Global Trust Bank Ltd., New Delhi v. ACIT, New Delhi

ITA 20/DEL/2011 | 2005-2006
Pronouncement Date: 22-07-2011 | Result: Dismissed

Appeal Details

RSA Number 2020114 RSA 2011
Assessee PAN AAACO0191M
Bench Delhi
Appeal Number ITA 20/DEL/2011
Duration Of Justice 6 month(s) 18 day(s)
Appellant Global Trust Bank Ltd., New Delhi
Respondent ACIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 22-07-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 22-07-2011
Date Of Final Hearing 07-07-2011
Next Hearing Date 07-07-2011
Assessment Year 2005-2006
Appeal Filed On 04-01-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C DELHI BEFORE SHRI I.P. BANSAL AND SHRI K.G. BANSAL ITA NO. 23(DEL)/2011 ASSESSMENT YEAR: 2001-02 GLOBAL TRUST BANK LTD. ASSISTANT COMMISSIONER OF (NOW AMALGAMATED WITH ORIENTAL IN COME-TAX CIRCLE 13(1) BANK OF COMMERCE) F-14 VS. NEW DELHI. 4 TH FLOOR COMPETENT HOUSE CONNAUGHT PLACE NEW DELHI. PAN-AAACO0191M ITA NO. 172(DEL)/2011 ASSESSMENT YEAR: 2001-02 ASSISTANT COMMISSIONER OF GL OBAL TRUST BANK LTD. INCOME-TAX CIRCLE 13(1) VS. (N OW AMALGAMATED WITH ORIENTAL NEW DELHI. BANK OF COMMERCE) F-14 4 TH FLOOR COMPETENT HOUSE CONNAUGHT PLACE NEW DELHI. & ITA NO. 20(DEL)/2011 ASSESSMENT YEAR: 2005-06 GLOBAL TRUST BANK LTD. ASSISTANT COMMISSIONER OF (NOW AMALGAMATED WITH ORIENTAL IN COME-TAX CIRCLE 13(1) BANK OF COMMERCE) F-14 VS. NEW DELHI. 4 TH FLOOR COMPETENT HOUSE CONNAUGHT PLACE NEW DELHI. (APPELLANT) (RESPONDENT) CO NTD. PAGE 2 ITA NOS. 23 172 & 20(DEL)/2011 2 ASSESSEE BY : SHRI K.V.S.R. KRISHNA C .A. DEPARTMENT BY : SMT. PRATIMA KAUSHIK SR. DR ORDER PER BENCH THESE CROSS APPEALS OF THE ASSESSEE AND REVENU E FOR ASSESSMENT YEAR 2001-02 AND THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2005- 06 WERE ARGUED IN A CONSOLIDATED MANNER BY THE LD. COUNSEL FOR THE ASSESSEE. THE LD. CIT DR FILED AN APPLICATION REQUESTING FOR A SHORT ADJOURNMENT. NO REASON WAS FURNISHED IN THE AP PLICATION FOR SEEKING ADJOURNMENT. HE WAS NOT PRESENT AT THE TIME OF HE ARING OF THE APPLICATION. THE OTHER DEPARTMENTAL REPRESENTATIVES PRESENT AT THAT TIME COULD NOT EXPLAIN THE REASONS FOR SEEKING ADJOURNMENT. HOW EVER IT WAS MENTIONED THAT THEY ARE NOT AUTHORIZED TO ARGUE THESE AP PEALS. THE LD. COUNSEL SUBMITTED THAT THE APPEALS INVOLVE GROUNDS WH ICH STAND COVERED BY VARIOUS DECISIONS. THEREFORE THE APPLICATION WAS OPPOSED. LOOKING TO THE FACT THAT NO PARTICULAR REASON HAS BEEN ASSIGN ED FOR SEEKING ADJOURNMENT THE APPLICATION IS REJECTED AND WE P ROCEED TO DECIDE THE APPEALS ON MERITS. 2. WE START WITH THE APPEAL OF THE ASSESSEE BEA RING ITA NO. 23(DEL)/2011 FOR ASSESSMENT YEAR 2001-02. IN TH IS APPEAL THE ASSESSEE ITA NOS. 23 172 & 20(DEL)/2011 3 HAD CHALLENGED THE FINDINGS OF THE LD. CIT(APPEALS) IN RESPECT OF DISALLOWANCE TO BE MADE U/S 14A OF THE ACT. FOR T HE SAKE OF READY REFERENCE THREE SUBSTANTIVE GROUNDS TAKEN IN APP EAL IN THIS BEHALF ARE REPRODUCED BELOW:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE DISALLOWANCE U/S 14A AND DIRECTING THE AO TO COM PUTE DISALLOWANCE. THE DIRECTION GIVEN BY THE LD. CIT (A) IS IGNORING THE FACTS OF THE ASSESSEES CASE BEING THAT OF A N ATIONALIZED BANK WHERE INVESTMENTS ARE HELD AS STOCK-IN-TRADE AND EXPE NDITURE IS INCURRED FOR THE PURPOSE OF BANKING BUSINESS. 2. THE APPELLANT CONTENDS THAT A SUM OF RS. 41 96 11 9/- HAS BEEN VOLUNTARILY OFFERED AND DISALLOWED U/S 14A BY TH E ASSESSEE. NEITHER THE ASSESSING OFFICER NOR THE CIT(A) HAS ANY M ATERIAL TO SUPPORT THAT ANY FURTHER EXPENDITURE HAS BEEN INCURRED FOR EARNING TAX- FREE INCOME FOR DISALLOWANCE. HENCE THE ORDER OF THE CIT(A) UPHOLDING DISALLOWANCE U/S 14A IS WRONG AND BAD I N LAW. 3. IT IS CONTENDED THAT APPELLANT HAS SUFFICIENT O WN FUNDS NAMELY SHARE CAPITAL AND RESERVES COVERING INVESTMENTS IN SHARES/INVESTMENT IN UTI/MUTUAL FUNDS/BONDS/LONG-T ERM LOANS AS ON 31.03.2001 YIELDING TAX-FREE INCOME. AS AGAIN ST THIS POSITIVE EVIDENCE THE ASSESSING OFFICER AS WELL AS CIT(A) HAS NO MATERIAL OR EVIDENCE TO SHOW THAT ANY ADDITIONAL EXPENDITUR E WAS INCURRED TO EARN TAX-FREE INCOME. THEREFORE THERE IS NO QUES TION OF DISALLOWANCE U/S 14A. 2.1 THE FACTS ARE THAT THE ASSESSEE HAD EARN ED DIVIDEND INCOME FROM DOMESTIC COMPANIES AND MUTUAL FUNDS OF RS. 76 83 9 8 157/-. IT HAD ALSO EARNED TAX-FREE INTEREST ON BONDS AMOUNTING TO R S. 40 66 64 406/-. THESE ITA NOS. 23 172 & 20(DEL)/2011 4 AMOUNTS WERE NOT INCLUDED IN THE TOTAL INCOME. TH E ASSESSEE DISALLOWED EXPENDITURE OF RS. 41 96 119/- U/S 14A AS THE E XPENDITURE INCURRED IN RELATION TO EARNING OF AFORESAID INCOMES. THE WO RKING OF THIS DISALLOWANCE WAS FURNISHED IN THE COURSE OF ASSES SMENT PROCEEDINGS WHICH HAS BEEN REPRODUCED IN PARAGRAPH NO. 4.2 O F THE ORDER. THE AO DID NOT ACCEPT THIS WORKING OF THE ASSESSEE. HE CAME TO THE CONCLUSION THAT THREE SUMS OF RS. 26 69 79 464/- RS. 50 44 61 480 /- AND RS. 5 87 53 128/- AGGREGATING TO RS. 83 01 94 072/- REPRESENTING IN TEREST FOR EARNING TAX- FREE INTEREST DIVIDEND ADMINISTRATION CHARGES ARE REQUIRED TO BE DISALLOWED UNDER THE AFORESAID PROVISION. 2.2 AGGRIEVED BY THIS ORDER THE ASSESSEE MOVED AN APPEAL BEFORE THE CIT(APPEALS). THE LD. CIT(APPEALS) CONSIDERED T HE DECISION OF SPECIAL BENCH OF MUMBAI TRIBUNAL IN THE CASE OF ITO VS . DAGA CAPITAL MANAGEMENT PVT. LTD. (2002) 117 ITD 169 AND THAT OF HONBLE MUMBAI HIGH COURT IN THE CASE OF GODREJ & BOYCE M ANUFACTURING CO. LTD. VS. DCIT IN ITA NO. 626/2010 AND W.T. NO. 758/201 0 DATED 12.08.2010. RELYING ON THE DECISION IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. HE CAME TO THE CONCLUSION THAT THE PROVI SIONS CONTAINED IN RULE 8D ARE VALID ALTHOUGH THEY APPLY IN RELATION TO ASS ESSMENT YEAR 2008-09 AND ITA NOS. 23 172 & 20(DEL)/2011 5 SUBSEQUENT YEARS. FURTHER THE AO IS DUTY BOUND TO DETERMINE THE EXPENDITURE WHICH HAS BEEN INCURRED IN RELATION T O EARNING OF EXEMPT- INCOME AND FOR THIS PURPOSE HE MUST ADOPT A R EASONABLE BASIS TAKING INTO ACCOUNT ALL RELEVANT FACTS. IN VIEW THEREOF IT HAS BEEN HELD THAT THE AO HAS RIGHT TO COMPUTE DISALLOWANCE U/S 14A IN THIS CASE. HOWEVER THE QUANTUM OF DISALLOWANCE HAS TO BE DETERMINED ON A REASONABLE BASIS AFTER VERIFYING ALL RELEVANT FACTS. THEREFORE IT HAS B EEN HELD THAT THE DISALLOWANCE OF RS. 82 59 97 953/- ON A PRO-RATA BASIS MADE BY THE AO CANNOT BE UPHELD. IT APPEARS THAT THE ASSESSEE HAD FURNISHED A WITHOUT PREJUDICE COMPUTATION OF DISALLOWANCE WORKING THE AMOUNT AT RS. 3.95 CRORE. THE LD. CIT(A) DIRECTED THE AO TO VER IFY COMPLETE FACTS AND TO COMPUTE THE AMOUNT OF EXPENDITURE WHICH HAD BEEN INCURRED IN RELATION TO THE EARNING OF EXEMPT INCOME. 2.3 THE CASE OF THE LD. COUNSEL IS THAT THE ASSES SEE HAD SUFFICIENT FUNDS OF ITS OWN TO INVEST IN SHARES MUTUAL FUNDS AND BON DS. THEREFORE NO AMOUNT COULD BE DISALLOWED FROM THE LIABILITY OF INTERES T EXPENDITURE. IT HAS BEEN FURTHER SUBMITTED THAT THE COMPUTATION FURNISHED B Y THE ASSESSEE IN ASSESSMENT PROCEEDINGS SHOWING THE AMOUNT TO BE D ISALLOWED AT RS. 41.96 LAKH WAS IN ACCORDANCE WITH THE DECISION OF HONBLE MUMBAI HIGH ITA NOS. 23 172 & 20(DEL)/2011 6 COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. IN THIS CONNECTION HE STRESSED THAT ONLY THAT EXPENDITUR E WHICH IS RELATED TO EARNING OF EXEMPT INCOME CAN BE DISALLOWED. AS MENTIONED EARLIER THERE HAS BEEN NO REPRESENTATION ON BEHALF OF THE REVENUE. 2.4 WE HAVE CONSIDERED THE FACTS OF THE CASE AN D SUBMISSIONS MADE BEFORE US. THE QUESTION REGARDING DISALLOWANCE T O BE MADE U/S 14A IS NO LONGER RES INTEGRA AS IT STANDS COVERED BY THE DECISION IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. FROM THE COM PUTATION MADE BY THE AO IT IS CLEAR THAT THE SAME IS NOT IN ACCOR DANCE WITH THE AFORESAID DECISION WHICH MANDATES THAT ALL FACTS SHOULD BE TAKEN INTO ACCOUNT FOR ASCERTAINING SUCH EXPENDITURE. FURTHER THE LD . CIT(A) HAS FOLLOWED THIS DECISION BUT DID NOT FURNISH ANY SPECIFIC GUIDE LINES TO THE AO AS TO HOW THE DISALLOWANCE SHOULD BE COMPUTED. HIS DIRECTIO N IS TO VERIFY WITHOUT PREJUDICE CALCULATION SUBMITTED BY THE ASSESSEE SHOWING THE DISALLOWANCE AT RS. 3.95 CRORE. THE DETAILS OF THIS WORKING H AVE NOT BEEN FURNISHED IN THE ORDER. IN SUCH CIRCUMSTANCES WE THINK IT FI T TO RESTORE THE MATTER TO THE FILE OF THE AO TO RE-COMPUTE THE DISALLOWANCE A S PER LAW AND BY TAKING THE DECISION IN THE CASE OF GODREJ & BOYCE MANU FACTURING CO. LTD. INTO ACCOUNT. ITA NOS. 23 172 & 20(DEL)/2011 7 3. WE NOW COME TO THE CROSS APPEAL OF THE REVE NUE BEARING ITA NO. 172(DEL)/2011. IN THIS APPEAL THE ACTION OF THE LD. CIT(A) REGARDING ALLOWANCE OF LEASE-EQUALIZATION ADJUSTMENT AMOUNT ING TO RS. 4 33 57 401/- HAS BEEN CHALLENGED. 3.1 THE FACTS ARE THAT THE AO FOUND A SUM OF RS. 4 33 57 401/- CREDITED TO PROFIT AND LOSS ACCOUNT. THE CREDIT WAS MADE IN ACCORDANCE WITH GUIDANCE NOTE OF ICAI. THIS AMOUNT HAS BE EN INCLUDED WHILE COMPUTING THE TOTAL INCOME OF THE ASSESSEE. 3.2 THE CASE OF THE ASSESSEE BEFORE THE LD. CIT( A) HAD BEEN THAT THIS CREDIT IS A NOTIONAL ENTRY WHICH DOES NOT REPRE SENT ANY INCOME. THE ASSESSEE CAPITALIZES THE COST OF THE LEASE ASS ETS AND SUCH ASSETS ARE SHOWN UNDER THE HEAD FIXED ASSETS. LEASE REN T RECEIVED OR RECEIVABLE FROM THE LESSEES IS CREDITED TO THE MISCELLANEOUS INCOME ACCOUNT FROM WHICH IT IS TAKEN TO PROFIT AND LOSS ACCOUNT. IN THE BOOKS THE ASSET IS WRITTEN OFF OVER THE PRIMARY LEASE PERIOD AND T HE PROPORTIONATE AMOUNT FOR A YEAR IS DEBITED TO PROFIT AND LOSS ACCOUNT AS DEPRECIATION. HOWEVER SUCH DEPRECIATION IS ADDED BACK IN THE COMPUTATION OF INCOME AND THE SAME ITA NOS. 23 172 & 20(DEL)/2011 8 IS CLAIMED AS PER INCOME-TAX RULES. THE DIFFEREN CE BETWEEN BOOK DEPRECIATION AND THE LEASE CHARGE IS CREDITED OR DEBITED AS THE CASE MAY BE TO LEASE EQUALIZATION ACCOUNT BY DEBITING OR CREDITING AS THE CASE MAY BE THE LEASE ADJUSTMENT ACCOUNT. THESE ENTRIES ARE MERELY NOTIONAL ENTRIES WHICH DO NOT AFFECT THE COMPUTATION OF TO TAL INCOME. IT IS CLARIFIED THAT WHILE THERE MAY BE CREDIT BALANCE IN THE LE ASE EQUALIZATION ACCOUNT THERE WILL BE DEBIT IN THESE ACCOUNTS SUBSEQUENT LY AND THE ACCOUNT GETS SQUARED UP ON THE EXPIRY OF THE LEASE PERIOD. T HE LD. CIT(A) CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFOR E HIM. HE CAME TO THE CONCLUSION THAT THE CREDIT IN THIS ACCOUNT ARISE S ONLY ON ACCOUNT OF JOURNAL ENTRY WHICH IS MADE AS PER GUIDELINES ISSUED BY THE ICAI. THE INCOME FOR TAX PURPOSES IS TO BE CALCULATED U/S 5 I.E. LE ASE RENT HAS TO BE TAKEN INTO ACCOUNT ON ACCRUAL BASIS AND DEPRECIATION HAS TO B E GRANTED AS PER THE INCOME-TAX RULES. THEREFORE HE DELETED THE ADD ITION. 3.3 BEFORE US THERE WAS NO REPRESENTATION FROM THE SIDE OF THE REVENUE. HOWEVER THE LD. COUNSEL EXPLAINED THE FINDINGS OF THE AO AND THE LD. CIT(A). IT HAS BEEN ARGUED THAT LEASE EQUALIZ ATION ACCOUNT DOES NOT CONTAIN ANY INCOME WHICH HAS ACCRUED TO THE AS SESSEE. IT IS ONLY A NOTIONAL ENTRY MADE FOR COMPLYING WITH ICAI GUIDEL INES ISSUED WITH A ITA NOS. 23 172 & 20(DEL)/2011 9 VIEW TO AVOID LARGE FLUCTUATION IN INCOME IN DIFFE RENT YEARS OF THE TERM OF THE LEASE OF AN ASSET. THE ACCOUNT HAS NO RELE VANCE FOR THE PURPOSE OF COMPUTING THE TOTAL INCOME. IN THIS CONNECTION RELIANCE HAS BEEN PLACED ON THE DECISION OF MUMBAI TRIBUNAL IN THE CASE OF MUKAND GLOBAL FINANCE LTD. VS. DCIT (2009) 309 ITR (AT) 294 P LACED IN THE PAPER BOOK FROM PAGE NOS. 88 TO 119. QUESTION NO. 3 IN THAT CASE RELATED TO CONFIRMATION OF THE ADDITION OF RS. 3 79 303/- IN RESPECT OF LEASE EQUALIZATION. THE ARGUMENT OF THE ASSESSEE BEFOR E THE TRIBUNAL WAS THAT THIS ENTRY WAS ONLY A JOURNAL ENTRY AND THERE W AS NO ELEMENT OF PROFIT IN IT. THE TRIBUNAL HELD THAT THE ASSESSEE HAS BEE N FOLLOWING A PARTICULAR METHOD FOR A NUMBER OF YEARS WHICH CANNOT BE D ISTURBED IN THIS YEAR WITHOUT ESTABLISHING THAT THE JOURNAL ENTRY AFFECT ED THE PROFIT. THE RELEVANT PORTION OF THE DECISION IS REPRODUCED BELOW:- GROUND NO. 3 RELATES TO CONFIRMATION OF ADDITIO N OF RS. 3 79 303/- IN RESPECT OF LEASE EQUALIZATION. THE ASSESSEE HAS CLAIMED DEDUCTION ON ACCOUNT OF LEASE EQUALIZATI ON OF RS. 3 79 303/- BUT THE SAME WAS DISALLOWED BY THE A SSESSING OFFICER AFTER TREATING IT TO BE CAPITAL EXPENDIT URE. BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) IT WAS CONT ENDED THAT THE OBSERVATION OF THE ASSESSING OFFICER IS FACT UALLY INCORRECT BECAUSE THE ASSESSEE HAS NOT CLAIMED THE IMPUGNE D EXPENDITURE. WHAT THE ASSESSEE HAS DONE IS THAT IT HAS CREDITED A SUM OF RS. 3 79 303/- TO THE PROFIT AND LOSS ACCOUNT BEING LEASE EQUALIZATION AND HAS REDUCED THE SU M WHILE COMPUTING THE INCOME. SINCE THE ACCOUNTING YE AR 1997-98 ITA NOS. 23 172 & 20(DEL)/2011 10 THE COMPANY HAS ADOPTED THE RECOMMENDATION OF THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA CONTAI NED IN THE GUIDANCE NOTE ON ACCOUNTING FOR LEASES. ACCORDIN GLY THE DIFFERENCE BETWEEN ANNUAL LEASE CHARGE (I.E. LE ASE RENTAL NET OF FINANCE CHARGE) AND DEPRECIATION IS DEBITED/C REDITED TO THE ANNUAL LEASE EQUALIZATION ACCOUNT IN THE PROFIT AND LOSS ACCOUNT AND CREDITED TO THE LEASE TERMINAL ADJUS TMENT ACCOUNT. THE BALANCE OUTSTANDING IN THE LEASE TERMINAL ADJUSTMENT ACCOUNT IS ADJUSTED IN THE NET BOOK VALUE OF THE LEASED ASSET IN THE BALANCE-SHEET. THIS METHOD O F ACCOUNTING IS ACCEPTED BY THE ASSESSING OFFICER IN EARLIER YEARS AND THERE IS NO VALID REASON TO DISALLOW THE CLAIM OF TH E ASSESSEE IN THIS YEAR AS IT IS ONLY A JOURNAL ENTRY AND THE RE IS NO ELEMENT OF PROFIT. HAVING NOT CONVINCED WITH THE EXPLA NATION OF THE ASSESSEE THE COMMISSIONER OF INCOME-TAX (APPEALS) CONFIRMED THE DISALLOWANCE. NOW THE ASSESSEE IS BEFORE US AND HAS REITERATED HIS CONTENTIONS. DURING THE COURSE OF HEARING THE LD. DEPARTMEN TAL REPRESENTATIVE COULD NOT EXPLAIN HOW THE PROFIT OF THE ASSESSEE IS BEING AFFECTED BY PASSING THESE JOURN AL ENTRIES. SINCE THE ASSESSEE HAS BEEN FOLLOWING THIS METHOD OF ACCOUNTING FOR THE LAST SO MANY YEARS THIS ME THOD CANNOT BE DISTURBED IN THE IMPUGNED YEAR WITHOUT ESTABLI SHING THAT BY PASSING THESE JOURNAL ENTRIES THE PROFIT OF THE ASSESSEE IS BEING AFFECTED. WE THEREFORE FIND NO MERIT I N THIS DISALLOWANCE. ACCORDINGLY WE SET ASIDE THE ORD ER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AND DELETE TH E ADDITION. 3.4 WE HAVE CONSIDERED THE FACTS OF THE CASE A ND SUBMISSIONS MADE BEFORE US. IT IS FOUND THAT THE ASSESSEE HAS BE EN FOLLOWING THE ACCOUNTING PRACTICE UNDER WHICH LEASE RENT IS ACCOUNTED FOR O N ACCRUAL BASIS AND THE CORRESPONDING ASSET IS WRITTEN OFF OVER THE LEA SE PERIOD. HOWEVER WHILE ITA NOS. 23 172 & 20(DEL)/2011 11 FILING THE RETURN THE DEPRECIATION IS CLAIMED A S PER INCOME-TAX RULES. THE LD. CIT(APPEALS) HAS MENTIONED THAT THE APPE AL OF THE ASSESSEE FOR ASSESSMENT YEAR 2002-03 HAS ALSO BEEN DECIDE D BY HIM ON THIS VERY BASIS. IN VIEW THEREOF THE RATIO OF THE CASE O F MUKAND GLOBAL FINANCE LTD. IS APPLICABLE TO THE FACTS OF THE CASE. RE SPECTFULLY FOLLOWING THIS DECISION IT IS HELD THAT THE LD. CIT(APPEALS) WAS RIGHT IN DELETING THE ADDITION. 4. FINALLY WE COME TO THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2005-06 BEARING ITA NO. 20(DEL)/2011. IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE FINDINGS OF THE LOWER AUTHORITIES THAT IT IS ENTITLED TO DEDUCTION OF DEPRECIATION ON CERTAIN ASSETS @ 15% AND NOT @ 100%. FOR THE SAKE OF READY REFERENCE THE GROUNDS ARE RE PRODUCED AS UNDER:- 1.THE HONBLE CIT(A) HAS ERRED IN UPHOLDING TH E DENIAL OF THE CLAIM OF DEPRECIATION ON TEMPORARY WOODEN STRUCTURES A T 100% WHICH IS THE RATE PRESCRIBED UNDER THE INCOME-TAX RULES-I. B UILDING (4) AND RESTRICTING IT TO 15% ONLY MERELY ON THE GROUND THAT THE ASSESSEE HAS CLASSIFIED THE SAME AS FURNITURE AND FIXTURES . THE DISALLOWANCE OF DEPRECIATION OF RS. 7 13 13 797/- SHOULD BE DELETE D. 1. (A)EVEN IF THE ASSESSEE BANK HAS CLASSIFIED THESE UNDER THE HEAD FURNITURE AND FIXTURES IT IS THE DUTY OF THE AS SESSING OFFICER TO EXAMINE THE NATURE OF THE ADDITION AND THEN AL LOW DEPRECIATION UNDER THE PROPER HEAD WHICH AS PER THE FACTS GIVEN B Y THE ASSESSEE ARE TEMPORARY WOODEN STRUCTURES AND THE DEPRECIATION @ 100% IS ACCORDING ITA NOS. 23 172 & 20(DEL)/2011 12 TO APPENDIX-I OF INCOME TAX RULES 1962. THE AS SESSEES CLAIM OF DEPRECIATION @ 100% SHOULD BE ACCEPTED. 1(B) THE DEPRECIATION CLAIM IS DULY SUPPORTED BY THE CERTIFICATE OF THE CHARTERED ACCOUNTANTS. SIMPLY BECAUSE THE EARLI ER MANAGEMENT OF EGTB CLASSIFIED AS FURNITURE & FIXTURES AND CLAIM ED DEPRECIATION OF 15% WOULD NOT MEAN THAT THE AO CANNOT EXAMINE T HE NATURE OF ASSETS IN THE SUBSEQUENT YEARS. THE NATURE OF A SSETS BEING THAT OF TEMPORARY WOODEN STRUCTURES THE CLAIM OF 100% DEPRECIATION SHOULD BE ALLOWED. 4.1 THE CASE OF THE LD. COUNSEL BEFORE US IS THAT THE ASSESSEE-BANK WAS AMALGAMATED WITH ORIENTAL BANK OF COMMERCE IN THIS YEAR. UPON SUCH AMALGAMATION ALL THE ASSETS OF THE ERSTWHILE GLOB AL TRUST BANK LTD. (GTB) WERE TAKEN OVER BY THE ASSESSEE. THE ERSTWHILE BANK HAD WRONGLY CLASSIFIED CERTAIN ASSETS AS FURNITURE AND FIX TURES ON WHICH DEPRECIATION WAS BEING DEDUCTED @ 15%. UPON TAKING OVER THE ASSETS THEIR NATURE WAS EXAMINED BY THE ASSESSEE-BANK AND IT WAS FOUND T HAT SOME OF THEM WERE TEMPORARY WOODEN STRUCTURES ON WHICH 100% DEPR ECIATION WAS ADMISSIBLE. THE WRITTEN DOWN VALUE OF SUCH ASSETS WAS ASCERTAINED. UPON SUCH ASCERTAINMENT DEDUCTION AT 100% WAS CLAIME D. HOWEVER THE AO ALLOWED DEDUCTION @ 15% ON THE WDV OF THE BLOCK OF ASSETS LEADING TO DISALLOWANCE OF RS. 7 13 13 797/-. IT IS ARGUED THAT THE ASSESSEE HAD A RIGHT TO SEGREGATE VARIOUS ASSETS CLASSIFIED BY THE ERSTWHILE GTB AS FURNITURE AND FIXTURES WITH A VIEW TO RE-CLASSIF Y THEM UNDER VARIOUS ITA NOS. 23 172 & 20(DEL)/2011 13 BLOCKS OF ASSETS. THEREFORE SOME ASSETS WERE T AKEN OUT FROM THE BLOCK OF 15% DEPRECIATION AND 100% DEDUCTION WAS CLAIMED. IT IS AGITATED THAT THE ORDERS OF THE LOWER AUTHORITIES MAY BE MODIFIED ON THIS ISSUE. AS MENTIONED EARLIER THERE HAS BEEN NO REPRESENTA TION FROM THE REVENUE. 4.2 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. WE FIND THAT THE AFORESAID CLAIM RELAT ES TO THE ASSETS TAKEN OVER BY THE ASSESSEE-BANK FROM THE GTB ON AMALGAMATIO N. THE GTB HAD CLASSIFIED THE ASSETS AS FURNITURE AND FIXTURES . THE DEPRECIATION HAD ALL ALONG BEEN CLAIMED @ 15%. ON AMALGAMATION THE ASSESSEE BANK RE- CLASSIFIED SOME OF SUCH ASSETS AS INTERIORS AND CLAIMED DEPRECIATION @ 100%. THE FINDINGS OF THE LD. CIT(APPEALS) IN TH IS MATTER ARE AS UNDER:- 7.2 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSION MADE BY THE LD. AR ON THE ABOVE ISS UE. AS MENTIONED BY THE AO IN THE ASSESSMENT ORDER THE A BOVE CLAIM OF DEPRECIATION RELATES TO ASSETS TAKEN OVER B Y THE ORIENTAL BANK OF COMMERCE FROM GTB ON AMALGAMATION OF GTB WITH THE APPELLANT COMPANY VIDE GOVERNMENT OF INDIA NOT IFICATION DATED 14.08.2004. IT IS FOUND THAT THE SAID AS SETS HAD BEEN CONSISTENTLY SHOWN BY GTB UNDER THE BLOCK FUR NITURE & FIXTURES ON WHICH DEPRECIATION HAD BEEN CLAIMED @ 15% IN ALL EARLIER YEARS. ON AMALGAMATION OF GTB WITH OBC THE APPELLANT COMPANY HAS RECLASSIFIED THE ABOVE AS SETS AS INTERIORS HAVING TEMPORARY WOODEN STRUCTURE CL AIMING DEPRECIATION @ 100%. IT IS OBSERVED BY THE AO T HAT THE APPELLANT HAD NOT FURNISHED ANY EXPLANATION OR DOC UMENTARY ITA NOS. 23 172 & 20(DEL)/2011 14 EVIDENCE TO JUSTIFY ITS CLAIM. FURTHER THE ABO VE CLASSIFICATION AS FURNITURE & FIXTURE AND THE CLAIM OF DEPRECIA TION @ 15% IN THE HANDS OF GTB IN EARLIER YEARS WERE ALSO DULY SUPPORTED BY AUDITORS REPORT. BEFORE ME ALSO THE LD. AR HAS NOT FURNISHED ANY BASIS FOR CHANGING THE CLASSIFI CATION TO INTERIOR WITH TEMPORARY WOODEN STRUCTURE AND NO DOCUMENTARY PROOF IN THIS REGARD HAS BEEN FURNIS HED. DEPRECIATION IN THE CASE OF OBC FOR A.Y 2005-06 HAS ALSO BEEN RESTRICTED TO 15% IN THE ASSESSMENT ORDER U/ S 143(3). IN VIEW OF THE ABOVE I DO NOT FIND ANY JUSTIFICAT ION TO INTERFERE WITH THE ACTION OF THE AO IN THIS REGARD. TH IS GROUND OF APPEAL IS ACCORDINGLY REJECTED AND THE DISALLO WANCE OF RS. 7 13 13 797/- IS CONFIRMED. 4.3 THE FIRST QUESTION BEFORE US IS-WHETHER THE BL OCK OF ASSETS OF FURNITURE & FIXTURES OF THE GTB CAN NOW BE BROK EN UP INTO INTERIORS AND FURNITURE & FIXTURES. WITH THE INTRODUCTION OF THE CONCEPT OF BLOCK OF ASSETS AN INDIVIDUAL ASSET LOSSES THE IDENTITY AS IT GETS SUBSUMED ONCE AND FOR ALL IN THE BLOCK OF ASSETS HAVING SAME RATE OF DEPRECIATION. THEREFORE WE ARE OF THE VIEW THAT THE ASSESSEE COULD NOT H AVE TAKEN OUT CERTAIN ASSETS FROM THIS BLOCK AND RECLASSIFY THEM AS INTERIORS OR TEMPORARY WOODEN STRUCTURES SO AS TO CLAIM 100% DEPRECIATI ON THEREON. FURTHER WE FIND THAT THERE IS NO CONCLUSIVE EVIDENCE ON RECOR D THAT THE ERSTWHILE BLOCK OF FURNITURE AND FIXTURES CONTAINED ASSETS WHICH COULD BE TERMED AS TEMPORARY WOODEN STRUCTURES. THE ASSESSEE HAS RELIED ON ITS AUDITORS REPORT AND THE LD. CIT(APPEALS) HAS MENTIONED THA T AGAINST THIS THERE IS ALSO THE AUDITORS REPORT OF ERSTWHILE GTB UNDER WHICH DEPRECIATION WAS ITA NOS. 23 172 & 20(DEL)/2011 15 CLAIMED @ 15%. LOOKING TO THESE FACTS WE TEND TO AGREE WITH THE LD. CIT(APPEALS) THAT THE BLOCK OF ASSETS COULD NOT HAVE REOPENED NOW WITH CHANGE OF MANAGEMENT. THUS IT IS HELD THAT THE ASSETS CONTINUED TO REMAIN A PART OF THE BLOCK OF FURNITURE AND FIXTURES ENTI TLED TO DEPRECIATION @ 15% OF THE W.D.V. 5. IN THE RESULT:- (I) THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEA R 2001-02 BEARING ITA NO. 23(DEL)/2011 IS TREATED AS ALLOWED FOR STATI STICAL PURPOSES; (II) THE APPEAL OF THE REVENUE FOR ASSESSMENT YEA R 2001-02 BEARING ITA NO. 172(DEL)/2011 IS DISMISSED; AND (III) THE APPEAL OF THE ASSESSEE FOR ASSESSMENT Y EAR 2005-06 BEARING ITA NO. 20(DEL)/2011 IS DISMISSED. THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 22 JULY 2011. SD/- SD/- (I.P. BANSAL)) (K.G. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 22 .07.2011. SP SATIA ITA NOS. 23 172 & 20(DEL)/2011 16 COPY OF THE ORDER FORWARDED TO:- GLOBAL TRUST BANK LTD. (NOW AMALGAMATED WITH ORIE NTAL BANK OF COMMERCE) NEW DELHI. ACIT CIRCLE 13(1) NEW DELHI. CIT CIT(APPEALS) THE DR ITAT NEW DELHI. ASSISTANT REGISTRAR.