GAIL (INDIA) LTD. vs. ADDL. CIT, RANGE-12,,

ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, ; 858/Del/2006 & 859/Del/2006 are 03 separate appeals filed by the Assessee against the 03 separate orders of the Ld. CIT(A), New Delhi for the assessment years 2000- 01, 2001-02 & 2002-03 respectively. Since common grounds are involved in all these appeals which were heard together and are being disposed of by this common order for the sake of convenience. 1.1 We first address the Assessee’s Appeal i.e. (AY 2000-01). The assessee has raiSed the following grounds:-

1. That on facts and circumstances of the case and in law, the Commissioner of Income-tax (Appeals) - XV {briefly "the CIT (A)"}erred in holding that appellant was not entitled to deduction under sections 80I & 80 IA of the Act amounting to Rs.156.5 crores.

2. That on the facts and circumstances of the case and in law, having accepted that appellant is engaged in manufacture of LPG for which 80%(appx.)of gas was processed, the authorities below erred in holding that appellant is not an industrial undertakings engaged in manufacture or production of different article or thing.

3. That on the facts and circumstances of the case and in law, the CIT (A) erred in confirming the disallowance of 50%of LPG profits on an estimated basis amounting to Rs. 41.32 Crores.

4. That on the facts and circumstances of the case and in law the CIT(A)erred in confirming the disallowances of Rs.40.55 lakh on account of amortization of the cost of lease hold land as a capital expenses.

5. That on the facts and circumstances of the case and in law, CIT (A) erred in upholding the sales, interest and miscellaneous income of Rs.1125.11 lakh relating to pre- commencement stage of plant as income from other sources, rather than abating the same from the construction cost of the plant.

6. That on the facts and circumstances of the case and in law, the CIT(A)erred in confirming disallowance of the provision for wages of Rs.1118.24 lakh on account of wage settlement of pay revision arrears of staff holding it as contingent expense.

7. That on the facts and circumstances of the case and in law, the CIT(A)erred in confirming the expenditure on new projects of Rs.35.80 lakh incurred on purchase of data packages to facilitate in bidding for gas block offered by MOP&NG as capital expenditure in absence of production sharing agreement between GAIL and Central Govt.

8. That on the facts and circumstances of the case and in law, the CIT(A) erred in confirming the expenditure on consultancy for newly commissioned plant of 803.47 lakh on account of technical fee and traveling to tide over the initial glitches as capital expenditure.

9. That on the facts and circumstances of the case and in law, the CIT(A)erred in confirming disallowance u/s 14A ofRs.2629.80 lakh on notional interest burden and administrative charge calculated by assessing authority in its own way to earn tax free dividends.

10. That on the facts and circumstances of the case and in law, the CIT(A) erred in confirming disallowance of Rs873.39 lakh of depreciation on account of the capitalization affected due to exchange rate variation.

11. That on the facts and circumstances of the case and in law, the CIT(A) erred in confirming disallowances of Rs.29.16 lakh towards fee paid to M/s ElL for selection of computer configuration for LAN/WAN and for Y2K compliance as capital expenditure.

12. That on the facts and circumstances of the case and in law, the CIT(A) erred in confirming disallowances of Rs.32.06 lakh towards payment of Right of Use treating- these-expenditure as capital.

13. That on the facts and circumstances of the case and in law, the CIT(A)erred confirming foreign exchange variation on Revenue account of Rs, 21.82 lakh on reinstatement of liabilities on account of change in exchange rate.

14. That the orders passed by the Assessing Officer and the CIT(A)are bad in law and void ab-inito. 15. the appellant prays for leave to add, alter, amend or vary any of the grounds either before or at the time of hearing of appeal. 2. The issues raised by assessee in ground nos. 1, 2 & 3 are squarely covered by the order of the Coordinate Bench in and 4642/Del/2013 in assessee’s own case for the assessment year 1996-97 which order has been followed by the tribunal in AY 1997-98 and 1998-99 in ITA No. 4057 and 5091/Del/2014 and 5775 and 5912/Del/2014. For the detailed reasons given therein ground nos. 1, 2 and 3 are allowed. 3. Ground no. 4 relates to amortization of leasehold expenses. During the course of assessment proceedings, the AO noticed that assessee has claimed deduction of Rs. 40.55 lacs on account of amortization of leasehold expenses paid by the assessee to various local government authorities for lease on rent. The AO was of the firm belief that the same is of capital in nature and hence, not allowable. The action of the AO was upheld by the Ld. CIT(A). 3.1 We find that this issue is no more res integra as the same has been decided against the assessee and in favour of the revenue by the Hon’ble Delhi High Court in assessee’s own case in assessment year 1997-98 in and 957/2011 vide order dated 5.11.2012 [27 taxman.com 97]. Since the issue has been decided against the assessee by the Hon’ble Jurisdictional High Court, this ground is accordingly dismissed.

4. Ground no. 5 relates to taxation of sales and interest income relating to new plant. The underlying facts of this issue are that during the relevant previous year a new plant namely LPG plant at Pata was commissioned. The trial runs in relation to the above plant, commenced in November, 1999 and were concluded with the commissioning of the above project for commercial production in March, 2000. During this period, the assessee earned the following revenue:- i. Sales Rs. 10.23 crores ii. Interest income Rs. 0.92 crores iii. Misc. Income Rs. 3.84 crores Rs. 15.09 crores During this trial run, the assessee has also incurred certain expenditure which was revenue in nature totalling to Rs. 72.92 crores. The excess of expenditure over income amounting to Rs. 57.83 crores was transferred to Capital Work In Progress. However, the AO treated the income of Rs. 15.09 crores as income from other sources. The Ld. CIT(A) upheld the action of the AO. 4.1 Before us, the counsel for the assessee stated that netting off of revenue and the expenditure were transferred to Capital Work In Progress which is supported by the decision of the Hon’ble Supreme Court of India in the case of Bokaro Steel 236 ITR 315 and Karnal Cooperative Sugar 243 ITR 2. 4.2 Per contra, Ld. DR supported the findings of the AO. 4.3 We have carefully considered the orders of the authorities below. In our considered opinion, the assessee has rightly netted off the expenditure during trial run with the income of trial run and the balance has been rightly transferred to capital work in progress. We accordingly, direct the AO to delete the revenue of Rs. 15.09 crores from the head ‘income from other sources’. Accordingly, the ground no. 5 is allowed.

5. Ground no. 6 relates to the provision of wage revision of Rs. 11.18 crores. The underlying facts in this issue are that as per the policy of the Department of Public Enterprises, Ministry of Industry, Government of India, the wages of the employees of the appellant company are required to be revised every 5 years. The last pay revision took place w.e.f. 1.1.1992 and accordingly the next pay revision was due on 1.1.1997. On the basis of wage settlement amounting to Rs. 11.13 crores and claimed deduction thereof in the return of income, the AO was of the view that the provision on the ground of treating the above liability towards pay revision is contingent in nature since the wage settlement agreement had been entered into the following assessment year and not during the year under consideration. Accordingly, the addition of Rs. 11.18 crores was made which was confirmed by the Ld. CIT(A). 5.1 Before us, the Ld. counsel for the assessee vehemently stated that in view of the binding policy of the Government of India for pay revision of the assessee’s employees, the assessee has made the provision since the pay revision was due w.e.f. 1.1.1997. It is a say of the counsel that the liability of the assessee had been crystalised and being ascertained liability should be allowed as deduction. 5.1.1. Per contrar, the Ld. DR supported the findings of the AO. 5.2 We have given the thoughtful consideration of the orders of the authorities below. We find that on identical set of facts in the year 1999-2000, the assessment of the assessee was subject to revisionary proceedings of the Ld. Commissioner u/s. 263 of the Act. The matter travelled upto the Tribunal and the Tribunal in set aside the order of the Ld. CIT and allowed the claim of deduction of the provision of wage revision. The relevant finding of the Tribunal are read under- “8. In this case, from the order of the Ld. CIT it is clear that, by way of internal office order passed on 28.12.1998, a Committee was constituted for holding discussions with the Representatives of Employees for formulating an approach of the Board of Directors, towards the pending pay revision w.e.f. 1.1.1997. The Department of Public Enterprises, issued an office memo on 14.1.1999, authorizing the Public Sector Undertaking to start wage revision negotiations with the workers. It was thereafter on 17.8.1999, that the annual accounts of the company were certified by the Directors, wherein a provision for the above pay revision liability, was made in the accounts. The issue is whether a provision made towards impugned pay revision is allowable as a deduction or not. ......

8.4 In our considered view, though the date of signing of the MOU i.e. 24.09.2000, which is done after the approval of the Department of Public Enterprises, the negotiations were completed during the year and the liability was known as liability accrued from the effective date of commencement. It is also to be pointed out that the provisions for salary was not a contingent liability. It was in respect of outcome of the decision of the DPE.” 8.5 Consistent with the views taken by the Jurisdictional High Court as well as Hon’ble Kerala High Court, we hold that the provision for wages made towards impending pay revision, should be allowed as a deduction. The Ld. CIT(A) has not made any effort to prove that the quantum of provision made is unrealistic or imaginary. Under these circumstances we hold that the claim of the assessee is allowable.” 5.2.1 Since the issue is now settled in favour of the assessee and against the Revenue, we direct the AO to delete the impugned addition. The ground no. 6 is accordingly allowed.

8. Ground no. 9 relates to the disallowance made u/s. 14A of the Act. During the course of certain assessment proceedings, the AO noticed that the assessee has received dividend income of Rs. 18.96 crores. The AO was of the opinion that assessee must have incurred certain expenditure for earning the exempt dividend income. By applying the provision of section 14A of the Act the AO computed the disallowance of Rs. 26.29 crores which was confirmed by the Ld. CIT(A). 8.1 Before us, the counsel for the assessee stated that the asessee was directed to purchase shares of ONGC by the Government for disinvestment and cross purchase of shares of PSU and pursuant to the directions of the Government of India, the assesee invested Rs. 556.28 crores out of which Rs. 450 crores was paid as advance in financial year 1998-99 and balance Rs. 106.28 crores was paid in the year under consideration. It is a say of the counsel that the entire investments have been made out of own funds and therefore there should not be any disallowance u/s. 14A of the Act. The counsel further pointed out that nowhere in his assessment order, the AO has recorded any satisfaction before proceeding to make disallowance u/s. 14A of the Act.

8.2 Per contra, Ld. DR strongly supported the findings of the AO. It is a say of the Ld. DR that a reasonable disallowance has to be made for earning exempt dividend income. 8.3 We have carefully considered the orders of the authorities below. We find that the AO has applied the adhoc interest @12% per annum for computing the disallowance. The AO has nowhere examined the availability of own funds with the assesee. In our considered opinion, if sufficient interest free funds are available and even if there are borrowed funds, the presumption would be that the investment have been made out of own funds. Our view is fortified by the decision of the Hon’ble Bombay High Court in the case of Reliance Utility and Power 313 ITR 340. However, we are of the view that certain administrative expenses has to be disallowed for earning this exempt income. In our considered opinion, the disallowance of Rs. 5 lacs should meet the end of justice. We accordingly, direct the AO to restrict the disallowance to Rs. 5 lacs. Ground no. 9 is accordingly partly allowed.

- Preparation of specification of server, mode, LAN and WAN equipments, printers etc. - Identification of suitable hardware and software for the server. - Selection of suitable gateway package. - Identification of frequency and methodologies of data transfer across GAOL offices. The assessee claimed the said payment as consultancy services rendered by EIL for the purpose of improving operational efficiency of the computer system through LAN/WAN which was already in existence and was functioning satisfactory. The AO and the Ld. CIT(A) were of the firm belief that the said expenditure for identification and installation of new equipment resultant in enduring benefits and therefore is of capital nature. 10.1 Before us, the counsel for the assessee reiterated what has been stated before the lower authorities and relied upon the various judicial decisions. 10.2 Per contra, Ld. DR strongly supported the findings of the Ld. CIT(A) and read the relevant finding of the Ld. CIT(A). 10.3 We have carefully considered the orders of the authorities below. The Hon’ble Supreme Court of India in the case of Empire Jute Co. Ltd. vs. CIT 124 ITR 1, has laid down the test for determining as to what constitutes capital expenditure in the following terms:- “It is not every advantage of enduring nature acquired by an appellant that brings the case within the principle laid down in this test. What is material to consider is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital filed that the expenditure would be disallowable on an application of this test. If the advance consists merely in facilitating the appellant’s trading operations or enabling the management and conduct of the appellant’s business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future....” 10.4 In light of the aforesaid ratio laid down by the Hon’ble Supreme Court of India, we find that the said consultancy payment made by the assessee to EIL was to enhance the existing infrastructure of the assessee in IT segment. This was definitely for the benefit of the management to conduct the business of the appellant in the more efficient manner. We are therefore, of the considered view that such consultancy fee should be allowed as revenue expenditure and accordingly we direct the AO to do the same. The ground no. 11 is accordingly allowed.

12. The additional ground relating to disallowance of payment of tax under section 43B of the Act show that the assessee has claimed deduction of expenses aggregating to Rs. 7.95 crores out of the said payment tax amounting to Rs. 6.67 crores has been paid by the assessee before the due date of filing of return. Therefore, to this extent, no disallowance should be made as laid down by the Hon’ble Supreme Court in the case of Allied Motors 224 ITR 677. We further find that assesee suo moto disallowed Rs. 1,19,56,547/- u/s. 43B of the Act, therefore, no further disallowance need to be made. This additional ground is accordingly allowed.

1. 1. That on facts and circumstances of the case and in law, the Commissioner of Income-tax (Appeals) - XV {briefly "the CIT (A)"}erred in holding that appellant was not entitled to deduction under sections 80 I & 80 IA of the Act amounting to Rs.12589.33 lakhs.

2. That on the facts and circumstances of the case and in law, having accepted that appellant is engaged in manufacture of LPG for which majority of gas was processed, the authorities below erred in holding that appellant is not an industrial undertakings engaged in the manufacture or production of different article or thing.

7. That on the facts and circumstances of the case and in law, the CIT(A)erred in confirming disallowance u/s 14A of Rs.277080360/- on notional interest burden and administrative charge calculated by assessing authority in its own way to earn tax free dividends.

8. That on the facts and circumstances of the case and in law, the CIT(A) erred in confirming disallowance of Rs 53067500/- of depreciation on account of the capitalization affected due to exchange rate variation.

9. That on the facts and circumstances of the case and in law, the CIT(A) erred in confirming disallowances of Rs.41809754/- towards consultancy fee paid to M/s EIL and other consultants treating it as capital expenditure.

10. That on the facts and circumstances of the case and in law, the CIT(A) erred in confirming disallowances of depreciation on capitalization of Jamnagar-Loni pipeline and Ghandhar plant amounting to Rs 153,59,63,050 crores.

11. That on the facts and circumstances of the case and in law, the CIT(A) erred in confirming disallowances of penalty amounting to Rs 198248 as capital expenditure.

12. That on the facts and circumstances of the case and in law, the CIT(A) erred in confirming disallowances of Rs 23,36,98,000 lakh towards prior period adjustments.

13. That on the facts and circumstances of the case and in law, the CIT(A) erred in confirming disallowance of year end foreign exchange variation on Revenue account ofRs.315000.

18. Ground no. 5 relates to taxation of sales and interest income relating to new plant. A similar issue has been decided in ITA No. 301/Del/2006 vide ground no. 5 of that appeal (supra). For the detailed reasons therein this ground is allowed.

Rebuttal to the allegations of the assessing officer LPG Pipeline: Jamnagar in Gujarat to Loni near Delhi Assessing officer’s observations Assessee’s submission Section I: Section 1: • Final bill of M/s Larson & Turbo for an amount of • The activities referred to at pg 26 of the impugned order Rs. 1,98,86,207 was raised on 25-05-2001 and were completed up to 31.03.2001, but bill was raised after was for period upto 15-04-2001 of this section, 31.03.2001: even though the Contractual Date of Completion • The jobs for which the final bill had been raised after was 31.01.2001 31.03.2001 was for the balance works of material • On the basis of the aforesaid, the AO inferred reconciliation, submission of drawings, clean up and that since the aforesaid bill was raised after restoration, having no relevance to commissioning of 31.03.2001, the Pipeline could not be said to pipeline. have been commissioned on or before that date • Further the bill itself states that cumulative work done till date was Rs.45.62 crores [Refer Page 21 of AO order] • Refer, pg 228 of the Paper Book, being “Completion of Commissioning Certificate” issued by Engineers India Ltd certifying as follows: “This is to certify that system/ sub-system as detailed below has been successfully commissioned and it under operational control of Client’s production department. The minor items will no effect the normal operation of the system/ sub-system….”

Section 2: Section 2: • Final bill of M/s Larson & Turbo for an amount of • The activities referred to at pg 27 of the impugned order Rs.1,11,58,121 was raised on 07.07.2001 and were completed up to 31.03.2001. but bill was raised after was for period up to 31-05-2001, even though 31.03.2001 the Contractual Date of Completion was • Contract value of this job was Rs. 41.70 crores and the 13.01.2001 total payment of the bill in question was merely 2% of the • On the basis of the aforesaid, the AO inferred total contract value. that since the aforesaid bill was raised after • The said payment included job of chain link fencing, 31.03.2001, the Pipeline could not be said to construction of guard room, and final painting of the civil have been commissioned on or before that date jobs, etc. which could be executed after the pipeline starts operations • Jobs for which final bills were raised were not related to the completion of pipeline and were onlv for final acceptance of drawing, etc. and that the different section of the pipelines were commissioned as per the certificate issued by the pipeline -in-charge dated 22.02.2001 • Refer, pg. 229 of the Paper Book, being “Completion of Commissioning Certificate” issued by Engineers India Ltd certifying as follows: “This is to certify that system/ sub-system as detailed below has been successfully commissioned and it under operational control of Client’s production department. The minor items will no effect the normal operation of the system/ sub-system Section 5: Section 5: • Final bill of M/s Larson & Turbo for an amount of • The activities referred to at pg 28 of the impugned order Rs.2,57,31,106 was raised on 15.06.2001 and were completed up to 31.03.2001, but bill was raised after was for period up to 15.07.2001, even though 31.03.2001 the Contractual Date of Completion was • Contract value of this job was Rs. 54.7 crores and the total 13.01.2001 payment of the bill was merely 2% of the total contract • On the basis of the aforesaid, the AO inferred value. that since the aforesaid bill was raised after • The payment included job of chain link fencing, 31.03.2001, the Pipeline could not be said to construction of guard room, and final painting of civil jobs, have been commissioned on or before that date etc. which are the work not related to the completion of and were only for cleanup/restoration which had no relevance to commissioning or capitalization of the pipeline. • Different section of the pipelines were commissioned as per the certificate issued by the pipeline - in charge dated 22.02.2001 Section C: Abu Road Intermediate Pumping Station • Only 5% payments related to various jobs which were payable only after completion of work in all respect and acceptance by engineer- in-charge but these had no relevance to the • Final bill of M/s Larson & Turbo was raised for capitalization of the pipeline. period up to 31.05.2001, even though the Contractual Date of Completion was 21.11.2000 • Disallowance of depreciation cannot be based merely on the final bills being submitted by M/s L&T • On the basis of the aforesaid, the AO inferred that since the aforesaid bill was raised after • Against disallowance of depreciation in respect of Dispatch 31.03.2001, the Pipeline could not be said to Terminals at ABU Road based on bills submitted by M/s have been commissioned on or before that date. L&T for period up to 31.05.2001. • Bill was only 5%, final payment which was payable only after completion and integration of system but practically all construction/ commissioning work was completed before 31.03.20001. Section 3: • Punj Lloyd submitted its final bill for billing period from 01.03.2001 to 21.04.2001 for the activities referred to at • Final bill raised by Punj Lloyd is for period up to pg 30 of the CIT(A) order 21.04.2001 • The jobs had no connection with the capitalization of the • On the basis of the aforesaid, the AO inferred that project. since the aforesaid bill was raised after 31.03.2001, the Pipeline could not be said to • Total contract value was USD 114.19 lacs have been commissioned on or before that date • Payment in the said bill was USD 1.43 lacs, which was approximately 1% of the total work. • It is normal to release 5 % of final payments after handing over pipelines to owner and its final acceptance. Section 4: • Final bill dated 28.05.2001, which shows the billing period • Final bill dated 28.05.2001 raised by Punj Lloyd from 01.03.2001 to 07.05.2001 covered the activities for an amount of USD 3,10,005.22 was for the referred at pg 29 of the CIT(A) order period 01.03.2001 to 07.05.2001 • Total work order was for USD 87.70 Lakhs • On the basis of the aforesaid, the AO inferred that since the aforesaid bill was raised after • Payment of USD 84 lacs was already made 31.03.2001, the Pipeline could not be said to • Payment in this bill was USD 0.65 lacs which was less than have been commissioned on or before that date even 1% of the total contract value, and this had no bearing on the capitalization of the project Laving of spurlines for Jamnagar - Loni pipelines projects: • M/s Jai Hind Products was awarded the job for laying of spur pipelines for total of Rs. 6 Crores • Final bill dated 15.12.2001 was raised for the period 16.07.2001 to 31.11.2001m where as the • Since spurlines were integrated with Jamnagar - Loni Contractual completion date: 23.07.2000 Pipelines and laid before 31.03.2001, the capitalization was done on 31.03.2001 • EIL have certified that the job was finally completed on 31.11.2001 • Bills were raised late as their were some complication, not affecting the commissioning, in execution of job by the • On the basis of the aforesaid, the AO inferred contractor that since the aforesaid bill was raised after 31.03.2001, the Pipeline could not be said to have been commissioned on or before that date Gandhar LPG plant

M/s Bridge Roof and Co. Pvt. Ltd. • All the systems of LPG recovery units, all the utility systems and all the offsite systems had been commissioned, except for those referred at pg 25 of the CIT(A) order M/s Bridge Roof and Co. Pvt. Ltd. were awarded job of civil and structural work for various utilities and off site work and all these • From this certificate it is sent that, even as on utilities and offsite work were ready before 31.01.2001 and only 31.03.2001, certain important sub-systems of some petty jobs relating to culverts, painting etc were attended the plant were admittedly not ready. after 31.03.2001, without which also the plant could be successfully commissioned and run • From the completion certificate of M/s Bridge and Roof Co. Pvt. Ltd., a contractor for project shows actual completion date as 15.06.2001. the job given to it was civil, structural, and Lean gas turbine compressor and feed gas compressor architectural work for utilities and off site work at GPC-Gandhar unit. This job was, thus, not Observation regarding lean gas turbine compressor and feed gas compressor of the AO was clarified by the technical process complete as on 31.03.2001 as per the certificate involved in commissioning of lean gas turbine compressor and • From memorandum of payment of the final bill feed gas compressor. Lean gas compressor precedes feedgas of BHEL dated 15.06.2001; from noting at the compressor, such that if feedgas compressor was to be started end of page asking for payment of Rs. 1.8 Lacs without lean gas compressor, then the Plant would not safely and 2.5 lacs to be withheld for jobs pending and function. Thus, once it was not disputed that feedgas not done. Thus even till june,2001 part of work compressor was capitalized, there can be no dispute about lean of BHEL was incomplete. BHEL was the supplier gas compressor also having been capitalized. and the commissioning contractor for the main equipment of the project. • Lean gas turbine compressor, which is for output gas, Further, following documents were fded before the assessing is claimed as commissioned on 26.03.2001 and officer which clearly establishes production of LPG on or before the feed gas compressor which is for the input is 31.03.2001: claimed as commissioned on 31.03.2001. The • Production report, dispatch and closing registers duly certified assessee has further stated the production of by Senior Manager (Operations) of the appellant- LPG was made on 31.03.2001. The only evidence company. in this regard is a noting in a computerized sheet stated to be excise register but no excise duty • copy of RGI registers stating opening and closing balance, has been provided on this production. quantity manufactured and quantity removed from the factory • copy of invoices raised on the customers • details of excise duty on LPG. adjusted through CENVAT/PLA account 22.4 The rebuttal of the assessee mentioned hereinabove have been considered thoroughly with the relevant documentary evidences referred therein and placed in the paper book. Considering the facts in totality, we are of the considered view that assessee has successfully commissioned the Jamnagar Loni Pipeline and the LPG Gas Processing Plant Gandhar and is very much eligible for claim of depreciation on the capitalised cost thereon. We accordingly, direct the AO to allow the depreciation of Jamnagar Loni Pipeline and Gandhar Plant. Ground o. 10 is accordingly allowed.

ITA NO. 859/DEL/2006 (AY 2002-03)

6. That on the facts and circumstances of the case and in law, the CIT(A)erred in confirming disallowance u/s 14A of Rs.2236.88 lakh on notional interest burden and administrative charge calculated by assessing authority in its own way to earn tax free dividends.

7. That on the facts and circumstances of the case and in law, the CIT(A) erred in confirming disallowance of Rs 654.50 lakh of depreciation on account of the capitalization affected due to exchange rate variation. Ld. CIT(A) also erredin not allowing suo moto depreciation on Rs. 153.60 crores which was not allowed by AO in AY 2001-02 (by not accepting capitalization of Jamnagar Loni Pipeline and LPG plant at Gandhar).

9. That on the facts and circumstances of the case and in law, the CIT(A)erred in confirming foreign exchange variation on Revenue account of Rs.l288.001akh on reinstatement of liabilities on account of change in the year end exchange rate.

10. That on the facts and circumstances of the case and in law, the CIT(A)erred in confirming disallowance of depreciation of Rs.74.671akh on capitalized value of Rs.5,97,39,954/- on the ground that the work was not completed upto 31.03.2002, even when books of account were accepted by CAG.

11. That on the facts and circumstances of the case and in law, the CIT(A)erred in confirming interest u/s234C of Rs.504.11 lakh evenwhen the installment of Advance Tax was timely deposited on 15-09-2001 with bank.

13. That the orders passed by the Assessing Officer and the CIT(A)are bad in law and void ab- inito.

14. The appellant prays for leave to add, alter, amend or vary any of the grounds either before or at the time of hearing of appeal.