Assistant Commissioner of Income-tax, V. M/s. Maharashtra Water Conservation Corporation, Aurangabad

ITA 1689/PUN/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1629 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 04-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O A MAO
• Keywords: Business income; Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , , , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVE DI, AM . / ITA NO.1689/PUN/2016 / ASSESSMENT YEAR : 2012-13 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2, AURANGABAD. ....... / APPELLANT / V/S. M/S. MAHARASHTRA WATER CONSERVATION CORPORATION, FAZALPURA, NR. COLLECTOR OFFICE, AURANGABAD-431 001. PAN : AAMFM1607K / RESPONDENT APPELLANT BY : SHRI O. A MAO RESPONDENT BY : SHRI ABHAY SHASTRI / DATE OF HEARING : 29.08.2018 / DATE OF PRONOUNCEMENT : 30.08.2018 / ORDER PER SUSHMA CHOWLA, JM THE APPEAL FILED BY THE REVENUE IS AGAINST THE ORDE R OF THE COMMISSIONER OF INCOME TAX (APPEALS)-2, AURANGABAD, DATED 05.05.2016 RELATING TO ASSESSMENT YEAR 2012-13 AGAINST ORDER P ASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT). 2 ITA NO.1689/PUN/2016 A.Y.2012-13 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APP EAL: 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A)-2, ERRED IN HOLDING THAT THE ASSESSEE IS ENG AGED IN THE BUSINESS ACTIVITIES WHEN THERE WERE ONLY MEAGER CONTRACT REC EIPTS FROM FISHERIES OF RS.6,38,224/- WHICH WAS NOT AT ALL THE MAIN BUSINES S OF THE ASSESSEE BUT ONLY A CASUAL ACTIVITY AND WHEN IT HAS NOT EARNED A NY INCOME FROM, OR NOT ENGAGED IN ANY BUSINESS OF WATER CONSERVATION AND / OR IMPLEMENTATION OF IRRIGATION PROJECT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A)-2, AURANGABAD ERRED IN ALLOWING THE CLAIM OF DEPRECIATION AMOUNTING TO RS.14,46,61,834/- DISALLOWED BY THE A. O., WITHOUT APPRECIATING THE FACT THAT THE WATER CONSERVATION P ROJECTS AND OTHER ASSETS ON WHICH DEPRECIATION WAS CLAIMED HAS NOT BE EN USED FOR THE PURPOSE OF BUSINESS AND ASSESSEE HAS NOT EARNED ANY INCOME FROM THE SAME, THEREBY DEFYING THE MATCHING CONCEPT OF ACC OUNTANCY. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE ORDER OF THE AO BE RESTORED AND THAT OF THE CIT(A)-2 BE VACATED. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTE R ALL OR ANY OF THE GROUNDS OF APPEAL. 3. THE LD. AR FOR THE ASSESSEE AT THE OUTSET POINTE D OUT THAT BOTH THE ISSUES RAISED IN THE PRESENT APPEAL ARE SQUARELY CO VERED BY THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE RELATING TO ASSESSM ENT YEAR 2010-11 & 2011- 12. 4. THE LD. DR FOR THE REVENUE ON THE OTHER HAND PLA CED RELIANCE ON THE ORDER OF ASSESSING OFFICER. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. BRIEFLY IN THE FACTS OF THE CASE, THE ASSESSEE WAS A STATUTORY CORPORATION OWNED BY THE STATE GOVERNMENT OF MAHARASHTRA FORMED BY THE MAHAR ASHTRA WATER CONSERVATION CORPORATION ACT, 2000 ( MAH.III OF 200 1) WITH THE PURPOSE OF PROMOTION, OPERATION AND RAPID DEVELOPMENT AND REGU LATION OF WATERSHED AND WATER CONSERVATION WORKS INCLUDING SOCIAL FORESTRY AND IRRIGATION PROJECTS IN THE STATE OF MAHARASHTRA. THE ASSESSEE FILED RETURN OF INCOME FOR THE ASSESSMENT 3 ITA NO.1689/PUN/2016 A.Y.2012-13 YEAR 2012-13 ON 29.09.1012 DECLARING A LOSS OF RS.2 ,35,28,155/-. THE CASE OF THE ASSESSEE WAS TAKEN UP FOR SCRUTINY. THE ASSESSI NG OFFICER WAS OF THE OPINION THAT SINCE THE ASSESSEE HAD NOT EARNED INCO ME FROM ITS MAIN BUSINESS OF IRRIGATION AND WATER SUPPLY AND BECAUSE THE INCO ME EARNED FROM FISHERIES CONTRACT WAS NOT THE MAIN BUSINESS OF THE ASSESSEE, THERE WAS NO BUSINESS ACTIVITY AND THE ASSESSEE HAD NOT USED ANY OF ITS A SSETS FOR THE PURPOSE OF BUSINESS FOR EARNING ANY INCOME OR PROFIT. THEREFOR E, HE HELD THAT THE ASSESSEE WAS NOT ENTITLED TO CLAIM DEPRECIATION ON THE ASSET S OWNED BY IT AND HE DISALLOWED THE CLAIM OF DEPRECIATION OF RS.14,46,61 ,834/- AND ADDED IT BACK TO THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSING OFF ICER ALSO TREATED THE RECEIPTS FROM FISHERIES BUSINESS AS INCOME FROM OTH ER SOURCES. 6. THE CIT(A) REFERRED TO THE ORDER OF HIS PREDECES SOR IN ASSESSEES OWN CASE AND NOTED THAT SIMILAR ISSUE HAS BEEN DECIDED IN ASSESSMENT YEARS 2010- 11 AND 2011-12. THE CIT(A) HELD THAT THE SAID DECIS IONS WERE BINDING FOR THE YEAR UNDER REFERENCE. HE FURTHER HELD THAT IT WAS N OT REPUDIATED THAT FISHERY WAS ALSO ONE OF THE MAIN BUSINESS ACTIVITY OF THE ASSES SEE CORPORATION. THE CIT(A) FURTHER OBSERVED THAT THE ASSESSEE IS ENGAGED IN TH E ACTIVITIES OF CONSERVATION OF WATER AND IMPLEMENTATION OF IRRIGATION PROJECTS APP ROVED BY THE GOVT. OF MAHARASHTRA. ACCORDINGLY, THE ASSESSEE HAD CARRIED OUT SAID ACTIVITIES UNINTERRUPTEDLY AND DURING THE YEAR UNDER REFERENCE , IT HAD EARNED INCOME OF RS.6,38,224 ON ACCOUNT OF FISHERY PERMISSION FEES, SALE OF TENDER FORMS, WATER CHARGES ETC. FURTHER, ITS MAIN PURPOSE WAS PROMOTIO N, OPERATION AND RAPID DEVELOPMENT AND REGULATION OF WATERSHED AND WATER C ONSERVATION WORKS INCLUDING SOCIAL FORESTRY AND IRRIGATION PROJECTS I N THE STATE OF MAHARASHTRA. AS PER MAHARASHTRA WATER CONSERVATION CORPORATION ACT, 2000, IT HAD TO PROMOTE IRRIGATION RELATED ACTIVITIES SUCH AS FISHERIES, FL ORICULTURE, HORTICULTURE, SERICULTURE 4 ITA NO.1689/PUN/2016 A.Y.2012-13 ETC. ITS OBJECT WAS NOT TO EARN ANY PROFIT OF INCOM E IN SUCH PROJECTS. THE CIT(A), THEREFORE, HELD THAT THE ASSESSEE HAS USED THE ASSE TS FOR THE PURPOSE OF ITS BUSINESS AND THE AO WAS NOT RIGHT IN DISALLOWING DE PRECIATION OF RS.14,46,61,834/- ON RESERVOIR PROJECTS. HE ACCORDI NGLY, DIRECTED THE AO TO DELETE THE ADDITION OF RS.14,46,61,834/- MADE BY HI M AND ALLOWED THE GROUND OF APPEAL. 7. THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORDER OF CIT(A). 8. WE FIND THAT THE TRIBUNAL IN ITA NOS.883 & 1568 / PUN/2015 RELATING TO ASSESSMENT YEARS 2010-11 & 2011-12 VIDE ORDER DATED 23.03.2018 HAD ALLOWED BOTH THE CLAIMS OF THE ASSESSEE AS PER OBSERVATION IN PARA 6 AND 7 AND SAME ARE REPRODUCED AS UNDER: 6. WE HAVE HEARD THE SUBMISSIONS MADE BY REPRESENTA TIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF AUTHORITIES BE LOW. WE HAVE ALSO CONSIDERED THE DECISIONS AND DOCUMENTS ON WHICH THE LD. AR OF ASSESSEE HAS PLACED RELIANCE TO SUPPORT HIS SUBMISS ION. TWO ISSUES HAVE BEEN RAISED BY THE REVENUE IN ITS APPEALS. THE FIRST ISSUE IS WITH RESPECT TO HEAD OF INCOME UNDER WHICH INCOME FROM F ISHERIES IS TO BE ASSESSED I.E. WHETHER IT IS BUSINESS INCOME OR I NCOME FROM OTHER SOURCES. THE SECOND ISSUE RAISED BY THE REVENUE IS WHETHER THE ASSESSEE IS ELIGIBLE TO CLAIM DEPRECIATION ON RESER VOIR WHEN NO INCOME HAS BEEN DECLARED FROM NEW ASSET ACQUIRED BY ASSESS EE. IN SO FAR AS THE FIRST ISSUE RELATING TO INCOME FRO M FISHERIES IS CONCERNED, WE FIND THAT IT WOULD BE RELEVANT TO REFER THE OBJE CTS OF ASSESSEE. CHAPTER-IV OF THE MAHARASHTRA WATER CONSERVATION CO RPORATION ACT, 2000 DEALS WITH FUNCTIONS AND POWERS OF CORPORATION . IN SECTION 18 OF THE SAID ACT, FUNCTIONS OF THE CORPORATION ARE ENUMERAT ED. IN CLAUSE-(M) OF SECTION 18, FISHERIES HAS BEEN MENTIONED AS ONE OF THE ACTIVITIES PROMOTED BY THE ASSESSEE. THE RELEVANT EXTRACT OF S ECTION 18 IS REPRODUCED HEREIN BELOW FOR READY REFERENCE: 18. THE FUNCTIONS OF THE CORPORATION SHALL BE AS F OLLOWS, NAMELY:- (A). (B). . . (M) TO PROMOTE IRRIGATION RELATED ACTIVITIES SUCH A S FISHERIES, PISCICULTURE, FLORICULTURE, HORTICULTURE, SERICULTU RE, ETC. 5 ITA NO.1689/PUN/2016 A.Y.2012-13 A PERUSAL OF THE SECTION 18 REVEALS THAT THE FUNCTI ONS OR OBJECTS MENTIONED ARE NOT DIVIDED INTO MAIN FUNCTIONS/OBJEC TS OR ANCILLARY FUNCTIONS/OBJECTS. THUS, ANY INCOME EARNED BY THE ASSESSEE FROM ANY OF THE ACTIVITIES/FUNCTIONS CARRIED OUT AS LISTED I N SECTION 18 WOULD FALL WITHIN THE AMBIT OF ACTIVITIES CARRIED OUT BY THE A SSESSEE AND INCOME EARNED FROM SUCH ACTIVITIES WOULD BE BUSINESS INCO ME OF THE ASSESSEE. THEREFORE, IN OUR CONSIDERED VIEW, THE INCOME EARNE D BY ASSESSEE FROM FISHERIES, HOWSOEVER, SMALL IT MAY BE, IS BUSINESS INCOME OF THE ASSESSEE. ACCORDINGLY, GROUND NO. 1 RAISED IN APPEALS BY REVENUE FOR BOTH THE ASSESSMENT YEARS IS DISMISSED . 7. THE SECOND ISSUE RAISED IN THE APPEAL BY THE REV ENUE IS WITH RESPECT TO CLAIM OF DEPRECIATION. THE ASSESSING OFF ICER REJECTED THE ASSESSEES CLAIM OF DEPRECIATION FOR THE FOLLOWING REASONS: (I) THE ASSESSEE HAS NOT EARNED INCOME FROM ITS MAI N BUSINESS OF IRRIGATION AND WATER SUPPLY. (II) THE INCOME EARNED FROM FISHING CONTRACT IS NOT THE MAIN BUSINESS OF THE ASSESSEE. (III) FOR THE PURPOSE OF CLAIMING DEPRECIATION THE ASSETS MUST HAVE BEEN USED FOR THE PURPOSE OF BUSINESS. SINCE N O INCOME HAS BEEN EARNED FROM THE ASSETS, THEREFORE, IT CANN OT BE SAID THE ASSET IS PUT TO USE. HENCE, DEPRECIATION ON THE SAI D ASSET CAN BE ALLOWED TO THE ASSESSEE. WE FIND THAT OBJECTIONS RAISED BY THE ASSESSING OFF ICER TO DISALLOW ASSESSEES CLAIM OF DEPRECIATION ARE NOT SUSTAINABL E. THE COMMISSIONER OF INCOME TAX (APPEALS) ALLOWED THE CLAIM OF ASSESS EE BY FOLLOWING THE DECISION OF CO-ORDINATE BENCH OF TRIBUNAL IN THE CA SE OF TAPI IRRIGATION DEVELOPMENT CORPORATION VS. ITO (SUPRA). IN THE PRESENT CASE, WE FIND THAT THE ASSESSEE HAS EARNED INCOME FROM ALLOCATING CONTRACT FOR FISHING AT NEWLY CREATED RE SERVOIR. WHILE ADJUDICATING GROUND NO.1 OF THE APPEAL, WE HAVE HEL D INCOME EARNED BY ASSESSEE FROM FISHERIES AS BUSINESS INCOME OF THE ASSESSEE. THUS, THE ASSET HAD COME INTO EXISTENCE AND ASSESSEE HAS EARN ED SOME INCOME FROM THE SAID ASSET. IT IS NOT DISPUTED BY THE REVE NUE THAT INCOME FROM FISHERIES IS NOT FROM RESERVOIR ON WHICH DEPRECIATI ON HAS BEEN CLAIMED BY THE ASSESSEE. THE QUANTUM OF THE INCOME EARNED FROM ASSET WOULD NOT DETERMINE WHETHER THE ASSET HAS BEEN PUT TO USE OR NOT. ONCE THE ASSET HAS COME INTO EXISTENCE AND IS PUT TO USE, THE ASSE SSEE IS ELIGIBLE TO CLAIM DEPRECIATION ON SAME. WE DO NOT FIND ANY INFI RMITY IN THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS). ACCORDINGLY, THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IS UPHELD AND GROUND NO. 2 RAISED IN APPEALS BY REVENUE FOR BOTH THE ASSESSMEN T YEARS ARE DISMISSED. 9. THE ISSUE ARISING IN THE PRESENT APPEAL IS SIMIL AR TO THE ISSUE RAISED BEFORE THE TRIBUNAL IN ASSESSMENT YEAR 2010-11 & 20 11-12 (SUPRA.). FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT RECEIPTS FROM FISHERIES BUSINESS ARE 6 ITA NO.1689/PUN/2016 A.Y.2012-13 TO BE ASSESSED AS BUSINESS INCOME OF THE ASSESSEE; AND ASSESSEE WAS ALSO ENTITLED TO DEPRECIATION ON THE ASSETS PUT TO USE. ACCORDINGLY, GROUNDS OF APPEAL NO. 1 AND 2 RAISED BY THE REVENUE ARE DISMISSED. 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED ON THIS 30TH DAY OF AUGUST, 2018. SD/- SD/- (ANIL CHATURVEDI) (S USHMA CHOWLA) /ACCOUNTANT MEMBER /JUDICIAL MEMBER / PUNE; ! / DATED : 30 TH AUGUST, 2018 SB !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS)-2, AURANGABAD. 4. THE PR. CIT-2, AURANGABAD. 5. '#$ %& , ' %& , ()* , / DR, ITAT, B BENCH, PUNE. 6. $+, -. / GUARD FILE. // TRUE COPY // '/ / BY ORDER, 0 %* /PRIVATE SECRETARY ' %& , / ITAT, PUNE.