THE ITO 8(1)(4), MUMBAI vs. M/S. GTC INDUSTRIES LTD, MUMBAI

The learned Commissioner (Appeals) observing that similar claim was made by the assessee in assessment year 2002–03 was not allowed by his predecessor–in–office rejected assessee’s claim.

The learned Authorised Representative referring to the written submissions filed before the first appellate authority submitted, out of the total expenditure claimed an amount of ` 3.24 lakh pertained to annual support fee for BAAN–IV ERP users’ licence. It was submitted, the expenditure incurred was not on account of acquisition of any software but is annual support fee which is in the nature of annual maintenance charges in relation to usage of software. He, therefore, submitted, the expenditure is required to be allowed in full as it is not in the nature of capital expenditure. The learned Authorised Representative submitted, the Tribunal, Mumbai Bench, while considering similar payment made for acquiring ERP software licence of the same company in case of Perfect Circle India Ltd. v/s ACIT, 2014–TIOL–807, has held the expenditure as revenue in nature. He submitted, the assessee has paid an amount of ` 1.50 lakh for customisation of time and attendance software, it was submitted, the expenditure incurred was not on account of acquisition of any software but it pertains to fee charged for modification in the existing software which is akin to repair and replacement of the software. Hence, it cannot be treated as capital expenditure and in support of such contention, learned Authorised Representative relied upon the decision of the Hon'ble Madras High Court in CIT v/s Karur Vysya Bank, [2015] 54 Taxmann.com 324 (Mad.).

The learned Departmental Representative relied upon the order of the learned Commissioner (Appeals) and the Assessing Officer.

We have considered the submissions of the parties and perused the material available on record. On a perusal of the assessment order, it is noticed that the Assessing Officer while holding the expenditure as capital, has not at all examined the exact nature of expenditure. Before the learned Commissioner (Appeals), though, the assessee has submitted in detail the nature of expenditure incurred in a cryptic and unreasoned order, the learned Commissioner (Appeals) rejected the claim of the assessee by merely referring to the decision of his predecessor–in–office for assessment year 2001–02 and 2002– 03 without even bothering to examine whether the facts involved are similar or not. Though, it may be a fact that computer software along with computer is included in the depreciation schedule and depreciation @ 60% is allowable but that will not be a ground enough to disallow assessee’s claim if the expenditure incurred is of revenue nature. In the present case, it is the claim of the assessee that an amount of ` 3.24 lakh was for annual support fee for maintenance of an existing software. Same is the case of expenditure of ` 1.50 lakh for a customisation of existing software. Undisputedly, the assessee is not in software business but is a manufacturer of cigarette and 8 M/s. GTC Industries Ld.

In ground no.2, assessee has challenged the addition made to the closing stock on account of unutilised MODVAT.

At the time of hearing, learned Authorised Representative did not wish to press the ground. Consequently, the same is dismissed as “not pressed”.

In ground no.3, assessee has challenged the decision of the Departmental Authorities in adding the amount of ` 27,27,663, to the stock on account of stocks written–off / taken at nil.

Brief facts are, during the assessment proceedings, the Assessing Officer noticed that the assessee has written–off finished goods worth ` 27,27,663. He, therefore, called upon the assessee to justify his claim. In response, it was submitted by the assessee that company has been showing value of closing stock as on the last date of the accounting year at nil value in respect of certain stock of finished good

The Learned Commissioner (Appeals) found that similar addition to closing stock in assessment year 2002–03, was challenged before the learned Commissioner (Appeals) and learned Commissioner (Appeals) had directed to enhance the opening stock to that extent in the subsequent assessment year. Accordingly, he directed the Assessing Officer to make similar adjustment in the impugned assessment year also.

The learned Authorised Representative referring to the written submissions filed before the learned Commissioner (Appeals) submitted, certain stocks of manufactured cigarettes are of no use

Learned Departmental Representative relied upon the order of the learned Commissioner (Appeals).

We have considered the submissions of the parties and perused the material available on record. As could be seen, neither the Assessing Officer nor the learned Commissioner (Appeals) has given any factual finding whether the stocks valued at nil are similar to stocks valued at market rate. In case, the stocks are damaged or destroyed they cannot be valued at market rate. That being the case, the value of such stock has to be taken at nil. It is seen from the facts on record total sales made by the assessee during the year was to the tune of ` 328.50 crore. During the year, the assessee manufactured total 7,075 million cigarettes and sold 7,204 million cigarettes.

In ground no.4, the assessee has challenged disallowance of depreciation on account of non-user of the asset.

Brief facts are, while examining assessee’s claim of depreciation, the Assessing Officer noticed, the assessee has claimed depreciation on certain asset given on lease. The Assessing Officer referring to certain judicial precedent opined that if the asset is not to be used, then no depreciation is allowed. He further observed, the assessee has given on lease the assets which were utilised by the parties to whom

Learned Commissioner (Appeals), after considering the submissions of the assessee, relying upon the decision of his predecessor–in–office in assessee’s own case for assessment year 2001–02 and 2002–03 allowed part relief to the assessee.

Learned Authorised Representative, at the outset submitted, the issue has been decided in favour of the assessee by the decision of the Tribunal in assessee’s own case for assessment year 2007–08.

Learned Departmental Representative on the other hand relied upon the order of the authorities below.

We have considered the submissions of the parties and perused the material available on record. As is evident, assessee’s claim of depreciation was disallowed primarily for the reason that it has not 13 M/s. GTC Industries Ld.

Ground no.5 relates to disallowance of interest amounting to ` 58,88,217 under section 14A of the Act.

Brief facts are, during the assessment proceedings, the Assessing Officer, while verifying the return of income, found that the assessee

The learned Commissioner (Appeals) noticing that similar disallowance was upheld by his predecessor–in–office in assessee’s own case in assessment year 2001–02 and 2002–03, dismissed the ground of the assessee.

The learned Authorised Representative submitted, investments of ` 4,43,49,221, are carried over from earlier years appears in the Balance Sheet for assessment year 1998–99. He submitted, the disallowance made was deleted by the Tribunal on the reasoning that assessee had own funds to make the investment. He submitted, as far as investments in subsidiary GTC Global is concerned, the Tribunal in assessee’s own case for the assessment year 2007–08, has dismissed the appeal of the Revenue on the issue by holding that such investment is in course of regular business dealing between the companies. He submitted, other disallowances are also towards receivables from subsidiary companies and advance to manufacturers and suppliers in usual course of business. It was submitted, such advances / investments are for smooth running of business, hence, for business exigencies. It was submitted, even otherwise also, the 16 M/s. GTC Industries Ld.

The learned Departmental Representative relied upon the order of the authorities below.

We have considered the submissions of the parties and perused the material available on record. Undisputedly, the investment, loans, advances, etc., on the basis of which the Assessing Officer made proportionate disallowance of interest expenditure are not made during the impugned year but are carried over from earlier assessment year. It is observed, the issue relating to proportionate disallowance of interest had first cropped up in the assessment year 1997–98 and 1998–99. The Tribunal, after going through entire gamut of facts relating to investments / advances made to subsidiary categorically held that such investments, loans, advances, etc., are in regular course of business and for the purpose of business, hence, no 17 M/s. GTC Industries Ld.

In the result, assessee’s appeal is allowed. ./2007 – A.Y. 2003–04

Ground no.1, is in relation to allowance of assessee’s claim of expenditure in T.V. film advertisement.

Brief facts are, in the course of assessment proceedings, the Assessing Officer noticed that the assessee has claimed expenditure of ` 28,54,98,021, on account of advertisement and sales promotion out

The learned Commissioner (Appeals), noticing similar disallowance made in assessment year 2001–02 and 2002–03, was deleted by his predecessor–in–office followed the same and deleted the addition.

Learned Departmental Representative relying upon the observations of the Assessing Officer submitted, as assessee has produced films, the expenditure cannot be allowed as revenue expenditure.

Learned Authorised Representative on the other hand submitted, the Assessing Officer has completely misconceived the facts while coming to his conclusion. He submitted, assessee had not produced any films but the expenditures are for preparing slides shown in cinema house and for advertisement in print media. He submitted, all necessary and relevant details relating to expenditure incurred was submitted before the Assessing Officer. That being the case, the 20 M/s. GTC Industries Ld.

We have considered the submissions of the parties and perused the material available on record. As could be seen from the bills raised towards advertisement expenses, these are not for production of any film. On the contrary, they are for advertisement through slides and print media. In our view, the Assessing Officer has not correctly appreciated the facts while coming to the conclusion that assessee has produced T.V. films for advertisement. There is no such film produced by the assessee. In these circumstances, disallowance made by Assessing Officer has rightly been deleted by the learned Commissioner (Appeals). Ground no.1, is dismissed.

In ground no.2, the Department has challenged part relief granted by the learned Commissioner (Appeals) in respect of the addition made to closing stock on account of unutilised MODVAT credit.

Brief facts are, during the assessment proceedings, the Assessing Officer noticed, assessee has unutilised MODVAT credit of ` 12,01,210. He, therefore, called upon the assessee to explain why unutilised MODVAT should not be added to the value of the closing stock. Though, the assessee explained that unutilised MODVAT credit need not be added to the closing stock but the Assessing Officer rejecting

The learned Commissioner (Appeals) following the order passed by his predecessor–in–office for assessment years 2001–02 and 2002– 03 held that if any adjustment made to the closing stock, similar adjustment has to be made to the opening stock also.

We have considered the submissions of the parties and perused the material available on record. It is observed, similar issue arose in case of assessee in ITA no.5213/Mum./2010, dated 26th June 2013, for the assessment year 2007–08, the Tribunal while deciding the issue observed as under:–

Law is now fairly well settled that the adjustment contemplated under section 145A, has to be made in all items like purchases, sales, opening and closing stock. That being the case, we do not find any infirmity in the order of the learned Commissioner (Appeals). Accordingly, ground no.2, is dismissed.

In ground no.3, Department has challenged the allowance of prior period expenses.

Brief facts are, during the assessment proceedings, the Assessing Officer on going through the tax audit report noticed that the expenditure claimed at ` 3,84,004, pertained to earlier year. He, therefore, called upon the assessee to explain why the expenditure claimed should not be disallowed. Though, assessee objected to the proposed disallowance by stating that the payment crystallized during the impugned assessment year but the Assessing Officer rejecting the claim of the assessee disallowed the amount of ` 3,84,004. Being

The learned Commissioner (Appeals), after verifying the relevant facts and materials on record, noticed, though the expenditure relates to the previous assessment year but the bills were raised and passed only in previous year relevant to the assessment year 2003–04, hence, the liability accrued only during the year under consideration. Accordingly, he allowed the expenditure claimed by the assessee.

We have considered the submissions of the parties and perused the material available on record. As could be seen, the only reason for which the Assessing Officer disallowed the expenditure is, it pertains to the previous assessment year. However, as per the finding of fact recorded by the learned Commissioner (Appeals), the bills for expenditures were raised only in the impugned assessment year, therefore, the expenditures crystallised only in the impugned assessment year. That being the case, assessee is eligible to claim deduction for the expenditure incurred. Thus, ground no.3, is dismissed.

In ground no.4, the Department has challenged the relief granted by the learned Commissioner (Appeals) in enhancing the opening stock by ` 15,22,377.

This ground is consequential to ground no.3, raised by the assessee in its appeal being ITA no.6995/Mum./2007. However, to briefly reiterate the facts of the case while deciding the appeal for assessment year 2002–03, in assessee’s own case, the learned Commissioner (Appeals) while upholding the order of the Assessing Officer in adding the value of stock taken at nil to the closing stock had directed the Assessing Officer to enhance the value of opening stock to that extent in assessment year 2003–04. However, while completing the assessment for the impugned assessment year, Assessing Officer did not make such adjustment to opening stock. The assessee, therefore, raised a ground before the learned Commissioner (Appeals) for enhancement of opening stock.

The learned Commissioner (Appeals), following the direction of his predecessor–in–office for the assessment year 2002–03 directed the Assessing Officer to enhance the opening stock by ` 15,22,377.

Having heard the parties and perused the material on record, we do not find any infirmity in the order passed by the learned Commissioner (Appeals). If some addition has been made to the closing stock, consequently, similar adjustment has to be made to the opening stock for the succeeding year. Accordingly, ground no.4, is also dismissed.

In the result, Department’s appeal stands dismissed. ./2008 – A.Y. 2004–05

Ground no.1, relates to addition of unutilised MODVAT credit to the closing stock.

Learned Authorised Representative submitted before us that he did not wish to press this ground. Consequently, ground no.1, raised by the assessee is dismissed as ”not pressed”.

In ground no.2, assessee has challenged disallowance of prior period expenses of ` 14,994.

During the assessment proceedings, the Assessing Officer noticing that expenditure of ` 14,994, claimed under the head “Personal Cost” actually relates to bonus pertaining to earlier years. He, therefore, called upon the assessee to explain why the expenditure being a prior period item should not be disallowed. In response, it was submitted, though, the expenditure relates to a transaction taking place in the immediately previous assessment year, however, the liability to pay has accrued in the impugned assessment year, the Assessing Officer, however, did not accept the explanation of the 27 M/s. GTC Industries Ld.

Learned Commissioner (Appeals) also confirmed the disallowance with the remark that details of such expenditure was not provided to establish the fact that the bonus pertains to the year under consideration. The learned Authorised Representative submitted, bonus expenses through were estimated in the previous year, however, the bonus became payable only in the current year. Therefore, the shortage or surplus is always considered in the year of actual expenses. In support of such contention, learned Authorised Representative referred to the note of auditor in Annexure–K, a copy of which is placed at Page–19 of the paper book.

The learned Departmental Representative relied on the order of the authorities below.

We have considered the submissions of the parties and perused the material available on record. Undisputedly, bonus relates to the previous assessment year. Though, the assessee has claimed that in the assessment year 2003–04, has created provisions for bonus payment on estimate basis, however, the amount became payable in the current assessment year. In our view, if the assessee has not claimed the expenditure or the expenditure has not been allowed in 28 M/s. GTC Industries Ld.

In ground no.3, the assessee has challenged the addition made to closing stock on account of stock valued at nil.

This ground is similar to ground no.3, raised by the assessee in its appeal being ITA no.6995/Mum./2007, wherein we have decided the issue in favour of the assessee. Consistent with the findings given in Para–15 as aforesaid, we set aside the impugned order passed by the learned Commissioner (Appeals) on this issue and allow the ground no.3, raised by the assessee with similar observation.

Ground no.4, relates to disallowance of assessee’s claim of depreciation on leased assets.

This ground is also similar to ground no.4, raised by the assessee in its appeal being ITA no.6995/Mum./2007, wherein we have decided this issue in favour of the assessee. Consistent with the findings given in Para–21 as aforesaid, we set aside the impugned order passed by the learned Commissioner (Appeals) on this issue and allow the ground no.4, raised by the assessee.

Ground no.5, relates to disallowance made out of interest expenditure on account of investments, loans, advances, etc., made to subsidiary.

This ground is similar to ground no.5, raised by the assessee in its appeal being ITA no.6995/Mum./2007, wherein we have decided this issue in favour of the assessee. Consistent with the findings given in Para–27 as aforesaid, we set aside the impugned order passed by the learned Commissioner (Appeals) on this issue and allow the ground no.5, raised by the assessee.

Ground no.6, relates to the issue of disallowance of ` 35,333, on account of payment of PF / ESIC dues.

Brief facts are, during the assessment proceedings, the Assessing Officer noticing that assessee has paid employees’ contribution for PF / ESIC after the specified due date, disallowed the amount of ` 35,333. Being aggrieved of such disallowance, though the assessee challenged the same before the learned Commissioner (Appeals), but at the time of hearing of appeal before the first appellate authority, the assessee did not press the ground.

The learned Authorised Representative submitted, the assessee has paid the employees’ contribution for PF / ESIC before the due date

Learned Departmental Representative on the other hand submitted, as the assessee did not press this ground before the learned Commissioner (Appeals), he cannot raise it again at this stage.

We have considered the submissions of the parties and perused the material available on record. As is evident, assessee on his own volition, did not raise the ground before the learned Commissioner (Appeals). Accordingly, ground was dismissed as not pressed. That being the case, though, in principle, we agree that employees’ contribution to PF / ESIC if paid after the specified due date under the relevant statute, but before the due date of of return under section 139(1) of the Act, eligible for deduction, but since the assessee has 31 M/s. GTC Industries Ld.

Ground no.7 relates to charging of interest under section 234A, 234B and 234C of the Act.

This ground is consequential in nature. Hence, we direct the Assessing Officer to give consequential effect in accordance with law while re-computing the income of the assessee.

In the result, assessee’s appeal is partly allowed for statistical purposes. ./2008 – A.Y. 2004–05

Ground no.1 relates to addition made to closing stock on account of unutilised MODVAT credit.

This ground is similar to ground no.2, raised by the Department in its appeal being ITA no.7223/Mum./2007, wherein we have decided this issue in favour of the assessee. Consistent with the findings given in Para–38 and 39 as aforesaid, we uphold the order passed by the learned Commissioner (Appeals) on this issue and dismiss ground no.1, raised by the department.

In ground no.2, Department has challenged the decision of the learned Commissioner (Appeals) in deleting the addition made on account of disallowance of bad debts amounting to ` 1,13,214.

Brief facts are, during the assessment proceedings, the Assessing Officer noticing that the assessee has claimed deduction of ` 1,13,214, on account of bad debt written–off, called upon the assessee to furnish details in respect of bad debt. After going through the details submitted by the assessee, the Assessing Officer referring to certain judicial precedents held that for claiming bad debt, the assessee must prove that the debt is not recoverable and the decision to write–off is an honest decision. Accordingly, he disallowed the claim made by the assessee. The assessee challenged the disallowance before the learned Commissioner (Appeals).

Learned Commissioner (Appeals) allowed assessee’s claim by holding that once the assessee writes–off the bad debt in the books of account, there is no need for the assessee to further prove that the debt has become irrecoverable. Accordingly, he allowed assessee’s claim.

We have considered the submissions of the parties and perused the material available on record. As per the provisions of section 33 M/s. GTC Industries Ld.

In ground no.3, Department has challenged the decision of the learned Commissioner (Appeals) in deleting the addition of ` 5,000, under section 40A(3) of the Act.

Brief facts are, during the assessment proceedings, the Assessing Officer found that assessee has made cash payment of ` 25,000 towards salary to employees in violation of section 40A(3). Though, the auditors in his notes on account stated that as per assessee the payment is covered by the exceptions provided under rule 6DD(i), but the Assessing Officer called upon the assessee to explain why 20% of 34 M/s. GTC Industries Ld.

Learned Departmental Representative submitted before us that though the assessee did not press the ground before the learned Commissioner (Appeals), but he wrongly allowed the assessee’s claim.

Learned Authorised Representative fairly submitted, the assessee did not press this ground before the learned Commissioner (Appeals). However, referring to the observations of the learned Commissioner (Appeals), learned Authorised Representative submitted that the learned Commissioner (Appeals) has actually dismissed the ground.

We have considered the submissions of the parties and perused the material available on record. Undisputedly, before the learned Commissioner (Appeals), assessee did not press this ground. It is noted by us, assessee raised this issue in ground no.10, before the learned Commissioner (Appeals). The learned Commissioner (Appeals) decided the issue against the assessee by observing as under:–

In view of the aforesaid decision of the learned Commissioner (Appeals), we fail to understand how the Revenue can raise this ground. Accordingly, ground no.3, having become infructuous is dismissed.

In ground no.4, the Department has challenged the decision of the first appellate authority in treating the interest income earned as income from business as against income from other sources as held by the Assessing Officer.

Brief facts are, the Assessing Officer in the course of assessment proceedings, noticed that assessee has received interest of ` 1,09,78,163, during the relevant previous year which has been shown as income under the head “Business”. He, therefore, called upon the assessee to explain why such income shall not be treated as income from other sources. In response to the query raised by the Assessing Officer, it was submitted by the assessee that as the interest was earned out of deposits given to various banks towards margin money for executing Government contract, the interest income has to be treated as business income. The Assessing Officer, however, did not 36 M/s. GTC Industries Ld.

Before the learned Commissioner (Appeals), it was argued by the assessee that in the course of its business activities, assessee has to execute bank guarantee in favour of Government Departments and issue letter of credit to the suppliers and to avail such facilities from the bank it is mandatory to maintain with the bank a specific percentage of the sanctioned amount as margin money in the form of fixed deposit. Thus, it was submitted by the assessee the interest received on such fixed deposits being integrally connected to the business activities should be treated as business income. The learned Commissioner (Appeals), after considering the submissions of the assessee and factual details available on record, found that the interest income earned is on fixed deposit kept as margin money for bank guarantee / letter of credit. Learned Commissioner (Appeals) having found that such bank guarantee / letter of credit were obtained

Learned Departmental Representative relying upon the reasoning of the Assessing Officer in Para–10.7 of his order submitted, interest earned on fixed deposit under no circumstances, can be treated as business income of the assessee.

Learned Authorised Representative on the other hand strongly supporting the order of the learned Commissioner (Appeals) submitted, as the interest earned on fixed deposit kept as margin money in respect of bank guarantee / letter of credit obtained from banks is in connection with the business activities, the income has to be treated as business income of the assessee. Learned Authorised Representative submitted, similar issue arose in assessee’s own case for assessment year 2007–08 and the Tribunal accepted assessee’s claim by directing the Assessing Officer to treat it as business income after verification. Learned Authorised Representative also referred to the decision of the Hon'ble Gujarat High Court in Empire Pump Pvt. Ltd. v/s ACIT, of 2003 & Ors., dated 14th October 2014.

We have considered the submissions of the parties and perused the material available on record. As is evident from the facts and material on record, the fixed deposit on which the assessee has earned the interest income are kept as margin money with the banks against the bank guarantee / letter of credit, issued to various authorities, State Government in connection with assessee’s business activities. Therefore, as the fixed deposit kept with the banks has a direct nexus with the business activities of the assessee, the interest income has to be assessed under the head “Business”. It is further observed, the issue arose in assessee’s own case for assessment year 2007–08 and the Tribunal while deciding the issue in ITA no.5213/Mum./2010 dated 26th June 2013, held as under:–

Further, the Hon'ble Gujarat High Court in Empire Pump Pvt. Ltd. (supra) while considering similar nature of dispute held as under:–

In view of the principle laid down as above, we do not find any infirmity in the order passed by the learned Commissioner (Appeals) on this issue. Accordingly, ground no.4, is dismissed.

In the result, Department’s appeal is dismissed. ./2010 – A.Y. 2005–06

In ground no.2, the assessee has challenged the decision of the first appellate authority in treating the interest income earned as income from other sources as against income from business as claimed by the assessee.

This ground is similar to ground no.4, raised by the Department in its appeal being ITA no. 2921/Mum./2008, wherein we have decided this issue in favour of the assessee by dismissing the ground raised by the Department. Consistent with the findings given in Para–87, 88 and 89 as aforesaid, we set aside the impugned order passed by the learned Commissioner (Appeals) on this issue and allow ground no.2, raised by the assessee.

In the result, assessee’s appeal is allowed. ./2010 – A.Y. 2005–06

Ground no.1, relates to disallowance of depreciation on leased assets.

This ground is also similar to ground no.4, raised by the assessee in its appeal being ITA no.6995/Mum./2007, wherein we have decided this issue in favour of the assessee. Consistent with the findings given

Ground no.2, relates to deletion of disallowance of interest expenditure made by the Assessing Officer amounting to ` 63,62,782.

This ground is similar to ground no.5, raised by the assessee in its appeal being ITA no.6995/Mum./2007, wherein we have decided this issue in favour of the assessee. Consistent with the findings given in Para–27 as aforesaid, we uphold the order of the learned Commissioner (Appeals) on this issue by dismissing the ground raised.

In the result, departments appeal is dismissed. ./2010 – A.Y. 2006–07

Ground no.1, relating to addition made to closing stock on account of unutilised MODVAT credit is dismissed as not pressed.

In ground no.2, the assessee has challenged the decision of the first appellate authority in treating the interest income earned as income from other sources as against income from business as claimed by the assessee.

This ground is similar to ground no.4, raised by the Department in its appeal being ITA no. 2921/Mum./2008, wherein we have decided this issue in favour of the assessee by dismissing the ground raised by the Department. Consistent with the findings given in Para–87, 88 and 89 as aforesaid, we set aside the impugned order passed by the learned Commissioner (Appeals) on this issue and allow ground no.2, raised by the assessee.

In the result, assessee’s appeal is allowed. ./2010 – A.Y. 2006–07

Ground no.1, relates to disallowance of depreciation on leased assets.

This ground is similar to ground no.4, raised by the assessee in its appeal being ITA no.6995/Mum./2007, wherein we have decided this issue in favour of the assessee. Consistent with the findings given in Para–21 as aforesaid, we do not find any reason to interfere with the order of the learned Commissioner (Appeals) and dismiss the ground no.1 raised by the Department.

Ground no.2, relates to deletion of disallowance of interest made by the Assessing Officer amounting to ` 22,95,665.

This ground is similar to ground no.5, raised by the assessee in its appeal being ITA no.6995/Mum./2007, wherein we have decided this issue in favour of the assessee. Consistent with the findings given in Para–27 as aforesaid, we uphold the order of the learned Commissioner (Appeals) and dismiss ground no.2, raised by the Department.

In the result, Revenue’s appeal is dismissed. ./2012 – A.Y. 2008–09

Ground no.1, relates to allowance of depreciation on discarded and leased assets.

Brief facts are, during the assessment proceedings, the Assessing Officer after verifying the details of depreciation found that the assessee has claimed depreciation on leased and discarded assets. He, therefore, called upon the assessee to justify its claim. In response, it was submitted by the assessee that depreciation on leased plant and machinery is very negligible amounting to ` 171. As far as depreciation on discarded asset is concerned, it was submitted by the assessee that 44 M/s. GTC Industries Ld.

The learned Commissioner (Appeals) after considering the submissions of the assessee, however, allowed the claim of depreciation. As far as depreciation on leased asset is concerned, the learned Commissioner (Appeals) held that in assessment year 2007– 08, his predecessor–in–office has held that leasing of plant and machinery is the regular business of the assessee, hence, depreciation on leased assets is to be allowed. As far as discarded assets are concerned, the learned Commissioner (Appeals) held that since such assets are part of block of assets even if such asset is not used for the purpose of business, however, as the block as a whole is used, depreciation is to be allowed for the entire block and cannot be segregated.

We have considered the submissions of the parties and perused the material available on record. As far as leased assets are concerned, the issue is covered by the decision of the Tribunal for assessment year 2007–08 referred to in the earlier part of the order while deciding similar issue. As far as depreciation on discarded asset is concerned, undisputedly, such assets form part of the block on which assessee has claimed depreciation. Therefore, when the assessee is claiming depreciation on block of asset, out of such depreciation claimed some disallowance cannot be made on the ground that some assets forming part of the block have not been used for the business. In Natco Exports v/s DCIT, 86 ITD 445 (Hyd.), relied upon by the learned Authorised Representative, it has been held that the expression used “for the purpose of business” has to be construed to mean that the discarded plant and machinery on which the assessee has claimed depreciation was used for the purpose of assessee’s business in the earlier financial years even though they may not have been used in the relevant previous year. In view of the aforesaid, we do not find infirmity in the decision of the learned Commissioner (Appeals). Ground no.1, raised by the Department is dismissed.

Ground no.2, relates to disallowance of interest on investments in sister concern.

This ground is similar to ground no.5, raised by the assessee in its appeal being ITA no.6995/Mum./2007, wherein we have decided this issue in favour of the assessee. Consistent with the findings given in Para–27 as aforesaid, we uphold the order of the learned Commissioner (Appeals) and dismiss ground no.2, raised by the department.

In the result, Department’s appeal is dismissed. Order pronounced in the open Court on 13.04.2016