Inventaa Chemical Ltd.,, Hyderabad v. ACIT, Hyderabad

ITA 328/HYD/2006 | 2002-2003
Pronouncement Date: 26-05-2010 | Result: Allowed

Appeal Details

RSA Number 32822514 RSA 2006
Assessee PAN AAACI4539B
Bench Hyderabad
Appeal Number ITA 328/HYD/2006
Duration Of Justice 4 year(s) 1 month(s) 20 day(s)
Appellant Inventaa Chemical Ltd.,, Hyderabad
Respondent ACIT, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 26-05-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 26-05-2010
Date Of Final Hearing 31-03-2010
Next Hearing Date 31-03-2010
Assessment Year 2002-2003
Appeal Filed On 06-04-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A HYDERABAD BEFORE SHRI G.C. GUPTA VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA.NO.328/HYD/2006 A.Y. 2003-04 M/S INVENTAA CHEMICAL LIMITED HYDERABAD (PAN AAA CI 4539 B) VS ACIT CIRCLE 2 (1) HYDERABAD (APPELLANT) (RESPONDENT) ITA.NO.1037/HYD/2007 A.Y. 2002-03 M/S INVENTAA CHEMICAL LIMITED HYDERABAD (PAN AAA CI 4539 B) VS DCIT CIRCLE 2 (1) HYDERABAD (APPELLANT) (RESPONDENT) ITA.NO.1038/HYD/2007 A.Y. 2004-05 M/S INVENTAA CHEMICAL LIMITED HYDERABAD (PAN AAA CI 4539 B) VS DCIT CIRCLE 2 (1) HYDERABAD (APPELLANT) (RESPONDENT) ITA.NO.329/HYD/2006 A.Y. 2003-04 M/S INVENTAA CHEMICAL LIMITED HYDERABAD (PAN AAA CI 4539 B) VS CIT HYDERABAD-II. (APPELLANT) (RESPONDENT) ITA.NO.538/HYD/2006 A.Y. 2003-04 M/S INVENTAA CHEMICAL LIMITED HYDERABAD (PAN AAA CI 4539 B) VS DCIT CIRCLE 2 (1) HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SHRI S. RAMA RAO RESPONDENT BY: SHRI B. SENTHIL KULAR & SHRI H. PH ANI RAJU DRS O R D E R ITA NOS.328/329/538/06 1037/1038/07 M/S INVENTAA CHEMICALS LTD. HYD 2 2 PER: CHANDRA POOJARI ACCOUNTANT MEMBER: THESE FIVE APPEALS PREFERRED BY THE ASSESSEE IS DIRECT ED AGAINST DIFFERENT ORDERS PASSED BY THE CIT HYDERABAD A ND PERTAINS TO THE ASSESSMENT YEARS 2002-03 2003-04 2004-05. SINCE CERT AIN ISSUES ARE INTER RELATED THESE APPEALS ARE CLUBBED TOGETHER HEARD TOGETHER AND DISPOSED OFF VIDE THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST WE WILL TAKE UP THE ASSESSEES APPEALS IN ITA NO.328/HYD/2006 AND ITA.NO.1037/HYD/2007. THE ISSUE IN ITA NO.328/HYD/2006 IS RELATING TO THE ORDER PASSED U/S 263 FOR THE ASSESSMENT YEAR 2002-03 AND IN ITA NO.1037/HYD/2007 IS DI RECTED AGAINST THE ORDER OF CIT(A) DATED 13/8/2007 RELATIN G TO THE ORDER PASSED U/S 143(3) READ WITH SEC.263 CONSEQUENT TO ORDER PASSED U/S 263. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HEREIN I S A PUBLIC LIMITED COMPANY IN WHICH THE PUBLIC ARE NOT SUBST ANTIALLY INTERESTED CARRYING ON BUSINESS OF MANUFACTURE AND SALE OF CHEMICALS. FOR THE ASSESSMENT YEARS 2002-03 THE ASSESSEE COMPANY FILED RETURN OF INCOME ON 31.10.2002 ADMITTING TOTAL INCOME OF RS. NIL . THE BOOK PROFIT FOR THE PURPOSE OF SEC.115JB WAS ADMITTED AT RS. NIL. THE ASSESSMENT WAS COMPLETED U/S 143(3) ON 29.3.2004 AND THE TOTAL ITA NOS.328/329/538/06 1037/1038/07 M/S INVENTAA CHEMICALS LTD. HYD 3 3 INCOME WAS DETERMINED AT RS. NIL. AFTER ADJUSTMENTS OF THE BROUGHT FORWARD LOSS. THE BOOK PROFIT WAS ALSO DETERMINED AT RS. NIL. FOR THE PURPOSE OF ARRIVING AT THE BOOK PROFIT THE ASSESSEE DED UCTED UNABSORBED DEPRECIATION AS PER THE BOOKS AT RS.1 86 11 743/-. AFTER THE ASSESSMENT WAS COMPLETED THE CIT HYDERABAD-II ISSUED A NOTICE U/S 263 OF THE ACT REQUIRING THE ASSESSEE TO EXPLAIN AS T O WHY THE ASSESSMENT SHOULD NOT BE REVISED BY WITHDRAWING DEDUCTION TOWARDS UNABSORBED DEPRECIATION. THE ASSESSEE FILED A DETAILED R EPLY BEFORE THE CIT-II HYDERABAD. IT WAS EXPLAINED THAT THERE WAS LO SS AS PER THE BOOKS OF ACCOUNT AND SUCH LOSS IS ALLOWABLE AS A DEDUCTIO N FOR THE PURPOSE OF ARRIVING AT THE BOOK PROFIT. THE CIT RE JECTED THE CONTENTION OF THE ASSESSEE AND PASSED AN ORDER U/S 263 ON 16.2.2006. ACCORDING TO CIT THE UNABSORBED DEPRECIATION OF RS.1 86 11 743/ - FOR THE ASSESSMENT YEAR 2001-02 SHOULD NOT BE ALLOWED AS A DEDUCTI ON FOR THE PURPOSE OF ARRIVING AT THE BOOK PROFIT FOR THE ASSESSMEN T YEAR 2002-03. ACCORDINGLY PASSED ORDER U/S 263. 4. THE GRIEVANCE OF THE ASSESSEE IN ITA NO.328/HYD/2006 IS ONLY LIMITED TO THE DIRECTION GIVEN BY THE CIT THAT THERE IS NO UNABSORBED DEPRECIATION RELATING TO THE ASSESSMENT YEAR 2 001-02 AND FURTHER ERRED IN DIRECTING THE ASSESSING OFFICER TO WITH DRAW AT RS.1 86 11 743/- ALLOWED AS DEDUCTION FOR THE PURPOSE OF ARRIVING AT BOOK PROFIT. ITA NOS.328/329/538/06 1037/1038/07 M/S INVENTAA CHEMICALS LTD. HYD 4 4 5. ACCORDING TO THE CIT WHILE COMPLETING THE ASSESSMENT U/S 143(3) THE ASSESSING OFFICER ARRIVED AT TOTAL INCOME OF RS.1 05 08 896/- AND SET OFF THE SAME AGAINST THE BROUGHT FORWARD LOSSES O F ASSESSMENT YEAR 2001-02. HOWEVER IN SPITE OF THERE BEING PROFI T AS PER BOOKS OF ACCOUNTS THE ASSESSING OFFICER DID NOT COMPUTE BOOK PROFIT AS REQUIRED U/S 115JB. TO THIS EXTENT THE ORDER OF THE ASSESSING OFF ICER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. 5.1. ACCORDING TO CIT THE ASSESSEE HAD A BOOK PROFIT O F RS.1 00 57 393/-. IN THE RETURN OF INCOME THE ASSESSEE HAS CLAIMED A DEDUCTION U/S 80HHC OF RS.28 53 493/- PRIOR TO THE SETTI NG OFF OF BROUGHT FORWARD LOSSES. THIS DEDUCTION PRIMA/FACIE IS NO T ADMISSIBLE. FURTHER THE ASSESSEE HAS SET OFF AN AMOUNT OF RS.1 86 11 7 43/- BEING LESSER OF UNABSORBED DEPRECIATION AND UNABSORBED BUSINESS L OSS RELATING TO ASSESSMENT YEAR 2001-02. THIS PRIMA FACIE IS NOT CORRECT AS THE LOSS AS PER BOOKS RELATING TO ASSESSMENT YEAR 2001-02 HAS BEEN SET OFF AGAINST ACCUMULATED BROUGHT FORWARD PROFITS OF THE EAR LIER YEARS AND NO AMOUNT OF LOSS HAS BEEN BROUGHT FORWARD IN THE BOOKS TO THIS YEAR. 6. IN VIEW OF THIS HE SET ASIDE THE ASSESSMENT ORDER U /S 143(3) ON 29.3.2004 TO RE-COMPUTE THE BOOK PROFIT U/ S 115JB AS PER THE PROVISIONS OF LAW. AGAINST THIS ASSESSEE IS IN APPEAL BEF ORE US. THE ITA NOS.328/329/538/06 1037/1038/07 M/S INVENTAA CHEMICALS LTD. HYD 5 5 ASSESSEES COUNSEL PLEADED THAT AS PER PLAIN READING OF CLA USE (III) OF EXPLANATION BELOW SUB SEC.2 U/S 115JB IF ANY LOSS IS BR OUGHT FORWARD OR UNABSORBED DEPRECIATION LESSER OF THE TWO HAS TO BE RED UCED FOR ARRIVING BOOK PROFIT. IN THE CASE OF ASSESSEE THERE IS BROUGHT FORWARD LOSS AT RS.4 85 46 632/- AND UNABSORBED DEPRECIATION AT RS.1 86 11 543/- ON 31.3.2001 WHICH WERE BROUGHT FORW ARD FROM EARLIER YEAR. THE ADJUSTMENT OF SUCH LOSS AS AGAINST THE RESERVE WOULD NOT CHANGE THE FACT THAT THE LOSS OR UNABSORBED DEPRECIATION IS BROUGHT FORWARD IN VIEW OF THE EXPLANATION TO SUB SEC.2 OF S EC.115JB. THE RESERVES CONTAIN THE FIGURES OF THE PROFIT OR THE LOSS OF VARIOUS YEARS TAKEN TO THE BALANCE SHEET. THE RESERVE GIVES THE AGG REGATE OF THE AMOUNT BUT CONTAIN IN ITSELF THE PROFIT AND LOSS OF VAR IOUS YEARS. THE AMOUNT OF RESERVE THAT APPEARING IN THE BALANCE SHEET CONTAINS THE PROFIT OF EARLIER YEARS CARRIED TO THE GENERAL RESERVE AND THE LOSSES OF THE IMMEDIATELY PRECEDING YEARS ALSO. ACCORDING TO THE ASSESSE E IT CANNOT BE SAID THAT THE RESERVES ABSORB THE LOSSES. THE PROFITS CA RRIED TO THE RESERVE IN THE EARLIER YEARS WERE SUBJECT TO INCOME TAX. UNDER THE COMPANIES ACT EVEN IF THERE WERE RESERVES FROM OUT OF THE INCOME OF EARLIER YEARS THE LOSSES ARISING ARE CARRIED FORWARD TO THE LATER YEAR. THE WORDS BROUGHT FORWARD OR UNABSORBED MENTIONED IN CLAUSE (III) ARE THE WORDS USED UNDER THE IT ACT FOR THE LOSSES BROUG HT FORWARD. THEREFORE THE MEANING ASSIGNED TO THESE WORDS BY THE IT ACT ALONE ARE TO BE GIVEN TO THOSE WORDS USED IN CLAUSE (III) TO THE SECOND PART OF THE ITA NOS.328/329/538/06 1037/1038/07 M/S INVENTAA CHEMICALS LTD. HYD 6 6 EXPLANATION. FURTHER HE SUBMITTED THAT SUB SEC. (2) OF SEC.115JB TALKS ABOUT ARRIVING AT THE BOOK PROFIT IN ACCORDANCE WITH T HE PROVISIONS OF COMPANIES ACT. PART II AND PART III RELATE TO THE D EFERMINATION OF THE PROFIT OF THE YEAR UNDER CONSIDERATION. THE SAID SUB SE CTION MENTIONS THAT THE BOOK PROFIT HAS TO BE ARRIVED AT IN ACCORDAN CE WITH THE PROVISIONS OF PART II AND PART III OF SCHEDULE VI TO THE COMPANIES ACT. THE SAID SUB SECTION DID NOT REFER TO PART I TO SCHEDUL E VI WHICH DEALS WITH PREPARATION OF BALANCE SHEET. THEREFORE THE R ULES MADE BY THE COMPANIES LAW FOR PURPOSES OF PREPARATION OF BALANCE SH EET DO NOT APPLY FOR THE PURPOSE OF SEC.115JB. THE BROUGHT FORW ARD LOSSES ARE TO BE DEALT WITH IN THE BALANCE SHEET BY ADJUSTMENT OF THE RESERVES BUT NOT IN THE PROFIT & LOSS ACCOUNT. THEREFORE THE BROUGHT F ORWARD LOSSES ARE TO BE DEALT WITH IN ACCORDANCE WITH THE IT ACT AND NOT IN ACCORDANCE WITH THE COMPANIES ACT. FURTHER HE SUBMITTED THAT CL AUSE (III) OF SECOND PART OF THE EXPLANATION MENTIONS THAT THE LOSS BR OUGHT FORWARD OR UNABSORBED DEPRECIATION WHICHEVER IS LESS AS PER THE BOOKS OF ACCOUNT IS TO BE REDUCED. THE SAID CLAUSE DOES NOT REQUIRE THE ADJUSTMENT AS CONTEMPLATED UNDER THE COMPANIES ACT FOR PREPARATION OF THE FINAL ACCOUNTS. THE LOSS AS PER BOOKS HAS TO BE CONSIDE RED FOR DEDUCTION FOR THE PURPOSE OF ARRIVING AT THE BOOK PRO FIT. 7. FURTHER HE RELIED ON THE FOLLOWING JUDGEMENTS : 1. SPECIAL BENCH OF MUM IN THE CASE OF DCIT VS. SYNCOME ITA NOS.328/329/538/06 1037/1038/07 M/S INVENTAA CHEMICALS LTD. HYD 7 7 FORMULATIONS (I) LTD. (292 ITR 144) (AT) (SB) (MUM). 2. CIT VS. G N T TEXTILES LTD. (KER. HC) (248 ITR 372 ) 3. IN THE CASE OF STARCHIK SPECIALTIES LTD. VS. DCIT ( 90 ITD 34) (HYD.). 5. SMRUTHI ORGANICS LTD. VS. DCIT (101 ITD 205) (PU NE) 6. DCIT VS. GOVIND RUBBER (P) LTD. (89 ITD 457) (M UM. BENCH E) 7. ACIT VS. VIPUL DYE-CHEM LTD. (86 ITD 851) (MUM). 8. KARNATAKA SMALL SCALE INDUSTRIES DEVELOPMENT CORPO RATION LTD. VS. CIT (SC) (258 ITR 770 ) WHEREIN IT WAS HELD THAT: EVEN WHERE THE BOOK PROFIT LIABILITY IS IMPOSED TH E AMOUNTS OF BUSINESS LOSS UNABSORBED DEPRECIATION INVESTMENT ALLOWANCE ETC. AS AT THE BEGINNING OF THE ACCOUNTING YEAR ARE TO BE ADJUSTED AND SET OFF TO THE SAME EXTENT OF SUCH BROUGHT FORWARD LOSS UNABSORBED DEPRECIATION ETC. AS THEY WOULD HAVE BEEN ADJUSTED OR SET OFF HAD THE ASSESSEE BEEN ASSESSED TO TAX IN THE REGULAR WAY IN ACCORDANCE WITH THE PROVISIONS OF SECTIONS 28 TO 43 OF THE ACT AND ONLY THE RESULTANT AMOUNTS OF LOSS UNABSORBED DEPRECIATION ETC. CAN BE CARRIED FORWARD TO THE NEXT YEAR. HAD SECTION 115J NOT BEE N INTRODUCED THE ASSESSEE WOULD HAVE BEEN ENTITLED UNDER THE PROVISIONS OF SE CTIONS 32(2) 32A(3) 72(1)(II) 73 74 74A(3) AND 80J (3) TO CARRY FORW ARD ONLY THE UNABSORBED DEPRECIATION ALLOWANCE UNDER SECTION 32 INVESTMENT ALLOWANCE UNDER SECTION 32A LOSSES U/S 72 72A 73 AND 74 AND PERMISSIBLE DEDUCTIONS U/S 80J TO THE FOLLOWING ASSESSMENT YEAR TO BE SET OFF AGAINST THE PROFITS AND GAINS OF THAT ASSESSMENT YEAR. ALL THAT SECTION 115J(2) DOES IS TO PRESERVE THIS RIGHT VIZ. TO CARRY FORWARD THE BALANCE OF THE UNABSORBED DEDU CTIONS IN THE RELEVANT PREVIOUS YEAR TO THE NEXT YEAR. SEC.115J ALLOWS ON LY THE UNABSORBED LOSSES DEPRECIATION INVESTMENT ALLOWANCE ETC. WHICH COULD OTHERWISE HAVE BEEN CARRIED FORWARD TO BE CARRIED FORWARD. THE ALLOWAN CES NEED NOT HAVE BEEN QUANTIFIED UNDER SUB SEC.(1) OF SEC.115J TO BE CARR IED FORWARD UNDER SUB SECTION (2). 8. FURTHER ACCORDING TO THE ASSESSEE DEDUCTION U/S 8 0 HHC HAS TO BE MADE TAKING INTO CONSIDERATION THE BOOK PROF IT AND NOT THE INCOME DETERMINED REGULAR PROVISIONS OF THE IT ACT. ITA NOS.328/329/538/06 1037/1038/07 M/S INVENTAA CHEMICALS LTD. HYD 8 8 9. ACCORDING TO THE DR AS PER CAUSE (III) OF THE EXP LANATION BELOW SUB SEC.2 OF SEC.115JB THE DEDUCTION ALLOWABLE FROM THE BOOK PROFIT AS PER THE PROFIT AND LOSS ACCOUNT IS THE AMOUNT O F LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION WHICHEVER IS LESS AS PE R THE BOOKS OF ACCOUNT. IN THIS INSTANT CASE OF THE ASSESSEE THE BUSINESS LOSS BROUGHT FORWARD FROM THE EARLIER YEARS AS PER BOOKS OF ACCOUNTS IS NIL. THE LOSS FOR THE ASSESSMENT YEAR 2001-02 SOUGHT TO BE SE T OFF NOW HAS BEEN ADJUSTED AGAINST ACCUMULATED IN THE BOOKS PROFIT OF THE EARLIER YEARS. AND NO SUCH LAWS HAS BEEN BROUGHT FORWARD AS PER BOOKS OF ACCOUNTS AND AS SUCH NO AMOUNT SHOULD HAVE BEEN ALLOWED AS A DEDUCTION. THE AMOUNTS TO BE CONSIDERED FOR DEDUCTION HA VE BEEN WHILE COMPUTING THE BOOK PROFITS HAVE BEEN SPECIFICALLY MENT IONED U/S 115 JB WHICH IS SELF CONTAINED CODE AND THERE IS NO PROVISION SIMILAR TO SEC.72 FOR BRINGING FORWARD AND SETTING OFF UNABSORBED BUSINESS LOSS DEPRECIATION AND OTHER ALLOWANCES AS IN THE CASE UNDER NO RMAL COMPUTATION OF TOTAL INCOME. IN THE PRESENT CASE THE BR OUGHT FORWARD LOSS IS NIL AS PER BOOKS OF ACCOUNTS. 10. THE DEPARTMENTAL REPRESENTATIVE RELIED STRONGLY ON THE ORDER OF THE CIT AND JUDGEMENT IN THE CASE OF CIT VS. SHIRK E CONSTRUCTION EQUIPMENT LTD. (291 ITR 380) (SC). ITA NOS.328/329/538/06 1037/1038/07 M/S INVENTAA CHEMICALS LTD. HYD 9 9 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THIS CASE THIS IS AN APPEAL AG AINST THE ORDER PASSED U/S 263 OF THE ACT. THE ORIGINAL ASSESSMENT ORDER HAS BEEN PASSED U/S 143(3) VIDE ORDER DATED 29.3.2004 FOR THE ASSESSMENT YEAR 2002-03. THE ASSESSING OFFICER AFTER PROPER APPRAISAL O F THE MATERIAL ON RECORD TAKEN ONE VIEW. THE ACTION TAKEN BY CIT U/S 2 63 IS NOT JUSTIFIED BECAUSE DIFFERENT VIEW WAS POSSIBLE ON THE SAID ISSUES CONSID ERED BY CIT. IN THE CASE OF MAX INDIA LTD. VS. CIT (295 ITR 282 (SC) WHEREIN IT WAS HELD THAT WHERE THE ORDER PASSED BY THE ASSESSING OFFICER WAS A POSSIBLE VIEW SUPPORTED BY SUBSEQUENT DECISION OF TRIBUNAL IT WAS NOT AMENABLE TO REVISIONAL JURISDICTION OF CIT. 11.1 A BARE READING OF SEC. 263 OF THE IT ACT 1961 MAKES IT CLEAR THAT THE PREREQUISITE FOR THE EXERCISE OF JURISDICT ION BY THE COMMISSIONER SUO MOTO UNDER IT IS THAT THE ORDER OF TH E ITO IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE COMMISSIONER HAS TO BE SATISFIED OF TWIN CONDITIONS N AMELY (I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRO NEOUS AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENT IF THE ORDER OF THE ITO IS ERRONEOUS BUT IS NOT PREJUD ICIAL TO THE REVENUE OF IF IT IS NOT ERRONEOUS BUT IS PREJUDICIAL TO THE RE VENUE RECOURSE CANNOT BE HAD TO SEC. 263(1) OF THE ACT. THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITT ED BY THE ITA NOS.328/329/538/06 1037/1038/07 M/S INVENTAA CHEMICALS LTD. HYD 10 10 ASSESSING OFFICER IT IS ONLY WHEN AN ORDER IS ERRONEOUS TH AT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR A N INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGORY FALL ORDERS PASSED WITHO UT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATIO N OF MIND. THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REVENUE IS NOT AN EXPRESSION OF ART AND IS NOT DEFINED IN THE ACT. UNDERSTOOD IN ITS ORDINARY MEANING IT IS OF WIDE IMPORT AND IS NOT CONFINED TO LOSS OF TAX. THE SCHEME OF THE ACT IS TO LEVY AND COLLECT TAX IN ACCORDANCE WITH THE PRO VISIONS OF THE ACT AND THIS TASK IS ENTRUSTED TO THE REVENUE. IF DUE TO AN ERRONEOUS ORDER OF THE ITO THE REVENUE IS LOSING TAX LAWFULLY PAYABLE BY A PERSON IT WILL CERTAINLY BE PREJUDICIAL TO THE INTERESTS OF THE REVENU E. THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REVENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. E VERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFI CER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVEN UE FOR EXAMPLE WHEN AN ITO ADOPTED ONE OF THE COURSES PERMISSIBLE IN L AW AND IT HAS RESULTED IN LOSS OF REVENUE OR WHERE TWO VIEWS ARE POSSIB LE AND ITO HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGR EE IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL IN THE I NTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE ITO IS UNSUSTAINAB LE IN LAW. THIS VIEW OF OURS FORTIFIED BY THE JUDGEMENT OF HONBLE SU PREME COURT IN THE CASE OF MALABAR INDUSTRIES COMPANY LTD. (243 ITR 83). ITA NOS.328/329/538/06 1037/1038/07 M/S INVENTAA CHEMICALS LTD. HYD 11 11 12. IN THE PRESENT CASE AS SEEN FROM THE ARGUMENTS O F THE ASSESSEES COUNSEL THERE ARE VARIOUS DECISIONS AVAILABLE AT THE TIME OF COMPLETING ASSESSMENT WHICH ARE IN FAVOUR OF THE ASSESSEE ON THE IMPUGNED ISSUES. IN THE CASE OF STARCHIK SPECIALTIES LTD. VS. DCIT (2004) (90 ITD 34 (HYD) DCIT VS. GOVIND RUBBER (P) LTD. (2004) (89 ITD 457) (MUM) TUSHAKO PUMPS LTD. VS. ACIT (2005) 2 SOT 556 (MUM) AND IN THE CASE OF CIT VS. SYNCOME FORMULATIONS ( I) LTD. (106 ITD 193) (MUMBAI SPECIAL BENCH) WHEREIN IT WAS HELD TH AT THE DEDUCTION U/S 80HHC DESERVES TO BE COMPUTED BY TAKING INTO CONSIDERA TION BOOK PROFIT AND CANNOT BE RESTRICTED TO THE PROFITS OF THE B USINESS AS COMPUTED UNDER THE NORMAL PROVISIONS OF THE IT ACT. S IMILAR VIEW HAS BEEN TAKEN BY CO-ORDINATE BENCH IN THE CASE OF DCIT VS. M/S GLENMARK LABORATORIES LTD. IN ITA NO.4155/MUM/07 VIDE ORDER D ATED 9.11.2007 FOR THE ASSESSMENT YEAR 2004-05 AND ALSO BY HONBLE MADR AS HIGH COURT IN THE CASE OF CIT VS. K.G. DENIM LTD. (180 TAXM AN 590). 12. 1 IN THIS CIRCUMSTANCE WE ARE OF THE OPINION T HAT THE ASSESSING OFFICERS DECISIONS ARE BASED ON VARIOUS JUDICIAL PRONOUNCEMENTS THOUGH DECISION OF THE ASSESSING OFFICER IS PR EJUDICIAL TO THE REVENUE IT CANNOT BE TREATED AS ERRONEOUS. IN VI EW OF THIS IN OUR OPINION THE CIT CANNOT INVOKE THE PROVISIONS OF SEC. 263 TO SET RIGHT THE ERRORS COMMITTED BY THE ASSESSING OFFICER. ITA NOS.328/329/538/06 1037/1038/07 M/S INVENTAA CHEMICALS LTD. HYD 12 12 13. IN THE RESULT THE APPEAL OF THE ASSESSEE IN ITA NO.328/HYD/2006 IS ALLOWED. 13.1. GROUND NO.2 IN ITA NO.1037/HYD/2007 IS THAT THE CIT(A) ERRED IN HOLDING THAT THE ASSESS EE CANNOT AGITATE UPON THE GROUNDS WITH REGARD TO DETERMINATION OF DE DUCTION U/S 80HHC FOR THE PURPOSE OF ARRIVING AT THE BOOK PROFIT U/S 115JB OF THE IT ACT. 14. THIS GROUND TAKEN BY THE ASSESSEE IN THIS APPEAL I S ALLOWED IN VIEW OF OUR FINDINGS IN ITA NO.328/HYD/2006 WHEREI N WE HAVE HELD THAT REVISION U/S 263 IS NOT POSSIBLE ON THIS ISSUE. CONSE QUENTLY ASSESSING OFFICER CANNOT PASS GIVING EFFECT ORDER ON THE IM PUGNED ISSUE. 15. THE NEXT GROUND IN ITA NO.1037/HYD/2007 IS AS F OLLOWS: 3. THE CIT (A) OUGHT TO HAVE SEEN THAT A REASSESSME NT WAS MADE U/S 143(3) AND THEY REPRESENT SEPARATE AND DISTINCT PROCEEDING S WHICH CAN BE CHALLENGED IN APPEAL AS SUCH ORDER IS PASSED U/S 14 3(3) OF THE IT ACT. 4. THE CIT(A) OUGHT TO HAVE ADJUDICATED THE GROUNDS RAISED BY THE ASSESSEE WHICH HAVE EMANATED FROM THE ORDER OF THE ASSESSING OFFICER. 16. NO SERIOUS ARGUMENTS WERE ADVANCED BY THE LEARNED COUNSEL FOR THE ASSESSEE ON THESE GROUNDS. ACCORDINGLY THESE GROUN DS WERE DISMISSED AS NOT PRESSED. 17. GROUND NO.5 IN ITA NO.1037/HYD/2007 IS AS FOLLOW S: 5. THE CIT(A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN MAKING AN ADDITION OF RS.5 35 085/- TO THE BOOK PROFIT ON ACCOUNT OF PROVISION FOR GRATUITY WITHOUT CONSIDERING THAT THE SAID PROVISIO N IS AN ASCERTAINED LIABILITY. ITA NOS.328/329/538/06 1037/1038/07 M/S INVENTAA CHEMICALS LTD. HYD 13 13 THE LEARNED AR SUBMITTED THAT THE PROVISIONS OF GRATUI TY MADE IN THE BOOKS OF ACCOUNT IS ASCERTAINED LIABILITY AND DOES NOT REP RESENT MERE PROVISION BUT REPRESENTS ASCERTAIN LIABILITY QUANTIFIED BASED ON NO. OF EMPLOYEES THEIR PAY AND THE AMOUNT OF GRATUITY PAYA BLE AT THE END OF THE YEAR. TAKING INTO CONSIDERATION THE LIABILITY A T THE BEGINNING OF THE YEAR A PROVISION IS MADE IN THE BOOKS OF ACCOUNT TOWARD S THE GRATUITY PAYABLE. THEREFORE THE GRATUITY IS ASCERTAIN LIABILI TY WHICH IS TO BE DEBITED TO THE PROFIT AND LOSS ACCOUNT. ACCORDING TO EXP LANATION TO SEC.115JB THE AMOUNT SET ASIDE TO PROVISIONS OTHER TH AN THE ASCERTAINED LIABILITY ARE TO BE DEDUCTED. HE RELIED ON ORDER OF THE TRIBUNAL IN THE CASE OF EICTCHER MOTORS LTD. VS. DCIT (82 TTJ 61) & SWAMY ELECTRONICS (P) LTD. VS. DCIT WHEREIN IT WAS HELD THAT PROVISIONS FOR REPAIRS OF ASSETS IS NOT TO BE ADDED FOR AR RIVING AT THE BOOK PROFIT. 18. THE DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE CIT(A). 19. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. A FTER CONSIDERING THE ENTIRE FACTS OF THE CASE WE ARE OF THE O PINION THAT THIS ISSUE IS REQUIRED TO BE RE-EXAMINED BY THE ASSESSING OFFICE R. HENCE WE SET ASIDE THIS ISSUE TO THE FILE OF ASSESSING OFFICER TO SEE THE CRYSTALLIZATION OF THE LIABILITIES IN THE ASSESSMENT YEAR UNDER CONSIDERATION. IF THE LIABILITIES TOWARDS GRATUITY IS CR YSTALLIZED IN THE ASSESSMENT YEAR UNDER CONSIDERATION THEN IT IS TO BE CONSID ERED AS ASCERTAINED LIABILITY AND CLAIM OF THE ASSESSEE IS TO BE AL LOWED. ITA NOS.328/329/538/06 1037/1038/07 M/S INVENTAA CHEMICALS LTD. HYD 14 14 ACCORDINGLY THIS ISSUE IS SET ASIDE TO THE FILE OF ASSESSING OFFICER WITH A DIRECTION TO ASSESSEE TO PLACE NECESSARY EVIDENCE TO PROVE THAT THE LIABILITIES ARE ASCERTAINED. 20. IN THE RESULT THE APPEAL OF THE ASSESSEE IN ITA NO.1037/HYD/2007 IS PARTLY ALLOWED. 21. NOW COMING TO ITA NO.329/HYD/2006 THE GROUNDS R AISED BY THE ASSESSEE ARE SIMILAR TO THE GROUNDS RAISED IN ITA NO.3 28/HYD/2006 AND THE ONLY CHANGE IS IN AMOUNT. 21.1. SINCE THE FACTS IN THIS APPEALS ARE SIMILAR TO FA CTS IN ITA NO.328/HYD/2006 APPLYING THE SAME RATIO THIS APPEAL OF THE ASSESSEE IN ITA NO.329/HYD/2006 IS ALLOWED. 22. NOW COMING TO ITA NO.1038/HYD/2007 THIS APPEAL BY ASSESSEE EMANATED FROM THE ORDER OF CIT(A) PASSED U/S 250 READ WITH 143(3) DATED 13/8/2007. THE FIRST GROUNDS FOR OUR CO NSIDERATION ARE AS FOLLOWS: 2. THE CIT(A) ERRED IN HOLDING THAT THE LOSSES OF EARLIER YEARS IS TO BE DEDUCTED FOR THE PURPOSE OF COMPUTATION OF DEDUCTIO N U/S 80HHC WHILE CALCULATING THE BOOK PROFIT WITHIN THE MEANING OF S EC.115 JA OF THE IT ACT. ITA NOS.328/329/538/06 1037/1038/07 M/S INVENTAA CHEMICALS LTD. HYD 15 15 3. THE CIT(A) OUGHT TO HAVE CONSIDERED THE FACT TH AT THE DECISION OF THE SUPREME COURT IN IPCA LABORATORIES VS. DCIT (266 IT R 521) HAS NO APPLICATION FOR COMPUTATION OF BOOK PROFIT U/S 115J A OF THE ACT. 23. THE ASSESSING OFFICER SET OFF THE LOSSES OF EARLIER Y EAR WHILE COMPUTING THE DEDUCTION U/S 80HHC ON BOOK PROFIT DETERMI NED U/S 115JA OF THE IT ACT WHILE PASSING ORDER U/S 143(3). IN OUR OPINION THE LOWER AUTHORITIES TAKEN CORRECT VIEW SINCE SEC.80AB OF TH E ACT WHICH IS ALSO IN CHAPTER VI A STARTING WITH THE WORDS WHERE ANY DEDUCTION IS REQUIRED TO BE MADE OR ALLOWED UNDER ANY SECTION OF T HIS CHAPTER WOULD INCLUDE SEC. 80HHC ALSO. FURTHER SECTION 80AB OF THE ACT U SES THE WORD NOTWITHSTANDING ANYTHING CONTAINED IN THAT SECTION.. THUS SEC.80AB OF THE ACT HAS BEEN GIVEN AN OVERRIDING EFFECT OVER ALL O THER SECTIONS IN CHAPTER VI-A. BUT SECTION 80HHC DOES NOT PROVIDE THAT ITS PROVISIONS ARE TO PREVAIL OVER SECTION 80AB OF THE ACT OR OVER AN Y OTHER PROVISIONS OF THE ACT. SEC.80HHC OF THE ACT WOULD THUS BE GOVERNED BY SEC. 80AB OF THE ACT. THE UNABSORBED BUSINESS LOSSES UNABSORBED DE PRECIATION ETC. SHOULD BE TAKEN INTO ACCOUNT WHILE COMPUTING THE I NCOME FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80HHC. MORESO THESE GROUNDS ARE COVERED AGAINST THE ASSESSEE BY THE JUDGEMENT OF SUPREME COURT IN THE CASE IPCA LABORATORIES VS. DCIT (266 ITR 521) AND IN T HE CASE OF CIT VS. SHIRKE CONSTRUCTION EQUIPMENT LTD. (291 ITR 380 ) (SC). ACCORDINGLY THE ABOVE GROUNDS ARE DISMISSED . ITA NOS.328/329/538/06 1037/1038/07 M/S INVENTAA CHEMICALS LTD. HYD 16 16 24. THE ASSESSEE RAISED THE GROUND NO.4 IN ITA NO.1038/HYD/2007 THAT THE CIT ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN INCLUDING THE PROVISION FOR GRATUITY OF RS.12 60 996/- TO THE BOOK PROFIT. THIS GROUND IS SET ASIDE TO THE FI LE OF ASSESSING OFFICER FOR FRESH CONSIDERATION WITH SIMILAR DIRECTIONS A S GIVEN IN ITA NO.1037/HYD/2007 ON THIS ISSUE. 25. THE ASSESSEE RAISED THE GROUND NO.5 IN ITA NO.1038/HYD/2007 IS THAT THE CIT ERRED IN HOLDING TH AT INTEREST U/S 234B AND 234C ARE CHARGEABLE WHEN THE TAX PAYABLE IS IN VIEW OF THE PROVISIONS OF SEC.115JB OF THE ACT. 26. WE HAVE HEARD BOTH THE PARTIES AND PERUSED MATE RIAL AVAILABLE ON RECORD. THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. KWALITY BISCUITS LTD. (284 ITR 434) WHEREIN IT WAS HELD THAT WH EN ASSESSEE IS LIABLE FOR TO PAY TAX U/S 115J INTEREST U/S 243 B & C CANNOT BE CHARGED. THIS ISSUE DECIDED IN FAVOUR OF THE ASSESSEE AND THE GROU ND TAKEN BY THE ASSESSEE ON THIS ISSUE IS ALLOWED. 27. THE ASSESSEE RAISED IN GROUND NO.6 IN ITA NO.1038/HYD/2007 IS THAT THE CIT(A) ERRED IN NOT CONSID ERING THE ADDITIONAL GROUND OF APPEAL RAISED BY THE ASSESSEE WITH REGARD TO THE ITA NOS.328/329/538/06 1037/1038/07 M/S INVENTAA CHEMICALS LTD. HYD 17 17 DETERMINATION OF TOTAL TURNOVER FOR WORKING OUT THE DEDUCTION U/S 80HHC OF THE ACT. 27.1 THE ASSESSEE RAISED ADDITIONAL GROUNDS RELATING TO THE COMPUTATION OF TOTAL TURNOVER WHICH INCLUDES SALES TAX AND ALSO CONTENDED BEFORE THE CIT(A)THAT THESE ISSUES ARE BORNE O UT OF ASSESSMENT ORDER AND PRAYED TO ADJUDICATE THE ISSUE BUT HE FAILED TO ADJUDICATE THE SAME. IN OUR OPINION THE CIT(A) MUST HAVE CONSIDERED THESE ISSUES WHILE DECIDING THE APPEAL. HIS JURISDICTION IS CO-TERMINUS WITH ASSESSING OFFICER. ACCORDINGLY WE SET ASIDE THIS ISSUE TO THE FILE OF ASSESSING OFFICER FOR FRESH CONSIDERATION. 28. IN THE RESULT THE APPEAL OF THE ASSESSEE IN ITA NO.1038/HYD/2007 IS PARTLY ALLOWED. 29. NOW WE WILL TAKE UP THE CASE IN ITA NO.538/HYD/2 006: 29.1. THE ASSESSEES PLEA IN GROUND NO.2 IS THAT THE CIT(A) IS NOT CONSIDERING THE SET OFF OF THE LO SSES OF DECCAN DRUGS LTD. WHICH WAS MERGED WITH THE ASSESSEE COMPANY. T HE CIT(A) IS NOT CORRECT IN MENTIONING THAT NO LOSS OF DECCAN DRUGS LTD. HAS BEEN BROUGHT FORWARD IN THE PROFIT & LOSS ACCOUNT. THE LOSSES OF DECCAN DRUGS LTD. ARE MERGED IN THE FINAL ACCOUNTS OF THE ASSESSEE COMPANY ON THE DATE OF MERGER OF DECCAN DRUGS LTD. WITH ASSESS EE COMPANY. THE CIT(A) OUGHT TO HAVE HELD THAT THE LOSSES OF DECCAN DRUGS LTD. ARE ALSO TO BE CONSIDERED FOR DEDUCTION WHILE ARRIVING AT TH E BOOK PROFIT OF THE ASSESSEE COMPANY. 30. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THIS GROUND WAS NOT PROPERLY AD JUDICATED BY THE ITA NOS.328/329/538/06 1037/1038/07 M/S INVENTAA CHEMICALS LTD. HYD 18 18 CIT(A) ON THE REASON THAT NO SPECIFIC EVIDENCE/DETAILS HA VE BEEN PROVIDED BY THE ASSESSEE NEITHER BEFORE THE ASSESSING OFFI CER NOR BEFORE THE CIT(A). ON PERUSAL OF THE PROFIT AND LOSS ACCOUNT THE CIT(A) CAME TO THE CONCLUSION THAT NO SUCH LOSS OF THE EARLIER YEAR CO MPANY HAS BEEN BROUGHT FORWARD IN THE PROFIT AND LOSS ACCOUNT OF THE R ELEVANT YEAR AND ALSO HE WAS OF THE OPINION THAT THE JUDGEMENT OF HON BLE SUPREME COURT IN THE CASE OF M/S APOLLO TYRES (255 ITR 273) (SC) AS PE R WHICH PROFIT ARRIVED AT THE PROFIT AND LOSS ACCOUNT WHICH IS PREPARED IN ACCORDANCE WITH THE COMPANIES ACT HAS TO BE ADOPTED FOR THE PURPO SE OF BOOK PROFIT. AS NO SUCH LOSS OF EARLIER COMPANY REFLECTED IN THE PROFIT AND LOSS ACCOUNT OF THE RELEVANT YEAR THE CIT(A) HELD THAT TH ERE IS NO JUSTIFICATION FOR DEDUCTION OF SUCH LOSS IN ARRIVING AT THE BOOK PROFIT OF THIS YEAR. HOWEVER BEFORE US THE AUTHORISED REPRESENT ATIVE SUBMITTED THAT THE LOSS OF THE DECCAN ARE MERGED IN THE FINAL ACCO UNTS OF THE ASSESSEE COMPANY ON THE DATE OF MERGER OF DECCAN DRUGS LTD . WITH THE ASSESSEE COMPANY. AS SUCH THE SAID LOSS TO BE CONSIDERED FOR DEDUCTION WHILE ARRIVING AT BOOK PROFIT OF THE ASSESSEE COMPANY. 31. IN OUR OPINION THE ARGUMENT OF THE ASSESSEE IS TO BE EXAMINED BY THE LOWER AUTHORITIES W.R.T. THE EVIDENCE IN SUPPORT OF THAT CLAIM. ACCORDINGLY IT IS FAIR TO SET ASIDE THIS ISSUE TO T HE FILE OF ASSESSING OFFICER FOR FRESH CONSIDERATION. THE ISSUE SET ASID E TO ASSESSING OFFICER FOR RECONSIDERATION. ITA NOS.328/329/538/06 1037/1038/07 M/S INVENTAA CHEMICALS LTD. HYD 19 19 32. GROUND NO.3 IN ITA.538/HYD/2006 IS THAT THE CIT (A) ERRED IN HOLDING THAT THE RELIEF U/S 80HHC IS ALLOWABLE ON T HE GROSS TOTAL INCOME AS REDUCED BY THE LOSSES OF THE EARLIER YEAR. THI S ISSUE IS COVERED AGAINST THE ASSESSEE AS HELD BY US IN EARLIER PARA NO.23 OF THIS ORDER ACCORDINGLY WE DISMISS THIS GROUND TAKEN BY THE ASSESSEE. 33. GROUND NO.4 IN ITA NO.538/HYD/2006 IS THAT THE CIT(A) ERRED IN HOLDING THAT SUBSIDY OF RS.20 LAKHS HAS TO BE R EDUCED FROM THE COST OF THE FIXED ASSETS FOR THE PURPOSE OF ARRIVING AT THE DEPRECIATION. 34. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS REGA RDING THE DISALLOWANCE OF DEPRECIATION ON ACCOUNT OF STATE SUBSIDY RE CEIVED BY THE ASSESSEE AT RS.20 LAKHS. THE ASSESSING OFFICER HAS MADE THE DISALLOWANCE REFERRING TO EXPLANATION 10 TO SEC.43(1) OF THE IT ACT AS PER WHICH WHERE A PORTION OF THE COST OF AN ASSET ACQUIRE D BY THE ASSESSEE HAS BEEN MET DIRECTLY OR INDIRECTLY BY THE CENTRA L GOVT. OR STATE GOVT. OR ANY AUTHORITY ESTABLISHED UNDER ANY L AW OR BY ANY OTHER PERSON IN THE FORM OF A SUBSIDY OR GRANT OR REIMBURSEME NT BY WHATEVER NAME CALLED THEN SO MUCH OF THE COST AS IS RELATABLE TO SU CH GRANT OR REIMBURSEMENT SHALL NOT BE INCLUDED IN THE ACTUAL COST O F THE ASSET TO THE ASSESSEE. ITA NOS.328/329/538/06 1037/1038/07 M/S INVENTAA CHEMICALS LTD. HYD 20 20 35. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. ACCO RDING TO THE DEPARTMENTAL REPRESENTATIVE THE EXPRESSION WORD ACTUAL COST WHICH FORMS THE BASIS FOR ALLOWANCE OF DEPRECIATION U/S 32 HAS TO BE CONSIDERED W.R.T. SEC.43(1) OF THE ACT. ACCORDING TO TH IS SEC. THE EXPRESSION ACTUAL COST MEANS THE ACTUAL COST OF THE ASSET T O THE ASSESSEE REDUCED BY THE PORTION OF THE COST THEREOF IF AN Y AS HAS BEEN MET DIRECTLY OR INDIRECTLY BY ANY OTHER PERSON OR AUTH ORITY. THIS DEFINITION TO OUR MIND FIRST RELATES MEETING OF TH E COST OF THE ASSET BY ANY OTHER PERSON OR AUTHORITY DIRECTLY OR INDIRECTLY. THEREFORE IT HAS BEEN SEEN WHETHER GRANT OF SUBSIDY IS INTENDED TO R EDUCE EXPENDITURE WHICH THE ASSESSEE HAS INCURRED FOR ACQUIRING BUILDING PLA NT AND MACHINERY. HOWEVER A DISTINCTION HAS TO BE MADE BETWE EN THE COST MET BY THE AUTHORITY. IN THE INSTANT CASE NAMELY BY GOVT. SUBSIDY AND THE PAYMENTS SUBSIDY WITH REFERENCE TO THE COST OR INVE STMENT THE ASSESSEE HAS MADE IN ITS FIXED ASSETS. IN THE CASE OF FORMER THE DEFINITION OF THE ACTUAL COST WOULD OPERATE AND WOULD RESULT IN REDUCTION OF ACTUAL COST. BUT IF THE SUBSIDY IS BASED ON INVESTMENT S MADE IN THE FIXED ASSETS AS A MEASURE OF COMPENSATION TO BE PAID TO SP ECIFIC INDUSTRIES TO ENABLE THEM TO SHIFT TO BACKWARD AREAS OF FERING ENCOURAGEMENT THEIR SHIFTING TO BACKWARD AREAS THE SAME RESULT IN OUR OPINION WOULD NOT FOLLOW. IN OTHER WORDS IF THE SUB SIDY IS PAYABLE ON THE BASIS OF FIXED ASSET NOT RELATE TO EXECUTION OF A PA RTICULAR ASSET AND IN PARTICULAR AS THE FACTS OF THE CASE ENGAGED AFTER BU SINESS IS ALREADY ITA NOS.328/329/538/06 1037/1038/07 M/S INVENTAA CHEMICALS LTD. HYD 21 21 SET UP THEN IT WOULD BE DIFFICULT TO ACCEPT THE PROPO SITION CANVASSED ON BEHALF OF THE REVENUE THAT THE PAYMENT OF SUBSIDY WO ULD REDUCE THE ACTUAL COST OF THE ASSET IN QUESTION. IF THE PAYMENT OF SUBSIDY IS NOT RELATED TO ACTUAL ACQUISITION OF ASSETS AND THE SUBSIDY I S GRANTED ON CAPITAL INVESTMENT ON LAND BUILDING AND MACHINERY TH EN IT CANNOT BE REDUCED FROM THE VALUE OF THE ASSET (WRITTEN DOWN VALU E). FURTHER IF THERE IS NO SPECIAL MENTION REGARDING THE INTENTION TO ADJUST THE SAID SUBSIDY AGAINST THE ACTUAL COST OF MACHINERY THEN THAT AM OUNT OF SUBSIDY CANNOT BE REDUCED FROM THE COST OF THE PLANT AND MACHINERY. HENCE WE SET ASIDE THIS ISSUE TO THE FILE OF ASSESSING OFFI CER TO EXAMINE THE TERMS AND CONDITIONS OF SANCTION OF SUBSIDY AND IF THE SUBSIDY WAS NOT GIVEN TO MEET THE COST OF ANY SPECIFIC CAPITAL ASSET AN D THE AMOUNT OF SUBSIDY SO RECEIVED WAS QUANTIFIED ACCORDING TO THE IN VESTMENT MADE BY THE ASSESSEE IN PLANT AND MACHINERY AND BUILDING THE CLAIM OF THE ASSESSEE TO BE ALLOWED. WITH THIS DIRECTION THE ISSUE SET ASIDE TO THE FILE OF ASSESSING OFFICER FOR FRESH CONSIDERATION. 36. IN THE RESULT THE APPEALS OF THE ASSESSEES IN ITA.328/HYD/2006 AND ITA.329/HYD/2006 ARE ALLOWED. ITA NOS.328/329/538/06 1037/1038/07 M/S INVENTAA CHEMICALS LTD. HYD 22 22 2. IN ITA NOS.1037/HYD/2007 ITA.1038/HYD/2007 AND ITA.538/HYD/2006 ASSESSEES APPEALS ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT : 26. 5.2010 SD/- SD/- G.C. GUPTA CHANDRA POOJARI VICE PRESIDENT ACCOUNTANT MEMBER DATED THE 26 TH MAY 2010 COPY FORWARDED TO: 1. M/S INVESNTAA CHEMICALS LTD. HYDERABAD C/O SHRI S. RAMA RAO ADVOCATE INDIRANILAYAM HIMAY ATNAGAR HYDERABAD. 2. DCIT 2 (1) ACIT 2 (1) DIT HYDERABAD-II HYDER ABAD 3. CIT(A)-II & III HYDERABAD. 4. CIT HYDERABAD 5. THE D.R. ITAT HYDERABAD. NP