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2016 (3) TMI 120 - ITAT AHMEDABAD

2016 (3) TMI 120 - ITAT AHMEDABAD - TMI - Reducing the subsidy for the purpose of calculation of depreciation - Held that:- Section 43(6)(c) of the Act, the WDV of an asset can be computed only in the manner provided thereunder namely by adding the actual cost of any asset falling within that block acquired during the previous year or by deducting the money payable in respect of any asset within the block, which is sold, discarded or demolished or destroyed during the previous year together with .....

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Section 43 of the Act cannot be made applicable to assets of which the actual cost has been determined and forms part of a block of assets. Before us, Revenue has not brought any contrary binding decision in its support nor has pointed out as to why the ratio of the decision rendered by Hon’ble Gujarat High Court in the case of Banco Products (supra) would not be applicable to the present facts of the case. In such a situation, we are of the view that the ground of assessee deserved to be allow .....

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t is assessee’s contention that it is eligible for claim of deduction u/s.80IA(4). After placing reliance on the aforesaid decision in case of CIT vs. Mitesh Impex reported in (2014 (4) TMI 484 - GUJARAT HIGH COURT ) in the present facts of the case, we are of the view that in the interest of justice, the ground needs to be restored to the file of Assessing Officer to decide the claim of assessee of deduction afresh in accordance with law. Needless to state that AO shall grant adequate opportuni .....

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Member These two appeals filed by Assessee are against the orders of CIT(A)-XI, Ahmedabad, dated 21.09.2010 and 15.02.2012 for A.Y.2004-05 & 2005-06 respectively. 2. Before us, at the outset, ld. A.R. submitted that though the two appeals of the Assessee pertain to different assessment years, but most of the issues are identical except for the amounts and assessment years and therefore the submission made by him as far as to the common issues are concerned, it would be applicable to both the .....

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me for A.Y. 04-05 on 30.10.2004 declaring total income at ₹ 2,99,450/-. The return was initially processed on 25.10.2005. Subsequently, notice u/s.148 was issued on 01.06.2007 and served on assessee on 29.06.2007 and thereafter, the assessment was framed u/s.143(3) r.w.s. 147 of the Act vide order dated 31.07.2008 and the total income was determined at ₹ 27,76,763/-before setting off of unabsorbed forward losses. Aggrieved by the order of Assessing Officer, Assessee carried the matte .....

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come. 2.1 Ld. CIT (A) erred in law and on facts in confirming action of AO in rejecting appellant's contention that assessment was reopened on basis of audit objections raised by Revenue Audit Party. 2.2 Ld. CIT (A) erred in law and on facts in confirming disallowance of depreciation made by AO of ₹ 18,19,520/- by reducing amount of subsidy, not received from any authority during the year under appeal. Ld. CIT (A) ought to have held that reopening of assessment is void and thereby dele .....

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sing the assessment order will not be applicable to the assessment order already passed, and thereby deleting the addition of bad debts made by AO. It be so held now. 4. Before us, at the outset ld. A.R. submitted that he did not wish to press ground nos.1, 2 & 2.1 which are with respect to reopening of assessment u/s.147. In view of the aforesaid submission of ld. A.R., these grounds are dismissed as not pressed. 5. Ground no.2.2 is with respect to confirming disallowance of depreciation ma .....

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Section 43(1) of the Act and the subsidy amount should not have been credited to Reserve and Surplus. In such a situation, he was of the view that the depreciation on Effluent Treatment Plants was to be allowed not on the basis of actual cost but the cost after reducing the subsidy from the cost of asset. He was therefore of the view that the claim of depreciation should have been on the cost reduced by subsidy and not on the original cost. He, therefore, worked out the excess depreciation clai .....

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allowance of depreciation is called for. 4.2.1. While making the disallowance A.O. relied on the case of Saharangpur Electric Supply Co. Ltd. & ORS vs. CIT (194 ITR 294) (SC), in which it was held that the actual cost of all assets, including those acquired in earlier years, is to be determined in each A.Y. and that the A.O. has to ensure that the depreciation allowed is not more than the actual cost. In the instant case, it is not the claim of the appellant that in the earlier years, deprec .....

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d prior to A.Y. 2000-01 and that no subsidy was received subsequent to A.Y. 2000-01. He further submitted that the opening balance of the block of assets under the head Effluent Treatment Plant amounting to ₹ 6,36,233/- relates to the assets acquired in A.Y. 2003-04 and that no subsidy was received in A.Y.2003-04. He further submitted that on effluent treatment plants that were acquired in A.Y. 1999-2000 and 2000-01, depreciation was claimed at prevailing rate of 100% and therefore the Wri .....

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to be computed as a percentage of written down value. As per Section 43(6) of the Act written down value means - (a) in the case of assets acquired in the previous year, the actual cost to the assessee; (b) in the case of assets acquired before the previous year, the actual cost to the assessee less all depreciation actually allowed to him under this Act. He further submitted that the expression actual cost in Section 43(1) means the actual cost of assets to the assessee as reduced by that porti .....

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rease in the block of assets on account of acquisition of new asset, provided such asset is put to be used in the year under consideration; and decrease in case where the asset is sold or otherwise disposed of in the previous year. He further submitted that the Section does not permit any other adjustment to be made from the Written Down Value and the concept of actual cost has bearing only in year one in which the assets are acquired. He further submitted that when once the asset enters the blo .....

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ssets cannot be reduced out of the written down value and for this proposition he placed reliance on the decision of Hon ble Gujarat High Court in case of Banco Products (India) Ltd. vs. DCIT in Tax Appeal No.255 of 2007, order dated 05.10.2015. He also placed on record the copy of the aforesaid decision at page nos. 17 to 32 of the paper book. He further submitted that reliance placed by the Revenue in case of Saharanpur Electric Supply Co. Ltd. vs. CIT (1992) 194 ITR 294 is misplaced in view o .....

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t case is with respect to reducing the subsidy for the purpose of calculation of depreciation. Before us, it is assessee s contention that the impugned amount of subsidy that the Assessing Officer has reduced from the cost of assets was received by the assessee in A.Y. 2000-01 and prior to A.Y. 2000-01 and no part of subsidy was received in the year under consideration and the block of assets does not relate to any assets which has been acquired in the year in which the subsidy was received by t .....

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ned had not been disbursed. At the time when the assets came to be acquired, section 43(1) of the Act did not provide for non-inclusion of the subsidy received in the actual cost. Accordingly, the actual cost came to be computed in terms of the provisions in force at the relevant time. It may be noted that the assets in relation to which subsidy has been granted, form part of a block of assets and depreciation is granted on the written down value of the block of assets. In relation to block of a .....

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ve blocks to the extent of ₹ 25,00,000/-. 9. At this juncture, it may be noted that the expression "actual cost" envisages the actual cost of asset as reduced by any amount received directly or indirectly from any person or authority and Explanation 10 to section 43 (1) of the Act, clearly provides that where a portion of the cost of an asset acquired by the assessee had been met directly or indirectly by the Central Government or a State Government or any authority established u .....

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e assessee for the purchase of such asset. However, in the present case, the assessee created total facility by constructing building and installing various machineries in 1993-94, Thus, the actual cost of the assets in respect of which subsidy has been granted, came to be determined at the relevant time. Thereafter, the assets entered the block of assets and lost their independent identity and the cost of such assets merged with the other assets in the block. At the time when the actual cost of .....

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s for consideration is as to whether Explanation 10 to section 43(1) of the Act can be given effect to in the facts and circumstances of this case, by reducing the actual cost of the assets by the amount of subsidy received by the assessee. To put it differently, whether at this stage it would be possible to ascertain the actual cost of such assets in terms of Explanation 10 to section 43(1) of the Act, inasmuch as, once such assets enter the block, the depreciation is computed on the written do .....

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ue. The statute does not contemplate any other category for computing the written down value of a block of assets. Therefore, section 43(6)(c) of the Act does not permit reducing the written down value of the block of assets by the amount of subsidy received in relation to some of the assets forming part of the block of assets. Consequently, the costs of assets cannot be reduced out of the written down value of their respective blocks to the extent of ₹ 25,00,000/-as the statute does not e .....

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Explanation 10 to subsection (1) of section 43 of the Act cannot be made applicable to assets of which the actual cost has been determined much before the insertion thereof and which also form part of a block of assets. Therefore, when it is not possible to apply Explanation 10 of section 43(1) of the Act, in relation to an asset which has entered into the block much before the insertion thereof, it must be regarded as never having been intended by the legislature to apply to assets forming part .....

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any asset within the block, which is sold, discarded or demolished or destroyed during the previous year together with the amount of scrap value. It has further held that the statute does not contemplate any other category for computing the WDV of a block of assets and that Section 43(6)(c) of the Act does not permit reducing the WDV of the block of assets by the amount of subsidy received in relation to some of the assets forming part of the block of assets. Hon ble High Court further held tha .....

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s (supra) would not be applicable to the present facts of the case. In such a situation, we are of the view that the ground of assessee deserved to be allowed and thus allow the ground of assessee. 6. Ground no.3 is with respect to adjustment of bad and doubtful debts for computing book profit u/s.115JB of the Act. 6.1 Assessing Officer while framing assessment noticed that the total taxable income assessed worked out to Rs.Nil. Assessing Officer while computing the tax payable u/s.115JB noticed .....

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e appellant and the observations of the assessing officer in the assessment order. The first contention of the appellant is that the issue of computation of book-profits u/s. 115JB is not part of the reasons recorded for reopening and therefore A.O. could not disturb the book-profits. In this regard it is seen that Expln. 3 below Sec. 147, inserted by the F. A. (No.2) of 2009 w.r.e.f. 1.4.1989 expressly empowers the A.O. to travel beyond the reasons recorded for reopening. In the case of Pioneer .....

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was not an ascertained liability. Besides the above mentioned Expln.1(i) was inserted by Finance (No.2) Act, 2009 w.r.e.f. 1.4.2001. In view of this A. O's action is perfectly in tune with law. Therefore [his contention of the appellant also fails. 5.2.2. Accordingly A.O's action in adding back the provision is upheld. These grounds of appeal are dismissed. 6.3 Aggrieved by the order of CIT(A), assessee is now in appeal before us. 6.4 Before us, ld. A.R. reiterated the submissions made b .....

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of Assessing Officer and CIT(A). 6.5 We have heard the rival submissions and perused the material on record. The issue in the present case is with respect to adjustment of bad and doubtful debts to the book profit. We find that identical issue was before the Co-ordinate Bench of Tribunal in case of ACIT vs. Vodafone Essar Gujarat Ltd. (supra) and it was decided in favour of assessee by observing as under: 8. Before us the Ld. D.R. urged and stated that consequent to the amendment brought in the .....

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115JB by insertion of cl. (i) in Explanation to s. 115JB(2) which specifically mentions the amount or amounts set aside as provision for diminution in the value of any asset. 9. The Ld. A.R. on the other hand cited the decision of High Court of Karnataka in the case of CIT vs. Yokogwa India Ltd. (2012) 17 Taxmann Com.15 (Kar.) (IT Appeal No.1062 of 2008) of August 29, 2011. In this case the question before the Hon'ble High Court was as under:- "Whether the Appellate Authorities were co .....

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for liability. Therefore it was held that Item (c) of the Explanation is not attracted to the facts of the case. Item (c) in Section 115JA and 115-JB(1) are identical. In order to attract the Explanation the debt which is doubtful or bad should satisfy the requirement contemplated in Item (c) of the Explanation. It is the amount or amounts set aside as provisions made for meeting the liability other than the ascertained liabilities. In the instant case also the bad and doubtful debt for which a .....

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. counsel for the assessee brought to our notice the judgment of the Apex Court in the case of Vijaya Bank (supra) where the Apex Court had an occasion to consider his explanation. It accepted the argument on behalf of the Revenue to the effect that the explanation makes it very clear that there is a dichotomy between actual write off on the one hand and provision for bad and doubtful debt on the other. A mere debit of the profit and loss account would constitute a bad and doubtful debt, but it .....

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off. The Apex Court accepted the said legal position. However, it was clarified that besides debiting the profit and loss account and creating a provision for bad and doubtful debt the assessee correspondingly/simultaneously obliterated the said provision from its accounts by reducing the corresponding amount from loans and advances/debtors on the assets side of the balance sheet and, consequentially, at the end of the year, the figure in the loans and advances or the debtors on the assets side .....

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loans and advances/debtors is shown as net of the provisions for the Impugned bad debt. Therefore, in the first place if the bad debt or doubtful debt is reduced from the loans and advances or the debtors from the assets aside of the balance sheet, the Explanation to Section 115JA or JB is not at all attracted. In that context even if amendment which is made retrospective the benefit given by the Tribunal and the appellate Commissioner to the assessee is in no way affected. In that view of the m .....

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e net sundry debtors are shown as asset in the balance sheet. Thus the provision for bad and doubtful debts cannot be termed as a provision for liability but is in the nature of diminution in the value of asset. In view of the aforesaid facts, we are of the view that the facts in the present case are identical to that of the case of Yokogwa India Ltd (supra). We therefore, respectfully following the decision of Hon'ble High Court in the case of CIT vs. Yokogwa India Ltd., (supra) we do not f .....

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debts to the net profits for the purpose of Section 115JB. We thus set aside the addition made by Assessing Officer. Thus, this ground of assessee is allowed. 7. In the result, this appeal is partly allowed. ITA No.152/Ahd/2013, A.Y. 2005-06 8. The grounds raised by assessee in A.Y.2005-06 are as under: 1. The Order passed by CIT (Appeals) is bad in law and on facts and hence, it is submitted that the same be cancelled and be suitably modified. 2. The learned CIT (A) grossly erred in law and on .....

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e-tax Officer who had to record the reason for reopening the assessment, issued the notice u/s. 148 dated 30/04/2008 and ultimately passed the impugned assessment order did not have jurisdiction over the appellant's case. Therefore, the initiation of reassessment proceedings and issuance of notice u/s. 148 are ab-initio void and consequently the assessment order passed pursuant to such notice u/s. 148 is also null and void before the eyes of law. The impugned assessment order therefore pleas .....

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received from the members in earlier years prior to the assessment year under appeal in utter disregard to the fact that the predecessor Assessing Officer in the scrutiny assessment made for A.Y. 2004-05 had correctly worked out the depreciation and the written down value of the depreciable assets for A.Y. 2004-05. The learned AO ought to have adopted the WDV of the depreciable assets on the basis of the assessment order for A.Y. 2004-05. 5. The learned CIT (A) grossly erred in law and on facts .....

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n of the AO in deducting the amount of ₹ 8,04,93,623/- being contribution received from the members in earlier years only from the WDV of the depreciable assets without apportioning to the cost of land. 7. The learned CIT (A) grossly erred in law and on facts of the case in not specifically adjudicating the 7th ground of appeal taken before him which reads as under: "Without prejudice to the above ground, if at all the amount of contribution received from the members were to be reduce .....

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is therefore prayed that the disallowance of depreciation made by the AO by recomputing the WDV of the depreciable assets may please be deleted and the depreciation as claimed in the return of income may please be allowed. 9. The learned CIT (A) grossly erred in law and on facts of the case in confirming the action of the AO in not allowing deduction u/s. 80IA of the I.T. Act though the appellant assessee had by footnote in the statement of income categorically stated that it is entitled to ded .....

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oundary transportation of solid wastes is not taxable on principle of mutuality as the receipts are from the members only. It is therefore prayed that the income of the appellant may be please held as not taxable on principle of mutuality. 9. Ld. A.R. at the outset submitted that first ground is general and needs not be adjudicated. We therefore dismiss the ground of assessee. 10. Ground no.2 is with respect to reopening. Ld. A.R. did not wish to press this ground and therefore, the same is dism .....

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while deciding the issue for A.Y. 2004-05 allow the present ground of assessee. Thus, this ground of Assessee is allowed. 12. Ground no.9 is with respect to not allowing deduction u/s.80IA of the Act. 12.1 Assessing Officer noticed that in the statement of income that was filed by the assessee that a mention was made that the assessee that it is entitled to exemption u/s.80IA but since, there was a loss, the same was not claimed in the current year. Assessing Officer was of the view that for cl .....

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ons. I have also perused various cases relied upon by the appellant. It is seen that the appellant has claimed deduction U/S.80IA by making a note below the computation of income. The law in this regard is clearly laid down by the Hon'ble Supreme Court in the case of Goetez (India) Ltd., vs CIT reported at 284 ITR 323. In this case it is clearly held that deductions cannot be claimed by filing a statement. The case of the appellant is wholly and squarely covered with the ratio of this case. .....

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filed along with return. He submitted that assessee fulfills all the conditions prescribed in the Act and is eligible for deduction. He submitted that ld. CIT(A) also summarily dismissed the ground of assessee by following the decision in the case of Goetz India Ltd. vs. CIT(supra). He submitted that it is settled law that appellate authorities have powers to entertain a new claim for the first time though not made before AO and for this proposition he relied on the decision of Hon ble Gujarat .....

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that ld. CIT(A) after relying upon the decision of Hon ble Apex Court in the case of Goetez (India) Ltd., vs CIT reported at 284 ITR 323 upheld the order of Assessing Officer. We find that Hon ble Gujarat High Court in case of CIT vs. Mitesh Impex reported in (2014) 46 taxmann.com 30 (Gujarat) has held that if a claim though available in law is not made either inadvertently or on account of erroneous belief of complex legal position, such claim cannot be shut out for all times to come, merely b .....

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nt in the case of National Thermal Power Co. Ltd-(supra) and that is how various High Courts have viewed the dictum of the decision in the case of Goetze (India) Ltd.(supra). When it comes to the power of Appellate Commissioner or the Tribunal, the Courts have recognized their jurisdiction to entertain a new ground or a legal contention. A ground would have a reference to an argument touching a question of fact or a question of law or mixed question of law or facts. A legal contention would ordi .....

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a claim though available in law is not made either inadvertently or on account of erroneous belief of complex legal position, such claim cannot be shut out for all times to come, merely because it is raised for the first time before the appellate authority without resorting to revising the return before the assessing officer. 40. Therefore, any ground, legal contention or even a claim would be permissible to be raised for the first time before the appellate authority or the Tribunal when facts n .....

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ns that we have noted above, the Courts have considered such questions when a legal contention or a claim was based on material already on record but raised at an appellate stage. On such premise we wholeheartedly agree that the appellate authority and the Tribunal would have the power to entertain any such new ground, legal contention or claim. However, it is only the Bombay High Court in the case of CIT Pruthvi Brokers & Shareholders (P.) Ltd. (supra), which has travelled a little beyond t .....

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