ACIT, Jaipur V. SHRI SUDHIR JAJOO, Jaipur

ITA 655/JPR/2012

• Counselvise Citation: 65523114 RSA 2012
• Duration Of Justice: 1 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 06-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Assessee Lawyers: R S JAJOO
• Keywords: Depreciation; Revenue expenditure; Capital expenditure
• Section: 143(3); 37(1); 194C; 201(1); 32

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH, JAIPUR (BEFORE SHRI B.R. JAIN AND SHRI KUL BHARAT) ITA NO. 655/JP/2012 ASSESSMENT YEAR : 2009-10 PAN: ABUPJ 0255 F THE ACIT VS. SHRI SUDHIR JAJOO CIRCLE- 4 D-42, AMBABARI JAIPUR JAIPUR (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI D.C. SHARMA ASSESSEE BY : SHRI R.S. JAJOO DATE OF HEARING: 19-08-2013 DATE OF PRONOUNCEMENT: 21-08-2013 ORDER PER KUL BHARAT, JM:- THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-II, JAIPUR DATED 17-04-2012 FOR THE ASSESSMENT YEAR 200 9-10 WHEREIN THE REVENUE HAS RAISED FOLLOWING GROUNDS. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN:- (I) ALLOWING DEPRECIATION OF RS. 1,10,19,200/- WHIC H WAS DISALLOWED BY THE AO U/S 40(A)(IA), HOLDING THAT TH E CONTRACT OF PURCHASE, INSTALLATION AND COMMISSION OF WINDMILL W AS NOT A WORKS CONTRACT WITHOUT APPRECIATING THE FACTS MENTIONED B Y THE AO IN ASSESSMENT ORDER . (II) HOLDING THAT NO DISALLOWANCE U/S 40(A)(IA) COU LD BE MADE AS NO EXPENDITURE WAS CHARGED IN THE PROFIT AND LOSS A CCOUNT WITHOUT APPRECIATING THE FACT THAT EXPENDITURE IN FORM OF D EPRECIATION CHARGED TO THE PROFIT AND LOSS ACCOUNT WAS IN FACT PART OF PAYMENT MADE FOR WORKS CONTRACT OF WINDMILL. 2 2.1 BRIEFLY, THE FACTS STATED ARE THAT THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S 143(3) OF THE INC OME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT) WAS FRAMED AND THEREBY THE AO MADE DISALLOWANCE U/S 40(A)(IA) OF THE ACT. AGAINST THE ASSESSMENT ORDER OF THE AO, TH E ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE ALLOWED THE APPEAL OF THE ASSESSEE. 2.2 IN THIS APPEAL, THE ONLY EFFECTIVE GROUND TAKEN BY THE REVENUE IS AGAINST DELETION OF ADDITION OF RS. 1,10,19,200/- MADE BY THE AO U/S 40(A)(IA) OF THE ACT WHEREIN THE LD. DR STRONGLY SUPPORTED THE ORDER OF THE AO AND VEHEM ENTLY ARGUED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION MADE BY THE AO. 2.3 ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASS ESSEE STRONGLY SUPPORTED THE ORDER OF THE LD. CIT(A). 2.4 WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIALS AVAILABLE ON RECORD AND THE ORDERS OF THE AUTHORITIES BELOW. THE UNDISP UTED FACTS ARE THAT THE CLAIM OF THE ASSESSEE IN RESPECT OF DEPRECIATION WAS DISALLOWED BY THE AO BY INVOKING THE PROVISION OF SECTION 40(A)(IA) OF THE ACT. HOWEVER, WE FIND T HAT THE LD. CIT(A) HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UND ER:- 3.1 I HAVE DULY CONSIDERED THE SUBMISSIONS OF TH E APPELLANT. ON PERUSAL OF THE ASSESSMENT ORDER, IT I S SEEN THAT THE AO HAS DISALLOWED DEPRECIATION OF RS 1,10,19,200/- U/S 40(A)(IA) OF THE I T ACT ON THE GROUND THAT NO TDS WAS DEDUCTED BY T HE ASSESSEE IN RESPECT OF PAYMENTS MADE FOR WINDMILL PROJECT AT V ILLAGE JETHWAI, JAISAHNER. THE AO NOTICED THAT THE ASSESSEE HAD MAD E PAYMENTS TO M/S SUZLON ENERGY LTD, M/S SUZLON INFRASTRUCTURE SE RVICES LTD, M/S SUZLON POWER AND INFRASTRUCTURE LTD AND M/S SUZLON GUJARAT WIND PARK LTD FOR SUPPLY OF WINDMILL, INSTALLATION, OPER ATION AND MAINTENANCE BUT NOT DEDUCTED TDS. THE AO HAS SUMMAR IZED THE DETAILS OF EXPENDITURE ON PAGES 3 & 4 OF THE ASSESS MENT ORDER WHEREIN OUT OF TOTAL PAYMENTS OF RS 3,56,02,143/-, THE COST OF 3 MACHINERY, PARTS & OTHER MATERIALS WAS SHOWN AT RS 2,66,48,000/- ON WHICH NO TDS WAS DEDUCTED BY THE ASSESSEE. THE COST OF SERVICE CONTRACT/ERECTION/COMMISSIONING WAS AT RS 89,54,143 /- AND TDS WAS DEDUCTED BY THE ASSESSEE ON PAYMENTS OF RS 80,5 4,143/-MADE TO M/S SUZLON INFRASTRUCTURE SERVICES LTD AND M/S SUZL ON POWER AND INFRASTRUCTURE LTD. THE AO NOTICED THAT THOUGH SEPA RATE ORDERS HAD BEEN PLACED BUT THE INTENTION OF THE ASSESSEE AND S UZLON GROUP WAS TO AWARD THE WORK ON TURNKEY BASIS AND THERE WAS NO INVOLVEMENT OF THIRD PARTY. THE AO HELD THAT THE CONTRACTS AWARDED BY THE ASSESSEE WERE COMPOSITE TYPES OF TURNKEY CONTRACTS. THE PURP OSE OF GIVING ORDERS ON TURNKEY CONTRACT BASIS WAS INSTALLATION O F PLANT & MACHINERY AND NOT EXCLUSIVELY THE PURCHASE OF PLANT & MACHINERY. THERE WERE MANY INTERLINKING CONDITION IN THE WORK ORDER WHICH INDICATED THAT IT WAS A SINGLE CONTRACT FOR ALL THE WORK ORDERS. THE INTENTION WAS NOT THE PURCHASE OF THE ARTICLE BUT T O IMPROVE THE UTILITY. THE CONSIDERATION WAS NOT FOR THE TRANSFER OF PROPERTY BUT FOR THE LABOUR AND WORK DONE AND THE MATERIAL FURNISHED . THE SUBJECT AND SUBSTANCE OF THE ORDERS PLACED UNDER CONSIDERAT ION WAS TO CARRY OUT THE WORK OF ERECTION, TESTING, COMMISSION ING ON TURNKEY BASIS INCLUDING SUPPLY OF MATERIAL WHICH MADE IT 'W ORKS CONTRACT' LIABLE FOR DEDUCTION OF TAX AT SOURCE U/S 194C ON T HE TOTAL PAYMENTS. WHEN CONFRONTED, THE APPELLANT EXPLAINED THAT SUBJE CT PROVISIONS ENVISAGED DEDUCTION OF TAX AT SOURCE ONLY IN THE CA SE OF A CONTRACT INVOLVING WORK AND NOT A CONTRACT FOR SUPPLY OF MAT ERIAL. THUS PROVISIONS FOR TDS WERE NOT APPLICABLE TO THE CONTR ACT FOR SALE OF GOODS. THIS FACT WAS ALSO RECOGNIZED AND ACCEPTED B Y CBDT VIDE ITS CIRCULAR NO 681 DATED 08.03.1994. THE LEGISLATURE H AS RECOGNIZED THAT THE VALUE OF MATERIAL SHOULD BE EXCLUDED WHILE DEDUCTING TAX U/S 194C AND SUPPLY OF MATERIAL COULD NOT BE TREATED AS WORKS CONTRACT. THE PROVISIONS OF SECTION 40(A)(IA) WERE NOT APPLIC ABLE TO THE CLAIM OF DEPRECIATION. FURTHER IT WAS ARGUED THAT EVEN IN TH E TURNKEY CONTRACT, NO TDS WAS REQUIRED TO BE DEDUCTED ON SUPPLY OF MAT ERIAL AS IT WAS DISTINCT AND SEPARATE FROM THE ACTIVITY OF ERECTION AND COMMISSIONING. RELIANCE WAS PLACED ON THE DECISION OF ITAT, HYDERABAD IN THE CASE OF POWER GRID CORPORATION LTD VS ACIT (108 ITD 340). IT WAS ARGUED THAT THE ASSESSEE HAD TAKEN CONSULTANCY SERVICES FROM M/S SUZLON ENERGY LTD AND IN PURSUANC E THEREOF, HE HAD PLACED ORDERS FOR MACHINERY AND OTHER PARTS OF WINDMILL WITH THE VARIOUS SUPPLIERS AND PAYMENTS WERE MADE TO THE M DIRECTLY. THE ASSESSEE HAD PURCHASED WINDMILL AND ITS PARTS FROM M/S SUZLON ENERGY LTD ON WHICH NO TDS WAS DEDUCTED. SIMILARLY NO TDS WAS DEDUCTED ON THE PURCHASES OF TRANSFORMER OF RS 9,38 ,000/- FROM M/S SUZLON INFRASTRUCTURE SERVICES LTD AND PURCHASE OF LAND OF 4 RS 9,00,000/- FROM M/S SUZLON GUJARAT WIND PARK LTD . FURTHER COPIES OF DELIVERY CHALLANS FOR MACHINERY AND ITS P ARTS FROM VARIOUS SUPPLIERS WERE ALSO SUBMITTED. ON CAREFUL CONSIDERA TION OF THE FACTS, I FIND THAT THE AO WAS OF THE OPINION THAT THE CONT RACTOR HAD NOT ONLY SUPPLIED THE MACHINERY BUT ALSO INSTALLED THE SAME, COMMISSIONED THE PROJECT, OPERATED AND MAINTAINED THE PLANT. HOWEVER THE DISTINGUISHING FACTOR IN THE PRESENT CASE WAS THAT IT WAS A CONTRACT FOR SALE OF GOODS AND THERE WAS NO WORK CONTRACT. OUT O F TOTAL PAYMENT OF RS 3,56,02,143/-,THE PAYMENT FOR SUPPLY OF MACHI NERY AND PARTS WAS AT RS.2,66,48,000/-.FURTHER THE COST OF INSTALL ATION/COMMISSIONING THE PLANT WAS AT RS 80,54,143/-. IT ALSO INCLUDED S ERVICE CHARGES AND LABOUR CHARGES ON WHICH TDS WAS DEDUCTED BY THE ASS ESSEE WHILE MAKING PAYMENTS. DUE TO HEAVY SIZE OF WINDMILL, CON SIDERABLE AMOUNT OF PAYMENT RELATED TO CIVIL WORK INCLUDING F OUNDATION. HOWEVER THE APPELLANT HAD NOT GIVEN ANY WORK CONTRA CT TO THE SUZLON GROUP OR OTHER SUPPLIERS. ON THE OTHER HAND, THE EXAMPLES CITED BY THE AO ON PAGE 15 & 16 OF THE ASSESSMENT O RDER RELATED TO WORKS CONTRACT. IN FACT, THE AO HAD RELIED ON THE, DECISION OF HON'BLE SUPREME COURT IN THE CASE OF VANGUARD ROLLING SHUTT ERS BUT IN THE CITED DECISION IT WAS HELD THAT IF THE CONTRACT WAS FOR THE SALE OF MATERIAL, THE SALE PROCEEDS WOULD BE EXIGIBLE TO SA LES TAX. IN THE PRESENT CASE THE SUPPLIERS HAD CHARGED VAT ON SALE OF MATERIAL TO THE APPELLANT. FURTHER THE TERMS OF PAYMENT SHOWED THAT 30% OF THE TOTAL COST WAS TO BE PAID IN ADVANCE, 20% OF THE CO ST OF WINDMILL WAS TO BE PAID ON SUPPLY OF TOWER MATERIAL AT SITE, 20% OF THE COST WAS TO BE PAID ON SUPPLY OF NACELLE AT SITE, 25% OF THE COST WAS TO BE PAID ON SUPPLY OF ROTOR BLADES AT SITE AND ONLY 5% OF THE COST WAS TO BE PAID AT COMPLETION OF ERECTION OF THE WINDMIL L. NEITHER FROM THE BILLS/AGREEMENT NOR FROM OTHER DOCUMENTS SUBMIT TED BY THE APPELLANT, IT COULD BE CONCLUDED THAT THE APPELLANT HAD GIVEN A WORK CONTRACT TO THE SUZLON GROUP/OTHER SUPPLIERS. IN TH E CASE OF SMS DEMAG PVT LTD VS DCIT (132 TTJ 498), THE ASSESSEE M /S SMS DEMAG (P) LTD WAS A SUBSIDIARY OF M/S SMA, DEMAG AG GERMANY. M/S SMS DEMAG INDIA (P) LTD. WAS ENGAGED IN THE BUS INESS OF SUPPLY AS ASSEMBLIES/SUB-ASSEMBLIES OF METALLURGICA L EQUIPMENT, PROFESSION OF CONSULTATION AND TECHNICAL SERVICE IN DESIGN AND ENGINEERING TO FERROUS AND NON-FERROUS SECTORS. AS PER THE ORDER UNDER SECTION 201/201(1 A) OF THE ACT PASSED BY THE INCOME TAX OFFICER, TDS-1(2) (INTERNATIONAL TAXATION), THE ASS ESSEE MADE SAP MAINTENANCE EXPENSES OF RS 1,82,48,673/- TO THE PAR ENT COMPANY M/S SMA DEMAG AG GERMANY WITHOUT DEDUCTING TAX IN I NDIA DURING THE FINANCIAL YEAR 1999-2000 RELEVANT TO ASS ESSMENT YEAR 2000-01. THE ASSESSING OFFICER ISSUED SHOW-CAUSE NO TICE AS TO WHY THE PAYMENT OF RS. 1,82,48,673/- SHOULD NOT BE DISALLOW ED UNDER SECTION 5 40(A)(I). IT WAS SUBMITTED BY THE ASSESSEE THAT THE AMOUNT OF RS. 1,82,48,673/- WAS NOT CHARGED TO PROFIT & LOSS ACCO UNT RELEVANT TO ASSESSMENT YEAR. THE AMOUNT REPRESENTED THE CHARGES PAYABLE TO SAP INSTALLATION CHARGES WHICH WERE CAPITALIZED IN THE BOOKS OF- ACCOUNT UNDER THE HEAD COMPUTER IN THE RELEVANT ASSESSMENT YEAR. THE AMOUNT REFERRED TO IN THE NOTICE FORMED PART OF THE TOTAL ADDITION UNDER THE HEAD 'COMPUTER'. THE ASSESSEE FILED THE COPY OF AUD ITED ACCOUNTS SHOWING THE ADDITIONS TO THE COMPUTER AMOUNTING TO RS. 4,32,23,878/- WHICH INCLUDED THE AMOUNT OF RS. 1,82,48,673/-. SIN CE THE AMOUNT WAS NOT CHARGED TO PROFIT & LOSS ACCOUNT, THE PROVI SIONS OF SECTION 40(A)(I) HAD NO APPLICABILITY. HOWEVER, THIS CONTEN TION OF THE ASSESSEE WAS REJECTED BY THE ASSESSING OFFICER RELY ING ON PROVISIONS OF SECTION 40(A)(I) UNDER WHICH DEDUCTIO N WAS NOT TO BE ALLOWED UNLESS TAX WAS DEDUCTED AT SOURCE. IT WAS S UBMITTED THAT THE EXPENDITURE OF RS.1,82,48,673/-WAS INCURRED ON INSTALLATION/MAINTENANCE OF SOFTWARE AND CONSIDERIN G THE NATURE OF COST, THE ASSESSEE HAD CHOSEN TO CAPITALIZE THE SAI D AMOUNT IN THE BOOKS OF ACCOUNT. IT WAS HELD BY HON'BLE TRIBUNAL T HAT IT WAS CLEAR THAT THE ASSESSEE HAD MADE PAYMENT FOR THE PURCHASE OF SOFTWARE NAMED AS SAP. THE ASSESSEE HAD CAPITALIZED THE COST OF INSTALLATION OF SAP IN THE BOOKS OF ACCOUNT AND HAD CLAIMED DEPR ECIATION AS APPLICABLE TO COMPUTERS. THE ASSESSEE WHILE MAKING PAYMENT IN 2006 TO THE PARENT COMPANY HAD NOT DEDUCTED TAX AT SOURCE. THE ASSESSING OFFICER HAD DISALLOWED THE CLAIM OF T HE ASSESSEE FOR DEPRECIATION ON THE GROUND THAT TAX WAS NOT DEDUCTE D UNDER SECTION 40(A)(I). UNDER SECTION 40(A)(I) ANY INTEREST (NOT BEING INTEREST ON LOAN ISSUED FOR PUBLIC BEFORE 1-4-1938), ROYALTY FE E FOR TECHNICAL SERVICES OR SUM CHARGEABLE UNDER THIS ACT, WHICH WA S PAYABLE OUTSIDE INDIA OR INSIDE INDIA TO A NON-RESIDENT NOT BEING A COMPANY OR TO A FOREIGN COMPANY ON WHICH TAX WAS DEDUCTIBLE AT SOUR CE AND SUCH TAX HAD NOT BEEN DEDUCTED OR, AFTER DEDUCTION, HAD NOT BEEN PAID DURING THE PREVIOUS YEAR OR IN THE SUBSEQUENT YEAR BEFORE THE EXPIRY OF TIME PRESCRIBED UNDER SUB-SECTION (1) OF SECTION 200 SHA LL NOT BE ALLOWED AS DEDUCTION WHILE COMPUTING THE INCOME CHA RGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSIO N. FROM THE LANGUAGE OF SECTION 40(A)(I), IT WAS CLEAR THAT PAY MENT MADE OUTSIDE INDIA SHOULD BE IN THE NATURE OF INTEREST, ROYALTY, FEE FOR TECHNICAL SERVICES OR OTHER SUM CHARGEABLE UNDER THE ACT. THE ASSESSING OFFICER HAS SIMPLY REOPENED THE ASSESSMENT ON THE BASIS OF INFORMATION RECEIVED FROM ADDITIONAL DIRECTOR OF I T (INTERNATI ONAL TAXATION) RANGE-2, NEW DELHI AND DISALLOWED DEPRECIATION ON A SSETS CAPITALIZED IN THE BOOKS OF ACCOUNT. THE COMMISSION ER (APPEALS) HAD ALSO NOT EXAMINED THE NATURE OF THE EXPENDITURE INCURRED TOWARDS INSTALLATION OF SOFTWARE NAMED SAP. SHE HAD TREATED THE 6 PAYMENT WITHOUT ANY DISCUSSION IN THE NATURE OF ROY ALTY /FEE FOR TECHNICAL SERVICES OR INTEREST. ACCORDING TO HER, T HE PAYMENT MADE MIGHT FALL IN ANY OF THE CATEGORIES. APPARENTLY, TH E PAYMENT MADE TOWARDS INSTALLATION OF SOFTWARE WAS NOT IN THE NAT URE OF INTEREST. THE ASSESSEE HAD MADE PAYMENT TO PARENT COMPANY FOR THE PURPOSE OF SOFTWARE. THE PAYMENT MADE FOR PURCHASE OF SOFTWARE COULD NOT BE TREATED EITHER AS ROYALTY OR EVEN FOR TECHNICAL SER VICES. THEREFORE, THE PAYMENT FOR SAP SOFTWARE COULD NOT BE CHARGED TO TA X IN INDIA AS INTEREST OR ROYALTY OR FEE FOR TECHNICAL SERVICES. IN THE CONSIDERED OPINION OF MEMBERS OF TRIBUNAL, THE PAYMENT MADE FO R ACQUISITION OF AN ASSET WHETHER IT WAS A REVENUE EXPENDITURE OR CA PITAL, PROVISIONS OF SECTION 40(A)(I) OF THE ACT WOULD NOT BE APPLICA BLE IN CASE OF RESIDENT ASSESSEE FOR ASSESSMENT YEAR 2000-01. THER EFORE, IT WAS HELD THAT THE COMMISSIONER (APPEALS) WAS NOT JUSTIFIED I N HOLDING THAT THE AMOUNT PAID BY THE ASSESSEE FOR ACQUISITION OF COMP UTERS WAS CHARGEABLE TO TAX IN INDIA. ACCORDINGLY, THIS GROUN D OF APPEAL WAS DECIDED IN FAVOUR OF THE ASSESSEE. AS REGARDS THE C LAIM OF ASSESSEE FOR DEPRECIATION ON ASSETS CAPITALIZED, IT WAS HELD THAT DEPRECIATION COULD NOT BE DISALLOWED ON THE GROUND THAT AT THE T IME OF REMITTANCE NO TAX WAS DEDUCTED AT SOURCE. PROVISIONS OF SECTIO N 40(A)(I) WERE NOT APPLICABLE FOR CLAIM FOR DEDUCTION UNDER SECTIO N 32 OF THE ACT. ACCORDINGLY, IN THEIR CONSIDERED OPINION, THE ASSES SING OFFICER WAS NOT JUSTIFIED IN DISALLOWING 50 PER CENT OF DEPRECI ATION ON THE GROUND THAT PROVISIONS OF SECTION 40(A)(I) WERE APPLICABLE . SIMILARLY IN THE CASE OF S. T. REDDIAR AND SONS VS DCIT (007 ITR TRI B. 001), IT WAS FOUND THAT ONLY A SMALL FRACTION OF THE TOTAL E XPENDITURE WAS IN THE FORM OF LABOUR CHARGES. THEREFORE, THE CONTRACT WAS NOT FOR SUPPLY OF LABOUR OR FOR WORK BUT FOR PURCHASE OF GO ODS FOR WHICH SOME LABOUR WORK WAS PERFORMED. IT WAS NOT THE CASE OF THE DEPARTMENT THAT THE GOODS WERE BOUGHT IN UNPROCESSE D FORM AND THEN GIVEN FOR JOB WORK. ANY GOODS PURCHASED FROM T HE MARKET INCLUDED SOME COMPONENT OF LABOUR DUE TO SERVICES P ERFORMED ON THE INPUT MATERIAL PROCURED BY THE SUPPLIER. EACH 'GOOD ' COULD BE BROKEN INTO COMPOSITE SERVICES IN ORDER TO ESSENTIA LLY FORM A TANGIBLE FORM OF LABOUR AND IT WOULD NOT ATTRACT TH E PROVISIONS OF SECTION 194C AND CONSEQUENTLY SECTION 40(A)(IA) OF THE ACT. IN THE ABSENCE OF ANY FINDING BY ANY OF THE AUTHORITIES BE LOW REGARDING EXISTENCE OF A SEPARATE CONTRACT IN RESPECT OF LABO UR WORK, THE DISALLOWANCE WAS DELETED BY THE HON'BLE COCHIN TRIB UNAL. 3.2 IT IS PERTINENT TO MENTION HERE THAT IN THE PR ESENT CASE, THE CONTRACT OF MANUFACTURED GOODS WAS ON PRINCIPLE TO PRINCIPAL BASIS AND WAS NOT A CONTRACT FOR CARRYING OUT ANY W ORK. ACCORDINGLY THE CONTRACT UNDER CONSIDERATION WAS A CONTRACT FOR SALE OF GOODS FOR 7 THE REASONS THAT THE PURCHASE OF GOODS WAS ON PRINC IPAL-TO-PRINCIPAL BASIS AND WAS NOT A CONTRACT FOR CARRYING OUT OF WO RK; THE FINISHED GOODS WERE TRANSFERRED AND TITLE THEREON WAS PASSED ON TO THE APPELLANT AT THE TIME OF SALE THEREOF UNTIL SUCH TIME OWNERSH IP IN THE GOODS AND THE RISKS ASSOCIATED THERETO RESTED WITH THE VENDOR : THE INVOICES RAISED BY THE MANUFACTURER DID NOT CONTAIN ANY BREA KUP OF THE COST OF MATERIAL AND COST OF LABOUR: THE MANUFACTURER IN DEPENDENTLY PURCHASED ALL THE INPUT RAW MATERIALS USED FOR PROD UCTION OF THE PRODUCTS EQUIPMENT: IN THE INVOICES, THE SUPPLIERS HAD CHARGED TAXES AS APPLICABLE ON SALE OF PRODUCTS. THE FINDINGS OF HON'BLE DELHI TRIBUNAL IN THE CASE OF DCIT VS SEAGRAM MANUFACTURI NG PVT LTD (19 SOT 139) ARE PERTINENT FOR THE ISSUE UNDER CONS IDERATION:- 'THE REQUIREMENT OF SECTION 194C IS THAT IN ORDER T O ATTRACT THE PROVISIONS, THE ASSESSEE SHOULD HAVE MA DE THE PAYMENTS TO A CONTRACTOR FOR CARRYING OUT ANY CONTR ACT, INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WOR K. THE EXPRESSION CONTRACT FOR CARRYING OUT ANY WORK IMPLI ES THAT THE CONTRACTOR SHOULD HAVE CARRIED OUT SUCH ACTIVIT IES. THE TERM CARRIED OUT SUGGESTS AN EXECUTORY CONTRACT, RA THER THAN AS CASE OF MERE SUPPLY OR SALE OF GOODS. WHERE A PE RSON ENGAGES IN THE SERVICES OF ANOTHER AND GIVE HIM A J OB OF MANUFACTURING GOODS AND FOR THIS PURPOSE SUPPLIES H IM RAW MATERIAL, ETC., IT WOULD BE A CLEAR CASE OF CONTRAC T OF WORK AND THE PROVISIONS OF SECTION 194C WOULD BE ATTRACTED. BUT IF ON THE OTHER HAND, THE MANUFACTURER ON HIS OWN PURCHAS ES MATERIAL AND MANUFACTURE PRODUCTS WHICH HE SELLS TO THE ANOTHER PERSON AND IT MAY BE THAT SUCH PRODUCTS MIG HT BE CUSTOMER SPECIFIC AS PER THE REQUIREMENTS OF THE CU STOMER, IT IS STILL A CASE OF SALE AND NOT FOR CARRYING OUT ANY W ORK. EVEN IN CASE OF CUSTOMER SPECIFIC SALE, THE FACT THAT THE G OODS MANUFACTURED WERE ACCORDING TO THE REQUIREMENTS OF THE CUSTOMER, DOES NOT MEAN THAT ANY WORK HAS BEEN CARR IED OUT ON BEHALF OF CONTRACTEE. SO, THE CUSTOMIZATION OF T HE PACKING MATERIAL SUPPLIED IN ACCORDANCE WITH THE SPECIFICAT IONS LAID DOWN BY THE ASSESSEE, WOULD NOT MADE THE TRANSACTIO N INTO A TRANSACTION OF CONTRACT. IN THE CASE OF BDA LTD. VS ITO (281 ITR 99), THE AURANGABAD BENCH OF THE BOMBAY HIGH COURT, AFTER A CONSIDERATION OF ALL THE AUTHORITIES ON THE POINT, HELD THAT FOR THE PURPOSE OF SECTION 194C OF THE I.T ACT THE DIFFERENCE BETWEEN A SALE CONTRACT AND A WORKS CONTRACT SHOULD BE KEPT IN MIND AND WHE RE A MANUFACTURER PURCHASED MATERIAL ON HIS OWN AND MANU FACTURED A 8 PRODUCT AS PER THE REQUIREMENTS OF A SPECIFIC CUSTO MER, IT WAS A CASE OF SALE AND NOT A CONTRACT FOR CARRYING OUT ANY WOR K. THE HIGH COURT FURTHER OBSERVED THAT THE FACT THAT THE GOODS WERE MANUFACTURED ACCORDING TO THE SPECIFICATIONS AND RE QUIREMENTS OF THE CUSTOMERS DID NOT MEAN OR IMPLY THAT ANY WORK WAS C ARRIED OUT ON BEHALF OF THAT CUSTOMER SO AS TO ATTRACT THE PROVIS IONS OF SECTION 194C. IN THE CASE OF KRIBHCO VS DCIT (10 ITR TRIB. 527), IT WAS HELD BY HON'BLE DELHI ITAT THAT THE CONTRACT FOR SUPPLY OF GAS FROM THE PRODUCERS FOR THE PURPOSE OF USE OF THIS GAS FOR BU RNING IN THE ASSESSEE'S FACTORY WAS A CONTRACT FOR SALE OF GOODS AND NOT A WORKS CONTRACT. THEREFORE THE ORDER OF THE COMMISSIONER ( APPEALS) DELETING THE DISALLOWANCE OF THE PAYMENT MADE WAS T O BE UPHELD. IN THE CASE OF POWER GRID CORPORATION OF INDIA LTD VS. ACIT (108 ITD 340), THE ASSESSEE WAS A CENTRAL GOVERNMENT UNDERTA KING ENGAGED IN THE ACTIVITY OF TRANSMISSION AND POWER DISTRIBUTION OF ELECTRICITY TO VARIOUS CONSTITUENTS ACROSS THE COUNTRY. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE WAS INVOLVED IN THREE P ROJECTS FOR WHICH CONTRACTS WERE AWARDED TO DIFFERENT CONTRACTORS. TH E ASSESSEE AWARDED CONTRACTS TO VARIOUS PARTIES TO CONSTRUCT/E XECUTE THE TRANSMISSION LINE/SUB-STATION. THE CATEGORIES OF CO NTRACTS ENTERED INTO BY THE APPELLANT WITH VARIOUS CONTRACTORS FOR THE ABOVE PURPOSE WERE FOR PURE SUPPLY CONTRACTS; PURE ERECTION CONTR ACTS; AND SUPPLY-CUM-ERECTION CONTRACTS (BUT WITH SEPARATE AG REEMENTS IN RESPECT OF SUPPLY PORTION). THE CONTRACTS ENTERED I NTO WITH THE RESPECTIVE CONTRACTORS WERE IDENTICAL AND THE SCOPE OF VARIOUS CONTRACTS CONSISTED OF SUPPLY OF CONDUCTORS, INSULA TORS, TOWERS AND SUB-STATIONS AND THE ERECTION PART WAS INCIDENTAL. IN RESPECT OF ERECTION CONTRACTS, THE ASSESSEE HAD DEDUCTED TAXES AT SOURCE DULY APPLYING THE PROVISIONS OF SECTION 194C. IN SO FAR AS THE SUPPLY CONTRACTS WERE CONCERNED, THE ASSESSEE DID NOT MAKE ANY DEDUCTION, ON THE GROUND THAT PROVISIONS OF SECTION 194C ARE N OT ATTRACTED TO THE SAID PAYMENTS. THE CASE OF THE ASSESSING OFFICER WA S THAT THE SUPPLY OF TRANSMISSION TOWERS/CABLES INVOLVED DESIGN AND M ANUFACTURE OF THE GOODS, AND HENCE IT WAS A CONTRACT OF WORKS AND NOT A CONTRACT OF SALE. THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE REPLY FILED BY THE APPELLANT AND PASSED AN ORDER UNDER SECTION 201 (1) READ WITH SECTION 201(1A) HOLDING THE ASSESSEE AS 'ASSESSEE I N DEFAULT' FOR NOT HAVING DEDUCTED TAXES IN RESPECT OF THE VARIOUS CON TRACTS ENTERED INTO BY IT, WHICH ACCORDING TO HIM, WERE CONTRACTS IN TH E NATURE OF WORKS CONTRACTS. THE CIT(A) UPHELD THE ORDER OF THE AO. I T WAS HELD BY HON'BLE MUMBAI TRIBUNAL THAT THE AO WAS NOT JUSTIFI ED. IT WAS HELD THAT IF EQUIPMENTS WERE MANUFACTURED AS PER DESIGN ENGINEERING, ETC., SPECIFIED BY THE CUSTOMER (ASSESSEE) IT WOULD NOT RESULT IN A WORK CONTRACT, ESPECIALLY WHEN ALL THE MATERIALS BE LONGED TO 9 SUPPLIER, EVEN THOUGH IT PRODUCED A TAILOR MADE PRO DUCT. THE FACTS OF THE CASE CLEARLY SHOWED THAT IT WAS A CONTRACT FOR SALE AND PROVISIONS OF SECTION 194C WERE, THEREFORE, NOT APPLICABLE. TH E CONTRACTS, THOUGH CONTAINED IN THE SAME DOCUMENT IN SOME CASES WERE I N TWO PARTS. SIMPLY BECAUSE THE SUPPLY AND ERECTION PARTS OF THE CONTRACT WERE ENTERED INTO WITH THE SAME PARTY IN SOME CASES AND IN SOME OTHER CASES, WERE IN TWO SEPARATE PARTS IN THE SAME AGREE MENT THE NATURE OF EACH PART OF THE CONTRACT WOULD NOT ALTER. IT WAS HELD THAT IF THE FACTS OF THE PRESENT CASE WERE TESTED BY APPLYING THE PRINCI PLES LAID DOWN BY THE JURISDICTIONAL HIGH COURT AND THE HON'BLE SUPRE ME COURT, THE OBVIOUS ANSWER THAT WOULD EMERGE WAS THAT THIS WAS A 'SUPPLY CONTRACT' AND NOT 'WORKS CONTRACT'. THE NATURE OF A CONTRACT AS TO WHETHER IT WAS A CONTRACT FOR SALE OR 'WORKS CONTRA CT' WOULD DEPEND ON THE TERMS OF THE CONTRACT AND ITS EXECUTION. IN THE PRESENT CASE, THE CONTRACTORS HAD TO FABRICATE TOWERS AS PER TEST ED QUALITY OF CONFORMITY WITH INTERNATIONAL STANDARD (IS) 2062. F URTHER THE CONTRACTOR HAD BEEN GIVEN THE OPTION TO USE OTHER E QUIVALENT GRADE OF STRUCTURAL STEEL ANGLE SECTIONS AND PLATES CONFORMI NG TO LATEST INTERNATIONAL STANDARDS. THE CONTRACTOR FABRICATED AND MANUFACTURED THE TOWER WITH STEEL SECTIONS AS PER INTERNATIONAL STANDARDS. THE MATERIAL WAS THAT OF 'THE SUPPLIER' AND NOT OF 'THE PURCHASER'. THE 'SUPPLIER' DID NOT WORK ON THE MATERIAL SUPPLIED BY THE 'PURCHASER'. THERE WAS NO ACCRETION OF MATERIAL TO THE PURCHASER , PART BY PART, UNIT BY UNIT. THE REST OF THE EQUIPMENT SUCH AS INS ULATORS, CONDUCTORS, TRANSFORMERS, CIRCUIT BREAKERS, ETC., W ERE STANDARD EQUIPMENTS. THE RELEVANT TECHNICAL SPECIFICATION WA S SPECIFIED BY THE 'PURCHASER'. THE TITLE IN THE GOODS PASSED AS A CHATTEL ON DELIVERY THOUGH CERTAIN OBLIGATIONS WERE STILL NECESSARILY T O BE PERFORMED BY THE SUPPLIER. THOUGH THE ASSESSEE CLAIMED THAT THE DESIGN SPECIFICATION WERE NOT UNIQUE IN THE SENSE THAT THE SAME SPECIFICATIONS WERE USED BY MANY OTHER CONCERNS, HO WEVER IT WAS HELD TO BE NOT A RELEVANT TEST. THE ISSUE WAS AS TO THE TIME AND SITUS OF PASSING OF THE PROPERTY AND AS TO WHETHER THE PROPE RTY PASSED 'BRICK BY BRICK' ON THE THEORY OF ACCRETION OR AS A CHATTE L QUA CHATTEL. THE MERE FACT THAT THE SUPPLIER HAD TO PERFORM MANY OTH ER OBLIGATIONS CAST ON IT BY VIRTUE OF THE CONTRACT AFTER DELIVERY OF G OODS DID NOT CHANGE THE NATURE OF TRANSACTION. THE 'SUPPLY' PORTION OF THE CONTRACT WAS THE PREDOMINANT OBJECT AND INTENTION OF THE PARTIES . ERECTION WAS A RELATIVELY MINOR PORTION AS COMPARED TO THE SUPPLY PORTION. IF THE ERECTION PORTION COULD NOT BE TAKEN AS THE MAIN OBJ ECT OF THESE CONTRACTS, TITLE IN GOODS WAS TRANSFERRED AS MOVABL ES PRIOR TO ERECTION. IF EQUIPMENTS WERE MANUFACTURED AS PER TH E DESIGN ENGINEERING, ETC., SPECIFIED BY THE CUSTOMER, IT WO ULD NOT RESULT IN A WORKS CONTRACT ESPECIALLY WHEN ALL THE MATERIAL B ELONGED TO THE 10 SUPPLIER, EVEN THOUGH IT PRODUCED A TAILOR MADE PRO DUCT. THE ERECTION PORTION BEING SUBSEQUENT TO PASSING OF TIT LE BY EXECUTION OF THE SUPPLY PORTION, IT COULD NOT BE SAID THAT THE E RECTION, PORTION CONTROLLED THE SUPPLY PORTION THOUGH THE FULFILLMEN T OF THE CONDITIONS OF THE ERECTION CONTRACT HAD A BEARING O N THE FULFILLMENT OF THE CONDITION OF SUPPLY PORTION OF THE CONTRACT, AN D THOUGH IN SOME CASES BOTH THE CONTRACTS WERE IN THE SAME DOCUMENT. THE SCOPE AND OBJECT OF EACH PART OF THE CONTRACT WAS DIFFERENT. THOUGH THE SUPPLY PORTION AND ERECTION PORTION DOVETAILED INTO EACH O THER, THE ERECTION PORTION DID NOT CONTROL THE SUPPLY PORTION AND THE SUPPLY CONTRACT DID NOT BECOME A WORKS CONTRACT, JUST BECAUSE THERE WAS AN OBLIGATION CAST ON THE SUPPLIER TO ERECT THE EQUIPMENT WHICH B Y THAT TIME HAD BECOME THE PROPERTY OF THE PURCHASER. THE TITLE IN THE GOODS IN RESPECT OF EQUIPMENT/MATERIAL TO BE SUPPLIED AS PER THE TERMS OF CONTRACT WAS TO BE TRANSFERRED 'EX-WORK' ON DISPATC H AS MOVABLE PROPERTY. THE CRITICAL TEST TO BE APPLIED WAS AS TO WHEN THE TITLE IN THE GOODS WAS TRANSFERRED. THUS AS THE TITLE IN THE GOO DS WERE PASSED ON TO THE ASSESSEE, BEFORE THE COMMENCEMENT OF THE WOR KS OR ERECTION CONTRACT AND AS ADMITTED BY THE ASSESSEE I T HAD TREATED THESE GOODS AS ITS PROPERTY AND ENTERED THE SAME AS SUCH IN ITS STOCK REGISTER BEFORE ISSUING THE SAME FOR ERECTION, IT W AS A CONTRACT OF SALE AND SECTION 194C HAD NO APPLICATION. ON ERECTI ON PORTION AS ADMITTED TDS WAS MADE. THE TEST WAS WHETHER, IN SUB STANCE, THE CONTRACT WAS ONE OF WORK OR LABOUR OR NOT. SECTION 194C WOULD APPLY, WHEN PAYMENT WAS MADE TO THE DEDUCTED FOR CARRYING ON ANY WORK OR FOR SUPPLYING LABOUR FOR CARRYING OUT ANY WORK AND WOULD NOT COVER CONTRACTS FOR SALE OF GOODS. THE CBDT RECOGNIZED TH IS POSITION AND ISSUED THE FOLLOWING GUIDELINES IN REGARD TO THE AP PLICABILITY OF THE PROVISIONS OF SECTION 194C VIDE CIRCULAR NO. 681, D ATED 8-3-1994. A PLAIN READING OF THE SECTION 194C ALONG WITH CBDT C IRCULAR REFERRED ABOVE AND APPLYING THE SAME TO THE FACTS OF THIS CA SE, WHERE THE SUPPLIER DID NOT WORK OR PROCESSED THE MATERIAL SUP PLIED BY THE PURCHASER AND THAT THE SELLER SUPPLIED GOODS THE TI TLE IN WHICH PASSED ON TO THE PURCHASER/ASSESSEE, AS A CHATTEL, ON DELI VERY EX-WORK DISPATCH AND AS THE ASSESSEE HAD ALREADY DEDUCTED T AX AT SOURCE FROM THE ERECTION PORTION OF THE CONTRACT TREATING IT AS A SEPARATE CONTRACT, SECTION 194C WAS NOT APPLICABLE TO THE SUPPLY CONTR ACT IN QUESTION. IN THE RESULT, THE APPEAL OF THE ASSESSEE WAS ALLOW ED. THE AO HAS PLACED RELIANCE ON THE DECISION OF MUMBAI ITAT IN T HE CASE OF SPACO CARBURETTORS (I) LTD VS ACIT (3 SOT 798) AND THE DECISION OF CIT(A)-III, JAIPUR IN THE CASE OF SANKALP INTERNATI ONAL. IN THE CASE OF SPACO CARBURETTORS LTD, IT WAS HELD THAT ANY PAYMEN T FOR TECHNICAL KNOW-HOW WHETHER TO BE COVERED UNDER SECTION 37(1) OR UNDER SECTION 35AB COULD ONLY BE ALLOWED WHEN TDS WAS NOT ONLY 11 DEDUCTED BUT ALSO PAID. FURTHER SECTION 35AB WAS QU ITE CLEAR ON THE ISSUE THAT L/6TH OF THE TOTAL PAYMENT TO BE COVERED UNDER SECTION 35AB WOULD BE ALLOWED ONLY WHEN IT WAS PAID, I.E., L/6TH PAYMENT WOULD BE ALLOWED IN THE FIRST YEAR WHEN IT WAS PAID AND L/6TH EACH WOULD BE ALLOWED IN SUBSEQUENT FIVE ASSESSMENT YEAR S. IN VIEW OF THIS, IT WAS HELD BY MUMBAI ITAT THAT DEDUCTION UND ER SECTION 3 SAB WOULD BE ALLOWED (I) WHEN IT WAS ACTUALLY PAID (II) WHEN TDS WAS DEDUCTED AND PAID TO THE GOVERNMENT ACCOUNT. IT IS NOT THE CASE HERE. IN FACT, THE HON'BLE MUMBAI TRIBUNAL (BENCH C ) IN THE CASE OF M/S CRESCENT CHEMSOL PVT LTD VS. ACIT ( ITA NO.L497 /MUM/2010 DATED 09.03.2011) HELD THAT THE DECISION IN THE CAS E OF SPACO CARBURETTORS (I) LIMITED (3 SOT 798) COULD NOT BE A PPLIED WHEN DEPRECIATION WAS DISALLOWED BY INVOKING PROVISIONS OF SECTION 40(A)(IA). THE OBSERVATIONS OF THE HON'BLE TRIBUNAL IN PARA 10 OF ITS ORDER DATED 09.03.2011 ARE REPRODUCED AS UNDER.- ' WE HAVE HEARD THE RIVAL SUBMISSIONS. A PERUSAL OF THE SECTION 40(A)(IA) SHOWS THAT IT IS ONLY WHEN A DEDUCTION IS CLAIMED IN COMPUTING THE INCOME CHARGEABLE UNDER TH E HEAD 'PROFIT AND GRAINS OF BUSINESS OR PROFESSION' THAT THE ABOVE PROVISION ARE ATTRACTED. THE DEDUCTION CLAIMED SHOU LD BE OF INTEREST, COMMISSION OR BROKERAGE, RENT, ROYALTY , FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICE S. THE CLAIM FOR DEPRECIATION MADE BY THE ASSESSEE DOES NOT FALL WITHIN ANY OF THE CATEGORIES MENTIONED IN THE AFORESAID PROVIS ION. THEREFORE, IT IS NOT POSSIBLE TO MAKE THE IMPUGNED DISALLOWANCE BY RESORTING TO THE PROVISIONS OF SECT ION 40(A)(I) OF THE ACT. THE LEARNED D.R. HOWEVER SUBMITTED THAT PROVISIONS OF SEC. 40(A)(I) OF THE ACT WERE HELD TO APPLY EVEN TO CAPITAL EXPENDITURE BY THE ITAT MUMBAI IN SPACO CARBURETTORS (I) LTD. VS. ACIT 2005(3) SOT 798 (MUM ). WE FIND THAT THE SAID DECISION WAS RENDERED IN THE CON TEXT OF DEDUCTION OF CAPITAL EXPENDITURE WHILE COMPUTING IN COME, CLAIMED BY AN ASSESSEE U/S. 35AB OF THE ACT. WE THE REFORE DO NOT FIND ANY RELEVANCE OF THE SAID DECISION TO THE PRESENT CASE. IN THAT VIEW OF THE MATTER WE DIRECT THAT DISALLOWA NCE MADE BE DELETED. GROUND NO.3 RAISED BY THE ASSESSEE IS ACCO RDINGLY ALLOWED'. SIMILARLY THE DECISION IN THE CASE OF SANKALP INTER NATIONAL WAS WITH REFERENCE TO THE ORDER U/S 201(1) AND 201(1A). THE DISTINGUISHING FEATURE WAS WHETHER THE CONTRACT AW ARDED IN THE PRESENT CASE COULD BE TERMED AS WORK CONTRACT OR NO T. THE APPELLANT 12 IN THE PRESENT CASE HAD PRIMARILY PURCHASED WINDMIL L AND ITS PARTS INCLUDING TRANSFORMER FROM VARIOUS SUPPLIERS. THE C ONTRACT ENTERED BY THE ASSESSEE RELATED TO SALE OF GOODS. THE PAYME NTS FOR ERECTION & COMMISSIONING AS A LOGICAL COROLLARY WERE 'ANCILLAR Y AND SUBSIDIARY, AS WELL AS INEXTRICABLY AND ESSENTIALLY LINKED TO S UCH A SALE WERE TO BE TREATED AS AN INTEGRAL PART OF THE SALE. THE WINDMI LL AND ITS PARTS WERE NOT MANUFACTURED BY THE ALLEGED SUPPLIERS AFTER PLA CING OF ORDER BY THE APPELLANT BUT MUCH PRIOR TO IT. THE SUPPLIERS H AD PAID VAT ON THESE SALES AND TITLE IN THE GOODS HAD PASSED ON TH E APPELLANT MUCH PRIOR TO ERECTION & COMMISSIONING. GOING BY THE FACTS OF THE PRESENT CASE, I AM OF THE OPINION THAT SAME WAS NOT A WORK CONTRACT THEREFORE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF ASSOCIATED CEMENT COMPANY LTD VS CIT (201 ITR 435) RELATING TO LOADING OF CEMENT BAGS IN TO TRUCKS FOR A WORK CONT RACT COULD NOT BE APPLIED TO THE PRESENT CASE. WITHOUT PREJUDICE TO A BOVE, EVEN IF THE APPELLANT HAD DEFAULTED IN COMPLIANCE OF TDS PROVIS IONS, THEN THE NECESSARY ACTION COULD BE TAKEN BY ITO, TDS. HOWEVE R IN THE PRESENT CASE, SINCE THE EXPENDITURE WAS NOT CHARGED TO THE PROFIT AND LOSS ACCOUNT, THE AO WAS NOT JUSTIFIED IN INVOKING THE P ROVISIONS OF SECTION 40(A)(IA) OF THE I T ACT. I THEREFORE DIREC T THE AO TO ALLOW DEPRECIATION OF RS 1,10,19,200/- ON THE WINDMILLS I NSTALLED AT VILLAGE JETHWAI, JAISALMER. THESE GROUNDS OF APPEAL ARE ALL OWED. 2.5 WE FIND THAT THE LD. CIT(A) HAS FOLLOWED THE DE CISION OF HON'BLE COORDINATE BENCH IN THE CASE OF M/S. CRESCENT CHEMSOL (P) LTD. VS. ACIT (ITA NO. 1497/MUM/2010 DATED 09-03-2011) WHEREIN THE HON'BLE COORDINATE BENCH HAS HELD THAT THE CLAIM FOR DEPRECIATION MADE BY THE ASSESSEE DOES NOT FALL WIT HIN ANY OF THE CATEGORIES MENTIONED IN THE PROVISION OF SECTION 40(A)(IA) OF THE ACT. THER EFORE, IT IS NOT POSSIBLE TO MAKE THE IMPUGNED DISALLOWANCE BY RESORTING TO THE PROVISION OF SECTION 40(A)(IA) OF THE ACT. THIS FACT IS NOT CONTROVERTED BY THE LD. DR DURING THE C OURSE OF HEARING. MOREOVER, THE LD. CIT(A) HAS GIVEN A FINDING ON FACT THAT THE CONTRAC T ENTERED BY THE ASSESSEE RELATED TO SALE OF GOODS AND THE PAYMENTS FOR ERECTION & COMMI SSIONING AS A LOGICAL COROLLARY WERE ANCILLARY AND SUBSIDIARY AS WELL AS INEXTRICABLY AND ESSENTIALLY LINKED TO SUCH A SALE 13 WERE TO BE TREATED AS AN INTEGRAL PART OF THE SALE. HENCE, THE SAME WAS NOT TREATED AS WORK CONTRACT BY THE LD. CIT(A). THEREFORE, WE DO NOT F IND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) AS THE LD. CIT(A) HAS RIGHTLY FOLLOWED THE D ECISION OF HON'BLE COORDINATE BENCH IN THE CASE OF CRESCENT CHEMSOL (P) LTD. VS. ACIT ( SUPRA) WHEREIN IT HAS BEEN CATEGORICALLY HELD THAT THE CLAIM FOR DEPRECIATION MADE BY THE ASSESSEE DOES NOT FALL WITHIN ANY OF THE CATEGORIES MENTIONED IN THE PROVI SION OF SECTION 40(A)(IA) OF THE ACT. THEREFORE, IT IS NOT POSSIBLE TO MAKE THE IMPUGNED DISALLOWANCE BY RESORTING TO THE PROVISION OF SECTION 40(A)(IA) OF THE ACT. IN OUR C ONSIDERED VIEW, THE DEPRECIATION IS AN ALLOWANCE AND NOT THE EXPENDITURE. THEREFORE, WE AR E IN RESPECTFUL AGREEMENT WITH THE DECISION OF HON'BLE COORDINATE BENCH OF ITAT, MUMB AI RENDERED IN THE CASE OF CRESCENT CHEMSOL (P) LTD. VS. ACIT (SUPRA). HENCE, IN THIS VIEW OF THE MATTER, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) W HICH IS UPHELD. THUS THE GROUNDS RAISED BY THE REVENUE IN ITS APPEAL ARE REJECTED. 3.0 IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21-08-2013 . SD/- SD/- (B.R. JAIN) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR DATED: 21 ST AUG, 2013 *MISHRA COPY FORWARDED TO:- BY ORDER 1. THE ACIT, CIRCLE- 4, JAIPUR 2. SHRI SUDHIR JAJOO, JAIPUR 3. THE LD. CIT(A) 4. THE LD. CIT 5. THE LD. DR 6. THE GUARD FILE (IT NO.655/JP/12 ) A.R. ITAT: JAIPUR 14 15