The DCIT- Circle-I(2), Baroda V. M/s. L.K. India Pvt. Ltd., Baroda

ITA 1459/AHD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62932 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 02-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P TALATI
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD B BENCH BEFORE: SHRI D.K. TYAGI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTAN T MEMBER I.T.A. NO.1458/AHD/2012 A. Y. 2003-04 WITH I.T.A. NO.1459/AHD/2012 A. Y. 2003-04 THE DCIT, CIRCLE-1(2), BARODA APPELLANT VS. M/S L.K. INDIA PVT. LTD. 328/23, RASULABAD ROAD, VILLAGE JAROD, TA. WAGHODIA DIST. BOARODA.391510 PAN-AAACL3236C RESPONDENT DEPARTMENT BY : SHRI S.P. TALATI, SR. D.R. ASSESSEE BY : NONE DATE OF HEARING : 03.09.2012 DATE OF PRONOUNCEMENT : 07.09.2012 / ORDER PER : D.K. TYAGI, JUDICIAL MEMBER THESE ARE REVENUES APPEAL AGAINST THE ORDER OF LD. CIT(A)-IV, BARODA DATED 03.04.2012 AND 04.04.2012. SINCE BOTH THE APPEALS BELONG TO THE SAME ASSESSEE, WERE HEARD TOGETHER AND FACTS AR E SIMILAR, WE ARE DECIDING THEM BY PASSING A CONSOLIDATED ORDER. 2. IN BOTH THE APPEALS, FOLLOWING COMMON GROUNDS HA VE BEEN TAKEN EXCEPT THE FIGURE. I.T.A. NO.1458/AHD/2012, A. Y. 2003-04 WITH I.T.A. NO.1459/AHD/2012, A. Y. 2003-04 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS .26,86,162/- (RS.22,54,318 IN ITA NO.1459/AHD/2012) BY ALLOWING DEPRECIATION ON MOULDS @ 40% AS AGAINST 25% ALLOWAB LE ON THE DIES AND MOULDS USED FOR MANUFACTURING ELECTRIC AND ELECTRONIC GOODS BY TREATING THE MANUFACTURING FACILITY OR THE ASSESSEE AS RUBBER AND PLASTIC GOODS FACTORY IN TERMS OF APPEND IX-1 TO RULE 5 OF THE INCOME TAX RULES, 1962, IGNORING THE FACT THAT, IN COMMON COMMERCIAL PRACTICE, FACTORIES PRODUCING ELE CTRIC AND ELECTRONIC GOODS ARE NOT KNOWN AS A RUBBER AND PLAS TIC GOODS FACTORIES. 3. WE ARE DECIDING BOTH THE APPEALS BY TAKING THE F ACTS OF ITA NO.1458/AHD/2012. 4. THE ASSESSING OFFICER HAS DEALT THE ISSUE AS UND ER:- IT IS NOTICED FROM THE COMPUTATION OF DEPRECIATIO N THAT THE ASSESSEE HAS CLAIMED DEPRECIATION ON MOULDS @ 4 0%. THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THE RATE OF ALLOWABLE DEPRECIATION ON MOULDS SHOULD NOT BE REST RICTED TO 25%. THE ASSESSEE SUBMITTED THAT THE MAIN PRODUCTS OF COMPANY ARE SWITCHES AND SOCKETS. ALL SWITCHES AND SOCKETS BY THEIR VERY NATURE ARE PLASTIC PRODUCTS AND THE COMP ANY IS INTO MANUFACTURE OF PLASTIC GOODS HAVING ELECTRICAL APPL ICATION THEREFORE DEPRECIATION ON MOULDS SHOULD BE ALLOWED @ 40%. THE SUBMISSION OF THE ASSESSEE HAS BEEN CONSIDERED . IT IS WORTHWHILE TO MENTION THAT AS PER APPENDIX-1 TO RUL E OF THE INCOME TAX RULES, 1962 THE DEPRECIATION ON MOULDS I S ALLOWED @ 40% WHERE THE MOULDS ARE USED IN RUBBER AND PLAST IC GOODS FACTORIES. SINCE THE ASSESSEE IS ENGAGED IN THE MA NUFACTURE AND SALES OF ELECTRICAL AND ELECTRONIC ITEMS IT IS ENTITLED TO DEPRECIATION ON MOULDS AT THE NORMAL RATE APPLICABL E TO PLANT AND MACHINERY I.E. @ 25%. IT IS CLEAR THAT IN THE CASE OF ASSESSEE THE MOULDS ARE NOT USED IN RUBBER AND PLAS TIC GOODS FACTORIES. THE CONTENTION OF THE ASSESSEE THAT ALL SWITCHES AND SOCKETS BY THEIR VERY NATURE ARE PLASTIC PRODUCTS A LSO HOLDS NO GROUND BECAUSE SWITCHES AND SOCKETS ETC. ARE NOT PL ASTIC PRODUCTS AND PLASTIC MAY BE MERELY A COMPONENT OF T HE ELECTRICAL AND ELECTRONIC ITEMS MANUFACTURED BY THE COMPANY. ACCORDINGLY THE CLAIM OF DEPRECIATION ON MOULDS IS RESTRICTED TO @ 25%. THE ALLOWABLE DEPRECIATION ON MOULDS IS COM PUTED AS UNDER:- W.D..V. AS ADDITIONS FROM 1-10-2002 ALLOWABLE W.D.V. ON 1-4-2002 UPTO 30-9-2002 TO 31-3-2003 DEPRECIATION AS ON I.T.A. NO.1458/AHD/2012, A. Y. 2003-04 WITH I.T.A. NO.1459/AHD/2012, A. Y. 2003-04 3 31-3-01 RS.13885946/- RS.3980352/- RS.82900/- 4476937 13472261 THE ASSESSEE HAS CLAIMED RS.7163099/- AS DEPRECIATI ON ON MOULDS FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. BUT ALLOWABLE DEPRECIATION AS DISCUSSED ABOVE COMES TO RS.4476937/-. HENCE AN ADDITION OF RS.2686162/- (RS.7163099-RS.4476937) IS MADE TO THE TOTAL INCOME OF THE ASSESSEE ON THIS ACCOUNT. 5. LD. CIT(A) DELETED THIS ADDITION BY FOLLOWING TH E EARLIER DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE VIDE ITA NO.488/AHD /2007 DATED 04.10.2007 FOR THE ASSESSMENT YEAR 2001-02 WHEREIN FOLLOWING W AS HELD:- CIT(A) AFTER CONSIDERING VARIOUS JUDGEMENTS AND FA CTS OF THE CASE HELD THAT MOULDS IN QUESTION WERE USED FOR MAN UFACTURE OF PLASTIC GOODS AND ALLOWED HIGHER DEPRECIATION BY FO LLOWING OBSERVATION: BEFORE ME, THE APPELLANT HAS REITERATED WHAT HAD BE EN SUBMITTED BEFORE THE AO. IN ADDITION, IT HAS BEEN STATED THAT THE PRINCIPLE RAW MATERIAL FOR MANUFACTURING THESE GOODS IN THE FORM OF PLASTIC GRANULES,. THE PLASTIC GRANULES AR E LOADED INTO EJECTION MOULDING MACHINES, THESE MACHINES ARE GENE RAL PURPOSE PLASTIC PROCESSING MACHINES. THE GRANULES ARE CONVERTED INTO LIQUIED FORM AND THEN THE SAME ARE G IVEN A DEFINITE SHAPE THROUGH DIFFERENT KINDS OF EJECTION MOULDS, DYES AND TOOLS. THESE PLASTIC COMPONENTS ARE ASSEMBLED TOGETHER TO MAKE SWITCHES AND SOCKETS. WE THEREFORE, SUBMIT TH AT THE BASIC RAW MATERIALS FOR MANUFACTURING GOODS ARE PLA STIC AND THE FINAL PRODUCTS IS ALSO MADE OF PLASTIC. THE APPEL LANT HAS RELIED UPON THE DECISION OF ITAT BANGALORE IN THE CASE OF BPL REFRIGERATION LTD. VS. ACIT, 272 ITR 47 (BANGALORE) (AT) AND KINETIC HONDA MOTOR LTD. VS. JT. CIT, 72 TTJ 72 (PU NE ITAT). I HAVE CONSIDERED THE RIVAL SUB MISSION PERUSED THE CASE LAW. THE MAIN OBJECTION OF THE AO IS THAT THE END PRODUC T MANUFACTURED BY THE APPELLANT ARE NOT PLASTIC PRODU CT AND PLASTIC IS MERELY A COMPONENT OF THE ELECTRICAL AND ELECTRIC ITEMS MANUFACTURED BY THE COMPANY. IT IS OBSERVED THAT T HE BASIS OF CLASSIFICATION BY THE AO IS AGAINST REASON. I.T.A. NO.1458/AHD/2012, A. Y. 2003-04 WITH I.T.A. NO.1459/AHD/2012, A. Y. 2003-04 4 THE HONBLE ITAT BANGALORE HAVE HELD IN THE CASE OF BPL SANYO UTILIES AND APPLIANCE LIMITED WHICH OBSERVATIONS HA VE BEEN QUOTED IN THE CASE OF BPL REFRIGERATION LTD. (SUPRA ) THAT ONCE THE MOULDS ARE USED FOR MANUFACTURE OF RUBBER AND P LASTICS GOODS PARTS THOUGH IN A COMPONENT FACTORY MANUFACTU RING WASHING MACHINE, VACCUM CLEANERS ETC. THE ASSESSEE IS ELIGIBLE FOR DEDUCTION AT HIGHER RATE OF DEPRECIATION I.E. 4 0%. FOLLOWING THE SAID ORDER, IT IS HELD THAT THE APPELLANT IS EN TITLED TO DEPRECIATION 40% FOR THE MOULDS. THE ASSESSING OFFI CER IS DIRECTED TO RECOMPUTED THE DEPRECIATION ON MOULDS A CCORDINGLY. WE HAVE HEARD RIVAL SUBMISSION AND PERUSED MATERIAL AVAILABLE ON RECORD. IN THE GIVEN FACTS AND CIRCUMSTANCES, M ADRAS HIGH COURTS JUDGEMENT TO IN THE CASE OF CIT VS. FALCON WIRES P. LTD. (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE ASSES SEES CASE, IN OR VIEW, TRIBUNAL JUDGEMENT IN THE CASE OF BPL REFR IGERATION LTD. AND KINETIC HONDA MOTOR LTD. (SUPRA) ARE APPLICABLE TO THE ASSESSEES CASE, RESPECTFULLY FOLLOWING THEM, WE WO ULD ORDER OF THE CIT(A) ALLOWING HIGHER DEPRECIATION OF THE RATE OF 40% ON MOULDS. 6. RESPECTFULLY FOLLOWING THE SAME, THE ORDER PASSE D BY LD. CIT(A) IS HEREBY UPHELD. 7. IN THE RESULT, BOTH THE APPEALS, FILED BY THE RE VENUE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 07.09.2012 SD/- SD/- (A. MOHAN ALANKAMONY) (D.K. TY AGI) ACCOUNTANT MEMBER JUDICIAL MEMBER TRUE COPY N.K. CHAUDHARY, SR. P.S. COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD 6. THE GUARD FILE BY ORDER AR,ITAT,AHMEDABAD