ACIT, Ludhiana V. M/s Abhishek Industries Ltd., Ludhiana

ITA 970/CHANDI/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73570 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 11-03-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 24-09-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Capital asset; Business income; Depreciation; Revised return; Revenue expenditure; Capital expenditure
• Section: 143(3); 80HHC; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.859 /CHD/2012 ASSESSMENT YEAR : 2005-06 M/S ABHISHEK INDUSTRIES LTD., VS. THE ADDL. CIT , (NOW TRIDENT LIMITED) RANGE I, E-212, KITCHLU NAGAR, LUDHIANA. LUDHIANA. PAN: AABCA4139J AND ITA NO.970 /CHD/2012 ASSESSMENT YEAR : 2005-06 THE A.C.I.T., VS. M/S ABHISHEK INDUSTRIES LTD. , CIRCLEL I, 85, INDL. AREA, LUDHIANA. LUDHIANA. PAN: AABCA4139J (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ASHWANI KUMAR DEPARTMENT BY : SHRI MANJIT SINGH, DR DATE OF HEARING : 11.03.2014 DATE OF PRONOUNCEMENT : 20.03.2014 O R D E R PER SUSHMA CHOWLA, J.M. : THE CROSS APPEALS FILED BY THE ASSESSEE AND THE REV ENUE ARE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEAL S), CHANDIGARH DATED 13.7.2012 RELATING TO ASSESSMENT YEAR 2005-06 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2 2. THE CROSS APPEALS FILED BY THE ASSESSEE AND REVE NUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLI DATED ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.859/CHD/2012 :: ASSESSEES APPEAL 3. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE ORDER PASSED U/S 250(6) BY THE LD. CIT(A)-I I, LUDHIANA IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO ARBITRARILY HOLD THAT SALES TAX SUBSID Y AMOUNTING TO RS.7,59,63,822/- IS TO BE TREATED AS INCOME FRO M OTHER SOURCES AND NOT INCOME FROM BUSINESS. 2. THAT HE WAS FURTHER NOT JUSTIFIED TO UPHOLD THE DISALLOWANCE OF RS.2,50,000/- U/S 14A. 4. THE GROUND NO.1 RAISED BY THE ASSESSEE IS AGAINS T THE ORDER OF THE CIT (APPEALS) IN HOLDING THAT THE SALES TAX SUBSIDY RECEIVED BY THE ASSESSEE IS TO BE TREATED AS INCOME FROM OTHER SO URCES AND NOT AS INCOME FROM BUSINESS. 5. THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT TH AT THE ISSUE RAISED IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE OR DER OF THE TRIBUNAL IN ASSESSEES OWN CASE RELATING TO EARLIER YEARS WHERE IN THE SALES TAX SUBSIDY THOUGH TREATED AS REVENUE RECEIPT, HAS BEEN ASSESSED AS INCOME FROM BUSINESS. 6. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. SIMILAR ISSUE OF ASSESSABILITY OF SALES TAX SUBSIDY RECEIVED BY THE ASSESSEE IS INCOME FROM BUSINESS OR INCOME FROM OTH ER SOURCES AROSE BEFORE THE TRIBUNAL IN ITA NO.490/CHD/2009 RELATING TO ASSESSMENT YEAR 2006-07 AND VIDE ORDER DATED 17.1.2014 ALONGWITH CR OSS APPEAL IN ITA 3 NO.531/CHD/2009 FILED BY THE REVENUE, THE TRIBUNAL VIDE PARA 11 HELD AS UNDER: 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RECORD. THE TRIBUNAL IN 1TA NO. 321/CHD/2009 AND IT A 259/CHD/2009 IN CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE RELATING TO ASSESSMENT YEAR 2004-05 VIDE OR DER DATED 27.09.2011, VIDE PARAS 23 & 24 HAD HELD THAT 90% OF THE AMOUNT OF SALES TAX SUBSIDY IS NOT TO BE EXCLUDED F ROM THE PROFITS OF BUSINESS FOR THE PURPOSE OF COMPUTING DE DUCTION UNDER SECTION 80HHC OF THE ACT, IMPLYING THEREBY TH AT THE SAID RECEIPTS WERE TREATED AS BUSINESS INCOME OF TH E ASSESSEE. THE ASSESSEE VIDE GROUND NO. L(B) IS AGGR IEVED BY THE TREATMENT OF SALES TAX SUBSIDY AS INCOME FROM O THER SOURCES IN THE HANDS OF THE ASSESSEE BY THE AUTHORI TIES BELOW FOR THE YEAR UNDER CONSIDERATION- FOLLOWING THE SIM ILAR REASONING AS IN THE EARLIER YEARS, WE DIRECT THE AS SESSING OFFICER TO TREAT THE SALES TAX SUBSIDY AS INCOME FR OM THE BUSINESS IN THE HANDS OF THE ASSESSEE. THE GROUND NO.1(B) RAISED BY THE ASSESSEE IS, THUS ALLOWED. 8. FOLLOWING THE ABOVE PARITY OF REASONING AND THE ISSUE BEING IDENTICAL TO THE EARLIER YEARS, WE DIRECT THE ASSES SING OFFICER TO ASSESS THE INCOME FROM SALES TAX SUBSIDY IN THE HANDS OF T HE ASSESSEE AS INCOME FROM BUSINESS. THE GROUND NO.1 RAISED BY THE ASSES SEE IS THUS ALLOWED. 9. THE GROUND NO.2 RAISED BY THE ASSESSEE IS AGAINS T THE DISALLOWANCE OF RS.2,50,000/- UNDER SECTION 14A OF THE ACT. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD CLAIMED DIVIDEND INCOM E OF RS.25,75,000/- AS EXEMPT UNDER THE ACT. THE ASSESSING OFFICER IN VIEW OF THE PROVISIONS OF SECTION 14A OF THE ACT DISALLOWED THE SUM OF RS.2,50,000/- BEING EXPENDITURE RELATABLE TO THE EARNING OF TAX F REE INCOME. THE CIT (APPEALS) UPHELD THE SAID DISALLOWANCE IN THE HANDS OF THE ASSESSEE. THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT THAT DISA LLOWANCE WAS MADE ON HIGHER SIDE. 10. IN THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE DISALLOWANCE OF RS.1,25,000/- IN THE HANDS OF THE ASSESSEE IS REASONABLE AND HENCE THE SAID DISALLOWA NCE UNDER SECTION 4 14A OF THE ACT IS RESTRICTED TO RS.1,25,000/-. THE GROUND NO.2 RAISED BY THE ASSESSEE IS THUS PARTLY ALLOWED. ITA NO.970/CHD/2012 :: REVENUES APPEAL 11. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THAT THE LD.CIT(A) HAS ERRED IN LAW IN DELETI NG ADDITION OF RS. 50 LACS MADE BY THE A.O. ON ACCOUNT OF EXPENSES RELATING TO FEEDER LINES FOR CANAL WATER TREATMENT, TREATING AS CAPITAL EXPENDIT URE BECAUSE BENEFIT OF THIS EXPENDITURE IS OF ENDURING NATURE. 2. THAT THE LD.CIT(A) HAS ERRED IN DELETING THE ADD ITION OF RS. 5 LACS ON ACCOUNT OF DISALLOWANCE OF CLUB EXPENSES PAID BY TH E COMPANY FOR ITS OFFICERS FOR GETTING LIFETIME MEMBERSHIP WHICH ITSELF MEANS THAT THE EXPENDITURE INCURRED IS A CAPITAL EXPENDITURE. 3. THAT THE LD. CIT(A) HAS ERRED IN L AW IN DELETING ADDITION OF RS. 1,01,070/- MADE BY THE A.O. BY DISALLOWING DEDU CTION U/S 80IA OF I.T. ACT, 1961 AS THERE IS NO DIRECT NEXUS BETWEEN THE M ISC. RECEIPT I.E. REBATE AND DISCOUNT AND THIS INCOME IS NOT ELIGIBLE FOR DE DUCTION U/S 80IA. 4. THAT THE LD. CIT(A) HAS ERRED IN L AW IN DELETING ADDITION OF RS.8,90,711/- MADE BY THE A.O. ON ACCOUNT OF SOFTWA RE EXPENSES TREATING THE SAME AS CAPITAL EXPENDITURE. 5. THAT THE ORDER OF THE LD.CIT(A) BE SET ASIDE AND THAT OF A.O. BE RESTORED. 6. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUND OF APPEAL BEFORE IT IS FINALLY DISPOSED OFF. 12. THE GROUND NO.1 RAISED BY THE REVENUE IS AGAINS T THE ORDER OF THE CIT (APPEALS) IN RELATION TO EXPENSES RELATING TO F EEDER LINES FOR CANAL WATER TREATMENT BEING HELD TO BE REVENUE IN NATURE. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD CLAIMED RS.50 L ACS ON ACCOUNT OF EXPENSES RELATING TO FEEDER LINES FOR CANAL WATER T REATMENT IN RE-REVISED RETURN OF INCOME FILED ON 31.3.2007. THE CLAIM OF THE ASSESSEE WAS THAT THE SAID AMOUNT WAS PAID TO THE EXECUTIVE ENGINEER, SANGRUR, PUNJAB FOR FEEDER LINES FOR USING CANAL WATER IN THE PAPER PLA NT OF THE COMPANY. AS THE OWNERSHIP OF THE SAID FEEDER LINES WAS WITH THE STATE GOVERNMENT, THE EXPENDITURE INCURRED ON THE SAME WAS TO BE ALLO WED AS REVENUE EXPENDITURE. THE ASSESSING OFFICER NOTED THAT THE AMOUNT HAS BEEN 5 ADVANCED AS PART PAYMENT FOR CONSTRUCTION WORK OF L INKING THE CANAL WITH FACTORY PREMISES BY THE PWD DEPARTMENT OF GOVERNMEN T OF PUNJAB. THE BENEFIT ARISING TO THE ASSESSEE WAS FOUND TO BE OF ENDURING NATURE AND HENCE THE EXPENDITURE WAS HELD TO BE CAPITAL EXPEND ITURE IN VIEW OF THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIG H COURT IN CIT-I, LUDHIANA VS. SHREYANS INDUSTRIES LTD. REPORTED IN I TA NO.277 OF 2004. SINCE THE AMOUNT PAID BY THE ASSESSEE WAS AN ADVANC E ONLY, NO DEPRECIATION WAS ALLOWED TO THE ASSESSEE FOR THE YE AR UNDER CONSIDERATION. HOWEVER, THE AMOUNT WAS CAPITALIZED UNDER THE HEAD BUILDING ELIGIBLE FOR DEPRECIATION @ 10%. 13. THE CIT (APPEALS) ALLOWED THE CLAIM OF THE ASSE SSEE IN VIEW OF SIMILAR ADDITION BEING DELETED IN ASSESSEES OWN CA SE. THE CIT (APPEALS) ALSO NOTED THAT THE DECISION OF THE HON'B LE PUNJAB & HARYANA HIGH COURT IN CIT VS. SHREYANS INDUSTRIES LTD. REP ORTED IN 307 ITR 393 (P&H), ON WHICH THE ASSESSING OFFICER HAD RELIED UP ON, HAD BEEN SET ASIDE BY THE HON'BLE SUPREME COURT VIDE ITS ORDER I N THE CASE OF SHREYANS INDUSTRIES LTD. VS. CIT REPORTED IN 314 IT R 302 (SC) AND THE MATTER WAS REMANDED BACK TO THE HON'BLE HIGH COURT. 14. WE FIND THAT SIMILAR ISSUE OF INSTALLMENTS PAID FOR THE ACQUISITION OF FEEDER LINES AROSE BEFORE THE TRIBUNAL IN ASSESS MENT YEAR 2006-07 (SUPRA) AND THE TRIBUNAL VIDE PARAS 26 TO 30 HAD CO NSIDERED THE FACTS AND THE ARGUMENTS OF BOTH THE AUTHORIZED REPRESENTATIVE S AND OBSERVED AS UNDER: 27. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD CLAIMED EXPEN DITURE ON ACCOUNT OF EXPENSES RELATING TO FEEDER LINES FOR CA NAL WATER TREATMENT OF RS.1,10,00,000/- AND PAYMENT MADE TO P SEB FOR ELECTRIC SERVICE LINE AMOUNTING TO RS.1.33 CR. THE SAID EXP ENDITURE WAS CLAIMED IN THE REVISED RETURN OF INCOME FILED ON 20 .03.2008. BEFORE THE ASSESSING OFFICER, IT WAS EXPLAINED BY THE ASSE SSEE THAT BOTH THE FEEDER LINES FOR CANAL WATER TREATMENT AND POWER SE RVICE LINE OF ELECTRICITY DID NOT BECOME THE PROPERTY OF THE ASSE SSEE COMPANY AND 6 DEDUCTION WAS CLAIMED PLACING RELIANCE ON SERIES OF JUDICIAL DECISIONS. THE ASSESSING OFFICER OBSERVED THAT THE SUM OF RS.1.10 CR WAS PAID BY THE ASSESSEE AS SECOND INSTALMENT FOR T HE PURPOSE OF CONSTRUCTION OF FEEDER LINES FOR CANAL WATER TREATM ENT WHICH WOULD PROVIDE WATER TO THE ASSESSEE COMPANY OVER THE NEXT YEARS. AS THE BENEFIT OF THE SAID EXPENSES WAS OF ENDURING NATURE , THE ASSESSING OFFICER HELD THAT THE AMOUNT WAS TO BE TREATED AS C APITAL EXPENDITURE. SIMILARLY, THE SUM OF RS. 1.33 CR PAI D TO PSEB FOR ERECTION OF 66 KV POWER LINE FROM DHAULA COMPLEX TO SANGHERA COMPLEX OF THE ASSESSEE WAS HELD TO HAVE BEEN PAID FOR CREATION OF FIXED ASSETS IN THE NATURE OF POWER SERVICE LINE ON LY. THE ASSESSING OFFICER HELD THAT AS THE AMOUNT HAD BEEN SPENT FOR CREATION OF ASSETS WHICH WOULD BE UTILIZED ONLY WHEN THE ASSETS WERE M ADE FULLY OPERATIONAL, THE AMOUNT WAS HELD TO BE CAPITAL IN N ATURE AS THE SAID ASSETS HAD NOT BECOME OPERATIONAL. THE ASSESSING O FFICER HELD THAT NO DEPRECIATION WAS ALLOWABLE ON THE SAID CAPITAL W ORK IN PROGRESS. 28. BEFORE THE CIT(APPEALS), THE CONTENTION OF THE ASSESSEE WAS THAT THE ASSETS CREATED BY SPENDING THE AMOUNT IN Q UESTION DID NOT BECOME THE PROPERTY OF THE ASSESSEE AND RATHER THE OWNERSHIP LIES WITH THE STATE GOVERNMENT. THE LD. AR FOR THE ASSES SEE PLACED RELIANCE ON THE DECISION OF CIT(APPEALS) IN ASSESSE E'S OWN CASE RELATING TO ASSESSMENT YEAR 1999-2000 UNDER WHICH T HE SAID ADDITION WAS DELETED IN TURN RELYING ON THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT V PANBARI TEA CO . LTD. 151 ITR 726 (P&H). THE CIT(APPEALS) HELD THAT AS THE A SSETS IN QUESTION DID NOT BECOME THE PROPERTY OF THE ASSESSEE, THE AM OUNTS INCURRED FOR CREATION OF THESE ASSETS WAS TO BE ALLOWED AS A REV ENUE EXPENDITURE IN THE HANDS OF THE ASSESSEE. 29. THE LD. DR FOR THE REVENUE POINTED OUT THAT THE ASSESSING OFFICER IN PARAS 10 TO 12 HAVE CONSIDERED THE ISSUE AND GIVEN A FINDING THAT THE AMOUNT HAS BEEN PAID AS CAPITAL WO RK IN PROGRESS ON WHICH DEPRECIATION IS NOT ALLOWABLE. IN VIEW THERE OF, WHERE THE ASSESSEE HAS MADE THE PAYMENT FOR ACQUISITION OF AS SET, WHICH HAS ENDURING ADVANTAGE TO THE ASSESSEE AND THEN SAME IS NOT TO BE ALLOWED AS AN EXPENDITURE. RELIANCE WAS PLACED ON C IT VS SHREYANS INDUSTRIES LTD. 303 ITR 393 (P&H) AND TRAVANCORE CO CHIN CHEMICALS LTD. VS CIT 106 ITR 900 (S.C). 30. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT TH E EXPENDITURE INCURRED BY THE ASSESSEE WAS IN THE COURSE OF CARRY ING ON OF THE BUSINESS AND THE SAME WAS ALLOWABLE AS AN EXPENDITU RE. IT WAS FURTHER POINTED OUT BY THE LD. AR FOR THE ASSESSEE THAT THE HON'BLE SUPREME COURT IN SHREYANS INDUSTRIES LTD. VS CIT 31 4 ITR 302 HAS RESTORED THE MATTER BACK TO THE HON'BLE HIGH COURT TO RE-DECIDE THE ISSUE WHICH WAS DECIDED AGAINST THE ASSESSEE BY THE HON'BLE PUNJAB & HARYANA HIGH COURT REPORTED IN SHREYANS INDUSTRIE S LTD. VS CIT (SUPRA). FURTHER RELIANCE WAS PLACED ON CIT VS PANB ARI TEA CO. 151 ITR 726 (P&H), CIT VS ASSOCIATED CEMENT CO. LTD. 17 2 ITR 257 (S.C) AND ALSO CIT VS DART MFG. INDIA (P) LTD.175 T AXMAN 6 (DELHI). IT WAS FURTHER POINTED OUT BY THE LD. AR FOR THE AS SESSEE THAT THE QUESTION OF WORK IN PROGRESS WOULD ARISE IF THE EXP ENDITURE WAS CAPITAL IN NATURE AND IF THE EXPENDITURE WAS REVENU E IN NATURE, THE SAME MERITS TO BE ALLOWED. 7 15. THE TRIBUNAL VIDE PARAS 31 TO 33 HAD HELD AS UN DER : 31. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RECORD. THE ASSESSEE HAD CLAIMED EXPENDITURE OF RS. 1,10,00 ,000/- CLAIMED TO BE INCURRED ON FEEDER CANAL WATER TREATMENT AND PAY MENT OF RS. 1.33 CR BEING PAYMENT MADE TO PSEB FOR ELECTRIC SERVICE LINES. THE ASSESSEE HAD FILED WRITTEN SUBMISSIONS BEFORE THE A SSESSING OFFICER WITH REGARD TO HIS CLAIM OF EXPENDITURE TOTALING RS .2.43 CR. THE SAID WRITTEN SUBMISSIONS ARE INCORPORATED UNDER SUB-PARA (B) AT PAGES 10 & 11 OF THE ASSESSMENT ORDER. THE PERUSAL OF THE SA ID SUBMISSIONS REFLECT THAT THE SUM OF RS. 1,10,00,000/- WAS PAID TO EXECUTIVE ENGINEER, SANGRUR (PUNJAB). FOR FEEDER LINES FOR US ING CANAL WATER IN THE PAPER PLANT OF THE COMPANY AND THE EXPENDITU RE OF RS. 1,33,00,000/- WAS PAID TO PSEB, TAPA, PUNJAB FOR ER ECTION OF 66 KV POWER SERVICE LINES FROM DHAULA COMPLEX TO SANGHERA COMPLEX OF THE ASSESSEE COMPANY. IT WAS FURTHER SUBMITTED BY T HE ASSESSEE BEFORE THE ASSESSING OFFICER AS UNDER : FURTHER AS DESIRED THE BELOW MENTIONED DOCUMENTS A RE ENCLOSED HEREWITH :- (A) COPY OF LETTER DATED 22 ND JUNE, 2005 FROM EXECUTIVE ENGINEER, SANGRUR FOR DEPOSIT OF 2 ND INSTALLMENT AMOUNTING TO RS. 60.00 LACS. (B) COPY OF LETTER DATED 7 TH MAY, 2005 FROM CHIEF ENGINEER/COMMERCIAL (SALES DIRECTORATE), PUNJAB STATE ELECTRICITY BOARD, PATIA LA FOR PAYMENT OF RS. 1.33 CRORE. 32. THE PLEA OF THE ASSESSEE BEFORE THE CIT(APPEAL S) WAS THAT THE ASSESSEE COMPANY DOES NOT ACQUIRE OWNERSHIP OF ANY PROPERTY BY SPENDING AMOUNT FOR FEEDER LINES FOR CANAL WATER TREATMENT AND POWER SERVICE LINES OF ELECTRICITY AS THE OWNER SHIP LIES WITH THE STATE GOVT. AND DO NOT BELONG TO THE ASSESSEE C OMPANY SO THE EXPENDITURE IS PURELY OF REVENUE NATURE. 33. ADMITTEDLY, THE ASSESSEE DOES NOT BECOME OWNER OF THE SAID ASSETS BUT THE ISSUE ARISING BEFORE US IS WHETHER I N CASE WHERE THE SO CALLED ASSET HAS NOT COME INTO EXISTENCE, THE EXPEN DITURE INCURRED ON THE SAME I.E. INSTALMENTS PAID FOR BRINGING THE SAM E INTO EXISTENCE BEING CAPITAL WORK IN PROGRESS, ARE TO BE ALLOWED A S AN EXPENDITURE IN THE HANDS OF THE ASSESSEE. THE ASSESSING OFFICE R HAS GIVEN A FINDING THAT THE SAID ASSETS ARE CAPITAL ASSETS BUT NO DEPRECIATION IS TO BE ALLOWED ON SUCH ASSETS AS THE SAME ARE CAPITA L WORK IN PROGRESS. THE PLEA OF THE LD. AR FOR THE ASSESSEE BEFORE US IS THAT THE EXPENDITURE IS ALLOWABLE AS A REVENUE EXPENDITU RE AND THERE IS NO QUESTION OF BEING HELD AS CAPITAL WORK IN PROGRESS. IN CASES WHERE THE ASSET IS UNDER CONSTRUCTION I.E. THE FINAL ASSE T HAS NOT COME INTO EXISTENCE, THE AMOUNTS PAID IN INSTALMENTS FOR BRIN GING INTO EXISTENCE SUCH ASSETS, CANNOT BE ALLOWED AS A REVENUE EXPENDI TURE IN THE YEAR IN WHICH THE ASSET HAS NOT COME INTO EXISTENCE. TH E ALLOWABILITY OF THE EXPENDITURE IN THE YEAR OF THE ASSET COMING INT O EXISTENCE HAS TO BE SEEN WHEN THE SAID ASSET COMES INTO EXISTENCE. HOWEVER, COMPLETE FACTS ARE NOT AVAILABLE ON RECORD AND IN ORDER TO A DJUDICATE THE ISSUE, WE ARE OF THE VIEW THAT BASIC FACTS RELATING TO THE ISSUE OF ALLOWABILITY OF EXPENDITURE TOTALING RS. 2.33 CR NE EDS TO BE CULLED OUT FROM THE RECORD. IN ORDER TO ADJUDICATE THE IS SUE OF ALLOWABILITY OF THE SAID EXPENDITURE, WE ARE OF THE VIEW THAT NE CESSARY EVIDENCE IN THIS REGARD IS TO BE FILED BY THE ASSESSEE TO ESTAB LISH ITS CASE THAT IT IS NOT MERE WORK IN PROGRESS AND ON THE OTHER HAND, THE AMOUNT HAS 8 ACTUALLY BEEN SPENT FOR BRINGING INTO EXISTENCE THE SAID ASSET. IN THE TOTALITY OF THE ABOVESAID FACTS, IN ORDER TO ADJUDI CATE THE ALLOWABILITY OF CLAIM OF EXPENDITURE, WE REMIT THIS ISSUE BACK T O THE FILE OF ASSESSING OFFICER AND DIRECT THE ASSESSEE TO FURNIS H COMPLETE INFORMATION IN THIS REGARD BEFORE THE ASSESSING OFF ICER WHO IN TURN WILL DECIDE THE SAID ISSUE. REASONABLE OPPORTUNITY OF HEARING SHALL BE AFFORDED TO THE ASSESSEE. THE GROUND NO. 3 RAISE D BY THE REVENUE IS THUS ALLOWED FOR STATISTICAL PURPOSES. 16. THE ISSUE OF ALLOWABILITY OF THE CLAIM OF THE A SSESSEE WAS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER TO ESTABLISH W HETHER THE AMOUNT HAD ACTUALLY BEEN SPENT FOR BRINGING THE SAID ASSET INT O EXISTENCE OR IT IS MERE WORK-IN-PROGRESS. WE FIND THAT THE ISSUE RAIS ED IN THE PRESENT APPEAL IS IDENTICAL TO THE ISSUE BEFORE THE TRIBUNA L IN ASSESSMENT YEAR 2006-07 (SUPRA) AND THE SAME IS SET ASIDE TO THE FI LE OF THE ASSESSING OFFICER WITH SIMILAR DIRECTIONS. 17. WE FURTHER FIND THAT THE HON'BLE PUNJAB & HARYA NA HIGH COURT IN CIT-I, LUDHIANA VS. SHREYANS INDUSTRIES LTD. REPORT ED IN ITA NO.277 OF 2004 (SUPRA) VIDE JUDGMENT DATED 15.11.2013 HAD HEL D AS UNDER: ANY EXPENDITURE INCURRED IN COMPLYING WITH STATUTORY REQUIREMENTS PARTICULARLY WHERE THE ASSET CONCERNED WOULD ENURE TO THE BENEFIT OF THE ASSESSEE FROM YEAR TO YEAR, WOULD NE CESSARILY BE AN ASSET OF ENDURING NATURE AND, THEREFORE, CATEGORISED AS CAPITAL EXPENDITURE. THE MERE FACT THAT THE LAND IS NOT OWNED BY THE ASSESSEE, IS IRRELEVANT AS BY EXCAVATING THE DRAIN THROUGH FOREST LAND ON THE BASIS OF APPROVAL GRANTED BY THE FOREST DEPARTMENT, THE ASSESSEE HAS BEEN ABLE TO OVERCOME STATUTORY REQUIREMENTS FOR RELEASE OF EFFLUENTS AS PRESCRIBED UNDER THE POLLUTION CONTROL ACT, THE RULES AND NOTIFICATIONS ETC. ISSUED THEREUNDER, THEREBY CONFERRING BENEFIT OF AN ENDURING NATURE THAT WOULD BE AVAILABLE TO THE ASSESSEE FROM YEAR TO YEAR. THE FACT THAT THE ASSESSEE HAS TRANSFERRED LAND TO THE FOREST DEPARTMENT OR HAS PAID MONEY FOR COMPENSATORY FORESTRY DOES NOT DENUD E THE ASSESSEE'S RIGHTS VIS-A-VIS THE ASSET CREATED. A PERUSAL OF THE APPROVAL GRANTED TO THE ASSESSEE, CONSIDERATION OF THE NATURE OF THE EXPENSE INCURRED AND THE STATUTOR Y OBLIGATIONS FOR DISCHARGE OF EFFLUENTS, IN OR CONSIDERED OPINION, L EAVE NO AMBIGUITY THAT EXPENSE INCURRED UPON CONSTRUCTION O F THE DRAIN FOR RELEASE OF EFFLUENTS HAVE CONFERRED BENEFIT OF AN E NDURING NATURE UPON THE ASSESSEE. WE, THEREFORE, ANSWER THIS QUES TION IN FAVOUR OF THE REVENUE AND AGAINST THE APPELLANT. 9 18. THE ASSESSING OFFICER IS DIRECTED TO APPLY THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN SHREYANS INDUSTRIES LTD. VS. CIT (SUPRA) WHILE ADJUDICATING THE ISSUE IN THE PRESENT CASE AFTER ESTABLISHING THE FACT SITUATION OF THE ISSUE RAISED . THE GROUND OF APPEAL NO.1 RAISED BY THE REVENUE IS ALLOWED FOR STATISTIC AL PURPOSES. 19. THE ISSUE IN GROUND NO.2 RAISED BY THE REVENUE IS AGAINST THE DELETION OF ADDITION OF RS.5 LACS MADE ON ACCOUNT O F DISALLOWANCE OF CLUB EXPENSES. 20. THE ASSESSING OFFICER HAD DISALLOWED THE SAID E XPENDITURE INCURRED BY THE ASSESSEE ON ENTRANCE FEE PAID FOR BARNALA CL UB FOR CORPORATE MEMBERSHIP OF 25 OFFICERS OF THE ASSESSEE COMPANY @ RS.20,000/- EACH. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE CORP ORATE MEMBERSHIP BELONGED TO THE ASSESSEE AS IT COULD NOMINATE ANY 2 5 OFFICERS FOR USAGE OF THE CLUB. SINCE THE BENEFIT WAS FOR LIFE TIME F OR ASSESSEE COMPANY, THE EXPENDITURE WAS HELD TO BE ENDURING NATURE AND WAS TREATED AS CAPITAL EXPENDITURE IN THE HANDS OF THE ASSESSEE. 21. THE CIT (APPEALS) HELD THAT THE EXPENDITURE WAS ALLOWABLE IN THE HANDS OF THE ASSESSEE AS NO CAPITAL ASSET HAS COME INTO EXISTENCE BY INCURRING THE SAID EXPENDITURE. WE ARE IN CONFORMI TY WITH THE ORDER OF THE CIT (APPEALS) AS THE EXPENDITURE INCURRED BY TH E ASSESSEE HAS NOT RESULTED IN BRINGING INTO EXISTENCE ANY CAPITAL ASS ET, THE SAID EXPENDITURE IS DULY ALLOWABLE IN THE HANDS OF THE ASSESSEE. UP HOLDING THE ORDER OF THE CIT (APPEALS) WE DISMISS THE GROUND OF APPEAL N O.2 RAISED BY THE REVENUE. 10 22. THE GROUND NO.3 RAISED BY THE REVENUE IS AGAINS T THE COMPUTATION OF DEDUCTION UNDER SECTION 80IA OF THE ACT ON MISCE LLANEOUS RECEIPTS I.E. REBATE AND DISCOUNT. 23. THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT THAT THE SAID ISSUE OF REBATE AND DISCOUNT WAS RELATABLE TO THE PURCHAS E OF RAW MATERIAL AND WAS DIRECTLY LINKED TO THE MANUFACTURING PROCESS AN D HENCE IT HAD TO BE CONSIDERED WHILE COMPUTING THE DEDUCTION UNDER SECT ION 80IA OF THE ACT. 24. WE ARE IN CONFORMITY WITH THE PLEA OF THE ASSES SEE IN THIS REGARD THAT THE SAID MISCELLANEOUS RECEIPTS BEING ON REBAT E AND DISCOUNT ON PURCHASE OF RAW MATERIAL ARE DIRECTLY LINKED TO THE MANUFACTURING ACTIVITY CARRIED ON BY THE ASSESSEE AND HENCE THE S AME ARE TO BE INCLUDED AS PROFITS OF BUSINESS UNDER SECTION 80IA OF THE AC T. THE GROUND OF APPEAL NO.3 RAISED BY THE REVENUE IS THUS DISMISSE D. 25. THE GROUND OF APPEAL NO.4 RAISED BY THE REVENUE IS AGAINST THE TREATMENT OF SOFTWARE EXPENSES AS CAPITAL OR REVENU E IN NATURE. 26. THE LEARNED A.R. FOR THE ASSESSEE FAIRLY CONCED ED THAT IN VIEW OF THE AMENDMENT TO THE DEFINITION OF COMPUTER THE SAI D EXPENSES IS CAPITAL IN NATURE. 27. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATIO N HAD INCURRED EXPENDITURE ON COMPUTER SOFTWARE WHICH WAS HELD TO BE CAPITAL IN NATURE BY THE ASSESSING OFFICER ON WHICH DEPRECIATION WAS ALLOWED. THE CIT (APPEALS), HOWEVER TREATED THE SAID EXPENDITURE AS REVENUE IN NATURE. IN VIEW OF THE AMENDMENT TO THE DEFINITION OF COMPU TER, WHICH INCLUDES COMPUTER SOFTWARE WITHIN ITS AMBIT, THE EXPENDITURE INCURRED BY THE 11 ASSESSEE IS CAPITAL IN NATURE. HOWEVER, THE ASSESS EE IS ENTITLED TO DEPRECIATION @ 60% ON THE SAID COMPUTER SOFTWARE AN D UPHOLDING THE ORDER OF THE ASSESSING OFFICER WE REVERSE THE FINDI NGS OF THE CIT (APPEALS). THE GROUND OF APPEAL NO.4 RAISED BY THE REVENUE IS THUS ALLOWED. 28. IN THE RESULT, BOTH THE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF MARCH, 2014. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 20 TH MARCH, 2014 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 12