Luna Chemical Industries Private Ltd., New Delhi V. ACIT, New Delhi

ITA 2437/DEL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7154 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 11-07-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 25-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRAVAN GOTRU SENIOR
• Assessee Lawyers: S K CHADHA
• Keywords: Depreciation; Additional depreciation; Assessment record
• Section: 32; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D : NEW DELHI) BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.2437/DEL./2013 (ASSESSMENT YEAR : 2006-07) M/S. LUNA CHEMICAL INDUSTRIES PVT. LTD., VS. ACIT, 1 ST FLOOR, M 3, HAUZ KHAS ENCLAVE, CIRCLE 4 (1), NEW DELHI 110 016. (PAN : AAACL3540K) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.K. CHADHA, CA REVENUE BY : SHRI SHRAVAN GOTRU, SENIOR DR DATE OF HEARING : 11.07.2016 DATE OF ORDER : 13.07.2016 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, M/S. LUNA CHEMICAL INDUSTRIES PVT. L TD. (HEREINAFTER REFERRED TO AS THE ASSESSEE) BY FILI NG THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 14.03.2013 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)- VIII, NEW DELHI QUA THE ASSESSMENT YEAR 2006-07 ON THE GROUND S INTER ALIA THAT :- 1. THE LEARNED ACIT HAS ERRED IN REOPENING THE ASSESSMENT BY ISSUING NOTICE U/S 148 OF THE IT ACT AND THE SAME BEING CONFIRMED BY THE LEARNED FIRST APPEL LATE ITA NO.2437/DEL./2013 2 AUTHORITY WHICH IS TOTALLY UNJUSTIFIED AND AGAINST THE PROVISIONS OF LAW. 2. THE LEARNED CIT (A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.14048261/- BY DISALLOWING THE CLAIM OF ADDITIONAL DEPRECIATION WHICH IS TOTALLY ARBITRARY, UNJUSTIFIED AND AGAINST THE PROVISIONS OF LAW. 3. THE LEARNED CIT (A) HAS ERRED IN DISMISSING THE APPEAL WHICH IS ARBITRARY, UNJUSTIFIED, AGAINST THE FACTS OF THE CASE AS WELL AS AGAINST THE PROVISIONS OF LAW. 2. BRIEFLY STATED THE FACTS OF THIS CASE ARE : ASSE SSEE IS INTO THE BUSINESS OF MANUFACTURING OF FERTILIZERS, CHEMICALS AND PAINTS. AFTER COMPLETION OF ASSESSMENT UNDER SECTION 143 (3 ) OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) ON 21.11 .2008 WITH INCOME OF RS.33,16,280/-, ASSESSMENT WAS REOPENED U /S 148 ON THE GROUND THAT FROM THE SCRUTINY OF ASSESSMENT RECORD, IT IS NOTICED THAT ASSESSEE HAS CLAIMED ADDITIONAL DEPRECIATION O F RS.1,50,84,010/- ON ADDITION OF RS.15,08,40,102/- O N PLANT AND MACHINERY. SINCE THE ASSESSEE HAS NOT PURCHASED AN Y PLANT AND MACHINERY DURING THE YEAR UNDER ASSESSMENT, ADDITIO NAL DEPRECIATION OF RS.1,40,48,261/- CLAIMED ON OPENING WORK-IN- PROGRESS AND TRANSFERRED FROM PRE-OPERATIVE EXPENSE S HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147/148 OF THE ACT. AO CAME TO THE CONCLUSION THAT ADDITIONAL DEPRECIATION IS ALLOWABLE ON NEW MACHINERY PURCHASED AND INSTALLED DURING THE YE AR UNDER ITA NO.2437/DEL./2013 3 CONSIDERATION ONLY WHEREAS IN THE PRESENT CASE, MAC HINERY WAS PURCHASED BEFORE BEGINNING OF THE FINANCIAL YEAR AN D IT WAS ONLY TRANSFERRED FROM PRE-OPERATIVE EXPENSES TO THE SCHE DULE OF ASSETS AND SHOWN AS ADDITION IN PLANT AND MACHINERY WHICH DOES NOT QUALIFY FOR CLAIM OF ADDITIONAL DEPRECIATION UNDER THE ACT AND CONSEQUENTLY, DISALLOWED ADDITIONAL DEPRECIATION AM OUNTING TO RS.1,40,48,261/- AND MADE AN ADDITION THEREOF TO TH E INCOME OF THE ASSESSEE. 3. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT ( A) WHO HAS AFFIRMED THE ASSESSMENT ORDER PASSED U/S 147/143 (3 ) OF THE ACT. FEELING AGGRIEVED, THE ASSESSEE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. LD. AR FOR THE ASSESSEE CHALLENGING THE IMPUGNED ORDER CONTENDED INTER ALIA THAT THE ASSESSEE COMPANY BEIN G A MANUFACTURING UNIT ACQUIRED MACHINERY ON 15.12.2005 I.E. AFTER THE FINANCIAL YEAR 2004-05 UNDER THE HEAD CAPITAL WORK -IN-PROGRESS AND ERECTION WAS COMPLETED ON 15.12.2005 AND AS SUC H IS ENTITLED FOR ADDITIONAL DEPRECIATION UNDER PROVISIONS CONTAI NED U/S 32(1)(II) ITA NO.2437/DEL./2013 4 OF THE ACT; THAT THE PRODUCTION IN THE CASE OF ASSE SSEE STARTED ONLY AFTER 15.12.2015 AND RELIED UPON THE ORDER PASSED B Y THE ITAT, MUMBAI IN CASE CITED AS JCIT VS. LOTUS ENERGY (INDI A) LTD. [2016] 68 TAXMANN.COM 364 (MUMBAI TRIB.). HOWEVER, ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER PASSED BY THE AO/CIT(A). 6. IN THE BACKDROP OF THE AFORESAID FACTS AND CIRCU MSTANCES OF THE CASE AND CONTENTIONS RAISED BY THE PARTIES, THE SOLE QUESTION ARISES FOR DETERMINATION IN THIS CASE IS : AS TO WHETHER ASSESSEE IS ENTITLED FOR ADDITIONAL DEPRECIATION (PLANT AND MACHINERY) NOT PURCHASED DURING THE YEAR UNDER ASSESSMENT, CLAIMED UNDER THE HEAD CAPITAL WORK-IN-PROGRESS, TRANSFERRED FROM PRE-OPERATIVE EXPENSES? 7. TO ADJUDICATE THE CONTROVERSY, PROVISIONS CONTAI NED U/S 32 (IIA) OF THE ACT ARE REPRODUCED FOR FACILITY OF REF ERENCE AS UNDER :- SECTION 32 . (IIA) IN THE CASE OF ANY NEW MACHINERY OR PLANT (OT HER THAN SHIPS AND AIRCRAFT), WHICH HAS BEEN ACQUIRED A ND INSTALLED AFTER THE 31ST DAY OF MARCH, 2005, BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING 34 [OR IN THE BUSINESS OF GENERATION OR GENERATION AND DISTRIBUTION] OF PO WER, A FURTHER SUM EQUAL TO TWENTY PER CENT OF THE ACTUA L COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UNDER CLAUSE (II) : . PROVIDED THAT NO DEDUCTION SHALL BE ALLOWED IN RESP ECT OF:- ITA NO.2437/DEL./2013 5 (A) ANY MACHINERY OR PLANT WHICH, BEFORE ITS INSTALLATION BY THE ASSESSEE, WAS USED EITHER WITHI N OR OUTSIDE INDIA BY ANY OTHER PERSON; OR (B) ANY MACHINERY OR PLANT INSTALLED IN ANY OFFICE PREMISES OR ANY RESIDENTIAL ACCOMMODATION, INCLUDIN G ACCOMMODATION IN THE NATURE OF A GUEST-HOUSE; OR (C) ANY OFFICE APPLIANCES OR ROAD TRANSPORT VEHICLE S; OR (D) ANY MACHINERY OR PLANT, THE WHOLE OF THE ACTUAL COST OF WHICH IS ALLOWED AS A DEDUCTION (WHETHER BY WAY OF DEPRECIATION OR OTHERWISE) IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' OF ANY ONE PREVIOUS YEAR; 8. UNDISPUTEDLY, AS PER ANNEXURE OF ADDITION IN PLA NT AND MACHINERY, THE ASSESSEE HAS SHOWN RS.14,04,82,610/- AS OPENING WORK-IN-PROGRESS AND TRANSFERRED FROM PRE-OPERATIVE EXPENSES; THAT THE ASSESSEE HAS NOT PURCHASED ANY PLANT AND M ACHINERY DURING THE YEAR UNDER CONSIDERATION; THAT THE ERECTION OF PLANT AND MACHINERY IN THE ASSESSEES UNIT GOT COMPLETED ON 1 5.12.2005 AND PRODUCTION ALSO STARTED W.E.F. 15.12.2005. 9. IDENTICAL ISSUE AS TO DISALLOWING ADDITIONAL DEP RECIATION TO THE ASSESSEE ON THE PLANT AND MACHINERY BY THE AO H AS BEEN DEALT WITH BY THE COORDINATE BENCH IN CASE CITED AS JCIT VS. LOTUS ENERGY (INDIA) LTD. (SUPRA) AND THE QUESTION FRAMED HAS BEEN ANSWERED IN FAVOUR OF THE ASSESSEE. ITA NO.2437/DEL./2013 6 10. BARE PERUSAL OF THE PROVISIONS CONTAINED U/S 32 (1)(II) OF THE ACT GOES TO PROVE THAT THIS IS A BENEFICIAL LEGISLA TION TO EXTEND INCENTIVE TO THE NEW MANUFACTURING UNITS, WHICH SHO ULD BE CONSTRUCTED LIBERALLY. LEGISLATION HAS USED WORDS ACQUIRED AND INSTALLED IN THE PROVISIONS CONTAINED U/S 32(1)(II A), AFTER FIRST DAY OF MARCH 2005. 11. UNDISPUTEDLY, THE ASSESSEE HAS PURCHASED PLANT AND MACHINERY PRIOR TO AS WELL AS AFTER 31.03.2005 AND COMPLETED THE INSTALLATION / ERECTION ON OR BEFORE 15.12.2005. P RODUCTION ALSO STARTED IN ASSESSEES UNIT ON OR AFTER 15.12.2005. SO, WHEN THE OPENING WORK WAS IN PROGRESS AT THE TIME OF COMPLET ION OF ASSESSMENT OF THE ASSESSEE U/S 143(3), ON COMPLETIO N OF ERECTION AND INSTALLATION OF THE MACHINERY, THE ASSESSEE COM PANY IS CERTAINLY ENTITLED FOR CLAIMING ADDITIONAL DEPRECIATION SHOWN AS TRANSFERRED FROM PRE-OPERATIVE EXPENSES. MOREOVER WHEN INTEGRA TED UNIT WAS COMPLETED AFTER INSTALLATION OF THE PLANT AND MACHI NERY ON 15.12.2005 WHICH FACT HAS NOT BEEN DISPUTED BY THE REVENUE, ADDITIONAL DEPRECIATION CANNOT BE DISALLOWED ON THE GROUND THAT THE MACHINERY WAS PURCHASED BEFORE THE BEGINNING OF THE FINANCIAL YEAR. 12. EVEN OTHERWISE, THE CAPITAL WORK-IN-PROGRESS UN DER THE HEAD PLANT AND MACHINERY CONSTITUTES THE PURCHASES OF VARIOUS ITA NO.2437/DEL./2013 7 COMPONENTS, ASSEMBLED, FABRICATED, INSTALLED TO FOR MULATE THE COMPLETE UNIT. IN OTHER WORDS, EXPENSES UNDER THE HEAD WORK-IN- PROGRESS CONSTITUTE THE AMOUNT OF EXPENSES FOR THE ACQUISITION OF VARIOUS COMPONENTS AND MATERIAL TO CONVERT THE SAME INTO PLANT AND MACHINERY (COMPLETE UNIT). WHEN UNDISPUTEDLY THE A SSESSEE HAS NOT CLAIMED NORMAL DEPRECIATION OR ADDITIONAL DEPRE CIATION ON THE EXPENSES INCURRED UNDER THE HEAD CAPITAL WORK-IN-P ROGRESS IN THE EARLIER ASSESSMENT YEARS AS THE INSTALLATION AND ER ECTION OF MACHINERY WAS UNDER PROGRESS, THE FINDINGS RETURNED BY THE LOWER AUTHORITIES THAT NO NEW MACHINERY WAS PURCHASED AND INSTALLED DURING THE FINANCIAL YEAR UNDER CONSIDERATION ARE N OT TENABLE IN THE EYES OF LAW. SO, WHEN THE ASSESSEE HAS NOT CLAIMED ANY SUCH DEDUCTION DURING THE AY 2005-06 ON ACQUISITION AND INSTALLATION OF THE PLANT AND MACHINERY ON THE GROUND THAT THE PROC ESS OF ACQUISITION AND INSTALLATION WAS UNDER PROGRESS THE ASSESSEE IS ENTITLED FOR ADDITIONAL DEPRECIATION UNDER THE AMEN DED PROVISIONS CONTAINED U/S 32 (IIA) OF THE ACT. 13. SO, IN THE GIVEN CIRCUMSTANCES, THE AO HAS ASSU MED JURISDICTION TO REOPEN THE ASSESSMENT U/S 147/148 O F THE ACT BY MIS INTERPRETING THE RELEVANT PROVISIONS AND DISALLOW T HE ADDITIONAL DEPRECIATION ON THE GROUND THAT NO MATERIAL HAS BEE N PURCHASED BY THE ASSESSEE DURING THE RELEVANT FINANCIAL YEAR, WH ICH IS NOT ITA NO.2437/DEL./2013 8 SUSTAINABLE IN THE EYES OF LAW. CIT (A) HAS ALSO E RRED IN PERPETUATING THE MISINTERPRETATION OF LAW MADE BY T HE AO. IN OTHER WORDS, IT IS A CASE OF NON-APPLICATION OF MIND BY T HE AO. 14. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE AND FO LLOWING THE ORDER PASSED BY THE COORDINATE BENCH, WHICH IS NOT CONTROVERTED BY THE REVENUE, WE ARE OF THE CONSIDERED VIEW THAT THE CIT (A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.1,40,48,261/ - BY DISALLOWING THE CLAIM OF ADDITIONAL DEPRECIATION, HENCE THE IMP UGNED ORDER IS NOT SUSTAINABLE IN THE EYES OF LAW. CONSEQUENTLY, PRESENT APPEAL IS HEREBY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 13 TH DAY OF JULY, 2016. SD/- SD/- (N.K. SAINI) (KULDIP SING H) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 13 TH DAY OF JULY, 2016 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-VIII, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.