Gujarat Liqui Pharmacaps Pvt. Ltd., Baroda V. The Dy.CIT.,Circle-1(1), Baroda

ITA 174/AHD/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0008 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 23-11-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 17-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Depreciation; Additional depreciation
• Section: 37

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO. 174/AHD/2014 ( / ASSESSMENT YEAR : 2010-11) GUJARAT LIQUI PHARMACAPS PVT. LTD. PLOT NO.662-666, GIDC WAGHODIA BARODA-391760 / VS. DY.CIT, CIRCLE-1(1), AAYAKAR BHAVAN, RACE COURSE, BARODA ./ ./ PAN/GIR NO. :AAACG7270K ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI S.N. SOPARKAR, A.R. / RESPONDENT BY : SHRI JAMES KURIAN, SR. D.R. / DATE OF HEARING 23/11/2016 / DATE OF PRONOUNCEMENT 29 /11/2016 / O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-I, BARODA D ATED 01/10/2013 FOR ASSESSMENT YEAR (AY) 2010-11. THE A PPELLANT- ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL :- (I) THE LEARNED CIT HAS ERRED IN CONFIRMING THE LEARNED ASSESSING OFFICERS ACTION OF DISALLOWING THE SUM OF RS.52,18 ,783/- BY HOLDING THAT IN VIEW OF NON DEDUCTION OF TAX FROM SALARY PA ID TO FOREIGN SALES PERSONNEL, THE DEDUCTION OF THE AMOUNT UNDER REFERE NCE CANNOT BE ALLOWED AS SALARY PAID TO THEM HAS BEEN EARNED IN I NDIA. ITA NO.174/AHD/2014 GUJARAT LIQUI PHARMACAPSPVT. LTD VS.CIT ASST.YEAR 2010-11 - 2 - (II) THE LEARNED CIT HAS ERRED IN CONFIRMING THE LEARNED ASSESSING OFFICERS ACTION OF DISALLOWING THE SUM OF RS.1,39, 581/- OUT OF FOREIGN SALES PERSONNEL. (III) THE LEARNED CIT APPEAL HAS ERRED IN CONFIRMING THE ACTION OF LEARNED ASSESSING OFFICER HAS NOT ACCEPTING OR CLAI M FOR DEDUCTION OF ADDITIONAL DEPRECIATION IN ITS ENTIRETY AND INST EAD DISALLOWING RS. 59,896/- OUT OF TOTAL CLAIM OF ADDITIONAL DEPRECIAT ION. 1. THE FACTS OF THE CASE ARE THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF SOFT GELATIN CA PSULES. DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE HAS SHOWN GROSS PR OFIT OF RS.707.53 LACS ON TOTAL TURNOVER OF RS.2242.84 LACS WHICH WORKS OUT THE GROSS PROFIT RATE AT 31.54% AS AGAINS T THE GROSS PROFIT OF RS.947.50 LACS ON THE TOTAL TURNOVER OF R S.2969.52 LACS WHICH WORKS OUT THE GROSS PROFIT RATE AT 31.90 % SHOWN IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. THE D ETAILS FILED BY THE ASSESSEE ARE VERIFIED AND KEPT ON RECO RD. AFTER PERUSING THE DETAILS FURNISHED. ON BEHALF OF THE RE CORD IT WAS SEEN THAT THE ASSESSEE COMPANY HAS PAID SALARY TO SALES STAFF (FOREIGN) OF RS.52,18,783/-. DURING THE COURSE OF A SSESSMENT PROCEEDINGS, VIDE LETTER DATED 04.02.2013, THE ASSE SSEE WAS ASKED TO SUBMIT COMPLETE DETAILS OF SALARY TO FOREI GN EMPLOYEES AND, REASONS FOR NON-DEDUCTION OF TDS. 2. IN THE REPLY OF THIS SAID QUERY THE ASSESSEE STATED THAT RECIPIENTS OF SALARY WERE NON-RESIDENT FOR THE YEAR UNDER ITA NO.174/AHD/2014 GUJARAT LIQUI PHARMACAPSPVT. LTD VS.CIT ASST.YEAR 2010-11 - 3 - REFERENCE AND HENCE THEY WERE NOT LIABLE FOR TAX IN RESPECT OF INCOME EARNED OUTSIDE INDIA. 3. RECIPIENTS HAVE RENDERED SERVICES OUTSIDE INDIA AND HENCE THE SAME CANNOT BE CONSIDERED TO HAVE BEEN EARNED I N INDIA. 4. THE ASSESSING OFFICER WAS NOT AGREE WITH THE CONTEN TION OF THE APPELLANT/ASSESSEE AND ADDITION OF RS.5218783/- WERE MADE. 5. DISALLOWANCE OUT OF FOREIGN TRAVEL:- DURING THE YEA R UNDER CONSIDERATION IT WAS SEEN BY THE ASSESSING OFFICER HAS DEBITED AS SUM OF RS. 7,21,253/- TOWARDS FOREIGN TR AVELLING EXPENSES UNDER SELLING AND DISTRIBUTION EXPENSES AN D WHEN APPELLANT WAS ASKED FOR THE REPLY ASSESSEE/APPELLAN T ATTACHED LEDGER ACCOUNT OF FOREIGN TRAVELLING EXPENSES. AND IT WAS STATED THAT FOREIGN TRIP FOR BUSINESS DEVELOPMENT A S WELL AS COLLECTING OF DUES FROM CLIENTS AND THESE EXPENSES WERE THEREFORE ALLOWABLE UNDER SECTION 37 OF THE ACT. BU T ASSESSING OFFICER WAS NOT CONVICED WITH THE APPELLA NT HENCE MADE ADDITION OF RS.139581/-. 6. IT WAS ALSO NOTICED BY THE AO THE DEPRECIATION CHAR T WAS ANNEXED TO TAX AUDIT REPORT AND IT WAS REVEALED THA T THE ITA NO.174/AHD/2014 GUJARAT LIQUI PHARMACAPSPVT. LTD VS.CIT ASST.YEAR 2010-11 - 4 - ASSESSEE HAS CLAIMED ADDITIONAL DEPRECIATION OF NEW PLANT AND MACHINERY PURCHASED DURING THE YEAR UNDER CONSIDERATION. HOWEVER, ASSESSING OFFICER WAS NOT A GREE WITH THE CONTENTION OF THE APPELLANT BY STATING THA T ASSESSEE HAS ACQUIRED AND INSTALLED MACHINERY AFTER THE 31 ST DAY OF MARCH, 2005 AND A FURTHER SUM EQUAL TO 21% OF THE A CTUAL COST WAS ALLOWABLE AS DEDUCTION UNDER THE CLAUSE AN D ALSO HOLD THAT NO NEW PLANT AND MACHINERY WAS INSTALLED, BUT IT WAS ONLY PARTS OF MACHINERY OR PLANT OR ADDITIONAL CAPITAL EXPENSE ON EXISTING PLANTS OR MACHINERY. BEST OF TH E EXISTING PLANT AND MACHINERY ALREADY FALLS IN THE BLOCK UNDE R SECTION 32(1)(II) AND THEREFORE ANY CAPITAL EXPENSES OR CHA NGING OF PARTS IS REMAIN IN SAME BLOCK AND DERIVE THE MEANIN G ACQUIRED AND INSTALLED OF NEW PLANT OR MACHINERY TO CLAIM ADDITIONAL DEPRECIATION UNDER SECTION 32(1)(IIA) OF THE ACT. ACCORDINGLY, AO MADE ADDITION OF RS.59,896/- AND OF FICIALLY AO MADE ADDITION OF RS.1,49,77,970/-. 7. AGAINST THE SAID ORDER APPELLANT PREFERRED FIRST ST ATUTORY APPEAL BEFORE THE CIT(A), WHO PARTIALLY ALLOWED THE APPEAL OF THE APPELLANT AND FOR REST OF THE GROUND APPEALS BEFORE US. WE HAVE GONE THROUGH THE IMPUGNED ORDER RELEVANT RE CORD AND WE FIND A PAPER BOOK FILED BY THE APPELLANT AND READ UNDER SECTION 18(6) AND WE FIND THAT THE SIMILAR IS SUE WAS ITA NO.174/AHD/2014 GUJARAT LIQUI PHARMACAPSPVT. LTD VS.CIT ASST.YEAR 2010-11 - 5 - DECIDED IN ASSESSEE OWN CASE IN THE ASSESSMENT YEAR 2008-09 ITA NO.573/A/2012 AND SIMILAR APPEAL WAS ALLOWED. I N THE SAID ORDER THE TRIBUNAL HAS ALSO DISCUSSED THE HON BLE KARNATAKA HIGH COURT JUDGMENT ORDER IN THE CASE OF DIRECTOR OF CIT(INT.TAXN.) VS. PRAHLAD VIJENDRA RAO (SUPRA) NOTED THE FACT THAT THE EMPLOYEE BEING CHIEF ENGINEER WORKING IN A SHIP, STAYED OUT OF INDIA DURING THE RELEVANT PERIO D FOR 227 DAYS AND THAT SALARY WAS EARNED BY HIM WAS ON ACCOU NT OF THE WORK DISCHARGED BY HIM ON BOARD DURING THE SAID PER IOD, WHICH OUTSIDE THE SHORES OF INDIA. THE HONBLE HIGH COURT AFTER EXAMINING THE LAW AND JUDICIAL PRONOUNCEMENT HELD THAT IT WOULD EMERGE THAT ASSESSEE WAS WORKING OUTSIDE I NDIA FOR A PERIOD OF 225 DAYS AND THE INCOME IN QUESTION EAR NED BY ASSESSEE HAS NOT ACCRUED IN INDIA AND IS NOT DEEMED TO HAVE ACCURED IN INDIA. AS SUCH, THE CONTENTION OF THE RE VENUE CANNOT BE ACCEPTED. 8. FROM THE ABOVE, IT IS EVIDENT THAT THE HONBLE HIGH COURT HAS RULED WHERE THE EMPLOYEE DISCHARGES HIS DUTIES OUTS IDE INDIA AND HIS STAY IS BEYOND THE PRESCRIBED LIMIT TO TERM HIM RESIDENT, THE INCOME EARNED UPON SUCH DISCHARGE OF DUTIES OUTSIDE INDIA WOULD NOT BE WITHIN THE AMBIT OF TERM HAS ACCRUED IN INDIA AND IS DEEMED TO HAVE ACCRUED IN I NDIA. THEREFORE, WOULD NOT BE TAXABLE IN INDIA. ADMITTEDL Y, IF ANY ITA NO.174/AHD/2014 GUJARAT LIQUI PHARMACAPSPVT. LTD VS.CIT ASST.YEAR 2010-11 - 6 - INCOME WHICH IS NOT TAXABLE IN INDIA AND WOULD NOT BE LIABLE FOR TAX. IN THE CASE IN HAND, ADMITTEDLY TWO OF THE EMPLOYEES OF THE APPELLANT WORKED OUTSIDE INDIA AND WERE NRI. THEREFORE, IN THE LIGHT OF JUDGMENT OF HONBLE KARN ATAKA HIGH COURT IN THE CASE OF DIT(INT.TAXN.) VS. PRAHLA D VIJENDRA RAO (SUPRA), THE AMOUNT OF SALARY PAID TO SUCH EMPLOYEES WOULD NOT BE TAXABLE IN INDIA. ON THE BAS IS OF ABOVE DISCUSSION THIS GROUND IS ALLOWED IN FAVOUR O F ASSESSEE SO FAR DISALLOWANCE FOR FOREIGN TRAVELS ARE CONCERN ED IN SUPPORT OF ITS CONTENTION APPELLANT/ASSESSEE HAS SU BMITTED THE COPY OF INVOICE ISSUED BY INDIAN OVERSEAS TRAVEL AN D TOURS AND ALSO HAS GIVEN DETAILS OF HIS TOUR AND THIS IS PREROGATIVE FOR THE BUSINESSMAN TO DECIDE THE FOREIGN TRAVEL IN THE INTEREST OF THE BUSINESS ENTIRETY NOT FOR THE REVEN UE AUTHORITY TO DECIDE WHETHER BUSINESSMAN SHOULD TRAVEL OR NOT. THEREFORE, THIS GROUND IS ALSO ALLOWED IN FAVOUR OF ASSESSEE. 9. IN THE GROUND NO.3 LD.AO&CIT HAS NOT ALLOWED THE DEPRECIATION FOR PARTS OF THE PLANT AND MACHINERY. THOUGH THEY ACCEPTED THAT EXISTING PLANTS AND MACHINERIES ALREADY FALLS IN THE BLOCK OF UNDER SECTION 32(1)(II) BUT T HEY DID NOT ACCEPT CONTENTION OF THE ASSESSEE THAT PARTS ARE AL LOWABLE IN THE SAME BLOCK FOR ADDITIONAL DEPRECIATION UNDER S ECTION 32(1)(IIA) OF THE ACT. IN OUR OPINION WHEN MACHINER IES AND ITA NO.174/AHD/2014 GUJARAT LIQUI PHARMACAPSPVT. LTD VS.CIT ASST.YEAR 2010-11 - 7 - PLANTS ARE ALLOWABLE AND WHY PARTS OF THE SAME CANN OT BE ALLOWED AND IS NO WHERE IT IS WRITTEN IN THE LAW, T HE PARTS OF THE MACHINERIES AND PLANTS ARE NOT ALLOWABLE, THERE FORE, WE ALLOW THE GROUNDS OF APPEAL IN FAVOUR OF ASSESSEE. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED FOR STATIS TICAL PURPOSE. . T HIS ORDER PRONOUNCED IN OPEN COURT ON 29 /11/2016 SD/- SD/- ( N.K. BILLAIYA ) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER TRUE COPY AHMEDABAD; DATED 29 / 11/2016 PRITI YADAV '# $# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. $ & / CONERNED CIT 4. ( ) / THE CIT(A)-I, BARODA 5. ' **$ , $ , / DR, ITAT, AHMEDABAD 6. / / GUARD FILE. / BY ORDE / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD