Solidaire India Ltd., CHENNAI V. ITO, CHENNAI

ITA 1971/CHNY/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5056 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 30-06-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: N ARJUN RAJ
• Keywords: Business income; Depreciation
• Section: 234B; 144

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: CHENNAI . . . , , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NO.1971 /CHNY/20 16 / ASSESSMENT YEAR: 20 05 - 06 M/S. SOLIDARE INDIA LTD, NEW NO.9, FIRST CROSS STREET, KARPAGAM GARDENS, CHENNAI 600 020. [PAN: AAACS 5019 G ] VS. THE INCOME TAX OFFICER, COMPANY WARD - VI (3), CHENNAI. ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. N. ARJUN RAJ /RESPONDENT BY : MR. SRIDHAR DORA, JCIT / DATE OF HEARING : 13 .0 5 .2019 / DATE OF PRONOUNCEMENT : 17 .0 5 .2019 / O R D E R PER S. JAYARAMAN , ACCOUNTANT MEMBER : THE ASSESSEE HAS FILED THIS APPEAL AGAINST THE ORDER OF THE LD CIT (A) - 15, CHENNAI IN ITA NO. 172/CIT(A) - 15/13 - 14, DATED 16/03/2016 FOR ASSESSMENT YEAR 2005 - 06. 2 2. IN THE ASSESSMENT MADE U/S 144 OF THE ACT FOR THE AY 2005 - 06, THE AO NOTICED FROM THE DIRECTOR S REPORT FILED ALONG WITH THE RETURN OF INCOME, THAT THE COMPANY HAS BEEN DECLARED AS A SICK UNIT BY BIFR W.E.F. 1997 AND THAT THE COMPANY WAS DIRECTED TO WIND UP B Y BIFR ON 13/10/2001. THE COMPANY HAS SUSPENDED OPERATIONS FROM 2000 ONWARDS. THE ASSESSEE HAS ALSO NOT ADMITTED ANY BUSINESS INCOME IN THE P & L ACCOUNT AND ONLY INCOME FROM PROPERTY HAS BEEN CREDITED TO P & L ACCOUNT AGAINST WHICH THE ASSESSEE HAS CLAI MED SET - OFF OF DEPRECIATION ON PLANT AND MACHINERY EVEN THOUGH NO COMMERCIAL ACTIVITY HAS TAKEN PLACE. SINCE, THE ASSESSEE HAS NOT PUT TO USE THE PLANT & MACHINERY TO ITS BUSINESS, THE AO HELD THAT THE ASSESSEE IS NOT ENTITLED TO ANY DEPRECIATION AS THE PL ANT & MACHINERY ETC., WERE LYING IDLE. 3. AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE FILED APPEAL BEFORE THE CIT (A). 4. ON APPEAL, THE LD CIT (A) HELD THAT AS PER THE ASSESSEE , THE STOPPAGE OF BUSINESS SHOULD NOT BE BASIS FOR DISALLOWANCE OF DEPRECIATION. THE ASSETS WERE PART OF BLOCK OF ASSETS AND RELIED ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF M/S. SONIC BLOCHEM EXTRACTIONS P. LTD IN ITA NO. 2088/2013 DATED 17/11/2015. THE FACTS OF THE CASE RE LIED UPON BY THE ASSESSEE ARE DIFFERE NT AND 3 DISTINCT FROM THE CASE OF THE ASSESSEE . IN THE CASE RELIED UPON BY THE ASSESSEE , THE DEPRECIATION ON MACHINERY WHICH FORMED PART OF BLOCK OF ASSET WAS DISALLOWED AS IT WAS NOT PUT TO USE. HOWEVER, IN THE ASSESSEE S CASE, DEPRECIATION WAS DISALLOWED AS THE COMPANY HAD DISCONTINUED ITS BUSINESS AS PER THE ORDERS OF BIFR AND IT HAD SET OFF DEPRECIATION AGAINST INCOME FROM HOUSE PROPERTY WHICH IS NO (SIC) ALLOWABLE . TH E ACTION OF THE AO IN DISALLOWING DEPRECIATION OF RS. 9,97,752/ - IS CONFIRMED. THESE GROUNDS OF APPEAL ARE DISMISSED. IN RESPECT OF CHARGING OF INTEREST U/S 234B & 234C IT WAS HELD THAT THE SAID SECTIONS ARE MANDATORY AND CONSEQUENTIAL IN NATURE. HENCE, THE GROUND OF APPEAL IS DISMISSED. 5. AGAINST THE ORDER OF THE CIT (A), THE ASSESSEE FILED THIS APPEAL. THOUGH THE ASSESSEE RAISED MANY GROUNDS, THE ARGUMENT WAS MADE ONLY ON THE ISSUE OF ALLOWANCE OF DEPRECIATION AND CONSEQUENTIAL LEVY OF INTEREST U/S 234B AND 234C. THEREFORE, THESE TWO GROUNDS ARE DISCUSSED AS UNDER. SINCE ALL OTHER GROUNDS ARE NOT ARGUED, THEY ARE TREATED AS DISMISSED. 6. BEFORE US, LD AUTHORISED REPRESENTATIVE OF ASSESSEE SUBMITTED THAT IN THE CASE OF NIRMA CREDIT & CAPITAL LTD VS. ACIT [2009] 177 TAXMAN 416 (SC) IT WAS HELD THAT IT APPEARS THAT THE OPERATION OF ASSESSEE S BUSINESS STOOD SUSPENDED DURING THE PREVIOUS YEAR. ASSESSEE CLAIMS THAT 4 DESPITE SUCH SUSPENSION OF OPERATION, ASSESSEE WAS STILL ENTITLED TO CLAIM DEPRECIATION ON THE GROUND OF PASSIVE USER. THIS AS PECT HAS NOT BEEN GONE INTO BY THE HIGH COURT ON DISMISSING THE ASSESSEE S APPEAL UNDER SECTION 260A. IN FACT NO REASON WHATSOEVER HAS BEEN RECORDED BY THE HIGH COURT ON THIS POINT. IN THE CIRCUMSTANCES, WE SET - ASIDE THE IMPUGNED JUDGMENT AND REMIT THE MATTER TO THE HIGH COURT FOR FRESH DECISION IN ACCORDANCE WITH LAW. WE REQUEST THE HIGH COURT, IF POSSIBLE, TO DISPOSE OF THE MATTER, AS EARLY AS POSSIBLE, WITHIN SIX MONTHS. 7. WHEN THIS BENCH ASKED WHAT WAS THE OUTCOM E OF THE HIGH COURT S DECISION, LD AUTHORISED REPRESENTATIVE OF ASSESSEE SUBMITTED THAT UNFORTUNATELY HE IS UNAWARE AND THEREAFTER LD AUTHORISED REPRESENTATIVE OF ASSESSEE RELIED ON THE DECISION O F THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. INTEGR ATED TECHNOLOGIES LTD [ITA NO. 530/2011, DATED 16 TH DECEMBER, 2011]. WHEN THE BENCH RAISED A QUERY WHAT IS THE PRESENT CONDITION OF THE COMPANY, WHETHER THE BUSINESS HAS BEEN CLOSED DOWN ONCE FOR ALL AND WHETHER THE ASSESSEE COULD DEMONSTRATE THE HOP E S OF THE BUSINESS BEING R EVIVED ARE ALIVE AND REAL AS ON 31/03/2005, LD AUTHORISED REPRESENTATIVE OF ASSESSEE SUBMITTED THAT THE COMPANY PROPOSED TO INDUCT STRATEGIC ALLIANCE PARTNER IN THE REVIVAL AND REHABILITATION OF THE COMPANY. HOWEVER, THE GOVERNMENT OF TAMIL NADU DID NOT CONSIDER THE REQUEST FOR SALES TAX DEFERRAL AS SOUGHT BY THE 5 PROSPECTIVE INVESTOR. THEREFORE, THE BIFR WAS CONSTRAINED TO RECOMMEND WINDING UP THE COMPANY ON 13/08/2001 AND WINDING UP PETITION IS PENDING BEFORE THE HON'BLE HIGH COURT O F MADRAS. THE ASSESSEE S APPEAL TO HON'BLE AAIFR AGAINST THE ORDER OF THE HON'BLE BIFR WAS DISMISSED. ON A CIVIL WRIT PETITION BEFORE THE HON'BLE HIGH COURT, THE HIGH COURT DISMISSED THE APPEAL ON 03/11/2004 SINCE THE GOVERNMENT OF TAMIL NADU DID NOT CON SIDER THE COMPANY S REQUEST FOR SALES TAX DEFERRAL FAVOURABLY. 8. PER CONTRA, LD DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. FROM THE ABOVE FACTS, I T IS CLEAR THAT THE ASSESSEE IS NOT ABLE TO ESTABLISH THAT ITS BUSINESS WAS NOT CLOSED DOWN ONCE FOR ALL AND IT IS ALSO NOT ABLE TO DEMONSTRATE THAT THE HOPES OF THE BUSINESS BEING REVIVED ARE ALIVE AND REAL AS ON 31/03/2005. THE LD AUTHORISED REPRESENTAT IVE OF ASSESSEE IS NOT ABLE TO STATE THE PRESENT CONDITION OF THE COMPANY AFTER 13 YEARS . THEREFORE, SINCE THE ASSESSEE FAILED TO DEMONSTRATE THAT THE IMPUGNED ASSETS ARE USED FOR THE ASSESSEE - COMPANY S BUSINESS E VEN PASSIVELY, WE DO NOT FIND ANY REASON T O INTERFERE WITH THE ORDERS OF THE LOWER AUTHORITIES. THUS, THE G ROUND S ON THE ISSUE OF DEPRECIATION ARE 6 DISMISSED. SINCE THE LEVY OF INTEREST U/S 234B AND 234C ARE CONSEQUENTIAL, THEY ARE ALSO DISMISSED. 10. IN THE RESULT, ASSESSEE S APPEAL IS DISMISSED. ORD ER PRONOUNCED ON 17 TH MAY 2019, IN CHENNAI. SD/ - SD/ - ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ) ( S. JAYARAMAN ) /ACCOUNTANT MEMBER / CHENNAI, / DATED: 17 TH MAY, 2019. OKK / COPY TO: 1. / APPELLANT 4. / CIT 2. / RESPONDENT 5. / DR 3. ( ) / CIT(A) 6. / GF