Talavadi Cements Ltd., Kolkata V. ITO, Ward-4(1), Kolkata, Kolkata

ITA 2008/KOL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1602 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 31-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA B BENCH, KOLKATA [BEFORE SRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER & SRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER] I.T.A. NO. 2008/KOL/2014 ASSESSMENT YEAR: 2005-06 TALAVADI CEMENTS LTD..... ...APPELLANT BIRLA BUILDING, 4 TH FLOOR 9/1, R. N. MUKHERJEE ROAD KOLKATA - 700001 [PAN : AABCT 6724 G] INCOME TAX OFFICER, WARD-4(1)... .RESPONDENT AAYAKAR BHAWAN, 8 TH FLOOR P-7 CHOWRINGHEE SQUARE KOLKATA 700 069 APPEARANCES BY: SHRI AKKAL DUDHWEWALA, FCA, APPEARED ON BEHALF OF T HE ASSESSEE. NONE APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : MAY 31 ST , 2017 DATE OF PRONOUNCING THE ORDER : AUGUST 23 RD , 2017 O R D E R PER J. SUDHAKAR REDDY :- THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-IV, KO LKATA (HEREINAFTER THE LD. CIT(A)), PASSED U/S 250 OF THE INCOME TAX ACT, 1961 (THE ACT), DT. 06/08/2014, FOR THE ASSESSMENT YEAR 2005-06. 2. NONE APPEARED ON BEHALF OF THE REVENUE. THERE IS NO PETITION FOR ADJOURNMENT EITHER. UNDER THESE CIRCUMSTANCES, WE D ISPOSE OF THIS CASE EX-PARTE QUA THE REVENUE, ON MERITS, AFTER HEARING THE LD. COUN SEL FOR THE ASSESSEE. 2 I.T.A. NO. 2008/KOL/2014 ASSESSMENT YEAR: 2005-06 TALAVADI CEMENTS LTD 3. THOUGH A NUMBER OF GROUNDS HAVE BEEN RAISED, THE SOLE ISSUE IS REGARDING THE LIABILITY OF THE CLAIM OF DEPRECIATIO N OF RS.13,85,078/-, ON THE PLANT AND MACHINERY OF THE ASSESSEE. THE ASSESS ING OFFICER DISALLOWED THIS CLAIM BY HOLDING THAT THERE WAS NOT BUSINESS ACTIVITY CARRIED ON BY THE ASSESSEE DURING THE YEAR SINCE TH E PLANT AND MACHINERY WAS NOT IN OPERATION. 3.1. THE LD. FIRST APPELLATE AUTHORITY, UPHELD THIS FINDING OF THE ASSESSING OFFICER. 4. WE FIND THAT DURING THE YEAR, THE ASSESSES OPER ATIONS WERE TEMPORARILY SUSPENDED FOR THE FOLLOWING REASONS GIV EN IN THE DIRECTORS REPORT FOR THE YEAR ENDED 31 ST MARCH, 2005:- THE FLY-ASH EXTRACTION PLANT OF THE COMPANY SITUAT ED AT UNCHAHAR NEAR RAEBARELI, UTTAR PRADESH HAS NOT BEEN OPERATIVE DURING THE YEAR AS FEROZE GANDHI UNCHAHAR THERMAL POWER PROJEC OF NTPC STOPPED THE MOVEMENT O F FLY ASH CARRIERS WRONGFULLY. NECESSARY LEGAL ACTION HAS BEEN UNDERTAKEN AND ORDER HAVE BEEN PASSED DIRECTING NTP C TO RESUME SUPPLY OF DRY FLY ASH. HOWEVER, NTPC HAS FIL ED APPEAL AGAINST SUCH ORDER. HEARING FOR THE CASE IS CONTINUING. 4.1. FOR THE ASSESSMENT YEAR 2003-04, THIS PLANT WA S IN OPERATION AND THE ASSESE CLAIMED DEPRECIATION AND THE SAME WA S ALLOWED. THE DIRECTORS REPORT FOR THE YEAR ENDED 31 ST MARCH 2008, REPORTS 3 I.T.A. NO. 2008/KOL/2014 ASSESSMENT YEAR: 2005-06 TALAVADI CEMENTS LTD RESUMPTION OF SUPPLIES OF FLY ASH. THE PLANT WAS IN OPERATION FOR THE FINANCIAL YEAR 2007-08, RELEVANT TO THE ASSESSMENT YEAR 2008-09 AND DEPRECIATION WAS CLAIMED BY THE ASSESSEE AND ALLOWE D BY THE ASSESSING OFFICER. THE ABOVE PROVES, THAT IT WAS ON LY FOR THE FINANCIAL YEAR 2004-05, THAT THE ASSESSEE WAS UNABLE TO PUT T O THE PLANT AND MACHINERY, DUE TO STOPPAGE OF MOVEMENT OF FLY ASH. THIS HAS RESULTED IN TEMPORARY CLOSURE. DEPRECIATION CANNOT BE DENIED UNDER SUCH CIRCUMSTANCES. 4.1.1. EVEN OTHERWISE, UNDER THE BLOCK OF ASSETS CO NCEPT, THE REQUIREMENT OF USING OF THE PLANT AND MACHINERY, BY THE ASSESSEE, DURING THE FINANCIAL YEAR, DOES NOT ARISE. FOR THIS PROPOSITION WE RELY ON THE DECISION OF THE HYDERABAD BENCH OF THE ITAT IN THE CASE OF NATCO EXPORTS VS DY. COMMISSIONER OF INCOME TAX, OR DER DT. 11 TH JUNE 2002, 2003 86 ITD 445 HYD, WHEREIN IT WAS HELD AS FOLLOWS:- (B) THE CIT(A) OUGHT TO HAVE SEEN THAT WHEN ONCE T HE VALUE OF ASSET FORMS PART OF BLOCK OF ASSETS, DEPRECIATION I S TO BE ALLOWED ON THE ENTIRE BLOCK IRRESPECTIVE OF USER OF ANY ITE M FALLING WITHIN THE BLOCK DURING THE ASSESSMENT YEAR AND HENCE DEPR ECIATION CANNOT BE DISALLOWED ON PONDS STATING THAT THEY WER E NOT USED BY THE APPELLANT DURING THE ASSESSMENT YEARS 1997-9 8 & 1998- 99 FROM THE ABOVE, IT IS CLEAR THAT AS LONG AS AN ASSE T FORMS PART OF THE BLOCK OF ASSETS AND THE BLOCK CONTINUES TO EXIST, 4 I.T.A. NO. 2008/KOL/2014 ASSESSMENT YEAR: 2005-06 TALAVADI CEMENTS LTD PROVISIONS OF SECTION 50 DO NOT COME INTO PLAY AND DEPRECIATION HAS TO BE ALLOWED ON THAT PORTION OF THE W.D.V. OF THE ASSETS WHICH HAVE BEEN SCRAPPED, AFTER REDUCING THE SCRAP VALUE FROM THE BLOCK OF ASSETS. THIS VIEW IS FORTIFIED BY THE JUDGMENTS OF JABALPUR BENCH OF THE ITAT IN THE CASE OF PACKWELL PRINTERS, THE JUDGMENT OF THE AHMEDABAD BENCH OF THE ITAT IN THE CASE OF INDUCTOTHERM (INDIA) LTD. (SUPRA) AND THE JUDGMENT OF THE PATNA BENCH OF THE ITAT IN THE CASE OF PARIKH ENGG. & BODY BLDG. CO. LTD. (SUPRA). THEREFORE, IN VIEW OF THE D ECISIONS AND INTERPRETATION OF THE CONCEPT OF 'BLOCK OF ASSETS' DEPRECIATION ON PONDS WHICH IS FORMING PART OF THE BLOCK OF ASSETS HAS TO BE ALLOWED AS DEDUCTION EVEN THOUGH THESE PONDS WERE D ISCARDED AND NOT USED AND NOT OWNED BY IT DURING THE ASSESSM ENT YEARS IN QUESTION, AS THE ASSESSEE WAS NOT ENTITLED TO ANY S CRAP VALUE WHATSOEVER, CONSEQUENT TO DISCARDING. COMING TO THE CASE LAW RELIED UPON BY THE LD. DEPARTMENTAL REPRESENTATIVE AND BY THE LD. CIT(A), ALL OF THEM ARE DISTINGUISHABLE, AS ALL THESE CASES DEALT WITH GRANT OF DEPRECIATION FOR ASSESSMENT YEARS BEF ORE THE INTRODUCTION OF THE CONCEPT OF DEPRECIATION ON 'BLO CK ASSETS.' THUS, WE UPHOLD THE CLAIM OF THE ASSESSEE FOR DEPRE CIATION FOR BOTH THE ASSESSMENT YEARS AND SET ASIDE THE ORDER O F THE LD. CIT(A). 5. RESPECTFULLY FOLLOWING THE PROPOSITIONS OF LAW L AID DOWN IN THE ABOVE JUDICIAL PRECEDENT, WE ALLOW THIS CLAIM OF TH E ASSESSEE. 5 I.T.A. NO. 2008/KOL/2014 ASSESSMENT YEAR: 2005-06 TALAVADI CEMENTS LTD 6. AS WE HAVE ALLOWED GROUND NO. 3 & 4 OF THE ASSES SEE, WE DO NOT ADJUDICATE GROUND NO. 1, 2 & 5, AS IT WOULD BE A MERE ACADEMIC EXERCISE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. KOLKATA, THE 23 RD DAY OF AUGUST, 2017. SD/- SD/- [S.S. VISWANETHRA RAVI] [ J. SUDHAKAR REDDY ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :23.08.2017 {SC SPS} COPY OF THE ORDER FORWARDED TO: 1. TALAVADI CEMENTS LTD BIRLA BUILDING, 4 TH FLOOR 9/1, R. N. MUKHERJEE ROAD KOLKATA - 700001 2. INCOME TAX OFFICER, WARD-4(1) AAYAKAR BHAWAN, 8 TH FLOOR P-7 CHOWRINGHEE SQUARE KOLKATA 700 069 3. CIT(A)- 4. CIT- , 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY HEAD OF OFFICE/ D.D.O. ITAT, KOLKATA BENCHES