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M/s GAIL (INDIA) LTD 16, BHIKAJI CAMA PLACE NEW DELHI Vs. ADDL. CIT, RANGE 12 C.R. BUILDING, NEW DELHI
November, 30th 2020

1

IN THE INCOME TAX APPELLATE TRIBUNAL,
DELHI ‘C’ BENCH, NEW DELHI

(THROUGH VIDEO CONFERENCE)

BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER
AND

MS. MADHUMITA ROY, JUDICIAL MEMBER

ITA Nos. 301/DEL/2006; 858 & 859/DEL/2006
[Assessment Years: 2000-01; 2001-02 & 2002-03]

M/s GAIL (INDIA) LTD., VS. ADDL. CIT, RANGE-12,
16, BHIKAJI CAMA PLACE, C.R. BUILDING,
NEW DELHI NEW DELHI
(PAN : AAACG1209J)
[Respondent]
[Appellant]

Date of Hearing : 24.11.2020

Date of Pronouncement : 27.11.2020

Assessee by : Sh. Rohit Jain, Adv.; Ms.
Deepshree Rao, CA & Sh.
Vibhu Gupta, CA

Revenue by : Ms. Sunita Singh, CIT(DR)

ORDER
PER N.K. BILLAIYA, ACCOUNTANT MEMBER,

ITA Nos. 301/Del/2006; 858/Del/2006 & 859/Del/2006 are 03
separate appeals filed by the Assessee against the 03 separate
orders of the Ld. CIT(A), New Delhi for the assessment years 2000-
01, 2001-02 & 2002-03 respectively. Since common grounds are
involved in all these appeals which were heard together and are
2

being disposed of by this common order for the sake of
convenience.
1.1 We first address the Assessee’s Appeal i.e. ITA No.
301/Del/2006 (AY 2000-01). The assessee has raiSed the following
grounds:-

1. That on facts and circumstances of the case and in
law, the Commissioner of Income-tax (Appeals) - XV
{briefly "the CIT (A)"}erred in holding that appellant was
not entitled to deduction under sections 80I & 80 IA of
the Act amounting to Rs.156.5 crores.
2. That on the facts and circumstances of the case and
in law, having accepted that appellant is engaged in
manufacture of LPG for which 80%(appx.)of gas was
processed, the authorities below erred in holding that
appellant is not an industrial undertakings engaged in
manufacture or production of different article or thing.
3. That on the facts and circumstances of the case and
in law, the CIT (A) erred in confirming the disallowance
of 50%of LPG profits on an estimated basis amounting to
Rs. 41.32 Crores.
4. That on the facts and circumstances of the case and
in law the CIT(A)erred in confirming the disallowances of
3

Rs.40.55 lakh on account of amortization of the cost of
lease hold land as a capital expenses.
5. That on the facts and circumstances of the case and in
law, CIT (A) erred in upholding the sales, interest and
miscellaneous income of Rs.1125.11 lakh relating to pre-
commencement stage of plant as income from other
sources, rather than abating the same from the
construction cost of the plant.
6. That on the facts and circumstances of the case
and in law, the CIT(A)erred in confirming disallowance of
the provision for wages of Rs.1118.24 lakh on account of
wage settlement of pay revision arrears of staff holding it
as contingent expense.
7. That on the facts and circumstances of the case and
in law, the CIT(A)erred in confirming the expenditure on
new projects of Rs.35.80 lakh incurred on purchase of
data packages to facilitate in bidding for gas block
offered by MOP&NG as capital expenditure in absence of
production sharing agreement between GAIL and Central
Govt.
8. That on the facts and circumstances of the case and
in law, the CIT(A) erred in confirming the expenditure on
4

consultancy for newly commissioned plant of 803.47 lakh
on account of technical fee and traveling to tide over the
initial glitches as capital expenditure.
9. That on the facts and circumstances of the case and
in law, the CIT(A)erred in confirming disallowance u/s
14A ofRs.2629.80 lakh on notional interest burden and
administrative charge calculated by assessing authority
in its own way to earn tax free dividends.
10. That on the facts and circumstances of the case
and in law, the CIT(A) erred in confirming disallowance
of Rs873.39 lakh of depreciation on account of the
capitalization affected due to exchange rate variation.
11. That on the facts and circumstances of the case and
in law, the CIT(A) erred in confirming disallowances of
Rs.29.16 lakh towards fee paid to M/s ElL for selection of
computer configuration for LAN/WAN and for Y2K
compliance as capital expenditure.
12. That on the facts and circumstances of the case and
in law, the CIT(A) erred in confirming disallowances of
Rs.32.06 lakh towards payment of Right of Use treating-
these-expenditure as capital.
5

13. That on the facts and circumstances of the case and
in law, the CIT(A)erred confirming foreign exchange
variation on Revenue account of Rs, 21.82 lakh on
reinstatement of liabilities on account of change in
exchange rate.
14. That the orders passed by the Assessing Officer and
the CIT(A)are bad in law and void ab-inito.
15. the appellant prays for leave to add, alter, amend
or vary any of the grounds either before or at the time of
hearing of appeal.
2. The issues raised by assessee in ground nos. 1, 2 & 3 are
squarely covered by the order of the Coordinate Bench in ITA No.
4454 and 4642/Del/2013 in assessee’s own case for the
assessment year 1996-97 which order has been followed by the
tribunal in AY 1997-98 and 1998-99 in ITA No. 4057 and
5091/Del/2014 and 5775 and 5912/Del/2014. For the detailed
reasons given therein ground nos. 1, 2 and 3 are allowed.
3. Ground no. 4 relates to amortization of leasehold expenses.
During the course of assessment proceedings, the AO noticed that
assessee has claimed deduction of Rs. 40.55 lacs on account of
amortization of leasehold expenses paid by the assessee to various
local government authorities for lease on rent. The AO was of the
6

firm belief that the same is of capital in nature and hence, not

allowable. The action of the AO was upheld by the Ld. CIT(A).

3.1 We find that this issue is no more res integra as the same has

been decided against the assessee and in favour of the revenue by

the Hon’ble Delhi High Court in assessee’s own case in assessment

year 1997-98 in ITA No. 956 and 957/2011 vide order dated

5.11.2012 [27 taxman.com 97]. Since the issue has been decided

against the assessee by the Hon’ble Jurisdictional High Court, this

ground is accordingly dismissed.

4. Ground no. 5 relates to taxation of sales and interest income

relating to new plant. The underlying facts of this issue are that

during the relevant previous year a new plant namely LPG plant at

Pata was commissioned. The trial runs in relation to the above

plant, commenced in November, 1999 and were concluded with the

commissioning of the above project for commercial production in

March, 2000. During this period, the assessee earned the following

revenue:-

i. Sales Rs. 10.23 crores

ii. Interest income Rs. 0.92 crores

iii. Misc. Income Rs. 3.84 crores

Rs. 15.09 crores
7

During this trial run, the assessee has also incurred certain
expenditure which was revenue in nature totalling to Rs. 72.92
crores. The excess of expenditure over income amounting to Rs.
57.83 crores was transferred to Capital Work In Progress.
However, the AO treated the income of Rs. 15.09 crores as income
from other sources. The Ld. CIT(A) upheld the action of the AO.
4.1 Before us, the counsel for the assessee stated that netting off
of revenue and the expenditure were transferred to Capital Work
In Progress which is supported by the decision of the Hon’ble
Supreme Court of India in the case of Bokaro Steel 236 ITR 315 and
Karnal Cooperative Sugar 243 ITR 2.
4.2 Per contra, Ld. DR supported the findings of the AO.
4.3 We have carefully considered the orders of the authorities
below. In our considered opinion, the assessee has rightly netted off
the expenditure during trial run with the income of trial run and the
balance has been rightly transferred to capital work in progress. We
accordingly, direct the AO to delete the revenue of Rs. 15.09 crores
from the head ‘income from other sources’. Accordingly, the ground
no. 5 is allowed.
5. Ground no. 6 relates to the provision of wage revision of Rs.
11.18 crores. The underlying facts in this issue are that as per the
policy of the Department of Public Enterprises, Ministry of Industry,
8

Government of India, the wages of the employees of the appellant
company are required to be revised every 5 years. The last pay
revision took place w.e.f. 1.1.1992 and accordingly the next pay
revision was due on 1.1.1997. On the basis of wage settlement
amounting to Rs. 11.13 crores and claimed deduction thereof in the
return of income, the AO was of the view that the provision on the
ground of treating the above liability towards pay revision is
contingent in nature since the wage settlement agreement had been
entered into the following assessment year and not during the year
under consideration. Accordingly, the addition of Rs. 11.18 crores
was made which was confirmed by the Ld. CIT(A).
5.1 Before us, the Ld. counsel for the assessee vehemently stated
that in view of the binding policy of the Government of India for pay
revision of the assessee’s employees, the assessee has made the
provision since the pay revision was due w.e.f. 1.1.1997. It is a
say of the counsel that the liability of the assessee had been
crystalised and being ascertained liability should be allowed as
deduction.
5.1.1. Per contrar, the Ld. DR supported the findings of the AO.
5.2 We have given the thoughtful consideration of the orders of the
authorities below. We find that on identical set of facts in the year
1999-2000, the assessment of the assessee was subject to
9

revisionary proceedings of the Ld. Commissioner u/s. 263 of the
Act. The matter travelled upto the Tribunal and the Tribunal in ITA
No. 2577/Del/2004 set aside the order of the Ld. CIT and allowed
the claim of deduction of the provision of wage revision. The
relevant finding of the Tribunal are read under-

“8. In this case, from the order of the Ld. CIT it is
clear that, by way of internal office order passed on
28.12.1998, a Committee was constituted for
holding discussions with the Representatives of
Employees for formulating an approach of the
Board of Directors, towards the pending pay
revision w.e.f. 1.1.1997. The Department of Public
Enterprises, issued an office memo on 14.1.1999,
authorizing the Public Sector Undertaking to start
wage revision negotiations with the workers. It was
thereafter on 17.8.1999, that the annual accounts
of the company were certified by the Directors,
wherein a provision for the above pay revision
liability, was made in the accounts. The issue is
whether a provision made towards impugned pay
revision is allowable as a deduction or not. ......
10

8.4 In our considered view, though the date of

signing of the MOU i.e. 24.09.2000, which is done

after the approval of the Department of Public

Enterprises, the negotiations were completed

during the year and the liability was known as

liability accrued from the effective date of

commencement. It is also to be pointed out that

the provisions for salary was not a contingent

liability. It was in respect of outcome of the

decision of the DPE.”

8.5 Consistent with the views taken by the

Jurisdictional High Court as well as Hon’ble Kerala

High Court, we hold that the provision for wages

made towards impending pay revision, should be

allowed as a deduction. The Ld. CIT(A) has not

made any effort to prove that the quantum of

provision made is unrealistic or imaginary. Under

these circumstances we hold that the claim of the

assessee is allowable.”

5.2.1 Since the issue is now settled in favour of the assessee

and against the Revenue, we direct the AO to delete the impugned

addition. The ground no. 6 is accordingly allowed.
11

6. Ground No. 7 relates to the expenditure on new project
amounting to Rs. 35.80 lacs. The underlying facts of this issue are
that as part of its business of exploration and production of gas,
explores, on a regular basis, various business opportunities and
possibilities for further developing the existing business. As part of
this process, the appellant, on a regular basis, incurs expenses on
bidding, filing tenders, pursuing various new projects related to
exploration of gas, etc. In order to expand its existing network,
during the year under consideration, the assessee incurred
expenditure of Rs. 35.80 lacs being the payment made to ONGC as
reimbursement of expenses incurred and paid by ONGC for
obtaining “seismtic data” from various parties pertaining to
particular proposed contract area. The AO was of the firm belief
that the aforesaid expenditure had been incurred in respect of new
line of business which is not part of the appellant existing business
and hence, it is capital in nature. The action of the AO was upheld
by the Ld. CIT(A).
6.1 Before us, Ld. Counsel for the assessee stated that the
expenditure of Rs. 35.80 lacs has been incurred for exploring the
new business opportunities in the field of exploration, production
and distribution of gas which was the existing business of the
assessee. It is a say of the counsel that similar market expenses
12

have held to be allowable by the tribunal in ITA No. 4454 and
4642/Del/2013 vide order dated 26.10.2020 for AY 1996-97. The
Ld. Counsel also placed reliance on various judicial decisions.
6.2 Per contra, the Ld. DR strongly supported the findings of the
lower authorities.
6.3 We have given thoughtful consideration of the orders of the
authorities below. There is no dispute that the assessee is engaged
in the business of exploration, production and distribution of gas. In
furtherance, of its business ONGC was engaged to collect seismtic
data for different contract areas for which ONGC incurred
expenditure of Rs. 35.80 lacs which was reimbursed by the assessee
and claimed as expenditure. In our considered opinion, the
authorities below have erred in treating the same as being incurred
in respect of new line of business as the same was very much for
the existing business. A similar view was taken by the Tribunal in
assessment year 1996-97 (Supra). Therefore, we find merit in the
claim of the assessee and accordingly direct the AO to delete the
addition of Rs. 35.80 lacs. The ground no. 7 is accordingly allowed.
7. Ground no. 8 relates to claim of expenditure of technical /
consultancy fees of Rs. 8.03 crores in respect of newly
commissioned plant. The underlying facts in this issue show that a
new plant namely UP Petrochemicals Plant at Pata was
13

commissioned. However, after commissioning of the said plant
some expenditure on consultancy fees and travelling a technical
experts. The AO was of the opinion that since the capitalised value
of the said plant has been increased the expenses on consultancy
and travelling expenses of technical experts shall also required to be
treated as having been incurred in respect of setting up of plant and
consequently capitalised. The Ld. CIT(A) upheld the findings of the
AO.
7.1 Before us, the counsel for the assessee vehemently stated that
the said expenditure was very much revenue in nature as it has
been incurred after the plant had been commissioned and was
incurred in the normal course of business.
7.2 The Ld. DR strongly supported the orders of the lower
authorities.
7.3 We have carefully considered the orders of the authorities
below. In our considered opinion, since the expenditure of Rs. 8.03
crores has been incurred after the commissioning of the plant and
since this expenditure was necessary for the smooth functioning of
the operation of assessee and the same had been incurred to
overcome certain initial technical glitches. It is definitely of revenue
in nature. We accordingly direct the AO to delete the addition of Rs.
14

8.03 crores. The ground no. 8 is accordingly allowed. The Additional
ground no. 16 is accordingly become infructuous.
8. Ground no. 9 relates to the disallowance made u/s. 14A of the
Act. During the course of certain assessment proceedings, the AO
noticed that the assessee has received dividend income of Rs. 18.96
crores. The AO was of the opinion that assessee must have incurred
certain expenditure for earning the exempt dividend income. By
applying the provision of section 14A of the Act the AO computed
the disallowance of Rs. 26.29 crores which was confirmed by the Ld.
CIT(A).
8.1 Before us, the counsel for the assessee stated that the asessee
was directed to purchase shares of ONGC by the Government for
disinvestment and cross purchase of shares of PSU and pursuant to
the directions of the Government of India, the assesee invested Rs.
556.28 crores out of which Rs. 450 crores was paid as advance in
financial year 1998-99 and balance Rs. 106.28 crores was paid in
the year under consideration. It is a say of the counsel that the
entire investments have been made out of own funds and therefore
there should not be any disallowance u/s. 14A of the Act. The
counsel further pointed out that nowhere in his assessment order,
the AO has recorded any satisfaction before proceeding to make
disallowance u/s. 14A of the Act.
15

8.2 Per contra, Ld. DR strongly supported the findings of the AO.
It is a say of the Ld. DR that a reasonable disallowance has to be
made for earning exempt dividend income.
8.3 We have carefully considered the orders of the authorities
below. We find that the AO has applied the adhoc interest @12%
per annum for computing the disallowance. The AO has nowhere
examined the availability of own funds with the assesee. In our
considered opinion, if sufficient interest free funds are available and
even if there are borrowed funds, the presumption would be that
the investment have been made out of own funds. Our view is
fortified by the decision of the Hon’ble Bombay High Court in the
case of Reliance Utility and Power 313 ITR 340. However, we are
of the view that certain administrative expenses has to be
disallowed for earning this exempt income. In our considered
opinion, the disallowance of Rs. 5 lacs should meet the end of
justice. We accordingly, direct the AO to restrict the disallowance to
Rs. 5 lacs. Ground no. 9 is accordingly partly allowed.
9. Ground no. 10 and 13 relates to disallowance on account of
foreign exchange fluctuations. The facts in this issue show that the
assessee has claimed depreciation on increased cost of fixed assets
capitalized on account of changes in rate of exchange of currency.
The Assessee had also claimed that Rs. 21.82 lacs being loss
16

suffered on account of increased and foreign exchange liabilities
utlisied on revenue account on account of change in the exchange
rate. The AO disallowed the claim of the assesee on account of
holding the same to be notional loss and further hold that the
depreciation is allowable only at the time of when actual payment of
enhanced liability takes place.
9.1 Before us, the counsel drew our attention to the decision of
the Hon’ble Supreme Court of India in the case of Woodword
Governor 312 ITR 254 wherein the Hon’ble Supreme Court of India
held that loss suffered in respect of a revenue liability on account of
exchange difference as on the balance sheet date would be an item
of expenditure allowable under section 37(1) of the Act. The
counsel further stated that even the disallowance on account of
depreciation is not as per the provisions of law as the methodology
adopted by the AO relates to the period of holding of the capital
asset i.e. if the capital assessee is held more than 180 days full
depreciation is allowable and if held less than 180 days 50% of the
eligible depreciation is allowable.
9.2 Per contrary, Ld. DR strongly supported the findings of the AO.
9.3 In our considered opinion, the claim of revenue loss is well
supported by the decision of the Hon’ble Supreme Court of India in
the case of Woordword Governor (Supra) and in so far as the claim
17

 

of depreciation is concerned, the action of the AO is based on the
second proviso to section 32(1)(ii) of the Act which is not at all
applicable on the facts of the case in hand.
9.3.1 In the present case it is an admitted fact that the addition
to the actual cost was made on account of exchange rate variation
and not on account of acquisition of any capital fixed assets. In our
considered opinion, the addition to the actual cost of fixed assets is
amended by the provisions of section 43A of the Act. In our view
section 43A nowhere states that where the cost of fixed assets is
increased on account of any exchange rate variation there is
deemed acquisition of any fixed asset. Considering the facts in
totality, we direct the AO to allow the claim of the assesee.
Accordingly, the ground no. 10 & 13 are allowed.
10. Ground no. 11 relates to the consultancy payment in
connection with LAN/WAN. The underlying facts in this issue are
that during the year under consideration the assessee made the
payment of Rs. 29.16 lacs to Engineers India Ltd. (EIL) for the
following work:-

- Identification of server and node configuration,
designing of network topology for LAN and WAN,
selection of best suitable protocol and cabling techniques.
18

- Preparation of specification of server, mode, LAN and
WAN equipments, printers etc.

- Identification of suitable hardware and software for the
server.

- Selection of suitable gateway package.
- Identification of frequency and methodologies of data

transfer across GAOL offices.
The assessee claimed the said payment as consultancy
services rendered by EIL for the purpose of improving operational
efficiency of the computer system through LAN/WAN which was
already in existence and was functioning satisfactory. The AO and
the Ld. CIT(A) were of the firm belief that the said expenditure for
identification and installation of new equipment resultant in
enduring benefits and therefore is of capital nature.
10.1 Before us, the counsel for the assessee reiterated what has
been stated before the lower authorities and relied upon the various
judicial decisions.
10.2 Per contra, Ld. DR strongly supported the findings of the Ld.
CIT(A) and read the relevant finding of the Ld. CIT(A).
10.3 We have carefully considered the orders of the authorities
below. The Hon’ble Supreme Court of India in the case of Empire
Jute Co. Ltd. vs. CIT 124 ITR 1, has laid down the test for
19

determining as to what constitutes capital expenditure in the
following terms:-

“It is not every advantage of enduring nature
acquired by an appellant that brings the case
within the principle laid down in this test. What is
material to consider is the nature of the advantage
in a commercial sense and it is only where the
advantage is in the capital filed that the
expenditure would be disallowable on an application
of this test. If the advance consists merely in
facilitating the appellant’s trading operations or
enabling the management and conduct of the
appellant’s business to be carried on more
efficiently or more profitably while leaving the fixed
capital untouched, the expenditure would be on
revenue account, even though the advantage may
endure for an indefinite future....”
10.4 In light of the aforesaid ratio laid down by the Hon’ble
Supreme Court of India, we find that the said consultancy payment
made by the assessee to EIL was to enhance the existing
infrastructure of the assessee in IT segment. This was definitely for
the benefit of the management to conduct the business of the
20

appellant in the more efficient manner. We are therefore, of the
considered view that such consultancy fee should be allowed as
revenue expenditure and accordingly we direct the AO to do the
same. The ground no. 11 is accordingly allowed.
11. Ground no. 12 relates to the expenditure on right of use. The
underlying facts in this issue are that as part of its business of
production, transmission and distribution of gas, the assessee has
laid transmission lines under the soil all across the country for
which it incurred the expenditure amounting to Rs. 32,06,000/- and
claimed the same as deduction, though the same was capitalised as
part of cost of land in its books of accounts. The AO did not make
any observation in such claim of the assessee and the order of the
Ld. CIT(A) is also silent on this issue.
11.1 Before us, Counsel for the assessee pointed out that in
assessment year 2001-02 and 2002-03 such claim was allowed by
the AO while computing the total income of the assessee. The
counsel explained the provisions of Petroleum And Mineral Pipelines
Act, 1952 by which the said right to use the land for laying
pipelines was exercised by the assessee. The counsel stated that
treatment in the books of account is not determinative for the
allowability of any expense under the provisions of Act. He placed
strong reliance on the decision of the Hon’ble Supreme Court of
21

India in the case of Kedar Nath Jute Manufacturing Company vs.
CIT 82 ITR 363 and CIT vs. Sutlet Cottons Mills Supply Agency 100
ITR 706 (SC).
11.2 Per contra, Ld. DR strongly supported the findings of the AO.
11.3 We have given thoughtful consideration of the orders of the
authorities below. The undisputed fact is that the pipeline being laid
down as per the provisions of the Petroleum And Mineral Pipelines
Act, 1952. This Act enables the Central Government to acquire, by
notification in Official Gazette, right of user in any land under which
pipelines may be laid. It is also provided in this Act that the right of
use shall vests absolutely in the Central Government free from all
encumbrances. Under this Act the Central Government or the State
Government acquires the land and the right of use of such land for
laying pipelines is given to the parties who are in this line of
business like the assessee. Considering the facts of the case and in
light of the relevant Act, we are of the opinion that only the right to
use of land is acquired by the Central Government and not by the
appellant. The assesee is merely incurred the expenditure to obtain
the right to use i.e. right to lay the pipeline and nothing more. No
title or interest has been passed from the owners to the assessee.
Therefore, on the given facts the said expenditure deserve to be
allowed. We accordingly direct the AO to delete the impugned
22

addition. The ground no. 12 is allowed. Additional grounds

relating to claim of depreciation on the expenditure treated as

capital in nature become infructuous.

12. The additional ground relating to disallowance of payment of

tax under section 43B of the Act show that the assessee has claimed

deduction of expenses aggregating to Rs. 7.95 crores out of the said

payment tax amounting to Rs. 6.67 crores has been paid by the

assessee before the due date of filing of return. Therefore, to this

extent, no disallowance should be made as laid down by the Hon’ble

Supreme Court in the case of Allied Motors 224 ITR 677. We further

find that assesee suo moto disallowed Rs. 1,19,56,547/- u/s. 43B

of the Act, therefore, no further disallowance need to be made. This

additional ground is accordingly allowed.

13. The other additional grounds related to claim of deduction on

account of prior period adjustments. Before us, the counsel for the

assessee stated that certain disallowances have been made in

assessment years 2001-02 and 2002-03. The counsel prayed for the

allowance of such expenditure during the year consideration. We

are of the view that when there is no revenue leakage whether the

expenditure is allowed during the year under consideration or in the

year of claim should not make any difference and even if such

expenditure are allowed during the year and it will result into the
23

adjustments being made in subsequent assessment years that will
only increase unnecessary paper work and unnecessary pressure on
the revenue as well as assessee. Being tax neutral and revenue
neutral, we direct the AO to allow the expenditure in the year of its
claim. The additional grounds are treated as allowed.
14. In the result, the ITA No. 301/Del/2006 (AY 2000-01) is partly
allowed.
ITA No. 858/Del/2006 (AY 2001-02)
15. The grievance of the assessee read as under:-

1. That on facts and circumstances of the case
and in law, the Commissioner of Income-tax
(Appeals) - XV {briefly "the CIT (A)"}erred in
holding that appellant was not entitled to deduction
under sections 80 I & 80 IA of the Act amounting to
Rs.12589.33 lakhs.
2. That on the facts and circumstances of the
case and in law, having accepted that appellant is
engaged in manufacture of LPG for which majority
of gas was processed, the authorities below erred in
holding that appellant is not an industrial
undertakings engaged in the manufacture or
production of different article or thing.
24

3. That on the facts and circumstances of the
case and in law, the CIT (A) erred in confirming the
disallowance of LPG profits on an estimated basis
amounting to Rs. 37.50 Crores instead of actual
profit of Rs 39.54 crores.
4. That on the facts and circumstances of the
case and in law the CIT(A)erred in confirming the
disallowances of Rs.5163234/- on account of
amortization of the cost of lease hold land as a
capital expenses.
5. That on the facts and circumstances of the
case and in law, CIT (A) erred in upholding the
sales, interest and miscellaneous income of
Rs.90962000/- relating to pre-commencement
stage of plant as income from other sources, rather
than abating the same from the construction cost of
the plant.
6. That on the facts and' circumstances of the
case and in law, the CIT(A) erred in confirming the
expenditure on consultancy for setting of new
business of Rs. 5008031/- on account of technical
25

fee and traveling to tide over the initial glitches as
capital expenditure.
7. That on the facts and circumstances of the
case and in law, the CIT(A)erred in confirming
disallowance u/s 14A of Rs.277080360/- on
notional interest burden and administrative charge
calculated by assessing authority in its own way to
earn tax free dividends.
8. That on the facts and circumstances of the
case and in law, the CIT(A) erred in confirming
disallowance of Rs 53067500/- of depreciation on
account of the capitalization affected due to
exchange rate variation.
9. That on the facts and circumstances of the
case and in law, the CIT(A) erred in confirming
disallowances of Rs.41809754/- towards
consultancy fee paid to M/s EIL and other
consultants treating it as capital expenditure.
10. That on the facts and circumstances of the
case and in law, the CIT(A) erred in confirming
disallowances of depreciation on capitalization of
26

Jamnagar-Loni pipeline and Ghandhar plant
amounting to Rs 153,59,63,050 crores.
11. That on the facts and circumstances of the
case and in law, the CIT(A) erred in confirming
disallowances of penalty amounting to Rs 198248
as capital expenditure.
12. That on the facts and circumstances of the
case and in law, the CIT(A) erred in confirming
disallowances of Rs 23,36,98,000 lakh towards prior
period adjustments.
13. That on the facts and circumstances of the
case and in law, the CIT(A) erred in confirming
disallowance of year end foreign exchange variation
on Revenue account ofRs.315000.
14. That the orders passed by the Assessing
Officer and the CIT(A)are bad in law and void ab-
inito.
15. The appellant prays for leave to add, alter,
amend or vary any of the grounds either before or
at the time of hearing of appeal.
16. Issues raised vide ground no. 1, 2 & 3 are identical to the
issues considered by the Tribunal in AY 1996-97 in ITA No. 4454 &
27

4642/Del/2013 which have been followed by the Tribunal in ITA No.
5775 and 5912/Del/2014 and further in ITA No. 301/Del/2006
(Supra). For the reasons given in ITA No. 4454 and 4642/Del/2013
the ground no. 1, 2 & 3 are allowed.
17. Ground no. 4 relates to amortization of leasehold expenses.
This issue has been decided against the assessee vide ground no.4
in ITA No. 301/Del/2006 (supra). For the reasons given therein this
ground is dismissed.
18. Ground no. 5 relates to taxation of sales and interest income
relating to new plant. A similar issue has been decided in ITA No.
301/Del/2006 vide ground no. 5 of that appeal (supra). For the
detailed reasons therein this ground is allowed.
18. Ground no. 6 relates to the expenditure on feasibility studies
for exploring new business opportunities. A similar issue has been
decided in ITA No. 301/Del/2006 (supra) vide ground no. 7 and 8 of
that appeal. For the reasons given therein this ground is allowed.
19. Ground no. 7 relates to the disallowance made u/s. 14A of the
Act. A similar issue has been considered in ITA No. 301/Del/2006
vide ground no. 9 of that appeal. For the reasons given therein, we
direct the AO to restrict the disallowance to a sum of Rs. 2 lacs.
Accordingly, this ground is partly allowed.
28

20. Ground no. 8 and 13 relates to disallowance of depreciation
and also on revenue account on account of foreign exchange
fluctuations. Similar issue has been decided in ITA No.
301/Del/2006 vide ground no. 10 & 13 of that appeal. For the
reasons given therein the ground no. 8 and 13 are allowed.
21. Ground no. 9 relates to consultancy fee paid to EIL Ltd. Similar
issue has been decided in ITA No. 301/Del/2006 vide ground no. 11
of that appeal. For the reasons given therein the ground no. 9 is
allowed.
22. Ground no. 10 relates to the claim of depreciation on
Jamnagar-Loni-Pipeline and Gandhar LPG Plant. The underlying
facts show that during the year under consideration the assessee
successfully laid and commissioned pipeline from Jamnagar, Gujarat
to Loni (the Jamnagar-Loni Pipeline) and the LPG Gas Processing
Plant, Gandhar. The AO was of the opinion that the work of
Jamnagar Loni Pipeline was completed after 31.3.2001 and the
same was not ready and not put to use on or before 31.3.2001.
The AO accordingly disallowed the claim of depreciation aggregating
to Rs. 99.37 crores. The reasons given by the AO for disallowing the
claim of depreciation in respect of LPG Gas Processing Plant
Gandhar is that assessee has not established that the LPG Plant was
ready for use on 31.3.2001 and consequently disallowed
29

depreciation aggregating to Rs. 54.22 crores when the matter was
agitated before the Ld. CIT(A). The Ld. CIT(A) held that in order to
claim depreciation the asset should be put to use for the purpose of
business. As regards Jamnagar Loni Pipe Line, the Ld. CIT(A)
observed that small work is relating to pipe line was still pending
to be done and therefore, the said pipe line was not put to use by
the appellant company in the year under consideration. In so far
the LPG Gas Processing Plant Gandhar is concerned, the Ld. CIT(A)
observed that production started only in April, 2001 and certain
works were yet to be completed and accordingly upheld the action
of the AO in disallowing the claim of depreciation.
22.1 Before us, the counsel for the assessee drew our attention to
Annexure-1 and pointed out that each and every allegation has
been replied by the assessee to justify its claim of depreciation. The
Counsel in support of the claim relied upon various judicial
decisions and concluded by saying that the assessee has
successfully commissioned the Jamnagar-Loni Pipeline and the LPG
Gas Processing Plant, Gandhar and therefore, the depreciation
should be allowed.
22.2 Per contra, the Ld. DR read the relevant findings of the Ld.
CIT(A) and stated that Ld. CIT(A) has given effective findings while
30

upholding the disallowance on depreciation and the same deserve

to be followed.

22.3 We have given a thoughtful consideration of the orders of the

authorities below. The commissioning of the plant can be

understood from the following chart:-

Particulars Date of

Jamnagar Loni Pipeline (Refer PB pg 226) commissioning
Despatch Terminal at RPL Jamnagar
Pipeline Section I Jamnagar to Ajmer 19.10.2000
Pipeline Section II Ajmer to Jaipur 23.11.2000
Intermediate Pumping Station at Ajmer 27.11.2000
Pipeline Section III : Jaipur to IP-4 10.12.2000
Pipeline Section IV IP 4 to Piyala 11.12.2000
Pipeline Section V Piyala to Loni 16.12.2000
Intermediate Pumping Station at Samakhiali 14.1.2001
Intermediate Pumping Station at Abu Road 19.1.2001
LPG Plant, Gandhar (Refer PB pg. 22) 31.01.2001
Energization of electricity for the plant
Cooling Water Plant 22.12.2000
Air Compressors 02.01.2001
Fire Water Network 06.01.2001
Central Control Toom 13.01.2000
Gas in system 21.1.2001
Lean Gas Turbine Compressor 15.3.2001
Feed Gas Turbine Compressor 26.3.2001
30.3.2001

22.3.1 In light of the above, we will now consider the rebuttal
of the allegations which are as under:-
31

Rebuttal to the allegations of the assessing officer

LPG Pipeline: Jamnagar in Gujarat to Loni near Delhi Assessee’s submission
Assessing officer’s observations

Section I: Section 1:

• Final bill of M/s Larson & Turbo for an amount of • The activities referred to at pg 26 of the impugned order

Rs. 1,98,86,207 was raised on 25-05-2001 and were completed up to 31.03.2001, but bill was raised after

was for period upto 15-04-2001 of this section, 31.03.2001:

even though the Contractual Date of Completion

was 31.01.2001 • The jobs for which the final bill had been raised after
31.03.2001 was for the balance works of material

• On the basis of the aforesaid, the AO inferred reconciliation, submission of drawings, clean up and

that since the aforesaid bill was raised after restoration, having no relevance to commissioning of

31.03.2001, the Pipeline could not be said to pipeline.

have been commissioned on or before that date
• Further the bill itself states that cumulative work done till

date was Rs.45.62 crores [Refer Page 21 of AO order]

• Refer, pg 228 of the Paper Book, being “Completion of
Commissioning Certificate” issued by Engineers India Ltd
certifying as follows:

“This is to certify that system/ sub-system as
detailed below has been successfully
commissioned and it under operational control of
Client’s production department. The minor items
will no effect the normal operation of the system/
sub-system….”
32

Section 2: Section 2:

• Final bill of M/s Larson & Turbo for an amount of • The activities referred to at pg 27 of the impugned order

Rs.1,11,58,121 was raised on 07.07.2001 and were completed up to 31.03.2001. but bill was raised after

was for period up to 31-05-2001, even though 31.03.2001

the Contractual Date of Completion was

13.01.2001 • Contract value of this job was Rs. 41.70 crores and the
total payment of the bill in question was merely 2% of the

• On the basis of the aforesaid, the AO inferred total contract value.

that since the aforesaid bill was raised after The said payment included job of chain link fencing,
31.03.2001, the Pipeline could not be said to• construction of guard room, and final painting of the civil
jobs, etc. which could be executed after the pipeline starts
have been commissioned on or before that date

operations

• Jobs for which final bills were raised were not related to
the completion of pipeline and were onlv for final
acceptance of drawing, etc. and that the different section
of the pipelines were commissioned as per the certificate
issued by the pipeline -in-charge dated 22.02.2001

• Refer, pg. 229 of the Paper Book, being “Completion of
Commissioning Certificate” issued by Engineers India Ltd
certifying as follows:

“This is to certify that system/ sub-system as
detailed below has been successfully
commissioned and it under operational control of
Client’s production department. The minor items
will no effect the normal operation of the system/
sub-system

Section 5: Section 5:

• Final bill of M/s Larson & Turbo for an amount of • The activities referred to at pg 28 of the impugned order

Rs.2,57,31,106 was raised on 15.06.2001 and were completed up to 31.03.2001, but bill was raised after

was for period up to 15.07.2001, even though 31.03.2001

the Contractual Date of Completion was

13.01.2001 • Contract value of this job was Rs. 54.7 crores and the total
payment of the bill was merely 2% of the total contract

• On the basis of the aforesaid, the AO inferred value.

that since the aforesaid bill was raised after The payment included job of chain link fencing,
31.03.2001, the Pipeline could not be said to • construction of guard room, and final painting of civil jobs,
etc. which are the work not related to the completion of
have been commissioned on or before that date

and were only for cleanup/restoration which had no

relevance to commissioning or capitalization of the
33

pipeline.
• Different section of the pipelines were commissioned as per

the certificate issued by the pipeline - in charge dated
22.02.2001

Section C: Abu Road Intermediate Pumping Station

• Only 5% payments related to various jobs which were payable

only after completion of work in all respect and acceptance

• Final bill of M/s Larson & Turbo was raised for by engineer- in-charge but these had no relevance to the
period up to 31.05.2001, even though the capitalization of the pipeline.

Contractual Date of Completion was 21.11.2000
• Disallowance of depreciation cannot be based merely on

• On the basis of the aforesaid, the AO inferred the final bills being submitted by M/s L&T

that since the aforesaid bill was raised after Against disallowance of depreciation in respect of Dispatch
• Terminals at ABU Road based on bills submitted by M/s
L&T for period up to 31.05.2001.
31.03.2001, the Pipeline could not be said to
have been commissioned on or before that date.

• Bill was only 5%, final payment which was payable only
after completion and integration of system but practically
all construction/ commissioning work was completed
before 31.03.20001.

Section 3: • Punj Lloyd submitted its final bill for billing period from
01.03.2001 to 21.04.2001 for the activities referred to at
• Final bill raised by Punj Lloyd is for period up to pg 30 of the CIT(A) order
21.04.2001
• The jobs had no connection with the capitalization of the
project.
• On the basis of the aforesaid, the AO inferred that
since the aforesaid bill was raised after Total contract value was USD 114.19 lacs
31.03.2001, the Pipeline could not be said to •
have been commissioned on or before that date Payment in the said bill was USD 1.43 lacs, which was
• approximately 1% of the total work.

• It is normal to release 5 % of final payments after handing
over pipelines to owner and its final acceptance.

Section 4: Final bill dated 28.05.2001, which shows the billing period
• from 01.03.2001 to 07.05.2001 covered the activities
referred at pg 29 of the CIT(A) order
• Final bill dated 28.05.2001 raised by Punj Lloyd
for an amount of USD 3,10,005.22 was for the Total work order was for USD 87.70 Lakhs

period 01.03.2001 to 07.05.2001


• On the basis of the aforesaid, the AO inferred
34

that since the aforesaid bill was raised after • Payment of USD 84 lacs was already made

31.03.2001, the Pipeline could not be said to
have been commissioned on or before that date • Payment in this bill was USD 0.65 lacs which was less than

even 1% of the total contract value, and this had no

bearing on the capitalization of the project

Laving of spurlines for Jamnagar - Loni pipelines

projects: M/s Jai Hind Products was awarded the job for laying of
• spur pipelines for total of Rs. 6 Crores

• Final bill dated 15.12.2001 was raised for the Since spurlines were integrated with Jamnagar - Loni
Pipelines and laid before 31.03.2001, the capitalization
period 16.07.2001 to 31.11.2001m where as the • was done on 31.03.2001

Contractual completion date: 23.07.2000 Bills were raised late as their were some complication, not
affecting the commissioning, in execution of job by the
• EIL have certified that the job was finally contractor
completed on 31.11.2001

• On the basis of the aforesaid, the AO inferred
that since the aforesaid bill was raised after
31.03.2001, the Pipeline could not be said to
have been commissioned on or before that date

Gandhar LPG plant

• All the systems of LPG recovery units, all the M/s Bridge Roof and Co. Pvt. Ltd.

utility systems and all the offsite systems had

been commissioned, except for those referred at

pg 25 of the CIT(A) order M/s Bridge Roof and Co. Pvt. Ltd. were awarded job of civil and

• From this certificate it is sent that, even as on structural work for various utilities and off site work and all these
31.03.2001, certain important sub-systems of utilities and offsite work were ready before 31.01.2001 and only
some petty jobs relating to culverts, painting etc were attended
the plant were admittedly not ready.
after 31.03.2001, without which also the plant could be

• From the completion certificate of M/s Bridge successfully commissioned and run

and Roof Co. Pvt. Ltd., a contractor for project

shows actual completion date as 15.06.2001. the

job given to it was civil, structural, and Lean gas turbine compressor and feed gas compressor
architectural work for utilities and off site work

at GPC-Gandhar unit. This job was, thus, not Observation regarding lean gas turbine compressor and feed gas

complete as on 31.03.2001 as per the certificate compressor of the AO was clarified by the technical process

involved in commissioning of lean gas turbine compressor and

• From memorandum of payment of the final bill feed gas compressor. Lean gas compressor precedes feedgas
of BHEL dated 15.06.2001; from noting at the compressor, such that if feedgas compressor was to be started
end of page asking for payment of Rs. 1.8 Lacs without lean gas compressor, then the Plant would not safely

and 2.5 lacs to be withheld for jobs pending and function. Thus, once it was not disputed that feedgas
not done. Thus even till june,2001 part of work compressor was capitalized, there can be no dispute about lean
of BHEL was incomplete. BHEL was the supplier gas compressor also having been capitalized.
and the commissioning contractor for the main
35

equipment of the project.

• Lean gas turbine compressor, which is for output gas, Further, following documents were fded before the assessing

is claimed as commissioned on 26.03.2001 and officer which clearly establishes production of LPG on or before

the feed gas compressor which is for the input is 31.03.2001:

claimed as commissioned on 31.03.2001. The

assessee has further stated the production of • Production report, dispatch and closing registers duly certified

LPG was made on 31.03.2001. The only evidence by Senior Manager (Operations) of the appellant-

in this regard is a noting in a computerized sheet company.

stated to be excise register but no excise duty • copy of RGI registers stating opening and closing balance,

has been provided on this production. quantity manufactured and quantity removed from the

factory

• copy of invoices raised on the customers

• details of excise duty on LPG. adjusted through
CENVAT/PLA account

22.4 The rebuttal of the assessee mentioned hereinabove have
been considered thoroughly with the relevant documentary
evidences referred therein and placed in the paper book.
Considering the facts in totality, we are of the considered view that
assessee has successfully commissioned the Jamnagar Loni Pipeline
and the LPG Gas Processing Plant Gandhar and is very much eligible
for claim of depreciation on the capitalised cost thereon. We
accordingly, direct the AO to allow the depreciation of Jamnagar
Loni Pipeline and Gandhar Plant. Ground o. 10 is accordingly
allowed.
23. Ground No. 11 relates to the disallowance of payment of
penalty of Rs. 1,98,248. Facts on record show that this amount was
36

capitalised alongwith cost of project and transferred to IEDC
account as it was incurred before the completion of the project.
However, the AO without applying his mind disallowed the same
stating that penalty paid is not allowable expenditure. We are of the
considered view that since the assessee has never claimed this
amount of expenditure, there is no question of any disallowance. We
accordingly, direct the AO to delete the addition of Rs. 1,98,248.The
ground no. 11 is accordingly allowed.
24. Ground no. 12 relates to prior period adjustments. The AO
noticed that assessee has debited a sum of Rs. 27.05 crores on
account of prior period expenses. The AO was of the opinion that
this being prior period expenditure cannot be allowed in the year
under consideration. In ITA No. 301/Del/2006, we have observed
that such disallowance and claim in the year of incurring the liability
would add much add paper work and unnecessary rounds of
assessment when the effect is tax neutral and revenue neutral. We
accordingly direct the AO to allow the expenditure in this year. It is
to avoid unnecessary ground work. Additional Ground no. 16 to 20
become infructuous and need not separate adjudication.
25. In the result, the ITA No. 858/Del/2006 (AY 2001-02) is partly
allowed.
37

ITA NO. 859/DEL/2006 (AY 2002-03)

26. The grounds raised by the assessee read as under:-

1. That on facts and circumstances of the case
and in law, the Commissioner of Income-tax
(Appeals) - XV {briefly "the CIT (A)"}erred in
holding that appellant was not entitled to deduction
under sections 80 I & 80 IA of the Act amounting to
Rs.112.00 crores.
2. That on the facts and circumstances of the
case and in law, having accepted that appellant is
engaged in manufacture of LPG for which 80%
(apprx.) of gas was processed, the authorities
below erred in holding that appellant is not an
industrial undertakings engaged in the manufacture
or production of different article or thing.
3. That on the facts and circumstances of the
case and in law, the CIT (A) erred in confirming the
disallowance of LPG profits on an estimated basis
amounting to Rs. 87.27 lakh.
4. That on the facts and circumstances of the
case and in law the CIT(A)erred in confirming the
38

disallowances of Rs.54.17 lakh on account of
amortization of the cost of lease hold land as a
capital expenses.
5. That on the facts and circumstances of the
case and in law the Ld. CIT(A) erred in upholding
the interest and miscellaneous income of Rs. 78.30
lakh relating to pre-commencement stage of plant
as income from other sources, rather than abating
the same from the construction cost of the plant.
6. That on the facts and circumstances of the
case and in law, the CIT(A)erred in confirming
disallowance u/s 14A of Rs.2236.88 lakh on
notional interest burden and administrative charge
calculated by assessing authority in its own way to
earn tax free dividends.
7. That on the facts and circumstances of the
case and in law, the CIT(A) erred in confirming
disallowance of Rs 654.50 lakh of depreciation on
account of the capitalization affected due to
exchange rate variation. Ld. CIT(A) also erredin not
allowing suo moto depreciation on Rs. 153.60
crores which was not allowed by AO in AY 2001-02
39

(by not accepting capitalization of Jamnagar Loni
Pipeline and LPG plant at Gandhar).
8. That on the facts and circumstances of the
case and in law, the CIT(A) erred in confirming
disallowances of Rs. 1664.65 lakh towards expense
related to prior period adjustment that are actually
errors or omissions of the past, booked during the
year.
9. That on the facts and circumstances of the
case and in law, the CIT(A)erred in confirming
foreign exchange variation on Revenue account of
Rs.l288.001akh on reinstatement of liabilities on
account of change in the year end exchange rate.
10. That on the facts and circumstances of the
case and in law, the CIT(A)erred in confirming
disallowance of depreciation of Rs.74.671akh on
capitalized value of Rs.5,97,39,954/- on the ground
that the work was not completed upto 31.03.2002,
even when books of account were accepted by CAG.
11. That on the facts and circumstances of the
case and in law, the CIT(A)erred in confirming
interest u/s234C of Rs.504.11 lakh evenwhen the
40

installment of Advance Tax was timely deposited on
15-09-2001 with bank.
12. That on the facts and circumstances of the
case and in law, the CIT(A)erred in confirming
interest u/s234D of Rs.718.30 lakh even the section
was inserted w.e.f 1-6-2003.
13. That the orders passed by the Assessing
Officer and the CIT(A)are bad in law and void ab-
inito.
14. The appellant prays for leave to add, alter,
amend or vary any of the grounds either before or
at the time of hearing of appeal.
27. Issues raised vide ground no. 1, 2 & 3 are identical to the
issues considered by the Tribunal in AY 1996-97 in ITA No. 4454 &
4642/Del/2013 which have been followed by the Tribunal in ITA No.
5775 and 5912/Del/2014 and further in ITA No. 301/Del/2006
(Supra). For the reasons given in ITA No. 4454 and 4642/Del/2013
the ground no. 1, 2 & 3 are allowed.
28. Ground no. 4 relates to amortization of leasehold expenses.
This issue has been decided against the assessee vide ground no. 4
in ITA No. 301/Del/2006 (supra). For the reasons given therein this
ground is dismissed.
41

29. Ground no. 5 relates to taxation of sales and interest income
relating to new plant. A similar issue has been decided in ITA No.
301/Del/2006 vide ground no. 5 of that appeal (supra). For the
detailed reasons therein this ground is allowed.
30. Ground no. 6 relates to the disallowance made u/s. 14A of the
Act. A similar issue has been considered in ITA No. 301/Del/2006
vide ground no. 9 of that appeal. For the reasons given therein, we
direct the AO to restrict the disallowance to a sum of Rs. 5 lacs.
Accordingly, this ground is partly allowed.
31. Ground no. 7 and 9 relates to disallowance of depreciation and
also on revenue account on account of foreign exchange
fluctuations. Similar issue has been decided in ITA No.
301/Del/2006 vide ground no. 10 & 13 of that appeal. For the
reasons given therein the ground no. 7 and 9 are allowed.
32. Ground no. 8 relates to prior period adjustments. Similar
issue has been decided in ITA No. 301/Del/2006 & in ITA no.
858/Del/2006 (AY 2001-02) vide ground no. 12 of that appeal. For
the reasons given therein the ground no. 8 is allowed.
33. Ground no. 10 relates to allowability of depreciation on fixed
assets. Identical issue has been decided in ITA No. 858/Del/2006
(AY 2001-02) vide ground 10 of that appeal. For the reasons given
therein the ground no. 10 is allowed.
42

34. Ground no. 11 relates to levy of interest u/s. 234C of the Act.
The claim of the assessee is that there was no deferment of advance
tax on the total income declared in the return of income. The
assessee contends that the advance tax of Rs. 140 crores for the
quarter ended 15.09.2001 was credited to the Government Treasury
on 17.09.2001 since 16.09.2001 was a Holiday. It is a say of the
counsel that since the tax was deposited vide cheque no. 985562
dated 14.9.2001 with SBI CAG Branch, New Delhi duly receipted by
the Bank on 15.09.2001. The date of clearing of the cheque should
not be construed and the advance cheque was paid on or before the
date.
34.1 Per contra, Ld. DR strongly supported the charge of interest
u/s. 234C.
34.2 We find that cheque no. 985562 dated 14.9.2001 was
deposited and acknowledged by the Bank on 15.09.2001 which is
the due date of payment for the advance tax. Merely because the
amount was credited in the Government Treasury on 17.9.2001
since 16.09.2001 was a Bank Holiday, it cannot be considered that
assessee has defaulted any payment of advance tax. On given
facts, we direct the AO to delete the interest levied u/s. 234C of the
Act. Ground no. 10 is accordingly allowed.
43

35. Ground no. 12 relates to the levy of interest u/s. 234D of the
Act. We are in the assessment year 2002-03 and section 234D was
inserted in the Act w.e.f. 01.06.2003. Since the provisions is not
applicable in the year under consideration, hence, there cannot be
any levy of interest u/s. 234D of the Act. We accordingly direct the
AO to delete the interest levied u/s. 234D of the Act. Accordingly,
the ground no. 12 is allowed.
36. In the result, the ITA No. 859/Del/2006 (AY 2002-03) is partly
allowed.
37. In the result, all the 03 appeals of the assessee are partly
allowed.

The order is pronounced in the Open Court on 27.11.2020.

sd/- sd/-

(MADHUMITA ROY) (N.K. BILLAIYA)
JUDICIAL MEMBER ACCOUNTANT MEMBER

Dated: ___ 11-2020 Asst. Registrar,
SRB ITAT, New Delhi
Copy forwarded to:

1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
44

Order dictated on 25.11.2020.
Date on which the typed draft is placed before the Dictating Member 26.11.2020..
Date on which the approved draft comes to the Sr.PS/PS ………………
Date on which fair order sent to Member for signature ………………..
Date on which the fair order comes back after pronouncement to the Sr. PS/PS ………….
Date of Uploading order ………………Not Available on net.
Date on which the file goes to the Bench Clerk ……………
Date on which the file goes to the Head Clerk………………………………
The date on which the file goes to the Assistant Registrar for Signature on the order…………………………
Date of Despatch of the Order ………………………………..

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