DCIT, Circle-1(3), Hyderabad, Hyderabad V. M/s Bajaj Consumer Care Limited, Hyderabad

ITA 1687/HYD/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3081 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 15-02-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 03-11-2014
• Court: TRIBUNAL
• Department Lawyers: VASUNDHARA SINHA
• Keywords: Business income; Depreciation; Wholly owned subsidiary

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND S HRI S .S. VISWANETHRA RA VI, JUDICIAL MEMBER I.T.A. NO. 1 6 8 7/HYD/201 4 ASSESSMENT YEAR: 20 1 0 - 11 DY. COMMISSIONER OF INCOME TAX, CIRCLE - 1(3), HYDERABAD VS M/S. BAJAJ CONSUMER CARE LTD, SECUND ERABAD [PAN: AAACD8001D] (APPELLANT) (RESPONDENT) FOR REVENUE : SMT. VASUNDHARA SINHA, DR FOR ASSESSEE : SHRI SANDEEP JHANWAR, AR DATE OF HEARING : 1 6 - 0 2 - 201 6 DATE OF PRONOUNCEMENT : 19 - 0 2 - 201 6 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - II , HYDERABAD DT. 27 - 0 8 - 201 4 . THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS WITH REFERENCE TO ALLOWING DEPRECIATION CLAIM OF ASSESSEE. IT WAS THE CONTENTION THAT ASSESSE E HAS NOT PUT TO USE THESE ASSETS AND THERE WAS NO BUSINESS INCOME DURING THE YEAR. 2. BRIEFLY STATED THE FACTS ARE THAT, A SSESSEE IS IN THE BUSINESS OF TRADING AND ALSO WAS DOING MANUFACTURING ACTIVITY. DURING THE I . T . A . NO. 16 8 7 / HYD / 201 4 M/S. BAJAJ CONSUMER CARE LTD., : - 2 - : YEAR, ASSESSEE SOLD ITS ASSETS OF MANU FACTURING UNIT AT BADDI, HIMACHAL PRADESH AND SHOWN THE SALE CONSIDERATION BY WAY OF ADJUSTMENTS IN THE DEPRECIATION SCHEDULE. WHILE MAKING THE ISSUE OF VALUATION OF LAND IN THE YEAR, THE AO ALSO DISALLOWED DEPRECIATION OF RS. 84,99,977/ - FOR THE FOLLOWIN G REASONS: (A) THAT THE COMPANY DID NOT HAVE ANY OPERATIONS DURING F.Y. 2009 - 10; (B) ALL TH E ASSETS WERE SOLD IN THE YEAR; (C) IT IS NOT A CASE WHERE BUSINESS WAS CLOSED FOR SHORT PERIOD. THERE WAS A COMPLETE CLOSI NG DOWN OF BUSINESS OPERATIONS; (D) THE COMPANY HAD ONLY DIVIDEND INCOME AND ROYALTY INCOME FROM ITS SUBSIDIARY COMPANY BAJAJ CORP LTD. 2.1. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE LD.CIT(A). IT WAS SUBMITTED BEFORE THE CIT(A) THAT: (A) T HE ASSESSEE HAD NEVER CEASED ITS BU SINESS NOR IT HAD CLOSED DOWN ITS BUSINESS. IT HAD UNDERGONE THE CORPORATE RESTRUCTURING DUE TO WHICH MANUFACTURING ACTIVITIES WERE SHUT DOWN FROM F.Y. 2009 - 10 ONWARDS; (B) AS PER SECTION 32(1) OF INCOME TAX ACT, 1961, THE DEPRECIATION IS ALLOWABLE ON ASS ETS 'OWNED, WHOLLY OR PARTLY, BY THE ASSESSEE AND USED FOR THE PURPOSE OF BUSINESS OR PROFESSION'. ACCORDING TO SECTION 32(1) , DEPRECIATION IS ALLOWABLE IF THE ASSETS WERE USED IN THE PREVIOUS YEAR THOUGH NOT USED IN CURRENT YEAR. RELIANCE IS PLACED ON THE DECISION OF G.R. SHIPPING LTD. VS. DCIT [ ITA NO.598 OF 2009 (BOMBAY HIGH COURT) ] . (C) THAT THE DEPRECIATION CAN BE ALLOWED ON ASSETS WHICH ARE NOT USED FOR THE PURPOSE OF BUSINESS, THE WDV IS REDUCED AND THE GAIN IS TAXED U / S.50 AS AND WHEN THE ASSET IS SOLD. ASSESSEE MADE ALTERNATE CLAIM THAT IF DEPRECIATION IS NOT ALLOWED, THE WDV ON ASSETS SHOULD BE INCREASED BY THE AMOUNT OF DEPRECIATION DISALLOWED AS PER THE PROVISIONS OF SECTION 43(6) WHICH DEFINES THE WRITTEN DOWN VALUE. I . T . A . NO. 16 8 7 / HYD / 201 4 M/S. BAJAJ CONSUMER CARE LTD., : - 3 - : 3. LD. CIT(A) AFTER C ONSIDERING THE SAME, DIRECTED THE AO TO ALLOW DEPRECATION STATING AS UNDER: 6.3. THE INFORMATION ON RECORD IS CAREFULLY CONSIDERED. IT IS A FACT THAT THERE WAS NO MANUFACTURING ACTIVITY DURING F.Y. 2009 - 10 AS EVIDENT FROM THE PROFIT & LOSS ACCOUNT OF THE APPELLANT. THE INCOME CREDITED TO PROFIT & LOSS ACCOUNT IS THE INCOME UNDER THE HEAD 'OTHER INCOME', MAINLY CONSISTING OF DIVIDEND RECEIVED FROM BAJAJ CORP LTD., INTEREST ON ICDS, ROYALTY INCOME, ETC. THERE IS NO DISPUTE ON THE FACT THAT NO MANUFACTURING ACTIVITIES WERE CARRIED ON BY THE APPELLANT DURING F.Y. 2009 - 10. THE LAND, BUILDINGS, FURNITURE AND FIXTURES, PLANT AND MACHINERY, AT BADDI, HIMACHAL PRADESH WERE SOLD ON 15.02.2010. IN PROFIT & LOSS ACCOUNT THE ASSESSEE CLAIMED DEPRECIATION OF RS.1,38,10, 993/ - AS PER COMPANIES ACT WHICH WAS ADDED BACK IN COMPUTATION. IN COMPUTATION OF TOTAL INCOME, THE ASSESSEE HAD MENTIONED THAT ALLOWABLE DEPRECIATION IS RS. 84,99,977/ - BUT RESTRICTED TO 'ZERO' AS NO PROFITS WERE AVAILABLE. THE ASSESSEE CARRIED FORWARD TH E DEPRECIATION LOSS OF RS.84,99,977/ - . THE DEPRECIATION SCHEDULE AS PER INCOME TAX ACT IS AS UNDER: PARTICULARS RATE WDV AS ON 01/04/2009 ADDITIONS DEDUCT - IONS TOTAL DEPRECI - TION WDV AS ON 31/03/2010 BEF ORE 180 DAY S AFTER 180 DAYS 1.LA ND 0% 21,182,680 - 30,308 ,700 4,228,786 47,262,594 - 47,262,594 2.BUILDING 10% 68,576,979 - 10,000,000 58,576,979 5,857,698 52,719,281 3. PLNAT & MACHINERY 15% 18,745,601 - 13,504,000 5,241,601 786,240 4,455,361 4.VEHICLES 15% 7,263,701 - - 7,263,701 1,089,555 6,174,146 5.COMPUTER 60% 314,218 - - 314,218 188,531 125,687 6.FURNITURE & FIXTURES 10% 6,779,533 - 1,000,000 5,779 , 53 3 577,953 5,201,580 TOTAL 122,862,711 - 30,308 ,700 28,732,786 124, 438,625 8,499,977 115,938,648 OUT OF THE TOTAL ASSETS MENTIONED ABOVE, THE WDV OF ASSETS AT BADDI, HIMACHAL PRADESH, SOLD DURING THE YEAR ARE AS UNDER: LAND (AT COST) RS. 42,28,786 BUILDING RS.1,37,02,069 PLANT & MACHINERY RS.1,30,77,209 FURNITURE & FIXTURES RS. 12,37,037 I . T . A . NO. 16 8 7 / HYD / 201 4 M/S. BAJAJ CONSUMER CARE LTD., : - 4 - : FROM THE A.Y. 2009 - 10 ONWARDS, THE WHOLLY OWNED SUBSIDIARY OF APPELLANT, BAJAJ CORP LTD., WAS CARRYING OUT THE MANUFACTURING OF BUSINESS ACTIVITY OF THE ASSESSEE, BY' MANUFACTURING BAJAJ ALMOND DROPS HAIR OIL, BAJAJ AMLA SHIKAKAI, NEW BAJAJ BRAHMI AMLA, ETC. IN RETURN, THE ASSESSEE WAS DERIVING ROYALTY INCOME. MOREOVER, THE ASSETS AT BADDI WERE SOLD IN FEBRUARY, 2010, TOWARDS THE END OF THE FINANCIAL YEAR. FURTHER, THOUGH SOME OF THE ASSETS WERE SOLD, THE BLOCK OF ASSETS CONTINUED, AND WHEREVER THE ASSETS WERE SOLD, THE ASSESSEE CORRECTLY REDUCED SUCH AMOUNT FROM THE WDV OF BLOCK OF ASSETS. AS THE BUSINESS CONTINUED, THE ASSESSEE IS ENTITLED TO THE DEPRECIATION OF RS. 84,99,977/ - . THEREFORE, THIS GROUND OF APPEAL IS ALLOWED. REVENUE IS AGGRIEVED. 4. WHILE LD. DR CONTE NDED THAT ASSETS WERE NOT PUT TO USE, LD. A R SUBMITTED THAT ASSESSEES OTHER ASSETS ARE USED FOR THE BUSINESS AND ASSESSEES CLAIM IS ALLOWABLE. H E ALSO REFERRED TO THE COMPUTATION OF INCOME WHEREIN BUSINESS INCOME IS OFFERED. 5. WE HAVE CONSIDERED THE RI VAL CONTENTIONS. AS SEEN FROM THE DEPRECIATION SCHEDULE EXTRACTED BY THE LD. CIT(A) IN THE ORDER, ASSESSEE HAS EXCLUDED THE SALE CONSIDERATION RECEIVED ON THE BADDI UNIT FROM THE COMPUTATION OF DEPRECIATION. THUS, OUT OF THE VALUE OF RS. 6.85 CRORES OF B UILDING, THE SALE OF BADDI UNIT VALUE WAS REDUCED AND NET ASSET VALUE WAS SHOWN UNDER THE HEAD BUILDING ON WHICH DEPRECIATION OF RS. 58,5 7 , 69 8 / - WAS CLAIMED. IT WAS SUBMITTED THAT THIS BUILDING PERTAINS TO CORPORATE OFFICE BUILDI NG AND NOT THE FACTORY BUI LDING . LIKEWISE, OUT OF PLANT & MACHINERY OF RS. 1.87 CRORES, ASSESSEE HAS SHOWN NET ASSETS OF RS. 52.41 LAKHS AFTER REDUCING 1.35 CRORES, ON WHICH DEPRECIATION OF RS. 7,86,240/ - WAS CLAIMED. VEHICLES DEPRECIATION WAS AT RS. 10,89,555/ - , COMPUTERS, FIXTU RES AND FURNITURE INVOLVED DEPRECIATION OF RS. 1,88,531/ - AND RS. 5,71,933/ - . AS SUBMITTED, THE HIMACHAL PRADESH UNITS MANUFACTURING ACTIVITY HAS BEEN SOLD WAY, BUT ASSESSEE IS STILL IN THE BUSINESS AND INCOME UNDER THE HEAD BUSINESS IS STILL COMPUTED , EVEN THOUGH LOSS DURING THE YEAR. AO CANNOT REJECT THE CLAIM OF DEPRECIATION WITHOUT EXAMINING WHETHER THE ASSETS ARE PUT TO USE OR NOT? JUST BECAUSE PART OF THE BUSINESS UNIT WAS SOLD, IT CANNOT BE STATED THAT ASSESSEE IS NOT IN THE BUSINESS. EVEN THOU GH ASSESSEE HAS RECEIVED DIVIDENDS , INTEREST ON ICDS ETC., I T CANNOT BE STATED THAT I . T . A . NO. 16 8 7 / HYD / 201 4 M/S. BAJAJ CONSUMER CARE LTD., : - 5 - : ASSESSEE I S NOT IN THE BUSINESS. IN THE COMPUTATION OF INCOME, AS SESSEE HAS SHOWN LOSS UNDER THE HEAD BUSINESS AT RS. 7,78,68,570/ - . IT WAS ACCEPTED AS SUCH. THEREFORE IT CANNOT BE STATED THAT ASSESSEE IS NOT HAVING BUSINESS. IN VIEW OF THIS, WE DO NOT FIND ANY MERIT IN THE REVENUES CONTENTIONS. ACCORDINGLY, GROUNDS ARE DISMISSED. 6. IN THE RESULT, APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH FEBRU ARY , 201 6 SD/ - SD/ - (S.S. VISWANETHRA RAVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 19 TH FEBRUARY, 2016 TNMM COPY TO : 1. DY. COMMISSIONER OF INCOME TAX, CIRCLE - 1(3), 4 TH FLO OR, AAYAKAR BHAVAN, HYDERABAD. 2 . M/S. BAJAJ CONSUMER CARE LIMITED , 1001 & 1002, 1 ST FLOOR, EMERAL D HOUSE, S.D. ROAD, SECUNDERABAD. 3. CIT(A) - II , HYDERABAD. 4. THE CIT - I, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.