ACIT, Kota V. MANGALAM CEMENT LTD., Kota

ITA 82/JPR/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 5642 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 31-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H V GURJAR CIT DHK
• Keywords: Reopening of assessment; Business income; Depreciation; Additional depreciation; Additional evidence; Tangible material; Difference of opinion; Change of opinion; Revenue expenditure; Reassessment proceedings
• Section: 43B; 143(3); 142(1); 32; 147; 27; 148

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. 82/JP/14 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 THE ACIT, CIRCLE-1, KOTA CUKE VS. M/S MANGALAM CEMENT LTD. ADITYA NAGAR, MORAK RAMGANJ MANDI, KOTA LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AABCM 6602Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 681/JP/14 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10 THE ACIT, CIRCLE-1, KOTA CUKE VS. M/S MANGALAM CEMENT LTD. ADITYA NAGAR, MORAK RAMGANJ MANDI, KOTA LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AABCM 6602Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI H.V. GURJAR ( CIT ) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 05.01.2017 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT: 30/01/2017. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THESE ARE TWO APPEALS FILED BY THE REVENUE AGAINST THE ORDER OF LD CIT(A), KOTA DATED 29.11.2013 AND 22.07.2014 REL EVANT FOR ASSESSMENT YEARS 2008-09 & 2009-10 RESPECTIVELY. BOTH THE APPEALS H AVING IDENTICAL FACTS, THE ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 2 SAME WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER. THE GROUNDS OF APPEAL TAKEN BY THE REVENUE ARE AS UNDER: ITA NO. 82/JP/14 AY 2008-09 (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN ANNULLING THE ASSESSMENT ORDER BY HOLDING THAT R EOPENING OF THE ASSESSMENT U/S 147 OF THE ACT IN THIS CASE WAS M ERELY CHANGE OF OPINION, AND THEREFORE, BAD IN LAW. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.18,16,98,068/- O N ACCOUNT OF ADDITIONAL DEPRECIATION ON THE ASSETS OF POWER GEN ERATING UNITS. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.1,41,57,121/- MA DE BY THE AO U/S 43B. ITA NO. 681/JP/14 AY 2009-10 (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN ANNULLING THE ASSESSMENT ORDER BY HOLDING THAT R EOPENING OF THE ASSESSMENT U/S 147 OF THE ACT IN THIS CASE WAS M ERELY CHANGE OF OPINION, AND THEREFORE, BAD IN LAW. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 13,20,232/- MA DE BY THE AO ON ACCOUNT OF WITHDRAWAL OF ADDITIONAL DEPRECIATION CL AIMED BY THE ASSESSEE IN RESPECT OF MACHINERY INSTALLED IN ITS POWER GENE RATING UNITS. (III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.61,71,580/- MAD E BY THE AO ON A/C OF DEDUCTION CLAIMED BY THE ASSESSEE U/S 43B BY ADMIT TING ADDITIONAL EVIDENCE IN VIOLATION OF RULE 46A. 2. FIRSTLY, WE WILL TAKE UP APPEAL FOR AY 2008-09. IN RESPECT OF GROUND NO. 1, BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSESSME NT U/S 143(3) OF THE ACT WAS COMPLETED ON 31.12.2010 BY MAKING CERTAIN ADDITIONS /DISALLOWANCES TO THE RETURNED INCOME FILED BY THE ASSESSEE COMPANY. THER EAFTER, A NOTICE U/S 148 DT. 17.08.2012 WAS ISSUED TO THE ASSESSEE FOR THE F OLLOWING TWO REASONS: ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 3 (A) ASSESSEE HAS CLAIMED AND WAS ALLOWED ADDITIONAL DEP RECIATION OF RS. 18,16,98,068/- U/S 32(1)(IIA) ON ASSETS OF POWE R GENERATING UNIT WHEREAS THE SAME IS ALLOWABLE ONLY ON P&M WHICH FAL LS UNDER SEC.32(1)(II) WHEREAS THE ASSETS OF POWER GENERATIN G UNIT ARE COVERED UNDER SEC. 32(1)(I). (B) ASSESSEE CLAIMED AND WAS ALLOWED DEDUCTION OF RS.1, 41,57,121/- BEING DEPOSITS MADE UNDER PROTEST AGAINST DEMAND OF SERVI CE TAX AND LAND TAX BOOKED IN OTHER ADVANCES AND NOT DEBITED TO P&L A/C, HENCE, THE SAME IS NOT ALLOWABLE. EVEN DEDUCTION U/S 43B IS NO T JUSTIFIED ON SUCH PAYMENT AS UNDER THIS SECTION AMOUNT OF EXPENDITURE IS FIRST BOOKED IN EXPENDITURE AND IF NOT PAID, BE ADDED BACK TO INCOM E AND THEREAFTER DEDUCTION IS GIVEN ON PAYMENT BASIS. 3. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE VIDE L ETTER DT. 21.09.2012 OBJECTED TO THE ISSUANCE OF NOTICE U/S 148 BY INTER ALIA SUBMITTING AS UNDER:- (A) AS PER 2 ND PROVISO TO RULE 5(1A), AN UNDERTAKING ENGAGED IN G ENERATION OR GENERATION AND DISTRIBUTION OF POWER, MAY INSTEA D OF CLAIMING DEPRECIATION ON ITS ASSETS UNDER CLAUSE (I) OF SEC. 32(1) I.E. SLM BASIS HAS AN OPTION TO CLAIM DEPRECIATION UNDER CLAUSE (I I) OF THE SAID SECTION I.E. WDV BASIS. ACCORDINGLY, ASSESSEE HAS EXERCISED THE OPTION OF CLAIMING DEPRECIATION UNDER CLAUSE (II) OF SECTION 32(1) AND THUS HAS RIGHTLY CLAIMED AND BEEN ALLOWED ADDITIONAL DEPRECI ATION U/S 32(1)(IIA). (B) THE PAYMENT OF LAND TAX AND SERVICE TAX WAS MADE IN THE YEAR UNDER CONSIDERATION AGAINST THE DEMAND AND THEREFORE SAME IS OTHERWISE ALLOWABLE U/S 43B. ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 4 4. THE AO THEREAFTER IN THE ORDER PASSED U/S 147 DISAL LOWED THE CLAIM OF ADDITIONAL DEPRECIATION BY HOLDING THAT IN VIEW OF AMENDED PROVISION OF SEC. 32(1)(IIA), ASSESSEES ENGAGED IN THE BUSINESS OF G ENERATION OR GENERATION AND DISTRIBUTION OF POWER IS ALLOWED ADDITIONAL DEPRECI ATION W.E.F. A.Y. 13-14, MEANING THEREBY, THAT THEY WERE NOT ALLOWED ADDITIO NAL DEPRECIATION DURING THE YEAR UNDER CONSIDERATION I.E. A.Y. 08-09. IN RE SPECT OF CLAIM OF ASSESSEE U/S 43B, HE HELD THAT EXPLANATION OF THE ASSESSEE IS NO T ACCEPTABLE AND THEREFORE DISALLOWED THE CLAIM OF THE ASSESSEE. 5. ON APPEAL, THE LD. CIT(A) HELD THAT THE REOPENING O F ASSESSMENT U/S 148 WAS BAD IN LAW AND THE ORDER IS AB-INITIO VOID IN A S MUCH AS THE ISSUE OF DEPRECIATION AND CLAIM OF DEDUCTION U/S 43B WERE CO NSIDERED BY THE THEN AO AND THEREFORE THE REOPENING OF ASSESSMENT BY THE AO WAS MERELY A CHANGE OF OPINION.HENCE, AGAINST THE SAID ORDER OF LD CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 6. THE LD AR, AT THE OUTSET, SUBMITTED THAT BOTH THE I SSUES REGARDING THE CLAIM OF ADDITIONAL DEPRECIATION ON POWER PLANT AND WINDMILL, AND THE CLAIM OF DEDUCTION U/S 43B WAS EXAMINED IN THE COURSE OF ASS ESSMENT PROCEEDINGS U/S 143(3) AS UNDER:- (A) AO VIDE QUERY LETTER DT. 25.10.2010 IN POINT NO. 3 AND 9 REQUIRED ASSESSEE TO FURNISH ASSETS REGISTER AND FILE COPY O F ACCOUNTS OF ALL ASSETS ADDED OR SOLD DURING THE YEAR SO AS TO CONSIDER THE ASSESSEES CLAIM OF DEPRECIATION ON THESE ASSETS. IN RESPONSE TO SAME, ASSESSEE VIDE REPLY DT. 09.11.2010 IN POINT NO. 3 AND 9 SUBMITTED THAT DUE TO VOLUMINOUS AND ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 5 DETAILED NATURE OF TRANSACTION, FAR REGISTER WILL B E SUBMITTED LATER ON. HOWEVER, AO VIDE LETTER DT. 03.12.2010 HELD THAT TH E DETAILS FILED IS IN A ROUTINE MANNER AND NOT AS PER QUERIES RAISED VIDE L ETTER DT. 25.10.2010 AND THUS REQUIRED ASSESSEE TO FILE THE DETAILS IN THE P ERFORMA OF THE SAID LETTER. HE FURTHER IN POINT NO. 10, 11 AND 12 OF THE SAID L ETTER,SPECIFICALLY REQUIRED ASSESSEE TO FURNISH COMPLETE DETAILS OF POWER PLANT AT MORAK AND WINDMILL AT JAISALMER. IN RESPONSE TO SAME, ASSESSEE VIDE PO INT NO. 9 OF ANNEXURE 26 FURNISHED DOCUMENTS/SUPPORTINGS/INFORMATION OF TRAN SACTION OF ASSETS HAVING VALUE OF MORE THAN RS. 1 LACS. IT FURTHER VI DE REPLY DT. 14.12.2010 IN POINT NO. 10, 11 AND 12 EXPLAINED ABOUT THE POWER P LANT AND THE WINDMILL. IT FURTHER EXPLAINED THAT DEPRECIATION CLAIMED IS ALLO WABLE U/S 32. AFTER EXAMINING THE SAME, ALONG WITH THE DEPRECIATION CHA RT, ADDITIONAL DEPRECIATION WAS ALLOWED BY THE AO. (B) AO VIDE QUERY LETTER DT. 25.10.2010 IN POINT NO. 7 REQUIRED ASSESSEE TO FURNISH PROOF OF ALL PAYMENT COVERED U/S 43B AS MEN TIONED IN ITEM NO. 21 OF THE TAX AUDIT REPORT. IN RESPONSE TO SAME, ASSES SEE VIDE REPLY DT. 9.11.2010 IN POINT NO. 7 FURNISHED PROOF OF ALL PAY MENTS COVERED U/S 43B. HOWEVER, AO VIDE LETTER DT. 03.12.2010 HELD THAT TH E DETAILS FILED IS IN A ROUTINE MANNER AND NOT AS PER QUERIES RAISED VIDE L ETTER DT. 25.10.2010 AND THUS REQUIRED ASSESSEE TO FILE THE DETAILS IN THE P ERFORMA OF THE SAID LETTER. HE FURTHER IN POINT NO. 8 OF THE SAID LETTER BY REF ERRING TO THE FACT THAT AS PER COMPUTATION, ASSESSEE HAS CLAIMED DEDUCTION OF RS. 54,30,165/- FOR LAND TAX OF F.Y. 07-08 DEPOSITED ON 07.02.2008, REQ UIRED ASSESSEE TO EXPLAIN THAT WHY AN AMOUNT OF RS. 54,30,165/- OF LA ND TAX DEPOSITED ON 01.11.2008 AS PER DETAILS FILED BE NOT DISALLOWED U /S 43B. IN RESPONSE TO THE SAID LETTER, ASSESSEE VIDE POINT NO. 7 OF ANNEXURE 26 SUBMITTED THAT IT HAS ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 6 ALREADY SUBMITTED DETAILED ENCLOSURES OF PAYMENT AL LOWABLE U/S 43B AS PER POINT NO. 7 OF SUBMISSION DT. 09.11.2010. ASSESSEE FURTHER VIDE LETTER DT. 14.12.2010 IN POINT NO. 8 SUBMITTED THAT DUE TO OVE RSIGHT CHALLAN DT. 29.10.2007 FOR RS. 54,30,165/- TOWARDS LAND TAX WAS NOT FILED EARLIER AND IN PLACE OF THAT CHALLAN OF SIMILAR AMOUNT OF RS. 54,3 0,165/- DT. 01.11.2008 WAS FILED AND THUS ENCLOSED CHALLAN DT. 29.10.2007 FOR RS. 54,30,165/- IN SUPPORT OF ITS CLAIM OF DEDUCTION U/S 43B. AFTER C ONSIDERING THE ABOVE SUBMISSION OF ASSESSEE ALONG WITH EVIDENCE, AO WHIL E FRAMING ASSESSMENT U/S 143(3) ALLOWED THE CLAIM OF DEDUCTION U/S 43B. 7. THE LD AR SUBMITTED THAT FROM THE ABOVE, IT CAN BE NOTED THAT WHEN THE AO IN THE ORIGINAL ASSESSMENT PROCEEDINGS HAS EXAMI NED THE ISSUES OF ADDITIONAL DEPRECIATION AND DEDUCTION U/S 43B, ON T HOSE VERY ISSUES NOTICE U/S 148 TAKEN BY HIM IS ONLY ON ACCOUNT OF CHANGE OF OP INION. ON SUCH CHANGE OF OPINION, RE-ASSESSMENT PROCEEDINGS INITIATED BY HIM , EVEN WITHIN A PERIOD OF 4 YEARS, IS ILLEGAL AND BAD IN LAW. FOR THIS RELIANCE IS PLACED ON FOLLOWING CASES:- (A) CIT VS. HINDUSTAN ZINC LTD. (2016) 241 TAXMAN 392 ( RAJ.) (HC): AO INITIATED REASSESSMENT PROCEEDINGS ON THE GROUND THAT ASSESSEE HAD MADE INCORRECT CLAIM OF ADDITIONAL DEPRECIATION ON CAPTI VE POWER PLANT. ON APPEAL, IT WAS HELD THAT IT IS NOTICED THAT ASSESSEE HAD MADE TRUE AND FULL DISCLOSURE OF ALL RELEVANT FACTS RELATING TO THE CLAIM OF ADDITIONAL DEPRECIATION AND ALSO IN RESPECT OF CLAIM FOR GRANT OF DEDUCTION U/S 80-IA. FURTHER, A SEPARATE AUDIT REPORT IN THE PRESCRIBED FORM 10CCB IN SUPPORT OF C LAIM FOR DEDUCTION U/S 80- IA/80-IB WAS ALSO DULY SUBMITTED. THE ASSESSEE HAD ALSO SUBMITTED REPLY PURSUANT TO ALL THE QUERIES MADE BY THE AO DURING A SSESSMENT PROCEEDINGS U/S ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 7 143(3) OF THE ACT. THUS, THE CONTENTION SOUGHT TO B E RAISED BY THE REVENUE ABOUT NON-DISCLOSURE ON THE BASIS OF FAILURE ON THE PART OF THE ASSESSEE IN MENTIONING BIFURCATED AMOUNT OF ADDITIONAL DEPRECIA TION ALLOWABLE IN THE DEPRECIATION CHART IS ABSOLUTELY BASELESS. ALL THAT HAS BEEN SAID BY THE AO IS THAT AFTER SCRUTINY ASSESSMENT, IT WAS OBSERVED THA T ASSESSEE HAS MADE INCORRECT CLAIM OF ADDITIONAL DEPRECIATION ON CAPTI VE POWER PLANT WHEREAS THE CLAIM FOR ADDITIONAL DEPRECIATION ON CAPTIVE POWER PLANT WAS ALLOWED BY THE AO WHILE FRAMING THE ASSESSMENT U/S 143(3) AFTER CO NSCIOUS CONSIDERATION OF THE MATERIAL ON RECORD. THE FORMATION OF BELIEF BY THE AO REGARDING ESCAPEMENT OF INCOME WAS BASED ON RE-APPRECIATION O F THE MATERIAL ALREADY AVAILABLE ON RECORD AT THE TIME OF SCRUTINY ASSESSM ENT WHICH AMOUNTS TO MERE CHANGE OF OPINION. IN THE GARB OF PURPORTED EXERCIS E OF THE POWER TO REASSESS, THE AO CANNOT BE PERMITTED TO REVIEW HIS OWN ORDER OR THE ORDER PASSED BY HIS PREDECESSOR. THUS, THE FINDING ARRIVED AT BY THE IT AT THAT THE REASSESSMENT PROCEEDINGS INITIATED BY THE AO BY MERE CHANGE OF O PINION IS PATENTLY ILLEGAL, CANNOT BE FAULTED WITH. THEREFORE, THE ITAT HAVING ARRIVED AT THE CATEGORICAL FINDING THAT REOPENING OF THE COMPLETED ASSESSMENT WITHOUT ANY FRESH MATERIAL, MERELY ON THE BASIS OF CHANGE OF OPINION OF THE AO, IS WITHOUT JURISDICTION & ERRONEOUS, THE APPEAL PREFERRED BY T HE REVENUE HAD RIGHTLY BEEN DISMISSED AS HAVING BECOME INFRUCTIOUS. (B) ASHWAMEGH CO.OP. HOUSE SOC. LTD., VIBHAG 2 VS. DCIT (2013) 214 TAXMAN 42 (GUJ.)(HC)(MAGZ.): ASSESSEE FILED ITS RETURN DECLARING CERTAIN CAPITAL GAIN ARISING FROM SALE OF LAND. AO COMPLETED ASSESSMENT U/S 143(3) ACCEPTING THE CO MPUTATION OF CAPITAL GAIN. SUBSEQUENTLY, AO ISSUED NOTICE U/S 148 SEEKIN G TO REOPEN THE ASSESSMENT ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 8 ON THE GROUND THAT BUSINESS OF ASSESSEE WAS LAND DE VELOPMENT AND SALE AND PURCHASE OF PLOTS AND, HENCE, THE LAND/PLOTS WERE N OTHING BUT STOCK-IN-TRADE AND THE PROFIT/INCOME ARRIVED BY THE ASSESSEE SHOUL D BE TREATED AS BUSINESS INCOME. IT WAS HELD THAT SINCE AO HAD PASSED THE AS SESSMENT ORDER AFTER TAKING INTO CONSIDERATION ALL THE RELEVANT FACTS, REASSESS MENT PROCEEDINGS COULD NOT BE INITIATED MERELY ON THE BASIS OF CHANGE OF OPINI ON EVEN WITHIN A PERIOD OF FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR . THEREFORE, IMPUGNED REASSESSMENT PROCEEDINGS WERE TO BE QUASHED. (C) CIT VS. USHA INTERNATIONAL LTD.(2012) 77 DTR 39 6 (DEL.)(HC)(FB): EXPRESSION CHANGE OF OPINION POSTULATES FORMATION OF OPINION AND THEN A CHANGE THEREOF. IN THE CONTEXT OFS.147, IT IMPLIES THAT THE AO HAVE FORMED AN OPINION AT THE FIRST INSTANCE AND LATER PROPOSES OR WANTS TO TAKE A DIFFERENT VIEW. QUESTION OF CHANGE OF OPINION ARISES WHEN AN AO INITIALLY FORMS AN OPINION AND DECIDES NOT TO MAKE AN ADDITION ACCEPTI NG THE ASSESSEES POSITION OR STAND. REASSESSMENT PROCEEDINGS IN THE SAID CASE S WOULD BE HIT BY THE PRINCIPLE OF CHANGE OF OPINION. IN CASE AN ISSUE OR QUERY IS RAISED BY THE AO AND ANSWERED BY THE ASSESSEE IN THE ORIGINAL ASSESS MENT PROCEEDINGS, AND THE AO DOES NOT MAKE ANY ADDITION, IT HAS TO BE ACCEPTE D THAT THE ISSUE HAS BEEN EXAMINED BUT THE AO DID NOT FIND ANY GROUND OR REAS ON TO MAKE ANY ADDITION, AND THUS, THE REASSESSMENT WOULD BE INVALID. ONCE T HERE HAS BEEN A FULL AND TRUE DISCLOSURE OF ALL MATERIAL AND PRIMARY FACTS A T THE TIME OF ORIGINAL ASSESSMENT U/S 143(3), AND THE ASSESSMENT IS REOPEN ED IN RESPECT OF A MATTER COVERED BY THE DISCLOSURE, IT IS A CASE OF CHANGE O F OPINION AND THE ASSESSMENT PROCEEDINGS CANNOT BE VALIDLY REOPENED EVEN WITHIN FOUR YEARS. ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 9 (C) ACIT VS. ROLTA INDIA LTD. (2011) 57 DTR 370 (MUM) ( TM): ASSESSEE CAPITALIZED THE COST OF SOFTWARE IN THE BO OKS OF ACCOUNTS & CLAIMED THE SAME AS REVENUE EXPENDITURE IN THE COMPUTATION OF INCOME FURNISHED WITH THE RETURN. AO RAISED A SPECIFIC QUERY REGARDING AL LOWABILITY OF THE SAID SOFTWARE EXPENSES AS REVENUE EXPENDITURE AND SPECIF ICALLY ASKED THE ASSESSEE TO JUSTIFY THE CLAIM FOR DEDUCTION THEREOF. ASSESSE E WROTE A LETTER TO THE AO GIVING THE JUSTIFICATION AND STATING THE RELEVANT F ACTS. AO WAS SATISFIED WITH THE ASSESSEES REPLY THAT THE EXPENSES WERE ALLOWABLE A S REVENUE EXPENDITURE THOUGH HE DID NOT MADE ANY SPECIFIC REFERENCE ON TH IS ISSUE IN THE ASSESSMENT ORDER PASSED U/S 143(3). HOWEVER, AO REOPENED THE A SSESSMENT ON THE BASIS OF AUDIT PARTY NOTE ON THE SAID ISSUE. IT WAS HELD THAT IN THE ABSENCE OF ANY TANGIBLE MATERIAL WHICH COULD PERSUADE THE AO TO FO RM A BELIEF THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT BY REASON OF THE ALLOWANCE OF THE EXPENSES, HE COULD NOT ISSUE A NOTICE U/S 148 EVEN WITHIN THE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. MERE FACT THAT THE SAID ISSUE WAS NOT SPECIFICALLY ADVERTED TO IN THE ASSES SMENT ORDER DID NOT IPSO FACTO GIVE JURISDICTION TO THE AO TO REOPEN THE ASS ESSMENT. THEREFORE, THE INITIATION OF REASSESSMENT PROCEEDINGS WAS VOID AB INITIO. 8. THE LD AR FURTHER SUBMITTED THAT THE AO WHILE FRAMI NG ASSESSMENT U/S 143(3)/147, DISALLOWED THE ASSESSEES CLAIM OF ADDI TIONAL DEPRECIATION U/S 32(1)(IIA) NOT FOR THE REASON FOR WHICH NOTICE U/S 148 WAS ISSUED BUT FOR AN ENTIRELY DIFFERENT REASON AS STATED IN THE FACTS AB OVE. THUS, ORDER U/S 143(3)/147 TO THIS EXTENT IS ILLEGAL & BAD IN LAW. RELIANCE IN THIS CONNECTION IS PLACED IN CASE OF ITO VS. BIDBHANJAN INVESTMENT & T RADING CO. (P) LTD. (2012) ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 10 16 ITR (TRIB.) 220 (MUM.). IN THIS CASE, ASSESSEE P URCHASED A PROPERTY IN 1986. IN ORDER TO MAINTAIN THE PROPERTY IT HAD TO INCUR C ERTAIN EXPENDITURE IN THE FORM OF SECURITY CHARGES, WATER CHARGES, MUNICIPAL TAXES ETC. SINCE THE COMPANY HAD NO BUSINESS ACTIVITY OTHER THAN HOLDING THE PROPERTY, WHATEVER EXPENDITURE WAS INCURRED FOR MAINTAINING THE SAID P ROPERTY WAS ADDED TO THE COST OF THE PROPERTY FROM YEAR TO YEAR SO AS TO DEP ICT TRUE AND CORRECT PICTURE OF THE COMPANY. IN THE PROCESS OF WIDENING OF THE R OAD, THE BOMBAY MUNICIPAL CORPORATION TOOK OVER THE FRONT SIDE OF THE PROPERT Y AND THUS ASSESSEE WAS LEFT WITH THE BALANCE PLOT. ASSESSEE SOLD THE DEVELOPMEN T RIGHTS OF THE SAID PROPERTY IN 1999 BUT RETAINED THE RIGHT OF BALANCE FSI WITH IT. THE RIGHT ON FSI, WHICH WAS RETAINED, WAS VALUED AND WAS REFLECTED IN THE BALANCE SHEET. ON SALE OF DEVELOPMENT RIGHTS OF PROPERTY, ASSESSEE DECLARE D CAPITAL GAIN AND RETURN WAS PROCESSED U/S 143(1). HOWEVER, AO REOPENED THE ASSESSMENT, FOR THE REASON THAT ASSESSEE HAD PAID MUNICIPAL TAXES WHICH 'APPEARS TO BE FOR THE CHANGE OF USAGE'. ON LOCAL ENQUIRIES IT IS 'UNDERST OOD' THAT THE PROPERTY IN QUESTION WAS A FACTORY BUILDING AND NOW IT STANDS D EVELOPED AS SHOPS AND MARRIAGE HALL CONSISTING OF 110 UNITS, KNOWN AS 'OS HIWARA PLAZA' AND ASSESSEE HAD DEVELOPED THE PROPERTY CONSISTING OF 110 UNITS AND SOLD THE SAME DURING THE PERIOD. IN RESPONSE TO THE SHOW-CAUSE NOTICE, A SSESSEE FURNISHED A DETAILED REPLY AND UPON GOING THROUGH THE REPLY, AO NOTICED THAT THE INITIAL ASSUMPTIONS WHICH WERE THE BASIS FOR REOPENING OF THE ASSESSMEN T WERE WRONG BUT, HE PROCEEDED TO RECOMPUTE THE TOTAL INCOME ON THE GROU ND THAT THE ASSESSEE IS NOT ENTITLED TO THE BENEFIT OF INDEXED COST OF ACQU ISITION OF THE PROPERTY, BY TREATING THE SALE PROCEEDS AS CAPITAL GAINS. IN THE OPINION OF THE AO, INCOME ON SALE OF PROPERTY WAS ASSESSABLE TO TAX UNDER THE HE AD 'PROFITS AND GAINS OF BUSINESS AND PROFESSION'. SINCE ASSESSEE CAPITALIZE D VARIOUS EXPENSES OVER THE YEARS AND ENHANCED THE COST OF THE PROPERTY, AO ASS UMED THAT THE ASSESSEES ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 11 INTENTION WAS TO TREAT THIS PROPERTY AS A COMMERCIA L ASSET, TO BE DEVELOPED SUBSEQUENTLY, AND HENCE IT CANNOT BE TREATED AS AN INVESTMENT IN PROPERTY. IT WAS HELD THAT REOPENING OF ASSESSMENT IS BAD IN LAW IN AS MUCH AS AO HAS ULTIMATELY NOT COMPLETED THE ASSESSMENT ON THE STRE NGTH OF THE REASONS RECORDED FOR REOPENING THE ASSESSMENT BUT ON ALTOGE THER DIFFERENT GROUNDS. HONBLE SUPREME COURT IN 130 ITR 1 HELD THAT THOUGH COURT CANNOT INVESTIGATE INTO THE ADEQUACY OR SUFFICIENCY OF THE REASONS, TH E COURT CAN CERTAINLY EXAMINE WHETHER THE REASONS ARE RELEVANT AND HAVE A BEARING ON THE MATTERS IN REGARD TO WHICH HE IS REQUIRED TO ENTERTAIN SUCH A BELIEF, BEFORE A NOTICE IS SOUGHT TO BE ISSUED U/S 148 OF THE ACT. IN OTHER WO RDS, IF THERE IS NO RATIONAL AND INTELLIGIBLE NEXUS BETWEEN THE REASONS AND THE BELIEF, AN APPELLATE AUTHORITY IS COMPETENT TO HOLD THAT THE REASSESSMEN T PROCEEDINGS ARE INVALID AND LIABLE TO BE QUASHED. IN THE PRESENT CASE, AO A PPEARS TO HAVE REOPENED THE ASSESSMENT ON MERE ASSUMPTIONS AND SURMISES AND HE NEVER CARED TO VERIFY THE FACTUAL POSITION. ASSESSMENT WAS NOT MAD E ON THE STRENGTH OF THE REASONS MENTIONED IN THE NOTE WHICH CLEARLY SUPPORT S THE STAND OF ASSESSEE THAT ASSESSMENT WAS SOUGHT TO BE REOPENED MERELY TO HARASS THE ASSESSEE. AO HAD REOPENED THE ASSESSMENT ON ARBITRARY AND FLIMSY GROUNDS AND SINCE NO ADDITION WAS MADE ON THE STRENGTH OF SUCH REASONS, LD. CIT(A) WAS JUSTIFIED IN QUASHING THE REASSESSMENT PROCEEDINGS. 9. THE LD AR FURTHER SUBMITTED THAT IN RESPECT OF DISA LLOWANCE U/S 43B, THE AO HAS NOT STATED ANYTHING AS TO WHY THE EXPLANATIO N OF ASSESSEE IS NOT ACCEPTABLE. THE ASSESSEE HAS GIVEN VARIOUS CASE LAW S VIDE LETTER DT. 21.09.2012 WHERE IT WAS HELD THAT STATUTORY LIABILITY IS ALLOW ABLE ON PAYMENT BASIS EVEN IF EXPENDITURE IS NOT BOOKED IN BOOKS OF ACCOUNTS. THE REFORE, MAKING THE ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 12 DISALLOWANCE WITHOUT GIVING ANY REASON FOR THE SAME IN THE ASSESSMENT ORDER SHOWS THAT THE REASONS RECORDED BY THE AO ON THIS I SSUE IS ON FLIMSY GROUND AND THEREFORE THE REOPENING ON THIS ISSUE IS ILLEGA L AND BAD IN LAW. IN VIEW OF ABOVE, THE ORDER PASSED BY THE AO U/S 14 3(3)/147 IS ILLEGAL AND BAD IN LAW AND THEREFORE THE LD. CIT(A) HAS RIGHTLY HEL D THAT REOPENING OF ASSESSMENT U/S 148 IS BAD IN LAW AND THE ORDER IS H ELD TO BE AB-INITIO VOID. 10. THE LD DR IS HEARD WHO HAS VEHEMENTLY ARGUED THE MA TTER AND SUPPORTED THE REOPENING OF ASSESSMENT PROCEEDINGS. HE SUBMITTED THAT THE BOTH THE ISSUE OF CLAIM OF ADDITIONAL DEPRECIATION AS WELL AS CLAIM UNDER SECTION 43B WAS NOT EXAMINED BY THE AO IN THE ORIGINAL ASSE SSMENT PROCEEDINGS AND HENCE, THERE IS NO QUESTION OF CHANGE OF OPINION. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. THE REVENUE HAS CHALLENGED THE ORDER OF THE LD. CIT(A) WHEREIN HE HAS HELD THAT THE CLAIM OF ADDITI ONAL DEPRECIATION AND CLAIM OF DEDUCTION U/S 43B WERE CONSIDERED BY THE ASSESS ING OFFICER WHILE COMPLETING THE ORIGINAL ASSESSMENT U/S 143(3) OF TH E ACT. THE LD. CIT(A) HELD REOPENING OF THE ASSESSMENT BY THE AO AS MERELY CH ANGE OF OPINION WHICH IS BAD IN LAW AND THE ORDER PASSED U/S 147 READ WITH S ECTION 143(3) WAS HELD TO BE VOID AB-INITIO. DURING THE COURSE OF HEARING, TH E LD. AR HAS ALSO SUBMITTED THAT BOTH THE ISSUES REGARDING THE CLAIM OF ADDITIO NAL DEPRECIATION ON POWER PLANT AND WINDMILL, AND THE CLAIM OF DEDUCTION U/S 43B WERE EXAMINED IN THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS U/S 143(3 ) OF THE ACT. IT WAS FURTHER SUBMITTED THAT WHEN THE AO IN THE ORIGINAL ASSESSME NT PROCEEDING HAS EXAMINED BOTH THE ISSUES, THE ISSUANCE OF NOTICE U/ S 148 ON THOSE VERY ISSUES ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 13 IS ONLY ON ACCOUNT OF CHANGE OF OPINION AND ON SUCH CHANGE OF OPINION, REASSESSMENT PROCEEDINGS INITIATED BY HIM EVEN WIT HIN A PERIOD OF FOUR YEARS IS ILLEGAL AND BAD IN LAW. 12. IN THIS CASE THE ASSESSMENT YEAR INVOLVED IS A.Y. 2 008-09 WHERE THE ASSESSMENT UNDER SECTION 143(3) WAS ORIGINALLY COMP LETED ON 31.12.2010 AND NOTICE HAS BEEN ISSUED U/S 148 ON 17.08.2012. THER EFORE, THE PROVISO TO SECTION 147 IS NOT RELEVANT AND THEREFORE NOT BEEN CONSIDERED BY US. THE LIMITED ISSUE UNDER CONSIDERATION IS WHETHER THE IS SUE OF CLAIM OF ADDITIONAL DEPRECIATION HAS BEEN EXAMINED BY THE ASSESSING OFF ICER IN THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS OR NOT. THE EXPRES SION CHANGE OF OPINION POSTULATES FORMATION OF AN OPINION AND THEN A CHANG E THEREOF. IN THE CONTEXT OF SECTION 147, IT IMPLIES THAT THE AO HAS FORMED A N OPINION AT THE FIRST INSTANCE IN THE ORIGINAL ASSESSMENT PROCEEDINGS AND LATER PROPOSES OR WISHES TO TAKE A DIFFERENT VIEW ON A PARTICULAR MATTER. I T WOULD THEREFORE BE RELEVANT TO EXAMINE WHETHER THE ISSUE OF CLAIM OF ADDITIONAL DEPRECIATION AS WELL AS CLAIM OF DEDUCTION U/S 43B WAS EXAMINED IN THE COUR SE OF ORIGINAL ASSESSMENT PROCEEDINGS OR NOT. 12.1 IN THIS REGARD, WE REFER TO NOTICE U/S 142(1) DATED 25.10.2010 ISSUED BY THE AO WHEREIN, IN THE POINT NO.3 AND 9, THE AO HAS RAISED THE FOLLOWING QUERIES: (3) YOU HAVE CLAIMED DEPRECIATION OF RS. 17,70,25, 733/- AS PER PROFIT AND LOSS ACCOUNT OF THE RETURN. ON REFERRING TO THE SC HEDULE (ANNEXURE E), IT IS SEEN THAT THERE ARE ADDITIONS OF THE ASSETS O F RS. 14663.22 LACS IN THE ASSESSMENT YEAR. PLEASE FILE THE COPIES OF ACC OUNTS IN RESPECT OF THESE ASSETS WITH COPIES OF PURCHASE BILLS AND THE DETAILS OF PAYMENTS MADE. THE COST OF TRANSPORTATION OF THE CAPITAL AS SETS, THE ERECTION & INSTALLATION EXPENSES AND OTHER INCIDENTAL EXPENSES FOR PUTTING THESE ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 14 ASSETS IN USE MAY BE SEPARATELY WORKED OUT. IF THE SAME ARE CHARGED TO REVENUE EXPENDITURE, IDENTIFY THE AMOUNTS AND HEAD OF ACCOUNTS UNDER WHICH THEY ARE DEBITED. (9) PRODUCE THE ASSETS REGISTERS REQUIRED TO BE MA INTAINED AS PER THE COMPANY LAWS AND FILE THE COPIES OF ACCOUNTS OF AL L THE ASSETS ADDED OR SOLD DURING THE YEAR UNDER CONSIDERATION WITH CO PIES OF BILLS AND THE DATES ON WHICH THEY WERE FIRST PUT TO USE SO AS TO CONSIDER YOUR CLAIMS FOR DEPRECIATION OF THESE ASSETS. 12.2 THEREAFTER, ON 03.12.2010, THE ASSESSING OFFIC ER HAS ASKED THE FOLLOWING FURTHER DETAILS ALONGWITH NECESSARY SUPPORTING EVID ENCES: (10) AS PER NOTE OF COMPUTATION, PRODUCTION IN MAN GALAM POWER PLANT, MORAK AND MANGALAM WIND POWER PLANT, JAISALMER HAS STARTED IN OCTOBER AND SEPTEMBER, 2007 RESPECTIVELY BUT NO PRO DUCTION AND SALES DETAILS HAVE BEEN SHOWN IN THE BOOKS OF ACCOU NTS. PLEASE FURNISH MONTH WISE DETAILS OF PRODUCTION AND SALES ALONGWITH DOCUMENTARY EVIDENCE OF PRODUCTION COMMENCED. PLEA SE ALSO FILE COMPLETE DETAILS OF INCOME AND EXPENDITURE DETAILS OF ABOVE PLANTS SEPARATELY. (11) AS PER DEPRECIATION CHART FILED, INVESTMENT OF RS. 79.44 CRORES AND RS. 33.62 CRORES HAS BEEN SHOWN IN THE CASE OF MANGALAM POWER PLANT, MORAK BUT NO WDV AS ON 01.04.2007 AND ADDITION MADE DURING THE YEAR HAS BEEN MENTIONED SEPARATELY. PLEASE FURNISH BLOCK WISE DETAILS ALONGWITH PURCHASE OF BILLS AND SOURCE OF INVESTMEN T IN THE ABOVE PLANT. (12) AS PER DEPRECATION CHART, DEPRECIATION OF 80% HAS BEEN CLAIMED IN THE CASE OF MANGALAM WIND POWER PLANT, JAISALMER BUT NO DETAILS OF PRODUCTION AND SALES HAVE BEEN SHOWN IN THE YEAR UN DER CONSIDERATION. SINCE NO RECEIPTS HAVE BEEN SHOWN F ROM THE ABOVE PLANT YOU ARE REQUIRED TO SHOW CAUSE WHY THE DEPREC IATION CLAIMED MAY NOT BE DISALLOWED . PLEASE FILE COMPLETE DETAI LS OF PRODUCTION AND CONSUMPTION THEREOF AND FILE COPY OF AGREEMENT I F ANY WITH RSEB FOR POWER SUPPLY. 12.3 THE ASSESSEE VIDE ITS LETTER DATED 14.12.2010 HAS SUBMITTED AS UNDER: ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 15 (10) WE ARE ENCLOSING HEREWITH FOLLOWING DOCUMENTS OF THE MANGALAM POWER PLANT, SITUATED AT MORAK AND MANGALAM WIND M ILLS SITUATED AT JAISALMER: (I) BALANCE SHEET AND PROFIT AND LOSS ACCOUNT OF A BOVE UNITS (REF.ANN 34(A) (II) COMPUTATION OF INCOME OF ABOVE UNITS (REF.ANN 34(B) (III) DETAILS OF MONTHWISE PRODUCTION OF UNIT GENE RATED IN ABOVE UNITS (REF. ANN 34(C) (IV) COPY OF COMMISSIONING CERTIFICATE OF ABOVE U NITS (REF. ANN 34(D) THE RECEIPTS OF RS.2393.54LACS (2345.85 LACS FROM POWER PLANT AND RS. 47.09 LACS FROM WINDMILLS) FROM POWER GENERATION HAVE BEE N DEDUCTED FROM POWER AND FUEL (REFER SCHEDULE 15 OF THE BALANCE SHEET OF MANGALAM CEMENT LTD). (11) WE WISH TO SUBMIT THAT BOTH 17.5 MW CAPTIVE POWER PLANT VALUED RS. 7944.94 LACS AND WIND MILLS VALUED RS. 3362.00 LACS WERE COMMISSIONED DURING THE YEAR THEREFORE, OPENING B ALANCE OF BLOCK ACCOUNTS IS NIL. THE AMOUNT INCURRED TILL 31.03.20 07 WAS SHOWN AS CAPITAL WORK IN PROGRESS AMOUNTING TO RS.6460.27 LACS OF MANGALAM POWER PLANT. REFER BALANCE SHEET OF MANGALAM POWER PLANT. THIS AMOUNT CAN BE VERIFIED FROM THE LAST YEAR FIGURE I N THE BALANCE SHEET. WE SUBMIT HEREUNDER: (I) DETAILS OF BLOCK WISE ASSETS OF THE MANGALAM PO WER PLANT AND MANGALAM WIND MILLS ALREADY SUBMITTED O 19.11.2010 IN DETAIL . (II) WE ARE ENCLOSING HEREWITH COPIES OF INVOICES/B ILLS OF MATERIAL AND SERVICES PROVIDED BY THE PARTIES RELATED TO MANGALA M WIND MILLS AND MANGALAM POWER PLANT. (III) WE HEREBY INFORMED THAT HAVING ALONG TERM LOA N FROM SBI KOLKATA OF RS. 5250 LACS FOR MANGALAM POWER PLANT (COPY OF AGREEM ENT ALREADY SUBMITTED AT ANN. 20 VIDE OUR SUBMISSION DAED 9.11 .2010 AND BALANCE OUT OF INTERNAL ACCRUALS. WE HAVE USED INTERNAL AC CRUALS OF RS. 3362 LACSS FOR INSTALLING MANGLAM WIND MILLS. (12) WE ARE ENCLOSING HEREWITH FOLLOWING: (I) COPIES OF AGREEMENTS WITH JVVNL AND SUZLON ENE RGY LTD. RELATING TO BANKING AND WHEELING AGREEMENTS FOR MANGALAM WING MILLS (II) DETAILS OF PRODUCTION AND CONSUMPTION HAVE AL READY BEEN MENTIONED IN POINT NO.10 ABOVE. ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 16 AS PER THE DETAILS MENTIONED ABOVE, YOUR GOODSELF W ILL FIND THAT A RECEIPT OF RS. 2345.85 LACS FROM POWER PLANT AND RS.47.69 LACS FROM WIND MILLS IS DISCLOSED AS PER P&L ACCOUNT OF THE RESPECTIVE UNIT S. SINCE UNITS GENERATED WERE CONSUMED BY THE CEMENT PLANTS FOR CAPTIVE PURPOSE, HENCE THE RECEIPT HAS BEEN NETTED OFF FROM THE POWE R AND FUEL EXPENSES OF MANGALAM CEMENT LTD. PLEASE REFER SCHEDULE 15 O F BALANCE SHEET. HENCE DEPRECIATION CLAIMED IS ALLOWABLE U/S 32 OF T HE INCOME TAX ACT, 1961. 12.4 FOR CLAIM OF DEPRECIATION, THE ASSESSEE HAS TO SATISFY THE REQUIREMENTS OF SECTION 32(1)(I) AND SECTION 32(1)(II) OF THE ACT WHEREIN THE ASSESSEE HAS TO SATISFY THE TEST OF OWNERSHIP OVER THE ASSETS AND T HE USAGE OF THE ASSETS FOR THE PURPOSE OF THE BUSINESS. FURTHER DEPENDING ON THE NATURE OF THE ASSETS TANGIBLE/INTANGIBLE ASSETS AND THE PERIOD OF USAGE, THE RATE OF DEPRECIATION HAS BEEN PRESCRIBED WHICH CAN BE CLAIMED BY THE ASSESSE E. IN THE CONTEXT OF ADDITIONAL DEPRECIATION, THE PROVISIONS ARE CONTAIN ED IN SECTION 32(1)(II)(A) WHICH PROVIDES THAT WHERE A NEW MACHINERY OR PLA NT (OTHER THAN SHIPS AND AIRCRAFT) WHICH HAS BEEN ACQUIRED AND INSTALLED AFT ER THE 31 ST DAY OF MARCH, 2005 BY THE ASSESSEE WHO IS ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING OR IN BUSINESS OF GENERATION OR GENERATION AND DISTRIBUTION OF POWER, A FURTHER SUM EQUAL TO 2 0% OF THE ACTUAL COST OF MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UN DER CLAUSE (II). IN OUR VIEW, THE CONDITIONS PRESCRIBED UNDER SECTION 32(1)(II)(A ) FOR CLAIM OF ADDITIONAL DEPRECIATION NEEDS TO BE SATISFIED IN ADDITION TO T HE CONDITIONS FOR CLAIM OF DEPRECIATION UNDER SECTION 32(1)(II) OF THE ACT. F URTHER, IT WOULD BE EQUALLY RELEVANT TO NOTE THAT SECTION 32(1)(IIA) OF THE ACT PROVIDES THAT A FURTHER SUM EQUAL TO 20% OF ACTUAL COST OF SUCH MACHINERY OR PL ANT SHALL BE ALLOWED AS DEDUCTION UNDER CLAUSE (II). IN OTHER WORDS, THE M ACHINERY OR PLANT WHICH ARE OTHERWISE ELIGIBLE TO DEPRECIATION UNDER SECTION 32 (1)(II) OF THE ACT SHALL BE ALLOWED ADDITIONAL DEPRECIATION AT THE RATE OF 20% OF ACTUAL COST. THE CLAIM OF ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 17 ADDITIONAL DEPRECIATION AT ACTUAL COST IS THEREFORE CLOSELY LINKED AND CONNECTED TO MACHINERY OR PLANT WHICH ARE OTHERWISE ELIGIBLE FOR DEPRECIATION ON THE WRITTEN DOWN VALUE THEREOF AS MAY BE PRESCRIBED UND ER SECTION 32(1)(II). 12.5 IN THE INSTANT CASE, IN THE REASONS RECORDED B Y THE AO BEFORE ISSUANCE OF NOTICE U/S 148, IT IS STATED THAT THE ASSESSEE HAS CLAIMED AND WAS ALLOWED ADDITIONAL DEPRECIATION OF RS. 18,16,98,068/- U/S 3 2(1)(IIA) ON ASSETS OF POWER GENERATING UNIT WHEREAS THE SAME IS ALLOWABLE ONLY ON P&M WHICH FALLS UNDER SEC.32(1)(II) WHEREAS THE ASSETS OF POWER GENERATIN G UNIT ARE COVERED UNDER SEC. 32(1)(I). IN THE INSTANT CASE, THE ASSESSEE H AS CLAIMED DEPRECIATION ON POWER PLANT AND WINDMILL @ 80% ON WRITTEN DOWN VALU E BASIS UNDER SECTION 32(1)(II) OF THE ACT. THE ASSESSING OFFICER HAS NO T CHALLENGED SUCH CLAIM OF DEPRECIATION UNDER SECTION 32(1)(II) OF THE ACT, HO WEVER, ON THE SAME ASSETS, THE CLAIM OF ADDITIONAL DEPRECIATION UNDER SECTION 32(1)(IIA) HAS NOW BEEN CHALLENGED BY ISSUANCE OF NOTICE U/S 148 OF THE ACT . THE BASIS OF FORMATION OF BELIEF BY THE AO THAT THE ASSETS FALLS UNDER CLAUSE (I) AND NOT CLAUSE (II) AND HENCE, CLAIM OF ADDITIONAL DEPRECIATION ON SUCH ASS ETS IS NOT ALLOWABLE, CANNOT THEREFORE BE ACCEPTED. MORE SO, WHEN THE CLAIM OF D EPRECIATION ON SUCH ASSETS UNDER SECTION 32(1)(II) HAS BEEN ALLOWED BY THE RE VENUE IN ORIGINAL ASSESSMENT PROCEEDINGS AND ALSO IN THE INSTANT REASSESSMENT PR OCEEDINGS WHICH ARE UNDER CHALLENGE BEFORE US. THERE CANNOT BE A SITUATION W HERE THE ADDITIONAL CLAIM OF DEPRECIATION IS DISPUTED STATING THAT THE ORIGINAL CLAIM OF DEPRECIATION HAS BEEN WRONGLY CLAIMED BUT WITHOUT DISTURBING (RATHER ACCE PTING) SUCH ORIGINAL CLAIM OF DEPRECIATION. WE ARE THEREFORE OF THE CONSIDERED VIEW THAT THE REASONS RECORDED ARE SELF-CONTRADICTORY AND CANNOT FORM THE BASIS TO INITIATE REASSESSMENT PROCEEDINGS. ON THIS GROUND ALONE, TH E REOPENING OF ASSESSMENT U/S 147 CANNOT BE HELD VALID IN LAW AND IS LIABLE T O BE QUASHED. ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 18 12.6 FURTHER, ON REVIEW OF THE QUERIES RAISED BY TH E AO, IT TRANSPIRES THAT THE SAME WERE RELATED TO EXAMINATION OF PURCHASE OF TH E ASSETS DURING THE YEAR, THE DATE ON WHICH THEY WERE FIRST PUT TO USE, THE PRODUCTION AND SALES IN RESPECT OF THE POWER PLANT AND WINDMILL AND WHETHER THE PRODUCTION HAS BEEN COMMENCED DURING THE YEAR OR NOT. THESE QUERIES WER E RAISED BY THE AO AFTER GOING THROUGH THE COMPUTATION OF INCOME AND DEPRECI ATION CHART SUBMITTED BY THE ASSESSEE COMPANY IN RESPECT OF POWER PLANT AS W ELL AS WIND MILL WHEREIN THE ASSESSEE HAS CLAIMED DEPRECIATION @ 80% ON WRIT TEN DOWN VALUE AS WELL AS ADDITIONAL DEPRECIATION @ 20% ON ACTUAL COSTS AVAIL ABLE AT APB 30-31. IN OUR VIEW, EVEN THOUGH THE QUERY LETTER FROM AO DIDNT S PECIFICALLY MENTION ABOUT CLAIM OF ADDITIONAL DEPRECIATION AND TALKS ABOUT DE PRECIATION CLAIM, THE QUERIES RAISED BY THE AO WERE EQUALLY RELEVANT FOR EXAMININ G THE CLAIM OF DEPRECIATION AS WELL AS ADDITIONAL DEPRECIATION AND MORE SO, WHE N THE SAME WERE ORIGINATING FROM THE SAME SET OF DEPRECIATION CHART FURNISHED BY THE ASSESSEE COMPANY. THEREAFTER, ON REVIEW OF SUBMISSIONS AND RELATED DOCUMENTATION FILED BY THE ASSESSEE, THE AO HAD ALLOWED THE ASSES SEES CLAIM OF DEPRECIATION UNDER SECTION 32(1)(II) AND ADDITIONAL DEPRECIATION UNDER SECTION 32(1)(IIA) OF THE ACT DURING THE COURSE OF ORIGINAL ASSESSMENT PR OCEEDINGS UNDER SECTION 143(3) OF THE ACT. NOW, EXAMINING THE SAID CLAIM O F ADDITIONAL DEPRECIATION DURING THE REASSESSMENT PROCEEDINGS WOULD THEREFORE BE A CLEAR CASE OF CHANGE OF OPINION. ON THIS GROUND AS WELL, THE REA SSESSMENT PROCEEDINGS CAN NOT BE HELD VALID IN LAW. 12.7 AS FAR AS THE ISSUE OF CLAIM OF DEDUCTION U/S 43B OF THE ACT WE AGREE WITH THE CONTENTIONS OF THE LD. AR THAT THE ISSUE HAS BE EN DULY EXAMINED BY THE AO DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDIN GS AND TO THIS EXTENT THERE IS CLEARLY A CHANGE OF OPINION WHICH HAS BEEN RIGHT LY UPHELD BY THE LD. CIT(A). ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 19 12.8 IN THE RESULT, THE GROUND NO. 1 OF THE REVENU E IS DISMISSED. 13. NOW COMING TO GROUND NO 2 WHERE, ON MERITS, THE REV ENUE HAS CHALLENGED THE ACTION OF THE LD CIT(A) IN DELETING THE DISALLOWANCE OF RS. 18,16,98,068/- ON ACCOUNT OF ADDITIONAL DEPRECIATIO N ON THE ASSETS OF POWER GENERATING UNITS. 13.1 BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASS ESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF CEMENT. FOR UNINTERRUP TED SUPPLY OF POWER, ASSESSEE DURING THE YEAR, ACQUIRED AND INSTALLED NE W P&M I.E. POWER PLANT AT MORAK AND A WINDMILL AT JAISALMER FOR PRODUCTION OF ELECTRICITY FOR CAPTIVE CONSUMPTION IN MANUFACTURING OF CEMENT. THE ELECTRI CITY PRODUCED FROM POWER PLANT AT MORAK WAS DIRECTLY UTILIZED IN MANUFACTURI NG OF CEMENT WHEREAS THE ELECTRICITY PRODUCED FROM WINDMILL AT JAISALMER WAS SUPPLIED TO JAIPUR VIDHYUT VITRAN NIGAM LTD. WHO IN TURN REDUCE THAT QUANTITY OF ELECTRICITY FROM THE POWER BILL RAISED ON THE ASSESSEE. ON THESE P&M, AS SESSEE CLAIMED ADDITIONAL DEPRECIATION OF RS. 18,16,98,068/- (RS.14,44,58,058 + RS.3,72,40,000) U/S 32(1)(IIA) OF THE ACT. 13.2 THE AO WHILE FRAMING ASSESSMENT U/S 143(3)/147 HELD THAT IN VIEW OF AMENDED PROVISION OF SEC. 32(1)(IIA), ASSESSEES EN GAGED IN THE BUSINESS OF GENERATION OR GENERATION AND DISTRIBUTION OF POWER IS ALLOWED ADDITIONAL DEPRECIATION W.E.F. A.Y. 2013-14, MEANING THEREBY, THAT THEY WERE NOT ALLOWED ADDITIONAL DEPRECIATION DURING THE YEAR UNDER CONSI DERATION I.E. A.Y. 08-09. ACCORDINGLY, HE DISALLOWED THE CLAIM OF ADDITIONAL DEPRECIATION. ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 20 13.3 THE LD. CIT(A) AFTER CONSIDERING THE LANGUAGE OF SECTION 32(1)(I) HELD THAT THE POWER PLANT OF THE ASSESSEE HAS TO BE TREATED A S AN UNDERTAKING OF ASSESSEE GENERATING POWER AND THEREFORE THE ASSESSE E CLEARLY FALLS IN THE FIRST CATEGORY AND WAS ELIGIBLE FOR DEPRECIATION. SECONDL Y, THE ASSESSEES CASE IS ALSO COVERED BY SECTION 32(1)(IIA) WHEREIN ADDITIONAL DE PRECIATION IS ALLOWABLE IF THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. THE ASSESSEE WAS MANUFACTURING CEMENT (WH ICH HAS TO BE TREATED AS AN ARTICLE OR THING) AND THEREFORE WAS ELIGIBLE FOR ADDITIONAL DEPRECIATION. 14. THE LD AR SUBMITTED THAT FOR CLAIM OF ADDITIONAL DE PRECIATION U/S 32(1)(IIA), WHAT IS REQUIRED IS THAT NEW P&M HAS BE EN ACQUIRED AND INSTALLED BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. THERE IS NO DISPUTE AS TO THE FA CT THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF CEMENT. FOR UNINTE RRUPTED SUPPLY OF POWER TO ITS CEMENT MANUFACTURING UNIT, IT INSTALLED NEW P&M FOR PRODUCTION OF POWER. THEREFORE, THE ELECTRICITY PRODUCED BY POWER PLANT/WINDMILL INSTALLED BY THE ASSESSEE ARE BASICALLY FOR MANUFACTURING OF CEMENT I.E. ARTICLE OR THING. HENCE, THE SUBSEQUENT AMENDMENT MADE IN A.Y. 2013-1 4 DO NOT EFFECT THE CLAIM OF ADDITIONAL DEPRECIATION ON THE POWER PLANT /WINDMILL INSTALLED BY THE ASSESSEE. 14.1 IN SUPPORT, THE LD AR PLACES RELIANCE ON THE F OLLOWING CASES:- PRINCIPAL CIT VS. KANISHK STEEL INDUSTRIES (2016) 9 6 CCH 0292 (MAD.) (HC): IN THIS CASE, THE ASSESSEE WAS STATED TO HAVE SET U P TWO WIND MILLS IN ADDITION TO THE ALREADY EXISTING FOUR WIND MILLS AND THEREBY HAVING INCREASED ITS POWER GENERATION CAPACITY BY ABOVE 50%. IT WAS HELD THAT IT IS TRUE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE OF OIL SEEDS, MOULDED RUBBER PARTS, REED VALUE ASSEMBLIES APART FROM GENE RATION OF POWER. AFTER THE ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 21 INSTALLATION OF THE ADDITIONAL WIND MILLS, BOTH PRI OR TO AS WELL AS AFTER THE INSTALLATION OF THE ADDITIONAL WIND MILLS, THE ASSE SSEE WAS USING WIND ENERGY FOR GENERATING POWER FOR ITS CAPITATIVE CONSUMPTION APA RT FROM SELLING THE SURPLUS POWER GENERATED TO THE TAMIL NADU ELECTRICITY BOARD . AS FAR AS APPLICATION OF SECTION 32(1)(IIA) OF THE ACT, IS CONCERNED, WHAT I S REQUIRED TO BE SATISFIED IN ORDER TO CLAIM THE ADDITIONAL DEPRECIATION IS THAT THE SETTING UP OF A NEW MACHINERY OR PLANT SHOULD HAVE BEEN ACQUIRED AND IN STALLED AFTER 31ST MARCH 2002 BY AN ASSESSEE, WHO WAS ALREADY ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. THE SAID PRO VISION DOES NOT STATE THAT THE SETTING UP OF A NEW MACHINERY OR PLANT, WHICH WAS A CQUIRED AND INSTALLED UPTO 31.03.2002 SHOULD HAVE ANY OPERATIONAL CONNECTIVITY TO THE ARTICLE OR THING THAT WAS ALREADY BEING MANUFACTURED BY THE ASSESSEE. THE REFORE, THE CONTENTION THAT THE SETTING UP OF A WIND MILL HAS NOTHING TO D O WITH THE POWER INDUSTRY, NAMELY, MANUFACTURE OF OIL SEEDS ETC. IS TOTALLY NO T GERMANE TO THE SPECIFIC PROVISION CONTAINED IN SECTION 32(1)(IIA) OF THE AC T CIT VS. DIAMINES & CHEMICALS LTD. (2014) 109 DTR 62 (GUJ.) (HC): THE ASSESSEE ALREADY IN THE BUSINESS OF MANUFACTURE OF CHEMICALS, IS ELIGIBLE FOR ADDITIONAL DEPRECIATION U/S 32(1)(IIA) IN RESPECT O F WINDMILL ELECTRICITY GENERATING MACHINERY ACQUIRED BY IT. JCIT VS. MINERAL ENTERPRISES LTD. (2013) 144 ITD 68 0 (BANG.)(TRIB.): THE ASSESSEE WAS ENGAGED IN MANUFACTURE OF ARTICLE OR THING. BY EXERCISING THE OPTION PROVIDED UNDER SECOND PROVISO TO RULE 5(1A), IT CLAIMED ADDITIONAL DEPRECIATION ON WIND MILL. THE AO DISALLOWED THE CL AIM OF ADDITIONAL DEPRECIATION ON WIND MILL ON THE GROUND THAT PROVIS IONS OF THE ACT ALLOWED DEPRECIATION ONLY IN CASE OF ANY NEW MACHINERY OR P LANT (OTHER THAN SHIPS AND ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 22 AIRCRAFT) AND NOT FOR WIND MILL, WHICH WAS ENGAGED IN POWER GENERATION. IT WAS HELD THAT IN VIEW OF THE DECISION OF MADRAS HIGH CO URT RENDERED IN CASE OF CIT VS. VTM LTD. [2009] 319 ITR 336, ASSESSEE WAS ENTIT LED TO ADDITIONAL DEPRECIATION ON THE WIND MILL. CIT VS. VTM LTD. (2009) 319 ITR 336 (MAD.)(HC): IN THIS CASE, ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE OF TEXTILE GOODS. IT SET UP A WINDMILL FOR GENERATION OF POWER AND CLAIMED ADDITIONAL DEPRECIATION U/S 32(1)(IIA). AO HELD THA T SETTING UP OF A WINDMILL HAS ABSOLUTELY NO CONNECTION WITH THE MANUFACTURING OF TEXTILE GOODS AND THUS ASSESSEE IS NOT ENTITLED TO CLAIM ADDITIONAL DEPREC IATION U/S 32(1)(IIA). IT WAS HELD THAT TO CLAIM ADDITIONAL DEPRECIATION U/S 32(1 )(IIA), WHAT IS REQUIRED TO BE SATISFIED IS THAT SETTING UP OF A NEW MACHINERY OR PLANT SHOULD HAVE BEEN ACQUIRED AND INSTALLED AFTER 31ST MARCH, 2002 BY AN ASSESSEE, WHO WAS ALREADY ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTIO N OF ANY ARTICLE OR THING. THE SAID PROVISION DOES NOT STATE THAT THE SETTING UP OF A NEW MACHINERY OR PLANT, WHICH WAS ACQUIRED AND INSTALLED UPTO 31ST M ARCH, 2002 SHOULD HAVE ANY OPERATIONAL CONNECTIVITY TO THE ARTICLE OR THING TH AT WAS ALREADY BEING MANUFACTURED BY THE ASSESSEE. THEREFORE, THE CONTEN TION THAT SETTING UP OF A WINDMILL HAS NOTHING TO DO WITH THE POWER INDUSTRY, NAMELY, MANUFACTURE OF TEXTILE GOODS IS TOTALLY NOT GERMANE TO THE SPECIFI C PROVISION CONTAINED IN S. 32(1)(IIA) OF THE ACT. ACCORDINGLY, ADDITIONAL DEPR ECIATION ON WINDMILL AS ALLOWED BY CIT(A)/ITAT WAS UPHELD. THIS VIEW WAS AL SO FOLLOWED IN CASE OF CIT VS. HI TECH ARAI LTD. 321 ITR 477 (MAD.)(HC) AND CI T VS. TEXMO PRECISION CASTINGS 321 ITR 481 (MAD.)(HC) ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 23 14.2 IT WAS FURTHER SUBMITTED THAT THE EXPRESSION ARTICLE OR THING USED IN SECTION 32(1)(IIA) IS NOT DEFINED IN THE IT ACT, 19 61. THE SUPREME COURT IN CASE OF STATE OF ANDHRA PRADESH VS. NTPC LTD. 5 SSC 203 HELD THAT ELECTRICITY IS GOODS AND THEREFORE PRODUCTION/GENERATION OF ELEC TRICITY IS PRODUCTION OF ARTICLE OR THING. FURTHER, DELHI TRIBUNAL IN CASE O F NTPC LTD. VS. DCIT (2012) 54 SOT 177 WHEREIN ASSESSEES CLAIM OF ADDITIONAL DEPR ECIATION WAS DISALLOWED ON THE GROUND THAT POWER/ELECTRICITY GENERATED BY ASSE SSEE COULD NOT BE EQUATED WITH AN ARTICLE OR THING WHICH WAS BEING MANUFACTUR ED IN AN INDUSTRIAL UNDERTAKING, HELD THAT IF THERE CAN BE SALE AND PUR CHASE OF ELECTRIC ENERGY LIKE ANY MOVEABLE OBJECT, THEN ELECTRIC ENERGY IS COVERE D BY THE DEFINITION OF GOODS AND THUS ADMISSIBILITY OF ADDITIONAL DEPRECIATION C OULD NOT BE DENIED TO ASSESSEE MERELY ON THE GROUND THAT ELECTRICITY IS N OT AN ARTICLE OR THING. IN VIEW OF THE SAID DECISIONS, P&M ACQUIRED AND INSTALLED B Y ASSESSEE FOR GENERATION OF ELECTRICITY IS AKIN TO MANUFACTURE OR PRODUCTION OF AN ARTICLE OR THING AND CONSEQUENTLY ASSESSEE IS ENTITLED FOR ADDITIONAL DE PRECIATION U/S 32(1)(IIA) ON SAME. 14.3 IT WAS FURTHER SUBMITTED THAT THE AO WHILE FR AMING ASSESSMENT U/S 143(3)/147 HELD THAT ASSESSEES SUBMISSION IS NOT A CCEPTABLE IN VIEW OF AMENDED PROVISION OF SEC. 32(1)(IIA) WHEREBY ASSESS EES ENGAGED IN THE BUSINESS OF GENERATION OR GENERATION AND DISTRIBUTI ON OF POWER IS ALLOWED ADDITIONAL DEPRECIATION W.E.F. A.Y. 13-14, MEANING THEREBY, THAT THEY WERE NOT ALLOWED ADDITIONAL DEPRECIATION DURING THE YEAR UND ER CONSIDERATION I.E. A.Y. 08-09. THE SAID AMENDMENT HAS BEEN INCORRECTLY INTE RPRETED BY AO. THE HONBLE CHENNAI TRIBUNAL IN CASE OF ACIT VS. M. SAT ISH KUMAR (2012) 19 ITR (TRIB.) 646, CASE PERTAINING TO A.Y. 08-09, HAS GIV EN A FINDING ON SUCH AMENDMENT AND HAS HELD THAT GENERATION OF ELECTRICI TY IS A MANUFACTURING ACTIVITY ENTITLING ASSESSEE TO CLAIM ADDITIONAL DEP RECIATION U/S 32(1)(IIA). IN THIS ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 24 CASE, ASSESSEE WAS ENGAGED IN THE BUSINESS OF SALE OF IMPORTED SECOND HAND MACHINERY AND GENERATION OF ELECTRICITY THROUGH WIN DMILLS. HE INSTALLED TWO WINDMILLS. THE 1 ST WINDMILL WAS INSTALLED IN YEAR 2005 AND SECOND IN SEPT. 2007 I.E. A.Y. 08-09. ASSESSEE CLAIMED 100% DEPRECIATION IN RESPECT OF 2 ND WINDMILL INSTALLED AS PER PROVISIONS OF SEC. 32(1) AND ITEM XIII OF NEW APPENDIX 1 R.W.R. 5. AO REJECTED THE CLAIM OF ASSESSEE FOR GRANT OF ADDI TIONAL DEPRECIATION ON WINDMILL INSTALLED DURING A.Y. 08-09 BY OBSERVING T HAT ASSESSEE IS NOT INVOLVED IN MANUFACTURING OF ANY GOODS. BEFORE TRIBUNAL, REV ENUE SUBMITTED THAT ASSESSEE IS A COMMISSION AGENT AND NOT A MANUFACTUR ER. FOR AVAILING BENEFIT OF ADDITIONAL DEPRECIATION, IT IS ESSENTIAL THAT ASSES SEE SHOULD BE ENGAGED IN MANUFACTURING ACTIVITY. THEREFORE, ASSESSEE IS NOT ENTITLED TO ADDITIONAL DEPRECIATION U/S 32(1)(IIA). ASSESSEE SUBMITTED THA T IT HAD NO CLAIMED ADDITIONAL DEPRECIATION ON 1 ST WINDMILL SINCE HE WAS NOT INVOLVED IN ANY MANUFACTURING OR PRODUCTION ACTIVITY AT THAT TIME. NOW, HE IS CLAIMING ADDITIONAL DEPRECIATION ON 2 ND WINDMILL AS HE IS ALREADY ENGAGED IN THE BUSINESS OF PRODUCTION/GENERATION OF ELECTRICITY. IT WAS HEL D VIDE PARA 9 AND 10 OF THE ORDER AS UNDER:- A PERUSAL OF JUDGMENT CLEARLY SHOWS THAT GENERATIO N OF ELECTRICITY IS AKIN TO MANUFACTURING OF A NEW PRODUCT. IN THE INSTANT CASE , ELECTRICITY WHICH MAY NOT BE SEEN WITH THE EYES, HOWEVER, ITS EFFECT CAN BE S EEN AND FELT. THE ELECTRICITY CAN BE TRANSMITTED, TRANSFERRED, DELIVERED, STORED, POSSESSED ETC. THE HONBLE SUPREME COURT IN THE CASE OF CST VS. MADHYA PRADESH ELECTRICITY BOARD (SUPRA) HAS HELD THAT ELECTRICITY FALLS WITHIN THE DEFINITI ON OF GOODS UNDER THE PROVISIONS OF SALE OF GOODS ACT, 1930. THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF NTPC LTD. (SUPRA) AFTER A DETAILED EXAMINATION OF SEVERA L JUDGMENTS, ACTS, CONSTITUTION OF INDIA, HAS CONCLUDED THAT THE PROCE SS OF GENERATION OF ELECTRICITY IS AKIN TO MANUFACTURE OF AN ARTICLE OR THING. IN V IEW OF THE ABOVE, WE ARE OF THE ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 25 CONSIDERED OPINION THAT GENERATION OF ELECTRICITY I S A MANUFACTURING ACTIVITY. THE ASSESSEE IS INVOLVED IN THE MANUFACTURING ACTIV ITY AND FULFILLS THE CONDITIONS AS LAID DOWN UNDER SECTION 32(1)(IIA). THE GOVERNME NT VIDE FINANCE ACT, 2012 HAS AMENDED THE PROVISIONS OF SECTION 32(1)(IIA) TO INCLUDE THE BUSINESS OF GENERATION OR GENERATION AND DISTRIBUTION OF POWER, ELIGIBLE FOR BENEFIT UNDER SECTION 32(1)(IIA). ALTHOUGH THE SAID AMENDMENT IS WITH EFFECT FROM 1.4.2013 BUT IT GIVES IMPETUS TO THE VIEW THAT GENERATION OF ELECTRICITY IS A MANUFACTURING PROCESS AND QUALIFIES FOR THE BENEFITS UNDER SECTIO N 32(1)(IIA). FURTHER, THE HONBLE KOLKATA TRIBUNAL IN CASE OF DA MODAR VALLEY CORPORATION (2016) 160 ITD 78, CASE PERTAINING TO A.Y. 11-12 HE LD THAT ON PERUSAL OF SECTION 32(1)(IIA) OF THE ACT AS IT STOOD UPTO A.Y. 2012-13 , IT IS EVIDENT THAT THE ADDITIONAL DEPRECIATION IS PERMISSIBLE TO ALL ASSES SEES WHO ARE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICL E OR THING. IN THE CIRCUMSTANCES, THE ASSESSEE WHO IS DESIROUS OF CLAI MING THE ADDITIONAL DEPRECIATION NEED ONLY TO PROVE THAT DURING THE REL EVANT YEAR HE WAS ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. NOW THE QUESTION TO BE DECIDED IS AS TO WHETHER THE ASSESSE E ENGAGED IN GENERATION AND DISTRIBUTION OF ELECTRICITY COULD BE SAID TO BE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING S O AS TO BE ELIGIBLE FOR CLAIMING ADDITIONAL DEPRECIATION U/S 32(1)(IIA) OF THE ACT. IT IS WELL SETTLED THAT FOR THE PURPOSE OF MANUFACTURE, AN ELEMENT OF TRANS FORMATION IS A PRE- REQUISITE. A PARTICULAR ITEM SHOULD UNDERGO CHANGES IN ITS COLOUR AND CHARACTER AND BECOME A SEPARATE AND NEW MARKETABLE COMMODITY AFTER THE MANUFACTURING PROCESS. IN THE INSTANT CASE, THE ASS ESSEE HAD SET UP HYDEL POWER AND THERMAL POWER PLANT, WHEREIN THE WATER AN D COAL GETS CONVERTED INTO ELECTRICITY THROUGH THE MANUFACTURING PROCESS. HENCE IT IS UNDISPUTED THAT ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 26 TRANSFORMATION FROM MERE COAL TO ELECTRICITY AND FR OM MERE WATER TO ELECTRICITY HAPPENS PURSUANT TO THE MANUFACTURING PROCESS AND T HE ELECTRICITY SO PRODUCED OR GENERATED BECOMES A SEPARATE MARKETABLE COMMODITY. THE VARIOUS APEX COURT DECISIONS RELIED UPON BY THE ASS ESSEE BEFORE THE LD IN THE CONTEXT OF LEVY OF SALES TAX ON THE SALE OF ELECTRI CITY HAD ALSO DECIDED THAT THE GENERATION OF ELECTRICITY AMOUNTS TO PRODUCTION OF ARTICLE OR THING. HENCE, IT COULD BE SAFELY CONCLUDED THAT THE ASSESSEE IS ENTI TLED FOR CLAIMING ADDITIONAL DEPRECIATION U/S 32(1)(IIA) OF THE ACT EVEN PRIOR T O THE AMENDMENT BROUGHT IN BY FINANCE ACT 2012. 15. THE LD DR IS HEARD WHO HAS RELIED ON THE ORDER OF T HE AO. 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. IN THIS REGARD, IT WOULD BE RELEVANT TO GO THROUGH THE REASONS RECORDED BY THE AO BEFORE ISSUANCE OF NOTICE U/S 14 8, THE ASSESSEES RESPONSE THERETO AND THE FINAL FINDINGS OF THE AO. 16.1 FIRSTLY, IN THE REASON RECORDED BEFORE ISSUE O F NOTICE U/S 148, THE AO HAS STATED AS UNDER: IN THIS CASE, ASSESSMENT U/S 43(3) OF THE IT ACT WAS PASSED ON 31.12.2010 AT RS. 84,65,41,700/- AS AGAINST RETURNED INCOME OF RS .76,09,97,363/-LATER ON IT IS REVEALED THAT THE ASSESSEE CLAIMED AND WAS ALLOWED DEDUCTION OF DEPRECIATION RS. 70.53 CRORE, WHICH INCLUDE RS. 18,16,98,068/- B EING THE AMOUNT OF ADDITIONAL DEPRECIATION ON THE ASSETS OF POWER GEN ERATING UNITS. AS THE ADDITIONAL DEPRECIATION WAS ALLOWABLE ONLY ON SUCH PLAN AND MACHINERY WHICH CAME UNDER THE CLAUSE (II) OF SECTION 32(I) OF INCO ME TAX ACT, WHILE THE ASSETS OF POWER GENERATING UNITS HAVE BEEN COVERED UNDER THE CLAUSE (I) OF THE IBID ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 27 SECTION, THEREFORE NO AMOUNT OF ADDITIONAL DEPRECIA TION WAS ALLOWANCE ON THE ASSETS OF MANGALAM POWER PLANT, MORAK UNIT AND MANG ALAM WIND POWER PLANT IN JAISALMER. 16.2 THE ASSESSEE HOWEVER OBJECTED TO THE ISSUANCE OF THE NOTICE AND VIDE ITS SUBMISSION DATED 21.09.2012 HAS SUBMITTED AS UNDER: - (1.1) IT MAY BE NOTED THAT SECTION 32(1) WAS AMEND ED W.E.F. 01.04.98 WHEREBY UNDER CLAUSE (I) OF THIS SECTION AN UNDERT AKING ENGAGED IN GENERATION OR GENERATION AND DISTRIBUTION OF POWER IS ALLOWED DEPRECIATION AT SUCH PERCENT AGE OF THE ACTUAL COST AS MAY BE PRESCRIBED. THE PRESCRIBED RATE IS GIVEN IN APPEND IX 1A OF THE RULES WHEREBY STRAIGHT LINE OF DEPRECIATION IS PROVIDED. CLAUSE(II) OF THIS SECTION PROVIDES FOR THE DEPRECIATION ON THE WRITTE N DOWN VALUE OF THE BLOCK OF ASSETS AS PER THE RATES PRESCRIBED IN NE W APPENDIX-1 . (1.2) AS PER SECOND PROVISO TO RULE 5(1A) AN UNDERT AKING SPECIFIED IN CLAUSE (I) OF SECTION 32 MAY, INSTEAD IF CLAIMING DEPRECATION SPECIFIED IN APPENDIX 1A AT ITS OPTION BE ALLOWED DEPRECIATION AS PER AP PENDIX-1, IF SUCH OPTION IS EXERCISED BEFORE THE DUE DATE FOR FURNI SHING THE RETURN OF INCOME U/S 139(10 & THE OPTION ONCE EXERCISED SHALL BE FINAL & SHALL APPLY TO ALL THE SUBSEQUENT A.YS. (1.3) FROM THE ABOVE PROVISIONS, I IS CLEAR THAT TH E UNDERTAKING ENGAGED IN GENERATION OF GENERATION & DISTRIBUTION OF POWER H AS AN OPTION TO CLAIM THE DEPRECIATION EITHER U/S 32(1)(I) OR 32(1)(II). WE HAVE INSTALLED A POWER PLANT AT MORAK & A WINDMILL AT JAISALMER IN T HE YEAR UNDER ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 28 CONSIDERATION & HAVE EXERCISED THE OPTION OF CLAIM ING THE DEPRECIATION U/S 32(1)(II). THEREFORE THE ADDITIONAL DEPRECIATI ON HAS RIGHTLY BEEN CLAIMED AND ALLOWED TO S IN THE ASSESSMENT FRAMED U/S 143(3). IT MAY BE NOTED THAT THERE IS NO PRESCRIBED FORM OR METHO D FOR EXERCISING THE OPTION & THEREFORE HE CLAIM MADE IN THE RETURN OF I NCOME AND THE AUDIT REPORT FILED ALONGWITH THE RETURN IS SUFFICIENT FO R EXERCISE OF THE OPTION REQUIRED UNDER SECOND PROVISO TO RULE 5(1A) AS HEL D BY THE ITAT CHENNAI BENCH IN THE CASE OF K.K.S.K.LEATHER PROCESSORS PVT . LTD. VS. ITO 126 ITD 215. (1.4) WITHOUT PREJUDICE TO ABOVE, THE DEPRECIATION U/S 32(1)(I) IS ALLOWABLE TO AN UNDERTAKING ENGAGED IN GENERATION OR GENERATI ON & DISTRIBUTION OF POWERS AT ITS OPTION. THIS ALTERNATIVE BASIS IS AV AILABLE ONLY FOR THOSE WHO ARE COVERED BY THE ELECTRICITY ACT & THE INDI AN ELECTRICITY RULES 1956. ANY OTHER INDUSTRIAL UNDERTAKING WHICH ESTAB LISHES A WINDMILL OF POWER PLANT FOR ITS CAPTIVE CONSUMPTION AND NOT FO R GENERATION & DISTRIBUTION OF POWER AND NOT GOVERNED BY THE ELEC TRICITY ACT ARE NOT COVERED U/S 32(1)(I). THEY HAVE TO CLAIM THE DEPRE CIATION U/S 32(1)(II) & THEREFORE ADDITIONAL DEPRECIATION IS OTHERWISE ALLO WABLE TO THEM U/S 32(IIA).. IN VIEW OF ABOVE, HE REASONS RECORDED B Y YOU REGARDING THE INCORRECT ALLOWANCE OF ADDITIONAL DEPRECATION IS LE GALLY NOT TENABLE& THEREFORE FOR THIS REASON THE NOTICE ISSUE U/S 148 IS BAD IN LAW. 16.3 THEREAFTER, THE AO COMPLETED THE REASSESSMENT PROCEEDINGS WHEREBY THE ASSESSEES CLAIM FOR ADDITIONAL DEPRECIATION WA S DISALLOWED BY HOLDING THAT IN VIEW OF THE AMENDED PROVISO TO SECTION 32(1)(IIA ),THE ASSESSEE IS ALLOWED ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 29 ADDITIONAL DEPRECIATION W.E.F. A.Y. 2013-14 AND IS NOT ELIGIBLE FOR ASSESSMENT YEAR UNDER CONSIDERATION. 16.4 ON PERUSAL OF THE ABOVE, IT SEEMS THAT THE A O WAS OF THE VIEW THAT THE ASSESSEE CASE IS COVERED U/S 32(1)(I) OF THE ACT WH ICH PROVIDES FOR DEPRECIATION TO AN UNDERTAKING ENGAGED IN GENERATION OR GENERAT ION & DISTRIBUTION OF POWER AT SUCH PERCENTAGE OF THE ACTUAL COST AS PRES CRIBED AND THEREAFTER REFERRING TO THE AMENDMENT WHICH HAS BEEN BROUGHT IN BY THE FINANCE ACT, 2012 WHEREIN THE PROVISIONS OF SECTION 32 (1)(IIA) HAS BEEN AMENDED TO PROVIDE FOR ADDITIONAL DEPRECIATION TO AN ASSESSEE ENGAGED IN BUSINESS OF GENERATION OR GENERATION & DISTRIBUTION OF POWERS, THE ASSESSEES CLAIM WAS DENIED HOLDING THE SAID AMENDMENT PROSPECTIVE IN NATURE. HOWEVER, THE ASSESSEES CASE IS THAT AS PER THE SECOND PROVISO TO RULE 5(1)(A) OF T HE IT RULES, AN UNDERTAKING SPECIFIED IN SECTION IN 32(1)(I) MAY INSTEAD OF CLA IMING DEPRECIATION AS PER APPENDIX IA (DEPRECIATION ON ACTUAL COSTON STRAIGHT LINE BASIS) CAN EXERCISE ITS OPTION TO CLAIM DEPRECIATION AS PER APPENDIX-1 (ON WRITTEN DOWN VALUE) AND SUCH OPTION HAS BEEN EXERCISED BY THE ASSESSEE BEFO RE THE DUE DATE OF FURNISHING OF RETURN OF INCOME U/S 139(1) OF THE AC T. 16.5 ON REVIEW OF PROVISIONS OF SECTION 32 READ WIT H THE RULES, IT IS CLEAR THAT AN UNDERTAKING ENGAGED IN GENERATION OR GENERATION & DISTRIBUTION OF POWER HAS AN OPTION TO CLAIM THE DEPRECIATION EITHER U/S 32(1)(I) OR 32(1)(II) OF THE ACT. THERE IS NO DISPUTE THAT THE ASSESSEE HAS CLAIMED D EPRECIATION U/S 32 (1)(II) OF THE ACT. THE AO HAS NOT DISPUTED THE SAID CLAIM OF THE ASSESSEE IN RESPECT OF CLAIM OF DEPRECIATION U/S 32(1)(II) OF THE ACT WHE REBY THE ASSESSEE HAS CLAIMED DEPRECIATION @ 80% ON THE ASSETS PERTAINING TO THE POWER PLANT AT MORAK AND WINDMILL AT JAISALMER IN THE YEAR UNDER CONSIDERATI ON. ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 30 16.6 WE NOW REFER TO THE PROVISIONS OF SECTION 32(1 )(II)(A) OF THE ACT WHICH READS AS UNDER: (IIA) IN THE CASE OF ANY NEW MACHINERY OR PLANT (O THER THAN SHIPS AND AIRCRAFT) WHICH HAS BEEN ACQUIRED AND INSTALLED AFTER THE 31 ST DAY OF MARCH, 2005BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE O R PRODUCTION OF ANY ARTICLE OR THING OR IN THE BUSINESS OF GENERATION OR GENER ATION AND DISTRIBUTION OF POWER, A FURTHER SUM EQUAL TO TWENTY PER CENT OF TH E ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UN DER CLAUSE (II). 16.7 A READING OF THE ABOVE PROVISIONS MAKES IT CLE AR THAT THE ADDITIONAL DEPRECIATION @ 20% OF THE ACTUAL COST OF MACHINERY & PLANT SHALL BE ALLOWED AS DEDUCTION UNDER CLAUSE (II). IN OTHER WORDS, OVER AND ABOVE THE DEPRECIATION CLAIMED AND ALLOWED U/S 32(1)(II) OF THE ACT, THE A SSESSEE SHALL BE ELIGIBLE FOR AN ADDITIONAL DEPRECIATION OF 20% OF THE ACTUAL COS T OF SUCH MACHINERY AND PLANT. IT FURTHER PROVIDES THAT A MACHINERY OF PLAN T SHOULD BE A NEW MACHINERY OR PLANT (OTHER THAN SHIPS AND AIRCRAFT) WHICH HAS BEEN ACQUIRED AND INSTALLED AFTER THE 31 ST DAY OF MARCH, 2005. IT FURTHER PROVIDES THAT THE ADDITIONAL DEPRECIATION IN NEW MACHINERY OR PLANT SHALL BE ALL OWED IN THE HANDS OF THE ASSESSEE WHO IS ENGAGED IN THE BUSINESS OF MANUFACT URE OR PRODUCTION OF ANY ARTICLE OR THING OR IN THE BUSINESS OF GENERATION O R GENERATION & DISTRIBUTION OF POWER. IN THE INSTANT CASE, IT IS NOT IN DISPUTE T HAT NEW MACHINERY OR PLANT HAS BEEN ACQUIRED AND INSTALLED AFTER THE 31 ST MARCH 2005. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS CLAIMED DEPRECIATION U/S 32(1 )(II) OF THE ACT. ONCE THE AO HAS ACCEPTED THE ASSESSEES CLAIM U/S 32(1)(II) OF THE ACT, WE DO NOT SEE A REASON WHY THE ASSESSEE SHOULD BE DENIED THE CLAIM OF ADDITIONAL DEPRECIATION ON THE SAME ASSETS U/S 32(1)(IIA) OF THE ACT. ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 31 16.8 IT IS NOW A SETTLED POSITION AS HELD BY THE HO NBLE SUPREME COURT AND THE VARIOUS CO-ORDINATE BENCHES OF THE TRIBUNAL THAT TH E PROCESS OF GENERATION OF ELECTRICITY IS AKIN TO MANUFACTURE OF AN ARTICLE O R THING, THE ASSESSEE IN THE INSTANT CASE SATISFY THE REQUIREMENT THAT IT IS EN GAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF AN ARTICLE OR THING. NOW COMING TO THE AMENDMENT WHICH HAS BEEN BROUGHT-IN BY THE FINANCE ACT 2012 W.E.F. A.Y. 2013-14WHEREBY THE ASSESSEE ENGAGED IN THE BUSINESS OF GENERATION OR GENERATION & DISTRIBUTION OF POWER HAVE SPECIFICALL Y BEEN INCLUDED AND HELD ELIGIBLE FOR CLAIM OF ADDITIONAL DEPRECIATION. IN OUR VIEW, THE SAID AMENDMENT CANNOT BE HELD TO DISENTITLE THE ASSESSEE TO CLAIM OF THE ADDITIONAL DEPRECIATION. VARIOUS COORDINATE BENCHES HAVE HELD THAT EVEN PRIOR TO THE AMENDMENT BROUGHT IN BY THE FINANCE ACT 2012, THE A SSESSEES ENGAGED IN GENERATION OR GENERATION AND DISTRIBUTION OF ELECT RICITY WERE HELD ELIGIBLE FOR ADDITIONAL DEPRECIATION. IN THIS REGARD, REFERENCE CAN BE DRAWN TO THE DECISION OF NTPC LTD. (SUPRA), M. SATISH KUMAR (SUPRA) AND D AMODAR VALLEY CORPN. (SUPRA). NO CONTRARY AUTHORITY HAS BEEN BROUGHT TO OUR NOTICE. IN OUR VIEW, THE SAID AMENDMENT CANNOT BE READ TO NEGATE THE SET TLED LEGAL POSITION THAT GENERATION OF ELECTRICITY IS AKIN TO MANUFACTURE OR PRODUCTION OF AN ARTICLE OR THING. AS HELD BY COORDINATE BENCH IN M SATISH KUM AR (SUPRA), THE SAID AMENDMENT BY THE FINANCE ACT 2012 GIVES AN IMPETUS TO THE VIEW THAT GENERATION OF ELECTRICITY IS A MANUFACTURING PROCES S. IN LIGHT OF ABOVE, THE ASSESSEE IS HELD ENTITLED TO THE ADDITIONAL CLAIM OF DEPRECIATION ON THE POWER PLANT AND THE WINDMILL INSTALLED DURING THE YEAR. HENCE THE GROUND OF THE DEPARTMENT IS DISMISSED. ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 32 17. NOW, COMING TO GROUND NO. 3 WHERE ON MERITS, THE RE VENUE HAS CHALLENGED THE ACTION OF LD CIT(A) IN DELETING THE DISALLOWANCE OF RS.1,41,57,121/- U/S 43B MADE BY THE AO. 17.1 BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASS ESSEE CLAIMED DEDUCTION OF RS. 1,41,57,121/- U/S 43B BEING PAYMENT MADE UNDER PROTEST AGAINST DEMAND OF SERVICE TAX AND LAND TAX AND BOOKED IN OTHER ADV ANCES. THE ASSESSEE FILED DETAILED EXPLANATION ON ALLOWABILITY OF THE CLAIM. HOWEVER, THE AO HELD THAT EXPLANATION OF THE ASSESSEE IS NOT ACCEPTABLE AND T HEREFORE DISALLOWED THE CLAIM OF THE ASSESSEE. 17.2 THE LD. CIT(A) DELETED THE DISALLOWANCE BY HOL DING THAT AO HAS SIMPLY DISALLOWED THE EXPENSES U/S 43B WITHOUT ANY FINDING . AS AGAINST THIS, THE ASSESSEE HAS GIVEN DETAILED SUBMISSION STATING THAT THESE EXPENSES WERE PROVIDED IN EARLIER YEARS AND CLAIMED IN CURRENT YE AR ON PAYMENT BASIS. 18. THE LD AR, AT THE OUTSET, SUBMITTED THE DETAILS OF PAYMENT OF RS.1,41,57,121/-UNDER CONSIDERATION AS UNDER:- (A) THE DEMAND OF SERVICE TAX OF RS. 13,59,941/- ON OUT WARD TRANSPORTATION OF CEMENT FROM FACTORY TO CONSUMER P LACE WAS PAID ON 09.06.2007 AS PER CESTAT ORDER DT. 16.04.2007. (B) LAND TAX OF RS. 54,30,165/- WAS PAID TO SUB REGISTR AR, CHECHAT & RS. 19,36,850/- WAS PAID TO SUB REGISTRAR, MERTA CITY O N 27.10.2007 AGAINST DEMAND FOR THE YEAR 06-07 IN VIEW OF THE OR DER OF RAJASTHAN HIGH COURT DT. 10.10.2007. ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 33 (C) LAND TAX OF RS. 54,30,165/- WAS PAID ON 07.02.2008 TO SUB REGISTRAR, CHECHAT AS PER THE ORDER OF RAJASTHAN HIGH COURT DT . 01.11.2007. 18.1 IT WAS SUBMITTED THAT ALL THESE ARE STATUTORY LIABILITIES. A STATUTORY LIABILITY IS ALLOWABLE IN THE YEAR IN WHICH IT ARIS ES NOTWITHSTANDING THE FACT THAT IT IS DISPUTED BY THE ASSESSEE AND NO ENTRIES ARE M ADE IN THE BOOKS OF ACCOUNTS [CIT VS. CENTRAL PROVINCES MANGANESE ORE CO. LTD. 1 12 ITR 734 (BOM.)]. HENCE, THESE PAYMENT ARE ALLOWABLE IN THE YEAR UNDER CONSI DERATION. 18.2 IT WAS FURTHER SUBMITTED THAT OTHERWISE ALSO B ECAUSE OF SPECIFIC PROVISION OF SECTION 43B, SUCH STATUTORY LIABILITY ARE ALLOWABLE ON PAYMENT BASIS EVEN IF EXPENDITURE IS NOT BOOKED IN BOOKS OF ACCOU NTS FOR WHICH RELIANCE IS PLACED ON FOLLOWING CASES:- ASSOCIATED PIGMENTS LTD. VS. CIT 234 ITR 589 (CAL.) (HC): IN THIS CASE, PURCHASE TAX WAS PAID BY ASSESSEE DUR ING THE YEAR WHICH RELATED TO AN EARLIER ACCOUNTING YEAR. THE SAME WAS CLAIMED AS DEDUCTION U/S 43B WHICH WAS DISALLOWED BY AO. IT WAS HELD THAT THERE IS NO PART OF S. 43B OR THE IT ACT ITSELF WHICH REQUIRES THAT WHEN DEDUCTION IS CLAIME D ON THE BASIS OF S. 43B, THE ASSESSEE MUST SATISFY THE TWIN TEST OF BOTH PROVING ACTUAL PAYMENT OF THE DUE TAX OR CESS IN THE PREVIOUS YEAR IN QUESTION AS WEL L AS SATISFYING THE DEPARTMENT THAT DUE PROVISION HAD BEEN MADE IN THE BOOKS IN RE GARD TO SUCH DUTY OR TAX FOR WHICH PAYMENT WAS MADE LATER ON. TO INTRODUCE THIS DOUBLE TEST WOULD BE WRITING WORDS INTO THE SECTION WHICH NEITHER THE TR IBUNAL NOR THE COURT IS ENTITLED TO DO. IN OTHER PARTS OF THE ACT, WHERE PR OVISION IN THE BOOKS IS GIVEN A SPECIAL STATUS, AND THAT IS SPECIFICALLY CALLED FOR BUT S. 43B IS NOT ONE SUCH SECTION. THE TRIBUNAL WAS NOT CORRECT IN LAW IN HOL DING THAT WHERE MERCANTILE ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 34 SYSTEM IS FOLLOWED DEDUCTION OF TAX UNDER S. 43B IS IMPERMISSIBLE UNLESS THE PROVISION WAS MADE IN THE YEAR IN WHICH THE LIABILI TY FOR TAX ACCRUED OR AROSE. CIT VS. DHARAMPAL SATYAPAL SONS (P.) LTD. 50 DTR 28 7 (DEL.) (HC): PAYMENT OF PRE-DEPOSIT BY THE ASSESSEE ON THE DIREC TION OF CESTAT. THOUGH THE CESTAT HAD DIRECTED THE ASSESSEE TO MAKE AFORES AID PAYMENT BY WAY OF PRE-DEPOSIT FOR STAY OF THE IMPUGNED DEMAND AND PRE -ADDITION FOR HEARING THE APPEAL, INDUBITABLY THIS DIRECTION WAS GIVEN KEEPIN G IN VIEW THE TOTAL EXCISE DUTY DEMAND RAISED BY THE ADJUDICATING AUTHORITY UN DER THE EXCISE LAW, THEREFORE, IT HAD DIRECT NEXUS AND CO-RELATION. FAC T IS THAT THE ASSESSEE HAD MADE THE PAYMENT TOWARDS EXCISE DUTY ALBEIT ON THE DIRECTION OF THE CESTAT AS PRE-DEPOSIT WHICH THEREFORE, WOULD NOT SEIZE TO HAV E THE CHARACTER OF EXCISE DUTY. ULTIMATE DECISION IN THE APPEAL WILL HAVE NO BEARING ON THE ISSUE. AMOUNT IS PAID AS A PART PAYMENT AGAINST THE EXCISE DUTY D EMAND RAISED BY THE EXCISE AUTHORITIES AND SINCE IT WAS A STATUTORY LIABILITY ON THAT PART, THE CONDITIONS STIPULATED IN SECTION 43B ARE DULY FULFILLED AND TH E ASSESSEE WAS ENTITLED TO CLAIM THE DEDUCTION THEREOF. CIT VS. HUGHES ESCORTS COMMUNICATIONS LTD. 14 DTR 3 46 (DEL.)(HC): ASSESSEE CLAIMED DEDUCTION U/S 43B ON THE GROUND TH AT IT WAS REQUIRED TO MAKE SPECIAL VALUE BRANCH DEPOSIT WITH THE CUSTOM A UTHORITIES. THE SAME WAS DISALLOWED BY AO. IT WAS HELD THAT LIABILITY WAS RE QUIRED TO BE DISCHARGED BY ASSESSEE ON PAYMENT AND THE ASSESSEE HAD NO OPTION BUT TO MAKE PAYMENT. THEREFORE SUCH PAYMENT CLEARLY FALLS WITHIN SEC. 43 B OF THE ACT. EURO RSCG ADVERTISING (P) LTD. VS. ACIT 85 DTR 272 (MUM.) (TRIB.): ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 35 ASSESSEE PAID SERVICE TAX ALONG WITH INTEREST AS PE R SHOW CAUSE NOTICE ISSUED BY SERVICE TAX DEPARTMENT. AO DISALLOWED THE SAME O N THE GROUND THAT LIABILITY HAS NOT CRYSTALLIZED DURING THE YEAR AS THERE WAS N O FORMAL WRITTEN ORDER. IT WAS HELD THAT FOR CLAIM OF DEDUCTION OF SUM PAID AGAINS T LIABILITY OF TAX, DUTY, CESS, FEE, ETC. THE YEAR OF PAYMENT IS RELEVANT WHICH IS TO BE TAKEN INTO ACCOUNT. THE YEAR IN WHICH ASSESSEE INCURRED LIABILITY TO PAY SU CH TAX, DUTY ETC. HAS NO RELEVANCE AND CANNOT BE LINKED IN THE NATTER OF GIV ING BENEFIT OF DEDUCTION U/S 43B. THEREFORE, THE AMOUNT OF SERVICE TAX ALONG WIT H INTEREST PAID BY ASSESSEE IS ALLOWABLE IN VIEW OF PROVISIONS OF SEC. 43B. 19. THE LD DR IS HEARD WHO HAS RELIED ON THE ORDER OF T HE ASSESSING OFFICER. 20. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. THE DEMAND OF SERVICE TAX OF RS. 13,59, 941/- WAS PAID ON 09.06.2007 AS PER CESTAT ORDER DT. 16.04.2007. THE LAND TAX OF RS. 54,30,165/- WAS PAID ON 29.10.2007 &LAND TAX OF RS. 19,36,850/- WAS ON 27.10.2007 IN VIEW OF THE ORDER OF HONBLE RAJASTHA N HIGH COURT DT. 10.10.2007. FURTHER, THE LAND TAX OF RS. 54,30,165/ - WAS PAID ON 07.02.2008 AS PER THE ORDER OF HONBLE RAJASTHAN HIGH COURT DT. 0 1.11.2007. THE SERVICE TAX AND LAND TAX ARE STATUTORY LIABILITIES WHICH ARE PA ID DURING THE YEAR AS PER THE ORDERS OF THE CESTAT AND HONBLE RAJASTHAN HIGH COU RT. THESE ARE STATUTORY LIABILITIES WHICH PERTAIN TO THE BUSINESS CARRIED O N BY THE ASSESSEE. THE ASSESSEE CANNOT BE DENIED A DEDUCTION IN RESPECT OF THESE PAYMENTS MERELY ON ACCOUNT OF THE FACT THAT THESE ARE PAYMENTS IN RESP ECT OF MATTERS WHICH ARE CONTESTED BEFORE THE AUTHORITIES AND NO EXPENDITURE IS BOOK IN THE PROFIT AND LOSS ACCOUNT. THE DECISION OF HONBLE DELHI HIGH C OURT IN CASE OF DHARAMPAL SATYAPAL SONS (SUPRA) SUPPORTS THE CASE OF THE ASSE SSEE. IN LIGHT OF ABOVE, WE ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 36 UPHELD THE ORDER OF THE LD CIT(A) IN DELETING THE D ISALLOWANCE OF RS.1,41,57,121/- U/S 43B MADE BY THE AO. IN THE R ESULT, THE GROUND TAKEN BY REVENUE IS DISMISSED. ITA NO. 681/JP/14 AY 2009-10 IN THIS APPEAL, IDENTICAL GROUNDS OF APPEAL UNDER I DENTICAL FACTS AND CIRCUMSTANCES OF THE CASE HAVE BEEN TAKEN UP BY THE REVENUE WHEREIN IN GROUND NO. 1, THE REVENUE HAS CHALLENGED THE ACTION OF THE LD CIT(A) IN HOLDING THAT REASSESSMENT PROCEEDINGS ARE BAD IN LAW AS THE RE WAS MERELY CHANGE IN OPINION IN RESPECT OF ASSESSEES CLAIM OF ADDITIONA L DEPRECIATION ON POWER PLANT AND WINDMILL, AND ALLOWANCE OF DEDUCTION UNDE R SECTION 43B. FURTHER, IN GROUND NO. 2 AND 3, ON MERITS, THE REVENUE HAS CHAL LENGED THE ACTION OF LD CIT(A) IN DELETING THE DISALLOWANCE TOWARDS CLAIM O F ADDITIONAL DEPRECIATION AND DEDUCTION UNDER SECTION 43B. OUR DISCUSSIONS A ND DECISION TAKEN IN RESPECT OF ITA NO. 82/JP/14 SHALL ACCORDINGLY APPLY MUTATIS MUTANDIS TO THIS APPEAL. THE GROUNDS TAKEN BY REVENUE ARE ACCORDING LY DISMISSED. IN THE RESULT BOTH THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30/01/ 2017. SD/- SD/- (KUL BHARAT ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 30/01/2017 PILLAI VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: ITA NO. 82/JP/14 & 681/JP/14 ACIT, CIRCLE-1, KOTA VS. M/S MANGALAM CEMENT LTD. K OTA 37 1. VIHYKFKHZ@ THE APPELLANT- THE ACIT, CIRCLE-1, KOTA 2. IZR;FKHZ@ THE RESPONDENT- M/S MANGALAM CEMENT LTD. 3. VK;DJ VK;QDR@ CIT KOTA 4. VK;DJ VK;QDRVIHY@ THE CIT(A)-KOTA 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.82 & 681/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR.