ACIT, CHENNAI V. M/s. Baghmar Finance Ltd., CHENNAI

ITA 2144/CHNY/2013

• Counselvise Citation: 214421714 RSA 2013
• Duration Of Justice: 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 11-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN
• Assessee Lawyers: M KARUNAKARAN
• Keywords: Depreciation
• Section: 143(3); 115JB; 32

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI . , . . , ! ' [BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMB ER AND SHRI S. S. GODARA, JUDICIAL MEMBER] ./ I.T.A.NO.2144/MDS/2013 / ASSESSMENT YEAR : 2010-11 THE ASSTT. COMMISSIONER OF INCOME-TAX CIRCLE I(2) CHENNAI VS. M/S BAGHMAR FINANCE LTD N21 NO.4, OLD NO.49, LAXMI NIVAS ERULAPPAN ST., SOWCARPET, CHENNAI - 600079 [PAN AAACB 3597Q] ( #$ / APPELLANT) ( %&#$ /RESPONDENT) / APPELLANT BY : SHRI N. MADHAVAN, JCIT /RESPONDENT BY : SHRI M. KARUNAKARAN, ADVOCATE / DATE OF HEARING : 28-01-2014 ! / DATE OF PRONOUNCEMENT : 30-01-2014 ' / O R D E R PER S.S.GODARA, JUDICIAL MEMBER THIS APPEAL FILED BY THE REVENUE FOR ASSESSMENT Y EAR 2010-11, IS DIRECTED AGAINST THE ORDER OF THE COMMI SSIONER OF INCOME- TAX (APPEALS)(C)-II CHENNAI, DATED 27.9.2013, PASSE D IN APPEAL I.T.A.NO.2144/13 :- 2 -: NO.328/13-14, IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT). 2. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THE INSTA NT APPEAL: 2.1 THE CIT(APPEALS) ERRED IN DELETING THE DISAL LOWANCE OF DEPRECIATION ON THE WINDMILL. 2.2. THE CIT(APPEALS) FAILED TO NOTE THAT THE AGREE MENT ENTERED INTO BETWEEN THE PARTIES WAS NOT ON STAMP PAPER AND THE LAND WAS PURCHASED IN THE NAME OF SURANA INDUSTRIES. FURTHE R, AS PER CLAUSE 10 OF THE AGREEMENT DATED 27.3.2006, THE ASSESSEE W AS PROHIBITED FROM BECOMING THE ABSOLUTE OWNER OF THE WINDMILL. H ENCE, AS THE ASSESSEE WAS NOT THE OWNER OF THE ASSET, THE ASSESS ING OFFICER RIGHTLY DISALLOWED THE DEPRECATION ON WINDMILL. HENCE, THE CONDITIONS PROVIDED U/S 32 FOR CLAIMING DEPRECIATION ARE NOT SATISFIED. 2.3 IT IS SUBMITTED THAT THE ORDER OF THE ITAT, CH ENNAI IN THE ASSESSEE'S OWN CASE FOR THE A. Y S.2006-07, 2008-09 AND 2009-10 HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND THE APPEAL IS PENDING BEFORE THE HIGH COURT. 3. IN THE COURSE OF HEARING, THE REVENUE VEHEMENTLY RE ITERATES THE AFORESAID GROUNDS AND ARGUES THAT THE CIT(A) OU GHT TO HAVE UPHELD THE IMPUGNED DISALLOWANCE OF DEPRECIATION TO TALLING TO ` 3,40,468/-. ACCORDINGLY, IT PRAYS FOR ACCEPTANCE O F THE APPEAL. 4. THE ASSESSEE SUPPORTS THE ORDER OF THE CIT(A) UNDER CHALLENGE AND SUBMITS THAT AFTER PLACING RELIANCE ON THE DECISIONS OF PRECEDING ASSESSMENT YEARS QUA ISSUE OF DEPRECIATIO N RELATING TO THE I.T.A.NO.2144/13 :- 3 -: SAME VERY ASSET, IMPUGNED DISALLOWANCE HAS BEEN RIGHTLY DELETED IN LOWER APPELLATE PROCEEDINGS. IN SUPPORT, IT FIL ES ORDER OF THE TRIBUNAL DATED 23.8.2013 FOR ASSESSMENT YEARS 200 8-09 AND 2009-10 AND PRAYS FOR REJECTION OF THE APPEAL. 5. THE ASSESSEE IS A PRIVATE COMPANY. IT IS ENGAGE D IN THE BUSINESS OF HIRE PURCHASE FINANCE, WINDMILL AND JEW ELLERY BUSINESS. ON 27.9.2010, THE ASSESSEE HAD FILED ITS RETURN DISC LOSING INCOME OF ` 1,29,67,730/- BEFORE SET OFF OF LOSSES BROUGHT FORW ARD FROM PRECEDING ASSESSMENT YEARS. ALONGWITH THE SAME, IT HAD ALSO COMPUTED BOOK PROFITS U/S 115JB OF THE ACT TO THE TUNE OF ` 91,80,230/-. THE SAME WAS SUMMARILY PROCESSED. 6. IN THE COURSE OF SCRUTINY, THE ASSESSING OFFICER CAME ACROSS ASSESSEES CLAIM OF DEPRECIATION ON WINDMILL @ 80% TOTALLING TO ` 3,09,313/-, WINDMILL BUILDING @ 10% AMOUNTING TO ` 9,998/- AND WINDMILL ROAD @ 10% TO THE TUNE OF ` 21,157/-; ALL AGGREGATING TO ` 3,40,468/-. THIS PERTAINED TO WINDMILL NO.WEG HT.S C.NO.1588 LOCATED AT SF NO. 7 VILLAGE 425/4, 5A(P), 5B(P) RAD HAPURAM VILLAGE, TIRUNELVELI DISTRICT. IN SUPPORT, THE ASSESSEE PL ACED HEAVY RELIANCE ON THE ORDER OF THE TRIBUNAL DATED 24.2.2010 REGARDI NG THE VERY ISSUE. THE ASSESSING OFFICER, IN HIS ORDER DATED 29.1.2013 OBSERVED THAT THE I.T.A.NO.2144/13 :- 4 -: ISSUE HAD NOT BECOME FINAL AS THE REVENUES APPEAL AGAINST THE TRIBUNAL ORDER IS PENDING BEFORE THE HON'BLE HIGH COURT. THEREAFTER, HE DISALLOWED THE CLAIM, INTER ALIA, HOLDING THAT A GREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND M/S SURANA INDUSTRIES WAS NOT ON A STAMP PAPER, THE SAID ENTITY WAS NOT OWNER OF THE LAND, T HE AGREEMENT WAS UNREGISTERED, THE TAMIL NADU ELECTRICITY BOARDS LE TTER WAS ADDRESSED TO THE OTHER ENTITY AND NOT TO THE ASSESSEE ETC. ACCORDINGLY, THE ASSESSING OFFICER DETERMINED THE TOTAL INCOME AT ` 1,33,08,198/- WITHOUT ALLOWING CARRY FORWARD OF LOSSES BROUGHT FO RWARD FROM EARLIER ASSESSMENT YEARS AS CLAIMED BY THE ASSESSEE. IN TH IS MANNER, THE NORMAL TAX PAYABLE TURNED OUT TO BE MORE THAN THE B OOK PROFITS. 7. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL. IN THE LOWER APPELLATE PROCEEDINGS, THE CIT(A) HAS DELETED THE D ISALLOWANCE BY OBSERVING AS FOLLOWS: 4. THE ONLY ISSUE INVOLVED IN THE PRESENT APPEAL P ERTAINS TO DISALLOWANCE OF DEPRECIATION ON WINDMILL. THE APPEL LANT HAS CLAIMED DEPRECIATION ON WINDMILL TOTALLING TO RS.3,40,468/- . THE APPELLANT'S CLAIM OF DEPRECIATION ON WINDMILL FOR THE A.YS.06-0 7, 07-08, 08-09 & 09-10 HAD BEEN DISALLOWED FOR THE REASON THAT THE A SSET DID NOT EXIST IN THE NAME OF THE APPELLANT. THE ID. CIT(A) AND HO N'BLE ITAT HAD ALLOWED APPELLANT'S APPEAL FOR THE ABOVE ASSESSMENT YEARS. THE DEPARTMENT HAS GONE ON APPEAL BEFORE THE HIGH COURT FOR THESE YEARS. HENCE ON THIS BACKGROUND, THE AO HAD DISALLO WED THE DEPRECIATION ON WINDMILL ON THE FOLLOWING GROUNDS: I.T.A.NO.2144/13 :- 5 -: (I) AGREEMENT ENTERED INTO BETWEEN THE PARTIES ARE NOT IN A STAMP PAPER; (II) THE LAND PURCHASED IS IN THE NAME OF M/S SURANA INDUSTRIES; (III) THE ALLEGED AGREEMENT IS NOT A REGISTERED DOC UMENT; (IV) THE LETTERS FROM TNEB ARE ADDRESSED TO M/S SURANA INDUSTRIES LTD. AND NOT TO THE ASSESSEE. (V) WITH THE ALLEGED AGREEMENT, IT CANNOT BE SAID THAT THE ASSESSEE IS THE ABSOLUTE OWNER OF THE WINDMILL WITH THE RIGHT TO SELL. HERE THE RIGHT TO SELL IS ABSENT SINCE 20% OF THE OWNERSHIP IS RETAINED BY M/S SURANA INDUSTRIES LTD. (VI) AS PER CLAUSE 10 OF THE AGREEMENT DATED 27.3.2006, THE ASSESSEE IS PROHIBITED FROM BECOMING THE ABSOLUTE O WNER OF THE WINDMILL; (VII) THE ASSESSEE CONTENTION THAT SECTION 32 DOES NOT SP ECIFY THAT A BILL IS TO BE REQUIRED FOR ALLOWANCE OF DEPR ECATION DOES NOT APPLY TO THE ASSESSEE AS THE AGREEMENT ENTERED ON A PLAIN PAPER COULD NOT BE CONTESTED IN A COURT OF LAW ETC. 4.1 IN THE GROUNDS OF APPEAL, THE APPELLANT HAS ARG UED THAT THE DISALLOWANCE OF DEPRECIATION BY THE AO IS ILLEGAL, ARBITRARY, AGAINST THE WEIGHT OF EVIDENCE AND ALL PROBABILITIE S OF THE CASE. THE APPELLANT RELIED ON THE DECISION OF THE ITAT IN APPELLANT'S OWN CASE FOR THE A.Y.06-07 AND ALSO THE ORDER OF TH E CIT(A) IN ITA NO.160 & 186/12-13 DATED 17.01.2013 WHEREIN THE APPELLATE AUTHORITIES HAVE HELD THAT THE APPELLANT IS ENTITLED TO DEPRECIATION ON WINDMILLS. THE AR FURTHER ARGUED THAT THE AO ERRED IN HOLDING THAT THE TRANSACTION IS A FINANCIA L TRANSACTION AND NOT A SALE TRANSACTION AND THE APPELLATE AUTHOR ITIES HAS ALSO HELD THAT THE TRANSACTION WAS NOT A FINANCIAL TRANSACTION BUT A S ALE AND THAT THE APPELLANT BEING THE OWNER OF THE WINDM ILL IS ENTITLED TO DEPRECIATION. 4.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE, GROUNDS OF APPEAL AND THE SUBMISSIONS MADE BY THE L EARNED AR. THE ISSUE INVOLVED IN APPEAL IS COVERED BY THE EARL IER ORDERS OF THE CIT (A) AND THE ITAT IN APPELLANT'S OWN CASE. THE A PPELLANT FILED COPIES OF THE COMMON ORDER OF THE CIT(A) FOR AYS.20 08-09 AND 2009-10 DATED 17.01.2013 AND THE ORDER OF THE ITAT FOR THESE YEARS IN ITA NOS.1244 & 1257/MDS/2013 DTD.23.08.2013. I.T.A.NO.2144/13 :- 6 -: 4.3 FROM THE ASSESSMENT ORDER IT IS SEEN THAT THE DEPRECIATION CLAIMED OF THE APPELLANT IS ON THE SAME ASSET(S) ON WHICH THE CLAIM HAD BEEN MADE IN THE EARLIER ASSESSMENT YEARS AND D ISALLOWED BY THE AO. SUCH CLAIMS WERE ALLOWED TO THE APPELLANT BY MY LEARNED PREDECESSOR, AS DISCUSSED ABOVE. SINCE THE DEPRECIA TION CLAIMED BY THE APPELLANT FOR THE YEAR UNDER CONSIDERATION I S ALSO ON THE SAME VERY ASSETS, RESPECTFULLY FOLLOWING THE DECISI ONS OF THE LEARNED CIT(A) AND THAT OF THE HON'BLE ITAT, AS DI SCUSSED ABOVE I ALSO HOLD THAT THE APPELLANTS CLAIM OF DEPRECIATIO N FOR THE YEAR UNDER CONSIDERATION HAS ALSO TO BE ALLOWED. I THER EFORE DIRECT THE AO TO ALLOW THE APPELLANT'S CLAIM FOR THE YEAR UNDE R CONSIDERATION ALSO. THE GROUNDS OF APPEAL IN THIS REGARD, THEREFO RE, ARE ALLOWED. THEREFORE, THE REVENUE IS IN APPEAL. 8. WE HAVE HEARD BOTH PARTIES AND GONE THROUGH THE CAS E FILE. WE MAKE IT CLEAR THAT NEITHER ANY PAPER BOOK HAS B EEN FILED BEFORE US BY THE REVENUE SO AS TO CONTROVERT THE FINDINGS ARR IVED AT BY THE CIT(A) NOR ANY DISTINCTION HAS BEEN DRAWN QUA FACTS OF THE PRECEDING ASSESSMENT YEARS AND THE PRESENT ASSESSMENT YEAR. IN OUR VIEW, ONCE THE CIT(A) HAS FOLLOWED THE ORDER OF THE TRIBUNAL PERTAINING TO THE EARLIER ASSESSMENT YEARS REGARDING DEPRECIATION OF THE VERY SAME ASSETS, WE SEE NO REASON TO TAKE A DIFFERENT VIEW I N THE IMPUGNED ASSESSMENT YEAR. MERELY BECAUSE THE REVENUE CONTEN DS THAT ITS APPEAL IS PENDING BEFORE THE HON'BLE HIGH COURT, DO ES NOT FORM A JUSTIFIABLE GROUND TO HOLD OTHERWISE IN THE INSTANT CASE. SO, THE FINDINGS OF THE CIT(A) ARE AFFIRMED. I.T.A.NO.2144/13 :- 7 -: 9. THE REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED ON THURSDAY, THE 30 TH OF JANUARY, 2014, AT CHENNAI. SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (S. S. GODARA) JUDICIAL MEMBER DATED: 30 TH JANUARY, 2014 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR