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Income Tax Appellate Tribunal, DELHI BENCHES : “G”, NEW DELHI
Before: SHRI J.SUDHAKAR REDDY & SHRI A.T.VARKEY
These are Cross appeals and are directed against the order of the Ld.CIT(A), New Delhi dt. 12.4.2013 for the A.Y. 2009-10 on the following grounds . ITA 3867/Del/2013 :
1. The CIT(A) erred in confirming the disallowance of pro-rata depreciation of Rs.4,302.73 lakhs on account of downward revaluation of assets (by reduction) in A.Y. 2000-2001.
ITA 4279/Del/2013 A.Y. 2009-10 Steel Authority of India Ltd., New Delhi
2. That the appellant seeks leave to add, amend, alter, abandon or substitute any of the above grounds at the time of hearing of appeal.” ITA 4279/Del/2013 1. "The Ld. CIT(A) erred in law and on the facts in deleting the addition of prior period expenses amounting to Rs.l02 lacs". 2. "The Ld. CIT(A) erred in law and on the facts in deleting the addition of in respect of depreciation on water supply & sewerage plants amounting to Rs.60.83 lacs." 3. "The Ld. CIT(A) erred in law and on the facts in deleting the disallowance made on account of Foreign Exchange Fluctuation amounting to Rs.1413 lacs." 4. "The Ld. CIT(A) erred in law and on the facts in deleting the disallowance made on account of depreciation on assets not in active use amounting to Rs.25.75 lacs". 5. "The Ld. CIT(A) erred in law and on the facts in deleting the disallowance on depreciation on "Fiber Optic Computer Networking" and UPS amounting to Rs.5.73 lacs". 6. "The Ld. CIT(A) erred in law and on the facts in deleting the disallowance made u/s 43B of the Income Tax Act, 1961, amounting to Rs.297.67 lacs". 7. "The Ld. CIT(A) erred in law and on the facts in restoring back the matter to the file of the AO for verification on account of depreciation on the intangible assets of mining rights amounting to Rs.4868.34 lacs." 8. "The Ld. CIT(A) erred in law and on the facts in restoring back the issue of disallowance of depreciation on the intangible assets of mining rights." 9. "The Ld. CIT(A) erred in law and on the facts in deleting the addition on account of Long Service Awards provided on actuarial basis amounting to Rs.583 lacs". 10. "The Ld. CIT(A) erred in law and on the facts in deleting the addition of Rs.6S1S.09 lacs made on account of LTC," 11. "The appellant craves to amend modify, alter, add or forego any ground of appeal at any time before or during the hearing of this appeal."
Facts of the case:- The assessee is a Public Sector Undertaking and it filed its return of income on 30.9.2009 declaring income of Rs.10,08,853.11 lakhs. This return of income was revised on 25.3.2009 declaring income of Rs.10,09,125.59 lakhs. The A.O. completed the assessment u/s 143(3), determining the total income at Rs.10,27,511.57 lakhs. He assessed book
ITA 4279/Del/2013 A.Y. 2009-10 Steel Authority of India Ltd., New Delhi profits u/s 115 JB of the Income Tax Act, 1961 (the Act) at Rs.99,26,329.81 lakhs. Aggrieved the assessee carried the matter in appeal.
The First Appellate Authority granted part relief. On the issues which were decided against the Revenue, by the First Appellate Authority, the A.O. filed these appeals. The assessee filed an appeal on the sole issue of disallowance of prorata depreciation.
We have heard Shri KK Jaswal, the Ld.Sr.D.R. on behalf of the Revenue and Shri MP Rastogi, the Ld.Counsel for the assessee.
On a careful consideration of the facts and circumstances of the case, on perusal of orders of lower authorities, material placed on record, we hold as follows.
We first take up assessee’s appeal in ITA 3867/Del/2013 for the A.Y. 2009-10.
Admittedly the very same issue in the assessee’s own case arose for the A.Ys 2000-2001, 2001-02 and 2002-03 as well as in the subsequent years. The ITAT in its order dt. 25.10.2012 for the A.Y. 2007-08 in ITA 751/Del/2011 dt. 26.10.2012 at para 5 and 6 pages 27 to 29 of the paper book) held as follows. “ 5. During assessment proceedings, the Assessing Officer observed that assessee was granted waiver of loan to the extent of 5.073 crores by the Govt. of India out of loans granted by it from Steel Development Fund. During the year, the Assessing Officer further observed that assessee in turn had waived loans to the extent of 2072 crores granted by it to Indian Iron & Steel Co. Ltd. and the balance amount of Rs. 3001 crores was transferred to capital reserve which was utilized by the assessee to re-value down wards its fixed assets which had got capitalized at a high value on account of various expenses during construction. The Assessing Officer disallowed the depreciation on proportionate basis on reduction amount of assets relying upon the provisions ITA 4279/Del/2013 A.Y. 2009-10 Steel Authority of India Ltd., New Delhi of section 43(1), 43(6) & 32 (1) which according to him clearly allowed depreciation on reduced written down value of assets. In this respect explanation 10 to section 43(1) which states that where a portion of the cost of an asset acquired by the assessee has been met directly or indirectly by the Central Govt. or by State Govt. or any authority established under any law in the form of a subsidy or grant then so much of the cost as it relatable to such subsidy or grant of reimbursement shall not be included in the actual cost of the assets of the assessee. The assessee submitted before the Assessing Officer that when a loan is obtained if it is of a capital nature and when loan is utilized, it does not become an expense. Therefore, when a loan is waived/written off by an assessee, it is not an allowable deduction as it is capital in nature and similarly when the loan is waived in favour of assessee it retains its capital nature and does not result into a taxable receipt. It further submitted that when an asset is revalued up-ward depreciation allowance as per Income Tax Act remains as per WDV of assets. Similarly, the assessee pleaded that when fixed assets of a company are revalued downward due to receipt of grant or waiver of loan, the consequent reduction in depreciation on the amount of waiver is not justified. However, the Assessing Officer did not agree with the contention of the assessee and made the addition.
6. Before the Ld CIT(A), the assessee reiterated its arguments. The Ld CIT(A) however, observed that Hon'ble ITAT in its order dated 25.6.2009 for assessment years 2000-01 to 2002-03 had confirmed the similar addition. Following the same, the Ld CIT(A) confirmed the action of Assessing Officer.
7.1. Consistent with the view taken therein, we dismiss this ground of the assessee. 8. In the result the appeal of the assessee is dismissed. 9. We now take up Revenue’s appeal in ITA 4279/Del/2013. 10. The first ground of appeal is regarding allowability of prior period expenses of Rs.120 lakhs. The facts of the case are as follows.
ITA 4279/Del/2013 A.Y. 2009-10 Steel Authority of India Ltd., New Delhi 10.1. The assessee dispatches goods by railway wagons from its 8 plants to its stock yards and customers. The average no. Of wagons are 600 to 800 per day. Sometimes the wagons do not reach their destination within reasonable time. The company has to lodge claims on Railways within a stipulated time for such wagons. The claims lodged are accounted as income at that time. It so happens when wagons say are dispatched to Ludhiana and Lucknow all the wagons are sent to Ludhiana Stock yard only. Ludhiana records them in Material Diversion Statement and takes it into stock. The railways, in due course of time trace the wagons not delivered at its destination but at another place. Then they give the details to the company and it verifies them, after which it makes the necessary adjustments in accounts. It so happened, that TMT Steel dispatched on IPT (Inter Plant Transfer) basis in FY 2007-08 got delivered at BSO (Branch Sales Office) Bhilai in February 2008. When the Plant did not receive the goods, a claim was lodged on railways and accounted as income. When the wrong delivery was brought to our notice in FY 2008-09 (after 31-3-2008), necessary adjustments were done in accounts and the Claims lodged (Accounted as Other Revenues) was reversed- and shown as Adjustment pertaining to earlier year. This being a reversal of an income (claims) credited to P&L a/c of the earlier year on being found as not recoverable, it is allowable u/s 28,36 & 37 of the Act CIT [A] has been allowing similar Prior Period Expenses from AY 2001-02 onwards on the basis of crystallization / accrual-including AY 2007-08.
10.2. The First Appellate Authority has allowed the claim of the assessee by observing that lodging of the claim by the company on railways for the wagons not reaching their destination and being reversed in all cases where the railways have been able to prove their delivery at some plant or stock yard of the assessee though not the original destination, appears to be a regular feature, in past many years. Thus there is sufficient force in the ITA 4279/Del/2013 A.Y. 2009-10 Steel Authority of India Ltd., New Delhi submissions of the assessee and this is a regular feature, which is normal debit in almost every year. Thereafter he further held that since this debit of Rs.102 lakhs is on account of a claim accounted as income in the earlier A.Y. which has been reversed in this year after settlement with the railways, it is allowable in this year. Therefore the disallowance of Rs.102 lakhs is deleted in this year also. 10.3. We find no infirmity in the order of the First Appellate Authority. Hence we uphold the same and dismiss this ground of the Revenue.
The next issue is regarding allowability of depreciation on water supply and sewerage plant. 11.1. Admittedly this issue is covered in favour of the assessee and against the Revenue by the decision of the ITAT ina ssessee’s own case for the A.Y. 2007-08 in ordr dt. 25.10.2012 in ITA 1488/Del/2011. The findings are at para 46 to 48 of that order which are not extracted for the sake of brevity. 11.2. Respectfully following the same, we uphold the order of the First Appellate Authority and dismiss this ground of the Revenue.
The next ground is on disallowance of interest claimed on KFW Germany loan transfer to Foreign Exchange Fluctuation Reserve as per loan agreement of Rs.1413 lakhs. The Ld.Counsel pointed out that the correct figure is Rs.1656.68 lakhs.
Admittedly this issue has arisen for the A.Y. 1998-99 onwards to the A.Y. 2002-03. The ITAT had deleted the disallowance in all these years. For the A.Y. 2007-08 the ITAT upheld the order of the Ld.CIT(A), where this disallowance has been deleted. The issue has been discussed at paras 46 to 48 of that order. For the sake of brevity, we do not extract the same. Consistent with the view taken therein, we dismiss this ground of the Revenue.
ITA 4279/Del/2013 A.Y. 2009-10 Steel Authority of India Ltd., New Delhi 14. The next ground of Revenue is on the issue of depreciation on assets not in active use of Rs.25.75 lakhs.
14.1. Admittedly this issue is also covered in favour of the assessee and against the Revenue for all the earlier A.Ys. The Tribunal has discussed the issue at paras 49 to 51 of its order for A.Y. 2007-08. Consistent with the view taken therein, we dismiss this ground of the Revenue.
The next ground is on the rate of depreciation that is allowable on “fibre optic computer net working” of Rs.31.85 lakhs and on “UPS of computers” Rs.5.73 lakhs.
15.1. Admittedly this issue is covered in favour of the assessee by the order of the Tribunal for the A.Y. 2007-08, wherein the Revenue was directed to grant depreciation at the rate of 60%, by following the judgement of the Jurisdictional High Court in the case of CIT vs. BSES Yamuna Powers Ltd. (in ITA 1267 ordr dt. 31.82010. Consistent with the view taken therein we dismiss this ground of the Revenue.
The next ground is on disallowance u/s 43B of provident fund dues deposited within the grace period. The Ld.Sr.D.R. relied on the decision of Hon’ble Gujarat High Court reported in 366 ITR 117. The assessee relied on the judgement of the Jurisdictional High Court in the case of CIT vs. AMIL Ltd. 188 Taxman 265 (Del.). 16.1. We follow the binding judgement of the Jurisdictional High Court and dismiss this ground of Revenue. The fact that the PF dues were deposited
ITA 4279/Del/2013 A.Y. 2009-10 Steel Authority of India Ltd., New Delhi within the grace period, allowed under the respective Act, and before the due date of submitting the return u/s 139(1) of the Act is not in dispute.
The next ground is against the order of the Ld.CIT(A) restoring to the AO, for verification, the disallowance on depreciation on intangible assets on mining rights.
17.1. We find that the Ld.CIT(A) has not restored this issue to the A.O. Hence the ground is not correct. Hence we dismiss this ground as ‘misconceived’.
The next ground is on the issue of allowability of actuarial provision, for long service awards. This issue is also admittedly covered by the order of the Tribunal for the A.Y. 2007-08. This issue is discussed at paras 52 to 54 of that order. Consistent with the view taken therein, we uphold the finding of the First Appellate Authority and dismiss this ground of the Revenue.
The last issue is allowability of provision for LTC amounting to Rs.6515.09 lakhs.
19.1. Admittedly this issue is also decided in favour of the assessee by the Tribunal in the earlier A.Ys. For the A.Y. 2007-08 the discussion on this issue is at paras 55 to 57 of the order.
19.2. Consistent with the view taken therein we dismiss this ground of the Revenue.
ITA 4279/Del/2013 A.Y. 2009-10 Steel Authority of India Ltd., New Delhi 20. In the result the appeal of the Revenue is dismissed.
In the result, the appeal by the Revenue as well as appeal by the assessee, both are dismissed.
Order pronounced in the Open Court on 07th October, 2015.