Chowgule & Co. Pvt. Ltd., Vasco V. Asst. Commissioner of Income tax Cir. 2, Margao

ITA 27/PAN/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1032 (ITAT-PANAJI)
• Duration Of Justice: 1 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 09-06-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 17-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BANGARI LD
• Keywords: Depreciation
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI GEORGE MATHAN , HONBLE JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, HON'BLE ACCOUNTANT MEMBER ITA N O . 27 /PNJ/20 14 : (A.Y 2006 - 07 ) CHOWGULE & COMPANY (P) LTD., CHOWGULE HOUSE, MORMUGAO HARBOUR, GOA 403 803. PAN : AAACC5479J ( APPELLANT) VS. ACIT, CIRCLE - 2 , MARGAO, GOA (RESPONDENT) ASSESSEE BY : MIHIR NANIWADEKAR, ADV. REVENUE BY : M.R. BANGARI, LD. DR DATE OF HEARING : 09 / 06 /201 5 DATE OF PRONOUNCEMENT : 09 / 06 /201 5 O R D E R PER GEORGE MATHAN : 1. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A), PANAJI IN ITA NO. 41/MRG/2008 - 09 DT. 28.10.2013 FOR THE A.Y 2006 - 07. SHRI MIHIR NANIWADEKAR, ADVOCATE REPRESENTED ON BEHALF OF THE ASSESSEE AND SHRI M.R. BANGARI, LD. DR REPRESENTED ON BEHALF OF THE REVENUE. 2. IT WAS SUBMITTED BY THE LD. AR THAT GROUND NOS. 2.1 TO 2.5 OF THE ASSESSEES APPEAL WAS AGAINST ACTION OF THE LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF DEPRECIATION CLAIMED ON THE PAY MENTS MADE TOWARDS INTANGIBLE ASSETS NAMELY GOODWILL. IT WAS THE SUBMISSION THAT THE ISSUE WAS SQUARELY COVERED BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SMIFS SECURITIES LTD. REPORTED IN 348 ITR 302 WHEREIN IN QUESTION NO. (B) READING WHETHER G OODWILL IS AN ASSET WITHIN THE MEANING OF SEC. 32 OF THE INCOME TAX 2 ITA NO. 27/PNJ/2014 (A.Y : 2006 - 07) ACT, 1961 AND WHETHER D EPRECIATION ON THE G OODWILL IS ALLOWABLE UNDER THE SAID SECTION, THE HON'BLE SUPREME COURT HAS CATEGORICALLY HELD THAT GOODWILL IS AN ASSET UNDER EXPLANATI ON - 3(B) TO SEC. 32(1) OF THE ACT AND CONSEQUENTLY ENTITLED TO DEPRECIATION. 3. IN REPLY, THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE AO AND LD. CIT(A). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS IT IS NOTICED THAT THE ISSUE AS TO WHETHER GOO DWILL IS AN ASSET WITHIN THE MEANING OF SEC. 32 OF THE INCOME TAX ACT AND DEPRECIATION IS ALLOWABLE ON THE SAME, IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SMIFS SECURITIES LTD. REFERRED TO SUPRA, THE AO IS DIRECTED TO ALLOW THE CL AIM OF DEPRECIATION ON THE SAID INTANGIBLE ASSET AS CLAIMED BY THE ASSESSEE. IN THE RESULT, GROUND NOS. 2.1 TO 2.5 OF THE ASSESSEES APPEAL STANDS ALLOWED. 5. IN RESPECT OF GROUND NOS. 3.1 TO 3.5 OF THE ASSESSEES APPEAL, IT WAS SUBMITTED BY THE LD. AR T HAT THE ISSUE WAS AGAINST THE ACTION OF THE LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF DEPRECIATION IN RESPECT OF TUDOU PLANT. IT WAS THE SUBMISSION THAT THE ASSESSEE IS IN THE BUSINESS OF IRON ORE MINING. THE ASSESSEES PLANT NAMELY TUDOU PLANT HAD TW O PROCESSES; ONE WAS WET PROCESS AND ONE WAS DRY PROCESS. AS THE WET PROCESS OF THE TUDOU PLANT RESULTED IN THE IRON ORE TAILINGS BEING DEPOSITED IN THE TAILING LAKE WHICH FELL WITHIN THE FOREST AREA, THE SAID PLANT WAS DIRECTED TO BE STOPPED FOR PRODUCTI ON BY THE FOREST DEPARTMENT. IT WAS THE SUBMISSION THAT, HOWEVER, THE DRY PROCESS HAD BEEN USED AND THE LOG SHOWING THE RUNNING OF THE DRY PLANT HAD BEEN PRODUCED BEFORE THE AO AND THE LD. CIT(A). IT WAS THE SUBMISSION THAT AS THE DRY PLANT OF THE TUDOU PLANT HAD BEEN USED AND AS THE ASSET FELL WITHIN THE BLOCK OF ASSETS , 3 ITA NO. 27/PNJ/2014 (A.Y : 2006 - 07) DEPRECIATION WAS LIABLE TO BE ALLOWED. THE LD. AR DREW OUR ATTENTION TO THE ORDER OF THE LD. CIT(A) AND THE AO WHEREIN THE AO AND THE LD. CIT(A) HAVE RECOGNIZED THE USAGE OF THE DRY PLA NT. 6. IN REPLY, THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE AO AND THE LD. CIT(A). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. ADMITTEDLY, AFTER THE CONCEPT OF BLOCK OF ASSETS FOR THE PURPOSE OF DEPRECIATION, IF ANY PART OF THE PLANT AND MACHIN ERY FALLING WITHIN THE BLOCK IS PUT TO USE DURING THE RELEVANT ASSESSMENT YEAR, THEN, THE DEPRECIATION BECOMES ELIGIBLE FOR THE SAID BLOCK OF ASSETS. ADMITTEDLY, THE DRY PLANT OF TUDOU DIVISION HAS BEEN PUT TO USE DURING THE RELEVANT ASSESSMENT YEAR. IT IS ONLY THE WET PROCESS WHICH HAD BEEN TEMPORARILY SHUT DOWN IN VIEW OF THE ORDER OF THE FOREST DEPARTMENT. THE DRY PLANT HAVING BEEN USED DURING THE RELEVANT ASSESSMENT YEAR AND AS THE PLANT AND MACHINERY FALLS WITHIN THE BLOCK OF ASSETS, THE ASSESSEE WO ULD BE ENTITLED TO DEPRECIATION IN RESPECT OF THE SAID BLOCK OF ASSETS. IN THESE CIRCUMSTANCES, THE AO IS DIRECTED TO GRANT THE ASSESSEE DEPRECIATION IN RESPECT OF THE TUDOU PLANT AS CLAIMED. IN THE RESULT, GROUND NOS. 3.1 TO 3.4 OF THE ASSESSEES APPEAL STANDS ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09/06/2015. S D / - (N.K. BILLAIYA) ACCOUNTANT MEMBER S D / - ( GEORGE MATHAN ) JUDICIAL MEMBER PLACE : PANAJI / GOA DATED : 0 9 /06/ 201 5 *SSL* 4 ITA NO. 27/PNJ/2014 (A.Y : 2006 - 07) COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT(A) CONCERNED (4) CIT CONCERNED (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER , 5 ITA NO. 27/PNJ/2014 (A.Y : 2006 - 07) DATE INITIAL ORIGINAL DICTATION PAD & DRAFT ORDER ARE ENCLOSED IN THE FILE 1. DRAFT DICTATED ON 09/06/2015 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 09/06/2015 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 09/06/2015 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 09/06/2015 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 1 0 /06/2015 SR.PS 6. DATE OF PRONOUNCEMENT 09/06/2015 SR.PS 7. FILE SENT TO THE BENCH CLERK 1 0 /06/2015 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER