M /S Gujarat Mineral Development Corporations Ltd, Ahmedabad V. The A C I T, Ahmedabad

ITA 908/AHD/1999

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9311 (ITAT-AHMEDABAD)
• Duration Of Justice: 10 year(s) 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 26-08-2009
• Assessment Year: misc
• Appeal Filed On: 29-04-1999
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJIV AGARWAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Capital asset; Business income; Depreciation; Rule of consistency; Bad and doubtful debts; Commercial expediency; Revised return; Reason to believe; Revenue expenditure; Reassessment proceedings; Capital expenditure; Set aside
• Section: 43B; 40A(3); 143(3); 192; 139(1); 148; 37; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI T.K.SHARMA, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER DATE OF HEARING : DRAFTED ON: ITA NO. 908 /AHD/ 1999 , ITA NO.89/AHD/2001, ITA NO.90/AHD/2001, ITA NO.91/AHD/2001, ASSESSMENT YEAR : 1988-89, 1994-95, 1996-97, 1997-98, GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. VS. JT. COMMISSIONER OF INCOME TAX, (ASSTT.) SPL. RANG-9, AHMEDABAD (APPELLANT) .. (RESPONDENT) ITA NO.1031/AHD/1999, ITA NO.2726 /AHD/2000, ITA NO.2727/AHD/2000, ITA NO.2728/AHD/2000, ASSESSMENT YEAR : 1988-89, 1994-95, 1996-97, 1997-98, PAN/GIR NO. : JT. COMMISSIONER OF INCOME TAX, (ASSTT.) SPL. RANG-9, AHMEDABAD VS GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. (APPELLANT) .. (RESPONDENT) APPELLANT BY : S. N. SOPARKAR, SR. ADVOCATE RESPONDENT BY: RAJIV AGARWAL, CIT, DR O R D E R GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 2 PER N.S.SAINI , ACCOUNTANT MEMBER :- THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE A ND REVENUE AGAINST THE ORDERS OF THE LEARNED COMMISSIONER OF INCOME TA X(APPEALS) PASSED IN ASSESSMENT YEARS 1998-99, 1994-95, 1996-97 AND 1 997-98 RESPECTIVELY DATED 26.02.1999, 29.09.2000, 29.09.20 00 AND 29.09.2000 RESPECTIVELY BY TAKING FOLLOWING GROUNDS OF APPEAL. ITA NO.908/AHD/1999 . (ASSESSEES APPEAL) 1. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN LAW AND ON FACTS OF THE CASE BY CONFIRMING THAT THE AS SESSING OFFICER HAS RIGHTLY ISSUED NOTICE UNDER SECTION 148J OF THE INCOME TAX ACT, 1961 AND ACCORDINGLY HAS ERRED IN CO NFIRMING THE PROCEEDINGS FINALIZED BY THE ASSESSING OFFICER U NDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961. 1.1 YOUR APPELLANT SUBMITS THAT UNDER THE FACTS AND CIRC UMSTANCES OF THE CASE AS NARRATED IN THE LETTER DATED 10 TH JANUARY 1995 AND 23 RD JANUARY 1995 ADDRESSED TO THE ASSESSING OFFICER AND LETTER DATED 29 TH JANUARY, 1999 ADDRESSED TO LEARNED COMMISSIONER OF INCOME TAX(APPEALS). IT IS PROVED BEYOND DOUBT THAT NO INCOME HAS ESCAPED ASSESSMENT BECAUSE THE ORIGINAL ASSESSMEN T WAS FINALIZED AFTER CARRYING DETAILED INVESTIGATION AND SC RUTINY OF THE RECORDS OF THE APPELLANT AND THEREFORE, THE ENTIRE PROCE EDINGS CARRIED OUT THEREAFTER BY THE ASSESSING OFFICER ARE ILL EGAL AND BAD AT LAW AND THEREFORE, THE SAME IS REQUIRED TO BE QUASHE D ON THIS PRELIMINARY GROUNDS ITSELF. 2. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN LAW AND ON FACTS OF THE CASE BY CONFIRMING THE ADDITI ON MADE BY THE ASSESSING OFFICER WHILE COMPUTING BOOK PROFIT UND ER SECTION 115J OF THE ACT. IN RESPECT OF PROVISION FOR BAD AND D OUBTFUL DEBTS AMOUNTING TO RS.3,89,033/- STATING THAT THE SAME IS B EING CONTINGENT LIABILITY REQUIRES TO BE ADDED. 2.1 YOUR APPELLANT SUBMITS THAT THE PROVISIONS MADE F OR BAD AND DOUBTFUL DEBTS IS NOT A CONTINGENT LIABILITY AND THEREFORE , THE GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 3 DISALLOWANCE MADE BY HIM FOR A PURPOSE OF COMPUTING BOOK PROFIT UNDER SECTION 115J OF THE INCOME TAX ACT IS ILLE GAL AND BAD AT LAW. 3. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ALSO ERRED IN LAW AND ON FACTS OF THE CASE BY CONFIRMING TH E DISALLOWANCE MADE BY THE ASSESSING OFFICER IN RESPEC T OF SO CALLED EXCESS DEPRECIATION AMOUNTING TO RS.6,92,93,38 9 WHILE COMPUTING THE BOOK PROFIT UNDER SECTION 115J STATING THAT TH E SAME HAS BEEN PROVIDED BY THE APPELLATN WITH A MOTIVE TO REDUCE THE BOOK PROFIT AND THEREFORE, THE SAME REQUIRES TO BE ADDED. 3.1 YOUR APPELLANT SUBMITS THAT THE DEPRECIATION HAS B EEN PROVIDED IN ACCORDANCE WITH THE PROVISIONS OF COMPANIES ACT, 19 56 AS EXPLAINED IN DETAIL TO THE ASSESSING OFFICER IN THE LE TTER DATED 23 RD JANUARY 1995 ADDRESSED TO THE ASSESSING OFFICER AND LETTER DATED 29 TH JANUARY, 1999 ADDRESSED TO LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AND THEREFORE, THERE IS NO JUSTIF ICATION ON THE PART OF THE ASSESSING OFFICER TO HOLD THAT THE SAME IS PROVIDED WITH A MOTIVE TO REDUCE THE TAX LIABILITY. 3.2 IT IS FURTHER SUBMITTED THAT THE APPELLANT BEING A GO VERNMENT COMPANY, THERE CANNOT BE ANY MOTIVE OF REDUCING THE T AX LIABILITY, THERE CANNOT BE ANY MOTIVE OF REDUCING THE TA X LIABILITY. IN VIEW OF THIS THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS HIGHLY UNJUSTIFIED AND ILLEGAL. 3.3 YOUR APPELLANT SUBMITS THAT THE BOOK PROFIT FOR TH E PURPOSE OF SECTION 115J MEANS THE NET PROFIT AS SHOWN IN THE PROFIT & LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR AS PREPARED IN ACCORDANCE WITH THE PROVISIONS OF PART II AND III OF SCHEDULE 6 OF THE COMPANIES ACT, 1956, WHICH IS INCREASED/REDUCED BY CERTAIN ITEMS AS PROVIDED IN THE EXPLANATION. IN THE PRESENT CAS E THE APPELLANT HAS COMPUTED THE BOOK PROFIT IN ACCORDANCE W ITH THE SAID PROVISION AND THEREFORE, THE DISALLOWANCE MADE B Y THE ASSESSING OFFICER AS STATED IN HIS ORDER ARE OUT OF PU RVIEW OF THE PROVISIONS OF SECTION 115J AND THEREFORE, THE SAME A RE DESERVES TO BE DELETED. GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 4 4. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)H AS ERRED IN LAW AND ON FACTS OF THE CASE BY CONFIRMING THE FINDIN GS OF ASSESSING OFFICER THAT EXPENDITURE OF RS.35,90,404 IN CURRED BY THE APPELLANT UNDER THE VARIOUS PROJECTS IS CAPITAL EXP ENDITURE AND ACCORDINGLY HAS ERRED IN CONFIRMING THE DISALLOW ANCE MADE BY ASSESSING OFFICER. 4.1 YOUR APPELLANT SUBMITS THAT UNDER THE FACTS AND CIRC UMSTANCES OF THE CASE AND AS EXPLAINED IN DETAIL VIDE LETTER DATED 27.02.1997 ADDRESSED TO THE ASSESSING OFFICER AND LE TTER DATED 29 TH JANUARY, 1999 ADDRESSED TO LEARNED COMMISSIONER OF INCOME TAX(APPEALS), THE EXPENDITURE INCURRED UNDER TH E HEAD OF PROJECT EXPENSES ARE OF REVENUE NATURE FOR THE REAS ON THAT THE PROJECTS FOR WHICH THE EXPENDITURE HAVE BEEN INCU RRED ARE PART AND PARCEL OF THE BUSINESS ACTIVITIES CARRIED O N BY THE APPELLANT. THIS CONTENTION OF THE APPELLANT IS SUPPORTED BY GOVERNMENT HIGH COURT DECISION IN CASE OF CIT VS. ALE MBIC GLASS INDUSTRIES LIMITED (103 ITR 278). 4.2 YOUR APPELLANT ALSO SUBMITS THAT THE LEARNED COMMISS IONER OF INCOME TAX(APPEALS) HAS ALSO ERRED IN HOLDING THAT EX PENDITURE IN RESPECT OF THE SAID PROJECTS HAVE BEEN INCURRED FO R BRINGING INTO EXISTENCE OF AN ASSET OR FOR ADVANTAGE OF ENDURING NATURE AND THEREFORE, ACCORDING TO HIM THE EXPENDITURE IN QUE STION IS OF CAPITAL NATURE. THIS CONCLUSION OF THE CIT(APPEALS) IS INCORRECT FOR THE REASON THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND AS EXPLAINED TO LEARNED COMMISSIONER OF INCOME TAX(APPEALS). THE APPELLANT COMPANY IS AN EXISTING COMPANY CARRYING ON THE SAME BUSINESS AND THEREFORE, THE PROJE CT EXPENSES IN QUESTION CANNOT BE TREATED AS CAPITAL EXPE NSES. 4.3 YOUR APPELLANT SUBMITS THAT LEARNED COMMISSIONER O F INCOME TAX(APPEALS) HAS ERRED IN NOT APPRECIATING THE FACT THA T THE APPELLANT IS CARRYING ON BUSINESS OF MINING AND FOR THAT PURPOSE INDENTIFIES DIFFERENT PLACES FOR THE PURPOSE OF CAR RYING OUT THE SAID ACTIVITY AND AFTER IDENTIFICATION OF SUCH PLACES THE VARIOUS ACTIVITIES LIKE SURVEY OF DEPOSITS, ASCERTAINING QUALI TY OF MINERAL, DECIDING UPON THE METHOD OF EXTRACTING THE SAME AND ORGANIZATION OF MINING ACTIVITY AT THE PLACES ARE UNDERTA KEN. THE EXPENSES INCURRED FOR THIS ACTIVITY ARE NOT INCURRED F OR BRINGING GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 5 INTO EXISTENCE OR PUTTING INTO WORKING CONDITION OF THE FIXED ASSETS OF THE BUSINESS. IT IS FURTHER SUBMITTED FROM THE D ETAILS OF EXPENDITURE IT CAN BE SEEN THAT THE EXPENSES ARE ON ITEMS LIKE SALARY, WELFARE EXPENSES, STORES, ETC. WHICH ARE NOT A L ALL RELATED TO PUTTING THE FIXED ASSETS INTO WORKING CONDITION BUT A RE IN RELATION TO THE NORMAL BUSINESS ACTIVITIES AS STATED H EREINABOVE. THUS, THE RATIO LAID DOWN IN CASE OF VADILAL DIARY IN TERNATIONAL IS NOT AT ALL APPLICABLE TO THE FACTS OF THE APPELLANT WHERE IN THE EXPENDITURE WERE INCURRED IN CONNECTION WITH CAPITAL A SSETS EITHER BRINGING THEM INTO EXISTENCE OR PUTTING THEM INTO WORKING CONDITION AND THEREFORE, ACCORDING TO ITAT IN THE SAID CASE SUCH EXPENDITURE WERE NOT ALLOWABLE IN VIEW OF FACTS THAT TH E SAME WERE OF CAPITAL NATURE, WHEREAS IN THE PRESENT CASE THE EXPENDITURE ARE OF REVENUE NATURE INCURRED FOR THE PUR POSE OF BUSINESS FULLY ALLOWABLE UNDER SECTION 37 OF THE ACT. 4.4 YOUR APPELLANT ALSO SUBMITS THAT THE EXPENDITURE IN QUESTION ARE TREATED AS DEFERRED REVENUE EXPENDITURE ONLY IN THE BO OKS OF ACCOUNTS AND NOT AS PART OF THE EXPENDITURE TOWARDS CONSTRUCTION/ACQUISITION OF ASSETS AND ADDED TO THE COS T OF ASSETS WHICH WAS THE CASE OF VADILA DIARY INTERNATIONAL . 4.5 WITHOUT PREJUDICE TO ABOVE YOUR APPELLANT SUBMITS THA T EVEN IF IT IS HELD OTHERWISE, THEN THE APPELLANT BE ALLOWED DE PRECIATION ON THE AMOUNT DISALLOWED WHICH ACCORDING TO ASSESSING OFFICER IS OF CAPITAL NATURE. ITA NO.908/AHD/1999 . (REVENUES APPEAL) 1. THE LD. C.I.T.(A)/DY. C.I.T.(A) HAS ERRED IN LAW AN D FACTS IN 1) DELETING THE INTEREST PAYMENT OF RS.32,71,371/- DEBITED UNDER THE HEAD PROJECT EXPENSES. 2) DELETING THE ADDITION OF PRIOR INCOME OF RS.3,72,111/ - MADE TO THE BOOK PROFIT UNDER SECTION 115 OF THE ACT. 3) DELETING THE ADDITION OF RS.3,70,119/- OUT OF PROVISIO N OF BAD AND DOUBTFUL DEBTS OF RS.7,59,152/- FOR THE PURPOS E OF BOOK PROFIT. GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 6 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE L EARNED COMMISSIONER OF INCOME TAX(APPEALS)/DCIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 3. IT IS THEREFORE, PRAYED THAT THE ORDER OF LEARNED COMMIS SIONER OF INCOME TAX(APPEALS)/DCIT(A) MAY BE SET ASIDE AND THAT OF THE ORDER OF THE ASSESSING OFFICER BE RESTORED TO THE ABO VE EXTENT. 2. GROUND NO.1 OF THE APPEAL IN ASSESSMENT YEAR 198 8-89 IS DIRECTED AGAINST ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CHALLENGING THE VALIDITY OF NOTICE ISSUED UNDER SEC TION 148 OF THE INCOME TAX ACT, 1961. ** THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSM ENT FOR THE ASSESSMENT YEAR 1988-89 WAS FINALIZED BY LEARNED ASSESSING OFF ICER VIDE ORDER DATED 30.01.1991 PASSED UNDER SECTION 143 (3). THE LEARNE D AUTHORISED REPRESENTATIVE OF THE ASSESSEE ARGUED BEFORE THE LE ARNED COMMISSIONER OF INCOME TAX(APPEALS) THAT IN THIS OR DER, ISSUE REGARDING COMPUTATION OF BOOK PROFIT UNDER SECTION 115J OF TH E ACT, WAS DULY CONSIDERED AND DECIDED. THE ASSESSMENT WAS FINALIZE D AFTER PROPER VERIFICATION AND CONSIDERATION OF ALL RELEVANT FACT S AND MATERIAL. HENCE, THE LEARNED ASSESSING OFFICER HAD NO REASON WHATSOE VER TO FORM ANY BELIEF THAT ANY INCOME HAS ESCAPED ASSESSMENT AND W HICH HAS COME TO HIS NOTICE SUBSEQUENTLY. HENCE, NOTICE ISSUED UNDER SECTION 148 OF THE ACT IS ILLEGAL AND UNJUSTIFIED. THE LEARNED AUTHOR ISED REPRESENTATIVE OF THE ASSESSEE RELIED ON THE FOLLOWING DECISIONS:- GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 7 (I) VXL INDIA LTD. VS. ACIT 215 ITR 295 (II) GARDEN SILK MILLS LTD. VS. DCIT 225 ITR 68 (III) KAIRA DISTRICT CO-OP. MILK PRODUCERS UNION LT D. VS. ACIT 220 ITR 194. 3. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVE D THAT AFTER PERUSING THE REASONS RECORDED FOR REOPENING OF THE ASSESSMEN T UNDER SECTION 148 OF THE ACT, IT IS OBSERVED THAT THE LEARNED ASSESSI NG OFFICER HAS REOPENED THE ASSESSMENT AFTER RECEIVING SATISFACTIO N OF CIT GUJARAT-1 AHMEDABAD. THE REASONS GIVEN ARE AS FOLLOWS. THE APPELLANT COMPANY FURNISHED COMPUTATION OF BOO K PROFIT UNDER SECTION 115-J OF THE ACT FOR THE YEAR AND IT WAS DULY ACCEPTED BY LEARNED ASSESSING OFFICER IN THE ASSESS MENT ORDER DATED 30.01.1991 LATER ON IT WAS FOUND THAT PRIOR P ERIOD ADJUSTMENT, WHICH WAS ADDED TO THE NET PROFIT IN P & L A/C. WAS THE NET FIGURE WHICH TOOK INTO ACCOUNT THE INCOME A S WELL AS EXPENSES OF THE EARLIER YEARS. THEREFORE, THE PRIOR PERIOD INCOME OF RS.3,72,111/- WAS NOT REQUIRED TO BE REDUCED AGA IN FROM THE BOOK PROFIT FOR THE PURPOSE OF COMPUTATION UNDER S ECTION 115-J. THERE WAS NO INFORMATION AVAILABLE ABOUT THIS AMOUN T EITHER IN THE FINAL ACCOUNTS OR IN THE TAX AUDIT REPORT. BECA USE OF THIS REDUCTION, TOTAL INCOME UNDER SECTION 115-J WAS RED UCED BY RS.1,11,633/-(30% OF 3,72,111/-). SO, THE LEARNED A SSESSING OFFICER HAD REASON TO BELIEVE THAT INCOME OF RS.1,1 1,633/- CHARGEABLE TO TAX FOR ASSESSMENT YEAR 1988-89 HAD E SCAPED ASSESSMENT BECAUSE OF THE FAILURE ON THE PART OF TH E ASSESSEE FOR WHICH ISSUE OF NOTICE UNDER SECTION 148 WAS NECESSI TATED. GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 8 4. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) FROM THE ABOVE STATED FACTS OBSERVED THAT IT SHOWS THAT THE ASSESSING OFFICER WAS FULLY JUSTIFIED IN REOPENING OF THE ASSESSMENT BY T HE LEARNED ASSESSING OFFICER. HE ALSO OBSERVED THAT LEARNED ASSESSING OF FICER WHILE COMPLETING THE IMPUGNED ASSESSMENT ORDER DATED 28.0 2.1997 HAS DISALLOWED RS.3,72,111/- IN THE COMPUTATION OF BOOK PROFIT UNDER SECTION 115-J AGAINST WHICH THE ASSESSEE DID NOT FILE ANY A PPEAL. THIS GOES TO FURTHER STRENGTHEN THE COURSE OF ACTION ADOPTED BY THE LEARNED ASSESSING OFFICER TO TAX THE ESCAPE INCOME. HE THE REFORE, HELD THE ASSESSMENT PROCEEDINGS TO BE VALID. 5. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASS ESSEE ARGUED THAT THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS FI LED COPY OF THE REASONS RECORDED BY LEARNED ASSESSING OFFICER FOR R EOPENING OF THE ASSESSMENT WHICH READS AS UNDER: GUJARAT MINERAL DEV. CORP. LTD. ANNEXURE- ASSTT. YEAR 1988-89. IN THIS CASE THE ASSESSMENT WAS COMPLETED UNDER SEC TION 143(3) ON 30.01.1991 DETERMINING INCOME OF RS.19,83,578/- (AG AINST THE RETURNED LOSS OF RS.38,83,730/-), AS PER THE REGULAR PROVISIONS O F I.T.ACT. THE 30% OF BOOK PROFIT UNDER SECTION 115-J WAS WORKED OUT AT RS.34, 29,323/-. THE COMPUTATION UNDER SECTION 115-J IN THE RETURN WAS A S UNDER:- COMPUTATION OF BOOK PROFIT UNDER SECTION 115J NET PROFIT AS PER PROFIT & LOSS ACCOUNT AFTER TAX. RS.78,19,004/- TAXATION PROVISIONS ADD: PRIOR PERIOD ADJUSTMENT (NET EXPENSES) RS.13,78,822/- RS.91,97,826/- LESS PRIOR PERIOD INCOME RS. 3,72,111/- RS.88,25,715/- GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 9 PROFIT AS PER PART-II & III OF SCHEDULE OF COMPANIES ACT, 1956 ADD: INCOME TAX PROVISION, RS. 25,43,100/- AMT. TRANSFERRED FROM RESERVE EXCESS PROVISION OF BONUS. RS. 62,262/- RS.26,05,362/- RS.1,14,31,877/- 30% OF BOOK PROFIT .. RS. 34,29,323/- THIS COMPUTATION WAS ACCEPTED IN THE ASSTT. ORDER. IT IS SEEN THAT PRIOR PERIOD ADJUSTMENT WHICH IS ADDED TO THE NET PROFIT IN P& L A/S. IS NET FIGURE WHICH TAKES INTO ACCOUNT THE INCOME AS WELL EXPENSE S OF THE EARLIER YEARS PERIOD. THEREFORE, THE PRIOR PERIOD INCOME OF RS.3, 72,111/-IS NOT REQUIRED TO BE REDUCED AGAIN FROM THE BOOK PROFIT FOR THE PURPO SE OF COMPUTATION UNDER SECTION 115-J. NEITHER IN THE FINAL A/CS. NOR IN TH E TAX AUDIT REPORT ANY INFORMATION REGARDING THIS AMOUNT IS AVAILABLE WITH THE RETURN. BECAUSE OF THIS REDUCTION THE TOTAL INCOME UNDER SECTION 115-J IS REDUCED BY RS.1,11,633/- (30% OF 3,72,111). IN VIEW ABOVE, THERE IS REASON TO BELIEVE THAT THE INCOME OF RS.1,11,633/- CHARGEABLE TO TAX FOR ASSESSMENT YEAR 1988-89 HAS ESCAPED ASSESSMENT BECAUSE OF THE FAILURE ON PART OF THE AS SESSEE FOR THE ASSESSMENT OF ITS INCOME FOR ASSESSMENT YEAR 88-89. THEREFORE, IT IS FIT CASE FOR ISSUE OF NOTICE UNDER SECTION 148. SD/- (RAKESH GUPTA) DY. COMMISSIONER OF INCOME TAX. SPL. RANGE-8, AHMEDABAD. 6. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASS ESSEE ARGUED THAT SATISFACTION ABOUT INCOME HAVING ESCAPED ASSES SMENT HAS TO BE RECORDED IN THE REASONS ITSELF. ABSENCE OF SATISFAC TION RECORDED IN THE REASONS WILL INVALIDATE THE PROCEEDINGS OF REOPENIN G. FOR THIS HE PLACED RELIANCE ON THE DECISION OF HONBLE MADRAS HIGH COU RT IN THE CASE OF FENNER (INDIA) LTD. VS. DEPUTY COMMISSIONER OF INCO ME TAX HIGH COURT OF MADRAS 241 ITR 672 (MAD), WHEREIN IT WAS HELD THAT IN ORDER TO REOPEN AN ASSESSMENT AFTER EXPIRY OF FOUR YEARS FROM THE E ND OF RELEVANT GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 10 ASSESSMENT YEAR, AO MUST NECESSARILY RECORD NOT ONL Y HIS REASONABLE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT BUT ALSO THE DEFAULT OR FAILURE OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIA L FACTS; NOTICE ISSUED UNDER S. 148 AFTER EXPIRY OF FOUR YEARS CANNOT BE S USTAINED AS ESCAPEMENT OF INCOME, IF ANY, IS NOT ON ACCOUNT OF ANY FAILURE ON THE PART OF ASSESSEE TO DISCLOSE THE MATERIAL FACTS FUL LY AND TRULY. 7. HE ALSO RELIED ON THE DECISION THE HONBLE PANJA B AND HARYANA HIGH COURT IN THE CASE OF DULI CHAND SINGHANIA VS. ASSISTANT COMMISSIONER OF INCOME TAX (2004) 269 ITR 192 (P&H) , WHEREIN IT WAS HELD THAT IN THE ABSENCE OF ANY ALLEGATION IN THE R EASONS RECORDED OF FAILURE ON ASSESSEES PART TO DISCLOSE FULLY AND TR ULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT, NO ACTION UNDER S. 14 7 COULD BE TAKEN AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR IN VIEW OF THE PROVISO TO S. 147. 8. HE FURTHER RELIED ON THE DECISION OF HONBLE DEL HI HIGH COURT HARYANA ACRYLIC MANUFACTURING CO. VS. COMMISSIONER OF INCOME TAX & ANR. (2009) 308 ITR 38, WHEREIN IT WAS HELD THAT TH ERE BEING NO WHISPER IN THE REASONS SUPPLIED TO ASSESSEE THAT INCOME ESC APED ASSESSMENT BY REASON OF ASSESSEES FAILURE TO MAKE A FULL AND TRU E DISCLOSURE OF ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT, NOTICE UND ER S. 148 ISSUED BEYOND FOUR YEARS FROM THE END OF RELEVANT ASSESSME NT YEAR WAS BARRED BY LIMITATION UNDER PROVISO TO S. 147, HENCE WITHOU T JURISDICTION. GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 11 9. FURTHER RELIANCE WAS ALSO PLACED ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF KRISHNA METAL IND USTRIES VS. H.M. ALGOTAR, ASSISTANT COMMISSIONER OF INCOME TAX (1997 ) 225 ITR 853 (GUJ), WHEREIN IT IS HELD THAT ASSESSMENT HAVING BEEN MADE UNDER S. 143(3) AND THERE BEING NO ALLEGATION IN THE NOTICE UNDER S . 148 THAT ASSESSEE HAD FAILED TO MAKE FULL AID TRUE DISCLOSURE, NOTICE UNDER S. 148 ISSUED BEYOND FOUR YEARS FROM THE END OF RELEVANT ASSESSME NT YEAR WAS BARRED BY LIMITATION. 10. HENCE, IT WAS SUBMITTED THAT AS NOTICE UNDER SE CTION 148(2) WAS ISSUED AFTER FOUR YEARS FROM THE END OF THE RELEVAN T ASSESSMENT YEAR AND AS THE LEARNED ASSESSING OFFICER COULD NOT SHOW THA T THE ASSESSEE HAS FAILED TO DISCLOSE ALL MATERIAL FACTS TRULY AND COR RECTLY, THEREFORE, THE REASSESSMENT NOTICE WAS BAD IN LAW AND CONSEQUENTLY THE ASSESSMENT FRAMED IN PURSUANCE TO THE SAID NOTICE WAS ALSO BAD IN LAW. THEREFORE, THE REASSESSMENT ORDER FRAMED SHOULD BE QUASHED. 11. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS FIL ED WRITTEN SUBMISSION WHICH ARE AS FOLLOWS: NON DISCLOSUREOFMATERJAL FACTS-NOTICE: JJ/S148 RW147 IS THEREFORE VALID THE LEARNED CIT HAS CORRECTLY HELD THAT THE MATERIAL F ACTS IN RELATION TO INCOME THAT HAS ESCAPED ASSESSMENT WERE NOT DISCLOSED B Y THE ASSESSES. IN . PARA 4 O F THE APPELLATE ORDER IT HAS BEEN STATED TH A T THERE WAS NO INFORMATION ABOUT THIS AMOUNT EITHER IN TH E FINA L ACC O UNT S OR IN THE TAX AUDIT REPORT . ONLY IN THE REASSESSMENT PROCEEDINGS THE REAL NATURE OF BOTH THE (NET) EXPENSES OF 13,78,821 GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 12 AND THE FACT THAT THE PRIOR PERIOD INCOME IN QUESTION ALSO CONSISTED OF EXCESS PROVISION OF DEPRECIATION WRITTEN BACK AND EXCESS PROVISION _____ YEAR CAME TO BE DISCLOSED (REFER PARA 3.1 & 3.2 OF REASSE SSMENT ORDER). IN THESE CIRCUMSTANCES THE REOPENING WAS VALI D EVEN BEYO ND FOUR YEARS . SUPPORT IS TAKEN FROM THE FOLLOWING DECISIONS 1 ) PHOOL CHAN D BAJRANG LAL & ANR. VS. INCOME TAX OFFICER & AN R. SUPREME COURT OF INDIA (19 9 3) 113 CTR (SC)436 : (1393) 203 ITR 456 (SC ; (1993)69 TAXMAN 627 IT IS IMMATERIAL WHETHER THE ITO DID NO T MAKE FARTHER ENQUIRY AT THE T IME O F ORIGINAL ASSESSMENT WHICH HE COULD HAVE MADE IN THE PRESENT CASE, THE ITO ON THE BASIS OF SUBSEQUENT INFO RMATION WHICH WAS SPECIFIC, RELEVANT AND RELIABLE, AFTER RECORDING THE REASONS FOR FORMATION OF BELIEF THAT ASSESSEE DID NOT MAKE FULL AND TRUE DISCLOSURE AND THERE FORE , INCOME ESCAPED ASSESSMENT, RIGHTLY INVOKED THE PROVISIONS OF SS. 147(A) AND 148 21 INDOADEN SALT MFG. & TRADING CO. (P) LTD VS COMM ISSIONER OF INCOME TAX SUPREME COURT OF INDIA SOURCE : (198 6) 58 CTR ( SC )9 . (198 6) 159 ITR 624 (SC) - ( 1986 ) 25 TAXMAN 356 REASSESSMENT UNDER S - 147(A)-FULL AND TRUE DISCLOSURE-BELIEF OF ITO WAS THAT ASSESSEE HAD OBTAINED DEPRECIATION AT THE RATE OF 6 % ON ASSETS WHICH WERE SUPPOSED TO BE MASONRY WORKS BUT THE ASSET S CONSISTED OF EARTH WORK WHOLLY OR SUBSTANTIALLY-ASSESSEE HAD NOT. AC TUALLY, DISCLOSED THE PROPORTION OF EARTH AND MASONRY WORK WHICH WAS A MATERIAL FACT FOR COMPUTING DEPRECIATION-THE ITO COULD, THEREFORE, REASONABLY BE SAID TO HAVE FORMED BELIEF THE FACT THAT ITO COULD HAV E FOUND TRUE POSITION BY FURTHER PROBING DID NOT EXONERATE ASSES SEE FROM MAKING FULL DISCLOSURE TRULY-HIGH COURT, THEREFORE, JUSTIF IED IN REJECTING APPLICATION RELATING TO VALIDITY OF REOPENING OF AS SESSMENT . 3) CENTRAL INDIA ELECTRIC SUPPLY COMPANY VS COMMISSION ER OF INCOME TAX SUPREME COURT OF INDIA (2000) 162 CTR 406: (2001) 247 ITR 54 (S C) (20 01) 115 TAXMAN 686(SC) REASSESSMENT UNDER S . 147(A)-FULL AND TRUE DISCLOSURE-PROFITS CHARGEABLE TO TAX UNDER S . 41 (2 ) - A SS ESSEE DID NOT INFORM THE AO ABOUT PASSING OF DECREE O F THE COURT IN TERMS OF UMPIRE'S AWARD AND THE AMOUNT OF DECREE-PARAMETERS OF S. 147(A) SATISFIED-A O JUSTIFIED IN RESORTING TO S. 147(A)-C I T VS. CENTRAL INDIA ELECTRIC SUPPLY CO. LTD. (1993) 114 CTR (MP) 160 : TC 29R.182 AFFIRMED GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 13 ( 4 ) NI R ANJAN & CO- (P) LTD VS. COMMISSIONER OF INCOME TAX SUPREME COURT OF INDIA SOURCE . (1986) 52 CTR (SC) 270 (19 8 6 ) 159 I TR 153 (S C) : (19 8 6) 25 TAXMA N 80 Q REASSESSMENT UNDER S.147(A ) FULL AND TRUE DISCLOSURE-FILING OF REVISED RETURN BEFORE COMPLETION OF THE ASSESSMENT ON THE BASIS OF THE FIRST AND THE ORIGINAL RETURN-THE REVISED RETUR N NOT, HOWEVER, BEFORE THE ITO WHILE HE MADE THE ORIGINAL ASSESSMEN T-THIS VOLUNTARILY REVISED RETURN THUS CAME TO THE NOTICE OF THE ITO AFTER COMPLETION OF THE ASSESSMENT- THEREFORE, IT COULD N OT BE A BAR TO ISSUE OF S.148 NOTICE FOR REOPENING UNDER S.147(A) ON THE GROUND OF ASSESSEES FAILURE OR OMISSION TO DISCLOSE MATERIAL FACTS. [5J JAI HIND PRINTING PRESS VS. COMMISSIONER OF INCOME TAX HIGH COURT OF GUJARAT SOURCE -. (1972) 8 6 ITR 309 (GUJ ) REASSESSMENT UNDER S.147(A)- FULL AND TRUE DISCLOSU RE-CAPITAL GAIN ON SALE OF MACHINERY AROSE AFTER ENACTMENT OF S.12B OF I.T.ACT, 1922 EFFECTIVE FROM 1 ST APRIL, 1956-OMMISSION TO DISCLOSE PRIMARY FACT OF DATE OF SALE IN RETURN-REASSESSMENT VALID. MAMTA TYPE SETTING WORKS VS. ASSISTANT COMMISSIONER OF INCOME TAX HIGH COURT OF GUJA R AT (2004)1 8 7 CTR (GUJ) : 151: (2004)267 ITR 623 (GUJ) : 2004 134 TAXMAN 34 REASSESSMENT-FULL AND TRUE DISCLOSURE-FAILURE TO IN F ORM ABOUT SALE OF MACHINERY WITHIN EIGHT YEARS ON WHICH INVESTMENT ALLOW ANCE WAS ALLOWED-ASSESSEE CLAIMING INVESTM ENT ALLOWANCE IN RETURN FOR ASST , YR. 1984-85, WHICH WAS PARTLY ALLOWED AND PARTLY ALLOWED TO BE CARRIED FORWARD-MACHINERY SOLD IN 1986 AND ASSESSMENT FOR AS ST. YR. 1934-85 WAS COMPLETED ON 31ST MARCH, 1987-AO WAS JUSTIFIED IN REOPENING ASSESSMENT-IT WAS THE DUTY OF THE ASSESSES TO INFORM THE AO ABOUT SALE OF THE MACHINERY WITHIN 8 YEARS IN THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS . WRITTEN SUBMISSIONS ON SOME GROUNDS ON MERITS ADDITION ON ACCOUNT OF PROVISION FOR BAD & DOUBTFUL DEBTS (GROUND-3 OF ASSESSEE & 3 OF DEPARTMENT THE ASSESSEEE RELIES WRONGLY ON APPOLO TYRES 255 I TR 273 (SC). IT IS TRUE THAT IT HAS BEEN HELD THAT P&L ACCOUNT CANNOT BE DISTURBE D BUT NOT IN GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 14 RESPECT OF THOSE DEBITS WHICH ARE SPECIFICALLY ORDAINED TO BE ADDED. THE PROVISIONS AND CONTINGENT LIABILITIES ARE TO BE ADDED AND THE PROVISION UNLESS WRITTEN OFF IS BY NATURE ACCEPTANCE THAT LIABILITY IS ONLY LIKELY TO ARISE. CONFIRMING DISALLOWANCE OF PROJECT EXPENDITURE (GRO UND NO.4 OF ASSESSEE) TH E ASSESSEE IS RELYING ON THE HON'BLE ITAT'S DECISION IN ITS CASE FOR AY 1 99 0 /91 WHICH IS CLEARLY GIVEN ON APPARENTLY WRONG APPRECIATION OF FACTS. THAT DECISION (PARA 17 PAGE6) WAS GIVEN UNDER THE WRONG IMPRESSION THAT THE ISSUE WAS DECIDED IN ASSESSEE S FAVOUR IN EARLIER YEAR, WHICH IS WRONG . T HE DECISION CITED I.E. 81 I TD 553 IS ACTUALLY PERTAINING TO UNITED PHOSPHOROUS LTD . THERE THE ISSUE WAS ALLOWABILITY OF INTEREST IN CASE OF EXPANSION OF BUSINESS U/S 36 ( I)(III) AND HERE IT IS OTHER PREOPERATIVE EXPENSES WHICH WERE CAPITALIZED IN THE BOOKS AND THEREFORE RIGHTLY CONFIRMED BY CIT (APPEALS), THE TRI BUNAL CANNOT CORRECT AN ERROR BY COMMITTING ANOTHER WHEN THE EARLIE R ORDER WAS CLEARLY GIVEN ON APPARENTLY WRONG APPRECIATION OF FA CTS ON OTHER ISSUES I WOULD MAKE VERBAL SUBMISSIONS (RAJEEVAGARWAL) CIT DR' 12. IN THE REJOINDER THE LEARNED AUTHORISED REPRESE NTATIVE OF THE ASSESSEE SUBMITTED THAT THE REASONS RECORDED ARE FA CTUALLY INCORRECT BY REFEREEING TO PAGE-6 OF THE PAPER BOOK PAGE 18 OF THE PRINTED COPY OF THE STATEMENT OF ACCOUNTS. 13. HE RELIED ON THE DECISION OF THE HONBLE GUJARA T HIGH COURT IN THE CASE OF MOHAMED NASIM ABDUL RAZAK MISTRY VS. WEALTH TAX OFFICER (1995) 216 ITR 104 (GUJ), AND SUBMITTED THAT IT HAS BEEN HELD BY THE HONBLE HIGH COURT THAT TRIBUNAL HAVING DECIDED THE ISSUE OF VALUATION OF GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 15 LAND IN FAVOUR OF ASSESSEE, REASSESSMENT PROPOSED O N THAT VERY ISSUE IS INVALID. 14. HE RELIED ON THE DECISION OF THE HONBLE GUJARA T HIGH COURT IN THE CASE OF AVANI CORPORATION VS. INCOME TAX OFFICER (1 999) 238 ITR 407 (GUJ) WHEREIN IT WAS HELD THAT INITIATION OF PROCEE DINGS UNDER S. 147 PURSUANT TO NOTICE UNDER S. 148 ISSUED BEYOND FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR WAS WITHOUT JURISDICTIO N AS THERE WAS NO FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY A ND TRULY ALL THE MATERIAL FACTS. 15. HE RELIED ON THE DECISION OF THE HONBLE GUJARA T HIGH COURT IN THE CASE MEGHDOOT LAMINART (P) LTD. VS. RAJIV SINHA OR HIS S UCCESSOR IN OFFICE OF THE DEPUTY COMMISSIONER OF INCOME TAX (19 99) 238 ITR 918 (GUJ)WHEREIN IT WAS HELD THAT INITIATION OF ACTION UNDER S. 147 AFTER EXPIRY OF FOUR YEARS ON THE GROUND THAT REFUNDS OF EXCISE DUTY WERE NOT SHOWN AS INCOME WAS NOT VALID AS APPEAL AGAINST THE REFUND ORDER WAS PENDING AND ASSESSEE HAD DISCLOSED THE AMOUNT IN TH E AUDITED BALANCE SHEET UNDER AUDITORS NOTE. 16. HE RELIED ON THE DECISION OF THE HONBLE GUJARA T HIGH COURT IN THE CASE COMMISSIONER OF INCOME TAX VS. BIPIN VADILAL (1999) 238 ITR 1022 (GUJ) WHEREIN IT WAS HELD THAT REOPENING OF ASSESSM ENT BEYOND EXPIRY OF FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR S ON THE BASIS OF A JUDGMENT OF HIGH COURT WAS BARRED BY TIME AS THE CA SE SQUARELY FELL UNDER S. 147 (B) AND NOT UNDER S. 147(A). GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 16 17. HE RELIED ON THE DECISION OF THE HONBLE GUJARA T HIGH COURT IN THE CASE OF VARELI WEAVERS PVT. LTD. VS. DEPUTY COMMISS IONER OF INCOME TAX (1999) 240 ITR 77 (GUJ), WHEREIN IT WAS HELD THAT I NITIATION OF ACTION UNDER S. 147 AFTER EXPIRY OF FOUR YEARS FROM THE EN D OF RELEVANT ASSESSMENT YEAR WAS CLEARLY BARRED BY TIME AS THE R EASONS RECORDED BY AO DID NOT MENTION ABOUT FAILURE ON THE PART OF ASS ESSEE TO DISCLOSE TRULY AND FULLY ALL MATERIAL FACTS WHICH ALLEGEDLY LED TO ESCAPEMENT OF INCOME. 18. HE RELIED ON THE DECISION OF THE HONBLE SUPREM E COURT IN THE CASE OF PARASHURAM POTTERY WORKS CO. LTD. VS. INCOM E TAX OFFICER (1977) 106 ITR 1 (SC) , WHEREIN IT WAS HELD THAT IT WOULD APPEAR FROM WHAT HAS BEEN DISCUSSED ABOVE THAT ONE OF ESSENTIAL REQUISIT ES FOR PROCEEDING UNDER CL. (A) OF S. 147 OF THE ACT OF 1961 IS THAT THE INCOME CHARGEABLE TO TAX SHOULD ESCAPE ASSESSMENT BECAUSE OF THE OMISSIO N OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY AL L MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT. THE PRESENT IS NOT A CASE WHERE THE ASSESSEE HAD OMITTED OR FAILED TO FILE THE RETURN. QUESTION THEN ARISES AS TO WHAT HAS BEEN OMISSION OR FAILURE ON THE PART OF THE ASSESSE E TO MAKE A FULL AND TRUE DISCLOSURE. THERE IS NOTHING BEFORE US TO SHOW THAT IN THE RETURN FILED BY THE ASSESSEE- APPELLANT THE PARTICULARS GI VEN WERE NOT CORRECT. FORM C UNDER R. 19 OF THE INDIAN IT RULES 1922, AT THE RELEVANT TIME GIVES THE FORM OF RETURN WHICH HAD TO BE FILED BY THE COM PANIES. PART V OF THAT FORM DEALS WITH DEPRECIATION. THE SAID PART REQUIRE S A NUMBER OF GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 17 COLUMNS TO BE FILLED IN BY THE ASSESSEE. IT HAS NOT BEEN SUGGESTED THAT ANY OF THE INFORMATION FURNISHED OR ANY OF THE PARTICULARS GIV EN IN THOSE COLUMNS BY THE APPELLANT-COMPANY WERE FACTUALLY INC ORRECT. NOR IS IT THE CASE OF THE REVENUE THAT THE APPELLANT FAILED TO FU RNISH THE PARTICULARS REQUIRED TO BE INSERTED IN THOSE COLUMNS. INDEED, T HE COPY OF THE RETURN HAS NOT BEEN FILED AND CONSEQUENTLY NO ARGUMENT ON THAT SCORE COULD BE OR HAS BEEN ADDRESSED BEFORE US. PART V OF THE FORM NO DOUBT REQUIRES THE ASSESSEE TO STATE THE WRITTEN DOWN VALUE IN COL . NO. (2). SUCH WRITTEN DOWN VALUE HAD TO BE SPECIFIED WITHOUT TAKING INTO ACCOUNT THE INITIAL DEPRECIATION BECAUSE SUCH DEPRECIATION IN TERMS OF CL. (VI) OF S. 10(2) OF THE ACT OF 1922 COULD NOT BE DEDUCTED IN DETERMININ G THE WRITTEN DOWN VALUE FOR THE PURPOSE OF THAT CLAUSE. THE CASE OF T HE APPELLANT IS THAT IN DETERMINING THE AMOUNT OF DEPRECIATION AT THE TIME OF THE ORIGINAL ASSESSMENT FOR THE TWO ASSESSMENT YEARS IN QUESTION , THE ITO RELIED UPON THE WRITTEN DOWN VALUE OF THE VARIOUS CAPITAL ASSETS AS OBTAINING IN THE RECORDS OF THE DEPARTMENT. THIS STAND HAS NOT B EEN CONTROVERTED. WHEN AN ITO RELIES UPON HIS OWN RECORDS FOR DETERMI NING THE AMOUNT OF DEPRECIATION AND MAKES A MISTAKE IN DOING SO, WE FA IL TO UNDERSTAND AS TO HOW RESPONSIBILITY FOR THAT MISTAKE CAN BE ASCRI BED TO AN OMISSION OR FAILURE ON THE PART OF THE ASSESSEE. IT ALSO CANNOT BE DISPUTED THAT INITIAL DEPRECIATION IN RESPECT OF ITEMS OF CAPITAL ASSETS IN THE SHAPE OF NEW MACHINERY, PLANT AND BUILDING INSTALLED OR ERECTED AFTER THE 31ST DAY OF MARCH, 1945, AND BEFORE THE 1ST DAY OF APRIL, 1956, IS NORMALLY CLAIMED AND ALLOWED. IT SEEMS THAT THE ITO IN WORKING THE F IGURES OF DEPRECIATION FOR CERTAIN ITEMS OF CAPITAL ASSETS LOST SIGHT OF T HE FACT THAT THE AGGREGATE GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 18 OF THE DEPRECIATION, INCLUDING THE INITIAL DEPRECIA TION, ALLOWED UNDER DIFFERENT HEADS COULD NOT EXCEED THE ORIGINAL COST TO THE ASSESSEE OF THOSE ITEMS OF CAPITAL ASSETS. THE APPELLANT CANNOT BE HELD LIABLE BECAUSE OF THIS REMISSNESS ON THE PART OF THE ITO I N NOT APPLYING THE LAW CONTAINED IN CL. (C) OF THE PROVISO TO S. 10 (2)(VI ) OF THE ACT 1922. AS OBSERVED BY SHAH J. IN CIT VS. BHANJI LAVJI (1971) 79 ITR 582 (SC) : TC51R.802, S. 34(1)(A) OF THE ACT OF 1922 (CORRESPO NDING TO S. 147(A) OF THE ACT OF 1961) DOES NOT CAST A DUTY UPON THE ASSE SSEE TO INSTRUCT THE ITO ON QUESTIONS OF LAW. 19. HE RELIED ON THE DECISION OF THE HONBLE SUPREM E COURT IN THE CASE OF INCOME TAX OFFICER & ORS. VS. LAKHMANI MEWA L DAS (1976) 103 ITR 437 (SC), WHEREIN IT WAS HELD THAT THE GROUNDS OR REASONS WHICH LEAD TO THE FORMATION OF THE BELIEF CONTEMPLATED BY S. 1 47(A) MUST HAVE A MATERIAL BEARING ON THE QUESTION OF ESCAPEMENT OF I NCOME OF THE ASSESSEE FROM ASSESSMENT BECAUSE OF HIS FAILURE OR OMISSION TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. ONCE THERE EXIS T REASONABLE GROUNDS FOR THE ITO TO FORM THE ABOVE BELIEF, THAT WOULD BE SUF FICIENT TO CLOTHE HIM WITH JURISDICTION TO ISSUE NOTICE. WHETHER THE GROU NDS ARE ADEQUATE OR NOT IS NOT A MATTER FOR THE COURT TO INVESTIGATE. T HE SUFFICIENCY OF THE GROUNDS WHICH INDUCE THE ITO TO ACT IS, THEREFORE, NOT A JUSTICIABLE ISSUE. IT IS, OF COURSE, OPEN TO THE ASSESSEE TO CONTEND T HAT THE ITO DID NOT HOLD THE BELIEF THAT THERE HAD BEEN SUCH NON-DISCLOSURE. THE EXISTENCE OF THE BELIEF CAN BE CHALLENGED BY THE ASSESSEE BUT NOT TH E SUFFICIENCY OF THE REASONS FOR THE BELIEF. THE EXPRESSION 'REASON TO B ELIEVE' DOES NOT MEAN GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 19 A PURELY SUBJECTIVE SATISFACTION ON THE PART OF THE ITO. THE REASON MUST BE HELD IN GOOD FAITH. IT CANNOT BE MERELY A PRETEN CE. IT IS OPEN TO THE COURT TO EXAMINE WHETHER THE REASONS FOR THE FORMAT ION OF THE BELIEF HAVE A RATIONAL CONNECTION WITH OR A RELEVANT BEARI NG ON THE FORMATION OF THE BELIEF AND ARE NOT EXTRANEOUS OR IRRELEVANT FOR THE PURPOSE OF THE SECTION. TO THIS LIMITED EXTENT, THE ACTION OF THE ITO IN STARTING PROCEEDINGS IN RESPECT OF INCOME ESCAPING ASSESSMEN T IS OPEN TO CHALLENGE IN A COURT OF LAW. 20. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE O N RECORD. IN THE INSTANT CASE ORIGINAL ASSESSMENT WAS COMPLETED ON 3 1.01.1991 UNDER SECTION 143(3) WHEREIN BOOK PROFIT UNDER SECTION 11 5J WAS COMPUTED AT RS.34,29,323/- BEING 30% OF RS.1,14,31,077/- AND AC CORDINGLY, TAX WAS LEVIED. THEREAFTER, ON 9.12.2004 THE LEARNED ASSESS ING OFFICER ISSUED A NOTICE UNDER SECTION 147 FOR ASSESSING THE INCOME E SCAPED FROM TAX. THE REASON RECORDED UNDER SECTION 148(2) WAS AS UNDER:- IN THIS CASE THE ASSESSMENT WAS COMPLETED UNDER SEC TION 143(3) ON 30.01.1991 DETERMINING INCOME OF RS.19,83,578/- (AG AINST THE RETURNED LOSS OF RS.38,83,730/-), AS PER THE REGULAR PROVISIONS O F I.T.ACT. THE 30% OF BOOK PROFIT UNDER SECTION 115-J WAS WORKED OUT AT RS.34, 29,323/-. THE COMPUTATION UNDER SECTION 115-J IN THE RETURN WAS A S UNDER:- COMPUTATION OF BOOK PROFIT UNDER SECTION 115J NET PROFIT AS PER PROFIT & LOSS ACCOUNT AFTER TAX. RS.78,19,004/- GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 20 TAXATION PROVISIONS ADD: PRIOR PERIOD ADJUSTMENT (NET EXPENSES) RS.13,78,822/- RS.91,97,826/- LESS PRIOR PERIOD INCOME RS. 3,72,111/- RS.88,25,715/- PROFIT AS PER PART-II & III OF SCHEDULE OF COMPANIES ACT, 1956 ADD: INCOME TAX PROVISION, RS. 25,43,100/- AMT. TRANSFERRED FROM RESERVE EXCESS PROVISION OF BONUS. RS. 62,262/- RS.26,05,362/- RS.1,14,31,877/- 30% OF BOOK PROFIT RS. 34,29,323 /- THIS COMPUTATION WAS ACCEPTED IN THE ASSTT. ORDER. IT IS SEEN THAT PRIOR PERIOD ADJUSTMENT WHICH IS ADDED TO THE NET PROFIT IN P& L A/S. IS NET FIGURE WHICH TAKES INTO ACCOUNT THE INCOME AS WELL EXPENSE S OF THE EARLIER YEARS PERIOD. THEREFORE, THE PRIOR PERIOD INCOME OF RS.3, 72,111/-IS NOT REQUIRED TO BE REDUCED AGAIN FROM THE BOOK PROFIT FOR THE PURPO SE OF COMPUTATION UNDER SECTION 115-J. NEITHER IN THE FINAL A/CS. NOR IN TH E TAX AUDIT REPORT ANY INFORMATION REGARDING THIS AMOUNT IS AVAILABLE WITH THE RETURN. BECAUSE OF THIS REDUCTION THE TOTAL INCOME UNDER SECTION 115-J IS REDUCED BY RS.1,11,633/- (30% OF 3,72,111). IN VIEW ABOVE, THERE IS REASON TO BELIEVE THAT THE INCOME OF RS.1,11,633/- CHARGEABLE TO TAX FOR ASSESSMENT YEAR 1988-89 HAS E SCAPED ASSESSMENT BECAUSE OF THE FAILURE ON PART OF THE ASSESSEE FOR THE ASSESSMENT OF ITS INCOME FOR ASSESSMENT YEAR 88-89. THEREFORE, IT IS FIT CASE FOR ISSUE OF NOTICE UNDER SECTION 148. 21. ON THE ABOVE FACTS, THE ASSESSEE CHALLENGED THE VALIDITY OF REOPENING OF THE ASSESSMENT UNDER SECTION 147 OF TH E ACT. ON APPEAL, LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HELD T HAT THE REOPENING OF THE ASSESSMENT WAS VALID. BEFORE US, THE ASSESSE E SUBMITTED THAT THE AS THE REOPENING WAS MADE AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR, THE REOPENING WAS INVALID. FUR THER THE ASSESSEE ALSO POINTED OUT THAT THE LEARNED ASSESSING OFFICER WHILE COMPUTING GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 21 BOOK PROFIT THOUGH ADDED PRIOR PERIOD EXPENSES OF R S.13,78,822/- IN THE PROFIT AND LOSS ACCOUNT BUT HAS NOT REDUCED PRIOR P ERIOD INCOME OF RS.3,72,111/- CREDITED IN THE PROFIT AND LOSS ACCOU NT. WE FIND THAT ASSESSMENT YEAR UNDER APPEAL IS 1988-89 AND FOUR YE ARS FROM THE END OF THE ASSESSMENT YEAR EXPIRED ON 31.03.1993. THUS, ON 9.12.1994, THE LEARNED ASSESSING OFFICER COULD HAVE REOPENED THE A SSESSMENT LEGALLY ONLY WHEN HE FINDS THAT UNDER ASSESSMENT OF INCOME WAS ON ACCOUNT OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ANY MATERIAL FACTS. IN THE INSTANT CASE, WE FIND THAT THERE WAS NO SUCH UNDISC LOSURE OF MATERIAL FACT ON THE PART OF THE ASSESSEE. THE ASSESSEE HAS CLEAR LY SHOWN CREDIT OF RS.3,72,111/- IN THE PROFIT AND LOSS ACCOUNT WHICH WAS CLAIMED AS DEDUCTION WHILE COMPUTING BOOK PROFIT UNDER SECTION 115J. THE LEARNED ASSESSING OFFICER ACCEPTED THE ABOVE CALCULATION IN THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT. THE L EARNED DEPARTMENTAL REPRESENTATIVE COULD NOT POINT OUT WHICH MATERIAL F ACT WAS NOT DISCLOSED BY THE ASSESSEE AT THE TIME OF THE ORIGINAL ASSESSM ENT. FURTHER, WE FIND THAT FOR THE SAME REASONING FOR WHICH ACCORDING TO THE LEARNED ASSESSING OFFICER, PRIOR PERIOD INCOME OF RS.3,72,1 11/- SHOULD FORM PART OF THE BOOK PROFIT OF THE YEAR UNDER CONSIDERATION. THE PRIOR PERIOD EXPENSES OF RS.13,78,822/- SHOULD ALSO HAVE BEEN TR EATED AS EXPENSES ALLOWABLE FOR COMPUTING THE BOOK PROFIT OF THE YEAR UNDER CONSIDERATION. THE ASSESSEE HAS PAID TAX ON RS.13,78,822/- WHICH W AS PRIOR PERIOD EXPENSES AND CLAIMED DEDUCTION OF RS.3,72,111/- BEI NG PRIOR PERIOD INCOME. THE LEARNED ASSESSING OFFICER CANNOT BE ALL OWED TO BLOW BOTH HOT AND COLD AIR AT THE SAME TIME. HE CANNOT BE PER MITTED TO DISALLOW GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 22 PRIOR PERIOD EXPENSES OF RS.13,78,822/- FOR COMPUTI NG THE BOOK PROFIT AND TO ADD RS. 3,72,111/- BEING INCOME OF PRIOR PER IOD AS WELL. IN VIEW OF THE ABOVE, IN OUR CONSIDERED OPINION, THE REOPENING OF THE ASSESSMENT, IN THE INSTANT CASE WAS BAD IN LAW AND THUS, THE CO NSEQUENTIAL ORDER PASSED UNDER SECTION 147 IS LIABLE TO BE QUASHED. W E ACCORDINGLY, CANCEL THE IMPUGNED ORDER PASSED UNDER SECTION 147 OF THE ACT. THUS, THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 22. IN VIEW OF OUR DECISION ABOVE, THE OTHER GROUN DS OF THE APPEAL TAKEN BY THE ASSESSEE AND THE VARIOUS GROUNDS OF AP PEAL TAKEN BY THE REVENUE IN THE CROSS APPEAL ALL OF THEM HAVE BECOME INFRUCTUOUS AND THEREFORE, REQUIRES NO ADJUDICATION ON OUR PART BEI NG ONLY ACADEMIC IN NATURE. THEREFORE, THE REMAINING GROUNDS OF THE ASS ESSEE AND THE APPEAL OF THE REVENUE ARE DISMISSED. 23. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED AND THAT OF THE REVENUE IS DISMISSED. 24. GROUND NO.1 IN ASSESSEES APPEAL FOR ASSESSMENT YEAR 1994-95, 1996-97 AND 1997-98 RELATES TO THE CONFIRMING DISAL LOWANCE OF RS.3,15,85,310/-, RS.30,65,370/- AND RS.26,59,288/- RESPECTIVELY CLAIMED AS PROJECT EXPENDITURE AS CAPITAL EXPENDITURE. 25. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EES CLAIM OF DEDUCTION OF RS.77,10,762 AND RS.2,38,74,548 IN RES PECT OF BAUXITE PROJECT AT GHADSISA AND LIGNITE PROJECT AT MATHA NO MADH RESPECTIVELY. GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 23 THE EXPENDITURE HAS BEEN TREATED AS PREOPERATIVE EX PENDITURE IN THE BOOKS OF ACCOUNTS OF THE CORPORATION AS THESE PROJE CTS WERE STILL UNDER IMPLEMENTATION AND HAD NOT COMPLETED. THIS FACT WAS CLARIFIED BY THE ASSESSEE IN NOTE NO.7 OF THE STATEMENT OF INCOME WH EREIN IT WAS STATED THAT THE EXPENDITURE EVEN THOUGH IN THE NATURE OF P REOPERATIVE EXPENSES WAS CLAIMED AS DEDUCTION IN VIEW OF GUJARA T HIGH COURT DECISION IN THE CASE OF ALEMBIC GLASS INDIA LIMITED . THE ASSESSEE CLAIMED DEDUCTION QUOTING CERTAIN CASE LAWS IN ORDER TO CLA IM THAT THE PROJECT EXPENSE WAS ALLOWABLE AS DEDUCTION. IN THIS REGARD, THE ASSESSING OFFICER OBSERVED IN THE ASSESSMENT ORDER THAT THE ISSUE REG ARDING ALLOWABILITY OF PROJECT EXPENSES HAS BEEN DISCUSSED IN DETAIL IN TH E CASE OF THE ASSESSEE FOR A.YS. 1992-93 AND 1993-94. THE ASSESSING OFFICE R FURTHER OBSERVED THAT EVEN THOUGH THE PROJECT IN RESPECT OF WHICH TH E EXPENSES WERE CLAIMED, BUT WERE DISALLOWED IN THOSE YEARS MAY BE DIFFERENT, THE BASIC FACTS ARE SIMILAR. THE EXPENSES ARE PERTAINING TO C ERTAIN UNCOMPLETED PROJECTS AND THEREFORE, ARE CLEARLY IN THE NATURE O F PREOPERATIVE EXPENSES. THE ASSESSEE HAS ITSELF TREATED SUCH EXPENSES AS OF PREOPERATIVE NATURE IN ITS OWN BOOKS OF ACCOUNTS. H OWEVER, ONLY FOR THE PURPOSE OF COMPUTATION OF ITS INCOME, THESE EXPENSE S HAVE BEEN CLAIMED AS DEDUCTION. THE ASSESSING OFFICER RELIED ON THE DECISION OF CIT(A)-V, AHMEDABAD IN THE CASE OF VADILAL DIARY IN TERNATIONAL LIMITED IN APPEAL NO.CIT(A)V/DCSR-913/96-97 WHICH HAS BEEN MAD E PART OF THE ASSESSMENT ORDER. IN VIEW OF THE DETAILED DISCUSSIO N MADE IN THE SAID ORDER OF THE CIT(A)V, THE ASSESSING OFFICER DISALLO WED THE CLAIM OF GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 24 PROJECT EXPENSES OF RS.77,10,762 FOR GHADSIS PROJEC T AND RS.2,38,74,548 FOR LIGNITE PROJECT TOTALING TO RS.3,15,85,310. 26. IN APPEAL THE LEARNED COMMISSIONER OF INCOME TA X(APPEALS) CONFIRMED THE ORDER OF THE LEARNED ASSESSING OFFICE R BY OBSERVING AS UNDER. 11. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND THE SUBMISSIONS MADE. I HAVE ALSO GONE THROUGH THE DECI SION OF MY PREDECESSOR GIVEN IN THE CASE OF EARLIER YEARS BY R ELYING ON THE DECISION OF THE HONBLE ITAT IN THE CASE OF VADILAL DIARY INTERNATIONAL LIMITED VS. DCIT, SR-9, AHMEDABAD. AS THERE IS NO CHANGE IN THE FACTUAL AS WELL AS THE LEGAL POSITION , IN THIS REGARD. I AGREE WITH THE REASONING AND THE DECISION GIVEN BY MY PREDECESSOR IN THE CASE. I ACCORDINGLY DIRECT THE A SSESSING OFFICER TO ALLOW INTEREST EXPENSES DEBITED UNDER THE HEAD P ROJECT EXPENSES UNDER SECTION 36(1)(III) OF THE ACT. HOWEV ER, AS REGARDS THE OTHER EXPENSES, THE DECISION TAKEN BY THE ASSES SING OFFICER TREATING THEM AS CAPITAL EXPENDITURE IS CONFIRMED. 27. SIMILARLY, IN ASSESSMENT YEAR 1996-97, ASSESSEE CLAIMED DEDUCTION OF RS.30,65,370/- IN RESPECT OF LIGNITE PROJECT MAT A NO MADH. THE SAME WAS TREATED AS PRE-OPERATING EXPENDITURE IN THE BOO KS OF ACCOUNT BY THE ASSESSEE AS PROJECT WAS UNDER THE IMPLEMENTATION AN D HAD NOT THE COMPLETED. THE LEARNED ASSESSING OFFICER DISALLOWED THE SAME TREATING THE SAME AS CAPITAL EXPENDITURE. IN APPEAL LEARNED COMMISSIONER OF INCOME TAX(APPEALS) FOLLOWING THE ORDER FOR ASSESS MENT YEAR 1994-95 CONFIRMED THE DISALLOWANCE BUT DIRECTED THE LEARNED ASSESSING OFFICER GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 25 TO ALLOW INTEREST EXPENDITURE UNDER THE HEAD PROJEC T EXPENSES UNDER SECTION 36(1)(III) OF THE ACT. 28. SIMILARLY IN ASSESSMENT YEAR 1997-98, THE ASSES SING OFFICER DISALLOWED THE EXPENDITURE ON MATA NO MATH PROJECT OF AMOUNTING TO RS.44,65,125/- TREATING THE SAME AS CAPITAL EXPENDI TURE. IN APPEAL THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) FOLLOWI NG THE ORDER OF ASSESSMENT YEAR 1994-95 CONFIRMED THE DISALLOWANCE BUT DIRECTED THE LEARNED ASSESSING OFFICER TO ALLOW INTEREST EXPENDI TURE UNDER THE HEAD PROJECT EXPENSES UNDER SECTION 36(1)(III) OF THE AC T. 29. THE LEARNED AUTHORISED REPRESENTATIVE OF THE A SSESSEE SUBMITTED THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSE SSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 3232 /AHD/1996 IN ASSESSMENT YEAR 1990-91 ORDER DATED 5.05.2005 AND T HIS ORDER WAS FOLLOWED IN ASSESSEES OWN CASE IN ITA NO.936/AHD/1 999 IN ASSESSMENT YEAR 1992-93 ORDER DATED 12.07.2005. 30. THE LEARNED DEPARTMENTAL REPRESENTATIVE AGREED WITH THE SUBMISSION OF THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE. 31. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE O N RECORD. WE FIND THAT THE TRIBUNAL WHILE DECIDING THE ISSUE IN ASSESSMENT YEAR 1990-91 HAS OBSERVED AS UNDER. GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 26 16. THE NEXT DISPUTE IS AGAINST DELETION OF DISALL OWANCE OF RS.51,43,986/- INCURRED IN RESPECT OF MULTI METAL P ROJECT. THE ASSESSING OFFICER NOTICED THAT AS PER THE STATE MENT OF INCOME, THE ASSESSEE HAD DEBITED THE EXPENSES OF MU LTI METAL PROJECT OF RS.73,78,864/- AND AS PER THE STAT UTORY AUDIT REPORT, THIS PROJECT AT AMBAJI WAS UNDER INST ALLATION AND THEREFORE, THESE EXPENSES BEING PRE-OPERATIVE EXPENSES CANNOT BE ALLOWED AS DEDUCTION. THE LEARNE D COMMISSIONER OF INCOME TAX(APPEALS) ALLOWED THE CLA IM OF THE ASSESSEE BY FOLLOWING HIS EARLIER ORDER IN THE APPEAL FOR ASSESSMENT YEAR 1976-77 TO 1991-92. 17. THE LD. COUNSEL OF THE ASSESSEE BROUGHT TO OUR NOTICE THAT A SIMILAR ALLOWANCE HAS BEEN UPHELD BY THE TRIBUNAL I N EARLIER YEAR VIDE ORDER REPORTED IN 81 ITD 553 VIDE DISCUSS ION AT PAGES 608 TO 616. THE FACTS AND CIRCUMSTANCES BEING SIMILAR, WE RESPECTFULLY FOLLOWING THE AFORESAID ORDER OF TH E TRIBUNAL, UPHOLD THE ORDER OF THE CIT(A) IN THIS YE AR AS WELL. 32. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE O N RECORD. IN THE INSTANT CASE IT HAS BEEN ADMITTED BY ALL CONCERNED THAT THE FACT INVOLVED IN THE INSTANT ISSUE IN THE YEARS UNDER CONSIDERAT ION ARE IDENTICAL TO THE FACT INVOLVED IN RESPECT OF SIMILAR ISSUE IN THE C ASE OF THE ASSESSEE IN EARLIER YEAR. WE FIND THAT THE TRIBUNAL VIDE ITS O RDER DATED 5-5-2005 PASSED IN ITA NO.3177/AHD/1996 IN THE ASSESSMENT Y EAR 1990-91 IN THE GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 27 CASE OF THE ASSESSEE ALLOWED THE CLAIM OF THE ASSES SEE. THIS ORDER OF A TRIBUNAL WAS AGAIN FOLLOWED BY THE TRIBUNAL IN THE CASE OF THE ASSESSEE IN ASST. YEAR 1992-93 VIDE ORDER DATED 12-7-2005 PA SSED IN ITA NO.936/AHD/1999. THE ONLY OBJECTION OF THE LD. DEP ARTMENTAL REPRESENTATIVE TO FOLLOW THE ABOVE ORDER OF THE TR IBUNAL IN THE YEARS UNDER APPEAL WAS THAT IN ASST. YEAR 1990-91 THE TRI BUNAL HAS ORDERED AS UNDER: 16. THE NEXT DISPUTE IS AGAINST DELETION OF DISAL LOWANCE OF RS.51,43,986/- INCURRED IN RESPECT OF MULTI METAL P ROJECT. THE ASSESSING OFFICER NOTICED THAT AS PER THE STATE MENT OF INCOME, THE ASSESSEE HAD DEBITED THE EXPENSES OF MU LTI METAL PROJECT OF RS.73,78,864/- AND AS PER THE STAT UTORY AUDIT REPORT, THIS PROJECT AT AMBAJI WAS UNDER INST ALLATION AND THEREFORE, THESE EXPENSES BEING PRE-OPERATIVE EXPENSES CANNOT BE ALLOWED AS DEDUCTION. THE LEARNE D COMMISSIONER OF INCOME TAX(APPEALS) ALLOWED THE CLA IM OF THE ASSESSEE BY FOLLOWING HIS EARLIER ORDER IN THE APPEAL FOR ASSESSMENT YEAR 1976-77 TO 1991-92. 17. THE LD. COUNSEL OF THE ASSESSEE BROUGHT TO OUR NOTICE THAT A SIMILAR ALLOWANCE HAS BEEN UPHELD BY THE TRIBUNAL I N EARLIER YEAR VIDE ORDER REPORTED IN 81 ITD 553 VIDE DISCUSS ION AT PAGES 608 TO 616. THE FACTS AND CIRCUMSTANCES BEING SIMILAR, WE RESPECTFULLY FOLLOWING THE AFORESAID ORDER OF TH E TRIBUNAL, UPHOLD THE ORDER OF THE CIT(A) IN THIS YE AR AS WELL. GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 28 33. THE LD. DEPARTMENTAL REPRESENTATIVE POINTED OUT THAT IN 81 ITD 553 THE CASE REPORTED RELATES TO THE CASE OF UNITED PHOSPHORUS LTD. V/S. JCIT AND NOT THE ASSESSEE. THEREFORE, THE TRIBUNA L HAS ALLOWED THE RELIEF TO THE ASSESSEE UNDER A ERRONEOUS PRESUMPTION AND T HEREFORE, THE SAID ORDER SHOULD NOT BE FOLLOWED IN THE YEARS UNDER APP EAL. WE FIND THAT THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT POIN T OUT THAT ANY MISCELLANEOUS APPLICATION WAS FILED BY THE REVENUE IN RESPECT OF THE ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 1990- 91 OR ANY APPEAL WAS PREFERRED THERE AGAINST. THUS, THE REVENUE HAS ALL OWED THAT ORDER OF THE TRIBUNAL TO BECOME FINAL. FURTHER, EVEN WHEN THE S AID ORDER WAS FOLLOWED IN THE CASE OF THE ASSESSEE FOR THE ASSESS MENT YEAR 1992-93 THE ORDER OF THE TRIBUNAL WAS ACCEPTED BY THE REVENUE. AFTER ACCEPTING THE ABOVE ORDERS AND ALLOWING THEM TO BECOME FINAL, IT WAS NOT JUSTIFIED ON THE PART OF THE REVENUE TO OBJECT AGAINST THE SAME FOR THE YEARS UNDER APPEAL. IT IS A WELL SETTLED PRINCIPLE OF LAW THAT THOUGH RULE OF ESTOPPEL IS NOT APPLICABLE BUT RULE OF CONSISTENCY SHOULD BE F OLLOWED AND IF FACT PERMEATING THROUGH DIFFERENT YEARS ARE SAME THE DEC ISION OF THE ONE YEAR SHOULD NOT BE DISTURBED UNLESS SOME NEW FACTS ARE BROUGHT ON RECORD. MOREOVER, WE FIND THAT THE LD. DEPARTMENTA L REPRESENTATIVE COULD NOT BRING ANY MATERIAL BEFORE US TO SHOW THAT THE FACTS INVOLVED IN THE CASE REPORTED AT 81 ITD 553 WERE DISTINGUISHABL E FROM THE FACT OF THE INSTANT CASE OR ON THE BASIS OF THE SAID DECISION ALLOWANCE COULD NOT HAS BEEN MADE BY THE TRIBUNAL IN THE CASE OF THE ASSESS EE. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY GOOD REASON TO NOT TO FOL LOW THE ORDERS OF THE GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 29 TRIBUNAL PASSED IN THE CASE OF THE ASSESSEE ITSELF IN EARLIER YEARS. WE, THEREFORE, FOLLOWING THE ORDERS OF THE TRIBUNAL PAS SED IN THE CASE OF ASSESSEE FOR THE ASST. YEAR 1990-91 AND 1992-93, DI RECT THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE. THUS, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 34. GROUND NO. 2 OF THE APPEAL OF THE ASSESSEE IN ASSESSMENT YEAR 1994-95, 1996-97 AND 1997-98 ARE DIRECTED AGAINST D ISALLOWANCE OF GUEST HOUSE EXPENSES OF RS.1,00,000/- IN EACH YEAR. 35. AT THE TIME OF HEARING THE LEARNED AUTHORISED R EPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED BY DECISION OF THE HONBLE SUPREME COURT AGAINST THE ASSESSEE IN THE C ASE OF BRITANNIA INDUSTRIES LTD. VS. COMMISSIONER OF INCOME TAX & AN R. (2005) 278 ITR 546 (SC), WHEREIN IT HAS BEEN HELD THAT EXPENSES TO WARDS RENTS, REPAIRS, MAINTENANCE AND DEPRECIATION OF PREMISES/ACCOMMODAT ION USED FOR THE PURPOSES OF GUEST-HOUSE WERE TO BE DISALLOWED UNDER S. 37(4). THEREFORE, THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 36. GROUND NO.3 OF THE APPEAL OF THE ASSESSEE, IN A SSESSMENT YEAR 1994-95 IS DIRECTED AGAINST DISALLOWANCE OF SET OFF OF UNABSORBED LOSS, DEPRECIATION, INVESTMENT ALLOWANCE OF SHRIRAM CEMEN T LTD. AMOUNTING TO RS.8,25,86,660/-. GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 30 37. GROUND NO.4 OF THE APPEAL OF THE ASSESSEE IN AS ST. YEAR 1994-95 IS DIRECTED AGAINST DISALLOWANCE OF REMISSION OF LIABI LITY OF SHRIRAM CEMENT LTD. OF RS.1,39,94,412/-. 38. SINCE ON BOTH THE ABOVE GROUNDS OF APPEAL, COMM ON ARGUMENTS WERE ADVANCED, THEREFORE, BOTH ARE DECIDED TOGETHE R AS UNDER. 39. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE CLAIMED SET OFF FROM INCOME IN RESPECT OF ACCUMULATED LOSS AND UNAB SORBED DEPRECIATION OF ANOTHER COMPANY, VIZ., SHRIRAM CEME NT LIMITED (SCL) WHICH HAS BEEN AMALGAMATED WITH THE ASSESSEE COMPAN Y AS PER BIFR ORDER. THE UNABSORBED LOSS AND DEPRECIATION OF SHRI RAM CEMENT LIMITED CLAIMED AS SET OFF ARE AS UNDER: - ASSESSMENT YEAR AMOUNT 1989-90 RS. 4,46,63,630/- 1990-91 RS. 2,35,46,079/- 1991-92 RS. 1,29,08,670/- RS.8,11,18,379/- 40. APART FROM THE ABOVE ORDER, THE ASSESSEE HAS CL AIMED AS DEDUCTION THE INVESTMENT ALLOWANCE OF RS.14,68,281/ - IN RESPECT OF THE COMPANY, SHRIRAM CEMENT LTD. FOR VARIOUS ASSESSMENT YEAR FROM 1986- 87 TO 1990-91. THE ASSESSEE COMPANY HAS ALSO CLAIME D AS NOT TAXABLE GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 31 U/S. 41(1), THE REMISSION OF INTEREST LIABILITY TO THE EXTENT OF RS.1,39,44,412/- IN RESPECT OF THE SAID UNIT. 41. IT WAS SUBMITTED BEFORE THE ASSESSING OFFICER T HAT BIFR BEING GOVT. BODY, EMPOWERED TO SANCTION THE REHABILITATION/REVI VAL SCHEME IN THE CASE OF SICK INDUSTRIAL UNIT SPECIFICALLY GRANTED T HE BENEFIT OF SET OFF 72A OF THE LOSS AND DEPRECIATION OF SCL FROM THE ASSESS EEES INCOME AND HAS EXEMPTED THEAPPELLANT FROM THE PROVISIONS OF SECTIO N 41(1) OF IT ACT, 1961 IN RESPECT OF THE REMISSIONS ARISING OUT OF RE LIEF, CONCESSION ENVISAGED UNDER THE SCHEME. HOWEVER, THE ASSESSING OFFICER OBSERVES THAT THERE ARE CERTAIN CONDITIONS SPECIFIED WHICH A RE TO BE FULFILLED BY THE ASSESSEE. UNLESS THE CONDITIONS SPECIFIED ARE FULFI LLED, THE BENEFIT OF SETTING OFF LOSSES OF SCL, ETC. IS NOT AVAILABLE TO ASSESSEE COMPANY. IN THIS REGARD, THE FOLLOWIOJNG SUBMISSIONS WERE MADE BEFORE THE ASSESSING OFFICER. 1.REGARDNG SHRIRAM CEMENT LIMITED : 1.1IN OUR LETTER DATED 11 TH MARCH,1997, WE HAVE SUBMITTED THE DETAILS OF CARRIED FORWARD LOSSES OF THE AFORE SAID COMPANY, WHICH HAS BEEN MERGED WITH OUR CORPORATION . WE HAVE ALSO SUBMITTED THE COPY OF BIFR ORDER AND ASSESSMENT ORDER IN CASE OF SHRIRAM CEMENT LTD. REG ARDING CARRYING OUT REVIVAL OF THE SAID COMPANY AS PER BIF R ORDER, WE WOULD LIKE TO STATE THAT THE SUBJECT OF PREPARIN G REVIVAL GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 32 SCHEME FOR THE SAID CEMENT PLANT WAS ASSIGNED TO IN DIAS LEADING CONSULTANT FOR CEMENT INDUSTRY, M/S. HOLTE CH ENGINEERS PRIVATE LIMITED, NEW DELHI. THEIR TEAM V ISITED THE PLANT AND PREPARED A DETAILED PROJECT REPORT FO R EXPANSION OF THE PLANT TO 600 TPD. A COPY OF REPOR T IS PRODUCED BEFORE YOU FOR YOUR PERUSAL. BASED ON THE SCHEME PREPARED BY M/S. HOLTECH ENGINEERS PVT.LTD. TENDERS WERE INVITED ON ALL INDIA BASIS FOR EXPANS ION OF THE PLANT TO 600 TPD TO MAKE IT OPERATIVE. THE CORPORA TION HAS ALSO RECEIVED TENDERS AND THE MATTER IS UNDER CONSIDERATION. 1.2 FURTHER WE HAVE DURING FINANCIAL YEAR1993-94, 1 994- 95 AND 1995-96 SPENT A SUM OF RS.11,35,02,079 FOR M AKING VARIOUS PAYMENTS TO FINANCIAL INSTITUTION AND OTHER EXPENSES OF SHRIRAM CEMENT LIMITED. THE DETAILED B REAK- UP IS ENCLOSED FOR YOUR VERIFICATION. 42. THE STATEMENT SHOWING THE BREAK-UP OF THE AMOUN T OF RS.11,35,00,279 ALLEGEDLY SPENT BY THE ASSESSEE FOR SCL UNIT HAS BEEN MADE PART OF THE ASSESSMENT ORDER BY THE ASSESSING OFFICER AS PER EXHIBIT-2 OF THE ASSESSMENT ORDER. THE ASSESSING O FFICER OBSERVES THAT THE ASSESSEE DID NOT FULFILL THE OBLIGATIONS CAST U PON BY THE BIFR IN THE SCHEME OF MERGER. IT WAS CLEARLY CLAIMED THAT TAX BENEFIT ESTIMATED ATRS.4.77 CRORES AVAILED BY THE ASSESSEE WOULD HAVE TO BE INVESTED IN SCL FOR THE PURPOSE OF ITS REVIVAL WITHIN A PERIOD OF 2-3 YEARS. THE GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 33 ASSESSING OFFICER OBSERVES FROM THE STATEMENT OF EX PENDITURE INCURRED BY THE ASSESSEE ON SCL THAT IT REVEALS CLEARLY THAT THE PAYMENT OF RS.9.09 CRORES MADE TO FINANCIAL INSTITUTIONS WERE ITSELF T HE PART OF SCHEME AND THAT PAYMENT CANNOT BE TREATED AS MADE TOWARDS THE REVIVAL. AS ABOUT THE OTHER PAYMENTS, THEY ARE IN THE NATURE OF NORMA L DAY-TO-DAY EXPENSES WHICH ARE REQUIRED TO BE INCURRED EVEN IF THE SAID UNIT IS NOT FUNCTIONING. THE ASSESSING OFFICER CONTENDS THAT B ECAUSE THE SCL HAS BECOME PART OF THE ASSESSEE AFTER MERGER, IT IS NAT URAL THAT THE DAY-TO- DAY EXPENSES IN CONNECTION WITH THE SAME WILL HAVE TO BE MET BY THE ASSESSEE. WITHOUT PREJUDICE TO THIS, THE ASSESSING OFFICER OBSERVES THAT MAJOR PART OF THE EXPENDITURE IS PAYMENT OF OUTSTAN DING SALES TAX PAYMENT FOR ACQUIRING EQUITY SHAREHOLDING IN SCL (A GAIN AS PER THE TERMS OF SCHEME) AND SALARY EXPENSES TO THE EMPLOYEES WHI CH IS ALSO TO BE INCURRED AS PER THE NORMAL PRACTICE OF THE MERGER. THE ASSESSING OFFICER OBSERVES THAT THERE IS NO SPECIFIC INVESTMENT FOR T HE REVIVAL OF THE SCL UNIT, LET ALONE INVESTMENT OF RS.4.77 CRORES AND MA KING THE UNIT COMMENCE ITS PRODUCTION IN OCTOBER, 1993. AS PER C LAUSE8.2 REPRODUCED IN THE ASSESSMENT ORDER, THE GMDC WAS TO HAVE ENHANCED THE CAPACITY OF SCL TO 99000 TPA FROM THE EXISTING CAPACITY OF 66000 IPA. HOWEVER, ADMITTEDLY, NO SUCH STEPS HAVE BEEN TAKEN BY THE ASSESSEE COMPANY TO MAKE THE UNIT OPERATIONAL. AS FAR AS TH E APPOINTMENT OF M/S. HOLTECH ENGINEERS PVT. LTD., OF DELHI AND INVI TING THE TENDERS FOR EXPANSION OF THE PLANT, IT IS ONLY AN EYE-WASH AND NO SUCH REAL INTENTION APPEARS ON THE PART OF THE ASSESSEE COMPANY. THE A LLEGED REPORT FROM THE CONSULTANT WAS NOT PRODUCED DURING THE ASSESSME NT PROCEEDINGS. GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 34 ONLY SOME TENDER DOCUMENTS WERE SHOWN WHICH ALSO AC CORDING TO THE ASSESSING OFFICER APPEARS TO BE ONLY A PAPER WORK B ECAUSE NO ACTION THEREAFTER WAS REPORTEDLY TAKEN IN THIS DIRECTION. 43. THE ASSESSING OFFICER FURTHER OBSERVED THAT FRO M THE ORDER OF BIFR, THE ASSESSEE COMPANY WAS NOT ONLY DIRECTED TO MAKE INVESTMENT FOR REVIVAL OF THE UNIT, BUT WAS ALSO GRANTED TIME LIMI T FOR THE SAME AND SUCH REVIVAL WAS TO BE CARRIED OUT WITHIN A PERIOD OF 2- 3 YEARS. HOWEVER, WHAT IS ACTUALLY SEEN IS THAT THE ASSESSEE COMPANY ACTUA LLY OFFERED THE SAID UNIT FOR SALE AFTER AVAILING OF THE TAX BENEFITS. T HE LEARNED ASSESSING OFFICER IS OF THE OPINION THAT SUCH TAX BENEFITS CA NNOT BE GRANTED BECAUSE THE ASSESSEE IS ELIGIBLE FOR THIS BENEFITS ONLY IN PURSUANT TO BIFR ORDER, THE TERMS OF WHICH HAVE NOT BEEN FULFILLED B Y IT. THE LEARNED ASSESSING OFFICER, ACCORDINGLY REJECTED THE CLAIM O F SET OFF OF BROUGHT FORWARD LOSSES AND DEPRECIATION AGGREGATING RS.8,11 ,18,379/- AND INVESTMENT ALLOWANCE OF RS.14,68,281/-. FOR THE SA ME REASONING, THE ASSESSING OFFICER HELD THAT THE ASSESSEE IS NOT ELI GIBLE FOR EXEMPTION FROM TAXABILITY OF THE REMISSION OF INTEREST OF RS. 1,39,44,412. 44 IN APPEAL, THE LEARNED COMMISSIONER OF INCOME TA X(APPEALS) CONFIRMED THE ACTION OF THE LEARNED ASSESSING OFFIC ER BY OBSERVING AS UNDER:- 25. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND THE SUBMISSIONS MADE. AS PER SECTION 32(1) OF SICK INDU STRIAL GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 35 COMPANIES (SPECIAL PROVISIONS) ACT, 1985, THE PROVI SION OF THIS ACT AND THE RULES OR SCHEME MADE THEREUNDER HA VE OVERRIDING EFFECT NOTWITHSTANDING ANYTHING INCONSIS TENT THEREWITH IN ANY OTHER LAW EXCEPT THE PRESCRIBED AC TS THEREIN. THEREFORE, THE PROVISIONS OF OTHER ACTS AR E APPLICABLE UNLESS THEY ARE INCONSISTENT WITH THE PR OVISIONS OF SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) A CT, 1985. SECTION 72A OF I.T. ACT IS NOT INCONSISTENT WITH TH E PROVISIONS OF THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISION S) ACT, 1985. THEREFORE, I AM OF THE VIEW THAT THE PROVISIO NS OF SECTION 72A ARE STILL APPLICABLE TO THE CASES COVER ED BY ORDERS OF THE BIFR. THIS IS ALSO CLEAR FROM THE NOT IFICATION NO.20-1083(E) DATED 14.12.1987 WHICH HAS SPECIFIED THE BOARD FOR INDUSTRIAL AND FINANCIAL RECONSTRUCTION, ESTABLISHED UNDER SECTION 4 OF THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 (1 OF 1986) AS THE S PECIFIED AUTHORITY FOR THE PURPOSE OF CLAUSE (II) OF SUB-SEC TION (2) OF THE SAID SECTION 72A IN SO FAR AS AMALGAMATION OF A SICK INDUSTRIAL COMPANY WITH ANOTHER COMPANY UNDER THE S ICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 IS CONCERNED. THE PROVISIONS OF SECTION 72A ARE PROCED URAL ONE AND HAVE TO BE TAKEN INTO CONSIDERATION FOR DEC IDING THE CLAIM OF THE APPELLANT. CLAUSE (II) OF SUB SECT ION (2) OF 72A OF IT ACT PROVIDES THAT ACCUMULATED LOSSES ARE NOT TO BE SET OFF OR CARRIED FORWARD AND UNABSORBED DEPRECIAT ION IS GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 36 NOT TO BE ALLOWED IN THE ASSESSMENT OF THE AMALGAMA TED COMPANY, UNLESS THE AMALGAMATED COMPANY FURNISHES A LONG WITH ITS RETURN OF INCOME FOR THE SAID ASSESSMENT Y EAR, A CERTIFICATE FROM THE SPECIFIED AUTHORITY TO THE EFF ECT THAT ADEQUATE STEPS HAVE BEEN TAKEN BY THE COMPANY FOR T HE REHABILITATION OR REVIVAL OF THE BUSINESS OF THE AM ALGAMATING COMPANY. ACCORDING TO THIS PROVISION, THE QUESTION WHETHER ADEQUATE STEPS HAVE BEEN TAKEN BY THE AMALGAMATING COMPANY FOR THE REHABILITATION OR REVIVAL OF THE BU SINESS HAS TO BE DECIDED BY THE SPECIFIED AUTHORITY AND IF THE SAID AUTHORITY ISSUES A CERTIFICATE TO THIS EFFECT AND S UCH CERTIFICATE IS FURNISHED ALONGWITH THE RETURN OF IN COME, THE BENEFIT OF ACCUMULATED LOSS FOR SET OFF AND OF UNAB SORBED DEPRECIATION HAS TO BE ALLOWED. IN THE INSTANT CASE , NO SUCH CERTIFICATE HAS BEEN BROUGHT TO MY NOTICE ON THE BA SIS OF WHICH IT CAN BE SAID THAT ADEQUATE STEPS HAVE BEEN TAKEN FOR THE REHABILITATION OR REVIVAL OF THE BUSINESS O F THE AMALGAMATING COMPANY, I.E. S.C.I. 26. BIFR ORDER DATED 31.05.1995 RELATES ONLY TO CLA RIFICATION REGARDING THE ASSESSMENT YEAR FOR WHICH BENEFIT UND ER SECTION 72A OF THE I.T.ACT, 1961 CAN BE AVAILED BY GMDC. IN SECOND PARA OF THE SAID ORDER, IT IS MENTIONED THAT WHEN HEARING HELD ON 1.05.1995, J.F. PATEL, GENERAL MANA GER, GMDC HAD SOUGHT CLARIFICATION FROM THE BENCH IN REG ARD TO THE TRANSFER DATE AND ALSO ASSESSMENT ORDER FROM W HICH GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 37 THE BENEFIT UNDER SECTION 72A OF THE IT ACT, 1961 W OULD BE AVAILABLE TO THE COMPANY. THE ORDER DATED 31.05.19 95 IS CLARIFICATION IN THIS REGARD. OTHER ORDER OF BIFR B ROUGHT TO THE NOTICE DURING THE COURSE OF APPEAL PROCEEDING I S ORDER DATED 16.09.1993, WHICH IS NOTHING ELSE, BUT SANCTI ONING OF THE SCHEME FOR THE REVIVAL/REHABILITATION OF SCL IN ACCORDANCE WITH THE CERTAIN OBLIGATIONS PUT ON THE APPELLANT AND THEREBY MAKING IT ELIGIBLE FOR CERTAI N TAX BENEFITS. THE INTRODUCTION OF THE ORDER MAKES IT CL EAR THAT THE BENEFITS UNDER THE SCHEME ARISES TO THE APPELLA NT ON FULFILLMENT OF THE CONDITIONS PRESCRIBED IN THE SC HEME. SECTION 72A OF THE I.T. ACT HAS PRESCRIBED A PROCED URE FOR CLAIMING BENEFIT IN SUCH SITUATIONS BY PROVISIONS O F CLAUSE (II) OF SUB-SECTION (2) OF SECTION 72A OF THE ACT. THERE FORE, I DO NOT CONSIDER IT NECESSARY TO GO INTO THE QUESTION W HETHER ADEQUATE STEPS HAVE BEEN TAKEN BY THE COMPANY FOR REHABILITATION OR REVIVAL OF THE BUSINESS OF AMALGA MATING COMPANY. AS THE SAID CERTIFICATE AS PRESCRIBED AS P RESCRIBED UNDER SECTION 72A(2)(II) HAS NOT BEEN FURNISHED, I AM THE VIEW THAT THE LEARNED ASSESSING OFFICER WAS JUSTIFI ED IN REJECTING THE APPELLANTS CLAIM OF UNABSORBED LOSS, DEPRECIATION ETC. OF RS8,25,86,560 PERTAINING TO TH E SCL AND ALSO IN TAXING REMISSION OF INTEREST LIABILITY OF S CL OF RS.1,39,94,412/-. I ACCORDINGLY REJECT THIS TWO GRO UNDS OF APPEAL. GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 38 45. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE O N RECORD. IN THE INSTANT CASE, A SICK COMPANY NAMELY SHRIRAM CEMENT LTD. WAS AMALGAMATED WITH THE ASSESSEE COMPANY IN PURSUANCE TO A SCHEME FRAMED BY THE BIFR. THE ASSESSEE CLAIMED DEDUCTION IN RESPECT OF UNABSORBED LOSS, DEPRECIATION , INVESTMENT ALLOWANC E OF AMALGAMATING COMPANY AND CLAIMED THAT REMISSIONS OF INTEREST LIA BILITY OF AMALGAMATING COMPANY IN PURSUANCE TO THE SCHEME OF THE BIFR IS NOT TAXABLE. THE ABOVE CLAIM OF THE ASSESSEE WAS NEGAT ED BY THE ASSESSING OFFICER. THE CIT(A) ALSO CONFIRMED THE ACTION OF THE ASSESSING OFFICER FOR THE REASONS QUOTED HEREINABOVE. THE ASSESSEE SUBMI TTED BEFORE US THAT IN PURSUANCE OF THE SCHEME SANCTIONED BY BIFR, THE ASSESSEE WAS ENTITLED FOR DEDUCTION IN RESPECT OF UNABSORBED LOS S, DEPRECIATION AND INVESTMENT ALLOWANCE OF THE SICK COMPANY WHICH WAS AMALGAMATED WITH THE ASSESSEE COMPANY AND WAS NOT LIABLE TO TAX IN R ESPECT OF REMISSIONS OF INTEREST BY THE BIFR OF THE SICK COMPANY. THE A SSESSEE ALSO CLAIMED THAT THE LOWER AUTHORITIES HAVE NOT ALLOWED ANY OPP ORTUNITY TO THE ASSESSEE TO OBTAIN AND FURNISH THE CERTIFICATE ENVI SAGED U/S. 72A(2)(II) OF THE ACT. WE FIND THE PROVISIONS OF SECTION 32(1) O F THE SICK INDUSTRIAL COMPANY (SPECIAL PROVISION) ACT, 1985 READ AS UNDE R: THE PROVISIONS OF THIS ACT AND OF ANY RULES OR SCHE MES MADE THEREUNDER SHALL HAVE EFFECT NOTWITHSTANDING ANYTHING I NCONSISTENT THEREWITH IN ANY OTHER LAW EXCEPT THE PROVISIONS OF THE F OREIGN EXCHANGE REGULATION ACT 1973 AND THE URBAN LAND (CEIL ING AND GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 39 REGULATION) ACT 1976 FOR THE TIME BEING IN FORCE OR IN THE MEMORANDUM OR ARTICLES OF ASSOCIATION OF AN INDUSTRIAL COMPANY OR ANY OTHER INSTRUMENT HAVING EFFECT BY VIRTUE OF ANY LAW OTHER THAN THIS ACT. THE CENTRAL BOARD OF DIRECT TAXES HAVE BEEN ADVISED THAT IF A SCHEME IS SANCTIONED IN PURSUANCE OF SECTION 17(3)OF THE ACT, IT WILL HAVE AN OVER- RIDING EFFECT OVER THE PROVISIONS OF THE INCOME-TAX AC T BY VIRTUE OF SECTION 32 OF THE ACT. 46. WE FIND THAT THE SCHEME FRAMED UNDER THE SICK INDUSTRIAL COMPANY (SPECIAL PROVISION) ACT, 1985 SHALL OVER-RIDE THE P ROVISION OF INCOME-TAX ACT, 1961. IN THE INSTANT CASE BOTH THE PARTIES HA VE NOT FILED BEFORE US THE COPY OF THE SCHEME SANCTIONED UNDER THE SICK IN DUSTRIAL COMPANY (SPECIAL PROVISION) ACT, 1985. IN ABSENCE OF THAT THE CONTENTION OF THE ASSESSEE CANNOT BE PROPERLY AND COMPLETELY BE ADJUD ICATED BY US. FURTHER, THE LD. DEPARTMENTAL REPRESENTATIVE HAS NO T REBUTTED THE CONTENTION OF THE ASSESSEE THAT NO OPPORTUNITY WAS ALLOWED TO IT TO FURNISH THE CERTIFICATE OF SPECIFIED AUTHORITY AS E NVISAGED U/S. 72A(2)(II) WAS ALLOWED TO IT BY THE LOWER AUTHORITIES AFTER FI NDING THAT EVEN IN VIEW OF THE SCHEME SANCTIONED UNDER THE SICK INDUSTRIAL COMPANY (SPECIAL PROVISION) ACT, 1985 THE SAID CERTIFICATE WAS REQU IRED. ON THE ABOVE FACTS AND CIRCUMSTANCES, IN OUR CONSIDERED OPINION IT SHALL BE IN THE INTEREST OF JUSTICE TO REMIT THE ISSUES UNDER CONSI DERATION BACK TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE SAME AFTER C ONSIDERING THE RELEVANT PROVISION CONTAINED IN THE SCHEME SANCTIONED UNDER THE SICK INDUSTRIAL COMPANY (SPECIAL PROVISION) ACT, 1985 IN THIS REGAR D. THE ASSESSING OFFICER S DIRECTED TO REFRAME THE ASSESSMENT ON THE ABOVE ISSUE AS PER LAW AFTER CONSIDERING THE RELEVANT SCHEME AND BY PA SSING A SPEAKING GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 40 ORDER AFTER ALLOWING REASONABLE OPPORTUNITY OF HEAR ING TO THE ASSESSEE. THUS, THE ORDERS OF THE LOWER AUTHORITIES ON THE AB OVE ISSUE ARE SET ASIDE AND THE GROUNDS OF THE ASSESSEE ARE ALLOWED FOR STA TISTICAL PURPOSES. 47. GROUND NO. 5 OF THE APPEAL OF THE ASSESSEE IN A SST. YEAR 1994-95 IS DIRECTED AGAINST DISALLOWANCE OF DEPRECIATION OF RS .87,33,306/- CLAIMED ON ASSETS OF SHRIRAM CEMENT LTD. 48. GROUND NO. 3 OF THE APPEAL OF THE ASSESSEE IN A SST. YEAR 1996-97 IS DIRECTED AGAINST DISALLOWANCE OF DEPRECIATION OF RS .1,15,20,138/- CLAIMED ON ASSETS OF SHRIRAM CEMENT LTD. 49. GROUND NO. 3 OF THE APPEAL OF THE ASSESSEE IN A SST. YEAR 1997-98 IS DIRECTED AGAINST DISALLOWANCE OF DEPRECIATION OF RS .86,79,272/- CLAIMED ON ASSETS OF SHRIRAM CEMENT LTD 50. DURING THE COURSE OF THE HEARING BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE CONCEDED THAT IN VIE W OF THE FACT THAT FIXED ASSETS WERE NOT USED FOR BUSINESS PURPOSES B Y THE ASSESSEE COMPANY DURING THE YEARS UNDER APPEAL, THEREFORE, D EPRECIATION IS NOT ADMISSIBLE. IN VIEW OF THIS, THE GROUNDS OF APPEAL OF THE ASSESSEE ARE DISMISSED. 51. GROUND NO. 6 OF THE APPEAL OF THE ASSESSEE IN A SST. YEAR 1994-95, GROUNDS NO. 4 OF THE APPEAL OF THE ASSESSEE IN ASST . YEAR 1996-97 AND GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 41 GROUND NO. 4 OF THE APPEAL OF THE ASSESSEE IN ASST. YEAR 1997-98 IS DIRECTED AGAINST DISALLOWANCE OF PRIOR PERIOD EXPEN DITURE OF RS.48,04,046/-, RS.23,18,704/- AND RS.37,84,108/- R ESPECTIVELY. 52. DURING THE COURSE OF HEARING THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE CONCEDED IN VIEW OF THE FACT THAT THE LD. CIT(A) HAS REMANDED THE MATTER BACK TO THE FILE OF THE ASSESSI NG OFFICER FOR COMPLETE VERIFICATION OF THE DETAILS AND THE EVIDEN CES TO BE FILED BY THE ASSESSEE AND THEREAFTER DECIDE THE ISSUE REGARDING THE ALLOWABILITY OR OTHERWISE OF THE EXPENSES CLAIMED, THERE IS NO GRI EVANCE OF THE ASSESSEE AGAINST THE SAID ORDER OF THE CIT(A). IN VIEW OF THIS, THE GROUNDS OF APPEAL OF THE ASSESSEE ARE DISMISSED. 53. GROUND NO. 7 OF THE APPEAL OF THE ASSESSEE IN A SST. YEAR 1994-95 IS DIRECTED AGAINST DISALLOWANCE OF RS.3,07,936/- U/S. 40A(3) OF THE I.T. ACT. 54. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS ING OFFICER OBSERVED FROM SCHEDULE-X TO THE TAX AUDIT REPORT THAT THE AS SESSEE HAD MADE CASH PAYMENT EXCEEDING RS.10,000/- IN CASH AGGREGAT ING TO RS.7,80,343/- . THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SECTION 40A(3) DISALLOWED THE SAME. IN APPEAL, THE LD. CIT(A) OBS ERVING THAT PAYMENT OF SALARY OF RS.1,13,789/- HAS BEEN MADE AT HEAD OF FICE IN CASH IN VIOLATION OF PROVISIONS OF SECTION40A(3) OF THE ACT AND THAT THE OTHER PAYMENTS TO STAFF OF RS.1,94,147/- AT HEAD OFFICE O N ACCOUNT OF MEDICAL EXPENSES/LAB/WELFARE EXPENSES/TADA TO STAFF, EX-GRA TIA, ETC. WERE ALSO GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 42 MADE IN CASH IN VIOLATION OF PROVISIONS OF SECTION 40A(3) OF THE ACT. CONFIRMED THE DISALLOWANCE MADE BY THE A.O. TO THE EXTENT OF RS.3,07,936/- AND DELETED THE BALANCE AMOUNT OF DIS ALLOWANCE. 55. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. IN THE INSTANT CASE, IT IS NOT IN DISPUTE THAT THE ASSESSEE MADE C ASH PAYMENT OF RS.3,07,936/- IN VIOLATION THE PROVISIONS OF SECTIO N 40A(3) OF THE ACT. THE ASSESSEE CLAIMED THAT THE AFORESAID PAYMENTS WE RE MADE DUE TO COMMERCIAL EXPEDIENCY, GENUINENESS OF PAYMENT IS N OT IN DOUBT AND ARE SUPPORTED BY VOUCHERS. THE CIT(A) CONFIRMED TH E PART OF THIS DISALLOWANCE ON THE GROUND THAT NO UNAVOIDABLE CIRC UMSTANCES AS PROVIDED IN RULE 6DD(J) WAS CITED BY THE ASSESSEE A S THE PAYMENTS WERE MADE AT HEAD OFFICE OF THE ASSESSEE COMPANY SITUAT ED AT AHMEDABAD. WE FIND THAT NO MATERIAL WAS BROUGHT BEFORE US BY T HE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE TO ESTABLISH THAT TH E AFORESAID PAYMENTS WERE MADE IN ANY CIRCUMSTANCES ENUMERATED IN RULE 6DD. WE THUS, DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDE R OF THE CIT(A). THUS, THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 56. GROUND NO. 1 IN REVENUES APPEAL IN ASST. YEAR 1994-95 RELATES TO DELETING THE DISALLOWANCE OF INTEREST LIABILITY DUE TO REDUCTION IN RATE OF RS.92,37,032/-. GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 43 57. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE CAME TO KNOW THROUGH TH E GOVERNMENT RESOLUTION (GR) DATED 25-5-1992 THAT THE RATE OF IN TEREST ALLOWABLE BYTHE GOVT. TO THE CORPORATION WITH EFFECT FROM 1 -7-1992 WAS SAME AS APPLICABLE TO BANK SAVINGS ACCOUNTS. THE ASSESSEE, THEREFORE, WORKED OUT THE DIFFERENCE OF RS.92,37,032/- AS EXCESS INTE REST CREDITED IN THE PROFIT & LOSS ACCOUNT FOR THE PERIOD 1-7-92 TO 31- 12-1994. THIS AMOUNT WAS DEBITED IN THE P & L A/C. ON THE GROUND THAT TH E GOVT. RESOLUTION WAS RECEIVED BY THE CORPORATION DURING THE YEAR AND THEREFORE, THE ENTIRE LIABILITY AROSE IN THE CURRENT YEAR. THE ASSESSING OFFICER WAS OF THE VIEW THAT FROM THE GOVT. RESOLUTION , IT IS SEE N THAT THE GOVT. HAD ALLOWED THE INTEREST AT TERM DEPOSIT RATE BUT THE ASSESSEE CALCULATED THE ADDITIONAL LIABILITY AS PER THE INTEREST APPLIC ABLE TO SAVINGS BANK ACCOUNTS. THEREFORE, THE ASSESSING OFFICER OBSERVE D THAT THE CALCULATION OF THE AMOUNT WAS NOT CORRECT EVEN ACCORDING TO TH E GOVT. RESOLUTION AND THEREFORE, THE AMOUNT DOES NOT REPRESENT LIABIL ITY FOR EXPENDITURE. IN APPEAL, THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE FOR THE REASON THAT EXCESS INTEREST WAS CREDITED BY THE ASS ESSEE IN EARLIER YEAR AND FROM THE GOVT. RESOLUTION RECEIVED DURING THE Y EAR, IT WAS FOUND BY THE ASSESSEE THAT EXCESS INTEREST CREDITED IN THE E ARLIER YEARS AMOUNTING TO RS.92,37,032/- WAS NOT REALIZABLE AND HENCE THE SAME WAS ADMISSIBLE AS DEDUCTION AS BAD DEBTS TO THE ASSESSEE. 58. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE O N RECORD. THE GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 44 UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION CAME TO KNOW BY GOVT. RESOLUTION RECE IVED THAT INTEREST RECEIVABLE BY IT IS ONLY AT THE RATE APPLICABLE TO SAVING ACCOUNT THOUGH EXCESS INTEREST IN THE EARLIER YEARS WHICH WERE ACC OUNTED FOR ON THE BASIS OF RATE OF TERM DEPOSIT WERE REVERSED AND TH E ASSESSEE CLAIMED DEDUCTION OF THE SAME ON ACCOUNT OF THE FACT THAT S UCH INTEREST WERE TAXED IN THE EARLIER YEARS AS INCOME. THE ASSESSIN G OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE, WHICH WAS ALLOWED BY THE CIT (A) ON THE GROUND THAT SUCH DEDUCTION WAS ALLOWABLE TO THE ASSESSEE A S BAD DEBTS. WE FIND THAT NO SPECIFIC ERROR IN THE ORDER OF THE CI TA) COULD NOT BE POINTED BY THE LD. DEPARTMENTAL REPRESENTATIVE. IN ABSENCE OF THE SAME, WE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDE R OF THE CIT(A). THEREFORE, THE SAME IS CONFIRMED AND GROUND OF THE REVENUE IS DISMISSED. 59. GROUND NO. 2 OF THE REVENUES APPEAL IN ASST. YEAR 1994-95 IS DIRECTED AGAINST THE DELETING DISALLOWANCE OF SALES -TAX LIABILITY OF EARLIER YEAR OF RS.1,03,67,185/-. 60. THE BRIEF FACTS ARE THAT THE ASSESSEE CLAIMED P AYMENT OF SALES-TAX LIABILITY OF EARLIER YEARS AMOUNTING TO RS.1,03,67, 185/-. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD CLAIMED DEDU CTION IN RESPECT OF SALES-TAX LIABILITY PERTAINING TO THE YEAR 1985-86 AND 1986-87 ON PAYMENT BASIS EVEN THOUGH APPEAL HAD BEEN FILED; AG AINST THE RELEVANT SALES-TAX ASSESSMENT ORDERS. THE AMOUNTS WERE PAID ON 22-4-1994 THE GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 45 ASSESSING OFFICER WAS OF THE VIEW THAT SINCE PAYMEN TS OF THE SALES-TAX AMOUNT WAS MADE DURING THE ACCOUNTING YEAR 1994-95, THE SAME CANNOT BE ALLOWED AS DEDUCTION IN ASST. YEAR 1994-95. I A PPEAL, THE LD. CIT(A) ALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE FOR T HE REASON THAT THE SALES-TAX ORDERS IN QUESTION WERE DULY SERVED ON TH E ASSESSEE ON23-3- 1994 AND THEREFORE, THE LIABILITY FOR PAYMENT OF SA LES-TAX WERE ASCERTAINED AND CRYSTALLIZED BEFORE 31-3-1994. TH E PAYMENT OF THE SAID LIABILITY WAS MADE BEFORE THE DUE DATE OF FILLING OF INCOME-TAX RETURN U/S. 139(1) OF THE ACT. 61 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE O N RECORD. THE YEAR UNDER APPEAL IS ASST. YEAR 1994-95 RELATING TO PREV IOUS YEAR 1993-94. THE UNDISPUTED FACTS OF THE CASE ARE THAT FOR THE YEARS 1985-86 AND 1986-87, SALES-TAX ASSESSMENTS OF THE ASSESSEE WERE COMPLETED VIDE ORDER DATED 21-3-1994 PASSED BY THE SALES-TAX OFFIC ER AND IN PURSUANCE THEREOF, A DEMAND OF RS.1,03,67,185/- WAS RAISED O N THE ASSESSEE. THE SAID DEMAND WAS DULY PAID BY THE ASSESSEE ON 22-4-1 994. THUS, IT IS OBSERVED THAT THE DEMAND WAS QUANTIFIED DURING THE FINANCIAL YEAR 1993-94 RELEVANT TO ASSST. YEAR 1994-95 UNDER APPEA L. THEREFORE, THE ASSESSEE WAS JUSTIFIED IN CLAIMING THE SAME AS EXP ENDITURE OF THE YEAR UNDER CONSIDERATION. FURTHER, IN VIEW OF THE FACTS THAT PAYMENT OF THE AFORESAID EXPENDITURE WAS ACTUALLY MADE BY THE ASSE SSEE BEFORE THE DUE DATE OF FURNISHING OF RETURN U/S.139(1) OF THE ACT IN OUR CONSIDERED OPINION CIT(A) WAS FULLY JUSTIFIED IN ALLOWING DEDU CTION IN RESPECT OF THE GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 46 SAME TO THE ASSESSEE IN THE ASST. YEA UNDER CONSIDE RATION AFTER TAKING INTO CONSIDERATION THE PROVISIONS OF SECTION 43B O F THE ACT. WE FIND THAT NO GOOD REASON COULD BE POINTED OUT BY THE LD. DEPA RTMENTAL REPRESENTATIVE FOR INTERFERING WITH THE ORDER OF TH E CIT(A) ON THIS ISSUE. WE, THEREFORE, CONFIRM THE ORDER OF THE CIT)A AND DISMISS THIS GROUND OF APPEAL OF THE REVENUE. 62. GROUND NO. 3 OF THE APPEAL OF THE REVENUE IN AS ST. YEAR 1994-95 AND GROUND NO.1 OF THE APPEAL OF THE REVENUE IN ASS T.YEAR 1996-97 ARE DIRECTED AGAINST DELETING THE DISALLOWANCE OF RS.8 ,00,000/- AND RS.10,00,000/- RESPECTIVELY ON ACCOUNT OF DEPRECIAT ION ON ACCOUNT OF FRACTIONAL OWNERSHIP OF ASSETS. 63. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE ASST. YEAR 1992-93 ASSESSEE CONSTRUCTED THE BUILDING WORTH RS.50.25 L ACS WHICH WAS JOINTLY OWNED WITH GUJARAT ELECTRICITY BOARD (GEB). (IT MAY BE MENTIONED THAT BOTH I.E. THE ASSESSEE AS WELL AS GEB ARE THE STAT E GOVT. UNDERTAKINGS). THE ASSESSING OFFICER DISALLOWED THE CLAIM ON THE A BOVE BUILDING THAT THE BUILDING IS JOINTLY OWNED WITH GEB. ON APPEAL, THE CIT(A) FOUND THAT THE ASSESSEE HAD CLAIMED THE DEPRECIATION ONLY ON THE I NVESTMENT MADE BY THE ASSESSEE I.E. FROM THE TOTAL COST OF CONSTRUCTI ON OF THE BUILDING, THE COST CONTRIBUTED BY GEB WAS REDUCED. HE, THEREFORE , DELETED THE DISALLOWANCE OF DEPRECIATION AMOUNTING TO RS.8,00,0 00/- IN ASST. YEAR 1994-95 AND RS.10,00,000/- IN ASST. YEAR1996-97. GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 47 64. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE O N RECORD. THE LEARNED AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE ISSUE UNDER CONSIDERATION IS COVERED BY THE DECISION OF T HE TRIBUNAL IN FAVOUR OF THE ASSESSEE IN THE CASE OF THE ASSESSEE ITSELF IN ASST. YEAR 1992-93 VIDE ORDER PASSED ON 12-7-2005 IN ITA NO. 924/AHD/1 999 WHEREIN THE ORDER OF THE CIT(A) ALLOWING THE DEPRECIATION TO TH E ASSESSEE ON THE BUILDING WAS CONFIRMED AND THE APPEAL OF THE REVEN UE WAS DISMISSED. THE LD. DEPARTMENTAL REPRESENTATIVE ALSO AGREED WIT H THE SUBMISSIONS MADE BY THE LD. AUTHORIZED REPRESENTATIVE OF THE AS SESSEE. WE FIND THAT THE TRIBUNAL IN ASSESSMENT YEAR 1992-93 HAS OBSERVE D AS UNDER: 8.1 AFTER CONSIDERING THE ARGUMENTS F BOTH THE PARTIES A ND THE FACTS OF THE CASE, WE ENTIRELY AGREE WITH THE FINDI NG OF THE CIT(A). IT IS NOT IN DISPUTE THAT THE BUILDING WAS OWNE D BY THE ASSESSEE AND USED FOR THE PURPOSE OF ITS BUSINESS. THE CONTRIBUTION MADE TOWARDS THE CONSTRUCTION OF SUCH BUILD ING BY GEB HAS ALREADY BEEN REDUCED FROM THE TOTAL COST OF TH E BUILDING AND THE DEPRECIATION HAS BEEN CLAIMED ON THE NET COST OF BUILDING WHICH WAS BORNE BY THE ASSESSEE. IN THE AB OVE CIRCUMSTANCES, IN OUR OPINION, THE A.O. WAS NOT JUSTIF IED IN HOLDING THAT THE ASSESSEE WAS NOT THE OWNER OF THE BUILD ING. IN FACT THE ASSESSEE WAS THE OWNER OF THE BUILDING AND GE B ONLY MADE SOME CONTRIBUTION TOWARDS THE CONSTRUCTION OF SUCH BUILDING. IN VIEW OF ABOVE, WE UPHOLD THE ORDER OF TH E CIT(A) IN THIS REGARD AND REJECT GROUND NO. 3 OF THE REVENUES APPEAL. GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 48 65 THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT SHOW ANY GOOD REASON AS TO WHY THE ABOVE QUOTED ORDER OF THE TRIBUNAL SHOULD NOT BE FOLLOWED IN THE YEAR UNDER APPEAL. THEREFORE, RESPECTFULLY FOLL OWING THE ABOVE ORDER OF THE TRIBUNAL WE DISMISS THE GROUND OF APPEAL OF THE R EVENUE. 66 GROUND NO.4 IN REVENUES APPEAL FOR ASST.YEAR 199 4-95 AND GROUND NO. 2 IN ASST. YEAR 1996-97 ARE DIRECTED AGAINST DELETING THE DISALLOWANCE OF DEDUCTION OF RS.17,33,53,821/- AND RS.21,52,93,964/ - RESPECTIVELY U/S. 80I OF THE I.T.ACT. 67 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OF FICER OBSERVED THAT THE ASSESSEES CLAIM FOR DEDUCTION U/S. 80I IN RESP ECT OF BUCKET WHEEL EXTRACTION (BWE) PROJECT WAS CONSIDERED AND DISCUSSED IN DETAIL IN THE ASSESSMENT ORDER FOR ASST. YEAR1991-92. AFTER CONSIDE RING ALL FACTS AND EXPLANATIONS, THE CLAIM WAS NOT FUND ADMISSIBLE. THE FINDINGS OF THE ASSESSING OFFICER WERE CONFIRMED BY CIT(A) ALSO. THEREAFTER I N ALL SUBSEQUENT YEARS, THE DEDUCTION WAS NOT ALLOWED. AS THERE IS NO CHANGE IN TH E FACTS DURING THIS YEAR, THE ASSESSING OFFICER DID NOT ALLOW DEDUCTION U/S. 80-I FOLLOWING THE REASONS DISCUSSED IN THE EARLIER YEARS ORDERS. WITHOUT PREJU DICE TO THIS, THE ASSESSING OFFICER FURTHER OBSERVES THAT DEDUCTION U/S. 80-I IS TO BE COMPUTED IN RESPECT OF PROFITS DERIVED FROM INDUSTRIAL UNDERTAKING WHIC H IS CARRYING ON MANUFACTURING OR PRODUCTION ACTIVITIES AND THE INCOME OF THE NATURE MENTIONED IN PARA 13.2 OF THE ASSESSMENT ORDER CANNO T BE CONSIDERED AS DIRECTLY DERIVED FROM THE ALLEGED MANUFACTURING OR PR ODUCTION ACTIVITIES BY THE GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 49 BWE PROJECT. ASSESSING OFFICER, THEREFORE, CONCLUDES THAT EVEN IF IT IS FOUND TO BE ELIGIBLE FOR DEDUCTION U/S.80-I AT LATER STAGE, THE AMOUNT OF DEDUCTION SHALL BE REDUCED BY RS.7,61,076, (25% OF RS.30,44,304). ACCORDING TO THE ASSESSING OFFICER, THE ACTUAL AMOUNT ADMISSIBLE WILL BE ONLY RS. 17,33,53,821 AS AGAINST THE CLAIM OF RS.17,41,14,897. 68 FOR THE SAME REASON, IN ASST.YEAR 1996-97 THE ASSES SING OFFICER DISALLOWED THE DEDUCTION U/S. 80I FOR RS.21,52,93,96 4/- TO THE ASSESSEE. 69 IN APPEAL, THE LD. CIT(A) FOLLOWING THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE FOR ASST. YEAR 1989-90 IN ITA NO. 2270/AHD /1999 ALLOWED THE CLAIM FOR DEDUCTION TO THE ASSESSEE IN BOTH THE YEARS UNDER CO NSIDERATION. 70. THE LD. AUTHROISED REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE IN A SSESSEES OWN CASE BY ORDER OF A TRIBUNAL IN THE ASST. YEAR 1991-92 IN ITA NO. 1 209/AHD/1995. THE LD. DEPARTMENTAL REPRESENTATIVE ALSO AGREED WITH THE SUBMISS IONS OF THE LEARNED AUTHORIZED REPRESENTATIVE OF THE ASSESSEE. 71 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDE R OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECORD, WE FIND THAT THE TRIBUNAL WHILE DECIDING THE ISSUE IN ASST.YEAR 1991-92 HAS OBS ERVED AS UNDER: 18. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE P ARTIES. ONE OF THE REQUIREMENTS OF SECTION 80I(A) THAT ANY PROFITS AN D GAINS DERIVED BY ASSESSEE FROM AND INDUSTRIAL UNDERTAKING WHICH BEGI NS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS. IN ACCOR DANCE WITH ABOVE DECISION OF ITAT EXTRACTION OF MINERAL FROM EARTH M AY NOT TANTAMOUNT TO MANUFACTURE BUT IT IS DEFINITELY PR ODUCTION OF AN GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 50 ARTICLE OR THING. THE RELEVANT OBSERVATIONS OF ITA T ARE REPRODUCED AS BELOW:- 6.7 IN THE CASE OF CIT VS. SINGARANI COLLERY CO. LTD. 221 ITR 48 THEIR LORDSHIP HELD THAT EXTRACTION OF MINERAL F ROM EARTH AMOUNTS TO PRODUCTION OF MINERALS AND, THEREFORE, M ACHINERY EMPLOYED IN SUCH PRODUCTION WAS ENTITLED TO INVESTM ENT ALLOWANCE U/S. 32AOF THE IT ACT. AFTER CONSIDERING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF N C BUDHARA JA AND CO. (SUPRA) THEIR LORDSHIP OBSERVED AS UNDER:- THE EXPRESSION PRODUCE USE IN SECTION 32A OF TH E IT ACT, 1961, MUST BE UNDERSTOOD IN ITS NORMAL CONNOTATION AND ACCORDING TO COMMERCIAL USAGE. THE WORD PRODUCTION HAS A WIDER CONNOTATION THAN THE WORD MANUFACTURE. WHILE EVERY MANUFACTURE CAN BE CHARACTERIZED AS PRODUCTION, EVERY PRODUCTION NEED NO AMOUNT OR MANUFACTURE. THE ACTIVITY OF WINNING OR EXCAVATING THE COAL FROM THE MINES CAN BE APPLY DESCRIBED AS PRODUCTION ACTIVITY. THE EXPRESSION PRODUCTION OF MINERAL IS USED IN THE ALLIED PROVI SION OF THE (SECTION 35E) AND THIS IS A DEFINITE POINTER THAT PARLIAMENT EMPLOYED THE EXPRESSION PRODUCTION TO BE MINERALS EXTRACTED FROM UNDERNEATH THE SURFACE. THUS, EXTRACTION OF MINERAL FROM EARTH MAY NOT TAN TAMOUNT TO MANUFACTURE BUT IT IS DEFINITELY PRODUCTION OF AN ARTICLE OR THING AND CONDITIONS OF SECTION 32A ARE FULLY SATIS FIED. THE CLAIM U/S. 32A IN THE ORIGINAL ASSESSMENT WAS ORIGI NALLY ALLOWED. 19. THE DECISIONS CITED BY THE LD. DR ARE DISTINGUI SHABLE ON FACTS AS THESE DECISIONS PERTAIN TO MANUFACTURE. WE FIND THAT T HE ISSUE IS COVERED BY THE ABOVE DECISION OF ITAT AS LANGUAGE OF SECTIO N 3AA(2(III) AND 80I(1A)(1) ARE IDENTICAL I.E. PRODUCTION OF ANY AR TICLE OR THING. WE RESPECTFULLY FOLLOW THE DECISION. IN VIEW OF THAT W E FIND THAT CONDITION OF SECTION 80I, THE AO IS DIRECTED ACCORDINGLY. GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 51 72 THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT SHOW ANY GOOD REASON AS TO WHY THE ABOVE QUOTED ORDER OF THE TRIBUNAL SHOULD NOT BE FOLLOWED IN THE YEAR UNDER APPEAL. THEREFORE, RESPECTFULLY FOLL OWING THE ABOVE ORDER OF THE TRIBUNAL WE DISMISS THE GROUND OF APPEAL OF THE R EVENUE. 73 GROUND NO. 1 OF THE IN THE REVENUES APPEAL IN ASS ESSMENT YEAR 1997- 98 IS DIRECTED AGAINST DISALLOWANCE OF INTEREST EXPENS E OUT OF PROJECT EXPENSE OF RS.44,65,125/- . 74 THE LEARNED ASSESSING OFFICER DISALLOWED PROJECT EXPENSES OF MATA-NO MATH LIGNITE PROJECT OF RS.44,65,125/- AS ASSESSEE HA S TREATED THE EXPENDITURE AS PRE-OPERATIVE EXPENDITURE IN ITS BOOKS OF ACCOUNT A ND CLAIMED DEDUCTION AS REVENUE EXPENDITURE IN THE STATEMENT OF TOTAL INCOME AS IN LAST YEAR. THE LEARNED ASSESSING OFFICER DISALLOWED THE SAME TREATING AS CAPITAL EXPENDITURE. 75 IN APPEAL LEARNED COMMISSIONER OF INCOME TAX(APP EALS) OBSERVED AS UNDER :- 3. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS MADE. THE ISSUE IN THIS YEAR IS SIMILAR TO THE ISSUE AS IN ASSESSMENT YEAR 1994-95. FOR THE DETAILED REASONING G IVEN IN THE APPEAL ORDER NO.CIT (A) XIII/DCSR9/35/97-98 DATED 29 .9.2000 IN THE APPELLANTS CASE FOR A.Y. 1994-95, I DIRECT THE ASSES SING OFFICER TO ALLOW THE INTEREST EXPENSES DEDUCTED UNDER THE HEAD PROJECT EX PENSES UNDER SECTION 36(1)(III) 0F THE ACT. HOWEVER, AS REGARDS THE OTHER EXPENSES, THE DECISION TAKEN BY THE ASSESSING OFFICER TREATING THEM AS CAPITAL EXPENDITURE IS HEREBY CONFIRMED. GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 52 4.DURING THE COURSE OF APPEAL HEARING, THE AUTHORIS ED REPRESENTATIVE FURTHER SUBMITS THAT IN THE STATEMENT OF TOTAL INCOME FOR A .Y. 1997-98, THE APPELLANT HAD CLAIMED DEDUCTION OF RS.26,59,288/- UNDER THE HEAD PROJECT EXPENSES WHEREAS THE ASSESSING OFFICER HAS MA DE ADDITION UNDER THIS HEAD OF RS.44,65,125. WITHOUT PREJUDICE TO O THER SUBMISSIONS, THE APPELLANT HAD FILED AN APPLICATION BE FORE THE ASSESSING OFFICER UNDER SECTION 154 OF THE ACT DATED 18.3.2000 P OINTING OUT THIS MISTAKE AND SUBMITTING THAT MAXIMUM DISALLOWANCE UNDER TH IS HEAD CANNOT BE MORE THAN WHAT IS CLAIMED AS DEDUCTION. DURIN G APPEAL PROCEEDINGS, ALTERNATIVELY IT IS PRAYED TO RESTRICT THE DISALLOWANCE AT RS.26,59,288 INSTEAD OF RS.44,65,125. 5.IN VIEW OF THE ABOVE SUBMISSIONS OF THE APPELLANT, I DIRECT THE ASSESSING OFFICER TO VERIFY THE CLAIM OF THE APPELLAN T THAT THE CORRECT DISALLOWANCE AS PER THE ASSESSMENT ORDER SHOULD HAVE BEEN OF RS.26,59,288 AND NOT OF RS.44,65,125 AND TO ALLOW AP PROPRIATE RELIEF TO THE ASSESSEE IF FOUND ADMISSIBLE IN ADDITION TO THE RE LIEF ALLOWED AS REFERRED ABOVE ON ACCOUNT OF INTEREST EXPENSES DEBITED UNDER THE HEAD PROJECT EXPENSES UNDER SECTION 36(1)(III) OF THE ACT. 76 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECOR D. THE SUBMISSIONS IN RESPECT OF THIS GROUND OF APPEAL AS MADE BY THE ASSE SSEE BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) WAS AS UNDER :- 4.DURING THE COURSE OF APPEAL HEARING, THE AUTHORI SED REPRESENTATIVE FURTHER SUBMITS THAT IN THE STATEMENT OF TOTAL INCOME FOR A .Y. 1997-98, THE APPELLANT HAD CLAIMED DEDUCTION OF RS.26,59,288/- UNDER THE HEAD PROJECT EXPENSES WHEREAS THE ASSESSING OFFICER HAS MA DE ADDITION UNDER THIS HEAD OF RS.44,65,125. WITHOUT PREJUDICE TO O THER GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 53 SUBMISSIONS, THE APPELLANT HAD FILED AN APPLICATION BE FORE THE ASSESSING OFFICER UNDER SECTION 154 OF THE ACT DATED 18.3.2000 P OINTING OUT THIS MISTAKE AND SUBMITTING THAT MAXIMUM DISALLOWANCE UNDER TH IS HEAD CANNOT BE MORE THAN WHAT IS CLAIMED AS DEDUCTION. DURIN G APPEAL PROCEEDINGS, ALTERNATIVELY IT IS PRAYED TO RESTRICT THE DISALLOWANCE AT RS.26,59,288 INSTEAD OF RS.44,65,125. 77 THE REVENUE COULD NOT MAKE OUT ANY GENUINE CASE BE FORE US AGAINST THE ABOVE DIRECTIONS OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). THEREFORE THE GROUND OF APPEAL OF THE REVENUE IS DIS MISSED. 78 GROUND NO. 2 IN REVENUES APPEAL IN ASST.YEAR 19 97-98 IS DIRECTED AGAINST DELETING EXCESS DEPRECIATION ON LEASED OUT BU SES AMOUNTING TO RS.2,49,51,419/-. 79 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CLA IMED DEPRECIATION AT THE RATE 40% ON MOTOR BUSES LEASED OUT TO GUJARAT STATE ROAD TRANSPORT CORPORATION. THE ASSESSING OFFICER ALLOWED THE DEPR ECIATION @ 25% ONLY ON THE GROUND THAT THE BUSES WERE NOT USED BY THE ASSESSEE IN RUNNING THEM ON HIRE. IT WAS SUBMITTED BEFORE THE ASSESSING OFFICER THA T IT IS SUFFICIENT IF THE VEHICLE IS USED IN A BUSINESS OF RUNNING ON HIRE AN D NOWHERE IT IS SUBMITTED THAT SUCH BUSINESS SHOULD BE CARRIED ON BY THE ASSESS EE. THE APPELLANT HAD RELIED ON THE DECISION OF HONBLE ITAT, DELHI BENCH IN THE CASE OF ORIENTAL LEASING COMPANY VS. DCIT 55 TTJ 294 DURING THE ASSES SMENT PROCEEDINGS. BUT, THE ASSESSING OFFICER DID NOT AGREE WITH THE SUBMIS SIONS MADE. THE ASSESSING OFFICER OBSERVES THAT IN THE CASE DECIDED B Y THE HONBLE ITAT, DELHI BENCH, THE TRANSACTION WAS BETWEEN MANUFACTURER AND LES SOR. THE GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 54 MANUFACTURER MANUFACTURED ALL TRUCKS ITSELF. THEREFORE , THE ASSESSING OFFICER HELD THAT THE FACTS WERE TOTALLY DIFFERENT, AND CANNOT BE APPLIED TO THIS CASE. THE ASSESSING OFFICER FURTHER OBSERVES THAT SECTION 32( 1) SPEAKS ONLY ASSETS ACQUIRED AND USED BY ASSESSEE. FURTHER, RULE 5 SPECI FICALLY STATES THAT THE ASSETS SHOULD BE USED FOR THE PURPOSE OF THE BUSINESS OR PROFESSION OF THE ASSESSEE AT ANY TIME DURING THE YEAR. AS PER SUB-SEC TION 2(I), ITEM III OF APPENDIX-I TO THE IT RULES, 1962, HIGHER RATE OF DEPRE CIATION OF 40% IS ALLOWED ON MOTOR BUSES, MOTOR LORRIES AND MOTOR TAXIES USED I N A BUSINESS RUNNING THEM ON HIRE. THE ASSESSING OFFICER ALSO REFERRED TO CBDT CIRCULAR NO. 652 DATED 14.6.1993. THE ASSESSING OFFICER HELD THAT IT IS NOT SUFFICIENT THAT THE BUSES SHOULD BE USED IN RUNNING THEM ON HIRE BY ANYB ODY ELSE, BUT IT SHOULD BE USED BY THE ASSESSEE ITSELF IN ITS BUSINESS OF RUN NING THEM ON HIRE SO AS TO ENTITLE IT FOR DEPRECIATION AT HIGHER RATE OF40% THAN THE R ATE OF 25%. THE ASSESSEE IS NOT IN THE BUSINESS OF HIRING OF MOTOR BUS ES. THE ASSESSEE HAS NOT SHOWN ANY INCOME FROM PLYING THESE VEHICLES. THE AS SESSING OFFICER, ACCORDINGLY, DISALLOWED THE EXCESS DEPRECIATION AT 15 % ON THE WDV OF RS.16,63,42,796. 80 IN APPEAL, THE LD. CIT(A) ALLOWED THE CLAIM FOR DE PRECIATION AT HIGHER RATE OF 40% TO THE ASSESSEE OBSERVING THAT THERE WOULD BE MORE WEAR AND TARE WHERE THE VEHICLES ARE USED IN A BUSINESS OF RUNNIN G IT ON HIRE. THE LD. CIT(A) RELYING ON THE DECISION OF TRIBUNAL CITED BEFORE HIM ALLOWED THE CLAIM FOR DEPRECIATION ON BUSES LEASED OUT TO GSRTC @ 40% IN PLA CE OF 25% ALLOWED BY THE ASSESSING OFFICER. 81 THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESSE E AT THE TIME OF THE GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 55 HEARING RELIED ON THE DECISION OF THE HONBLE MADRA S HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. ANNAMALAI FINANCE LT D. : (2005) 275 ITR 451 (MAD) WHEREIN IT WAS HELD THAT L EASING OF VEHICLES BEING ONE OF THE MODES OF DOING BUSINESS BY ASSESSEE AND INCO ME THEREFROM ACCEPTED AS BUSINESS INCOME, ASSESSEE WAS ENTITLED TO HIGHER RA TE OF DEPRECIATION UNDER ITEM III(2)(II) OF PART A OF APPENDIX I TO THE IT RULES, 1962. 82 HE ALSO RELIED ON THE DECISION OF HOBLE DELHI H IGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. BANSAL CREDITS LTD. & ORS. (2003) 259 ITR 69 (DEL) WHEREIN IT WAS HELD THAT A SSESSEE ENGAGED IN THE BUSINESS OF LEASING OUT VEHICLES WAS ENTITLED TO DEPRECIATION @ 40 PER CENT. OR 50 PER CENT. IN RESP ECT OF THE COMMERCIAL VEHICLES OWNED BY IT BUT LEASED OUT TO T HIRD PARTIES SUBJECT TO VERIFICATION WHETHER THE LEASED OUT VEHI CLES HAD BEEN ACTUALLY USED BY THE LESSEES IN THE BUSINESS OF HIR E. 83. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECOR D. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OBSERVING THAT AS SESSEE HAS LET OUT BUSES TO GUJARAT STATE ROAD TRANSPORT CORPORATION WHICH WERE USED BY THEM FOR HIRING BUSINESS OPINED THAT LEARNED ASSESSING OFF ICER WAS NOT JUSTIFIED IN ALLOWING DEPRECIATION @ 25% AND THE ASSESSEE WAS ELI GIBLE FOR HIGHER RATE OF DEPRECIATION OF 40% . WE FIND THAT THE VIEW OF THE LEARN ED COMMISSIONER OF INCOME TAX(APPEALS) FINDS SUPPORT FROM THE DECISION I N THE CASE OF COMMISSIONER OF INCOME TAX VS. ANNAMALAI FINANCE LT D. : (2005) 275 ITR 451 (MAD) AND COMMISSIONER OF INCOME TAX VS. BANSAL CREDITS LTD. & ORS. (2003) 259 ITR 69 (DEL). NO ERROR IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WAS POINTED OUT BY THE REVENUE BEFORE US. THUS WE CONFI RM THE ORDER OF GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 56 THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AND DISMISS THE GROUND OF APPEAL OF THE REVENUE. 84. GROUND NO. 3 IN REVENUES APPEAL FOR ASST. YEAR 1997-98 RELATES TO DELETING THE DISALLOWANCE OF DEPRECIATION ON MULTI META L PROJECT OF RS.5 LACS. 85 AT THE TIME OF HEARING THE LEARNED DEPARTMENTAL REPRE SENTATIVE DID NOT MAKE ANY SUBMISSION ON THIS GROUND OF APPEAL. TH EREFORE, THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED FOR WANT OF PROSE CUTION. 86 IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR ASST. YEARS 1988-89 IS ALLOWED AND FOR ASST. YEAR 1994-95, ASST. YEAR 1996-9 7 AND ASST. YEAR 1997-98 ARE PARTLY ALLOWED. THE APPEAL OF THE REVENUE FOR AS ST. YEAR 1988-89, ASST. YEAR 1994-95, ASST. YEAR 1996-97 ARE AND ASST. YEAR 1997-98 ARE DISMISSED. ORDER SIGNED, DATED PRONOUNCED IN THE COURT ON 31. 08.2009. SD/- SD/- ( T.K. SHARMA ) ( N.S. SAINI ) JUDICIAL MEMBER A CCOUNTANT MEMBER AHMEDABAD; DATED 31/08/2009 PARAS# COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)- 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. V/S. JCI T, SPL. R-9, ABAD ITA 908/AHD/1999,.89/AHD/2001,90/AHD/2001, 91/AHD/2001 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 . JCIT, SPL. R-9, ABAD V/S.GUJARAT MINERAL DEVELO PMENT CORPORATION LTD ITA 1031/AHD/1999, 2726/AHD/2000, 2727/AHD/2000, 2728/AHD/2000 ASST.YEARS 1988-89, 1994-95, 1996-97, 1997-98 57 BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD