Kirloskar Batteries Pvt. Ltd., Bangalore V. ACIT, Bangalore

CO 23/BANG/2011

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 6094 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 19 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 28-06-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 28-06-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 09-05-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JACINTA ZIMIK VASHAI ADD; G V GOPALA RAO CITI
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

PAGE 1 OF 6 ITA NOS.1082 TO 1084/BANG/2010 & C.O.NOS.21 TO 23/BANG/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI N BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI GEORGE GEORGE K, J.M ITA NOS.1082 TO 1084/BANG/2010 (ASSESSMENT YEARS 2005-06 TO 2007-08) THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-11(5), BANGALORE. - APPELLANT VS M/S KIRLOSKAR BATTERIES PRIVATE LTD., NO.P.B.NO.2231, YESHWANTPUR, BANGALORE. - RESPONDENT C.O.NOS.21 TO 23/BANG/2011 (ASST. YEARS 2005-06 TO 2007-08) (BY ASSESSEE) REVENUE BY : SHRI G V GOPALA RAO, CIT-I & SMT. JACINTA ZIMIK VASHAI, ADDL. CIT ASSESSEE BY : SHRI R SATHHYANARAYANA MURTHY , C.A. ORD ER PER BENCH : THESE APPEALS INSTITUTED BY THE REVENUE AND THE CROS S OBJECTIONS FILED BY THE ASSESSEE ARE DIRECTED AGAINS T THREE SEPARATE ORDERS OF THE CIT(A)-I, BANGALORE, ALL DATED 28.06. 2010. THE RELEVANT ASSESSMENT YEARS ARE 2005-06 TO 2007-08. 2. SINCE COMMON ISSUE IS INVOLVED IN THESE APPEALS AND THE CROSS OBJECTIONS AND THEY PERTAIN TO THE SAME ASSESS EE, THEY ARE PAGE 2 OF 6 ITA NOS.1082 TO 1084/BANG/2010 & C.O.NOS.21 TO 23/BANG/2011 2 HEARD TOGETHER AND DISPOSE OFF BY THIS COMMON AND CO NSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. 3. THE SOLITARY ISSUE THAT IS RAISED IN ALL THESE A PPEALS IS WHETHER THE CIT(A) IS JUSTIFIED IN DELETING THE ADD ITION MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE PERTAI NING TO NOIDA UNIT. 4. THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE O NLY SUPPORTING THE ORDERS OF THE CIT(A). 5. BRIEF FACTS OF THE CASE ARE AS FOLLOWS:- FOR THE ASST. YEAR 2005-06, RETURN OF INCOME WAS FILED ON 31.10.2005 DECLARING A LOSS OF RS.59,77,299/0-. AS SESSMENT WAS TAKEN UP FOR SCRUTINY BY ISSUANCE OF NOTICE U/S 143(2 ) OF THE ACT AND THE SCRUTINY ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT VIDE ORDER DATED 31.12.2007. IN THE SAID SCRUTINY ASSESS MENT, THE AO HAD DISALLOWED EXPENDITURE AND DEPRECIATION PERTAINING TO NOIDA UNIT OF THE ASSESSEE COMPANY AMOUNTING TO RS.1,52,60,555/-. 5.1 FOR THE ASST. YEAR 2006-07, RETURN OF INCOME WA S FILED ON 30.11.2006 DECLARING NIL INCOME AFTER SETTING OFF B ROUGHT FORWARD LOSSES. IN THE SCRUTINY ASSESSMENT COMPLETED U/S 14 3(3) ON 8.12.2008, THE AO DISALLOWED THE EXPENSES AND DEPRE CIATION CLAIMED PERTAINING TO NOIDA UNIT AMOUNTING IN TOTAL TO RS.4 5,85,023/-. PAGE 3 OF 6 ITA NOS.1082 TO 1084/BANG/2010 & C.O.NOS.21 TO 23/BANG/2011 3 5.2 FOR THE AY 2007-08, THE ASSESSEE COMPANY FILED THE RETURN OF INCOME ON 31.10.2007 DECLARING NIL TOTAL INCOME. ASSESSMENT U/S 143(3) OF THE ACT WAS PASSED ON 25.1 1.2009 MAKING A DISALLOWANCE OF EXPENDITURE AND DEPRECIATION IN TOT AL AMOUNTING TO RS.55,87,189/-. 6. AGGRIEVED BY THE DISALLOWANCE OF EXPENDITURE AND DEPRECIATION PERTAINING TO NOIDA UNIT IN RESPECT OF ALL THE ABOVE STATED ASST. YEARS, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 7. THE FIRST APPELLATE, AFTER CONSIDERING THE WRIT TEN SUBMISSIONS OF THE ASSESSEE COMPANY, ALLOWED THE APP EAL OF THE ASSESSEE. THE RELEVANT FINDING OF THE CIT(A) CONC ERNING THE AY 2005-06 READS AS FOLLOWS:- 5. THE AO, ON THE OTHER HAND, IN THE ASSESSMENT ORDER PLEADED THAT IF THE SURAJPUR/NOIDA UNIT WAS NOT OPERATING AND NOT MANUFACTURING THE BATTERIES, IT SHOULD NOT HAVE INCURRED THE EXPENDITURES UNDER DIFFERENT HEADS, VIZ., SALARY, WAGES, BONUS, GRATUITY, CONTRIBUTIONS T O PF ETC., STAFF WELFARE EXPENSES, RENT, REPAIR AND TRAVELING EXPENSES, ETC. IT IS ALSO POINTED OUT TH AT DEPRECIATION HAS BEEN WRONGLY CLAIMED BY THE APPELLANT BECAUSE THE ASSETS COULD NOT HAVE BEEN USED FOR MANUFACTURE OF THE BATTERIES IN A CLOSED UNIT. 6. AFTER CONSIDERING THE WRITTEN SUBMISSION VIS-A-VIS THE ASSESSMENT ORDER, I FIND STRENGTH AND MERIT IN THE ARGUMENTS OF THE ARS ELABORATED IN PAGE 4 OF 6 ITA NOS.1082 TO 1084/BANG/2010 & C.O.NOS.21 TO 23/BANG/2011 4 THE WRITTEN SUBMISSION WHICH IS ALSO WELL SUPPORTED BY CASE LAWS. IT IS NOT DISPUTED THAT THE ASSESSEE WAS OPERATING TWO UNITS ONE AT BANGALORE AND ANOTHER AT SURAJPUR AND THE SURAJPUR UNIT WAS CLOSED DOWN IN JUNE, 2003 WHICH DID NOT MEAN THAT THE BUSINESS WAS DISCONTINUED. THE PLETHORA OF DECISIONS CITED BY THE AR ALSO STRONGLY POINT OUT THAT IF THE BUSINESS, HAS NOT BEEN CLOSED, THE EXPENDITURES AND DEPRECIATION PERTAINING TO THE CLOSED UNIT ARE ELIGIBLE DEDUCTIONS FROM THE PROFIT S EARNED FROM THE RUNNING BUSINESS, IN VIEW OF THE ABOVE, THE ADDITIONS ARE DELETED AND GROUNDS OF APPEAL ARE ALLOWED. 8. THE DEPARTMENT, BEING AGGRIEVED, IS IN APPEAL B EFORE US. 9. THE LEARNED DR SUBMITTED THAT THE CIT(A) HAS ER RED IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE PERTAINING TO THE NOIDA UNIT WITHOUT AP PRECIATING THE FACTS AND CIRCUMSTANCES UNDER WHICH THE ADDITION WA S MADE. IT WAS ALSO SUBMITTED BY THE LEARNED DR THAT THE CIT(A) WAS NOT JUSTIFIED IN ALLOWING THE EXPENDITURE CLAIMED BY THE ASSESSEE PER TAINING TO THE NOIDA UNIT, WHEN THE ASSESSEE ITSELF, HAS ADMITTED THAT THE ASSESSEE HAS STOPPED MANUFACTURING ACTIVITY AT NOIDA UNIT SIN CE EARLIER YEARS. THE LEARNED DR ARGUED THAT THE CIT(A) HAS ERRED IN ALLOWING THE VARIOUS EXPENDITURES INCLUDING THE DEPRECIATION CLA IMED BY THE ASSESSEE, WITHOUT APPRECIATING THE FACT THAT THE AS SETS COULD NOT HAVE BEEN USED FOR MANUFACTURE OF THE BATTERIES IN A CLO SED UNIT. PAGE 5 OF 6 ITA NOS.1082 TO 1084/BANG/2010 & C.O.NOS.21 TO 23/BANG/2011 5 10. THE LEARNED AR REITERATED THE SUBMISSIONS MADE BEFORE THE INCOME TAX AUTHORITIES AND SUPPORTED THE FINDIN GS OF THE CIT(A). 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD. ON PERUSAL OF THE ASSESSMENT O RDER AS WELL AS THE CIT(A)S ORDER, WE FIND THAT THE FACTS HAS NOT BEEN DISCUSSED IN DETAIL. THERE HAS BEEN NO EXAMINATION AS TO WHETHE R THE NOIDA UNIT OF THE ASSESSEE AS WELL AS THE UNIT IN BANGALORE IS A COMPOSITE BUSINESS. IN OTHER WORDS, WHETHER IT IS IN THE SAM E LINE OF BUSINESS OR SEPARATE BUSINESS AND WHETHER THERE IS UNITY OF CONT ROL AND INTERLACING AMONG THE LINE OF BUSINESS, WHICH HAS B EEN DISCONTINUED AND THOSE WHICH ARE CARRIED ON. IN THE ABSENCE OF SUCH FINDING, IT IS NECESSARY THAT THE MATTER SHOULD BE RESTORED TO THE AO SO THAT A PROPER FINDING AND REASONED ORDER CAN BE PASSED. T HEREFORE, THIS ISSUE IS RESTORED TO THE FILE OF THE AO. HE SHALL EXAMINE THE DETAILS OF THE EXPENDITURE CLAIMED, WHETHER THE ASSESSEE IS CARRYING ON A COMPOSITE BUSINESS AND THERE IS UNITY OF CONTROL AN D INTERLACING AMONG THE LINE OF BUSINESS. IF THE EXPENDITURE CLAIMED I S GENUINE AND IF THERE IS INTERLACING AMONG THE LINE OF BUSINESS, NE CESSARILY THE EXPENDITURE CLAIMED FOR NOIDA UNIT IS TO BE ALLOWED AS A DEDUCTION. FOR THIS LIMITED PURPOSE, THE MATTER IS RESTORED TO THE FILE OF A.O. 12. IN THE RESULT, THE APPEALS FILED BY THE DEPARTM ENT ARE ALLOWED FOR STATISTICAL PURPOSES. PAGE 6 OF 6 ITA NOS.1082 TO 1084/BANG/2010 & C.O.NOS.21 TO 23/BANG/2011 6 13. IN THE LIGHT OF THE DISPOSAL OF THE APPEALS FI LED BY THE DEPARTMENT, THE CROSS OBJECTIONS FILED, WHICH ARE O NLY SUPPORTING THE ORDERS OF THE CIT(A), HAVE BECOME ACADEMIC AND THE SAME ARE DISMISSED AS INFRUCTUOUS. 14. IN THE RESULT, THE CROSS OBJECTIONS FILED BY TH E ASSESSEE ARE DISMISSED. THE ORDER PRONOUNCED ON TUESDAY, THE 28 TH DAY OF JUNE, 2011 AT BANGALORE. SD/- SD/- (N BARATHVAJA SANKAR) (GEORGE GEORGE K) VICE PRESIDENT JUDICIAL MEMBER COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE C IT CONCERNED. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/28/6. BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.