Court upholds Tribunal's decision on disallowance under Section 14A, criticizes Revenue for lack of justification.

The court dismissed the appeal, upholding the Tribunal's decision to recompute the disallowance under Section 14A and delete disallowances related to the Kavesar Unit. The court criticized the Revenue for lack of justification in the appeal and emphasized the need for uniform application of law. The Chief Commissioner of Income Tax was directed to ensure compliance with the court's orders, with a warning of potential costs for non-compliance.

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Issues Involved:
1. Recompute disallowance under Section 14A.
2. Deletion of disallowance incurred on Kavesar Unit.
3. Deletion of disallowance of depreciation on assets of Kavesar Unit.

Issue-wise Detailed Analysis:

1. Recompute Disallowance under Section 14A:
The Tribunal directed the Assessing Officer to recompute the disallowance under Section 14A on a reasonable basis, relying on the judgment of the Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. Vs. DCIT (2010). The Revenue challenged this, citing that the judgment had not been accepted and was under challenge before the Supreme Court. However, the court noted that the Supreme Court had dismissed the Revenue's challenge to the Godrej & Boyce decision, thus concluding the issue against the Revenue. Consequently, question (a) did not raise any substantial question of law and was not entertained.

2. Deletion of Disallowance Incurred on Kavesar Unit:
The Tribunal deleted the disallowance of Rs. 1,19,498/- incurred by the assessee on the Kavesar Unit, following its decision for the Assessment Year 2002-03. The Revenue's appeal memo did not indicate any challenge to the earlier order of the Tribunal for the Assessment Year 2002-03, nor did it provide any justification for the appeal. The court emphasized that whenever the Tribunal follows its own order and the Revenue has accepted the earlier decision, the appeal memo must set out reasons for preferring an appeal. Since no such reasons were provided, question (b) did not raise any substantial question of law and was not entertained.

3. Deletion of Disallowance of Depreciation on Assets of Kavesar Unit:
The Tribunal deleted the disallowance of Rs. 1,27,678/- being depreciation on assets of Kavesar, noting that the assessee had discontinued its pigment operation at Kavesar from 01.04.1999 and the assets were never put to use. Again, the Tribunal followed its decision for the Assessment Year 2002-03, which the Revenue had accepted. No justification was provided for the appeal, and thus, question (c) did not raise any substantial question of law and was not entertained.

Court's Observations on Revenue's Conduct:
The court expressed displeasure with the manner in which the Revenue prosecuted the appeal, highlighting the lack of necessary information provided to the counsel and the failure to follow directions in earlier orders. The court reiterated the need for certainty and uniform application of law, emphasizing that the Revenue should not act arbitrarily. The court directed the Chief Commissioner of Income Tax to ensure compliance with its directions and warned of potential costs on the Assessing Officer and Commissioner for non-compliance.

Conclusion:
The appeal was dismissed, with the court directing the Registry to serve a copy of the order to the Principal Chief Commissioner of Income Tax and the Central Board of Direct Taxes.

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