ACIT RG 3(1), MUMBAI V. DEEPAK FERTILISERS & PETROCHEMICALS CORPORATION LTD, MUMBAI

ITA 5027/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48929 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 09-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 02-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANDEEP DAHIYA
• Assessee Lawyers: H P MAHAJANI
• Keywords: Depreciation; Rule of consistency; Additional depreciation
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI P.M. JAGTAP (AM) AND SMT. ASHA VIJAYARAGHAVAN (JM) ITA NO. 4904/MUM/2009 ASSESSMENT YEAR-2006-07 M/S. DEEPAK FERTILISERS & PETROCHEMICALS CORPN. LTD., 10-B, BAKHTAWAR, NARIMAN POINT, MUMBAI-400 021 PAN-AAACD 1388D VS. THE DCIT, CIRCLE 3(1), AAYAKAR BHAVAN, MUMBAI-400 020 (APPELLANT) (RESPONDENT) ITA NO. 5027/MUM/2009 ASSESSMENT YEAR-2006-07 THE DCIT, CIRCLE 3(1), AAYAKAR BHAVAN, MUMBAI-400 020 VS. M/S. DEEPAK FERTILISERS & PETROCHEMICALS CORPN. LTD., 10-B, BAKHTAWAR, NARIMAN POINT, MUMBAI-400 021 PAN-AAACD 1388D (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI H.P. MAHAJANI DEPARTMENT BY : SHRI SANDEEP DAHIYA O R D E R PER ASHA VIJAYARAGHAVAN (JM) THIS SET OF CROSS APPEALS CONSISTING OF ONE APPEAL FILED BY THE ASSESSEE AND THE OTHER APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDERS DT. 1.6.2009 PASSED BY THE LD. CIT(A)-XX VIII FOR THE ASSESSMENT YEAR 2006-07. DEEPAK FERTILISERS 2 2. THE ASSESSEE IS A PUBLIC LIMITED COMPANY HAVING ITS FACTORY AT TALOJA, DIST. RAIGAD AND ENGAGED IN MANUFACTURE AND SALE OF CHEMICALS AND FERTILIZERS AS WELL AS GENERATION OF ELECTRICIT Y. THE ASSESSEE IS ALSO ENGAGED IN THE BUSINESS OF TRADING IN CHEMICALS AND FERTILIZERS. 3. THE ASSESSEE FILED ITS RETURN OF INCOME DECLARIN G A TAXABLE INCOME OF RS.1,07,69,09,439/-. HOWEVER, THE ACIT COMPLETE D THE ASSESSMENT DETERMINING THE TAXABLE INCOME AT RS.1,10,90,07,090 /-. WHILE ASSESSING THE TAXABLE INCOME, THE ACIT DISALLOWED SOME CLAIMS . ITA NO. 4904/M/08-ASSESSEES APPEAL 4. THE FIRST ISSUE IN THE ASSESSEES APPEAL IS REGA RDING THE DISALLOWANCE OF [PROVISION MADE FOR OBSOLETE STORES / SPARES. DURING THE ASSESSMENT YEAR THE APPELLANT MADE PROVISION IN THE ACCOUNTS AMOUNTING TO RS.16,37,358 TOWARDS STORES AND SPARES AND ALSO HAD SOLD OFF / USED STORE SPARES VALUED AT RS.35,40,882 AND CREDITED THIS AMOUNT TO THE PROFIT & LOSS ACCOUNT. THE ASSESSEE CLAIMED THAT THE COMPANY WAS ENTITLED TO DEDUCTION OF RS.35,40,882/-. AS PER THE JUDGMENT IN THE CASE OF CIT VS HERDILLA CHEMICALS 225 ITR 532 THE ASSESS EE CLAIMED THAT AN AMOUNT OF RS.19,03,124 (RS.35,40,882 RS.16,37,758 ) SHOULD HAVE BEEN ALLOWED AS DEDUCTION WHILE COMPUTING THE TAXABLE IN COME FOR THE YEAR. HOWEVER, THE LD. ADDITIONAL COMMISSIONER DID NOT AL LOW THE CLAIM OF RS.35,40,882/- AND ADDED BACK THE PROVISION OF RS.1 6,37,758/-. THE AGGRIEVED ASSESSEE HAS FILED AN APPEAL BEFORE THE C IT(A). THE LD. CIT(A) HELD AS FOLLOWS: 6.2 THE ISSUE WAS DECIDED AGAINST THE ASSESSEE BY THE HONBLE ITAT FOR THE AY 97-98 WITH THE DIRECTION TH E APPELLANT WOULD BE ENTITLED TO CLAIM DEDUCTION ON ACCOUNT OF LOSS I N THE YEAR IN WHICH THE ITEMS WERE SOLD. RESPECTFULLY FOLLOWING THE DE CISION OF ITAT, THE DEEPAK FERTILISERS 3 ASSESSING OFFICER IS DIRECTED TO ALLOW CREDIT FOR V ALUE OF STORES AND SPARES SOLD DURING THE YEAR OF RS.35,40,882/-. THE DISALLOWANCES MADE BY THE ASSESSING OFFICER TOWARDS THE PROVISION OF RS.16,37,758/- IS CONFIRMED. 5. AGGRIEVED THE ASSESSEE IS ON APPEAL BEFORE US RE GARDING DISALLOWANCE OF PROVISION MADE FOR STORES/SPARES. WE FIND THAT THIS ISSUE HAS BEEN DECIDED BY THE ITAT IN ASSESSEES OWN CASE BY THE ITAT FOR THE AY 97-98 IN ITA NO. 2188/M/04 WHEREIN AT PARAS 21-2 2 THE ITAT HAS HELD AS FOLLOWS: 21. THE NEXT ISSUE COMMON TO ALL THE APPEALS RELAT ES TO DISALLOWANCE OF PROVISIONS FOR OBSOLETE INVENTORY. FOR THE SAKE OF CONVENIENCE THE FACTS RELATING TO THE ASSESSMENT YE AR 1997-98 ARE BEING NARRATED. THE ASSESSEE HAD WRITTEN OFF THE S UM OF RS.11,20,000/- ON ACCOUNT OF ITEMS CONSIDERED OBSOL ETE. SUCH ITEMS INCLUDED INSTRUMENT ITEMS, CEMENT, PAINT AND PAINT MATERIALS, SAFETY SHOES AND DRESS MATERIAL. THE ASSESSING OFFICER DI SALLOWED THE CLAIM OF THE ASSESSEE FOLLOWING THE BOMBAY HIGH COU RT JUDGMENT IN THE CASE OF HERDILLA CHEMICALS LTD. 225 ITR 532 WHE REIN IT WAS HELD THAT SUCH LOSS CANNOT BE CLAIMED IN ANY YEAR IN WHI CH ASSESSEE LIKES. SUCH LOSS CAN BE CLAIMED ONLY IN THE YEAR I N WHICH SUCH ITEMS ARE SOLD AND DISPOSED OFF. ON APPEAL, THE DISALLOWA NCE MADE BY ASSESSING OFFICER WAS CONFIRMED. AGGRIEVED BY THE SAME THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL FOR ALL T HE YEARS. 22. CONTENTION RAISED ON BEHALF OF THE ASSESSEE IS THAT THE DECISION OF THE BOMBAY HIGH COURT DID NOT CONSIDER THE ACCOUNTING STANDARD PRESCRIBED BY THE INSTITUTE OF CHARTERED A CCOUNTANTS WHICH WERE BINDING ON THE ASSESSEE. THEREFORE, THE SAID DECISION SHOULD NOT BE RELIED. IT WAS ALSO CONTENDED THAT T HE STOCKS CAN BE VALUED AT COST OR MARKET VALUE AS PER THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CHAINRUP SAMPATRAM 24 ITR 481. IN OUR OPINION BOTH THE CONTENTIONS ARE WITHOUT FORCE. NORMALLY, THE ACCOUNTING STANDARDS IS ACCEPTED BUT IT CANNOT OVER RIDE THE PROVISIONS OF THE I.T. ACT AS HELD BY THE SUPREME C OURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LTD. 227 ITR 172. THE JUDGMENT OF BOMBAY HIGH COURT WOULD THEREFORE APPLY TO THE PRESENT CASE WHEREIN IT HAS BEEN CLEARLY HELD THAT LOSS CAN BE CLAIMED ONLY IN THE YEAR IN WHICH SUCH ITEMS ARE SO LD. THE DECISION OF SUPREME COURT IN THE CASE OF CHAINRUP SAMPATRAM (SUPRA) IS APPLICABLE ONLY WHERE STOCK IN TRADE IS TO BE VALUE D AND NOT OTHER DEEPAK FERTILISERS 4 ITEMS. IN THE PRESENT CASE, THE ITEMS WRITTEN OFF DO NOT FORM PART OF STOCK IN TRADE. HENCE, THE SAID DECISION WOULD NOT APPLY. NO OTHER CONTENTION HAS BEEN RAISED. THEREFORE, FOLLOWING T HE JUDGMENT OF BOMBAY HIGH COURT IN THE CASE OF HEREDILLA CHEMICAL S LTD (SUPRA) WE DO NOT FIND ANY MERIT IN THE APPEALS OF THE ASSE SSEE ON THIS ISSUE. THE ORDERS OF THE LEARNED CIT(A) ARE THEREF ORE UPHELD ON THIS ISSUE. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDIN ATE BENCH WE UPHOLD THE ORDER OF CIT(A) ON THIS ISSUE. HOWEVER WE MAKE IT CLEAR THAT THE ASSESSEE WOULD BE AT LIBERTY TO CLAIM DEDUCTIO N ON ACCOUNT OF LOSS IN THE YEARS IN WHICH SUCH ITEMS ARE SOLD. THE ASSESS ING OFFICER SHALL LOOK INTO THE MATTER IF NECESSARY EVIDENCES ARE FILED BE FORE HIM. TO THAT EXTENT, THE ORDER OF THE LEARNED CIT(A) IS MODIFIED . 6. GROUND NO.1 PART-2 IS NOT PRESSED BY THE ASSESSE E AND IS DISMISSED AS NOT PRESSED. 7. THE SECOND ISSUE IS DISALLOWANCE U/S 14A READ WI TH RULE8D. THE FACTS OF THE ISSUE IS THAT THE ASSESSEE CLAIMED DIV IDEND INCOME OF RS.7,50,76,831/- S EXEMPT FROM TAX. THE ASSESSING OFFICER WORKED OUT THE DISALLOWANCE U/S 14A IN ACCORDANCE WITH RULE8D AT RS.2,35,68,500/-. ON FURTHER APPEAL BEFORE THE CIT (A), THE COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD ALREAD Y DISALLOWED THE AMOUNT OF RS.1,37,00,382/-. IT WAS FURTHER SUBMITT ED THAT NO PART OF SUCH EXPENDITURE CAN BE ATTRIBUTABLE TOWARDS EARNIN G THE TAX FREE DIVIDEND INCOME. THE CIT(A) DISMISSED THE CLAIM OF THE ASSESSEE HOLDING AS UNDER: I HAVE CAREFULLY CONSIDERED THE INFORMATION ON REC ORD. THE HONBLE TRIBUNAL SPECIAL BRANCH MUMBAI IN CASE OF D AGA CAPITAL MANAGEMENT LTD HELD THAT THE PROVISIONS OF SECTION 14A(2) AND (3) OR RETROSPECTIVE IN NATURE AND RULE 8D WOULD APPLY ACCORDINGLY. SINCE THIS DECISION IS BEING FOLLOWED IN ALL CASES WHEREVER SECTION 14A IS INVOLVED, I DO NOT FIND ANY INFIRMITY IN AC TION TAKEN BY THE DEEPAK FERTILISERS 5 ASSESSING OFFICER. FURTHER, RULE 8D PRESCRIBES THA T THE AVERAGE VALUE OF ASSETS AT THE BEGINNING AND AT THE END OF THE YEAR IS TO BE CONSIDERED FOR THE PURPOSE OF RULE 8D. NOWHERE IT IS MENTIONED THAT THE GROSS VALUE OF THE FIXED ASSETS AND NOT WDV SHO ULD BE TAKEN. REGARDING INVESTMENT IN SUBSIDIARY COMPANY STARCHEM , RULE 8D DO NOT DIFFERENTIATE WHETHER THE INVESTMENT IS FOR THE PURPOSE OF BUSINESS AND ALSO IN VIEW OF THE FACT THAT SUCH DIS ALLOWANCE IS CONFIRMED BY THE CIT(A) ORDER FOR AY 2005-06, FOLLO WING THE RULE OF CONSISTENCY THE DISALLOWANCE MADE THE ASSESSING OFF ICER U/S.14A IS CONFIRMED. 8. THE JURISDICTIONAL HIGH COURT IN THE CASE OF GOD REJ & BOYCE MFG CO LTD V DCIT (328 ITR 81) HAS HELD THAT RULE 8D, FOR DET ERMINING THE DISALLOWANCE U/S 14A IS PROSPECTIVE IN ITS APPLICAT ION AND WOULD BE APPLICABLE FOR THE AY 2008-09 AND LATER. IN RESPECT OF EARLIER YEARS THE AO SHOULD DETERMINE THE DISALLOWANCE ON A REASONABLE B ASIS HAVING REGARD TO ALL FACTS AND CIRCUMSTANCES OF THE CASE. IN THIS CASE THE ASSESSEE THEMSELVES HAVE DISALLOWED THE AMOUNT OF RS.1,37,00 ,382/-. THE ASSESSING OFFICER SHOULD EXAMINE WHETHER THIS DISAL LOWANCE OFFERED BY THE ASSESSEE THEMSELVES IS REASONABLE AND IF NOT EX PLAIN WHY IT IS NOT SO. IN THIS VIEW OF THE MATTER WE REMIT THE MATTER BACK TO THE FILE OF THE AO TO REWORK THE DISALLOWANCE U/S 14A ON A REASONABLE MAN NER. 8.1 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA 5027/M/09 DEPARTMENTAL APPEAL 9. THE FIRST ISSUE IS WITH RESPECT TO PRIOR PERIOD EXPENSES CLAIMED AS A DEDUCTION BY THE ASSESSEE. THE CIT(A) ALLOWED THE A SSESSEES CLAIM AS UNDER: I HAVE CAREFULLY CONSIDERED THE INFORMATION ON REC ORD. FROM THE DETAILS OF THE PRIOR PERIOD EXPENSES CLAIMED, THE EXPENSES PERTAINED TO DISCOUNT CRYSTALLIZED DURING THE YEAR. SIMILAR EXPENSES DEEPAK FERTILISERS 6 WERE ALLOWED BY CIT(A) FOR AY 05-06 VIDE ORDER DT.1 0.07.2008. THE HONBLE ITAT FOR AY 97-98 ALSO ALLOWED SUCH EXPENSE S. THE OBSERVATIONS OF THE ITAT ARE AS UNDER: THE NEXT ISSUE RELATES TO THE DISALLOWANCE IN RESP ECT OF PRIOR PERIOD EXPENSES. THIS ISSUE ARISES IN THE ASSESSM ENT YEARS 1997-98, 98-99 AND 2000-01. THE DISALLOWANCE HAS B EEN MADE WITHOUT MUCH DISCUSSION BY THE ASSESSING OFFIC ER IN THESE YEARS BUT THE LEARNED CIT(A) FOLLOWING HIS EA RLIER ORDER DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. IT HA D BEEN CONTENDED BEFORE LEARNED CIT(A) THAT CERTAIN EXPENS ES ARE NOT SUPPORTED BY THE BILLS/VOUCHERS AND SOMETIMES THE C LAIMS ARE NOT PROCESSED AND ACCEPTED BY THE ACCOUNTS DEPARTME NT. AS AND WHEN SUCH BILLS/VOUCHERS ARE RECEIVED OR CLAIMS ARE SETTLED, THE EXPENSES ARE BOOKED THROUGH SOMETIMES IT MAY RELATE TO THE EARLIER YEARS. IT WAS ALSO SUBMITTED THAT SUCH PROCEDURE WAS BEING FOLLOWED CONSISTENTLY. THE LEA RNED CIT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE. TH E LEARNED CIT(A) ALSO TOOK INTO CONSIDERATION THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF NAGRI MILLS CO LTD. 33 IT R 681 WHEREIN THEIR LORDSHIPS OBSERVED THAT WHERE THE DED UCTION IS OBVIOUSLY A PERMISSIBLE DEDUCTION THEN THE DEPARTME NT SHOULD NOT DISPUTE AS TO THE YEAR IN WHICH DEDUCTION SHOUL D ALLOWED. FOLLOWING THE AFORESAID OBSERVATIONS OF BOMBAY HIGH COURT AND FOR THE SAKE OF CONSISTENCY, THE LEARNED CIT(A) UPHELD THE CONTENTION OF THE ASSESSEE AND CONSEQUENTLY, DISALL OWANCES MADE BY THE ASSESSING OFFICER WERE DELETED. AGGRIE VED BY THE SAME, THE REVENUE IS IN APPEALS BEFORE THE TRIB UNAL. AFTER HEARING BOTH THE PARTIES, WE FIND THAT THE ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF THE TRIBUNAL DATED 31 ST DECEMBER, 2004 IN ASSESSEES OWN CASE FOR THE ASSES SMENT YEAR 1990/-91, WHEREIN THE SYSTEM OF ACCOUNTING ADO PTED BY THE ASSESSEE HAS BEEN ACCEPTED. THEREFORE, FOLLOWI NG THE SAME, THE ORDERS OF THE LEARNED CIT(A) ARE UPHELD. SINCE THE FACTS AND CIRCUMSTANCES ARE EXACTLY SAME, FOLLOWING THE PRINCIPLES OF CONSISTENCY THE ADDITIO N MADE BY THE ASSESSING OFFICER OF RS.13,11,309/- TOWARDS PR IOR PERIOD EXPENSES IS DELETED. 10. AGGRIEVED THE DEPARTMENT IS ON APPEAL BEFORE US . WE FIND THAT ON THIS VERY SAME ISSUE, THE ITAT BY ITS ORDER DT. 21. 9.2007 FOR ASSESSMENT YEAR 1997-98 HAS HELD AS FOLLOWS: DEEPAK FERTILISERS 7 THE NEXT ISSUE RELATES TO THE DISALLOWANCE IN RESP ECT OF PRIOR PERIOD EXPENSES. THIS ISSUE ARISES IN THE ASSESSMENT YEAR S 1997-98, 1998-99 AND 2000-01. THE DISALLOWANCE HAS BEEN MAD E WITHOUT MUCH DISCUSSION BY THE ASSESSING OFFIER IN THESE YE ARS BUT THE LEARNED CIT(A) FOLLOWING HIS EARLIER ORDER DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. IT HAD BEEN CONTENDED BEFORE LEAR NED CIT(A) THAT CERTAIN EXPENSES ARE NOT SUPPORTED BY THE BILLS/VOU CHERS AND SOMETIMES THE CLAIMS ARE NOT PROCESSED AND ACCEPTED BY THE ACCOUNTS DEPARTMENT. AS AND WHEN SUCH BILLS/VOUCHE RS ARE RECEIVED OR CLAIMS ARE SETTLED, THE EXPENSES ARE BO OKED THROUGH SOMETIMES IT MAY RELATE TO THE EARLIER YEARS. IT W AS ALSO SUBMITTED THAT SUCH PROCEDURE WAS BEING FOLLOWED CONSISTENTLY . THE LEARNED CIT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE. TH E LEARNED CIT(A) ALSO TOOK INTO CONSIDERATION THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF NAGRI MILLS CO LTD. 33 ITR 681 WHEREIN THEIR LORDSHIPS OBSERVED THAT WHERE THE DEDUCTION IS OBVIOUSLY A PE RMISSIBLE DEDUCTION THEN THE DEPARTMENT SHOULD NOT DISPUTE AS TO THE YEAR IN WHICH DEDUCTION SHOULD ALLOWED. FOLLOWING THE AFOR ESAID OBSERVATIONS OF BOMBAY HIGH COURT AND FOR THE SAKE OF CONSISTENCY, THE LEARNED CIT(A) UPHELD THE CONTENTION OF THE ASS ESSEE AND CONSEQUENTLY, DISALLOWANCES MADE BY THE ASSESSING O FFICER WERE DELETED. AGGRIEVED BY THE SAME, THE REVENUE IS IN APPEALS BEFORE THE TRIBUNAL. AFTER HEARING BOTH THE PARTIES, WE F IND THAT THE ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF TH E TRIBUNAL DATED 31 ST DECEMBER, 2004 IN ASSESSEES OWN CASE FOR THE ASSE SSMENT YEAR 1990/-91, WHEREIN THE SYSTEM OF ACCOUNTING ADO PTED BY THE ASSESSEE HAS BEEN ACCEPTED. THEREFORE, FOLLOWING T HE SAME, THE ORDERS OF THE LEARNED CIT(A) ARE UPHELD. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDIN ATE BENCH IN ASSESSEES OWN CASE FOR EARLIER YEARS, WE DISMISS T HE DEPARTMENTAL APPEAL ON THIS ISSUE. 11. THE NEXT ISSUE IN THE DEPARTMENTAL APPEAL IS AG AINST GRANT OF DEPRECIATION ON BUILDINGS. THE ASSESSEE CLAIMED DEP RECIATION IN RESPECT OF A FLAT WHICH HAS BEEN USED FOR BUSINESS PURPOSES . THE ASSESSING OFFICER DISALLOWED DEPRECIATION ON THE FOLLOWING GR OUNDS. DEEPAK FERTILISERS 8 A) THE ASSESSEE ACQUIRED SHARES AND NOT BUILDING AND H ENCE, NO DEPRECIATION IS ALLOWABLE. B) THE ASSESSEE IS NOT THE OWNER OF THE BUILDING AND H ENCE, IT CANNOT CLAIM DEPRECIATION. C) THE ASSESSEES CLAIM THAT ABOVE TRANSACTION IN PARI MATERIA WITH THAT OF COOPERATIVE SOCIETY IS NOT ACCEPTED SINCE T HIS IS A CASE OF COMPANY AND NOT CO-OPERATIVE SOCIETY AND THEREFORE CANNOT BE EQUATED. 12. THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE OB SERVING AS UNDER: THE ISSUE WAS COVERED IN FAVOUR OF ASSESSEE BY THE ORDER OF CIT(A) FOR A.Y 2004-05 AND 2005-06. THIS WAS ALSO COVERED BY THE HONBLE ITAT IN FAVOUR OF THE ASSESSEE FOR AY 1997-98. THE HONBLE ITAT DISCUSSED THE ISSUE AT LENGTH AND HELD THAT THE WOR D OWNER HAS TO BE UNDERSTOOD IN A WIDER SENSE AND NOT IN THE LEGAL SENSE AS PER THE TRANSFER OF PROPERTY ACT. THE SURE TEST WOULD BE W HETHER THE ASSESSEE CAN EXERCISE THE RIGHT OF THE OWNER TO THE EXCLUSION OF OTHERS? AS THERE IS NO CHANGE IN FACTS AND CIRCUMS TANCES, RESPECTFULLY FOLLOWING THE DECISION OF THE ITAT, TH E ADDITION MADE BY THE ASSESSING OFFICER OF RS.25,55,754/- IS DELETED. 13. AGGRIEVED THE DEPARTMENT IS ON APPEAL. WE FIND THAT FOR THE A.Y 1997-98, THE TRIBUNAL HAS HELD AS FOLLOWS: A BARE READING OF THE AFORESAID ARTICLES SHOWS THA T BY VIRTUE OF HOLDING OF PARTICULAR NOS. OF SHARES HAVING PARTICU LAR DISTINCTIVE NOS., THE HOLDER WOULD BE ENTITLED TO HAVE EXCLUSIVE POSS ESSION OF A PARTICULAR NO. OF FLAT SO AS TO HAVE EXCLUSIVE USE AND OCCUPATION OF THE SAID FLAT. THUS, OWNERSHIP A FLAT IS ATTACHED WITH A PARTICULAR AND SPECIFIC SHARE HAVING SPECIFIED DISTINCTIVE NOS . THEREFORE, IF THAT SHARE IS TRANSFERRED THEN THE ABSOLUTE OWNERSHIP OF THAT FLAT IS AUTOMATICALLY TRANSFERRED TO THE OTHER PARTY AND TH E COMPANY HAS NO POWER TO REFUSE THE TRANSFER OF SUCH SHARE FROM ONE PERSON TO ANOTHER. THIS IS AN ACCEPTABLE MODE OF TRANSFER OF PROPERTY IN THE CASE OF A COMPANY AND IS DULY RECOGNIZED BY SECTION 2(47(VI), SECTION 27(III) AS WELL AS SECTION 269UA(D) OF THE ACT. IN VIEW OF THE ABOVE DISCUSSIONS, WE ARE OF THE VIEW THAT ASSESSEE HAD B ECOME THE OWNER OF THE PROPERTIES BY VIRTUE OF HOLDING OF SHA RES OF YERROWDA DEEPAK FERTILISERS 9 INVESTMENTS LTD AND CONSEQUENTLY IT WAS ENTITLED TO CLAIM DEPRECIATION IN ACCORDANCE WITH THE LAW. THE ORDER OF THE LEARNED CIT(A) IS THEREFORE UPHELD ON THIS ISSUE. RESPECTFULLY FOLLOWING THE DECISION OF THE ITAT IN THE ASSESSEES OWN CASE FOR THE EARLIER YEARS, WE CONFIRM THE ORDE R OF THE CIT(A) GRANTING DEPRECIATION ON THE BUILDINGS AND DISMISS THE REVEN UES APPEAL ON THIS ISSUE. 14. THE NEXT ISSUE IN THE DEPARTMENTAL APPEAL IS AG AINST THE ALLOWANCE OF LOSS IN RESPECT OF R VALUE OF STORES & SPARES SO LD. 15. AS HELD BY US IN ASSESSEES APPEAL SUPRA, ON T HE SAME ISSUE, THE ASSESSEE IS NOT ENTITLED TO ANY DEDUCTION ON THE PR OVISION MADE FOR OBSOLETE STORES/ SPARES, BUT IS ENTITLED TO CLAIM D EDUCTION OF LOSS ARISING FROM ACTUAL SALE OF STORES/SPARES. THE ASSESSING OF FICER SHALL VERIFY THE CORRECTNESS OF COMPUTATION OF LOSS. WITH THE ABOVE DIRECTIONS THE DEPARTMENTAL APPEAL ON THIS ISSUE IS DISMISSED. 16. THE NEXT ISSUE IN THE DEPARTMENTAL APPEAL IS WH ETHER DEPRECIATION IS TO BE ALLOWED ON THE SOFTWARE- ERP SYSTEM CAPITA LISED AT THE RATE OF 60% OR 25% . 17. THE CIT(A) HAS HELD AS FOLLOWS: THE APPELLANT HAS SPENT A SUM OF RS.263.74 LACS FO R ACQUIRING ERP SOFTWARE. THE APPELLANT CLAIMED 60% DEPRECIATION WHILE ASSESSING OFFICER ALLOWED 25% AS APPLICABLE IN CASE OF INTANGIBLE ASSETS. THE DIFFE RENCE IS RS.12,16,326/-. THE APPELLANT PLEADS THAT IF ITEMS FALLS UNDER SPECIFIC CATEGORY COMPUTER SOFTWARE (60% DEPRECIA TION), THAT DEPRECIATION IS TO BE ALLOWED OVER GENERAL CATEGORY INTANGIBLE ASSETS (25% DEPRECIATION). IT HAS FURTHER PLEASED , IF AN ITEM FALLS UNDER BOTH CATEGORIES, THE ONE WHICH IS FAVOU RABLE TO ASSESSEE HAS TO BE FOLLOWED. DEEPAK FERTILISERS 10 THE ISSUE IS COVERED IN THE FAVOUR OF ASSESSEE BY T HE ORDER OF CIT(A) FOR AY 2005-06 FOLLOWING THE DECISI ON OF HONBLE SUPREME COURT IN THE CASE OF TATA CONSULTAN CY SERVICES 271 ITR 401 WHEREIN IT WAS HELD THE COMPUT ER SOFTWARE PACKAGE WAS GOODS FOR THE PURPOSE OF CEN TRAL EXCISE. THEREFORE, IT CAN NOT BE CONSIDERED AS INT ANGIBLE ASSETS. IN ACCORDANCE WITH PRINCIPLES OF CONSISTEN CY THE ASSESSING OFFICER IS DIRECTED TO ALLOW 60% DEPRECIA TION ON COMPUTER SOFTWARE. 18. AGGRIEVED REVENUE IS ON APPEAL BEFORE US. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI H.P. MAHAJANI SUBMITTED BEFO RE US THAT IN DATACRAFT INDIA LTD (40 SOT 295) SPECIAL BENCH MUMB AI, IT HAS BEEN HELD THAT AID CAN BE TAKEN OF THE DEFINITION OF TH E TERM COMPUTER GIVEN IN INFORMATION TECHNOLOGY ACT 2000. THE SPECIAL BEN CH HAS REPRODUCED THE DEFINITION OF COMPUTER WHICH INCLUDES COMPUTER SOFTWARE. THE SPECIAL BENCH HAS HELD THAT FROM AY 2003-04 ENHANCE D RATE OF 60% WOULD APPLY TO COMPUTER SOFTWARE. WE HEARD BOTH PA RTIES. 19. WE FIND THAT FROM AY 2003-04, UNDER THE DEPRECI ATION TABLE IN IT RULES, COMPUTERS INCLUDING COMPUTER SOFTWARE IS ENT ITLED TO DEPRECIATION AT 60%. IN THIS VIEW OF THE MATTER WE CONFIRM THE ORDER OF THE CIT(A) GRANTING DEPRECIATION AT THE RATE 60% ON THE COMPUTER SOFTWARE AND DISMISS THE REVENUES APPEAL ON THIS I SSUE. 20. THE NEXT ISSUE IS WITH RESPECT TO ADDITION OF R S. 18.18 LAKHS BEING THE AMOUNT TRANSFERRED FROM SPECIAL RESERVE AND SET OFF AGAINST THE DEPRECIATION IN THE BOOKS. 21. THE CIT(A) HAS DEALT WITH THIS ISSUE AT PARA 9. 1 AND 9.2 AS FOLLOWS: THE FACTS OF THE ISSUE ARE THE ASSESSEE HAD RECEIV ED AN INCENTIVE FROM GOVERNMENT OF INDIA ON COMMISSIONING OF ITS NITRO PHOSPHATE PLANT ON 1.7.1992. FOR ACCOUNTING PURPOS ES THE SAID DEEPAK FERTILISERS 11 AMOUNT WAS REFLECTED IN THE BALANCE SHEET UNDER A S PECIAL RESERVE ACCOUNT. FOR THE LAST SEVERAL YEARS THE ASSESSEE F OLLOWED THE ACCOUNTING PRACTICE OF TRANSFERRING PROPORTIONATE A MOUNT FROM THIS SPECIAL RESERVE AND SETTING OFF OF BOOK DEPRECIATIO N. IN THE YEAR CURRENT YEAR ALSO ASSESSEE ADJUSTED RS.18.18 LACS A GAINST THE BOOK DEPRECIATION AS PER INCOME TAX RULES. THE SET OFF OF SPECIAL RESERVE E AGAINST BOOK DEPRECIATION DONOT AFFECT THE INCOME. ALSO AS THE AMOUNT WAS RECEIVED IN 1992 THEREFORE THE SAME CANN OT BE TREATED INCOME OF ASSESSEE IN THIS YEAR. THE ISSUE WAS COVERED IN FAVOR OF ASSESSEE BY CIT(A ) FOR AY 2005-06 ON THE GROUND THAT THIS WAS ONLY A MERE BOO K ENTRY WHICH WAS SET OFF AGAINST DEPRECIATION. THIS AMOUNT WAS CAPITAL SUBSIDY RECEIVED IN THE YEAR 1992. THEREFORE THE SAME CAN NOT BE TREATED AS INCOME OF THE APPELLANT FOR THIS YEAR. HENCE THE A DDITION MADE BY ASSESSING OFFICER IS DELETED. 22. AGGRIEVED REVENUE IS ON APPEAL BEFORE US. WE F IND THAT ITAT FOR THE A.Y 2005-06 HAS HELD AS FOLLOWS: WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THE ASSESSEE HAS SET UP A PLANT OF NITRO PHOSPHATE IN T HE YEAR 1992 AND HAD RECEIVED INCENTIVE FROM THE GOVERNMENT ON THE C OMMISSIONING OF THE PLANT, WHICH WAS REFLECTED IN THE BALANCE SH EET OF THE ASSESSEE AS A SPECIAL RESERVE. THIS AMOUNT OF SPECI AL RESERVE IS SET OFF AGAINST THE BOOK DEPRECIATION. THE CIT(A) HAS RECORDED THAT SINCE THE ASSESSEE HAD ALREADY ADDED THE ENTIRE BOO K DEPRECIATION AND HAS CLAIMED DEPRECIATION AS PER INCOME TAX RULE S AND, THEREFORE, THE SET OFF OF SPECIAL RESERVE IN BOOK D EPRECIATION DO NOT EFFECT THE INCOME OF THE ASSESSEE AND THAT SINCE TH E AMOUNT WAS RECEIVED IN THE YEAR 1992, THEREFORE, THE SAME COUL D NOT BE TREATED AS INCOME OF THE ASSESSEE IN THIS YEAR. WE FIND TH AT THE REVENUE COULD NOT CONTROVERT THE SUBMISSION OF THE LD. COUN SEL FOR THE ASSESSEE THAT NO SUCH ADDITION WAS EVER MADE BY THE REVENUE RIGHT FROM THE YEAR 1992 WHEN THE PLANT WAS SET UP TILL T HE IMMEDIATELY PRECEDING ASSESSMENT YEAR 2004-05 AND THAT THE RELE VANT ASSESSMENT YEAR 2005-06 IS THE FIRST ASSESSMENT YEA R IN WHICH SUCH ADDITION HAS BEEN MADE BY THE DEPARTMENT. WE FIND THAT THERE IS NO JUSTIFICATION FOR THE ACTION OF THE DEPARTMEN T IN MAKING THE ADDITION OF THE AMOUNT TRANSFERRED FROM SPECIAL RES ERVE. THERE BEING NO MISTAKE IN THE DECISION OF THE CIT(A) ON THIS IS SUE, WE CONFIRM THE ORDER OF THE CIT(A) ON THIS ISSUE AND THE GROUND OF APPEAL NO.4 OF THE REVENUE IS DISMISSED. DEEPAK FERTILISERS 12 RESPECTFULLY FOLLOWING THE DECISION OF THE ITAT IN THE ASSESSEES OWN CASE FOR THE EARLIER YEARS, WE CONFIRM THE ORDER OF THE CIT(A) AND DISMISS THE DEPARTMENTAL APPEAL ON THIS ISSUE. 23. THE LAST GROUND IS AGAINST GRANT OF ADDITIONAL DEPRECIATION OF RS. 26,96,923/- ON NEW PLANT AND MACHINERY INSTALLED. T HE MAIN GROUSE IS THAT THE CLAIM WAS NOT MADE IN THE RETURN OF INCOME . GRANT OF DEPRECIATION AND ADDITIONAL DEPRECIATION IS MANDATO RY, WHETHER CLAIMED BY THE ASSESSEE OR NOT. OMISSION TO CLAIM DEPRECIAT ION IN THE RETURN, WILL NOT DISENTITLED THE ASSESSEE TO CLAIM ADDITIONAL DE PRECIATION TO WHICH THEY ARE STATUTORILY ENTITLED TO FOR THE FIRST TIME BEFORE THE CIT(A). THE REQUISITE CERTIFICATE FROM THE AUDITORS REGARDING T HE CLAIM FOR DEPRECIATION HAS BEEN FILED DURING THE ASSESSMENT P ROCEEDINGS. THERE IS NO FINDING BY THE AO THAT THE CLAIM OF THE ASSESSEE IS NOT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. WE THEREFORE DIREC T THE ALLOWANCE OF ADDITIONAL DEPRECIATION AS CLAIMED BY THE ASSESSEE SUBJECT TO VERIFICATION BY THE AO OF THE COMPLIANCE WITH THE SECTION AND CO RRECTNESS OF COMPUTATION. 24. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED ON THIS 31 ST DAY OF MAY, 2011 SD/- SD/- (P.M. JAGTAP) (ASH A VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEM BER MUMBAI, DATED 31 ST MAY, 2011 R DEEPAK FERTILISERS 13 COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR D BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI DEEPAK FERTILISERS 14 DATE INITIALS 1 DRAFT DICTATED ON: 26 .0 5 .2011 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 27 .0 5 .2011 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: _________ ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ SR. PS/PS 8. 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK: DATE ON WHICH FILE GOES TO AR _________ ______ 10. DATE OF DISPATCH OF ORDER: _________ ______