The ACIT- Circle-I(2), Baroda V. M/s. L.K. India Pvt. Ltd., Baroda

ITA 2252/AHD/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0981 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 05-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MAYUR K SWADIA
• Keywords: Depreciation

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD , , BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ./ I.T.A. NO.2252/AHD/2013 ( / ASSESSMENT YEAR : 2005-06) THE ACIT CIRCLE-1(2) BARODA / VS. M/S.L. K. INDIA PRIVATE LIMITED 328/23 RASULABAD ROAD VILLAE : JARODA TALUKA : WAGHODIA DIST. VADODARA $ ./ ./ PAN/GIR NO. : AAACL 3236 C ( $& / APPELLANT ) .. ( '($& / RESPONDENT ) $&) / APPELLANT BY : SHRI JAMES KURIAN, SR.DR '($&*) / RESPONDENT BY : SHRI MAYUR K. SWADIA, AR +* / DATE OF HEARING 26/07/2016 ,-./* / DATE OF PRONOUNCEMENT 28/07/2016 / O R D E R PER SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-IV, BARODA DA TED 04/06/2013 FOR THE ASSESSMENT YEAR (AY) 2005-06. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- ITA NO.2252/AH/ 2013 ACIT VS. M/S.L.K. INDIA PVT. LTD. ASST.YEAR 2005-06 - 2 - 2.1. ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALES OF ELECTRICAL AND ELECTRONI C ITEMS. ASSESSEE FILED ITS RETURN OF INCOME FOR AY 2005-06 ON 30/10/200 5 DECLARING TOTAL INCOME OF RS.2,39,22,937/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S.143(3) OF TH E INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT') VIDE OR DER DATED 11/12/2008 AND THE TOTAL INCOME BEFORE SET OFF OF UNABSORBED B USINESS LOSS WAS DETERMINED AT RS.2,48,35,166/-. AGGRIEVED BY THE O RDER OF ASSESSING OFFICER (AO), ASSESSEE CARRIED THE MATTER BEFORE TH E LD.CIT(A) WHO VIDE ORDER DATED 04/06/2013 GRANTED PARTIAL RELIEF TO TH E ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUND:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(APPEALS) ERRED IN DELETING THE ADDITION OF 37,09,251/- BY ALLOWING DEPRECIATION ON MOULDS @ 40% AS AGAINST 25% ALLOWAB LE ON THE DIES AND MOULDS USED FOR MANUFACTURING ELECTRIC AND ELECTRON IC GOODS BY TREATING THE MANUFACTURING FACILITY OF THE ASSESSEE AS RUBBER AN D PLASTIC GOODS FACTORY IN TERMS OF APPENDIX-I TO RULE 5 OF THE INCOME-TAX RUL ES, 1962, IGNORING THE FACT THAT, IN COMMON COMMERCIAL PRACTICE, FACTORIES PROD UCING ELECTRIC AND ELECTRONIC GOODS ARE NOT KNOWN AS A RUBBER AND PLAS TIC GOODS FACTORIES. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTICED THAT ASSESSEE HAD CLAIMED DEPRECIATION ON DIES AND MOULD S AT 40% (BEING THE RATE APPLICABLE TO MANUFACTURE OF PLASTIC GOODS) AN D THUS CLAIMED DEPRECIATION OF RS.2,03,48,689/-. AO WAS OF THE VIEW THAT THE FINAL PRODUCTS OF THE COMPANY WERE ELECTRICAL PRODUCTS BE ING SWITCHES AND SOCKETS AND PART OF WHICH WOULD BE PLASTIC AND PAR T WOULD BE LACED WITH ITA NO.2252/AH/ 2013 ACIT VS. M/S.L.K. INDIA PVT. LTD. ASST.YEAR 2005-06 - 3 - ELECTRICAL CIRCUITS MADE UP OF COPPER AND ALUMINI UM FOR USES IN ELECTRICAL INSTALLATIONS. AO WAS OF THE VIEW THAT 40% DEPRECIATION WAS ALLOWABLE ONLY TO THOSE INDUSTRIES WHICH EXCLUSIVEL Y MANUFACTURE PLASTIC PRODUCTS AND SINCE ASSESSEE WAS MANUFACTURING ELECT RICAL AND ELECTRONIC ITEMS IT WAS ELIGIBLE FOR DEPRECIATION ON DIES AND MOULDS @ 25% AS AGAINST THE CLAIM OF ASSESSEE OF DEPRECIATION OF 40 %. HE ALSO NOTICED THAT WHILE FRAMING THE ASSESSMENT FOR AY 2004-05 IN ASSESSEES OWN CASE, THE AO HAD HELD THAT THE DEPRECIATION ON DIES AND MOULDS WAS ALLOWABLE AT 25% INSTEAD OF 40% AS CLAIMED BY THE A SSESSEE. HE ACCORDINGLY, FOLLOWING THE ORDER OF HIS PREDECESSOR FOR AY 2005-06, ALLOWED THE DEPRECIATION AT 25% AND ACCORDINGLY DIS ALLOWED THE EXCESS CLAIM OF DEPRECIATION OF RS.37,09,251/-. AGGRIEVE D BY THE ORDER OF THE ASSESSING OFFICER, ASSESSEE CARRIED THE MATTER BEFO RE THE LD.CIT(A), WHO VIDE ORDER DATED 04/06/2013 (IN APPEAL NO.CAB/IV/4 02/09-10) DECIDED THE ISSUE IN FAVOUR OF ASSESSEE BY OBSERVING AS UND ER:- 19.1. SINCE THE SIMILAR ISSUES INVOLVED IN THE CASE OF APPELLANT FOR A.Y. 2001-02 AND FOR A.Y. 2002-03 HAVE BEEN DECIDED BY LD.CIT(A)-I, BARODA AS WELL AS BY HONBLE ITAT, AHMEDABAD B BE NCH, AHMEDABAD IN FAVOUR OF APPELLANT AND FOLLOWING SUCH DECISIONS OF THESE TWO APPELLATE AUTHORITIES WHICH ARE GIVEN IN VIEW O F THE REASONS AS MENTIONED IN THEIR APPELLATE ORDERS, I HOLD THT THE A.O. WAS NOT CORRECT IN MAKING ADDITION OF 37,09,251/- FOR THE YEAR UNDER CONSIDERATION ALSO AND THEREFORE, THE SAME IS DELETED. THUS, THE GROUND OF APPEAL NO.1 OF THE APPELLANT IS ALLOWED. 4. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. ITA NO.2252/AH/ 2013 ACIT VS. M/S.L.K. INDIA PVT. LTD. ASST.YEAR 2005-06 - 4 - 4.1. BEFORE US, LD.SR.DR SUPPORTED THE ORDER OF AO. LD.AR, ON THE OTHER HAND, REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD.CIT(A) AND FURTHER SUBMITTED THAT AN IDENTICAL ISSUE AROS E IN THE CASE OF ASSESSEE IN EARLIER YEARS AND AGAINST THE ORDER OF HONBLE I TAT, THE MATTER WAS CARRIED BY THE REVENUE BEFORE THE HONBLE GUJARAT H IGH COURT. HONBLE GUJARAT HIGH COURT WHILE DECIDING THE APPEAL IN TAX APPEAL NO.747 OF 2015 ORDER DATED 21/06/2016 DISMISSED THE APPEAL OF THE REVENUE. HE THEREFORE SUBMITTED THAT IN VIEW OF THE DECISION OF THE HONBLE GUJARAT HIGH COURT, NO INTERFERENCE TO THE ORDER OF THE LD .CIT(A) IS CALLED FOR THUS SUPPORTED THE ORDER OF LD.CIT(A). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO DE PRECIATION ON DIES AND MOULDS. AS PER THE AO, THE ASSESSEE WAS ELIGIBLE F OR DEPRECIATION AT 25% AS IT WAS NOT EXCLUSIVELY ENGAGED IN THE BUSINESS O F MANUFACTURING OF PLASTIC PRODUCTS AS AGAINST THE CLAIM OF DEPRECIATI ON @ 40% BY ASSESSEE. WE FIND THAT IDENTICAL ISSUE AROSE IN ASSESSEES OW N CASE IN EARLIER YEAR AND WHEN THE MATTER WAS CARRIED BY THE REVENUE BEFO RE THE HONBLE GUJARAT HIGH COURT, THE HONBLE GUJARAT HIGH COURT IN TAX APPEAL NO.747 OF 2015 ORDER DATED 21/06/2016 DISMISSED THE REVENUES APPEAL BY OBSERVING AS UNDER:- 7. HAVING HERD LEARNED COUNSEL FOR THE PARTIES AND HAVING PERUSED THE DOCUMENTS ON RECORD, WE NOTICE THAT SUB-CLAUSE (VII ) OF CLAUSE(3) OF ENTRY III IN PART-A IN THE NEW APPENDIX I, READS AS UNDER: ITA NO.2252/AH/ 2013 ACIT VS. M/S.L.K. INDIA PVT. LTD. ASST.YEAR 2005-06 - 5 - (VII) MOULDS USED IN RUBBER AND PLASTIC GOODS FACT ORIES 8. THUS FOR MOULD USED IN RUBBER AND PLASTIC FACTO RIES, HIGHER RATE OF DEPRECIATION OF 30% IS PRESCRIBED. RATE OF DEPRECI ATION OF 15% APPLIES TO RESIDUAL ITEMS. THUS IF AN ITEM FALLS UNDER SAID S UB-CLAUSE (VIII) RATE OF DEPRECIATION WOULD BE 30%. IN THE PRESENT CASE, AD MITTEDLY, MOULDS WERE USED FOR MANUFACTURING OF PLASTIC GOODS. THESE GOO DS WERE IN THE NATURE OF ELECTRIC SWITCHES AND SOCKETS. MERELY BECAUSE AFTE R THE MANUFACTURE, THE CONSUMER MAY BE HAVING PLASTIC WIRES AND CIRCUITS I NSTALLED IN SUCH PLASTIC SWITCHES AND SOCKETS, SO AS TO MAKE THEM FUNCTIONAL , WOULD NOT TAKE AWAY THE BASIC CHARACTER OF THE APPLIANCES BEING PLASTIC GOO DS. THE ASSESSEE WAS EXCLUSIVELY INVOLVED IN MANUFACTURING SUCH GOODS. FACTORY OF THE ASSESSEE WAS THEREFORE, PLASTIC GOODS FACTORY. THE MOULDS U SED FOR MANUFACTURING SUCH GOODS, THEREFORE, QUALIFY FOR HIGHER RATE OF D EPRECIATION UNDER SUB- CLAUSE(VII) OF CLAUSE(3) OF ENTRY III IN PART-A IN THE NEW APPENDIX I. 9. WE DO NOT FIND ANY ERROR IN VIEW OF THE TRIBUNA L. QUESTION IS THEREFORE, ANSWERED AGAINST THE REVENUE AND IN FAVOUR OF THE A SSESSEE. 6. BEFORE US, REVENUE HAS NOT PLACED ANY CONTRARY B INDING DECISION FOR ITS SUPPORT. IN VIEW OF THE AFORESAID FACTS AN D RESPECTFULLY FOLLOWING THE AFORESAID ORDER OF THE HONBLE GUJARAT HIGH COU RT, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF LD.CIT(A) AND THUS T HIS GROUND OF REVENUE IS DISMISSED. 7. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED . THIS ORDER PRONOUNCED IN OPEN COURT ON 28/07/2016 SD/- SD/- () () (RAJPAL YADAV) ( ANIL CHATURVEDI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 28/ 07 /2016 3..,.../ T.C. NAIR, SR. PS ITA NO.2252/AH/ 2013 ACIT VS. M/S.L.K. INDIA PVT. LTD. ASST.YEAR 2005-06 - 6 - !'#$#! / COPY OF THE ORDER FORWARDED TO : 1. $& / THE APPELLANT 2. '($& / THE RESPONDENT. 3. 456 7 / CONCERNED CIT 4. 7 ( ) / THE CIT(A)-IV, BARODA 5. 89: '56 , 56/ , 4 / DR, ITAT, AHMEDABAD 6. :<=+ / GUARD FILE. / BY ORDER, (8' //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 26.7.16 (DICTATION-PAD 7-P AGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 28.7.16 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.28.7.16 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 28.7.16 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