CASTECH FOUNDRIES PRIVATE LTD.,JUNAGADH V. THE DCIT, JUNAGADH CIRCLE, JUNAGADH

ITA 454/RJT/2023

AI Insights

Castech Foundries P. Ltd. appealed against the order of the Learned Commissioner of Income Tax (Appeals) which disallowed depreciation on newly acquired plant & machinery, arguing that the assets were not put to use during the assessment year 2014-15. The Tribunal examined the circumstances under which the assets were acquired and the legal precedents cited by the appellant, which supported the claim that assets kept ready for use qualify for depreciation. The Tribunal's decision favored the appellant, leading to the deletion of the disallowed depreciation amount.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 469824 (ITAT-RAJKOT)
• Duration Of Justice: 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 24-10-2024
• Assessment Year: 2014-2015
• Appeal Filed On: 28-12-2023
• Other Referred Cases: CIT v. Geo Tech Construction Corporation (2000) 244 ITR 452, CIT v. Refrigeration & Allied Industries Ltd. (2001) 247 ITR 12, CIT v. Panacea Biotech Ltd. (2010) 324 ITR 311, Betterman Engineers Pvt. Ltd. V. ITO Ward \\u2013 1(1) in ITA no. 2001/kol/2014 dated 06-06-2018
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHISH KUMAR PANDEY; LD.
• Assessee Lawyers: MEHUL RANPURA; LD
• Keywords: Depreciation
• Section: 143(1); 32; 13

Judgement Text

"आयकर अपील\tय अ धकरण,राजकोट \u0011यायपीठ, राजकोट। IN THE INCOMETAXAPPELLATE TRIBUNAL, RAJKOT BENCH: RAJKOT BEFORE DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER And SHRI DINESH MOHAN SINHA, JUDICIAL MEMBER आयकर अपील सं./ITA No. 454/RJT/2023 (\u000eनधा\u0012रण वष\u0012/Assessment Year: (2014-15) Castech Foundries P. Ltd. 1708-1709 GIDC – II, Dolatpara Junagadh Vs. The DCIT, Junagadh, Circle, Junagadh \u0016थायी लेखा सं./जीआइआरसं./PAN/GIR No.: AAACC8601N (अपीलाथ\u001c/Appellant) (\u001d\u001eयथ\u001c/Respondent) \u000eनधा\u0012\u001fरती क! ओर से/Appellant by : Shri Mehul Ranpura, Ld. AR राज\u0016व क! ओर से/Respondent by : Shri Ashish Kumar Pandey, Ld. Sr. DR. सुनवाई क! तार%ख/ Date of Hearing : 24/10/2024 घोषणा क! तार%ख/Date of Pronouncement : 13/ 11 /2024 आदेश / O R D E R PER SHRI DINESH MOHAN SINHA, JUDICIAL MEMBER: This appeal filed by the assessee is directed against the order of Learned Commissioner of Income Tax (Appeals) [in short, “the Ld. CIT (A)”], National Faceless Appeal Centre, Delhi order dated 28.12.2023 for Assessment year 2014-15. 2. The assessee has raised the following of appeal: 1. The Ld. CIT(A) has grossly erred in disallowing depreciation of Rs. 6,69,305/- on addition made under plant & Machinery of Rs. 38,24,600/- during 28-03-2014 to 31-03-2014 by presuming that considering the mode of transportation, distance from Junagadh and time of dispatch from the respective supplier. The above referred assets have not been put to use during the year under consideration. 1.2 The Ld. CIT(A) has filed to appreciate that under normal circumstances, distance of 316 Kms from Ahmedabad to Junagadh via road can be easily reached before 31-03-2014 when the truck started at 10.00 A.M. or on 2.45 PM on 31-03-2014 from Ahmedabad. Under the circumstances, question of disallowance of depreciation on additions made under the head plant & Machinery on 31-03-2014 for purchase of machines from Ahmedabad does not arise. 1.3 The Ld. CIT(A) has further failed to appreciate that under normal circumstances, distance of 803 kms from mumbai to junagadh via road can be easily reached before 31-03-2014 when the truck had started at 10.50 A.M. on 28-03-2014 from Mumbai. Under the circumstances, question of disallowance of depreciation on additions made under the head plant & Machinery on 31-03-2014 for purchase of machineries from Mumbai does not arise. 1.4 The Ld. CIT(A) has further failed to appreciate that additions are made for phrase of various machines which does not require any process or sub- sequential time to make them ready to use. All these machines are of plug in nature. Hence, at the time of purchase itself all the machines were in workable conditions and ready to use at that time. The same has been used in the business during the year and according appellant has claimed depreciation on the dame, under the circumstances, question of disallowance of depreciation does not arise. 1.5 The Ld. CIT(A) has grossly erred in not appearing that appellant can claim depreciation once the assets is ready to sue in view of following decisions. • CIT v. Geo Tech Construction Corporation (2000) 244 ITR 452 • CIT v. Refrigeration & alled Industries Ltd. (2001) 247 ITR 12 • CIT v. Panaca Biotech Ltd. (2010) 324 ITR 311 • Betterman Engineers Pvt. Ltd. V. ITO Ward – 1(1) in ITA no. 2001/kol/2014 dated 06-06-2018.” 1.6 The appellant humbly requests your honour that impugned disallowance of depreciation of Rs. 6, 69,205/- on additions under plant & Machinery as made by the Ld. CIT(A) may kindly be deleted. 2. The appellant reserves its right of add, amend, alter, substitute or modify all or any of the grounds stated herein above as the facts and circumstances of the case may justify. 3. The assessee is a private limited company and is engaged in the business of Manufacturing of steel & Alloy casting and wind Electronic Power. 4. The assessee has e–filed its return of income on 30-09-2014 declaring a total income at Rs. 3,68,14,390/- under normal provisions and a book profit of Rs. 4,12,34,229/- vide acknowledgement number 37917231300914 and the same was processed u/s. 143(1) of the Act by CPC Banglore. During the Period of AY. 2014-15 the assessee purchase machine and recorded in the books of Account Date of purchase Amount 28.03.2014 35,49,565 31.03.2014 2,31,630 31.03.2014 4,63,260 The above dates are tabulated from the copies of the invoices furnished by the assessee. From the above tabulated data, it can be seen that it is not convincing that the above tabulated assets have in fact been put to use by the assessee on or before 31.12.2014 and such assets have been utilized on or before 31.03.2014 for the purpose as they were intended for considering the facts and circumstances, the claim of the assessee that such assets aggregating to Rs. 42,44,455/- as stated above, have in fact depreciation claimed by the assessee under the head “plant & Machinery” on this assets reads to be disallowed. 5. On this machinery total of Rs. 42,44,455/- the assessee claimed depreciation which was denied by the Ld. AO was of Rs. 6,36,663/-. Thus, allowable depreciation, in the case of the assessee arrives at Rs. 24,58,238/- as above. The assessee has claimed depreciation of Rs. 41,95,320/- on pant & machinery. Therefore, difference of Rs. 17,32,082/- (Rs. 41,95,320/- as claimed by the assessee – Rs. 24,58,238/- as computed above) is disallowed and added back to the total income of the assessee accordingly. The assessment was framed as and the income was Subject to the above remarks total income of the assessee company is computed as under: Total income as per statement of income Rs. 3,61,14,390/- Particular Opening as on 01.04.2013 Addition Depreciation W.D.V. as on 31.03.2014 On or before 30.09.2013 After 30.09.2013 15% on (ii) + (iii) 7.5% On (iv) Total (i) (ii) (iii) (iv) (v) (vi) (v)+(vi) 11475146 301248 13468177 Less : Assets not put to use during the year as para. 6.4 above 4244455 Block for allowable depreciation 11475146 301248 9223722 1766459 6917 79 245823 8 22786333 Add: Disallowance out of power expenses Rs. 1,86,09,265/- Addition as discussed in para – 5.5 & 5.6 Rs. 17,37,02/- Assessee total income round off Rs. 5,53,60,840/- 6. That the assessee filed an appeal against the order dated 30.12.2016 before the Ld. CIT (appeal) on 23.1.2017. The Ld. CIT(A) partly allowed the appeal of the appellant vide order dated 02.11.2023. 7. The appeal of the assessee was partly allowed by the Ld. CIT(A) on the basis of written submission in Para 2.10 & 2.11 are as under. 2.10 Thus, without prejudice to the claim & contentions of the appellant, the Ld. AO has failed to appreciate that amount of disallowance on account of depreciation comes to Rs. 6,69,305/- and not Rs. 17,37,082/- as amde by him. 2.11 The appellant humbly request your honour that impugned disallowance of depreciation of Rs. 17,37,082/- on additions of Rs. 42,44,455/- as made by the Ld. AO may kindly be deleted. Alternately, if the disallowance of depreciation is confirmed then the appellant humbly request your honour that amount of disallowance on account of depreciation be considered at Rs. 6,69,205/- and in turn amount of disallowance be reduced by Rs. 10,67,777/- (Rs. 17,37,082 /- less Rs. 6,69,305/-) In view of the above the disallowance of depreciation is restricted to Rs. 6,69,305/- as against Rs. 17,37,082/- thus giving relief of Rs. 10,67,777/-. The AO is directed to make necessary revision order. 8. Feeling aggrieved by the order of the Ld. CIT(A) the assessee in appeal before us. 9. Ld. AR of the assessee has produced the machinery bill testimony equipment report (Pg no. 26 of paper book placed on record) in support of the case. 10. Ld. Sr. DR of the revenue relied on the order of the Ld. CIT(A). 11. We have heard the argument of the assessee and perused the material available on record. We note that case law referred by the Ld. AR of the assessee are: CIT v. Gao Tech Construction Corporation (2000) 244 ITR 452 Depreciation – user for business – Active vis-as-vis passive user- there is no requirement is section 32 that the assets should be owned and used for the whole of previous year in question- wider meaning of the word “used” will include cases where an asset is kept ready for use- Tribunal, on a consideration of factual aspects, has recorded a finding about passive user of trippers purchased by assessee just before the end of relevant previous year – said conclusion essential is factual and it cannot be termed to be one without any basis or illogical – assessee entitled to depreciation on trippers. Conclusion: Tribunal having recorded a finding about passive user of tippers purchased by assessee just before the end of relevant previous year, assessee was entitled to depreciation on tippers. CIT v. Refrigeration & Allied Industries Ltd. (2001) 247 ITR 12 depreciation user for business, active vis-as-vis passive use, there is no requirement is section 32 that the assets should be used for whole of previous year, an asset can be said to be in use even when it is kept ready for use, assessee had no business from cold storage during the year in question due to poor crop of potatos, however, the plant was kept in operational condition expenses relating to cold storage plant allowed by AO depreciation could not be disallowed. Conclusion: As asset can be said to be in use when it is kept ready for use; assessee was entitled to depreciation on cold storage plant which was kept in operational condition though not put to actual use during the previous year, particularly when other expenses relating to the p-leant have been allowed by AO. CIT v. Panacea Biotech Ltd. (2010) 234 ITR 311 Depreciation- user for business flat purchased and used as officer assessee obtained possession of the flat no 21th march, 2000 and got the deed registered on 29th march, 2000 after paying the charged of the concerned society. Flat was fitted with requisite amenities for using it as an officer it as an office for using it as an officer and one consignment was sent to this officer. Thus, the office was functional and was actually used for the purpose of business user of office need not be fitted. Therefore, assessee is entitled to depreciation on the flat in the relevant assessment year CIT v. Refrigeration & Allied Industries Ltd. (2000) 163 CTR (Del) 498 : (2001) 247 ITR 12 (Del) and capital Bus Services P. Ltd. V. CIT (Del) followed. 12. since the case of the assessee squarely covered by the above judgement placed on record. We are inclined to accept the appeal of the assessee. We hold that the addition of Rs. 6,89,305/- is deleted, we quash the order of Ld. CIT(A) on dated 23.01.2015. Hence, that the appeal of the assessee in hereby allowed. Order is pronounced on 13/ 11/2024 in the Open Court. S Sd/- Sd/- (DR. ARJUN LAL SAINI) (DINESH MOHAN SINHA) ACCOUNTANT MEMBER JUDICIAL MEMBER Rajkot TRUE COPY *दनांक/ Date: 13 /11/2024 Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT (A) 4. Pr. CIT 5. DR/AR, ITAT, Rajkot 6. Guard File. By Order, Assistant Registrar/Sr. PS/PS ITAT, Rajkot "