GLOBELINK WW INDIA PVT. LTD, MUMBAI V. DCIT 2 (1) (2), MUMBAI

ITA 5884/MUM/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1761 (ITAT-MUMBAI)
• Duration Of Justice: 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 26-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH
• Assessee Lawyers: RA JEEV WAGLAY
• Keywords: Depreciation; Charitable institution; Additional depreciation; Bonafide belief; Wrong claim; Difference of opinion; Revenue expenditure; Reassessment proceedings; Capital expenditure
• Section: 143(3); 142(1); 32; 148; 37

Judgement Text

G IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI JOGINDER SINGH, VICE PRESIDENT AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO.5884 / MUM/2018 ( / ASSESSME NT YEAR : 2010 - 11 ) GLOBELINK WW INDIA P. LTD. 2 ND FLOOR, SATYAM TOWER, BEHIND USV, OFF GOVANDI STATION ROAD, GOVANDI DEONAR, MUMBAI 400088 / V. DCIT 2(1)(2) 5 TH FLOOR, R. NO. 561, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400020 ./ PAN : AABCG1834G ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY: SHRI. RAJEEV WAGLAY REVENUE BY : SHRI. CHAUDHARY ARUN KUMAR SINGH / DATE OF HEARING : 11 .10.2018 / DATE OF PRONOUNCEMENT : 14 .11 .2018 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER: THIS APPEAL FILED BY ASSESSEE, BEING ITA NO. 5884/MUM/2018 , IS DIRECTED AGAINST APPELLATE ORDER DATED 09.08.2018 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 4 , MUMBAI (HEREINAFTER CALLED THE CIT(A)), FOR ASSESSMENT YEAR 2010 - 11 , THE APPELLATE PROCEEDINGS HAD ARISEN BEFORE LEARNED CIT(A) FROM PENALTY ORDER DATED 2 9.07 .2016 PASSED BY LEARNED ASSESSING OF FICER (HEREINA FTER CALLED THE AO) U/S 271(1)(C) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) FOR AY 2010 - 11 . I.T.A. NO.5884/MUM/2018 2 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THE MEMO OF APPEAL FILED WITH THE INCOME - TAX APPELLATE TRIBUNAL, MUMBAI (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER: - 1. CONFIRMING PENALTY OF RS. 14,42,920 U/S. 271(1)( C ) OF I. T. ACT, 1961. 2. CONFIRMING THE ABOVE PENALTY ON TH E GROUND THAT THE DEDUCTION CLAIMED BY THE APPELLANT OF RS. 42,45,129 ON ACCOUNT OF FIXED ASSETS WRITTEN OFF AS A REVENUE EXPENDITURE WAS INCORRECT AND HENCE, THE PENALTY US/. 271 (1) ( C) WAS ATTRACTED. 3. CONFIRMING THE ABOVE PENALTY ON THE GROUND THAT THE DEDUCTION CLAIMED BY THE APPELLANT AS STATED ABOVE WAS NOT A BONAFIDE DEDUCTION BUT IT WAS A WRONG CLAIM MADE IN THE RETURN OF INCOME & HENCE, PENALTY U/S. 271 (1)( C ) WAS ATTRACTED. 4. CONFIRMING THE ABOVE PENALTY ON THE GROUND THAT THE AP PELLANT HAD ACCEPTED THE DISALLOWANCE AS STATED ABOVE AND HAD NOT PREFERRED ANY APPEAL AND HENCE, PENALTY U/S. 271 (1)( C ) WAS ATTRACTED. 5. NOT APPRECIATING THE FACT THAT THE APPELLANT WAS UNDER A BONAFIDE IMPRESSION THAT THE DEDUCTION CLAIMED BY T HE A PPELLANT WAS ALLOWABLE U/S. 32 (1 )(III) OF I. T. ACT, 1961 & IT WAS SO SHOWN SEPARATELY IN THE PROFIT & LOSS ACCOUNT UNDER SCHEDULE 9 - 'ADMINISTRATIVE EXPENSES' AS 'FIXED ASSETS' W/O. RS. 42,45,129. 6. NOT APPRECIATING THE TRUE RATIO OF THE SUPRE ME COURT JUDGMENT IN CIT VS. RELIANCE PETROPRODUCTS LIMITED - 2010] 322 ITR 158. 7. CONFIRMING THE ABOVE PENALTY WITHOUT APPRECIATING THE FACT THAT IN THE NOTICE DATED 28.1.2016 I SSUED U/S. 274 R.W.S. 271 OF I. T. ACT, 1961, THE RELEVANT WORDS I.E. CO NCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME WERE NOT STUCK OFF AND HENCE, THE NOTICE SUFFERED FROM THE VICE OF NON - APPLICATION OF MIND BY THE AO & WAS INVALID AND HENCE, PENALTY U/S. 271 (1) (C ) COULD NOT BE L EVIED 8. CONFIRMING THE ABOVE PENALTY WITHOUT APPRECIATING THE FACT THAT THE APPELLANT HAD TO BE MADE AWARE AS TO WHICH OF THE 2 CHARGES I.E. (A), FOR CONCEALING OF PARTICULARS OF INCOME OR (B) FURNISHING OF INACCURATE PARTICULARS OF INCOME ARE BEING PUT AGAINST HIM. AND IF IT WAS NOT SO, THE I.T.A. NO.5884/MUM/2018 3 NOTICE WAS INVALID & PENALTY U/S. 271 (1) (C ) COULD NOT BE VALID. 9. CONFIRMING THE ABOVE PENALTY WITHOUT APPRECIATING THE FACT THAT EVEN IN THE SHOW CAUSE NOTICE DATED 5.7.2016 ISSUED U/S. 274 R.W.S 271 TO THE APPELLANT, THE APPELLANT WAS ASKED TO SHOW CAUSE FOR CONCEALING THE PARTICULARS OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME AND AS SUCH, THE SAID NOTICE WAS INVALID AND PENALTY U/S. 271 (1) (C ) COULD NOT BE LEVIED. 10. CONFIRMING THE AB OVE PENALTY WITHOUT APPRECIATING THE FACT THAT THERE WAS A CATENA OF JUDGMENTS OF THE HIGH COURTS INCLUDING BOMBAY HIGH COURT IN CIT VS. SAMSON PERINCHERY - 2017] 392 ITR 4 AS WELL AS CATENA OF TRIBUNAL DECISIONS WHEREIN IT WAS HELD THAT IF THE APPROPRIATE WORDS (AS MENTIONED ABOVE ) WERE NOT STUCK OFF IN THE NOTICE U/S. 274 R.W.S. 271, THE PENALTY LEVIED WAS INVALID. AND HENCE, THE ORDER PASSED BY THE CIT(A) - 4 DESERVES TO BE SET ASIDE IN TOTO. YOUR APPELLANT CRAVES LEAVE TO ADD, ALTER, MODIFY OR DELETE ALL OR ANY OF THE GROUNDS OF APPEAL. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SHIPPING ACTIVITIES. THE ASSESSEE FILED RETURN OF INCOME FOR IMPUGNED ASSESSMENT YEAR ON 14.10.2010 DECLARING INCOME OF RS. 2,22,87,600/ - . THE ASSESSMENT WAS ORIGINALLY FRAMED BY REVENUE U/S. 143(3) ACCEPTING RETURN ED INCOME VIDE A SSESSMENT ORDER DATED 30.03.2013 . S UBSEQUENTLY , THE AS SESSMENT WAS REOPENED BY REVENUE BY ISSUANCE OF NOTICE U/S. 148 ON 16.03.2015 I.E. WITHIN FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR AND ADDITION S WERE MADE OF RS. 42,45,129/ - ON ACCOUNT OF DISALLOWANCE OF CAPITAL EXPENDITURE BEING FIXED ASSET WRITTEN OFF UNDER T HE HEAD ADMINISTRATIVE EXPENSES WHICH WERE CLAIMED BY THE ASSESSEE AS REVENUE EXPENDITURE IN THE RETURN OF INCOME FILED WITH THE REVENUE , VIDE ASSESSMENT ORDER DATED 28.01.2016 PASSED BY THE AO U/S 143(3) R.W.S. 147 OF THE 1961 ACT , BY HOLDING AS UNDER: - 3. DISALLOWANCE OF CAPITAL LOSS TREATED AS REVENUE EXPENDITURE I.T.A. NO.5884/MUM/2018 4 3.1 . ON PERUSAL OF RECORDS IT IS SEEN THAT THE ASSE SSEE HAS DEBITED AN AMOUNT OF RS 42,45,129/ - ON ACCOUNT OF 'FIXED ASSETS WRITTEN OFF UNDER T HE HEAD ADMINISTRATIVE EXPENSES AND CLAIMED THE SAME AS REVENUE EXPENDITURE. HOWEVER, THIS AMOUNT IS CLEARLY A CAPITAL LOSS AND THEREFORE THE ASSESSEE'S CLAIM OF T HE SAME AS REVENUE EXPENDITURE IS INELIGIBLE. THEREFORE, VIDE NOTICE U/S 142(1) DT 7.1.2016, THE ASSESSEE WAS REQUIRED TO SHOW CAUSE WHY A SUM OF RS 42,45,129/ - SHOULD NOT BE DISALLOWED AND ADDED BACK TO YOUR TOTAL INCOME. 3.2. IN RESPONSE THE ASSESEE MADE SUBMISSION ON 15.1.2016 WHICH IS REPRODUCED AS UNDER : WE WISH TO INFORM DURING THE PERIOD WE HAVE SHIFTED OUR MUMBAI OFFICE LOCATION, AND WE HAVE RELOCATED FURNITURE AND FIXTURES WHICH CAN BE MOVED TO NEW PREMISES, AND THERE WERE CERTAIN FIXED ASSETS LIKE FITTING AND INTERIORS WHICH COULD NOT BE DISMANTLED, AND THOSE ASSETS VALUE WERE TREATED AS WRITTEN OFF DURING THE YEAR. HENCE WE REQUEST YOU TO CONSIDER THE ABOVE WRITTEN OFF AS REVENUE EXPENDITURE DURING THE YEAR. 3.3. THE SUBMISSION OF THE ASSESSEE IS DULY CONSIDERED BUT NOT FOUND TENABLE. THE LOSS ON WRITE OFF OF FIXED ASSETS IS CLEARLY A CAPITAL LOSS AND SHOULD HAVE BEEN ADDED BACK IN COMPUTATION OF INCOME. THE REASON FOR WHICH THE WRITE OFF HAS BEEN DONE IS IMMATERIAL AND DOES NOT AFFECT THE NATURE OF THE CLAIM. AS THE WRITE - OFF PERTAINED TO AN ASSET, THE SAME SHOULD HAVE BEEN ADDED BACK IN THE COMPUTATION OF INCOME WHICH HAS NOT BEEN DONE. THEREFORE, THE ASSESSEE'S CLAIM OF THE SAME AS A REVENUE LOSS IS INCORRECT AND NOT SUSTAINABLE. IN V IEW OF THE SAME A SUM OF RS. 42,45,129/ - IS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. ( DISALLOWANCE OF RS. 42,45,129/ - ) AS THE ASSESSEE HAS FILED INACCURATE PARTICULAR S OF INCOME, PENALTY PROCEEDINGS U/S. 271(1)(C) ARE INITI ATED SEPARATELY. 4. THE AO INITIATED PENALTY PROCEEDINGS UNDER S ECTION 271(1 )(C) OF THE 1961 ACT AGAINST ASSESSEE BY ISSUANCE OF NOTICE DATED 28.01.2016 . T HE ASSESSEE WAS ASKED T O EXPLAIN WHY PENALTY U/S. 271(1 )(C) SHOULD NOT BE LEVIED AGAINST THE ASSESSEE. THE ASSESSEE DURING REASSESSMENT PROCEEDINGS HAD EARLIER SUBMITTED REPLY DATED 15.01.2016 EXPLAINING ITS POSITION , AS UNDER : I.T.A. NO.5884/MUM/2018 5 WE WISH TO INFORM DURING THE PERIOD WE HAVE SHIFTED OUR MUMBAI OFFICE LOCATION, AND WE HAVE RELOCATED FURNITURE AND FIXTURES WHICH CAN BE MOVED TO NEW PREMISES, AND THERE WERE CERTAIN FIXED ASSETS LIKE FITTINGS AND INTERIORS WHICH COULD NOT BE DISMANTLED AND THOSE ASSETS VALUE WERE TREATED AS WRITTEN OFF DURING THE YEAR. HENCE WE REQUEST YOU TO CONSIDER THE ABOVE WRITTE N OFF AS REVENUE EXPENDITURE DURING THE YEAR. SO FAR AS QUANTUM PROCEEDINGS ARE CONCERNED , THE ASSESSEE ACCEPTED THE QUANTUM ASSESSMENT AND NO APPEAL WAS FILED BEFORE THE LD. CIT(A) AGAINST THE QUANTUM ADDITION OF RS.42,45,129/ - MADE BY THE AO BY DISALLO WING CAPITAL EXPENDITURE BEING FIXED ASSETS WRITTEN OFF UNDER THE HEAD ADMINISTRATIVE EXPENSES AS REVENUE EXPENSES , VIDE ASSESSMENT ORDER DATED 28.01.2016 PASSED U/S 143(3) R.W.S. 147 OF THE 1961 ACT . THE ASSESSEE WAS AGAIN SHOW - CAUSED BY THE AO ON 0 5.07.2016 TO WHICH THE ASSESSEE REPEATED THE SAME CONTENTIONS WHICH ARE REPRODUCED ABOVE. THE ASSESSEE ALSO CLAIMED THAT IT HAS NOT CONCEALED ANY INFORMATION WHILE FILING ITS RETURN OF INCOME AS THE FIXED ASSET WRITE OFF AMOUNTING TO RS. 42,45,129/ - WAS A PPARENTLY SHOWN ON THE FACE OF PROFIT & LOSS ACCOUNT , ON THE BASIS OF WHICH THE REOPENING OF THE ASSESSMENT WAS DONE BY THE AO. IT WAS ALSO SUBMITTED THAT THIS MATTER WAS VERY MUCH AVAILABLE AT THE TIME OF FRAMING SCRUTINY ASSESSMENT U/S 143( 3 ) AND HENCE IT COULD NOT BE SAID THAT THERE WAS ANY CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS BY THE ASSESSEE IN THE RETURN OF INCOME FILED WITH REVENUE. IT WAS SUBMITTED THAT INSTEAD IT WAS A DIFFERENCE OF OPINION AT THE TIME OF FILING OF RETURN O F INCOME. 5. THE LD. AO REJECTED THE CONTENTION S OF THE ASSESSEE AND LEVIED PENALTY OF RS. 14,42,920/ - U/S 271(1)(C) OF THE 1961 ACT VIDE ORDERS DATED 29.07.2016 , BY HOLDING AS UNDER: - 9. THE SUBMISSION OF THE ASSESSEE WAS PERUSED BUT THE SAME IS NOT ACCEPTABLE AS THE LOSS ON WRITE OFF OF FIXED ASSETS IS A CAPITAL LOSS AND SHOULD HAVE BEEN ADDED BACK IN COMPUTATION OF INCOME. THE REASON FOR WHICH THE WRITE OFF HAS BEEN DONE IS IMMATERIAL AND DOES NOT AFFECT THE I.T.A. NO.5884/MUM/2018 6 NATURE O F THE CLAIM. AS THE WRITE OFF PERTAINED TO AN ASSET, THE SAME SHOULD HAVE BEEN ADDED BACK IN THE COMPUTATION OF INCOME WHICH HAS NOT BEEN DONE. THEREFORE, THE ASSESSEE'S CLAIM OF THE SAME AS A REVENUE LOSS IS INCORRECT AND NOT SUSTAINABLE. MERELY CLAIMING OF DEDUCTION ON THE BASIS OF NO VALID SECTION CAN'T BE TREATED AS BONAFIDE CLAIM. IT ALSO CAN'T BE SAID THAT IT WAS AN OPINION DIFFERENCE BECAUSE IN ANY SECTION OF INCOME TAX ACT, 1961, IT IS NOT AN ALLOWABLE EXPENDITURE. THE ISSUE OF OPINION DIFFERENCE AR RIVES WHERE LAW IS NOT CLEAR ABOUT THE FACT. BUT IN THE INSTANCE CASE, IT IS NOT THE SAVER. WRONG CLAIM, WHICH IS NOT BACKED BY ANY SECTION OF THE ACT, ITSELF ATTRACTS THE PENALTY. 10. IN VIEW OF THE ABOVE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, I AM OF THE OPINION THAT THE ASSESSEE HAS FILED INACCURATE PARTICULARS OF THE INCOME THEREBY SUPPRESSING THE TAXABLE INCOME WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT, 1961 READ WITH EXPLANATION 1 THERETO. I, THEREFORE, HOLD THAT THE ASSESSE E AS A DEFAULTER U/S 271(1)(C) OF THE ACT AND ACCORDINGLY LEVY PENALTY AS UNDER 6. AGGRIEVED BY THE PENALTY LEVIED BY THE AO U/S 271(1)(C) OF THE 1961 ACT VIDE ORDERS DATED 29.07.2016 , THE ASSESSEE FILE D FIRST APPEAL BEFORE LD. CIT(A) WHO REJECTED THE CON TENTION S OF THE ASSESSEE AND UPHELD THE PENALTY LEVIED BY THE AO U/S 271(1)(C) OF THE 1961 ACT , VIDE APPELLATE ORDERS DATED 09.08.2018 PASSED BY LEARNED CIT(A). 7. AGGRIEVED BY THE APPELLATE ORDER DATED 09 TH AUGUST 2018 PASSED BY LEARNED CIT(A), THE ASSESS EE HAS FILED SECOND APPEAL BEFORE THE TRIBUNAL . IT IS SUBMITTED AT THE OUTSET BY LEARNED COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE HAS NOT FILED ANY APPEAL AGAINST THE QUANTUM ASSESSMENT FRA MED AGAINST THE ASSESSEE U/S 143(3) R.W.S . 147 VIDE ASSESSMENT ORDER DATED 28.01.2016 WITH RESPECT TO ADDITIONS MADE BY DISALLOWING LOSS OF RS. 42,45,129/ - ON ACCOUNT OF FIXED ASSETS WRITTEN OFF CLAIMED AS REVENUE EXPENSES UNDER THE HEAD ADMINISTRATIVE EXPENSES . THE ASSESSEE SUBMITTED THAT IT IS ENGAGED IN THE BUSINESS OF SHIPPING ACTIVITIES. T HE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE SHIFTED ITS OFFICE WHEREIN SOME FURNITURE/FIXTURE IN OLD OFFICE GOT DAMAGED/UNUSABLE IN SHIFTING I.T.A. NO.5884/MUM/2018 7 WHICH WA S WRITTEN OFF AND CLAIMED AS ALLOWABL E LOSS WITHIN THE P ROVISION S OF SECTION 32 OF THE 1961 ACT. IT WAS SUBMITTED THAT TRUE AND COMPLETE DISCLOSURE WAS MADE IN THE RETURN OF INCOME AND AUDITED FINANCIAL STATEMENTS AS TO THE CLAIM OF LOSS ON ACCOUNT OF FIXED ASSETS WRITTEN OFF TO THE TUNE OF RS. 42,45,129/ - . OUR ATTENTION WAS DRAWN TO PAGE 19/20 OF THE PAPER BOOK FILED BY THE ASSESSEE WHEREIN PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31.03.2010 IS PLACED ALONG WITH SCHEDULE 9 CONSISTING OF ADMINISTRATIVE EXPENSES . THERE IS A DISCLOSU RE OF FIXED ASSET WRITTEN O F OF F RS. 42,4 5 ,129/ - IN THE SAID SCHEDULE 9 WHICH IS PLACED IN PAPER BOOK/PAGE 20. IT WAS SUBMITTED THAT THE ORIGINALLY REVENUE FRAME D ASSESSMENT U/S. 143(3) VIDE ASSESSMENT ORDER DATED 30.03.2013 , WHEREIN NO ADDITIONS WERE MA DE TO THAT EFFECT . THE SAID ASSESSMENT ORDER DATED 30.03.2013 PASSED U/S 143(3) IS PLACED IN THE PAPER BOOK FILED BY THE ASSESSEE (PAGE 21/22/PB) WHEREIN NO DISALLOWANCES TOWARDS FIXED ASSETS WRITTEN OFF TO THE TUNE OF RS. 42,45,129/ - CLAIMED AS REVENUE EX PENSES WAS MADE. IT WAS SUBMITTED THAT IT WAS ONLY IN PROCEEDINGS U/S 147 OF THE 1961 ACT BY WAY OF REOPENING OF THE CONCLUDED ASSESSMENT WHEREIN ADDITIONS WERE MADE BY REVENUE BY WAY OF DISALLOWANCE OF LOSS ON ACCOUNT OF FIXED ASSETS WRITTEN OFF AS REVENU E EXPENDITURE. THE LD COUNSEL FOR THE ASSESSEE SUBMITT ED THAT IT HAS TRULY AND BONAFID E LY DECLARED THE SAID LOSS IN T HE AUDITED ACCOUNTS AND RETURN OF INCOME FILED WITH THE REVENUE AND NOTHING WAS CONCEALED FROM THE R EVENUE. IT WAS SUBMITTED T HAT THE ASSESSEE WAS UNDER A BONAFIDE B ELIEF THAT THE ASSESSEE CAN CLAIM WRITE OFF OF SAID FIXED ASSETS WRITTEN OFF A S A REVENUE EXPENSES. THE ASSESSEE RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT V. RELIANCE PETROPRODUCTS P. LTD., (2010) 322 ITR 158(SC). THE ASSESSEE HAS ALSO FILED WRITTEN SUBMISSIONS BEFORE THE TRIBUNAL TO CONTEND THAT THE PENALTY LEVIED BY THE AO U/S 271(1)(C) OF THE 1961 ACT AND AS CONFIRMED BY LEARNED CIT(A) BE DELETED. I.T.A. NO.5884/MUM/2018 8 8 . THE LD. DR ON THE OTHER HAND STRONGLY RELIED U PON THE APPELLATE ORDER PASSED BY LD. CIT(A) . 9. W E HAVE CONSIDERED RIVAL CONTENTION S AND PERUSED THE MATERIAL ON RECORD INCLUDING ORDERS OF AUTHORITIES BELOW, PAPER BOOK FILED BY THE ASSESSEE AND CASE LAWS CITED BEFORE US . WE HAVE OBSERVED THAT THE ASSES SEE IS IN THE BUSINESS OF SHIPPING ACTIVITIES. THE ASSESSEE FILED RETURN OF INCOME U/S. 139(1) ON 14 - 10 - 2010 D ECLARING INCOME OF RS. 2,22,87,602/ - . THE REVENUE FRAMED SCRUTINY ASSESSMENT U/S 143(3) VIDE ASSESSMENT ORDER DATED 30.03.2013 WHEREIN RETURNED INCOME WAS ACCEPTED BY REVENUE AND NO ADDITIONS WERE MADE TO THE RETURNED INCOME . S UBSEQUENTLY , AO ISSUED NOTICE DATED 16.03.2015 U/S. 148 OF THE 1961 ACT TO THE ASSESSEE WHEREIN CONCLUDED ASSESSMENT WAS REOPENED U/S 147 OF THE 1961 ACT . THE SAID REOPENING OF THE CONCLUDED ASSESSMENT WAS DONE WITHIN A PERIOD OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR AND CLEARLY FIRST PROVISO TO SECTION 147 OF THE 1961 ACT IS NOT APPLICABLE. THE REASONS FOR REOPENING OF THE CONCLUDED ASSESSMENT WERE FURNISHED TO THE ASSESSEE TO WHICH THE ASSESSEE RESPONDED BUT THE SAID CONTENTIONS OF THE ASSESSEE WERE REJECTED BY THE AO. S UBSEQUENTLY , ASSESSMENT WAS FRAMED BY REVENUE U/ S. 143(3) R.W.S. 147 OF THE ACT VIDE ASSESSMENT ORDER DATED 28.01.2016 , WHERE IN ADDITIONS TO THE INCOME ON ACCOUNT OF WRITE OFF OF FIXED ASSETS AMOUNTING TO RS. 42,45,129/ - WHICH WAS CLAIMED AS REVENUE EXPENSES UNDER THE HEAD ADMINISTRATIVE EXPENSES BY THE ASSESSEE W ERE MADE IN THE HANDS OF THE ASSESSEE BY THE AO BY DISALLOWING T HE SAID EXPENSES CLAIMED AS REVENUE EXPENSES . T HE ASSESSEE ON ITS PART HAS CLAIMED THAT IT SHIFTED ITS OFFICE PRE MISES TO A NEW LOCATION DURING FINANCIAL YEAR 2009 - 10 AND THE FURNITURE & FIXTURE AT THE OLD OFFICE WHICH WA S DAMAGED/UNUSABLE WERE NOT TAKEN TO NEW OFFICE AND WERE WRITTEN OFF IN THE BOOKS OF ACCOUNTS AS REVENUE LOSS KEEPING IN VIEW PROVISION OF S ECTION 32 (1)(III) OF THE 1961 ACT. HOWEVER, LATER THE ASSESSEE REALISED ITS MISTAKE IN CLAIMING THE SAID LOSS BECAUSE LOSS ON FIXED ASSETS WRITTEN OFF IN BOOKS OF ACCOUNTS ON I.T.A. NO.5884/MUM/2018 9 BEING DESTROYED, DEMOLISHED, DISCARDED OR SOLD IS ALLOWED AS PROVIDED U/S 32(1)(III) ONLY IN THE CASE OF TAX - PAYER ENGAGED IN THE GENERATION OR GENERATION AND DISTRIBUTION OF POWER AS SPECIF IED U/S. 32 (1) (I) , WH ILE IN THE CASE OF OTHER TAX - PAYERS CONCEPT OF BLOCK OF ASSET IS FOLLOWED AS PROVIDED U/S 32(1)(II) WHICH IS SUB JECT TO PROVISIONS OF SECTION 50 OF THE 1961 ACT. THE ASSESSEE DID NOT FILE ANY APPEAL AGAINST ASSESSMENT FRAMED U/S 143(3 ) R.W.S. 147 WHEREIN AFORESAID ADDITIONS TO THE TUNE OF RS. 42,45,129/ - WAS MADE TO THE INCOME OF THE ASSESSEE AND THE SAID ASSESSMENT ATTAINED FINALITY. THE CONCEPT OF BLOCK OF ASSET WAS INTRODUCED FOR TAX - PAYERS (OTHER THAN ENGAGED IN GENERATION OR GENE RATION AND DISTRIBUTION OF POWER) BY THE TAXATION LAWS (AMENDMENT AND MISCELLANEOUS PROVISION ) ACT, 1986 W.E.F. 01.04.1988 . EARLIER , THE CONCEPT OF TERMINAL DEPRECIATION WAS PREVAILING U/S 32(1)(III) READ WITH SECTION 41(2) WHICH ALLOWED SUCH WRITE OFF BUT AFTER NEW SCHEME OF BLOCK OF ASSETS INTRODUCED FOR TAX - PAYERS OTHER THAN ENGAGED IN GENERATION OR GENERATION AND DISTRIBUTION OF POWER , THE WRITE OFF OF FIXED ASSET AS WAS AVAILABLE EARLIER IS NOW NOT AVAILABLE AS IT IS NOW MADE SUBJECT TO SECTION 50 OF THE 1961 ACT. HOWEVER, AS PER PREVAILING SECTION 32(1)(III) AS IT EXISTS IN STATUTE , THE WRITE OFF OF THE FIXED ASSET SOLD, DISCARDED, DEMOLISHED OR DESTROYED IN THE CASE OF TAX - PAYER ENGAGED IN GENERATION OR GENERATION AND DISTRIBUTION OF POWER IS STI LL AVAILABLE PROVIDED THE SAID DEFICIENCY IS ACTUALLY WRITTEN OFF IN THE BOOKS OF ACCOUNTS. THIS ISSUE OF WRITE OFF OF LOSS ON FIXED ASSETS WRITTEN OFF ON BEING SOLD, DISCARDED , DEMOLISHED OR DESTROYED IS NOT RIPE WITH COMPLETE CLARITY AS PLACEMENT OF SEC TION 32 AND ITS SUB - SECTIONS IN THE STATUTE ARE PLACED IN A MANNER WHICH COULD EASILY LEAD TO INCOMPLETE CLARITY IN THE MINDS OF TAX - PAYERS. THE TRUE POSITION , HOWEVER, SO FAR AS NON ALLOWABILITY OF LOSS ON WRITE OFF OF FIXED ASSETS ON BEING DISCARDED BY TAX - PAYER WHICH IS NOW GOVERNED BY CONCEPT OF BLOCK OF ASSET U/S 32(1)(II) READ WITH SECTION 50 OF THE 1961 ACT FOR TAXPAYERS OTHER THAN ENGAGED IN GENERATION OR GENERATION AND DISTRIBUTION OF POWER IS CONCE DED BY THE ASSESSEE BY NOT FILING AN APPEAL AGAINST QUANTUM ASSESSMENT FRAMED I.T.A. NO.5884/MUM/2018 10 BY THE AO U/S 143(3) R.W.S. 147 , AS TAXPAYERS ENGAGED IN POWER SECTOR AS DESCRIBED IN STATUTE ARE STILL ALLOWED TO TAKE BENEFIT OF WRITE OFF OF LOSS ON FIXED ASSETS ON BEING DI SCARDED , DEMOLISHED, DESTROYED OR SOLD AS REVENUE LOSS PROVIDED SUCH DEFICIENCY IS ACTUALLY WRITTEN OFF IN BOOKS OF ACCOUNTS , BUT THE PLACEMENT OF SECTION 32 AND RELEVANT SUB - SECTIONS IN STATUTE INDICATE S NON CLARITY ON THIS ISSUE , THE RELEVANT PROVISIONS ARE REPRODUCE HEREUNDER: 32. (1) [IN RESPECT OF DEPRECIATION OF ( I ) BUILDINGS, MACHINERY , PLANT OR FURNITURE, BEING TANGIBLE ASSETS; ( II ) KNOW - HOW, PATENTS, COPYRIGHTS, TRADE MARKS, LICENCES, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE , BEING INTANGIBLE ASSETS ACQUIRED ON OR AFTER THE 1ST DAY OF APRIL, 1998, O WNED , WHOLLY OR PARTLY, BY THE ASSESSEE AND USED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION, THE FOLLOWING DEDUCTIONS SHALL BE ALLOWED ] [( I ) IN THE CASE OF ASSETS OF AN UNDERTAKING ENGAGED IN GENERATION OR GENERATION AND DISTRIBUTION OF POWER, SUCH PERCENTAGE ON THE ACTUAL COST THEREOF TO THE ASSESSEE AS MAY BE PRESCRIBED;] ( II ) [IN THE CASE OF ANY BLOCK OF ASSETS, SUCH PERCENTAGE ON THE WRITTEN DOWN VALUE THEREOF AS MAY BE PRESCRIBED:] [***] [ PROVIDED [***] THAT NO DEDUCTION SHALL BE ALLOWED UNDER THIS CLAUSE IN RESPECT OF ( A ) ANY MOTOR CAR MANUFACTURED OUTSIDE INDIA, WHERE SUCH MOTOR CAR IS ACQUIRED BY THE ASSESSEE AFTER THE 28TH DAY OF FEBRUARY, 1975 [BUT BEFORE THE 1ST DAY OF APRIL, 2001], UNLESS IT IS USED ( I ) IN A BUSINESS OF RUNNING IT ON HIRE FOR TOURISTS ; OR ( II ) OUTSIDE INDIA IN HIS BUSINESS OR PROFESSION IN ANOTHER COUNTRY ; AND ( B ) ANY MACHINERY OR PLANT IF THE ACTUAL COST THEREOF IS ALLOWED AS A DEDUCTION IN ONE OR MORE YEARS UNDER AN AGREEMENT ENTERED INTO BY THE CENTRAL GOVERNMENT UNDER SECTION 42 :] [ PROVIDED FURTHER THAT WHERE AN ASSET REFERRED TO IN CLAUSE ( I ) OR CLAUSE ( II ) [OR CLAUSE ( IIA )] [OR THE FIRST PROVISO TO CLAUSE ( IIA )], AS THE CASE MAY BE, IS ACQUIRED BY THE ASSESSEE DURING THE PREVIOUS YEAR AND IS PUT TO USE FOR THE PURPOSES OF BUSINESS OR PROFESSION FOR A PERIOD OF LESS THAN ONE HUNDRED AND EIGHTY DAYS IN THAT P REVIOUS YEAR, THE DEDUCTION UNDER THIS SUB - SECTION IN RESPECT OF SUCH ASSET SHALL BE RESTRICTED TO FIFTY PER CENT OF THE AMOUNT CALCULATED AT THE PERCENTAGE PRESCRIBED FOR AN ASSET UNDER CLAUSE ( I ) OR CLAUSE ( II ) [OR CLAUSE ( IIA )], AS THE CASE MAY BE :] [ PROVIDED ALSO THAT WHERE AN ASSET REFERRED TO IN CLAUSE ( IIA )OR THE FIRST PROVISO TO CLAUSE ( IIA ) , AS THE CASE MAY BE, IS ACQUIRED BY THE ASSESSEE DURING THE PREVIOUS YEAR AND IS PUT TO USE FOR THE I.T.A. NO.5884/MUM/2018 11 PURPOSES OF BUSINESS FOR A PERIOD OF LESS THAN ONE H UNDRED AND EIGHTY DAYS IN THAT PREVIOUS YEAR, AND THE DEDUCTION UNDER THIS SUB - SECTION IN RESPECT OF SUCH ASSET IS RESTRICTED TO FIFTY PER CENT OF THE AMOUNT CALCULATED AT THE PERCENTAGE PRESCRIBED FOR AN ASSET UNDER CLAUSE ( IIA )FOR THAT PREVIOUS YEAR, THE N, THE DEDUCTION FOR THE BALANCE FIFTY PER CENT OF THE AMOUNT CALCULATED AT THE PERCENTAGE PRESCRIBED FOR SUCH ASSET UNDER CLAUSE ( IIA )SHALL BE ALLOWED UNDER THIS SUB - SECTION IN THE IMMEDIATELY SUCCEEDING PREVIOUS YEAR IN RESPECT OF SUCH ASSET:] [ PROVIDED ALSO THAT WHERE AN ASSET BEING COMMERCIAL VEHICLE IS ACQUIRED BY THE ASSESSEE ON OR AFTER THE 1ST DAY OF OCTOBER, 1998 BUT BEFORE THE 1ST DAY OF APRIL, 1999 AND IS PUT TO USE BEFORE THE 1ST DAY OF APRIL, 1999 FOR THE PURPOSES OF BUSINESS OR PROFES SION, THE DEDUCTION IN RESPECT OF SUCH ASSET SHALL BE ALLOWED ON SUCH PERCENTAGE ON THE WRITTEN DOWN VALUE THEREOF AS MAY BE PRESCRIBED. EXPLANATION. FOR THE PURPOSES OF THIS PROVISO, ( A ) THE EXPRESSION 'COMMERCIAL VEHICLE' MEANS 'HEAVY GOODS VEHICLE', 'HEAVY PASSENGER MOTOR VEHICLE', 'LIGHT MOTOR VEHICLE', 'MEDIUM GOODS VEHICLE' AND 'MEDIUM PASSENGER MOTOR VEHICLE' BUT DOES NOT INCLUDE 'MAXI - CAB', 'MOTOR - CAB', 'TRACTOR' AND 'ROAD - ROLLER'; ( B ) THE EXPRESSIONS 'HEAVY GOODS VEHICLE', 'HEAVY PA SSENGER MOTOR VEHICLE', 'LIGHT MOTOR VEHICLE', 'MEDIUM GOODS VEHICLE', 'MEDIUM PASSENGER MOTOR VEHICLE' , 'MAXI - CAB', 'MOTOR - CAB', 'TRACTOR' AND 'ROAD ROLLER' SHALL HAVE THE MEANINGS RESPECTIVELY AS ASSIGNED TO THEM IN SECTION 2 OF THE MOTOR VEHICLES ACT, 1988 (59 OF 1988):] [ PROVIDED ALSO THAT, IN RESPECT OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL, 1991, THE DEDUCTION IN RELATION TO ANY BLOCK OF ASSETS UNDER THIS CLAUSE SHALL, IN THE CASE OF A COMPANY, BE RESTRICTED TO SEVENTY - FIVE PER CENT OF THE AMOUNT CALCULATED AT THE PERCENTAGE, ON THE WRITTEN DOWN VALUE OF SUCH ASSETS, PRESCRIBED UNDER THIS ACT IMMEDIATELY BEFORE THE COMMENCEMENT OF THE TAXATION LAWS (AMENDMENT) ACT, 1991:] [ PROVIDED ALSO THAT TH E AGGREGATE DEDUCTION, IN RESPECT OF DEPRECIATION OF BUILDINGS, MACHINERY, PLANT OR FURNITURE, BEING TANGIBLE ASSETS OR KNOW - HOW, PATENTS, COPYRIGHTS, TRADEMARKS, LICENCES, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE, BEING INTA NGIBLE ASSETS ALLOWABLE TO THE PREDECESSOR AND THE SUCCESSOR IN THE CASE OF SUCCESSION REFERRED TO IN [CLAUSE ( XIII ), CLAUSE ( XIIIB ) AND CLAUSE ( XIV )]OF SECTION 47 OR SECTION 170 OR TO THE AMALGAMATING COMPANY AND THE AMALGAMATED COMPANY IN THE CASE OF AMALGAMATION, OR TO THE DEMERGED COMPANY AND THE RESULTING COMPANY I N THE CASE OF DEMERGER, AS THE CASE MAY BE, SHALL NOT EXCEED IN ANY PREVIOUS YEAR THE DEDUCTION CALCULATED AT THE PRESCRIBED RATES AS IF THE SUCCESSION OR THE AMALGAMATION OR THE DEMERGER, AS THE CASE MAY BE, HAD NOT TAKEN PLACE, AND SUCH DEDUCTION SHALL B E APPORTIONED BETWEEN THE PREDECESSOR AND THE SUCCESSOR, OR THE AMALGAMATING COMPANY AND THE AMALGAMATED COMPANY, OR THE DEMERGED COMPANY AND THE RESULTING COMPANY, AS THE CASE MAY BE, IN THE RATIO OF THE NUMBER OF DAYS FOR WHICH THE I.T.A. NO.5884/MUM/2018 12 ASSETS WERE USED BY TH EM.] [ EXPLANATION 1. WHERE THE BUSINESS OR PROFESSION OF THE ASSESSEE IS CARRIED ON IN A BUILDING NOT OWNED BY HIM BUT IN RESPECT OF WHICH THE ASSESSEE HOLDS A LEASE OR OTHER RIGHT OF OCCUPANCY AND ANY CAPITAL EXPENDITURE IS INCURRED BY THE ASSESSEE FOR THE PURPOSES OF THE BUSINESS OR PROFESSION ON THE CONSTRUCTION OF ANY STRUCTURE OR DOING OF ANY WORK IN OR IN RELATION TO, AND BY WAY OF RENOVATION OR EXTENSION OF, OR IMPROVEMENT TO, THE BUILDING, THEN, THE PROVISIONS OF THIS CLAUSE SHALL APPLY AS IF THE SAID STRUCTURE OR WORK IS A BUILDING OWNED BY THE ASSESSEE. EXPLANATION 2. FOR THE PURPOSES OF THIS [SUB - SECTION] 'WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS' SHALL HAVE THE SAME MEANING AS IN CLAUSE* ( C ) OF SUB - SECTION ( 6 ) OF SECTION 43 .] EXPLANATION 3. FOR THE PURPOSES OF THIS SUB - SECTION, [THE EXPRESSION 'ASSETS'] SHALL MEAN ( A ) TANGIBLE ASSETS, BEING BUILDINGS, MACHINERY, PLANT OR FURNITURE; ( B ) INTANGIBLE ASSETS, BEING KNOW - HOW, PATENTS, COPYRIGHTS, TRADE MARKS, LICENCES, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE EXPLANATION 4. FOR THE PURPOSES OF THIS SUB - SECTION, THE EXPRESSION 'KNOW - HOW' MEANS ANY INDUSTRIAL INFORMATION OR TECHNIQUE LIKELY TO ASSIST IN THE MANUFACTURE OR PROCESSING OF GOODS OR IN THE WORKING OF A MINE, OIL - WELL OR OTHER SOURCES OF MINERAL DEPOSITS (INCLUDING SEARCHING FOR DISCOVERY OR TESTING OF DEPOSITS FOR THE WINNING OF ACCESS THERETO). [ EXPLANATION 5. FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT THE PROVISIONS OF THIS SUB - SECTION SHALL APPLY WHETHER OR NOT THE ASSESSEE HAS CLAIMED THE DEDUCTION IN RESPECT OF DEPRECIATION IN COMPUTING HIS TOTAL I NCOME;] [( IIA ) IN THE CASE OF ANY NEW MACHINERY OR PLANT (OTHER THAN SHIPS AND AIRCRAFT), WHICH HAS BEEN ACQUIRED AND INSTALLED AFTER THE 31ST 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, TRANSMISSION OR 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 WHERE AN ASSESSEE, SETS UP AN UNDERTAKING OR ENTERPRISE FOR MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING, ON OR AFTER THE 1ST DAY OF APRIL, 2015 IN ANY BACKWARD AREA NOTIFIED BY THE CENTRAL GOVERNMENT IN THIS BEHALF, IN THE STATE OF ANDHRA PRADESH OR IN THE STATE OF BIHAR OR IN THE STATE OF TELANGANA OR IN THE STATE OF WEST BENGAL, AND ACQUIRES AND INSTALLS ANY NEW MACHINERY OR PLANT (OTHER THAN SHIPS AND AIRCRAFT) FOR THE PURPOSES OF THE SAID UNDERTAKING OR ENTERPRISE DURING THE PERIOD BEGINNING ON THE 1ST DAY OF APRIL, 2015 AND ENDING BEFORE THE 1ST DAY OF APRIL, 2020 IN THE SAID BACKWARD AREA, THEN, THE PROVISIONS OF CLAUSE ( IIA )SHALL HAVE EFFECT, AS IF FOR THE WORDS 'TWENTY PER CENT ', THE WORDS 'THIRTY - FIVE I.T.A. NO.5884/MUM/2018 13 PER CENT' HAD BEEN SUBSTITUTED :] PROVIDED [ FURTHER ] THAT NO DEDUCTION 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 PERSON; OR ( B ) ANY MACHINERY OR PLANT INSTALLED IN ANY OFFICE PREMISES OR ANY RESIDENTIAL ACCOMMODATION, 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 COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' OF ANY ONE PREVIOUS YEAR;] [( III ) IN THE CASE OF ANY BUILDING, MACHINERY, PLANT OR FURNITURE IN RESPECT OF WHICH DEPRECIATION IS CLAIMED AND ALLOWED UNDER CLAUSE ( I ) AND WHICH IS SOLD, DISCARDED, DEMOLISHED OR DESTROYED IN THE PREVIOUS YEAR (OTHER THAN THE PREVIOUS YEAR IN WHICH I T IS FIRST BROUGHT INTO USE), THE AMOUNT BY WHICH THE MONEYS PAYABLE IN RESPECT OF SUCH BUILDING, MACHINERY, PLANT OR FURNITURE, TOGETHER WITH THE AMOUNT OF SCRAP VALUE, IF ANY, FALL SHORT OF THE WRITTEN DOWN VALUE THEREOF : PROVIDED THAT SUCH DEFICIENCY IS ACTUALLY WRITTEN OFF IN THE BOOKS OF THE ASSESSEE. ***** ***** THE PROVISIONS OF SECTION 32 (1)(III) AS REPRODUCED ABOVE REFERS TO BUILDING, MACHINERY,PLANT OR FURNITURE IN RESPECT OF WHICH DEPRECIATION IS CLAIMED AND ALLOWED UNDER CLAUSE (I) BUT THERE ARE TWO CLAUSE(I) ONE IMMEDIATELY AFTER SUB - SECTION (1) OF SECTION 32(1) WHICH DEALS WITH BUILDINGS, MACHINERY , PLANT OR FURNITURE, BEING TANGIBLE ASSETS AN D SECOND FURTHER BENEATH IT WHICH DEALS WITH TAXPAYERS ENGAGED IN GENERATION OR GENERATION AND DISTRIBUTION OF POWER , THUS LEADING TO STATE OF COMFUSION WHILE SECTION 32(1)(III) , INFACT, SPEAKS OF BUILDING , MACHINERY , PLANT OR FURNITURE IN RESPECT OF WHICH DEPRECIATION IS CLAIMED AND ALLOWED UNDER CLAUSE 32(1)(I) WHICH DEALS WITH TAXPAYERS ENGAGED IN GENERATION OR GENERATION AND DISTRIBUTION OF POWER . THUS, IN SUCH CASES OF TAXPAYERS ENGAGED IN GENERATION OR GENERATION AND DISTRIBUTION OF POWER , TERMI NAL DEPRECIATION BY WAY OF LOSS ON FIXED ASSET WRITTEN OFF CONTINUED TO BE ALLOWED IN CASE THE ASSET IS SOLD, DEMOLISHED, DISCARDED OR DESTROYED PROVIDED THE SAID DEFICIENCY IS ACTUALLY WRITTEN OFF IN BOOKS OF ACCOUNTS OF THE ASSESSEE . AT THIS STAGE I.T.A. NO.5884/MUM/2018 14 RECE NT DECISION DATED 26.02.2018 OF HONBLE BOMBAY HIGH COURT BECOMES RELEVANT IN THE CASE OF CIT V. BHATIA GENERAL HOSPITAL REPORTED IN (2008) 91 TAXMANN.COM 361(BOM.) FOR AY 2007 - 08 ALTHOUGH THIS DECISION DEALS WITH HOSPITAL BEING RUN BY A CHARITABLE TRUST A ND DOES NOT REFER TO THE TAXPAYERS ENGAGED IN BUSINESS ACTIVITIES , THE OPERATIVE PART OF AFORESAID DECISION OF HONBLE BOMBAY HIGH COURT IS REPRODUCED HEREUNDER: 7. WE FIND THAT THE CIT(A) AS WELL AS TRIBUNAL HAS AFTER PLACING RELIANCE UPON INSTITUTE OF PERSONNEL BANKING SELECTION ( IBPS ) ( SUPRA ) THAT THE INCOME OF THE TRUST IS REQUIRED TO BE COMPUTED ON COMMERCIAL PRINCIPLES HAVE IMPLICITLY UPHELD THE APPLICATION OF THE PRINCIPLE LAID DOWN IN SECTION 32(1)(III) OF THE ACT IN RESPECT OF DEPRECIATION. THE AFORESAID PROVISION TAKES CARE OF A SITUATION WHERE A PLANT AND MACHINERY IS DISCARDED/ DESTROYED IN THE PREVIOUS YEAR, THE AMOUNT OF MONEY RECEIVED ON SALE AS SUCH OR AS SCRAP OR ANY INSURANCE AMOUNT RECEIVED TO THE EXTENT IT FALLS SHORT OF THE WRITTEN DO WN VALUE IS ALLOWED AS DEPRECIATION, PROVIDED THE SAME IS WRITTEN OFF IN THE BOOKS OF ACCOUNT. IN THIS CASE, THE RESPONDENT - ASSESSEE COULD NOT SELL THE HOSPITAL EQUIPMENTS AS SCRAP NOR THE ASSESSEE COULD USE THE HOSPITAL EQUIPMENTS. THEREFORE, THE WRITTEN DOWN VALUE OF THE HOSPITAL EQUIPMENTS, WAS TO BE ALLOWED AS DEPRECIATION. THIS IS SO, PROVIDED THE HOSPITAL EQUIPMENT (ASSET) IS WRITTEN OFF IN ITS BOOKS OF ACCOUNTS. THIS HAS BEEN ADMITTEDLY DONE I.E. WRITING OFF FROM ITS BOOKS. THUS, THE NOMENCLATURE, AS ADDITIONAL DEPRECIATION RATHER THEN DEPRECIATION, IS THE ONLY OBJECTION OF THE REVENUE. NOMENCLATURE, CANNOT DECIDE A CLAIM. IN ANY CASE, THIS COULD ALSO BE ALLOWED AS AN EXPENSES UNDER SECTION 37 OF THE ACT AS IT IS AN EXPENDITURE INCURRED WHOLLY AND EXC LUSIVELY FOR CARRYING OUT ITS ITS ACTIVITY AS A HOSPITAL (ON APPLICATION OF COMMERCIAL PRINCIPLES). THE ASSESSEE ON ITS PART HAS MADE ADEQUATE DISCLOSURES IN THE RETURN OF INCOME FILED WITH THE REVENUE AND PROPER DISCLOSURE WAS MADE IN ITS AUDITED FI NANCIAL STATEMENTS ABOUT THE SAID LOSS ON FIXED ASSETS WRITTEN OFF CLEARLY UNDER SCHEDULE 9 ADMINISTRATIVE EXPENSES (PB - PAGE 19 & 20) . THE REVENUE ON ITS PART HAS ACCEPTED THE CLAIM OF THE ASSESSEE FOR LOSS ON FIXED ASSETS WRITTEN OFF IN THE ORIGINAL ASSE SSMENT FRAMED U/S 143(3) OF THE 1961 ACT , VIDE ASSESSMENT ORDERS DATED 30.03.2013 (PB /PAGE 21/22) . NO NEW TANGIBLE INCRIMINATING MATERIAL WAS RECEIVED BY THE AO AS THE REOPENING WAS DONE BASED ON THE MATERIAL ALREADY ON RECORD WHILE FRAMING ORIGINAL ASSESSMENT U/S 143(3) AND IN FIRST ROUND THE CLAIM OF THE ASSESSEE WAS ALLOWED WHEN I.T.A. NO.5884/MUM/2018 15 THE ORIGINAL ASSESSMENT U/S 143(3) WAS FRAMED ON 30 - 03 - 2013 . NO DOUBT THE REVENUE CAN RIGHTFULLY OPEN CONCLUDED ASSESSMENT U/S 147 UNDER THE PREVAILING CIRCUMSTANCES OF THE CASE AS THE REOPENING WAS DONE WITHIN FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR AND FIRST PROVISO TO SECTION 147 IS NOT APPLICABLE . THERE IS NO ESTOPPELS AGAINST LAW. SO FAR AS PENALTY U/S 271(1)(C) LEVIED BY REVENUE IS CONCERNED IN THE INSTANT CASE, T HE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PRIVATE LIMITED(SUPRA) IS RELEVANT AS THE ASSESSEE LODGED ITS LEGAL CLAIM FOR ALLOWABILIT Y OF LOSS ON FIXED ASSETS WRITTEN OFF AS THE SAID ASSETS BECAME UNUSABLE / DAMAGED ON A BONAFIDE BELIEF BUT THE SAID CLAIM WAS NOT ACCEPTED IN REOPENING PROCEEDINGS U/S 147 IN THE MIDST OF CONCEPT OF BLOCK OF ASSETS U/S 32 (1)(II) READ WITH SECTION 50 OF T HE 1961 WHICH WAS APPLICABLE TO THE INSTANT CASE AS THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SHIPPING . WE HAVE ALREADY SEEN ABOVE THAT THERE IS LACK OF CLARITY IN THE PLACEMENT OF SECTION 32 AND ITS SUBSECTIONS. MERELY BECAUSE THE LEGAL CLAIM FILED BY TH E ASSESSEE IS NOT ACCEPTED BY REVENUE WILL NOT AUTOMATICALLY MAKE TAX - PAYER LIABLE FOR PENALTY U/S 271(1)(C) OF THE 1961 ACT. THE ASSESSEE HAD A BONEFIDE BELIEF THAT ITS CLAIM IS ALLOWABLE KEEPING IN VIEW PROVISIONS OF SECTION 32(1)(III) ALBEIT ASSESSEE W AS GOVERNED BY BLOCK OF ASSETS AS PER PROVISION OF SECTION 32 (1)(II) AND 50 OF THE 1961 ACT BUT NO DOUBT EXPLANATION OFFERED BY THE ASSESSEE WAS BONAF I DE AND E XPLANATION 1 TO SECTION 271(1)(C) WILL BE APPLICABLE WHICH TAKES ASSESSEE OUT OF PENALTY PROVISI ONS AS ARE CONTAINED IN SECTION 271(1)(C) OF THE 1961 ACT . THE ASSESSEE HAS ALSO TRULY AND COMPLETELY DISCLOSED AND DECLARED THE SAID LOSS ON FIXED ASSETS WRITTEN OFF IN ITS BOOKS OF ACCOUNTS WHI LE FILING RETURN OF INCOME AND DURING THE COURSE OF RELEVANT PROCEEDINGS AND NOTHING WAS CONCEALED FROM REVENUE . THE REVENUE COULD NOT DISCREDIT OR DEMOLISH THE FACTUAL EXPLANATION GIVEN BY TH E ASSESSEEE THAT THE SAID FURNI TURE AND FIXTURE BECAME UNUSABLE/DAMAGED DURING SHIFTING TO NEW OFFICE AND BEING UNUSABLE/DAM AGED THE SAME WAS WRITTEN OFF IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. IT IS NOT THE CASE OF REVENUE THAT ALTOGETHER I.T.A. NO.5884/MUM/2018 16 A BOGUS/SHAM LOSS WAS CLAIMED BY THE ASSESSEE TO DEFRAUD REVENUE . THUS, BASED ON TOTALITY OF SURROUNDING CIRCUMSTANCES AROUND THIS CASE AND ALSO DETAILED REASONING AS GIVEN BY US ABOVE IN THIS ORDER , IN OUR CONSIDERED VIEW PENALTY U/S 271(1)(C) IS NOT EXIGIBLE IN THE INSTANT CASE AND WE ORDER DELETION OF PENALTY OF RS.14,42,950/ - LEVIED BY THE AO U/S 271(1)(C) OF THE 1961 ACT AND AS CONF IRMED BY LEARNED CIT(A). THE ORDERS OF THE AUTHORITIES ARE SET ASIDE. THE ASSESSEE SUCCEEDS IN THIS APPEAL. WE ORDER ACCORDINGLY. 10. IN THE RESULT APPEAL OF THE ASSESSEE IN ITA NO. 5884/MUM/2018 FOR AY 2010 - 11 IS ALLOWED. ORDER PRONO UNCED IN THE OPEN COURT ON 14 .11 .2018. 14 .11 .2018 SD/ - SD/ - (JOGINDER SINGH) (RAMIT KOCHAR) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED: 14 .11 .2018 NISHANT VERMA SR. PRIVATE SECRETARY COPY TO 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE CIT(A) CONCERNED, MUMBAI 4 . THE CIT - CONCERNED, MUMBAI 5 . THE DR BENCH, 6 . MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI I.T.A. NO.5884/MUM/2018 17