DCIT, Circle - 4, Kolkata, Kolkata V. M/s. Adhunik Ispat Ltd., Kolkata

ITA 1006/KOL/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8026 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2012
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 13-07-2011
• Court: TRIBUNAL
• Department Lawyers: A K MAHAPATRA
• Keywords: Depreciation; Opportunity of being heard; Additional depreciation

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA () BEFORE , /AND ! ' ! , ) [BEFORE SHRI PRAMOD KUMAR, AM & SHRI MAHAVIR SINGH, JM] # # # # / I.T.A NO. 1006/KOL/2011 '$% &' '$% &' '$% &' '$% &'/ // / ASSESSMENT YEAR: 2005-06 DEPUTY COMMISSIONER OF INCOME-TAX, VS. M/S. ADHUN IK ISPAT LTD. CIRCLE-4, KOLKATA. (PAN: AADCA6473B) ()* /APPELLANT ) (+)*/ RESPONDENT ) DATE OF HEARING: 14.11.2012 DATE OF PRONOUNCEMENT: 14.11.2012 FOR THE APPELLANT: SHRI A. K. MAHAPATRA, CIT (DR) FOR THE RESPONDENT: SHRI RAJEEVA KUMAR, ADVOCATE , / ORDER PER MAHAVIR SINGH, JM ( ! ' ! ! ' ! ! ' ! ! ' !, , , , ) THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A)-IV, KOLKATA IN APPEAL NO.165/CIT(A)-IV/2010-11 DATED 25.03.2011. ASSESSME NT WAS FRAMED BY ADDL. CIT, R-4, KOLKATA U/S. 147/143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2005-06 VIDE HIS ORDER DATED 30.11. 2010. 2. THE FIRST ISSUE IN THIS APPEAL OF REVENUE IS AG AINST THE ORDER OF CIT(A) ALLOWING ADDITIONAL DEPRECIATION AS THE AO HAS DISALLOWED TH E SAME ONLY FOR THE REASON THAT THE ASSESSEE FAILED TO FILE AUDIT REPORT IN FORM NO. 3AA ALONG W ITH THE RETURN OF INCOME. FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NO.1: 1. THAT LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS, IN DIRECTING THE A.O. TO ALLOW THE CLAIM OF ADDITIONAL DEPRECIATION WITHOUT CONSIDERIN G THE CLAUSE AS ENUMERATED IN THE ACT THAT THE ASSESSEE IS ENTITLED TO GET BENEFIT OF SEC TION 32(1)(IIA) ONLY WHEN FILING AUDIT REPORT IN FORM NO. 3AA ALONG WITH THE RETURN WILL B E MADE (APPLICABLE FOR A.Y. 2005- 06). 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. THE AO DISALLOWED ADDITIONAL DEPRECIATION OF RS.2,4 2,05,489/- CLAIMED BY ASSESSEE U/S. 32(1)(IIA) OF THE ACT ON THE GROUND THAT AUDIT REPO RT IN FORM NO. 3AA HAS NOT BEEN FILED ALONG WITH THE RETURN OF INCOME. THE AO ADMITTED THAT AU DIT REPORT WAS FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. AGGRIEVED AGAINST THE DISAL LOWANCE, ASSESSEE FILED APPEAL BEFORE CIT(A), WHO RELYING ON THE DECISION OF HONBLE SUPR EME COURT IN THE CASE OF BAJAJ TEMPO 2 ITA 1006/K/2011 M/S.ADHUNIK ISPAT LTD. A.Y.05-06 LTD. VS. CIT (1992) 196 ITR 188 (SC) ALLOWED THE CL AIM OF ASSESSEE VIDE PARA 2.2 AND 2.3 OF ITS ORDER AS UNDER: 2.2. I HAVE CONSIDERED THE ASSESSMENT ORDER AS WEL L AS SUBMISSION OF THE ASSESSEE. AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF BA JAJ TEMPO LTD. VS. CIT (196 ITR 188 (SC) THAT FILING OF AUDIT REPORT WITH RETURN IS NOT MANDATORY IN THE STRICT SENSE OF THE TERMS BUT IS ONLY DIRECTIVE. THE SAME IS ALSO HELD BY THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. MAGNUM EXPORTS (P) LTD. (2003) 262 ITR 10 (CAL) AND VARIOUS OTHER HIGH COURTS. THE HONBLE ITAT, KOLKATA HAS ALSO HE LD VARIOUS CASES INCLUDING IN THE CASE OF ACIT VS. HIMGIRI CASTINGS (P) LTD. (ITA NO. 1382/KOL/2008) AS UNDER: . .. 2.3. RESPECTFULLY FOLLOWING THE DECISION OF THE HO NBLE SUPREME COURT, VARIOUS HONBLE HIGH COURTS AND HONBLE ITAT, KOLKATA, I HELD THAT AS THE ASSESSEE HAS FILED THE AUDITED REPORT IN FORM NO. 3AA IN THE COURSE OF THE ASSESSM ENT PROCEEDINGS BEFORE THE A.O, WHICH IS EVIDENT FROM THE ASSESSMENT ORDER ITSELF, HENCE THE CLAIM OF THE ADDITIONAL DEPRECIATION OF THE ASSESSEE CANNOT BE DENIED ONLY ON THE GROUND THAT AUDIT REPORT IS NOT FILED WITH THE RETURN. THE A.O IS DIRECTED TO ALLO W THE CLAIM OF ADDITIONAL DEPRECIATION OF ASSESSEE. THE SAID GROUND IS ALLOWED IN FAVOUR OF THE ASSESSEE. THIS GROUND OF APPEAL IS ALLOWED. 4. WE FIND THAT THE CIT(A) RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF BAJAJ TEMPO LTD. (SUPRA) ALLOWED THE CLAIM OF AS SESSEE WHEREIN IT IS HELD THAT FILING OF AUDIT REPORT IS NOT MANDATORY IN THE STRICTER SENSE BUT I S ONLY DIRECTIVE. ONCE THE ASSESSEE HAS COMPLIED WITH THE CONDITION DURING THE ASSESSMENT P ROCEEDINGS FOR FILING OF AUDIT REPORT IN FORM NO. 3AA, THE ASSESSEE HAS COMPLIED WITH THE CO NDITION. HENCE, WE CONFIRM THE ORDER OF CIT(A) ON THIS ISSUE AND REVENUES GROUND OF APPEAL IS DISMISSED. 5. THE NEXT ISSUE IN THIS APPEAL OF REVENUE AGAINST THE ORDER OF CIT(A) ALLOWING DIFFERENTIAL DEPRECIATION CONSEQUENT UPON ALLOWANCE OF RATE OF DEPRECIATION ON FURNITURE AND FIXTURE INSTEAD OF PLANT AND MACHINERY IN THE CASE OF ELECTRICAL INSTALLATIONS. FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NO.2: 2. THAT LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN ALLOWING THE DIFFERENCE OF THE DEPRECIATION AMOUNTING TO RS.37,88,971/- CONSEQUENT UPON ALLOWANCE OF RATE OF DEPRECIATION OF FURNITURE AND FIXTURE INSTEAD OF PL ANT AND MACHINERY IN CASE OF ELECTRICAL INSTALLATION SINCE THE DECISION OF LD. C IT(A) CHALLENGES THE FUNDAMENTALS OF I. T. RULES. 6. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE AO NOTED THAT AS PER RULE 5 OF I. T. RULES, 1962 (HEREINAFTER REFERRED TO AS THE RULES) READ WITH NOTE 5 BELOW APPENDIX I TO RULES, DEPRECIATION ON ELECTRICAL FITTINGS SUCH AS ELECTRICAL WIRING, SWITCHES, STARTERS AND OTHER FIT TINGS AND FANS ETC. WILL BE ALLOWED @ 15%. ACCORDING TO AO, AS PER RULE 5 OF I. T. RULES, THE ASSESSEE HAS CLAIMED DEPRECIATION @ 25%, THEREFORE, HE DISALLOWED THE EXCESS DEPRECIATION. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ALLOWED THE CLAIM OF ASSESSEE VIDE PARA 3.2 AND 3.3 OF ITS ORDER BY OBSERVING AS UNDER: 3 ITA 1006/K/2011 M/S.ADHUNIK ISPAT LTD. A.Y.05-06 3.2. I HAVE CONSIDERED THE ASSESSMENT ORDER AS WE LL AS SUBMISSION OF THE ASSESSEE. THE A.O HAS NOT BROUGHT ANY SPECIFIC MATERIAL OTHER THE GENERAL ALLEGATION. ELECTRICAL WIRING, FITTINGS IN THE FACTORY PREMISES ARE INTEGR AL PART OF THE PLANT & MACHINERY AND WITHOUT THAT PLANT & MACHINERY CANNOT OPERATE. IT W ILL NOT BE OUT OF POINT TO MENTION THAT THE SEVERAL COSTS LIKE INSTALLATION, TRANSPORT ATION, PRE-OPERATIVE EXPENSES INCURRED FOR INSTALLATION OF PLANT & MACHINERY BECOMES PART OF THE COST OF PLANT & MACHINERY ON WHICH DEPRECIATION ARE ALLOWED AT THE RATE OF PLANT & MACHINERY. SIMILARLY, THE ELECTRICAL WIRING AND ELECTRICAL FITTINGS & EQUIPME NT WHICH HAS DIRECTLY NEXUS WITH THE PLANT & MACHINERY HAS TO BE ACCEPTED AS INTEGRAL PA RT OF THE PLANT & MACHINERY. THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS OSWAL WOOLEN MILLS LTD. 289 ITR 261 (P&H) HAS HELD THAT THE ELECTRICAL INST ALLATION IN THE FULLY FASHIONED UNIT OF THE ASSESSEE ARE INTEGRAL PART OF THE MACHINERY AND CANT BE SEPARATED FROM IT. THEREFORE, DEPRECIATION IS ALLOWABLE TREATING THE E LECTRIC INSTALLATION AS PART OF THE MACHINERY. SIMILAR VIEWS HAS BEEN TAKEN BY THE HON BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS SUBRATA DUTTA CHOUDHARY (2010) 33 DTR 259 (P&H) HAS HELD THAT TRANSFORMERS, CONTROL PANELS, FAX MACHINE AND CCTV SYSTEMS WHICH ARE BEING USED IN THE BUSINESS OF THE ASSESSEE ARE TO B E TREATED AS PART & PARCEL OF PLANT AND MACHINERY AND NOT AS FURNITURE AND THEREFORE THE SA ME ARE ENTITLED TO DEPRECIATION @ 25%. 3.3. I FULLY AGREE WITH THE ASSESSEES SUBMISSION AN D RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT CITED ABOVE AND THAT THE ELECTRICAL INSTALLATION IN THE FACTORY PREMISES ARE THE INTEGR AL PART OF THE PLANT & MACHINERY AND ARE ENTITLED TO RATE OF THE DEPRECIATION AS APPLICA BLE TO THE PLANT & MACHINERY. THE A.O IS DIRECTED TO ALLOW THE DEPRECIATION AT THE RATE A PPLICABLE TO THE PLANT & MACHINERY ON THE ELECTRICAL INSTALLATION INSTALLED IN THE FACTOR Y PREMISES. AS RESULT THIS GROUND OF THE APPEAL IS ALLOWED. 7. WE FIND FROM THE ORDER OF AO AS WELL AS THE ORDE R OF CIT(A) THAT NONE OF THE AUTHORITIES BELOW HAS GIVEN A FINDING THAT HOW THESE ELECTRICAL FITTINGS ARE PART AND PARCEL OF PLANT AND MACHINERY I.E. TRANSFORMER MOTORS, CONTROL PANELS, STARTERS, SWITCHES, GEARS AND RELATED ACCESSORIES LIKE SWITCH BOARD, CABLES ETC. ONCE TH IS FACT HAS NOT BEEN BROUGHT ON RECORD THAT HOW THESE ELECTRICAL FITTINGS IS PART AND PARCEL OF PLANT AND MACHINERY, THE ISSUE OF DEPRECIATION CANNOT BE DECIDED. HENCE, AS TO BRING THE FACT ON RECORD, WE SET ASIDE THIS ISSUE TO THE FILE OF AO, WHO WILL DECIDE THE ISSUE AFRESH AFTER ALLOWING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS GROUND OF APPEAL OF REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, APPEAL OF REVENUE IS PARTLY ALLOW ED FOR STATISTICAL PURPOSES. 9. ORDER PRONOUNCED IN OPEN COURT. SD/- SD/- , ! ' ! ! ' ! ! ' ! ! ' ! , (PRAMOD KUMAR) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( - - - -) )) ) DATED : 14TH NOVEMBER, 2012 ./ '$01 '2 JD.(SR.P.S.) 4 ITA 1006/K/2011 M/S.ADHUNIK ISPAT LTD. A.Y.05-06 , 3 ''4 54&6- COPY OF THE ORDER FORWARDED TO: 1 . )* / APPELLANT DCIT, CIRCLE-4, KOLKATA. 2 +)* / RESPONDENT M/S. ADHUNIK ISPAT LTD., 14, N. S. R OAD, 2 ND FLOOR, KOLKATA-700 001. 3 . ',$ ( )/ THE CIT(A), KOLKATA 4. ',$ / CIT, KOLKATA 5 . ='> '$ / DR, KOLKATA BENCHES, KOLKATA +4 '/ TRUE COPY, ,$/ BY ORDER, ! 1 /ASSTT. REGISTRAR .