Torrent Power Ltd., Ahmedabad V. The Jt.CIT.,Circle-8, Ahmedabad

ITA 922/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 72999 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 02-01-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 29-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: P L KUREEL
• Keywords: Capital asset; Depreciation; Business expenditure; Earning of tax free income; Tangible material; Revenue expenditure; Capital expenditure
• Section: 143(3); 14A; 37(1); 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T. A. NO. 955 & 922 /AHD/2011 (ASSESSMENT YEAR:2007-08) THE ACIT CIRCLE-8, AHMEDABAD V/S TORRENT POWER LTD., TORRENT HOUSE, NR. DINESH HALL, OFF ASHRAM RAOD, AHMEDABAD (APPELLANT) (RESPONDENT) TORRENT POWER LTD., TORRENT HOUSE, NR. DINESH HALL, OFF ASHRAM RAOD, AHMEDABAD V/S THE JT CIT RANGE-8, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAACT0294J APPELLANT BY : SHRI P.L. KUREEL, SR. D.R. RESPONDENT BY : SHRI VARTIK CHOKSHI ( )/ ORDER DATE OF HEARING : 02-01-201 4 DATE OF PRONOUNCEMENT : 21 -02-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THESE TWO APPEALS, ONE FILED BY THE ASSESSEE AND TH E OTHER FILED BY THE REVENUE, ARE AGAINST THE ORDER OF CIT(A)-XIV, AHMED ABAD DATED 18.01.2011 FOR A.Y. 2007-08. ITA NOS. 955 & 922/AHD/2011 . A.Y. 2007- 08 2 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF GE NERATION, TRANSMISSION AND DISTRIBUTION OF ELECTRICITY. ASSES SEE ELECTRONICALLY FILED ITS RETURN OF INCOME FOR A.Y. 07-08 ON 29.10.2007 D ECLARING TOTAL INCOME OF RS. 245,36,71,970/-. THE CASE WAS SELECTED FOR S CRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ORDER DATED 31.12.2009 AND THE TOTAL INCOME WAS DETERMINED AT R S. 250,38,02,010/-. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED TH E MATTER BEFORE CIT(A). CIT(A) VIDE ORDER DATED 18.01.2011 GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER OF CIT(A ), THE REVENUE AS WELL AS ASSESSEE ARE NOW IN APPEAL BEFORE US. 4. THE GROUNDS RAISED BY THE ASSESSEE READS AS UNDER:- 1. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE OF ADMINISTRATIVE EXPENSES OF RS 32,74 ,850/- U/S 14A OF THE IT ACT BY APPLYING FORMULA OF 0.5% OF THE INVESTMENT AS DONE BY THE LD . A.O. 2. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE AP PELLANT'S CASE, THE LEARNED CIT (A) ERRED IN REJECTING THE APPELLANT'S CLAIM THAT THE LEASEHOLD RIGHTS FOR 99 YEARS WAS A INTANGIBLE ASSET ENVISAGED IN SECTION 32 OF THE IT. ACT AND CONSEQUE NTLY ERRED IN NOT ACCEPTING THE APPELLANT'S CLAIM OF DEPRECIATION THEREON. 3. WITHOUT PREJUDICE TO THE ABOVE THE LD. CIT (A) OUGH T TO HAVE ALLOWED A DEDUCTION EQUAL TO SOME ATTRIBUTABLE TO RELEVANT PREVIOUS YEAR (BEING TOTAL PREMIUM PAID DIVIDED BY 99 YEARS) BECAUSE THE LEASE IS OPERATIVE FOR THE PERIOD OF 99 YEARS. 4. WITHOUT PREJUDICE TO THE ABOVE THE LD. CIT (A) ERRE D IN NOT ALLOWING THE EXPENDITURE U\S 37(1) OF THE IT ACT AS REVENUE EXPENDITURE BY NOT FOLLOWING THE JUDGMENT OF GUJARAT HIGH COURT IN THE CASE OF SUN PHARMACEUTICALS LTD. (227 CTR 206). 5. THE GROUND RAISED BY THE REVENUE READS AS UNDER:- 1. THE LD. CIT(A)-XIV, AHMEDABAD ERRED IN LAW AND ON F ACTS IN ALLOWING EXPENDITURE AMOUNTING TO RS. 23,81,088/- MADE BY THE ASSESSING OFFICER OUT O F TOTAL ADDITION OF RS. 56,55,938/-. ITA NOS. 955 & 922/AHD/2011 . A.Y. 2007- 08 3 2. THE LD. CIT(A) HAS ERRED AND ON FACTS IN DELETING T HE DISALLOWANCE OF RS. 12,28,579/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF FEES PAID FOR STUDY RELATING TO NEW PROJECT AT BHUVANESHWAR TO ERNST AND YOUNG. 6. WE NOW FIRST TAKE UP ASSESSEES APPEAL (ITA NO. 922 /AHD/2011) 1 ST GROUND IS WITH RESPECT TO DISALLOWANCE UNDER SECTI ON 14A. 7. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O. N OTICED THAT ASSESSEE HAD SHOWN EXEMPT INCOME FROM TAX FREE BONDS AND DIV IDENDS AGGREGATING TO RS. 6,26,76,144/-. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY DISALLOWANCE UNDER SECTION 14A OF THE ACT NOT B E MADE IN RESPONSE TO WHICH ASSESSEE INTERALIA SUBMITTED THAT THERE WA S SUFFICIENT INTEREST FREE FUNDS AVAILABLE WITH IT AND THEREFORE NO INTER EST BEARING FUNDS HAVE BEEN USED FOR MAKING INVESTMENTS. IT WAS FURTHER SU BMITTED THAT NO SPECIFIC EFFORTS WERE MADE BY THE COMPANY FOR EARNI NG EXEMPT INCOME AND THEREFORE NO PART OF ADMINISTRATIVE EXPENSES CA N BE CONSIDERED TO HAVE BEEN INCURRED FOR THE PURPOSE OF EARNING EXEMP T INCOME. THE SUBMISSIONS OF THE ASSESSEE WAS NOT FOUND ACCEPTABL E TO THE A.O. FOR THE REASON THAT NO SEPARATE ACCOUNTS WITH REGARD TO EAR NING OF EXEMPT INCOME WAS MAINTAINED BY THE ASSESSEE. A.O. WAS FURTHER OF THE VIEW THAT THE DIVERSION OF INTEREST FREE FUNDS CREATE THE NEED FO R BORROWED FUNDS AND THEREFORE HAD THE INTEREST FREE FUNDS NOT BEEN DIVE RTED FROM MAKING INVESTMENTS, THE NEED FOR INTEREST BEARING FUNDS WO ULD HAVE BEEN LESSER. HE ALSO NOTED THAT THE MANAGEMENT AND MAINTENANCE O F INVESTMENTS ALSO ENTAIL CERTAIN ADMINISTRATIVE EXPENSES LIKE TELEPHO NE ETC. AND THEREFORE THE SUBMISSION OF THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED FOR ITA NOS. 955 & 922/AHD/2011 . A.Y. 2007- 08 4 EARNING EXEMPT INCOME WAS NOT FOUND ACCEPTABLE. HE ALSO PLACED RELIANCE ON THE SPECIAL BENCH DECISION OF TRIBUNAL IN THE CA SE OF CHEMINVEST LTD. VS. ITO. HE THEREAFTER WORKED THE DISALLOWANCE UNDE R SECTION 14A OF THE ACT BY APPLYING THE METHOD PRESCRIBED UNDER RULE 8D OF THE INCOME TAX RULES AND DETERMINED THE DISALLOWANCE U/S. 14A AT R S. 56,55,938/-. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED TH E MATTER BEFORE CIT(A). CIT(A) AFTER CONSIDERING THE SUBMISSIONS O F THE ASSESSEE GRANTED PARTIAL RELIEF TO THE ASSESSEE BY HOLDING A S UNDER:- 3.2 I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE ABOVE CONTENTIONS, IT IS NOTICED THAT THE APPELLAN T HAD MADE INVESTMENT OUT OF CONTINGENCY RESERVES AS STATUTORILY REQUIRED AND FURTHER IT HAD AVAILABILITY OF SHAREHOLDERS FUND OF RS.2607 CRORES WHICH IS MUCH MORE THAN THE INVESTMENT, INCOME FROM WHICH IS EXEMPT. THUS, FOLLOWING RATIO OF DECI SION OF BOMBAY H.C. IN THE CASE OF RELIANCE UTILITY LTD AND DECISION OF ITAT AHMEDABAD IN THE CASE OF H IPOLIN LTD. REFERRED TO EARLIER, THE DISALLOWANCE OF INTEREST OF RS.23,81,088/- MADE U/S 14A IS DELET ED. THUS, THE APPELLANT GETS RELIEF OF RS.23,81,088 /-. SO FAR AS, DISALLOWANCE OF ADMINISTRATIVE EXPENSES OF RS.32,74,850/- IS CONCERNED THE APPELLANT HAS ARGUED THAT NO SPECIFIC EXPENDITURE IS INCURRED FOR SUCH INVESTMENT. IT IS HELD THAT A PART OF THE EXPENDITURE OUT OF ADMINISTRATIVE ACTIVITY IS REQUI RED TO BE CONSIDERED FOR THE PURPOSE OF SECTION 14A . THE ASSESSING OFFICER HAS THEREFORE, RIGHTLY DISALL OWED THE AMOUNT OF RS. 32,74,850/- WHICH IS QUITE JUSTIFIED AND ACCORDINGLY, THE DISALLOWANCE TO THIS EXTENT MADE U/S. 14A IS CONFIRMED. 8. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS N OW IN APPEAL BEFORE US. BEFORE US, THE LD. A.R. SUBMITTED THAT THE ISSU E WITH RESPECT TO DISALLOWANCE UNDER 14A OF THE ACT IS COVERED IN ASS ESSEES FAVOUR BY THE DECISION OF HON. TRIBUNAL IN ASSESSEES OWN CASE FO R A.Y. 06-07 IN ITA NO. 1865/AHD/2010 ORDER DATED 28.12.2012. HE PLACED ON RECORD AT PAGE 56 TO 72 OF THE PAPER BOOK THE COPY OF THE AFO RESAID ORDER AND FURTHER SUBMITTED THAT SINCE THE FACTS OF THE CASE THE YEAR UNDER APPEAL ARE IDENTICAL TO THAT OF A.Y. 06-07, THE DISALLOWANCE M ADE UNDER SECTION 14A BE DELETED. ITA NOS. 955 & 922/AHD/2011 . A.Y. 2007- 08 5 9. THE LD. D.R. ON THE OTHER HAND SUBMITTED THE DISALL OWANCE UNDER SECTION 14A IS WARRANTED EVEN IF THERE IS NO EXEMPT INCOME. HE FURTHER SUBMITTED THAT THE ONUS WAS ON THE ASSESSEE TO PROV E THAT IT HAS NOT INCURRED ANY EXPENDITURE RELATING TO INCOME NOT FOR MING PART OF TOTAL INCOME. HE FURTHER SUBMITTED EVEN IN THE CASE OF GO DREJ BOYCE (2010) 328 ITR 81 (BOM.)THE HONBLE HIGH COURT HAS HELD TH AT A.O. WAS DUTY BOUND TO COMPUTE THE DISALLOWANCE BY APPLYING A REA SONABLE METHOD HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE. HE THEREFORE SUBMITTED THAT THE A.O. WAS JUSTIFIED IN MAKING THE DISALLOWANCE. HE ALSO PLACED RELIANCE ON THE DECISION IN THE CASE OF ACIT VS. JOE MARCENINHO MATHIAS (2013) 143 ITD 132 (PANJI) AND THE DECISION IN THE CASE OF STREAM INTERNATIONAL SERVICES PVT. LTD. VS. ACIT (2 013) 141 ITD 492 (MUM). HE THUS SUPPORTED THE ORDER OF A.O. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT ASSESSEE HAS EARNED T AX FREE INCOME TO THE EXTENT OF RS. 6.27 CRORE. IT IS ASSESSEES SUBMISSI ON THAT FOR EARNING SUCH HUGE INCOME, NO SPECIFIC EFFORTS WERE MADE BY THE A SSESSEE AND THEREFORE NO PART OF ADMINISTRATIVE EXPENSES CAN BE CONSIDERED FOR DISALLOWANCE U/S. 14A. ON THE OTHER HAND, A.O. HAS NOTED THAT MANAGEMENT OF INVESTMENTS ENTAILS CERTAIN ADMINISTR ATIVE EXPENSES AND THEREAFTER APPLYING THE FORMULA PRESCRIBED UNDER RU LE 8D OF THE I.T. RULES HAS WORKED OUT THE DISALLOWANCE U/S. 14A. HO NBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MANUFACTURING COM PANY LTD. VS. DCIT (SUPRA) HAS HELD THAT THOUGH RULE 8D IS APPLIC ABLE WITH EFFECT FROM A.Y. 08-09 BUT IN THE YEARS WHEN THE PROVISIONS OF RULE 8D WERE NOT APPLICABLE, THE A.O. WOULD BE DUTY BOUND TO COMPUTE THE EXPENDITURE OF ITA NOS. 955 & 922/AHD/2011 . A.Y. 2007- 08 6 DISALLOWANCE BY THE APPLYING A REASONABLE METHOD. IT IS ALSO A FACT THAT IN THE ASSESSEES OWN CASE FOR A.Y.06-07, THE CO-OR DINATE BENCH OF TRIBUNAL HAS DELETED THE DISALLOWANCE. THE YEAR UN DER APPEAL BEFORE US IS A.Y. 07-08 AND THEREFORE AS PER THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE (SUPRA) THE PROVI SIONS OF SECTION RULE 8D ARE NOT APPLICABLE TO THE YEAR UNDER CONSIDERATI ON. BEFORE US THE ASSESSEE HAS NOT PLACED ANY MATERIAL TO DEMONSTRATE THE NUMBER OF TRANSACTIONS AND THE DETAILS OF RECEIPT OF EXEMPT I NCOME. THE ASSESSEE HAS ALSO NOT BEEN ABLE TO DEMONSTRATE THAT NO ADMIN ISTRATIVE EXPENSES AT ALL HAVE BEEN INCURRED FOR EARNING THE EXEMPT INCOM E TO THE EXTENT OF RS. 6.27 CRORE. WE ALSO FIND CIT(A) WHILE DELETING THE DISALLOWANCE TO THE EXTENT OF RS. 32.74 LACS HAS NOT GIVEN ANY DETAILED FINDING BUT BY PASSING A VERY CRYPTIC ORDER HAS SUMMARILY UPHELD THE DISAL LOWANCE IT IS A SETTLED LAW THAT THE PRINCIPLE OF RES JUDICATA IS NOT APPLI CABLE IN INCOME TAX MATTERS AND EACH ASSESSMENT YEAR IS SEPARATE UNIT O F ASSESSSMENT. CONSIDERING THE TOTALITY OF THE FACTS, WE ARE OF TH E VIEW THAT IN THE INTEREST OF JUSTICE AND FAIR PLAY THE ENDS OF JUSTICE SHALL BE MET IF DISALLOWANCE IS RESTRICTED TO A SUM OF RS. 10 LACS INSTEAD OF RS. 5 6,55,938/- MADE BY THE A.O AND WHICH WAS RESTRICTED TO RS. 32,74,850/-. W E THUS DIRECT ACCORDINGLY. THUS THIS GROUND OF THE ASSESSEE IS PA RTLY ALLOWED. GROUND NO. 2 AND 3 ARE WITH RESPECT TO DEPRECIATION ON LEASE HOLD LAND. 11. ON PERUSING THE DEPRECIATION STATEMENT, A.O. NOTICE D THAT ASSESSEE HAD CLAIMED DEPRECIATION ON LEASE HOLD VALUE OF LAND IN THE CASE OF ERSTWHILE TORRENT POWER (ABC) AND IN THE CASE OF TORRENT POWE R (SEC) WHICH ITA NOS. 955 & 922/AHD/2011 . A.Y. 2007- 08 7 WERE NOW MERGED WITH ASSESSEE. A.O. WAS OF THE VIEW THAT ASSESSEE IS NOT ENTITLED DEPRECIATION IN VIEW OF THE FOLLOWING FACTS. (I) THE LEASE IS FOR A PERIOD OF 99 YEARS, WHICH IS A SUBSTANTIAL PERIOD FOR HOLDING THE PROPERTY. (2) ONCE A LUMP SUM PAYMENT WAS MADE THEN THE ASSES SEE COMPANY IS REQUIRED TO PAY YEARLY RENT OF RS. 1 PER SQ. MTR. O NLY, WHICH IS NEGLIGIBLE BECAUSE FOR ALL INTENTS AND PURPOSES, THE ASSESSEE COMPANY HAD BECOME THE OWNER SO NATURALLY NOT TO PAY ANY RENT FOR A PR OPERTY POSSESSED IN THE CAPACITY AS GOOD AS AN OWNER. (3) THE ASSESSEE HAS NEITHER MADE PAYMENT NOR EXECU TED THE LESE DEED IN THE RELEVANT PERIOD. (4) THE ASSESSEE HAS ACQUIRED ENDURING ADVANTAGE FO R A LONG PERIOD OF 99 YEARS WHICH IS ALSO IN A WAY A PERPETUAL RIGHT CONF ERRED ON THE ASSESSEE DUE TO THE PAYMENT OF LUMP SUM AMOUNT AS PREMIUM. (5) THE PROPERTY WAS ACQUIRED FOR ALL INTENTS AND P URPOSES IN THE CAPACITY OF AN OWNER AND THE LUMP SUM PAYMENT WAS MADE AS A CONSIDERATION FOR ACQUIRING THE RIGHTS OVER THE PROPERTY. (6) SUCH PREMIUM IS CAPITAL IN NATURE AND THEREFORE DEPRECIATION IS NOT ALLOWABLE. (7) SUCH PREMIUM CANNOT BE SAID TO BE ANY OTHER BUS INESS OR COMMERCIAL RIGHTS AS MENTIONED IN PART-B OF DEPRECIATION RULE. (8) VARIOUS JUDICIAL AUTHORITIES ALSO TREAT THE EXP ENDITURE INCURRED ON ACQUISITION OF LEASEHOLD LAND AS CAPITAL EXPENDITUR E AND THEREFORE, THE ASSESSEE IS NOT ENTITLED FOR ANY DEPRECIATION ON TH E SAME. (9) THE FACTS REGARDING THE LEASE HOLD LAND ARE SIM ILAR IN BOTH THE CONSTITUENTS OF TORRENT POWER LTD. I.E. TPSEC AND T PAEC. WHILE THE ERSTWHILE CORPORATION (SMC), TORRENT POWER AEC LTD. (TPAEC) TOOK LAND ON LEASE FROM AHMEDABAD MUNICIPAL CORPORATION (AMC) ON SIMILAR TERMS. 12. HE ACCORDINGLY DISALLOWED THE CLAIM OF DEPRECIATION OF RS. 4,26,81,418/-. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED TH E MATTER BEFORE CIT(A). CIT(A) UPHELD THE ORDER OF A.O. BY HOLDING AS UNDER:- 4.2 I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIO NS OF THE APPELLANT. I AM NOT INCLINED TO ACCEPT THE CONTENTIONS OF THE APPELLANT SINCE THE A SSESSING OFFICER HAD ALREADY CONSIDERED ALL SUCH SUBMISSIONS INCLUDING THE RATIO OF VARIOUS CAS E LAWS RELIED UPON AND JUDICIOUSLY REBUTTED OR GIVEN REASONING FOR NON ACCEPTANCE OF SAME. SIMI LAR ISSUE IN THE APPELLANT'S OWN CASE (THE ERSTWHILE COMPANIES VIZ. TORRENT POWER SEC. LTD. (T PSEC) AND TORRENT POWER AEC LTD. ITA NOS. 955 & 922/AHD/2011 . A.Y. 2007- 08 8 (PAEC) NOW AMALGAMATED WITH APPELLANT COMPANY) THE HON. ITAT AHMEDABAD 'D' BENCH IN THE APPELLANT'S M/S TORRENT POWER SEC LTD. {INCOME TAX ACT NO. 1998/AHD/2006/ C.O. 254 /AHD/2006 (A/O INCOME TAX ACT 1998 /AHD/2006} CASE FOR A.Y. 02-03 VIDE ORDER DT: 23-12-08 HAD ALREADY CONSIDERED ISSUE IN RESPECT OF LEASEHOL D RIGHTS ON LAND SO ACQUIRED AND CLAIM OF DEPRECIATION AND HELD AGAINST THE APPELLANT. SINCE THE HON'BLE ITAT AHMEDABAD AFTER CONSIDERING ALL THE FACTS AND CIRCUMSTANCES INCLUDING THE RATIOS OF VARIOUS CASE LAWS HELD AGAINST THE AP PELLANT NOT ONLY IN RESPECT OF ALLOWABILITY OF DEPRECIATION BEING SUCH LEASEHOLDING IS NOT AN INTA NGIBLE ASSET, BUT ALSO HELD THAT PAYMENT OF SUCH AMOUNT IS CAPITAL IN NATURE AND AS SUCH COST O F LAND SO ACQUIRED ON WHICH NO DEPRECIATION IS PERMITTED AS PER IT. RULES AND PROVISION BESIDES TH E SAME IS CAPITAL EXPENDITURE. THE APPELLANT DURING THE COURSE OF APPELLATE PROCEEDING S PREFERRED THE APPLICABILITY OF THE RATIO OF HON. GUJARAT HIGH COURT'S DECISION IN THE CASE OF D Y. C1T VS. SUN PHARMACEUTICALS INDUSTRY LTD. (2009) 227 CTR (GUJ) 206, WHERE FOR A.Y. 94-95 , HON'BLE GUJARAT HIGH COURT ON THE FACTS SIMILAR TO THE APPELLANT HELD THAT ENTIRE PREMIUM P AID FOR ACQUISITION OF LAND ON LEASE OF 99 YEARS WITH MAKING PAYMENT OF ADVANCE RENT OF RS.48 CR. AND PAYING NOMINAL MONTHLY RENT OF RS.40 PER MONTH IS AN ALLOWABLE REVENUE EXPENDITURE . WITH DUE REGARD TO THE RATIO OF SUCH DECISION, THE APPELLANT'S CLAIM CANNOT BE ACCEPTED ON THE FOLLOWING REASONS:- A) THE APPELLANT HAS NOT CLAIMED ENTIRE EXPENDITURE AS REVENUE EXPENDITURE IN ITS RETURN OF INCOME. IN FACT, THE APPELLANT HAS CLAIMED THE P REMIUM PAID FOR LEASE HOLD LAND AS INTANGIBLE ASSET AND CLAIMED DEPRECIATION ON IT. FU RTHER, THE PREVIOUS YEAR IS NOT THE FIRST YEAR OF SUCH PAYMENT AND CLAIM AND THEREFORE, ALLOWABILITY OF ENTIRE PAYMENT AS REVENUE CANNOT BE CONSIDERED IN THE PRESENT ASST. Y EAR. B) THE CLAIM OF ENTIRE PREMIUM PAID AS REVENUE EXPENDI TURE WAS ONE OF THE GROUNDS OF APPEAL (GROUND NO.2) AS DISCUSSED EARLIER BEFORE TH E HON'BLE IT AT IN APPELLANT'S OWN CASE, BUT THE SAME WAS DISMISSED BY THE HON'BLE GUJ ARAT HIGH COURT (SUPRA) TO CLAIM IT IN ENTIRETY SINCE THE DECISION OF SUN PHARMACEUT ICAL (SUPRA) WAS NOT RELIED ON BY APPELLANT BEFORE THE HON'BLE IT AT. BUT, IN THE CAS E OF SUN PHARMACEUTICAL (SUPRA), THE HON. IT AT DECISION IN FAVOUR OF APPELLANT WAS DT 1 7-02-99, I.E., BEFORE THE HON'BIE ITAT'S ORDER IN APPELLANT'S CASE I.E. DT: 23-12-08 AND, THEREFORE, THE SAME WAS NEITHER RELIED UPON NOR MENTIONED BY THE APPELLANT AND EVEN IF MENTIONED, THE REFERENCE IS NOT AVAILABLE IN HON'BLE ITAT'S ORDER IN APPELLANT'S CA SE. IT IS A JUDICIAL DICTUM THAT THE LAW ASSIST THOSE WHO ARE VIGILANT AND NOT THOSE WHO SLEEP OVER THEIR RIGHT 'VIGILANTIBUS, NON DORMANTIBUS VENUIUNT'' C) THE CLAIM OF PREMIUM PAID FOR LEASEHOLD RIGHT OF LA ND THOUGH A GROUND OR THOUGH AN APPLICATION WITHOUT CLAIMING THE SAME IN RETURN OF INCOME IS ALSO AGAINST THE SETTLED PRINCIPLE OF CLAIM OF ANY SUCH DEDUCTION AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF - GOETZE (INDIA) LTD. VS. CIT (2006) 284 IT R 323 (SUPREME COURT). D) BY ACCEPTING THE APPELLANT'S CLAIM OF ALLOWABILITY OF ENTIRE EXPENDITURE AS REVENUE NOT ONLY REDUCE THE RETURNED INCOME OF PREVIOUS YEAR BU T ALSO EFFECT THE ASSESSED INCOME OF EARLIER YEAR AND, THEREFORE, HAS CASCADING EFFECT F OR WHICH THERE IS NO SCOPE OF RECTIFICATION IN THE ACT. RESPECTFULLY FOLLOWING THE HON'BLE ITAT'S ORDER IN THE APPELLANT'S CASE WHICH IS BINDING ALSO AND ALSO CONSIDERING THE DISTINGUISHAB LE FACTS AND REASONS FOR NON APPLICABILITY OF RATIO OF HON'BLE GUJARAT HIGH COUR T IN THE CASE OF SUN PHARMACEUTICALS (SUPRA), THE APPELLANT'S GROUND IS REJECTED. 13. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS N OW IN APPEAL BEFORE US. BEFORE US, AT THE OUTSET, THE LD. A.R. SUBMITTE D THAT ON IDENTICAL FACTS IN THE ASSESSEES OWN CASE FOR A.Y. 06-07, THE ISSU E HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. HE PLACED ON RECORD, THE CO PY OF THE AFORESAID ITA NOS. 955 & 922/AHD/2011 . A.Y. 2007- 08 9 ORDER BY TRIBUNAL IN ITA NO. 1865/AHD/2010 FOR A.Y. 06-07 AND POINTED TO THE RELEVANT PORTION ON PAGE 64 TO 70 OF THE PAPER BOOK. HE THEREFORE SUBMITTED THAT SINCE THE FACTS OF THE CAS E YEAR UNDER APPEAL ARE IDENTICAL TO THE FACTS OF THE CASE IN A.Y. 06-07, S IMILAR VIEW MAY BE TAKEN IN THE YEAR UNDER APPEAL. THE LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF A.O. AND CIT(A). 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE ISSUE OF DEPRECIATION LEASE HOLD L AND WAS RAISED BY ASSESSEE IN A.Y. 06-07 BEFORE THE TRIBUNAL. THE CO- ORDINATE BENCH OF TRIBUNAL DECIDED THE ISSUE IN ITA NO. 1865/AHD/2010 ORDER DATED 28.12.2012 BY HOLDING AS UNDER:- 17. BEFORE US AT THE OUTSET THE LD. A.R. SUBMITT ED THAT IN THE ASSESSEES OWN CASE IN THE CASE OF T ORRENT POWER LTD., (FORMERLY KNOWN AS TORRENT POWER SEC. LTD.) I N ITA NO. 293/A/2008 AND ITA NO. 771/AHD/2008 ON ID ENTICAL FACTS HONBLE ITAT HAS RESTORED THE MATTER TO THE F ILE OF A.O. HE THEREFORE SUBMITTED THAT FOLLOWING T HE AFORESAID DECISION, IN THE PRESENT APPEAL, SIMILAR DIRECTIONS MAY BE ISSUED AND THE MATTER MAY BE REMITTED TO TH E FILE OF A.O. 18. THE LD. D.R. FAIRLY AGREED THAT THE MATTER BE R EMITTED BACK TO THE FILE OF A.O. FOR VERIFICATION I N THE LIGHT OF DECISION IN THE CASE OF DCIT VS. SUN PHARMACEUTICAL S INDUSTRIES LTD. (SUPRA). 19. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT T HAT THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE PRESENT APPEAL ARE IDENTICAL TO THAT OF EARLIER YEARS. WE FIND T HAT ON AN IDENTICAL ISSUE IN ASSESSMENT YEAR 2004-05 , THE CO -ORDINATE BENCH OF TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 293/AHD/2008 AND 771/AHD/ 2008 HAS REMITTED THE MAT TER BACK TO THE FILE OF A.O. BY HOLDING AS UNDER:- '3. ON THIS SHORT SUBMISSION OF RESTORATION, LD. D. R, MR. KARTAR SINGH HAD NO OBJECTION BUT STATED THA T ONCE THE MATTER HAS BEEN DECIDED BY THE HON'BLE HIGH COURT, THOUGH THE A.O. HAD LEFT WITH A LIMITED SCOPE BUT S TILL HAS TO VERIFY THE CONNECTED FACTS TO APPLY THE RATIO LAID IN THE SAID PRECEDENT. THE SAID VERDICT IS AS FOLLO WS, REPRODUCED FROM THE HEAD NOTES (329ITR 479):- 'THE ASSESSEE-COMPANY CLAIMED DEDUCTION OF A SUM OF RS.48,02,616/- BEING PAYMENT TO GIDC. IT CONTENDED THAT THE LEASE RENT IN RESPECT OF THE LAND ALLOTTED TO T HE ASSESSEE-COMPANY BEING VERY NOMINAL I.E. AT RS.4 0 PER YEAR,THE PAYMENT WAS NOTHING ELSE BUT ADVANCE RENT AND HENCE , ALLOWABLE AS REVENUE EXPENDITURE. AFTER GOING THR OUGH THE LEASE AGREEMENT THE A.O. DISALLOWED THE CLAIM HOLDI NG THAT THE ASSESSEE HAD ACQUIRED A BENEFIT OF ENDU RING NATURE IN THE FORM OF USE OF LAND FOR A PERIOD OF 99 YEARS ; THAT THE LAND HAD BEEN TRANSFERRED THROUGH A REGI STERED DEED INVOLVING TRANSFER OF IMMOVABLE PROPERTY AND THUS, THE ASSESSEE HAD ACQUIRED A FIXED ASSET IN THE FORM OF A PARCEL OF LAND. THE TRIBUNAL HELD THAT THE LEASE RENT WAS DEDUCTIBLE. ON APPEAL TO THE HIGH COURT: HELD, DISMISSING THE APPEAL, THAT THE TRIBUNAL HAD FOUND THAT THE LAND IN QUESTION WAS NOT ACQUIRED BY THE ASSESSEE. MERELY BECAUSE THE DEED WAS REGISTERED TH E TRANSACTION IN QUESTION WOULD NOT ASSUME A DIFFER ENT CHARACTER. THE LEASE RENT WAS VERY NOMINAL. BY OBTA INING THE LAND ON LEASE THE CAPITAL STRUCTURE OF TH E ASSESSEE DID NOT UNDERGO ANY CHANGE. THE ASSESSEE ONLY ACQUI RED A FACILITY TO CARRY ON BUSINESS PROFITABLY BY P AYING NOMINAL LEASE RENT. THE LEASE RENT PAID BY THE ASSE SSEE TO GIDC WAS ALLOWABLE AS REVENUE EXPENDITURE,' 4. ON CAREFUL READING OF THE JUDGMENT OF SUN PHARMA CEUTICALS IND. LTD. (SUPRA), WE HAVE FOUND THAT THE ISSUE WAS CONFINED TO THE QUESTION OF DEDUCIBILITY OF THE LEA SE RENT. DISMISSING THE APPEAL OF THE REVENUE, THE COURT HAS SAID THAT THE TRIBUNAL HAD FOUND THAT THE LAND IN QUESTI ON WAS NOT ACQUIRED BY THE ASSESSEE. MERELY BECAUSE THE DEED WAS REGISTERED THE TRANSACTION IN QUESTION WOULD NO T ASSUME A DIFFERENT CHARACTER. BY OBTAINING THE LA ND ON LEASE THE ASSESSEE HAS ACQUIRED A FACILITY TO CARRY ON BU SINESS BY PAYING NOMINAL LEASE RENT, THEREFORE, LEA SE RENT PAID WAS HELD ALLOWABLE AS REVENUE EXPENDITURE. IN THIS CONTEXT WE MAY LIKE TO ADD THAT THOUGH THE RESPECTE D CO- ORDINATE BENCH VIDE AN ORDER DATED 21-1-2011 FOR A. Y. 2005-06 HAS RESTORED BOTH THE GROUNDS FOR RE-ADJ UDICATION ITA NOS. 955 & 922/AHD/2011 . A.Y. 2007- 08 10 BY A.O. BUT THE DISTINCTION BETWEEN THE TWO GROUNDS IS THAT GROUND NO. 1 IS ABOUT CLAIM OF DEPRECIATIO N ON LEASE HOLD RIGHTS AND GROUND NO.2 IS ABOUT THE CLAIM OF E XPENDITURE PERTAINING TO THE SAID LEASE. THE HON'BL E COURT HAS DECIDED ONLY IN RESPECT OF DEDUCTIBILITY OF LEASE R ENT BUT SINCE THE MATTER NOW STOOD RESTORED BACK TO THE A.O., THEREFORE, WE HEREBY DIRECT TO KEEP IN MIND THIS SU BTLE DISTINCTION AND RE-DECIDE AS PER LAW. IDENTICA LLY, THESE TWO GROUNDS MAY BE TREATED AS ALLOWED BUT FOR STATISTIC AL PURPOSES.' 20. SINCE IT IS AN UNDISPUTED FACT THAT THE FACTS I N THE PRESENT YEAR ARE SIMILAR TO THAT OF EARLIER Y EAR, WE ARE OF THE VIEW THAT SINCE FOR A.Y. 2004-05, THE MATTER HAS BE EN REMITTED BACK TO THE FILE OF A.O. TO EXAMINE AND DECIDE THE ISSUE IN LINE WITH THE DIRECTIONS CONTAINED THEREIN , IN THE YEAR UNDER APPEAL ALSO THE MATTER BE REMIT TED BACK TO THE FILE OF A.O. TO DECIDE THE MATTER. WE RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH REM IT THE ISSUE TO THE FILE OF A.O. TO EXAMINE THE FACTS AND DECIDE TH E ISSUE IN THE LIGHT OF DECISION IN THE CASE OF DCI T VS. SUN PHARMACEUTICALS IND. LTD., AND AFTER GIVING REASONA BLE OPPORTUNITY OF HEARING TO ASSESSEE. THUS THIS G ROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL P URPOSES. 15. SINCE THE FACTS OF THE CASE, IN THE YEAR UNDER APPE AL ARE IDENTICAL TO THAT OF A.Y. 06-07 AND WHICH HAS BEEN ADMITTED BY BOTH THE PARTIES, WE RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDIN ATE BENCH OF TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 06-07 REMIT THE MAT TER TO THE FILE OF A.O. TO EXAMINE THE FACTS AND DECIDE THE ISSUE IN THE LI GHT OF DECISION IN THE CASE OF DCIT VS. SUN PHARMACEUTICALS IND. LTD. (200 9) 227 CTR (GUJ.) 206 AND AFTER GIVING REASONABLE OPPORTUNITY OF HEAR ING TO THE ASSESSEE. THUS THIS GROUND OF ASSESSEE IS ALLOWED FOR STATIST ICAL PURPOSES. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 955/AHD/2011 REVENUES APPEAL. GROUND NO. 1 IS WITH RESPECT TO DISALLOWANCE UNDER SECTION 14A. 17. THE FACTS OF THE CASE OF THIS GROUND ARE INTERCONN ECTED WITH GROUND NO. 1 OF ASSESSEES APPEAL IN ITA NO. 922/AHD/2011. WE WH ILE DISPOSING OF THE AFORESAID GROUND HEREINABOVE HAVE PARTLY ALLOWE D THE APPEAL OF ASSESSEE. WE THEREFORE FOR SIMILAR REASONS PARTLY A LLOW THE PRESENT GROUND OF REVENUE. THUS THIS GROUND OF THE REVENUE IS PARTLY ALLOWED. ITA NOS. 955 & 922/AHD/2011 . A.Y. 2007- 08 11 GROUND NO. 2 IS WITH RESPECT TO DISALLOWANCE OF FEE S PAID FOR NEW PROJECT AT BHUVNESHWAR:- 18. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O. N OTICED THAT ASSESSEE HAD PAID RS.12,28,579/- TOWARDS FEES FOR STUDY RELA TING TO NEW PROJECT AT BHUVNESHWAR TO EARNST AND YOUNG . THE A.O. WAS OF T HE VIEW THAT SINCE THE AMOUNT WAS PAID FOR NEW PROJECT, IT WOULD BE CA PITAL IN NATURE AND THEREFORE DISALLOWED THE SAME. AGGRIEVED BY THE ORD ER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) DELETED TH E ADDITION BY HOLDING AS UNDER:- 6.4 I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE ABOVE SUBMISSIONS. IT IS SEEN THAT THE EXPENDITURE IS INCURRED FOR STUDY RELATING TO POSSIBLE EXPANSIO N OF THE BUSINESS IN THE SAME LINE FOR ESTABLISHING A PROJECT AT BUVANEWSHWAR. HOWEVER, THE PROJECT COULD NOT MATERIALIZED AND WAS ABANDONED. THEREFORE SUCH EXPENDITURE IS ALLOWABLE AS BUSINESS EXPENDITURE AS HELD BY THE DELHI HIGH COURT IN THE ABOVE REFERRED CASE OF PRIYA VILLAGES ROADSHOWS LTD. WHER EIN, IT IS HELD THAT, SUCH EXPENDITURE WAS REVENUE IN NATURE. THE ITAT AHMEDABAD IN THE CASE OF SHRI D INESH MILLS LTD. VIDE THEIR DECISION DATED 30.7.2010 IN RESPECT OF SIMILAR CLAIM HELD AS UNDER : 'WE FIND THAT GENUINENESS OF THE EXPENDITURE IS NOT IN DOUBT. FURTHER IT IS ALSO NOT IN DISPUTE THAT T HE EXPENDITURE HAS NOT RESULTED IN ACQUISITION OF ANY CAPITAL ASSET OF ENDURING NATURE IN THE HANDS OF TH E ASSESSEE. FURTHER, THE SAID EXPENDITURE WAS INCURRE D TO RUN THE EXISTING BUSINESS EFFICIENTLY. THE HON'BLE GAUHATI HIGH COURT IN THE CASE OF ASSAM ASB ESTOS LTD., (SUPRA) HAS HELD THAT EXPENDITURE INCURRED ON PREPARATION OF FEASIBILITY REPORT FOR A PROJECT WHICH DID NOT COME INTO EXISTENCE WAS OF .REVENUE NATURE AS THE ENDEAVOUR WAS TO AID THE EXI STING BUSINESS IN SUPPLY OF RAW MATERIALS. IN THE INSTANT CASE ALSO THE ENDEAVOUR WAS TO BENEFIT EXIS TING BUSINESS AS BY CONSTRUCTING THE HOSPITAL THE ASSESSEE COULD HAVE PROVIDED BETTER MEDICAL FACILIT IES TO STAFF AT A LOWER COST THEREFORE, ON THE ABOV E FACTS IN VIEW OF THE AFORESAID DECISION OF THE HON' BLE GAUHATI HIGH COURT WE ARE OF THE VIEW THAT THE EXPENDITURE IN QUESTION WAS A DEDUCTIBLE REVENUE EX PENDITURE IN THE HANDS OF THE ASSESSEE. WE THEREFORE, DELETE THE DISALLOWANCE OF RS.7,75,235/- AND ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE'. ACCORDINGLY, FOLLOWING THE DECISION OF ITAT, AHMEDA BAD, THIS GROUND OF APPEAL IS ALLOWED. ITA NOS. 955 & 922/AHD/2011 . A.Y. 2007- 08 12 19. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS NO W IN APPEAL BEFORE US. BEFORE US, THE LD. D.R. SUBMITTED THAT EXPENSES INCURRED WAS FOR THE PURPOSE OF NEW PROJECT AND THEREFORE THE SAME WAS N OT ALLOWABLE. THE LD. A.R. ON THE OTHER HAND SUBMITTED THAT THE PROJECT F OR WHICH THE STUDY WAS CARRIED OUT WAS ABANDONED AND NOT CARRIED OUT. HE FURTHER SUBMITTED THAT IT WAS FOR THE PURPOSE OF EXISTING BUSINESS OF THE ASSESSEE AND THEREFORE ALLOWABLE EXPENDITURE. HE ALSO PLACED RELIANCE ON THE DECISION IN THE CASE OF DCIT VS. INOX LEISURE LTD. ITA NO. 1984/AHD /2009 AND ORS. HE ALSO PLACED ON RECORD AT PAGE 77 TO 84, THE COPY OF THE AFORESAID ORDER. HE THEREFORE SUBMITTED THAT THE EXPENDITURE BE ALLOWED. 20. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. BEFORE US, THE LD. A.R. HAS SUBMITTED THAT THE EXPE NDITURE WAS INCURRED FOR THE STUDY RELATING TO POSSIBLE EXPANSION OF PRO JECT IN THE SAME LINE OF BUSINESS AND THE EXPENDITURE HAS NEITHER BROUGHT IN TO EXISTENCE ANY NEW ASSET NOR HAS RESULTED INTO ANY BENEFIT OF ENDURING NATURE TO THE ASSESSEE AND THE PROJECT COULD NOT MATERIALIZE AND ABANDONED . HOWEVER NO TANGIBLE MATERIAL HAS BEEN PLACED ON RECORD BEFORE US BY ASSESSEE IN SUPPORT OF THE AFORESAID CONTENTIONS. BEFORE US, RE PORT WHICH THE ASSESSEE SHAD RECEIVED FROM ERNST AND YOUNG WAS ALS O NOT PLACED ON RECORD. IN VIEW OF THE AFORESAID FACTS AND IN THE A BSENCE OF ANY MATERIAL BEFORE US, WE ARE OF THE VIEW THAT THE ORDER OF A.O . UPHOLDING THE DISALLOWANCE NEEDS TO BE UPHELD AND THAT OF CIT(A) ON THIS GROUND NEEDS TO BE SET ASIDE. THUS THIS GROUND OF REVENUE IS AL LOWED. 21. IN THE RESULT, THE APPEAL OF REVENUE IS PARTLY ALLO WED. ITA NOS. 955 & 922/AHD/2011 . A.Y. 2007- 08 13 22. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALL OWED FOR STATISTICAL PURPOSES AND THE APPEAL OF REVENUE IS ALSO PARTLY A LLOWED. ORDER PRONOUNCED IN OPEN COURT ON 21 - 02 - 2014. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD