LAFFANS PETROCHEMICALS LTD, MUMBAI V. DCIT CIR 8(2), MUMBAI

ITA 1221/MUM/2012

• Counselvise Citation: 122119914 RSA 2012
• Duration Of Justice: 2 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 03-12-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 22-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASGHAR ZAIN
• Keywords: Depreciation
• Section: 143(3); 194C

Judgement Text

A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER & SHRI SANJAY GARG, JUDICIAL MEMBER ./ I.T.A. NO. 1221 /MUM/2012 ( / ASSESSMENT YEAR : 2008-2009 LAFFANS PETROCHEMICALS LTD., 10, LUTHRA INDL. COMPLEX, ANDHERI KURLA ROAD, SAFED PHOOL, MUMBAI 400 072. / VS. DY. C OMMISSIONER OF INCOME TAX, CIR. 8(2), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. ./ PAN : AAACL 0645 D ( / APPELLANT ) .. ( / RESPONDENT ) A PPELLANT BY SHRI SHEKHAR GUPTA R E SPONDENT BY : SHRI ASGHAR ZAIN / DATE OF HEARING : 03-12-2014 / DATE OF PRONOUNCEMENT :20-02-2015 [ !' / O R D E R PER R.C. SHARMA, A.M . : THIS IS AN APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) -17, MUMBAI DATED 31-1-2012 FOR THE A.Y. 2008-09 IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 . 2. THE FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE AS SESSEE IN THIS APPEAL:- 1. THE LEARNED CIT (APPEALS) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN SUSTAINING THE ORDER OF THE AS SESSING OFFICER DISALLOWING DEPRECIATION ON BUILDING RS. 8, 59,315/- AND ELECTRICAL FITTINGS RS. 2,57,498/- 2. THE LEARNED CIT (APPEALS) HAS ERRED IN LAW AND O N THE FACTS OF THE CASE IN CONFIRMING THE ADDITION OF RS. 5,38,502/- AND RS. 1,00,940/- U/S. 40(A)(IA) OF THE ACT. ITA 1221/M/12 2 3. THE AO HAS DISALLOWED DEPRECIATION AMOUNTING TO RS. 859315/- AND RS, 2,57,498/- ON BUILDING AND ELECTRI CAL FITTINGS RESPECTIVELY. IN THIS REGARD, THE AO HAS HELD AS FO LLOWS:- DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SHOWN ADDITION TO BUILDING OF RS. 1, 71,86,298 AND ADDITION TO FURNIT URE, FIXTURES & ELECTRICAL FITTINGS OF RS. 73,09.121/- WHICH COMPRISED OF ELEC TRICAL FITTINGS OF RS. 51,49,9571- . TO VERIFY THIS ADDITION, THE ASSESSEE WAS REQUESTED TO FURNISH THE DETAILS OF ADDITIONS MADE TO THE BUILDI NG. ON PERUSAL OF THE DETAILS OF ADDITIONS FILED BY THE ASSESSEE, IT IS O BSERVED THAT THOUGH THE DATE OF SUPPLY OF MATERIAL AND LABOUR IS SPREAD THROUGHO UT THE YEAR, THE ASSESSEE HAS CONSIDERED DATE OF SUPPLY AS DATE ON WHICH BUIL DING WAS PUT TO USE AND ACCORDINGLY DEPRECIATION WAS CLAIMED. FOR CONSTRUCT ION OF THE BUILDING, THE ASSESSEE KEPT ON PURCHASING THE MATERIAL EVEN A FTER 31-03-2008 WHICH PROVED THAT THE BUILDING WAS NOT COMPLETED UPTO 31- 03-2008 BUT THE ASSESSEE HAS CLAIMED DEPRECIATION ON THE BUILDING. TO VERIFY THE EXACT DATE OF THE COMPLETION OF BUILDING, DURING THE COURSE OF ASSESS MENT PROCEEDINGS, THE ASSESSEE WAS REQUESTED TO FURNISH A COMPLETION CERT IFICATE/OCCUPANCY CERTIFICATE IN RESPECT OF THE BUILDING. IN RESPONSE TO THE SAME, ASSESSEE VIDE ITS LETTER DATED 11-11-2010, SUBMITTED THAT 'THE AS SESSEE COMPANY HAS CONSTRUCTED ADDITIONAL FACTORY PREMISES DURING THE YEAR. THE SAME WERE OPERATIONAL AND WE ARE ENCLOSING THE COMPLETION CER TIFICATE IN RESPECT OF THE SAME WAS ALSO FURNISHED. THE ADDITIONAL SPACE WAS C ONSTRUCTED IN- HOUSE BY THE ASSESSEE COMPANY' IT IS OBSERVED THAT THE ASSES SEE UNDER ITS OWN LETTER HEAD DATED 11-11-2010 CERTIFIED THAT THERE WAS AN A DDITION TO BUILDING DURING THE ASSESSMENT YEAR 2008-09 AND SAME WAS COM PLETED DURING THE YEAR. THIS IS A SELF- MADE LETTER WHICH CANNOT BE A RELIABLE DOCUMENT. THE DETAILS OF ADDITION TO FIXED ASSETS SHOW THAT THE A SSESSEE HAS MADE FIRST PAYMENT TO YOGI STEEL & CEMENT ON 11-04-2007 AND AL SO THE LAST PAYMENT OF YOGI STEEL & CEMENT ON 31-03-2008. THESE FACTS CLEA RLY REVEALED THAT THE ASSESSEE HAS CONTINUED THE CIVIL WORK EVEN AFTER TH E END OF THE RELEVANT PREVIOUS YEAR I.E. 31-03-2008. 4. WE HAVE CONSIDERED THE RIVAL CONTENTION AND FOUN D THAT ASSESSEE COMPANY HAS MADE ADDITION TO BUILDING AND ELECTRICA L FITTINGS DURING THE YEAR. DURING THE YEAR, THE ASSESSEE COMPANY HAD BUILT ADD ITIONAL STORAGE SPACE, ITA 1221/M/12 3 STORAGE TANKS AND PURCHASED PIPE LINES FOR CONNECTI ON TO THE STORAGE TANK AND BESIDES, HAD SPENT ON DRAINAGE WORKS AND ROAD WIDEN ING WORKS. THE ASSESSING OFFICER HAS DISALLOWED CLAIM OF THE DEPRECIATION ON THE PLEA THAT THE BUILDING COULD NOT HAVE BEEN COMPLETED TILL 31-03-2 008. THE ASSESSEE COMPANY HAD FURNISHED A CERTIFICATE FROM THE DIRECT OR (COMMERCIAL) CONFIRMING THAT THE BUILDING WAS COMPLETED DURING THE YEAR. IT WAS NOT A CASE OF CONSTRUCTION OF NEW BUILDING, BUT IT WAS MERE ADDIT ION TO THE EXISTING BUILDING ALREADY IN USE FOR ITS INDUSTRIAL PURPOSES . MERELY BECAUSE BILLS WERE SUBMITTED LATE BY THE CONTRACTORS, THIS SHOULD NOT BE THE BASIS TO ARRIVE AT THE CONCLUSION THAT BUILDING WAS NOT READY. ACCORDINGLY A.O. WAS NOT JUSTIFIED IN DECLINING THE CLAIM OF DEPRECIATION. WE THEREFORE D IRECT THE A.O. TO DELETE THE DISALLOWANCE OF ASSESSEES CLAIM OF DEPRECIATION. 5. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE A. O. DISALLOWED PAYMENTS MADE TO SCIENTIFIC SALES CORPORATION ON AC COUNT OF REPAIRS AND MAINTENANCE AMOUNTING TO RS. 1,00,940/- AND PAYMENT MADE TO EXODUS CHEMTANK P. LTD. AMOUNTING TO RS. 5,38,502/- ON ACC OUNT OF CLEARING AND FORWARDING CHARGES BY INVOKING THE PROVISIONS OF SE CTION 40(A)(IA) OF THE INCOME TAX ACT, 1961. IN RESPECT OF PAYMENT MADE TO SCIENTIFIC SALES CORPORATION, THE ASSESSEE HAS CONTENDED THAT THEY H AVE PURCHASED LOW TEMPERATURE COOLING BATH AND THE PARTY HAS ALSO CHA RGED CENTRAL SALES TAX. THE ASSESSEE FURTHER CONTENDED THAT SINCE IT WAS A CASE OF SUPPLY OF MATERIAL, NO TAX WAS REQUIRED TO BE DEDUCTED. THE A SSESSEE ALSO PRODUCED A COPY OF THE PURCHASE BILL. IN RESPECT OF PAYMENT MADE TO EXODUS CHEMTANK PVT. LTD. ON ACCOUNT OF CLEARING AN D FORWARDING AMOUNTING TO RS. 5,38,502/-, THE ASSESSEE CONTENDED THAT SINCE THE PAYMENT IS MADE TO A FOREIGN SHIPPING COMPANY THROU GH ITS AGENT, PROVISION OF SECTION 172 SHALL APPLY AND NOT PROVISIONS OF SE CTION 194C AND 195. THE ASSESSEE HAS ALSO FILED A CERTIFICATE FROM THE ASST . DIRECTOR OF INCOME TAX ITA 1221/M/12 4 (INTERNATIONAL TAXATION) AS REQUIRED UNDER THE PROV ISION OF SECTION 172 OF THE ACT BEFORE THE A.O. 6. WE FOUND THAT THE PAYMENT OF RS. 1,00,940/- TO S CIENTIFIC SALES CORPORATION WAS MADE ON ACCOUNT OF COOLING BATH WHI CH INVOLVES REPLACEMENT OF COMPRESSOR, THERMOSTAT AND REFILLING OF GAS. WE HAVE VERIFIED INVOICE NO. JKM/24243/07 DATED 6-8-2007 ISSUED BY M/S SCIENTIFI C SALES CORPORATION PLACED ON RECORD AND FOUND THAT PAYMENT WAS MADE ON ACCOUNT OF PURCHASE OF THESE ITEMS ON WHICH CST AT 3% WAS PAID, ACCORDINGL Y IT DID NOT REQUIRE ANY DEDUCTION OF TAX AT SOURCE. WE THEREFORE DIRECT THE A.O. TO DELETE THE DISALLOWANCE OF RS. 1,00,940/- WHICH WAS ON ACCOUNT OF PURCHASE OF COOLING BATH. 7. IN RESPECT OF PAYMENT MADE TO EXODUS CHEMTANK PV T. LTD., WE FOUND THAT THE PAYMENT WAS MADE TO A FOREIGN SHIPPING COM PANY THROUGH AN AGENT, HENCE PROVISIONS OF SECTION 194-C OF THE ACT IS NOT APPLICABLE. FOR THIS PURPOSE, A CERTIFICATE FROM ASSTT. DIRECTOR OF INCOME TAX (I NTERNATIONAL TAXATION) WAS ALSO PRODUCED AS REQUIRED U/S 172 OF THE ACT. ACCO RDINGLY WE DO NOT FIND ANY MERIT FOR THE DISALLOWANCE OF PAYMENT MADE ON ACCOU NT OF FREIGHT, FORWARDING AND CLEARING CHARGES PAID TO THE FOREIGN SHIPPING C OMPANY THROUGH ITS AGENT. THE A.O. IS DIRECTED TO DELETE THE DISALLOWANCE SO MADE U/S 40(A)(IA) OF THE ACT. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH FEB, 2015 !' # $% &! ' 20-2-2015 ( ) SD/- SD/- (SANJAY GARG) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER $ 5 MUMBAI ; &! DATED 20-02-2015 [ ITA 1221/M/12 5 .6../ RK , SR. PS ! '#$% &%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 7 () / THE CIT(A) 4,, MUMBAI 4. 7 / CIT 3MUMBAI 5. :;( 66<= , <= , $ 5 / DR, ITAT, MUMBAI C BENCH 6. (?@ A / GUARD FILE. ' / BY ORDER, : 6 //TRUE COPY// (/') * ( DY./ASSTT. REGISTRAR) , $ 5 / ITAT, MUMBAI