The ACIT, Circle-2(1)(1), Ahmedabad V. M/s.Gopala Polyplast Ltd., Ahmedabad

ITA 151/AHD/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6544 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 15-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASEEM L THAKKER
• Keywords: Capital asset; Depreciation

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./ ITA NO.151/AHD/2018 / ASSTT. YEAR: 2011-12 ACIT, CIR.2(1)(1) AHMEDABAD. VS. M/S.GOPALA POLYPLAST LTD. (AABCG 1282 C) 1-2, AKASHANA APARTMENT SOLA ROAD AHMEDABAD. / (APPELLANT) / (RESPONDENT) REVENUE BY : SHRI MUDIT NAGPAL, SR.DR ASSESSEE BY : SHRI ASEEM L. THAKKER, AR ! / DATE OF HEARING : 14/04/2019 '#$ ! / DATE OF PRONOUNCEMENT: 30/04/2019 %& / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST OR DER OF THE LD.CIT(A)-2, AHMEDABAD DATED 4.10.2017 PASSED FOR T HE ASSTT.YEAR 2011-12. 2. THE FOLLOWING GROUNDS OF APPEAL PROJECT THE GRIE VANCE OF THE REVENUE: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING DEPRECIATION ON THE FULL VALUE OF THE CAPITAL ASSET S IN GROSS VIOLATION OF EXPLANATION 9 TO SECTION 43 OF THE I.T .ACT. ITA NO.151/AHD/2018 2 2. THE LD.CIT(A)HAS FAILED TO APPRECIATE THAT ADMIT TEDLY THE ASSESSEE HAD FAILED TO REDUCE THE COST OF THE C APITAL GOODS BY THE AMOUNT OF CENVAT CREDIT AVAILABLE ON S UCH CAPITAL GOODS. 3. BEFORE ADVERTING TO THE SPECIFIC ISSUE, WE DEEM I T APPROPRIATE TO TAKE NOTE OF THE EXPLANATION GIVEN B Y THE ASSESSEE BEFORE THE CIT(A) AS WELL AS FINDING OF THE LD.CIT( A). IT READS AS UNDER: 4.2. APPELLANT'S SUBMISSION :- THE RELEVANT EXTRACTS FROM THE SUBMISSION OF THE AP PELLANT ARE REPRODUCED HERE UNDER: '7. COMING TO THE MERITS OF THE CASE ATTENTION IS D RAWN TO ANNEXURE 'A', STATEMENT OF DEPRECIATION ON FIXED ASSETS AS PER THE I.T. ACT 1961 WHICH IS PLACED ON PG.58 OF THE PB. THE AFORESAID STATEMENT CONTAINS T HE DETAILED CALCULATION OF THE CLAIM OF DEPRECIATION M ADE WHILE FILING THE RETURN ON INCOME AND HAD BEEN FURNISHED DURING THE COURSE OF ASSESSMENT PROCEEDIN GS. THE AO HAD DULY EXAMINED THE SAME AND CALLED FOR TH E DETAILS WITH REGARDS THE ADDITIONS TO THE FIXED ASS ETS ON THE BASIS OF THE AFORESAID STATEMENT. THE PERUSAL O F THE STATEMENT WOULD REVEAL THAT APPELLANT COMPANY HAD PURCHASED NEW PLANT & MACHINERY AMOUNTING TO RS.1,53,26,117/- DURING THE YEAR UNDER CONSIDERATIO N. IT IS FURTHER SUBMITTED THAT THE VALUE OF THE PLANT & MACHINERY SO PURCHASED DURING THE YEAR UNDER CONSIDERATION INCLUDES THE EXCISE DUTY/CST ELEMENT THEREON. THE COPY OF THE STATEMENT HAS BEEN PLACED ON PG.59 OF THE PB. COPY OF THE INVOICES OF THE PURCHA SE BILLS WITH RESPECT TO THE PLANT & MACHINERY ON A SA MPLE BASIS ARE ENCLOSED FOR YOUR KIND REFERENCE AND PLAC ED ON PG.60 61 OF THE PB. FROM A CAREFUL ANALYSIS OF TH E PURCHASE INVOICES OF THE PLANT & MACHINERY IT WOULD BE OBSERVED THAT THE APPELLANT COMPANY HAS INCLUDED TH E ELEMENT OF EXCISE DUTY/CST IN THE GROSS BLOCK. THE TOTAL MODVAT ON CAPITAL GOODS AS INCLUDED IN THE FI XED ASSETS I.E. PLANT & MACHINERY IS RS. 10,76,104/-. T HE APPELLANT COMPANY HAS SUITABLY REDUCED THE PROPORTIONATE DEPRECIATION OF RS.L1,90,703/-FROM TH E ITA NO.151/AHD/2018 3 TOTAL DEPRECIATION CLAIMED OF RS.2,43,78,038/-. THEREFORE, THE TOTAL DEPRECIATION CLAIMED BY THE APPELLANT COMPANY IS AMOUNTING TO RS.2,31,87,335/- (2,43,78,038-11,90,703) AND NOT RS.2,43,78,038/-. THE AMOUNT OF RS.69,96,116/- IS THE CARRY FORWARD BALANCE OF THE ASSETS ON WHICH MODVAT CREDIT HAS BE EN PROPORTIONATELY REDUCED. IT IS WORTHWHILE TO NOTE A LL THESE DETAILS HAD BEEN FURNISHED AT THE TIME OF ASSESSMENT PROCEEDINGS AND THE AO HAD TAKEN DUE COGNIZANCE OF THE SAME WHILE FINALIZING THE ASSESSM ENT. IT IS NOT OUT OF PLACE TO MENTION THAT THE APPELLAN T COMPANY IS ADOPTING SIMILAR METHOD OF CLAIMING DEPRECIATION IN THE EARLIER AS WELL AS SUBSEQUENT Y EARS. IN FACT SUCH METHOD OF CLAIMING OF DEPRECIATION HAS BEEN FOLLOWED RIGHT FROM ASSESSMENT YEAR 1992-93. I T WAS AFTER DUE EXAMINATION AND VERIFICATION FOR ALL THE EARLIER YEARS THAT THE SAME CAME TO BE ACCEPTED. IN FACT, NO ADVERSE INFERENCE HAS BEEN DRAWN IN ANY OF THE EARLIER YEARS THAT THERE EXISTS ESCAPEMENT OF INCOM E WHICH JUSTIFIES THE RE ASSESSMENT PROCEEDINGS. FURTHERMORE, THAT THERE EXISTS NO ESCAPEMENT OF INCOME IS ALSO DEMONSTRATED BY WAY OF THE BELOW ILLUSTRATION. PURCHASE VALUE OF MACHINERY RS.100/- ADD. EXCISE DUTY RS. 10/- RS.110/- LESS. DEPRECIATION (A) RS. 11/- RS. 99/- EXCISE MODVAT RS. 10/- LESS. DEPRECIATION THEREON (B) RS. 1/- DEPRECIATION CLAIMED (A-B) I.E. RS. 10/-( 11-1) THE ABOVE ILLUSTRATION WOULD CLEARLY INDICATE THAT THERE IS NO EXCESS DEPRECIATION CLAIMED BY THE APPELLANT COMPANY ON ACCOUNT OF EXCISE MODVAT AS HAS BEEN WRONGLY PRESUMED. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES AND TH E VARIOUS JUDICIAL PRONOUNCEMENTS RELIED UPON THE ADDITIONS MADE DESERVE TO BE DELETED AND THE RETURN ED INCOME OF THE APPELLANT COMPANY IS REQUIRED TO BE RESTORED.' ITA NO.151/AHD/2018 4 DECISION: 4.3. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE, ASSESSMENT ORDER AND SUBMISSION OF THE APPELLANT. T HE AO HAS MADE THE ADDITION OF CENVAT CREDIT ON CAPITA L GOODS OF RS.69,96,116/-. THE AO IN MAKING THE ADDITION HAS OBSERVED THAT AS PER EXPLANATION 9 TO SECTION 43 OF THE ACT, THE FIXED ASSETS WERE REQUIR ED TO BE REDUCED TO THE EXTENT OF CENVAT CREDIT BALANCE O F RS.69,96,116/- FOR THE ACTUAL COST. 4.4. AS PER EXPLANATION 9 TO SECTION 43, THE ACTUAL COST OF ASSETS IS TO BE REDUCED BY THE AMOUNT OF DUTY OF EXCISE FOR THE ADDITIONAL DUTY LEVIABLE U/S. 3 OF C USTOM TARRIF ACT, 1975 IN RESPECT OF WHICH A CLAIM OF CRE DIT HAS BEEN MADE AND ALLOWED UNDER CENTRAL EXCISE RULE S, 1974. THE ABOVE PROVISION IS FOR DETERMINING THE AC TUAL COST FOR THE PURPOSE OF ALLOWING DEPRECIATION. THEREFORE, ASSESSING OFFICER WAS NOT JUSTIFIED TO M AKE ADDITION OF CENVAT CREDIT ON CAPITAL GOODS IN TOTAL INCOME BY QUOTING EXPLANATION 9 TO SECTION 43. AS REGARD TO CLAIM OF DEPRECIATION AFTER REDUCING THE CENVAT CREDIT FROM THE COST OF FIXED ASSET, APPELLA NT IN THE COMPUTATION OF INCOME HAS ALREADY ADDED RS.10,87,970/- AS DEPRECIATION ON MODVAT CAPITAL GOODS WHICH IS 15% OF THE CENVAT CREDIT TO BE REDUC ED FROM THE COST OF FIXED ASSET. THEREFORE, IN ESSENCE THE APPELLANT HAS COMPUTED DEPRECIATION BY REDUCING THE CENVAT CREDIT FROM THE COST OF FIXED ASSETS. 4.5. IN VIEW OF THE ABOVE, THE GROUND OF APPEAL IS DELETED AND IS ACCORDINGLY ALLOWED. 4. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. THE CASE OF THE AO I S THAT ELEMENT OF CENVAT CREDIT OR EXCISE DUTY OUGHT NOT TO BE INC LUDED IN THE ACTUAL COST ASSES AS PROVIDED IN EXPLANATION 9 TO SECTION 43. THEREFORE, HE INCLUDED THE VALUE OF SUCH CENVAT CRE DIT IN THE ITA NO.151/AHD/2018 5 TAXABLE INCOME OF THE ASSESSEE. THE LD.CIT(A) HAS APPRECIATED ALL THESE FACTS AND OBSERVED THAT THE ASSESSEE HAS NOT CLAIMED DEPRECIATION ON THE DEEMED VALUE AFTER INCLUSION OF CENVAT CREDIT/MODAVT. IT HAS REDUCED 15% OF THE CENVAT CR EDIT FROM THE COST OF FIXED ASSETS WHILE CALCULATING DEPRECIA TION. THUS, QUESTION IS, HOW THIS VALUE OF CENVAT GAIN ON ACQUI SITION OF ASSETS WOULD BECOME A TAXABLE INCOME OF THE ASSESSEE. TH E AO FAILED TO APPRECIATE THE OUTCOME OF EXPLANATION 9 . THE ASSESSEE HAS DEMONSTRATED WITH HELP OF EXAMPLE NOTICED BY US IN THE WRITTEN SUBMISSIONS OF THE ASSESSEE EXTRACTED (SUPRA). THE LD.CIT(A) FURTHER AFFIRMED THE CONTENTIONS OF THE ASSESSEE BY OBSERVING THAT CENVAT CREDIT ON THE CAPITAL GOODS CANNOT BE INCLUD ED IN THE TOTAL INCOME OF THE ASSESSEE WITH THE HELP OF EXPLANATION 9 . IT CAN BE ONLY CONSIDERED FOR THE PURPOSE OF COMPUTING DEPREC IATION AND OTHER ASPECTS. THE ASSESSEE ITSELF HAS REDUCED THE CENVAT CREDIT BEFORE CALCULATING THE DEPRECIATION. THEREFORE, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD.CIT(A). GROUNDS RAISE D BY THE REVENUE ARE REJECTED. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE COURT ON 30 TH APRIL, 2019. SD/- SD/- (AMARJIT SINGH) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 30/04/2019