The ACIT- Circle-1(1)(2), Baroda V. M/s. L.K. India Pvt. Ltd., Baroda

ITA 104/AHD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8147 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 09-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MAYUR SWADIA
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER THE ACIT, CIRCLE1(1)(2), BARODA (APPELLANT) VS M/S. L.K. INDIA PVT. LTD. 328/23, RASULABAD ROAD, VILLAGE - JAROD, TAL. WAGHODIA, DIST. VADODARA - 391510 PAN: AAACL3236C (RESPONDENT) REVENUE BY : S H RI MUDIT NAGPAL , SR. D . R . ASSESSEE BY: S H RI MAYUR SWADIA , A.R. DATE OF HEARING : 15 - 11 - 2 017 DATE OF PRONOUNCEMENT : 22 - 11 - 2 017 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBE R : - THIS REVENUE S APPEAL FOR A.Y. 2009 - 10 , AR I SES FROM ORDER OF THE CIT(A) - I, BARODA DATED 08 - 10 - 2014 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . I T A NO . 104 / A HD/20 15 A SSESS MENT YEAR 200 9 - 10 I.T.A NO. 104 /AHD/20 15 A.Y. 2009 - 10 PAGE NO ACIT VS. M/S. L.K. INDIA PVT. LTD. 2 2. THE REVE NUE HAS RAISED FOLLOWING GROUND OF APPEAL: - 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) ERRED IN DELETING THE ADDITION OF RS 46,11,130/ - BY ALLOWING DEPRECIATION ON MOULDS @ 40% AS AGAINST 15% ALLOWABLE ON THE DIES AND MOULDS USED FOR MANUFACTURING ELECTRIC AND ELECTRON IC GOODS BY TREATING THE MANUFACTURING FACILITY OF THE ASSESSEE AS RUBBER AND PLASTIC GOODS FACTORY IN TERMS OF APPENDIX - I TO RULE 5 OF THE INCOME TAX RULES - 1962, IGNORING THE FACT THAT, IN COMMON COMMERCIAL PRACTICE, FACTORIES PRODUCING ELECTRIC AND ELECT RONIC GOODS ARE NOT KNOWN AS A RUBBER AND PLASTIC GOODS FACTORIES.' 3. THE BRIEF FACT OF THE ISSUE IN APPEAL IS AS UNDER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS CLAIMED DEPRECIATION ON MOULD @ 30% . T HE ASSESSING OFFICER SHOW CAUSED THE ASSESSEE WHY NOT THE DEPRECIATION ON MOULD S SHOULD NOT BE RESTRICTED TO 15%. IN THIS CONNECTION T HE ASSESSEE COMPANY EXPLAIN ED THAT ALL THE SWITCHES ARE PLASTIC PRODUCT S AND THE COMPANY IS IN THE MANUFACTURING OF PL ASTIC GOODS HAVING ELECTRICAL APPLICATION, THEREFORE , DEPRECIATION ON MOULD S SHOULD BE ALLOWED @ 30%. THE ASSESSING OFFICER HAS NOT ACCEPTED THE SUBMISSION OF THE ASSESSEE BY OBSERVING THAT AS PER A PPENDIX - I RULE 5 OF THE INCOME TAX RULES - 1662 , THE DEPREC IATION ON MOULD S IS ALLOWED @ 30% WHEREIN T HE MO U LD S ARE USED IN A RUBBER AND PLASTIC GOODS FACTORY. SINCE ASSESSEE WAS ENGAGED IN THE MANUFACTURING AND SALE OF ELECTRICAL AND ELECTR ONIC ITEM, THEREFORE, IT IS ENTITL ED TO DEPRECIATION ON MOULDS @ NORMAL R ATE APPLICABL E TO PLANT AND MACHINERY I.E. 15 %. CONSEQUENTLY , THE ASSESSING OFFICER HAS RESTRICTED THE CLAIM OF DEPRECIATION FROM RS. 92,22,260/ - TO RS . 46 , 11 , 13 0 / - I.T.A NO. 104 /AHD/20 15 A.Y. 2009 - 10 PAGE NO ACIT VS. M/S. L.K. INDIA PVT. LTD. 3 4. AGGRIEVED ASSESSEE AGAINST THE IMPUGNED DECISION OF THE ASSESSING OFFICER PREFERR ED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE BY OBSERVING AS UNDER: - 5.2 THE REASONS FOR MAKING DISALLOWANCE OF DEPRECIATION AS MENTIONED BY THE AO IN THE ASSESSMENT ORDER AS WELL AS ABOVE ENTIRE SUBMISSION OF AR OF THE APPELLANT HAVE BEEN CONSIDERED. THE APPELLANT HAS CHARGED DEPRECIATION ON DIES AND MOULDS @ 30% WHEREAS IN THE OPINION OF ASSESSING OFFICER DEPRECIATION @ 15% IS ONLY ADMISSIBLE ON SUCH DIES AND MOULDS. IN THE CASE OF APPELLANT, THE SAID ISSUE WAS FIRST RAISED IN A.Y. 2001 - 02. THE LEARNED AO MADE ADDITION TO ITS INCOME ON ACCOUNT OF ALLEGED DIFFERENTIAL EXCESS CHARGE OF DEPRECIATION ON THE AFORESAID ASSETS. SIMILAR ADDITIONS HAD BEEN MADE IN THE CASE OF APPELLANT IN THE SUBSEQUENT ASSESSMENT YEARS O N THE SAME GROUNDS. THE LEARNED CIT (APPEALS) DECIDED THE AFORESAID ISSUE IN ITS FAVOUR FOR A.Y. 2001 - 02 AND SUBSEQUENT YEARS. BEING AGGRIEVED, THE DEPARTMENT PREFERRED AN APPEAL WITH THE HONOURABLE INCOME TAX APPELLATE TRIBUNAL. THE HONOURABLE TRIBUNAL VI DE ITS ORDER DATED OCTOBER 4, 2007, DISMISSED THE APPEAL OF THE DEPARTMENT FOR A.Y. 2001 - 02. AS PER THE APPELLANT FURTHER IN A.Y. 2002 - 03 AND 2006 - 07, CIT(APPEALS) - IV AND CIT(APPEALS) - ! HAVE ALSO DECIDED THE SAID ISSUE IN ITS FAVOUR. WITH REGARD TO THIS SU BMISSION OF THE APPELLANT, IT IS MENTIONED THAT THE HON'BLE ITAT AHMEDABAD, IN APPELLANT'S CASE FOR AY 2001 - 02 HAS HELD THAT DEPRECIATION @ 40% ON MOULDS IS TO BE ALLOWED IN VIEW OF DECISION OF ITAT BANGALORE IN THE CASE OF BPL REFRIGERATION LTD. 272 ITR 4 7 AND IN VIEW OF D ECISION OF ITAT, PUNE IN THE CASE OF KINETIC HONDA MOTORS LTD. 72 TTJ 72. RESPEC TFULLY FOLLOWING IT AT, AHMEDABA D'S DECISION - IN APPELLANT'S OWN CASE FOR AY 2001 - 02, THE AO IS DIRECTED TO ALLOW THE DEPRECIATION ON MOULDS AND DIES @ 40% AND ADDITION OF RS. 46,11,130/ - IS ACCORDINGLY HEREBY DELETED. THUS THE GROUND OF APPEAL NO. 2 OF THE APPELLANT IS ALLOWED. 5. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, LEARNED COUNSEL CONTENDED THAT TH IS ISSUE IS COVERED IN FAVOUR OF THE ASSESS EE BY THE DECISION OF CO - ORDINATE BENCH OF THE ITAT DECIDED IN THE CASE OF THE ASSESSEE ITSELF IN THE PRECEDING ASSESSMENT YEARS AND THE D ECISION OF JURISDICTIONAL HIGH C OURT IN THE CA SE OF THE I.T.A NO. 104 /AHD/20 15 A.Y. 2009 - 10 PAGE NO ACIT VS. M/S. L.K. INDIA PVT. LTD. 4 ASSESSEE ITSELF VIDE TAX A PPEAL NO. 747 OF 2015. ON THE OTH ER HAND , LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE ASSESSING OFFICER. 6. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE CO - ORDINATE BENCH OF THE ITAT IN THE CASE OF THE ASSESSEE PERTAINING TO ASSESS MENT YEAR 2001 - 02 TO 2008 - 09 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY STATING THAT ASSESSEE IS ENTITLED FOR DEPRECIATION AT HIGHER RATE. WE HAVE ALSO NOTIC ED THAT HON BLE JURISDICTIONAL H IGH COURT VIDE TAX A PPEAL NO. 747 OF 2015 IN THE CASE OF THE ASSESSEE HELD THAT ASSESSEE IS ENTITLED FOR DEPRECIATION ON MOULD S @ 30% AS AGAINST 15% ALLOWED BY THE ASSESSING OFFICER . THE RELEVANT PAR T OF THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IS REPRODUCED AS UNDER : - 7. HAVING HEARD LEARN ED COUNSEL FOR THE PARTIES AND HAVING PERUSED THE DOCUMENTS ON RECORD, WE NOTICE THAT SUB CLAUSE(VII) OF CLAUSE(3) OF ENTRY III IN PART - A IN THE NEW APPENDIX I, READS AS UNDER: '(VII) MOULDS USED IN RUBB ER AND PLASTIC GOODS FACTORIES' 8. THUS FOR MOULD USED IN RUBBER AND PLASTIC FACTORIES, HIGHER RATE OF DEPRECIATION OF 30% IS PRESCRIBED. RATE OF DEPRECIATION OF 15% APPLIES TO RESIDUAL ITEMS. THUS IF AN ITEM FALLS UNDER SAID SUB - CLAUSE (VIII) RATE OF DEPRECIATION WOULD BE 30%. IN THE PRESENT CASE, ADMITTEDLY, MOULDS WERE USED FOR MANUFACTURING OF PLASTIC GOODS. THESE GOODS WERE I N THE NATURE OF ELECTRIC SWITCHES AND SOCKETS. MERELY BECAUSE AFTER THE MAN UFACTURE, THE CONSUMER MAY BE HAVING PLASTIC WIRES AND CIRCUITS INSTALLED IN SUCH PLASTIC SWITCHES AND SOCKETS, SO AS TO MAKE THEM FUNCTIONAL, WOULD NOT TAKE AWAY THE BAS IC CHARACTER OF THE APPLIANCES BEIN G PLASTIC GOODS. THE ASS ESSEE WAS EXCLUSIVELY INVOLVED IN MANUFACTURING SUCH GOODS. FACTORY OF THE ASSESSEE WAS THEREFORE, PLASTIC GOODS I.T.A NO. 104 /AHD/20 15 A.Y. 2009 - 10 PAGE NO ACIT VS. M/S. L.K. INDIA PVT. LTD. 5 FACTORY. THE MOULDS USED FOR MANUFACTURING SUCH GOODS, THEREFORE, QUALIFY FOR HIGHER RATE OF DEPRECIATION UNDER SUB - CLAUSE(VII) OF CLAUSE(3) OF ENTRY III I N PART - A IN THE NEW APPENDIX I. IN VIEW OF THE FACTS AND LEGAL FINDINGS AS ELABORATED SUPRA IN THE DECISION OF THE CO - ORDINATE BENCH A ND JURISDICTIONAL HIGH COURT , WE ARE INCLINED WITH THE DECISION OF THE LD. CIT(A). THEREFORE, THE APPEAL OF THE REVENUE IS DISMISSED . 7 . IN THE RESULT, THE A PPEAL OF THE REVENUE IS DISMISSED . ORDER PR ONOUNCED IN THE OPEN C OURT ON 22 - 11 - 201 7 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 22 /11 /2017 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY O RDER/ , / ,