DCIT, CHENNAI V. Seven Seas Distillery Pvt Ltd., CHENNAI

ITA 1418/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8819 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 1995-1996
• Appeal Filed On: 20-05-2016
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: D ANAND
• Keywords: Depreciation

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI . . . , ! . '#'$ , % !& ' [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ] ./ I.T.A.NO.1418/MDS/2016 / ASSESSMENT YEAR : 1995-96 THE DY. COMMISSIONER OF INCOME-TAX CORPORATE CIRCLE 6(1) CHENNAI VS. M/S SEVEN SEAS DISTILLERY PVT. LTD NO.1, RAMAKRISHNA STREET T. NAGAR, CHENNAI 600 017 [PAN AADCS 0200Q ] ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : SHRI A.V SREEKANTH, JCIT /RESPONDENT BY : SHRI D. ANAND, ADVOCA TE / DATE OF HEARING : 04 - 0 8 - 2016 ! / DATE OF PRONOUNCEMENT : 10 - 0 8 - 2016 / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER IN THIS APPEAL FILED BY THE REVENUE AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-15, CHENNAI, D ATED 16.2.2016 FOR ASSESSMENT YEAR 1995-96, ITS GRIEVANCE IS THAT THE CIT(A) DIRECTED ALLOWANCE OF DEPRECIATION OF ` 32,76,130/- ON MACHINERY LEASED OUT BY THE ASSESSEE. ITA NO. 1418/16 :- 2 -: 2. FACTS APROPOS ARE THAT THE ASSESSEE, A MANUFACTURE R OF INDIAN MADE FOREIGN LIQUOR, HAD FILED ITS RETURN DE CLARING INCOME OF ` 47,43,084/-. ASSESSMENT WAS ORIGINALLY COMPLETED O N 31.3.1996 ON WHICH AN APPEAL WAS FILED BY THE ASSESSEE. ASSES SEE WAS AGGRIEVED ON DISALLOWANCE OF DEPRECIATION CLAIMED BY IT ON MA CHINERY LEASED OUT BY IT. THE ISSUE WAS CARRIED IN APPEAL BEFORE T HE CIT(A) AND WITHOUT GETTING SUCCESS THE ASSESSEE MOVED THE TRIBUNAL IN FURTHER APPEAL. THE TRIBUNAL VIDE ORDER DATED 17.2.2006 IN I.T.A.NO .993/MDS/1999 SET ASIDE THE ISSUE BACK TO THE FILE OF THE ASSESSING O FFICER FOR CONSIDERATION AFRESH SINCE LETTER DATED 2.3.1998 WR ITTEN BY M/S CREATIVE INDUSTRIES (HYDERABAD) PVT. LTD WHICH WAS USED AGAINST THE ASSESSEE BY THE ASSESSING OFFICER WAS NOT CONFRONTE D WITH THE ASSESSEE. M/S CREATIVE INDUSTRIES (HYDERABAD) PVT. LTD. HAD MENTIONED THAT THEY HAD INSTALLED THE MACHINERY GIVEN BY THE ASSESSEE ON LEASE TO THEM AND HAD DONE TRIAL RUNS IN THE MONTH OF MAR CH, 1995. THEY ALSO STATED THAT TRIAL RUNS HAD RESULTED IN PRODUCT ION OF DUMMY COPIES OF NEWSPAPER THE GUARDIAN. ASSESSING OFFICER WAS OF THE OPINION THAT THE MACHINERY WAS USED BY THE ASSESSEE ONLY FOR A TRIAL RUN AND THEREFORE, ASSESSEE COULD NOT BE GIVEN DEPRECIATIO N CLAIMED AS FRESH MACHINERY. AS PER THE ASSESSING OFFICER, MACHINERY WAS NOT PUT TO USE FOR THE PURPOSE OF BUSINESS. IN REPLY TO THAT THE ASSESSEE SUBMITTED THAT THE ASSETS LEASED OUT HAD BEEN PUT T O USE BY THE ITA NO. 1418/16 :- 3 -: LESSEES, HENCE THE ASSESSEE WAS ELIGIBLE FOR DEPRE CIATION. THIS WAS NOT ACCEPTED BY THE ASSESSING OFFICER. ACCORDING T O HIM, USE FOR THE PURPOSE OF BUSINESS OR PROFESSION MEAN ACTUAL EFFEC TIVE AND REAL USER IN THE COMMERCIAL SENSE. AS PER THE ASSESSING OFFI CER, ASSESSEE HAD NOT PUT TO USE THE MACHINERY BUT HAD KEPT IT READY FOR USE. HE DISALLOWED THE CLAIM OF DEPRECIATION AND COMPLETED THE ASSESSMENT. 3. AGGRIEVED, THE ASSESSEE MOVED ONCE AGAIN IN APPEAL BEFORE THE CIT(A). ARGUMENT OF THE ASSESSEE BEFORE THE C IT(A) WAS THAT SUB-CLAUSE 5 OF CLAUSE (C) OF ITS OBJECTS IN THE ME MORANDUM OF ASSOCIATION ENABLED THE ASSESSEE TO CARRY ON THE B USINESS OF LEASING. AS PER THE ASSESSEE, IT WAS ENTITLED TO DO ANY BUS INESS SUBJECT TO THE RESTRICTIONS PLACED IN THE MEMORANDUM OF ASSOCIATIO N IN ADDITION TO ITS MANUFACTURING ACTIVITY. RELIANCE WAS ALSO PLACED O N THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS SUNDARAM FINANCE LTD, 18 TAXMANN.COM 197. THE CIT(A) WAS APPRECIATI VE OF THIS CONTENTION. ACCORDING TO HIM, BY VIRTUE OF THE ABO VE JUDGMENT OF THE JURISDICTIONAL HIGH COURT, ASSESSEE WAS ELIGIBLE F OR CLAIMING DEPRECIATION. AS PER THE CIT(A), WHAT WAS NECESSAR Y WAS INSTALLATION OF ASSET AT THE PLACE OF THE ASSESSEE AND ACTUAL U SE THEREOF BY THE LESSEE WAS NOT A CONDITION PRECEDENT FOR CLAIMING D EPRECIATION PREFERRED BY THE LESSEE. ITA NO. 1418/16 :- 4 -: 4. NOW BEFORE US, STRONGLY ASSAILING THE ORDER OF THE CIT(A), LD. DR SUBMITTED THAT THE MACHINERY WAS NOT PUT TO USE BY THE LESSEE AND THEREFORE, ASSESSEE COULD NOT BE ELIGIBLE FOR CLAI MING DEPRECIATION. 5. PER CONTRA, LD. AR SUBMITTED THAT THE ISSUE STOOD C OVERED IN FAVOUR OF THE ASSESSEE BY VIRTUE OF JUDGMENT OF TH E JURISDICTIONAL HIGH COURT IN THE CASE OF SUNDARAM FINANCE LTD (SUPRA). RELIANCE WAS ALSO PLACED ON THE JUDGMENT OF THE MADRAS HIGH COURT IN THE CASE OF CIT VS KOTAK MAHINDRA FINANCE LTD, 317 ITR 236. 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. CREATIVE INDUSTRI ES (HYDERABAD) PVT. LTD. HAD CONFIRMED INSTALLATION OF THE MACHINERY AN D CARRYING OUT THE TRIAL RUNS RESULTING IN PRODUCTION OF NEWSPAPER TH E GUARDIAN. THE ASSESSEES CLAIM WAS DISALLOWED BY THE ASSESSING OF FICER FOR THE REASON THAT THE ASSESSEE HAD NOT USED THE SAME FOR ITS BU SINESS. IT IS ADMITTED POSITION THAT THE ASSESSEE HAD LEASED OUT THE MACHINERY TO CREATIVE INDUSTRIES (HYDERABAD) PVT. LTD. BY VIRTU E OF THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF SUNDAR AM FINANCE LTD. (SUPRA) WHEN LEASED ASSETS WERE INSTALLED AT THE PL ACE OF THE LESSEE, IT COULD BE PRESUMED FOR THE PURPOSE OF ALLOWANCE OF D EPRECIATION THAT THEY HAD BEEN USED BY THE LESSEE. IT IS NOT IN DIS PUTE THAT THE MEMORANDUM OF ASSOCIATION OF THE ASSESSEE HAD AS O NE OF ITS OBJECTS ITA NO. 1418/16 :- 5 -: CARRYING OUT THE LEASING BUSINESS. IN SUCH CIRCUMS TANCES, WE DO NOT FIND ANY FAULT IN THE ORDER OF THE CIT(A) IN FOLLOW ING THE JUDGMENT F THE JURISDICTIONAL HIGH COURT IN SUNDARAM FINANCE LTD. (SUPRA) WHILE ALLOWING DEPRECIATION TO THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH AUGUST, 2016, AT CHENNAI. SD/- SD/- ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( ! . '#'$ ) (ABRAHAM P. GEORGE) % / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 10 TH AUGUST, 2016 RD &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF