Banco Aluminium Ltd., Baroda V. The Dy.CIT., Circle-1(1), Baroda

ITA 74/AHD/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6312 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 21-02-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 11-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: OM PRAKASH MEENA
• Assessee Lawyers: MILAN MEHTA
• Keywords: Depreciation; Question of law; Corroborative evidences; Revenue expenditure; Capital expenditure
• Section: 143(3); 234B; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER BANCO ALUMINIUM LTD. BILL, NEAR BHAILI RAILWAY STATION, PADRA ROAD, BARODA - 391410, PAN: AAACB8629B (APPELLANT) VS THE DCIT, CIRCLE - 1(1), AAYKAR BHAVAN, RACE COURSE, VADODARA (RESPONDENT) REVENUE BY : S H RI OM PRAKASH MEE NA , SR. D . R. ASSESSEE BY: S H RI MILAN MEHTA , A.R. DATE OF HEARING : 21 - 02 - 2 017 DATE OF PRONOUNCEMENT : 06 - 04 - 2 017 / ORDER P ER : AMARJIT SINGH, ACCOUNT ANT MEMBER : - THIS ASSESSEE S APPEAL FOR A.Y. 2008 - 09 , AR I SES FROM ORDER OF THE CIT(A) - I, BARODA DATED 31 - 11 - 2011 IN APPEAL NO. CAB / I/39/10 - 11 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . I T A NO . 74 / A HD/20 12 A SSESSME NT YEAR 200 8 - 09 I.T.A NO. 74/AHD/2012 A.Y. 2008 - 09 PAGE NO BANCO ALUMINIUM LTD. VS. DCIT 2 2. THE ASSESSEE HAS RAIS ED FOLLOWING GROUNDS OF APPEAL: - 1. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF AO BY MAKING DISALLOWANCE OF RS.4,07,400 BY TREATING SOFTWARE EXPENSES AS CAPITAL EXPENDITURE INSTEAD OF REVENUE EXPENDITURE. 2. THE LE ARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF AO IN NOT ALLOWING DEDUCTION U/S. 80IA OF THE ACT AMOUNTING TO RS.3,73,691/ - ON COGEN I & II, BY RE - COMPUTING THE PROFITS OF THE UNDERTAKINGS BY ADJUSTING THE SALES VALUE OF THE POWER PRODUC ED AND SUPPLIED BY THE UNDERTAKINGS. 3. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING THE CHARGING OF INTEREST BY ASSESSING OFFICER U/S. 234B OF THE INCOME TAX ACT, 1961. 4. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIR MING THE CHARGING OF INTEREST BY ASSESSING OFFICER U/S.234D OF THE INCOME TAX ACT, 1961. 5. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN INITIATING PENALTY PROCEEDING U/S. 271(1)(C). 3. IN THIS CASE RETURN OF INCOME DECLARING INCOME OF RS.2 3927420/WAS FILED ON 30/09/2008. SUBSEQUENTLY, THE CASE WAS SELECTED UNDER SCRUTINY BY THE ISSUING OF NOTICE UNDER SECTION 143(2) OF THE ACT ON 24/09/ 2009 . THE BRIEF FACTS OF THE CASE ARE DISCUSSED IN THE RESPECTIVE GROUNDS OF APPEAL AS UNDER: - GROUND NO. 1 (SOFTWARE EXPENSES AS CAPITAL EXPENSES) I.T.A NO. 74/AHD/2012 A.Y. 2008 - 09 PAGE NO BANCO ALUMINIUM LTD. VS. DCIT 3 4 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS DEBITED RS128 20709/ UNDER THE HEAD REPAIRS TO MACHINERY. THE ASSESSING OFFICER OBSER VED THAT THESE EXPENDITURES WERE INCURRED FOR ENHANCING THE EFFI CIENCY OF THE MACHINERY AND WAS THE NATURE OF ENDURING BENEFIT TO THE MACHINERY. TH EREFORE, THE ASSESSING OFFICER MADE DISALLOWANCE OF RS. 12,29,858/ - NET OF DEPRECIATION PERTAINING TO REP AIR & MAINTENANCE EXPENSES TO PLANT AND MACHINERY HOLDING THE SAME AS CAPITAL EXPENSES. AGGRIEVED AGAINST THE DECISION OF LD. CIT(A) , TH E ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). THE LD. CIT(A) HAD ALLOWED THE APPEAL OF THE ASSESSEE TO THE EXTENT OF RS. 10,83,337/ - EXCLUDING RS. 4 , 07 , 400/ - . THE LD. CIT(A) HAD HELD THAT RS. 4 , 07 , 400/ - PERTAINING TO THE SOFTWARE EXPENSES WAS OF CAPITAL NATURE BY OBSERVING AS UNDER: - 2.2. I HAVE CONSIDERED THE SUBMISSIONS. ALL THE ITEMS COMPRISING EXPENDITURE OF RS. 14 ,90,737/ - EXCEPT ITEM NO.3 (SOFTWARE FOR BILLET HEATER PROGRAMMING) WERE IN RESPECT OF PARTS OF MACHINES HAVING NO INDEPENDENT FUNCTION AND ARE THEREFORE OF REVENUE NATURE. EXPENDITURE ON SOFTWARE FOR BILLET HEATER PROGRAMMING WAS OF CAPITAL NATURE SINCE I T RESULTED INTO AN ENDURING BENEFIT TO THE APPELLANT. THERE IS NO BASIS OR SUPPORTING EVIDENCE FOR APPELLANT'S CLAIM THAT LIFE OF SOFTWARE WAS LESS THAN TWO YEARS. TO SUM UP, OUT OF EXPENDITURE OF RS.14,90,737/ - , EXPENDITURE OF RS.10,83,337/ - IS HELD TO BE OF REVENUE NATURE AND EXPENDITURE OF RS.4,07,400/ - IS HELD TO BE OF CAPITAL NATURE. DEPRECIATION ON EXPENDITURE FOR PROCURING SOFTWARE, I.E. ON EXPENDITURE OF , RS.4,07,400/ - IS TO BE ALLOWED AS APPLICABLE. 5 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PER USED THE MATERIAL ON RECORD. WE HAVE NOTICED THAT LD. CIT(A) HAS HELD THAT EXPENDITURE ON SOFTW ARE FOR BIL L ET HEA TER PROGRAMMING WAS OF CAPITAL NATURE SINCE I.T.A NO. 74/AHD/2012 A.Y. 2008 - 09 PAGE NO BANCO ALUMINIUM LTD. VS. DCIT 4 IT RESULTED INTO AN ENDURING BENEFIT TO THE ASSESSEE. THE L D. CIT(A) HAS FURTHER REPORTED THAT LI FE OF TH IS KIND OF SOFTWARE WAS NOT LESS THAN 2 YEARS AND STATED THAT DEPRECIATION ON THE SAME TO BE ALLOWED AS APP L I CAB LE. WE FIND THAT ASSESSEE FAILED TO DISPROVE THE FACTS AS ELABORATED IN THE FINDINGS OF THE LD.CIT(A),THEREFORE WE DO NOT FIND ANY R EASON TO INTERFERE IN THE FINDINGS OF THE L D CIT(A). GROUND NO. 2 (DISALLOWANCE OF DEDUCTION U/S. 80I A 6 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HELD THAT DEDUCTION UNDER SECTION 80 IA OF THE ACT WAS NOT AVAILABLE TO THE ASSE SSEE IN RESPECT OF COGEN UNIT I AND AND COGEN UNIT II AS BOTH HAD GENERATED POWER FOR CAPTIVE USE ONLY. ASSESSING OFFICER HAS COMPUTED THE DEDUCTION UNDER SECTION 80 IA BY APPLYING THE A VERAGE RATE AT WHICH POWER GENERATING UNITS SOLD POWER TO G UVNL AS A GAINST RATE OF SALE OF POWER BY THE G UVNL, ADOPTED BY THE ASSESSEE TO COMPUTE DEDUCTION UNDER SECTION 80 IA(4). AGGRIEVED AGAINST THE DECISION OF ASSESSING OFFICER THE ASSESSEE FILED APPEAL BEFORE THE LEARNED COMMISSIONER OF INCOME TAX APPEAL WHO DISMISSE D THE APPEAL OF THE ASSESSEE BY STATING THAT THE ASSESSING OFFICER WAS JUSTIFIED IN TAKING AVERAGE RATE OF PURCHASE OF POWER BY GUVNL FROM GENERATING COMPANIES TO BE THE MARKET RATE TO BE APPLIED FOR COMPUTING PROFIT UNDER SECTION 80IA(4) OF THE ACT . THE L D. COUNSEL OF THE ASSESSEE HAS CONTENDED THAT TH IS ISSUE IN QUESTION WAS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE ITAT, AHMEDABAD IN THE CASE OF ALEMBIC LTD AND THE HON BLE HIGH I.T.A NO. 74/AHD/2012 A.Y. 2008 - 09 PAGE NO BANCO ALUMINIUM LTD. VS. DCIT 5 COURT OF GUJARAT ISSUE IN THE CASE OF ALEMBIC LTD IN TAX APPEA L NO. 471 OF 2009. IN THIS CONNECTION, WE HAVE NOTICED THAT CO - ORDINATED BENCH OF ITAT AHMEDABAD VIDE ITA NO. 1912/AHD/2012 DATED 09 - 12 - 2016 IN THE CASE OF ALEMBIC LTD ON THE SIMILAR ISSUE HAS DECIDED AS UNDER: - 17.1 LD. COUNSEL AS WELL AS GE AND UNIT TW O SINCE BOTH HAD FAR ONLY THE ASSESSEE CONTENDS THAT THE ISSUE IN QUESTION STANDS COVERED IN FAVOUR OF THE ASSESSEE IN ITS OWN CASE BY THE JUDGMENT OF HON BLE GUJARAT HIGH COURT VIDE A CONSOLIDATED ORDER DATED 20.07.2016 IN TAX APPEAL NO. 471 TO 474 OF 200 9, IN TAX APPEAL NO. 471 AND 473, THE COMMON QUESTION OF LAW REFERRED TO BY THE REVENUE IS AS UNDER: - WHETHER THE APPELLATE TRIBUNAL WAS RIGHT IN LAW AND ON FACTS IN NOT APPRECIATING THAT DEDUCTION U/S 80IA(4) IS NOT ALLOWABLE TO THE ASSESSEE FOR GENE RATING POWER FOR CAPTIVE CONSUMPTION? 17.2 THE ITAT ALLOWED THE ASSESSEE S CLAIM U/S 80IA(4) AT THE RATE OF SELLING PRICE CHARGED BY GUJARAT STATE ELECTRICITY BOARD AND OTHER DISTRIBUTING COMPANIES FROM ITS CAPTIVE POWER PLANT. AGAINST THE ORDER OF TH E TRIBUNAL, THE REVENUE PREFERRED THE APPEAL BEFORE THE HON BLE GUJARAT HIGH COURT AND THE ABOVE QUESTION OF LAW WAS FRAMED. THE HON BLE GUJARAT HIGH COURT WHILE HOLDING IN FAVOUR OF ASSESSEE, RELIED ON A HOST OF JUDGMENTS INCLUDING ACIT, BHARUCH CIRCLE, BHARUCH VS. PRAGATI GLASS WORKS PVT LTD DECIDED ON 25.09.2012 AND CIT VS. SHAH ALLOYS LTD, DECIDED ON 22.11.2011 IN TAX APPEAL NO.2092 OF 2010. THE HON BLE GUJARAT HIGH COURT FURTHER RELIED ON THE JUDGMENT OF CALCUTTA HIGH COURT IN THE CASE OF CIT VS. KAN ORIA CHEMICALS & INDUSTREIS LTD, [2013] 35 TAXMANN.COM 566 (CALCUTTA), WHEREIN THE COURT HAS HELD AS UNDER: - IT IS PRICE AT WHICH ASSESSEE TRANSFERRED ELECTRICITY GENERATED BY IT ELIGIBLE BUSINESS TO ITS OTHER BUSINESS WHICH WOULD BE CONSIDERED FOR PUR POSE OF COMPUTATION OF PROFITS AND GAINS OF ELIGIBLE BUSINESS IN TERMS OF SECTION 80 - IA(8) AND NOT LESSER PRICE AT WHICH SURPLUS ELECTRICITY WAS SOLD TO ELECTRICITY BOARD. I.T.A NO. 74/AHD/2012 A.Y. 2008 - 09 PAGE NO BANCO ALUMINIUM LTD. VS. DCIT 6 17.3 RELYING ON ALL THESE JUDGMENTS, BY DETAILED OBSERVATIONS, THE HON BLE GUJARAT HIGH COURT UPHELD THE CLAIM OF THE ASSESSEE AND DISMISSED THE REVENUE S GROUND IN THIS BEHALF BY FOLLOWING OBSERVATIONS: - 11. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY THE LEARNED COUNSEL FOR THE PARTIES. WE HAVE ALSO CONSIDERED THE CASE LAWS CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE. TAKING INTO CONSIDERATION THE JUDEMENTS OF THIS COURT AND OTHER HIGH COURTS, CITED ABOVE, WE ARE OF THE OPINION THAT THE TRIBUNAL HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE. IN THAT VIEW OF THE MATTER, WE DO NOT FI ND ANY INFIRMITY IN THE ORDER OF THE TRIBUNAL. THEREFORE, WE ANSWER QUESTION (C) AND (D) IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 17.4 THE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE AUTHORITIES BELOW. 1 8. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IN VIEW OF THE HON BLE GUJARAT HIGH COURT JUDGMENT ON THE SAME ISSUE IN ASSESSEE S OWN CASE, THE ISSUE IN QUESTION THAT THE ASSESSEE IS ELIGIBLE FOR COMPUTATION OF DEDUCTION U/S 80IA(4) ON THE RATES CHARGED BY IT AT SELLING PRICE IS NO MORE RES INTEGRA. RESPECTFULLY FOLLOWING THE HON BLE GUJARAT HIGH COURT JUDGMENT IN ASSESSEE S OWN CASE (SUPRA), THIS GROUND OF THE ASSESSE E IS ALLOWED. 7 .1 IN VIEW OF THE ABOVE STATED FACTS AND LEGAL FINDINGS, RESPECTFULLY FOLLOWING THE HON BLE GUJARAT HIGH COURT IN THE CASE OF ALEMBIC LTD. AS SUPRA WE ALLOW THIS GROUND OF THE ASSESSEE . 8 . GROUND NOS. 3 TO 5 ARE OF GENERAL NATURE, SO, T HEY DO NOT REQUIRE ANY ADJUDICATION. I.T.A NO. 74/AHD/2012 A.Y. 2008 - 09 PAGE NO BANCO ALUMINIUM LTD. VS. DCIT 7 9 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 06 - 04 - 201 7 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 06 /04 /2017 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,