The ITO, Ward-1(2), Ahmedabad V. Crest Composites & Plastics Pvt. Ltd., Ahmedabad

ITA 1456/AHD/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6248 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 22-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Assessee Lawyers: PRAKASH UDESHI
• Keywords: Depreciation; Corroborative evidences
• Section: 43B

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ ITA NO. 1540/AHD/2015 / ASSESSMENT YEAR : 2011-12 CREST COMPOSITE & PLASTICS PVT. LTD. 808, ABHISHREE ADROIT, JUDGES BUNGLOW ROAD, VASTRAPUR, AHMEDABAD 380 054 VS ITO, WARD 1(2), AHMEDABAD. ./ ITA NO. 1456/AHD/2015 / ASSESSMENT YEAR : 2011-12 ITO, WARD 1(2), AHMEDABAD. VS CREST COMPOSITE & PLASTICS PVT. LTD. 808, ABHISHREE ADROIT, JUDGES BUNGLOW ROAD, VASTRAPUR, AHMEDABAD 380 054 PAN : AAACC 6333 R / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI PRAKASH UDESHI, AR REVENUE BY : SHRI V. K. SINGH, SR. DR / DATE OF HEARING : 04/01/2018 / DATE OF PRONOUNCEMENT: 08/01/2018 / O R D E R PER MAHAVIR PRASAD, JUDICIAL MEMBER:- THESE CROSS APPEALS BY THE ASSESSEE AND REVENUE ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEAL S)-6, AHMEDABAD DATED 10.03.2015 FOR ASSESSMENT YEAR 2011-12. 2. THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS IN ITS APPEAL VIDE ITA NO.1540/AHD/2015: 1. THE HONBLE COMMISSIONER OF INCOME TAX (APPEALS)-6, AHMEDABAD HAS ERRED ON THE FACTS AND IN LAW BY CONFIRMING THE DIS ALLOWANCE OF DEPRECIATION OF RS.1,45,617/-. ITA NOS. 1540 & 1456/AHD/2015 ASSESSEE & REVENUE CREST COMPOSITE & PLASTICS PVT. LTD. AY : 2011-12 2 2. THE HONBLE COMMISSIONER OF INCOME TAX (APPEALS)-6, AHMEDABAD HAS ERRED ON THE FACTS AND IN LAW BY CONFIRMING THE DIS ALLOWANCE OF UNAPPROVED GRATUITY OF RS.2,83,300/-. 3. THE REVENUE HAS RAISED FOLLOWING GROUNDS IN ITS APPEAL VIDE ITA NO. 1456/AHD/2015: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE DISALLOWANCE OF INTEREST EXPENSES AND FINANCE CHARGES OF RS.16,7 5,605/- WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS NOT FUR NISHED ANY SUPPORTING EVIDENCE REGARDING THE UTILIZATION OF FUND WHEN THE ASSESSEE IS HAVING ENOUGH FUND FOR UTILIZATION. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE DISALLOWANCE OF RS.20,00,000/- MADE BY AO AS UNEXPLAINED/UNSECURE D LOAN WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE HAS NOT PROV ED THE CREDITWORTHINESS AND IDENTITY OF THE PARTY. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION OF RS.95,274/- MADE BY AO TOWARDS LATE PAYMENT OF EMPL OYEES CONTRIBUTION TO PF & ESIC EVEN THOUGH THE SAME WAS NOT PAID WITH IN DUE DATE. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE AO NOTI CED THAT APPELLANT HAD CLAIMED DEPRECIATION AT 15% ON ELECTRICAL EQUIPMENT S INSTEAD OF 10% SO THAT THE DIFFERENCE OF 5% I.E. RS.1,36,878/- AND FURTHER THE ADDITIONAL DEPRECATION OF RS.77,178/- WAS INADMISSIBLE. LD. CIT(A) HELD TH AT AO HAS FAILED TO APPRECIATE THAT THE APPELLANT COMPANY HAS CLAIMED T HE DEPRECIATION AT 15% BECAUSE THE ELECTRICAL INSTALLATIONS WERE INSTALLED AT THE PLANT OF THE FACTORY. THE ELECTRICAL INSTALLATION INCLUDES ITEMS LIKE CON TROL PENAL BOARD COOLING AND TEMPERATURE CONTROL IN PLANT, HP MOTOR, UTILITY PENAL, GLAND KCE FOR PLAT ETC. WHICH ARE BEING USED IN THE PLANT OF THE ASSESSEE COMPANY AS A PART OF PLANT AND MACHINERY. HENCE IT CANNOT BE CONSTRUE D AS FURNITURE AND FIXTURES. THE APPELLANT EXPLAINED THESES FACTS. AS PER CIT(A), LD. AO HAS ERRED IN NOT GRANTING DEPRECIATION AT 15% BY NOT CO NSIDERING THE ELECTRICAL INSTALLATION AS PLANT & MACHINERY AND REQUESTED TO ALLOW THE DEPRECIATION AT 15% AS ELECTRICAL INSTALLATIONS ARE PART OF PLANT A ND MACHINERY AND NOT FURNITURE AND FIXTURES. LD. CIT(A) ALSO NOT CONVINC ED WITH THE PLEA OF THE ITA NOS. 1540 & 1456/AHD/2015 ASSESSEE & REVENUE CREST COMPOSITE & PLASTICS PVT. LTD. AY : 2011-12 3 ASSESSEE AND HENCE HE CONFIRMED THE ADDITION OF RS. 1,45,617/- MADE BY THE AO. 5. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMP UGNED ORDER. LD. AR CITED AN ORDER OF CO-ORDINATE BENCH IN ITA NO.41 72/AHD/2007. CO- ORDINATE BENCH HAS HELD AS UNDER: WE FIND FROM THE ARGUMENTS OF BOTH THE SIDES AS WE LL AS THE ORDERS OF THE LOWER AUTHORITIES THAT THE NATURE OF ASSETS I.E. EL ECTRICAL INSTALLATION THAT CONSISTS OF ELECTRICAL WIRES, SWITCHES, PLUGS, CABL ES, MCB BOX AND ELECTRICAL ITEMS, WHICH CANNOT FUNCTION INDEPENDENTLY, RATHER , THIS IS A PART OF PLANT AND MACHINERY AND IT CANNOT BE CLASSIFIED UNDER FUR NITURE AND FITTINGS. ACCORDINGLY, WE ARE OF THE VIEW THAT ASSESSEE IS EL IGIBLE FOR DEPRECIATION UNDER THE BLOCK OF PLANT & MACHINERY @25%. WE ALLOW THE CLAIM OF THE ASSESSEE AND THIS ISSUE OF THE ASSESSEES APPEAL IS ALLOWED. 6. SIMILARLY CO-ORDINATE BENCH IN ITA NO.3175/AHD/2 010 HAS HELD AS UNDER: WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED TH E MATERIAL ON RECORD, IT IS UNDISPUTED THAT ELECTRICAL ITEMS ARE FITTED WITH PROJECTOR AND OTHER FILM EXHIBITION SYSTEMS. WITHOUT ELECTRICAL ITEMS, THE P ROJECTOR AS WELL EXHIBITION SYSTEMS CANNOT BE RUN. THEREFORE, IT IS A PART AND PARCEL OF THE PLANT AND MACHINERY. THUS, THE ASSESSEE IS ENTITLED TO HIGHER RATE @25%. WE CONFIRM THE ORDER OF THE CIT(A) AND DISMISS THE REV ENUES APPEAL ON THIS GROUND. 7. RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF COORDINATE BENCH, WE HOLD THAT ASSESSEE HAS RIGHTLY CLAIMED DEPRECIATION AT 15% ON ELECTRICAL EQUIPMENTS. THEREFORE, THIS GROUND OF APPEAL IS ALL OWED. 8. SO FAR AS GROUND RELATED TO DISALLOWANCE OF UNAP PROVED GRATUITY OF RS.2,83,300/- IS CONCERNED. DURING THE COURSE OF AS SESSMENT PROCEEDINGS, THE AO OBSERVED THAT APPELLANT HAS DEPOSITED THE GR ATUITY AMOUNT INTO LIC - GRATUITY FUND AND HENCE MADE DISALLOWANCE OF RS.2 ,83,300/-. IN THIS APPEAL LD. CIT(A) ALSO CONFIRMED THE SAME. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGNED ORDER, IN THIS CASE, A PPELLANT HAS FILED AN APPLICATION FOR APPROVAL OF GRATUITY FUND UNDER PAR T-C OF THE 4 TH SCHEDULE ITA NOS. 1540 & 1456/AHD/2015 ASSESSEE & REVENUE CREST COMPOSITE & PLASTICS PVT. LTD. AY : 2011-12 4 TO INCOME TAX OF 31 ST JAN, 2007 AS ON DATE, SAME WAS NOT DISPOSED OFF BY THE DEPARTMENT. IN THIS CASE, AMOUNT WAS PAID TO LIC GR OUP OF GRATUITY FUND, WHICH IS UNDER THE CONTROL OF THE CENTRAL GOVERNMEN T AND AN APPLICATION FOR APPROVAL OF GRATUITY FUND IS PENDING BEFORE THE DEPARTMENT. AS PER DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT, IN THE CASE OF CIT VS. BITONI LAMPS LTD. 277 ITR 396. THE AO HOWEVER, HELD THAT GRATUITY LIABILITY CANNOT BE ALLOWED WHEN THE ASSESSEE DID NOT HAVE AN Y APPROVED GRATUITY FUND. THE CLAIM WAS ACCORDINGLY DCIT, BHARUCH VS. B ARODA GUJARAT GRAMIN BANK DISALLOWED. SAME SUBMISSIONS WERE MADE BEFORE THE LEARNED CIT(A). THE LEARNED CIT(A) CONSIDERING THE ORDER OF ITAT AH MEDABAD BENCH IN THE CASE OF CRYSTAL SOLVENT PVT. LTD. (ITA NO.655/AHD/2 005) ALLOWED THE APPEAL OF THE ASSESSEE IN WHICH IT WAS HELD THAT DI SALLOWANCE U/S.40A(7) OF THE IT ACT CANNOT BE MADE ON THE GROUND OF ABSENCE OF APPROVAL OF GRATUITY FUND AS THE DEDUCTION WAS NOT CLAIMED ON ACCOUNT OF ANY PROVISION. AS PER ORDER OF CO-ORDINATE BENCH, IN THE CASE OF NEW BHARAT ENGINEERING WORKS (JAM) LTD. VS. ITO 44 TTJ (AHD) 522 . THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSEE MADE A CLAIM ON ACTUAL EXPENSES INCURRED UNDER THE HEAD GRATUITY CONTRIBUTION. THEREFORE, PROVISIONS OF SECTION 40A(7) OF THE ACT WOULD NOT APPLY IN THE MATTER. 9. RESPECTFULLY FOLLOWING THE AFORESAID DECISIONS, WE ALLOW THIS GROUND OF APPEAL. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. 11. NOW, WE COME TO REVENUES APPEAL IN ITA NO.1456 /AHD/15. SO FAR AS DELETING OF DISALLOWANCE OF INTEREST EXPENSES AN D FINANCE CHARGES OF RS.16,75,605/- IS CONCERNED. DURING THE COURSE OF A SSESSMENT PROCEEDING AO OBSERVED THAT THE APPELLANT HAD PAID INTEREST TO THE TUNE OF ITA NOS. 1540 & 1456/AHD/2015 ASSESSEE & REVENUE CREST COMPOSITE & PLASTICS PVT. LTD. AY : 2011-12 5 RS.14,68,149/- TO DEPOSITORS AND RS.2,07,456/- TO O THERS, FURTHER HE OBSERVED THAT THE APPELLANT HAD NOT UTILIZED ITS RESERVE AND SURPLUS AND USED THE BORROWED FUNDS IN THE BUSINESS. HENCE, HE DISALLOWE D THE WHOLE OF THE INTEREST AMOUNT OF RS.16,75,605/-. IN APPEAL LD. AO DISALLOWED GROUND OF APPEAL. 12. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IM PUGNED ORDER. IN THIS CASE, AO HAS FAILED TO APPRECIATE THAT VIDE RE PLY NO.3 DTD.10/03/2014 UTILIZATION OF BORROWINGS TAKEN DURING THE YEAR UND ER CONSIDERATION. THE APPELLANT HAD DEMONSTRATED THE UTILIZATION OF BORRO WED FUNDS BY WAY OF PRODUCING THE RELEVANT EXTRACT OF BANK STATEMENT AN D AO HAS FAILED TO APPRECIATE THAT DISALLOWANCE OF INTEREST EXPENSES C ANNOT BE MADE EVEN THOUGH FUND ARE UTILIZED FOR BUSINESS PURPOSES. SO FAR AS UTILIZATION OF RESERVE AND SURPLUS IS CONCERNED. THE AO FAILED IN CALCULATING THAT APPELLANT HAD UTILIZED RESERVE AND SURPLUS AND AO H AS FAILED TO APPRECIATE THAT IT GOES TO PRUDENCE OF THE APPELLANT COMPANY T O UTILIZE THE RESERVE AND SURPLUS. AO HAS NO RIGHT TO SUGGEST AS TO HOW THE F UNDS, RESERVES AND SURPLUS, SHARE CAPITAL ETC. SHOULD BE UTILIZED. IT IS THE COMPANY WHO DECIDES THE TIME OF UTILIZATION OF RESERVE AND SURPLUS FUND S. DURING THE YEAR UNDER CONSIDERATION APPELLANT HAS TAKEN FRESH LOANS FROM (I) RANJIT SEN, (II) ADITYA SEN, (III) SUPRIYA SEN, (IV) SUPARNA SEN, (V) R. R. GOPAL. ALL OTHER BALANCES ARE OPENING BALANCES. THUS WITHOUT PREJUDICE TO THE ABOVE AND IN THE ALTERNATIVE, THE APPELLANT STATED THAT THE PROPOSIT ION THAT WHEN ADVANCE HAVE BEEN MADE IN THE PAST FOR WHICH NO DISALLOWANC E HAS BEEN MADE IN THE YEAR OF ADVANCE, THERE COULD BE NO DISALLOWANCE IN THE SUBSEQUENT YEAR AND NOW IT IS SETTLED BY THE DECISION IN CASE OF SHRIDE V ENTERPRISE [189 ITR 165] (KAR.) AND CIT VS. SUSHMA KAPOOR [230 CTR 262] (DEL .). ITA NOS. 1540 & 1456/AHD/2015 ASSESSEE & REVENUE CREST COMPOSITE & PLASTICS PVT. LTD. AY : 2011-12 6 13. IN OUR CONSIDERED OPINION, IT DOES NOT REQUIRE ANY INTERFERENCE IN THE ORDER PASSED BY THE LD. CIT(A). THEREFORE, THIS GRO UND OF APPEAL OF THE DEPARTMENT IS DISMISSED. 14. SO FAR AS DISALLOWANCE OF 20,00,000/- MADE BY A O AS UNEXPLAINED/UNSECURED LOAN IS CONCERNED. DURING THE YEAR OF ASSESSMENT PROCEEDING, THE AO HAD ASKED FOR THE CONFIRMATION O F PARTIES TO THE UNSECURED LOAN. ASSESSEE FILED CONFIRMATIONS OF 11 PARTIES TO THE UNSECURED LOANS ALONGWITH THEIR PAN. BUT IN ABSENCE OF SOURCE , CREDIT WORTHINESS, IDENTITY ETC. ONE OF THE PARTIES TO THE UNSECURED L OANS I.E. STANDARD CAL CHEM, THE LD. AO MADE ADDITION OF RS.20,00,000/- AS UNSECURED LOAN. IN APPEAL LD. CIT(A) DELETED THE ADDITION. 15. WE HAVE GONE THROUGH THE RELEVANT RECORD, THE A MOUNT OF RS.20,00,000/- IS AN OPENING BALANCE WHICH IS BEING CARRIED FORWARD FOR F.Y.2007-08 AND THERE IS NO NEW AMOUNT HAS BEEN TAK EN DURING THE YEAR UNDER CONSIDERATION AND AN ADDITION U/S.68 IS NOT L EGAL AND ASSESSEE CITED A JUDGMENT CIT VS. USHA STUD AGRICULTURAL FAMRS LTD. (301 ITR 384)(DELHI HC) IN THE APPEAL, IT HAS BEEN HELD THAT NO ADDITIO N U/S.68 WITH RESPECT TO OPENING BALANCE. IN OUR CONSIDERED OPINION, IN SUCH CIRCUMSTANCES THIS GROUND OF APPEAL CANNOT SUSTAIN. IN THE RESULT, THI S GROUND OF APPEAL IS DISMISSED. 16. SO FAR AS GROUND RELATED TO DELEING THE ADDITIO N OF RS.95,274/- MADE BY AO TOWARD THE LATE PAYMENT OF EMPLOYEES CONTRIBU TION TO PF AND ESIC, EVEN THOUGH SAME WAS NOT PAID WITHIN DUE DATE. THE LD. AO MADE DISALLOWANCE OF CONTRIBUTION OF THE EMPLOYEE TOWARD S PF & ESI OF RS.95,274/- OBSERVING THAT THE SAME WERE PAID AFTER DUE DATE. IN APPEAL LD. CIT(A) ALLOWED THE CLAIM OF RS.95,274/-. ITA NOS. 1540 & 1456/AHD/2015 ASSESSEE & REVENUE CREST COMPOSITE & PLASTICS PVT. LTD. AY : 2011-12 7 17. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IM PUGNED ORDER. IN THIS CASE, JURISDICTIONAL HIGH COURT HAS HELD IN THE MATTER OF CIT VS. GUJARAT STATE ROAD TRANSPORT CORPORATION, RELEVANT PARA OF THE SAME IS REPRODUCED HERE AS UNDER: ' SECTION 43B, READ WITH SECTION 36(1)(VA) OF THE INCOM E-TAX ACT, 1961 - BUSINESS DISALLOWANCE - CERTAIN DEDUCTIONS TO BE AL LOWED ON ACTUAL PAYMENT (EMPLOYEE CONTRIBUTION) - WHETHER WHERE AN EMPLOYER HAS NOT CREDITED SUM RECEIVED BY IT AS EMPLOYEES' CONTRIBUTION TO EMPLOY EES' ACCOUNT IN RELEVANT FUND ON OR BEFORE DUE DATE AS PRESCRIBED IN EXPLANA TION TO SECTION 36(1)(VA), ASSESSES SHALL NOT BE ENTITLED TO DEDUCTION OF SUCH AMOUNT T HOUGH HE DEPOSITS SAME BEFORE DUE DATE PRESCRIBED UNDER SECT ION 43B I.E., PRIOR TO FILING OF RETURN UNDER SECTION 139(1) - HELD, YES - ASSESSE E STATE TRANSPORT CORPORATION COLLECTED A SUM BEING PROVIDENT FUND CO NTRIBUTION FROM ITS EMPLOYEES - HOWEVER, IT HAD DEPOSITED LESSER SUM IN PROVIDENT FUND ACCOUNT - ASSESSING OFFICER DISALLOWED SAME UNDER SECTION 43 B - HOWEVER, COMMISSIONER (APPEALS) DELETED DISALLOWANCE ON GROUN D THAT EMPLOYEE, CONTRIBUTION WAS DEPOSITED BEFORE FILING RETURN - W HETHER SINCE ASSESSES HAD NO DEPOSITED SAID CONTRIBUTION IN RESPECTIVE FUND A CCOUNT ON DATE AS PRESCRIBED IN EXPLANATION TO SECTION 36(1)(VA), DISA LLOWANCE MADE BY ASSESSING OFFICER WAS JUST AND PROPER - HELD, YES [P ARA 8] [IN FAVOUR OF REVENUE]' 18. RESPECTFULLY FOLLOWING THE ORDER OF THE HONBLE GUJARAT HIGH COURT IN THE AFORESAID MATTER, WE ALLOW THIS GROUND OF APPEAL IN FAVOUR OF DEPARTMENT. 19. IN THE RESULT, APPEAL FILED BY THE REVENUE IS P ARTLY ALLOWED. 20. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED AND THE BY REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 8 TH JAN, 2018 AT AHMEDABAD. SD/- SD/- .. ( ) ( ) ( N.K. BILLAIYA ) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 08/01/2018 ITA NOS. 1540 & 1456/AHD/2015 ASSESSEE & REVENUE CREST COMPOSITE & PLASTICS PVT. LTD. AY : 2011-12 8 PRITI YADAV, SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. ! / THE RESPONDENT. 3. ''#$% & & ' (% / CONCERNED CIT 4. & & ' (% () / THE CIT(A)-6, AHMEDABAD. 5. )* + %#$ , & - #$. , / DR, ITAT, AHMEDABAD 6. + /0 1 2 / GUARD FILE. / BY ORDER, ! )% % //TRUE COPY// / (DY./ASSTT.REGISTRAR) ! '# $, %& / ITAT, AHMEDABAD 1. DATE OF DICTATION 04/01/2018. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 05/01/2018 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER