RBBR INFRASTRUCTURE P.LTD, MUMBAI V. ITO 2(3)(1), MUMBAI

ITA 1456/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9984 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 16-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Assessee Lawyers: MANISH R RESHAMWAH
• Keywords: Depreciation; Additional depreciation
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , A M AND SHRI AMARJIT SINGH, JM ./ I.T.A. NO. 1456/MUM/2016 ( / ASSESSMENT YEAR: 2012 - 13) M/S. RBBR INF RASTRUCTURE PRIVATE LIMITED C/O. R. C. RESHAMWALA & CO., CHARTERED ACCOUNTANTS, 323, VARMA CHAMBERS, 11, HOMJI STREET, FORT, MUMBAI - 400 001 / VS. INCOME TAX OFFICER - 2(3)(1), ROOM NO. 581A, AAYAKAR BHAVAN, MUMBAI ./ ./ PAN/GIR NO . AAACD 3931 C ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI KIRIT SANGHVI & SHRI MANISH R. RESHAMWAH / RESPONDENT BY : SHRI RAM TIWARI / DATE OF HEARING : 22.0 1.2018 / DATE OF PRONOUNCEMENT : 20.03 .2018 / O R D E R PER S HAMIM YAHYA , A. M.: THIS A PPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE O RDER BY THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 28.12.2015 AND PERTAINS TO THE A SSESSM ENT YEAR 2012 - 13. 2. THE GROUNDS OF APPEAL READ AS UNDER: 1. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING DISALLOWANCE OF 2 ITA NO. 1456/MUM/2016 M/S. RBBR INFRASTRUCTURE PRIVATE LIMITED ADDITIONAL DEPRECIATION UNDER SECTION 32(1)(IIA) OF THE ACT OF RS.1,11,10,266/ - MADE BY THE INCOME - TAX OFFICER, ON THE GROUND THAT THE ASSESSEE HAS STARTED PRODUCTION IN THE SUCCEEDING YEAR, BUT ASSETS WERE PURCHASED IN THE PREVIOUS YEAR AND THE ASSESSEE WAS NOT ENGAGED IN THE BUSINESS OF MANUFACTURING PROFITS WHEN NEW MACHINERY AND PLANT WERE ACQUIRED. 3. BRIEF FACTS OF THE CASE ARE AS UNDER: THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE R OF RCC PIPES, AIR AVIVE CHAMBERS, CABLE TRENCH & READY MIX CONCRETE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE ASSESSING OFFICER OBSERVED THAT FROM THE PERUSAL OF THE TAX AUDIT REPORT, HE CAME TO THE NOTICE THAT THE ASSESSEE HAS CLAIMED DEPRECIATION @ 15% I.E. RS.1,26,65,451/ - AND ADDITIONAL DEPRECIATION @ 20% I.E. RS.34,94,657/ - ON PLANT AND MACHINERY PERTAININ G TO F.Y. 2010 - 11. SINCE THE ASSESSEE HAD PURCHASED THE AFORESAID FIXED ASSETS IN F.Y. 2010 - 11 AND NOT IN THE FINANCIAL YEAR UNDER CONSIDERATION I.E. F.Y. 2011 - 12, THE ASSESSING OFFICER DISALLOWED 35% OF COST OF ASSETS TOWARDS DEPRECATION AND ADDITIONAL DE PRECIATION UNDER THE HEAD PLANT AND MACHINERY I.E. RS.1,94,42,965/ - AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 4. BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS), THE ASSESSEE APPEALED AGAINST THE DISALLOWANCE BOTH OF DEPRECIATION AS WEL L AS ADDITIONAL DEPRECIATION. 5. WITH REGARD TO THE ADDITIONAL DEPRECIATION, THE ASSESSEE SUBMITTED BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AS UNDER: 4. ADDITIONAL DEPRECIATION: 4.01 ADDITIONAL DEPRECIATION IS ALLOWED WHEN NEW PLANT AND MACHINERY HAS BEEN ACQUIRED AND INSTALLED AFTER 3I ST DAY OF MARCH, 2005. 4.02 SEC.32(I)(IIA) OF THE INCOME - TAX ACT READS AS UNDER: 3 ITA NO. 1456/MUM/2016 M/S. RBBR INFRASTRUCTURE PRIVATE LIMITED [(IIA) IN THE CASE OF ANY NEW MACHINERY OR PLANT (OTHER THAN SHIPS AND AIRCRAFT), WHICH HAS BEEN ACQUIRED AND INSTALLED AFTER THE 31*' DAY OF MARCH, 2005, BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING [OR IN THE BUSINESS OF GENERATION OR GENERATION AND DISTRIBUTION OF POWER], A FURTHER SUM EQUAL TO TWENTY PER CENT OF THE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UNDER CLAUSE(II). 4.03 THE ASSESSEE HAS ACQUIRED PLANT AND MACHINERY BETWEEN JULY , 2009 AND MARCH, 2011, AS SUCH ON ALL THE PLANT AND MACHINERY ADDITIONAL DEPRECIATION HAS TO BE ALLOWED WHEN THE PLANT AND MACHINERY ARE FIRST PUT TO USE. 4.04 IN THE PRESENT CASE, THE PLANT AND MACHINERY WERE PUT TO USE WITH EFFECT FROM 1 ST JULY, 2011. AS SUCH, ADDITIONAL DEPRECIATION ON ALL THE PLANT AND MACHINERY PUT INTO USE ON 1 ST JULY, 2011 SHOULD BE AL LOWED. 4.05 THE INCOME - TAX OFFICER HAS DISALLOWED ADDITIONAL DEPRECIATION OF RS.1,14,42,96 4/ - [20% ON RS.5,55,51,329) SOLELY ON THE GROUND THAT THE ASSESSEE HAS PURCHASED THE AFORESAID FIXED ASSETS IN F.Y.2 010 - 11 AND NOT DURING THE CURRENT F.Y. NAMELY 2 011 - 12, THEREFORE ON SUCH PLANT AND MACHINERY, ADDITIONAL DEPRECIATION SHOULD NOT BE ALLOWED. 4.06 IT IS THE CONTENTION OF THE ASSESSEE THAT THE PLANT AND MACHINERY THOUGH PURCHASED IN F,Y,2 010 - 11 WAS PUT INTO USE FOR THE FIRST TIME IN F.Y.20 11 - 12, THE ADDITIONAL DEPRECIATION MUST BE ALLOWED IN ASSESSMENT YEAR 2012 - 13. 4.07 IT IS THE CONTENTION OF THE ASSESSEE THAT THE ADDITIONAL DEPRECIATION ON PLANT AND MACHINERY AMOUNTING TO RS,1,14,42,964 BE ALLOWED IN FULL DURING ASSESSMENT 6. CONSIDERING THE SU BMISSIONS OF THE ASSESSEE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION WITH REGARD TO THE DISALLOWANCE OF DEPRECIATION. HOWEVER, HE RETAINED THE DISALLOWANCE WITH RESPECT TO CLAIM OF ADDITIONAL DEPRECIATION. THE ORDER OF THE LD. COMMI SSIONER OF INCOME TAX (APPEALS) READ AS UNDER: 5. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS MADE BY THE LD. AR. IT IS SEEN FROM THE DETAILS THAT THE ASSESSEE HAS CLAIMED DEPRECIATION @15 PER CENT ON PLANT AND MACHINERY AND FURT HER ADDITIONAL DEPRECIATION OF 20 PER CENT ON THE : SAME PLANT AND MACHINERY. THE PLANT AND MACHINERY WERE PURCHASED IN F.Y.2010 - 11 RELEVANT TO A.Y.2011 - 12 RELEVANT TO A.Y.2012 - 13. SINCE THEY WERE NOT PURCHASED IN THE RELEVANT PREVIOUS YEAR 2011 - 12, THE AO HAS NOT ALLOWED THE DEPRECIATION. HOWEVER, IT IS SEEN FROM THE DETAILS THAT THE FACTORY OF THE APPELLANT NEAR BANGALORE WAS UNDER CONSTRUCTION 4 ITA NO. 1456/MUM/2016 M/S. RBBR INFRASTRUCTURE PRIVATE LIMITED AND THE EXPENDITURE HAD BEEN SHOWN AS CAPITAL WORK - IN - PROGRESS. THE COMPANY STARTED THE PLANT FROM 1 ST JULY, 201 1 AND ALL THE CAPITAL PURCHASED UPT O 31.03.2011 AND SHOWN AS CAPITAL WORK - IN - PROGRESS WERE TRANSFERRED TO RE SPECTIVE ASSETS D URING THE YEAR ENDING 31.03.2012. THE PRODUCTION STARTED IN THE PREVIOUS YEAR 2011 - 12 AND THE ASSESSEE HAS SHOWN SALE PROCEEDS FROM OPERATION AMOUNTING TO RS.2.09 CRORES THEREFORE, ACTUAL PRODUCTION STARTED IN PREVIOUS YEAR 2011 - 12 AND THE BUSINESS OF THE ASSESSEE WAS CARRIED ON DURING THE YEAR. AS THE ASSETS ARE OWNED BY THE ASSESSEE, IT IS ELIGIBLE FOR DEPRECIATION @15 PER CENT OF T HE PLANT AND MACHINERY. THE CONDITIONS OF SECTION 32(1) ARE SATISFIED AND HENCE AO IS DIRECTED TO ALLOW DEPRECIATION @ 15 PER CENT ON THE PLANT AND MACHINERY. 5.1 HOWEVER, THE CLAIM FOR ADDITIONAL DEPRECIATION @ 20 PER CENT CANNOT BE ALLOWED BECAUSE AS PE R CLAUSE (IIA) OF SECTION 32(1), ADDITIONAL DEPRECIATION @ 20 PER CENT WILL BE ALLOWABLE TO AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. IN THIS CASE, THE ASSESSEE HAS STARTED PRODUCTION IN THE SUBJECT ASSESSMEN T YEAR. IT WAS NOT ALREADY ENGAGED IN THE BUSINESS WHILE THE NEW ASSETS WERE PURCHASED. ALL THE ASSETS WERE PURCHASED IN THE PREVIOUS YEAR WHEN THE FACTORY WAS UNDER CONSTRUCTION. THE ASSESSEE WAS NOT ENGAGED IN ANY BUSINESS OF MANUFACTURE OR PRODUCTION WH EN THE NEW MACHINERY AND PLANT WERE ACQUIRED. THEREFORE, THE ASSESSEE IS ELIGIBLE ONLY FOR THE INITIAL DEPRECIATION AND NOT THE ADDITIONAL DEPRECIATION. ACCORDINGLY, ADDITIONAL DEPRECIATION OF RS. 1,11,10,266 / - IS, DISALLOWED AND THE AO IS DIRECTED TO ALLO W THE NORMAL DEPRECIATION OF RS.83,32,699/ - . 7. AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 8. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS DULY ENTITLED TO THE CL AIM OF ADDITIONAL DEPRECIATION. HE SUBMITTED THAT THE ASSESSEE HAS DULY COMPLIED WITH THE PROVISIONS OF SECTION 32(IIA) WITH REGARD TO THE CLAIM OF ADDITIONAL DEPRECIATION. HE SUBMITTED THAT IN ACCORDANCE WITH THE SAID PROVISION OF LAW THE ASSESSEE HAS AC Q UIRED AND INSTALLED NEW MACHINERY AFTER THE SPECIFIED DATE PRESCRIBED IN THE ACT AND THE ASSESSEE IS ENGAGED IN THE MANUFACTURE OF PRODUCTION OF ANY ARTICLE OR THING. HE SUBMITTED THAT ON THE SAME FACTS, DEPRECIATION W AS ALLOWED, BUT THE LD. COMMISSIONER O F INCOME TAX 5 ITA NO. 1456/MUM/2016 M/S. RBBR INFRASTRUCTURE PRIVATE LIMITED (APPEALS) HAS NOT PROPERLY UNDERSTOOD THE ISSUE AND RETAINED THE DISALLOWANCE OF ADDITIONAL DEPRECIATION O N THE ERRONEOUS PREMISE THAT THE ASSETS WERE PURCHASED IN THE PREVIOUS YEAR PRIOR TO THE CURRENT ASSESSMENT YEAR. HE SUBMITTED THAT THE L D. COMMISSIONER OF INCOME TAX (APPEALS) HAS HIMSELF GIVEN A FINDING THAT DURING THE PREVIOUS YEAR PRECEDING THE PREVIOUS YEAR IN THIS ASSESSMENT, THESE NEW MACHINERIES W ERE ACQUIRED AND WERE CAPITAL WORK - IN - PROGRESS . T HE PLANT STARTED MANUFACTURING FROM 01 .07.2011 RELEVANT TO THE CURRENT ASSESSMENT YEAR . HENCE, THE LD. COUNSEL OF THE ASSESSEE PLEADED THAT T HE ASSESSEE IS VERY MUCH ENTITLED BOTH TO THE DEPRECIATION AS WELL AS ADDITIONAL DEPRECIATION. 9. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 10. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. BEFORE PROCEEDING FURTHER WE MAY GAINFULLY REFER TO THE PROVISION OF SECTION 32 (1) (IIA) OF THE ACT AND THE SAME READS AS UNDER: DEPRECIAT ION. 32. (1) IN RESPECT OF DEPRECIATION OF ( IIA ) IN THE CASE OF ANY NEW MACHINERY OR PLANT (OTHER THAN SHIPS AND AIRCRAFT), WHICH HAS BEEN ACQUIRED AND INSTALLED AFTER THE 31ST DAY OF MARCH, 2005, BY AN ASSESSEE ENGAG ED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING OR IN THE BUSINESS OF GENERATION, TRANSMISSION OR DISTRIBUTION OF POWER, A FURTHER SUM EQUAL TO TWENTY PER CENT OF THE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCT ION UNDER CLAUSE ( II ) : PROVIDED THAT WHERE AN ASSESSEE, SETS UP AN UNDERTAKING OR ENTERPRISE FOR MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING, ON OR AFTER THE 1ST DAY OF APRIL, 2015 IN ANY BACKWARD AREA NOTIFIED BY THE CENTRAL 6 ITA NO. 1456/MUM/2016 M/S. RBBR INFRASTRUCTURE PRIVATE LIMITED GOVERNMENT IN THIS BEHALF, IN THE STATE OF ANDHRA PRADESH OR IN THE STATE OF BIHAR OR IN THE STATE OF TELANGANA OR IN THE STATE OF WEST BENGAL, AND ACQUIRES AND INSTALLS ANY NEW MACHINERY OR PLANT (OTHER THAN SHIPS AND AIRCRAFT) FOR THE PURPOSES OF THE SAID UNDERTAKING OR EN TERPRISE DURING THE PERIOD BEGINNING ON THE 1ST DAY OF APRIL, 2015 AND ENDING BEFORE THE 1ST DAY OF APRIL, 2020 IN THE SAID BACKWARD AREA, THEN, THE PROVISIONS OF CLAUSE ( IIA ) SHALL HAVE EFFECT, AS IF FOR THE WORDS 'TWENTY PER CENT', THE WORDS 'THIRTY - FIVE PER CENT' HAD BEEN SUBSTITUTED: PROVIDED FURTHER THAT NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF ( A ) ANY MACHINERY OR PLANT WHICH, BEFORE ITS INSTALLATION BY THE ASSESSEE, WAS USED EITHER WITHIN OR OUTSIDE INDIA BY ANY OTHER PERSON; OR ( B ) AN Y MACHINERY OR PLANT INSTALLED IN ANY OFFICE PREMISES OR ANY RESIDENTIAL ACCOMMODATION, INCLUDING ACCOMMODATION IN THE NATURE OF A GUEST - HOUSE; OR ( C ) ANY OFFICE APPLIANCES OR ROAD TRANSPORT VEHICLES; OR ( D ) ANY MACHINERY OR PLANT, THE WHOLE OF THE A CTUAL COST OF WHICH IS ALLOWED AS A DEDUCTION (WHETHER BY WAY OF DEPRECIATION OR OTHERWISE) IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' OF ANY ONE PREVIOUS YEAR; 11. A READING OF THE ABOVE INDICATES T HAT THE ASSESSEE IS ENTITLED TO ADDITIONAL DEPRECIATION IN CASE OF NEW MACHINERY OR PLA N T WHICH ARE AC QUIRED AND INSTALLED AFTER 31.03.2005 BY THE ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. IN THE PRESENT CASE, T HE ASSESSEE HA S ACQUIRED THE PLANT AND MACHINERY IN THE YEAR PRIOR TO THE PREVIOUS YEAR RELEVANT TO CURRENT ASSESSMENT YEAR. IN THAT YEAR, THE SAID PLANT AND MACHINERY WAS UNDER CAPITAL WORK - IN - PROGRESS. THE PLANT HAS STARTED FROM 01.07.2011 AND ALL THE CA PITAL ASSETS PURCHASED BY 31.3.2011 AND SHOWN AS CAPITAL WORK - IN - PROGRESS WERE TRANSFERRED TO RESPECTIVE ASSETS ON 31.03.2012. IN SUCH CIRCUMSTANCES, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS HIMSELF GIVEN A CLEAR FINDING THAT THE PLANT AND MACHINER Y PURCHASED IN THE 7 ITA NO. 1456/MUM/2016 M/S. RBBR INFRASTRUCTURE PRIVATE LIMITED FINANCIAL YEAR 2010 - 11 WHICH IS SUBSEQUENT TO THE DATE SPECIFIED FOR THE ALLOWANCE OF THE ADDITIONAL DEPRECIATION IN THE ACT, I.E., 31.03.2005 . WE DO NOT FIND ANY REASON WHY THE ASSESSEE SHOULD BE DENIED ADDITIONAL DEPRECIATION. HENCE, W E AGREE WITH THE SUBMISSION OF THE LD. COUNSEL OF THE ASSESSEE THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN UNDERSTANDING THE FACTS. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS HELD THAT SINCE THE MACHINERY WERE ACQUIRED AND PURCHASE D IN THE FINANCIAL YEAR 2010 - 1 1 WHERE THE Y WERE CAPITAL WORK - IN - PROGRESS AND THE FINANCIAL YEAR 2011 - 12 WAS THE YEAR IN WHICH THE COMPANY AND THE MACHINERY STARTED FUNCTIONING, THE ASSESSEE IS NOT ELIGIBLE FOR THE CLAIM OF DEPRECIATION. THIS IS CLEARLY A W RONG APPRECIATION OF FACTS AS WELL AS LAW. WE FIND THAT IT IS CLEAR THAT THE MACHINERIES I N DISPUTE WERE ACQUIRED AFTER THE DATE SPECIFIED IN THE ACT AND TH EIR USE WAS COMMENCED FROM THE CURRENT ASSESSMENT YEAR. HENCE , THE CLAIM OF ADDITIONAL DEPRECIATION IS FU LLY JUSTIFIED. HENCE, WE SET ASIDE THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AND HOLD THAT THE ASSESSEE IS ELIGIBLE FOR ADDITIONAL DEPRECIATION UNDER RULE 32 (1) (IIA) OF THE ACT. 12. IN THE RESULT, TH IS APPEAL BY THE ASSESSEE STANDS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 20.03.2018 SD/ - SD/ - ( AMARJIT SINGH ) (S HAMIM YAHYA ) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 20.03.2018 . . ./ ROSHANI , SR. PS 8 ITA NO. 1456/MUM/2016 M/S. RBBR INFRASTRUCTURE PRIVATE LIMITED / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / TH E RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI