Core Health Care Ltd., (Liquidated Company), Ahmedabad V. The ACIT, Circle-5, Ahmedabad

ITA 1410/AHD/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0226 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2005-2006
• Appeal Filed On: 19-05-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: SHRIVINOD TANWANI
• Keywords: Reopening of assessment; Depreciation; Tax effect; Revised return; Unabsorbed depreciation
• Section: 143(3); 142(1); 143(1); 32; 148

Judgement Text

, D - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER &SMT. MADHUMITA ROY, JUDICIAL MEMBER . ITA NOS.1410&1388/AHD/2015 / ASSTT. YEARS: 2005-06& 2007-08 ASSESSEE BY : SHRIVINODTANWANI, SR. DR REVENUE BY : SHRIS.N. SOPARKAR&HIMANSHU SHAH, ARS / DATE OF HEARING : 04/02/2019 / DATE OF PRONOUNCEMENT: 29/03/2019 !'/ O R D E R PER MADHUMITA ROY- JM : THE APPEALS HAVE BEEN PREFERRED BY THE ASSESSEE AGA INST THE ORDER DATED 18.03.2015 PASSED BY THE CIT(A)-9, AHMEDABAD U/S. 14 3(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS TH E ACT) FOR ASSESSMENT YEAR 2005-06 AND BY THE REVENUE AGAINST THE ORDER DATED 27.02.2015 PASSED BY THE CIT(A)-9 U/S. 143(3) OF THE ACT FOR ASSESSMENT YEAR 2007-08 RESPECTIVELY. SINCE BOTH THE APPEALS RELATE TO THE SAME ASSESSEE , THESE ARE HEARD ANALOGOUSLY AND ARE BEING DISPOSED OF BY A COMMON O RDER. ITA NO. 1410/AHD/2015 A.Y. 2005-06 (ASSESSEES APPE AL) 3. THE ASSESSEE IN THE INSTANT APPEAL BASICALLY CHAL LENGED THE REOPENING OF ASSESSMENT U/S. 148 OF THE ACT. THE REASSESSMENT WA S FINALIZED BY MAKING A DCIT, CIR-5, AHMEDABAD VS. M/S. CORE HEALTHCARE LTD. JIVABHAI CHAMBERS, B/H SWASTIK SUPER MARKET, AHRAM ROAD, AHMEDABAD- 380009 PAN:AAA CC6 252 H (APPELLANT/RESPONDENT) (RESPONDENT/APPELLANT) ITA NOS. 1410 & 1388/AHD/2015 A.YS. 2005-06 & 2007- 08 2 DISALLOWANCE OF RS. 40,97,845/- U/S. 36(1)(VA) R.W. S. 2(24)(X) OF THE ACT, WHICH WAS AFFIRMED BY THE APPELLATE AUTHORITY. THE ASSESSEE INITIALLY FILED ITS RETURN OF INCOME O N 31.10.2005 DECLARING TOTAL LOSS AT RS. 12,35,64,127/- ASSESSMENT WHEREOF WAS C OMPLETED ON 17.12.2007 DETERMINING TOTAL INCOME AT RS. NIL. SUBSEQUENTLY T HE SAME WAS REOPENED U/S. 147 OF THE ACT BY ISSUANCE OF NOTICE DATED. 13.05.2 011 U/S. 148 OF ACT AND SERVED UPON THE OFFICIAL LIQUIDATOR OF THE COMPANY FOLLOWE D BY A FRESH NOTICE U/S. 148 DUE TO CHANGE OF INCUMBENT. THE REASON OF REOPENING WAS ALSO FURNISHED ON 13.03.2013. IT WAS OBSERVED FROM THE STATEMENT OF COMPUTATION O F TOTAL INCOME THAT THE ASSESSEE HAD ADDED AN AMOUNT OF RS. 7,53,350/- TO T HE TOTAL INCOME ON ACCOUNT OF DELAY NON-PAYMENT OF EMPLOYEES CONTRIBUTION TOWARD S PROVIDENT FUND. IN TERMS OF THE PROVISION OF SEC. 36(1)(VA) OF THE ACT R.W.S . 2(24)(X) OF THE ACT RS. 44,50,840/- WAS REQUIRED TO BE ADDED TO THE TOTAL I NCOME AS AGAINST RS. 3,53,995/; THE DIFFERENCE WORKED OUT AT RS. 40,97,845/- AND ON SUCH UNDER ASSESSMENT THE TAX EFFECT WAS WORKED OUT AT RS. 18,74,380/- INCLUDING INTEREST U/S. 234(B). HENCE, SUCH REOPENING. 4. HEARD THE RESPECTIVE PARTIES PERUSED THE RELEVAN T MATERIALS AVAILABLE ON RECORD. WE FIND IN VIEW OF THE SEC. 36(1)(VA) R.W. S. 2(24)(X) OF THE ACT THE LD. AO DISALLOWED RS. 40,97,845/- AND ADDED BACK THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. IN APPEAL THE SAME WAS CONFIRMED. ADMIT TEDLY THE PROVIDENT FUND CONTRIBUTION RECEIVED FROM THE EMPLOYEES WERE DEPO SITED BY THE ASSESSEE IN THE CONCERNED PROVIDENT FUND AMOUNT BEYOND THE DUE DATE S AS PRESCRIBED IN THE SAID ACT. WE HAVE CONSIDERED THE JUDGMENT PASSED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE MATTER OF CIT VS. GUJARAT STATE ROAD TRA NSPORT CORPORATION REPORTED IN 265 CTR 64 (GUJ.) WHEREIN IT WAS HELD THAT IF SUC H CONTRIBUTION IS DEPOSITED WITHIN THE DUE DATE SPECIFIED IN EXPLANATION TO SEC . 36(1)(VA) OF THE ACT THEN ONLY ITA NOS. 1410 & 1388/AHD/2015 A.YS. 2005-06 & 2007- 08 3 THE DEDUCTION WILL BE ALLOWED.SINCE THE APPELLANT H AS NOT CREDITED THE CONTRIBUTION RECEIVED FROM ITS EMPLOYEES TO EMPLOYEES ACCOUNT IN RELEVANT FUND ON OR BEFORE THE DUE DATE AS PRESCRIBED IN EXPLANATION TO SEC. 3 6(1)(VA),THOUGH HE DEPOSITED THE SAID SUM BEFORE DUE DATE PRESCRIBED U/S. 43(B) I.E. PRIOR TO FILING OF RETURN U/S. 139(1), OF THE ACT THE AUTHORITIES BELOW RIGHTLY DI SALLOWED SUCH AMOUNT OF CONTRIBUTION TO THE TUNE OF RS. 40,97,845/-AND MADE ADDITION THEREOF. WE, THEREFORE, FIND NO INFIRMITY IN THE ORDER PASSED BY THE AUTHORITIES BELOW WARRANTING INTERFERENCE. RESPECTFULLY, FOLLOWING THE JUDGMENT PASSED BY THE JURISDICTIONAL HIGH COURT AS CITED ABOVE,WE ARE OF THE CONSIDERED VIEW TO AFFIRM THE SAME. HENCE, ASSESSEES APPEAL IS DISMISSED. ITA NO. 1388/AHD/2015 A.Y. 2007-08 (REVENUES APPEA L) 5. THE ASSESSEE FILED ITS ORIGINAL RETURN OF INCOME THROUGH ELECTRONIC MEDIA ON 31.10.2007 FOLLOWED BY A REVISED RETURN FILED ON TH E SAME DATE DECLARING TOTAL LOSS AT RS. 56,39,710/- WHICH WAS PROCESSED U/S. 143(1) OF THE ACT. UNDER SCRUTINY ASSESSMENT NOTICE U/S. 143(2) DATED 22.08.2008 WAS SERVED UPON THE ASSESSEE FOLLOWED BY A FRESH NOTICE U/S. 143(2) DATED 31.08. 2009 DUE TO CHANGE OF INCUMBENT ALONGWITH A NOTICE U/S. 142(1) OF THE ACT IN THE FORM OF DETAILED QUESTIONNAIRE. IT WAS FOUND THAT THE ASSESSEE CLAI MED BUSINESS LOSS OF RS. 56,39,710/- COMPRISING UNABSORBED DEPRECIATION OF R S. 6,71,798/- AND RS. 49,67,912/- BEING BUSINESS LOSS. AFTER THE DEMERGE R OFSACHANA UNIT, ADMITTEDLY THE ASSESSEE DISCONTINUED MANUFACTURING OPERATIONS BUT THE BUSINESS ACTIVITIES WAS CONTINUED FOR COLLECTION OF DEBTORS, PAYMENT OF LIA BILITIES ETC. AND HENCE THE ASSESSEE CLAIMED SUCH LOSS. ACCORDING TO THE LD. AO THE COLLECTION OF DEBTORS AND PAYMENT OF LIABILITIES DOES NOT CONSTITUTE CARRYING ON BUSINESS ACTIVITY SINCE THERE WERE NO SALES DURING THE YEAR. THUS, THE CLAIM OF B USINESS LOSS OF RS. 56,39,710/- HAS BEEN DISALLOWED. IN APPEAL THE SAME WAS DELETE D BY THE LD. CIT(A). HENCE THE INSTANT APPEAL FILED BY THE REVENUE BEFORE US. ITA NOS. 1410 & 1388/AHD/2015 A.YS. 2005-06 & 2007- 08 4 THE ASSESSEE WAS A MANUFACTURER OF PHARMACEUTICALS. DUE TO THE DEMERGER SCHEME SANCTIONED BY THE JURISDICTIONAL HIGH COURT SACHANA UNIT WAS DEMERGED WITH THE APPELLANT COMPANY. IT WAS THE CASE OF THE ASSESSEE THAT IT HAD OTHER INCOME OF RS. 5,86,000/- AND ALSO INCURRED CERTAIN EXPENSES TOWARDS EMPLOYEES COST AND OTHER EXPENSES WHICH ARE ALLOWABLE. THE EX PENSES TOWARDS THE COLLECTION FROM DEBTORS AND PAYMENT OF LIABILITY WERE ALSO INC URRED BY THE ASSESSEE FOR MAINTAINING THE PLANTS IN ORDER TO MAINTAIN THE EST ABLISHMENT AND TO KEEP THE CONDITION OF THE PLANT INTACT SO THAT THE UNIT CAN BE MERGED, KEEPING IN MIND THAT IN THE EVENT OF DEMERGER SCHEME IS FAILED THE COMPANY CAN COMMENCE THE ACTIVITY. THUS, THERE WAS NO CESSATION OF BUSINESS BUT A TEMPO RARY LULL AND HENCE THE EXPENDITURE INCURRED DURING LULL PERIOD ARE ALLOWAB LE AS SETTLED BY THE UMPTEEN NUMBER OF JUDGMENTS BY DIFFERENT COURT AS THE CASE MADE OUT BY THE APPELLANT. 6. AT THE TIME OF HEARING THE LD. ADVOCATE APPEARING FOR THE ASSESSEE RELIED UPON THE JUDGMENT PASSED BY THE HONBLE DELHI HIGH COURT PASSED IN THE MATTER OF CIT VS. INTEGRATED TECHNOLOGIES LTD. IN SUPPORT OF HIS CLAIM OF DEPRECIATION.ACCORDING TOHIS CLAIM OF DEPRECIATION IS ALLOWABLE ON THE PLANT AND MACHINERY ON THE FOOTING THEY WERE KEPT READY FOR T HE USE IN THE BUSINESS IF GOT REVIVED AND THAT AMOUNTED TO PASSIVE USE OF ASSETS WHICH WOULD MEET THE REQUIREMENT OF SEC. 32 OF THE ACT. IT WAS FURTHER S UBMITTED THAT THE ADDITION MADE BY THE LD. AO ON THE SAME ISSUE IN ASSESSEES OWN CA SE FOR ASSESSMENT YEAR 2005- 06 WAS ULTIMATELY DELETED BY THE LD. CIT(A). 7. ON THE OTHER HAND THE LD. DR RELIED UPON THE ORDE R PASSED BY THE LD. AO. 8. HEARD THE RESPECTIVE PARTIES, PERUSED THE RELEVA NT MATERIALS AVAILABLE ON RECORD. WE HAVE ALSO CAREFULLY CONSIDERED THE JUDG MENT PASSED BY THE DELHI HIGH COURT WHICH WAS FURTHER TAKEN INTO ACCOUNT BY THE L D. CIT(A).WE FIND THAT THE LD. CIT(A) TAKING INTO CONSIDERATION THE ENTIRE ASPECT O F THE MATTER ALLOWED THE CLAIM ITA NOS. 1410 & 1388/AHD/2015 A.YS. 2005-06 & 2007- 08 5 OF BUSINESS LOSS OF RS. 56,39,710/- INCLUDING UNABS ORBED DEPRECIATION WITH THE FOLLOWING OBSERVATION:- 3.2 I HAVE CAREFULLY CONSIDERED THE SUBMISSION AND CASE LAWS RELIED UPON BY THE APPELLANT. APPELLANT SUBMITTED IT WAS MANUFACTU RING PHARMACEUTICAL PRODUCTS. DUE TO THE SCHEME OF DEMERGER SANCTIONED BY HON. GUJARAT HIGH COURT VIDE ORDER DATED 1ST MARCH, 2007 THE SACHANA UNIT WAS DEMERGED WITH NIRMA LIMITED. IT WAS THE OBLIGATION OF THE COMPANY TO KEEP THE CONDITION OF THE PLANT INTACT AND IF FOR ANY REASON DEMERGER SCH EME FAILS, THE COMPANY HAD TO COMMENCE THE ACTIVITY. IN THAT SITUATION, IT WIL L BE PERIOD OF LULL. APPELLANT SUBMITTED THAT EXPENDITURE DURING LULL PERIOD IS AL LOWABLE EXPENDITURE FOR WHICH IT RELIED ON THE ABOVE DECISIONS. IN THE CAS E OF CIT V/S. INTEGRATED TECHNOLOGIES LTD. (DEL.) TAX APPEAL NO.530/2011 DTD . 16TH DECEMBER, 2011 HON'BLE DELHI HIGH COURT HAS HELD:- 'THE TRIBUNAL HAS REFERRED TO THE JUDGMENTS IN CAPI TAL BUS SERVICE (SUPRA), CIT VS. REFRIGERATION AND ALLIED INDUSTRIE S LTD. (SUPRA) & CIT VS. PANACEA BIOTECH LTD. (SUPRA) AND HAS APPLIE D THE RATIO LAID DOWN THEREIN TO THE FACTS OF THE PRESENT CASE. THE RATIO IN BRIEF IS THAT IT IS NOT NECESSARY THAT THE PLANT AND MACHINERY OWNED BY THE ASSESSEE SHOULD BE ACTUALLY PUT TO USE IN THE RELEVANT ACCOU NTING YEAR TO JUSTIFY THE CLAIM OF DEPRECIATION AND THAT EVEN IF THE PLAN T AND MACHINERY OR OTHER ASSET IS KEPT READY FOR USE IN THE ASSESSEE'S BUSINESS, THE ASSESSEE WOULD BE ENTITLED TO DEPRECIATION. THE ONLY CONDITI ON IS THAT THE BUSINESS SHOULD NOT HAVE BEEN CLOSED DOWN ONCE FOR ALL AND THAT THE ASSESSEE SHOULD DEMONSTRATE THAT THE HOPES OF THE B USINESS BEING REVIVED ARE ALIVE AND REAL. IT IS HOWEVER NOT A MAT TER THAT CAN TURN ENTIRELY ON THE ASSESSEE1 S HOPES ALONE. THERE SHOU LD BE EVIDENCE OR MATERIAL TO SHOW THAT THE ASSESSEE TOOK EFFORTS TO KEEP THE BUSINESS ALIVE IN THE HOPE OF REVIVING THE SAME. MAINTAINING THE OFFICE AND ESTABLISHMENT, COMPLYING WITH THE STATUTORY FORMALI TIES, NOT DISPOSING OF THE PLANT AND MACHINERY, INCURRING EXPENSES ON T HE REPAIR OF PLANT AND MACHINERY ETC. ARE SOME OF THE INDICATIONS OF N URTURING THE HOPES OF REVIVING THE BUSINESS. THE ABOVE ARE ONLY ILLUST RATIVE INSTANCES AND ARE BY NO MEANS EXHAUSTIVE AND THE QUESTION AS TO W HETHER THE ASSETS WERE KEPT READY FOR USE IN THE BUSINESS IS LARGELY TO BE DECIDED ON THE FACTS AND CIRCUMSTANCES OF EACH CASE. IN OUR OPINIO N, THE TRIBUNAL HAS NOT COMMITTED ANY ERROR IN APPLYING THE RATIO LAID DOWN IN THE JUDGMENTS OF THIS COURT TO THE FACTS OF THE PRESENT CASE IN ORDER TO UPHOLD THE ASSESSEE'S CLAIM FOR DEPRECIATION.' AFTER CONSIDERING THE SUBMISSION AND CASE LAWS RELI ED UPON BY IT, I AM OF THE VIEW THAT THE APPELLANT IS ENTITLED FOR CLAIM OF BU SINESS LOSS OF RS,56,39,710/- INCLUDING UNABSORBED DEPRECIATION. THE AO IS DIRE CTED TO ALLOW THE CLAIM OF BUSINESS LOSS AND UNABSORBED DEPRECIATION TO THE AP PELLANT, AFTER VERIFICATION OF RECORDS, AS PER THE PROVISIONS OF I.T. ACT. SUBJ ECT TO VERIFICATION, THESE GROUNDS ARE ALLOWED FOR STATISTICAL PURPOSE. ITA NOS. 1410 & 1388/AHD/2015 A.YS. 2005-06 & 2007- 08 6 9. CONSIDERING THE DECISION RELIED UPON BY THE LD. A R AS CITED ABOVE WE FIND THE DEPRECIATION CLAIMED BY THE ASSESSEE IS ALLOWAB LE KEEPING IN VIEW THE TEMPORARY LULL IN THE BUSINESS OF THE ASSESSEE AND ALSO THE EXPENDITURE MADE THEREON FOR THE REASONS MENTIONED IN THE FOREGOING PARAGRAPH AND WE FIND NO REASON TOINTERFERE WITH THE ORDER PASSED BY THE LD. CIT(A), WHICH IN OUR CONSIDERED VIEW IS JUST AND PROPER HAVING REGARD TO THE JUDGMENT PASSED BY THE DIFFERENT HIGH COURTS AS DISCUSSED ABOVE. IN THAT VIEW OF THE MATTER WE FIND NO MERIT IN THE APPEAL PREFERRED BY THE REVENUE AND TH E SAME IS THUS DISMISSED. 10. HENCE, THE REVENUES APPEAL IS DISMISSED. [ORDER PRONOUNCED IN THE COURT ON 29-03-2019.] SD/- SD/- ( WASEEM AHMED ) ( MADHUMITA ROY ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 29/03/2019 TANMAY TRUE COPY !'$%&'(!' / COPY OF THE ORDER FORWARDED TO : 1. )* / THE APPELLANT 2. $+)* / THE RESPONDENT. 3. ,, - / CONCERNED CIT 4. - ( ) / THE CIT(A) 5. '01$%% , / DR, ITAT, 6. 1345 / GUARD FILE. !' / BY ORDER, 6/ ,7 (DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD