INDITAL TINTORIA LTD., V. ADDL. CIT, Alwar

ITA 881/JPR/2006

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82765 (ITAT-JAIPUR)
• Duration Of Justice: 7 year(s) 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 1995-1996
• Appeal Filed On: 11-10-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Keywords: Depreciation; Unabsorbed depreciation; Revenue expenditure
• Section: 145; 37; 28

Judgement Text

ITA NO.881/JP/2006 INDITAL TINTORIA LTD. VS. DCIT , ALWAR 1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH, JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. ME ENA) ITA NO. 881/JP/2006 ASSESSMENT YEAR : 1995-96 M/S. INDITAL TINTORIA LTD. VS. THE DCIT SP-272, MIA INDUSTRIAL AREA CIRCLE- ALWAR ALWAR ALWAR (APPELLANT) (RESPONDENT) ITA NO. 846/JP/2006 ASSESSMENT YEAR : 1995-96 THE ACIT VS. M/S. INDITAL TEINTORIA LTD. CIRCLE- 1 SP-272, MIA, INDUSTRIAL AREA ALWAR ALWAR (APPELLANT) (RESPONDENT) ITA NO. 1184/JP/2010 ASSESSMENT YEAR : 1995-96 THE DCIT VS. M/S. INDITAL TEINTORIA LTD. CIRCLE- 1 SP-272, MIA, INDUSTRIAL AREA ALWAR ALWAR (APPELLANT) (RESPONDENT) ITA NO. 882/JP/2006 ASSESSMENT YEAR : 1996-97 M/S. INDITAL TEINTORIA LTD. VS. THE DCIT SP-272, MIA, INDUSTRIAL AREA CIRCLE- ALWAR ALWAR ALWAR (APPELLANT) (RESPONDENT) ITA NO.881/JP/2006 INDITAL TINTORIA LTD. VS. DCIT , ALWAR 2 ITA NO. 847/JP/2006 ASSESSMENT YEAR : 1996-97 THE ACIT VS. M/S. INDITAL TEINTORIA LTD. CIRCLE- 1 SP-272, MIA, INDUSTRIAL AREA ALWAR ALWAR (APPELLANT) (RESPONDENT) ITA NO. 883/JP/2006 ASSESSMENT YEAR : 1998-99 M/S. INDITAL TEINTORIA LTD. VS. THE DCIT SP-272, MIA, INDUSTRIAL AREA CIRCLE- ALWAR ALWAR ALWAR (APPELLANT) (RESPONDENT) ITA NO. 848/JP/2006 ASSESSMENT YEAR : 1998-99 THE ACIT VS. M/S. INDITAL TEINTORIA LTD. CIRCLE- 1 SP-272, MIA, INDUSTRIAL AREA ALWAR ALWAR (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ASHWANI KUMAR DEPARTMENT BY: SHRI D.C. SHARMA DATE OF HEARING: 13-08-2014 DATE OF PRONOUNCEMENT: 12 -09-2014 ORDER PER R.P. TOLANI, JM THIS IS A BUNCH OF SEVEN APPEALS WHICH PERTAINS TO THE ASSESSEE AND REVENUE AGAINST DIFFERENT ORDERS OF THE LD. CIT(A), ALWAR. FOR THE SAKE OF ITA NO.881/JP/2006 INDITAL TINTORIA LTD. VS. DCIT , ALWAR 3 CONVENIENCE AND BREVITY, THESE APPEALS ARE BEING DE CIDED THROUGH A CONSOLIDATED ORDER. 2.1 FIRST OF ALL, WE TAKE UP THE SET OF CROSS APPEA LS FOR THE ASSESSMENT YEAR 1995-96 COMPRISING OF REVENUES APPEAL AND ASSESSEE 'S APPEAL AND ALSO PENALTY APPEAL U/S 271(1)( C) OF THE REVENUE. 3.1 THE GROUNDS RAISED BY THE ASSESSEE IN ITS APPEA L FOR THE ASSESSMENT YEAR 1995-96 ARE AS UNDER:- 1. THAT ON FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT-APPEAL HAS ERRED IN RESTRICTING THE SHORTAGE AT 5 % ON ADHOC BASIS INSTEAD OF ALLOWING ON ACTUAL BASIS WHICH WAS @ 7.4 % FOR THE YEAR UNDER CONSIDERATION. THAT THE AFORESAID ADDITION MADE IS ARBITRARY AND U NCALLED FOR AND OUGHT TO BE DELETED ON THE FACTS OF THE CASE. 2. THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE CIT APPEAL HAS ERRED IN RESTRICTING THE DISALLO WANCE AT RS. 50000/- ON ADHOC BASIS (AS AGAINST TOTAL DISALLOWANCE AT RS. 1 00000/- BY LD. AO) OUT OF FOREIGN TRAVELING EXPENSES OF RS.1392202/- INCURRED ON FOREIGN TRAVELS MADE BY ITS EMPLOYEES/DIRECTORS FOR THE BUSINESS OF THE APPELLANT COMPANY. THE ENTIRE DISALLOWANCE DESERVES TO BE DELETED. 3. THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE C ASE AND JN LAW THE LD. CIT APPEAL HAS ERRED IN NOT ALLOWING 100% DEPRE CIATION ON WATER POLLUTION MACHINERY ALL AGGREGATING TO RS. 1733407/-, ALLEGIN G THAT THESE ITEMS DO NOT QUALIFY FOR 100% DEPRECIATION AS PER DEPRECIATION S CHEDULE ATTACHED WITH THE INCOME TAX RULES. THIS IS SPECIFICALLY ALLOWED @ 10 0 % IN THE DEPRECIATION CHART PROVIDED IN THE INCOME TAX RULES. 4. THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT APPEAL HAS ERRED IN CONFIRMING THE DISA LLOWANCE OF RS. 10,000/- OUT OF STAFF WELFARE EXPENDITURE OF RS. 1.03 LACS O N ADHOC BASIS. WITHOUT PREJUDICE TO THE AFORESAID GROUND, THE ASS ESSING OFFICER HAS FAILED TO ALLOW DEDUCTION U/S. 37(2) OF THE I.T.ACT OUT OF THE AFORESAID AMOUNT OF RS. 1 0,000/- WAS DISALLOWED AS ENTERTAINMENT EX PENDITURE. ITA NO.881/JP/2006 INDITAL TINTORIA LTD. VS. DCIT , ALWAR 4 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT APPEAL HAS ERRED IN CONFIRMING THE DISA LLOWANCE A SUM OF RS. 56994/-BEING EXPENDITURE INCURRED ON MAINTAINING A TRANSIT HOUSE-CUM- OFFICE AT ALWAR UNDER SEC. 37(4) OF THE I.TAX ACT. 6. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT APPEAL HAS ERRED IN CONFIRMING THE DISA LLOWANCE OF RS. 20,000/- OUT OF MESS/ CANTEEN EXPENSES OF RS. 99,029/- TREAT ING THE SAME AS OF ENTERTAINMENT NATURE. WITHOUT PREJUDICE THE ASSESSING OFFICER HAS FAILED T O ALLOW DEDUCTION U/S 37(2) OF THE I.T. ACT IN CASE THE AFORESAID AMO UNT OF RS. 10,000/- WAS DISALLOWED AS ENTERTAINMENT EXPENDITURE. 7. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT APPEAL HAS ERRED IN CONFIRMING THE DISA LLOWANCE A SUM OF RS. 30,000/- ON ADHOC BASIS, OUT OF TELEPHONE EXPENSES HOLDING THE SAME AS RELATABLE TO EXPENDITURE ON TELEPHONE INSTALLED AT THE RESIDENCE OF THE DIRECTOR. THE ASSESSING OFFICER HAS FAILED TO APPRECIATE THAT THE ASSESSEE COMPANY HAS NOT PROVIDED ANY TELEPHONE AT THE RESID ENCE OF ANY OF ITS DIRECTORS AND AS SUCH THE DISALLOWANCE MADE CALLS FOR TO BE D ELETED. 8. THAT THE APPELLANT CRAVE, LEAVE TO VARY, ALTER, AD OR AMEND TO THE AFORESAID GROUNDS OF APPEAL EITHER AT OR BEFORE THE TIME OF HEARING. 3.2 THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN ITS APPEAL. 1. THAT THE LD. CIT(A) HAS GROSSLY ERRED ON FACTS A ND CIRCUMSTANCES OF THE CASE BY WITHOUT GIVING SPECIFIC FINDING, ALLOWI NG 5% WASTAGE OF RAW MATERIAL AS AGAINST 2% WASTAGE ALLOWED BY THE AO THEREBY ALL OWED RELIEF OF RS. 14,73,744/- WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO DISCHARGE ITS ONUS OF PROVIDING THE SAME AS NO REPLY WAS FILED BY THE ASSESSEE TO THE SPECIFIC QUERY IN THIS REGARD AND THE ASSESSEE ITSELF CLAIME D WASTAGE AT 1% IN THE ASSESSMENT YEAR 1997-98. 2 . THAT THE LD. CIT(A) HAS GROSSLY ERRED ON FACTS AND CIRCUMSTANCES OF THE CASE BY HOLDING THAT THE ASSESSEE IS FOLLOWING THE SAME METHOD OF VALUATION FOR THE OPENING STOCK THEREBY DELETED THE ADDITION OF RS. 5 LAKHS MADE ON ACCOUNT OF INCREASE IN WORK IN PROGRESS WITHOUT APPRECIATI NG THE FACT THAT THIS IS THE FIRST OF COMMERCIAL PRODUCTION AND THE FIRST RETURN FILED BY THE ASSESSEE SO THE QUESTION OF VALUATION OF OPENING STOCK DOES NOT ARISE. ITA NO.881/JP/2006 INDITAL TINTORIA LTD. VS. DCIT , ALWAR 5 3. THAT THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AS WEL L AS ON THE FACTS AND CIRCUMSTANCES OF THE CASE BY MAINLY FOLLOWING T HE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CHELLAPALLI SUGAR LTD. VS. CIT , 98 ITR 167, DIRECTING THE AO TO ALLOW CAPITALIZATION OF PRE-OPE RATIVE EXPENSES AMOUNTING TO RS. 64,37 LAKHS THEREBY ALLOWED DEPRECIATING ALSO T HEREUPON WHEREAS THE FCTS OF THE CASE ARE CLEARLY DISTINGUISHABLE FROM CASE LAW REFERRED. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) HAS ERRED BY, WITHOUT GIVING SPECIFIC FINDIN GS, RESTRICTING CERTAIN DISALLOWANCE OF PRE-OPERATIVE EXPENSES FOR CAPITALI ZATION TO 10%, 25% & 75% WHICH RESULTED IN EXCESS ALLOWABLE CAPITALIZATION O F PRE-OPERATIVE EXPENSES AT RS. 4,12,289/- AND DEPRECIATION OF RS. 1,03,072/- ALLOW ABLE THEREUPON WITHOUT APPRECIATING THE FACTS AND MATERIAL BROUGHT ON RECO RD BY THE AO. 3.3 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE COMPANY DEALS IN PROCESSING OF YARN AND IT IS 100% EXPORT ORIENT UNI T (FOR SHORT EOU). IT STARTED ITS COMMERCIAL PRODUCTION IN APRIL 1994 WHI CH MAKES THE ASSESSMENT YEAR 1995-96 AS THE FIRST YEAR OF ITS CO MMERCIAL PRODUCTION. THE ASSESSEE FILED ITS RETURN OF LOSS OF RS. 5.29 CRORE RS WHICH INCLUDES UNABSORBED DEPRECIATION OF RS. 2.26 CRORES. THESE U NABSORBED DEPRECIATION ALLOWANCES WERE CARRIED OVER AS PER THE RELEVANT PR OVISIONS. THE ASSESSMENT WAS TAKEN FOR SCRUTINY IN WHICH THE AO PROPOSED TO MAKE THE FOLLOWING ADDITIONS. (I) SHORTAGE / PROCESS LOSS:- THE AO WAS OF THE V IEW THAT THE SHORTAGE/ PROCESS LOSS OF 7.4% AS CLAIMED BY THE AS SESSEE WAS HIGHER. THE ASSESSEE EXPLAINED THAT PROCESSING OF YARN INVOLVED NUMBER OF STAGES AND THE DIFFICULTY IN ONE STAGE/ PROCESS AFFECTS THE SUBSEQ UENT PROCESS WHICH AFTER SEVERAL PROCESSES RESULTS IN UNVIABLE PRODUCTS. THI S YEAR BEING THE FIRST YEAR ITA NO.881/JP/2006 INDITAL TINTORIA LTD. VS. DCIT , ALWAR 6 OF COMMERCIAL PRODUCTION, THE PRODUCTION LOSS TENDE D TO BE ON HIGHER SIDE. THE STANDARD SHORTAGE IN OUT PUT OF THIS TYPE OF IN DUSTRY IS ALSO 10% TO 12%. THE ASSESSEE MAINTAINS PROPER BOOKS OF ACCOUNT WHICH ARE AUDITED BY THE RENOWNED CHARTERED ACCOUNTANT FIRM M/S. A.F. FE RGUSON & CO. WHO HAD VERIFIED, EXAMINED, AUDITED THE BOOKS OF ACCOUN T AND MADE NO ADVERSE ENTRY. THE AO HOWEVER, ON PURE SURMISES AND CONJECT URE ESTIMATED THE SHORTAGE ONLY AT 2%. 3.4 IN FIRST APPEAL, THE LD. CIT(A) ALLOWED 5% SHOR TAGE OF THE TOTAL CONSUMPTION ON INPUTS USED DURING THE RELEVANT PERI OD. 3.5 BOTH THE PARTIES ARE IN APPEAL ON RESPECTIVE GR IEVANCE. 3.6 THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY ARG UED THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE NEITHER REJECTED NOR AN Y SPECIFIC DISCREPANCY HAS BEEN FOUND OUT. THE LD. AR OF THE ASSESSEE PLEADED THAT IN THIS TYPE OF INDUSTRY THE STANDARD INDUSTRIAL LOSS IS 10% TO 12% . THE AO WITHOUT ASSIGNING ANY COGENT BASIS HELD THAT THE PROCESS LO SS IS ALLOWABLE AT 2% BY FOLLOWING OBSERVATION. 2. ASSESSEE COMPANY IS ENGAGED IN THE MANUFACTURE OF COTTON YARN. THIS IS THE FIRST YEAR OF THE BUSIN ESS. DURING THE COURSE OF PROCEEDINGS, IT WAS NOTICED THAT THE ASSE SSEE COMPANY HAS SHOWN CONSUMPTION OF RAW MATERIAL OF 254.10 TO NS AND THE PRODUCTION HAS BEEN SHOWN AT 235.71 TONS. SHORTAGE OF 7.4% WAS SOWN. THE ASSESSEE COMPANY VIDE ORDER SHEET ENT RY DATED 8 TH AUG. 96 WAS REQUIRED TO GIVE THE REASONS FOR SHORT AGE. THE ASSESSEE COMPANY VIDE LETTER DATED 5 TH NOV. 96 SBMITTED THAT THE ITA NO.881/JP/2006 INDITAL TINTORIA LTD. VS. DCIT , ALWAR 7 SHORTAGE WAS NORMAL PROCESS LOSS. THIS PROCESS LOSS GOES UPTO 12%. AFTER CONSIDERING THE ABOVE REPLY THE ASSESSEE COMPANY, VIDE ORDER SHEET ENTRY DATED 17 TH DEC. 96 WAS REQUIRED TO GIVE THE LOWER LIMIT OF SHORTAGE BECAUSE IN THE REPLY TH E ASSESSEE HAS GIVEN THE UPPER LIMIT OF SHORTAGE. THE ASSESSEE COM PANY WAS FURTHER REQUIRED TO LET ME KNOW THE TIME TAKEN FOR THE PROCESS TO BE COMPLETED. IN RESPONSE TO THE ABOVE QUERY, NO RE PLY HAS BEEN FILED. THE ASSESSEE VIDE ORDER SHEET ENTRY DATED 26 TH FEB.98 WAS AGAINST REQUESTED TO GIVE ME THE SHORTAGE SHOWN IN SUBSEQUENT YEARS. IN SPITE OF ABOVE SPECIFIC QUERIES, NO FURTH ER REPLY HAS BEEN FILED FOR THE SHORTAGES. IN VIEW OF THE ABOVE FACTS, I AM LEFT WITH NO ALTERNATIVE BUT TO ESTIMATE THE SHORTAGE ON THE BASIS OF SUBSEQUENT RESULTS. IN THE ASSESSMENT YEAR 1997-98, THE ASSESSEE COMPANY HAS SHOWN PRODUCTION OF 202.99 TON S AGAINST CONSUMPTION OF 205.17. THIS GIVES SHORTAGE OF ONLY 1 PERCENT. HOWEVER, IN THE ASSESSMENT YEAR 96-97, THE SHORTAGE SHOWN IS MORE THAN 10%. THE ONUS WAS ON THE ASSESSEE COMPANY TO HAVE EXPLAINED THE SHORTAGES. I, THEREFORE, ESTIMATE THE SHORTAGE AT 2%. THIS WILL MEAN THE PRODUCTION OF YARD AT 249.02 AS AGAINST 235.71. THIS WILL MEAN AN ADDITION OF 13.31 TONS. D URING THE YEAR UNDER REFERENCE, THE ASSESSEE COMPANY HAS SOLD 195.99 TONS FOR AN AMOUNT OF RS. 379.00 LACS. THIS GIVES A N AVERAGE SALE PRICE OF 1.934 LACS PER TON. THEREFORE, THE AD DITION WHICH COMES ON ACCOUNT OF EXCESS SHORTAGE IS RS. 25,74,1 90/-. 3.7 THE LD. CIT(A) WHO OBSERVED THAT (I) NO EVIDENCE OR REASONS HAVE BEEN ADDUCED BY THE AO TO COME TO THE CONCLUSION THAT THE ASSESSEE HAS SOLD A NY YARN OUTSIDE THE BOOKS OF ACCOUNT. THIS BEING THE FIRST YEAR OF ASSESSEE'S BUSINESS, THE RAW MATERIAL OF 10.44 TONS CONSUMED DURING TRIAL RUN WAS TO BE EXCLUDED. THE ACTUAL CON SUMPTION WAS AT 243.66 TONS CORRESPONDING TO THE PRODUCTION OF 235.71 ITA NO.881/JP/2006 INDITAL TINTORIA LTD. VS. DCIT , ALWAR 8 TONES WHICH WAS EVIDENT FROM THE ANNUAL REPORT. SIM ILARLY, THE MATERIAL WHICH FORMED PART OF PROCESS STOCK OR WORK IN PROGRESS (FOR SHORT WIP' ) WAS TO BE EXCLUDED BUT IT WAS NO T DONE BY THE AO. (II) THE CLEAR FINDING ABOUT THE SOUNDNESS OF THE A SSESSEE AND NON-REJECTION OF THE BOOKS OF ACCOUNT OF THE ASSES SEE HAVE BEEN RECORDED BY THE LD. CIT(A). HOWEVER, SURPRISINGLY, THE LD. CIT(A) HAS ESTIMATED THE PROCESS LOSS AT 5% WITHOUT GIVING ANY BASIS BY FOLLOWING OBSERVATIONS. 5.2.. THE AFORESAID WOULD SHOW THAT THE APPELLANT HAD NOT COME OUT WITH ALL THE MAJOR DETAI LS REGARDING SHORTAGE OF STOCK DURING THE PRODUCTION PROCESS. DU RING THE APPELLATE PROCEEDINGS THE A.R. OF THE APPELLANT HAS POINTED OUT THAT IN THE YEAR UNDER REFERENCE RAW MATERIAL OF 10 .4 TONS WAS CONSUMED DURING TRIAL RUN. THEREFORE, IT IS REQUIRE D TO BE EXCLUDED FORM THE TOTAL CONSUMPTION. THE A.R.S CLAI M OF TRAIL RUN CAN BE ACCEPTED SINCE IT IS THE FIRST YEAR OF P RODUCTION OF THE APPELLANT. HOWEVER, IT IS BEYOND IMAGINATION THAT F OR THE TRIAL RUN ALL THE CONSUMPTION WOULD GO TO WASTAGE. IN THE NORMAL CIRCUMSTANCES DURING THE TRIAL RUN THERE MIGHT BE H IGH PERCENTAGE OF WASTAGE BUT TO CLAIM 100% SHORTAGE DE FIES LOGIC. THEREFORE, KEEPING IN VIEW THE SURROUNDING CIRCUMST ANCES, IT APPEARS THAT THE APPELLANT HAS WORKED OUT SHORTAGE ON ESTIMATE BASIS AND CLAIMED THE SAME IN THE RETURN OF INCOME. SINCE THE SHORTAGE HAS NOT BEEN SUBSTANTIATED WITH APPROPRIAT E DETAILS, SOME DISALLOWANCE OUT OF THE CLAIM IS REQUIRED TO B E MADE BY INVOKING PROVISION OF SECTION 145 OF THE ACT. IN TH E GIVEN CIRCUMSTANCES, IT WOULD BE PROPER THAT THE APPELLAN T IS ALLOWED 5% SHORTAGE OF THE TOTAL CONSUMPTION ON INPUTS USED DURING THE RELEVANT PERIOD. THIS WILL TAKE CARE OF THE INPUTS USED BY THE ITA NO.881/JP/2006 INDITAL TINTORIA LTD. VS. DCIT , ALWAR 9 APPELLANT DURING THE TRIAL RUN ALSO. THE AO WILL WO RK OUT THE RELIEF ACCORDINGLY. 3.8 THE LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT WHEN THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE AUDITED, NO SPECIFIC DI SCREPANCY IS FOUND, IT HAS BEEN ADMITTED THAT THIS BEING THE FIRST YEAR OF COM MERCIAL PRODUCTION, THE PRODUCTION LOSS IS ON HIGHER SIDE AND TRIAL RUN LOS S AND WORK IN PROGRESS STOCK HAS NOT BEEN CONSIDERED BY THE AO. DESPITE TH ESE POSITIVE FINDINGS, THERE IS NO JUSTIFICATION FOR THE LD. CIT(A) IN HOL DING THAT SHORTAGE HAS NOT BEEN SUBSTANTIATED AND HENCE THE SHORTAGE CAN BE ES TIMATED AT 5% INVOKING THE PROVISION OF SECTION 145 OF THE ACT. THUS NEITH ER THE ORDER OF THE AO NOR THE ORDER OF THE LD. CIT(A) GIVE ANY CONVINCING, R EASONABLE OR COGENT BASIS TO HOLD THAT THE ASSESSEE COMPANY PRODUCTION LOSS W AS EXCESSIVE, KEEPING IN VIEW THE INDUSTRY STANDARD OF 10% TO 12% WHICH HAS NOT BEEN CONTROVERTED. 3.9 THE LD. DR SUPPORTED THE ORDERS OF THE LOWER AU THORITIES. 3.10 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. WE FIND MERIT IN THE ARGUMENTS OF THE LD. COUNSEL FOR THE ASSESSEE. THE LD. CIT(A) HAS GIVEN CLEAR FINDIN G ABOUT THE CORRECTNESS OF THE ASSESSEE'S BOOKS OF ACCOUNTS. NO SPECIFIC INSTA NCE OF ANY MISCHIEF IN THE BOOKS OF ACCOUNT IS POINTED OUT. THERE IS NO WHISP ER ABOUT ANY REASON TO ASSUME THAT THE ASSESSEE SOLD THE PROCESS YARN OUTS IDE THE BOOKS OF ACCOUNT. ITA NO.881/JP/2006 INDITAL TINTORIA LTD. VS. DCIT , ALWAR 10 IN THESE CIRCUMSTANCES, THE LD. CIT(A) NOTED THE ST RONG REASONS TO DISALLOW THE PRODUCTION LOSS WHICH IS TOTALLY MISSING IN HIS ORDER. THE ASSESSEE GAVE REASONABLE EXPLANATION WHICH HAS BEEN PARTLY CONSID ERED WITHOUT CONSIDERING THE PART OF THE MATTER. IT HAS BEEN SUM MARILY HELD THAT THE ASSESSEE COULD NOT SUBSTANTIATE THE PRODUCTION LOSS . IN VIEW THEREOF, WE SEE NO JUSTIFICATION IN ANY DISALLOWANCE OUT OF PRODUCT ION LOSS WHEN THE CLAIM OF THE ASSESSEE FALLS WITHIN THE FIGURE QUOTED AS INDU STRY STANDARD WHICH ARE NOT DISPUTED BY THE LOWER AUTHORITIES. THUS IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ALLOW GROUND NO. 1 OF THE ASSESSEE AND DISMISS THE GROUND NO. 1 OF THE REVENUE. 4.1 APROPOS GROUND NO. 2 OF THE ASSESSEE, THE LD. C OUNSEL FOR THE ASSESSEE CONTENDS THAT OUT OF FOREIGN TRAVELING EX PENSES, THE AO DISALLOWED ADHOC ADDITION OF RS. 1.00 CRORE WHICH WAS REDUCED TO RS. 50,000/- BY THE LD. CIT(A). BOTH OF THEM HAD NOT QUOTED ANY INSTANC E OF FOREIGN TRAVELING EXPENDITURE INCURRING NOT FOR THE PURPOSE OF BUSINE SS. ON THE BASIS OF THE PRESUMPTION, THE ADHOD DISALLOWANCE HAS BEEN MADE W HICH DESERVES TO BE DELETED. 4.2 THE LD. DR IS HEARD WHO SUPPORTED THE ORDER OF THE LD. CIT(A). 4.3 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND MERIT IN THE ARGUMENTS OF THE LD. AR. WE ARE OF ITA NO.881/JP/2006 INDITAL TINTORIA LTD. VS. DCIT , ALWAR 11 THE VIEW THAT A PART OF THE FOREIGN TRAVEL EXPENDIT URE CANNOT BE DISALLOWED ON ADHOC BASIS WITHOUT CITING ANY SPECIFIC INSTANCE AN D GIVING A FINDING THAT A PARTICULAR EXPENDITURE WAS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THUS IN VIEW THEREOF, THE DISA LLOWANCE OF RS. 50,000/- MADE BY THE LD. CIT(A) IS DELETED. HENCE, THE GROUN D NO. 2 OF THE ASSESSEE IS ALLOWED. 5.1 APROPOS GROUND NO. 3 OF THE ASSESSEE, THE LD. C IT(A) ALLOWED 100% DEPRECIATION ON VARIOUS ITEMS OF PLANT AND MACHINER Y. HOWEVER, IN RESPECT OF EFFLUENT TREATMENT PLANT (FOR SHORT ETP), 100 % CLAIM HAS BEEN DISALLOWED WITHOUT APPRECIATING THE FOLLOWING OBSER VATIONS. 8.6.2 IN REGARD TO THE APPELLANTS CLAIM FOR 100% DEPRECIATION ON EFFLUENT TREATMENT PLANT AMOUNTING TO RS. 17,3,407/-, IT IS SEEN THAT THE CLAIM WAS DISALLOWE D BY THE AO HOLDING THAT SUCH PLANT WAS NOT SPECIFIED FOR 100% DEPRECIATIONS IN APPENDIX-I OF THE I.T. RULES, 1962 . SINCE APPELLANT RUNS A PROCESS INDUSTRY ENGAGED IN PROCES SING OF YARN WITH USE OF CHEMICALS ETC. IT IS REQUIRED TO S ETUP ITS SYSTEM TO CONTROL THE WATER POLLUTION UNDER THE INDUSTRIAL POLICY OF GOVT. OF INDIA. THEREFORE, IT INSTALLED THE EFFLUEN T TREATMENT PLANT DURING THE RELEVANT PERIOD. IN THIS REGARD, T HE A.R. OF THE APPELLANT FILED A CERTIFICATE FROM RAJASTHAN POLLUT ION CONTROL BOARD DATED 24-01-2000 NO. F.12(2-39) RPCB/G-1/621. IT IS SEEN FROM THE DETAILS FILED BY THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS THAT IT INCURRED EXPENDI TURE ON THE CONSTRUCTION OF EFFLUENT TREATMENT PLANT AMOUNTING TO RS. 17,33,407/-. HOWEVER, THE APPELLANT FAILED TO FILE ANY CERTIFICATE FROM THE INDEPENDENT AGENCY TO SHOW THAT THE PLANT WAS MEETING THE STANDARD SET OUT FOR CONTROLLING WATER POLLUTION DURING THE RELEVANT PERIOD. IN FACT, THE BOARD ALLO WS PERMISSION ITA NO.881/JP/2006 INDITAL TINTORIA LTD. VS. DCIT , ALWAR 12 TO HIM FOR DISCHARGE OF THE INDUSTRIAL EFFLUENT FRO M THE INDUSTRIAL PREMISES W.E.F. 22-11-1999. INCIDENTALLY THIS IS THE DATE FROM WHICH THE APPELLANT HAD SOUGHT PERMISSION FOR ALLOWING SUCH DISCHARGE. THIS CLEARLY SHOW THAT PRI OR TO THIS DATE THE APPELLANT WAS NOT IN POSITION TO OBTAIN CE RTIFICATE FROM THE RAJASTHAN POLLUTION CONTROL BOARD. IF THE EFFLU ENT PLANT WAS METING THE SPECIFIED STANDARDS THE APPELLANT COULD HAVE OBTAINED THE SAME DURING THE RELEVANT PERIOD. THERE FORE, IN THESE CIRCUMSTANCES IT IS DIFFICULT TO HOLD THAT TH E APPELLANT WAS RUNNING AN EFFLUENT TREATMENT PLANT TO CONTROL THE WATER POLLUTION FOR WHICH 100% DEPRECIATION WAS AVAILABLE . IN VIEW OF THE ABOVE, THE AO HAS RIGHTLY REJECTED THE APPEL LANTS CLAIM FOR 100% DEPRECIATION ON SUCH EQUIPMENT. THEREFORE, THE APPELLANTS GROUND AGAINST THE SAME IS HEREBY REJEC TED. 5.2 THE LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT AS PER INDUSTRIAL POLICY OF GOVT. OF INDIAN, THE ASSESSEE IS MANDATORY REQUI RED TO SET UP A WATER POLLUTION CONTROL SYSTEM AT THE TIME OF STARTING OF THE FACTORY. WITHOUT INSTALLATION OF ETP PLANT, THE ASSESSEE COMPANY COU LD NOT HAVE STARTED ITS PRODUCTION. THUS THE ASSESSEE COMPANY WAS BOUND TO INSTALL THE ETP PLANT AS PER THE GUIDELINES ISSUED BY RAJASTHAN POLLUTION CONTROL BOARD AND IT APPLIED TO THE POLLUTION CONTROL BOARD FOR INSPECTI ON OF THE PLANT. ON INSPECTION OF THE PLANT, THE ASSESSEE WAS ALLOWED T O COMMENCE IT PRODUCTION. HOWEVER, THE POLLUTION CONTROL BOARD ISSUED A CERTI FICATE BELATEDLY ON 22- 11-1999. BE THAT AS IT MAY, THE FACT REMAINS THAT E TP WAS ACQUIRED BY THE ASSESSEE IN THE YEAR IN QUESTION AND IT WAS ALSO PU T TO BUSINESS USE AS ETP. IT HAS NOT BEEN DISPUTED THAT THE ASSESSEE COMPANY COU LD NOT COMMENCE ITS ITA NO.881/JP/2006 INDITAL TINTORIA LTD. VS. DCIT , ALWAR 13 BUSINESS WITHOUT INSTALLATION OF ETP. IN THESE UNDI SPUTED CIRCUMSTANCES, THE MERE FACT OF BELATED CERTIFICATE ISSUED BY RAJSTHA N CONTROL BOARD CANNOT BE CONSTRUED TO BE A NEGATIVE FACTOR. THE PRODUCTION O F THE ASSESSEE HAS BEEN ACCEPTED. THE EXPENDITURE INCURRED ON OPERATION OF ETP HAS BEEN ALLOWED. THUS IN THESE CIRCUMSTANCES, THERE IS NO JUSTIFICAT ION TO DENY 100% DEPRECIATION ON ETP TO THE ASSESSEE. 5.3 THE LD. DR SUPPORTED THE ORDER OF THE LD. CIT(A ). 5.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE FACT IS THAT THE ASSESSEE STARTED ITS COMMERCIAL PRODUCTION AND THE SAME COULD NOT HAVE BEEN DONE WI THOUT PROPER INSTALLATION OF ETP WHICH HAS NOT BEEN DISPUTED. TH EREFORE, IT IS EVIDENT THAT THE ASSESSEE HAD UTILIZED THE ETP FOR THE PURPOSE O F BUSINESS. THIS BEING SO, IN OUR CONSIDERED VIEW, THE ASSESSEE IS ELIGIBLE FO R 100% DEPRECIATION ON ETP AS CLAIMED. THE GRANTING OF CERTIFICATE IS IN T HE HANDS OF THE POLLUTION CONTROL BOARD AND THE DELAY IN GIVING THE CERTIFICA TE CANNOT BE THE REASON TO DENY THE ASSESSEE'S ORIGINAL CLAIM. THUS IN VIEW TH EREOF, THE ASSESSEE IS ELIGIBLE FOR 100% DEPRECIATION ON ETP. THEREFORE, T HE GROUND NO. 2 OF THE ASSESSEE IS ALLOWED. 6.1 APROPOS GROUND NOS. 4,5,6, AND 7 WHICH ARE SMA LLER DISALLOWANCES I.E. OUT OF STAFF WELFARE EXPENDITURE, MAINTENANCE OF TRANSIT HOUSE-CUM- ITA NO.881/JP/2006 INDITAL TINTORIA LTD. VS. DCIT , ALWAR 14 OFFICE, MESS/ CANTEEN EXPENSES, ENTERTAINMENT EXPEN SES AND OUT OF TELEPHONE EXPENSES. THE ASSESSEE COMPANY IS A PRIVATE LIMITED COMPANY AND THESE DISALLOWANCES CANNOT BE MADE IN VIEW OF THE DECISIO N OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF SAYAJI IRON AND ENGG. CO .VS CIT, 253 ITR 749. THUS IN VIEW THEREOF, THE GROUND NOS, 4, 5, 6 AND 7 OF THE ASSESSEE ARE ALLOWED. 7.1 ADVERTING TO REMAINING GROUNDS OF REVENUES APP EAL, GROUND NO. 2 OF REVENUES APPEAL IS REGARDING VALUATION OF CLOS ING STOCK WHILE DEALING WITH GROUND NO. 1 OF THE ASSESSEE AND GROUND NO. 1 OF THE REVENUE IN RESPECT OF TRADING RESULTS, WE HAVE UPHELD THE BOO KS OF ACCOUNT OF THE ASSESSEE WHICH WILL ALSO INCLUDE THE CLOSING STOCK. BESIDES THE ISSUE DOES NOT HAVE ANY SIGNIFICANCE IN TERMS OF REVENUE INASMUCH AS THE CLOSING STOCK OF THIS YEAR WILL BECOME THE OPENING STOCK OF THE SUBS EQUENT YEAR. THE ASSESSEE'S ASSESSED INCOME HAS A HUGE FIGURE OF LOS S. THE HON'BLE APEX COURT IN THE CASE OF CIT VS. EXCEL INDUSTRIES LTD., 358 ITR 295 HAS REITERATED THE PROPOSITION THAT PREPONEMENT OR POST PONEMENT OF EXPENSES SHOULD NOT BE APPEALED BY REVENUE. THIS IS NOT EVEN THE CASE OF EXPENDITURE BUT VALUATION OF THE CLOSING STOCK. THUS LOOKING TO THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE SEE NO INFIRMITY IN THE ORDER OF THE LD. ITA NO.881/JP/2006 INDITAL TINTORIA LTD. VS. DCIT , ALWAR 15 CIT(A) WHICH IS UPHELD ON THIS ISSUE. HENCE, THE GR OUND NO. 2 OF THE REVENUE IS DISMISSED. 8.1 APROPOS GROUND NO. 3 OF THE REVENUE, THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CLAIMED OF PRE-OPERATIVE EXPENSES OF RS. 2.61 CRORES OUT OF WHICH ONLY RS. 1.97 CRORES WAS ALLOWED TO BE CAPITA LIZED BY AO BY FOLLOWING OBSERVATION. 10 DURING THE ASSESSMENT PROCEEDINGS THE AO NOTED THAT THE APPELLANT MADE A CLAIM FOR CAPITALIZ ATION OF PRE- OPERATIVE EXPENSE TO THE TUNE OF RS. 2.61 CRORES. H E FURTHER NOTED THAT DURING THE PRE-OPERATION PERIOD THE APP ELLANT CLAIMED EXPENSES ON LAND DEVELOPMENT, TRANSIT HOUSE MAINTENANCE, ENTERTAINMENT, LOSS ON TRIAL BALANCE A MOUNTING TO RS. 0.64 CRORES. HE DISALLOWED THE SAME HOLDING THA T SAME WAS NOT NECESSARY TO BRING ASSETS INTO EXISTENCE AND PU T THEM IN WORKING CONDITION. OUT OF RS. 2.61 CRORES THE AO HELD THAT ONLY 1.97 CRORES QUALIFIED FOR CAPITALIZATION. HE ACCORDINGLY ALLOWED CAPITALIZATION OF EXPENSES TO THE TUNE OF RS. 1.35 CRORES BY REFERRING THE DECISION OF HON'BLE RAJASTHAN HIGH C OURT IN THE CASE OF CIT VS. ANIL STEEL INDUSTRIES LTD., 193 ITR 124. HE ARRIVED AT THE FIGURE OF RS. 1.35 CRORES AFTER DISA LLOWING CERTAIN PERCENTAGE OF EXPENSES CLAIMED BY THE APPELLANT UND ER VARIOUS HEADS. 8.2 BEFORE THE LD. CIT(A), THE ASSESSEE HAS SUBMITT ED AS UNDER:- THE ASSESSEE COMPANY STARTING PUTTING UP ITS PLANT IN Y.E. MARCH 1993 AND THE COMMERCIAL PRODUCT ION STARTED DURING THE ASSESSMENT YEAR UNDER APPEAL ON APRIL 10,1994. DURING THE PRE-OPERATIVE PERIOD THE APPELL ANT CONDUCTED TRIAL RUNS OF THE PLANT AND MACHINERY AND INCURRED VARIOUS EXPENSES INCLUDING ON RAW MATERIAL / WAGES/ ELECTRICITY ETC. THE GOODS PRODUCED DURING TRIAL RUN WERE SOLD AND THE ITA NO.881/JP/2006 INDITAL TINTORIA LTD. VS. DCIT , ALWAR 16 TOTAL SALE DURING PRE-OPERATIVE PERIOD WAS RS. 1.16 CRORES. AFTER SET OFF OF VARIOUS EXPENDITURE INCURRED FOR T HE TRIAL RUN AGAINST THE SALE /CLOSING STOCK OF TRIAL RUN PRODUC TION, THERE WAS A NET EXPENSE OF RS. 64.37 LACS WHICH WAS MAINLY RE LATABLE TO THE COST OF TRIAL RUN OF THE PLANT AND MACHINERY AN D WAS CAPITALIZED BY THE APPELLANT. THE ASSESSING OFFICER HAS NOT ALLOWED THIS CAPITALIZATION OF NET EXPENSE OF RS. 6 4.37 LACS HOLDING THAT THE LOSS PERTAINS TO THE TRIAL RUN AND CANNOT BE CAPITALIZED. WITHOUT PREJUDICE TO ANYTHING CONTRARY HEREINABOVE, THE ASSESSING OFFICER OUGHT TO HAVE AL LOWED THE EXPENDITURE AS BUSINESS LOSS U/S 28 OF THE ACT. IT IS WORTHWHILE TO MENTION HERE THAT AN EXPENDITURE MAY BE EITHER O F REVENUE IN NATURE OR CAPITAL. IF ANY EXPENDITURE IS NOT CAPITA L IN NATURE IT OUGHT TO BE ALLOWED AS REVENUE EXPENDITURE U/S 28 R EAD WITH SECTION 37 OF THE I.T. ACT , 1961. IT MAY PLEASE BE APPRECIATED THAT IN ORDER TO CHECK WHETHER THE PLANT HAS BEEN SET UP PROPERLY TO PRODU CE DESIRED GOODS OF THE COMMERCIAL QUALITY AND TO CARRY OUT NE CESSARY CORRECTIONS IN THE PLANT SET UP OR TO REDUCE/REMOVE THE BOTTLENECK IN THE PLANT, IT IS MUST TO CARRY OUT TH E TRIALS AND THE EXPENDITURE INCURRED ON TRIAL RUN HAS TO BE CAPITAL IZED AND WILL ADD TO THE COST OF THE PLANT AND SET UP OF PLANT AN D MACHINERY IS NOT COMPLETE TILL COMMERCIAL QUALITY OF THE PRODUCT IS ACHIEVED. THIS VIEW HAS ALSO BEEN HELD BY THE DELHI HIGH COUR T IN THE CASE OF CIT VS. FOOD SPECIALTIES LTD. (1982) 136 IT R 203 (DELHI) 8.3 THE ASSESSEE IN HIS PLEADINGS INTER ALIA RELIED ON THE FOLLOWING JUDGEMENTS. (I) CHALLAPALLI SUGARS LTD. VS. (1974), 98 ITR 167 (SC) (II) SHREE VALLABH GLASS WORKS LTD. VS. CIT (1981), 127 ITR 37 (GUJ.) (III) CIT VS. HINDUSTAN POLYMERS LTD., 156 ITR 860 (BOM.) ITA NO.881/JP/2006 INDITAL TINTORIA LTD. VS. DCIT , ALWAR 17 (IV) CIT VS. LUCAS TVS LTD. (1977), 110 ITR 346 (MAD.) ((V) ITO VS. SUNIL SYNCHEM LTD. VS. CIT (1981) 41 T AXMAN 77 (JP) ITAT. (VI) MODERN SYNTECH (INDIA) LTD. VS. ITO (1987) 20 TTJ (JP) 105. 8.4 THE ASSESSEE'S EXPLANATION FOUND FAVOUR BEFORE THE LD. CIT(A) WHO ALLOWED THE CAPITALIZATION AS CLAIMED BY THE ASSESS EE BY FOLLOWING OBSERVATIONS. 10.21 AS REGARDS THE REJECTION OF APPELLANTS CLA IM FOR EXPENDITURE AMOUNTING TO RS. 0.64 CRORES FOR CA PITALIZATION, IT IS SEEN THAT THE AMOUNT PERTAINS TO LOSSES INCUR RED BY THE APPELLANT DURING THE PROCESS PRIOR TO FINAL PRODUCT ION. THE LOSS HAS BEEN INCURRED BY THE APPELLANT IN TRIAL RUN. TH E SIGNIFICANCE ON TRIAL RUN CANNOT BE UNDERMINED WHEN THE APPELLAN T HAS SET UP SUCH A HUGE PLANT. THE AO HAS NOT DISPUTED THE E XPENDITURE CLAIMED BY THE APPELLANT DURING THE RELEVANT PERIOD . 10.22 AS REGARDS DISALLOWANCE OUT OF RS. 1,96,82,569/- CLAIMED BY THE APPELLANT AS PRE-OPERA TIVE EXPENSES, IT IS SEEN THAT THE AO WHILE DISALLOWING CERTAIN PERCENTAGE FROM VARIOUS HEADS RELIED ON THE DECISIO N OF HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF ANIL S TEEL INDUSTRIES LTD. VS. CIT, 193 ITR 124 AND THE DECISI ON OF HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. SIMCO METE RS LTD. , 111 ITR 113. 8.5 THE LD. CIT(A) RELIED ON THE DECISION OF HON'BL E APEX COURT IN THE CASE OF CHALLAPALLI SUGARS LTD. VS. CIT (SUPRA) BY FOLLOWING OBSERVATIONS:- ITA NO.881/JP/2006 INDITAL TINTORIA LTD. VS. DCIT , ALWAR 18 AS THE EXPRESSION ACTUAL COST HIGHER SIDE NOT B EEN DEFINED, IT SHOULD BE CONSTRUED IN THE SENSE WHICH NO COMMERCIAL MAN WOULD MISUNDERSTOOD. FOR THIS PURPOS E, IT WOULD BE NECESSARY TO ASCERTAIN THE CONNOTATION OF THE EXPRESSION IN ACCORDANCE WITH THE NORMAL RULES OF A CCOUNTANCY PREVAILING IN COMMERCE AND INDUSTRY. THE ACCEPTED ACCOUNTANCY RULE FOR DETERMINING COST OF FIXED ASSE TS IS TO INCLUDE ALL EXPENDITURE NECESSARY TO BRING SUCH ASS ETS INTO EXISTENCE AND TO PUT THEM IN WORKING CONDITION. THE LD. CIT(A) ALSO RELIED ON THE FOLLOWING CASE LA WS. (I) ARVIND MILLS LTD. VS. CIT , 112 ITR 64 (GUJ.) (II) VALLABH GLASS WORKS LTD. VS. CIT, 127 ITR 37 (GUJ.) (III) CIT VS. JMA INDUSTRIES, 129 ITR 373 (DEL.) 8.6 AGGRIEVED, THE REVENUE IS BEFORE US. 8.7 THE LD. DR RELIED ON THE ORDER OF THE AO. 8.8 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE BENCH ASKED THE QUERY FROM THE LD. DR AS TO HOW THE CASE OF CHALLAPALLI SUGARS LTD. VS. CIT (SUPRA ) IS NOT APPLICABLE TO THE ASSESSEE FACTS AND THE OBSERVATION OF THE LD. CIT(A ). THE LD. DR COULD NOT CONTROVERT THE FINDINGS OF THE LD. CIT(A). THE GENU INENESS OF THE PRE- OPERATIVE EXPENSES IS NOT IN QUESTION. THIS BEING S O, THE HON'BLE SUPREME COURT IN THE CASE OF CHALLAPALLI SUGARS LTD. VS. CI T (SUPRA) HAS CLEARLY HELD THAT ALL THE EXPENDITURE INCURRED BY THE ASSESSEE P RIOR TO COMMENCEMENT OF PRODUCTION ARE TO BE CAPITALIZED ON ACCEPTED ACCOUN TANCY NORMS AND THE COST OF FIXED ASSETS WILL INCLUDE ALL THE EXPENDITURE NE CESSARY TO BRING SUCH ASSETS ITA NO.881/JP/2006 INDITAL TINTORIA LTD. VS. DCIT , ALWAR 19 INTO EXISTENCE AND TO PUT THEM IN WORKING CONDITION S. THERE IS NO ISSUE ON CAPITALIZATION. THE DEPRECIATION IS TO BE ALLOWED A S PER PRESCRIBED RATE ON THE COST OF THE ASSETS. WE SEE NO INFIRMITY IN THE ORD ER OF THE LD. CIT(A). SINCE WE HAVE ALLOWED GROUND NO. 3 AND 4 OF THE ASSESSEE WHICH IS A QUESTION OF CONSEQUENT DEPRECIATION, THEREFORE, THE ISSUE ON DE PRECIATION HAS RIGHTLY BEEN DECIDED BY THE LD. CIT(A). THUS THE GROUND NO. 3 AN D 4 OF THE REVENUE ARE DISMISSED. THUS THE APPEAL FOR ASSESSMENT YEAR 1995-96 OF THE ASSESSEE IS ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED . 9.1 THE REVENUE HAS RAISED THE FOLLOWING GROUND IN ITS PENALTY APPEAL BEARING ITA NO. 1184/JP/2010 FOR THE ASSESSMENT YE AR 1995-96. THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS O N THE FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE PENALTY OF RS. 5,06,204/- IMPOSED U/S 271(1)(C) OF THE I.T. AC T, 1961 9.2 SINCE WE HAVE ALLOWED THE APPEAL OF THE ASSESSE E AND DISMISSED THE APPEAL OF THE REVENUE, THEREFORE, THE ORDER OF THE LD. CIT(A) DELETING THE PENALTY IS UPHELD. CONSEQUENTLY, THIS APPEAL OF THE REVENUE IS ALSO DISMISSED. NOW WE TAKE UP THE APPEALS OF THE ASSESSEE AND THE REVENUE FOR THE ASSESSMENT YEAR 1996-97. ITA NO.881/JP/2006 INDITAL TINTORIA LTD. VS. DCIT , ALWAR 20 10.1 THE GROUNDS RAISED BY THE ASSESSEE IN ITS APPE AL FOR THE ASSESSMENT YEAR 1996-97 ARE AS UNDER:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION MADE BY THE LD. AO TOTALLING A SUM OF RS. 56,400/- BEING RENT ON MAINTAINING A TRANSIT-CU M-OFFICE AT ALWAR IS JUSTIFIED AND IS DISALLOWABLE U/S 37(4) OF THE I.T. ACT, 1961 2. THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE CIT APPEAL HAS ERRED IN RESTRICTING THE DISALLO WANCE AT RS. 75000/- ON ADHOC BASIS (AS AGAINST TOTAL DISALLOWANCE AT RS. 2 00000/- BY LD. AO) OUT OF FOREIGN TRAVELING EXPENSES OF RS.5,14,295/- INCURRE D ON FOREIGN TRAVELS MADE BY ITS EMPLOYEES/DIRECTORS FOR THE BUSINESS OF THE APPELLANT COMPANY. THE ENTIRE DISALLOWANCE DESERVES TO BE DELETED. 3. THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT APPEAL HAS ERRED IN RESTRICTING THE DISALLO WANCE OF RS. 20,000/ ON ADHOC BASIS OUT OF INLAND TRAVEL EXPENSES ON TRAVEL ING MADE BY ITS EMPLOYEES FOR THE PURPOSES OF BUSINESS OF THE ASSESSEE. 4. THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT APPEAL HAS ERRED IN CONFIRMING THE DISA LLOWANCE OF RS. 30,000/- OUT OF CAR MAINTENANCE EXPENSES FOR THE CARS OF THE ASSESSEE COMPANY BEING USED BY ITS EMPLOYEES FOR THE PURPOSES OF BUSINESS OF THE ASSESSEE. 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT APPEAL HAS ERRED IN RESTRICTING THE DIS ALLOWANCE TO RS. 10,000/- ON ADHOC BASIS OUT OF MISCELLANEOUS EXPENSES. THE ENTI RE EXPENDITURE OF RS. 18,000/- DESERVES TO BE DELETED. 6. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT APPEAL HAS ERRED IN RESTRICTING THE SHO RTAGE AT 5% ON ADHOC BASIS INSTEAD OF ALLOWING ON ACTUAL BASIS WHICH WAS @ 10. 23% FOR THE YEAR UNDER CONSIDERATION. THAT THE ADDITION WORKED OUT BY THE LD. AO WAS RS. 4713946/- PRESUMING THE SHORTAGE TO BE @ 2% ARBITRARY AND WIT HOUT ANY LAWFUL BASIS AND WITHOUT GOING INTO THE MERITS OF THE CASE AND JUST FOLLOWING THE PREVIOUS ASSESSMENT ORDER. THAT THE AFORESAID ADDITION MADE IS ARBITRARY AND U NCALLED FOR AND OUGHT TO BE DELETED ON THE FACTS OF THE CASE. ITA NO.881/JP/2006 INDITAL TINTORIA LTD. VS. DCIT , ALWAR 21 11.1 THE REVENUE HAS RAISED THE FOLLOWING GROUNDS I N ITS APPEAL. 1. THAT THE LD. CIT(A) HAS GROSSLY ERRED ON FACTS AND CIRCUMSTANCES OF THE CASE BY WITHOUT GIVING SPECIFIC FINDING, ALLOWI NG 5% WASTAGE OF RAW MATERIAL AS AGAINST 2% WASTAGE ALLOWED BY THE AO THEREBY ALL OWED RELIEF OF RS. 17,17952//- WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO DISCHARGE ITS ONUS OF PROVIDING THE SAME AS NO REPLY WAS FILED BY THE ASSESSEE TO THE SPECIFIC QUERY IN THIS REGARD AND THE ASSESSEE ITSELF CLAIME D WASTAGE AT 1% IN THE ASSESSMENT YEAR 1997-98. 2 . THAT THE LD. CIT(A) HAS GROSSLY ERRED ON FACTS AND CIRCUMSTANCES OF THE CASE BY HOLDING THAT THE AO WHILE MAKING THE IMPUGNED ADDITION HAS NOT BROUGHT ON RECORD NEW FACTS IN SPITE OF THE FACT T HAT THE AO OBSERVED THAT MOST STOCK OF WORK IN PROGRESS PERTAINS TO LAST PROCESS OF PRODUCTION WHEREAS THE ASSESSEE VALUED IT AT AVERAGE RATE OF ALL PROCESSES . 3. THAT THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AS WEL L AS ON THE FACTS AND CIRCUMSTANCES OF THE CASE BY DELETING THE DISAL LOWANCE OF DEPRECIATION OF RS. 1842959/- CLAIMED ON CAPITALIZED PRE-OPERATIVE EXPE NSES RS. 64.37 LACS DISALLOWED BY THE AO IN ASSESSMENT YEAR 1995-96 AND AGAINST DELETION OF WHICH THE DEPARTMENT PREFERRED SECOND APPEAL BEFORE HON'B LE ITAT. 4. THAT THE LD. CIT(A) HAS GROSSLY ERRED ON THE FAC TS AND CIRCUMSTANCES OF THE CASE BY HOLDING THAT THE AO WI THOUT POINTING OUT ANY SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNTS MADE THE DISALLOWA NCE OF RS. 2.00 LACS OUT OF STORES AND SPARES EXPENSES THEREBY DELETED THE SAME WITHOUT APPRECIATING THE FACTS AND MATERIAL BROUGHT ON RECORD WHEREAS THE AO OBSERVED THAT THE ASSESSEE HAS NOT CLAIMED THE EXPENDITURE ON THE BASIS OF CON SUMPTION, NOT MAINTAINED ANY RECORD FOR CONSUMPTION OF THE SAME AND NOT ACCOUNTE D FOR THE SCRAP VALUE OF THE STORES AND SPARES OBTAINED AS REPLACEMENT. 11.2 THE GROUND NO. 6 OF THE ASSESSEES APPEAL AN D THE GROUND NO. 1 OF THE REVENUES APPEAL WHICH RELATES TO THE CLAI M OF SHORTAGE BY ASSESSEE IS SIMILAR TO THE FACTS AND CIRCUMSTANCES OF THE CA SE TO GROUND NO. 1 FOR THE ASSESSMENT YEAR 1995-96. IN THIS YEAR ALSO, NO SPEC IFIC INSTANCE FOR REJECTION OF BOOK RESULT HAS BEEN INDICATED. AS WE HAVE ALLOW ED THE SHORTAGE CLAIMED BY THE ASSESSEE IN ITS PROCESS FOR THE ASSESSMENT Y EAR 1995-96 FOR THE SAME ITA NO.881/JP/2006 INDITAL TINTORIA LTD. VS. DCIT , ALWAR 22 REASON, WE ALLOW THE CLAIM OF THE ASSESSEE IN ASSES SMENT YEAR 1996-97 ALSO. THUS GROUND NO. 6 OF THE ASSESSEE IS ALLOWED AND GR OUND NO. 1 OF THE REVENUE IS DISMISSED. 12.1 APROPOS GROUND NOS. 1 TO 5 OF THE ASSESSEE REG ARDING RENT ON TRANSIT- CUM-OFFICE, FOREIGN TRAVELS, INLAND TRAVELS, CAR MA INTENANCE AND MISCELLANEOUS EXPENSES. THE ASSESSEE'S GROUNDS ARE ALLOWED FOLLOWING OUR ORDER FOR THE ASSESSMENT YEAR 1995-96 BY RELYING ON THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF SAYAJI IRON AND ENGG. CO. VS CIT, (SUPRA). THUS WE SEE NO INFIRMITY IN THE ORDER OF T HE LD. CIT(A) WHICH IS UPHELD ON THIS ISSUE. HENCE, GROUND NOS. 1 TO 5 OF THE ASSESSEE ARE ALLOWED. 13.1 COMING TO REMAINING GROUNDS OF THE REVENUES APPEAL , THE GROUND NO. 2 OF THE REVENUES APPEAL IS SIMILAR TO THE FAC TS AND CIRCUMSTANCES OF THE CASE TO GROUND NO. 2 FOR THE ASSESSMENT YEAR 1995-9 6 IN RESPECT OF VALUATION OF CLOSING STOCK. THUS BY FOLLOWING OUR O RDER FOR THE ASSESSMENT YEAR 1995-96, THIS GROUND OF THE REVENUE IS DISMISS ED AND THE ORDER OF THE LD. CIT(A) ON THIS ISSUE IS UPHELD. THUS GROUND NO. 2 OF THE REVENUE IS DISMISSED. 14.1 THE GROUND NO. 3 OF THE REVENUE IS SIMILAR TO THE FACTS AND CIRCUMSTANCES OF THE CASE TO GROUND NO. 3 FOR THE A SSESSMENT YEAR 1995-96 IN RESPECT OF CAPITALIZATION OF EXPENSES. THUS BY FOLLOWING OUR ORDER FOR THE ITA NO.881/JP/2006 INDITAL TINTORIA LTD. VS. DCIT , ALWAR 23 ASSESSMENT YEAR 1995-96, THIS GROUND OF THE REVENUE IS DISMISSED AND THE ORDER OF THE LD. CIT(A) ON THIS ISSUE IS UPHELD. TH US GROUND NO. 3 OF THE REVENUE IS DISMISSED. 15.1 COMING TO GROUND NO. 4 OF THE REVENUE WHERE TH E LD. CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE AMOUNTING TO RS. 2.00 LACS ON STORES AND SPARES EXPENSES. 15.2 IN FIRST APPEAL, THE ASSESSEE HAS SUBMITTED TH E FOLLOWING EXPLANATION BEFORE THE LD. CIT(A). 11.1THE LD. AO HAS ALSO ADDED A SUM OF RS. 2. 00 LACS ALLEGING THAT SALE OF SCRAP IS NOT ACCOUNTED. THE ALLEGATION IS BASELESS AND WITHOUT ANY LOGIC. NO SUCH INSTANCE HAS BEEN POINTED OUT BY THE LD. AO. MORE SO, HE HAS NOT APPR ECIATED THAT MISC. RECEIPTS/INCOME RECORDED IN THE P & L ACCOU NTING IS NOTHING BUT SALE OF SCRAP. IT IS ALSO IMPORTANT TO MENTION HERE THAT THE COMPANY IS TWO YEARS YOUNG ONLY AT T HAT T IME AND SALE OF SCRAP OUT OF STORES CANNOT BE MUCH IN TWO YEAR O LD COMPANY. IT IS CLEAR THAT THE LD. AO HAS EXCEEDED HIS POWERS WHILE ADDING THIS KIND OF ARBITRARY ADDITIONS 15.3 THE LD. CIT(A) DELETED THE ADDITION BY FOLLOWI NG OBSERVATION. 11.2 I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS OF THE A.R. OF THE APPELLANT CAREFULLY. IT IS SEEN THAT THE AO MADE THE DISALLOWANCE WITHOUT POINTING OUT A NY SPECIFIC DEFECT IN THE BOOKS OF ACCOUNTS OF THE APPELLANT. T HEREFORE, UNDER THESE CIRCUMSTANCES, I DO NOT FIND ANY JUSTIF ICATION FOR MAKING SUCH DISALLOWANCE. IN VIEW OF THIS, THE DISA LLOWANCE MADE BY THE AO IS HEREBY DELETED. 15.4 THE LD. DR RELIED ON THE ORDER OF THE AO. ITA NO.881/JP/2006 INDITAL TINTORIA LTD. VS. DCIT , ALWAR 24 15.5 THE LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT THE AO PRESUMED THAT THERE IS A POSSIBILITY OF SALE OF SCRAP OUT OF STOR ES WITHOUT ANY COGENT REASONS. THE LD. CIT(A) DELETED THE SAME HOLDING TH E DISALLOWANCE TO BE WITHOUT ANY COGENT REASONING. 15.6 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. SINCE NO INSTANCE OF ANY SCRAP SALE OUT OF STORES HAS BEEN POINTED OUT BY THE AO, THEREFORE, WE SEE NO IN FIRMITY IN THE ORDER OF THE LD. CIT(A) WHICH IS UPHELD ON THIS ISSUE. THUS THE GROUND NO. 4 OF THE REVENUE IS DISMISSED. IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR ASSE SSMENT YEAR 1996-97 IS ALLOWED AND THAT OF THE REVENUE IS DISMISSED. 16.1 NOW WE TAKE UP THE APPEALS OF THE ASSESSEE AND THE REVENUE FOR THE ASSESSMENT YEAR 1998-99. 16.2 THE REVENUE HAS RAISED THE FOLLOWING GROUNDS I N ITS APPEAL FOR THE ASSESSMENT YEAR 1998-99. 1. THAT THE LD. CIT(A) HAS GROSSLY ERRED ON FACTS AND CIRCUMSTANCES OF THE CASE BY WITHOUT GIVING SPECIFI C FINDINGS, DELETING THE ADDITION OF RS. 6,24,000/- MADE ON ACC OUNT OF WASTAGE OF RAW MATERIAL CLAIMED AT 3.50% AS AGAINST 2% WASTAGE ALLOWED BY THE AO WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO DISCHARGE ITS ONUS OF PROVI NG THE SAME AS NO REPLY WAS FILED BY THE ASSESSEE TO THE SPECIFIC QUERY IN THIS REGARD AND THE ASSESSEE ITSELF CLAIMED WASTAGE AT 1 % IN THE ASSESSMENT YEAR 1997-98. ITA NO.881/JP/2006 INDITAL TINTORIA LTD. VS. DCIT , ALWAR 25 2. THAT THE LD. CIT(A) HAS GROSSLY ERRED ON FACTS A ND CIRCUMSTANCES OF THE CASE BY HOLDING THAT THE AO W HILE MAKING THE IMPUGNED ADDITION HAS NOT BROUGHT ON RECORD NEW FACTS IN SPITE OF THE FACT THAT THE AO OBSERVED THE SAME AS DISCUSSED IN ASSESSMENT ORDER FOR ASSESSMENT YEAR 1995-96 AND 19 96-97 THAT MOST STOCK OF WORKING IN PROGRESS PERTAINS TO LAST PROCESS OF PRODUCTION WHEREAS THE ASSESSEE VALUED IT AT AVE RAGE RATE OF ALL PROCESSED.. 3. THAT THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTANCES OF THE CASE BY DELETING THE DISALLOWANCE OF DEPRECIATION OF RS. 11,54,792/- CLAIMED ON CAPITALIZED PRE-OPERATIVE EXPENSES RS. 64.37 LAKHS DISALLOWED BY THE AO IN ASSESSMENT YEAR 1995-96 AND AGAINST DE LETION OF WHICH THE DEPARTMENT PREFERRED SECOND APPEAL BEFORE HON'BLE ITAT. 4. THAT THE LD. CIT(A) HAS GROSSLY ERRED ON FACTS A ND CIRCUMSTANCES OF THE CASE BY HOLDING THAT THE AO WI THOUT POINTING OUT ANY SPECIFIC DEFECTS IN THE BOOKS OF A CCOUNT MADE THE DISALLOWANCE OF RS. 5 LACS OUT OF STORES AND SP ARES EXPENSES THEREBY DELETING THE SAME WITHOUT APPRECIATING THE FACTS AND MATERIAL BROUGHT ON RECORD WHEREAS THE AO OBSERVED, AS DISCUSSED IN THE ASSESSMENT ORDER FOR ASSESSMENT YE AR 1995-96 AND 96-97, THAT THE ASSESSEE HAS NOT CLAIMED THE EX PENDITURE ON THE BASIS OF CONSUMPTION, NOT MAINTAINED ANY RECORD FOR CONSUMPTION OF THE SAME AND NOT ACCOUNTED FOR THE S CRAP VALUE OF THE STORES AND SPARES OBTAINED AS REPLACEMENT. 16.3 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. THE GROUND NOS. 1, 2 AND 3 OF THE REVENUE ARE SIMILAR TO THE FACTS AND CIRCUMSTANCES OF THE CASE TO GROUN D NOS. 1 TO 3 OF EARLIER YEAR IN RESPECT OF SHORTAGE, VALUATION OF STOCK OF WORK IN PROGRESS AND ITA NO.881/JP/2006 INDITAL TINTORIA LTD. VS. DCIT , ALWAR 26 CAPITALIZATION OF PRE-OPERATIVE EXPENSES. FOLLOWING OUR ORDER (SUPRA), THE GROUND NOS. 1 TO 3 OF THE REVENUE ARE DISMISSED. 17.1 THE GROUND NO. 4 OF THE REVENUE IS REGARDING S TORES AND SPARES WHICH IS SIMILAR TO THE FACTS AND CIRCUMSTANCES TO GROUND NO. 4 OF THE REVENUE FOR THE ASSESSMENT YEAR 1996-97. BY FOLLOWI NG OUR ORDER ON THIS ISSUE (SUPRA), THIS GROUND NO. 4 OF THE REVENUE IS ALSO DISMISSED. 18.1 THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN ITS APPEAL FOR ASSESSMENT YEAR 1998-99. 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) HAS ERRED IN CONFIRMING T HE ADDITION MADE BY THE LD. AO TOTALING A SUM OF RS. 50,000/- B EING REPAIR EXPENSES. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANCE AT RS. 50,000/- ON ADHOC BASIS (AS AGA INST TOTAL DISALLOWANCE AT RS. 1,00,000/- BY LD AO) OUT OF TRA VELING AND CONVEYANCE EXPENSES INCURRED BY ITS EMPLOYEES/ DIRE CTORS FOR THE BUSINESS OF THE APPELLANT COMPANY. THE ENTIRE D ISALLOWANCE DESERVES TO BE DELETED. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN CONFIRMING T HE DISALLOWANCE AT RS. 50,000/- ON ADHOC BASIS OUT OF MISCELLANEOUS EXPENSES. 19.1 APROPOS GROUND NO. 1 OF THE ASSESSEE WHEREIN T HE AMOUNT OF RS. 3.53 LACS WAS CLAIMED AS REVENUE EXPENDITURE BY THE ASSE SSEE OUT OF WHICH THE ITA NO.881/JP/2006 INDITAL TINTORIA LTD. VS. DCIT , ALWAR 27 AO DISALLOWED A SUM OF RS. 50,000/- ON ADHOC BASIS. THE LD. CIT(A) CONFIRMED THE ADDITION MADE BY THE AO BY FOLLOWING OBSERVATION. 5.2 I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS OF THE A.R. OF THE APPELLANT CAREFULLY. THE A.R. OF THE APPELLANT HAS NOT CONTROVERTED THE FACT THAT TH E RELEVANT VOUCHERS WERE NOT PRODUCED BEFORE THE AO FOR VERIFI CATION. THEREFORE, UNDER THESE CIRCUMSTANCES THE AO HAS RIG HTLY DISALLOWED A PART OF SUCH EXPENSES ACCORDINGLY. IN VIEW OF THIS THE DISALLOWANCE MADE BY THE AO IS HEREBY CONFIRMED . 19.2 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE COULD NOT CONTROVERT THE FACT THAT AS TO WHY THE VOUCHERS COU LD NOT BE PRODUCED BEFORE THE LOWER AUTHORITIES. IN THE CIRCUMSTANCES, THE ES TIMATE BECOMES INEVITABLE. THE LD. COUNSEL FOR THE ASSESSEE COULD NOT GIVE ANY COGENT REASONS TO HOLD THAT ADHOC DISALLOWANCE WAS ARBITRARY OR EXCESSIVE . UNDER THESE CIRCUMSTANCES, WE FIND NO REASON TO INTERFERE IN TH E ORDER OF THE LD. CIT(A) WHICH IS UPHELD. THUS GROUND NO. 1 OF THE ASSESSEE IS DISMISSED. 20.1 THE GROUND NOS. 2 OF THE ASSESSEE IS IN RESPEC T OF CONVEYANCE AND TRAVELING EXPENSES AND 3 OF THE ASSESSEE IS IN RES PECT OF MISC. EXPENSES. 20.2 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. THESE EXPENSES ARE ALLOWED BY FOLLOWING OUR EARLIER ITA NO.881/JP/2006 INDITAL TINTORIA LTD. VS. DCIT , ALWAR 28 ORDER (SUPRA) AND ACCORDINGLY RELYING ON THE CASE O F SAYAJI IRON AND ENGG. CO. VS CIT (SUPRA). THUS GROUND NOS. 2 AND 3 OF TH E ASSESSEE ARE ALLOWED. THUS THE APPEAL OF THE REVENUE IS DISMISSED AND T HE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 21.0 IN THE RESULT, ALL THE APPEALS OF THE REVENUE ARE DISMISSED AND THE APPEALS OF THE ASSESSEE FOR THE ASSESSMENT YEAR 199 5-96, 1996-97 ARE ALLOWED AND APPEAL FOR THE 1998-99 ARE PARTLY ALLOW ED.. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 12- 09-2014 SD/- SD/- (T.R. MEENA) (R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR DATED: 12 TH SEPT. 2014 *MISHRA COPY FORWARDED TO:- 1. M/S. INDITAL TINTORIA LTD., ALWAR 2. THE DCIT, CIRCLE- ALWAR / ACIT CIRCLE- 1, ALWAR 3. THE LD. CIT 4. THE LD. CIT(A), JAIPUR BY ORDER 5..THE LD. DR 6.THE GUARD FILE (IT NO. 881/JP/2006) AR ITAT, JAIPUR ITA NO.881/JP/2006 INDITAL TINTORIA LTD. VS. DCIT , ALWAR 29 ITA NO.881/JP/2006 INDITAL TINTORIA LTD. VS. DCIT , ALWAR 30 ITA NO.881/JP/2006 INDITAL TINTORIA LTD. VS. DCIT , ALWAR 31