Guajrat Alkalies &Chemicals Ltd., V. The DY. CIT., Circle-1,

ITA 569/AHD/2004

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 8909 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 17-09-2009
• Assessment Year: 1999-2000
• Appeal Filed On: 27-02-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B S SANDHUDR
• Assessee Lawyers: JP SHAHAR
• Keywords: Capital asset; Depreciation; Revenue expenditure; Set aside
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD D BENCH (BEFORE S/SHRI R.V.EASWAR, VICE-PRESIDENT AND A.N.PAHUJA, ACCOUNTANT MEMBER) ITA.NO.569 AND 570/AHD/2004 [ASSTT.YEAR : 1999-2000 AND 2000-2001] GUJARAT ALKALIES & CHEMICALS LTD. PO PETROCHEMICALS DIST-BARODA 391 346 [PAN:AAACG8896M]. : DCIT CIRCLE-1,BARODA ITA NO.668/AHD/2004 [ASSTT.YEAR : 1999-2000] DCIT, CIR.1 BARODA. : GUJARAT ALKALIES & CHEMICALS LTD. PO PETROCHEMICALS DIST-BARODA 391 346. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI J.P. SHAH,AR REVENUE BY : SHRI B.S.SANDHU,DR O R D E R A.N. PAHUJA: THESE THREE APPEALS TWO BY THE ASSESSEE FOR THE A.Y.1999-2000 AND 2000-2001 AND ONE BY THE REVENUE FOR THE A.Y.1999- 2000 AGAINST TWO SEPARATE ORDERS DATED 3-12-2003 O F THE LD. CIT(A)- 1,BARODA, RAISE THE FOLLOWING GROUNDS: ITA NO.668/AHD/2004[REVENUE] 1(I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWAN CE OF INTEREST AND LEASE RENT OF RS.30,71,52,205/- RELYING ON THE DECISION OF THE ITAT IN ASSESSEES OWN CASE FOR AY 1995-96 WHER E THE ITAT WAS NOT JUSTIFIED IN HOLDING THAT THE AMOUNT W AS REVENUE EXPENDITURE ALLOWABLE U/S.36(I)(III) OF THE ACT DIS REGARDING THE CLEAR PROVISIONS OF SECTION 43(1) EXPL.(8) OF THE A CT. II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER PASSED BY THE ASSESSING OFFICER. III) IT IS, THEREFORE, PRAYED THAT THE ORDER O F THE CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. PAGE NO. 2 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT -2- TA NO.569/AHD/2004[ASSESSEE]-AY 1999-2000: 1. THE ORDER PASSED BY THE CIT(A) IS BAD IN LAW AN D BE QUASHED. 2. THE LD.CIT(A) HAS ERRED IN CONFIRMING THE DISALL OWANCE OF RS.1,78,722 BEING THE CONTRIBUTION OF PF MADE AFTER DUE DATES. YOUR APPELLANT SUBMITS THAT PAYMENT HAS BEEN MADE WITHIN GRACE PERIOD/WITHIN THE ACCOUNTING YEAR AND THEREFORE THE DISALLOWANCE MADE IS NOT JUSTIFIED AND SAME BE DELETED NOW. 3. THE LD.CIT(A) HAS ERRED IN DIRECTING THE AO TO V ERIFY THE PAYMENT OF EXCISE DUTY AND THEN ALLOW DEDUCTION U/S .43B OF THE ACT. YOUR APPELLANT SUBMITS CIT(A) OUGHT TO HAVE DELETED THE ADDITION OF RS.86,04,000/- MADE BY THE AO. THE ADDITION MADE B Y THE AO BY INCLUDING EXCISE DUTY IN THE VALUE OF CLOSING STOCK OF FINISHED GOODS IS NOT JUSTIFIED MORE PARTICULARLY WHEN YOUR APPELLANT HAS FOLLOWED THE METHOD OF VALUATION OF CLOSING STOCK CONSISTENTLY W HICH HAS BEEN ACCEPTED BY THE DEPARTMENT IN PAST. THE DEVIATION IN THE REGULAR METHOD ADOPTED IS UNWARRANTED AND ADDITION MADE BE DELETED NOW. 4. THE LD.CIT(A) HAS ERRED IN UPHOLDING THE ACTION OF THE AO OF NOT ALLOWING DEDUCTION OF RS.25,13,20,259 BEING EXPENDI TURE INCURRED ON INSTALLATION/REPLACEMENT/RE-MEMBRAINING IN MEMBRANE CELL-1 PLANT AND TREATING THE SAME IN THE NATURE OF CAPITAL EXPENDIT URE. IT IS SUBMITTED THAT SAME IS REVENUE EXPENDITURE AND NOT CAPITAL EX PENDITURE AS INFERRED BY THE AO AND UPHELD BY CIT(A). IT BE HEL D SO NO AND DEDUCTION BE ALLOWED. 5. THE LEARNED CIT(A) HAS ERRED IN NOT ALLOWING THE CLAIM OF DEDUCTION OF RS.70,16,802 AND RS.2,88,720 BEING CON TRIBUTION TO GACL EMPLOYEES WELFARE TRUST AND GACL BENEVOLENT F UND RESPECTIVELY ON THE GROUND THAT FRESH FACTS CAN SH ED ANY LIGHT ON THE MATTER. YOUR APPELLANT SUBMITS THAT SAME BE A LLOWED AS DEDUCTION NOW. YOUR APPELLANT CRAVES LEAVE FOR, TO ADD/ALTER/AMEND /WITHDRAW ANY GROUND OF APPEAL BEFORE/AT THE TIME OF HEARING ITA NO.570/AHD/2004[ASSESSEE]-AY 2000-01: 1. THE ORDER PASSED BY THE CIT(A) IS BAD IN LAW AN D BE QUASHED. 2. THE LD.CIT(A) HAS ERRED IN UPHOLDING THE ACTION OF THE AO OF NOT ALLOWING DEDUCTION OF RS.11,44,94,255 BEING EXPENDI TURE INCURRED ON INSTALLATION/REPLACEMENT/RE-MEMBRAINING IN MEMBRANE CELL-II PLANT AND TREATING THE SAME IN THE NATURE OF CAPITAL EXPENDIT URE. IT IS SUBMITTED THAT SAME IS REVENUE EXPENDITURE AND NOT CAPITAL EX PENDITURE AS PAGE NO. 3 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT -3- INFERRED BY THE AO AND UPHELD BY CIT(A). IT BE HEL D SO NOW AND DEDUCTION BE ALLOWED. 3. THE LD.CIT(A) HAS ERRED IN DIRECTING THE AO TO V ERIFY THE PAYMENT OF EXCISE DUTY AND THEN ALLOW DEDUCTION U/S .43B OF THE ACT. YOUR APPELLANT SUBMITS CIT(A) OUGHT TO HAVE DELETED THE ADDITION OF RS.1,96,49,000/- MADE BY THE AO. THE ADDITION MADE BY THE AO BY INCLUDING EXCISE DUTY IN THE VALUE OF CLOSING STOCK OF FINISHED GOODS IS NOT JUSTIFIED MORE PARTICULARLY WHEN YOUR APPELLANT HAS FOLLOWED THE METHOD OF VALUATION OF CLOSING STOCK CONSISTENTLY W HICH HAS BEEN ACCEPTED BY THE DEPARTMENT IN PAST. THE DEVIATION IN THE REGULAR METHOD ADOPTED IS UNWARRANTED AND ADDITION MADE BE DELETED NOW. 4. THE LEARNED CIT(A) HAS ERRED IN NOT ALLOWING THE CLAIM OF DEDUCTION OF RS.1,18,32,918 AND RS.3,17,760/-BEING CONTRIBUTION TO GACL EMPLOYEES WELFARE TRUST AND GACL BENEVOLENT F UND RESPECTIVELY ON THE GROUND THAT FRESH FACTS CAN SH ED ANY LIGHT ON THE MATTER. YOUR APPELLANT SUBMITS THAT SAME BE ALLOW ED AS DEDUCTION NOW. YOUR APPELLANT CRAVES LEAVE FOR, TO ADD/ALTER/AMEND /WITHDRAW ANY GROUND OF APPEAL BEFORE/AT THE TIME OF HEARING 2. SINCE SIMILAR ISSUES ARE INVOLVED , THESE AP PEALS WERE HEARD TOGETHER FOR THE SAKE OF CONVENIENCE AND ARE BEING DISPOSED OF T HROUGH THIS COMMON ORDER 3. ADVERTING FIRST TO GROUND NO.1 IN THE APPEAL OF THE REVENUE, THE AO DISALLOWED THE CLAIM FOR DEDUCTION OF INTEREST AND LEASE RENT, RELYING UPON HIS OWN ORDERS FOR THE PRECEDING YEARS ON THE GROUND TH AT THE BORROWINGS WERE UTILIZED FOR NEW PROJECTS VIZ. 350TPD CAUSTIC SODA PLANT, MEMBRANE CELL-1 PLANT AND 90MW POWER PLANT AT DAHEJ, WHICH HAD NOT COMMENCED COMMERCIAL PRODUCTION IN THE YEAR UNDER CONSIDERATION. ON APP EAL, THE LD. CIT(A) ALLOWED THE CLAIM , RELYING UPON ORDERS OF THE ITAT FOR THE AYS 1994-95 TO 1996-97 AND ORDER OF THE CIT(A) FOR THE AY 1998-99. 4. THE REVENUE IS NOW IN APPEAL AGAINST THE AFORES AID FINDINGS OF THE LD. CIT(A). BEFORE US, BOTH THE PARTIES AGREED THAT TH E ISSUE IS NOW SETTLED BY THE HONBLE SUPREME COURT IN THE CASE OF DCIT V. CORE H EALTH CARE LTD.. [2008] PAGE NO. 4 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT -4- 298 ITR 194 (SC) AND DCIT VS. GUJRAT ALKALIES AND C HEMICALS LTD.,299 ITR 85(SC). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. THE ISSUE REGARDING CLAIM FOR DEDUCTION OF INTEREST ON BORROWED FUNDS HAS NOW BEEN SETTLED BY THE DECISION OF THE HONBLE SUP REME COURT IN THE AFORESAID CASE OF CORE HEALTH CARE LTD. (SUPRA), W HEREIN IT WAS HELD: IN THE CASE OF CHALLAPALLI SUGARS LTD. [1975] 98 ITR 167 THIS COURT OBSERVED THAT INTEREST PAID ON THE BORROWING UTILISED TO BRI NG INTO EXISTENCE A FIXED ASSET WHICH HAS NOT GONE INTO PRODUCTION, GOES TO ADD TO THE COST OF INSTALLATION OF THAT ASSET. IT WAS FURTHER OBSERVED THAT IF THE SAI D BORROWING WAS NOT 'FOR THE PURPOSE OF BUSINESS' INASMUCH AS NO BUSINESS HAD CO ME INTO EXISTENCE, IT MUST FOLLOW THAT IT WAS MADE FOR THE PURPOSE OF ACQ UIRING AN ASSET WHICH COULD BE PUT TO USE FOR DOING BUSINESS, AND HENCE INTERES T PAID ON SUCH BORROWING WOULD GO TO ADD TO THE COST OF THE ASSETS SO ACQUIR ED. IN OUR VIEW THE ABOVE OBSERVATIONS HAVE TO BE CONFI NED TO THE FACTS IN THE CASE OF CHALLAPALLI SUGARS LTD. [1975] 98 ITR 167 (SC). IT WAS A CASE WHERE THE COMPANY HAD NOT YET STARTED PRODUCTION WHEN IT BORROWED THE AMOUNT IN QUESTION. THE MORE APPROPRIATE DECISION APPLICABLE TO THE PRESENT CASE WOULD BE THE JUDGMENT. OF THIS COURT IN THE CASE OF INDIA CEMENTS LTD. V. CIT [1966] 60 ITR 52 IN WHICH IT HAS BEEN OBSERVED THAT, FOR CONSIDERIN G WHETHER PAYMENT OF INTEREST ON BORROWING IS REVENUE EXPENDI TURE OR NOT, THE PURPOSE FOR WHICH THE BORROWING IS MADE IS IRRELEVANT. IN O UR VIEW, SECTION 36(1)(III) OF THE 1961 ACT HAS TO BE READ ON ITS OWN TERMS. IT IS A CODE BY ITSELF. SECTION 36(1)(III) IS ATTRACTED WHEN THE ASSESSEE BORROWS T HE CAPITAL FOR THE PURPOSE OF HIS BUSINESS. IT DOES NOT MATTER WHETHER THE CAPITAL IS BORROWED IN ORDER TO ACQUIRE A REVENUE ASSET OR A CAPITAL ASSET, BECA USE ALL THAT THE SECTION REQUIRES IS THAT THE ASSESSEE MUST BORROW THE CAPIT AL FOR THE PURPOSE OF HIS BUSINESS. THIS DICHOTOMY BETWEEN THE BORROWING OF A LOAN AND ACTUAL APPLICATION THEREOF IN THE PURCHASE OF A CAP ITAL ASSET, SEEMS TO PROCEED ON THE BASIS THAT A MERE TRANSACTION OF BOR ROWING DOES NOT, BY ITSELF BRING ANY NEW ASSET OF ENDURING NATURE INTO EXISTENCE, AND THAT IT IS THE TRANSACTION OF INVESTMENT OF THE BORROWED CA PITAL IN THE PURCHASE OF A NEW ASSET WHICH BRINGS THAT ASSET INTO EXISTEN CE. THE TRANSACTION OF BORROWING IS NOT THE SAME AS THE TRANSACTION OF INV ESTMENT. IF THIS DICHOTOMY IS KEPT IN MIND IT BECOMES CLEAR THAT THE TRANSACTION OF BORROWING ATTRACTS THE PROVISIONS OF SECTION 36(1)( III). THUS, THE DECISION OF THE BOMBAY HIGH COURT IN CALICO DYEING AND PRINT ING WORKS [1958] 34 ITR 265 AND THE JUDGMENT OF THE SUPREME COURT IN INDIA CEM ENTS LTD. [1966] 60 ITR 52 HAVE BEEN GIVEN WITH REFERENCE TO THE BORROWINGS M ADE FOR THE PURPOSES OF A RUNNING BUSINESS, WHILE THE DECISION OF THE SUPREME COURT IN PAGE NO. 5 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT -5- CHALLAPALLI SUGARS LTD. [1975] 98 ITR 167 WAS GIVEN WITH REFERENCE TO THE BORROWINGS WHICH COULD NOT BE TREATED AS MADE FOR T HE PURPOSES OF BUSINESS AS NO BUSINESS HAD COMMENCED IN THAT CASE. THEREFOR E, THERE IS NO INCONSISTENCY BETWEEN THE ABOVE DECISIONS. CONCLUSIONS FOR THE ABOVE REASONS, WE HOLD THAT THE ASSESSING O FFICER WAS NOT JUSTIFIED IN MAKING DISALLOWANCE OF RS. 1,56,76,000 IN RESPECT O F BORROWINGS UTILISED FOR PURCHASE OF MACHINES. ACCORDINGLY, THE ABOVE QUESTI ON IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. 5.1. THE AFORESAID DECISION HAS SUBSEQUENTLY BEEN FOLLOW ED IN GUJRAT ALKALIES AND CHEMICALS LTD.(SUPRA), JCIT VS. UNITED PHOSPHOROUS LTD.,299 ITR 9(SC),ACIT VS. ARVIND POLYCOT LTD.,299 ITR 12(S C) AND CIT VS. ISHWAR BUVAN HOTELS LTD.,215CTR 14(SC) . 5.2. IN THE LIGHT OF AFORESAID DECISIONS OF THE HONBLE APEX COURT, WE HAVE NO ALTERNATIVE BUT TO UPHOLD THE FINDINGS OF LD. CIT(A ).THEREFORE, GROUND NO. 1 IN THE APPEAL OF THE REVENUE IS DISMISSED. ITA NO.569& 570/AHD/2004 6. WE SHALL NOW DEAL WITH THE TWO APPEALS OF THE AS SESSEE. GROUND NO.1 IN BOTH THE APPEALS, BEING GENERAL IN NATURE, DOES NOT REQUIRE ANY SEPARATE ADJUDICATION AND IS, THEREFORE, DISMISSED. 7. GROUND NO. 2 IN THE APPEAL FOR THE AY 1999-2000 RELATES TO DISALLOWANCE OF RS.1,78,722/- ON ACCOUNT OF EMPLOYE ES CONTRIBUTION FOR THE MONTH OF DECEMBER, 1998 DEPOSITED ON 19.1.1999 IN T ERMS OF PROVISIONS OF SEC. 43B OF THE INCOME-TAX ACT,1961[HEREINAFTER REF ERRED TO AS THE ACT]. THE AO WAS OF THE OPINION THAT EMPLOYER AS WELL AS EMPL OYEE CONTRIBUTION HAS TO BE DEPOSITED WITHIN 15 DAYS OF THE CLOSE OF MONTH. ACCORDINGLY, HE DISALLOWED THE CLAIM. ON APPEAL , THE LD. CIT(A) MAINTAINED TH E DISALLOWANCE, RELYING INTER ALIA, ON THE DECISION OF HONBLE MADRAS HIGH COURT IN CASE OF CIT VS. MADRAS RADIATORS AND PRESSINGS LTD. 183 CTR 332. . PAGE NO. 6 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT -6- 7.1 THE ASSESSEE IS NOW IN APPEAL BEFORE US. WE H AVE HEARD BOTH PARTIES. UNDISPUTEDLY, EMPLOYEES CONTRIBUTION FOR THE MONTH OF DECEMBER,98 HAS BEEN PAID ON 19.1.1999 I.E WITHIN THE GRACE PERIOD PERMITTED UNDER THE RELEVANT ENACTMENT. THEREFORE, IN THE LIGHT OF DECI SION IN THE CASE OF CIT VS. SALEM CO-OPERATIVE SPINNING MILLS LTD.,258 ITR 360( MAD.) , THE PAYMENTS HAVING BEEN MADE WITHIN THE GRACE PERIOD ALLOWED BY THE RELEVANT STATUTE, THERE WAS NO DEFAULT ON THE PART OF THE ASSESSEE. ACCORDINGLY, WE ALLOW GROUND NO.2 IN THE APPEAL OF THE ASSESSEE FOR THE A Y 1999-2000. 8. GROUND NO.3 IN BOTH THE APPEALS RELATES TO IN CLUSION OF EXCISE DUTY WHILE VALUING THE CLOSING STOCK OF FINISHED GOODS. THE LD . AR DID NOT PRESS THESE GROUNDS AND MERELY SOUGHT SIMILAR DIRECTIONS TO THE AO IN THE AY 2000-01 FOR ALLOWANCE OF DEDUCTION U/S 43B AFTER DUE VERIFICATI ON, AS HAVE BEEN ISSUED BY THE LD. CIT(A) IN HER ORDER FOR THE AY 1999-2000. T HE LD. DR DID NOT RAISE ANY OBJECTION TO ISSUANCE OF SUCH DIRECTIONS. ACCORDING LY, GROUND NO. 3 IN BOTH THESE APPEALS, IS DISMISSED. HOWEVER, THE AO SHALL CONSIDER DEDUCTION U/S 43B OF THE ACT IN THE AY 2000-01 IN ACCORDANCE WITH LAW. 9. THE NEXT COMMON GROUND RAISED IN THESE APPEAL S IS WITH REGARD TO TREATMENT OF THE EXPENDITURE INCURRED ON INSTALLA TION/REPLACEMENT/ RE- MEMBRANING IN MEMBRANE CELL-I &II PLANTS AS CAPITAL IN NATURE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE AY 1999-20 00, THE AO NOTICED THAT THE ASSESSEE CLAIMED EXPENDITURE OF RS.25,13,20,259 /- INCURRED ON THE INSTALLATION/REPLACEMENT OF RE-MEMBRAINING IN MEMBR ANE CELL-I PLANT AS REVENUE EXPENDITURE. HOWEVER, THE AO WAS OF THE OP INION THAT EXPENDITURE IS CAPITAL IN NATURE, SINCE THE EXPENDITURE REPRESENTE D AN ASSET BEING USED FOR YEARS TOGETHER AND ALSO INVOLVED HUGE QUANTUM OF CA PITAL FOR ITS ACQUISITION. TO A QUERY BY THE AO, THE ASSESSEE REPLIED THAT MEM BRANES WERE ESSENTIAL COMPONENT OF THE PROCESS SYSTEM, REQUIRING REPLACEM ENT AT PERIODICAL INTERVALS AND THE EXPENDITURE BEING SUBSTANTIAL IN QUANTUM, WAS TREATED AS PAGE NO. 7 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT -7- DEFERRED REVENUE EXPENDITURE IN THE BOOKS OF ACCOUN TS AND AMORTIZED OVER A PERIOD ACCORDINGLY. IT WAS FURTHER MENTIONED THAT SIMILAR CLAIM OF THE ASSESSEE WAS ACCEPTED BY THE DEPARTMENT IN THE A.YS .1993-94 AND 1995-96. HOWEVER, THE AO REJECTED THE CLAIM HOLDING THAT TH E MEMBRANES HAVE SPECIFIED LIFE VARYING BETWEEN 3 TO 5 YEARS, REQUIR ING PERIODIC REPLACEMENT AND THE MAGNITUDE OF THE COST INVOLVED WAS HUGE. ACCOR DINGLY, THE AO WHILE RELYING UPON DECISION OF THE HONBLE APEX COURT IN THE CASE OF MADRAS AUTO SERVICE (P) LTD., 233 ITR 468 CONCLUDED THAT SINCE THE ASSESSEE DERIVED ENDURING BENEFIT, EXPENDITURE WAS CAPITAL IN NATURE . SIMULATENEOUSLY, THE AO ALLOWED DEPRECIATION ON THE AMOUNT SO CAPITALIZED. SIMILAR FINDINGS WERE RECORDED IN RESPECT OF CLAIM IN THE AY 2000-01. 9.1 ON APPEAL, THE LD. CIT(A) UPHELD THE ADDITION IN THE AY 1999-2000 IN FOLLOWING TERMS: 5.2 ON GOING THROUGH THE OVERALL FACTS OF THE CASE , I FIND THAT THE REPLACEMENT COST HAS TO BE CONSIDERED A KEY FACTOR IN DETERMINING WHETHER THE EXPENDITURE IS CAPITAL OR REVENUE IN SU CH A CASE. IT CAN NO LONG BE SAID THAT THE MEMBRANE IS ONLY A SMALL PART OF A MUCH LARGER MACHINE WHICH HAS TO BE PERIODICALLY REPLACED. HER E, IT IS ALMOST LIKE A PLANT BY ITSELF AND THEREFORE, NEW MEMBRANE TO REPL ACE THE OLD ONES AFTER A PERIOD OF 2 TO 5 YEARS HAS TO BE CONSIDERED IN THE PROPER CONTEXT. WITHOUT THE NEW MEMBRANES, THE PLANT CANN OT FUNCTION EFFECTIVELY. THEREFORE, SUCH A LARGE ITEM WHEN REP LACED IS LIKE PUTTING A NEW ASSET INTO POSITION WHICH DEFINITELY GIVES ENDU RING BENEFIT FOR ATLEAST 2 TO 3 YEARS. THIS IS NOT ONE OF THE ROUTI NE ITEMS WHICH HAVE TO BE REPLACED DUE TO WEAR AND TEAR. THE ASSESSEE ITS ELF HAS NOT WRITTEN OFF THE EXPENDITURE IN ONE YEAR ITSELF, BUT HAS DEF ERRED IT OVER A NUMBER OF YEARS. THE TOTAL VALUE OF THE ITEM ITSELF IS A CLEAR INDICATOR THAT IT IS NOT A ROUTINE REPLACEMENT OF A SEPARATE PART OR A S MALL PART OF A MACHINE WHICH ONLY ENHANCES THE EFFICIENCY WORKABIL ITY OF THE MACHINE BUT IS LIKE A TOTAL ITEM OF MACHINE IN ITSELF. HEN CE, THE ADDITION MADE IS CONFIRMED. 9.2 FOLLOWING THE AFORESAID ORDER, THE LD. CIT(A ) UPHELD THE ADDITION IN THE AY 2000-01 ALSO. PAGE NO. 8 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT -8- 10. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LEARNED COUNSEL ON BEHALF O F THE ASSESSEE SUBMITTED THAT IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 1993-94 & 1995- 96, THE AO HIMSELF TREATED A SIMILAR CLAIM REVENUE IN NATURE. ACCORDINGLY, WHILE RELYING UPON THE PRINCIPLES OF CONSISTENCY LA ID DOWN IN THE CASE OF TARABEN RAMANBHAI PATEL & ANOTHER VS. ITO& OTHERS,2 15 ITR 323(GUJ), DIT VS. LOVELY BAL SHIKHA PARISHAD,266 ITR 349(DEL.),DI T VS. GURU NANAK VIDHYA BHANDAR TRUST, 272 ITR 379(DEL.), CIT VS. LE ADER VALVES LTD.,295 ITR 273(P&H) AND CIT VS. DS PROMOTERS & DEVELOPERS PVT. LTD., 25 DTR (DEL) 8, THE LD. AR CONTENDED THAT CLAIM HAS TO BE ALLOWED. ON THE OTHER HAND, LEARNED DR DID NOT DISPUTE THESE SUBMISSIONS ON BEH ALF OF THE ASSESSEE. 11. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. WE FIND THAT THE AO HIMSELF HAS TREATED THE EXPENDI TURE INCURRED BY THE ASSESSEE IN THE A.Y.1993-94 ON INSTALLATION/REPLAC EMENT OF RE-MEMBRAINING IN MEMBRANE CELL PLANT, REVENUE IN NATURE. THOUGH T HE LD. CIT(A) OBSERVED IN THE IMPUGNED ORDER THAT A SIMILAR CLAIM HAS BEEN AC CEPTED BY THE AO IN THE AY 1993-94 & 1995-96, NO REASONS HAVE BEEN GIVEN AS TO HOW THE FACTS RELATING TO THE CLAIM IN THE YEAR UNDER CONSIDERATI ON ARE DIFFERENT FROM THE AY 1993-94 OR AY 1995-96, SO AS TO TAKE A DIFFERENT VI EW IN THE MATTER. IN THESE CIRCUMSTANCES , WE FIND MERIT IN THE UNDISPUTED C ONTENTIONS OF THE LD. AR THAT PRINCIPLES OF CONSISTENCY SHOULD HAVE BEEN ADHERED TO . IN THIS CONNECTION, HONBLE JURISDICTIONAL HIGH COURT IN THEIR DECISION IN THE CASE OF TARABEN RAMANBHAI PATEL & ANOTHER (SUPRA) IN THE CONTEXT OF LEVY OF PENALTY U/S 271(1)OBSERVED AS UNDER: IT IS NO DOUBT TRUE THAT THE STRICT RULE OF THE DOCTRINE OF RES JUDICATA DOES NOT APPLY TO PROCEEDINGS UNDER THE INCOME-TAX ACT. AT T HE SAME TIME, IT IS EQUALLY TRUE THAT UNLESS THERE IS A CHANGE OF CIRCUMSTANCES , THE AUTHORITIES WILL NOT DEPART FROM PREVIOUS DECISIONS AT THEIR SWEET WILL IN THE ABSENCE OF MATERIAL CIRCUMSTANCES OR REASONS FOR SUCH DEPARTURE : JOINT FAMILY OF UDAYA CHINUBHAI V. CIT [1967] 63 ITR 416 (SC), AIR 1967 SC 762 ; RADHASOAMI PAGE NO. 9 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT -9- SATSANG V. CIT [1992] 193 ITR 321 (SC) ; AIR 1992 SC 377 ; H. A. SHAH AND CO. V. CIT/EPT [1956] 30 ITR 618 (BOM). IN THE LAST MENTIONED CASE, IT WAS OBSERVED THAT IF THE QUESTION WAS NOT CONSIDERED IN DETAIL IN EARLIER PROCEEDINGS, IT IS OPEN TO THE AUTHORITIES TO CONSIDER THOSE DOCUMENTS AND TO COME TO A DIFFERENT CONCLUSION. BUT IF THE QUESTION IS ALREADY DECIDED ON THE BASIS OF THE FAC TS AND THERE IS NO CHANGE IN THAT FACTUAL POSITION, IT CANNOT BE REOPENED. IN TH E INSTANT CASE, AS OBSERVED BY US HEREINABOVE, THE FACT WAS BROUGHT TO THE NOTI CE OF THE RESPONDENT AUTHORITY BY THE PETITIONERS THAT LITIGATION WAS GO ING ON BETWEEN THE PARTIES AND THE RECEIVER WAS APPOINTED BY THE HIGH COURT OF BOMBAY. THAT FACT WAS ALSO ACCEPTED BY THE DEPARTMENT FOR THE ASSESSMENT YEAR 1978-79 AND EVEN FOR THE YEAR 1982-83 IN RESPECT OF A NUMBER OF APPE ALS FILED BY OTHER CO- OWNERS AS ALSO BY SOME OF THE PETITIONERS. IN OUR O PINION, THERE WAS NO GOOD AND JUSTIFIABLE CAUSE TO TAKE A DIFFERENT VIEW WHEN SOME APPEALS CAME BEFORE A DIFFERENT OFFICER WITHOUT THERE BEING ANY CHANGE IN THE FACTUAL POSITION AND WHEN THE EARLIER DECISION WAS NOT CHALLENGED BY THE DEPARTMENT. 11.1 THE AFORESAID DECISION HAS BEEN FOLLOWED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THEIR SUBSEQUENT DECISION IN LALLUDAS CHILDREN TRUST VS, CIT,251 ITR 50(GUJ) .SIMILAR VIEW HAS BEEN TAKEN IN THE OTHER DECISIONS RELIED UPON ON BEHALF OF THE ASSESSEE AS ALSO IN SEVERAL C ASES INCLUDING IN ARIHANT BUILDERS DEVELOPERS & INVESTORS (P.) LTD V. ITAT [2 005] 277 ITR 239 (MP), ASSTT. CIT V. GENDALAL HAZARILAL & CO. [2003] 263 ITR 679 (MP), CIT V. NEO POLY PACK (P.) LTD [2000] 245 ITR 492 (DELHI),4. DHANSIRAM AGARWALLA V. CIT [1996] 217 ITR 4 (GAUHATI). CIT V. SHIV SAGAR ESTATE [2002] 257 ITR 59 (SC) UNION OF INDIA V. SATISH PANNALAL SHAH [2001] 249 ITR 221 (SC).IN THE CASE OF CWT V. M.K. GUPTA [1990] 185 ITR 393 (DELHI) . SINCE IN THE CASE UNDER CONSIDERATION, THE AO HIMSELF HAS ALLOWED THE CLAIM IN THE AY 1993-94 , TREATING THE EXPENDITURE REVENUE IN NATURE WHILE N O CHANGE OF FACTS AND CIRCUMSTANCES HAVE BEEN POINTED OUT ON BEHALF OF T HE REVENUE IN THE YEARS UNDER CONSIDERATION, WE ARE OF THE OPINION THAT THE AO IS NOT JUSTIFIED IN DEPARTING FROM HIS PREVIOUS DECISION IN THE AY 1993 -94, IN THE ABSENCE OF MATERIAL CIRCUMSTANCES OR REASONS FOR SUCH DEPARTUR E. THEREFORE, GROUND NO.4 IN THE APPEAL FOR THE AY 1999-2000 & GROUND NO.2 IN THE AY 2000-01 ARE ALLOWED. PAGE NO. 10 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT -10- 12. LAST COMMON GROUND IN BOTH THE APPEALS RE LATES TO DISALLOWANCE OF DEDUCTION IN RESPECT OF CONTRIBUTION TO GACL EMPLOY EES WELFARE TRUST AND GACL BENEVOLENT FUND. THE AO DISALLOWED THE CLAIM WHILE DETERMINING TOTAL INCOME. ON APPEAL, THE ASSESSEE CONTENDED THAT A SI MILAR CLAIM HAS BEEN ALLOWED BY THE LD. CIT(A) IN THE AY 1990-91 & 1998- 99. HOWEVER, THE LD. CIT(A) REJECTED THE CLAIM ON THE GROUND THAT THE A SSESSEE DID NOT SUBMIT ANY FACTUAL DATA IN THE YEARS UNDER CONSIDERATION. SINC E NEITHER BEFORE THE AO NOR BEFORE THE LD. CIT(A) ANY FACTS WERE PLACED REGARDI NG CONTRIBUTIONS TO THE WELFARE TRUST AND THE BENEVOLENT FUND WHILE NO SUBM ISSIONS WERE MADE AS TO WHY PROVISIONS OF SEC. 40A(9) SHOULD NOT APPLY OR H OW CLAIM WAS ADMISSIBLE U/S 40A(10) OF THE ACT , THE LD. CIT(A) UPHELD THE DISALLOWANCE. 13. THE ASSESSEE IS NOW IN APPEAL BEFORE US. THE LD. AR ON BEHALF OF THE ASSESSEE WHILE RELYING UPON DECISION DATED 30.4.200 8 OF THE TRIBUNAL IN THE CASE OF INDIAN PETROCHEMICALS CORPORATION LTD. IN I TA NO.4039/AHD./2003 FOR THE AY 2000-01 AND DECISION DATED 27.6.1995 IN THE CASE OF GUJARAT NARMADA VALLEY FERTILIZERS LTD. IN ITA NO.3959/AHD. /1990 FOR THE AY 1985-86, SUBMITTED THAT THE THOUGH THE ITAT HAD MAINTAINED THE DISALLOWANCE IN THE ASSESSEES OWN CASE VIDE THEIR ORDER DATED 5.7.2001 FOR THE AY 1989-90 IN ITA NO. 3260/AHD./1993 AND VIDE ORDER DATED 13.12.2 001 IN ITA NO. 1188/AHD./2000 IN THE 1996-97,FOLLOWING THEIR OWN D ECISION IN THE AY 1995- 96, IN SUBSEQUENT DECISIONS , SIMILAR CLAIM HAS BE EN ALLOWED BY THE ITAT IN THE CASE OF INDIAN PETROCHEMICALS CORPORATION LTD. AND GUJARAT NARMADA VALLEY FERTILISERS LTD. THE LD. AR ADDED THAT IN TH E AY 1990-91, THE LD. CIT(A) DELETED THE DISALLOWANCE AND THE DEPARTMENT HAVE NO T GONE IN FURTHER APPEAL WHILE IN AY 1998-99, THE LD. CIT(A) RESTORED THE M ATTER BACK TO THE FILE OF THE AO. ON THE OTHER HAND, THE LD. DR SUPPORTED THE FIN DINGS OF THE LD. CIT(A). 14. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE FACTS OF THE CASE AS ALSO THE DECISIONS RELIED UPON. WE FIND THAT TH E LD. CIT(A) UPHELD THE DISALLOWANCE ON THE GROUND THAT THE ASSESSEE NEITH ER SUBMITTED ANY FACTUAL PAGE NO. 11 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT -11- DETAILS OF THE AFORESAID WELFARE TRUST AND BENEVOLE NT FUND NOR MADE ANY SUBMISSIONS ON THE APPLICABILITY OR OTHERWISE OF PR OVISIONS OF SEC. 40A(9) AND 40A(10) OF THE ACT. EVEN BEFORE US, THE SITUATION I S NO BETTER NOR THE LD. AR PLACED BEFORE US ANY MATERIAL, CONTROVERTING THE AF ORESAID FINDINGS OF THE LD. CIT(A). THE RELIANCE BY THE LD. AR ON THE DECISIONS OF THE ITAT IN THE CASE OF OTHER ASSESSEES IS TOTALLY MISPLACED, ESPECIALLY W HEN THE ASSESSEE DID NOT SUBMIT THE REQUISITE DETAILS BEFORE THE AO OR THE L D. CIT(A) AND EVEN BEFORE US WHILE SIMILAR DISALLOWANCE HAS BEEN UPHELD BY THE I TAT IN THE A.YS.1989-90, 1995-96 AND 1996-97. IN VIEW OF THE FOREGOING, ESP ECIALLY WHEN THERE IS NO MATERIAL BEFORE US TO TAKE A DIFFERENT VIEW IN THE MATTER, WE HAVE NO ALTERNATIVE BUT TO UPHOLD THE FINDINGS OF THE LD. C IT(A) IN THESE TWO ASSESSMENT YEARS. THEREFORE, GROUND NO.5 IN THE APP EAL FOR THE AY 1999- 2000 & GROUND NO.4 IN THE AY 2000-01 ARE DISMISSED . 15. GROUND NOS. 2 AND 3 IN THE APPEAL OF THE REVENU E, BEING GENERAL IN NATURE, DO NOT REQUIRE ANY SEPARATE ADJUDICATION W HILE NO ADDITIONAL GROUND HAVING BEEN RAISED IN TERMS OF THE RESIDUARY GROUND IN THE APPEALS OF THE ASSESSEE, ALL THESE GROUNDS ARE DISMISSSED. 16. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED WHILE THOSE OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT THIS 25TH SEPTE MBER, 2009. SD/- SD/- (R.V. EASWAR) VICE-PRESIDENT (A.N. PAHUJA) ACCOUNTANT MEMBER PLACE : AHMEDABAD DATE : 25 -09-2009 COPY OF THE ORDER FORWARDED TO: 1) : ASSESSEE 2) : DCIT CIRCLE-1,BARODA 3) : CIT(A)-1,BARODA PAGE NO. 12 GUJARAT ALKALIES & CHEMICALS LTD. VS. DCIT -12- 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR, ITAT, AHMEDABAD