The ITO, Ward-4(2), Ahmedabad V. Kairav Chemicals Ltd., Ahmedabad

ITA 1296/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5812 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-07-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 10-04-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K MADHUSUDANSR
• Assessee Lawyers: R T SHAH
• Keywords: Depreciation; Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B BEFORE SHRI MUKUL SHRAWAT, JUDICIAL MEMBER AND SHRI N.S.SAINI, ACCOUNTANT MEMBER DATE OF HEARING : 5-7-10 DRAFTED ON : 5-7-2010 ITA NO. 1296 /AHD/08 ASSESSMENT YEAR : 2004-05 INCOME TAX OFFICER, WARD 4(2), NAVJIVAN TRUST BLDG., OFF ASHRAM ROAD, AHMEDABAD. VS. KAIRAV CHEMICALS LTD., 901,PARSHWA TOWER OPP.RAJPATH CLUB, S.G. HIGHWAY, AHMEDABAD PAN/GIR NO. : AAACK 8018P (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI K.MADHUSUDAN,SR.D.R. RESPONDENT BY: SHRI R.T.SHAH O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE REVENUE AGAINST TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-VIII ,A HMEDABAD DATED 11-01-2008 2. THE SOLE GROUND OF APPEAL TAKEN BY THE RVENUE IS THAT THE CIT(A) ERRED IN DIRECTING THE A.O. TO ADOPT WDV CA LCULATED AFTER ALLOWING REVISED DEPRECATION AS PER THE ORDER OF TH E LEARNED COMMISSIONER OF INCOME TAX(APPEALS) FOR A.Y. 2003-0 4 AND RE- WORK THE ALLOWABLE DEPRECIATION FOR THE YEAR UNDER CONSIDERATION. - 2 - 3. THE BRIEF FACTS ARE THAT THERE WAS FIRE IN THE F ACTORY PREMISES OF THE APPELLANT ON 26.1.2003 AND THE APPELLANT MADE A CLAIM FOR RS.55 LACS FOR DAMAGED PLANT AND MACHINERY AND RS.10 LACS FOR DAMAGED BUILDING WITH INSURANCE COMPANY ON ESTIMATE BASIS. THE CLAIM REMAINED UNSETTLED UP TO31-3-2003 AND 31.3.2004.THE A.O. WHILE COMPUTING INCOME FOR A.Y. 2003-04 REDUCED THE CLAIM OF DEPRECIATION BY REDUCING THE ABOVE AMOUNTS AS RECEI VABLE FROM THE ORIENTAL INSURANCE CO. LTD., AND REDUCED THE WDV ON WHICH DEPRECIATION WAS ALLOWED. THIS HAD THE EFFECT OF RE DUCTION IN DEPRECIATION FOR A.Y. 2003-04 OF RS.13.75 LACS ON P LANT AND MACHINERY AND RS.1 LAC ON FACTORY BUILDING, TOTALIN G TO RS. 14.75 LACS. ACCORDINGLY WHILE COMPUTING INCOME FOR A.Y. 2004-05 I.E. YEAR IN CONSIDERATION, THE A.O. CALCULATED DEPRECIATION FOR THIS YEAR ON THE REDUCED WDV OF BLOCK OF ASSETS OF PLANT AND MACHINE RY AND BUILDING AND MADE DISALLOWANCE OF DEPRECIATION AS ABOVE. 4. BEFORE THE LD. C.I.T.(A) IT WAS CONTENDED AS IN THE PRECEDING YEAR, THAT THE CLAIM BEFORE THE A.O. WAS PROVISION AL AND THE CLAIM WAS SETTLED ONLY SUBSEQUENTLY DURING THE F.Y. 2004- 05 AND HENCE THE DEPRECIATION ON ENTIRE BLOCK OF ASSETS WITHOUT ANY REDUCTION SHOULD HAVE BEEN GRANTED. IT WAS ALSO EXPLAINED THAT WHILE PREPARING THE STATEMENT OF INCOME FOR A.Y. 2003-04, ENTRIES IN TH E BOOKS OF ACCOUNTS WERE REVERSED AS IF THERE WAS NO FIRE AND NO DAMAGE. ACCORDINGLY, THE DISALLOWANCE EFFECTED BY THE LEARN ED ASSESSING OFFICER WAS CONTESTED AS NOT JUSTIFIABLE. THE LD. A .R. FURTHER SUBMITTED THAT ON SETTLEMENT OF ACTUAL INSURANCE CL AIM IN RESPECT OF VARIOUS ASSETS, NAMELY, PLANT AND MACHINERY, FACTOR Y BUILDING, STOCK- IN-TRADE, THE APPELLANT RECEIVED ON 08.06.2004 RS.1 ,35,39,128/- AS - 3 - AGAINST THE ORIGINAL CLAIM OF RS.2,15,12,282/-. THE DIFFERENCE OF RS.79,73,154/- WAS CLAIMED AS BUSINESS EXPENDITURE FOR THE A.Y. 2005-06. AS REGARDS THE PROPORTIONATE CLAIM RECEIV ED TOWARDS PLANT AND MACHINERY AND FACTORY BUILDING BEING DEPRECIABL E ASSETS,. THE APPELLANT FURNISHED THE FIGURES AS UNDER : CLAIM RECEIVED FOR FACTORY BUILDING. RS. 7,38,61 6 CLAIM RECEIVED FOR PLANT AND MACHINERY. RS. 40, 62,455 THUS, IT WAS CLAIMED THAT THE AMOUNT TO BE DEDUCTED FROM THE DEPRECIABLE BLOCK ON THE BASIS OF FINAL SETTLEMENT SHALL BE THE ABOVE FIGURE ONLY AS AGAINST RS.10 LACS AND RS.55 LACS AD OPTED BY THE AO. ACCORDINGLY THE CIT(A) WHILE DECIDING APPEAL FOR A. Y. 2003-04 DIRECTED THE LEARNED ASSESSING OFFICER TO REDUCE RS .40,62,455/- FROM THE BLOCK OF PLANT AND MACHINERY AND RS.7,38,616/- FROM THE BLOCK OF FACTORY BUILDING AS AGAINST RS.55 LACS AND RS.10 LA CS RESPECTIVELY DONE BY THE A.O. IN HIS ORDER AND ALSO DIRECTED THA T DEPRECIATION ALLOWABLE FOR A.Y. 2003-04 SHALL BE ACCORDINGLY REW ORKED AND THE BALANCER WDV SHALL BE CARRIED FORWARD TO THE FOLLOW ING YEAR AND APPROPRIATE DEPRECIATION SHALL BE ALLOWED FOR A.Y. 2004-05. 5. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) FOLLOWING THE ORDER OF THE CIT(A) FOR A.Y. 2003-04 ALLOWED TH E CLAIM OF THE ASSESSEE. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED U PON THE ORDER OF THE LEARNED ASSESSING OFFICER. - 4 - 7. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASS ESSEE FILED BEFORE US COPY OF ORDER DATED 4-3-2010 OF THE TRI BUNAL FOR ASSESSMENT YEAR 2003-04 PASSED IN THE CASE OF THE ASSESSEE ITSELF IN ITA NO.2517/AHD/2007 AND SUBMITTED THAT THE TRIBUNA L HAD CONFIRMED THE ORDER OF THE CIT(A) AND DISMISSED THE APPEAL OF THE REVENUE. AS THE FACTS AND ISSUE OF THE PRESENT YEA R OF APPEAL ARE IDENTICAL TO THE FACTS AND ISSUE FOR ASSESSMENT YEA R 2003-04 THEREFORE, FOLLOWING THE ORDER OF THE TRIBUNAL FOR ASSESSMENT YEAR 2003-04 THE ORDER OF THE LEARNED COMMISSIONER OF IN COME TAX(APPEALS) SHOULD BE CONFIRMED THE APPEAL OF THE REVENUE SHOULD BE DISMISSED. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE THERE WAS FIRE AT THE FACTORY PREMISES OF THE ASSESSEE ON26.1.2003 AND THE PLANT AND MACHINERY AND BUILDING WERE DAMAGED IN THE SAID FIRE. THE AS SESSEE LODGED INSURANCE CLAIM OF RS.55 LACS FOR DAMAGE CAUSED TO PLANT AND MACHINERY AND RS.10 LACS FOR DAMAGE CAUSED TO THE F ACTORY BUILDING. THE SAID CLAIM WAS NOT SETTLED UNTIL 31-3-2004. THE REFORE, THE ASSESSEE REDUCED RS.55 LACS FROM THE WDV VALUE OF P LANT AND MACHINERY AND RS.10 LACS FROM THE WDV VALUE OF THE FACTORY BUILDING AND ACCORDINGLY CLAIMED DEPRECIATION ON TH E SAME. THE CLAIM WAS SUBSEQUENTLY SETTLED ON 8-6-2004 BY THE I NSURANCE COMPANY AND ASSESSEE RECEIVED RS.7,38,616 AGAINST D AMAGE TO FACTORY BUILDING AND RS.40,62,455/- AGAINST DAMAGE TO PLANT AND MACHINERY. THE ASSESSEE ACCORDINGLY SUBMITTED BEFOR E THE LEARNED ASSESSING OFFICER THAT INSTEAD OF REDUCING RS.55 LA CS FROM WDV OF PLANT AND MACHINERY AND RS.10 LACS FROM WDV OF FACT ORY BUILDING - 5 - THE ACTUAL CLAIM RECEIVED FROM INSURANCE COMPANY OF RS.7,38,616/- AGAINST DAMAGE TO FACTORY BUILDING AND RS.40,62,455 /- AGAINST DAMAGE TO PLANT AND MACHINERY SHOULD BE REDUCED WHI LE ALLOWING DEPRECIATION TO THE ASSESSEE. THE LEARNED ASSESSIN G OFFICER IN HIS ORDER PASSED ON 31-11-2006 DID NOT ALLOW THE CLAIM OF THE ASSESSEE. IN APPEAL, THE CIT(A) ALLOWED THE CLAIM OF THE ASSE SSEE AGAINST WHICH THE REVENUE FILED APPEAL BEFORE THE TRIBUNAL WHICH WAS DISMISSED BY THE TRIBUNAL AND THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) WAS CONFIRMED. WE FIND THAT THE TRIBU NAL IN THE ORDER FOR ASSESSMENT YEAR 2003-04 HAS HELD AS UNDER :- 5. WE HAVE HEARD BOTH THE PARTIES AND CONSIDERED T HE RIVAL SUBMISSIONS. UNDISPUTEDLY, DUE TO FIRE IN THE FACTO RY PREMISES OF THE ASSESSEE ON 26.1.2003, CERTAIN PLANT AND MAC HINERY AS ALSO BUILDINGS WERE DESTROYED. THE LEARNED ASSESSIN G OFFICER REDUCED THE AMOUNT ESTIMATED BY THE ASSESSEE FROM T HE BLOCK OF ASSETS AND ACCORDINGLY DISALLOWED DEPRECIATION W HILE THE LD. CIT(A) REDUCED THE ACTUAL AMOUNT SETTLED BY INSURAN CE COMPANY. THE LD.CIT(A) THEREFORE, DIRECTED THE LEAR NED ASSESSING OFFICER TO REDUCE RS.40,62,455/- FROM THE BLOCK OF PLANT AND MACHINERY AND RS.7,38,616/- FROM THE BLOC K OF FACTORY BUILDING AS AGAINST RS.55 LACS AND RS.10 L ACS RESPECTIVELY DONE BY THE AO IN THE ORDER. THE REVEN UE HAVE NOT PLACED BEFORE US ANY MATERIAL, CONTROVERTING THESE FACTS NOR POINTED OUT ANY INFIRMITY IN THE FINDINGS OF THE CI T(A) ON THIS ASPECT SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER. IN THESE CIRCUMSTANCES, WE HAVE NO OPTION BUT TO UP HOLD THE FINDINGS OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ON THIS ASPECT SO AS TO ENABLE US TO T AKE A DIFFERENT VIEW IN THE MATTER. IN THESE CIRCUMSTANCE S, WE HAVE NO OPTION BUT TO UPHOLD THE FINDINGS OF THE LD. CIT (A).THUS, GROUND NO.1 IS DISMISSED. 9. THE LEARNED DEPARTMENTAL REPRESENTATIVE COULD N OT POINT OUT ANY DISTINGUISHING FEATURES IN THE ABOVE QUOTED ORD ER OF THE TRIBUNAL. HE ALSO COULD NOT SHOW THAT THE ORDER OF THE TRIBUN AL PASSED IN THE - 6 - ASSESSMENT YEAR 2003-04 WAS REVERSED IN APPEAL BY T HE HIGHER FORUM. AS THE FACTS AND ISSUE INVOLVED IN THE PRES ENT YEAR OF APPEAL ARE IDENTICAL TO THE FACTS AND ISSUE INVOLVED IN TH E ASSESSMENT YEAR 2003-04, RESPECTFULLY FOLLOWING THE ABOVE QUOTED OR DER OF THE TRIBUNAL WE CONFIRM THE ORDER OF THE CIT(A) AND DIS MISS THE GROUND OF APPEAL OF THE REVENUE. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS D ISMISSED. 11. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING IN THE PRESENCE OF THE PARTIES ON 5 TH DAY OF JULY, 20 10. SD/- SD/- (MUKUL SHRAWAT ) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; ON THIS 5TH DAY OF JULY, 2010 PATKI COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)- 5. THE DR, AHMEDABAD BENCH 6. THE GUA RD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD DATE INITIALS 1. DRAFT DICTATED ON 5-7-2010 ------------ ------- 2. DRAFT PLACED BEFORE AUTHORITY 5-7-2010 3. DRAFT PROPOSED & PLACED ------------ ------- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED 5-7-2010 -------- ----------- JM/AM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S 5-7-2010 ------ -------------- 6. KEPT FOR PRONOUNCEMENT ON 5-7-2010 ------- ------------- 7. FILE SENT TO THE BENCH CLERK ---------------- -------------------- 8. DATE ON WHICH FILE GOES TO THE ---------------- -------------------- 9. DATE OF DISPATCH OF ORDER ---------------- --- ------------------