ACIT, CHENNAI V. Titanium Tantalum Products Ltd., CHENNAI

ITA 1137/CHNY/2013

• Counselvise Citation: 113721714 RSA 2013
• Duration Of Justice: 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 02-12-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 24-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation; Principle of natural justice; Additional depreciation
• Section: 143(3); 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI [BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI S. S. GODARA, JUDICIAL MEMBER] I.T.A.NO.1137/MDS/2013 ASSESSMENT YEAR : 2004-05 THE ASSTT. COMMISSIONER OF INCOME-TAX COMPANY CIRCLE III(2) CHENNAI VS M/S TITANIUM TANTALUM PRODUCTS LTD 86/1, VENGAIVASAL MAIN ROAD GOWRIVAKKAM CHENAI 600 073 [PAN AAACT 1272 A ] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHAJI P. JACOB, ADDL. CIT RESPONDENT BY : NONE DATE OF HEARING : 02-12-2013 DATE OF PRONOUNCEMENT : 02-12-2013 O R D E R PER S.S.GODARA, JUDICIAL MEMBER THIS APPEAL FILED BY THE REVENUE FOR ASSESSMENT YEAR 2004- 05, IS DIRECTED AGAINST THE ORDER OF THE COMMISSION ER OF INCOME-TAX (APPEALS),TRICHY [CAMP OFFICE AT CHENNAI] DATED 1. 2.2013 , PASSED IN APPEAL NO.580/08-09, IN PROCEEDINGS UNDER SECTION 143(3) R.W.S 147 OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT). I.T.A.NO. 1137/13 :- 2 -: 2. IN THE COURSE OF HEARING, THE REVENUE-APPELLANT STR ONGLY ARGUES THAT THE CIT(A) HAS WRONGLY DELETED THE DISA LLOWANCE OF ADDITIONAL DEPRECIATION OF ` 5,16,481/- U/S 32(1)(IIA) OF THE ACT AND ALSO AN ADDITION OF ` 22,76,813/- WHICH WAS MADE BY THE ASSESSING OFFICER BY ADDING TO THE TOTAL TURNOVER, MODVAT, I NTEREST AND EXCHANGE FLUCTUATION. THEREAFTER, IT REITERATES THE GROUNDS AND PRAYS FOR ACCEPTANCE OF THE APPEAL. 3. NOBODY HAS COME PRESENT ON BEHALF OF THE ASSESSEE. A PERUSAL OF THE CASE FILE REVEALS THAT ON 22.7.2013 AND 25.9.2013 AS WELL THE ASSESSEE HAD NOT APPEARED. ON ALL OCCASI ONS, IT HAD BEEN SERVED THROUGH REGISTERED NOTICES AND ACKNOWLEDGEME NTS CONCERNED ARE AVAILABLE IN THE CASE FILE. THEREFORE, IT IS P RESUMED THAT THE ASSESSEE IS NOT INTERESTED IN PURSUING CASE. SO, I T IS PROCEEDED EX- PARTE. 4. THE ASSESSEE IS A COMPANY ENGAGED IN FABRICATION OF CHEMICAL EQUIPMENTS. ON 12.10.2006, IT HAD FILED I TS RETURN DECLARING INCOME OF ` 1,13,63,620/-. FROM THE CASE FILE IT TRANSPIRES T HAT THE ASSESSING OFFICER HAD ISSUED SEC.148 NOTICE DATED 4 .4.2007 TO THE ASSESSEE. IN REPLY THERETO, THE ASSESSEE REITERAT ED ITS RETURN ALREADY FILED. THEREAFTER, THE ASSESSING OFFICER FRAMED R E-ASSESSMENT VIDE I.T.A.NO. 1137/13 :- 3 -: ORDER DATED 12.12.2008. IN COURSE THEREOF, THE ASS ESSING OFFICER DEALT WITH ASSESSEES CLAIM OF ADDITIONAL DEPRECIATION O F ` 5,16,481/-. IN SUPPORT, THE ASSESSEE HAD FILED NAMES OF THE CONCE RNED MACHINE, DETAILS OF TIME TAKEN IN OPERATIONS VIS--VIS TIME REQUIRED IN MANUAL PERFORMANCE. IT HAD ALSO EMPHASIZED THAT DUE TO IN STALLATION OF AFORESAID MACHINERY AND EFFECTIVE USE THEREOF, ITS TURNOVER IN THE PREVIOUS YEAR RELEVANT TO THE IMPUGNED ASSESSMENT Y EAR HAD INCREASED FROM ` 11 CRORES TO ` 21.81 CRORES. THE ASSESSING OFFICER DID NOT AGREE TO THE ASSESSEES EXPLANATION. IN HIS VIEW, THE ASSESSEE HAD NOT BEEN ABLE TO ESTABLISH THE EXACT PERCENTAGE OF INCREASE IN INSTALLED CAPACITY WHICH WAS A PRE-REQUISITE FOR CLAIMING ADD ITIONAL DEPRECIATION. THEREFORE, HE DISALLOWED THE IMPUGNED CLAIM. WITH THE SAME, HE ALSO DISALLOWED A SUM OF ` 22,76,813/- BY ADDING TO THE TOTAL TURNOVER, MODVAT, INTEREST AND EXCHANGE FLUCTUATION. IN THIS MANNER, THE ASSESSEES INCOME WAS RE-COMPUTED TO ` 1,26,12,747/-. 5. IN LOWER APPELLATE PROCEEDINGS, THE CIT(A) HAS DELE TED ALL THE AFORESAID DISALLOWANCES/ADDITIONS BY AGREEING T O THE CONTENTIONS OF THE ASSESSEE. SINCE THE MAIN CONTENTION OF THE RE VENUE IS THAT BEFORE ALLOWING THE ASSESSEES APPEAL, THE CIT(A) HAS NOWHERE REFERRED TO THE EVIDENCE AVAILABLE ON RECORD, WE DE EM IT APPROPRIATE TO I.T.A.NO. 1137/13 :- 4 -: REPRODUCE THE RELEVANT PORTION OF THE ORDER UNDER C HALLENGE READING AS UNDER: 5. ADDITIONAL DEPRECIATION ON MACHINERY : THE LEARNED AO OBSERVED AS UNDER: AS EXTRACTED FROM THE APPELLANT'S SUBMISSIONS: THE LEARNED AO OBSERVED THAT THE APPELLANT HAD NOT SUBSTANTIATED THAT THERE IS INCREASE IN CAPACITY BY THE ADDITION OF NE W MACHINERY BY NOT LESS THAN 10% BUT ACCEPTED THE APPELLANT'S SUBMISSI ONS THAT THERE WAS INCREASE IN EFFICIENCY. THE ISSUE IS THE PROVISION GRANTING ADDITIONAL DEPRECIATION IS TO GIVE LIBERAL RELIEF TO THE ASSES SEE IN CASE OF INVESTMENT IN MACHINERY TO HAVE ADDITIONAL CAPACITY . THE APPELLANT HAD DEMONSTRATED WHICH IN FACT ACCEPTED BY THE AO BY VI RTUE OF ADDITIONS MADE IN THE MACHINERY, THE CAPACITY HAS BEEN INCREA SED BY ON ACCOUNT OF LESSER TIME TAKEN BY THE MACHINERY INSTALLED. IT MAY NOT BE CORRECT TO HOLD THAT THE NEW MACHINERY PURCHASED SHOULD BE THE SAME MACHINERY WHICH CAPACITY SHOULD BE INCREASED. IT IS NOT DISPU TED THAT THE ABOVE STATEMENT MADE BY THE ASSESSEE CLEARLY SHOWS THAT T HERE WAS INCREASE IN CAPACITY IN VIEW OF LESSER TIME TAKEN BY THE NEW MACHINERY, THEREBY RESULTING IN HIGHER TURNOVER AND REDUCTION OF EXPEN DITURE ON LABOUR, ELECTRICITY ETC THE LAW IS WELL SETTLED THAT THE AD MINISTRATIVE AUTHORITIES SHOULD NOT WHITTLE DOWN THE PLENTITUDE OF EXEMPTION RELIEF GRANTED BY THE PARLIAMENT (SEE CIT VS .. SIMPSON AND CO) REPORTED IN 122 ITR 283, MADRAS. 6. ADDITION U/S 80HHC IN RESPECT OF MODVAT, INTEREST AND EXCHANGE FLUCTUATION: THE ASSESSING OFFICER HAS NOT PASSED SPEAKING ORDER ON WHAT BASIS HE HAS MADE THE ADDITION. THE LAW IS WELL SETTLED THAT MODVAT CANNOT BE DISALLOWED AS THE SAME DO NOT EMANATE FROM THE TURN OVER (SEE CIT V CUTOPHARMA INDIA PVT LTD) 292 ITR 641 SC. AS REGARDS THE ISSUE OF EXCHANGE FLUCTUATION, THE I SSUE IS SQUARELY COVERED BY THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF WOODWARD GOVERNOR REPORTED IN 210 LTR 354. AS REGARDS INTEREST THE DEPOSIT HAS BEEN MADE FROM AND OUT OF FOREIGN EXCHANGE RECEIVED FROM THE APPELLANT TO THE EXTENT OF 16.73 CRORES OUT OF 21.81 CRORES AND HENCE IT SHOULD NOT BE CONSTRUE D AS INCOME FROM OTHER SOURCES SINCE IT IS MADE DUE TO COMMERCIAL EX PEDIENCY FOR THE PURPOSE OF EXPORT/IMPORT, LIKE LETTER OF CREDIT MAR GIN AND BANK GUARANTEE MARGIN FOR EXPORTS/IMPORTS. I.T.A.NO. 1137/13 :- 5 -: 7. IN THE LIGHT OF THE ABOVE DECISIONS, THE APPELLA NT SUCCEEDS ON THESE ISSUES . THEREFORE, THE REVENUE HAS FILED THE INSTANT APPEA L. 6. WE HAVE HEARD THE REVENUE-APPELLANT AND GONE THROUG H THE CASE FILE. THE ASSESSING OFFICER HAD DISALLOWED TH E CLAIMS OF THE ASSESSEE QUA ADDITIONAL DEPRECIATION AS WELL AS THO SE U/S 80HHC ETC FOR WANT OF NECESSARY PROOF IN THE COURSE OF RE-AS SESSMENT. IN THE LOWER APPELLATE PROCEEDINGS, THE CIT(A) HAS, THOUGH APPLIED VARIOUS CASE LAW CIT VS SIMPSON AND CO., 122 ITR 283(MAD), CIT VS CUTOPHARMA INDIA PVT. LTD, 292 ITR 641(SC), WOODW ARD GOVERNOR, 210 ITR 354 ETC. IN GRANTING THE RELIEF PRAYED FOR BY THE ASSESSEE, HOWEVER, NOWHERE HE DISCUSSES AS TO HOW THE SAID CA SE LAW HAS BEEN MADE APPLICABLE VIS--VIS THE FACTS OF THE ASSESSE ES CASE. A PERUSAL OF THE CIT(A)S ORDER UNDER CHALLENGE NOWHERE PROVE S AS TO HOW THE ON THE BASIS OF WHAT MATERIAL ON RECORD, THE IMPUGN ED FINDINGS HAVE BEEN ARRIVED AT. HENCE, IN THE INTEREST OF NATURAL JUSTICE, WE DEEM IT APPROPRIATE THAT THE MATTER REQUIRES TO BE RE-EXAMI NED AFRESH BY THE ASSESSING OFFICER. WE ORDER ACCORDINGLY AND RESTOR E ALL THE ISSUES TO THE FILE OF THE ASSESSING OFFICER, WHO SHALL PROCEE D FURTHER IN ACCORDANCE WITH LAW AFTER ALLOWING ADEQUATE OPPORTU NITY OF HEARING TO I.T.A.NO. 1137/13 :- 6 -: THE ASSESSEE, WHO SHALL PLACE ON RECORD THE RELEVA NT EVIDENCE, IF SO ADVISED. 7. THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ON MONDAY, THE 02 ND OF DECEMBER, 2013, AT CHENNAI SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (S. S. GODARA) JUDICIAL MEMBER DATED: 02 ND DECEMBER, 2013 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR