ACIT, UDAIPUR V. M/s. Hindustan Zinc Limited, UDAIPUR

ITA 612/JODH/2009

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1970 (ITAT-JODHPUR)
• Duration Of Justice: 7 year(s) 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 18-12-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D S KOTHARI
• Assessee Lawyers: K SAMPAT C A DHK
• Keywords: Capital asset; Depreciation; Business expenditure; Share purchase agreement; Rule of consistency; Bad and doubtful debts; Revenue expenditure; Reassessment proceedings
• Section: 143(3); 37(1); 32; 145

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO. 612/JU/2009 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2005-06 THE ASSTT. COMMISSIONER OF INCOME - TAX, CIRCLE-2, UDAIPUR. CUKE VS. M/S HINDUSTAN ZINC LTD. , YASAD BHAWAN, UDAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAACH 7354 K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI D. S. KOTHARI (CIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI K. SAMPAT(C.A) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 15.03.2017. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 10/04/2017. VKNS'K@ ORDER PER SHRI KUL BHARAT, JM. THIS APPEAL BY THE REVENUE IS FILED AGAINST THE OR DER OF LD. CIT (A), UDAIPUR DATED 16.09.2009 PERTAINING TO ASSESSMENT YEAR 2005 -06. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. DELETING THE DISALLOWANCE OF RS. 3,20,82,216/- U/S 40A(9). 2. DELETING THE DISALLOWANCE MADE ON ACCOUNT OF PUBLIC ITY & PR EXPENSES AMOUNTING TO RS. 10,86,920/-. 3. DELETING THE DISALLOWANCE MADE ON ACCOUNT OF DEPREC IATION CLAIMED IN RESPECT OF INTANGIBLE ASSETS IN THE FORM OF RIGH T IN RELATION TO POWER FROM APGPL AMOUNTING TO RS. 10,54,60,000/- 4. DELETING THE ADDITION ON ACCOUNT OF UNDERVALUATION OF CLOSING STOCK OF ORE AMOUNTING TO RS. 2,21,21,933/-. 5. DELETING THE DISALLOWANCE OF DEPRECIATION IN RESPEC T OF ASSETS RETIRED FROM ACTIVE USE AMOUNTING TO RS. 1,00,63,48 0/-. 6. DELETING THE ADDITION OF RS. 34,60,170/- ON ACCOUNT ENABLING ASSETS WRITTEN OFF. 2 ITA NO. 612/JU/2009 M/S HINDUSTAN ZINC LTD., UDAIPUR. 7. DELETING THE REDUCTION OF RS. 4,36,36,093/- MADE BY THE AO FOR THE CLAIM U/S 80IA OF THE IT ACT, ON CAPTIVE POWER PLAN T. 8. DELETING THE DISALLOWANCE ON ACCOUNT TECHNICAL/OTHE R CONSULTANCY EXPENSES AMOUNTING TO RS. 16,88,300/-. 2. BRIEFLY STATED THE FACTS ARE THAT THE CASE OF TH E ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S 143(3) O F THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WHILE FRAMING THE ASSESSMENT, THE ASSESSING OFFICER MADE DISALLOWANCE U/S 40A(9) OF RS. 3,20,82 ,216/- PUBLICITY AND PUBLIC RELATION EXPENSES OF RS. 10,86,920/- DISALLOWANCE O F DEPRECIATION ON THE VALUE OF SHARES HELD IN APGPL OF RS. 10,54,60,000/- ON ACCOU NT OF UNDERVALUATION OF CLOSING STOCKS OF ORE OF RS. 2,21,21,933/- DEPRECIATION OF ASSETS RETIRED FROM ACTIVE USE OF RS. 1,00,63,480/- ENABLING ASSETS OF RETURN OF RS. 34,60,170/- AND ALSO DISALLOWANCE OUT OF TECHNICAL/OTHER CONSULTANCY EXPENSES OF RS. 16,88,300/- AND ALSO THE ASSESSING OFFICER REDUCED THE CLAIM OF DEDUCTION U/ S 80IA OF CAPTIVE POWER PLANT AMOUNTING OF RS. 4,36,36,093/- AGGRIEVED BY THIS OR DER THE ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A). IT IS PERTINENT TO NOTE HERE THAT THIS IS SECOND ROUND OF LITIGATION IN THE EARLIER ROUND, THE MATTER HAD TRA VELED UP TO THE STAGE OF THE ITAT IN ITA NO. 379/JU/2008, WHEREIN THE ISSUES WERE REMAND ED BACK TO THE LD. CIT(A) FOR DECISION AFRESH. THE LD. CIT(A) WHILE DECIDING THE APPEAL AFRESH DELETED THE DISALLOWANCE OF RS. 3,20,82,216 DELETED DISALLOWANC E OF RS. 10,86,920/- DELETED THE DISALLOWANCE OF DEPRECIATION OF RS. 10,54,60,000/-/ - DELETED THE DISALLOWANCE OF RS. 2,21,21,933/- AND ALSO DELETED THE DISALLOWANCE OF RS. 1,00,63,480/- FURTHER THE LD. CIT(A) ALSO DELETED THE DISALLOWANCE OF DEDUCTION U /S 80IA OF THE ACT AND ALSO 3 ITA NO. 612/JU/2009 M/S HINDUSTAN ZINC LTD., UDAIPUR. DELETED THE DISALLOWANCE OF RS. 16,88,300/- MADE ON ACCOUNT OF TECHNICAL FEASIBILITY/ OTHER CONSULTANCY EXPENSES. 3. AGGRIEVED BY THIS, THE REVENUE HAS PREFERRED TH E PRESENT APPEAL. AT THE TIME OF HEARING, THE LD. DEPARTMENTAL REPRESENTATIVES FA IRLY CONCEDED THAT GROUNDS NOS. 1,2,3,5 & 6 ARE COVERED AGAINST IN ITA NO. 235/JU/2 008, ITA NO. 537/JU/2007, ITA NO. 311/JU/2006. 4. GROUND NO. 1 , IT IS STATED BY THE REPRESENTATIVES OF THE PARTIE S, THAT THE ISSUE IS COVERED BY THE DECISION OF THE CO-ORDINATE BENCH IN ASSESEES OWN CASE. WE FIND THAT THE CO-ORDINATE BENCH IN ITA NO. 235/JU/2 008, DECIDED THIS ISSUE IN PARA 11.1 TO 11.2 BY OBSERVING AS UNDER: 11.1 AS REGARDS GROUND 5 OF THE REVENUE CHALLENGI NG STAFF WELFARE EXPENSE U/S 40A(9), WE FIND THAT THE SIMILAR ISSUE STANDS D ECIDED BY US IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2003-04 VIDE OUR O RDER DATED 11-03-2016 (IN ITA NO. 537/JU/2007-REVENUE) WHEREIN REVENUES RELEVANT GROUND NO. 5 HAS BEEN DISMISSED BY FOLLOWING OBSERVATIONS: 15.2 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT GROUND NO. 7, 8 AND 9 OF THE REVENUE IS SIMILAR TO GROUND NO. 7,8 AND 9 OF THE REVENUE FOR THE ASSESSMENT YEAR 2002-03 AND THIS ISSUE HAS BEEN DECIDED AGAINST THE REVENUE BY THIS BENCH VIDE ITS ORDER DATED 09-03-2016 BY FOLLOWING OBSERV ATIONS. 16.1 GROUND NO. 7,8,AND 9 AS MENTIONED HEREUNDER ARE SIMILAR IN NATURE:- (VII) DELETING THE DISALLOWANCE OF RS. 3,79,96,220 /- ON ACCOUNT OF STAFF WELFARE EXPENSES U/S 40A(9) OF THE IT ACT. (VIII) DELETING DISALLOWANCE OF RS. 62,90,317/- ON ACCOUNT OF CONTRIBUTION TOWARDS WELFARE FUND 4 ITA NO. 612/JU/2009 M/S HINDUSTAN ZINC LTD., UDAIPUR. (IX) DELETING DISALLOWANCE OF RS. 1,73,43,466/- ON ACCOUNT OF OTHER WELFARE EXPENSES. 16.2 LD. DR RELIED ON THE ORDER OF THE AO IN THIS BEH ALF. 16.3 THE LD. AR OF THE ASSESEE CONTENDS THAT THE AB OVE EXPENDITURE BEING FOR BUSINESS PURPOSES AND FALLING WITHIN THE PARAMETERS O F RELEVANT PROVISIONS HAVE BEEN RIGHTLY ALLOWED BY THE LD. CIT (A) BY DETA ILED ORDER, WHICH IS RELIED ON. 16.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED T HE MATERIALS AVAILABLE ON RECORD. WE FIND MERIT IN THE ORDER OF THE LD. CIT (A) WHO HAS RIGHTLY ALLOWED THE ABOVE EXPENDITURE AGITATED BY REVENUE QUA GROUND NO. 7,8, AND 9. THIS BENCH OF ITAT VIDE ITS ORDER DATED 03-03-2016 HAS ALL OWED SIMILAR EXPENSES BY FOLLOWING OBSERVATIONS. 13.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE MATERIAL AVAILABLE ON RECORD. ASSESSEE IS A PSU GOVERNED BY STATUTORY AS WELL AS INTERNAL REGULATIONS FOR INCURRING THE EXPENDITURE, ITS APPR OVAL AS PER A HIERARCHICAL ADMINISTRATE FRAME WORK. ON FACTS NEITHER OF THE AU DITORS I.E. STATUTORY AND TAX AUDITORS HAVE INDICATED ANYTHING ADVERSE IN RES PECT OF STAFF WELFARE EXPENDITURE. IT IS ALSO A FACT THAT THE STAFF WELF ARE EXPENDITURE IS INCURRED THROUGH VARIOUS BODIES IN CONSULTATION WITH SUCH ST AFF UNIONS. THESE FACTS COUPLED WITH FINDINGS OF LD. CIT (A) THAT EXPENDITU RE IS GENUINE. WHOLLY FOR BUSINESS PURPOSED AND ALLOWED IN VARIOUS EARLIER YE ARS EVEN AFTER VERIFICATION HAVE NEITHER BEEN DISLODGED BY REVENUE NOR CONTROVE RTED IN ANY MANNER EXCEPT RAISING A SPECIOUS PLEA THAT ISSUE MAY BE SE T ASIDE AGAIN. ITS VEHEMENTLY CONTENDED THAT SETTING ASIDE AMOUNTS TO BE A BURDEN OF FRESH PROCEEDINGS ON ASSESSEE WHICH SHOULD NOT BE RESTORE D TO BE APPELLATE AUTHORITIES IN ROUTINE AND CASUAL MANNER. LD. COUNS EL CONTENDS THAT IT AMOUNTS TO REASSESSMENT PROCEEDINGS AND IN THIS CAS E AFTER 15 YEARS, VARIOUS COURTS HAVE EXPRESSED THEIR STRONG DISPLEASURE ON P ERFUNCTORY REASSESSMENT. IN OUR CONSIDERED VIEW THE FOLLOWING PROPOSITIONS O F LAW IN THE REALM OF TAX JURISPRUDENCE AS CONTENDED BY LD. COUNSEL FOR THE A SSESSEE DESERVE MERIT THAT: (I) PRINCIPLES OF RES JUDI CATA DO NOT APPLY TO IT PR OCEEDINGS (II) EVERY ASSESSMENT YEA IS A SEPARATE AND DISTINCT UNI T OF ASSESSMENT AND STANDS ON ITS OWN FACTS. (III) WHAT IS SETTLED SHOULD NOT BE ORDINARILY UNSETTLED UNLESS THERE ARE JUSTIFIABLE REASONS I.E. THE PRINCIPLES OF CONS ISTENCY AS 5 ITA NO. 612/JU/2009 M/S HINDUSTAN ZINC LTD., UDAIPUR. ENUNCIATED BY HONBLE SUPREME COURT IN RADHA SOAMI SATSANG (SUPRA) IT IS NOT DISPUTED BY REVENUE THAT THE EXPENDITURE ON STAFF WELFARE HAS BEEN ALLOWED BY AO HIMSELF IN VARIOUS EARLIER YEARS WHIL E RE-VARYING ALSO IN SET ASIDE FRESH PROCEEDINGS. FROM THE RECORD IT EMERGES THAT NO SPECIFIC ITEM OF EXPENDITURE IS POINTED OUT TO BE NOT COVERED BY SEC . 40A(9), NO SUCH INDICATION IS GIVEN BY AUDITORS AND LD. CIT(A)S FI NDING ON FACTS AND LAW HAVE NOT BEEN DISLODGED BY REVENUE. ADVERTING TO THE PL EA OF SET ASIDE AS RAISED BY REVENUE, IT CAN BE ACCEDED AS NO LAWFUL JUSTIFICATI ON EXISTS TO SUPPORT IT. IN PAT SO MANY YEARS EVEN AFTER RE-VERIFICATION AO HIMSELF HAS ALLOWED SUCH EXPENDITURE. SUCH ORDERS MAY HAVE BEEN PASSED AFTE R THE IMPUGNED ASSESSMENT ORDER WAS PASSED RESPECTFULLY FOLLOWING THE HONBLE SUPREME COURT IN THE CASE OF RADHA SOAMI SATSANG WE CANNOT GLOSS OVER THE OBVIOUS LEGAL POSITION THAT REVENUE BY ITS AO HAS ALLOWED T HE STAFF WELFARE EXPENDITURE IN SUCCESSIVE ASSESSMENT YEARS AFTER DIRECTION OF H ONBLE HIGH COURT AND ITAT DURING RE-VERIFICATION AS PROCEEDINGS OF SET ASIDE ASSESSMENT YEARS. THE LEGAL PROPOSITIONS AS CANVASSED BY LD. COUNSEL DESERVED M ERIT, CONSEQUENTLY WE HOLD THAT THE SET ASIDE OF PROCEEDINGS CANNOT BE RE COURSE BY APPELLATE AUTHORITIES IN PERFUNCTORY MANNER AND THERE MUST EX IST VALID AND JUSTIFIABLE REASONS FOR SUBJECTING THE ASSESSEE TO SECOND ROUND OF PROCEEDINGS. THE ORDER OF LD. CIT(A) ON THE ISSUE OF STAFF WELFARE EXPENDI TURE IS UPHELD, THIS GROUND NO. 7 OF THE REVENUE IS DISMISSED. THE NATURE OF EXPENDITURE AND FACTS AND CIRCUMSTANC E QUA GROUND NO. 7, AND 9 OF THIS YEAR ARE SIMILAR. THEREFORE, FOLLOWING OUR DECISION IN ASSESSEES OWN CASE (SUPRA) FOR THE ASSESSMENT YEAR 2001-02, WE UP HOLD THE ORDER O THE LD. CIT(A) IN THIS BEHALF. THUS, GROUND NOS. 7,8, AND 9 OF THE REVENUE ARE DISMISSED. 15.3 FACTS AND CIRCUMSTANCES OF THE CASE BEING SI MILAR TO EARLIER YEARS AND ALSO FOLLOWING OUR OWN DECISION IN THE ABOVE GROUND S OF APPEAL (SUPRA), THE GROUND NO. 7,8 AND 9 O THE REVENUE ARE DISMISSED. 11.2 RESPECTFULLY FOLLOWING THE DECISION OF THE CO -ORDINATE BENCH IN ASSESSEES OWN CASE(SUPRA), THE GROUND NO. 5 OF THE REVENUE CHALLENGING STAFF WELFARE EXPENSE U/S 40A(9) IS DISMISSED. 4.1 THEREFORE, TAKING A CONSISTENT VIEW, THE GROUND NO. 1 OF REVENUES APPEAL IS DISMISSED. 6 ITA NO. 612/JU/2009 M/S HINDUSTAN ZINC LTD., UDAIPUR. 5. APROPOS TO GROUND NO. 2 IT IS STATED BY THE REPRESENTATIVE OF THE PARTIES, THAT THE ISSUE IS COVERED BY THE DECISION OF THE CO -ORDINATE BENCH IN ASSESSEES OWN CASE. WE FIND THAT THE CO-ORDINATE BENCH IN ITA NO . 235/JU/2008, DECIDED THIS ISSUE IN PARA 12.1 AND 12.2 BY OBSERVED AS UNDER: 12.1 AS REGARD GROUND 6 OF THE REVENUE CHALLENGIN G ALLOWABILITY OF PUBLICITY AND PR EXPENSE, WE FIND THAT THE SIMILAR ISSUE HAS BEEN DECIDED BY US IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2003-04 VIDE OUR ORDER DATED 11- 03-2016 ( IN ITA NO. 537/JU/2007- REVENUE) WHEREIN REVENUES GROUND NO. 6 HAS BEEN DISMISSED BY FOLLOWING OBSERVATIONS. 16.2 WE HAVE HEARD THE RIVAL CONTENTIONS AND PER USED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THIS ISSUE HAS ALREADY BEEN DECIDED BY THIS BENCH VIDE ITS ORDER DATED 09-03-2016 (A.Y. 20 02-03) IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER:- 5.3 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED T HE MATERIAL AVAILABLE ON RECORD, SIMILAR ISSUE CAME UP IN ASSESSMENT YEAR 200 1-02 ON THE SAME ISSUE I.E. GUJARAT EARTHQUAKE ITSELF. THE AMOUNT PROVIDED F OR SUCH RELIEF ON THE CALL OF DISTRICT COLLECTOR HAS BEEN ALLOWED IN ASSESSMENT YEAR 2001-02 BY US BY FOLLOWING OBSERVATIONS. 5.1 GROUND NO. 4 FOR AN AMOUNT OF RS. 20,000/- OF THE ASSESSEE DESERVES TO BE ALLOWED AS IT IS NOT DISPUTED THAT IT WAS INCURRED FOR SENDING GUJARAT EARTHQUAKE RELIEF IN THE FORM OF A TRUCKLOAD OF FOOD IT EMS CONSEQUENT TO CHITTORGARH DISTRICT COLLECTORS CLARION CALL. THE AMOU NT BEING FOR SOCIAL GOOD AND FOR DISCHARGE OF CORPORATE SOCIAL RESPONSIBILITY IS ALLOWABLE AS BUSINESS EXPENDITURE U/S 37(1). THIS GROUND NO. 4 OF THE ASSE SSEE IS ALLOWED. FOLLOWING ABOVE JUDGMENT IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2001-02, THE GROUND NO. 3 OF THE ASSESSEE IS ALLOWE D. 16.3 FACTS AND CIRCUMSTANCES OF THE CASE BEING SIM ILAR TO EARLIER YEARS AND ALSO FOLLOWING OUR OWN DECISION IN THE ABOVE GROUND OF APPEAL(SUPRA), THE GROUND NO. 10 OF THE REVENUE IS DISMISSED. 7 ITA NO. 612/JU/2009 M/S HINDUSTAN ZINC LTD., UDAIPUR. 12.2 RESPECTFULLY FOLLOWING THE DECISION OF THE CO -ORDINATE BENCH IN ASSESSEES OWN CASE(SUPRA), THE GROUND NO. 6 OF THE REVENUE CHALLENGING ALLOWABILITY OF PUBLICITY AND PR EXPENSES IS DISMIS SED. 5.2 THE FACTS ARE IDENTICAL AND THERE IS NO CHANGE INTO THE FACTS AND CIRCUMSTANCES POINTED OUT BY THE REVENUE. THEREFOR E, TAKING A CONSISTENT VIEW, THIS GROUND OF THE REVENUES APPEAL IS DISMISSED. 6. APROPOS TO GROUND NO. 3, IT IS STATED BY THE LD. REPRESENTATIVES OF THE PARTIES, THAT THE ISSUE IS COVERED BY THE DECISION OF THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE. WE FIND THAT THE CO-ORDINATE BENCH IN ITA NO. 235/JODHPUR/2008 DECIDED THIS ISSUE IN PARA 10.1 TO 10.2 BY OBSERVED AS UNDER:- 10.1 AS REGARDS GROUND 4 OF THE REVENUE REGARDIN G THE ALLOWABILITY OF DEPRECIATION ON APGPCL SHARES, WE FIND THAT THE SIM ILAR ISSUE HAS BEEN DECIDED BY US IN ASSESSEES OWN CASE FOR THE ASSESS MENT YEAR 2003-04 VIDE OUR ORDER DATED 11-03-2016 (IN ITA NO. 537/JU/ 2007 REVENUE) WHEREIN REVENUES GROUND NO. 4 HAS BEEN PARTLY ALLO WED BY FOLLOWING OBSERVATIONS. 14.2 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT GROUND NO. 6 OF THE REVENUE IS SIMILAR TO GROUND NO. 6 OF THE REVENUE FOR THE ASSESSMENT YEAR 2002-03 AND THIS GROUND IS PARTLY ALLOWED BY THIS BENCH VIDE ITS ORD ER DATED 09-03-201 BY FOLLOWING OBSERVATIONS. 15.1 APROPOS GROUND NO. 6 REGARDING DELETING DISA LLOWANCE OF DEPRECIATION OF RS. 19,50,74,094/- ON SHARES OF APGPCL CLAIMING IT TO FOR ACQUISITION OF 8 ITA NO. 612/JU/2009 M/S HINDUSTAN ZINC LTD., UDAIPUR. INTANGIBLE COMMERCIAL RIGHTS FOR USE OF POWER GENER ATED BY APGPCL AT A COST. BOTH PARTIES AGREED THAT THE ISSUE IS SIMILA R TO AY 2001-02 AND THE SAME DECISION MAY BE APPLIED. 15.2 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE MATERIALS AVAILABLE ON RECORD. SIMILAR ISSUE CAME UP FIRST TI ME BEFORE US N ASSESSMENT YEAR 2001-02, BY A DETAILED ORDER WE HAVE PARTLY UP HELD THE ORDER OF THE LD. CIT(A) BY DIRECTING THAT 2/3RD VALUE OF THE INVESTM ENT IN APGPCL, SHARES SHOULD BE ATTRIBUTED FOR ACQUISITION OF INTANGIBLE RIGHTS EMBEDDED THEREIN AND DEPRECIATION SHOULD BE ALLOWED ON 2/3RD VALUE I N TERMS OF SECTION 32(1)(II) THEREON. BESIDES 1/3RD VALUE OF INVESTME NT IS ATTRIBUTABLE TO THE EQUITY SHARES. WHENEVER SHARES OF APGPCL ARE TRANS FERRED THE SALE PROCEEDS SHALL BE ACCORDINGLY ALLOCATED I.E. 1/3RD TOWARDS THE SHARE CORRESPONDING COST OF SHARE FOR COMPUTING LONG-TERM CAPITAL GAINS IN ACCORDANCE WITH RELEVANT PROVISIONS AND 2/3RD TOWAR DS BLOCK OF ASSESSEES INTANGIBLE ASSETS BY FOLLOWING OBSERVATIONS:- 17.21 THE CIRCUMSTANCES THAT THE DECLARATION OF LAWI N CIT V. SMIFS SECURITIES LTD. [2012] 348 ITR 302/210 TAXMAN 428/24 TAMAN.COM 222(SC) ENVISIONS INCLUSION OF GOODWILL AS AN ASSET AND, THEREFORE, EN TITLED TO DEPRECIATION, IN OTHER WORDS DOES NOT NECESSARILY MEAN THAT IN EVERY CAS E THE GOODWILL CLAIM HAS TO BE ALLOWED. IN THE PRESENT CASE, THOUGH TERMED AS GOODWILL, WHAT WAS ACTUALLY PARTED WITH BY STL WAS A COMMERCIAL RIGHT, I. E. EXCLUSIVELY TO THE NETWORK WHICH WOULD NOT HAVE BEEN OTHERWISE AVAILABLE BUT FOR THE TERMS OF THE ARRANGEMENT. 9 ITA NO. 612/JU/2009 M/S HINDUSTAN ZINC LTD., UDAIPUR. 17.22 IN BOTH THE ABOVE CASES, IT IS TO BE APPRECIAT ED THAT IN CASE OF SMIFS SECURITIES, THE WHOLE OF THE BUSINESS WAS ACQUIRED AN D AMALGAMATED WITH THE ASSESSEE COMPANY AND THE CONSIDERATION PAID OVER AND ABOVE THE NET BOOK VALUE OF THE ASSETS (I.E. THE TANGIBLE ASSETS) TERME D AS GOODWILL WAS HELD ELIGIBLE FOR DEPRECIATION ON INTANGIBLE ASSET. SIMI LARLY, IN THE CASE OF MIS BHARTI, THE ASSESSEE-COMPANY APART FROM PAYING CONSIDE RATION TO ACQUIRE SHARES OF COMPANY S, AS PER TERMS OF AGREEMENT, ALSO HAD TO PAY SPECIFIC AMOUNT TO TRANSFER TO GET COMMERCIAL RIGHT FOR MARKETING, CUSTOMER SUPPORT, DISTRIBUTION AND ASSOCIATE SET UPS; OTHERWISE SUCH MA RKET/CUSTOMER NETWORK WOULD NOT HAVE BEEN TRANSFERRED TO ASSESSEE COMPANY B Y COMPANY S. THE AMOUNT SO PAID TO ACQUIRE THE COMMERCIAL RIGHTS (AND N OT THE CONSIDERATION TO ACQUIRE SHARES) WAS HELD ELIGIBLE FOR DEPRECIATION. 17.23 THESE FACTS, CIRCUMSTANCES AND JUDICIAL DECIS IONS LEAD US HOLD THAT IN SUCH TYPE OF BUSINESS TRANSACTIONS, THERE ARE ALWAYS S OME TANGIBLE ASSETS AND SOME INTANGIBLES ASSETS WHICH ARE SOLD AND ACQUIRED A ND EACH CASE WILL HAVE ITS OWN PECULIARITIES IN TERMS OF DOMINANT OBJECTIVE OF SUCH ACQUISITION AND A REASONABLE ESTIMATION OF VALUATION OF DOMINANT INTAN GIBLE ASSET AND OTHER RIGHTS IS TO BE ARRIVED AT. IN THE CASES A DISCUSSED ABOVE, THE VALUE OF INTANGIBLES ARE EITHER DEDUCED BY WAY OF A RESIDUARY ME THODOLOGY WHERE CONSIDERATION PAID OVER AND ABOVE THE NET BOOK VALUE HAS BEEN CONSIDERED AS VALUE OF INTANGIBLE OR THERE COULD BE A SPECIFIC CONS IDERATION AGREED WITH THE SELLER TOWARDS ACQUISITION OF INTANGIBLES. 17.24 IN LIGHT OF ABOVE DISCUSSION FACTS, CIRCUMSTA NCES AND CASE LAWS OF SMIFF SECURITIES. BHARTI TELETECH AND OTHERS (SUPRA) WE HOLD THAT TO ASCRIBE 2/3 RD VALUE OF THE APGPCL INVESTMENT TO INTANGIBLE COMMERC IAL RIGHTS OF COST EFFECTIVE POWER SUPPLY RIGHTS AN 1/3 RD VALUE TO THE TANGIBLE RIGHTS A SHARE HOLDER WILL BE A REASONABLE ESTIMATE ASCRIBABLE TO THE SE CONSTITUENTS. THE AO WILL ACCORDINGLY WORD OUT THE ELIGIBLE DEPRECIATION O N INTANGIBLE RIGHTS U/S 32(I)(II) ON 2/3 RD VALUE OF APGPCL INVESTMENT AND 1/3 RD TO SHARE HOLDER RIGHTS AND WORK OUT THE BLOCK OF ASSET OF INTANGIBLE RIGHTS FOR DEPRECIATION AND 1/3 RD TO VALUE OF APGPCL SHARES. THE ALLOWANCES, CLAIM OF LTCG ON SALE OF SHARES WHENEVER SOLD WILL BE WORKED OUT ACCORDINGLY. 17.25 IN THE ENTIRETY OF FACTS, CIRCUMSTANCES, CONTE NTIONS AND CASE LAWS WE PARTLY UPHELD THE ASSESSEES CLAIM OF DEPRECIATION IN THIS BEHALF U/S 32(I)(II) IN TERMS OF PARA 17.24 ABOVE BY HOLDING THAT:- 10 ITA NO. 612/JU/2009 M/S HINDUSTAN ZINC LTD., UDAIPUR. (I) PRINCIPLE OF EJUSDEM GENERIS A HELD BY HONBLE S UPREME COURT IN TECHNO SHARES IS APPLICABLE TO INTERPRETATION OF SEC. 32(I)( II). LEGISLATURE DID NOT INTEND TO PROVIDE OR DEPRECIATION ONLY IN RESPECT OF SPECIFIED INTANGIBLE ASSETS BUT ALSO TO OTHER CATEGORIES OF INTANGIBLE ASSETS AS IT IS NOT POSSIBLE TO EXHAUSTIVELY ENUMERATE EACH AND EVERY INTANGIBLE ASSET OR RIGHT. (II) IN THE INSTANT CASE, IT IS THE INTANGIBLE ASS ET IN FORM OF RIGHT TO PROCURE POWER AT COST WHICH QUALIFIED FOR DEPRECIATION UNDER SE CTION 32 OF THE ACT. GIVEN THAT THERE IS NO SEPARATE CONSIDERATION FOR VALU E OF SHARES AN VALUE OF SUCH INTANGIBLE RIGHTS, THE ASESSEE AND AO HAVE TO C OME UP WITH AN APPROPRIATE METHODOLOGY. ON THE LIMITED ISSUE OF DET ERMINING THE VALUATION THE INTANGIBLE RIGHTS WHICH OTHERWISE QUALIFY FOR DEPRE CIATION U/S 32(I)(II) OF THE ACT, THE MATTER IS SET ASIDE TO THE FILE OF AO T O EXAMINE THE SAME AFTER PROVIDING REASONABLE OPPORTUNITY TO THE ASSESSEE. (III) CARE SHALL BE TAKING TO CONSIDER THE NATURE OF INTANGIBLE AND TANGIBLE COMMERCIAL RIGHTS ACQUIRED BY ASSESSEE IN A COMPOSITE TRANSACTION AND TO ASCRIBE REASONABLE VALUATION TO RESPECTIVE RIGHTS. (IV) THE CATEGORIES OF SPECIFIC INTANGIBLE ASSETS RE FERRED IN SECTION 32(I)(II) ARE NOT OF THE SAME KIND AND ARE CLEARLY DISTINCT FROM ON E ANOTHER. LIKE WISE UNREMUNERATED RIGHTS NEED NOT STRICTLY ANSWER THE DESCRIP TION OF KNOWHOW, PATENT, TRADEMARKS, LICENSES OR FRANCHISES BUT MUST BE OF SIMILAR OF NATURE AS THE SPECIFIED ASSETS. IN OUR VIEW THE ASSESSEES CL AIM CONFORM TO THIS PARAMETER. (V) INTANGIBLE ASSETS, LIKE SECURING EXPEDIENT AND USEFUL POWER SUPPLY OBTAINED FROM APGPCL ARE INVALUABLE FOR CARRYING ON THE BUSINESS BY THE ASSESSEE. (VI) ACQUISITION OF SUCH INTANGIBLE ASSETS WHICH A RE WHOLE OR PART OF ACQUISITION VALUE, THEREFORE, CORRESPONDINGLY COMPARABLE TO A LICENS E TO CARRY OUT THE EXISTING TRANSMISSION AND DISTRIBUTION BUSINESS OF TH E TRANSFEROR. IN THIS CASE ALSO APGPCL GOT THE RIGHTS OF EARLIER ALLOTEE IN FAVOU R OF THE ASSESSEE. (VII) HONBLE SC IN TECHNO SHARES AND STOCKS LTD. H ELD THAT INTANGIBLE ASSETS OWNED BY THE ASSESSEE AND USED FOR THE BUSINESS PURP OSE WHICH ENABLES THE ASSESSEE TO ACCESS THE MARKET AND HAS AN ECONOMIC AN D MONEY VALUE IS A LICENSE OR AKIN TO A LICENSE WHICH IS ONE OF THE ITEMS FALLING IN SECTION 32(I)(II). 11 ITA NO. 612/JU/2009 M/S HINDUSTAN ZINC LTD., UDAIPUR. (VIII) EVEN IF STRICTLY THE RIGHTS DO NOT AMOUNT TO L ICENSE, IN ANY CASE THEY CONSTITUTE ANOTHER GENUS OF OTHER COMMERCIAL RIGHTS OF SIMILAR NATURE AS ENVISAGED BY SEC. 32(I)(II). (IX) THE SHARES ARE THE WRITTEN MEANS TO ACQUIRE AND ENJOY THE RIGHTS OF ELECTRICITY UNDER A POLICY FORMULATED BY APSEB AND AGP GCL UNDER THE AEGIS OF POLICIES OF AP GOVT. THEREFORE THE RIGHTS BEING ACHIE VED IN THE FORM OF ZERO DIVIDEND SHARE CERTIFICATED CANNOT MILITATE AGINST TH E REAL NATURE OF TRANSACTION. OUR VIEW IS FORTIFIED BY HONBLE SUPREM E COURT JUDGMENTS IN THE CASE OF KEDARNATH JUTE MILL AND SUTLEJ COTTON MILLS (SUPRA), THEREFORE, ACQUISITION OF RIGHTS BEING THE DOMINANT AND PRIME MO TIVE IN IMPUGNED TRANSACTION, DEPRECIATION IN TERMS OF SEC. 32(I)(II) I S TO BE ALLOWED IN TERMS OF PARA 17.24 ABOVE. (X) THOUGH NO ADVERSE JUDGMENT HAS BEEN CITED ON THE INTERPRETATION AND SCOPE OF SEC.32(I)(II) AND THE ISSUE, ASSUMING EVEN THAT MORE THAN ONE INTERPRETATION IS POSSIBLE, EVEN THE ONE FAVOURABLE T O ASSESSEE IS TO BE ADOPTED IN VIEW OF THE HONBLE SUPREME COURT JUDGMENTS IN THE CASE OF VEGETABLE PRODUCT AND VATIKA TOWNSHIP(SUPRA) 17.26 IN VIEW OF THE FOREGOING WE PARTLY UPHOLD THE O RDER OF LD. CIT(A) ON THIS ISSUE ON ALLOWING IMPUGNED DEPRECIATION IN TERMS OF P ARA 17.24 ABOVE, SAME IS UPHELD. REVENUE GROUND NO. 2 IS PARTLY ALLOWED. 15.3 IN THESE FACTS AND CIRUMSTNCES, FOLLOWING OU R OWN JUDGMENT DATED 03- 03-2016 IN ASSESSEES OWN CASE FOR THE ASSESSMENT Y EAR 2001-02, THE GROUND NO. 6 OF THE REVENUE IS ACCORDINGLY PARTLY ALLOWED ON THE SIMILAR TERMS AS MENTIONED ABOVE. THUS GROUND NO. 6 OF THE REVENUE IS PARTLY ALLOWED . 14.3 FACTS AND CIRCUMSTANCES OF THE CASE BEING SIM ILAR TO EARLIER YEARS AND ALSO FOLLOWING OUR OWN DECISION IN THE ABOVE GROUND S OF APPEAL (SUPRA), THE GROUND NO. 6 OF THE REVENUE IS PARTLY ALLOWED. 12 ITA NO. 612/JU/2009 M/S HINDUSTAN ZINC LTD., UDAIPUR. 10.2 RESPECTFULLY FOLLOWING THE DECISION OF THE C O-ORDINATE BENCH IN ASSESSEES OWN CASE (SUPRA) THE GROUND NO. 4 OF THE REVENUE REGARDING THE CLAIM OF DEPRECIATION ON APGPCL SHARE S IS PARTLY ALLOWED. 6.1 THEREFORE, TAKING A CONSISTENT VIEW, THIS GROUN D OF THE REVENUES APPEAL IS DISMISSED . 7. GROUND NO. 5 , IT IS STATED BY THE LD. REPRESENTATIVES OF THE PA RTIES, THAT THE ISSUE IS COVERED BY THE DECISION OF THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE. WE FIND THAT THE CO-ORDINATE BENCH IN ITA NO. 235/J U/2008 HAS DECIDED THIS ISSUE IN PARA 16.1 TO 16.2 BY OBSERVED AS UNDER:- 16.1 AS REGARDS GROUND 11 OF THE REVENUE CHALLEN GING CLAIM OF DEPRECIATION ON ASSETS RETIRED FROM ACTIVE, USE WE FIND THAT THE SIMILAR ISSUE HAS BEEN DECIDED BY US IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2003-04 VIDE OUR ORDER DATED 11/03/ 2016 ( IN ITA NO. 537/JU/2007 REVENUE) WHEREIN REVENUES GROUND NO. 11 HAS BEEN DISMISSED BY FOLLOWING OBSERVATIONS. 22.2 WE HAVE HEARD THE RIVAL CONTENTION AND PERUS ED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT GROUND NO. 18 OF THE REVENUE IS SIMILAR TO GROUND NO. 15 OF THE REVENUE FOR THE ASSESSMENT YEA R 2002-03 AND THE ISSUE IN QUESTION HAS BEEN DECIDED AGAINST THE REVE NUE BY THIS BENCH VIDE ITS ORDER DATED 09/03/2016 BY FOLLOWING OBSERVATION S. 22.7 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THIS ISSUE IS SQ UARELY COVERED BY THE 13 ITA NO. 612/JU/2009 M/S HINDUSTAN ZINC LTD., UDAIPUR. DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. YAMAHA MOTOR INDIA(P) LTD. (2010), 328 ITR 297 WHEREIN IT IS HEL D AS UNDER:- HELD DISMISSING THE APPEAL, THAT AS LONG AS THE MA CHINERY WAS AVAILABLE FOR USE, THOUGH NOT ACTUALLY USED, IT FEEL WITHIN THE E XPRESSION USED FOR THE PURPOSE OF THE BUSINESS AND THE ASESSEE COULD CLAI M THE BENEFIT OF DEPRECIATION. AN ACTUAL USER WAS NOT REQUIRED AS HAD B EEN CONTENDED BY THE REVENUE. USE AND DISCARDING WERE NOT IN THE SAME FIEL D AND COULD NOT STAND TOGETHER. HOWEVER, A HARMONIOUS READING OF THE EXPRESS IONS USED FOR THE PURPOSE OF THE BUSINESS AND DISCARDED IT WOULD SH OW THAT USED FOR THE PURPOSES OF THE BUSINESS ONLY MEANS THAT THE ASSE SSEE HAD USED THE MACHINERY FOR THE PURPOSE OF THE BUSINESS IN EARLIER YE ARS. THE EXPRESSION USED FOR THE PURPOSES OF THE BUSINESS AS FOUND IN SECTION 32 WHEN USED WITH RESPECT TO DISCARDED MACHINERY WOULD MEAN THAT THE USE R IN THE BUSINESS WAS NOT IN THE RELEVANT FINANCIAL YEAR/ PREVIOUS YEAR BUT IN THE EARLIER FINANCIAL YEARS. ANY OTHER INTERPRETATION WOULD LEAD TO AN INCO NGRUOUS SITUATION BECAUSE ON THE ONE HAND THE DEPRECIATION WAS ALLOWED ON DISCARDED MACHINERY AFTER ALLOWING, INTER ALIA, AN ADJUSTMENT FO R SCRAP VALUE, YET, ON THE OTHER HAND USER WOULD BE REQUIRED OF THE DISCARDED MACHI NERY WHICH WAS NOT POSSIBLE BECAUSE OF VARIOUS REASONS. THE DISCARDED MA CHINERY WOULD NOT BE ACTUALLY USED IN THE RELEVANT PREVIOUS YEAR AS LONG A S IT WAS USED FOR THE PURPOSES OF BUSINESS IN THE EARLIER YEARS. THE TRIBUNA L WAS CORRECT IN DIRECTING THE ASSESSING OFFICER TO RECOMPUTED DEPRECIATION AFTER REDUCING THE SCRAP VALUE OF THE ASSETS WHICH HAD BEEN DISCARDED AND WRI TTEN OFF IN THE BOOKS OF ACCOUNT FOR THE YEAR UNDER CONSIDERATION FROM THE WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS. ACTUAL USER OF THE MACHINERY WAS NO T REQUIRED WITH RESPECT TO DISCARDED MACHINERY AD THE CONDITION FOR ELIGIBILITY F OR DEPRECIATION THAT THE MACHINERY BEING USED FOR THE PURPOSE OF THE BUSINESS WOULD MEAN THAT THE DISCARDED MACHINERY WAS USED FOR THE PURPOSE OF THE BU SINESS IN THE EARLIER YEARS FOR WHICH DEPRECIATION HAD BEEN ALLOWED. [ THE SUPREME COURT HAS DISMISSED THE SPECIAL LEAVE P ETITION FILED BY THE DEPARTMENT AGAINST THIS JUDGMENT : SEE [2010] 328 IT R (ST.)10.] 22.8 RESPECTFULLY THE DECISION OF HONBLE DELHI HI GH COURT IN THE CASE OF CIT VS. YAMAHA MOTOR INDIA (P) LTD. (SUPRA) AND THE DEC ISION OF ITAT JODHPUR 14 ITA NO. 612/JU/2009 M/S HINDUSTAN ZINC LTD., UDAIPUR. BENCH IN THE CASE OF DCIT VS. UDAIPUR DISTILLERY CO . LTD. (SUPRA), WE UPHOLD THE ORDER OF THE LD. CIT (A) ON THIS ISSUE. THUS GROUND NO. 15 OF THE REVENUE IS DISMISSED. 22.3 FACTS AND CIRCUMSTANCES OF THE CASE BEING SIMI LAR TO EARLIER YEARS AND ALSO FOLLOWING OUR OWN DECISION IN THE ABOVE GROUND OF APPEAL(SUPRA), THE GROUND NO. 18 OF THE REVENUE IS DISMISSED. 16.2 RESPECTFULLY FOLLOWING THE DECISION OF THE CO -ORDINATE BENCH IN ASSESSEES OWN CASE(SUPRA), THE GROUND NO. 11 OF TH E REVENUE CHALLENGING CLAIM OF DEPRECIATION ON ASSETS RETIRED FROM ACTIVE USE IS DISMISSED. 7.1 THEREFORE, THIS GROUND OF THE REVENUES APPEAL IS DISMISSED. 8. APROPOS TO GROUND NO. 6 , IT IS STATED BY THE LD. REPRESENTATIVES OF THE PARTIES, AND THAT IDENTICAL ISSUE IS DECIDED BY THE CO-ORDINATE BENCH IN ITA NO. 235/JU/2008 IN ASSESSEES OWN CASE PERTAINING TO TH E ASSESSMENT YEAR 2004-05 IN PARA 13.1 TO 13.2 HAS READS AS UNDER:- 13.1 AS REGARDS GROUND 7 OF THE REVENUE CHALLENGI NG GHOSUNDA DAMN EXPENSES WE FIND THAT THE SIMILAR ISSUE HAS BE EN DECIDED BY US IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2003-04 VIDE OUR ORDER DATED 11-03-2016( IN ITA NO. 537/JU/2007- REVENUE) WHEREIN REVENUES GROUND NO. 7 HAS BEEN DISMISSED BY FOLLOW ING OBSERVATIONS. 17.2 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT GROUND NO. 11 OF THE REVENUE IS SIMILAR TO 15 ITA NO. 612/JU/2009 M/S HINDUSTAN ZINC LTD., UDAIPUR. GROUND NO. 10 OF THE REVENUE FOR THE ASSESSMENT YEA R 2002-03 AND THIS ISSUE HAS BEEN DECIDED AGAINST THE REVENUE BY THIS BENCH VIDE ITS ORDER DATED 09-03-2016 BY FOLLOWING OBSERVATIONS; 17.1 APROPOS REVENUE GROUND NO. 10 REGARDING DELET ING DISALLOWANCE OF RS. 4,19,12,571/- U/S 37(I) ON ACCOUNT OF ENABLING ASSE TS WRITTEN OFF BEING EXPENSES INCURRED ON GOSUNDA DAM FOR PROCURING WATE R. 17.2 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE MATERIALS AVAILABLE ON RECORD. THIS ISSUE IS ONE GOING ONE F ROM EARLIER YEARS. IN ASSESSMENT YEAR 2001-02, THIS BENCH OF ITAT VIDE IT S ORDER DATED 03-03-2016 (SUPRA) HAS UPHELD THE ORDER OF THE LD. CIT(A) ON T HIS ISSUE BY FOLLOWING OBSERVATIONS:- 15.1 REVENUE GROUND NO. 9 CHALLENGING ALLOWANCE OF RS. 9,33,45,17/- ON ACCOUNT OF EXPENSES INCURRED ON GHOSUNDA DAM FOR PROCURI NG WATER. L. CIT(A) ALLOWED THIS CLAIM BY FOLLOWING OBSERVATION. 11.2 DURING THE COURSE OF APPELLATE PROCEEDINGS, THE LD.AR CONTENDED THAT WITH REFERENCE TO THE EXPENDITURE INCURRED ON ALTERATION EFFECTED IN THE CONSTRUCTION OF GOSUNDA DAM WERE IN EARLIER YEARS ALSO A ND ALLOWABLE U/S 37(I) OF THE ACT BUT THE SAME WERE NOT ALLOWED BY THE AO. HE FURTHER SUBMITTED THAT THE EXPENDITURE INCURRED ONLY ENABLED A MORE EFFIC IENT AND ECONOMICAL SATE OF BUSINESS OPERATION AND THAT NO NEW ASSET WAS CREATED OR ANY PROPERTY ACQUIRED. IN SUPPORT OF THIS THE LD. AR PLACED RELIAN CE IN THE CASE OF CIT VS. BONGAIGAON REFINERY & PETROCHEMICALS LTD. 222 ITR 206 (GAU). NATIONAL ORGANIC CHEMICAL INDUSTRIES LTD. VS. CIT203ITR 410(BO M). BIKANER GYPSUM VS CIT, 187 ITR 39 (SC) AND CITVS. ASSOCIATED CEMENT C OMPANY LTD. 172ITR 257 (SC). HE FURTHER STATED THAT SIMILAR ISSUE HAS BEEN C ONSIDERED IN ITA NO. 1106/JP/94 FOR AY 1991-92 AND ITA NO. 321/JP/96 FOR A Y 1992-93 WHEREIN THE HONBLE ITAT HAS DISMISSED THE DEPARTMENTAL APPEAL A ND DECIDED IN VARIOUS OF 16 ITA NO. 612/JU/2009 M/S HINDUSTAN ZINC LTD., UDAIPUR. THE APPELLANT. HE FURTHER STATED THAT AFTER SUBMITTIN G THE BREAK UP OF THE AMOUNT, NO OTHER INFORMATION WAS REQUIRED BY THE AO. T HE LD.AR FURNISHED COMPLETE DETAILS OF EXPENDITURE INCURRED FOR GHOSUNDA D AM. IN VIEW OF THE ABOVE, THE LD. AR CONTENDED THAT THE DISALLOWANCE D ESERVED TO BE DELETED. AS FAR AS THE DISALLOWANCE OF BAD DEBTS AMOUNTING TO RS. 4,79,519/- COMPLETE DETAILS FROM ALL THE UNITS COULD NOT BE FIL ED AT THE TIME OF ASSESSMENT. HE FURTHER STATED THE CLAIM OF THE APPELLANT DESERVE TO BE ALLOWED ON THE BASIS OF AUDITED BALANCE SHEET AS THE AMOUNTS ARE AUDITED BY THE AUDITORS APPOINTED BY C & AG. 11.3 I HAVE CONSIDERED THE FACTS OF THE CASE AND A LSO GONE THROUGH THE DECISION OF HONBLE ITAT (SUPRA). RESPECTFULLY FOLL OWING THE DECISION OF THE HONBLE IT, ACT IN THE CASE OF THE APPELLANT CITED ABOVE, I HOLD THAT THE AO WAS NOT JUSTIFIED IN DISALLOWING THE EXPENDITURE INCURRED ON GOSUNDA DAM AMOUNTING TO RS. 9,3,45,17/- , THE SAME IS DELETED. WITH REGARD TO OTHER DISALLOWANCES OF RS. 4,79,519/- I N THE APPELLANT PROCEEDINGS ALSO, THE LD. AR DID NOT FILE ANY DETAIL S. THEREFORE, THE ASCERTAINMENT IS NOT POSSIBLE. HENCE, THE DISALLOWA NCE IS CONFIRMED. 15.2 LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT TH IS ISSUE IS COVERED AND SETTLED IN ITS FAVOUR OF THE ASSESSEE, ITAT ALLOWED THESE CLAIMS IN AYS 1991-92 AND 1992-93; AGGRIEVED REVENUE PREFERRED APPEALS BEFORE HONBLE RAJASTHAN HIGH COURT WHICH WAS PLEASED TO DISMISS REVENUE APPEA LS BY THE ORDER DTD. 30/01/09 IN ITA NOS. 52 & 78/2002 BY FOLLOWING OBSE RVATIONS:- 12 ADVERTING TO THE FACTS OF THE PRESENT CASE, ADM ITTEDLY, THE ASSESSEES SUPER SMELTER PLANT REQUIRES ADEQUATE QUANTITY OF WATER FOR ITS OPERATION AND UNLESS AND UNTIL, WATER IS AVAILABLE, THE SUPER SMEL TER PLANT WOULD NOT FUNCTION AND WOULD NOT BE ABLE TO PRODUCE ANY ITEMS. ADMITTE DLY, THE GHOSUNDA DAM HAS BEEN CONSTRUCTED BY THE STATE GOVT. AND THE ASSE SSEE HAS MADE EXPENDITURE FOR ITS ALTERATION SO AS TO ENSURE SHARING O F THE WATER WITH THE STATE GOVT. WITHOUT HAVING ANY RIGHT OR OWNERSHIP IN T HE DAM OR THE WATER. 17 ITA NO. 612/JU/2009 M/S HINDUSTAN ZINC LTD., UDAIPUR. EVEN THE ASSESSEES SHARE OF WATER IS ALSO DETERMINED BY THE STATE GOVT. THUS, THE EXPENDITURE INCURRED BY THE ASSESSEE FOR COMMERCIA L EXPEDIENCY RELATES WITH CARRYING ON OF BUSINESS AND FALLS WITHIN SUCH EX PENDITURE AS PRUDENT BUSINESSMAN MAY INCUR FOR THE PURPOSE OF THE BUSINESS . THE OPERATIONAL EXPENSES INCURRED BY THE ASSESSEE SOLELY INTENDED FOR FURTHERANCE OF THE ENTERPRISE CAN BE NO MEANS BE TREATED AS EXPENDITURE O F CAPITAL NATURE . 13.KEEPING IN VIEW THE OBJECT AND PURPOSE OF THE EX PENDITURE AND TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE NOTICED ABOV E, IN OUR CONSIDERED OPINION, THE BENEFIT RECEIVED BY THE ASSESSEE COMPAN Y ON ACCOUNT OF THE EXPENDITURE INCURRED CANNOT BE SAID TO BE AN ADVANTAGE IN THE CAPITAL FIELD. WE ARE IN AGREEMENT WITH THE VIEW TAKEN BY THE CIT(A ) AND AFFIRMED BY THE LD. ITAT THAT THE OBJECT AND EFFECT OF THE EXPENDITURE M ADE BY THE ASSESSEE IS TO FACILITATE ITS TRADE OPERATION AND ENABLE THE MANAGE MENT TO CONDUCT BUSINESS MORE EFFICIENTLY OR MORE PROFITABLY. THEREFORE, THE QUE STION NO. 1 (SUPRA) DESERVES TO BE ANSWERED IN AFFIRMATIVE I.E. IN FAVOUR O F THE ASSESSEE AND AGAINST THE REVENUE. 15.3 REVENUE FURTHER PREFERRED SLP WHICH WAS DISMISSED O N 18-07-11. COPIES OF THE ORDERS ARE REFERRED TO. 15.4 LD. DR IS HEARD. 15.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED T HE MATERIAL AVAILABLE ON RECORD. IN VIEW OF THE ABOVE LEGAL HISTORY ISSUE I N QUESTION STANDS SETTLED IN FAVOR OF THE ASSESSEE, CONSEQUENTLY THIS GROUND NO. 9 OF REVENUE IS DISMISSED. 18 ITA NO. 612/JU/2009 M/S HINDUSTAN ZINC LTD., UDAIPUR. 17.3 RESPECTFULLY FOLLOWING OUR OWN DECISION IN TH IS CASE FOR THE ASSESSMENT YEAR 2001-02 (SUPRA), THE GROUND NO. 10 OF THE REVE NUE IS DISMISSED. 17.3 FACTS AND CIRCUMSTANCES OF THE CASE BEING SAM E AS EARLIER AND ALSO FOLLOWING OUR OWN DECISION IN THE ABOVE GROUND OF A PPEAL(SUPRA), THE GROUND NO. 11 OF THE REVENUE IS DISMISSED. 13.2 RESPECTFULLY FOLLOWING DECISION OF THE CO-ORD INATE BENCH IS ASSESSEES OWN CASE(SUPRA), GROUND NO. 7 OF THE REV ENUE CHALLENGING GHOSUNDA DAMN EXPENSES IS DISMISSED. 8.2 THE FACTS ARE IDENTICAL AND TAKING INTO CONSIS TENT VIEW, THIS APPEAL OF THE REVENUE IS DISMISSED. THEREFORE, THE GROUND NOS. 1,2,3,5 & 6 ARE DISMISSE D BEING COVERED AGAINST THE REVENUE BY THE DECISION OF THE CO-ORDINATE BENC H IN THE EARLIER YEARS. THE REVENUE HAS NOT POINTED OUT ANY CHANGE INTO THE FAC TS AND CIRCUMSTANCES IN THE PRESENT YEAR. 9. GROUND NO. 4 IS AGAINST DELETION OF ADDITION MADE ON ACCOUNT OF UNDERVALUATION OF CLOSING STOCKS OF ORE OF RS. 2,21 ,21,933/-. THE LD. CIT (DR) SHRI D.S. KOTHARI VEHEMENTLY ARGUED THAT THE LD. CIT (A) WAS NOT JUSTIFIED IN DELETING THE DISALLOWANCE. HE SUBMITTED THAT THE STOCK IS REQUI RED TO BE VALUED ON THE BASIS OF THE COST OF ORE OR NET REALIZABLE VALUE IN THIS REG ARD THE LD. CIT(DR) HAS RELIED UPON THE JUDGEMENT OF THE HONBLE SUPREME COURT RENDERED IN THE CASE OF CIT VS. BRITISH PAINTS INDIA LTD. (1991) 188 ITR 44 (SC). HE SUBMI TTED THAT THE ASSESSING OFFICER HAS OBSERVED THAT IN THE CASE OF THE ASSESSEE THE V ALUE HAS BEEN TAKEN AT RS. 1 19 ITA NO. 612/JU/2009 M/S HINDUSTAN ZINC LTD., UDAIPUR. PER/MT IS NEITHER COST NOR MARKET VALUE. HE SUBMIT TED THAT IT WAS INCUMBENT UPON THE ASSESSEE TO DEMONSTRATE THE VALUE OF THIS STOCK . HE SUBMITTED THAT STOCK CANNOT BE VALUED ON NOTIONAL BASIS. PER CONTRA LD. COUNSEL FOR THE ASSESSEE SHRI K. SAMPAT OPPOSED THE SUBMISSIONS AND SUBMITTED THAT THE ORE IS NOTHING BUT THE SOIL WHICH HAS NO MARKET OR COST VALUE. HE SUBMITTED THAT THE ASSESSEE HAS BEEN ADOPTING THE SAME VALUE AND SAME HAS BEEN ACCEPTED IN ITA NO. 95 /JU/2007, IN PERTAINING TO THE ASSESSMENT YEAR 2002-03 AND IN THE ITA NO. 537/JU/2 007 PERTAINING TO THE ASSESSMENT YEAR 2003-04 AND ALSO IN ITA NO. 235/JU/ 2008 PERTAINING TO THE ASSESSMENT YEAR 2004-05. 9.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS BRITISH PAINTS INDIA LT D. (SUPRA) HAS HELD AS UNDER:- SECTION 145 OF THE INCOME-TAX ACT, 1961, CONFERS S UFFICIENT POWER UPON THE OFFICER-NAY IT IMPOSES A DUTY UPON HIM- TO MAKE SUC H COMPUTATION IN SUCH MANNER AS HE DETERMINES FOR DEDUCING THE CORRECT PROFITS AND GAINS . THIS MEANS THAT WHERE ACCOUNTS ARE PREPARED WITHOUT DISCLOSING THE REAL COST OF THE STOCK-IN-TRADE, ALBEIT ON SOUND EXPERT ADVICE IN THE INTEREST OF EFFICIENT ADMI NISTRATION OF THE COMPANY, IT IS THE DUTY OF THE INCOME-TAX OFFICER TO DETERMINE THE TAXA BLE INCOME BY MAKING SUCH COMPUTATION AS HE THINKS FIT. ANY SYSTEM OF ACCOUNTING WHICH EXCLUDES, FOR THE VA LUATION OF THE STOCK-IN- TRADE, ALL COSTS OTHER THAN THE COST OF RAW MATERIALS F OR THE GOODS-IN- PROCESS AND FINISHED PRODUCTS, IS LIKELY TO RESULT IN A DISTORTED PICTURE OF THE TRUE STATE OF THE BUSINESS FOR THE PURPOSE OF COMPUTING THE CHARGEABLE INCOME. SUCH A SYSTEM MAY PRODUCE A COMPARATIVELY LOWER VALUATION OF THE OPENING STOCK AND THE CLOSING STOCK, THUS SHOWING A COMPARATIVELY LOW DIFFERENCE BETWEEN T HE TWO. IN A PERIOD OF RISING TURNOVER AND RISING PRICES, THE SYSTEM ADOPTED BY THE A SSESEE, AS FOUND BY THE TRIBUNAL, IS APT TO DIMINISH THE ASSESSMENT OF THE T AXABLE PROFIT OF A YEAR. THE PROFIT OF ONE YEAR IS LIKELY TO BE SHIFTED TO ANOTHER YEARS WHICH IS AN INCORRECT METHOD OF COMPUTING PROFITS AND GAINS FOR THE PURPOSE OF ASSES SMENT. EACH YEAR BEING A SELF- 20 ITA NO. 612/JU/2009 M/S HINDUSTAN ZINC LTD., UDAIPUR. CONTAINED UNIT, AND THE TAXES OF A PARTICULAR YEAR BEI NG PAYABLE WITH REFERENCE TO THE INCOME OF THAT YEAR, AS COMPUTED IN TERMS OF THE ACT , THE METHOD ADOPTED BY THE ASSESSEE HAS BEEN FOUND TO BE SUCH THAT INCOME CANN OT PROPERLY BE DEDUCED THEREFORE,. IT IS THEREFORE, NOT ONLY THE RIGHT BUT THE DUTY OF THE ASSESSING OFFICER TO ACT IN EXERCISE OF HIS STATUTORY POWER, AS HE HAS DON E IN THE INSTANT CASE, FOR DETERMINING WHAT, IN HIS OPINION, IS THE CORRECT TAXAB LE INCOME. WE FIND THAT THE LD. CIT(A) DECIDED THE ISSUE BY OB SERVING THAT THE METHOD OF STOCK VALUATION IS CHANGED AND CHANGED IS BONAFIDE. THIS HAS BEEN REGULARLY ADOPTED BY THE APPELLANT AND IS IN LINE WITH THE ACCOUNTING PR INCIPLES. SINCE THE CLOSING STOCK OF THE RELEVANT YEAR BECOMES THE OPENING STOCK OF THE NEXT YEAR THE SAME IS REVENUE NEUTRAL. THUS, THE ACCOUNTING METHOD OF STOCK VALU ATION IS DONE BY BONAFIDE INTENTION TO ARRIVE AT TRUE PROFIT OF THE BUSINESS. IT IS FURTHER OBSERVED BY THE LD. CIT(A) THAT IN THE ORDER DATED 16/03/2005 PERTAININ G TO THE ASSESSMENT YEAR 2001- 02 AND SUBSEQUENTLY, IN 2002-03 AND 2004-05 WHEREIN IT HAS BEEN DECIDE THE CLAIM OF THE VALUATION OF CLOSING STOCK OF ORE ETC., IS A LLOWABLE. IT IS POINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE ISSUE HAS BEEN DE CIDED IN FAVOUR OF THE ASSESSEE IN ITA NO. 95/JU/2007, ITA NO. 537/JU/2007 AND ITA NO. 235/JU/2008. WE FIND THAT THE TRIBUNAL IN ITA NO. 95/JU/2007, THE TRIBUN AL HAS NOTED THE FACT IN THAT YEAR IN PARA 20.2 AS UNDER: BRIEF OF THE CASE ARE THAT DURING THE YEAR UNDER C ONSIDERATION, THE PRODUCTION ACTIVITIES AT SARGIPALLI AND MATON MINES WERE DISCO NTINUED. ACCORDINGLY THE STORES AND SPARES STOCK LYING AT THE MINES AS ON MA RCH 31,2002 WERE VALUED AT 25% OF THE COST, RESULTING IN DECREASE OF PROFI TS BY RS. 98.63 LACS. THIS IS AS PER PERUSAL OF THE NOTES ON ACCOUNTS OF THE RELE VANT YEAR (SCHEDULED-17 VIDE NOTE NO. 5). THE AO INCREASED THE VALUE OF CL OSING STOCK BY RS. 98.63 LACS MENTIONING THAT THE ACTION OF ASESSEE COMPANY IN REDUCING THE STOCK VALUE BY THE MINES WAS NOT IN CONFORMITY WITH THE A CCOUNTING POLICY ADOPTED BY THE COMPANY. THUS THE AO HAS DISALLOWANCE TO T HE TUNE OF RS. 98.63 LACS. OR DECIDED THE ISSUE IN PARA 2.6 AS UNDER: 21 ITA NO. 612/JU/2009 M/S HINDUSTAN ZINC LTD., UDAIPUR. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED T HE MATERIALS AVAILABLE ON RECORD. IT EMERGES FROM THE RECORD THAT THE VALUAT ION OF STORES AND SPARES EXPENDITURE HAS BEEN CONSISTENTLY FOLLOWED BY THE A SSESSEE WHICH SHOULD NOT BE DISTURBED ON THE PRINCIPLE OF CONSISTENCY AS HEL D BY HONBLE SUPREME COURT IN THE CASE OF RADHASWAMI SATSANG VS. CIT, 19 3 ITR 321 (SC). BESIDES, SIMILAR DISALLOWANCE WAS DELETED BY ITAT I N ASSESSEES OWN CASE IN EARLIER YEARS. THE HONBLE SUPREME COURT IN THE CA SE OF CIT VS. EXCEL INDUSTRIES (2013), 358 ITR 295 HAS HELD THAT SUCH T YPE OF VALUATION BASED STOCK, ADDITIONS ARE ESSENTIALLY REVENUE NEUTRALS A S CLOSING STOCK BECOME OPENING BALANCE OF THE NEXT YEAR AND REDUCED THE PR OFIT OF THE NEXT YEAR CORRESPONDINGLY. IN VIEW THEREOF, WE SEE NO INFIRM ITY IN THE ORDER OF THE LD. CIT(A) WHICH IS UPHELD ON THIS ISSUE. THUS GROUND NO. 13 OF THE REVENUE IS DISMISSED. WE FIND THAT THE FACTS ARE NOT SIMILAR IN THAT YEAR , THE ISSUE WAS RELATED TO THE VALUATION OF THE STOCKS RELATED TO SPARES BUT HERE IS THE ISSUE IS WITH REGARD TO THE VALUATION OF ORE, WHICH IS ADOPTED ON THE BASIS OF NOTIONAL COST. IN VIEW OF THE JUDGMENT OF THE HONBLE SUPREME COUR T IN THE CASE OF CIT VS. BRITISH PAINTS (SUPRA) WE FIND FORCE INTO THE CONTENTION OF THE REVENUE THAT THE VALUE OF STOCK IS TO BE ADOPTED EITHER ON COST ORE NET REALI ZABLE VALUE. THE ASSESSEE HAS TO DEMONSTRATE THE VALUE SO ADOPTED BY FURNISHING THE EVIDENCES IN SUPPORT THEREOF. IN THE PRESENT CASE, THE ASSESSEE HAS FAILED TO DIS CHARGE THIS REQUIREMENT OF LAW, THEREFORE, IN ORDER TO COMPUTE THE CORRECT VALUE TH IS ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR DECISION AFRESH. THE ASS ESSING OFFICER IS HEREBY DIRECTED TO MAKE ON THE SPOT ENQUIRY FOR VERIFICATION OF THE CO RRECT VALUE OF THE STOCKS OF ORE. WE ARE UNABLE TO ACCEPT THE CONTENTION OF THE ASSES SEE THAT THE STOCK OF ORE IS MERELY SOIL AND HAS NO REALIZABLE VALUE. IN OUR CO NSIDERED VIEW, THERE HAS TO BE SAME BASIS FOR ADOPTING A CERTAIN VALUE OF SUCH STO CKS. NEEDLESS TO SAY, THAT THE ASSESSING OFFICER WOULD AFFORD SUFFICIENT OPPORTUNI TY TO THE ASSESSEE FOR FURNISHING OF EVIDENCE IN SUPPORT OF THE VALUE OF THE STOCKS. 22 ITA NO. 612/JU/2009 M/S HINDUSTAN ZINC LTD., UDAIPUR. THIS GROUND OF THE REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 10. COMING TO GROUND NO. 7 IS AGAINST DELETING OF REDUCTION OF RS. 4,36,36,093/- THE LD. CIT(DR) SUBMITTED THAT THE LD . CIT(A) WAS NOT JUSTIFIED IN DELETING THE REDUCTION OF RS. 4,36,36,093/- THE LD. DR SUBMITTED THAT THE LD. CIT(A) FAILED TO APPRECIATE THE FACTS OF EXPENSES RELATED TO CAPTIVE POWER PLANT CAN ONLY BE ELIGIBLE FOR THE PURPOSE OF SECTION 80IA OF THE ACT , HE SUBMITTED THAT THE LD. CIT(A) IGNORED THE FACT THAT THE ASSESSEE HAS TAKEN BOTH H EAD OFFICE EXPENSE AND CAPTIVE POWER PLANT EXPENSES TOGETHER. HE HAS DRAWN OUR AT TENTION TO THE ASSESSMENT ORDER AT PAGE NO. 29. HE SUBMITTED THAT DIRECTORS FEE FOR THE HEAD-OFFICE AND THE TOTAL FEE IS THE SAME AS WELL AS PAYMENT TO AUDITOR S IS SAME AND ALSO CHARITY AND DONATION IS ALSO SAME, HE SUBMITTED THAT DIRECTORS WORKED FOR ACTIVITIES POWER PLANT AND ALSO LOOKED AFTER SAME ACTIVITIES WAS THE CASE WITH THE AUDITORS. HE FURTHER SUBMITTED THAT CHARITY AND DONATION IS GIVEN AS AN ENTITY AS A WHOLE. THE ASSESSEE OUGHT TO HAVE APPORTIONED THIS EXPENSE BETWEEN THE HEAD OFFICE AND THE CAPTIVE POWER PLANT. WHICH HAS NOT BEEN DONE THAT GOES TO SHOW THAT THE WORKING OF THE ASSESSEE IS NOT IN ACCORDANCE WITH THE LAW. 10.1 ON THE CONTRARY, THE LD. COUNSEL FOR THE ASSES SEE SUPPORTED THE ORDERS OF THE LD. CIT(A) HE SUBMITTED THAT THE ASSESSING OFFICER HAS REDUCED CLAIM U/S 80IA BY RS. 4,36,36,093/- WITH REGARD TO CPP, JAWAR AND CPP DEB RI ON THE GROUND THAT HEAD OFFICE EXPENSES HAVE NOT BEEN ALLOCATED. HE SUBMITT ED THAT THE EXPENSE ARE: DEPRECIATION ON RESIDENTIAL PREMISES, COMPUTERS, FU RNITURE, MOTOR-VEHICLES AT HO RS. 91,29,936 AND OTHER HEAD OFFICER EXPENSES OF RS. 68 ,92,62,690/-. IT IS CONTENDED THAT THESE EXPENSES HAVE BEEN ALLOCATED TO ELIGIBLE UNIT IN THE RATIO OF TURNOVER. ON THE GROUND THAT THE TERM DERIVED FROM USED IN THE S ECTION REFERENCE TO BOTH INCOME 23 ITA NO. 612/JU/2009 M/S HINDUSTAN ZINC LTD., UDAIPUR. AND EXPENDITURE. RELIANCE IS PLACED ON: CAMBAY ELE CTRIC SUPPLY COMPANY VS. CIT (1978) 113 ITR 84 (SC) AND CIT VS. STERLING FOODS ( 1999) 237 ITR 579. ON THE GROUND THAT THE TERM DERIVED THAT USE IN THIS SECTI ON REFERENCE TO BOTH INCOME AND EXPENDITURE. THE RELIANCE WAS ALSO PLACED ON THE JU DGMENT OF THE HONBLE BOMBAY HIGH COURT REPORTED AT 350 ITR 366(BOM). THE LD. CO UNSEL SUBMITTED THAT THE CO- ORDINATE BENCH IN ITA NO. 235/JU/2008, HAD DISMISSE D THE SIMILAR GROUND OF THE REVENUE IN ITA NO. 235/JU/2008. 10.2 WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED T HE MATERIAL AVAILABLE ON RECORDS AND GONE THROUGH THE ORDERS OF THE AUTHORIT IES BELOW. WE FIND THAT THE IDENTICAL ISSUE WAS IN THE YEAR 2004-05 IN ITA NO. 235/JU/2008. THE COORDINATE BENCH HAS DECIDED THE ISSUE IN PARA 17.9 HOLDING AS UNDER:- 17.9 WE HAVE HEARD THE RIVAL CONTENTION AND PERU SED THE MATERIAL AVAILABLE ON RECORD. IT IS SETTLED LAW THAT WHEN THE ASSESSE E CLAIMS ANY ALLOWABLE DEDUCTION THE EXPLANATION AND EVIDENCE SUBMITTED IN THIS BEHA LF IS TO BE OBJECTIVELY CONSIDERED BY LD. AO. IN CASE OF ANY INFIRMITY IN THE CLAIM, THE SAME SHOULD BE EFFECTIVELY DEALT AND THE CLAIM SHOULD BE DENIED BY PROPER DISCHARGE OF ONUS. WITHOUT EFFECTIVE REBUTTAL AND OBJECTIVE CONSIDERATION ASSESSEES BEN EFICIAL CLAIM CANNOT BE DISALLOWED ON ASSUMPTIONS AND INTENDMENTS. IT IS ALSO SETTLED JURISPRUDENCE THAT WHILE INTERPRETING THE BENEFICIAL LEGISLATIONS A LIBERAL APPROACH SHOULD BE ADOPTED. THIS IS SO AS A VERY STRICT INTERPRETATION WILL DEFEAT THE LEGISLATIVE INTENT OF ENCOURAGING CAPTIVE POWER PLANTS IN ELECTRICITY STARVED NATION IN GENERAL AND POWER SHORT STATE OF RAJASTHAN. PROVISIONS OF SEC. 80IA OF THE IT ACT A RE UNDOUBTEDLY BENEFICIAL IN NATURE, SO IN CASE OF AMBIGUITY ABOUT ITS INTERPRET ATION A LIBERAL APPROACH IS MANDATES BY SETTLED JUDICIAL PRECEDENTS. THE UNDI SPUTED FACTS WHICH EMERGE FROM THE RECORD INDICATE THAT ASSESSEE BY EVIDENCE AND E XPLANATION BROUGHT ON RECORD OBJECTIVE MATERIAL TO DEMONSTRATE IN THIS CAE HO AN D OTHER COMMON ASSETS HAVE NO PROXIMATE CONNECTION WHICH THE CPP, DEBARI WHICH IS AN INDUSTRIAL UNDERTAKING ELIGIBLE TO DEDUCTION UNDER SECTION 80IA. THE HO A ND OTHER COMMON ASSETS EXISTED EVEN PRIOR TO INSTALLATION OF CPP. THE ALLEGED EXP ENSES REPRESENT GENERAL CORPORATE EXPENDITURE WHICH CANT BE ALLOCATED OR ASSIGNED TO AN INDEPENDENT UNIT ENGAGED IN POWER GENERATING ACTIVITY ON STANDALONE BASIS. WHI LE REDUCING THE DEDUCTION U/S 80IA, LD. AO HAS IGNORED THE CRUCIAL TERM DERIVED FROM USED IN SEC. 80IA A TERM WHICH BECAME SUBJECT MATTER OF JUDICIAL DECISION AN D SETTLED BY HONBLE SUPREME COURT. THIS CRUCIAL OMISSION HAS RESULTED IN AOS CONCLUSION THAT: (I) THE PROPORTIONATE DEPRECIATION OF OTHER COMMON ASSE TS IS ALLOCABLE TO BE REDUCED FROM THE PROFITS OF ELIGIBLE CPP UNIT. 24 ITA NO. 612/JU/2009 M/S HINDUSTAN ZINC LTD., UDAIPUR. (II) THE PROPORTIONATE PART OF THE EMPLOYEES REMUNERATI ON AND BENEFITS, ADMINISTRATIVE AND SELLING EXPENSE SUCH A REMUNERAT ION OF MANAGERS, DIRECTORS, AUDITORS, FINANCIAL ADVERTISERS, AMENITI ES AND HEAD OFFICER ASSETS IS ALSO REQUIRE TO BE ALLOCATED TO CPP DEBAR I. (III) LD. AO INSTEAD OF ESTABLISHING ANY DIRECT OF PROXIM ATE RELATION BETWEEN THESE UNCONNECTED PROPORTIONATE EXPENSES REDUCED TH EM FROM ELIGIBLE PROFITS UNDER A NOTION THAT EVEN THE REMOTE AND UNC ONNECTED PROPORTIONATE EXPENSES ARE ALLOCABLE. (IV) THE LD. AO HELD THAT HO IS NOT A PROFIT EARNING CEN TRE AND CAPTIVE POWER PLANT, DEBARI, IS NOT A STANDALONE UNIT, HAVI NG INDEPENDENT FUNCTIONING AND A SEPARATE PROFIT CENTER AND ON SUC H ERRONEOUS ASSUMPTION REDUCED THE DEDUCTION U/ 80IA BY AFORESA ID EXPENSES OF OTHER INDEPENDENT AND FUNCTIONALLY DIFFERENT UNITS. LD. COUNSEL HAS DEMONSTRATED THAT OTHER UNITS OF TH E COMPANY CANNOT USE THE FIXED ASSETS, LIKE PERMANENT RESIDENTIAL BUILDINGS OF UDA IPUR UNIT WHICH ARE WHOLLY AND EXCLUSIVELY FOR THE OPERATION OF UDAIPUR UNIT ONLY; THERE IS NO BASIS TO ASSUME THAT THEY WERE EVEN IMPLIEDLY USED BY OTHER OPERATING UN ITS INCLUDING CPP. CONSEQUENTLY THERE BEING NO DIRECT NEXUS BETWEEN TWO INDEPENDENT INDUSTRIAL UNITS THE QUESTION OF PROPORTIONATE APPORTIONMENT OF THEIR USER OR DEP RECIATION TO CPP DOES NOT ARISE. MOREOVER, IT HAS BEEN DEMONSTRATED THAT THE UDAIPUR BASED OFFICE EQUIPMENT, FURNITURE, FIXTURES, COMPUTERS, MOTOR VEHICLES ETC. ARE ALSO EXCLUSIVELY USED FOR THE DAY TO DAY WORKING OF UDAIPUR UNIT AND THEY CAN IN NO WAY BE SUPPOSED TO BE USED FOR CPP. SINCE RESPECTIVE UNITS RETAIN CONTROL OVER THEIR ASSETS, THEY HAVE NO OCCASION OF USER BY CPP. ROM THE FACTS AND CIRCUMST ANCES EMERGING FORM THE RECORD AND CONTENTIONS. WE OBSERVE THAT: A) NO ALLOCATION OF HO AND OTHER EXPENSES IS JUSTIFIED SINCE SUCH EXPENDITURE ON HO AND OTHER UNITS WAS INCURRED EVEN PRIOR TO SETTI NG UP OF ELIGIBLE CPP UNIT. B) THE ASSESSEE IS PRIMARILY ENGAGED IN THE ACTIVITIES OF MINING AND MANUFACTURING OF ZINC AND LEAD METALS. THIS BUSINE SS OF THE ASSESSEE IS ONE AND INDIVISIBLE FROM CPP UNIT. IN THE ABSENCE OF A NY DIRECT NEXUS THE APPORTIONMENT IS NOT MANDATED BY THE CORRECT INTERP RETATION OF SEC 80IA. C) IT HAS NOT BEEN REBUTTED THAT AFTER THE COMMENCEMEN T OF CPP ACTIVITY THERE WAS NO INCREASE IN THE HO EXPENSE RELATABLE TO EMPL OYEES REMUNERATION & BENEFITS AN ADMINISTRATIVE EXPENSE AS A WHOLE, IN C OMPARISON TO THE EARLIER YEAR. RATHER HO EXPENSES FOR THE YEAR UNDER CONSIDE RATION HAVE BEEN REDUCED DRASTICALLY. THUS THERE IS NO REASON TO AS SUME ANY NOTIONAL INCREASE IN THESE EXPENSES AFTER THE COMMENCEMENT OF CPP DEB ARI, CONSEQUENTLY, THE CONCLUSION THAT IMPUGNED ALLOCATION OF EXPENSES HAS NO DIRECT NEXUS WITH ELIGIBLE CPP UNIT, HAS NO BASIS OR VALID JUSTIFICAT ION. D) APROPOS EXPENSES LIKE, RATES & TAXES, FEES TO AUDIT ORS, COT AUDITORS, DIRECTORS TRAVELLING, REIMBURSEMENT OF CORPORATE EXPENSE AS W ELL AS CONSULTANCY CHARGES ETC., SUCH EXPENSES WERE REQUIRED TO BE INC URRED IRRESPECTIVE OF THE CPP UNIT. E) ELIGIBLE PROFITS OF ANY INDUSTRIAL UNDERTAKING WHIC H EXITS ON STANDALONE FOOTING, ACCORDING TO ACCEPTED ACCOUNTING THE LEGAL PRINCIPL ES, ARE TO BE COMPUTED AFTER TAKING INTO ACCOUNT ALL THE RECEIPTS AND EXPE NDITURE INCURRED ONLY BY IT 25 ITA NO. 612/JU/2009 M/S HINDUSTAN ZINC LTD., UDAIPUR. AND NOT BY NOTIONALLY ATTRIBUTING THE PROPORTIONATE DEPRECIATION OR ADMINISTRATIVE EXPENSES ON ASSUMPTIONS. F) THE AFORESAID EXPENSES OF SALARY AND WAGES, CONTRIB UTION TO PROVIDENT FUND ETC. AND OTHER BENEFITS TO EMPLOYEE INSURANCE, CO NSULTANCY AND OTHER ADMINISTRATIVE EXPENSE AS ALLEGED BY LD. AO, HAVE I N FACT, BEEN INCURRED AT UDAIPUR OFFICE FOR GOODS MANUFACTURED I.E. ZINC AND LEAD BY THE APPELLANT . CONSEQUENTLY, SUCH EXPENDITURE IS DEDUCTIBLE WHILE COMPUTING THE PROFIT OF ASSESSEES MANUFACTURING BUSINESS OF ZINC AND LEAD. ANY PART THEREOF CANNOT BE HYPOTHETICALLY ATTRIBUTED TO INDEPENDENT CPP UNI T SITUATED AT DEBRI. SUCH PRESUMPTIVE AND NOTIONAL REDUCTION OF CLAIM U/S 80I A IS ARBITRARY AND UNSUSTAINABLE. G) THE WORDS DERIVED FROM HAVE BEEN USED BY THE LEGI SLATURE IN THE RESTRICTED SENSE AND THEREFORE, THERE MUST BE DIRECT NEXUS BET WEEN THE EXPENDITURE AND INDUSTRIAL ACTIVITY. SINCE THERE IS NO DIRECT NEXUS OF THE ALLEGED EXPENSE WITH CPP UNIT, NEITHER ALLOCATION NOR REDUCTION OF 80IA CLAIM HAS JUSTIFICATION. IT IS SETTLED LAW THAT ALLOCATION, IF ANY, CANNOT BE MADE BY DEMONSTRATION OF DIRECT NEXUS BETWEEN ALLEGED PROPORTIONS OF EXPENSES WITH POWER GENERATION OPERATIONS OF PP UNIT SITUATE AT DEBARI, LD. CIT(A) HAS RIGHTLY DELETED THE REDUCTION IN 80IA CLAIM. I) THE LEGISLATURE HAS USED THE WORDS DERIVED FRO M IN CONTRADICTION TO THE WORDS ATTRIBUTABLE TO IN OTHER SECTIONS. A. IN THE CASE OF CAMBAY ELECTRIC SUPPLY CO VS. CIT 19 78 CTR (SC) 50: (197) 113 ITR 84 HONBLE SUPREME COURT HAS SQUARELY HELD THAT THE WORDS DERIVED FROM HAVE BEEN USED BY THE LEGISLATURE IN RESTRICT ED SENSE AS THE WORDS ATTRIBUTABLE TO ARE MUCH WIDER IN MEANING THAN TH E WORDS DERIVED FROM. B. HONBLE SUPREME COURT IN THE CASE OF IT VS. STERLIN G FOODS (1999) 153 ITR CTR (SC) 439: (1999) 237 ITR 579 (SC) HAS HELD THA T OR APPLICATION OF THE WORDS DERIVED FROM. THERE MUST BE A DIRECT NEXUS BETWEEN THE PROFITS AND THE ACTIVITY OF THE INDUSTRIAL UNDERTAKING, CONSEQU ENTLY, IT IS BY NOW A SETTLED PROPOSITION THAT REMOTE OR INDIRECT NEXUS WOULD NOT BE SUFFICIENT FOR APPLICATION OF THE WORDS DERIVED FROM. C. IN THE CASE OF IT VS. STRAWBOARD MANUFACTURING CO L TD. {(1989) 177 ITR 43} IN THE CONTEXT OF DEDUCTION UNDER SECTION 80E, HON BLE SUPREME COURT HELD THAT: THE PROVISION FOR REBATE HAS BEEN MADE FOR THE PUR POSE OF ENCOURAGING THE SETTING UP OF NEW INDUSTRIES. IT I S NECESSARY TO REMEMBER THE WHEN A PROVISION IS MADE IN THE CONTEX T OF A LAW PROVIDING FOR CONCESSIONAL RATE OF TAX FOR THE PURP OSE OF ENCOURAGING AN INDUSTRIAL ACTIVITY, A LIBERAL CONSTRUCTION SHOU LD BE PUT UPON THE LANGUAGE OF THE STATUTE. IN OUR VIEW, THE CONTROVERSY IN QUESTION STANDS SQ UARELY COVERED BY THE CASE OF ZANDU PHARMACEUTICALS WORKS LTD. (SUPRA) IN FAVO R OF THE ASSESEE. IN THIS CASE ASSESSEE INCURRED EXPENDITURE FOR THE R & D WORK IN THE HO AND THERE WERE 26 ITA NO. 612/JU/2009 M/S HINDUSTAN ZINC LTD., UDAIPUR. INDEPENDENT MANUFACTURING UNITS. ASSESSEE CLAIMED DEDUCTION U/S 80IA WITHOUT ALLOCATING ANY PROPORTIONATE EXPENSES OF HO LD. AO ADOPTED THE SAME COURSE AS IN THE CASE OF THIS ASSESSEE. IT WAS HELD THAT THE HO WAS MAINTAINED FOR THE OVERALL BENEFIT OF THE MANUFACTURING UNITS ONLY AND HO WAS NOT A PROFIT EARNING CENTRE; IT HAD NO INCOME OTHER THAN THE MANUFACTURING UNITS. THEREFORE, R& D EXPENSE INCURRED FOR THE DEVELOPMENT OF NEW DRUGS WERE ASSU MED TO BE FOR THE BENEFIT OF ALL MANUFACTURING UNITS. ON THIS BASIS, LD. AO ALLOCAT ED PROPORTIONATE AND SIMILARLY REDUCED THEM FROM ELIGIBLE INCOME WHILE CALCULATING DEDUCTION U/S 80IA. CIT(A) AND ITAT UPHELD AOS ACTION REJECTING THE APPELLANTS C ONTENTION THAT THE R & D EXPENSE INCURRED BY HO HAD NOTHING TO DO WITH THE ELIGIBLE UNITS AND PROPORTIONATE EXPENSES SHOULD NOT BE REDUCED WHILE CALCULATING DEDUCTION U /S 80IA. HONBLE BOMABY HIGH COURT UPHELD ASSESSEES CLAIM. LD. CIT(A) IN THIS CASE WHILE DELETING THE REDUCTION FROM ASSESSEES CLAIM U/S 80IA HAS APPLIED NEARLY S IMILAR OBSERVATION. IN VIEW THEREOF NO INFIRMITY CAN BE ATTRIBUTED TO THE ORDER OF LD. CIT(A) WHICH IS UPHELD. IN THE GIVEN FACTS, CIRCUMSTANCES AND LEGAL POSITION, WE HOLD THAT THE SAID HO EXPENSES WITH THE ELIGIBLE INDUSTRIAL UNDERTAKING I.E. CPP, THEREFORE THE UNRELATED PROPORTIONATE HO EXPENSES CANNOT BE REDUCED WHILE C OMPUTING DEDUCTION U/S 80IA. THIS GROUND NO. 12 OF THE REVENUE IS DISMISSED. HOWEVER, WE FIND THAT THE CERTAIN EXPENSES WHICH AR E COMMON TO BOTH TO THE HEAD OFFICE AND CAPTIVE POWER PLANT HAS NOT BEEN ALLOCAT ED. THEREFORE, THE ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR R E-COMPUTATION OF REDUCTION. THE ASSESSING OFFICER WOULD RE-WORK ALLOCATION OF THE E XPENSES RELATED TO THE DIRECTORS FEES, AUDITORS FEES AND DONATION FOR CHARITY. TO THIS EXTENT, THE ORDER OF THE LD. CIT(A) IS MODIFIED. THIS GROUND OF THE REVENUES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 11. GROUND NO. 8 IS AGAINST DELETION OF DISALLOWANCE OF TECHNICAL F EASIBILITY AND OTHER CONSULTANCY EXPENSES. THE LD. COUNSEL FOR TH E ASSESSEE SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE PERTAINING TO THE ASSESSMENT YEAR 2001-02 AND 2002-03 PER CONT RA THE LD. DEPARTMENTAL REPRESENTATIVES SUPPORTED THE ASSESSING OFFICER AND SUBMITTED THAT LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION. 27 ITA NO. 612/JU/2009 M/S HINDUSTAN ZINC LTD., UDAIPUR. 11.1 WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED T HE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDER OF THE AUTHORITIES BELOW . WE FIND THAT THE IDENTICAL ISSUE WAS BEFORE THE CO-ORDINATE BENCH IN ITA NO. 311/JU/ 2006 HAS DECIDED IN PARA 12.3 AND 12.4 AS UNDER: 12.3 APROPOS ISSUE B) I.E. FEASIBILITY EXPENSES ACCOUNTE D AS PERFORMANCE IMPROVEMENT EXPENSES, THE ITAT ALLOWED THE CLAIM OF THE ASSESSEE BY FOLLOWING OBSERVATIONS:- 38 THE GROUND NO. 6 OF THE REVENUES APPEAL IS AGAIN ST DELETING THE ADDITION OF RS. 2,88,42,367/- IN RESPECT OF THE DISALLOWANCE OF FEASIBILITY EXPENSES. THE LD. ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD DEBITED A SUM OF RS. 4,60,02,032/- ON ACCOUNT OF FEASIBILITY AND CONSULT ANCY EXPENSES. AS PER ASSESSEES SUBMISSION, THESE EXPENSES WERE REVENUE IN NATURE, AS SUCH , NO ENDURING BENEFIT HAS BEEN DERIVED BY THE COMPANY AND HENCE THESE EXPENSES WERE ALLOWABLE U/S 37(1) OF THE ACT. THE ASSESSING OFFICER FOUND FROM THE DETAILS SUBMITTED BY THE ASSESSEE THAT THESE EXPEND ITURE WERE INCURRED ON SURVEY AND EXPLORATION CONDUCTED BY THE ASSESSEE TO T HE EXTENT OF RS. 2,88,42,367/- IS NOT ALLOWABLE U/S 37(1) OF THE ACT AS WELL AS U/S 35D OF THE ACT. 41 WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THESE EXPENSE HAD B EEN INCURRED BY THE ASSESSEE FOR GETTING FEASIBILITY STUDY FOR INCREASE TH E HEIGHT OF GOSSUNDA DAM 28 ITA NO. 612/JU/2009 M/S HINDUSTAN ZINC LTD., UDAIPUR. AND CONDUCTING GEOLOGICAL WORK OF EXCAVATION. THE E XPENSES RELATED TO CONDUCT GEOLOGICAL WORK PAID TO M/S MINERAL EXPLORATIO N TO FACILITATE THAT THE BUSINESS SHOULD GO ON MORE PROFITABLE OR TO MAKE EARNING OF THE PROFIT . IT DOES NOT MAKE ANY CHANGE IN PROPER EARNING APPARATUS OF THE COMPANY OR HAD NOT BROUGHT ANY CAPITAL ASSETS IN EXISTENCE. THE ITAT H AD ALLOWED THESE EXPENSES IN A.Y. 1991-92 AND 1998-99 AS REVENUE EXPENDITURE. T HE ISSUE BEING IDENTICAL TO A.Y. 1991-92 AND 1998-99, WE ALSO FIND THAT THES E EXPENSES ARE HAVING NATURE OF REVENUE EXPENSES AS NO CAPITAL ASSETS HAD BEEN BROUGHT IN EXISTENCE AND INCURRED THEE EXPENDITURE FOR SMOOTH RUNNING OF THE BUSINESS. THEREFORE, WE CONFIRM THE ORDER O THE LD. CIT(A). 12.4. AFTER HEARING THE RIVAL CONTENTIONS AND PERUSAL T HE RECORD, RESPECTFULLY FOLLOWING THE ITAT ORDER FOR THE AY 20 00-01 THE ISSUE I) ABOUT EXPLORATION EXPENSES RAISED IN REVENUE APPEAL IS SE T ASIDE AND RESTORED BACK TO THE FILE OF LD. CIT(A). ACCORDINGLY FOLLOWING T HE ITAT JUDGMENT FOR AY 2000-01, ORDER OF LD. CIT(A) ON ISSUE II) ALLOWING ASSESSEE CLAIM FOR FEASIBILITY EXPENSES ENTERED AS PERFORMANCE IMPROVEMENT EXPENSE AMOUNTING TO RS. 1,32,95,335/- IS UPHELD. THIS GROUND NO. 6 OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 11.2 THEREFORE, TAKING A CONSISTENT VIEW WE DO NOT SEE ANY REASON TO INTERFERE INTO THE ORDER OF THE CIT (A), SAME IS HEREBY AFFIRMED. THE GROUND RAISED IN THIS APPEAL IS DISMISSED. 12. IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO. 612/JU/2009 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 29 ITA NO. 612/JU/2009 M/S HINDUSTAN ZINC LTD., UDAIPUR. ORDER PRONOUNCED IN THE OPEN COURT ON MONDAY , THE 10TH, DAY OF APRIL 2017. SD/- SD/- FOE FLAG ;KNO ( DQY HKKJR ) (VIKRAM SINGH YADAV) ( KUL BHARAT ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 10/04/2017. POOJA/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- THE ASSTT. COMMISSIONER OF INCOME -TAX, CIRCLE-2, UDAIPUR. 2. THE RESPONDENT- M/S HINDUSTAN ZINE LTD. YASAD B HAWAN, UDAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 612/JU/2009) VKNS'KKUQLKJ@ BY ORDER LGK;DIATHDKJ@ ASSISTANT. REGISTRAR