The DCIT, Circle-5, Ahmedabad V. Reclamation Welding Pvt. Ltd., Ahmedabad

ITA 1826/AHD/2008

• Counselvise Citation: 182620514 RSA 2008
• Duration Of Justice: 3 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 01-09-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 23-05-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH, AHMEDABAD BEFORE SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO.1826 / AHD/2008 (ASSESSMENT YEAR 2004-05) JCIT, CIRCLE 5, AHMEDABAD VS. RECLAMATION WELDING LTD., 129/129-A, GVMM ESTATE, ODHAVE ROAD, ODHAV, AHMEDABAD PAN/GIR NO. : AAACR7383J (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI D C SHARMA, SR. DR RESPONDENT BY: SHRI TUSHAR HEMANI, AR DATE OF HEARING: 15.12.2011 DATE OF PRONOUNCEMENT: 19.01.2012 O R D E R PER SHRI A. K. GARODIA, AM:- THIS IS REVENUES APPEAL DIRECTED AGAINST THE ORDE R OF LD. CIT (A) XI, AHMEDABAD DATED 10.03.2008 FOR THE ASSESSMENT Y EAR 2004-05. 2. THE GROUND NO.1 IS AS UNDER: 1) THE LD. COMMISSIONER OF INCOME TAX (A) - XI, AH MEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDIT ION MADE OF RS. 13,51,462/-ON ACCOUNT OF DISALLOWANCE OF FREIGHT, O CTROI AND CARTAGE EXPENSES. 3. LD. D.R. SUPPORTED THE ASSESSMENT ORDER WHEREAS THE LD. A.R. SUPPORTED THE ORDER OF LD. CIT (A). HE ALSO SUBMIT TED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL D ECISION IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2004-05 IN I.T.A.NO. I.T.A.NO.1826 /AHD/2008 2 1808/AHD/2007 DATED 19.11.2010, COPY OF WHICH WAS S UBMITTED. OUR ATTENTION AS DRAWN TO PARA 15 OF THIS TRIBUNAL ORDE R AS PER WHICH, SIMILAR ADDITION WAS DELETED BY THE TRIBUNAL IN THAT YEAR B Y FOLLOWING THE TRIBUNAL ORDER IN I.T.A.NO. 1807/AHD/2007 FOR THE ASSESSMENT YEAR 2002-03. IN THIS REGARD, OUR ATTENTION WAS DRAWN TO PARA 7 AND PARA 8 OF THE TRIBUNAL ORDER AND IT IS POINTED OUT THAT IN THAT YEAR, THE TRIBUNAL HAS FOLLOWED THE TRIBUNAL DECISION FOR THE ASSESSMENT YEAR 2003-04 I N I.T.A.NO. 2954/AHD/2006 DATED 31.12.2009. IT IS SUBMITTED TH AT THE FACTS IN THE PRESENT YEAR ARE IDENTICAL AND, THEREFORE, THIS ISS UE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THESE TRIBUNAL DECISIONS IN ASSESSEES OWN CASE. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE TRIBUNAL DECISIONS IN ASSESSEES OWN CASE. SINCE N O DIFFERENCE IN THE FACTS COULD BE POINTED OUT BY THE LD. D.R., WE FIND NO REASON TO TAKE A CONTRARY VIEW IN THE PRESENT CASE AND HENCE, BY RES PECTFULLY FOLLOWING THE PRECEDENCE, THIS GROUND OF THE REVENUE IS REJECTED. 5. GROUND NO.2 OF THE REVENUE IS AS UNDER: THE LD. COMMISSIONER OF INCOME TAX (A) - XI, AHMED ABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE OF RS.7,43,564/- ON ACCOUNT OF DISALLOWANCE OF ADDITIO NAL DEPRECIATION. 6. THE LD. D.R. SUPPORTED THE ASSESSMENT ORDER WHER EAS THE LD. A.R. SUPPORTED THE ORDER OF LD. CIT(A). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT THE LD. CIT(A) HAS GIVEN A CLEAR FINDING IN PA RA 3.1.2 OF HIS ORDER THAT THE ASSESSEE HAS FULFILLED ALL THE CONDITIONS AS LAD DOWN AS PER THE PROVISIONS OF SECTION 32(1)(II) OF THE INCOME TAX A CT, 1961. THIS FINDING I.T.A.NO.1826 /AHD/2008 3 OF LD. CIT(A) COULD NOT BE CONTROVERTED BY THE LD. D.R. AND HENCE, WE DECLINE TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE. GROUND NO.2 OF THE REVENUE IS REJECTED. 8. GROUND NO.3 OF THE REVENUE IS AS UNDER: THE LD. COMMISSIONER OF INCOME TAX (A) - XI, AHMED ABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE OF RS. 4,79,42 8/- ON ACCOUNT OF DISALLOWANCE OF INTEREST EXPENSES. 9. LD. D.R. SUPPORTED THE ASSESSMENT ORDER AND THE LD. A.R. SUPPORTED THE ORDER OF LD. CIT(A). 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT THE INTEREST PAID BY THE ASSESSEE TO THE LENDE R ON UNSECURED LOAN IS @ 15% WHEREAS THE RATE OF INTEREST PAYABLE TO THE BAN K IS @ 14% AND IN ADDITION TO THIS, THE ASSESSEE WAS SUPPOSED TO INCU R MORTGAGE CHARES @ 1% AND OTHER CHARGES @ 0.5% AND THEREFORE, THE TOTA L INTEREST RATE WOULD COME OUT TO @ 15.50%. MOREOVER, THE LOANS OF BANKS ARE SECURED LOANS WHEREAS THE LOANS FROM RELATIVES ARE UNSECURED LOAN S. UNDER THESE FACTS, WE FEEL THAT ON THIS ISSUE ALSO, NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LD. CIT(A) AND HENCE, WE DECLINE TO INTERFERE. THI S GERUND OF THE REVENUE IS ALSO REJECTED. 11. GROUND NO.4 OF THE REVENUE IS AS UNDER: THE LD. COMMISSIONER OF INCOME TAX (A) - XI, AHMED ABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE OF RS. 4,56,213/- ON ACCOUNT OF DISALLOWANCE OF MAINTENANC E EXPENSES BEING SCRAP VALUE. 12. LD. D.R. SUPPORTED THE ASSESSMENT ORDER WHEREAS THE LD. A.R. SUPPORTED THE ORDER OF LD. CIT(A). HE ALSO SUBMITT ED THAT MANUFACTURING ACTIVITIES IN WHICH THE ASSESSEE IS ENGAGED IS SUCH THAT THE PLANT AND I.T.A.NO.1826 /AHD/2008 4 MACHINERY AS WELL AS SPARES GOT WORN OUT VERY FAST DUE TO EXPOSURE TO VERY HIGH TEMPERATURE AND AS A RESULT, HIGH MAINTEN ANCE AND REPAIRS ARE REQUIRED BUT IT DOES NOT RESULT INTO ANY SCRAP. HE ALSO SUBMITTED THAT LABOUR AND JOB CHARGES AND MAINTENANCE OF REFRACTOR Y ARE LARGEST PAT OF SUCH REPAIRS WHEREIN NO SCRAP ARISES. HE ALSO SUBM ITTED THAT THE A.O. HAS MADE ADDITION WITHOUT ANYTHING ON RECORD AND HENCE, THE SAME IS ONLY NOTIONAL AND THEREFORE, SHOULD BE DELETED. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT THE ADDITION HAS BEEN MADE BY THE A.O. MERELY ON ESTIMATE AND ASSUMPTION WITHOUT BRINGING ON RECORD EVEN SINGLE E VIDENCE SUGGESTING THAT MANUFACTURING ACTIVITY IN THE PRESENT CASE MUS T GENERATE ANY SCRAP BY SHOWING THAT THE ITEMS USED IN REPAIRING WAS SUCH T HAT IT WILL RESULT INTO GENERATION OF ANY METAL SCRAP OR ANY OTHER VALUABLE SCRAP. IN THE ABSENCE OF ANY EVIDENCE DIRECT OR INDIRECT, ADDITION MADE B Y THE A.O. ON THE BASIS OF ASSUMPTION AND PRESUMPTION CANNOT BE SUSTAINED. WE, THEREFORE, DECLINE TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE ALSO. THIS GROUND OF THE REVENUE IS ALSO REJECTED. 14. GROUND NO. 5 OF THE REVENUE IS AS UNDER: THE LD. COMMISSIONER OF INCOME TAX (A) - XI, AHMED ABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE OF RS. 10,00,000/-ON ACCOUNT OF DISALLOWANCE OF VALUE OF PRODUCTION OF SCRAP. 15. LD. D.R. SUPPORTED THE ASSESSMENT ORDER WHEREAS THE LD. A.R. SUPPORTED THE ORDER OF LD. CIT(A). 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT IT WAS THE SUBMISSION OF THE ASSESSEE BEFORE T HE LD. CIT(A) THAT THE I.T.A.NO.1826 /AHD/2008 5 ASSESSEE HAS NOT DONE ANY MANUFACTURING DURING THE YEAR UNDER CONSIDERATION ON OWN ACCOUNT AND IT HAD NOT MADE AN Y PURCHASE AND SALE ON ITS OWN ACCOUNT AND THE ASSESSEE HAS SIMPLY DONE JOB WORK FOR ONE COMPANY AND AS PER THE AGREEMENT WITH THAT COMPANY, THE ENTIRE RAW MATERIAL WAS TO BE SUPPLIED BY THAT COMPANY AND THE ENTIRE FINISHED GOODS WERE ALSO TO BE TAKEN BY THAT COMPANY AND, THEREFOR E, SCARP, IF ANY WILL ALSO BE OWNED BY THAT COMPANY AND THE ASSESSEE CANN OT HAVE OWNERSHIP OF THE SCRAP GENERATED DURING THE PROCESSING OF SUC H GOODS AND THEREFORE, THE ADDITION IS NOT JUSTIFIED. LD. CIT(A) HAD AGRE ED WITH THIS SUBMISSION OF THE ASSESSEE AND DELETED THE ADDITION MADE BY TH E A.O. BY HOLDING THAT THERE IS NO VALID BASIS TO MAKE THE ADDITION TOWARD S ALLEGED SALE OF SCRAP AND REALIZATION OF ANY INCOME. WE ALSO FIND THAT T HIS IS NOT THE CASE OF THE A.O. OR OF THE LD. D.R. THAT ANY MATERIAL WAS PURCH ASED BY THE ASSESSEE AND THERE WAS ANY PRODUCTION ON THE ASSESSEES ACCO UNT. THIS IS THE ADMITTED POSITION THAT THE ASSESSEE WAS DOING ONLY JOB WORK AND AS PER THE AGREEMENT, ENTIRE RAW MATERIAL WAS TO BE SUPPLI ED TO THE ASSESSEE AND THE ENTIRE PRODUCTION AND SCRAP WAS TO BE SUPPLIED BACK TO THE SAID COMPANY BY THE ASSESSEE. UNDER THESE FACTS, WE D O NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISS UE ALSO. THIS GROUND OF THE REVENUE IS ALSO REJECTED. 17. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. 18. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD./- SD./- (MUKUL KUMAR SHRAWAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER SP I.T.A.NO.1826 /AHD/2008 6 COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD 1. DATE OF DICTATION 12/1 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 13/1.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 19/01/2012 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.23/1 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 23/1 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. ..