Jitendra Nath Patnaik, Keonjhar V. JCIT, Range-1, Cuttack

ITA 136/CTK/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5418 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 19-04-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D K PRADHAN
• Assessee Lawyers: S C BHADRA
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO.136 /CTK/2016 ASSESSMENT YEAR : 2012 - 2013 SRI JITENDRA NATH PATNAIK, AT/PO: BONIEKALA, JODA, KEONJHAR. VS. JCIT, RANGE - 1, CUTTACK PAN/GIR NO. ABFPP 3817 J (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI S.C.BHADRA, AR REVE NUE BY : SHRI D.K.PRADHAN, DR DATE OF HEARING : 23 /08/ 2017 DATE OF PRONOUNCEMENT : 31 /08/ 2017 O R D E R PER N.S.SAINI, AM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) - CUTTACK, DATED 29.1.2016 FOR THE ASSESSMENT YEAR 2012 - 2013. 2. THE SOLE ISSUE INVOLVED IN THIS APPEAL IS THAT THE CIT(A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER DISALLOWING DEPRECIATION ON PLANT AND MACHINERY AMOUNTING TO RS.27,21,595/ - , WHEN THE BUSINESS IS NOT DISCONTINUED AND THE EQUIPMENT ARE DEPRECIATED DUE TO PASSIVE USE. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS SUSPENDED ITS MINING ACTIVITY W.E.F 5.8.2010. DURING THE FINANCIAL YEAR 2011 - 12, PERTAINING TO ASSESSMENT YEAR 2012 - 13, THERE WAS NO BUSINESS OR MANUFACTURING ACTIVITY TAKEN BY THE ASSESSEE. THE ASSESSEE HAS EFFECTED ONLY ONE SALE ON 31.3.2012 OF THE 2 ITA NO.136/CTK/2016 ASSESSMENT YEAR : 2012 - 2013 OPENING STOCK AVAILABLE I N THE BEGINNING OF THE FINANCIAL YEAR I.E. ON 1.4.2011. THE ASSESSING OFFICER OBSERVED THAT SINCE THERE HAS BEEN NO ORE RAISING ACTIVITY, THE CLAIM OF DEPRECIATION ON HEA VY VEHICLE AMOUNTING TO RS.1,09,504/ - AND ON PLANT AND MACHINERY OF RS.27,21,595/ - IS NOT ALLOWABLE AND, THEREFORE, ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 4. BEING AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A) AND ARGUED THAT IT HAS NOT CLOSED DOWN THE BUSINESS UNIT NOR CEASED TO DO BUSINESS OF MINING ACTIVITIES. THE MINING ACTIVITIES WERE TEMPORARILY SUSPENDED DUE TO GOVERNMENT OF ODISHAS ORDER AND OTHER ACTIVITIES WERE BEING CARRIED OUT. AS SUCH, THERE WAS LOSS ON ACCOUNT OF WEAR AND TEAR OF MACHINERIES THOUGH NOT OPERATED DUE TO EFFLUX OF TIME. THE MINING ACTIVITIES ARE LIKELY TO RESUME ANY TIME ONCE THE GOVERNMENT LIFTS THE CLOSURE ORDER. THERE WAS A SALE DURING THE YEAR AND THE ASSESSEE WAS CARRYING STOCK IN TRADING WHICH COULD N OT BE DISPOSED OFF WITHOUT PERMIT FOR TRANSFER FROM THE DEPARTMENT OF MINES. THE ASSE SSEE WAS CONTINUING TO BE THE OWNER OF MINES, PLANT AND MACHINERY, ETC, AND, THEREFORE, DEPRECIATION WAS ALLOWABLE TO THE ASSESSEE FOR WHICH IT PLACED RELIANCE ON SOME JU DICIAL PRONOUNCEMENTS. 5. THE CIT(A) DISMISS ED THE APPEAL OF THE ASSESSEE OBSERVING THAT DEPRECIATION CANNOT BE ALLOWED TO THE ASSESSEE ONLY ON THE GROUND OF POSSESSING THE ASSET AND THAT THE ASSETS SHOULD BE USED FOR THE BUSINESS OF THE ASSESSEE. THIS TE ST IS TO BE APPLIED FOR THE CLAIM OF DEPRECIATION BY THE AS SESSEE EVERY YEAR. HE OBSERVED THAT THE ASSESSEE HAS RELIED ON THE 3 ITA NO.136/CTK/2016 ASSESSMENT YEAR : 2012 - 2013 DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CAPITAL BUS SERVICE (P) LTD VS CIT (1980 123 ITR 404 (DEL), WHEREIN, IT WAS H ELD THAT THE WORD USED IN THIS SECTION MAY BE GIVEN A WIDER MEANING AND EMBRACES PASSIVE AS WELL AS ACTIVE USER . MACHINERY WHICH IS KEPT IDLE MAY WELL DEPRECIATE, PARTICULARLY DURING THE MONSOON SEASON. IT SEEMS THAT THE ULTIMATE TEST IS, WHETHER, WITH OUT THE PARTICULAR USER OF THE MACHINERY RELIED UPON THE PROFITS SOUGHT TO BE TAXED COULD HAVE BEEN MADE AND IN THE CASE , THE PROFITS OF THE ASSESSEE DURING THE YEAR COULD NOT HAVE BEEN EARNED EXCEPT BY HIS MAINTAINING HIS FACTORY IN GOOD, WORKING ORDER, AND THAT INVOLVES THE USER OF THE FACTORY AND THE MACHINERY. THE CIT(A) OBSERVED THAT THE MAJOR TEST FOR ALLOWING DEPRECIATION IS AN ACTUAL EXPENDITURE INCURRED BY THE ASSESSEE, IS WHETHER THE PROFITS SOUGHT TO HAVE BEEN MADE WITHOUT THE PARTICULAR USE O F THE SAID PLANT AND MACHINERY FOR WHICH DEPRECIATION IS CLAIMED BY THE ASSESSEE. THE ASSESSEE DURING THE IMPUGNED YEAR HAS EFFECTED ONLY ONE SALE ON 31.3.2012 OF THE OPENING STOCK AVAILABLE AS ON 1.4.2011. TO EFFECT THIS SALE AND TO EARN PROFITS ON SUC H SALE, THE ASSESSEE HAS NOT USED PLANT AND MACHINERY DURING THE YEAR AS THERE WAS NO MANUFACTURING ACTIVITY. THUS, HE WAS UNABLE TO AGREE WITH THE CONTENTION OF THE ASSESSEE THAT DEPRECIATION SHOULD BE ALLOWED ON PLANT AND MACHINERY AS THEY WERE KEPT REA DY FOR USE. THE CIT(A) FURTHER OBSERVED THAT ON PERUSAL OF JUDICIAL DECISIONS RELIED ON BY THE ASSESSEE , IN EACH SUCH DECISIONS, THE FACTS WERE DISCUSSED BY THE HIGHER LEGAL AUTHORITIES AND THE DECISION WAS TAKEN REGARDING THE ALLOWABILITY OF DEPRECIATION . THE CASE OF THE ASSESSEE FALLS 4 ITA NO.136/CTK/2016 ASSESSMENT YEAR : 2012 - 2013 SQUARELY ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CAPITAL BUS SERVICES (P) LTD (SUPRA), WHERE A TEST FOR ALLOWING DEPRECIATION HAS BEEN DEFINED. THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING DEPREC IATION ON PLANT AND MACHINERY IS, THEREFORE, SUSTAINED. 6. BEFORE US, LD A.R. REITERATED THE SUBMISSION WHICH WERE MADE BEFORE THE CIT(A). HE RELIED ON THE DECISION OF HONBLE M.P. HIGH COURT IN THE CASE OF CIT VS. PREMIER INDUSTRIES (INDIA) LTD., 323 ITR 672 (MP), WHEREIN, IT WAS HELD THAT DEPRECIATION SHOULD BE ALLOWED IF M ACHINE WAS KEPT READY FOR USE. LD A.R. ALSO RELIED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. MR KAMAL SAWHNEY IN ITA NO.530/2011 ORDER DATED 16.11.2011. 7. LD D.R. SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 8. WE HAVE HEARD THE RI VAL SUBMISSIONS, PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF DEPRECIATION OF RS.27,21,595/ - ON PLANT AND MACHINERY ON THE GROUND THAT THEY WERE NOT ACTUALLY USED FOR THE BUSINESS OF THE ASSESSEE, WHICH WAS CONFIRMED BY THE CIT(A) IN APPEAL RELYING ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CAPITAL BUS SERVICES (P) LTD (SUPRA). THE CONTENTION OF THE ASSESSEE IS THAT SINCE MACHINERIES WERE KEPT READY FOR USE FOR THE BUSINESS OF THE ASSESSEE AND THE BUSINESS WAS TEMPORARILY SUSPENDED BY THE ORDER OF GOVERNMENT OF ODISHA DUE TO BAN ON MINES, THEREFORE, THE CLAIM OF DEPRECIATION SHOULD BE ALLOWED TO THE ASSESSEE. HE HAS RELIED ON THE 5 ITA NO.136/CTK/2016 ASSESSMENT YEAR : 2012 - 2013 DECISION OF HO NBLE M .P. HIGH COURT IN THE CASE OF PREMIER INDUSTRIES (INDIA) LTD(SUPRA) AND ALSO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF MR KAMAL SAWHNEY (SUPRA). WHEN QUESTIONED BY THE BENCH THAT FROM THE YEAR ENDING 31.3.2012, THE ASSESSEE DID NOT US E PLANT AND MACHINERY FOR ITS BUSINESS OF MINING AND IT HAS CLAIMED THAT THEY WERE KEPT READY FOR USE, THEN LET THE BENCH KNOW WHEN THE MACHINERIES WERE ACTUALLY PUT TO USE AS WE ARE NOW IN THE YEAR 2017. LD A.R. STATED THAT DUE TO BAN ON MINING BY GOVERN MENT OF ODISHA, THEY COULD NOT BE USED BY THE ASSESSEE. IN OUR CONSIDERED VIEW, THE MACHINERIES WERE NOT USED FOR ALMOST SIX YEARS APPROXIMATELY AND THERE IS UNCERTAINTY OF THEIR USE FOR THE BUSINESS OF MINING OF THE ASSESSEE DUE TO BAN BY THE STATE GOVERN MENT. IN THESE CIRCUMSTANCES, IT CANNOT BE SAID THAT THE MACHINERIES WERE KEPT READY FOR THE BUSINESS O F THE ASSESSEE AND IT WAS TEMPORARILY SUSPENDED. THEREFORE, WE FIND NO GOOD REASON TO INTERFERE WITH THE ORDER OF THE CIT(A), WHICH IS HEREBY CONFIRME D AND GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 /08/2017. SD/ - SD/ - ( PAVAN KUMAR GADALE) ( N.S SAINI) JUDICIALMEMBER A CCOUNTANT MEMBER CUTTACK; DATED 31 /08/2017 B.K.PARIDA, SPS 6 ITA NO.136/CTK/2016 ASSESSMENT YEAR : 2012 - 2013 COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY ITAT, CUTTACK 1. THE APPELLANT : SRI JITENDRA NATH PATNAIK, AT/PO: BONIEKALA, JODA, KEONJHAR. 2. THE RESPONDENT. JCIT, RANGE - 1, CUTTACK 3. THE CIT(A) - CUTTACK 4. PR.CIT - CUTTACK 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//