Tamilnadu State Transport Corporation (Kumbakonam) Limited, Kumbakonam V. DCIT, Kumbakonam

MA 36/CHNY/2011

• Counselvise Citation: [2011] 123 COUNSELVISE.COM (IT) 6559 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 13-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 25-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JR
• Assessee Lawyers: S SRIDHAR
• Keywords: Reopening of assessment; Depreciation; Unabsorbed depreciation
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH B : CHENNAI [BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER] M.P.NO.31/MDS/2011 & I.T.A NO.1718/MDS/2009 ASSESSMENT YEAR : 2001-02 TAMIL NADU STATE TRANSPORT CORPORATION (KUM. DIV.I) LIMITED RAILWAY STATION NEW ROAD KUMBAKONAM 612 001 VS THE JT. CIT KUMBAKONAM RANGE KUMBAKONAM [PAN - AAACC1294K] (PETITIONER/APPELLANT) (RESPONDENT) M.P.NOS.35,36,37,38,39 & 40/MDS/2011 & I.T.A NOS. 1722,1723,1724, 1725, 1726 & 1727/MDS/ 09 ASSESSMENT YEARS : 2003-04, 2004-05 & 2005-06 & 2006-07 TAMIL NADU STATE TRANSPORT CORPORATION (KUMBAKONAM) LIMITED RAILWAY STATION NEW ROAD KUMBAKONAM 612 001 VS THE JT. CIT/KUMBAKONAM RANGE DY. CIT /CIRCLE I KUMBAKONAM [PAN - AAACC1294K] (PETITIONER/APPELLANT) (RESPONDENT) M.P.NO.32/MDS/2011 & I.T.A NO.1719/MDS/2009 ASSESSMENT YEAR : 2001-02 TAMIL NADU STATE TRANSPORT CORPRN. (KUM.) LIMITED, SUCCESSOR COMPANY TO TNSTC(KUM. DIV.III), KARAIKUDI RAILWAY STATION NEW ROAD KUMBAKONAM 612 001 VS THE ACIT CIRCLE I KUMBAKONAM [PAN AAACT5560D] (PETITIONER/APPELLANT) (RESPONDENT) MP 31 TO 40/2011 & ITA 1718 TO 1727/2009 :- 2 -: M.P.NO.33/MDS/2011 & I.T.A NO.1720/MDS/2009 ASSESSMENT YEAR : 2001-02 TAMIL NADU STATE TRANSPORT CORPRN. (KUM.) LIMITED, SUCCESSOR COMPANY TO NSTC(KUM.DIV.II) TRICHI RAILWAY STATION NEW ROAD KUMBAKONAM 612 001 VS THE ACIT CIRCLE I KUMBAKONAM [PAN - AAACD1269K] (PETITIONER/APPELLANT) (RESPONDENT) M.P.NO.34/MDS/2011 & I.T.A NO.1721/MDS/2009 ASSESSMENT YEAR : 2001-02 TAMIL NADU STATE TRANSPORT CORPRN. (KUM.) LIMITED, SUCCESSOR COMPANY TO NSTC(KUM.DIV.IV) PUDUKOTTAI RAILWAY STATION NEW ROAD KUMBAKONAM 612 001 VS THE ACIT CIRCLE I KUMBAKONAM [PAN - AAACV2112P] (PETITIONER/APPELLANT) (RESPONDENT) PETITIONERS/APPELLANTS BY : SHRI S.SRIDHAR RESPONDENT BY : SHRI K.E.B RENGARAJAN, JR. STANDING COUNSEL O R D E R PER BENCH: THE ABOVE CAPTIONED MISCELLANEOUS PETITIONS HAV E BEEN FILED BY THE ASSESSEES FOR RECALLING OF THE COMMON ORDE R OF THE TRIBUNAL MP 31 TO 40/2011 & ITA 1718 TO 1727/2009 :- 3 -: DATED 15.12.2009, VIDE WHICH THE APPEALS OF THE PET ITIONERS WERE DISMISSED FOR WANT OF PERMISSION OF THE COMMITTEE O N DISPUTES(COD). THE ASSESSEES WERE GIVEN LIBERTY TO GET THE ORDER R ECALLED ONCE IT OBTAINS THE REQUISITE COD PERMISSION. 2. IT HAS BEEN PLEADED THAT IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT RENDERED RECENTLY IN THE CASE OF ELEC TRONICS CORPORATION OF INDIA LTD VS UNION OF INDIA, 2011-TIOL-18-SC-CX- CB, JUDGMENT DATED 17.2.2011, IN CIVIL APPEAL NOS.1883 OF 2011 A ND 1903 OF 2008, SLP NO.2538 OF 2009, IT HAS BEEN CATEGORICALLY HEL D THAT FOR PURSUING LITIGATION BETWEEN PSUS AND THE GOVERNMENT, THERE I S NO LONGER A NEED TO OBTAIN PERMISSION OF COD. THE REASON FOR ARRIVI NG AT THE ABOVE CONCLUSION HAS BEEN STATED TO BE THAT ALTHOUGH THE OBJECT IN GETTING COD PERMISSION IS LAUDATORY BUT THE MECHANISM INVOL VED IN THE PROCESS LEADS TO DELAYS IN LITIGATION AND AS SUCH, THE MECHANISM HAS OUTLIVED ITS UTILITY. A COPY OF THE ABOVE MENTIONE D JUDGMENT HAS BEEN PLACED FOR OUR PERUSAL. ALTHOUGH WE ARE AWARE OF T HIS DECISION, YET WE HAVE TREADED ONCE AGAIN THROUGH IT. IT HAS BEEN OB SERVED BY THEIR LORDSHIPS THAT IN THE CHANGED SCENARIO THE EXISTING DIRECTIONS TO OBTAIN COD PERMISSION HAS OUTLIVED SO IT IS BEING RECALLED AND HEREINAFTER, THERE IS NO NEED FOR SUCH PERMISSION OF COD TO PURS UE LITIGATION BETWEEN PSUS AND GOVERNMENT. SINCE THE JUDGMENT OF APEX COURT BECOMES THE LAW OF THE LAND IN VIEW OF ARTICLE 141 OF THE CONSTITUTION MP 31 TO 40/2011 & ITA 1718 TO 1727/2009 :- 4 -: OF INDIA, IT WOULD BE DEEMED THAT ON THE DATE OF JU DGMENT PASSED ON 15.12.2009 BY THIS BENCH THERE WAS NO NEED FOR PERM ISSION OF THE COD TO PURSUE THE DISPUTE BY THE PETITIONER AGAINST THE INCOME-TAX DEPARTMENT OF GOVERNMENT OF INDIA. THEREFORE, IN THAT VIEW OF THE MATTER, WE RECALL THE TRIBUNAL ORDER DATED 15.12.20 09 PASSED IN THESE CASES. 3. AT THE SAME TIME, IN ORDER TO AVOID FURTHER DELAY I N THE DISPOSAL OF THE APPEALS, THE BENCH WAS OF THE OPINION THAT T HE APPEALS SHOULD ALSO BE HEARD SIMULTANEOUSLY AS MOST OF THE ISSUE S INVOLVED IN THESE CASES WERE STATED TO BE COVERED IN FAVOUR OF THE AS SESSEE AND NO FURTHER FACTS ARE REQUIRED TO BE BROUGHT ON RECORD. NONE OF THE PARTIES RAISED ANY OBJECTION IN THIS REGARD. 4. THE GOVERNMENT OF TAMIL NADU, AS A MEASURE OF REST RUCTURING THE VARIOUS TRANSPORT CORPORATIONS IN TAMIL NADU, D ECIDED, INTERALIA, THAT THE EXISTING THREE STATE TRANSPORT CORPORATION S NAMELY (A) THE TAMIL NADU STATE TRANSPORT CORPORATION, KUMBAKONAM DIVISION-II LTD., HAVING ITS REGISTERED OFFICE AT PERIA MILAGUPARAI, TIRUCHIRAPPALLI-L, (B) THE TAMIL NADU STATE TRANSPORT CORPORATION (KUMBAKO NAM DIVISION- III) LTD., HAVING ITS REGISTERED OFFICE AT MARUTHUP ATHI, MANAGIRI ROAD, KARAIKUDI-630 302 AND (C) THE TAMIL NADU STATE TRAN SPORT CORPORATION (KUMBAKONAM, DIVISION-IV) LTD, HAVING ITS REGISTERE D OFFICE AT 51/1, THIRUMAYAM ROAD, PUDUKORTAI-622 001 BE AMALGAMATED INTO ONE MP 31 TO 40/2011 & ITA 1718 TO 1727/2009 :- 5 -: TRANSPORT CORPORATION NAMELY (TAMIL NADU STATE TRAN SPORT CORPORATION(KUMBAKONAM) DIV-I LTD., FOR THE PURPOSE OF EFFECTIVE AND EFFICIENT USE OF THE DEPOTS, EQUIPMENTS, PERSONNEL, MATERIAL AND OTHER INFRASTRUCTURE FACILITIES FOR ENSURING CO-ORDINATIO N IN POLICY AND FOR THE EFFICIENT FUNCTIONING OF ROAD TRANSPORT SERVICES IN TAMIL NADU. THE GOVERNMENT OF TAMIL NADU DIRECTED THESE THREE TRANS PORT CORPORATIONS TO INITIATE APPROPRIATE STEPS FOR MERG ER OF THESE 3 COMPANIES INTO ONE TRANSPORT CORPORATION I.E. TNSTC KUMBAKONAM DIV-L LTD. IN P UR S U A N CE O F TH E ABO V E MENTIONED STATE GO V E R NM ENT OR D E R A N D AF T ER CO MP LY ING W ITH AL L THE STATUTO RY R E QU IR EMENT S UNDER THE C OMP A N IES ACT , 1956 , TH E ABOV E REFERRE D E R STW HIL E TH R E E TAMIL NA D U S T A T E T RAN S PO RT C O RPORATION S , APPLIED T O T H E DEPART M ENT O F C OMPAN Y A FFAI R S, M I N IS TR Y O F LAW AND COMP A N Y A FFA IR S FO R A MALGAMATI ON O F THE S E COMPAN IES IN TO TH E F OURTH COMPAN Y I N THE N AME O F TAMIL NA DU ST A TE TRANS PO RT C ORPOR A TION KUMB AK ON A M DI V I S ION-I L TD ., (A GO VERN M ENT COMP A N Y I NCORPORATE D UND E R T H E C O MPANIE S ACT , 1956 , ) H AVI N G I T S REGISTERED OFFICE A T R A IL WA Y STAT ION , N EW RO A D , KUMBAKO N A M - 612 00 1 . TH E ABO V E S A I D APPL ICATION FOR A PP RO VAL OF T HE S CHEME OF A MAL G AMA T ION WAS S UBMITTED TO THE DEPARTMENT O F CO M PAN Y A FF A IR S ON 1 7 . 01 . 200 2 . 5. AF TER CO N SI D E RIN G TH E S U GGES T IO N S A ND OBJECTION S THE C ENT RA L GOVE R NME N T I N E X E R C I S E OF THE P O WERS CON FER R E D B Y SUB- SE CTION ( 1 ) & MP 31 TO 40/2011 & ITA 1718 TO 1727/2009 :- 6 -: (2) O F T HE SEC . 396 O F TH E COM P A NIE S ACT , 1956 PASSE D AN ORDER S . O. 1477( E ) DATED 3 0. 12.2 00 3 , APPRO V IN G T H E A MA L GA MATION OF THE S A I D TH REE C O MPA NI ES NAMEL Y TNSTC DI V - I I , D IV -I II AND DI V -I V INTO TN STC K U MBAK ONA M D I V - I . 6. FOR ASSESSMENT YEAR 2000-01, ALL THE ABOVE FOUR DIV ISIONS ARE IN APPEAL. AS ALMOST COMMON ISSUES ARE INVOLVED IN TH ESE APPEALS. WE NARRATE THE FACTS AS OBTAINING IN THE CASE OF TNSTC (KUMBAKONAM DIVISION III) LTD. [KARAIKUDI]. FOR THE ASSESSME NT YEAR 2001-02, ASSESSMENT ORDER WAS PASSED ON 24.12.2008. THE AS SESSING OFFICER HAS ADDED THE FOLLOWING AMOUNTS: A) DEEMED PROFITS AND GAINS U/S 41(1)(A) B) ADDITIONS TOWARDS PENSION AND PROVIDENT FUND C) ADDITION TOWARDS INSURANCE FUND D) GRATUITY. 7. AGAINST THESE ADDITIONS, THE ASSESSEE PREFERRED APP EAL AND THE LD. CIT(A), TRICHY, VIDE ORDER DATED 20.10.2009, DI SPOSED OF THE APPEAL BY CONFIRMING ALL THE ADDITIONS EXCEPT THE AMOUNT TOWARDS INSURANCE FUND WHICH HE DIRECTED TO BE ALLOWED AFTER VERIFICA TION ON ACTUAL PAYMENT BASIS. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 8. WITH REGARD TO DEEMED PROFITS AND GAINS U/S 41(1)(A ), IT WAS ARGUED THAT THE ACCUMULATED INTEREST PAYABLE TO GOV ERNMENT WHICH WAS CONVERTED AS SHARE CAPITAL DURING THE YEAR WAS TREATED AS DEEMED PROFIT U/S 41(1)(A). IN FACT, IT WAS INTEREST ACCR UED FROM 1995-96 TO MP 31 TO 40/2011 & ITA 1718 TO 1727/2009 :- 7 -: 31.10.2000. THE LD. CIT(A) HAS CONFIRMED THIS ADDI TION ON THE GROUND THAT IT IS A CLEAR CASE OF CESSATION OF LIABILITY. BUT IT WAS FAIRLY CONCEDED BY BOTH SIDES THAT THIS ISSUE STANDS COVERED IN FAV OUR OF THE ASSESSEE BY THE DECISION OF THIS BENCH IN THE CASE OF METRO POLITAN CORPORATION (CHENNAI) LTD IN I.T.A.NO. 2012/MDS/2006, ORDER DAT ED 16.11.2007 FOR ASSESSMENT YEAR 2001-02. IN THAT CASE, UNDER IDENT ICAL FACTS, THE TRIBUNAL HAS DELETED THE ADDITION MADE BY THE ASSES SING OFFICER. WHILE DOING SO, THE TRIBUNAL HAS RELIED ON THE G.O. NO.18, TRANSPORT(T1)DEPARTMENT, DATED 7.3.2001 OF GOVERNME NT OF TAMIL NADU. SINCE THE G.O IS COMMON TO ALL THE STATE TRA NSPORT UNDERTAKINGS AND COVERS KUMBAKONAM DIVISION I ALSO VIDE SL.NO.14 OF THE SAID G.O. 9. WE HAVE GONE THROUGH THE TRIBUNAL ORDER. THE TRIBU NAL HAS HELD THAT THE ASSESSEE-COMPANY HAS DISCHARGED ITS I NTEREST LIABILITY AND INSTEAD OF MAKING PAYMENT IN CASH IT HAS ISSUED SHA RE CAPITAL TO THE GOVERNMENT AS PER THE G.O. IN QUESTION. HENCE, THE PROVISIONS OF SECTION 41(1)(A) OF THE ACT ARE NOT ATTRACTED AT AL L. THEREFORE, THE CONVERSION OF THE PAYMENT IN THE SHARE CAPITAL HAS TO BE TREATED AS PROPER DISCHARGE OF INTEREST PAYMENTS. THIS DECISI ON IS APPLICABLE TO THE FACTS OF THIS CASE MUTATIS MUTANDIS. IN VIEW O F THE ABOVE DECISION, WE ARE OF THE CONSIDERED OPINION THAT THIS ISSUE ST ANDS ALLOWED IN FAVOUR OF THE ASSESSEES IN ALL THESE APPEALS. MP 31 TO 40/2011 & ITA 1718 TO 1727/2009 :- 8 -: 10. THE SECOND ISSUE WHICH IS COMMON IN ALL THESE APPEA LS IS REGARDING ADDITION MADE ON ACCOUNT OF CONTRIBUTION TO PENSION FUND. AS PER THE DEPARTMENT, SUCH CONTRIBUTION IS NEITHER APPROVED UNDER THE ACT NOR THE SAME IS A RECOGNIZED FUND. THE CAS E OF THE ASSESSEE IS THAT THIS CONTRIBUTION IS MADE IN PURSUANCE OF A SE TTLEMENT REACHED WITH THE EMPLOYEES AND THE MANAGEMENT U/S 12(3) OF THE INDUSTRIAL DISPUTES ACT. THIS BEING ONE TIME CONTRIBUTION AT ` 1,000/- PER EMPLOYEE. IT WAS BROUGHT TO OUR NOTICE THAT THE SA ME OFFICER HAS BEEN ALLOWING SUCH CONTRIBUTION IN FAVOUR OF THE ASSESSE E. THIS FACT WAS NOT CONTROVERTED SUCCESSFULLY BY THE DEPARTMENT RATHER IT WAS ALLOWED BY THE SAME OFFICER. THEREFORE, WE ORDER TO DELETE TH E ADDITION MADE ON THIS ACCOUNT IN ALL THE CASES. 11. THE NEXT ISSUE IS REGARDING CONTRIBUTION TO INSURAN CE FUND. THIS AMOUNT REFERS TO THE AMOUNT ACTUALLY PAID TO VICTIM S IN CASE OF ACCIDENT, EITHER DEATH OR DISABILITY/INJURY, EITHER BY WAY OF NO FAULT LIABILITY OR THIRD PARTY LIABILITY. BUT IN THE PROFIT & LOSS ACCOUNT, THE NOMENCLATURE STATED IS CONTRIBUTION TO INSURANCE F UND IN ACCORDANCE WITH THE GOVERNMENT ORDER. 12. BOTH THE PARTIES HEARD AND IT WAS FOUND THAT WHEN A N ACCIDENT OCCURS DURING A FINANCIAL YEAR, AS PER THE PROVISIO NS OF THE MOTOR VEHICLES ACT, NO FAULT LIABILITY FOR EACH FATAL AND FOR EACH INJURY BECOME PAYABLE BY THE OWNER OF THE VEHICLE. THE OWNER OF THE VEHICLE IN THIS MP 31 TO 40/2011 & ITA 1718 TO 1727/2009 :- 9 -: CASE BEING THE ASSESSEE, ON WHOM SUCH A DUTY IS CAS T BY THE MOTOR VEHICLES ACT. IN SUCH CASES, THE ACT SAYS THAT EVE N IF THERE IS NO FAULT OF THE OWNER OR IN OTHER WORDS, WHETHER THE FAULT I S ON THE PART OF THE OWNER/VICTIM AND WHETHER THE VEHICLE IS OWN BY THE PUBLIC/PRIVATE TRANSPORT, SUCH MINIMUM AMOUNTS BEING 50,000/- IN T HE CASE OF DEATH AND ` 25,000/- IN CASE OF INJURY HAVE TO BE PAID. THE A SSESSEE HAS BOOKED THESE AMOUNTS BASED ON THE NUMBER OF ACCIDEN TS OCCURRED DURING THE RELEVANT FINANCIAL YEAR(S). THE CORPORA TION IS EXEMPTED FROM INSURING THE VEHICLES AGAINST THE THIRD PARTY LIABILITY WITH THE INSURANCE COMPANIES AS PER THE G.O. BUT IN CASE HI GHER CLAIM IS MADE BY THE VICTIM FOR PAYMENT AS PER THE COURT ORDER, THE SAME IS BOOKED UNDER THE HEAD ACCIDENT COMPENSATION AGAINST THIR D PARTY CLAIMS. IN THAT CASE, NO FAULT LIABILITY AMOUNT SHALL ALSO BE INCLUDED IN THAT BASED ON THE JUDICIAL PRONOUNCEMENTS OF THE APPROPRIATE J UDICIAL AUTHORITIES AND AS ACCEPTED BY THE ASSESSEE. THIS ISSUE IS ALS O COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL REN DERED IN THE CASE OF CHOLAN ROADWAYS CORPORATION LTD FOR ASSESSMENT YEAR S 1994-95 AND 1995-96 IN I.T.A.NO. 158 AND 159/MDS/1999 DATED 14. 2.2005. SUBSEQUENTLY, THE ASSESSING OFFICER HAS BEEN ALLOWI NG THIS CLAIM IN FAVOUR OF THE ASSESSEE. FROM DIFFERENT ANGLES IT WAS FOUND THAT IN FACT THIS PAYMENT IS NOT MADE TO AN EMPLOYEE BY AN EMPLO YER AND THEREFORE, THE PROVISIONS OF SECTION 40A(9) OF THE ACT ARE NOT ATTRACTED. HENCE, WE FIND THAT THIS PROVISION WOULD NOT APPLY IN SUCH CASES. IT MP 31 TO 40/2011 & ITA 1718 TO 1727/2009 :- 10 - : DOES NOT MEAN THAT THE ASSESSEE IS NOT ENTITLED TO SUCH A CLAIM. ON THE OTHER HAND, THE ISSUE STANDS COVERED BY THE AFO REMENTIONED TRIBUNAL ORDER IN FAVOUR OF THE ASSESSEE. ACCORDIN GLY, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE(S) AS PER OUR ABO VE OBSERVATION. 13. THE LAST ISSUE RELATES TO GRATUITY WHICH IS A LIABI LITY TO A RECOGNIZED GRATUITY FUND. SINCE THE ASSESSEE DID NOT PAY THE CONTRIBUTION, IT HAS DISALLOWED THIS AMOUNT IN THE MEMO OF ADJUSTMENT BUT THE ASSESSING OFFICER HAS AGAIN DISALLOWED THE SAME. IN THIS WAY, HE HAS TAXED THE SAME AMOUNT TWICE. 14. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND UNDERST ANDING THE ISSUE IN DETAIL, WE FIND THAT THE ASSESSEE ITSELF H AS DISALLOWED THIS AMOUNT IN THE MEMO OF ADJUSTMENT AND HENCE, THERE I S NO QUESTION OF DISALLOWANCE OF THE SAME AMOUNT AGAIN. HENCE, WE D ECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE . 15. IN ALL THESE APPEALS, ALMOST COMMON ISSUES ARE INVO LVED. WE CHOOSE TO DECIDE THE ISSUE IN FAVOUR OF THE ASSES SEE(S) IN VIEW OF OUR ABOVE OBSERVATIONS. THE AMOUNTS ADDED UNDER DIFFE RENT HEADS DEFINITELY BE DIFFERENT IN THESE CASES, BUT WE DO N OT FEEL NECESSARY TO MENTION THE EXACT AMOUNTS. THESE ARE VERILY GIVEN IN THE ASSESSMENT ORDER(S) OF EACH CASE. CONSEQUENTLY, WE ALLOW ALL THESE GROUNDS TAKEN IN ALL THE APPEALS IN FAVOUR OF THE ASSESSEE. MP 31 TO 40/2011 & ITA 1718 TO 1727/2009 :- 11 - : 16. IN ASSESSMENT YEAR 2001-02, IN THE CASE OF TNSTC, KUMBAKONAM DIVISION IV) [PUDUKOTTAI], INITN 1721/MD S/2009, APART FROM THE GROUNDS DECIDED ABOVE, THERE ARE OTHER ADD ITIONS LIKE ADDITION TOWARDS INTEREST OF ` 8,26,885/-; AND ADVANCE RECEIVED ASSESSED AS INCOME OF ` 9,20,565/-. IN SO FAR AS ADDITION ON ACCOUNT OF INTEREST IS CONCERNED, THIS AMOUNT REPRESENTS OUTST ANDING LIABILITY PAYABLE TO TAMIL NADU TRANSPORT DEVELOPMENT FINANCE CORPORATION LIMITED FOR THE MONTH OF MARCH, 2001 WHICH IS PAID IN APRIL 2001. SINCE THE DUE DATE IS IN APRIL AND THE LIABILITY RE LATES TO MARCH 2001, AS PER THE MERCANTILE SYSTEM OF ACCOUNTING, THE ASSESS EE HAS CLAIMED THIS SUM AS DEDUCTION. 17. AFTER HEARING BOTH SIDES, WE FIND THAT THE ASSESSIN G OFFICER HAS HIMSELF MENTIONED IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS CREDITED A SUM OF ` 8,26,885/- TO THE ACCOUNT OF INTEREST ACCRUED BUT NOT DUE. SINCE THE ASSESSEE IS FOLLOWING MERCANTIL E BASIS, THIS ACCRUED INTEREST IS ADDED TO THE TOTAL INCOME. THIS AMOUNT HAS BEEN PAID TO THE CONCERNED AUTHORITIES WITHIN THE DUE DATE OF FI LING THE RETURN OF INCOME AND THE SAME HAS BEEN ASSESSED TO TAX IN THE SUBSEQUENT YEAR. THEREFORE, THIS AMOUNT CANNOT BE CONSIDERED FOR ADDITION IN THIS YEAR. THE SAME IS ALLOWED IN THIS YEAR. IN OUR OP INION, THE ASSESSING OFFICER HAS ERRED TO JUDGE THE EXPENDITURE AND THE SAME STANDS DELETED. MP 31 TO 40/2011 & ITA 1718 TO 1727/2009 :- 12 - : 18. REGARDING THE ADVANCE OF ` 9,20,565/- RECEIVED FROM SALE OF BUS PASSES ETC. MADE ON THE LAST COUPLE OF DAYS IN THE YEAR ENDING 31.3.2001 FOR WHICH THE TRAVEL DATE WILL COMMENCE A FTER 31.3.2001. EVEN IF MERCANTILE SYSTEM IS FOLLOWED, THIS AMOUNT CANNOT BE ASSESSED IN THE YEAR UNDER CONSIDERATION. THE ASSESSEE HAS OFFERED THIS AMOUNT IN THE NEXT ASSESSMENT YEAR AND HENCE, THIS AMOUNT CANNOT BE ADDED IN THE HANDS OF THE ASSESSEE IN THIS YEAR AND THE S AME STANDS DELETED. 19. IN THE RESULT, ALL THE APPEALS FOR ASSESSMENT YEAR 2001-02, BEING I.T.A.NOS.1718/MDS/2009,1719/MDS/2009, 1720/M DS/2009 AND 1721/MDS/2009 STAND ALLOWED. 20. FOR ASSESSMENT YEARS 2003-04, 2004-05, 2005-06 & 2006-07, THE ASSESSEE M/S TAMILNADU STATE TRANSPORT CORPORAT ION (KUMBAKONAM) LIMITED, IS IN APPEAL. I.T.A.NO. 1722/MDS/2009 A.Y 2003-04 21. FOR ASSESSMENT YEAR 2003-04, THE ASSESSEE HAS FIL ED RETURN OF INCOME ON 27.3.2006 DECLARING A TOTAL INCOME OF ` 26,85,29,558/-. THIS TOTAL INCOME WAS COMPRISED OF FOUR DIVISIONS V IZ. TNSTC, DIV- I(KUMBAKONAM), DIV-II(TRICHY), DIV-III(KARAIKUDI) A ND DIV- IV(PUDUKOTTAI). IT WAS OBSERVED THAT THE ABOVE MEN TIONED FOUR DIVISIONS GOT MERGED BY AN AMALGAMATION RECOGNIZED BY MINISTRY OF FINANCE, GOVERNMENT OF INDIA, AS STATED IN THE EARL IER PART OF THIS ORDER. THE ORIGINAL RETURN IN THE NAME OF TNSTC(KU M.DIV-I) LTD., WAS FILED ON 20.11.2003 AS EFFECT FOR AMALGAMATION WAS NOT GIVEN IN THE MP 31 TO 40/2011 & ITA 1718 TO 1727/2009 :- 13 - : ORIGINAL RETURN, THE ASSESSEE HAS FILED REVISED RET URN OF INCOME ON 27.3.2006 DECLARING NET INCOME OF ` 26,85,29,558/- COMPRISING OF THE FOUR UNITS. HOWEVER, THE ASSESSEE-COMPANY HAS SET OFF OF UNABSORBED BUSINESS LOSS AND UNABSORBED DEPRECIATIO N BROUGHT FORWARD FROM EARLIER YEARS AGAINST INCOME DECLARED ` 26,85,29,558/- THEREBYNET INCOME WAS SHOWN AT NIL. BESIDES THIS, THE ASSESSEE HAD ALSO CLAIMED CARRY FORWARD FOR SET OFF AGAINST FUTU RE YEAR PROFITS BUSINESS LOSS AND UNABSORBED DEPRECIATION AMOUNTING TO ` 40,72,49,036/- AND ` 1,44,59,30,027/- RESPECTIVELY. SINCE THE ASSESSEE HAS FILED RETURN OF INCOME BELATEDLY ON 27 .3.2006, THE RETURN WAS LODGED. MOREOVER, THE ASSESSEE HAD MADE A CLAI M OF ADJUSTMENT OF EARLIER YEAR BUSINESS LOSS AND UNABSORBED DEPREC IATION LOSSES U/S 72A OF THE ACT ON ACCOUNT OF AMALGAMATION. THE ASSE SSING OFFICER OBSERVED THAT SINCE THE ASSESSEE IS NOT AN INDUSTRI AL COMPANY, NO ADJUSTMENT OF EARLIER YEARS LOSSES CAN BE ADJUSTED AS PER SECTION 72A. ON ACCOUNT OF THESE REASONS, THE ASSESSING OFFICER WAS OF THE VIEW THAT THERE WAS ESCAPEMENT OF INCOME. HE, THEREFORE , ISSUED NOTICE U/S 148 ON 28.12.2007 CALLING FOR ASSESSEES REVISED RE TURN IN RESPONSE TO WHICH THE ASSESSEE, VIDE LETTER DATED 23.1.2008 STA TED THAT THE RETURN OF INCOME FILED ON 27.3.2006 BE TREATED AS RETURN F ILED IN RESPONSE TO NOTICE U/S 148. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT O N PROTECTIVE BASIS SINCE THE SUBSTANTIVE ASSESSMENT WAS DONE IN THE C ASE OF M/S MP 31 TO 40/2011 & ITA 1718 TO 1727/2009 :- 14 - : TNSTC(KUMBAKONAM DIV.I) LTD FOR ASSESSMENT YEAR 200 3-04 BY DENYING BROUGHT FORWARD BUSINESS LOSSES/UNABSORBED DEPRECIATION. 22. ON APPEAL, THE LD. CIT(A) HAS CONFIRMED THE ACTION OF REOPENING OF ASSESSMENT BY THE ASSESSING OFFICER. THE LD. CIT(A) HAS OBSERVED THAT THE ASSESSEE IS ONLY A TRANSPORT OPERATOR FOR CARRYING PASSENGERS AND THEREFORE, IT IS NOT ENTITLED FOR SUCH CARRY FO RWARD OF ACCUMULATED LOSSES AND UNABSORBED DEPRECIATION WHICH IS ELIGIBL E FOR INDUSTRIAL UNDERTAKINGS ONLY U/S 72A OF THE ACT. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 23. THE LEGAL ISSUE IN REGARD TO REOPENING OF ASSESSM ENT WAS NOT SERIOUSLY CONTESTED HENCE, THE GROUND RAISED IN THI S RESPECT IS REJECTED. 24. THE NEXT ISSUE RELATES TO BUSINESS LOSS/UNABSORBED DEPRECIATION. WHILE COMPLETING THE ASSESSMENT , TH E ASSESSING OFFICER HAS NOT CONSIDERED SET OFF OF BROUGHT FORWARD BUSIN ESS LOSS AND UNABSORBED DEPRECIATION ON THE GROUND THAT THE ASSE SSEE IS NOT AN INDUSTRIAL UNDERTAKING. THE LD. CIT(A) HAS CONFIRM ED THE ACTION OF THE ASSESSING OFFICER. 25. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIND I T FOR A FACT THAT THE ASSESSEE IS RUNNING VEHICLES ON HIRE, BUT IT IS ENTITLED TO CARRY FORWARD AND SET OFF OF BROUGHT FORWARD BUSINESS LOS S AND UNABSORBED DEPRECIATION IN VIEW OF THE VERY PURPOSE OF THE VAR IOUS UNITS AND IN VIEW OF THE PURPOSE OF SECTION 72A, WHERE THE CONCE PT OF THE BUSINESS HAS TO BE UNDERSTOOD IN BROADER SENSE. MP 31 TO 40/2011 & ITA 1718 TO 1727/2009 :- 15 - : 26. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. I.T.A.NO. 1723/MDS/2009 A.Y 2004-05 27. THE FIRST ISSUE IS REGARDING PRIOR PERIOD EXPENSES AMOUNTING TO ` 21,74,857/-. THE FACTS APROPOS THIS ISSUE ARE THA T THE ASSESSING OFFICER, WHILE COMPLETING THE ASSESSMENT HAS DISAL LOWED THIS AMOUNT AS THEY ARE NOT CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION. THE LD.AR SUBMITTED THAT THE ENTIRE EXPENSES WERE CRYS TALLIZED DURING THE YEAR ONLY. 28. AFTER HEARING BOTH SIDES, WE ARE OF THE CONSIDERED OPINION THAT THE ISSUE NEEDS TO BE CLEARLY SPELT OUT BY THE ASS ESSING AUTHORITIES. CONSEQUENTLY, WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR VERIFYING THE CLAIM OF THE ASSESSEE AND DECIDE THE ISSUE AS PER LAW. 29. THE OTHER ISSUE RAISED IN THIS APPEAL IS REGARDING ADDITION OF ` 17,23,90,009/- TOWARDS PENSION CONTRIBUTION IS DECI DED IN FAVOUR OF THE ASSESSEE IN VIEW OF OUR FINDING IN ASSESSMENT YEAR 2001-02. 30. THE LAST ISSUE RAISED IN THIS APPEAL RELATES TO D ISALLOWANCE OF EXPENSES RELATING TO SHARE CAPITAL INCREASE AMOUNTI NG TO ` 37,50,000/-. THE FACTS APROPOS THIS ISSUE ARE THAT THE ASSESSING OFFICER HAS DISALLOWED THIS EXPENDITURE OF THE ASSESSEE TREATIN G IT TO BE CAPITAL IN NATURE AND IN VIEW OF THE HON'BLE SUPREME COURTS D ECISION IN THE CASE OF BROOKE BOND INDIA, THE SAME AMOUNT NEEDS TO BE C APITALIZED. THE MP 31 TO 40/2011 & ITA 1718 TO 1727/2009 :- 16 - : ASSESSEE SUBMITTED BEFORE THE ASSESSING OFFICER THA T ONLY DUE TO AMALGAMATION, THE AUTHORIZED CAPITAL OF THE COMPANY WAS INCREASED FOR WHICH FEES WERE PAID. THE LD. CIT(A) HAS CONFI RMED THIS DISALLOWANCE. 31. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIND T HAT THE AUTHORIZED CAPITAL OF THE COMPANY WAS INCREASED DUE TO AMALGAMATION OF THE FOUR DIVISIONS. THEREFORE, WE DIRECT TO DEL ETE THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 32. IN THE RESULT, THE APPEAL FOR ASSESSMENT YEAR 2004 -05 IS PARTLY ALLOWED AND PARTLY ALLOWED FOR STATISTICAL PURPOSES . I.T.A.NO. 1724/MDS/2009 A.Y 2004-05 33. THE FIRST ISSUE REGARDING REOPENING OF ASSESSMENT WAS NOT SERIOUSLY CONTESTED, HENCE, THE SAME STANDS DISMISS ED. 34. THE NEXT ISSUE RELATES TO PRIOR PERIOD EXPENSES. IN VIEW OF OUR FINDING IN ASSESSMENT YEAR 2003-04, THE ISSUE IS RE STORED TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION AS DIRECTED IN ASSESSMENT YEAR 2003-04. 35. THE NEXT ISSUES RELATE TO GRATUITY AMOUNT OF ` 4,65,16,458/- PAID TO AN APPROVED GRATUITY FUND AND ` 15,13,52,550/- TO INSURANCE FUND. THESE ISSUES STAND COVERED IN FAVOUR OF THE ASSESSEE IN VIEW OF OUR ORDER FOR ASSESSMENT YEAR 2001-02. 36. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED AND PA RTLY ALLOWED FOR STATISTICAL PURPOSES. MP 31 TO 40/2011 & ITA 1718 TO 1727/2009 :- 17 - : I.T.A.NO. 1725/MDS/2009 A.Y 2005-06 37. THE LEGAL ISSUE REGARDING REOPENING OF ASSESSMENT WAS NOT SERIOUSLY PRESSED AT THE TIME OF HEARING, HENCE, TH E SAME IS REJECTED. 38. AS REGARDS THE CLAIM OF UNABSORBED DEPRECIATION, THE SAME IS ALLOWED IN VIEW OF OUR ABOVE ORDER IN I.T.A.NO. 172 2/MDS/2009. 39. THE ASSESSEE HAS RAISED GROUNDS IN RELATION TO D ISALLOWANCE OF GRATUITY AMOUNTING TO ` 5,69,51,044/, INSURANCE FUND AMOUNTING TO ` 14,65,27,889/-. THESE ISSUES STAND COVERED IN FAV OUR OF THE ASSESSEE IN VIEW OF OUR ORDER FOR ASSESSMENT YEAR 2 001-02. 40. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. I.T.A.NO. 1726/MDS/2009 A.Y 2005-06 41. THE FIRST ISSUE RELATES TO PRIOR PERIOD EXPENSES A MOUNTING TO ` 23,93,899/-. THE ASSESSING OFFICER, WHILE COMPLETI NG THE ASSESSMENT , HAS DISALLOWED ` 23,93,899/- UNDER THIS HEAD. THE ASSESSEE HAS SUBMITTED THAT THE ENTIRE EXPENSES WERE CRYSTALLIZE D DURING THE YEAR ONLY. 42. AFTER HEARING THE RIVAL SUBMISSIONS, WE RESTORE TH IS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION AS D IRECTED ABOVE IN OUR ORDER FOR ASSESSMENT YEAR 2003-04. MP 31 TO 40/2011 & ITA 1718 TO 1727/2009 :- 18 - : 43. THE NEXT ISSUE RELATES TO ADDITION OF ` 17,16,72,947/- TOWARDS PENSION CONTRIBUTION. IN VIEW OF OUR ORDER FOR A SSESSMENT YEAR 2001- 01, WE DELETE THIS ADDITION. 44. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED AND PAR TLY ALLOWED FOR STATISTICAL PURPOSES. I.T.A.NO. 1727/MDS/2009 A.Y 2006-07 45. THE FIRST ISSUE REGARDING UNABSORBED DEPRECIATION I S ALLOWED IN VIEW OF OUR ORDER IN I.T.A.NO. 1722/MDS/2009. 46. THE NEXT ISSUES REGARDING GRATUITY PAYMENT OF ` 96,87,795/-, AND INSURANCE FUND OF ` 13,49,51,019/- ARE ALLOWED IN VIEW OF OUR ORDER FOR ASSESSMENT YEAR 2001-02. 47. THE LAST ISSUE IS AGAINST ADDITION OF ` 57,000/- MADE TOWARDS EMPLOYEES RETIREMENT BENEFIT SCHEME. THE CONTRIBUT ION WAS MADE IN PURSUANCE OF A SETTLEMENT REACHED WITH THE EMPLOYEE S AND THE MANAGEMENT U/S 12(3) OF THE INDUSTRIAL DISPUTES ACT . THE ASSESSEE SUBMITTED THAT DURING ASSESSMENT YEAR 2001-02, SIMI LAR CLAIM IN THE CASE OF TRICHY DIVISION WAS ALLOWED BY THE SAME ASS ESSING OFFICER. 48. AFTER CONSIDERING THE RIVAL SUBMISSIONS, IN VIEW O F OUR FINDING IN ASSESSMENT YEAR 2001-02, THIS ADDITION IS DELETED. 49. IN THE RESULT, THE APPEAL IS ALLOWED. MP 31 TO 40/2011 & ITA 1718 TO 1727/2009 :- 19 - : 50. TO SUMMARIZE THE RESULT- I.T.A.NOS.1718/MDS/2009, 1719/MDS/2009, 1720/MDS/20 09, 1721/MDS/2009 AND 1727/MDS/2009 ARE ALLOWED. I.T.A.NOS.1723/MDS/2009, 1724/MDS/2009 AND 1726/MDS /2009 ARE PARTLY ALLOWED AND PARTLY ALLOWED FOR STATISTIC AL PURPOSES. I.T.A.NOS. 1722/MDS/2009 & 1725/MDS2009 ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 3.6.2011. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (HARI OM MARATHA) JUDICIAL MEMBER DATED: 13 TH JUNE, 2011 RD : COPY TO: 1. PETITIONER 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR