Ankit Texpin Pvt.Ltd., Vapi V. The Income tax Officer,Vapi Ward-I, Vapi

ITA 2252/AHD/2009

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6879 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 17-11-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 22-07-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D V SINGH
• Assessee Lawyers: K N BHATT
• Keywords: Depreciation
• Section: 142(1); 32

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE S/SHRI D.K.TYAGI, JM AND A. MOHAN ALANKAMON Y, AM. ANKIT TEXPIN (P) LTD., SHREE GANESH, JALARAM SOCIETY, KACHIGAM ROAD, VAPI. VS. THE INCOME-TAX OFFICER, VAPI WARD-1, VAPI. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI K. N. BHATT, AR RESPONDENT BY:- SHRI D. V. SINGH, SR.DR DATE OF HEARING :28/11/2011 DATE OF PRONOUNCEMENT : 9/12/11. O R D E R PER D. K. TYAGI, JUDICIAL MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A) DATED 14.05.2009 WHEREIN FOLLOWING GROUNDS H AVE BEEN RAISED :- (1) THE LD. CIT HAS ERRED IN LAW AS WELL AS ON FACTS IN SUSTAINING THE ADDITIONS MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION OF RS.16,78,560/- (2) WITHOUT PREJUDICE TO THE ABOVE THE LD. CIT HAS ERRE D IN LAW AS WELL AS ON FACTS IN NOT APPRAISING THE FACT THAT AL LOWING OR DISALLOWING DEPRECIATION IS REVENUE NEUTRAL. ITA NO.2252/AHD/2009 ASST. YEAR :2006-07 ITA NO.2252/AHD/2009 ASST. YEAR 2006-07 2 2. THE EFFECTIVE GROUND RELATES TO DISALLOWANCE OF DEPRECIATION OF RS.16,78,560/-. THE FACTS OF THE CASE ARE THAT THE ASSESSEE ANKIT TEXPIN (P) LTD. IS A PRIVATE COMPANY ENGAGED IN THE BUSINE SS OF MANUFACTURING OF TEXTILE TRADING IN PETROLEUM PRODUCTS AND WEIGH BRIDGE. THE RETURN OF INCOME FOR AY 2006-07 WAS FILED ON 31.12.2006. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICES WERE ISSUED U/S 143(2) AND 142(1) IN RESPONSE TO WHICH ASSESSEE FILED WRITTEN SUBMISSIONS. THE ASSES SEE CLAIMED DEPRECIATION OF RS.18,06,185/- FOR THE ASST. YEAR 2 006-07. THE ASSESSEE HAS TOTAL FOUR UNITS OF BUSINESS. THE TOTAL DEPRECI ATION OF TWO UNITS OF THE ASSESSEE UNIT-I AND UNIT-II AMOUNTS TO RS.16,78,560 /-. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT IN ANKI T TEXPIN (P) LTD. UNIT-I AND ANKIT TEXPIN (P) LTD. UNIT-II THERE WERE NO MANUFACTURING ACTIVITIES DURING THE YEAR ACCOUNT. EVEN THEN THE A SSESSEE HAD CLAIMED DEPRECIATION OF RS.9,57,544/- AND RS.8,48,641/- RES PECTIVELY ON ANKIT TEXPIN (P) LTD. UNIT-I AND ANKIT TEXPIN (P) LTD. UN IT-II. AS PER SECTION 32 OF THE IT ACT IN ORDER TO CLAIM DEPRECIATION ON THE ASSETS SAME SHOULD HAVE BEEN UTILIZED FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. ON ASKING, THE ASSESSEE SUBMITTED THAT THERE WAS TOTAL CLAIM OF DEPRECIATION OF RS.18,06,185/- IN ASST. YEAR 2006-07. OUT OF THE SAID AMOUNT OF DEPRECIATION RS.14,30,251/- RELATED TO BUILDING AND BALANCE AMOUNT TO PLANT AND MACHINERY AND OTHER ASSETS. THERE WERE FE W EXPENSES WHICH HAVE BEEN DEBITED TO THE PROFIT & LOSS A/C WHICH PR OVED THAT SOME ITA NO.2252/AHD/2009 ASST. YEAR 2006-07 3 BUSINESS ACTIVITIES WERE CONDUCTED DURING THE SAID ASST. YEAR. THE EXPENSES RELATING TO POWER FOR RS.46,000/-, ELECTRI CAL EXPENSES OF RS.1,20,578/-, INSURANCE EXPENSES OF RS.32,350/-, R EPAIRS & MAINTENANCE OTHERS OF RS.32,149/- SHOW THAT THERE WERE SOME AC TIVITIES DURING THE YEAR. FURTHER IT WAS SUBMITTED THAT THE PLANT AND M ACHINERY ON WHICH DEPRECIATION WAS CLAIMED HAD BEEN SOLD IN THE NEXT ASST. YEAR 2007-08 AT A LOSS OF RS.8,72,037/-. THE FORCED IDLENESS OF THE ASSETS COULD NOT DISENTITLE THE ASSESSEE FROM GETTING BENEFIT OF DEP RECIATION ALLOWANCE. THE WORD USE INCLUDES READY FOR USE AND THE WORD U SER SHOULD BE GIVEN A WIDER AND LIBERAL MEANING . IN THIS CONNECTION TH E ASSESSEE RELIED ON VARIOUS DECISIONS ALSO. CONSIDERING THE OVERALL FAC TS AND CIRCUMSTANCES OF THE CASE, THE AO FINALLY OBSERVED THAT SINCE THERE WERE NO MANUFACTURING ACTIVITIES DURING THE YEAR UNDER ACCOUNT IN ANKIT T EXPIN (P) LTD. UNIT-I AND ANKIT TEXPIN (P) LTD. UNIT-II, THE CLAIM OF DEP RECIATION OF RS.8,32,856/- AND RS.8,45,704/- RESPECTIVELY TOTALI NG TO RS.16,78,560/- AS PER WORKING FILED DURING THE COURSE OF ASSESSMENT P ROCEEDINGS, COULD NOT BE ALLOWED AS DEDUCTION U/S 32 OF THE ACT. THEREFOR E, DEPRECIATION TO THE EXTENT OF RS.16,78,560/- WAS DISALLOWED. 3. THE ASSESSEE WENT IN APPEAL BEFORE THE LD. CIT(A ) WHEREIN THE SUBMISSION WAS MADE AT LENGTH. THE SUBMISSIONS OF A SSESSEE ARE NARRATED BY THE LD. CIT(A) FROM PAGES 3 TO 6. AFTER CONSIDER ING THE CONTENTIONS OF ITA NO.2252/AHD/2009 ASST. YEAR 2006-07 4 THE ASSESSING OFFICER AND THE SUBMISSIONS OF THE AS SESSEE THE LD. CIT(A) DISMISSED THE APPEAL FILED BY THE ASSESSEE WITH THE FOLLOWING OBSERVATIONS:- 6.4 I HAVE PERUSED THE CONTENTIONS OF THE AR AND T HE SUBMISSIONS PUTFORWARD BY HIM TO THIS OFFICE. I FIND NO MERITS IN THE CONTENTIONS RAISED BY HIM. SINCE, THE ASSETS HAVE NOT BEEN USED IN THE YEAR UNDER APPEAL, DEPRECIATION CANNOT BE ALLOWED. ACCORDING TO THE PR OVISIONS OF SECTION 32, THE ASSETS MUST BE USED FOR THE PURPOSE OF BUSI NESS TO CLAIM DEPRECIATION. THERE WERE NO ACTIVITIES IN UNIT I A ND UNIT II OF THE APPELLANT DURING THE YEAR UNDER APPEAL. THEREFORE, I AM INCLINED TO UPHOLD THE FINDINGS OF THE AO. HENCE, ON THE BASIS OF THE LEGAL BACKGROUND AND THE FACTS OF THE CASE, GROUND NO.1 & 2 OF THE APPEAL ARE DISMISSED. FURTHER AGGRIEVED BY THIS ORDER OF LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4. BEFORE US THE LD. COUNSEL OF THE ASSESSEE REITER ATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. THE ASSESSEE HAD INCURRED FEW EXPENSES WHICH HAD BEEN DEBITED TO THE PROFIT AND L OSS ACCOUNT WHICH WOULD GO TO PROVE THAT SOME BUSINESS ACTIVITIES WER E CONDUCTED DURING THE SAID ASST. YEAR. THE EXPENSES RELATING TO POWER FOR RS.46,000/-, ELECTRICAL EXPENSES OF RS.1,20,578/-, INSURANCE EXP ENSES OF RS.32,350/-, REPAIRS AND MAINTENANCE OTHERS OF RS.32,149/- SHOW THAT THERE WERE SOME ACTIVITIES DURING THE YEAR WHICH RELATE TO USE /MAINTENANCE OF THE PLANT AND MACHINERY. THEREFORE, IT CAN BE SAID THAT ASSETS WERE READY TO BE USED. THE PLANT & MACHINERY ON WHICH DEPRECIATION W AS CLAIMED HAD ITA NO.2252/AHD/2009 ASST. YEAR 2006-07 5 BEEN SOLD IN THE NEXT ASST. YEAR 2007-08 AT A LOSS OF RS.8,72,037/-. THE ASSETS WERE PURCHASED FOR THE PURPOSE OF ITS USE IN BUSINESS. THE ASSETS WERE READY TO BE USED FOR THE PURPOSE OF BUSINESS. THE CONNOTATION OF USER OF ASSETS IS QUIET WIDE AS GIVEN IN THE PROV ISIONS OF THE INCOME-TAX ACT. THE CONDITION STIPULATED IS THAT THE SAME SHOU LD BE USED WHICH DO NOT MEAN THAT THERE HAS TO BE ONLY ACTIVE USE. EVEN PASSIVE USE IS ALSO SUFFICIENT. ACCORDINGLY, HE SUBMITTED THAT THE LOWE R AUTHORITIES HAVE NOT APPRECIATED THE FACTS OF THE CASE AND DISALLOWED TH E CLAIM OF DEPRECIATION. THE ORDERS OF LOWER AUTHORITIES BE SET ASIDE AND TH E CLAIM OF DEPRECIATION MAY KINDLY BE ALLOWED. 5. ON THE OTHER HAND THE LD. DR SUPPORTED THE ORDER S OF LOWER AUTHORITIES AND SUBMITTED THAT SINCE THE PLANT AND MACHINERY WERE PURCHASED BUT NOT USED FOR BUSINESS PURPOSES, THERE WERE NO BUSINESS ACTIVITIES DURING THE YEAR AND THE SAME WERE SOLD J UST IN THE NEXT YEAR, THE CONDITIONS OF SECTION 32 WERE NOT FULFILLED, THE CL AIM OF THE ASSESSEE WAS RIGHTLY DENIED BY THE LOWER AUTHORITIES. NO INTERFE RENCE IS CALLED FOR IN THE ORDER OF LD. CIT(A) THE SAME MAY KINDLY BE UPHELD. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND GOIN G THROUGH THE MATERIAL ON RECORD, WE FIND THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOUND THAT IN TWO UNITS OF ASSESSEE THE RE WERE NO MANUFACTURING ACTIVITY DURING THE YEAR UNDER APPEAL . THEREFORE, CLAIM OF ITA NO.2252/AHD/2009 ASST. YEAR 2006-07 6 DEPRECIATION OF RS.8,32,856/- AND RS.8,45,704/- TOT ALING TO RS.16,78,560/- WAS NOT ALLOWED AS DEDUCTION U/S 32 OF THE ACT. ASS ESSEES CONSISTENT CONTENTION HAS REMAINED THAT IN VIEW OF EXPENSES RE LATING TO POWER, ELECTRICITY, INSURANCE AND REPAIRING AND MAINTENAN CE INCURRED BY IT THERE WERE SOME ACTIVITIES DURING THE YEAR AND SIMPLY BEC AUSE PLANT AND MACHINERY WAS NOT USED FOR MANUFACTURING PURPOSES, DEPRECIATION CANNOT BE DENIED TO THE ASSESSEE AS PLANT AND MACHINERY WA S READY TO USE. THIS SUBMISSION OF THE ASSESSEE IS DEVOID OF MERIT AS TH E EXPENSES INCURRED BY THE ASSESSEE WERE OF ROUTINE NATURE AND DO NOT SHOW ANY INTENTION ON THE PART OF THE ASSESSEE TO HAVE A MANUFACTURING ACTIVI TY DURING THE YEAR UNDER APPEAL AS WE FIND THAT NO PURCHASES WERE MADE DURING THE YEAR OF RAW MATERIAL TO SHOW THAT PLANT AND MACHINERY COULD BE USED FOR MANUFACTURING PURPOSES. UNLESS THERE IS A POSITIVE ACTION ON THE PART OF THE ASSESSEE IT CANNOT BE SAID OR THE ASSESSEES C ONTENTIONS CANNOT BE ACCEPTED THAT PLANT AND MACHINERY WAS READY FOR USE AND DEPRECIATION ON THE SAME SHOULD HAVE BEEN ALLOWED. ON THE CONTRARY THERE IS SUFFICIENT EVIDENCES TO SHOW THAT ASSESSEE WAS NOT INTERESTED IN ANY MANUFACTURING AS THE PLANT AND MACHINERY WAS SOLD BY THE ASSESSEE IN THE FIRST MONTH OF THE NEXT FINANCIAL YEAR AT A LOSS OF RS.8,72,037/-. IN VIEW OF THESE UNDISPUTED FACTS OF THIS CASE, WE HAVE NO HESITATIO N IN UPHOLDING THE ORDERS OF LOWER AUTHORITIES DISALLOWING THE CLAIM O F DEPRECIATION OF ITA NO.2252/AHD/2009 ASST. YEAR 2006-07 7 RS.16,78,560/- BY THE ASSESSEE. THE GROUND RAISED B Y THE ASSESSEE IS DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 9/12/11. SD/- SD/- (A. MOHAN ALANKAMONY) (D.K. TYAGI) ACCOUNTANT MEMBER JUDICI AL MEMBER AHMEDABAD, MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 28/11/2011. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER.OTHER MEMBER 2/12/2011 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..