Torrent Power Ltd.(Formerly Torrent Power SEC Ltd),, Surat v. The ACIT.,Circle-4,, Surat

ITA 3133/AHD/2008 | 2005-2006
Pronouncement Date: 21-01-2011 | Result: Partly Allowed

Appeal Details

RSA Number 313320514 RSA 2008
Bench Ahmedabad
Appeal Number ITA 3133/AHD/2008
Duration Of Justice 2 year(s) 4 month(s) 18 day(s)
Appellant Torrent Power Ltd.(Formerly Torrent Power SEC Ltd),, Surat
Respondent The ACIT.,Circle-4,, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 21-01-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 21-01-2011
Date Of Final Hearing 18-01-2011
Next Hearing Date 18-01-2011
Assessment Year 2005-2006
Appeal Filed On 03-09-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE SHRI MAHAVIR SINGH JUDICIAL MEMBER AND SHRI D. C. AGRAWAL ACCOUNTANT MEMBER ITA NO.3133 & 3331/AHD/2008 ASSESSMENT YEAR :2005-06 DATE OF HEARING:18.1.11 DRAFTED:19..1.11 TORRENT POWER LTD. (FORMERLY KNOWN AS TORRENT POWER SEC. LTD. SURAT) TORRENT HOUSE STATION ROAD SURAT PAN NO.AACCT0294J ACIT CIRCLE-4 SURAT ROOM NO.223 AAYAKAR BHAVAN MAJURA GATE SURAT V/S . V/S . ACIT CIRCLE-4 SURAT M/S.TORRENT POWER LTD. (FORMERLY TORRENT POWER SEC LTD.) TORRENT HOUSE STATION ROAD SURAT (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI VARTIK R CHOKSHI AR RESPONDENT BY:- SHRI K.K. VYAWAHARL CIT-DR O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THESE CROSS-APPEALS BY ASSESSEE AND REVENUE ARE AR ISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-III SURAT IN APPEAL NO.CAS- III/158/07-08 DATED 22-07-2008. THE ASSESSMENT WAS FRAMED BY ACIT CIRCLE- 4 SURAT U/S143(3) OF THE INCOME-TAX ACT 1961 (HER EINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 30-11-2007 FOR ASSESSME NT YEAR 2005-06. FIRST WE WILL TAKE UP ASSESSEES APPEAL IN ITA NO.3 133/AHD/2008. 2. THE FIRST AND SECOND BOTH INTER-CONNECTED ISSUES ARE REGARDING DEPRECIATION ON LEASE HOLD RIGHT OF LAND AND LEASE RENT. FOR THIS ASSESSEE HAS RAISED FOLLOWING EFFECTIVE TWO GROUNDS NO.1 & 2 :- ITA NO.3133/AHD/2008 A.Y.2005-06 TORRENT POWER LTD. V. ACIT CIR-4 SRT PAGE 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE CIT(A) HAS ERRED IN REJECTING THE ASSESSEES CLAIM THAT THE LE ASEHOLD RIGHT FOR 99 YEARS WAS SNOT AN INTANGIBLE ASSET ENVISAGED IN SEC TION 32 AND CONSEQUENTLY ERRED IN NOT ACCEPTING THE ASSESSEES CLAIM OF DEPRECIATION ON COST/WDV OF THE SAME. 2. WITHOUT PREJUDICE ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE SINCE THE WHOLE OF THAT SUM HAD NOT BEEN ALLOWED IN ANY PAST YEAR ON REVENUE ACCOUNT THE ASSESSEE WAS ENTITLED TO DEDUCT ION FOR THE SUM ATTRIBUTABLE TO THE RELEVANT PREVIOUS YEAR (BEG TOT AL PREMIUM DIVIDED BY 99) BECAUSE THE LEASE WAS OPERATIVE FOR 99 YEARS. 3. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE SHRI VARTIK R CHOKSHI FAIRLY STATED THAT THESE ISSUES IN ASSESSEES OWN CASE IN ITA NO.644/AHD/2007 VIDE ORDER DATED 10-12-2007 FOR ASSESSMENT YEAR 2003-04 HAS CONFIRMED THE DISALLOWANCE OF DEPRECIATION VIDE PARA-5 AND 6.1 AS UNDER:- 5. THIS ISSUE HAD ONCE BEEN DECIDED BY THE MUMBAI BENCHES IN THE CASE OF GOVIK ELECTRICALS 96ITD70/ 97 TTJ75(MUM.) (ONE OF US I.E JM IS THE PARTY) AND HELD THAT THE LUMP-SUM PAYMENT MADE AS A CONSIDERATION FOR ACQUIRING THE RIGHTS OVER THE PROPERTY WAS IN THE N ATURE OF CAPITAL EXPENDITURE. FURTHER ON IDENTICAL FACTS AND CIRCU MSTANCES IN ASSESSEES OWN CASE ONCE THE ISSUE OF DISALLOWANCE OF DEPRECIA TION HAS ALREADY BEEN DECIDED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE BY THE RESPECTED COORDINATE BENCH FOR A.Y. 2002-03 THEREF ORE IN THE IDENTICAL MANNER FOR THE YEAR UNDER CONSIDERATION I.E. 2003- 04 THIS GROUND OF THE ASSESSEE IS HEREBY DISMISSED. 6.1. THIS GROUND CAN BE SAID TO BE AN ALTERNATE PLE A HOWEVER WE ARE NOT CONVINCED WITH THE ALTERNATE PLEA. AS EMERGED F ROM THE AFORESAID DECISION OF THE RESPECTED CO-ORDINATE BENCH A CATEG ORICAL FINDING HAS BEEN GIVEN FURTHER THE OBTAINING OF LAND FROM THE SMC WAS IN THE NATURE OF CAPITAL EXPENDITURE FOR OBTAINING ENDURIN G BENEFIT IN POSSESSION OF LAND FOR A PERIOD OF 99 YEARS. THEREF ORE THIS EXPENDITURE CANNOT BE ALLOWED AS REVENUE EXPENDITURE. MOREOVER WE ARE ALSO INCLINED TO FOLLOW THE VIEW EXPRESSED IN GOVIK ELEC TRICALS (SUPRA). THERE IS NO CHANGE IN THE FACTS OF THE CASE FOR THE YEAR UNDER CONSIDERATION HENCE RESPECTFULLY FOLLOWING THE VIEW ALREADY TAKEN THIS GROUND OF THE ASSESSEE AS WELL IS HEREBY DISMISSED. HOWEVER LD. COUNSEL FOR THE ASSESSEE STATED THAT T HE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF DCIT V. SUN PHARMACEUTICALS IND. LTD. (2010) 329 ITA NO.3133/AHD/2008 A.Y.2005-06 TORRENT POWER LTD. V. ACIT CIR-4 SRT PAGE 3 ITR 479 (GUJ) HAS ALLOWED THE CLAIM OF DEPRECIATION ON LEASE BY EXAMINING THE LEASE AGREEMENT AND ALSO LEASE RENT HE REFERRED TO PAGE-481 OF THE HONBLE HIGH COURTS DECISION WHICH READS AS UNDER:- THE FACTS ARE NOT IN DISPUTE. THE LEASE AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND GIDC HAS BEEN ANALYZED AND RELEVANT TERMS SUMMARIZED BY THE TRI. IT IS NOT NECESSARY TO REFER TO THE SAID TERMS IN DETAIL IN THE PRESENT PROCEEDINGS. SUFFICE IT TO ST ATE THAT THE TRIBUNAL ON APPRECIATION OF THE DEED IN QUESTION HAS RECORDED THE FOLLOWING FINDINGS OF FACT: IT IS NOT DISPUTED THAT THE LAND WHICH HAS BEEN LE ASED OUT TO THE ASSESSEE DID NOT CEASE TO BE BELONGING TO GIDC THE LESSOR. THE LEASE DEED WAS REGISTERED BECAUSE AS PER THE REGIST RATION ACT IT IS COMPULSORILY REGISTRABLE BUT IT HAS NOT CHANGED THE OWNERSHIP. IT IS NOT ALSO DISPUTED THAT THE LEASE RENT IS VERY NOMINAL AND BY OBTAINING THIS LAND BY LEASE THE CAPITAL STRUCTURE OF THE COMPANY HAS NOT BEEN CHANGED THUS BY THIS PAYMENT THE ASSETS OF THE ASSESSEE-C OMPANY HAD NOT BEEN INCREASED BECAUSE THE LAND CONTINUED T O BE THE LAND OF GIDC. THE BENEFIT THE ASSESSEE GOT IS ONLY OF AN ADVANTAGE OF CARRYING ON THE BUSINESS MORE PROFITAB LY BY PAYING NOMINAL RENT ON THE LAND. THE ISSUE CAN BE CONSIDER ED IN ANOTHER ANGLE. IT CANNOT BE DISPUTED THAT IF THE LAND IS NO T OBTAINED BY THE ASSESSEE IT WOULD NOT BE POSSIBLE FOR IT TO CARRY O N THE BUSINESS THE TRIBUNAL HAS THUS AFTER REFERRING TO TWO DECIS IONS OF THE SUPREME COURT HELD THAT THE LAND IN QUESTION WAS NOT ACQUI RED BY THE ASSESSEE. THAT MERELY BECAUSE THE DEED WAS REGISTERED THE TRA NSACTION IN QUESTION WOULD NOT ASSUME A DIFFERENT CHARACTER. TH E LEASE RENT WAS VERY NOMINAL. BY OBTAINING THE LAND ON LEASE THE CA PITAL STRUCTURE OF THE ASSESSEE DID NOT UNDERGO ANY CHANGE. THE ASSESSEE O NLY ACQUIRED A FACILITY TO CARRY ON BUSINESS PROFITABLY BY PAYING NOMINAL LEASE RENT. IN THE LIGHT OF THE AFORESAID FINDINGS OF FACT AND THE RATIO OF THE APEX COURT DECISIONS THE COURT DOES NOT FIND THIS TO BE A CASE WHICH WARRANTS INTERFERENCE. EVEN THE ASSESSING OFFICER HAS RECORD ED THAT THE PAYMENT WAS FOR USE OF LAND. THERE IS NO LEGAL INFIRMITY CO MMITTED BY THE TRIBUNAL. BEFORE PARTING IT IS NECESSARY TO NOTE THAT THE APP ELLANT-REVENUE WAS NOT EVEN AGGRIEVED BY THE AFORESAID FINDINGS RECORD ED BY THE TRIBUNAL AND HAD NOT EVEN PROPOSED A QUESTION ON THIS ISSUE WHEN THE TAX APPEAL WAS FILED AS THE MEMORANDUM OF TAX APPEAL RE VEALS. IN THE AFORESAID FACTS AND CIRCUMSTANCES OF THE CAS E THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE LEASE RENT PAID BY TH E ASSESSEE TO GIDC WAS ITA NO.3133/AHD/2008 A.Y.2005-06 TORRENT POWER LTD. V. ACIT CIR-4 SRT PAGE 4 ALLOWABLE AS REVENUE EXPENDITURE. THE APPEAL IS DIS MISSED ACCORDINGLY WITH NO ORDER AS TO COSTS. IN VIEW OF THESE FACTUAL AND LEGAL POSITION LD. CO UNSEL FOR ASSESSEE STATED THAT THESE INTER-CONNECTED ISSUES NEEDS REEXAMINATI ON IN THE LIGHT OF DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SUN PHARMACEUTICALS IND. LTD. (SUPRA) WHEREIN HONBLE HIGH COURT HAS SPECIFICAL LY EXAMINED LEASE AGREEMENTS AND OTHER DOCUMENTS. HE FAIRLY CONCEDED THAT IN THE PRESENT CASE THESE DOCUMENTS ARE NOT EXAMINED EITHER BY ASSESSIN G OFFICER OR BY CIT(A). IN VIEW OF THESE ARGUMENTS LD. COUNSEL FOR THE ASS ESSEE STATED THAT THIS ISSUE NEEDS FRESH EXAMINATION IN ENTERITY BY ASSESS ING OFFICER. ON THE OTHER HAND LD. CIT-DR SHRI K.K. VAWAHALA STATED THAT HE HAS NO OBJECTION IN CASE THE ISSUE IS SET ASIDE TO THE FILE OF ASSESSING OFF ICER FOR FRESH EXAMINATION IN THE LIGHT OF HONBLE JURISDICTIONAL HIGH COURTS DE CISION. 4. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THESE INTER -CONNECTED ISSUES NEEDS RE-EXAMINATION AT THE LEVEL OF ASSESSING OFFICER IN THE LIGHT OF THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SUN PHARMACEUTICALS IND. LTD. (SUPRA) AND ASSESSING OFFICER WILL ALSO EXAMINE LEA SE AGREEMENTS AND OTHER DOCUMENTS IN DETAIL AND THEN DECIDE THE ISSUE. THE ASSESSING OFFICER WILL EXAMINE THE LATEST LEGAL POSITION AS STAND ON THAT DATE. ACCORDINGLY THESE INTER-CONNECTED ISSUES OF THE ASSESSEES APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES. 5. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AS REGARDS TO THE CLAIM OF DEPRECIATION ON ENERGY SAVING DEVICES WHETHER ENTI TLE TO DEPRECIATION @ 80% OR NOT I.E. REPLACEMENT OF OLD METERS. FOR THIS AS SESSEE HAS RAISED THE FOLLOWING GROUND NO.3 :- 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE CIT(A) HAS ERRED IN NOT ACCEPTING THE ASSESSEES CLAIM THAT TH E METERS INSTALLED BY THE ASSESSEE WERE ENERGY SAVING DEVICES ENTITLED TO DEPRECIATION @ ITA NO.3133/AHD/2008 A.Y.2005-06 TORRENT POWER LTD. V. ACIT CIR-4 SRT PAGE 5 80% AS MENTIONED IN APPENDIX-I PART-III(8)(IX)B(E) OF THE I.T. RULES 1962. 6. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE STATE D THAT THIS ISSUE HAS BEEN DECIDED BY TRIBUNAL IN ASSESSEES OWN CASE (SU PRA) BY CONSIDERING THE FACTS AND CIRCUMSTANCES IN PARA-9.1 & 9.2 AS UNDER:- 9.1 BOTH THESE GROUNDS ARE IN RESPECT OF THE SAME ISSUE AND NOW DECIDED IN FAVOUR OF THE ASSESSEE VIDE ITAT AHMEDAB AD ORDER IN ASSESSEES OWN CASE BEARING ITA NO.1998/AHD/2006 [CO NO.254/AHD/2006] ORDER DATED 23/12/2008 (SUPRA) THE REIN IT WAS HELD AS UNDER:- WE FIND FROM THE ABOVE THAT THESE SOPHISTICATED M ETERS CONSUME LESS POWER WITHOUT LOAD AGAINST ERSTWHILE 1.5 WATTS . WE BELIEVE THIS IS THE DIRECT ENERGY SAVING BENEFIT BY THE MET ERS. TYPICALLY IN THE POWER SECTOR THE LOSS OCCUR MAINLY ON ACCOUNT OF TECHNICAL REASONS AND NON-TECHNICAL REASONS. NON-TECHNICAL RE ASONS INCLUDE THEFT OF POWER BY INTRUDING INTO DISTRIBUTION LINES OR TAMPERING WITH THE METERS OR SUCH OTHER WAY. WHEREAS TECHNICAL RE ASONS INCLUDE INEFFICIENT AND OUTDATED DISTRIBUTION LINES TRANSM ITTERS METERS ETC. THE ELECTRONIC METERS ARE THEFT PRONE AND THUS IN T URN REDUCE DISTRIBUTION LOSSES WHICH OCCUR ON ACCOUNT OF THEFT OF POWER. FURTHER WITH THESE SOPHISTICATED ELECTRONIC METERS THE LEAKAGE OF ENERGY IS TOTALLY PLUGGED. THEREFORE GOVERNMENT C ONSIDERS POWER GENERATION MODERNIZATION AND ANY MEASURE TO AUGMEN T SUPPLY OF POWER/REDUCE LOSSES OF POWER/ESTABLISH MONITORING S YSTEM FOR ENERGY WITHIN THE AMBIT OF ENERGY SAVING DEVICES. THAT IS THE REASON WHY METERS GRIDLINES ETC. ARE CLASSIFIED U NDER THIS PARTICULAR PARA OF 100% DEPRECIATION. THERE ARE DI RECTIVES FROM THE CENTRAL POWER AUTHORITY AND STATE POWER AUTHORITIES THAT THE SUPPLIERS OF ENERGY MONITOR AT DIFFERENT LEVELS OF THE SYSTEM BY DEPLOYING SUITABLE METERS. THE IMPERATIVES HAVE GI VEN IMPETUS TO ENERGY SAVING BY BROADCASTING PROPER ECONOMIC SIGNA LS TO THE END USERS AND TO THE ENTITLES DOING SURVEILLANCE OF THE SYSTEMS. THE ELECTRONICS HAD DEVELOPED PARTICULARS MICRO ELE CTRONICS AND THE INDIA INNOVATIONS COULD DEVELOP METERS WHICH C OULD MITIGATE THE PROBLEMS OF METER RELATED LOSSES. WITH MORE MI CRO ELECTRONICS GOING INTO THE METER MANUFACTURE IT WAS POSSIBLE TO OBTAIN PROPER RECORDING OF THE CONSUMPTION IN A VERY WIDE RANGE O F USAGE PATTERN. THE ACCURATE RECORDING OF THESE METERS GE NERATES RIGHT ECONOMICAL SIGNALS TO THE EXTRAVAGANT CONSUMERS BY MAKING THEM PAY FOR THEIR USE OR SAVE ENERGY BY USING ENERGY MO RE ITA NO.3133/AHD/2008 A.Y.2005-06 TORRENT POWER LTD. V. ACIT CIR-4 SRT PAGE 6 ECONOMICALLY AND EFFICIENTLY OR SHIFT TO MORE ENERG Y EFFICIENT APPLIANCES. THE DEVELOPING METERS ALSO HAD SOME FE ATURES BY WHICH INTRUSION COULD BE COMBATED. ANY USER TYING TO DIVERT THE RETURN CURRENT IN THE CIRCUIT COULD NOT AFFECT THE ACCURACY OF RECORDING. THESE METERS COULD ALSO TOLERATE WIDE R ANGE OF VOLTAGE FLUCTUATION AND FREQUENCY VARIATION WITHOUT LOSS OF ACCURACY. THE PROPER RECORDING AND CONSEQUENT BILLING HAS TRIGGED ENERGY CONSERVATION AND ENERGY MEASURES. BY PROCESS OR ACC URATE RECORDING IN METERS ELECTRICITY CAN BE PRICED CLOSE LY TO MATCH THE COST IN THE FORM OF TIME SLOTTED TARIFFS. THE ACCUR ATE REACTIVE ENERGY METERING AT THE END USER LEVEL ALSO TRIGGERS POWER FACTOR IMPROVEMENT INITIATIVES. THESE METERS HAVE HELPED THE COUNTRY TO SAVE ON CAPITAL COST AND TO BRING THE PRICE CLOSER TO THE COST. FURTHER IT MAY BE NOTED THAT THE WORD SAVING IS IN COMMON PARLANCE USED FOR REDUCING THE CONSUMPTION OR EXPEN SES AND IT IS NOT USED FOR INCREASING THE SUPPLY OR INCOME THOUG H THE LAST MENTIONED MODE ALSO GOES TO AUGMENT THE SAVINGS. I T IS IMPORTANT TO NOTE THAT IN THE AFORESAID ITEM NO.3 (III) WORD SAVINGS: IS OBVIOUSLY NOT USED FOR MERELY REDUCING THE CONSUMPT ION OF ENERGY BUT THE LIST CONTAINED UNDER THAT TIME CLEARLY SHOW S THAT IT CAN INTO AMBIT ALSO THE ITEMS WHICH GO TO AUGMENT THE PRODUC TION OF ENERGY. FURTHER IT COVERS THOSE ITEMS ALSO WHOSE USE MAY N OT DIRECTLY REDUCE THE CONSUMPTION BUT ULTIMATELY RESULTS IN S AVING OF ENERGY FOR EXAMPLE DIGITAL HEAT LOSS METERS SOMEWHAT SIM ILAR IS THE POSITION FOR EXHAUST GASSES ANALYZER ENERGY SAVING DEVICES INCLUDE AND COVER THE EQUIPMENTS AND INSTRUMENTS WH OSE INSTALLATION OR USE DOES NOT RESULT IN DIRECTLY RE DUCING THE CONSUMPTION OF ENERGY BUT ARE CONNECTED WITH AN HEL PFUL IN DEVISING WAYS AND MEANS OF SAVING ENERGY. THEREFOR E THE ITEM HAS TO BE VIEWED IN QUITE A LIBERAL AND A COMPREHENSIVE WAY AND NEED NOT BE ARTIFICIALLY RESTRICTED TO A VERY NARROW COM PASS. 13. FURTHER THE ASSESSEE HAS FILED A NOTE ON ME TERS HOW THAT IS SAVING ENERGY AND BECOMES ENERGY SAVING DEVICE. BEFORE PARTING WE WANT TO GOT THROUGH THE ASSESSEES NOTE WHICH READS AS U NDER: 17. IN VIEW OF THE FACTS AND CIRCUMSTANCES DISCUSS ED ABOVE WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE-COMPANYS ELECTRONIC METERS AS INSTALLED AT THE PREMISES OF THE CONSUMER S FALL UNDER RULE ITA NO.3133/AHD/2008 A.Y.2005-06 TORRENT POWER LTD. V. ACIT CIR-4 SRT PAGE 7 5 APPENDIX-I PART-A-III 3 (III)B(E) OF THE I.T. R ULES THEREBY IS ELIGIBLE FOR DEPRECIATION @ 100%. 9.2. THE ABOVE VIEW IS TO BE FOLLOWED HOWEVER THE ONLY REQUIREMENT IS THAT THE RATE OF DEPRECIATION IS TO BE APPLIED AS P ER THE PRESCRIBED RATES FOR THE YEAR UNDER CONSIDERATION PROVIDED IN THE IN COME TAX RULES 1962. THESE GROUNDS ARE THEREFORE ALLOWED. WE FIND FROM FACTS AND CIRCUMSTANCES OF THE CASE TH AT THESE ARE EXACTLY IDENTICAL. RESPECTFULLY FOLLOWING THE TRIBUNALS D ECISION (SUPRA) WE ALLOW THE CLAIM OF ASSESSEE. 7. AS REGARDS TO GROUND NO.4 TO 6 LD. COUNSEL FOR THE ASSESSEE STATED THAT ONCE GROUND NO.3 IS DECIDED IN FAVOUR OF ASSESSEE THESE GROUNDS NE ED NO ADJUDICATION. ACCORDINGLY THESE GROUNDS HAVE BE COME REDUNDANT AND HENCE WE DISMISS. NOW COMING TO REVENUES APPEAL IN ITA NO.3331/AHD/2 008. 8. THE FIRST ISSUE IN THIS APPEAL OF REVENUE IS AGA INST THE ORDER OF CIT(A) IN ALLOWING THE CLAIM OF ASSESSEE FOR DEPRECIATION. FOR THIS REVENUE HAS RAISED THE FOLLOWING GROUND NO.1 :- [1] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A)-III SURAT HAS ERRED IN DELETING THE ADD ITION OF RS.5 11 85 157/- MADE BY THE ASSESSING OFFICER ON A CCOUNT OF DISALLOWANCE OF EXCESS CLAIM OF DEPRECIATION. 9. AS WE HAVE ALREADY ALLOWED THIS ISSUE REGARDING HIGHER DEPRECIATION IN ASSESSEES OWN APPEAL IN ITA NO.3133/AHD/2008 . HENCE THIS ISSUE OF REVENUES APPEAL WILL NOT SURVIVE AND ACCORDINGLY S AME IS DISMISSED. 10. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGA INST THE ORDER OF CIT(A) IN DELETING THE DISALLOWANCE OF PROVISION OF WAGE S ETTLEMENT. FOR THIS REVENUE HAS RAISED THE FOLLOWING GROUND NO.2 :- [2] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A)-III SURAT HAS ERRED IN DELETING THE ADD ITION OF ITA NO.3133/AHD/2008 A.Y.2005-06 TORRENT POWER LTD. V. ACIT CIR-4 SRT PAGE 8 RS.1 20 00 000/- MADE BY THE ASSESSING OFFICER ON A CCOUNT OF DISALLOWANCE OF PROVISION OF WAGE SETTLEMENT. 11. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE STAT ED THAT THIS ISSUE HAS BEEN DECIDED BY TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.644/AHD/2007 DATED 10-12-2010 FOR ASSESSMENT YEAR 2003-04 IN PARA-2.1 & 3 HAS ALLOWED THE CLAIM OF ASSESSEE WHICH READS AS UNDER:- 2.1. THIS ISSUE NOW STOOD SETTLED IN FAVOUR OF THE ASSESSEE BY AN ORDER OF RESPECTED CO-ORDINATE BENCH D AHMEDABAD IN AS SESSEES OWN CASE BEARING ITA NO.1998/AHD/2006 (BY REVENUE) AND CO NO.254/AHD/2006(BY ASSESSEE) FOR ASSESSMENT YEAR 20 02-03 DATED 23/12/2008 WHEREIN THE TRIBUNAL HELD AS UNDER:- 21. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE T HROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE HAVE ALSO GONE TH ROUGH THE VARIOUS DECISIONS AS RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE BEFORE THE CIT(A) AS WELL AS BEFORE US ALONG WITH T HE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT IF A LIABILITY HAD ACCRUED DURING THE RELEVANT PREVIOUS YEAR AND COULD QUITE REASONABLY BE ESTIMATED ON THE BASIS OF MATERIAL AVAILABLE WITH THE ASSESSEE THEN MERELY BECAUSE QUANTIFICATION OF THE SAME WAS DONE IN A SUBSEQUEN T YEAR IT CANNOT BE SAID THAT THE PROVISION SO MADE WAS A CONTINGENT LI ABILITY. WHAT SHOULD BE CERTAIN IS THE INCURRING OF THE LIABILITY. IT SH OULD ALSO BE CAPABLE OF BEING ESTIMATED WITH REASONABLE CERTAINTY THOUGH I TS ACTUAL QUANTIFICATION MAY NOT BE POSSIBLE. IF THESE REQUI REMENTS ARE SATISFIED THEN THE LIABILITY IS IN PRAESENTI THOUGH IT WILL BE DISCHARGED AT A FUTURE DATE AND IT ALSO DOES NOT MAKE ANY DIFFERENCE IF THE FUTURE DATE ON WHICH THE LIABILITY SHALL HAVE TO BE DISCHARGED I S NOT CERTAIN. IN THE INSTANT CASE IT IS SEEN THAT THE EARLIER WAGE SETTLEMENT CAME TO AN END ON 31.12.2000 AND A FRESH CHARTER OF DEMA ND FOR THE NEXT 3 YEARS PERIOD BEGINNING FROM 01.012001 TO 31.12.2003 WAS SUBMITTED BY THE EMPLOYEES THROUGH THE NOTICE OF DEMAND ON 23.06.2001 AND THE PROCESS OF WAGE SETTLEMENT W AS STARTED. ONCE A CHARTER OF DEMANDS WAS SUBMITTED BY THE UNIO N THE COMPANY WAS LEGALLY BOUND UNDER THE INDUSTRIAL DISPUTES AC T TO TAKE NOTICE OF THE SAME AND TO ARRIVE AT A PRUDENT DECISION IN ACC ORDANCE WITH THE PRESCRIBED PROCEDURES. AFTER PROTRACTED NEGOTIATIO NS IN RESPECT OF THE DEMANDS RAISED IN THE FRESH CHARTER OF DEMANDS CONCILIATION PROCEEDINGS WERE HELD AND A FORMAL AGREEMENT WAS EXECUTED ON 16.10.2003 FOR THE PERIOD 01.01.2000 TO 31.12.2003 . A TOTAL PROVISION OF RS.3.31 CRORES WAS MADE BY THE APPELLANT DURING THE SETTLEMENT PERIOD (AS AGAINST CRYSTALLIZED LIABILITY OF RS.3.0 2 CRORES). IT IS FURTHER SEEN THAT SUCH WAGE SETTLEMENT WAS NOT A NEW EVEN T OCCURRING IN THE CASE OF THE ASSESSEE AND THREE SUCH SETTLEMENT S WITH THE EMPLOYEES UNION HAD BEEN ARRIVED AT FOR THE PERI ODS FROM 01.01.1992 TO 31.12.1994 01.01.1995 TO 31.12.1997 AND 01.01. 1998 TO ITA NO.3133/AHD/2008 A.Y.2005-06 TORRENT POWER LTD. V. ACIT CIR-4 SRT PAGE 9 31.12.2000. AS THE COMPANY HAD ON RECORD THREE W AGE SETTLEMENTS FOR THE PRECEDING 9 YEARS PERIOD AND THE PERCEN TAGE INCREASE GIVEN ON SALARY IN THOSE SETTLEMENTS A REASONABLE BASIS IN THE FORM OF SETTLEMENTS EARLIER REACHED FOR PAY REVISION WAS THEREFORE AVAILABLE TO THE ASSESSEE FOR ASCERTAINMENT OF THE LIABILI TIES LIKELY TO ARISE ON ACCOUNT OF THE CONSEQUENTIAL INCREASE IN SALARIES AND WAGES OF ITS EMPLOYEES. THE ASSESSEE WAS THUS REASONABLY CERTAI N OF IS INCREASED LIABILITY ON THAT ACCOUNT AND COULD REASONABLY EST IMATE THE QUANTUM OF SUCH ACCRUED LIABILITY IN VIEW OF THE FACTS THAT (I) THE SERVICES HAD ALREADY BEEN RENDERED BY 31-3-2002 (II) THE REVISED WAGES / SALARY WAS TO BE GIVEN WITH EFFECT FROM 01.01.2001 AND (III) THE COMPANY HAD ON RECORD THREE WAGE SETTLEMENTS FOR THE PRECEDING 9 YEARS PERIOD AND THE PERCENTAGE INCREASE GIVEN ON SALARY IN THO SE SETTLEMENTS. THE LIABILITY WAS THUS CERTAIN. WHAT WAS NOT CERTAI N WAS THE QUANTUM OF SUCH LIABILITY. IT IS THEREFORE SEEN THAT THE PROVISION FOR WAGE SETTLEMENT WAS MADE BY THE APPELLANT ON A REASON ABLE BASIS FOR THE ANTICIPATED EXPENDITURE ON ACCOUNT OF THE REVISED WAGES / SALARIES TO BE GIVEN WITH EFFECT FROM 01.01.2001.( EMPHASIS SU PPLIED BY US ) 22. IN VIEW OF THE ABOVE FACTS NOW WE HAVE GONE THR OUGH THE LEGAL POSITION AS ARGUED BY BOTH THE SIDES. FIRST OF ALL IT IS SEEN THAT THE HON'BLE APEX COURT IN THE CASE OF BHARAT EARTH MOVE RS V. CIT (2000) 245 ITR 428 (SC). THE LIABILITY WAS NOT A CONTING ENT LIABILITY. FURTHER THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V. MAHINDRA UGINE AND STEEL CO. LTD. (2001) 250 ITR 84 (BOM) WHEREIN IT IS HELD THAT WHERE AFTER PURSUING THE TERMS AND CONDITIONS OF T HE WAGE SETTLEMENT ENTERED INTO BY THE ASSESSEE-COMPANY THE TRIBUNAL F OUND THAT UNDER THE CONCILIATION PROCEEDINGS A LUMP SUM PAYMENT WAS TO BE PAID TO THE WORKERS AND HENCE A DEBIT WAS MADE IN THE PROFIT AN D LOSS ACCOUNT TO DISCHARGE THE INCREASED LIABILITY AND THAT THE PRO VISION WAS MADE ON A REASONABLE BASIS FOR ANTICIPATED EXPENDITURE AND TH EREFORE AN ALLOWABLE DEDUCTION. 23.. 24. SIMILARLY THE CHENNAI BENCH OF THIS TRIBUNAL IN THE CASE OF NEYVELI LIGNITE CORPORATION V. ACIT 2 SOT 863 (CHEN NAI) HAS DISCUSSED THE FACTS THAT THE ASSESSEE HAD MADE A CLAIM ON ACCOUNT OF PAY REVISION IN THE A.Y. 2001-02. . HELD THA T THE LIABILITY HAD GERMINATED IN THE SUBSEQUENT YEAR AND COULD NOT B E RELATED BACK TO THE EARLIER YEAR. . . 25. IN VIEW OF THE FACTS ABOVE DISCUSSED CASE LAWS RELIED ON BY BOTH THE SIDES WE ARE OF THE VIEW THAT THE FACTS ALMOST SIMILAR IN THE PRESENT CASE TAKING A CONSISTENT VIEW AND RESPECTFULLY FOL LOWING THE HON'BLE APEX COURT AS WELL AS THE BOMBAY HIGH COURT WE UPHO LD THE ORDER OF CIT(A) ALLOWING THE CLAIM OF THE ASSESSEE. ACCORDI NGLY THIS ISSUE OF THE REVENUES APPEAL IS DISMISSED. ITA NO.3133/AHD/2008 A.Y.2005-06 TORRENT POWER LTD. V. ACIT CIR-4 SRT PAGE 10 3. FOR THE YEAR UNDER CONSIDERATION THE FACTS ARE S TATED TO BE IDENTICAL DUE TO THE REASON THAT ON THE SAME LINES A PROVISION I N RESPECT OF THE WAGE SETTLEMENT OF RS.2 70 00 000/- WAS MADE AND THE FIRST APPELLATE AUTHORITY HAS SIMPLY FOLLOWED HIS PREDECESSORS ORD ER OF THE A.Y. 2002- 03. ONCE THIS VERY GROUND OF THE REVENUE HAS ALREA DY BEEN DISMISSED BY THE RESPECTED CO-ORDINATE BENCH FOR THE A.Y. 02-03 RELEVANT PORTIONS REPRODUCED THEREFORE THE JUDICIAL PROPRIETY REQ UIRES ONE BENCH OF THE TRIBUNAL TO FOLLOW ANOTHER BENCH WHERE FACTS AND TH E CIRCUMSTANCES ARE LIKE PEAS IN A POD. WE FIND NO REASON TO ADOPT ANY OTHER VIEW BECAUSE ON THESE VERY FACTS AND CIRCUMSTANCES THE AFORESAID RESPECTED CO-ORDINATE BENCH HAS ALREADY TAKEN A DECISION THAT THE PROVISION SO MADE FOR ENHANCED WAGES WAS NOT A CONTINGENT LIABILITY BUT A N ANTICIPATED EXPENDITURE ACCRUED THIS YEAR THEREFORE AN ALLOWABLE REVENUE EXPENDITURE HENCE THAT VIEW OUGHT TO BE FOLLOWED IN THE PRESENT APPEAL. THUS THE GROUND RAISED BY THE REVENUE IS DISMISSED . AS THE FACTS ARE EXACTLY IDENTICAL IN THE PRESENT C ASE RESPECTFULLY FOLLOWING THE TRIBUNAL DECISION WE ALLOW THE CLAIM OF ASSESSEE A ND THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 12. IN THE RESULT ASSESSEES APPEAL IS ALLOWED PARTLY FOR STATISTICAL PURPOSES AND THAT OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 21 /01/2011 SD/- SD/- (D.C.AGRAWAL) (MAHAVIR SIN GH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD DATED :21/01/2011 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-III SURAT 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD