M/s. Hari Machines Ltd., New Delhi V. ACIT, New Delhi

CO 362/DEL/2010

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 5960 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 7 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 09-05-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 09-05-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 01-11-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M L DUJARI
• Assessee Lawyers: MONA MOHANTY
• Keywords: Depreciation; Wrong claim

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER & SHRI K.D. RANJAN, ACCOUNTANT MEMBER ITA NO. 4589/DEL/2010 ASSESSMENT YEAR: 2005-06 ACIT, VS. M/S HARI MACHINES LTD., CIRCLE 12(1), RAJGANPUR, SUNDARGARH, NEW DELHI. ORISSA. AAACH0868C (APPELLANT) (RESPONDENT) & CROSS OBJECTION NO. 362/DEL/2010 ASSESSMENT YEAR: 2005-06 M/S HARI MACHINES LTD., VS. ACIT, RAJGANPUR, SUNDARGARH, CIRCLE 12(1), ORISSA. NEW DELHI. AAACH0868C (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. MONA MOHANTY, SR. DR RESPONDENT BY : SH. M.L. DUJARI, CA ORDER PER I.P. BANSAL, J.M. THE APPEAL IS FILED BY THE REVENUE AND CROSS OBJE CTION BY THE ASSESSEE BOTH ARE DIRECTED AGAINST ORDER PASSED BY LD. CIT(A) DATED 14.7.2010 FOR A.Y. 2005-06. GROUNDS OF THE APPEAL AND CROSS OBJECTION ARE READ AS UNDER: GROUNDS OF REVENUES APPEAL : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE ORDER OF THE CIT(A) IS ERRONEOUS, PERVERSE, ILLEGAL AND AGAINST THE PROVISIONS OF LAW WHICH IS LIABLE TO BE SET ASIDE. ITA NO. 4589/D/10 & CO NO. 362/D/10 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 3,31,145/- MADE BY THE AO ON ACCOUNT OF UNDER STATEMENT OF INC OME. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 2,36,066/- MADE BY THE AO ON ACCOUNT OF UNDER STATEMENT OF INC OME. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 82,07,445/- MADE BY THE AO ON ACCOUNT OF WRONG CLAIM OF DEPRECI ATION. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN RESTRICTED THE ADDITION TO RS. 2,68,984/- MADE BY THE AO ON ACCOUNT OF NON ALLOWANCE OF DEPRE CIATION. 6. THE APPELLANT CRAVES LEAVE, TO ADD, ALTER OR AME ND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF THE HEARING. GROUNDS OF ASSESSEES CROSS OBJECTION : - 1. THAT THE LD. AO HAS ERRED IN NOT ALLOWING DEPRE CIATION TO THE ASSESSEE COMPANY ON HB-8 BORING MACHINE. 2. THAT THE CROSS OBJECTOR RESERVES ITS RIGHT TO AD D ONE OR MORE GROUNDS ON OR BEFORE THE HEARING. 2. ASSESSEE HAD FILED RETURNED DECLARING INCOME OF RS. 13,36,34,400/- ON 29 TH OCTOBER, 2005 AND ASSESSMENT HAS BEEN MADE VIDE ASSESSMENT ORDER DATED 28.12.2007 AT AN INCOME OF RS. 14,26,99,627/-, WHEREIN VARIOUS ADDITIONS AGGREGATI NG TO A SUM OF RS. 90,65,227/- WERE MADE. LD CIT(A) HAS PARTLY DELETE D THE ADDITION. AGAINST DELETED AMOUNTS THE REVENUE IS AGGRIEVED AN D HAS FILED AFOREMENTIONED APPEAL. AGAINST THE SUSTAINED DISAL LOWANCE THE ASSESSEE HAS FILED CROSS OBJECTION. ITA NO. 4589/D/10 & CO NO. 362/D/10 3 3. GROUND NO. 1 OF THE REVENUES APPEAL IS GENERAL IN NATURE. NO SPECIFIC ARGUMENTS WERE RAISED IN THAT REGARD. THE REFORE, SUCH GROUND DOES NOT NEED SEPARATE ADJUDICATION. 4. IN GROUND NO. 2 DELETION OF A SUM OF RS. 3,31,14 5/- IS AGITATED. THIS ISSUE HAS BEEN DEALT WITH BY THE AO IN PARA 3 OF THE ASSESSMENT ORDER. THE ADDITION HAS BEEN MADE ON THE BASIS THA T TDS CERTIFICATES FILED BY THE ASSESSEE WERE SHOWING THE RECEIPTS FRO M OCL INDIA LTD. AT RS. 36,00,000/- AGAINST TOTAL AMOUNT RECEIVED OF RS . 39,31,145/-. THE DIFFERENCE OF RS. 3,31,145/- HAS BEEN ADDED TO THE INCOME OF THE ASSESSEE ON ACCOUNT OF NON-OFFERING THE SAID DIFFER ENCE TO THE RETURNED INCOME. 5. BEFORE CIT(A), IT HAS BEEN THE CASE OF THE ASSES SEE THAT APART FROM 36 LAKH WHICH IS SHOWN IN THE TDS CERTIFICATE, ANOTHER SUM OF RS. 3,32,220/- WAS CREDITED TO SERVICE TAX ACCOUNT WHIC H WAS REALIZED FROM CUSTOMER AND PAID TO GOVERNMENT. IT WAS SUBMITTED THAT THAT AMOUNT DID NOT REPRESENT INCOME OF THE ASSESSEE. THE AO ADDED THE SAID AMOUNT WITHOUT AFFORDING ANY OPPORTUNITY TO THE ASSESSEE. IT WAS SUBMITTED THAT THERE WAS A SMALL DIFFERENCE OF RS. 1,075/- WHICH W AS ON ACCOUNT OF SMALL CREDITS ON WHICH NO TDS WAS DEDUCTIBLE. HENC E, IT WAS PLEADED THAT THE SAID AMOUNT COULD NOT BE ADDED TO THE INCO ME OF THE ASSESSEE. ON THESE SUBMISSIONS LD. CIT(A) HAS RETURNED A FIND ING THAT THE DIFFERENCE WAS ON ACCOUNT OF SERVICE TAX WHICH COUL D NOT BE TREATED AS ITA NO. 4589/D/10 & CO NO. 362/D/10 4 INCOME OF THE ASSESSEE. THE ASSESSEE HAS ACCOUNTED FOR THE INCOME PART, HENCE, NO ADDITION ON THIS ACCOUNT WAS CALLED FOR. 6. AFTER NARRATING THE FACTS, IT WAS SUBMITTED BY L D. DR THAT THE SAID AMOUNT WAS RIGHTLY ADDED BY THE AO TO THE INCOME OF THE ASSESSEE AS ASSESSEE COULD NOT EXPLAINED THE DIFFERENCE IN THE AMOUNT CREDITED IN THE ACCOUNT OF THE ASSESSEE RELATING TO OCL INDIA L TD. AND LD. CIT(A) HAS WRONGLY DELETED THE SAME. 7. ON THE OTHER HAND, IT WAS SUBMITTED BY LD. AR TH AT THE DIFFERENCE WAS ON ACCOUNT OF SERVICE TAX PAYABLE. HE DREW OUR ATTENTION TOWARDS THE DETAIL SUBMITTED TO THE CIT(A) WITH REGARD TO T HE PAYMENTS RECEIVED FROM OCL LTD. AND THESE DETAILS ARE CONTAINED IN PA GES 52 TO 65 OF THE PAPER BOOK. HE SUBMITTED THAT AFTER GOING THROUGH ALL THESE DETAILS LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION AS THE DIFF ERENCE WAS ON ACCOUNT OF SERVICE TAX PAYABLE WHICH COULD NOT BE TREATED A S INCOME OF THE ASSESSEE. THUS, RELYING UPON THE ORDER OF CIT(A), IT WAS PLEADED THAT ADDITION HAS BEEN RIGHTLY DELETED AND HIS ORDER IN THIS REGARD SHOULD BE UPHELD. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO N IN THE LIGHT OF MATERIAL PLACED BEFORE US. ON VERIFICATION OF ALL THE DOCUMENTS A FINDING HAS BEEN RECORDED BY LD. CIT(A) THAT THE BILLS ISSU ED BY THE ASSESSEE WERE INCLUSIVE OF SERVICE TAX. SERVICE TAX IS A RE COVERY ON BEHALF OF THE COMPANY AND IT HAS BEEN PAID TO GOVERNMENT ACCOUNT. ELEMENT OF ITA NO. 4589/D/10 & CO NO. 362/D/10 5 SERVICE TAX CANNOT BE TREATED AS INCOME OF THE ASSE SSEE. NO CONTRARY MATERIAL HAS BEEN BROUGHT TO OUR NOTICE TO SHOW THA T THESE FINDINGS OF LD. CIT(A) ARE CONTRARY TO FACTS EXISTED ON RECORD. THE REFORE, WE DECLINE TO INTERFERE AND THIS GROUND OF THE REVENUE IS DISMISS ED. 9. IN GROUND NO. 3 REVENUE HAS AGITATED THE DELETIO N OF A SUM OF RS. 2,36,066/-. THIS ISSUE HAS BEEN DISCUSSED BY THE A O IN THE ASSESSMENT ORDER IN PARA 4. THE AO HAS MENTIONED THAT AS PER AUDIT REPORT AND DETAILS THE SALES TO M/S OCL LTD. WERE SHOWN AT RS. 64,27,006/-. AS AGAINST THAT ASSESSEE IN ITS LEDGER ACCOUNT HAS SHO WN A FIGURE OF RS. 61,90,940/-. THE DIFFERENCE OF RS. 2,36,066/- IS A DDED TO THE INCOME OF THE ASSESSEE. HE REJECTED THE CONTENTION OF THE AS SESSEE THAT THE SAID AMOUNT WAS ON ACCOUNT OF SHORT RECOVERY ADJUSTED AG AINST FUTURE BILLS AS NO EVIDENCE OF SUCH ADJUSTMENT WAS FILED. BEFORE C IT(A), IT WAS PLEADED THAT RECONCILIATION OF SUCH TRANSACTION WAS FILED B EFORE THE AO AND THE REFERENCE WAS MADE TO PAGE 48 OF THE PAPER BOOK AND IT WAS SUBMITTED THAT THE DETAILS CONTAINED TWO ITEMS OF RS. 61,90,9 40/- AND RS. 64,27,006/-. IT WAS SUBMITTED THAT WITH RESPECT TO FORMER AMOUNT THERE WAS NO DISCREPANCY WHATSOEVER. WITH REGARD TO LATE R AMOUNT, IT WAS SUBMITTED THAT THE INCOME CREDITED BY THE ASSESSEE IS A SUM OF RS. 62,60,731/- AND DIFFERENCE OF RS. 1,66,275/- WAS ON ACCOUNT OF CHARGES OF TAXES AND DUTIES. IT WAS SUBMITTED THAT THOSE T AXES COULD NOT BE TREATED TO BE INCOME OF THE ASSESSEE. ON THESE SUB MISSIONS LD. CIT(A) HAS RECORDED A FINDING THAT THE CONTENTION OF THE A SSESSEE IS REASONABLE ITA NO. 4589/D/10 & CO NO. 362/D/10 6 AND HE HAS RECORDED HIS SATISFACTION THAT THE ADDIT ION MADE BY THE AO WAS NOT CALLED FOR. THE REVENUE IS AGGRIEVED, HENC E IN APPEAL. 10. RELYING UPON THE ORDER OF AO, IT WAS SUBMITTED BY LD. DR THAT THE ADDITION WAS RIGHTLY MADE. SHE SUBMITTED THAT LD. CIT(A) HAS WRONGLY DELETED THE ADDITION AND HIS ORDER SHOULD BE SET AS IDE AND THAT OF AO BE RESTORED. 11. ON THE OTHER HAND, RELYING UPON THE SUBMISSIONS MADE BEFORE CIT(A) AND THE FINDINGS RECORDED BY HIM, IT WAS PLE ADED BY LD. AR THAT THE ADDITION HAS RIGHTLY BEEN DELETED AND THE ORDER OF CIT(A) ON THIS ISSUE SHOULD BE UPHELD. 12. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ON IN THE LIGHT OF MATERIAL PLACED BEFORE US. IN THE SUBMISSIONS MADE BEFORE CIT(A) IT WAS SUBMITTED THAT THERE WERE TWO SEPARATE TRANSACTIONS . RS. 61,90,940/- RELATES TO SALE OF GOODS. ANOTHER AMOUNT OF RS. 64 ,27,006/- RELATED TO SALE OF POWER PLANT. IT WAS ALSO SUBMITTED THAT IN THE PROFIT AND LOSS ACCOUNT A SUM OF RS. 62,60,331/- WAS CREDITED AND N OT A SUM OF RS. 61,90,940/- AS CLAIMED BY THE AO. IT WAS SUBMITTED THAT DEBIT ALSO INCLUDES ELEMENT OF SERVICE TAX AND THE DIFFERENCE IS ON ACCOUNT OF SUCH ELEMENT OF TAXES AND DUTIES WHICH HAVE BEEN ACCOUNT ED FOR SEPARATELY. ON THESE SUBMISSIONS LD. CIT(A) HAS RECORDED A FIND ING THAT THE ACTUAL DIFFERENCE WAS A SUM OF RS. 1,66,275/- AND IT WAS N OT 2,36,066/- AS ADDED BY THE AO AND SECONDLY THAT THE SAID DIFFEREN CE WAS ON ACCOUNT ITA NO. 4589/D/10 & CO NO. 362/D/10 7 OF CHARGES OF TAXES AND DUTIES. NO MATERIAL HAS BE EN BROUGHT ON RECORD TO SHOW THAT THESE FINDINGS OF FACT RECORDED BY LD. CIT(A) ARE CONTRARY TO THE FACTS EXISTING ON RECORD. IN ABSENCE OF ANY SU CH MATERIAL, WE DECLINE TO INTERFERE IN THE RELIEF GIVEN BY LD. CIT(A) AND THIS GROUND OF THE REVENUE IS DISMISSED. 13. IN GROUND NO. 4 REVENUE IS AGITATING THE DELETI ON OF ADDITION OF RS. 82,07,445/- MADE ON ACCOUNT OF WRONG CLAIM OF DEPRE CIATION. THIS ISSUE IS DISCUSSED BY THE AO IN PARA 8 OF THE ASSESSMENT ORDER. IT IS MENTIONED BY THE AO THAT DURING THE YEAR UNDER CONS IDERATION ASSESSEE HAD ADDED A NEW FABRICATION UNIT IN ITS FACTORY. S UCH UNIT CONTAINED TWO 50T CRANES, PLATE BENDING MACHINE AND HB-8 HORIZONT AL BORING MACHINE. AS PER FIXED REGISTER MAINTAINED BY THE A SSESSEE, THE DATE OF CAPITALIZATION (WHICH ASSESSEE ALSO TREATS AS DATE OF PUT TO USE) IN RESPECT OF DIFFERENT COMPONENT IS AS UNDER: - S.NO. ITEM DATE AMOUNT NO. OF DAYS 1. ELECTRICAL EQUIPMENT 30-09-04 3404680 183 2. PATTER & DIES 350/1W TPD SPONGTRON EQUIPMENT 31-03-05 1,74,752 1 3. PLATE BENDING MACHINE 25-06-04 24,98,482 280 4. 50 T CRANE 2 NOS 24-07-04 1,47,83,212 251 5. HB-8 13-01-05 1,57,41,437 78 6. BUILDING CAPITALIZED 21-03-05 2,09,26,582 11 14. OBSERVING FROM ABOVE FACTS, THE AO HAS ARRIVED AT A CONCLUSION THAT FACTORY BUILDING WAS CAPITALIZED OR TREATED AS READY TO BE USED ONLY ON 21.3.2005. THEREFORE, EXPRESSING THE DOUBT AO H AS MENTIONED THAT THE DIFFERENT MACHINES HOW COULD BE CLAIMED TO HAVE BEEN PUT TO USE ITA NO. 4589/D/10 & CO NO. 362/D/10 8 EVEN BEFORE FACTORY WAS COMPLETED. THE ASSESSEE WA S REQUIRED TO PRODUCE EVIDENCE IN RESPECT OF FACTORY BUILDING ALO NG WITH MACHINES TO SHOW THAT WHETHER THEY WERE PUT TO USE OR NOT. IN RESPONSE VIDE LETTER DATED 20.12.07 IT WAS SUBMITTED THAT A SUM OF RS. 2 ,09,26,582/- WAS CAPITALIZED ON ACCOUNT OF A NEW FABRICATION SHOP. THE JOB OF SUCH FABRICATION SHOP WAS COMPLETED ON 21.3.2005, THEREF ORE, DEPRECIATION IS CLAIMED ON THE BASIS OF COMPLETION OF FABRICATION S HOP ON 21.3.2005. IT WAS SUBMITTED THAT PENDING COMPLETION OF ROOFING ET C. THE FABRICATION WORK ON SUCH SHOP WAS ALREADY COMMENCED EVEN EARLIE R THAN THE COMPLETION OF THE ENTIRE WORK ON THE FABRICATION SH OP. REFERENCE WAS MADE TO THE INSPECTION CERTIFICATE DATED 27 TH AUGUST, 2004 ISSUED BY THE ELECTRICAL INSPECTOR IN RESPECT OF POWER SUPPLY TO GOLIATH CRAIN, PLATE BENDING MACHINE AND ELECTRICAL INSTALLATION OF CONT ROL PANEL, DISTRIBUTION BOARDS, SWITCH FUSE UNITS AND POWER CABLES UNDER TH E HEAD ELECTRICAL INSTALLATION. THE POWER SUPPLY TO THE CRAIN WAS M ADE ON 24 TH JULY, 2004, TO PLATE BENDING MACHINE ON 25.6.2004 AND TO VARIOUS ELECTRICAL INSTALLATIONS ON 30 TH MAY, 2004 AND THUS, IT WAS CLAIMED THAT DEPRECIATI ON ON FABRICATION SHOP IS ALLOWABLE. COPIES OF LOG SH EETS IN RESPECT OF OPERATION OF SAW-1 MACHINE & HB-8 MACHINE TO CLAIM THAT OPERATION IN FABRICATION SHOP HAD BEGIN EVER BEFORE COMPLETION O F NEW SHED WERE ALSO FILED. THE AO CONSIDERED THE REPLY FILED BY T HE ASSESSEE AS UNSATISFACTORY FOR THE FOLLOWING REASONS: - I) THERE IS NO EVIDENCE OF ANY NATURE IN RESPECT OF CRANES AND OTHER MACHINES BEING PUT TO USE BEFORE THE DATE OF COMPLETION OF FACTORY OR EVEN AFTER THAT DATE. ITA NO. 4589/D/10 & CO NO. 362/D/10 9 II) THE INSPECTOR REPORT IN RESPECT OF ELECTRICAL EQUIPMENT RELIED UPON BY THE ASSESSEE DOES NOT INDICATE THAT EQUIPMENT WAS PUT TO USE. RATHER IT IS A STEP IN PREPARATION AND CERTIFICATION THAT ELECTRICAL SUPPL Y LINES ETC. HAVE BEEN LAID ACCORDING TO THE NORMS PRESCRIB ED FOR INDUSTRIAL POWER. THE INSPECTION REPORT OF ELECTRI CAL INSPECTOR SIMPLY VERIFIES THAT INSTALLATION WAS IN PLACE AND IS IN ACCORDANCE WITH NORMS PRESCRIBED. IN FACT IT BEING PREPARATORY REQUIREMENT IS ALSO EVIDENT THAT THE IN SPECTOR IS ALLOWING THE INSTALLATIONS TO BE ENERGIZED WHETHER ACTUAL PUT TO USE TOOK PLACE OR ONLY TRIAL OF CHECK ING POWER LINE WAS THERE IS NOT KNOW. THE FACT OF MATT ER IS THAT IN INDUSTRIAL SHED THE LINES ARE LAID OUT IN T HE PERIOD WHEN SHED ARE UNDER CONSTRUCTION AND AFTER TESTING OF POWER REQUIREMENT AND IT SOUNDNESS FURTHER CONSTRUC TION AND INSTALLATION TAKES PLACE. THEREFORE, THIS REPO RT MAY SAME AS EVIDENCE OF ELECTRICAL INSTALLATION IN PLAC E AND FIT FOR USE BUT DOES NOT SHOW ACTUAL USE WHICH IN ANY C ASE CAN BE ONLY AFTER FACTORY SHED HAS BEEN COMPLETED. III) THE CASE OF HB-8 WOULD CLEARLY ESTABLISH THAT LOG BOOKS AND OTHER EVIDENCE PRODUCED AND RELIED UPON BY ASSESSEE DO NOT SUPPORT RATHER THEY ARE IN COMPLETE CONTRADICTION TO EVIDENCE ALREADY PRODUCED. IN THE LOG BOOK COPIES PRODUCED IT IS CLAIMED THAT PRODUCTION FROM THIS MACHINE STARTED FROM 13-01-05 ONWARDS WHEREAS THE DOCUMENTS GIVEN IN RESPECT OF ACQUISITION REVEAL TH AT MACHINE WAS IN CALCUTTA PORT TILL 06-01-05. THE SU RVEYOR REPORT DATED 16-02-05 GIVEN BY ASSESSEE MENTION THA T SURVEYOR HAD INSPECT THE PACKED 4 CONTAINERS CONTAI NING THE MACHINE ON 5 & 6 JANUARY05 AT KOLKATA PORT. THEREFORE, THE PRESUMPTION IS THAT MACHINE GOT TRANSPORTED TO ORISSA, GOT ERECTED AND TESTED AND S TARTED PRODUCTION ALL WITHIN 7 DAYS WHICH IS AGAINST POSSI BILITIES. ITA NO. 4589/D/10 & CO NO. 362/D/10 10 15. THE AO REFERRED TO THE VOUCHER OF CAPITALIZATIO N OF MACHINE WHICH IS NAMED AS JV-24 IN WHICH IT WAS SHOWN THAT THE AS SESSEE HAD PAID THE AMOUNT TO M/S V. SUDERSHAN NAIR OF CHENNAI AGAINST BILL DATED 31.3.2005 IN RESPECT OF ERECTION WORK OF HB-8 MACHI NE AND THE CONTRACT OF ERECTION OF SUCH MACHINE WAS GIVEN ONLY ON 20.2. 2005. THUS, HE HAS DENIED THE CLAIM OF DEPRECIATION TO THE ASSESSEE. H E OBSERVED THAT THERE IS NO EVIDENCE THAT THE MACHINES AND BUILDINGS WERE PUT TO USE AND HE OBSERVED THAT AT BEST THEY CAN SAID TO BE READY TO USE. AS THE ASSETS WERE NOT USED, THE DEPRECIATION IS NOT ALLOWABLE. IT IS IN THIS MANNER, THE ENTIRE CLAIM OF DEPRECIATION OF RS. 82,07,445/- HAS BEEN DENIED TO THE ASSESSEE. THE SUBMISSIONS MADE BEFORE AO WERE REIT ERATED BEFORE CIT(A). IT WAS SUBMITTED THAT GOVERNMENTS ELECTRIC AL INSPECTOR HAD INSPECTED THE EQUIPMENTS AND PERMITTED ITS ENERGISA TION. ON SUCH ENERGISATION THEY ARE PUT TO USE. REFERENCE WAS MA DE TO THE REPORT DATED 27 TH AUGUST, 2004. REFERENCE WAS ALSO MADE TO THE OTHE R EVIDENCES PRODUCED BEFORE THE AO TO SHOW THAT POWER SUPPLY TO 50 TON CRANES WERE MADE ON 24 TH JULY, 2004, TO PLATE BENDING MACHINE ON 25.6.2004 AND TO ELECTRIC INSTALLATIONS ON 30 TH MAY, 204. THUS, IT WAS PLEADED THAT AO IS WRONG IN NOT ALLOWING THE CLAIM TO THE ASSESSEE. SO AS IT RELATES TO DEPRECIATION ON HB-8 EQUIPMENT IT WAS SUBMITTED THAT MERELY BECAUSE THE CONTRACTOR WHO HAS COMPLETED THE ERECTION WORK HAS RAISED BILL ON 31.3.2005, IT DOES NOT MEAN THAT SUC H ERECTION WAS NOT COMPLETED BEFORE 31.3.2005. REFERRING TO THE OBSER VATION OF AO THAT PLANT WAS READY TO USE, IT WAS SUBMITTED THAT ACCOR DING TO DECISION OF GUJARAT HIGH COURT IN THE CASE OF CIT VS. SONAL GUM INDUSTRIES 322 ITR ITA NO. 4589/D/10 & CO NO. 362/D/10 11 542, UNDER THE CONCEPT OF BLOCK OF ASSETS THE DEPRE CIATION IS ALLOWABLE EVEN ON THE MACHINERY WHICH IS READY TO USE. ON TH ESE SUBMISSIONS OF THE ASSESSEE LD. CIT(A) HAS RECORDED A FINDING THAT BY PLACING THE REPORT OF INSPECTOR ON RECORD THE ASSESSEE HAS PRODUCED SU FFICIENT EVIDENCE OF PUTTING TO USE THE ELECTRIC INSTALLATION, PLATE BEN DING MACHINE AND 50 TON CRANES. HE OBSERVED THAT ONCE A GOVERNMENT AUTHORI TY INSPECTING THE EQUIPMENT, CERTIFIES THE DATE OF POWER SUPPLY TO TH E EQUIPMENTS AND AFTER INSPECTION HAS PERMITTED ENERGISATION OF THE EQUIPM ENT THEN IT HAS TO BE ACCEPTED THAT THE EQUIPMENTS WERE PUT TO USE AT LEA ST ON THE DATE WHEN GOVERNMENT AUTHORITY HAS ISSUED THE CERTIFICATE. H E, THEREFORE, DIRECTED TO ALLOW THE DEPRECIATION IN RESPECT OF PLATE BENDI NG MACHINE, 50 TON CRANES AND ELECTRIC INSTALLATIONS AS CLAIMED BY THE ASSESSEE. HOWEVER, IN RESPECT OF DEPRECIATION RELATING TO HB-8 HE HAS OBSERVED THAT THE SAID MACHINERY COULD NOT HAVE BEEN PUT TO USE DURING THE YEAR UNDER CONSIDERATION, HENCE, HE HAS DISALLOWED THE DEPRECI ATION ON THE SAID MACHINE. THUS, PART RELIEF HAS BEEN GIVEN TO ASSES SEE. IN REVENUES APPEAL THE RELIEF GIVEN BY THE CIT(A) HAS BEEN AGIT ATED AND IN ASSESSEES CROSS OBJECTION NON-GRANT OF DEPRECIATIO N ON HB-8 BORING MACHINE IS AGITATED. 16. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE AN D THEIR CONTENTIONS HAVE CAREFULLY BEEN CONSIDERED. LD. DR RELIED UPON THE ORDER OF AO AS AGAINST THAT SO AS IT RELATES TO DEL ETION OF THE ADDITION, LD. AR HAS RELIED UPON THE ORDER OF CIT(A) AND ON THE O THER PART HE HAS ITA NO. 4589/D/10 & CO NO. 362/D/10 12 SUBMITTED THAT DEPRECIATION COULD NOT BE DISALLOWED AS THE HB-8 MACHINE WAS AT LEAST PUT TO USE ON 31.3.2005. 17. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND WE HAVE ALSO GONE THROUGH THE ORDER OF AO AND CIT(A). A F INDING OF FACT HAS BEEN RECORDED BY LD. CIT(A) THAT SO AS IT RELATES T O DEPRECIATION RELATING TO PLATE BENDING MACHINE, 50 TON CRANES AND ELECTRI CAL INSTALLATIONS, THE USER OF THESE ASSETS IS BACKED BY THE REPORT OF ELE CTRICAL INSPECTOR WHO IS A GOVERNMENT AUTHORITY AUTHORIZE TO INSPECT THE EQU IPMENT AND TO GRANT CERTIFICATE REGARDING ENERGISATION OF THOSE ASSETS. IT HAS NOT BEEN SHOWN BY THE REVENUE THAT THESE FINDINGS RECORDED BY LD. CIT(A) ARE CONTRARY TO THE FACTS EXISTING ON RECORD. THEREFORE, WE DECLIN E TO INTERFERE IN THE RELIEF GIVEN BY CIT(A) AND THIS GROUND OF THE REVEN UE IS DISMISSED. 18. NOW COMING TO THE CROSS OBJECTION FILED BY THE ASSESSEE, LD. AR COULD NOT FURNISH ANY EVIDENCE TO SHOW THAT HB-8 MA CHINE IN FACT WAS PUT TO USE BEFORE 31.3.2005. LD. CIT(A) HAS ALSO R ECORDED SUCH FINDING THAT NO EVIDENCE HAS BEEN PRODUCED BY THE ASSESSEE REGARDING USER OF THE SAID ASSET. THEREFORE, WE FIND NO SUBSTANCE IN THE CROSS OBJECTION FILED BY THE ASSESSEE AS THE ASSESSEE HAS NOT BEEN ABLE TO PROVE THAT THE SAID MACHINE WAS PUT TO USE DURING THE YEAR UND ER CONSIDERATION. THE CROSS OBJECTION OF THE ASSESSEE HAS RAISED ONLY THIS ISSUE THEREFORE, THE SAME IS DISMISSED. ITA NO. 4589/D/10 & CO NO. 362/D/10 13 19. NOW COMING TO GROUND NO. 5 OF REVENUES APPEAL THIS ISSUE HAS BEEN DISCUSSED BY THE AO IN PARA 6 OF THE ASSESSMEN T ORDER. AFTER GOING THROUGH THE EXPENDITURE RELATING TO REPAIRS O F BUILDING AND MACHINERY THE AO OBSERVED THAT VARIOUS EXPENDITURES WERE OF CAPITAL IN NATURE. WORKING OUT THOSE EXPENDITURE AT A SUM OF RS. 2,68,984/- THE SAID AMOUNT WAS ADDED TO THE INCOME OF THE ASSESSEE AS THE SAME WAS NOT CAPITALIZED BY THE ASSESSEE. LD. CIT(A) HAS DI RECTED THE AO TO ALLOW DEPRECIATION ON THAT AMOUNT ON THE GROUND THAT IF T HEY ARE NOT CONSIDERED AS CURRENT REPAIR AND MAINTENANCE THEN IT IS CAPITA L EXPENDITURE AND FORM PART OF FIXED ASSETS ON WHICH DEPRECIATION IS ALLOW ABLE. THEREFORE, LD. CIT(A) HAS DIRECTED THE AO TO ALLOW THE DEPRECIATIO N ON SUCH AMOUNT. 20. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE AN D WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) IN WHICH IT HAS BE EN HELD THAT IN CASE OF DISALLOWANCE MADE ON ACCOUNT OF THOSE EXPENDITURE B EING CAPITAL IN NATURE THEN DEPRECIATION HAS TO BE ALLOWED. WE DEC LINE TO INTERFERE AND GROUND NO. 5 OF THE REVENUE IS DISMISSED. 21. IN THE RESULT, THE APPEAL AS WELL AS CROSS OBJE CTION BOTH ARE DISMISSED IN THE MANNER AFORESAID. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 09.05.201 1 SD/- SD/- (K.D. RANJAN) (I.P. BANSAL) ACCOUNTANT MEMBER JUDI CIAL MEMBER DATED: 9.5.11 *KAVITA CHOPRA ITA NO. 4589/D/10 & CO NO. 362/D/10 14 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR