Assistant Commissioner of Income-tax, Circle - 2, Aurangabad V. Maharashtra Water Conservation Corporation, Aurangbad

ITA 2299/PUN/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 2864 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 29-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APARNA M AGARWAL
• Keywords: Business income; Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E (THROUGH VIRTUAL COURT) BEFORE SHRI P.M. JAGTAP, VICE PRESIDENT (KZ) AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER . / ITA NO.2299/PUN/2017 / ASSESSMENT YEAR : 2014-15 THE ASST.COMMISSIONER OF INCOME TAX, CIRCLE 2, AURANGABAD. ..APPELLANT. VS. MAHARASHTRA WATER CONSERVATION CORPORATION, NEW ADMINISTRATIVE BUILDINGS, GROUND FLOOR, COLLECTOR OFFICE, AURANGABAD 431 001. PAN : AAMFM1607K. ..RESPONDENT. ASSESSEE BY : SHRI ABHAY SHASTRI. REVENUE BY : MS. APARNA M. AGARWAL. / ORDER PER SHRI PARTHA SARATHI CHAUDHURY, JM. THIS APPEAL PREFERRED BY THE REVENUE EMANATES FROM THE ORDER OF LD.CIT(A) FOR A.Y.2014-15 AS PER THE FOLLOWING GROUNDS OF APPEAL. 1. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND LAW, THE LD. CIT (A)-2, IS JUSTIFIED IN HOLDING THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS ACTIVITIES AND THE MEAGER RECEIPTS RECEIVE D FROM FISHERIES PERMISSION FEES, SALE OF TENDER FORMS AND MISC. INC OME OF RS.10,52,267/- ARE 'BUSINESS RECEIPTS' INSTEAD OF TREATING IT AS ' INCOME FROM OTHER SOURCES', WHICH WAS NOT AT ALL THE MAIN BUSINESS OF THE ASSES SEE BUT ONLY AN ALLIED ACTIVITY. 2. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND LAW, THE LD. CIT (A)-2, AURANGABAD IS JUSTIFIED IN ALLOWING THE CLAIM OF DEPRECIATION AMOUNTING TO RS.27,65,60,139/-DISALLOWED BY THE A.O ., WITHOUT APPRECIATING THE FACT THAT THE WATER CONSERVATION P ROJECTS AND OTHER ASSETS ON WHICH DEPRECIATION WAS CLAIMED HAS NOT BEEN USED FOR THE PURPOSE OF / DATE OF HEARING : 24.11.2020 / DATE OF PRONOUNCEMENT: 25.11.2020 2 BUSINESS AND ASSESSEE HAS NOT EARNED ANY INCOME FRO M ITS BUSINESS ACTIVITIES. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE ORDER OF THE AO BE RESTORED AND THAT OF THE CIT (A)-2 BE VACATED. 2. THAT WITH REGARD TO GROUND NO.1, THE LD. D.R. AT THE V ERY OUTSET SUBMITTED THAT THERE IS NO MENTION OF THIS ISSUE IN THE O RDER OF THE LD.CIT(A). THAT ALSO IN THE ASSESSMENT ORDER THERE IS NO DISCUSSION WITH REGARD TO THIS ISSUE. 3. WE HAVE PERUSED THE ORDERS OF THE SUB-ORDINATE AUT HORITIES AND HAVING GONE THROUGH THEM, WE FIND THAT THERE IS NO MENTIO N OF THIS ISSUE NEITHER IN THE ORDER OF THE ASSESSING OFFICER NOR IN THE OR DER OF LD.CIT(A). THEREFORE, THIS GROUND TAKEN BY THE REVENUE DOES NOT A RISE FROM THE ORDERS OF SUB-ORDINATE AUTHORITIES. IN SUCH SCENARIO, THI S GROUND IS DISMISSED. 4. THAT WITH REGARD TO THE NEXT GROUND, IT WAS SUBMITT ED BY THE LD.A.R. THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSE E BY THE ORDERS OF PUNE TRIBUNAL IN THE EARLIER YEARS IN ASSESSEES OWN CA SE. HE HAS FILED THE COPIES OF THOSE ORDERS ON RECORD. THE LD.D.R. CONCEDED TO THESE FACTS. 5. WE HAVE PERUSED THE CASE RECORDS, HEARD THE CONTE NTIONS OF THE PARTIES HEREIN AND ANALYZED THE FACTS AND CIRCUMSTANCES . THE ISSUE PERTAINS TO THE CLAIM OF DEPRECIATION ON WATER CONSERVATIO N PROJECTS AND OTHER ASSETS AND IT IS THE GRIEVANCE OF THE REVENUE T HAT SUCH ASSETS HAVE NOT BEEN USED FOR THE PURPOSE OF BUSINESS AND THE ASS ESSEE HAS NOT EARNED ANY INCOME FROM SUCH BUSINESS ACTIVITIES AND HEN CE, THE LD.CIT(A) WAS NOT RIGHT IN GIVING RELIEF ON THIS ISSUE. WE ALSO FIN D IN THE PUNE TRIBUNAL ORDER DATED DT.23.03.2018 IN ITA NOS.883 & 3 1568/PUN/2015 FOR A.YS.2010-11 AND 2011-12, RESPECTIVELY , WHEREIN THE DEPRECIATION HAS BEEN ALLOWED TO THE ASSESSEE AND T HE RELEVANT PORTION OF THE SAME IS EXTRACTED HEREIN BELOW : 6.WE HAVE HEARD THE SUBMISSIONS MADE BY REPRESENTA TIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW. W E HAVE ALSO CONSIDERED THE DECISIONS AND DOCUMENTS ON WHICH THE LD. AR OF ASSESSEE HAS PLACED RELIANCE TO SUPPORT HIS SUBMISSION. TWO ISSUES HAVE BEEN RAISED BY THE REVENUE IN ITS APPEALS. THE FIRST ISS UE IS WITH RESPECT TO HEAD OF INCOME UNDER WHICH INCOME FROM FISHERIES IS TO BE ASSESSED I.E. WHETHER IT IS BUSINESS INCOME OR INCOME FROM OTH ER SOURCES. THE SECOND ISSUE RAISED BY THE REVENUE IS WHETHER THE ASSESSEE IS ELIGIBLE TO CLAIM DEPRECIATION ON RESERVOIR WHEN NO INCOME HAS BEEN D ECLARED FROM NEW ASSET ACQUIRED BY ASSESSEE. IN SO FAR AS THE FIRST ISSUE RELATING TO INCOME FR OM FISHERIES IS CONCERNED, WE FIND THAT IT WOULD BE RELEVANT TO REFER THE OBJE CTS OF ASSESSEE. CHAPTER- IV OF THE MAHARASHTRA WATER CONSERVATION CORPORATIO N ACT, 2000 DEALS WITH FUNCTIONS AND POWERS OF CORPORATION. IN SECTIO N 18 OF THE SAID ACT, FUNCTIONS OF THE CORPORATION ARE ENUMERATED. IN CLA USE-(M) OF SECTION 18, FISHERIES HAS BEEN MENTIONED AS ONE OF THE ACTIVITI ES PROMOTED BY THE ASSESSEE. THE RELEVANT EXTRACT OF SECTION 18 IS REP RODUCED HEREIN BELOW FOR READY REFERENCE: 18. THE FUNCTIONS OF THE CORPORATION SHALL BE AS F OLLOWS, NAMELY:- (A). (B). . . (M) TO PROMOTE IRRIGATION RELATED ACTIVITIES SUCH A S FISHERIES, PISCICULTURE, FLORICULTURE, HORTICULTURE, SERICULTURE, ETC. A PERUSAL OF THE SECTION 18 REVEALS THAT THE FUNCTI ONS OR OBJECTS MENTIONED ARE NOT DIVIDED INTO MAIN FUNCTIONS/OBJECTS OR ANCI LLARY FUNCTIONS/OBJECTS. THUS, ANY INCOME EARNED BY THE ASSESSEE FROM ANY OF THE ACTIVITIES/FUNCTIONS CARRIED OUT AS LISTED IN SECTI ON 18 WOULD FALL WITHIN THE AMBIT OF ACTIVITIES CARRIED OUT BY THE ASSESSEE AND INCOME EARNED FROM SUCH ACTIVITIES WOULD BE BUSINESS INCOME OF THE A SSESSEE. THEREFORE, IN OUR CONSIDERED VIEW, THE INCOME EARNED BY ASSESSEE FROM FISHERIES, HOWSOEVER, SMALL IT MAY BE, IS BUSINESS INCOME OF THE ASSESSEE. ACCORDINGLY, GROUND NO. 1 RAISED IN APPEALS BY REVE NUE FOR BOTH THE ASSESSMENT YEARS IS DISMISSED. 7. THE SECOND ISSUE RAISED IN THE APPEAL BY THE REV ENUE IS WITH RESPECT TO CLAIM OF DEPRECIATION. THE ASSESSING OFFICER REJECT ED THE ASSESSEES CLAIM OF DEPRECIATION FOR THE FOLLOWING REASONS: (I) THE ASSESSEE HAS NOT EARNED INCOME FROM ITS MAI N BUSINESS OF IRRIGATION AND WATER SUPPLY. (II) THE INCOME EARNED FROM FISHING CONTRACT IS NOT THE MAIN BUSINESS OF THE ASSESSEE. 4 (III) FOR THE PURPOSE OF CLAIMING DEPRECIATION THE A SSETS MUST HAVE BEEN USED FOR THE PURPOSE OF BUSINESS. SINCE NO INCOME H AS BEEN EARNED FROM THE ASSETS, THEREFORE, IT CANNOT BE SAID THE ASSET IS PUT TO USE. HENCE, DEPRECIATION ON THE SAID ASSET CAN BE ALLOWED TO TH E ASSESSEE. WE FIND THAT OBJECTIONS RAISED BY THE ASSESSING OFF ICER TO DISALLOW ASSESSEES CLAIM OF DEPRECIATION ARE NOT SUSTAINABL E. THE COMMISSIONER OF INCOME TAX (APPEALS) ALLOWED THE CLAIM OF ASSESSEE BY FOLLOWING THE DECISION OF CO-ORDINATE BENCH OF TRIBUNAL IN THE CA SE OF TAPI IRRIGATION DEVELOPMENT CORPORATION VS. ITO (SUPRA). IN THE PRESENT CASE, WE FIND THAT THE ASSESSEE HAS EARNED INCOME FROM ALLOCATING CONTRACT FOR FISHING AT NEWLY CREATED RE SERVOIR. WHILE ADJUDICATING GROUND NO.1 OF THE APPEAL, WE HAVE HEL D INCOME EARNED BY ASSESSEE FROM FISHERIES AS BUSINESS INCOME OF THE ASSESSEE. THUS, THE ASSET HAD COME INTO EXISTENCE AND ASSESSEE HAS EARN ED SOME INCOME FROM THE SAID ASSET. IT IS NOT DISPUTED BY THE REVENUE T HAT INCOME FROM FISHERIES IS NOT FROM RESERVOIR ON WHICH DEPRECIATION HAS BEE N CLAIMED BY THE ASSESSEE. THE QUANTUM OF THE INCOME EARNED FROM ASS ET WOULD NOT DETERMINE WHETHER THE ASSET HAS BEEN PUT TO USE OR NOT. ONCE THE ASSET HAS COME INTO EXISTENCE AND IS PUT TO USE, THE ASSE SSEE IS ELIGIBLE TO CLAIM DEPRECIATION ON SAME. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS). ACCORDINGLY, T HE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IS UPHELD AND G ROUND NO. 2 RAISED IN APPEALS BY REVENUE FOR BOTH THE ASSESSMENT YEARS ARE DISMISSED. 8. TO SUM UP, APPEALS OF THE REVENUE FOR ASSESSMENT YEARS 2010-11 AND 2011-12 ARE DISMISSED. 6. RESPECTFULLY, FOLLOWING OUR ORDER IN ASSESSEES OWN CASE FOR A.YS.2010-11 AND 2011-12 IN ITA NOS.883 & 1568/PUN/20 15 (SUPRA), WE SUSTAIN THE RELIEF PROVIDED TO THE ASSESSEE AND HENCE, THERE IS NO NEED FOR ANY INTERFERENCE WITH THE FINDINGS OF THE FIRST APPELLATE A UTHORITY. ACCORDINGLY, GROUND NO.2 RAISED BY THE REVENUE IS DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON 25 TH DAY OF NOVEMBER, 2020. SD/- SD/- ( P.M. JAGTAP ) ( PARTHA SARATHI CHAUDHURY ) VICE PRESIDENT JUDICIAL MEMBER PUNE; DATED : 25 TH NOVEMBER, 2020. YAMINI 5 ' ( )*+ ,+) / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A) - 2 , PUNE. PR. CIT-2, AURANGABAD. , , , / DR, ITAT, A BENCH, PUNE. !'/ GUARD FILE. / BY ORDER // TRUE COPY // $ %&'()* / SR. PRIVATE SECRETARY + ), , / ITAT, PUNE.