M/s. SVIL Mines Ltd., New Delhi V. DCIT, New Delhi

ITA 1685/DEL/2012

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3824 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-02-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 18-04-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 11-04-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Keywords: Depreciation; Search and seizure
• Section: 32; 132; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : G , NEW DELHI BEFORE SHRI BHAVNESH SAINI , JUDICIAL M EMBER AND SH RI O.P. KANT , ACCOUNTANT MEMBER ITA NO .1685 /DE L/ 2012 ASSESSMENT YEAR : 2007 - 08 M/S. SVIL MINES LTD., (AMALGAMATED COMPANY OF AMALGAMATING COMPANY M/S. TEXEFX MARBLE INDUSTRIES LTD.), E - 3, 1 ST FLOOR, MANGOLPURI INDUSTRIAL AREA, PHASE - II, NEW DELHI VS. DCIT, CENTRAL CIRCLE - 25, NEW DELHI PAN : AAICS5805Q (APPELLANT) (RESPONDENT) APPELLANT BY SHRI AJIT KUMAR JHA, ADVOCATE RESPONDENT BY SHRI S.S. RANA, CIT(DR) ORDER PER O.P. KANT, A .M. : THIS APPEAL BY THE ASSESSEE IS DI RECTED AGAINST ORDER DATED 05/01 /2012 PASSED BY THE LD. COMMISSIONER OF INCOME - TAX (APPEALS), NEW DELHI [IN SHORT THE LD. CIT(A) ] FOR ASSESSMENT YEAR 2 007 - 08 IN CASE OF THE ENTITY M /S . TEXEFX MAR B LE INDUSTRIES L IMITED, WHICH HAS BEEN AMALGAMATED WITH THE ASSESSEE DATE OF HEARING 30.01.2019 DATE OF PRONOUNCEMENT 01.02.2019 2 ITA NO. 1685/DEL/2012 COMPANY. THE GROUNDS RAISED IN THE APPEAL ARE REPRODUCED AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF DEDUCTION OF RS.29,411/ - CLAIMED U/S 35D OF THE INCOME TAX ACT, 1961. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF CLAIM OF DEPRECIATION OF RS.5,57,172/ - . 3. THE APPELLANT CRAVES LEAVE FOR ADDITION, MODIFICATION, ALTERNATION, AMENDMENT OF ANY OF THE GROUNDS OF APPEAL. 2. A T THE OUTSET, WE MAY LI KE TO MENTION THAT ON THE DATE OF HEARING, AN APPLICATION WAS FILED BY SH. AJIT KUMAR JHA, CLAIMING TO BE COUNSEL FOR THE ASSESSEE. IN THE SAID APPLICATION , HE HAS SUBMITTED THAT NO INSTRUCTION HAS BEEN GIVEN BY THE ASSESSEE AND THE PERSON RESPONSIBLE FOR THE ASSESSEE WAS NOT IN TOUCH WITH HIM EVEN AFTER SO MANY CALLS MADE TO HIM. IN THE SAID APPLICATION ADDRESSES OF THE TWO PERSONS HAVE BEEN PROVIDED FOR FURTHER COMMUNICATION , IF ANY. ON PERUSAL OF THE RECORD, IT IS ALSO OBSERVED THAT SIMILAR APPLICATION W AS FILED BY SH . AJIT KUMAR JHA ON 31/10/2018 EXPRESSING INABILITY IN ARGUING THE APPEAL IN ABSENCE OF ANY INSTRUCTIONS FROM THE ASSESSEE COMPANY AND SOUGHT ADJOURNMENT. WE NOTE THAT THIS APPEAL WAS FIRST FIXED ON 14/06/2012 AND , THEREAFTER , IT HAS BEEN ADJ OURNED ON THE REQUEST OF THE LD. COUNSEL FROM TIME TO TIME. THUS, TILL THE DATE OF HEARING APPROXIMATELY 7 YEARS HAVE ELAPSED. IN VIEW OF THE ABOVE FACTS, THE LD. COUNSEL APPEARING FOR THE ASSESSEE WAS ASKED TO ARGUE THE CASE, BUT HE DECLINED TO ARGUE THE CASE AND THUS CASE WAS HEARD ON THE BASIS OF THE ARGUMENTS OF THE LD. DR. 3. B RIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE E - FILED ORIGINAL RETURN OF INCOME ON 28/10/2007 DECLARING NIL INCOME 3 ITA NO. 1685/DEL/2012 AND WHICH WAS PROCESSED ON 26/08/2008 UNDER SECTION 14 3 (1) OF THE INCOME - TAX A CT, 1961 (IN SHORT THE A CT ) AT INCOME OF RS. 70,536/ - AS PE R THE PROVISIONS OF SECTION 115 JB OF THE A CT. THE ASSESSING OFFICER NOTICE D THAT A SEARCH AND SEIZURE ACT ION UNDER SECTION 132 OF THE A CT WAS CARRIED OUT ON 21/03/2007 IN THE CASES OF SURYA VINAYAK INDUSTRIES LIMITED G ROUP. THE ASSESSEE COMPANY ALSO HAS BEEN CLAIMED BY THE ASSESSING OFFICER TO BE ONE OF THE ASSOCIATED COMPANY OF THE GROUP. THE CASE WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICES WERE ISSUED AND COMPLIED WITH. THE ASSESSMENT WAS COMPLETED ON 24/12/20 09 UNDER SECTION 143(3) OF THE A CT AFTER MAKING CERTAIN ADDITIONS/DISALLOWANCES. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A) WHO PARTLY ALLOWED THE APPEAL. AGGRIEVED WITH THE ADDITION SUSTAINED BY THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE T RIBUNAL RAISING THE GROUNDS A S REPRODUCED ABOVE. 4. THE LD. DR RELIED ON THE ORDER OF THE LD. CIT(A) AND ALSO SUPPORTED THE GROUNDS BY WAY OF THE DECISIONS RELIED UPON BY THE LD. CIT(A). 5. THE GROU ND NO. 1 OF THE APPEAL IS RELATED TO DIS ALLOWANCE OF RS.29,411/ - UNDER SECTION 3 5D OF THE A CT. ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE WAS ENGAGED IN THE SALE AND PURCHASE OF THE SECURITIES AND NO INDUSTRIAL UNIT WAS SET - UP AND , THEREFORE , IT WAS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 35D OF THE A CT. BEFORE THE LD. CIT(A), THE ASSESSEE STATED THAT SAID AMOUNT HAS BEEN PAID TO THE R EGISTRAR OF C OMPANIES (ROC) TO INCREASE THE AUTHORISED SHARE CAPITAL AND THUS THE ASSESSEE HAS CLAIMED 1/5 TH OF EXPEN SES UNDER SECTION 35D OF THE A CT. THE LD. CIT(A) SUSTAINED THE DISALLOWANCE OBSERVING AS UNDER: 4 ITA NO. 1685/DEL/2012 5.3 I HAVE GONE THROUGH THE SUBMISSION FILED BY THE APPELLANT AND IT IS OBSERVED THAT THE ASSESSEE HAS NOT COUNTERED THE MAIN OBJECTION OF THE ASSESSING OFFICER THAT IT IS NOT AN INDUSTRIAL UNDERTAKING. SUB CLAUSE 1 (II) OF SECTION 35D STATES THAT AFTER THE CO MMENCEMENT OF BUSINESS IF ANY EXPENDITURE IS INCURRED WHICH IS OF THE NATURE WHICH IS SPECIFIED IN SECTION 35D, THE SAME SHALL BE ALLOWABLE TO AN INDUSTRIAL UNDERTAKING IN CONNECTION WITH THE EXTENSION OF ITS BUSINESS. THE WORD INDUSTRIAL HAS BEEN OMITTE D BY THE FINANCE ACT, 2008 W.E.F 01.04.2009, THEREFORE, THE ASSESSEE S COMPANY NOT BEING AN INDUSTRIAL UNDERTAKING IS NOT ENTITLED TO THE BENEFITS OF DEDUCTION U/S 35D IN CONNECTION WITH THE EXTENSION OF ITS BUSINESS. RELIANCE IS PLACED ON THE FOLLOWING DE CISION: A) THE HON BLE MADRAS HIGH COURT IN THE CASE OF INDBANK MERCHANT BANKING SERVICES LTD VS. ACIT [2011] 334 ITR 0271 HAS HELD THAT THE ASSESSEE WAS NOT ENTITLED TO AMORTIZATION OF PRELIMINARY EXPENSES U/S 35D OF THE ACT TOWARDS SHARE ISSUE EXPENS ES SINCE THE INCREASE IN SHARE CAPITAL WAS SUBSEQUENT TO THE ESTABLISHMENT OF THE BUSINESS AND THE ASSESSEE HAD NOT ESTABLISHED ANY NEW INDUSTRIAL UNIT NOR EXPANDED THE EXISTING INDUSTRIAL UNDERTAKING. B) THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. HINDUSTAN INSECTICIDES LTD [2001] 250 ITR 0338 HAS HELD THAT ITEMS 1 AND 2 OF THE TENTH SCHEDULE TO THE COMPANIES ACT, 1956, WHICH PRESCRIBE THE FEES PAYABLE TO THE REGISTRAR OF COMPANIES FOR REGISTRATION OF NEW COMPANIES, OPERATE IN A CONCEPTUALLY A ND CONTEXTUALLY DIFFERENT FIELD FROM ITENI3 WHICH DEALS WITH FEES FOR INCREASE OF SHARE CAPITAL. SECTION 35D(2)(C)(III) DEALS WITH EXPENDITURE INCURRED BY WAY OF FEES FOR REGISTRATION OF A COMPANY UNDER THE ACT. FEES PAID UNDER ITEM 3 OF THE TENTH SCHEDULE CANNOT BE STATED TO BE FEES PAID FOR REGISTERING A COMPANY. THEREFORE, SECTION 35D WAS NOT APPLICABLE. C) THE HON BLE DELHI HIGH COURT IN THE CASE OF ANSAL HOUSING AND CONSTRUCTION LTD VS. CIT [2010] 320 ITR 0420 HAS HELD THAT DISMISSING THE APPEAL, THAT THE ASSESSEE WAS NOT AN INDUSTRIAL UNDERTAKING AND, THEREFORE, NOT ENTITLED TO THE BENEFIT U/S 35D. 5.1 W E FIND THAT THE ASSESSEE HAS FAILED TO CONTROVERT THE FINDING OF THE ASSESSING OFFICER BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS SUPPORTED HI S FINDING RELYING ON THE DECISION CITED IN THE IMPUGNED ORDER. IN THE SAID DECISIONS IT IS CLEARLY HELD THAT THE ASSESSEE HAS TO SUBSTANTIATE THAT NEW INDUSTRY UNDERTAKING HAS BEEN ESTABLISHED OR THE EXISTING INDUSTRIAL UNDERTAKING IS EXPENDED. IN VIEW OF THE FAILURE OF THE ASSESSEE IN SUBSTANTIATING 5 ITA NO. 1685/DEL/2012 THE ABOVE REQUIREMENT ALONGWITH EVIDENCES, THE LD. CIT(A) IS JUSTIFIED IN SUSTAINING THE DISALLOWANCE. WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE, ACCORDINGLY WE UPHOLD THE SAME. THE GROUND NO. 1 OF THE APPEAL IS ACCORDINGLY DISMISSED. 6. THE GROUND NO. 2 OF THE APPEAL RELATE TO DISALLOWANCE OF CLAIM O F DEPRECIATION AMOUNTING TO RS. 5,57,172/ - . THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE COMPANY ACQUIRED M/S AM ENTERP RISES ON 31/01/2007 AND CLAIMED DEPRECIATION AT THE RATE OF 50% OF THE ENTITLED AMOUNT OF THE DEPRECIATION, HOWEVER ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE WAS ELIGIBLE FOR DEPRECIATION ON PRO - RATA BASIS ONLY FOR 60 DAYS. BEFORE THE LD. CIT(A), TH E ASSESSEE CLAIMED THAT ASSETS WERE USED BY THE ASSESSEE FOR LESS THAN 180 DAYS AND THEREFORE IT WAS ENTITLED FOR DEPRECIATION AT THE RATE OF 50% OF THE TOTAL DEPRECIATION ON THE ASSETS. THE LD. CIT(A) AFTER REFERRING THE RELEVANT PR OVISO OF THE SECTION 32 OF THE A CT, SUSTAINED THE DISALLOWANCE OBSERVING AS UNDER: 6.3 I HAVE CONSIDERED THE SUBMISSION GIVEN BY THE APPELLANT AND AM OF THE OPINION THAT THE ASSESSEE HAS IGNORED THE PROVISO AS MENTIONED IN SECTION 32 IN THE CASE OF SUCCESSION OR TAKE - OVER OF A B USINESS. THE SAID PROVISO READS AS PROVIDED ALSO THAT THE AGGREGATE DEDUCTION, IN RESPECT OF DEPRECIATION OF BUILDINGS, MACHINERY, PLANT OR FURNITURE, BEING TANGIBLE ASSETS OR KNOW - HOW, PATENTS, COPYRIGHTS, TRADEMARKS, LICENSES, FRANCHISES OR ANY OTHER BU SINESS - OR COMMERCIAL RIGHTS OF SIMILAR NATURE, BEING INTANGIBLE ASSETS ALLOWABLE TO THE PREDECESSOR AND THE SUCCESSOR IN THE CASE OF SUCCESSION REFERRED TO IN [CLAUSE (X HI), CLAUSE (XIIIB) AND CLAUSE (XIV)] OF SECTION 47 OR SECTION 170 OR TO THE AMALGAM ATING COMPANY AND THE AMALGAMATED COMPANY IN THE CASE OF AMALGAMATION, OR TO THE DEMERGED COMPANY AND THE RESULTING COMPANY IN THE CASE OF DEMERGER, AS THE CASE MAY BE, SHALL NOT EXCEED IN ANY PREVIOUS YEAR THE DEDUCTION CALCULATED AT THE PRESCRIBED RATES AS IF THE SUCCESSION OR THE AMALGAMATION OR THE DEMERGER, AS THE CASE MAY BE, HAD NOT TAKEN PLACE, AND SUCH DEDUCTION SHALL BE APPORTIONED BETWEEN THE PREDECESSOR AND THE SUCCESSOR, OR THE AMALGAMATING COMPANY AND 6 ITA NO. 1685/DEL/2012 THE AMALGAMATED COMPANY, OR THE DEMERGED C OMPANY AND THE RESULTING COMPANY, AS THE CASE MAY BE, IN THE RATIO OF THE NUMBER OF DAYS FOR WHICH THE ASSETS WERE USED BY THEM. 7. WE FIND THAT THE ASSESSEE HAS FAILED TO JUSTIFY ITS CLAIM OF 50% OF THE DEPRECIATION. AS PER TH E PROVISO TO SECTION 32 OF THE A CT, THE DEPRECIATION HAS TO BE APPORTIONED BETWEEN THE PREDECESSOR AND THE SUCCESSOR OR AMALGAMATING COMPANY AND AMALGAMATED COMPANY AS THE CASE MAY BE, IN THE RATIO OF NUMBER OF DAYS FOR WHICH THE ASSETS ARE USED BY THEM. IN OUR OPINION, THE LD. CIT( A) HAS CORRECTLY SUSTAINED THE DISALLOWANCE OF DEPRECIATION AND RESTRICTED IT TO 60 DAYS. ACCORDINGLY , WE UPHOLD THE SAME. THE GROUND NO. 2 OF THE APPEAL IS ACCORDINGLY DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER IS PRONOUN CED IN THE OPEN COURT ON 1 S T F E B R U A R Y , 201 9 . S D / - S D / - [BHAVNESH SAINI ] [O.P. KANT] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 S T F E B R U A R Y , 2019 . RK / - [D.T.D.S] COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR ASST. REGISTRAR, ITAT, NEW DELHI