9911796707
TMI Blog2012 (8) TMI 493X X X X Extracts X X X X X X X X Extracts X X X X ..... sales tax exemption granted by the Government of Gujarat for establishing industries in the backward area of Gandhar. In reply to a query raised by the Assessing Officer as to why the said amount should not be treated as revenue receipt, the assessee filed its reply stating that the exemption is granted by the State Government of Gujarat because the industry is situated in the backward area as notified in the notification passed by the Government. The total quantum of exemption available is based on the investment made in the fixed assets of the undertaking / industrial plant. That the mode of granting such incentive is by way of sales tax exemption in respect of sale of products generated by such undertaking but the total quantum of incentive available is based on the capital invested in the aforesaid project/ plants / undertaking. Hence, the sales tax exemption is a capital receipt not chargeable to income tax. The Assessing Officer did not accept the contention of the assessee and considering the judgment of Hon'ble Supreme Court in Sahney Steel and Press Works Ltd. v/s CIT, [1997] 228 ITR 253 (SC), and also following the order of the Commissioner (Appeals) for assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is covered in favour of the assessee. 7. Learned Departmental Representative, on the other hand, has not disputed the above submissions of the learned Counsel for the assessee, save and except, relying on the order of the authorities below. 8. On considering the above submissions of the learned Representatives of the parties and earlier orders of the Tribunal in assessee's own case for assessment years 2000-01, 2001-02 and 2002-03, copy placed at Pages-1 to 53 of the paper book (relevant Pages-14 to 18) and respectfully following the said order, we decide the issue in favour of the assessee by allowing assessee's ground of appeal and set aside the orders of the authorities below. Hence, ground no.1, taken by the assessee is allowed. 9. In ground no.2, the assessee has disputed the order of the Commissioner (Appeals) in confirming the disallowance of expenditure by way of contribution of Rs. 70.20 lakhs, made by the assessee to various organisations. 10. The Assessing Officer has stated that the assessee has claimed Rs. 11,50,000, under the head "Donation / Contribution" and Rs. 58,70,190, under the head "Community Welfare Expenses". The Assessing Officer has stated that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 96 ITD 186 (Mum.), and the judgment of Hon'ble Karnataka High Court in Mysore Kirloskar Ltd. v/s CIT, [1987] 166 ITR 836 (Kar.), held that the expenditure incurred by the assessee was of revenue in nature and is allowable as deduction under section 37(1) of the Act. To substantiate his submissions, the learned Counsel referred to Paras-9 to 11 of the said judgment (relevant Pages-18 to 23 of the paper book). He submitted that issue is covered in favour of the assessee in assessee's own case by earlier order of the Tribunal. 13. On the other hand, the learned Departmental Representative has not disputed the above submissions of the learned Counsel for the assessee, save and except, relying on the orders of the authorities below. 14. We have heard the submissions of the learned Representatives and perused the earlier orders of the Tribunal. We observe that the Tribunal, vide Para-11, in assessee's own case for assessment year 2000-01, observed as under:- "11. We have considered the rival submissions, facts and circumstances of the case and decisions relied upon by the assessee. (i) So far as decision in the case of Madras Refineries Ltd (supra) is concerned, the Hon'ble High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pts or to avoid future recurring payments of a revenue character. Expenditure in this sense is equal to disbursement which to use a homely phrase, means something which comes out of the trader's pocket. Thus, in finding out what profits there be, the normal accountancy practice may be to allow as expense any sum in respect of liabilities which have accrued over the accounting period and to deduct such sums from profits. But the income tax law does not take every such allowance as legitimate for purpose of tax. A distinction is made between an actual liability in presenti and a liability de futuro which, for the time being, is only contingent. The former is deductible but not the latter." 11.2 After considering the nature of expenditure and the proposition of law held the Hon'ble Supreme Court as well as High Courts and the Tribunal (supra), we are of the opinion that the expenditure incurred by the assessee was definitely of Revenue nature and the assessee was entitled to the deduction under section 37(1) of the Act subject, however, to the verification of payment and since the assessee had not furnished the receipts before the Assessing Officer, we direct the Assessing Officer to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x and Vadodara for a distance of 107 kms. As per the said agreement, the assessee company was to pay a minimum guaranteed amount of Rs. 2.47 crores per month to Dodsal which would increase depending upon the actual quantity handled. Dodsal for its own financial purposes involved ICICI Ltd. who became the lessor. The assessee company was not involved in this financial arrangement between ICICI Ltd. and Dodsal. The assessee company claimed the payment of Rs. 2.47 crores per month as revenue expenditure. The assessee stated before the Assessing Officer that in the initial stages of Gandhar Complex, the focus of the assessee was to put up the main plant and run successfully rather than to concentrate the activities related to infrastructure facilities for the raw materials. At that time, focus was to leave it to external agency in areas like Port infrastructure and pipelines both on the economics of cost constraint on initial investment as well as the limited expertise on these areas. Since the assessee company was not having expertise in the working and managing of pipeline project and also handling movements of materials through it, the assessee company identified Dodsal who had rich ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r restructuring of the BOOT agreement, ICICI Ltd. became the owner of the pipeline. The assessee was not the owner of the pipeline earlier and by restructuring such agreement, the assessee has not become the owner of the pipeline. What the assessee was able to achieve by such restructuring is: 1. Taking control of the operations and maintenance of the pipeline which was very vital for its operation and functioning from Dodsal Ltd. to itself thereby reducing any security hazard or any other operational problems which might crop up in future. 2. Utilising the experience gained during the operation of the pipeline from 1997 to 2003 to its advantage thereby reducing the need of a middle person in between. 3. Making substantial saving in the operational cost of the pipeline viz. for the previous 3 years like 31.3.2001, 31.3.2002 and 31.3.2003, annual aggregate payment made to Dodsal Ltd. for operation of this particular pipeline was as follows:- 31.3.2001 Rs. 30.92 crores 31.3.2002 Rs. 31.35 crores 31.3.2003 Rs. 32.64 crores 4. The expenditure on payment of lease rent and maintenance of the pipeline as per the original BOOT agreement with Dodsal and as per restructuring agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial year under consideration, the assessee is entitled for the depreciation at half of the eligible rate which comes to Rs. 12,75,42,913. Hence, the Assessing Officer disallowed Rs. 89,28,00,398 [Rs. 102,03,43,311 (-) Rs. 12,75,42,913] and added back to the total income of the assessee. 20. Being aggrieved, the assessee carried the matter before the first appellate authority, wherein it was contended on behalf of the assessee that one time payment to Dodsal has not given right to any intangible asset or any fixed assets in the hands of the assessee. Before the termination of BOOT agreement, the pipeline was owned by the ICICI Ltd. and after re- structuring of said agreement also, ICICI Ltd. continued to remain the owner and lessor of the pipeline. The assessee was not the owner of the pipeline earlier and by re-structuring such agreement, the assessee has not become the owner of the pipeline. In both the situation, the assessee was only paying for the user of the pipeline and for the flow of raw materials and the payment for such user was always regarded as revenue expenditure and claimed accordingly. It was further submitted before the Commissioner (Appeals) that the BOOT a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 85, wherein broad test was deduced for distinguishing capital expenditure from revenue expenditure. It was held that if what is got rid of by a lump sum payment is an annual business expense chargeable against revenue, the lump sum payment should equally be regarded as business expense but if the lump sum payment brings in a capital asset, then that puts the business on another footing altogether. He submitted that the assessee has made a lump sum payment, to get rid of making annual payment in the form of monthly payment to Dodsal which was allowable as business expenditure to the assessee, is also to be considered as business expenditure under section 37(1) of the Act, That no asset has come into existence to the assessee by making said payment. He further relied on the judgment of Hon'ble Supreme Court in CIT v/s Madras Auto Service (P.) Ltd., [1998] 233 ITR 468 (SC). He submitted that in the above case, the assessee company entered into a lease agreement and as per conditions of lease agreement, the lessee i.e., the assessee had a right to demolish at this own expenditure the existing premises and appropriate to itself all the materials thereof without payment to the lessor any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment with Dodsal is a saving in annual expenditure in the form of lump sum payment and, therefore, the same be equally regarded as business expenditure as the monthly payment made by the assessee was also considered as revenue expenditure. The learned Counsel also placed reliance on the judgment of Hon'ble Jurisdictional High Court in CIT v/s HEDE Consultancy Pvt. Ltd., [2002] 258 ITR 380 (Bom.) and the judgment of Hon'ble Jurisdictional High Court in Talathi And Panthaky Associates Pvt. Ltd., [2012] 343 ITR 309 (Bom.) and submitted that the Hon'ble Jurisdictional High Court also followed the same principle and held that when a lump sum payment is made to get rid of annual payment by which the assessee gets commercial advantage in the form of securing tenancy of an equivalent area of premises on the same rent as before, the expenditure could not be regarded as being of a capital nature, the said expenditure incurred by the assessee is revenue expenditure. 22. The learned Counsel further submitted that the Assessing Officer has also stated it as capital expenditure because the assessee had capitalized it in its book after termination of agreement with Dodsal. The learned Counsel, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company, we observe that the assessee stated before the Assessing Officer that in the last three years i.e., F.Y. ending 31st March 2001, it paid Rs. 30.92 crores, in the F.Y. ending 31st March 2002, it paid Rs. 31.35 crores and in the F.Y. ending 31st March 2003, it paid Rs. 32.64 crores to Dodsal for operation of said pipeline. Undisputedly, the said payments were allowed as revenue expenditure in respective assessment years. Further, the assessee, in its reply to the Assessing Officer, also stated that over a period of nine F.Ys from 2003-04 to 2011-12, it was to pay, as per earlier agreement, minimum Rs. 266.76 crores to Dodsal. However, the amount payable as per re-constructing agreement comes to Rs. 104.45 crores. We further observe that the assessee has stated that even when BOOT agreement was in operation, the assessee was not the owner of the pipeline and also after re-constructing of the BOOT agreement, the assessee has not become the owner of the pipeline. We observe that after re-structuring of the BOOT agreement, i.e., when the assessee made the lump sum payment of Rs. 102,03,43,311, ICICI Ltd. became the owner of the pipeline and the assessee only got control of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure, therefore, was made in order to secure a long lease of new and more suitable business premises at a lower rent. In other words, the assessee made substantial savings in monthly rent for a period of 39 years by expending these amounts. The saving in expenditure was a saving in revenue expenditure in the form of rent. Whatever substitutes for revenue expenditure should normally be considered as revenue expenditure. Moreover, the assessee in the present case did not get any capital asset by spending the said amounts. The assessee, therefore, could not have claimed any depreciation. Looking to the nature of the advantage which the assessee obtained in a commercial sense, the expenditure appears to be revenue expenditure." For distinguishing between the capital expenditure and revenue expenditure Their Lordships of the Apex Court considered the case of Assam Bangal Cement Co. Ltd. (supra) and at Page-473, stated as follows:- 1. Outlay is deemed to be capital when it is made for the initiation of a business, for extension of a business, or for a substantial replacement of equipment. 2. Expenditure may be treated as properly attributable to capital when it is made not only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee company has not acquired any capital asset by making lump sum payment. It has only derived an enduring advantage as in the case of Madras Auto Service (P.) Ltd. (supra). Therefore, the said expenditure of making lump sum payment by terminating BOOT agreement entered into by the assessee company and Dodsal, it has only got the business advantage of maintaining and operating the pipeline. The assessee company has stated that even when the BOOT agreement was in operation, the assessee was neither the owner of the pipeline nor after making the lump sum payment to Dodsal on terminating the BOOT agreement the assessee became the owner of the pipeline. The owner of the pipeline is ICICI Ltd. The said facts have not been disputed by the Department, even when assessee filed its reply before the authorities below as well as at the time of hearing of this appeal before us. 27. The Hon'ble Jurisdictional High Court in HEDE Consultancy Pvt. Ltd. (supra) also held that if the assessee company by spending amount by renovating the godown, taken on lease did not get the assets created belonging to it but if the assessee got business advantage of using modern business premises at a low rent t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said interest would nonetheless be allowed as deduction under section 36(1)(iii) of the Act while computing business profits of the relevant assessment year as the entries in the books of account are not relevant for rejecting the claim of the assessee, if it is otherwise allowable. The Hon'ble Calcutta High Court in CIT v/s Berger Paints (India) Ltd. (No.2), [2002] 254 ITR 503 (Cal.) held that if according to the revenue laws the assessee is entitled to treat a sum as a revenue expenditure, then that legal right of the assessee is not estopped by the treatment given by the assessee to it in its own books of account. The Hon'ble Supreme Court in Kedarnath Jute Mfg. Co. Ltd. (supra) held that whether the assessee is entitled to a particular deduction or not will depend on the provisions of law relating thereto and not on the view which the assessee might take of his rights, nor can the existence or absence of entries in his books of account be decisive or conclusive on the matter. 31. In view of the above judgments, we hold that the claim of the assessee which is otherwise allowable as revenue expenditure, cannot be denied merely on the ground that the assessee has capitalized the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f said expenditure of Rs. 1,07,02,000. Learned Counsel, relying on the judgment of Hon'ble Jurisdictional High Court in CIT v/s Cinceita Pvt. Ltd., [1982] 137 ITR 652 (Bom.) and the judgment of Hon'ble M.P. High Court in CIT v/s Gopal Associates, [2010] 326 ITR 413, (M.P), submitted that the said expenditure is to be allowed as revenue expenditure. 37. On the other hand, the learned Departmental Representative relied on the order of the Commissioner (Appeals). 38. We have heard the learned Representatives of the parties, considered the orders of the authorities below and the case laws cited before us. We observe that the issue is squarely covered in favour of the assessee by the aforesaid judgments. In the case of Cinceita Pvt. Ltd. (supra), the issue was, as to whether the expenditure of Rs. 10,700, incurred by the assessee for stamp duty, registration of lease deed and payment to Solicitor in connection with the lease deed is capital expenditure or revenue expenditure. The Hon'ble Jurisdictional High Court by following its earlier judgment in CIT v/s Hoechst Pharmaceuticals Ltd., [1978] 113 ITR 877 (Bom.) held that by incurring the said expenditure, the assessee has not acquire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee and stated that the exercise of re-locating the reactor resulted in its optimum use by the assessee and thus, clearly attributed to value addition of the reactor. He has stated that by re-locating the reactor, the assessee has acquired a new or different advantage in the form of optimum use of the reactor and, accordingly, considered the said expenditure of Rs. 24.87 lacs as capital in nature. However, the Assessing Officer allowed the depreciation of Rs. 3,10,875, and added back the balance amount of Rs. 21,76,125, to the income of the assessee. 41. Being aggrieved, the assessee carried the matter before the first appellate authority, wherein the Commissioner (Appeals) has confirmed the order passed by the Assessing Officer after stating that the said reactor did not function at its original place of installation and the expenditure incurred on designing of its location amounted to being in the peculiar facts and circumstances of the case the expenditure incurred to form part of the capital asset. Hence, the assessee is in further appeal before the Tribunal. 42. Before us, the learned Counsel for the assessee submitted that the assessee has not acquired any new ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer has stated that the assessee has claimed Rs. 22,13,29,394, as deduction under section 80HHC. The Assessing Officer stated that the profit of the business as computed under the head "Profit & Gains of Business or Profession" in the case of assessee is nil. The question of allowance of deduction under section 80HHC does not arise both under the normal provisions as well as section 115JB and, accordingly, disallowed the deduction claimed by the assessee under section 80HHC. 48. Being aggrieved, the assessee carried the matter before the first appellate authority, wherein the Commissioner (Appeals) stated that similar issue came up before him in the case of assessee in assessment year 2001- 02 and he confirmed the action of the Assessing Officer in this regard. Accordingly, the Commissioner (Appeals), by following his earlier order dated 28th November 2006, passed for assessment year 2001-02, confirmed the action of the Assessing Officer in rejecting the claim of deduction under section 80HHC of Rs. 22,13,29,394, for the purpose of computing book profit under section 115JB. Being aggrieved, assessee is in further appeal before the Tribunal. 49. Before us, the learned C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approved the decision of ITAT Mumbai Special Bench in Syncom Formulations (I) Ltd. (supra) and stated that section 80HHC as well as section 80HHE falls in the same Chapter i.e., Chapter-VI. The provisions under section 115JA are also in pari material with the provisions of section 115JB of the Act. Consequently, we allow ground no.6, raised by the assessee by reversing the orders of the authorities below. 52. We now take up Revenue's appeal being ITA no.744/Ahd./2008, for assessment year 2003-04. 53. In ground no.1, the department has disputed the order of the Commissioner (Appeals) in allowing deduction of Rs. 15,59,750, claimed as lease rental. 54. The Assessing Officer has stated that the assessee claimed deduction for lease rent of Rs. 22,43,936, in respect of boilers taken on lease from ICICI Ltd. / ICICI Securities and Finance Ltd. (I-SEC) during the financial years 1993-94 and 1994-95. The Assessing Officer disallowed the claim of the assessee by following his order for assessment year 1994-95 and 1998-99 and considering that the said payment comprising of re-payment of principal amount, interest and sales tax thereon. The Assessing Officer allowed Rs. 5,94,856, being int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d no.1, raised by the Revenue. 59. In ground no.2, the Department has disputed the order of the Commissioner (Appeals) in deleting the disallowance of Rs. 40,25,388, made by the Assessing Officer under section 40A(9) of the Act. 60. The Assessing Officer has stated that the assessee made contribution of Rs. 40,25,388, to various clubs run by and meant for the staff and their families at Vadodara, Naga Channa and other stations. The Assessing Officer stated that this contribution has been categorised under the head sums paid by the assessee as an employer which are not allowable under section 40A(9) of the Act. The Assessing Officer did not accept the contention of the assessee that the said expenditure was incurred to facilitate management of various activities of employees and their family purpose covering population of different types at the plants. The Assessing Officer stated that the provisions of section 40A(9) are very clear that any contribution to employee's any fund, trust, company or society, etc., other than for the purposes as provided under section 36(1) of the Act are not eligible for deduction as business expenditure. Therefore, he disallowed the claim of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowed the prior period expenses of Rs. 2.66 lacs and added back to the total income of the assessee. 67. Being aggrieved, the assessee carried the matter before the first appellate authority, wherein the Commissioner (Appeals) allowed the claim stating that similar disallowance made in the earlier assessment years 2000- 01 and 2001-02, were allowed. Hence, the Department is in appeal before the Tribunal. 68. Before us, the learned Departmental Representative relied on the order of the Assessing Officer and whereas the learned Counsel for the assessee submitted that similar issue on identical facts came before the Tribunal in assessment year 2001-02 and the Tribunal, by its order dated 30th April 2008, allowed the claim of the assessee. The learned Departmental Representative has not disputed this fact. 69. Considering the orders of the authorities below and the submissions of the learned Representatives of the parties, we observe that similar issue on identical facts came before the Tribunal in assessee's own case for assessment year 2001-02 and the Tribunal allowed the claim of the assessee. Respectfully following the same, we hold that there is no reason to interfere with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are identical to assessment year 2003-04. We also observe that the Commissioner (Appeals), while confirming the action of the Assessing Officer, followed orders for assessment years 2001-02 and 2002-03. We have discussed the said issue in Paras-4 to 7, herein above and following our findings given in Para-8, we decide the issue in favour of the assessee by allowing the assessee's ground of appeal. Hence, ground no.1, raised by the assessee is allowed. 77. In ground no.2, the assessee has disputed the order of the Commissioner (Appeals) in confirming the disallowance of expenditure by way of contribution of Rs. 1,03,20,654, made by the assessee to various organisations. 78. At the time of hearing, the learned Representatives of the parties submitted that the facts and issue are identical to assessment year 2003-04 and, therefore, whatever decision is taken in respect of that assessment year i.e., 2003-04, the same will be applicable for this assessment year as well. 79. On perusal of the orders of the authorities below, we agree that the facts and the issue in this assessment year viz. 2004-05 are identical to assessment year 2003-04. We also observe that the Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r despite the capital cost being liquidated by the rebates received by the assessee from GMB from time to time. The Assessing Officer disallowed the depreciation claimed by the assessee and added to the total income of the assessee. Being aggrieved, the assessee carried the matter before the first appellate authority. 82. On behalf of the assessee, it was argued that as per agreement with GMB, ownership of jetty would always remain with GMB. The benefit to the assessee on account of construction of jetty was the license to use jetty for the purpose of its business and to get concession in the payment of landing and shipping fees / port charges. In such circumstances, actually the assessee would have been entitled to claim the whole of the cost of jetty as a revenue deduction in the year in which such jetty was constructed. Further, it was contended that assessee had been claiming depreciation from assessment year 1997-98 onwards at the rate applicable to plant and machinery, which has been allowed till assessment year 2003-04. It was contended that the rebate available to the assessee as per the agreement on account of having met the cost of construction of the jetty, is only reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. v/s DCIT, by order dated 26th November 2007, and the Tribunal allowed the claim for depreciation on the cost of construction of jetties by treating the said expenditure as part of the block of intangible asset and filed a copy of said order of the Tribunal. 85. On the other hand, the learned Departmental Representative relied on the orders of the authorities below. 86. We have carefully considered the submissions of the learned Representatives of the parties and the orders of the authorities below. We have also considered the order of the Tribunal dated 26th November 2007 (supra). 87. We observe that on identical facts, the Tribunal considered similar issue in the case of Reliance Ports and Terminals Ltd., and allowed the claim for depreciation on the cost incurred by the assessee on construction of jetties at Sikka Port, Gujarat, for GMB. In the said case, the assessee constructed jetties at Sikka Port, Gujarat of GMB primarily to serve imports of group companies at the port. As per the agreement entered into, the assessee was entitled to concession in wharfage charges i.e., land / shipping fee on use of jetty, which was to be set-off against capital investment made by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the terms of agreement, the assessee only acquired the commercial right or license and they are really an intangible asset within the meaning of section 32(1) of the Act. Thereafter, the Tribunal, vide Para-32, of the said order, held that the assessee is entitled for the depreciation by treating the expenditure as part of block of intangible asset. The relevant Para-32 of the said order, reads as follows:- "32. The question is whether the present expenses incurred by the assessee can be said satisfy the tests of being licences, franchises or any other business or commercial rights being intangible assets within the meaning of the aforesaid provisions. In our view, the Tribunal in the earlier year has already concluded that this expenditure is question is incurred wholly and exclusively for the purpose of business and the terms of the agreement which are extracted hereinabove clearly shows that the assessee has acquired some business or commercial right by incurring this expenditure. This expenditure has not resulted in the acquisition of any tangible asset like building, machinery, plant or furniture. Any other expenditure which did not result in the acquisition of these inta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for depreciation at the rate as applicable on the cost incurred for construction of jetty at Dahej. Hence, we allow ground no.3, of the appeal filed by the assessee by reversing the orders of the authorities below. 89. In ground no.4, the assessee has disputed the order of the Commissioner (Appeals) in confirming the addition of Rs. 91,29,312, on account of unavailed CENVAT credit under section 145A of the Act. 90. The Assessing Officer has stated that the account of the assessee company in annexure to clause 12 of the Tax Audit Report reflected unutilised CENVAT credit amounting to Rs. 91,29,312. The assessee was asked to explain as to why the said amount should not be added in view of the provisions of section 145A of the Act. The assessee filed its reply, stating that the aforesaid item has been shown under the head of loan and advance in the printed balance sheet and the same has not been claimed as revenue deduction. Therefore, no disallowance is called for. The Assessing Officer did not agree with the assessee and stated that the position in law has undergone a substantial change with the introduction of section 145A. The Assessing Officer also rejected the content ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entries including purchase, sale and dosing stock are on net basis and not on gross basis". It has argued that its case Is dearly covered by the decision of Supreme Court In the case of CIT v. Indo Nippon Chemicals Co. Ltd 261 ITR 275, where it was held that "(i) that merely because the Modvat credit was an irreversible credit available to manufacturers upon purchase of duty-paid raw material, that would not amount to income which was liable to be taxed under the Act: Income was not generated to the extent of the Modvat credit on unconsumed raw material; (ii) that it was not permissible for the Assessing Officer to adopt the gross method" for valuation of raw materials at the time of purchase and the 'net method' for valuation of stock on hand". The appellant has argued from this that in its case "it is a reverse situation where we have adopted the net method at the time of purchase and valuation of stock and the AO. has adopted net method for purchase and gross method for valuation of stock In hand. As clearly laid down by the Supreme Court, such inconsistent method of valuation of stock is totally unjustified. Without prejudice to the aforesaid submission, the appellant has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hearing, the learned Counsel for the assessee submitted that above issue is covered in favour of the assessee by the judgment of Hon'ble Jurisdictional High Court in the case of CIT v/s Mahalaxmi Glass Works Pvt. Ltd., [2009] 318 ITR 116 (Bom.) and also by the judgment of Hon'ble Delhi High Court in CIT v/s Mahavir Alluminium Ltd. [2008] 297 ITR 77 (Del.), wherein it has been held that if there is a change in valuation of closing stock in one end, there must necessarily be a corresponding change at the other end otherwise the true profit would not be reflected. 94. On the other hand, the learned Departmental Representative relied on the order of the Commissioner (Appeals). 95. We have considered the submissions of the learned Representatives of the parties and the orders of the authorities below as well as the cases relied on by the learned Counsel for the assessee (supra). We are of the considered view that if the valuation of closing stock is increased by the unavailed CENVAT / MODVAT, the purchases should also be increased by a similar amount. During the course of hearing, it was contended that purchases has been debited exclusive of the excise duty element i.e., by adopting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year as well. 99. On perusal of the orders of the authorities below, we agree that the facts and the issue in this assessment year viz. 2004-05 are identical to assessment year 2003-04. We also observe that the Commissioner (Appeals), while confirming the action of the Assessing Officer, followed his order for assessment years 2001-02 dated 28th November 2006. We have discussed the said issue in Paras-47 to 50 herein above and following our findings given in Para-51 herein above, we decide the issue in favour of the assessee by allowing the assessee's ground of appeal. Hence, ground no.5, raised by the assessee is allowed by reversing the orders of the authorities below. 100. We now take up Revenue's appeal being ITA no.745/Ahd./2008, for assessment year 2004-05. 101. In ground no.1, the Department has disputed the order of the Commissioner (Appeals) in deleting the disallowance of Rs. 46,37,295, made by the Assessing Officer under section 40A(9) of the Act. 102. At the time of hearing, the learned Representatives of the parties submitted that the facts and the issue are identical to ground no.2, of the appeal filed by the Department for assessment year 2003-04 and, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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