AMOL DICALITE LTD., Ahmedabad V. The DY.CIT, Circle-1, Ahmedabad

ITA 878/AHD/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9688 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 22-12-2016
• Assessment Year: 2002-2003
• Appeal Filed On: 25-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD . . , , BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.878/AHD/2014 ( / ASSESSMENT YEAR : 2002-03) AMOL DICALITE LTD. AHMEDABAD / VS. THE DCIT, CIR-1, AHMEDABAD ./ ./ PAN/GIR NO. : ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : MS. URVASHI SHODHAN, A.R. / RESPONDENT BY : SHRI PRASOON KABRA, SR.D.R. / DATE OF HEARING 22/12/2016 / DATE OF PRONOUNCEMENT 23/12/2016 / O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-II, SURAT, DATED 03/02/2014 FOR THE ASSESSMENT YEAR (AY) 2002-03 AND FOLLOWING GROUNDS HAVE BEEN TAKEN:- (I) THE LD.CIT(A) HAS MATERIALLY ERRED ON FACTS AND IN LAW IN DISMISSING THE APPEAL FILED BY THE APPELLANT COMPANY AND THEREBY CONFIRMING THE DISALLOWANCE MADE BY THE A.O. OF RS.8,24,932/- IN THE ORDER SO PASSED. (II) THE LD.CIT(A) OUGHT NOT TO HAVE CONFIRMED THE SAID DISALLOWANCE MADE BY THE A.O. BUT OUGHT TO HAVE DELETED THE SAME BY ALLOWING THE APPEAL IN VIEW OF THE FACTS AND CIRCUMSTANCES AS WELL AS THE SUBMISSIONS MADE BEFORE HIM. ITA NO.878/AHD/2014 AMOL DICALITE LTD. VS.DCIT ASST.YEAR 2002-03 - 2 - 2. THE FACTS OF THE CASE ARE - IN THIS CASE, THE RETURN OF INCOME WAS FILED ON 31/10/2002 DECLARING TOTAL INCOME OF RS.65,78,880/-. THE ASSESSMENT U/S.143(3) OF THE INCOME-TAX ACT, WAS COMPLETED ON 31/01/2005 AND INCOME WAS ASSESSED AT RS.78,49,640/-. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER REDUCED THE DEPRECIATION CLAIMED ON SUBSTATION ANNEXED WITH THE WIND MILL TO 25% AS AGAINST 100% BY THE ASSESSEE. THE ASSESSING OFFICER OBSERVED THAT THE SUBSTATION IS NOT AN INTEGRAL PART OF THE WIND FARM BUT COULD BE INDEPENDENTLY USED IN A POWER GENERATION UNIT. THEREFORE, THE DEPRECIATION AVAILABLE WAS ONLY THE GENERAL CATEGORY OF PLANT & MACHINERY. HOWEVER, ON PERUSAL OF THE ASSESSMENT ORDER, IT IS ALSO SEEN THAT THE ASSESSING OFFICER, WITHOUT PREJUDICE TO THE CONTENTION THAT DEPRECIATION WAS AVAILABLE ONLY @ 25%, DISALLOWED WHOLE QUANTUM OF RS.12,42,121/-, BEING THE COST OF THE ASSET BY STATING THAT THE SUBSTATION UNDER CONSIDERATION WAS COMMISSIONED AND PUT TO USE IN THE YEAR 1994 TO 1997. THEREFORE, AS PER THE ASSESSING OFFICER, DEPRECIATION, IF ANY, WAS ALLOWABLE AGAINST THE INCOME OF THOSE YEARS. 3. BEING AGGRIEVED WITH THE ABOVE ASSESSMENT, THE ASSESSEE HAS PREFERRED APPEAL BEFORE CIT(A). THE CIT(A) VIDE ORDER DTD.21/03/2006, HELD THAT THE SUBSTATION UNDER QUESTION WAS NOT OWNED BY THE APPELLANT, AS THE APPELLANT WAS MAKING CONTRIBUTION TO THE GEDA FOR THAT ASSETS, AND ACCORDINGLY DIRECTED THE ASSESSING OFFICER TO WITHDRAW THE ITA NO.878/AHD/2014 AMOL DICALITE LTD. VS.DCIT ASST.YEAR 2002-03 - 3 - DEPRECIATION OF 25% ON THE SAID ASSETS. HOWEVER, IN VIEW OF THE FACT THAT THE ASSESSING OFFICER HAD DISALLOWED THE FULL DEPRECIATION, THE ORDER OF THE CIT(A) ENHANCING THE INCOME OF THE ASSESSEE HAD MERELY A NOTIONAL EFFECT. 4. THEREAFTER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE HON'BLE ITAT. THE HON'BLE ITAT, VIDE ORDER ITA NO.1571/AHD/2006 DTD.06/03/2009, SET ASIDE THE ISSUE TO THE FILE OF THE AO. THE HON'BLE TRIBUNAL, IN ITS ORDER, HAS NOTED THAT THE GENERATION OF POWER IS DIFFERENT ACTIVITY FROM THE DISTRIBUTION AND TRANSMISSION OF POWER AND THEREFORE 100% DEPRECIATION CANNOT BE ALLOWED. THE HON'BLE TRIBUNAL FURTHER NOTED THAT THE CONTENTION OF THE CIT(A), REGARDING THE ASSESSEE NOT BEING THE OWNER OF THE SUBSTATION WAS ALSO CORRECT. THE TRIBUNAL, THEREFORE, HAS REMARKED THAT THE DEPRECIATION WAS NOT ALLOWABLE TO THE ASSESSEE UNDER THE SAID CIRCUMSTANCES. 5. HOWEVER, VIDE PARA 7 OF THE ABOVE MENTIONED ORDER OF THE TRIBUNAL, THE ISSUE REGARDING ALLOWABILITY OF THE EXPENDITURE INCURRED BY THE ASSESSEE AS REVENUE EXPENDITURE HAS BEEN RAISED BY THE TRIBUNAL. THE TRIBUNAL HAS, THEREFORE, SET ASIDE THE MATTER, NOTING THAT THE EXPENDITURE WAS NOT CAPITAL EXPENDITURE BECAUSE THE ASSESSEE DID NOT OWN ANY ASSET WHILE AT THE SAME TIME, THE BUSINESS EXPEDIENCY DEMANDED SUCH EXPENDITURE TO BE INCURRED. THEREFORE, IMPLICITLY THE TRIBUNAL HAS ITA NO.878/AHD/2014 AMOL DICALITE LTD. VS.DCIT ASST.YEAR 2002-03 - 4 - HELD THAT THE EXPENDITURE INCURRED BY THE ASSESSEE COMPANY WAS OF THE NATURE OF REVENUE EXPENDITURE. THE TRIBUNAL HAS FILED OF THE AO FOR EXAMINATION OF THE FACT WHETHER THE LIABILITY WAS CRYSTALLIZED BEFORE 31/03/2002 AND ACCORDINGLY DECIDES THE MATTER. 6. AS PER THE RECORDS, THE YEAR OF INSTALLATION OF THE ASSET UNDER QUESTION AND THE CORRESPONDING EXPENDITURE IS PRODUCED BELOW. YEAR OF INSTALLATION QUANTUM 1993-94 412416.32 1994-95 412416.31 1995-96 417288.60 7. THE HON'BLE TRIBUNAL HAS SET ASIDE THE MATTER STATING THAT IF THE LIABILITY IN RESPECT OF THE SAID EXPENDITURE HAS BEEN CRYSTALLIZED BEFORE 31/03/2002, THE DEDUCTION BE ALLOWED. HOWEVER, IN EFFECT, THIS DIRECTION MEANS THAT IF THE LIABILITY HAS BEEN CRYSTALLIZED IN ANY OF THE YEARS PRIOR TO 31/03/2002 AND NOT NECESSARILY F.Y.2001-02, THE DEDUCTION BE ALLOWED TO THE ASSESSEE. THIS MAY LEAD TO ANOMALOUS SITUATION WHEN THE EXPENDITURE IS FOUND TO HAVE BEEN CRYSTALLIZED IN ANY YEAR PRIOR TO F.Y.2001-02, DEDUCTION OF WHICH, AS PER DIRECTION OF TRIBUNAL, WILL HAVE TO BE ALLOWED IN THE A.Y.2002-03 RELEVANT TO THE F.Y.2001-02. THEREFORE, IT IS NOTICED THAT THERE IS NO CLEAR FINDINGS ON THE ISSUE INVOLVED. ACCORDINGLY, A ITA NO.878/AHD/2014 AMOL DICALITE LTD. VS.DCIT ASST.YEAR 2002-03 - 5 - MISCELLANEOUS APPLICATION WAS FILED ON 15/07/2009 FOR GETTING A CLEAR FINDING ON THE ISSUE INVOLVED IN THIS CASE. 8. TO THE PERUSAL TO THE DIRECTION OF THE ITAT ORDER, THE ASSESSEE WAS ASKED TO FURNISH A COPY OF CERTIFICATE ISSUED BY GEDA CERTIFYING THAT THE ACCOUNTS WITH RESPECT TO CERTIFICATES ISSUED ON JUNE, 2002 WERE SETTLED PRIOR TO 31 ST MARCH, 2002. 9. IN RESPONSE TO THE SAID LETTER ASSESSEE GAVE FOLLOWING REPLY:- 'PLEASE REFER TO THE ORDER OF THE ITAT, AHMEDABAD IN OUR CASE FOR AY. 2002- 03 (ITA NO. 1571/AHD/2006) WHEREIN THE ITAT SET ASIDE THE ISSUE IN RESPECT OF DEPRECIATION CLAIMED ON SUBSTATION ANNEXED WITH THE WINDMILL OF RS.12,42,121/-. WE ARE ENCLOSED HEREWITH CERTIFICATES 9-09-2005, 9-06-2002 AND 6-06-2002 RECEIVED FROM GUJARAT ENERGY DEVELOPMENT AGENCY FOR ACCOUNT OF THE SUBSTATION WERE SETTLED IN YEAR 2002. WE FURTHER REQUESTED TO GEDA FOR MORE CLARIFICATION REGARDING ACCOUNT SETTLED IN WHICH PERIOD AND CLARIFY EXPENDITURE HAS CRYSTALLIZED ON OR BEFORE 31-03-2002. THAN GEDA CHECKS ALL OLD RECORDS AND ISSUED ONE CERTIFICATE DATED 25 FEBRUARY 2011 REGARDING SETTLEMENT OF ACCOUNTS PRIOR TO 31-03-2002, WE ENCLOSED HEREWITH SAID CERTIFICATE. I IT MEANS FROM FOUR CERTIFICATES ITS CLEAR THAT ACCOUNTS WAS SETTLED DURING JAN 2002 TO MARCH 2002. WE REQUEST YOU TO KINDLY CONSIDER OUR CLAIM OF DEPRECIATION OF WINDMILL. YOU WANT FURTHER AND CLARIFICATION PLEASE WRITES TO US.' 10. DURING THE ABOVE COURSE, THE HON'BLE ITAT HAS PASSED AN ORDER VIDE MA NO.241/AHD/2009 (ARISING OUT ITA NO. 1571/AND/2006) AS UNDER:- ITA NO.878/AHD/2014 AMOL DICALITE LTD. VS.DCIT ASST.YEAR 2002-03 - 6 - WE HAVE CONSIDERED THE RIVAL SUBMISSION. WE FIND THAT IT IS NOTED BY THE TRIBUNAL IN PARA-8 OF THE TRIBUNAL'S ORDER THAT IT WAS THE CLAIM BEFORE THE TRIBUNAL THAT EXPENDITURE HAS CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION. THE TRIBUNAL HAS ALSO NOTED THAT IT HAD GONE THROUGH THE CERTIFICATE ISSUED BY GUJARAT ENERGY DEVELOPMENT AGENCY (GEDA FOR SHORT) AND AS PER THIS CERTIFICATE, IT IS COMING OUT THAT THE SETTLEMENT OF THE ACCOUNT HAS TAKEN PLACE IN THE YEAR 2002. BUT IT DOES NOT GIVE THE DATE WHEN THE ACCOUNT WAS SETTLED. THE DIRECTION OF THE TRIBUNAL SHOULD BE READ ALONG WITH THESE OBSERVATIONS OF THE TRIBUNAL AND IF THIS IS DONE, IT CLEARLY COMES OUT THAT IF THE LIABILITY HAS CRYSTALLIZED DURING THE PRESENT YEAR BEFORE 31-03-2002 THEN THE ASSESSEE IS ELIGIBLE FOR DEDUCTION. HENCE, WE FEEL THAT THE APPREHENSION OF THE REVENUE IS UNFOUNDED AND THERE IS NO AMBIGUITY IN THE DIRECTION OF THE TRIBUNAL BECAUSE THE DIRECTION OF THE TRIBUNAL IS CLEAR THAT IF THE LIABILITY HAS CRYSTALLIZED DURING THE PRESENT YEAR BEFORE 31-03-2002 THEN ONLY THE ASSESSEE IS ELIGIBLE FOR DEDUCTION IN THE PRESENT YEAR. HENCE, THERE IS NO MERIT IN THIS MA OF THE REVENUE. 11. THE SUBMISSION OF THE ASSESSEE HAS BEEN PERUSED BUT THE SAME IS NOT TENABLE. AS PER THE DIRECTION OF THE HONBLE ITAT IF THE LIABILITY HAS CRYSTALLIZED DURING THE PRESENT YEAR BEFORE 31-03-2002 THEN ONLY THE ASSESSEE IS ELIGIBLE FOR DEDUCTION IN THE PRESENT YEAR. FROM PERUSAL OF THE DETAILS SUBMITTED BY THE ASSESSEE ALONG, WITH THE MATERIAL AVAILABLE ON RECORD, IT HAS BEEN FOUND THAT THE ASSESSEE HAS FURNISHED-THREE CERTIFICATE ISSUED ON 06/06/2002, 17/06/2002 AND 09/09/2005 FROM GEDA. ON PERUSAL OF THE SAID, IT IS NOT CLEAR THAT THE LIABILITY WAS CRYSTALLIZED DURING THE YEAR BEFORE 31/03/2002. IN THE CERTIFICATE DATED 09/09/2005, GEDA IS CERTIFIED THAT 'IT IS ONLY CERTIFY THAT THE ACCOUNT OF THE ABOVE WERE SETTLED IN YEAR 2002'. IN THE ABOVE CERTIFICATES, NOWHERE THE DATE HAS SHOWN WHEN THE ACCOUNT WAS SETTLED. ITA NO.878/AHD/2014 AMOL DICALITE LTD. VS.DCIT ASST.YEAR 2002-03 - 7 - 12. HOWEVER, ON FURTHER PERUSAL OF THE CERTIFICATE OF GEDA ISSUED ON 25/02/2011, GEDA HAS CLEARLY NOTED THAT 'WE HAVE ISSUED CERTIFICATES OF CAPITAL EXPENDITURE ON 6 TH JUNE AND 17 TH JUNE, 2002 WERE BASED ON SETTLEMENT OF ACCOUNT PRIOR TO 31/03/2002.' 13. IN THIS REGARD, ON PERUSAL OF THE ABOVE, IT IS NOT CLEAR THAT THE LIABILITY HAS CRYSTALLIZED DURING THE YEAR. THE DIRECTION OF THE HON'BLE ITAT IS THAT 'IT HAD GONE THROUGH THE CERTIFICATE ISSUED BY GEDA AND AS PER THIS CERTIFICATE, IT IS COMING OUT THAT THE SETTLEMENT OF THE ACCOUNT HAS TAKEN PLACE IN THE YEAR 2002. BUT IT DOES NOT GIVE THE DATE WHEN THE ACCOUNT WAS SETTLED. THE DIRECTION OF THE TRIBUNAL SHOULD BE READ ALONG WITH THESE OBSERVATIONS OF THE TRIBUNAL AND IF THIS IS DONE, IT CLEARLY COMES OUT THAT IF THE LIABILITY HAS CRYSTALLIZED DURING THE PRESENT YEAR BEFORE 31-03-2002 THEN THE ASSESSEE IS ELIGIBLE FOR DEDUCTION'. 14. ON PERUSAL OF THE CERTIFICATES OF GEDA AND GONE THROUGH THE DIRECTION OF THE, HON'BLE ITAT, IT IS CONCLUDED THAT THE DATE IS NOT CRYSTALLIZED WHEN THE ACCOUNT WAS SETTLED. NOWHERE THE ASSESSEE HAS NOT ESTABLISHED THAT THE LIABILITY CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE HAS FAILED TO SHOW THE DATE WHEN THE ACCOUNT WAS SETTLED. THEREFORE, AS PER THE DIRECTION OF THE HON'BLE ITAT, THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION OF LIABILITY AND FINALLY THE TOTAL ITA NO.878/AHD/2014 AMOL DICALITE LTD. VS.DCIT ASST.YEAR 2002-03 - 8 - INCOME AS PER THE ORDER OF DTD.26/04/2006 GIVING EFFECT TO THE CIT(A)S ORDER DTD.21/03/2006 WAS 86,45,934/- 15. AGAINST THE ASSESSEE/APPELLANT PREFERRED FIRST STATUTORY APPEAL BEFORE THE LD.CIT(A). IN THE FINDING LD.CIT(A) MENTIONED THAT THE FACTS OF THE CASE AND SUBMISSIONS MADE BY THE A.R. HAVE BEEN CAREFULLY PERUSED. IT IS OBSERVED THAT EVEN THE COPIES OF THE DOCUMENTS FURNISHED BEFORE ME I.E. COPIES OF CERTIFICATES ISSUED BY GEDA DTD.06-06-2002, 17-06-2002, 09-09-2005 AND 25-02-2011 DO NOT MENTION CLEARLY THE EXACT DATE BY WHICH THE LIABILITY WAS CRYSTALLIZED. THEREFORE, IN MY CONSIDERED VIEW, THE ASSESSING OFFICER WAS JUSTIFIED IN HOLDING THAT SINCE THE LIABILITY WAS NOT CRYSTALLIZED PRIOR TO 31-03-2002, THE DEDUCTION COULD NOT BE ALLOWED. THE CERTIFICATES SIMPLY MENTION ABOUT THE SETTLEMENT OF ACCOUNTS AND NOT ABOUT THE EXACT DATE WHEN THE LIABILITY WAS ACTUALLY CRYSTALLIZED. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS HELD TO BE JUSTIFIED AND THE SAME WAS DECIDED BY THE LD.CIT(A) AND APPEAL OF THE APPELLANT WAS DISMISSED. 16. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGNED ORDER AND ALSO ORDER OF THE HONBLE ITAT AND LD.A.R. HAS FILED A LETTER DTD.25/02/2005 IN WHICH, IT IS MENTIONED THAT M/S. AMOL DICALITE LTD., AHMEDABAD HAS ASKED FOR CLARIFICATION OF OUR LETTER NO. GEDA/PWF/LAM/AMOL/2005/4180 DATED 9 TH SEPTEMBER 2005. ITA NO.878/AHD/2014 AMOL DICALITE LTD. VS.DCIT ASST.YEAR 2002-03 - 9 - 17. WE HAVE ISSUED CERTIFICATES OF CAPITAL EXPENDITURE ON 6 TH JUNE AND 17 TH JUNE 2002 WERE BASED ON SETTLEMENT OF ACCOUNTS PRIOR TO 31 ST MARCH 2002. 18. AFTER GOING THROUGH THE ABOVE LETTER, IT IS CLEAR THAT LIABILITY HAS CRYSTALLIZED DURING THE YEAR BEFORE 31/03/2002. 19. ACCORDINGLY, ORDER OF THE CIT(A) IS SET ASIDE AND APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 20. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER PRONOUNCED IN OPEN COURT ON 23/12/2016 SD/- SD/- . . ( ) ( ) ( N.K. BILLAIYA ) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 23/12/2016 ITA NO.878/AHD/2014 AMOL DICALITE LTD. VS.DCIT ASST.YEAR 2002-03 - 10 - / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-II 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD TRUE COPY