ITA NOS. 748, 749 & 901/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 748/DEL/2011 A.YRS. : 2006-07 SUNIL KUMAR GARG, M/S GUPTA SPINNERS, SHIV NAGAR, PANIPAT (PAN : AAPPG0178E) VS. ASSISTANT COMMISSIONER OF INCOME TAX, PANIPAT CIRCLE, PALIKA BAZAR, PANIPAT I.T.A. NO. 749/DEL/2011 A.YRS. : 2006-07 RAM DHAN DASS, M/S R.D. SHIPPING MILLS, SHIV NAGAR, KRISHNAPURA, PANIPAT (HARYANA) (PAN : AAKPD3623Q) VS. ASSISTANT COMMISSIONER OF INCOME TAX, PANIPAT CIRCLE, PANIPAT AND I.T.A. NO. 901/DEL/2011 A.YRS. : 2006-07 SIYA RAM GARG (HUF), M/S VICKY SPINNING MILLS, SHIV NAGAR, PANIPAT (PAN : AACHS2495B) VS. ASSISTANT COMMISSIONER OF INCOME TAX, PANIPAT CIRCLE, PALIKA BAZAR, PANIPAT (APPELLANT (APPELLANT (APPELLANT (APPELLANT S SS S ) )) ) (RESPONDENT (RESPONDENT (RESPONDENT (RESPONDENT S SS S ) )) ) ASSEESSEE BY : SH. SATISH KUMAR GOEL, ADVOCATE DEPARTMENT BY : SH. KISHORE B. (D.R.) ORDER ORDER ORDER ORDER PER PER PER PER SHAMIM YAHYA : AM SHAMIM YAHYA : AM SHAMIM YAHYA : AM SHAMIM YAHYA : AM THESE APPEALS BY SEPARATE ASSESSEES ARE DIRECTED A GAINST COMMON ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX ITA NOS. 748, 749 & 901/DEL/2011 2 (APPEALS) DATED 2.12.2010 AND PERTAINING TO ASSESS MENT YEAR 2006- 07. THESE APPEALS ARE BEING DISPOSED OF BY THIS CO MMON ORDER. 2. ONE COMMON ISSUE RAISED IS THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THAT THE GRANT OF AG RO BASED CAPITAL SUBSIDY RECEIVED BY THE ASSESSEES WAS NOT EXEMPT A ND THE GRANT RECEIVED RELATED TO ASSETS, HENCE ONLY ENTITLED TO DEPRECIATION BY INVOKING EXPLANATION 10 TO SECTION 43 OF THE IT ACT . 3. ON THIS ISSUE THE ASSESSING OFFICER NOTED THAT ASSESSEE HAS RECEIVED CAPITAL SUBSIDY WHICH HAS BEEN CREDITED IN THE CAPITAL ACCOUNT BY THE ASSESSEE DIRECTLY. BY WAY OF EXPLANATION ASSESSEE STATED THAT THE SAME WAS CAPITAL RECEIPT. ASSESSING OFFICER HELD THAT THE CONTENTION OF THE ASSESSEE MAY BE CORRECT THAT IT WA S CAPITAL RECEIPT. BUT HE INVOKED THE PROVISO BELOW EXPLANATION 10 TO SECTION 43 AND DEDUCTED THE SUBSIDY AMOUNT FROM THE WDV OF ASSETS PR OPORTIONATELY AND ACCORDINGLY, CLAIM OF DEPRECIATION WAS ALLOWED AT LOWER AMOUNT. 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ASSESSING OFFICERS ACTION. 5. AGAINST THE ABOVE ORDER, ASSESSEES ARE IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT O F THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. LD. COUNSEL OF THE ASSESSEE AVERRED THAT THE SAME SUBSIDY WAS GRANTED EARLIER AND ON PART OF THE SAME SUBSIDY IN ASSESSMENT YEAR 2004-05, THE MATTER HAD TRAVELLED TO THE HIGH COURT AND THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE WHEREIN REVENUES CLAIM THAT IT WAS REVENUE RECEIPT WAS REJECTED. LD. COUNSEL FOR THE ASSESSEE HAS REFERRED TO THE PA PER BOOK FILED IN THE CASE OF SIYA RAM GARG (HUF). THEREIN, COPY OF W RITTEN SUBMISSIONS ITA NOS. 748, 749 & 901/DEL/2011 3 DATED 8.3.09 FILED BY THE ASSESSEE BEFORE THE CIT(A ) IS PLACED AT PAGES 1-2; COPY OF LETTER DATED 12.10.09 FILED BY THE ASS ESSEE BEFORE THE CIT(A) IN RESPONSE TO THE LETTER DATED 4.10,09 IS P LACED AT PAGES 3-4; REJOINDER DATED 229.09 TO THE COPY OF COMMENTS OF TH E AO, IS AT PAGES 5-6; COPY OF ITAT, F BENCH ORDER PASSED IN I.T.A. NO.4303/DEL/07 IN THE CASE OF SIYA RAM GARG(HUF) IS AT PAGES 7-23, COP Y OF ORDER DATED 14.12.10 OF THE HONBLE PUNJAB & HARYANA HIGH COURT I N I.T.A. NO.679 OF 2010 DISMISSING THE APPEAL PREFERRED BY THE DEPAR TMENT AGAINST THE AFORESAID ORDER OF THE TRIBUNAL IS AT PAGES 24-25; AND A COPY OF THE AFFIDAVIT OF SIYA RAM GARG,(HUF). ON THE OTHER HAND , LD. A.R. FOR THE ASSESSEE STRONGLY SUPPORTED THE ORDER UNDER APPEAL. SHRI RAM DHAN DAS, R/O PANIPAT, KARTA OF SIYA RAM GARG(HUF) WITH RE GARD THE FACTS OF THE CASE IS AT PAGES 29-30. IN THE AFFIDAVIT MENTIO NED AT LAST, SHRI SIYA RAM GARG HAS DEPOSED, INTER ALIA, THAT NEITHER THE TRIBUNAL NOR THE HONBLE P&H HIGH COURT INVOKED THE EXPLANATION 10 OF SECTION 43(1) IN RESPECT OF AGRO BASED SUBSIDY RECEIVED IN ASSESSMEN T YEAR 2004-05, GRANTED VIDE SANCTION DATED 27.1.95; AND THAT IN AS SESSMENT YEAR 2006-07, THE AGRO BASED SUBSIDY IS THE SAME SUBSIDY WHICH WAS SANCTIONED ON 12.11.95 AND ONLY THE BALANCE INSTALL MENT WAS RECEIVED DURING THE YEAR 2006-07, OTHERWISE WHICH WAS PART O F SAME SUBSIDY WHICH WAS MATTER OF APPEAL BEFORE THE HONBLE HIGH COURT/ITAT IN ASSESSMENT YEAR 2004-05. 6.1 LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAN D CLAIMED THAT THE ISSUE EARLIER WAS NOT LOOKED UPON FROM THE POI NT OF VIEW TO EXPLANATION 10 TO SECTION 43. ITA NOS. 748, 749 & 901/DEL/2011 4 6.2 WE HAVE CAREFULLY CONSIDERED THE ISSUE. WE NOTE THAT LD. COUNSEL OF THE ASSESSEE HAS ALSO PRODUCED BEFORE US A CERT IFICATE WHICH READS AS UNDER:- TO WHOM IT MAY CONCERN THIS IS TO CERTIFIED THAT A CHEQUE NO. 086469 AMOUN TING TO ` 30,00,000/- (RUPEES THIRTY LACS ONLY) ON ACCOUNT OF AGRO BASED SUSIDY WAS DISBURSED TO M/S RD SPINNING MILLS, SHIV NAGAR KRISHANPURA PANIPAT ON DATED 20.10.2005. THE SUBSID Y WAS SANCTIONED IN THE YEAR 1995. THIS WAS AGRO BASED SUBSIDY NOT AGAINST ANY ASSETS. TO SD/- PROP. RAMDHAN DASS JOINT DIRECTOR M/S RD SPINNING MILLS, DISTRICT INDUSTRIES CENTER SHIV NAGAR, KRISHANPURA, PANIPAT PANIPAT NO. DIC/PNP/AGRO BASED SUB/1109 DATED 21.4.2011 6.3 WE NOTE THAT THE ABOVE CERTIFICATE IS A VERY CR UCIAL DOCUMENT AND THE SAME WAS NOT AVAILABLE BEFORE THE AUTHORITIES BE LOW. BOTH THE COUNSEL FAIRLY AGREED THAT IN VIEW OF THE ABOVE, TH IS ISSUE MAY BE SENT TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE ISSUE AFRESH, IN LIGHT OF THE ABOVE SAID DOCUMENT. ACCORDINGLY, THE ISSUE ST ANDS REMITTED TO THE FILES OF THE ASSESSING OFFICER . 7. ONE ISSUE RAISED IN THE CASE OF RAM DHAN DASS (IT A NO. 749/DEL/2011) THAT LD. COMMISSIONER OF INCOME TAX (AP PEALS) ERRED IN ENHANCING INCOME BY WAY OF DISALLOWING ADDITIONAL D EPRECIATION OF ` 388112/- ALLOWED BY THE LD. ACIT CLAIMED DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON NEW MACHINERY ADDITIONS. ITA NOS. 748, 749 & 901/DEL/2011 5 8. ON THIS ISSUE ASSESSEE HAD BEEN PROVIDED ADDITIO NAL DEPRECIATION AMOUNTING TO ` 388112/-, BY THE ASSESSING OFFICER. 9. LD. COMMISSIONER OF INCOME TAX (APPEALS) NOTED THA T THE ADDITIONAL DEPRECIATION WAS NOT CLAIMED IN THE RETUR N OF INCOME AND IT WAS CLAIMED DURING THE COURSE OF ASSESSMENT. HENCE, IN THE OPINION OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS), THE HO NBLE SUPREME COURT IN THE CASE OF GOETZE INDIA LTD. VS C.I.T. 2 84 ITR 323 APPLIES. ACCORDINGLY, ADDITIONAL DEPRECIATION AMOUNTING TO ` 388112/- ALLOWED BY THE ASSESSING OFFICER WAS HELD TO BE NOT AVAILA BLE. 10. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPE AL BEFORE US. 11. LD. COUNSEL OF THE ASSESSEE CLAIMED THAT THE AS SESSEE WAS DULY ENTITLED FOR THE CLAIM BY DEPRECIATION AND HE CLAIME D THAT IT WAS MANDATORY ON THE PART OF THE ASSESSING OFFICER TO G RANT THE ASSESSEE DEPRECIATION, WHICH WAS LEGALLY ELIGIBLE. IN THI S CONNECTION, LD. COUNSEL OF THE ASSESSEE REFERRED TO THE PROVISIONS OF SECTION 32(1)(IIA) READ WITH SECTION 32(1) EXPLANATION 5. 11.1 LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER H AND RELIED UPON THE ORDERS OF THE LD. COMMISSIONER OF INCOME TAX (APP EALS). 12. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AN D PERUSED THE RECORDS. WE FIND THAT ARTICLE 265 OF THE CONSTIT UTION OF INDIA STATES THAT NO TAX CAN BE COLLECTED EXCEPT BY AUTHORITY OF LAW. CBDT CIRCULAR NO. 114 XL-35 OF 1955 DATED 11.4.1955 STATES THAT O FFICER OF THE DEPARTMENT MUST NOT TAKE ADVANTAGE OF THE IGNORANCE OF AN ASSESSEE AS TO HIS RIGHTS. HONBLE APEX COURT IN THE CASE OF CIT VS. MR. P. FIRM IN 56 ITR 67 WHEREIN THE BENCH COMPRISED THREE OF THEIR LORDSHIPS HAD ITA NOS. 748, 749 & 901/DEL/2011 6 EXPOUNDED THAT IF A PARTICULAR INCOME IS NOT TAXABLE UNDER IT ACT, IT CANNOT BE TAXED ON THE BASIS OF ESTOPPEL OF ANY OT HER EQUITABLE DOCTRINE. 13. IN THE BACKGROUND OF THE AFORESAID DISCUSSION, WE HOLD THAT ASSESSING OFFICER HAS RIGHTLY ALLOWED THE CLAIM OF DEPRECIATION AND ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. COM MISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE AND RESTORE TO THAT ASS ESSING OFFICER. 14. ANOTHER ISSUE RAISED IN THE CASE OF RAM DHAN DAS S (ITA NO. 749/DEL/2011) IS THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST OF ` 1,25 ,000/- FOR ALLEGED NON-CHARGING OF INTEREST FROM M/S GUPTA SPUNTEX. 15. ON THIS ISSUE AT THE OUT SET, LD. COUNSEL OF T HE ASSESSEE SUBMITTED THAT IN AN IDENTICAL SITUATION, THE TRIBUNAL IN IT A NO. 1285 FOR A.Y. 2006-07 REMITTED THE MATTER TO THE FILE OF ASSESSING OFFICER TO EXAMINE THE PROPOSITION WHETHER ANY NON-INTEREST BEA RING FUNDS WERE UTILIZED FOR MAKING THE IMPUGNED ADVANCE. 16. AGAIN IN ITA NO. 1067 FOR A.Y. 2006-07 THE T RIBUNAL VIDE ORDER DATED 12.2.2010 HAD REMITTED THE MATTER TO THE FILE O F THE ASSESSING OFFICER TO EXAMINE WHETHER ONLY NON-INTEREST BEARI NG FUNDS WERE UTILIZED FOR ADVANCING INTEREST FREE FUNDS. SINCE THIS ISSUE WAS DECIDED IN ASSESSEES GROUP CASES, BOTH THE COUNSEL FAIRLY AGREED THAT THE ISSUE MAY BE REMITTED TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE AS TO WHETHER THE CLAIM OF THE ASSESSEE IS CORRECT THAT N ON-INTEREST BEARING FUNDS WERE UTILIZED FOR MAKING THE ADVANCE. ITA NOS. 748, 749 & 901/DEL/2011 7 17. IN ITA NO. 748 (SUNIL KUMAR GARG), THE GROUNDS RAISED READ AS UNDER:- THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TA X (APPEALS) IN UPHOLDING EXCESSIVE DISALLOWANCE OF 1/ 5TH CAR EXPENSES AT ` 49772/- IS ARBITRARY AND UNCALLED FOR . THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED IN UPHOLDING EXCESSIVE DISALLOWANCE O F ` 19744/- OUT OF TELEPHONE EXPENSES WHICH IS ARBITRAR Y AND UNCALLED FOR. 18. LD. COUNSEL OF THE ASSESSEE PLEADED BEFORE US T HAT HE SHALL NOT BE PRESSING THESE GROUNDS. ACCORDINGLY, THESE GROUNDS ARE DISMISSED AS NOT PRESSED. 19. IN THIS RESULT, ALL THE APPEALS BY THE SEPARAT E ASSESSEES STAND ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29/04/2011 UP ON CONCLUSION OF HEARING. SD/ SD/ SD/ SD/- -- - SD/ SD/ SD/ SD/- -- - [ [[ [A.D. JAIN A.D. JAIN A.D. JAIN A.D. JAIN] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 29/4/2011 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES