Intervalve (India) Ltd., Pune V. Deputy Commissioner of Income-tax,

ITA 684/PUN/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9319 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 12-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMITRA BANARJI
• Assessee Lawyers: SUNIL PATHAK
• Keywords: Depreciation; Business expenditure; Additional depreciation; Benefit of exemption; Revenue expenditure; Capital expenditure
• Section: 80G; 12A; 12; 11

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . . . . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO. 684/PUN/2015 / ASSESSMENT YEAR : 2010-11 INTERVALVE (INDIA) LTD., 16-B/1, SAROSH BHAVAN, DR. AMBEDKAR ROAD, PUNE 411001 PAN : AAACI3917P . / APPELLANT V/S D CIT, CENTRAL CIRCLE - 1 (1) , PUNE . / RESPONDENT ASSESSEE BY : SHRI SUNIL PATHAK REVENUE BY : SMT. SUMITRA BANARJI / ORDER PER VIKAS AWASTHY, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A)-I, PUNE DATED 31-10-2014 FOR THE ASSESSMENT YEAR 2010- 11. 2. THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 08-10-2010 DECLARING TOTAL INCOM E AS RS.1,34,66,789/-. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDING S, THE AO INTER ALIA MADE FOLLOWING DISALLOWANCES/ADDITIONS : (I) DISALLOWANCES OF GRATUITY PAID - RS.9,23,983/- (II) PROVISION FOR LEAVE ENCASHMENT - RS.19,53,436/- (III) DISALLOWANCE U/S.14A R.W. RULE 8D - RS.1,61,265/- / DATE OF HEARING :08.06.2017 / DATE OF PRONOUNCEMENT: 23.06.2017 2 ITA NO.684/PUN/2015 (IV) DISALLOWANCE OF EXPENDITURE ON CONSTRUCTION OF BUNGALOW - RS,12,48,500/- (V) DISALLOWANCE OF EXPENDITURE ON INCURRED ON SHIFTING OF MANUFACTURING UNIT/FACTORY - RS.19,61,178/- (VI) DISALLOWANCE OF ADDITIONAL DEPRECIATION ON STORAGE RACKS DOORS AND EXTRA COMPARTMENTS, CRATES ETC. - RS.2,41,017/- AGGRIEVED BY THE ASSESSMENT ORDER DATED 18-03-2013 , THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). THE CIT(A) VIDE IMPUGNED ORDER CONFIRMED THE AFORESAID ADDITIONS MADE BY AO. NOW THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRI BUNAL ASSAILING THE FINDINGS OF FIRST APPELLATE AUTHORITY CONFIRMING TH E ADDITIONS. 3. THE GROUNDS RAISED BY THE ASSESSEE IN APPEAL ARE DEALT WITH IN SERIATUM FOR THE SAKE OF CONVENIENCE. 4. GROUND NO.1 IN THE APPEAL BY THE ASSESSEE READS AS UNDER : 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISA LLOWANCE OF RS.9,23,783/- U/S.36(1)(V) ON ACCOUNT OF THE GRATUI TY PAYMENT MADE BY THE APPELLANT COMPANY. 1.1 THE LEARNED CIT(A) ERRED IN HOLDING THAT THE GR ATUITY PAYMENT MADE BY THE APPELLANT COMPANY WAS NOT ALLOWABLE SINCE TH E FUND TO WHICH THE AMOUNT WAS PAID WAS NOT APPROVED BY THE CIT AND HEN CE, THE SAID EXPENDITURE WAS NOT ALLOWABLE AS A DEDUCTION. 1.2 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT TH E FUND TO WHICH THE CONTRIBUTION WAS MADE HAD APPLIED FOR APPROVAL TO T HE CONCERNED CIT AND HENCE, THERE WAS NO REASON TO MAKE THE DISALLOWANCE U/S.36(1)(V). 1.3 WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE ASS ESSEE SUBMITS THAT IN CASE, IN FUTURE, THE SAID FUND IS GRANTED APPROVAL, THE DISALLOWANCE MADE U/S.36(1)(V) MAY KINDLY BE DELETED. 5. SHRI SUNIL PATHAK APPEARING ON BEHALF OF THE ASS ESSEE SUBMITTED THAT THE ASSESSEE HAD CREATED IRREVOCABLE GRATUITY FUND WITH LIFE INSURANCE CORPORATION OF INDIA (LIC). THE ASSESSEE HAS BEEN REGULARLY DEPOSITING THE 3 ITA NO.684/PUN/2015 AMOUNT IN THE AFORESAID FUND. THE ASSESSEE HAD APP LIED FOR APPROVAL OF THE SAID FUND WITH CIT(A) IN 1995. THE ASSESSEE HAS BE EN CLAIMING CONTRIBUTION TOWARDS THE SAID FUND AS DEDUCTION IN THE PAST SEVE RAL YEARS AND THE SAME HAS BEEN ALLOWED TO THE ASSESSEE. THE LD. AUTHORIS ED REPRESENTATIVE PLACED ON RECORD A COPY OF THE ASSESSMENT ORDER FOR THE AS SESSMENT YEAR 2005-06 PASSED U/S.143(3) READ WITH SECTION 250 AND SECTION 254 OF THE ACT TO SHOW THAT THE ASSESSEE HAS BEEN CLAIMING DEDUCTION ON AC COUNT OF CONTRIBUTION TOWARDS GRATUITY FUND AND THE SAME WAS ALLOWED BY T HE AO. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ASSESS MENT ORDER UNDER APPEAL IS THE FIRST YEAR WHEN THE AO HAD RAISED QUESTION A BOUT THE APPROVAL OF GRATUITY FUND. ADMITTEDLY, THE ASSESSEE COULD NOT PRODUCE APPROVAL LETTER FROM CIT. THE ASSESSEE DESPITE BEST EFFORTS COULD NOT TRACE THE APPROVAL LETTER. HOWEVER, THE ASSESSEE FURNISHED A COPY OF LETTER VIDE WHICH REQUEST WAS MADE TO THE CIT IN THE YEAR 1995 FOR APPROVAL O F THE FUND. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ASSESS EE HAD APPROACHED CONCERNED CIT TO PROVIDE WITH THE DUPLICATE COPY OF APPROVAL. THE DEPARTMENT ALSO FAILED TO PROVIDE COPY OF APPROVAL AS THE RELEVANT RECORDS WERE MORE THAN TWO DECADES OLD. 6. THE LD. AUTHORISED REPRESENTATIVE CONTENDED THAT THE CONTRIBUTION MADE BY THE ASSESSEE TOWARDS THE GRATUITY FUND IS N OT DISPUTED BY THE DEPARTMENT. CONTRIBUTION MADE BY THE ASSESSEE HAS BEEN DISALLOWED ONLY ON THE GROUND THAT THE ASSESSEE HAS FAILED TO FURN ISH COPY OF APPROVAL LETTER. THE AUTHORITIES BELOW HAVE IGNORED THE FACT THAT AS SESSEE HAS BEEN CLAIMING DEDUCTION IN RESPECT OF CONTRIBUTION TOWARDS THE GR ATUITY FUND SINCE LONG AND THE DEPARTMENT HAS BEEN ACCEPTING THE SAME. IN SUP PORT OF HIS SUBMISSIONS, THE LD. AUTHORISED REPRESENTATIVE PLAC ED RELIANCE ON THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF PROGRESSIVE EDUCATION 4 ITA NO.684/PUN/2015 SOCIETY VS. CIT IN ITA NO.915/PUN/2010 DECIDED ON 3 0-12-2011, WHEREIN THE ASSESSEE HAD FAILED TO FURNISH THE COPY OF REGI STRATION GRANTED U/S.12A AND THE AO REFUSED TO GRANT THE BENEFIT OF EXEMPTIO N U/S.11. IT WAS NOT DISPUTED THAT THE ASSESSEE HAS BEEN CLAIMING THE BE NEFIT OF REGISTRATION OF THE TRUST U/S.12A SINCE LONG AND THE DEPARTMENT WIT HOUT QUESTIONING THE SAME GRANTED THE BENEFIT OF REGISTRATION TO THE ASS ESSEE. UNDER SUCH CIRCUMSTANCES, THE TRIBUNAL HELD THAT MERELY FOR TH E REASON THAT THE TRUST HAS NOT BEEN ABLE TO PRODUCE THE REGISTRATION CERTIFICA TE U/S.12A, THE DEPARTMENT CANNOT TAKE A STAND THAT THE TRUST WAS NOT GRANTED REGISTRATION. THE BURDEN IS ON THE REVENUE TO DEMONSTRATE THAT SUCH REGISTRA TION WAS NOT GRANTED. THE LD. AUTHORISED REPRESENTATIVE FURTHER PLACED RE LIANCE ON THE DECISION RENDERED IN THE CASE OF PHALTAN EDUCATION SOCIETY V S. CIT IN ITA NO.188/PN/2008 FOR THE ASSESSMENT YEARS 2000-01 TO 2005-06 DECIDED ON 31-10-2008. THE LD. AUTHORISED REPRESENTATIVE ALSO PLACED RELIA NCE ON THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ISHA STEEL TREATMENT PVT. LTD. VS. ACIT IN ITA NO.1671/MUM/2011 DECIDED ON 08 -01-2014. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT IN THE SAI D CASE THE AO HAD DISALLOWED THE CLAIM OF ASSESSEE IN RESPECT OF GRAT UITY FUND U/S.40A(7) ON THE GROUND THAT THE GRATUITY FUND IS NOT APPROVED BY TH E CHIEF COMMISSIONER OF INCOME-TAX. THE TRIBUNAL AFTER PLACING RELIANCE ON THE DECISION OF HONBLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS. TEXTO OL COMPANY LTD. REPORTED AS 263 ITR 257 (SC) HELD THAT WHERE THE ASSESSEE HA S NO CONTROL OVER THE GRATUITY FUND APPROVED BY THE LIC FOR THE BENEFIT O F EMPLOYEES, THE ASSESSEE IS ELIGIBLE TO CLAIM DEDUCTION U/S.36(1)(V) OF THE ACT IN RESPECT OF CONTRIBUTION TOWARDS SUCH FUND. 5 ITA NO.684/PUN/2015 7. ON THE OTHER HAND SMT. SUMITRA BANARJI REPRESENT ING THE DEPARTMENT VEHEMENTLY SUPPORTED THE FINDINGS OF CIT(A) IN CONF IRMING THE ADDITION IN RESPECT OF CONTRIBUTION MADE TOWARDS GRATUITY FUND NOT APPROVED BY THE CIT. THE PROVISIONS OF SECTION 36(1)(V) MANDATES THAT TH E CONTRIBUTION TOWARDS THE GRATUITY FUND SHALL BE ALLOWED ONLY IF IT IS AP PROVED AND IS CREATED FOR THE EXCLUSIVE BENEFIT OF THE EMPLOYEES UNDER IRREVOCABL E TRUST. SINCE, THE ASSESSEE HAS FAILED TO FURNISH COPY OF APPROVAL LET TER, THEREFORE, THE AO HAS RIGHTLY DISALLOWED THE CLAIM OF ASSESSEE. 8. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRES ENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. WE HAVE ALSO CONSIDERED THE DECISIONS ON WHICH LD. AUTHORISED RE PRESENTATIVE OF THE ASSESSEE HAS PLACED RELIANCE. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS CREATED GRATUITY FUND WITH LIC UNDER AN IRREVOCABLE TRUST. THE DEPARTMENT HAS NOT RAISED ANY DOUBT ABOUT THE CONTRIBUTIONS MA DE BY THE ASSESSEE TOWARDS THE SAID FUND. THE ONLY OBJECTION RAISED B Y THE DEPARTMENT IS THAT THE ASSESSEE HAS FAILED TO PRODUCE COPY OF APPROVAL OF THE SAID FUND BY CIT. OSTENSIBLY, THE FUND WAS CREATED BY THE ASSESSEE IN 1995 AND THE ASSESSEE IS CONTRIBUTING TOWARDS THE GRATUITY FUND FOR THE PAST SEVERAL YEARS. THE DEPARTMENT HAS BEEN ALLOWING SUCH CONTRIBUTIONS BY THE ASSESSEE IN THE PAST. IN SUPPORT OF HIS CONTENTIONS, THE LD. AUTHO RISED REPRESENTATIVE HAS FURNISHED A COPY OF THE ASSESSMENT ORDER DATED 12-1 2-2011 FOR THE ASSESSMENT YEAR 2005-06 PASSED U/S.143(3) READ WITH SECTION 250 AND SECTION 254 OF THE ACT. 9. THE REVENUE HAS NOT REBUTTED THE FACT THAT IN EA RLIER ASSESSMENT YEARS THE CLAIM OF ASSESSEE TOWARDS CONTRIBUTION OF GRATUITY FUND WAS NEVER DENIED. A PERUSAL OF THE PROVISIONS OF SECTION 36( 1)(V) WOULD SHOW THAT FOR CLAIMING DEDUCTION FOLLOWING CONDITIONS SHOULD BE C OMPLIED: 6 ITA NO.684/PUN/2015 (I) THE CONTRIBUTION SHOULD BE MADE BY THE ASSESSEE AS AN EMPLOYER; (II) CONTRIBUTION SHOULD BE TOWARDS APPROVED FUND; (III) THE FUND SHOULD BE CREATED EXCLUSIVELY FOR TH E BENEFIT OF EMPLOYEES; AND (IV) THE FUND SHOULD BE UNDER AN IRREVOCABLE TRUST. 10. IN THE PRESENT CASE, UNDISPUTEDLY, THE ASSESSEE AS AN EMPLOYER CREATED A GRATUITY FUND AND HAS BEEN MAKING CONTRIB UTION TOWARDS THE SAME. THE FUND IS CREATED BY THE ASSESSEE EXCLUSIVELY FOR THE BENEFIT OF EMPLOYEES AND PURPORTEDLY THE FUND IS UNDER AN IRREVOCABLE TR UST AND APPROVED BY THE LIC. THE DOCUMENTS ON RECORD AND THE FACTS INDICAT E THAT THE DEPARTMENT HAS BEEN ALLOWING THE BENEFIT OF DEDUCTION U/S.36(1 )(V) TO THE ASSESSEE IN THE PAST. NOW, AFTER MORE THAN 2 DECADES, THE DEPA RTMENT HAS COME OUT OF SLUMBER TO ASK FOR THE APPROVAL LETTER. ALTHOUGH, THE ASSESSEE HAS FAILED TO PRODUCE THE APPROVAL LETTER NOW, BUT THE CONDUCT O F ASSESSEE IN PAST AND SCRUTINY ASSESSMENTS MADE BY THE DEPARTMENT IN EARL IER YEARS ALLOWING THE EXPENDITURE REINFORCES THE STAND OF ASSESSEE THAT T HE GRATUITY FUND CREATED BY THE ASSESSEE MUST HAVE BEEN APPROVED AT SOME POI NT OF TIME BY THE DEPARTMENT. 11. THE COORDINATE BENCH OF THE TRIBUNAL IN THE CAS E OF PHALTAN EDUCATION SOCIETY VS. CIT (SUPRA) UNDER SIMILAR CIRCUMSTANCES ACCEPTED THE CONTENTIONS OF ASSESSEE THAT ASSESSEE IS REGISTERED U/S.12A ALT HOUGH THE ASSESSEE FAILED TO PRODUCE REGISTRATION CERTIFICATE. IN THE SAID C ASE THE ASSESSEE WAS ENJOYING BENEFITS OF REGISTRATION U/S.12A FOR ALMOS T 3 DECADES BUT FAILED TO PRODUCE THE COPY OF REGISTRATION. AS A RESULT, THE REVENUE REFUSED TO GRANT BENEFIT OF EXEMPTION CLAIMED BY THE ASSESSEE U/S.11 AND 12 OF THE ACT. UNDER SUCH CIRCUMSTANCES THE TRIBUNAL HELD : 7 ITA NO.684/PUN/2015 5. . . . . . . . . . . IN OUR CONSIDERED OPINION IT IS A STRANGE SITUATION THAT THE REVENUE DEPARTMENT FROM LAST 30 YEARS WAS GRANT ING ALL THE BENEFITS AS IF THERE WAS A PROPER REGISTRATION ALREADY GRANTED TO THIS TRUST AS PRESCRIBED U/S 12A OF I.T. ACT. IT WAS ALSO STRANGE ENOUGH TH AT INSTEAD OF SEARCHING THEIR OWN RECORDS WHETHER REGISTRATION WAS GRANTED TO THIS TRUST OR NOT THE REVENUE HAS PUT THE ONUS ON THIS TRUST TO PLACE THE REGISTRATION CERTIFICATE. THE ADMITTED POSITION IS THAT THE TRUST WAS IN OPER ATION SINCE PAST 30 YEARS SO IT COULD ALSO NOT BE RULED OUT THAT THE AGE OLD 12A REGISTRATION CERTIFICATE MIGHT HAVE BEEN LOST BY THE TRUST. IN SUCH PECULIA R SITUATION A QUESTION CAN BE RAISED TO THE REVENUE DEPARTMENT THAT ON WHAT BA SIS THEY WERE PROVIDING THE FACILITIES TO THIS TRUST WHICH OTHERW ISE COULD NOT HAVE BEEN PROVIDED IN THE ABSENCE OF THE MANDATORY REGISTRATI ON CERTIFICATE. FROM THE BENCH WE HAVE ASKED A QUESTION THAT WHETHER IN THE ABSENCE OF A REGISTRATION U/S 12A, AS IT WAS APPLICABLE IN THE P AST, A TRUST COULD BE IN A POSITION TO OBTAIN 80G EXEMPTION CERTIFICATE? HOWEV ER, THE ANSWER WAS IN NEGATIVE. SO THE EXPLANATION OFFERED BEFORE US IS THAT IN THE ABSENCE OF THE MANDATORY CERTIFICATE U/S 12A THE TRUST WAS NOT ENT ITLED FOR CLAIMING OF EXEMPTION EVEN UNDER SECTIONS 11 AND 12 OF I.T. ACT . HOWEVER THE LEARNED CIT HAS ACCEPTED IN THE CHALLENGED ORDER ITSELF THA T IT WAS FOUND FROM THE RECORDS THAT THE APPLICANT I.E. THE TRUST HAD BEEN GETTING THE EXEMPTION U/S 11 AND U/S 12 OF I.T. ACT IN PAST YEARS. AGAIN A QUESTION HAS COME TO OUR MIND THAT WHY THE DEPARTMENT SLEPT OVER THE QUESTIO N OF REGISTRATION IN THE PAST 30 YEARS. IF IT WAS SO THEN WE HAVE NO HESITA TION IN HOLDING THAT THE FAULT WAS WITH THE REVENUE DEPARTMENT; INSTEAD IT W AS WRONGLY SHIFTED ON TO THIS ASSESSEE. EVEN IF TODAY WE ASK THE REVENUE DE PARTMENT TO PROVIDE US A LIST OF ALL THOSE TRUSTS WHO HAVE BEEN GRANTED RE GISTRATION IN THE YEAR 1973 WHEN THIS TRUST ALLEGED TO HAVE BEEN GRANTED REGIST RATION WITH EFFECT FROM 01/04/1973, WE ARE SURE THAT REVENUE DEPARTMENT CAN NOT PROVIDE THE SAID LIST. THE HELPLESSNESS HAS BEEN EXPRESSED IN THIS REGARD BEFORE US. THE TRUST WAS REGISTERED UNDER SOCIETIES REGISTRATION A CT ON 27 TH DAY OF FEBRUARY, 1951 AND LATER ON IT WAS ALSO REGISTERED AS A CHARI TABLE TRUST UNDER BOMBAY PUBLIC TRUSTS ACT, 1951 ON 27 TH DAY OF APRIL, 1953, AS AFFIRMED IN THE SWORN AFFIDAVIT. TO CONCLUDE THIS ISSUE WE CAN HOLD THAT IN THE ABSENCE OF ANY CONTRARY MATERIAL OR EVIDENCE PLACED FROM THE SIDE OF THE REVENUE TO DEMONSTRATE THAT THERE WAS NO REGISTRATION EVER GRA NTED TO THIS TRUST U/S 12A, WE CAN HOLD THAT THE CIRCUMSTANCES OF THE CASE THUS PROVE THAT THERE COULD HAVE BEEN A STRONG POSSIBILITY OF THE EXISTEN CE OF 12A CERTIFICATE THOUGH IT WAS NOT IN POSSESSION OF THE ASSESSEE. I T IS NOT A FIT CASE TO DRAW AN ADVERSE INFERENCE AGAINST THIS ASSESSEE, RATHER THE BALANCE OF JUSTICE TILTS IN FAVOUR OF THIS TRUST.. . . . . . . . . . . . FOLLOWING THE DECISION IN THE CASE OF PHALTAN EDUC ATION SOCIETY VS. CIT (SUPRA), SIMILAR VIEW WAS TAKEN BY THE TRIBUNAL IN THE CASE OF PROGRESSIVE EDUCATION SOCIETY VS. CIT (SUPRA). 12. WE WOULD ALSO LIKE TO TAKE CUE FROM THE DECISIO N RENDERED IN THE CASE OF ISHA STEEL TREATMENT PVT. LTD. VS. ACIT (SUPRA), WHEREIN THE BENEFIT OF SECTION 36(1)(V) WAS GRANTED TO THE ASSESSEE WHERE THE TRUST WAS NOT APPROVED BY THE CHIEF COMMISSIONER OF INCOME-TAX BU T THE EMPLOYER CONTRIBUTED TOWARDS THE FUND ESTABLISHED EXCLUSIVEL Y FOR THE BENEFIT OF 8 ITA NO.684/PUN/2015 EMPLOYEES. RELEVANT EXTRACT OF THE FINDINGS OF THE TRIBUNAL IN THE SAID CASE ARE AS UNDER : 8. RECENTLY HON'BLE SUPREME COURT IN THE CASE OF T EXTOOL COMPANY LTD. (263 CTR 257) (SC) HAVE HELD THAT CONTRIBUTIONS TO APPROVED GRATUITY FUND, WHERE DIRECT PAYMENT IS MADE TO LIC TOWARDS GROUP G RATUITY FUNDS IS TO BE ALLOWED. IT WAS FURTHER HELD THAT WHERE THE ASSESS EE HAD NO CONTROL OVER THE FUND GRATUITY BY THE LIC FOR THE BENEFIT OF EMP LOYEES AND ALL THE CONTRIBUTIONS ARE MADE BY ASSESSEE IN THE SAID FUND S, ULTIMATELY COMES BACK TO THE FUNDS APPROVED BY CIT. THE CONDITIONS STIPUL ATED U/S 36 1 (V) ARE SATISFIED. THEREFORE PAYMENT MADE BY ASSESSEE COMPA NY DIRECTLY TO LIC TOWARDS GROUP GRATUITY FUND IS DEDUCTIBLE U/S 36 1( 4) 9. IN VIEW OF THE ABOVE JUDICIAL PRONOUNCEMENTS, WE DIRECT THE AO TO VERIFY THE ACTUAL PAYMENT MADE BY ASSESSEE AS A CONTRIBUTI ON TO LIC GRATUITY SCHEME, IF THE AO FINDS THAT ASSESSEE IS CONTINUOUS LY CLAIMING DEDUCTION ON THE BASIS OF SUCH CONTRIBUTION, NO DISALLOWANCE IS TO BE MADE IRRESPECTIVE OF THE FACT THAT SUCH GRATUITY FUND IS NOT APPROVED BY COMMISSIONER. WE DIRECT ACCORDINGLY. 13. THUS, IN VIEW OF THE PECULIAR FACTS OF THE CASE AND THE DECISIONS DISCUSSED ABOVE, WE HOLD THAT DISALLOWANCE OF RS.9, 23,283/- U/S.36(1)(V) MADE ON ACCOUNT OF GRATUITY PAYMENT FUND BY THE ASS ESSEE IS UNJUSTIFIED. ACCORDINGLY, THE FINDINGS OF THE CIT(A) ON THIS ISS UE ARE REVERSED AND THE GROUND NO.1 IN THE APPEAL OF ASSESSEE IS ALLOWED. 14. THE SECOND GROUND RAISED IN THE APPEAL BY THE A SSESSEE IS AS UNDER : 2. THE LEARNED CIT(A) ERRED IN NOT ALLOWING DEDUCT ION U/S.19,53,436/- BEING THE INCREMENTAL LIABILITY TOWARDS LEAVE ENCAS HMENT PAYABLE TO THE EMPLOYEES ON THE GROUND THAT THE SAID EXPENDITURE W AS DISALLOWABLE U/S.43B(1) OF THE INCOME TAX ACT. 15. DURING THE ASSESSMENT PROCEEDINGS, THE AO OBSER VED THAT THE ASSESSEE HAD NOT ADDED BACK THE PROVISION OF LEAVE ENCASHMENT OF RS.19,53,436/- IN THE COMPUTATION OF INCOME. THE L D. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE COMPANY GRANTS EARNED LEAVE TO ITS PERMANENT EMPLOYEES. THE ASSESSEE ALL OWS ITS EMPLOYEES TO ENCASH UNAVAILED EARNED LEAVE SUBJECT TO ALLOWANCE OF 120 DAYS AS PER ITS POLICY. THE UNAVAILED LEAVE UPTO 120 DAYS CAN BE E NCASHED BY THE EMPLOYEE AT THE TIME OF RETIREMENT/RESIGNATION. THE LEAVE E NCASHMENT ACCRUES IN VIEW 9 ITA NO.684/PUN/2015 OF CONTRACTUAL OBLIGATIONS ORIGINATING FROM LETTER OF EMPLOYMENT. THE ASSESSEE COMPANY IS FOLLOWING ACCRUAL METHOD OF ACC OUNTING WHICH IS SUBJECT TO CHARGE ON ACCRUAL BASIS. IN SUPPORT OF ASSESSEE S CLAIM THE LD. AUTHORISED REPRESENTATIVE PLACED RELIANCE ON THE DECISION OF H ONBLE CALCUTTA HIGH COURT IN THE CASE OF EXIDE INDUSTRIES LTD. VS. UNION OF I NDIA 292 ITR 470. THE LD. AUTHORISED REPRESENTATIVE FAIRLY POINTED THAT THE A FORESAID DECISION OF HONBLE CALCUTTA HIGH COURT HAS BEEN STAYED BY THE HONBLE SUPREME COURT OF INDIA. 16. THE LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTED THE FINDINGS OF CIT(A) ON THE ISSUE. THE LD. DEPARTM ENTAL REPRESENTATIVE SUBMITTED THAT CIT(A) HAS DENIED THE DEDUCTION PRIM ARILY FOR THE REASON THAT THE DECISION RENDERED IN THE CASE OF EXIDE INDUSTRI ES LTD. VS. UNION OF INDIA (SUPRA) HAS BEEN STAYED BY THE HONBLE APEX COURT A ND THUS AS ON TODAY IT IS NOT IN FORCE. 17. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRE SENTATIVES OF RIVAL SIDES ON THIS ISSUE. THE AO MADE ADDITION OF RS.19 ,53,436/- ON ACCOUNT OF DISALLOWANCE OF PROVISION FOR LEAVE ENCASHMENT. TH E ASSESSEE HAD CLAIMED THE AFORESAID AMOUNT ON THE PREMISE THAT THE PROVIS IONS OF SECTION 43B(F) ARE NOT APPLICABLE AS THE SAME HAVE BEEN STUCK DOWN BY THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF EXIDE INDUSTRIES LTD. VS. UNION OF INDIA (SUPRA). NOW THE DECISION RENDERED IN THE CASE OF EXIDE INDUSTRIES LTD. VS. UNION OF INDIA (SUPRA) HAS BEEN STAYED BY THE HONB LE SUPREME COURT OF INDIA. THE PROVISIONS OF SECTION 43B(F) ARE STILL ALIVE AND APPLICABLE. FURTHER, THE CIT(A) HAS REJECTED THE CONTENTIONS OF THE ASSE SSEE BY PLACING RELIANCE ON THE DECISION OF THE COORDINATE BENCH OF THE TRI BUNAL IN THE CASE OF POPULAR VEHICLES AND SERVICES LTD. REPORTED AS 66 S OT 17. THE LD. AUTHORISED REPRESENTATIVE HAS NOT BEEN ABLE TO CONT ROVERT THE FINDINGS OF THE 10 ITA NO.684/PUN/2015 CIT(A). WE FIND NO MERIT IN THIS GROUND RAISED BY THE ASSESSEE. ACCORDINGLY, THE GROUND NO. 2 RAISED IN THE APPEAL IS DISMISSED. 18. THE THIRD GROUND RAISED BY THE ASSESSEE IN APPE AL READS AS UNDER : 3. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISA LLOWANCE OF RS.1,61,265/- U/S.14A R.W. RULE 8D WITHOUT APPRECIA TING THAT NO SUCH DISALLOWANCE WAS WARRANTED ON THE FACTS OF THE CASE . 3.1 THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISA LLOWANCE OF INTEREST OF RS.56,485/- U/S.14A R.W. RULE 8D(II) WITHOUT APP RECIATING THAT THE ASSESSEE HAD NOT UTILISED ANY BORROWED FUNDS FOR MA KING TAX FEE INVESTMENTS AND HENCE, THE DISALLOWANCE OF INTEREST IS NOT WARRANTED. 19. THE ASSESSEE HAS ASSAILED THE FINDINGS OF CIT(A ) IN CONFIRMING THE DISALLOWANCE OF RS.1,61,265/- U/S.14A R.W. RULE 8D. THE AO HAS MADE ADDITION UNDER RULE 8D SUB-RULE 2(II) RS.56,485/- AND 2(III) RS.1,04,780/-. 20. THE LD. AUTHORISED REPRESENTATIVE FOR THE ASSES SEE SUBMITTED THAT A PERUSAL OF THE BALANCE SHEET AS ON 31-03-2010 OF TH E ASSESSEE WOULD CLEARLY INDICATE THAT THE ASSESSEE IS HAVING RESERVES AND S URPLUS MUCH MORE THAN THE INVESTMENT MADE. THUS, THE INTEREST FREE OWN F UNDS OF THE ASSESSEE ARE MUCH MORE THAN THE FUNDS DEPLOYED TOWARDS INVESTMEN T. WHERE OWN FUNDS OF THE ASSESSEE ARE SUFFICIENT TO COVER INVESTMENT, NO DISALLOWANCE U/S.14A IS WARRANTED. THE LD. AUTHORISED REPRESENTATIVE IN SU PPORT OF HIS SUBMISSIONS PLACED RELIANCE ON THE DECISION OF HONBLE BOMBAY H IGH COURT IN THE CASE OF CIT VS. HDFC BANK LTD. REPORTED AS 366 ITR 505 (BOM .) AND THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. BEDMUTHA INDUSTRIES LTD. IN ITA NO.1277/PUN/2013 FOR THE ASSESSMENT YEAR 200 9-10 DECIDED ON 29-01-2015. 21. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTAT IVE OF THE ASSESSEE VEHEMENTLY SUPPORTED THE FINDINGS OF CIT(A) IN CONF IRMING THE DISALLOWANCE 11 ITA NO.684/PUN/2015 MADE U/S.14A R.W. RULE 8D AND PRAYED FOR DISMISSING THIS GROUND RAISED BY THE ASSESSEE IN APPEAL. 22. THE ASSESSEE HAS ASSAILED THE ADDITION U/S.14A R.W. RULE 8D UNDER TWO LIMBS, I.E., (A) RULE 8D (2)(II) WHERE EXPENDIT URE TO BE DISALLOWED IS INTEREST PAID DURING THE PREVIOUS YEAR; AND (B) RUL E 8D (2)(III) % OF THE AVERAGE VALUE OF OPENING AND CLOSING VALUE OF INVES TMENT. IN SO FAR AS THE ADDITION UNDER FIRST LIMB IS CONCERNED, WE FIND THA T INTEREST FREE OWN FUNDS OF THE ASSESSEE ARE MUCH MORE THAN THE INVESTMENT MADE . THE TOTAL INVESTMENT OF ASSESSEE DURING F.Y. 2009-10 IS RS.2, 59,12,689/-, WHEREAS OWN FUNDS OF THE ASSESSEE AS ON 31-03-2010 COMPRISI NG OF SHARE CAPITAL AND RESOURCES & SURPLUS ARE TO THE TUNE OF RS.26,77,70, 664/-. THUS, OWN INTEREST FREE FUNDS OF THE ASSESSEE ARE SUFFICIENT TO COVER THE INVESTMENTS MADE. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. HDFC BANK LTD. (SUPRA) HAS HELD THAT WHERE OWN INTEREST FREE FUNDS OF THE ASSESSEE ARE SUFFICIENT TO COVER THE INVESTMENT MADE, NO DISALLO WANCE U/S.14A IS TO BE MADE. SIMILAR VIEW HAS BEEN TAKEN BY THE COORDINAT E BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. BEDMUTHA INDUSTRIES LTD. (S UPRA). ACCORDINGLY, THE ADDITION OF RS.56,485/- MADE BY INVOKING PROVISIONS OF RULE 8D 2(II) IS DELETED. IN SO FAR AS ADDITION MADE UNDER RULE 8D 2(III) IS CONCERNED, THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE AS TO HO W THE FINDINGS OF CIT(A) ARE PERVERSE. THEREFORE, WE FIND NO REASON TO INTE RFERE WITH THE SAME. THE AO IS DIRECTED TO DELETE THE ADDITION OF RS.56,485/ - MADE UNDER RULE 8D(2)(II) ONLY. ACCORDINGLY, GROUND NO.3 RAISED IN THE APPEAL IS PARTLY ALLOWED. 12 ITA NO.684/PUN/2015 23. THE FOURTH GROUND RAISED IN THE APPEAL IS AS UN DER : 4. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISA LLOWANCE OF RS.12,48,500/- BEING THE AMOUNT OF EXPENDITURE INCU RRED BY THE APPELLANT COMPANY FOR CONSTRUCTION OF BUNGALOW OWNED BY GROUP CONCERN ON THE GROUND THAT THE SAID EXPENDITURE INCURRED BY THE AP PELLANT COMPANY WAS NOT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSIN ESS. 4.1 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT TH E EXPENDITURE INCURRED OF RS.12,48,500/- ON THE CONSTRUCTION OF BUNGALOW O WNED BY GROUP CONCERN WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE APPELLANT COMPANY AND HENCE, THERE WAS NO REASON TO MAKE THE DISALLOWANCE. 24. THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESS EE SUBMITTED THAT IDENTICAL ISSUE RELATING TO CONTRIBUTION TOWARDS CO NSTRUCTION OF BUNGALOW NO.70, KOREGAON PARK, PUNE WAS RAISED IN THE APPEAL IN ITA NO.1703/PUN/2014 IN THE CASE OF SERUM INSTITUTE OF INDIA LTD. VS. DCIT FOR ASSESSMENT YEAR 2005-06 DECIDED ON 30-11-2016. APA RT FROM ASSESSEE, SERUM INSTITUTE OF INDIA LTD. AND POONAWALLA INVEST MENT AND INDUSTRIES PVT. LTD. HAD ALSO CONTRIBUTED TOWARDS CONSTRUCTION OF T HE SAID PROPERTY. AFTER ANALYSING THE FACTS, THE TRIBUNAL HELD THAT THE EXP ENDITURE INCURRED ON REPAIRS AND RENOVATION OF BUNGALOW LOCATED AT 70, K OREGAON PARK, PUNE HAS TO BE ALLOWED AS BUSINESS EXPENDITURE IN THE HANDS OF ASSESSEE COMPANY. THE CASE OF THE PRESENT ASSESSEE COMPANY IS ON IDEN TICAL FOOTING. ASSESSEE COMPANY HAS CONTRIBUTED RS.12,48,500/- TOWARDS REP AIR AND RENOVATION OF THE SAME BUNGALOW. 25. THE LD. DEPARTMENTAL REPRESENTATIVE FAIRLY ADMI TTED THAT IDENTICAL ISSUE HAS BEEN ADJUDICATED BY THE TRIBUNAL IN THE C ASE OF SERUM INSTITUTE OF INDIA LTD. VS. DCIT (SUPRA). 26. THE ASSESSEE HAS CLAIMED RS.12,48,500/- ON THE REPAIR AND RENOVATION OF BUNGALOW OWNED BY GROUP CONCERN. PURPORTEDLY TH E EXPENDITURE HAS BEEN INCURRED FOR THE BUSINESS PURPOSE OF THE ASSES SEE COMPANY. THE AUTHORITIES BELOW HAVE DISALLOWED THE CLAIM OF THE ASSESSEE. WE FIND THAT 13 ITA NO.684/PUN/2015 IDENTICAL ISSUE WAS RAISED IN THE CASE OF SERUM INS TITUTE OF INDIA LTD. VS. DCIT (SUPRA). THE CLAIM OF THE ASSESSEE IN THE SAI D CASE WAS DISALLOWED BY THE REVENUE ON SIMILAR GROUNDS. HOWEVER, THE TRIBU NAL REVERSED THE FINDINGS OF CIT(A) AND ACCEPTED THE CLAIM OF THE AS SESSEE. RELEVANT EXTRACT OF THE FINDINGS OF THE TRIBUNAL ON THIS ISSUE ARE A S UNDER : 28. WE FIND SOME FORCE IN THE ABOVE ARGUMENT OF TH E LD. COUNSEL FOR THE ASSESSEE. WE FIND THE HONBLE SETTLEMENT COMMISSIO N IN ITS ORDER DATED 14-12-2012 ON THE BASIS OF THE APPLICATION MADE BY POONAWALLA GROUP AT PARA 6.3 TO 6.5 OF THE ORDER HAS OBSERVED AS UNDER : 6.5 (VI) YEAR OF TAXABILITY OF INVESTMENT MADE TOWARDS THE CONSTRUCTION OF THE BUNGALOW AT KOREGAON PARK- THIS ISSUE IS RELEVANT IN THE CASE OF M/S POONAWALL A FINVEST & AGRO PVT. LTD. (PFAPL). IT IS STATED BY THE AR THAT PFAP L HAD AN OLD BUNGALOW AT 70 KOREGAON PARK, PUNE WHICH WAS RENTED OUT TO M/S SERUM INSTITUTE OF INDIA LTD. (SIIL) (CONTROLLED BY DR. C.S. POONAWALLA). THERE WAS A FAMILY ARRANGEMENT BETWEEN DR. C.S. POONAWALLA (CSP) AND SHRI Z.S. POONAWALLA (ZSP) IN WHICH IT WAS DECIDED THAT A NEW BUNGALOW WOULD BE CONSTRUCTED ON THE ABOVE PREMISES AND THE EXPENDITURE WOULD BE INCURRED BY S IIL. THE INTENTION WAS TO PROVIDE FOR A SEPARATE OFFICE-CUM- RESIDENCE FOR SHRI ZSP. ACCORDINGLY, SIIL HAD INCURRED THE EXPENDITURE ON CONSTRUCTION OF THE BUNGALOW AMOUNTING TO RS.1080.84 LAKHS OVER THE YEARS AND M/S POONAWALLA INVESTMENT & INDUSTRIES PVT. LTD. (P IIPL) HAD INCURRED THE EXPENDITURE OF RS.721.20 LAKHS. SIIL H AD CLAIMED THE ABOVE EXPENDITURE AS A REVENUE EXPENDITURE IN ITS B OOKS OF ACCOUNT, WHILE PIIPL. HAD CAPITALIZED THE ABOVE EXPENDITURE AND CLAIMED DEPRECIATION THEREON. THE CLAIM FOR THE EXPENDITURE AS A DEDUCTION WAS MADE BY SIIL ON THE GROUND THAT IT WILL HAVE A RIGHT TO USE THE BUNGALOW FOR ITS BUSINESS PURPOSES AS THE BUNGALOW BELONGED TO PFAPL, THE EXPENDITURE INCURRED-WAS CLAIMED AS A DE DUCTION IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ASSOCIATED CEMENT COMPANY [172 ITR 257 (SC)] AND L. H. SUGAR FACTORY LTD. [125 ITR 293 (SC)]. DURING THE COURSE OF THE SEARCH. DR. CSP HAD AGREED TO WITHDRAW THE DEDUCTION CLAIMED IN THE HANDS OF SIIL AND PIIPL OVER THE YEARS AND TO OFFER THE ENTI RE INVESTMENT IN THE HANDS OF PFAPL FOR THE F.Y. 2011-12, I.E, THE YE AR OF SEARCH, CORRESPONDING TO A.Y. 2012-13 AMOUNTING TO RS.18,15, 43,000/-. THE CIT IN THE REPORT UNDER RULE 9 HAS PROPOSED THAT TH E INVESTMENT IN RESPECT OF THE ABOVE BUNGALOW SHOULD BE BROUGHT TO TAX FOR THE ASSTT.YEARS 2005-06 TO 2011-12. IN THIS CONNECTION, IT IS STATED BY THE AR THAT IF THE CIT'S PROPOSAL IN THE ABOVE MATTER I S CONSIDERED, THEN THE EXPENDITURE OF RS.119.74 LAKHS INCURRED UPTO 31 .03.2004 WOULD ESCAPE ASSESSMENT AND HENCE, WITH A VIEW TO PUT A Q UIETUS TO THE YEAR OF ASSESSABILITY OF THE ABOVE INVESTMENT, THE APPLICANT HAS OFFERED THE ENTIRE INVESTMENT FOR TAXATION IN THE Y EAR 2012-13 IN THE HANDS OF PFAPL. WE HAVE CONSIDERED THE MATTER. IN THE FIRST PLACE, IT MAY BE MENTIONED THAT THE ABOVE ISSUE HAS BEEN RESOLVED DU E TO ADMISSION MADE BY DR. CSP FOR ITS ASSCSSABILITY IN THE HANDS OF PFAPL DURING 14 ITA NO.684/PUN/2015 THE COURSE OF A STATEMENT RECORDED FROM HIM BY THE SEARCH PARTY, I.E. IN A.Y. 2012-13. FURTHER, IF THE CITS PROPOSAL ASSE SSMENT YEAR-WISE INVESTMENT IS CONSIDERED, THEN THERE WOULD BE ESCAP EMENT OF INVESTMENT TO THE TUNE OF RS.119.74 LAKHS INCURRED UPTO 31.3.2004. UNDER THE CIRCUMSTANCES. WE ARE OF THE CONSIDERED O PINION THAT THE OFFER MADE BY PFAPL FOR CONSIDERING THE ENTIRE INVE STMENT MADE IN THE ABOVE BUNGALOW AMOUNTING TO RS.18,15,43,000/- F OR THE ASSTT. YEAR 2012-13, AS ADMITTED BY IT, IN THE RETURN OF IN COME FOR THE ABOVE ASSESSMENT YEAR IS QUITE FAIR AND REASONABLE. WE, THEREFORE, SETTLE THE ISSUE ACCORDINGLY. 29. SINCE THE ENTIRE AMOUNT HAS ALREADY BEEN OFFERE D TO TAX BY THE ZSP GROUP AND THE SAME HAS BEEN ACCEPTED BY THE HONBLE SETTLEMENT COMMISSION, THEREFORE, TAXING THE SAME AMOUNT IN TH E HANDS OF THE ASSESSEE WILL AMOUNT TO DOUBLE TAXATION. WE, THERE FORE, FIND MERIT IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ABOVE AMOUNT SHOULD BE ALLOWED AS A REVENUE EXPENDITURE IN THE H ANDS OF THE ASSESSEE. THE TRIBUNAL AFTER DEALING WITH VARIOUS FACETS OF T HE ADDITION, FINALLY CONCLUDED AS UNDER : 35. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE CONSIDERED OPINION THAT THE EXPENDITURE OF RS.1,17,88,000/- IN CURRED ON REPAIRS AND RENOVATION ON BUNGALOW LOCATED AT 70, K OREGAON PARK, PUNE HAS TO BE ALLOWED AS A BUSINESS EXPENDITURE IN THE HANDS OF THE ASSESSEE COMPANY. WE THEREFORE SET ASIDE THE ORDER OF THE CIT(A). THE GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY AL LOWED. (EMPHASIS SUPPLIED BY US) 27. SINCE THE ISSUE RAISED IN THE PRESENT APPEAL IS IDENTICAL TO THE ONE ALREADY ADJUDICATED BY THE COORDINATE BENCH OF THE TRIBUNAL, WE RESPECTFULLY FOLLOW THE DECISION OF THE TRIBUNAL AND ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE IN THE SAME TERMS. ACCORDINGLY, GROUND NO .4 RAISED IN THE APPEAL IS ALLOWED. 28. THE FIFTH GROUND IN THE APPEAL BY ASSESSEE READ S AS UNDER : 5. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOW ANCE OF RS.19 , 61, 178 / - INCURRED ON SHIFTING ITS MANUFACTURING UNIT/FACTO RY ON THE GROUND THAT THE SAID EXPENDITURE WAS CAPITAL IN NATURE. 5.1 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT TH E EXPENDITURE INCURRED BY THE ASSESSEE ON SHIFTING ITS MANUFACTURING UNIT / FACTORY DID NOT RESULT IN ENDURING BENEFIT TO THE ASSESSEE COMPANY AND HENCE, THE SAID EXPENDITURE SHOULD HAVE BEEN ALLOWED AS A REVENUE EXPENDITURE. 15 ITA NO.684/PUN/2015 5.2 WITHOUT PREJUDICE, THE ASSESSEE SUBMITS THAT IN CASE, THE SAID EXPENDITURE OF RS . 19,61,178/- IS HELD TO BE CAPITAL EXPENDITURE, THE ASSESSEE SUBMITS THAT DEPRECIATION ON THE SAME SHOU LD BE ALLOWED. 29. THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESS EE SUBMITTED THAT THE ASSESSEE HAD SHIFTED ENTIRE MANUFACTURING UNIT/FACT ORY FROM ONE TENANTED PREMISES TO ANOTHER. THE ASSESSEE INCURRED EXPENDI TURE OF RS.19,61,178/- TOWARDS TRANSPORTATION AND INSTALLATION OF MACHINER Y, ETC. THE AUTHORITIES BELOW HAVE ERRED IN COMING TO THE CONCLUSION THAT T HE ASSESSEE HAS ACQUIRED ENDURING BENEFIT. SINCE, THE ASSESSEE HAS MERELY S HIFTED ITS MANUFACTURING UNIT FROM ONE TENANTED PREMISES TO ANOTHER TENANTED PREMISES NO NEW ASSET HAS BEEN CREATED. THE ASSESSEE HAS NOT RECEIVED AN Y ENDURING BENEFIT AND THEREFORE THE FINDINGS OF THE AUTHORITIES BELOW ARE AGAINST THE FACTS. THE BREAKUP OF THE EXPENDITURE INCURRED ON SHIFTING OF THE MANUFACTURING UNIT IS AT PAGE 89 OF THE PAPER BOOK. A PERUSAL OF THE SA ME WOULD SHOW THAT MAJORITY OF THE EXPENDITURE IS TOWARDS LABOUR CHARG ES, PAYMENT TOWARDS REMOVAL OF MACHINERY FROM OLD LOCATION AND INSTALLA TION OF THE SAME AT THE NEW LOCATION. THE EXPENDITURE INCURRED BY THE ASSE SSEE TOWARDS SHIFTING IS THUS REVENUE IN NATURE. IN SUPPORT OF HIS SUBMISSI ONS, THE LD. AUTHORISED REPRESENTATIVE PLACED RELIANCE ON THE FOLLOWING DEC ISIONS : (I) CIT VS. LOYAL SUPER FABRICS 304 ITR 78 (II) CORAL COSMETICS LTD. VS. ITO IN ITA NO.2112/M UM/2009 FOR ASSESSMENT YEAR 2005-06 DECIDED ON 11-04-2012. 30. ON THE OTHER HAND LD. DEPARTMENTAL REPRESENTATI VE VEHEMENTLY SUPPORTED THE FINDINGS OF CIT(A) ON THIS ISSUE. 31. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED T HAT THE EXPENDITURE INCURRED FOR SHIFTING OF MANUFACTURING UNIT BY THE ASSESSEE IS NOT RECURRING IN 16 ITA NO.684/PUN/2015 NATURE. AFTER SHIFTING OF THE UNIT ASSESSEE WILL H AVE ADVANTAGE OF BETTER WORKING ENVIRONMENT. 32. WE HAVE HEARD THE REPRESENTATIVES OF RIVAL SIDE S. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS SHIFTED ITS MANUFACTURIN G UNIT FROM ONE TENANTED PREMISES TO ANOTHER TENANTED PREMISES. IT IS NOT T HE CASE OF THE DEPARTMENT THAT THE ASSESSEE HAS SHIFTED FROM RENTED PREMISES TO OWN PREMISES. A PERUSAL OF THE SHIFTING EXPENDITURE AT PAGE 89 OF T HE PAPER BOOK REVEAL THAT THE EXPENDITURE HAS BEEN INCURRED TOWARDS PAYMENT O F LABOUR CHARGES, TRANSPORTATION, INSTALLATION OF MACHINERY ETC. IT IS EVIDENT FROM RECORD THAT NO NEW ASSET HAS BEEN CREATED. THE REVENUE HAS NOT BEEN ABLE TO SHOW THAT AFTER SHIFTING OF THE PREMISES THE PRODUCTIVIT Y OF THE ASSESSEE HAS INCREASED IN ANY MANNER. THEREFORE, WE DO NOT CONC UR WITH THE FINDINGS OF THE CIT(A) ON THIS ISSUE. OUR VIEW IS FURTHER FORT IFIED BY THE DECISION RENDERED BY THE HONBLE MADRAS HIGH COURT IN THE CA SE OF CIT VS. LOYAL SUPER FABRICS WHEREIN THE HONBLE HIGH COURT HELD T HAT EXPENDITURE INCURRED ON SHIFTING FACTORY FROM ONE PREMISES TO ANOTHER IS REVENUE IN NATURE. THUS, WE FIND MERIT IN THE GROUND NO.5 RAISED IN APPEAL B Y THE ASSESSEE. ACCORDINGLY, THE FINDINGS OF CIT(A) OF THIS ISSUE A RE REVERSED AND GROUND NO.5 OF THE APPEAL BY ASSESSEE IS ALLOWED. 33. THE SIXTH AND THE LAST GROUND RAISED BY THE ASS ESSEE READS AS UNDER : 6. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISA LLOWANCE OF DEPRECIATION AND ADDITIONAL DEPRECIATION OF RS. 2 , 41,017/- CLAIMED BY THE APPELLANT COMPANY IN RESPECT OF CERTAIN ITEMS ON TH E GROUND THAT THESE ITEMS COULD NOT BE TREATED AS PLANT & MACHINERY FOR PURPOSES OF ALLOWANCE OF DEPRECIATION / ADDITIONAL DEPRECIATION. 6.1 THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED TH AT ITEMS LIKE STORAGE RACKS , CRATES, DOORS AND EXTRA COMPARTMENTS SHOULD HAVE BE EN CONSIDERED AS PLANT AND MACHINERY BY APPLYING THE FUNCTIONAL T EST AND HENCE, THE DEPRECIATION AND ADDITIONAL DEPRECIATION CLAIMED B Y THE APPELLANT COMPANY IN RESPECT OF THESE ITEMS SHOULD HAVE BEEN ALLOWED. 17 ITA NO.684/PUN/2015 34. THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESS EE SUBMITTED THAT THE ASSESSEE HAD PURCHASED RACKS, CRATES, DOORS ETC. WH ICH WERE INCLUDED IN THE LIST OF PLANT AND MACHINERY AND HAD CLAIMED DEPRECI ATION ON THE SAME. SINCE THESE ITEMS WERE USED BY THE ASSESSEE IN THE FACTOR Y THEY CONSTITUTE PLANT. THE AO WHILE GRANTING NORMAL DEPRECIATION TREATED T HE AFORESAID ITEMS AS PART OF PLANT AND MACHINERY AND ALLOWED THE DEPRECI ATION. ONCE AN ASSET IS INCLUDED IN THE BLOCK IT CANNOT BE SEGREGATED. IT IS ONLY WHILE GRANTING ADDITIONAL DEPRECIATION THAT THE AO RAISED OBJECTIO N AND TREATED THE AFORESAID ITEMS AS PART OF FURNITURE AND FIXTURES. THE LD. A UTHORISED REPRESENTATIVE SUBMITTED THAT AFTER HAVING INCLUDING RACKS, CRATES , DOORS ETC. IN THE BLOCK OF PLANT AND MACHINERY, THE SAME CANNOT BE TAKEN OUT F ROM ONE BLOCK AND INCLUDED IN ANOTHER BLOCK OF ASSETS FOR THE PURPOSE OF REJECTING ADDITIONAL DEPRECIATION. 35. ON THE OTHER HAND LD. DEPARTMENTAL REPRESENTATI VE SUPPORTED THE FINDINGS OF CIT(A) AND PRAYED FOR REJECTING THE GRO UND NO.6 RAISED BY THE ASSESSEE IN APPEAL. 36. BOTH SIDES HEARD. THE ASSESSEE HAD PURCHASED R ACKS, CRATES, DOORS ETC. AND HAD TREATED THE SAME AS PLANT AND MACHINER Y AS THESE ITEMS WERE USED BY THE ASSESSEE AT FACTORY PREMISES. AT THE T IME OF ALLOWING NORMAL DEPRECIATION, THE AO ACCEPTED THE ALLOCATION OF ABO VE ITEMS TO PLANT & MACHINERY. WHILE GRANTING DEPRECIATION UNDER THE P ROVISIONS OF SECTION 32(1)(IIA) THE ASSESSEES CLAIM OF ADDITIONAL DEPRE CIATION ON AFORESAID ITEMS WAS DISALLOWED BY THE AO ON THE PREMISE THAT THESE ITEMS ARE NOT PART OF PLANT AND MACHINERY BUT ARE FURNITURE AND FIXTURES. ONCE HAVING INCLUDED THE ASSETS IN A PARTICULAR BLOCK OF ASSETS, THE AS SETS BECOME PART OF THE BLOCK. THEY SHOULD NOT BE DISTURBED THEREAFTER. 18 ITA NO.684/PUN/2015 37. WE FIND MERIT IN THE SUBMISSIONS OF THE LD. AUT HORISED REPRESENTATIVE. ACCORDINGLY, WE HOLD THAT THE RACKS, CRATES, DOORS ETC. ARE PART OF PLANT AND MACHINERY AND ELIGIBLE FOR ADDITIONAL DEPRECIATION UNDER THE PROVISIONS OF SECTION 32(1)(IIA) OF THE ACT. ACCORDINGLY, GROUND NO.6 RAISED IN THE APPEAL BY THE ASSESSEE IS ALLOWED. 38. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED IN THE AFORESAID TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY THE 23 RD DAY OF JUNE, 2017. SD/- SD/- (D. KARUNAKARA RAO) (VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE; DATED : 23 RD JUNE, 2017. / COPY OF THE ORDER FORWARDED TO : / BY ORDER , // TRUE COPY // //TRUE COPY// /ASSISTANT REGISTRAR , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A) - I , PUNE 4. CIT - I, PUNE 5. DR, ITAT, B BENCH PUNE; 6. / GUARD FILE.