Income Tax Appellate Tribunal - Chandigarh
Jogindra Castings (P) Ltd., Mandi ... vs Assessee on 12 December, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCH 'A & B', CHANDIGARH
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
AND SHRI T.R.SOOD, ACCOUNTANT MEMBER
ITA No. 659/Chd/2014
Assessment Year : 2008-09
M/s Shiva Castings Private Limited Vs. The Addl.CIT.,
Vill. Tooran, Amloh Road, Mandi Gobindgarh Range,
Mandi Gobindgarh. Mandi Gobindgarh.
PAN: AACCS3543H
Appellant by : Shri Rajiv Datta
Respondent by : Shri S.K.Mittal, DR
And
ITA No. 578/Chd/2014
Assessment Year : 2008-09
The D.C.I.T., Vs. M/s Jogindra Castings (P) Ltd.,
Circle Mandi Gobindgarh. Mandi Gobindgarh.
PAN: AACJ4218Q
Appellant by : Shri S.K.Mittal, DR
Respondent by : Shri Tej Mohan Singh
And
ITA No. 616/Chd/2014
Assessment Year : 2008-09
M/s Jogindra Castings (P) Ltd., Vs. The D.C.I.T.,Circle
G.T.Road, Sirhind Side, Mandi Gobindgarh Range,
Mandi Gobindgarh. Mandi Gobindgarh.
PAN: AACJ4218Q
(Appellant) (Respondent)
Appellant by : Shri Tej Mohan Singh
Respondent by : Shri S.K.Mittal, DR
Date of hearing : 08.12.2014
Date of Pronouncement : 12.12.2014
2
O R D E R
PER BHAVNESH SAINI, J.M. :
This order shall dispose off all the above appeals raising the same questions on identical facts.
2. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. The appeals shall decide as under :
ITA No.659/Chd/2014 (Assessee's Appeal)
(M/s Shiva Castings Private Limited)
3. This appeal filed by the assessee is directed against the order of learned Commissioner of Income Tax (Appeals), Patiala dated 29.5.2014 for assessment year 2008-09.
4. In this appeal, the assessee challenged the rejection of books of account and addition of Rs.1,67,014/- on account of cenvat credit on purchases made from M/s Rohit Ispat (India) and addition of Rs.5 lacs on account of extra profit.
5. Briefly, the facts of the case are that the assessee company is in the business of manufacturing of MS ingots. During the year under consideration, it was seen that the assessee has made purchases of pig iron amounting to Rs.13,07,705/- from M/s Rohit Ispat (India), Mandi Gobindgarh. In this connection, one report from Central Excise Authority was received by the Assessing Officer, which is noted in the assessment order. In short, the fact is that 3 the proprietor of M/s Rohit Ispat (India) Shri Suresh Yadav had obtained the Central Excise Registration fraudulently. It neither existed or conducted any business from the premises and did not have any godown. It was issuing invoices without actual receipt/storage/dispatch of pig iron. The Registration Certificate of this concern was cancelled retrospectively w.e.f. 20.12.2006 by the Excise Authorities. Shri Suresh Yadav had confessed before the Excise Authorities of indulging in paper transaction only. It was also found that pig iron was mostly delivered at palaces like Batala/Dhandari Kalan while the assessee issued cenvatable invoices to the furnace units of Mandi Gobindgarh were issued by M/s Rohit Ispat (India). It was, therefore, not understood as to why one should take delivery of the goods at Batala and incur expenses for transportation of the consignment all the way to Mandi Gobindgarh. Batala is a hub of foundry industry. It was, therefore, found that fake invoices were issued and there were no actual delivery. It was also contended that it appears that foundry unit of Batala had received and consumed the consignment of pig iron without accounting in their records and finished goods so manufactured too have been cleared clandestinely by them without accounting in their records enabling them to remain within SSI exemption limit. On the other hand, the furnace units seem to have procured non-duty paid scrap from the open market and covered up the same by receiving cenvatable invoices from M/s Rohit Ispat (India) and other similar sources. This seems to have been done deliberately to avoid 4 detection by the law enforcing agencies and appears to be a modus operandi for substitution of pig iron with non-duty paid scrap, in which cenvatable invoices of pig iron were obtained from M/s Rohit Ispat (India) but actually non-duty paid scrap was consumed as discussed by the authorities below, pig iron appears to have been used in foundry industry at Batala.
6. During the assessment proceedings, the assessee claimed that all the purchases are genuine and the payments are made through account payee cheques. The Assessing Officer, however, did not accept the contention of the assessee due to the reasons mentioned above and found the purchases to be bogus. It was also found that M/s Rohit Ispat (India) was doing only paper transaction and was not carrying out any business activity. It was further held that in unaccounted market transaction, purchases without bill could certainly be at much lower rate as compared to accounted for duty and tax bearing purchases. Apart from saving duty, there may be various reasons for assessee to cover up such purchases from open market with bogus duty paid purchases. In this connection, the Assessing Officer noted that difference in average price per metric ton from the purchase made from M/s Rohit Ispat (India) is Rs.20,102/- per metric ton vis-à-vis Rs.17,919/- per metric ton in case of non-duty purchases and, therefore, total inflation in purchase is Rs.1,36,550/-. The Assessing Officer, therefore, rejected he books of account and estimated the GP at 2.47% and made addition of Rs.5,89,727/-. However, no further addition of cenvate or inflation in purchases 5 was made as it was deemed to be included in the addition so made.
7. The assessee challenged the addition of Rs.5,89,727/- before the learned CI T (Appeals). The written submission of the assessee is reproduced in the impugned order in which the assessee briefly explained that in the year under consideration the assessee has made total turnover of Rs.36.85 cores and declared GP rate of 2.39%. However, in the earlier assessment years, it has declared turn over of Rs.38.48 crores and GP rate of 1.49% in assessment year 2006-07 and turnover of Rs.24.51 crores with GP rate of 2.55% in preceding assessment year 2007-08. It was also explained that the burning loss has increased as compared to earlier years. Therefore, there was slight decrease in GP rate. It was submitted that the assessee has maintained proper books of account and all entries are supported by details. Therefore, there was no basis to reject the books of account or to enhance the GP rate.
8. The learned CIT (Appeals), however, rejected the contention of the assessee and confirmed the rejection of books of account, however, as against addition of Rs.5,89,727/-, the addition of Rs.5 lacs was maintained. Therefore, the appeal of the assessee was partly allowed. The findings of the learned CIT (Appeals) in paras 4.4 to 5 are reproduced as under :
"4.4 I have considered the submissions made. As regards ground no. 5, 6 & 7, the facts marshaled by the A.O. discussed in the preceding paragraphs amply proves that the entire purchases from M/s Rohit Ispat bogus. The findings of the Excise Authorities were 6 confirmed by the A.O. by making independent enquiry which revealed that M/s Rohit Ispat was not doing any actual trading activity. The assessee was confronted with the statement of Sr. Yadav, Sr. Subhas and Sr. Subhash Garg, Director of the company during the assessment proceeding. The assessee was also informed about the enquiries made by the Dept. I am of the opinion that it was the duty of the appellant to substantiate the transaction particularly looking into the clinching report of the Excise Authority and various statements of the parties concerned. These were duty confronted to the appellant and he was not precluded from producing the persons with whom he entered into the transactions Further, the assessment is made on the basis of facts gathered and duly confronted to the appellant. Therefore, the ground no. 5, 6 & 7 of the appellant is dismissed. Looking into the facts of the case, it is held that Books of a/c are rightly rejected by the A.O. The case laws cited by the appellant are distinguishable.
4.4.1 As regard ground no. 3, i.e. on the issue of cenvat, the A.O. has contended that "In fact, when confronted by the Excise Authorities with its transactions with Rohit Ispat (India), the assessee reversed cenvat credit of Rs.1,67,014/- availed on the purchases from Rohit Ispat. The amount so reversed has been debited by assessee to duty consumed, account which has resulted into suppression of profit by this amount. Thus, an addition of Rs.1,67,014/- is to be made on this account only for which assessee is liable for penalty u/s 271(l)(c) of the IT Act. Looking into the facts of the case, I am of the opinion that the addition has been correctly made by the A.O. as profit has been suppressed by the appellant. Therefore, this ground of appeal is dismissed.
4.4.2 As regards ground No.4, i.e. inflation in the price, It is noted that the purchases from M/s Rohit Ispat is inclusive of duty paid and while comparing price of duty paid scrap with duty free scrap, the duty element should have been reduced. However, this ground is being considered in para 4.4.3.
4.4.3 As regards ground No.2, on the issue of estimation of profit, it is seen that in this year, the G.P. is 2.39% on turnover of Rs.36.85 crore compared to 2.55% on turnover of Rs. 24.51 crore in the last year. No comparable case haue been cited by the A.O. The appellant has submitted some general reason for fall in G.P and also compared his case with A.Y. 2005-06 when GP was lower. In this case, the issue is substitution of bogus transaction by non duty scrap as contended in the 7 assessment order and there is always a possibility of earning some extra amount also on these transactions entered into by the appellant. Looking into the entirety of the case, there/ore, I am of the opinion that net addition of Rs.5,00,000/- (inclusive of all addition) is justified in this case against Rs.5,89,727/- made by the A.O .
05. In the result, the appeal is partly allowed."
9. We have considered the rival submissions. The learned counsel for the assessee relied upon the order of the Income Tax Appellate Tribunal, Chandigarh Bench in the case of M/s Vimal Alloys Pvt. Ltd. Vs. The Addl. CIT in ITA No.605/Chd/2014 dated 15.10.2014 in which in paras 7 to 19, it was held as under :
"7. We have considered the rival submissions and material on record. Though the ld. counsel for the assessee reiterated the submissions made bef ore authorities belo w, but ultimately restricted his arguments to the f act that addition is still on excessive side and rel ied upon order of ITAT Chandigarh Bench in the case of M/s Gian Castings P.Ltd. V DCIT in ITA 451/Chd/2012 dated 12.09.2012 and submitted that in this case, the total bogus purchases of the assessee were of Rs. 1.03 Cr on which Assessing Off icer made addition of Rs. 29,20,176/- and the ITAT revised the addition to Rs. 4 lacs. He has submitted that in the case of the assessee, the total purchases bogus found to be of Rs. 23,34,540/-. Therefore, addition sustained by ld. CIT(Appeals) at Rs. 4,50,000/- is still on excessive side. Copy of the order is placed on record.
8. The ld. DR, however, relied upon order of the ld. CIT(Appeals).
9. In vie w of the submissions above and considering the total ity of the f acts and circumstances noted above, it is clear that the excise authorities have f ound that transactions conducted by M/s Rohit Ispat (India) are f ake and no actual delivery of the goods have been made. These were only paper 8 transactions and ultimately registration of M/s Rohit Ispat (India) was cancelled by the excise authorities. The detailed discussion made by the Assessing Off icer and ld. CIT(Appeals) in the impugned orders thus, clearly support the f act that books of account of the assessee were not reliable and have been correctly rejected by the authorities belo w. The ld.
CIT(Appeals) also f ound that the GP rate in the year under consideration is better than the previous year, theref ore reduced the addition to Rs. 4,50,000/-. Ho wever, considering the f acts of the case in the l ight of the order in the case of M/s Gian Castings Pvt. Ltd. (supra). It is clear that the bogus purchases in the case of assessee are very lesser as compared to the case of M/s Gian Castings Pvt. Ltd. in which the ITAT ultimately sustained the addition of Rs. 4 l acs only. Therefore, considering the history of the assessee that GP rate was better in earlier year as noted by ld. CIT(Appeals) and comparing the f acts with the case of M/s Gian Castings Pvt. Ltd. (supra), we are of the vie w that it would be reasonable and appropriate to restrict the addition to Rs. 2 lacs as against addition sustained by ld. CIT(Appeals) in a sum of Rs. 4,50,000/-. The orders of authorities belo w are theref ore modif ied to that extent and addition is restricted to Rs. 2 lacs only and accordingly, Assessing Off icer is directed to substitute the addition by Rs. 2 lacs.
10. In the resul t, the appeal of the assessee is partly allo wed.
ITA 603/CHD/2014 ( M/s Jatin Ispat Pvt. Ltd. )
11. In this case, the f acts are simil ar as have been considered in the case of assessee M/s Vimal Alloys Pvt. Ltd. and simil arly it was f ound that assessee made bogus purchases f rom M/s Rohit Ispat (India) in a sum of Rs. 98,26,701/-. In this case, the Assessing Off icer rejected the book results and Assessing Off icer estimated the GP at 4.81% against decl ared GP of 3.66% on the total turnover of Rs. 26.20 Cr and added Rs. 30,13,777/- on account of enhanced GP. The assessee simil arly made the same submissions bef ore 9 ld. CIT(Appeals) and it was pointed out that in the preceding assessment year 2006-07, the GP rte of the assessee was 2.44% and in assessment year 2007-08 the GP rate was 3.95%. It was, theref ore, submitted that addition is still on excessive side. The ld. CIT(Appeals) conf irmed the rejection of the books of account, ho wever, considering that assessee substituted the bogus purchases from the Grain Market, theref ore, must have earned extra prof it on bogus transaction, restricted the addition to Rs. 16 lacs against addition of Rs. 30,13,777/-. The assessee is in appeal challenging the addition of Rs. 16 lacs on account of enhanced gross prof it.
12. Both the parties stated that issue is same, theref ore following the reasons f or decision in the case of M/s Vimal Alloys Pvt. Ltd., we conf irm rejection of the books of account. Ho wever, considering the history of the assessee in which al most simil ar GP has been declared by assessee and even in assessment year 2006-07, less GP of 2.44% have been decl ared and considering the part addition sustained in the case of M/s Gian Castings Pvt. Ltd. (supra) by ITAT, Chandigarh, it would be reasonable and proper to restrict the addition to Rs. 6 lacs as against Rs. 16 lacs made by the ld. CIT(Appeals). This ground of appeal of the se is partly allo wed.
13. The assessee in this appeal f urther challenged addition of Rs. 24,43,885/- on account of unexplained investments. It was f ound that there was a liabil ity of Rs. 25,43,885/- against M/s Rohit Ispat ( India) in this year. Treating this as bogus liabil ity, Assessing Officer made the addition accordingly. The assessee submitted bef ore ld. CIT(Appeals) that Assessing Off icer was not justif ied in making this addition on account of unexplained credit pertaining to balance of M/s Rohit Ispat (India) ignoring the surrender of Rs. 2 Cr and f urther surrender of outstanding balance of the party as income of the next year under the head 'unclaimed creditor'. It was submitted that whatever was stated by M/s Rohit Ispat (India) was not conf ronted to the assessee and the 10 said amount was forf eited in assessment year 2009-10 and in case the addition was to be made by Assessing Off icer in this year, then the income of assessment year 2009-10 should have reduced accordingly. The comments of the Assessing Off icer were also called f or in which Assessing Off icer expl ained that the amount was pertaining to M/s Rohit Ispat (India). Theref ore, addition is justif ied.
14. The ld. CIT(Appeals) f ound the contention of the Assessing Off icer to be correct because it was a f act that outstanding balance was appearing in the year under consideration only and the entire transaction was established as bogus. Therefore, l iability is non-existent and should have to be treated as income of the assessee in the year under consideration. The Assessing Off icer also contended that the surrender made by assessee was not in respect of outstanding liability. The addition was, theref ore, conf irmed and appeal of the assessee was dismissed on this ground.
15. Though the ld. counsel f or the assessee did not argue this appeal but in the written synopsis, it is stated that at the time of survey, the assessee made surrender of Rs. 2 Cr and the amount of the credit bal ance is much less than the amount of credit which was also written back in subsequent assessment year 2009-10. Therefore, addition should not be made twice.
16. On consideration of the rival submissions, we do not f ind any merit in this ground of appeal of the assessee. It is a f act that the outstanding balance was appearing against M/s Rohit Ispat (India) in the books of account of the assessee in the year under consideration on 31.03.2008. The transaction was found to be bogus and when assessee was conf ronted with this f act, it was stated that this amount has already been surrendered as income in the next year on account of uncl aimed creditors. It would prove that the liability was sho wn in the books of account as bogus in the year under consideration, theref ore, addition shall have to be necessarily made in the year under consideration only. Even if some 11 surrender is made in next year, would not be relevant theref ore, in principle, authorities belo w were justif ied in making and conf irming addition of Rs. 25,43,885/- on account of unclaimed cash credit in the year under consideration. This ground is, therefore, dismissed. Ho wever, assessee is at liberty to take any plea bef ore revenue authorities in subsequent assessment year 2009-10, f or redressal of his grievance, if any in accordance with law. With these observations, this ground of appeal of the assessee is dismissed.
17. In the resul t, appeal of the assessee is partly allo wed.
18. No other points in both the appeals have been argued or pressed.
19. In the result, both appeals of the assessee are partly allo wed."
10. He has, therefore submitted that the issue is covered.
11. On the other hand, the learned D.R. for the Revenue relied upon the order of the learned CIT (Appeals) and submitted that the case is to be decided on the basis of the facts of each case.
12. On going through the order of the Tribunal in the case of M/s Vimal Alloys Pvt. Ltd. Vs. The Addl. CI T (supra), we are of the view that as regards the facts are concerned, the issue is covered against the assessee with regard to rejection of the books of account, it is clear from the facts and circumstances of the case that the Excise Authorities have found that the transactions conducted by M/s Rohit Ispat (India) are fake and no actual delivery of goods had been made. These were only paper transactions and ultimately registration of M/s Rohit Ispat (India) was cancelled by the Excise Authorities. The findings of fact 12 recorded by the authorities below clearly support the fact that the books of account of the assessee were not reliable and have been correctly rejected by the authorities below. In the case of M/s Vimal Alloys Pvt. Ltd. Vs. The Addl. CIT (supra), the GP rate of the assessee was better in earlier year as was noted by the learned CIT (Appeals). However, in the case of the assessee, the GP rate declared by the assessee in assessment year under appeal is admittedly lesser as compared to the preceding assessment year 2007-08. Therefore, the benefit allowed in the case of M/s Vimal Alloys Pvt. Ltd. Vs. The Addl. CIT (supra) could not be extended in the case of the assessee. However, considering the discussion made in that case and following the reasons given, it would be reasonable and appropriate to restrict the addition of Rs.5 lacs to Rs.4 lacs in all, the orders of the authorities below are, therefore, modified to the extent that the addition would be restricted to Rs.4 lacs only in place of Rs.5 lacs maintained by the learned CIT (Appeals). No separate addition is made of Rs.1,67,014/- on account of cenvat or inflation in purchases. Therefore, the grounds of appeal raised in this regard would stand dismissed.
13. In the result, the appeal of the assessee is partly allowed. ITA No.578/Chd/2014 (Revenue's Appeal) (M/s Jogindra Castings (P) Ltd.) & ITA No.616/Chd/2014 (Assessee's Appeal) (M/s Jogindra Castings (P) Ltd.)
14. Both the cross appeals are directed against the o r d e r o f learned Commissioner of Income Tax (Appeals), Patiala dated 26.3.2014 for assessment year 2008-09. In this case, the 13 facts are similar as have been considered in the case of M/s Shiva Castings Private Limited (supra), in which it was found that the assessee has made bugus purchases from M/s Rohit Ispat (India) of pig iron for a sum of Rs.1.15 crores. The Assessing Officer similarly rejected the books of account and estimated the GP rate at 2.25% (2.26%) on turnover of Rs.9.74 crores and made addition of Rs.47,25,350/-. In this year, the GP rate declared is 1.76% which was found to be better than GP rate declared in earlier year at 1.32%. However, no further addition of cenvat and inflation in purchases is made as it was deemed to be included in the addition so made. No separate addition of Rs.14,98,163/- on account of disallowance of cenvat was made as it was included in the GP addition. The learned CIT (Appeals) considering the GP rate of the assessee better in the year under consideration as against the preceding assessment year and inflation in the prices, restricted the addition to Rs.20 lacs as against the addition of Rs.47,25,350/-. The learned CIT (Appeals), however, confirmed the rejection of books of account.
15. The assessee on ground Nos.1 to 5 in this appeal challenged the rejection of books of account, addition of Rs.20 lacs on account of enhanced GP rate, inflated purchases and disallowance of cenvat of Rs.14,98,163/-.
16. The Revenue on ground Nos. 1 and 2 challenged the order of the learned CIT (Appeals) in reducing the addition to Rs.20 lacs out of the total addition of Rs.47,25,350/-. 14
17. On consideration of the rival submissions, we do not find any merit in these grounds raised in the cross appeals. The rejection of books of account is justified because the assessee made purchases from non-existing concern, who was doing only paper work. The issue is same as is considered in the case of M/s Shiva Castings Private Limited (supra) & others reproduced in this order. Therefore, considering the totality of the facts and circumstances, the rejection of books of account is confirmed. Further following the above orders, we find that the GP rate declared by the assessee as compared to the earlier years was better. The learned CIT (Appeals) also considered the inflation in the price. Therefore, the learned CIT (Appeals) was justified in reducing the addition of Rs.47,25,350/- to Rs.20 lacs. The orders of the authorities below, therefore, do not require any interference. The Assessing Officer has already held that the addition on account of disallowance of cenvat of Rs.14,98,163/- is not separately added because the same is considered in the GP addition. Therefore, no further interference is required. The order of the learned CIT (Appeals), therefore, is confirmed as a result of which departmental appeal on ground Nos.1 and 2 stands dismissed as well as the appeal of the assessee on ground Nos.1 to 5 would also be dismissed.
18. On ground No.6 of the appeal of the assessee, the assessee challenged the addition of Rs.3,82,000/- for bogus credit entry. The Assessing Officer noted that sum of Rs.3,82,000/- stands credited against M/s Rohit Ispat (India) 15 in the books of the assessee for the year ending 31.3.2008. It was found that this firm was only doing paper work and was not doing any business. The assessee has failed to establish the genuineness of the transaction by not producing confirmation from M/s Rohit Ispat (India) in respect of outstanding credit. It also expressed its inability to produce the proprietor of M/s Rohit Ispat (India) for personal examination. It was, therefore, found that there appears a bogus entry of Rs.3,82,000/- which was not genuine and that M/s Rohit Ispat (India) was never credit-worthy for such transaction. Therefore, addition was made accordingly. The learned CIT (Appeals) confirmed the addition.
19. This issue is same as considered by the Income Tax Appellate Tribunal, Chandigarh Bench in the case of M/s Vimal Alloys Pvt. Ltd. Vs. The Addl. CIT and M/s Jatin Ispat Pvt. Ltd. Vs. ACI T, reproduced above. Therefore, following the order dated 15.10.2014, this ground of appeal of the assessee stands dismissed.
20. On ground of appeal No.7, the assessee challenged the addition of Rs.3,97,343/-. The Assessing Officer noted that during the course of assessment proceedings, it has been observed that the assessee received subsidy amounting to Rs.27,53,500/-. The assessee was asked to explain as to why the amount of subsidy received by the assessee may not be reduced from the value of its fixed assets in plant and machinery account for allowing depreciation. In this connection, the assessee submitted in its reply that "subsidy 16 has been received on the basis of package of incentives available f or setting up ne w industrial undertaking in Punjab. T he subsidy h as not been belonged to any specif ic assets. C o p y o f s a n c t i o n l e t t e r o f s u b s i d y i s e n c l o s e d h e r e wi t h " . The assessee in its reply has further emphasized that in view of the decision of the Hon'ble Apex Court in the case of CIT Vs. P.J. Chemicals Ltd. (1994) 12 CTR (SC) 201 and the decision of Hon'ble Madras High Court in the case of Standard Fireworks (P) Ltd., 326 ITR 498 (P&H), subsidy cannot be deducted from actual cost. The Assessing Officer on considering the reply of the assessee noted that though the assessee has not given any specific explanation as to why the amount of subsidy may not be reduced from the fixed assets under the head "plant & machinery" before allowing depreciation except that placing its reliance on the above decisions. It was noted that assessee's reliance on these cases appear to be mis-placed after insertion of Explanation- 10 appended to section 43 of the Act introduced in the Income Tax Act w.e.f. 1.4.1999, which thus become effective only after the decision in the above cases. These judgments are relevant to the assessment years prior to insertion of Explanation-10 appended to section 43 of the Act. The Assessing Officer after reproducing the Explanation-10 to section 43 of the Act found that the amount of subsidy received by the assessee has to be reduced from the actual cost of plant and machinery and accordingly, recomputed the depreciation allowance and made the addition of Rs.3,97,343/- on account of disallowance of depreciation on 17 subsidy. The learned CIT (Appeals) following the Explanation- 10 to section 43 of the Act confirmed the addition and dismissed the appeal of the assessee.
21. We have considered the rival submissions. The learned counsel for the assessee did not dispute that the Explanation- 10 to section 43 of the Act is effective w.e.f. 1.4.1999. He has also emphasized that the above decision cited before the learned CIT (Appeals) pertain to the amendment in section 43 before insertion of Explanation-10 to section 43 of the Act. He has, however, submitted that since the subsidy has been received against the unit set-up before 1.4.1999, therefore, the addition is not justified. He has referred to pages 14 and 15 of the Paper Book in this regard. On the other hand, the learned D.R. for the Revenue relied upon the orders of the authorities below.
22. On consideration of the rival submissions, we do not find any merit in this ground of appeal of the assessee. It is admitted fact that Explanation-10 to section 43 of the Act was inserted in the Act w.e.f. 1.4.1999, through which it was clear that the amount of subsidy received by the assessee has to be reduced from the actual cost of plant and machinery. The assessee made a claim of depreciation in the year under consideration while including the subsidy in the actual cost of plant and machinery. It was, therefore, against the proviso to Explanation-10 to section 43 of the Act. The learned CIT (Appeals) was, therefore, justified in holding that the assessee is not entitled for depreciation on the subsidy. This ground 18 has no merit and is accordingly, dismissed.
23. On ground No.8, the assessee challenged charging of interest under section 234B and 234C, which is consequential and mandatory nature, therefore, this ground is dismissed.
24. No other point is argued or pressed in both the cross appeals.
25. In the result, both the cross appeals are dismissed.
26. In the result, the appeal of the assessee in ITA No.659/Chd/2014 is partly allowed, whereas the appeal of the Revenue in ITA No.578/Chd/2014 and appeal of the assessee in ITA No.616/2014 are dismissed.
Order pronounced in the open court on this 12th day of December, 2014.
Sd/- Sd/-
(T.R.SOOD) (BHAVNESH SAINI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated : 12 t h December, 2014
*Rati*
Copy to: The Appellant/The Respondent/The CIT(A)/The CIT/The DR.
Assistant Registrar, ITAT, Chandigarh