ACIT, Trichy V. M/s. Alpha Mills Private Ltd., Karur

ITA 121/CHNY/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6318 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 05-05-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 15-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GURU BHASHYAM
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Depreciation; Additional depreciation
• Section: 143(3); 32; 147

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . , ! ' , # $ BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NO. 121/MDS/2014 ( / ASSESSMENT YEAR: 2006-07) ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-I(1) TRICHY. VS M/S. ALPHA MILLS PVT.LTD., ATLAS CHAMBERS, 29-J, PUGALUR ROAD, KARUR. PAN:AAACA5661Q ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. GURU BHASHYAM, JCIT /RESPONDENT BY : MR. R.VIJAYARAGHAVAN, ADVOCATE / DATE OF HEARING : 5 TH MAY, 2014 /DATE OF PRONOUNCEMENT : 20 TH JUNE, 2014 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME TAX (APPEALS), TIRUCHIRA PPALLI DATED 7.10.2013 FOR THE ASSESSMENT YEAR 2006-07 . 2. THE FIRST ISSUE IN THE APPEAL OF THE REVENUE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ALLOW ING THE CLAIM OF HIGHER DEPRECIATION ON WINDMILL HOLDING T HAT ITA NO.121/MDS/2014 2 ASSESSEE HAD FILED RETURN OF INCOME EXERCISING OPT ION FOR HIGHER DEPRECIATION. 3. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FILED RETURN OF INCOME ON 30.11.2006 CLAIMING DEPRECIATION ON WIND MILL AT 80% . THE ASSESSEE ALSO CLAIMED ADDITIONAL DEPRECIA TION UNDER SECTION 32(1)(IIA) OF THE ACT. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ON 26.11. 2008. LATER, THE ASSESSMENT WAS REOPENED UNDER SECTION 1 47 OF THE ACT AND REASSESSMENT WAS COMPLETED UNDER SECTI ON 143(3) READ WITH SECTION 147 OF THE ACT ON 20.12.20 10. THE ASSESSING OFFICER WHILE COMPLETING ASSESSMENT RESTR ICTED THE CLAIM OF DEPRECIATION ON WINDMILL TO 7.69% AS AGAI NST 80% CLAIMED BY THE ASSESSEE ON THE GROUND THAT ASSESSEE HAS NOT EXERCISED ITS OPTION FOR CLAIMING HIGHER DEPRECIATI ON BEFORE THE DUE DATE FOR FILING OF THE RETURN AS REQUIRED UNDER PROVISO TO RULE 5(1A) OF THE INCOME TAX RULES. THE ASSESS ING OFFICER ALSO DISALLOWED ADDITIONAL DEPRECIATION CL AIMED BY THE ASSESSEE ON WINDMILL STATING THAT ASSESSEE IS NOT ELIGIBLE FOR ADDITIONAL DEPRECIATION AS THE ASSESSEE IS NOT INTO ITA NO.121/MDS/2014 3 MANUFACTURE OR PRODUCTION OF ARTICLE OR THING. THE ASSESSING OFFICER ALSO STATED THAT ASSESSEE HAS ACQUIRED OR I NSTALLED THE MACHINERY PRIOR TO 31.3.2005 AND THEREFORE CONDITIO NS FOR ALLOWING ADDITIONAL DEPRECIATION UNDER SECTION 32(1 )(IIA) ARE NOT SATISFIED. ON APPEAL, COMMISSIONER OF INCOME T AX (APPEALS) ALLOWED CLAIMS OF THE ASSESSEE. 4. AT THE TIME OF HEARING, COUNSEL FOR THE ASSESSEE SUBMITS THAT BOTH THE ISSUES HAVE BEEN DECIDED BY T HE CO- ORDINATE BENCH OF THIS TRIBUNAL IN FAVOUR OF THE AS SESSEE IN THE CASES OF ER.R.RAMASAMY VS. IN ITA NOS.162 & 163/MDS/2014 DATED 9.4.2014 AND K.RAVI VS. ACIT [2 ITR TRIB 752 (CHENNAI)]. 5. AS FAR AS THE ISSUE OF ALLOWING HIGHER DEPRECIAT ION ON WINDMILL IS CONCERNED, DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDER OF THE ASSESSING OFFI CER AND SUBMITS THAT ASSESSEE HAS NOT EXERCISED OPTION FOR CLAIMING HIGHER DEPRECIATION BEFORE DUE DATE FOR FILING OF RETURN AND THEREFORE HIGHER DEPRECIATION IS NOT ALLOWABLE. INS OFAR AS ITA NO.121/MDS/2014 4 ADDITIONAL DEPRECIATION IS CONCERNED, DEPARTMENTAL REPRESENTATIVE PLACING RELIANCE ON THE DECISION I N THE CASE OF SHIVA CARGO MOVERS LTD. VS. DCIT (53 SOT 44) S UBMITS THAT PRE-CONDITION FOR ALLOWING ADDITIONAL DEPRECIA TION IS THAT ASSESSEE SHOULD HAVE BEEN ENGAGED IN THE BUSINESS O F MANUFACTURE/PRODUCTION. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT IN THIS CASE ASSESSEE IS INTO ONLY TRA DING IN TEXTILE PRODUCTS AND NEVER INTO MANUFACTURE OR PRODUCTION O F ARTICLE OR THING, THEREFORE SINCE MANUFACTURE OR PRODUCTION OF ARTICLE OR THING IS A PRE-CONDITION FOR ALLOWING ADDITIONAL DEPRECIATION, THE ASSESSEE IS NOT ELIGIBLE FOR ADDITIONAL DEPRECI ATION. DEPARTMENTAL REPRESENTATIVE FURTHER SUBMITS THAT A S DEMONSTRATED BY THE ASSESSING OFFICER IN THE ASSESS MENT ORDER THE ASSESSEE HAS ACQUIRED AND INSTALLED MACHI NERY PRIOR TO 31.3.2005 AND THE PROVISIONS OF SECTION 32 (1)(IIA) SPECIFICALLY PROVIDES THAT MACHINERY ACQUIRED OR I NSTALLED AFTER 31.3.2005 ONLY IS ELIGIBLE FOR ADDITIONAL DEPRECIAT ION. SINCE THIS CONDITION IS NOT SATISFIED , THE ASSESSEE IS N OT ELIGIBLE FOR ADDITIONAL DEPRECIATION. ITA NO.121/MDS/2014 5 6. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES AND THE DECISIONS RELIED ON BEFORE US. AS FAR AS T HE FIRST ISSUE IS CONCERNED, I.E. CLAIM OF HIGHER DEPRECIATION AND EXERCISING OPTION UNDER SECOND PROVISO TO RULE 5(1A), WE FIND THAT THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF K .RAVI VS. ACIT (SUPRA) HAS HELD THAT WHEN THERE IS NO SPECIF IC FORM OR METHOD PRESCRIBED FOR EXERCISING OPTION AS PER THE SECOND PROVISO TO RULE 5(1A), THEN CLAIM MADE FOR HIGHER D EPRECIATION IN THE RETURN OF INCOME AS WELL AS REFLECTED FROM T HE BOOKS OF ACCOUNT AND AUDIT REPORT ARE MORE THAN SUFFICIENT FOR EXERCISING OPTION AS REQUIRED UNDER SECOND PROVISO TO RULE 5(1A). IN THIS CASE ASSESSEE FILED RETURN OF INCOME ON 30.11.2006 AND CLAIMED HIGHER DEPRECIATION ON WIND MILLS. THIS IS WITHIN THE DATE PRESCRIBED FOR FILING RETUR N OF INCOME AS PER SECTION 139(1) OF THE ACT. THEREFORE, RESPECT FULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL, WE UPHOLD THE ORDER OF THE COMMISSIONER O F INCOME TAX (APPEALS) ON THIS ISSUE AND THE GROUNDS OF APPE AL RAISED BY THE REVENUE ON THIS ISSUE ARE REJECTED. ITA NO.121/MDS/2014 6 7. IN RESPECT OF THE CLAIM OF ADDITIONAL DEPRECIATI ON UNDER SECTION 32 (1)(IIA) OF THE ACT, WE FIND THAT ASSESS ING OFFICER HAS GIVEN FINDING AS UNDER:- IT IS PERTINENT TO NOTE THAT SEC 32 (I) (IIA) AS SUBSTITU TED BY THE FINANCE ACT 2005 W . E . F . 01 . 04.2006 (W . E . F. AY. 2006-07) GRANTS ADDITIONAL DEPRECIATION AT 20% IN THE CASE OF ANY NEW MACHINERY OR PLANT ACQUIRED AND INSTALLED AFTER 31.03.2005 BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTUR E OR PRODUCTION OF ANY ARTICLE OR THING . IN THE INSTANT CASE THE DEPREDATION SCHEDULE ANNEXED TO THE ANNUAL ACCOUNTS (AS PER COMPANIES ACT) AND ALSO THE WIND MILL PURCHASE ACCOUNT FILED DURING TH E ORIGINAL ASSESSM E NT PROCEEDINGS SHOW THE OPENING BALANCE UNDER WIND MIL L PURCHASE AS RS . 95,32,399/ - AS ON 01.04 . 2005 AND ADDITIONS ON 02 . 01.2005 AS RS.85 , 693/ - . IT IS THEREFORE APPARENT THAT THE WIND MILL HAS BEEN ACQUIRED BY TH E ASSESSEE COMPANY PRIOR TO 31 . 03 . 2005 EVEN THOUGH PUT TO USE IN THE SUBSEQUENT YEAR I . E . F . Y . 2005-06 . IN VIEW OF THE ABOVE FACTUAL POSITION, AS THE CONDITIO NS ARE NOT FULFILLED, THE ASSESSEE COMPANY IS NOT E LIGIBLE FOR ADDIT I ONAL DEPRECIATION U/S 3 2 (1) (IIA) OF THE ACT. 8. THIS FINDING OF THE ASSESSING OFFICER HAS NEVER BEEN REBUTTED BY THE ASSESSEE EITHER BEFORE THE ASSESSIN G OFFICER OR BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) OR EVEN BEFORE US. THUS, SINCE THE ASSESSEE HAS NOT SHOWN O R DEMONSTRATED THAT WINDMILL HAS BEEN ACQUIRED OR INS TALLED AFTER 31.3.2005, PRIMARY CONDITION PROVIDED IN SECT ION 32 (1)(IIA) IS NOT FULFILLED. IN THE CIRCUMSTANCES, W E REVERSE THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS ) AND ITA NO.121/MDS/2014 7 RESTORE THE ORDER OF THE ASSESSING OFFICER IN DISA LLOWING THE ADDITIONAL DEPRECIATION UNDER SECTION 32(1)(IIA). T HUS GROUNDS OF APPEAL RAISED BY THE REVENUE ARE ALLOWED ON THIS ISSUE. 9. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY THE 20 TH DAY OF JUNE, 2014 AT CHENNAI. SD/- SD/- ( A .MOHAN ALANKAMONY ) ( CHALLA NAGENDRA PRASAD ) . ( & () ) ACCOUNTANT MEMBER / + JUDICIAL MEMBER/ ( + ( /CHENNAI, , /DATED, 20 TH JUNE, 2014 SOMU ./ 0/ /COPY TO: 1. APPELLANT 2. /RESPONDENT 3. 1 () /CIT(A) 4. 1 /CIT 5. / 5 /DR 6. /GF .