M/S. SIR SHADILAL ENTERPRISES LTD.,NEW DELHI vs. DCIT, NEW DELHI

The grounds of appeal are as under:- (A.Y 2008-09)

On the facts and in the circumstances of the case, the learned CIT(A) erred in not accepting the declaration filed u/s 158A(1) of the Act in Form No. 8 in respect of additions of Rs. 12,14,932/- and Rs. 5,34,843/- being Dharmada receipts and interest earned on accumulated Dharmada funds respectively. Additional grounds of appeal “1. On The facts and circumstances of the case, Ld.CIT(A) ought to have restricted the claim of depreciation @5%in respect of the assessee premises used for residential purpose by assessee.”

The Ld. AR submitted that as regards grounds of appeal 2.1, 2.2, 2.3, 3, the same are withdrawn as order under Section 154 of the Act was passed by the CIT(A) and the relief was granted. Therefore, in assessee’s appeal, only Ground No. 1 is contested herein. The Ld. AR submitted that the CIT(A) erred in upholding action of the Assessing Officer in curtailing the original cost of the factory, buildings in Unn sugar units to Rs. 6,62,31,999/- as against Rs. 13,85,44,737/- claimed by the assessee. The Ld. AR submitted that the assessee acquired Unn Sugar Complex from M/s Monnet Sugar Ltd. on 24/09/2007 for a total consideration of Rs. 100,30,95,080/- including stamp duty in terms of conveyance deed date 22nd September, 2007. The assessee had acquired fixed assets like pre-hold land, lease hold land, buildings plants and machinery, furniture and fixture, office equipment, computers and vehicles. For a determination of cost of each assets including free hold land was valued as per circle rate prescribed by the UP Government, building and plant and machinery were valued as per report submitted by a registered valuer and furniture and fixture as well as other office items were valued at their respective written down value. Since, the valuation of lease hold land as per market value prescribed by the UP Government was substantially lower than the value assigned by stamp authorities the remaining value of consideration was allocated to lease hold land. The Ld. AR further submitted that a reconciliation of figures relating to valuation of assets of Unn Sugar Unit was submitted to Assessing Officer during assessment proceedings. The Assessing Officer did not agree with the basis on which the same was given. It was further pointed out that fixed assets had been valued by the assessee and alleged that the assessee had inflated the values assign to fix assets in such a way that it could claim higher depreciation on certain fixed assets. The Ld. AR submitted that the Assessing Officer invoked the provisions of Explanation 3 to section 43(1) of the Act as the Assessing Officer was satisfied that the main purpose of transfer of such assets was for reducing the tax liability by the assessee by claiming depreciation with reference to enhanced cost. The Assessing Officer mentioned in the assessment order that the Assessing Officer obtained the approval of Additional Commissioner of Income Tax, Central Range (vi), New Delhi before invoking the said provision and re- computation of value of fixed assets. Thus, the Ld. AR submitted that the addition is not warranted and the same may be deleted.

The Ld. DR relied upon the assessment order and the order of the CIT(A).

We have heard both the parties and perused the material available on record. It is to be noted that the assessee has paid Rs. 100,30,95,080/- while acquiring the sugar complex from M/s Monnet Sugar Ltd. The assets were acquired consisting of freehold land, leasehold land, building, plant and machinery, furniture and fixtures, office equipment, computers and vehicles. The submissions of the Ld. AR that for determination of cost of each asset separately, freehold land was valued as per circle rate prescribed by the UP Government, while the building and plant as well as machinery were valued as per report submitted by registered-valuer. The furniture & fixture as well as other office item were valued at their respective written down value. But from the records, it can be seen that the leasehold land valued as per market value prescribed by UP Government was substantially lower than the value assigned by stamp authority. There is no basis for adopting this value. The CIT(A) has categorically observed that the assessee adopted this value as balancing figure by allocating higher value to building. The total sale consideration as per the sale deed and as recorded in the books of accounts of the assessee are appears to be similar. The assessee allocated higher value to building and lower value to leasehold land. But there is no justification for the same given by the assessee The CIT(A) has given a detailed finding and there is no need to interfere with the findings of the CIT(A). Hence, Ground No. 1 of the assessee’s appeal is dismissed. As regards Ground Nos. 2.1, 2.2, 2.3, and 3 the same are withdrawn by the assessee. Hence, Ground Nos. 2.1, 2.2, 2.3, and 3 are dismissed.

As regards Revenue’s appeal, the Ld. DR relied upon the assessment order and submitted that the CIT(A) erred in law and facts in restricting the disallowance made by the Assessing Officer on account of provision of expenses to Rs. 18.64 crores as against Rs. 20,59,20,430/- made by the Assessing Officer while making the assessment. The Ld. DR further submitted that the CIT(A) also erred in deleting, the addition of RS. 1,59,08,429/- made by the Assessing Officer u/s 43B of the Income Tax Act on account of interest on levy of sugar price for the season 1082-83. The Ld. DR further submitted that the CIT(A) allowing the depreciation on boiler 80% rather than the allowed depreciation at 15% by the Assessing Officer while making assessment order. The Ld. DR further submitted that the CIT(A) ought to have restricted the claim of depreciation at 5% in respect of the premises used for residential purpose by the assessee.

The Ld. AR relied upon the order of the CIT(A).

We have heard both the parties and perused all the relevant material available on record. As regards Ground No. 1 of the Revenue’s appeal, it is seen that the assessee has paid State Advised Price (SAP) of Rs. 18.64 crores as per the Court order. The CIT(A) has rightly held that the same has to be allowed as a deduction during the assessment year under consideration. Therefore, the CIT(A) rightly directed the AO to verify whether this amount has been claimed during the assessment year 2013-14 and if not AO was directed to allow its deduction in the present assessment year. There is no need to interfere with the findings of the CIT(A). Ground No. 1 of Revenue’s appeal is dismissed. As regards Ground No. 2, it is pertinent to note that since the Supreme Court order came in 2012, the claim is admissible in the Assessment Year under consideration as the same was a liability in A.Y. 2008-09. Therefore, there is no need to interfere with the findings of the CIT(A). Ground No. 2 of Revenue’s appeal is dismissed. As regards Ground No. 3 and additional grounds, the CIT(A) has given categorical finding based on the evidences produced before the CIT(A) as well as Assessing Officer. Ground No. 3 and additional ground are dismissed. Therefore, there is no need to interfere with the same. The appeal of the Revenue is dismissed.