Raju Ramrao Shinde, Aurangabad V. Income-tax Officer,

ITA 2133/PUN/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1062 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 08-09-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 05-12-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DHEERAJ KUMAR JAIN
• Keywords: Depreciation
• Section: 143(3); 234B; 32

Judgement Text

] ]] ] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , !, # $ BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM ITA NO.2133/PN/2013 ASSESSMENT YEAR : 2009-10 SHRI RAJU RAMRAO SHINDE, E-31, MIDC, CHIKALTHANA, AURANGABAD 431 006. PAN : AMCPS8180P . APPELLANT VS. THE INCOME TAX OFFICER, WARD 2(3), AURANGABAD. . RESPONDENT / APPELLANT BY : SHRI M. K. KULKARNI / RESPONDENT BY : SHRI DHEERAJ KUMAR JAIN / DATE OF HEARING : 10.09.2015 / DATE OF PRONOUNCEMENT: 23.09.2015 % / ORDER PER SUSHMA CHOWLA, JM : THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE OR DER OF CIT(A), AURANGABAD DATED 06.09.2013 RELATING TO ASSESSMENT YEAR 2009-1 0 PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1) WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A), A'BAD WAS CORRECT IN HIS DECISION TO CONFIR M THE DISALLOWANCE MADE BY THE A.O. OF RS.67000/- UNDER S. 36(1)(III) OF THE ACT? WHETHER THE ORDER OF THE LD. CIT(A) IS LIABLE TO BE SET ASIDE AS THE ISSUE HAS B EEN DECIDED BY BOTH THE LOWER AUTHORITIES WITHOUT PROPERLY APPRECIATING THE JUDIC IAL PRECEDENTS PLACED BEFORE THEM? 2) WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A) A'BAD WAS CORRECT IN HIS DECISION TO CON FIRM THE 2 ITA NO.2133/PN/2013 DISALLOWANCE MADE BY THE A.O. OF RS.5,91,325/- OF D EPRECIATION CLAIMED UNDER S. 32 OF THE ACT? WHETHER THE ORDER O F THE LD. CIT(A) IS LIABLE TO BE SET ASIDE AS THE ISSUE HAS BEEN DECIDE D AGAINST THE ASSESSEE BY BOTH THE LOWER AUTHORITIES WITHOUT PROP ERLY APPRECIATING THE JUDICIAL PRECEDENTS PLACED BEFORE LD. CIT(A) IN THE MATTER? 3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE FILING OF THIS APPEAL IS DELAYED FOR REASONS BEYOND THE CONTROL OF THE APPELLANT- ASSESSEE (JV). THE DETAILED AFFIDAVIT EXPLAINING TH E REASONS FOR SUCH DELAY IS BEING FILED SEPARATELY. THE APPELLANT THER EFORE, EARNESTLY REQUESTS TO CONDONE THE DELAY AND ADMIT THE APPEAL FOR ADJUDICATION TO DO JUSTICE TO THE APPELLANT. 4) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LEVY OF INTEREST U/S 234B AND 234C IS NOT JUSTIFIED. THE LEVY OF IN TEREST BE QUASHED. 5) THE APPELLANT CRAVES/LEAVE TO ADD, AMEND OR ALTE R ANY OF THE ABOVE GROUNDS OF APPEAL. 3. THE PRESENT APPEAL IS FILED AFTER A DELAY OF 25 DAYS. THE CONTENTION OF THE ASSESSEE BY WAY OF AN AFFIDAVIT IS THAT THE ORDER O F THE CIT(A) WAS RECEIVED ON 11.09.2013 AND THE APPEAL HAD TO BE FILED BEFORE 10 .11.2013. HOWEVER, THE APPEAL WAS FILED ON 05.12.2013 I.E. AFTER A DELAY OF 25 DA YS. THE REASONS FOR THE DELAY WAS CLAIMED TO BE THE ADMISSION IN HOSPITAL FOR HEA LTH REASONS. IN THE TOTALITY OF THE FACTS AND CIRCUMSTANCES, WE FIND MERIT IN THE PLEA OF THE ASSESSEE AND WE CONDONE THE DELAY IN FILING THE PRESENT APPEAL LATE BY 25 D AYS. WE PROCEED TO DECIDE THE APPEAL ON MERITS. 4. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESS EE POINTED OUT THAT THE GROUND OF APPEAL NO.1 IS NOT PRESSED. HENCE THE GR OUND OF APPEAL NO.1 IS DISMISSED AS NOT PRESSED. 5. THE ISSUE IN GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE IS IN RELATION TO THE CLAIM OF DEPRECIATION OF RS.5,91,325/- UNDER SE CTION 32 OF THE ACT. 6. BRIEFLY, IN THE FACTS OF THE PRESENT CASE, THE A SSESSEE WAS CARRYING ON THE MANUFACTURING ACTIVITY IN THE EARLIER YEARS. HOWEV ER, IN THE YEAR UNDER CONSIDERATION, NO MANUFACTURING ACTIVITY WAS CARRIE D OUT. THE ASSESSEE WAS ASKED 3 ITA NO.2133/PN/2013 TO FURNISH THE DATE OF LAST OPERATION/MANUFACTURING ACTIVITY. THE ASSESSING OFFICER ON PERUSAL OF THE CENTRAL EXCISE REGISTER IN FORM R .G.23A-PART-II NOTED THAT THE LAST MANUFACTURING ACTIVITY HAD TAKEN PLACE IN THE MONTH OF NOVEMBER, 2007. THE ASSESSING OFFICER, THUS, OBSERVED THAT DURING THE E NTIRE ACCOUNTING YEAR, NO MANUFACTURING ACTIVITY WAS CARRIED OUT. THE ASSESS EE FURNISHED THE WRITTEN SUBMISSIONS IN REPLY TO THE SHOW-CAUSE NOTICE ISSUE D BY THE ASSESSING OFFICER AND POINTED OUT THAT WHERE THE ASSET WAS OWNED BY THE A SSESSEE AND WAS USED FOR THE PURPOSE OF BUSINESS, IT WAS ENTITLED TO THE CLAIM O F DEPRECATION. THE ASSESSEE FURTHER SUBMITTED THAT EVEN A PASSIVE USER WAS ELIG IBLE TO CLAIM DEDUCTION OF DEPRECIATION, EVEN WHERE THE ASSET WAS NOT ACTIVELY USED IN THE BUSINESS. THE ASSESSING OFFICER NOTED THE CONDITIONS OF SECTION 3 2(1) OF THE ACT AND REFERRED TO THE CENTRAL EXCISE DETAILS FILED BY THE ASSESSEE UN DER WHICH IT WAS NOTED THAT THE ASSESSEE HAD STOPPED MANUFACTURING ACTIVITY IN DECE MBER, 2007 ITSELF. THE ASSESSING OFFICER FURTHER NOTED THAT IN THE NEXT FI NANCIAL YEAR THE ENTIRE UNIT OF THE ASSESSEE WAS SOLD ON 11.05.2009, THOUGH THE PROCESS OF ACQUIRING THE PLANT OF THE ASSESSEE HAD COMMENCED DURING THE YEAR ITSELF. THE ASSESSEE HAD RECEIVED A TOTAL SUM OF RS.1.35 CRORES ON VARIOUS DATES IN THE MONTH OF MARCH, 2009 WHICH, IN TURN, WAS UTILIZED FOR CLOSING THE LIABILITIES OF S ECURED LOANS, TERMS LOANS, C.C. ACCOUNT WHICH WERE OUTSTANDING AT THE BEGINNING OF YEAR I.E. 01.04.2008. ON PERUSAL OF THE AGREEMENT TO SELL, THE ASSESSING OFF ICER NOTED THAT THE UNIT WAS SOLD AS A SLUMP SALE FOR A TOTAL CONSIDERATION OF RS.36, 00,000/-, WHERE THE PAYMENTS WERE RECEIVED BETWEEN THE PERIOD 07.11.2007 TO 18.0 4.2008. SINCE THE PROCESS OF SALE OF BUSINESS WITH THE INTENTION OF THE ASSESSEE TO CLOSE THE SAME, HAD INITIATED IN THE FINANCIAL YEAR 2007-08 BY WAY OF RECEIPT OF FIRST CHEQUE ON 07.11.2007, AND SINCE NO MANUFACTURING ACTIVITY WAS CARRIED OUT FRO M DECEMBER, 2007, THE ASSESSING OFFICER HELD THAT THE ASSESSEE WAS NOT EN TITLED TO THE CLAIM OF DEPRECIATION UNDER SECTION 32(1) OF THE ACT AT RS.5 ,91,325/-. 4 ITA NO.2133/PN/2013 7. BEFORE THE CIT(A), THE CLAIM OF THE ASSESSEE WAS THAT THE SAID ASSETS WERE PART OF BLOCK OF ASSET AND EVEN IF A PART OF THE AS SETS IN THE BLOCK WAS USED FOR BUSINESS, THE DEPRECIATION FOR WHOLE BLOCK OF ASSET WAS TO BE ALLOWED. RELIANCE IN THIS REGARD WAS PLACED ON THE RATIO LAID DOWN IN CI T VS. BHARAT ALUMINIUM CO. LTD. REPORTED IN (2010) 187 TAXMANN 111 (DELHI). THE CI T(A) NOTED THE CONTENTION OF THE ASSESSEE THAT THOUGH THE MACHINERY HAD BEEN USE D FOR MANUFACTURING ACTIVITY, THE SAME HAD BEEN KEPT READY FOR USE AND HENCE DEPR ECIATION WAS ALLOWABLE. THE CIT(A) FURTHER OBSERVED THAT THE ASSESSEE HAD ENTER ED INTO AN AGREEMENT FOR SALE OF MANUFACTURING UNIT FOR A CONSIDERATION OF RS.36, 00,000/- AND HAD RECEIVED THE SAID AMOUNT BY BANK CHEQUES FROM 07.11.2007 TO 11.0 4.2008. THE CIT(A) THUS HELD THAT THE ASSESSEE HAD DECIDED TO SELL THE MANU FACTURING UNIT INCLUDING THE MACHINERY IN FINANCIAL YEAR 2007-08 AND HENCE IT CO ULD NOT BE SAID THAT THE ASSESSEE HAD KEPT THE IMPUGNED MACHINERY READY FOR USE IN FINANCIAL YEAR 2008-09. UPHOLDING THE DECISION RELIED UPON BY THE ASSESSEE WAS TO BE DISTINGUISHABLE. THE CIT(A) HELD THAT THE ASSESSEE WAS NOT ENTITLED TO DEPRECIATION ON MACHINERY. HE FURTHER REFERRED TO THE CONTENTIO N OF THE ASSESSEE THAT IN VIEW OF CONCEPT OF BLOCK ASSET, THE DEPRECIATION IS TO BE A LLOWED IN RESPECT OF THE WHOLE BLOCK OF ASSET, BUT IN THE ABSENCE OF ANY EVIDENCE FILED IN SUPPORT OF THE CONTENTION THAT SOME OF THE ASSETS IN THE BLOCK OF ASSETS WERE USED FOR THE PURPOSE OF BUSINESS, THE CONTENTION OF THE ASSESSEE COULD NOT BE ACCEPTED. 8. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF T HE CIT(A). 9. SHRI M. K. KULKARNI, LD. AUTHORIZED REPRESENTATI VE APPEARED ON BEHALF OF THE ASSESSEE AND SHRI DHEERAJ KUMAR JAIN, LD. DEPARTMEN TAL REPRESENTATIVE APPEARED ON BEHALF OF THE REVENUE AND PUT FORWARD T HEIR CONTENTIONS. 5 ITA NO.2133/PN/2013 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ONLY ISSUE ARISING IN THE PRESENT APPEAL IS AGAINST THE CLAIM OF DEPRECIATION ON THE ASSETS OF THE MANUFACTURING UNIT OF THE ASSESSEE AT RS.5,91,3 25/-. THE ASSESSEE WAS CARRYING ON MANUFACTURING ACTIVITY IN THE PRECEDING YEARS BUT THE SAID MANUFACTURING ACTIVITY HAD BEEN STOOPED W.E.F. NOVE MBER/DECEMBER, 2007. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD PRODUCED THE FORM NO. R.G.23A-PART-II OF THE CENTRAL EXCISE AUTHORITIES I N WHICH IT WAS MENTIONED THAT THE ASSESSEE HAD STOPPED MANUFACTURING ACTIVITY W.E.F. DECEMBER, 2007 ITSELF. THE YEAR IN THE APPEAL BEFORE US IS RELATING TO FINANCI AL YEAR 2008-09, THERE WAS NO MANUFACTURING ACTIVITY FOR THE ENTIRE PREVIOUS YEAR . THE ASSESSEE HAD FURTHER ENTERED INTO AN AGREEMENT TO SELL ITS MANUFACTURING UNIT ON A SLUM SALE PRICE OF RS.36,00,000/- AND THE SALE VALUE WAS RECEIVED BY T HE ASSESSEE THROUGH BANK CHEQUES DURING THE PERIOD 07.11.2007 TO 11.04.2008. THE LAND IN BUILDING OF THE FACTORY WAS ALSO SOLD BY THE ASSESSEE AND THE AMOUN T WAS RECEIVED IN ADVANCE DURING THE FINANCIAL YEAR, WHICH WAS UTILIZED FOR C LOSING THE LIABILITIES OF SECURED LOANS RAISED BY THE ASSESSEE I.E. TERM LOANS, C.C. ACCOUNT AND OTHER SECURED LOANS. THE ASSESSEE EVENTUALLY SOLD THE BUILDING ON 11.05. 2009. IN THE ENTIRETY OF THE ABOVE-SAID FACTS AND CIRCUMSTANCES WHERE THE ASSESS EE HAD CLOSED ITS MANUFACTURING ACTIVITY IN THE PRECEDING YEARS AND D URING THE YEAR UNDER CONSIDERATION HAD NOT CARRIED OUT ANY MANUFACTURING ACTIVITY, BUT HAD RECEIVED THE SALE CONSIDERATION AGAINST THE VALUE OF THE IMPUGNE D MACHINERY, THE ASSESSEE IS NOT ENTITLED TO THE CLAIM OF DEPRECIATION ON SUCH A SSETS NOT USED IN THE MANUFACTURING ACTIVITY. THE CONTENTION OF THE ASSE SSEE THAT IT WAS PART OF THE BLOCK OF ASSETS AND HENCE IT WAS ENTITLED TO THE CLAIM OF DEPRECIATION HAS NO MEANING AS THE HONBLE DELHI HIGH COURT IN CIT VS. BHARAT ALUM INIUM CO. LTD. (SUPRA) WHILE LAYING DOWN THE SAID PROPOSITION OF LAW HAD ALSO HE LD THAT WHERE PART OF THE ASSETS IN THE BLOCK ARE USED IN BUSINESS, THEN THE DEPRECI ATION FOR WHOLE BLOCK OF ASSETS IS TO BE ALLOWED. IN THE FACTS OF THE PRESENT CASE WH ERE THE ASSESSEE HAS FAILED TO 6 ITA NO.2133/PN/2013 USE ANY PART OF THE ASSETS FOR ITS MANUFACTURING AC TIVITY, WE FIND NO MERIT IN THE CLAIM OF THE ASSESSEE AND THE SAME IS REJECTED. TH US, THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS DISMISSED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED ON THIS 23 RD DAY OF SEPTEMBER, 2015. SD/- SD/- ( PRADIP KUMAR KEDIA ) ( SUSHMA CHOWLA ) # / ACCOUNTANT MEMBER / JUDICIAL MEMBER PUNE ; DATED : 23 RD SEPTEMBER, 2015. % & '() *)' ! COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A), AURANGABAD; 4) THE CIT, AURANGABAD; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. %+ / BY ORDER , '# //TRUE COPY// $ %&# '( / SR. PRIVATE SECRETARY ) '* + / ITAT, PUNE