The ACIT, Circle-1(1)(1), Vadodara V. Gujarat Green Revolution Co. Ltd., Vadodara

ITA 850/AHD/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0803 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 16-12-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 06-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Keywords: Depreciation
• Section: 143(3); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER) ITA. NO: 850/AHD/2018 (ASSESSMENT YEAR: 2014-15) THE ASSTT. CIT, CIRCLE- 1(1)(1), VADODARA V/S GUJARAT GREEN REVOLUTION CO. LTD. P.O. FERTILIZERNAGAR, VADODARA- 391750 (APPELLANT) (RESPONDENT) PAN: AABCG0798F APPELLANT BY : SHRI SURENDRA KUMAR, CIT/ DR RESPONDENT BY : MS. AMRIN PATHAN, A.R. ( )/ ORDER DATE OF HEARING : 16 -12-201 9 DATE OF PRONOUNCEMENT : 17 -12-2019 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE LD. CIT(A)-,1 VADODARA DATED 31.01.2018 PERTAINING TO A.Y. 2014-15 AND FOLLOWING GROUNDS HAVE BEEN TAKEN: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY A.O. ON ISSU E OF CLAIM OF DEPRECIATION U/S. ITA NO. 850/ AHD/2018 . A.Y. 2014-15 2 32 OF THE I.T. ACT, 1961 WITHOUT CONSIDERING THE FA CT ON RECORD AS THE ASSETS WERE RELIED FROM THE ACTIVE USE THE AMOUNT WAS REQUIRED TO BE REDUCED FROM SUCH BLOCK OF ASSETS AND DEPRECIATION CLAIMED ON SUCH AS SETS BY THE ASSESSEE SHOULD NOT BE ALLOWED. 2.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ENTIRE DISALLOWANCE MADE ON A CCOUNT OF UNSPENT GRANT WITHOUT APPRECIATING THE A.OS FINDINGS IN THE ASSE SSEE ORDER U/S 143(3) THE I.T. ACT, 1961. 2. FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PROVID ING SERVICES AS NODAL AGENCY APPOINTED BY GOVERNMENT OF GUJARAT FOR IMPLEMENTATIO N OF MICRO-IRRIGATION SYSTEM. 3. AT THE TIME OF HEARING, LD. A.R. SUBMITTED AN ORDER O F THIS BENCH IN ASSESSEES OWN CASE IN ITA NO. 852 & 853/AHD/2016 FOR A.YS. 2009-10 & 2012-13 AND STATED THAT THIS BENCH HAS ALREADY GRANTED RELIEF TO THE ASSESS EE WITH FOLLOWING OBSERVATIONS: 5. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMP UGNED ORDER. THE ASSESSEE COMPANY IS A NODAL AGENCY OF GOVERNMENT OF INDIA FOR IMPLEMENTING MIRCO IRRIGATION SCHEMES. THE BENEFICIARIES OF TH E GRANTS ARE THE FARMERS AND NOT THE COMPANY. THE FUNDS ARE TO BE UTILIZED ONL Y FOR SPECIFIC PURPOSE AS DIRECTED BY THE GOVERNMENT. UNSPENT GRANT NEEDS TO BE REFUNDED TO THE GOVERNMENT OR GETS ADJUSTED IN THE SUCCEEDING GRANT . THE UNSPENT GRANT IS SHOWN AS LIABILITY IN ACCOUNTS. THE COMPANY RECEIVE S GRANTS UNDER THE CENTRAL SPONSORED SCHEME OF THE GOVERNMENT WHEREIN THE AMOU NT ALLOCATED TO THE COMPANY IS TREATED AS CAPITAL OUTLAY. SINCE THE GRA NTS ARE FOR SPECIFIC PURPOSE AND CANNOT BE USED OTHERWISE THEREFORE ASSESSEE CON TENTION I8S SAME CANNOT BE CONSIDERED AS INCOME OF THE COMPANY. 6. AT THE TIME OF HEARING, LD. A.R. STATED THAT ASS ESSEE COMPANY IS GETTING 5% OF THE TOTAL GRANT AS AN ADMINISTRATIVE EXPENSES AND FOR THAT INCOME TAX ARE DULY PAID ON REGULAR BASIS. AND IN SUPPORT OF ITS C ONTENTION, ASSESSEE CITED AN ORDER OF ALLAHABAD BENCH OF ITAT IN THE CASE OF U.P . EXPORT CORPORATION LTD. 23 ITD 389 (ALL.) WHEREIN IT IS HELD: '11. WHENEVER THE ASSESSEE RECEIVED GRANTS FROM THE STATE GOVERNMENT, THEY WERE CREDITED IN THE ACCOUNTS OPENED UNDER THE HEAD S UNDER WHICH THEY WERE RECEIVED, IF ANY EXPENDITURE WAS INCURRED, IT WAS N OT DEBITED BY THE ASSESSEE TO ITS PROFIT AND LOSS ACCOUNT BUT IT WAS DEBITED TO T HE ACCOUNT OF THE GRANT. THE ITA NO. 850/ AHD/2018 . A.Y. 2014-15 3 GRANTS 'HAD BEEN GIVEN BY THE GOVERNMENT FOR CERTAI N SPECIFIED PURPOSES. THE UNSPENT AMOUNT OF THE GRANT WAS REQUIRED TO BE RETU RNED TO THE GOVERNMENT. AS MENTIONED ABOVE, THE ASSESSEE HAD RECEIVED GRANTS U NDER VARIOUS HEADS AMOUNTING TO RS. 66,14,544. THE ASSESSEE HAD SPENT BY THE END OF THE YEAR ONLY A SUM OF RS. 2,60,015. HENCE, IN THE VARIOUS ACCOUNTS , THERE WERE CREDIT BALANCES TOTALLING TO RS. 63,84,529 IN ALL. THE ASSESSEE HAD TAKEN THESE CREDIT BALANCES TO THE BALANCE SHEET AND HAD SHOWN THEM AS AMOUNTS OUT STANDING IN THE RESPECTIVE ACCOUNTS OF GRANTS. THE DEPARTMENT IS OF THE VIEW T HAT THESE CREDIT BALANCES WERE INSTEAD REQUIRED TO BE TAKEN TO THE PROFIT AND LOSS ACCOUNT.' THE SIMPLE YARDSTICK IS THAT IF THE CREDIT BALANCE OF ANY ACCO UNT IS PAYABLE, IT IS OBVIOUSLY A LIABILITY AND HENCE IT SHOULD APPEAR IN THE BALANCE SHEET. ON THE OTHER HAND, IF IT IS NOT PAYABLE, IT IS A GAIN AND HENCE SHOULD BE TA KEN TO THE PROFIT AND LOSS ACCOUNT. AS WOULD BE CLEAR FROM THE ABOVE DISCUSSIO N, THESE AMOUNTS BEING PAYABLE BY THE ASSESSEE TO THE STATE GOVERNMENT, HA D CONSTITUTED THE LIABILITY AND HENCE THE ASSESSEE HAD RIGHTLY TAKEN THESE AMOU NTS TO THE BALANCE SHEET. THESE AMOUNTS COULD NOT BE CONSIDERED TO BE THE GAI N OF THE ASSESSEE. WE HAVE ALREADY STATED ABOVE AS TO HOW THE VARIOUS CASES, O N WHICH THE CIT(A) HAD RELIED TO COME TO THE CONCLUSION THAT THESE AMOUNTS WERE T AXABLE BEING THE PROFIT OF THE ASSESSEE, ARE IRRELEVANT TO THE ISSUE BEING CON SIDERED HERE. THE ASSESSEE HAD AT NO STAGE DEBITED THE EXPENDITURE WHICH HAD BEEN INCURRED BY IT ON THE SPECIFIED PROJECTS FOR WHICH THE GRANTS HAD BEEN RE CEIVED TO ITS PROFIT AND LOSS ACCOUNT. HENCE, WHEN THE ASSESSEE HAD NOT DEBITED T HE EXPENDITURE TO ITS OWN PROFIT AND LOSS ACCOUNT, THE QUESTION OF CREDITING THE AMOUNTS RECEIVED BY WAY OF GRANTS TO ITS PROFIT AND LOSS ACCOUNT DOES NOT ARIS E. WE HAVE BEEN INFORMED THAT IN SUBSEQUENT ASSESSMENT YEARS, WHEN THE EXPENDITUR E WAS IN FACT INCURRED, NO DEDUCTION FOR SUCH EXPENDITURE HAD BEEN ALLOWED BY THE DEPARTMENT IN THE COMPUTATION OF THE TAXABLE INCOME OF THE ASSESSEE F OR 'THOSE YEARS. HENCE, IF THE ENHANCEMENT MADE BY THE CIT(A) FOR THE YEAR UNDER C ONSIDERATION WAS TO BE CONFIRMED, THE RESULT WOULD BE THAT THE ASSESSEE WO ULD BE ASKED UPON TO PAY TAX ON THE AMOUNTS WHICH HAD, IN FACT, NEVER COME TO BE LONG TO THE ASSESSEE AND AT THE SAME TIME NO DEDUCTION WOULD BE ADMISSIBLE TO T HE ASSESSEE WHEN THE ASSESSEE INCURS EXPENDITURE FOR THE IMPLEMENTATION OF THE SCHEMES FOR WHICH THE GRANTS HAD BEEN RECEIVED. THE AMOUNTS OF THE GRANTS HAD NEVER BECOME THE PROPERTY OF THE ASSESSEE; THERE WAS NO INCREASE IN THE NET ASSETS OF THE ASSESSEE ON ACCOUNT OF THE RECEIPT OF THE GRANTS. UNDER THE CIRCUMSTANCES, WE FAIL TO UNDERSTAND AS TO HOW THE AMOUNT OF THE GRANTS CAN B E CONSIDERED TO BE THE INCOME OF THE ASSESSEE. THESE RECEIPTS ARE NOT OF I NCOME NATURE. WE HENCE SET ITA NO. 850/ AHD/2018 . A.Y. 2014-15 4 ASIDE THE ORDER OF THE CIT(A) ON THIS BEHALF. WE VA CATE THE ENHANCEMENT OF RS. 63,84,529/- AS MADE BY THE CIT(A).' 7. APART FROM THAT LD. A.R. CITED ONE MORE ORDER OF AHMEDABAD BENCH OF ITAT IN THE CASE OF GUJARAT HANDICRAFT & HANDLOOM D EVELOPMENT CORPORATION LTD. 488 (AHD.) IN THIS CASE, CO-ORDINATE BENCH HAS HELD AS UNDER:- '4, BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE COMMISSIONER (APPEALS). IT WAS CONTENDED, ON BEHALF OF THE ASSESSEE, THAT THE ENTIRE SHARE CAPITAL WAS FULLY OWNED BY THE GOVERNM ENT OF GUJARAT WHICH HAS SET UP THE CORPORATION WITH THE PRIMARY OBJECT OF DEVEL OPMENT AND ENCOURAGEMENT OF TRIBAL HANDICRAFTS IN THE STATE OF GUJARAT, PART ICULARLY ITS BACKWARD AND UNDEVELOPED AREAS. AS THE MAIN OBJECT OF THE CORPOR ATION IS TO DEVELOP AND ENCOURAGE TRIBAL HANDICRAFTS BY DEALING IN SUCH ART ICLES, THE STATE GOVERNMENT HAD, DURING THE YEARS UNDER CONSIDERATION, PROVIDED FUNDS TO THE CORPORATION BY WAY OF LOANS AND SUBSIDIES WITH A VIEW THAT THE MAI N OBJECT OF THE CORPORATION WAS NOT DEFEATED FOR WANT OF FINANCE. THE SAID LOAN S AND SUBSIDIES WERE GRANTED BY THE GOVERNMENT FOR DIFFERENT OBJECTS AND AIMS IN VARIOUS RESOLUTIONS PASSED BY THE GOVERNMENT. IN SOME CASES THE GOVERNMENT HAD CO NVERTED SUBSIDIES GRANTED EARLIER INTO LOANS. THAT APART THERE WAS A SPECIFIC STIPULATION THAT THE AMOUNTS OF UNSPENT SUBSIDIES HAVE TO BE REFUNDED TO THE GOVERN MENT IN THE FOLLOWING YEAR. VARIOUS RESOLUTIONS IN THIS CONNECTION WERE PRODUCE D. THUS, ON THE BASIS OF THE RESOLUTIONS IT WAS POINTED OUT FIRSTLY, THAT THE SU BSIDIES WERE GRANTED BY THE GOVERNMENT FOR SPECIFIC .OBJECT OR PURPOSE. SECONDL Y, THE SAME WERE REQUIRED TO BE UTILISED ONLY FOR THE SAID PURPOSE AND OBJECTS. THIRDLY, THE UNSPENT SUBSI-DIES WERE REQUIRED TO BE REFUNDED TO THE GOVERNMENT AND LASTLY, THE ASSESSEE RECEIVED THE AMOUNTS AS SUBSIDY AS MERELY A TRUSTEE FOR THE GOVERNMENT WHO WAS REQUIRED TO UTILISE THE AMOUNT AS PER THE DIREC TIONS OF THE GOVERNMENT FROM TIME TO TIME. IT WAS ALSO POINTED OUT THAT THE ASSE SSEE HAD NO RIGHT OVER THE FUNDS AT ALL. RELYING ON THE DECISION IN THE CASE O F SEAHAM HARBOUR DOCK CO. V. CROOK (INSPECTOR OF TAXES) 16 TC 333, IT WAS POINTE D OUT THAT UNEMPLOYMENT GRANT MADE BY THE GOVERNMENT DEPARTMENT WAS NOT TRE ATED AS INCOME., THUS, ON THE PRINCIPLE LAID DOWN IN THIS JUDGMENT, IT WAS UR GED THAT THE GRANTS GIVEN BY THE GOVERNMENT FOR ENCOURAGEMENT OF HANDICRAFTS IN TRIB AL AREA, WHICH DID NOT RELATE TO THE ASSESSEE'S OWN BUSINESS ACTIVITIES, WERE NOT EXIGIBLE TO TAX AS INCOME. THE COMMISSIONER (APPEALS) OBSERVED THAT FOR THE ASSESS MENT YEAR 1977-78, THE ASSESSEE HAD RECEIVED A SUM OF RS: 8,02,000 OUT OF WHICH A SUM OF RS, 1,65,715 WAS SPENT AND THE BALANCE AMOUNT OF RS. 6,36,285 WA S TREATED AS THE ASSESSEE'S INCOME EVEN THOUGH A SUM OF RS. 30,349 WAS SPENT FO R ACQUIRING ASSETS FOR THE ITA NO. 850/ AHD/2018 . A.Y. 2014-15 5 PURPOSE OF THE SCHEME. SIMILARLY, UNDER DIFFERENT S CHEMES, THE 'ASSESSEE HAD RECEIVED GRANT TOTALLING RS. 19,09,250 FOR THE ASSE SSMENT YEAR 1977-78 AGAINST WHICH THE EXPENDITURE INCURRED WORKED OUT TO RS. 5, 81,426. THE ITO HAD CONSIDERED THE ENTIRE AMOUNT OF SUBSIDY AS RECEIPTS WITHOUT ALLOWING ANY EXPENDITURE. HE HAS, THUS, TREATED THE GROSS AMOUNT AS INCOME OF THE ASSESSEE FOR THE YEAR. THE COMMISSIONER (APPEALS) ACCEPTED T HE SUBMISSION MADE BY THE ASSESSEE THAT THE ASSESSEE WAS ONLY A MEDIUM THROUG H WHICH THE GOVERNMENT IMPLEMENTED ITS SCHEME OF ENCOURAGING TRIBAL HANDIC RAFTS INDUSTRY. THE AMOUNTS GRANTED BY THE GOVERNMENT, THUS, WAS FOR ENCOURAGIN G CAPITAL PROJECT IN FORM OF SETTING UP TRAINING CENTRES, MUSEUM, ETC. THUS, THE ASSESSEE WAS ONLY ACTING IN A REPRESENTATIVE CAPACITY OR ON BEHALF OF THE GOVERNM ENT SO TO SAY AS A TRUSTEE QUA GRANTS AND SUBSIDIES GRANTED BY THE WAS FULLY ACCOU NTABLE TO THE GOVERNMENT AND THE UTILISATION OF THE FUNDS WAS SUBJECT TO CHE CKS APPLIED BY THE GOVERNMENT. THAT, THE GOVERNMENT HAD RETAINED CONTROL OVER UTIL ISATION OF THE FUNDS AND IN SUCH CIRCUM- STANCES THE SAID AMOUNT COULD NOT BE T REATED AS TRADING RECEIPTS IN THE HANDS OF THE ASSESSEE. AFTER SETTING OUT, VARIO US REASONS IN DETAIL, THE COMMISSIONER (APPEALS) CONCLUDED THUS: 1. THE ASSESSEE HAS NO CONTROL OVER THE FUNDS AS TH E SAME WERE TO BE SPENT AS DIRECTED BY THE GOVERNMENT. 2. THE ASSESSEE HAS TO ACCOUNT TO THE. GOVERNMENT FOR THE EXPENDITURE, INCURRED. 3. THE ASSESSEE IS NOT ENTITLED TO RETAIN 'THE PROF ITS ACCRUING FROM THE VARIOUS SCHEMES. 4. THE ASSESSEE IS REQUIRED TO REFUND THE UNSPENT A MOUNTS. HE, THUS, HELD THAT THE AMOUNTS IN QUESTION DID NOT FORM PART OF THE A SSESSEE'S TRADING RECEIPTS AND WERE NOT TAXABLE AS INCOME FOR THE RESPECTIVE YEARS UNDER CONSIDERATION. THE COMMISSIONER (APPEALS), THUS, DELETED THE SAID ADDITIONS.' 5.2.3 THE FACTS OF THE PRESENT CASE ARE IDENTICAL T O THE FACTS IN THE DECISION IN THE CASE OF GUJARAT HANDICRAFT & HANDLOOM DEVELOPMENT C ORPORATION LTD. '(SUPRA). IN THE PRESENT CASE, THE GRANT RECEIVED BY THE APPE LLANT HAS NOT BEEN OFFERED AS INCOME BY IT IN ITS PROFIT & LOSS ACCOUNT. THE GRAN T HAS NOT BEEN RECEIVED FOR THE NORMAL TRADING ACTIVITY BY THE APPELLANT. IT HAS RE CEIVED THE GRANT FOR IMPLEMENTING MICRO IRRIGATION SCHEME ON BEHALF OF T HE .GOVERNMENT AND SUCH GRANT HAS TO BE SPENT ONLY FOR THE SPECIFIC PURPOSE . THE UNSPENT AMOUNT OF GRANT IS REQUIRED TO BE RETURNED BACK ALONGWITH INTEREST. ALL THESE FACTS WERE BROUGHT TO THE NOTICE OF THE AO BY THE APPELLANT DURING THE CO URSE OF THE ASSESSMENT PROCEEDINGS ITSELF, STILL THE AO HAS TREATED THE AM OUNT AS INCOME OF THE APPELLANT BY REFERRING TO THE AS-12 OF ICAI WHICH IS EVIDENTL Y NOT APPLICABLE TO THE TYPES OF ITA NO. 850/ AHD/2018 . A.Y. 2014-15 6 GRANT AS RECEIVED BY THE APPELLANT. SUCH GRANT HAS BEEN MADE TO THE APPELLANT UNDER THE HEAD 4702 'CAPITAL OUTLAY ON KINOR IRRIGA TION'. SINCE THE AMOUNTS RECEIVED BY THE APPELLANT ARE ON ACCOUNT OF CAPITAL OUTLAY OF THE GOVERNMENT OF INDIA, THE SAME UNDER NO CIRCUMSTANCES CAN BE CLASS IFIED AS REVENUE IN NATURE. 5.2.4 THE AO HAS ALSO STATED THAT THE UNSPENT PORTI ON OF GRANT IS NOT RETURNED TO THE GOVERNMENT BUT IT IS TREATED AS THE BALANCE FUN D AND CONSIDERED OR ADJUSTED WHILE ALLOCATING GRANT FOR THE SUCCEEDING OR NEXT Y EAR. BUT SUCH TYPE OF TREATMENT IN WHICH THE UNUTILIZED GRANT IS BEING ADJUSTED AGA INST THE GRANT TO BE GRANTED BY THE GOVERNMENT FOR SUCCEEDING YEAR TO THE ASSESSEE, AMOUNTS TO CONSTRUCTIVE REFUND OF THE UNSPENT AMOUNT OF GRANT, AS THE UNSPE NT AMOUNT OF GRANT IS GOING TO REDUCE THE AMOUNT OF GRANT TO BE RECEIVED FROM T HE GOVERNMENT IN THE SUCCEEDING YEARS. THUS, THE INFERENCE DRAWN BY THE AO IS NOT AS PER ACCOUNTING POLICY AND LAW. THUS THE ISSUE IS COVERED IN FAVOUR OF THE APPELLANT BY THE DECISIONS OF BENCHES OF ITAT AS DISCUSSED ABOVE. AC CORDINGLY, THE ADDITION MADE BY THE AO OF THE UNSPENT AMOUNT OF GRANT AS INCOME -OF THE APPELLANT IS DIRECTED TO BE DELETED. 8. SINCE ASSESSEE COMPANY IS A MERELY IMPLEMENTING AGENCY OF THE GOVERNMENT AND GIVING SUBSIDIES TO FARMERS AND UNSP ENT AMOUNT IS IF ANY IS KEPT FOR SUCCEEDING YEARS FOR DISBURSAL IN FAVOUR OF BEN EFICIARIES/FARMERS AS PER THE GUIDELINES OF THE GOVERNMENT AND IN PARITY WITH THE ABOVE SAID ORDERS OF CO- ORDINATE BENCH, WE DISMISS THIS GROUND OF THE REVEN UE. 9. SO GAR NEXT GROUND IS CONCERNED WITH REGARD TO I NTEREST EARNED UNUTILIZED GRANT IS CONCERNED, ASSESSEE CONTENDED BEFORE THE A O THAT ONLY THE AMOUNT OF RS.31,61,000/- HAD BEEN DEBITED IN THE PROFIT & LOS S A/C OF THE CURRENT YEAR UNDER THE HEAD 'FINANCIAL EXPENSES BEING INTEREST ON UNU TILIZED BALANCE GRANT. DESPITE THIS THE AO HAS MADE ADDITION OF RS. 2,13,61,441/- WHICH INCLUDES THE PROVISIONS FOR INTEREST TO BE PAID TO GOVERNMENT MADE IN THE E ARLIER YEARS AMOUNTING TO RS. 1,69,27,000/- AND ANOTHER PROVISION MADE IN THE CUR RENT YEAR OF RS. 12,73,441 WHICH HAVE NOT BEEN DEBITED IN PROFIT & LOSS A/C. O F THE CURRENT YEAR. AN AMOUNT WHICH IS NOT DEBITED IN PROFIT & LOSS A/C. OR HAS N OT BEEN CLAIMED AS A DEDUCTION IN THE COMPUTATION OF TOTAL INCOME OF A PARTICULAR YEAR, CANNOT BE DISALLOWED WHILE ASSESSING THE TOTAL INCOME OF THAT YEAR. THER EFORE, IN OUR CONSIDERED OPINION, LD. CIT(A) HAS PASSED REASONED ORDER. AND IN SUPPORT OF ITS CONTENTION, LD. A.R. CITED AN ORDER OF GUJARAT HIGH COURT IN TH E MATTER OF INFORMATICS LTD. 36 TAXMANN.COM 272 (GUJ.) WHEREIN IT IS HELD: ITA NO. 850/ AHD/2018 . A.Y. 2014-15 7 '11. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS C AN BE NOTED FROM THE RECORD, THE ASSESSEE NEEDED TO PAY THE SPECIFIED AMOUNT OF EXPENDITURE, BEING THE INTEREST AMOUNT, AT THE RATE OF 6%, TO BE PAID TO T HE DEPARTMENT OF THE SCIENCE AND TECHNOLOGY. THE LIABILITY WAS NECESSARILY ASCER TAINED FOR HAVING COME IN A PACKAGE, GIVEN TO THE ASSESSEE WHILE DISBURSING THE AMOUNT/GRANT AS ALSO BY WAY OF BOTH GOVERNMENT RESOLUTIONS AS DISCUSSED ELABORA TELY BY BOTH THE CIT(A) AND THE TRIBUNAL AND, THEREFORE, BY NO STRETCH OF IMAGI NATION IT CAN BE SAID THAT THERE WAS UNCERTAIN OR UNDETERMINED LIABILITY. THE ASSESS EE-COMPANY IS A GOVERNMENT UNDERTAKING INCORPORATED FOR IMPLEMENTATION OF INFO RMATION TECHNOLOGY (IT) POLICIES IN THE STATE OF GUJARAT. IT ALSO PROVIDES ITS SERVICES TO VARIOUS DEPARTMENTS ON COMMISSION BASIS FOR PROVIDING HARDW ARE AND SOFTWARE. AS THE GOVERNMENT RESOLUTIONS AS MENTIONED HEREINABOVE SPE CIFY THAT THE UNSPENT AMOUNT OF THE GRANT SHALL BEAR THE INTEREST AT THE RATE OF 6% PER ANNUM AND WHEN APPROPRIATE PROVISION HAD BEEN MADE BY THE ASS ESSEE MAKING A REQUEST THEREAFTER TO TREAT THE SAID AMOUNT AS EXPENDITURE UNDER SECTION 37(1) OF THE INCOME TAX ACT, BOTH THE AUTHORITIES HAVE RIGHTLY H ELD THAT SUCH PROVISIONS SINCE WAS MEANT FOR THE PURPOSE OF BUSINESS, THE ASSESSIN G OFFICER COULD NOT HAVE HELD THAT THE PERCENTAGE (%) SPECIFIED IN THE GOVERNMENT RESOLUTION BY WAY OF INTEREST ON UNSPENT AMOUNT WAS A CONTINGENT EXPENDITURE. THE SE AUTHORITIES HAVE RIGHTLY GRANTED THE DIRECTION OF DEDUCTION OF SUCH AMOUNT U NDER SECTION 37(1) OF THE INCOME TAX ACT TO THE ASSESSEE.' 10. IN VIEW OF ABOVE, WE ARE NOT INCLINED TO GIVE ANY KIND OF RELIEF TO THE REVENUE. 11. NOW WE COME TO GROUND NO. 3 WITH REGARD TO CLAI M OF DEPRECIATION U/S. 32 OF THE INCOME TAX ACT. 12. AS PER A.O. ORDER THAT OUT OF GROSS BLOCK OF RS .L,14,82,145/- OF PLANT AND MACHINERY, RS. 1,04,795/- WORTH OF PLANT AND MACHIN ERY WAS IN ACTIVE USE. THE DRIP IRRIGATION SYSTEM AND GREEN HOUSES WERE COMPLE TELY REMOVED FROM ACTIVE USE. HOWEVER, NO IMPACT OF THE SAME WAS GIVEN WHILE CLAIMING DEPRECIATION ALLOWANCE U/S 32 OF THE ACT. SINCE THE ASSETS WERE RETIRED FROM THE ACTIVE USE, THE AMOUNT WAS REQUIRED TO BE REDUCED FROM SUCH BLOCK O F ASSETS AND DEPRECIATION CLAIMED ON SUCH ASSETS SHOULD BE DISALLOWED BY THE ASSESSING OFFICER. 13. AS PER SECTION 50 OF THE ACT ONLY THE CONSIDERA TION RECEIVED BY THE ASSESSEE ON ACCOUNT OF SALE OF AN ASSET IS TO BE RE DUCED FROM THE WRITTEN DOWN ITA NO. 850/ AHD/2018 . A.Y. 2014-15 8 VALUE OF THE BLOCK OF ASSETS TO WHICH THE SOLD ASSE T BELONGS TO. IF NO CONSIDERATION IS RECEIVED, EVEN IF THE PARTICULAR ASSET IS DISCAR DED, NOTHING BECOMES DEDUCTIBLE FROM THE BLOCK OF ASSETS AND ASSESSEE CONTINUES TO CLAIM DEPRECIATION ON THE ORIGINAL WRITTEN DOWN VALUE SO LONG AS THE BLOCK DO ES NOT CEASE TO EXIST. THEREFORE, IN OUR CONSIDERED OPINION, LD. CIT(A) HA S PASSED REASONED ORDER AND ASSESSEE HAS RIGHTLY CLAIMED DEPRECIATION ON THE WD V OF THE BLOCK OF ASSETS IN ITS BOOKS OF ACCOUNTS. 14. IN THE RESULT, APPEAL FILED BY THE REVENUE IS D ISMISSED. 4. ON THE OTHER HAND, LD. D.R. ALSO AGREED THAT THIS MAT TER IS SQUARELY COVERED BY THE ITAT ORDER. SINCE AGAINST THE ITA NO. 852 & 853/AHD/ 2016, NO APPEAL HAS BEEN FILED BY THE DEPARTMENT AGAINST THE ORDER OF ITAT. SO THAT SAID ORDER GOT THE FINALITY. 5. THUS IN PARITY WITH THE ITAT IN ASSESSEES OWN CASE FOR A.YS. 2009-10 & 2012-13 IN ITA ITA NO. 852 & 853/AHD/2016 ORDER DATED 13.05.201 9, WE DISMISS THE APPEAL OF THE REVENUE. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 17 - 12 - 2019 SD/- SD/- (AMARJIT SINGH) (MAHAVIR PRASA D) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 17/12/2019 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD