Gujarat Co.Op. Milk Mktg. Federation Ltd.,, Anand v. The ACIT., Anand Circle,, Anand

ITA 3782/AHD/2007 | 2004-2005
Pronouncement Date: 26-05-2010 | Result: Partly Allowed

Appeal Details

RSA Number 378220514 RSA 2007
Assessee PAN AAACG7189H
Bench Ahmedabad
Appeal Number ITA 3782/AHD/2007
Duration Of Justice 2 year(s) 7 month(s) 25 day(s)
Appellant Gujarat Co.Op. Milk Mktg. Federation Ltd.,, Anand
Respondent The ACIT., Anand Circle,, Anand
Appeal Type Income Tax Appeal
Pronouncement Date 26-05-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 26-05-2010
Date Of Final Hearing 25-03-2010
Next Hearing Date 25-03-2010
Assessment Year 2004-2005
Appeal Filed On 01-10-2007
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' [BEFORE SH. D T GARASIA JM & SH. A N PAHUJA AM] ITA NO.3782/AHD/2007 (ASSESSMENT YEAR:-2004-05) GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LIMITED AMUL DAIRY ROAD ANAND [PAN: AAACG7189H] V/S ASSISTANT COMMISSIONER OF INCOME-TAX ANAND CIRCLE ANAND [APPELLANT] [RESPONDENT] ITA NO.3806/AHD/2007 (ASSESSMENT YEAR:-2004-05) ASSISTANT COMMISSIONER OF INCOME-TAX ANAND CIRCLE ANAND V/S GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LIMITED AMUL DAIRY ROAD ANAND [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI D K PARIKH AR REVENUE BY:- SHRI B S GAHLOT DR O R D E R A N PAHUJA: THESE CROSS APPEALS AGAINST AN ORDER DATED 05-07- 2007 OF THE LD. CIT(A)-IV BARODA RAISE THE FOLLOWI NG GROUNDS: ITA NO.3782/AHD/2007[ ASSESSEE] 1. THE LEARNED C.IT.(APPEALS) ERRED BOTH IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF DEDUCTION OF RS.1 82 75 000/- BEING AMOUNT TRANSFERRED UNDER STATUTORY REQUIREMENT TO THE RESE RVE FUND. IN VIEW OF THE STATUTORY REQUIREMENT OF SEC. 67 OF THE GUJARAT CO-OP. SOCIETIES ACT THE DEDUCTION OF THE AMOUNT COMPULSORILY TRANSFERRE D OUGHT TO HAVE BEEN ALLOWED. THE SAME BE DIRECTED TO BE ALLOWED AS CLAI MED. 2. THE LEARNED C.IT.(APPEALS) FURTHER ERRED BOTH IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF REPAIRS AND MAINTENA NCE EXPENSES AMOUNTING TO RS.11 74 002 OUT OF RS.13 61 602/- VAR IOUS BY TREATING EXPENSES AS CAPITAL EXPENSES. ON THE FACTS AND CIRC UMSTANCES OF THE CASE AND IN VIEW OF THE LEGAL POSITION THESE EXPENSES O F RS.6 34 666/- AND RS.1 51 700/- AND RS.3 87 636 AS SUBMITTED BEFORE C IT(A) BEING OF 2 REVENUE IN NATURE AND INCURRED WHOLLY AND EXCLUSIVE LY FOR THE PURPOSE OF BUSINESS THE SAME OUGHT TO HAVE BEEN ALLOWED AS CL AIMED. THE SAME BE SO HELD NOW AND THE EXPENSES BE ALLOWED AS REVENUE. THE LEARNED C.IT.(APPEALS) ERRED IN LAW AND ON FACT S IN NOT APPRECIATING THE FACT THAT BY THE DETAILED SUBMISSIONS WITH REGA RD TO THE EXPENSES THE NATURE OF EXPENSES WERE FULLY EXPLAINED ALONG WITH THE NECESSARY DOCUMENTS. IN VIEW OF THE FACTS AND LEGAL DECISIONS THE ADDITION OF RS.11 74 002/- OUT OF REPAIRS AND MAINTENANCE EXPEN SES TREATING THEM AS CAPITAL EXPENDITURE DESERVES TO BE DELETED. THE SAM E BE DELETED. 3. THE LEARNED C.I.T. (APPEALS) ERRED BOTH IN LAW A ND ON FACTS IN NOT ALLOWING THE GROUND OF THE APPELLANT REGARDING ALLO CATION OF EXPENSES WHILE CALCULATING THE DEDUCTION U/S. 80HHC OF THE INCOME TAX ACT. THE LEARNED C.I.T.(APPEALS) ERRED IN NOT FOLLOWING THE ORDER OF HONBLE ITAT FOR A.Y. 1993-94 WHEREBY THE ITAT HAD REMITTED THE ISSUE TO THE FILE OF ASSESSING OFFICER. ALSO ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CALCULATION OF DEDUCTION U/S. 80HHC WAS CORRECTLY MADE ON CORRECT ALLOCATION OF EXPENSES BY THE APPELLANT AND THE DEDUCTION CLAIMED OUGHT TO HAVE BEEN ALLOWED IN FULL. THE SAME BE ALLOWED AS CLAIMED. 4 THE LEARNED C.I.T.(APPEALS) ALSO ERRED IN HOLDING THAT THE PROVISIONS OF SEC.234 D WERE APPLICABLE TO THE FACTS OF THE AP PELLANTS CASE. IN VIEW OF THE FACTS AND CORRECT LEGAL POSITION AND LEGAL D ECISIONS CITED BEFORE HIM THE LEARNED C.I.T. (APPEALS) OUGHT TO HAVE HELD THA T INTEREST U/S. 234 D WAS NOT CHARGEABLE. THE SAME BE SO HELD NOW AND INT EREST U/S.234D BE DELETED. 5 THE ORDER PASSED BY THE LEARNED CIT(A) IS BAD IN LAW AND CONTRARY TO THE PROVISIONS OF LAW AND FACTS.IT IS S UBMITTED THAT THE SAME BE HELD SO NOW. 6 THE LEARNED CIT(A) OUGHT TO HAVE ALLOWED THE APPE AL IN TOTO 7 YOUR APPELLANT CRAVES LEAVE TO ADD ALTER AND/OR T O AMEND ALL OR ANY OF THE GROUNDS BEFORE THE FINAL HEARING. ITA NO.3806/AHD/2007[REVENUE] 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN DIRECTING THE AO TO ALLOW D EPRECIATION ON THE COST OF PLANT AND MACHINERY OF MOTHER DAIRY AT GAND HINAGAR ON THE GROSS VALUE OF THE FIXED ASSETS WITHOUT REDUCING TH E AMOUNT OF GRANT / SUBSIDY RECEIVED FROM N. D. D. B. DESPITE THE CLARI FICATION MADE IN EXPLANATION 10 INSERTED VIDE FINANCE ACT (NO.2) 199 8 W.E.F. 01-04- 1999. 3 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN DIRECTING THE AO TO TREAT T HE EXPENDITURE INCURRED FOR REPLACEMENT OF AUTOMATIC GATE IN PLACE OF MANUAL GATE AS REVENUE EXPENDITURE THOUGH IN IT NEW ASSET WAS CREA TED AND THE ASSESSEE EARNED ENDURING BENEFIT OUT OF IT. 3 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF TH E ASSESSING OFFICER. 4 THE APPELLANT CRAVES LEAVE TO ADD TO AMEND OR A LTER THE ABOVE GROUNDS AS MAY BE DEEMED NECESSARY. 2 ADVERTING FIRST TO GROUND NO.1 IN THE APPEAL OF THE ASSESSEE FACTS IN BRIEF AS PER RELEVANT ORDERS AR E THAT RETURN DECLARING INCOME OF RS.16 02 59 350/- FILED ON 26.1 0.2004 BY THE ASSESSEE MANUFACTURING AND MARKETING MILK AND MILK PRODUCTS AFTER BEING PROCESSED ON 15.2.2005 U/S 143(1) OF THE INCO ME-TAX ACT 1961[HEREINAFTER REFERRED TO AS THE ACT] WAS TAKEN UP FOR SCRUTINY WITH THE ISSUE OF NOTICE U/S 143(2) OF THE ACT ON 28.2.2005. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AS SESSING OFFICER[AO IN SHORT] NOTICED THAT THE ASSESSEE CLA IMED DEDUCTION OF AN AMOUNT OF RS.1 82 75 000/- BEING 25% OF THE PR OFIT TRANSFERRED TO A RESERVE FUND IN TERMS OF THE PROVISIONS OF SEC. 67 OF THE GUJARAT CO-OPERATIVE SOCIETIES ACT . RELYING UPON THE DECISION OF THE LD. CIT(A) FOR THE AY 2001-02 AND OF THE ITAT F OR THE AY 1994-95 IN THE ASSESSEES OWN CASE THE AO DISALLOWED THE C LAIM. 3 ON APPEAL THE LD. CIT(A) UPHELD THE DISALLOWANC E WITH THE FOLLOWING OBSERVATIONS: THE ASSESSEE HAS TRANSFERRED RS.1 82 75 000/- TO T HE RESERVE FUND BEING 25% OF THE PROFIT AS PER THE REQUIREMENT OF S ECTION 67 OF THE GUJARAT CO-OPERATIVE SOCIETIES ACT AND CLAIMED IT AS A REVE NUE EXPENDITURE. THE I.T.A.T. AHMEDABAD BENCH B' IN ITS DECISION ITA NO .2091/AHD/9/1990 DATED 31.8.1995 IN THE CASE OF MEHSANA DISTRICT MIL K PRODUCERS UNION HAD DECIDED AN IDENTICAL ISSUE IN FAVOUR OF THE DEPARTM ENT. IN THE CASE OF THE APPELLANT ALSO THE HON'BLE TRIBUNAL HAS DECIDED TH E ISSUE AGAINST THE APPELLANT IN EARLIER ASSESSMENT YEARS. THE TRIBUNAL HAS DIFFERENTIATED THE JUDGEMENT GIVEN BY THE M. P. HIGH COURT IN THE CASE OF KESHKAI CO-OP. MARKETING SOCIETY LTD VS. CIT 165 ITR 437 (M.P.) W ITH THE CASES FALLING IN 4 THE GUJARAT REGION BY HOLDING THAT THE M. P. HIGH C OURT JUDGEMENT WAS BASED ON THE PROVISIONS OF SECTION 43 AND 44 OF THE M. P. STATE CO-OP. SOCIETIES ACT UNDER WHICH THE RESERVE FUND OF THE SOCIETY COULD BE INVESTED OR UTILIZED ONLY IN SUCH MANNER AND ON SUC H TERMS AND CONDITIONS AS MAY BE LAID DOWN BY THE REGISTRAR OF CO-OPERATIV E SOCIETIES IN THIS BEHALF. THUS THERE WAS CLEAR PROHIBITION AND RESTR ICTION REGARDING UTILIZATION OF STATUTORY RESERVE IN THE BUSINESS OF THE SOCIETY FALLING UNDER M. P. STATE CO-OP SOCIETIES ACT WHEREAS IN SECTI ON 67 OF THE GUJARAT CO- OP. SOCIETIES ACT THERE WAS NO SUCH RESTRICTION WH ICH PERMITS THE USE OF STATUTORY RESERVE IN THE BUSINESS OF THE CONCERNED SOCIETY. HENCE THE ASSESSEE CONTINUES TO REMAIN THE BENEFICIARY OF THE RESERVE FUND. ACCORDINGLY IT WAS HELD IN ALL SUCH CASES ADJUDICA TED BY THE HON. ITAT AHMEDABAD THAT THE AMOUNT TRANSFERRED TO THE RESERV E FUND CANNOT BE ALLOWED AS A DEDUCTION. SINCE THE ABOVE ISSUE IS A COVERED MATTER AND THE APPELLANT HAS ALSO ACCEPTED THIS FACT AT THE TIME OF THE HEARING OF AP PEAL THEREFORE KEEPING IN VIEW THE ABOVE MENTIONED DECISIONS I HOLD THAT 25% OF PROFIT AMOUNTING TO RS.1 82 75 000/- TRANSFERRED TO RESERVE FUND IS APPROPRIATION OF PROFIT WHICH HAS BEEN SET APART FOR FUTURE USE HENCE NO DEDUCTION OF THIS AMOUNT IS PERMISSIBLE. THEREFORE THE DISALLOWANCE MADE BY THE AO ON THIS ACCOUNT IS CONFIRMED. 4. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAI NST THE AFORESAID FINDINGS OF THE LD. CIT(A). AT THE OUTSET BOTH THE PARTIES AGREED THAT ISSUE IS SQUARELY COVERED IN FAVOUR OF THE REVENUE BY THE DECISION DATED 26.9.2006 IN THE ASSESSEES OWN CASE IN ITA NO.102/AHD./2006 FOR THE AY 2000-01 FOLLOWED IN DE CISION DATED 23.3.2007 IN ITA NOS. 1884 TO 1888/AHD./2004 FOR TH E AYS. 1992- 93 1995-96 1996-97 1999-2000 & 2001-02. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE FACTS OF THE CASE AS ALSO THE DECISIONS RELIED UPON. WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE REVENUE THE DECIS ION 26-09-2006 OF THE TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA N O.102/AHD/2006 FOR AY 2000-01 WHEREIN IT WAS HELD: 4. THE SECOND GROUND IS AGAINST THE CONFIRMAT ION OF DISALLOWANCE OF RS.1 44 62 415 BEING TRANSFER OF RE SERVE FUND U/S.67 OF THE GUJARAT C-OPERATIVE SOCIETIES ACT. TH IS ISSUE STANDS COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN 5 THE CASE OF ASSESSEE'S OWN CASE FOR ASST.YEAR 1994- 95 WHEREIN THE TRIBUNAL DECIDED THE MATTER AGAINST THE ASSESSE E VIDE DISCUSSION IN PARAGRAPH 8 OF THE ORDER WHICH READS AS UNDER:-. '8. THE ONLY GROUND WHICH REMAINS TO BE CONSIDERED IN REVENUE'S APPEAL IS GROUND NO. J WHICH IS REPRODUCED BELOW:- 0N THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED C1T(A) ERRED IN DIRECTING TO ALLOW THE ASSESSEE'S C LAIM FOR DEDUCTION FOR THE SUM OFRS.19 71 528/- TRANSFERRED TO RCSEN>E FUN D ACCOUNT.' 8.1 AT THE OUTSET THE LEARNED REPRESENTATIVES OF BOTH SIDES CONTENDED THAT THIS ISSUE IS ALSO COVERED AGAINST THE ASSESSE E BY EARLIER DECISION OF THE TRIBUNAL IN ASSESSEE'S O\VN CASE FOI> .Y. 1993 -94 (SUPRA). THE TRIBUNAL IN PARA 2.1 OF THEIR--ORDER TYAVE GIVEN TH E FOLLOWING FINDINGS: 2.1 IT IS COMMON CONTENTION THAT ISSUE INVOLV ED IN THIS GROUND OF APPEAL I S COVERED AGAINST THE ASSESSEE BY ORDER OF THE TRIBUN AL DATED 19.12.2002 IN ASSESSEES OWN CASE FOR THE AY S 1984-85 1987-88 & 1988-89 IN APPEAL NOS.252 TO 1253/AHD/ 95. IN THE SAID ORDER THIS TRIBUNAL FO LLOWING THE DECISION OF 1TAT AHMEDAHAD BENCH IN THE CASE OF MEH SANA DIST. CO-OP. MILK PRODUCERS UNION LTD. IN ITA NO.2091/AHD/90 AND OTHERS DATED 31.8.95 HELD THAT THE AO HAD RIGHTLY DENIED DEDUCTI ON IN RESPECT OF AMOUNT TRANSFERRED TO RETAKE FUND ACCOUNT AS REQUIRED U/S. 67 OF THE GUJARAT CO- OPERATIVE SOCIETIES ACT. WE THEREFORE RESPECTFULL Y THE SAME REVERSE THE ORDER OF ID. CLT(A) AND RESTORE THE ADDITION OF RS. 7619692/-: 8:2 WE THEREFORE RESPECTFULLY FOLLOWING THE AFO RESAID ORDER OF THE TRIBUNAL HOLD THAT THE CIT(A) HAS ERRED IN DIRECTI NG THE AO TO ALLOW DEDUCTION FOR THE SUM OF RS.19 71 528/- TRANSFERRED TO RESERVE FUND ACCOUNT. THE ORDER PASSED BY THE CIT(A) IS SET ASID E AND THAT OF THE AO IS RESTORED IN RELATION TO THIS POINT. 5. SINCE THE FACTS AND CIRCUMSTANCES IN THE AFORESA ID CASE ARE SIMILAR TO THAT OF THE ISSUE UNDER CONSIDERATION ON THE SAME LINE WE UPHOLD THE ORD ER OF THE CIT(A) IN THIS YEAR AS WELL. 6. THE AFORESAID DECISION WAS FOLLOWED BY THE ITAT IN THE ASSESSEES OWN CASE IN THE AYS1992-93 1995-96 1996- 97 1999- 2000 & 2001-02. UNDISPUTEDLY SINCE THE FACTS IN T HE YEAR UNDER CONSIDERATION ARE SIMILAR TO THE FACTS IN THE AYS. 1992-93 1995- 96 1996-97 1999-2000 2000-01& 2001-02 FOLLOWING T HE AFORESAID DECISION OF CO-ORDINATE BENCHES WE UPHOLD THE FIND INGS OF THE LD. 6 CIT(A) IN THIS YEAR ALSO. THEREFORE GROUND NO.1 IN THE ASSESSEES APPEAL IS DISMISSED. 7. GROUND NO.2 IN THE APPEAL OF THE ASSESSEE AND G ROUND NO.2 IN THE APPEAL OF THE REVENUE RELATE TO DISALLOWANCE O UT OF REPAIR AND MAINTENANCE EXPENSES TO BUILDINGS. DURING THE COURS E OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASS ESSEE DEBITED A SUM OF RS.582.04 LACS UNDER THE HEAD REPAIRS AND MAINTENANCE OF WHICH RS.96.35 LACS PERTAINED TO REPAIRS AND MA INTENANCE OF BUILDING OF MOTHER DAIRY-BHAT - GANDHINAGAR. TO A Q UERY BY THE AO THE ASSESSEE EXPLAINED THAT (I) EXPENDITURE OF RS.6 34 666/- WAS INCURRED FOR T HE ADDITION OF CERTAIN FACILITIES LIKE TOILET DESPATCH DOCK ETC. IN THE EXISTING BUILDING AT MOTHER DAIRY GANDHINAGAR AND THE SAME WAS IN THE NATURE OF REPLACEMENT OF OLD FACILITIES. THE ASSESS EE PLEADED THAT NO NEW ASSET HAD COME IN TO EXISTENCE AND THEREFORE T HE EXPENDITURE WAS REVENUE IN NATURE. HOWEVER ON PERUSAL OF THE R ELEVANT WORK ORDER AND BILLS THE AO NOTICED THAT THE SCOPE OF W ORK WAS 'CIVIL WORKS OF CONSTRUCTING DESPATCH DOCK NEW TOILET BLO CK SEPTIC TANKS SOAK PITS CHANGE ROOM AND MISCELLANEOUS WORKS ETC. ACCORDINGLY THE AO CONCLUDED THAT A NEW ASSET HAD COME INTO EXI STENCE AND THEREFORE THE EXPENDITURE WAS CAPITAL IN NATURE. O N APPEAL THE LD. CIT(A)OBSERVED THAT THE VERY TERM 'ADDITION' CONNOT ES SOMETHING NEW. SINCE IT WAS NEITHER REPAIR NOR REPLACEMENT T HE LD. CIT(A) UPHELD THE FINDINGS OF THE AO. (II) EXPENDITURE OF RS.1 87 600/- HAD BEEN INCURRED FOR AUTOMATION OF THE FRONT GATE AND ROLLING SHUTTER AT MOTHER DAI RY GANDHINAGAR. SINCE THE EXISTING MANUAL GATE WAS REPLACED WITH AN AUTOMATIC GATE THE ASSESSEE CONTENDED THAT NO NEW ASSET HAD COME I N TO EXISTENCE. HOWEVER ON PERUSAL OF THE RELEVANT WORK ORDER AND BILLS THE AO NOTICED THAT THE REPLACEMENT RESULTED IN AN ASSET O F AN ENDURING 7 NATURE AND THEREFORE EXPENDITURE WAS CAPITAL IN NA TURE. ON APPEAL THE LD. CIT(A) ALLOWED THE CLAIM ON THE GROUND THAT SINCE THE EXPENDITURE WAS ON REPLACEMENT OF AN EXISTING ASSET IT WAS REVENUE IN NATURE. (III) EXPENDITURE OF RS.1 51 700/- HAD BEEN INCURRE D FOR SUPPLY AND INSTALLATION OF HOIST WITH STRUCTURE FOR LIFT. THE AO ON PERUSAL OF RELEVANT BILL TREATED THE EXPENDITURE CAPITAL IN N ATURE. ON APPEAL SINCE THE A.R. COULD NOT SHED ANY LIGHT ON THE NATU RE OF THIS EXPENDITURE AND NOR EXPLAINED AS TO HOW THE CLAIM C ONSTITUTED A REVENUE EXPENDITURE THE LD. CIT(A) UPHELD THE FIND INGS OF THE AO. (IV) EXPENDITURE OF RS.3 87 636/- HAD BEEN INCURR ED FOR THE PURPOSE OF MISCELLANEOUS CIVIL WORK FOR SEPTIC WORK AND SOA K WELL ROOFING ON POWDER DESPATCH DOCK AND ROOFING ON FIRE FIGHTING S YSTEMS. SINCE THESE REPAIRS WERE CARRIED OUT IN THE EXISTING BUI LDING AND NOT ON CONSTRUCTION OF A NEW BUILDING THE ASSESSEE CLAIME D THE EXPENDITURE REVENUE IN NATURE. HOWEVER ON VERIFIC ATION OF THE COPY OF WORK ORDER THE AO OBSERVED THAT A MEAGRE 10 SQ. METERS CONSTRUCTION WAS DISMANTLED WHEREAS CIVIL CONSTRUCT ION WORK WAS DONE ON AN AREA MORE THAN WHAT WAS DISMANTLED. HE T HEREFORE CONCLUDED THAT THE EXPENDITURE WAS CAPITAL IN NATUR E AND DISALLOWED THE CLAIM OF THE ASSESSEE. ON APPEAL THE LD. CIT(A ) HELD AS UNDER: IN APPEAL THE AUTHORIZED REPRESENTATIVE MERELY RE ITERATED WHAT WAS SUBMITTED BEFORE THE ASSESSING OFFICER. A READING OF THE DESCRIPTION OF THE WORK DONE LINKS IT TO ITEM N O.L DISCUSSED ABOVE. BOTH THE WORKS INVOLVED CONSTRUCTION OF TOIL ET BLOCK SOAK PITS AND SEPTIC TANKS. THE PAYMENTS HAVE ALSO BEEN MADE TO THE SAME CONTRACTOR. I THEREFORE HOLD THAT THIS EXPENDITURE IS CAPITAL IN NATURE AND ADDITION MADE BY THE ASSESSING OFFICER IS CONFIRMED. 8 8. THE ASSESSEE IS NOW IN APPEAL BEFORE US AG AINST UPHOLDING THE FINDINGS OF THE AO IN RESPECT OF EXPENDITURE OF RS.11 74 002/-[ 6 34 666+1 51 700+3 87 636] WHILE THE REVENUE IS IN APPEAL IN RESPECT OF EXPEND ITURE ON REPLACEMENT OF MANUAL GATE WITH AUTOMATIC GATE. THE LEARNED AR ON BEHALF OF THE ASSESSEE WHILE INVITING OUR ATTENTION TO RELEVANT PAGES OF THE PAPER BOOK CONTENDED THAT THE ENTIRE EXPENDITURE DEBITED UNDER THE HEAD REPA IRS AND MAINTENANCE WAS ON REPLACEMENT AND NO NEW ASSET HAS BEEN ADDED. THE AS SESSEE CLAIMED DEPRECIATION OF ABOUT RS.19 CRORES ON VARIOUS ASSET S OF MORE THAN RS.100 CRORES IT WAS SUBMITTED. IN THIS CONNECTION WHILE REFERRI NG TO THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MIHIR TEXT ILES 219 CTR 35 (GUJ) THE LEARNED AR CONTENDED THAT THE REPAIRS EXPENDITURE B EING NOMINAL VIS--VIS HUGE ASSETS OWNED BY THE ASSESSEE NO DISALLOWANCE COUL D BE MADE. THE LEARNED AR FURTHER REFERRED TO THE DECISION OF THE TRIBUNAL IN THE CASE OF POWER BUILD 126 TTJ 551 (AHD) IN SUPPORT OF HIS ARGUMENT THAT THE E NTIRE EXPENDITURE WAS REVENUE IN NATURE. ON THE OTHER HAND THE LEARNED DR WHIL E REFERRING TO THE DECISIONS IN THE CASE OF CIT VS. SARAVANA SPINNING MILLS P. LTD. (2007) 293 ITR 201 (SC) COMMISSIONER OF INCOME-TAX.VS SRI MANGAYARKARASI MI LLS (P) LTD. 182 TAXMAN 141 (SC) AND AN UNREPORTED DECISION OF THE ITAT CHA NDIGARH BENCH IN ITA NO.781/CHD/05 CONTENDED THAT SINCE THE EXPEN DITURE HAS BEEN INCURRED ON NEW ASSETS IT COULD NOT BE TERMED AS CURRENT REPAIRS AND THUS SUPPORTED THE FINDINGS OF THE AO. DESPITE REQUEST MADE THE LD. DR DID NOT MAKE AVAILABLE COPY OF THE SAID UNREPORTED DECISION. 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THROU GH THE FACTS OF THE CASE AS ALSO THE DECISIONS RELIED UPON BY BOTH THE PARTIES. THE ISSUE BEFORE US IS AS TO WHETHER THE AFORESAID EXP ENDITURE INCURRED ON REPLACEMENT OF /ADDITION TO ASSETS IS REVENUE IN NATURE OR CAPITAL IN NATURE. AT THE OUTSET WE NOTICE THAT THE EXPEND ITURE IS STATED TO HAVE BEEN INCURRED ON REPAIRS TO BUILDINGS. IN THIS CONNECTION RELEVANT PROVISIONS OF SEC. 30 OF THE ACT ALLOW DED UCTION FOR CURRENT REPAIRS. AN EXPLANATION HAS BEEN INSERTED BY FINANC E ACT 2003 W.E.F 1.2004 CLARIFYING THAT EXPENDITURE ON REPAIRS OR C URRENT REPAIRS SHALL 9 NOT INCLUDE ANY EXPENDITURE IN THE NATURE OF CAPITA L EXPENDITURE. AN ALLOWANCE IS GRANTED BY CLAUSE A(I) &(II) OF SECTIO N 30 IN RESPECT OF AMOUNT EXPENDED ON REPAIRS OR CURRENT REPAIRS TO BUILDIN GS. THE EXPRESSION 'CURRENT REPAIRS' DENOTES REPAIRS WHICH ARE UNDERTAKEN WHEN THE NEED FOR THEM ARISES FROM THE VIEWPOINT OF A BUSINESSMAN. THE WORD 'REPA IR' INVOLVES RENEWAL. HOWEVER THE WORDS USED IN SECTION 30 ARE 'CURRENT REPAIRS'. THE OBJECT BEHIND SECTION 30 IS TO PRESERVE AND MAINTAIN THE ASSET AN D NOT TO BRING IN A NEW ASSET. AS HELD BY THE HONBLE APEX COURT IN THE CASE OF CI T VS. SARAVANA SPINNING MILLS P LTD. 293 ITR 201 RELIED ON BY THE REVENUE THE RELEVANT PROVISIONS OF SECTION 30 LIMIT THE SCOPE OF ALLOWABILITY OF EXPENDITURE AS DEDUCTION IN RESPECT OF REPAIRS MADE TO BUILDINGS BY RESTRICTING IT TO THE CONCEPT OF 'CURRENT REPAIRS' IF EXPENDITURE IS INCURRED OTHERWISE THAN AS A TENANT. THERE IS NO MATERIAL BEFORE US SUGGESTING THAT EXPENDITURE HAS BEEN INCURRED BY TH E ASSESSEE AS A TENANT. MOREOVER ALL REPAIRS ARE NOT CURRENT REPAIRS. SECTI ON 37(1) ALLOWS CLAIM FOR EXPENDITURE WHICH ARE NOT OF CAPITAL NATURE. EVEN S ECTION 37(1) EXCLUDES THOSE ITEMS OF EXPENDITURE WHICH EXPRESSLY FALL IN SECTIO NS 30 TO 36. THE BASIC TEST TO FIND OUT AS TO WHAT WOULD CONSTITUTE CURRENT REPAIR S IS THAT THE EXPENDITURE MUST HAVE BEEN INCURRED TO 'PRESERVE AND MAINTAIN' AN AL READY EXISTING ASSET AND THE OBJECT OF THE EXPENDITURE MUST NOT BE TO BRING A NE W ASSET INTO EXISTENCE OR TO OBTAIN A NEW ADVANTAGE. THE SARAVANA SPINNING MILLS (P) LTD. CASE HOLDS THA T EXPENDITURE IS DEDUCTIBLE UNDER S. 37 ONLY IF IT (A ) IS NOT DEDUCTIBLE UNDER SS. 30- 36 (B) IS OF A REVENUE NATURE (C) IS INCURRED DUR ING THE CURRENT ACCOUNTING YEAR AND (D) IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. THE DISPUTE BEFORE US IS WITH RESPECT TO THE NATURE OF EXPENDITURE THAT IS WHETHER IT IS REVENUE OR CAPITAL IN NATURE. IN FACT IN THE P RESENT CASE AS IS APPARENT FROM THE IMPUGNED ORDRS THE ASSESSEE HAD ADDED NEW ASSE TS OR NEW ADVANTAGE. THE ASSESSEE WHILE REPLACING A MANUAL GATE WITH AN AU TOMATIC GATE HAVE OBTAINED A NEW ADVANTAGE AND WE ARE OF THE OPINION THAT IT CA N NOT BE CATEGORIZED AS CURRENT REPAIRS OR EVEN REPAIRS. THIS REPLACEMENT B Y AUTOMATIC GATE RESULTED IN EFFACING AN OLD ASSET AND BRINGING INTO EXISTENCE A TOTALLY NEW ASSET. THE ONLY PROBABLE REASON FOR THE REPLACEMENT OF THE ASSET WO ULD HAVE BEEN TO OBTAIN AN ENDURING BENEFIT FROM THE ASSET SO REPLACED THUS E XPENDITURE ON INSTALLATION OF AN AUTOMATIC GATE IN OUR OPINION IS CAPITAL IN NA TURE AND IS NOT DEDUCTIBLE IN 10 TERMS OF PROVISIONS OF SEC. 30 OR SEC. 37 OF THE AC T. MOREOVER AS IS APPARENT FROM THE FINDINGS OF THE LD. CIT(A) IN THE IMPUGNE D ORDER EXPENDITURE OF RS. 6 34 666/- & RS. 3 87 636/- WAS INCURRED ON CONSTR UCTION OF TOILET BLOCK SOAK PITS AND SEPTIC TANKS AS ALSO DISPATCH DOCKS. THE LD. CI T(A) FOUND THAT EXPENDITURE WAS ADMITTEDLY ON ADDITION OF CERTAIN FACILITIES A ND WAS THUS NEITHER REPAIR NOR REPLACEMENT. AS REGARDS EXPENDITURE OF RS. 1 51 700 /- THE ASSESSEE DID NOT EXPLAIN EVEN THE NATURE OF EXPENDITURE BEFORE THE L D. CIT(A) NOR EVEN BEFORE US. IN THE LIGHT OF THESE UNDISPUTED FACTS ESPECIALLY WHEN THE EXPENDITURE HAS BEEN INCURRED ON ADDITION ON CERTAIN FACILITIES WHILE NO MATERIAL HAS BEEN BROUGHT TO OUR NOTICE SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A) IN RESPECT CLAIM FOR DEDUCTION OF EXPENDITURE OF RS.11 74 002 [6 34 666+ 1 51 700+ 3 87 636]. BESIDES THE LD. AR HAS NOT DEMONSTRATED AS TO HOW THE FACTS IN THE DECISIONS CITED BY HIM WERE PARALLEL T O THE FACTS IN THE CASE UNDER CONSIDERATION. IN MIHIR TEXTILES(SUPRA) RELIED ON ON BEHALF OF THE ASSESSEE THE LD. CIT(A) FOUND THAT NO NEW ASSETS CAME INTO EXISTENCE AND THE ENTIRE EXPENDITURE WAS INCURRED F OR THE PURPOSE OF RUNNING OF EXISTING AUTO LOOM SHED IN A MORE EFFICIENT MANNER. IT WAS FURTHER FOUND THAT THE QUANTUM OF EXPENDITURE WHEN COMPARED WITH GROSS BL OCK OF ASSETS CANNOT BE TERMED TO BE VERY HIGH. THESE FINDINGS WERE CONFIRM ED BY THE TRIBUNAL. IN THE LIGHT OF THESE FACTS THE HONBLE HIGH COURT OBSERV ED THAT THE ORDER OF CIT(A) SHOWS THAT CIT(A) EXAMINED IN DETAIL EACH AND EVERY ITEM OF EXPENDITURE BEFORE RECORDING THE AFORESAID FINDINGS AND THUS THERE WA S NO ERROR OF LAW IN THE ORDER OF THE CIT(A). BUT SUCH ARE NOT THE FACTS IN THE C ASE UNDER CONSIDERATION. THEREFORE RELIANCE ON THE DECISIONS BY THE LD. A R IS TOTALLY MISPLACED WHILE THE DECISIONS OF THE HONBLE APEX COURT RELIE D ON BY THE LD. DR SUPPORT THE CASE OF THE REVENUE. IN VIEW THEREOF GROUND NO.2 IN THE APPEAL OF THE ASSESSEE IS DISMISSED WHILE GROUND NO.2 IN THE APPEAL OF THE REVENUE IS ALLOWED. 10 GROUND NO.3 IN THE APPEAL OF THE ASSESSEE RELATE S TO ALLOCATION OF EXPENSES WHILE CALCULATING THE DEDUCTION U/S 80H HC OF THE ACT IN THE LIGHT OF VIEW TAKEN BY THE ITAT IN THE ASSESSEE S OWN CASE FOR THE AY 1993-94. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS THE 11 AO WHILE REFERRING TO THE ORDERS OF THE LD. CIT(A) FOR THE AYS 2002- 03 & 2003-04 ALLOCATED ALL THE INDIRECT EXPENSES I N THE RATIO OF TURNOVER OF TRADING GOODS TO THE TOTAL TURNOVER WHI LE COMPUTING DEDUCTION U/S 80HHC OF THE ACT AND ACCORDINGLY REST RICTED DEDUCTION U/S 80HHC OF THE ACT TO RS.5.47 LACS. ON APPEAL TH OUGH THE ASSESSEE RELIED UPON THE DECISION OF THE ITAT FOR T HE AY 1993-94 THEY DID NOT FURNISH ANY BIFURCATION OF DIRECT AND INDIRECT EXPENSES IN ACCORDANCE WITH GUIDELINES LAID DOWN BY THE ITAT. A CCORDINGLY THE LD. CIT(A) WHILE OBSERVING THAT THE PROVISIONS OF S EC. 80HHC OF THE ACT DO NOT PROVIDE FOR UNIT WISE CLASSIFICATION OF DIRECT AND INDIRECT EXPENSES UPHELD THE FINDINGS OF THE AO. 11 THE ASSESSEE IS NOW IN APPEAL BEFORE US. THE LD . AR ON BEHALF OF THE ASSESSEE WITHOUT FURNISHING ANY REASO N AS TO WHY THE ASSESSEE DID NOT FURNISH ANY BIFURCATION OF DIRECT AND INDIRECT EXPENSES IN ACCORDANCE WITH GUIDELINES LAID DOWN BY THE ITAT IN THEIR DECISION FOR THE AY 1993-94 BEFORE THE LD. C IT(A) MERELY CONTENDED THAT THE MATTER MAY BE REMITTED TO THE A O IN THE LIGHT OF DECISION DATED 23.3.2007 IN ITA NOS. 1884 TO 1888/A HD./2004 FOR THE AYS. 1992-93 1995-96 1996-97 1999 -2000 & 2001-02 . ON THE OTHER HAND THE LD. DR MERELY SUPPORTED THE FINDING S OF THE LD. CIT(A). 12. WE HAVE HEARD BOTH THE PARTIES AND GONE THROU GH THE FACTS OF THE CASE AS ALSO THE DECISIONS RELIED UPON. WE FIND THAT WHILE ADJUDICATING A SIMILAR ISSUE THE TRIBUNAL IN T HEIR DECISION IN ITA NO.3224/AHD/1996 FOR AY 1993-94 IN THE ASSESSEES O WN CASE CONCLUDED AS UNDER: '6.1 AT THE TIME HEARING BEFORE US ID. COUNSEL APPE ARED FOR THE ASSESSEE CONTENDED THAT IN THE A.O. IN PARAGRAPH 8.1 ASSESS ING OFFICER HAS STATED THAT ASSESSEE HAS NOT COMPUTED THE INTEREST COST CO RRECTLY. ACCORDING TO ASSESSING OFFICER EXPLANATION (E) TO SECTION 80 HH C (3) INDIRECT COST NOT BEING DIRECT COSTS ALLOCATED IN THE RATIO OF' EXPOR T TURNOVER IN RESPECT OF THE TRADING GOODS TO THE TOTAL TURNOVER. IF THIS DEFINI TION IS READ IN CONJUNCTION 12 WITH THE WORDS 'INDIRECT COSTS ATTRIBUTABLE TO SUCH EXPORTS' IN SECTION 80 HHC (3)(B) IT IS APPARENT THAT THE WORD COSTS USED IN THE DEFINITION OR IN DIRECT COSTS CAN REFERRED ONLY TO THE COSTS ATTRIBU TABLE TO THE EXPORT OF TRADING GOODS. IN CASE THE ASSESSEE WHO CARRIES ON EXPORT ACTIVITIES AS WELL AS OTHER LINES OF BUSINESS THE INDIRECT COST HAS TO BE DETERMINED ON PROPORTIONATE BASIS WITH RESPECT TO THE EXPORT TURN OVER AND THE TOTAL TURNOVER. THE COUNSEL OF THE ASSESSEE SUBMITTED THA T WHEN SOME COST ARC DIRECTLY RELATABLE TO OTHER LINE OF BUSINESS OTHER THAN EXPORT TURNOVER IN THAT EVENT SAME IS TO BE ALLOCATED WITHOUT USING ANY FOR MULA AND ONLY IN CASE OF INDIRECT COST WHICH CANNOT BE DIRECTLY RELATED T O ANY OTHER TWO LINES OF BUSINESS IN THAT EVENT SAME IS TO BE ALLOCATED AS P ER FORMULA APPLIED BY AO. COUNSEL OF THE ASSESSEE ACCORDINGLY SUBMITTED THAT IN THE COMPUTATION U/S 80 HHC ASSESSEE HAD ADOPTED THE MET HOD OF DIRECT ALLOCATION OF COST AND ONLY INDIRECT COST ARE TO BE ALLOCATED AS PER FORMULA APPLIED BY AO. THEREFORE AO BE DIRECTED TO RE-WOR K OUT THE DEDUCTION U/S 80 HHC. 12.1 FOLLOWING THE AFORESAID DECISION THE ITAT I N THEIR DECISION DATED 23.3.2007 IN ITA NOS. 1884 TO 1888/AHD./2004 FOR TH E AYS. 1992- 93 1995-96 1996-97 1999 -2000 & 2001-02. RESTORED A SIMILAR ISSUE BACK TO THE FILE OF A.O. IN THE LIGHT OF VIEW TAKE N IN THESE DECISIONS BY THE ITAT IN THE PRECEDING ASSESSMENT YEARS THE MATTER REGARD ING ALLOCATION OF INDIRECT EXPENSES WHILE COMPUTING DEDUCTION U/S 80HHC OF THE ACT IS RESTORED TO THE FILE OF THE AO FOR THE YEAR UNDER CONSIDERATION. THE ASS ESSEE IS ALSO DIRECTED TO FURNISH BIFURCATION OF DIRECT AND INDIRECT EXPENSE S IN ACCORDANCE WITH GUIDELINES LAID DOWN BY THE ITAT IN THEIR DECI SION FOR THE AY 1993-94. THE AO SHALL THEREAFTER PASS APPROPRIAT E ORDERS IN ACCORDANCE WITH LAW AFTER ALLOWING SUFFICIENT OPPOR TUNITY TO THE ASSESSEE. IN THE EVENT THE ASSESSEE FAILS TO FURNI SH THE DESIRED DETAILS THE FINDINGS OF THE LD. CIT(A) SHALL STAND AFFIRMED .WITH THESE OBSERVATIONS GROUND NO. 3 IN THE APPEAL OF THE ASS ESSEE IS DISPOSED OF. 13 GROUND NO.4 IN THE APPEAL OF THE ASSESSEE RELA TES TO CHARGING OF INTEREST U/S 234D OF THE ACT. THERE IS NO DISCUSSION ON THIS ASPECT IN THE ASSESSMENT ORDER EXCEPT THAT THE AO WHILE COMPLETING THE ASSESSMENT LEVIED INTEREST U/S 234D OF THE ACT.ON APPEAL THE LD. CIT(A) WHILE REFERRING TO DECISION OF THE HONBLE APEX 13 COURT IN COMMISSIONER OF INCOME TAX. VS ANJUM M. H. GHASWALA AND OTHERS 252 ITR 1(SC) AND JCIT VS. SARDAR SAROVAR NA RMADA NIGAM LTD 93 ITD 321(AHMEDABAD) AS ALSO IN THE ASSESSEES OWN CASE F OR THE AY 2003-04 UPHELD THE LEVY OF INTEREST U/S 234D OF THE ACT 14. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAIN ST THE AFORESAID FINDINGS OF THE LD. CIT(A). BEFORE US BOTH THE PAR TIES AGREED THAT ISSUE MAY BE ADJUDICATED IN THE LIGHT OF DECISION O F THE ITAT SPECIAL BENCH IN THE CASE OF ITO V EKTA PROMOTERS (P) LTD. (2008) 113 ITD 719 (DELHI) (SB) . 15 WE HAVE HEARD BOTH THE PATIES AND GONE THROUGH THE FACTS OF THE CASE.WE FIND THAT THE ITAT SPECIAL BE NCH IN THE CASE OF ITO V EKTA PROMOTERS (P) LTD. (2008) 113 ITD 719 (D ELHI) (SB) HELD THAT SECTION 234D WHICH HAS BEEN BROUGHT ON THE STA TUTE FROM 01-06- 2003 CANNOT BE APPLIED TO THE ASSESSMENT YEAR 2003- 04 AND EARLIER YEARS BUT IT WILL HAVE APPLICATION ONLY WITH EFFECT FROM AY 2004-05. IN THE LIGHT OF VIEW TAKEN BY THE SPECIAL BENCH AND NO CONTRARY DECISION HAVING BEEN BROUGHT TO OUR NOTICE WE HAVE NO ALTERNATIVE BUT TO UPHOLD THE FINDINGS OF THE LD. CIT(A). THERE FORE GROUND NO. 4 IN THE APPEAL OF THE ASSESSEE IS DISMISSED. 15 NOW COMING TO GROUND NO.1 IN THE APPEAL OF THE REVENUE RELATING TO ALLOWANCE OF DEPRECIATION ON T HE COST OF PLANT AND MACHINERY OF MOTHER DAIRY AT GANDHINAGAR WITHOU T REDUCING THE AMOUNT OF GRANT/SUBSIDY RECEIVED FROM NDDB THE AO NOTICED THAT THE ASSESSEE HAD RECEIVED PLANT AND MACHINERY FROM NDDB UNDER 'OPERATION FLOOD PROJECT'. 30% OF THE TOTAL COST OF PLANT AND MACHINERY FROM NDDB WAS TREATED AS GRANT AND 70% AS LOAN. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE CLAIMED DEPRECIATION OF RS.85 58 663/- ATTRIBUTABLE TO GRANT PORTION OF THE MACHINEY ACQUIRED UNTIL 31.3.1998. NO NEW GRANT HAD BEEN RECEIVED IN THE YEAR UNDER CONSIDERATION. TO A QUERY BY THE AO THE ASSESSEE E XPLAINED THAT 14 THE LD. CIT(A) HAD DELETED A SIMILAR DISALLOWANCE I N EARLIER YEARS ON THE BASIS OF DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MEHSANA DISTRICT CO-OP. MILK PRODUCERS UNIO N LTD. HOWEVER SINCE THE REVENUE HAD NOT ACCEPTED THE DEC ISION OF THE LD. CIT(A) REFERRED TO BY THE ASSESSEE WHILE THE LD. CI T(A)-IV BARODA IN THE ASSESSEES OWN CASE FOR THE AY 2000-01 & 2001-0 2 HAD DECIDED THE ISSUE IN FAVOUR OF THE REVENUE RELYING UPON EX PLANATION 10 TO SEC. 43(1) OF THE ACT INTRODUCED W.E.F 1.4.1999 T HE AO DISALLOWED THE CLAIM FOR DEPRECIATION/ADDL. DEPRECIATION CORRE SPONDING TO SUBSIDY RECEIVED FROM NDDB IN THE EARLIER YEARS. 16 ON APPEAL THE LD. CIT(A) HELD AS UNDER: THIS IS AGAIN A COVERED ISSUE IN THE ORDERS OF THE I.T.A.T. DATED 22.09.2006 AND 26.09.2006 IN THE APPELLANT'S OWN CA SE FOR ASSTT. YEARS 1997-98 1998-99 AND 2000-01. THE HONOURABLE TRIBUN AL HELD THAT 'THE ASSESSEE HAS NOT BEEN GIVEN ANY SPECIFIC MACHINERY. IT HAS BEEN GIVEN A GRANT WHICH IS NOT GIVEN AS A DIRECT COST OF THE P LANT AND MACHINERY BUT IT WAS GIVEN AS A GRANT FOR THE PROJECT AS A WHOLE INC LUDING PROCESSING FACILITY TECHNICAL INPUTS MILK MARKETING. THE CIT (A) IS THEREFORE RIGHT IN HOLDING THAT IT IS A GRANT THAT WAS NOT GIVEN FOR P URCHASE OF ANY SPECIFIC PLANT OR MACHINERY OR ACQUISITION OF ASSETS. IT HAS BEEN GIVEN FOR THE ENTIRE PROJECT AND ACCORDINGLY THE CASE OF THE ASSESSEE I S COVERED BY THE DECISION OF THE SUPREME COURT IN THE CASE OF P. J. CHEMICALS WORKS LTD. (210 ITR 230). THE RELIANCE ON THE EXPLANATION (10) TO SEC. 43(L) ALSO CANNOT BE OF ANY HELP TO THE REVENUE AS IT WAS INC ORPORATED W.E.F. 1.4.1999 AND WOULD NOT BE APPLICABLE TO THE YEAR UN DER CONSIDERATION. THE DECISION OF SAHNEY STEEL & PRESS WORKS LTD. (220 IT R 253) IS ALSO OF NO HELP AS THE ISSUE IN THAT CASE WAS WHETHER THE AMOU NT RECEIVED BY THE ASSESSEE WAS A REVENUE INCOME OR CAPITAL EXPENDITUR E AND NOTHING TO DO WITH COST OF ASSETS. WE ACCORDINGLY UPHOLD THE OR DER OF THE CIT(A) AND REJECT THE GROUND OF THE REVENUE'. RESPECTFULLY FOLLOWING THE ORDER OF THE I.T.A.T. THE ASSESSING OFFICER IS DIRECTED TO ALLO W THE DEPRECIATION ON THE PLANT 'MOTHER DAIRY' AT GANDHINAGAR ON THE GROSS VA LUE OF THE FIXED ASSETS WITHOUT REDUCING THE AMOUNT OF GRANT/SUBSIDY RECEIV ED FROM N.D.D.B. AFTER CONSIDERING THE DEPRECIATION ADMISSIBLE IN THE EARL IER YEARS. 17 THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LEARNED D R CONTENDED THAT EXPLANATION 10 INTRODUCED BY THE FINANCE ACT (NO.2) 1998 WITH EFFECT FROM 01-04-1999 HAD NOT BEEN CONSIDERED BY T HE TRIBUNAL IN 15 THEIR EARLIER DECISION AND THUS THE DECISION RELIE D UPON BY THE CIT(A) WAS NOT APPLICABLE TO THE FACTS OF THE CASE UNDER CONSIDERATION. ON THE OTHER HAND THE LEARNED AR ON BEHALF OF THE ASSESSEE WHILE REFERRING TO RELEVANT PAGE OF THE PAPER BOOK CONTENDED THAT THE SAID EXPLANATION 10 HAS BEEN CO NSIDERED IN THE DECISION OF THIS TRIBUNAL. 19 WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE DECISIONS OF THE ITAT IN THE ASSESSEES OWN CASE. WE FIND THAT THE TRIBUNAL AHMEDABAD BENCH -B IN ITA NO.958/AHD/2007 FOR THE AY 2003-04 IN THE ASSESSEE S OWN CASE IN THEIR DECISION DATED 4.5.2007 HAVE DECIDED THE I SSUE IN FAVOUR OF THE ASSESSEE HOLDING AS UNDER: 2 AT THE VERY OUTSET IT WAS THE COMMON CONTENTIO N OF BOTH THE PARTIES THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE ITAT AHMEDABAD BENCH A IN THE CASE OF THE ASSESSEE IN ITA NO.102/AHD/2006 [COPY OF ORDER IS PLACED ON RECORD] FOR AY 2000-01 DATED 26-09-2006. 3. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE MATERIAL ON RECORD AND HAVE ALSO GONE T HROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE ORDER OF THE T RIBUNAL IN THE ASSESSEES CASE CITED SUPRA. THE TRIBUNAL HAS DEALT WITH THE I SSUE IN GREAT DETAIL VIDE PARAS-8 & 9 OF THE ORDER WHICH ARE AS UNDER: 8. THE NEXT GROUND IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF DEPRECIATION OF RS.2 45 04 358 ON GRANTS RECEIVE D IN EARLIER YEAR BY REDUCING W.D.V. SIMILAR MATTER CAME UP BEFORE TH E TRIBUNAL AND THE TRIBUNAL IN ITS EARLIER ORDER ALLOWED THE CLAIM OF THE ASSESSEE VIDE DISCUSSION IN PARAGRAPHS 16 AND 17 WHICH READ AS UNDER:- 16. WE HAVE HEARD THE PARTIES AND CONSIDERED THE RIVAL SUBMISSIONS. IN OUR OPINION THE CIT(A) IS RIGHT IN HOLDING THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED B Y THE DECISION OF THE SUPREME COURT IN THE CASE OF P.J.CHEMICALS WORKS LTD. (SUPRA). THE ASSESSEE HAS SET UP A MILK PROCESSING PLANT CALLED MOTHER DAIRY PLA NT AT GANDHINAGAR HAVING MILK PROCESSING CAPACITY OF 4 LA C LITERS PER DAY. THE SAID PROJECT INITIALLY ESTIMATED AT A COST OF RS.16.04 CRORES WAS FINANCED UNDER THE NATIONAL DAI RY PROJECT-II/OPERATION FLOOD-III BY THE NATIONAL DAIR Y 16 DEVELOPMENT BOARD. THE FINANCING BY THE NDDB IS UNDERTAKEN BY 70% LOAN AND 30% GRANT BASIS. AS PER THE AGREEMENT DATED 30TH OCTOBER 1991 SIGNED BETWEEN T HE ASSESSEE AND NDDB WHAT COMES OUT IS THAT BY CLAUSE (1) OF THE AGREEMENT NDDB HAS GIVEN DISBURSEMENT TO BORROWERS A SUM OF RS.13058.98 LACS AS GRANTS TOWAR DS PART-FINANCE FOR THE PROJECT AS PER THE TERMS AND CONDITIONS. SUBJECT TO PARAGRAPH 4 OF THE AGREEMENT THE ESTIMATED COST FOR DISBURSEMENT IS STATED AS UNDER: - ITEM ESTIMATED TOTAL COST AMOUNT OF GRANT (30% OF COST) PROCESSING FACILITIES 37914.23 LACS 11 247.07 TECHNICAL INPUTS 4009.86 LACS 1 202.95 MILK MARKETING 395.09 LACS 118.53 17. THE NDDB BY CLAUSE (4) OF THE AGREEMENT HAS BEEN GIVEN OPTION THAT INSTEAD OF GIVING THE AMOUNT OF GRANT BY WAY OF CASH THEY CAN GIVE SPECIFIC MACHINE RY AND/OR EQUIPMENT REQUIRED FOR THE PROJECT AS GRANT. IN SUCH A CASE THE ACTUAL COST OF PLANT EQUIPMENT OR MACHI NERY WILL BE CONSIDERED TOWARDS GRANT FOR PURPOSE OF PAR AS 2 AND 3 AND SUCH ACTUAL COST WILL BE THE AMOUNT AS COMPUTED BY THE NDDB AND MAY INCLUDE DIRECT AND INDIRECT EXPENSES AND ALL COSTS OF PURCHASING ACQU ISITION TRANSPORTATION INSURANCE TRIAL RUNS INVENTORY HO LDING COSTS SERVICE CHARGES AND INTEREST CHARGED AS COMP UTED BY THE NDDB AND THE AMOUNT OF GRANT TO BE GIVEN WIL L BE REDUCED BY THE AMOUNT OF COST OF THE MACHINERY AND/ OR EQUIPMENT SO SUPPLIED TO THE BORROWER AND ONLY THE BALANCE OF THE AMOUNT IF ANY WILL BE GRANTED / PAY ABLE BY THE NDDB IN CASH. THE ASSESSEE HAS NOT BEEN GIVEN ANY SPECIFIC MACHINERY. IT HAS BEEN GIVEN A GRANT WHIC H IS NOT GIVEN AS A DIRECT COST OF THE PLANT AND MACHINERY B UT IT WAS GIVEN AS A GRANT FOR THE PROJECT AS A WHOLE INCLUDI NG PROCESSING FACILITY TECHNICAL INPUTS MILK MARKETI NG. THE CIT(A) IS THEREFORE RIGHT IN HOLDING THAT IT IS A GRANT THAT WAS NOT GIVEN FOR PURCHASE OF ANY SPECIFIC PLANT OR MACHINERY OR ACQUISITION OF ASSETS. IT HAS BEEN GIV EN FOR THE ENTIRE PROJECT AND ACCORDINGLY THE CASE OF THE ASSESSEE IS COVERED BY THE DECISION OF THE SUPREME COURT IN THE CASE OF P.J.CHEMICALS WORKS LTD. (SUPRA). TH E RELIANCE ON THE EXPLANATION (10) TO SEC.43(1) ALSO CANNOT BE ANY HELP TO THE REVENUE AS IT WAS INCORPORATED W.E.F. 1.4.1999 AND WOULD NOT BE APPLICABLE TO THE YEAR UN DER CONSIDERATION. THE DECISION OF SAHNEY STEEL & PRESS WORKS LTD. (SUPRA) IS ALSO OF NO HELP AS THE ISSUE IN THAT 17 CASE WAS WHETHER THE AMOUNT RECEIVED BY THE ASSESSE E WAS A REVENUE INCOME OR CAPITAL EXPENDITURE AND NOT HING TO DO WITH COST OF THE ASSETS. WE ACCORDINGLY UPH OLD THE ORDER OF THE CIT(A) AND REJECT THE GROUND OF THE RE VENUE. 9. SINCE FACTS AND CIRCUMSTANCES ARE SIMILAR IN THI S YEAR WE ALLOW THE CLAIM OF THE ASSESSEE IN THIS YEAR AS WE LL. RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF TH E TRIBUNAL WE UPHOLD THE ORDER OF THE CIT(A) AND REJECT THE GROUND RAISED BY THE REVENUE . 19.1 THE AFORESAID DECISION DATED 26.9.2006 F OR THE AY 2000-01 WAS ALSO FOLLOWED WHILE ADJUDICATING A SIMILAR ISSU E IN THE ASSESSEES OWN CASE FOR THE AYS. 1996-97 1999-2000 & 2001-02 IN THEIR DECISION DATED 23.3.2007. IN THE LIGHT OF VI EW TAKEN BY THE CO- ORDINATE BENCHES WE HAVE NO ALTERNATIVE BUT TO UP HOLD THE ORDER OF THE LD. CIT(A) AND REJECT GROUND NO.1 RAISED BY T HE REVENUE. 20. GROUND NOS. 5 & 6 IN THE APPEAL OF THE ASSE SSEE AND GROUND NO. 3 IN THE APPEAL OF THE APPEAL OF THE REVENUE BEING GENERAL IN NATURE DO NOT REQUIRE ANY SEPARATE ADJUDICATION NO R ANY SUBMISSIONS HAVE BEEN MADE BEFORE US ON THESE GROUN DS WHILE NO ADDITIONAL GROUND HAVING BEEN RAISED IN TERMS OF RE SIDUARY GROUND NO. 7 IN THE APPEAL OF THE ASSESSEE AND GROUND NO.4 IN THE APPEAL OF THE REVENUE ALL THESE GROUNDS ARE DISMISSED. 21 IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE WHILE THE APPEAL FI LED BY THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT TODAY ON 26 -05- 2010 SD/- SD/- (D T GARASIA) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATE : 26 -05-2010 COPY OF THE ORDER FORWARDED TO : 18 1. GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION L IMITED AMUL DAIRY ROAD ANAND 2. THE ACIT ANAND CIRCLE ANAND 3. CIT CONCERNED 4. CIT(A)-IV BARODA 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT AHMEDABAD