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Income Tax Appellate Tribunal, AHMEDABAD D BENCH, AHMEDABAD
Per Pramod Kumar, AM:
By way of this appeal, the assessee-appellant has challenged correctness of the order dated 19th March 2014 passed by the learned Commissioner under Section 263 r.w.s. 143(3) of the Income-tax Act, 1961, for the assessment year 2009-10.
Grievances raised by the appellant are as follows:-
“1) The order passed by The Hon'ble CIT-I, Baroda is bad in law, since the conditions laid down in section 263 of the Act viz. namely, (i) the order of the assessing officer sought to be revised is erroneous; and (ii) it is prejudicial to the interest of the revenue, are not satisfied. It be held so now and order passed by the Hon'ble CIT-I, Baroda be quashed.
2) The action of the Hon'ble CIT-I, Baroda is not justified, since all the issues involved are highly debatable. Therefore the action of Hon'ble CIT-I, Baroda is unjust and uncalled for. It be held so now and the order passed by Hon'ble CIT-I, Baroda be cancelled.
ITA No. 1254/Ahd/2014 Gujarat Alkalies & Chemicals Ltd Vs. DCIT Assessment year: 2009-10 Page 2 of 5 3) The Hon'ble CIT-I, Baroda has erred in setting aside all the issues involved in the order passed u/s 263 of the Act and directing the AO to pass the fresh order. The Hon'ble CIT-I has wrongly directed to examine all the issues instead of issues directed to be reexamined in view of the directions given by him. Issues No. 2, 3 & 4 of the order are stated to be dropped and hence do not need re-examination.
4) The Hon'ble CIT-I, Baroda has erred in holding that as per provisions of sec.32(1)(iia) r.w.s. 2(29BA), the additional depreciation of Rs.23,95,21,849 was not allowable in respect of additions made to Plant & Machinery for Wind Mill. The Hon'ble CIT-I, Baroda has wrongly relied upon the amendment brought in sec.32(1) (iia) by Finance Act, 2012 w.e.f 01.04.2013. Your appellant submits that additional depreciation has been rightly claimed and be allowed now since the amendment brought in as above is not applicable for the year under consideration.
5) The Hon'ble CIT-I, Baroda has erred in setting aside the issue regarding allowability of so called excess claim of following expenses to the file of AO to examine the nature of these expenses and allow the same as per law.
Sponsorship expenses - Rs. 6,77,769/- 2. Social welfare expenses - Rs.43,14,189/- 3. Donation u/s 35AC of the Act - RS.18,10,000/- Total - RS.68,01,958/-
Your appellant submits that the said expenses debited under the head donations are in fact business expenses incurred in the ordinary course of business and for the purpose of business. There are fully allowable as per the provisions of the Income Tax Act and hence the direction given by the Hon'ble CIT-I, Baroda is unjust and uncalled for. It be held so now and the direction given by Hon'ble CIT-I, Baroda be cancelled.
To adjudicate on this appeal, only a few material facts need to be taken note of. The assessment under section 143(3) was completed on 30.12.2011. Subsequently, however, the Commissioner invoked his revision powers under section 263 on the two points (i.e. additional depreciation on windmill and verification with respect to claim of expenditure) and the relevant directions of the learned Commissioner were as follows:-
“3. I have considered the submission of the assessee and also the facts available on record. In respect of claim of additional of Rs.38,62,288/- on wind mills, the assessee’s submissions is that this issue is settled in favour of the assessee in the case of CIT vs. VTM Ltd, 319 ITR 336 (Madras) It has further been contended that SLP filed against that decision has been rejected by the Hon'ble Supreme Court. In the case of M/s CIT vs VTM Ltd, it has been held that it is not required that the new plant and machinery installed after 31sl
ITA No. 1254/Ahd/2014 Gujarat Alkalies & Chemicals Ltd Vs. DCIT Assessment year: 2009-10 Page 3 of 5 March, 2002 should have any operational connectivity to the article or thing that was already being manufactured by the assessee. It is sufficient that the assessee is engaged in manufacturing or production activity. In other words, the assessee's contention is that it is immaterial whether generation of electricity is manufacturing or not is a irrelevant factor for the purpose of granting additional depreciation.
3.1. However this contention of the assessee is to be examined in the light of amendment brought u/s 32(1)(iia) w.e.f. 01-04-2013. This amendment is provided for additional depreciation in respect of business of generation or generation and distribution of power. In other words prior to amendment, additional depreciation on production and generation of power was not included in the scheme of things. Therefore, it cannot be said that the question raised in the present proceedings is covered by the decision in the case of M/s VTM Ltd. It is the contention of the assessee that Assessing Officer had allowed the claim in the light of the decision in the case of CIT vs VTM Ltd. It is apparent that the Assessing Officer had not considered the implications of the amendment brought in section 32(1)(iia) as noted above. It is, therefore, held that the order passed by the Assessing Officer was erroneous as well as prejudicial to the interest of Revenue.
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In respect of excess claim of Rs.68,02,000/- it has been contended that these amounts were in the nature of business expenditure and not donations and therefore, proposed disallowance is not justified. The assessee has not however explained as to how these are business expenditure. Since the order is being set aside on other issues, this issue is also set aside and the Assessing Officer is directed to examine the nature of these payments as per law.”
Aggrieved by the directions so given by the learned Commissioner, the assessee is in appeal before us.
We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.
We have noted that, so far as additional depreciation on windmill is concerned, it was specifically pointed out to the learned Commissioner that this issue is covered in favour of the assessee, by Tribunal’s decision in the case of ACIT vs. Power Build Ltd and vice versa (ITA No.1945/Ahd/2010 and CO No.198/Ahd/2010; order dated 31.08.2012) wherein the co-ordinate bench had specifically observed as follows:-
“5. We find that the disallowance of claim of the assessee regarding additional depreciation was made by the A.O. on this basis that as per the clause (iia)
ITA No. 1254/Ahd/2014 Gujarat Alkalies & Chemicals Ltd Vs. DCIT Assessment year: 2009-10 Page 4 of 5 of Section 32, additional depreciation is allowable only when the extension of industrial undertaking achieved the substantial expansion by way of increase in installed capacity. As against this, it is held by Ld. CIT(A) that the provisions of Section 32(1)(iia) were amended by Finance Act 2005 w.e.f. 01.04.2006 i.e. applicable to assessment year 2006-07 onwards, as per which there is no condition regarding substantial expansion by way of increase in installed capacity of an industrial undertaking. He has also referred the explanatory memorandum to the Finance Actof 2005. We find that in such explanatory memo, it is specifically stated that the requirement of fulfilling the conditions of expansion in installed capacity has been dispensed with. Under this factual position, we do not find any reason to interfere in the order of Ld. CIT(A) on this issue. This ground of the revenue is rejected.”
The above contentions are duly noted at page nos. 3 & 4 of the impugned order, and yet the learned Commissioner has proceeded to treat the order passed by the Assessing Officer as erroneous and prejudicial to the interest of the revenue. We are of the considered view that the course adopted by the Assessing Officer, which is unambiguously supported by a binding judicial precedent, cannot be said to be erroneous and prejudicial to the interest of the revenue. As noted by Hon’ble Supreme Court, in the case of CIT vs. Malabar Industrial Co Ltd [(2000) 243 ITR 83 (SC)], “every loss of revenue, as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interest of the revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the ITO is not sustainable in law”. A view taken in consonance with the Tribunal decision cannot be said to unsustainable in law. Clearly, therefore, the learned Commissioner was in error in invoking his revision powers under section 263 in respect of additional depreciation on windmill.
As regards the learned Commissioner’s invoking the revision powers under section 263 in respect of, what is termed as by the CIT, “excess claim of Rs.68,02,000”, we have noted that the stand of the assessee is that these expenses are duly deductable under section 37(1), that the assessee had furnished complete information, as requisitioned by the Assessing Officer, at the assessment stage – copies of which are placed at pages 44 to 59 of the paper-book filed before us, and yet the Commissioner has remitted the matter to the file of the Assessing Officer for necessary verification. As a matter of fact, the learned CIT has justified the action on the ground that “since the order is being set aside on other issues, this issue is also set aside and the Assessing Officer is directed to examine the nature of these payments as per law”. As the things stand now, however, the order under section 263 on the other issue (i.e. additional depreciation) stands vacated. In any case, it is not even the case of the CIT that there is any error in the claim or this aspect of the matter was not examined in the original proceedings.
ITA No. 1254/Ahd/2014 Gujarat Alkalies & Chemicals Ltd Vs. DCIT Assessment year: 2009-10 Page 5 of 5 9. On this issue also, therefore, action of the CIT in invoking powers under section 263 cannot be justified. No issue can be remitted to the file of the Assessing Officer, by invoking powers under section 263, simply because some other issues are also remitted to the file of the Assessing Officer. That is a very casual approach by the CIT. Learned CIT’s action, therefore, does not meet our approval.
In view of these discussions, as also bearing in mind entirety of the case, we vacate the impugned revision order on both the issues. The assessee thus succeeds in its appeal.
In the result, the appeal is allowed. Pronounced in the open court today on the 6th day of February, 2018.
Sd/- Sd/-
S S Godara Pramod Kumar (Accountant Member) (Judicial Member) Ahmedabad, the 6th day of February, 2018 **bt Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) DR (6) Guard File By order TRUE COPY
Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad
Date of dictation- order prepared as per six pages manuscript of Hon’ble AM, which is attached with the appeal file ....06.02.2018 2. Date on which the typed draft is placed before the Dictating Member … 06.02.2018… Other member …06.02.2018… …. 3. Date on which the approved draft comes to the Sr.P.S./P.S. - …06.02.2018.. 4. Date on which the fair order is placed before the Dictating Member for Pronouncement …..06.02.2018………….. 5. Date on which the file goes to the Bench Clerk….06.02.2018………… 6. Date on which the file goes to the Head Clerk……………………………. 7. The date on which the file goes to the Assistant Registrar for signature on the order.. 8. Date of Despatch of the Order………………