MILTONS P. LTD, MUMBAI V. ACIT 6(3), MUMBAI

ITA 2354/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54904 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 30-05-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 25-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I, MUMBAI BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER & SHRI VIJAY PAL RAO, JUDICIAL MEMBER. I.T.A. NO. 2354/MUM/2010. ASSESSMENT YEAR : 2005-06. M/S MILLTONS PVT. LTD., ASSTT. COMMISSIONER OF INCOME-TAX, ARVIND HOUSE, DARUKHANA, VS. 6( 3), MUMBAI. QUAY STREET, REAY ROAD EAST, MUMBAI 400 010. PAN AABCM 6689D. APPELLANT. RESPONDENT. APPELLANT BY : SHRI HIRO RAI. RESPONDENT BY : SHRI SUNIL KUMAR S INGH. DATE OF HEARING : 27-07-2011 DATE OF PRONOUNCEMENT : 12-08-2011. O R D E R. PER P.M. JAGTAP, A.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LEARNED CIT(APPEALS)-12, MUMBAI DATED 13-01-2010 AND THE SO LITARY ISSUE ARISING OUT OF THE SAME RELATES TO THE ADDITION OF RS.1,18,59,912/ - MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT(APPEALS) TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF THE AMOUNT WITHDRAWN FROM REVALUATION RESERVE. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING, TRADING AND EXPORT OF RE ADYMADE GARMENTS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILE D BY IT ON 31-10-2005 DECLARING 2 ITA NO.2354/MUM/2010 ASSESSMENT YEAR : 2005-06. A LOSS OF RS.2,24,04,043/-. IN THE COMPUTATION OF T OTAL INCOME FILED ALONG WITH THE RETURN OF INCOME, THE ASSESSEE COMPANY HAD CLAIMED DEDUCTION ON ACCOUNT OF DEPRECIATION WITHDRAWN FROM REVALUATION RESERVE ACC OUNT AMOUNTING TO RS.1,18,59,912/-. ACCORDING TO THE AO, THE ASSESSEE COMPANY THUS HAD MADE AN ATTEMPT TO CLAIM DEPRECIATION ON THE REVALUED VALU E OF ASSETS WHICH WAS NOT PERMISSIBLE. HE, THEREFORE, DISALLOWED THE ASSESSEE S CLAIM FOR DEPRECIATION ON REVALUED ASSETS AMOUNTING TO RS.1,18,59,912/- AND A DDED THE SAID AMOUNT TO THE TOTAL INCOME OF THE ASSESSEE IN THE ASSESSMENT COMP LETED U/S 143(3) VIDE AN ORDER DATED 05-12-2007. 3. AGAINST THE ORDER PASSED BY THE AO U/S 143(3), A N APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LEARNED CIT(APPEALS) CHALL ENGING THEREIN INTER ALIA, THE ADDITION MADE ON ACCOUNT OF DEPRECIATION WITHDRAWN FROM REVALUATION RESERVE AMOUNTING TO RS.1,18,59,912/-. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(APPEALS), IT WAS SUBMITTED ON BEHAL F OF THE ASSESSEE THAT TOTAL DEPRECIATION AMOUNTING TO RS.1,72,18,866/- WAS DEB ITED IN THE PROFIT & LOSS ACCOUNT WHICH WAS INCLUSIVE OF DEPRECIATION CLAIMED ON ENHANCED VALUE OF ASSETS AS PER THE REVALUATION TO THE EXTENT OF RS.1,18,59, 912/-. IT WAS SUBMITTED THAT IN THE COMPUTATION OF TOTAL INCOME, THE TOTAL DEPRECIATION OF RS.1,72,18,866/- WAS ADDED BACK AND THE DEPRECIATION OF RS.1,19,59,912/- RELAT ING TO ENHANCED VALUE OF ASSETS DUE TO REVALUATION WAS DEDUCTED. IT WAS SUBMITTED T HAT SINCE THESE TWO AMOUNTS WERE DEBITED AND CREDITED BY THE ASSESSEE COMPANY T O ITS PROFIT & LOSS ACCOUNT, ONLY NET DEPRECIATION AS ALLOWABLE ON THE ORIGINAL WRITTEN DOWN VALUE OF THE ASSETS WAS ACTUALLY CLAIMED BY THE ASSESSEE AND THERE WAS NO JUSTIFIABLE REASON FOR THE AO TO MAKE THE ADDITION OF RS.1,18,59,912/-. THE LEARN ED CIT(APPEALS) DID NOT ACCEPT THIS SUBMISSION OF THE ASSESSEE AND CONFIRMED THE A DDITION MADE BY THE AO ON THIS ISSUE OBSERVING THAT DEPRECIATION WAS CLAIMED BY TH E ASSESSEE ON THE REVALUED 3 ITA NO.2354/MUM/2010 ASSESSMENT YEAR : 2005-06. ASSETS WHICH WAS NOT PERMISSIBLE. HE ALSO OBSERVED THAT THE AMOUNT OF RS.1,18,59,912/- WITHDRAWN FROM THE REVALUATION RE SERVE WAS WRONGLY CLAIMED BY THE ASSESSEE AS DEDUCTION IN THE COMPUTATION OF TOT AL INCOME. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(APPEALS) ON THIS ISSUE, TH E ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. THE LEARNED COUNSEL FOR THE ASS ESSEE HAS INVITED OUR ATTENTION TO THE COPY OF PROFIT & LOSS ACCOUNT OF THE ASSESSEE C OMPANY FOR THE YEAR UNDER CONSIDERATION PLACED AT PAGE NO. 5 AND 6 OF HIS PAP ER BOOK TO SHOW THAT TOTAL DEPRECIATION OF RS.1,72,18,866/- WAS DEBITED BY THE ASSESSEE TO ITS PROFIT & LOSS ACCOUNT. HE SUBMITTED THAT SINCE THIS TOTAL DEPRECI ATION CLAIMED BY THE ASSESSEE WAS ALSO INCLUSIVE OF DEPRECIATION CLAIMED ON THE E NHANCED VALUE OF ASSETS AS A RESULT OF REVALUATION TO THE EXTENT OF RS.1,18,59,9 12/-, THE SAID AMOUNT WAS CREDITED TO THE PROFIT & LOSS ACCOUNT AS TRANSFERRED FROM R EVALUATION RESERVE. HE THEN INVITED OUR ATTENTION TO THE COPY OF COMPUTATION OF TOTAL INCOME PLACED AT PAGE NO. 1 OF HIS PAPER BOOK TO SHOW THAT THE LOSS OF RS.5,3 2,26,707/- AS REFLECTED IN THE PROFIT & LOSS ACCOUNT WAS TAKEN AS A STARTING POINT FOR THE PURPOSE OF COMPUTATION OF TOTAL INCOME. IN THE SAID COMPUTATION OF TOTAL I NCOME, THE SUM OF RS.1,72,18,866/- WAS ADDED BACK WHEREAS THE AMOUNT OF RS.1,18,59,912/- CREDITED IN THE PROFIT & LOSS ACCOUNT AS TRANSFERRED FROM RE VALUATION RESERVE WAS REDUCED. THE ASSESSEE THUS HAD CLAIMED ONLY THE NET AMOUNT O F R.54,58,954/- IN ITS PROFIT & LOSS ACCOUNT AS DEPRECIATION WHICH REPRESENTED DEPR ECIATION ON ACTUAL WRITTEN DOWN VALUE OF ASSETS AND THUS NET DEPRECIATION AMOUNT WA S RIGHTLY ADDED BACK IN THE COMPUTATION OF TOTAL INCOME. WHILE DOING SO, THE GR OSS AMOUNT OF DEPRECIATION WAS ADDED BACK WHEREAS EXCESS DEPRECIATION CLAIMED ON E NHANCED VALUE OF ASSETS DUE TO REVALUATION WAS REDUCED INSTEAD OF STRAIGHT AWAY ADDING BACK THE NET AMOUNT 4 ITA NO.2354/MUM/2010 ASSESSMENT YEAR : 2005-06. AND THIS TREATMENT GIVEN BY THE ASSESSEE CREATED A CONFUSION AND GAVE A WRONG IMPRESSION TO THE AUTHORITIES BELOW THAT DEPRECIATI ON ON ENHANCED VALUE OF ASSETS WAS ALSO CLAIMED BY THE ASSESSEE. IN OUR OPINION, T HE ADDITION MADE ON THIS ISSUE THUS WAS BASED ON MISCONCEPTION AND MISUNDERSTANDIN G OF FACTS BY THE AUTHORITIES BELOW AND SINCE THERE WAS NO DEPRECIATION ACTUALLY CLAIMED BY THE ASSESSEE ON THE ENHANCED VALUE OF ASSETS AS A RESULT OF REVALUATION , THE DISALLOWANCE MADE ON THIS ISSUE IS TOTALLY UNJUSTIFIED AND HENCE UNSUSTAINABL E. WE, THEREFORE, DELETE THE SAME AND ALLOW THIS APPEAL OF THE ASSESSEE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. PRONOUNCED ON 12/8/2011. SD/- SD/- (VIJAY PAL RAO) (P.M. JAGTAP) JUDICIAL MEMBER A CCOUNTANT MEMBER MUMBAI, DATED: 12 TH AUGUST, 2011. COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, I-BENCH. (TRUE COPY ) BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI BENCHES, MUMBAI. WAKODE