ABBOTT HEALTHCARE P.LTD, MUMBAI V. ASST CIT RG 2(1), MUMBAI

ITA 1109/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8176 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 11-05-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 08-02-2013
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Keywords: Reopening of assessment; Depreciation; Additional depreciation
• Section: 32; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER & SHRI ASHWANI TANEJA, ACCOUNTANT MEMER I.T.A. NO. 1109/MUM/2013 (ASSESSMENT YEAR: 2006-07) M/S ABBOTT HEALTHCARE PVT. LTD., UNIT 4, CORPORATE PARK, SION- TROMBAY ROAD, CHEMBUR, MUMBAI, 400071 V S THE ASST. COMMISSIONER OF INCOME-TAX RANGE 2(1), AAYAKAR BHAVAN, M.K. MARG, MUMBAI- 400020 PAN : AAACK3935D (APP ELLANT ) (RESPONDENT) APP ELLANT BY SHRI NIRAJ SHETH (AR) RESPONDENT BY SHRI M.C. OMI NINGSHEN (DR) DATE OF HEARING : 01/02/2017 DATE OF ORDER : 15/02/2017 O R D E R PER ASHWANI TANEJA, AM: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-4, MUMBAI (HEREINAFTER CALLED AS LD. CIT (A) IN SHORT) DATED 23.11.2012 AN D PASSED AGAINST THE ORDER OF THE ASSESSING OFFICER (AO) U/S 143 (3) R.W .S. 147 OF THE INCOME TAX ACT, 1961 DATED 15.11.2011 FOR AY 2006-07 ON TH E FOLLOWING GROUNDS: 1:0 RE.: VALIDITY OF RE-ASSESSMENT PROCEEDINGS:- 1:1 THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN UPHOLDING THE RE-OPENING OF THE APPELLANTS ASSESSM ENT U/S. 148 OF THE INCOME-TAX ACT, 1961. 1:2 THE APPELLANT SUBMITS THAT CONSIDERING THE FACT S AND CIRCUMSTANCES OF ITS CASE AND THE LAW PREVAILING ON THE SUBJECT, THE RE-OPENING OF ASSESSMENT U/S. 148 WAS IN EXCESS OF JURISDICTION AND THE COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE HELD AS SUCH. 2 I.T.A. NO. 1109/MUM/2013 1:3 THE APPELLATE SUBMITS THAT THE PROCEEDINGS U/S 148 OF THE ACT WERE NOT IN ACCORDANCE WITH LAW AND CONSEQUENTL Y OUGHT TO BE STRUCK DOWN. WITHOUT PREJUDICE TO THE FOREGOING: 2:0 ADDITIONAL DEPRECIATION ON DIAGNOSTIC/SERVICE EQUIPMENTS CLAIMED AS A DEDUCTION U/S. 32 (1) (IIA) : 2:1 THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS ER RED IN UPHOLDING THE DISALLOWANCE OF A SUM OF RS. 1,63,85, 522/- BEING THE ADDITIONAL DEPRECIATION CLAIMED BY THE APPELLAN T ON DIAGNOSTIC/SERVICE EQUIPMENTS INSTALLED AT HOSPITAL S. 2:2 THE APPELLANT SUBMITS THAT CONSIDERING THE FACT S AND CIRCUMSTANCES OF ITS CASE AND THE LAW PREVAILING ON THE SUBJECT, IT IS ENTITLED TO ADDITIONAL DEPRECIATION ON THE DIAGNOST IC/SERVICE EQUIPMENTS IN TERMS OF SECTION 32 (1) (IIA) OF THE INCOME-TAX ACT, 1961 AND THE STAND TAKEN BY THE ASSESSING OFFICER I N THIS REGARD IS ERRONEOUS, MISCONCEIVED AND OUGHT TO BE STRUCK DOWN AND THE COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE HELD AS SUCH. 2:3 THE APPELLANT SUBMITS THAT THE ASSESSING OFFICE R BE DIRECTED TO GRANT ADDITIONAL DEPRECIATION ON THE VAPORIZERS AS CLAIMED BY IT AND TO RE-COMPUTE ITS TOTAL INCOME ACCORDINGLY. 2. DURING THE COURSE OF HEARING, IT WAS SUBMITTED BY T HE LD. COUNSEL OF THE ASSESSEE THAT THE ISSUE ON MERITS WI TH REGARD TO ALLOWABILITY OF ADDITIONAL DEPRECIATION IS COVERED BY THE ORDER OF THE TRIBUNAL IN GROUP COMPANY OF THE ASSESSEE NAMELY AB BOTT INDIA LTD. VS. ACIT (ITA NO. 8428/MUM/2011) DATED 30.10.2015 AND I F THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSE THEN GROUND OF THE ASSESSEE WITH REGARD TO REOPENING MAY BE TREATED AS INFRUCTUOUS A T THIS STAGE. THEREFORE, WE FIND IT APPROPRIATE TO FIRST TAKE UP THE GROUND WITH REGARD TO MERITS I.E. GROUND NO. 2 FIRST. 3. BRIEF BACKGROUNDS AND THE FACTS WITH REGARD TO THE ISSUE ON MERITS ARE THAT DURING YEAR ASSESSEE WAS ENGAGED IN THE BUSINESS OF PHARMACEUTICALS, NUTRITIONAL AND DIAGNOSTIC PRODUCT S. THE ASSESSEE CLAIMED ADDITIONAL DEPRECIATION OF RS. 1,63,85,522/ - ON THE MEDICAL EQUIPMENTS WHICH WERE PLACED BY THE ASSESSEE AT THE PREMISES OF ITS CLIENTS I.E. HOSPITALS AT THEIR DISPOSAL FOR USE OF PATIENTS OF THESE HOSPITALS. DURING THE COURSE OF ASSESSMENT PROCEEDI NGS, THE AO DISALLOWED THE IMPUGNED ADDITIONAL DEPRECIATION CLA IMED BY THE ASSESSEE ON THESE MEDICAL EQUIPMENTS ON THE GROUND THAT ASSESSEE WAS 3 I.T.A. NO. 1109/MUM/2013 NEITHER MANUFACTURING ANYTHING DIRECTLY NOR PRODUCI NG ANY ARTICLE OR THING, WHEREAS ADDITIONAL DEPRECIATION WAS ALLOWABL E U/S 32 (1) (IIA) OF THE ACT ONLY TO THE MANUFACTURERS. LD. CIT (A) CONF IRMED THE DISALLOWANCE MADE BY THE AO. 4. DURING THE COURSE OF HEARING BEFORE US, LD. COUNSE L INTER-ALIA SUBMITTED THAT THIS ISSUE HAS BEEN DECIDED IN FAVOU R OF THE ASSESSEE IN THE CASE OF ITS GROUP COMPANY OF THE ASSESSEE NAMEL Y ABBOTT INDIA LTD., SUPRA. PER CONTRA, LD. DR DID NOT MAKE ANY DISTINCT ION ON FACTS OR LAW. 5. WE HAVE GONE THROUGH THE ORDERS PASSED BY THE LOWE R AUTHORITIES AS WELL AS ORDER PASSED BY THE TRIBUNAL IN THE CASE OF ABBOTT INDIA LTD., SUPRA. IT IS NOTED BY US THAT TRIBUNAL HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER: 5. WE HAVE PERUSED THE ORDERS PASSED BY THE AUTHOR ITIES BELOW, THE SUBMISSION BY BOTH THE PARTIES AND THE J UDGEMENTS RELIED UPON BY THE LD. AR BEFORE WE START WITH OUR OBSERVATION, SECTION 32 (1) (IIA), AS IT STOOD AT THE RELEVANT A SSESSMENT YEAR, IS UNDER: DEPRECIATION 32(1) IN RESPECT OF DEPRECIATING OF- (IIA) IN THE CASE OF ANY NEW MACHINERY OR PLANT (OT HER THAN SHIPS AND AIRCRAFT), WHICH HAS BEEN ACQUIRED AND INSTALLE D AFTER THE 31 ST DAY OF MARCH, 2005, BY AN ASSESSE ENGAGED IN THE BU SINESS OF MANUFACTURER OR PRODUCTION OF ANY ARTICLE OR THING OR IN THE BUSINESS OF GENERATION OR GENERATION AND DISTRIBUTI ON OF POWER, A FURTHER SUM EQUAL TO TWENTY PER CENT OF THE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UN DER CAUSE (II): PROVIDED THAT NO DEDUCTION SHALL BE ALLOWED IN RESP ECT OF- (A) ANY MACHINERY OR PLANT WHICH, BEFORE ITS INSTALLATI ON BY THE ASSESSEE, WAS USED EITHER WITHIN OR OUTSIDE INDIA B Y ANY OTHER PERSON, OR (B) ANY MACHINERY OR PLANT INSTALLED IN ANY OFFICE PREM ISES OR ANY RESIDENTIAL ACCOMMODATION, INCLUDING ACCOMMODAT ION IN THE NATURE OF A GUEST-HOUSE; OR (C) ANY OFFICE APPLIANCES OR ROAD TRANSPORT VEHICLES; O R (D) ANY MACHINERY OR PLANT, THE WHOLE OF THE ACTUAL COS T OF WHICH IS ALLOWED AS DEDUCTION (WHETHER BY WAY OF DEPRECIA TION OR OTHERWISE) IN COMPUTING THE INCOME CHARGEABLE UNDER THE 4 I.T.A. NO. 1109/MUM/2013 HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSIONS OF ANYONE PREVIOUS YEAR. THE LD. AR SUBMITS THAT THE ASSESSE HAS BEEN ENGAGE D IN MANUFACTURING ACTIVITIES, AND SINCE VAPORIZERS ARE NOT INSTALLED AT ITS OFFICE PREMISES, THE SUM IS QUALIFIED FOR ADDIT IONAL DEPRECIATION. THE LD. AR PLACED HIS RELEVANCE ON; 1. CIT VS. DIAMINES AND CHEMICALS LTD. REPORTED IN 109 DTR (GUJ) 62. 2. CIT VS. VTM LTD. REPORTED IN (2009) 319 ITR 336 (MA D). 6. THE LD. DR RELIES ON THE ORDER OF DRP. 7. THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF D CIT V IS. COSMO FILMS LTD., BEARING ITA NO. 2831/DEL/2007, IN TER-ALIA HAD THE OCCASION TO EXAMINE THE PROVISIONS RELATING TO THE GRANT OF ADDITIONAL DEPRECIATION. THE TRIBUNAL HELD THEREIN THAT, THE ASSESSEE WOULD BE ABLE TO CLAIM THE ADDITIONAL DEPR ECIATION. WHILE DOING SO, THE TRIBUNAL REFERRED TO THE SPEECH OF FI NANCE MINISTER WHILE INSERTING THE RELEVANT PROVISIONS, WHEN IT WA S STATED THAT THIS CLAUSE WAS INSERTED TO PROVIDE AN INCENTIVE FOR FRE SH INVESTMENT IN INDUSTRIAL SECTOR. 8. IT OBSERVED THAT THIS PROVISION HAS BEEN DIRECTE D TOWARDS ENCOURAGING INDUSTRIALIZATION BY ALLOWING ADDITIONA L BENEFIT TO THE TAX PAYERS SETTING UP NEW INDUSTRIAL UNDERTAKINGS/M AKING MORE INVESTMENT IN CAPITAL GOODS. THUS, THESE ARE INCENT IVES AIMED TO BOOST NEW INVESTMENTS IN SETTING UP AND EXPANDING T HE UNITS. 9. IN THE FACTS OF THE PRESENT CASE THAT ASSESSE H AS INSTALLED VAPORIZERS AMOUNTING TO RS.35,58,040/- AT ITS HOSPI TALS. THE REVENUE HAS NOT DISPUTED THE FACT THAT, THE ASSESSE IS NOT ENGAGED IN MANUFACTURING ACTIVITIES, CARRIED ON AT GOA PLAN T. THE ASSESSE PROVIDES HEALTH CARE SOLUTIONS THROUGH ITS FAIR MAR KETING ARMS BEING PRIMARY CARE, SPECIALTY CARE, NEUROSCIENCE AN D HOSPITALS CARE. AS FAR AS THE APPLICATION OF SEC. 32(1)(IIA) OF THE ACT AS CONCERN, THE ASSESSE IS REQUIRED SATISFY THE STIPUL ATED CONDITIONS IN ORDER TO CLAIM ADDITIONAL DEPRECIATING. WE OBSERVE THAT IN PARA 23.2 OF THE FINAL ORDER PASSED BY THE LD. AO, THE F ACTUAL POSITION IN RESPECT OF THE MACHINERY, HAS BEEN PROVIDED VIS--V IS THE CONDITIONS U/S 32(1)(IIA) OF THE ACT. THE LD. AO, H AS DISALLOWED THE ADDITIONAL DEPRECIATION ONLY ON THE GROUND THAT THE ASSESSE HAS BEEN INTO TRADING ACTIVITY. APART FROM THE MANUFACT URING ACTIVITY CARRIED ON BY THE ASSESSE, IT ALSO PROVIDES HEALTH CARE SOLUTIONS. THE VAPORIZERS, PURCHASED BY THE ASSESSE ARE RETAIN ED BY THE ASSESSE ITSELF. 10. IN OUR CONSIDERED OPINION, SECTION 32(1)(IIA) DOES NOT STATE THAT SETTING UP OF A NEW MACHINERY OR A PLANT, WHICH WAS ACQUIRED AND INSTALLED AFTER 31.03.2005, SHOULD HAVE AN OPERATIO NAL CONNECTIVITY 5 I.T.A. NO. 1109/MUM/2013 TO THE ARTICLE OR THING THAT WAS ALREADY BEING MANU FACTURED BY THE ASSESSE. THEREFORE, THE REASONING OF THE LD. AO THA T THE VAPORIZERS, HAS NOTHING TO DO WITH THE MANUFACTURING OF ARTICLE S ETC., IS TOTALLY NOT GERMANE TO THE SPECIFIC PROVISION CONTAINED IN SECTION 32 (1) (IIA) OF THE ACT. 11. IN THE LIGHT OF THE ABOVE THAT DISCUSSION, WE H OLD THAT THE ASSESSEE IS ELIGIBLE FOR ADDITIONAL DEPRECIATION ON VAPORIZERS U/S. 32(1) (IIA) OF THE ACT. 6. IT IS NOTED BY US THE ISSUE INVOLVED BEFORE US IS IDENTICAL. NO DISTINCTION HAS BEEN MADE ON FACTS. THEREFORE, RESP ECTFULLY FOLLOWING ORDER OF THE TRIBUNAL, WE ALLOW THE CLAIM OF THE AS SESSEE. THUS, THIS GROUND IS ALLOWED. 7. SINCE, RELIEF HAS BEEN ALLOWED TO THE ASSESSEE ON MERITS, THE GROUND REGARDING REOPENING IS DISMISSED AS INFRUCTU OUS AT THIS STAGE. 8 . AS A RESULT, APPEAL OF THE ASSESSEE STANDS PARTLY ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE CONCL USION OF THE HEARING. SD/- SD/- (D.T. GARASIA) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED: 15/02/2017 ALINDRA-PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- 4. / CIT 5. , , / DR, ITAT, MUMBAI 6 I.T.A. NO. 1109/MUM/2013 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI