M/s. Torrent Cables Limited,(Now merged with Torrent Power Ltd), Ahmedabad V. The ACIT, Circle-4(1)(2), Ahmedabad

CO 47/AHD/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2674 (ITAT-AHMEDABAD)
• Duration Of Justice: 11 month(s) 3 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 06-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 13-05-2020
• Assessment Year: 2014-2015
• Appeal Filed On: 03-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Additional depreciation
• Section: 32(1)(iia); 143(2); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH BEFORE: SHR I SANDEEP GOSAIN , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER THE ACIT, CIRCLE - 4(1)(2), AHMEDABAD VS M/S. TORRENT CABLES LTD., TORRENT HOUSE, OFF ASHRAM ROAD, AHMEDABAD - 380009 PAN: AACCT5457B (RESPONDENT) M/S. TORRENT CABLES LTD., TORRENT HOUSE, OFF ASHRAM ROAD, AHMEDABAD - 380009 PAN: AACCT5457B VS THE ACIT, CIRCLE - 4(1)(2), AHMEDABAD (RESPONDENT) REVENUE BY : S H RI VIDHYUT TRIVEDI , SR. D . R. ASSESSEE BY: SHRI VARTIK CHOKSHI , A.R. DATE OF HEARING : 04 - 0 3 - 2 020 DATE OF PRONOUNCEMENT : 06 - 03 - 2 020 / ORDER I T A NO . 2969 / A HD/20 17 A SS ESSMENT YEAR 2014 - 15 CROSS OBJECTION NO. 47/AHD/2019 (IN ITA NO. 2969 /AHD/20 17) ASS ESSMENT YEAR 2014 - 15 I.T.A NO. 2969 /AHD/20 17 & C.O. NO. 47/AHD/2019 A.Y. 2014 - 15 P AGE NO ACIT VS. M/S. TORRENT CABLES LTD. 2 P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS REVENUE S APPEAL AND ASSESSEE S CROSS OBJECTION FOR A.Y. 2014 - 15 , ARI SE FROM ORDER OF THE CIT(A) - 8, AHMEDABAD DATED 09 - 10 - 2 017 , IN PROCEEDINGS UNDER SECTION 1 4 3(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE APPEAL OF THE REVENUE AND CROSS OBJECTION FILED BY THE ASSESSEE ARE BASED ON IDENTICAL ISSUE AND FACTS AGAINST THE DECISION OF LD. CIT(A), THEREFORE, FOR THE SAKE OF CONVENIENCE BOTH THESE APPEALS ARE ADJUDICATED TOGETHER. RE VENUE S APPEAL ITA NO. 2 9 69 /AHD/2017 & CROSS OBJECTION NO. 47/AHD/2019 FILED BY ASSESSEE 3. THE FACT IN BRIEF IS THAT ASSESSEE HAS FILED RETURN OF INCOME DECLARING TOTAL INCOME AT RS. 5 , 92 , 42 , 180/ - ON 26 TH SEP, 2014. THE CASE WAS SUBJECT TO SCRUTIN Y ASSESSMENT AND NOTICE U/S. 143(2) OF THE ACT WAS ISSUED ON 28 TH AUGUST, 2015. DURING THE COURSE OF ASSESSMENT PROCEE DINGS, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAD SHOWN THE UNUTILIZED/CLOSING BALANCE ON ACCOUNT OF MODVAT/CENVAT CREDITS UNDER LO AN AND ADVANCES AND THE SAME WAS NOT INCLUDED IN THE VALUE OF CLOSING STOCK . ON QUERY, THE ASSESSEE EXPLAINED THAT ASSESSEE COMPANY HAS FOLLOWED EXCLUSIVE METHOD OF VALUATION OF CLOSING STOCK OF FINISHED GOODS. IT IS FURTHER STATED THAT THE COMPANY H AS A LSO FOLLOWED EX CLUSIVE METHOD FOR ACCOUN TING OF CENVAT WHEREAS THE COST OF PURCHASE OF RAW MATERIAL IS ACCOUNTED FOR NET OF CENVAT CREDIT. THE ASSESSEE HAS ALSO REFERRED ANNEXURE TO THE AUDIT REPORT STATING THAT HAD I.T.A NO. 2969 /AHD/20 17 & C.O. NO. 47/AHD/2019 A.Y. 2014 - 15 P AGE NO ACIT VS. M/S. TORRENT CABLES LTD. 3 THE EXCISE DUTY INCLUDED IN THE VALUE O F STOCK , THE NET IM PACT OF THE SAME UPON PROFIT WAS TO BE NIL. THE ASSESSEE HAS ALSO REFERR ED THE DECISION OF CO - ORDINATE B ENCH OF THE ITAT AHMEDABAD IN THE CASE OF ALAPNAIL INDUSTRIES VS. ACIT I N ITA NO. 169/AHD/2005 AND 170/A HD/2015 FOR A.Y. 1999 - 2000, 2000 - 01 WHEREIN IT IS HELD THAT ON FOLLOWING EXCLUSIVE METHOD OF ACCOUNTING FOR EXCISE DUTY, THERE WILL BE NO EFFECT IN THE TAXABLE PROFIT OF THE ASSESSEE BY INCLUDING THE AMOUNT OF EXCISE DUTY PAID ON PURCHASES IN THE VALUE OF CLOSING STOCK OF RA W MATERIA L , WHETHER AS RAW MATERIAL OR AS FORMING PART OF WORK IN PROGRESS OR FINISHED G OODS. THE ASSESSING OFFICER HAD NOT ACCEPTED THE SUBMISSION OF THE ASSESSEE STATING THAT AS PER PROVISION OF SECTION 145A, THE ASSESSEE WAS BOUND TO VALUE ITS CLOSING STOCK INC LUSIVE OF SUCH TAXES/DUTY/CESS/FEES WHICH H AD BEEN INCURRED BY THE ASSESSEE AND HELD THAT UNUTILIZED BALANCES OF TAXES NEED TO BE INCLUDED IN THE VALUE OF CLOSING STOCK. ACCORDINGLY, THE ASSESSING OFFICER HAS INCLUDED THE SUM OF RS. 4 , 46 , 24 , 317/ - ON ACCO UNT OF UNUTILIZED / CL OSING BALANCE ON ACCOUNT OF MODVAT/CENVAT IN THE VALUATION OF CLOSING STOCK AS ON 31 ST MARCH, 2013. THE SAME WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4. THE ASSESSEE HAS PREFERRED APPEAL BEFORE THE LD. CIT(A). T HE LD. CI T(A) HAS STATED THAT ON RAW MATERIAL THE EXCISE DUTY IS ALREADY PAID AT THE TIME OF PURCHASES MADE AND SUCH DUTY IN THE EXCLUSIVE METHOD OF ACCOUNTING IS ADDED TO DEBIT BALANCE IN THE BALANCE SHEET AND THERE IS NO SCOPE FOR ADDITION IN RESPECT OF EXCISE DU TY ON RAW MATERIAL. HOWEVER, THE LD. CIT(A) HAS STATED THAT THE ADDITION OF RS. 1 , 3 1, 94 , 929/ - FOR EXCISE DUTY IN RESPECT OF WORK IN PROGRESS AND FINISHED GOODS IS REQUIRED TO BE MADE. THEREFORE, THE LD. CIT(A) HAS RESTRICTED THE ADDITION TO THE EXTENT OF RS. 1 , 3 1, 94 , 929/ - I.T.A NO. 2969 /AHD/20 17 & C.O. NO. 47/AHD/2019 A.Y. 2014 - 15 P AGE NO ACIT VS. M/S. TORRENT CABLES LTD. 4 5. THE ASSESSEE HAS FILED CROSS OBJECTION ON THE ADDITION TO THE EXTENT OF RS. 1 , 31 , 9 4,9 29/ - MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) 6. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, AT THE OUTSET T HE LD. COUNSEL HAS BROUGHT TO OUR NOTICE THAT ON IDENTICAL ISSUE AND SIMILAR FACTS THE CO - ORDINATE BENCH OF THE ITAT IN THE CASE OF THE ASSESSEE VIDE ITA 1293/AHD/2014, 2409/AHD/2015 AND 564/AHD/2017 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE RE F ORE , THE LD. COUNSEL HAS SUBMITTED THAT ISSUE IS FULLY COVERED IN FAVOUR OF THE ASSESSEE, THEREFORE, THE APPEAL OF THE REVENUE BE DISMISSED AND CROSS OBJECTION OF THE ASSESSEE BE ALLOWED. LD. DEPARTMENTAL REPRESENTATIVE WAS FAIR ENOUGH NOT TO CONTRADICT T HESE UNDISPUTED FACTS PLEADED BY THE LD. COUNSEL ON THE BASIS OF DECISION OF CO - ORDINATE BENCH OF THE ITAT IN THE CASE OF ASSESSEE ITSELF AS CITED ABOVE. 7. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. THE CO - ORDINATE BENCH OF T HE ITAT IN THE CASE OF CASE OF THE ASSESSEE ITSELF VIDE ITA NO. 1293/AHD/2014 FOR ASSESSMENT YEAR 2010 - 11 ON IDENTICAL ISSUE ON SIMILAR FACTS HAS HELD AS UNDER: - 16.WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGNED ORDER. LD. A.O. HAS DISCUSSED FIRST GROUND AT PAGE NO. 12 TO 13 OF PARA 6.7 AND LD. CIT(A) HAS DISCUSSED ISSUE AT PAGE NO. 21 OF PARA 9.2. LD. CIT(A) STATED THAT AS FACT OF THE CURRENT CASE ARE IDENTICAL WITH THE FACTS OF EARLIER YEARS, FOLLOWING THE ORDER OF HIS PREDECESSOR. LD. CIT(A) IN APPELLANT S OWN CASE ADDITION OF RS. 33951765/ - WAS DELETED. IN SUPPORT OF ITS CONTENTION, ASSESSEE RELIED A JUDGMENT OF ITAT IN ASSESSEE S OWN CASE IN ITA NO. 2584/AHD/2012 FOR A.Y. 2009 - 10 DATED 11.06.2018. IN SIMILAR CIRCUMSTANCES, IN ASSESSEE S OWN CA SE, ITAT DISMISSED THE APPEAL F THE DEPARTMENT AND OPERATIVE PARA OF THE SAID JUDGMENT IS REPRODUCED: 4. GROUND NO,2 RELATES TO ADDITION OF RS.2,90.28,909/ - MADE BY THE AO U/S.I45A, WHICH WAS DELETED BY THE CITY A), THE LEARNED AR SUBMITTED THAT THE AFORES AID GROUND REPRESENTS ADDITION ON ACCOUNT OF UNUTILIZED CENVAT/MODVAT CREDIT, WHICH IS NOT PERMISSIBLE IN VIEW OF THE PRINCIPLES LAID DOWN BY THE HON'BLE GUJARAT HIGH COURT IN CASE I.T.A NO. 2969 /AHD/20 17 & C.O. NO. 47/AHD/2019 A.Y. 2014 - 15 P AGE NO ACIT VS. M/S. TORRENT CABLES LTD. 5 OF CIT VS. BELL GRANITO CEREMICA LTD., TAX APPEAL NOS. 436 - 437 OF 2011. JUD GMENT DATED 13.06.2012, THE LEARNED AR NEXT SUBMITTED THAT THE CIT(A) HAS CORRECTLY CONCLUDED THE ISSUE IN FAVOUR OF THE ASSESSEE ALSO HAVING REGARD TO THE FACT THAT EFFECT OF PROVISIONS OF SECTION .1.45A WOULD HE NIL IN THE CASE OF ASSESSEE. WE FIND THAT THE C!T(A) HAS ANALYZED THE ISSUE OBJECTIVELY IN DETAIL AS PER PARA 5 OF ITS ORDER. THE CONCLUSION DRAWN BY THE C1T(A) IS IN CONSONANCE WITH THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN CASE OF BELL GRANTIO (SUPRA). WE ALSO TAKE NOTE OF THE DECISION O F THE HON'BLE GUJARAT HIGH COURT IN THE EASE OF PR.CIT VS. ORACLE GRANITO PVT. LTD.. TAX APPEAL NO. 1030 OF 2017, ORDER DATED 14TH FEBRUARY. 2018, WHICH SUPPORTS THE EASE OF THE ASSESSEE SQUARELY. THEREFORE, WE DECLINE TO INTERFERE WITH THE ORDER OF THE CI TY A) IN THIS REGARD. GROUND NO.2 OF THE REVENUE'S APPEAL IS THEREFORE DISMISSED. AFTER CONSIDERING THE ABOVE FACTS AND FINDING OF THE CO - ORDINATE B ENCH OF THE ITAT IN THE CASE OF THE ASSESSEE ITSELF, WE OBSERVED THAT IF THE ASSESSING OFFICER HAS APPLIED INCLUSIVE METHOD FOR VALUATION OF CLOSING STOCK, THEN, SAME METHOD HAS ALSO BE TO BE APPLIED FOR VALUATION OF OPENING STOCK TO ARRIVE AT TRUE PROFIT IN THE CASE OF THE ASSESSEE. WE HAVE ALSO PERUSED THE DECISION OF HON BLE GUJARAT HIGH COURT IN THE CASE O F VEERA EXPORTS VS. ACIT (2017) 82 TAXMAN.COM 448(GUJ) WHEREIN IT IS HELD THAT WHERE REVENUE HAD MODIFIED OR SUBSTITUTED METHOD OF VALUATION OF CLOSING STOCK IN PARTICULAR YEAR , THE SAME METHODOLOGY WOULD ALSO TO BE APPLIED FOR VALUATION OF OPENING STOCK F OR THAT YEAR . IN THE LIGHT OF THE ABOVE FACTS AND FINDING, WE OBSERVE THAT THE ASSESEEE HAS FOLLOWED EXCLUSIVE METHOD OF ACCOUNTING FROM YEAR TO YEAR WHICH DEMONSTRATE S THAT OPENING AND CLOSING STOCK WAS VALUED BY THE SAME METHOD. THEREFORE, ANY CHA NGE IN METHOD OF VALUATION OF CLOSING STOCK IS ALSO REQUIRED TO BE APPLIED TO THE VALUATION OF OPENING STOCK AS WELL. WE HAVE ALSO PERUSED THE WORKING OF VALUATION PROVIDED BY THE ASSESSEE AS PER ANNEXURE 4A PLACED AT PAGE NO. 16 OF THE PAPER BOOK AS PER WHICH INCLUSIVE METHOD AND EXCLUSIVE METHOD DEMONSTRATE THAT NET EFFECT IS ARRIVED AT NIL. AFTER CONSIDERING THE ABOVE FACTS AND FINDINGS AS PER JUDICIAL I.T.A NO. 2969 /AHD/20 17 & C.O. NO. 47/AHD/2019 A.Y. 2014 - 15 P AGE NO ACIT VS. M/S. TORRENT CABLES LTD. 6 PR ONOUNCEMENTS AS CITED ABOVE, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED AND CROSS OBJECTI ON OF THE ASSESSEE IS ALLOWED. GROUND NO. 3 ( DELETING ADDITION ADDITIONAL DEPRECIATION OF RS. 1 , 81 , 152/ - ) 8. DURING THE COURSE OF ASSES SMENT, THE ASSESSING OFFICER NOTICED THAT ASSESSEE COMPANY HAS CLAIMED ADDITIONAL DEPRECIATION OF RS. 1 ,1 8 ,9 5 2 / - ON BATTERY AND RS. 62 ,160/ - ON AIR COOLED DUCTA BLE UNITS AND COMPRESSOR. THE ASSESSING OFFICER WAS OF THE VIEW THAT THESE ASSETS WERE USED AS POWER BACKUP AND CANNOT BE REGARDED AS PLANT AND MACHINERY FOR PRODUCTION, THEREFORE, THE ASSESSING OFFICER HAS DIS ALLOWED THE CLAIM OF ADDITIONAL DEPRECIATION ON PLANT AND MACHINERY TO THE AMOUNT OF R S. 1 , 81 , 152/ - . 9. THE ASSESSEE HAS PREFERRED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE. 10. WE HAVE HEARD RIVAL CON TENTION AND PERUSED THE MATERIAL ON RECORD. I T IS NOTICED THAT LD. CIT(A) STATED THAT ASSESSEE HAS PURCHASED BATTERY AND AIR COOLED DUCT A BLE UNIT S AND COMPRESSOR WHICH WAS INTEGRAL PART OF PLANT AND MACHINERY AND USED FOR UNINTERRUPTED POWER SUPPLY DURING PRODUCTION PROCESS, THEREFORE, HELD THAT ASSETS WERE ELIGIBLE FOR ADDITIONAL DEPRECIA TION AS CLAIMED BY THE ASSESSEE. THE LD. CIT(A) HAS ALSO STATED THAT THE ASSESSING OFFICER HAS HIMSELF ALLOWED REGULAR DEPRECIATION CONSIDERING THE ABOVE ASSETS UNDER T HE BLOCK PLANT AND MACHINERY AND SUCH ASSETS WERE NOT EXCLUDED FROM ASSETS NOT ELIGIBLE FOR CLAIMING ADDITIONAL DEPRECIATION AS PER PROVISO TO SECTION 32(1)(IIA) OF THE ACT . IN THE LIGHT OF THE ABOVE FINDING OF LD. CIT(A), I.T.A NO. 2969 /AHD/20 17 & C.O. NO. 47/AHD/2019 A.Y. 2014 - 15 P AGE NO ACIT VS. M/S. TORRENT CABLES LTD. 7 WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE , THEREFORE , THIS GROUND OF APPEAL OF TH E REVENUE IS DISMISSED . 11. IN THE RESULT , THE APPEAL OF THE REVENUE IS DISMISSED AND CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 06 - 0 3 - 20 20 SD/ - SD/ - ( SANDEEP GO SAIN ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 06 /03 /2020 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CO NCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,