SATYAM EMBROIDERIES SYSTEMS P.LTD, MUMBAI V. ITO 4(3)(1), MUMBAI

ITA 1210/MUM/2013

• Counselvise Citation: 121019914 RSA 2013
• Duration Of Justice: 1 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2004-2005
• Appeal Filed On: 12-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PITAMBAR DAS
• Assessee Lawyers: H N MOTIWALLA
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NOS. 1210/MUM/2013 ASSESSMENT YEAR: 2004-05 M/S. SATYAM EMBROIDERIES SYSTEMS PVT. LTD. 16A/B, 2 ND FLOOR, 32/36, SHAMSETH STREET, C.P. CHAWL, ZAVERI BAZAR MUMBAI-400 002 PAN:AAFCS 7441 F VS. ITO-4(3)-1 MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI H. N. MOTIWALLA REVENUE BY SHRI PITAMBAR DAS DATE OF HEARING : 08.05.2014 DATE OF PRONOUNCEMENT : 21.05.2014 O R D E R PER DR. S.T.M. PAVALAN, JM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD.CIT(A)-8, MUMBAI DATED 04.01.2013 CONFIRMING THE PENALTY OF RS.93,968/- LEVIED BY THE AO U/S 271(1)(C) READ WITH SECTION 274 OF TH E INCOME-TAX ACT. 2. BRIEFLY STATED, THE ASSESSEE HAD FILED RETURN OF INCOME DECLARING A LOSS OF RS.1,08,62,190/- AND IN THE ASSESSMENT FRAMED U/S 1 43(3), THE AO DETERMINED THE LOSS AT RS.1,03,70,575/-. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAD CLAIMED DEPRECIATION AT 50% ON PLANT & MACHINERY WORTH RS.2,72,78,237/-. THE SAID DEPRECIATION WAS C LAIMED AS THE PLANT & MACHINERY WERE PURCHASED UNDER TECHNOLOGY UPGRADATION FUND SC HEME (TUFS) WHICH INCLUDED (I) UPS-RS.4,00,000/-, (II) AIR CONDITION-RS.2,07,7 96/- (III) COMPRESSOR -RS.1,45,567 TOTALING RS.7,48,363/-. ACCORDING TO THE AO, THESE ITEMS DID NOT FALL UNDER THE TUF ITA NOS. 1210/MUM/2013 M/S. SATYAM EMBROIDERIES SYSTEMS PVT. LTD. ASSESSMENT YEAR: 2004-05 2 SCHEME, THE ASSESSEE WAS NOT ENTITLED FOR THE DEPRE CIATION @ 50% AS AVAILABLE IN THE CASE OF PLANT & MACHINERY PURCHASED TUF SCHEME, BUT ONLY ENTITLED FOR NORMAL RATE OF 15%. THUS, THE AO DISALLOWED THE EXCESS DEP RECIATION CLAIM OF RS.2,61,931/. THE SAID DISALLOWANCE WAS UPHELD BY THE LD.CIT(A) A ND NO FURTHER APPEAL WAS PREFERRED TO THE TRIBUNAL. CONSEQUENT UPON THE ADDI TION MADE IN THE ASSESSMENT PROCEEDINGS, THE AO LEVIED A MINIMUM PENALTY OF RS. 96,357/- BEING 100% OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE. ON APPEAL AGAI NST THE PENALTY ORDER, THE LD.CIT(A) UPHELD THE ACTION OF THE AO LEVYING THE I MPUGNED PENALTY. AGGRIEVED BY THE IMPUGNED ORDER, THE ASSESSEE IS IN APPEAL BEFOR E US. 3. HAVING HEARD BOTH THE SIDES AND PERUSED THE MATE RIAL ON RECORD, IT IS PERTINENT TO MENTION THAT THE AO HAS MADE A DISALLO WANCE OF THE DEPRECIATION PRIMARILY ON THE GROUND THAT THE MACHINERY AND PLA NT, FOR THE PURPOSE OF TUF SCHEME, DOES NOT INCLUDE THE UPS, AIR CONDITIONER A ND COMPRESSOR AS THE SAME ARE NOT USED IN WEAVING, PROCESSING AND GARMENT SECTOR OF TEXTILE INDUSTRY WHICH IS PURCHASED UNDER TUFS SCHEME WHEREAS THESE ITEMS ARE ENTITLED ONLY TO THE NORMAL RATE OF 15% DEPRECIATION. THE DUE EXAMINATION OF FA CTS AND CIRCUMSTANCES REVEALS THAT THE UPS, AIR CONDITIONER AND THE COMPRESSOR AR E PURCHASED BY THE ASSESSEE OUT OF THE LOAN GIVEN BY THE BANK UNDER TUFS SCHEME FLO ATED BY THE MINISTRY OF TEXTILE. THIS FACT, IN OUR VIEW, STRENGTHENS THE CLAIM OF TH E ASSESSEE THAT IT HAS BEEN UNDER THE IMPRESSION THAT THE CLAIM OF DEPRECIATION HAS B EEN AS PER THE SPECIFIC RATES PRESCRIBED. IT IS ALSO EVIDENT THAT THE ASSESSEE HA S BEEN HARPING UPON THE INTERPRETATION OF PLANT & MACHINERY FOR THE PURPO SE OF TUF SCHEME. THEREFORE, THE SAID FACTS PROVE THAT THE CORRECT ENTITLEMENT OF TH E DEPRECIATION IS A DEBATABLE ISSUE. IT IS PERTINENT TO MENTION THAT THE HONBLE APEX CO URT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC) HAS HELD THAT NO PENALTY CAN BE LEVIED MERELY ON DISALLOWANCE OF THE DEDUCTION WHIC H HAS BEEN MADE BY TAKING A DIFFERENT VIEW. IN VIEW OF THE AFOREMENTIONED DISCU SSION WE ARE OF THE CONSIDERED VIEW THAT THE CASE OF THE ASSESSEE DOES NOT ATTRACT SECTION 271(1)(C) OF THE INCOME- TAX ACT AND THEREFORE, THE LD.CIT(A) IS NOT JUSTIFI ED IN UPHOLDING THE LEVY OF THE IMPUGNED PENALTY. THUS, THE IMPUGNED PENALTY CONFIR MED/LEVIED BY THE LD.CIT(A)/AO STANDS DELETED. ITA NOS. 1210/MUM/2013 M/S. SATYAM EMBROIDERIES SYSTEMS PVT. LTD. ASSESSMENT YEAR: 2004-05 3 4. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY OF MAY, 2014. SD/- SD/- (P.M. JAGTAP) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 21.05.2014. *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR E BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.