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TMI Blog2012 (8) TMI 666X X X X Extracts X X X X X X X X Extracts X X X X ..... has not been considered by the CIT(A) - issue remanded back to the file of A.O. X X X X Extracts X X X X X X X X Extracts X X X X ..... nced on behalf of the assessee are found reproduced in para 4.3 which are reproduced hereunder:- 4.3 Vide-reply dated 21.11.2007, the assessee has submitted as under: - "You are aware that there was a global glut in steel and consequent fall in steel prices around the year 1997 and 1998. This was consequent to an economic melt down or recession in South East Asia especially in Korea, Malaysia and Indonesia etc. This company being one of the largest steel producers in India was adversely affected and incurred huge losses. The Government of India in its wisdom and a measure of rehabilitating the company, waived loans to the extent of Rs 5073 crores availed by it from the SDF (Steel Development Fund)the Govt. of India plus its own loans of Rs. 381 crores. This waiver was done in the year-ended 31.3.2000 relevant to AY 2000-01. The company had given loans to its subsidiary - IISCO (Indian Iron & Steel Co. Ltd) It had written off loan to the extent of &2072 crores and adjusted it against the waiver of SDF loans. When a loan is waived it does not become an expense since it is not the business of the company to extend loans. The converse also (that loan waived does not result in inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT Vs Tata Iron & Steel Co. Ltd 231 ITR 285 SC CIT Vs Cochin Co. Pvt. Ltd - 184 ITR 230 (Ker) Bharat Forge Ltd. Vs CIT - 205 ITR 339 However, the Department in AY 2000-01 took a view that the waiver of loan amounted to a cost of assets met by the GOI and consequently reduced it from WDV of the block of assets. This resulted in reduction of the amount of depreciation allowed This issue is pending in appeal before the ITAT. The Department has followed its stand in AY 2001-02, 2002- 03, 2003-04 & AY 2004-05. The resultant affect of the deprecation for AY 2005-06 on the above basis of the department will be Rs. 15191.18Iakhs. (Note No. 3.8 of Annex-2 to ITR) This however is subject to the final outcome of the pending appeals on this issue." 3.1. The reasoning taken for disallowing the claim was on account of conjoint reading of S.43(1), 43(6) and 32(1) which makes it clear that depreciation is allowable on the reduced written down value of the assets read along with Explanation 10 to S.43(1) inserted by Finance no.2 Act of 1998 w.e.f. 1.4.1999. 3.2. In appeal before the First Appellate Authority the claim was rejected relying upon the order dt. 25.6.2009 in ITA 2782/Del/200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equest was made that the issue in the year under consideration also may be restored to the A.O. Ld.D.R. had placed reliance upon the impugned order however confronted with the order of the Tribunal no objection to the request of restoring the issue to the AO was made. 4.2. Before coming to the conclusion we consider it appropriate to set out the facts, arguments and reasoning taken by the Coordinate Bench in restoring the issue back to the file of A.O. by the said order in the consolidated order passed in the case of the assessee for the 3 A.Ys as found discussed in paras 45 to 48 in pages 125 of the paper book as under:- 45. The last issue for consideration relates to depreciation on mining rights. During the course of assessment proceedings the assessing officer noted that the assessee in. the computation of income had itself added back an amount of Rs.98.44 lakhs representing depreciation on mining rights treating it as disallowable claim. The claim of allowability in earlier years was not pressed before the appellate authority. However, during the course of assessment proceedings for assessment year under consideration, the assessee claimed the depreciation on mining rights. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing officer with the directions to verify the date of acquisition of mining rights and examine the case whether the mining rights are covered under intangible assets, as specified in old Appendix I applicable for assessment year 1988-89 to 2002-03. As. regards the alternative claim of the assessee as revenue expenditure, this issue has also not been examined by either of the authorities. We, therefore, set aside the matter to the file of the assessing officer with a direction to examine the claim of the assessee whether expenditure incurred on acquisition of mining right sis revenue expenditure or capital in nature. 4.3. Accordingly on consideration of the factual material in the light of the arguments of the parties advanced, respectfully following the order of the Tribunal the said issue is restored to the file of A.O. with the above directions., Ground no.2 raised by the assessee is allowed for statistical purposes. 5. The facts relevant to ground no. 3 agitated by the assessee are found discussed at pages 33, 34 of the assessment order in paras 15 to 15.3. A perusal of the same shows that the assessee claimed depreciation of computer @ 60% treating it as computer instead ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the purpose of allowing higher depreciation. 5.5. It was contended that in A.Y. 2006-07 the CIT(A) relying upon the order of the Delhi Bench of the Tribunal in case of Nestle India Ltd. vs DCIT 94 TTJ 498 in which it was held that UPS were not eligible for depreciation at rates applicable to computers since they were electrical equipments by nature. It was contended that the principle laid down in the said judgement was not applicable as UPS and computer net working are independently different types of equipment as such the said judgement has no applicability. 5.6. Considering the arguments the CIT(A) upheld the action of the AO vide para 12.1 holding as under:- "12.1. The submissions given by the appellant has been perused. There is a difference between a computer and its accessories and wiring. The Fiber Optic Computer Networking is a system of wiring which can be used in many other things apart from computer. Therefore, the A.O. has rightly decided the issue that Fiber Optic Computer Networking is not a part of the computer system. Reliance is also placed on the decision of Delhi Bench of the Hon'ble ITAT in the case of Nestle India Ltd. Vs DCIT (ITAT, Del) 111 TTJ 498 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... qua the first issue are found discussed at pages 10 to 15 of the assessment order. A perusal of the same shows that the A.O. vide para 7 observed after hearing the assessee that disallowance of Rs.445 lakhs on account of adjustment relating to earlier year which are treated as prior period expenses had to be disallowed requiring the assessee to explain the prior period items claimed as per Schedule 2.13 of the Profit ad Loss a/c the A.O. accepted the explanation in regard to the extent of sales of Rs.11 lakhs. However in regard to stores and spares, power and fuel and repair and maintenance it appeared that the assessee could not prove that the liability had been incurred in the year under consideration. Relevant finding is at para 7.3 and 7.4 which are reproduced here under. "7.3. Submissions of assessee have been considered. The depreciation has already been added back in the computation by the assessee. The debit of Rs.11 lakhs in sales is on account of reversal of excess income accounted for during A.Y. 2003-04. Since this is a reversal of excess income, the same is allowed. In respect of repair & maintenance, fuel & store and spares is not admissible as it could not be prove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed before the CIT(A) contended that similar expenses on account of the stores and spares, power and fuel, repairs etc. have been allowed by CIT(A) in A.Y. 2001-02 on the basis of acceptance/accrual/crystallization of liability during the year on the basis of documentary evidences and the CIT(A) has followed this position in all the subsequent years. The said issue it was stated is covered in assessee's favour by the judgement of the Jurisdictional High Court in Shriram Pistons & Rings Ltd. 174 Taxman 147 (Delhi). 7.5. We have heard the rival submissions and perused the material available on record. On a perusal of the same we are of the view that the factual findings on record remains unrebutted. In the facts as they stand where no infirmity in the impugned order has been pointed out nor any material fact has been brought on record nor any argument has been advanced to canvass a contrary view we are of the view that the departments ground deserves to be dismissed. Being satisfied with the reasoning and finding based on documentary evidences which remain uncontroverted the ground no.1 of the Revenue is dismissed. 8. The facts pertaining to the next issue agitated by the Revenue p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in 1997-98, 1998-99, 2000-2001 and 2001-02 AYs and the claim has been consistently been allowed in 2002-03 to 2004-05 A.Ys by the CIT(A) and again in 2006-07, 2007-08 on the basis of orders of the Tribunal. It was argued that there is no change in position either of law or of fact. 8.5. We have heard the rival submissions and perused the material available on record. On a perusal of the same it is seen that the Coordinate Bench vide its order dt., 25.6.09 in 2001-02, 2002-03 copy of which is placed at pages 118 for A.Y. 19095-96 concluded the issue vide paras 33 and 34 as under:- "33. We have heard both the parties and gone through the material available on record. ITAT, Delhi Bench D in order dt. 15th September, 2006 in ITA no.4618 and 4619 (Del) of 2002 decided the issue in favour of the assessee by observing as under. 'We have heard the arguments of both the sides and also perused the relevant material on record. Before us, the ld.counsel for the assessee has submitted that this issue stands squarely covered in favour of the assessee by the decision of Mumbai D bench of ITAT in the case of DCIT vs TISCO Ltd. Rendered vide its order dt. 5.3.2002 in ITA nos. 8116 and 8117(Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal which are still pending. Having regard to this position on the issue under consideration in the subsequent years, we are of the view that the rule of consistency has no application to the facts of the case and rejecting the contention raised by the ld.DR based on the said rule, we set aside the impugned orders of the ld.CIT(A) on this issue and direct the AO to treat the entire water supply and sewerage plant of the assessee as a plant and machinery for the purpose of depreciation as held by the Mumbai bench of ITAT in the case of TISCO Ltd. (supra)". 34. In the year under consideration, the facts of the case are identical and the revenue has not brought any material on record to distinguish the facts from AY 1995-96 and 1996-97. Therefore, there is nor reason for us not to follow the decision of the Tribunal. Accordingly, we decide this issue in favour of assessee and direct the AO to treat the entire water supply and sewerage plant of assessee as plant&machinery for the purpose of depreciation, as decided by the Tribunal in A.Ys 1995-96." 8.6. Since no change in the facts and circumstances and position of law has been brought to our notice the action of the CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oresaid case, the issue at hand was deductibility of accrued interest during the moratorium period, as the liability of payment of interest was not waived. There was only a moratorium on the payment of interest. 10.4. Accordingly, out of total interest debited on this account during the year amounting to Rs.1554 lakhs, only 0.75% is allowable and the balance of Rs.1421 lakhs is disallowed." 9.2. In appeal before the First Appellate Authority relying upon the order of ITAT in assessee's own case in ITA 192/Del/2004 for A.Y. 1998- 99 the addition made was deleted. 9.3. Aggrieved by this the Revenue is in appeal before the Tribunal. 9.4. Ld.D.R. places reliance upon the assessment order. 9.5. Ld.A.R. of the assessee relied upon the impugned order and placed further reliance upon the orders of the Tribunal in 2001 to 2003 A.Ys contended that consistently the said claim has been allowed in 2003-04 also by the Tribunal. A perusal of the order of the Coordinate Bench dt. 25.6.2009 for 3 consecutive A.Ys 2001, 2002, 2003 shows that while deciding the said issue reliance was placed upon the order of the Tribunal in 1998-99 dt. 28.11.2008 which has discussed the issue from pages 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion on assets not in active use. Briefly the facts are that the A.O. noticed from Schedule 1.5 of the fixed asset schedule that it included assets valued at Rs.11.78 crores which were retired from active use. In the note below the schedule, a remark had been appended by the auditors as under. "Gross block as on 31.3.2001 includes Rs.11.78 crores being assets retired from active use." The AO held that depreciation on such assets was not allowable since the assets were idle and were not being used for the purposes of the business. Accordingly depreciation was disallowed to the extent of Rs.2,94,50,000/-. 8.2. It was argued in appeal that the company had certain assets which were not in active use on account of changes in demand or process or obsolescence. The value of such assets was Rs.11.78 crores out of the gross block of Rs.26,916/- crores. This valuation was as per accounts prepared in accordance with the Companies Act. However, for I.T. purposes, after allowing depreciation on WDV basis, the written down value of such assets was nil. Hence, no depreciation in respect of such assets had been charged in the accounts prepared in accordance with the provisions of Income Tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X
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