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

ITA 2033/AHD/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6298 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 09-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Additional depreciation; Revenue expenditure; Capital expenditure
• Section: 234B; 32

Judgement Text

, CH CHCH CH 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.2033/AHD/2015 ( / ASSESSMENT YEAR : 2011-12) GUJARAT LIQUI PHARMACAPS PVT. LTD., PLOT NO.662-666, GIDC, WAGHODIA, BARODA 391 760 # VS. THE CIT, CIRCLE 1(1), BARODA 390 007 $ # % & # PAN/GIR NO. : AAACG 7270 K ( !$' / APPELLANT ) .. ( ($' # RESPONDENT ) !$') # APPELLANT BY : MS. URVASHI SODHAN, A.R. ($'*) / RESPONDENT BY : SHRI MUDIT NAGPAL, SR. D.R. + ,*-. / DATE OF HEARING 21/12/2017 /012*-. / DATE OF PRONOUNCEMENT 15/01/2018 3# O R D E R PER MAHAVIR PRASAD, JUDICIAL MEMBER : THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1, VADODARA, V IDE APPEAL NO.CAB-1/179/2014-15 DATED 28/04/2015 FOR THE ASSES SMENT YEAR (AY) 2011-12. 2. ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEALS: 1. THE LEARNED CIT (APPEALS) HAS ERRED IN CONFIRMING T HE ACTION OF LEARNED ASSESSING OFFICER OF DISALLOWING OUR ENTIRE CLAIM OF ADDITIONAL DEPRECIATION AMOUNTING TO RS.17,33,148/- . ITA NO.2033/AHD /2015 GUJARAT LIQUI PHARMACAPS PVT. LTD. VS. DCIT ASST.YEAR 2011-12 - 2 - 2. (I). THE LEARNED CIT( APPEALS) HAS ERRED IN CONFIRM ING PARTLY THE ACTION OF THE LEARNED ASSESSING OFFICER BY RETAININ G THE DISALLOWANCE OF THE SUM OF RS. 1,39,141 (COMPRISING OF RS.75,141 IN RESPECT OF WATERING VACUUM PUMP AND RS.64,000/- REPRESENTING F EEDER BOX) OUT OF RS. 4,75,501/- DISALLOWED BY THE LEARNED ASSESSI NG OFFICER IN RESPECT OF OUR CLAIM OF REPAIRS AND MAINTENANCE EXP ENSES RELATING TO PLANT AND MACHINERY. (II).WITHOUT PREJUDICE TO ABOVE, THE LEARNED CIT (A PPEALS) HAS ERRED IN CONSIDERING THE SUM OF RS.64,000/- TOWARDS FEEDE R BOX AS AGAINST RS.57,600/- WHICH IS THE AMOUNT INCLUDED IN THE TOT AL OF RS.4,75,501/-. (III). THE LEARNED CIT (APPEALS) HAS FURTHER ERRED IN DIRECTING THE LEARNED ASSESSING OFFICER IN PARA 5.1 OF HIS ORDER TO TREAT THE AMOUNT OF RS.3,04,260/- AS REVENUE EXPENDITURE WHER EAS AMOUNT ALLOWABLE AS PER FINDING OF CIT(APPEALS) COMES TO R S.3,36,360/- [RS.4,75,501 RS.1,39,141 DISALLOWANCE RETAINED BY THE CIT'(APPEALS)] 3. THE LEARNED CIT (APPEALS) HAS ERRED IN NOT DECIDING OUR GROUND NUMBER 4 WHICH IS REPRODUCED BELOW. 'THE LEARNED ASSESSING OFFICER HAS ERRED IN LEVYING AND CALCULATING INTEREST OF RS.6,31,173/- UNDER SECTION 234B AND RS .5,29,029/- UNDER SECTION 234C OF THE INCOME TAX ACT, 1961.' 3. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF SOFT GELATIN CAPSULES. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS SHOWN GROSS PROFIT O F RS.1228.13 LACS ON THE TOTAL TURNOVER OFRS.4026.58 LACS WHICH WORKS OU T THE GROSS PROFIT RATE AT 30.50% AS AGAINST THE GROSS PROFIT OF RS.70 7.53 LACS ON THE TOTAL TURNOVER OF RS.2242.84% LACS WHICH WORKS OUT THE GR OSS PROFIT RATE AT ITA NO.2033/AHD /2015 GUJARAT LIQUI PHARMACAPS PVT. LTD. VS. DCIT ASST.YEAR 2011-12 - 3 - 31.55% SHOWN IN THE IMMEDIATELY PRECEDING ASSESSMEN T YEAR. THE DETAILS FILED BY THE ASSESSEE WERE VERIFIED. 3.1 ON PERUSAL OF THE DEPRECIATION CHART ANNEXED TO TAX AUDIT REPORT, IT IS REVEALED THAT THE ASSESSEE HAS CLAIMED ADDITIONA L DEPRECIATION ON NEW PLANT AND MACHINERY PURCHASED DURING THE YEAR UNDER CONSIDERATION, HOWEVER, IT IS OBSERVED FROM COPY OF THE LEDGER A/C SUBMITTED BY THE ASSESSEE COMPANY IN RESPONSE TO DETAILED QUESTIONNA IRE THAT ALL PLANTS AND MACHINERY ON WHICH ADDITIONAL DEPRECIATION CLAIMED IS NOT A NEW PLANT AND MACHINERY BUT IT IS PART OF PLANT AND MACHINERY OR CAPITAL EXPENDITURE RELATED TO THE EXISTING PLANT & MACHINERY. IN THE L EDGER A/C THE EXPENSES ARE SHOWN AS PURCHASE OF KSP-PUMP, HEATER, STEAM CO IL, 3 HP CRPMTION GRAVES, FLINCH NAUNTED MOTORS, CHANGE PARTS OF BILS ERS PACKINGS MACHINES, CONTROL PANEL FOR AUTO SYSTEM, WASTE AND SCRAPS OF STAINLESS STILLS STORAGE TANKS, SS ELBOW, MS SCRAPE SPARES OF BILSER PACK MACHINES, STREAM TAPE VALVE, SEAMLESS SUCH PIPES, B UTTERFLY VALVES, GASKET RUBBER, M.S NUT BOLT NUT, VAPOUR ABSORPTION HEAT PUMP, POWER VOLTAGE CONTROLLERS F SPARE OF ENCAPSULATION MACHINE, PURCHASE OF AIR BLOWER, LIFT MATERIALS ETC, THE ASSESSEE COMPANY VI DE ORDER SHEET DATED 14/03/2014 WAS ASKED TO EXPLAIN WHY THE ADDITIONAL DEPRECIATION ON NEW PLANT AND MACHINERY SHOULD NOT BE DISALLOWED. THE A SSESSEE VIDE IT REPLY DATED 19/03/2014 SUBMITTED ON 20/03/2014 HAS CONTEN DED AS FOLLOWS: - '..... FURTHER TO THE HEARING ON 14 TH MARCH, 2014 WE WOULD LIKE TO REPLY ON THE ADDITIONAL DEPRECIATION CLAIMED IN A.Y. 2011 -12 ON PLANT & MACHINERY. PLEASE FIND HEREWITH ATTACH PLANT AND MA CHINERY LEDGER ON WHICH ADDITIONAL DEPRECIATION CALCULATED AS PER PRO VISION OF SECTION 32 OF INCOME-TAX ACT 1961. ACCORDING TO THIS IT INCLUD ES NEWLY PURCHASED MACHINERIES AND INSTALLATION CHARGES AND COST DIREC TLY ATTRIBUTABLE TO ITA NO.2033/AHD /2015 GUJARAT LIQUI PHARMACAPS PVT. LTD. VS. DCIT ASST.YEAR 2011-12 - 4 - BRINGING THE ASSET IN WORKING CONDITIONS. FURTHER W E WOULD LIKE TO CLARIFY THAT THE MACHINERY ON WHICH ADDITIONAL DEPR ECIATION HAS BEEN CLAIMED IS AN INDEPENDENT PLANT AND MACHINERY AND I T FUNCTIONS INDEPENDENTLY. THESE ARE NOT IN NATURE OF SPARES OF ANY EXISTING PLANT AND MACHINERY. 3. WITHOUT PREJUDICE TO OUR CONTENTION TO ALLOW ADD ITIONAL DEPRECIATION AS CLAIMED FOR A.Y.10-11, WE REQUEST Y OURSELF TO INCREASE THE OPENING WDV OF THE YEAR UNDER REFERENCE CONSEQU ENT TO DENIAL OF OUR CLAIM FOR ADDITIONAL DEPRECIATION IN A.Y.10-11 WHILE CALCULATING DEPRECIATION TO BE ALLOWED FOR A. Y. 11-12...' I HAVE DULY CONSIDERED THE SUBMISSION OF ASSESSES A ND HAVE NOT FOUND IT ACCEPTABLE. BEFORE ANALYZING ISSUE THE SECTION 32(I IA) OF I.T. ACT IS REPRODUCED HEREUNDER: [IIA] IN THE CASE OF ANY NEW MACHINERY OR PLANT (OT HER THAN SHIPS AND AIRCRAFT), WHICH HAS BEEN ACQUIRED AND INSTALLE D AFTER THE 31 ST DAY OF MARCH, 2005 BY AN ASSESSEE ENGAGED IN THE BUSINE SS OR MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING, A FURTHER SU M EQUAL TO TWENTY PERCENT OF THE ACTUAL COST OF SUCH MACHINERY OR PLA NT SHALL BE ALLOWED AS DEDUCTION UNDER CLAUSE(II): PROVIDED: THAT NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF- A) ANY MACHINERY OR PLANT WHICH, BEFORE ITS INSTALL ATION BY THE ASSESSEE, WAS USED EITHER WITHIN OR OUTSIDE INDIA B Y ANY OTHER PERSON: OR B) ANY MACHINERY OR PLANT INSTALLED IN ANY OFFICE PREMISES OR ANY RESIDENTIAL ACCOMMODATION, INCLUDING ACCOMMODATION IN THE NATURE OF A GUEST-HOUSE; OR C) ANY OFFICER APPLIANCES OR ROAD TRANSPORT VEHICL ES: OR D) ANY MACHINERY OR PLANT, THE WHOLE OF THE ACTUAL COST OF WHICH IS ALLOWED AS A DEDUCTION (WHETHER BY WAY OF DEPRECIAT ION OR OTHERWISE) IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' OF AN Y ONE PREVIOUS YEAR;] IT IS CLEARLY MENTIONED IN THE PROVISION OF THE ACT THAT FOR CLAIMING THE ADDITIONAL DEPRECIATION THAT THE ADDITION DEPRECIAT ION SHOULD BE MADE IN NEW PLANT OR MACHINERY AND IT SHOULD BE ACQUIRED AND INSTALLED DURING THE YEAR. THIS AMENDMENT HAS BEEN INTRODUCED TO GIVE A THRUST TO INVESTMENT IN MANUFACTURING SECTOR. BUT, IN THE CAS E OF THE ASSESSEE, NO ITA NO.2033/AHD /2015 GUJARAT LIQUI PHARMACAPS PVT. LTD. VS. DCIT ASST.YEAR 2011-12 - 5 - NEW PLANT AND MACHINERY IS INSTALLED BUT IT IS ONLY PARTS OF MACHINERY OR PLANT OR ADDITIONAL CAPITAL EXPENSE ON EXISTING PLA NT OR MACHINERY. THE EXISTING PLANT AND MACHINERY ALREADY FALLS IN THE B LOCK OF SECTION 32(L)(II) AND THEREFORE, ANY CAPITAL EXPENSES OR CH ANGING OF PARTS WILL REMAIN IN SAME BLOCK AND IT WILL NOT DERIVE THE MEA NING ACQUIRED AND INSTALLED OF NEW PLANT OR MACHINERY TO CLAIM ADDITI ONAL DEPRECIATION U/S.32(L)(IIA) OF THE ACT, FURTHER, THE ITEM ADDED IN PLANT OR MACHINERY COULD NOT BE SAID AS ACQUISITION OR INSTALLATION OF NEW PLANT OR MACHINERY 'AS IT DOES NOT PRODUCE OR MANUFACTURE OR WORK INDEPENDENTLY. THE INTENTION OF THE LEGISLATION HER E IS TO GIVE THRUST TO INVESTMENT IN MANUFACTURING SECTION, BENEFITING IT BY PROVIDING ADDITIONAL DEPREDATION FOR INSTALLATION OF NEW PLAN TS AND MACHINERY. THEREFORE, THE CLAIM OF ADDITIONAL DEPRECIATION AMO UNTING TO RS.L7,33,148/- ON PLANT & MACHINERY TO THE EXTENT O F RS.1,34,02,795/- DOES NOT FALL IN THE PROVISIONS OF SECTION 32(L)(II A) OF THE ACT. IN VIEW OF THE ABOVE, THE ASSESSEE COMPANY HAS CLAI MED ADDITIONAL DEPREDATION ON THE SAID PLANT & MACHINER Y @ 20% OF RS.17,33,148/- WHICH IS DISALLOWED AND ADDED BACK T O THE TOTAL INCOME. 4. THEREAFTER, ASSESSEE PREFERRED FIRST STATUTORY A PPEAL BEFORE THE LD. CIT(A) FOR CONFIRMING THE ADDITIONAL DEPRECIATION A MOUNTING TO RS.1733148/-. 5. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMP UGNED ORDER. IN ASSESSEES OWN CASE, WE HAVE ALLOWED ADDITIONAL DEP RECIATION IN ITA NO.174/AHD/2014 FOR A.Y. 2010-11 WITH FOLLOWING OBS ERVATION: I N THE GROUND NO.3 LD. AO&CIT HAS NOT ALLOWED THE DE PRECIATION FOR PARTS OF THE PLANT AND MACHINERY. THOUGH THEY ACCEP TED THAT EXISTING PLANTS AND MACHINERIES ALREADY FALLS IN THE BLOCK O F UNDER SECTION 32(1)(II) BUT THEY DID NOT ACCEPT CONTENTION OF THE ASSESSEE THAT PARTS ARE ALLOWABLE IN THE SAME BLOCK FOR ADDITIONAL DEPR ECIATION UNDER SECTION 32(1)(IIA) OF THE ACT. IN OUR OPINION WHEN MACHINERIES AND PLANTS ARE ALLOWABLE AND WHY PARTS OF THE SAME CANN OT BE ALLOWED AND IS NO WHERE IT IS WRITTEN IN THE LAW, THE PARTS OF THE MACHINERIES AND ITA NO.2033/AHD /2015 GUJARAT LIQUI PHARMACAPS PVT. LTD. VS. DCIT ASST.YEAR 2011-12 - 6 - PLANTS ARE NOT ALLOWABLE, THEREFORE, WE ALLOW THE G ROUNDS OF APPEAL IN FAVOUR OF ASSESSEE. IN THE RESULT APPEAL OF THE ASS ESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 5.1 RESPECTFULLY CONSIDERED OUR OWN ORDER IN ASSESS EES OWN CASE, WE ALLOW THIS GROUND OF APPEAL. 6. SO FAR AS GROUND RELATED TO WATERING VACUUM PUMP AND FEEDER BOX TO BE CONSIDERED AS CAPITAL EXPENDITURE AND ACCORDI NGLY DEPRECIATION TO BE ALLOWED TO THE APPELLANT. 7. SO FAR AS GROUND NO.2 (II) IS CONCERNED. AO IS D IRECTED TO VERIFY THE AMOUNT WHETHER SUM IS 64,000/- OR 57,600/-. THE REFORE, THIS ISSUE WILL GO BACK TO THE FILE OF THE ASSESSING OFFICER TO DEC IDE ACCORDINGLY. 8. SO FAR AS GROUND NO.3 IS CONCERNED REGARDING TO CALCULATING INTEREST IS CONCERNED. AO IS DIRECTED TO GIVE EFFEC T TO OUR ORDER AND THEREAFTER, CALCULATE THE INTEREST. 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 15/01/2018 SD/- SD/- ( ) 4 5 ( N.K. BILLAIYA ) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 15/01/2018 ITA NO.2033/AHD /2015 GUJARAT LIQUI PHARMACAPS PVT. LTD. VS. DCIT ASST.YEAR 2011-12 - 7 - PRITI YADAV, SR.PS !'# $#! # COPY OF THE ORDER FORWARDED TO : 1. !$' / THE APPELLANT 2. ($' / THE RESPONDENT. 3. 67- + 8- / CONCERNED CIT 4. + 8- 4!5 / THE CIT(A)-1, VADODARA. 5. 9:;-67 !.!672 ! / DR, ITAT, AHMEDABAD 6. ;<=, # GUARD FILE. % & / BY ORDER, (9-- //TRUE COPY// '/& () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD TRUE COPY 1. DATE OF DICTATION 12/01/2018. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 16/01/2018 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER