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TMI Blog2009 (9) TMI 982X X X X Extracts X X X X X X X X Extracts X X X X ..... order passed by the Assessing Officer. iii) It is, therefore, prayed that the order of the CIT(A) be set aside and that of the Assessing Officer be restored. ITA No.569/Ahd/2004[Assessee]-AY 1999-2000: 1. The order passed by the CIT(A) is bad in law and be quashed. 2. The Ld.CIT(A) has erred in confirming the disallowance of ₹ 1,78,722 being the contribution of PF made after due dates. Your appellant submits that payment has been made within grace period/within the accounting year and therefore the disallowance made is not justified and same be deleted now. 3. The Ld.CIT(A) has erred in directing the AO to verify the payment of excise duty and then allow deduction u/s.43B of the Act. Your appellant submits CIT(A) ought to have deleted the addition of ₹ 86,04,000/- made by the AO. The addition made by the AO by including excise duty in the value of closing stock of finished goods is not justified more particularly when your appellant has followed the method of valuation of closing stock consistently which has been accepted by the department in past. The deviation in the regular method adopted is unwarranted and addition made be deleted now. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction now. Your appellant craves leave for, to add/alter/amend/withdraw any ground of appeal before/at the time of hearing 2. Since similar issues are involved , these appeals were heard together for the sake of convenience and are being disposed of through this common order 3. Adverting first to ground no.1 in the appeal of the Revenue, the AO disallowed the claim for deduction of interest and lease rent, relying upon his own orders for the preceding years on the ground that the borrowings were utilized for new projects viz. 350TPD caustic soda plant, Membrane Cell-1 plant and 90MW power plant at Dahej, which had not commenced commercial production in the year under consideration. On appeal, the ld. CIT(A) allowed the claim , relying upon orders of the ITAT for the AYs 1994-95 to 1996-97 and order of the CIT(A) for the AY 1998-99. 4. The Revenue is now in appeal against the aforesaid findings of the ld. CIT(A). Before us, both the parties agreed that the issue is now settled by the Hon'ble Supreme Court in the case of DCIT v. Core Health Care Ltd.. [2008] 298 ITR 194 (SC) and DCIT Vs. Gujrat Alkalies and Chemicals Ltd.,299 ITR 85(SC). 5. We have heard both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lear that the transaction of borrowing attracts the provisions of section 36(1)(iii). Thus, the decision of the Bombay High Court in Calico Dyeing and Printing Works [1958] 34 ITR 265 and the judgment of the Supreme Court in India Cements Ltd. [1966] 60 ITR 52 have been given with reference to the borrowings made for the purposes of a running business, while the decision of the Supreme Court in Challapalli Sugars Ltd. [1975] 98 ITR 167 was given with reference to the borrowings which could not be treated as made for the purposes of business as no business had commenced in that case. Therefore, there is no inconsistency between the above decisions. Conclusions For the above reasons, we hold that the Assessing Officer was not justified in making disallowance of ₹ 1,56,76,000 in respect of borrowings utilised for purchase of machines. Accordingly, the above question is answered in favour of the assessee and against the Department. 5.1. The aforesaid decision has subsequently been followed in Gujrat Alkalies and Chemicals Ltd.(supra), JCIT Vs. United Phosphorous Ltd.,299 ITR 9(SC),ACIT Vs. Arvind Polycot Ltd.,299 ITR 12(SC) and CIT Vs. Ishwar Buvan Hotels Ltd.,215CTR 14(SC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n/replacement/ re- membraning in membrane cell-I II plants as capital in nature. During the course of assessment proceedings for the AY 1999-2000, the AO noticed that the assessee claimed expenditure of ₹ 25,13,20,259/- incurred on the installation/replacement of re-membraining in Membrane Cell-I plant as revenue expenditure. However, the AO was of the opinion that expenditure is capital in nature, since the expenditure represented an asset being used for years together and also involved huge quantum of capital for its acquisition. To a query by the AO, the assessee replied that membranes were essential component of the process system, requiring replacement at periodical intervals and the expenditure being substantial in quantum, was treated as deferred revenue expenditure in the books of accounts and amortized over a period accordingly. It was further mentioned that similar claim of the assessee was accepted by the Department in the A.Ys.1993-94 and 1995-96. However, the AO rejected the claim holding that the membranes have specified life varying between 3 to 5 years, requiring periodic replacement and the magnitude of the cost involved was huge. Accordingly, the AO while r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25 DTR (Del) 8, the ld. AR contended that claim has to be allowed. On the other hand, learned DR did not dispute these submissions on behalf of the assessee. 11. We have heard both the parties and gone through the facts of the case. We find that the AO himself has treated the expenditure incurred by the assessee in the A.Y.1993-94 on installation/replacement of re-membraining in Membrane Cell plant, revenue in nature. Though the ld. CIT(A) observed in the impugned order that a similar claim has been accepted by the AO in the AY 1993-94 1995-96, no reasons have been given as to how the facts relating to the claim in the year under consideration are different from the AY 1993-94 or AY 1995-96, so as to take a different view in the matter. In these circumstances , we find merit in the undisputed contentions of the ld. AR that principles of consistency should have been adhered to . In this connection, Hon'ble jurisdictional High Court in their decision in the case of Taraben Ramanbhai Patel Another (supra) in the context of levy of penalty u/s 271(1)observed as under: It is no doubt true that the strict rule of the doctrine of res judicata does not apply to proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while no change of facts and circumstances have been pointed out on behalf of the Revenue in the years under consideration, we are of the opinion that the AO is not justified in departing from his previous decision in the AY 1993-94, in the absence of material circumstances or reasons for such departure. Therefore, ground no.4 in the appeal for the AY 1999-2000 ground no.2 in the AY 2000-01 are allowed. 12. Last common ground in both the appeals relates to disallowance of deduction in respect of contribution to GACL Employees' Welfare Trust and GACL Benevolent Fund. The AO disallowed the claim while determining total income. On appeal, the assessee contended that a similar claim has been allowed by the ld. CIT(A) in the AY 1990-91 1998-99. However, the ld. CIT(A) rejected the claim on the ground that the assessee did not submit any factual data in the years under consideration. Since neither before the AO nor before the ld. CIT(A) any facts were placed regarding contributions to the welfare trust and the benevolent fund while no submissions were made as to why provisions of sec. 40A(9) should not apply or how claim was admissible u/s 40A(10) of the Act , the ld. CIT(A) u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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