAL WAS RAISED BY THE ASSESSEE AS AN ADDITIONAL GROUND DURING THE APPELLATE P ROCEEDINGS BEFORE THE LD. CIT(A). THE ASSESSEE HAD INCURRED LONG TERM CAPITAL LOSS OF RS. 5,25,17,770/ - ON SALE OF UNITS OF MUTUAL FUNDS DURING ASSESSMENT YEAR 2009 - 10. FURTHER THE ASSESSEE HAD CARRIED FORWARD THE SIMILAR LOSS OF RS. 14,28,23,071/ - FROM TH E EARLIER YEARS. SINCE, THE AO HAD NOT QUANTIFIED THE LOSS TO BE CARRIED FORWARD FOR SET OFF IN THE SUBSEQUENT ASSESSMENT YEARS, T HE ASSESSEE URGED BEFORE THE LD. CIT(A) THAT THE LOSS BROUGHT FORWARD FROM EARLIER YEARS IS REQUIRED TO BE QUANTIFIED AND 12 ITA NO S . 3974 & 3977 /MUM/2015 ASSESSMENT YEAR: 2009 - 2010 CARR IED FORWARD TO SUBSEQUENT YEARS U/S 74 OF THE OF THE ACT AND THE SAME NEEDS TO BE MENTIONED IN THE ASSESSMENT ORDER U/S 157 OF THE ACT. 19. THE LD. CIT(A) DID NOT ADJUDICATE THE ISSUE HOLDING THAT SINCE THE ISSUE RAISED BY THE ASSESSEE THROUGH THE ADDITI ONAL GROUND DOES NOT EMANATE FROM THE ORDER OF THE AO, THE SAME IS NOT ADJUDICATED UPON. CONSEQUENTLY, THE ASSESSEE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) CONTENDING THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) ERRED IN N OT DIRECTING THE AO TO QUANTIFY THE BROUGHT FORWARD LONG TERM CAPITAL LOSS AND THE LONG TERM CAPITAL LOSS INCURRED DURING THE YEAR AGGREGATING TO RS. 19,53,40,841 TO BE CARRIED FORWARD FOR SET OFF TO THE SUBSEQUENT ASSESSMENT YEARS . THE LD. DR RELIED ON TH E FINDINGS OF THE LD. CIT(A). 20. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND AL SO GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. SECTION 157 OF THE ACT SAYS THAT WHEN IN THE COURSE OF ASSESSMENT OF THE TOTAL INCOME OF ANY ASSESSEE , IT IS ESTABLISHED THAT A LOSS HAS TAKEN PLACE WHICH THE ASSESSEE IS ENTITLED TO HAVE CARRIED FORWARD A N D SET OFF UNDER THE PROVISIONS OF THE ACT, THE AO SHALL NOTIFY TO THE ASSESSEE BY AN ORDER IN WRITING THE AMOUNT OF LOSS AS COMPUTED BY HIM FOR THE PURPOSES OF SUB - SECTION (1) OF SECTION 72, SUB - SECTION (2) OF SECTION 73, SUB - SECTION(1) OR SUB - SECTION (3) OF SECTION 74 OR SUB - SECTION (3) OF SECTION 74A. SO, IN OUR CONSIDERED OPINION, THE LD. CIT (A) OUGHT TO HAVE ADJUDICATED THE ISSUE RAISED BY THE ASSESSEE. WE, THEREFORE, ALLOW THIS GROUND OF THE APPEAL AND DIRECT THE AO TO VERIFY THE CLAIM AND NOTIFY THE SAME IN ACCORDANCE WITH THE PROVISIONS OF SECTION 157 OF THE ACT. ITA NO. 3977 /MUM/2015 (ASSE SSMENT Y EAR: 2009 - 2010 ) THE REVENUE HAS ASSAILED THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) ON THE FOLLOWING EFFECTIVE GROUND : - 13 ITA NO S . 3974 & 3977 /MUM/2015 ASSESSMENT YEAR: 2009 - 2010 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN IGNORING THE FACT THAT THE ASSESSING OFFICER HAS ADOPTED THE PROVISION OF RULE 8D FOR COMPUTING THE DISALLOWANCE U/S 1 4A OF THE I.T. ACT AND THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. COMPANY LTD. 328 ITR 81 WHEREIN IT HAS BEEN HELD THAT THE PROVISIONS OF RULE 8D ARE APPLICABLE FROM A.Y. 2008 - 09. 2. SINCE, WE HAVE SET ASIDE THE FINDINGS OF THE LD. CIT(A) ON THE ISSUE OF DISALLOWANCE U/S 14A READ WITH RULE 8D AND ALLOWED THIS GROUND OF THE APPEAL OF THE ASSESSEE, THIS GROUND OF THE REVENUE DOES NOT SURVIVE. HENCE, WE DISMISS THE SOLE GROUND OF THE APPEAL OF THE REVENUE. IN THE RESULT, THE ASSESSEE S APPEAL IS ALLOWED AND THE REVENUE S APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 31 ST JULY , 2017 . SD/ - SD/ - ( G.S. PANNU ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 31 / 0 7 / 2017 ALINDRA PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . 14 ITA NO S . 3974 & 3977 /MUM/2015 ASSESSMENT YEAR: 2009 - 2010 / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI