M/s Central U.P. Gas Limited, Kanpur V. Dy. Commissioner of Income Tax-VI, Kanpur

ITA 746/LKW/2011

• Counselvise Citation: 74623714 RSA 2011
• Duration Of Justice: 2 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 09-05-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 26-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: Y P SRIVASTA VA
• Keywords: Depreciation; Opportunity of being heard; Additional depreciation; Revenue expenditure; Capital expenditure

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.746/LKW/2011 ASSESSMENT YEAR:2008 - 09 CENTRAL U.P. GAS LIMITED, 7 TH FLOOR, UPSIDC COMPLEX, A - 1/4, LAKHANPUR, KANPUR. PAN:AACCC5883A VS. DY.C.I.T. - VI, KANPUR. (APPELLANT) (RESPONDENT) APPELLANT BY SHRI RAKESH GARG, ADVOCATE RESPONDENT BY SHRI Y. P. SRIVASTAVA, D. R. DATE OF HEARING 09/05/2014 DATE OF PRONOUNCEMENT 1 3 /06/2014 O R D E R PER A. K. GARODIA, A.M. THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE ORDER PASSED BY LEARNED CIT (A) - II, KANPUR DATED 24/10/2011 FOR ASSESSMENT YEAR 2008 - 2009. 2. GROUND NO. 1 IS AS UNDER: 1. BECAUSE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED AND WRONGLY UPHELD THE DISALLOWANCE OF THE AMOUNT OF RS.10246900.00 CLAIMED AS ADDITIONAL DEPRECIATION ON ADDITIONS MADE DURING THE PREVIOUS YEAR TO PLANT AND MACHINERY REQUIRED FOR MANUFACTURE OF COMPRESSED NATUR AL GAS (CNG) FROM NATURAL GAS. 3. IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME - TAX VS HINDUSTAN PETROLEUM CORPORATION LTD. AS REPORTED IN [2014] 361 ITR 190 (BOM) . 2 4. LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDER OF LEARNED CIT(A). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND THE JUDGMENT CITED BY LEARNED A.R. OF THE ASSESSEE. WE FIND THAT IT IS NOTED BY CIT(A) ON PAGE NO. 6 OF HIS ORDER THAT THE ASSESSEES ACTIVITY OF CONVERSION OF NATURAL GAS TO COMPRESSED NA TURAL GAS DOES NOT AMOUNT TO BRINGING OUT A NEW AND DISTINCT OBJECT OR ARTICLE OR THING HAVING DIFFERENT CHARACTER, USE OR CHEMICAL COMPOSITION. IN THE LIGHT OF THESE FINDINGS OF CIT(A), NOW WE EXAMINE THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME - TAX VS HINDUSTAN PETROLEUM CORPORATION LTD. (SUPRA) CITED BY LEARNED A.R. OF THE ASSESSEE. IN THIS CASE, THE ISSUE BEFORE THE HON'BLE HIGH COURT WAS THAT AS TO WHETHER THE ACTIVITY OF THE ASSESSEE OF BOTTLING LPG GAS AM OUNTS TO PRODUCTION OR MANUFACTURING ACTIVITY FOR THE PURPOSE OF DEDUCTION UNDER SECTIONS 80HHC, 80 - I AND 80 - IA OF THE INCOME - TAX ACT, 1961 . HON'BLE BOMBAY HIGH COURT HAS GIVEN A FINDING THAT T HE PROCESS OF BOTTLING LIQUEFIED PETROLEUM GAS INTO CYLINDERS MAKES THE GAS MARKETABLE ON EXECUTION OF THE PROCESS AND THEREFORE, FOLLOWS THAT A NEW PRODUCT COMES INTO EXISTENCE . WE ALSO FIND THAT ON PAGE 2 OF THE ORDER, IT IS NOTED BY CIT(A) THAT IT WAS SUBMITTED BY LEARNED COUNSEL FOR THE ASSESSEE BEFORE HIM THAT THE ASSESSEE COMPANY BUYS NATURAL GAS FROM GAIL AND SUCH NATURAL GAS IS THEN SOLD THROUGH COMPANYS OWN PIPELINES TO FACTORIES AND HOUSEHOLDS ETC. WHICH SALE IS NAMED AS PIPED NATURAL GAS (PNG) SALE OR THE NATURAL GAS RECEIVED FROM GAIL IS CONVERTED INTO C OMPRESSED NATURAL GAS (CNG) WHICH IS SOLD AS CNG FROM THE VENDING STATIONS AS A FUEL FOR RUNNING OF VEHICLES ETC. FROM THESE FACTS, IT COMES OUT THAT NATURAL GAS IS SALEABLE OTHERWISE ALSO THROUGH PIPELINES AND IT IS NOT A FACT THAT THE NATURAL GAS IS MAD E SALEABLE ONLY BY CONVERTING THE SAME INTO CNG WHEREAS IN THE CASE OF LPG, THE SAME IS NOT SALEABLE UNLESS IT IS BOTTLED AND THEREFORE, BOTTLING OF LPG INTO CYLINDERS MAKES LPG SALEABLE IS NOT OTHERWISE SALEABLE. THERE IS 3 DIFFERENCE IN THE FACTS. IN OUR CONSIDERED OPINION, THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IS NOT APPLICABLE IN THE FACTS OF THE PRESENT CASE. SINCE CO MPRESSION OF NATURAL GAS INTO CNG DOES NOT RESULT INTO BRINGING INTO EXISTENCE ANY NEW PRODUCT, IN OUR CONSIDERED OPINION, THIS ACTI VITY IS NEITHER MANUFACTURE NOR PRODUCTION AND HENCE, NO INTERFERENCE IS CALLED FOR IN THE ORDER OF CIT(A) ON THIS ISSUE. ACCORDINGLY, GROUND NO. 1 OF THE ASSESSEE IS REJECTED. 6. GROUND NO. 2, 3 & 4 ARE AS UNDER: 2. BECAUSE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED AND WRONGLY UPHELD THAT TDS WAS REQUIRED TO BE MADE ON PAYMENT OF DISCOUNT AND APPLIED THE PROVISIONS OF SECTION 40 (A) (IA) OF THE INCOME TAX ACT, 1961 TO THE AMOUNT OF RS.2636547.00 FOR NON - DEDUCTION OF TDS THEREON. 3. BECAUSE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED AND WRONGLY UPHELD THAT THE PROVISIONS OF SECTION 40 (A) (IA) OF THE INCOME TAX ACT, 1961 WERE APPLICABLE EVEN TO THE AMOUNTS AGGREGATING RS.538457.00 WHICH STOOD PAID AND DID NOT REMAIN PAYABL E IGNORING THE DECISION OF HON'BLE ITAT IN THE CASE OF TEJA CONSTRUCTIONS V. CIT (39 SOT 13). 4. BECAUSE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED AND WRONGLY UPHELD THAT THE PROVISIONS OF SECTION 40 (A) (IA) OF THE INCOME TAX ACT, 1961 WERE APPLICABLE EVEN TO SUCH AMOUNTS AGGREGATING RS.552716.00 ON WHICH SHORT DEDUCTION OF TDS RANGING BETWEEN RS.17.00 TO RS.4621.00 THEREON. 7. LEARNED A.R. OF THE ASSESSEE REITERATED THE SAME ARGUMENTS WHICH WERE RAISED BEFORE THE CIT(A). IT WAS CONTENDED BEFORE THE CIT(A) THAT BPCL IS NOT AN AGENT OF THE ASSESSEE COMPANY. IT WAS ALSO SUBMITTED THAT BPCL BUYS CNG FROM ASSESSEE AND SELLS IT TO CUSTOMERS. HENCE, BPCL IS NOT AGENT OF THE ASSESSEE AND THEREFORE, THEY ARE NOT ENTITLED TO COMMISSION. REGARDING THE AGREEMENT OF THE ASSESSEE WITH BPCL, IT WAS SUBMITTED THAT 4 THE SAME IS AVAILABLE ON PAGE NO. 6 TO 25 OF THE PAPER BOOK AND IN PARTICULAR , OUR ATTENTION WAS DRAWN TO PARA 8.4 OF THIS AGREEMENT APPEARING ON PAGE NO. 13 OF THE PAPER BOOK. 8. LEARNED D.R . OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE HAVE TO DECIDE AS TO WHETHER THE IMPUGNED EXPENDITURE IS DISCOUNT OR COMMISSION. AS PER CLAUSE 8.4 OF THE AGREEMENT, IT COMES OUT THAT THE RE TAIL PRICE OF CNG HAS BEEN FIXED BY THE ASSESSEE COMPANY AND THE BPCL OR ITS DEALERS HAVE TO SELL CNG ONLY ON THE RETAIL PRICE COMMUNICATED BY THE ASSESSEE TO BPCL FROM TIME TO TIME. THIS FACT ALONE GOES TO SHOW THAT BPCL AND ITS DEALERS WERE NOT HAVING C ONTROL ON THE SALE PRICE. THIS FACTS SUGGESTS THAT IN FACT BPCL WAS SALES AGENT ONLY AND THEREFORE, THE IMPUGNED EXPENDITURE APPEARS TO BE IN THE NATURE OF COMMISSION PAYMENT BUT THIS CLAUSE OF THE AGREEMENT WAS NOT EXAMINED BY CIT(A) AND HENCE, WE FEEL I T PROPER THAT THIS ISSUE SHOULD GO TO CIT(A) FOR FRESH DECISION AFTER EXAMINING THE AGREEMENT BETWEEN THE ASSESSEE AND BPCL. ACCORDINGLY , WE SET ASIDE THE ORDER OF CIT(A) AND RESTORE THE MATTER BACK TO HIS FILE FOR FRESH DECISION AFTER PROVIDING ADEQUATE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, GROUND NO. 2, 3 & 4 OF THE APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES. 10. GROUND NO. 5 IS AS UNDER: 5. BECAUSE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT ALLOWING THE AMOUNT OF RS.412000.00 BEING EXCHANGE FLUCTUATION LOSS. 11. IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF COMMISSIONER OF I NCOME - TAX VS WOODWARD GOVERNOR 5 INDIA P. LTD. AS REPORTED IN [2009] 312 ITR 254 (SC) . HE FURTHER SUBMITTED THAT EVEN IF IT IS FOUND THAT SUCH LOSS IS ON ACCOUNT OF CAPITAL GOODS, THEN ALSO , THE ASSESSING OFFICER SHOULD ALLOW DEPRECIATION ON THIS EXPENDITUR E . 12. LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS PER THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME - TAX VS WOODW ARD GOVERNOR INDIA P. LTD. (SUPRA), IF THE EXCHANGE FLUCTUATION LOSS IS IN RESPECT OF REVENUE EXPENDITURE THEN THE SAME IS ALLOWABLE AS REVENUE EXPENDITURE BUT IF THE SAME IS IN CONNECTION WITH THE CAPITAL GOODS THEN SUCH FLUCTUATION LOSS HAS TO BE CAPITAL IZED. IN THE PRESENT CASE, WE FIND THAT IT IS NOTED BY CIT(A) ON PAGE NO. 10 OF HIS ORDER THAT IT WAS SUBMITTED BEFORE HIM THAT LOSS DUE TO FOREIGN EXCHANGE FLUCTUATION HAS BEEN INCURRED DUE TO REVALUATION OF LIABILITY ON ACCOUNT OF PURCHASE OF PLANT & MA CHINERY. HENCE, THIS HAS TO BE CONSIDERED AS CAPITAL EXPENDITURE ONLY AND THE SAME IS NOT ALLOWABLE AS REVENUE EXPENDITURE. AT THE SAME TIME, AS AND WHEN THE CONCERNED PLANT & MACHINERY IS PUT TO USE, THE ASSESSEE DESERVES ALLOWANCE OF DEPRECIATION ON SU CH CAPITAL EXPENDITURE. HENCE, WE SET ASIDE THE ORDER OF CIT(A) ON THIS ISSUE AND RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR THE PURPOSE OF ALLOWING DEPRECIATION TO THE ASSESSEE ON THIS CAPITAL EXPENDITURE OF RS.4.12 LAC IF THE ASSES SEE IS ABLE TO ESTABLISH THAT THE CONCERNED PLANT & MACHINERY WAS PUT TO USE IN THE PRESENT YEAR OR IN ANY EARLIER YEAR . THE ASSESSING OFFICER SHOULD DECIDE THIS ISSUE AS PER LAW AS PER ABOVE DISCUSSION AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEAR D TO THE ASSESSEE. ACCORDINGLY, GROUND NO. 5 IS ALLOWED FOR STATISTICAL PURPOSES. 14. GROUND NO. 6 OF THE APPEAL IS AS UNDER: 6 6. BECAUSE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING AND NOT PASSING AN ORDER ON THE GROUND OF APPEA L TAKEN BY THE APPELLANT ON ALLOWANCE OF CORRECT CREDIT OF TDS AND MAT CREDIT AVAILABLE TO THE APPELLANT AS A CONSEQUENCE OF WHICH THE AMOUNT OF INTEREST CHARGED UNDER SECTIONS 234 B AND 234 C OF THE INCOME TAX ACT, 1961 WOULD HAVE ALSO BEEN CORRECTLY CALC ULATED. 15. AT THE VERY OUTSET, IT WAS SUBMITTED BY LEARNED D.R. OF THE REVENUE THAT THIS ISSUE WAS RAISED BY THE ASSESSEE BEFORE THE CIT(A) AS PER GROUND NO. 6 AND IT IS NOTED BY CIT(A) ON PAGE 10 OF HIS ORDER THAT GROUND NO. 5 & 6 ARE NOT PRESSED BY THE ASSESSEE. HE SUBMITTED THAT WHEN THIS ISSUE WAS NOT PRESSED BEFORE THE CIT(A) THEN THE SAME CANNOT BE RAISED BEFORE THE TRIBUNAL. WE FIND FORCE IN THE SUBMISSIONS OF LEARNED D.R. OF THE REVENUE AND HENCE, WE REJECT THIS GROUND OF THE ASSESSEE. 16. I N THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 3 /06/2014. *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR