9911796707
TMI Blog2012 (8) TMI 666X X X X Extracts X X X X X X X X Extracts X X X X ..... ng allowed it as a revenue expenses in some years. 2.2. The CIT(A) has erred in not properly dealing with the issue of consequential allowance of the claim of depreciation on the intangible asset of mining rights from 1.4.1998 u/s 32(1)(ii) of the Income Tax Act. 3. The CIT(A) has erred in confirming the addition made by the AO by treating the Fiber Optic Computer Networking as an ordinary asset instead of being a part of the computer systems and consequently disallowing Rs.46.42 lacs of depreciation claimed and the disallowance /allowance is not correct on facts. 4. That the above grounds are independent and without prejudice to each other. 5. That the appellant seeks leave to add, amend, alter, abandon or substitute any of the above grounds at the time of hearing of appeal". 2. The relevant facts of the case are that the assessee filed its return of income on 29.10.2005 declaring a taxable income of Rs. 1779.47 crores which included long term capital gain of Rs.6 crores, tax thereon worked out to Rs.650.21 crores as per the computation of tax u/s 115 JB the tax payable under M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01. The company had given loans to its subsidiary - IISCO (Indian Iron & Steel Co. Ltd) It had written off loan to the extent of &2072 crores and adjusted it against the waiver of SDF loans. When a loan is waived it does not become an expense since it is not the business of the company to extend loans. The converse also (that loan waived does not result in income) also hold good The loan waived by the GOI is thus a capital receipt and the loan of IISCO waived by the company is also a capital outflow. Thus, the capital receipt exceeded the outflow by &.3001 (5073 less 2072) crores. The company was having considerable losses in the P & L A/c. Various Financial institutions had opined that the Plant & Machinery and other assets stood over capitalized on account of overruns of errectioning and commissioning and consequent capitalization of expenses during construction (EDC). It was giving a distorted picture of the company with large capital reserves and also large revenue losses in the Balance Sheet. Therefore, it was decided by the company to revalue its fixed assets downwards. Accordingly, it revalued downwards its fixed assets by &2578.13 crores and Capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.8 of Annex-2 to ITR) This however is subject to the final outcome of the pending appeals on this issue." 3.1. The reasoning taken for disallowing the claim was on account of conjoint reading of S.43(1), 43(6) and 32(1) which makes it clear that depreciation is allowable on the reduced written down value of the assets read along with Explanation 10 to S.43(1) inserted by Finance no.2 Act of 1998 w.e.f. 1.4.1999. 3.2. In appeal before the First Appellate Authority the claim was rejected relying upon the order dt. 25.6.2009 in ITA 2782/Del/2004, 2481/Del/2006 and 1013/Del/2008 for 2000-2001, 2001-02 and 2002-2003 A.Ys in the case of the assessee. 3.3. Aggrieved by which the assessee is in appeal before the Tribunal. 3.4. Both the parties were heard. A perusal of the order of the Tribunal which has been relied upon by the CIT(A), copy of which is placed at pages 91 to 126 shows that the said issue has been discussed at length at page 91 vide para 2 to 110, para 17, a perusal of which shows that the view of the CIT(A) in A.Y. 2000-2001 and the other years were upheld as the same w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue back to the file of A.O. by the said order in the consolidated order passed in the case of the assessee for the 3 A.Ys as found discussed in paras 45 to 48 in pages 125 of the paper book as under:- 45. The last issue for consideration relates to depreciation on mining rights. During the course of assessment proceedings the assessing officer noted that the assessee in. the computation of income had itself added back an amount of Rs.98.44 lakhs representing depreciation on mining rights treating it as disallowable claim. The claim of allowability in earlier years was not pressed before the appellate authority. However, during the course of assessment proceedings for assessment year under consideration, the assessee claimed the depreciation on mining rights. The assessing officer rejected the claim of the assessee on the ground that the mining rights have not even enumerated amounts the list of eligible intangible assets. 46. On appeal the ld. CIT (Appeals) observed that change III law on depreciation on intangible assets has been brought in the statutes from 110411999 and the assessee has raised the ground for the first time before the ld. CIT (Appeals). He, therefore, upheld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to the file of the assessing officer with a direction to examine the claim of the assessee whether expenditure incurred on acquisition of mining right sis revenue expenditure or capital in nature. 4.3. Accordingly on consideration of the factual material in the light of the arguments of the parties advanced, respectfully following the order of the Tribunal the said issue is restored to the file of A.O. with the above directions., Ground no.2 raised by the assessee is allowed for statistical purposes. 5. The facts relevant to ground no. 3 agitated by the assessee are found discussed at pages 33, 34 of the assessment order in paras 15 to 15.3. A perusal of the same shows that the assessee claimed depreciation of computer @ 60% treating it as computer instead of plant and machinery where the applicable rate was 25%. In the year under consideration the assessee had made an addition of Rs. 265.29 (in the second half portion of the year) lakhs and net working of computer and claimed depreciation of Rs.79.59 lakhs. 5.1. The A.O. being of the view that depreciation is allowably only @ 25% applicable to plant & machinery amounting to Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes applicable to computers since they were electrical equipments by nature. It was contended that the principle laid down in the said judgement was not applicable as UPS and computer net working are independently different types of equipment as such the said judgement has no applicability. 5.6. Considering the arguments the CIT(A) upheld the action of the AO vide para 12.1 holding as under:- "12.1. The submissions given by the appellant has been perused. There is a difference between a computer and its accessories and wiring. The Fiber Optic Computer Networking is a system of wiring which can be used in many other things apart from computer. Therefore, the A.O. has rightly decided the issue that Fiber Optic Computer Networking is not a part of the computer system. Reliance is also placed on the decision of Delhi Bench of the Hon'ble ITAT in the case of Nestle India Ltd. Vs DCIT (ITAT, Del) 111 TTJ 498 wherein it has been held that UPS is not an integral part of computer and not entitled to higher rate of depreciation. Hence this ground is decided against the appellant." 5.7. Aggr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 observed after hearing the assessee that disallowance of Rs.445 lakhs on account of adjustment relating to earlier year which are treated as prior period expenses had to be disallowed requiring the assessee to explain the prior period items claimed as per Schedule 2.13 of the Profit ad Loss a/c the A.O. accepted the explanation in regard to the extent of sales of Rs.11 lakhs. However in regard to stores and spares, power and fuel and repair and maintenance it appeared that the assessee could not prove that the liability had been incurred in the year under consideration. Relevant finding is at para 7.3 and 7.4 which are reproduced here under. "7.3. Submissions of assessee have been considered. The depreciation has already been added back in the computation by the assessee. The debit of Rs.11 lakhs in sales is on account of reversal of excess income accounted for during A.Y. 2003-04. Since this is a reversal of excess income, the same is allowed. In respect of repair & maintenance, fuel & store and spares is not admissible as it could not be proved that the liability has been incurred during the year under consideration. 7.4 In v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elying upon the submissions advanced before the CIT(A) contended that similar expenses on account of the stores and spares, power and fuel, repairs etc. have been allowed by CIT(A) in A.Y. 2001-02 on the basis of acceptance/accrual/crystallization of liability during the year on the basis of documentary evidences and the CIT(A) has followed this position in all the subsequent years. The said issue it was stated is covered in assessee's favour by the judgement of the Jurisdictional High Court in Shriram Pistons & Rings Ltd. 174 Taxman 147 (Delhi). 7.5. We have heard the rival submissions and perused the material available on record. On a perusal of the same we are of the view that the factual findings on record remains unrebutted. In the facts as they stand where no infirmity in the impugned order has been pointed out nor any material fact has been brought on record nor any argument has been advanced to canvass a contrary view we are of the view that the departments ground deserves to be dismissed. Being satisfied with the reasoning and finding based on documentary evidences which remain uncontroverted the ground no.1 of the Revenue is dismissed. 8. The fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der. 8.4. Ld.A.R. of the assessee on the other hand submitted that the Tribunal had decided the issue in favour of assessee in A.Y. 1995-96, 1996-97 and consistently thereafter in 1997-98, 1998-99, 2000-2001 and 2001-02 AYs and the claim has been consistently been allowed in 2002-03 to 2004-05 A.Ys by the CIT(A) and again in 2006-07, 2007-08 on the basis of orders of the Tribunal. It was argued that there is no change in position either of law or of fact. 8.5. We have heard the rival submissions and perused the material available on record. On a perusal of the same it is seen that the Coordinate Bench vide its order dt., 25.6.09 in 2001-02, 2002-03 copy of which is placed at pages 118 for A.Y. 19095-96 concluded the issue vide paras 33 and 34 as under:- "33. We have heard both the parties and gone through the material available on record. ITAT, Delhi Bench D in order dt. 15th September, 2006 in ITA no.4618 and 4619 (Del) of 2002 decided the issue in favour of the assessee by observing as under. 'We have heard the arguments of both the sides and also perus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the treatment given by the assessee to the water supply and sewerage plant as 'plant and machinery' for the purpose of claiming depreciation stands undisturbed. Insofar as the A.Ys 1987-88, 1991-92 and 1992-93 are concerned, the similar issue is disputed by the assessee in the appeals filed before the Tribunal which are still pending. Having regard to this position on the issue under consideration in the subsequent years, we are of the view that the rule of consistency has no application to the facts of the case and rejecting the contention raised by the ld.DR based on the said rule, we set aside the impugned orders of the ld.CIT(A) on this issue and direct the AO to treat the entire water supply and sewerage plant of the assessee as a plant and machinery for the purpose of depreciation as held by the Mumbai bench of ITAT in the case of TISCO Ltd. (supra)". 34. In the year under consideration, the facts of the case are identical and the revenue has not brought any material on record to distinguish the facts from AY 1995-96 and 1996-97. Therefore, there is nor reason for us not to follow the decision of the Tribunal. Accordingly, we decide this issue in favour of assessee and dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of rupee vis-à-vis the German Dutch Mark. The ultimate utilization of retained amount is of no consequence and it not a relevant factor for claiming deduction. The assessee's reliance on the decision of Hon'ble ITAT in the case of RBNS Sugar Mills Ltd. Vs DCIT reported in 85 ITD 552 (Delhi) is misplaced in as much the facts are clearly distinguishable. In the aforesaid case, the issue at hand was deductibility of accrued interest during the moratorium period, as the liability of payment of interest was not waived. There was only a moratorium on the payment of interest. 10.4. Accordingly, out of total interest debited on this account during the year amounting to Rs.1554 lakhs, only 0.75% is allowable and the balance of Rs.1421 lakhs is disallowed." 9.2. In appeal before the First Appellate Authority relying upon the order of ITAT in assessee's own case in ITA 192/Del/2004 for A.Y. 1998- 99 the addition made was deleted. 9.3. Aggrieved by this the Revenue is in appeal before the Tribunal. 9.4. Ld.D.R. places reliance upon the assessment order. 9.5. Ld.A.R. of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he addition made by way of disallowance stood deleted allowed the claim of the assessee. 10.3. Aggrieved by this the Revenue is in appeal before the Tribunal. 10.4. Ld.D.R. relied upon the assessment order. Ld.A.R. of the assessee inviting attention to order dt. 29.5.2006 passed by the CIT(A)-XII New Delhi pertaining to A.Y. 2001-02 submitted that the said issue was discussed at page 135 of the paper book, internal page 9, para 8. For ready reference the same is reproduced hereunder:- "8. Ground no.7 is with respect to depreciation on assets not in active use. Briefly the facts are that the A.O. noticed from Schedule 1.5 of the fixed asset schedule that it included assets valued at Rs.11.78 crores which were retired from active use. In the note below the schedule, a remark had been appended by the auditors as under. "Gross block as on 31.3.2001 includes Rs.11.78 crores being assets retired from active use." The AO held that depreciation on such assets was not allowable since the assets were idle and were not being used for the purposes of the business. Accordingly depreciation was disallowed to the exte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on behalf of the assessee that the department has not appealed on this point before the ITAT in 2001-02 A.Y. and consistently relying on this order of the CIT(A) in subsequent years the said view has been upheld even in 2006-07 and 2007-08 A.Ys. by way of disallowance in the earlier years. 10.6. We have heard the rival submissions and perused the material available on record. Taking into consideration the fact that the issue has emerged from A.Y. 2001-02 wherein the finding of the CIT(A) was accepted by the department, it is necessary to verify whether the said claim has been accepted by the department or not in subsequent years. Accordingly for necessary verification in regard to the past history of the assessee on the said issue it is restored back to the file of A.O. with the direction to verify the claim of assessee in regard to the departmental stand on this issue up to the ITAT stage. Accordingly ground raised by Revenue is allowed for statistical purposes. 11. In the result the appeal of the department is partly allowed for statistical purposes. 12. In the result ITA 2698/Del/11 of assessee and ITA 3274/Del/11 of department are partly allowed for statistical purposes. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
