The ITO, Ward-6(1), Ahmedabad V. Shri Nitesh Arvindbhai Thakkar, Ahmedabad

ITA 1098/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 85637 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 08-01-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 13-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROOP CHAND
• Keywords: Depreciation; Additional depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL CHATURVEDI , A.M.) I. T. A. NO. 1098 / AHD/ 20 1 1 (A SSESSMENT YEAR: 2007 - 08) INCOME TAX OFFICER WARD - 6 (1), C.U. SHAH BUILDING ASHRAM ROAD, AHMEDABAD V/S SHRI NITESH ARVINDBHAI THAKKAR OPP. HARIOM NAG AR, BAGODARA ROAD, AT - DHOLKA, DIST - AHMEDABAD (APPELLANT) (RESPONDENT) PAN: ADHPT 0858M APPELLANT BY : SHRI ROOP CHAND, SR. D.R. RESPONDENT BY : NONE ( )/ ORDER DATE OF HEARING : 04 - 12 - 2014 DATE OF PRONOUNCEMENT : 23 - 01 - 2015 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF CIT(A) - XI, AHMEDABAD DATED 15.02.2011 FOR A.Y. 2007 - 08. 2. IN THIS CASE, N ONE APPEARED ON BEHALF OF ASSESSEE THOUGH THE NOTICE OF HEARING WAS SERVED ON ASSESSEE. ASSESSEE HAS HOWEVER FILED WRITTEN SUBMISSIONS VIDE LETTER DATED 12.06.2014 . WE THEREFORE PROCEED TO DECIDE THE ISSUE EX PARTE QUA THE ASSESSEE AND ON THE BASIS OF WRITTEN SUBMISSIONS AND MATERIAL ON RE CORD. 3. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 4. ASSESSEE IS AN INDIVIDUAL AND PROPRIETOR OF BALRAM COTTON INDUSTRIES WHICH IS ENGAGED IN THE BUSINESS OF GINNING/PRESSING OF COTTON. ASSESSEE ELECTRONICALLY ITA NO 1098/AHD/2011 . A.Y. 2007 - 08 2 FILED HIS RETU RN OF INCOME FOR A.Y. 07 - 08 ON 30.10.2010 DECLARING TOTAL INCOME OF RS. NIL. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ORDER DATED 24.03.2009 AND THE TOTAL INCOME WAS DETERMINED AT RS. 16,08,520/ - . AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A) WHO VIDE ORDER DATED 15.02.2011 GRANTED SUBSTANTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS; - 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE AO TO ALLOW THE ADDITIONAL DEPRECIATION OF RS.8,45,016/ - . 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE AO TO VERIFY THE CONTENTIONS OF THE ASSESSEE AND DEL ETE THE DISALLOWANCE OF DEPRECIATION OF RS. 2,56,717/ - , WHICH IS BEYOND THE POWERS OF CIT(A) UNDER THE PROVISIONS OF SEC. 251. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF INTEREST EXPENSES OF RS. 4,59,406/ - . 4. ON THE FACT S AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX [A] OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 1 ST GROUND IS WITH RESPECT TO DELETION OF CLAIM OF ADDITIONAL DEPRECIATION OF RS. 8,45,016/ - . 5. DURING THE COURSE OF ASSESSME NT PROCEEDINGS AND ON PERUSING THE DEPRECIATION STATEMENT, A.O NOTICED THAT ON CERTAIN ADDITIONS MADE TO PLANT AND MACHINERY. ASSESSEE HAD CLAIMED DEPRECIATION AT 35% WHEREAS ACCORDING TO THE A.O, THE NORMAL RATE OF DEPRECIATION WAS 15%. THE ASSESSEE WAS A SKED TO JUSTIFY THE CLAIM OF ADDITIONAL DEPRECIATION OF RS. 8,45,016/ - . THE SUBMISSIONS OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE TO THE A.O AS ACCORDING TO THE A.O, THE ACTIVITY OF GINNING AND PRESSING OF COTTON EFFECTIVELY MEANT SEPARATING OF COTTON AND C OTTON SEEDS AND THEREFORE IT COULD NOT BE CONSIDERED AS MANUFACTURING OF ARTICLE OR A THING AND THEREFORE NOT ELIGIBLE FOR ADDITIONAL DEPRECIATION . HE ACCORDINGLY RESTRICTED THE DEPRECIA TION CLAIM AT 15% AND THE ADDITIONAL DEPRECIATION OF RS. 8,45,016/ - WA S DISALLOWED . AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A). LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE ALLOWED THE CLAIM BY HOLDING AS UNDER: - 2.2. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE A. R. OF THE APPELLANT AND THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. I AM INCLINED TO ACCEPT THE CONTENTIONS OF THE LEARNED A.R. AS EXPLAINED IN THE WRITTEN SUBMISSIONS THE PRODUCT OF THE APPELLANT HAS A DISTINCT NAME, CHARACTER AND USE. IN ITA NO 1098/AHD/2011 . A.Y. 2007 - 08 3 THE CASE OF CIT VS. EAST INDIA HOTELS LTD. (209 ITR 854)(CAL.), IT WAS HELD THAT THE EXPRESSION 'PRODUCE' HAS TO BE TAKEN IN A MORE LIBERAL SENSE THAN 'MANUFACTURE' AND THAT IF THE END - PRODUCT IS DIFFERENT IT WOULD MEET THE REQUIREMENT OF 'PRODUCING'. IN THE CASE OF POONAM CHAND PREM RAJ VS. CIT (207 ITR 895)(RAJ), IT WAS HELD THAT GINNING OF COTTON IS ALSO A PROCESS OF MANUFACTURE AND HENCE A GINNING FACTORY IS AN INDUSTRIAL UNDERTAKING ENTITLED TO DEDUCTION U/S. 80IA. THOUGH THE NEWLY INSERTED SEC. 2(29B A) IS EFFECTIVE FROM 01 - 04 - 2009, IT MAKES THE LEGISLATIVE INTENT CLEAR. 2.2.1. KEEPING IN VIEW THE FACTS OF THE CASE, CASE LAWS REFERRED TO ABOVE AND IN THE LIGHT OF DECISIONS RELIED ON BY THE LEARNED A.R., I HOLD THAT THE ACTIVITY OF THE APPELLANT IS ONE OF PRODUCTION, IF NOT MANUFACTURE. ACCORDINGLY, A.O. IS DIRECTED TO ALLOW ADDITIONAL DEPRECIATION. HOWEVER, THE QUANTUM OF ADDITIONAL DEPRECIATION WILL BE SUBJECT TO MY FINDING ON THE SECOND GROUND OF APPEAL. THIS GROUND OF APPEAL IS TREATED AS PARTLY ALLO WED FOR STATISTICAL PURPOSES. 6. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 7. BEFORE US, LD. D.R. RELIED ON THE ORDER OF A.O. 8. WE HAVE HEARD THE LD. D.R. AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) WHILE GRANTING THE RELIEF TO THE ASSESSEE AND AFTER RELYING ON THE DECISION OF RAJASTHAN HIGH COURT IN THE CASE OF POONAMCHAND PREMRAJ VS. CIT 207 ITR 895 (RAJ.) WHERE IT WAS HELD THAT GINNING OF COTTON WAS ALSO A PROCESS OF MANUFACTURE DECIDED THE APPEAL IN FAVOUR OF A SSESSEE. BEFORE US REVENUE HAS NOT BROUGHT ANY CONTRARY BINDING DECISION IN ITS SUPPORT. WE THEREFORE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED. 2 ND GROUND IS WITH RESPECT TO DELETION OF DISALLO WANCE OF DEPRECIATION OF RS. 2,56,717/ - . 9. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NOTICED THAT ASSESSEE HAD CLAIMED DEPRECIATION FOR THE ENTIRE YEAR. A.O ON PERUSING THE ACCOUNTS OF THE ASSESSEE CONCLUDED THAT THE MACHINERY ON WHICH ASSESSEE HAS CLAIMED THE DEPRECIATION WAS NOT USED FOR THE ENTIRE YEAR BUT WAS PUT TO USE IN THE SECOND PART OF THE YEAR AND THEREFORE ASSESSEE WAS ELIGIBLE FOR DEPRECIATION AT ONLY 50% OF THE NORMAL RATE. HE ACCORDINGLY RESTRICTED THE DEPRECIATION AT 50% OF ASSESSEE S CLAI M AND ADDED THE DIFFERENCE OF RS. 2,56,717/ - . AGGRIEVED BY THE ITA NO 1098/AHD/2011 . A.Y. 2007 - 08 4 ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A). LD. CIT(A) DECIDED THE ISSUE BY HOLDING AS UNDER: - 3.2. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE A. R. OF THE APPELLANT AND T HE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. AS SEEN FROM THE ASSESSMENT ORDER, A.O'S OBSERVATIONS ON THE ISSUE ARE GENERAL AND VAGUE. THE CONTENTIONS OF THE APPELLANT ARE THAT PART OF THE MACHINERY PERTAINING TO GINNING UNIT WAS PUT T O USE BEFORE SEPTEMBER, 2006 AND FULL DEPRECIATION WAS CLAIMED ONLY ON THAT PART OF THE MACHINERY. ON THE BALANCE MACHINERY PERTAINING TO PRESSING UNIT HE HIMSELF CLAIMED 50% OF THE ELIGIBLE DEPRECIATION. A.O. IS DIRECTED TO VERIFY THE CONTENTIONS OF THE A PPELLANT REPRODUCED ABOVE AND DELETE THE DISALLOWANCE. THUS SUBJECT TO VERIFICATION, THIS GROUND OF APPEAL IS ALLOWED. 10. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 11. BEFORE US LD. D.R SUBMITTED THAT LD CIT(A) HAD REMITTED THE ISS UE TO THE FILE OF A.O WHICH IS BEYOND THE POWERS OF LD. CIT(A) UNDER THE PROVISIONS OF SECTION 251 OF THE ACT. HE THUS S UPPORTED THE ORDER OF A.O . 12. WE HAVE HEARD THE LD. D.R. AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) HAS NOT REMITTED THE ISSUE BUT HAD ONLY DIRECTED THE A.O TO VERIFY AND THE GROUND WAS ALLOWED SUBJECT TO THE FACTUAL VERIFICATION. BEFORE US, REVENUE HAS NOT PLACED ANY MATERIAL ON RECORD TO DEMONSTRATE ANY INFIRMITY IN THE ORDER OF LD. CIT(A). WE THEREFORE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED. 3 RD GROUND IS WITH RESPECT TO DELETING OF INTEREST EXPENSE OF RS. 4,59,406/ - . 13. ON VERIFICATION THE DETAILS, A.O NOTICED THAT ASSESSEE HAD ADVANCED AMOUNTS TO VARIOUS CO MPANIES/FIRMS. HE ALSO NOTICED THAT THOUGH THE ASSESSEE HAD TAKEN TERM LOAN FROM PUNJAB NATIONAL BANK IN FEBRUARY 2007, T HE INTEREST BEARING FUNDS WERE DIVERTED FOR GIVING INTEREST FREE ADVANCES. HE ACCORDINGLY WO RKED OUT THE INTEREST EXPENSE AS ATTRIBUTAB LE TO THE FUNDS WHICH HAVE BEEN ADVANCED AS INTEREST FREE AND ACCORDINGLY DISALLOWED THE INTEREST CLAIM OF RS. 4,59,406/ - . AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A). LD. CIT(A) DELETED THE ADDITION BY HOLDING AS UNDER: - 4.2. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE A. R. OF THE APPELLANT AND THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. A S SEEN FROM THE ASSESSMENT ORDER, NO MATERIAL IS BROUGHT ITA NO 1098/AHD/2011 . A.Y. 2007 - 08 5 ON RECORD TO SHOW THAT INTEREST - BEARING FUNDS WERE ADVANC ED INTEREST FREE. AS CONTENDED BY THE APPELLANT INTEREST WAS PAID ON LOANS OBTAINED FROM BANKS FOR SPECIFIC PURPOSES, AND THEREFORE DIVERSION OF SUCH FUNDS TO MAKE ADVANCES IS RULE OUT. IN VIEW OF THESE FACTS, I HOLD THAT DISALLOWANCE OF INTEREST IS UNWARR ANTED. IT IS DELETED. THIS GROUND OF APPEAL IS ALLOWED 14. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 15. BEFORE US, LD. D.R. SUPPORTED THE ORDER OF A.R. 16. WE HAVE HEARD THE LD. D.R. AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) WHILE DELETING THE ADDITION HAS NOTED THAT NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE A.O TO DEMONSTRATE THAT INTEREST BEARING FUNDS WERE ADVANCED INTEREST FREE ADVANCE BY THE ASSESSEE . BEFORE US NO MATERIAL HAS BEEN BROUGHT ON RECORD BY REVENUE TO CONTROVERT THE FINDINGS OF LD. CIT(A). IN VIEW OF THESE FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED. 17. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COUR T ON 23 - 01 - 201 5 . SD/ - SD/ - (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FOR WARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD